It was a week wherein oil prices rose back above $100 and natural gas futures crossed the $7 threshold for the first time in more than a decade.
On the news front, Norwegian oil major Equinor ASA EQNR made a hydrocarbon discovery in the North Sea, while U.S. producer Murphy Oil MUR started crude production from a project in the deepwater Gulf of Mexico (GoM). Announcements from Shell plc SHEL, TotalEnergies TTE and Delek Logistics Partners DKL also made it to the headlines.
Overall, it was a good seven-day period for the sector. West Texas Intermediate (WTI) crude futures gained around 8.8% to close at $106.95 per barrel, while natural gas prices surged more than 16% to end at $7.30 per million British thermal units (MMBtu). In particular, the oil market rose for just the second time in six weeks.
Coming back to the holiday-shortened week ended Apr 14, oil prices settled higher on concerns about supplies from Russia, which is one of the world's largest producers of the commodity. Speculation has it that the European Union could shortly follow the United States in blocking imports of Russian energy to protest Moscow’s invasion of Ukraine.
Natural gas finished up even more strongly, reflecting colder-than-normal late winter weather, lower domestic output, strong LNG shipments and high coal prices.
Recap of the Week’s Most-Important Stories
1. Norway-based energy biggie Equinor announced an oil and gas discovery near the Troll and Fram area in the Norwegian North Sea. The discovery was made in the Kveikje exploration well in production license 293 B. The well was drilled with the help of Odfjell Drilling's Deepsea Stavanger offshore drilling rig.
This is the sixth breakthrough in this area since September 2019. About 300 million barrels of oil equivalent have been confirmed in the five previous findings. Based on preliminary estimates, the size of the latest discovery is expected at 4-8 million standard cubic meters of recoverable oil equivalent or 25-50 million barrels of recoverable oil equivalent. The latest discovery is commercially viable, with excellent reservoir quality.
Using the existing infrastructure, Equinor will be able to recover the oil and gas volumes at a lower cost and with low carbon emissions. The company will consider tying the discovery to the Troll B or C platform. (Equinor Finds Oil & Gas in Kveikje Exploration Well)
2. Murphy Oil announced that its King’s Quay floating production system achieved the first oil from the Khaleesi, Mormont and Samurai field development project in deepwater GoM. Once the project is fully operational by the end of this year, it is expected to process 85 thousand barrels of oil per day (MBOEPD) and 100 million cubic feet of natural gas per day.
Murphy Oil is one of the leading producers in the GoM. MUR generated 61 MBOEPD in the fourth quarter of 2021. Achieving the first oil from this offshore field on schedule and within budget shows Murphy Oil’s focus on expanding domestic oil production. At present, the Zacks Rank #1 (Strong Buy) company is completing the remaining five wells in the seven-well project.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The target for initial oil production from the Khaleesi, Mormont and Samurai project is 20,000 barrels per day and is expected to rise in the upcoming years. The production is forecast to generate a significant free cash flow, which will allow MUR to continue to deleverage the $600-$650 million range of the targeted debt reduction in 2022 and the optionality of up to $1 billion in 2023. (Murphy Gets First Oil From King's Quay in Offshore GOM)
3 London-based oil and gas major Shell, and the Chinese conglomerate — BYD — announced that the two entities would get into a strategic cooperation agreement associated with plug-in electric vehicles (EVs) in China and Europe to begin with and possibly in other regions worldwide in the future.
Shell and BYD mentioned that they plan to form a joint venture to develop EV charging networks in China. They have come up with a blueprint to operate a network of more than 10,000 charging points in China’s Shenzhen at the beginning and the Guangdong province in the near future. The network will be further expanded to more sites in the country.
Both firms will jointly look for opportunities to create BYD-Shell EV hubs in crucial European markets and form a pan-European Mobility Service Provider partnership and cooperatively develop fleet solutions and depot charging services for BYD customers in Europe. (Shell & BYD Partner for EV Charging in Europe & China)
4 French supermajor TotalEnergies and ENEOS entered into a joint venture to build onsite B2B solar distributed generation across Asia. Through the joint venture, these companies aim to develop 2 gigawatts (GW) of decentralized solar capacity over the next five years.
The joint venture will utilize TotalEnergies’ global footprint and expertise in this market segment as well as ENEOS’ expertise in renewables and strong brand presence to reduce the cost of developing onsite solar solutions for industrial and commercial customers. The ultimate aim is to lower emissions and reduce dependency on the grid.
As the demand for solar energy is expected to increase substantially in this region in the next 10 years, the joint venture should gain from the rising demand. Given the expected increase in demand, these companies might upwardly revise their clean power generation goal for the next five years. (TotalEnergies & ENEOS to Build 2GW Solar JV in Asia)
5. Brentwood, TN-based energy infrastructure firm Delek Logistics Partners declared that it signed a definitive agreement for the full acquisition of the equity stake of privately owned 3Bear Delaware Holding — an indirect subsidiary of 3Bear Energy.
The takeover, which includes 3Bear’s crude oil and gas gathering, processing and transportation businesses along with the water disposal and recycling operations in the New Mexico portion of the Delaware sub-basin, was concluded for a cash consideration worth $624.7 million.
According to Delek Logistics, this tactical deal will considerably improve its third-party revenues and help diversify its consumer base and product mix. It will also expand its position in the Delaware Basin. The acquisition, which is projected to result in an investment multiple of around 6.25 times 2023 EBITDA, provides instant growth to the distributable cash flow and strengthens environmental, social and governance optionality via carbon capture opportunities and greenhouse gas reduction projects in progress. (Delek Expands in Permian Basin by Acquiring 3Bear Energy)
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 +1.1% +41.5%
CVX +1% +58.7%
COP -1.6% +38.9%
OXY -4% +86.4%
SLB +1.6% +27.9%
RIG +2.9% +17.1%
VLO +1.6% +41.2%
MPC +0.3% +35.7%
The Energy Select Sector SPDR — a popular way to track energy companies — edged up 0.4% last week. Over the past six months, the sector tracker has increased 41.2%.
What’s Next in the Energy World?
As the global oil consumption outlook strengthens amid tightening fundamentals, market participants will closely track 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 the trends in U.S. crude production, is closely followed too. News related to the ongoing Russia-Ukraine geopolitical conflict and the potential demand hit from the resurgence of new coronavirus cases in China will be other factors that will dictate the near-term price direction for oil. Finally, there will be 2022 Q1 earnings, with the first batch of S&P 500 components coming up with quarterly results.
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Murphy Oil Corporation (MUR) : Free Stock Analysis Report
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