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Oil & Gas Stock Roundup: Updates From ConocoPhillips and Eni Lead Week's Action

It was a week when oil prices moved up while natural gas futures registered another big decline.

On the news front, upstream behemoth ConocoPhillips COP firmed up a partnership for an LNG export initiative in Texas, while Italy-based major Eni E announced plans to develop three floating wind farms off the country’s coast. Developments associated with Suncor Energy SU, Shell SHEL and Petrobras PBR also made it to the headlines.

Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures gained 3.5% to close at $69.26 per barrel but natural gas prices fell 5.2% to end at $2.216 per million British thermal units (MMBtu).

Coming back to the holiday-shortened week ended Dec 30, oil prices rebounded from their lowest levels since December 2021, as worries over the banking crisis eased. The commodity also got a leg up after U.S. Federal Reserve signaled an imminent end to interest rate increases.

Meanwhile, natural gas finished down on forecasts for warmer weather and plentiful supply.

Recap of the Week’s Most Important Stories

1. One of the world’s largest independent oil and gas producers, ConocoPhillips’ joint venture (JV) with energy services holding company Sempra Energy has been finalized for the Port Arthur liquefied natural gas (“LNG”) export project in Texas.

Sempra Energy reached a final investment decision to develop and operate the first phase of Port Arthur LNG in Jefferson County, which will involve two liquefaction trains, LNG storage tanks and associated facilities. The project is expected to produce up to 13.5 million tons per annum of LNG.

About 10.5 million tons per annum of the project’s LNG capacity is fully subscribed under long-term contracts with buyers, including ConocoPhillips and other offtakers. The project is estimated to cost $13 billion. (ConocoPhillips, Sempra Energy Finalize Port Arthur LNG JV)

2. Rome-based energy biggie Eni signed an agreement with Copenhagen Infrastructure Partners to develop three floating offshore wind projects in Latium and Sardinia, located 30 kilometers off the coast, with an overall capacity of 2 gigawatts (GW).

The agreement comprises the development of a project in Latium, offshore Civitavecchia, with a total capacity of up to 540 megawatts (MW). The two other wind farms will be located offshore Sardinia, with a capacity of 500 MW and 1,000 MW.

Combined, the three projects will produce about 5 terawatt-hours of energy per year (TWh/year). The companies expect commercial activities to start between 2028-2031 once the authorization process and subsequent construction phase is completed. (Eni Signs Deal to Develop Offshore Wind Projects in Italy)

3. Suncor Energy, one of Canada's leading energy companies, recently revised its agreement with Elliott Investment Management. The amendment grants the activist investor an extended timeline until Mar 31 to add a new director to Suncor's board.

In April 2022, Elliott Investment Management publicized its acquisition of a 3.4% stake in Suncor and has since been advocating for the Zacks Rank #3 (Hold) company to implement organizational modifications and undergo a strategy review.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The revised agreement between Suncor Energy and Elliott Investment Management could have a significant impact on the future of the former. With Elliott having greater influence over decision-making, the possibility of organizational changes and a strategy review becomes more likely. However, the appointment of Rich Kruger as Suncor’s CEO brings hope for addressing the challenges faced by the company. Overall, this revised agreement could result in a stronger and more competitive Suncor Energy in the long run. (Suncor Grants More Time to Elliott for Appointing Director)

4   Europe’s larget oil company Shell, at its annual general meeting in London recently, urged its shareholders to reject an environment activist resolution calling for stringent emissions reductions by 2030.

Six significant institutional investors, managing $1.3 trillion in assets, have co-filed resolutions requesting Shell and other oil majors to make absolute emissions cuts by 2030. The activist group wants the companies to commit to complete emissions cuts, including emissions from burning of the fuels they sell, also called Scope 3 emissions.

As the world adapts to the difficulties of energy security and the energy transition, Shell has given two opposing scenarios of what the world could encounter. According to Shell's primary findings from the Energy Security Scenarios, there is no practical way to an immediate and sharp decline in emissions, and it would take extensive carbon removal and storage to bring the global temperature increase back down to 1.5°C. (Shell Seeks Investors to Oppose Climate Resolution)

5.   Brazil's state-run oil company, Petrobras, has been planning to drill at the mouth of the Amazon river for quite some time now. However, its plan has been delayed by the Brazilian agency responsible for environmental protection. This decision has led to controversy among different stakeholders, including environmentalists, indigenous groups, and the government.

Petrobras has been requested to provide additional information to Brazil's environmental regulator regarding its drilling plans at the Amazon river's mouth. This is necessary before the company can proceed to test its emergency oil spill response.

Consequently, the drilling test, which was planned for the week, cannot take place until Petrobras provides all the necessary documentation. Below, we will discuss the reasons for the delay and the potential environmental impact of the drilling. (Petrobras' Amazon Drilling Delayed by Environment Agency)

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

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XOM                 +3.7%              +19.1%
CVX                 +2.4%               +8.1%
COP                 +1.1%              -5.4%
OXY                  -0.5%               +1.3%
SLB                  -0.2%               +32%
RIG                   +1.1%              +127.1%
VLO                  +2.3%               +21.2%
MPC                 +0.8%               +28.8%

With oil rising for the week, most stocks were up too. The Energy Select Sector SPDR — a popular way to track energy companies — rose 2.2% last week. Over the past six months, the sector tracker has increased 9.6%.

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.

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. Currently, news related to the financial sector in view of the bank jitters will be the key factor that will dictate the near-term price movement of the commodities.

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ConocoPhillips (COP) : Free Stock Analysis Report

Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report

Eni SpA (E) : Free Stock Analysis Report

Suncor Energy Inc. (SU) : Free Stock Analysis Report

Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report

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