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Oil & Gas Stock Roundup: Exxon & Conoco Q1 Updates, Pioneer's Acquisition & More
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It was a week when both oil and natural gas prices settled higher.
On the news front, ExxonMobil (XOM - Free Report) and ConocoPhillips (COP - Free Report) , among others, issued updates on their upcoming Q1 earnings. Meanwhile, shale driller Pioneer Natural Resources Company (PXD - Free Report) agreed to buy privately held upstream company DoublePoint Energy for $6.4 billion.
Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures inched up 0.8% to close at $61.45 per barrel, while natural gas prices rose 3.5% in the week to end at $2.64 per million British thermal units (MMBtu). In particular, the oil markets reversed their decline from the previous week, when the commodity fell into correction territory.
Coming back to the holiday-shortened week ended Apr 1, oil prices posted a small rise after the OPEC+ coalition of producers decided to gradually loosen the output cuts from May through July, reflecting their confidence in the fuel’s demand.
Natural gas finished higher too on encouraging inventory numbers, coupled with favorable weather predictions.
Recap of the Week’s Most-Important Stories
1. ExxonMobil recently expressed concerns regarding the Texas winter storm having hit its first-quarter 2021 earnings by as much as $800 million. Notably, the brutal storm in February wreaked havoc on power and water systems in Texas, thereby hurting the company’s production and sales volumes. However, the leading integrated energy company now projects a significant improvement in results for its three key business lines.
The Zacks Rank #1 (Strong Buy) company projects operating results in the first quarter from oil and liquids businesses to improve $1.6 billion to $2 billion as compared to the December quarter of 2020, thanks to an uptick in oil prices. The hike in natural gas prices is likely to have contributed another $300 million to $700 million to profits of the upstream business, as forecast by the energy major. It is to be noted that the rolling out of coronavirus vaccines, which led to expectations that economies will rebound strongly later this year, primarily helped commodity prices to move north in the March quarter of 2021.
Moreover, ExxonMobil estimated $300 million to $500 million of a sequential improvement in profit from the downstream business in the March quarter, thanks to strong refining margins. From the chemical business, the company estimated a higher profit of $400 million to $600 million owing to healthy chemicals margin. (ExxonMobil Expects Texas Storm Impact on Q1 Earnings)
2. ConocoPhillips recently provided some preliminary operational and financial updates for the March quarter of 2021. The company is scheduled to report first-quarter results on May 4. Its acquisition of Concho Resources, which was completed in January, has been taken into account in the preliminary data. It reiterated the 2021 capital budget at $5.5 billion, suggesting an increase from the 2020 level of around $4.7 billion.
ConocoPhillips’ first-quarter overall production is estimated in the range of 1,470-1,490 thousand barrels of oil equivalent per day (MBoe/d), excluding Libya. The company reported production of 1,289 MBoe/d in the year-ago quarter. Also, the expected figure indicates a sequential rise from 1,169 MBoe/d. First-quarter Libya production is expected to be 40 MBoe/d. The total expected figure includes a 50 MBoe/d hit from the cold Winter Storm Uri.
The company expects first-quarter average realized prices in the range of $43-$45 per Boe, indicating a rise of $38.81 from the year-ago level. Moreover, the estimated figure signals a significant improvement from the fourth-quarter 2020 level of $33.21 per Boe. (ConocoPhillips' Q1 Profits to Jump Y/Y on Higher Output)
3. Pioneer Natural Resources recently announced that it has agreed to acquire a Permian rival for $6.4 billion. The acquiree is a privately held Fort Worth, TX-based upstream company, DoublePoint Energy. The latest acquisition agreement follows the $4.5-billion all-stock buyout of Parsley Energy, which concluded in January.
Acquiring the Midland Basin neighbor will make Pioneer Natural one of the biggest producers in the Permian Basin, the most prolific oil resource in the United States. As a result of the bolt-on acquisition, 97,000 high-quality net contiguous acres will be added to Pioneer Natural’s existing asset base. The deal will boost the acquirer’s total holding in the basin to more than 1 million net acres.
The company expects output from the acquired acres to rise to 100,000 barrels of oil equivalent per day by the June quarter-end. Earlier, with the Parsley Energy acquisition, Pioneer Natural bolstered the daily output capacity to 558 thousand barrels oil equivalent. Moreover, the DoublePoint buyout is expected to result in $175 million of annual cost savings. Reduction in general and administrative and interest expenses, along with rising operational efficiencies will likely help the combined company to achieve the goal of cost curtailments. (Pioneer Natural Eyes $6.4B DoublePoint Acquisition)
4. Devon Energy (DVN - Free Report) announced that it has revised its first-quarter and 2021 production guidance, taking into account the impact of severe winter weather on its service territories and sale of the Wind River asset in Wyoming. The winter weather is expected to reduce first-quarter production by 8%, while the asset sale is likely to lower 2021 daily oil production by 2,000 barrels. Moreover, per-unit expenses are expected to increase 5% in the first quarter as a result of the impact of weather on Devon Energy’s operations.
The company expects first-quarter total production in the range of 485,000-499,000 barrels of oil equivalent per day (boe/d) and oil production within 261,000-265,000 barrels per day. The acquisition of WPX Energy is likely to benefit total production volumes in the first quarter.
The company now expects 2021 total production in the range of 529,000-559,000 boe/d, down from the prior expectation of 543,000-580,000 Boe/d. However, it has kept its 2021 capital expenditure guidance unchanged in the range of $1,720-$1,980 million. (Devon Trims View on Account of Asset Sale, Weather Woes)
5. Marathon Oil (MRO - Free Report) entered a transaction to fully redeem the $500 million in aggregate outstanding principal amount of its 2.8% senior notes due 2022. Notably, the company will redeem the aforementioned senior notes on Apr 29, 2021.
The transaction will result in a $500-million reduction in gross debt and annual cash interest expenses by $14 million. Importantly, it aligns with the company’s pledge to reduce gross debt by $500 million in 2021 to strengthen its balance sheet.
The senior notes redemption reflects advancement toward ensuring that at least 30% of cash flow generated from the company’s operating activities is aimed at investor-friendly purposes. Moreover, the transaction is in line with Marathon Oil’s objective to continue improving its investment-grade balance sheet through gross debt reduction and sustainable free cash flow generation. (Marathon Oil to Redeem $500M Senior Notes to Ease Debt Load)
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.
The Energy Select Sector SPDR — a popular way to track energy companies — ended up essentially unchanged last week. But over the past six months, the sector tracker has risen 67.4%. Offshore driller Transocean (RIG - Free Report) was the major gainer during the period, experiencing a 307.5% price appreciation.
What’s Next in the Energy World?
As global oil consumption gradually ticks up from the depths of coronavirus amid the OPEC+-led calibrated supply cuts, 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 closely followed too. Finally, news related to coronavirus vaccine approval/rollout/distribution will be of utmost importance.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Oil & Gas Stock Roundup: Exxon & Conoco Q1 Updates, Pioneer's Acquisition & More
It was a week when both oil and natural gas prices settled higher.
On the news front, ExxonMobil (XOM - Free Report) and ConocoPhillips (COP - Free Report) , among others, issued updates on their upcoming Q1 earnings. Meanwhile, shale driller Pioneer Natural Resources Company (PXD - Free Report) agreed to buy privately held upstream company DoublePoint Energy for $6.4 billion.
Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures inched up 0.8% to close at $61.45 per barrel, while natural gas prices rose 3.5% in the week to end at $2.64 per million British thermal units (MMBtu). In particular, the oil markets reversed their decline from the previous week, when the commodity fell into correction territory.
Coming back to the holiday-shortened week ended Apr 1, oil prices posted a small rise after the OPEC+ coalition of producers decided to gradually loosen the output cuts from May through July, reflecting their confidence in the fuel’s demand.
Natural gas finished higher too on encouraging inventory numbers, coupled with favorable weather predictions.
Recap of the Week’s Most-Important Stories
1. ExxonMobil recently expressed concerns regarding the Texas winter storm having hit its first-quarter 2021 earnings by as much as $800 million. Notably, the brutal storm in February wreaked havoc on power and water systems in Texas, thereby hurting the company’s production and sales volumes. However, the leading integrated energy company now projects a significant improvement in results for its three key business lines.
The Zacks Rank #1 (Strong Buy) company projects operating results in the first quarter from oil and liquids businesses to improve $1.6 billion to $2 billion as compared to the December quarter of 2020, thanks to an uptick in oil prices. The hike in natural gas prices is likely to have contributed another $300 million to $700 million to profits of the upstream business, as forecast by the energy major. It is to be noted that the rolling out of coronavirus vaccines, which led to expectations that economies will rebound strongly later this year, primarily helped commodity prices to move north in the March quarter of 2021.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Moreover, ExxonMobil estimated $300 million to $500 million of a sequential improvement in profit from the downstream business in the March quarter, thanks to strong refining margins. From the chemical business, the company estimated a higher profit of $400 million to $600 million owing to healthy chemicals margin. (ExxonMobil Expects Texas Storm Impact on Q1 Earnings)
2. ConocoPhillips recently provided some preliminary operational and financial updates for the March quarter of 2021. The company is scheduled to report first-quarter results on May 4. Its acquisition of Concho Resources, which was completed in January, has been taken into account in the preliminary data. It reiterated the 2021 capital budget at $5.5 billion, suggesting an increase from the 2020 level of around $4.7 billion.
ConocoPhillips’ first-quarter overall production is estimated in the range of 1,470-1,490 thousand barrels of oil equivalent per day (MBoe/d), excluding Libya. The company reported production of 1,289 MBoe/d in the year-ago quarter. Also, the expected figure indicates a sequential rise from 1,169 MBoe/d. First-quarter Libya production is expected to be 40 MBoe/d. The total expected figure includes a 50 MBoe/d hit from the cold Winter Storm Uri.
The company expects first-quarter average realized prices in the range of $43-$45 per Boe, indicating a rise of $38.81 from the year-ago level. Moreover, the estimated figure signals a significant improvement from the fourth-quarter 2020 level of $33.21 per Boe. (ConocoPhillips' Q1 Profits to Jump Y/Y on Higher Output)
3. Pioneer Natural Resources recently announced that it has agreed to acquire a Permian rival for $6.4 billion. The acquiree is a privately held Fort Worth, TX-based upstream company, DoublePoint Energy. The latest acquisition agreement follows the $4.5-billion all-stock buyout of Parsley Energy, which concluded in January.
Acquiring the Midland Basin neighbor will make Pioneer Natural one of the biggest producers in the Permian Basin, the most prolific oil resource in the United States. As a result of the bolt-on acquisition, 97,000 high-quality net contiguous acres will be added to Pioneer Natural’s existing asset base. The deal will boost the acquirer’s total holding in the basin to more than 1 million net acres.
The company expects output from the acquired acres to rise to 100,000 barrels of oil equivalent per day by the June quarter-end. Earlier, with the Parsley Energy acquisition, Pioneer Natural bolstered the daily output capacity to 558 thousand barrels oil equivalent. Moreover, the DoublePoint buyout is expected to result in $175 million of annual cost savings. Reduction in general and administrative and interest expenses, along with rising operational efficiencies will likely help the combined company to achieve the goal of cost curtailments. (Pioneer Natural Eyes $6.4B DoublePoint Acquisition)
4. Devon Energy (DVN - Free Report) announced that it has revised its first-quarter and 2021 production guidance, taking into account the impact of severe winter weather on its service territories and sale of the Wind River asset in Wyoming. The winter weather is expected to reduce first-quarter production by 8%, while the asset sale is likely to lower 2021 daily oil production by 2,000 barrels. Moreover, per-unit expenses are expected to increase 5% in the first quarter as a result of the impact of weather on Devon Energy’s operations.
The company expects first-quarter total production in the range of 485,000-499,000 barrels of oil equivalent per day (boe/d) and oil production within 261,000-265,000 barrels per day. The acquisition of WPX Energy is likely to benefit total production volumes in the first quarter.
The company now expects 2021 total production in the range of 529,000-559,000 boe/d, down from the prior expectation of 543,000-580,000 Boe/d. However, it has kept its 2021 capital expenditure guidance unchanged in the range of $1,720-$1,980 million. (Devon Trims View on Account of Asset Sale, Weather Woes)
5. Marathon Oil (MRO - Free Report) entered a transaction to fully redeem the $500 million in aggregate outstanding principal amount of its 2.8% senior notes due 2022. Notably, the company will redeem the aforementioned senior notes on Apr 29, 2021.
The transaction will result in a $500-million reduction in gross debt and annual cash interest expenses by $14 million. Importantly, it aligns with the company’s pledge to reduce gross debt by $500 million in 2021 to strengthen its balance sheet.
The senior notes redemption reflects advancement toward ensuring that at least 30% of cash flow generated from the company’s operating activities is aimed at investor-friendly purposes. Moreover, the transaction is in line with Marathon Oil’s objective to continue improving its investment-grade balance sheet through gross debt reduction and sustainable free cash flow generation. (Marathon Oil to Redeem $500M Senior Notes to Ease Debt Load)
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 -0.6% +69.3%
CVX -1.6% +47.2%
COP -1.9% +60.2%
OXY -1.4% +169.7%
SLB -0.7% +74.6%
RIG +7.7% +307.5%
VLO +3% +75.8%.
MPC +1.4% +89.2%
The Energy Select Sector SPDR — a popular way to track energy companies — ended up essentially unchanged last week. But over the past six months, the sector tracker has risen 67.4%. Offshore driller Transocean (RIG - Free Report) was the major gainer during the period, experiencing a 307.5% price appreciation.
What’s Next in the Energy World?
As global oil consumption gradually ticks up from the depths of coronavirus amid the OPEC+-led calibrated supply cuts, 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 closely followed too. Finally, news related to coronavirus vaccine approval/rollout/distribution will be of utmost importance.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>