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Oil & Gas Stock Roundup: News From Chevron, Equinor, Shell, ConocoPhillips & APA

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·7 min read
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It was a week when both oil and natural gas prices settled lower.

On the news front, integrated major Chevron CVX earmarked growth action in its annual analyst meeting, while Norway’s Equinor EQNR struck oil in the Barents Sea.

Overall, it was not a good week for the sector. West Texas Intermediate (WTI) crude futures edged down a marginal 0.7% to close at $65.61 per barrel, natural gas prices fell 3.7% in the week to end at $2.60 per million British thermal units (MMBtu). In particular, the oil market hit a speed bump after rallying to a 23-month high in the previous week.

Coming back to the week ended Mar 12, oil prices fell after a U.S. government data showed surging crude stockpiles. However, this was offset by hefty declines in gasoline and distillate supplies, pointing to improving fundamentals in the fuel market.

Natural gas finished down too following a smaller-than-expected withdrawal from storage and the prospect of less consumption due to unfavorable changes in the weather data.

Recap of the Week’s Most-Important Stories

1.  Chevron recently drafted a plan wherein it will maintain disciplined spending, double its targeted savings from its Noble Energy deal and set new carbon intensity reduction goals.

For the 2021-2025 period, Chevron reiterated its organic capital and exploratory expenditure guidance in the $14-$16 billion range. Further, the Zacks Rank #1 (Strong Buy) company doubled its initial estimate of Noble synergies to $600 million, which will lead to an anticipated 2021 operating cost reduction of 10% from the 2019 levels.

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

Over the next five years, Chevron foresees an investment boost in various lucrative assets, including the prolific Permian Basin of Texas and New Mexico where output could reach one million barrel a day as expenses of its major expansion in Kazakhstan are expected to alleviate. (Chevron Outlines Capital Spending & Investment Plans)

2.  Equinor recently announced the discovery of oil in the Barents Sea. Exploration well 7220/7-4, located in production license 532, has proven to have a significant hydrocarbons depository. The license 532 was awarded in 2009 in the 20th licensing round. Notably, 7220/7-4 well is the 11th in this production license and the first of the four wells planned for 2021.

Recoverable resources of 5-8 million standard cubic meters of oil have been estimated at the discovery site. In other words, it has a recoverable resource of 31-50 million barrels of oil. The exploration well was drilled around 10 kilometers southwest of the 7220/8-1 well in the Johan Castberg field to a depth of 2080 metres below sea. Equinor has Petoro and Eni S.p.A.’s (E Quick QuoteE - Research Report) affiliate VårEnergi as partners at the license.

The company encountered 109 meters of oil from the Sto and Nordmela formations. Oil was struck at a depth of 1,788 meters below sea, with no gas cap in the well. This discovery is expected to be connected to the Johan Castberg field through planned infrastructure at a future date, which will boost the value of the field. The exploration well was plugged and abandoned by the company. (Equinor & Partners Discover New Oil in Barents Sea)

3.  Royal Dutch Shell RDS.A recently inked a deal with a consortium — made up of subsidiaries of Cheiron Petroleum Corporation and Cairn Energy PLC — to sell its upstream assets in Egypt's Western Desert for $926 million.

The contract is set at a base price of $646 million along with additional payments of around $280 million between 2021 and 2024, depending on the price of crude oil and exploration results. The agreement comprising Shell Egypt’s interest in 13 inland concessions and its share in the Badr El-Din Petroleum Company (BAPETCO) is slated to be completed by the end of this year. It is contingent on government consents and pending approvals.

Per the company’s upstream director Wael Sawan, “The deal will deliver value to Shell and to Egypt. It will enable Shell to concentrate on its offshore exploration and integrated value chain in Egypt, including seven new blocks in the Nile Delta, West Mediterranean and Red Sea. It will help Egypt maximize the potential of its onshore assets through new investment, helping secure energy and revenue for years to come.” (Shell to Divest Its Upstream Assets in Egypt for $926M)

4.  ConocoPhillips COP recently announced the resumption of a share repurchase program. The leading upstream energy player expects to repurchase stocks at an annual rate of $1.5 billion and is planning to accomplish the stock buyback ratably across all four quarters of this year. In the wake of the company’s deal to buy Concho Resources, the program was suspended in the December quarter of 2020.

ConocoPhillips added that the annualized stock repurchase rate suggests an increase of 50% from the prior program. It can be said that the resumption of stock buyback suggests the company’s confidence in the overall business scenario, since the energy sector is now in a better footing, as reflected by the rebound of oil price to pre-pandemic levels.

ConocoPhillips believes that via dividend payments and the recently announced share repurchases, it will be able to return 30% of cash from operations to shareholders every year. (ConocoPhillips Resumes Stock Repurchases: Here's Why)

5.  APA Corporation APA and partner TOTAL SE TOT had to involuntarily halt drilling operations and services at the Keskesi East-1 exploration well off the Suriname coast due to substantial pressure increases.

Earlier, APA and Total made a significant oil discovery in Block 58 offshore Suriname. Notably, APA owns a 50% participating interest in Block 58, while TOTAL is the operator of the block with the remaining interest.

The Keskesi East-1 well was drilled using the Noble Sam Croft drillship at a water depth of about 725 meters. The well discovered volatile oil and gas condensate in the Upper cretaceous-aged Campanian and Santonian intervals, and continued the drilling toward deeper Neocomian-aged targets. (APA and TOTAL Cease Keskesi Well Drilling in Offshore Suriname)

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                +1.7%              +67.2%
CVX                 +2.3%              +43.9%
COP                +1.5%               +78.5%
OXY                  -1.9%               +204.6%
SLB                  -0.2%               +63.1%
RIG                  +7.7%               +291.1%
VLO                 +4.3%               +73.6%.
MPC                +0.8%               +81.1%

The Energy Select Sector SPDR — a popular way to track energy companies — was up 1.2% last week. The best performer was offshore driller Transocean RIG whose stock rose 7.7%.

For the longer term, over six months, the sector tracker has gained 62.6%. Transocean was the major gainer during the period too, experiencing a 291.1% price appreciation.

What’s Next in the Energy World?

As global oil consumption gradually ticks up from the depths of coronavirus amid the OPEC+-led supply cuts, 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 closely followed too. Finally, news related to coronavirus vaccine approval/rollout/distribution will be of utmost importance.

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Transocean Ltd. (RIG) : Free Stock Analysis Report
 
TOTAL SE (TOT) : Free Stock Analysis Report
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report
 
Equinor ASA (EQNR) : Free Stock Analysis Report
 
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