Yahoo Finance Oil & Gas Stock Roundup: BP and Shell Take Center Stage
It was a week when oil prices moved up, but natural gas futures posted a loss.
The headlines revolved around acquisitions by European oil majors BP plc BP and Shell SHEL. Developments associated with ExxonMobil XOM, Cheniere Energy LNG and Oceaneering International OII also grabbed attention.
Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures rose around 2.9% to close at $80.73 per barrel, but natural gas prices fell 6.1% to end at $2.71 per million British thermal units (MMBtu).
The crude price action remained positive after a report from the Energy Information Administration ("EIA") showed drawdowns in crude and fuel stockpiles.
Meanwhile, natural gas settled with a loss following the U.S. Energy Department's inventory release that showed a higher-than-expected increase in supplies.
Recap of the Week’s Most Important Stories
1. BP has announced its agreement to acquire Bunge's 50% stake in their joint venture, BP Bunge Bioenergia S.A., solidifying the London-based oil major’s control over one of Brazil’s top biofuel-producing companies. This strategic acquisition, valued at approximately $1.4 billion, marks a pivotal step in BP's efforts to expand and optimize its bioenergy portfolio.
The acquisition will allow BP to fully integrate BP Bunge Bioenergia into its operations, leveraging its trading and technology capabilities to maximize value. The deal is expected to lead to the consolidation of 100% of the JV's financial results, including debt of around $0.5 billion and lease obligations of approximately $0.7 billion.
Once the transaction is completed, BP will have the capacity to produce around 50,000 barrels of ethanol equivalent per day from sugarcane, utilizing BP Bunge Bioenergia's 11 agro-industrial units spread across five Brazilian states. This integrated business model spans the entire production chain, from cultivation to selling ethanol and sugar. (BP to Acquire Full Control of Biofuels Joint Venture for $1.4B)
2. Larger rival Shell has finalized a deal to acquire Pavilion Energy, the Singaporean liquified natural gas (LNG) firm, from Temasek, a global investment company. The acquisition is likely to strengthen Shell’s overall LNG portfolio and allow the energy major to tap into the key gas markets in Europe and Singapore. Shell is aggressively pursuing an expansion strategy to solidify its position as a leader in LNG markets.
The purchase will be covered within Shell’s present cash capital guidance. The Zacks Rank #3 (Hold) company has stated that its cash capital guidance will remain unchanged, which implies that it will not need to increase its planned spending to complete the purchase. The deal exceeds Shell’s internal rate of return (IRR) hurdle rate for its Integrated Gas business, aligning with its growth ambition target of a 15-25% increase in purchased LNG volumes from the 2022 level.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The acquisition is scheduled to be closed by the first quarter of 2025, contingent upon regulatory approvals, following which Shell will start integrating the asset portfolios. The deal with Temasek should help Shell expand its LNG portfolio and meet its long-term objective of growing its LNG business by 20-30% within 2030 (compared to 2022). (Shell to Expand LNG Portfolio With Pavilion Energy Deal)
3. ExxonMobil’s ongoing arbitration over its right of first refusal concerning Hess Corporation’s Guyana operations has put a significant hold on Chevron’s $53-billion acquisition of Hess.
This delay has stalled a decision on whether ExxonMobil has a right of first refusal over Hess’ lucrative Guyana operations. The arbitration panel, tasked with deciding this critical issue, remains incomplete three months after the case was filed, hindering any immediate resolution.
The sale has become a contentious issue, primarily because it involves a 30% stake in a lucrative Guyana oil consortium, which has discovered at least 11 billion barrels of oil and expects to produce 1.3 million barrels per day by 2027. ExxonMobil, holding a 45% majority stake in the consortium, claims that Chevron's acquisition of Hess circumvents its preemption right as specified in the joint operating agreement (JOA). (ExxonMobil's Right of Refusal Halts Chevron-Hess Deal)
4. Cheniere Energy, a leading U.S. exporter of liquefied natural gas (“LNG”), has announced a significant enhancement to its capital allocation strategy. The company has approved an additional $4 billion in share repurchase authorization through 2027 and plans to increase its quarterly dividend by 15% to an annualized rate of $2.00 per common share starting in the third quarter of 2024.
Cheniere’s 20/20 Vision capital allocation plan, introduced in 2022, has made substantial progress. The plan aims to deploy over $20 billion toward growth, capital returns and maintaining an investment-grade balance sheet.
The increased share repurchase authorization and dividend hike are part of a broader strategy to enhance shareholder value while supporting accretive growth projects. Further, Cheniere aims to consistently generate over $20 per share in distributable cash flow, leveraging its strategic investments and strong market position. (Cheniere Hikes Dividend, Buyback in Strategic Boost).
5. Oilfield service provider Oceaneering International's Manufactured Products division has secured a major contract from a U.S. independent energy company. The contract is valued at roughly $50 million and involves supplying a specialized underwater cable for a project in the Gulf of Mexico. This deal highlights OII's strong reputation in the industry and its capacity to deliver high-quality products in a timely manner.
The contract involves the supply of an electro-hydraulic, steel tube dynamic umbilical. This specialized product will be utilized in a project located in the Gulf of Mexico. The total length of the umbilical is approximately 27 kilometers (17 miles). Such a substantial length indicates the scale and complexity of the project, highlighting OII's technical expertise and manufacturing capabilities.
Securing this contract is a notable milestone for OII. The anticipated revenues from this contract, approximately $50 million, should significantly boost the company's financial performance. This influx of revenues is expected to enhance OII's market position, providing a competitive edge in the highly dynamic and competitive energy sector. (Oceaneering Secures $50 Million Umbilical Contract)
Price Performance
The following table shows the price movement of some major oil and gas players over the past week and during the last six months.
Company Last Week Last 6 Months
XOM +1.5% +12.2%
CVX +1.8% +4.9%
COP +1.8% -2.3%
OXY +1.8% +3.8%
SLB +6.2% -10.7%
RIG -0.4% -20.9%
VLO +0.1% +18%
MPC +1.5% +16.1%
With oil moving up for the week, stocks were mostly positive. The Energy Select Sector SPDR — a popular way to track energy companies — rose 1.9% last week. However, the sector tracker has increased 7.7% over the past six months.
What’s Next in the Energy World?
As usual, market participants will closely track the regular releases to look for guidance on the direction of the commodities. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that come out regularly — will be on energy traders' radar. Fuel demand and the rate of stock drawdowns in the coming weeks will determine the trend in commodity prices. Data on rig count from the oilfield service firm Baker Hughes, which is a pointer to the trends in U.S. crude/natural gas production, is closely followed, too.
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BP p.l.c. (BP) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Oceaneering International, Inc. (OII) : Free Stock Analysis Report
Cheniere Energy, Inc. (LNG) : Free Stock Analysis Report
Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report
