It was a week where Exxon Mobil Corp. (XOM) struck a land swap deal with LINN Energy LLC (LINE), while a unit of Patterson-UTI Energy Inc. (PTEN) agreed to buy pressure pumping assets in Texas.
Overall, it was a mixed week for the sector. West Texas Intermediate (WTI) crude futures arrested the two-week losing streak, edging up 0.2% to close at $92.41 per barrel. However, natural gas prices slumped 0.5% over the period and ended the week at around $3.84 per million Btu (MMBtu).
Oil prices recovered somewhat on concerns about Libyan production and reports that OPEC might cut production next year. But the commodity’s plentiful inventory and weak demand continues to keep a lid on prices. Moreover, a stronger dollar made the greenback-priced crude dearer for investors holding foreign currency.
Meanwhile, natural gas retreated, as it had to deal with another above-average supply increase. The commodity was also pulled down by expectations of tepid electric power demand with forecasts of mild weather across most parts of the U.S.
Recap of the Week’s Most Important Stories
1. U.S. energy behemoth Exxon Mobil Corp. has entered into a non-monetary exchange agreement with oil and gas finder LINN Energy LLC to add 17,800 net acres in the Permian Basin to its U.S. oil and natural gas portfolio. Per the agreement, LINN Energy will receive interest in about 500 net acres from Exxon Mobil's South Belridge Field, near Bakersfield, CA. In exchange, Exxon Mobil will receive 17,000 net acres in the Midland Basin core area in west Texas and 800 net acres in the New Mexico Delaware Basin. Both acreage positions will be operated and developed by its wholly owned subsidiary XTO Energy. (Read More: Exxon Mobil in Non-Monetary Exchange Agreement with LINN.)
2. A subsidiary of the onshore contract driller, Patterson-UTI Energy Inc. has signed a deal with a private firm to acquire the latter’s pressure pumping assets located in Texas. The name of the firm and the financial details of the transaction have not been disclosed. Patterson-UTI added that the transaction adds to its portfolio 143,250 horsepower of hydraulic fracturing equipment. Moreover, it will create two additional operational bases for the company to support Eagle Ford and Haynesville’s activities. The agreement is anticipated to be complete within 90 days, subject to third-party approval and other customary closing conditions. (Read More: Patterson-UTI Subsidiary to Buy Pressure Pumping Assets.)
3. Oil refiner and marketer Western Refining Inc. (WNR) announced that it has signed a deal with the energy major ConocoPhillips (COP), to acquire the latter’s Wingate Fractionation Plant in Gallup, New Mexico. The transaction is anticipated to close in early next month. However, financial details of the agreement were not disclosed. The 25,000 barrel per day facility, which is currently idle, includes rail loading and offloading and storage facilities. The facility also has natural gas liquids (NGL) fractionation capability. (Read More: Western Refining to Buy Wingate Plant from ConocoPhillips.)
4. Suncor Energy Inc. (SU), Canada’s leading energy firm and the largest oil sands outfit, announced that it has entered into an agreement with Parkland Fuel Corp., the largest fuel distributor and retailer in the nation, to sell the assets of jointly owned Pioneer Energy. The transaction is valued at C$378 million and includes 393 Pioneer-branded retail gas stations located throughout Ontario and Manitoba. The sale is anticipated to close in the final quarter of the year, subject to regulatory approvals. (Read More: Suncor Energy (SU) to Sell its Pioneer Energy Assets.)
5. Independent oil and gas company Range Resources Corp. (RRC) was fined $4.15 million by The Department of Environmental Protection or DEP in Pennsylvania for violations at six of its Washington County impoundments. The order entails a payment of the fine, closure of five impoundments and upgrade at two more to meet the DEP standards currently under development. Violations at the impoundments include various releases of contaminants, such as leaking flowback that affected soil and groundwater. To date, there has been no impact on drinking water from any of these impoundments. (Read More: Range Resources Fined $4.15 Million by Pennsylvania DEP.)
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 |
0.00% |
+2.01% |
|
CVX |
-0.70% |
+6.59% |
|
COP |
+0.01% |
+17.94% |
|
OXY |
-0.89% |
+3.24% |
|
SLB |
-1.72% |
+9.11% |
|
RIG |
-5.32% |
-15.67% |
|
VLO |
-3.73% |
-12.69% |
|
TSO |
-3.79% |
+21.28% |
Over the course of last week, most of the market heavyweights suffered losses. The biggest casualty was offshore driller Transocean Ltd. (RIG), which fell 5.3% 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. (TSO) was the leader of the pack with its shares advancing 21.3%. Investors have rewarded the company for its continued focus on shareholder returns. Transocean was again the laggard, as it witnessed a 15.7% 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 data on home sales, consumer confidence, durable orders and initial claims. Friday will witness the release of the crucial final GDP numbers for the second quarter.
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