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News From Shell & ExxonMobil Dominate Oil & Gas Stock Roundup

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·7 min read
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It was a week wherein oil prices hit the highest in seven years but natural gas futures pulled back after topping $6 for the first time since 2014.

On the news front, European supermajor Royal Dutch Shell (RDS.A) issued an update on its upcoming Q3 earnings, while American biggie ExxonMobil XOM boosted its estimate of discovered recoverable resources from the Stabroek block offshore Guyana.

Overall, it was a mixed week for the sector. West Texas Intermediate (WTI) crude futures gained 4.6% to close at $79.35 per barrel, while natural gas prices fell 1% to end at $5.565 per million British thermal units (MMBtu). In particular, the oil market managed to maintain their forward momentum from the previous six weeks.

Coming back to the week ended Oct 8, oil prices rose despite a bearish report from the Energy Information Administration ("EIA") that showed a build in crude and gasoline inventories. Instead, energy investors chose to concentrate on the market’s robust fundamentals and a supportive macro backdrop.

Crude supplies recently fell to their lowest levels since October 2018, with U.S. commercial stockpiles down more than 16% since mid-March. There is also a marked improvement in fuel demand on the back of rebounding road and airline travel.

Meanwhile, natural gas finished down following a higher-than-expected increase in supplies and the prospect of less weather-related consumption.

Recap of the Week’s Most-Important Stories

1.  Royal Dutch Shell expects a negative impact to its third-quarter earnings and cash flows, following disruptions in U.S. Gulf of Mexico production after Hurricane Ida swept through the region. The company lost about $400 million in income when the storm forced it to shut down several Gulf facilities for days and weeks. On a positive note, the European supermajor expects the prevailing strong commodity price environment to significantly boost its ‘Integrated Gas’ results.

Shell released a preliminary report for the July-September period wherein the Anglo-Dutch biggie informed that the performance of the firm’s trading division, which was instrumental in helping the supermajor partly cushion the impact of the coronavirus-induced oil price slump, is likely to be sequentially higher for the Integrated Gas division and “similar” to the Oil Products business.

According to the latest update, Shell’s upstream production fell by 6.4% on a year-over-year basis in the third quarter of 2021 at the midpoint of the guidance. Taking into account the storm-related outage of 90 oil-equivalent per day (MBOE/d), the supermajor is estimating its output in the range of 2,025 to 2,100 MBOE/d compared to 2,203 MBOE/d a year ago. (Shell Braces for Hurricane-Hit Q3 Amid Soaring Prices)

2.   ExxonMobil announced that its estimate of discovered recoverable resources from the Stabroek Block has been raised. The block is located off the coast of Guyana.

The energy giant has increased the estimate to approximately 10 billion oil-equivalent barrels. The company has included a new discovery at the Cataback-1 well in its updated resource estimate. Thus, the total key discoveries in the prolific offshore resource are now at more than 20, said the leading integrated energy player. With the drilling of the Cataback-1 well by the drillship Noble Tom Madden in 5,928 feet of water, the well encountered 243 feet of net pay in high-quality hydrocarbon bearing sandstone reservoirs.

ExxonMobil said that the Guyanese economy is continuously being aided by the recent major discoveries and projects that are in progress. In the Stabroek Block, spreading across 6.6 million acres, ExxonMobil has a 45% interest along with operatorship. The remaining 30% and 25% stakes are in possession of Hess (HES) and CNOOC Petroleum Guyana Limited. (ExxonMobil Revises Stabroek Resource Estimate Upward)

3   Suncor Energy SU recently announced that it took over as the operator of the Syncrude Joint Venture, a significant move toward increasing productivity and competitiveness across all its operations in the Regional Municipality of Wood Buffalo.

The Calgary, Alberta based energy behemoth's optimism surrounding the Syncrude asset is reflected in its operatorship, which has the full backing of the Syncrude joint-venture owners and was first announced in the fourth quarter of 2020. It is part of a long-term strategy to improve the Syncrude asset's service quality, efficiency and profitability.

Suncor purchased Canadian Oil Sands' stake in 2016 and has ever since been engaged with the other owners to identify methods for its improvement. Through acquisitions, the energy player has increased its shareholding in Syncrude from 12% to 58.74% since 2016. (Suncor Assumes Control of the Syncrude Joint Venture)

4.   Penn Virginia PVAC completed its previously announced all-stock merger deal with Lonestar Resources US Inc. The company aims to officially rebrand itself as Ranger Oil Corporation, which will be in effect from Oct 18, 2021. The merged entity will begin trading under the ticker symbol of ROCC. The official rebranding is expected to complete by the end of 2021.

Per the terms of the deal, Penn Virginia shareholders will now own 87% of the merged entity, while Lonestar shareholders will own the rest. The transaction strengthens Penn Virginia’s position as a leading Eagle Ford operator and will provide additional scale and synergies.

The resources of both companies will create a consolidated asset position, which spreads about 140,000 net acres placed in the core of the Eagle Ford shale in South Texas. It is expected to have a production capacity of 40,000 barrels of oil equivalent per day. (Penn Virginia, Lonestar Complete All-Stock Merger Deal)

5.  Repsol SA REPYY announced ambitious carbon-reduction targets, which will accelerate its clean-energy transition toward a net-zero emission future.

Due to mounting pressure from investors to reduce emissions, energy companies have established various targets to increase renewable capacity and improve energy efficiency. Repsol was one of the early movers in this regard and possibly the first energy company to announce its non-binding plan to achieve carbon neutrality by 2050. The Spanish firm has now set targets to accelerate its transformation plan.

Repsol boosted its 2030 renewable energy target by 60%. The company previously aimed for 5.2 gigawatt (GW) of renewables by 2025 and 12.7GW by 2030.  It currently plans to reach an installed capacity of 20 GW by 2030 and a target of 6 GW by 2025. (Repsol Lays Out Enhanced Renewable Energy Targets)

Price Performance

The following table shows the price movement of some major oil and gas players over the past week and during the last six months.

Company    Last Week    Last 6 Months

XOM                +2.1%              +11.3%
CVX                 +3.6%             +2.7%
COP                +6.9%              +39.6%
OXY                 +8%                  +32.1%
SLB                 +4.3%              +15.9%
RIG                  +2.6%              +14.1%
VLO                 +6.8%               +6.8%
MPC                +2.5%               +20.2%

The Energy Select Sector SPDR — a popular way to track energy companies — was up 5.1% last week. The best performer was Houston-TX based upstream biggie Occidental Petroleum OXY whose stock climbed 8%.

Over the past six months, the sector tracker has increased 13.9%. Upstream biggie ConocoPhillips COP was the major gainer during the period, experiencing a 39.6% price appreciation.

What’s Next in the Energy World?

As the global oil consumption outlook strengthens amid tightening fundamentals, market participants will be closely tracking the regular releases to watch for signs that could further validate the upward momentum. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that come out regularly — will be on energy traders' radar. Data on rig count from the oilfield service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is closely followed too. News related to coronavirus vaccine approval/rollout/distribution will be of utmost importance. Finally, the closely watched monthly reports from three key agencies (EIA, OPEC and the IEA) complete the releases this week.

 


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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
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Repsol SA (REPYY) : Free Stock Analysis Report
 
Penn Virginia Corporation (PVAC) : Free Stock Analysis Report
 
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