Oil & Gas Stock Roundup: Chevron's Green Initiative, Exxon's Asset Sale & More

It was a week when both oil and natural gas prices posted gains.

The headlines revolved around energy biggie Chevron’s CVX plans to develop a solar-to-hydrogen production project in California and another biggie, ExxonMobil’s XOM divestment of a deepwater GoM development. Developments associated with Ecopetrol EC, Atlas Energy Solutions AESI and Shell SHEL also grabbed attention.

Overall, it was a bullish seven-day period for the sector. West Texas Intermediate (WTI) crude futures increased around 4.5% to close at $79.97 per barrel, while natural gas prices moved up some 8% to end at $1.84 per million British thermal units (MMBtu).

The positive crude price action was well supported by heightened tensions in the Middle East and OPEC’s willingness to extend its production cut deal.

Meanwhile, natural gas rallied sharply following bullish inventory numbers to go with signs of production pullback.

Recap of the Week’s Most Important Stories

1.    A subsidiary of American energy major Chevron announced its ambitious plan to develop a 5-megawatt hydrogen production project in California's Central Valley in a bold move toward sustainable energy production. This initiative aims to transform energy generation by leveraging solar energy, land resources and non-potable produced water from Chevron's existing assets at the Lost Hills Oil Field in Kern County.

Chevron's strategy is based on using its strength to safely deliver low-carbon energy solutions to meet the demands of a rapidly changing world. The project's focus on producing low carbon intensity (LCI) electrolytic hydrogen through electrolysis marks a milestone in CVX's commitment to environmental sustainability. By using electricity to split water into hydrogen and oxygen, the company aims to pioneer a cleaner, more sustainable energy future.

The planned facility is designed to produce an impressive two tons of LCI hydrogen per day, with the overarching goal of supporting the expansion of hydrogen refueling networks. Austin Knight, vice president for Hydrogen at Chevron New Energies, emphasized the key role of hydrogen in transitioning toward a lower carbon future. He expressed his interest in the scalability of the project, highlighting CVX's dedication to delivering innovative solutions to address the challenges of climate change. (Chevron Announces a 5MW Hydrogen Production Project)

2.    Larger rival ExxonMobil entered into an agreement to divest its interest in the Gulf of Mexico’s Ursa and Princess fields. Esperanza Capital Partners (“ECP”) and Andros Capital Partners are acquiring the stake as a joint venture (JV). The financial details of the deal have not been disclosed, marking a significant move for both buyers and sellers.

The JV between Esperanza Capital Partners and Andros Capital Partners is strategically aimed at the acquisition and further development of upstream assets in the deep-water regions of the Gulf of Mexico.

The divestment includes the current production from Ursa, which stands at 8,500 barrels of oil equivalent per day, primarily consisting of oil. The deal encompasses related infrastructure, notably the Ursa Tension Leg Platform host facility, further solidifying the JV’s foothold in the region. (ExxonMobil Divests Stake in Gulf of Mexico Fields)

3.    Ecopetrol, a Colombian state-owned energy company, discovered two new gas deposits in separate reservoirs while determining the size of the Orca-1 discovery. While evaluating its size, it was found that the Orca-1 discovery was smaller than expected. The company has not revealed any details regarding the two new reservoirs. However, the commercial viability of these reserves is yet to be determined.

The Orca Norte 1 is the first deepwater well to be operated wholly by Ecopetrol. The appraisal drilling of Orca 1 was carried out by Noble Corporation’s semi-submersible rig Noble Discoverer.

The Orca 1 discovery was made in collaboration with Brazilian energy giant Petrobras in 2014. It is located at a depth of 706 meters under water in the Tayrona Block. This new discovery suggests the possibility of finding additional resources in the Colombian deepwaters. The new discoveries add to a series of successful exploration campaigns in the Gorgon, Uchuva and Glaucus areas, offshore Colombia. (Ecopetrol Discovers New Gas Reserves in the Orca Block)

4.   Atlas Energy Solutions, a market leader in the proppant and logistics industry, announced the purchase of Hi-Crush Inc.’s Permian Basin proppant production assets and North American logistics operations in a deal worth $450 million. By combining Atlas’ Dune Express logistics with Hi-Crush’s Oncore + Pronghorn logistics, the acquisition will help expand the logistic capabilities of the former.

The companies stated that the buyout will combine two of the largest holders of premium giant open dune sand reserves and resources in the Permian Basin, which is located in the Southwestern United States and is an area of strategic importance to oil producers in the country.

The deal is set to be financed in upfront cash and Atlas common stock worth $150 million and $175 million, respectively. The company will also pay $125 million in deferred cash payments via a seller’s note. (Atlas to Buy Proppant Production Assets in a $450M Deal).

5.   European supermajor Shell agreed to sell off its position in the MunmuBaram project to its joint venture partner, Hexicon. Shell will sell its 80% stake in the 1.25 GW MunmuBaram offshore wind project to Hexicon. The JV partner previously had a 20% ownership in the same project, making it the sole owner of the South Korean wind project.

Shell mentioned that when it invested in this project in 2021, it deemed offshore wind energy as a crucial part of the net-zero energy ecosystem. However, Zacks Rank #3 (Hold) has been abandoning its offshore wind projects recently to increase its focus on the company’s other businesses. It still owns more than 2.1 GW of operational offshore wind capacity and over 9 GW of potential projects around the world.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Per the terms of the agreement, Hexicon will pay $5 million to Shell as a down payment. The agreement also includes a profit-sharing arrangement of $50 million between the two companies, spread over a period of three years. (Shell Abandons Offshore Wind Project in South Korea).

Price Performance

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

Company    Last Week    Last 6 Months

XOM                 +1.9%               -6.9%
CVX                  -1.2%                -10.1%
COP                +2.4%                 -9.5%
OXY                 +2.2%                 -8.5%
SLB                 +1.1%                 -17.5%
RIG                  +9%                    -37.5%
VLO                  +1.2%                +8.4%
MPC                 +2.2%                +19.2%

With oil moving up for the week, stocks were mostly positive. The Energy Select Sector SPDR — a popular way to track energy companies — rose 1.4% last week. But over the past six months, the sector tracker has decreased 4.8%.

What’s Next in the Energy World?

As usual, market participants will closely track the regular releases to look for guidance on the direction of the commodities. In this context, the U.S. government’s statistics on oil and natural gas — one of the few solid indicators that come out regularly — will be on energy traders' radar. As a matter of fact, fuel demand and the rate of stock drawdowns in the coming weeks will determine the trend in commodity prices. Data on rig count from the oilfield service firm Baker Hughes, which is a pointer to the trends in U.S. crude/natural gas production, is closely followed, too.

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Chevron Corporation (CVX) : Free Stock Analysis Report

Exxon Mobil Corporation (XOM) : Free Stock Analysis Report

Ecopetrol S.A. (EC) : Free Stock Analysis Report

Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report

Atlas Energy Solutions Inc. (AESI) : 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.

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