News Oil & Gas

Shell’s Acquisition, Chevron’s Venezuela Update & More


It was a week when oil prices moved up while natural gas futures registered a decrease.

On the news front, European energy biggie Shell SHEL agreed to acquire a Danish biogas player for about $2 billion, U.S. giant Chevron CVX got the Biden government’s permission to restart oil sales in Venezuela. Developments associated with Suncor Energy SU, Eni E and Enbridge ENB also made it to the headlines.

Overall, it was a mixed seven-day period for the sector. West Texas Intermediate (WTI) crude futures gained some 4.9% to close at $79.98 per barrel, while natural gas prices decreased around 14.3% to end at $6.281 per million British thermal units (MMBtu). Interestingly, both the oil and gas markets flipped to the opposite after three weeks.

Coming back to the week that ended Dec 2, the oil price action turned bullish after government data showed a large draw in supplies. The EU price cap on Russia’s crude exports and China’s easing of Covid-Zero policies were also major factors.

Meanwhile, natural gas finished down for the first time in a month following a smaller-than-expected decrease in weekly supplies. Forecasts for milder weather and the extended shutdown of the Freeport LNG export plant in Texas also played spoilsport.

Recap of the Week’s Most Important Stories

1.  Shell announced that it would acquire a Danish biogas producer Nature Energy Biogas from Davidson Kempner Capital Management LP, Pioneer Point Partners and Sampension for about $2 billion.

Headquartered in Denmark, Nature Energy produces Renewable Natural Gas (RNG) from agricultural, industrial and household wastes. The company operates 12 biogas plants in Denmark and one in France and has others in the pipeline.

As a result of the acquisition, Shell will become the owner of Europe’s largest producer of RNG. The London-based oil supermajor stated it would also acquire a portfolio of cash-generative operating plants, an associated feedstock supply and infrastructure, a pipeline of growth projects and Nature Energy’s know-how in RNG plant technology. (Shell To Take Over Nature Energy In $2B Acquisition)

2. American oil behemoth Chevron has been granted a license to recommence oil production in Venezuela by the Biden administration after U.S. sanctions halted all drilling activities in the South American nation almost three years ago. The respite was followed by the resumption of talks by Venezuela’s political groups with a deal to work together on a humanitarian spending plan.

The oil major received a six-month license from the U.S. Office of Foreign Assets Control, OFAC. The new policy authorizes the company to produce crude oil and petroleum products in its projects in Venezuela.

While no new drilling is approved, CVX will be able to overhaul and do maintenance of oil fields. The decision allows the San Ramon, CA-based company to revive existing oil projects in Venezuela and bring new oil supplies to refiners in the United States. (Chevron to Commence Venezuelan Oil Output Amid Easing Sanctions)

3.  Canada’s premier integrated company Suncor Energy recently declared that it would retain its Petro-Canada gas station retail business after concluding a review it launched earlier this year under pressure from the activist investor, Elliott Investment Management.

In July 2022, Calgary-based Suncor first announced that it would explore the sale of its gas station business after reaching an agreement with Elliott, which publicly called for an overhaul at the company citing underperforming shares, operational challenges and safety concerns. Elliott wanted the Zacks Rank #3 (Hold) firm to look for opportunities beyond its core oilsands business, along with the possible sale of its Petro-Canada 1,800-location retail network.

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

However, Suncor shunned the possibility of the sale by stating that it has decided to retain, improve and optimize the Petro-Canada retail business after a comprehensive review. The company intends to augment its EBITDA contribution and strengthen its integrated refining & marketing business. (Suncor to Retain Its Petro-Canada Retail Fuel Business)

4   Rome-based energy operator Eni SpA’s renewable energy unit, Plenitude, entered an agreement to fully acquire Italy-based wind and solar developer PLT for an undisclosed amount. PLT has a 1.6-gigawatts (GW) renewable capacity portfolio in Italy and Spain. The transaction will enhance Eni’s onshore wind capacity in Italy and strengthen its presence in Spain.

Located in Lombardy, Plenitude currently delivers electricity to about 10 million customers in the Europe retail market. It intends to serve more than 11 million customers by 2025 and install more than 30,000 electric vehicle charging points.

Per the deal, Plenitude will acquire PLT Energia and SEF and their respective subsidiaries and affiliates. The acquisition will add more than 400 megawatts of renewable energy assets to Plenitude’s portfolio, most of which are wind farms. Of the renewable energy assets, 80% are in operation. The rest are currently under development and are expected to be up and running in 2024. (Eni’s Plenitude Signs Deal to Acquire Italy-Based PLT)

5  Energy infrastructure provider Enbridge provided a glimpse of its financial guidance for 2023. company projects earnings before interest, income taxes and depreciation (EBITDA) for next year in the band of C$15.9 billion to C$16.5 billion. This reflects an improvement from C$15.0 billion to C$15.6 billion in adjusted EBITDA this year. Enbridge also reaffirmed its 2022 adjusted EBITDA in the top half of the projected range.

ENB said that C$3.8 billion of assets that are going to be placed into service this year are mainly contributing to the positive development. Enbridge is expecting strong utilization of its assets that are also aiding the developments.

For next year, ENB projects distributable cash flow (DCF) per share in the band of $5.25 to $5.65. This is also depicting the picture of improvement from this year’s DCF of $5.20 to $5.50. Enbridge expects DCF in 2022 to be just above the midpoint of the projected band. (Enbridge Offers Financial Guidance, Hikes Dividend)

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%                   +8.1%
CVX                    -1.5%               -0.2%
COP                   -3.7%               +1.7%
OXY                     -2.9%               -4.7%
SLB                     +3.8%              +8.8%
RIG                      +3.2%               -6.2%
VLO                      -8.2%                -12.8%
MPC                     -5.6%                +2.8%

With oil and gas moving in opposite directions for the week, stocks saw a mixed bag. The Energy Select Sector SPDR — a popular way to track energy companies — was down 1.7% last week. Over the past six months, the sector tracker has fallen 2%.

What’s Next in the Energy World?

Following last week’s mixed fortunes for oil and gas, market participants will closely track the regular releases to look for further 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. News related to the ongoing Russia-Ukraine geopolitical conflict and the potential demand boost from the easing of coronavirus lockdowns in China will be the other factors that will dictate the near-term price movement of the commodities.

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