Yahoo Finance Oil & Gas Stock Roundup: Shell's Appeal Verdict, Transocean's Rig Deal & More
It was a week when oil prices continued the southward journey, while natural gas futures surged to the highest levels in more than five months.
The headlines revolved around the dismissal of supermajor Shell’s SHEL appeal regarding an exploration dispute in South Africa and offshore driller Transocean’s RIG contract awards. Developments associated with TC Energy TRP, Diamondback Energy FANG and ProPetro Holding PUMP also grabbed attention.
Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures dropped around 1.9% to close at $75.53 per barrel, but natural gas prices surged 12.8% to end at $2.92 per million British thermal units (MMBtu).
The crude price action remained negative for the third straight week, primarily due to the OPEC+ decision to slowly phase out some of its 2.2 million barrels per day of voluntary production cuts later this year.
Meanwhile, natural gas settled with a big gain on signs of production pullback, resurgence of LNG exports and robust summer demand.
Recap of the Week’s Most Important Stories
1. European energy major Shell faced a legal setback in South Africa. Its appeal to overturn a judgment that blocked an offshore oil exploration had been dismissed by South Africa's Supreme Court of Appeals. This decision came amid strong opposition from environmental groups and local communities concerned about the environmental impact of Shell's oil explorations and its lack of proper public consultation.
Shell welcomed the court's direction to retain the exploration rights with conditions. A company spokesperson highlighted Shell's commitment to re-evaluating the ruling and determining the next steps. This decision allowed Shell to continue with its exploration activities, subject to further regulatory and community engagement.
The dismissal of Shell's appeal by South Africa's Supreme Court of Appeals marked a significant development in the ongoing debate over offshore oil exploration. The ruling reflected the complex interplay between economic ambitions, legal frameworks and environmental stewardship. As Shell and other stakeholders navigate this challenging landscape, the outcomes of this and future cases could shape the future of energy exploration in South Africa and beyond. (Shell's Offshore Oil Appeal Gets Rejected in South Africa)
2. Transocean, an international provider of offshore contract drilling services for oil and gas wells, has secured new contract extensions for three of its harsh environment semisubmersible rigs — Transocean Spitsbergen, Transocean Norge and Transocean Endurance. The new deals contribute approximately $161 million to the firm’s contract backlog.
The Transocean Spitsbergen received a three-well contract extension in Norway from Equinor. The rig has been contracted by Equinor since November 2023. The extension with Equinor should contribute around $72 million in firm backlog. The Transocean Norge has been awarded a contract extension with Wintershall Dea for three wells. The extension is expected to contribute approximately $71 million in contract backlog.
The third semisubmersible Transocean Endurance was contracted by Woodside Energy by exercising its second option for the rig. The contract extension includes an estimated 45-day well, which should contribute approximately $18 million to Transocean’s contract backlog. The program is scheduled to commence in continuation with the rig’s current program. (Transocean Secures Major Contract Extensions Worth $161M)
3. TC Energy, a major North American energy sector player, received its shareholder approval to spin off its liquids pipeline business. This strategic move is expected to result in the formation of a new entity, South Bow Corp, which would inherit TRP's extensive liquids pipeline assets, including the renowned Keystone pipeline. This spin-off is aimed at reducing the substantial debt of TC Energy and sharpening its focus on natural gas transportation.
South Bow, the newly formed energy infrastructure company, would own nearly 4,900 kilometers of liquid pipelines. These pipelines are critical for transporting oil from Alberta, Canada and parts of the United States to key refining markets in Illinois, Oklahoma and Texas. The centerpiece of South Bow's assets is the Keystone pipeline, capable of transporting 622,000 barrels of oil per day, making it a vital conduit for Canada’s crude exports.
The spin-off is strategically designed to allow TC Energy and South Bow to maximize the value of their respective assets. TRP's CEO, Francois Poirier, emphasized that this separation enabled each company to focus on distinct strategies and opportunities. TC Energy is expected to concentrate on putting more effort into its natural gas business, which is a core component of the company's growth plans. (TC Energy's Liquids Pipeline Spin-Off Creates New Player)
4. Permian-focused upstream player Diamondback Energy’s joint venture (JV) with Five Point Energy LLC, Deep Blue Midland Basin, has acquired the water infrastructure assets from Lagoon Operating Midland. The acquisition underscores the JV’s commitment to sustainable water management practices at the heart of the Midland Basin. The financial details of the transaction have not been disclosed.
Lagoon’s assets include a large-diameter pipeline spanning approximately 105 miles, a disposal capacity of 240,000 barrels per (bpd) and an additional permitted disposal capacity of 544,000 bpd. The assets are located mostly in Martin County, TX.
The acquired assets should complement Deep Blue’s existing infrastructure and significantly enhance its capabilities in water recycling. FANG also stated that the expansion of Deep Blue’s water recycling capabilities is driven by a strong portfolio of acreage dedications and minimum volume commitments from key producers in the basin. The acquisition not only solidifies Deep Blue’s position as an important player in water management but also ensures steady demand from important producers in the Midland Basin. (Diamondback JV Acquires New Water Infrastructure Assets).
5. ProPetro Holding, a leading provider of oilfield services, announced its acquisition of Aqua Prop LLC, a provider of cost-effective wet sand solutions. This all-cash acquisition, valued at $35.6 million net of working capital, signifies a substantial step in PUMP's ongoing commitment to delivering more integrated and industrial solutions while enhancing value for stakeholders.
The acquisition of Aqua Prop LLC is in perfect sync with the Zacks Rank #2 (Buy) company’s strategic vision of innovation and integration within its disciplined operating model. Sam Sledge, CEO of ProPetro, emphasized the seamless alignment of this acquisition with the company's long-term goals. By incorporating Aqua Prop’s innovative wet sand solutions, PUMP aims to enhance its operational efficiency and capital allocation strategies, which would bring more value to its customers and stakeholders.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PUMP will now own and provide onsite sand storage and handling, leveraging strategic agreements for logistics and preferred access to wet sand supply. This enhanced capability should streamline operations, reduce costs and improve service delivery in the Permian Basin, a region known for prolific oil and gas production. (ProPetro Declares $35.6M Acquisition of Aqua Prop).
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 -3.8% +5.3%
CVX -3.8% -1.3%
COP -3.8% +9.1%
OXY -4.8% +2%
SLB -2.3% -5.4%
RIG -12.9% -9.6%
VLO -1.7% +36.3%
MPC -0.9% +54.3%
With oil moving down for the week, stocks were mostly negative. The Energy Select Sector SPDR — a popular way to track energy companies — fell 3.4% last week. But over the past six months, the sector tracker has increased 11.5%.
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.
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Transocean Ltd. (RIG) : Free Stock Analysis Report
TC Energy Corporation (TRP) : Free Stock Analysis Report
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
ProPetro Holding Corp. (PUMP) : Free Stock Analysis Report
Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report
