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Oil & Gas Stock Roundup: Mergers & Partnerships Take Center Stage
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It was a week when both oil and natural gas prices recorded gains.
The headlines revolved around oilfield service major SLB’s (SLB - Free Report) majority stake purchase in Norway’s Aker Carbon Capture and European energy biggie Repsol’s (REPYY - Free Report) partnership with agribusiness firm Bunge Global on renewable fuels. Developments associated with VAALCO Energy (EGY - Free Report) , Shell (SHEL - Free Report) and Enbridge (ENB - Free Report) also grabbed attention.
Overall, it was a bullish seven-day period for the sector. West Texas Intermediate (WTI) crude futures moved up around 3.2% to close at $83.17 per barrel, while natural gas prices went higher by 6% to end at $1.76 per million British thermal units (MMBtu).
The crude price action remained positive for the third week running, primarily on the back of relatively bullish fundamentals and tensions in the oil-rich Middle East.
Meanwhile, natural gas settled with its third gain in the last nine weeks on positive inventory numbers and signs of production pullback.
Recap of the Week’s Most Important Stories
1. SLB, the largest oilfield contractor, has announced its plans to merge its carbon capture segment with Aker Carbon Capture (“ACC”). The partnership aims to expedite the global transition toward net-zero emissions by scaling up carbon capture technologies. Per the terms of the agreement, SLB will acquire an 80% stake in Aker Carbon Capture Holding AS (“ACCH”), which encapsulates ACC’s operations, for NOK 4.12 billion.
The collaboration is not just a financial transaction but a strategic alliance to enhance the carbon capture, utilization and sequestration (“CCUS”) landscape. SLB has committed to make additional payments of up to NOK 1.36 billion over the forthcoming three years, contingent on the joint venture’s performance.
The merger of SLB and ACC is poised to create a powerhouse in the carbon capture domain. The combined enterprise aims to revolutionize the market by leveraging ACC’s established commercial carbon capture product suite, and SLB’s innovative technology and industrialization prowess. (SLB and ACC Join Forces to Accelerate Decarbonization Efforts)
2. Spanish energy giant Repsol and renowned food and agribusiness company Bunge Global have decided to form a partnership to capitalize on the new opportunities aimed at meeting the rising demand for lower carbon-intensity feedstock used in the production of renewable fuel. By joining forces, both companies will work together to accelerate the expansion of renewable fuel production, keeping in mind the mandates provided by the European Union.
As part of the agreement, Repsol, which carries Zacks Rank #3 (Hold), will be acquiring a 40% stake in three industrial facilities in the Iberian Peninsula. The three facilities are owned by Bunge Iberica, a subsidiary of Bunge. The total consideration for the transaction is $300 million, with up to $40 million in contingent payments. The deal is subject to customary closing conditions.
Per the agreement, the three plants dedicated to the production of oils and biofuel will be operated by Bunge. These plants are located in Bilbao, Barcelona and Cartagena, near Repsol’s industrial complexes in the region. The collaboration allows Repsol to gain access to a wide portfolio of low-carbon intensity feedstock used in the production of renewable fuel. This also provides an immediate way to speed up the process of reducing emissions from transport, including cars, trucks, airplanes and shipping. (Repsol and Bunge to Ramp-Up Renewable Fuel Supply)
3. VAALCO Energy and its partners have signed the final documents for the Joint Operating Agreement related to the Venus Block-P plan of development (“POD”), after receiving the Government of Equatorial Guinea’s approval. VAALCO is serving as the operator of the block with a 60% interest. The other partners in the project are state-owned GEPetrol and Atlas Petroleum International Ltd.
The Block P Production Sharing Contract outlines a 25-year development and production period from the date when the POD was approved. The POD was approved in 2022. The West Africa-focused oil and gas finder will move to develop, operate and produce from the discovery offshore Equatorial Guinea in the next few years.
VAALCO will move forward with the Front-End Engineering Design study, which, upon completion, will lead to an economic Final Investment Decision (“FID”). The FID will facilitate the development of the Venus POD. (VAALCO Gets the Green Light for Block-P Development)
4 Shell’s renewable energy subsidiary, Shell New Energies US LLC, recently finalized the sale of its 50% equity share in SouthCoast Wind Energy LLC to its joint venture partner Ocean Winds North America LLC. This strategic move marks a significant development in the renewable energy sector, particularly in the offshore wind projects off the coast of Massachusetts.
SouthCoast Wind Energy LLC is an equal fifty-fifty joint venture between Shell and Ocean Winds, focused on advancing offshore wind projects in strategic locations. With Shell's commitment to its Powering Progress strategy, this divestiture aligns with the company's focus on refining its portfolio of renewable generation projects in markets where it holds a competitive edge.
Glenn Wright, senior vice president of Shell Energy Americas, emphasized the company's dedication to advancing its renewable energy initiatives. He expressed gratitude toward Ocean Winds for their longstanding partnership and reiterated Shell's ongoing pursuit of opportunities to deliver sustainable energy solutions while minimizing emissions. (Shell Sells 50% Stake in US Offshore Wind Project).
5. North American energy infrastructure provider Enbridge announced a significant move to bolster its position in the natural gas market by forming a joint venture (JV) with investment firm I Squared Capital, and pipeline operators WhiteWater and MPLX LP.
The partnership aims to connect the prolific Permian Basin, a major oil-and-gas-producing area in western Texas and southeast New Mexico, with the high-demand markets of the U.S. Gulf Coast, particularly targeting the liquefied natural gas (LNG) export sector. Enbridge will hold a 19% stake in this JV, while WhiteWater and I Squared Capital will collectively control 50.6%, and MPLX LP will secure the rest. The collaboration is set to be finalized in the second quarter of 2024.
The JV will embark on the development, construction, ownership and operation of natural gas pipeline and storage assets. These initiatives are strategically designed to facilitate the transfer of natural gas from the Permian Basin to meet the increasing demand for LNG and natural gas in the U.S. Gulf Coast region. (Enbridge Forms JV to Enhance Permian Basin Connectivity).
Price Performance
The following table shows the price movement of some major oil and gas players over the past week and during the last six months.
With both oil and gas moving up for the week, stocks were mostly positive. The Energy Select Sector SPDR — a popular way to track energy companies — rose 2.2% last week. But over the past six months, the sector tracker has increased 5.2%.
What’s Next in the Energy World?
As usual, market participants will closely track the regular releases to look for guidance on the direction of the commodities. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that come out regularly — will be on energy traders' radar. As a matter of fact, fuel demand and the rate of stock drawdowns in the coming weeks will determine the trend in commodity prices. Data on rig count from the oilfield service firm Baker Hughes, which is a pointer to the trends in U.S. crude/natural gas production, is closely followed, too.
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Oil & Gas Stock Roundup: Mergers & Partnerships Take Center Stage
It was a week when both oil and natural gas prices recorded gains.
The headlines revolved around oilfield service major SLB’s (SLB - Free Report) majority stake purchase in Norway’s Aker Carbon Capture and European energy biggie Repsol’s (REPYY - Free Report) partnership with agribusiness firm Bunge Global on renewable fuels. Developments associated with VAALCO Energy (EGY - Free Report) , Shell (SHEL - Free Report) and Enbridge (ENB - Free Report) also grabbed attention.
Overall, it was a bullish seven-day period for the sector. West Texas Intermediate (WTI) crude futures moved up around 3.2% to close at $83.17 per barrel, while natural gas prices went higher by 6% to end at $1.76 per million British thermal units (MMBtu).
The crude price action remained positive for the third week running, primarily on the back of relatively bullish fundamentals and tensions in the oil-rich Middle East.
Meanwhile, natural gas settled with its third gain in the last nine weeks on positive inventory numbers and signs of production pullback.
Recap of the Week’s Most Important Stories
1. SLB, the largest oilfield contractor, has announced its plans to merge its carbon capture segment with Aker Carbon Capture (“ACC”). The partnership aims to expedite the global transition toward net-zero emissions by scaling up carbon capture technologies. Per the terms of the agreement, SLB will acquire an 80% stake in Aker Carbon Capture Holding AS (“ACCH”), which encapsulates ACC’s operations, for NOK 4.12 billion.
The collaboration is not just a financial transaction but a strategic alliance to enhance the carbon capture, utilization and sequestration (“CCUS”) landscape. SLB has committed to make additional payments of up to NOK 1.36 billion over the forthcoming three years, contingent on the joint venture’s performance.
The merger of SLB and ACC is poised to create a powerhouse in the carbon capture domain. The combined enterprise aims to revolutionize the market by leveraging ACC’s established commercial carbon capture product suite, and SLB’s innovative technology and industrialization prowess. (SLB and ACC Join Forces to Accelerate Decarbonization Efforts)
2. Spanish energy giant Repsol and renowned food and agribusiness company Bunge Global have decided to form a partnership to capitalize on the new opportunities aimed at meeting the rising demand for lower carbon-intensity feedstock used in the production of renewable fuel. By joining forces, both companies will work together to accelerate the expansion of renewable fuel production, keeping in mind the mandates provided by the European Union.
As part of the agreement, Repsol, which carries Zacks Rank #3 (Hold), will be acquiring a 40% stake in three industrial facilities in the Iberian Peninsula. The three facilities are owned by Bunge Iberica, a subsidiary of Bunge. The total consideration for the transaction is $300 million, with up to $40 million in contingent payments. The deal is subject to customary closing conditions.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Per the agreement, the three plants dedicated to the production of oils and biofuel will be operated by Bunge. These plants are located in Bilbao, Barcelona and Cartagena, near Repsol’s industrial complexes in the region. The collaboration allows Repsol to gain access to a wide portfolio of low-carbon intensity feedstock used in the production of renewable fuel. This also provides an immediate way to speed up the process of reducing emissions from transport, including cars, trucks, airplanes and shipping. (Repsol and Bunge to Ramp-Up Renewable Fuel Supply)
3. VAALCO Energy and its partners have signed the final documents for the Joint Operating Agreement related to the Venus Block-P plan of development (“POD”), after receiving the Government of Equatorial Guinea’s approval. VAALCO is serving as the operator of the block with a 60% interest. The other partners in the project are state-owned GEPetrol and Atlas Petroleum International Ltd.
The Block P Production Sharing Contract outlines a 25-year development and production period from the date when the POD was approved. The POD was approved in 2022. The West Africa-focused oil and gas finder will move to develop, operate and produce from the discovery offshore Equatorial Guinea in the next few years.
VAALCO will move forward with the Front-End Engineering Design study, which, upon completion, will lead to an economic Final Investment Decision (“FID”). The FID will facilitate the development of the Venus POD. (VAALCO Gets the Green Light for Block-P Development)
4 Shell’s renewable energy subsidiary, Shell New Energies US LLC, recently finalized the sale of its 50% equity share in SouthCoast Wind Energy LLC to its joint venture partner Ocean Winds North America LLC. This strategic move marks a significant development in the renewable energy sector, particularly in the offshore wind projects off the coast of Massachusetts.
SouthCoast Wind Energy LLC is an equal fifty-fifty joint venture between Shell and Ocean Winds, focused on advancing offshore wind projects in strategic locations. With Shell's commitment to its Powering Progress strategy, this divestiture aligns with the company's focus on refining its portfolio of renewable generation projects in markets where it holds a competitive edge.
Glenn Wright, senior vice president of Shell Energy Americas, emphasized the company's dedication to advancing its renewable energy initiatives. He expressed gratitude toward Ocean Winds for their longstanding partnership and reiterated Shell's ongoing pursuit of opportunities to deliver sustainable energy solutions while minimizing emissions. (Shell Sells 50% Stake in US Offshore Wind Project).
5. North American energy infrastructure provider Enbridge announced a significant move to bolster its position in the natural gas market by forming a joint venture (JV) with investment firm I Squared Capital, and pipeline operators WhiteWater and MPLX LP.
The partnership aims to connect the prolific Permian Basin, a major oil-and-gas-producing area in western Texas and southeast New Mexico, with the high-demand markets of the U.S. Gulf Coast, particularly targeting the liquefied natural gas (LNG) export sector. Enbridge will hold a 19% stake in this JV, while WhiteWater and I Squared Capital will collectively control 50.6%, and MPLX LP will secure the rest. The collaboration is set to be finalized in the second quarter of 2024.
The JV will embark on the development, construction, ownership and operation of natural gas pipeline and storage assets. These initiatives are strategically designed to facilitate the transfer of natural gas from the Permian Basin to meet the increasing demand for LNG and natural gas in the U.S. Gulf Coast region. (Enbridge Forms JV to Enhance Permian Basin Connectivity).
Price Performance
The following table shows the price movement of some major oil and gas players over the past week and during the last six months.
Company Last Week Last 6 Months
XOM +2.4% -0.5%
CVX +2% -5.7%
COP +3.5% +7.4%
OXY +1.8% +2.3%
SLB +1.5% -5.3%
RIG +5.2% -22.4%
VLO +0.6% +21.8%
MPC +0.7% +35.1%
With both oil and gas moving up for the week, stocks were mostly positive. The Energy Select Sector SPDR — a popular way to track energy companies — rose 2.2% last week. But over the past six months, the sector tracker has increased 5.2%.
What’s Next in the Energy World?
As usual, market participants will closely track the regular releases to look for guidance on the direction of the commodities. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that come out regularly — will be on energy traders' radar. As a matter of fact, fuel demand and the rate of stock drawdowns in the coming weeks will determine the trend in commodity prices. Data on rig count from the oilfield service firm Baker Hughes, which is a pointer to the trends in U.S. crude/natural gas production, is closely followed, too.