Energy Market Commentary: Concerns Over Rising U.S. Production

Wednesday, February 14, 2018

Sector Commentary

The energy sector is poised for a weak start, tracking declines in the underlying commodities and major market indices after higher than expected CPI data dragged on sentiment and stoked inflation concerns.

WTI crude oil futures were off ~1% in early trading, trailing Brent, under pressure from concerns about rising U.S. production and how much it would hurt efforts by OPEC and its partners to control global supplies. The API last night said that U.S. crude inventories rose by 3.9 million barrels in the week to Feb. 9, to reach 422.4 million. Meanwhile, comments from Saudi Arabia over plans to keep its crude oil exports at around 7 million barrels per day for the first quarter despite planned refinery shutdowns, in an effort to end a global supply glut and boost prices, offered support. The markets will be looking towards the EIA report later this morning as the next major catalyst for crude.

Natural gas futures were off over 1.25%, pressured by warming weather forecasts for the north east.


Reuters - Woodside Petroleum launched a surprise A$2.5 billion ($1.96 billion) share sale on Wednesday to raise funds to take control of and develop a long-stranded gas field off the country's west coast. Woodside said it had agreed to pay $744 million for ExxonMobil 50-percent stake in the Scarborough field, a project that has been stuck on the drawing board for nearly 40 years due to factors including its remote, deepwater location.


(Late Tuesday) Press Release - BP announced the start of gas production from the Atoll Phase One project, offshore Egypt.


(Late Tuesday) Press Release - Antero Resources released its fourth quarter and full year 2017 financial and operational results. It said that GAAP net income was $487 million, or $1.54 per diluted share, adjusted net income of $74 million, or $0.23 per diluted share, and Stand-Alone E&P adjusted net income of $55 million. It added that the proved reserves increased by 12% to 17.3 Tcfe at year-end 2017 (36% liquids), compared to year-end 2016.

(Late Tuesday) Press Release - The board of directors of Apache Corp declared the regular cash dividend on the company's common shares. The dividend on common shares is payable May 22, 2018, to stockholders of record on April 23, 2018, at a rate of 25 cents per share.

(Late Tuesday) Press Release - Diamondback Energy announced financial and operating results for the fourth quarter ended December 31, 2017. It said that its Q4 2017 net income of $115 million, or $1.16 per diluted share; adjusted net income of $153 million, or $1.56 per diluted share. Diamond also initiated annual cash dividend of $0.50 per common share to be payable quarterly beginning with Q1 2018.

Press Release - Goodrich Petroleum announced that its proved oil and natural gas reserves as of December 31, 2017 increased by 41% to 428 billion cubic feet equivalent versus 303 Bcfe at year-end 2016.

(Late Tuesday) Press Release - Occidental Petroleum announced reported net income of $497 million, or $0.65 per diluted share, for the fourth quarter of 2017, compared with $190 million, or $0.25 per diluted share, for the third quarter of 2017. Core income for the fourth quarter of 2017 was $313 million, or $0.41 per diluted share, compared with $137 million, or $0.18 per diluted share, for the third quarter of 2017.


Press Release - Helix Energy Solutions Group announced that it is notifying holders of its outstanding 3.25% Convertible Senior Notes due 2032 that they have the option, pursuant to the terms of the indenture governing the Notes, to require Helix to purchase on March 15, 2018 all or a portion of such holders’ Notes

BMO Capital Markets upgraded Patterson-UTI Energy to ‘Outperform’ from ‘Market Perform’.

Press Release - TETRA Technologies announced that it has entered into an Equity Interest Purchase Agreement with the members of SwiftWater Energy Services, providing for the purchase by TETRA of all of the issued and outstanding equity interests in SwiftWater. SwiftWater is engaged in the business of providing water management and water solutions to oil and gas operators in the Permian Basin market.


Citigroup upgraded Andeavor, Delek US Holdings and Valero Energy to ‘Buy’ from ‘Neutral.

Press Release - Phillips 66 announced it agreed to repurchase 35 million shares of Phillips 66 common stock from a wholly-owned subsidiary of Berkshire Hathaway for $93.725 per share. This $3.3 billion repurchase is expected to close on Feb. 14, 2018.

MLPs & PipelinES

(Late Tuesday) Press Release - DCP Midstream announced its financial results for the fourth quarter and year ended December 31, 2017 and announced its 2018 guidance. The company reported net income attributable to partners of $60 million for the fourth quarter of 2017, or $0.10 per basic and diluted limited partner unit, and $229 million for the year ended December 31, 2017, or $0.43 per basic and diluted limited partner unit. Generated distributable cash flow was s$176 million and $643 million for the fourth quarter and year ended December 31, 2017, respectively, resulting in a distribution coverage ratio of 1.04 times for the full year.


U.S. stock reversed course to trade half a percent lower on Wednesday after data showed consumer prices rose more than expected in January, with a measure of underlying inflation posting its biggest gain in a year.

Nasdaq Advisory Services Energy Team Tamar Essner
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