Oil & Gas Stock Roundup Headlined by ExxonMobil & Shell's Q1 Updates
It was a week wherein oil prices lost more steam but natural gas futures rallied to their highest since 2008.
On the news front, supermajors ExxonMobil XOM and Shell SHEL issued updates on their upcoming Q1 earnings. Announcements from Murphy Oil MUR, Equinor EQNR and Petrobras PBR also made it to the headlines.
Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures lost 1.2% to close at $98.26 per barrel but natural gas prices rose around 10% to end at $6.278 per million British thermal units (MMBtu). In particular, the oil market fell for the fourth time in five weeks.
Coming back to the week ended Apr 8, oil prices fell further below $100 after a government report showed builds in crude and distillate stockpiles. The possible release of crude by the International Energy Agency into the commercial market also dragged prices down, while a stronger greenback, which can weaken dollar-denominated commodities like oil, played its part too.
Meanwhile, natural gas finished up strongly, reflecting colder-than-normal weather, lower domestic output, strong LNG shipments and high coal prices.
Recap of the Week’s Most-Important Stories
1. ExxonMobil recently expressed optimism over the significantly higher oil and gas prices, contributing to its first-quarter 2022 upstream earnings.
XOM expects its upstream business to generate a maximum of $2.7 billion in additional earnings in the first quarter sequentially. The integrated energy giant expects operating profits from oil and gas operations of up to $9.3 billion, the highest for any quarter since 2017.
The company expects high oil and gas prices to boost earnings of its production business after Russia’s invasion of Ukraine pushed the commodity prices significantly higher. The company projects operating results in the first quarter from the oil and liquids businesses to improve $1.9-$2.3 billion compared with the December-end quarter of 2021, thanks to an uptick in oil prices. The improvement in natural gas prices is likely to have contributed up to $400 million to upstream business profits, as estimated by ExxonMobil. (ExxonMobil Projects $9.3B Worth Upstream Earnings for Q1)
2. Shell said it would take a $4-5 billion hit in the first quarter of this year after ceasing operations in Russia following Moscow’s invasion of Ukraine. The company released a preliminary report for the January-March period wherein the London-based energy biggie informed that apart from the cost of exit, the charges include other associated effects like loss of value on assets, non-payment of obligations and other credit losses.
Shell, however, maintained that the charges, which were previously thought to reach some $3.4 billion, won’t impact adjusted earnings. The company also warned about adverse working capital movements to the tune of $7 billion due to highly fluctuating oil and gas prices.
On a positive note, the company expects surging commodity realizations to boost its first-quarter trading results, while its LNG unit is also set to benefit. Shell will separate its renewable energy business from the integrated gas segment, when it reports next month. (Shell Flags Possible $5B Q1 Hit From Russia Business)
3 Murphy Oil announced that its board of directors approved a 17% increase in the annualized dividend rate to 70 cents per share, up from the prior annualized rate of 60 cents.
The new quarterly dividend is payable Jun 1, 2022, to stockholders of record as of May 16, 2022. Murphy Oil has a long history of dividend payments and has paid dividends to shareholders consecutively since 1989. Since 2012, the Zacks Rank #1 (Strong Buy) upstream operator has returned $3.9 billion to its shareholders through buybacks and dividend payouts. Murphy Oil’s new dividend yield will be 1.72% compared with the Zacks S&P 500 composite's average of 1.45%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Stable operating expenses, systematic hedges and strong production volumes will provide enough funds to sustain the dividend hike over the long term. (Murphy Oil Rewards Shareholders With 17% Dividend Hike)
4 Equinor received approval from the Canada government to proceed with the Bay du Nord development project to drive the Newfoundland and Labrador economy.
Discovered in 2013, Bay du Nord is situated in the Flemish Pass region off the coast of Newfoundland and Labrador. Once completed, it will be the first deepwater drilling site in Canada. The project, operated by Equinor, is currently expected to be valued at more than $12 billion.
The project involves three light oil discoveries in the Flemish Pass Basin, with estimated recoverable resources of 300 million oil barrels. Additional discoveries in the area could increase the estimate significantly. Bay du Nord is expected to commence production as early as 2028. (Equinor Gets Approval for Canada's Bay du Nord Project)
5. Brazilian government-owned oil giant, Petrobras, declared that it found a new oil accumulation in the southern part of the Campos Basin. The oil accumulation was discovered in a wildcat well in the Alto de Cabo Frio Central block, at a distance of about 140 miles from Rio de Janeiro, the water depth of which is 1,833 meters.
Petrobras took over the Alto de Cabo Frio Central block in October 2017 in the third bidding round of the National Agency for Petroleum, Natural Gas and Biofuels (ANP), under the production sharing regime, with Pré-Sal Petróleo S.A. as the manager. PBR, which is the operator of the block, owns a 50% stake.
Petrobras has an impressive portfolio of investments, particularly in Brazil’s pre-salt reservoirs that lie below the Espírito Santo, Campos and Santos basins in deep and ultra-deep water. The company is the operator in most of these exploration areas and holds interests in them ranging from 20% to 100%. (Petrobras Unearths New Pre-Salt Oil in Campos Basin)
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 +4.5% +41.1%
CVX +3.5% +58.6%
COP +2.5% +39.3%
OXY +6.4% +85.1%
SLB +2.1% +31.1%
RIG -4.1% +12.1%
VLO +1.9% +32.7%
MPC +2.5% +34.6%
The Energy Select Sector SPDR — a popular way to track energy companies — was up 3.2% last week. Over the past six months, the sector tracker has increased 41.1%.
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.
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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Petroleo Brasileiro S.A. Petrobras (PBR) : Free Stock Analysis Report
Murphy Oil Corporation (MUR) : Free Stock Analysis Report
Equinor ASA (EQNR) : Free Stock Analysis Report
Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report
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