We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Oil & Gas Stock Roundup: ExxonMobil & Shell's Q2 Updates in Focus
Read MoreHide Full Article
It was a week when oil prices moved up, but natural gas futures posted a loss.
The headlines revolved around energy biggies ExxonMobil (XOM - Free Report) and Shell’s (SHEL - Free Report) Q2 earnings update. Developments associated with Kosmos Energy (KOS - Free Report) , Eni SpA (E - Free Report) and Pembina Pipeline Corporation (PBA - Free Report) also grabbed attention.
Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures rose around 2% to close at $83.16 per barrel, but natural gas prices fell 10.8% to end at $2.32 per million British thermal units (MMBtu).
Oil prices extended gains for the fourth straight week after a report from the Energy Information Administration ("EIA") showed drawdowns in crude and fuel stockpiles.
Meanwhile, natural gas settled with a heavy loss following bearish inventory numbers, together with signs of production gains.
Recap of the Week’s Most Important Stories
1. American energy major ExxonMobil recently disclosed in a Form 8-K that soft natural gas prices due to lower demand and excess inventories will sequentially hurt its second-quarter 2024 earnings.
Owing to changes in prices of the commodity, the leading integrated energy player expects its second-quarter earnings to decline sequentially by $300 million to $700 million. However, XOM projects that a favorable crude pricing scenario in the June quarter will completely offset this negative impact.
ExxonMobil added that unfavorable changes in industry margins will affect its earnings from refining activities by $1.1 billion to $1.5 billion. These estimates exclude the impact of the acquisition of Pioneer Natural Resources, which was closed on May 3 and strengthened the company’s footprint in the Permian Basin, the most prolific basin in the United States. (ExxonMobil Expects Soft Gas Prices to Hurt Q2 Earnings)
2. Shell expects a $2 billion impairment in the second quarter of 2024 after pausing its Rotterdam biofuels facility and divesting its Singapore refinery. Rotterdam's construction halt leads to a $600 million to $1 billion non-cash charge, while Singapore sees $600 million to $800 million in charges.
According to the London-based energy biggie’s latest update, Shell’s upstream production fell 5.4% on a sequential basis in the second quarter of 2024 at the midpoint of the guidance. The Zacks Rank #3 (Hold) supermajor is estimating its output in the range of 1,720-1,820 (thousand barrels of oil equivalent per day) MBOE/d compared to 1,872 MBOE/d in the first quarter of 2024. Tax charges are expected to hurt earnings in the range of $1.8-$2.6 billion.
Meanwhile, Shell’s LNG liquefaction volumes in its Integrated Gas unit are expected in the range of 6.8-7.2 million tons, translating into a decrease of around 7.7% sequentially. Shell’s integrated gas production is expected in the range of 940,000-9800,000 barrels of oil equivalent per day (BOE/d) or 960,000 BOE/d at the midpoint. It was 992,000 BOE/d in the January-March period. (Shell Provides Q2 Guidance: Warns of Up to $2B Hit)
3. Kosmos Energy, a deepwater exploration and production firm, has announced the initiation of oil production from the Winterfell development in the U.S. Gulf of Mexico. The Winterfell development in the Green Canyon area of the U.S. Gulf of Mexico is operated by Beacon Offshore Energy, with Kosmos holding a 25.04% working interest in the field.
Winterfell is a phased development. For the first phase, two production wells are currently online and working to increase the production from the development. Alongside, a third well is being drilled, expected to be operational by the end of the third quarter of 2024. The three wells are anticipated to produce 20,000 barrels of oil equivalent per day (boe/d).
The first phase includes five wells in total, which are projected to produce 100 million boe, with significant upside potential in subsequent phases. The Miocene-aged Winterfell field is situated in water depths of approximately 5,400 feet. It was developed using a 13-mile subsea tieback to a host platform operated by Occidental Petroleum. Discovered in 2021, the final investment decision for Winterfell was made in January 2024. (Kosmos Energy Hits Production Milestone With Winterfell)
4. Eni, an Italian energy giant, has announced a major new oil discovery in the Yopaat-1 EXP exploration well in Block 9, located approximately 63 kilometers off the coast in the mid-deep waters of the Cuenca Salina in the Sureste Basin, offshore Mexico. The preliminary estimates suggest that the discovery holds around 300-400 million barrels of oil equivalents (Mboe) and associated gas in place.
The Yopaat-1 EXP well was drilled in a water depth of 525 meters and reached a total depth of 2,931 meters, encountering approximately 200 meters of net pay of hydrocarbon-bearing sands in the Pliocene and Miocene sequences. The drilling operation was accompanied by an extensive subsurface data acquisition campaign, ensuring a comprehensive understanding of the geological formation.
Eni's presence in Mexico dates back to 2006. In 2015, the company established its wholly-owned subsidiary, Eni Mexico S. de R. L. de C.V. Today, Eni stands as the leading foreign operator in the country, holding rights in eight exploration and production blocks in the Sureste Basin, of which the company operates seven. (Eni Strikes Big With New Discovery in Sureste Basin).
5. Pembina Pipeline, an energy transportation and midstream services provider, has entered into a purchase and sale agreement through its joint venture entity, Pembina Gas Infrastructure Inc. ("PGI"), with Whitecap Resources Inc., a Calgary-based oil and gas exploration and production company.
This strategic collaboration will see PGI acquiring a 50% working interest in Whitecap’s 15-07 Kaybob Complex in Alberta and supporting the infrastructure development of the company’s Lator growth area. The gross proceeds related to this transaction amount to C$420 million, with C$252 million net to Pembina.
Despite the acquisition, Whitecap will retain operatorship of the assets. A long-term take-or-pay agreement for PGI’s capacity in the Kaybob Complex has been secured with Whitecap, which will be a dedicated area for all volumes produced by the company in the region.
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.
Stocks had a mostly bearish week, indicative of the uncertain trading in oil and gas. The Energy Select Sector SPDR — a popular way to track energy companies — fell 1.2% last week. However, the sector tracker has increased 10.6% over the past six months.
What’s Next in the Energy World?
As usual, market participants will closely track the regular releases to look for guidance on the direction of the commodities. 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. Fuel demand and the rate of stock drawdowns in the coming weeks will determine the trend in commodity prices. 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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Oil & Gas Stock Roundup: ExxonMobil & Shell's Q2 Updates in Focus
It was a week when oil prices moved up, but natural gas futures posted a loss.
The headlines revolved around energy biggies ExxonMobil (XOM - Free Report) and Shell’s (SHEL - Free Report) Q2 earnings update. Developments associated with Kosmos Energy (KOS - Free Report) , Eni SpA (E - Free Report) and Pembina Pipeline Corporation (PBA - Free Report) also grabbed attention.
Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures rose around 2% to close at $83.16 per barrel, but natural gas prices fell 10.8% to end at $2.32 per million British thermal units (MMBtu).
Oil prices extended gains for the fourth straight week after a report from the Energy Information Administration ("EIA") showed drawdowns in crude and fuel stockpiles.
Meanwhile, natural gas settled with a heavy loss following bearish inventory numbers, together with signs of production gains.
Recap of the Week’s Most Important Stories
1. American energy major ExxonMobil recently disclosed in a Form 8-K that soft natural gas prices due to lower demand and excess inventories will sequentially hurt its second-quarter 2024 earnings.
Owing to changes in prices of the commodity, the leading integrated energy player expects its second-quarter earnings to decline sequentially by $300 million to $700 million. However, XOM projects that a favorable crude pricing scenario in the June quarter will completely offset this negative impact.
ExxonMobil added that unfavorable changes in industry margins will affect its earnings from refining activities by $1.1 billion to $1.5 billion. These estimates exclude the impact of the acquisition of Pioneer Natural Resources, which was closed on May 3 and strengthened the company’s footprint in the Permian Basin, the most prolific basin in the United States. (ExxonMobil Expects Soft Gas Prices to Hurt Q2 Earnings)
2. Shell expects a $2 billion impairment in the second quarter of 2024 after pausing its Rotterdam biofuels facility and divesting its Singapore refinery. Rotterdam's construction halt leads to a $600 million to $1 billion non-cash charge, while Singapore sees $600 million to $800 million in charges.
According to the London-based energy biggie’s latest update, Shell’s upstream production fell 5.4% on a sequential basis in the second quarter of 2024 at the midpoint of the guidance. The Zacks Rank #3 (Hold) supermajor is estimating its output in the range of 1,720-1,820 (thousand barrels of oil equivalent per day) MBOE/d compared to 1,872 MBOE/d in the first quarter of 2024. Tax charges are expected to hurt earnings in the range of $1.8-$2.6 billion.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Meanwhile, Shell’s LNG liquefaction volumes in its Integrated Gas unit are expected in the range of 6.8-7.2 million tons, translating into a decrease of around 7.7% sequentially. Shell’s integrated gas production is expected in the range of 940,000-9800,000 barrels of oil equivalent per day (BOE/d) or 960,000 BOE/d at the midpoint. It was 992,000 BOE/d in the January-March period. (Shell Provides Q2 Guidance: Warns of Up to $2B Hit)
3. Kosmos Energy, a deepwater exploration and production firm, has announced the initiation of oil production from the Winterfell development in the U.S. Gulf of Mexico. The Winterfell development in the Green Canyon area of the U.S. Gulf of Mexico is operated by Beacon Offshore Energy, with Kosmos holding a 25.04% working interest in the field.
Winterfell is a phased development. For the first phase, two production wells are currently online and working to increase the production from the development. Alongside, a third well is being drilled, expected to be operational by the end of the third quarter of 2024. The three wells are anticipated to produce 20,000 barrels of oil equivalent per day (boe/d).
The first phase includes five wells in total, which are projected to produce 100 million boe, with significant upside potential in subsequent phases. The Miocene-aged Winterfell field is situated in water depths of approximately 5,400 feet. It was developed using a 13-mile subsea tieback to a host platform operated by Occidental Petroleum. Discovered in 2021, the final investment decision for Winterfell was made in January 2024. (Kosmos Energy Hits Production Milestone With Winterfell)
4. Eni, an Italian energy giant, has announced a major new oil discovery in the Yopaat-1 EXP exploration well in Block 9, located approximately 63 kilometers off the coast in the mid-deep waters of the Cuenca Salina in the Sureste Basin, offshore Mexico. The preliminary estimates suggest that the discovery holds around 300-400 million barrels of oil equivalents (Mboe) and associated gas in place.
The Yopaat-1 EXP well was drilled in a water depth of 525 meters and reached a total depth of 2,931 meters, encountering approximately 200 meters of net pay of hydrocarbon-bearing sands in the Pliocene and Miocene sequences. The drilling operation was accompanied by an extensive subsurface data acquisition campaign, ensuring a comprehensive understanding of the geological formation.
Eni's presence in Mexico dates back to 2006. In 2015, the company established its wholly-owned subsidiary, Eni Mexico S. de R. L. de C.V. Today, Eni stands as the leading foreign operator in the country, holding rights in eight exploration and production blocks in the Sureste Basin, of which the company operates seven. (Eni Strikes Big With New Discovery in Sureste Basin).
5. Pembina Pipeline, an energy transportation and midstream services provider, has entered into a purchase and sale agreement through its joint venture entity, Pembina Gas Infrastructure Inc. ("PGI"), with Whitecap Resources Inc., a Calgary-based oil and gas exploration and production company.
This strategic collaboration will see PGI acquiring a 50% working interest in Whitecap’s 15-07 Kaybob Complex in Alberta and supporting the infrastructure development of the company’s Lator growth area. The gross proceeds related to this transaction amount to C$420 million, with C$252 million net to Pembina.
Despite the acquisition, Whitecap will retain operatorship of the assets. A long-term take-or-pay agreement for PGI’s capacity in the Kaybob Complex has been secured with Whitecap, which will be a dedicated area for all volumes produced by the company in the region.
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 -1.5% +14.9%
CVX -1.3% +8.2%
COP -1.6% +1.9%
OXY -2% +7.7%
SLB -2.2% -7.1%
RIG -4.7% -11.3%
VLO -2.5% +15.3%
MPC -1.6% +5.1%
Stocks had a mostly bearish week, indicative of the uncertain trading in oil and gas. The Energy Select Sector SPDR — a popular way to track energy companies — fell 1.2% last week. However, the sector tracker has increased 10.6% over the past six months.
What’s Next in the Energy World?
As usual, market participants will closely track the regular releases to look for guidance on the direction of the commodities. 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. Fuel demand and the rate of stock drawdowns in the coming weeks will determine the trend in commodity prices. 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.