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Crude Bolstered by Investor Hopes for U.S.-China Trade Deal

Thursday, February 14, 2019

SECTOR COMMENTARY

Energy stocks and broader indices have pared earlier morning gains following weaker than expected retail sales data released this morning. Currently, equity futures are flat.

Within the sector, today marks one of the busiest earnings reporting sessions across the energy sector, so there will be numerous micro catalysts to drive trading.

Oil rose for a third day on Thursday to reach its highest so far this year as financial markets drew support from investor optimism that the U.S. and China could resolve their trade dispute. "This rally that we're seeing over the last two to three days is completely justified when you put the predicted OPEC production cuts into your global oil supply and demand equation," Tamas Varga of PVM Oil Associates said.

Natural gas futures are higher ahead of weekly inventory data calling for an 82 bcf drawdown.

US INTEGRATEDS

(Late Wednesday) Press Release - Chevron U.S.A., a wholly owned subsidiary ofChevron, announced the signing of a sales and purchase agreement with GS Caltex Corporation for the delivery of liquefied natural gas (LNG) to South Korea from Chevron’s global supply portfolio. As a joint venture between Chevron and GS Energy, GS Caltex has signed a long-term agreement and will begin receiving LNG in October 2019.

Macquarie upgraded ExxonMobil to ‘Outperform’ from ‘Underperform’.

(Late Wednesday) Press Release - Rowan Companies announced that Exxon Mobil has exercised the third of four options for the Rowan Relentless, an R-Class ultra-deepwater drillship. The option will be used for operations in the US Gulf of Mexico and has an expected duration of 180 days. The Rowan Relentless has been under contract with ExxonMobil since September 2018.

INTERNATIONAL INTEGRATEDS

Reuters - BP, BASF and more than 30 other multinationals stand to benefit after EU judges overturned an order demanding Belgium revoke a tax break. The European Commission failed to prove that the Belgian tax break constituted aid, said the ruling by the General Court, the lower branch of the Court of Justice in Luxembourg.

Press Release - Royal Dutch Shell will join forces with renewable energy developers to build an €18m (£15.7m) floating wind project off the coast of Norway by next year. The Anglo-Dutch giant will take a majority stake in the company that hopes to prove that the cost of floating wind projects could fall significantly using innovative approaches.

Press Release - Saudi Aramco and Total signed a Joint Venture (JV) Agreement to develop a network of fuel and retail services in Saudi Arabia. The 50:50 JV plans to invest around USD 1 billion over the next 6 years in the Saudi fuel retail market and start providing motorists with premium fuels and retail services in Saudi Arabia.

U.S. E&PS

(Late Wednesday) Press Release - For the three months ended December 31, 2018, Antero reported a net loss of $122 million, or $0.39 per share, compared to net income of $487 million, or $1.54 per diluted share, in the prior year period. Excluding items, Adjusted Net Income was $145 million, or $0.46 per diluted share, compared to $74 million, or $0.23 per diluted share, in the prior year period. Stand-alone Adjusted Net Income was $175 million, or $0.56 per diluted share, compared to $55 million, or $0.17 per diluted share, in the prior year period.

(Late Wednesday) Press Release - The board of directors of Anadarko Petroleum declared a quarterly cash dividend on the company's common stock of 30 cents per share, payable March 27, 2019, to stockholders of record at the close of business on March 13, 2019. The amount of future dividends for Anadarko common stock will depend on earnings, financial condition, capital requirements and other factors. The board of directors will determine dividends on a quarterly basis.

Press Release - Chesapeake Energy announced an innovative partnership to accelerate the company's digital transformation and data-driven growth initiatives. Chesapeake continues to build momentum in early 2019, with a concentration on operational efficiency and optimization, capital discipline and growth by leveraging advanced data science and machine learning/AI to solidify its position as a top-tier operator. The company's engagement with RS Energy Group (RSEG) reinforces those key initiatives.

(Late Wednesday) Press Release - Continental Resources announced a 2019 capital expenditures budget of $2.6 billion, which is focused on both strong free cash flow generation and oil-weighted production growth. Annual crude oil production is projected to grow 13% to 19% and to range between 190,000 to 200,000 barrels of oil (Bo) per day. Annual crude oil volumetric growth is projected to be split approximately equally between the Company's North and South assets. Annual natural gas production is projected to grow 1% to 4% and to range between 790,000 to 810,000 thousand cubic feet (Mcf) per day.

Press Release - Eclipse Resources reported fourth quarter 2018 average net production of 404.5 MMcfe per day and reported full year 2018 average net production of 343.2 MMcfe per day, which were both above the high end of the Company’s previously issued guidance and analyst consensus estimates. For the fourth quarter of 2018, the Company’s production mix was 72% natural gas, 16% natural gas liquids (“NGLs”) and 12% oil, while the production mix for the full year 2018 was 72% natural gas, 17% NGLs and 11% oil.

Press Release - In the fourth quarter 2018, EQT reported a net loss from continuing operations, primarily as a result of goodwill and lease impairments and a loss on derivatives not designated as hedges, partly offset by an increase in quarterly revenue of $583 million from sales of natural gas, oil and natural gas liquids. Adjusted net income from continuing operations, which excludes impairment charges, non-cash derivatives and other items impacting comparability between periods, was $84 million higher than the same quarter last year. Net cash provided by operating activities for the fourth quarter increased $105 million and adjusted operating cash flow increased 49%.

Press Release - EQT reported year-end 2018 proved reserves of 21.8 Tcfe. Adjusting for the impact of asset divestitures in 2018, the Company’s proved reserves increased 11%, or 2.1 Tcfe, which was 142% more than the 1,495 Bcfe production during the year. This increase was primarily driven by further development within the Marcellus and Utica formations.

(Late Wednesday) Press Release - The Board of Directors of EOG Resources has declared a dividend of $0.22 per share on EOG's Common Stock, payable April 30, 2019, to stockholders of record as of April 16, 2019. The indicated annual rate is $0.88.

(Late Wednesday) Press Release - Laredo Petroleum reported net income attributable to common stockholders of $149.6 million, or $0.65 per diluted share for the fourth quarter of 2018. Adjusted Net Income, a non-GAAP financial measure, for the fourth quarter of 2018 was $37.5 million, or $0.16 per adjusted diluted share. Adjusted EBITDA, a non-GAAP financial measure, for the fourth quarter of 2018, was $132.4 million.

(Late Wednesday) Press Release - Marathon Oil reported fourth quarter 2018 net income of $390 million, or $0.47 per diluted share. Adjusted net income was $121 million, or $0.15 per diluted share. Net operating cash flow was $855 million, or $787 million before changes in working capital.

(Late Wednesday) Press Release - Encana announced that it has completed its acquisition of Newfield Exploration Company in an all-stock transaction. Demonstrating the quality of its business and its commitment to return capital to shareholders, Encana will proceed with its previously announced $1.25 billion share buyback in 2019, following receipt of regulatory approvals, and increase its dividend by 25 percent. In connection with the closing of the acquisition, Encana intends to implement cross guarantees whereby Encana will guarantee Newfield’s outstanding notes and Newfield will guarantee Encana’s outstanding notes. With the close of this transaction, Encana welcomes the appointment of Steven W. Nance and Thomas G. Ricks to its Board of Directors, both of whom previously served as directors on the Newfield Board.

(Late Wednesday) Press Release - Pioneer Natural Resources reported fourth quarter net income attributable to common stockholders of $324 million, or $1.89 per diluted share. These results include the effect of noncash mark-to-market (MTM) derivative gains and certain other unusual items typically excluded by the investment community in published estimates. Excluding these items, non-GAAP adjusted income for the fourth quarter was $202 million, or $1.18 per diluted share.

(Late Wednesday) Press Release - Pioneer Natural Resources announced that its Board of Directors approved an increase in the Company’s semiannual cash dividend from $0.16 per share to $0.32 per share on Pioneer’s outstanding common stock (equivalent to $0.64 per share on an annualized basis). The dividend is payable April 12, 2019, to stockholders of record at the close of business on March 29, 2019.

CANADIAN E&PS

(Late Wednesday) Press Release - Birchcliff Energy announced its unaudited 2018 year-end and fourth quarter financial and operational results, highlights from its independent reserves evaluations effective December 31, 2018, its 2019 capital program and a 5% increase to its quarterly common share dividend. The board of directors has approved a disciplined capital budget for 2019, in line with the objective of generating free funds flow in 2019. The 2019 capital program targets an annual average production rate of 76,000 to 78,000 boe/d which is expected to generate approximately $330 million of adjusted funds flow. Adjusted funds flow of $81.5 million, or $0.31 per basic common share, a 16% decrease and a 14% decrease, respectively, from Q4 2017. Net income to common shareholders of $70.9 million, or $0.27 per basic common share, a 186% increase and a 200% increase, respectively, from Q4 2017.

TD Securities resumed coverage of Encana.

(Late Wednesday) Press Release - Encana announced that it has completed its acquisition of Newfield Exploration Company in an all-stock transaction. Demonstrating the quality of its business and its commitment to return capital to shareholders, Encana will proceed with its previously announced $1.25 billion share buyback in 2019, following receipt of regulatory approvals, and increase its dividend by 25 percent. In connection with the closing of the acquisition, Encana intends to implement cross guarantees whereby Encana will guarantee Newfield’s outstanding notes and Newfield will guarantee Encana’s outstanding notes. With the close of this transaction, Encana welcomes the appointment of Steven W. Nance and Thomas G. Ricks to its Board of Directors, both of whom previously served as directors on the Newfield Board.

OILFIELD SERVICES

(Late Wednesday) Press Release - Halliburton Company announced that its board of directors has declared a 2019 first quarter dividend of eighteen cents ($0.18) a share on the company’s common stock payable on March 27, 2019 to shareholders of record at the close of business on March 6, 2019. The company’s annual meeting of shareholders will take place on May 15, 2019, in Houston, Texas. The record date for determination of shareholders entitled to vote at the meeting is March 18, 2019.

(Late Wednesday) Press Release - Hornbeck Offshore Services reported revenues of $53.9 million for the fourth quarter of 2018, a decrease of $2.3 million, or 4.1%, from $56.2 million for the fourth quarter of 2017; and a decrease of $4.6 million, or 7.9%, from $58.5 million for the third quarter of 2018. For the three months ended December 31, 2018, the Company had an average of 39.0 vessels stacked compared to 43.5 vessels stacked in the prior-year quarter and 40.7 vessels stacked in the sequential quarter. Operating loss was $(15.5) million, or (28.8)% of revenues, for the fourth quarter of 2018 compared to an operating loss of $(14.3) million, or (25.4)% of revenues, for the prior-year quarter; and an operating loss of $(22.4) million, or (38.3)% of revenues, for the third quarter of 2018.

(Late Wednesday) Press Release - Oil States International reported a net loss for the fourth quarter 2018 of $14.3 million, or $0.24 per diluted share. During the fourth quarter of 2018, the Company generated revenues of $274.1 million and Consolidated EBITDA (Note A) of $24.1 million.

(Late Wednesday) Press Release - Oceaneering International reported a net loss of $64.1 million, or $(0.65) per share, on revenue of $495 million for the three months ended December 31, 2018. Adjusted net income was $7.3 million, or $0.07 per share, reflecting the impact of $71.4 million of net adjustments, primarily a $76.4 million pre-tax goodwill impairment in its Subsea Projects segment. During the prior quarter ended September 30, 2018, Oceaneering reported a net loss of $66.0 million, or $(0.67) per share, on revenue of $519 million, and an adjusted net loss of $13.9 million, or $(0.14) per share.

DRILLERS

Press Release - Noble announced that it has exercised an option for the purchase of a second newbuild Gusto MSC CJ46 design jackup rig from the PaxOcean Group (PaxOcean) for $83.75 million. Noble will pay $30.1 million of the $83.75 million purchase price in cash, with the remainder of the purchase price, or $53.6 million, to be seller-financed at a 4.25% interest rate paid in cash and 1.25% paid in kind over the term of the financing. The Company will use existing cash balances for the initial payment and the secured seller-financed amount will be repaid in four years.

Press Release - Precision Drilling announced 2018 fourth quarter revenue of $427 million was an increase of 23% over the prior year comparative quarter. Net loss was $198 million ($0.68 per share) compares to a net loss of $47 million ($0.16 per share) in the fourth quarter of 2017. Funds provided by operations were $93 million versus $28 million in the prior year comparative quarter. During the fourth quarter the company reduced the principal amount of the outstanding debt by US$74 million through redemptions and repurchases for a gain of $7 million. Fourth quarter ending cash balance was $97 million, up $32 million from the December 31, 2017 balance of $65 million. Fourth quarter capital expenditures were $30 million.

(Late Wednesday) Press Release - Rowan Companies announced that ExxonMobil has exercised the third of four options for the Rowan Relentless, an R-Class ultra-deepwater drillship. The option will be used for operations in the US Gulf of Mexico and has an expected duration of 180 days. The Rowan Relentless has been under contract with ExxonMobil since September 2018.

REFINERS

(Late Wednesday) Press Release - On February 12, 2019, the Board of Directors of HollyFrontier expanded the size of the Board from ten to eleven members and appointed Craig Knocke as an independent director to the Board, in each case effective February 13, 2019. In addition, on February 13, 2019, Franklin Myers was appointed as Chairman of the Board. The Company’s former Chairman of the Board, Michael C. Jennings, will continue to serve as a member of the Board.

(Late Wednesday) Press Release - HollyFrontier announced that its Board of Directors declared a regular quarterly dividend in the amount of $0.33 per share, payable on March 13, 2019 to holders of record of common stock on February 27, 2019.

Press Release - PBF Energy reported fourth quarter 2018 loss from operations of $446.2 million as compared to income from operations of $254.6 million for the fourth quarter of 2017. Excluding special items, fourth quarter 2018 income from operations was $213.2 million as compared to income from operations of $57.0 million for the fourth quarter of 2017. The company reported fourth quarter 2018 net loss of $346.7 million and net loss attributable to PBF Energy of $353.7 million or $2.97 per share. The company also announced that it will pay a quarterly dividend of $0.30 per share of Class A common stock on March 14, 2019, to holders of record as of February 28, 2019.

MLPS & PIPELINES

AltaCorp initiated coverage of Inter Pipeline, Keyera and Pembina Pipeline at ‘Outperform’.

AltaCorp initiated coverage of Gibson Energy at ‘Sector Perform’.

Press Release - PBF Logistics announced fourth quarter 2018 net income attributable to the limited partners of $21.8 million, or $0.48 per common unit. During the fourth quarter, the Partnership generated cash from operations of approximately $15.6 million, earnings before interest, income taxes, depreciation, and amortization (EBITDA) of $41.1 million and distributable cash flow of $28.7 million. The board of directors of PBF Logistics GP LLC, the Partnership's general partner, declared a regular quarterly cash distribution of $0.5050 per common unit. The distribution is payable on March 14, 2019, to unitholders of record at the close of business on March 1, 2019.

Press Release - TransCanada announced net income attributable to common shares for fourth quarter 2018 of $1.1 billion or $1.19 per share compared to net income of $0.9 billion or $0.98 per share for the same period in 2017. For the year ended December 31, 2018, net income attributable to common shares was $3.5 billion or $3.92 per share compared to net income of $3.0 billion or $3.44 per share in 2017. TransCanada's Board of Directors also declared a quarterly dividend of $0.75 per common share for the quarter ending March 31, 2019, equivalent to $3.00 per common share on an annualized basis, an increase of 8.7 per cent. This is the nineteenth consecutive year the Board of Directors has raised the dividend.

(Late Wednesday) Press Release - Williams and Targa Resources announced new natural gas liquids (“NGL”) agreements and NGL pipeline projects that will link the Conway, Kansas, and Mont Belvieu, Texas, NGL markets. Williams will build a 188-mile NGL pipeline, called the “Bluestem Pipeline,” from its fractionator in Conway, Kansas, and the southern terminus of Overland Pass Pipeline to an interconnect with Targa’s Grand Prix NGL Pipeline (“Grand Prix”) in Kingfisher County, Oklahoma. Targa will construct a 110-mile extension of Grand Prix from southern Oklahoma into the Sooner Trend (oil field), Anadarko (basin), Canadian and Kingfisher (counties) (“STACK”) region of Central Oklahoma where it will connect with Williams’ new Bluestem Pipeline.

MARKET COMMENTARY

Futures for Wall Street’s major indexes pared gains amid weak economic data. Upbeat earnings pushed European shares higher, while Asian stock markets traded in a cautious mood. The euro held above a three-month low, brushing off weak data out of Europe. In commodities, gold was little changed. Earnings from Applied Materials, CBS Corp and NVIDIA will be in focus.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP


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