Oil & Gas Stock Roundup: Exxon-Shell's Divestment, Schlumberger's Subsea JV in Focus

It was a week when both oil and natural gas prices registered decreases.

On the news front, two of the world’s biggest energy companies ExxonMobil XOM and Shell SHEL sold their California joint venture assets for $4 billion, while oilfield services giant Schlumberger SLB was instrumental in forming a three-way agreement involving the subsea business. Developments associated with Equinor EQNR and ProPetro PUMP also made it to the headlines.

Overall, it was a bearish seven-day period for the sector. West Texas Intermediate (WTI) crude futures lost 4.6% to close at $86.87 per barrel, while natural gas prices declined 5.2% to end at $8.786 per million British thermal units (MMBtu).

U.S. oil prices moved lower as worries about a potential global economic slowdown and uncertainties surrounding OPEC’s next move outweighed the larger-than-expected fall in domestic oil stocks and another decline in gasoline inventories.

Natural gas notched a larger weekly loss, primarily due to the news that European countries (that depend on Russian supplies) have secured enough sources of the commodity to allay fears about a potential winter scarcity.

Recap of the Week’s Most-Important Stories

1.  Energy biggies ExxonMobil and Shell recently entered separate agreements to divest their California-based joint venture, Aera Energy, to IKAV for $4 billion. The sale marks the end of a 25-year partnership between oil majors ExxonMobil and Shell. Aera Energy was one of the state’s largest oil producers.

The divestment reflects ExxonMobil and Shell’s withdrawal from mature properties when higher oil and gas prices support new offers. Also, ExxonMobil and Shell were in advanced talks to divest the San Jaoquin Valley property in California.

Aera Energy is an independent oil and gas company, which accounts for nearly 25% of California’s hydrocarbon production. In 2021, Aera produced 95,000 barrels of crude oil equivalent per day from the 13,000 wells it operates in the San Joaquin Valley. (ExxonMobil, Shell Sign Deal to Divest California Asset to IKAV)

2. Schlumberger, a leading provider of technical products and services to drillers of oil and gas wells, has entered into an agreement with Aker Solutions and Subsea 7 to create a joint venture.

The initiative is to help clients unlock reserves and reduce cycle time while driving innovation and efficiency in subsea production. Subsea businesses of Zacks Rank #2 (Buy) Schlumberger and Aker Solutions will get combined as a result of the proposed joint venture. The accord will finally assist customers in reaching their decarbonization goals by merging a portfolio of innovative technologies like all-electric subsea production systems, subsea gas compression and other electrification capabilities.

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

In the joint arrangement, Schlumberger will have a 70% interest, while Aker Solutions and Subsea 7 will own 20% and 10%, respectively. The agreement might close in the second half of 2023, depending upon regulatory approvals and other customary closing conditions. (Schlumberger Signs an Accord to Create Joint Venture)

3. Stavanger, Norway-headquartered integrated major Equinor completed its exit from Russia operations due to the country’s aggressive invasion of Ukraine, delivering on its commitment made in February. With the departure, it became the first major Western oil producer to completely remove its exposure in the country, while the pressure to exit mounts on other oil majors.

Equinor had been contributing to Russia’s growth for more than three decades.  In February, it initiated a plan to end all investments and partnerships in Russia. By the first-quarter end, the company witnessed an impairment of more than $1 billion after it stopped trading Russia hydrocarbons.

In May, Equinor announced its exit from all joint ventures in Russia. From all future commitments and obligations, the company has freed itself, thereby transferring its participating interests in four joint ventures in Russia to Rosneft. After that, Equinor was left to divest one Russia asset — the Arctic Kharyaga oilfield operated by the state-controlled oil company Zarubezhneft.

Notably, the withdrawal from Kharyaga has been completed. Equinor has no remaining assets or projects in Russia after the exit from Kharyaga. (Equinor Completes Exit From Its Russia Operations)

4    ProPetro, the Midland, TX-based oilfield services company, recently announced the divestiture of its coiled tubing assets. The company declared that it sold the assets used for services, including frac plug mill-out, wellbore clean-out, tubing-conveyed perforating and nitrogen pumping, to a STEP Energy Services Ltd. subsidiary.

ProPetro chose to receive consideration in the form of cash and shares of STEP for the transaction valued at around C$17.2 million, indicating PUMP’s confidence in STEP’s ability to grow the business and create value for shareholders.

Sam Sledge, the Chief Executive Officer of ProPetro, mentioned that the deal was great for the company and all its stakeholders. “Our goal was to rationalize our portfolio while positioning the Coiled Tubing business’ assets and talented team for even greater success,” he said.

The CEO further stated that PUMP would continue to manage its portfolio of assets to make sure that the company has the best mix to serve its customers and generate value for its shareholders. (ProPetro Sells Its Coiled Tubing Assets to STEP Energy)

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                 -2.3%              +11.6%
CVX                  -3.4%              -2%
COP                 -1.7%              +7.2%
OXY                  -6.5%              +21.8%
SLB                  -3.4%               -5.4%
RIG                  -4%                   -14.6%
VLO                  -6.6%               +28.7%
MPC                 -5%                  +24.5%

With oil being in red for the week, stocks were down too. In fact, the Energy Select Sector SPDR — a popular way to track energy companies — fell 3.5% last week. But over the past six months, the sector tracker has increased 4.4%.

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 prices. 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 loss from fresh coronavirus curbs in China will be the other factors that will dictate the near-term price movement of the commodities.

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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
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