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Crude prices edged back under $100 during the past week on record domestic stockpiles, while natural gas remained flat.

Among the newsmakers, the two largest U.S. oil firms – Exxon Mobil Corp. (XOM - Analyst Report) and Chevron Corp. (CVX - Analyst Report) – boosted their quarterly dividends and reported first quarter results.   

Crude Oil:

Crude prices got a boost from the latest jobs and manufacturing reports, 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 positive momentum was further propelled by continued confrontation between Moscow and the West, threatening to derail hydrocarbon supplies from Russia.

However, the bulls were more than offset by a spike in crude inventories – now at their highest levels since at least Aug 1982. The weak GDP report and the imminent resumption of oil exports from the Libyan coast have also been a drag on prices.

As a result of these factors, by close of trade on Friday, West Texas Intermediate (WTI) oil settled at around $99.76 per barrel, losing 1.1% for the week.   

Natural Gas:

Natural gas remained flat during the period, as early week gains on forecasts of an end-of-the-season cool snap were offset by a bearish supply data.

Traders were betting that unseasonal below-normal temperatures – across certain parts of the central and eastern U.S. – are likely to spur natural gas’ demand for heating.

However, contrary to expectations, the EIA's weekly inventory release showed that natural gas stockpiles held in underground storage in the lower 48 states rose by 82 billion cubic feet (Bcf) for the week ended Apr 25, well above the guided range (of 73–77 Bcf build).

As it is, natural gas supplies are at their 11-year-lows following a frigid winter, prompting fears about the timely replenishment of the inventories ahead of the next heating season, starting from November.

Influenced by these factors, natural gas prices ended Friday at $4.62 per million Btu (MMBtu), essentially flat over the week.

Energy Week That Was:

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

‘Big Oil’ Goes on Dividend Spree  

Among the integrated supermajors, Chevron Corp. and BP plc (BP - Analyst Report) posted weak first quarter results on falling production. However, Royal Dutch Shell plc (RDS.A - Analyst Report) and Exxon Mobil Corp. – Europe and America’s largest oil company, respectively – managed to beat the Zacks Consensus Estimate on the back of higher natural gas prices. But more importantly, all of them raised their dividends. Pressure has been building on the oil majors to curb their skyrocketing capital expenses and return more cash to shareholders.

Encana Selling Texas Gas Assets for $530M

Canadian energy outfit Encana Corp. (ECA - Analyst Report) has agreed to sell 900 acres of certain natural gas assets in east Texas to an undisclosed buyer for $530 million. The to-be-sold properties hold an estimated 200 billion cubic feet equivalent in proved reserves (97% gas) with average daily production of about 100 million cubic feet of natural gas and about 1,200 barrels of total liquids. The deal, expected to close in the second quarter, is in tune with Encana’s strategy of getting rid of non-core slow-growth assets in favor of acreage that they believe will give better returns over time.  

Energy Transfer to Snap Up Susser Holdings for $1.8B

Natural gas transportation and storage partnership Energy Transfer Partners L.P. (ETP - Analyst Report) has agreed to acquire gasoline retailer Susser Holdings Corp. for about $1.8 billion in cash and stock. The transaction – likely to conclude in the third quarter – has been okayed by the boards of both companies but awaits regulatory and shareholder approval. Should the deal go through, Energy Transfer Partners will be able to expand its existing network of 5,000 gas stations – mostly along the East Coast. Apart from scale advantages and increasing Dallas-based Energy Transfer Partners’ retail reach, the Susser Holdings buy will help the partnership inch closer to creating a stand-alone gasoline retailing unit, separate from its core pipeline and terminals business.

National Oilwell Varco Slumps on Weak Guidance

Shares of large-cap energy equipment maker National Oilwell Varco Inc. (NOV - Analyst Report) tanked 7% despite beating first quarter estimates, as investors were spooked by the weak outlook for rig sales. In particular, the backlog for capital equipment orders for the company’s Rig Technology segment, which was a record $16,350.0 million at Mar 31, is expected to fall to $14-$15 billion by year-end. The anticipated demand slowdown in the largest of the company's three units led to the sell-off.     

Later in the week, the company announced that its board of directors has given the green light for the spin-off of its Distribution business segment. The new entity – to be known as NOW Inc. – will take flight on May 30 and will be based in Houston.

Refiners Suffer from Lower Margins

Most of the big names bore the brunt of a sharp drop in gross refining margins, along with substantial rise in costs. Valero Energy Corp. (VLO - Analyst Report) was the one to buck the trend, with margins increasing to $10.90 per barrel from the year-ago level of $10.59 per barrel. Some of the sector components like Phillips 66 (PSX - Analyst Report) and Tesoro Corp. managed to beat estimates despite being pressured by lower margins, mainly on the back of improved performance from other businesses.

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

+1.37%

+10.89%

CVX

+0.30%

+5.29%

COP

+2.97%

+5.44%

OXY

-2.10%

-2.33%

SLB

-0.48%

+9.35%

RIG

+0.58%

-10.83%

VLO

+2.48%

+39.74%

TSO

+1.04%

+16.57%

 

Other Headline News on Energy:

Shell Raises LNG Canada Stake

European oil major Royal Dutch Shell plchas increased its interest in a proposed natural gas export plant in Canada’s British Columbia. The Hague, Netherlands-based group boosted its stake by 10% to 50% after two Asian partners – Mitsubishi Corp. and Korea Gas Corp. – trimmed their holdings by 5% each to 15%. PetroChina (PTR - Analyst Report) owns the remaining 20%. The project associates are now set to begin engineering and design work, together with an ongoing environmental evaluation. A final decision is expected in two years.

FMC Technologies Wraps Up Material Handling Biz Sale

Oil drilling equipment maker FMC Technologies Inc. (FMC - Analyst Report) completed the sale of its Tupelo, Mississippi-based material handling products business to Syntron Material Handling, LLC, a subsidiary of CA-based investment firm Levine Leichtman Capital Partners. The material handling business was a section of the Energy Infrastructure segment of the company, primarily constructing conveyor and vibratory products. The equipments are utilized for loading, transporting and feeding bulk materials.

McDermott Gets Offshore Gig in Indonesia

Offshore oil and gas-focused engineering and construction firm McDermott International Inc. (MDR - Analyst Report) announced that one of its vessels – Derrick Barge 101 – recently started operations in Indonesia for a local customer. The job has been incorporated in the first-quarter 2013 backlog of the 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 the service sector and trade balance numbers, apart from a host of S&P 500 earnings. Fed Chairman Janet Yellen’s Wednesday statement on monetary policy and the economy will also be closely watched.

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