It was a week where BP plc (BP) named David Lawler as CEO for its planned U.S. onshore unit and reports surfaced about Exxon Mobil Corp.’s (XOM) possible $10 billion deal with PetroVietnam.
Overall, it was a mixed week for the sector. West Texas Intermediate (WTI) crude futures declined yet again – this time by 3.8% – to close at $93.65 per barrel. Meanwhile, natural gas prices rallied 1.7% over the period and ended the week at around $3.84 per million Btu (MMBtu). (See last ‘Oil & Gas Stock Roundup’ here: Shell Shakes Up Portfolio, Apache Strikes Big Down Under.)
Oil prices slumped below $95 a barrel to their lowest level since mid-January on easing geopolitical tensions, a strong dollar, soft manufacturing numbers from China and reopening of Libyan export facilities. The negative sentiment was partially offset by a spate of positive economic reports on the domestic front and bullish inventory data.
On the other hand, natural gas fared much better, as it shrugged off another above-average supply increase. The commodity was buoyed by expectations of strong electric power demand with forecasts of hotter weather across most parts of the U.S.
Recap of the Week’s Most Important Stories
1. British energy major BP plc announced the appointment of David Lawler as the chief executive officer (CEO) of its U.S. business, effective Sep 15. The move is in sync with the proposed spinoff of BP’s onshore oil and gas assets in the U.S. into a new company. The unit has the equivalent of 7.6 billion barrels of oil across 5.5 million acres and a stake in more than 21,000 wells. The spinoff is expected to be completed early 2015. The new company will still be owned by BP, but will run independently and disclose separate financial results for its business. (Read More: BP Appoints New CEO-for US Business Post Spinoff Proposal.)
2. Energy behemoth Exxon Mobil Corp. is likely to sign an agreement with state-run PetroVietnam on a $10 billion natural gas and power project – the country’s biggest of its kind, by 2015. The proposed natural gas fields – to be developed by PetroVietnam – are projected to be the fourth largest in East Asia. The development plans have got momentum from Exxon Mobil’s huge gas discovery off the coast in 2012. (Read More: Exxon, PetroVietnam Likely to Enter $10B Gas & Power Project.)
3. Energy company Kinder Morgan Inc. (KMI) has received an early clearance under the Hart-Scott-Rodino Antitrust Improvements Act from the Federal Trade Commission for its planned purchase of its affiliate Kinder Morgan Energy Partners L.P. The deal also entails the acquisition of all the outstanding equity securities of two other subsidiaries – Kinder Morgan Management LLC and El Paso Pipeline Partners L.P. The $70 billion restructuring is expected to close by end of 2014. With an enterprise value of about $140 billion, the combined entity will represent the largest energy infrastructure company in North America and the third-largest energy company overall.
4. Weatherford International plc (WFT), the provider of equipment for the oil and gas industry, has received an unwanted “mini-tender” offer notification by privately held TRC Capital to acquire up to 5,000,000 shares (or about 0.65% of the outstanding ordinary shares of Weatherford) at $21.25 per share. TRC Capital's offer is about 4.3% below Weatherford's closing price of $22.10 on August 18, 2014, the day before the offer. This unsolicited mini-tender offer has not been approved by Weatherford and the company has urged shareholders to reject it. (Read More: Weatherford Urges Shareholders to Reject TRC Capital's Offer.)
5. North Atlantic Drilling Ltd. (NADL), a unit of the Norwegian offshore drilling contractor SeaDrill Ltd. (SDRL), entered into an exchange deal with the Russian state oil company OAO Rosneft. Per the agreement, North Atlantic Drilling will receive a significant part of Roseneft’s Russian land drilling fleet in exchange of cash and a 30% stake in the company. The deal is expected to close in the final quarter of the year. (Read More: North Atlantic Drilling & Rosneft Ink Equity-Asset Swap Deal.)
Price Performance
The following table shows the price movement of the major oil and gas players over the past week and during the last 6 months.
|
Company |
Last Week |
Last 6 Months |
|
XOM |
-0.97% |
+3.09% |
|
CVX |
+0.66% |
+10.67% |
|
COP |
+1.37% |
+22.18% |
|
OXY |
+2.39% |
+8.49% |
|
SLB |
+1.47% |
+19.35% |
|
RIG |
-4.85% |
-12.86% |
|
VLO |
+0.78% |
+6.82% |
|
TSO |
+1.11% |
+26.11% |
Over the course of last week, Occidental Petroleum Corp. (OXY) was the best performer among the market heavyweights, adding 2.4% to its stock price. The oil and gas producer seems to be progressing well on its strategic asset-divestment program. At the other end of the spectrum, the biggest loser was offshore driller Transocean Ltd. (RIG), which fell 4.9% during the period after its latest fleet report showed a rise in the expected out-of-service time for 2014.
Over the last 6 months, refiner Tesoro Corp. was the leader of the pack with its shares advancing 26.1%. Investors have rewarded the company for its continued focus on shareholder returns. Transocean was again the laggard, as it witnessed a 12.9% price decline over the same time frame on the back of rig oversupply that has led the industry into a cyclical downturn.
What’s Next in the Energy World?
Apart from the usual releases in this week – the U.S. government data on oil and natural gas – market participants will be closely tracking the all-important GDP report.
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