Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

Oil & Gas Stock Roundup: Chevron Sells Wheatstone Gas, Carlyle Eyes Halliburton-Baker Hughes Assets

It was a week where oil futures notched their highest rates of 2016, though natural gas experienced sharp losses.

On the news front, Chevron Corp. CVX signed an agreement to sell gas from its Wheatstone facility in Australia, while Carlyle Group L.P. is looking to buy a package of assets from Halliburton Co. HAL and Baker Hughes Inc. to facilitate their merger.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures gained 1.6% to close at $40.36 per barrel, natural gas prices dived 4.4% to $1.902 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: DOJ Plans to Block Halliburton Deal, NOV Slashes Dividend.)

Oil prices moved north on speculation that Russia and Saudi Arabia have reached a consensus on the terms of freezing output and bullish talks surrounding the Doha producers’ meeting. Things were further helped by the Baker Hughes report that showed another drop in oil-directed rigs – indicating a break in shale drilling activities.

But natural gas fared badly despite a modest decrease in supplies. The fuel was further dragged down by tepid temperatures across the country that has restricted the commodity’s requirement for power burn.

Recap of the Week’s Most Important Stories

1.    Integrated energy major Chevron Corp. has entered into a deal with Sydney, New South Wales-based Alinta Energy to supply natural gas from its Wheatstone project in Western Australia. The agreement will see Chevron will sell 20 petajoules of natural gas every year from 2020 onward to Alinta Energy for a period of seven years.

The under-construction Wheatstone project is anticipated to commence supplying natural gas in Western Australia from 2018 onward, providing 200 terajoules of the fuel every day at its full capacity to the domestic market.

Chevron holds a 64.14% interest in the $29 billion Wheatstone venture.

2.    Reports have surfaced that oilfield services providers Halliburton Co. and Baker Hughes Inc. are in serious discussion with private equity firm The Carlyle Group L.P. to divest properties worth as high as $7 billion in an attempt to get their troubled $35 billion merger on track.

Importantly, talks with Carlyle Group eased the worries of Halliburton and Baker Hughes as both firms have been struggling to reach an accord with General Electric Company for divesting assets.

The need to sell assets has been of utmost importance for Halliburton and Baker Hughes as the Department of Justice (DOJ) filed a civil antitrust lawsuit in an attempt to block the proposed union on apprehensions of elimination of competition and increasing prices. The merger might also impede the innovations in the industry. (See More: Halliburton, BHI Assets Find Carlyle as New Potential Buyer.)

3.    Schlumberger Ltd. SLB – the world’s biggest oilfield services firm – announced that it would trim its Venezuelan exposure to align operations with cash collections. The move followed inadequate payments received in recent times from the Venezuelan state-run oil holding Petróleos de Venezuela SA (“PDVSA”). The difficulties have been prevailing for quite some time now as the cash-strapped PDVSA delayed payments to oil-service providers operating in the country.

The company will reduce its exposure in Venezuela in April itself. Schlumberger will continue to provide services to those with stable books while trim the others. (See More: Schlumberger to Trim Venezuela Presence as per Payments.)

4.    U.S. energy behemoth Exxon Mobil Corp. XOM has announced that R.W. Tillerson, its Chairman and CEO, has received total compensation worth $27.30 million for 2015. This reflects a year-over-year decline of nearly 18%.

The total compensation of the CEO includes a base salary of $3.05 million, stock grants worth $18.29 million as well as a bonus of $2.39 million. Notably, the bonus and stock grants declined significantly from $3.67 million and $21.42 million in 2014, respectively. However, Tillerson’s base salary increased in comparison to $2.87 million received in 2014.

For 2015, earnings plunged 50.2% year over year to $16.2 billion amid weak oil prices. Also, earnings for the fourth quarter declined 57.6% to 2.8 billion from $6.6 billion reported the year-ago quarter. Hence, the company took to reducing its CEO’s compensation to lower operating costs and improve financials in this unfavorable business scenario. (See More: Exxon Mobil Slashes CEO Compensation by 18% to Cut Costs.)

5.    Energy producer Hess Corp. HES announced that it has sold Bakken crude for export out of the U.S. Gulf Coast to Europe. It is reportedly the first shipment of North Dakota oil since the Congress lifted the ban on crude export in Dec 2015.

Per reports, Hess sold 175,000 barrels of Bakken crude. The consignment was loaded in early April at St. James, LA and is currently being shipped to a European refinery. No other detail with respect to the buyer or the name of the cargo ship was disclosed.

The declaration comes close on the heels of Exxon Mobil’s announcement that it is transporting about 18,000 barrels of oil from its deepwater Julia field in the Gulf of Mexico to its refinery in Rotterdam, the Netherlands. (See More: Hess Corp's Bakken Crude Sold for Export from U.S. Gulf Coast.)

Price Performance

The following table shows the price movement of the major oil and gas players over the past week and during the last 6 months.

Company

Last Week

Last 6 Months

XOM

+2.74%

+5.91%

CVX

+3.31%

+9.63%

COP

+9.37%

-16.19%

OXY

+3.81%

+0.81%

SLB

+4.63%

+4.46%

RIG

+8.21%

-35.69%

VLO

-0.05%

-1.17%

TSO

-0.08%

-19.24%

Over the course of last week, ‘The Energy Select Sector SPDR’ was up 3.99% on Doha freeze hopes. Consequently, investors witnessed a buying spree in most large companies. The best performer was Houston-based energy major ConocoPhillips COP that added 9.37% to its stock price.

But longer-term, over the last 6 months, the sector tracker is down 6.70%. Offshore drilling giant Transocean Ltd. RIG was the main casualty during this period, experiencing a 35.69% price decrease.

What’s Next in the Energy World?

Apart from the usual releases in this week – the U.S. government data on oil and natural gas – market participants will be closely tracking a series of top-tier economic readings, including those on industrial production, housing and leading indicators. And with the Doha meeting now a closed chapter, the 2016 Q1 earnings remain the primary focus this week, with some S&P 500 members coming out with quarterly results.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. http://www.zacks.com/registration/pfp/?ALERT=RPT_7BST_LP194&...">Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
SCHLUMBERGER LT (SLB): Free Stock Analysis Report
 
HALLIBURTON CO (HAL): Free Stock Analysis Report
 
CHEVRON CORP (CVX): Free Stock Analysis Report
 
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
 
TRANSOCEAN LTD (RIG): Free Stock Analysis Report
 
HESS CORP (HES): Free Stock Analysis Report
 
CONOCOPHILLIPS (COP): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research