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Confidence in Crude Demand Hit By Escalating US-China Dispute

Thursday, August 09, 2018

Sector Commentary

Energy stocks are set to open around break-even, with higher oil prices and rising broader index futures offsetting yesterday’s sell-off in the session and amid another heavy dose of quarterly earnings releases across the space.

Oil prices recouped some of yesterday’s steep losses after the first round of U.S. sanctions against Iran came into effect, although confidence in crude demand has been hit by the escalating China-U.S. trade dispute.

Natural gas was virtually flat ahead of weekly storage data expected to show a build of 47 bcf.

INTERNATIONAL INTEGRATEDS

(Late Wednesday) Press Release - Eni and Snam, through its subsidiary Snam4Mobility, have signed a second contract implementing the framework agreement signed in May 2017, aimed at creating 20 new CNG refuelling stations for vehicles in Italy, as part of both companies' commitment to promoting sustainable mobility in the country.

(Late Wednesday) Reuters - Royal Dutch Shell completed restarting the gasoline-producing unit at its 209,787 barrel per day Convent, Louisiana, refinery on Wednesday.

U.S. E&PS

(Late Wednesday) Press Release - Apache and Kayne Anderson Acquisition Corp. have announced an agreement pursuant to which Apache will contribute its midstream assets at Alpine High to Altus Midstream LP, a partnership jointly owned by Apache and KAAC.

(Late Wednesday) Press Release - Bonanza Creek Energy reported net revenue for the second quarter of 2018 was $71.9 million, compared to $44.1 million for the second quarter of 2017.

Credit Suisse downgraded Cimarex Energy to ‘Neutral’ from ‘Outperform’.

Ladenburg Thalmann upgraded Comstock Resources to ‘Buy’ from ‘Neutral’.

(Late Wednesday) Press Release - Diamondback Energy reported Q2 2018 net income of $219 million, or $2.22 per diluted share; adjusted net income of $158 million, or $1.59 per diluted share. The Company's Board of Directors has declared a cash dividend for the second quarter of 12.5 cents per common share payable on August 27, 2018, to stockholders of record at the close of business on August 20, 2018.

Press Release - Energy XXI Gulf Coast reported adjusted EBITDA totaled $27.8 million for the second quarter 2018, compared to $13.6 million in the first quarter of 2018.

Press Release - EQT Corporation announced that Robert J. McNally, EQT’s current Chief Financial Officer, will become President and Chief Executive Officer upon completion of the Company’s upstream and midstream business separation. McNally will succeed David L. Porges who has been acting as interim President and Chief Executive Officer of EQT since March of this year. Also in conjunction with the separation, David L. Porges will step down from the EQT Board of Directors and become Chairman of the Board for Equitrans Midstream Corporation. Additionally, Karam is expected to resign as a member of the EQT Board of Directors post-separation. James Rohr was also appointed chairman of the board.

(Late Wednesday) Press Release - For the second quarter of 2018, HighPoint Resources reported a net loss of $46.9 million, or $0.22 per diluted share. Adjusted net income for the second quarter of 2018 was a net loss of $3.2 million, or $0.02 per diluted share. EBITDAX for the second quarter of 2018 was $63.1 million.

Press Release - Murphy Oil announced its financial and operating results for the second quarter ended June 30, 2018, including net income of $46 million, or $0.26 per diluted share.

Reuters - Northern Oil and Gas reported 2Q18 adjusted earnings per share of $0.09 and total revenues of $66.8 million.

Press Release - Moda Midstream announced it has entered into a definitive agreement to acquire the Oxy Ingleside Energy Center and certain crude oil and LPG infrastructure from Occidental Petroleum. The transaction is expected to close in the third quarter of 2018, subject to customary closing conditions. IEC is a storage and export terminal that provides access to global markets for crude oil and LPG producers and marketers.

(Late Wednesday) Press Release - Occidental Petroleum released earnings for its second quarter that advanced from last year. The company's earnings totaled $848 million, or $1.10 per share. This compares with $507 million, or $0.66 per share, in last year's second quarter.

(Late Wednesday) Press Release - PDC Energy reported net loss for the second quarter of 2018 was $160.3 million, or $2.43 per diluted share, compared to net income of $41.3 million, or $0.62 per diluted share, for the comparable period of 2017.

(Late Wednesday) Press Release - SandRidge Energy announced financial and operational results for the quarter ended June 30, 2018. For the second quarter, the Company reported a net loss of $34 million, or $0.97 per share, and net cash provided by operating activities of $26 million. After adjusting for certain items, the Company's adjusted net loss amounted to $2 million, or $0.05 per share, operating cash flow totaled $24 million and adjusted EBITDA was $34 million for the quarter.

CANADIAN E&PS

Press Release - Baytex Energy and Raging River Exploration are pleased to announce that two leading independent proxy advisory firms that provide voting recommendations to institutional investors, Institutional Shareholder Services Inc. and Glass Lewis & Co. have each recommended that shareholders vote in favour of the proposed plan of arrangement involving Baytex and Raging River.

(Late Wednesday) Press Release - MEG Energy announced that its Board of Directors has unanimously appointed Derek Evans to the position of President and CEO, effective immediately.

(Late Wednesday) Press Release - Parex Resources earned net income of $188.6 million ($1.21 per share basic) compared to a net income of $3.5 million ($0.02 per share basic) in the three months ended June 30, 2017. It generated adjusted funds flow from operations of $121.7 million ($0.78 (or CAD $1.01)(1) per share basic) which has been adjusted to exclude the $137.5 million ($0.88 per share basic) previously released cost of a voluntary tax restructuring completed in June 2018 which will be funded from existing working capital.

Press Release - Petrus Resources generated funds flow of $8.4 million in the second quarter of 2018 which is 33% lower than the $12.5 million generated in the second quarter of 2017.

Press Release - Touchstone Exploration achieved average second quarter 2018 crude oil production of 1,717 barrels per day, representing increases of 11% and 29% from the first quarter of 2018 and the second quarter of 2017, respectively.

OILFIELD SERVICES

(Late Wednesday) Press Release - Key Energy Services reported second quarter 2018 consolidated revenues of $144.4 million and a pre-tax GAAP loss of $16.7 million, or $0.84 per share. The results for the second quarter include expenses of $0.3 million, or $0.02 per share, associated with certain equity awards and gains on sale of assets of $0.7 million, or $0.04 per share. Excluding these items, the Company reported a pre-tax loss of $17.1 million, or $0.86 per share.

Press Release - Natural Gas Services Group reported net income of $247,000 for the second quarter compared to $375,000 in the same quarter in 2017 and $225,000 in the first quarter 2018. For the six months ended June 30, 2018, The Company reported net income of $472,000 compared to $627,000 for the same period ended 2017. Earnings per diluted share for the quarter ended June 30, 2018 was 2 cents.

Press Release - TETRA Technologies announced consolidated second quarter 2018 net loss per share before discontinued operations attributable to TETRA stockholders of $0.05. This compares to consolidated net loss of $0.10 per share before discontinued operations attributable to TETRA stockholders in the first quarter of 2018, and a net loss per share before discontinued operations attributable to TETRA stockholders of $0.04 in the second quarter of 2017. TETRA's adjusted per share results attributable to TETRA stockholders for the second quarter of 2018, before discontinued operations excluding special items, were earnings per share of $0.03.

DRILLERS

Barclays downgraded Noble Corporation to ‘Underweight’ from ‘Equal Weight’.

(Late Wednesday) Press Release - Ocean Rig UDW recorded net loss of $19.1 million, or $0.21 basic and diluted loss per share, for the three-month period ended June 30, 2018, as compared to a net income of $57.0 million, or $6,357.57 basic and diluted earnings per share, for the three-month period ended June 30, 2017.

BMO Capital Markets downgraded RPC to ‘Market Perform’ from ‘Outperform’.

GMP Securities downgraded Trinidad Drilling to ‘Hold’ from ‘Buy’.

REFINERS

Press Release - Calumet Specialty Products Partners’ $51.9 million net loss for the second quarter 2018 included $58.2 million of debt extinguishment costs. Excluding this impact, Net income for the second quarter 2018 would have been $6.3 million, and net income per unit would have been $0.08 per unit.

(Late Wednesday) Reuters - HollyFrontier said it did not expect operational disruptions at its 85,000-barrel-per-day Tulsa West refinery in Tulsa, Oklahoma, after a fire in a wastewater plant was put out on Wednesday afternoon.

MLPS & PIPELINES

Reuters - BP Midstream Partners reported net income attributable to partnership in quarter was $0.29 per unit. Its 2018 cash available for distribution guidance revised up to $130 million-$135 million.

Reuters - Cheniere Energy reported 2Q18 loss per share of $0.07 and quarterly revenue of $1,543 million.

Press Release - Energy Transfer Equity’s net income attributable to partners was $355 million for the three months ended June 30, 2018, an increase of $143 million compared to the three months ended June 30, 2017. Distributable Cash Flow, as adjusted, for the three months ended June 30, 2018 was $407 million, an increase of $167 million compared to the three months ended June 30, 2017. In July 2018, ETE announced a $0.305 distribution per ETE common unit for the quarter ended June 30, 2018, or $1.22 per unit on an annualized basis.

Press Release - Energy Transfer Partners reported its financial results for the quarter ended June 30, 2018. For the three months ended June 30, 2018, net income was $602 million and Adjusted EBITDA was $2.05 billion. Adjusted EBITDA increased $506 million compared to the three months ended June 30, 2017, reflecting an increase of $320 million in Adjusted EBITDA from the crude oil transportation and services segment, as well as higher results from several of the other segments. In July 2018, ETP announced a quarterly distribution of $0.565 per unit ($2.260 annualized) on ETP common units for the quarter ended June 30, 2018.

(Late Wednesday) Press Release - Gibson Energy announced that its Board of Directors has approved a quarterly dividend of $0.33 per common share payable on October 17, 2018, to shareholders of record at the close of business on September 28, 2018.

(Late Wednesday) Press Release - Gibson Energy reported adjusted EBITDA from continuing operations of $100 million, a $42 million or 71% increase relative to the second quarter of 2017. Its distributable cash flow from combined operations was $78 million, a $35 million or 80% increase over the second quarter of 2017, and an increase of $13 million or 20% relative to the first quarter of 2018.

(Late Wednesday) Press Release - Gibson Energy announced it has secured an additional $200 million to $250 million of growth capital opportunities, consisting of the sanction of one million barrels of new tankage at the Hardisty Terminal, the expansion of the Moose Jaw Facility and the acceleration of the U.S. strategy through the extension of the Pyote gathering system.

(Late Wednesday) Press Release - Keyera delivered strong financial results in the second quarter of 2018 with adjusted earnings before interest, taxes, depreciation and amortization of $210 million, compared to $133 million reported in the second quarter of the previous year. The company is increasing its monthly dividend by 7% from $0.14 per share to $0.15, or $1.80 per share annually. The dividend is effective with the August dividend payable on September 17, 2018.

(Late Wednesday) Press Release - Targa Resources reported earnings before interest, income taxes, depreciation and amortization, and other non-cash items of $326.0 million for the second quarter of 2018 compared to $257.9 million for the second quarter of 2017. On July 18, 2018, TRC declared a quarterly dividend of $0.91 per share of its common stock for the three months ended June 30, 2018, or $3.64 per share on an annualized basis.

MARKET COMMENTARY

Amid trade jitters and levied sanctions, Wall Street futures edged up, as investors focus on a strong earnings season and await inflation data due later in the day. European markets dipped and the Russian rouble tumbled after the United States imposed fresh sanctions on the country. Asian stocks were underpinned by strength in Chinese stocks, which rose on hopes for more infrastructure spending. The yen and dollar advanced on their safe-haven appeal, while gold prices were mostly steady. Dropbox and News Corp are expected to report after markets close.


Nasdaq Advisory Services Energy Team Nasdaq's Advisory Services Tamar Essner
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