Oil & Gas Stock Roundup: Exxon's Megadeal, Suncor's Asset Buy & More
It was a week when oil prices moved down while natural gas futures marked a gain.
On the news front, the headlines revolved around energy biggie ExxonMobil’s XOM $60 billion deal to buy upstream firm Pioneer Natural Resources PXD and Alberta-based Suncor Energy’s SU buyout of TotalEnergies' Canadian operations. Developments associated with Shell plc SHEL and Eni SpA E also made it to the headlines.
Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures decreased 8.8% to close at $82.79 per barrel but natural gas prices moved up 14% to end at $3.34 per million British thermal units (MMBtu).
In particular, crude prices slipped even as there was another decline in weekly supplies. The negative price action came as market participants expressed significant worry over the Fed’s warning of an additional 25 basis point rate hike before the year-end, indicating a prolonged period of higher interest rates and the prospect of weaker demand.
Meanwhile, natural gas settled with a healthy weekly gain, buoyed by bullish inventory data, a hint of tightening supply and predictions of strong cooling demand.
Recap of the Week’s Most Important Stories
1. U.S. supermajor ExxonMobil has agreed to buy shale gas explorer Pioneer Natural Resources for $60 billion. At that size, the deal is the largest acquisition globally for the year.
It is ExxonMobil’s largest merger after the one with Mobil Corporation in 1999. The acquisition offers XOM a leading position in the Permian Basin, an area crucial to its growth plans. The agreement brings together two major landholders in the Permian Basin of Texas and New Mexico, solidifying Zacks Rank #3 (Hold) ExxonMobil’s position as the dominant producer in the oil field by a significant margin.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The acquisition would significantly expand ExxonMobil’s inventory of high-quality drilling sites within the basin, ensuring a stable and cost-effective source of crude oil well into the future, potentially extending beyond 2050. This extended supply will support and sustain its extensive refinery network along the Gulf Coast.
2. Suncor Energy, Canada's largest oil producer, announced its acquisition of French energy company TotalEnergies' Canadian operations for C$1.47 billion ($1.07 billion). The deal includes TTE's 31.23% stake in the Fort Hills oil sands mining project, which will give SU full ownership of the asset. This strategic move is expected to boost Suncor Energy's bitumen production capacity and solidify its position as a key player in the sector.
Under the terms of the agreement, SU will acquire TTE' 31.23% stake in the Fort Hills oil sands mining project, situated in the pristine northern Alberta region. This acquisition will skyrocket Suncor Energy's ownership in the project to a commanding 100%, marking a pivotal moment in the company's history.
This acquisition comes as a game-changer for Suncor Energy, causing a significant increase in bitumen production capacity. It will add a substantial 61,000 barrels per day to the company’s production capability and introduce a remarkable 675 million barrels of proven and probable reserves to its already impressive oil sands portfolio. (Suncor Energy to Acquire TotalEnergies' Canadian Stake)
3. Shell said that maintenance issues in the Prelude floating LNG facility, and Trinidad and Tobago resulted in decreased gas output in the third quarter. At the same time, the London-based supermajor sees considerably higher contributions from the Trading & Optimisation division, recovering from the previous quarter's slump.
According to the latest update, Shell’s upstream production rose 2.9% on a sequential basis in the third quarter of 2023 at the midpoint of the guidance. The supermajor is estimating its output in the range of 1,700-1,800 (thousand barrels of oil equivalent per day) MBOE/d compared to 1,701 MBOE/d in the second quarter of 2023.
Shell’s LNG liquefaction volumes are expected in the range of 6.6-7 million tons, translating into a decrease of around 5.2% sequentially, hampered by maintenance activity. Shell’s integrated gas production is expected in the range of 880,000-920,000 barrels of oil equivalent per day (BOE/d) or 900,000 BOE/d at the midpoint. It was 985,000 BOE/d in the April-June period. (What Did Shell Reveal in Its Update Pre Q3 Earnings?)
4. Eni, Italy's energy giant, announced a significant gas discovery in the Kutei Basin, situated off the coast of East Kalimantan, Indonesia. The Geng North-1 exploration well, drilled in the North Ganal PSC, yielded preliminary estimates of a staggering 5 trillion cubic feet (Tcf) of gas in place, along with an expected 400 million barrels of condensate.
According to Eni, the Geng North-1 well, reaching a depth of 5,025 meters in 1,947 meters of water, encountered a gas column approximately 50 meters thick in a Miocene sandstone reservoir with exceptional petrophysical properties. Following an extensive data acquisition campaign, a successful well production test revealed a capacity of up to 80-100 million standard cubic feet per day of gas and 5-6 thousand barrels per day of condensate.
The gas-rich discovery aligns with Eni's strategic vision to transition toward a portfolio composition where gas and LNG dominate, targeting 60% by 2030. The newfound gas deposit not only presents an opportunity to establish a new production hub in the Northern part of the Kutei Basin but also allows for integration with existing Bontang LNG facilities, optimizing capacity utilization. (Eni Makes a Significant Gas Discovery in Indonesia)
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 -8.9% -3.2%
CVX -3.8% -0.9%
COP -3.7% +15%
OXY -5.4% +0.1%
SLB -4.5% +16.4%
RIG -6.9% +21.2%
VLO -10.7% -6%
MPC -5.4% +11.7%
With oil moving down for the week, stocks were mostly negative. The Energy Select Sector SPDR — a popular way to track energy companies — fell 5.2% last week. But over the past six months, the sector tracker has increased 3.4%.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Eni SpA (E) : Free Stock Analysis Report
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
Suncor Energy Inc. (SU) : Free Stock Analysis Report
Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report
