Crude Continues Decline on Weakening Global Demand, Increased Supply
The energy sector is poised for a mixed to lower start pressured by weakness in the crude complex and in the major market indices. Following a three-day stretch of gains, U.S. stock index futures wavered, with social media firms and companies that sell online ads leading declines after Snap Inc missed quarterly revenue targets.
Schlumberger raised its annual revenue forecast after beating analysts' second quarter earnings expectations, buoyed by higher demand for its oilfield services and equipment. The company has benefited from a boost in activity driven by stronger oil and gas prices. Global crude prices hovered above $100 per barrel last quarter, fueled by tight supplies following Western sanctions on major producer Russia and as energy consumption returned to near pre-pandemic levels.
WTI and Brent crude oil are trading down for the third consecutive session on a weakening global demand outlook and the resumption of some Libyan crude oil output. The global economy looks increasingly likely to be heading into a serious slowdown, just as central banks aggressively reverse ultra-loose monetary policy adopted during the pandemic to support growth. While signs of softening U.S. demand weighed on oil prices and sent benchmark contracts sliding around 3% in the previous session, tight global supplies continued to keep the market buoyed. Switzerland is releasing 245,000 cubic metres of its oil reserves to help ease supply constraints caused by low water levels hitting barge capacity on the River Rhine and train delays. A prolonged drought has led to record-low Rhine water levels, so loading quantities for ships have been drastically reduced. The last time the mandatory stockpile for mineral oil products was undercut was in the very dry summer of 2018.
Natural gas futures rose in early trading as the NOAA's 6-10 day outlook shows above-normal temps for the northwestern US, the Gulf Coast and the East Coast, while below-normal temps are seen across the north-central region and, to some extent, southern AZ.
BY SECTOR:
US INTEGRATEDS
No significant news.
INTERNATIONAL INTEGRATEDS
Petrobras fell in the second quarter as asset divestments and increased work stoppages took their toll, while the company's refinery utilization rate hit a whopping 97%. In a securities filing, Petroleo Brasileiro SA PETR4.SA, as the state-run firm is formally known, said crude production came to 2.114 million barrels per day, down 5.2% from the previous quarter and 5% from the same period a year ago. Including natural gas, the company produced 2.653 million barrels of oil equivalent per day (boepd), down 5.1% in both quarterly and annual terms.
To meet the expectations of French people affected by the increase in energy prices and the impact on their purchasing power, TotalEnergies is initiating a large-scale fuel price reduction programme for all of its service stations in France, effective until year-end. From September 1 to November 1, TotalEnergies will lower its petroleum fuel prices sold in service stations by €0.20/litre compared to quotation prices, followed by a €0.10/litre reduction from November 1 to 31 December.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Denbury announced that it has signed a definitive agreement with a landowner near Donaldsonville, Louisiana, to lease approximately 18,000 acres for future CO2 sequestration. The site is located in Assumption and St. James Parishes, less than five miles from the Company’s existing CO2 Green Pipeline and in close proximity to the Louisiana Industrial Corridor, one of the highest geographic concentrations of industrial CO2 emissions in the United States. Denbury estimates more than 50 million metric tons per year of existing stationary CO2 emissions are located within 30 miles of the site.
Devon Energy announced that it has completed its previously announced acquisition of the leasehold interest and related assets of RimRock Oil and Gas, LP in the Williston Basin for a total cash consideration of $865 million, less purchase price adjustments.
As per SEC filing, Pioneer Natural Resources said that In April 2022, the Company increased its marketing derivative positions by entering into two long-term marketing contracts to purchase and simultaneously sell (i) 40 thousand barrels of oil per day beginning May 1, 2022 and ending April 30, 2027 and (ii) 30 thousand barrels of oil per day beginning August 1, 2022 and ending July 31, 2027. The Company owns 16.6 million shares of ProPetro Holding Corp., which is measured on a recurring basis at fair value. The Company expects to report a noncash loss of $65 million and a noncash gain of $32 million on its investment in ProPetro for the three and six months ended June 30, 2022, respectively. The Company enters into pipeline capacity commitments in order to secure available oil, NGLs and gas transportation capacity from the Company's areas of production, and secure diesel supply from the Gulf Coast to the Company's operations in the Permian Basin. The Company enters into purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's oil and gas sales to (i) Gulf Coast refineries, (ii) Gulf Coast and West Coast gas markets and (iii) international oil markets, and to satisfy unused gas pipeline capacity commitments. The Company expects the net earnings effect of third party purchases and sales of oil, gas and diesel for the three and six months ended June 30, 2022 to result in a loss of $16 million and a gain of $49 million, respectively. The Company’s production during the three months ended June 30, 2022 is expected to average 348 thousand barrels of oil per day and 643 thousand barrels of oil equivalent per day. These production volumes include the effects of prior period adjustments related to the payout of certain wells acquired in 2021 that had carried ownership interests. Without these adjustments, the Company's production for the three months ended June 30, 2022 would have been expected to average 350 thousand barrels of oil per day and 646 thousand barrels of oil equivalent per day.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
As per SEC filing, on July 18, 2022, Liberty Energy, Liberty Oilfield Services New Holdco LLC, R/C IV Non-U.S. LOS Corp, Liberty Oilfield Services LLC, other subsidiaries of the Company, Wells Fargo Bank, National Association, as administrative agent, and other lenders entered into that certain Increase Joinder and Seventh Amendment to Credit Agreement. The Seventh Amendment further amends the credit agreement and guaranty and security agreement originally entered into by the parties on September 19, 2017, as amended prior to July 18, 2022, which governs the Company's revolving credit facility. The Seventh Amendment amends certain terms, provisions and covenants of the Original Credit Agreement, including, among other things: (i) increases the maximum revolver amount by $75,000,000 for an aggregate revolver commitment amount of $425,000,000; (ii) modifies certain covenant and reporting-related baskets; and (iii) replaces the London Interbank Offered Rate (LIBOR) with the secured overnight financing rate (SOFR) as the interest rate benchmark.
As per SEC filing, on July 19, 2022, NexTier Completion Solutions, a wholly-owned subsidiary of NexTier Oilfield Solutions, entered into a definitive agreement to sell the Company's Coiled Tubing assets to Gladiator Energy LLC for a cash purchase price of $21.55 million. The transaction is subject to customary closing conditions and is expected to close in the third quarter of 2022.
Schlumberger announced results for the second-quarter 2022. Revenue of $6.8 billion increased 14% sequentially and 20% year on year. GAAP EPS of $0.67 increased 86% sequentially and 123% year on year. EPS, excluding charges and credits, of $0.50 increased 47% sequentially and 67% year on year. The Board approved quarterly cash dividend of $0.175 per share. Full-year revenue outlook was revised upward to at least $27 billion.
DRILLERS
The Competition and Markets Authority (CMA) has opened a consultation on undertakings proposed by Noble and the Drilling Company of 1972 A/S (Maersk Drilling) to address competition concerns over the anticipated merger between Noble and Maersk Drilling.
REFINERS
The Board of Directors of Valero Energy has declared a regular quarterly cash dividend on common stock of $0.98 per share. The dividend is payable on September 1, 2022 to holders of record at the close of business on August 4, 2022.
MLPS & PIPELINES
Energy Transfer LP announced the quarterly cash distribution of $0.4609375 per Series C Preferred Unit, the quarterly cash distribution of $0.4765625 per Series D Preferred Unit, and the quarterly cash distribution of $0.4750000 per Series E Preferred Unit. These cash distributions will be paid on August 15, 2022 to Series C, Series D and Series E unitholders of record as of the close of business on August 1, 2022.
The Board of Directors of Holly Energy Partners, L.P. has declared a cash distribution of $0.35 per unit for the second quarter of 2022. The distribution will be paid on August 12, 2022 to unitholders of record on August 1, 2022.
MARKET COMMENTARY
Wall Street futures fell as shares of social media firms and companies that sell online ads fell after Snap missed quarterly revenue targets. European shares rose as concerns over an energy supply crunch eased. Japanese shares closed higher on gains in growth stocks and shipping firms. The euro fell against the dollar on dampening activity data. Gold prices held to a tight range as investors avoided big bets ahead of next week's Federal Reserve policy meeting. Oil prices fell on a weakening global demand outlook and the resumption of some Libyan crude oil output. S&P Global's manufacturing and services PMI data is scheduled for release.
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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