Crude Slips as Recession Fears Cloud Demand Outlook
The energy sector is poised for a mixed to lower start, pressured by weakness in the underlying commodities but supported by strength in the major equity futures which ticked higher this morning with the S&P 500 headed for its fourth positive week in a row on the hope that inflation is peaking.
WTI and Brent crude oil futures slipped lower following two-straight days of strong gains, retreating as recession fears clouded the demand outlook. The market absorbed contrasting demand views from the OPEC and the IEA. OPEC cut its forecast for growth in world oil demand in 2022 by 260,000 bpd and now expects demand to rise by 3.1 million bpd this year. In contrast, the IEA raised its demand growth forecast to 2.1 million bpd citing gas-to-oil switching in power generation. The IEA also raised its outlook for Russian oil supply by 500,000 bpd for the second half of 2022 but said OPEC would struggle to boost production.
Natural gas futures dropped over 2% this morning following three-straight days of gains, falling on forecasts for cooler weather and lower demand next week than previously expected. The price decline came even though output was on track to fall for a fourth day in a row on Friday after hitting a record high on Monday and despite forecasts for hotter weather in late August. Also weighing on prices was the ongoing outage at the Freeport LNG export plant in Texas.
BY SECTOR:
US INTEGRATEDS
Ocean GeoLoop AS announced a NOK ~100 million investment at NOK 37 per share by Chevron U.S.A., and a memorandum of understanding to identify areas of potential technical or commercial collaboration.
INTERNATIONAL INTEGRATEDS
Department for Business, Energy, and Industrial Strategy announced that Equinor'sHydrogen to Humber Saltend (H2H Saltend) production facility has been successfully progressed through Phase-2 of the Government's cluster sequencing process. The selected projects will now proceed to the due diligence stage of the Phase-2 cluster sequencing process to allow them to connect to the East Coast Cluster's CO2 infrastructure and be operational in the mid-2020s.
Petrobras informed that it has begun the opportunity disclosure stage (teaser), referring to the sale of its mining rights for research and mining of potassium salts located in the Amazon Basin.
Petrobras informed that it received a official letter from the Ministry of Economy (ME), ratifying the nomination by the controlling shareholder of Mr. Ricardo Soriano de Alencar for the Company's Board of Directors, to be submitted to the Extraordinary General Meeting (EGM) called for 08/19/2022.
Top U.S. Gulf of Mexico oil producer Shell said it halted production at three U.S. Gulf of Mexico deepwater platforms after a leak shut two pipelines connecting the platforms, adding it expected pipeline service to resume on Friday.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Enerplus announced acceptance by the Toronto Stock Exchange of its notice to commence a normal course issuer bid. Pursuant to the Bid, Enerplus proposes to purchase through the facilities of the TSX, the New York Stock Exchange and/or alternative trading systems, from time to time over the next 12 months, if considered advisable, up to 23,140,231 common shares, being 10% of the public float of Enerplus (within the meaning under the TSX rules) as of August 4, 2022.
CANADIAN E&PS
Vermilion Energy reported Q2 2022 fund flows from operations was $453 million ($2.75/basic share) and free cash flow was $340 million ($2.07/basic share), an increase of 16% and 12%, respectively from the prior quarter. Pro forma Q2 2022 FFO and FCF incorporating the incremental 36.5% ownership in Corrib was $536 million ($3.26/basic share) and $422 million ($2.56/basic share), respectively.
Vermilion Energy announced a 33% increase to its quarterly cash dividend to $0.08 CDN per share, payable on October 17, 2022 to all shareholders of record on September 30, 2022. The ex-dividend date for this payment is September 29, 2022.
OILFIELD SERVICES
CES Energy Solutions announced strong Q2 2022 financial results, demonstrating record quarterly revenue and Adjusted EBITDAC, margin expansion and strong Funds Flow from Operations. Revenue for the quarter was $433.7 million, representing a sequential increase of $32.4 million or 8% relative to CES' previous record of $401.3 million in Q1 2022. Adjusted EBITDAC for the quarter was a record $61.0 million, compared to the Company's previous record of $51.1 million in Q1 2020 and $42.5 million in Q1 2022. Adjusted EBITDAC margin expanded to 14.1% versus 10.6% in Q1 2022, as CES continued to realize the benefits of updated pricing adoption and increased scale.
CES Energy Solutions announced that it has entered into support agreements with certain holders of its 6.375% senior notes due October 21, 2024 representing a majority in aggregate principal amount of outstanding Notes, to consent to the amendment of the trust indenture dated October 20, 2017, as supplemented, governing the Notes. The Consenting Noteholders' consents will be sufficient to enable the Company to implement the Amendment without undertaking a more formal consent solicitation of all of the holders of the Notes, although all Noteholders will be afforded the opportunity to consent should they wish to do so.
ChampionX announced its Board of Directors has declared a regular quarterly dividend of $0.075 per share on the company’s common stock, par value $0.01 per share, to be paid on October 28, 2022 to shareholders of record on October 7, 2022.
As per SEC filing, on August 11, 2022, Minerals Technologies entered into a Refinancing Facility Agreement to amend the credit agreement dated as of May 9, 2014, among the Company, the borrowing subsidiaries party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the other agents party thereto. The Credit Agreement provided for, among other things, a $788,000,000 senior secured floating rate term loan facility and a $300,000,000 senior secured revolving credit facility.
SECURE Energy Services announced that it has renewed and extended its $800 million Senior Secured Revolving Credit Facility to July 2025. The renewed and extended credit facility allows SECURE to maintain a healthy liquidity position and reduces its cost of borrowing, saving at least $2 million over the next four quarters in interest, letters of credit, and other credit facility related costs compared to its previous pricing grid. The Credit Facility is supported by commitments from nine financial institutions and Chartered Banks. In addition, SECURE maintains a $30 million unsecured letter of credit facility guaranteed by Export Development Canada providing additional capacity to the Corporation's capital structure.
Shawcor reported its financial results for the three months ended June 30, 2022. On a consolidated basis, revenue was $307.0 million, operating income was $33.7 million and Adjusted EBITDA was $31.5 million.
DRILLERS
No significant news.
REFINERS
Phillips 66 announced that its subsidiary, Phillips 66 Carrier, LLC, is launching a binding expansion open season on its Seminoe Pipeline system to solicit shipper commitments for services from Billings, Montana, to Casper, Wyoming. The expansion open season will provide an opportunity for interested shippers to secure long-term refined product transportation with Seminoe Pipeline under binding transportation services agreements.
MLPS & PIPELINES
Brooge Energy announced that it has engaged Ernst & Young, one of the largest professional services providers in the world, to provide consulting services with respect to its planned Green Hydrogen and Green Ammonia plant.
U.S. regulators raised doubts about Cheniere Energy's decision to install higher-polluting gas-fired turbines at its Gulf Coast liquefied natural gas terminals in Texas and Louisiana years before they began operating, according to documents reviewed by Reuters.
Kinder Morgan announced it has closed on the acquisition of North American Natural Resources, Inc. (NANR) and its sister companies, North American Biofuels, LLC and North American-Central, LLC. The $135 million acquisition in combined purchase price and related transaction costs includes seven landfill gas-to-power facilities in Michigan and Kentucky.
Teekay announced that its Board of Directors has authorized a share repurchase program for the repurchase of up to $30 million of the Company’s outstanding common shares.
MARKET COMMENTARY
Wall Street futures rose on signs of inflation cooling and as investors anticipate a slower rate of U.S. interest rate hikes. European shares were up, supported by gains in healthcare stocks led by GSK. In Asian markets, Japan's Nikkei ended higher, while China's stocks ended lower as domestic COVID-19 cases rose sharply. The dollar gained, while gold prices dipped. Oil prices fell over demand outlook worries.
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