Oil & Gas Stock Roundup: TOT's Acquisition, ANDV & ECA's Q3 Numbers, & More

It was a week where the price of oil spiked to its highest settlement since June 2015, while natural gas futures rose to a five-month peak.

On the news front, France-based integrated major TOTAL S.A. (NYSE:TOT) agreed to buy liquefied natural gas assets from utility company Engie for around $1.5 billion. Meanwhile, downstream operator Andeavor (NYSE:ANDV) and Canadian natural gas firm Encana Corp. (NYSE:ECA) came up with weaker-than-expected earnings reports.

Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures gained about 2.3% to close at $56.74 per barrel, while natural gas prices jumped 7.7% to $3.213 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Shell (LON:RDSa), EOG, Concho Report Strong Q3 )

The U.S. oil benchmark rallied on expectations that OPEC and other major producers will agree to expand their output-cut deal beyond March when they meet at the end of the month. The agreement, already renewed once, keeps 1.8 million barrels a day off the market in an attempt to clear a supply glut.

Further support came from the U.S. Energy Department's inventory release, which showed steep declines in domestic gasoline and distillate inventories.

Political turmoil in Saudi Arabia, where the kingdom’s 32-year old crown price – Mohammed bin Salman – ordered the arrest of much of the country’s top leadership, was also bullish for oil prices.

Meanwhile, natural gas futures logged a big gain following strong power burn consumption from residential/commercial customers. Despite the commodity’s Lower 48 production being at its highest level on record, colder-than-normal weather forecasts over the next two weeks are expected to drive natural gas demand.

Recap of the Week’s Most Important Stories

1. French energy giant TOTAL S.A. announced that it has entered into a definite agreement to acquire the upstream liquefied natural gas (LNG) assets of compatriot gas utility Engie for $1.49 billion. The decision to buy the assets and expand footprint in the LNG business is expected to benefit the company significantly.

Per the agreement, TOTAL will have control over Engie’s interest in the Cameron LNG project in the United States, long-term LNG sales and purchase agreements, and an LNG tanker fleet. It will also have access to regasification capacities in Europe. TOTAL might pay another $550 million to Engie, subject to improvement in oil markets in the coming year. This transaction is expected to close by mid-2018.

This deal, scheduled to be closed in 2018, will expand TOTAL’s total volume of LNG sales to 40 million tons per year in 2020. So, the decision to acquire Engie’s assets will expand TOTAL’s operation in LNG and increase revenue contribution from this space. (Read more: Noble Energy Sells Non-Core DJ Basin Portion For $680M )

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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 +1.7% return last week. The best performer was offshore drilling rig operator Transocean Ltd. (NYSE:RIG) whose stock rose by 9%.

Longer-term, over 6 months, the sector tracker is up 2.2%. Downstream operator Andeavor was the major gainer during this period, experiencing a 31.3% 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.

The 2017 Q3 earnings will again garner some attention this week, with the final few energy companies coming out with quarterly results.

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