Oil

Crude Inventories in U.S. Fell by 6.8 Million Barrels Against Expected Increase of 357,000 Barrels

The energy sector is getting a bid in the pre-market ahead of a congressional hearing on antitrust in Big Tech as well as the Federal Reserve’s latest policy decision.

WEDNESDAY, JULY 29, 2020

SECTOR COMMENTARY

The energy sector is getting a bid in the pre-market ahead of a congressional hearing on antitrust in Big Tech as well as the Federal Reserve’s latest policy decision. Several stocks are witnessing heightened volatility in the pre-market following earnings releases. 

Good operational and cost updates at Ovintiv were offset by restructuring and impairment charges of $3.25 billion. Both Matador, Hess and Nabors Industries showed smaller than expected EPS losses. In midstream, Enterprise Products Partners showed a large beat while Oneok had a sizeable EBITDA miss and lowered its guidance.

Oil prices are higher in the pre-market after the API data showed that crude inventories in the United States fell by 6.8 million barrels against an expected increase of 357,000 barrels, giving the market a boost amid record increases of coronavirus infections in the U.S. and elsewhere.

Natural gas prices are under modest pressure as the August contract expires today and amid expectations for a storage build to be reported tomorrow.

US INTEGRATEDS

Press Release - Exxon Mobil has received notice of an unsolicited mini-tender offer by Ponos Industries LLC to purchase up to 1 million shares of ExxonMobil common stock, which represents approximately 0.024 percent of the shares outstanding as of the April 27, 2020 offer date.

INTERNATIONAL INTEGRATEDS

Reuters - Petrobras said it opens non-binding phase for sale of its stake in seven onshore and shallow water concessions in Alagoas state.

U.S. E&PS

Press Release - Concho Resources announced that its Board of Directors declared a quarterly dividend of $0.20 per share on the Company’s outstanding common stock. The quarterly dividend is payable September 28, 2020, to stockholders of record at the close of business on August 7, 2020.

Press Release - Denbury Resources announced that it has entered into a Restructuring Support Agreement with funded debtholders holding 100% of revolving credit facility loans, approximately 67.2% of second lien notes and approximately 70.8% of convertible notes for a “pre-packaged” plan that will eliminate the Company’s $2.1 billion of bond debt.

Press Release - Hess reported a net loss of $320 million, or $1.05 per common share, in the second quarter of 2020, compared with a net loss of $6 million, or $0.02 per common share, in the second quarter of 2019. On an adjusted basis, the second quarter 2019 net loss was $28 million, or $0.09 per common share.

Press Release - Matador Resources reported financial and operating results for the second quarter of 2020. Second quarter 2020 adjusted net loss (a non-GAAP financial measure) was $3.1 million, or an adjusted net loss of $0.03 per diluted common share, a sequential decrease from adjusted net income of $23.1 million in the first quarter of 2020, and a year-over-year decrease from adjusted net income of $34.6 million in the second quarter of 2019. The Company made no changes to its full year 2020 guidance for capital expenditures to drill, complete and equip wells of $440 to $500 million, nor to its full year 2020 guidance for Matador’s portion of San Mateo’s capital expenditures of $85 to $105 million.

(Late Tuesday) Press Release - Ovintiv announced its second quarter 2020 financial and operating results and will hold a conference call and webcast at 9 a.m. MT (11 a.m. ET) on July 29, 2020. The Company recorded a net loss in the second quarter of $4.4 billion, or $16.87 per share of common stock. Excluding these and other items, the Company reported a non-GAAP operating loss of $111 million. Cash from operating activities was $117 million and non-GAAP cash flow was $304 million. Second quarter capital investments were $252 million (compared to guidance of $250 – $300 million). On July 28, 2020, Ovintiv's Board declared a dividend of $0.09375 per share of common stock payable on September 30, 2020 to common stockholders of record as of September 15, 2020.

CANADIAN E&PS 

Press Release - Seven Generations reported second quarter 2020 funds flow totaled $138.8 million with capital investments of $69.4 million. Free cash flow of $69.4 million and Canadian dollar strength contributed to a net debt reduction of $161 million compared to the first quarter of 2020. Available funding is currently $1.1 billion. Sales volumes were 183,200 boe/d (43% natural gas, 35% condensate, 22% other NGLs). Its quarterly adjusted earnings per share was $0.13 and funds flow per share of $0.42

OILFIELD SERVICES

Press Release - CGG announced its 2020 second quarter unaudited results. IFRS figures were revenue at $239m, OPINC at $(32)m and net income at $(147)m. After minority interests, Group net loss attributable to CGG shareholders was $(147) million/ €(134) million. Adjusted Net loss from continuing operations, excluding $(94) million of non-recurring charges, was $(40) million.

Canaccord Genuity upgraded Secure Energy Services to ‘Buy’ from ‘Hold’.

(Late Tuesday) Press Release - Secure Energy Services reported its operational and financial results for the three and six months ended June 30, 2020. The Corporation recorded Adjusted EBITDA(i) of $20.5 million for the three months ended June 30, 2020, compared to $35.0 million in the prior year second quarter. SECURE's revenue (excluding oil purchase and resale) of $65.5 million for the second quarter of 2020 decreased 51% from the prior year comparative period as a result of lower production-related volumes at the Corporation's midstream facilities due to short-term shut-ins, and limited drilling and completion volumes at the Corporation's midstream facilities and landfills, as evidenced by active rig counts decreasing by approximately 75% from the prior year. During the three and six months ended June 30, 2020, the Corporation paid monthly dividend payments totaling $4.4 million and $15.0 million to holders of common shares. On March 24, 2020, the Corporation announced that the monthly dividend would be reduced from $0.0225 per common share to $0.0025 (0.25 cents) per common share, effective for the May 2020 dividend. This reduction of the dividend results in annualized cash savings of approximately $38 million. Following the June 2020 monthly dividend paid on June 15, 2020, the Corporation has moved to a quarterly dividend, with the first planned payment of $0.0075 (0.75 cents) per common share to occur on or about October 15, 2020, to shareholders of record on October 1, 2020.

DRILLERS 

Press Release - Helmerich & Payne reported a net loss of $46 million or $(0.43) per diluted share from operating revenues of $317 million for the quarter ended June 30, 2020, compared to a net loss of $421 million, or $(3.88) per diluted share, on revenues of $634 million for the quarter ended March 31, 2020. The net losses per diluted share for the third and second quarters of fiscal year 2020 include $(0.09) and $(3.96), respectively, of after-tax losses comprised of select items. On June 3, 2020, Directors of the Company declared a quarterly cash dividend of $0.25 per share on August 31, 2020 to stockholders of record at the close of business August 17, 2020.

(Late Tuesday) Press Release - Nabors Industries reported second quarter 2020 operating revenues of $534 million compared to operating revenues of $718 million in the first quarter of 2020. The net loss from continuing operations attributable to Nabors common shareholders for the quarter is expected to be $152 million, or $22.13 per share, compared to a loss of $395 million, or $56.72 per share in the prior quarter. After-tax charges in the second quarter are expected to be $54 million, or $7.68 per share, primarily related to asset impairments and severance costs. After-tax charges in the first quarter totaled $260 million, or $36.86 per share.

Press Release - RPC announced its unaudited results for the second quarter ended June 30, 2020. For the quarter ended June 30, 2020, revenues were $89.3 million, a decrease of 75.1 percent compared with $358.5 million in the second quarter of 2019. Revenues decreased due to lower activity levels and pricing compared to the second quarter of the prior year. Operating loss for the second quarter of 2020 was $37.5 million compared to operating profit of $8.4 million in the same period of the prior year. Adjusted operating loss for the second quarter of 2020 was $35.9 million. Net loss for the second quarter of 2020 was $25.1 million, or $0.12 loss per share, compared to net income of $6.2 million, or $0.03 earnings per share, in the second quarter of 2019. Adjusted net loss for the second quarter of 2020 was $22.3 million, or $0.10 adjusted loss per share. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter of 2020 was negative $19.4 million, compared to EBITDA of $51.2 million in the same period of the prior year.3 Adjusted EBITDA for the second quarter of 2020 was negative $17.8 million.

MLPS & PIPELINES

Press Release - Enbridge reported second quarter 2020 financial results and provided a quarterly business update. GAAP earnings attributable to common shareholders for the second quarter of 2020 decreased by $89 million or $0.04 per share compared with the same period in 2019. Adjusted earnings in the second quarter of 2020 decreased by $216 million and on a per share basis by $0.11. Adjusted earnings were $1,133 million or $0.56 per common share, compared with $1,349 million or $0.67 per common share in 2019. The Company's Board of Directors declared the following quarterly dividends, payable on September 1, 2020, to shareholders of record on August 14, 2020. Based on its solid performance in the first half and the outlook for the second half, the Company still expects to generate DCF within our original guidance range of $4.50 to $4.80 per share. The Company's outperformance in the first half of the year is expected to be offset by headwinds unique to the second half of 2020. These include the pace and magnitude of recovery in Mainline throughput, a catch up in enterprise-wide maintenance spending consistent with 2020 guidance, lower revenues on the Texas Eastern system due to temporary operating capacity restrictions, and a lower contribution from Energy Services.

Press Release - Energy Transfer announced a quarterly cash distribution of $0.305 per ET common unit ($1.22 on an annualized basis) for the second quarter ended June 30, 2020. The announced quarterly distribution is consistent with the distribution for the first quarter of 2020 and will be paid on August 19, 2020 to unitholders of record as of the close of business on August 7, 2020.

Press Release - Enterprise Products Partners announced its financial results for the three months ended June 30, 2020. Net income and fully diluted earnings per unit for the second quarters of 2020 and 2019 include non-cash asset impairment and related charges of approximately $12 million, or $0.01 per unit, and $7 million or less than $0.01 per unit, respectively. For the six months ended June 30, 2020 and 2019, net income and fully diluted earnings per unit include $13 million, or $0.01 per unit and $12 million, or $0.01 per unit, respectively, of non-cash asset impairment and related charges. Enterprise increased its cash distribution with respect to the second quarter of 2020 by 1.1 percent to $0.445 per unit compared to the cash distribution paid with respect to the second quarter of 2019. The cash distribution will be paid on August 12, 2020 to unitholders of record as of the close of business on July 31, 2020. Enterprise reported DCF of $1.6 billion for the second quarter of 2020, which provided 1.6 times coverage of the $0.445 per unit cash distribution and resulted in $597 million of retained DCF. DCF of $3.1 billion for the first six months of 2020 also provided 1.6 times coverage of the aggregate $0.89 per unit cash distribution and resulted in $1.2 billion of retained DCF for such period.

(Late Tuesday) Press Release - The board of directors of the general partner ofMPLX LP has declared a quarterly cash distribution of $0.6875 per common unit for the second quarter of 2020, or $2.75 on an annualized basis. This distribution is flat versus the first quarter of 2020 distribution and represents an increase of 3% over the second quarter 2019 distribution. The distribution will be paid on Aug. 14, 2020, to common unitholders of record as of Aug. 7, 2020.

(Late Tuesday) Press Release - ONEOK announced second quarter 2020 financial results and updated its 2020 outlook. The company reported second quarter 2020 net income and adjusted EBITDA of $134.3 million and $533.9 million, respectively. Given continued market and industry uncertainty, including recent developments related to crude oil pipeline takeaway in the Williston Basin, ONEOK expects 2020 net income and adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) results to be at the low end of the ranges provided on April 28, 2020. Oneok declared in July 2020 a quarterly dividend of 93.5 cents per share, or $3.74 per share on an annualized basis.

Press Release - Summit Midstream Partners announced preliminary results regarding its offer to exchange any and all of its 9.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units for newly issued common units representing limited partner interests in the Partnership, which expired at 5:00 p.m., New York City time on July 28, 2020. 

MARKET COMMENTARY

U.S. stock index futures rose as investors awaited cues of support from the Federal Reserve while the country grappled with a spike in coronavirus cases and Washington was in disarray over a new spending package. European shares edged up after mixed earnings reports. Asian shares dipped due to a weak start to corporate earnings. The U.S. dollar fell to a two-year low. Gold eased as investors booked profits. Oil prices rose after a surprise drop in U.S. crude inventories. Pending home sales data is on the economic radar. Boeing is scheduled to report later in the day.

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