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Oil & Gas Stock Roundup: Chevron & TC Energy's Buyouts, Exxon's 5-Year Plan & More
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It was a week when oil prices reached their highest settlement since April 2019 but natural gas finished lower.
On the news front, Chevron (CVX - Free Report) and TC Energy (TRP - Free Report) announced deals to fully own their pipeline units, while ExxonMobil (XOM - Free Report) unveiled its five-year plan.
Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures gained 7.5% to close at $66.09 per barrel, natural gas prices fell 2.5% in the week to end at $2.701 per million Btu (MMBtu).
The U.S. crude benchmark rallied to a 23-month high after major oil producers maintained their output cuts till the end of April contrary to expectations of a slight increase. The OPEC+ alliance will continue withholding production by around 7 million barrels per day (or about 7% of the global consumption) through next month. Moreover, OPEC-kingpin Saudi Arabia pledged to extend its voluntary supply curbs of 1 million barrels per day.
Meanwhile, natural gas finished lower following a smaller-than-expected withdrawal from storage and the prospect of less heating consumption due to a mild weather outlook in March.
Recap of the Week’s Most-Important Stories
1. Chevron entered an agreement with Noble Midstream Partners LP to obtain the latter’s remaining outstanding assets in an all-stock deal. The contract was announced within six months after Chevron acquired Noble Energy, the parent organization of the master limited partnership (“MLP”), in one of the biggest deals in the oil industry last year.
Chevron is the majority shareholder, with about 63% equitable interest, and the largest customer of Noble Midstream. Notably, the pipeline operator provides crude oil and natural gas, and offers several midstream services to Chevron in the DJ Basin of Colorado as well as Texas's Delaware Basin.
Chevron proposed to acquire the remaining 33.925 million publicly held common units in a $1.32-billion deal. The transaction is scheduled to be completed in the second quarter of 2021 and is subject to customary approvals. (Chevron to Purchase All Outstanding Shares in Noble Midstream)
2. TC Energy was granted approval for the previously announced acquisition of TC PipeLines, LP from the latter’s unitholders in a $1.68-billion all-stock deal. Per the agreement, a fully owned subsidiary of TC Energy acquired all the outstanding common units of TC PipeLines not beneficially owned by itself or its affiliates in return for TC Energy common shares. Notably, the transaction was effective on Mar 3.
Earlier, TC Energy put in a $1.48-billion offer to acquire the outstanding shares of TC PipeLines, which TC Energy did not already own, in an effort to put the MLP fully under the authority of TC Energy. In December, it raised its offer to $1.68 billion due to investors' allegations that the offer, which was already an increase from the previous bid, was insufficient. However, TC Energy mentioned that it would not lift the bid price any further than it already had.
Following the deal completion, TC Energy now fully owns TC PipeLines and the latter is no longer a publicly-held master limited partnership.
3. ExxonMobil recently announced a long-term production outlook, with an intention of boosting profits and cash flows. Long-term plans are expected to enable the company to increase dividend payments and reduce debt. It is also planning to commercialize low-emission technologies through carbon capture and storage, which highlights the company’s efforts to abide by the Paris Agreement goals.
The Zacks Rank #2 (Buy) company estimates 2021 capital budget in the range of $16-$19 billion, which indicates a decline from the 2020 level of $21.4 billion, reflecting a disciplined approach. Notably, capital spending is expected in the range of $20-$25 billion per annum through 2025. Importantly, the energy major anticipates its investments to generate more than 30% returns. Overall investments in carbon capture are expected to rise in the coming days.
Further, ExxonMobil decreased the oil and gas production estimate to 3.7 million barrels of oil equivalent per day (MMboe/d) through 2025 from the previous expectation of 5 MMBoe/d. This implies that production for the next few years will remain flat with the 2020 level, even though output from the Permian Basin and Guyana will rise. (What You Should Know From ExxonMobil's Long-Term Plan)
4. EquinorASA (EQNR - Free Report) recently announced that it will make more investments in the Asgard license in the Norwegian Sea. The company, along with the partners in the license, intends to spend just below NOK 1.4 billion (around $163 million) in the field to make further developments. Moreover, the company is looking forward to implementing the Asgard B low-pressure project.
The low-pressure project is expected to boost output from the current Smørbukk wells. To achieve this target, it awarded Aker Solutions with a NOK 800 million new contract, the scope of which incorporates engineering, procurement, construction and installation of new equipment for Asgard B platform modifications. In December 2019, a front-end engineering and design contract was provided to the same company.
Notably, production in the field commenced in 1999 and the company still expects to produce 400-500 million barrels of oil equivalent (Boe) therein. While the current recovery rate at the field is 50%, it is aiming to reach 60%, which will enable it to generate greater value. The low-pressure production process is crucial to ensure improved recovery from the field, which is expected to begin in 2023. (Equinor to Invest Further in Asgard Low-Pressure Project)
5. Canadian Natural Resources Limited (CNQ - Free Report) reported fourth-quarter 2020 adjusted earnings per share of 12 cents, beating the Zacks Consensus Estimate of 4 cents, attributable to increased production from North America, lower costs and higher natural gas price realizations. However, the bottom line fell from the year-ago figure of 44 cents per share. The year-over-year underperformance was due to weak crude oil and natural gas liquids (NGLs) price realizations.
Total expenses incurred in the quarter were C$4,259 million, lower than C$5,079 million recorded a year ago. A decline in transportation costs and production expenses, along with higher foreign exchange gain, reduced the overall costs. Meanwhile, Canadian Natural’s Oil Sands Mining and Upgrading operating expenses decreased 19% year over year to C$20.20 per barrel.
As of Dec 31, the company had C$184 million in cash and cash equivalents, and a long-term debt of C$20,110 million, representing total debt to total capital of 38.3%. Further, the company generated free cash flow of C$694 in the fourth quarter. Canadian Natural Resources also declared a dividend of 47 Canadian cents a share, up 10.6% from the previous payout. (Canadian Natural Q4 Earnings & Revenues Beat Estimates)
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 10% last week. The best performer was offshore driller Transocean (RIG - Free Report) whose stock rose 22.8%.
For the longer term, over six months, the sector tracker has gained 57.9%. Transocean was the major gainer during the period too, experiencing a 302% price appreciation.
What’s Next in the Energy World?
As global oil consumption gradually ticks up from the depths of coronavirus amid the OPEC+-led supply cuts, market participants will be closely tracking the regular releases to watch for signs that could further validate a rebound. 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 closely followed too. Finally, news related to coronavirus vaccine approval/rollout/distribution will be of utmost importance.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Oil & Gas Stock Roundup: Chevron & TC Energy's Buyouts, Exxon's 5-Year Plan & More
It was a week when oil prices reached their highest settlement since April 2019 but natural gas finished lower.
On the news front, Chevron (CVX - Free Report) and TC Energy (TRP - Free Report) announced deals to fully own their pipeline units, while ExxonMobil (XOM - Free Report) unveiled its five-year plan.
Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures gained 7.5% to close at $66.09 per barrel, natural gas prices fell 2.5% in the week to end at $2.701 per million Btu (MMBtu).
The U.S. crude benchmark rallied to a 23-month high after major oil producers maintained their output cuts till the end of April contrary to expectations of a slight increase. The OPEC+ alliance will continue withholding production by around 7 million barrels per day (or about 7% of the global consumption) through next month. Moreover, OPEC-kingpin Saudi Arabia pledged to extend its voluntary supply curbs of 1 million barrels per day.
Meanwhile, natural gas finished lower following a smaller-than-expected withdrawal from storage and the prospect of less heating consumption due to a mild weather outlook in March.
Recap of the Week’s Most-Important Stories
1. Chevron entered an agreement with Noble Midstream Partners LP to obtain the latter’s remaining outstanding assets in an all-stock deal. The contract was announced within six months after Chevron acquired Noble Energy, the parent organization of the master limited partnership (“MLP”), in one of the biggest deals in the oil industry last year.
Chevron is the majority shareholder, with about 63% equitable interest, and the largest customer of Noble Midstream. Notably, the pipeline operator provides crude oil and natural gas, and offers several midstream services to Chevron in the DJ Basin of Colorado as well as Texas's Delaware Basin.
Chevron proposed to acquire the remaining 33.925 million publicly held common units in a $1.32-billion deal. The transaction is scheduled to be completed in the second quarter of 2021 and is subject to customary approvals. (Chevron to Purchase All Outstanding Shares in Noble Midstream)
2. TC Energy was granted approval for the previously announced acquisition of TC PipeLines, LP from the latter’s unitholders in a $1.68-billion all-stock deal. Per the agreement, a fully owned subsidiary of TC Energy acquired all the outstanding common units of TC PipeLines not beneficially owned by itself or its affiliates in return for TC Energy common shares. Notably, the transaction was effective on Mar 3.
Earlier, TC Energy put in a $1.48-billion offer to acquire the outstanding shares of TC PipeLines, which TC Energy did not already own, in an effort to put the MLP fully under the authority of TC Energy. In December, it raised its offer to $1.68 billion due to investors' allegations that the offer, which was already an increase from the previous bid, was insufficient. However, TC Energy mentioned that it would not lift the bid price any further than it already had.
Following the deal completion, TC Energy now fully owns TC PipeLines and the latter is no longer a publicly-held master limited partnership.
3. ExxonMobil recently announced a long-term production outlook, with an intention of boosting profits and cash flows. Long-term plans are expected to enable the company to increase dividend payments and reduce debt. It is also planning to commercialize low-emission technologies through carbon capture and storage, which highlights the company’s efforts to abide by the Paris Agreement goals.
The Zacks Rank #2 (Buy) company estimates 2021 capital budget in the range of $16-$19 billion, which indicates a decline from the 2020 level of $21.4 billion, reflecting a disciplined approach. Notably, capital spending is expected in the range of $20-$25 billion per annum through 2025. Importantly, the energy major anticipates its investments to generate more than 30% returns. Overall investments in carbon capture are expected to rise in the coming days.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Further, ExxonMobil decreased the oil and gas production estimate to 3.7 million barrels of oil equivalent per day (MMboe/d) through 2025 from the previous expectation of 5 MMBoe/d. This implies that production for the next few years will remain flat with the 2020 level, even though output from the Permian Basin and Guyana will rise. (What You Should Know From ExxonMobil's Long-Term Plan)
4. Equinor ASA (EQNR - Free Report) recently announced that it will make more investments in the Asgard license in the Norwegian Sea. The company, along with the partners in the license, intends to spend just below NOK 1.4 billion (around $163 million) in the field to make further developments. Moreover, the company is looking forward to implementing the Asgard B low-pressure project.
The low-pressure project is expected to boost output from the current Smørbukk wells. To achieve this target, it awarded Aker Solutions with a NOK 800 million new contract, the scope of which incorporates engineering, procurement, construction and installation of new equipment for Asgard B platform modifications. In December 2019, a front-end engineering and design contract was provided to the same company.
Notably, production in the field commenced in 1999 and the company still expects to produce 400-500 million barrels of oil equivalent (Boe) therein. While the current recovery rate at the field is 50%, it is aiming to reach 60%, which will enable it to generate greater value. The low-pressure production process is crucial to ensure improved recovery from the field, which is expected to begin in 2023. (Equinor to Invest Further in Asgard Low-Pressure Project)
5. Canadian Natural Resources Limited (CNQ - Free Report) reported fourth-quarter 2020 adjusted earnings per share of 12 cents, beating the Zacks Consensus Estimate of 4 cents, attributable to increased production from North America, lower costs and higher natural gas price realizations. However, the bottom line fell from the year-ago figure of 44 cents per share. The year-over-year underperformance was due to weak crude oil and natural gas liquids (NGLs) price realizations.
Total expenses incurred in the quarter were C$4,259 million, lower than C$5,079 million recorded a year ago. A decline in transportation costs and production expenses, along with higher foreign exchange gain, reduced the overall costs. Meanwhile, Canadian Natural’s Oil Sands Mining and Upgrading operating expenses decreased 19% year over year to C$20.20 per barrel.
As of Dec 31, the company had C$184 million in cash and cash equivalents, and a long-term debt of C$20,110 million, representing total debt to total capital of 38.3%. Further, the company generated free cash flow of C$694 in the fourth quarter. Canadian Natural Resources also declared a dividend of 47 Canadian cents a share, up 10.6% from the previous payout. (Canadian Natural Q4 Earnings & Revenues Beat Estimates)
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 +12.1% +59.4%
CVX +9% +39%
COP +12.2% +72.6%
OXY +17.4% +169.2%
SLB +4.2% +61.6%
RIG +22.8% +302%
VLO +2.7% +65.3%
MPC +4.9% +76.8%
The Energy Select Sector SPDR — a popular way to track energy companies — was up 10% last week. The best performer was offshore driller Transocean (RIG - Free Report) whose stock rose 22.8%.
For the longer term, over six months, the sector tracker has gained 57.9%. Transocean was the major gainer during the period too, experiencing a 302% price appreciation.
What’s Next in the Energy World?
As global oil consumption gradually ticks up from the depths of coronavirus amid the OPEC+-led supply cuts, market participants will be closely tracking the regular releases to watch for signs that could further validate a rebound. 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 closely followed too. Finally, news related to coronavirus vaccine approval/rollout/distribution will be of utmost importance.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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