Crude Climbs on Renewed Supply Fears
The energy sector is set for a higher start, supported by strength in the underlying commodities. The broader markets are near the flatline in the pre-market ahead of the Federal Reserve’s annual conference this Friday.
WTI and Brent crude oil are up in early trading as focus has returned to tight supply amid reports that Saudi Arabia would consider cutting output in response to poor liquidity in the crude futures market and global economic fears. A fall in open interest for Nymex-traded oil futures is also providing support to oil markets. Prince Abdulaziz was quoted as saying the oil futures market has fallen into "a self-perpetuating vicious circle of very thin liquidity and extreme volatility", making the cost of hedging and managing risks for market participants prohibitive. OPEC+ said this is likely to occur with a return of Iranian oil to the market if the 2015 Iranian Nuclear Deal is revived. Sources also mentioned a production cut at the September 5th OPEC+ meeting may be too soon.
Natural gas futures rose this morning following news of a delay at the Freeport LNG plant and on forecasts for warmer weather than previously expected.
BY SECTOR:
US INTEGRATEDS
No significant news.
INTERNATIONAL INTEGRATEDS
A Peruvian judge admitted a $4.5 billion lawsuit against Repsol SA, eight months after an underwater oil pipeline owned by the company caused a spill of over 10,000 barrels into the Pacific Ocean.
Shell and unions representing workers at its Prelude floating liquefied natural gas (FLNG) facility have reached a wage deal to end a long-running strike and restart production at the site off northwest Australia, they said.
TotalEnergies denied a newspaper report which said gas condensate converted into jet fuel and delivered by a company it co-owns with Russia's Novatek might have supplied Russian army bases.
The Bonaparte CCS Assessment joint venture between TotalEnergies (26%), INPEX (53%, Operator) and Woodside (21%) has been awarded a Greenhouse Gas Storage Assessment Permit, off the northwest coast of Australia, to carry out evaluation and appraisal work on block G-7-AP, which is considered a promising area for geological storage of CO2. Appraisal work will begin in 2023.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Truist Bank upgraded Centennial Resource Development Inc to Buy from Hold.
TortoiseEcofin announced that Rattler Midstream LP will be removed from the Tortoise MLP Index, and the Tortoise North American Pipeline Index, as a result of the approved merger with Diamondback Energy. Due to the merger, RTLR will be removed from both indices at market open on Thursday, August 25, 2022.
Occidental Petroleum will begin construction on its first carbon capture project this fall, an official told an industry group, a key part of its effort to build a business from greenhouse gas reduction.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Fluor announced that first production of copper concentrate has been achieved at Anglo American’s Quellaveco project in Peru.
The Board of Directors of Matson approved adding three million shares, or approximately eight percent of outstanding common shares, to the existing six million share repurchase program. As of August 22, 2022, the existing share repurchase program had approximately 0.5 million shares remaining.
DRILLERS
Precision Drilling announced that the Toronto Stock Exchange has approved its intention to implement a normal course issuer bid for a portion of its common shares. The NCIB effectively renews the existing NCIB, which is scheduled to terminate on August 26, 2022. Precision believes the NCIB continues to represent another tool for the Company to enhance the value of its underlying shares. Pursuant to the renewed NCIB, the Company has been authorized by the TSX to acquire up to a maximum of 1,148,771 Common Shares, or approximately 10% of the public float as of August 15, 2022 for cancellation. Purchases under the NCIB may commence on August 29, 2022 and will terminate no later than August 28, 2023, or such earlier time as the Company completes its purchases pursuant to the NCIB or provides notice of termination.
REFINERS
Reuters reported that Marathon Petroleum's 593,000 barrel-per-day (bpd) Galveston Bay Refinery in Texas City, Texas, was operating normally on Tuesday afternoon following an early morning malfunction, said sources familiar with plant operations.
MLPS & PIPELINES
Golar LNG announced that it has entered into swap arrangements to hedge approximately 50% of its exposure to Dutch Title Transfer Facility linked production for 2024 at a TTF price of $51.20/MMBtu. A TTF price of $51.2/MMBtu is the energy equivalent to a Brent oil price of approximately $300/bbl. The hedging transaction secures cash flow visibility for part of our 2024 Distributable Adjusted EBITDA at an attractive historic level, whilst retaining meaningful exposure to the possibility of higher prices. Based on TTF gas prices of $51.20/MMBtu, and current Brent forward prices for 2024 at $86/bbl, Golar’s share of annual distributable Hilli Adjusted EBITDA for 2024 is expected to be approximately $294 million (fixed tariff of $67 million, Brent oil linked earnings of $73 million, and TTF linked earnings of approximately $154 million). Golar’s share of expected 2024 annual debt service for Hilli’s contractual debt is approximately $47 million (debt amortization of approximately $29 million and interest of approximately $18 million).
As per SEC filing, on August 17, 2022, Phillips 66 and Enbridge, through their respective subsidiaries, entered into an Agreement and Plan of Merger for the purpose of realigning their respective economic and governance interests in DCP Midstream, LP and Gray Oak Pipeline, LLC through the merger of existing joint ventures owned by Phillips 66 and Enbridge. Phillips Gas Company LLC, an indirect wholly owned subsidiary of Phillips 66, and Spectra DEFS Holding, LLC, an indirect wholly owned subsidiary of Enbridge, as the members of DCP Midstream, LLC, the owner of DCP Midstream GP, LLC, the general partner of DCP Midstream GP, LP, the general partner of the Partnership, entered into a Third Amended and Restated Limited Liability Agreement of DCP Midstream, LLC, effective on August 17, 2022, which, among other things, designated PGC as the Class A Managing Member of DCP Midstream. Messrs. Allen C. Capps and Stephen J. Neyland resigned from the Board of Directors of the General Partner, and Messrs. Kevin Mitchell and Todd Denton were appointed by DCP Midstream, the owner of the General Partner, to serve on the Board. Neither Mr. Mitchell nor Mr. Denton has been appointed to any committee of the Board at this time. Phillips 66 delivered a proposal to the Board to acquire all of the Partnership’s outstanding Common Units not already owned by DCP Midstream or its subsidiaries at a cash purchase price of $34.75 per Common Unit.
MARKET COMMENTARY
U.S. stock futures were in the red, in line with global equities, as weaker economic data from across the world hurt investor sentiment, with focus set on the Jackson Hole Symposium beginning Thursday for cues on pace of interest rate hikes. The dollar strengthened further, while gold prices fell, and the euro was under pressure on recession fears. Oil prices edged higher, amid talks about OPEC+ cutting output. Durable goods and home sales data will be released later in the day.
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.
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