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Oil & Gas Stock Roundup: Chevron's Tengiz Setbacks, Eni's Capital Update & More

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It was a week when oil prices surged to the highest levels in four months, while natural gas futures continued the southward journey.

The headlines revolved around the budget hike associated with energy biggie Chevron’s (CVX - Free Report) Tengiz Project in Kazakhstan and Italy-based major Eni’s (E - Free Report) shareholder return plan for 2024-2027. Developments associated with Harbour Energy (HBRIY - Free Report) , Drilling Tools International (DTI - Free Report) and TC Energy (TRP - Free Report) also grabbed attention.

Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures increased around 3.8% to close at $81.04 per barrel, but natural gas prices moved down 8.3% to end at $1.655 per million British thermal units (MMBtu).

The oil price action returned to positive territory, driven by significant decreases in U.S. crude and gasoline inventories, along with an optimistic demand projection from the International Energy Agency. Additionally, ongoing production cuts by OPEC and its allies, coupled with drone attacks on Russian energy facilities in Ukraine, further bolstered crude prices.

Meanwhile, natural gas settled with its sixth loss in the last seven weeks, overwhelmed by excessive supply and insipid weather-related demand.

Recap of the Week’s Most Important Stories

1.    American energy major Chevron is reportedly facing significant cost increases and schedule setbacks in its ambitious project to boost oil production at the Tengiz field in Kazakhstan. According to sources, the total project expenditure is now projected to reach $48.5 billion, marking a steep rise from the initial budget of $37 billion.

During its third-quarter earnings report in October, Chevron disclosed an upward revision in the budget allocated for the Tengiz project. Initially estimated at $45.2 billion, the budget has witnessed a 4% increase due to a slower-than-anticipated startup phase. Sources close to the matter revealed an additional $1.5 billion expenditure reserved for project enhancement, highlighting the scale and complexity of the work.

The Tengizchevroil venture, renowned as the Future Growth Project, has encountered several milestones and setbacks throughout its trajectory. The project has surpassed its initial financial estimates, signaling the magnitude of its scope and technological complexity. Moreover, the completion timeline has witnessed multiple revisions, with the full startup now scheduled for the second quarter following year. (Chevron Faces Rising Costs and Delays in Tengiz Project)

2.    Eni unveiled a comprehensive capital market update, outlining its strategic plans for the period 2024-2027. Per the Rome-based energy biggie, it intends to initiate a share buyback program amounting to approximately euro 1.1 billion (approximately $1.2 billion) and increase its dividend to euro 1 per share for the current fiscal year. This move accompanies an expansion of its shareholder distribution policy to 30-35% of cash flow from operations.

E expects a robust cash flow from operations before working capital of approximately euro 13.5 billion in 2024 and a staggering euro 62 billion throughout the outlined plan period. This projection represents a notable 30% improvement under a constant scenario.

The company aims to limit its net capital spending to euro 27 billion over the 2024-2027 period, translating to an annual average of euro 7 billion. This figure is notably lower than euro 37 billion allocated for the 2023-2026 plan, as presented last year. Eni remains committed to achieving net zero Scope 1, 2 emissions by 2035 and reducing Scope 1, 2 and 3 emissions by 35% within 2030. (Eni's Capital Update Unveils $1.2B Buyback, Dividend Hike)

3.    Upstream operator Harbour Energy and its joint venture partners have confirmed a natural gas discovery in the North Sea, offshore Norway. The Zacks Rank #2 (Buy) company’s discovery was made in well 15/9-25. The estimated overall gas volume is 1-3 million standard cubic meters of oil equivalent (Sm3).

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

According to the Norwegian Offshore Directorate, Harbour Energy and its partners — Sval Energi and Aker BP — are evaluating the technical and financial feasibility of tying the discovery to existing infrastructure.

The Well 15/9-25 was drilled up to a measured depth of 2872 meters below the sea level. It encountered a 22-meter-thick layer of aquiferous sand in the Hugin formation. The sand is known to have an excellent reservoir quality. The well also encountered a 10-meter gas column in a 118 m thick sandstone reservoir, within the Ty formation with outstanding reservoir quality. (Harbour Energy JV Confirms Natural Gas Discovery)

4 Drilling Tools International, a leading oilfield services company based in the United States, has entered into an agreement to acquire Superior Drilling Products, Inc. (“SDP”) in a cash-and-stock deal. The total consideration for the transaction is approximately $32.2 million. The deal is expected to be closed in the third quarter of 2024.

The acquisition supports DTI’s overall growth strategy to become a premier provider of quality solutions and services for the oil and gas drilling industry globally. According to DTI, the company operated as an exclusive distributor of SDP’s patented Drill-N-Ream well-bore conditioning tool in North America.

Through this acquisition, DTI will integrate SDP’s patented Drill-N-Ream well-bore conditioning tool into DTI’s existing technologies. This will help DTI gain access to potential markets in newer geographies. Furthermore, the move is expected to improve operational efficiencies and lower capital requirements and operating costs. (Drilling Tools to Acquire Drill-N-Ream Patent Holder).

5.   North American energy infrastructure provider TC Energy announced that it has agreed to sell its Prince Rupert Gas Transmission project (“PRGT”) to Nisga’a Nation and Western LNG. PRGT is a natural gas pipeline project in British Columbia, the westernmost province of Canada, that would support the development of liquefied natural gas (“LNG”) exports.

The divestiture aligns with TC Energy's strategic priorities for 2024, which focus on disciplined capital allocation within its established investment framework, maximizing asset value and enhancing its overall financial strength.

TC Energy's 2024 strategic priorities show the company's commitment to responsible growth and operational excellence. With an annual net capital expenditure limit of $6-$7 billion, TRP intends to maximize asset value while maintaining financial strength and flexibility. The agreement with Nisga'a Nation and Western LNG is perfectly aligned with these goals, indicating TC Energy's commitment to creating shareholder value and promoting sustainable energy infrastructure. (TC Energy Agrees to Sell Prince Rupert Pipeline Project).

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                 +2.7%              -4.5%
CVX                  +3.8%             -7.1%
COP                 +6.2%             -3.4%
OXY                  +3%                 -4.7%
SLB                  +4.9%              -12.7%
RIG                   +10.5%            -30.5%
VLO                  +9.5%              +13.7%
MPC                 +8%                  +23.8%

With oil moving up for the week, stocks were mostly positive. The Energy Select Sector SPDR — a popular way to track energy companies — rose 3.9% last week. But over the past six months, the sector tracker has decreased 1.1%.

What’s Next in the Energy World?

As usual, market participants will closely track the regular releases to look for guidance on the direction of the commodities. 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. As a matter of fact, fuel demand and the rate of stock drawdowns in the coming weeks will determine the trend in commodity prices. Data on rig count from the oilfield service firm Baker Hughes, which is a pointer to the trends in U.S. crude/natural gas production, is closely followed, too.

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