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The Zacks Analyst Blog Highlights: Chevron, Anadarko Petroleum, Marathon Oil, Encana and Cabot Oil & Gas

CHICAGO, Dec. 18, 2013 /PRNewswire/ -- 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 theChevron Corp. (NYSE:CVX-Free Report), Anadarko Petroleum Corp. (NYSE:APC-Free Report), Marathon Oil Corp. (NYSE:MRO-Free Report), Encana Corp. (NYSE:ECA-Free Report) and Cabot Oil & Gas Corp. (NYSE:COG-Free Report).

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Here are highlights from Tuesday's Analyst Blog:

Oil & Gas Stock Roundup

Growing odds of an imminent Fed Taper, combined with whopping refined product builds weakened crude prices, while natural gas surged on frigid weather forecasts and stockpiles data.  

Among the newsmakers, Chevron Corp. (NYSE:CVX-Free Report) announced plans to spend a massive $40 billion next year, while Anadarko Petroleum Corp. (NYSE:APC-Free Report) found itself reeling from legal woes.   

Crude Oil:

Crude prices came under pressure last week, as a combination of encouraging economic reports and reduced fiscal overhang (following the two-year Congressional budget deal) once again intensified apprehensions that the Federal Reserve may announce a small cut in the $85 billion a month economic stimulus plan at its upcoming policy meeting scheduled this week.

Traders have voiced concerns that Fed's shift away from the bond buying policy may lead to dollar-denominated oil prices to increase in local-currency terms in emerging markets, thus slowing growth.

Sentiments were further weakened by the Energy Information Administration (EIA) report that showed a huge build in fuel (gasoline and distillate) supplies, which outweighed a hefty drop in oil inventories.

As per the EIA's weekly 'Petroleum Status Report,' crude inventories dropped by a larger-than-expected 10.59 million barrels for the week ending Dec 6 to 375.25 million barrels. However, storage at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – was up by 625,000 barrels to their highest level since Jul. Further weighing on the sentiments, gasoline and distillate supplies were both up significantly from the week-ago levels.

As a result of these factors, by close of trade on Friday, West Texas Intermediate (WTI) oil was in the red and settled at $96.60 per barrel, losing 0.9% for the week. 

Natural Gas:

Investors continue to focus on temperature patterns to understand the fuel's economic dynamics. As it is, natural gas fundamentals look uninspiring with supplies remaining ample in the face of underwhelming demand. In fact, it is expected to take many years for the commodity's demand to match supply in the face of newer projects.

Despite these issues, natural gas rallied to a two-year high last week on the back of an in-line decrease in natural gas supplies and forecasts of freezing cold weather conditions.

The EIA's weekly inventory release showed that natural gas stockpiles held in underground storage in the lower 48 states fell by 81 billion cubic feet (Bcf) for the week ended Dec 6, at the midpoint of the guided range (of 79–81 Bcf drawdown). Moreover, the decrease was higher than both last year's withdrawal of 8 Bcf and the 5-year average reduction of 76 Bcf for the reported week.

Chilly weather forecasts – in the key U.S. consuming regions over the next few days – are likely to further spur the commodity's demand for heating.

Influenced by these factors, natural gas spot prices ended Friday at $4.35 per million Btu (MMBtu), up 5.8% over the week.

Energy Week That Was:

The week's energy coverage was dominated by the following news:

Chevron '14 Capex Plan Nears $40B

U.S.energy giant Chevron Corp. unveiled its 2014 capex budget of $39.8 billion. Of the total outlay, $4.8 billion will be invested by the company's affiliates, lowering Chevron's pocket pinch to $35 billion.

The 2014 projected capital expenditure is, however, approximately $2 billion less than that of the current year. Almost 90% of the 2014 budget – $35.8 billion – will be spent on the company's 'Upstream' segment. The 'Downstream' segment would receive only 8% or around $3.1 billion whereas the remaining $0.9 billion will be spent on corporate activities. 

Anadarko Tumbles on Cleanup Cost Liability

Shares of Anadarko Petroleum Corp. fell to a 10-month low following a court verdict that went against the company. U.S. bankruptcy judge Allan L. Gropper held that Anadarko could have to shell out anything within $5.2–$14.2 billion in environmental clean-up costs – much higher than initial estimates – associated with its 2006 acquisition of Kerr-McGee Corp.

MRO to Increase Output in U.S. Plays

Oil and natural gas explorer Marathon Oil Corp. (NYSE:MRO-Free Report) reported that it intends to ramp up its rig operations in U.S resource plays – Eagle Ford, Bakken and Oklahoma Woodford – in 2014, resulting in a 30% hike in production from the regions. Marathon Oil also projects its total output to increase 4% in the coming year.

Additionally, the Houston, TX-based upstream operator set its total capital, investment and exploration budget for 2014 at $5.9 billion. Further, Marathon Oil said that its board of directors has approved the expansion of the residual stock buyback program to roughly $2.5 billion.  

Encana Tanks on 2014 Spending Plans

Canadian natural gas producer Encana Corp. (NYSE:ECA-Free Report) said that it will lower its 2014 capital expenditures by about 10% even as it aims to increase liquids production by 30%. The Calgary-based energy giant has pegged its 2014 capital budget at C$2.4–2.5 billion. Of the total, roughly three-fourths will go toward five liquid-rich resource plays across North America.

However, the forecasts seem to have spooked investors, as Encana shares fell 6% on Wednesday to close at $18.11. Shareholders were disappointed that despite the greater focus on oil, price-stifled natural gas would still make up around 80% of the company's total output.

Cabot Shares Up on Marcellus Update

Shares of the independent oil and gas exploration firm Cabot Oil & Gas Corp. (NYSE:COG-Free Report) shot up 4.6% to $36.82 post the announcement of the company's success in the Marcellus shale. The 10-well pad, which the company successfully completed, will result in a 30-day average production of 168 million cubic feet (Mmcf) per day and has a peak production capacity of 201 Mmcf per day.

In particular, the two Upper Marcellus wells — with initial production (IP) of 32 Mmcf per day and 30-day production of 24 Mmcf per day — are expected to provide rates of return competing with those of the other unconventional resource plays. A key takeaway from the update is the success of the downspacing test that would provide a greater recoverable resource base for Cabot.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.


 

 

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