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Oil & Gas Stock Roundup: A Look at TOTAL, Equinor & Cenovus Q4 Earnings & More

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It was a week when both oil and natural gas prices settled higher.

On the news front, energy firms TOTAL SE (TOT - Free Report) , Equinor ASA (EQNR - Free Report) and Cenovus Energy (CVE - Free Report) reported December-quarter earnings. The highlights for the week also include TechnipFMC’s (FTI - Free Report) massive contract win and ExxonMobil’s (XOM - Free Report) decision to shut a refinery in Australia.

Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures gained 4.6% to close at $59.47 per barrel, while natural gas prices rose around 1.7% in the week to end at $2.912 per million Btu (MMBtu).

The crude benchmark returned to its pre-pandemic level on continued vaccine-related developments and their successful deployment around the world that offer hope for an earlier-than-expected pickup in the commodity’s demand. Crude has been driven up further by a U.S. government data showing a large decline in stockpiles, geopolitical tensions in the Middle East, continued lid on production from OPEC+ members and optimism related to the passage of the latest stimulus from Washington.

Natural gas finished higher too after a cold spell across the country led to a spike in the commodity’s demand for heating.

Recap of the Week’s Most-Important Stories

1.  Energy major TOTAL reported fourth-quarter 2020 operating earnings of 46 cents (€0.39) per share, on par with the Zacks Consensus Estimate. However, the French supermajor’s bottom line declined 61% from the year-ago figure of $1.19 (€1.07) per share. This year-over-year decline was due to a substantial fall in commodity prices, drop in production and decline in refining margins.

In 2020, TOTAL acquired $4.2 billion worth of assets and sold assets valued at $1.5 billion. Courtesy of cost-savings initiatives, the Zacks Rank #1 (Strong Buy) company was able to lower operating costs by $1.1 billion in 2020 from the 2019 level.

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

TOTAL expects LNG sales to improve 10% in 2021 from the 2020 levels, primarily due to the ramp up of Cameron LNG. Management continues with cost-saving initiatives and targets additional savings of $0.5 billion in 2021, indicating a decline from $1.1 billion in 2020. TOTAL plans to allocate 20% of net investment in 2021 toward expanding the Renewables and Electricity business. The company aims to install and operate 35 GW of renewable assets by 2025. (TOTAL Q4 Earnings Meet Estimates, Revenues Drop Y/Y)

2.  Equinor reported fourth-quarter 2020 adjusted loss per share of 18 cents against the Zacks Consensus Estimate of earnings of 18 cents. The company reported earnings of 36 cents in the year-ago period. The deterioration was owing to a decline in liquid prices and oil equivalent production. Moreover, the Hammerfest LNG facility shutdown and natural decline in output affected fourth-quarter results.

In the December quarter, the Norwegian energy firm generated free cash flows of $1,363 million against negative free cash flow of $513 million in the year-ago period. Despite the coronavirus pandemic, the massive improvement was aided by lower tax payments and dividends paid.

Equinor announced expectations for compound annual production growth rate of 3% from 2020 through 2026, banking mostly on new projects. Production for 2021 is expected to rise 2% from the 2020 level despite the fact that it is divesting its entire Bakken acreage to a private entity for $900 million. Entitled production from the region in the fourth quarter was 48 MBoe/d. (Equinor Q4 Earnings Miss, Decline Y/Y on Lower Prices)

3.  Cenovus Energy reported fourth-quarter 2020 loss per share of 35 cents, wider than the Zacks Consensus Estimate of a loss of 6 cents and the year-ago loss of 10 cents. The Canadian energy firm’s quarterly results were weak due to lower contributions from oil sands operations, partially offset by a decline in transportation and blending expenses. Notably, a weak pricing environment of commodities owing to the coronavirus pandemic hurt the company’s bottom line.

The company incurred total capital expenditure of C$250 million in the quarter under review. As of Dec 31, 2020, the Canadian energy player had cash and cash equivalents of C$378 million. Total long-term debt was C$7,441 million. Its total debt to capitalization was 31.2%.

On Jan 28, the company announced its projection for oil sands production in 2021 in the band of 524 thousand barrel per day (MBbl/D) to 586 MBbl/D. For oil sands business, the company plans capital expenditure of C$850 million to C$950 million. The company has set C$1,220 million to C$1,410 million of capital spending budget for upstream business in 2021. For downstream operations, the company’s capital budget lies in the band of C$1,000 million to C$1,200 million. (Cenovus Energy Q4 Earnings Lag, '21 Capital Budget Set)

4.  Oilfield service provider TechnipFMC obtained a substantial Engineering, Procurement, Construction and Commissioning (“EPCC”) agreement from Qatar Petroleum for the expansion of phase one of its North Field East Project (“NFE”).

Qatar petroleum awarded the EPCC contract to CTJV, a joint venture between Japan-based construction engineering company Chiyoda Corporation and TechnipFMC’s wholly owned subsidiary Technip Energies. Notably, the $28.7-billion contract is, so far, the largest single Liquefied Natural Gas (“LNG”) project to be authorized in the entire energy industry.

The execution of the contract marks the beginning of the NFE Project construction and is an important milestone for Qatar Petroleum's road to development. This project will earn high profitability for the state of Qatar and provide considerable advantages to all sectors of the Qatari economy. On its part, the EPCC contract demonstrates Technip Energies’ ability to incorporate technologies toward low-carbon LNG and upholds its goal to boost the energy transition journey.(TechnipFMC JV Clinches Massive LNG Contract in Qatar)

5.  ExxonMobil plans to shut down its Altona refinery, located 13 kilometers west of Melbourne in the Australian state of Victoria. The 72-year old facility will be transformed into an import terminal as the refinery has been struggling with low demand for fuel. Notably, ExxonMobil stated that the terminal would ensure the constant and steady supply of fuel for Victoria.

The oil giant added that the transition is expected to commence in around six months. Till then, the refinery, which serves nearly 50% of Victoria's refined fuel needs, will remain in service. The facility has a refining capacity of up to 14.5 million liters per day and is plenty to fill more than 330,000 cars.

The refinery significantly contributes to Victoria’s fuel supply chain, and the local and state economy. It offers several job opportunities and produces refined fuel products for industrial customers. However, the closure of the Altona refinery is likely to trim more than 300 positions that the facility employees. (ExxonMobil to Shut Down Australia Refinery Amid Losses)

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                +2.9%              +15.9%
CVX                 +3.7%              +2.5%
COP                +7.1%              +14.3%
OXY                 +12.5%            +71.1%
SLB                 +7%                  +32.7%
RIG                 +0.9%                +67.4%
VLO                +6.5%                +21.4%
MPC               +5.9%                +33.6%

The Energy Select Sector SPDR — a popular way to track energy companies — was up 5% last week. The best performer was Houston-based oil and gas producer Occidental Petroleum (OXY - Free Report) whose stock surged 12.5%.

For the longer term, over six months, the sector tracker has gained 16.4%. Occidental was the major gainer during the period too, experiencing a 71.1% price appreciation.

What’s Next in the Energy World?

As global oil consumption gradually ticks up from the depths of coronavirus, market participants will be closely tracking the regular releases to watch for signs that could further validate a rebound. 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. There will also be 2020 Q4 earnings, with quite a few of the S&P 500 components coming up with quarterly results. Finally, news related to coronavirus vaccination/distribution and additional U.S. stimulus will be of utmost importance.

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