Crude Jumps After Saudi Energy Minister Says OPEC Is 'Taking It Easy'

Wednesday, February27, 2019

SECTOR COMMENTARY

The energy sector is poised for a mix to higher start, backed by strength in the crude complex and following a flurry o f earnings reports from the producers while major equity indices dipped on new geopolitical uncertainties especially between Pakistan and India.

WTI crude oil futures were up over 2% this morning, marginally outpacing Brent. Futures on both sides of the Atlantic jumped on following comments from Saudi's Energy Minister who said OPEC and its partners were "taking it easy" in response to a tweet from President Trump on Monday that called on the group to slacken its restrictions on crude production while WTI saw additional support from a bullish API read last night. Ahead of the official government data later today, the industry group reported a surprise drop in U.S. crude inventories, falling 4.2 million barrels last week compared with expectations of a build of 2.8mm barrels.

Natural gas futures fell this morning, pressured by forecasts for less heating demand next week than previously expected.

US INTEGRATEDS

(Late Tuesday) Reuters - Exxon Mobil has resumed seismic exploration for oil and gas off of the coast of Guyana after halting work in December due to a run-in with the Venezuelan navy.

(Late Tuesday) Reuters - Exxon Mobil reported that Beaumont Complex, Texas, will begin maintenance activity - community line.

(Late Tuesday) Reuters - Exxon Mobil said its oil and gas reserves rose nearly 23 percent last year, driven mainly by increases from holdings in U.S. shale, offshore Guyana and Brazil. The reserve update, which is required annually by U.S. regulators, comes as the largest publicly traded U.S. oil producer has been spending heavily under Chief Executive Darren Woods on new fields and projects to reverse weak oil and gas production.

INTERNATIONAL INTEGRATEDS

(Late Tuesday) Reuters - Petroleo Brasileiro said that it is studying a voluntary layoff program at its administrative headquarters in Sao Paulo to cut costs. Petrobras said in a statement it did not have further details or a timeline for potential layoffs. The Sao Paulo unit of the company employs more than 400 workers, according to a local union.

Reuters - Royal Dutch Shell aims to boost output and recoverable reserves from its Ormen Lange gas field off Norway by installing subsea compressors. Output from Shell-operated Ormen Lange, Norway's second-largest gas field and one of the key external gas supply sources for Britain, has been gradually declining since its 2012 peak.

RBC downgraded Shell to 'Sector Perform' from 'Outperform'.

RBC upgraded Total to 'Outperform' from 'Sector Perform'.

CANADIAN INTEGRATEDS

Raymond James downgraded Husky Energy to 'Market Perform' from 'Market Outperform'.

U.S. E&PS

Cowen and Company downgraded Centennial Resource Development to 'Market Perform' from 'Outperform'.

Press Release - Chesapeake reported net income of $514 million and net income available to common stockholders of $486 million, or $0.49 per diluted share for the 2018 fourth quarter, compared to $334 million, $309 million, and $0.33 in the 2017 fourth quarter, respectively. Adjusting for items that are typically excluded by securities analysts, the 2018 fourth quarter adjusted net income attributable to Chesapeake was $238 million, or $0.21 per diluted share, compared to $314 million, or $0.30 per diluted share in the 2017 fourth quarter.

(Late Tuesday) Press Release - Callon Petroleum reported fourth quarter 2018 production of 41.1 Mboe/d (81% oil), an increase of 55% over fourth quarter 2017 volumes and a sequential increase of 18%. For the quarter ended December 31, 2018, Callon reported total revenue of $161.9 million and total revenue including settled derivatives ("Adjusted Total Revenue," a non-GAAP financial measure of $160.3 million, including the impact of a $1.6 million loss from the settlement of derivative contracts.

Press Release - Denbury Resources reported net income of $174 million for 4Q 2018 and $323 million for 2018. Adjusted net income (a non-GAAP measure) was $46 million for 4Q 2018 and $220 million for 2018.

(Late Tuesday) Press Release - Viper Energy Partners, a subsidiary of DiamondbackEnergy , announced that Viper has commenced an underwritten public offering of 8,000,000 common units representing limited partner interests, subject to market and other conditions. Viper anticipates granting the underwriters a 30 day option to purchase up to an additional 1,200,000 common units from Viper. All of the common units to be sold in this offering will be sold by Viper.

(Late Tuesday) Press Release - EOG Resources reported fourth quarter 2018 net income of $893 million, or $1.54 per share. This compares to fourth quarter 2017 net income of $2.4 billion, or $4.20 per share. Adjusted non-GAAP net income for the fourth quarter 2018 was $718 million, or $1.24 per share, compared to adjusted non-GAAP net income of $401 million, or $0.69 per share, for the same prior year period.

(Late Tuesday) Press Release - HighPoint Resources reported earnings of $222.4 million, or $1.06 per diluted share for the fourth quarter of 2018. Adjusted net income for the fourth quarter of 2018 was $1.2 million, or $0.01 per diluted share.

(Late Tuesday) Press Release - Lonestar Resources US announced its two-year capital plan and associated guidance. Lonestar reported that for the three months ended December 31, 2018, the Company produced 13,152 boe/d, exceeding the high end of guidance for the fourth consecutive quarter. Lonestar has entered into term contracts for drilling rigs that give it considerable optionality in the number of wells it drills based on market conditions. Lonestar has also entered into a frac spread dedication agreement for all wells it completes in 2019 with a major pressure pumping provider with whom it has substantial experience.

(Late Tuesday) Reuters - Lonestar Resources US expects first quarter production to average between 11,200 boe/d and 12,000 boe/d. The current two-year plan is designed to achieve cash flow self-sufficiency in the second half of 2019, extending through 2020. The company increased its 2020 wti crude oil swaps from 2,680 bopd to 4,180 bopd. The company also increased its 2019 henry hub natural gas swaps from 7,479 mmbtu/d to 15,000 mmbtu/d and increased its 2019 wti crude oil swaps from 6,000 bopd to 6,336 bopd.

(Late Tuesday) Press Release - Matador Resources reported fourth quarter 2018 net income (GAAP basis) of $136.7 million, or $1.17 per diluted common share, a sequential increase of $118.9 million from $17.8 million in the third quarter of 2018, and a year-over-year increase of 257% from $38.3 million in the fourth quarter of 2017. The company announced fourth quarter 2018 average daily oil equivalent production increased 2% sequentially to a record quarterly high for the Company of 55,500 barrels of oil equivalent ("BOE") per day (60% oil) as compared to the third quarter of 2018. Average daily oil production increased 4% sequentially to 33,500 barrels per day and average daily natural gas production decreased 1% sequentially to 132.3 million cubic feet per day, each as compared to the third quarter of 2018.

(Late Tuesday) Press Release - Oasis Petroleum reported net income attributable to Oasis of $222.0 million in the fourth quarter of 2018. For the full year of 2018, Oasis reported net loss attributable to Oasis of $35.3 million. Excluding certain non-cash items and their tax effect in the fourth quarter of 2018, Adjusted Net Loss Attributable to Oasis (non-GAAP) was $7.3 million, or $0.02 per diluted share, and in the full year of 2018, Adjusted Net Income Attributable to Oasis (non-GAAP) was $79.6 million, or $0.26 per diluted share, respectively.

Press Release - Penn Virginia reported net income of $200.7 million, or $13.10 per diluted share, and adjusted net income of $39.2 million, or $2.56 per diluted share, for the fourth quarter of 2018. Net income was $224.8 million, or $14.70 per diluted share, and adjusted net income of $140.5 million, or $9.19 per diluted share, for the full year 2018.

(Late Tuesday) Press Release - Ring Energy announced that it has entered into a definitive agreement with Wishbone Energy Partners, LLC and its affiliates to acquire its North Central Basin Platform assets located primarily in Southwest Yoakum County, Texas and East Lea County, New Mexico. The total purchase price for the acquisition is $300 million, comprised of $270 million of cash and $30 million of common stock of the Company.

(Late Tuesday) Press Release - Ring Energy announced that its estimated total proved reserves of oil and natural gas as of December 31, 2018 increased 14.6% to 36.6 million barrels of oil equivalent (BOE), from 31.9 million BOE at year end 2017, and 21.5% when adjusted for 2018 oil and gas sales. Ring replaced 308% of production in 2018. The 2018 year-end proved reserves consisted of 27.8 million barrels of crude oil (76%) and 52.7 Bcf of natural gas (24%). Of the 36.6 million BOE of total proved reserves, 67% are proved developed and 33% are proved undeveloped. The proved developed reserves consist of proved developed producing (61%) and proved developed non-producing (6%).

(Late Tuesday) Press Release - Whiting 's production in the fourth quarter 2018 totaled 11.96 million barrels of oil equivalent (MMBOE), an average of 129,960 barrels of oil equivalent per day (BOE/d). Crude oil and natural gas liquids (NGLs) comprised 68% and 15% of total production. Oil production for the quarter was consistent with Company expectations. Natural gas and natural gas liquids production were reduced by third-party gathering delays and gas processing curtailments.

CANADIAN E&PS

Press Release - Gran Tierra Energy reported net income of $103 million, or $0.26 per share basic and diluted, compared with a net loss of $32 million, or $0.08 per share basic and diluted. Funds flow from operations increased by 39% to $306 million compared with $220 million in 2017, and funds flow from operations per share increased by 41% to $0.79 per share in 2018 from $0.56 per share in 2017. The company achieved a new Company milestone with record high average annual production in 2018 of 36,209 BOE per day ("BOEPD"), 15% higher than 31,426 BOEPD in 2017 and 38% higher than 26,216 BOEPD in 2016; on a per share basis, production in 2018 was up 17% from 2017.

Reuters - Gran Tierra Energy entered into sale agreements with Vetra Energía, S.L. and Vetra Exploración y Producción Colombia S.A.S. The deal for cash consideration was $104.2 million.

Press Release - Touchstone Exploration announced the closing of its previously announced private placement on the same terms as were provided in the Company's news release dated February 19, 2019. The new common shares issued in connection with the private placement were admitted to trading on the Toronto Stock Exchange and AIM market of the London Stock Exchange.

OILFIELD SERVICES

(Late Tuesday) Press Release - Pason Systems announced that the Board of Directors (with Mr. Jim Hill, the significant shareholder through J.D Hill Investments Ltd., abstaining from voting) declared a quarterly dividend of eighteen cents(C$0.18) per share on the company's common shares. The dividend will be paid on March 29, 2019 to shareholders of record at the close of business on March 15, 2019.

(Late Tuesday) Press Release - Pason Systems generated consolidated revenue of $82.0 million in the fourth quarter of 2018, an increase of 24% from the same period in 2017. The Company recorded net income of $20.7 million ($0.24 per share) in the fourth quarter of 2018, compared to net income of $5.0 million ($0.06 per share) recorded in the same period in 2017.

Press Release - SEACOR reported net loss from continuing operations was $4.7 million ($0.26 per diluted share) for the fourth quarter, compared with net income of $17.1 million ($0.88 per diluted share) in the preceding quarter and $73.3 million ($3.37 per diluted share) in the fourth quarter of 2017.

(Late Tuesday) Press Release - Secure Energy Services reported net income of $13.9 million for the three months ended December 31, 2018, improved from a net loss of $23.9 million in the three months ended December 31, 2017. Secure also announced the appointment of Richard (Rick) Wise to the Corporation's Board of Directors. In addition, the company announced the recent retirement of Daniel Steinke from his role as Executive Vice President of New Ventures and Government Affairs.

DRILLERS

(Late Tuesday) Press Release - Dril-Quip announced that its Board of Directors has authorized a stock repurchase program under which the Company can repurchase up to $100 million of its outstanding common stock. The repurchase program has no set expiration date. Repurchases under the program will be made through open market purchases, privately negotiated transactions or plans, instructions or contracts established under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. In the fourth quarter of 2018, the Company completed a previously authorized stock repurchase program of $100 million.

(Late Tuesday) Press Release - Dril-Quip reported consolidated revenue for the fourth quarter of 2018 of $97.3 million, an increase of $4.1 million compared to the third quarter of 2018. For the fourth quarter of 2018, Dril-Quip reported a net loss of $74.9 million, or $2.09 loss per diluted share. Adjusted net loss for the fourth quarter was $1.5 million ($0.04 loss per diluted share), after excluding $2.07 per share related to the impairment and restructuring charges, and other items.

Reuters - On February 26, Ensco received written notice from committee on foreign investment in U.S. that it completed review of deal with Rowan Companies . Ensco said that notice also determined that there are no unresolved national security concerns with respect to transaction.

Press Release - Rowan Companies reported a net loss of $14.3 million or $0.11 net loss per diluted share for the quarter ended December 31, 2018, compared to net income of $112.0 million, or $0.89 net income per diluted share, in the fourth quarter of 2017.

(Late Tuesday) Press Release - Nabors Industries reported fourth quarter 2018 operating revenues of $782 million, compared to operating revenues of $779 million in the third quarter. Net income from continuing operations attributable to Nabors common shareholders for the quarter was a loss of $188 million, or $0.55 per share, compared to loss of $105 million, or $0.31 per share, in the prior quarter.

MARKET COMMENTARY

U.S. stock futures fell, tracking global equities, after fresh tensions escalated between India and Pakistan, pushing investors away from riskier assets. The yen strengthened on safe-haven demand and the dollar remained lower after Federal Reserve Chairman Jerome Powell repeated that the U.S. central bank would remain patient on monetary policy. Oil prices rose, buoyed by an unexpected decline in U.S. crude inventories and as producer club OPEC seemed to stick to its supply cuts despite pressure from U.S. President Donald Trump. Gold held steady. Data on factory orders and pending home sales are scheduled to be released later in the day.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP

• Bloomberg TV Commodities Edge - Q2'18 Earnings Themes
• Bloomberg TV DayBreak Americas - (Discussion with Kevin Holt, CIO of Invesco, begins at 0:56:58 - 1:05:22)
• TD Ameritrade Network - Trade Tariff Effects on Market & Interest Rates

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 . This communication and the content found by following any link herein are being provided to you by Corporate Solutions, a business of Nasdaq, Inc. and certain of its subsidiaries (collectively, "Nasdaq"), for informational purposes only. Nasdaq makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Sources include Reuters, TR IBES, WSJ, The Financial Times and proprietary Nasdaq research.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.