Canadian natural gas producer Encana Corp.’s (ECA) $7.1 billion acquisition of Athlon Energy Inc. (ATHL) was the top story.
Overall, it was a bullish week for the sector. West Texas Intermediate (WTI) crude futures edged up 2% to close at around $93 per barrel. Natural gas prices also moved up to nudge $4 per million Btu (MMBtu). (See last ‘Oil & Gas Stock Roundup’ here: Exxon Mobil Swaps Assets, Patterson-UTI Buys.)
Oil prices gained after the U.S. Energy Department's weekly inventory release showed a surprise decline in stockpiles and scaled up refinery demand. The commodity was also helped by an improving U.S. economic outlook. But crude’s additional production from Libya continues to keep a lid on prices.
Natural gas fared even better, shrugging off another above-average supply increase. The commodity was buoyed by expectations of strong electric power demand with forecasts of cold weather across parts of the Midwest.
Recap of the Week’s Most Important Stories
1. Encana Corp. announced that it has entered into an agreement to acquire the TX-based oil producer, Athlon Energy Inc. The Canadian energy explorer will pay $7.1 billion for the deal, which includes assumption of $1.15 billion of Athlon’s debt. The remaining cash consideration of $5.93 billion would be spent in acquiring Athlon’s stock at $58.50 per share. The transaction – expected to close by the end of 2014 – would add about 140,000 net acres in the Midland Basin, the seventh addition in Encana’s oil-rich asset portfolio after Montney, Duvernay, Eagle Ford, DJ basin, San Juan basin and Tuscaloosa marine shale. Management at Encana stated that the assets hold over 10 years of drilling inventory in one of the most lucrative oil plays in North America.
2. French energy giant TOTAL S.A. (TOT) announced that it has entered into an agreement to sell its interest in Utica Midstream assets to a group of Korean companies. Per the deal, TOTAL will sell its 25% stake in Cardinal Gas Services LLC in Ohio’s Utica shale play to E1 Corp. and a consortium led by Samchully – both from Korea – for $400 million plus an estimated price adjustment of $50 million. The sale of these non-core assets will help TOTAL to unlock funds for other profitable initiatives. Presently, TOTAL has shifted its focus on upstream ventures and is planning to bring 15 projects online by 2017, which will push up its total production to 2.8 million barrels per day, up nearly 0.6 million barrels from the current level. (Read More: TOTAL to Sell Utica Midstream Assets In-Line with E&P Plans.)
3. Oil and gas producer Hess Corp. (HES) announced the filing of a registration statement by its subsidiary, Hess Midstream Partners LP. The company said that Hess Midstream Partners has filed the statement with the U.S. Securities and Exchange Commission for a proposed initial public offering (“IPO”) of common units representing limited partner interests. The offering is expected in the first quarter of 2015. Hess Midstream Partners intends to list its common units on the stock exchange under the symbol "HESM". The number of common units to be offered and the price range for the offering have not yet been determined. (Read More: Hess Files for IPO of Subsidiary Hess Midstream Partners.)
4. Independent oil and gas company Magnum Hunter Resources Corp. (MHR) announced that its Eureka Hunter Pipeline has reached record throughput levels. The natural gas gathering pipeline system, located in West Virginia and Ohio, has reached throughput levels of about 316,500 million British thermal unit per day. The announcement was well received by investors. Shares of the company have gained over 10% since. (Read More: Magnum Hunter's Eureka Hunter Attains Record Throughput.)
5. Oil refiner and marketer Western Refining Inc. (WNR) announced that it has entered into an agreement to drop down the southwest wholesale business to its master limited partnership (MLP) unit, Western Refining Logistics L.P. The transaction will fetch about $360 million for the oil refiner and marketer and will comprise cash and Western Refining Logistics units. The deal is anticipated to close around Oct 15. (Read More: Western Refining to Sell Southwest Wholesale Business.)
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 |
-2.09% |
-3.33% |
|
CVX |
-2.43% |
+1.38% |
|
COP |
-1.99% |
+10.65% |
|
OXY |
+0.65% |
+2.04% |
|
SLB |
+0.99% |
+5.93% |
|
RIG |
-3.25% |
-21.17% |
|
VLO |
-1.02% |
-11.92% |
|
TSO |
+1.36% |
+20.68% |
Over the course of last week, most of the market heavyweights suffered losses. The biggest casualty was offshore driller Transocean Ltd. (RIG), which fell 3.3% 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. was the leader of the pack with its shares advancing 20.7%. Investors have rewarded the company for its continued focus on shareholder returns. Transocean was again the laggard, as it witnessed a 21.2% 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 consumer confidence, jobless claims and nonfarm payrolls.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment