Oil and Gas Shares Plummet Amid Earnings Concerns and Oil Price Drop

Strategic Insights -

The U.S. oil and gas market experienced a downturn last week, with shares plummeting due to concerns over second-quarter and future earnings, coupled with a significant drop in the price of front-month West Texas Intermediate. The Oil Daily 30 Composite index slipped 3%, with most major oil companies reporting double-digit profit declines from year-ago levels. The Dow Jones Industrials index suffered an even steeper loss, falling 400.61 points, or 4.3%. Earnings reports are expected to dictate trading this week, with more independent producers set to release second-quarter results.

Key Takeaways:

  • The Oil Daily 30 Composite index slipped 3% due to concerns over second-quarter earnings, with most major oil companies reporting double-digit profit declines.
  • The Dow Jones Industrials index suffered a 4.3% loss, its worst one-week point decline this year, and its second worst in percentage terms.
  • Only one company, Ramco Energy plc, managed a double-digit share price advance, with a 10% increase after signing a contract with the Azeri government to develop oil resources in Azerbaijan.
  • Ramco and its partners plan to invest $13 billion over 15 years to develop an estimated 30 billion bbl-plus of oil reserves in the Caspian region.
  • Service firm Petroleum Helicopters Inc. rebounded with a 9% advance, while Golden Triangle Industries Inc. and Northern Border Partners L.P. gained 7.5% and 6%, respectively, due to improved second-quarter earnings.
  • Ohio-based Corrpro Cos. Inc. rounded out the top five winners with a gain of nearly 6% based on improved second-quarter earnings.
  • On the losing side, shipping company OMI Corp. led the way with a 23.4% drop, followed closely by Forcenergy Inc. and HS Resources Inc., both with 23% losses.
  • Pool Energy Services Co. and Abraxas Petroleum Corp. also suffered significant declines, with losses of 21.5% and over 20%, respectively.
  • Analysts are likening Rutherford-Moran Oil Corp.'s situation to Triton Energy Corp.'s recent struggles, which resulted in a share price decline of over 30%.

Statistics:

  • Front-month West Texas Intermediate price dropped 43 cents/bbl.
  • Oil Daily 30 Composite index slipped 3%.
  • Dow Jones Industrials index fell 400.61 points, or 4.3%.
  • Ramco Energy plc plans to invest $13 billion over 15 years.
  • Estimated oil reserves in the Caspian region: 30 billion bbl-plus.
  • Northern Border Partners L.P. owns a 70% interest in a 970-mile pipeline transporting about 20% of all Canadian natural gas into the United States.
  • OMI Corp. dropped 23.4% after analyst Jeffries & Co. downgraded the stock.
  • Forcenergy Inc. and HS Resources Inc. each lost 23%.
  • Abraxas Petroleum Corp. dropped over 20% and closed at 7, its year-to-date low.
  • Pool Energy Services Co. declined 21.5%.

Sources:

  • Oil Daily 30 Composite index
  • New York Mercantile Exchange
  • Jeffries & Co.
  • Ramco Energy plc
  • British Petroleum Co. plc
  • Amoco Corp.
  • Petroleum Helicopters Inc.
  • Golden Triangle Industries Inc.
  • Northern Border Partners L.P.
  • Corrpro Cos. Inc.
  • OMI Corp.