Oil & Gas Stock Roundup: Crude Reclaims $100, Chevron to Explore Waters Off Myanmar - Analyst Blog

Crude prices reclaimed the $100-a-barrel level past week on positive U.S. economic data, while natural gas was propelled by a strong inventory report.

Among the newsmakers, U.S. supermajor Chevron Corp. CVX was awarded oil exploration rights offshore Myanmar, while oilfield services behemoth Schlumberger Ltd. SLB provided upbeat first quarter earnings guidance.   

Crude Oil:

Crude prices got a boost from upbeat U.S. jobless claims and consumer confidence data. The commodity got some more support from a positive revision to fourth quarter GDP numbers. This has fueled hopes for robust fuel and energy demand in the world's biggest oil consumer. The bullish momentum was further propelled by the Energy Information Administration EIA report that showed a significantly higher-than-expected decrease in gasoline inventories, and oil production disruptions in Libya and Nigeria.

However, to some extent, the bulls were offset by fears of an economic slowdown in China – the second largest oil consumer in the world – where an initial gauge of the country's factory activity fell to an eight-month low.

As a result of these factors, by close of trade on Friday, West Texas Intermediate WTI oil settled at around $101.70 per barrel, gaining 1.7% for the week. 

Natural Gas:

Natural gas rallied to their highest level in more than two weeks on the back of a bullish supply data and predictions of below-normal temperatures in some northeastern U.S. pockets.

The EIA's weekly inventory release showed that natural gas stockpiles held in underground storage in the lower 48 states fell by 57 billion cubic feet (Bcf) for the week ended Mar 21, above the guided range (of 50–54 Bcf drawdown).

To make things better, despite milder spring weather forecasts in bulk of the country over the next few days, certain regions in the northeast are expected to witness a cold snap. This is likely to spur natural gas' demand for heating.

Influenced by these factors, natural gas prices ended Friday at $4.49 per million Btu (MMBtu), up 4.4% over the week.

Energy Week That Was:

The week's energy coverage was dominated by the following news:

Chevron Wins Exploration Rights Off Myanmar

U.S. energy giant Chevron Corp. gained around 2% for the week after announcing that it has won rights to look for oil and gas off the coast of Myanmar. The company was awarded exploration rights in Rakhine Offshore Basin's Block A5 that covers 2.6 million acres in relatively shallow water. Chevron's local unit has a 99% operated interest in the plot. With the established oil producing regions of Europe and North America well beyond their prime, Asia is one of the few growth markets, and consequently a contract win in the region is seen as a positive to Chevron's production drive.

Schlumberger Foresees Strong 1Q14 Earnings

The world's largest oilfield services provider Schlumberger Ltd. expects its first-quarter 2014 EPS to be higher year over year. The bullishness of the company stems from higher market share and an improving cost structure. As per Schlumberger, the company's decision to target state-owned and independent energy companies will be the major growth factor. These entities have been spending significantly to develop shale and other resources around the world, as against multinational energy companies, most of which are cutting spending.

Weatherford to Sell Pipeline & Specialty Services Biz

Oilfield service provider Weatherford International Ltd. WFT has agreed to sell its pipeline and specialty services business to a unit of larger rival Baker Hughes Inc. for $250 million. Of this, $241 million would be in cash, while the remaining $9 million will be as retained working capital. The transaction is part Weatherford's plans to divest assets that do not fit into the company's long-term growth plan.

Nabors Foresees 1Q14 Earnings Miss

Land drilling contractor Nabors Industries Ltd. NBR shares dropped 2.3% following disappointing first quarter guidance. A severe winter hampered the company's Completion Services business operations and is expected to pull down its March quarter EPS below the consensus estimates. In particular, inclement weather has affected Nabors' pressure pumping activities (a constituent of the Completion Services unit) in Rocky Mountains and Appalachia basins. However, the Barbados-based company expects its other operations to generate earnings at par with expectation.

Cameron Gets Blowout Preventer Contract

Oil drilling equipment maker Cameron International Corp. CAM received an award from Freeport-McMoRan Oil & Gas to deliver a 25,000 psi blowout preventer stack and a 25,000 psi manifold. This order follows a similar blowout preventer that was delivered by Cameron to Freeport-McMoRan in 2011. The 13-5/8" 25,000 psi blowout preventer was the first in the industry and its success in the Gulf of Mexico led to this second contract. Freeport-McMoRan intends to use this new blowout preventer for some high pressure activity expected to commence in 2015.

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.

Other Headline News on Energy:

CNOOC Earnings Fall

China's number one offshore oil producer CNOOC Ltd. CEO reported a slide in its 2013 net profits, as it struggled to increase output amid spiraling costs and lower crude prices. The state-owned firm, which acquired Canadian energy explorer Nexen last year, saw its production (excluding contributions from Nexen) miss the CAGR target of 6-10% for the 2011-2015 period, the third successive yearly miss. 

Brazil Clears Statoil's Stake Buy from Vale

Norwegian energy provider Statoil ASA's STO offshore oil concession stake purchase from mining giant Vale was approved by the Brazilian government. This authorizes Statoil to acquire 25% of the BM-ES-22A concession, which consists of two blocks – ES-M-468 and ES-M-527 – in the Espírito Santo basin offshore Brazil, near several other blocks where Statoil is either operator or partner.

Sanchez Energy Reduces '14 Capital Plan

Eagle Ford shale-focused oil and gas explorer Sanchez Energy Corp. announced a reduction in its 2014 capital expenditure plan, which now stands at 600-$650 million, down from the previous projection of $650-$700 million. The Houston-based company attributed the expenditure cut to lower drilling and completion costs, together with more efficient operations. However, Sanchez vowed to maintain its full-year production guidance.

This Week's Outlook:

Apart from the usual releases – the U.S. government data on oil and natural gas – market participants will be closely tracking Tuesday's manufacturing ISM survey and Friday's non-farm payroll reports.

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