Pooling of Oil and Gas Inventories: Acquisitions by Pembina, Southwestern and Kinder Morgan
It was a week when oil and natural gas prices posted solid gains.
On the news front, the headlines have come from the energy infrastructure provider Pembina Pipeline Company PBA, natural gas producer Southwestern Energy Company SWN and intermediary operator Kinder MorganKMI acquisition announcements.
Overall, it was another good week for the industry. West Texas Intermediate (WTI) crude futures gained 5% to close at $ 69.62 a barrel and natural gas prices rose 3.7% during the week to close at 3.10 $ per million British thermal units (MMBtu). In particular, the oil market managed to maintain its forward momentum compared to the previous week.
Going back to the week ended June 4, oil prices marked their highest level since October 2018 after U.S. government data showed a second consecutive weekly draw for crude. Prices were also pulled up by hopes of a faster recovery in demand and the gradual easing of production cuts by the OPEC + coalition, reflecting their confidence in fuel use.
Natural gas also ended with encouraging inventory figures, the prospect of consumption more linked to weather conditions and heavy deliveries of liquefied natural gas (“LNG”).
Recap of the most important stories of the week
1. Pembina Pipeline has entered into a definitive agreement with Inter Pipeline Ltd. (IPL) whereby Zacks Rank # 2 (Buy) will acquire all of the issued and outstanding shares of IPL in an all-equity transaction valued at C $ 8.3 billion.
You can see The full list of today’s Zacks # 1 Rank stocks here.
Under the terms of the agreement, which is unanimously approved by the board members of both companies, IPL shareholders will receive 0.5 Pembina common shares for each IPL common share they hold. Following the completion of this transaction, Pembina shareholders will own a 72% stake in the combined entity, while the remainder will belong to IPL stakeholders.
The C $ 15.2 billion deal, including debt, is expected to establish one of Canada’s largest energy infrastructure companies as well as a diverse and integrated asset base capable of sustaining and developing a extensive value chain for natural gas, natural gas liquids and wellhead crude oil. to its end user. (Pembina signs deal to buy Inter Pipeline for C $ 8.3 billion)
2. Southwestern Energy recently agreed to acquire private natural gas producer Indigo Natural Resources, LLC for approximately $ 2.7 billion. The move comes at a time when gas prices are expected to rise in the coming days.
Indigo’s net production is 1 billion cubic feet of natural gas per day (Bcf / d), which is expected to increase after the acquisition closes. The acquired company is a low-cost producer at the heart of Haynesville’s prolific play. Its adjusted net debt stands at $ 631 million, with leverage of 1.1X.
Southwestern already has a diverse reserve base in several US basins and remains focused on investing in high yielding areas such as the Appalachians. The Indigo acquisition further extends its reach into the Haynesville and Bossier shale deposits of northern Louisiana. Indigo’s low-cost production structure will increase Southwestern’s profitability. In addition, the purchaser should have access to the upscale Gulf Coast export market. The deal is expected to close early in the fourth quarter. (Southwestern to acquire Indigo for $ 2.7 billion: here’s why)
3. Kinder Morgan has entered into an agreement to acquire Stagecoach Gas Services LLC (Stagecoach). The $ 1.225 billion deal is expected to close in the third quarter of this year, pending regulatory approval from Hart-Scott-Rodino.
It should be noted that Stagecoach is a joint venture between Consolidated Edison and Crestwood Equity Partners LP. Stagecoach includes four natural gas storage facilities as well as pipeline networks – spanning 185 miles. Importantly, the storage facilities have a total gas production capacity of 41 billion cubic feet, FERC certified. In addition, the gas pipeline networks have several interconnections with the main interstate gas pipelines that make up Kinder Morgan’s subsidiary, Tennessee Gas Pipeline.
The mid-level energy company expects the acquisition to expand its range of services by connecting demand regions in the northeast to natural gas supply sources. Arguably, the acquisition has placed Kinder Morgan in a position to capitalize on the growing demand for natural gas, which is a clean energy source and has long been used as a fuel to provide heat and hot water to people. businesses and homes in the Northeast. . (Kinder Morgan signs $ 1.2 billion deal to acquire Stagecoach)
4. Schlumberger SLB recently provided encouraging forecasts for the oil industry at the Bernstein 2021 Strategic Decisions conference. The company also provided exceptional estimates for this year. Thus, the action jumped 7.7% on Wednesday.
The oil services provider expects 2021 revenue to be over $ 22.5 billion, slightly above Zacks’ consensus estimate of $ 22.4 billion. However, the figure indicates a decline from the 2020 level of $ 23.6 billion. The adjusted EBITDA margin for 2021 is expected to be between 20.8% and 21.3%, signaling an increase from 18.3% in 2020. In addition, the free cash flow margin is expected to be above 10% this year , indicating a significant jump from the 6% recorded in 2020.
Schlumberger reiterated the 2021 capital investment vision of $ 1.5 billion to $ 1.7 billion. Last year the metric was $ 1.5 billion. The company believes there has been increased optimism that demand for fuel will pick up in 2021, thanks to the rollout of coronavirus vaccines. He expects demand for oil to return to pre-2019 levels by the end of 2022. As such, the growth cycle may provide the company with immense potential to capture a larger share. market with low carbon technology. (Schlumberger stock jumps 7.7% on bullish forecast)
5. TotalEnergies TOT announced that it has entered into an agreement to acquire 10% of Arctic Transshipment LLC from Novatek. The acquisition will further expand TotalEnergies’ footprint in the global LNG space. Arctic Transshipment owns and will operate two liquefied natural gas (LNG) transshipment terminals under construction in the Murmansk and Kamchatka regions of Russia.
These terminals will provide export logistics services, including the Arctic LNG 2 project under construction, and will each initially include a 360,000 m3 floating storage unit and two ship-to-ship transfer kits.
TotalEnergies has a 20% stake in Yamal LNG and a 10% stake in Arctic LNG 2, a project currently under construction and on track to deliver its first LNG cargo in 2023. The acquisition of a stake in these terminals is a strategic operation of TotalEnergies, and an important step in the advancement and consolidation of the Arctic LNG 2 project. In addition, these terminals will contribute to the safe and sustainable export of cargo from its existing and developing Yamal projects. (TotalEnergies expands its LNG operations through an acquisition)
The following table shows the price development of some of the major oil and gas players over the past week and over the past six months.
Company Last week Last 6 months
XOM + 5.3% + 50.2%
CVX + 4.5% + 19.5%
COP + 7.4% + 39.8%
OXY + 12.2% + 60.2%
SLB + 16.7% + 59.5%
RIG + 16.9% + 106.5%
VLO + 3.5% + 40%
CPM + 3% + 50.8%
The SPDR Energy Select Sector – a popular way to track energy companies – rose 6.8% last week. The offshore driller performed the best Transocean Ltd. RIG whose share gained 16.9%.
Over the past six months, the sector tracker has jumped 40.5%. Transocean was also the main winner during the period, with a price appreciation of 106.5%.
What’s the next step in the energy world?
As the outlook for global oil consumption strengthens amid the calibrated supply cuts led by OPEC + and successful vaccine deployments, market players will be watching regular releases closely to watch for signs that could further validate a rebound. Against this backdrop, US government statistics on oil and natural gas – one of the few solid indicators that come out regularly – will be on the radar of energy traders. Data on the number of rigs from energy services firm Baker Hughes, which indicates trends in US crude production, is also being closely monitored. News regarding the approval / deployment / distribution of the coronavirus vaccine will be of the utmost importance. Finally, closely watched monthly reports from three key agencies (EIA, OPEC and AIE) complement the releases this week.
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Transocean Ltd. (RIG): Free Stock Analysis Report
TOTAL SE (TOT): Analysis report of available stocks
Southwestern Energy Company (SWN): Free Inventory Analysis Report
Schlumberger Limited (SLB): Free Inventory Analysis Report
Kinder Morgan, Inc. (KMI): Free Stock Analysis Report
Pembina Pipeline Corp. (PBA): Free Stock Analysis Report
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