It was a week where oil prices eked out another gain but natural gas settled lower. On the news front, Royal Dutch Shell plc RDS.A received clearance from the European regulator for its proposed purchase of BG Group plc, while ConocoPhillips COP said it will reduce 10% of its global workforce.

Overall, it was a mixed week for the sector. While resurgent West Texas Intermediate (WTI) crude futures edged up 1.8% to close at $46.05 per barrel, natural gas prices slumped 2.2% to $2.66 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Schlumberger to Buy Cameron, Transocean Plans Dividend Halt.)

Oil prices continued their rebound from 6½-year lows and gained for the second week in a row, encouraged by the U.S. Energy Department's latest inventory release. Though the report showed that crude stockpiles recorded a massive build, traders chose to focus instead on a small decline in domestic production. Things were further helped by the Baker Hughes report that showed a drop in oil-directed rigs.

Natural gas though fared badly amid expectations of tepid cooling demand with the imminent arrival of soft autumn temperature.

Recap of the Week’s Most Important Stories

1.    Another hurdle in the way of Royal Dutch Shell plc’s planned acquisition of BG Group plc was cleared after the Anglo-Dutch major got approval from the highest antitrust authority of Europe.

The European regulator concluded that the $70 billion deal, under which the integrated energy major will likely acquire BG Group – a leading upstream energy player in the UK – will not give Shell the power to manipulate the European energy market by influencing oil and gas prices. Shell also got the green signal for the merger from Brazil and the U.S. in June. (See More: Shell Gets Green Signal from Europe to Acquire BG Group.)

2.    Houston-based energy major ConocoPhillips is among the string of oil companies to lay off staff in an attempt to counter the volatile oil prices. The American oil firm, which has already cut 1,000 jobs this year, says it will slash around 1,810 more positions.

ConocoPhillips plans to eliminate almost 10% of its workforce. The biggest proportion of the cuts will be in North America. ConocoPhillips plans to eliminate more than 500 jobs in Houston, where it is based. ConocoPhillips had 18,100 employees on Jun 30, 2015. The difficult macro backdrop has forced ConocoPhillips to some tough calls, which might however prove beneficial for its business going forward. The steps undertaken are expected to position the company for long-term success in any price environment. (See More: ConocoPhillips to Cut 10% Jobs to Counter Oil Price Rout.)

3.    Independent petroleum refiner HollyFrontier Corp. HFC has entered into an agreement with its 39%-controlled partnership Holly Energy Partners, L.P. to sell its El Dorado processing units. The newly constructed naphtha fractionation and hydrogen generation units are being sold for a cash consideration of about $62 million. The transaction is expected to complete in the fourth quarter of this year, subject to customary closing conditions.

Post completion of this deal, HollyFrontier and Holly Energy will ink a 15-year tolling agreement with minimum quarterly throughput commitments. The deal is expected to be immediately accretive to Holly Energy Partners. (See More: HollyFrontier to Sell its El Dorado Processing Units.)

4.    U.K. supermajor BP plc BP is pushing for refund in some cases it considers excessive paid in connection to economic damage claims to businesses and individuals under a settlement arising from the 2010 Gulf of Mexico oil spill. The company argued its position in a federal appeals court that certain payouts prior to Oct 2013 were excessive. Per company estimation, the reversal involves more than 790 businesses amounting to hundreds of millions of dollars.

The fallout is a drawback from the method of first settlement approved in 2012. The company argued that the claims administrator has not been correctly matching business' revenues and expenses, resulting in overpayments. Another court order ensued for a new calculation method but the court refused to reverse restitution of payments already made. (See More: BP Pushes for Refund of Overcharged Gulf Oil Spill Payouts.)

5.    The news that Brazilian state-run energy company Petrobras PBR has terminated its contract with Vantage Drilling Co. VTG for the offshore driller’s deep water drill ship, Titanium Explorer, is now at the forefront. Petrobras cancelled the Titanium Explorer contract by sending Vantage Drilling a notice citing failure by the latter to abide by its obligations under the agreement.

However, Houston, TX- based Vantage Drilling strongly denied this accusation and claimed that Petrobras has wrongly cancelled the deal. Eventually, the drilling contractor filed for arbitration. It is to be noted that Titanium Explorer − which can drill at a depth of 40,000 feet – started working for Petrobras on Dec 2012. As per media reports, the drillship was about to work for the integrated player through 2020. In the mean time, Petrobras cancelled the contract without any prior intimation. (See More: Petrobras Again Ends Drilling Contract to Save Day Rates.)   

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 Houston-based independent exploration and production company ConocoPhillips that added 2.9% to its stock price, while the biggest loser was offshore driller Transocean Ltd. RIG, which edged down 2.3% during the period.

Over the last 6 months, downstream operator Tesoro Corp. was the chief beneficiary on the bourses with its shares inching up 2.6% even amid the dismal oil price scenario. On the other hand, U.S. supermajor Chevron Corp. was the laggard, as it witnessed a 27.1% 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 inflation, wholesale inventories and consumer comfort.

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