Crude Surges as Russia Attacks Ukraine
Energy stocks are set to surge, while broader equities plunge following confirmations that Russia has invaded Ukraine. Global risk assets are plummeting, with overseas equity markets down between 3% and 5%, while U.S. equities are set to open lower by more than 2%. Meanwhile, risk and inflation hedges are rising, including oil, gold, the U.S. Dollar and Treasurys.
Oil prices jumped on Thursday, with Brent rising above $105 a barrel for the first time since 2014, after Russia's attack on Ukraine exacerbated concerns about disruptions to global energy supply. Brent crude was up 8.4%, at $104.99, having touched a high of $105.79. WTI crude jumped 8%, to $99.43. Brent and WTI hit their highest since August and July 2014 respectively.
"If sanctions affect payment transactions, Russian banks and possibly also the insurance that covers Russian oil and gas deliveries, supply outages cannot be excluded," said Commerzbank analyst Carsten Fritsch. At least three major buyers of Russian oil were unable to open letters of credit from Western banks to cover purchases on Thursday, sources told Reuters.
Natural gas futures are higher by nearly 7%, trading around $4.95, rising alongside crude prices. Weekly inventory data is expected to show a draw of 126 bcf.
BY SECTOR:
US INTEGRATEDS
Exxon Mobil reported total proved reserves of 18,536 mln barrels of oil equivalent at year-end 2021.
INTERNATIONAL INTEGRATEDS
Eni announced that Miamte Floating Production, Storage and Offloading (FPSO) started hydrocarbon production at the Miztón field, within the Development Project in Area 1 in the Gulf of Mexico, approximately 10 kilometres offshore Tabasco coast. The FPSO will allow to increase the country´s production with an economical benefit for Mexico.
Eni gas e luce - Plenitude, through its US based controlled entity Eni New Energy US Inc, today expands its portfolio of renewable capacity in the United States through the acquisition of a portfolio of two assets in Texas for additional 466 MW, developed by global renewable energy developer BayWa r.e.
Pareto Securities upgraded Equinor to Hold from Sell.
Petrobras smashed its all-time record for annual profits and dividend payouts in 2021, as sky-high Brent prices and a laser focus on the firm's exploration and production business continued to bear fruit. In a Wednesday evening securities filing, the firm posted a yearly net income of 106.7 billion reais ($21.3 billion). That was more than double Petrobras' previous record, set in 2019, when the firm posted a profit of 40.1 billion reais, which was about $9.2 billion at the contemporaneous exchange rate. "Recurring" annual profit came in at 83.3 billion reais. Shortly before releasing its results, Petrobras also announced that it was proposing a supplementary dividend of 2.861 reais per share at the next shareholders' meeting in April. If approved as expected, dividends relative to the company's 2021 performance will come to 7.773 reais per share, or 101.4 billion reais in total, a figure the company described as an all-time record.
Petrobras, following up on the release disclosed on 02/22/2022, informed that it has signed with the company Seacrest Petróleo SPE Norte Capixaba Ltda., a wholly owned subsidiary of Seacrest Exploração e Produção de Petróleo Ltda., a contract for the sale of its total interest (100%) in a set of 4 concessions of onshore production fields, with integrated facilities, located in the state of Espírito Santo - ES, jointly called Norte Capixaba Cluster. The total amount of the sale is up to US$ 544 million, with (a) US$ 35.85 million paid on this date (b) US$442.15 million at the closing of the transaction and (c) up to US$ 66 million in contingent payments provided for in contracts, depending on future Brent quotations.
TotalEnergies has made a significant discovery of light oil with associated gas on the Venus prospect, located in block 2913B in the Orange Basin, offshore southern Namibia. The Venus 1-X well encountered approximately 84 meters of net oil pay in a good quality Lower Cretaceous reservoir.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
APA announced the appointment of Dave Stover to its board of directors. Stover is expected to serve on the Audit Committee.
Callon Petroleum reported results of operations for the three months ended December 31, 2021. Net income was $285.4 million, or $4.78 per diluted share, adjusted EBITDA was $339.2 million, and adjusted income was $159.2 million or $2.66 per diluted share.
Chesapeake Energy reported fourth quarter 2021 results and updated 2022 guidance. Net cash provided by operating activities was $563 million; unrestricted cash balance of $905 million. Net income was approximately $1.4 billion, or $11.13 per diluted share; adjusted net income was $308 million, or $2.39 per diluted share. The Company also announced quarterly dividend of $1.7675 per common share, consisting of the first quarterly variable dividend of $1.33 per common share and a quarterly base dividend of $0.4375 per common share, payable on March 22, 2022 to shareholders of record at the close of business on March 7, 2022. 2022 Guidance highlights include: Increased 2022 adjusted EBITDAX guidance to $3.8 – $4.0 billion (previous range $3.4 – $3.6 billion) with no change in capital spending; Expected to generate approximately $1.9 – $2.1 billion in adjusted free cash flow in 2022 and greater than $9 billion in adjusted free cash flow over the next five years.
Coterra Energy reported fourth-quarter 2021 financial results. Net income for fourth-quarter 2021 totaled $939 million, or $1.16 per share. Adjusted net income (non-GAAP) for fourth-quarter 2021, excluding non-recurring items, was $670 million, or $0.83 per share. Coterra's Board of Directors approved a 20 percent increase to the annual base common dividend from $0.50 per share to $0.60 per share ($0.15 per share, per quarter). The Board also approved an incremental $0.41 per share variable dividend payment based on fourth-quarter 2021 free cash flow (non-GAAP) generation. The approved base plus variable quarterly dividend equals $0.56 per share ($0.15 base, $0.41 variable), and will be paid on March 17, 2022 to holders of record on March 7, 2022. Separately, the Company announced a share repurchase program of its common stock with a $1.25 billion authorization, representing approximately 7 percent of the Company's market capitalization as of market close on February 22, 2022.
Rattler Midstream LP, a subsidiary of Diamondback Energy, announced financial results for the fourth quarter ended December 31, 2021. Q4 2021 consolidated net income (including non-controlling interest) was $44.5 million.
Denbury provided its fourth quarter 2021 financial results. Denbury’s fourth quarter 2021 total revenues and other income totaled $362 million, a five percent increase over third quarter 2021 levels, driven primarily by an improvement in underlying commodity prices and improved oil price differentials. The Company’s fourth quarter 2021 average pre-hedge realized oil price was $75.68 per barrel (“Bbl”), which was $1.22 per Bbl below NYMEX WTI oil prices. Denbury’s average differential improved more than 50 cents per Bbl from the third quarter of 2021 as values for the Company’s Gulf Coast and Rocky Mountain region sales volumes both improved relative to WTI.
Denbury announced its 2022 capital budget range for oil and natural gas development expenditures of $290 million to $320 million; at the midpoint comprised of $115 million for continuation of the Cedar Creek Anticline (“CCA”) EOR development and $190 million for other tertiary and non-tertiary oil-focused development projects, capitalized internal costs and CO2 sources and pipelines. This compares to total oil and natural gas development expenditures of $252 million in 2021, of which $123 million was invested in the CCA EOR development and $129 million in other tertiary and non-tertiary oil-focused development projects, capitalized internal costs and CO2 sources and pipelines. In addition to oil and natural gas development capital, the Company currently anticipates 2022 expenditures of approximately $50 million in connection with its strategic carbon capture, utilization, and storage (“CCUS”) initiatives, which could flex higher based on the progress and timing of various CCUS agreements, including the development of new sequestration sites.
Denbury provided an update on the continued growth of Denbury Carbon Solutions, its carbon capture, utilization, and storage (“CCUS”) business, including established 2022 goals and multiple new agreements for CO2 transportation, utilization and storage services. The Company’s 2022 goals for Denbury Carbon Solutions that will further advance the Company’s vision of leading the energy transition with world-class carbon solutions include: Reach agreements for transportation and storage of captured industrial CO2 emissions totaling in excess of a cumulative 10 million metric tons of CO2 per year (mmtpa); Secure CO2 sequestration sites in strategic locations with an aggregate storage potential of at least 1.2 billion tons of CO2; and Progress pre-development activities on multiple potential sequestration sites, with Class VI permitting processes commenced during 2022.
Infinium announced that the company has entered into a strategic alliance with Denbury to collaborate on developing ultra-low carbon fuels projects in the state of Texas. Infinium electrofuels facilities being developed in Brazoria County will convert renewable power into green hydrogen and combine it with industrial-sourced carbon dioxide (CO2) to produce ultra-low carbon fuels using Infinium proprietary technology.
Oasis Petroleum announced financial results for the quarter ending December 31, 2021. Net cash provided by operating activities was $269.4MM, net income was $225.9MM and net income from continuing operations was $188.2MM. Adjusted EBITDA from continuing operations was $200.8MM and Adjusted Free Cash Flow was $148.5MM.
Whiting Petroleum announced fourth quarter 2021 results. Revenue was $473 million for the quarter ending December 31, 2021. Net income (GAAP) was $292 million or $7.34 per diluted share. Adjusted net income (non-GAAP) was $168 million or $4.23 per diluted share.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Enerflex reported its financial results for the three months ended December 31, 2021. Bookings totaled $324 million, up substantially from $53 million in the same period last year and $191 million in the third quarter of 2021, which mirrors the optimism in the recovering oil and gas sector and is reflected in the increased activity in Engineered Systems business. Subsequent to December 31, 2021, the Company’s Board of Directors approved its quarterly dividend of $0.025 per share, payable on April 7, 2022, to shareholders of record on March 10, 2022.
Fluor announced that its joint venture team comprised of Fluor and The Lane Construction Corporation has completed construction of the Port Access Road project for the South Carolina State Port Authority (SCSPA) and South Carolina Department of Transportation (SCDOT) in Charleston, South Carolina. All lanes of traffic are now open to the public.
Granite and DTG Recycle announced the execution of an agreement for Granite to operate the Anderson Rock Quarry at the DTG Recycle Sustainability Park in Yakima, WA. This agreement gives Granite the exclusive right to mine and manufacture aggregate and asphalt at the facility.
Halliburton announced the addition of Ms. Tobi Young and Mr. Earl Cummings to its board of directors. The appointments went into effect on February 23, 2022, and both will stand for election by shareholders at the annual meeting on May 18, 2022.
According to SEC filing, on February 22, 2022, Ms. Patricia Hemingway Hall notified the Board of Directors of that she had decided not to stand for re-election as a Director of Halliburton due solely to a personal decision related to health and travel issues associated with the continuing COVID pandemic and endemic. She will continue as a Director until her term ends on May 18, 2022.
TechnipFMC reported fourth quarter 2021 results. Total Company revenue in the fourth quarter was $1,523.3 million. Loss from continuing operations attributable to TechnipFMC was $127.2 million, or $0.28 per diluted share. Adjusted loss from continuing operations was $55.8 million, or $0.12 per diluted share. Included in adjusted loss from continuing operations was a loss on early extinguishment of debt of $22.4 million.
DRILLERS
Dril-Quip reported financial results for the fourth quarter 2021. Consolidated revenue for the fourth quarter of 2021 was $77.9 million, down $5.1 million from the third quarter of 2021. For the fourth quarter of 2021, the Company reported a net loss of $63.4 million, or $1.81 per share, compared to a net loss of $11.1 million, or $0.31 per share, for the third quarter of 2021. On February 22, 2022, the Board of Directors authorized an additional $100 million in share repurchases under its share repurchase plan.
The Competition and Markets Authority (CMA) is considering whether it is or may be the case that the anticipated acquisition by Noble of The Drilling Company of 1972 A/S (Maersk Drilling), if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services. The CMA announced the launch of its merger inquiry by notice to the Parties on 23 February 2022 and has a deadline of 22 April 2022 for its phase 1 decision.
REFINERS
Delek US Holdings announced financial results for its fourth quarter ended December 31, 2021. Delek US reported a fourth quarter 2021 net loss of $(41.9) million, or $(0.57) per share, versus net loss of $(293.2) million, or $(3.98) per share, for the quarter ended December 31, 2020. On an adjusted basis, Delek US reported Adjusted net loss of $(44.9) million, or $(0.61) per share, for the fourth quarter 2021. This compares to Adjusted net loss of $(204.0) million, or $(2.77) per share, in the prior year. Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") was $58.2 million for the fourth quarter compared to Adjusted EBITDA of $(137.6) million in the prior year.
MLPS & PIPELINES
Cheniere Energy announced its financial results for the fourth quarter 2021. Consolidated Adjusted EBITDA was approximately $1.3 billion and $4.9 billion for the fourth quarter and full year 2021, respectively. Distributable Cash Flow was approximately $540 million and $2.0 billion for the fourth quarter and full year 2021, respectively. Full year 2021 Consolidated Adjusted EBITDA and Distributable Cash Flow are within guidance ranges. Net loss was approximately $1.3 billion and $2.3 billion for the fourth quarter and full year 2021, respectively. The Company is raising full year 2022 Consolidated Adjusted EBITDA guidance to $7.0 - $7.5 billion and full year 2022 Distributable Cash Flow guidance to $4.3 - $4.8 billion due primarily to the accelerated substantial completion of Train 6 at the SPL Project, further improvement in LNG market margins across 2022, and the timing of delivery of certain LNG cargoes around year end 2021.
Cheniere Energy announced that its subsidiary, Cheniere Corpus Christi Liquefaction Stage III, LLC, has amended the long-term Integrated Production Marketing gas supply agreement signed in 2019 with EOG Resources, extending the term and tripling the volume of LNG associated with the natural gas supply under this long-term IPM transaction.
Delek Logistics Partners, LP announced its financial results for the fourth quarter 2021. For the three months ended December 31, 2021, Delek Logistics reported net income attributable to all partners of $41.7 million, or $0.96 per diluted common limited partner unit. This compares to net income attributable to all partners of $40.7 million, or $0.94 per diluted common limited partner unit, in the fourth quarter 2020. Net cash from operating activities was $52.9 million in the fourth quarter 2021 compared to $58.4 million in the fourth quarter 2020. Distributable cash flow was $53.9 million in the fourth quarter 2021, compared to $55.9 million in the fourth quarter 2020.
Golar LNG announced preliminary fourth quarter 2021 results. Total Q4 operating revenues were $115.0 million and Adjusted EBITDA was $93.5 million.
Reuters reported that union workers at Kinder Morgan’s Pasadena, Texas, refined products terminal face a possible lockout after rejecting the company’s last, best and final contract offer.
Shell Midstream Partners, L.P. reported net income attributable to the Partnership of $104 million for the fourth quarter of 2021, which equated to $0.23 per diluted common limited partner unit. Excluding non-cash impairment charges related to our investment in Colonial Pipeline, earnings per diluted common limited partner unit would have been $0.35. Shell Midstream Partners also generated adjusted earnings before interest, income taxes, depreciation and amortization attributable to the Partnership of $167 million. The Board of Directors of the general partner previously declared a cash distribution of $0.3000 per limited partner common unit for the fourth quarter of 2021, consistent with the prior quarter. The distribution was paid February 11, 2022 to unitholders of record as of February 1, 2022.
Targa Resources reported fourth quarter 2021 results. Fourth quarter 2021 net income (loss) attributable to Targa Resources Corp. was $(313.6) million (including a non-cash pre-tax impairment loss of $452.3 million on assets in SouthTX associated with Targa’s Central operations) compared to $33.6 million for the fourth quarter of 2020. The Company reported adjusted earnings before interest, income taxes, depreciation and amortization, and other non-cash items (“adjusted EBITDA”) of $570.6 million for the fourth quarter of 2021 compared to $438.1 million for the fourth quarter of 2020.
According to SEC filing, on February 17, 2022, Targa Resources entered into the Credit Agreement with Bank of America, N.A., as the Administrative Agent, Collateral Agent and Swing Line Lender, and the other lenders party thereto. The Credit Agreement provides for a revolving credit facility in an initial aggregate principal amount up to $2,750,000,000 (with an option to increase such maximum aggregate principal amount by up to $500,000,000 in the future, subject to the terms of the Credit Agreement) and a swing line sub-facility of up to $100,000,000. The Credit Agreement matures on February 17, 2027.
Teekay reported GAAP net loss attributable to shareholders of Teekay of $17.4 million, or $0.17 per share, and adjusted net income attributable to shareholders of Teekay of $8.4 million, or $0.08 per share, in the fourth quarter of 2021 (excluding items).
Teekay Tankers reported GAAP net loss of $39.8 million, or $1.17 per share; and adjusted net loss of $25.0 million, or $0.74 per share, in the fourth quarter of 2021 (excluding items).
MARKET COMMENTARY
U.S. stock index futures sank, mirroring a sharp sell-off in global equities, after Russia launched an all-out invasion of Ukraine. The Russian rouble tumbled to a record low and European currencies including the euro bore the brunt of selling, sparking dramatic moves across foreign exchange markets. Gold prices surged as investors sought safe-haven assets.
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