Energy Equities Bounce Back

Brittney Barrett |

After months of ambiguity,  France and Germany have stated that they will take whatever steps necessary in order to support European banks. The welfare of these banks has been negatively impacting the global markets for months as fear that a Greek debt default would collapse the banks across Europe that are invested in it.The potential impact on Western Europe would resonate globally, by depleting the number of world-wide consumers and damaging emerging producing nations. Intesified struggles in Europe would serve to excacerbate the current economic slowing and potentially push the U.S. back into a recession.

The stress of this possibility has weighed heavily on the markets and while the announcement is not exactly a resolution to the Greek crisis, it is at least a short-term opiate for Wall St. Among the first areas to experience relief from the announcement was the energy sector. Oil tends to be among the hardest hit in a bad economy as the need for energy declines alongside such factors as low unemployment and a drop in production.

The price of crude and the shares at major oil and gas companies both began a sharp ascent following the pledge as a result of the news that Greece would not default on its debt. Crude oil added 3 percent on Monday for a fourth consecutive session of gains. Prior to the more persistent rumors of a potential resolultion, was hovering well-below $80 a barrel.

The low price of oil was expected to cut into the bottom lines at many major oil and gas companies, pushing their shares lower. The surge in crude helped those companies regain some of the strength during the session today.

The most standout performance in the sector came from Complete Production Services Inc. (CPX) which gained nearly 40 percent following the pre-open announcement that Superior Energy Services (SPN) would aquire the company in a $2.7 billion cash-stock deal. The offer accounted for a 61 percent premium in Friday’s closing price.

The energy sector is ripe with acquisition targets right now as the the decline in crude has battered the valuations of major energy companies, making formerly unattainable enterprises into feasible buys. Complete, once a competitor for Superior, is an excellent example of this, having fallen 41 percent over the most recent three month period.

Other notable gainers for the day included Nabors Industries (NBR), which tacked on 13 percent before closing around 8 percent higher. The improvements by the result of analyst conjecture that the company will take in a profit of 40 cents per share on revenue of $1.51 billion against a year-earlier loss of 14 cents. Over the past year, Nabors has seen increasingly strong growth in the U.S. lower-48 land-drilling segment and as of July, reported ongoing significant interest in more rigs. Other factors, for instance a rise in projected income from its pressure pumping segment all appear to be working in support of a strong upcoming quarter.

Tesoro Corp. (TSO) also caught invetors attention today. The company, which refines and markets petroleum products, and provides transporting services has been gaining strength and is now within reach of the years highs provided it continues on this trajectory.

Other independent oil refiners and producers that experienced a steep climb during the rally were with Valero Energy Corp. (VLO) and the historically volatile Marathon Oil Corp. (MRO). Sunoco Inc. (SUN), which  is still at the lower end of its spectrum, also experienced significant strength.

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
ATH:CA Athabasca Oil Corporation 1.46 0.03 2.10 1,400,256
VLO Valero Energy Corporation 68.00 -0.37 -0.54 5,124,518
TSO Tesoro Corporation 90.18 -0.76 -0.84 1,773,748
NCR NCR Corporation 41.16 -0.21 -0.51 610,612
SPN Superior Energy Services Inc. 18.06 -0.40 -2.17 3,578,716
MRO Marathon Oil Corporation 18.25 -0.13 -0.71 10,999,743
SUN Sunoco LP representing limited partner interests 24.54 0.23 0.95 824,739

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