Discoveries by Equinor and Eni Lead Oil & Gas Stock Roundup

·6-min read

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

On the news front, Norwegian behemoth Equinor EQNR and Italy-based major Eni E made hydrocarbon discoveries in the North Sea and offshore Mexico, respectively. Developments associated with ConocoPhillips COP, Pembina Pipeline PBA and Petrobras PBR also made it to the headlines.

Overall, it was a dismal seven-day period for the sector. West Texas Intermediate (WTI) crude futures plunged 12.9% to close at $66.74 per barrel, while natural gas prices fell 3.8% to end at $2.338 per million British thermal units (MMBtu).

Oil prices logged their lowest finish since December 2021, as investors dumped risky assets in the wake of the biggest U.S. bank collapse since 2008 and the Credit Suisse blowup.

Natural gas finished down too on elevated supplies and concerns that the banking crisis could prompt an economic slowdown which would hurt the consumption of energy.

Recap of the Week’s Most Important Stories

1. Stavanger, Norway-headquartered integrated major Equinor announced the discovery oil and gas near the Troll field in the North Sea. This is the company's eighth discovery in the region since 2019. The estimated volume is in the range of 24-84 million barrels of oil equivalent (BOE), with somewhat more oil than gas. The new well, Heisenberg, was dug by the Deepsea Stavanger drilling rig. Equinor is the operator of this discovery and DNO is an associate.

The discovery is considered commercially viable, partially because it can use the existing infrastructure related to the Troll B platform. The parties are thinking of drilling an appraisal well in 2024 since a more accurate assessment of its size is necessary to determine the volumes that can be recovered.

According to Geir Sortveit, senior vice president for exploration and production west at Equinor, discoveries in eight out of nine exploration wells at Troll have helped the company in achieving a 90% success rate. (Equinor Strikes Another Oil Discovery Near Troll Field)

2. Rome-based energy biggie Eni made an oil discovery on the Yatzil exploration prospect in Block 7 in the Sureste Basin off Mexico’s coast. The Yatzil exploration prospect is situated in the mid-deep water of the Cuenca Salina in the Sureste Basin. Eni operates Block 7 with a 45% interest, while Capricorn and Citla Energy own 30% and 25% interest, respectively.

Using the Valaris DPS5 semisub rig, the Yatzil-1 well was drilled in 284 meters of water to a total depth of 2,441 meters. The Yatzil-1 well encountered in excess of 40 meters of net pay sands with good quality oil in the Upper Miocene sequences, with excellent petrophysical properties.

Yatzil-1 is Eni’s eighth successful well drilled in the basin and the second commitment well of Block 7. The latest discovery is located 25-30 kilometers away from other discoveries. According to preliminary estimates, the latest discovery is estimated to hold 200 million barrels of oil. (Eni Makes Oil Discovery at Yatzil-1 Well Offshore Mexico)

3.  ConocoPhillips — one of the world’s largest independent oil and gas producers — will be allowed to drill from three places across its Willow site in the National Petroleum Reserve-Alaska, according to the new authorization from the U.S. Department of the Interior. While prohibiting further drilling on more than 13 million acres in Alaska and the Arctic Ocean, the Biden administration recently approved the construction of the Willow oil drilling project on Alaska's North Slope.

In Willow, the Zacks Rank #3 (Hold) firm initially planned to drill from five well pads, believing that anything less than that would not be economically feasible. The petroleum reserve, which is situated roughly 200 miles north of the Arctic Circle, would be the site of the drilling operation. The reserve is the single biggest expanse of pristine land in the nation and has no roads.

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

The $8 billion Willow project, headed by oil tycoon ConocoPhillips, is anticipated to produce more than 600 million barrels of petroleum over a 30-year period. There’s a possibility of almost 280 million metric tons of carbon emissions by burning all that oil. That would result in 9.2 million metric tons of carbon emissions annually, which is the same as adding nearly 2 million new automobiles to the road. (ConocoPhillips' Alaska Oil Project Scores Biden Approval)

4   Canada-based energy infrastructure operator Pembina Pipeline recently announced that the British Columbia (BC) government has granted environmental certification for its $2.4 billion Cedar liquefied natural gas (LNG) project. Cedar received its first license from the province's energy regulator for an approximately 8.5-kilometer pipeline that will connect the project to the Coastal GasLink pipeline.

According to Pembina Pipeline, the project entered into a memorandum of understanding (MOU) with ARC Resources Ltd., oil and gas producer, for 20 years of liquefaction services. They are currently working toward finalizing a supply agreement for 1.5 million tons of LNG per annum (MTPA).

Cedar LNG is a collaboration between the indigenous group Haisla Nation and Pembina Pipeline to build a floating LNG facility in Kitimat, British Columbia. It will have the capacity to export 3 MTPA of LNG. (Pembina Receives Environment Clearance for LNG Project)

5.   Petrobras, Brazil's state-owned oil and gas company, reported that it recently received an unfavorable decision from the country’s Administrative Council of Tax Appeals ("CARF"). The Panel denied, by majority, the special appeals submitted by the company. It also determined that taxes would be owed to PBR on payments for chartering vessels to companies abroad in 2010, 2011 and 2013, totaling more than R$ 18 billion.

The debts became legally binding in the administrative realm with this ruling. Following the outcome of the administrative procedure, the company will take proper legal action to oppose the collection, as well as guarantee the debt.

The CARF's judgment does not include an accrual in the company's financial statements. Rather, it means that risks of losses are quite likely and are the object of an explanatory note in financial statements. (Petrobras Shares Dip After CARF Appeal Dismissed)

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                 -7.4%               +10.8%
CVX                  -4.6%               -1.1%
COP                 -9.4%               -14.2%
OXY                  -2.3%               -8.3%
SLB                  -12.4%             +20.1%
RIG                   -15.7%             +116.1%
VLO                   -4.4%               +20%
MPC                  -3.8%               +29.9%

With last week’s rout in commodities, stocks were down too. The Energy Select Sector SPDR — a popular way to track energy companies — fell 6.8% last week. Over the past six months, the sector tracker has increased 3.4%.

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.

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. Currently, news related to the financial sector in view of the bank jitters will be the key factor that will dictate the near-term price movement of the commodities.

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ConocoPhillips (COP) : Free Stock Analysis Report

Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report

Eni SpA (E) : Free Stock Analysis Report

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