Yahoo Finance Oil & Gas Stock Roundup Headlined by Exxon & Chevron's 2023 Outlooks
It was a week when oil prices experienced its worst selloff in nine months and natural gas futures registered a marginal decrease.
On the news front, U.S. energy biggies Chevron CVX and ExxonMobil XOM offered a glimpse of their future spending plans. Developments associated with Cenovus Energy CVE, Transocean RIG and Petrobras PBR also made it to the headlines.
Overall, it was a bearish seven-day period for the sector. West Texas Intermediate (WTI) crude futures lost some 11% to close at $71.02 per barrel, while natural gas prices edged down around 0.6% to end at $6.245 per million British thermal units (MMBtu). In particular, the oil and gas markets closed down for the second week in a row.
Coming back to the week ended Dec 9, the oil price action turned bearish after government data showed a large build in gasoline and distillate supplies. The ongoing recession fears and slowing demand in China were also major factors.
Meanwhile, natural gas finished slightly down following a smaller-than-expected decrease in weekly supplies. Forecasts for milder weather and the extended shutdown of the Freeport LNG export plant in Texas also played spoilsport.
Recap of the Week’s Most Important Stories
1. ExxonMobil will expand its share buyback program to $50 billion to enhance shareholder returns and raise dividends. The decision has been made as the American integrated major opposes a political backlash by offering investors the profits from surging commodity prices.
ExxonMobil would spend $50 billion to buy back its shares from 2022 to 2024, indicating an increase from the current $30-billion program set to end in 2023. The Zacks Rank #3 (Hold) company also increased its annual dividend payment for the 40th consecutive year. It expects to pay out $30 billion to shareholders by 2022-end, which includes $15 billion in dividends and $15 billion in share repurchases.
You can see the complete list of today’s Zacks #1 Rank stocks here.
In 2023, ExxonMobil expects to spend $23-$25 billion on projects, up from $22 billion this year. The company increased its planned spending on low-carbon projects to $17 billion through 2027, up 15% year over year. XOM is keeping its annual capital expenditure at $20-$25 billion for the next five years. More than 70% of the company’s spending will be allocated to developments in the Permian Basin, Guyana, Brazil and LNG projects worldwide. (ExxonMobil Announces $50B Share Buyback, Ups 2023 Capex)
2. Smaller rival Chevron has pegged its organic capital and exploratory budget for 2023 at $14 billion, up 25% from its 2022 guidance. Adding the $3 billion projected expenditures relating to equity affiliates, the total comes at the high end of its estimation of $15-$17 billion.
Chevron’s total budget for next year is higher than the company’s 2021 spending of $11.7 billion, though it’s down 19% from the 2019 pre-pandemic expenditure of $21 billion.
The second-biggest U.S. oil and gas group's boost in capital spending reflects Chevron's plans to optimize its outlay while relying heavily on shale drilling. Investors should know that during the nine months ended Sep 30, 2022, CVX incurred a capital expenditure of $11.1 billion. (Where Will Chevron Spend the Bulk of Its 2023 Capex?)
3. Canada’s integrated oil and gas firm Cenovus Energy announced that it will increase production by more than 3% in 2023 for continued growth in shareholder returns. The production growth comes amid weakening crude prices despite the ongoing energy supply concerns due to Russia’s aggressive invasion of Ukraine.
For 2023, the company expects total upstream production of 800,000-840,000 barrels of oil equivalent per day (Boe/d). Cenovus expects total downstream crude throughput of 610,000-660,000 barrels per day (bpd), up 28% year over year.
Cenovus further informed that it would increase its capital budget by about 21% year over year to $4-$4.5 billion. Of the total, the company will spend $1.2-$1.7 billion for optimization and growth. This involves the restart of the West White Rose project in offshore Newfoundland, optimizing oil-sand assets and improving reliability in its downstream business. (Cenovus Gives Production Guidance for 2023, Hikes Capex)
4 Transocean recently declared that it won two drilling contracts for its ultra-deepwater drillships — Deepwater Corcovado and Deepwater Orion — for work offshore Brazil with a national oil firm. Per the Vernier, Switzerland-based American offshore driller, the two deals represent roughly $1.04 billion in the firm’s backlog.
Transocean mentioned that its Deepwater Corcovado drillship was given a four-year contract, adding $583 million to the backlog. The contract is anticipated to commence in the third quarter of 2023 in direct continuation of the rig’s current contract.
Meanwhile, the Deepwater Orion drillship was granted a three-year contract for a projected $456 million backlog. The contract is expected to begin in the fourth quarter of 2023. (Transocean Wins 2 Ultra-Deepwater Drillship Contracts)
5 Petrobras recently came out with a blueprint to increase its five-year investment plan by 15% to $78 billion for augmenting spending across exploration, production and refining during the 2023-27 period.
PBR expanded planned investments between 2023 and 2027 by $10 billion compared with the 2022-2026 plan, reflecting higher drilling costs. The hike in spending comes despite a reduction in the production target for 2023 by 100,000 barrels of equivalent oil per day (boed) to 2.6 million boed.
The Brazilian state-owned oil major also sanctioned additional short-term drilling for existing projects above its long-term break-even of $35 per barrel. Exploration and production will be up 83% of the spending, with the output expected to increase to 3.1 million boed by 2027. (Petrobras Raises Five-Year Spending Plan to $78 Billion)
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 -5.8% +11.9%
CVX -7.2% +3.3%
COP -10% +1.5%
OXY -8% +7.4%
SLB -10.7% +15.2%
RIG -11% +1.5%
VLO -9.8% -8.4%
MPC -9.6% +8.8%
With oil and gas being in red for the week, stocks were down too. The Energy Select Sector SPDR — a popular way to track energy companies — fell 8.4% last week. But over the past six months, the sector tracker has risen 2.8%.
What’s Next in the Energy World?
Following last week’s sliding fortunes for oil and gas, market participants will closely track the regular releases to look for further 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.
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. News related to the ongoing Russia-Ukraine geopolitical conflict and the potential demand boost from the easing of coronavirus lockdowns in China will be the other factors that will dictate the near-term price movement of the commodities.
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
Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Transocean Ltd. (RIG) : Free Stock Analysis Report
Petroleo Brasileiro S.A. Petrobras (PBR) : Free Stock Analysis Report
Cenovus Energy Inc (CVE) : Free Stock Analysis Report
