Investor Relations

Energy Market Commentary August 2, 2016: Nasdaq Advisory Services

Tuesday, August 2, 2016

Sector Commentary

Energy stocks are indicating a higher opening, bucking the weakness in the broader equities futures market. U.S. equities are poised to extend yesterday’s weakness as investors focused on hefty falls in Europe's banking sector and a new fiscal stimulus package from Japan while energy investors are more sanguine after oil prices steadied after yesterday’s brief dip below $40 in intraday activity.

Energy specific news is light this morning on the corporate side, with the volume of E&P earnings reports expected to pick up tomorrow. On the E&P and MLP side, attention will focus on Williams Companies after the company cut its dividend by 69% in conjunction with 2Q earnings. Among refiners, investors will focus on the beat at Western Refining with shares already up in the pre-market.

Both WTI and Brent are trading higher by more than 1%, though remain near three month lows with a boost on technical support and as the fallout of poor GDP data continued to weigh on the U.S. Dollar. Markets will pay special attention to the API data later tonight given rising stockpiles, especially in gasoline. Preliminary consensus data suggests draws in all three segments – crude, gasoline and distillates.

Natural gas fractionally higher, after dropping nearly 4% yesterday, lifted by technical buying and expectations of continued hot weather in the medium-term.

INTERNATIONAL INTEGRATEDS

Goldman Sachs reinstated InterOil with a ‘Neutral’ rating.

(Late Monday) Reuters - Dril-Quip’s amendment extends term of contract with Petrobras until October 27, 2016 pending resolution of ongoing discussions regarding a longer term extension.

Liberum downgraded Royal Dutch Shell to ‘Hold’ from ‘Buy.’

U.S. E&PS

  • BCEI reported 2Q’16 EPS of ($0.40) versus Thomson Reuters I/B/E/S estimate of ($0.27).
  • CIE reported 2Q’16 EPS of ($0.13) versus Thomson Reuters I/B/E/S estimate of ($0.11).
  • PQ reported 2Q’16 EPS of ($0.63) versus Thomson Reuters I/B/E/S estimate of ($0.47).
  • WMB reported 2Q’16 EPS of $0.19 versus Thomson Reuters I/B/E/S estimate of $0.22.

Wunderlich Securities downgraded Bonanza Creek Energy to ‘Sell’ from ‘Hold.’

(Late Monday) Press Release - Bonanza Creek Energy reported net revenue for the second quarter of 2016 was $54.5 million, a 23% sequential increase from the first quarter of 2016 and a 40% decrease from the second quarter of 2015. Its GAAP net loss for the second quarter of 2016 was $49.5 million, or $1.00 per diluted share, compared to a net loss of $41.2 million, or $0.83 per diluted share, for the second quarter of 2015. The company’s adjusted net loss for the second quarter of 2016 was $19.7 million, or $0.40 per diluted share, compared to an adjusted net loss of $6.9 million, or $0.14 per diluted share for the second quarter of 2015, and an adjusted net loss of $22.4 million, or $0.46 per diluted share for the first quarter of 2016.

Press Release - Cobalt International Energy announced a net loss from continuing operations of $200.4 million, or $0.49 per basic and diluted share for the second quarter of 2016, compared to a net loss from continuing operations of $53.4 million, or $0.13 per basic and diluted share, for the second quarter of 2015.

(Late Monday) Press Release - Comstock Resources announced that it has commenced an offer to exchange any and all of its existing senior notes for three new series of secured notes and, in the case of the Company's 10% Senior Secured Notes due 2020.

(Late Monday) Press Release - PetroQuest Energy announced a loss available to common stockholders for the quarter ended June 30, 2016 of $24,143,000, or $1.38 per share, compared to second quarter 2015 loss available to common stockholders of $61,083,000, or $3.77 per share. For the first six months of 2016, the Company reported a loss available to common stockholders of $63,280,000, or $3.67 per share, compared to a loss available to common stockholders of $183,323,000, or $11.31 per share, for the 2015 period. The losses during the quarter and six months ended June 30, 2016 and June 30, 2015 included non-cash ceiling test write-downs totaling $12,782,000 and $31,639,000, respectively, and $65,495,000 and $174,406,000, respectively.

Barclays upgraded Pioneer Natural Resources to ‘Overweight’ from ‘Equal Weight.’

(Late Monday) Reuters - Williams Companies laid out plans to move forward as a standalone company and invest $1.7 billion in its master limited partnership, Williams Partners, in the wake of the breakup of its more than $20 billion takeover by rival Energy Transfer Equity in June.

(Late Monday) Press Release - Williams Companies announced second quarter 2016 adjusted EBITDA of $1.065 billion, a $48 million increase over second quarter 2015. On its year-to-date, Williams reported an unaudited net loss of $470 million, an unfavorable change of $654 million from the same six-month reporting period in 2015, due primarily to the items affecting the second quarter. Its quarterly cash dividend reduced to $0.20 per share in 3Q 2016 or $0.80 annualized through 2017 with expected increases resuming in 2018.

U.S. E&PS

Press Release - Canacol Energy Ltd. announced that it has committed to and closed a private placement offering of 9,687,670 common shares at a price of CDN $4.08 per Common Share for gross proceeds of CDN $39,525,694 with certain new and existing long term strategic investors, including Cavengas Holdings S.R.L., a Barbados company.

OIL SERVICES

  • CKH reported 2Q’16 EPS of ($0.34) versus Thomson Reuters I/B/E/S estimate of ($0.26).
  • HCLP reported 2Q’16 EPS of ($.26) versus Thomson Reuters I/B/E/S estimate of ($0.22).

Press Release - Hi-Crush Partners reported second quarter 2016 results. The limited partners' interest in net loss was $(10.9) million for the second quarter of 2016, resulting in basic and diluted loss of $(0.26) per limited partner unit. Revenues for the quarter ended June 30, 2016 totaled $38.4 million on sales of 849,263 tons of frac sand. This compares to revenues in the first quarter of 2016 of $52.1 million on sales of 962,998 tons of frac sand.

(Late Monday) Press Release - SEACOR Holdings reported net loss for June 30, 2016 of was $55.2 million. For the six months ended June 30, 2016, net loss attributable was $82.3 million. Its operating revenue was $197 million.

DRILLERS

  • ATW reported 3Q’16 EPS of $0.98 versus Thomson Reuters I/B/E/S estimate of $0.90.
  • RDC reported 2Q’16 EPS of $0.75 versus Thomson Reuters I/B/E/S estimate of $0.81.
  • ATW reported 3Q’16 EPS of $0.98 versus Thomson Reuters I/B/E/S estimate of $0.90.
  • RDC reported 2Q’16 EPS of $0.75 versus Thomson Reuters I/B/E/S estimate of $0.81.

(Late Monday) Press Release - Atwood Oceanics announced that it had earned net income of $99.5 million or $1.53 per diluted share, on revenues of $227.8 million for the quarter ended June 30, 2016 compared to $122.4 million or $1.89 per diluted share, on revenues of $296.4 million for the quarter ended March 31, 2016 and compared to net income of $113.0 million or $1.73 per diluted share on revenues of $330.6 million for the quarter ended June 30, 2015. For the nine months ended June 30, 2016, the Company earned net income of $261.0 million or $4.02 per diluted share, on revenues of $832.0 million compared to net income of $281.9 million or $4.33 per diluted share, on revenues of $1.0 billion for the nine months ended June 30, 2015.

(Late Monday) Reuters - Dril-Quip’s amendment extends term of contract with Petrobras until October 27, 2016 pending resolution of ongoing discussions regarding a longer term extension.

Press Release - Rowan Companies reported net income of $216.7 million, or $1.72 per diluted share, compared to $84.7 million, or $0.68 per diluted share, in the second quarter of 2015. Net income for the current quarter included a $120.0 million, or $0.95 per share, after-tax increase to net income for the Rowan Relentless contract termination and related items. Rowan's revenues were $611.9 million in the second quarter of 2016, an increase of 20% from the prior-year quarter.

Evercore ISI suspended coverage of Transocean.

REFINERS

WNR reported 3Q’16 EPS of $0.72 versus Thomson Reuters I/B/E/S estimate of $0.51.

(Late Monday) Reuters - Phillips 66 reported a steam boiler tripped out of production on Monday morning at its 347,000 barrel per day Alliance, Louisiana refinery.

Press Release - Western Refining reported second quarter 2016 net income attributable to Western of $65.4 million, or $0.70 per diluted share, as compared to net income attributable to Western of $133.9 million, or $1.40 per diluted share for the second quarter of 2015. Net income attributable to Western, excluding special items, was $66.5 million, or $0.72 per diluted share. Western paid a dividend of $0.38 per share of common stock to shareholders in the second quarter.

MLPs & Pipelines

Press Release - Columbia Pipeline Partners reported net income attributable to limited partners of $18.1 million, or $0.18 per common unit compared with net income attributable to limited partners of $16.3 million, or $0.17 per common unit in the prior-year period. CPPL reported net cash flows from operating activities of $177.2 million compared with $151.2 million in the prior-year period. CPPL generated Distributable Cash Flow of $15.5 million for the second quarter compared with $12.5 million in the prior-year period and declared a distribution of $0.1975 per unit on August 1, 2016.

(Late Monday) Press Release - The Board of Directors of CPP GP, as general partner of Columbia Pipeline Partners approved a quarterly distribution payment of $0.1975 per unit for CPPL, payable on August 19, 2016, to both common and subordinated unit holders of record at the close of business on August 12, 2016. This distribution represents an approximately 5.3 percent increase over the prior quarter's distribution of $0.1875 per unit.

(Late Monday) Reuters - Ineos will load the first cargo of ethane from Enterprise Products Partners' new export terminal on the Houston Ship Channel.

Press Release - Holly Energy Partners reported financial results for the second quarter of 2016. Net income attributable to Holly Energy Partners for the second quarter was $39.1 million compared to $30.2 million for the second quarter of 2015. HEP announced its 47th consecutive distribution increase on July 22, 2016, raising the quarterly distribution from $0.575 to $0.585 per unit, which represents an increase of 7.3% over the distribution for the second quarter of 2015.

Press Release - LinnCo announced the final results of, and expiration of the subsequent offering period relating to, its previously announced offer to exchange each outstanding unit of LINN Energy for one LinnCo share upon the terms and conditions of the Prospectus/Offer to Exchange dated April 26, 2016, and the accompanying Amended and Restated Letter of Transmittal.

Press Release - Magellan Midstream Partners, L.P. reported net income of $187.9 million for second quarter 2016 compared to $177.4 million for second quarter 2015. Distributable cash flow (DCF), a non-generally accepted accounting principles (non-GAAP) financial measure that represents the amount of cash generated during the period that is available to pay distributions, was $221.0 million for second quarter 2016 compared to $222.8 million for second quarter 2015. Diluted net income per limited partner unit was 82 cents in second quarter 2016 and 78 cents in second quarter 2015.

Press Release - NuStar Energy announced that its second quarter 2016 quarterly earnings exceeded consensus estimates and surpassed the partnership’s guidance expectations. The partnership reported net income applicable to limited partners of $40.0 million, or $0.52 per unit, for the second quarter of 2016 and $84.8 million, or $1.09 per unit, for the six months ended June 30, 2016. The second quarter 2016 distribution of $1.095 per unit will be paid on August 12, 2016 to holders of record as of August 9, 2016.

(Late Monday) Press Release - Williams Partners reported second quarter 2016 financial results that included strong cash flow from operations and affirmed the partnership intends to maintain its quarterly cash distribution of $0.85 per unit, or $3.40 annualized, through 2017 with planned distribution growth beyond. It reported second quarter 2016 adjusted EBITDA of $1.065 billion, a $57 million increase over second quarter 2015. Its quarterly GAAP loss per unit was $0.49.

(Late Monday) Reuters - Williams Companies laid out plans to move forward as a standalone company and invest $1.7 billion in its master limited partnership, Williams Partners, in the wake of the breakup of its more than $20 billion takeover by rival Energy Transfer Equity in June.

MARKET COMMENTARY

U.S. stock index futures indicated a lower open Tuesday. In Europe, stocks were lower, dragged down by banking shares as worries about the health of the region's lenders continued to weigh on sentiment. Italian banks were the worst hit. Shares of BMPS were down nearly 9 percent and briefly suspended from trade. In Asia, the Japanese cabinet approved 13.5 trillion yen ($132.04 billion) in fiscal measures with cash payouts to low-income earners and infrastructure spending. The yen, however, strengthened against the dollar after the announcement.


Nasdaq Advisory Services Energy Team Tamar Essner
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