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The Zacks Analyst Blog Highlights: Chevron, Canadian Natural Resources, Devon Energy, TC Energy and Plains All American Pipeline
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For Immediate Release
Chicago, IL – June 6, 2019 – Zacks.com 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: Chevron (CVX - Free Report) , Canadian Natural Resources Limited (CNQ - Free Report) , Devon Energy (DVN - Free Report) , TC Energy Corporation (TRP - Free Report) and Plains All American Pipeline (PAA - Free Report) .
Here are highlights from Wednesday’s Analyst Blog:
Oil & Gas Stock Roundup: CVX, CNQ, DVN & More
It was a week where oil prices logged sharp losses and natural gas futures dropped to multi-year lows.
On the news front, Chevron moved closer to its goal of pulling out of UK exploration and production after selling bulk of its North Sea oil and gas assets to Israel’s Delek group for $2 billion. Meanwhile, Canadian Natural Resources Limited announced that it has decided to buy Devon Energy’s assets in Canada for C$3.8 billion.
Overall, it was a dismal week for the sector. West Texas Intermediate (WTI) crude futures fell 8.8% to close at $53.50 per barrel, while natural gas prices moved down 6% for the week to finish at $2.454 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Shell's Appomattox Start-Up, Rattler Midstream's IPO & More)
The U.S. crude benchmark hit the lowest settlement level since Feb 12 following the U.S. Energy Department's latest inventory release. The report showed that crude stockpiles recorded a significantly lower-than-expected weekly draw, while domestic production climbed back to record 12.3 million barrels a day.
On a further bearish note, analysts and industry watchers are worried over the worsening U.S.-China and U.S.-Mexico trade spats that could lead to a major slowdown in global economy and translate into weak demand for the commodity.
Natural gas prices also suffered after a government report showed a larger-than-expected increase in supplies. The bearish injection, which was also higher than the five-year average, intensified a sell-off that left the U.S. benchmark with its lowest close in three years.
Recap of the Week’s Most Important Stories
1. In a bid to streamline portfolio, Chevron will divest bulk of North Sea assets in the United Kingdom to Israeli conglomerate Delek Group’s subsidiary, Ithaca Energy, for about $2 billion. The move, which is in sync with Delek Group’s and Chevron’s long-term objectives, is a win-win transaction for both. While Delek Group seeks to become a global offshore oil/gas powerhouse, Chevron is focused on revving up production and optimization of portfolio in high-return U.S. shale plays, especially the Permian Basin.
The deal brings Chevron much closer to its goal of withdrawing from the aging North Sea, in a bid to streamline portfolio. The move is part of Chevron’s strategic review of global portfolio to determine the competitiveness of all its projects. The decision seems to be a prudent one, as extracting oil from North Sea is not so economical since production costs are much higher than returns. With North Sea accounting for just around 3% of production, the company had put most of its assets in the region for sale last year.
As it is, the company plans to jettison $15-$20 billion worth of assets in the 2020-2022-time frame, in order to optimize portfolio and provide additional cash to investors. (Read more Chevron to Sell North Sea Assets to Delek Group for $2B)
2. In a bid to further solidify its position on its home turf, Canadian Natural Resources Limited recently inked a mega deal of C$3.8 billion to snap up Devon Energy’s Canadian business. The pact represents Canadian Natural’s biggest buyout since 2017, when it acquired Shell’s oilsands assets for C$8.16 billion.
Markedly, Canadian Natural — the largest energy producer in terms of volume in Canada and eighth largest explorer (excluding national oil companies) in the world — will boost output capacity to 1.2 million barrels of oil equivalent per day (Mboe/d) with this latest deal with Devon.
Per the deal, Canadian Natural will acquire Devon’s Jackfish oilsands project, heavy oil wells and undeveloped lands. Notably, the acquired assets netted 113,000 barrels of oil equivalent to Devon in the first quarter of 2019. The proved reserves associated with the holdings amounted to 409 million barrels of oil in 2018.(Read more Canadian Natural Ups Oilsands Game With C$3.8B Buyout)
3. In a bid to ramp up its core pipeline growth projects, TC Energy Corporation is set to jettison 85% stake in its Northern Courier Pipeline to Canadian Pension Fund, Alberta Investment Management Corporation for $860 million (or C$1.05 billion). Notably, the 90-kilometer conduit deals with the transportation of bitumen and diluent between the Fort Hills mine site and a terminal owned by Suncor Energy.
Subject to customary approvals, the deal is set for closure in the third quarter of 2019. Subsequent to the divestment, TC Energy will continue to be the operator of the pipeline with 15% stake.
The company recently offloaded its Coolidge Generating Station. In fact, so far this year, the firm has announced sale of $1.3 billion (or $1.75 billion) of its assets. TC Energy is currently focusing on divesting its assets to raise cash to repay a huge debt burden as well as to fund its growth projects. (Read more TC Energy to Vend Northern Courier Pipeline for $860M)
4. Plains All American Pipeline announced a joint venture with Delek Logistics Partners, LP for the Red River Pipeline system. Delek Logistics has purchased 33% ownership interest from Plains All American in a new Red River Pipeline Company LLC joint venture for $128 million. The partnership will continue to operate the system and retain 67% ownership of the pipeline.
In addition, Plains All American announced expansion of the current Red River Pipeline system capacity from nearly 150,000 barrels per day to around 235,000 barrels per day. The expansion will be achieved through the addition of pumping capacity, which is expected to be completed during the first half of 2020.
Plains All American might utilize the proceeds to lower existing debt levels or fund ongoing capital programs. After spending nearly $1.9 billion on capital expansion in 2018, the partnership anticipates 2019 expansion capital at $1.35 billion, up from previous expectation of $1.1 billion. (Read more Plains Sells Red River System's 33% Stake to Delek Logistics)
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Chevron, Canadian Natural Resources, Devon Energy, TC Energy and Plains All American Pipeline
For Immediate Release
Chicago, IL – June 6, 2019 – Zacks.com 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: Chevron (CVX - Free Report) , Canadian Natural Resources Limited (CNQ - Free Report) , Devon Energy (DVN - Free Report) , TC Energy Corporation (TRP - Free Report) and Plains All American Pipeline (PAA - Free Report) .
Here are highlights from Wednesday’s Analyst Blog:
Oil & Gas Stock Roundup: CVX, CNQ, DVN & More
It was a week where oil prices logged sharp losses and natural gas futures dropped to multi-year lows.
On the news front, Chevron moved closer to its goal of pulling out of UK exploration and production after selling bulk of its North Sea oil and gas assets to Israel’s Delek group for $2 billion. Meanwhile, Canadian Natural Resources Limited announced that it has decided to buy Devon Energy’s assets in Canada for C$3.8 billion.
Overall, it was a dismal week for the sector. West Texas Intermediate (WTI) crude futures fell 8.8% to close at $53.50 per barrel, while natural gas prices moved down 6% for the week to finish at $2.454 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Shell's Appomattox Start-Up, Rattler Midstream's IPO & More)
The U.S. crude benchmark hit the lowest settlement level since Feb 12 following the U.S. Energy Department's latest inventory release. The report showed that crude stockpiles recorded a significantly lower-than-expected weekly draw, while domestic production climbed back to record 12.3 million barrels a day.
On a further bearish note, analysts and industry watchers are worried over the worsening U.S.-China and U.S.-Mexico trade spats that could lead to a major slowdown in global economy and translate into weak demand for the commodity.
Natural gas prices also suffered after a government report showed a larger-than-expected increase in supplies. The bearish injection, which was also higher than the five-year average, intensified a sell-off that left the U.S. benchmark with its lowest close in three years.
Recap of the Week’s Most Important Stories
1. In a bid to streamline portfolio, Chevron will divest bulk of North Sea assets in the United Kingdom to Israeli conglomerate Delek Group’s subsidiary, Ithaca Energy, for about $2 billion. The move, which is in sync with Delek Group’s and Chevron’s long-term objectives, is a win-win transaction for both. While Delek Group seeks to become a global offshore oil/gas powerhouse, Chevron is focused on revving up production and optimization of portfolio in high-return U.S. shale plays, especially the Permian Basin.
The deal brings Chevron much closer to its goal of withdrawing from the aging North Sea, in a bid to streamline portfolio. The move is part of Chevron’s strategic review of global portfolio to determine the competitiveness of all its projects. The decision seems to be a prudent one, as extracting oil from North Sea is not so economical since production costs are much higher than returns. With North Sea accounting for just around 3% of production, the company had put most of its assets in the region for sale last year.
As it is, the company plans to jettison $15-$20 billion worth of assets in the 2020-2022-time frame, in order to optimize portfolio and provide additional cash to investors. (Read more Chevron to Sell North Sea Assets to Delek Group for $2B)
2. In a bid to further solidify its position on its home turf, Canadian Natural Resources Limited recently inked a mega deal of C$3.8 billion to snap up Devon Energy’s Canadian business. The pact represents Canadian Natural’s biggest buyout since 2017, when it acquired Shell’s oilsands assets for C$8.16 billion.
Markedly, Canadian Natural — the largest energy producer in terms of volume in Canada and eighth largest explorer (excluding national oil companies) in the world — will boost output capacity to 1.2 million barrels of oil equivalent per day (Mboe/d) with this latest deal with Devon.
Per the deal, Canadian Natural will acquire Devon’s Jackfish oilsands project, heavy oil wells and undeveloped lands. Notably, the acquired assets netted 113,000 barrels of oil equivalent to Devon in the first quarter of 2019. The proved reserves associated with the holdings amounted to 409 million barrels of oil in 2018.(Read more Canadian Natural Ups Oilsands Game With C$3.8B Buyout)
3. In a bid to ramp up its core pipeline growth projects, TC Energy Corporation is set to jettison 85% stake in its Northern Courier Pipeline to Canadian Pension Fund, Alberta Investment Management Corporation for $860 million (or C$1.05 billion). Notably, the 90-kilometer conduit deals with the transportation of bitumen and diluent between the Fort Hills mine site and a terminal owned by Suncor Energy.
Subject to customary approvals, the deal is set for closure in the third quarter of 2019. Subsequent to the divestment, TC Energy will continue to be the operator of the pipeline with 15% stake.
The company recently offloaded its Coolidge Generating Station. In fact, so far this year, the firm has announced sale of $1.3 billion (or $1.75 billion) of its assets. TC Energy is currently focusing on divesting its assets to raise cash to repay a huge debt burden as well as to fund its growth projects. (Read more TC Energy to Vend Northern Courier Pipeline for $860M)
4. Plains All American Pipeline announced a joint venture with Delek Logistics Partners, LP for the Red River Pipeline system. Delek Logistics has purchased 33% ownership interest from Plains All American in a new Red River Pipeline Company LLC joint venture for $128 million. The partnership will continue to operate the system and retain 67% ownership of the pipeline.
In addition, Plains All American announced expansion of the current Red River Pipeline system capacity from nearly 150,000 barrels per day to around 235,000 barrels per day. The expansion will be achieved through the addition of pumping capacity, which is expected to be completed during the first half of 2020.
Plains All American might utilize the proceeds to lower existing debt levels or fund ongoing capital programs. After spending nearly $1.9 billion on capital expansion in 2018, the partnership anticipates 2019 expansion capital at $1.35 billion, up from previous expectation of $1.1 billion. (Read more Plains Sells Red River System's 33% Stake to Delek Logistics)
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.