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Oil & Gas Stock Roundup: Halliburton's Q4 Earnings, Apache's Oil Find & More

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Nilanjan Choudhury
·8 min read
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It was a week when both oil and natural gas prices settled higher.

On the news front, oilfield services biggie Halliburton HAL reported December quarter earnings, while American upstream major Apache Corporation APA — together with partner TOTAL SE TOT — announced another discovery offshore Suriname Block 58.

Overall, it was a modestly bullish week for the sector. West Texas Intermediate (WTI) crude futures inched up a marginal 0.2% to close at $52.36 per barrel, while natural gas prices were up1.4% in the week to end at $2.737 per million Btu (MMBtu). In particular, the oil markets just about managed to maintain their forward momentum from the previous two weeks.

Oil prices got a slight nudge up as investors looked past a U.S. government data showing an increase in gasoline and distillate supplies and turned their attention to the fifth successive weekly crude stockpile draw. However, the price gains were tempered by a fresh COVID-19 outbreak in China that triggered a new wave of lockdowns — inflicting another blow to fuel consumption.

Natural gas finished up too following a bullish weekly supply data, favorable weather predictions and strong liquefied natural gas (“LNG”) feedgas deliveries.

Recap of the Week’s Most-Important Stories

1.  Halliburton beat the fourth-quarter Zacks Consensus Estimate for earnings with stronger-than-expected profits from both its divisions. The company reported adjusted net income per share of 18 cents, beating the Zacks Consensus Estimate of 15 cents.

Meanwhile, revenues of $3.2 billion came in 37.6% lower than the year-ago quarter but essentially matched the Zacks Consensus Estimate. North American revenues fell 46.9% year over year to $1.2 billion, while revenues from Halliburton’s international operations were down 30% from the year-ago period to $2 billion.

The world’s biggest provider of hydraulic fracking noted that the North American activity levels are finally gathering momentum, while international operations are likely to bottom out in the first quarter of 2021. The company’s disciplined execution, cost-cutting measures and improvements in service offerings should lead to strong margins and cash flows. With the most encouraging macro backdrop in months and the sector’s recovery from the coronavirus-induced depths, Halliburton is targeting industry-leading returns and strong free cash flow. (Halliburton Q4 Earnings Surpass Estimates, Down YoY)

2.  Apache and its joint venture partner TOTAL have made the fourth oil discovery at the Keskesi East-1 well in Block 58, offshore Suriname.

The Keskesi East-1 well, which was drilled using the Noble Sam Croft drillship at a water depth of 725 meters, found a total of 63 meters net pay of hydrocarbons, containing 58 meters of net black oil, volatile oil, and gas pay in good quality Campano-Maastrichtian reservoirs. It also holds 5 meters of net volatile oil pay in Santonian reservoirs where wireline logging has just been carried out. Drilling of the Keskesi East-1 well is in progress to deeper Neocomian-aged targets.

With the success of oil discoveries from four wells in Block 58, offshore Suriname, the company’s CEO and president John Christmann said, “we are excited to commence the appraisal program on our initial discoveries and extend our Block 58 exploration program to the north in 2021”.(Apache Hits Oil for the 4th Time in Suriname's Block 58)

3.  TOTAL announced that it has entered into an agreement to acquire a 20% interest in Adani Green Energy Limited from Adani Group. Per the agreement with Adani Group, TOTAL will acquire a 50% stake in a 2.35- gigawatt (GWac) portfolio of operating solar assets owned by Adani Green and a 20% stake in Adani Green for a total investment of $2.5 billion.

This strategic investment of TOTAL is in sync with the Zacks Rank #1 (Strong Buy) company’s long-term goal of achieving 35 GW of gross production capacity globally from renewable sources by 2025 and adding 10 GW per year afterward. TOTAL has been entering into agreements, joint ventures and acquisitions, along with making investments through its unit SunPower Corporation SPWR, to expand the renewable footprint.

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

TOTAL’s entry into India’s renewable space with Adani Green can be a lucrative proposition for the former as India is currently aiming for 450-GW renewable energy by 2030. So, there is ample scope for growth in India’s renewable space, as demand for energy is constantly increasing. (TOTAL Focuses on Renewables, to Buy 20% of Adani Green)

4.  Chevron CVX recently made a Series C investment in Blue Planet Systems Corporation. In addition, it signed a letter of intent with Blue Planet regarding cooperation on pilot projects and other commercial opportunities in prime geographic locations with the purpose of jointly developing lower-carbon prospects.

San Jose-domiciled Blue Planet Systems is a fledgling company that uses its own carbon capture process to extract fuel gas from refineries and other industrial activities into making materials. It manufactures and develops carbonate aggregates and carbon capture technology to lower the carbon footprint from industrial operations.

Chevron’s Technology Ventures unit president Barbara Burger states, “Carbon capture, utilization, and storage or CCUS is viewed to be essential to advancing progress toward the global net zero ambition of the Paris Agreement. This investment is made through our Future Energy Fund which focuses on startups with lower-carbon technologies that can scale commercially, and we welcome Blue Planet to this portfolio.” (Chevron Invests in San Jose-Based Carbon Capture Start-Up)

5.  TC Energy TRP announced the launch of a binding open season to seek shipper commitments for the movement of crude oil through the Keystone XL pipeline system from various receipt points located in Hardisty, AB, to Patoka, IL.

The binding open season procedure provides an opportunity for interested shippers to bid for capacity that is likely to be offered after the commencement of the pipeline services in about two years. Notably, the launch is being conducted despite upcoming U.S. President Joe Biden’s pledge to suspend the pipeline’s permits to continue the construction.

The company expects to free up the capacity of nearly 80,000 bbl per day of crude oil on the current base Keystone XL pipeline system once the barrels are moved to the expansion pipeline upon its completion. The present Keystone XL pipeline system is capable of transporting more than 590,000 bbl per day of oil export from Alberta to distillation markets in the Midwest and Gulf Coast of the United States. Importantly, the pipeline can append an additional capacity of 830,000 bpd of oil export from Alberta to Nebraska. (TC Energy Seeks Shipper Commitments for Keystone XL)

Price Performance

The following table shows the price movement of some the major oil and gas players over past week and during the last six months.

Company    Last Week    Last 6 Months

XOM                +5.3%                 +10%
CVX                +1.1%                 +5.6%
COP               +0.9%                 +12.9%
OXY                +11.5%               +37.5%
SLB                +0.3%                 +33.8%
RIG                 +18%                  +78.1%
VLO                +1%                    +5.1%
MPC               +1.9%                 +16%

The Energy Select Sector SPDR — a popular way to track energy companies — was up 3.2% last week. The best performer was offshore driller Transocean RIG whose stock surged 18%.

For the longer term, over six months, the sector tracker is up 16.5%. Transocean was the major gainer during the period too, experiencing a 78.1% price appreciation.

What’s Next in the Energy World?

As global oil consumption gradually ticks up from the depths of coronavirus, market participants will be closely tracking the regular releases to watch for signs that could further validate a rebound. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that comes out regularly — will be on energy traders' radar. Data on rig count from energy service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is also closely followed. Finally, news related to coronavirus vaccination and additional U.S. stimulus will be of utmost importance.

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Transocean Ltd. (RIG) : Free Stock Analysis Report
TOTAL SE (TOT) : Free Stock Analysis Report
Apache Corporation (APA) : Free Stock Analysis Report
Chevron Corporation (CVX) : Free Stock Analysis Report
Halliburton Company (HAL) : Free Stock Analysis Report
SunPower Corporation (SPWR) : Free Stock Analysis Report
TC Energy Corporation (TRP) : Free Stock Analysis Report
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