Growing odds of an imminent Fed Taper, combined with whopping
refined product builds weakened crude prices, while natural gas
surged on frigid weather forecasts and stockpiles data.
Among the newsmakers,
) announced plans to spend a massive $40 billion next year, while
Anadarko Petroleum Corp.
) found itself reeling from legal woes.
Crude prices came under pressure last week, as a combination
of encouraging economic reports and reduced fiscal overhang
(following the two-year Congressional budget deal) once again
intensified apprehensions that the Federal Reserve may announce a
small cut in the $85 billion a month economic stimulus plan at
its upcoming policy meeting scheduled this week.
Traders have voiced concerns that Fed's shift away from the
bond buying policy may lead to dollar-denominated oil prices to
increase in local-currency terms in emerging markets, thus
Sentiments were further weakened by the Energy Information
Administration (EIA) report that showed a huge build in fuel
(gasoline and distillate) supplies, which outweighed a hefty drop
in oil inventories.
As per the EIA's weekly 'Petroleum Status Report,' crude
inventories dropped by a larger-than-expected 10.59 million
barrels for the week ending Dec 6 to 375.25 million barrels.
However, storage at the Cushing terminal in Oklahoma - the key
delivery hub for U.S. crude futures traded on the New York
Mercantile Exchange - was up by 625,000 barrels to their highest
level since Jul. Further weighing on the sentiments, gasoline and
distillate supplies were both up significantly from the week-ago
As a result of these factors, by close of trade on Friday,
West Texas Intermediate (WTI) oil was in the red and settled at
$96.60 per barrel, losing 0.9% 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.
Despite these issues, natural gas rallied to a two-year high
last week on the back of an in-line decrease in natural gas
supplies and forecasts of freezing 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 81 billion cubic feet (Bcf) for the week ended Dec 6, at
the midpoint of the guided range (of 79-81 Bcf drawdown).
Moreover, the decrease was higher than both last year's
withdrawal of 8 Bcf and the 5-year average reduction of 76 Bcf
for the reported week.
Chilly weather forecasts - in the key U.S. consuming regions
over the next few days - are likely to further spur the
commodity's demand for heating.
Influenced by these factors, natural gas spot prices ended
Friday at $4.35 per million Btu (MMBtu), up 5.8% over the
Energy Week That Was:
The week's energy coverage was dominated by the following
Chevron '14 Capex Plan Nears $40B
U.S.energy giant Chevron Corp. unveiled its 2014 capex budget
of $39.8 billion. Of the total outlay, $4.8 billion will be
invested by the company's affiliates, lowering Chevron's pocket
pinch to $35 billion.
The 2014 projected capital expenditure is, however,
approximately $2 billion less than that of the current year.
Almost 90% of the 2014 budget - $35.8 billion - will be spent on
the company's 'Upstream' segment. The 'Downstream' segment would
receive only 8% or around $3.1 billion whereas the remaining $0.9
billion will be spent on corporate activities.
Anadarko Tumbles on Cleanup Cost Liability
Shares of Anadarko Petroleum Corp. fell to a 10-month low
following a court verdict that went against the company. U.S.
bankruptcy judge Allan L. Gropper held that Anadarko could have
to shell out anything within $5.2-$14.2 billion in environmental
clean-up costs - much higher than initial estimates - associated
with its 2006 acquisition of Kerr-McGee Corp.
MRO to Increase Output in U.S. Plays
Oil and natural gas explorer
Marathon Oil Corp.
) reported that it intends to ramp up its rig operations in U.S
resource plays - Eagle Ford, Bakken and Oklahoma Woodford - in
2014, resulting in a 30% hike in production from the regions.
Marathon Oil also projects its total output to increase 4% in the
Additionally, the Houston, TX-based upstream operator set its
total capital, investment and exploration budget for 2014 at $5.9
billion. Further, Marathon Oil said that its board of directors
has approved the expansion of the residual stock buyback program
to roughly $2.5 billion.
Encana Tanks on 2014 Spending Plans
Canadian natural gas producer
) said that it will lower its 2014 capital expenditures by about
10% even as it aims to increase liquids production by 30%. The
Calgary-based energy giant has pegged its 2014 capital budget at
C$2.4-2.5 billion. Of the total, roughly three-fourths will go
toward five liquid-rich resource plays across North America.
However, the forecasts seem to have spooked investors, as
Encana shares fell 6% on Wednesday to close at $18.11.
Shareholders were disappointed that despite the greater focus on
oil, price-stifled natural gas would still make up around 80% of
the company's total output.
Cabot Shares Up on Marcellus Update
Shares of the independent oil and gas exploration firm
Cabot Oil & Gas Corp.
) shot up 4.6% to $36.82 post the announcement of the company's
success in the Marcellus shale. The 10-well pad, which the
company successfully completed, will result in a 30-day average
production of 168 million cubic feet (Mmcf) per day and has a
peak production capacity of 201 Mmcf per day.
In particular, the two Upper Marcellus wells - with initial
production (IP) of 32 Mmcf per day and 30-day production of 24
Mmcf per day - are expected to provide rates of return competing
with those of the other unconventional resource plays. A key
takeaway from the update is the success of the downspacing test
that would provide a greater recoverable resource base for
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:
QEP Resources Arm Pens $950M Deal
QEP Energy Co., a fully owned affiliate of domestic energy
QEP Resources Inc.
), has entered into an agreement with an undisclosed seller to
purchase Permian Basin-based oil and gas assets for roughly
$950.0 million. The to-be-acquired properties span across roughly
26,519 net acres and generate 6,700 barrels of oil equivalent per
day (68% oil). Moreover, the net proved reserve and the projected
recoverable reserve of the Permian Basin oil and gas properties
are 47 and 300 million barrels of oil equivalent,
Cameron Raises Share Buyback Approval
Oil drilling equipment maker,
Cameron International Corp.
) has announced plans to buy back $750 million of its common
stock. This program is over and above the ongoing share
repurchase scheme of $1.65 billion, which was approved by the
Board of Directors in phases. Under the previous authorization,
the company has already spent roughly $1.36 billion to buy back
some 23.5 million shares of its common stock.
NFX Sees Higher Production in 2014
Newfield Exploration Co. recently announced production
guidance for next year. The company expects net production from
continuing operations to range 44-48 million barrels of oil
equivalent (BOE) in 2014, or 10%-20% higher than the 2013
estimated volume of 40 million BOE.
In particular, domestic liquids production in 2014 is slated
to increase 30% versus 2013. The Woodlands, TX-based energy
explorer further informed that it plans to invest about $1.6
billion in capital expenditures during 2014, of which the major
portion ($700 million) will be invested in the Anadarko
This Week's Outlook:
Apart from the usual suspects - the U.S. government data on
oil and natural gas - market participants will be closely
tracking Fed's final policy meeting for the year. Scheduled for
Dec 17-18, the outcome of this meeting is widely expected to
determine the future of the stimulus
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ANADARKO PETROL (APC): Free Stock Analysis
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