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Oil & Gas Stock Roundup: Exxon Mobil Plans $20B Vietnam Push - Analyst Blog

Posted
3/25/2014 11:02:00 AM
By: Zacks.com
Referenced Stocks:EIA;WTI;CHK;CVE;IMO

Crude prices edged up slightly during the past week on Federal Reserve's confirmation of a recuperating economy, while natural gas declined amid a weak inventory report and expectations of milder temperatures with the arrival of spring.

Among the newsmakers, U.S. behemoth Exxon Mobil Corp. ( XOM ) is planning to invest around $20 billion in a power project in Vietnam.   

Crude Oil:

Crude prices edged up last week amid Federal Reserve's Taper announcement, which works on the premise that the U.S. economy is strong enough. Crude got a further boost from recent geopolitical tensions associated with the Crimea crisis and news about a pipeline expansion - likely to amplify takeaway capacity at the Cushing, Oklahoma storage hub - to be completed sooner than previously suggested.

However, to a large extent, the bulls were offset by the Energy Information Administration (EIA) report that showed a significantly higher-than-expected increase in oil inventories. Prices were also pressured by a stronger greenback after the Federal Reserve indicated it might increase key lending rates earlier than expected.

As a result of these factors, by close of trade on Friday, West Texas Intermediate (WTI) oil settled at around $99.50 per barrel, gaining a mere 0.2% for the week. 

Natural Gas:

Natural gas fell last week to their lowest level in 2 months on the back of a bearish supply data and the onset of soft spring temperature.

The EIA's weekly inventory release showed that natural gas stockpiles held in underground storage in the lower 48 states fell by 48 billion cubic feet (Bcf) for the week ended Mar 14, below the guided range (of 57-61 Bcf drawdown).

To make things worse, milder spring weather forecasts - in bulk of the country over the next few days - are likely to limit natural gas' demand for heating.

Influenced by these factors, natural gas prices ended Friday at $4.30 per million Btu (MMBtu), down 2.9% over the week.

Energy Week That Was:

The week's energy coverage was dominated by the following news:

Exxon, PetroVietnam to Invest $20B

US energy giant Exxon Mobil Corp. intends to team up with state-owned Vietnam oil and gas group - PetroVietnam - to invest about $20 billion in a gas-fired power complex, according to the Ministry of Industry and Trade sources. The project will include construction of two power plants with a combined capacity of 6,000 to 6,500 megawatts.

The plants would span across 200 hectares in total, but the locations for them have not been disclosed. This project is likely to make the U.S. one of the top four foreign investors in Vietnam along with Japan, South Korea and Taiwan.

PetroChina Reports Profit Growth

ADRs of Chinese energy giant PetroChina Co. Ltd. ( PTR ) rose more than 3% after reporting higher 2013 profit despite in the world's second largest economy. The improved performance could be attributed to narrower refining losses due to a favorable pricing policy, together with growth in international oil and gas output. Importantly, the Beijing-based group has vowed to reduce capital spending by around 7% in 2014 to RMB 297 billion, thereby strengthening its balance sheet and cash flows.

Shell Consortium Finds Oil Off Sabah

Europe's largest oil company Royal Dutch Shell plc ( RDS.A ), along with its joint venture partners, ConocoPhillips and Petroliam Nasional Berhad or Petronas, discovered oil offshore Sabah, Malaysia. Crude was found from the deepwater appraisal well Limbayong-2, in the Limbayong gas field, located in Block J off the coast of Sabah. During the appraisal of the gas field, Shell discovered 136 meters of oil bearing sands in the well. There are plans to continue the appraisal to determine the recoverable volume.

Chesapeake Services Unit Spin-off Likely

U.S gas giant Chesapeake Energy Corp. ( CHK ) is preparing for a possible spin-off of its oilfield-services unit and has filed a Registration Statement on Form 10 with the U.S Securities and Exchange Commission. The spin-off is an effort towards reducing costs, debt as well as enhancing the market value of the company's assets. Per the paperwork filed, the unit would be converted into a corporation and renamed Seventy Seven Energy Inc. prior to the completion of the spin off. The transaction would be tax-free for its shareholders.

Cenovus Grand Rapids Gets Regulatory Nod

Canadian oil company Cenovus Energy Inc. ( CVE ) announced that it has received approval from the government of Alberta for a new oil sands initiative. The project, christened Grand Rapids, is located approximately 300 kilometers north of Edmonton, in northern Alberta. Grand Rapids is expected to have production capacity of 180,000 barrels per day and will be developed in multiple phases. The project is anticipated to have a life of 40 years. Cenovus expects to make a decision on the timing of development later this year.

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 months.

Ticker

Last 5 Day's Performance

6 month performance

XOM

+0.58%

+8.26%

CVX

+1.28%

-7.21%

COP

+1.21%

-4.15%

OXY

-2.85%

+1.37%

SLB

+3.68%

+5.41%

RIG

+3.72%

-10.24%

VLO

-1.28%

+56.78%

TSO

-5.11%

+11.71%

Other Headline News on Energy:

Valero Unit Buys Ethanol Plant

Valero Renewable Fuels, a unit of refiner Valero Energy Corp. ( VLO ), has purchased a corn ethanol plant in Mount Vernon, Ind. from Aventine Renewable Energy-Mt. Vernon, LLC. The plant has an annual production capacity of 110 million gallons and uses Delta-T technology, similar to the process already in use at Valero Renewables' ethanol plant in Jefferson, Wis. The Mount Vernon plant is the 11th corn ethanol plant in Valero Renewables' system and it's second in Indiana. The addition will give Valero more than 1.3 billion gallons per year in ethanol production

Imperial Oil to Vend C$855M Assets

Canadian energy explorer Imperial Oil Ltd. ( IMO ) has entered into a deal with smaller rival Whitecap Resources Inc. to divest part of its producing properties in Western Canada for roughly C$855 million. The to-be-sold properties churned out approximately 15,000 oil-equivalent barrels per day in 2013. The transaction - expected to close in May - is part of Imperial Oil's efforts to concentrate on its oil sands and shale properties in the region.

McDermott, Petrobras Sign Subsea Deal

Offshore oil and gas-focused engineering and construction firm, McDermott International Inc. signed a deal to supply its subsea Lay Vessel North Ocean 105 to the Brazilian state-run energy giant Petrobras. The vessel, expected to start work during the third quarter, will be responsible for the installation of deepwater umbilical and flexible pipelines in the pre-salt area and the Campos Basin, off the coast of Brazil.

This Week's Outlook:

Apart from the usual releases in this holiday shortened week - the U.S. government data on oil and natural gas - market participants will be closely tracking housing sector and durable orders data plus the crucial GDP report. Energy traders will also be focusing on developments in Ukraine.

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CHESAPEAKE ENGY (CHK): Free Stock Analysis Report

CENOVUS ENERGY (CVE): Free Stock Analysis Report

IMPERIAL OIL LT (IMO): Free Stock Analysis Report

PETROCHINA ADR (PTR): Free Stock Analysis Report

ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report

VALERO ENERGY (VLO): Free Stock Analysis Report

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

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