Oil & Gas Stock Roundup: Anadarko Surges on Cleanup Settlement - Analyst Blog

Crude prices edged down for the first time in 3 weeks on the imminent resumption of Libyan exports, while natural gas also declined amid expectations of lower heating demand with the onset of warmer spring temperatures.

Among the newsmakers, The Woodlands, Texas-based oil and gas producer Anadarko Petroleum Corp.'s APC stock jumped 15% after it confirmed the settlement of an environmental dispute for $5.15 billion.

Crude Oil:

Crude prices got a boost from the latest jobs report that did not meet some of the more optimistic estimates, but it nevertheless provides further evidence that the U.S. economy is coming out of its winter freeze. This has fueled hopes for robust fuel and energy demand in the world's biggest oil consumer. The bullish momentum was further propelled by hopes of a stimulus package out of China to revive the slowing growth.

However, the bulls were more than offset by expectations of oil export resumption from the Libyan coast, which has witnessed an eight-month impasse between armed protestors and the government. Even an unexpected drop in crude stockpiles could not deter the negative sentiment, as the decline was termed as an aberration, attributed to the recent temporary suspension of marine traffic in a Gulf Coast waterway.

As a result of these factors, by close of trade on Friday, West Texas Intermediate WTI oil settled at around $101.14 per barrel, losing 0.6% for the week.  

Natural Gas:

Natural gas fell last week on forecasts of soft spring temperatures across the U.S., partially offset by an in-line supply data.

In particular, milder weather predictions – in bulk of the country over the next few days – are likely to limit natural gas' demand for heating. Also, the period of hot summer weather, which increases the fuel's usage for air conditioning, remain weeks away.

Some of this headwind was compensated by the EIA's weekly inventory release, showing that natural gas stockpiles held in underground storage in the lower 48 states fell by 74 billion cubic feet (Bcf) for the week ended Mar 28, within the guided range (of 73–77 Bcf drawdown).       

Influenced by these factors, natural gas prices ended Friday at $4.44 per million Btu (MMBtu), down 1.0% over the week.

Energy Week That Was:

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

Anadarko Settles Environmental Cleanup Lawsuit, Shares Soar

Good news flowed in at the exploration & production company Anadarko Petroleum Corp. after it settled a long, drawn-out pollution case. Anadarko agreed to pay $5.15 billion to the plaintiffs in environmental clean-up costs associated with its 2006 acquisition of Kerr-McGee Corp.

The arrangement – following a lengthy legal battle – was well received by the investors, with Anadarko's shares gaining 14.51% in intraday trade. The lawsuit has long been the albatross tied to Anadarko's neck and the settlement can only mean good for the company. Moreover, the value of the final settlement is much lower than what was expected.

BP Australia Refinery to Cease Operations

UK supermajor BP plc BP intends to terminate operations at its 102,000 barrels-per-day Bulwer Island refinery in Brisbane, Australia by mid 2015, blaming heightened competition from the cheap new mega-refineries in Asia. In particular, a higher local dollar, strict fuel quality standards, and the introduction of super-sized refineries in Asia, has rendered the facility uncompetitive and loss making. London-based BP is considering converting the refinery into a multi-product import terminal.

McDermott Tumbles 10% on Stock Offering, Operational Update

Offshore oil and gas-focused engineering and construction firm McDermott International Inc.'s MDR share price plummeted 10.1% after the company declared its intention to offer around 10,000,000 stocks at $25.00 per apiece. Separately, McDermott warned that its first quarter results might be worse-than-expected, with profit margin – from the operation of backlog projects – not able to cover its fixed expenses and restructuring costs.

Encana to Sell Wyoming Assets for $1.8B

Canadian energy explorer Encana Corp. ECA has reached an agreement to unload some of its Wyoming natural gas assets to an affiliate of U.S. private investment firm TPG Capital for about $1.8 billion. The to-be-sold properties are located in the Jonah field with approximately 24,000 acres of productive area and more than 1,500 active wells, holding proved reserves of about 1,493 billion cubic feet equivalent. Encana management stated that this divestment is in sync with its current strategy of shifting focus to the more lucrative oil-linked assets. 

Apache Getting Rid of Canadian Acreage

U.S. energy firm Apache Corp. APA announced the sale of its Western Canada oil and gas producing properties in the Deep Basin area of western Alberta and British Columbia for $374 million. These mainly dry gas producing assets – spread across 328,400 net acres – had per day production of 101 million cubic feet of natural gas and 1,500 barrels of liquid hydrocarbons last year. Apache is rebalancing its portfolio to facilitate greater focus on the liquids-linked assets in North America and the sale of the aforesaid natural gas properties are in tune with its strategy.

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:

Cheniere Signs LNG Export Deal

Houston, Texas-based Cheniere Energy Inc. LNG entered into a deal to sell about 1.5 million tons of liquefied natural gas LNG per annum from its planned Corpus Christi export operations to Spanish energy company Endesa Genercion S.A. As per the contract, Cheniere would provide LNG to Endesa for a period of 20 years, possibly starting in 2018.

Weatherford to Relocate to Ireland

Oilfield services giant Weatherford International Ltd. WFT announced that its board of directors has approved the relocation of its legal domicile to Ireland from Switzerland. The incorporation under the Irish law will strengthen Weatherford's activities and facilitate operations at the lowest possible cost. It will also boost the company's ability to rapidly and efficiently carry out and progress on its transformational path. The move will enable Weatherford to retain and further attract the finest personnel in the industry.

SeaDrill Ltd. Inks $319M Rig Deals

Offshore drilling firm SeaDrill Ltd. announced the receipt of new contracts for its four jack-up rigs. The units are West Tucana, West Telesto, West Ariel and West Prospero. The company also secured a four-month contract extension for its West Mischief jack-up unit. It is expected that the extension agreement along with the four new deals will generate roughly $319.0 million in revenues.

This Week's Outlook:

Apart from the usual releases – the U.S. government data on oil and natural gas – market participants will be tracking monthly supply/demand numbers from global energy bodies IEA and OPEC. Wednesday's minutes of Federal Reserve's policy meeting will also be closely watched.

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