It was a week where both oil and gas prices finished sharply lower.

On the news front, earnings from the top global integrated oil firms remained front and center as both ExxonMobil Corp. (XOM Quick QuoteXOM - Free Report) and Chevron Corp. (CVX Quick QuoteCVX - Free Report) defied low crude prices to beat per-share forecasts. In another important development, oilfield services major Baker Hughes Inc. is set to combine with the oil and gas business of General Electric Co. (GE Quick QuoteGE - Free Report) .

Overall, it was a dismal week for the sector. West Texas Intermediate (WTI) crude futures dived 4.2% to close at $48.70 per barrel, while natural gas prices ended down 7.6% to $3.1050 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Schlumberger, Halliburton Beats and Sees Drilling Upswing.)

Oil prices sank to their first loss in six weeks as investors remained anxious about the OPEC and non-OPEC players’ commitments to slash production targets. With divisions in the cartel becoming apparent, the future of the ambitious OPEC announcement looks more and more uncertain. Apart from Iraq’s wish to be excluded from output curbs, indications of record output from the group also kept industry watchers on tenterhooks.  

In fact, the pessimism surrounding the OPEC deal more than offset the U.S. Energy Department's weekly inventory release, which showed a surprise fall in domestic crude stockpiles.

Meanwhile, natural gas also turned sharply lower despite an inline inventory build. The commodity was hampered by a warmer-than-normal autumn weather that translates into weak demand.

Recap of the Week’s Most Important Stories

1.    The world’s largest publicly traded oil company, ExxonMobil Corp. posted better-than-expected third-quarter 2016 earnings. Project startups along with favorable volume and mix effects led to the outperformance. This was offset partially by lower oil and gas realizations, lower refining margins and an increased downtime in Nigeria.

During the quarter, ExxonMobil generated cash flow of $6.3 billion from operations and asset sales. The company returned $3.1 billion to shareholders through dividends. Capital and exploration spending decreased 45% year over year to $4.2 billion.

A day prior to the earnings release, ExxonMobil discovered potential recoverable oil resources on the Owowo field, located off the coast of Nigeria. The company estimates recoverable resources of 500 million and one billion barrels of oil. It is to be noted that the field was drilled safely to 10,410 feet at almost 1,890 feet depth of water. (Read more: ExxonMobil Earnings Beat on Project StartUps in Q3.)

2.    U.S. energy giant Chevron Corp. reported strong third quarter results, buoyed by the success of its cost savings initiatives. The company reported earnings per share of 68 cents, higher than the Zacks Consensus Estimate of 39 cents. However, the bottom line compared unfavorably with the year-ago adjusted profit of $1.09 amid the continued plunge in commodity prices and lower refining. Chevron currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Exploration costs fell from $315 million in the third quarter of 2015 to $258 million. Chevron spent $5,175 million in capital expenditures during the quarter, a considerable decline from the $7,965 million incurred a year ago.

Earlier, the company announced a 1% increase in its quarterly dividend to $1.08 per share, or $4.32 per share annualized. The dividend is payable on Dec 12 to shareholders of record on Nov 18, 2016. (Read more: Chevron Q3 Earnings Beat as Cost Cut Offsets Low Price.)

3.    Oilfield services provider Baker Hughes Inc. entered into a deal with industrial conglomerate General Electric Co., per which the latter will combine its oil and gas business with the former. The merger will create the second-largest oilfield service player in the world.

The merger is in sync with the growing demand from upstream players for more efficient oilfield services amid intense competition and the persistent weakness in oil prices since mid-2014. The newly formed entity will combine the strength of General Electric with the expertise of Baker Hughes in fracking new wells.

The combined entity is projected to generate revenues of more than $32 billion, annually. The complementary products of the involved companies are anticipated to provide better solutions to customers alongside creating cost synergy. In fact, Baker Hughes and General Electric projected yearly cost savings of $1.2 billion in 2020 and beyond. Moreover, the diversified asset base of the merged entity is expected to cushion it against any downturn in the energy market.

4.    Houston-based oil and gas finder ConocoPhillips (COP Quick QuoteCOP - Free Report) reported third-quarter 2016 adjusted loss of 66 cents per share, narrower than the Zacks Consensus Estimate of a loss of 69 cents. Increased production from growth projects, along with higher well performances, supported the improvement.

Daily production from continuing operations averaged 1.557 million barrels of oil equivalent (MMBOE) in the quarter, up from 1.554 MMBOE in the year-ago quarter. Average realized price for oil was $43.21 per barrel, compared with $46.41 in the year-earlier quarter.

For 2016, ConocoPhillips has further reduced its capital expenditure guidance to $5.2 billion from $5.5 billion. The decrease is mainly attributable to efficiency improvements across the portfolio.

The world's largest independent exploration and production company raised the lower limit of its production guidance to 1,560 MBOED from 1,540 MBOED. Hence, output is now expected in the range of 1,560–1,570 MBOED – reflecting strong year-to-date performance across most of the portfolio. For the fourth quarter, production from continuing operations is expected at 1.555–1.595 MMBOE. (Read more: ConocoPhillips' Loss Narrower Than Expected in Q3.)

5.    Canada’s largest energy firm, Suncor Energy Inc. (SU Quick QuoteSU - Free Report) , recently entered into an agreement to divest its Petro-Canada lubricants business to Dallas-based HollyFrontier Corp. for $1.125 billion.

Under the deal, Suncor will be divesting a manufacturing, research and sales centre in Mississauga. This unit sells various types of specialty lubricants and oils around the world. Also, HollyFrontier will gain a perpetual exclusive license to use the Petro-Canada trademark for lubricants.

This divestment is in line with Suncor’s strategy of shifting its focus to core assets to drive long-term profitable growth. The company intends to divest assets worth $1billion–$1.5-billion by mid-2017. Recently, Suncor divested 49% stake in a storage tank farm in Alberta for about $500 million.

Price Performance

The following table shows the price movement of some 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 down by 1.60% on doubts over the OPEC output deal. Consequently, investors witnessed selling in some market heavyweights. The worst performer was oilfield service majors Schlumberger Ltd. (SLB Quick QuoteSLB - Free Report) whose stock price fell 4.29%.

But longer-term, over the last 6 months, the sector tracker has gained 1.76%. Downstream operator Tesoro Corp. was one of the major beneficiaries during this period, experiencing a 4.86% 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. However, the 2016 Q3 earnings remain the primary focus this week, with a number of S&P 500 members coming out with quarterly results.

Now See Our Private Investment Ideas

While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum  . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>