Oil & Gas Stock Roundup: CVX on Track to Grow Output, XOM's $19B Project Ships First Gas - Analyst Blog

Crude prices registered a big weekly loss on weaker-than-expected U.S. economic data, while natural gas was propelled by the forecasts of warmer temperatures.

Among the newsmakers, U.S. supermajor Chevron Corp. CVX said that it is on track to grow production by 20% to 3.1 million barrels of oil-equivalent per day by 2017, while larger rival Exxon Mobil Corp. XOM shipped first cargo from its $19 billion Papua New Guinea plant.        

Crude Oil:

Crude prices edged down last week, as the dismal GDP data renewed concerns about the U.S. economy's growth outlook. Sentiments were further dampened by a fall in the country's April consumer spending – the first drop this year. Geopolitical forces also played their part in bringing down crude prices, with Ukraine's presidential election results being viewed as a step towards easing confrontation in the region. 

However, to some extent the bears were offset by strong fuel demand – particularly motor gasoline – and continued decline in storage at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange. 

As a result of these factors, by close of trade on Friday, West Texas Intermediate WTI oil settled at around $102.71 per barrel, shedding 2.2% for the week.      

Natural Gas:

Natural gas rallied last week on expectations of an uptick in electric power demand with the imminent arrival of summer months. This was partially offset by a bearish supply data.

The commodity found support from the impending onset of warmer-than-normal summertime mercury readings that is likely to boost gas-fired electricity demand for air conditioning.

However, some of the gain was lost by the EIA's weekly inventory release, which showed natural gas stockpiles held in underground storage in the lower 48 states rose by 114 billion cubic feet (Bcf) for the week ended May 23, above the guided range (of 107–111 Bcf build).

Influenced by these factors, natural gas prices ended Friday at $4.54 per million Btu (MMBtu), up 3.1% over the week.

Energy Week That Was:

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

Chevron Production Growth Target on Track

In its 2014 Annual Meeting of Stockholders, U.S. energy giant Chevron Corp. declared that its production growth target is on track. The company intends to reach a production level of 3.1 million barrels of oil-equivalent per day by 2017, marking 20% increase from the 2013 output.

Further growth can be expected toward the end of the decade. Chevron has over 70 projects in the pipeline, due to start by 2020. Amongst the major upcoming projects, the Gorgon and Wheatstone natural gas initiatives in Australia are progressing well, with expected start-ups in 2015 and 2016, respectively. 

Exxon's $19B Project Ships First Cargo

Last week, U.S. energy giant Exxon Mobil Corp's $19 billion Papua New Guinea PNG liquefied natural gas LNG project dispatched its first cargo ahead of schedule. Operated by affiliate Exxon Mobil PNG Ltd., PNG LNG is anticipated to generate over 9 trillion cubic feet of gas over its estimated 30 years of operation.

Japan's Tokyo Electric Power Co. Inc. will be the recipient of the first cargo. The facility – whose construction started in 2010 – is an integrated development that comprises gas production and processing facilities in the Southern Highlands, Hela, Western, Gulf and Central provinces of PNG.

BP Spillover Case Review Rejected by Court

Oil giant BP plc's BP ongoing court case tied to its 2010 Gulf of Mexico (GoM) oil spill suffered a setback on Wednesday. In a 2-1 judgment, the 5th U.S. Circuit Court of Appeals rejected BP's bid to stop payments to businesses that have not proved their damage from the spill. The company has already appealed to the U.S. Supreme Court to review the court order on the settlement. The bone of contention per the company is that the lower court ruling will force it to pay for economic damages to business without the claimants having to prove their losses resulted from the spill.

Encana's PrairieSky IPO a Success

Canada's Encana Corp. ECA announced the closure of its PrairieSky Royalty Ltd. initial public offering IPO. The 52 million shares offered in the IPO were priced at $28.00 per share. Encana received gross proceeds of roughly C$1.46 billion. Canada's largest IPO in over a decade officially opened business on May 29 and made a superb start. Shares of PrairieSky gained around 32% to close at $37 per share in the Toronto stock exchange, substantially higher than its $28 sale price. Encana shares also gained about 1.5% on the day to close at $23.28.

PetroChina Parent May Invest $2B in Peru

China National Petroleum Corporation (“CNPC”) – the parent company of Chinese energy giant PetroChina Co. Ltd. PTR – intends to invest roughly $2 billion in Peru over a period of 10 years. Latin America has caught China's attention for its natural gas resources that could fuel the Asian country's future economic growth. This led the Chinese state-owned firm CNPC to expand its presence over there. CNPC has already started operations at Colombia, Ecuador, Cuba, Brazil, Costa Rica and Venezuela.     

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:

SeaDrill Strikes Deal with Rosneft

Norwegian oilfield service firm SeaDrill Ltd.'s SDRL majority owned subsidiary North Atlantic Drilling Ltd. (NADL) entered into an ‘Investment and Co-operation Agreement' with Russian integrated oil major Rosneft. The agreement permits NADL to explore onshore and offshore growth opportunities in the Russian drilling market at least through 2022. Also, Rosneft will be entitled to acquire a substantial equity stake in the firm, though SeaDrill will still remain the majority stakeholder.

Statoil Set to Drill Apollo Well

Norwegian giant, Statoil ASA is going ahead with its plan to drill Apollo wildcat, one of the world's northernmost wells in the Barents Sea. The move follows the Norwegian authorities' rejection of the appeal from Greenpeace. However, in an attempt to stop drilling on the prospect in the Hoop area, Greenpeace's ship, Esperanza continues to block Statoil's rig, Transocean Spitsbergen. Statoil has termed such a step by the activist group to be “illegal.” Moreover, this has led Norwegian authorities to set up a 500-meter safety zone around the company's drilling site.

TOTAL to Sell Interest in Shah Deniz Field

International oil and gas major TOTAL S.A. has decided to shed its 10% interest in the Shah Deniz field and the South Caucasus Pipeline in Azerbaijan to state-owned Turkish Petroleum Corporation, or TPAO. The transaction, subject to customary approval, will boost TOTAL's liquidity by $1.5 billion. The deal will raise TPAO's stake in the development to 19%, while TOTAL gets out of the project. However, The French supermajor will keep its two decade old presence in the country through the 40% operated interest in the offshore field of Absheron, a discovery made in 2011.   

This Week's Outlook:

Apart from the usual releases in this week – the U.S. government data on oil and natural gas – market participants will be closely tracking Friday's U.S. nonfarm payrolls report for May.

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