Wall Street PR

Oil Stocks Ripe for Santa Claus Rally as Market Looks Past Omicron (COP, CEI, OXY, SLB, XOM, SM, OIH, XLE)

The Oil market has rebounded 8% from its lows recorded Monday mid-morning after reports of the Omicron variant exploding in major developed markets hit the wires. The rip since that point has likely reinforced the standing narrative for oil, which was nailed into place by Goldman Sachs and Bank of America last week.

That view holds that we have seen a series of catalysts over the past year that have restrained investment in expanding oil production, including fears of Covid resurgence, worries about climate change and the potential for ESG investors to strike back at plans to expand production of fossil fuels, and concerns about the impact of SPR release plans from the White House and its partners. All of those factors threaten to imbalance the oil market to favor higher prices. And, with the deterioration of the US shale industry, OPEC is in prime position to coax prices as high as they want.
But, right now, the key is probably about Omicron, and the degree to which it could be a relatively short-lived problem.
If it is less severe but more contagious – as would seem to be the case according to the rampant spread and huge divergence between cases and hospitalizations in Gauteng province in South Africa – then it stands to potentially burn out quickly without sparking much in the way of lockdowns or travel restrictions.
Omicron could even replace Delta as the dominant strain worldwide and signal a de facto end to the pandemic by marginalizing more severe strains, relegating Covid to the ranks of the common cold. At least, that’s the hope of several prominent analysts at present, including famed JP Morgan analyst Marko Kolanovic.
But it has also probably already done a job on oil production investment. The end result could spur the next leg higher in oil. With that in mind, we take a look at some of the most interesting oil stocks in play right now along with their recent catalysts.
ConocoPhillips (NYSE:COP) engages in the exploration, production, transportation and marketing of crude oil, bitumen, natural gas, natural gas liquids, and liquefied natural gas on a worldwide basis. It operates through the following geographical segments: Alaska; Lower 48; Canada; Europe, Middle East and North Africa; Asia Pacific; and Other International.
The Alaska segment primarily explores for produces, transports and markets crude oil, natural gas and natural gas liquids. The Lower 48 segment consists of operations in the U.S. and the Gulf of Mexico. The Canada segment is comprised of oil sands development in the Athabasca Region of northeastern Alberta and a liquids-rich unconventional play in western Canada. The Europe, Middle East and North Africa segment consists of operations and exploration activities in Norway, the United Kingdom and Libya. The Asia Pacific segment has explorations and product operations in China, Indonesia, Malaysia, and Australia. The Other International segment handles exploration activities in Columbia and Argentina.
ConocoPhillips (NYSE:COP) recently announced two transactions intended to core up the important Asia-Pacific segment of its diverse global portfolio. First, the company announced it has entered into an agreement to sell the subsidiary that indirectly owns the company’s 54% interest in the Indonesia Corridor Block Production Sharing Contract (PSC) and a 35% shareholding interest in the Transasia Pipeline Company. Second, the company announced that it has notified Origin Energy that it is exercising its preemption right to purchase up to an additional 10% shareholding interest in Australia Pacific LNG (APLNG) from Origin Energy for up to $1.645 billion, which will be funded from cash on the balance sheet, subject to customary adjustments.
“Today’s announcement reflects our ongoing commitment to further strengthen our company across every aspect of our global portfolio,” said Ryan Lance, ConocoPhillips chairman and chief executive officer. “The Asia Pacific region plays an important role in our diversification advantage as an independent E&P and these two transactions enhance that advantage by lowering our aggregate decline rate and diversifying our product mix. We are proud of our nearly 50-year history in Indonesia and pleased that MedcoEnergi recognizes the value of this business.”
Even in light of this news, COP hasn’t really done much of anything over the past week, with shares logging no net movement over that period. COP shares have been relatively flat over the past month of action, with very little net movement during that period.
ConocoPhillips (NYSE:COP) managed to rope in revenues totaling $11.8B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 171.3%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($10.6B against $10.4B).
Camber Energy Inc (NYSE American:CEI) is a more speculative name, but one that has strong operations and has been sharply devalued by a potentially suspect “short report” from a bear fund a couple months ago. Hence, it could get interesting again, especially because it has been the focus of some meme stock traders at times over recent months, which has sparked some huge rallies, including one run that saw the stock rip about 800% in less than 6 weeks last fall.
The company has exposure to oil and gas assets through its majority-owned subsidiary, Viking Energy Group Inc (OTC US:VKIN), which has energy assets located in North America in Kansas, Missouri, Texas, Louisiana, and Mississippi. It has also gained exposure to the carbon capture theme through a recent Exclusive Intellectual Property License Agreement with ESG Clean Energy regarding ESG’s patent rights and know-how related to stationary electric power generation, including methods to utilize heat and capture carbon dioxide.
Camber Energy Inc. (NYSE American:CEI) most recently announced that, on November 18, its Viking subsidiary entered into a Membership Interest Purchase Agreement to acquire a 100% interest in a group of companies that are in the process of engineering, developing, constructing and bringing into commercial operations a processing plant located in Reno, Nevada, which is designed to produce renewable diesel. According to the release, the estimated production capacity of the Plant once operational is ⁓ 43,000,000 Gallons per year. The main part of the Plant is ⁓ 95% complete and there is a pre-treatment unit under construction within the Plant that is ⁓ 30% complete.
Renewable diesel fuel, sometimes called green diesel, is a biofuel that is chemically the same as petroleum diesel fuel, and is produced through various thermochemical processes such as hydrotreating, gasification, and pyrolysis. Renewable diesel is made from renewable feedstocks instead of crude oil.
CEI shares have been dumped over recent days, but the stock is still up powerfully from its summer levels, suggesting that a resurgence of interest could make it ripe for a fresh move to reclaim some its lost ground from its September highs near $5/share.
Camber Energy Inc. (NYSE American:CEI) has seen more than half of its VKIN subsidiary’s shares sold short over recent trading sessions according to OTCshortreport.com. If oil is setting up for a fresh run, the potential for a squeeze in CEI, augmented by meme stock bulls, could be appreciable.
Occidental Petroleum Corp. (NYSE:OXY) engages in the exploration and production of oil and natural gas. It operates through the following segments: Oil and Gas, Chemical, and Midstream and Marketing.
The Oil and Gas segment explores for, develops, and produces oil and condensate, natural gas liquids and natural gas. The Chemical segment manufactures and markets basic chemicals and vinyls. The Midstream and Marketing segment purchases, markets, gathers, processes, transports and stores oil, condensate, natural gas liquids, natural gas, carbon dioxide, and power.
Occidental Petroleum Corp. (NYSE:OXY) recently announced it awarded a services contract to Worley for a facility being designed to produce renewable fuels in British Columbia by capturing carbon dioxide from the atmosphere. Using Carbon Engineering’s Direct Air Capture and AIR TO FUELS™ technologies, the facility is expected to produce up to 100 million litres (26.4 million gallons) of ultra-low carbon fuel annually for the local Canadian market.
“We are proud to partner with Carbon Engineering and Huron on the AIR TO FUELS™ project and pleased that Worley will join the team to conduct the pre-FEED,” said Richard Jackson, President, Operations, U.S. Onshore Resources and Carbon Management, of Oxy. “We selected Worley based on our experience working with them and believe their method of driving innovation within their company will advance the development of the AIR TO FUELS™ facility.”
Even with that news, the action hasn’t really heated up in the stock, with shares moving net sideways over the past week. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -5%.
Occidental Petroleum Corp. (NYSE:OXY) pulled in revenues totaling $6.9B in the company’s most recent quarter, driving top line growth of 71.3%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($2.3B against $9.1B, respectively).
Other key names in the Oil space include Schlumberger Ltd. (NYSE:SLB), Exxon Mobil Corp. (NYSE:XOM), SM Energy Co. (NYSE:SM), VanEck Oil Services ETF (NYSEArca:OIH), and Energy Select Sector SPDR ETF (NYSEArca:XLE).