The Zacks Analyst Blog Highlights Shell, Occidental Petroleum, Petrobras, Equinor ASA, and The Williams Companies

For Immediate Release

Chicago, IL – May 20, 2022 – 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: Shell plc SHEL, Occidental Petroleum OXY, Petrobras PBR, Equinor ASA EQNR and The Williams Companies WMB.

Here are highlights from Thursday’s Analyst Blog:

Oil & Gas Stock Roundup: Shell Exits Russia and More

It was a week wherein oil prices just about maintained their winning streak but natural gas futures lost some steam.

On the news front, London-based energy biggie Shell plc finalized the sale of its retail and lubricants businesses in Russia to local oil producer Lukoil, while U.S. upstream major Occidental Petroleum reported March-quarter earnings. Announcements from Petrobras, Equinor ASA, and The Williams Companies also made it to the headlines.

Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures edged up 0.7% to close at $110.49 per barrel but natural gas prices lost some 4.7% to end at $7.663 per million British thermal units (MMBtu).

Oil prices settled marginally higher as investors looked past the Energy Information Administration's ("EIA") report showing a surprise build in stockpiles and turned their attention to the strained market fundamentals. The uptick primarily reflected concerns about supplies from Russia, which is one of the world's largest producers of the commodity.

Raising the prospect of a dramatic fall in crude flows, speculation has it that the European Union could shortly follow the United States in blocking imports of Russian energy to protest Moscow's invasion of Ukraine. In other words, the pending European embargo could lead to an acute supply squeeze.

Meanwhile, natural gas finished down due to a higher-than-expected increase in supplies, plus the prospect of tepid weather-related consumption.

Recap of the Week's Most-Important Stories

1. Europe's largest oil company Shell announced that it agreed to sell its retail and lubricant ventures based in Russia to the Russian energy company — Lukoil. This sale is the first substantial agreement in the oil and gas sector ever since most companies from the west vowed to exit the country following Russia's military operations in Ukraine.

The sale amount is undisclosed and the deal is anticipated to be completed later this year, subject to regulatory consent. Shell mentioned that the deal includes 411 retail stations, primarily in the Central and Northwestern regions of Russia, and the lubricants blending plant located approximately 200 kilometers northwest of Moscow in Torzhok.

Shell mentioned that the deal includes 411 retail stations, primarily in the Central and Northwestern regions of Russia, and the lubricants blending plant located approximately 200 kilometers northwest of Moscow in Torzhok. (Shell plc to Sell Its Retail Businesses in Russia)

2. Occidental Petroleum reported first-quarter earnings of $2.12 per share, beating the Zacks Consensus Estimate of $1.97 by 7.6%. The Zacks Rank #1 (Strong Buy) company's earnings improved year over year due to an increase in operating efficiencies and commodity prices.

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

Occidental's total production volume for the first quarter was 1,079 thousand barrels of oil equivalent per day (Mboe/d), which was within the guided range of 1,070-1,090 Mboe/d. Strong production volumes were attributed to higher volumes from the Rockies and Other Domestic assets.

OXY's total expenses for the reported quarter were $5,774 million, up 1.6% year over year. The oil and gas producer generated $3.3 billion in free cash flow in the first quarter and repaid debts worth $3.3 billion, further strengthening the balance sheet. Interest expenses for the reported quarter were down 6.1% to $371 million from $395 million in the year-ago period. (Occidental's Q1 Earnings and Revenues Beat Estimates)

3   The Brazilian state-owned oil major Petrobras is set to make an investment of $16 billion for the revitalization of the Campos Basin offshore Brazil. As part of this project, Petrobras plans to install three new Floating Production Storage and Offloading systems (FPSOs) and interconnect more than 100 wells over the next five years.

Eduardo Bordieri, Petrobras' Executive Manager of Strategy, mentioned at the Offshore Technology Conference that his company would embrace new technologies in the upcoming years for the revitalization of mature assets and the decommissioning of oil platforms. He further stated that the Campos Basin accounted for about 25% of the company's total output in 2021 and explained that without investments, future production from the same place would be about a third of what Petrobras now anticipates to accomplish by 2026.

In accordance with its Strategic Plan 2022-2026, Petrobras plans to add a volume of 20 billion barrels of oil equivalent (boe) to its reserves by the end of this decade, including 5 billion boe, which are expected to be added from assets operated by the company in the Campos Basin. (Petrobras to Spend $16B for Campos Revitalization)

4   Norway-based integrated energy giant Equinor ASA entered into an agreement with Sval Energi to divest stakes in two North Sea fields. Per the terms of the deal, Equinor will divest its 7.604% stake in three Ekofisk production licenses, 19% in the Martin Linge field and 6.6% in the Tor field.

The Ekofisk production licenses include PL018, PL018B and PL275, which cover the Ekofisk, Eldfisk and Embla fields. The divestment also involves Equinor's 18.5% interest in the Norpipe Oil pipeline, which transports oil from the Greater Ekofisk Area to land.

EQNR will receive $1 billion in cash and additional contingent payments linked to oil and gas prices for 2022 and 2023. Following the divestment, Equinor will not have ownership interests in the Greater Ekofisk Area. However, the company will retain a 51% stake in Martin Linge and continue as the field operator. (Equinor to Divest Stake in Norway Fields to Sval Energi)

5.  The Tulsa, OK-based pipeline operator, The Williams Companies, recently stated that it obtained another tieback to Discovery's Keathley Canyon Connector (KCC) pipeline, making its deepwater natural gas infrastructure services available to the operator LLOG Exploration Offshore, for its new Salamanca development in the Keathley Canyon area of the Gulf of Mexico.

The development at Salamanca, which will be situated 200 miles off the coast of Louisiana, will handle the output from the Leon and Castile fields. The initial production is anticipated to begin in the second quarter of 2025. Salamanca is set to be the third deepwater production tieback to the KCC pipeline, which began operations in 2015 as a primary natural gas corridor through the Central Gulf of Mexico, and the fifth overall tieback to the Discovery system in the last couple of years.

Williams' president and chief executive officer, Alan Armstrong, said, "Williams provides critical infrastructure to gather and transport the Gulf of Mexico's low carbon intensity natural gas for U.S. consumption." He further mentioned that Williams' scale and connectivity in the region offer a safe, smooth and effective route to market, enabling its customers to maximize the value of these important deepwater resources. (Williams Declares New Deepwater Deal at Salamanca)

Price Performance

The Energy Select Sector SPDR — a popular way to track energy companies — fell 2.6% last week. But over the past six months, the sector tracker has increased 42.7%.

What's Next in the Energy World?

With real-life activities returning to normalcy, gasoline and diesel prices have reached record highs. Amid this backdrop, market participants will closely track the regular releases to look for more decisive price direction. 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 too. News related to the ongoing Russia-Ukraine geopolitical conflict and the potential demand hit from the coronavirus lockdowns in China will be other factors that will dictate the near-term price movement for oil.

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