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The Zacks Analyst Blog Highlights: BP, SeaDrill, Resolute Energy and Oasis Petroleum
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For Immediate Release
Chicago, IL – September 20, 2017 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include BP plc (NYSE:(BP - Free Report) – Free Report), SeaDrill Limited (NYSE:(SDRL - Free Report) – Free Report), Resolute Energy Corporation (NYSE: – Free Report) and Oasis Petroleum Inc. (NYSE: – Free Report).
It was a week where oil prices briefly crossed the key mark of $50. Natural gas futures rallied too as warmer forecasts continue raising expectations for demand.
On the news front, European oil major BP plc (NYSE:(BP - Free Report) – Free Report) and its international partners have agreed to pay Azerbaijan $3.6 billion to extend an oilfield contract for 25 more years, offshore drilling company SeaDrill Limited (NYSE:(SDRL - Free Report) – Free Report) filed for bankruptcy protection, while small oil and gas explorer Resolute Energy Corporation (NYSE: – Free Report) sold properties in the Paradox Basin in southeastern Utah for up to $195 million.
Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures jumped 5.1% to close at $49.89 per barrel, while natural gas prices gained 4.6% to $3.024 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: BP Launches U.S. Pipeline IPO, Shell Enters Mexican Fuel Market.)
The U.S. oil benchmark closed at its highest level since Jul 31 as traders held out hope for price stability amid an improving supply-demand narrative. Data showing the number of U.S. oil rigs dropping for a second straight week helped cement those gains.
Energy bodies OPEC and IEA both recently raised global oil demand forecasts for this year, helping to tighten the market significantly. Further, the Paris-based IEA said that the global oil supply had come down by 720,000 per day last month to 97.7 million barrels on outages and maintenance in non-OPEC countries.
Meanwhile, according to the OPEC’s latest monthly report, the oil cartel’s production fell by 79,000 barrels a day in August to 32.76 million as output dropped in Libya, Gabon, Venezuela and Iraq. This points to the success of the 14-member group’s output curb initiatives and rising compliance levels.
Adding to the positive momentum, OPEC and fellow exporters are said to be open to extending their production cut agreement beyond its March expiry.
The number of active rigs drilling for crude in the U.S. – an indicator of oil industry activity – fell by 7 to 749 as of Friday, as per data from oilfield services firm Baker Hughes Inc.
Meanwhile, bullish weather forecasts and lower-than-expected power loss from Hurricane Irma propelled natural gas futures despite an above-average build.
Recap of the Week’s Most Important Stories
1. Oil giant BP plc along with its co-venturers has inked a modified and restated Azeri-Chirag-Deepwater Gunashli (ACG) field production sharing agreement (PSA), which calls for a one-time payment of $3.6 billion to the State Oil Fund of the Republic of Azerbaijan. Per the new agreement, Azerbaijan's government has extended the production sharing deal for the country’s massive ACG oilfields until 2049. The current deal was slated to end in 2024.
Under the new accord, State Oil Company of the Republic of Azerbaijan (“SOCAR”) has increased its shareholding to 25% from 11.65%. BP’s shareholding has dropped to 30.37% from 35.8%, though it continues to be the operator of the field.
Located in the Azerbaijan Sector of the Caspian Sea, the first PSA for the ACG field was inked in 1994. The field has received investments of over $33 billion and has yielded about 440 million tons of oil. This has aided the country to rake in a direct net profit of $125 billion. Total production from ACG averaged 585,000 barrels per day during the first half of the year.
The extended contract is a major milestone for BP amid the ongoing price volatility. It will provide regular revenues to the company for almost the next three decades and also increases the company’s backlog. (Read more BP & Partners Ink Deal to Extend PSA for ACG Field till 2049.)
2. International offshore drilling company SeaDrill Limited filed for Chapter 11 bankruptcy protection on Sep 12 to restructure its balance sheet amid volatile oil prices. Following the development, shares of the company rose more than 20% to eventually close at 23 cents on Sep 12. The stock scaled up further more than 21% yesterday. The rise reflects investors’ optimism as the company finally managed to secure a restructuring agreement after 18 months of negotiations. The agreement will provide the company with more than $1 billion of capital to restructure its highly leveraged financials.
Due to the plunge in oil prices since 2014, energy companies reduced their spending and slashed rig hires. Demand for drilling reduced further as the rigs ordered during the boom period led to oversupply. This in turn led to reduced activities and diminishing contracts for Seadrill which negatively impacted the company’s revenues, earnings and cash flows. Increased costs, idle rigs and low dayrates led to high operating losses and affected the market capitalization of the company adversely. SeaDrill, being one of the worst sufferers of the downturn has been battling with around $14 billion debts and liabilities.
The company expects to emerge from Chapter 11 in six to nine months. The restructuring deal will not affect the day-to-day business operations of SeaDrill as the company expects to pay employees, suppliers and vendors as usual. The company which has more than $1 billion in cash will not require debtor-in-possession financing. (Read more: SeaDrill Files for Bankruptcy Protection, Shares Up.)
3. In a bid to transform itself into a Delaware Basin pure play, upstream player Resolute Energy Corporation recently inked a deal to divest assets in the Paradox Basin in southeastern Utah for up to $195 million.
Per the deal, Resolute Energy will sell the Aneth Field assets in the Paradox Basin to an affiliate of Elk Petroleum Limited. Aneth is one of the largest carbon dioxide enhanced oil recovery field projects in the Rocky Mountains with a production capacity of 6,500 barrels of oil per day. The oilfield contains around 1.5 billion barrels of oil equivalent, out of which just 31% has been recovered yet.
Proceeds from the deal will be used to pay the outstanding balance under the revolving credit facility of Resolute Energy. This will help the company to reduce its leverage ratio and strengthen its financials. Employees of Aneth Field will also make a transition to Elk Petroleum reducing the future overhead expenses of Resolute Energy by $6 million along with $3 million in stock-based compensation. The deal will also lower the lease operating expenses of the Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The transaction not only aims at improving the cost structure of the company, it also makes Resolute Energy become a pure play in the Delaware Basin - one of the most productive and economically viable oil and gas fields in the United States. (Read more: Resolute Energy to Divest $195 Million Paradox Assets.)
4. Upstream player Oasis Petroleum Inc. (NYSE: – Free Report) recently filed for the initial public offering (IPO) of its pipeline unit Oasis Midstream Partners LP. The company launched an IPO of 7,500,000 common units with an expected price range of $19-$21 per unit. Oasis Midstream – to be listed in the NYSE under the ticker HESM – intends to raise around $150 million at a price of $20. The partnership is expected to grant underwriters a 30-day option to purchase up to an additional 1,125,000 common units.
About 27.3% of the ownership stake is being sold in the IPO and the figure is likely to reach 31.4% if the underwriters purchase the additional common units. Post the closure of the IPO, Oasis Petroleum and its affiliates will own either a 72.7% limited partner interest in Oasis Midstream or a 68.6% interest in case the underwriters exercise their full option to purchase the additional units.
Oasis Midstream, which was created in 2013, reported revenues of $140 million for the trailing 12 months ending Jun 30. The partnership’s operations are located exclusively in the Williston Basin area of North Dakota and Montana. The assets include a diversified portfolio of midstream assets which are strategically positioned to secure volumes from various producers. These assets mainly include crude oil /natural gas gathering and transportation system and water handling systems. (Read more: Oasis Petroleum Midstream Unit Files for $150M IPO.)
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: BP, SeaDrill, Resolute Energy and Oasis Petroleum
For Immediate Release
Chicago, IL – September 20, 2017 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include BP plc (NYSE:(BP - Free Report) – Free Report), SeaDrill Limited (NYSE:(SDRL - Free Report) – Free Report), Resolute Energy Corporation (NYSE: – Free Report) and Oasis Petroleum Inc. (NYSE: – Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Tuesday’s Analyst Blog:
Oil & Gas Stock Roundup: BP, SDRL, REN & More
It was a week where oil prices briefly crossed the key mark of $50. Natural gas futures rallied too as warmer forecasts continue raising expectations for demand.
On the news front, European oil major BP plc (NYSE:(BP - Free Report) – Free Report) and its international partners have agreed to pay Azerbaijan $3.6 billion to extend an oilfield contract for 25 more years, offshore drilling company SeaDrill Limited (NYSE:(SDRL - Free Report) – Free Report) filed for bankruptcy protection, while small oil and gas explorer Resolute Energy Corporation (NYSE: – Free Report) sold properties in the Paradox Basin in southeastern Utah for up to $195 million.
Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures jumped 5.1% to close at $49.89 per barrel, while natural gas prices gained 4.6% to $3.024 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: BP Launches U.S. Pipeline IPO, Shell Enters Mexican Fuel Market.)
The U.S. oil benchmark closed at its highest level since Jul 31 as traders held out hope for price stability amid an improving supply-demand narrative. Data showing the number of U.S. oil rigs dropping for a second straight week helped cement those gains.
Energy bodies OPEC and IEA both recently raised global oil demand forecasts for this year, helping to tighten the market significantly. Further, the Paris-based IEA said that the global oil supply had come down by 720,000 per day last month to 97.7 million barrels on outages and maintenance in non-OPEC countries.
Meanwhile, according to the OPEC’s latest monthly report, the oil cartel’s production fell by 79,000 barrels a day in August to 32.76 million as output dropped in Libya, Gabon, Venezuela and Iraq. This points to the success of the 14-member group’s output curb initiatives and rising compliance levels.
Adding to the positive momentum, OPEC and fellow exporters are said to be open to extending their production cut agreement beyond its March expiry.
The number of active rigs drilling for crude in the U.S. – an indicator of oil industry activity – fell by 7 to 749 as of Friday, as per data from oilfield services firm Baker Hughes Inc.
Meanwhile, bullish weather forecasts and lower-than-expected power loss from Hurricane Irma propelled natural gas futures despite an above-average build.
Recap of the Week’s Most Important Stories
1. Oil giant BP plc along with its co-venturers has inked a modified and restated Azeri-Chirag-Deepwater Gunashli (ACG) field production sharing agreement (PSA), which calls for a one-time payment of $3.6 billion to the State Oil Fund of the Republic of Azerbaijan. Per the new agreement, Azerbaijan's government has extended the production sharing deal for the country’s massive ACG oilfields until 2049. The current deal was slated to end in 2024.
Under the new accord, State Oil Company of the Republic of Azerbaijan (“SOCAR”) has increased its shareholding to 25% from 11.65%. BP’s shareholding has dropped to 30.37% from 35.8%, though it continues to be the operator of the field.
Located in the Azerbaijan Sector of the Caspian Sea, the first PSA for the ACG field was inked in 1994. The field has received investments of over $33 billion and has yielded about 440 million tons of oil. This has aided the country to rake in a direct net profit of $125 billion. Total production from ACG averaged 585,000 barrels per day during the first half of the year.
The extended contract is a major milestone for BP amid the ongoing price volatility. It will provide regular revenues to the company for almost the next three decades and also increases the company’s backlog. (Read more BP & Partners Ink Deal to Extend PSA for ACG Field till 2049.)
2. International offshore drilling company SeaDrill Limited filed for Chapter 11 bankruptcy protection on Sep 12 to restructure its balance sheet amid volatile oil prices. Following the development, shares of the company rose more than 20% to eventually close at 23 cents on Sep 12. The stock scaled up further more than 21% yesterday. The rise reflects investors’ optimism as the company finally managed to secure a restructuring agreement after 18 months of negotiations. The agreement will provide the company with more than $1 billion of capital to restructure its highly leveraged financials.
Due to the plunge in oil prices since 2014, energy companies reduced their spending and slashed rig hires. Demand for drilling reduced further as the rigs ordered during the boom period led to oversupply. This in turn led to reduced activities and diminishing contracts for Seadrill which negatively impacted the company’s revenues, earnings and cash flows. Increased costs, idle rigs and low dayrates led to high operating losses and affected the market capitalization of the company adversely. SeaDrill, being one of the worst sufferers of the downturn has been battling with around $14 billion debts and liabilities.
The company expects to emerge from Chapter 11 in six to nine months. The restructuring deal will not affect the day-to-day business operations of SeaDrill as the company expects to pay employees, suppliers and vendors as usual. The company which has more than $1 billion in cash will not require debtor-in-possession financing. (Read more: SeaDrill Files for Bankruptcy Protection, Shares Up.)
3. In a bid to transform itself into a Delaware Basin pure play, upstream player Resolute Energy Corporation recently inked a deal to divest assets in the Paradox Basin in southeastern Utah for up to $195 million.
Per the deal, Resolute Energy will sell the Aneth Field assets in the Paradox Basin to an affiliate of Elk Petroleum Limited. Aneth is one of the largest carbon dioxide enhanced oil recovery field projects in the Rocky Mountains with a production capacity of 6,500 barrels of oil per day. The oilfield contains around 1.5 billion barrels of oil equivalent, out of which just 31% has been recovered yet.
Proceeds from the deal will be used to pay the outstanding balance under the revolving credit facility of Resolute Energy. This will help the company to reduce its leverage ratio and strengthen its financials. Employees of Aneth Field will also make a transition to Elk Petroleum reducing the future overhead expenses of Resolute Energy by $6 million along with $3 million in stock-based compensation. The deal will also lower the lease operating expenses of the Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The transaction not only aims at improving the cost structure of the company, it also makes Resolute Energy become a pure play in the Delaware Basin - one of the most productive and economically viable oil and gas fields in the United States. (Read more: Resolute Energy to Divest $195 Million Paradox Assets.)
4. Upstream player Oasis Petroleum Inc. (NYSE: – Free Report) recently filed for the initial public offering (IPO) of its pipeline unit Oasis Midstream Partners LP. The company launched an IPO of 7,500,000 common units with an expected price range of $19-$21 per unit. Oasis Midstream – to be listed in the NYSE under the ticker HESM – intends to raise around $150 million at a price of $20. The partnership is expected to grant underwriters a 30-day option to purchase up to an additional 1,125,000 common units.
About 27.3% of the ownership stake is being sold in the IPO and the figure is likely to reach 31.4% if the underwriters purchase the additional common units. Post the closure of the IPO, Oasis Petroleum and its affiliates will own either a 72.7% limited partner interest in Oasis Midstream or a 68.6% interest in case the underwriters exercise their full option to purchase the additional units.
Oasis Midstream, which was created in 2013, reported revenues of $140 million for the trailing 12 months ending Jun 30. The partnership’s operations are located exclusively in the Williston Basin area of North Dakota and Montana. The assets include a diversified portfolio of midstream assets which are strategically positioned to secure volumes from various producers. These assets mainly include crude oil /natural gas gathering and transportation system and water handling systems. (Read more: Oasis Petroleum Midstream Unit Files for $150M IPO.)
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.