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Oil & Gas Stock Roundup: COP, APC, OXY Boosting Shareholders' Wealth


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It was a week where both oil and natural gas finished lower.

On the news front, oil biggies ConocoPhillips COP and Anadarko Petroleum APC authorized additions to their stock repurchase programs. Meanwhile, Occidental Petroleum OXY recently increased its dividend.

Overall, it wasn't a good week for the sector. While West Texas Intermediate (WTI) crude futures lost 3.8% to close at $71.01 per barrel, natural gas prices fell around 3.7% to $2.752 per million Btu (MMBtu). (See the last 'Oil & Gas Stock Roundup' here: Enbridge's Midstream Sale, Chevron's North Sea Plans & More )

The U.S. crude benchmark slipped for the second week in a row even as the Energy Department's inventory release showed that stockpiles recorded its largest weekly draw since 2016. The massive 12.6 million barrels dip pushed storage levels to their lowest since February 2015, while keeping them under the five-year average. However, the positive reading was more than offset by fears of supply resumption from Libya and escalating trade conflict between the United States and China.

Meanwhile, natural gas prices also moved southward last week as bearish weather predictions pointed to weakening demand and pressured the fuel's price. Investors were spooked by forecasts of lower-than-normal temperature that could lead to decrease in natural gas demand for air-conditioning.

Recap of the Week's Most Important Stories

1.    ConocoPhillips has received consent from board of directors for increasing share repurchase program for 2018 by 50% to $3 billion from $2 billion. In 2018, the Zacks Rank #1 (Strong Buy) company will have sufficient cash from operations to fund the program along with dividend and capital expenditures. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Currently, the company has a total share repurchase authorization of $6 billion. The 2018 share repurchase program expansion to $3 billion along with shares repurchased worth $3 billion during 2016 and 2017, will fully utilize the board's existing authorization. Therefore, the board has authorized additional share repurchases of $9 billion, taking the total amount to $15 billion.

ConocoPhillips also announced that it has reduced debt by $2.1 billion during the second quarter and has attained declared debt target of $15 billion much before the original target date of 2019 end. (Read more Conoco Hikes Share Repurchase Program, Lowers Debt )

2.    Anadarko Petroleum's board of directors has authorized a $1-billion hike in share repurchase program and raised its debt reduction plan by $500 million. The authorization indicates the company's plan to utilize free cash flow to fund repurchase and repayment of debts.

Anadarko Petroleum has been undertaking initiatives to create value for shareholders. On Jun 29, 2018, the company completed its previous $3-billion share repurchase authorization. The recent authorization created another coffer of $1 billion for shares to be repurchased before the end of June 2019.

The current debt/capital ratio of the company is 57.09%, which is higher than the industry average of 35.05%. Anadarko Petroleum had a plan to redeem debts worth $1 billion in the near term. The recent authorization raised the debt reduction program to $1.5 billion. (Read more Anadarko Raises Buyback & Debt Reduction Target by $1.5B )

3.    Occidental Petroleum's Board of Directors announced the company's regular quarterly dividend of 78 cents per share, which annually stands at $3.12. The figure reflects a 1.3% hike compared with the previous annual rate of $3.08 per share.

The board members of Occidental Petroleum have been clearing annual dividend hikes for more than a decade now. Notably, yearly payout increases are becoming a steady policy for this Oil and Gas major. The company's latest move marks the 16th consecutive year of dividend raise.

The current annualized dividend yield is 3.7% compared with the S&P 500 average of 1.8%. This rise in distributable income vouches for the company's strong balance sheet and a constant cash flow position, providing it with financial flexibility and a cushion for incremental dividend. (Read more Occidental's Board Approves 1.3% Hike in Dividend )

4.    Offshore services provider, Tidewater Inc has proposed to buy smaller rival - GulfMark Offshore, Inc . GLF . The move is expected to create significant synergies and growth prospects as the offshore support vessel (OSV) sector continues to revive with the recovery in oil prices . The combination is anticipated to conclude in the fourth quarter of 2018.

Per the agreement, Tidewater will purchase GulfMark by paying about $340 million to create a combined company worth about $1.25 billion in an all-stock deal. GulfMark's shareholders will get 1.100 shares of Tidewater common stock for each share.

Subject to Jones Act restrictions on maximum ownership of shares by non-U.S. citizens, GulfMark noteholder warrant will be automatically changed into the right to receive 1.100 Tidewater shares. Post the completion of the deal, the GulfMark security holders will jointly hold 27% ownership of the combined company or 26% on a fully-diluted basis.

The combined company will possess the industry's largest fleet as well as extensive coverage globally in the OSV sector. It will operate 102 Tier 1 vessels, of which 20 are stacked currently, with an average age of about 6.5 years. The reactivation of the stacked vessels is projected to generate an additional annual vessel operating margin of $32 million. (Read Tidewater to Buy GulfMark, Form Combined Entity Worth $1.25B )

5.    QEP Resources, Inc. QEP recently inked a $155-million deal to offload its oil and gas assets in the Uinta Basin, in a bid to sharpen focus on the prolific Permian play. Middle Fork Energy Partners, LLC will be purchasing the Uinta assets located in Duchesne and Uintah counties in eastern Utah.

The divested assets comprise acreage of around 230,000 net acres and incorporate 605 billion cubic feet equivalents of proved reserves as of Dec 31, 2017. QEP Resources' net production in the last reported quarter, from the Uinta assets, was 54 million cubic feet of gas equivalent per day. Around 26% of the production was liquids.

The deal is in line with QEP Resources' strategy to streamline portfolio. The company has been entering into various strategic deals of late to sharpen focus on the more profitable Permian Basin and upgrade portfolio. (Read more QEP Resources to Sell Uinta Assets, Deepen Focus in Permian )

Price Performance

The following table shows the price movement of some the major oil and gas players over the past week and during the last 6 months.

Company

Last Week

Last 6 Months

XOM

+1.2%

-6.3%

CVX

-0.1%

-7.1%

COP

+3.4%

+17.9%

OXY

-0.7%

+8.8%

SLB

+1.6%

-11.7%

RIG

+2.2%

+15.7%

VLO

-0.5%

+9%

MPC

+2.2%

-0.8%

Bucking the week's negative oil market sentiment, the Energy Select Sector SPDR - a popular way to track energy companies - generated a +0.8% return last week. The best performer was upstream energy player ConocoPhillips whose stock rose 3.4%.

Longer-term, over six months, the sector tracker is down 2.2%. Oilfield services powerhouse Schlumberger Ltd. SLB is far and away the major loser during this period, experiencing a 11.7% price fall.

What's Next in the Energy World?

As usual, market participants will be closely tracking the regular releases i.e. the U.S. government statistics on oil and natural gas -- one of the few solid indicators that comes out regularly. Energy traders will also be focusing on the Baker Hughes data on rig count.

Finally, the 2018 Q2 earnings will remain under scrutiny this week, with the oil services companies, providers of technical products and services to drillers of oil and gas wells, kicking off what is expected to be another good earnings season for U.S. energy firms.

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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

Schlumberger Limited (SLB): Free Stock Analysis Report

GulfMark Offshore, Inc. (GLF): Free Stock Analysis Report

QEP Resources, Inc. (QEP): Free Stock Analysis Report

Anadarko Petroleum Corporation (APC): Free Stock Analysis Report

ConocoPhillips (COP): Free Stock Analysis Report

Occidental Petroleum Corporation (OXY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: SLB , GLF , QEP , APC , COP



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