Crude Slips on Demand Outlook Concerns
SECTOR COMMENTARY
Energy stocks are set to rise alongside broader equity futures, which are higher by two tenths of a percent. Sector earnings ramped up this morning, with several E&Ps, drillers and refiners releasing quarterly results.
Oil steadied above $61 a barrel on Thursday as concern over the demand outlook offset a surprise drop in U.S. crude inventories and the prospect of further action by OPEC and its allies to support the market. In the latest sign of economic weakness that has prompted lower oil demand projections, employment in Germany's private sector fell for the first time in six years in October, a survey showed on Thursday. "Oil may now be off its lows, but gains are very gradual and downward pressures, most notably as a result of the subdued global outlook, persist," said Craig Erlam, analyst at broker OANDA.
Natural gas futures are higher by 4 cents, ahead of weekly inventory data, which expects a build of 88 bcf.
INTERNATIONAL INTEGRATEDS
Reuters - Eni has bought 70% of Edison's stake in Block 12 of the offshore Habi gas concession in Egypt's eastern Mediterranean, an official at state-owned Egyptian gas company EGAS said. The official, who spoke on condition of anonymity, declined to give further details.
Reuters - Brazil’s federal audits court approved a draft contract for a massive transfer of rights oil deal between Petroleo Brasileiro SA Petrobras and the government. The highly anticipated auction, which takes place next month, could take in $26 billion from the combined signing bonuses bidders who win exploration and production rights will be obliged to pay the government.
Press Release - Total announced that it will focus its global venture fund on fostering carbon neutrality. The fund will increase its capital to a cumulative $400 million within five years’ time. Its investments will support start-ups that develop innovative technologies and solutions which help companies to reduce their energy consumption or the carbon intensity of their activities. The fund will be known as Total Carbon Neutrality Ventures (TCNV).
CANADIAN INTEGRATEDS
Press Release - Husky Energy continued to execute its 2019 business plan in the third quarter, with the delivery of all planned milestones in the Integrated Corridor and Offshore businesses. Funds from operations were $1 billion, compared to $1.3 billion in the third quarter of 2018. Net earnings were $273 million. Cash flow from operating activities, including changes in non-cash working capital, was $800 million, compared to $1.3 billion in the third quarter of 2018. The reductions in funds from operations and net earnings include impacts from lower crude oil prices and lower U.S. refining margins. The Board of Directors has approved a quarterly dividend of $0.125 per common share for the three-month period ended September 30, 2019. The dividend will be payable on January 2, 2020 to shareholders of record at the close of business on December 2, 2019.
U.S. E&PS
(Late Wednesday) Press Release - Callon Petroleum issued a statement regarding its previously announced pending all-stock acquisition of Carrizo Oil & Gas. A part of it read, “Yesterday, Callon filed an investor presentation highlighting the benefits of the Carrizo transaction. As the presentation makes clear, Callon is led by an experienced Board of Directors and management team with a track record of successful value-enhancing acquisitions, significant cost savings, and productivity improvements. The Carrizo acquisition is compelling and we expect it will also deliver substantial value to shareholders. Far from precluding any future alternatives for Callon, this transaction improves strategic optionality and creates a stronger and more attractive company for investors as well as prospective buyers or merger partners. By contrast with a letter and presentation which Paulson & Co. Inc. ("Paulson") issued the same day, and which contain a number of objectively false and misleading statements about the merger, our investor presentation and proxy statement lay out the salient facts clearly and in detail.”
(Late Wednesday) Press Release - Range Resources announced its third quarter 2019 financial results. GAAP revenues for third quarter 2019 totaled $622 million, GAAP net cash provided from operating activities (including changes in working capital) was $104 million, and GAAP net income was a loss of $28 million ($0.11 per diluted share). Third quarter earnings results include a $75 million derivative gain due to decreases in commodity prices and a $36 million loss related to asset sales. Non-GAAP revenues for third quarter 2019 totaled $628 million, and cash flow from operations before changes in working capital, a non-GAAP measure, was $128 million. Adjusted net income comparable to analysts’ estimates, a non-GAAP measure, was a loss of $18 million ($0.07 per diluted share) in third quarter 2019. Range repurchased and retired approximately $94 million in principal amount of its senior notes during the quarter for a total cash spend of approximately $90 million. Range’s Board of Directors approved the initiation of a $100 million equity repurchase program, beginning October 2019. The share repurchase program will be executed at times deemed appropriate by the Company.
(Late Wednesday) Press Release - QEP Resources reported third quarter 2019 financial and operating results. The Company reported net income of $81.0 million for the third quarter 2019, or $0.34 per diluted share, compared with net income of $7.3 million, or $0.03 per diluted share, for the third quarter 2018. The Company's increase in net income in the third quarter of 2019 compared to 2018 was primarily due to an $87.4 million gain on realized and unrealized derivative contracts in the third quarter of 2019.
(Late Wednesday) Press Release - QEP Resources announced that it has appointed Joseph N. Jaggers and Barth E. Whitham to its board of directors, effective October 20, 2019. These appointments were made in accordance with QEP’s previously announced cooperation agreement with Elliott Management Corporation. The Company and Elliott mutually agreed on the selection of the two new independent directors, and both Messrs. Jaggers and Whitham will serve on QEP’s newly formed Operations Committee which will be chaired by QEP’s President and CEO Tim Cutt.
OILFIELD SERVICES
(Late Wednesday) Press Release - Core Laboratories reported that continuing operations resulted in third quarter 2019 revenue of $173,200,000. Core's operating income was $31,200,000 with earnings per diluted share of $0.54, all in accordance with U.S. generally accepted accounting principles; operating income, ex-items, a non-GAAP financial measure, was $31,800,000, yielding operating margins of 18% and EPS, ex-items, of $0.50. The third quarter of 2019 also marks the 72nd consecutive quarter that the Company generated positive FCF. Core's third quarter 2019 free cash was returned to Core's shareholders via the Company's regular quarterly dividend. Core will continue its commitment to invest for future growth of the Company, and will return generated FCF to shareholders via the Company's regular quarterly dividend and future opportunistic share repurchases. On 8 October 2019, the Board announced a quarterly cash dividend of $0.55 per share of common stock, payable in the fourth quarter of 2019. The quarterly cash dividend will be payable on 19 November 2019 to shareholders of record on 18 October 2019. Dutch withholding tax will be deducted from the dividend at a rate of 15%.
Press Release - McDermott International announced it has been awarded a sizeable fabrication subcontract for the Greater Tortue Ahmeyim natural gas project. The scope of work for fabrication of the SPS includes: project management; fabrication engineering; procurement; pre-assembly; fabrication; acceptance tests; and system-integration tests. The work is scheduled to begin in the third quarter 2019 and is expected to be completed by third quarter 2020 in McDermott's fabrication facility in Batam, Indonesia. As part of a previous award, McDermott is also fabricating the pipeline structures and riser structure for the Greater Tortue Ahmeyim Project in Batam. The award will be reflected in McDermott's third quarter 2019 backlog.
Press Release - Patterson-UTI Energy reported financial results for the three and nine months ended September 30, 2019. The Company reported a net loss of $262 million, or $1.31 per share, for the third quarter of 2019, compared to a net loss of $75.0 million, or $0.34 per share, for the quarter ended September 30, 2018. Excluding charges discussed below, the majority of which were non-cash, the net loss for the third quarter of 2019 would have been $52.9 million, or $0.27 per share. Revenues for the third quarter of 2019 were $598 million, compared to $867 million for the third quarter of 2018. During the third quarter, the Company spent $75.0 million to repurchase 8.2 million shares, which brings the total repurchases through the first three quarters of 2019 to $225 million for 20.0 million shares under the Company's share repurchase program. At September 30, 2019, $175 million remained under the Company's share repurchase authorization. The Company declared a quarterly dividend on its common stock of $0.04 per share, payable on December 19, 2019, to holders of record as of December 5, 2019.
(Late Wednesday) Press Release - TechnipFMC reported third quarter 2019 results. Total Company revenue was $3,335.1 million. Net income was $21.8 million, or $0.05 per diluted share. These results included after-tax charges and credits totaling $32.6 million of expense, or $0.07 per diluted share. Adjusted net income was $54.4 million, or $0.12 per diluted share. Adjusted EBITDA, which excludes pre-tax charges and credits, was $379.2 million; adjusted EBITDA margin was 11.4 percent.
DRILLERS
Press Release - Precision Drilling announced 3Q19 Revenue of $376 million, a decrease of 2% compared with the third quarter of 2018; Net loss of $4 million or negative $0.01 per share compared to a net loss of $31 million or negative $0.10 per share in the third quarter of 2018; 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 $98 million was 21% higher than the third quarter of 2018. During the quarter, the company recognized $6 million of non-recurring items that positively impacted Adjusted EBITDA but did not relate to current period operations. Funds provided by operations was $80 million versus $64 million in the prior year quarter. Cash provided by operations was $67 million versus $32 million in the prior year quarter. The increase in funds and cash provided by operations in the current quarter was primarily the result of improved operations and management’s focus on free cash flow. The company also reported that for the first nine months of 2019, debt reduction was $146 million and share repurchases was $8 million while its cash balance of $94 million remained largely unchanged from the start of the year.
REFINERS
(Late Wednesday) Press Release - CVR Energy announced net income of $119 million, or $1.18 per diluted share, on net sales of $1,622 million for the third quarter of 2019, compared to net income of $81 million, or 85 cents per diluted share, on net sales of $1,935 million for the third quarter of 2018. Third quarter 2019 EBITDA was $235 million, compared to third quarter 2018 EBITDA of $235 million. CVR Energy also announced a third quarter 2019 cash dividend of 80 cents per share, which represents a 7 percent increase from the prior quarter. The dividend, as declared by CVR Energy’s Board of Directors, will be paid on Nov. 12, 2019, to stockholders of record as of the close of market on Nov. 4, 2019. The annualized dividend of $3.20 per share represents an industry leading dividend yield of 7 percent based on the Oct. 22, 2019, closing stock price.
Media Report - Paul Foster and Jeff Stevens, who together with their affiliates hold approximately 1.7% of the outstanding common stock of Marathon Petroleum, issued a letter to the Company’s stockholders regarding their ongoing engagement with fellow investors and the Company’s Board of Directors. A part of it read, “Those of you who we have spoken with agree that the Board must immediately modernize corporate governance, institute more transparent financial disclosures and reporting, and adopt various elements of Elliott Management’s restructuring proposal. What is more telling, however, is that we have found there is overwhelming support for our calls to have Gary Heminger resign immediately from his chairman and chief executive roles.”
Press Release - Valero Energy reported net income attributable to Valero stockholders of $609 million, or $1.48 per share, for the third quarter of 2019 compared to $856 million, or $2.01 per share, for the third quarter of 2018. The company returned $679 million to stockholders in the third quarter of 2019, of which $372 million was paid as dividends and $307 million was for the purchase of approximately 3.9 million shares of common stock, resulting in a total payout ratio of 61 percent of adjusted net cash provided by operating activities.
MLPS & PIPELINES
Press Release - Enable Midstream Partners announced that Chief Operating Officer Craig Harris is leaving the company for a chief executive role at a privately-held midstream energy company. Harris will serve until Nov. 1, after which the company will begin a search for its next chief operating officer.
Press Release - NuStar Energy announced that its Board of Directors has declared a third quarter 2019 Series A preferred unit distribution of $0.53125 per unit, a Series B preferred unit distribution of $0.47657 per unit and a Series C preferred unit distribution of $0.56250 per unit. The preferred unit distributions will be paid on December 16, 2019 to holders of record as of December 2, 2019. NuStar Energy L.P.’s Board of Directors also declared a third quarter 2019 common unit distribution of $0.60 per unit. The third quarter common unit distribution will be paid on November 14, 2019 to holders of record as of November 8, 2019.
(Late Wednesday) Press Release - The board of directors of ONEOK increased ONEOK's quarterly dividend 2.5 cents per share to 91.5 cents per share. This increase results in an annualized dividend of $3.66 per share. The dividend is payable Nov. 14, 2019, to shareholders of record at the close of business Nov. 4, 2019.
Press Release - Shell Midstream Partners announced that the Board of Directors of its general partner declared a cash distribution of $0.4450 per limited partner unit for the third quarter of 2019. This represents an increase of 3.5 percent over the previous quarterly distribution of $0.4300 per unit and a 16.5 percent increase over the distribution paid with respect to the third quarter of 2018. The distribution will be paid November 14, 2019 to unitholders of record as of November 4, 2019.
MARKET COMMENTARY
U.S. stock futures edged up, along with most Asian shares as corporate earnings and a ceasefire in northern Syria helped prop up sentiment. European stocks rose to their highest in over a year with European Central Bank chief Mario Draghi leading his final policy meeting. In currencies, the Swedish crown rose after the country's central bank said it was still planning to raise interest rates in December. The dollar held firm against a basket of major currencies. In commodities, gold dipped. Investors will keep a watch on results from Amazon, Intel, and Visa after market.
NASDAQ ENERGY TEAM THOUGHT LEADERSHIP
- 9/17/19 - Oil's New Risk Premium Discussion on CNBC TV
- 9/16/19 - Discussion on Bloomberg TV about Impact of Abqaiq Attack
- 7/1/19 - OPEC meeting discussion with CNBC TV
- 7/1/19 - Oil Market Geopolitics with Bloomberg TV
- 5/23/19 - Oil's New Bear Market Discussion with Bloomberg TV
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