Crude Hits New Peaks on Supply Concerns
SECTOR COMMENTARY:
The energy sector is set for a higher start, supported by strength in oil contracts and the major equity futures which are recovering from yesterday’s losses. Markets remain focused on more second quarter results and tomorrow’s CPI print in order to gauge the health of the U.S. economy.
WTI and Brent crude oil hit new peaks this morning, touching their highest levels since April and are extending yesterday’s gains on supply concerns tied to oil production cuts from Saudi Arabia. Last night’s API report which showed a 4.1 million barrel build in crude inventories and weaker-than-expected Chinese economic data has put a cap on today’s advances. Additionally, on Tuesday, Saudi Arabia’s cabinet reaffirmed its support for more oil production cuts by OPEC+ in order to stabilize the oil market, increasing concerns of tighter supply.
Natural gas futures are trading sharply higher, adding on to yesterday’s increase, tracking gains in European natural gas futures and on forecasts for higher demand through the end of August. TTF was up as much as +21.0% with Bloomberg attributing the move to reports of possible worker strikes at some Australian LNG facilities.
BY SECTOR:
US INTEGRATEDS
No significant news.
INTERNATIONAL INTEGRATEDS
RBC upgraded Equinor to Outperform from Sector Perform.
Petrobras has signaled interest in possibly investing in Bolivia's lithium-rich salt flats with an eye toward industrial-scale projects, the country's top energy official said on Tuesday.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
ConocoPhillips will offer notes to raise funds for its acquisition of the remaining 50% stake in Surmont oil facility in Canada worth $3 billion, the U.S. oil gas producer said in a filing on Tuesday.
Talos Energy announced its operational and financial results for fiscal quarter ended June 30, 2023. Revenue of $367.2 million, driven by realized prices (excluding hedges) of $71.44 per barrel for oil, $16.25 per barrel for natural gas liquids ("NGLs"), and $2.46 per thousand cubic feet for natural gas. Net Income of $13.7 million, or $0.11 Net Income per diluted share, and Adjusted Net Income(1) of $11.5 million, or $0.09 Adjusted Net Income per diluted share.
Vital Energy reported its second-quarter 2023 financial and operating results. The Company reported net income attributable to common stockholders of $294.8 million, or $16.30 per diluted share, including income of $222.2 million related to the reduction of the valuation allowance against the Company's gross deferred tax asset. Adjusted Net Income was $78.6 million, or $4.35 per adjusted diluted share. Cash flows from operating activities were $248.9 million and Consolidated EBITDAX was $239.5 million. Production. The Company recently increased expectations for full-year 2023 production to incorporate second-quarter 2023 outperformance and production associated with the Forge acquisition. Higher than expected volumes year-to-date were primarily related to stronger base production, which exceeded expectations for both oil and total production by approximately 10%. As a result, full-year 2023 oil production guidance is further increased to 41.9 - 43.4 MBO/d (previously 40.0 - 43.0 MBO/d) and total production guidance to 87.0 - 89.0 MBOE/d (previously 82.0 - 86.0 MBOE/d).
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Flotek Industries announced significantly improved operational and financial results for the second quarter ended June 30, 2023. Flotek reported total revenues of $50.6 million for the second quarter of 2023, which was an increase of 72% compared to total revenues of $29.4 million for the second quarter of 2022 and a 5% increase compared to total revenues of $48.0 million for the first quarter of 2023. Second quarter of 2023 revenues benefited from a 68% sequential increase in transactional chemistry revenue. Flotek reported a net loss of $21 thousand, or $0 per basic share, for the second quarter of 2023. This compares to net income of $6.2 million, or $0.08 per basic share, for the second quarter of 2022 and net income of $21.3 million, or $0.22 per basic share, in the first quarter of 2023. Net income/(loss) during the second quarter of 2023 and 2022 and the first quarter of 2023 included non-cash gains on the fair value measurement of convertible notes totaling $3.9 million, $17.2 million, and $26.1 million, respectively. Reiterate full year 2023 guidance for total revenues of $210 million to $230 million and an adjusted gross profit margin of 8% to 10%.
Smart Sand announced results for the second quarter of 2023. Revenues were $74.8 million in the second quarter of 2023, compared to $82.4 million in the first quarter of 2023 and $68.7 million in the second quarter of 2022. Revenues decreased in the second quarter of 2023, compared to the first quarter of 2023, due to lower tons sold in the second quarter of 2023 and contractual shortfall revenue recognized in the first quarter of 2023. Adjusted EBITDA was $11.4 million for the second quarter of 2023, compared to $8.4 million for the first quarter of 2023 and $9.2 million for the second quarter of 2022.
DRILLERS
No significant news.
REFINERS
Vertex Energy announced its financial results for the second quarter ended June 30, 2023. Vertex reported second quarter 2023 net loss attributable to common shareholders of $(81.4) million, or $(1.03) per basic share, versus a net loss attributable to common shareholders of $(67.0) million, or $(0.99) per basic share for the second quarter of 2022. Adjusted EBITDA was $(34.2) million for the second quarter 2023, compared to Adjusted EBITDA of $71.3 million in the prior-year period. Financial results for the second quarter of 2023 include a non-cash, one-time interest expense in the amount of $63.0 million related to the recent privately negotiated exchange of approximately $79.9 million of Vertex’s Senior Secured 6.25% Convertible Notes Due 2027, which closed on June 12, 2023.
MLPS & PIPELINES
No significant news.
MARKET COMMENTARY
U.S. stocks futures edged higher after a risk-off session triggered by a Moody's downgrade of some banks, while investors awaited key inflation data later this week. European shares were higher with Italian lenders rebounding from losses from previous sessions after the government eased its stance on a new banking tax. British stocks rose, buoyed by strong earnings and boost from mining sector. Japan's Nikkei ended lower as heavyweights SoftBank and Daikin Industries slumped. Chinese stocks fell as the country's economy slipped into deflation. The dollar retreated and gold was little changed. Oil prices jumped as tighter supply owing to Saudi and Russian output cuts offset concerns over slow demand from China.
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 Rich Pontillo.
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