Back to top

Analyst Blog

Crude prices moved up during the past week on expectations of an improving economy, while the recent natural gas rally took a breather on forecasts of a break in colder temperatures.

Among the newsmakers, Chevron Corp. (CVX - Analyst Report) shares tanked after reporting weak fourth-quarter results.     

Crude Oil:

Crude prices increased last week on Federal Reserve’s Taper announcement Wednesday afternoon. The central bank – working on the premise that the U.S. economy was strong enough – stated that it will reduce bond repurchases by a further $10 billion, bringing its monetary stimulus to $65 billion a month from February.

This has fueled hopes for robust fuel and energy demand in the worlds biggest oil consumer. The bullish momentum was propelled by Thursday’s positive reading of fourth quarter initial GDP numbers.

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

However, at the same time, crude prices were pressured by a possible slowdown in China’s manufacturing sector and concerns surrounding the health of emerging markets.

As a result of these factors, by close of trade on Friday, West Texas Intermediate (WTI) oil was slightly in the black and settled at around $97.50 per barrel, gaining 1% for the week. 

Natural Gas:

Natural gas fell last week, pulled down by a tepid supply data and forecasts of a break in cold weather conditions.

The EIA's weekly inventory release showed that natural gas stockpiles held in underground storage in the lower 48 states fell by 230 billion cubic feet (Bcf) for the week ended Jan 24. However, the reduction could not beat the guided range (of 228–232 Bcf drawdown) despite the cold snap that hit many cities during the period.

Moreover, milder weather forecasts – in bulk of the country over the next few days – are likely to limit natural gas’ demand for heating.

Influenced by these factors, natural gas spot prices ended Friday at around $4.95 per million Btu (MMBtu), down 4.5% over the week.

Energy Week That Was:

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

‘Big Oil’ Disappoints in Q4

Among the integrated supermajors, Chevron Corp. and Royal Dutch Shell plc posted weak fourth quarter results on falling production and refinery margins. Chevron was the major loser, as shares fell 4% in Friday trading. Exxon Mobil Corp. (XOM - Analyst Report) – the largest U.S. oil company by market value – was the exception, as it managed to brush past the Zacks Consensus Estimate on the back of higher natural gas prices. However, output and downstream profitability were down from the year-ago period.  

Refiners Beat Estimates

Refining giants Phillips 66 (PSX - Analyst Report), Marathon Petroleum Corp. (MPC - Analyst Report) and Valero Energy Corp. all reported better-than-expected fourth-quarter earnings, as increased throughput volumes and improved operating activities more than made up for lower margins.

Rowan Companies Initiates Dividend

The board of directors of Rowan Companies plc (RDC - Analyst Report), a provider of offshore contract drilling services, initiated a quarterly cash dividend of 10 cents per outstanding share of common stock. The first dividend is expected to be paid in the second quarter of 2014. Rowan’s decision to initiate a quarterly dividend reflects its steady earnings growth from its well positioned jackup fleet and entry into the ultra-deepwater market with four highly capable drillships.  

Apache’s Success Story in Egypt

U.S.energy firm Apache Corp. (APA - Analyst Report) announced success at drilling ventures and new field discoveries in Egypt’s Western Desert, building on the integrated energy company’s leading position in this hydrocarbon-rich area.    

Petrobras' 2013 Domestic Output Decreases

Brazil’s largest integrated energy firm Petrobras announced its full year 2013 domestic production at 2.321.0 million barrels of oil equivalent per day (MMBOE/D), 1.5% down from 2012. The delay in beginning the Papa-Terra oil field project, situated in the Campos Basin, negatively affected the results. Crude volumes (accounting for 83% of the total) were down 2.5% but natural gas output was up by 3.8%.    

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 5 Day’s Performance

6 month performance

XOM

-2.88%

+0.23%

CVX

-3.78%

-10.66%

COP

-1.90%

-3.39%

OXY

-0.21%

-1.52%

SLB

-0.87%

+5.65%

RIG

-2.85%

-10.49%

VLO

+3.32%

+45.63%

TSO

+1.38%

-6.84%

 

Other Headline News on Energy:

QEP Resources Announces Strategic Moves

Domestic oil and gas explorer QEP Resources Inc. (QEP - Analyst Report) announced a string of strategic initiatives to be undertaken by the company to enhance the value of its business. Among the measures, the board authorized the spin-off of its midstream business, QEP Field Services Company, in addition to the separation of the company’s interest in the master-limited partnership – QEP Midstream Partners L.P.

QEP Resources is arranging the necessary documents to establish its midstream business as a standalone public company. Additionally, the company declared a share repurchase program worth $500 million.

Noble Corporation Hikes Dividend

Offshore drilling contractor Noble Corp. raised its quarterly cash dividend to 37.50 cents per share ($1.50 per share annualized), representing an increase of 50% over the previous payout. The new dividend is payable on Feb 20, to shareholders of record as of Feb 10, 2014.

Hess to Divest Utica Acres for $924M

Energy explorer Hess Corp. entered into an agreement with an undisclosed buyer to divest natural gas fields in Ohio's Utica Shale for $924 million. As part of the deal, Hess, which reported disappointing fourth quarter earnings due to drop in production volumes, will let go approximately 74,000 acres of dry gas acreage.

This Week’s Outlook:

Apart from the usual releases – the U.S. government data on oil and natural gas – market participants await Friday’s non-farm payroll report for January.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ALASKA AIR… ALK 96.79 +2.26%
PILGRIMS PR… PPC 29.50 +1.90%
SASOL LTD -… SSL 58.83 +1.78%
NSK LTD -UN… NPSKY 26.70 +1.52%
CTPARTNERS… CTP 10.99 +1.29%