Oil & Gas Stock Roundup: Equinor & Eni's Discoveries, TC Energy's Cancellation & More

It was a week wherein oil prices hit the highest in 32 months but natural gas futures finished lower.

On the news front, European energy biggies Equinor EQNR and Eni E made separate oil discoveries in the North Sea. Meanwhile, Canadian midstream major TC Energy TRP officially pulled the plug on the controversial Keystone XL pipeline.

Overall, it was mixed week for the sector. West Texas Intermediate (WTI) crude futures gained 1% to close at $71.64 per barrel, while natural gas prices fell 2.5% to end at nearly $3.22 per million British thermal units (MMBtu). In particular, the oil market managed to maintain its forward momentum from the previous three weeks.

Coming back to the week ended Jun 18, oil prices marked their highest settlement since October 2018 after the latest U.S. government data gave further proof of improving fundamentals in the energy market. While oil supplies declined to a four-month low, refinery consumption was at the highest since January last year. Moreover, there was an improvement in gasoline and distillate demand that bodes well for oil prices in the second half of 2021.

Meanwhile, natural gas finished down on the prospect of less weather-related consumption and an impending storm-induced demand disruption.

Recap of the Week’s Most-Important Stories

1.  Equinor recently announced that it has discovered oil in production license 554, close to the Visund field in North Sea, offshore Norway. This marks the fifth discovery so far in the Norwegian Continental Shelf in 2021.

The company drilled exploration wells 34/6-5 S and 34/6-5 ST2 in the Garantiana West prospect, only around 10 kilometers north-east of the famous Visund field. The first well discovered 86 meters of oil column in the Cook formation. A medium-good quality sandstone reservoir of 60 meters was discovered at the site. It is drilled 3952 meters below sea, wherein the water depth is 285 meters. The company estimates recoverable resources within 1.3-3.6 million standard cubic meters of oil equivalent. This can translate to recoverable resources of 8-23 million barrels of oil equivalent.

Importantly, this discovery can allow the company to utilize its nearby existing infrastructure in the Garantiana field development project to produce oil. The tied-back option will likely allow it to gain massive profits due to low production costs, as new costly infrastructure installments will not be required. (Equinor Strikes Oil in North Sea Near Visund Field)

2.   Eni recently announced a significant hydrocarbon discovery in the Southern North Sea. The Italian energy major, through its subsidiary Vår Energi, has discovered oil and gas in the production license PL027. While Vår Energi has a 90% stake in the license, private oil and gas producer Mime Petroleum holds the remaining interest.  

Eni made the commercial discovery in the King and Prince exploration wells in the Balder region, close to existing infrastructure. This can help the company reduce production cost at the site, thanks to potential tie-in options. The wells are drilled 3 kilometers west of the Ringhorne platform.

Water dept at the site is 128 meters. The new find is expected to enable the company to further boost development of the Balder Area. Notably, this is the fifth significant find by Vår Energi in 2021. The preliminary estimates of the discovery are pegged at 60-135 million barrels of recoverable oil equivalent. The companies associated with the project intend to reduce the time required to put the discovery to production. (Eni Affiliate Makes Significant Oil Discovery in North Sea)

3.  TC Energy announced the cancellation of the Keystone XL pipeline construction, following a comprehensive survey of its options in cooperation with the Alberta government and partners.

The Keystone pipeline project, which is alleged to negatively impact local communities and exacerbate climate change, has been experiencing criticism for the past 12 years. Earlier this year, the project was discontinued in response to American President Joe Biden’s pledge to suspend the presidential permits to proceed with the pipeline construction.

The Keystone XL pipeline system has a carrying capacity of 830,000 barrels of oil export per day from Alberta to Nebraska. Notably, the $8-billion pipeline was designed to carry crude oil from Alberta’s oil sands to U.S. Gulf Coast refineries, and about 200 kilometers of the pipeline was already installed. (TC Energy Announces Keystone Pipeline Project Cancellation)

4.  The Williams Companies WMB recently inked an export deal with Beacon Offshore Energy Development and its co-owner ShenHai, a Navitas Petroleum LP subsidiary. Per the terms of the deal, Williams will offer offshore natural gas collecting and transportation services as well as onshore natural gas processing services to the Shenandoah development in the central Gulf of Mexico.

Further, according to the agreement, a five-mile offshore lateral pipeline connecting the Shenandoah platform to Discovery natural gas gathering pipeline system's existing Keathley Canyon Connector pipeline and new onshore processing facilities to manage the estimated rich Shenandoah output are part of the infrastructure to be constructed for the project.

Shenandoah oil and gas field is located in the Walker Ridge region of the Gulf of Mexico, 160 miles off the coast of Louisiana. William's investment in Shenandoah, which is expected to be operational by late 2024, is a strategic extension of its Gulf of Mexico infrastructure that will further improve its service portfolio. The firm is happy to offer Beacon with its complete range of midstream capabilities that will optimally utilize these significant deepwater resources. (Williams Inks Export Deal With Beacon for Shenandoah)

5.  Halliburton Company HAL — carrying a Zacks Rank #2 (Buy) — recently secured a contract from Kuwait Oil Company (KOC) to participate in the latter’s digital transformation drive by maintaining and developing digital solutions. The deal covers all Kuwait fields including West, South and East Kuwait as well as Heavy Oil. Plus, it builds on a previously granted contract for the comparable services in North Kuwait.

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

The activities of KOC involve exploration, drilling and production of oil and gas within Kuwait. The company’s responsibilities include storage and delivery of crude oil to tankers for export.

The collaboration will enable KOC to boost its data-to-decisions cycle. This is possible by developing and implementing digital twins of the field through the availability of Halliburton’s DecisionSpace 365, which is a cloud-based subscription service for E&P applications, to automate the working method. Based on open architecture, the cloud-based subscription service will assist the KOC experts to model, optimize and utilize insightful working methods to achieve optimal production and asset operations. (Halliburton Wins KOC Digital Transformation Strategy Deal)

Price Performance

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

Company    Last Week    Last 6 Months

XOM                 -2.8%                +44%
CVX                  -4.5%               +19.7%
COP                 -4.1%               +43%
OXY                  -1.2%               +60.2%
SLB                  -10.3%             +43.7%
RIG                   -4.4%               +67.2%
VLO                   -6.5%               +40.7%
MPC                  -6.8%               +48.1%

Despite oil’s rise, the Energy Select Sector SPDR — a popular way to track energy companies — was down 5.4% last week. The worst performer was oilfield service biggie Schlumberger SLB whose stock fell 10.3%.

However, over the past six months, the sector tracker has surged 37.4%. Offshore driller Transocean Ltd. RIG was the major gainer during the period, experiencing a 67.2% price appreciation.

What’s Next in the Energy World?

As global oil consumption outlook strengthens amid the OPEC+ led calibrated supply cuts and successful vaccine deployments, 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 energy 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.

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Williams Companies, Inc. The (WMB) : Free Stock Analysis Report
 
Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Eni SpA (E) : Free Stock Analysis Report
 
TC Energy Corporation (TRP) : Free Stock Analysis Report
 
Equinor ASA (EQNR) : Free Stock Analysis Report
 
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