Oil & Gas Stock Roundup: Exxon & Chevron's Strategy Updates, Hess' Buyback Plan & More
Zacks Investment Research | Mar 13, 2018 05:40AM ET
It was a week where both oil and gas prices logged gains.
On the news front, integrated majors ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) earmarked their growth actions in respective annual analyst meetings. Meanwhile, energy explorer Hess Corporation (NYSE:HES) (NYSE:E) announced a new $1 billion share repurchase program.
Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures gained about 1.3% to close at $62.04 per barrel, while natural gas prices increased 1.4% to $2.732 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Marathon's Libya Sale, SeaDrill's Restructuring, Canadian Natural's Q4 & More )
Oil rebounded from its mid-week slump, with the U.S. benchmark rising more than 1%. The commodity declined in earlier sessions after the Energy Department's inventory release revealed that crude stockpiles recorded another weekly build. Crude was further pressured by soaring U.S. production, wherein output rose to 10.4 million barrels per day -- the most since the EIA started maintaining weekly data in 1983.
However, a strong jobs report, falling U.S. oil rig count and news of more countries likely to be excluded from Trump administration’s planned tariffs on imported steel and aluminum, helped turn things around. Oil’s recovery was further facilitated by weakness in the U.S. dollar and reduced geopolitical fears on the back of reports that President Trump has agreed to meet North Korean leader Kim Jong Un.
Meanwhile, natural gas prices moved higher last week on strong demand and a supportive weather outlook.
Recap of the Week’s Most Important Stories
1. ExxonMobil has outlined its growth strategy, which intends to more than double earnings and cash flow from operations by 2025 based on current oil prices. Per the growth plans, the company expects earnings of $31 billion by 2025, up more than 100% from last year’s adjusted profit of $15 billion. The figure does not include the impact of U.S. tax reform and impairments.
ExxonMobil has set capital spending at $24 billion for 2018, $28 billion for 2019 and $30 billion from 2023 to 2025, to meet its target to achieve high growth. However, its peers including Chevron are cutting down on spending and keeping budgets unchanged.
Darren W. Woods, chairman and chief executive officer of ExxonMobil, also emphasized that the plan estimates double-digit rates of return in all three segments of ExxonMobil’s business — upstream, downstream and chemical.
Overall, ExxonMobil’s growth strategy aims to fully leverage competitive advantages to boost shareholder value in three of its world-class businesses. The increased investments are expected to enhance and boost returns on capital employed to about 15% by 2025.(Read more Eni to Divest 10% in the Shorouk Concession for $934M )
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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 | -0.9% | -5.4% |
CVX | +4.6% | +3.8% |
COP | +2.2% | +21.9% |
OXY | -3% | +5.1% |
SLB | +5.5% | +2.5% |
RIG | +2.2% | +12.6% |
VLO | +3.9% | +32% |
ANDV | +12.2% | -3.3% |
In line with the week’s positive oil market sentiment, the Energy Select Sector SPDR – a popular way to track energy companies – generated a +2.7% return last week. The best performer was San Antonio, TX-based downstream operator Andeavor (NYSE:ANDV) whose stock jumped 12.2%.
Longer-term, over six months, the sector tracker is up 4.6%. Another independent refinerValero Energy Corp. (NYSE:VLO) was the major gainer during this period, experiencing a 32% price appreciation.
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.
Additionally, investors will keep an eye on International Energy Agency’s (IEA) February Oil Market Report to get insights on the industry.
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