Crude Continues Decline on Bearish Global Economic Data
The energy sector is posed for a mixed to lower start, pressured by mild weakness in the crude complex and in the major equity futures which slide lower this morning ahead to big technology earnings for further clues into the health of the U.S. economy.
In earnings news, Halliburton is the OFS to report better-than-expected results amid a surge in drilling activity around the globe. The firm posted a rise in profit for the third quarter that beat analysts' forecasts and management commented they expect activity to increase around the world, echoing the peers.
WTI and Brent crude oil futures continued to tick lower for the third-straight session, steadying this morning as bearish economic data from key global economies heightened demand fears. Government data yesterday showed China's crude oil imports in September were 2% lower than a year earlier, continuing a trend of lower imports at the same time it reported slowing retail sales. U.S. business activity contracted for a fourth month in October, with manufacturers and services firms saying in a monthly S&P Global survey of purchasing managers published on Monday that client demand is falling. Business activity also contracted in the manufacturing sectors in the euro zone and the United Kingdom. Goldman Sachs CEO David Solomon said on Tuesday he believes a U.S. recession is "most likely", while a recession may be occurring in Europe.
After six-consecutive days of declines, natural gas futures rebounded this morning and are currently up over 3% in early trading. Prices jumped higher ahead of the front-months expiration on Thursday after the recent string of declines brought prices to seven-month lows. Traders are also looking to Thursday’s storage report as the next major catalyst while overall waiting for LNG export plants to exit maintenance outages in coming weeks.
BY SECTOR:
US INTEGRATEDS
Chevron published a methane report that builds on Chevron’s ongoing efforts to promote transparency on climate-related matters. This report details information on Chevron’s approach to detecting, measuring and reducing methane intensity. Since 2016, Chevron has reduced the company’s methane intensity by 50 percent. Chevron’s U.S. upstream methane intensity is 85 percent lower than the U.S. upstream production sector average as of 2020.
INTERNATIONAL INTEGRATEDS
Lightsource BP aims to rapidly grow battery capacity at its solar farms around the world to reach 4 gigawatts (GW) by 2025 in order to store and supply power at night and on cloudy days, the British company's chief executive told Reuters. Solar power developer Lightsource BP, half-owned by oil major BP, has rapidly expanded around the world in recent years, benefiting from a push by countries around the world to build low-carbon energy capacity.
Eni has definitively ended the procurement of palm oil for use at the Venice and Gela biorefineries for the production of hydrogenated biofuels. The last shipments arrived in the last few weeks, ahead of the declared goal of becoming 'palm oil free' by the end of 2022.
Data Gumbo announced that Equinor has implemented Data Gumbo’s smart contract platform to automatically calculate and execute payments for Integrated Drilling and Well Services (IDWS) Day Rates for Johan Sverdrup and Troll assets.
Petrobras said that its crude oil production during the third-quarter fell 6.8% compared to the same period last year. Petroleo Brasileiro SA, as the company is formally known, pumped 2.115 million barrels per day (bpd) in the July-to-September period, according to a Petrobras statement. Including natural gas output, the Brazilian oil giant produced a daily average of 2.644 million barrels of oil equivalent, down 6.6% from the same quarter last year. Around 73% of Petrobras output came from Brazil's so-called pre-salt fields, an oil-rich offshore region off the country's southeastern Atlantic coast. In the same quarter last year, 71% of the company's oil production came from the same area.
The strike affecting work at the TotalEnergies' Gonfreville and Feyzin refineries have been renewed, a CGT trade union representative told Reuters.
TotalEnergies announced it reached the milestone of 500 MW of onsite B2B solar distributed generation in operation. More than 300 sites of its industrial and commercial customers have been equipped with solar panels in Asia, the Middle East, Europe and the United States.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Callon Petroleum announced that the Company entered into an amended and restated senior secured revolving credit facility, which extends the maturity to October 19, 2027. The Credit Facility will have a borrowing base of $2.0 billion with an elected commitment of $1.5 billion.
Reuters reported that Chesapeake Energy last week cut about 3% of its workforce, according people familiar with the matter, as it readies a sale of South Texas oil properties.
Stifel resumed coverage on Coterra Energy, EOG Resources, Range Resources and W&T Offshore with a Buy rating.
Range Resources announced its third quarter 2022 financial results. Non-GAAP revenues for third quarter 2022 totaled $1.1 billion, and cash flow from operations before changes in working capital, a non-GAAP measure, was $550 million. Adjusted net income comparable to analysts’ estimates, a non-GAAP measure, was $336 million ($1.37 per diluted share) in third quarter 2022. On October 21st, Range’s Board of Directors authorized a $1 billion increase to the Company’s share repurchase program.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Fluor was awarded a reimbursable front-end engineering and detailed design, engineering and procurement services contract for Imperial as the company progresses plans to develop a world-class renewable diesel complex at its Strathcona refinery near Edmonton, Alberta, Canada. The new complex is expected to be the largest renewable diesel production facility in Canada and will produce approximately 20,000 barrels of renewable diesel per day from locally sourced feedstocks.
Granite Construction previously announced its decision to retain the Water Resources and Mineral Services businesses that were previously classified as held for sale and reported in discontinued operations. The financial results for these businesses will be reported within the Mountain operating group's continuing operations and their assets and liabilities will no longer be classified as held for sale as of September 30, 2022. The results of Inliner, its trenchless and pipe rehabilitation services business, which was sold on March 16, 2022 will also now be reported within the Mountain operating group's continuing operations through the date of sale. These changes will be presented beginning in Granite's Form 10-Q for the quarter ended September 30, 2022, and prior periods will be revised.
Halliburton announced net income of $544 million, or $0.60 per diluted share, for the third quarter of 2022. This compares to net income for the second quarter of 2022 of $109 million, or $0.12 per diluted share, and the adjusted net income for the second quarter of 2022, excluding impairments and other charges, of $442 million, or $0.49 per diluted share. Halliburton's total revenue for the third quarter of 2022 was $5.4 billion compared to total revenue of $5.1 billion in the second quarter of 2022. Reported operating income was $846 million in the third quarter of 2022 compared to reported operating income of $374 million and adjusted operating income of $718 million in the second quarter of 2022.
McDermott International has been awarded a front-end engineering design (FEED) contract from Hydrostor Incorporated for the Silver City Energy Storage project located in Broken Hill, New South Wales, Australia. Under the contract scope, McDermott will provide the full suite of FEED services for a 200MW advanced compressed air energy storage (A-CAES) facility that can provide up to eight hours of energy discharge at a time.
HSBC upgraded TechnipFMC to Buy from Hold.
DRILLERS
No significant news.
REFINERS
Valero Energy reported net income attributable to Valero stockholders of $2.8 billion, or $7.19 per share, for the third quarter of 2022, compared to $463 million, or $1.13 per share, for the third quarter of 2021. Excluding adjustments, adjusted net income attributable to Valero stockholders was $2.8 billion, or $7.14 per share, for the third quarter of 2022, compared to $545 million, or $1.33 per share, for the third quarter of 2021.
MLPS & PIPELINES
Cheniere Energy Partners, L.P. declared (i) a cash distribution of $1.07 per common unit to unitholders of record as of November 3, 2022, comprised of a base amount equal to $0.775 and a variable amount equal to $0.295, and (ii) the related distribution to its general partner. These distributions are payable on November 14, 2022.
MARKET COMMENTARY
U.S stock futures edged lower after a two-day bounce on Wall Street as investors looked ahead to another round of earnings reports, especially from megacap companies, that could put a recent market rally to test. European stocks steadied, after a slew of better-than-expected earnings reports helped offset worries about fast rising interest rates and a slowing euro zone economy. Japan’s Nikkei rose, as electric motor maker Nidec kickstarted the earnings season with strong results. Gold fell as the U.S dollar regained some ground, but bullion's losses were capped by expectations that the U.S. central bank may hit pause on its rapid rate hike trajectory. Oil prices fell, as bearish economic data from key global economies heightened demand fears. Microsoft and Visa are reporting after markets close. Consumer confidence and monthly home price data are scheduled for release later during the day.
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