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Yamil Berard
Yamil Berard
Articles (171) 

Energy Stocks Soar

Devon Energy was up 6% while the battered stocks of two natural gas producers rose 4%. The company announced 300 layoffs as part of a cost-reduction strategy

April 10, 2018 | About:

Wall Street legends like Mario Gabelli (Trades, Portfolio) kept signaling high expectations for oil and gas in 2018. It didn't matter that the energy sector has been one of the worst-performing in the markets. The guru stuck to his guns even after disappointing fourth-quarter earnings for the world’s largest producers, including Exxon Mobil Corp. (NYSE:XOM) and Chevron Corp. (NYSE:CVX).

Now, the guru's predictions are showing signs of life. Energy stocks, including those of oil and natural gas producers, led gains in the major indexes during pre-marketing trading on Tuesday. By early afternoon, the stocks of some of the companies had soared up to 7%. What's more, most of the stocks had maintained their gains before market close.

The gains, in part, were fueled by rising oil prices and the announcement of record-breaking production. Devon Energy Corp. (NYSE:DVN), which experienced some of the highest gains, announced 300 layoffs as part of a cost-reduction plan worth up to $200 million through 2020.

The U.S. Energy Information Administration reported gross withdrawals reached 90.9 cubic feet per day last year, the highest volume on record. The agency also reported production that is measured as marketed natural gas reached a new high, though dry natural gas production did not exceed 2015 levels.

By early afternoon, Brent Crude had climbed to over $65 a barrel, yet another indicator of a brighter future for energy stocks. Projections are that crude will hit over $70 a barrel later in the year. Natural gas was slightly down.

Since early this year, the EIA has predicted continued development of U.S. shale, light oil and natural gas resources will alter the nation’s role in the industry as a net energy exporter by 2022.

Since 1953, the U.S. has largely been an importer of net energy. In some cases, the agency says the shift will happen even sooner as drilling is on the upswing and oil prices are at their highest level in three years.

Stocks up

In the fourth quarter, analysts had expected far better earnings from energy giants like Dallas-based Exxon. Instead, they got explanations that profits had been halved by international refinery costs and lags in technology.

As a result, early February proved challenging for stocks like Exxon. The global oil and gas leader had stood at more than $89 a share, then sank 6% in a matter of days.

Tuesday boded well for those companies that are part of the S&P 500. By early afternoon, the S&P 500 had gained 1.34% to 2,648.19 while the Dow Jones Industrial Average stood at 24,347.22, up 1.5%.

Exxon Mobil beat the market for a gain of 3.49% to under $78 a share in early afternoon trading. (Exxon is expected to release first-quarter 2018 results April 27.)

Other energy players also headed north. A top afternoon performer was Devon Energy. At one point, it was up over 7% to almost $34 a share. Devon, which is based in Oklahoma City, has an asset base of more than 6.2 million net acres of conventional and unconventional oil and natural gas properties.

Baker Hughes (BHGE) an arm of General Electric Co. (GE) climbed more than 5% to just under $31 a share. The compahy is a fullstream provider of oilfield products.

London-based BP (NYSE:BP) was up nearly 3% to just under $43 a share, while California-based Chevron stood at $119.38 a share, up 2.93%.

Other gainers included the battered stocks of two southwest-based producers of natural gas. Oklahoma-based Chesapeake Energy Corp. (NYSE:CHK) was up 4%, but selling at $3 a share. The company’s 52-week range is $2.53 to $6.39.

Houston-based Southwestern Energy Co. (NYSE:SWN) was at $4.44 a share, up 4.22%. The Peter Lynch chart showed the stock at Southwestern Energy trading far below its median value of $24 a share.

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Chesapeake and others are largely dependent on natural gas as profits have been adversely affected by oversupply.

Estimates are that energy consumption will grow about 0.4% per year on average from 2017 to 2050, which is less than the rate of expected population growth (0.6% per year).

Annual real gross domestic product growth is expected to average 2.0% through 2050, the agency reported.

Exxon and Chevron are slated to released first-quarter financial and operating results on April 27.


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