Oil & Gas Stock Roundup: Exxon Stops Drilling Off Santa Barbara, Chevron Sells Nigeria Oil Blocks - Analyst Blog
It was a week where both oil and natural gas prices ended lower. On the news front, a ruptured pipeline forced Exxon Mobil Corp. XOM to halt drilling at three California platforms, while Chevron Corp. CVX has agreed to sell 40% stakes in two more Nigerian oil blocks.
Overall, it was a bearish week for the sector. While West Texas Intermediate (WTI) crude futures edged down 0.6% to close at $59.63 per barrel, natural gas prices fell 1.5% to $2.77 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Williams Snubs $48B Takeover Bid.)
Oil prices fell for the third time in 4 weeks, the backdrop being the ongoing Greek debt impasse and apprehensions about the impending Iranian nuclear deal that has the potential to release more oil into the already oversupplied market. Moreover, a weekly U.S. government report – showing a surprise climb in gasoline supplies and an increase in oil production – added to the negative sentiment.
To a large extent, the bears were offset by the Baker Hughes report that showed another drop in oil-directed rigs and the U.S. Energy Department's latest inventory release with news of eighth straight decline in crude stockpiles.
Natural gas fared even worse amid predictions of mild summer cooling demand with forecasts of mostly average weather across majority of the country over the next few days. A lower-than-expected supply build helped offset matters somewhat.
Recap of the Week’s Most Important Stories
1. The largest U.S. oil company by market value, Exxon Mobil Corp., has suspended oil production at three of its offshore platforms. The company has been forced to take the decision following the shutdown of a pipeline that leaked about 101,000 gallons of crude on the Santa Barbara, California, coastline.
The three offshore platforms – that used to churn out about 30,000 barrels per day – have been temporarily closed as the company failed to ship oil to refineries. The shutdown will have an adverse effect on Exxon Mobil’s bottom line, despite the yield from the platform being small compared with the company’s overall output. (See More: Exxon Mobil Closes 3 Platforms in Offshore Santa Barbara)
2. U.S. energy giant Chevron Corp. is selling its stakes in two more Nigerian shallow water offshore oil blocks. The sale includes Chevron’s 40% stakes in the Oil Mining Leases (OMLs) 86 and 88, located in the Niger Delta. The properties had been sold to First Exploration & Petroleum Development Company, a Nigerian exploration and production firm.
With the sale of OMLs 86 and 88, Chevron will have divested all the shallow water assets it had acquired with the Texaco buyout. Though no details have been available, the assets under sale are believed to hold substantial resource potential. (See More: Chevron to Sell Additional Oil Blocks Offshore Nigeria)
3. Shares of oilfield service company Core Laboratories N.V. CLB gained about 2% following the announcement of its takeover of pressure-volume-temperature (“PVT”) equipment and instrumentation manufacturer Sanchez Technologies. Core Laboratories added that it wasan all-cash transaction. The financial details of the transaction, however, were not disclosed.
Viarmes, France-based Sanchez manufactures equipment for use in hydrocarbon reservoirs. The company is one of the leading firms in the world in terms of manufacturing automated high-pressure, high-temperature ("HPHT") mercury-free PVT instrumentation. Core Laboratories added that it has fully integrated Sanchez’s HPHT PVT system into its operations. (See More: Core Laboratories Gains on Sanchez Technologies Acquisition)
4. Oil and gas-focused engineering and construction firm McDermott International Inc. MDR announced that it has received a ‘sizeable’ contract from LLOG Exploration Offshore, LLC. However, the financials details of the deal were not disclosed.
The contract is for LLOG Exploration’s Otis field subsea tieback project, located in the Gulf of Mexico. McDermott stated that this contract would be added to its second-quarter backlog. (See More: McDermott Gets Otis Project Contract from LLOG Exploration)
5. Brazilian state-run energy company Petrobras PBR has slashed its five-year plan in a bid to tackle its huge debt burden and the repercussions of the money-laundering scandal. For the 2015–19 period, the company plans investment of $130.3 billion, 41% lower than its previous five-year plan. This also marks the lowest investment level by the company since 2008.
Petrobras announced that about 83% of the proposed spending – $108.6 billion – will be allocated for its upstream segment. Notably, downstream capital spending has fallen to just $12.8 billion, a 67% decline from last year’s budget. The energy firm announced that the new investment plan will focus on exploration and production activities in the pre-salt area of Brazil.
Price Performance
The following table shows the price movement of the major oil and gas players over the past week and during the last 6 months.
Company | Last Week | Last 6 Months |
XOM | -2.06% | -10.97% |
CVX | -4.05% | -14.52% |
COP | -2.29% | -12.76% |
OXY | -1.54% | -4.95% |
SLB | -0.86% | -0.90% |
RIG | -4.66% | -14.61% |
VLO | +1.07% | +21.83% |
TSO | -1.87% | +11.20% |
Over the course of last week, the best performer was U.S. refiner Valero Energy Corp. VLO that added 1.1% to its stock price, while the biggest loser was offshore driller Transocean Ltd. RIG, which fell 4.7% during the period.
Over the last 6 months, Valero Energy was again the chief beneficiary on the bourses with its shares advancing 21.8%. Likewise, Transocean was the laggard, as it witnessed a 14.6% price decline over the same time frame.
What’s Next in the Energy World?
Apart from the usual releases in this week – the U.S. government data on oil and natural gas – market participants will be closely tracking a series of crucial economic reports, including those on home sales and prices, consumer confidence, manufacturing, construction, factory orders and June’s employment data.
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CHEVRON CORP (CVX): Free Stock Analysis Report
VALERO ENERGY (VLO): Free Stock Analysis Report
PETROBRAS-ADR C (PBR): Free Stock Analysis Report
CORE LABS NV (CLB): Free Stock Analysis Report
MCDERMOTT INTL (MDR): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
TRANSOCEAN LTD (RIG): Free Stock Analysis Report
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