Evening

Over the past year (1 June 2017 to 31 May 2018) the Big Oil investment portfolio has generated a total return of +19.16%. By comparison, the ASX has returned +9.63% in the same period.

The oil price, as measured by West Texas Intermediate (WTI), rose +36.6 % during the same period.

The best performing stocks were Anadarko Petroleum (+36.29%), Royal Dutch Shell (+33.74%), BP (+32.11%), and EOG Resources (+29.28%).

Detractors to performance were Schlumberger (-0.70%), and Exxon Mobil (+3.19%)

Vue Company Updates

Anadarko Petroleum Corp. (NYSE:APC)

Anadarko Petroleum Corporation today announced that Mozambique LNG1 Company Pty. Ltd., the jointly owned sales entity of Anadarko and the Mozambique Area 1 co-venturers, has signed a Heads of Agreement (HOA) with Tokyo Gas Co., Ltd. (Tokyo Gas) and Centrica LNG Company Ltd. (Centrica) for the long-term supply of LNG. The co-purchasing off-take agreement calls for the delivered ex-ship supply of 2.6 million tonnes per annum (MTPA) from the start-up of production until the early 2040s.

The Anadarko-operated Mozambique LNG project will be Mozambique's first onshore LNG development, initially consisting of two LNG trains with total nameplate capacity of 12.88 MTPA to support the development of the Golfinho/Atum fields located entirely within Offshore Area 1. Anadarko stated in a press release that "This off-take arrangement takes full advantage of Mozambique's favourable central location, which enables Mozambique LNG to supply customers in both the European and Asian-Pacific markets”.

Royal Dutch Shell Plc (LON:RDSB)

The global liquefied natural gas (LNG) market has continued to surprise analysts by increasing some 29 million tonnes in 2017, according to Royal Dutch Shell's latest LNG Outlook (“Shell LNG Outlook 2018”). Based on current demand projections, Shell sees potential for a supply shortage developing in the mid-2020s, unless new LNG production project commitments are made soon. The company has a large number of LNG projects anticipated to come online in the coming years. From 2015-2020, the company anticipates 50% supply growth, which will position the company perfectly for the emerging supply/demand gap in the early 2020s, as illustrated by the graphic below:

LNG Supply Demand Gap ChartBP Plc (LON:BP)

Like its major competitor Royal Dutch Shell, BP is also flagging a strategic shift towards gas. Facing a long-term shift in global energy demand away from oil and the transition to a low-carbon future, BP is responding with an upstream strategy increasingly weighted toward gas and LNG volumes. BP’s production mix has historically held one of the highest oil weightings vs. peers. The weighting of oil in BP's production mix has averaged 63% through 2017, which is by far the highest in the integrated oil peer group. Analysts expect this share to gradually fall as BP's project pipeline reflects a strong bias toward gas and LNG upstream as the company positions for a long-term structural change in the global energy-demand mix. BP's transition to a low-carbon future also complements its directional gas strategy, defined by its nine global gas development hubs.

The company anticipates gas will make up 50% or more of its production by the middle of the next decade. For example, BP's upstream project pipeline is clearly pivoting the business toward integrated gas chains. Six of BP's seven major projects brought online in 2017 (Khazzan, Juniper, Persephone, Trinidad Onshore, Taurus/Libra, Zohr) were gas or LNG. Four of the company's six major projects to start up in 2018 (Atoll Phase 1, Shah Deniz 2, Giza/Fayoum, Taas Expansion) will also be gas.

EOG Resources Inc. (NYSE:EOG)

EOG Resources delivered excellent 1Q FY 2018 results, given the strong recovery in oil prices. Fuelling that high-end result were the many wells EOG completed across its vast shale portfolio. The company completed 70 wells in the Delaware Basin during the quarter, with several producing more than 2,000 barrels of oil equivalent per day (BOE/D). Its guidance for the rest of 2018 was also impressive with the company flagging an increase in oil output of some 16% to 20% while staying within its planned US$5.4 billion to US$5.8 billion capital expenditure budget. EOG Resources also revealed its plans to repay bonds as they mature over the next four years, with an aim to reduce debt by US$3 billion. This level of capital expenditure represents a nearly 50% reduction from its current level of US$6.4 billion which would improve an already solid balance sheet.


Learn more about Macrovue’s Big Oil investment portfolio.


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Past performance is not a reliable indicator of previous performance. See how our performance is calculated.

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