Markets

Energy Commentary: Thin Trading Expected For First Full Day Of New Quarter

Wednesday, July 05, 2017

Sector Commentary

The energy sector is poised for a lower start on the first full day of trading for the new quarter, weighed down by weakness in the crude complex and as major equity indices are flat ahead of the FOMC minutes release later this afternoon. With little sector news and a light economic calendar, trading is expected to be thin.

WTI and Brent crude oil futures are down over 1% in early trading, sliding after eight-straight sessions of gains on a rise in the dollar, news that OPEC crude exports in June increased and a Bloomberg article which said Russia wouldn't support a further extension or deepening of ongoing production cuts because it would send a message the current deal is insufficient. Trading is also very thin ahead of the API and EIA reports tonight and tomorrow on top of comments from the IEA chief who expects the market to rebalance in 2H’17.

Natural gas futures are flat to lower this morning, pressured by bearish weather forecasts in parts of the U.S. and despite above seasonal temperatures in other areas.

INTERNATIONAL INTEGRATEDS

Gazprom plans to issue a Eurobond in Swiss francs in July.

Reuters - Gazprom will start supplying the fuel to China via the Power of Siberia pipeline on Dec. 20, 2019.

(Late Tuesday) Press Release - The annual General Shareholders Meeting of Gazprom announced the Company's newly elected Board of Directors. The meeting resolved to elect Viktor Zubkov as Chairman of the Gazprom Board of Directors. Alexey Miller, Chairman of the Gazprom Management Committee, was named as Deputy Chairman of the Company's Board of Directors.

Press Release - Petróleo Brasileiro teamed up with China National Petroleum Corp to complete construction of a petrochemical compound in Rio de Janeiro that was ensnared in a massive corruption scandal.

(Late Tuesday) Reuters - Fugro announced that it has been awarded a further 2-year contract by Petróleo Brasileiro for inspection, repair, and maintenance and pipeline inspection services in Brazil.

(Late Tuesday) 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.

Press Release - Gassnova assigned Statoil to evaluate the development of carbon storage on the Norwegian continental shelf. The storage project is part of Norwegian authorities' efforts to develop full-scale carbon capture and storage in Norway. It will capture CO2 from three onshore industrial facilities in Eastern Norway and transport CO2 by ship from the capture area to a receiving plant onshore located on the west-coast of Norway.

Kepler Cheuvreux started Statoil at ‘Hold’.

(Late Tuesday) Press Release - Total and the National Iranian Oil Company have signed a contract for the development and production of phase 11 of South Pars.

(Late Tuesday) Reuters - Total and Iran reached a preliminary agreement to build three petrochemical plants in a deal that if finalised could see the French oil major investing up to $2 billion in Iran.

CAnadian INTergrateds

Raymond James downgraded Cenovus Energy to ‘Underperform’ from ‘Market Perform’.

Raymond James downgraded Imperial Oil to ‘Market Perform’ from ‘Outperform’.

U.S. E&PS

(Late Tuesday) Press Release - WildHorse Resource Development completed the acquisition of oil and gas assets located in Burleson, Brazos, Lee, Milam, Robertson, and Washington counties, Texas, the US, from Anadarko Petroleum, for a purchase consideration of US$594.4 million. The transaction has an effective date of January 1, 2017.

(Late Tuesday) Press Release - Cardinal Energy completed the acquisition of certain light oil assets located in the Weyburn/Midale area of southeast Saskatchewan and in the House Mountain area of Alberta, Canada, from Apache Corporation, for a cash consideration of approximately C$300 million, net of preliminary adjustments.

Press Release - Denbury Resources completed the acquisition of a 23% non-operated working interest in Salt Creek field located in Wyoming, the US, from Linn Energy, for purchase consideration of US$71.5 million, subject to standard purchase price adjustments.

RBC Capital Markets downgraded EQT to ‘Sector Perform’ from ‘Outperform’.

CANADIAN E&PS

Raymond James upgraded ARC Resources and Encana to ‘Strong Buy’ from ‘Outperform’.

Raymond James downgraded Athabasca Oil to ‘Market Perform’ from ‘Outperform’.

Raymond James downgraded Baytex Energy and Pengrowth Energy to ‘Underperform’ from ‘Market Perform’.

National Bank of Canada started Encana at ‘Outperform’.

Raymond James downgraded Meg Energy to ‘Underperform’ from ‘Outperform’.

Press Release - Touchstone Exploration announced the upcoming merger of its two Common Share trading lines. On 26 June 2017, Touchstone was admitted to trading on the AIM market of the London Stock Exchange and pursuant to a private placement, issued 20,000,000 new Common Shares.

OIL SERVICES

Press Release - Forum Energy Technologies announced that it acquired the stock of Multilift from Pelican Energy Partners.

Press Release - Halliburton announced the acquisition of Summit ESP. The addition of Summit’s artificial lift offerings and industry-leading customer service strengthens Halliburton’s artificial lift portfolio for its global customers.

(Late Tuesday) Press Release - Secure Energy Services is pleased to announce it has entered a new $470 million first lien credit facility led by Alberta Treasury Branches with a syndicate of ten financial institutions and Canadian Chartered banks. In addition, the Corporation has entered into a new $130 million second lien credit facility led by National Bank of Canada with a syndicate of three financial institutions and Canadian Chartered banks. The combined facilities total $600 million, and replace the Corporation's previous $700 million syndicated facility.

DRILLERS

(Late Tuesday) Press Release - RPC announced that during the second quarter of 2017 it purchased 348,000 shares under its share repurchase program.

REFINERs

Barclays initiated Alon USA Energy and Delek US Holdings at ‘Equal Weight’.

MLPs & Pipelines

Press Release - Enterprise Products Partners announced it has executed additional long-term contracts to provide transportation services on the Midland to ECHO crude oil pipeline system. The execution of these additional agreements brings total committed volumes on the Midland to Sealy segment of this system to 335,000 barrels per day, which represents approximately 83 percent of the segment’s ultimate committed capacity of 405,000 BPD.

Press Release - Enterprise Products Partners announced that the board of directors of its general partner declared an increase in the quarterly cash distribution paid to partners to $0.42 per common unit, or $1.68 per unit on an annualized basis.

Press Release - Denbury Resources completed the acquisition of a 23% non-operated working interest in Salt Creek field located in Wyoming, the US, from Linn Energy, for purchase consideration of US$71.5 million, subject to standard purchase price adjustments.

BMO Capital Markets upgraded ONEOK to ‘Outperform’ from ‘Market Perform’.

(Late Tuesday) Press Release - ONEOK announced that it has 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.

(Late Tuesday) Press Release - Pembina Pipeline announced that it placed approximately $2.8 billion of integrated capital projects into service, including its Phase III pipeline expansion and two connected major delivery points: the Company's third fractionator at Redwater and its Canadian Diluent Hub.

TD Securities resumed coverage of Veresen at ‘Tender’ rating.

(Late Tuesday) Press Release - Veresen is pleased to announce it has closed the sale of certain additional power assets such that approximately two-thirds of previously announced total proceeds have been received to date.

MARKET COMMENTARY

U.S. stock index futures fell as focus shifted to minutes from the Federal Reserve’s last policy meeting. The dollar strengthened against a basket of currencies, while gold prices slipped. Data on factory goods orders is scheduled for release later in the day. In Europe, weakness in healthcare stocks and utilities weighed on major stock indexes. Markets in Asia recorded broad gains. Oil prices fell more than one percent as climbing OPEC exports and a stronger dollar turned sentiment more bearish.

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