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Oil & Gas Stock Roundup: Helmerich & Payne's Q4, Gulfport's Bankruptcy & More

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It was a week wherein oil futures tallied another healthy gain but gas prices moved southward.

On the news front, contract drilling operator Helmerich & Payne (HP - Free Report) reported September-quarter earnings, while natural gas producer Gulfport Energy filed for Chapter 11 bankruptcy protection.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures gained 5% to close at $42.15 per barrel, natural gas prices fell more than 11% in the week to finish at $2.65 per million Btu (MMBtu). In particular, the oil markets maintained their forward momentum from the previous two weeks.

Oil prices ended sharply higher after biotech company Moderna reported that its coronavirus vaccine was 94.5% effective in trials. The Cambridge, MA-based firm’s early-week breakthrough was followed by the news of pharma giant Pfizer’s application seeking emergency use of its COVID-19 vaccine being developed with BioNTech.

For oil in particular, the developments hold out hope of protection against the deadly pandemic that has crushed the commodity’s demand and caused a bloodbath for the energy-related stocks. A potential treatment is expected to revive economic and transport activity, leading to stronger crude demand.

On the other hand, natural gas fell for the week after the U.S. Energy Department's inventory release showed a larger-than-expected increase in supplies. The bearish injection, together with an unfavorable weather forecast, sparked a collapse.

Recap of the Week’s Most-Important Stories

1.  Helmerich & Payne posted fiscal fourth-quarter adjusted loss of 74 cents per share, narrower than the Zacks Consensus Estimate of a loss of 80 cents per share owing to better-than-expected revenues from the International Solutions segment. Precisely, the unit generated operating revenues of $24 million, beating the Zacks Consensus Estimate of $17.13 million. However, the bottom line came against the year-ago earnings of 39 cents per share. This underperformance can be attributed to sharp decline in rig activity as a result of coronavirus-induced lower crude prices.

In the reported quarter, Helmerich & Payne spent $19.8 million on capital programs. As of Sep 30, 2020, the company had $487.9 million in cash and cash equivalents while net long-term debt was $480.7 million (debt-to-capitalization of 12.7%).

This Tulsa, OK-based company anticipates operating gross margins in the North America Solutions segment in the first quarter of fiscal 2021 to be between $40 million and $50 million. Coming to the offshore Gulf of Mexico segment, Helmerich & Payne envisions operating gross margins within $5-7 million for the fiscal first quarter and operating income in the $1-$2 million range. Additionally, International Solutions operating gross margins are forecast in a negative $5-$7 million range for the current quarter.

2.  Gulfport Energy recently announced that it has filed for Chapter 11 bankruptcy protection at the United States Bankruptcy Court for the Southern District of Texas after coronavirus-induced commodity price crash dried up the available capital in the energy industry. The company filed for Chapter 11 with an intention to improve its financial position and significantly lower its debt.

Gulfport management felt that the bankruptcy protection route will be the best option for the stock’s turnaround. Under the Chapter 11 security, the company will be able to reduce its funded debt by $1.25 billion and save its cash and annual expense. Under the restructuring agreement, the company plans to issue $550 million of new senior unsecured notes to the existing unsecured creditors of certain Gulfport subsidiaries while safeguarding the interests of its shareholders as its balance sheet is realigned to fit the present demand scenario.

Further, this natural gas explorer and producer obtained $262.5 million in debtor-in-possession financing from Gulfport’s present lenders under its revolving credit facility. This also comprises $105 million in new money that can be achieved upon the court’s consent. This, in turn, will help the company finance its ordinary business activities at the time of the chapter 11 proceedings, consisting of employee salaries and perks and the bills owed to suppliers and vendors. (Gulfport Files for Chapter 11 Bankruptcy Amid Coronavirus)

3.  Eni SpA (E - Free Report) announced that along with Falck Renewables SpA, it has signed an accord with renewable energy company Savion to buy a solar project in Virginia. The transaction value has not been specified.

Through the joint venture of Eni and Falck Renewables, named Novis Renewables Holdings LLC, the companies intend to invest $35 million on constructing and developing the 30-megawatt (MW) Westmoreland Solar development. Eni, which carries Zacks Rank of #3 (Hold), expects the project to generate sufficient clean energy that will reduce annual carbon dioxide emissions by more than 33,000 tons.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It is to be noted that Eni expects the acquisition to close by November-end and the solar development to commence commercial operations by the third quarter of 2021. Overall, the accord signifies Eni’s strong focus on renewable energy since it has been a challenge for energy companies to supply sustainable cleaner energy and combat climate change. Thus, Eni is focused to create long-term value for its shareholders while capitalizing on the energy transition. (Eni-Falck Renewables to Buy Savion's Virginia Solar Project)

4.  TechnipFMC (FTI - Free Report) received a Notice to Proceed by Sempra LNG and IEnova, two subsidiaries of the energy provider Sempra Energy for an Engineering, Procurement and Construction (“EPC”) contract worth more than $1 billion at the Energía Costa Azul liquefied natural gas (ECA LNG) facility in Baja California, Mexico.

ECA LNG is one of Sempra LNG’s natural gas liquefying infrastructure projects underway in North America to satisfy global LNG demands. The move was made after Sempra and IEnova reached a final investment decision to develop, construct and operate the first phase of the Pacific Coast project. TechnipFMC has been part of this project since 2017 and provided the Front End Engineering Design (“FEED”).

For TechnipFMC, the EPC contract will add to its revenues and comes at a time when the oil market crash and the coronavirus-induced demand destruction for fuel has led to massive capital expenditure curtailments by the upstream players, which has created an extremely challenging operating environment for oilfield service players. (TechnipFMC Advances With EPC Contract for Mexican LNG Facility)

5.  ExxonMobil (XOM - Free Report) recently made another discovery in offshore Guyana but the results are uneconomic in nature, per reports. The company’s oil discovery at the Tanager-1 well is viewed as a non-commercial discovery on a standalone basis.

The Tanager-1 well is located near the Kaieteur Block, offshore Guyana. Southwest of the Kaieteur Block lies the famous Stabroek block, wherein ExxonMobil has made 18 promising world-class oil discoveries. Notably, it estimates gross resources of much more than 9 billion barrels of oil equivalent in the Stabroek Block, wherein ExxonMobil has Hess Corporation (HES) and China’s CNOOC Limited (CEO) as partners.

ExxonMobil has found 16 meters net oil pay in high-quality sandstone reservoirs at the site from the Maastrichtian age. The preliminary test results indicated the presence of less-valuable heavier crude oil in the well compared with the Liza Phase 1 in the Stabroek Block. The Tanager-1 well is expected to be plugged and abandoned in the future. (ExxonMobil Makes Non-Commercial Oil Discovery at Tanager-1)

Price Performance

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

Company    Last Week    Last 6 Months

XOM                 +2.4%            -16.1%
CVX                  +4.8%            -6.9%
COP                 +12.1%          -9.7%
OXY                   +14.3%         -6.3%
SLB                   +12.3%         +15%
RIG                    +27.8%         -9.5%
VLO                   +1.6%            -22%
MPC                  +3.3%            +9.5%

The Energy Select Sector SPDR — a popular way to track energy companies — was up 5.7% last week. The best performer was offshore driller Transocean (RIG - Free Report) whose stock surged 27.8%.

But for the longer term, over six months, the sector tracker has lost 7%. Downstream operator, Valero Energy (VLO - Free Report) was the major loser during the period, experiencing a 22% price decline.

What’s Next in the Energy World?

With rapidly rising new coronavirus cases around the world leading to the reimposition of lockdowns and the looming threat of another bout of oil demand weakness, market participants will be closely tracking the regular releases to watch for signs that could validate a revival. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that comes out regularly — will be on energy traders' radar. Data on rig count from energy service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is also closely followed.

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