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Chevron's Net-Zero Goal & Occidental's Ghana Sale Dominate Oil & Gas Stock Roundup

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It was a week wherein oil prices hit another multiyear high but natural gas futures lost some steam.

On the news front, American biggie Chevron CVX aspired to hit net-zero carbon by 2050, while upstream giant Occidental Petroleum OXY announced the sale of its stakes in two Ghanaian offshore fields for $750 million.

Overall, it was a mixed week for the sector. West Texas Intermediate (WTI) crude futures gained 3.7% to close at $82.28 per barrel, while natural gas prices fell 2.8% to end at $5.41 per million British thermal units (MMBtu). In particular, the oil market managed to maintain their forward momentum from the seven previous weeks.

Coming back to the week ended Oct 15, oil prices rose despite a bearish report from the Energy Information Administration ("EIA") that showed a surprise build in crude inventories. Instead, energy investors chose to concentrate on the market’s robust fundamentals and a supportive macro backdrop.

Crude supplies recently fell to their lowest levels since October 2018, with U.S. commercial stockpiles down some 15% since mid-March. There is also a marked improvement in fuel demand on the back of rebounding road and airline travel. Besides, the commodity was boosted by the major international forecasters’ encouraging view on oil demand growth.

Meanwhile, natural gas finished down despite a lower-than-expected increase in supplies. A bearish turn in weather forecasts sparked off a pullback in the fuel’s price.

Recap of the Week’s Most-Important Stories

1.  Chevron became the latest oil biggie to set long-term climate goals after committing to becoming carbon neutral over the next three decades.

Chevron recently said that it “aspired” to achieve net-zero greenhouse gas emissions in its operations by 2050. The Zacks Rank #1 (Strong Buy) company’s climate goal covers carbon emissions directly generated from its operations (Scope 1) and indirect emissions caused by the electricity consumption to run its facilities (Scope 2).

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

In the shorter term, Chevron pledged to cut carbon intensity by 5% within 2028 relative to 2016, including emissions from the combustion of fuel (such as jet fuel and gasoline) it sells to end-users. These are the hard-to-address Scope 3 emissions that typically constitute more than 90% of an oil and gas holding’s total footprint. Earlier this year, 61% of Chevron shareholders voted in favor of a proposal asking the company to substantially cut Scope 3 emissions. (Chevron Sets Net-Zero Goal, Includes End-User Emissions)

2.   Occidental Petroleum announced that it has entered into a definitive agreement to sell its shares in two non-core offshore assets in Ghana. The agreement includes Occidental’s interests in both Jubilee and TEN fields. These fields had combined second-quarter 2021 net production of 22 thousand barrels of oil equivalent per day.

The oil and gas producer decided to sell an 18% interest in Jubilees Field and an 11% interest in TEN fields to Kosmos Energy KOS for $550 million and the remaining interest in these fields to Ghana National Petroleum Corporation for $200 million. Subject to necessary approval, the agreement is expected to close by fourth-quarter 2021. Proceeds from the asset sale will be utilized to lower the outstanding debt level.

Occidental held Ghana operations for sale on Jun 30, 2021, so when the deal was announced on Oct 14, it did not come as a surprise for investors. Hence, hardly any movement has been noticed in Occidental’s share prices. (Occidental Announces Asset Sale, Meets Divestiture Goal)

3   Transocean RIG recently declared that by 2030, it will cut its operational Scope 1 and Scope 2 greenhouse gas (GHG) emissions intensity by 40% from its 2019 levels.

The offshore drilling contractor has maintained its technological leadership throughout the years and this vital effort is no exception. Indeed, the firm adopted a number of proactive innovations to optimize the productivity of its rigs as well as increase safety, dependability, operational execution and efficiency.

Nowadays, most of the energy needed to power Transocean's global fleet of high-capability drilling rigs comes from diesel fuel conversion to electricity. As a result, the firm is committed to reducing emissions throughout its fleet via fuel savings and other measures, which may be accomplished by creating and deploying new procedures and technologies that allow it to maximize its power-control capabilities. (Transocean Aims to Cut GHG Emissions by 40% Through 2030)

4.   Cheniere Energy LNG, through its wholly owned subsidiary Cheniere Marketing, signed a sale and purchase agreement (“SPA”) with ENN Natural Gas Co. Ltd to deliver liquefied natural gas in China.

The agreement marks the first collaboration of exporter Cheniere and China-based ENN in the field of liquefied natural gas. Under the SPA, Cheniere will supply 0.9 million tons per annum (Mtpa) of liquefied natural gas on a free-on-board basis to ENN. The deal has a term of 13 years and will be in effect from July 2022.

The latest SPA highlights the strength of the global liquefied natural gas market, particularly in China, and Cheniere’s role as a leading global liquefied natural gas supplier. ENN is advancing the use of digital technology to develop a modern energy system and promote intelligent upgrading of the natural gas industry. (Cheniere Signs Liquefied Natural Gas Supply Deal With ENN)

5.  TechnipFMC FTI recently secured a substantial long-term charter and services contract for the pipelay support vessel Coral do Atlântico from Petrobras PBR. For the seabed-to-surface oilfield equipment and services provider, a substantial contract is worth a value ranging between $250 million and $500 million.

The Brazilian-registered vessel, which regularly received the top rating from the client in terms of operational efficiency, work quality, health, safety and the environment, is awarded the contract for three years with an extension option. The operations are slated to commence in the second quarter of 2022.

The Coral do Atlântico is the third of TechnipFMC's pipelay support vessels to be hired by Petrobras on a long-term charter this year, showing increased demand for flexibles in the Brazilian market. The key attraction of the Coral do Atlântico is its adaptability and ability to function in both deep and shallow waters. (TechnipFMC Clinches Substantial Contract From Petrobras)

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              +0.7%              +10.5%
CVX               +1.4%             +6.5%
COP              -1%                 +45.1%
OXY               -5.9%              +29.9%
SLB               +7.4%             +29.3%
RIG                +2.3%             +14%
VLO               +0.1%             +8.5%
MPC              +2.5%             +23.1%

The Energy Select Sector SPDR — a popular way to track energy companies — was up 1.3% last week. The best performer was Houston-TX based oilfield service biggie Schlumberger whose stock climbed 7.4%.

Over the past six months, the sector tracker has increased 18.5%. Upstream biggie ConocoPhillips was the major gainer during the period, experiencing a 45.1% price appreciation.

What’s Next in the Energy World?

As the global oil consumption outlook strengthens amid tightening fundamentals, market participants will be closely tracking the regular releases to watch for signs that could further validate the upward momentum. 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 trends in U.S. crude production, is closely followed too. News related to coronavirus vaccine approval/rollout/distribution will be of utmost importance. Finally, there will be 2021 Q3 earnings, with the first batch of S&P 500 components coming up with quarterly results.

 


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Chevron Corporation (CVX) : Free Stock Analysis Report
 
Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Petroleo Brasileiro S.A. Petrobras (PBR) : Free Stock Analysis Report
 
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
 
TechnipFMC plc (FTI) : Free Stock Analysis Report
 
Cheniere Energy, Inc. (LNG) : Free Stock Analysis Report
 
Kosmos Energy Ltd. (KOS) : Free Stock Analysis Report
 
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