Oil & Gas Stock Roundup: Schlumberger & Halliburton's Q1, TOTAL's Acquisition & More

It was a week where oil prices marked its highest finish in three-and-a-half years.

On the news front, oilfield service majors Schlumberger Ltd. (NYSE:SLB) and Halliburton Company (NYSE:HAL) kicked off the first-quarter energy earnings season. Both companies, apart from coming out with estimate-meeting numbers, indicated that the North American drilling market remains robust, driven by increased activity. Meanwhile, French oil giant TOTAL S.A. (NYSE:TOT) agreed to acquire French utility Direct Energie for $1.73 billion.

Overall, it was another good week for the sector. West Texas Intermediate crude futures gained around 1.5% to close at $68.38 per barrel, while natural gas prices edged up a marginal 0.2% to $2.739 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: CVX's Gorgon Expansion, MDR & NOV's Operational Updates & More )

The U.S. oil benchmark recovered from President Trump’s tweet, posting a second straight weekly gain following bullish EIA crude inventory numbers and expectations that the OPEC-led group of exporters will continue with their supply cuts.

The federal government’s EIA report revealed that crude inventories were down by 1.1 million barrels for the week ended Apr 13. The analysts surveyed by S&P Global Platts – the leading independent commodities and energy data provider – had expected crude stocks to go up some 625,000 barrels. Oil stockpiles have actually shrunk in 38 of the last 54 weeks and are down more than 105 million barrels in the past year – a pointer to a tightening oil market.

The commodity was also supported by reports that the OPEC-Russian alliance would like production withholding pact to run beyond the scheduled closure at the end of 2018.

Natural gas prices also inched up northward last week following a larger-than-expected decrease in supplies. Investors were encouraged by another unseasonal inventory drawdown that further pushed back the commencement of the injection season.

Recap of the Week’s Most Important Stories

1. The world’s largest oilfield services provider, Schlumberger, reported first-quarter 2018 earnings of 38 cents per share (eliminating charges and credits) - in line with the Zacks Consensus Estimate. The bottom line rose from the year-earlier figure of 25 cents.

Surge in North American directional land drilling operations and awards for Integrated Production Services (IPS) contracts supported the first-quarter results. This was offset partially by operations related to Testing Services in Qatar, Egypt and Brazil.

As of Mar 31, 2018, Schlumberger had approximately $4,165 million in cash and short-term investments and $13,526 million in long-term debt. This represents a debt-to-capitalization ratio of 32.7%. In the January-to-March quarter, the company bought back 1.4 million shares.

For 2018, the company projects investments of $2 billion, almost in line with the 2017 and 2016 figures. (Read more: McDermott Sticks to CBI Brushing Aside Subsea 7, Stock Jumps )

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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 bullish oil market sentiment, the Energy Select Sector SPDR – a popular way to track energy companies – generated a +2.6% return last week. Downstream operator downstream operator Andeavor (NYSE:ANDV) whose stock jumped 6.6%,

Longer-term, over six months, the sector tracker is up 9.2%. Another independent refiner Valero Energy Corporation (NYSE:VLO) , is far and away the major gainer during this period, experiencing a 40.6% price apreciation.

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 2018 Q1 earnings will remain under scrutiny this week, with some of the integrated energy majors coming out with quarterly results.

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