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Crude prices edged up on positive economic data and geopolitical fears, while natural gas was propelled by a strong inventory report that revealed robust demand.

Among the newsmakers, U.S. supermajor Chevron Corp. (CVX - Analyst Report) said that it expects first quarter profit to decline sequentially, while European behemoth Royal Dutch Shell Plc (RDS.A - Analyst Report) started crude oil exports from Iraq’s Majnoon field. 

Crude Oil:

Crude prices got a boost from the latest consumer sentiment report that rose to a nine-month high, providing further evidence that the U.S. economy is coming out of its winter freeze. This has fueled hopes for robust fuel and energy demand in the world’s biggest oil consumer. The bullish momentum was further propelled by the continued standoff in Ukraine, concerns over oil export resumption from the Libyan coast, and a fall in OPEC crude output.

However, the bulls were somewhat offset by weak Chinese trade numbers. A larger-than-expected rise in crude stockpiles added to the negative sentiment.

As a result of these factors, by close of trade on Friday, West Texas Intermediate (WTI) oil settled at around $103.74 per barrel, gaining 2.6% for the week.   

Natural Gas:

Natural gas rallied last week on the back of a bullish supply data and forecasts of below-normal temperatures across certain regions.

The EIA's weekly inventory release showed that natural gas stockpiles held in underground storage in the lower 48 states rose by 4 billion cubic feet (Bcf) for the week ended Apr 4, well below the guided range (of 13–17 Bcf build).

To make things better, despite milder spring weather predictions in bulk of the country over the next few days, certain parts of the central and eastern U.S. are expected to witness a comparatively cool snap. This is likely to linger natural gas’ demand for heating.

Influenced by these factors, natural gas prices ended Friday at $4.64 per million Btu (MMBtu), up 4.5% over the week.

Energy Week That Was:

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

Chevron Expects Sequentially Lower Q1 Earnings

Energy major Chevron Corp. slid 2% after warning about a sequential decline in first quarter profits due to high currency conversion expenses and charges associated to asset impairment. Further, Chevron’s worldwide oil and gas output is likely to fall from the previous-year period though it is expected to remain in line with the December quarter.

In the downstream sector, the refining margin in the U.S. west coast is expected to decrease sequentially. However, the reverse is projected for the Gulf Coast.

Later in the week, Chevron announced a deal with Argentina-based integrated oil firm YPF SA to invest an additional $1.6 billion to sustain the exploration and advancement of the shale oil and gas properties in the South American country’s Vaca Muerta formation.

Shell's Majnoon Success Prompts First Shipment

Integrated energy behemoth, Royal Dutch Shell plc reported that it has exported yield from the Majnoon oilfield, in Iraq. The first shipment was made as output surpassed the First Commercial Production (FCP) target of 175,000 barrels of oil per day (BOE/d). This is an important milestone for Shell, which has undertaken extensive rehabilitation work at the oilfield to boost output. Production at Majnoon oilfield currently averages 210,000 BOE/d, substantially higher than its FCP target.

Conoco Targets Double-digit Returns

At its 2014 Analyst Meeting presentation, energy biggie ConocoPhillips (COP - Analyst Report) reiterated its target of delivering double-digit returns annually to shareholders by growing production and margins by 3%-5% a year and offering a ‘compelling’ dividend. The company also augmented its total resource base in its Eagle Ford acreage by 39% to 2.5 billion barrels. The number represents original oil in place and not recoverable barrels of proved reserves. ConocoPhillips also intends to boost production in the Eagle Ford play to 250,000 barrels of oil equivalent a day by 2017.

Athlon Energy Rallies on Asset Buy Deal

Shares of oil and liquids-rich natural gas explorer Athlon Energy Inc. (ATHL - Snapshot Report) jumped 13% after it agreed to acquire certain producing and undeveloped properties spread over 23,500 net acres in northern Midland basin from five different sellers for a combined $873 million in cash.

The to-be-bought assets in the Texas counties Martin, Upton, Andrews and Glasscock – adjacent to Athlon Energy’s existing fields in the region – holds an estimated 250 million oil-equivalent barrels (MMBOE) in reserve potential and will add 4,800 BOE (67% oil) to the outfit’s daily production. The properties would also add 425 ‘highly prospective’ horizontal drilling locations to Athlon Energy’s inventory. 

Exxon to Export LNG from PNG by Mid '14

U.S. oil and gas giant Exxon Mobil Corp. (XOM - Analyst Report) announced that its long delayed Papua New Guinea (PNG) liquefied natural gas (LNG - Snapshot Report) project will start exporting LNG by mid 2014. The PNG LNG project is on track and will commence operations ahead of schedule and below its $19 billion budget. The project has brought online a gas conditioning plant in PNG’s highlands. The gas is drilled at the site and a 292-kilometer (180 miles) onshore pipeline has been placed. The first of the two units at the LNG plant are also ready.

Performance Chart of Some Major Companies:

The following table shows the price movement of the major oil and gas players over the past 5 days and during the last 6 months.

 

Ticker

Last 5 Day’s Performance

6 month performance

XOM

-0.36%

+10.41%

CVX

-1.11%

-1.31%

COP

+0.96%

-1.51%

OXY

-1.48%

-2.49%

SLB

-0.87%

+6.50%

RIG

-4.78%

-13.14%

VLO

-5.47%

+39.35%

TSO

-5.34%

+4.17%

 

Other Headline News on Energy:

Chesapeake Energy Prices Senior Notes

Natural gas producer Chesapeake Energy Corp. (CHK - Analyst Report) priced its public offering of $3.0 billion in aggregate principal amount of its senior notes at par. The notes will be issued in two separate series of notes, namely $1.5 billion in Floating Rate Senior Notes due 2019 that will bear interest at LIBOR plus 3.25% and be reset quarterly, and $1.5 billion in 4.875% Senior Notes due 2022. Chesapeake expects the issuance and delivery of the two series of senior notes to occur on Apr 24.

Cheniere, Endesa in Second LNG Pact

Houston, Texas-based Cheniere Energy Inc. (LNG - Snapshot Report) announced that it has signed a second liquefied natural gas (“LNG”) sale and purchase agreement (SPA) with Spanish electric utility firm, Endesa Genercion S.A. The deal involves the sale of about 0.75 million tons per annum (mtpa) of LNG from Cheniere’s planned Corpus Christi Liquefaction Project. The total quantity under agreement now stands at 2.25 mtpa, including the 1.5 mtpa LNG SPA signed earlier this month.

Energen to Sell Natural Gas Utility

U.S. energy holding company, Energen Corp. announced that it has signed a definitive stock purchase agreement to sell its natural gas utility business, Alabama Gas Corporation (Alagasco), to The Laclede Group Inc. The $1.6 billion transaction comprises $1.28 billion in cash and approximately $320 million of debt. Energen’s after-tax proceeds are estimated at $1.1 billion, after considering accelerated intangible drilling costs. This divestment would allow Energen to become a pure exploration and production company.

This Week’s Outlook:

Apart from the usual releases – the U.S. government data on oil and natural gas – market participants will be tracking several key economic reports, including those on retail sales, industrial production and housing starts.

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Read the Full Research Report on LNG
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