Back to top

Analyst Blog

Royal Dutch Shell plc’s (RDS.A - Analyst Report) yet another major discovery in the deepwater Gulf of Mexico (GoM) and Chevron Corp’s (CVX - Analyst Report) launch of its new $1.4 billion oil facility were the major headlines over the past week.  

Overall, it was a mixed week for the sector. West Texas Intermediate (WTI) crude futures were up 1.1% during the period to close at $101.95 per barrel. However, natural gas prices ended the week at $3.95 per million Btu (MMBtu), down 4.7% over the period. (See last ‘Oil & Gas Stock Roundup’ here: Crude Under $101, Whiting-Kodiak Combo Creates Bakken Behemoth)

Oil prices clocked their first gain in five weeks, as stockpiles logged a larger-than-expected decline indicating strong domestic demand for the commodity. Geopolitical forces also played their part in brightening sentiments with the Malaysia Airlines incident in eastern Ukraine and Israel’s decision to expand ground offensive in Gaza.

Natural gas fared badly, hitting a seven-month low on a larger-than-expected supply gain. This was further aggravated by expectations of tepid electric power demand with forecasts of cooler weather conditions across most parts of the Midwest and Northeast U.S.

Recap of the Week’s Most Important Stories

1.    Integrated energy behemoth Royal Dutch Shell announced that it has made yet another major find in the deepwaters of the Gulf of Mexico (GoM) in the Norphlet play. This discovery – the third in the region – was made using the Rydberg exploration well, which is located 75 miles off the Louisiana coast and was drilled to a depth of 26,371 feet. Though evaluation of well results is still under progress, Shell estimates resource potential of about 100 million barrels of oil equivalent (Read More: Shell Strikes a New Find in the Norphlet Play in GoM)

2.    U.S. energy major Chevron Corp. announced that its subsidiary U.S.A. Inc. has started commercial production from a $1.4 billion facility at its Pascagoula, MS refinery. The newly built manufacturing plant will add to Chevron’s premium base oil production capacity, thereby making it the largest producer in the world.

3.    U.S. energy giant Exxon Mobil Corp. (XOM - Analyst Report) and its partners have submitted an application to the U.S. Department of Energy in order to export liquefied natural gas (LNG) from the proposed Alaska LNG project. The application seeks the approval to export about 20 million metric tons per annum of LNG for a period of three decades to countries that have existing free trade agreements with the U.S. and to non-free trade agreement countries as well.

4.    Last week also saw a kickoff in quarterly reporting from the oilfield services segment, with biggies Baker Hughes Inc. (BHI - Analyst Report), Schlumberger Ltd. (SLB - Analyst Report) and Halliburton Co. (HAL - Analyst Report) already coming out with second quarter numbers. While the results were a mixed bag, they were mostly unanimous in pointing towards an improving North American market, coupled with strength in the Middle East and Asia. Additionally, the companies remain positive about stepped-up activity in the U.S. Gulf of Mexico.

5.    Brazilian energy giant Petroleo Brasileiro SA or Petrobras (PBR - Analyst Report) declared that it was in talks with the electricity company, Companhia Energética de Minas Gerais (CIG - Analyst Report) or CEMIG, to sell its 40% stake in local natural gas distributor Gasmig. However, financial details of the transaction have not been revealed. Petrobras stated that this anticipated sale is in accordance with its Business and Management Plan, which proposes non-core asset sales in Brazil as well as globally. (Read More: Petrobras Talks with CEMIG to Sell Gasmig Interest)

Price Performance

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

Company

Last Week

Last 6 Months

XOM

+0.80%

+5.31%

CVX

+1.80%

+9.02%

COP

-1.10%

+23.64%

OXY

-0.83%

+10.58%

SLB

-1.52%

+23.93%

RIG

-0.78%

-7.79%

VLO

-5.04%

-6.14%

TSO

-4.33%

+8.58%

Over the course of last week, Chevron was the best performer among the market heavyweights, adding 1.8% to its stock price. On the other end of the spectrum, the biggest loser was refiner Valero Energy Corp. (VLO - Analyst Report), which fell 5.0% during the period.

Over the last 6 months, Schlumberger was the leader of the pack with the company’s shares advancing 23.9%. But offshore driller Transocean Ltd. (RIG - Analyst Report) witnessed a 7.8% price decline over the same time frame.

What’s Next in the Energy World?

Apart from the usual releases in this week – the U.S. government data on oil and natural gas – market participants will be closely tracking releases on housing, inflation, durable orders and jobless claims, apart from a host of earnings reports. 

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.