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Oil & Gas Stock Roundup Headlined by TC Energy & Petrobras
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It was a week wherein oil prices fell below $70 for the first time since September but natural gas futures closed in on the $5.50 threshold.
On the headline front, Canadian midstream company TC Energy (TRP - Free Report) is seeking a $15 billion compensation from the United States over the cancellation of the Keystone XL pipeline, while Brazil's state-run energy giant Petrobras (PBR - Free Report) presented its business and management plan for the upcoming five-year period. News related to ConocoPhillips (COP - Free Report) , Eni SpA (E - Free Report) and Royal Dutch Shell also made it to the top stories.
Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures lost 10.4% to close at $68.15 per barrel, while natural gas prices rose 7.5% to end at $5.447 per million British thermal units (MMBtu). In particular, the oil market extended its decline from the previous four weeks.
Coming back to the holiday-shortened week ended Nov 26, Black Friday’s 13.1% plunge — one of the largest ever intra-day drops — pushed oil firmly in the red. The jitters associated with the proliferation of the Omicron variant, which spurred a flurry of renewed curbs by governments to check its spread (posing a risk to consumption), primarily contributed to this bearish price action.
Meanwhile, natural gas finished up despite a lower-than-expected decrease in supplies, higher production and a warmer-than-normal weather outlook. The uptick in price is the result of the ongoing strength in U.S. LNG exports.
Recap of the Week’s Most-Important Stories
1. TC Energy — sponsor of the canceled Keystone XL pipeline — has sought a compensation of $15 billion under the North American Free Trade Agreement (“NAFTA”) provision from the United States for nixing a permit for the border-crossing oil conduit.
TC Energy lodged an arbitration request last week as per a NAFTA rule — the investor-state dispute settlement provision under Chapter 11 — that allows companies to recoup money for lost investment. The official submission of paperwork follows the Canadian firm’s filing of a notice of intent in July to start a legacy NAFTA claim accusing the United States of breaching free trade obligations.
TC Energy believes that Biden’s move to rescind the Keystone XL permit even after the project was well underway for months on the U.S. as well as the Canada side was “unfair and inequitable.” The developer of the pipeline stressed that it had all the requisite permissions and pursued the project under three U.S. presidents for a very long period of time. The Biden administration’s decision to end the pipeline has also been blamed for causing mass layoffs of thousands of union workers, apart from putting an unfair loan burden of $1.3 billion on Alberta taxpayers and billions in debt guarantee. (TC Energy Files $15B Suit Against U.S. Over Keystone XL)
2. Petrobras plans to invest $68 billion from 2022-2026 to increase oil production in the subsea pre-salt area. The latest investment is a substantive increase from the previously announced $55 billion for 2021-2025.
In the five-year period, Petrobras will spend $57 billion on exploration and production, about $10 billion more than its previous plan. Of the total, $38.2 billion will be spent on pre-salt development, up from its previously mentioned $32.5 billion. PBR intends to add 15 production platforms, which will enter into production in the next five years.
The largest integrated energy firm in Brazil expects to produce 2.7 million and 3.2 million barrels of oil equivalent per day in 2022 and 2026, respectively. Oil production is expected to reach 2.1 million barrels per day (b/d) in 2022, revised downward from its previously mentioned 2.3 million b/d. The target was revised due to the pandemic-led impacts and divestments this year. For 2026, PBR expects to produce 2.6 million b/d of oil. (Petrobras Revises Production Guidance for 2022-2026)
3 ConocoPhillips received approval from the Libya government to acquire an additional stake in Waha Oil Company. ConocoPhillips owns a 16.33% stake in the Waha concessions, located in the prolific Sirte Basin. Per the deal, Zacks Rank #1 (Strong Buy) COP will add a 4.08% stake to its existing assets in the Waha concessions.
In the past few years, the upstream biggie’s production activities in Libya and related oil exports have been frequently disrupted due to forced shutdowns of the Es Sider terminal. Libya's oil sector is willing to generate more interest from energy companies as its recent production recovery was hampered by insufficient funds.
Waha Oil usually produces 280,000-300,000 barrels per day (b/d), which feeds into the state's Es Sider grade. National Oil Corporation is the operator of the Waha concessions. With Libya crude production hovering around 1.2 million b/d in 2021, ConocoPhillips is set to expand operations in the state and increase production. (ConocoPhillips to Acquire Additional Waha Assets in Libya)
4. Eni SpA announced that its retail and renewable power business will be named Eni-Plenitude (Plenitude) at a capital markets event in Milan. Eni aims for the business unit's initial public offering (“IPO”) next year, subject to market conditions.
As presented by Italy’s energy behemoth, the financial framework revealed that as of Jan 1, 2022, the net debt of Plenitude will be around zero. Eni added that through from 2022 to 2025, Plenitude will have an average yearly investment program of €1.8 billion. The investment will mostly be allocated toward renewable activities, accounting for more than 80% of total capital spending. E also said that Plenitude will finance its yearly investment program with its cash flow and borrowing.
The planned IPO reflects Eni’s strong belief that Plenitude — planning to supply all of its decarbonized energy products to its customers by 2040 — will get more capital and be able to grow at a faster pace on its own. In Plenitude, Eni will continue to have a majority interest following the IPO. (Eni Introduces Plenitude, To Lead Energy Transition)
5. Royal Dutch Shell announced an agreement with Dogger Bank offshore wind farm. The deal is related to a power purchase agreement for electricity for 15 years.
The 15-year accord comprises the purchase of 240 megawatts (MW) from Dogger Bank C. Notably, Dogger Bank Wind Farm is located off the northeast coast of England and Dogger Bank C is the third and final phase of the 3.6-gigawatt farm. According to Dogger Bank Wind Farm, with the completion of three phases — Dogger Bank A, B and C — likely by March 2026, it will be the world’s largest offshore wind farm.
With the inclusion of the previous 480 MW of power purchase deal with Dogger Bank A and B, Europe’s largest energy company will be purchasing a combined of 720 MW of power. The latest deal of Royal Dutch Shell justifies the integrated energy major’s inclination toward clean energy. Royal Dutch Shell is leading the energy transition with a bold target of becoming a net-zero-emission player by 2050 or earlier. (Royal Dutch Shell Inks 15-Year Power Purchase Accord)
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 up 1.7% last week. But over the past six months, the sector tracker has increased 6.5%.
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. Last but not the least, investors will keep an eye on the potential demand hit from the Omicron variant and the OPEC+ summit outcome for the next course of their oil production policy.
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Oil & Gas Stock Roundup Headlined by TC Energy & Petrobras
It was a week wherein oil prices fell below $70 for the first time since September but natural gas futures closed in on the $5.50 threshold.
On the headline front, Canadian midstream company TC Energy (TRP - Free Report) is seeking a $15 billion compensation from the United States over the cancellation of the Keystone XL pipeline, while Brazil's state-run energy giant Petrobras (PBR - Free Report) presented its business and management plan for the upcoming five-year period. News related to ConocoPhillips (COP - Free Report) , Eni SpA (E - Free Report) and Royal Dutch Shell also made it to the top stories.
Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures lost 10.4% to close at $68.15 per barrel, while natural gas prices rose 7.5% to end at $5.447 per million British thermal units (MMBtu). In particular, the oil market extended its decline from the previous four weeks.
Coming back to the holiday-shortened week ended Nov 26, Black Friday’s 13.1% plunge — one of the largest ever intra-day drops — pushed oil firmly in the red. The jitters associated with the proliferation of the Omicron variant, which spurred a flurry of renewed curbs by governments to check its spread (posing a risk to consumption), primarily contributed to this bearish price action.
Meanwhile, natural gas finished up despite a lower-than-expected decrease in supplies, higher production and a warmer-than-normal weather outlook. The uptick in price is the result of the ongoing strength in U.S. LNG exports.
Recap of the Week’s Most-Important Stories
1. TC Energy — sponsor of the canceled Keystone XL pipeline — has sought a compensation of $15 billion under the North American Free Trade Agreement (“NAFTA”) provision from the United States for nixing a permit for the border-crossing oil conduit.
TC Energy lodged an arbitration request last week as per a NAFTA rule — the investor-state dispute settlement provision under Chapter 11 — that allows companies to recoup money for lost investment. The official submission of paperwork follows the Canadian firm’s filing of a notice of intent in July to start a legacy NAFTA claim accusing the United States of breaching free trade obligations.
TC Energy believes that Biden’s move to rescind the Keystone XL permit even after the project was well underway for months on the U.S. as well as the Canada side was “unfair and inequitable.” The developer of the pipeline stressed that it had all the requisite permissions and pursued the project under three U.S. presidents for a very long period of time. The Biden administration’s decision to end the pipeline has also been blamed for causing mass layoffs of thousands of union workers, apart from putting an unfair loan burden of $1.3 billion on Alberta taxpayers and billions in debt guarantee. (TC Energy Files $15B Suit Against U.S. Over Keystone XL)
2. Petrobras plans to invest $68 billion from 2022-2026 to increase oil production in the subsea pre-salt area. The latest investment is a substantive increase from the previously announced $55 billion for 2021-2025.
In the five-year period, Petrobras will spend $57 billion on exploration and production, about $10 billion more than its previous plan. Of the total, $38.2 billion will be spent on pre-salt development, up from its previously mentioned $32.5 billion. PBR intends to add 15 production platforms, which will enter into production in the next five years.
The largest integrated energy firm in Brazil expects to produce 2.7 million and 3.2 million barrels of oil equivalent per day in 2022 and 2026, respectively. Oil production is expected to reach 2.1 million barrels per day (b/d) in 2022, revised downward from its previously mentioned 2.3 million b/d. The target was revised due to the pandemic-led impacts and divestments this year. For 2026, PBR expects to produce 2.6 million b/d of oil. (Petrobras Revises Production Guidance for 2022-2026)
3 ConocoPhillips received approval from the Libya government to acquire an additional stake in Waha Oil Company. ConocoPhillips owns a 16.33% stake in the Waha concessions, located in the prolific Sirte Basin. Per the deal, Zacks Rank #1 (Strong Buy) COP will add a 4.08% stake to its existing assets in the Waha concessions.
You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past few years, the upstream biggie’s production activities in Libya and related oil exports have been frequently disrupted due to forced shutdowns of the Es Sider terminal. Libya's oil sector is willing to generate more interest from energy companies as its recent production recovery was hampered by insufficient funds.
Waha Oil usually produces 280,000-300,000 barrels per day (b/d), which feeds into the state's Es Sider grade. National Oil Corporation is the operator of the Waha concessions. With Libya crude production hovering around 1.2 million b/d in 2021, ConocoPhillips is set to expand operations in the state and increase production. (ConocoPhillips to Acquire Additional Waha Assets in Libya)
4. Eni SpA announced that its retail and renewable power business will be named Eni-Plenitude (Plenitude) at a capital markets event in Milan. Eni aims for the business unit's initial public offering (“IPO”) next year, subject to market conditions.
As presented by Italy’s energy behemoth, the financial framework revealed that as of Jan 1, 2022, the net debt of Plenitude will be around zero. Eni added that through from 2022 to 2025, Plenitude will have an average yearly investment program of €1.8 billion. The investment will mostly be allocated toward renewable activities, accounting for more than 80% of total capital spending. E also said that Plenitude will finance its yearly investment program with its cash flow and borrowing.
The planned IPO reflects Eni’s strong belief that Plenitude — planning to supply all of its decarbonized energy products to its customers by 2040 — will get more capital and be able to grow at a faster pace on its own. In Plenitude, Eni will continue to have a majority interest following the IPO. (Eni Introduces Plenitude, To Lead Energy Transition)
5. Royal Dutch Shell announced an agreement with Dogger Bank offshore wind farm. The deal is related to a power purchase agreement for electricity for 15 years.
The 15-year accord comprises the purchase of 240 megawatts (MW) from Dogger Bank C. Notably, Dogger Bank Wind Farm is located off the northeast coast of England and Dogger Bank C is the third and final phase of the 3.6-gigawatt farm. According to Dogger Bank Wind Farm, with the completion of three phases — Dogger Bank A, B and C — likely by March 2026, it will be the world’s largest offshore wind farm.
With the inclusion of the previous 480 MW of power purchase deal with Dogger Bank A and B, Europe’s largest energy company will be purchasing a combined of 720 MW of power. The latest deal of Royal Dutch Shell justifies the integrated energy major’s inclination toward clean energy. Royal Dutch Shell is leading the energy transition with a bold target of becoming a net-zero-emission player by 2050 or earlier. (Royal Dutch Shell Inks 15-Year Power Purchase Accord)
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% +4.9%
CVX +2.3% +10.3%
COP +2.7% +28.2%
OXY +2% +14.4%
SLB -1.2% -5.2%
RIG +1.3% -14.8%
VLO -1.5% -15.4%
MPC +1.8% -0.7%
The Energy Select Sector SPDR — a popular way to track energy companies — was up 1.7% last week. But over the past six months, the sector tracker has increased 6.5%.
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. Last but not the least, investors will keep an eye on the potential demand hit from the Omicron variant and the OPEC+ summit outcome for the next course of their oil production policy.