Both crude and natural gas prices declined during the past
Among the newsmakers,
Baker Hughes Inc.
) cautioned investors about sub-par fourth quarter
Crude prices came under pressure last week, as markets were
faced by an increase in Libyan oil exports to near-normal levels
following months of political turmoil. The commodity was also hit
by surprisingly weak U.S. jobs reading.
Sentiments were further weakened by the Energy Information
Administration (EIA) report that showed a build in fuel (gasoline
and distillate) supplies, apart from a tepid drop in oil
As per the EIA's weekly 'Petroleum Status Report,' crude
inventories fell by a smaller-than-expected 2.68 million barrels
for the week ending Jan 3 to 357.89 million barrels. More
worryingly, gasoline and distillate supplies were both up
significantly from the week-ago levels.
As a result of these factors, by close of trade on Friday,
West Texas Intermediate (WTI) oil was in the red and settled at
$92.72 per barrel, losing 1.0% for the week.
Investors continue to focus on temperature patterns to
understand the fuel's economic dynamics. As it is, natural gas
fundamentals look uninspiring with supplies remaining ample in
the face of underwhelming demand. In fact, it is expected to take
many years for the commodity's demand to match supply in the face
of newer projects.
Natural gas fell to a one-month low last week, pulled down by
a smaller year-over-year decrease in supplies and forecasts of a
break in cold weather conditions.
The EIA's weekly inventory release showed that natural gas
stockpiles held in underground storage in the lower 48 states
fell by 157 billion cubic feet (Bcf) for the week ended Jan 3,
slightly higher than the guided range (of 148-152 Bcf drawdown).
However, the reduction was below last year's withdrawal of 191
Bcf despite the cold snap that hit many cities during the current
Moreover, milder weather forecasts - in bulk of the country
over the next few days - are likely to limit the commodity's
demand for heating.
Influenced by these factors, natural gas spot prices ended
Friday at $4.05 per million Btu (MMBtu), down 7.7% over the
The Energy Week That Was:
The week's energy coverage was dominated by the following
Chevron Expects Lower Q4 Production
Shares of U.S. energy giant Chevron Corp. were down almost 2%
after the company warned investors about a drop in fourth quarter
production. Though the San Ramon, Calif.-based integrated
supermajor expects earnings for the period to be comparable to
the previous quarter, lower volumes and slumping commodity prices
will pull down the 'Upstream' segment result. However, on a
slightly bullish note, the outlook for the 'Downstream' unit is
positive with refining margin projected to increase in the U.S.
Weather to Dampen Conoco Q4 Yield
U.S.energy giant ConocoPhillips reported that poor weather
conditions in the continental U.S. and North Sea will negatively
impact its expected production for the fourth quarter. Notably,
significant weather-related downtime in several operational areas
has lately disrupted truck traffic and abandoned some wells.
In view of these challenges and turbulent weather in that
region, ConocoPhillips lowered its output at its huge Ekofisk
field in the North Sea last month. The company expects
fourth-quarter output from continuing operations at 1,475
thousand barrels oil equivalent per day (Mboed), down from its
earlier forecast of 1,485-1,525 Mboed.
Biz to Hurt BHI Q4 Earnings
In its fourth quarter preliminary operational update, oilfield
services provider Baker Hughes Inc. said that its Iraqi business
suffered disruptions and increased expenses during the period due
to personnel movements, security measures and other nonrecurring
items. These contributed to a loss in revenues. In fact, Baker
Hughes' pre-tax and after-tax profit is also likely to have been
affected by around $80 million, or 18 cents per share due to
disturbances in Iraq.
Moreover, weather delays late in the quarter affected activity
in the U.S. and the North Sea. As a result, operating profit
margins are expected to post a sequential decline in North
America and Europe/Africa/Russia Caspian.
SandRidge to Divest GoM Assets
Oil and gas explorer
SandRidge Energy Inc.
) announced the sale of its Gulf of Mexico assets to Fieldwood
Energy LLC for a cash consideration of $750 million, along with
an abandonment liability of $370 million. The sale, which is
expected to close by March 31, is a strategic move by SandRidge
to shift focus to its lucrative Mid-Continent business where it
already has a strong presence.
The proceeds from this divestment are expected be incorporated
in the company's Mid-Continent drilling projects in due course.
The move is also likely to boost the company's financials,
bringing more than $2.0 billion in pro-forma liquidity and
lowering the leverage ratio to less than 3.0x.
Hess to Separate Retail Unit
Oil and gas company
) wholly owned subsidiary Hess Retail Corporation has filed
paperwork with the U.S. Securities and Exchange Commission (SEC)
for a potential spin-off of its retail unit. The spin-off of
Hess' gasoline stations and convenience store network is in
response to a campaign by activist investor Elliott Management
and comes almost a year after Hess planned to exit the energy
trading and marketing businesses.
Performance Chart of Some Major Companies:
The following table shows the price movement of the major oil
and gas players over the past week and during the last 6
Last Week's Performance
6 month performance
Other Headline News on Energy:
BHI Counts 26 More Rigs in Dec
In its monthly release, Baker Hughes reported worldwide rotary
rig count for Dec 2013 to be 3,478, up 26 from 3,452 in Nov 2013,
and up 88 from 3,390 in Dec 2012. The industry operated 2,143
rigs in the U.S. and 1,335 internationally in December.
Statoil Shelves Kristin Gas Project
) has decided to shelve its Kristin gas export project (KGEP) due
to unsustainable economics. The Norwegian oil giant's associates
in KGEP also support the decision. Located on the southwestern
part of the Halten Bank in the Norwegian Sea, the Kristin field
is estimated to hold recoverable reserves of around 1.5 trillion
cubic feet of gas and 240 billion barrels of condensate. However,
the partners have decided to terminate the project due to
increased costs and volume risk.
This Week's Outlook:
Apart from the usual releases - the U.S. government data on
oil and natural gas - market participants await data on retail
sales and consumer prices.
Want the latest recommendations from Zacks Investment
Research? Today, you can download
7 Best Stocks for the Next 30 Days
Click to get this free report >>
BAKER-HUGHES (BHI): Free Stock Analysis
CONOCOPHILLIPS (COP): Free Stock Analysis
CHEVRON CORP (CVX): Free Stock Analysis
HESS CORP (HES): Free Stock Analysis Report
SANDRIDGE ENRGY (SD): Free Stock Analysis
STATOIL ASA-ADR (STO): Free Stock Analysis
To read this article on Zacks.com click here.