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Oil & Gas Stock Roundup Headlined by Penn Virginia & Kinder Morgan Acquisitions
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It was a week when oil prices plunged, although natural gas remained flat.
On the news front, Eagle Ford-focused upstream company Penn Virginia agreed to snap up Fort Worth-based Lonestar Resources US for approximately $370 million, while energy infrastructure provider Kinder Morgan (KMI - Free Report) said it would purchase renewable natural gas developer Kinetrex Energy for $310 million.
Overall, it was another not-so-good week for the sector. West Texas Intermediate (WTI) crude futures lost 3.7% to close at $71.81 per barrel, while natural gas prices ended the week flat at $3.67 per million British thermal units (MMBtu). In particular, the oil market extended its decline from the previous week.
Coming back to the week ended Jul 16, oil prices finished significantly lower after the OPEC+ cartel reached an agreement to gradually start raising output from August to the pre-pandemic levels. The commodity’s negative price reaction was also blamed on coronavirus’ Delta variant-induced fresh travel curbs that might inflict another blow to fuel consumption.
Meanwhile, natural gas remained essentially unchanged last week as strong cooling demand and robust LNG export shipments were offset by a bearish inventory report.
Recap of the Week’s Most-Important Stories
1. Penn Virginia — carrying a Zacks Rank #1 (Strong Buy) — announced that it entered a merger agreement to acquire Lonestar Resources US Inc. in an all-stock deal. The transaction value is estimated at $370 million, which involves 5.9 million shares of Penn Virginia common stock and the assumption of $236 million of Lonestar's net debt.
Per the terms of the deal, Lonestar shareholders will receive 0.51 shares of Penn Virginia common stock for each of its outstanding shares. The all-stock deal has been unanimously approved by both companies' boards of directors. The transaction, which is subject to customary closing conditions, is expected to close in the second half of 2021. Following the deal closure, Penn Virginia shareholders will own 87% of the merged entity, while Lonestar shareholders will own the rest.
The transaction fits well with Penn Virginia’s strategy and is expected to enhance free cash flow generation and other key financial metrics to deliver long-term value to shareholders. The acquisition increases its inventory locations by 50% to 750 gross locations, and is likely to increase estimated 2021 sales volumes and free cash flow by 50%. It is also expected to increase the company's market capitalization by 15%. (Penn Virginia Signs All-Stock Merger Deal With Lonestar)
2. Kinder Morgan recently agreed to acquire renewable natural gas developer Kinetrex Energy for $310 million, in a bid to increase green energy exposure. Kinder Morgan, a major midstream infrastructure operator, is acquiring the Indianapolis-based company from a subsidiary of a private equity investment firm, Parallel49 Equity.
The acquiree holds a 50% stake in the biggest renewable natural gas unit located in Indiana. It has three additional landfill-based units to be constructed, which can come online by next year. Total renewable natural gas production from the four facilities is expected to be more than 4 billion cubic feet per annum.
The commodity is developed from renewable sources like organic waste in landfills, waste from agricultural operations and wastewater treatments. The decomposition process of these organic wastes creates methane, which is captured by the company. The production process decreases greenhouse gas emissions. (Kinder Morgan Boosts Green Portfolio Via Kinetrex Buyout)
3. The Williams Companies (WMB - Free Report) recently signed an upstream joint venture with Crowheart Energy in Wyoming's Wamsutter Field in the Greater Green River Basin. The strategic initiatives of Williams to integrate the Wamsutter Field deposits will increase the worth of its midstream and downstream natural gas and NGL infrastructure.
The deal combines the historic upstream assets of BP plc (BP - Free Report) , Southland Royalty Co. LLC and Crowheart into a single unified footprint offering operational cost reductions and synergies while unleashing substantial long lateral development inventory. More than 1.2 million net acres, approximately 3,500 operational wells and above 3,000 prospective development areas make up the three legacy operating properties.
Crowheart will be the operator of the combined entities' upstream position while Williams will continue to manage and own all its midstream assets under this joint venture. The company's real estate, surface and other rights will be intact, thus allowing it to expand its midstream and renewable energy prospects in Wyoming. (Williams, Crowheart Ink Upstream JV in Wamsutter Field)
4. Royal Dutch Shell’s subsidiary Shell Deutschland recently inked a deal to divest its non-operating 37.5% stake in Germany-based PCK Schwedt Refinery to Austria-based Alcmene GmbH (part of the Liwathon Group). The transaction is slated to close in the second half of this year upon fulfilling all the necessary conditions and pending approvals.
The sale is part of Shell's target to shrink its worldwide refinery footprint to key locations connected to the company's trading centers, chemical facilities and marketing operations. Robin Mooldijk, EVP of manufacturing at Shell believes that “This is yet another milestone in our journey toward a reduced refining portfolio.” He further said that this transaction contributes to Shell's refining portfolio transition, which involves the construction of the high-value Energy & Chemicals Park Rheinland.
The PCK refinery, located 120 kilometers to the northeast of Berlin, Germany, presently processes around 220,000 barrels of crude oil per day. PCK is handled autonomously. The other owners with pre-emption rights in the joint venture are Rosneft (54.17%) and Eni S.p.A. (8.33%). (Shell to Divest PCK Schwedt Refinery Stake to Alcmene)
5. BP announced that it has entered into an accord to acquire full ownership of its Thorntons retail joint venture. The British energy giant has aimed to acquire the business’ remaining stake from ArcLight Capital Partners, LLC.
In 2019, the joint venture between BP and ArcLight acquired Thorntons, which is headquartered in Louisville, KY. With the likely closure of the recently announced deal later this year, upon receipt of regulatory approvals, BP will be able to broaden its presence in the U.S. fuels and convenience retail business. In fact, the deal will help the integrated energy player gain ownership interests and operatorship in 208 locations in the states of Illinois, Kentucky, Tennessee, Indiana, Florida and Ohio.
In its global network of convenience stores, the company is planning to boost the number of strategic sites to more than 3,000 by 2030 from the current tally of roughly 2,000. With ever-changing consumer needs, convenience retail is evolving. The recent deal will thus place BP well to capitalize on the growing demand from consumers and boost earnings. (BP Inks Deal to Broaden US Convenience Retail Footprint)
Price Performance
The following table shows the price movement of some the major oil and gas players over the past week and during the last six months.
The Energy Select Sector SPDR — a popular way to track energy companies — was down 7.9% last week. The worst performer was offshore driller Transocean Ltd. (RIG - Free Report) whose stock lost 22%.
But over the past six months, the sector tracker has increased 7.7%. Upstream biggie ConocoPhillips (COP - Free Report) was the major gainer during the period, experiencing a 16.7% price appreciation.
What’s Next in the Energy World?
As the global oil consumption outlook strengthens amid tightening fundamentals, market participants will be closely tracking the regular releases to watch for signs that could further validate the upward momentum. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that come out regularly — will be on energy traders' radar. Data on rig count from the energy service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is closely followed too. There will also be 2021 Q2 earnings, with the first batch of S&P 500 components coming up with quarterly results. News related to coronavirus vaccine approval/rollout/distribution will be of utmost importance.
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Oil & Gas Stock Roundup Headlined by Penn Virginia & Kinder Morgan Acquisitions
It was a week when oil prices plunged, although natural gas remained flat.
On the news front, Eagle Ford-focused upstream company Penn Virginia agreed to snap up Fort Worth-based Lonestar Resources US for approximately $370 million, while energy infrastructure provider Kinder Morgan (KMI - Free Report) said it would purchase renewable natural gas developer Kinetrex Energy for $310 million.
Overall, it was another not-so-good week for the sector. West Texas Intermediate (WTI) crude futures lost 3.7% to close at $71.81 per barrel, while natural gas prices ended the week flat at $3.67 per million British thermal units (MMBtu). In particular, the oil market extended its decline from the previous week.
Coming back to the week ended Jul 16, oil prices finished significantly lower after the OPEC+ cartel reached an agreement to gradually start raising output from August to the pre-pandemic levels. The commodity’s negative price reaction was also blamed on coronavirus’ Delta variant-induced fresh travel curbs that might inflict another blow to fuel consumption.
Meanwhile, natural gas remained essentially unchanged last week as strong cooling demand and robust LNG export shipments were offset by a bearish inventory report.
Recap of the Week’s Most-Important Stories
1. Penn Virginia — carrying a Zacks Rank #1 (Strong Buy) — announced that it entered a merger agreement to acquire Lonestar Resources US Inc. in an all-stock deal. The transaction value is estimated at $370 million, which involves 5.9 million shares of Penn Virginia common stock and the assumption of $236 million of Lonestar's net debt.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Per the terms of the deal, Lonestar shareholders will receive 0.51 shares of Penn Virginia common stock for each of its outstanding shares. The all-stock deal has been unanimously approved by both companies' boards of directors. The transaction, which is subject to customary closing conditions, is expected to close in the second half of 2021. Following the deal closure, Penn Virginia shareholders will own 87% of the merged entity, while Lonestar shareholders will own the rest.
The transaction fits well with Penn Virginia’s strategy and is expected to enhance free cash flow generation and other key financial metrics to deliver long-term value to shareholders. The acquisition increases its inventory locations by 50% to 750 gross locations, and is likely to increase estimated 2021 sales volumes and free cash flow by 50%. It is also expected to increase the company's market capitalization by 15%. (Penn Virginia Signs All-Stock Merger Deal With Lonestar)
2. Kinder Morgan recently agreed to acquire renewable natural gas developer Kinetrex Energy for $310 million, in a bid to increase green energy exposure. Kinder Morgan, a major midstream infrastructure operator, is acquiring the Indianapolis-based company from a subsidiary of a private equity investment firm, Parallel49 Equity.
The acquiree holds a 50% stake in the biggest renewable natural gas unit located in Indiana. It has three additional landfill-based units to be constructed, which can come online by next year. Total renewable natural gas production from the four facilities is expected to be more than 4 billion cubic feet per annum.
The commodity is developed from renewable sources like organic waste in landfills, waste from agricultural operations and wastewater treatments. The decomposition process of these organic wastes creates methane, which is captured by the company. The production process decreases greenhouse gas emissions. (Kinder Morgan Boosts Green Portfolio Via Kinetrex Buyout)
3. The Williams Companies (WMB - Free Report) recently signed an upstream joint venture with Crowheart Energy in Wyoming's Wamsutter Field in the Greater Green River Basin. The strategic initiatives of Williams to integrate the Wamsutter Field deposits will increase the worth of its midstream and downstream natural gas and NGL infrastructure.
The deal combines the historic upstream assets of BP plc (BP - Free Report) , Southland Royalty Co. LLC and Crowheart into a single unified footprint offering operational cost reductions and synergies while unleashing substantial long lateral development inventory. More than 1.2 million net acres, approximately 3,500 operational wells and above 3,000 prospective development areas make up the three legacy operating properties.
Crowheart will be the operator of the combined entities' upstream position while Williams will continue to manage and own all its midstream assets under this joint venture. The company's real estate, surface and other rights will be intact, thus allowing it to expand its midstream and renewable energy prospects in Wyoming. (Williams, Crowheart Ink Upstream JV in Wamsutter Field)
4. Royal Dutch Shell’s subsidiary Shell Deutschland recently inked a deal to divest its non-operating 37.5% stake in Germany-based PCK Schwedt Refinery to Austria-based Alcmene GmbH (part of the Liwathon Group). The transaction is slated to close in the second half of this year upon fulfilling all the necessary conditions and pending approvals.
The sale is part of Shell's target to shrink its worldwide refinery footprint to key locations connected to the company's trading centers, chemical facilities and marketing operations. Robin Mooldijk, EVP of manufacturing at Shell believes that “This is yet another milestone in our journey toward a reduced refining portfolio.” He further said that this transaction contributes to Shell's refining portfolio transition, which involves the construction of the high-value Energy & Chemicals Park Rheinland.
The PCK refinery, located 120 kilometers to the northeast of Berlin, Germany, presently processes around 220,000 barrels of crude oil per day. PCK is handled autonomously. The other owners with pre-emption rights in the joint venture are Rosneft (54.17%) and Eni S.p.A. (8.33%). (Shell to Divest PCK Schwedt Refinery Stake to Alcmene)
5. BP announced that it has entered into an accord to acquire full ownership of its Thorntons retail joint venture. The British energy giant has aimed to acquire the business’ remaining stake from ArcLight Capital Partners, LLC.
In 2019, the joint venture between BP and ArcLight acquired Thorntons, which is headquartered in Louisville, KY. With the likely closure of the recently announced deal later this year, upon receipt of regulatory approvals, BP will be able to broaden its presence in the U.S. fuels and convenience retail business. In fact, the deal will help the integrated energy player gain ownership interests and operatorship in 208 locations in the states of Illinois, Kentucky, Tennessee, Indiana, Florida and Ohio.
In its global network of convenience stores, the company is planning to boost the number of strategic sites to more than 3,000 by 2030 from the current tally of roughly 2,000. With ever-changing consumer needs, convenience retail is evolving. The recent deal will thus place BP well to capitalize on the growing demand from consumers and boost earnings. (BP Inks Deal to Broaden US Convenience Retail Footprint)
Price Performance
The following table shows the price movement of some the major oil and gas players over the past week and during the last six months.
Company Last Week Last 6 Months
XOM -6.4% +13.3%
CVX -5.2% +1.5%
COP -7.7% +16.7%
OXY -14.2% +7.6%
SLB -10.6% +4.8%
RIG -22% +3.4%
VLO -10.3% +2.3%
MPC -9.2% +10.4%
The Energy Select Sector SPDR — a popular way to track energy companies — was down 7.9% last week. The worst performer was offshore driller Transocean Ltd. (RIG - Free Report) whose stock lost 22%.
But over the past six months, the sector tracker has increased 7.7%. Upstream biggie ConocoPhillips (COP - Free Report) was the major gainer during the period, experiencing a 16.7% price appreciation.
What’s Next in the Energy World?
As the global oil consumption outlook strengthens amid tightening fundamentals, market participants will be closely tracking the regular releases to watch for signs that could further validate the upward momentum. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that come out regularly — will be on energy traders' radar. Data on rig count from the energy service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is closely followed too. There will also be 2021 Q2 earnings, with the first batch of S&P 500 components coming up with quarterly results. News related to coronavirus vaccine approval/rollout/distribution will be of utmost importance.