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Oil & Gas Roundup: CVX's LNG Stance, EQNR's Project Cancellation & More
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It has been a week since both oil and natural gas prices have moved up.
The headlines revolved around energy supermajor Chevron’s (CVX - Free Report) plans on LNG investment and Equinor’s (EQNR - Free Report) pullout of the blue hydrogen project in its native Norway. Developments associated with SLB (SLB - Free Report) , TechnipFMC (FTI - Free Report) and Chesapeake Energy also grabbed attention.
Overall, it was a bullish seven-day period for the sector. West Texas Intermediate (WTI) crude futures rose around 4.7% to close at $71.92 per barrel, while natural gas prices increased 5.4% to end at $2.434 per million British thermal units (MMBtu).
The positive crude price action was driven by the Federal Reserve’s significant 50-basis point rate cut and escalating tensions in the Middle East, fostering expectations of stronger future demand.
Meanwhile, natural gas also settled with a gain due to forecasts for strong cooling demand.
Recap of the Week’s Most Important Stories
1. U.S. energy major Chevron has taken a decisive step in its energy strategy by choosing not to invest in a U.S. LNG plant. Instead, the company is shifting its focus toward selling gas directly to the market, taking full advantage of the United States’ expansive midstream market. This strategic choice, which reflects the company's long-term goals in natural gas monetization without the need for LNG conversion infrastructure, is significant for CVX and the LNG sector as a whole.
Chevron’s midstream head, Colin Parfitt, emphasized the company’s ability to monetize U.S. gas effectively without converting it to LNG. The robust U.S. midstream market infrastructure allows CVX to tap into lucrative natural gas deals that bypass the need for expensive LNG plant investments.
The decision to forgo an equity stake in the Driftwood LNG project in Louisiana, which is operated by Woodside Energy, reflects CVX's conservative investment approach. This LNG project, expected to produce 27.6 million tons per annum, is a significant project, and Woodside is reportedly considering selling up to a 50% stake. However, CVX has made clear that it will not be taking a direct equity position in the venture. (Chevron Focuses on Direct Gas Sales Instead of LNG Plant Investment)
2. Equinor, a Norwegian state-owned energy company, has scrapped its plans to export blue hydrogen to Germany due to high costs and a lack of sufficient demand, per media reports. The move came at the heels of the Zacks Rank #3 (Hold) company's initial partnership with German energy giant RWE, which was established in January 2022 to create a hydrogen supply network aimed at reducing greenhouse gas emissions in German power plants. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Equinor initially expected to produce blue hydrogen from natural gas in Norway, combined with carbon capture and storage, and export it to Germany via an offshore hydrogen pipeline. However, the cost of the entire supply chain, which Equinor CEO Anders Opedal had previously estimated could reach "tens" of billions of euros, proved prohibitive.
3. SLB, the U.S. oilfield service biggie, is deepening its collaboration with NVIDIA to develop cutting-edge generative AI solutions tailored for the energy industry. This partnership, building on years of collaboration, aims to accelerate the deployment of industry-specific AI models across SLB's digital platforms. These platforms, including Delfi and Lumi, will enhance the way energy professionals interact with data.
At the heart of this initiative is NVIDIA NeMo, a key component of the NVIDIA AI Enterprise software platform. By leveraging NeMo, SLB will create custom generative AI models to address the unique, data-intensive needs of the energy industry. These models will be optimized for various computing environments, from data centers to cloud-based systems and edge devices.
The integration of AI into SLB’s platforms will have wide-reaching implications for the industry. It promises to enhance subsurface exploration, streamline production operations and improve data management processes, offering researchers, scientists and engineers powerful tools for addressing complex technical challenges. By applying generative AI, these domain experts will be able to drive innovation, increase efficiency and support more sustainable practices within the energy sector. (SLB & NVIDIA Partner to Drive AI Innovation in Energy Sector)
4. UK-based oilfield service provider TechnipFMC has been awarded two major subsea contracts by Brazil’s Petrobras. These contracts are seen to be a significant step toward the development of the hydrocarbon resources in Brazil’s offshore oil fields.
The major terms of the first contract between TechnipFMC and Petrobras include designing, engineering and manufacturing flexible riser pipes, along with providing associated services like packing and storage. The first contract won by TechnipFMC is considered to be substantial as it is valued between $250 million and $500 million in inbound orders.
The terms of the second contract include designing, engineering and manufacturing the subsea production systems by TechnipFMC for deployment on the Atapu 2, Sepia 2 and Roncador projects. The company would also provide some additional services like installation support, life-of-field services and additional equipment. The second contract is equally significant for TechnipFMC as the company expects to win between $75 million and $250 million in inbound orders. (TechnipFMC Secures Two Petrobras Subsea Contracts in Brazil).
5. Natural gas player Chesapeake Energy has announced that the pending merger with Southwestern Energy is anticipated to close early in the fourth quarter of this year. Chesapeake Energy had announced the acquisition of rival natural gas firm Southwestern Energy in an all-stock deal in January 2024. The deal was valued at approximately $7 billion.
The acquisition was originally anticipated to be closed by the end of the second quarter. However, the U.S. Federal Trade Commission's request for additional information on the transaction postponed the deal.
Chesapeake Energy CEO Dell'Osso commented on the current state of the U.S. natural gas market, mentioning that it is oversupplied at present. In this situation, he believes that the company should be cautious about its overall supply strategy. The post-merger company will adjust the supply as and when management believes that the oversupply issue has been resolved. (Chesapeake Energy's Merger Deal to Close Early in Q4 2024).
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 positive week, indicative of the bullish trading in oil and gas. The Energy Select Sector SPDR — a popular way to track energy companies — rose 3.7% last week. However, the sector tracker has decreased 4.7% 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.
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Oil & Gas Roundup: CVX's LNG Stance, EQNR's Project Cancellation & More
It has been a week since both oil and natural gas prices have moved up.
The headlines revolved around energy supermajor Chevron’s (CVX - Free Report) plans on LNG investment and Equinor’s (EQNR - Free Report) pullout of the blue hydrogen project in its native Norway. Developments associated with SLB (SLB - Free Report) , TechnipFMC (FTI - Free Report) and Chesapeake Energy also grabbed attention.
Overall, it was a bullish seven-day period for the sector. West Texas Intermediate (WTI) crude futures rose around 4.7% to close at $71.92 per barrel, while natural gas prices increased 5.4% to end at $2.434 per million British thermal units (MMBtu).
The positive crude price action was driven by the Federal Reserve’s significant 50-basis point rate cut and escalating tensions in the Middle East, fostering expectations of stronger future demand.
Meanwhile, natural gas also settled with a gain due to forecasts for strong cooling demand.
Recap of the Week’s Most Important Stories
1. U.S. energy major Chevron has taken a decisive step in its energy strategy by choosing not to invest in a U.S. LNG plant. Instead, the company is shifting its focus toward selling gas directly to the market, taking full advantage of the United States’ expansive midstream market. This strategic choice, which reflects the company's long-term goals in natural gas monetization without the need for LNG conversion infrastructure, is significant for CVX and the LNG sector as a whole.
Chevron’s midstream head, Colin Parfitt, emphasized the company’s ability to monetize U.S. gas effectively without converting it to LNG. The robust U.S. midstream market infrastructure allows CVX to tap into lucrative natural gas deals that bypass the need for expensive LNG plant investments.
The decision to forgo an equity stake in the Driftwood LNG project in Louisiana, which is operated by Woodside Energy, reflects CVX's conservative investment approach. This LNG project, expected to produce 27.6 million tons per annum, is a significant project, and Woodside is reportedly considering selling up to a 50% stake. However, CVX has made clear that it will not be taking a direct equity position in the venture. (Chevron Focuses on Direct Gas Sales Instead of LNG Plant Investment)
2. Equinor, a Norwegian state-owned energy company, has scrapped its plans to export blue hydrogen to Germany due to high costs and a lack of sufficient demand, per media reports. The move came at the heels of the Zacks Rank #3 (Hold) company's initial partnership with German energy giant RWE, which was established in January 2022 to create a hydrogen supply network aimed at reducing greenhouse gas emissions in German power plants. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Equinor initially expected to produce blue hydrogen from natural gas in Norway, combined with carbon capture and storage, and export it to Germany via an offshore hydrogen pipeline. However, the cost of the entire supply chain, which Equinor CEO Anders Opedal had previously estimated could reach "tens" of billions of euros, proved prohibitive.
The pipeline alone was projected to cost around €3 billion ($3.35 billion). Without firm long-term commitments from European buyers to import hydrogen, EQNR could not justify continuing the project. (Equinor Cancels Blue Hydrogen Export Plans to Germany Amid Low Demand)
3. SLB, the U.S. oilfield service biggie, is deepening its collaboration with NVIDIA to develop cutting-edge generative AI solutions tailored for the energy industry. This partnership, building on years of collaboration, aims to accelerate the deployment of industry-specific AI models across SLB's digital platforms. These platforms, including Delfi and Lumi, will enhance the way energy professionals interact with data.
At the heart of this initiative is NVIDIA NeMo, a key component of the NVIDIA AI Enterprise software platform. By leveraging NeMo, SLB will create custom generative AI models to address the unique, data-intensive needs of the energy industry. These models will be optimized for various computing environments, from data centers to cloud-based systems and edge devices.
The integration of AI into SLB’s platforms will have wide-reaching implications for the industry. It promises to enhance subsurface exploration, streamline production operations and improve data management processes, offering researchers, scientists and engineers powerful tools for addressing complex technical challenges. By applying generative AI, these domain experts will be able to drive innovation, increase efficiency and support more sustainable practices within the energy sector. (SLB & NVIDIA Partner to Drive AI Innovation in Energy Sector)
4. UK-based oilfield service provider TechnipFMC has been awarded two major subsea contracts by Brazil’s Petrobras. These contracts are seen to be a significant step toward the development of the hydrocarbon resources in Brazil’s offshore oil fields.
The major terms of the first contract between TechnipFMC and Petrobras include designing, engineering and manufacturing flexible riser pipes, along with providing associated services like packing and storage. The first contract won by TechnipFMC is considered to be substantial as it is valued between $250 million and $500 million in inbound orders.
The terms of the second contract include designing, engineering and manufacturing the subsea production systems by TechnipFMC for deployment on the Atapu 2, Sepia 2 and Roncador projects. The company would also provide some additional services like installation support, life-of-field services and additional equipment. The second contract is equally significant for TechnipFMC as the company expects to win between $75 million and $250 million in inbound orders. (TechnipFMC Secures Two Petrobras Subsea Contracts in Brazil).
5. Natural gas player Chesapeake Energy has announced that the pending merger with Southwestern Energy is anticipated to close early in the fourth quarter of this year. Chesapeake Energy had announced the acquisition of rival natural gas firm Southwestern Energy in an all-stock deal in January 2024. The deal was valued at approximately $7 billion.
The acquisition was originally anticipated to be closed by the end of the second quarter. However, the U.S. Federal Trade Commission's request for additional information on the transaction postponed the deal.
Chesapeake Energy CEO Dell'Osso commented on the current state of the U.S. natural gas market, mentioning that it is oversupplied at present. In this situation, he believes that the company should be cautious about its overall supply strategy. The post-merger company will adjust the supply as and when management believes that the oversupply issue has been resolved. (Chesapeake Energy's Merger Deal to Close Early in Q4 2024).
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 +3.7% +0.1%
CVX +3.6% -8%
COP +6.2% -15.7%
OXY +1.2% -20.5%
SLB +6.1% -22.9%
RIG +9.9% -28.8%
VLO +0.1% -20.7%
MPC +0.5% -18.8%
Stocks had a mostly positive week, indicative of the bullish trading in oil and gas. The Energy Select Sector SPDR — a popular way to track energy companies — rose 3.7% last week. However, the sector tracker has decreased 4.7% 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.