Oil & Gas Stock Roundup: EOG, Apache Wrap Up Q3 Energy Earnings Season

It was a week where both oil and gas prices finished sharply lower.

On the news front, with earnings taking center stage yet again, the major headlines came from EOG Resources Inc. (NYSE:EOG) and Apache Corp.’s (NYSE:APA) third-quarter results, wherein they battled plunging commodity prices to report contrasting numbers.

Overall, it was a dismal week for the sector. West Texas Intermediate (WTI) crude futures dived 9.5% to close at $44.07 per barrel, while natural gas prices ended down 10.9% to $2.767 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: XOM & CVX Beat Q3 Earnings, BHI to Merge with GE Unit .)

Oil prices sank to their lowest in more than six weeks as investors remained anxious about the OPEC and non-OPEC players’ commitments to slash production targets. With divisions in the cartel becoming apparent, the future of the ambitious OPEC announcement looks more and more uncertain. In particular, regional heavyweights and sworn enemies – Saudi Arabia and Iran – continue to be at loggerheads with threats that neither would yield an inch to the other.

Adding to the pessimism was the U.S. Energy Department's weekly inventory release, which showed a record build in domestic crude stockpiles.

Meanwhile, natural gas also turned sharply lower despite a lower-than-anticipated inventory build. The commodity was hampered by a warmer-than-normal autumn weather that translates into weak demand.

Recap of the Week’s Most Important Stories

1. Independent energy explorer EOG Resources Inc. reported wider-than-expected third-quarter 2016 loss. The underperformance could be attributed to attributed to lower production as well as weaker oil and gas prices.

In the quarter, EOG Resources’ total volume dipped almost 3% from the year-earlier level to 51.1 million barrels of oil equivalent. Average price realization for crude oil and condensates was down almost 5% year over year to $43.63 per barrel. Natural gas was sold at $1.95 per thousand cubic feet (Mcf), down 19% year over year.

In some positive news, EOG’s per-unit lease and well expenses fell 18%, while transportation costs also decreased from the prior-year period.

EOG Resources’ fourth-quarter daily production is expected between 562.7 thousand barrels of oil equivalent (MBoe) and 591.8 MBoe. For the full year, EOG Resources projected daily output in the range of 554.9–562.2 MBoe as against the prior projection of 533.5–551.5 MBoe. The company increased its capital expenditure budget to $2.6–$2.8 billion from the prior estimation of $2.4–$2.6 billion. (Read more: Chevron Corp. Produces First Gas from Alder .)

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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’ was down by 3.01% on doubts over the OPEC output deal. Consequently, investors witnessed heavy selling in most market heavyweights. The worst performer was domestic oil and gas explorer Occidental Petroleum Corp. (NYSE:OXY) whose stock price fell 10.86%.

But longer-term, over the last 6 months, the sector tracker has gained 7.63%. Oilfield services behemoth Schlumberger Ltd. (NYSE:SLB) was one of the major beneficiaries during this period, experiencing a 9.59% price increase.

What’s Next in the Energy World?

With bulk of the Q3 earnings season now behind us, market participants will be again closely tracking the regular weekly releases i.e. the U.S. government data on oil and natural gas. Energy traders will also be focusing on the Baker Hughes data on rig count and the upcoming Presidential election.

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