Crude Continues Climb as Supply Worries Trump Declining Demand
The energy sector is poised for a mixed to higher start, supported by strength in the crude complex and despite weakness in the major market indices. U.S. stock futures slid, pointing to a reversal to the rally in the tech sector after Amazon posted its first quarterly loss since 2015.
Earnings season carried on as Exxon Mobil Corp doubled its first-quarter per-share profit, but the results fell short of Wall Street estimates, even excluding a $3.4 billion writedown from its withdrawal from Russia. The U.S. oil producer tripled its buyback program, saying it will repurchase up to $30 billion in shares by the end of next year. Exxon reported net income of $5.48 billion, or $1.28 per share, in the three months ended March 31, compared with $2.73 billion, or 64 cents per share, last year. Meanwhile, peer Chevron’s first-quarter profit nearly quadrupled from the same period a year ago, surpassing Wall Street's forecasts as oil and gas prices surged following Russia's invasion of Ukraine. It posted adjusted earnings of $6.5 billion, or $3.36 per share, 8 cents above Wall Street's mean estimate of $3.27, according to Refinitiv. Chevron earned $1.7 billion, or 90 cents per share, in the same quarter last year.
WTI and Brent crude oil futures extended gains for the fourth consecutive day as fears over Russian supply disruption trumped COVID-19 lockdowns in China, the world's biggest crude importer. On the supply side, OPEC+ is likely to stick to its existing deal and agree another small output increase for June when it meets on May 5. Sanctions have also made it increasingly difficult for Russian ships to send oil to customers, prompting Exxon Mobil Corp to declare force majeure for its Sakhalin-1 operations and curtail output.
Natural gas futures are trading higher as NOAA's 6-10 day outlook shows below-normal temps over the northeastern US, Great Lakes and Corn Belt, as well as for the Pacific NW. Near- to above-normal temps are seen for the rest of the mainland, especially across the Southeast and along the Gulf Coast
BY SECTOR:
US INTEGRATEDS
Chevron reported earnings of $6.3 billion ($3.22 per share - diluted) for first quarter 2022, compared with $1.4 billion ($0.72 per share - diluted) in first quarter 2021. Included in the current quarter were pension settlement costs of $66 million. Foreign currency effects decreased earnings by $218 million. Adjusted earnings of $6.5 billion ($3.36 per share - diluted) in first quarter 2022 compares to adjusted earnings of $1.7 billion ($0.90 per share - diluted) in first quarter 2021.
Exxon Mobil announced estimated first-quarter 2022 earnings of $5.5 billion, or $1.28 per share assuming dilution. First-quarter results included an unfavorable identified item of $3.4 billion associated with our planned exit from Russia Sakhalin-1, or $0.79 per share assuming dilution. First-quarter capital and exploration expenditures were $4.9 billion.
California's attorney general announced he issued a subpoena to ExxonMobil for information on its role in causing the global plastic waste crisis.
INTERNATIONAL INTEGRATEDS
Reuters reported that India has asked state-run energy companies to evaluate the possibility of buying European oil major BP's stake in sanctions-hit Russian firm Rosneft.
Eni said profits in the first quarter soared above expectations on the back of booming oil and gas prices stoked by Russia's invasion of Ukraine. Adjusted net profit came in at 3.27 billion euros ($3.4 billion) from 0.27 billion euros a year ago to beat a 2.47 billion euro consensus. The group, which produced 1.654 million barrels of oil equivalent per day in the quarter, said it expected output for the year to be 1.7 mboed. It raised guidance for its adjusted cash flow before working capital at replacement cost to 16 billion euros from a previous forecast of more than 15 billion euros.
Brazilian oil company Petro Rio is still negotiating the terms of a deal to acquire Albacora field from Petrobras, the company's chief executive, Roberto Monteiro, said.
Shell Plc agreed to acquire India-based renewable power platform Sprng Energy group for $1.55 billion, as the global oil and gas major looks to expand its a low-carbon power generation portfolio in the country. Shell said its unit, Shell Overseas Investment, would buy 100% of Solenergi Power Private Limited, the flagship company of Sprng Energy group, from UK-based investor Actis.
CANADIAN INTEGRATEDS
Imperial Oil reported estimated net income in the first quarter of $1,173 million up from $813 million in the fourth quarter of 2021, driven primarily by strong market conditions. Cash flow from operating activities was $1,914 million up from $1,632 million in the fourth quarter of 2021. Both net income and cash flow from operating activities represent the highest first quarter result in over 30 years.
Imperial Oil declared a quarterly dividend of 34 cents per share on the outstanding common shares of the company, payable on July 1, 2022, to shareholders of record at the close of business on June 2, 2022. This second quarter 2022 dividend compares with the first quarter 2022 dividend of 34 cents per share.
Imperial Oil announced that the Board of Directors, on the recommendation of a special committee of independent directors, has authorized the initiation of a substantial issuer bid pursuant to which the company will offer to purchase for cancellation up to $2,500,000,000 of its common shares. The company anticipates that the terms and pricing will be determined, and the Offer will commence, during the next two weeks and will be completed before the end of June 2022.
Activist investment firm Elliott Management is pushing Suncor Energy to add new board directors, overhaul management and begin a strategic review, arguing that its shares have lagged even as crude prices surged to multi-year highs.
Suncor issued the following statement in response to the letter it received from Elliott Investment Management L.P.: “The Suncor Board and management team have received the letter and materials from Elliott. Suncor appreciates the views of its shareholders and will take the time to carefully assess the recommendations and materials provided, with a view to enhancing shareholder and other stakeholder value. Suncor’s Board and management team looks forward to engaging with Elliott in due course to better understand their perspective. We remain confident in the Company’s strategy for continued growth and will continue to execute our strategic plan and evaluate opportunities to enhance shareholder value.”
U.S. E&PS
Marathon Oil announced that the company's board of directors has declared a dividend of 8 cents per share on Marathon Oil Corporation common stock. This represents an approximate 15% increase from the company's last quarterly base dividend payment of 7 cents per share. The dividend is payable on June 10, 2022, to stockholders of record on May 18, 2022.
SM Energy announced financial results for the first quarter 2022. First quarter 2022 net income was $48.8 million, or $0.39 per diluted common share, compared with a net loss of $(251.3) million, or $(2.19) per diluted common share, for the same period in 2021. First quarter 2022 Adjusted net income was $245.9 million, or $1.98 per diluted common share, which compares with Adjusted net loss of $(5.7) million, or $(0.05) per diluted common share, for the same period in 2021.
For the quarter ended March 31, 2022, Southwestern Energy recorded a net loss of $2.7 billion, or ($2.40) per diluted share, primarily due to the mark-to-market of unsettled derivatives. Excluding this and other one-time items, adjusted net income (non-GAAP) was $447 million, or $0.40 per diluted share, and Adjusted EBITDA (non-GAAP) was $905 million. Net cash provided by operating activities was $972 million, net cash flow (non-GAAP) was $861 million and free cash flow (non-GAAP) was $317 million.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Balchem reported first quarter 2022 results: Record net sales of $228.9 million, an increase of 23.3% compared to the prior year quarter with quarterly double-digit sales growth in all three segments: Human Nutrition and Health, Animal Nutrition and Health, and Specialty Products. Record adjusted EBITDA was $53.6 million, an increase of 17.2% from the prior year. GAAP net earnings were $28.9 million, an increase of 23.6% from the prior year. These net earnings resulted in GAAP earnings per share of $0.89. Record adjusted net earnings of $33.4 million, an increase of 17.3% from the prior year, resulting in record adjusted earnings per share(a) of $1.03.
Liberty Energy announced the commencement of an underwritten public secondary offering of an aggregate of 14,500,000 shares of its Class A common stock by Schlumberger Technology.
The Board of Directors of Matson declared a second quarter dividend of $0.30 per common share. The dividend will be paid on June 2, 2022 to all shareholders of record as of the close of business on May 12, 2022.
Minerals Technologies reported diluted earnings per share of $1.33, or $1.36 excluding special items for the first quarter ended April 3, 2022, compared with $1.17 in the prior year. Worldwide net sales were $519.1 million, up 9 percent sequentially and 15 percent above the prior year on continued execution of strategic growth initiatives, strong demand across all segments, and continued pricing actions. Foreign exchange had an unfavorable impact on sales of $16 million, or 4 percentage points versus the prior year.
NOV reported first quarter 2022 revenues of $1.55 billion, an increase of 2 percent compared to the fourth quarter of 2021 and an increase of 24 percent compared to the first quarter of 2021. Net loss for the first quarter of 2022 was $50 million, or 3.2 percent of sales, which included $45 million of Other Items (see Corporate Information for additional details). Adjusted EBITDA (operating profit excluding depreciation, amortization, gain and loss on sales of fixed assets, and, when applicable, Other Items) increased sequentially to $103 million, or 6.7 percent of sales.
Oil States International reported a net loss of $9.4 million, or $0.16 per share, for the first quarter of 2022. During the first quarter of 2022, the Company generated revenues of $164.0 million and Consolidated EBITDA of $14.5 million. These results compare to revenues of $161.3 million and Adjusted Consolidated EBITDA of $13.4 million reported in the fourth quarter of 2021.
Pason generated $74.5 million in revenue in the first quarter of 2022, representing a 75% increase from the $42.6 million generated in the first quarter of 2021 as drilling activity improved significantly across Pason's operating regions. Furthermore, the Company realized the fourth consecutive quarter of sequential growth in Revenue per Industry day in the North American business unit with a new record of $835 in Q1 2022, an increase of 16% from the comparative period in 2021, resulting in improvements in revenue that outpaced underlying industry activity. With this increase in revenue, Pason generated $33.4 million in Adjusted EBITDA, or 44.8% of revenue in the first quarter of 2022, compared to $13.2 million in the first quarter of 2021, or 30.9% of revenue. While the Company incurred certain incremental expenses to support increased activity levels, such as equipment repairs, research and development costs and compensation expenses, first quarter results continue to demonstrate the Company's strong operating leverage. As a result, the Company generated net income attributable to Pason of $18.6 million ($0.23 per share) in the first quarter of 2022 compared to net income attributable to Pason of $4.3 million ($0.05 per share) in the corresponding period of 2021.
Pason announced that the Board of Directors have declared a quarterly dividend of eight cents(C$0.08) per share on the company's common shares. The dividend will be paid on June 30, 2022, to shareholders of record at the close of business on June 15, 2022.
Solaris Oilfield Infrastructure reported net income of $5.7 million, or $0.11 per diluted Class A share, for first quarter 2022, compared to fourth quarter 2021 net income of $1.1 million, or $0.01 per diluted Class A share. Adjusted pro forma net income for first quarter 2022 was $4.8 million, or $0.11 per fully diluted share, compared to fourth quarter 2021 adjusted pro forma net income of $1.0 million, or $0.02 per fully diluted share. Revenues were $56.9 million for first quarter 2022, which were up 24% from fourth quarter 2021, driven by an increase in systems deployed and improved pricing.
Toromont Industries Ltd. announced that on April 28, 2022, at its Annual and Special Meeting of Shareholders, all the nominees listed in its Management Information Circular dated February 26, 2022 were elected as Directors of Toromont.
U.S. Silica Holdings announced a net loss of $8.4 million, or $0.11 per diluted share, for the first quarter ended March 31, 2022. The first quarter results were negatively impacted by $9.4 million pre-tax, or $0.09 per diluted share after-tax, of charges primarily related to a supplier contract termination and merger and acquisition related expense, resulting in an adjusted loss of $0.02 per diluted share. Revenue of $304.9 million for the first quarter of 2022 increased 7% compared with $284.9 million in the fourth quarter of 2021 and increased 30% when compared with the first quarter of 2021.
DRILLERS
Dril-Quip reported financial results for the first quarter of 2022. Consolidated revenue for the first quarter of 2022 was $83.1 million, up $5.2 million from the fourth quarter of 2021 and up $1.9 million compared to the first quarter of 2021. For the first quarter of 2022, the Company reported a net loss of $8.9 million, or a $0.26 loss per share.
As per SEC filing, Helmerich & Payne filed for a mixed shelf. The size was not disclosed.
REFINERS
Phillips 66 announced first-quarter 2022 earnings of $582 million, compared with earnings of $1.3 billion in the fourth quarter of 2021. Excluding special items of $13 million, the company had adjusted earnings of $595 million in the first quarter, compared with fourth-quarter adjusted earnings of $1.3 billion.
Phillips 66 announced that it intends to resume its share repurchase program in the second quarter of 2022. The company suspended share repurchases in March 2020 to preserve liquidity. The temporary suspension was in response to the global economic disruption caused by the COVID-19 pandemic. Phillips 66 previously stated its intent to resume share repurchases and to continue to pay down debt to pre-pandemic levels as cash generation improves. Under the repurchase program previously authorized by the Board of Directors, Phillips 66 may repurchase its outstanding shares of common stock from time to time in open market or privately negotiated transactions, including accelerated share repurchase transactions, block trades or pursuant to 10b5-1 trading plans. Any repurchases will be at management’s discretion and will be subject to market conditions, the price of the company’s shares and other factors. The share repurchase program may be modified, suspended or terminated by the Board of Directors at any time. The company has $2.5 billion available under the current authorization, which has no expiration date.
MLPS & PIPELINES
NuStar Energy L.P. announced that its Board of Directors has declared a first quarter 2022 common unit distribution of $0.40 per unit. The first quarter common unit distribution will be paid on May 13, 2022 to holders of record as of May 9, 2022. NuStar Energy L.P.’s Board of Directors also declared a first quarter 2022 Series A preferred unit distribution of $0.47817 per unit, a Series B preferred unit distribution of $0.47657 per unit and a Series C preferred unit distribution of $0.56250 per unit. The preferred unit distributions will be paid on June 15, 2022 to holders of record as of June 1, 2022.
Shell Midstream Partners, L.P. reported net income attributable to the Partnership of $158 million for the first quarter of 2022, which equated to $0.36 per diluted common limited partner unit. Shell Midstream Partners also generated adjusted earnings before interest, income taxes, depreciation and amortization attributable to the Partnership of $182 million.
Shell Midstream Partners L.P. said that volumes on its Mars oil pipeline system rose during the first quarter, as repairs completed in the wake of Hurricane Ida allowed it to run at normal operating levels.
TC Energy released its first quarter results. Net income attributable to common shares was $0.4 billion or $0.36 per common share compared to a net loss of $1.1 billion or a loss of $1.11 per common share in 2021. Comparable earnings were $1.1 billion or $1.12 per common share compared to $1.1 billion or $1.16 per common share in 2021.
TC Energy announced that its Board of Directors (Board) declared a quarterly dividend of $0.90 per common share for the quarter ending June 30, 2022, on the Company’s outstanding common shares. The common share dividend is payable on July 29, 2022 to shareholders of record at the close of business on June 30, 2022.
MARKET COMMENTARY
Futures for Wall Street’s major indexes were in the red, after Amazon delivered a disappointing quarter and Apple posted a glum forecast, further pressuring growth stocks. European shares were up, supported by strong corporate earnings. Chinese shares ended higher, after authorities vowed to step up policy support to stabilize the economy and financial markets. Gold prices jumped, boosted by a pullback in the dollar. Lockdown concerns in China pushed oil prices higher. Data including PCE price index, personal consumption and consumer sentiment are scheduled for release 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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