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Oil & Gas Stock Roundup: ExxonMobil's Oil Find, Canadian Natural's Acquisition & More

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It was a week where oil prices rose back above $70 a barrel for the first time since July but natural gas futures ended flat.

On the news front, Exxon Mobil Corp. (XOM - Free Report) announced a major oil discovery offshore Guyana, while Canadian Natural Resources Ltd. (CNQ - Free Report) agreed to acquire Joslyn oil sands project for C$225 million.

Overall, it was another mixed week for the sector. While West Texas Intermediate (WTI) crude futures rose 1.6% to close at $69.80 per barrel, natural gas prices stayed put at 2.916 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Eclipse Resources' Merger, Schlumberger's Asset Sale & More)

The U.S. crude benchmark gained for only the third time in nine weeks after the Energy Department's inventory release showed that stockpiles recorded a large draw on the back of rising exports. Worries that Washington’s looming sanctions against Iran will significantly tighten supplies also contributed to the gains.

Meanwhile, natural gas prices were essentially unmoved last week. The U.S. Energy Department's weekly inventory release showed a larger-than-expected increase in natural gas supplies. However, the current storage remains well below benchmarks. At 2.505 trillion cubic feet (Tcf), current natural gas inventories are 588 Bcf (19%) under the five-year average and 646 Bcf (20.5%) below the year-ago figure.

Recap of the Week’s Most Important Stories

1.    ExxonMobil continues to gain from its holding in some of the most prolific upstream assets globally, particularly the Stabroek Block. The block’s exploration potential was proven again with the ninth discovery at the Hammerhead-1 well, offshore Guyana.

Hammerhead-1 well also represents the fifth find on the Stabroek Block in the past year. Located about 13 miles southwest of the Liza-1 well, the Hammerhead-1 encountered about 197 feet (60 meters) of superior, oil-bearing sandstone reservoir. The drilling of the well was commenced on Jul 27, 2018, using the Stena Carron drillship to reach a total depth of 13,862 feet (4,225 meters) in 3,773 feet (1,150 meters) of water.

The previous outstanding discoveries on the Stabroek Block include Liza, Payara, Liza Deep, Snoek, Turbot, Ranger, Pacora and Longtail. Currently, results of Longtail are under appraisal. The combined gross recoverable resources from all these discoveries are projected to surpass 4 billion barrels of oil equivalent.

The discoveries made so far on the Stabroek Block have the potential to add about five floating production, storage and offloading (FPSO) vessels capable of yielding over 750,000 barrels per day by 2025. (Read more Exxon Discovers Oil in Hammerhead -1 Exploration Well)

2.    Canadian Natural Resources Limited recently inked a deal to acquire 100% stake in the Joslyn oil sands project for a total consideration of C$225 million. TOTAL S.A. (TOT - Free Report) is the chief operator of the Joslyn project, holding 38.2% stake. Other co-partners in the project are Suncor Energy Inc. (SU - Free Report) , Joslyn Partnership and Inpex Canada Limited, owning 36.8%, 15% and 10% interests each.

Per the deal, Canadian Natural will pay C$100 million on the closure of the transaction along with C$25 million that has to be paid annually for the next five years. Subject to satisfactory closing conditions and regulatory approvals, the deal is set for culmination on Sep 28, 2018.

Canadian Natural believes that the Joslyn project, located directly south of its Horizon oil sands project, will add value to its already impressive portfolio in the region and boost future growth prospects. Being in close proximity to Horizon's operations enables the company to benefit from synergies.

Since the two projects can share the same infrastructure, it will definitely lead to a reduction in developmental costs. It would also allow for more effective lease-line development between the two projects. (Read more Canadian Natural to Buy Joslyn Project for C$225M)

3.    Eni SpA (E - Free Report) recently announced the purchase of onshore oil and natural gas resources, spreading across roughly 350,000 acres in Alaska, from Caelus Alaska Exploration Company. The acquired areas cover 124 exploration leases and Eni will have 100% working interest.

The Zacks Rank #3 (Hold) company expects the Eastern Exploration Area (EEA), located between two major oil and natural gas fields Prudhoe Bay and Point Thompson, to hold several potential reserves. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

With its vast experience in upstream business, Eni is well placed to explore the new hydrocarbon resources. The company is planning to fast track exploration activities in the acquired reserves to create long-term value for shareholders. 

Although Eni didn’t disclose the terms and value of the transaction, the acquisition by the Italian integrated energy firm has considerably widened its footprint in the North Slope of Alaska – considered among the potential American crude resources. The company has operating interests in 11 of the 21 oil and gas fields in the United States. From the 21 fields, the share of daily production that belongs to Eni is roughly 60,000 barrel of oil equivalent. (Read more Eni Expands in North Slope With Buyout of Onshore Assets)

4.    TOTAL S.A. has decided to exit from the polystyrene business in China, and thereby sell its two facilities with a production capacity of 200,000 tons per year each, located in Ningbo, Zhejiang Province, and in Foshan, Guangdong Province. Both these units will be sold to INEOS Styrolution.

TOTAL entered the Chinese polystyrene market in 2003, as economic development of the country resulted in massive growth in polystyrene demand in the past decade. However, the polystyrene business in China was highly competitive and the company failed to reach critical mass in China, and hence decided to exit the same to focus on the U.S. and European polystyrene business.

TOTAL is among the top global producers of Polystyrene. Per a report from Technavio Research, TOTAL is among the top five global producers of Expanded Polystyrene Market. Per a study report from Ceresana, polystyrene global demand will touch nearly $26 billion by 2020. (Read more TOTAL to Sell China Polystyrene Unit, Focus on US & Europe)

5.    PetroChina Company Ltd. (PTR - Free Report) announced first-half 2018 earnings of RMB 27,088 million or RMB 0.148 per diluted share compared with RMB 12,676 million or RMB 0.069 a year ago. This reflects a whopping year-over-year surge of around 114% in the first half of 2018.

The positive comparison can be primarily attributable to higher oil prices, which helped its biggest unit — exploration and production — to post 332.7% higher profits than the year-ago level. The company’s Refining & Chemicals business also buoyed the overall results.

The company has decided to pay an interim dividend of RMB 16,252 million to its stockholders. At the end of the semester, PetroChina’s cash balance was RMB 117,477 million, while cash flow from operating activities was RMB 146,158 million. Capital expenditure in the period was RMB 74,618 million, 19.7% higher than the year-ago level. (Read more PetroChina's 1H18 Earnings Up 114% Chiefly on Crude Rally)

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

+0.7%

+5.1%

CVX

-0.5%

+4.2%

COP

+1.1%

+35.8%

OXY

+0.7%

+21.2%

SLB

-3.2%

-5.2%

RIG

+2.8%

+25.5%

VLO

-2.2%

+28.8%

MPC

-1.8%

+24.4%

 

The Energy Select Sector SPDR – a popular way to track energy companies – was essentially unchanged last week. But longer-term, over six months, the sector tracker is up 10%. Large independent producer ConocoPhillips (COP - Free Report) is far and away the major gainer during this period, experiencing a 35.8% 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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