Oil & Gas Stock Roundup: Exxon Bids For InterOil, BP's Oil Spill Cost Hits $62B

It was a week where oil prices settled higher, while natural gas futures lost ground.

On the news front, Exxon Mobil Corp. (NYSE:XOM) launched a bid for Papua New Guinea explorer InterOil Corp., while BP plc (LON:BP) (NYSE:BP) is set to incur nearly $62 billion in costs for the deadly 2010 Gulf of Mexico oil spill.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures edged up 1.2% to close at $45.95 per barrel, natural gas prices fell 1.6% to $2.756 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Chevron (NYSE:CVX) OKs $37B Tengiz Expansion, National Oilwell Teams Up with GE .)

Oil prices moved north on robust economic data from the U.S. and China – the world’s top two fuel consuming nations – that bolstered prospects for energy demand.

However, some of the gains were erased after the Baker Hughes report revealed a rise in the U.S. oil rig count – indicating resurgence in shale drilling activities. Oil traders were also disappointed by the U.S. Energy Department's weekly inventory release, which showed a smaller-than-anticipated drop in crude stockpiles and a climb in domestic output.

Natural gas booked another weekly loss following a higher-than-expected build. The downward movement could also be attributed to predictions of tepid cooling demand with forecasts of milder temperature across the country over the next few days.

Recap of the Week’s Most Important Stories

1. The world’s largest publicly traded oil company Exxon Mobil Corp. has placed a bid for Canada’s InterOil Corp. to enhance its liquefied natural gas position in Papua New Guinea (‘PNG’).

Per Oil Search Ltd. – Exxon’s local partner in PNG – the U.S. supermajor’s offer of about $2.2 billion for PNG-focused InterOil Corp. has outbid that of Oil Search, which is backed by French energy giant Total SA (PA:TOTF) with an agreement to buy part of InterOil's stake in the potentially lucrative Elk-Antelope gas field. According to reports, Exxon Mobil has found favor with InterOil.

Exxon Mobil has offered $45 worth of its own shares for each InterOil share along with a payment of $0.90 per million cubic feet equivalent (Mcfe) for resources of over 6.2 trillion cubic feet in the Elk-Antelope gas field.

Oil Search, on the other hand, has offered 8.05 of its own shares for every InterOil share, and has valued InterOil's shares at $42.66 at the end of the trading session as of July 15. Also, the company has offered $0.77 per Mcfe for resources of over 6.2 Tcfe at Elk-Antelope. (See More: ConocoPhillips to Divest Senegal Assets to Woodside .)

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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.

Over the course of last week, ‘The Energy Select Sector SPDR’ was up 2.49% on bullish economic data. Consequently, investors witnessed buying in most market heavyweights. The best performer was downstream operator Valero Energy Corp. (NYSE:VLO) that added 5.44% to its stock price.

Longer-term, over the last 6 months, the sector tracker has jumped 30.22%. Offshore drilling giant Transocean Ltd. (NYSE:RIG) was the main beneficiary during this period, experiencing a 31.97% price increase.

What’s Next in the Energy World?

As usual, market participants will be 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.

Zacks Investment Research

Written By: Zacks Investment Research