Crude Extends Decline, Heading for Worst Weekly Performance in 4 Years
SECTOR COMMENTARY
Energy stocks once again are set to open broadly lower, pressured by further weakness in the underlying commodities and broader equity markets which are on pace for their worst week since the financial crisis. Earnings season carries on, however the coronavirus epidemic continues to dominate equity prices, overshadowing sector highlights.
Oil prices are off ~3% in early trading, extending their declines into further bear market territory and on track for the worst weekly performance in four years. The Financial Times last night reported Saudi Arabia is asking OPEC+ members to agree on an additional output cut of 1M bpd with Saudi Arabia taking the bulk of reductions. Reuters followed up, saying the added cuts would be for Q2 while a new survey by them of 42 analysts and economists sees Brent in 2020 averaging $60.63/bbl, down 5% from the prior survey.
Natural gas futures are also seeing significant weakness this morning, weighed down by pressure in the crude oil markets while above-seasonal temperatures for the next two weeks for most of the country added to the declines.
U.S. INTEGRATEDS
(Late Thursday) Reuters - Exxon Mobil said that operations are normal at the Baytown, Texas Complex.
INTERNATIONAL INTEGRATEDS
Press Release - Eni reported full year 2019 and fourth quarter results. The company reported Adjusted operating profit of €1.80 billion in the fourth quarter, down by 40% q-o-q (€8.60 billion in the full year, down by 24%); Adjusted net profit of €0.55 billion for the quarter, down by 62% q-o-q (down by 61% excluding IFRS 16 accounting effects); €2.88 billion in the full year, down by 37% (down by 35% excluding IFRS 16 accounting effects); net loss of €1.89 billion in the quarter; and net profit of €0.15 billion in the year. The company also proposed 2019 dividend of €0.86 per share, of which €0.43 already paid as interim dividend.
Press Release - Eni’s Board of Directors has resolved to submit a proposal to authorise the purchase of treasury shares at the Shareholder Meeting of the 13 May 2020, subject to revocation of the Shareholders' Meeting resolution of the 14 May 2019 for the part not yet executed, for a period of 18 months from the date of the Shareholders’ Meeting. The proposal concerns the purchase of treasury shares for a potential maximum outlay of €1,200 million and for a maximum number equal to 5% of ordinary shares, in which the Eni share capital will be divided as a result of the cancellation of the treasury shares acquired in 2019 (submitted to approval by the same Shareholder Meeting, called in an extraordinary session). The renewal of the authorisation for the purchase of treasury shares is functional to the continuation of the buyback programme envisaged under the Eni’s Strategic Plan, which was presented to the financial community today, with an amount of €400 million in 2020.
Reuters - Eni pledged to shrink its greenhouse gas emissions by 80% in one of the industry's most ambitious clean-up drives, just weeks before a decision on its chief executive's future. In its new business plan, Eni said its oil and gas production - forecast to grow 3.5% a year - would peak in 2025 before declining. "The result will be a portfolio that is more balanced and integrated and will be stronger for its adaptability and competitive shareholder remuneration," Chief Executive Claudio Descalzi said. The announcement comes ahead of a decision by the Italian government on whether or not to re-appoint Descalzi as CEO. The veteran oil man is under pressure to prove he can shift the group towards cleaner sources of energy without inflicting too much damage on profitability.
(Late Thursday) Reuters - Petrobras said it has started the sale process for its 51% stake in the gas unit Gaspetro and for its stakes in the Merluza and Lagosta oil fields in Brazil's Santos basin, according to a securities filing.
Press Release - Repsol said that it will develop a wind-farm project with a capacity of 860 megawatts in northern Spain. The Spanish company said the project, named Delta 2, will entail its subsidiary Repsol Electricidad y Gas building and operating 26 wind farms in the region of Aragon. Delta 2 will be developed over the next three years, it said. When fully operational, the wind farms will be able to supply electricity to around 1.8 million people and reduce carbon dioxide emissions by more than 2.6 million metric tons a year, the company said.
Press Release - Shell Midstream Partners announced it has signed an agreement with its general partner to eliminate all incentive distribution rights and economic general partner interest in SHLX. SHLX has also entered into a Purchase and Sale Agreement with affiliates of its sponsor, Royal Dutch Shell, to acquire (i) Shell’s 79% interest in Mattox Pipeline Company LLC, which owns the Mattox Pipeline, and (ii) certain logistics assets at the Shell Norco Manufacturing Complex. As consideration for the assets and the elimination of IDRs, the sponsor will receive 160 million newly issued SHLX common units, plus $1.2 billion of Series A perpetual convertible preferred units at a price of $23.63 per unit.
U.S. E&PS
(Late Thursday) Press Release - Bonanza Creek Energy announced its fourth quarter and full-year 2019 financial results. During the fourth quarter of 2019, the Company reported average daily sales of 24.3 MBoe/d. Product mix for the fourth quarter was 57% oil, 17% NGLs, and 26% residue natural gas, which was consistent with the third quarter of 2019. Capital expenditures were $49.3 million for the fourth quarter of 2019 and $222.2 million for the full year 2019, which was below the Company's original annual capital expenditure guidance range of $230 to $255 million, and its most recent guidance of $230 to $240 million. During the fourth quarter of 2019, the Company drilled 13 gross (12.3 net) operated wells and completed 8 gross (4.8 net) operated wells. There were no wells turned to sales during the fourth quarter. For the year, the Company drilled 59 gross (46.0 net), completed 40 gross (33.7 net), and turned to sales 45 gross (35.1 net) operated wells. Net oil and gas revenue for the fourth quarter of 2019 increased to $79.7 million compared to $75.2 million for the third quarter of 2019. The increase was a result of higher oil, natural gas, and NGL realized prices. Crude oil accounted for approximately 83% of total revenue for the quarter. Differentials for the Company's oil production averaged approximately $4.93 per barrel and $5.28 per barrel off NYMEX WTI for the fourth quarter and full-year, respectively.
(Late Thursday) Press Release - Gardner Denver Holdings will replace Cimarex Energy in the S&P 500, and Cimarex Energy will replace Chesapeake Energy in the S&P MidCap 400 effective prior to the open of trading on Tuesday, March 3.
MKM Partners downgraded Chesapeake Energy to ‘Sell’ from ‘Neutral’.
(Late Thursday) Press Release - EOG Resources reported fourth quarter 2019 net income of $637 million, or $1.10 per share, compared with fourth quarter 2018 net income of $893 million, or $1.54 per share. Net cash from operating activities for the fourth quarter 2019 was $1.8 billion. For the full year 2019, EOG reported net income of $2.7 billion, or $4.71 per share, compared with net income of $3.4 billion, or $5.89 per share, for the full year 2018. Net cash from operating activities for the full year 2019 was $8.2 billion. Adjusted non-GAAP net income for the fourth quarter 2019 was $787 million, or $1.35 per share, compared with adjusted non-GAAP net income of $718 million, or $1.24 per share, for the same prior year period. Adjusted non-GAAP net income for the full year 2019 was $2.9 billion, or $4.98 per share, compared with adjusted non-GAAP net income of $3.2 billion, or $5.54 per share, for the full year 2018.
(Late Thursday) Press Release - Gulfport Energy reported financial and operational results for the quarter and year ended December 31, 2019 and announced its 2020 operational and financial guidance. For fourth quarter 2019, the company reported net loss of $1,814.8 million, or $(11.36) per diluted share. Net production averaged 1,346.3 MMcfe per day. For full year 2019, the company reported Net loss of $2,002.4 million, or $(12.49) per diluted share, reflecting a non-cash impairment charge of $2,039.8 million. Net production averaged 1,374.6 MMcfe per day.
Scotiabank downgraded Gulfport Energy to ‘Sector Underperform’ from ‘Sector Outperform’.
Imperial Capital downgraded HighPoint Resources to ‘In-line’ from ‘Outperform’.
(Late Thursday) Press Release - Occidental Petroleum announced a net loss attributable to common stockholders for the fourth quarter of 2019 of $1.3 billion, or $1.50 per diluted share, and adjusted loss attributable to common stockholders of $269 million, or $0.30 per diluted share. Fourth quarter pre-tax items affecting comparability included a charge of approximately $1.0 billion to reflect Occidental’s investment in Western Midstream Partners at fair value as of December 31, 2019, upon applying the equity method of accounting, Anadarko acquisition-related transaction costs of $656 million, and net gains on sale of $475 million related to Occidental’s Midland Basin joint venture with Ecopetrol and a sale of real estate assets.
(Late Thursday) Press Release - Penn Virginia announced its financial and operational results for the fourth quarter and full-year 2019, year-end reserve estimates and 2020 outlook. Total production in the fourth quarter of 2019 increased by approximately 14% from the fourth quarter of 2018 to 2.7 MMBOE, or 29,314 BOEPD (76% crude oil). Penn Virginia produced 10.1 MMBOE, or 27,730 BOEPD (74% crude oil), for full-year 2019, representing 27% growth in total production and 23% growth in oil production over 2018 levels. Net income for the fourth quarter of 2019 was $3.3 million, or $0.22 per diluted share, compared to net income of $200.7 million, or $13.10 per diluted share, in the fourth quarter of 2018. Adjusted net income(2) was $41.6 million, or $2.75 per diluted share in the fourth quarter of 2019, versus $39.1 million, or $2.55 per diluted share in the fourth quarter of 2018. Net income for the full year of 2019 was $70.6 million, or $4.67 per diluted share. Adjusted net income was $135.6 million, or $8.97 per diluted share in 2019.
(Late Thursday) Press Release - Range Resources announced its fourth quarter and full-year 2019 financial results. GAAP revenues for fourth quarter 2019 totaled $606 million, GAAP net cash provided from operating activities (including changes in working capital) was $132 million, and GAAP earnings was a loss of $1.8 billion ($7.27 per diluted share). Non-GAAP revenues for fourth quarter 2019 totaled $637 million, and cash flow from operations before changes in working capital, a non-GAAP measure, was $175 million. Adjusted net income comparable to analysts’ estimates, a non-GAAP measure, was $21 million ($0.08 per diluted share) in fourth quarter 2019. GAAP revenues for 2019 totaled $2.8 billion, GAAP net cash provided from operating activities (including changes in working capital) was $682 million, and GAAP net income was a loss of $1.7 billion ($6.92 per diluted share). Full-year 2019 earnings results include $2.3 billion of impairments associated with North Louisiana assets. Full-year 2019 results also included a $227 million derivative gain due to decreases in commodity prices. Non-GAAP revenues for 2019 totaled $2.8 billion, and cash flow from operations before changes in working capital, a non-GAAP measure, was $729 million. Adjusted net income comparable to analysts’ estimates, a non-GAAP measure, was $98 million ($0.40 per diluted share) in 2019.
(Late Thursday) Press Release - Southwestern Energy announced financial and operating results for the fourth quarter and full year 2019 and issued 2020 guidance. Southwestern Energy recorded net income attributable to common stock of $110 million or $0.20 per diluted share for the quarter ended December 31, 2019. Adjusted net income, which excludes the impact of unsettled derivatives and one-time items, was $99 million or $0.18 per diluted share in 2019 and $176 million or $0.31 per share for the same period in 2018. Fourth quarter 2019 weighted average realized price (including transportation costs) was $2.12 per Mcfe excluding derivatives compared to $3.15 per Mcfe in 2018. Including derivatives and excluding transportation costs, the weighted average realized price in the fourth quarter of $2.85 per Mcfe was 8% less than prior year despite a 31% decrease in NYMEX Henry Hub. The Company recorded net income attributable to common stock of $891 million, or $1.65 per share, for the year ended December 31, 2019. Adjusted net income for 2019 was $328 million, or $0.61 per share, compared to $590 million, or $1.02 per share, in 2018. For the full year 2019, weighted average realized price (including transportation costs) was $2.18 per Mcfe excluding derivatives, an 18% decrease compared to $2.66 per Mcfe in 2018, due to decreased prices across all commodities.
CANADIAN E&PS
(Late Thursday) Press Release - Advantage Oil & Gas announced its 2019 results, including considerable progress on liquids growth, continued operational excellence of our low-cost natural gas foundation, and solid performance on our 2019 objectives. Accomplishments during 2019 included record annual production of 44,334 boe/d, an increase of 6% (250 mmcf/d natural gas and 2,700 bbls/d liquids). Record quarterly natural gas production of 266 mmcf/d in the fourth quarter of 2019 during a period of elevated AECO prices. Increased liquids production by 81% to average 2,700 bbls/d in the fourth quarter of 2019. Liquids comprised 18% of total revenue. 2019 operating and financial results include annual 2019 cash provided by operating activities of $156 million and adjusted funds flow(a) of $155 million or $0.83/share. Year-end net debt was $304 million on a $400 million bank credit facility, resulting in a net debt to adjusted funds flow(a) ratio of 2.0.
(Late Thursday) Press Release - Obsidian Energy has extended its syndicated credit facility with the underlying borrowing base and amount available under the syndicated credit facility set at $550-million and $450-million, respectively, subject to specific items being amended, as discussed. The amount available under the syndicated credit facility has been reduced by $10 million to the aforementioned $450 million level. Additional terms in the amending agreement are as follows: The revolving period under the agreement has been extended to May 31, 2021 with the end date of the term period extended to November 31, 2021; A revolving period reconfirmation date will occur on June 22, 2020, whereby the lenders may accelerate the end date of the revolving period to June 30, 2020 with the end date of the term period also concurrently accelerated to April 1, 2021; The next scheduled borrowing base redetermination will occur on November 30, 2020.
(Late Thursday) Press Release - Morguard Real Estate Investment Trust announced that it is in formal discussions with Obsidian Energy regarding a potential lease amendment for its Penn West Plaza tenancy. The Trust has been advised that as a condition of amending and extending the Obsidian syndicated credit facility, due February 28, 2020, the Trust and Obsidian execute an agreement that would reduce the net rent payable by Obsidian and have the Trust indemnify Obsidian in respect of existing subleases. The Trust estimates the potential impact to net operating income could be $7 million annualized for each remaining year of the lease term. The parties expect to resolve and settle the discussions on or before March 4, 2020.
OILFIELD SERVICES
Press Release - KBR announced the appointment of Lynn A. Dugle to its Board of Directors effective February 24, 2020.
(Late Thursday) Press Release - ShawCor has released its fourth quarter 2019 results. Fourth quarter 2019 revenue was $334 million, 6% lower than the $354 million reported in the fourth quarter of 2018. Adjusted EBITDA in the fourth quarter of 2019 was $30 million, 22% higher than the $24 million reported in the fourth quarter of 2018. Net loss in the fourth quarter of 2019 was $81.8 million (or loss per share of $1.17 diluted) compared with a net income of $4.4 million (or $0.06 earnings per share diluted) in the fourth quarter of 2018. Excluding the impact of impairment charges, gains on the sale of land and investment in associate, the costs related to the acquisition of ZCL Composites and the adjustment for Argentina hyperinflationary accounting, adjusted net loss in the fourth quarter of 2019 was $4.0 million (or adjusted loss per share of $0.06) compared with adjusted net income1 of $5.7 million (or $0.08 adjusted earnings per share) in the fourth quarter of 2018. The Company's order backlog was $513 million at December 31, 2019, slightly higher compared to the backlog of $509 million at September 30, 2019. The Board of Directors today declared a quarterly dividend of $0.15 per common share, payable on March 31, 2020, to shareholders of record at the close of business on March 16, 2020.
Scotiabank upgraded Trican Well Service to ‘Sector Outperform’ from ‘Sector Perform’.
DRILLERS
(Late Thursday) Press Release - Dril-Quip reported operational and financial results for the fourth quarter and full year 2019. Consolidated revenue for the fourth quarter of 2019 was $108.5 million, slightly higher compared with the $108.2 million in the third quarter of 2019. Revenues for the fourth quarter of 2019 were at the high end of the Company’s guidance range of $100 to $110 million primarily due to an increase in fabricated joint revenues. For the full year 2019, revenue was $414.8 million, a year-over-year increase of $30.2 million, or 8%, driven by an increase primarily in subsea trees, fabricated joints and connectors, partially offset by lower lease revenues year-over-year. For the fourth quarter of 2019, Dril-Quip reported net income of $7.4 million, or $0.21 per diluted share, compared to a net loss of $1.3 million, or $0.04 per diluted share, in the third quarter of 2019. Adjusted net income for the fourth quarter was $8.1 million, or $0.23 per diluted share, after excluding $0.02 per share related to restructuring charges, gains related to foreign currency, the sale of assets, and other items. For the full year 2019, Dril-Quip reported net income of $1.7 million, or $0.05 per diluted share, compared to a net loss of $95.7 million, or $2.58 per diluted share, in 2018. Adjusted net income for the full year 2019 was $2.7 million, or $0.08 per diluted share, compared with an adjusted net loss of $23.5 million, or $0.63 per diluted share, in calendar 2018.
Kepler Cheuvreux downgraded Seadrill to ‘Reduce’ from ‘Buy’.
REFINERS
Simmons Energy upgraded HollyFrontier to ‘Overweight’ from ‘Neutral’ and downgraded PBF Energy & Valero Energy to ‘Neutral’ from ‘Overweight’.
Press Release - Phillips 66 and Trafigura Group announced they have formed a 50/50 joint venture, Bluewater Texas Terminal, to develop an offshore deepwater port project located approximately 21 nautical miles east of the entrance to the Port of Corpus Christi. The proposed project, to be constructed by Phillips 66, will consist of up to two single point mooring buoys capable of fully loading Very Large Crude Carriers (VLCCs) to export crude oil. The project is currently in the permitting stage. The joint venture owners expect to make a final investment decision later this year, pending permit approval and customer volume commitments that support the project meeting the owners’ economic return thresholds. Trafigura has withdrawn its application to develop the Texas Gulf Terminals deepwater port facility that was submitted to the United States Maritime Administration (MARAD) in July 2018.
MLPS & PIPELINES
Press Release - AltaGas reported fourth quarter and full-year 2019 financial results. AltaGas also reaffirmed its 2020 outlook and provided an update on its business and near-term priorities, which remain on track. Normalized EBITDA1 was $425 million for the fourth quarter and $1.271 billion for the full-year, a 26 percent year-over-year increase and near the top of the 2019 guidance range of $1.2 to $1.3 billion. Normalized net income1 was $186 million ($0.67 per share) in the fourth quarter and $324 million ($1.17 per share) for the full-year, a 66 percent year-over-year increase. Normalized funds from operations (FFO) was $332 million for the fourth quarter and $895 million for the full-year. Net loss applicable to common shares was $103 million ($0.37 per share) in the fourth quarter and net income applicable to common shares was $769 million ($2.78 per share) for the full-year. Fourth quarter net loss was negatively impacted by impairments on non-core Power and Midstream assets and higher unrealized losses on risk management contracts.
Press Release - Summit Midstream Partners announced its financial and operating results for the three months ended December 31, 2019, including a net loss of $327.1 million, adjusted EBITDA of $77.5 million, DCF of $47.1 million, and a quarterly distribution coverage ratio of 4.0x. Net loss for the quarter was primarily related to a $336.7 million non-cash impairment associated with our equity investments in Ohio Gathering and Ohio Condensate due to an expected decrease in customer activity as a result of lower forward commodity prices. Net loss also included a $14.2 million non-cash impairment related to the $12.0 million sale of a natural gas gathering and processing sub-system in the Piceance Basin in December 2019, and $5.7 million of restructuring, severance and transaction expenses associated with the November 2019 DPPO amendment and our ongoing initiative to reduce our cost structure.
(Late Thursday) Press Release - Western Midstream Partners announced fourth-quarter and full-year 2019 financial and operating results. Net income (loss) available to limited partners for the fourth quarter of 2019 totaled $282.1 million, or $0.62 per common unit (diluted), with fourth-quarter 2019 Adjusted EBITDA (totaling $447.6 million and fourth-quarter 2019 Distributable cash flow totaling $345.4 million. Net income (loss) available to limited partners for 2019 totaled $662.3 million, or $1.59 per common unit (diluted), with full-year 2019 Adjusted EBITDA of $1.719 billion and full-year 2019 Distributable cash flow of $1.325 billion. Financial and operational results are presented as if WES owned the assets acquired in February 2019 for all periods reported. Fourth-quarter 2019 total natural-gas throughput averaged 4.3 Bcf/d, representing a 3-percent sequential-quarter increase and an 8-percent increase from fourth-quarter 2018. Fourth-quarter 2019 total throughput for crude-oil, NGLs, and produced-water assets averaged 1,378 MBbls/d, representing a 16-percent sequential-quarter increase and a 38-percent increase from fourth-quarter 2018. For the fourth quarter of 2019, WES paid a per-unit quarterly distribution of $0.6220. The full-year 2019 per-unit distribution of $2.47 represents a more than 5-percent increase over the full-year 2018 per-unit distribution of $2.35. This marks WES's 28th consecutive quarterly distribution increase and achieves WES's 2019 annual distribution-growth guidance range of 5 percent to 6 percent.
(Late Thursday) Press Release - DCP Midstream announced the publication of its inaugural Sustainability Report. The report, titled “Transforming Energy through People, Process and Technology” provides a review of DCP’s performance on safety, environmental, social, and governance initiatives.
(Late Thursday) Press Release - Pembina Pipeline announced its financial and operating results for the fourth quarter and full-year 2019. Fourth quarter earnings of $145 million and record full-year earnings of $1.5 billion, a 61 percent decrease and 17 percent increase, respectively, over the same periods in the prior year. Fourth quarter adjusted EBITDA of $787 million and full-year record adjusted EBITDA of $3.1 billion, a 10 and eight percent increase, respectively, over the same periods in 2018. Cash flow from operating activities of $728 million for the fourth quarter and a record $2.5 billion for the full year, an increase of eight percent and 12 percent, respectively, over the same periods in 2018.
Press Release - Shell Midstream Partners announced it has signed an agreement with its general partner to eliminate all incentive distribution rights and economic general partner interest in SHLX. SHLX has also entered into a Purchase and Sale Agreement with affiliates of its sponsor, Royal Dutch Shell, to acquire (i) Shell’s 79% interest in Mattox Pipeline Company LLC, which owns the Mattox Pipeline, and (ii) certain logistics assets at the Shell Norco Manufacturing Complex. As consideration for the assets and the elimination of IDRs, the sponsor will receive 160 million newly issued SHLX common units, plus $1.2 billion of Series A perpetual convertible preferred units at a price of $23.63 per unit.
MARKET COMMENTARY
Wall Street futures fell and world share markets tumbled, as the coronavirus panic sent markets crashing again, compounding their worst week since the 2008 global financial crisis, wiping out $5 trillion in value terms. Recession fears resulted in volatility in the euro-dollar exchange rate surging to its highest in more than a year and safe-haven demand pushed the yen higher. Oil slumped to their lowest in more than a year as the global spread of the coronavirus stoked demand concerns. Gold prices slid 1%. Consumer spending data and University of Michigan consumer sentiment index final reading are scheduled for release later in the day.
NASDAQ ENERGY TEAM THOUGHT LEADERSHIP
- 1/8/20 - CNBC’s Squawk Alley: Oil market reaction to US-Iran tensions
- 1/8/20 - Bloomberg Day Break - Steady escalation of US-Iran tensions
- 12/5/19 - Bloomberg Balance of Power - OPEC's Limited Efficacy
- 9/17/19 - Oil's New Risk Premium Discussion on CNBC TV
- 9/16/19 - Discussion on Bloomberg TV about Impact of Abqaiq Attack
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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