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The Zacks Analyst Blog Highlights: Transocean, Marathon Oil, BP, SeaDrill and Statoil ASA


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For Immediate Release

Chicago, IL – October 05, 2016 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Transocean Ltd. (NYSE:(RIG - Analyst Report) -Free Report),Marathon Oil Corp. (NYSE:(MRO - Analyst Report) -Free Report),BP plc (NYSE:(BP - Analyst Report) -Free Report),SeaDrill Ltd. (NYSE:(SDRL - Analyst Report) -Free Report) and Statoil ASA (NYSE:(STO - Analyst Report) - Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday’s Analyst Blog:

Oil & Gas Stock Roundup

It was a week which saw oil prices surge on OPEC action, while natural gas futures turned lower on weather worries.

On the news front, offshore contract drilling service provider Transocean Ltd. (NYSE:(RIG - Analyst Report) - Free Report) suffered early termination of a drillship contract, while domestic explorer Marathon Oil Corp. (NYSE:(MRO - Analyst Report) - Free Report) agreed to sell non-core assets in West Texas and New Mexico for $235 million.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures rallied 7.8% to close at $48.24 per barrel, while natural gas prices fell by 3.6% to $2.906 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Rice Energy's Acquisition, Schlumberger's Venezuela Contract .)

Oil prices notched up a big weekly gain as investors were impressed by a decision from the world's largest oil cartel to slash production targets.

The Organization of Petroleum Exporting Countries (OPEC), whose member nations supply around 40% of the world's crude, said it would cut production by as much as 750,000 barrels a day starting in November in order to keep oil prices from falling further. Most industry observers didn’t have high expectations from the meeting.

Apart from the OPEC announcement, oil prices were also supported by the U.S. Energy Department's weekly inventory release, which showed that crude stockpiles declined for the fourth straight week, continuing to drag down the overall surplus.

Oils-Energy Sector Price Index

Meanwhile, natural gas settled down despite another below-average build – the 21st in a row. The commodity was overwhelmed by predictions of tepid air conditioning demand with forecasts that showed cooler weather ahead.

Recap of the Week’s Most Important Stories

1. Offshore drilling giant Transocean Ltd. saw its shares decline 7.6% in the after-hours trading session on October 3 after India-based Reliance Industries Ltd. decided to exercise the option to terminate its contract for Transocean's Discoverer India rig ahead of schedule.

The ultra-deepwater drillship will be pulled out of service in Dec 2016, four years before the scheduled contract expiry in Jan 2021. Per the contract, Transocean will receive a lump sum compensation amount of approximately $160 million from Reliance for the early termination.

This is another sign that the collapse in crude prices that began in mid-2014 amid a glut of supply and slowing demand for the commodity has affected the offshore drillers badly as oil companies cut back their capital spending.

2. Leading upstream energy player Marathon Oil Corp. reported that it has signed a deal to sell off some of its non-core assets in West Texas and New Mexico for $235 million.

Under this deal, Marathon will be seen divesting its non-operated, conventional CO2 and waterflood assets to an unidentified buyer by the end of this year. These assets averaged about 4,000 barrels of oil equivalent per day in the first half of 2016.

With oil prices remaining low for a long time and still hovering below $50 a barrel, exploration and production companies such as Marathon find it difficult to borrow funds from the lenders. Hence, this forces them to sell off their non-core properties to meet their expenses.

3. British oil major BP plc (NYSE:(BP - Analyst Report) - Free Report) recently announced that it has struck an accord with the Egyptian government for the amendment of three concessions in the Arab country.

BP has secured amendments from the authorities for three concessions in Egypt – Temsah, Ras El Barr and Nile Delta Offshore. This will facilitate acceleration of output from the Nooros gas discovery after recording positive appraisal results from another find. Recently, BP achieved record production of 700 million standard cubic feet per day (mmscfd) in the Nooros development. BP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .

With the conclusion of these amendments, BP can progress with the enhancement of its drilling activities in these concession areas. The amendments also allow fast track development of the Nooros field in the Nile Delta offshore concession and should allow the company to reach a production level of 800 mmscfd by early 2017. Additional wells are also expected to be drilled by BP in Ras El Barr and Temsah areas, which will likely bring substantial gas to the Egyptian domestic market. (Read more: BP Inks Three Concession Agreements with Authorities in Egypt .)

4. Hamilton, Bermuda-based offshore drilling firm SeaDrill Ltd. (NYSE:(SDRL - Analyst Report) - Free Report) saw its shares decline after North Atlantic Drilling Ltd., in which it holds 70% stake, announced a rig contract cancellation by Norwegian oil giant Statoil ASA (NYSE:(STO - Analyst Report) - Free Report).

This cancellation notice, which pertains to the contract for the West Epsilon jack-up, came two months before the expiration of the drilling contract between the parties. The West Epsilon rig was originally contracted to provide drilling services in Norway until Dec 2016. However, Statoil has now decided to conclude the rig’s current activities in mid-Oct.

As per the terms of the contract, North Atlantic Drilling is now entitled to receive a lump-sum payment of approximately $11 million because of the early termination. The West Epsilon, on the other hand, is currently being marketed for new contract. (Read more: SeaDrill Subsidiary Reports Rig Contract Cancellation .)

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1 Stock of the Day pick for free.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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