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Energy Market Commentary: Energy Stocks Begin New Year Flat

Tuesday, January 02, 2018

Sector Commentary

Energy stocks are flat after last week's gains, continuing the softening that was seen on Friday as oil prices are slightly lower; however, both Brent and WTI are starting the year off above $60 for the first time since 2014 on geopolitical concerns. Broader markets are slightly higher.

Corporate news is quiet today and a relatively quiet schedule is expected for the week. Thursday's DOE Petroleum Supply Weekly numbers incorporate the Ad Valorem tax impact for Gulf Coast operators. Wolfe Research Oil & Gas Refiners Conference is also scheduled for this week.

Crude oil is trading at mid-2015 highs amid large anti-government rallies in Iran and ongoing supply cuts led by OPEC and Russia. Anti-government protesters demonstrated in Iran on Sunday in defiance of a warning by authorities of a crackdown, extending for a fourth day one of the most audacious challenges to the clerical leadership since pro-reform unrest in 2009. Even without the unrest in Iran, which is a major oil exporter, market sentiment was bullish due to falling inventories globally. U.S. commercial crude oil inventories have fallen by almost 20 percent from their historic highs last March, to 431.9 million barrels.

Natural gas is extending last week's 11% surge, rising further on a continuation of the severe cold weather across much of the Midwest and Northeast.

INTERNATIONAL INTEGRATEDS

Reuters - British energy company BP expects a positive impact on future post-tax earnings from the United States after the changes to U.S. corporate taxes, it said on Tuesday. The company said that the lowering of the U.S. corporate income tax rate to 21 percent from 35 percent requires revaluation of BP's U.S. deferred tax assets and liabilities.

Press Release - A $30 billion divestment program will be completed this year even after an agreement to sell a Danish subsidiary dissolved, Royal Dutch Shell said on Tuesday. Shell said an agreement signed in late 2016 with refiner Dansk Olieselskab terminated without the sale completing and operations would continue as usual under the Dutch supermajor's banner.

RBC Capital Markets upgraded Statoil to 'Outperform' from 'Sector Perform'.

U.S. E&PS

(Late Friday) Press Release - Bill Barrett announced that the underwriters of its previously announced public offering of 21,000,000 shares of the Company's common stock have purchased an additional 2,205,529 shares of the Company's common stock pursuant to their over-allotment option. The net proceeds from the exercise of the over-allotment option were approximately $10.5 million, after deducting fees and estimated expenses.

(Late Friday) Press Release - Bill Barrett announced that it has closed the previously announced sale of non-core assets located in the Uinta Basin. The proceeds from this transaction will be used for general corporate purposes.

Raymond James downgraded Cabot Oil & Gas to 'Underperform' from 'Outperform'.

Stifel Nicolaus and Co. discontinued coverage of Cobalt International Energy and Rex Energy .

Press Release - Penn Virginia announced that it has entered into a definitive agreement to acquire assets in the Eagle Ford Shale, primarily in Gonzales and Lavaca Counties, from Hunt Oil Company for $86 million in cash, subject to customary post-closing adjustments. The Company anticipates the acquisition will close on or before March 1, 2018, with an effective date of October 1, 2017. The acquisition is expected to be funded with borrowings under the Company's credit facility.

OIL SERVICES

Janney Montgomery downgraded Smart Sand to 'Neutral' from 'Buy'.

(Late Friday) Press Release - Weatherford International announced it has sold its U.S. pressure pumping and pump-down perforating assets to a subsidiary of SchlumbergerLtd for $430 million in cash. The parties agreed to revised deal terms that reflect an asset sale, as compared to the previously announced OneStim(SM) joint venture. As part of this transaction, Schlumberger will take ownership of Weatherford's U.S. pressure pumping and pump-down perforating related facilities and supplier and customer contracts.

Stifel Nicolaus and Co. discontinued coverage of Willbros Group .

DRILLERS

(Late Friday) Press Release - Ocean Rig UDW announced the following management changes: Pankaj Khanna has been appointed as President and Chief Executive Officer, Iraklis Sbarounis as Chief Financial Officer and David Cusiter as Chief Operations Officer, effective January 1, 2018.

MARKET COMMENTARY

U.S. stock index futures pointed to a higher opening on the first trading day of the year. The dollar continued its weak performance, having suffered the worst year since 2003 in 2017, as investors awaited the release of minutes of Federal Reserve's December meeting on Wednesday. European stocks had a poor start to the year, weighed down by autos, while Asian markets ended largely up, aided by China's stronger-than-expected factory activity. Gold rose, while oil prices were little changed amid large anti-government rallies in Iran.

Nasdaq Advisory Services Energy Team is part of Nasdaq's Advisory Services -- the most experienced team in the industry. The team delivers unmatched shareholder analysis, a comprehensive view of trading and investor activity, and insights into how best to manage investor relations outreach efforts. For questions, please contact Tamar Essner . This communication and the content found by following any link herein are being provided to you by Corporate Solutions, a business of Nasdaq, Inc. and certain of its subsidiaries (collectively, "Nasdaq"), for informational purposes only. Nasdaq makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Sources include Reuters, TR IBES, WSJ, The Financial Times and proprietary Nasdaq research.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.