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Crude Mixed as Trump Plans to Ease Lockdown Measures

WTI crude oil futures are trading sharply lower this morning and underperforming Brent which is up about 1%. WTI’s weakness is attributable to the imminent expiry of the contract, on April 21, and fast-filling crude storage.

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SECTOR COMMENTARY

Energy stocks are set to open mixed to higher, weighed down by weakness in domestic crude prices which plummeted ~7% to $18 a barrel, attributable to the imminent expiry of the contract, on April 21, and fast-filling crude storage, while major equity futures rallied following reports from Gilead Sciences that one of their drugs showed some effectiveness in treating the coronavirus, giving investors some hope.

At the sector level, Schlumberger kicked off earnings this morning, beating estimates by a penny a share with quarterly profit of 25 cents per share. The world’s largest oilfield services provider took a one-time charge of $8.5 billion during the quarter related to impairments resulting from the coronavirus outbreak and the severe decline in oil prices. The company also slashed its dividend by 75%. Shares are up ~5% in the pre-market.

WTI crude oil futures are trading sharply lower this morning and underperforming Brent which is up about 1%. WTI’s weakness is attributable to the imminent expiry of the contract, on April 21, and fast-filling crude storage. “As the oversupply is more a topic for right now, the May contract trades at a deep discount to June,” UBS analyst Giovanni Staunovo said. However, investors pinned their hopes on plans to ease lockdown measures after Trump laid out new guidelines for U.S. states to emerge from a coronavirus shutdown in a staggered, three-stage approach.

Natural gas futures are up ~2%, tracking gains in the broader equity markets while cooler weather in parts of the NE and warmer weather in the South which should boost some gas demand.

INTERNATIONAL INTEGRATEDS

Press Release - Royal Dutch Shell has vowed to slash its carbon emissions to net zero by 2050 by embracing green energy in the latest sign of seismic changes sweeping the global oil industry. The Anglo-Dutch company promised to reduce emissions from its own manufacturing processes to net zero within 30 years at the latest. It also wants to hit net zero on the energy products it sells to customers - a hugely ambitious target since this includes the world's drivers, as well as households and businesses using its fuel for energy. The announcement makes Shell only the second major drilling firm to set such a far-reaching goal, following BP's pledge in February to reach net zero by 2050.

(Late Thursday) Press Release - Shell Australia, a subsidiary of Royal Dutch Shell, has taken a final investment decision to develop the first phase of Arrow Energy’s Surat Gas Project in Queensland, Australia. This decision will bring up to 90 billion cubic feet per year of new gas to market at peak production, which will flow to Shell-operated QGC to be sold locally and exported through its plant on Curtis Island.

Reuters - Saudi Aramco has allocated around 4 million barrels per day of crude oil to its Asian customers, which is lower than its full contractual volumes to Asia by about 2 million bpd, a Saudi oil source familiar with the company's plans told Reuters. The Saudi source was clarifying a Reuters report earlier on Friday, which cited four source saying Aramco has notified some refiners in Asia that it would supply full contractual volumes of crude in May.

Reuters - Saudi Arabia has notified some refiners in Asia that it will supply full contractual volumes of crude in May, three sources with direct knowledge of the matter said. This comes after the Organization of the Petroleum Exporting Countries and allies including Russia agreed to reduce production and ease a supply glut exacerbated by a collapse in global oil demand following the coronavirus outbreak. Although there is no change in the volume of oil supplied, Saudi Aramco has altered the ratio among crude grades by increasing Arab Light crude and reducing Arab Heavy crude, the sources said.       

U.S. E&PS

(Late Thursday) Press Release - Callon Petroleum announced that on April 10, 2020, it received formal notice from the New York Stock Exchange that the average closing price of Callon's shares of common stock had fallen below $1.00 per share over a period of 30 consecutive trading days, which is the minimum average share price for continued listing on the NYSE. As required by the NYSE, Callon has responded to the NYSE regarding its intent to cure the deficiency to return to compliance with the NYSE continued listing requirements within the six-month cure period. Callon intends to put forth a proposal for a reverse stock split in connection with its annual meeting of shareholders. Callon's integration process and associated synergy capture has progressed ahead of schedule in the first quarter despite the challenges of the current economic and operating environment. Current expectations for first quarter operational results include: Operational capital spending of approximately $275 million; Production between 100 and 102 MBoepd with an oil cut of 63% (three-stream basis); Lease operating expense between $54 and $56 million, or $5.95 to $6.15 per Boe; Gathering, processing, & transport expense between $14 and $15 million, or $1.55 and $1.65 per Boe; Unhedged realized oil, natural gas, and NGL prices are expected to be between $45 and $46 per Bbl, $0.55 and $0.65 per Mcf, and $10 and $11 per Bbl respectively; Net cash from derivative settlements is estimated to be approximately $25 million for the quarter.

(Late Thursday) Reuters - Chesapeake Energy has laid off 200 employees in Oklahoma. Half of the job cuts were at the company's Oklahoma City headquarters and half were in the oilfield, according to Oklahoma Office of Workforce Development.

(Late Thursday) Reuters - ConocoPhillips said it would slash spending and cut U.S. oil output by about 30% of this year's target, the largest cut so far by a major shale producer to deal with an unprecedented drop in oil demand. U.S. oil and gas producers have cut expenses, dismissed tens of thousands of workers, and shut-in wells as coronavirus-related lockdowns have curtailed travel and closed businesses, knocking down crude prices CLc1 by 60% this year. ConocoPhillips will reduce planned North American output by 225,000 barrels per day (bpd), the company said. Overall, U.S. and Canadian producers have chopped 729,000 bpd from their goals, according to a Reuters tally of announced cuts.

Imperial Capital downgraded Magnolia Oil & Gas to ‘In-line’ from ‘Outperform’.

Roth Capital upgraded W&T Offshore to ‘Buy’ from ‘Neutral’.

CANADIAN E&PS

(Late Thursday) Press Release - Gran Tierra Energy announced a business update regarding the Company’s proactive measures taken to protect its financial strength in response to the large decrease in world oil prices and the impacts of COVID-19. Due to the unprecedented challenges of 2020, Gran Tierra has adjusted its production volumes, capital investments and operating and general and administrative costs to protect the Company’s balance sheet and to preserve long-term value. Gran Tierra has temporarily suspended fields with zero or negative netbacks at current oil prices. In addition, approximately 4,800 bopd of production that are awaiting routine mechanical workovers will remain offline during the low-price environment. Gran Tierra remains focused on the ongoing production and waterflooding of the Company’s core assets at Acordionero, Costayaco and Moqueta, which represent 81% of Gran Tierra’s WI Total Proved Reserves as of December 31, 2019. Due to the uncertainty of the financial and operational impact of COVID-19 and the large decrease in world oil prices, Gran Tierra is withdrawing its previously announced full-year 2020 guidance. The Company is not providing an updated fiscal outlook at this time.

Peel Hunt downgraded Gran Tierra Energy to ‘Hold’ from ‘Buy’.

OILFIELD SERVICES

(Late Thursday) Press Release - CES Energy Solutions announced that it will conduct its Q1 2020 conference call on May 15, 2020 following the upcoming release of its financial results for the first quarter ended March 31, 2020. In response to continually evolving impacts on the oil and gas market as a result of demand weakness from the COVID-19 pandemic and continued uncertainty surrounding production level decisions amongst OPEC+ members, CES also announced that the Company is suspending its monthly dividend. In addition to suspending the dividend, CES continues to assess and implement several initiatives including reductions to Executive and Board of Directors' compensation levels, reductions in personnel and overhead costs, and elimination of non-essential capital expenditures.  CES will provide more specific details on initiatives and outlook during its Q1 2020 conference call on May 15, 2020.

Press Release - Schlumberger reported results for the first quarter of 2020. The company reported: Worldwide revenue of $7.5 billion decreased 9% sequentially and 5% year-on-year; International revenue of $5.1 billion decreased 10% sequentially, but increased 2% year-on-year; North America revenue of $2.3 billion decreased 7% sequentially and 17% year-on-year; GAAP loss per share, including charges of $5.57 per share, was $5.32; EPS, excluding charges, was $0.25; Cash flow from operations was $784 million and free cash flow was $179 million; Board approved quarterly cash dividend of $0.125 per share.

MLPS & PIPELINES

(Late Thursday) Press Release - Crestwood Equity Partners announced that the board of directors of its general partner has declared the partnership’s quarterly cash distribution of $0.625 per limited partner unit ($2.50 annually) for the quarter ended March 31, 2020. In addition, Crestwood announced a quarterly cash distribution of $0.2111 per Class A preferred equity unit ($0.8444 annually). Both common and preferred distributions will be made on May 15, 2020, to unitholders of record as of May 8, 2020.

(Late Thursday) Press Release - The board of directors of ONEOK declared a quarterly dividend of 93.5 cents per share, unchanged from the previous quarter, resulting in an annualized dividend of $3.74 per share. The dividend is payable May 14, 2020, to shareholders of record at the close of business April 27, 2020.

(Late Thursday) Press Release - Summit Midstream Partners announced that on April 10, 2020, it received a formal notice from the New York Stock Exchange indicating noncompliance with the continued listing standard set forth in Rule 802.01C of the NYSE Listed Company Manual because the average closing price of SMLP's common units had fallen below $1.00 per unit over a period of 30 consecutive trading days, which is the minimum average unit price for continued listing on the NYSE.  SMLP has six months following the receipt of the formal noncompliance notice to cure the deficiency and regain compliance.  During this period, SMLP's common units will continue trading on the NYSE under its existing ticker symbol, with the addition of a suffix indicating the "below criteria" status of its common units, as "SMLP.BC."

MARKET COMMENTARY

Wall Street futures and global equities rose after President Donald Trump laid out plans to gradually reopen the coronavirus-hit U.S. economy, and on reports that patients with severe COVID-19 symptoms had responded positively to a drug by Gilead. The dollar index was little changed, while gold prices dropped. Oil was mixed, pressured by China's disappointing quarterly GDP data.

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. 

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.

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