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Oil & Gas Stock Roundup: ExxonMobil's Q1 Update & SLB's Acquisition in Focus
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It was yet another week when both oil and natural gas prices recorded gains.
The headlines revolved around energy biggie ExxonMobil’s (XOM - Free Report) Q1 earnings update and oilfield service major SLB’s (SLB - Free Report) acquisition of smaller rival ChampionX for $7.8 billion. Developments associated with Chesapeake Energy (CHK - Free Report) , SilverBow Resources (SBOW - Free Report) and Baker Hughes (BKR - Free Report) also grabbed attention.
Overall, it was another bullish seven-day period for the sector. West Texas Intermediate (WTI) crude futures moved up around 4.5% to close at $86.91 per barrel, while natural gas prices went up by 1.3% to end at $1.785 per million British thermal units (MMBtu).
The crude price action remained positive for the fourth week running, primarily driven by tensions in the oil-rich Middle East and a tight supply picture.
Meanwhile, natural gas settled with its fourth gain in the last 10 weeks on signs of production pullback on the back of a sharp decline in rig counts.
Recap of the Week’s Most Important Stories
1. American energy major ExxonMobil has indicated a decline in its first-quarter operating results for 2024. The announcement comes after a period of remarkable profitability, with the company, which is a leading force in the global energy sector, achieving record-breaking profits of $11.4 billion in the first quarter of 2023.
However, the latest data suggests a downturn, with operating profits expected to be $6.65 billion, suggesting a decline from $11.6 billion reported in the first quarter of 2023 and $7.63 billion posted in the previous quarter.
The reduction in profits is primarily due to weaker oil and gas prices and significant losses in fuel derivatives. Natural gas prices have plummeted to multi-year lows, contributing to the anticipated decrease in upstream earnings by $200-$600 million. (ExxonMobil Expects Dip in Q1 Profits Amid Weak Prices)
2. SLB, the largest oilfield contractor, and ChampionX Corporation have announced a definitive agreement for SLB to acquire ChampionX in an all-stock transaction. The agreement, which has received unanimous approval from ChampionX’s board of directors, marks a significant development in the oil and gas industry. ChampioX is primarily focused on the production chemicals business.
Per the terms of the agreement, ChampionX’s shareholders will receive 0.735 shares of SLB common stock for each ChampionX share they own. Following the closing of the transaction, shareholders are expected to own approximately 9% of SLB’s outstanding shares of common stock.
The acquisition comes at a pivotal time in the industry, with the production phase of oil and gas operations gaining increasing significance. Service providers are under pressure to address challenges across the entire production system while integrating emerging technologies such as AI and autonomous operations. (SLB Eyes ChampionX Acquisition in a $7.8B All-Stock Deal)
3. Natural gas players Chesapeake Energy and Southwestern Energy have announced a delay in the completion of their $7.4 billion merger, with the new closing date set for the second half of 2024.
Initially, Chesapeake aimed to finalize the acquisition of its smaller rival by the second quarter of 2024. This postponement comes after the Federal Trade Commission (“FTC”) issued a second request for additional information, signifying a deeper review process of the merger.
The FTC's request is part of a broader trend of increased scrutiny over large-scale transactions, particularly in the energy sector. In March, nearly 50 Democratic members of the U.S. Congress urged the regulator to intensify investigations into oil and gas company deals to safeguard consumer interests and ensure competitive market conditions. (Chesapeake, Southwestern Merger Delayed to Second Half of 2024)
4. Houston, TX-based upstream energy company SilverBow Resources has rejected the latest offer made by its largest shareholder Kimmeridge Energy Management. In its latest offer, Kimmeridge had proposed to acquire the upstream energy player for a total of $2.1 billion, including debt. The offer also mentioned a merger between Kimmeridge’s South Texas gas assets, Kimmeridge Texas Gas (“KTG”) with SilverBow.
The deal gained support from the other shareholders of SilverBow Resources. However, the company’s board of directors has urged shareholders to vote against Kimmeridge’s offer in its upcoming 2024 annual meeting of shareholders.
The board has sent out a rather harsh letter to its shareholders, vehemently opposing what they perceive to be “false claims” made by Kimmeridge. The letter stated that Kimmeridge’s offer “substantially undervalues SilverBow.” In addition, SBOW wrote that KTG’s assets are overvalued, and the merger would be advantageous for Kimmeridge at the expense of the other shareholders of the former. The board continues to point toward the importance of conducting due diligence on KTG’s assets. (SilverBow Rejects Kimmeridge's Offer on Undervaluation).
5. U.S.-based oil services firm, Baker Hughes has made a strategic investment toward Estonian clean energy producer, Elcogen. The specific terms of the transaction have not been disclosed yet. Baker Hughes, through this investment, intends to collaborate with Elcogen for the production of green hydrogen using the latter’s solid oxide electrolyzer cell technology.
Apart from Baker Hughes, Elcogen has secured equity investments from Hydrogen One Capital Growth, HD Hyundai and Mirae. The solid oxide technology developer has also received project grants from the European Commission, including the IPCEI project. These investments totaled in excess of €24 million.
The investment in Elcogen reflects Baker Hughes’ commitment to investing in the future decarbonization of the energy system. Elcogen highlights Baker Hughes’ investment as a significant vote of confidence in its solid oxide technology and its contribution toward the transition journey of the energy industry. (Baker Hughes Backs Green Hydrogen Producer Elcogen).
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.
With both oil and gas 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. Over the past six months, the sector tracker has increased 10%.
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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Oil & Gas Stock Roundup: ExxonMobil's Q1 Update & SLB's Acquisition in Focus
It was yet another week when both oil and natural gas prices recorded gains.
The headlines revolved around energy biggie ExxonMobil’s (XOM - Free Report) Q1 earnings update and oilfield service major SLB’s (SLB - Free Report) acquisition of smaller rival ChampionX for $7.8 billion. Developments associated with Chesapeake Energy (CHK - Free Report) , SilverBow Resources (SBOW - Free Report) and Baker Hughes (BKR - Free Report) also grabbed attention.
Overall, it was another bullish seven-day period for the sector. West Texas Intermediate (WTI) crude futures moved up around 4.5% to close at $86.91 per barrel, while natural gas prices went up by 1.3% to end at $1.785 per million British thermal units (MMBtu).
The crude price action remained positive for the fourth week running, primarily driven by tensions in the oil-rich Middle East and a tight supply picture.
Meanwhile, natural gas settled with its fourth gain in the last 10 weeks on signs of production pullback on the back of a sharp decline in rig counts.
Recap of the Week’s Most Important Stories
1. American energy major ExxonMobil has indicated a decline in its first-quarter operating results for 2024. The announcement comes after a period of remarkable profitability, with the company, which is a leading force in the global energy sector, achieving record-breaking profits of $11.4 billion in the first quarter of 2023.
However, the latest data suggests a downturn, with operating profits expected to be $6.65 billion, suggesting a decline from $11.6 billion reported in the first quarter of 2023 and $7.63 billion posted in the previous quarter.
The reduction in profits is primarily due to weaker oil and gas prices and significant losses in fuel derivatives. Natural gas prices have plummeted to multi-year lows, contributing to the anticipated decrease in upstream earnings by $200-$600 million. (ExxonMobil Expects Dip in Q1 Profits Amid Weak Prices)
2. SLB, the largest oilfield contractor, and ChampionX Corporation have announced a definitive agreement for SLB to acquire ChampionX in an all-stock transaction. The agreement, which has received unanimous approval from ChampionX’s board of directors, marks a significant development in the oil and gas industry. ChampioX is primarily focused on the production chemicals business.
Per the terms of the agreement, ChampionX’s shareholders will receive 0.735 shares of SLB common stock for each ChampionX share they own. Following the closing of the transaction, shareholders are expected to own approximately 9% of SLB’s outstanding shares of common stock.
The acquisition comes at a pivotal time in the industry, with the production phase of oil and gas operations gaining increasing significance. Service providers are under pressure to address challenges across the entire production system while integrating emerging technologies such as AI and autonomous operations. (SLB Eyes ChampionX Acquisition in a $7.8B All-Stock Deal)
3. Natural gas players Chesapeake Energy and Southwestern Energy have announced a delay in the completion of their $7.4 billion merger, with the new closing date set for the second half of 2024.
Initially, Chesapeake aimed to finalize the acquisition of its smaller rival by the second quarter of 2024. This postponement comes after the Federal Trade Commission (“FTC”) issued a second request for additional information, signifying a deeper review process of the merger.
The FTC's request is part of a broader trend of increased scrutiny over large-scale transactions, particularly in the energy sector. In March, nearly 50 Democratic members of the U.S. Congress urged the regulator to intensify investigations into oil and gas company deals to safeguard consumer interests and ensure competitive market conditions. (Chesapeake, Southwestern Merger Delayed to Second Half of 2024)
4. Houston, TX-based upstream energy company SilverBow Resources has rejected the latest offer made by its largest shareholder Kimmeridge Energy Management. In its latest offer, Kimmeridge had proposed to acquire the upstream energy player for a total of $2.1 billion, including debt. The offer also mentioned a merger between Kimmeridge’s South Texas gas assets, Kimmeridge Texas Gas (“KTG”) with SilverBow.
The deal gained support from the other shareholders of SilverBow Resources. However, the company’s board of directors has urged shareholders to vote against Kimmeridge’s offer in its upcoming 2024 annual meeting of shareholders.
The board has sent out a rather harsh letter to its shareholders, vehemently opposing what they perceive to be “false claims” made by Kimmeridge. The letter stated that Kimmeridge’s offer “substantially undervalues SilverBow.” In addition, SBOW wrote that KTG’s assets are overvalued, and the merger would be advantageous for Kimmeridge at the expense of the other shareholders of the former. The board continues to point toward the importance of conducting due diligence on KTG’s assets. (SilverBow Rejects Kimmeridge's Offer on Undervaluation).
5. U.S.-based oil services firm, Baker Hughes has made a strategic investment toward Estonian clean energy producer, Elcogen. The specific terms of the transaction have not been disclosed yet. Baker Hughes, through this investment, intends to collaborate with Elcogen for the production of green hydrogen using the latter’s solid oxide electrolyzer cell technology.
Apart from Baker Hughes, Elcogen has secured equity investments from Hydrogen One Capital Growth, HD Hyundai and Mirae. The solid oxide technology developer has also received project grants from the European Commission, including the IPCEI project. These investments totaled in excess of €24 million.
The investment in Elcogen reflects Baker Hughes’ commitment to investing in the future decarbonization of the energy system. Elcogen highlights Baker Hughes’ investment as a significant vote of confidence in its solid oxide technology and its contribution toward the transition journey of the energy industry. (Baker Hughes Backs Green Hydrogen Producer Elcogen).
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 +4.4% -8.7%
CVX +2.4% -3.3%
COP +4.9% +8.7%
OXY +6.6% +7.1%
SLB +0.4% -7.2%
RIG +4% -15.7%
VLO +7.4% +42.5%
MPC +8.7% +48%
With both oil and gas 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. Over the past six months, the sector tracker has increased 10%.
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.