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Oil & Gas Stock Roundup: Diamondback's Buyout & EQT's Q3 Update in Spotlight
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It was a week when both oil and natural gas prices tumbled.
On the news front, shale driller Diamondback Energy (FANG - Free Report) agreed to acquire Midland Basin operator Firebird Energy for $1.6 billion, while natural gas explorer EQT Corporation (EQT - Free Report) disclosed that commodity hedging took a toll on its third-quarter results. Developments associated with Equinor (EQNR - Free Report) , Oceaneering International (OII - Free Report) and Northern Oil and Gas (NOG - Free Report) also made it to the headlines.
Overall, it was a bearish seven-day period for the sector. West Texas Intermediate (WTI) crude futures lost some 7.6% to close at $85.61 per barrel, while natural gas prices decreased around 4.4% to end at $6.453 per million British thermal units (MMBtu). In particular, the oil market reversed its course after rising for two weeks.
Coming back to the week ended Oct 14, U.S. the oil price action returned to the negative zone due to investors’ tryst with slowing economic growth (and by extension, crude demand). The Energy Information Administration’s ("EIA") latest report showing a big stockpile build also put pressure on prices.
Meanwhile, natural gas finished down for the eighth straight week, primarily due to mild weather, a bearish inventory report and a spurt in production.
Recap of the Week’s Most Important Stories
1. Diamondback Energy — the Midland, TX-headquartered independent oil and gas exploration & production company — recently declared that it has signed a definitive agreement to buy all leasehold interest and related assets of FireBird Energy LLC. The cash and stock deal is valued at around $1.6 billion.
Per the terms of the deal, anticipated to be closed in the fourth quarter of 2022, FireBird shareholders will receive 5.86 million Diamondback shares along with $775 million as cash consideration.
The acquisition adds roughly 75,000 gross (68,000 net) highly contiguous acres in the Midland Basin located in Texas. At the time of closing the deal, the estimated production is likely to be about 22 thousand barrels of oil equivalent per day (MBoe/d). (Diamondback to Acquire FireBird Energy in a $1.6B Deal)
2. EQT Corporation announced that it expects billions of hedging losses in the latest SEC filing. The natural gas producer expects to report a $1.63-billion loss on derivatives in the third quarter of 2022, resulting in a total loss of $5.55 billion for the first nine months of this year.
Traders can use future contracts to hedge their risk or speculate on the price of an underlying asset. Hedging is a process that offsets the risk of any adverse price movements. The price of natural gas witnessed a massive jump in the past year. As hedging strategy helps capture the upside exposure to the near to medium-term rebalancing of oil and gas markets, Upstream companies like EQT Corp hedged their output to reduce risks and increase cash flow visibility.
The company expects to report $2.03 billion of net cash payments to settle derivatives in the third quarter and $4.67 billion of net cash settlements paid on derivatives for the first nine months of the year. (EQT Corp Signals $1.63B Derivatives Losses for Q3)
3. Stavanger, Norway-headquartered integrated major Equinor achieved the first oil from the Peregrino phase 2 project in Brazil. Located in the Campos Basin, Peregrino is the largest field operated by Equinor outside of Norway. Peregrino phase 2 produced oil through a new wellhead platform and drilling rig, Peregrino C. Equinor, carrying a Zacks Rank #1 (Strong Buy), operates the Peregrino field with a 60% interest.
Peregrino phase 2 involves a new platform with drilling facilities and living quarters tied to the existing Peregrino FPSO. The new platform will offer 350 long-term jobs offshore and onshore in Brazil. The project also involved a new pipeline for importing gas to the Peregrino C platform for power generation.
Equinor made significant investments to reduce carbon dioxide emissions from the Peregrino field, in line with its low-carbon strategy. Phase 2 is expected to lower absolute emissions by 100,000 tons of carbon dioxide per year from the field. (Equinor Achieves First Oil From Peregrino C Platform)
4 A leading supplier of offshore equipment and technology solutions to the energy industry, Oceaneering International recently declared that its subsea robotics segment secured multiple contracts in the third quarter of 2022, with expected cumulative revenues of about $300 million.
The contracts won by OII are predominantly for remotely operated vehicle services delivered from floating drilling rigs and vessels for subsea equipment support, subsea intervention and construction. The scope of work includes ROV tooling, survey, positioning and autonomous underwater vehicle services.
These service contracts are with international energy operators and marine construction firms whose duration ranges from numerous months to about five years. Moreover, some of these contracts have embedded options that increase both the duration and overall value of the contracts if exercised. (Oceaneering Wins Subsea Robotics Deals Worth $300M in Q3)
5 Northern Oil and Gas recently declared that it has signed an acquisition agreement to take over non-operated interests in the Delaware Basin from a private seller. The deal, which is worth around $130 million in cash, is subject to closing adjustments.
The properties are mainly situated in the Lea and Eddy counties in New Mexico, and the Loving and Winkler Counties, TX. These include nearly 2,100 net acres, 5.3 net producing wells, 2.1 net wells in-process and approximately 17.2 net undeveloped locations. Mewbourne Oil is the primary operator of the assets. The other operators include ConocoPhillips and EOG Resources.
In a separate press release, the Minnetonka, MN-based independent upstream operator stated that it closed its previously announced acquisition of non-operated Midland Basin assets. The closing consideration was $110.1 million in cash, which includes an $11.0 million deposit paid at the time of signing in August 2022. (NOG to Buy Delaware Basin Assets, Midland Basin Deal Closed)
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.
With oil and gas being in red for the week, most stocks were down too. The Energy Select Sector SPDR — a popular way to track energy companies — fell 1.9% last week. Over the past six months, the sector tracker has edged up 0.3%.
What’s Next in the Energy World?
Following last week’s sliding fortunes for oil and gas, market participants will closely track the regular releases to look for further guidance on the direction of prices. 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. News related to the ongoing Russia-Ukraine geopolitical conflict and the potential demand loss from the intermittent coronavirus lockdowns in China will be the other factors that will dictate the near-term price movement of the commodities. Finally, there will be 2022 Q3 earnings, with the first batch of S&P 500 components coming up with quarterly results.
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Oil & Gas Stock Roundup: Diamondback's Buyout & EQT's Q3 Update in Spotlight
It was a week when both oil and natural gas prices tumbled.
On the news front, shale driller Diamondback Energy (FANG - Free Report) agreed to acquire Midland Basin operator Firebird Energy for $1.6 billion, while natural gas explorer EQT Corporation (EQT - Free Report) disclosed that commodity hedging took a toll on its third-quarter results. Developments associated with Equinor (EQNR - Free Report) , Oceaneering International (OII - Free Report) and Northern Oil and Gas (NOG - Free Report) also made it to the headlines.
Overall, it was a bearish seven-day period for the sector. West Texas Intermediate (WTI) crude futures lost some 7.6% to close at $85.61 per barrel, while natural gas prices decreased around 4.4% to end at $6.453 per million British thermal units (MMBtu). In particular, the oil market reversed its course after rising for two weeks.
Coming back to the week ended Oct 14, U.S. the oil price action returned to the negative zone due to investors’ tryst with slowing economic growth (and by extension, crude demand). The Energy Information Administration’s ("EIA") latest report showing a big stockpile build also put pressure on prices.
Meanwhile, natural gas finished down for the eighth straight week, primarily due to mild weather, a bearish inventory report and a spurt in production.
Recap of the Week’s Most Important Stories
1. Diamondback Energy — the Midland, TX-headquartered independent oil and gas exploration & production company — recently declared that it has signed a definitive agreement to buy all leasehold interest and related assets of FireBird Energy LLC. The cash and stock deal is valued at around $1.6 billion.
Per the terms of the deal, anticipated to be closed in the fourth quarter of 2022, FireBird shareholders will receive 5.86 million Diamondback shares along with $775 million as cash consideration.
The acquisition adds roughly 75,000 gross (68,000 net) highly contiguous acres in the Midland Basin located in Texas. At the time of closing the deal, the estimated production is likely to be about 22 thousand barrels of oil equivalent per day (MBoe/d). (Diamondback to Acquire FireBird Energy in a $1.6B Deal)
2. EQT Corporation announced that it expects billions of hedging losses in the latest SEC filing. The natural gas producer expects to report a $1.63-billion loss on derivatives in the third quarter of 2022, resulting in a total loss of $5.55 billion for the first nine months of this year.
Traders can use future contracts to hedge their risk or speculate on the price of an underlying asset. Hedging is a process that offsets the risk of any adverse price movements. The price of natural gas witnessed a massive jump in the past year. As hedging strategy helps capture the upside exposure to the near to medium-term rebalancing of oil and gas markets, Upstream companies like EQT Corp hedged their output to reduce risks and increase cash flow visibility.
The company expects to report $2.03 billion of net cash payments to settle derivatives in the third quarter and $4.67 billion of net cash settlements paid on derivatives for the first nine months of the year. (EQT Corp Signals $1.63B Derivatives Losses for Q3)
3. Stavanger, Norway-headquartered integrated major Equinor achieved the first oil from the Peregrino phase 2 project in Brazil. Located in the Campos Basin, Peregrino is the largest field operated by Equinor outside of Norway. Peregrino phase 2 produced oil through a new wellhead platform and drilling rig, Peregrino C. Equinor, carrying a Zacks Rank #1 (Strong Buy), operates the Peregrino field with a 60% interest.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Peregrino phase 2 involves a new platform with drilling facilities and living quarters tied to the existing Peregrino FPSO. The new platform will offer 350 long-term jobs offshore and onshore in Brazil. The project also involved a new pipeline for importing gas to the Peregrino C platform for power generation.
Equinor made significant investments to reduce carbon dioxide emissions from the Peregrino field, in line with its low-carbon strategy. Phase 2 is expected to lower absolute emissions by 100,000 tons of carbon dioxide per year from the field. (Equinor Achieves First Oil From Peregrino C Platform)
4 A leading supplier of offshore equipment and technology solutions to the energy industry, Oceaneering International recently declared that its subsea robotics segment secured multiple contracts in the third quarter of 2022, with expected cumulative revenues of about $300 million.
The contracts won by OII are predominantly for remotely operated vehicle services delivered from floating drilling rigs and vessels for subsea equipment support, subsea intervention and construction. The scope of work includes ROV tooling, survey, positioning and autonomous underwater vehicle services.
These service contracts are with international energy operators and marine construction firms whose duration ranges from numerous months to about five years. Moreover, some of these contracts have embedded options that increase both the duration and overall value of the contracts if exercised. (Oceaneering Wins Subsea Robotics Deals Worth $300M in Q3)
5 Northern Oil and Gas recently declared that it has signed an acquisition agreement to take over non-operated interests in the Delaware Basin from a private seller. The deal, which is worth around $130 million in cash, is subject to closing adjustments.
The properties are mainly situated in the Lea and Eddy counties in New Mexico, and the Loving and Winkler Counties, TX. These include nearly 2,100 net acres, 5.3 net producing wells, 2.1 net wells in-process and approximately 17.2 net undeveloped locations. Mewbourne Oil is the primary operator of the assets. The other operators include ConocoPhillips and EOG Resources.
In a separate press release, the Minnetonka, MN-based independent upstream operator stated that it closed its previously announced acquisition of non-operated Midland Basin assets. The closing consideration was $110.1 million in cash, which includes an $11.0 million deposit paid at the time of signing in August 2022. (NOG to Buy Delaware Basin Assets, Midland Basin Deal Closed)
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 -1.8% +13.6%
CVX +0.1% -7.2%
COP -0.5% +14.4%
OXY -4.5% +9.8%
SLB -1% -1.9%
RIG -5.8% -38.2%
VLO +0.3% +4.7%
MPC -2.6% +16.9%
With oil and gas being in red for the week, most stocks were down too. The Energy Select Sector SPDR — a popular way to track energy companies — fell 1.9% last week. Over the past six months, the sector tracker has edged up 0.3%.
What’s Next in the Energy World?
Following last week’s sliding fortunes for oil and gas, market participants will closely track the regular releases to look for further guidance on the direction of prices. 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. News related to the ongoing Russia-Ukraine geopolitical conflict and the potential demand loss from the intermittent coronavirus lockdowns in China will be the other factors that will dictate the near-term price movement of the commodities. Finally, there will be 2022 Q3 earnings, with the first batch of S&P 500 components coming up with quarterly results.