For Immediate Release
Chicago, IL – September 23, 2015 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Royal Dutch Shell plc (RDS.A), Exxon Mobil Corp. (XOM), Weatherford International plc (WFT), Suncor Energy Inc. (SU) and TOTAL S.A. (TOT).
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Here are highlights from Tuesday’s Analyst Blog:
Oil & Gas Stock Roundup
It was a week where oil prices suffered a Friday meltdown after the U.S. Federal Reserve decided to keep the key rates unchanged and natural gas prices tanked to their lowest levels since June 5 on weather-induced demand concerns. On the news front, the Australian regulator has delayed granting approval to Royal Dutch Shell plc’s (RDS.A) proposed purchase of BG Group on competition concerns.
Overall, it was a bearish week for the sector. While West Texas Intermediate (WTI) crude futures remained essentially flat at $44.68 per barrel, natural gas prices fell 3.3% to $2.61 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Amid Oil Slump, Icahn Bets on Gas Exporter Cheniere Energy.)
Oil bulls were encouraged by the Baker Hughes report that showed another drop in oil-directed rigs – down 60% from a peak set last October – indicating a break in shale drilling activities. Things were further helped by the U.S. Energy Department's latest inventory release that showed a bigger-than-expected decline in crude stockpiles.
However, the commodity gave back all its gains following the Fed’s decision to keep the key rates unchanged. The FOMC’s acknowledgment of the global growth concerns and market volatility ended up raising doubts about energy demand.
Meanwhile, natural gas fared much worse amid predictions of waning heating demand with the imminent arrival of colder autumn temperatures subsequent to the end of summer. Even an in-line inventory report could not come to the commodity’s rescue.
Recap of the Week’s Most Important Stories
1. Europe’s largest energy company Royal Dutch Shell plc’s planned $70 billion acquisition of BG Group plc has got into trouble with Australia's consumer watchdog, delaying granting approval on the deal on grounds of competition concerns. ACCC was about to declare its decision within Sep 17, but has now deferred it to Nov 12.
The issue concerns Shell’s joint venture in Australia with PetroChina Co. Ltd. – Arrow Energy. Interestingly, Arrow has uncontracted gas reserves which are the largest in eastern Australia. BG Group – a leading upstream energy player in the UK – also has significant interest in the Queensland Curtis Liquefied Natural Gas (“QCLNG”) project, valued at almost $20 billion as per media resources.
Per ACCC chairperson Rod Sims, with the completion of the Shell-BG merger, Shell’s Arrow might start delivering almost all of its gas to QCLNG of BG, for export. If Arrow’s gas is transported out of Australia, both competition and gas supply will get reduced considerably in the domestic market. Australian gas prices will eventually rise. (See More: Why Australia Needs More Time to Approve Shell-BG Merger.)
2. The largest U.S. energy company by market value, Exxon Mobil Corp. (XOM) announced that its subsidiary – Esso Exploration and Production Nigeria Limited – has commissioned and has begun yielding oil months ahead of schedule at the Erha North Phase 2 project, offshore Nigeria.
Located 60 miles away from the Nigerian coast, the Erha North Phase 2 project is a deepwater subsea development. At its peak, the project – that comprises seven wells from three drill centers – will churn out 65,000 barrels of oil per day.
The wells are tied back to the existing Erha North floating production, storage and offloading vessel, which decreases further infrastructure requirements. The early startup of the project was backed by the robust performance of Nigerian contractors, which saved $400 million in costs. (See More: Exxon's Erha North Phase 2 Commissioned Ahead of Schedule.)
3. In a U-turn, leading oilfield services firm Weatherford International plc (WFT) announced that it has decided to cancel the $1 billion capital raise – through a combination of ordinary shares and mandatory subordinated notes – within hours of declaring the stock and debt offerings.
The company cited pricing concerns as reason for the volte-face, while noting that its focus on its core businesses and the efficiency of its operations remains intact. At the same time, Weatherford International still looks to deliver positive free cash flow in 2015 and beyond, has ample liquidity, and remains focused on generating strong returns to its shareholders.
4. Canada’s biggest energy firm and the largest oil sands outfit, Suncor Energy Inc. (SU), announced that it has entered into an agreement with partner, Total E&P Canada Ltd. – the Canadian arm of TOTAL S.A. (TOT) – to buy additional 10% stake in the Fort Hills oil sands project from the latter for C$310 million. The transaction – expected to close in the fourth quarter – also includes the sale of 10% interest in associated logistics like pipelines, storage terminals and third-party pipeline capacity agreements.
Upon closure of the deal, which is subject to regulatory approvals, Suncor’s stake in the $15 billion project will be 50.8%. Suncor is the developer and operator of the project. TOTAL will hold 29.2% stake in the Fort Hills project, whereas the remaining 20% will be held by Teck Resources Ltd.
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