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Oil

Crude Falls as Rising Coronavirus Cases Renew Demand Concerns

Oil prices eased amid concerns that a fresh wave of COVID-19 infections will see a global demand recovery stalling due to tighter lockdowns, just as major producers ramp up output.

SECTOR COMMENTARY

Energy stocks are set to open slightly lower, weighed down by weakness in the crude complex and U.S. stock index futures which took a breather from yesterday’s rally while investors continue to monitor negotiations over a new stimulus package as lawmakers struggle to make progress. Earnings season remains the main focus across the energy sector with a handful of producers, services, and pipelines reporting today.

In company news, BP cut its dividend for the first time in a decade after reporting a record $6.7 billion second-quarter loss. Its shares rose ~6% in early trading after the company unveiled a plan to reduce its oil and gas output by 40% and boost investments in renewable energy, such as wind and solar, over the next decade.

Oil prices eased amid concerns that a fresh wave of COVID-19 infections will see a global demand recovery stalling due to tighter lockdowns, just as major producers ramp up output. "Most oil market participants expect more downward pressure on oil... with COVID-19 ravaging the landscape and OPEC+ adding more barrels into play," said Stephen Innes, Chief Global Markets Strategist at AxiCorp.

Natural gas futures extended yesterday’s monster rally, as demand rose for exports of LNG and weather forecasts turning much hotter which should boost air conditioning demand.

INTERNATIONAL INTEGRATEDS 

Reuters - BP cut its dividend for the first time in a decade after reporting a record $6.7 billion loss in the second quarter as the coronavirus crisis hammered energy demand. The net loss, which was in line with analysts' expectations, was largely a result of BP's decision to wipe $6.5 billion off the value of oil and gas exploration assets after it revised sharply lower its oil and gas price forecasts. BP's second-quarter underlying replacement cost loss, the company's definition of net income, reached $6.7 billion, roughly in line with forecasts of $6.8 billion in a company-provided survey of analysts. That compared with profits of $2.8 billion a year earlier and $791 million in the first quarter of 2020.

Press Release - BP introduced a new strategy that will reshape its business as it pivots from being an international oil company focused on producing resources to an integrated energy company focused on delivering solutions for customers. Within 10 years, bp aims to have increased its annual low carbon investment 10-fold to around $5 billion a year, building out an integrated portfolio of low carbon technologies, including renewables, bioenergy and early positions in hydrogen and CCUS. By 2030, bp aims to have developed around 50GW of net renewable generating capacity - a 20-fold increase from 2019 - and to have doubled its consumer interactions to 20 million a day.

Press Release - Eni and ASSTRA have signed a collaboration agreement to implement a series of initiatives and trials to decarbonize transport and reduce the levels of particulates released into the air, using a holistic and technologically neutral approach to identify the appropriate solution for each area of use.

(Late Monday) Reuters - Petrobras said it has begun non-binding sell phase for Petrobras Biocombustivel SA.                       

U.S. E&PS

(Late Monday) Press Release - Apache announced that it has priced $500 million in aggregate principal amount of 4.625% notes due 2025 and $750 million in aggregate principal amount of 4.875% notes due 2027 in an underwritten public offering.

Credit Suisse terminated coverage on Callon PetroleumCentennial Resource,QEP Resources, SM Energy and PDC Energy.

(Late Monday) Press Release - Centennial Resource Development announced second quarter 2020 financial and operational results and issued 2020 operational plans and targets. For the second quarter 2020, Centennial reported net income of $5.3 million, or $0.02 per diluted share, compared to $17.9 million, or $0.07 per diluted share, in the prior year period.

(Late Monday) Press Release - Continental Resources announced second quarter 2020 operating and financial results. The Company reported a net loss of $239.3 million, or $0.66 per diluted share, for the quarter ended June 30, 2020. In second quarter 2020, typically excluded items in aggregate represented a decrease of $16.4 million, or $0.05 per diluted share, in Continental's reported net loss. Adjusted net loss for second quarter 2020 was $255.7 million, or $0.71 per diluted share (non-GAAP).

(Late Monday) Press Release - Diamondback Energy announced financial and operating results for the second quarter ended June 30, 2020. Diamondback's second quarter 2020 net loss was $2,393 million, or $15.17 per diluted share. Adjusted net income (a non-GAAP financial measure as defined and reconciled below) was $23 million, or $0.15 per diluted share. Second quarter 2020 net loss includes a non-cash impairment charge of $2.5 billion as a result of the lower SEC Pricing because of the sharp decline in commodity prices. Diamondback announced today that the Company's Board of Directors declared a cash dividend of $0.375 per common share for the second quarter of 2020 payable on August 20, 2020, to stockholders of record at the close of business on August 13, 2020. Future dividends remain subject to review and approval at the discretion of the Company's Board of Directors. Diamondback's guidance for the full year 2020. Diamondback narrowed its full year 2020 guidance for LOE to between $4.20 to $4.60 per BOE, cash G&A expense to between $0.50 to $0.70 per BOE, gathering and transportation expense to between $1.25 to $1.35 per BOE and interest expense to $1.75 per BOE. 

(Late Monday) Press Release - HighPoint Resources reported second quarter of 2020 financial and operating results, including total production and oil volumes above guidance and capital expenditures below guidance. For the second quarter of 2020, the Company reported a net loss of $68 million, or $0.32 per diluted share. Adjusted net income for the second quarter of 2020 was $8 million, or $0.04 per diluted share. EBITDAX for the second quarter of 2020 was $54 million. Excluding non-recurring employee severance and other costs of approximately $4 million, reported EBITDAX would have been approximately $58 million. Adjusted net income (loss) and EBITDAX are non-GAAP (Generally Accepted Accounting Principles) measures. Reconciliations of non-GAAP measures, including adjusted net income and EBITDAX to GAAP net income can be found in the tables at the end of this release.

SEC filing - As previously disclosed, Lonestar Resources US, elected not to make the approximately $14.1 million interest payment (the “Interest Payment”) due and payable on July 1, 2020 with respect to its 11.25% senior notes due 2023 (the “Notes”) issued under the indenture governing the Notes, dated as of January 4, 2018 (as amended, supplemented or otherwise modified from time to time, the “Indenture”). The Company elected not to make the Interest Payment in order to evaluate certain financial alternatives. The Company’s failure to make the Interest Payment on July 1, 2020 represented an event of default under the Credit Facility (as defined below) at that time and the Company’s failure to make the Interest Payment within thirty days after it is due and payable constitutes an “event of default” under the Indenture. As active discussions are still ongoing regarding the Company’s evaluation of financial alternatives, the Company determined it would not make the Interest Payment prior to the expiration of the thirty day grace period, resulting in an event of default under the Indenture. On July 31, 2020, the Company and certain of its subsidiaries, entered into a forbearance agreement (the “Forbearance Agreement”) with certain holders of the outstanding Notes and any additional holder of Notes that becomes a party hereto in accordance with the terms thereof (collectively, the “Forbearing Holders”). Pursuant to the Forbearance Agreement, subject to certain terms and conditions therein, the Forbearing Holders have agreed to temporarily forbear from the exercise of any rights or remedies they may have in respect of the aforementioned event of default under the Indenture. The Forbearance Agreement terminates on August 21, 2020, unless certain specified circumstances cause an earlier termination.

Stifel Nicolaus and Truist downgrades Noble Energy to ‘Hold’ from ‘Buy’.

SEC filing - On August 3, 2020, Occidental Petroleum distributed 114,734,500 warrants (the “Warrants”) to purchase an equivalent number of shares (the “Shares”) of the Company’s common stock, par value $0.20 per share (the “Common Stock”) to the holders of record of outstanding shares of Common Stock as of the close of business on July 6, 2020 (the “Distribution”). The Company will also issue an additional number of Warrants pursuant to the Company’s outstanding equity-based incentive awards in connection with anti-dilution adjustments resulting from such Distribution. Each Warrant represents the right to purchase from the Company one share of Common Stock at an initial exercise price of $22.00 per share.

(Late Monday) Press Release - Castleton Resources LLC announced that it has entered into a definitive agreement to acquire the Terryville upstream assets in Northern Louisiana from subsidiaries of Range Resources for $245 million plus contingent payments that are a function of commodity prices. Under the terms of the agreement, Range will retain certain midstream commitments through their remaining term.

(Late Monday) Press Release - Range Resources announced its second quarter 2020 financial results. Non-GAAP revenues for second quarter 2020 totaled $502 million, and cash flow from operations before changes in working capital, a non-GAAP measure, was $81 million.  Adjusted earnings comparable to analysts’ estimates, a non-GAAP measure, was a loss of $25 million ($0.10 per diluted share) in second quarter 2020.

CANADIAN E&PS 

Press Release - Canacol Energy is pleased to provide the following update on certain new and existing credit facilities.  All amounts are in USD. On July 31, 2020, the Corporation entered into a $46 million senior unsecured revolving credit facility (the “RCF”) with a syndicate of banks.  Notable terms of the RCF include an interest rate of LIBOR + 4.75%, a 3-year term, and the Corporation’s ability to repay/redraw the RCF at any time within the term without penalty.  Canacol will pay a commitment fee to the syndicate of 30% of the 4.75% interest margin on any undrawn amounts throughout the term.  The RCF will be undrawn at the start.  The RCF will not be subject to typical periodic redeterminations.  Covenants have been harmonized with the Corporation’s existing covenants on its May 2025 senior unsecured notes. Credit Suisse, Banco Davivienda and Citigroup were Lead Joint Arrangers and Joint Bookrunners on the RCF. On July 31, 2020, a subsidiary of the Corporation entered into a $75 million senior unsecured bridge term loan (the “Bridge”) with a syndicate of banks.  Notable terms of the Bridge include an interest rate of LIBOR + 4.25%, a 2-year term, and the Corporation’s ability to repay the Bridge at any time within the term without penalty.  Within 30 days of the July 31, 2020 closing the subsidiary is obligated to draw the first $25 million of the Bridge, with the remaining $50 million to be available to be drawn at any time up to 12 months from the closing date. The subsidiary will pay a commitment fee to the syndicate of 30% of the 4.25% interest margin on any undrawn amounts throughout the availability period. Covenants have been harmonized with the Corporation’s existing covenants on its May 2025 senior unsecured notes.

OILFIELD SERVICES 

(Late Monday) Press Release - Black Hills announced financial results for the second quarter of 2020. The company reported earnings per share of $0.33, up from $0.24 per share in second quarter of 2019.

Press Release - Wilks Brothers, LLC, a significant, long-term shareholder and debtholder of Calfrac Well Services announced that, further to Calfrac's announced recapitalization transaction (the "Initial Management Transaction"), it has submitted a superior alternative recapitalization transaction (the "Superior Alternative Proposal") to the board of directors of Calfrac today.

Press Release - MIND Technology announced that it has completed the reincorporation of the Company from the State of Texas to the State of Delaware, including a name change to MIND Technology, Inc., and the rebranding of the Company's operations to MIND Technology.  The change in legal domicile and rebranding were approved by the affirmative vote of the holders of more than two-thirds of the votes entitled to be cast by holders of the Company's common stock and 9.00% Series A Cumulative Preferred Stock (the "Preferred Stock"), voting separately, at the Annual Meeting of Shareholders held on July 27, 2020.

SEC filing - National Energy Services Reunited reported its financial results for the quarter ended June30, 2020. The Company had net income for the second quarter of 2020 totaling $10.5 million. Net income for the second quarter of 2020, first quarter of 2020, and second quarter of 2019,includes amortization expenses of approximately $3.8 million, per quarter, associated with intangible assets acquired primarily in the 2018 acquisitions of our two initialoperating subsidiaries, NPS Holdings Limited and Gulf Energy S.A.O.C. Adjusted net income for the second quarter of 2020 is $12.3 million and includes adjustments totaling$1.8 million (collectively, “Total Charges and Credits”) mainly related to nonrecurring transaction costs associated with the acquisition of SAPESCO in Egypt. A complete listof the adjusting items and the associated reconciliation from GAAP has been provided in Table 1 below in the section entitled “Reconciliation of Net Income and AdjustedNet Income.” The Company reported $0.12 of diluted earnings per share (“EPS”) for the second quarter of 2020. Adjusted for the impact of Total Charges and Credits, Adjusted Diluted EPS,a non-GAAP measure described in Table 1 below, for the second quarter of 2020 is $0.14.

(Late Monday) Press Release - Newpark Resources announced results for its second quarter ended June 30, 2020. Total revenues for the second quarter of 2020 were $101.9 million compared to $164.6 million for the first quarter of 2020 and $216.4 million for the second quarter of 2019. Net loss for the second quarter of 2020 was $26.2 million, or ($0.29) per share, compared to net loss of $12.1 million, or ($0.14) per share, for the first quarter of 2020, and net income of $4.3 million, or $0.05 per diluted share, for the second quarter of 2019.

(Reuters) – NexTier Oilfield Solutions Inc. reported second quarter 2020 financial and operational results. The loss announced by Nextier Oilfield Solutions Inc in the second quarter were lower than the Refinitiv mean estimate of losses. The company reported losses of -37 cents per share, 43 cents lower than the same quarter last year when the company reported EPS of 6 cents. Losses of -53 cents per share were anticipated by the fifteen analysts providing estimates for the quarter. Wall Street expected results to range from -93 cents to -35 cents per share, with a forecasted mean of -53 cents per share. The company reported revenue of $ 196.23 million, which is higher than the estimated $195.57 million.

Press Release - TETRA Technologies announced second quarter 2020 results. Second quarter 2020 revenue of $192 million, decreased 14% from the first quarter of 2020 compared to a 64% decline in US onshore rig activity and a 26% decline in international rig activity. Net loss before discontinued operations for the second quarter was $34.3 million, inclusive of $18.1 million of non-recurring charges and expenses. This compares to a net loss before discontinued operations of $10.2 million in the first quarter of 2020, inclusive of $8.1 million of non-recurring charges and expenses. Net loss per share attributable to TETRA stockholders in the second quarter was $0.15.  Excluding the non-recurring charges and expenses, the net loss per share attributable to TETRA stockholders was $0.09.  Consolidated Adjusted EBITDA before discontinued operations was $35.3 million and compares to $47.8 million in the first quarter. Consolidated cash provided by operating activities in the second quarter was $38 million, compared to $22 million in the first quarter of 2020.  TETRA only cash from operating activities was $33 million, while TETRA only adjusted free cash flow from continuing operations was $31 million, compared to $4.7 million in the first quarter of 2020. The improvements in consolidated cash provided by operating activities and TETRA only adjusted free cash flow reflects monetization of working capital.

DRILLERS 

JPMorgan terminated coverage on Noble Corporation.

REFINERS  

(Late Monday) Press Release - CVR Energy announced a net loss of $5 million, or 5 cents per diluted share, inclusive of a $41 million pre-tax charge related to a goodwill impairment recognized within its Nitrogen Fertilizer Segment, on net sales of $675 million for the second quarter of 2020, compared to net income of $116 million, or $1.16 per diluted share, on net sales of $1.7 billion for the second quarter of 2019. Second quarter 2020 EBITDA was $68 million, compared to second quarter 2019 EBITDA of $273 million. CVR Energy will not pay a cash dividend and CVR Partners will not pay a cash distribution for the 2020 second quarter.

Tudor Pickering downgraded Marathon Petroleum to ‘Sell’ from ‘Buy.

MLPS & PIPELINES   

Press Release - Crestwood Equity Partners reported its financial and operating results for the three months ended June 30, 2020. Its second quarter 2020 net loss was $24.3 million, compared to net income of $225.0 million in second quarter 2019.

Jefferies initiated coverage on Gibson EnergyInter Pipeline and Pembina Pipelinewith a ‘Hold’ rating.

Jefferies initiated coverage on Keyera with a ‘Buy’ rating.

Press Release - NuStar Energy announced results for the three months ended June 30, 2020. While NuStar reported second quarter 2020 income from continuing operations of $30 million, compared to $47 million for the second quarter of 2019, NuStar also reported earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations of $162 million for the second quarter of 2020, up from $161 million from the same period in 2019. Distributable cash flow (DCF) from continuing operations was $62 million for the second quarter of 2020, compared to $83 million in the second quarter of 2019, primarily as a result of increased interest expense. And the distribution coverage ratio to common limited partners from continuing operations was 1.43 times for the current period.

(BUSINESS WIRE) – Williams announced its unaudited financial results for the three and six months ended June 30, 2020. Strong 2Q 2020 results demonstrate stability and predictability of business; on track to meet 2020 guidance expectations. Net income of $303 million, resulting in net income of $0.25 per diluted share (EPS). Adjusted EBITDA of $1.24 billion for the quarter and $2.502 billion year to date, up slightly for the year. Excluding non-cash deferred revenue step down, 2Q 20 Adjusted EBITDA is up $31 million or 2.5%. Cash flow from operations of $1.143 billion, up 7% over 2Q 19. Debt-to-Adjusted EBITDA improved by 0.12x to 4.31x since 2Q 19. Continuing to generate excess cash flow - DCF exceeds dividends and growth capital.

MARKET COMMENTARY

U.S. stock futures fell as President Donald Trump's threat to ban TikTok failing a sale of its U.S. operations drew sharp rebuke from China hurting investor sentiment. European equities slumped due to disappointing earnings reports from top companies, while Asian shares ended higher. The dollar slipped as political wrangling over a U.S. relief plan weighed on the currency. Spot gold edged lower. Oil prices fell amid a fresh wave of COVID-19 infections dampening demand recovery. Walt Disney, Twenty-First Century Fox and Wynn Resorts are expected to report results after markets close. Durable goods data is on the economic radar.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP


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