Markets

Energy Earnings Take Center Stage

Friday, April 27, 2018

Sector Commentary

Energy stocks are mixed at the open as earnings season takes center stage, but upward momentum from broader equity futures is providing support against a background of weaker oil prices.

Shares of ExxonMobil are weaker in pre-market trading after it reported its quarterly profit increased from a year ago, but fell short of expectations, marking the second straight quarter that earnings missed consensus. Meanwhile, Chevron is higher in the early session after a large earnings beat.

Crude oil prices are lower, though still poised for the third straight week of gains, amid supply concerns should the United States impose sanctions on Iran. Strength in the U.S. Dollar, which reached a 3.5-month high this morning, weighed on oil futures as higher U.S. yields have prompted unwinding of big short positions in the currency while the euro was hampered by a dovish tone from the European Central Bank.

Natural gas futures are lower by more than 1% on profit-taking from recent strength which took prices to 11 week highs.

U.S. INTEGRATEDS

Press Release – Chevron Corp reported earnings of $3.6 billion ($1.90 per share – diluted) for first quarter 2018, compared with $2.7 billion ($1.41 per share – diluted) in the first quarter of 2017. Foreign currency effects increased earnings in the 2018 first quarter by $129 million, compared with a decrease of $241 million a year earlier.

Press Release – Exxon Mobil Corporation announced estimated first quarter 2018 earnings of $4.7 billion, or $1.09 per share assuming dilution, compared with $4 billion a year earlier. Cash flow from operations and asset sales was $10 billion, including proceeds associated with asset sales of $1.4 billion. During the quarter, the corporation distributed $3.3 billion in dividends to shareholders. Capital and exploration expenditures were $4.9 billion, up 17 percent from the prior year.

INTERNATIONAL INTEGRATEDS

Macquarie Research upgraded BP to ‘Neutral’ from ‘Underperform’.

Press Release - BP completed the acquisition of 49% stake in Kharampurneftegaz, an oil and gas company, from Rosneft Oil.

Press Release - Eni reported adjusted operating profit of €2.38 billion, up by 30% q-o-q. It added that is adjusted net profit: €0.98 billion, up by 31% q-o-q.

Press Release - Net profit of Gazprom attributed to company shareholders under the International Financial Reporting Standards fell 24.9% year-on-year in 2017 to 714.3 bln rubles. Revenues rose 7.1% in the reporting period to 6.6 trillion rubles. Sales profit surged 20% to 870.6 bln rubles.

Press Release - Statoil is making changes in its Corporate Executive Committee to ensure renewal, broaden the experience in the leadership team, and further strengthen the leadership pipeline in the company. EVP Development & Production International Lars Christian Bacher will take over the position as Chief Financial Officer, succeeding Hans Jakob Hegge, who will take the position as US country manager heading up Statoil's global onshore unconventional activities.

CANADIAN INTEGRATEDS

GMP Securities downgraded Husky Energy to ‘Hold’ from ‘Buy’.

(Late Thursday) Reuters - The fire at Husky Energy 38,000 barrel per day Superior, Wisconsin, refinery that injured at least 10 people on Thursday broke out in the asphalt still near the gasoline-producing fluidic catalytic cracking unit.

U.S. E&PS

Press Release - Cabot Oil & Gas reported first-quarter 2018 net income was $117.2 million, or $0.26 per share, compared to net income of $105.7 million, or $0.23 per share, in the prior-year period. First-quarter 2018 adjusted net income was $128.5 million, or $0.28 per share, compared to adjusted net income of $89.1 million, or $0.19 per share, in the prior-year period. First-quarter 2018 EBITDAX was $278.6 million, compared to $306.3 million in the prior-year period.

(Late Thursday) Press Release - Continental Resources announced the execution of a firm transportation agreement on Enable Midstream Partners' Project Wildcat. Project Wildcat will provide Continental Resources 400 million cubic feet per day of additional takeaway capacity from its properties in the SCOOP and STACK plays in Oklahoma.

(Late Thursday) Press Release - Marathon Oil announced today that the Company's board of directors has declared a dividend of 5 cents per share on Marathon Oil Corporation common stock. The dividend is payable on June 11, 2018, to stockholders of record on May 16, 2018.

(Late Thursday) Press Release - Oasis Petroleum will replace Washington Prime Group in the S&P MidCap 400, and Washington Prime Group will replace Biglari Holdings in the S&P SmallCap 600 effective prior to the open of trading on Tuesday, May 1.

Press Release - Sundance Energy Australia through its wholly-owned subsidiary Sundance Energy, completed the acquisition of oil and gas assets in Eagle Ford shale located in Texas, the US, from Pioneer Natural Resources USA, Inc, Reliance Eagleford Upstream Holding L.P., and Newpek, LLC, all oil and gas company, for a cash consideration of approximately US$220.1 million.

Reuters - Southwestern Energy entered second supplemental indenture to march 5, 2012 indenture relating to Co's 4.10% senior notes due 2022.

(Late Thursday) Press Release - Southwestern Energy reported operating income of $255 million for the first quarter of 2018. E&P segment operating income of $238 million was 6% higher than the first quarter of 2017 driven by higher production and improved realized pricing, partially offset by higher operating costs associated with increased volumes. In the Appalachian Basin, net cash provided by operating activities increased to approximately $294 million for the first quarter of 2018, or 36%, compared to approximately $216 million during the first quarter of 2017.

CANADIAN E&PS

(Late Thursday) Press Release - Canacol Energy is pleased to announce the pricing and terms of its offering of senior unsecured notes in the aggregate principal amount of U.S.$ 320 million.

(Late Thursday) Press Release - Vermilion Energy generated fund flows from operations for Q1 2018 was $157 million, a decrease of 13% from the prior quarter as the benefit of higher commodity pricing was more than offset by lower production volumes, higher realized losses on derivatives, a stronger Euro currency and the absence of a favourable tax adjustment in the Netherlands. Year-over-year, FFO increased 10% as compared to Q1 2017 on the strength of higher production and commodity prices. During the quarter, our Board of Directors approved a 7% increase to the monthly dividend to $0.23 per share from $0.215 per share, effective with the April 2018 dividend to be paid on May 15, 2018.

(Late Thursday) Press Release - Whitecap Resources is pleased to announce that all matters presented for approval at the annual and special meeting of shareholders held today have been fully authorized and approved. A total of 406,743,173 common shares representing 72.39% of Whitecap's issued and outstanding common shares were voted in connection with the meeting.

OIL SERVICES

Reuters - Chrysaor announced start of new drilling campaign in UK portfolio new service partnership contract with Baker Hughes.

Press Release - CGG Holding (US) Inc, a fully integrated geoscience company and a wholly-owned indirect subsidiary of CGG SA, completed the public offering of 7.875% first lien senior secured notes, due 2023, for gross proceeds of €280 million.

Press Release - CGG Holding (US) Inc, a fully integrated geoscience company and a wholly-owned indirect subsidiary of CGG SA, completed the public offering of 9% first lien senior secured notes, due 2023, for gross proceeds of €300 million.

(Late Thursday) Press Release - Fairmount Santrol and Unimin Corporation, a wholly owned subsidiary of SCR-Sibelco NV announced that the registration statement on Form S-4 filed with the Securities and Exchange Commission was declared effective by the SEC on April 26, 2018.

(Late Thursday) Press Release - National Oilwell Varco reported a first quarter 2018 net loss of $68 million, or $0.18 per share. Revenues for the first quarter were $1.80 billion, a decrease of nine percent compared to the fourth quarter of 2017 and an increase of three percent from the first quarter of 2017. Operating loss for the first quarter of 2018 was $1 million, or 0.1 percent of sales, and Adjusted EBITDA was $160 million, or 8.9 percent of sales. Other items were a net credit of $12 million, pre-tax, primarily from the reversal of certain accruals, partially offset by restructure charges and severance payments.

(Late Thursday) Press Release - Newpark Resources announced results for its first quarter ended March 31, 2018. Total revenues for the first quarter of 2018 were $227.3 million compared to $204.4 million in the fourth quarter of 2017 and $158.7 million in the first quarter of 2017. Income from continuing operations for the first quarter of 2018 was $7.2 million, or $0.08 per diluted share, compared to $7.9 million, or $0.09 per diluted share, in the fourth quarter of 2017, and a loss from continuing operations of $(1.0) million, or $(0.01) per share, in the first quarter of 2017.

JPMorgan downgraded Oil States International to ‘Neutral’ from ‘Overweight’.

Reuters - Schlumberger is no longer considering acquiring more than 50 percent in Russia's Eurasia Drilling.

DRILLERS

Press Release - Dril-Quip generated $99.2 million of revenue, a quarter-on-quarter decrease of 8% and consistent with general guidance. It reported a net loss of $7.4 million, or $0.20 loss per diluted share, including charges of $0.04 per share.

Press Release - Rowan Companies announced that the Rowan Gorilla VII, a Super Gorilla Class ultra-harsh environment jack-up rig, has been awarded an 18-month program by Chrysaor in the UK sector of the North Sea.

REFINERS

Press Release - CVR Energy announced net income of $66 million, or 76 cents per diluted share, on net sales of $1,537 million for the first quarter of 2018, compared to net income of $22 million, or 26 cents per diluted share, on net sales of $1,507 million for the 2017 first quarter. First quarter 2018 adjusted EBITDA, a non-GAAP financial measure, was $86 million, compared to first quarter 2017 adjusted EBITDA of $80 million. It also announced a first quarter 2018 cash dividend of 50 cents per share. The dividend, as declared by CVR Energy's Board of Directors, will be paid on May 14, 2018, to stockholders of record on May 7, 2018.

Press Release - Phillips 66 announced first-quarter 2018 earnings of $524 million and adjusted earnings of $512 million. This compares with fourth-quarter 2017 earnings of $3.2 billion and adjusted earnings of $548 million. Fourth-quarter 2017 earnings included a $2.7 billion benefit from U.S. tax reform.

MLPS & PIPELINES

Press Release - CVR Refining reported net income of $147 million for the first quarter, up from $67 million in the same period of 2017.

Press Release - Energy Transfer Equity announced a quarterly cash distribution of $0.305 per ETE common unit for the first quarter ended March 31, 2018. This cash distribution is the same as the distribution for the fourth quarter of 2017 and will be paid on May 21, 2018 to unitholders of record as of the close of business on May 7, 2018.

Press Release - Energy Transfer Partners announced a quarterly cash distribution of $0.565 per ETP common unit for the first quarter ended March 31, 2018. This cash distribution is the same as the distribution for the fourth quarter of 2017 and will be paid on May 15, 2018 to unitholders of record as of the close of business on May 7, 2018.

JPMorgan initiated Inter Pipeline at ‘Neutral’.

Press Release - Keyera announced its Keylink NGL gathering pipeline system is complete and in service, providing producers with a safe, reliable and economically improved alternative to trucking NGL volumes. Construction of the pipeline system was completed on time and under its budget of $147 million.

Press Release - Phillips 66 Partners announced first-quarter 2018 earnings of $172 million, or $0.87 per diluted common unit. Cash from operations was $171 million, and distributable cash flow was $194 million. Adjusted EBITDA was $247 million in the first quarter, compared with $254 million in the prior quarter. On April 18, 2018, the general partner’s board of directors declared a first-quarter 2018 cash distribution of $0.714 per common unit, a 5.3 percent increase over the previous quarter distribution of $0.678 per common unit. The Partnership has increased its distribution per common unit every quarter since its initial public offering in July 2013.

Reuters - TransCanada reported a 14 percent rise in first-quarter profit, helped by higher demand for its liquids and natural gas pipelines. Net income attributable to common shares for the first quarter rose to C$734 million, or 83 Canadian cents per share, from C$643 million, or 74 Canadian cents per share, for the same period in 2017. Revenue rose C$3.42 billion from C$3.41 billion.

MARKET COMMENTARY

Futures for the Nasdaq Composite were higher, lifted by strong gains from tech giants such as Amazon and Facebook, while the Dow and S&P futures were little changed. Rally in tech shares also boosted Asian equities and well-received results from Spanish banks buoyed European shares. Oil prices edged lower as the dollar rose. Gold edged higher, but was likely to fall after the prospect for a Korean denuclearization deal eroded bullion's safe-haven appeal. Data on gross domestic product is on the tap for the day.


Nasdaq Advisory Services Energy Team Nasdaq's Advisory Services Tamar Essner
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