Exxon Mobil Corporation (XOM), Schlumberger Limited. (SLB), and More: This Week in Energy

Although the big catalyst event everyone is waiting for will occur next week, many meaningful events occurred this week in the energy sector and crude was very volatile as a result.

In this article, we will review the major events surrounding Exxon Mobil Corporation (NYSE:XOM), Schlumberger Limited. (NYSE:SLB), Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR), SM Energy Co (NYSE:SM), and Oasis Petroleum Inc. (NYSE:OAS). In addition, we will take a look at the smart money sentiment towards the companies in question.

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Exxon Mobil Corporation (NYSE:XOM) found itself in an unwanted spotlight this week after the Wall Street Journal reported that the SEC is investigating the integrated giant for how it values its assets. Seeing as how crude prices have halved over the past three years, regulators wonder why Exxon has not written down its assets like almost all its other peers. Exxon has responded by saying that it has one of the most conservative accounting practices in the industry when valuing oil project initially, and thus does not need to write down the values as its peers do. Given that Exxon is one of the few integrated companies that raised its dividend in 2016, many investors don’t doubt Exxon’s conservative practices. The question is how the SEC feels and what might come as a consequence. Out of the around 749 funds Insider Monkey tracks, 60 were long Exxon Mobil Corporation (NYSE:XOM) at the end of June, unchanged from the previous quarter.

After shutting down much of its operations in the South American country earlier in the year, Schlumberger Limited. (NYSE:SLB) is back in Venezuela, courtesy of winning a sizable contract to drill around 80 wells in the country’s heavy oil-rich Orinoco Belt. Although the terms haven’t been finalized yet and the exact financial details weren’t released, PdVSA, the state firm that awarded the contract, has said that drilling 480 wells in the belt will net around $3.2 billion. Given the project’s difficult engineering requirements, PdVSA would be hard-pressed if it performed the project by itself.  Schlumberger bulls hope that payment for the contract will be paid on-time and the project will be the first of many more to come. Shares of the oil service giant inched lower by 0.5% this week versus a 1.89% increase in the main oil ETF, United States Oil Fund LP (ETF)(NYSEARCA:USO). A total of 55 funds from our database were long Schlumberger Limited. (NYSE:SLB) at the end of June, down by one from the previous quarter.

On the next page, we examine the meaningful events that occurred to Petroleo Brasileiro SA Petrobras, SM Energy Co, and Oasis Petroleum.

Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR)’s shares were in the green this week after its management outlined their plan to cut debt for the coming years. According to the blueprint, Petrobras will cut its capex/planned investment to $74.1 billion from $98.4 billion between 2017 and 2021. In addition, the company plans to divest around $19.5 billion in assets in 2017 and 2018. If all goes to plan, Petrobras’ net-debt-to-EBITDA should decline to a manageable 2.5x by 2018. Petrobras also made some waves in the week after it, and several other energy majors, were reportedly sued by the government of Nigeria for illegally exporting crude to the United States from 2011 to 2014. Nigeria is seeking $12.7 billion in lost revenues in total from all the oil companies. Given that Petrobras doesn’t have as big of an operation in Nigeria as other integrated companies, investors weren’t too concerned, and shares of Petrobras still managed to eek out a 0.77% gain for the week. Ken Fisher’s Fisher Asset Management inched up his stake in Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) by 3% in the second quarter to over 10.8 million shares.

Last but not least, Oasis Petroleum Inc. (NYSE:OAS) slid by 0.76% and  SM Energy Co (NYSE:SM) gained 0.99% this week as WTI prices remained volatile. After seeing WTI rise earlier in the week due to another positive inventory report from the EIA, traders were even more optimistic when news hit the wires that Saudi Arabia had offered to cut its production levels somewhat in exchange for Iran freezing its production at current levels of around 3.6 million barrels per day. Although the situation would likely have been a win-win for both sides as both countries would have made more from oil due to higher prices, the two country’s geopolitical differences reared their ugly head. Crude fell sharply on Friday as Iran doesn’t seem to want to freeze and would like more lax measurements in the event of a freeze. Saudi Arabia has also said that it doesn’t expect a major agreement to come out from the meeting next week. However, whether that will be the case next week is anyone’s guess. According to our data, 20 and 33 funds were long SM Energy Co (NYSE:SM) and Oasis Petroleum Inc. (NYSE:OAS), respectively, at the end of June.

Disclosure: none