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Oil & Gas Stock Roundup: BP's Oil Find, Chevron's Offshore Wind Foray & More

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It was a week when both oil and natural gas prices settled more than 6% higher.

On the news front, British energy major BP plc (BP - Free Report) announced an oil discovery in the deepwater Gulf of Mexico, while U.S. biggie Chevron (CVX - Free Report) made its maiden investment in offshore wind. Moreover, shale producers Continental Resources (CLR - Free Report) and Diamondback Energy (FANG - Free Report) issued updates on their upcoming Q1 earnings.

Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures gained 6.4% to close at $63.13 per barrel, while natural gas prices rose 6.1% in the week to end at $2.68 per million British thermal units (MMBtu). In particular, the oil market reversed their decline from the previous week, when the commodity fell below $60.

Coming back to the week ended Apr 16, oil prices reached their highest levels in almost a month after a report from the Energy Information Administration ("EIA") showed a third straight decline in crude inventories. Prices were also boosted by an overall stronger demand outlook from the major energy watchdogs.

Natural gas finished up too on encouraging inventory numbers, favorable weather predictions and the ongoing strength in liquefied natural gas (“LNG”) demand.

Recap of the Week’s Most-Important Stories

1.  BP announced that it made a significant oil discovery at the Puma West exploration prospect in the deepwater Gulf of Mexico of the United States. The discovery was made on the west of the prolific Mad Dog field, which is operated by BP. Located about 131 miles off the Louisiana coast, the exploratory well was drilled at a vertical height of 23,530 feet, with 4,108 feet below the water surface.

BP operates the Puma West with a 50% participating interest, while Talos Energy (TALO) and Chevron own a 25% interest each. The discovery was made on the west of the prolific Mad Dog field, which is operated by BP. Located about 131 miles off the Louisiana coast, the exploratory well was drilled at a vertical height of 23,530 feet, with 4,108 feet below the water surface.

The well encountered significant oil pay in a high-quality Miocene reservoir, which is said to possess fluid properties similar to the high-yielding Miocene reservoirs nearby. BP mentioned that the discovery has a high probability for commercial hydrocarbons on the basis of preliminary data. Importantly, BP and partners would initiate an appraisal program to better define the discovered resource. (BP Unearths Oil at Puma West Prospect in Offshore Louisiana)

2.   Chevron through its subsidiary Chevron Technology Ventures LLC along with Norway’s Moreld Ocean Wind recently decided to invest in Oakland-based Ocergy Inc.'s floating offshore wind turbine technology. With this deal, Chevron Technology Ventures is making its maiden investment in offshore wind. The Zacks Rank #1 (Strong Buy) company’s deal with Ocergy is part of its $300-million Future Energy Fund, which is formed to develop low-carbon technologies for a sustainable future.

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

Chevron Technology Ventures unit president Barbara Burger states, "Offshore wind power is undergoing a period of rapid innovation in an effort to provide lower carbon energy at a substantial scale. Ocergy has developed technology that could be part of the solution to enable more affordable, reliable, and ever-cleaner energy in a marine environment."

Chevron Technology Ventures seeks externally developed technologies and advanced business solutions to enhance Chevron’s strategies to manufacture and deliver affordable, more-reliable and ever-cleaner energy. (Chevron Forays Into Offshore Wind Via Deal With Ocergy)

3.  Continental Resources recently announced updates for first-quarter 2021 production, which was affected by adverse weather conditions in February. The unfavorable weather conditions resulted in almost 6 thousand barrels of oil equivalent per day of decline in production, of which 60% was oil. This preliminary data will give an insight into the company’s first-quarter earnings, scheduled to release on Apr 28.

First-quarter crude production is expected to be 152 thousand barrels of oil per day (MBbls/d), signaling a decrease from the year-ago figure of 200.7 MBbls/d. Natural gas production is expected to average 935 million cubic feet per day (MMcfpd), indicating a decline from the year-ago quarter’s 961 MMcfpd.

For the second quarter, Continental expects crude production in the range of 160-165 MBbls/d. Natural gas output guidance is projected within 920-940 MMcfpd. The company reiterated its full-year 2021 production guidance of 160-165 MBbls/d of crude and 880-920 MMcfpd of natural gas. (Continental Provides Q1 Production Update, Lowers Debt)

4.  Diamondback Energy recently issued a preliminary update on its first-quarter 2021 production and full-year guidance. During the March quarter of this year, the company concluded the acquisition of QEP Resources in an all-stock deal.

The company’s first-quarter 2021 production of oil and natural gas averaged at 307,400 barrels of oil equivalent per day (Boe/d) with oil output of 184,200 barrels per day. The average realized unhedged crude oil price in the period was $56.94 per barrel while that of natural gas liquids was $22.94. The same for natural gas was $3.05 per thousand cubic feet. Overall, the company fetched $42.36 per barrel of oil equivalent. Also, the company’s first-quarter cash capital expenditure outlook is projected in the $280-$300 million range.

Meanwhile, Diamondback Energy revised its 2021 production view to 360-370 thousand barrels of oil equivalent per day (MBOE/d) compared with the prior projection of 308-325 MBOE/d. In addition, the company expects oil production in the band of 218-222 MBO/d in 2021 with approximately 12 MBO/d coming from its Williston Basin reserves. It also renewed its current-year cash capital expenditure forecast between $1.6 billion and $1.75 billion compared with the prior guided range of $1.35-$1.55 billion. Further, the company plans to drill 178-192 net wells and estimates to complete 250-259 net wells with a lateral length of nearly 10,300 feet, on average, in 2021. (Diamondback Gives Preliminary Update on Q1 Production)

5.  In a recently issued publication, Royal Dutch Shell (RDS.A - Free Report) informed that almost two-third of its oil and gas reserves will be extracted by 2050, lowering the impact of stranded assets as the company plans to minimize greenhouse gas emissions in the decades ahead.

The announcement is an unusual acknowledgment by a supermajor firm suggesting that some of its reserves might be redundant as the world shifts from fossil fuels toward renewable energy to combat the global warming issue.

In a document to be presented to the company’s shareholders, management said that 75% of its proven oil and gas reserves will be delivered by 2030 while another 3% will be produced after 2040, based on the 2020-end estimates. The Anglo-Dutch company estimates about 70% of its proven plus probable reserves to be generated by 2030 and 5% after 2040. (Shell to Produce Majority of Oil-Gas Reserves by 2050)

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                  +1.4%             +67.1%
CVX                   0.0%               +41.9%
COP                 -0.3%              +53.7%
OXY                  -0.9%              +146.4%
SLB                  -1.8%              +78.1%
RIG                   +4.6%             +298.7%
VLO                   +2%                +77.5%
MPC                  +2.7%             +83.4%

The Energy Select Sector SPDR — a popular way to track energy companies — edged up 0.4% last week. The best performer was offshore driller Transocean (RIG - Free Report) whose stock rose 4.6%.

Over the past six months, the sector tracker has gained 61.6%. Transocean was the major gainer during the period too, experiencing a 298.7% 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 and successful vaccine deployments, 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.

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