Markets

Energy Market Commentary December 12, 2016: Nasdaq Advisory Services

MONDAY, DECEMBER 12, 2016

SECTOR COMMENTARY

The energy sector is set to kick off the week higher amid a rally in the crude complex after the world's top crude producers agreed to the first joint output cut since 2001 over the weekend and despite weakness in the broader equity futures ahead of a busy week on the economic data front. Investors focus will be on Wednesday’s U.S. Federal Reserve decision on interest rates with forecasters expecting that the FOMC will raise the Federal funds rate target range by a 1/4 point.

WTI crude oil futures are up over 4% in early trading while Brent is following closely behind after touching an 18-month high, lifted be news Saturday that producers from outside OPEC, led by Russia, agreed to reduce output by 558,000 bpd, short of the target of 600,000 bpd but still the largest contribution by non-OPEC ever. The move would come on top of the cut of 1.2 million barrels a day agreed to by OPEC in late November with the total of reductions representing almost 2% of the global supply. Keeping a cap on the gains was a rally in the dollar ahead of an expected U.S. rate increase Wednesday.

Natural gas futures are down over 5.5% in early trading after touching two year highs on Friday, pressured by waning forecasts for colder weather and higher heating demand through Christmas.

INTERNATIONAL INTEGRATEDS

Press Release - On behalf of Statoil, DNB has on 9 December 2016 purchased 567,259 shares for use in the group's Share saving plan. The shares have been acquired at a price of NOK 153.37 per share.

Reuters - Italian oil and gas group Eni agreed to sell a 30 percent stake in Egypt's offshore Shorouk concession to Russia's Rosneft for $1.125 billion, cutting its stake in the Zohr giant gas field to 60 percent. Eni said Rosneft would reimburse pro-rata investments already carried out by the Italian group totalling around $450 million at present.

U.S. E&PS

(Late Friday) - Press Release - Matador Resources announced that it has closed the previously announced underwritten public offering of 6,000,000 shares of its common stock. Matador received net proceeds from this offering, before deducting estimated offering expenses, of approximately $146.2 million.

(Sunday) – Press Release - EQT Holdings is in talks with Bendigo & Adelaide Bank about potentially buying the estates business of the regional lender's Sandhurst Trustees unit. EQT has been conducting due diligence to assess the strategic and financial merit of combining the businesses, but no agreement has been reached.

Cowen and Company upgraded ConocoPhillips to ‘Outperform’ from ‘Market Perform’.

Press Release - EQT announced the Company’s 2017 capital expenditure (CAPEX) forecast of $1.5 billion, excluding business development and land acquisitions, and including $1.3 billion for well development. Funding will be provided by cash generated from operations, and cash-on-hand. EQT forecasts 2017 production sales volume of 810 – 830 Bcfe, which includes volume growth of 70 Bcfe, the majority of which stems from the previous year's drilling program. The majority of the volume expected from the 2017 drilling program will be realized in 2018, at which time EQT forecasts production volume growth of 15 – 20% per year for several years.

Atlantic Equities downgraded EOG Resources to ‘Neutral’ from ‘Overweight’.

Press Release - Noble announced that the Company and certain subsidiaries of Royal Dutch Shell have agreed to amend the existing long-term contracts on three ultra-deepwater drillships. In the current, challenging environment for offshore exploration and production projects, the agreements offer benefits for both parties. The contract amendments pertain to the Noble Bully II, Noble Globetrotter I and Noble Globetrotter II, which are operating under 10-year term contracts that commenced in April 2012, July 2012 and September 2013, respectively.

CANADIAN E&PS

Press Release - Enerplus announced that its wholly-owned subsidiary, Enerplus Resources (USA), has entered into a definitive agreement to sell non-operated assets in North Dakota (the "Assets") for total cash consideration of US$292 million (approximately C$385 million), subject to estimated cash tax of US$12 million and customary closing adjustments. The divestment includes approximately 5,800 net acres primarily located on the Fort Berthold Indian Reservation with an average working interest per drilling spacing unit of 8%. Production from the Assets averaged approximately 5,000 BOE per day (approximately 4,000 BOE per day net of royalties) during the third quarter of 2016.

Press Release - Baytex Energy has closed the previously announced bought deal financing (the "Equity Financing"). Baytex issued 21,907,500 common shares (the "Common Shares"), including 2,857,500 common shares pursuant to the full exercise of the over-allotment option, at a price of $5.25 per share for aggregate gross proceeds of approximately $115 million. The company announced that its Board of Directors has approved a 2017 capital budget of $300 to $350 million, which is designed to generate average annual production of 66,000 to 70,000 boe/d. Baytex also announces that Ed LaFehr, President, will succeed James Bowzer as Chief Executive Officer in May 2017.

OIL SERVICES

Wunderlich upgraded Pioneer Energy Services to ‘Buy’ from ‘Hold’.

D.A. Davidson downgraded U.S. Silica Holdings to ‘Underperform’ from ‘Neutral’.

MLPs & PIPELINES

Wells Fargo upgraded Tesoro to ‘Outperform’ from ‘Market Perform’.

(Late Friday) Press Release - Keyera announced a cash dividend for December 2016 of 13.25 cents per common share. The dividend will be payable on January 16, 2017, to shareholders of record on December 22, 2016. The ex-dividend date is December 20, 2016. This dividend is an eligible dividend for the purposes of the Income Tax Act (Canada). For non-resident shareholders, Keyera's dividends are subject to Canadian withholding tax.

(Late Friday) Press Release - Veresen has received notice from the Federal Energy Regulatory Commission ("FERC") that it has denied the request for rehearing submitted on April 8, 2016, by Jordan Cove Energy Project, L.P. and Pacific Connector Gas Pipeline, LP related to their applications for authorization to construct and operate a liquefied natural gas export terminal and natural gas pipeline.

Press Release - EnLink Midstream and EnLink Midstream Partners announced that Robbie Leffel joined the company as Senior Vice President of Crude Oil Commercial. Leffel is leading EnLink's commercial crude oil services, working to significantly increase the crude oil segment's contributions to EnLink's portfolio.

MARKET COMMENTARY

Major U.S. stock index futures were mostly lower, while the dollar rose to its highest since February against the Japanese yen, ahead of the much awaited FOMC meeting this week. Federal Budget figures for November is on the economic calendar. European shares fell, pulled lower by weaker pharmaceutical stocks. Asian markets were also lower as Chinese stocks suffered their biggest fall in six months. Oil prices surged to their highest since mid 2015 after the world's top crude producers agreed to cut output. Gold prices sank to their lowest in over 10 months.


Nasdaq Advisory Services Energy Team Tamar Essner
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