Oil & Gas Stock Roundup: Shell's Appomattox Start-Up, Rattler Midstream's IPO & More
Zacks Investment Research | May 29, 2019 06:40AM ET
It was a week where oil prices hit their lowest in more than two months and natural gas futures tallied a small loss.
On the news front, Royal Dutch Shell (LON:RDSa) plc RDS.A started production at its Appomattox offshore platform in Gulf of Mexico. Meanwhile, Rattler Midstream Partners LP – the midstream subsidiary of Permian Basin operator Diamondback Energy (NASDAQ:FANG) – raised around $665 million in an IPO.
Overall, it was a dismal week for the sector. West Texas Intermediate (WTI) crude futures fell 6.8% to close at $58.63 per barrel, while natural gas prices moved down 1.3% for the week to finish at $2.598 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Equinor's GoM Boost, Schlumberger (NYSE:SLB)'s Asset Sale & More )
The U.S. crude benchmark hit the lowest settlement level since May 13 following the U.S. Energy Department's latest inventory release. The report showed that crude stockpiles recorded another unexpected weekly build, ballooning to their highest since July 2017. In particular, analysts and industry watchers are worried over the tepid refinery runs at a time of year that typically see heightened demand for gasoline as the U.S. summer driving season takes off. On a further bearish note, the report revealed that refined product inventories – gasoline and distillate – both increased from their previous week levels.
There are also concerns that the worsening U.S.-China trade spat could lead to a major slowdown in global economy and translate into weak demand for the commodity.
Natural gas prices also suffered as mild weather continues to limit heating and air conditioning demand in the face of strong production.
Recap of the Week’s Most Important Stories
1. Royal Dutch Shell recently commenced production at its Appomattox offshore platform in Gulf of Mexico (GoM) months ahead of the scheduled date. While Shell owns 79% of the project, CNOOC Limited (NYSE:CEO) owns the remaining 21%.
Appomattox is Shell’s biggest and most significant deepwater development projects, offering attractive long-term opportunities in the Gulf of Mexico. The company announced its final decision to invest in the project in July 2015. While many of the energy companies scrapped their offshore projects amid the crude downturn, Shell decided to go ahead with the Appomattox deepwater project in GoM Norphlet formation amid the challenging business scenario.
The average peak production from the multi-billion deepwater project is estimated to be 175,000 barrels of oil equivalent per day. The Appomattox development is also expected to act as a core long-term hub for Shell in deepwater Norphlet reservoir that can be tied back to numerous discovered fields as well as future discoveries. (Read more WPX Energy Sells Midstream Assets, to Lower Debts )
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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% | -8.6% |
CVX | -1.5% | -1.5% |
COP | -3.6% | -11.4% |
OXY | +1.3% | -26.8% |
SLB | -5.2% | -22.1% |
RIG | -9% | -34.3% |
VLO | -8.9% | -6% |
MPC | -3.2% | -25% |
Reflecting the weak market sentiment, the Energy Select Sector SPDR – a popular way to track energy companies – fell 3.3% last week. The worst performer was offshore driller Transocean Ltd. (NYSE:RIG) whose stock slumped 9%.
Longer-term, over six months, the sector tracker is down 9.1%. Transocean was again the major loser during this period, experiencing a 34.3% 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.
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