Markets

Energy Commentary: Energy Sector Poised For Lower Start

Wednesday, June 28, 2017

Sector Commentary

The energy sector is poised for a lower start, tracking weakness in the crude complex and despite recent premarket gains in the broader equity indices. The tape is absent of any major sector or macro headlines with the EIA data the next major near-term catalyst.

WTI and Brent crude oil futures are marginally lower in early trading, with the U.S. benchmark trailing its UK counterpart, pressured by last night’s API report that said U.S. crude and gasoline stocks increased last week versus expectations of a draw, stirring concerns over the global supply glut. The release also came before a statement from Russia Energy Minister who confirmed they are not discussing deeper oil cuts with OPEC and ahead of the more closely watched EIA report later this morning. Meanwhile, futures are still seeing weakness from yesterday Libya output report, news that OPEC loading programs have strengthened this month and headlines that Russia’s June production is tracking above OPEC compliance levels. A retreat in the dollar is offering some support.

July natural gas futures extended their rally higher into its fifth-consecutive session on the final day of trading as the front month, supported by warmer weather forecasts in key consuming regions that should spur demand.

U.S. INTEGRATEDS

Reuters - A joint venture between Royal Dutch Shell and Exxon Mobil said it will file an appeal against a Dutch government plan to lower a production cap at the Groningen natural gas field by a further 10 percent.

INTERNATIONAL INTEGRATEDS

Renaissance Capital downgraded Gazprom to ‘Hold’ from ‘Buy’.

Reuters - Gazprombank, a banking arm of Gazprom, may leave gas business in Turkey by selling its local assets.

(Late Tuesday) Reuters - Petróleo Brasileiro should cut the maximum amount of natural gas it buys from neighboring Bolivia in half in an effort to encourage domestic importers and distributors to enter the market.

(Late Tuesday) Reuters - Petróleo Brasileiro will resume its investment in renewable energy after reducing debt levels.

Reuters - Repsol Sinopec said it had started gas production from a new field in the North Sea in a boost to the maturing basin just days after EnQuest brought a new oil field on stream. Repsol Sinopec is a subsidiary of Repsol S.A.

Reuters - A joint venture between Royal Dutch Shell and Exxon Mobil said it will file an appeal against a Dutch government plan to lower a production cap at the Groningen natural gas field by a further 10 percent.

Press Release - Statoil said it is awarding contracts to five ship owners, covering seven supply vessels at a total contract value of NOK3.1 billion, or about $367.8 million, including options.

Press Release - Statoil awarded Havila Shipping contracts for the PSV vessels Havila Foresight and Havila Charisma. The contracts are firm for three years with three optional periods each of one year for each vessel.

U.S. E&PS

Press Release - As previously disclosed by Denbury Resources, Phil Rykhoek, Chief Executive Officer and a director of the Company is retiring from such positions effective as of the close of business on June 30, 2017. In conjunction with Mr. Rykhoek’s retirement, the Company’s board of directors has appointed Christian S. Kendall as CEO and a director of the Company effective July 1, 2017. Mr. Kendall will serve as the Company’s President and CEO.

Press Release - Occidental Petroleum entered into an agreement to acquire interest in enhanced oil recovery assets located in the Permian Basin, the US, from Hess Corp, for a purchase consideration of US$600 million. The assets include 34.2% interest in Seminole-San Andres Unit, 46.6% interests in Seminole gas processing plant, 100% interest in the West Bravo Dome C02 field and 9.9% interest in the Bravo Dome unit in New Mexico.

CANADIAN E&PS

(Late Tuesday) Press Release - Connacher Oil and Gas announced that it has obtained an extension of the stay of proceedings in Connacher's Companies' Creditors Arrangement Act proceeding to January 31, 2018 and has entered into an Approval and Modification Agreement #3 with its interim lenders with respect to the interim revolving credit facility established pursuant to the credit agreement dated as of May 25, 2016, and approved by the Court of Queen's Bench of Alberta in Connacher's CCAA proceeding on May 17, 2016.

Press Release - Penn West Petroleum changed its name to Obsidian Energy Ltd., effective at the open on June 29, 2017. According to the TSX, the company will trade under the new symbol OBE and new Cusip No.

OIL SERVICES

Reuters - Halliburton is in late-stage talks to acquire a fast-growing U.S. oilfield equipment supplier backed by Oklahoma energy and George Kaiser.

Reuters - National Oilwell Varco on June 27, entered into a credit agreement evidencing a five year unsecured revolving credit facility. Pursuant to agreement, the company may borrow an aggregate principal amount of up to $3.0 billion. National Oilwell has right to increase aggregate commitments under 2017 facility to $4.0 billion upon consent of only lenders holding any such increase.

DRILLERS

Press Release - Seadrill announced that it amended the revolving credit facility provided to North Atlantic Drilling, a majority owned subsidiary, to mature on July 31, 2017 and increased it to $150 million.

MLPs & Pipelines

Press Release - Cheniere Energy recently inked a deal to export liquefied natural gas to Lithuania's state-owned gas trader Lietuvos Duju Tiekimas. The company expects to deliver the first U.S. LNG cargo by the second half of August.

Reuters - Linn Energy ‍authorized increase in previously announced share repurchase program of up to total of $200 million outstanding shares of Class A common stock.​

MARKET COMMENTARY

World stocks fell following a slump in technology shares after another bout of ransomeware attack disrupted computers at banks and large companies including WPP, Moller-Maersk and Metro. Oil was also a source of concern for investors as prices edged lower after an industry report showed an increase in U.S. inventories. U.S. stock index futures were little changed. The euro surged to a one-year high after European Central Bank President Mario Draghi’s speech convinced investors that policymakers are ready to withdraw the emergency stimulus that has dominated policy-making for almost a decade. Gold prices rose as dollar weakened against a basket of currencies.

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

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