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Crude prices moved up during the past week, as International Energy Agency (IEA) and International Monetary Fund (IMF) raised global growth forecasts, while natural gas topped $5 for the first time since 2010 on cold-related demand bump.

Among the newsmakers, oilfield service biggies Halliburton Co. (HAL - Analyst Report) and Baker Hughes Inc. (BHI - Analyst Report) posted strong fourth-quarter results.     

Crude Oil:

Crude prices increased last week on encouraging IEA data in which the energy consultative body raised its outlook for this year’s global oil demand. Investors also applauded IMF’s latest report that suggested the world economy will expand by more than previously predicted in 2014.

The activation of the southern part of the Keystone XL pipeline – allowing the crude glut at the Cushing oil-storage hub in Oklahoma to be unlocked – also aided prices.

Sentiments were further brightened by the Energy Information Administration (EIA) report that showed a hefty drop in distillate supplies, which outweighed an increase in oil inventories.

As per the EIA’s weekly ‘Petroleum Status Report,’ distillate inventories dropped by a larger-than-expected 3.21 million barrels for the week ending Dec 17 to 120.74 million barrels.

As a result of these factors, by close of trade on Friday, West Texas Intermediate (WTI) oil was firmly in the black and settled at $96.64 per barrel, gaining around 3% for the week. 

Natural Gas:

Natural gas rallied last week to its highest level in 4 years on the back of a powerful winter snowstorm that called for the heating fuels’ higher consumption.

The EIA's weekly inventory release showed that natural gas stockpiles held in underground storage in the lower 48 states fell by 107 billion cubic feet (Bcf) for the week ended Jan 17, slightly higher than the guided range (of 102–106 Bcf drawdown).

Extreme cold weather forecasts – in the key U.S. consuming regions (Midwest and Northeast) over the next few days – are likely to further spur natural gas’ demand for heating.

Influenced by these factors, natural gas spot prices ended Friday at $5.20 per million Btu (MMBtu), up 18% over the week.

Energy Week That Was:

The week’s energy coverage was dominated by the following news:

Halliburton Beats on Q4 Earnings & Revs

Major oilfield services provider Halliburton Co. reported robust fourth quarter results, owing to strong international exposure (mainly Middle East and Asia), focus on offshore drilling and improved efficiencies in the domestic market. The company’s adjusted earnings of 93 cents per share (excluding special items) beat the Zacks Consensus Estimate of 89 cents and came well ahead of the 63 cents per share earned a year ago.

Revenues of $7.6 billion reflected a 4.8% year-over-year improvement. The figure also increased by 1.1% as compared to the Zacks Consensus Estimate.

Baker Hughes Beats on Q4 Earnings & Revs

Baker Hughes Inc. – another contingent of the ‘big 4 oil service companies’ – also came out with robust numbers on the back of encouraging activity in international markets, particularly Latin America and the Eastern Hemisphere. Adjusted earnings from continuing operations came in at 62 cents a share, beating the Zacks Consensus Estimate of 61 cents and the year-ago level of 49 cents.

Total revenue of $5,860 million in the quarter rose almost 10% from the fourth quarter 2012. Also, the top line surpassed the Zacks Consensus Estimate of $5,741 million.  

Shell, KUFPEC Pen $1,135M Deal

Europe’s oil giant Royal Dutch Shell plc (RDS.A - Analyst Report) struck a deal to leave the Wheatstone liquefied natural gas (LNG) project in Australia by agreeing to sell its holdings to Kuwait Foreign Petroleum Exploration Company. Depending on some closing conditions, Shell is likely to gain roughly $1,135.0 million cash from the exit strategy, whereby it will let go its 8% stake in the Wheatstone-Iago Joint Venture along with 6.4% equity ownership in the Wheatstone LNG development. The project is estimated to have a capacity of 8.9 million tons per annum.    

CNOOC Reports '14 Production Target

Chinese offshore powerhouse CNOOC Ltd. (CEO - Analyst Report) announced its net production target of 422 million to 435 million barrels of oil equivalent (BOE) for 2014. The oil and gas explorer expects 7 to 10 new projects to come on stream this year. Net production for 2013 is estimated at 412 million BOE, including 61 million BOE of production as a result of the company’s acquisition of Nexen in mid 2013. The company also pegged its 2014 capital budget in the range of RMB 105 billion–RMB 120 billion.   

Valero Raises Dividend, Gives Q4 Update

Valero Energy Corp. (VLO - Analyst Report) – the largest domestic independent refiner – said its board approved a quarterly dividend of 25 cents per share, up 2.5 cents, or 11%, from the prior quarter. The increased payout will be paid on Mar 12, 2014 to shareholders of record as of Feb 12. Separately, Valero announced that it expects to report net income in the range of $2.20 to $2.40 per share for the fourth quarter of 2013.

Performance Chart of Some Major Companies:

The following table shows the price movement of the major oil and gas players over the past week and during the last 6 months.

 

Ticker

Last Week’s Performance

6 month performance

XOM

-4.35%

+0.06%

CVX

-2.51%

-8.84%

COP

-1.39%

+1.29%

OXY

-2.84%

-3.03%

SLB

-2.28%

+7.62%

RIG

-5.23%

-7.21%

VLO

-4.63%

+36.07%

TSO

-3.82%

-7.23%

 

Other Headline News on Energy:

Hess Sets 2014 Capex at $5.8B

Oil and gas producer Hess Corp. (HES - Analyst Report) intends to spend $5.8 billion on exploration and production in 2014, down 15% from 2013, as it focuses more on greater efficiency in its U.S. shale fields. The company targets to spend most of its capital in low-risk, high-growth areas such as North Dakota's Bakken shale as well as focus largely on discovering and developing energy reserves to satisfy activist investor Elliot Management.

Of the total budgeted amount, Hess plans to allocate $2.85 billion (49%) toward unconventional shale resources, $1.475 billion (25%) for production, $925 million (16%) for development and the balance $550 million (10%) for exploration.

Williams Companies Hikes Q1 Div, Outlook Retained

North American energy firm, Williams Companies Inc. (WMB - Analyst Report) declared its first quarter 2014 cash dividend of 40.25 cents per share. The new payout reflects a sequential hike of 5.9% and a year-over-year increase of 18.8%. Williams’ dividend for full-year 2013 stood at $1.44 per share, reflecting a hike of 20% compared with $1.20 reported in 2012. Additionally, the company maintains its projected 20% dividend hike to $1.75 and $2.11 per share, for 2014 and 2015, respectively. 

Comstock's Proved Reserves Grow

Domestic energy explorer Comstock Resources Inc. provided an update of its proved oil and gas reserves. As reported by the company, total reserves (from continuing operations) reached 584.5 billion cubic feet of gas equivalent (Bcfe) at the end of 2013, up 6.1% from the 550.8 Bcfe as of Dec 31, 2012. Comstock further informed that total output from continuing operations in 2013 stood at 69.6 Bcfe, of which 80% was natural gas.

This Week’s Outlook:

Apart from the usual releases – the U.S. government data on oil and natural gas – market participants await Federal Reserve’s policy meeting on Wednesday to see if the central bank further tapers its $75 billion a month monetary stimulus. Traders will also focus on Thursday’s preliminary data on fourth quarter U.S. GDP.

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