The Zacks Analyst Blog Highlights: Chevron, Petrobras, Murphy, Cabot and Baker Hughes

For Immediate Release

Chicago, IL –October 17, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Chevron CVX, Petrobras PBR, Murphy Oil Corp. MUR, Cabot Oil and Gas Corporation COG and Baker Hughes, a GE company BHGE.

Here are highlights from Tuesday’s Analyst Blog:

Oil & Gas Stock Roundup: CVX, PBR, VLO & More

It was a week where oil prices took a hit but natural gas futures rallied to their highest levels since January.

On the news front, Chevron is selling its interests in Norway, while Petrobras entered into a strategic joint venture with Murphy Oil Corp. in the Gulf of Mexico.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures fell about 4% to close at $71.34 per barrel, natural gas prices edged up 0.6% to $3.161 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Drilling Industry Enjoys M&A Boom)

The U.S. crude benchmark dropped for the first time in five weeks after the Energy Department's inventory release showed that stockpiles recorded another large build. On a further bearish note, OPEC and Russian oil output rose in September that more than offset the loss in Iranian output. Surging production in the United States and a cut in oil demand growth forecast also played spoilsport.  

Meanwhile, natural gas jumped to its highest in nearly nine months as inventories remain significantly below their five-year average ahead of the upcoming winter.

Recap of the Week’s Most Important Stories

1.    Chevronis set to sell its last stake in the oil exploration license offshore Norway, becoming the first oil supermajor to exit the Norwegian continental shelf. The company will offload its 20% interest in the PL859 exploration license in Norway’s Arctic to a Norwegian company DNO. The financial terms of the transaction have been still kept under wraps. Subject to satisfactory conditions and regulatory approvals, the deal is set for closure in a few months. 

The deal brings Chevron a step closer to its intention of withdrawing from the aging North Sea, in a bid to streamline portfolio. The move is part of the Zacks Rank #2 (Buy) company’s strategic review of global portfolio to determine the competitiveness of all its projects. The decision seems to be a prudent one, as extracting oil from North Sea is not so economical since production costs are much higher than returns. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Notably, output from North Sea accounts for just about 3% of Chevron’s total production, providing around 50,000 barrels of oil and 155 million cubic feet of natural gas a day. (Read more Chevron Bids Adieu to Norway Amid Wider Exodus From North Sea)

2.    Petrobras and Murphy Oil Corporation have entered into a joint venture (JV) agreement for deep-water oil exploration operations in the Gulf of Mexico (GoM). The JV will comprise GoM producing assets from both Murphy Oil and Petrobras’s subsidiary PAI. The transaction, with an effective date of Oct 1, is expected to close by the end of this year. Murphy Oil will be the chief operator of the JV, with 80% stake.

The deal is expected to boost Murphy Oil’s production in the GoM by 41,000 net barrels of oil equivalent per day (Boe/d). Post the completion of the deal, Murphy Oil’s total output is likely to be approximately 60,000 net barrels. The JV will help Murphy Oil collaborate with the global leader in deep-water developments, leading to shareholder value creation and robust cash flow generation for the company.

Murphy Oil will be paying $900 million in cash to PAI for the formation of the JV. Additionally, Petrobras can earn $150 million if certain price and output limits exceed in the time frame of 2019-2025. On the other hand, the cash consideration is likely to strengthen the balance sheet of Petrobras. (Read more Petrobras and Murphy Oil Form JV for GoM Operations)

3.    Cabot Oil and Gas Corporation recently trimmed its daily production growth forecast for 2018 to 7-8% from its prior guided range of 10-12%. This revised guidance reflects the impact of lower-than-expected production in the third quarter.

Notably, during the last reported quarter, Cabot announced that it anticipated net production in the range of 2,100-2,200 million cubic feet equivalent a day (MMcfe/d) for the third quarter. However, it recently issued a statement, expecting its output for the third quarter to stand lower at 2,029 MMcfe/d. Delays in the in-service date of Atlantic Sunrise pipeline project — chiefly operated by Williams Companies — along with slight changes in the timing of pads being placed on production in the third quarter are mainly responsible for lower-than-expected output.

However, the expected production of 2,029 MMcfe/d still represents 7% and 19% increase on a sequential and yearly basis, respectively. (Read more Cabot Slashes Output Guidance, Provides Other Updates)

5.    Baker Hughes, a GE company plans to buy 5% stake in Abu Dhabi National Oil Company’s (ADNOC) drilling business for $550 million. The strategic partnership makes Baker Hughes the first foreign company to buy interest in the UAE-based state-run energy company’s any of the units. The move is expected to enhance Baker Hughes’ presence in Middle East, where oil and gas operations are rapidly increasing, and entitle it to secure a seat in the Board of Directors of ADNOC Drilling.

The deal values ADNOC Drilling at $11 billion and provides it access to the technical expertise of Baker Hughes, which can aid in making the former an international player. The knowledge that ADNOC will gain from Baker Hughes will enable it to increase drilling efficiencies and well economics, as well as unlock greater value from its conventional and unconventional hydrocarbon resources.

The deal is anticipated to aid Baker Hughes to generate predictable revenue streams for a long term from operations in the Middle East. The partnership is expected to slash ADNOC’s drilling time by 30% within 2019-end. The deal is expected to close in the final quarter of this year and operations will likely start next year. (Read more Baker Hughes to Acquire Stake in ADNOC Through $500M Deal)

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Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report
 
Chevron Corporation (CVX) : Free Stock Analysis Report
 
Cabot Oil & Gas Corporation (COG) : Free Stock Analysis Report
 
Murphy Oil Corporation (MUR) : Free Stock Analysis Report
 
Baker Hughes, a GE company (BHGE) : Free Stock Analysis Report
 
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