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Crude Gains on U.S.-China Trade Deal Hopes

WTI and Brent oil prices are reversing yesterday’s losses as they accelerate today on positive US-China trade headlines, but inventory data in the US later today and tomorrow is expected to show the 6th consecutive week of supply builds.

SECTOR COMMENTARY

Energy stocks are flat amid mildly higher oil prices and flat index futures as markets digest a deluge of earnings from Dow components.  In the oil and gas space, sector news is light.

WTI and Brent oil prices are reversing yesterday’s losses as they accelerate today on positive US-China trade headlines, but inventory data in the US later today and tomorrow is expected to show the 6th consecutive week of supply builds. Meanwhile, Goldman Sachs lowered its global oil demand growth estimates as well as US growth estimates.

Natural gas prices are up 1% after a nearly 4% loss in yesterday’s session but inventories are expected to build well in excess of the five year average. 

U.S. INTEGRATEDS

Reuters - The U.S. Treasury Department on Monday renewed a license allowingChevron, the last U.S. operating energy company in Venezuela, to continue drilling in the country for another three months through Jan. 22.

Reuters - ExxonMobil will face trial in a lawsuit by New York's attorney general accusing it of misleading investors about the risks of climate change regulations to its business. The trial, expected to begin before Justice Barry Ostrager in Manhattan Supreme Court and last up to three weeks, could feature testimony from Rex Tillerson, who was Exxon's chief executive before serving as U.S. Secretary of State. It is the first of several lawsuits currently pending against major oil companies related to climate change to go to trial. 

INTERNATIONAL INTEGRATEDS

Reuters - Aker BP, jointly controlled by BP and Aker, cut its full-year oil output target as the early start-up this month of Norway's giant Johan Sverdrup field was overshadowed by output problems at the company's Valhall field in the North Sea. Aker BP now expects its daily 2019 output to average 155,000 barrels of oil equivalents (boepd), down from a July forecast of 155,000-160,000 boepd.

Reuters - Swiss prosecutors have pressed charges against an individual in a corruption probe into Petroleo Brasileiro SA Petrobras and construction firm Odebrecht, the attorney general's office in Bern said. The Swiss authorities said they suspected the person, who acted as a financial middleman, of complicity in the bribery of public officials and money laundering. The Petrobras-Odebrecht case, one of the biggest corruption affairs in Latin-America, has led to around 70 criminal proceedings Switzerland while more than 130 businessmen and politicians have been convicted in the case in Brazil.

(Late Monday) Reuters - Petroleo Brasileiro SA Petrobras said it has collected 280 tonnes of oil and sand from the country's northeastern beaches since Sept. 12, following a mysterious oil spill whose causes remain unclear.

Press Release - Total has decided to double the production capacity of its affiliate Synova to meet growing market demand for high-performance recycled materials. By early 2021, Normandy-based Synova, a French leader in its sector, will produce 40,000 tons per year of recycled polypropylene that meets the demanding quality standards of automotive OEMs and carmakers.              

U.S. E&PS

Press Release - Callon Petroleum announced that it has filed an investor presentation with the Securities and Exchange Commission in connection with its previously announced pending all-stock acquisition of Carrizo Oil & Gas. Highlights of the transaction include: on a pro forma basis, Callon will have an approximate 200,000 net acre footprint in the Permian Basin and Eagle Ford Shale, including over 90,000 net acres in the Delaware Basin, and approximately 2,500 total gross horizontal drilling locations. The Company expects that its high-margin, free cash flow generating assets in the Eagle Ford Shale will accelerate its value proposition from a deep drilling inventory in the Permian, enhancing returns while sustainably generating corporate-wide free cash flow. In addition, the combined company's balanced asset portfolio provides flexible and increasingly efficient capital allocation to manage cash conversion cycles and capital intensity profiles. Together with Carrizo, Callon also expects to maintain industry-leading margins and a low cost of supply on an "all-in" corporate basis.

Press Release - Paulson & Co. Inc., as manager of funds holding 21.6 million shares, or 9.5% of those outstanding, of Callon Petroleum, sent a follow-up letter to the board of Callon, released a presentation exposing numerous flaws in Callon's statements of the purported benefits of the proposed acquisition of Carrizo Oil & Gasand reiterated its opposition to the deal.

EOG Resources was downgraded to sector perform from sector outperform at Peters & Co. Limited. 

(Late Monday) Press Release - During the three months ended September 30, 2019,Pioneer Natural Resources expects the average realized price for oil to be $53.93 per barrel, the average realized price for NGLs tobe $16.81 per barrel and the average realized price for gas to be $1.54 per thousand cubic feet. These prices exclude the effects of derivatives

CANADIAN E&PS

(Late Monday) Press Release - Obsidian Energy announced that David Hendry, Chief Financial Officer, has submitted his resignation, effective November 15, 2019 to pursue another opportunity. Obsidian Energy is currently in discussions to secure a successor and expects to announce a replacement in the near future.

OILFIELD SERVICES

(Late Monday) Press Release - Helix Energy Solutions reported net income of $31.6 million, or $0.21 per diluted share, for the third quarter of 2019 compared to $27.1 million, or $0.18 per diluted share, for the same period in 2018 and $16.8 million, or $0.11 per diluted share, for the second quarter of 2019. Net income for the nine months ended September 30, 2019 was $49.8 million, or $0.33 per diluted share, compared to $42.3 million, or $0.29 per diluted share, for the nine months ended September 30, 2018.

Press Release - McDermott International announced it has been awarded a large contract by Saudi Aramco and Total Raffinage Chimie (Total) to provide licenses, basic engineering package, extended basic engineering, training, technical services and supply of proprietary equipment for what will be one of the world's largest mixed feed crackers. As part of the contract, McDermott's Lummus Technology will provide licensing and engineering services for its olefins technology, low pressure recovery (refinery off-gas recovery and treating), pygas hydrotreating, CDMtbe Methyl Tertiary Butyl Ether (MTBE) (production technology using catalytic distillation), CDIB (back cracking of MTBE to produce high purity isobutylene and methanol) and the BASF NMP (N-methylpyrrolidone-based butadiene extraction process). In addition, Lummus will provide its proprietary Short Residence Time (SRT) heaters. 

Press Release - Petrofac secured three engineering contracts in MENA. The company will provide FEED and conceptualisation studies to clients in Oman and Libya following the award of a clutch of new contracts. In Oman, Petrofac will support Flare to Value LLC (F2V) by producing a basic engineering package to recover gas that is currently flared at three onshore locations. In another deal, Petrofac has been awarded a contract by Waha Oil Company (WOC) to produce a Front-End Engineering Design (FEED) for its Gialo III field, onshore Libya. The work will be executed over a schedule of 41 weeks and will support WOC’s planned programme of development over the coming years. Petrofac has also been awarded a four-month conceptual and pre-FEED study for the rehabilitation of the Dahra Oil Field in Concession 32, onshore Libya. The scope covers upstream facilities including well sites, flowlines, process plant and export pipelines. The ultimate client is Waha and Petrofac has formed a Project Joint Venture with Taknia to execute the work. This award demonstrates Petrofac’s strength of engineering capability and track record in North Africa. All three contracts will be executed by Petrofac’s Engineering & Consultancy Services (ECS) business in Woking, UK. 

Press Release - TechnipFMC has been awarded an integrated Engineering, Procurement, Construction and Installation contract by Shell for the Perdido Phase 2 development, located in the Gulf of Mexico. The contract covers the delivery and installation of subsea equipment, including flexible flowlines, flexible jumpers, steel flying leads, electrical flying leads, and will utilize compact manifold technology, with the Subsea 2.0 In-Line Compact Manifold.

MARKET COMMENTARY

U.S. stock index futures were slightly higher and European shares flitted between gains and losses as investors digested corporate earnings and eyed latest developments on U.S.-China trade talks. China stocks rose, bolstered by tech firms and Hong Kong stocks ended higher. In currencies, the euro edged lower after rising to a two-month high in the previous session versus the dollar. The pound was steady as traders waited for the British parliament to vote on the Withdrawal Agreement Bill. Oil prices rose, but gains were capped by bearish forecasts of a buildup in U.S. crude stockpiles. Gold prices edged higher. Results from Chipotle Mexican Grill, Texas Instruments and Whirlpool will also be in watch after market close. Existing home sales data is scheduled for release later in the day.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP


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