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Houston-based oil and gas pipeline company Kinder Morgan Inc. (KMI - Analyst Report) saw its shares jump 9% after unveiling a $70 billion mega-deal to consolidate its four related pipeline entities into one.   

Overall, it was a mixed week for the sector. West Texas Intermediate (WTI) crude futures were down slightly during the period to close at $97.65 per barrel. However, natural gas prices continued their winning streak and ended the week at around $4 per million Btu (MMBtu), up more than 4% from the previous week. (See last ‘Oil & Gas Stock Roundup’ here: Crude Drops Further, Production Sags at Exxon, Chevron)

Oil prices fell further below $100 to another six-month low on the commodity’s plentiful inventory particularly that of fuel products like gasoline. This was partially offset by the anticipated supply disruption following the U.S. authorization of airstrikes against Islamic militants in Iraq, OPEC’s second-largest producer.

Natural gas fared much better, helped by an in-line supply gain and expectations of strong electric power demand with forecasts of warm summer weather across most parts of the U.S.

Recap of the Week’s Most Important Stories

1.    Shares of energy company Kinder Morgan Inc. soared 9% after it announced the decision to purchase all the outstanding equity securities of three subsidiaries – Kinder Morgan Energy Partners, L.P. (KMP - Analyst Report), Kinder Morgan Management, LLC (KMR - Snapshot Report) and El Paso Pipeline Partners, L.P (EPB - Snapshot Report). The $70 billion restructuring is expected to close by end of 2014. With an enterprise value of about $140 billion, the combined entity will represent the largest energy infrastructure company in North America and the third-largest energy company overall.

2.    U.S. energy behemoth Exxon Mobil Corp. (XOM - Analyst Report) and Rosneft – Russia’s biggest oil producer – are moving together despite the ongoing Ukrainian imbroglio between Russia and the Western world. The joint venture company Karmorneftegaz has began drilling of Universitetskaya-1, the Russian Federation's northernmost well, using the West Alpha rig. The West Alpha rig was provided by the Norwegian company North Atlantic Drilling Ltd. (NADL), which signed long-term agreements with Rosneft on Jul 30, 2014 for offshore drilling.

3.    Offshore drilling giant Transocean Ltd. (RIG - Analyst Report) reported higher-than-expected second-quarter 2014 results on higher dayrates and reduced operating and maintenance costs. Total average dayrates increased to $410,000 in the quarter under review from $382,800 in the year-earlier quarter. The upside was driven by higher dayrates from High-Specification Floaters, Midwater Floaters and High-Specification Jackups. Meanwhile, total operating and maintenance expenses decreased 10.6% year over year to $1,213 million.  (Read More: Transocean Beats Q2 Earnings on Higher Dayrates, Shares Up)

4.    Europe’s largest oil company Royal Dutch Shell plc (RDS.A - Analyst Report) announced that its subsidiary has commenced operations of a project in Nigeria to produce and sell oil, providing a new source of energy and economic benefits. Operated by Shell Nigeria Exploration and Production Co. Ltd. (or SNEPCo), a Shell affiliate, the deepwater Bonga North West project involves the recovery of 40,000 oil equivalent barrels per day at its peak. (Read More: Royal Dutch Shell Starts Bonga North West Project in Nigeria)

5.    OneSubsea – an alliance between oil drilling equipment maker Cameron International Corp. (CAM - Analyst Report) and oilfield services giant Schlumberger Ltd. (SLB - Analyst Report) – have signed a letter of intent with offshore energy firm Helix Energy Solutions Group Inc. (HLX - Snapshot Report) and Schlumberger. Per the agreement, the trio will develop technology to minimize cost during well intervention operations. The three companies are planning to develop a unique technology for easier optimization of their well intervention operations especially in deep and ultra-deepwater basins and in areas where well pressure is very high.

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

-0.34%

+8.40%

CVX

+0.51%

+14.00%

COP

-0.32%

+23.89%

OXY

-0.14%

+8.22%

SLB

+0.79%

+21.30%

RIG

+1.12%

-8.38%

VLO

+2.74%

+7.14%

TSO

+1.65%

+27.42%

Over the course of last week, refiner Valero Energy Corp. (VLO - Analyst Report) was the best performer among the market heavyweights, adding 2.7% to its stock price. The downstream operator recently beat Q2 earnings estimates, thriving on higher refining throughput volumes. On the other end of the spectrum, the biggest loser was integrated energy giant Exxon Mobil Corp., which fell 0.3% during the period, as it continues to feel the effects of the Russian turmoil.

Over the last 6 months, Tesoro Corp. (TSO - Analyst Report) – another U.S. refiner – was the leader of the pack with its shares advancing 27.4%. Investors have rewarded the company for its continued focus on shareholder returns. But offshore driller Transocean Ltd. witnessed an 8.4% price decline over the same time frame on the back of rig oversupply that has led the industry into a cyclical downturn.

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 key reports on retail sales, business inventories, inflation and industrial production. 

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