Weekly Energy Roundup: Oil And Gas Companies, Dec. 18 - 22
The last two weeks of the year are often interesting for the stock market as it oftentimes experiences what is known as the “Santa Claus effect.” The Santa Claus effect, in short, refers to the strong gains that the market experiences during these weeks as a result of employees investing their Christmas bonuses, portfolio rotation for tax purposes en masse, and mutual funds buying to enable the fund managers to achieve their investment objectives and maximize reported gains. As a result, we can expect the oil and gas industry to be affected by this effect. Let us have a look at six major companies in the industry to see if this was indeed the case.
ExxonMobil (XOM)
ExxonMobil delivered a gain last week, following a loss on Tuesday. The company opened the week of December 18 at $83.18 per share and closed the week at $83.97 per share. This gives the stock an overall return of 0.95% over the week.
Source: Fidelity Investments
The stock’s two-week performance was also quite impressive, posting a fairly substantial gain over the period, although it had some volatility over the week of December 11 – December 15. However, it went from $82.95 to $83.97 per share over the two-week period for a gain of $1.02, which works out to 1.23%. Shareholders should be relatively pleased with this gain while traders undoubtedly appreciate the volatility.
Source: Fidelity Investments
On Monday, December 18, ExxonMobil and BHP (BHP) announced that they will end their joint marketing natural gas venture in Australia. This was due to governmental concerns that the joint venture is large enough to be unfairly stifling competition as it is by far the largest natural gas producer in the Southern States. It is uncertain exactly what effect this will have on ExxonMobil’s profits beginning in 2019 when the arrangement takes effect as the company will conceivably still be marketing the same quantity of natural gas, it will just be doing it independently of BHP Billiton and competing against its former partner.
Chevron (CVX)
Chevron also delivered a gain to investors last week with much more stability than ExxonMobil saw. This is because it gained slightly on Tuesday, December 19 instead of delivering a loss. The stock opened the week at $119.92 per share and closed the week at $124.98 per share. This gives the stock an impressive gain of 4.22% over the week.
Source: Fidelity Investments
Chevron’s stock price action was fairly impressive over the past two weeks. While it was almost flat until December 19, the stock then took off like a rocket and delivered very impressive gains in the last three days of the period. On Monday, December 11, Chevron’s stock opened at $120.29 per share. This gives the stock a total gain of 3.90% over the period, substantially better than what ExxonMobil delivered.
Source: Fidelity Investments
On Thursday, December 21, 2017, Chevron Phillips, a joint venture of Chevron and ConocoPhillips (COP), announced that it completed construction of a massive $6 billion petrochemical expansion near Houston, Texas. Now that this project has been completed, it is expected to produce approximately 1.5 million metric tons of ethylene per year to support the joint venture’s other existing businesses.
BP (BP)
BP also saw its stock price gain over the past week, although it suffered a decline on Friday unlike both ExxonMobil and Chevron. On December 18, 2017, BP shares opened at $40.52 and rose to $41.29 by the end of the week, although they did reach an intraday high of $41.76 on Thursday, December 21. This gives the stock a weekly gain of 1.90%.
Source: Fidelity Investments
BP shares were somewhat volatile over the two-week period, although they did deliver an overall gain. This would thus be appealing for both traders seeking to profit on the volatility as well as buy-and-hold investors looking for long-term gains. On December 11, BP shares opened at $39.79. The stock thus delivered a two-week gain of 3.77%, more impressive than ExxonMobil but not quite as good as Chevron.
Source: Fidelity Investments
Quite possibly the most significant news was the joint announcement by BP and Russian oil giant Rosneft (RNFTF) that the two companies have agreed to jointly develop the massive hydrocarbon reserves in Russia’s Arctic Yamal-Nenets region. The joint venture would be 49% owned by BP and will develop the nearly 800 billion cubic cm of natural gas reserves in the area. This will certainly have a significant impact on BP’s natural gas reserves.
Royal Dutch Shell (RDS-A, RDS-B)
Royal Dutch Shell saw similar price action to that of BP as it climbed consistently until declining on Friday, December 22. On December 18, 2017, RDS-A opened at $65.00 per share. By the end of the week, the stock had climbed to $65.75 per share. This represents a weekly gain of 0.38%.
Source: Fidelity Investments
Royal Dutch Shell posted a gain over the past two weeks with surprisingly little volatility. This would make the stock appealing to long-term investors over that period but not so much for traders as it was overall too flat to take advantage of price fluctuations. On December 11, 2017, the stock opened at $63.82 per share. It thus delivered a two-week gain of 3.02%.
Source: Fidelity Investments
Royal Dutch Shell announced that it would buy First Utility, an energy and broadband utility in the United Kingdom that serves approximately 825,000 households. This is an interesting move for the company as it represents an expansion into an entirely new market, however other European oil and gas companies also provide utility services and this could serve as a cash cow for the company. Overall then, this move will likely provide some support, if not improvement, to the company’s cash flows and should be welcomed for investors if the acquisition price is reasonable. Unfortunately, the terms of the deal have not yet been disclosed so we cannot know at this time if that is the case or not.
Eni (E)
Italian oil giant Eni's stock chart is somewhat different than both its American and European peers as the company saw declines on both Tuesday (like ExxonMobil) and on Friday (like BP and Royal Dutch Shell). With that said, it still managed to deliver a gain to its investors, due largely to very impressive performance on Wednesday, December 20. The stock opened the week at $33.05 and closed out at $33.24, delivering an overall gain of 0.57% for the week.
Source: Fidelity Investments
The company's two-week performance was quite volatile, showing numerous peaks and troughs on the chart. It was, however, overall positive. On Monday, December 11, Eni stock opened on the NYSE at $32.89 per share. As it closed at $33.24 as already mentioned, it delivered a gain of 1.05% to its buy-and-hold investors. Traders could have also profited quite handsomely by taking advantage of the volatility.
Source: Fidelity Investments
The only significant piece of news affecting Eni over the past week was its announcement that it restarted production at Norway’s Goliat oil field following a two-month long outage. It also started production at the Zohr gas field offshore field. Thus, it could see some production increases in the first quarter of 2018 but unfortunately both of these developments come too late in 2017 to have any significant effect on the company’s fourth quarter 2017 results.
Statoil (STO)
Norway's Statoil is often the most stable entity price-wise in these weekly reports, likely due to the Norwegian government’s substantial ownership stake in the company. However, this was not the case during the week of December 18. Statoil opened the week at $20.38, declined slightly on Tuesday and then climbed until Thursday. While it did decline slightly on Friday, this decline was quite negligible. As Statoil closed out the week at $21.03 per share, it delivered a gain of 3.19% to its investors on the week.
Source: Fidelity Investments
Statoil was surprisingly volatility over the past two weeks, showing numerous up days and down days. It had more down days than up days over the period but perhaps somewhat surprisingly managed to deliver a gain over the period. On December 11, 2017, Statoil opened at $20.06 and thus delivered a 4.84% gain over the two-week period.
Source: Fidelity Investments
Statoil had two significant pieces of news over the past week that could have an impact on the company. The first came on Monday, December 18, 2017, when Statoil agreed to acquire a 25% stake in the Roncandor oil field. This transaction will nearly triple Statoil’s Brazilian production, adding nearly 70,000 boe per day. The overall cost of this transaction could be as high as $2.9 billion. This shows that Statoil remains committed to shoring up what may be its greatest weakness, which is its overdependence on the declining fields in the Norwegian waters.
The second significant development is Statoil’s announcement that it intends to expand the production at the Snorre field in the North Sea. This project, once complete, will increase the amount of recoverable oil from the field by approximately 200 million barrels and thus significantly expand its productive life. This is certainly a positive development for the company.