Crude prices climbed back above $102-a-barrel past week on
positive U.S. economic data and the continued Ukraine impasse,
while natural gas continued its downtrend amid another big storage
build that eased worries about an imminent supply shortfall.
Among the newsmakers, natural gas producer
Chesapeake Energy Corp.
) announced plans to spin-off its oilfield services business in an
attempt to streamline itself, while Canada's
) came out with robust first quarter results.
Crude prices got a boost from the latest housing and jobless
claims numbers, providing further evidence that the U.S. economy is
coming out of its winter freeze. This has fueled hopes for robust
fuel and energy demand in the world's biggest oil consumer.
The positive momentum was further propelled by IEA's upward
revision to its 2014 global oil demand forecast and the approaching
summer driving season that would provide a fillip to gasoline
consumption. Geopolitical forces too played their part in
supporting crude prices, with news of renewed tension in Libya, and
continued confrontation between Moscow and the West that threatens
to derail hydrocarbon supplies from Russia.
However, the bulls were somewhat offset by an unexpected spike
in crude inventories, while domestic production still remains in
record territory. Concerns over Chinese demand slowdown and
Euro-zone's economic growth has also been a drag on prices.
As a result of these factors, by close of trade on Friday, West
Texas Intermediate (WTI) oil settled at around $102.02 per barrel,
gaining 1.7% for the week.
Natural gas extended losses from the previous week on the back
of a bearish supply data and predictions of neutral weather across
certain regions of the country.
The EIA's weekly inventory release showed that natural gas
stockpiles held in underground storage in the lower 48 states rose
by 105 billion cubic feet (Bcf) for the week ended May 9, above the
guided range (of 97-101 Bcf build). Moreover, the latest build -
the sixth on the trot and the fourth successive above consensus
injection - went a long way in easing fears about the timely
replenishment of the inventories ahead of the next heating season,
starting from November.
To make things worse, mild springtime temperature forecasts - in
the country's Northeast and Midwest over the next few days - are
likely to limit natural gas' early season cooling demand.
Influenced by these factors,
ended Friday at $4.41 per million Btu (MMBtu), down 2.6% over the
Energy Week That Was:
The week's energy coverage was dominated by the following
Chesapeake Slides on Plans to Spin Off Oilfield Service
U.S. gas giant Chesapeake Energy Corp. ended last week on a
slippery note, as the spin-off announcement for its oilfield
services business - Chesapeake Oilfield Operating LLC - dragged its
shares down by almost 2.5% on May 16. The proposed restructure is
in line with the company's ongoing strategy of shifting focus from
natural gas drilling to liquids production. Involved in drilling,
hydraulic fracturing, rig relocation, and other related services,
the to-be-divested business generated revenues of $2.2 billion last
Post spin-off completion, which is likely to be by June, the new
unit would be christened Seventy Seven Energy Inc. Per company
estimates, the oilfield services business would at one go take away
$1.1 billion of debt from its books.
Encana Beats on Q1 Earnings
Canadian energy explorer Encana Corp. saw its shares jump 6%
after reporting strong first quarter results. The predominantly
natural gas producer beat estimates on the back of high commodity
prices and lower operating expenses. On the production front,
liquids output climbed 56% from the first quarter of 2013, while
gas volumes fell 2%. The Calgary, Alberta-based company guided
towards capital spending of $2.4-$2.5 billion this year, while
lowering its 2014 total production expectation to reflect the
Wyoming asset sales.
Core Labs Guides Lower for Q2 & '14, Shares
Shares of oilfield services provider
Core Laboratories N.V.
) crashed 12% after it lowered second quarter EPS range to
$1.32-$1.35 from its previous projection of $1.48-$1.53. The
company also reduced its 2014 EPS guidance to $5.80-$6.00 from
$6.00-$6.25. Projected revenues were cut back too, with $265-$270
million now estimated for the second quarter instead of $280-$286
million before, while full year projections were trimmed to $1.1
billion from $1.16-1.18 billion.
Core Labs revealed that its North American customers expect
less-than-anticipated reservoir fluids levels from developed
unconventional resources in Bakken, Marcellus, Niobrara, Montney
and Eagle Ford formations, compelling the company to lower its EPS
and revenue guidance.
Anadarko Hikes Quarterly Dividend
The board of directors of
Anadarko Petroleum Corp.
) announced an impressive 50% hike in the quarterly dividend rate.
The new quarterly dividend comes to 27 cents per share, up from 18
cents per share in the prior quarter. The latest hike - the second
in less than a year - comes on the heels of Anadarko Petroleum's
strong performance in the first quarter 2014 thanks to the upbeat
production results from its U.S. onshore plays.
ConocoPhillips Reaffirms Double-Digit Returns
At its 'Annual Stockholders Meeting', world's largest
independent energy explorer and producer -
) - reiterated its target of delivering double-digit returns
annually to shareholders by growing production and margins by 3% to
5% a year and offering a steadily increasing dividend. The company
plans to increase output by maintaining its focus on growth in
reserves, through global drilling programs in legacy assets,
unconventional assets and major projects.
ConocoPhillips' margin growth drive would also be helped by its
shift of production mix to higher-value products. The company
expects to spend $16 billion per year on an average, allocating 95%
of the total to investments that deliver above-average margins.
Performance Chart of Some Major Companies:
The following table shows the price movement of the major oil
and gas players over the past 5 days and during the last 6
Last 5 Day's Performance
6 month performance
Other Headline News on Energy:
National Oilwell Ups Dividend by 77%
Global large-cap energy equipment maker,
National Oilwell Varco Inc.
) increased in its quarterly cash dividend to 46 cents per share
($1.84 annualized), up almost 77% from 26 cents. Earlier in the
week, the company announced that the spin-off of its distribution
business, NOW Inc., has received the approval to be listed on the
NYSE. The new entity - to come into effect after the close of trade
on May 30 - will be trading under the symbol DNOW. For every four
shares of NOV, one share of the new entity will be issued to
Apache Hikes Share Repurchase Plan
U.S. energy firm
) declared that its board of directors has approved an additional
buyback of 10 million shares, thereby increasing the quantum to 40
million. The company has already shelled out some $2.1 billion to
repurchase 24.3 million shares under its previous 30 million share
HollyFrontier Ups Dividend by 6.7%
Downstream operator HollyFrontier Corp. has increased its
quarterly cash dividend by 6.7% to 32 cents per share ($1.28 per
share annualized). This marks the sixth dividend hike for the
company since it came into existence after the merger of Holly
Corp. and Frontier Oil Corp. in July 2011. HollyFrontier also
declared a special cash dividend of 50 cents per share.
This Week's Outlook:
Apart from the usual releases - the U.S. government data on oil
and natural gas - market participants will be tracking Wednesday's
monetary policy meeting by the Federal Reserve. Energy traders will
also be focusing on developments in Ukraine.
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APACHE CORP (APA): Free Stock Analysis Report
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