Energy stocks remain under pressure this morning from the weight of 7-week lows for oil prices and natural gas futures that are modestly higher but still plumbing near 4-year lows. Commodity weakness has been the primary driver of energy equities stretching back to last week.
News flow continues to center around earnings, with Kinder Morgan reporting a 26% rise in quarterly profit on Wednesday, benefiting from higher gas takeaway from the Permian Basin through its Gulf Coast Express pipeline. Additionally, Scotiabank and Credit Suisse adjusted several individual stock recommendations across their integrated and E&P coverage.
Oil prices fell on Thursday on concern that the spread of a respiratory virus from China could lower fuel demand if it stunts economic growth in an echo of the SARS epidemic nearly 20 years ago. Brent crude futures were down around 1.4%, at $62.33 a barrel recently, having earlier touched their lowest since December 4. They lost 2.1% in the previous session. Traders will be looking ahead to the weekly inventory report out later this morning which was delayed a day due to Monday’s market holiday. The API expects crude stocks rose 1.6mm barrels last week while both gasoline and distillates saw another large build due to a lack of demand for refined products.
U.S. natural gas futures jumped 3% on Thursday from a near four-year low on forecasts for higher LNG exports and a continued slowdown in production. That price move came ahead of the release of a federal report expected to show a smaller than usual weekly storage draw. Analysts said utilities likely pulled 91 bcf of gas from storage during the week ended January 17. That compares with a decline of 152 bcf during the same week last year and a five-year average reduction of 194 bcf for the period.
Scotiabank upgraded Chevron to ‘Outperform’ from ‘Sector Perform’.
Scotiabank downgraded ExxonMobil to ‘Outperform’ from ‘Sector Perform’.
Reuters - Total and Tullow Oil aim to reduce their stakes in Kenya's first oil development with a joint sale that could see Tullow exit completely amid uncertainty over the project's launch, banking and industry sources said. The two oil and gas producers have hired French bank Natixis to run the joint sale process for Blocks 10 BA, 10 BB and 13T in the South Lokichar Basin, the sources said.
Scotiabank initiated coverage of Apache and Marathon Oil at ‘Sector Perform’.
Credit Suisse upgraded Cimarex Energy to ‘Outperform’ from ‘Neutral’.
Scotiabank downgraded ConocoPhillips to ‘Sector Perform’ from ‘Sector Outperform’.
Scotiabank initiated coverage of Continental Resources and Devon at ‘Sector Outperform’.
Press Release - Talos Energy announced the appointment of Robert "Bob" Abendschein as Executive Vice President and Head of Operations, succeeding Stephen E. Heitzman, Executive Vice President and Chief Operating Officer. The appointment is effective as of February 17, 2020.
(Late Wednesday) Press Release - Baytex Energy announced today the pricing of its previously announced private placement offering of US$500 million aggregate principal amount of senior unsecured notes due 2027. The Notes will be issued at par, bear interest at a rate of 8.75% per annum and mature on April 1, 2027. The Notes will pay interest semi-annually in arrears. The Offering is subject to customary closing conditions and is expected to close on February 5, 2020.
(Late Wednesday) Press Release - Birchcliff Energy announced its 2020 capital program, 2020 guidance and new five year plan. Key highlights of the 2020 Capital Program are as follows: Adjusted funds flow of approximately $370 million is expected to be generated in 20201 based on the mid-point of the Corporation’s 2020 annual average production guidance. Total F&D capital expenditures are estimated to be $340 million to $360 million. Annual average production in 2020 is expected to be in the range of 80,000 to 82,000 boe/d, which represents a 3% to 5% increase over Birchcliff’s estimated 2019 annual average production. Q4 2020 average production is expected to be in the range of 87,000 to 89,000 boe/d, which represents a 12% to 14% increase over Birchcliff’s estimated Q4 2019 average production.
(Late Wednesday) Press Release – Fluor announced that the Air Force Installation Contracting Agency awarded the company, through its Fluor AMEC II, LLC entity, the task order contract to repair the Ascension Island Auxiliary Airfield runway. The task order is awarded under the Air Force Contract Augmentation Program IV (AFCAP IV), a position Fluor has held since 2015. The cost-plus, fixed-fee task order is for up to 28 months and is valued at approximately $170 million.
(Late Wednesday) Press Release - ION Geophysical announced the Company entered into a multi-client agreement with Colombia's National Hydrocarbon Agency, the ANH, granting rights to reprocess existing data and acquire new 2D and 3D multi-client programs offshore Colombia's Caribbean coast. In February, the ANH announced a series of reforms to encourage investment in exploration and production, such as a permanent license round and a more attractive tax regime, to boost declining production and increase reserves. The data is intended to enable better understanding of hydrocarbon potential and investment opportunities of underexplored shallow and deep water offshore blocks on offer.
Reuters - NYSE indefinitely suspended trading of McDermott International’s common stock on January 22, 2020.
(Late Wednesday) Press Release - Superior Energy Services announced that its wholly owned subsidiary, SESI, L.L.C., has elected to (i) further extend the early participation date for its previously announced offer to exchange up to $500 million of its $800 million aggregate principal amount of outstanding 7.125% Senior Notes due 2021 for up to $500 million of newly issued 7.125% Senior Notes due 2021 and cash, and (ii) extend the expiration time for the Exchange Offer, in each case, upon the terms and subject to the conditions set forth in SESI’s offering memorandum and consent solicitation statement, dated as of January 6, 2020.
MLPS & PIPELINES
(Late Wednesday) Press Release – Kinder Morgan announced results for the fourth quarter of 2019. The company reported 14% year-over-year growth in natural gas transport volumes in the fourth quarter, the eighth consecutive quarter to exceed 10 percent growth; $610 million or $0.27 per share of net income available to common stockholders. The company also reported $610 million or $0.27 per share of net income available to common stockholders; $1.35 billion or $0.59 per share of distributable cash flow (DCF); $785 million of excess DCF above declared dividend. KMI’s board of directors also approved a cash dividend of $0.25 per share for the fourth quarter ($1.00 annualized), payable on February 18, 2020, to common stockholders of record as of the close of business on February 3, 2020.
(Late Wednesday) Press Release - DCP Midstream announced that the board of directors of its general partner declared a fourth quarter 2019 common unit distribution of $0.78 per unit, or $3.12 per unit on an annualized basis. This quarterly common unit distribution will be paid February 14, 2020 to common unitholders of record at the close of business on February 3, 2020.
(Late Wednesday) Press Release - Energy Transfer Operating announced the quarterly cash distribution of $0.4609375 per Series C Preferred Unit, the quarterly cash distribution of $0.4765625 per Series D Preferred Unit, and the quarterly cash distribution of $0.4750000 per Series E Preferred Unit. These cash distributions will be paid on February 18, 2020 to Series C, Series D and Series E unitholders of record as of the close of business on February 3, 2020.
Press Release - Enterprise Products Partners announced that it recently began operations at its new Bulldog cryogenic natural gas processing plant in Panola County, Texas. The facility has the capability to process 200 million cubic feet per day of natural gas, and extract up to 12,000 barrels per day of natural gas liquids. Combined with Enterprise’s existing Panola cryogenic facility, this new plant gives the company the capacity to process a total of 320 MMcf/d and produce in excess of 18,000 BPD of NGLs within the region.
Press Release - Shell Midstream Partners announced that the Board of Directors of its general partner declared a cash distribution of $0.4600 per limited partner unit for the fourth quarter of 2019. This represents an increase of 3.4 percent over the previous quarterly distribution of $0.4450 per unit and a 15.0 percent increase over the distribution paid with respect to the fourth quarter of 2018. The distribution will be paid February 14, 2020 to unitholders of record as of February 3, 2020.
Wall Street futures were little changed and global stocks fell, amid heightened anxiety about the spread of coronavirus in China. Oil fell, on concerns of lower fuel demand due to the virus outbreak, while safe-haven Japanese yen rose. Gold prices fell on profit booking. Initial jobless claims data is scheduled for release. Investors’ focus will also be on Intel, which will report fourth-quarter earnings post market 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.
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