Oil & Gas Stock Roundup: Schlumberger, Baker Hughes Hit 52-Week Highs on Q1 Beat - Analyst Blog

Crude prices edged up on positive economic data and geopolitical fears, while natural gas' continued uptrend was propelled by worries about an imminent supply shortfall.

Among the newsmakers, top oilfield service firms Schlumberger Ltd. SLB and Baker Hughes Inc. BHI posted better-than-expected first quarter earnings following which their stocks hit new 52-week highs.  

Crude Oil:

Crude prices got a boost from the latest employment and manufacturing reports, providing 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 the continued standoff in Ukraine and better-than-expected Chinese economic data.

However, to a large extent, the bulls were offset by a massive rise in crude stockpiles. The imminent resumption of oil exports from the Libyan coast added to the negative sentiment.

As a result of these factors, by close of trade on Friday, West Texas Intermediate WTI oil settled at around $104.30 per barrel, gaining a mere 0.6% for the week.   

Natural Gas:

Natural gas rallied last week to its highest level in 7 weeks, as another less-than-expected supply increase raised concerns about the country's ability to refill reserves before the next winter.

The EIA's weekly inventory release showed that natural gas stockpiles held in underground storage in the lower 48 states rose by 24 billion cubic feet (Bcf) for the week ended Apr 11, well below the guided range (of 34–38 Bcf build).

As it is, natural gas supplies are coming off their 11-year-lows following a frigid winter, prompting fears about the timely replenishment of the inventories ahead of the next heating season, starting from November.

Influenced by these factors, natural gas prices ended Thursday at $4.74 per million Btu (MMBtu), up 2.1% over the week.

Energy Week That Was:

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

Oilfield Service Behemoths Beat Earnings Estimates  

Thursday saw a kickoff in quarterly reporting from the oilfield services segment, with biggies Schlumberger Ltd. and Baker Hughes Inc. beating Zacks Consensus Estimates, in the process chalking up relatively solid numbers. Apart from pointing towards an improving North American market, coupled with strength in the Middle East and Asia, the companies remain positive about stepped-up activity in the U.S. Gulf of Mexico. However, project awards in Brazil, Canada, Russia and some other regions remain sluggish even as multiple firms run after a shrinking pool of contracts in North American shale fields.

Shell Finds Gas Column Offshore Malaysia

Integrated energy behemoth Royal Dutch Shell plc (RDS.A) announced a deep-water gas discovery off the coast of Malaysia. The well Rosmari-1 is located in Block SK318, 135 kilometers off the shore. Drilled to a depth of 2,123 meters, the well has revealed over 450 meters of gas column. Shell is the operator of the block with an 85% interest, whereas PETRONAS Carigali Sdn Bhd holds the remaining 15%. The find, in a strategic area of interest for Shell, adds to the company's recent exploration accomplishments in Malaysia.

Encana Initiates Alberta Properties Spinoff

Canadian energy outfit Encana Corp. ECA has announced the filing of initial prospectus related to the spinoff of its gas and oil resources in Western Canada. The plan reflects Encana's intent to vend non-core properties and to primarily focus on five liquid-rich assets. The company that will be formed through the offering – PrairieSky Royalty Ltd. – is expected to own roughly 5.2 million acres of land in Alberta, Western Canada, where production will be free from government royalties.

PrairieSky Royalty will not be executing upstream operations on the assets but will instead collect fees from the companies exploring the resources. Encana added that the divesture of PrairieSky Royalty is expected to be closed by the first half of June this year.

Noble Earnings & Revs Get the Better of Estimates

Offshore driller Noble Corp. NE reported strong first quarter results, with earnings and revenues both exceeding expectations on the back of contribution from new rigs. A combination of higher average dayrates, decrease in operating downtime and rise in bonus revenues aided the company's outperformance even as the sector looks set to enter a cyclical downturn.   

Canadian Natural Discovers Oil Off Cote d'Ivoire

Independent energy explorer Canadian Natural Resources Ltd. CNQ announced the discovery of light oil off the coast of Cote d'Ivoire. The discovery was made through well Saphir-1XB in Block CI-514 of the deepwater frontier exploration play. Canadian Natural stated that the well, at water depth of 2,300 meters, was drilled by a semi-submersible rig to reach 4,655 meters. The company announced that post discovery, the collected data would be evaluated to determine the potential of the find and to proceed to the appraisal phase.

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:

Western Refining Mulls Delaware Basin Pipeline

Energy downstream operator Western Refining Inc. WNR is mulling to lay a 40-mile, 12-inch crude oil pipeline in Texas' Delaware Basin. The project, subject to requisite approvals, will link sister concern Western Refining Logistics L.P.'s existing Mason Station crude oil gathering facility in Reeves County, Texas, with a new terminal at Wink Station in Winkler County, Texas. The pipeline – scheduled to come online by mid-2015 – will be capable of carrying 125,000 barrels of liquids daily to common carrier conduits at Wink.

FMC Technologies, BP in $322M Deal

Oil drilling equipment maker FMC Technologies Inc. has entered into a contract with BP plc to supply subsea systems for development of the latter's Shah Deniz Stage 2 project. The deal would fetch about $322 million in revenues for FMC Technologies. The order involves delivery of subsea manifolds, related controls and connection equipment, in addition to key controls and connection mechanism for subsea production trees. Before moving on to the manufacturing phase, FMC Technologies and BP will undergo three years of pre-engineering work to accelerate delivery.

Ensco Orders 2 Advanced Jackups

Oil and natural gas driller Ensco plc announced the placement of orders for ENSCO 140 and ENSCO 141, two high-specification jackup rigs. The jackups – that are expected to be delivered by the middle of 2016 − will have differentiated technology and specific designs, for complying with most of the regulatory standards in the Middle East.

This Week's Outlook:

Apart from the usual releases – the U.S. government data on oil and natural gas – market participants will be tracking the durable orders data, apart from a host of S&P 500 earnings reports.

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