Crude Rises on U.S. Inventory Decline
SECTOR COMMENTARY
Energy stocks are set to open higher this morning, lifted by a 1%+ gain in oil prices and rising equity futures, which are set to open once again in record territory. Earnings kick into full gear in the sector with several oilfield services, rig operators and refiners releasing quarterly results yesterday after market close and this morning.
Oil prices are continuing to rise, lifted by strengthening global asset classes, continued expected easing and stimulus from global central banks, OPEC+ cooperation and yesterday’s sharp drop in crude stocks.
Natural gas futures are higher by 2 cents ahead of the weekly inventory data. Analysts expect a build of 34 bcf.
INTERNATIONAL INTEGRATEDS
Reuters - Eni announced it successfully drilled Agogo-2, the first appraisal well of Agogo's discovery in Angola. Well results confirms the 650 million barrels of oil in place at the Agogo field, indicates further upside in its northern sector that will be assessed with new appraisal wells, and confirms the extension of the Agogo reservoir to the North of the discovery well and below the Salt Diapirs. The block 15/06 JV is composed by Eni, the operator of the asset with a 36.8421% stake. The company plans to start first production from Agogo before the end of 2019.
Reuters - Saipem, controlled by state lender CDP and oil major Eni, has drawn up a short list of potential partners for its drilling business as it casts around for joint venture deals to help revive growth.
Reuters - Saipem beat expectations in the second quarter as new orders more than doubled but it stuck to its cautious outlook for the year. The contractor, jointly controlled by oil major Eni and state lender Cassa Depositi e Prestiti, said core earnings in the period jumped 47% to 308 million euros ($343 million), above a Refinitiv consensus of 265 million euros.
(Late Wednesday) Press Release - Williams announced that it has acquired and placed into service the 16-inch Norphlet deepwater gathering pipeline system constructed by Shell Offshore Inc, a subsidiary of Royal Dutch Shell, operator, and CNOOC Petroleum Offshore U.S.A. Inc. extending 54 miles from the Shell-operated Appomattox Floating Production System in 7,400-feet of water to the Transco Main Pass 261A junction platform, located approximately 60 miles south of Mobile, Alabama. First gas delivery date occurred on June 22, 2019.
Reuters - Papua New Guinea's petroleum minister said a gas deal it agreed with Totalcould be re-drawn if a government review finds its terms unfavourable. The deal, for a project called Papua LNG, was agreed in April but put up for review after the prime minister who signed it was ousted in a parliamentary vote in May, following a crisis caused by discontent over the distribution of resource riches.
Reuters - Total reported a 19% year-on-year drop in adjusted net profit to $2.9 billion in the second quarter, which it attributed to a combination of unfavourable market factors. These include a 7% drop in oil prices since the second quarter of 2018, a sharp fall in gas prices, and a slide in refining margins. The company said it will sell assets worth around $5 billion mostly from its upstream exploration and production business as it seeks to focus on low breakeven projects that can withstand low oil prices.
CANADIAN INTEGRATEDS
Press Release - Cenovus Energy reduced net debt to $7.1 billion in the second quarter after generating over $830 million in free funds flow. The company’s excellent financial performance was driven by higher realized oil prices, which contributed to oil sands operating margin of more than $1.0 billion. During the first six months of 2019, Cenovus repurchased US$1.3 billion of unsecured notes for cash consideration of US$1.2 billion, including US$814 million in the second quarter. Cenovus’s operating earnings from continuing operations were $267 million compared with an operating loss of $292 million in the year-earlier period. Net earnings from continuing operations were approximately $1.8 billion in the second quarter compared with a net loss of $410 million in the same period in 2018.
Press Release - Husky Energy generated funds from operations of $802 million in the second quarter, with net earnings of $370 million. Cash flow from operating activities, including changes in non-cash working capital, was $760 million, compared to $1 billion in Q2 2018. The Board of Directors has approved a quarterly dividend of $0.125 per common share for the three-month period ended June 30, 2019. The dividend will be payable October 1, 2019 to shareholders of record at the close of business on September 3, 2019.
(Late Wednesday) Press Release - Suncor Energy reported cash flow provided by operating activities, which includes changes in non‑cash working capital, of $3.433 billion ($2.19 per common share) in the second quarter of 2019, compared to $2.446 billion ($1.50 per common share) in the prior year quarter. Net earnings were $2.729 billion ($1.74 per common share) in the second quarter of 2019, compared to $972 million ($0.60 per common share) in the prior year quarter and included a one‑time deferred income tax recovery of $1.116 billion ($0.71 per common share) to reflect the staged reduction of Alberta’s corporate income tax rate from 12% to 8% over the next four years. Operating earnings were $1.253 billion ($0.80 per common share), compared to operating earnings of $1.190 billion ($0.73 per common share) in the prior year quarter, an increase of 10% per common share. During the second quarter of 2019, the company issued $750 million of 3.10% senior unsecured medium term notes and repaid $1.3 billion of short‑term debt and US$140 million of maturing higher interest long‑term debt, further improving the company’s liquidity and balance sheet flexibility. The company paid $658 million in dividends and repurchased $552 million of its common shares during the quarter.
(Late Wednesday) Press Release - Suncor Energy’s Board of Directors has approved a quarterly dividend of $0.42 per share on its common shares, payable September 25, 2019 to shareholders of record at the close of business on September 4, 2019.
U.S. E&PS
Press Release - EQT announced financial and operational performance results for the second quarter 2019. The company achieved sales volumes of 370 Bcfe, at the high end of guidance (355-375 Bcfe), and received an average realized price of $2.59 per Mcfe, generated $444 million net cash provided by operating activities and $(81) million of adjusted free cash flow, and exited the quarter with $4,968 million of net debt, $39 million lower than first quarter 2019.
(Late Wednesday) Press Release - Northern Oil and Gas announced a midyear update on its ground game acquisition strategy, which is Northern’s regular acquisition activity excluding larger, separately announced deals such as the recent VEN Bakken acquisition. As part of this update, Northern is seeking to enhance its capital expenditures disclosure by providing both the acquisition capital spent to close Ground Game deals, as Northern has historically done, and also breaking out the incremental drilling and completion capital generated by Ground Game deals, to distinguish it from previously budgeted organic D&C capital. Despite Northern’s increased Ground Game activity, debt reduction has remained a priority. During the second quarter of 2019, Northern reduced the outstanding principal amount of its Second Lien Notes due 2023 by $8.5 million. This was the net result of $10.1 million of open market repurchases partially offset by $1.7 million in the expected final PIK interest payment on the notes.
CANADIAN E&PS
Press Release - Crescent Point Energy announced its operating and financial results for the quarter ended June 30, 2019. Adjusted funds flow totaled $503.8 million or $0.92 per share diluted during the second quarter, based on a strong operating netback of $36.59 per boe. Crescent Point continued to return capital to shareholders through dividends and share repurchases. Subsequent to the quarter, the Company declared a quarterly cash dividend of $0.01 per share payable to shareholders on October 1, 2019.
OILFIELD SERVICES
Press Release - CARBO Ceramics reported financial results for the second quarter of 2019. Revenues for the second quarter of $43.1 million decreased 26%, or $14.9 million, compared to revenue of $58.0 million in the same period of 2018. The largest contributors to this decrease were the declines in sales of sand products, as well as ceramic technology products and services. These decreases were partially offset by a 725% increase in contract manufacturing revenue, as well as an additional $1.4 million in sublease and rental income. As a result of the adoption of ASC 842 as of January 1, 2019, these amounts were classified within revenues during the three months ended June 30, 2019. These amounts were classified as a reduction of costs for the same period in 2018.
(Late Wednesday) Press Release - Core Laboratories reported that continuing operations resulted in second quarter 2019 revenue of $169,000,000. Second quarter 2019 revenue was impacted by a mid-quarter divestment of a non-strategic business in Asia Pacific and a softer than expected North American services market. Core's operating income was $28,000,000 with earnings per diluted share of $0.43, all in accordance with U.S. generally accepted accounting principles; operating income, ex-items, a non-GAAP financial measure, was $29,600,000, yielding operating margins of 17.5% and EPS, ex-items, was $0.46. During the second quarter of 2019, Core continued to generate FCF, with cash from operations of $17,100,000 and capital expenditures of $7,000,000, yielding FCF of $10,100,000. On 16 April 2019, the Board announced a quarterly cash dividend of $0.55 per share of common stock, which was paid on 21 May 2019 to shareholders of record on 26 April 2019. Dutch withholding tax was deducted from the dividend at a rate of 15%. On 12 July 2019, the Board announced a quarterly cash dividend of $0.55 per share of common stock, payable in the third quarter of 2019. The quarterly cash dividend will be payable on 12 August 2019 to shareholders of record on 22 July 2019. Dutch withholding tax will be deducted from the dividend at a rate of 15%.
(Late Wednesday) Press Release - Fluor announced that the U.S. Department of Energy (DOE) has extended the Fluor-led Savannah River Nuclear Solutions, LLC (SRNS) management and operating contract at the Savannah River Site near Aiken, South Carolina. Fluor booked its share of the $1.8 billion contract extension, which is for an additional 14 months with two 12-month options, in the third quarter of 2019.
(Late Wednesday) Press Release - Helix Energy Solutions Group reported net income of $16.8 million, or $0.11 per diluted share, for the second quarter of 2019 compared to $17.8 million, or $0.12 per diluted share, for the same period in 2018 and $1.3 million, or $0.01 per diluted share, for the first quarter of 2019. Net income for the six months ended June 30, 2019 was $18.1 million, or $0.12 per diluted share, compared to $15.2 million, or $0.10 per diluted share, for the six months ended June 30, 2018. Helix reported Adjusted EBITDA1 of $50.3 million for the second quarter of 2019 compared to $52.3 million for the second quarter of 2018 and $30.2 million for the first quarter of 2019. Adjusted EBITDA for the six months ended June 30, 2019 was $80.5 million compared to $79.8 million for the six months ended June 30, 2018. Operating cash flow increased to $66.8 million in the second quarter of 2019 compared to $(34.2) million in the first quarter of 2019 and $46.6 million in the second quarter of 2018.
Press Release - KBR announced that, following a Final Investment Decision from Methanex, approval has been given to begin work on the detailed Engineering, Procurement and Construction (EPC) phase of Methanex's Geismar 3 methanol project. KBR was awarded a reimbursable Front End Engineering Design (FEED) with EPC option contract for the project in July 2018.
Press Release - Kirby announced net earnings attributable to Kirby for the second quarter ended June 30, 2019 of $47.3 million, or $0.79 per share, compared with earnings of $28.6 million, or $0.48 per share, for the 2018 second quarter. Excluding a one-time charge related to the retirement of Kirby’s Executive Chairman, 2018 second quarter net earnings attributable to Kirby were $46.8 million, or $0.78 per share. Consolidated revenues for the 2019 second quarter were $771.0 million compared with $802.7 million reported for the 2018 second quarter.
Press Release - McDermott International announced that it has been awarded a sizeable technology contract by Indian Oil Corporation Limited (IOCL) for the technology license, basic engineering, proprietary equipment, training and technical services for a grassroots Fluid Catalytic Cracking (FCC) unit using INDMAX Technology, licensed by McDermott's Lummus Technology and developed in partnership with IOCL. This FCC unit is part of a refinery expansion project for IOCL to grow into petrochemicals at the complex in Panipat, Haryana, India. Lummus Technology is the exclusive worldwide licensor of INDMAX Technology, which is a unique solution for vertical integration of refinery and petrochemical complexes and offers better product yields with lower capital and operating expenditures.
(Late Wednesday) Press Release - Oceaneering International reported a net loss of $35.2 million, or $(0.36) per share, on revenue of $496 million for the three months ended June 30, 2019. During the prior quarter ended March 31, 2019, Oceaneering reported a net loss of $24.8 million, or $(0.25) per share, on revenue of $494 million, and an adjusted net loss of $23.9 million, or $(0.24) per share.
Press Release - Patterson-UTI Energy reported financial results for the three months ended June 30, 2019. The Company reported a net loss of $49.4 million, or $0.24 per share, for the second quarter of 2019, compared to a net loss of $10.7 million, or $0.05 per share, for the quarter ended June 30, 2018. During the second quarter, the Company spent $75.0 million to repurchase 6.3 million shares, which brings the total repurchases for the first half of 2019 to $150 million for 11.7 million shares. Subsequent to the end of the second quarter, the Company's Board has increased the repurchase authorization to $250 million. The company declared a quarterly dividend on its common stock of $0.04 per share, payable on September 19, 2019, to holders of record as of September 5, 2019.
(Late Wednesday) Press Release - SEACOR announced its results for the quarter ended June 30, 2019. Net income attributable to stockholders was $14.6 million ($0.76 per diluted share) compared with $45.1 million ($2.14 per diluted share) for the quarter ended June 30, 2018, which benefited from a net gain of $42.6 million ($1.89 per diluted share) related to the sale of the company's interest in Hawker Pacific Airservices. Operating income, excluding gains on asset dispositions, was $10.4 million, a $1.1 million decrease compared with the quarter ended June 30, 2018. “Cash Earnings” were $32.9 million compared with $2.3 million for the quarter ended June 30, 2018. During the current year quarter, the Company repurchased $13.3 million in principal amount of its 3.0% Convertible Senior Notes for $13.1 million resulting in debt extinguishment losses of $0.5 million.
(Late Wednesday) Press Release - TechnipFMC reported second quarter 2019 results. Total company revenue was $3,434.2 million. Net income was $97 million, or $0.21 per diluted share. These results included after-tax charges and credits totaling $78.6 million of expense, or $0.18 per diluted share; adjusted diluted earnings per share were $0.39. Adjusted EBITDA, which excludes pre-tax charges and credits, was $450 million; adjusted EBITDA margin was 13.1 percent.
(Late Wednesday) Press Release - Toromont Industries reported its financial results for the second quarter ended June 30, 2019. Net earnings increased $9.8 million or 14% in the quarter versus a year ago to $77.4 million or $0.95 EPS. For the first half of the year, net earnings increased 19% and EPS up 18%. Adjusted to exclude the non-recurring gain recorded in the first quarter described in note 9 to the financial statements, net earnings and EPS both increased 15%. The Board of Directors announced a quarterly dividend of 27 cents per common share, payable on October 2, 2019 to shareholders on record on September 6, 2019. The quarterly dividend was previously increased 17% to 27 cents per share effective with the dividend paid April 3, 2019.
DRILLERS
(Late Wednesday) Press Release - Helmerich & Payne reported a net loss of $155 million or $(1.42) per diluted share from operating revenues of $688 million for the quarter ended June 30, 2019, compared to income of $61 million, or $0.55 per diluted share, on revenues of $721 million for the quarter ended March 31, 2019. The net loss per diluted share for the third fiscal quarter and the net income for second fiscal quarter include $(1.82) and $(0.01), respectively, of after-tax losses comprised of select items. Net cash provided by operating activities was $250 million for the third quarter of fiscal 2019 compared to $200 million for the second fiscal quarter of fiscal 2019.
Press Release - Precision Drilling announces 2019 second quarter financial results. Revenue for the quarter was $359 million, 9% higher than the second quarter of 2018. The increase in revenue is primarily the result of higher activity and average day rates in its U.S. contract drilling business, offset by lower Canadian drilling activity and day rates. Earnings before income taxes, loss (gain) on repurchase of unsecured senior notes, finance charges, foreign exchange, impairment reversal, gain on asset disposals and depreciation and amortization of $81 million was 30% higher than the second quarter of 2018.
REFINERS
(Late Wednesday) Press Release - CVR Energy announced net income of $116 million, or $1.16 per diluted share, on net sales of $1,687 million for the second quarter of 2019, compared to net income of $43 million, or 50 cents per diluted share, on net sales of $1,914 million for the second quarter of 2018. Second quarter 2019 EBITDA was $273 million, compared to second quarter 2018 EBITDA of $180 million. CVR Energy also announced a second quarter 2019 cash dividend of 75 cents per share. The dividend, as declared by CVR Energy’s Board of Directors, will be paid on Aug. 12, 2019, to stockholders of record as of the close of market on Aug. 5, 2019. The annualized dividend of $3 per share represents an industry leading dividend yield of 6 percent based on the July 23, 2019, closing stock price. CVR Partners announced that the Board of Directors of its general partner declared a second quarter 2019 cash distribution of 14 cents per common unit, which will be paid on Aug. 12, 2019, to common unitholders of record as of the close of market on Aug. 5, 2019.
Press Release - Valero Energy reported net income attributable to Valero stockholders of $612 million, or $1.47 per share, for the second quarter of 2019 compared to $845 million, or $1.96 per share, for the second quarter of 2018. Excluding adjustments shown in the accompanying earnings release tables, second quarter 2019 adjusted net income attributable to Valero stockholders was $629 million, or $1.51 per share, compared to second quarter 2018 adjusted net income attributable to Valero stockholders of $928 million, or $2.15 per share. Valero returned $588 million to stockholders in the second quarter of 2019, of which $376 million was paid as dividends and $212 million was for the purchase of approximately 2.6 million shares of common stock, resulting in a year-to-date return of $1.0 billion to stockholders and a total payout ratio of 50 percent of adjusted net cash provided by operating activities.
MLPS & PIPELINES
Press Release - Alerian announced that Andeavor Logistics is expected to be removed from the Alerian Midstream Energy Index (AMNA), Alerian US Midstream Energy Index (AMUS), Alerian Midstream Energy Select Index (AMEI), Alerian MLP Index (AMZ), Alerian MLP Infrastructure Fund (AMZI), and Alerian MLP Equal Weight Index (AMZE) in a special rebalancing.
(Late Wednesday) Press Release - Delek Logistics Partners declared its quarterly cash distribution for the second quarter 2019 of $0.85 per common limited partner unit, or $3.40 per common limited partner unit on an annualized basis. This distribution represents a 3.7 percent increase from the distribution for the first quarter 2019 of $0.82 per common limited partner unit ($3.28 per common limited partner unit annualized) and a 10.4 percent increase over Delek Logistics’ distribution for the second quarter 2018 of $0.77 per common limited partner unit ($3.08 per common limited partner unit annualized). The second quarter 2019 cash distribution is payable on August 13, 2019 to unitholders of record on August 5, 2019.
(Late Wednesday) Reuters - A Native American tribe in Wisconsin is suing Enbridgein a bid to shut down an aging oil pipeline that runs across its tribal land, the latest in a string of challenges against the Canadian company's pipelines in the U.S. Midwest.
Mizuho Securities initiated coverage of EnLink Midstream at ‘Neutral.’
(Late Wednesday) Press Release - The board of directors of ONEOK increased ONEOK's quarterly dividend 2.5 cents per share to 89 cents per share. This increase results in an annualized dividend of $3.56 per share. The dividend is payable Aug. 14, 2019, to shareholders of record at the close of business Aug. 6, 2019.
Press Release - Seadrill Partners announced that it will reduce the quarterly distribution to its common unitholders to 1 cent per unit, down from the reverse split adjusted first quarter level of 10 cents per unit. While it continues to see improvements in tendering activity and dayrates, the reduced distribution level reflects the Company's desire to preserve liquidity ahead of debt maturities in the second half of 2020 and first quarter of 2021. The second quarter cash distribution will be paid on August 14, 2019 to all unitholders of record as of the close of business on August 7, 2019.
Press Release - Shell Midstream Partners announced that the Board of Directors of its general partner declared a cash distribution of $0.4300 per limited partner unit for the second quarter of 2019. This represents an increase of 3.6 percent over the previous quarterly distribution of $0.4150 per unit and a 17.8 percent increase over the distribution paid with respect to the second quarter of 2018. The distribution will be paid August 14, 2019 to unitholders of record as of August 5, 2019.
Press Release - Targa Resources announced updates regarding management succession planning and transition, with the following changes approved by Targa’s Board of Directors. Effective March 1, 2020, Matthew J. Meloy, current President, will become Chief Executive Officer and will be elected to the Board of Directors. Joe Bob Perkins, current Chief Executive Officer, will remain as a member of the management team and will become Executive Chairman of the Board of Directors. James W. Whalen, current Executive Chairman, will retire from the management team and will continue to serve on the Board of Directors. The changes announced continue the succession and transition in leadership contemplated under Targa’s ongoing management succession plan developed with and approved by Targa’s Board of Directors.
MARKET COMMENTARY
U.S. stock index futures gained on encouraging earnings results. European stock markets rose, supported by strong earnings from Roche, AB Inbev and LVMH. The euro was down against the dollar as investors anticipated the European Central Bank to begin another round of monetary easing. Asian equities ended in the green. Gold prices edged up. Top companies including Alphabet, Amazon.com, Intel and Starbucks are expected to report their earnings after market close.
NASDAQ ENERGY TEAM THOUGHT LEADERSHIP
- 5/2/19 - CNBC Worldwide Exchange – Energy sector M&A
- 4/23/19 - Bloomberg Daybreak Asia – Iran sanctions implications
- 3/26/19 - CNBC World Wide Exchange – Energy sector performance
- 3/18/19 - Bloomberg Daybreak Asia – OPEC meeting, Iran sanctions
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