Oil & Gas Stock Roundup: XOM's Guyana Find and DRQ's Merger Take Center Stage
It was a week when both oil and natural gas prices recorded marginal gains.
The headlines revolved around energy biggie ExxonMobil’s XOM latest discovery in Guyana’s Stabroek block and oilfield service provider Dril-Quip’s DRQ combination with Innovex Downhole Solutions. Developments associated with Shell SHEL, Galp Energia GLPEY and Chevron CVX also grabbed attention.
Overall, it was a slightly bullish seven-day period for the sector. West Texas Intermediate (WTI) crude futures edged up around 0.1% to close at $80.63 per barrel, while natural gas prices inched higher by 0.2% to end at $1.66 per million British thermal units (MMBtu).
The crude price action remained positive for the second week running, primarily on the back of tensions in the oil-rich Middle East, which was offset by a lower-than-expected decrease in U.S. inventories.
Meanwhile, natural gas settled with its second gain in the last eight weeks on signs of production pullback.
Recap of the Week’s Most Important Stories
1. American energy major ExxonMobil has made a groundbreaking announcement, revealing a significant oil and gas discovery in the prolific Stabroek block offshore Guyana. The new find, dubbed Bluefin, marks the company's first announced discovery in the South American country for 2024, promising to further boost its oil production capabilities.
Located in the southeastern part of the Stabroek block, the Bluefin well was drilled in 4,244 feet of water by the Stena Drillmax drillship. It encountered approximately 197 feet of hydrocarbon-bearing sandstone, signaling a substantial addition to ExxonMobil’s resources in the area. However, the company has not yet estimated the recoverable reserves from this particular discovery.
The Stabroek block, spanning an impressive 6.6 million acres, has been a hotspot for ExxonMobil since its major discovery there in 2015. This area is reported to contain more than 11 billion barrels of recoverable oil and gas, making it a key asset in the company's portfolio. The Bluefin discovery adds to the more than 30 finds since 2015 in the Stabroek block. (ExxonMobil Announces Bluefin Oil Discovery in Guyana)
2. Dril-Quip and Innovex Downhole Solutions, Inc. have announced a definitive agreement to merge, creating a unique and innovative energy platform. The all-stock transaction, disclosed in a recent press release, positions the combined entity as a frontrunner in innovation, boasting an expanded scale, diverse product portfolio and an extensive geographic footprint.
Dril-Quip, renowned for its expertise in developing, manufacturing and providing highly engineered equipment and services for the global offshore and onshore oil and gas sector, will join forces with Innovex, a global leader in providing mission-critical technologies and services across the entire well lifecycle. The merger is anticipated to yield a resilient earnings profile capable of driving value even through industry cycles.
Upon completion, Dril-Quip shareholders are expected to hold approximately 52% ownership of the combined company, with Innovex shareholders owning the remaining 48% on a fully diluted basis. (Dril-Quip & Innovex Forge Industry-Leading Merger)
3. Shell, a global energy company headquartered in London, recently announced its ambitious plan to divest approximately 500 retail sites annually over the next two years. This strategic move comes as a response to the escalating demand for electric vehicle (EV) chargers, reflecting the company's commitment to adapting to evolving consumer needs and transitioning toward sustainable energy solutions.
In its latest energy transition strategy, Shell emphasizes the importance of upgrading its retail network to cater to the rising demand for electric vehicle charging infrastructure. This Zacks Rank #3 (Hold) company acknowledges the shifting landscape of the energy sector and aims to align its operations with the growing popularity of electric vehicles.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
As the EV charging business continues to grow, Shell anticipates a favorable internal rate of return of 12% or higher. This projection underscores the company's confidence in the profitability of investing in electric vehicle infrastructure and reflects its long-term commitment to sustainable energy solutions. (Shell Plans to Divest Retail Sites to EV Charging)
4 Portugal-based energy company Galp Energia, along with its partners National Petroleum Corporation of Namibia (NAMCOR) and Custos Energy, discovered oil in the Mopane 2X well. The Mopane 2X well has reached its designated depth in the petroleum exploration license (PEL) 83.
The Mopane 2X well, drilled in the Orange Basin offshore Namibia, has successfully discovered a substantial column with light oil within reservoirs of excellent quality. The drilling operation included the AVO-3 exploration target, the AVO-1 appraisal target and another deeper target, which were thoroughly cored and logged. In particular, the AVO-1 appraisal target has confirmed the same pressure regime that was found in the Mopane 1X discovery well, located approximately 8 kilometers to the east. The discovery confirms the lateral extension of the well.
Following the completion of drilling activities, the rig will return to the location of the Mopane 1X well to conduct a drill stem test (DST) until early April. The acquired data will be analyzed by Galp Energia in the following week to evaluate the commercial viability of the discoveries. (Galp Energia Discovers Oil in Namibia's Orange Basin).
5. Chevron, one of the largest oil companies in the world, agreed to pay more than $13 million in fines for a series of oil spills that occurred in California. This penalty reflects the California Department of Conservation's commitment to environmental protection and holds oil companies accountable for their actions.
One of the most significant fines imposed on Chevron is associated with a devastating oil spill in Kern County in 2019. The spill, which dumped over 800,000 gallons (3 million liters) of oil and water into a canyon, shook the core of the state's oil industry.
While Chevron has already undertaken the cleanup efforts for this spill, it now faces a $5.6-million fine, marking a substantial punitive measure. In addition to the Kern County incident, Chevron has agreed to pay a $7.5-million fine for more than 70 smaller spills that occurred between 2018 and 2023. These spills collectively resulted in the release of over 446,000 gallons (1.6 million liters) of oil and significant environmental damage. (Chevron to Pay Settlement Worth $13M for Oil Spills).
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% -2.3%
CVX -0.6% -7.5%
COP +2.5% +4.9%
OXY +1.9% +0.3%
SLB +2.1% -8.6%
RIG +2.9% -27.3%
VLO +3.6% +18.1%
MPC +3.3% +30.7%
With both oil and gas moving up for the week, stocks were mostly positive. The Energy Select Sector SPDR — a popular way to track energy companies — rose 1.7% last week. But over the past six months, the sector tracker has increased 2.9%.
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. As a matter of fact, fuel demand and the rate of stock drawdowns in the coming weeks will determine the trend in commodity prices. 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.
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Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Dril-Quip, Inc. (DRQ) : Free Stock Analysis Report
Galp Energia SGPS SA (GLPEY) : Free Stock Analysis Report
Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report
