The Zacks Analyst Blog Highlights:Marathon Petroleum, Hess, Royal Dutch Shell, BP and Encana
CHICAGO, May 28, 2014 /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 Marathon Petroleum Corp. (NYSE:MPC-Free Report), Hess Corp. (NYSE:HES-Free Report), Royal Dutch Shell plc (NYSE:RDS.A-Free Report), BP plc (NYSE:BP-Free Report) andEncana Corp. (NYSE:ECA-Free Report).
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Here are highlights from Tuesday's Analyst Blog:
Oil & Gas Stock Roundup
Crude prices rallied to a five-week high on positive U.S. economic data and the continued Ukraine impasse, while natural gas continued its downtrend amid another above-consensus storage build.
Among the newsmakers, refiner Marathon Petroleum Corp. (NYSE:MPC-Free Report) agreed to buy the retail operations of energy producer Hess Corp. (NYSE:HES-Free Report) for $2.87 billion, while European oil giant Royal Dutch Shell plc (NYSE:RDS.A-Free Report) decided to cancel its scrip dividend program.
Crude Oil:
Crude prices got a boost from the latest manufacturing and housing numbers, 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 positive momentum was further propelled by a significantly higher-than-expected decrease in oil inventories and the approaching summer driving season that would provide a fillip to gasoline consumption. Geopolitical forces too played their part in supporting crude prices, with news of renewed tension in Libya, and continued confrontation between Moscow and the West that threatens to derail hydrocarbon supplies from Russia.
However, the bulls were somewhat offset by a bigger-than-expected jump in U.S. jobless claims, while domestic production still remains in record territory. Concerns over Chinese demand slowdown and Euro-zone's economic growth has also been a drag on prices.
As a result of these factors, by close of trade on Friday, West Texas Intermediate (WTI) oil settled at around $104.35 per barrel, gaining 2.0% for the week.
Natural Gas:
Natural gas extended losses slightly from the previous two weeks, spooked by a bearish supply data. To a large extent, this was offset by expectations of an uptick in electric power demand with the imminent arrival of summer months.
The EIA's weekly inventory release showed that natural gas stockpiles held in underground storage in the lower 48 states rose by 106 billion cubic feet (Bcf) for the week ended May 16, above the guided range (of 101–105 Bcf build). Moreover, the latest build – the seventh on the trot and the fifth successive above consensus injection – went a long way in easing fears about the timely replenishment of the inventories ahead of the next heating season, starting from November.
However, the commodity recouped most of the losses later in the week, as traders focused on the impending arrival of summertime mercury readings that is likely to boost natural gas' demand for air conditioning.
Influenced by these factors, natural gas prices ended Friday at $4.41 per million Btu (MMBtu), down a mere 0.2% over the week.
Energy Week That Was:
The week's energy coverage was dominated by the following news:
Marathon Petroleum to Buy Hess Retail Unit for $2.9B
Ohio-based independent oil refiner and marketer Marathon Petroleum Corp.'s Speedway LLC unit has agreed to acquire the retail arm (including gas stations and pipelines) of integrated energy firm Hess Corp. for about $2.87 billion in cash, working capital and capital leases. The transaction, which is likely to close by the third quarter, will significantly expand Speedway's fuel trading operations in the U.S. east and southeast coast. On the other hand, Hess will also benefit from the sale by divesting its downstream properties to focus primarily on upstream activities, apart from using the proceeds to buy back shares.
Shell Terminates Scrip Dividend Program
European oil giant Royal Dutch Shell plc announced that it will stop the scrip dividend program – paying dividends to shareholders in the form of stock – from the current quarter, focusing instead on share buybacks and cash payments. Shell believes that by 2015, the share buybacks would offset the dilution that has resulted from the company's scrip dividend program. Moreover, the move would put an end to Shell's dual share structure that resulted in increased costs for the company as per the Dutch tax rule, with additional buybacks – considered a type of payout – being taxed.
BP to Plead Supreme Court for Spillover Case Review
British energy giant BP plc (NYSE:BP-Free Report) has announced that it will appeal in the U.S. Supreme Court to review a court order on a settlement tied to its 2010 Gulf of Mexico oil spill. The company will appeal for a ruling by a lower court concerning the quantum of damage payments to businesses affected by the spill. On May 19, the 5th U.S. Circuit Court of Appeals – in an 8 to 5 vote – denied BP's request for a rehearing on its settlement dispute before the entire court. 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 Raises C$1.46B via PrairieSky IPO
Canadian natural gas producer Encana Corp. (NYSE:ECA-Free Report) raised C$1.46 billion by issuing 52,000,000 common shares in the initial public offering (IPO) of PrairieSky Royalty Ltd. at C$28 each. PrairieSky will be the newly formed company, after Encana spins off its gas and oil resources in Western Canada. Post separation, Encana will retain 60% ownership in PrairieSky, an energy royalty company controlling about 5.2 million acres of oil and gas properties across central and southern Alberta.
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