Oil & Gas Stock Roundup: SLB & HAL's Q3, RIG's New Contract & More
Zacks Investment Research | Oct 24, 2017 06:03AM ET
It was a week where both oil and gas prices logged gains.
On the news front, oilfield service majors Schlumberger Ltd. (NYSE:SLB) and Halliburton Co. (NYSE:HAL) kicked off the energy earnings season. Importantly, both companies indicated that activity in North America remain strong. Meanwhile, Swiss rig behemoth Transocean Ltd. (NYSE:RIG) received a new contract award for one of its ultra-deepwater drillships.
Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures edged up about 0.8% to close at $51.84 per barrel, while natural gas prices gained 1.5% to $2.915 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: RDS.A Buys EV Charging Network, CVX Cancels Australia Drilling Plan .)
The U.S. oil benchmark registered a modest climb after the U.S. Energy Department's inventory release showed that crude stockpiles fell for the fourth straight week.
The bullish impact from the crude inventory draw was supported by other developments including mounting tensions between Iraq and Kurdistan near the oil-rich city of Kirkuk, President Trump’s decision not to certify Iran’s compliance with the nuclear deal, and a falling U.S. rig count.
However, the gains were kept in check by concerns over a new wave of domestic shale oil production that continues to be the biggest headwind for the market.
Meanwhile, natural gas futures finished higher following an in-line increase in supplies. Current stocks – at 3.646 trillion cubic feet (Tcf) – are now 35 Bcf (1%) under the five-year average, while dropping 179 Bcf (4.7%) below the year-ago figure.
Recap of the Week’s Most Important Stories
1. The world’s largest oilfield services provider, Schlumberger Ltd., reported third-quarter 2017 earnings of 42 cents per share (excluding charges and credits), in line with the Zacks Consensus Estimate and higher than the year-ago figure of 25 cents.
The strong results were driven by solid demand for directional drilling in the North American land market. This was partially offset by major project completions in Mexico and Iraq, where the company wrapped up major service contracts.
The oilfield service player expects activity in North America – where Schlumberger has a significant client base – to continue growing but cautioned that the rate might slow down from previous quarters on account of flattening rig count.
As of Sep 30, 2017, the company had approximately $4,952 million in cash and short-term investments and $15,871 million in long-term debt. This represents a debt-to-capitalization ratio of 30%. In the July-to-September quarter, the company bought back 1.5 million shares. (Read more: TechnipFMC Inks Deal to Acquire Plexus' Wellhead Business )
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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 | +0.8% | +3.2% |
CVX | -0.4% | +13.4% |
COP | +0.9% | +5.3% |
OXY | +2% | +5.2% |
SLB | -6.2% | -17.3% |
RIG | -5.3% | -12.1% |
VLO | -0.5% | +18.7% |
ANDV | +0.8% | +35.9% |
Notwithstanding the modestly bullish oil market sentiment, the Energy Select Sector SPDR – a popular way to track energy companies – failed to keep up and generated a -0.6% return last week. The worst performer was oilfield services behemoth Schlumberger whose stock fell by 6.2%.
Longer-term, over the last 6 months, the sector tracker is down 0.6%. It was again Schlumberger that was the major laggard during this period, experiencing a 17.3% 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.
However, the 2017 Q3 earnings remain the primary focus this week, with a number of S&P 500 members coming out with quarterly results.
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