Oil & Gas Stock Roundup: Comstock's Acquisition, Shell's Strategy Update & More

It was a week where oil prices rebounded following its collapse into a bear market. Meanwhile, natural gas futures dropped to fresh three-year lows.

On the news front, Comstock Resources (NYSE:CRK) agreed to acquire privately-held Cover Park Energy in a $2.2 billion deal. Meanwhile, Royal Dutch Shell (LON:RDSa) RDS.A pledged to return at least $125 billion to its shareholders via dividends and share repurchase between 2021 and 2025.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures edged up 0.9% to close at $53.99 per barrel, natural gas prices moved down 4.8% for the week to finish at $2.337 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Deals From Chevron, Canadian Natural & TC Energy )

The U.S. crude benchmark came out of a bear market following settlement of the trade dispute between the U.S. and Mexico. Indications that the output caps by major oil producing countries will continue beyond June, also boosted the commodity. Data showing drillers in the United States cutting oil rigs the most in six weeks brought further upside.

However, natural gas prices suffered after a government report showed another larger-than-expected increase in natural gas supplies. The bearish injection, which was also higher than the five-year average, intensified a sell-off that left the U.S. benchmark with its lowest close in three years.

Recap of the Week’s Most Important Stories

1. In a bid to bolster Haynesville acreage, Comstock Resourcesis set to acquire Dallas-based Cover Park Energy LLC, a privately-held company, for $2.2 billion. The combined entity will have substantial scale advantage with attractive organic growth opportunities, going forward.

The cash and stock transaction, which is valued at $2.2 billion, includes the assumption of Covey Park’s outstanding debt and retirement of the existing preferred units, aggregating $1.1 billion. Per the deal, equity owners of Covey Park will receive $700 million in cash, 28.8 million shares of newly issued shares of Comstock stock at $6 apiece and $210 million of newly issued perpetual convertible preferred stock.

Comstock’s major position in the prolific Haynesville/Bossier shale play complements Cover Park’s properties, strengthening the former’s foothold in the region. (Read more Eni Hits Oil for the 5th Time in Block 15/06 Offshore Angola )

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.

Get The News You Want Read market moving news with a personalized feed of stocks you care about. Get The App Company	Last Week	Last 6 Months
XOM	+5.4%	-2.3%
CVX	+6.7%	+5.9%
COP	0%	-9.4%
OXY	-2.3%	-26%
SLB	+4.1%	-14%
RIG	-1.8%	-26.2%
VLO	+6.2%	+3.5%
MPC	+2.2%	-22.3%

The Energy Select Sector SPDR – a popular way to track energy companies – rose 4.3% last week. The best performer was integrated major Chevron (NYSE:CVX) whose stock jumped 5.4%.

But longer-term, over six months, the sector tracker is down 2.6%. Offshore driller Transocean Ltd. (NYSE:RIG) was the major loser during this period, experiencing a 26.2% price decline.

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. Finally, the closely watched monthly reports from three key agencies (EIA, OPEC and the IEA) are due for release this week.

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Zacks Investment Research

Written By: Zacks Investment Research