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Oil & Gas Stock Roundup: Eni's Discovery, Chevron's Renewables Push & More

It was a week when oil prices moved up while natural gas futures registered another big decrease.

On the news front, Italy-based energy major Eni E made a natural gas discovery in the Barents Sea, Norway, while American biggie Chevron CVX revealed a renewable fuel partnership with fuel-cell truck manufacturer, Hyzon Motors. Developments associated with Petrobras PBR and Equinor EQNR also made it to the headlines.

The last week of 2022 turned out to be a mixed one for the sector. West Texas Intermediate (WTI) crude futures edged up some 0.9% to close at $80.26 per barrel but natural gas prices slumped nearly 12% to end at $4.475 per million British thermal units (MMBtu).

Coming back to the holiday-shortened week ended Dec 30, the oil price action continued to be positive on China’s easing of Covid-Zero policies and demand concerns emanating from Moscow’s retaliatory crude export ban on countries that imposed price caps on its crude.
Meanwhile, natural gas finished deep down on forecasts of warmer weather.

Recap of the Week’s Most Important Stories

1. Rome-based energy biggie Eni, through its subsidiary, Vaar Energi, made a natural gas discovery in the 7122/9-1 T2 Lupa well near the Goliat field in the Barents Sea. This is the largest find in the Norwegian Continental Shelf this year and bolsters the company’s expansion strategies in the area. Lupa is the first exploration well to be drilled in the production license 229E.

Located 27 kilometers northeast of the Goliat field, the well was drilled in a water depth of 403 meters using the Transocean Enablers drilling rig. The well encountered a 55-meter gas column in the targeted sandstones of the Havert formation of the Triassic age. Extensive data acquisition and sampling have been performed.

According to preliminary estimates, the discovery holds 9-21 billion cubic meters of recoverable gas or 57-132 million barrels of oil equivalent. The find is expected to contribute to the future gas supply from the Barents Sea. Eni will consider tying back the discovery to existing infrastructure on the Goliat field later. (Eni Makes Gas Discovery at Lupa Well in Barents Sea)

2. Energy major Chevron has committed to partner with Hyzon Motors, according to a filing with the U.S. Securities and Exchange Commission by the fuel-cell truck manufacturer.

Per the agreement, Chevron’s New Energies division and Hyzon Zero Carbon — a subsidiary of the New York-based company — will invest in Raven SR S1 LLC. A wholly owned unit of privately held renewable fuels producer Raven SR, Raven SR S1 LLC will "develop, construct, operate and maintain a solid waste-to-hydrogen generation production facility located in Richmond, California."

The deal entails Chevron to infuse $20 million in Raven, while Hyzon will shell out $10 million for around a 20% stake in the LLC. (Chevron, Hyzon to Invest in Renewable Fuels Company)

3.  The new chief executive of Brazil's state-run energy giant Petrobras is likely to shift the company’s focus away from deep water drilling toward renewables. Jean-Paul Prates — named by president-elect Luiz Inacio Lula da Silva as the next CEO — further indicated that he plans to alter the fuel pricing policy that is currently aligned with global oil prices.

At the same time, the incoming head of PBR assured investors that prices won’t be totally detached from the international markets. Investors should know that pricing policy is a sensitive issue for this Zacks Rank #3 (Hold) company, which caused the ouster of three CEOs during the term of outgoing president Jair Bolsonaro, after an increase in fuel prices stoked voter frustration in an election year.

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

A senator for Lula’s Workers’ Party and former company official, Prates had previously stressed on the need to invest in the energy transition, with a primary focus on renewables. PBR has often come under fire for not focusing enough on greener energy and, while shelling out hefty dividends to investors. (Here's What to Expect From Petrobras' Incoming CEO)

4   Equinor resumed production at the Njord field in the Norwegian Sea after upgrading the platform and the floating storage and offloading vessel (“FSO”). In 2016, the field’s platform and Njord Bravo FSO were brought ashore after almost two decades of production, setting up a renewed energy hub in the Norwegian Sea.

This was the first time a platform and an FSO have been disconnected from the field and received extensive upgrades. With the upgrades, the The Stavanger, Norway-headquartered integrated major expects the Njord field to produce for another 20 years.

The Njord field is an important asset in Equinor’s portfolio in Norway. The project brings the company closer to its production target of 200,000 barrels of oil equivalent per day on the Norwegian Continental Shelf. (Equinor Resumes Production at Norway's Njord Field)

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%                 +26%
CVX                +1.2%                 +18.8%
COP               +0.8%                 +29.7%
OXY                -1.5%                  +4.2%
SLB                +0.9%                 +50%
RIG                -2.4%                  +36.9%
VLO               +2%                     +17.5%
MPC              +1.1%                 +37.8%

With oil rising for the week, most stocks were up too. The Energy Select Sector SPDR — a popular way to track energy companies — inched up 0.5% last week. Over the past six months, the sector tracker has increased 20.5%.

What’s Next in the Energy World?

Following an upbeat 2022, market participants will closely track the regular releases to look for further guidance on the direction of the commodities in the new year. 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. News related to the EU price cap on Russian oil exports and the potential demand loss from surging coronavirus cases in China will be the other factors that will dictate the near-term price movement of the commodities.

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