Investor Relations

Energy Market Commentary August 24, 2016: Nasdaq Advisory Services

Wednesday, August 24, 2016

Sector Commentary

Oil and gas stocks are expecting a flat open on Wednesday, as investors concentrate on fluctuating oil prices and key data releases ahead of a key speech by the Federal Reserve's Chair.

Crude oil futures are lower this morning with WTI underperforming Brent on an unexpected increase in U.S. crude stocks that revived worries about the supply glut that has capped prices for the past two years. Industry data from the API showed late on Tuesday that U.S. crude inventories had risen by 4.5 million barrels in the week ending Aug. 19. Analysts had expected a 455,000-barrel fall. Further pressuring prices, Iraq's prime minister said on Tuesday his country had not yet reached its full oil market share, suggesting the government would not restrain crude output as part of any OPEC agreement. China's state-controlled oil firm CNOOC said on Wednesday an oil price recovery was facing "significant headwinds", as it reported swinging to a loss in the first half of the year due to weak prices. A slightly bullish indicator was the news that Iran will attend the informal OPEC meeting next month following their refusal to attend the Doha round in April.

Henry Hub futures are up again this morning, reaching their highest level in more than two weeks, as traders covered their short positions amid expectations that hotter-than-usual weather would boost power demand for cooling. "It is a combination of short-covering and a change in weather forecasts more than anything else," said Martin King, an analyst at FirstEnergy Capital. Forecasts for an active hurricane season also provided support, with analysts expecting some reduction in gas flows if storms damage energy infrastructure at the Gulf of Mexico.

U.S. E&PS

Press Release - EXCO Resources announced the final results and expiration of the previously announced cash tender offer for EXCO’s outstanding 7.500% Senior Notes due 2018 and EXCO’s outstanding 8.500% Senior Notes due 2022 and the consent solicitation to amend certain terms of the indenture governing the 2022 Notes.

Capital One Securities upgraded Laredo Petroleum to “Overweight” from “Equal weight.”

Stephens upgraded PDC Energy to ‘Overweight’ from ‘Equal Weight.’

(Late Tuesday) Press Release - PDC Energy announced that it has entered into definitive agreements to acquire two privately held companies managed by Kimmeridge Energy Management Company for approximately $1.5 billion, subject to due diligence and certain customary closing conditions.

Wells Fargo Securities initiated coverage of RSP Permian with an ‘Outperform’ rating.

CANADIAN E&PS

(Late Tuesday) Press Release - Canacol Energy is pleased to provide the following update concerning the Nispero 1 gas discovery, the doubling of its gas drilling program for the remainder of 2016, and an increase of 9% in Corporate cash sales to 19,440 barrels of oil equivalent per day for the month of July 2016 compared to the average cash sales of 17,817 boepd for the quarter of April 1 to June 30, 2016.

(Late Tuesday) Press Release - Gran Tierra Energy is pleased to announce today that the Company has completed the previously announced acquisition of PetroLatina Energy for a purchase price of approximately $525 million, consisting of an initial payment of $500 million at closing, subject to closing adjustments, and a deferred payment of $25 million no later than December 31, 2016.

OIL SERVICES

Stifel Nicolaus and Company initiated coverage of SEACOR Holdings with a ‘Buy’ rating.

(Late Tuesday) Press Release - U.S. Silica Holdings announced that it has completed the acquisition of Sandbox Enterprises.

MLPs & Pipelines

Press Release - Jacobs Engineering Group announced it signed a three-year master engineering services agreement with TransCanada.

MARKET COMMENTARY

U.S. stock index futures were little changed as the main focus remained on the global central banks meet at Jackson Hole this week where U.S. Federal Reserve Chair Janet Yellen might provide clues on a possible interest rate hike. Building permits, monthly home prices and existing home sales will be closely watched to gauge strength of the economy. Hewlett-Packard marks an end of the earnings season and is expected to report after the closing bell. European shares rose, lifted by gains in Sweden's hygiene product maker SCA and British advertising group WPP, while the FTSE 100 was dragged lower by British miner Glencore. Asian stocks closed mixed as strong U.S housing data overnight increased the chances of an interest rate increase, prompting some investors to take profits. The dollar consolidated, while gold edged lower.


Nasdaq Advisory Services Energy Team Tamar Essner
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