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The Zacks Analyst Blog Highlights: BP, ExxonMobil, Marathon Petroleum, Transocean and Kinder Morgan

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For Immediate Release

Chicago, IL –October 3, 2019 – 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 (BP - Free Report) , ExxonMobil (XOM - Free Report) , Marathon Petroleum (MPC - Free Report) , Transocean Ltd. (RIG - Free Report) and Kinder Morgan, Inc. (KMI - Free Report) .

Here are highlights from Wednesday’s Analyst Blog:

Oil & Gas Stock Roundup: XOM, BP, MPC and More

It was a week where both oil and natural gas prices settled sharply lower.

On the news front, BP plc has signed up Korea Gas Corporation as a customer for its Freeport LNG terminal located in Texas or Calcasieu Pass terminal in Louisiana, while ExxonMobil has signed an agreement to divest its oil and gas business in Norway for $4.5 billion.

Overall, it was a dismal week for the sector. West Texas Intermediate (WTI) crude futures moved down 3.8% to close at $55.91 per barrel, while natural gas prices dropped 5.9% for the week to finish at 2.404 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Tellurian's LNG Deal, Equinor's Gas Find & More)

The U.S. crude benchmark registered a sharp weekly loss on hopes of a thawing in Saudi-Yemen geopolitical tensions and talks of a possible U.S. deal with Iran. Prices also remained under pressure amid indication that Saudi Arabia is on the verge of restoring the output they halted due to the drone attack and a report from the U.S. government showing a surprise increase in crude stockpiles.

Natural gas prices also finished down after the weekly inventory release showed a larger-than-expected increase in supplies. The bearish injection, which was also higher than the five-year average, sparked a sell-off. 

Recap of the Week’s Most Important Stories

1.  BP recently struck a 15-year liquefied natural gas ("LNG") deal with South Korea’s state-run natural gas company Korea Gas Corporation (“KOGAS”). The contract incorporates an option of extending the deal for three more years. Total value of the transaction is estimated at $9.61 billion.

Per the deal, BP will supply around 1.6 million tons of LNG per annum (MTPA) beginning in 2025. Low natural gas prices in the United States are expected to result in growing LNG exports and long-term deals, as is evident from BP’s contract with KOGAS. The British energy giant can supply the LNG either from the Freeport LNG terminal located in Texas or Calcasieu Pass terminal in Louisiana.

The Freeport LNG terminal, which was scheduled to start operations this month, will have a total export capacity of 13.9 MTPA. In 2013, BP had signed a 20-year sale and purchase agreement with Freeport LNG for 4.4 MTPA. Notably, Venture Global’s 10 MTPA Calcasieu Pass terminal is expected to come online in 2022. Last year, BP had struck a deal to buy 2 MTPA of LNG from the Calcasieu Pass terminal. The diversification of supply locations enables the energy major to serve the rising global demand for cleaner energy sources and expand its end-user portfolio. (Read more BP Signs $9.61B LNG Supply Deal With South Korea's KOGAS)

2.   ExxonMobil recently announced a deal with Vår Energi AS to divest its Norwegian non-operated upstream assets. The transaction, likely to close in the December quarter of 2019, is valued at $4.5 billion.

Per the accord, ExxonMobil will be divesting its stakes in more than 20 fields producing oil and natural gas. The company has estimated the fields’ daily combined production capacity at 150,000 barrels of oil equivalent.

Once the deal closes, ExxonMobil will be concluding its oil and gas production in Norway where it has presence for more than 100 years. Importantly, the refining and retail operations in Norway will be retained by ExxonMobil. (Read more ExxonMobil Agrees to Sell $4.5B of Upstream Assets in Norway)

3.   Shares of Marathon Petroleum scaled higher after billionaire activist investor Paul Singer’s Elliott Management Corp suggested the company to break into three separate businesses. Following this development, the stock rose 8.4% in yesterday’s trading to a more than 5-month high.

Claiming that Marathon suffered a long-term undervaluation in the equity market, Elliott recommended the split to help the company better its business scale while enhancing its shareholder value.

In this proposal, Elliott advises the company to disintegrate into three distinct independent concerns, namely RetailCo turning into autonomous Speedway, MidstreamCo converting to MPLX LP and RefiningCO transforming into New Marathon. (Read more Should Marathon Petroleum Pay Heed to a Triple Split Bid?)

4.   Transocean Ltd. recently announced that two of its indirect wholly-owned subsidiaries will cancel the deliveries of two drillships from Korean builder Samsung Heavy Industries in 2019 and 2020.

The newbuild drillships, namely Ocean Rig Santorini and Ocean Rig Crete were supposed to be delivered to Transocean in 2019 and 2020. Following the relinquishment of interests in the vessels — currently under construction at Geoje shipyard — Transocean’s units will not make further payments for the seventh generation ultra-deepwater drillship contracts to Samsung Heavy Industries.

Had Transocean received the consignment of its two newbuilds, it would have incurred a huge expense of $1.1 billion comprising payments to SHI as well as transportation and raw material costs. Therefore, upon this contract’s withdrawal, the company will be able to save a huge chunk from its future costs. Moreover, the construction-based contracts are not guaranteed by the parent entity or any of its wholly-owned subsidiaries. (Read more Transocean Calls Off Korea's Samsung Twin-Drillship Contract)

5.   Kinder Morgan, Inc.’s Gulf Coast Express (“GCX”) Pipeline Project is coming online today, ahead of schedule. The pipeline was designed to ramp up natural gas transportation capacity in the Permian Basin, which has been suffering from takeaway capacity limitation.

The 2 billion cubic feet per day (Bcf/d) pipeline will collect natural gas from the Waha region in West Texas and deliver it to Agua Dulce near Texas Gulf Coast. The commencement of the 448-mile pipeline can help the upstream companies operating in the prolific Permian to reduce flaring of natural gas that is produced as a by-product of crude oil.

With production from the region expected to rise in the coming days, the pipeline can provide Kinder Morgan with stable fee-based revenues in the long run. DCP Midstream, LP, Apache Corporation, ExxonMobil and others will serve as committed shippers for the GCX pipeline.(Read more Kinder Morgan's Gulf Coast Express Pipeline Comes Online)

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