It was a week where oil prices fell to its lowest point in a month, while natural gas futures tightened their grip over the $3 level.

On the news front, integrated majors ExxonMobil Ltd. (XOM Quick QuoteXOM - Free Report) and Chevron Corp. (CVX Quick QuoteCVX - Free Report) reported came up with stronger-then-expected earnings reports. Meanwhile, Canadian energy infrastructure major Pembina Pipeline Corp. (PBA Quick QuotePBA - Free Report) has agreed to buy smaller rival Veresen Inc. in a $7.1 billion deal.    

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures edged down 0.6% to close at $49.33 per barrel, natural gas prices gained around 6% to $3.276 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: SLB & HAL's Q1 Earnings, CVX's Canadian Sale & More.)

Suffering its second loss in as many weeks, oil prices were pressured by the U.S. government data that showed a surprise build in U.S. gasoline stockpiles - pointing to stuttering demand for the fuel in the summer driving season. The continued growth in U.S. production and a burgeoning rig count – both pointing to the ever-increasing shale drilling activities – further stymied the commodity.

Meanwhile, natural gas turned higher after a ‘Neutral’ storage report.

Recap of the Week’s Most Important Stories

1.    Energy giant ExxonMobil Corp. posted strong first-quarter earnings. Increased realizations for liquids primarily drove the outperformance. Increased realizations for liquids and gas as well as higher margin from the downstream business led to the outperformance.

Total revenue in the quarter increased to $63,287 million from $48,707 million in the year-ago quarter. However, the top line missed the Zacks Consensus Estimate of $64,354 million due to lower oil equivalent production.

During the quarter, ExxonMobil generated cash flow of $8.9 billion from operations and asset sales. The company returned $3.1 billion to shareholders through dividends. Capital and exploration spending decreased 19% year over year to $4.2 billion.

Prior to the earnings release, ExxonMobil declared dividend of 77 cents per share for second quarter, up 2.7% from the previous payout of 75 cents. The increased dividend will likely be paid on Jun 9, to the shareholders on record as of May 12, 2017. (Read more: ExxonMobil Beats on Q1 Earnings, Misses Revenues.)

2.    Smaller rival Chevron Corp. reported strong first-quarter results amid the recovery in commodity prices, improving domestic refining margins and the success of its cost savings initiatives. The company reported earnings per share of $1.41, sharply higher than the Zacks Consensus Estimate of 85 cents and turning around from the year-ago loss of 39 cents.

Importantly, Chevron delivered a good cash flow performance this quarter – an important gauge for the oil and gas industry – with $3,879 million in cash flow from operations, up from $1,141 million a year ago. Chevron currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Exploration costs fell from $370 million in the first quarter of 2016 to $144 million. The company spent $4,392 million in capital expenditures during the quarter, a considerable decline from the $6,469 million incurred a year ago. More than 90% of the total outlays pertained to upstream projects. (Read more: Chevron Shares Leap After Q1 Earnings, Sales Beat.)

3.    Canadian energy transportation and service provider Pembina Pipeline Corp. announced that it is considering the buyout of smaller rival Veresen Inc. in a stock-and-cash deal valued at $7.1 billion, including debt. The deal, if successful, will result in the creation of one of the largest energy infrastructures in the country and will provide Pembina Pipeline access to attractive natural gas pipelines and processing infrastructure.

Per the deal terms, shareholders of Veresen can either opt for 0.4287 of a Pembina Pipeline share or $13.64 in cash. The offer made by Pembina Pipeline is at a 22.5% premium to the last closing price of the stock.

Pembina Pipeline's existing pipeline network interlinks Western Canada and the U.S., covering more than 6,000 miles. Addition of Veresen's natural gas gathering, processing, and pipeline assets in Western Canada to Pembina Pipeline's network will provide the company an advantageous spot in the Western Canadian Sedimentary Basin, which has the world’s third-largest crude reserve.

The slow increase in oil prices after a two-year rut along with friendlier administration and tax policies in the U.S. are pressurizing firms with overcapacity and no major projects on the horizon beyond the few already approved ones in the pipeline industry to merge. (Read more: Pembina Pipeline to Purchase Veresen for $7.1 Billion.)

4.    Ohio-based independent oil refiner and marketer Marathon Petroleum Corp. (MPC Quick QuoteMPC - Free Report) reported strong first-quarter earnings on higher gross margins and solid operational performance from its ‘Midstream’ unit. The company’s earnings per share came in at 6 cents, contrary to the Zacks Consensus Estimate for a loss of a penny.

However, Marathon Petroleum’s revenues of $16,393 million missed the Zacks Consensus Estimate of $19,030.9 million amid lower throughput volumes, though they were up 28% year over year.

In the reported quarter, Marathon Petroleum spent $1,325 million on capital programs (81% on the Midstream segment). As of Mar 31, 2017, the company had cash and cash equivalents of $2,167 million and total debt of $12,598 million, with a debt-to-capitalization ratio of 38%. Marathon Petroleum returned $610 million of capital to shareholders, including $420 million of share repurchases. (Read more: Marathon Petroleum Earnings Surprise in Q1, Sales Lag.)

5.    British Energy giant BP plc (BP Quick QuoteBP - Free Report) recently declared that it has inked an agreement to divest its 50% stake in Shanghai SECCO Petrochemical Co. Ltd. to Sinopec's subsidiary, Gaoqiao Petrochemical Co Ltd., for $1.68 billion.

BP plans to use the proceeds from the transaction – expected to be completed in the current year – for general corporate purposes. The deal is dependent on the fulfillment regulatory approvals. 

BP considers China as an important region for its chemicals business, in spite of the divestment of its stake in SECCO. The company will keep looking for further opportunities in the country. (Read more: BP to Sell Stake in SECCO to Sinopec Unit for $1.68 Billion.)

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 – a popular way to track energy companies – fell by 0.38%. Consequently, investors witnessed selling in most market heavyweights. The worst performer was oilfield services giant Schlumberger Ltd. (SLB Quick QuoteSLB - Free Report) whose stock price dived 6.12%.

Longer-term, over the last 6 months, the sector tracker is down 0.32%. Houston-based energy explorer Occidental Petroleum Corp. (OXY Quick QuoteOXY - Free Report) was one of the major laggards during this period, experiencing a 10.28% price decline.

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. However, the 2017 Q1 earnings remain the primary focus this week, with a number of S&P 500 members coming out with quarterly results.

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