Crude Surges as Russian Invasion Outweighs Talks of Global Reserves Release
The energy sector is set to kick off March mixed to higher start, supported by outsized gains across the underlying commodities but pressured by further weakness in the major equity futures which fell as the Russia-Ukraine crisis deepened.
WTI and Brent crude oil futures extended their rally higher, surging this morning as concerns over supply disruptions after Russia's invasion of Ukraine and related sanctions outweighed talks of a coordinated global crude stocks release. Reports of a Russian armored column bearing down on Ukraine's capital Kyiv this morning after deadly shelling of civilian areas in its second largest city followed comments from Russia who said its forces had cut off the Ukrainian military from the Sea of Azov north of the Black Sea. Russia's economic isolation meanwhile deepened as the world's biggest shipping firm Maersk today said it would halt container movement to and from Russia while Britain said it will ban all ships with any Russian connection from entering its ports. Gains were capped by reports that the United States and allies were discussing a coordinated release of crude stocks to mitigate supply disruption. That release could reach 60 million to 70 million barrels, media outlets reported. Meanwhile, OPEC+, including Russia, are scheduled to meet tomorrow but analyst expect the group to stick to its original plan of a monthly 400,000 bpd increase.
Natural gas futures rebounded this morning following three-straight days of heavy declines, backed by gains in the crude complex and slightly cooler weather forecasts in key consuming regions over the next two weeks.
BY SECTOR:
US INTEGRATEDS
More Western companies are expected to pull out of Russia on Tuesday, as corporations and investors across industries follow the lead of energy firms BP and Shell that abandoned multi-billion-dollar positions after the invasion of Ukraine.
At its annual investor meeting, Chevron reported on its progress to deliver higher returns and advance a lower carbon future. Chevron expects to continue to improve capital and cost efficiency to deliver higher returns. In line with this objective, the company announced: Maintaining guidance for annual organic capital and exploratory expenditures of $15 billion to $17 billion through 2026. A target to reduce 2026 operating expenses per barrel by more than 10% from 2021 levels. Expected oil and gas production CAGR greater than 3% by 2026. The combination of a more capital-efficient investment program, lower unit costs, and higher production is expected to result in a 12% return on capital employed in 2026 and 10% CAGR of operating cash flow per share by 2026, both at $60 Brent. The company also raised its share buyback guidance range to $5 to $10 billion per year, up from prior guidance of $3 to $5 billion per year.
INTERNATIONAL INTEGRATEDS
Bloomberg reported that BP Plc may seek to sell its roughly 20% stake in Rosneft PJSC back to the state-controlled Russian explorer at a huge discount, after the invasion of Ukraine forced the U.K. oil major to make a rapid exit from the country.
Eni Vietnam B.V., a unit of Italian energy group Eni, and India's Essar Exploration & Production Ltd, will start drilling at the Dan Tranh-1X well in Vietnam's offshore oil block 114 from late this month, state oil firm PetroVietnam said.
Shell plc announced the appointment of Sinead Gorman as chief financial officer (CFO), effective April 1, 2022. She will become a member of both Shell’s Executive Committee and Board of Directors. After a distinguished career of 17 years with Shell, the last five years as CFO, Jessica Uhl will step down from her role on March 31, 2022. Jessica will be available to assist Sinead and the Board with transition until June 30, 2022, after which she will leave the group.
Shell plc has agreed to buy a 49% stake in wind farm developer WestWind Energy's Australian arm as it looks to build a low-carbon power generation business in the country, the two companies said.
All production facilities of the Sakhalin-2 oil and gas project in Russia's Sakhalin Island are operating as usual following Shell’s exit, and oil and liquefied natural gas shipments are continuing, Interfax quoted project operator as saying.
The exit of Shell from the Sakhalin-2 liquefied natural gas (LNG) plant does not impact Japan's energy imports, Japan's government spokesperson Hirokazu Matsuno said.
EDF, through its subsidiary EDF Renewables, and Shell New Energies US LLC, equal partners in the Atlantic Shores Offshore Wind LLC consortium, won development rights for a 32,112-hectare offshore area in the New York Bight, between Long Island and the New Jersey coast. After completing the development phase, the consortium will be able to build and operate an offshore wind project with an estimated capacity of 1.5 gigawatts (GW)for a period of 33 years.
TotalEnergies said it will no longer provide capital for new projects in Russia.
France and TotalEnergies should make a decision in the coming days regarding the oil and gas group's business in Russia, the country's Finance Minister Bruno Le Maire told France Info radio.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Gulfport Energy Corporation reported financial and operating results for the three and twelve months ended December 31, 2021 and provided its 2022 development plan and financial guidance. Fourth Quarter 2021 Highlights: Delivered total net production of 1,068.9 MMcfe per day. Reported $558.1 million of net income and $224.9 million of adjusted EBITDA. Generated $128.3 million of net cash provided by operating activities and $133.9 million of free cash flow. Amended credit facility increasing liquidity by more than $160 million. Authorized previously announced stock repurchase program to acquire up to $100 million of outstanding common stock
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Baker Hughes has announced an investment in San Francisco-based GreenFire Energy, an innovator in closed-loop geothermal technology. The new combined offering brings the first integrated Advanced Geothermal Systems (AGS) solution to the market.
Chart Industries has received full notice to proceed for the production of cold boxes and brazed aluminum heat exchangers for Venture Global’s 10 MTPA Plaquemines Phase 1 liquefied natural gas (LNG) export terminal project. In conjunction with the FNTP, Chart booked the full equipment order of $136 million for the Plaquemines project from Baker Hughes. Chart will begin recognizing revenue on this project in 2022 with a multi-year staggered delivery schedule.
As per SEC filing, Cactus filed for a mixed shelf. The size was not disclosed.
Tudor Pickering Holt downgraded Cactus to Hold from Buy
Forum Energy Technologies announced fourth quarter 2021 revenue of $148 million, an increase of $7 million from the third quarter 2021. Orders received in the quarter were $160 million. Net loss for the quarter was $20 million, or $3.46 per diluted share, compared to a net loss of $12 million, or $2.05 per diluted share, for the third quarter 2021. Excluding $7 million, or $1.23 per share of special items, adjusted net loss was $2.23 per diluted share in the fourth quarter 2021, compared to an adjusted net loss of $2.25 per diluted share in the third quarter 2021. Adjusted EBITDA declined by $3.0 million sequentially to $4.2 million.
Martin Marietta Materials announced that it has entered into a definitive agreement to sell certain West Coast cement and ready mixed concrete operations to CalPortland Company for $250 million in cash. The operations include the Redding cement plant, related cement distribution terminals and 14 ready-mixed concrete plants located in California.
TETRA Technologies announced fourth quarter 2021 results. Fourth quarter 2021 revenue of $113 million increased 19% from the third quarter of 2021 and 50% from the fourth quarter of 2020. Net loss before discontinued operations was $703,000, including the benefit of $4.6 million from the net gain on the sale of TETRA's equity ownership in Standard Lithium Ltd. and $3.2 million unrealized mark-to-market losses from TETRA's equity ownership in CSI Compressco LP, and the impact of $891,000 of non-recurring expenses. This compares to a net loss before discontinued operations of $2.5 million in the third quarter of 2021, which included the benefit of $6.2 million of mark-to-market gains from TETRA's equity ownership in Standard Lithium and CSI Compressco and the impact of $1.3 million of non-recurring credits, net of charges. Net loss per share from continuing operations in the fourth quarter was $0.01. Excluding the non-recurring expenses, adjusted net income per share from continuing operations was breakeven in the fourth quarter.
DRILLERS
No significant news.
REFINERS
Phillips 66 announced that it intends to reduce the greenhouse gas emissions intensity from its operations companywide 50% by 2050. The new target builds upon the company’s previously announced Scope 1 and 2 GHG emissions reduction targets.
MLPS & PIPELINES
Citi downgraded BP Midstream Partners LP to Sell from Neutral.
Energy Transfer LP announced the signing of a definitive agreement to sell its 51 percent interest in Energy Transfer Canada ULC (Energy Transfer Canada) to a joint venture which includes participation by Pembina Pipeline Corporation and global infrastructure funds managed by KKR at a valuation of approximately C$1.6 billion (US$1.3 billion) including debt and preferred equity. The sale is expected to result in cash proceeds to Energy Transfer of approximately C$340 million (US$270 million), subject to certain purchase price adjustments. The transaction is expected to close by the third quarter of 2022.
Kinder Morgan said it was working with regulatory authorities to identify the cause of diesel spillage from its pipeline in Georgia, which resumed service on Saturday evening after repairs were completed.
ONEOK, Inc. announced fourth quarter and full-year 2021 results and announced 2022 financial guidance. Higher Full-year 2021 Results, Compared With Full Year 2020: Net income of $1.5 billion, resulting in $3.35 per diluted share. 24% increase in adjusted EBITDA to $3.38 billion. 21% increase in Rocky Mountain region natural gas volumes processed. More than 320 wells connected in the Rocky Mountain region. 45% increase in Rocky Mountain region NGL raw feed throughput volumes. 3.99 times net debt-to-EBITDA ratio. More than $600 million in total debt reduction during 2021.
Summit Midstream Partners, LP announced that Rommel M. Oates has been appointed to the Board of Directors of its general partner, Summit Midstream GP, LLC. Mr. Oates was appointed on February 28, 2022 as a Class III Director.
MARKET COMMENTARY
U.S. stock index futures slid, with banks stocks declining further as the Russia-Ukraine crisis deepened, while a rise in oil prices supported shares of energy companies. European stocks fell, kicking off March on a glum note due to weak earnings reports and jitters over the crisis. Meanwhile, China stocks closed higher after data showed factory activity unexpectedly expanded in February and Japanese shares rise on bargain hunting. The dollar was higher against as basket of major currencies. Palladium jumped on concerns that Western sanctions against Russia would hit supply, with the conflict also driving up prices of safe-haven gold. Investors will keep an eye on manufacturing PMI, scheduled for release later in the day.
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