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Oil & Gas Stock Roundup: Exxon's Net-Zero Pledge & Q4 Earnings Blitz

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It was a week when oil prices rose above $85 once again but natural gas futures registered a decline.

American biggie ExxonMobil (XOM - Free Report) set a long-term target of net-zero emissions of greenhouse gas by 2050, while oil services behemoth Schlumberger (SLB - Free Report) reported September-quarter earnings. Results for the October-December period from Halliburton (HAL - Free Report) , Baker Hughes (BKR - Free Report) and Kinder Morgan (KMI - Free Report) also made it to the headlines.

Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures gained 2.2% to close at $85.14 per barrel but natural gas prices lost 6.2% to end at $3.999 per million British thermal units (MMBtu). In particular, the oil market managed to maintain its forward momentum from the previous four weeks.

The positive oil price action could be attributed to recent geopolitical headlines that could impact production. For example, the Russia-Ukraine tensions and the attack by Yemen's Houthi group on OPEC-member UAE gave a boost to oil by threatening supply disruptions. The commodity was also pushed up by the International Energy Agency’s encouraging view on oil demand growth this year.

Meanwhile, natural gas tallied a weekly loss, spooked by a mild weather outlook next month and the subsequent lull in heating demand.

Recap of the Week’s Most-Important Stories

1. ExxonMobil announced its pledge to achieve net-zero emissions from its operations by 2050.

ExxonMobil's net-zero plan involves emissions associated with its oil, gas and chemical production. XOM also commits to carbon neutrality for its Scope 1 and Scope 2 greenhouse gas emissions by 2050. However, the plan doesn’t cover emissions from the use of its products, including gasoline and other fuels, which constitute the majority of XOM’s emissions. It also doesn’t involve oilfields and other non-operating assets.

In December 2021, America’s biggest energy group pledged to achieve net-zero emissions from operated assets in the Permian Basin by 2030. The move was part of a company-wide effort to reduce upstream greenhouse gas emission intensity by 40-50% by 2030 from the 2016 levels. (ExxonMobil Commits to Reach Net-Zero Emissions by 2050)

2.   Schlumberger’s fourth-quarter 2021 earnings of 41 cents per share (excluding charges and credits) beat the Zacks Consensus Estimate of 39 cents. The quarterly earnings were aided by higher contributions from Europe/CIS/Africa, strong North America rig activity and increased well construction activities in the U.S. Gulf of Mexico.

Despite Schlumberger’s $22 million severance payments through the December-end quarter, the oilfield service firm generated a free cash flow of $1.3 billion. Capital expenditure in the quarter was $447 million. As of Dec 31, 2021, the company had approximately $3,139 million in cash and short-term investments. Schlumberger had long-term debt of $13,286 million at the end of the fourth quarter, representing a debt to capitalization of 48.2%.

Fuel demand has improved drastically, so has oil price, owing to the roll-out of coronavirus vaccines at a massive scale. Schlumberger expects the trend to continue for the next few years, which will drive upstream investment, especially in international resources. Being a leading player in the oilfield service space, the company expects to capitalize on this positive trend. (Schlumberger Q4 Earnings & Revenues Beat Estimates)

3   Smaller rival Halliburton also reported strong fourth-quarter earnings on the back of better-than-expected profit from its Drilling and Evaluation division. The company reported adjusted net income per share of 36 cents, beating the Zacks Consensus Estimate of 34 cents.

In more good news for investors, Halliburton raised its quarterly dividend by 167% to 12 cents per share (or 48 cents per share annualized). Further, as part of its ongoing commitment to debt reduction, the company announced that it will partly redeem its $1 billion of senior notes due in 2025.

The world’s biggest provider of hydraulic fracking noted that its execution remained solid throughout 2021. Looking ahead, the company expects industry fundamentals to stay supportive, which will spur growth in both North American and overseas markets. Halliburton believes that it is perfectly placed to benefit from this emerging multi-year upcycle based on its smart strategy, digital leadership, capital efficiency, while aiming for a sustainable energy future. The Houston-based company’s cash flow generation capabilities and balance sheet strength should also ensure increased shareholder returns. (Halliburton Tops Q4 Earnings Estimates, Hikes Dividend)

4.   Baker Hughes — the third major provider of technical products and services to drillers of oil and gas wells — reported fourth-quarter 2021 adjusted earnings of 25 cents per share, missing the Zacks Consensus Estimate of 29 cents. The lower-than-expected results were caused by a decline in cost productivity in Digital Solutions. This was partly offset by higher contributions from the Oilfield Services business unit.

As of Dec 31, 2021, Baker Hughes had cash and cash equivalents of $3,853 million. At the fourth-quarter end, the company had long-term debt of $6,687 million, implying a debt to capitalization of 28.7%. Baker Hughes’ net capital expenditures in the fourth quarter totaled $129 million.

The company generated a positive free cash flow of $645 million in the reported quarter compared with $250 million in the year-ago period. As far as outlook is concerned, Baker Hughes expects continued global economic growth this year, which will lead to increased energy demand. This will translate to an attractive business scenario for BKR’s customers. (Baker Hughes Q4 Earnings Miss, Revenues Beat Estimates)

4.   Energy infrastructure provider Kinder Morgan posted fourth-quarter 2021 adjusted earnings per share of 27 cents, beating the Zacks Consensus Estimate by a penny. The better-than-expected results were due to increased contributions from the Permian Highway Pipeline and a rebound in fuel demand. The positives were partially offset by a decline in CO2 sales and crude volumes.

As of Dec 31, 2021, Kinder Morgan reported $1.1 billion in cash and cash equivalents. The company’s long-term debt amounted to $29.8 billion at the quarter-end, resulting in a debt to capitalization of 50.4%.

For 2022, Kinder Morgan expects to generate a net income of $2.5 billion. The company anticipates DCF and adjusted EBITDA of $4.7 billion and $7.2 billion, respectively. For the year, the midstream player announces a dividend payout of $1.11 per share, reflecting a year-over-year increase of 3%. (Kinder Morgan Q4 Earnings & Revenues Beat Estimates)

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                  +0.4%            +26.5%
CVX                   -1.6%             +28.4%
COP                  -4.6%             +49.5%
OXY                   -5%                +27%
SLB                   -3.8%             +28%
RIG                   -11.4%            -6.2%
VLO                   -6.9%             +24.5%
MPC                  -5.4%             +32.3%

The Energy Select Sector SPDR — a popular way to track energy companies — was down 3.2% last week. But over the past six months, the sector tracker has increased 28.7%.

What’s Next in the Energy World?

As the global oil consumption outlook strengthens amid tightening fundamentals, market participants will closely track 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 oilfield service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is closely followed. News related to coronavirus vaccine approval/rollout/distribution will be of utmost importance too. Investors will also keep an eye on the potential demand hit from the Omicron variant. Finally, there will be 2021 Q4 earnings, with a couple of ‘Big Oil’ companies coming up with quarterly results.

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