Markets

Energy Commentary: Oil Extends Gains, Marking Longest Rally In Five Years

Monday, July 03, 2017

Sector Commentary

Energy stocks are pointing to a higher opening as oil extends gains for an 8th straight session, marking the longest rally in over five years. Corporate news is light today and trading volumes are expected to be low as the US equities markets close early and trading will be suspended for the July 4th holiday tomorrow.

Building on last week’s 7% gains, crude prices are up again this morning, albeit fractionally, as they maintain upward momentum on signs that US production is moderating. Baker Hughes reported a surprise drop in rigs in the US, with the count falling by 2, and the EIA showed that crude oil output fell in April for the first time this year. Meanwhile, however, June OPEC production was up by 280,000 bpd at 32.72 million bpd, according to a Reuters survey, despite the group's pledge to hold back output. The increases came mainly from Nigeria and Libya which are exempted from the agreement.

Natural gas futures are down by more than 1% on profit-taking following last week’s 4% uptick as near-term forecasts suggest more moderate temperatures in most of the US for the next 6 days.

U.S. INTEGRATEDS

Reuters - Exxon Mobil confirmed report of flaring event related to restart of a production unit at Joliet, Illinois refinery.

INTERNATIONAL INTEGRATEDS

Press Release - Eni made a new discovery in the PL532 license, southwest of the Johan Castberg field. The new discovery has been made via the well 7219/9-2, drilled in 336m of WD in the Kayak prospect of the Barents Sea PL532 License (Statoil 50% Op., Eni 30% and Petoro 20%).

(Late Friday) Press Release - Gazprom could sue in international arbitration for Ukraine's seizure of Gaztranzit shares.

(Late Friday) Press Release - Gazprom raised its production estimate for all of 2017 to 450 billion cubic meters based on the results of the first half of the year.

(Late Friday) Reuters - The Brazilian government concluded that it owes Petrobras money after a revaluation of the so-called Transfer of Rights contract. The government will offer to settle the debt arising from the contract with Petrobras using a payment in oil.

(Saturday) Press Release - Shell Energy North America, a subsidiary of Royal Dutch Shell, agreed to acquire MP2 Energy LLC. Through its self-developed proprietary systems and technology, MP2 Energy provides market based solutions to commercial and industrial customers for managing energy supply, load, and generation.

Reuters - Statoil started production on Gina Krog Oil and Gas Field in North Sea. Statoil and partners invest a total of some NOK 31 billion in development of Gina Krog Field.

Press Release - Total and the National Iranian Oil Company signed a contract for the development and production of phase 11 of South Pars. The project will have a production capacity of 2 billion cubic feet per day or 400,000 barrels of oil equivalent per day including condensate. The produced gas will supply the Iranian domestic market starting in 2021.

Press Release - Iran signed a $5 billion agreement with Total and a Chinese oil company to develop its massive offshore natural gas field.

Reuters - Total said it will sign a deal that completes a $1 billion investment in a giant Iranian gas field, capping months of negotiations over the first big move by a Western oil company into the country in years.

CAnadian INTergrateds

Press Release - In September 2015, DOF Subsea announced the award of a contract with Husky Energy for the construction of a new LIV committed to a 10-year IMR project off the East Coast of Canada. DOF Subsea is now happy to announce that the vessel, Skandi Vinland, which was designed and built in Norway, has commenced the contract in Canada as scheduled.

U.S. E&PS

Press Release - Denbury Resources announced it closed the previously announced acquisition of a 23% non-operated working interest in Salt Creek Field in Wyoming on June 30, 2017, for cash consideration of $71.5 million before purchase price adjustments.

William Capital downgraded Rice Energy to ‘Hold’ from ‘Buy’.

CANADIAN E&PS

Press Release - Maha Energy is pleased to announce that it has closed the previously announced acquisition of the Brazil business unit of Gran Tierra Energy through the purchase of all of the shares and outstanding intercompany debt of Gran Tierra Finance S.Á.R.L. and Gran Tierra Brazco S.A.R.L., for net cash consideration of $35 million.

OIL SERVICES

(Late Friday) Press Release - Core Laboratories repurchased a total of 15,000 of its common shares during the period beginning Wednesday, 21 June 2017, through Friday, 30 June 2017, at an average price stated in USD of $100.22 per share.

(Saturday) Press Release - Helix Energy Solutions Group announced that it entered into an amended and restated credit agreement with a syndicated bank lending group in the amount of $250 million, consisting of a $150 million revolving credit facility and a $100 million term loan. The proceeds from the term loan as well as cash on hand were used to repay the approximately $180 million outstanding term loan prior to its amendment and restatement.

(Late Friday) Press Release - Key Energy Services closed on the sale of Advanced Measurements to AFGlobal Corporation for an undisclosed amount.

Press Release - McDermott International announced it entered into a 5-year Amended and Restated Credit Agreement with $810 million of capacity for letters of credit and a $300 million revolving cash sublimit. Additionally, the agreement allows for current or new lenders to increase commitments up to a total of $1.0 billion.

REFINERs

Drexel Hamilton dropped coverage of Calumet Specialty Products Partners.

(Late Friday) Press Release - Delek US Holdings announced the closing of the acquisition of the remaining outstanding shares of Alon USA Energy common stock in an all-stock transaction.

(Late Friday) Reuters - Valero Energy filed a lawsuit against Pacific Gas & Electric Company, after PG&E shut off all electricity to Valero's Benicia, California refinery in early May

MLPs & Pipelines

Drexel Hamilton dropped coverage of Boardwalk Pipeline Partners, DCP Midstream Partners LP, EnLink Midstream Partners LP, PennTex Midstream Partners LP, Valero Energy Partners and Western Gas Partners LP.

(Late Friday) Press Release - ONEOK announced that it closed the acquisition of all outstanding common units of ONEOK Partners it did not previously own, and the merger of ONEOK Partners with a subsidiary of ONEOK will be effective at the end of today.

Stifel Nicolaus and Company discontinued coverage of ONEOK Partners.

MARKET COMMENTARY

U.S. stock index futures pointed to a higher open on Monday morning as investors prepared for the first trading week of the second half of 2017. The stock market closes at 1 p.m. on Monday and will not open Tuesday because of the Fourth of July holiday. Monday will see the release of manufacturing PMI data for June at around 9:45 a.m. ET. ISM manufacturing for June and construction spending for May are scheduled 15 minutes later while light vehicle sales for June is also expected to be released throughout the day. In Europe, the pan-European Stoxx-600 index was around 0.63 percent higher on Monday morning. In Asia, the Shanghai Composite in China closed 0.07 percent higher, while the Nikkei in Japan closed 0.11 percent higher.

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