The Zacks Analyst Blog Highlights:Chevron, Devon Energy, Exxon Mobil, ConocoPhillips and Transocean
CHICAGO, Nov. 27, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Chevron Corp. (NYSE:CVX-Free Report), Devon Energy Corp. (NYSE:DVN-Free Report), Exxon Mobil Corp. (NYSE:XOM-Free Report), ConocoPhillips (NYSE:COP-Free Report) and Transocean Ltd. (NYSE:RIG-Free Report).
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Here are highlights from Tuesday's Analyst Blog:
Oil & Gas Stock Roundup
Crude prices climbed, Chevron Corp. (NYSE:CVX-Free Report) put its $10 billion North Sea development on the back burner and Devon Energy Corp. (NYSE:DVN-Free Report) announced a $6 billion acquisition.
Crude Oil:
Crude prices increased last week on encouraging U.S. economic reports that fuelled hopes for robust demand in the world's biggest oil consumer.
In particular, U.S. manufacturing activity rebounded in Nov by hitting an eight-month high of 54.3, up from the 51.8 registered last month. Oil traders often refer to manufacturing statistics as yardsticks to gauge the future fuel demand growth.
Coming to jobless numbers, the U.S. Department of Labor reported that initial claims decreased 21,000 to 323,000 in the week ending on November 16, from previous week's figure of 344,000. This was considerably below the consensus estimate of 335,000.
However, sentiments were somewhat dampened by the Energy Information Administration (EIA) report that showed another big jump in inventories, which remains well above the upper limit of the average for this time of the year.
As per the EIA's weekly 'Petroleum Status Report,' crude inventories climbed by an unexpected 375,000 barrels for the week ending Nov 15 to 388.46 million barrels. What's more, storage at the Cushing terminal in Oklahoma, the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange, was also up 1.74 million barrels, the sixth straight weekly gain.
Wednesday's release of Fed minutes – which suggested that a steady improvement in economic conditions may prompt the central bank to taper its $85 billion bond repurchase plan in coming months – also held back crude prices. Traders have voiced concerns that Fed's shift away from the bond buying policy may lead to dollar-denominated oil prices to increase in local-currency terms in emerging markets, thus slowing growth.
As a result of these factors, by close of trade on Friday, West Texas Intermediate (WTI) oil settled at $94.84 per barrel, gaining 1.1% for the week.
The Sub-Sectors:
Integrated: Major integrated players were mixed, with the most prolific gainer being Chevron Corp. The San Ramon, CA-headquartered energy behemoth added 3.3% to its share price last week, as it postponed oil development from the Rosebank project in the U.K. North Sea, owing to doubts over the economic viability of the $10 billion initiative.
The temporary abandoning of the high-profile project further confirms shareholder pressure on the oil majors, who have struggled lately with poor returns and expensive capital projects.
In another development, world's largest publicly traded oil firm Exxon Mobil Corp. (NYSE:XOM-Free Report) has agreed to divest its 60% stake in the Hong Kong power business for $3.4 billion to existing partners CLP Holdings and state-owned China Southern Grid (CSG). The sale is an attempt by Exxon to raise funds and direct the amount into its core operations.
As mentioned above, several integrated global companies are eager to control spending and enhance value for its investors through asset sales, share buybacks or dividends in view of lagging share prices.
E&P: Last week, the SIG Oil Exploration & Production Index traded up 2.2%.
Top gainers include Devon Energy Corp., which was up 3.5% through the week after agreeing to buy Texas-based oil and gas explorer GeoSouthern Energy for about $6 billion in cash. The market reacted positively to the news, as the deal will enhance Devon's footprint in the Eagle Ford Shale. The acquired assets bring with it an output of 53,000 barrels of oil equivalent (BOE) per day and 82,000 net acres with at least 1,200 undrilled locations.
In addition, reserves are estimated at 400 million barrels of oil equivalent, the majority of which is proved reserves. Most importantly, production from the properties are expected to grow at a compound annual growth rate of 25% for the next few years, reaching a peak production rate of 140,000 BOE per day, a whopping increase of 164.1% from the current output level.
Among other developments, U.S. energy firm ConocoPhillips (NYSE:COP-Free Report) announced first gas production from the Jasmine field in the United Kingdom, Central North Sea. The Houston, TX-based energy explorer, which holds an operated interest of 36.5% in the development, sees Jasmine as an important growth project that will contribute significantly to its 3–5% production increase through 2017. The field is on course to churn out 40,000 barrels of oil equivalent per day in 2014.
Oilfield Services: The oil services group – represented by the Philadelphia Oil Services Sector Index – was down 2.4% through the week.
Transocean Ltd. (NYSE:RIG-Free Report) lost 4.3% through the week after the offshore drilling giant informed that its deepwater rigs would make up a third of the total number of fleet that will be available for work in 2014. The unusually high number of out-of-contract rigs confirms the concerns about the near-term softness for deepwater drilling work.
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