Oil & Gas Stock Roundup: EQT-Rice Energy Tie-Up, Chevron's $9.5B Legal Reprieve & More

It was a week where oil prices dropped to the lowest close since Nov 14 amid a bearish inventory data, while a production boom prevented natural gas futures from breaking out despite a smaller-than-expected increase in supplies.

On the news front, shale driller EQT Corp. (NYSE:EQT) said it would acquire smaller producer Rice Energy Inc. (NYSE:RICE) in a $6.7 billion deal to become the largest producer of natural gas in the U.S., while supermajor Chevron Corp. (NYSE:CVX) scored a big legal victory over pollution claims in Ecuador that protects the company from having to pay $9.5 billion fine.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures fell 2.4% to close at $44.74 per barrel, natural gas prices remained essentially unchanged at $3.037 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: SemGroup Buys Terminal Co., Encana & Centrica (LON:CNA) Sell Gas Assets .)

Oil prices sank to their lowest settlement of 2017, spooked by the U.S. Energy Department's inventory release. The report revealed that crude stockpiles recorded a lower-than-expected weekly draw. On a further bearish note, the report revealed that refined product inventories – gasoline and distillate – both rose from their week earlier levels. Investors also fretted over the burgeoning rig count – pointing to the ever-increasing shale drilling activities.

Meanwhile, natural gas futures stayed flat despite a smaller-than-expected increase in supplies. In particular, worries over the fuel’s steady production growth kept prices in check.

Recap of the Week’s Most Important Stories

1. In a landmark deal, oil and gas company EQT Corp. has decided to acquire smaller rival Rice Energy Inc. for a total consideration of $6.7 billion. This is the largest accord signed in the upstream industry of U.S in around three years.

Per the agreement, for every share, stockholders of Rice Energy will get 0.37 EQT shares and $5.30 in cash. On top of that, EQT Corp. will refinance Rice Energy’s $1.5 billion in long-term debt. It is to be noted that the transaction will likely close by fourth-quarter 2017. In the combined entity, the shareholders of EQT Corp. will hold around 65%.

EQT Corp. and Rice Energy are among the leading producers of natural gas in the Marcellus and Utica shale plays. Hence, with the deal completion, both the upstream companies will create the largest natural gas producer in the country. In particular, the acquisition will significantly raise EQT Corp.’s core acreage positions in the Marcellus and Utica shale plays.

Post-acquisition, EQT’s average daily natural gas sales volumes will surge to 3.6 billion cubic feet equivalent (Bcfe) from 1.3 Bcfe. Moreover, EQT Corp. and Rice Energy are among the low-cost producers of natural gas in the U.S shale resources. The acquisition will probably help the combined entity further lower operating cost and might also realize cost synergy of $2.5 billion. (Read more: Baker Hughes & GE Electric Merger Gets ACCC Clearance .)

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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 1.72%. The best performer was multinational oil company ConocoPhillips (NYSE:COP) whose stock price jumped 7.05%.

But longer-term, over the last 6 months, the sector tracker is down 13.44%. Offshore drilling powerhouse Transocean Ltd (NYSE:RIG). was the major laggard during this period, experiencing a 44.74% price decline.

What’s Next in the Energy World?

Market participants will be closely tracking the regular releases i.e. the U.S. government statistics on oil and natural gas. Energy traders will also be focusing on the Baker Hughes data on rig count.

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