Energy Sector Earnings Season Ends With A Bang

By Eric Fox | August 14, 2012 AAA

The final week of earnings season for the energy sector ended with good news as Chesapeake Energy (NYSE:CHK) announced various actions that delighted investors concerned with the funding of its future spending program.

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Capital Plan
Chesapeake Energy plans to reduce spending on leasehold acquisitions and sell approximately $4 billion to $5 billion in assets in 2013. The company also expects to increase 2012 production by 18% over 2011. The good news was tempered by reports that Chesapeake Energy is the subject of U.S. Justice Department antitrust investigation related to the leasing of acreage in Michigan. The government is investigating whether Chesapeake Energy participated with Encana (NYSE:ECA) in a scheme to limit competition.

Weaker Demand
The International Energy Agency (IEA) had some bad news for energy investors last week, as the organization trimmed oil demand growth estimates by 300,000 to 400,000 barrels per day for 2012 and 2013. The IEA cited a "weaker economic prognosis" than expected over the next 18 months.

Exploration Results
Apache Corporation (NYSE:APA) reported further exploration success at the Parmer prospect located in the deepwater area of the Gulf of Mexico. The company found 280 feet of net oil and gas pay in several Miocene formations and plans further analysis of this find prior to proffering a development plan. Stone Energy Corporation (NYSE:SGY) is also involved at this prospect on a non-operated basis and owns a 35% share.

Petrobras (NYSE:PBR) also reported on its recent exploration program, with a successful well located in offshore Brazil. The company found oil pay in the Ceara basin and plans to continue drilling on the prospect. Petrobras is not slowing down its oil and gas exploration and development program, and recently ordered nine more drillships to help with these efforts. This latest order brings the number of drillships ordered by the company to 21.

SEE: A Guide To Investing In Oil Markets

M & A
National Oilwell Varco
(NYSE:NOV) announced an agreement to purchase Robbins & Myers (NYSE:RBN) in an all-cash deal valued at $2.5 billion. The $60 per share acquisition price represented a 28% premium to the price on the previous trading day.

Robbins & Myers is predominately a North American supplier of oil and gas equipment, with 63% of its sales to this end market. The company's products include artificial lift systems, drilling systems, pipeline products and other oil field service products.

SEE: Oil And Gas Industry Primer

Shifting Assets
Noble Energy
(NYSE:NBL) shuffled around some oil and gas assets recently as the company adjusted its inventory of exploration and development properties. The company announced the sale of 14,000 acres in Kansas, with 250 producing wells, and should receive approximately $140 million.

Noble Energy also bought into a large offshore license area in the Falkland Islands, held by Falkland Oil and Gas Limited. The company expects to start drilling a prospect here in the fourth quarter of 2012 and to become the operator of part of this acreage by early 2013.

The Bottom Line
The end of second quarter of 2012 earnings season brought some relief to those investors concerned that Chesapeake Energy would have trouble funding its capital plan in 2012 and 2013. The industry also continued to buy and sell various properties and reported some new deepwater oil and gas discoveries.

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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