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Oil & Gas Stock Roundup: Investors Back CVX, XOM & SHEL's Climate Proposals
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It was a week when oil prices notched up their best close in nearly three months and natural gas futures reached their highest level since 2008.
On the news front, energy giants Chevron (CVX - Free Report) , ExxonMobil (XOM - Free Report) and Shell (SHEL - Free Report) won shareholder support for their push for lower emissions. Developments associated with Equinor (EQNR - Free Report) and Petrobras (PBR - Free Report) also made it to the headlines.
Overall, it was another good seven-day period for the sector. West Texas Intermediate (WTI) crude futures gained 4.3% to close at $115.17 per barrel, while natural gas prices increased around 8% to end at $8.727 per million British thermal units (MMBtu). In particular, the oil market managed to maintain its forward momentum from the previous four weeks.
Coming back to the week ended May 27, the positive oil price action could be attributed to investor concerns about signs of tight gasoline supplies going into the summer driving season. The Energy Information Administration’s ("EIA") latest report showing a larger-than-expected drawdown in crude stockpiles further pointed to the strained market fundamentals and propped up prices. As it is, the uptick also reflected concerns about supplies from Russia, which is one of the world's largest producers of the commodity.
Natural gas notched a healthy weekly gain, too, buoyed by hotter-than-normal early summer weather, lower domestic output, strong LNG shipments and high coal prices.
Recap of the Week’s Most-Important Stories
1. Supermajor Chevron recently announced significant changes to its organization and management structure. The company also conducted an Annual General Meeting (AGM), wherein several climate resolutions were put to vote.
Starting Oct 1, Chevron’s Upstream (or exploration and production), Midstream and Downstream (or refining) segments will be led by a single decision-maker — executive vice president, Oil, Products & Gas. Nigel Hearne — former head of the company's Europe, Asia and Pacific production — has been entrusted with this role and will look after the entire value chain.
Coming to its AGM, some 33% of Chevron shareholders voted in favor of a proposal asking the energy company to substantially cut Scope 3 emissions — a sharp decrease from last year when a similar motion won 61% support. These are the hard-to-address releases from the combustion of fuel (such as jet fuel and gasoline) it sells to end-users that typically constitute more than 90% of an oil and gas holding’s total footprint. (Making Sense of Chevron's Reorganization, Climate Plans)
2. Larger rival ExxonMobil won shareholders’ support for its energy transition strategies after receiving maximum votes against initiatives related to accelerating emission reduction.
XOM shareholders disapproved a resolution submitted by the activist group, Follow This, urging rapid measures to curb climate change. In a preliminary voting session, only 28% shareholders supported the proposal to set and publish medium- and long-term targets to reduce emissions from ExxonMobil’s operations and energy products and reduce hydrocarbon sales.
This Irving, TX-based company is actively investing in hydrocarbon production to prevent an energy crisis and the rising prices for consumers. The company’s directors previously suggested shareholders to vote against Follow This’ climate proposal as it believes Scope 3 targets are not feasible to manage emissions. (ExxonMobil Wins Investors Support for Climate Strategy)
3 At its Annual General Meeting in London, Shell shareholders voted in favor of the company’s energy transition strategy but in lower numbers. Europe’s largest oil company, which has set itself a target of becoming a net-zero greenhouse gas emissions business by 2050, received 80% support for its climate policy.
At the same time, a resolution filed by activist group Follow This, which demands the company's targets to be more stringent and in line with the Paris Agreement, got 20% votes — a sharp decrease from last year, when a similar motion won 30% support. As per the investor advocacy group, Shell’s intermediate targets are linked to emissions’ intensity that might actually allow the firm to advance its fossil fuel output.
According to the London-based multinational, it has lowered emissions from operations by 18% between 2016 and 2021, with a pledge to extend it to 50% by 2030. Shell also claims to have reduced the net carbon intensity of its marketable product portfolio by 2.5% by the end of 2021 compared with 2016, ultimately targeting a 9-12% reduction by 2024. (How Do Shareholders View Shell's Climate Goals?)
4 Another European integrated major, Equinor recently announced its exit from all joint ventures in Russia, clinching the title of the first major Western oil producer to completely remove its exposure in the country.
This Zacks Rank #1 (Strong Buy) company has now freed itself from all future commitments and obligations, thereby transferring its participating interests in four joint ventures in Russia to local energy producer Rosneft. Equinor is exiting the Kharyaga project and the accord to leave the development has been inked.
It was on Feb 27 that the integrated energy major made the decision to commence the process of exiting its joint ventures in Russia just a few days after the country’s troops invaded Ukraine. With the exit from Russia, Equinor has witnessed a massive impairment of its assets in the country. As of Mar 31, 2022, EQNR witnessed an impairment of $1.08 billion on the balance sheet. (Equinor Winds Down its Energy Business in Russia)
5. Brazil’s president, Jair Bolsonaro, recently sacked Jose Mauro Coelho, the chief executive officer (“CEO”) of the state-run oil giant Petrobras, less than two months into the job after the company declined to sell fuels at a subsidized rate to consumers, cautioning it would lead to shortages. However, this latest development raised concerns regarding the continued political interference at the company and the instability that it is creating.
Bolsonaro also called for the election of a new board at Petrobras, paving the way for a complete executive revamp. This shake-up is said to be the president’s latest move to influence PBR’s pricing policies and improve his re-election prospects later this year amid surging inflation driven by rising energy prices.
The outgoing CEO will be replaced by the senior Brazilian economy ministry official, Caio Mario Paes de Andrade, who is set to be the next top executive of Petrobras. Paes de Andrade will become Petrobras’ fourth chief executive in the last two years. (Petrobras CEO Ousted Again Over Rising Fuel Prices)
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 — rose 8.3% last week. Over the past six months, the sector tracker has increased 62.2%.
What’s Next in the Energy World?
Oil prices ended above $115 last week, primarily reflecting an anticipated pick-up in fuel consumption during and post Memorial Day weekend, which marks the start of the summer driving season. The high crude prices, surging demand for motor fuels and the effect of the Russian invasion of Ukraine have also resulted in gasoline and diesel prices reaching record highs.
Amid this backdrop, market participants will closely track the regular releases to look for further guidance on the direction of prices. 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 too. News related to the ongoing Russia-Ukraine geopolitical conflict and the potential demand boost from the easing of coronavirus lockdowns in China will be the other factors that will dictate the near-term price movement for oil.
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Oil & Gas Stock Roundup: Investors Back CVX, XOM & SHEL's Climate Proposals
It was a week when oil prices notched up their best close in nearly three months and natural gas futures reached their highest level since 2008.
On the news front, energy giants Chevron (CVX - Free Report) , ExxonMobil (XOM - Free Report) and Shell (SHEL - Free Report) won shareholder support for their push for lower emissions. Developments associated with Equinor (EQNR - Free Report) and Petrobras (PBR - Free Report) also made it to the headlines.
Overall, it was another good seven-day period for the sector. West Texas Intermediate (WTI) crude futures gained 4.3% to close at $115.17 per barrel, while natural gas prices increased around 8% to end at $8.727 per million British thermal units (MMBtu). In particular, the oil market managed to maintain its forward momentum from the previous four weeks.
Coming back to the week ended May 27, the positive oil price action could be attributed to investor concerns about signs of tight gasoline supplies going into the summer driving season. The Energy Information Administration’s ("EIA") latest report showing a larger-than-expected drawdown in crude stockpiles further pointed to the strained market fundamentals and propped up prices. As it is, the uptick also reflected concerns about supplies from Russia, which is one of the world's largest producers of the commodity.
Natural gas notched a healthy weekly gain, too, buoyed by hotter-than-normal early summer weather, lower domestic output, strong LNG shipments and high coal prices.
Recap of the Week’s Most-Important Stories
1. Supermajor Chevron recently announced significant changes to its organization and management structure. The company also conducted an Annual General Meeting (AGM), wherein several climate resolutions were put to vote.
Starting Oct 1, Chevron’s Upstream (or exploration and production), Midstream and Downstream (or refining) segments will be led by a single decision-maker — executive vice president, Oil, Products & Gas. Nigel Hearne — former head of the company's Europe, Asia and Pacific production — has been entrusted with this role and will look after the entire value chain.
Coming to its AGM, some 33% of Chevron shareholders voted in favor of a proposal asking the energy company to substantially cut Scope 3 emissions — a sharp decrease from last year when a similar motion won 61% support. These are the hard-to-address releases from the combustion of fuel (such as jet fuel and gasoline) it sells to end-users that typically constitute more than 90% of an oil and gas holding’s total footprint. (Making Sense of Chevron's Reorganization, Climate Plans)
2. Larger rival ExxonMobil won shareholders’ support for its energy transition strategies after receiving maximum votes against initiatives related to accelerating emission reduction.
XOM shareholders disapproved a resolution submitted by the activist group, Follow This, urging rapid measures to curb climate change. In a preliminary voting session, only 28% shareholders supported the proposal to set and publish medium- and long-term targets to reduce emissions from ExxonMobil’s operations and energy products and reduce hydrocarbon sales.
This Irving, TX-based company is actively investing in hydrocarbon production to prevent an energy crisis and the rising prices for consumers. The company’s directors previously suggested shareholders to vote against Follow This’ climate proposal as it believes Scope 3 targets are not feasible to manage emissions. (ExxonMobil Wins Investors Support for Climate Strategy)
3 At its Annual General Meeting in London, Shell shareholders voted in favor of the company’s energy transition strategy but in lower numbers. Europe’s largest oil company, which has set itself a target of becoming a net-zero greenhouse gas emissions business by 2050, received 80% support for its climate policy.
At the same time, a resolution filed by activist group Follow This, which demands the company's targets to be more stringent and in line with the Paris Agreement, got 20% votes — a sharp decrease from last year, when a similar motion won 30% support. As per the investor advocacy group, Shell’s intermediate targets are linked to emissions’ intensity that might actually allow the firm to advance its fossil fuel output.
According to the London-based multinational, it has lowered emissions from operations by 18% between 2016 and 2021, with a pledge to extend it to 50% by 2030. Shell also claims to have reduced the net carbon intensity of its marketable product portfolio by 2.5% by the end of 2021 compared with 2016, ultimately targeting a 9-12% reduction by 2024. (How Do Shareholders View Shell's Climate Goals?)
4 Another European integrated major, Equinor recently announced its exit from all joint ventures in Russia, clinching the title of the first major Western oil producer to completely remove its exposure in the country.
This Zacks Rank #1 (Strong Buy) company has now freed itself from all future commitments and obligations, thereby transferring its participating interests in four joint ventures in Russia to local energy producer Rosneft. Equinor is exiting the Kharyaga project and the accord to leave the development has been inked.
You can see the complete list of today’s Zacks #1 Rank stocks here.
It was on Feb 27 that the integrated energy major made the decision to commence the process of exiting its joint ventures in Russia just a few days after the country’s troops invaded Ukraine. With the exit from Russia, Equinor has witnessed a massive impairment of its assets in the country. As of Mar 31, 2022, EQNR witnessed an impairment of $1.08 billion on the balance sheet. (Equinor Winds Down its Energy Business in Russia)
5. Brazil’s president, Jair Bolsonaro, recently sacked Jose Mauro Coelho, the chief executive officer (“CEO”) of the state-run oil giant Petrobras, less than two months into the job after the company declined to sell fuels at a subsidized rate to consumers, cautioning it would lead to shortages. However, this latest development raised concerns regarding the continued political interference at the company and the instability that it is creating.
Bolsonaro also called for the election of a new board at Petrobras, paving the way for a complete executive revamp. This shake-up is said to be the president’s latest move to influence PBR’s pricing policies and improve his re-election prospects later this year amid surging inflation driven by rising energy prices.
The outgoing CEO will be replaced by the senior Brazilian economy ministry official, Caio Mario Paes de Andrade, who is set to be the next top executive of Petrobras. Paes de Andrade will become Petrobras’ fourth chief executive in the last two years. (Petrobras CEO Ousted Again Over Rising Fuel Prices)
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 +6.2% +63.1%
CVX +6.2% +58%
COP +9.1% +63.4%
OXY +12% +139%
SLB +17.2% +68.1%
RIG +7.2% +39.1%
VLO +7.2% +96.9%
MPC +5.7% +67.8%
The Energy Select Sector SPDR — a popular way to track energy companies — rose 8.3% last week. Over the past six months, the sector tracker has increased 62.2%.
What’s Next in the Energy World?
Oil prices ended above $115 last week, primarily reflecting an anticipated pick-up in fuel consumption during and post Memorial Day weekend, which marks the start of the summer driving season. The high crude prices, surging demand for motor fuels and the effect of the Russian invasion of Ukraine have also resulted in gasoline and diesel prices reaching record highs.
Amid this backdrop, market participants will closely track the regular releases to look for further guidance on the direction of prices. 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 too. News related to the ongoing Russia-Ukraine geopolitical conflict and the potential demand boost from the easing of coronavirus lockdowns in China will be the other factors that will dictate the near-term price movement for oil.