It was a week where oil prices posted their highest close since July 2015 but natural gas futures continued on the downhill trajectory.

On the news front, integrated major Exxon Mobil Corp. (XOM Quick QuoteXOM - Free Report) disclosed a big hit to its proved reserve estimates for 2016, while independent producer Apache Corp. (APA Quick QuoteAPA - Free Report) posted a surprise fourth-quarter loss but vowed a 60% increase in its 2017 spending.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures inched up 0.4% to close at $53.99 per barrel, natural gas prices dived 5.6% to $2.627 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Devon, Marathon's Q4, Matador's Midstream JV and More.)

Despite touching a 19-month high, oil prices again found themselves locked in a sideways trading range, as the tug-of-war over two powerful, opposing supply narratives continue.  

Reports have already indicated an impressive 90% compliance level from the OPEC producers who pledged output cuts in an effort to tackle the three-year supply glut. A smaller-than-expected rise in crude inventories provided further support.

However, a burgeoning rig count – pointing to the ever-increasing shale drilling activities – kept prices under check.

Meanwhile, natural gas turned sharply lower as a larger-than-expected withdrawal was more than offset by predictions of tepid demand due to milder weather forecasts over the last stretch of the November-March winter heating season.

Recap of the Week’s Most Important Stories

1.    Exxon Mobil Corp., the largest publicly traded oil company in the world, declared that it has lowered its 2016 proved reserve estimates to quite an extent owing to low commodity prices during the greater part of last year.    

The company’s 2016 proved reserve estimate now stands at 20 billion barrels of oil equivalent (BBOE), which is 19.4% lower than the 2015 reserve figure of 24.8 BBOE. The company was able to replace only 65% of oil and natural gas production with new discoveries. Meanwhile, smaller rival Chevron Corp. (CVX Quick QuoteCVX - Free Report) replaced 95% of the reserves it pumped out in 2016.

Clearly, the prolonged crude weakness has severely affected Exxon Mobil. This is evidenced by the fact that the company, which successfully replaced no less than 100% of its reserves for more than two decades till 2015, has failed in maintaining the trend in the last two years. (Read more: Exxon's 2016 Reserve Estimates Lowered: Here's Why.)

2.    U.S. energy firm Apache Corp. reported a fourth-quarter loss per share – excluding one-time items – of 6 cents, contrary to the Zacks Consensus Estimate for a profit of 6. The underperformance stems from a dip in output due to a conservative capital budget. The production of oil and natural gas (excluding divested assets and non-controlling interests) averaged 420,846 oil-equivalent barrels per day (BOE/d) (64% liquids), down 14% from last year.

However, the bottom line improved from the year-ago adjusted loss of 38 cents amid cost savings and higher realizations. The average realized crude oil  and natural gas prices during the fourth quarter were up 19% and 8% from the year-ago period, respectively. Apache’s fourth quarter lease operating expenses totaled $375 million, down 18% from the year-ago quarter. Total costs and expenses fell 77% from the fourth quarter of 2015 to $1,565 million.

After following a disciplined capital allocation program over the past 2 years, Apache is now looking to shift its strategic objective. With returns-focused growth in mind, Apache announced a 2017 capital budget of $3.1 billion, representing a 60% increase over its 2016 spend. The company also aims to grow production by approximately 10% in the next year. (Read more: Apache Reports Q4 Loss, to Boost 2017 Capex by 60%.)

3.    Domestic energy explorer Cabot Oil & Gas Corp. reported fourth quarter earnings per share – adjusted for special items – of 1 cent, in line with the Zacks Consensus Estimate but compared favorably with the year-ago quarter adjusted loss of 2 cents. The exploration and production firm’s results were hamstrung by higher costs but received a kick from higher production.

Total operating expenses were 72% higher than the fourth quarter of 2015, rising to $756.2 million. In particular, transportation and gathering costs were up 7% year-over-year to $113.7 million, oil and gas property write-offs jumped almost threefold to $435.6 million. Cabot’s overall production during the quarter totaled 164.2 billion cubic feet equivalent (Bcfe) – 97% gas – up 9% from the prior year quarter volume of 151.0 Bcfe.

While the company stuck to its 2017 production growth guidance of 5% to 10%, it now projects this year's capital budget at $650 million, an increase of $75 million from the prior guidance. (Read more: Cabot Oil & Gas Q4 Earnings in Line with Estimates, Sales Lag.)

4.    Offshore drilling giant Transocean Ltd. (RIG Quick QuoteRIG - Free Report) reported stronger-than-expected fourth-quarter 2016 results, buoyed by solid revenue efficiency and cost control initiatives. Adjusted earnings per share came in at 63 cents, significantly ahead of the Zacks Consensus Estimate of 4 cents. However, the bottom line decreased from the year-ago adjusted earnings of $1.68 per share amid reduced activity and lower dayrates.

In particular, the company achieved another quarter of outstanding revenue efficiency at 100.3%, up from 95.9% a year ago.Moreover, Transocean was able to reduce its operating and maintenance expenses by an impressive 60% to $314 million. While Transocean spend $665 million as capital expenditure in the fourth quarter of 2015, the amount came down sharply to just $272 million during the three months under review. 

Compared to the fourth quarter of 2015, dayrates fell 22% (from $422,800 to $329,400), unfavorably impacted by declines in all types of rigs. Overall fleet utilization was 46% during the quarter, down from the year-ago utilization rate of 60%. (Read more: Transocean Q4 Earnings Beat Despite Market Challenges.)

5.    Calgary-based midstream company TransCanada Corp. (TRP Quick QuoteTRP - Free Report) announced that it is the sale of two U.S. pipelines to affiliated limited partnership, TC Pipelines, L.P. in order to fund the recent purchase of Columbia Pipeline Group. The deal will likely strengthen the cash flows and enable the company to increase its quarterly dividend. The financial terms of the agreement remain undisclosed as yet. The deal is subject to regulatory approvals and satisfactory closing conditions.

TransCanada is negotiating the sale of 49.3 % stake in Iroquois Natural Gas Transmission System which connects its pipeline system to U.S. Northeast.  The company will also sell its remaining11.8% interest in the Portland Natural Gas Transmission System, an inter-state system carrying gas from Canada to England. TransCanada currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TransCanada had earlier sold 49.9% stake in Portland system and 25.9 % stake in Iroquois system for $223 and $286.5 million, respectively. TransCanada has been divesting stakes in many of its other assets lately to fund the ambitious Columbia Pipeline acquisition deal inked in July last year.

Price Performance

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

Over the course of last week, ‘The Energy Select Sector SPDR’ was down 3.51%. Consequently, investors witnessed selling in most market heavyweights. The worst performer was Houston, TX-based energy explorer ConocoPhillips (COP Quick QuoteCOP - Free Report) whose stock price fell 6%.

But longer-term, over the last 6 months, the sector tracker gained 2.51%. Offshore contract drilling behemoth Transocean Ltd. was one of the major beneficiaries during this period, experiencing a 40.1% price increase.

What’s Next in the Energy World?

With the Q4 earnings season effectively over, market participants will again be glued to the regular releases i.e. the U.S. government data on oil and natural gas. Energy traders will also be focusing on the Baker Hughes data on rig count.

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