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Oil & Gas Stock Roundup: Exxon's Suriname Find, Equinor's Hydrogen Bet & More
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It was a week when both oil and natural gas prices settled slightly higher.
On the news front, U.S. energy major ExxonMobil (XOM - Free Report) made an oil and gas discovery offshore Suriname Block 52, while Norway-based Equinor (EQNR - Free Report) signed up to Europe’s biggest green hydrogen project; NortH2.
Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures gained 0.7% to close at $46.57 per barrel, while natural gas prices edged up 0.6% in the week to finish at $2.591 per million Btu (MMBtu). In particular, the oil markets maintained their forward momentum from the previous five weeks and consolidated above the $45-a-barrel mark.
Oil prices ended higher as the market’s vaccine-related optimism and relief associated with the OPEC+ deal outweighed tightened lockdowns in parts of Europe and the United States, a monstrous domestic crude build, and big additions to fuel stocks.
Natural gas finished higher too after the U.S. Energy Department's inventory release showed a higher-than-expected storage withdrawal. The fuel was also buoyed by forecast models indicating a colder winter in December (than what was previously projected), which translates into larger draws due to increased use of heaters.
Recap of the Week’s Most-Important Stories
1. ExxonMobil recently announced a hydrocarbon discovery located offshore Suriname. It has found oil and gas at the Sloanea-1 exploration well in Block 52. The resource potential of the finding is being evaluated now.
The Sloanea-1 exploration well was drilled to a total depth of 4,780 meters with the help of the Maersk Developer rig. The Block 52 is located 75 miles north of Paramaribo, Suriname’s capital city. The block covers approximately 1.2 million acres, wherein water depth varies from 50-1,100 meters. While ExxonMobil has a 50% stake in the block, Malaysian oil and gas company PETRONAS is the operator and owns the rest of the stakes.
The latest discovery by ExxonMobil strengthens its presence in the South American region. It enables the company to build up on its Guyana-Suriname basin success. The company announced its intention of prioritizing deployment of capital to the advantaged assets that incorporates the South American basin, during November-end. Its expertise in the region is likely to help it to generate maximum value from the new discovery. (ExxonMobil Makes New Discovery in Offshore Suriname)
2. Equinor recently announced that it has joined the biggest green hydrogen project in Europe, the NortH2 project. It was launched this February by Royal Dutch Shell plc and other stakeholders. Along with Equinor, German utility firm RWE AG has also joined the massive project.
The NortH2 project is expected to produce green hydrogen using electricity generated from offshore wind facilities in the Netherlands. The project will have a power capacity of 1 gigawatt (GW) by 2027, 4 GW by 2030 and more than 10 GW by 2040 for electrolysis. Equinor expects the project to produce green hydrogen of 1 million tons by 2040. It can lessen carbon dioxide emissions by 8-10 million tons.
By 2021, the project is expected to complete a feasibility study, allowing the partners to commence development activities in the second half of the year. The companies are eyeing the major Northwest European Clusters to market their supplies. The latest move is expected to bring Equinor closer to its emission targets and enable it to be a net-zero energy company by 2050. Equinor expects to boost production capacities from renewables to 4-6 GW by 2026. Moreover, by 2035, it plans to boost the capacity of renewable projects to 12-16 GW. (Equinor Joins Massive NortH2 Green Hydrogen Project)
3. BP plc (BP - Free Report) announced agreements that call for an extension of its long-standing relationship with Amazon.com, Inc. (AMZN - Free Report) . Per the new set of accords, the British energy giant will provide additional renewable energy that will power Amazon’s operations and Amazon Web Services (“AWS”). BP will more than triple the renewable energy that it will be supplying to Amazon in Europe.
From 2022, BP, which carries Zacks Rank of #3 (Hold), will supply an additional 404 megawatts (MW) of wind power to Amazon in Europe. Notably, BP will source 275 MW of power from a Sweden-based new wind development. The remaining power will get sourced from two Scotland-based new wind projects. Importantly, the latest clean power deals are in addition to the prior agreement in December 2019, per which, BP will provide 170MW of renewable power to AWS in Europe.
It is to be noted that these initiatives signify BP’s ambitious goal of leading energy transition, with a target of transforming to a net-zero emission company by 2050. At the same time, it will be helping clients to decarbonize their operations. (BP to Deepen Ties With Amazon by Supplying More Renewable Energy)
4. Enbridge Inc. (ENB - Free Report) announced that its board of directors has approved an increase in quarterly dividend payment.
The new dividend of 83.5 Canadian cents represents a hike of 3% from the prior dividend of 81 Canadian cents. The increased dividend will be paid on Mar 1, 2021, to shareholders of record as of Feb 12, 2021. Thus, the annualized dividend of C$3.34 per share marks the North American energy infrastructure player’s 26th successive annual common share dividend hike.
In its financial guidance update, the midstream energy player also mentioned its 2021 distributable cash flow (DCF) projection in the band of C$4.70-C$5.00 per share, reflecting an increase from the company’s 2020 DCF per share expectation at the midpoint of the C$4.50-C$4.80 range. (Enbridge Hikes Dividend, Announces Financial Guidance)
5. Kinder Morgan, Inc. (KMI - Free Report) has revealed the board of directors’ intention to increase annual dividend for 2021 to $1.08 per share. This will mark a hike of 3% from the 2020 dividend.
The midstream energy giant added that its projection for distributable cash flow (DCF) in excess of discretionary capital expenditures and dividend payments for 2021 stands at $1.2 billion, reflecting an uptick of more than $700 million from its 2020 guidance. The company plans to allocate part of this excess coverage for reducing debt burden and repurchasing some shares, as a means of rewarding investors.
However, Kinder Morgan expects DCF for 2021 at $4.4 billion, reflecting a decline of 3% from the company’s 2020 DCF projection. The underperformance on the DCF front can be primarily attributed to a decrease in recontacting rates on several pipelines, mainly those transporting natural gas, fall in crude volumes and a decline in realized prices in the CO2 business. (Kinder Morgan Plans to Hike Dividend, Issues Guidance)
Price Performance
The following table shows the price movement of some the major oil and gas players over past week and during the last six months.
The Energy Select Sector SPDR — a popular way to track energy companies — was up 1.2% last week. The best performer was offshore driller Transocean Ltd. (RIG - Free Report) whose stock surged 16.1%.
For the longer term, over six months, the sector tracker is up 3.3%. Oilfield services major Schlumberger was the major gainer during the period, experiencing a 20.7% price appreciation.
What’s Next in the Energy World?
With rapidly rising new coronavirus cases around the world leading to the reimposition of lockdowns and the looming threat of another bout of oil demand weakness, market participants will be closely tracking the regular releases to watch for signs that could validate a revival. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that comes out regularly — will be on energy traders' radar. Data on rig count from energy service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is also closely followed. Finally, news related to coronavirus vaccination will be of utmost importance as well.
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Oil & Gas Stock Roundup: Exxon's Suriname Find, Equinor's Hydrogen Bet & More
It was a week when both oil and natural gas prices settled slightly higher.
On the news front, U.S. energy major ExxonMobil (XOM - Free Report) made an oil and gas discovery offshore Suriname Block 52, while Norway-based Equinor (EQNR - Free Report) signed up to Europe’s biggest green hydrogen project; NortH2.
Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures gained 0.7% to close at $46.57 per barrel, while natural gas prices edged up 0.6% in the week to finish at $2.591 per million Btu (MMBtu). In particular, the oil markets maintained their forward momentum from the previous five weeks and consolidated above the $45-a-barrel mark.
Oil prices ended higher as the market’s vaccine-related optimism and relief associated with the OPEC+ deal outweighed tightened lockdowns in parts of Europe and the United States, a monstrous domestic crude build, and big additions to fuel stocks.
Natural gas finished higher too after the U.S. Energy Department's inventory release showed a higher-than-expected storage withdrawal. The fuel was also buoyed by forecast models indicating a colder winter in December (than what was previously projected), which translates into larger draws due to increased use of heaters.
Recap of the Week’s Most-Important Stories
1. ExxonMobil recently announced a hydrocarbon discovery located offshore Suriname. It has found oil and gas at the Sloanea-1 exploration well in Block 52. The resource potential of the finding is being evaluated now.
The Sloanea-1 exploration well was drilled to a total depth of 4,780 meters with the help of the Maersk Developer rig. The Block 52 is located 75 miles north of Paramaribo, Suriname’s capital city. The block covers approximately 1.2 million acres, wherein water depth varies from 50-1,100 meters. While ExxonMobil has a 50% stake in the block, Malaysian oil and gas company PETRONAS is the operator and owns the rest of the stakes.
The latest discovery by ExxonMobil strengthens its presence in the South American region. It enables the company to build up on its Guyana-Suriname basin success. The company announced its intention of prioritizing deployment of capital to the advantaged assets that incorporates the South American basin, during November-end. Its expertise in the region is likely to help it to generate maximum value from the new discovery. (ExxonMobil Makes New Discovery in Offshore Suriname)
2. Equinor recently announced that it has joined the biggest green hydrogen project in Europe, the NortH2 project. It was launched this February by Royal Dutch Shell plc and other stakeholders. Along with Equinor, German utility firm RWE AG has also joined the massive project.
The NortH2 project is expected to produce green hydrogen using electricity generated from offshore wind facilities in the Netherlands. The project will have a power capacity of 1 gigawatt (GW) by 2027, 4 GW by 2030 and more than 10 GW by 2040 for electrolysis. Equinor expects the project to produce green hydrogen of 1 million tons by 2040. It can lessen carbon dioxide emissions by 8-10 million tons.
By 2021, the project is expected to complete a feasibility study, allowing the partners to commence development activities in the second half of the year. The companies are eyeing the major Northwest European Clusters to market their supplies. The latest move is expected to bring Equinor closer to its emission targets and enable it to be a net-zero energy company by 2050. Equinor expects to boost production capacities from renewables to 4-6 GW by 2026. Moreover, by 2035, it plans to boost the capacity of renewable projects to 12-16 GW. (Equinor Joins Massive NortH2 Green Hydrogen Project)
3. BP plc (BP - Free Report) announced agreements that call for an extension of its long-standing relationship with Amazon.com, Inc. (AMZN - Free Report) . Per the new set of accords, the British energy giant will provide additional renewable energy that will power Amazon’s operations and Amazon Web Services (“AWS”). BP will more than triple the renewable energy that it will be supplying to Amazon in Europe.
From 2022, BP, which carries Zacks Rank of #3 (Hold), will supply an additional 404 megawatts (MW) of wind power to Amazon in Europe. Notably, BP will source 275 MW of power from a Sweden-based new wind development. The remaining power will get sourced from two Scotland-based new wind projects. Importantly, the latest clean power deals are in addition to the prior agreement in December 2019, per which, BP will provide 170MW of renewable power to AWS in Europe.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
It is to be noted that these initiatives signify BP’s ambitious goal of leading energy transition, with a target of transforming to a net-zero emission company by 2050. At the same time, it will be helping clients to decarbonize their operations. (BP to Deepen Ties With Amazon by Supplying More Renewable Energy)
4. Enbridge Inc. (ENB - Free Report) announced that its board of directors has approved an increase in quarterly dividend payment.
The new dividend of 83.5 Canadian cents represents a hike of 3% from the prior dividend of 81 Canadian cents. The increased dividend will be paid on Mar 1, 2021, to shareholders of record as of Feb 12, 2021. Thus, the annualized dividend of C$3.34 per share marks the North American energy infrastructure player’s 26th successive annual common share dividend hike.
In its financial guidance update, the midstream energy player also mentioned its 2021 distributable cash flow (DCF) projection in the band of C$4.70-C$5.00 per share, reflecting an increase from the company’s 2020 DCF per share expectation at the midpoint of the C$4.50-C$4.80 range. (Enbridge Hikes Dividend, Announces Financial Guidance)
5. Kinder Morgan, Inc. (KMI - Free Report) has revealed the board of directors’ intention to increase annual dividend for 2021 to $1.08 per share. This will mark a hike of 3% from the 2020 dividend.
The midstream energy giant added that its projection for distributable cash flow (DCF) in excess of discretionary capital expenditures and dividend payments for 2021 stands at $1.2 billion, reflecting an uptick of more than $700 million from its 2020 guidance. The company plans to allocate part of this excess coverage for reducing debt burden and repurchasing some shares, as a means of rewarding investors.
However, Kinder Morgan expects DCF for 2021 at $4.4 billion, reflecting a decline of 3% from the company’s 2020 DCF projection. The underperformance on the DCF front can be primarily attributed to a decrease in recontacting rates on several pipelines, mainly those transporting natural gas, fall in crude volumes and a decline in realized prices in the CO2 business. (Kinder Morgan Plans to Hike Dividend, Issues Guidance)
Price Performance
The following table shows the price movement of some the major oil and gas players over past week and during the last six months.
Company Last Week Last 6 Months
XOM +5.1% -7.1%
CVX -0.9% +0.1%
COP -1.8% -0.6%
OXY +12.4% +12.9%
SLB -2.2% +20.7%
RIG +16.1% +14.9%
VLO -3.7% -7.5%
MPC 0.0% +17.2%
The Energy Select Sector SPDR — a popular way to track energy companies — was up 1.2% last week. The best performer was offshore driller Transocean Ltd. (RIG - Free Report) whose stock surged 16.1%.
For the longer term, over six months, the sector tracker is up 3.3%. Oilfield services major Schlumberger was the major gainer during the period, experiencing a 20.7% price appreciation.
What’s Next in the Energy World?
With rapidly rising new coronavirus cases around the world leading to the reimposition of lockdowns and the looming threat of another bout of oil demand weakness, market participants will be closely tracking the regular releases to watch for signs that could validate a revival. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that comes out regularly — will be on energy traders' radar. Data on rig count from energy service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is also closely followed. Finally, news related to coronavirus vaccination will be of utmost importance as well.
Legal Marijuana: An Investor’s Dream
Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
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