It was a week where oil prices logged their lowest settlement since Feb 8 but natural gas futures were on their way up again. 

On the news front, integrated major ExxonMobil Corp. (XOM Quick QuoteXOM - Free Report) plans to spend $20 billion along the U.S. Gulf Coast over a 10-year period, while British behemoth BP plc (BP Quick QuoteBP - Free Report) unveiled its strategy update on medium-term plans for the next five years.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures lost 1.2% to close at $53.33 per barrel, natural gas prices inched up 1.4% to $2.827 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Exxon's Proved Reserves Cut, Apache's Capex Boost and More.)

Despite OPEC members’ surprisingly high level of compliance with the landmark production cut agreement signed late last year, oil prices dropped after the U.S. Energy Department's weekly inventory release showed record high inventories and rise in production.

The commodity was also weighed down by a strong dollar and data from Baker Hughes indicating another rise in the domestic oil rig count and pointing to the resurgence in shale drilling activities. 

Meanwhile, natural gas turned higher as expected increase in industrial demand more than offset the surprise climb in supplies.

Recap of the Week’s Most Important Stories

1.    The world’s largest publicly traded oil company ExxonMobil Corp. announced its intention to make planned investments of $20 billion through 2022 to expand its chemical and oil refining plants on the U.S. Gulf Coast.    

The investments, which will be made over a 10-year period, will involve major chemical, refining, lubricant and liquefied natural gas projects at 11 proposed and existing sites. These investments are anticipated to create thousands of new high-paying jobs and generate $20 billion in increased economic activity in Texas and Louisiana. To be precise, the investments are expected to create 35,000 temporary construction jobs and 12,000 permanent jobs.

We note that Exxon Mobil already began investments in facilities along the Texas and Louisiana coasts in 2013. These projects are expected to continue through at least 2022. Per the company, the scope of the projects is growing and the timeline is being extended. This highlights the company’s commitment of growing the Gulf initiative.

2.    British energy giant BP plc provided a strategy update wherein it made some impressive cash flow projection for the next five years from major operating units. The company also expects to maintain the present capital framework over the period.

From the upstream segment, the company expects annual pre-tax cash flow between $13 billion and $14 billion through 2021. Startup of key higher-margin projects will primarily contribute to the improvement in cash flows. Last year, the company started production from six projects. Seven more projects are likely to become operational in 2017.

This apart, the integrated energy company is expected to bring online nine developments (that are currently under construction) between 2018 and 2021. It is to be noted that BP’s output is anticipated to grow by an average of 5% between 2016 and 2021.

Pre-tax cash flow from the downstream unit will likely be between $9 billion and $10 billion in each of the next five years. Significant growth in the marketing business should support the outperformance.

Notably, the company’s downstream business has played a major role in lowering cash expenses, which were as high as $3 billion since 2014.

Through 2021, BP is expected to maintain its financial framework. Capital spending for organic projects is anticipated in the range of $15–$17 billion every year with gearing of 20–30%. (Read more: BP's 5-Year Cash Flow Projection Looks Impressive.)

3.    Marathon Petroleum Corp. (MPC Quick QuoteMPC - Free Report) recently announced that it has divested of some of its terminal, pipeline and storage assets to its publicly traded partnership MPLX L.P. This asset sale helped Marathon garner proceeds of $2.02 billion from its master limited partnership, which it had spun off in 2012.

The assets being sold comprise 62 product terminals with about 24 million barrels of storage capacity. Additionally, it includes 604 miles of pipeline and 73 tanks with 7.8 million barrels of storage capacity. The proceeds from this sale will consist of $504 million in MPLX stock and $1.51 billion in cash for the assets. Marathon Petroleum currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The asset sale is part of Marathon Petroleum’s plans to appease hedge fund Elliott Management, which has rallied toward enhancing the firm’s shareholder value, Earlier, during the fourth-quarter earnings release, Marathon Petroleum said that it would speed up the previously announced plan to dropdown certain assets to its midstream partnership MPLX L.P. The company added that a designated committee to review the separation of its Speedway retail unit – another demand from the activist investor that owns 4% of Marathon Petroleum stock – is expected to provide an update by mid-2017.

4.    Houston, TX-based energy infrastructure provider Kinder Morgan Inc. (KMI Quick QuoteKMI - Free Report) divested 49% interest in Elba Liquefaction Company, LLC to investment funds managed by EIG Global Energy Partners.

The joint venture will gain ownership of 10 liquefaction units and other ancillary equipment to be constructed as part of the Elba Liquefaction Project at Kinder Morgan’s existing Southern LNG Company, L.L.C. Elba Island LNG facility near Savannah, GA. 

To obtain its membership interest, EIG has made an upfront cash payment of about $385 million, which comprises reimbursement to Kinder Morgan for EIG’s 49% share of previous Elba Liquefaction Company capital expenditures, excluding capitalized interest. This apart, a payment of about $170 million has been made beyond the capital expenditures in consideration of the value created by Kinder Morgan in developing the project to this stage. (Read more: Kinder Morgan Divests 49% Stake in Elba Liquefaction to EIG.)

5.    Upstream energy company EOG Resources Inc. (EOG Quick QuoteEOG - Free Report) reported fourth-quarter 2016 adjusted loss of 1 cent per share, narrower than both the Zacks Consensus Estimate of a loss of 16 cents and year-ago quarter loss of 27 cents. The strong results were supported by increased liquid production and higher oil and gas price realizations.

Crude oil and condensate production in the quarter totaled 311.7 thousand barrels per day (MBbl/d), up almost 11% from the prior-year level. Average price realization for crude oil and condensates jumped almost 19% year over year to $47.76 per barrel. Quarterly NGL prices also surged approximately 40% from $13.25 a year ago to $18.51 per barrel. Natural gas was sold at $2.04 per thousand cubic feet (Mcf), up 9% year over year.

During 2017, the company expects crude volume growth of 18%. Moreover, the company projects capital budget in the range of $3.7–$4.1 billion for 2017. As of 2016, net proved reserves were 2,147 MMBoe, up 1.4% year over year. (Read more: EOG Resources Posts Narrower-than-Expected Q4 Loss.)

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’ rose by a miniscule 0.24%. The best performer was San Ramon, CA-based energy behemoth Chevron Corp. (CVX Quick QuoteCVX - Free Report) whose stock price gained 2.46%.

Longer-term, over the last 6 months, the sector tracker is up 2.31%. Offshore contract drilling behemoth Transocean Ltd. (RIG Quick QuoteRIG - Free Report) was one of the major beneficiaries during this period, experiencing a 31.42% price increase.

What’s Next in the Energy World?

With the Q4 earnings season effectively over, market participants will again be glued to the regular 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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