Oil & Gas Stock Roundup: Exxon's Denbury Buyout, Shell's Oil Find & More
It was another week when oil prices moved up while natural gas futures marked a loss.
On the news front, the headlines came from energy biggie ExxonMobil’s XOM acquisition of carbon management expert Denbury Inc. and its European peer Shell’s SHEL oil find offshore Namibia. Developments associated with SLB SLB, BP plc BP and Ring Energy REI also made it to the headlines.
Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures increased 2.1% to close at $75.42 per barrel but natural gas prices dropped 1.7% to end at $2.54 per million British thermal units (MMBtu).
In particular, the crude price action continued to be positive, with a steady decline in inflation rates and the Federal Reserve's decision to reduce the magnitude of interest rate hikes. A weaker greenback also supported the dollar-denominated commodity.
Meanwhile, natural gas found itself on the opposite side on forecasts of cooler-than-expected temperatures and therefore limiting air conditioning demand.
Recap of the Week’s Most Important Stories
1. U.S. supermajor ExxonMobil has entered into an agreement to acquire oil producer Denbury Inc. for $4.9 billion. The move is part of ExxonMobil’s plan to enhance its transition to clean energy with a well-established carbon dioxide sequestration operation. The acquisition will provide XOM access to the biggest pipeline network in the United States.
Denbury exited bankruptcy in September 2020. The company’s main business is to churn out crude. The majority of DEN’s revenues are generated from enhanced oil recovery or injecting carbon dioxide into wells to extract more oil. Denbury is also an expert in carbon management. The acquisition gives ExxonMobil ready-made carbon dioxide transportation, allowing XOM to make carbon capture a profitable business.
Oil and gas companies are actively involved in carbon capture and storage (CCS) projects. These offer a transition pathway for the rapid and effective reduction of carbon dioxide emissions beyond what can be achieved by alternative methods like electrification and renewable fuels. (ExxonMobil Signs Deal to Acquire Denbury for $4.9B)
2. Shell, a leading global energy company, announced its fourth oil discovery offshore Namibia. The successful drilling has confirmed the presence of hydrocarbon, marking a milestone in the company's efforts to explore and leverage new oil resources.
The drilling operation by Shell, in collaboration with partners QatarEnergy and Namibia's national oil company, yielded positive results. Although further evaluation is required to determine the development potential of the discovered hydrocarbon, this recent achievement is a testament to SHEL’s expansion strategy in the region.
Namibia, located in southwestern Africa, has emerged as an attractive destination for offshore oil exploration and production. Shell's recent discoveries, including the Graff and La Rona wells and TotalEnergies' Venus prospect in France, have generated significant excitement in the industry. (Shell Makes Fourth Oil Discovery Offshore Namibia)
3. U.S. oilfield service biggie SLB announced that it is halting all shipments of products and technology to Russia from all its operations due to the continuous expansion of Western sanctions. It was one of the few providers to continue working in the country's oil sector following Russia's invasion of Ukraine. With the most recent embargo, more countries are now subject to restrictions that have been in place since 2022.
Management stated that the company takes its responsibility to comply with export control and economic sanction laws quite seriously. It also added that SLB remains aligned with the international community in condemning and calling for an end to the war in Ukraine. The Zacks Rank #3 (Hold) company said that the Russia ban now applies to all its worldwide operations and is not just restricted to the United Kingdom, the United States, the European Union and Canada.
You can see the complete list of today’s Zacks #1 Rank stocks here.
In order to comply with Western prohibitions on the transfer of oil equipment and technology, SLB reportedly changed its business operations earlier this year, per media reports. As part of the transformation, employees in Russia were denied access to specific communications and software platforms, and the unit was walled off from other activities. (SLB Halts Shipments to Russia From all of Its Operations)
4. BP came as a major winner in a 7-gigawatt (GW) offshore wind site auction in Germany, marking its entry into the offshore wind market in continental Europe. The London-based energy major BP and French multinational TotalEnergies acquired development rights for four sites in the Germany dynamic tender round, with combined bids of €12.6 billion.
Three sites are situated 120 kilometers northwest of Heligoland in the North Sea. The sites are intended to develop 2 GW of offshore turbine capacity. The remaining one with 1 GW is located in the Baltic Sea. BP acquired rights to develop two projects, representing 4 GW of the total capacity. TotalEnergies received awards for the other two sites.
The awards align well with BP’s integrated energy strategy and disciplined capital allocation. The company expected returns of 6-8% from the project. The latest move is a crucial step in implementing BP’s strategy to become a profitable integrated player in the electricity markets. (BP Makes Foray Into Continental Europe's Offshore Wind Market)
5. U.S.-based oil and gas producer Ring Energy recently agreed to buy the Central Basin Platform (“CBP”) assets of privately-held upstream company Founders Oil & Gas IV. The transaction, valued at $75 million, further solidifies Ring's presence in the Permian Basin and enhances its operational capabilities. The acquisition — to conclude by Sep 30 — is expected to be immediately accretive and bring various benefits to the company's shareholders.
The total transaction value comprises $60 million in cash to be paid at closing, and an additional deferred cash payment of $15 million, which will be due four months after the closing date. Ring will fund the transaction using its available cash reserves and borrowings under its recently reaffirmed senior revolving credit facility.
The acquisition of Founders' CBP assets strategically expands Ring's core operating area in Ector County, TX. This move allows REI to capture various cost synergies, further enhancing operational efficiency. The assets closely resemble the Stronghold assets acquired in the previous year, featuring high-quality rock formations and proven performance. Leveraging its expertise, Ring aims to optimize the undeveloped drilling locations available through the transaction. (Ring Energy to Acquire Permian Basin Assets for $75M)
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 -2.2% -10.6%
CVX -0.4% -15%
COP +3.7% -11.5%
OXY +1.3% -8.4%
SLB +7.1% -3.3%
RIG +1% +30.6%
VLO -1.2% -17.4%
MPC +0.3% -3%
With oil and gas moving in different directions, stocks were mixed. The Energy Select Sector SPDR — a popular way to track energy companies — edged up 0.8% last week. But over the past six months, the sector tracker has decreased 9.8%.
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. Finally, there will be 2023 Q2 earnings, with the first batch of S&P 500 components coming up with quarterly results.
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BP p.l.c. (BP) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Schlumberger Limited (SLB) : Free Stock Analysis Report
Ring Energy, Inc. (REI) : Free Stock Analysis Report
Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report
