Crude Falls as Coronavirus Cases Outside China Continue to Grow
SECTOR COMMENTARY
Energy stocks are set for a weaker opening as oil prices trade lower for a 4th straight day, down to new 1+ year lows as coronavirus cases outside China continue to grow and global stocks decline for the 5th consecutive session. Meanwhile, however, broader equities in the US are attempting to rebound from the worst two-day slide for the S&P 500 in four years.
Oil prices continue to retreat below $49 amid demand destruction from coronavirus even as Libya production ticked down to 120,000 bpd, the lowest since September. Meanwhile, inventory data later today is expected to show yet more builds in crude oil following similar data from API last night.
Natural gas prices are retreating from yesterday’s gains despite forecasts turning milder the first week of March with the potential for colder air to return the second week of the month. Consensus for storage data due tomorrow and preliminary estimates for week-ending this Friday have draws larger than historical averages.
U.S. INTEGRATEDS
(Late Tuesday) Reuters - Chevron asked about 300 British employees to work temporarily from home after an employee in its Canary Wharf office in London reported a flu-like illness. Traders, exploration and refining unit staff were assigned to work remotely until test results can determine whether the worker has coronavirus, said a person familiar with the matter. "Chevron continues to monitor the situation very closely, utilizing the guidance of international and local health authorities," said a Chevron spokeswoman. "Our primary concern is the health and safety of our employees and we are taking precautionary measures to reduce their risk of exposure. It is our policy to not provide details of our employees."
Reuters - Guyana's government launched a search for a company to market its share of crude produced at the offshore Liza well, where an Exxon Mobil-led consortium began producing oil in December. The South American country's government is entitled to a share of the oil produced, and has said it was seeking a marketing agent to help it export the crude. In a statement on its website, Guyana's Department of Energy said companies wishing to participate should submit an expression of interest by March 12.
INTERNATIONAL INTEGRATEDS
REUTERS - Saudi Aramco’s Aramco Trading announced establishment of London subsidiary Aramco Trading Limited to enhance its presence in Europe and Africa with establishment of London office.
Reuters - BP said it will leave three U.S. petroleum trade groups, including the country's main refining lobby, due to misaligned views over the energy transition to battle climate change. The decision comes after BP Chief Executive Officer Bernard Looney, who took office earlier this month, set one of the oil sector's most ambitious targets for curbing carbon emissions with a vow to "re-invent" the 111-year old company in the face of the climate challenge. The London-based company said in a report on Wednesday that it will quit the American Fuel & Petrochemical Manufacturers (AFPM), following similar moves by other European rivals. BP will also not renew its membership in the Western States Petroleum Association (WSPA) and Western Energy Alliance (WEA), it said.
Reuters - Royal Dutch Shell's onshore Egyptian oil and gas assets have drawn interest from American, Egyptian, Asian and Middle East bidders, two sources told Reuters. Shell launched a process at the end of November to sell its onshore upstream assets in the Western Desert to focus on expanding its Egyptian offshore gas exploration. It appointed investment bank Citigroup to run the sale, which could fetch around $1 billion, a source close to the process told Reuters in November. U.S. oil and gas producer Apache, Egyptian firms Apex International Energy and Cheiron, and London-listed Pharos Energy submitted bids, said the two sources close to the deal, declining to be named as the matter is not public. There were other Asian and Middle Eastern bidders too, they said. One of the sources said all the bids were non-binding.
U.S. E&PS
(Late Tuesday) Press Release - On August 28, 2019, Abraxas Petroleumannounced that it received notice from The NASDAQ Stock Market LLC that the company did not then meet the NASDAQ continued listing standard which requires a minimum average closing price of $1.00 per share over a period of 30 consecutive trading days. NASDAQ had provided a period of 180 days following receipt of the notice to meet the standard and regain compliance for continued listing on the exchange. The listed security has not regained compliance with the minimum average closing price of $1.00 per share requirement, however, NASDAQ staff has determined that the Company is eligible for an additional 180 day calendar period, or until August 24, 2020, to regain compliance. This determination is based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Capital Market with the exception of the per share price requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If at any time during this additional time period the average closing price of the Company’s security is at least $1.00 per share for a minimum of 10 consecutive business days, NASDAQ will provide written confirmation of compliance and this matter will be closed.
Reuters - Royal Dutch Shell's onshore Egyptian oil and gas assets have drawn interest from American, Egyptian, Asian and Middle East bidders, two sources told Reuters. Shell launched a process at the end of November to sell its onshore upstream assets in the Western Desert to focus on expanding its Egyptian offshore gas exploration. It appointed investment bank Citigroup to run the sale, which could fetch around $1 billion, a source close to the process told Reuters in November. U.S. oil and gas producer Apache, Egyptian firms Apex International Energy and Cheiron, and London-listed Pharos Energy submitted bids, said the two sources close to the deal, declining to be named as the matter is not public. There were other Asian and Middle Eastern bidders too, they said. One of the sources said all the bids were non-binding.
Press Release - Chesapeake Energy reported financial and operational results for the 2019 full year and fourth quarter and released its annual guidance. For the 2019 full year, Chesapeake reported a net loss of $308 million and a net loss available to common stockholders of $416 million, or $0.25 per diluted share, compared to net income of $228 million and net income available to common stockholders of $133 million, or $0.15 per diluted share, in 2018. Average daily production for 2019 was approximately 484,000 boe and consisted of approximately 118,000 bbls of oil, 1.995 billion cubic feet (bcf) of natural gas and 33,000 bbls of natural gas liquids (NGL). Average daily production for 2018 was approximately 521,000 boe and consisted of approximately 90,000 bbls of oil, 2.278 bcf of natural gas and 52,000 bbls of NGL. The increase in oil production of approximately 30% during 2019 was primarily driven by the WildHorse acquisition, while our legacy oil portfolio contributed 6% growth excluding acquisitions and divestitures. For the 2019 fourth quarter, Chesapeake reported a net loss of $324 million and a net loss available to common stockholders of $346 million, or $0.18 per diluted share, compared to net income of $605 million and net income available to common stockholders of $576 million, or $0.57 per diluted share, for the fourth quarter 2018. Average daily production for the 2019 fourth quarter was approximately 477,000 boe and consisted of approximately 126,000 bbls of oil, 1.935 bcf of natural gas and 29,000 bbls of NGL. Average daily production for the 2018 fourth quarter was approximately 464,000 boe and consisted of approximately 87,000 bbls of oil, 2.009 bcf of natural gas and 42,000 bbls of NGL. Overall, fourth quarter oil production grew approximately 45% from the 2018 fourth quarter, and represented approximately 26% of the company's total production, the highest oil mix in Chesapeake's history, compared to 19% in the 2018 fourth quarter.
(Late Tuesday) Press Release - At the request of EQT, Ryder Scott Company has conducted a reserves audit of the estimates of the proved reserves, future production and discounted future net income as of December 31, 2019 prepared by EQT’s engineering and geological staff based on the definitions and disclosure guidelines of the SEC contained in Title 17, Code of Federal Regulations, Modernization of Oil and Gas Reporting, Final Rule released January 14, 2009 in the Federal Register (SEC regulations). Our reserves audit, completed on February 24, 2020 and presented herein, was prepared for public disclosure by EQT in filings made with the SEC in accordance with the disclosure requirements set forth in the SEC regulations. The estimated reserves and income data shown herein represent EQT’s estimated net reserves and income data attributable to the leasehold and royalty interests in certain properties owned by EQT as of December31, 2019. The properties reviewed by Ryder Scott incorporate EQT reserves determinations and are located in the states of Ohio, Pennsylvania and West Virginia. The properties covered by Ryder Scott’s review account for 100 percent of the total net proved liquid hydrocarbon reserves, 100 percent of the total net proved gas reserves, and 100 percent of the total proved discounted future net income at 10 percent prepared by EQT as of December 31, 2019. For undeveloped locations, EQT determined, and Ryder Scott reviewed and approved, which areas within EQT’s acreage were to be considered proven. Reserves were assigned and projected by EQT for locations within these proven areas and approved by Ryder Scott based on analogous type curves and offset production information.
Bernstein downgraded Kosmos Energy to ‘Market-Perform’ from ‘Outperform’.
(Late Tuesday) Press Release - Matador Resources reported financial and operating results for the fourth quarter and full year 2019. Fourth quarter 2019 average daily oil equivalent production increased 6% sequentially to a record quarterly high for the Company of 73,700 barrels of oil equivalent per day (57% oil), as compared to 69,600 BOE per day (57% oil) in the third quarter of 2019. Both average daily oil production and average daily natural gas production increased 6% sequentially to 42,100 barrels per day and 190.0 million cubic feet per day, respectively. Fourth quarter 2019 net income (GAAP basis) was $24.0 million, or $0.21 per diluted common share, a 45% sequential decrease from $44.0 million in the third quarter of 2019, and an 82% year-over-year decrease from $136.7 million in the fourth quarter of 2018. Fourth quarter 2019 adjusted net income (a non-GAAP financial measure) was $46.1 million, or $0.39 per diluted common share, a 22% sequential increase from $37.9 million in the third quarter of 2019, and a 7% year-over-year increase from $43.0 million in the fourth quarter of 2018.
(Late Tuesday) Press Release - Matador Resources announced its full year 2020 operating plan and market guidance. Matador’s full year 2020 guidance estimates include Total Oil Production of 14.0 million Bbl, Total Natural Gas Production of 61.1 Bcf, and Total Oil Equivalent Production of 24.2 million BOE.
OILFIELD SERVICES
Press Release - National Energy Services reported its financial results for the quarter and year ended December 31, 2019. The Company had net income for the fourth quarter of 2019 totaling $3.7 million as compared to a net income of $11.1 million for the third quarter of 2019 and $22.8 million in the prior year quarter. The Company reported $0.04 of diluted earnings per share for the fourth quarter of 2019 compared to $0.13 per share during the third quarter 2019 period. The Company produced Adjusted EBITDA of $52 million during the fourth quarter of 2019.
CIBC downgraded Secure Energy Services to ‘Neutral’ from ‘Outperformer’.
Press Release - Witt O’Brien’s, a subsidiary of SEACOR Holdings, announced the acquisition of Navigate PR Ltd, Navigate Response Ltd, Navigate Response Asia Pte Ltd and Helix Media Pte Ltd.
Press Release - Smart Sand announced results for the fourth quarter and full year ended December 31, 2019. Revenues were $47.7 million in the fourth quarter of 2019, a 27% decrease compared to third quarter 2019 revenues of $65.7 million. Fourth quarter 2019 revenues decreased by 9% compared to fourth quarter 2018 revenues of $52.2 million. Net income was $2.4 million, or $0.06 per basic share and $0.05 per diluted share, for the fourth quarter of 2019, compared with net income of $10.9 million, or $0.27 per basic and diluted share for the third quarter of 2019, and net loss of $4.4 million, or $(0.11) per basic and diluted share, for the fourth quarter 2018.
(Late Tuesday) Press Release - TechnipFMC announced that the Company’s Board of Directors has authorized and declared a quarterly cash dividend of $0.13 per ordinary share payable on or shortly after April 8, 2020 to shareholders of record as of the close of business on the New York Stock Exchange on March 24, 2020. The ex-dividend date will be March 23, 2020.
REFINERS
(Late Tuesday) Press Release - Delek US Holdings and Delek Logistics Partners announced that Mr. Assi Ginzburg, Executive Vice President and Chief Financial Officer, has informed them that he will not renew his employment contract to pursue other opportunities.
(Late Tuesday) Press Release - Delek US Holdings announced financial results for its fourth quarter ended December 31, 2019. Delek US reported fourth quarter 2019 net income of $32.7 million, or $0.44 per diluted share, versus a net income of $121.6 million, or $1.48 per diluted share, for the quarter ended December 31, 2018. On an adjusted basis, Delek US reported Adjusted net loss of $(8.5) million, or $(0.11) per share for the fourth quarter 2019. This compares to Adjusted net income of $165.7 million, or $2.03 per share, in the prior-year period. Adjusted earnings before interest, taxes, depreciation and amortization was $66.0 million compared to Adjusted EBITDA of $287.4 million in the prior-year period. Adjusted quarterly results include a net income benefit of approximately $7.2 million, or $0.10 per share. This consists of a $31.1 million (after-tax) benefit from the retroactive biodiesel tax credit (BTC) attributable to the first three quarters of 2019, partially offset by headwinds of approximately $23.9 million (after-tax). These headwinds include $11.4 million related to environmental expenses and incremental employee costs. In addition, approximately $12.5 million is related to operating factors, such as accelerated work and product inventory builds at Krotz Springs and Big Spring, respectively, along with unplanned repairs and maintenance.
Reuters - An explosion and a fire have occurred at Marathon Petroleum's Carson refinery in California, according to a local media report. Los Angeles County firefighters are responding to the fire and no injuries have been reported at this time, a Fox News affiliate said.
MLPS & PIPELINES
(Late Tuesday) Press Release - Delek US Holdings and Delek Logistics Partners announced that Mr. Assi Ginzburg, Executive Vice President and Chief Financial Officer, has informed them that he will not renew his employment contract to pursue other opportunities.
(Late Tuesday) Press Release - Delek Logistics Partners announced its financial results for the fourth quarter 2019. For the three months ended December 31, 2019, Delek Logistics reported net income attributable to all partners of $21.6 million, or $0.52 per diluted common limited partner unit. This compares to net income attributable to all partners of $21.3 million, or $0.58 per diluted common limited partner unit, in the fourth quarter 2018. Net cash from operating activities was $45.8 million in the fourth quarter 2019 compared to $95.4 million in the fourth quarter 2018. Distributable cash flow was $33.0 million in the fourth quarter 2019, compared to $27.6 million in the fourth quarter 2018. For the fourth quarter 2019, EBITDA was $43.3 million compared to $40.8 million in the fourth quarter 2018.
(Late Tuesday) Press Release - EnLink Midstream reported financial results for the fourth quarter and full-year of 2019, reaffirmed previously announced 2020 financial guidance, and provided a segment level update. The company reported net loss attributable to EnLink of $938.7 million for the fourth quarter of 2019 and $1.12 billion for the full-year 2019. The net loss for 2019 includes non-cash impairments, primarily related to goodwill created at the formation of EnLink in 2014.The company also reported Adjusted EBITDA, net to EnLink of $290.9 million and Net Cash Provided by Operating Activities of $214.4 million.
(Late Tuesday) Press Release - EnLink Midstream announced the appointment of two new directors to its Board of Directors and a new member to its senior leadership team. EnLink has appointed Deborah G. Adams and James K. Lee to the Company's Board. Adams will serve as an independent director. Lee, an Investment Principal at Global Infrastructure Partners (GIP), will replace Matthew C. Harris, who will step down from the Board at the same time. These changes are effective March 1, 2020. As a result, the Board will be expanded to 10 directors, four of whom are independent. EnLink has also named Walter Pinto to the newly created position of Senior Vice President, Operational Excellence.
(Late Tuesday) Press Release - US Development Group and Gibson Energy jointly announced the receipt of all required regulatory approvals from the Government of Alberta to proceed with the construction of a diluent recovery unit (DRU) near Hardisty, Alberta, Canada. Additionally, USD and Gibson have finalized all required commercial agreements with ConocoPhillips Canada to fully underpin and sanction the construction of the initial phase of the DRU at 50,000 barrels per day of inlet bitumen blend capacity and enable rail shipments of DRU bit to the U.S. Gulf Coast. Construction of the DRU is expected to begin in April 2020, and the DRU could be placed into service later in the second quarter of 2021. USD and Gibson are currently in commercial discussions with other potential producer and refiner customers to secure additional long-term, take-or-pay agreements to support future expansions of capacity at the DRU.
(Late Tuesday) Press Release - On February 24, 2020, Tennessee Gas Pipeline Company, an indirect, wholly owned subsidiary of Kinder Morgan, offered and sold in a private placement under Rule 144A and Regulation S under the Securities Act of 1933, as amended, $1,000,000,000 in aggregate principal amount of its 2.900% Senior Notes due 2030. The Notes are guaranteed by KMI and substantially all of its wholly owned U.S. subsidiaries pursuant to a Cross Guarantee Agreement, which is described in and filed as Exhibit 10.15 to KMI’s Annual Report on Form 10-K for the year ended December 31, 2019. The Notes were offered and sold under a confidential offering memorandum dated February 19, 2020.
MARKET COMMENTARY
Wall Street futures were little changed, after falling for four consecutive sessions on fears about the spreading coronavirus. European and Asian shares fell for the fifth straight day, after governments and health authorities warned of a possible coronavirus pandemic. U.S. crude dropped below $50, the lowest level since January 2019. The dollar rose as markets pared dovish Fed bets. Safe-haven gold rose back towards seven-year highs as virus fears deepened.
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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