Earnings season for the energy sector ramps up this week with a number of oil services and exploration and production companies releasing financial results for the third quarter of 2012. These reports will provide additional evidence of the slowdown in the North American land drilling cycle and update the development of onshore shale oil and natural gas plays.
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Several large capitalization exploration and production companies report earnings this week this week, including Anadarko Petroleum (NYSE:APC) on Nov. 29, QEP Resources (NYSE:QEP) on Nov. 30 and Murphy Oil (NYSE:MUR) on Nov. 31. Analysts and investors will be looking for additional insight into progress on various North American shale plays during the quarter. Investors will also see earnings releases from the oil services segment, including Oceaneering International (NYSE:OII) on Nov. 29 and both Cameron International (NYSE:CAM) and C&J Energy Services (NYSE:CJES) on Nov. 31. These results are likely to confirm the slowdown in the North American land market and provide disclosures on offshore oil and gas development trends.
Royal Dutch Shell (NYSE:RDS.A, RDS.B) is increasing its investments in the United Kingdom and announced the purchase of the ownership stake held by Apache (NYSE:APA) in the Beryl field. The company will pay $525 million and receives interests in 12 oil and gas fields and the Scottish Area Gas Evacuation, a pipeline system serving the area. Royal Dutch Shell received approval to develop the Fram field located in the offshore United Kingdom. The field is expected to achieve peak production of 35,000 barrels of oil equivalent per day (BOE/D) and be developed with a floating, production, storage and offloading vessel.
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Marathon Oil (NYSE:MRO) is in the midst of a large divestiture program of noncore assets and is awaiting regulatory approval of the sale of the company's oil and gas properties in the Cook Inlet area of Alaska. This sale will yield $375 million in proceeds, and the company plans to generate between $1.5 billion to $3 billion in proceeds from 2011 to 2013 with its divestiture program. Marathon Oil is also considering selling a portion of its 20% ownership stake in the Athabasca Oil Sands Project in Alberta and any proceeds from this sale are not included in the original divestiture proceeds estimate range above.
BP (NYSE:BP) has been in divestiture mode for several years as it looks to raise cash to pay for damages and fines related to the 2010 Macondo oil spill. The company announced the sale of its interests in TNK-BP to Rosneft for $17.1 billion in cash and 12.84% of the company. BP will use part of the cash to buy additional shares of Rosneft, increasing its ownership stake in the company to 19.75% and yielding net cash of $12.3 billion for the company. TNK-BP is an integrated Russian oil company created in 2003 to hold the Russian oil and gas assets of BP and several other entities. The company has a global portfolio of assets, including properties in Russia, Vietnam, Ukraine, Brazil and Venezuela.
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Several exploration and production companies have added to positions in onshore shale plays as the industry plows North America for oil and gas resources. Halcon Resources (NYSE:HK) sees great value in the Bakken play in North Dakota and announced the purchase of 81,000 net acres here for $1.45 billion. The company will pay $700 million in cash and $750 million of preferred stock for developed and undeveloped acreage.
Magnum Hunter Resources (NYSE:MHR) announced the acquisition of a private oil and gas company with acreage in the Appalachian Basin prospective for the Utica and Marcellus Shale. The company will pay just under $107 million, $37.3 million in the form of cash and $69.4 million in preferred stock. Magnum Hunter Resources estimates that the properties contain 105 gross drilling locations in the Utica and Marcellus Shale.
The Bottom Line
Earnings season ramps up quickly this week and will no doubt yield a plethora of additional information on the current energy cycle for investors to digest. These disclosures should be incorporated into investments made in this volatile and important sector.
At the time of writing, Eric Fox did not own any shares in any company mentioned in this article.