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Oil

Crude Jumps as New Coronavirus Cases Slow, Easing Demand Concerns

WTI and Brent crude oil futures were both up over 2% in early trading, backed by reports that China saw its lowest daily number of new coronavirus cases since late January, stoking investor hopes that fuel demand may begin to recover from the epidemic.

SECTOR COMMENTARY

The energy sector is poised for a higher start, backed by further strength in the crude complex and major equity indices which continued to rise on more positive news surrounding the coronavirus.

WTI and Brent crude oil futures were both up over 2% in early trading, backed by reports that China saw its lowest daily number of new coronavirus cases since late January, stoking investor hopes that fuel demand may begin to recover from the epidemic. The gains also came despite last night’s industry supply report which showed U.S. crude inventories rose by 6 million barrels last week, significantly higher than the 3 million barrels increase analysts are expecting the official EIA numbers to show later this morning.

Natural gas futures have jumped over 2.5% so far today, rising on new forecasts calling for cooler weather in key consuming regions in the coming days that should stoke demand and ahead of tomorrow’s storage report. Consensus currently expecting a draw of (106) Bcf vs the 5 yr average of (131) Bcf in tomorrow’s EIA report.

U.S. INTEGRATEDS

Reuters - A fire in the offsite piping at Exxon Mobil's 502,500 barrel-per-day Baton Rouge refinery in Louisiana was being contained by the refinery's fire team on Wednesday, according to sources familiar with the matter. There were no injuries reported and the impact on production at the refinery is unknown as the team continues to put out the fire, the sources added. The company earlier said the fire was contained in the area where it broke out and there were no reported injuries, with all personnel accounted for. Exxon is monitoring air quality in the refinery and surrounding areas, company spokesman Jeremy Eikenberry said in an emailed response.

Reuters - Exxon Mobil has made preliminary plans to restart the large crude distillation unit (CDU) at its 502,500 barrrel-per-day (bpd) Baton Rouge, Louisiana, refinery later this week, sources familiar with plant operations said. Most of the refinery's units, including the three CDUs, were shut early on Wednesday after a natural gas line in a group of pipes caught fire late on Tuesday night, the sources said. The fire continued to burn on Wednesday morning in the pipeline area.

(Late Tuesday) Press Release - Noble and ExxonMobil announced the execution of a unique commercial enabling agreement for drilling services in the Guyana-Suriname Basin. The agreement defines contract terms for the continuation of drilling services using certain drilling units in Noble's fleet. The ultra-deepwater drillships Noble Bob Douglas, Noble Tom Madden and Noble Don Taylor, which are currently executing drilling assignments for ExxonMobil offshore Guyana, are included in the framework agreement, and other drilling rigs may be added to the agreement. The Noble Bob Douglas is located on the Liza Phase I field development project, while the Noble Tom Madden and Noble Don Taylor are assigned to exploration drilling in the region. Following the dates listed in the second column of the table below, dayrates earned by each rig will be updated at least twice per year to the prevailing market rate, subject to a scale-based discount and performance bonus which appropriately aligns the interests of Noble and ExxonMobil.

INTERNATIONAL INTEGRATEDS

HSBC upgraded Royal Dutch Shell to ‘Buy’ from ‘Hold’.

Reuters - BP plans deep cuts to its carbon emissions by 2050, setting one of the oil sector's most ambitious targets, as part of the biggest overhaul in the 111-year old company's history by new chief executive Bernard Looney. The targets set put BP ahead of rivals Royal Dutch Shell and Total. Although they fall short of commitments by Spanish peer Repsol, BP's operations and output are much larger.

(Late Tuesday) Press Release - Kosmos Energy announced that the company and its partners have signed a Sale and Purchase Agreement with BP Gas Marketing Limited, a wholly owned subsidiary of BP. The SPA is for 2.45 million tonnes per annum of liquified natural gas from Phase 1 of the Greater Tortue Ahmeyim project for an initial term of up to 20 years. Following the signing of the SPA, Kosmos intends to book net proved reserves of approximately 100 million barrels of oil equivalent associated with Phase 1, as evaluated by the company’s independent reserve auditor Ryder Scott Company, LP. The company expects to book additional reserves when further phases of the Tortue project are sanctioned and sale and purchase agreements signed for the offtake volumes.

CANADIAN INTEGRATEDS

Press Release - Cenovus Energy continued to gain momentum in 2019, generating free funds flow of $361 million in the fourth quarter and approximately $2.5 billion for the year, reducing net debt by 22% year-over-year and completing construction on its Christina Lake phase G oil sands expansion in March. In the fourth quarter of 2019, Cenovus increased its dividend by 25% and reached full ramp-up of its crude-by-rail shipping capacity. In 2019, Cenovus increased cash from operating activities to approximately $3.3 billion from $2.2 billion the previous year and adjusted funds flow to about $3.7 billion from $1.7 billion in 2018.       

U.S. E&PS

(Late Tuesday) Press Release - Viper Energy Partners, a subsidiary of Diamondback Energy, announced financial and operating results for the fourth quarter and full year ended December 31, 2019. Viper's fourth quarter 2019 average realized prices were $53.90 per barrel of oil, $1.29 per Mcf of natural gas and $14.53 per barrel of natural gas liquids, resulting in a total equivalent realized price of $38.20/boe. Based on current market differentials and estimated in-basin gathering costs, Viper expects to realize between 97% and 100% of WTI in 2020. During the fourth quarter of 2019, the Company recorded total operating income of $92.7 million and consolidated net income (including non-controlling interest) of $48.5 million.

Press Release - Kosmos Energy announced that total 1P reserves at year end 2019 were approximately 169 million barrels of oil equivalent (MMBoe) and 2P reserves were approximately 552 MMBoe. In addition, following the recent signing of the Sale and Purchase Agreement (SPA) for the Phase 1 LNG offtake of the Greater Tortue Ahmeyim project, Kosmos intends to book additional net 1P reserves of approximately 100 MMBoe. Adjusting for these additional volumes increases total 1P reserves to approximately 268 MMBoe.

(Late Tuesday) Press Release - Kosmos Energy announced that the company and its partners have signed a Sale and Purchase Agreement with BP Gas Marketing Limited, a wholly owned subsidiary of BP. The SPA is for 2.45 million tonnes per annum of liquified natural gas from Phase 1 of the Greater Tortue Ahmeyim project for an initial term of up to 20 years. Following the signing of the SPA, Kosmos intends to book net proved reserves of approximately 100 million barrels of oil equivalent associated with Phase 1, as evaluated by the company’s independent reserve auditor Ryder Scott Company, LP. The company expects to book additional reserves when further phases of the Tortue project are sanctioned and sale and purchase agreements signed for the offtake volumes.

OILFIELD SERVICES

(Late Tuesday) Press Release - Toromont Industries reported financial results for the three months and year ended December 31, 2019. Net earnings in 2019 were $286.8 million, up 14% from 2018, with basic EPS also 14% higher to $3.52. Revenue growth and mix, expense control and lower interest costs on reduced debt levels contributed to the improved results. Net earnings for the fourth quarter were $90.5 million, up 7% from 2018; basic EPS up 6% to $1.10. Considering the Company’s solid financial position and positive long-term outlook, the Board of Directors today increased the quarterly dividend by 14.8% to 31 cents per share. The next dividend is payable April 2, 2020 to shareholders on record at the close of business on March 9, 2020.

DRILLERS

(Late Tuesday) Press Release - Noble and ExxonMobil announced the execution of a unique commercial enabling agreement for drilling services in the Guyana-Suriname Basin. The agreement defines contract terms for the continuation of drilling services using certain drilling units in Noble's fleet. The ultra-deepwater drillships Noble Bob Douglas, Noble Tom Madden and Noble Don Taylor, which are currently executing drilling assignments for ExxonMobil offshore Guyana, are included in the framework agreement, and other drilling rigs may be added to the agreement. The Noble Bob Douglas is located on the Liza Phase I field development project, while the Noble Tom Madden and Noble Don Taylor are assigned to exploration drilling in the region. Following the dates listed in the second column of the table below, dayrates earned by each rig will be updated at least twice per year to the prevailing market rate, subject to a scale-based discount and performance bonus which appropriately aligns the interests of Noble and ExxonMobil.

MLPS & PIPELINES

(Late Tuesday) Press Release - DCP Midstream reported its financial results for the quarter and year ended December 31, 2019 and announced its 2020 guidance. Highlights include Net income attributable to partners of $1 million and $17 million for the quarter and year ended December 31, 2019, respectively. Distributable cash flow (DCF) of $175 million and $762 million for the quarter and year ended December 31, 2019, resulting in a paid distribution coverage ratio of 1.13 times and 1.23 times, respectively. Annual DCF increased approximately 11% year-over-year. Adjusted EBITDA of $296 million and $1,200 million for the quarter and year ended December 31, 2019, respectively. Annual Adjusted EBITDA increased approximately 10% year-over-year.

Stifel Nicolaus upgraded Magellan Midstream Partners to ‘Buy’ from ‘Hold’.

Press Release - Noble Midstream Partners reported fourth quarter and full year 2019 financial and operational results. The Partnership’s results are consolidated to include the non-controlling interests in the Partnership’s development companies retained by Noble Energy as well as Greenfield Midstream’s 45.6% ownership of Black Diamond Gathering. During the fourth quarter, Noble Midstream achieved record oil and gas volumes of 355 MBoe/d from its core gathering business, up 11% sequentially and above the top end of guidance. Fourth-quarter 2019 revenue totaled $191 million, up 12% compared to the third quarter. Fourth-quarter 2019 net income of $51 million and Adjusted EBITDA attributable to the Partnership of $73 million were impacted by a $10 million EBITDA loss on EPIC interim oil service due to lower than forecasted interim service volumes and realized tariffs, as well as other one-time accruals. 

MARKET COMMENTARY

Wall Street futures rose, in line with world equity markets, on signs that coronavirus spread is decreasing, with China reporting its lowest daily number of new cases since late January. Crude rallied on hopes of demand revival in China. Gold prices edged lower as investors eyed riskier assets, while dollar steadied.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP


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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