Crude prices traded up near $100 during the past week on expectations of an improving demand outlook, while natural gas moved lower amid a bearish supply report and forecasts of a break in colder temperatures.
Among the newsmakers – again dominated by earnings announcements – BP plc (BP) and Tesoro Corp. (TSO) profits were hit by refining weakness, while Apache Corp. (APA) pumped up its dividend.
Crude Oil:
Crude prices increased last week on positive demand outlook for heating oil amid below-normal temperatures that have prevailed for most part of the winter. The commodity got some more support from Friday’s January jobs data, which revealed a tick-down in the unemployment rate. The drop in initial jobless claims validates an improving U.S. labor market. This has fuelled hopes for robust fuel and energy demand in the world's biggest oil consumer.
Sentiments were further brightened by the bullish Energy Information Administration (EIA) report that showed a lower-than-expected increase in oil and gasoline inventories, while distillate stockpiles declined more-than-anticipated.
As a result of these factors, by close of trade on Friday, West Texas Intermediate (WTI) oil was firmly in the black and settled at around $100.00 per barrel, gaining 2.4% for the week.
Natural Gas:
Natural gas fell last week, pulled down by a bearish supply data and forecasts of a break in cold weather conditions.
The EIA's weekly inventory release showed that natural gas stockpiles held in underground storage in the lower 48 states fell by 262 billion cubic feet (Bcf) for the week ended Jan 31, lower than the guided range (of 273–277 Bcf drawdown).
Moreover, milder weather forecasts – in bulk of the country over the next few days – are likely to limit natural gas’ demand for heating.
Influenced by these factors, natural gas spot prices ended Friday at around $4.80 per million Btu (MMBtu), down 5.2% over the week.
Energy Week That Was:
The week’s energy coverage was dominated by the following news:
BP Downstream Biz Mars Q4 Earnings
Europe’s second largest oil company and integrated supermajor BP posted weak fourth quarter results on falling production and refinery margins. What’s more, the London-based company expects full-year 2014 output level to be lower than 2013 due to the expiry of the Abu Dhabi onshore concession and the effect of divestments. Still battling to recover from the Gulf of Mexico oil spill, BP also raised its provision for the disaster-related cost by around $200 million to $42.7 billion.
Tesoro Shares Drubbed After Weak Q4
Independent refiner Tesoro reported weak fourth-quarter 2013 earnings due to significantly higher operating expenses and sharp drop in refining margins across all operating regions. In particular, the San Antonio-based company’s woes were compounded by a 37.5% year-over-year decline in gross refining margins. Following the disappointing numbers, Tesoro shares dipped nearly 5% on Thursday.
Apache Ups Dividend by 25%
U.S.energy firm Apache declared quarterly cash dividend of 25 cents per share ($1.00 per share annualized), reflecting a significant sequential hike of 25.0% from the previous payout of 20 cents. The new dividend is likely to be paid on May 22, 2014, to shareholders of record as of Apr 22, 2014. Apache had approved a quarterly dividend hike of 18.0% and 13.0% in 2013 and 2012, respectively.
Anadarko Misses Q4 Earnings & Revs
U.S.independent Anadarko Petroleum Corp. (APC) reported a steep drop in its fourth quarter earnings and also missed the Zacks Consensus Estimate by a wide margin, primarily due to a decrease in revenues, higher total costs and expenses and an increase in outstanding shares. However, the company’s mainstay – its oil and gas business – reported solid results, growing production 9% from the year-ago period.
FMC Tech Earnings Thrive on Improved Segments
Offshore oilfield equipment manufacturer FMC Technologies Inc. (FTI) reported stellar fourth quarter results. Improvement in all the segments contributed to the outperformance, with focus on the Subsea Technologies segment that reported record quarterly results. Management estimated its 2014 diluted earnings per share in the range of $2.55–$2.75, amid projections of rising revenues and margins improvement in Subsea Technologies and strong performance from Surface Technologies’ international markets.
Performance Chart of Some Major Companies:
The following table shows the price movement of the major oil and gas players over the past 5 days and during the last 6 months.
|
Ticker |
Last 5 Day’s Performance |
6 month performance |
|
XOM |
-1.53% |
-0.15% |
|
CVX |
+0.08% |
-8.53% |
|
COP |
-0.11% |
-2.78% |
|
OXY |
+2.92% |
+2.62% |
|
SLB |
+2.04% |
+11.19% |
|
RIG |
-1.47% |
-10.90% |
|
VLO |
-3.75% |
+31.48% |
|
TSO |
-6.61% |
-9.78% |
Other Headline News on Energy:
Exxon Beefs Up Permian Acreage
Exxon Mobil Corp. (XOM) – the largest U.S. oil company by market value – is augmenting its position in the Permian Basin with the acquisition of a large acreage from Endeavor Energy Resources. Per the deal, Exxon Mobil’s subsidiary XTO Energy Inc.’s holdings in the Permian Basin will increase to over 1.5 million net acres, thereby boosting the company’s presence in one of the major U.S. growth areas for onshore oil production. In a separate deal, the energy major sold around 30,000 net acres of its Utica shale leasehold in Ohio to American Energy – Utica, LLC.
Patterson-UTI Soars on Q4 Earnings Beat, Div Hike
Onshore contract driller Patterson-UTI Energy Inc. (PTEN) reported better-than-expected fourth-quarter 2013 results, driven by improved average rig revenue per operating day and increased gross margin in the Contract Drilling business unit. The company also approved 10 cents per share in quarterly cash dividends, representing a significant sequential hike of 100.0%. The twin news sent Patterson-UTI shares soaring 13.4% to $27.87 on Thursday.
Phillips 66 to Invest $3B in Midstream
U.S. refiner Phillips 66 has received the consent from its board of directors to proceed with its twin projects, namely, Sweeny Fractionator One and Freeport Liquefied Petroleum Gas (LPG) Export Terminal. Both the projects form part of the company’s Midstream growth program and are projected to warrant an investment of over $3 billion.
This Week’s Outlook:
Apart from the usual releases – the U.S. government data on oil and natural gas – market participants await monthly supply/demand numbers from global energy bodies IEA and OPEC. New Fed Chairman Janet Yellen’s semi-annual monetary policy report on Tuesday will also be closely watched.
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