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Oil & Gas Stock Roundup: BP's Lightsource Deal, Equinor's Nigeria Exit & More

It was another week when both oil and natural gas prices posted losses.

On the news front, the headlines revolved around European supermajor BP plc’s BP decision to take full ownership of solar power developer Lightsource BP and Norwegian behemoth Equinor’s EQNR sale of its Nigerian business. Developments associated with Cheniere Energy LNG, Petrobras PBR and TC Energy TRP also made it to the headlines.

Overall, it was a bearish seven-day period for the sector. West Texas Intermediate (WTI) crude futures decreased around 2% to close at $74.07 per barrel, while natural gas prices moved down 6.2% to end at $2.81 per million British thermal units (MMBtu).

The crude price action remained negative for the sixth week running after government data showed a surprise build in inventories and record-high crude production. Even the OPEC+ announcement of nearly 2 million barrels per day of additional production cuts was unable to shore up oil prices as the market looked for stronger commitments.

Meanwhile, natural gas settled with another big weekly loss, overwhelmed by high production and insipid weather-related demand.

Recap of the Week’s Most Important Stories

1. BP announced the acquisition of the remaining 50.03% stake in Lightsource BP, a leading solar and battery storage developer. The deal, valued at approximately $322 million (£254 million), marks a milestone in the London-based oil major’s commitment to expanding its presence in the renewable energy sector.

Operating with a proven capital-light business model, Lightsource BP specializes in developing, engineering, constructing, and farming down utility-scale solar and battery storage projects. The company has built a solid reputation for delivering renewable projects with equity returns in the mid-teens, thanks to its strategic approach of selling its majority interests in assets to partners.

The acquisition will give BP full ownership of Lightsource BP, providing the energy giant with the opportunity to leverage its capabilities and strengths in areas such as finance and trading. The move aligns with BP's broader strategy to diversify its portfolio and transition toward cleaner and more sustainable energy sources. It is also in sync with BP's strategy to attain double-digit equity returns from the renewable energy business. (BP Expands Green Footprint With Lightsource BP Acquisition)

2. .  Equinor entered an agreement to divest its Nigeria business to the country-based Chappal Energies. The move is part of the Stavanger, Norway-headquartered integrated major’s initiatives to optimize asset allocation and align its portfolio with its core business strategy.

The divestment encompasses the Zacks Rank #3 (Hold) company’s stake in the Agbami oil field. The Agbami oilfield project stands as one of Nigeria’s major deepwater developments. Since its commencement in 2008, the Agbami field has yielded more than 1 billion barrels of oil.

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

Nigeria has long been a pivotal element of Equinor’s international operations. The company’s decision to divest its Nigeria business marks a substantial shift in its global footprint. Equinor’s Nigeria business includes a 53.85% interest in exploration licenses OMLs 128 and a 20.21% stake in the Agbami field. The transaction’s completion is subject to obtaining all necessary regulatory and contractual approvals. (Equinor Scores Deal to Divest Its Nigeria Business)

3. Natural gas exporter Cheniere Energy entered into a long-term gas supply agreement with ARC Resources, a prominent Canadian natural gas producer, and a liquefied natural gas sale (LNG) and purchase agreement with OMV, one of Austria’s largest listed industrial companies. These deals represent a substantial boost for Cheniere's LNG portfolio and underscore the company’s commitment to delivering reliable, clean-burning energy to customers worldwide.

According to Cheniere’s pact with ARC Resources, the latter will provide the former with 140,000 MMBtu of natural gas per day for a period of 15 years. This agreement is a critical step for Cheniere, as it will help ensure a reliable source of gas for its liquefaction facilities.

On the other hand, the deal with OMV will see Cheniere supply OMV with up to 12 LNG cargoes per year, equivalent to approximately 0.85 million tons per annum (mtpa) of LNG. (Cheniere Energy Secures Gas Supply, LNG Sales Deals)

4.   Petrobras, Brazil's state-controlled oil company, is set to join OPEC+ as an observer in January 2024. This strategic decision marks a key shift in Brazil's energy strategy. Notably, the country’s position as an observer exempts it from production quotas, a crucial consideration for Petrobras, as emphasized by CEO Jean Paul Prates.

Petrobras' decision to join OPEC+ stems from a desire to collaborate on energy transition initiatives. Prates acknowledges OPEC+'s diverse membership, comprising both voting and non-voting participants, with Brazil falling into the latter category. He firmly asserts Petrobras' commitment to maintaining its status as a publicly traded company, highlighting the incompatibility with production quotas.

The unexpected announcement of Brazil's OPEC+ observer membership has raised questions about the nation's participation in voluntary production cuts. Prates promptly clarified that Brazil will not partake in any production cuts, reinforcing the nation's commitment to maintaining its current production level. (Petrobras Confirms Brazil's OPEC+ Entry, Maintains Output).

5.   TC Energy has announced that it expects comparable EBITDA for 2023 to be 8% higher than last year, surpassing initial expectations, thanks to a strong October and favorable exchange rates. The Canada-based energy infrastructure provider also gave a robust outlook for 2024, forecasting comparable EBITDA to grow 5-7% year over year, excluding any potential impact of its planned asset sale program or the South Bow spinoff.

During its annual Investor Day, TC Energy decorated its significant progress in executing its 2023 priorities, which include project execution, deleveraging and maximizing asset value. The company highlighted its commitment to maintaining a disciplined financial approach, targeting a debt-to-EBITDA ratio of 4.75X by the year-end and maintaining its targeted C$6-C$7 billion annual net capital spending in 2025 and beyond.

TC Energy announced plans to advance an incremental C$3 billion of asset sales in 2024, further streamlining its portfolio and enhancing its financial flexibility. The company also reiterated its plans to spin off its South Bow business into a separate, publicly traded company in the second half of 2024. This spinoff is expected to create two strong, independent companies, each with a clear strategic focus and enhanced growth prospects. (TC Energy Expects Strong Results, Boosts 2024 Outlook).

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                -1.5%             -3.1%
CVX                +0.3%             -7.3%
COP               +0.4%             +11.9%
OXY                -2.2%              -3.1%
SLB                -0.4%              +11.3%
RIG                 0%                  -3.2%
VLO                +1.1%            +15.7%
MPC               +1.3%             +39%

Stocks had a mixed week, indicative of the uncertain trading in oil and gas. The Energy Select Sector SPDR — a popular way to track energy companies — edged up 0.1% last week. Over the past six months, the sector tracker has increased 5.9%.

What’s Next in the Energy World?

As usual, market participants will closely track the regular releases to look for guidance on the direction of the commodities. 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 the trends in U.S. crude/natural gas production, is closely followed, too.

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BP p.l.c. (BP) : Free Stock Analysis Report

Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report

TC Energy Corporation (TRP) : Free Stock Analysis Report

Cheniere Energy, Inc. (LNG) : Free Stock Analysis Report

Equinor ASA (EQNR) : Free Stock Analysis Report

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