The Zacks Analyst Blog Highlights:Royal Dutch Shell, Phillips 66, Petrobras, Statoil ASA and Valero Energy
CHICAGO, Jan. 8, 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 Royal Dutch Shell plc (NYSE:RDS.A-Free Report), Phillips 66 (NYSE:PSX-Free Report), Petrobras (NYSE:PBR-Free Report), Statoil ASA (NYSE:STO-Free Report) and Valero Energy Corp. (NYSE:VLO-Free Report).
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Here are highlights from Tuesday's Analyst Blog:
A Downbeat Start for Oil & Gas
Expectations of increased production from Libya pushed down crude prices by 6%. Natural gas also dipped slightly on bearish inventory data and predictions of a break in colder temperatures.
Among the newsmakers, Anglo-Dutch supermajor Royal Dutch Shell plc (NYSE:RDS.A-Free Report) closed the acquisition of Spanish oil group Repsol's liquefied natural gas assets, while legendary investor Warren Buffett's Berkshire Hathaway agreed to buy a subsidiary of Phillips 66 (NYSE:PSX-Free Report).
Crude Oil:
Crude prices came under pressure last week, as markets braced for an imminent increase in Libyan oil exports to near-normal levels following months of political turmoil. The commodity was also hit by soft Chinese manufacturing data and dismal readings from a survey of purchasing managers in the manufacturing-heavy Midwest.
Sentiments were further weakened by the Energy Information Administration (EIA) report that showed a build in fuel (gasoline and distillate) supplies, which outweighed a hefty drop in oil inventories.
As per the EIA's weekly 'Petroleum Status Report,' crude inventories dropped by a larger-than-expected 7.0 million barrels for the week ending Dec 27 to 360.57 million barrels. But worryingly, gasoline and distillate supplies were both up from the week-ago levels.
As a result of these factors, by close of trade on Friday, West Texas Intermediate (WTI) oil was in the red and settled at $93.96 per barrel, losing 6.0% for the week.
Natural Gas:
Investors continue to focus on temperature patterns to understand the fuel's economic dynamics. As it is, natural gas fundamentals look uninspiring with supplies remaining ample in the face of underwhelming demand. In fact, it is expected to take many years for the commodity's demand to match supply in the face of newer projects.
Natural gas fell slightly last week, pulled down by a smaller-than-expected decrease in supplies and forecasts of a break in cold weather conditions.
The EIA's weekly inventory release showed that natural gas stockpiles held in underground storage in the lower 48 states fell by 97 billion cubic feet (Bcf) for the week ended Dec 27, lower than the guided range (of 116–120 Bcf drawdown).
Moreover, milder weather forecasts – in the central and eastern regions over the next few days – are likely to limit the commodity's demand for heating.
Influenced by these factors, natural gas spot prices ended Friday at $4.30 per million Btu (MMBtu), down 0.9% over the week.
The Energy Week That Was:
The week's energy coverage was dominated by the following news:
Shell, Repsol Wrap Up LNG Asset Sale
Europe's oil giant Royal Dutch Shell plc closed the acquisition of liquefied natural gas assets of Repsol S.A. outside North America. The transaction was completed for a net cash purchase price of $3.8 billion, lower than the originally expected $4.4 billion that Shell agreed to pay in Feb 2013.
The reduced value could be traced back to the $200 million sale of the Basque power plant to BP plc by the Spanish oil and gas firm in Oct and the overall financial position of the company. The assets under consideration include liquefaction facilities in Trinidad & Tobago and Peru.
Phillips 66 to Divest PSPI
Refiner Phillips 66 announced that it has entered into an agreement with Warren Buffett's Berkshire Hathaway Inc. to divest its wholly owned subsidiary Phillips Specialty Products Inc. ("PSPI"). Following regulatory review, the transaction is expected to close in the first half of 2014.
Per the agreement, Phillips 66 will exchange all of its common stock in PSPI for approximately 19 million shares of its shares owned by Berkshire Hathaway. The company expects PSPI's balance sheet at closing to include approximately $450 million of cash and cash equivalents.
Petrobras P-55 Starts Production
Brazilian state-run energy giant, Petroleo Brasileiro SA or Petrobras (NYSE:PBR-Free Report) brought online its P-55 platform. The semi-submersible platform started production from the Roncador field, at the Campos Basin, in Rio de Janeiro. The vessel set sail for its destination on Oct 6 from the Rio Grande Shipyard, after completion of necessary tests and certifications.
The platform has an expected production capacity of 180,000 barrels of oil and can treat 6 million cubic meters of gas per day. The 52,000 ton P-55 – the largest semi-submersible platform built in Brazil – will be connected to 11 oil producing wells in the basin.
Statoil Hits Oil & Gas in Askja
Norwegian oil giant Statoil ASA (NYSE:STO-Free Report), along with its partners, has struck oil and gas in the Askja prospects in the North Sea. The mid-water semisubmersible rig Ocean Vanguard was used to drill two exploration wells – 30/11-9S and 30/11-9A – located between the Oseberg and Frigg fields and about 13 kilometer southeast of the Statoil-operated Krafla/Krafla West discoveries.
The main wellbore 30/11-9 S tested the Askja West prospect, where a net gas column of 295 feet (90 meters) in Late and Middle Jurassic rocks was proven. In the same geological formation, side-track 30/11-9 A tested the Askja East prospect and proved a net oil column of 131 feet (40 meters). The reservoir properties in both wells met expectations.
Valero Shares Hit 52-Week High
Shares of the largest domestic independent refiner Valero Energy Corp. (NYSE:VLO-Free Report) hit a 52-week high of $50.54 on Dec 31. The stock closed the session at $50.40, which reflects a solid return of 47.2% over the past six months.
The average trading volume for the last three months aggregated 6,407,968 shares. Among all the independent refiners, Valero offers the most diversified refinery base with a capacity of 3.0 million barrels per day in its 16 refineries throughout the U.S., Canada and the Caribbean. More importantly, Valero is best positioned to profit from increased refining margins mainly on account of its strategic refinery structure that enables it to use cheaper oil for over one-half of its needs.
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