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Shell & BP's Q1 Updates Lead Oil & Gas Stock Roundup

It was a week when both oil and natural gas prices recorded losses.

The headlines revolved around supermajor Shell SHEL and BP’s BP Q1 earnings updates. Developments associated with ExxonMobil XOM, Petrobras PBR and Chevron CVX also grabbed attention.

Overall, it was a bearish seven-day period for the sector. West Texas Intermediate (WTI) crude futures dropped around 1.4% to close at $85.66 per barrel, while natural gas prices edged down 0.8% to end at $1.77 per million British thermal units (MMBtu).

The crude price action turned negative after posting four straight weekly gains, primarily on the back of a sizeable increase in inventory and hotter-than-expected inflation, which were partly offset by tensions in the oil-rich Middle East.

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Meanwhile, natural gas settled with its seventh loss in the last 11 weeks due to bearish inventory numbers, together with weaker weather-related demand,

Recap of the Week’s Most Important Stories

1. European energy major Shell said that it anticipates a notable decrease in first-quarter trading results for its integrated gas division compared to the previous three-month period. Conversely, the company foresees a substantial improvement in the performance of its chemicals and products business, with anticipated reductions in losses for the unit compared to the final quarter of 2023.

Shell’s LNG liquefaction volumes are expected in the range of 7.2-7.6 million tons, translating into an increase of around 4.8% sequentially. Per the company, first-quarter trading and optimization results in its integrated gas unit will be “strong” though it will be well below the fourth quarter of 2023, which was exceptional. Segment operating cost is expected between $1 billion and $1.2 billion.

The company expects a steep upward trajectory in its Trading & Optimization results from the fourth-quarter levels. Also, as projected by Shell, the refining margin should strengthen in the first quarter, with the metric improving 17.9% sequentially. With chemical margins also jumping 21%, realized chemicals sub-segment numbers are expected to be better than in the fourth quarter. Shell also forecast refinery utilization of 89-93%, operating expense of $2.5-$2.9 billion and chemicals manufacturing plant utilization of 71-75%. (Shell's Outlook for Q1: Chemicals Division Shines)

2. Smaller rival BP anticipates robust results from its trading operations in the first quarter of 2024, with a notable uptick in oil transactions. In its latest trading update, BP emphasized the positive performance of its trading arm, highlighting concurrent increases in oil and gas production and improved margins within its refining division.

According to the Zacks Rank #3 (Hold) company's statement, the initial trading figures suggest a favorable outlook for first-quarter earnings, with BP's gas trading segment playing a pivotal role in bolstering the same. The gas marketing and trading segment of BP sustained its strong performance from the previous quarter, while the oil trading segment exhibited a stark improvement, as stated by BP.

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

BP anticipates a $200-$400 million decrease in revenues from lower natural gas prices, a $300-$600 million decrease from lower oil prices, and a loss worth $200 million from the devaluation of Egypt's pound from the prior-quarter level. Despite these setbacks, strong trading results, enhanced upstream production and favorable refining margins are anticipated to bolster first-quarter earnings. (BP Anticipates Robust Q1 Performance Amid Trading Surge)

3. ExxonMobil, the U.S.-based energy giant, has announced its ambitious plans to proceed with a $12.7 billion deepwater oil project off the coast of Guyana. This significant move marks the company's sixth deepwater oil development on the Stabroek block, showcasing its commitment to tapping into the rich oil resources in the region. The project, named Whiptail, has received all necessary government and regulatory approvals, culminating in a final investment decision by ExxonMobil.

The project is anticipated to yield 250,000 barrels per day (bpd) of oil by the close of 2027. This development is expected to elevate Guyana's total daily crude capacity to a staggering 1.3 million bpd, a remarkable feat achieved just eight years after the onset of oil production in the country.

The Whiptail project includes the establishment of up to 10 drill centers with 48 production and injection wells. Located in the southeastern portion of the Stabroek block, the project is expected to tap into the Whiptail, Pinktail and Tilapia fields, with the potential for additional resources pending feasibility studies. (ExxonMobil Advances $12.7B Whiptail Project Offshore Guyana)

4. Brazilian state-run oil and gas company Petrobras recently announced a significant discovery in the ultra-deep waters of the Potiguar Basin on the Brazilian Equatorial Margin. This discovery marks a key moment in the company's exploration efforts and has the potential to impact not only its operations but also the energy landscape on a global scale.

The Anhangá exploratory well, 1-BRSA-1390-RNS, situated within the POT-M-762_R15 Concession, has been explored to reveal the presence of an oil accumulation. Located near the border between the states of Ceará and Rio Grande do Norte, approximately 118 miles (190 kilometers) from Fortaleza and 155 miles (250 kilometers) from Natal, this discovery holds immense promise for Petrobras.

This discovery represents Petrobras' commitment to innovation and excellence in the field of energy exploration. It signifies a milestone in the company's efforts to replenish reserves and explore new frontiers to meet the growing global energy demand, particularly during the ongoing energy transition. (Petrobras Discovers Oil in Brazil's Potiguar Basin).

5.   American multinational energy operator Chevron has withdrawn its operations from Myanmar's Yadana natural gas field, as reported by Reuters. This decision, made in response to the political turmoil and ongoing humanitarian crisis in the Southeast Asian nation, highlights the challenges faced by multinational corporations operating in politically unstable environments. It marks a notable shift in the energy landscape of the region.

Chevron opted to strategically redistribute its 41.1% stake in the Yadana gas field, instead of selling it. This redistribution involved transferring its share to the remaining stakeholders, primarily PTT Exploration and Production (“PTTEP”) and Myanma Oil and Gas Enterprise (“MOGE”).

Situated offshore Myanmar, the Yadana natural gas field has been a cornerstone of the country's energy production. With an annual output of approximately 6 billion cubic meters (bcm) of gas, it has played a key role in meeting domestic and international energy demands. (Chevron Exits Yadana Natural Gas Field in Myanmar).

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 -0.8% +6.6%

CVX -1.6% -6.8%

COP -1.7% +3.7%

OXY -0.3% +2.4%

SLB -5.5% -14.6%

RIG -5.4% -21.6%

VLO -5.4% +29.3%

MPC -4.7% +35%

With both oil and gas moving down for the week, stocks were mostly negative. The Energy Select Sector SPDR — a popular way to track energy companies — fell 2% last week. But over the past six months, the sector tracker has increased 5.7%.

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. Finally, there will be 2024 Q1 earnings, with the first batch of S&P 500 components coming up with quarterly results.

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BP p.l.c. (BP) : Free Stock Analysis Report

Chevron Corporation (CVX) : Free Stock Analysis Report

Exxon Mobil Corporation (XOM) : Free Stock Analysis Report

Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report

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

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