Markets

China-U.S. Trade Dispute Causes Energy Market Jitters

Monday, November 19, 2018

Sector Commentary

The energy sector is poised for a lower start this morning, driven by declines in the crude complex while lower U.S. stock index futures heightened the risk-off sentiment. Index futures fell on conflicting signals of potential truce in the China-U.S. trade dispute which added to market jitters. U.S. Vice President Mike Pence said there would be no end to U.S. tariffs on $250 billion of Chinese goods until China changed its ways, dampening Friday's trade optimism that was fueled by U.S. President Donald Trump's comments.

Shares of Cimarex Energy are down heavily in pre-market on news it would buy smaller rival Resolute Energy Corp in a deal valued at $1.6 billion, including debt, as it seeks to expand its assets in the shale-rich Permian Basin.

Oil prices on both sides of the Atlantic steadied for most of the pre-market, however quickly dipped into negative territory despite having gained in the previous three sessions from the prospect that Saudi Arabia will push OPEC and potentially Russia to cut supply towards the year-end. Russia's Novak said he plans to sign a partnership agreement with OPEC, though said he wants to see how global markets develop ahead of next month's meetings. However, a number of factors continue to cloud the outlook on global oil prices , including trade tensions, a global demand slowdown, and record production from the US.

Natural gas futures are higher, as participants continue to digest the low working gas stockpiles, combined with winter weather lingering across the northeast, helping to push local prices higher on rising demand.

US INTEGRATEDS

Press Release - Block Energy is pleased to note that ExxonMobil is set to carry out a comprehensive review of western Georgia's hydrocarbon resource base and potential, following the signing of an agreement with the LEPL State Agency for Oil and Gas of the Ministry of Economy and Sustainable Development of Georgia.

INTERNATIONAL INTEGRATEDS

(Late Friday) Reuters - BP 's trading arm entered a tolling agreement with the owners of an idled oil refinery in St. Croix, U.S. Virgin Islands, cementing plans to bring the plant back online six years after it was idled by previous owners. Under BP's tolling agreement with Limetree Bay Refining LLC, owner of the idled Hovensa refinery, BP will supply the facility with crude and sell its products, low-sulfur fuels that will meet an International Maritime Organization mandate in 2020.

Reuters - Economist Roberto Castello Branco has accepted an invitation to become the chief executive officer of Petróleo Brasileiro SA . Branco, who had previously served as a central bank member as well as an executive at miner Vale SA, will take over from current CEO Ivan Monteiro.

U.S. E&PS

Press Release - Cimarex and Resolute Energy announced that Cimarex has entered into a definitive agreement to acquire Resolute in a cash and stock transaction valued at $35.00 per share, or a total purchase price of approximately $1.6 billion, including Resolute's long term debt of $710 million, as of September 30, 2018. The transaction was unanimously approved by both companies' Boards of Directors.

(Late Friday) Press Release - On November 16, 2018, California Resources terminated its existing at-the-market program and Equity Distribution Agreement, dated as of November 17, 2017 (the "Former EDA"), with Morgan Stanley and entered into a new at-the-market program and new Equity Distribution Agreement (the "New EDA") with Citigroup Global Markets, HSBC Securities (USA), Merrill Lynch, Pierce, Fenner & Smith, Mizuho Securities USA and SG Americas Securities (the "Managers"). The new at-the-market program does not increase the number of shares of the Company's common stock, par value $0.01 per share, available for issuance thereunder by the Company from that which was available at the time of termination under the prior at-the-market program.

Press Release - Extraction Oil & Gas announced that the board of directors of Extraction has approved a stock repurchase program under which Extraction is authorized to repurchase up to $100.0 million of its outstanding common stock from time to time in the open market, through negotiated transactions or otherwise.

Press Release - Lonestar Resources US announced that it has closed an acquisition of producing properties in the Eagle Ford Shale play. Lonestar paid $38.7 million for a 3,084 gross / 2,706 net acres in the Sugarkane Field in DeWitt County, Texas from Sabine Oil & Gas Corporation (and an affiliate) and Alerion Gas AXA, LLC. The properties, 95% of which are operated, currently produce 800 boe/d from 20 wells. Estimated annualized EBITDAX from this level of production is $6 million. The effective date of the acquisition is August 1, 2018. Lonestar has identified 26 Lower Eagle Ford drilling locations, with additional drilling potential in the Upper-Lower Eagle Ford, the Upper Eagle Ford and the Austin Chalk.

(Sunday) Press Release - ShaMaran Petroleum refers to the agreement announced on June 4, 2018 whereby the Company's wholly owned subsidiary, General Exploration Partners, agreed in a sale and purchase agreement with Marathon Oil KDV B.V., a wholly owned subsidiary of Marathon Oil , to acquire from MOKDV a further 15% working interest in the Atrush Block Production Sharing Contract in the Kurdistan Region of Iraq.

Press Release - QEP Resources announced that its wholly owned subsidiaries, QEP Energy Company, QEP Marketing Company, and QEP Oil & Gas Company, have entered into a definitive agreement to sell natural gas and oil producing properties, undeveloped acreage and associated gas gathering and treating systems in the Haynesville/Cotton Valley for $735.0 million, subject to purchase price adjustments (the "Divestiture").

DRILLERS

SunTrust Robinson upgraded Helmerich And Payne to 'Buy' from 'Sell'.

Credit Suisse upgraded Helmerich And Payne to 'Neutral' from 'Underperform'.

Press Release - Precision Drilling announced that the waiting period under the Competition Act (Canada) expired on November 16, 2018 in relation to the combination with Trinidad Drilling . At Precision's election, the expiration of the waiting period now satisfies the required Competition Act condition under the arrangement agreement between Precision and Trinidad.

Press Release - Trinidad Drilling confirmed its continued support for a strategic share exchange merger with Precision Drilling . Following the completion of the Precision Transaction, the combined entity will be one of the largest North American land drillers, operating a high-quality fleet of 348 rigs in key US and Canadian basins, with an expanded international footprint.

(Late Friday) Press Release - Ensign Energy Services announced that it is varying certain terms and conditions of its all-cash offer dated August 30, 2018 to acquire, through a wholly-owned subsidiary, all of the issued and outstanding common shares of Trinidad Drilling to, among other things, shorten the time period for acceptance of the Offer to 10:00 a.m. (Toronto time) on November 27, 2018. Ensign is entitled to shorten the time for acceptance of the Offer as Trinidad has accepted an alternative offer from Precision Drilling . The Inferior Precision Offer which is in the form of Precision common shares, the trading price of which has declined by as much as 30% since October 4, 2018, the day before the Inferior Precision Offer was announced, is, in the view of Ensign, far inferior to Ensign's cash Offer for Trinidad Common Shares.

MLPS & PIPELINES

(Late Friday) Press Release - Enbridge announced that none of Enbridge's outstanding Cumulative Redeemable Preference Shares, Series N will be converted into Cumulative Redeemable Preference Shares, Series O of Enbridge (Series O Shares) on December 1, 2018. After taking into account all conversion notices received from holders of its outstanding Series N Shares by the November 16, 2018 deadline for the conversion of the Series N Shares into Series O Shares, less than the 1,000,000 Series N Shares required to give effect to conversions into Series O Shares were tendered for conversion.

(Late Friday) Press Release - Pembina Pipeline announced that none of Pembina's Cumulative Redeemable Rate Reset Class A Preferred Shares, Series 1 will be converted into Cumulative Redeemable Floating Rate Class A Preferred Shares, Series 2 of Pembina on December 1, 2018. After taking into account all conversion notices received from holders of its outstanding Series 1 Shares by the November 16, 2018 deadline for the conversion of the Series 1 Shares into Series 2 Shares, less than the 1,000,000 Series 2 Shares required to give effect to conversions into Series 2 Shares were tendered for conversion.

MARKET COMMENTARY

Stock futures for Wall Street's major indexes rose, tracking global equities, amid conflicting signals of a potential truce in U.S.-China trade war tensions. Dollar steadied after posting its biggest weekly drop in two months last week, while gold prices edged higher. Oil was up over expectations that the OPEC will cut output. NAHB Housing Market Index for November is scheduled for release.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP

Nasdaq Advisory Services Energy Team is part of Nasdaq's Advisory Services -- the most experienced team in the industry. The team delivers unmatched shareholder analysis, a comprehensive view of trading and investor activity, and insights into how best to manage investor relations outreach efforts. For questions, please contact Tamar Essner . This communication and the content found by following any link herein are being provided to you by Corporate Solutions, a business of Nasdaq, Inc. and certain of its subsidiaries (collectively, "Nasdaq"), for informational purposes only. Nasdaq makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Sources include Reuters, TR IBES, WSJ, The Financial Times and proprietary Nasdaq research.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.