This Week in Energy: Kinder Morgan, Exxon Mobil and Others

Despite S&P and Dow Jones trading near all time highs, it’s been an uneventful week for the energy markets. Although WTI prices are slightly higher than what they were a week ago, American crude still trades for under $47 per barrel, below the ideal price of many oil companies. Let’s take a closer look at five energy companies in the news this week, Fairmount Santrol Holdings Inc (NYSE:FMSA), Baker Hughes Incorporated (NYSE:BHI), Kinder Morgan Inc (NYSE:KMI), Exxon Mobil Corporation (NYSE:XOM), and ConocoPhillips (NYSE:COP), and see what investors from our database think about the companies in question.

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Drillers Going to Drill 

One reason crude futures didn’t rally much this week was a disappointing EIA report that showed that the overall crude and distillate inventory level remained stubbornly high. Another reason was that the rig count continues to rise. According to Baker Hughes Incorporated (NYSE:BHI), the U.S. active oil rig count rose by six to 357, marking the sixth week of increases in the last seven weeks. Rising rig counts below 400 will generally translate to slower production declines. Despite the news, crude futures rallied on Friday, largely due to the military coup attempt in Turkey. Although Turkey isn’t a major crude producer, it is close to the Middle East, which does produce a lot of crude. If insurgents or militants from other countries follow Turkey’s lead, crude could rally. Jeffrey Ubben’s ValueAct Capital was a major shareholder of Baker Hughes Incorporated (NYSE:BHI) at the end of March.

Lower Guidance for Fracking Sand

Given the weak WTI prices, it isn’t exactly surprising that Fairmount Santrol Holdings Inc (NYSE:FMSA) issued soft guidance numbers for the company’s latest quarter. The company sees a second quarter loss of $0.56-$0.58 per share versus the consensus of a $0.12 per share loss. The greater loss guidance caused Fairmount Santrol Holdings Inc (NYSE:FMSA) shares to fall by almost 16% on Friday. Whether Fairmount’s soft guidance is an indication that other fracking sand manufacturers will disappoint is unknown, however. Bulls certainly hope WTI can rally further and demand for proppant sand will come back. Among the funds we track, six funds owned $5.13 million worth of Fairmount Santrol Holdings Inc (NYSE:FMSA) shares, which accounted for 1.30% of the float on March 31, versus nine funds and $7.59 million, respectively, on December 31.

On the next page, we take a closer look at Kinder Morgan, Exxon Mobil Corporation, and ConocoPhillips.

M&A Deals Alive and Well in the Energy Industry

After an unusually long period of quiet, it seems that the energy M&A market is kicking into higher gear. Three major energy companies announced M&A deals this week, with the largest Exxon Mobil Corporation (NYSE:XOM) making a greater than $2.2 billion bid for InterOil Corporation (USA) (NYSE:IOC) according to Reuters. Although InterOil agreed to be bought by Oil Search in June, Exxon’s bid could potentially win in the end. If Exxon acquires InterOil, the company would have a larger LNG presence in the critical Asian Pacific market.

Meanwhile, two other energy companies divested assets this week, with Kinder Morgan Inc (NYSE:KMI) agreeing to sell its 50% interest in the Parkway Pipeline for an undisclosed amount of cash and ConocoPhillips (NYSE:COP) selling its 35% interest in some offshore blocks off of West Africa for potentially $430 million. Although the sale of the assets won’t move the needle much for either companies given Kinder Morgan and ConocoPhillips’ size, the sales will help the two focus more on delivering value for shareholders. A healthier M&A market could also be considered bullish as it means more confidence in current and future crude prices.

A total of 45 investors from our database held shares of ConocoPhillips (NYSE:COP), 58 funds reported stakes in Kinder Morgan Inc (NYSE:KMI), and 60 funds were bullish on Exxon Mobil Corporation (NYSE:XOM) at the end of the first quarter.

Disclosure: none