Oil

Crude Extends Gains on Hopes of Continued Output Cuts

Crude oil prices are extending recent gains, trading at the their highest levels in about two months, on continued optimism that the appointment of Saudi's new Energy Minister should boost prices in the near-term.

SECTOR COMMENTARY

Energy stocks are flat on mixed signals from flat index futures and higher oil prices, which are extending gains for a fifth straight day. Corporate news in the energy sector was very light today but there were a handful of stock ratings downgrades across E&Ps, services and midstream companies.    

Crude oil prices are extending recent gains, trading at the their highest levels in about two months, on continued optimism that the appointment of Saudi's new Energy Minister should boost prices in the near-term. Meanwhile, both Citi and Goldman Sachs lowered their oil demand growth estimates. The EIA Short Term Energy Outlook will be released later today and inventory data tonight and tomorrow is expected to show stockpile declines across the board.   

Natural gas futures are accelerating gains with front month prices up in double digits for the month so far on warmer temperatures West of the Rockies as well as technical buying.           

U.S. INTEGRATEDS

(Late Monday) Reuters - Repsol is in advanced talks to acquire some deepwater assets in the U.S. Gulf of Mexico from ExxonMobil for about $1 billion. The deal would be a boon to Exxon's plans to accelerate asset sales, as it seeks to raise cash to return to shareholders and fund major projects. Suppressed oil prices have weighed on the appetite of oil majors to buy such assets.

INTERNATIONAL INTEGRATEDS

Press Release - Weatherford International plc announced the signing of an $87 million contract for fishing and intervention services with Petroleo Brasileiro SA Petrobras. The four-year agreement represents the largest fishing contract ever signed by Weatherford. It also constitutes the largest single global award for this scope in the recent past. 

(Late Monday) Reuters - Repsol is in advanced talks to acquire some deepwater assets in the U.S. Gulf of Mexico from ExxonMobil for about $1 billion. The deal would be a boon to Exxon's plans to accelerate asset sales, as it seeks to raise cash to return to shareholders and fund major projects. Suppressed oil prices have weighed on the appetite of oil majors to buy such assets.

UBS Equities upgraded Repsol to ‘Buy’ from ‘Neutral.’

Reuters - Azerbaijan's state energy company Socar said it had agreed with Engie,Royal Dutch Shell L, Azerbaijan Gas Supply Company on a partial transfer of Engie's Shah Deniz gas supply contract to Shell Energy Europe Limited. Under this latest agreement, Shell Energy Europe is significantly increasing the availability of gas for its customers by acquiring part of Engie's 25-year contract. The transfer agreement, signed on Sept. 5, covers supplies of Azerbaijani gas that will begin flowing into Italy upon completion of the Trans Adriatic Pipeline.

Reuters - Enteq Upstream signed license agreement with Royal Dutch Shell for drilling tech. The license gives the company exclusive rights to incorporate Shell's IP, Tech into engineering & making of rotary steerable drilling system. Development of commercial system related to drilling tech deal with Shell will take up to a further two years while development of commercial system related to drilling tech deal with Shell may require investment of up to about $3M over 2 years.

CANADIAN INTEGRATEDS

(Late Monday) Press Release - Suncor announced it is replacing its coke-fired boilers with two cogeneration units at its Oil Sands Base Plant. The cogeneration units will provide reliable steam generation required for Suncor’s extraction and upgrading operations and generate 800 megawatts (MW) of power. The power will be transmitted to Alberta’s grid, providing reliable, baseload, low-carbon power, equivalent to approximately 8% of Alberta’s current electricity demand. This project will increase demand for clean natural gas from Western Canada.       

U.S. E&PS

(Late Monday) Press Release - Callon Petroleum issued the following statement in response to the filing by Paulson & Co. Inc.: “Callon maintains an open dialogue with all of our shareholders and welcomes constructive input toward the shared goal of maximizing shareholder value. Our Board of Directors is committed to acting in the best interests of Callon shareholders and will continue to take actions to deliver returns on their behalf.”

Press Release - On September 9, 2019, Chesapeake Energy entered into a privately negotiated securities exchange agreement under which it has agreed to issue an aggregate of 250,721,554 shares of the company's common stock, par value $0.01 per share, in exchange for: (i) approximately $40.0 million aggregate principal amount of its 5.75% Convertible Preferred Stock; (ii) approximately $112.7 million aggregate principal amount of its 4.875% Senior Notes due 2022; (iii) approximately $129.3 million aggregate principal amount of its 5.75% Senior Notes due 2023; (iv) approximately $155.8 million aggregate principal amount of its 5.5% Convertible Senior Notes due 2026; and (v) approximately $150.0 million aggregate principal amount of its 8.00% Senior Notes due 2027. The company may engage in similar transactions in the future but is under no obligation to do so.

Bank of America Merrill Lynch upgraded PDC Energy to ‘Buy’ from ‘Neutral.’

BMO Capital Markets resumed coverage of QEP Resources at ‘Market Perform.’

Bank of America Merrill Lynch downgraded Whiting Petroleum to ‘Neutral’ from ‘Buy.’

8K – SM Energy updates Q3 differential. Repeats Q3/2019 production guidance and 2019 capex guidance.

Press Release - WPX Energy announced that it has commenced an underwritten public offering of $500 million of senior unsecured notes due 2027. WPX intends to use the net proceeds from the offering and, if necessary, any other sources of available funds, which may include borrowings under its senior secured credit facility, to fund the purchase of up to $450 million aggregate principal amount of its outstanding 6.000% Senior Notes due 2022 and 8.250% Senior Notes due 2023 through cash tender offers.

CANADIAN E&PS

Press Release - Encana announced changes to its Executive Leadership Team, including the promotion of Michael McAllister to president, Brendan McCracken to executive vice president – corporate development and external relations and Greg Givens to chief operating officer. These changes are effective immediately.

Press Release - Obsidian Energy announced that the Board of Directors has determined that it is in the best interest of the Company and its stakeholders to initiate a formal process to explore strategic alternatives. This process is intended to evaluate the Company's strategic options and alternatives to maximize shareholder value. Such strategic alternatives may include, but are not limited to, a corporate sale, merger or other business combination, a disposition of all or a portion of the Company's assets, a recapitalization, refinancing of its capital structure, or any combination of the foregoing.

OILFIELD SERVICES

(Late Monday) Press Release - Fluor announced that it has successfully completed its mechanical construction scope of work on MEGlobal’s world-class ethylene glycol (EG) manufacturing facility in Oyster Creek, Texas.

Morgan Stanley upgraded Schlumberger to ‘Overweight.’

US Silica was downgraded to hold from buy at RF Lafferty.

MLPS & PIPELINES

Kinder Morgan was downgraded to hold from buy at Argus Research.

(Late Monday) Press Release - Pembina Pipeline announced that it has agreed to issue $1.5 billion of senior unsecured medium-term notes (the "Offering").  The Offering will be conducted in three tranches consisting of $600 million in senior unsecured medium-term notes, series 14 having a fixed coupon of 2.56% per annum, paid semi-annually, and maturing on June 1, 2023; $600 million in senior unsecured medium-term notes, series 15 having a fixed coupon of 3.31%  per annum, paid semi-annually, and maturing on February 1, 2030; and $300 million principal amount to be issued through a re-opening of the Company's 4.54% medium-term notes, series 13, due April 3, 2049.

MARKET COMMENTARY

Futures for Wall Street’s major indexes fell, along with European and Chinese stocks, as disappointing China factory data stoked recession worries. The Japanese yen held at a five-week low versus the greenback on firming government bond yields. Optimism that OPEC and other producing countries may agree to extend output cuts supported oil prices. Gold dropped to a near one-month low to hold below the key $1,500 pivot, hit by a stronger dollar.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP


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