It was a week where oil prices halted its losing streak but still remained below $50-a-barrel. On the other hand, natural gas futures settled lower on bearish weather revisions.

On the news front, Switzerland-based rig contractor Transocean Ltd. (RIG Quick QuoteRIG - Free Report) has agreed to sell its entire fleet of 15 jack-up rigs to upstart Norwegian firm Borr Drilling, while supermajor BP plc (BP Quick QuoteBP - Free Report) confirmed that it is in talks to divest its Forties pipeline system in the North Sea to chemicals producer Ineos.

Overall, it was another mixed week for the sector. While West Texas Intermediate (WTI) crude futures edged up 0.6% to close at $48.78 per barrel, natural gas prices fell 2% to $2.948 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Shell's Oil Sands Sale, Chevron's Production Start-Up and More.)

Despite scoring its first gain in 3 weeks, 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. Big weekly draws for both crude and product inventories, as reported by the federal government’s Energy Information Administration (‘EIA’), provided further support.

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

Meanwhile, natural gas turned lower following a smaller-than-expected decrease in supplies and predictions of tepid spring-like temperatures over the next few days that could undermine the fuel’s demand.

Recap of the Week’s Most Important Stories

1.    Offshore drilling giant Transocean Ltd. signed an agreement to sell 15 jack-up drilling rigs to the Norwegian offshore drilling contractor Borr Drilling.

The transaction would involve the sale of Transocean’s entire jack-up fleet which is used in exploration drilling in shallow water. The sale includes 10 operational rigs and five new rigs which are under construction at Singapore’s Keppel FELS Limited. Out of the five rigs which are yet to be completed, three would be delivered between 2017 and 2018 and the remaining two in 2020.

The deal is valued at $1.35 billion and includes remaining contract backlogs and yard installments. Borr has already paid an initial consideration and will fund the remaining amount through private placement of equity.

By divesting its jack-up fleet, Transocean will be able to reduce its rig count without hurting the bottom line. The deal would help the company to monetize its jack-up fleet and reduce significant capital expenditure which in turn will reduce Transocean’s debt. It would further help the company to streamline its portfolio by focusing on deepwater floaters exclusively. (Read more: Transocean Inks Rig Sale Deal with Borr for $1.35B.)

2.    Energy giant BP plc is discussing the prospects of divesting the Forties pipeline system with Ineos, the leading manufacturer of chemicals and oil products. The Forties pipeline system is considered to be the largest and oldest oil pipeline of the North Sea.

The pipeline extends over 100 miles and carries crude to the onshore terminal at Cruden Bay from the Unity platform located off the coast of the North Sea. Originally, the pipeline system was constructed to transport crude to the Grangemouth refinery from the Forties field. The oil field was discovered in 1970. In 2003, BP divested its stake in the Forties field to upstream energy player Apache Corp. 

Notably, both BP and Ineos have confirmed their willingness for the transaction. The companies started discussions on the matter in the first half of 2016. Though the deal was expected to have fallen through owing to the disagreement of the companies over pricing the properties, it now seems that the transaction was kept under wraps all along. (Read more: Will BP plc Divest the Largest Pipeline of North Sea?.)

3.    California-based integrated energy company Chevron Corp. (CVX Quick QuoteCVX - Free Report) discovered oil at an appraisal well at the deepwater Anchor prospect in the Gulf of Mexico. The Anchor #4 appraisal well drilled to total depth, encountered 800 feet of net oil play in multiple reservoirs.

Chevron holds 55% working interest in the Anchor prospect and is its operator while Cobalt International Energy Inc. owns 20% stake. Samson Offshore Anchor LLC and Venari Resources LLC hold 12.5% interest each. Cobalt International currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cobalt owns 100% interest in two leases on the southern flank of Anchor. Based on reservoir simulation results, additional wells on these two leases are required to maximize recovery from the field. Cobalt is contemplating options to bring the two leases in the Anchor unit for the optimum development of the field. (Read more: Chevron Discovers Oil at Anchor Prospect in Gulf of Mexico.)

4.    Italian oil and gas company Eni SpA’s (E Quick QuoteE - Free Report) official claimed that the discovery of an enormous natural gas deposit in Egyptian waters has raised hopes of other such finds in the eastern Mediterranean. This is likely to help meet Europe's energy needs.

Per the official, the Zohr discovery by the company is a milestone as the find is estimated to be of 30 trillion cubic feet of gas. The claim bolstered the interest of other major oil and gas companies in the region.

Eni expects the Zohr field to be commissioned by the end of 2017 and meet Egypt's growing domestic demand for energy. The total cost for developing the deposit is 12 billion euros ($12.8 billion).

Egyptian government intends to bring online two idle processing plants to liquefy gas so it can be exported to the European markets. (Read more: Eni Claims Discovery of Huge Natural Gas Deposit in Egypt.)

5.    Brazil’s federal accounting court (or TCU) recently lifted its suspension order on the state energy giant Petrobras (PBR Quick QuotePBR - Free Report) that put a pause on its asset divestiture program. The news brought relief to the company as the suspension order had posed a severe threat to its aim of mitigating the huge debt that it has incurred.

Per the verdict, the company will have to begin the process of selling all the assets it had planned to divest all over again, excepting two. The other assets will be sold under the new rules revised by the TCU which are expected to bring about transparency in future asset sales.

The two assets which Petrobras will be able to divest without any further ordeals include the rights to operate the Baúna and Tartaruga Verde offshore oil fields, and a share of Petrobras' deepwater rights in the Gulf of Mexico. (Read more: Petrobras to Resume Asset Sales on Court's Verdict.)

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’ rose by 0.61%. Consequently, investors witnessed buying in most market heavyweights. The best performer was Houston-based energy explorer Occidental Petroleum Corp. (OXY Quick QuoteOXY - Free Report) whose stock price gained 3.39%.

Longer-term, over the last 6 months, the sector tracker is up 1.80%. Offshore drilling giant Transocean Ltd. was one of the major beneficiaries during this period, experiencing a 33.70% price increase.

What’s Next in the Energy World?

In this week, market participants will be closely tracking 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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