It was a week where oil prices rose to their highest level since Jul 22 but natural gas futures fell to a 2-month low.

On the news front, Brazil’s Petrobras (PBR Quick QuotePBR - Free Report) saw a sharp drop in its second quarter earnings, while Canadian firm Suncor Energy Inc. (SU Quick QuoteSU - Free Report) agreed to acquire a 30% interest in the Rosebank project in North Sea for $50 million.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures jumped 6.4% to close at $44.49 per barrel, natural gas prices ended down 6.7% to $2.5860 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: EOG, Apache Wrap Up Q2 Energy Earnings Season.)

Oil prices soared to a 3-week high on renewed expectations of a production freeze from the 14-member OPEC bloc and Russia. This was partly offset by the U.S. Energy Department's unseasonal crude build report and data from Baker Hughes showing a seventh straight rise in the domestic oil rig count and pointing to the resurgence in shale drilling activities.

Oils-Energy Sector Price Index

Oils-Energy Sector Price Index

Natural gas, on the other hand, moved south following a larger-than-expected increase in supplies. Things were made worse by predictions of tepid temperatures across the country in the near term - leading to the commodity’s weak demand for air conditioning.

Recap of the Week’s Most Important Stories

1.    Brazil's state-run energy giant Petrobras announced second-quarter profit of $106 million compared with profit of $171 million in the year-earlier quarter. Lower production along with weak oil prices led to the underperformance. Lower economic activities in Brazil along with decreased crude oil export compounded the woes.

The company’s total oil and gas production during the first half of 2016 was 2,710 thousand oil-equivalent barrels per day (MBOE/d), down from 2,784 MBOE/d in the same period of 2015. The average sales price of oil in Brazil plunged 28% from the year-earlier period to $34.54 per barrel. Average sales price of international oil was down 25% year over year to $44.37 per barrel.

During the first half ended Jun 30, 2016, the average sales price of oil in Brazil plunged 28% from the year-earlier period to $34.54 per barrel. Average sales price of international oil was down 25% year over year to $44.37 per barrel. (See More: Petrobras Posts Lower Q2 Earnings on Weak Oil Prices.)

2.    Canada’s largest energy firm Suncor Energy Inc. has entered into an agreement Austrian energy company, OMV AG, to purchase 30% interest in the Rosebank project from the latter.

Per the agreement, Suncor will pay an initial US$50 million to OMV for an interest in the proposed North Sea oil project. Notably, in 2016, this will be the company’s third sizable acquisition. OMV would retain a 20% stake in the project, which is currently undergoing engineering and designing. Suncor is likely to pay an additional US$165 million to OMV if the partners in the Chevron-led project agree to proceed with development.

The Rosebank project, expected to produce 100,000 barrels of crude and 80 million cubic feet of natural gas per day, is situated 130 kilometers northwest of the Shetland Islands at a depth of about 1,100 meters. The aforesaid equity interest acquisition deal, which is subject to regulatory approvals and conditions, is anticipated to close in the last quarter of this year. (Read more: Suncor to Purchase Stake in Rosebank Project for $50 Million.)

3.    Integrated energy major Royal Dutch Shell plc announced a force majeure (or legal indemnity allowing it to stop shipments without breaching contractual obligations) on gas supplies destined for the liquefied natural gas plant in Nigeria following a leak on the Eastern Gas Gathering System pipeline.

Following the discovery of a leak on the Eastern Gas Gathering System pipeline, which supplies the bulk of Shell’s gas to the Nigerian LNG plant, the company decided to halt the gas supply in order to find out the cause of the leak and undertake repair works. However, the plant continues to receive some supply via other pipelines, which has enabled it to sustain production and loading.

The Nigerian LNG plant on Bonny Island has the ability to process 22 million metric tons of the liquefied fuel a year, which is equivalent to 7% of the global supply. The plant also has the capacity to process 5 million tons of natural gas liquids. (Read more: Shell Announces Force Majeure on Gas Supply in Nigeria.)

4.    Predominantly natural gas producer Ultra Petroleum Corp. posted second-quarter 2016 adjusted earnings of 25 cents per share against the Zacks Consensus Estimate of a loss of 12 cents. The bottom line also came in higher than the year-ago comparable quarter profit of 21 cents. A massive decline in operating expenses along with success on the production front led to the improvement. The positives were slightly offset by reduced commodity price realizations.

Total lease operating costs decreased nearly 14.7% from the prior-year quarter to approximately $62 million. Moreover, the company witnessed a massive decrease in total operating expenses to $94.8 million from $188.5 million in the year-earlier quarter.

Production during the reported quarter increased year over year to 70.8 billion cubic feet equivalent (Bcfe) from 70.5 Bcfe. In particular, natural gas volumes – that accounted for approximately 93.8% of the total – increased 2% year over year to 66.4 Bcfe. (See More: Ultra Petroleum Q2 Earnings Beat as Costs Decline.)

5.    Norway’s Statoil ASA , along with its partners, has submitted the Plan for Development and Operation (PDO) and the Field Development Plan (FDP) for the Utgard gas and condensate discovery in the North Sea. The aforesaid plans have been submitted to regulatory bodies in both Norway and the U.K.

Located 21 kilometers away from the Sleipner field, Utgard (formerly Alfa Sentral) was discovered in 1982 and is estimated to have recoverable reserves of 56.4 million barrels of oil equivalent. The capital expenditures are expected at about NOK 3.5 billion.

The Utgard development will comprise two wells in a standard subsea concept with one drilling target on each side of the median line. As all the installations and infrastructure are located in the Norwegian sector, the well on the U.K. side will be drilled from the subsea template on the Norwegian continental shelf. The distance from the subsea template to the median line is 450 meters.

Price Performance

The following table shows the price movement of the major oil and gas players over the past week and during the last 6 months.

Over the course of last week, ‘The Energy Select Sector SPDR’ was up 1.84% on hopes for an output freeze agreement. Consequently, investors witnessed buying in most market heavyweights. The best performer was Houston-based energy major ConocoPhillips (COP Quick QuoteCOP - Free Report) that added 4.54% to its stock price.

Longer-term, over the last 6 months, the sector tracker has jumped 20.29%. ConocoPhillips was again the main beneficiary during this period, experiencing a 26.39% price increase.

What’s Next in the Energy World?

As usual, market participants will be closely tracking the regular weekly releases i.e. the U.S. government data on oil and natural gas. Energy traders will also be focusing on the Baker Hughes data on rig count.

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