Markets

Energy Commentary: Energy Sector Poised For Higher Start Ahead of Holiday Week

Friday, June 30, 2017

Sector Commentary

The energy sector is poised for a higher start on the final day of trading for 2Q’17 and ahead of next week’s shortened holiday week, supported by strength in the crude complex and global equity markets. While the markets will be looking towards several key economic data points today including consumer spending data, there is little company news or sector catalysts to impact the group’s trading.

On the energy front, Bank of America became the latest bank to cut its crude oil price targets, lowering their 2017 forecast to $47 and 2018 to $50. Their analysts also downgraded several E&Ps as well as most of the European majors.

WTI and Brent crude oil futures extended their trend higher into its seventh-straight session after touching a 10-month low last week, boosted by end of quarter buying and a weakness in the dollar which fell to its lowest since October this morning. Lingering worries about oversupply and reports that production from Libya had soared above 1 million barrels per day kept a cap on gains. Traders will also be looking towards the Baker Hughes rig report due out later this afternoon.

Natural gas futures carried over its slide lower into its second-straight session, weighed down by yesterday’s marginally bearish inventory report and supported by warmer weather forecasts in key consuming regions over the next two weeks.

INTERNATIONAL INTEGRATEDS

Kepler Cheuvreux resumed BP at ‘Reduce’.

Reuters - Gazprom will sign documents on the exact schedule of gas deliveries via the Power of Siberia pipeline to China in nearest days.

Reuters - Gazprom plans to produce more than 450 billion cubic metres of natural gas this year.

Kepler Cheuvreux downgraded Repsol to ‘Hold’ from ‘Buy’.

Kepler Cheuvreux resumed Royal Dutch Shell and Total at ‘Hold’.

CAnadian INTergrateds

TD Securities downgraded Cenovus Energy and Husky Energy to ‘Hold’ from ‘Buy’.

(Late Thursday) Press Release - Husky Energy plans on shutting the 40,000 barrel per day gasoline making unit at its Lima, Ohio, refinery in September for roughly six weeks for planned work.

U.S. E&PS

Bank of America Merrill Lynch upgraded Cabot Oil & Gas to ‘Buy’ from ‘Neutral’.

Bank of America Merrill Lynch downgraded California Resources to ‘Underperform’ from ‘Neutral’.

Bank of America Merrill Lynch downgraded Concho Resources to ‘Neutral’ from ‘Buy’.

Press Release - Carrizo Oil & Gas agreed to issue senior notes, due 2025, for gross proceeds of US$250 million, in a public offering.

Press Release - Carrizo Oil & Gas agreed to issue 250,000 redeemable preferred shares, for gross proceeds of US$250 million, in a private placement. The company intends to receive net proceeds of approximately US$242.5 MM before deduction of payment of commitment fees and expenses of the issuance.

Press Release - Carrizo Oil & Gas priced the public offering of 15.6 million shares, at a price of US$14.6 per share, for gross proceeds of US$227.76 MM. Goldman Sachs & Co. LLC and Wells Fargo Securities, LLC are acting as joint book-running managers, while Baker Botts L.L.P. is acting as legal advisor to the company for the offering.

Press Release - Noble Energy completed the sale of its Marcellus shale gas assets located in northern West Virginia and southern Pennsylvania, the US, to HG Energy II Appalachia, LLC, a portfolio company of Quantum Energy Partners, for a sale consideration of US$1,225 million.

CANADIAN E&PS

TD Securities upgraded Encana to ‘Buy’ from ‘Hold’.

OIL SERVICES

(Late Thursday) Press Release - On June 26, 2017, Weatherford International Ltd, a Bermuda exempted company and an indirect wholly owned subsidiary of Weatherford International plc, entered into a purchase agreement with Weatherford Ireland, Weatherford International, LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of Weatherford Ireland and an indirect subsidiary of Weatherford Bermuda, and Morgan Stanley. The Purchase Agreement provides for the offer and sale by Weatherford Bermuda, and the purchase by Morgan Stanley, of an additional $250 million aggregate principal amount of Weatherford Bermuda’s 9.875% senior notes due 2024.

DRILLERS

Press Release - Ensco and Atwood Oceanics jointly announced that they have received notice from the Department of Justice and the Federal Trade Commission granting early termination of the waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the proposed merger previously announced on 30 May 2017 pursuant to which Ensco will acquire Atwood in a stock transaction.

MLPs & Pipelines

Press Release - Enterprise Products Partners announced that the company is adding 300 million cubic feet per day of incremental capacity at its cryogenic natural gas processing facility currently under construction near Orla, Texas in Reeves County. Orla II, a second processing train at the facility, will double the inlet capacity of the facility to 600,000 MMcf/d and increase extraction of natural gas liquids from 40,000 barrels per day to 80,000 BPD.

Press Release - NuStar Logistics, a unit of NuStar Energy, was granted permits for three pipelines that cross the US-Mexico border.

Press Release - Veresen announced the expiry of its previously announced solicitation of consents in connection with a proposed amendment of the Indenture under which its outstanding 4.00% Medium Term Notes, Series 1 due 2018, 5.05% Medium Term Notes, series 3 due 2022, 3.06% Medium Term Notes, Series 4 due 2019, and 3.43% Medium Term notes, Series 5 due 2021 were issued.

MARKET COMMENTARY

U.S. stock index futures were slightly higher, a day after Wall Street fell sharply, as investors awaited a slew of economic data, including on consumer spending, a key indicator for U.S. economy. European markets rose and Asian markets witnessed a mixed trading day. The euro traded near a 14-month high and was on track for its best quarter in nearly 7 years, lifted by growing expectations that the European Central Bank is preparing to scale back its monetary stimulus. Weakness in dollar helped oil prices to trade higher. Gold eased and was on track to record its first monthly loss this year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.