Oil & Gas Stock Roundup: Keystone XL's Approval, BP's Buyback & More

It was a week where both oil and gas prices lost ground.

On the news front, sponsor TransCanada (TO:TRP) won approval to build its controversial Keystone XL Pipeline through the state of Nebraska, while BP (LON:BP) Plc (NYSE:BP) became the first European oil major to resume share repurchase since the 2014 oil slump.

Overall, it was a dismal week for the sector. West Texas Intermediate (WTI) crude futures edged down 0.3% to close at $56.55 per barrel, while natural gas prices slumped 3.6% to $3.097 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: TOT's Acquisition, ANDV & ECA's Q3 Numbers, & More )

The U.S. oil benchmark fell after the U.S. Energy Department's inventory release showed that crude stockpiles recorded an unexpected weekly build. The report further revealed that gasoline inventories increased slightly from previous week.

However, the talking point from the data sets was the steady trend of rising domestic oil production that continues to be the biggest headwind for the market. Specifically, U.S. output rose by 25,000 barrels per day last reported week to more than 9.6 million barrels per day – the most since the EIA started maintaining weekly data in 1983.

Meanwhile, natural gas futures logged a big decline despite a larger-than-expected decrease in supplies – the season’s first withdrawal. Unfavorable weather forecasts and strength in the commodity’s production fueled the downside.

Recap of the Week’s Most Important Stories

1. TransCanada Corporation’s Keystone XL Pipeline has finally received a regulatory approval from Nebraska commissioners after a prolonged period of delay. The decision marks a partial victory for TransCanada since the regulators have approved the project on an alternative route rather than the company’s proposed route.

The $8-billion Keystone XL pipeline with 830,000 barrels' capacity was designed to improve oil extraction from Alberta’s oil sands and the Bakken region in the U.S. refineries. The initial phase of the pipeline project was finished in 2011. A proposal was made to add another 1179 miles to the 2100-mile-long pipeline. The project, already approved by Canada, Montana and South Dakota, had been eagerly awaiting a federal ruling from the Nebraska state.

Nebraska commissioners’ recent verdict, granting approval to the project on an alternate route, created new problems. Per the company, the originally proposed route was most efficient. The alternate route will likely balloon costs and delay the disputed pipeline project further.

TransCanada announced that it is set to begin the review of Nebraska’s decision to examine the economics of the project. The company will thereby take an official call regarding construction and completion of the pipeline after carefully reevaluating the project’s viability and schedule. (Read more: Cheniere Energy Q3 Earnings Lag, Sales Top Estimates )

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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.

Reflecting the week’s bearish oil market sentiment, the Energy Select Sector SPDR – a popular way to track energy companies – generated a -3.7% return last week. The worst performer was offshore drilling rig operator Transocean Ltd (NYSE:RIG). whose stock slumped 10.2%.

Longer-term, over 6 months, the sector tracker is down 1.2%. Oilfield services behemoth Schlumberger Ltd. was the major loser during this period, experiencing a 14% price depreciation.

What’s Next in the Energy World?

With the 2017 Q3 earnings season essentially over, market participants will get back to 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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