Oil & Gas Stock Roundup: Deals From Shell, Halcon & Abraxas

It was a week where both oil and gas prices ended higher to tally a gain of more than 4%.

On the news front, supermajor Royal Dutch Shell (LON:RDSa) plc RDS.A as well as independent producers Halcón Resources Corp. (NYSE:HK) and Abraxas Petroleum Corp. (NASDAQ:AXAS) announced separate deals to offload major chunk of non-core holdings.

Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures jumped 4.7% to close at $46.54 per barrel, while natural gas prices gained 4.1% to $2.98 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Apache (NYSE:APA)'s Canadian Exit, Halliburton (NYSE:HAL)'s Acquisition & More .)

Oil prices scored just their second gain in eight weeks, bolstered by the U.S. Energy Department's inventory release that showed a sharp decline in crude stockpiles for the second week in a row. With its biggest fall in 10 months, domestic oil supplies have dropped below 500 million barrels for the first time since late January. Government figures also showed a surprise draw in gasoline inventories.

Investors were also encouraged by the energy watchdog IEA’s faster-than-expected oil demand growth forecast and growth in Chinese crude imports.

However, oil still remains in a bear market as the U.S. is awash with excess oil amid ever increasing output - the biggest headwind for the sector. As per the latest data, domestic crude production rose to 9.40 million barrels per day, the most since July 2015.

Meanwhile, natural gas also turned sharply higher following a smaller-than-expected increase in weekly supplies and optimism over the fuel’s strong demand on the back of bullish weather predictions.

Recap of the Week’s Most Important Stories

1. European oil giant Royal Dutch Shell plc recently inked a $1.23 billion deal to divest interests in the Corrib gas venture off the North Mayo Coast of Ireland. The move marks the exit of the upstream business of the company in Ireland.

Per the deal – scheduled to close in the second quarter of 2018 – Shell’s Irish subsidiary will offload its 45% stake in the Corrib natural gas field project to a unit of Toronto-based Canada Pension Plan Investment Board. Shell’s share of output from the Corrib gas field was 27,000 barrels of oil equivalent per day last year.

For Shell, the deal is part of its portfolio optimization strategy and the $30 billion global divestment program for 2016–2018. The company had sold assets worth $5 billion last year, while in 2017 Shell divested more than $15 billion of properties.

Further, the transaction also complements Shell’s strategy to mitigate climate risks and focus on renewable energy as Corrib gas field has been facing severe opposition by environmentalists and locals since 2005 for polluting the environment. (Read more: Petrobras Stock Rises on Revised Regulatory Verdict .)

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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 – a popular way to track energy companies – rose by +0.77%. The best performer was San Antonio-based energy explorer Tesoro Corp. (NYSE:TSO) whose stock price was up +3.26%.

Longer-term, over the last 6 months, the sector tracker is down -12.52%. The major laggard during this period was offshore drilling powerhouse Transocean Ltd. (NYSE:RIG) , experiencing a -45.36% price decline.

What’s Next in the Energy World?

Meanwhile, 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.

The 2017 Q2 earnings will also remain under scrutiny this week, with the oil services companies – providers of technical products and services to drillers of oil and gas wells – kicking off what is expected to be a good earnings season for U.S. energy firms.

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