Oil & Gas Stock Roundup: Callon Petroleum's Acquisition, McDermott's Contract Wins & More

It was a week where both oil and natural gas prices settled higher.

On the news front, shale producer Callon Petroleum Company (NYSE:CPE) agreed to buy Houston-based upstream player Carrizo Oil & Gas (NASDAQ:CRZO) in a $3.2 billion deal, while McDermott International (NYSE:MDR) clinched twin contracts from Saudi Aramco.

Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures rose 4.7% to close at $60.21 per barrel, while natural gas prices moved up 1.4% for the week to finish at $2.453 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: ExxonMobil (NYSE:XOM)'s Q2 Update, TC Energy's Asset Sale & More )

The U.S. crude benchmark hit the highest settlement level since May 22, buoyed by a significantly bigger-than-expected drop in U.S. crude supplies and worries about Tropical Storm Barry that sharply curtailed offshore oil production in the Gulf of Mexico (GoM).

Natural gas prices gained too as the market participants shrugged off another larger-than-expected climb in U.S. supplies and chose to focus on a bullish near-term weather forecast that could trigger strong power sector demand for the fuel, with an added push in the wake of the GoM storm.

Recap of the Week’s Most Important Stories

1. Callon Petroleum recently announced that the company has struck an all-stock deal to acquire Carrizo Oil & Gas.

The deal is valued at around $3.2 billion, which incorporates about $1.7 billion debt of Carrizo. The acquisition is expected to boost Callon’s footprint in the prolific Permian Basin. However, the company is set to lose its pure-play Permian status on acquiring Carrizo’s Eagle Ford shale play properties.

The combined company is expected to have around 200,000 net acres in the Permian Basin and Eagle Ford shale. Combined production in first-quarter 2019 was 102.3 thousand barrels of oil equivalent per day (Mboe/d), of which 71% was crude oil.

The deal is expected to generate more than $100 million of fee cash flow and annual cost-saving synergies in the range of $100-$125 million. (Read more Chevron's Venezuela Business at Risk: Will US Extend Waivers? )

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.

Company	Get The News You Want Read market moving news with a personalized feed of stocks you care about. Get The App Last Week	Last 6 Months
XOM	+2%	+7.6%
CVX	+2%	+12.9%
COP	+3.1%	-7.6%
OXY	+5%	-20.7%
SLB	+3.1%	-1.9%
RIG	+4.9%	-25.1%
VLO	+3.6%	+6.7%
MPC	+1.1%	-14.8%

Reflecting the positive market sentiment, the Energy Select Sector SPDR – a popular way to track energy companies – was up 2.1% last week. The best performer was Houston-based energy explorer Occidental Petroleum whose stock jumped 5%.

But longer-term, over six months, the sector tracker is up 3%. Integrated energy major Chevron was the major gainer during this period, experiencing a 12.9% price increase.

What’s Next in the Energy World?

As usual, 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. Meanwhile, the 2019 Q2 reporting season gets under way later this week

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Written By: Zacks Investment Research