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The Zacks Analyst Blog Highlights: Equinor, Schlumberger, Royal Dutch Shell, Cheniere Energy and Exxon Mobil

Zacks Equity Research
Schlumberger (SLB) is set to provide innovative technologies, as required by Chevron's Gulf of Mexico projects.

For Immediate Release

Chicago, IL – May 22, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Equinor ASA EQNR, Schlumberger Ltd. SLB, Royal Dutch Shell plc RDS.A, Cheniere Energy, Inc. LNG and Exxon Mobil Corporation XOM.

Here are highlights from Tuesday’s Analyst Blog:

Oil & Gas Stock Roundup: EQNR, SLB, RDS.A & More

It was a week where oil prices hit their highest since May 1 and natural gas futures tallied a small gain.

On the news front, Norway’s Equinor ASA agreed to shell out $965 million in cash to buy an additional 22.45% stake in the deepwater Caesar Tonga oilfield in the U.S. Gulf of Mexico. Meanwhile, oilfield services behemoth Schlumberger Ltd. announced the sale of several drilling assets for $400 million.

Overall, it was a positive week for the sector. West Texas Intermediate (WTI) crude futures rose 1.8% to close at $62.76 per barrel, while natural gas prices edged up 0.5% for the week to finish at $2.631 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Diamondback and Marathon Petroleum Report Q1 Earnings)

The U.S. crude benchmark was buoyed by the rising threat of supply disruptions due to mounting tensions in the Middle East. The escalating tension was enough to offset the impact of U.S. Energy Department's latest inventory release. The report showed that crude stockpiles recorded an unexpected weekly build, ballooning to their highest since September 2017.

Natural gas prices also gained as anticipated increase in power sector demand due to warmer weather forecasts overshadowed a larger-than-expected increase in supplies.

Recap of the Week’s Most Important Stories

1.   Equinor ASA recently announced that the company has exercised preferential rights to obtain a 22.45% additional stake from Royal Dutch Shell plc in the Caesar Tonga oil field. Through this deal, Equinor will be able to increase its interest in the oil field, located in the U.S. Gulf of Mexico (GoM), from 23.55% to 46% for $965 million in cash.

Located 290 kilometers southwest of New Orleans, the oil field — which came online in early-2012 — is one of the biggest deepwater resources in the prolific GoM. Currently, Equinor’s net production from the field stands at 18,600 barrels of oil equivalent per day. The latest deal will further increase the company’s footprint in the productive basin. The transaction has an effective date of Jan 1, 2019. Notably, this year, it will start drilling the Monument prospect in the region.

While Anadarko Petroleum Corporation is the operator of the Caesar Tonga field with a 33.75% stake, Chevron holds the remaining 20.25% interest. (Read more Equinor to Boost US GoM Footprint via Caesar Tonga Purchase)

2.    Schlumberger recently announced an accord with Wellbore Integrity Solutions, a subsidiary of a private equity firm.

The deal entails the largest oilfield service player’s intention to divest several drilling assets that are not complementing its business for a consideration of roughly $400 million. The agreement, which will see Schlumberger exit from the tubulars space, is likely to close by 2019-end.

Schlumberger added that its center of interest is to develop a core drilling strategy with the sale of non-core assets. Notably, the company’s core strategy includes developing technologies related to automation. The non-core operations that Schlumberger has agreed to sell include businesses and related properties of three subsidiaries - Thomas Tools, DRILCO, and Fishing and Remedial services. (Read more Schlumberger, Wellbore Integrity Solutions Ink $400M Deal)

3.    After missing earnings estimates in the trailing three quarters, Cheniere Energy, Inc. delivered a comprehensive beat this time around, with both the top and bottom lines surpassing the Zacks Consensus Estimate. The largest U.S. liquefied natural gas (‘LNG’) exporter reported first-quarter 2019 net earnings per share of 54 cents, significantly beating the Zacks Consensus Estimate of 29 cents. Higher-than-expected revenues on the back of increasing volumes of LNG exports led to the outperformance.

The company posted first-quarter 2019 adjusted EBITDA of $650 million, with DCF of more than $200 million. During the quarter, Cheniere Energy shipped 87 cargoes, reflecting an increase of 30% from a year ago. Total volumes of LNG exported in the reported quarter were 309 trillion British thermal units (TBtu) compared with 241TBtu in the year-ago period.

Overall costs and expenses rose 11% from the corresponding quarter last year to $1,655 million. As of Mar 31, Cheniere Energy had approximately $1,093 million in cash and cash equivalents. It recorded $28,726 million in net long-term debt (with a debt-to-capitalization ratio of 93%).

4.    Exxon Mobil Corporation, along with its partners in the P’nyang natural gas field in Papua New Guinea recently agreed to divest a stake to an Australian energy company Santos Ltd. Per a binding letter of intent signed between the companies, Santos will become a 14.3% stakeholder in the Petroleum Retention License 3 for $187 million.

The deal — expected to close by the end of June 2019 — will likely support the planned expansion of ExxonMobil-operated $19 billion PNG LNG project. Santos already holds 13.5% stake in the PNG LNG project.

Another partner in the PNG LNG project, Oil Search Limited — which will vend a 1.65% interest in the field for $21.6 million — will now hold 36.86% stake in the field. Notably, the same amount of interest will likely be held by ExxonMobil, following the completion of the transaction. Also, a bunker brokerage firm, Merlin Petroleum, will own 11.96% stake in the field. (Read more ExxonMobil to Divest Papua New Guinea Field Stake to Santos)

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

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