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Eni's Oil Find & Shell's Timi FID Dominate Oil & Gas Stock Roundup

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It was a week when oil prices trended slightly upward and natural gas futures surged to their highest settlement since November 2018.

On the news front, Italian major Eni SpA (E - Free Report) made an oil discovery offshore Ivory Coast, while another European biggie Royal Dutch Shell took the final investment decision (“FID”) for the Timi gas development project off the coast of Malaysia.

Overall, it was another good week for the sector. West Texas Intermediate (WTI) crude futures inched up 0.8% to close at $69.29 per barrel and natural gas prices gained 7.4% to $4.71 per million British thermal units (MMBtu). Overall, both the commodities managed to maintain their forward momentum from the previous week.

Coming back to the week ended Sep 3, crude prices edged higher, underpinned by a report from the Energy Information Administration ("EIA") that showed a stockpile draw. The fourth straight weekly fall in domestic oil stocks was accompanied by a decrease in distillate inventories. However, the commodity pared back most of its gains after gasoline supplies logged a surprise increase.

Meanwhile, natural gas climbed handsomely, buoyed by an in-line inventory report and Hurricane Ida-led disruption in production from the Gulf of Mexico. Investors also focused on the prospect of a higher power burn (or cooling demand) by the middle of this month following the near-term spell of lower temperatures.

Recap of the Week’s Most-Important Stories

1.  Eni announced a massive oil discovery in block CI-101. The block is situated off the coast of Ivory Coast and is operated by Eni, with a 90% ownership stake. The remaining 10% is owned by Petroci Holding.

The Italian integrated energy firm confirmed the discovery of light oil in the block. According to the preliminary estimates of the company, the discovery potential can be in the range of 1.5 to 2 billion barrels of oil and 1.8 to 2.4 trillion cubic feet of associated gas.

The discovery well was drilled with the employment of the Saipem 10,000 drill ship at a water depth of 1,200 meters. A total of 3,445 meters depth was reached by the company in a span of 30 days. (Eni Announces Massive Offshore Oil Discovery in Ivory Coast)

2.   Oil supermajor Royal Dutch Shell subsidiary Sarawak Shell Berhad (SSB) recently made a final investment decision (FID) on the Timi gas development project and aims to deliver it for Malaysia with its partners PETRONAS Carigali Sdn Bhd and Brunei Energy Exploration.

The Timi field is located around 200 kilometers off the Malaysian coast of Sarawak. SSB's first wellhead platform in Malaysia is powered by a solar and wind hybrid renewable energy system at the Timi development. This unmanned platform weighs almost 60% less than a traditional Tender Assisted Drilling wellhead platform. Also, two wells will be drilled as part of this project.

The Timi project is expected to churn out up to 50,000 barrels of oil equivalent per day (boe/d) in its peak time and will transmit the gas generated to the F23 production hub via an 80-kilometer pipeline. This, in turn, will boost growth in the central Luconia area offshore Sarawak. (Shell Takes FID on Malaysia's Timi Gas Development Plan)

3.   Chevron (CVX - Free Report) through its subsidiary Chevron U.S.A. Inc. announced a memorandum of understanding (MOU) of a proposed joint venture with Bunge Limited’s unit Bunge North America, Inc., a global leader in the procurement, processing, and distribution of oilseed and grain products plus additives. The MOU aims to explore a potential collaboration to meet the growing demand for renewable fuels and produce lower-carbon feedstocks.

Chevron and Bunge's joint venture, once completed, will provide both companies with a reliable supply chain from farmer to fueling station. Bunge will provide its soybean processing facilities in Destrehan, LA and Cairo, IL while the Zacks Rank #1 (Strong Buy) American oil biggie will invest $600 million cash in the joint venture. By the end of 2024, the two entities expect to double the total capacity of the facilities from 7,000 tons per day, courtesy of the joint venture.

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

Through this collaboration, the companies will also look for new prospects in lower-carbon-intensity feedstocks and invest in feedstock pretreatment. (Chevron Signs MOU With Bunge for Renewable Fuel Business)

4.   TechnipFMC (FTI - Free Report) announced the divestment of 17.6 million Technip Energies shares through a private placement with HAL Investments, the Dutch investment affiliate of HAL Holding, N.V. This represents 9.9% of the share capital of Technip Energies, which started trading under the symbol TE on the Euronext Paris Exchange earlier this year.

In February, TechnipFMC completed the spin-off of its engineering and construction activities into a separate entity called Technip Energies and transformed itself into a technology-focused equipment provider for the energy industry. The oilfield service company’s shareholders owned about 50% of the outstanding Technip Energies shares on a pro-rata basis.

The stock price in the placement was fixed at €11.15 per share, thereby offering total gross proceeds of €196.2 million. HAL Investments agreed to a 180-day lock-up period for its shares in Technip Energies. (TechnipFMC to Sell Off $17.6M Technip Energies Shares)

5.  Brazilian energy behemoth Petrobras (PBR - Free Report) recently announced that it has completed the transfer of its 10% stake in the Lapa field to global integrated oil and gas company TotalEnergies (TTE - Free Report) .

The deal, which also included the assignment of Petrobras Netherlands B.V.'s (PNBV) whole interest in Lapa Oil & Gas B.V., a business in Holland, was concluded with the payment of $49.4 million to Petrobras with contract changes.

The Lapa field (BM-S-9A block) has its address in the pre-salt area of the Santos Basin. Its average output in the first half of this year was 50.7 thousand barrels of oil equivalent per day (boe/d) with Petrobras accounting for 5.07 thousand boe/d share. (Petrobras Sells 10% Stake in Lapa Field to TotalEnergies)

Price Performance

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

Company    Last Week    Last 6 Months

XOM                 -1.6%                -9.9%
CVX                  -1.2%                -10.6%
COP                 -0.9%                -3.6%
OXY                  +1%                   -17%
SLB                  -3%                    -3.4%
RIG                  +0.8%                -11.5%
VLO                  -3.6%                -18.1%
MPC                 -3%                    +1.6%

The Energy Select Sector SPDR — a popular way to track energy companies — was down 1.4% last week. The worst performer was downstream operator Valero Energy (VLO - Free Report) whose stock lost 3.6%.

Over the past six months, the sector tracker has decreased 8.2%. Valero was the major casualty during the period too, experiencing an 18.1% price depreciation.

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. News related to coronavirus vaccine approval/rollout/distribution will be of utmost importance.