It was a holiday-shortened week where oil prices sank to their lowest levels in 2½ months, but natural gas futures pushed higher. On the news front, BP plc BP has agreed to pay $18.7 billion in penalties to settle the 2010 Gulf of Mexico (GoM) oil spill claims, while Royal Dutch Shell plc RDS.A declared that it will push ahead with its Appomattox deepwater development, also in the GoM.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures dived 4.5% to close at $56.93 per barrel, natural gas prices rose 1.9% to $2.82 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Exxon Stops Drilling Off Santa Barbara, Chevron Sells Nigeria Oil Blocks.)

Oil prices fell for the fourth time in 5 weeks, the backdrop being the latest weekly U.S. government report that showed a surprise climb in crude supplies. Moreover, the year’s first increase in the number of oil-directed rigs added to the negative sentiment.

On the other hand, natural gas fared well amid predictions of strong summer cooling demand with forecasts of warmer weather across majority of the country over the next few days. Prices also found support from an in-line supply build.

Recap of the Week’s Most Important Stories

1.    BP plc, one of the largest energy firms in the world, agreed to an $18.7 billion settlement of all federal and state claims related to the 2010 Gulf of Mexico (GoM) oil spill. This is touted as the worst spillage in the history of the U.S.

The agreement, to be spread over the next 18 years, will see BP shell out a minimum of $12.8 billion for Clean Water Act fines and natural resource damages. Another $4.9 billion will be doled out to the spill-affected states. (See More: BP to Settle Federal, State GoM Oil Spill Claims for $18B)

2.    Integrated energy major Royal Dutch Shell plc has decided to proceed with the Gulf of Mexico (GoM) based Appomattox deepwater project although the business scenario looks challenging with crude prices still at low levels. Per the company, the development will likely be operational by the end of this decade.

The project includes the installation and construction of a floating platform in the GoM. Initially, the platform will produce oil and gas from the Appomattox and Vicksburg fields. Shell estimates peak per day production capacity from the project at roughly 175,000 barrels of oil equivalent (BOE), not too far from the company’s total 2014 GoM daily output of 225,000 BOE. Investors should note that this development is the eight and the largest deepwater platform by the company in the GoM. (See More: Shell to Go Ahead with GoM Appomattox Deepwater Project)

3.    Upstream energy company, LINN Energy LLC LINE has agreed to sell its remaining stake in the Permian Basin’s Wolfcamp shale. The transaction, which is expected to complete in the third quarter of this year, will fetch $281 million for the firm. The sale has an effective date of May 1, 2015.

The company added that the assets under sale currently produce about 2 thousand barrels of oil equivalent per day from 133 wells. About 6,400 net acres of promising horizontal drilling acreage will also be sold.

4.    Upstream energy firm Comstock Resources Inc. CRK has announced the sale of its Burleson County properties. The company has also revised its 2015 production guidance considering the effects of the asset sale. Shares of the company tanked over 20% following the announcement.

Comstock stated that it has sold oil and natural gas assets around the Burleson County, TX for about $115 million. The sale was made to an undisclosed private firm. The deal is expected to close this month and will have an effective date of May 1, 2015.

Comstock said that it now expects 2015 oil production in the range of 9,000–9,500 barrels per day, down from its previous guidance of 9,500–10,500 barrels per day. Natural gas production guidance has also fallen to 125–150 MMcf per day from 130–155 MMcf per day. (See More: Comstock Resources Lowers Outlook in Line with Asset Sale)

5.    Brazilian state-run energy company Petrobras PBR announced that it has entered into a deal with PetroRio S.A – engaged in oil and gas exploration, and production activities.

Per the agreement, Petrobras will likely divest its 20% interest in the concessions of Bijupirá and Salema oil and gas fields, located at water depth of 480–850 meter in the Campos Basin. Presently, these fields are being operated by Royal Dutch Shell plc.

It is to be noted that from the sale, Petrobras will likely get $25 million. Petrobras added that the asset divestment is in sync with the business and management plan for the period 2015–2019. (See More: Petrobras to Sell Stake in Bijupira & Salema Fields for $25M)  

Price Performance

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

Over the course of last week, the best performer was U.S. refiner Valero Energy Corp. VLO that added 8.1% to its stock price, while the biggest loser was offshore driller Transocean Ltd. RIG, which fell 7% during the period.

Over the last 6 months, Valero Energy was again the chief beneficiary on the bourses with its shares advancing 38.1%. On the other hand, oil behemoth Chevron Corp. was the laggard, as it witnessed a 12.2% price decline over the same time frame.

What’s Next in the Energy World?

Apart from the usual releases in this week – the U.S. government data on oil and natural gas – market participants will be closely tracking a series of crucial economic reports, including those on consumer credit, jobless claims and wholesale inventories.

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