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It was a week when both oil and natural gas prices registered declines.
On the news front, Europe’s largest energy company, Royal Dutch Shell , decided to unify its group structure into a single parent company based in London, while Calgary-based Canadian Natural Resources (CNQ - Free Report) agreed to snap up smaller player Storm Resources for C$960 million.
Overall, it was a bearish seven-day period for the sector. West Texas Intermediate (WTI) crude futures lost 0.6% to close at $80.79 per barrel, while natural gas prices fell more than 13% to end at $4.791 per million British thermal units (MMBtu). In particular, the oil market extended its decline from the previous two weeks.
Coming back to the week ended Nov 12, oil prices dipped after a report from the Energy Information Administration ("EIA") showed another addition to crude stockpiles. The commodity’s negative price reaction was also blamed on a stronger greenback, which weakened the dollar-denominated crude. The possible release of oil from the U.S. Strategic Petroleum Reserve into the commercial market (to cool down higher U.S. gasoline prices) contributed to the decline too.
Natural gas finished down too despite a lower-than-expected increase in supplies. Higher production, a mild weather outlook (and the subsequent lull in heating/cooling demand), plus Russia’s renewed pledge to increase supplies to Europe sparked off a pullback in the fuel’s price.
Recap of the Week’s Most-Important Stories
1. Royal Dutch Shell has decided to consolidate its dual headquarters in London over The Hague. In a board meeting on Monday, Shell’s directors unveiled plans to become a single UK entity.
The energy major will change its name to just Shell plc, stripping the ‘Royal Dutch’ part and ending its relationship with the Netherlands that dates back to 1890. The relocation of its domicile to London is unlikely to cause a massive impact on the Dutch state revenues. But the move does raise some red flags regarding the country’s attractiveness to multinationals. On the other hand, Britain welcomed the RDS.A exercise, citing it as a “clear vote of confidence in the economy”.
For investors, it is seen as a positive move as it simplifies the structure and offers greater strategic flexibility. This assumes extra importance after Third Point — Daniel Loeb’s activist hedge fund that has a $500 million stake in the company — recently pursued a breakup of Shell into multiple businesses, arguing that this could unlock significant value. A new setup with a simplified business would also mean a higher ordinary share count and a possible increase in buyback authorization. (Shell to No Longer be a Dutch Company: Here's Why)
2. Canadian Natural Resources recently entered into an agreement with Storm Resources Ltd. to acquire all of the latter's shares for C$960 million.
The to-be-acquired assets involve Calgary-based oil and gas explorer Storm's holdings in the liquid-rich Montney area of northeast British Columbia. Storm currently produces 136 million cubic feet a day of natural gas and 5,600 barrels a day of natural gas liquids in the area. Per the terms of the agreement, CNQ — carrying a Zacks Rank #1 (Strong Buy) — will also assume Storm's total debt of about C$186 million.
The latest acquisition offers production and infrastructure that complements Canadian Natural's existing assets in the area. The areas will provide an opportunity for synergies within CNQ's current diversified portfolio. Notably, the deal is expected to complete in December, subject to normal closing conditions. (Canadian Natural to Buy Storm's Montney Assets for C$960M)
3 Oilfield services provider TechnipFMC (FTI - Free Report) announced the receipt of a large award. According to FTI, a contract is considered large if the value lies in the band of $500 million and $1 billion.
Per the award, TechnipFMC will get involved in supplying a subsea production system to develop the Yellowtail oil discovery in the prolific Stabroek Block, located offshore Guyana., This is the fourth award for FTI in the Stabroek Block.
TechnipFMC has decided to provide engineering, project management, testing capabilities and manufacturing to deliver the overall subsea production system. FTI announced that the project’s scope comprises 12 manifolds and associated controls and tie-in equipment along with 51 enhanced vertical deepwater trees and related tooling. (TechnipFMC Inks Large Subsea Contract for Yellowtail)
4. Cheniere Energy (LNG - Free Report) , through its wholly owned subsidiary, Cheniere Marketing, entered an agreement to supply liquefied natural gas to Sinochem Group Co. Ltd.
Per the terms of the agreement, Cheniere will supply an initial volume of 0.9 million tons per annum on a free-on-board basis to China-based Sinochem. The quantity will eventually increase to 1.8 mtpa. The deal has a term of 17.5 years and will be in effect from July 2023.
The deal is Cheniere’s third liquefied natural gas supply agreement in recent months, as the fuel is currently trading at record prices amid shortages in Asia and Europe, which have urged buyers to secure supplies. The agreement shows LNG’s ability to find solutions to meet consumers’ liquefied natural gas needs globally, acknowledged by the extent of the company’s platform and the reliability of its operations. (Cheniere to Supply Liquefied Natural Gas to Sinochem)
5. Chevron (CVX - Free Report) and partners agreed to purchase carbon credits worth more than A$230 million for its Gorgon carbon capture and storage ("CCS") project in Western Australia. The move is part of Chevron’s plans to offset penalties after failing to capture enough emissions from the Gorgon CCS project. Additionally, CVX will invest A$40 million in low-carbon projects in Western Australia.
Gorgon is the country's most notably single-resource natural gas project and features the largest natural gas projects globally. Expenses, which could amount to more than A$250 million, will be divided among the Gorgon project partners. Chevron operates the project with a 47.3% ownership interest.
Chevron intends to fulfill the obligations by purchasing Australian carbon credit units and offsets from two international programs, the Gold Standard and the Verified Carbon Standard. The integrated oil major will continue to purchase the offsets by July 2022.
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.
The Energy Select Sector SPDR — a popular way to track energy companies — was down 1.2% last week. But over the past six months, the sector tracker has increased 8.7%.
What’s Next in the Energy World?
As the global oil consumption outlook strengthens amid tightening fundamentals, market participants will closely track the regular releases to watch for signs that could further validate the upward momentum. 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 trends in U.S. crude production, is closely followed too. News related to coronavirus vaccine approval/rollout/distribution will be of utmost importance.
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Oil & Gas Stock Roundup: RDS.A's Corporate Overhaul, CNQ's Buyout Hogs Attention
It was a week when both oil and natural gas prices registered declines.
On the news front, Europe’s largest energy company, Royal Dutch Shell , decided to unify its group structure into a single parent company based in London, while Calgary-based Canadian Natural Resources (CNQ - Free Report) agreed to snap up smaller player Storm Resources for C$960 million.
Overall, it was a bearish seven-day period for the sector. West Texas Intermediate (WTI) crude futures lost 0.6% to close at $80.79 per barrel, while natural gas prices fell more than 13% to end at $4.791 per million British thermal units (MMBtu). In particular, the oil market extended its decline from the previous two weeks.
Coming back to the week ended Nov 12, oil prices dipped after a report from the Energy Information Administration ("EIA") showed another addition to crude stockpiles. The commodity’s negative price reaction was also blamed on a stronger greenback, which weakened the dollar-denominated crude. The possible release of oil from the U.S. Strategic Petroleum Reserve into the commercial market (to cool down higher U.S. gasoline prices) contributed to the decline too.
Natural gas finished down too despite a lower-than-expected increase in supplies. Higher production, a mild weather outlook (and the subsequent lull in heating/cooling demand), plus Russia’s renewed pledge to increase supplies to Europe sparked off a pullback in the fuel’s price.
Recap of the Week’s Most-Important Stories
1. Royal Dutch Shell has decided to consolidate its dual headquarters in London over The Hague. In a board meeting on Monday, Shell’s directors unveiled plans to become a single UK entity.
The energy major will change its name to just Shell plc, stripping the ‘Royal Dutch’ part and ending its relationship with the Netherlands that dates back to 1890. The relocation of its domicile to London is unlikely to cause a massive impact on the Dutch state revenues. But the move does raise some red flags regarding the country’s attractiveness to multinationals. On the other hand, Britain welcomed the RDS.A exercise, citing it as a “clear vote of confidence in the economy”.
For investors, it is seen as a positive move as it simplifies the structure and offers greater strategic flexibility. This assumes extra importance after Third Point — Daniel Loeb’s activist hedge fund that has a $500 million stake in the company — recently pursued a breakup of Shell into multiple businesses, arguing that this could unlock significant value. A new setup with a simplified business would also mean a higher ordinary share count and a possible increase in buyback authorization. (Shell to No Longer be a Dutch Company: Here's Why)
2. Canadian Natural Resources recently entered into an agreement with Storm Resources Ltd. to acquire all of the latter's shares for C$960 million.
The to-be-acquired assets involve Calgary-based oil and gas explorer Storm's holdings in the liquid-rich Montney area of northeast British Columbia. Storm currently produces 136 million cubic feet a day of natural gas and 5,600 barrels a day of natural gas liquids in the area. Per the terms of the agreement, CNQ — carrying a Zacks Rank #1 (Strong Buy) — will also assume Storm's total debt of about C$186 million.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The latest acquisition offers production and infrastructure that complements Canadian Natural's existing assets in the area. The areas will provide an opportunity for synergies within CNQ's current diversified portfolio. Notably, the deal is expected to complete in December, subject to normal closing conditions. (Canadian Natural to Buy Storm's Montney Assets for C$960M)
3 Oilfield services provider TechnipFMC (FTI - Free Report) announced the receipt of a large award. According to FTI, a contract is considered large if the value lies in the band of $500 million and $1 billion.
Per the award, TechnipFMC will get involved in supplying a subsea production system to develop the Yellowtail oil discovery in the prolific Stabroek Block, located offshore Guyana., This is the fourth award for FTI in the Stabroek Block.
TechnipFMC has decided to provide engineering, project management, testing capabilities and manufacturing to deliver the overall subsea production system. FTI announced that the project’s scope comprises 12 manifolds and associated controls and tie-in equipment along with 51 enhanced vertical deepwater trees and related tooling. (TechnipFMC Inks Large Subsea Contract for Yellowtail)
4. Cheniere Energy (LNG - Free Report) , through its wholly owned subsidiary, Cheniere Marketing, entered an agreement to supply liquefied natural gas to Sinochem Group Co. Ltd.
Per the terms of the agreement, Cheniere will supply an initial volume of 0.9 million tons per annum on a free-on-board basis to China-based Sinochem. The quantity will eventually increase to 1.8 mtpa. The deal has a term of 17.5 years and will be in effect from July 2023.
The deal is Cheniere’s third liquefied natural gas supply agreement in recent months, as the fuel is currently trading at record prices amid shortages in Asia and Europe, which have urged buyers to secure supplies. The agreement shows LNG’s ability to find solutions to meet consumers’ liquefied natural gas needs globally, acknowledged by the extent of the company’s platform and the reliability of its operations. (Cheniere to Supply Liquefied Natural Gas to Sinochem)
5. Chevron (CVX - Free Report) and partners agreed to purchase carbon credits worth more than A$230 million for its Gorgon carbon capture and storage ("CCS") project in Western Australia. The move is part of Chevron’s plans to offset penalties after failing to capture enough emissions from the Gorgon CCS project. Additionally, CVX will invest A$40 million in low-carbon projects in Western Australia.
Gorgon is the country's most notably single-resource natural gas project and features the largest natural gas projects globally. Expenses, which could amount to more than A$250 million, will be divided among the Gorgon project partners. Chevron operates the project with a 47.3% ownership interest.
Chevron intends to fulfill the obligations by purchasing Australian carbon credit units and offsets from two international programs, the Gold Standard and the Verified Carbon Standard. The integrated oil major will continue to purchase the offsets by July 2022.
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 -0.5% +7%
CVX -0.4% +7.1%
COP -4.1% +28.5%
OXY -4% +26.9%
SLB -2.2% +0.2%
RIG -4.7% -17.7%
VLO -1.7% -4%
MPC 0.0% +7.9%
The Energy Select Sector SPDR — a popular way to track energy companies — was down 1.2% last week. But over the past six months, the sector tracker has increased 8.7%.
What’s Next in the Energy World?
As the global oil consumption outlook strengthens amid tightening fundamentals, market participants will closely track the regular releases to watch for signs that could further validate the upward momentum. 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 trends in U.S. crude production, is closely followed too. News related to coronavirus vaccine approval/rollout/distribution will be of utmost importance.