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Oil & Gas Stock Roundup: Oilfield Service Giants Decide to Move From Russia
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It was a week when oil prices registered further decline but natural gas futures rose.
On the news front, oilfield service providers Halliburton (HAL - Free Report) , Schlumberger (SLB - Free Report) and Core Laboratories (CLB - Free Report) provided an update on their Russian operations. Announcements from The Williams Companies (WMB - Free Report) and Eni SpA (E - 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 lost 4.2% to close at $104.70 per barrel but natural gas prices rose 2.9% to end at $4.863 per million British thermal units (MMBtu). In particular, the oil market extended its decline from the previous week.
Oil logged its first back-to-back weekly decline this year on heightened diplomatic efforts to end the Ukraine crisis and continued flow of energy exports from Russia even as Western sanctions increase in scale and scope. The commodity’s negative price reaction was also blamed on a report from the Energy Information Administration ("EIA") showing addition to crude stockpiles. Finally, China’s renewed restrictions on movement to curb the latest COVID spurt and the possible demand inmplications from that contributed to the decline
Meanwhile, natural gas tallied a weekly gain following a higher-than-expected decrease in supplies and bullish weather forecasts.
Recap of the Week’s Most-Important Stories
1. Halliburton recently said that it has decided to suspend future business in Russia with immediate effect, citing a wave of sanctions imposed after Moscow attacked Ukraine. The oilfield service behemoth is also preparing to wind down its remaining operations in the nation to protest the full-scale invasion of Ukraine.
Larger rival Schlumberger followed suit by announcing a stoppage in investment and technology supply to its Russian venture while closely monitoring the “dynamic” situation. SLB’s disclosure heightened its concerns about the war.
Like Halliburton, Schlumberger too raised red flags about the conflict and worries about the safety of workers, to go with the complications of doing business in the country as Western sanctions increase in scale and scope. (Why are Halliburton, Schlumberger Pulling Back from Russia?)
2. Core Laboratories warned of falling earnings and revenues as the Russia-Ukraine crisis began to bite. Citing an impact on service revenues and product sales, the firm lowered its first-quarter revenue guidance to $110-$113 million from the prior $117-$122 million and its EPS view to 5-8 cents from 16-20 cents. Meanwhile, operating margin is now expected in the range of 5-6%, compared with 11% earlier.
The company said that cyberattacks on third-party units — prior to Russia’s full-scale invasion of Ukraine — hampered business by scuttling demand for crude-oil assay work, especially in Europe. According to CLB, such work continues to suffer in Europe, Russia and Ukraine as the war drags on. Core Laboratories further informed that it has put its Ukrainian operations on hold in order to protect workers, while suspending production sales delivery in the country.
In addition to the geopolitical risks, CLB suffered operational hiccups after a much larger-than-usual number of its employees tested positive for COVID during the first quarter. The surge in cases not only led to lockdowns and government-imposed curbs but also deferred certain client-backed projects. (Core Labs Hit by Russia Conflict, Pegs Down Q1 View)
3 Tulsa, OK-based pipeline operator, Williams Companies, stated that it signed an agreement to buy Trace Midstream’s Haynesville gathering and processing assets in a deal valued at $950 million. This transaction with Trace, which is a portfolio company of Quantum Energy Partners, is done to enlarge Williams’ footprint in Louisiana’s Haynesville Shale.
The Zacks Rank #1 (Strong Buy) company mentioned that this development increases its gathering capacity in Haynesville to more than 4 billion cubic feet a day (Bcf/d) from 1.8 Bcf/d. WMB anticipates the purchase to result in an investment value of roughly six times the 2023 EBITDA.
Per the agreement, Rockcliff Energy, Trace’s customer and Quantum’s associate, agreed to a long-term capacity assurance in support of Williams' Louisiana Energy Gateway (LEG) project. The project is designed to gather about 2 Bcf/d natural gas produced in Haynesville and link it to premium Transco markets, as well as liquefied natural gas export terminals, and industrial consumers situated on the Gulf Coast. (Williams to Acquire Trace Midstream's Assets for $950M)
4. Italian integrated major Eni entered an agreement with its London-based peer BP plc to create Azule Energy — a 50/50 joint venture combining their Angola businesses.
Azule Energy is expected to be the largest oil and gas producer in Angola, with stakes in 16 licenses and the Angola LNG joint venture. The JV could be beneficial to the country’s troubled oil industry. It will be capable of producing more than 200,000 barrels of oil and gas equivalent a day (boe/d).
In 2021, Eni and BP announced plans to combine their Angola businesses into a self-funded company. The consolidation is part of the companies’ restructuring of oil and gas businesses amid their transition to a more sustainable, low-carbon economy. It will also help the companies to reduce debt. (Eni, BP to Form 50/50 JV by Combining Angola Businesses)
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.
The Energy Select Sector SPDR — a popular way to track energy companies — was down 3.9% last week. But over the past six months, the sector tracker has increased 59.6%.
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 the trends in U.S. crude production, is closely followed. News related to the ongoing Russia-Ukraine geopolitical conflict will be of utmost importance too. Investors will also keep an eye on the potential demand hit from the resurgence of new coronavirus cases in China.
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Oil & Gas Stock Roundup: Oilfield Service Giants Decide to Move From Russia
It was a week when oil prices registered further decline but natural gas futures rose.
On the news front, oilfield service providers Halliburton (HAL - Free Report) , Schlumberger (SLB - Free Report) and Core Laboratories (CLB - Free Report) provided an update on their Russian operations. Announcements from The Williams Companies (WMB - Free Report) and Eni SpA (E - 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 lost 4.2% to close at $104.70 per barrel but natural gas prices rose 2.9% to end at $4.863 per million British thermal units (MMBtu). In particular, the oil market extended its decline from the previous week.
Oil logged its first back-to-back weekly decline this year on heightened diplomatic efforts to end the Ukraine crisis and continued flow of energy exports from Russia even as Western sanctions increase in scale and scope. The commodity’s negative price reaction was also blamed on a report from the Energy Information Administration ("EIA") showing addition to crude stockpiles. Finally, China’s renewed restrictions on movement to curb the latest COVID spurt and the possible demand inmplications from that contributed to the decline
Meanwhile, natural gas tallied a weekly gain following a higher-than-expected decrease in supplies and bullish weather forecasts.
Recap of the Week’s Most-Important Stories
1. Halliburton recently said that it has decided to suspend future business in Russia with immediate effect, citing a wave of sanctions imposed after Moscow attacked Ukraine. The oilfield service behemoth is also preparing to wind down its remaining operations in the nation to protest the full-scale invasion of Ukraine.
Larger rival Schlumberger followed suit by announcing a stoppage in investment and technology supply to its Russian venture while closely monitoring the “dynamic” situation. SLB’s disclosure heightened its concerns about the war.
Like Halliburton, Schlumberger too raised red flags about the conflict and worries about the safety of workers, to go with the complications of doing business in the country as Western sanctions increase in scale and scope. (Why are Halliburton, Schlumberger Pulling Back from Russia?)
2. Core Laboratories warned of falling earnings and revenues as the Russia-Ukraine crisis began to bite. Citing an impact on service revenues and product sales, the firm lowered its first-quarter revenue guidance to $110-$113 million from the prior $117-$122 million and its EPS view to 5-8 cents from 16-20 cents. Meanwhile, operating margin is now expected in the range of 5-6%, compared with 11% earlier.
The company said that cyberattacks on third-party units — prior to Russia’s full-scale invasion of Ukraine — hampered business by scuttling demand for crude-oil assay work, especially in Europe. According to CLB, such work continues to suffer in Europe, Russia and Ukraine as the war drags on. Core Laboratories further informed that it has put its Ukrainian operations on hold in order to protect workers, while suspending production sales delivery in the country.
In addition to the geopolitical risks, CLB suffered operational hiccups after a much larger-than-usual number of its employees tested positive for COVID during the first quarter. The surge in cases not only led to lockdowns and government-imposed curbs but also deferred certain client-backed projects. (Core Labs Hit by Russia Conflict, Pegs Down Q1 View)
3 Tulsa, OK-based pipeline operator, Williams Companies, stated that it signed an agreement to buy Trace Midstream’s Haynesville gathering and processing assets in a deal valued at $950 million. This transaction with Trace, which is a portfolio company of Quantum Energy Partners, is done to enlarge Williams’ footprint in Louisiana’s Haynesville Shale.
The Zacks Rank #1 (Strong Buy) company mentioned that this development increases its gathering capacity in Haynesville to more than 4 billion cubic feet a day (Bcf/d) from 1.8 Bcf/d. WMB anticipates the purchase to result in an investment value of roughly six times the 2023 EBITDA.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Per the agreement, Rockcliff Energy, Trace’s customer and Quantum’s associate, agreed to a long-term capacity assurance in support of Williams' Louisiana Energy Gateway (LEG) project. The project is designed to gather about 2 Bcf/d natural gas produced in Haynesville and link it to premium Transco markets, as well as liquefied natural gas export terminals, and industrial consumers situated on the Gulf Coast. (Williams to Acquire Trace Midstream's Assets for $950M)
4. Italian integrated major Eni entered an agreement with its London-based peer BP plc to create Azule Energy — a 50/50 joint venture combining their Angola businesses.
Azule Energy is expected to be the largest oil and gas producer in Angola, with stakes in 16 licenses and the Angola LNG joint venture. The JV could be beneficial to the country’s troubled oil industry. It will be capable of producing more than 200,000 barrels of oil and gas equivalent a day (boe/d).
In 2021, Eni and BP announced plans to combine their Angola businesses into a self-funded company. The consolidation is part of the companies’ restructuring of oil and gas businesses amid their transition to a more sustainable, low-carbon economy. It will also help the companies to reduce debt. (Eni, BP to Form 50/50 JV by Combining Angola Businesses)
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 -7.4% +52.6%
CVX -5.4% +73%
COP +1.2% +71.5%
OXY -3% +134.5%
SLB -7.4% +53%
RIG -9.9% +39.5%
VLO -1.4% +47.8%
MPC -0.2% +37%
The Energy Select Sector SPDR — a popular way to track energy companies — was down 3.9% last week. But over the past six months, the sector tracker has increased 59.6%.
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 the trends in U.S. crude production, is closely followed. News related to the ongoing Russia-Ukraine geopolitical conflict will be of utmost importance too. Investors will also keep an eye on the potential demand hit from the resurgence of new coronavirus cases in China.