Energy stocks are set to open lower, dragged down by weaker broader index futures and lower oil prices. News flow picked up today, with a number of E&Ps providing quarterly updates, a handful of recommendation changes from Scotiabank in the OFS space, and a restructuring announcement with creditors from California Resources.
Oil prices fell on Thursday after OPEC and other producers including Russia agreed to ease record supply curbs from August, though the drop was cushioned by tightening global inventories as economic activity picks up. Both contracts rose 2% the previous day after a sharp drop in U.S. crude inventories. OPEC+ agreed on Wednesday to scale back oil production cuts from August. They will reduce their cuts to 7.7 million barrels per day through December from the 9.7 million bpd cuts in place since May. "Things are getting back to normal on the oil market," said Norbert Rücker, head of economics research at Julius Baer. "The petro-nations announced the partial lifting of their production restrictions as oil demand rebounds and signs of an easing supply glut emerge... The economic recovery puts demand above supply."
Natural gas futures edged up on Thursday ahead of a federal storage report expected to show a smaller-than-usual storage build on forecasts for hot weather to keep air conditioning demand high over the next two weeks. That price rise came despite a slow increase in output and the lowest liquefied natural gas exports since early 2018. Analysts said U.S. utilities injected 47 bcf of gas into storage during the week ended July 10. That compares with an increase of 67 bcf during the same week last year and a five-year (2015-19) average build of 63 bcf for the period.
Jefferies upgraded BP and Repsol to ‘Buy’ from ‘Hold’.
(Late Wednesday) Reuters - Petrobras said it had finalized the sale of its stake in 10 oil fields to Trident Energy do Brasil with a payment of $365.4 million. The fields as a whole are known as the Polos de Pampo e Enchova. The deal still requires the payment of an additional $650 million.
Press Release - Royal Dutch Shell CEO Ben van Beurden talks about the company’s pending announcement on an up to $22 billion asset write down; the historic decision to cut what had been the world’s largest dividend for the first time since World War II; getting to net-zero emissions in 2050 and the future makeup of the company in latest edition of CERAWeek Conversations.
(Late Wednesday) Reuters - Reliance Industries' plans to sell 20% stake in its oil-to-chemical business to Saudi Aramco is delayed.
Press Release - California Resources announced it has entered into a Restructuring Support Agreement with holders of approximately 84% of the Company’s 2017 term loans, 51% of the Company’s 2016 term loans and its Elk Hills midstream joint venture partner, Ares Management L.P. To implement the terms of the RSA, the Company and certain of its subsidiaries have filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas. Upon plan confirmation, the implementation of the RSA would reduce CRC’s debt substantially, enabling the Company to operate safely through the current downturn in commodity prices and establishing a solid financial foundation to enhance future value creation.
(Late Wednesday) SEC filing - On July 15, 2020, Chaparral Energy, certain lenders party thereto, Royal Bank of Canada, as Administrative Agent and Issuing Bank and the other parties thereto, entered into a Limited Forbearance Agreement under the Company’s Tenth Restated Credit Agreement, dated as of December 21, 2017.Pursuant to the Forbearance Agreement, the Lenders agreed, during the forbearance period, to forbear from exercising any remedies under the Credit Agreement for any default or event of default resulting from any failure by the Company or any of its subsidiaries to make all or any part of the required interest payment due on July 15, 2020 with respect to the Company’s 8.75% senior notes due 2023. Any failure by the Company to make the Interest Payment with respect to the Notes on or prior to July 15, 2020 would constitute an “event of default” under the Credit Agreement.
Press Release - Earthstone Energy provided an update to its operations and 2020 production guidance. Following the previously announced production curtailments for May 2020 due to historically low oil prices, beginning in June, the Company commenced returning all of its shut-in and curtailed operated wells to full production, which are currently producing at nearly 100% of capacity. Earthstone estimates that total net production was curtailed by approximately 60% in May, with minimal volumes curtailed in April and June. The Company estimates average production for the second quarter of 2020 to be approximately 13,600 Boepd (65% oil). Assuming no further curtailments are warranted, average daily production for full year 2020 is expected to be 13,000 - 14,000 Boepd.
Press Release - Canacol Energy is pleased to provide the following gas sales and drilling update. Realized contractual natural gas sales for June 2020 averaged approximately 165 million standard cubic feet per day. In addition to the realized contractual gas sales (which are essentially gas produced, delivered, and paid for) the Corporation saw an additional 12 to 14 MMscfpd of gas sales nominations throughout the second quarter, which must be paid for during the remainder of 2020 for which delivery timing is at the discretion of the off taker, as outlined in the May 13, 2020 press release.
(Late Wednesday) Press Release - Tourmaline Oil is pleased to announce that the Toronto Stock Exchange has approved the renewal of Tourmaline's normal course issuer bid. The NCIB allows Tourmaline to purchase up to 13,538,778 common shares (representing 5% of its 270,775,559 outstanding common shares as of June 30, 2020) over a period of twelve months commencing on July 20, 2020.
(Late Wednesday) Press Release - Whitecap Resources confirmed that a cash dividend of Cdn. $0.01425 per common share in respect of July operations will be paid on August 17, 2020 to shareholders of record on July 31, 2020.
Scotiabank downgraded Baker Hughes and Core Laboratories to ‘Sector Perform’ from ‘Sector Outperform’.
Press Release - KBR has been awarded a contract for its proprietary Plinke Adiabatic Nitrobenzene solutions by Kutch Specialities Pvt Ltd, India. Under the terms of the contract, KBR will provide basic and detailed engineering design, equipment, and related advisory services to Kutch Specialities Pvt Ltd for its grassroots nitrobenzene project in India.
Scotiabank upgraded Schlumberger NV to ‘Sector Outperform’ from ‘Sector Perform’.
Scotiabank downgraded Dril-Quip to ‘Sector Perform’ from ‘Sector Outperform’.
(Late Wednesday) Press Release - Transocean issued a quarterly Fleet Status Report that provides the current status of, and contract information for, the company’s fleet of offshore drilling rigs. As of July 15, the company’s total backlog is approximately $8.9 billion.
(Late Wednesday) Reuters - Valero Energy shut the diesel hydrotreater at its 195,000-barrel-per-day (bpd) McKee refinery in Sunray, Texas, on Wednesday, said sources familiar with plant operations. The 40,000-bpd diesel hydrotreater may require repairs before it restarts.
MLPS & PIPELINES
Reuters - Brooge Energy announced completion of basic design for phase III facility. MUC Oil & Gas Engineering Consultancy (MUC) has issued the final basic design for the company's planned phase III oil storage terminals and refinery.
Credit Suisse started coverage on Inter Pipeline with a ‘Neutral’ rating.
Wall Street futures fell after worse-than-expected Chinese domestic consumption data signaled a slower economic recovery. European shares were lower on a batch of weak earnings and Asian stock markets faltered on deteriorating U.S.-China relations and weak Chinese data. The dollar strengthened, while gold prices dipped. Netflix Inc will release its second-quarter results after markets close.
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.
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.