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It was a week when oil prices rose while natural gas futures briefly surpassed the $4 mark.
The headlines revolved around energy biggie ExxonMobil’s XOM Q4 earnings update and downstream operator Phillips 66’s PSX purchase in the Permian Basin. Developments associated with Chevron CVX1-Shell SHEL and Canadian Natural Resources CNQ also grabbed attention.
Overall, it was a bullish seven-day period for the sector. West Texas Intermediate (WTI) crude futures increased around 3.5% to close at $76.57 per barrel, while natural gas prices jumped some 19% to end at $3.9890 per million British thermal units (MMBtu).
The crude price rise resulted from expanded U.S. sanctions on Russia that target key oil producers and hundreds of tankers, raising fears of global supply disruptions and tightening market conditions.
Meanwhile, the dramatic rise in natural gas prices was fueled by a confluence of factors, with cold-weather-driven demand serving as the primary catalyst.
Recap of the Week’s Most Important Stories
1. U.S. energy major ExxonMobil has projected a sharp decline in its fourth-quarter earnings due to weak performance across all its business segments, including significant headwinds in refining and chemicals. The oil giant's filing with the SEC indicates that quarterly profits could decrease $1.75 billion sequentially, highlighting a challenging environment for the energy sector.
ExxonMobil's filing highlighted two critical factors influencing its financial performance — upstream asset sales contributing approximately $400 million to its results and overall impairments costing around $600 million. However, the Zacks Rank #3 (Hold) company refrained from providing specific reasons behind these impairments.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A key contributor to the profit slump is ExxonMobil's refining segment, where margins are expected to reduce earnings by $300-$700 million. Timing effects related to inventory valuation and other factors are projected to cause an additional loss of $500-$900 million. Weak demand for gasoline and diesel, combined with new refinery operations in Asia and Africa, has created excess supply, increasing margin pressures. (ExxonMobil Warns of Weak Q4 Profits Amid Global Oil Challenges)
2. Phillips 66, a leading U.S.-based refining player, has announced a major acquisition involving the Ares-backed midstream business EPIC NGL. The company has signed an agreement to acquire EPIC Y-Grade GP, LLC and EPIC Y-Grade, LP in an all-cash transaction totaling $2.2 billion. PSX mentioned that the deal is expected to be immediately accretive to its EPS and strengthen its presence in the natural gas liquids (NGLs) market.
EPIC Y-Grade GP and EPIC Y-Grade own multiple subsidiaries and assets, including long-haul NGL (natural gas liquids) pipelines, fractionation facilities and distribution systems. NGLs are a category of hydrocarbons that are extracted from natural gas. The commodity can be used as feedstock in petrochemical plants, and for various other purposes like heating and cooking.
Phillips 66 aims to expand its Permian Basin NGL value chain by acquiring these key assets. Furthermore, EPIC NGL’s extensive infrastructure should enable PSX to offer extensive flow assurance to the producers, providing them with reliable service, reaching key fractionation sites near Corpus Christi, Sweeny and Mont Belvieu, TX. (Phillips 66 to Strengthen NGL Foothold With $2.2B EPIC NGL Deal)
3. Chevron and Shell, two of the world’s most influential oil and energy companies, have announced the start of oil production from the Whale semi-submersible platform located in the U.S. Gulf of Mexico. This groundbreaking project marks another milestone in both companies’ shared pursuit of energy innovation and sustainability. Chevron U.S.A. Inc., a subsidiary of CVX, holds a 40% working interest in the project, while Shell Offshore Inc., a subsidiary of the UK-headquartered energy giant SHEL, holds the remaining 60% and serves as the operator.
The Whale project represents a critical step forward for both companies in their effort to continue increasing production in the Gulf of Mexico while adhering to high environmental standards. By leveraging advanced technologies and new strategies, CVX and SHEL aim to make the most of the region’s deepwater resources and further set their positions as leaders in the energy sector.
The Whale platform sits in more than 8,600 feet of water in Alaminos Canyon Block 773, about 200 miles southwest of Houston, TX. The platform’s proximity to SHEL’s Perdido spar platform, where Chevron U.S.A. holds a 37.5% interest, highlights the strategic nature of the Whale project within the broader framework of their operations in the Gulf. (Chevron Starts Oil Output at New Gulf of Mexico Field With Shell)
4. Canadian Natural Resources recently announced its 2025 budget, highlighting its competitive advantage driven by its diversified asset base and flexible capital allocation strategy. The company’s capital allocation strategy is based on high-return projects that deliver maximum shareholder value. With a C$6 billion operating capital budget, the company targets strong returns on capital.
The production volume for 2025 is targeted between 1,510 MBOE/d (thousand barrels of oil equivalent per day) and 1,555 MBOE/d, indicating a 12% rise over 2024 levels at the midpoint of the guidance. CNQ targets natural gas production to range between 2,425 MMcf/d (million cubic feet per day) and 2,480 MMcf/d, representing growth of about 14% over the 2024 levels based on the average guidance range.
The acquisition of key assets, including Duvernay and AOSP in 2024, has been pivotal in expanding CNQ's production portfolio. The 2025 production mix is targeted to be across 47% light crude oil, NGLs and synthetic crude; 26% heavy crude oil; and 27% natural gas, showcasing a balanced and diversified product mix. (Canadian Natural's 2025 Guidance Eyes Growth in Production and Capex)