It was a week when both oil and natural gas prices registered declines.On the news front, Williston Basin-focused upstream firms Whiting Petroleum WLL and Oasis Petroleum OAS struck a $6 billion merger agreement, while European integrated major Shell plc SHEL confirmed plans to cut ties with Russia. News related to TC Energy TRP and Delek US Holdings DK also made it to the headlines.Overall, it was a bearish seven-day period for the sector. West Texas Intermediate (WTI) crude futures lost 5.5% to close at $109.33 per barrel, while natural gas prices fell 5.8% to end at $4.725 per million British thermal units (MMBtu).It was a wild week for oil. After surging to a 14-year high of over $130 a barrel amid fears of Russian production squeeze, the commodity pulled back sharply on speculation that production from alternate sources will make up for the potential loss of output from Moscow. It should be noted that the negative price action overshadowed a report from the Energy Information Administration showing draws in crude and fuel stockpilesNatural gas tallied a weekly loss too, spooked by a mild weather outlook and the subsequent lull in demand.
1. U.S. upstream operators Whiting Petroleum and Oasis Petroleum jointly announced that both the companies signed agreements to combine in a $6-billion merger of equals transaction.The companies stated that the merged entity will have the leading Williston Basin position in North Dakota and Montana, with top-tier assets spanning over 972,000 net acres and an output of about 167,800 barrels of oil equivalent per day, an improved free cash flow generation and a substantial scale of operations.Per the terms of the transaction, Whiting shareholders will be given 0.5774 shares of OAS common stock and $6.25 in cash for each share of WLL stock held. Oasis shareholders will receive a special dividend of $15.00 per share ahead of the close. On the closing of the deal, which is expected to be done by the second half of this year, Whiting and Oasis shareholders will own approximately 53% and 47% in the merged company, respectively. (Whiting, Oasis to Tie Up & Create Top Williston Producer)2.The energy giant, Shell, recently stated that it is withdrawing from the Russian oil and gas industry in a phased manner and is instantly discontinuing all spot purchases of Russian crude. This development is in line with the U.S. Government’s new guidelines of banning the import of oil and other energy sources from Russia, in response to Russia’s military campaign in Ukraine.Shell also declared that it would not renew any Russian term contracts and close its service stations, aviation fuels and lubricants operations in the country. The company further said that it would eventually find substitutes for the Russian supply but stressed that it might take some time, leading to lower output at some of its refineries.Europe’s largest oil company apologized after it faced criticism over buying the cargo of Russian crude at a reduced price after many other firms started to curb their purchases. SHEL mentioned that it would commit profits from its Russian oil purchases to humanitarian funds meant to alleviate the emergency in Ukraine. (Shell Withdraws From Russia, Halts Spot Purchases)3Calgary-based energy infrastructure provider TC Energy declared that it signed option agreements to sell 10% of its interest in the Coastal GasLink natural gas pipeline project to indigenous communities across the pipeline's route. The prospect of having equity ownership is available to the native groups that already hold existing agreements with the 670 km-long development.This project, in which TC Energy owns a 35% interest, while KKR and Alberta Investment Management together hold a 65% stake, has been opposed by environmentalists and First Nations (a term used to identify the native Canadian population) for several years as they contend that the pipeline trespasses the traditional native land.Built in British Columbia, Canada's westernmost province, the Coastal GasLink pipeline will have a preliminary transport capacity of 2.1 billion cubic feet per day. The project will transport natural gas from the Montney gas-producing region, the Groundbirch area west of Dawson Creek, to the permitted LNG Canada export facility near Kitimat. (TC Energy Agrees to Indigenous Stake in Coastal GasLink)4.Delek US Holdings stated that it signed a stock purchase and cooperation agreement with Carl Icahn and the Icahn Group for the buyback of $64 million worth, or approximately 50%, of Delek US’s common stock owned by the Icahn Group for about $18.3 per share. The $18.30 figure is the closing price of DK’s common shares on Mar 4, 2022, the last trading day preceding the agreement’s execution.Per the terms of the deal, the Icahn Group will pull out its nomination of directors and agree to a standstill restriction through the completion of Delek US’s 2023 annual stockholders meeting and abstain from purchasing additional shares of the refiner’s common stock.Delek US mentioned that it would make use of the available cash in hand to fund this share repurchase program. The companies anticipate the share buyback to close ahead of Mar 11, 2022, bound by certain customary closing conditions, after which the Icahn Group is likely to own roughly 3.48 million common shares of Delek US, which represent about 4.93% of the company's outstanding shares. (Delek to Buy Back $64M Worth of Its Shares From Icahn)
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 +1%+45.1%CVX+7.7%+69.7%COP -1.9%+62.8%OXY+3.4%+99.4%SLB+10.2%+42.1%RIG+11.6%+13.7%VLO+6.6%+36.1%MPC +1%+28.7%The Energy Select Sector SPDR — a popular way to track energy companies — was up 2.2% last week. Over the past six months, the sector tracker has increased 48.3%.
As the global oil consumption outlook strengthens amid tightening fundamentals, market participants will closely track 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 oilfield service firm Baker Hughes, which is a pointer to the trends in U.S. crude production, is closely followed. News related to the ongoing Russia-Ukraine geopolitical conflict will be of utmost importance too. Investors will also keep an eye on the potential demand hit from the resurgence of new coronavirus cases in China.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Delek US Holdings, Inc. (DK) : Free Stock Analysis Report TC Energy Corporation (TRP) : Free Stock Analysis Report Oasis Petroleum Inc. (OAS) : Free Stock Analysis Report Whiting Petroleum Corporation (WLL) : Free Stock Analysis Report Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research
