Oil & Gas Stock Roundup: Energy Transfer's Acquisition, ExxonMobil's Guyana Oil Find & More
Zacks Investment Research | Sep 17, 2019 03:01AM ET
It was a week where oil prices logged a loss but natural gas futures ended higher.
On the news front, Energy Transfer LP (NYSE:ET) , one of the largest midstream operators in the country, said on Monday it would buy SemGroup Corporation (NYSE:SEMG) for roughly $5.1 billion. Meanwhile, supermajor ExxonMobil (NYSE:XOM) confirmed its 14th oil discovery off the coast of Guyana.
Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures fell 3% to close at $54.85 per barrel, natural gas prices moved up 4.7% for the week to finish at 2.614 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: BP (LON:BP) Out of Alaska, Equinor Speeds Up Oil Field Start Up )
The U.S. crude benchmark notched finished lower even as a government report revealed a weekly decrease in domestic crude supplies that was much larger than anticipated. While EIA reported a fourth straight weekly inventory decline, crude prices fell after OPEC cut its forecast for oil demand growth this year and next.
Spooking markets further, the cartel decided to stick to its supply curb agreement till December as against expectations of deeper cuts from certain quarters. Reports that President Donald Trump may soften his stance against Iran resulted in further downside.
However, investors should note that this was before the weekend attacks on Saudi Arabia’s energy installations shook up the world of oil. On Saturday, unmanned aerial vehicles struck the state-run Saudi Arabian Oil Company’s (Aramco) Abqaiq plant – a key crude processing facility – and the Khurais complex, which houses the kingdom’s second-largest oilfield.
Such is the extent of damage that it is touted as the ‘single worst sudden disruption ever’ for the oil markets, surpassing the impact of the 1991 Persian Gulf War. WTI crude, the U.S. benchmark, soared nearly 15% on Monday, to $62.90 a barrel. This marked the sharpest daily price rise for the domestic benchmark grade since September 2008, putting the ‘black gold’ at a four-month high.
Meanwhile, natural gas prices notched another gain after the weekly inventory release showed a smaller-than-expected increase in supplies. The commodity also got a lift from expectations of above-average temperatures in many regions of the country over the next few days that could trigger strong power sector demand for the fuel.
Recap of the Week’s Most Important Stories
1. SemGroup recently announced that it has entered into a $5.1-billion contract to be acquired by pipeline giant Energy Transfer. The stock soared 61% in yesterday’s trade while units of Zacks Rank #3 (Hold) Energy Transfer fell more than 4%.
You can see Tullow Finds Oil for the 2nd Time in Orinduik Block, Guyana )
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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.
Company | Last Week | Last 6 Months |
XOM | +2.4% | -9.1% |
CVX | +2.7% | -1.4% |
COP | +6.9% | -7.5% |
OXY | +0.9% | -28.7% |
SLB | +9.2% | -9.3% |
RIG | +13.7% | -31.4% |
VLO | +9.5% | -5% |
MPC | +1.6% | -15.6% |
Notwithstanding the decline in U.S. oil prices, the Energy Select Sector SPDR – a popular way to track energy companies – was up 4.2% last week. The best performer was offshore driller Transocean Ltd. (NYSE:RIG) whose stock surged 13.7%.
Longer-term, over six months, the sector tracker is down 5%. On the other end of the spectrum this time, Transocean was the major loser during this period, experiencing a 31.4% price plunge.
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.
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