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Oil & Gas Stock Roundup: BP, Baker Hughes, EQT & More

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It was a week where oil prices finished at their highest since November 2014. Meanwhile natural gas futures fell slightly.

On the news front, BP plc (BP - Free Report) announced the expansion of its electric vehicle charging business, while Baker Hughes, a GE company (BHGE - Free Report) is on the verge of ending its disastrous relationship with parent General Electric Company (GE - Free Report) . Meanwhile, EQT Corporation (EQT - Free Report) will sell around 2.5 million non-core acres for $575 million.

Overall, it was another mixed week for the sector. While West Texas Intermediate (WTI) crude futures gained more than 8% to close at $74.15 per barrel, natural gas prices edged down some 0.7% to $2.924 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Shell, Baytex, Petrobras & OPEC)

The U.S. oil benchmark hit a new three-and-a-half-year high last week on significantly higher-than-expected decline in domestic stockpiles, worries about tightening global supplies and doubts over OPEC’s ability to boost production.

On the other hand, natural gas prices moved southward last week following an upward revision to EIA’s previously reported figures and forecasts for cooler temperatures that might lead to the fuel’s tepid use for air-conditioning.

Recap of the Week’s Most Important Stories

1.    BPannounced that it has agreed to acquire Chargemaster, touted to have the largest network of charging points for electric cars in the UK.

After the conclusion of the accord, BP will have the opportunity to set up ultra-fast chargers in all of its U.K.-based filling points. The united entity, BP Chargemaster, will likely own and operate roughly 1,200 forecourts of BP along with 6,500 charging units of Chargemaster. As per media reports, the transaction will be valued at $170 million.

It is to be noted that BP Chargemaster will operate as a wholly owned affiliate of BP and all the current Chargemaster employees will be serving the newly-formed company. The British energy giant foresees mounting demand for electric vehicles (EV) in the coming years. From 1 million electric cars in 2016, the world will see roughly 300 million EVs by 2040, per BP. (Read more BP to Unveil EV Chargers in Stations with Chargemaster Buy)

2.    Baker Hughes, a GE company will separate from parent company General Electric Company, which is planning to lower exposure in the volatile energy sector.

Over the next two to three years, General Electric will likely sell its 62.5% stake in Baker Hughes to strengthen its balance sheet and simplify operations. In July 2017, General Electric had acquired Baker Hughes and merged the affiliate with its oil and gas equipment and services businesses.

However, investors didn’t cheer the acquisition as following its closure, share prices of both the companies plunged. Baker Hughes has lost 39.2% since the acquisition, underperforming the 5.3% collective decline of the stocks belonging to the industry, while General Electric slipped 49.1%. (Read more Baker Hughes to Part Ways With General Electric in 2-3 Years)

3.    EQT Corporation recently agreed to divest around 2.5 million non-core Huron Play acres for $575 million, to Diversified Gas and Oil Plc. The net acres are located in Southern Appalachia. The transaction is expected to conclude in July 2018.

The all-cash deal enabled the company to sell net acreages in Kentucky, Virginia, and southern West Virginia. In the last reported quarter, net production from around 12,000 wells in the area came in about 200 million cubic feet of gas equivalent per day. Per the company, the assets consist of net proved developed reserves of 1.6 trillion cubic feet of gas equivalent.  Around 250 employees, currently working at the site, will be transferred to Diversified Gas and Oil.

The financial and operational guidance for 2018 will be revised as a result of the divestment, which the company plans to disclose in the April-June earnings report that is slated to be announced on Jul 26. (Read more EQT Gears Up for Huron Play Acres' Divestment to Reduce Debt)

4.    Oasis Petroleum, Inc. (OAS - Free Report) recently inked two separate deals to offload some of its non-operating assets in the Williston Basin, in a bid to upgrade its portfolio. The transaction is valued at $283 million. However, details of the buyers have been kept under wraps. The divested non-core assets comprise 65,000 acres in North Dakota and Montana, having an estimated production capacity of 4,400 barrels of oil equivalent per day (Boe/d).

The proceeds from this transaction will enable the company to pay for the acquisition of Permian acreage from San Antonio-based Forge Energy. In an attempt to diversify its holdings away from North Dakota, Oasis Petroleum acquired around 22,000 acres in the prolific Delaware Basin earlier this year. The deal has undoubtedly opened the gateway for Oasis Petroleum in the Delaware Basin, which is the most profitable area for oil explorers of late due to low production cost.

Oasis Petroleum paid a huge premium for this $946-million acquisition deal, funded through cash and stock. In order to finance the deal, the company had resorted to issuing new stocks and also planned to jettison its non-core Williston assets to raise cash. In fact, it had announced its plans to sell around 200,000 acres, accounting for 8000-10,000 Boe/d, for approximately $500 million.

The latest agreements highlight the company’s progress toward its target. Oasis Petroleum remains committed to evaluate and vend the additional non-pivotal acreage in order to streamline portfolio and strengthen its position in the prolific Delaware Basin. (Read more Oasis Petroleum to Vend Non-Core Williston Assets for $283M)

5.    Shares of Cheniere Energy, Inc. (LNG - Free Report) plunged on Thursday after Carl Icahn pared down his stake in the liquefied natural gas exporter. The activist hedge fund billionaire said in a filing that entities controlled by him sold nine million of his 32.7 million shares in Cheniere Energy. That marks a roughly 27.5% divestiture of the firm’s ownership.

Cheniere Energy’s stock tumbled on the news, falling 3.9% to $64.86. Icahn, who still has two members on Cheniere Energy’s board, remains the Zacks Rank #1 (Strong Buy) company’s largest shareholder with a roughly 9.5% stake. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Despite trimming his position in Cheniere Energy, Icahn expressed his confidence in Cheniere Energy’s management and Chief Executive Officer Jack Fusco. Since announcing his position in Cheniere Energy in 2015, Icahn has maintained his bullish stance on the company in the face of several headwinds. (Read more Icahn Trims Cheniere Energy Stake, Remains Major Investor)

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.

Company

Last Week

Last 6 Months

XOM

+1.7%

-5.7%

CVX

+1.1%

-3.3%

COP

+2.7%

+20.4%

OXY

+0.4%

+10%

SLB

+0.7%

-10.8%

RIG

+5.8%

+16.7%

VLO

-1.3%

+17.1%

MPC

-3.4%

+2.4%

 

Reflecting the positive oil market sentiment, the Energy Select Sector SPDR – a popular way to track energy companies – generated a +1.1% return last week. The best performer was offshore drilling powerhouse Transocean Ltd. (RIG - Free Report) whose stock rose 5.8%.

Longer-term, over six months, the sector tracker is up a miniscule 0.4%. large independent producer, ConocoPhillips is far and away the major gainer during this period, experiencing a 20.4% price appreciation.

What’s Next in the Energy World?

As usual, market participants will be closely tracking the regular releases i.e. the U.S. government statistics on oil and natural gas - one of the few solid indicators that comes out regularly. Energy traders will also be focusing on the Baker Hughes data on rig count.

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