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Crucial Updates from the Energy Sector Last Week

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Andeavor’s 2Q17 earnings

Andeavor’s (ANDV) net income from continuing operations (attributable to shareholders) dropped from $418 million in 2Q16 to $40 million in 2Q17. This income included $313 million in pre-tax expenses related to inventory adjustments and acquisition and integration costs.

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Encana stock performance

YTD (year-to-date), Encana’s (ECA) stock has fallen ~19%, or from $11.70 to $9.53. On a weekly basis, ECA’s stock price has been making a pattern of lower highs and lower lows since the start of fiscal 2017.

ECA stock is trading below its 50-week and 200-week moving averages. On August 14, 2017, ECA’s stock price closed at $9.53, while its 50-week and 200-week moving averages stand at $10.87 and $12.33, respectively. ECA’s stock price is now ~12% below its 50-week moving average.

Flotek Industries’ strategies

Flotek Industries (FTK) sells its conventional chemistry or non-CnF (complex nano-fluid) components through Flotek stores. According to Flotek’s management, upstream operators are gradually decoupling their energy chemistry selection and purchases.

Flotek’s store business model caught this trend early—more than two years ago. Now, the company is benefiting from being an early mover.

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Integrated energy versus broader markets

So far in 3Q17, Chevron (CVX) stock has risen 4.2%—the highest among peers ExxonMobil (XOM), BP (BP), and Royal Dutch Shell (RDS.A). Shell and BP have risen 3.8% and 0.10%, respectively, in the same period, while XOM has fallen 3.1%.

The SPDR S&P 500 ETF (SPY) and the SPDR Dow Jones Industrial Average ETF (DIA) have risen 1.1% and 2.9%, respectively, in the same period. Integrated energy stocks CVX and Shell have thus outperformed the market in 3Q17, while BP and XOM have underperformed the market in so far in 3Q17.

Nabors Plans to Acquire Tesco

On August 14, 2017, Nabors Industries (NBR) disclosed that it had signed an agreement to acquire its OFS (oilfield equipment and services) industry peer Tesco (TESO). Nabors claims to own and operate the world’s largest land-based drilling rig fleet and provides offshore platform rigs in the US and for a number of international markets.

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