Crude Plunges on Demand Destruction
SECTOR COMMENTARY
Energy stocks are set to crater at the open, driven by a significant decline in oil prices which are off ~35% at $11.95, to levels last seen since 1999, which is pressuring equity futures. Broader equity markets are poised for a ~1.5% decline with Dow futures off 485 points.
In company news, Halliburton reported a $1 billion first quarter loss and $1.1 billion in impairment charges this morning as it gave a bleak outlook for North American oilfields after the coronavirus-driven oil price decline.
At today’s lows, the May WTI contract tanked 39%, or $7.09, to $11.25 per barrel, while Brent traded lower by 6.4% at $26.29, as demand destruction continued to drive prices lower. The front part of the oil futures ‘curve,’ which is the May contract that expires on Tuesday, was hit the hardest since it applies to fuel that’s set to be delivered while most of the country remains on lockdown due to the coronavirus. There’s little demand for gasoline from refineries, and storage tanks in the U.S. are nearing their limits. "The May contract is set to expire tomorrow and the bulk of the open interest and volume is already in the June contract," said ING's head of commodities strategy, Warren Patterson.
Natural gas futures are also lower this morning, tracking weakness in the crude oil markets. However, weather models turned cooler for most of the country over the weekend which should boost heating demand, offering some support to price.
INTERNATIONAL INTEGRATEDS
(Late Friday) Reuters - The U.S. SEC said Eni had agreed to settle charges it breached corruption accounting rules over "improper" payments by a former unit in Algeria. The Securities and Exchange Commission said in a statement Eni had "violated the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act in connection with an improper payment scheme" in Algeria by former unit Saipem. Eni did not immediately reply to email messages for comment.
Morgan Stanley upgraded Eni to ‘Equal Weight’ from ‘Underweight’.
Jefferies downgraded Eni to ‘Hold’ from ‘Buy’.
(Late Friday) Reuters - Petrobras said that a Rio de Janeiro labor court issued an injunction preventing the firm from cutting worker pay or hours, according to a securities exchange filing. Petroleo Brasileiro SA, as the company is formally known, said it has not been officially notified of the decision and it would wait for that notification to evaluate possible appeals. Petrobras said its actions to preserve its financial stability and employment in light of the new coronavirus outbreak were within the bounds of the law.
Morgan Stanley downgraded Repsol, and Total to ‘Equal Weight’ from ‘Overweight’.
CANADIAN INTEGRATEDS
Press Release - Husky Energy cut its 2020 capital expenditure by an additional C$700 million ($496.31 million), citing a hit to oil prices from the coronavirus outbreak. The Calgary, Alberta-based company said it now expects to spend between C$1.6 billion and C$1.8 billion, about half its earlier estimate of C$3.2 billion to C$3.4 billion. Husky had previously cut its 2020 capital spending budget by C$900 million in March, citing challenging conditions.
U.S. E&PS
Press Release - Chaparral Energy announced changes in its senior leadership. On April 17, 2020, Scott Pittman resigned as Senior Vice President and Chief Financial Officer of Chaparral to pursue other interests. Mr. Pittman’s departure was not related to any disagreement with the Company or any matters relating to its operations, policies or practices. Chaparral intends to conduct a search to fill the vacancy in the Chief Financial Officer position resulting from Mr. Pittman’s departure. The Company has temporarily assigned the authority specific to the Chief Financial Officer to Stephanie A. Carnes, Chaparral’s Controller, until the Chief Financial Officer vacancy has been filled. In addition, Patrick Graham, Chaparral’s Senior Director of Corporate Finance, will serve as the primary investor contact. On April 17, 2020, Mark Ver Hoeve, Vice President of Geoscience elected to retire effective immediately. Chaparral is evaluating candidates to fulfill Mr. Ver Hoeve’s function.
(Late Friday) Press Release - Chesapeake Energy announced that it has suspended payment of dividends on each series of its outstanding convertible preferred stock effective immediately. Suspension of the dividend does not constitute an event of default under any of the company's debt instruments.
Bank of America upgraded Concho Resources to ‘Buy’ from ‘Neutral’.
Bank of America downgraded Cabot Oil & Gas to ‘Underperform’ from ‘Neutral’.
JP Morgan upgraded Montage Resources to ‘Overweight’ from ‘Neutral’.
Press Release - On April 14, 2020, SandRidge Energy determined to effect the separation of employment of Michael A. Johnson from his position as Senior Vice President and Chief Financial Officer and John P. Suter from his position as Executive Vice President and Chief Operating, effective no earlier than July 1, 2020.Messrs. Johnson and Suter will be eligible to receive severance consistent with their respective employment agreements, including severance payments and, if applicable, continuation of health and welfare benefits.
(Late Friday) Press Release - Sundance Energy announced that on April 13, 2020, it received notice from The Nasdaq Stock Market that the Company is not presently in compliance with the Nasdaq continued listing rules since the Company has not yet filed its Form 10-K for the period ended December 31, 2019. In accordance with applicable Nasdaq listing rules, the Company plans to timely notify Nasdaq that it intends to pursue actions to file its Form 10-K as soon as practicable. Nasdaq provides for a period of 60 days following receipt of the notice for the Company to submit a plan to regain compliance for continued listing on the exchange. The notice has no immediate impact on the listing of the Company’s common stock, which will continue to trade on Nasdaq, subject to the Company’s compliance with the other continued listing requirements.
CANADIAN E&PS
Press Release - Crescent Point Energy is taking additional action to further enhance the Company's long-term sustainability through additional cost reductions, and is including a revised 2020 outlook. Highlights include: Lowering 2020 capital expenditures guidance by $75 million, or 10 percent, with no associated impact to production. Maintaining flexibility to further reduce capital expenditures, if necessary. Enhancing sustainability by reducing 2020 operating expenses by $140 million. Reduced salaries for executive team and Board of Directors. Lowering annual production guidance by 15 percent, primarily due to the voluntary shut-in of higher cost production. Retains significant liquidity of over $2.5 billion, with no material near-term debt maturities. Crescent Point's capital expenditures for 2020 are now forecast to be approximately $650 to $700 million, or $75 million below its recently revised guidance of $700 to $800 million, based on the mid-point of the range. This capital reduction, which has no associated impact to production, is a combination of internal efficiencies and operational outperformance resulting in lower expenditures during the balance of the year.
OILFIELD SERVICES
Press Release - Halliburton announced a net loss of $1.0 billion, or $1.16 per diluted share, for the first quarter of 2020. This compares to net income for the first quarter of 2019 of $152 million, or $0.17 per diluted share. Adjusted net income for the first quarter of 2020, excluding impairments and other charges and a loss on the early extinguishment of debt, was $270 million, or $0.31 per diluted share. This compares to adjusted net income for the first quarter of 2019, excluding impairments and other charges, of $201 million, or $0.23 per diluted share. Halliburton's total revenue in the first quarter of 2020 was $5.0 billion, a 12% decrease from revenue of $5.7 billion in the first quarter of 2019. Reported operating loss was $571 million in the first quarter of 2020 compared to reported operating income of $365 million in the first quarter of 2019. Excluding impairments and other charges, adjusted operating income was $502 million in the first quarter of 2020, an 18% increase from adjusted operating income of $426 million in the first quarter of 2019.
(GLOBE NEWSWIRE) -- KLX Energy Services Holdings Amin J. Khoury, Chairman of the Board of Directors and Chief Executive Officer, announced today that he will be resigning for personal family health reasons on May 1, 2020. Mr. Khoury will continue to be a member of the Board of Directors and serve as a consultant to the Company following his resignation. Also effective on May 1, 2020, Tom McCaffrey, currently Senior Vice President and Chief Financial Officer, will become President and Chief Executive Officer of the Company and will join the Company’s Board of Directors.
REFINERS
Bank of America upgraded Phillips 66 to ‘Buy’ from “Neutral’.
Press Release - PBF Energy announced it has completed, and received the $530 million consideration for, the sale of five steam methane reformer (SMR) hydrogen production plants to Air Products. PBF Energy has entered into long-term supply agreements with Air Products at the Martinez, Torrance and Delaware City refineries.
Bank of America downgraded PDF Energy to ‘Neutral’ from ‘Buy;.
Reuters - PBF Energy began restarting its 190,000 barrel-per-day (bpd) Chalmette, Louisiana, refinery on Sunday night, April 19, after it was knocked out of production by a Saturday lightning strike, sources familiar with plant operations said. Among the units knocked out by the lightning strike were the two 96,000 bpd crude distillation units (CDUs) and the 68,000 bpd gasoline-producing fluidic catalytic cracker (FCC), the sources said.
MLPS & PIPELINES
Bank of America upgraded BP Midstream Partners to ‘Neutral’ from ‘Underperform’.
(Late Friday) Reuters - Kinder Morgan’s Natural Gas Pipeline Company of America lifts force majeure at Amarillo 3 mainline in Kansas after remediation work. The company declared force majeure on April 7 for remediation work, and said pipeline remediation work will be completed in time for gas day April 18, 2020, intraday 1 cycle nominations.
Press Release - NuStar Energy announced that it has entered into a $750 million unsecured term loan agreement with funds managed by Oaktree Capital Management, L.P. to strengthen its near-term liquidity. The three-year, 12 percent facility provides that NuStar will draw $500 million at closing and may elect to draw an additional $250 million under the facility during the first year. NuStar now plans to spend between $165 and $195 million for strategic capital in 2020, which is a reduction of over $145 million, or approximately 45 percent below previously forecasted 2020 strategic capital spending and approximately 60 percent below 2019 strategic capital spending. NuStar has also identified $20 - $30 million of controllable expense reductions for the full-year of 2020.
Tudor Pickering Holt downgraded ONEOK to ‘Hold’ from ‘Buy’.
MARKET COMMENTARY
Wall Street futures were down, pressured by a slide in oil prices, with U.S. crude futures hitting its lowest level since 1999, on concerns that U.S. crude storage will soon be full. European shares fell and Asian equities ended lower with investors bracing for earnings reports and economic data, which will show the impact of COVID-19 on the global economy. Gold prices were in the red as the dollar strengthened.
NASDAQ ENERGY TEAM THOUGHT LEADERSHIP
- 1/8/20 - CNBC’s Squawk Alley: Oil market reaction to US-Iran tensions
- 1/8/20 - Bloomberg Day Break - Steady escalation of US-Iran tensions
- 12/5/19 - Bloomberg Balance of Power - OPEC's Limited Efficacy
- 9/17/19 - Oil's New Risk Premium Discussion on CNBC TV
- 9/16/19 - Discussion on Bloomberg TV about Impact of Abqaiq Attack
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.
Other Topics
Energy Commodities
MarketInsite
Nasdaq
Nasdaq’s Marketinsite offers actionable insights on a variety of market-moving topics. Learn from our thought leaders who are driving the capital markets of tomorrow.
Read MarketInsite's Bio