Results for: Oil and Gas

The United States witnessed a record-shattering $51 billion in oil and gas acquisitions during the first quarter of 2023, predominantly focused on the prolific Permian Basin in West Texas and New Mexico. Energy companies are flocking to the Permian due to its exceptional drilling prospects and relatively low break-even costs, leading to significant investments. Top-tier deals included Diamondback Energy’s $26 billion bid for Endeavor Energy Partners and Apache Corp’s $4.5 billion acquisition of rival Callon Petroleum. Despite regulatory hurdles, including antitrust reviews that have delayed some major deals, the number of transactions surged to 27 in Q1, a 35% increase from the previous year. The strong oil price environment is enabling companies to retain non-core drilling assets, showcasing a shift towards strategic asset retention among E&P companies. The oil and gas sector experienced a banner year for mergers and acquisitions in 2023, with Exxon’s $60 billion purchase of Pioneer and Chevron’s planned $53 billion acquisition of Hess. However, Chevron’s deal has encountered obstacles, as Exxon has asserted right-of-first-refusal challenges over the transaction.

Occidental Petroleum (OXY) has outperformed the broader market this year, driven by the recovery in oil prices.

The company’s recent acquisition of CrownRock is expected to boost free cash flow and earnings, making it an attractive investment.

Analysts at BofA have a price target of $80 on OXY, while I believe the stock is worth $80-96, representing a 20-44% upside potential from the current price.

Despite the risks associated with oil price volatility, I believe OXY’s management team is effective and the company is well-positioned to benefit from the ongoing bullish cycle in the oil market.

PrairieSky Royalty is a well-managed oil and gas royalty company with a clean balance sheet. However, the stock is currently trading at a premium valuation, making it less attractive compared to other options in the sector. While the company may benefit from higher oil prices and a potential increase in natural gas prices, it is still considered fully valued, even with these expectations. As such, investors may want to consider other royalty companies that offer better value.

U.S. oil and gas deals reached a record $51 billion in the first quarter of 2023, continuing the merger spree seen in the top U.S. shale field. Energy companies have been aggressively expanding their drilling inventories, particularly in the Permian Basin, where production costs are relatively low. The largest deal proposed last quarter was Diamondback Energy’s $26 billion acquisition of Endeavor Energy Partners, bringing together two major Permian operators. Other notable deals included Apache Corp’s $4.5 billion purchase of Callon Petroleum and Chesapeake Energy’s $7.4 billion acquisition of Southwestern Energy. However, some mergers, such as Chesapeake’s and those executed by Exxon Mobil and Chevron last year, have been delayed by antitrust reviews due to concerns about market concentration. Despite the high number of deals, analysts expect the pace to slow as strong oil prices make it more advantageous for companies to hold on to their assets.

Tenaris, a leader in the energy services sector, with a strong market position, especially in the tubular goods market for oil and gas wells, and a conservative financial profile. The company’s recent quarterly results showed a decline in sales and EBITDA but an increase in net income, and it proposed an impressive dividend increase of 18%. However, despite the company’s strengths and potential growth opportunities, concerns about the valuation and future earnings decline suggest a Hold rating. The author’s previous Buy rating has been revised to a Hold due to the company’s current valuation, which is considered too high given the expected decline in earnings over the next three fiscal years.

Schlumberger N.V. (SLB) reported strong financial results for the first quarter of 2024. The company’s revenue grew 13% year-over-year to $8.707 billion, beating analysts’ estimates. Adjusted earnings per share (EPS) increased 19% to 75 cents, in line with expectations. Schlumberger’s growth was driven by international markets, with revenue increasing 18% in the Middle East & Asia and 18% in Europe & Africa. The company’s North American market revenue declined 6% year-over-year. SLB announced a quarterly cash dividend of 27.5 cents per share, payable on July 11, 2024.

Leallen Blackhair, 47, used his position as the Compliance Supervisor for the Energy and Minerals Dept. of the Ute Tribe to extort $109,925 for personal gain over three years. He reportedly used the money on dining, shopping, and trips to amusement parks. Blackhair reportedly convinced companies to pay him personally by offering to reduce fines against them.