Oil & Gas Stock Roundup: Chevron's Capex Boost, Schlumberger's Revenue Warning & More
Zacks Investment Research | Dec 11, 2018 06:09AM ET
It was a week where oil prices climbed but natural gas futures dropped.
On the news front, U.S. energy major Chevron (NYSE:CVX) set its investment budget for 2019 at $20 billion, up 9.3% from its projected spending this year. Meanwhile, Schlumberger (NYSE:SLB) warned of weakness in the North American hydraulic fracturing market.
Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures gained 3.3% to close at $52.61 per barrel, natural gas prices fell some 2.7% to $4.488 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Shell (LON:RDSa)'s Green Initiative, Par Pacific's Acquisition & More )
The U.S. crude benchmark rose last week after OPEC members and some non-OPEC producers, led by Russia, committed to withhold production by 1.2 million barrels per day from January in an effort to tighten the market and boost prices. Data showing drillers in the United States cutting oil rigs the most in more than two years also contributed to the gains.
Meanwhile, natural gas prices dropped as predictions of milder weather (translating into weak heating gas demand) over the next few days more than offset the larger-than-expected decrease in supplies.
Recap of the Week’s Most Important Stories
1. Chevron recently announced its capital and exploratory spending program for 2019. The budget for capital projects is reserved at $20 billion, higher than 2018’s projected investment of $18.3 billion. Notably, this marks the first budget increase in four years and reflects a 9.3% annual increase.
Chevron’s upstream spending in 2019 is expected to increase 9.5% from 2018, which can enable the company to deliver steady growth in production. Downstream expenditure of the company will likely increase 13.6% in 2019. Moreover, the company expects 66.7% of its 2019 capital spending to realize cash flow by two years.
Chevron allocated 86.5% of its total budget toward upstream operations. The company has plans to spend $7.6 billion in the upstream projects located in the United States and $9.7 billion in the international upstream projects. The company will use around $10.4 billion to develop and grow its present producing assets, of which $3.6 billion will allocated to the Permian Basin and $1.6 billion for other shale related developments. (Read more Petrobras Ups Investment, Divestment Goals in New 5-Year Plan )
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 | 
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Last Week | Last 6 Months |
XOM | -2.3% | -7.9% |
CVX | -2.9% | -9.9% |
COP | -0.4% | -6.1% |
OXY | -4.2% | -23.6% |
SLB | -3.5% | -38.8% |
RIG | -10.6% | -37.2% |
VLO | -4.9% | -37.8% |
MPC | -5.5% | -21.6% |
The Energy Select Sector SPDR – a popular way to track energy companies – generated a -3.1% return last week. The worst performer was Transocean Ltd. (NYSE:RIG) whose stock slumped 10.6%.
Longer-term, over six months, the sector tracker is down 18.4%. Oilfield service major Schlumberger was the major loser during this period, experiencing a 38.8% price decline.
What’s Next in the Energy World?
In this week, 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.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
Zacks Investment Research
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