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Oil & Gas Stock Roundup: BP's Gas Production in India & a Flurry of Discoveries

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·8 min read
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It was a week when both oil and natural gas prices settled lower.

On the news front, British energy major BP plc BP, in association with Reliance Industries, started production from Asia’s deepest offshore gas field. Meanwhile, a slew of oil/gas discoveries was announced by ConocoPhillips COP, PetroChina PTR and Petrobras PBR.

Overall, it was a dismal week for the sector. West Texas Intermediate (WTI) crude futures lost 2.1% to close at $48.23 per barrel, while natural gas prices were down 6.7% in the week to end Christmas Eve at $2.5180 per million Btu (MMBtu). In particular, the oil market hit a speed bump after posting a gain in the previous seven weeks.

Oil prices snapped the winning streak on apprehensions that travel bans and renewed restrictions to mitigate a fast-spreading coronavirus strain — detected in the U.K. — will again stymie crude usage and jeopardize the nascent recovery. However, the drop was cushioned by a U.S. government data revealing a weekly drop in domestic crude inventories, along with declines in both gasoline and distillate stockpiles.

Natural gas finished down too after the U.S. Energy Department's inventory release showed a lower-than-expected decrease in weekly supplies. The fuel was also impacted by unfavorable weather predictions.

Recap of the Week’s Most-Important Stories

1.  BP and its partner Reliance Industries Ltd (“RIL”) announced the beginning of natural gas production from the ultra-deep-water gas field — R Cluster — in block KG D6 along the east coast of India.

In the KG-D6 block, three deepwater gas fields are being developed by the companies that comprise R Cluster, Satellites Cluster and MJ. Of the three developments, R Cluster is the first to become operational. Importantly, the companies expect the three projects to meet 15% gas demand by the world’s second-most populous country by 2023. Investors should also know that in Asia, R Cluster is the deepest offshore gas field and is placed at a water depth of more than 2,000 meters.

Notably, the British energy giant holds a 33.33% participating interest in the block, while the remaining majority stakes are being owned by the operator RILIn 2021, the companies expect the R cluster field, situated 60 kilometers from the KG D6 Control & Riser Platform (“CRP”), to achieve plateau gas production of 12.9 million standard cubic meters per day (mmscm/d). (BP And Reliance Begin Production in Asia's Deepest Gas Field)

2.  ConocoPhillips announced the latest oil discovery in the North Sea’s Norwegian part. The oil was found on the Slagugle prospect, situated 14 miles north-northeast of the Heidrun field in the Norwegian Sea. The discovery was made in production license 891, wherein ConocoPhillips is the operator with an 80% participating interest, while its partner Pandion Energy holds the remaining 20%.

It is to be noted that this is the first exploration well in PL-891. The 6507/5-10 discovery well was drilled 1,165 feet vertically to a total depth of 7,149 feet below the sea surface with the help of the LeivEiriksson semi-submersible drilling rig. The oil major has conducted extensive data collection and sampling in the discovery well, and expects future analysis to determine the flow rates, the well’s ultimate resource recovery as well as potential development solutions.

The Houston-based company mentioned that the size of the discovery is placed within 75-200 million barrels of recoverable oil equivalent on the basis of tentative estimates. Importantly, the licensees will evaluate the outcomes of the discovery and other nearby prospects in order to determine the future appraisal, as well as potential development of the existing infrastructure in the area. (ConocoPhillips Finds New Oil in the Norwegian Sea)

3.  PetroChina Company Limited recently discovered a natural gas reservoir in northwest China's Hutubi County, Xinjiang Uyghur Autonomous Region. The announcement, made by the company's local unit, adds that the well will likely possess a production capacity of 61,000 cubic meters of natural gas and 106.3 cubic meters of crude oil per day.

Spread across an area of around 156 million square meters along the southern border of the Junggar Basin, the new-found reservoir’s reserves are estimated to be in excess of 100 billion cubic meters. PetroChina — carrying a Zacks Rank #3 (Hold) — is drilling three additional exploration wells, namely Letan 1, Tianwan 1 and Tianan-1 nearby the latest discovery.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HuoJin, general manager of PetroChina's unit in the northwestern province of Xinjiang believes that “the discovery marks a major breakthrough in gas exploration in the southern rim of the Junggar Basin, which will further guarantee the gas supply of our company and contribute to the stability and prosperity of the region.” (PetroChina Hits Gas Prospect in China's Xinjiang Province)

4.  Petrobras recently drilled a new 9-BUZ-48D-RJS well at a water depth of 1,850 meters in its deepwater Buzios field in the Santos Basin and found traces of high-quality oil. The discovery was confirmed through tests at a depth of 5,540 meters. This latest finding shows greater potential for pre-salt in the Buzios field.

The Buzios field is located 188 kilometers off the coast of Rio de Janeiro and the state-run energy giant is its chief operator with a 90% interest. The rest is held by Chinese producers CNOOC (CEO) and China National Petroleum – the parent of PetroChina.

Buzios is the newest subsalt field to be fully developed following the Tupi and Sapinhoa fields, which are Brazil's first and the third-biggest oil and natural gas producers in terms of volume. Buzios field extracted its first oil in April 2018. It is Brazil's second-most productive oilfield and per the latest available data from the National Petroleum Agency, the country’s energy regulator, it produced 564,474 barrels of oil per day and 22.7 million cubic meters of gas daily in October. (Petrobras Unearths Great Quality Oil in Buzios Well)

5.  ExxonMobil XOM recently reached a milestone, as the Liza-1 well in Stabroek block offshore Guyana met the original target of 120,000 barrels of oil per day (bpd) production at the site.

A glitch in the re-injection process and equipment delays deferred the achievement of the milestone. Moreover, the coronavirus pandemic delayed the commissioning of a gas injection system. The company had to produce less than the target to reduce flaring. The production level of 120,000 bpd was expected to be achieved a year ago. It is using the Liza Destiny floating production, storage and offloading (FPSO) vessel at the site.

While Liza Phase 1 is under production, the Phase 2 is expected to commence in 2022. The company expects production to reach 220,000 bpd in the second phase. Notably, it has reached a final investment decision for the third find at the Payara field. It is expected to produce 220,000 bpd of crude from the beginning of 2024. The company expects to utilize the Prosperity FPSO vessel for the field development. (ExxonMobil Reaches Liza-1 Well Production Goal in Guyana)

Price Performance

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

Company    Last Week    Last 6 Months

XOM                -2.6%                 -4.6%
CVX                 -2.1%                -1.3%
COP                -3.6%                -2.1%
OXY                 -4.6%                -0.1%
SLB                 -3%                    +24.1%
RIG                 -11.2%                +29.2%
VLO                +1.7%                 -1.1%
MPC               +2.1%                 +16.5%

The Energy Select Sector SPDR — a popular way to track energy companies — was down 2% last week. The worst performer was offshore driller Transocean RIG whose stock slumped 11.2%.

For the longer term, over six months, the sector tracker is up 4.4%.On the other end of the spectrum this time, Transocean was the major gainer during the period, experiencing a 29.2% price appreciation.

What’s Next in the Energy World?

As global oil consumption gradually ticks up from the depths of coronavirus, market participants will be closely tracking the regular releases to watch for signs that could further validate a rebound. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that comes out regularly — will be on energy traders' radar. Data on rig count from energy service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is also closely followed. Finally, news related to coronavirus vaccination will be of utmost importance.

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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Transocean Ltd. (RIG) : Free Stock Analysis Report
Petroleo Brasileiro S.A. Petrobras (PBR) : Free Stock Analysis Report
PetroChina Company Limited (PTR) : Free Stock Analysis Report
ConocoPhillips (COP) : Free Stock Analysis Report
BP p.l.c. (BP) : Free Stock Analysis Report
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