Crude Slips, Weighed Down by Renewed Demand Concerns, Possible Interest Rate Hikes
The energy sector is set to kick off the holiday-shortened week mostly higher, weighed down by weakness in the crude complex but supported by strength in the major equity futures which were higher ahead of a busy week on the economic data front.
WTI crude oil futures are flat to lower in early trading while Brent dropped following yesterday’s rally, weighed down by renewed concerns about weaker demand and the prospect of more interest rate hikes, trumping support from OPEC+'s first output target cut since 2020. New COVID-19 lockdowns in China have added to worries that high inflation and rate hikes will also hit demand. The European Central Bank is widely expected to lift rates sharply when it meets on Thursday. After the ECB's meeting, a U.S. Federal Reserve meeting will follow on Sept. 21. OPEC+ announced yesterday it decided to cut their October output target by 100,000 barrel per day. Brent prices rose on Monday after the decision. Lending oil some support were signs that an agreement to resurrect Iran's nuclear deal with world powers was less imminent, delaying any return of around 1 million bpd of Iranian crude to the market.
Natural gas futures continued to slide lower for the second-straight session and are down ~4.5% in early trading, pressured by cooling weather forecast in key consuming regions that should stunt demand.
BY SECTOR:
US INTEGRATEDS
No significant news.
INTERNATIONAL INTEGRATEDS
On 2 August 2022, the Directors of BP announced that the interim dividend for the second quarter of 2022 would be US$0.0601 per ordinary share (US$0.3604 per ADS). This interim dividend is to be paid on 23 September 2022 to shareholders on the share register on 12 August 2022. The dividend is payable in cash in sterling to holders of ordinary shares and in US dollars to holders of ADSs. The board has decided not to offer a scrip dividend alternative in respect of the second quarter 2022 dividend. Dividend reinvestment plans have been made available for this dividend for ordinary shareholders and ADS holders (subject to certain exceptions) to receive additional bp shares. Sterling dividends payable in cash will be converted from US dollars at an average of the market exchange rate over the three dealing days between 31 August and 2 September 2022 (£1 = US$1.16206). Accordingly, the amount of sterling dividend payable in cash on 23 September 2022 will be: 5.1718 pence per share.
Eni plans to invest around 4.5 billion euros ($4.47 billion) in upstream activities each year from now to 2025 focusing on several countries, its deputy chief operating officer for natural resources said.
Eni Chief Operating Officer Guido Brusco said during an event in Milan: “plans to fully replace Russian gas by 2025 helped by east med fields.”
Eni Chief Operating Officer Guido Brusco said during an event in Milan: “Algerian gas supplies to Eni will double to 18 billion cubic metres per year by 2024”; “will receive 4 additional billion cubic metres of gas supplies from Northern Europe this year”.
Saudi Arabia's Minister of Investment, HE Khalid Al-Falih, met the CEO of Eni, Claudio Descalzi. During the meeting, Mr Descalzi presented the company's decarbonization strategy with a special focus on the many industrial initiatives and technologies supporting the energy technology transition. During the meeting, Eni and the Saudi Ministry of Investment (MISA) signed a memorandum of understanding aimed at promoting cooperation between Eni, Saudi institutions and companies mainly in the field of sustainable development around the country, and speciality conversion chemicals.
Equinor believes that a wide-scale demand reduction would be the only feasible short-term solution to Europe's power crisis if Russia cuts off all gas supply, a senior executive at the energy group told Reuters.
SEB upgraded Equinor to Buy from Hold.
Petrobras informed that its CEO Caio Mário Paes de Andrade has appointed Paulo Palaia for the position of Chief Digital Transformation and Innovation Officer, replacing Juliano Dantas.
Reuters reported that Petrobras is studying a broader shakeup of its executive board after having tapped a new head of innovation.
Sarawak Shell Berhad (80%, Operator), a subsidiary of Shell, together with PETRONAS Carigali Sdn Bhd (20%), has taken a final investment decision to develop the Rosmari-Marjoram gas project. Rosmari-Marjoram fields are situated 220 kilometres (km) off the coast of Bintulu, Sarawak, Malaysia and will be powered by renewable energy, using solar power for the offshore platform.
The Board of Shell announced the pounds sterling and euro equivalent dividend payments in respect of the second quarter 2022 interim dividend, which was announced on July 28, 2022 at US$0.25 per ordinary share. Shareholders have been able to elect to receive their dividends in US dollars, euros or pounds sterling. Holders of ordinary shares who have validly submitted US dollars, euros or pounds sterling currency elections by August 26, 2022 will be entitled to a dividend of US$0.25, €0.2499 or 21.57p per ordinary share, respectively.
A coalition of companies including oil major Shell and no. 1 container line MSC launched an initiative to explore ways to cut climate-warming methane emissions from ships, which pose a major risk to industry efforts to go greener.
Shell and Exxon Mobil have put up for sale one of Europe's largest and oldest natural gas production ventures, betting on soaring energy prices amid tensions with Russia to attract buyers, according to a document and industry sources.
TotalEnergies has lodged its production licence application for Block 11B/12B offshore of South Africa, the national petroleum regulator said on Tuesday, before a deadline expired which might have seen the oil major forfeit its right to develop the huge discovery.
Lebanon's President Michel Aoun said that TotalEnergies, could help his country solve maritime demarcation issues with Israel, according to a post from the presidency office on Twitter.
Russian President Vladimir Putin has authorised Novatek to purchase shares in the Terneftegaz joint venture from France's TotalEnergies, according to a decree published on the Russian government's website.
CANADIAN INTEGRATEDS
Imperial announced a long-term contract with Air Products to supply low-carbon hydrogen for Imperial's proposed renewable diesel complex at its Strathcona refinery near Edmonton, Alberta. Air Products will provide pipeline supply from its hydrogen plant under construction in Edmonton.
U.S. E&PS
ConocoPhillips will provide natural gas and manage a carbon capture and storage facility for a proposed U.S. hydrogen gas project to be jointly developed with Japan's largest utility JERA, the companies said.
Delfin Midstream and Devon Energy announced that they have entered into a liquefied natural gas export partnership that includes an executed Heads of Agreement for long-term liquefaction capacity and a pre-Financial Investment Decision strategic investment by Devon in Delfin.
As per SEC filing, Earthstone Energy said that the selling stockholders may offer and sell up to 3.9 mln shares of Class A common stock.
Reuters reported that EQT is in advanced talks to acquire peer THQ Appalachia I LLC and associated pipeline infrastructure for around $4 billion, including debt, people familiar with the matter said.
Ovintiv announced that Ralph Izzo has been named as an independent member of its Board of Directors, effective September 6, 2022, and that Bruce Waterman will retire from the Board of Directors effective December 31, 2022.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Baker Hughes has announced it is restructuring and simplifying its organization and accelerating its strategic transformation. These changes will simplify operations, enhance profitability, and drive growth, meeting customer needs and producing solutions in the rapidly evolving energy and industrial markets. Baker Hughes is restructuring its four product companies to focus on two reporting business segments and streamlining its corporate structure, which is expected to deliver at least $150 million in cost savings and form the baseline for further margin improvement. Effective October 1, the Company will be formally restructured into two reporting business segments: Oilfield Services & Equipment (OFSE) integrates the current Oilfield Services (OFS) and Oilfield Equipment (OFE) product companies. Industrial & Energy Technology (IET) integrates the current Turbomachinery & Process Solutions (TPS) and Digital Solutions (DS) product companies. Baker Hughes will also be making changes to its management team reporting to Lorenzo Simonelli. Effective October 1: Maria Claudia Borras is executive vice president (EVP) of OFSE. Borras previously served as EVP of OFS since 2017. Rod Christie is EVP of IET. Christie previously served as EVP of TPS since 2017. Jim Apostolides is senior vice president (SVP) of enterprise operational excellence, a newly-created role to drive better coordination and alignment of key operational areas. Apostolides will oversee the Company’s consolidated Supply Chain Centers of Excellence; Health, Safety, Environment, and Quality (HSEQ); and Environmental, Social, and Governance (ESG) functions. He previously served as SVP of enterprise excellence and has been with the Company for 23 years.
In connection with today’s announcement of Baker Hughes’ restructuring and simplifying of its organizational structure, Neil Saunders will be departing the Company. The Company and Mr. Saunders have agreed to discuss an appropriate transition period, during which Mr. Saunders will transition his duties to other management personnel.
Liberty Energy announced an investment in Natron Energy. Liberty and Natron will collaborate to introduce sodium-ion batteries as an energy storage solution to provide uninterruptible backup power for Liberty’s digiFrac electric frac pumps. Liberty’s digiFrac is the industry’s first purpose-built, fully integrated electric frac pump with high power density and significantly lower emissions compared to the best available frac pump technology in the market. Natron’s sodium-ion batteries are expected to be used to maximize uptime and optimize generator utilization ensuring the lowest possible emissions footprint for onsite power generation.
Dynatrace and Annaly Capital Management will replace American Eagle Outfitters and Minerals Technologies respectively in the S&P MidCap 400. American Eagle Outfitters and Minerals Technologies will replace CalAmp Corp. and Glatfelter Corp. respectively in the S&P SmallCap 600. Outfront Media will replace Fossil Group in the S&P SmallCap 600.
Shawcor announced that it has sold its Lake Superior Consulting operating unit to a private investment group, including members of LSC management, in a transaction generating approximately C$8 million in gross proceeds. The LSC business, reported within the Company’s Pipeline and Pipe Services segment, offers engineering, consulting and field inspection services to the US onshore pipeline and broader energy infrastructure markets. It generated revenue of approximately C$59 million with neutral adjusted EBITDA during the full year of 2021 and generated revenue of approximately C$26 million with an adjusted EBITDA loss of C$1 million during the first half of 2022. Proceeds from the sale will be used to reduce the Company’s existing indebtedness.
TETRA Technologies announced changes in its senior management with the promotion of Matt Sanderson, to Executive Vice President and Chief Commercial Officer and the addition of Roy McNiven, who will be joining TETRA as Senior Vice President, Energy Services Operations.
Evercore ISI initiated coverage of Weatherford International with a Outperform rating.
DRILLERS
Reference is made to the voluntary public share exchange offer by Noble to acquire the entire share capital (excluding any treasury shares) in The Drilling Company of 1972 A/S ("Maersk Drilling") in connection with the business combination of Noble and Maersk Drilling. The offer document, setting out the full terms and conditions to the Exchange Offer was approved by the Danish Financial Supervisory Authority on 8 August 2022 and published by Topco on the same day. Pursuant to the Offer Document, the Exchange Offer became valid as of 10 August 2022 and expires on 8 September 2022 at 23:59 (CEST). The Exchange Offer is recommended by the board of directors of Maersk Drilling. Topco would like to remind all shareholders of Maersk Drilling who have not yet tendered their shares in Maersk Drilling, of the expiry of the Offer Period on 8 September 2022 at 23:59 (CEST) and encourage all Maersk Drilling Shareholders, who have not yet tendered their Maersk Drilling Shares to do so in advance of the expiry of the Offer Period.
Patterson-UTI Energy reported that for the month of August 2022, the Company had an average of 128 drilling rigs operating in the United States. For the two months ended August 31, 2022, the Company had an average of 127 drilling rigs operating in the United States.
BTIG upgraded Transocean to Buy from Neutral
SpareBank upgraded Transocean to Buy from Neutral
REFINERS
The U.S. Environmental Protection Agency has revoked the pollution control permit of Bluewater Texas Terminal, according to a letter sent by the EPA to the offshore oil terminal, following objections from environmental groups. The terminal, jointly developed by refiner Phillips 66 and commodities trader Trafigura, had applied for a Clean Air Act permit in 2019 and received an EPA pollution control license in November 2020 that allowed it to emit almost 19,000 tons of pollutants per year.
MLPS & PIPELINES
Ardmore Shipping announced that the Company has completed its annual review of its securities filings. As a part of this process, the Company has filed with the Securities and Exchange Commission a shelf registration statement on Form F-3 registering $500 million of primary securities, which will replace the Company's existing shelf registration statement filed in August 2019 (File Number: 333-233540) and a prospectus supplement for an at-the-market program and has entered into an open market sale agreement pursuant to which the Company may offer and sell common shares of up to an aggregate sales amount of $50 million. The ATM program will supplement the Company's existing ATM program.
Jefferies upgraded Frontline to Buy from Hold.
Nordic American Tankers provided an update on the position of its suexmax vessels: “The situation associated with the war between Russia and Ukraine is difficult to assess in detail. However, it is a general experience that uncertain times are good for Nordic American Tankers. Our suezmaxes are well placed to benefit from the situation. We have reduced our fleet to about 20 vessels. We are now in an upward trend and over the next year, two or three, we expect to increase our fleet.” Furthermore, “Going forward, we prioritize to distribute dividend. In a stronger market that we now see, the dividend can be expected to increase.”
Jefferies upgraded Nordic American Tanker to Buy from Hold.
Jefferies upgraded Tsakos Energy Navigation to Buy from Hold.
MARKET COMMENTARY
U.S. stock futures pointed to a positive opening for Wall Street after Monday's Labor Day holiday. Investors’ focus will be set on PMI data from ISM scheduled for release later in the day. European equities were in the green and the euro edged higher against the dollar as policy makers tried to get a grip on the energy crisis. Japan's Nikkei ended higher after a four-session losing streak, as investors bought back stocks. Oil dropped as concerns surrounding weaker demand remerged and on prospect of more interest rate hikes. Gold prices were higher.
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