Crude Declines on Falling Demand in China, Bearish CPI Report
The energy sector is pointing to a lower start, weighed down by weakness in the crude complex and in the major equity futures which abruptly turned lower this morning on the heels of a bearish CPI report. The August data showed a higher-than-expected reading for inflation and is one of the final reports the Fed will see ahead of their meeting next week where they’re expected to deliver their third consecutive 0.75 percentage point interest rate hike to tame inflation.
WTI and Brent crude oil futures turned lower this morning, pressured by worries over falling demand in China and a bearish CPI report while lingering supply concerns and weakness in the dollar kept a cap on the declines. As China continued to impose COVID-19 linked restrictions, the number of trips taken over China's three-day Mid-Autumn Festival holiday shrank, further dampening demand expectations. The Dollar Index extended its declines from >20-year highs reached last Wednesday. The faster-than-expected rise in August consumer prices cemented bets that the Fed will deliver a third straight 75-basis-point rate hike next week.
Natural gas futures bucked the trend and are higher by ~1.5% in early trading, supported by warmer weather forecast in key consuming regions and ahead of Thursday’s storage report. Analysts expect the EIA data to show a build of +70 Bcf vs the 5-year average of +82 Bcf.
BY SECTOR:
US INTEGRATEDS
No significant news.
INTERNATIONAL INTEGRATEDS
Cyber attacks are one of the top risks faced by Saudi Arabia's state oil giant Aramco, on a par with natural disasters and physical attacks, the company's chief executive said at an artificial intelligence summit in Riyadh.
Equinor Energy AS, operator of production licence 1104, has concluded the drilling of wildcat well 30/3-11 S.
TotalEnergies said that during his trip to Denmark, Patrick Pouyanné signed an agreement with the President of the Technical University of Denmark (DTU) concerning the creation of the DTU-TotalEnergies Excellence Center of Clean Energy. This advanced research center will focus on developing reliable, profitable, low-emission energy solutions that will reduce the intermittence of renewables and accelerate the decarbonization of industrial facilities.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
CNX Resources announced the pricing of $500 million of its 7.375% senior notes due 2031 at a price to the public of 100.0% of their face value. The offering is expected to close on September 26, 2022, subject to the satisfaction of customary closing conditions. The Notes will be guaranteed by all of CNX's wholly owned restricted subsidiaries that guarantee its revolving credit facility.
ConocoPhillips Skandinavia AS, operator of production licence 782 S, has concluded the drilling of wildcat well 25/7-10.
Matador Resources announced recent upgrades by Moody’s Investors Service to the Company’s corporate credit rating and senior unsecured notes and $30 million in additional purchases of the Company’s outstanding senior notes. Between July 25, 2022 and September 12, 2022, Matador used a portion of its free cash flow to repurchase $30 million of its outstanding senior notes in a series of open market transactions, reducing its outstanding bonds from $892 million at July 25, 2022 (and $1.05 billion originally) to $862 million today. Over the past seven quarters, beginning in the fourth quarter of 2020, Matador has reduced its outstanding debt by $663 million or approximately 44% of Matador’s then total revolving debt and senior notes outstanding.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Weatherford International plc received a five-year framework agreement from Abu Dhabi National Oil Company ("ADNOC") to provide directional drilling and logging-while-drilling services. The contract is currently valued at over $400 million and ADNOC has an option to extend the contract for an additional two years.
DRILLERS
No significant news.
REFINERS
Valero Energy has engaged in talks with the Mexican government over inflated invoices for fuel imports, President Andres Manuel Lopez Obrador said, and the company said the invoices were the work of unknown third parties.
MLPS & PIPELINES
Cheniere Energy announced that its Board of Directors has approved a revised comprehensive, long-term capital allocation plan designed to maintain investment grade credit metrics through cycles, further return capital to shareholders over time, and continue to invest in accretive organic growth. Given the Company’s progress on its prior capital allocation plan significantly ahead of schedule, which is driven by the Company’s continued outperformance, Cheniere has reached a new cash flow inflection point and now expects to generate over $20 billion of available cash through 2026 and construction of CCL Stage 3, enabling further execution on its balance sheet, capital return and growth priorities. The Plan is designed to achieve a run-rate Distributable Cash Flow of over $20 per share on a run-rate basis. Cheniere is also raising full year 2022 Consolidated Adjusted EBITDA guidance to $11.0 - $11.5 billion and full year 2022 DCF guidance to $8.1 - $8.6 billion due primarily to a change in the expected timing of several cargoes accelerating into 2022 which were previously forecast for 2023 as well as sustained higher margins on LNG throughout 2022. The objectives and design of the Plan include Meaningful Shareholder Returns: Upsize share repurchase program by $4 billion for an additional 3-year authorization with potential to repurchase ~10% or more of Cheniere’s market capitalization with excess capital; Increase annualized dividend by 20% to $1.58 per common share from inaugural $1.32 per common share dividend initiated last year.
Crestwood Equity Partners LP announced the divestiture of its Marcellus natural gas gathering and compression assets to Antero Midstream, for $205 million in cash, representing a multiple of over 7 times 2023E Adjusted EBITDA, subject to customary adjustments. These assets located in Doddridge County and Harrison County, West Virginia, comprise a legacy gas system that was acquired in 2012 and was impacted in recent years by Crestwood’s anchor producer focusing development activity on the rich gas window of the Southwest Marcellus Shale. As a result, Crestwood’s assets have been on natural field decline since 2017 and are non-core to Crestwood’s long-term growth strategy of becoming a leading midstream operator in the Williston, Delaware, and Power River basins. Crestwood intends to use the proceeds from the sale of these assets to enhance financial flexibility through a combination of debt reduction and opportunistic common unit repurchases.
Crestwood Equity Partners LP announced the pricing of the previously announced underwritten secondary offering by certain subsidiaries of Chord Energy (f/k/a Oasis Petroleum Inc.) of an aggregate of 11,400,000 common units representing limited partner interests of Crestwood resulting in total gross proceeds to the Selling Unitholders of approximately $306.7 million. The Selling Unitholders will receive all of the proceeds from the Offering. Crestwood is not offering any of its common units in the Public Offering and will not receive any proceeds from the Public Offering. As previously announced, Crestwood also entered into a common unit repurchase agreement with one of the Selling Unitholders pursuant to which it intends to repurchase up to an aggregate of $125 million of common units from such Selling Unitholder. The price per common unit to be paid by Crestwood will equal the price at which the common units will be sold to the public in the Public Offering.
MARKET COMMENTARY
U.S. stock index futures fell sharply on Tuesday after data showed a faster-than-expected rise in August consumer prices, cementing bets of a third straight 75-basis-point rate hike from the Federal Reserve next week.
The Labor Department's consumer price index (CPI) report showed monthly CPI rose 0.1% in August from July, against expectation of a 0.1% contraction, while on a year-on-year basis it edged down to 8.3% from 8.5%. Excluding the volatile food and energy components, core CPI likely increased to 6.3% from 5.9% in July, putting further pressure on the Fed to continue on its rate-hiking spree.
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.
This communication and the content found by following any link herein are being provided to you by Corporate Solutions, a business of Nasdaq, Inc. and certain of its subsidiaries (collectively, “Nasdaq”), for informational purposes only. Nasdaq makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Sources include Reuters, TR IBES, WSJ, The Financial Times and proprietary Nasdaq research.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Other Topics
Energy Commodities
MarketInsite
Nasdaq
Nasdaq’s Marketinsite offers actionable insights on a variety of market-moving topics. Learn from our thought leaders who are driving the capital markets of tomorrow.
Read MarketInsite's Bio