Chevron and Clean Energy Fuel Shake Up Energy Sector

Brittney Barrett  |

Energy stocks have been sinking alongside negative economic news surrounding jobs and international debt of late, but Chevron (CVX) began a reversal of that trend today after announcing that it expects second quarter profits exceed first quarter results. Chevron cited improvement in both its upstream and downstream businesses as well as more favorable industry margins as the cause for growth. Chevron will not release its full results until July 29, but the most recent announcement could help shares of the company push higher in the interim.

Perhaps Chevron’s optimism has prompted more confidence that other large oil companies will be able to thrive financially in spite of lower-per barrel pricing. Chevron was not the only company that was higher in trading today, the overall NYSE Arca Oil index was also up, as was the natural gas index.

Among natural gas companies in focus, Chesapeake Energy Corp. (CHK) was celebrated by analysts today after announcing their intentions to spend $1 billion on promoting wider use of natural gas as a transportation fuel.

The company will begin their effort with a $150 million placement for Clean Energy Fuels Inc. and $155 million insertion for Sundrop Fuels.

The promised cash infusion sent shares of Clean Energy Fuel (CLNE) up to their highest levels in months making them among the day’s biggest gainers. Analysts approved of Clean Energy Fuels plans to erect 150 liquid natural-gas filling stops, wan answer to the shortage of fueling infrastructure that has kept broader fleet adoption of natural gas.  Northland Capital Markets upgraded the company to outperform with a price target of $17 a share.

Clean Energy Fuel’s largest shareholder, billionaire, T. Boone Pickens has joined forced with Chesapeake co-found and chief executive Aubrey McClendor in the effort to heighten natural gas use and minimize oil imports. Analysts at Northland Capital Markets consider the plan “major step to increase the use of natural gas,” which could help bolster shares of both companies. The fact that natural gas is also become more profitable for major oil players, like Exxon and others bodes well for the outcome of the new developments.

Elsewhere in the sector, Bank of America Merrill Lynch reduced Tesoro Corp. (TSO) to underperform and cut its rating on HollyFrontier Corp. (HFC) to neutral. Shares or both companies sunk in trading today. Valero Energy Corp. (VLO) also was negatively impacted by equity research that indicated which companies were best able to benefit from the current price gap between Brent crude and intermediate crude.  Valero Energy Corp. was determined to be considerable more exposed to Brent North Sea prices than other competitors, rendering it “less capable of taking advantage of the current price gap.”

Marathon Petroleum Corp. (MPC) on the other hand was deemed to offer “the best combination of value, operational catalysts and earnings leverage” among large-capitalization refining companies. Shares of Marathon, while improved for the day, were not among the best performing in the sector.



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