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Energy Market Commentary: Energy Stocks Look To Continue Rallying

Tuesday, November 07, 2017

Sector Commentary

Energy stocks are poised to extend yesterday's rally with oil prices hovering near the highest levels in nearly 2.5 years. A handful of small and mid-cap producers reported 3Q results that mostly beat expectations though production figures were underwhelming.

Crude oil prices are easing only fractionally from nearly 2½ year highs after having posted the largest gain in six weeks the previous day following the Saudi Crown Prince's cement on power. Tensions also escalated between Saudi and Iran following a Yemen rocket launch into Saudi. Saudi Arabia and its Gulf allies said they see Iran as responsible for the Yemen conflict and yesterday the Saudi Foreign Minister said his country reserves the right to respond to Iran's "hostile actions."

Natural gas prices are down moderately after a gain of +5% yesterday which took the front-month to its best closing price since mid-September.

U.S. INTEGRATEDs

(Late Monday) Reuters - Chevron Canada, a unit of global oil major Chevron Corp , is forging ahead with its first ever Canadian shale play development, targeting the East Kaybob region of central Alberta's Duvernay formation.

HSBC downgraded Exxon Mobil to 'Reduce' from 'Hold'.

INTERNATIONAL INTEGRATEDS

HSBC upgraded Eni to 'Buy' from 'Hold'.

(Late Monday) Reuters - Petroleo Brasileiro asked Odebrecht's offshore drilling arm to halt operations of a rig, after an explosion there killed three people in June.

Press Release - Statoil awarded Multiconsult ASA the contract for Northern Lights - Site preparation and Marine structures. The value of the contract is approximately NOK 24 million for Multiconsult ASA and work will begin immediately.

HSBC downgraded Statoil to 'Hold' from 'Buy'.

Press Release - Marie-Noëlle Semeria has been appointed Senior Vice President, Group CTO at Total , effective November 2nd, 2017.

CAnadian INTEGRATEDS

Press Release - Cenovus Energy is expected to announce a deal shortly to sell its interest in a major Saskatchewan oil project just as surging crude prices rekindle industry interest in attractive energy properties.

U.S. E&PS

Drexel Hamilton downgraded Cabot Oil & Gas to 'Hold' from 'Buy'.

Morgan Stanley upgraded California Resources to 'Overweight' from 'Equal Weight'.

(Late Monday) Press Release - California Resources reported a net loss attributable to common stock of $133 million, or $3.11 per diluted share, for the third quarter of 2017, compared with net income attributable to common stock of $546 million, or $13.04 per diluted share, for the third quarter of 2016. The adjusted net loss(1) for the third quarter of 2017 was $52 million, or $1.22 per diluted share, compared with an adjusted net loss(1) of $71 million, or $1.74 per diluted share, for the third quarter of 2016. For the first nine months of 2017, the CRC net loss was $128 million, or $3.01 per diluted share, compared with CRC net income of $356 million, or $8.79 per diluted share, for the same period in 2016.

(Late Monday) Press Release - Callon Petroleum reported total revenue of $84.6 million and total revenue including cash-settled derivatives of $83.4 million, including the impact of a $1.2 million loss from the settlement of derivative contracts.

Press Release - Denbury Resources announced net income of $0.4 million, or $0.00 per diluted share, for the third quarter of 2017. Excluding special items, the Company reported adjusted net income for the quarter of $14 million, or $0.04 per diluted share.

(Late Monday) Press Release - Diamondback Energy 's third quarter 2017 net income was $73 million, or $0.74 per diluted share. Adjusted net income was $131 million, or $1.33 per diluted share.

(Late Monday) Press Release - Matador Resources ' net income (GAAP basis) increased 26% from $11.9 million, or earnings of $0.13 per diluted common share, in the third quarter of 2016 to net income (GAAP basis) of $15.0 million, or earnings of $0.15 per diluted common share, in the third quarter of 2017. Matador's adjusted net income (a non-GAAP financial measure) increased 231% from adjusted net income (non-GAAP) of $5.4 million, or adjusted earnings of $0.06 per diluted common share, in the third quarter of 2016 to adjusted net income (non-GAAP) of $17.8 million, or adjusted earnings of $0.18 per diluted common share, in the third quarter of 2017.

(Late Monday) Press Release - PDC Energy recorded a net loss of $292.5 million, or $4.44 per diluted share in the third quarter of 2017, which includes $41.9 million of exploration, geologic and geophysical expense primarily related to two exploratory dry holes in the Company's Western acreage block of its Delaware Basin asset.

Barclays downgraded QEP Resources to 'Equal Weight' from 'Overweight'.

(Late Monday) Press Release - RSP Permian reported net income of $21.3 million, or $0.14 per diluted share. Adjusted net income, which does not include certain items, was $28.2 million, or $0.18 per diluted share. Adjusted EBITDAX of $144.7 million, a 120% increase compared to 3Q16 and a 7% increase compared to 2Q17.

Barclays upgraded WPX Energy to 'Overweight' from 'Equal Weight'.

CANADIAN E&PS

Press Release - Canadian Natural 's 2018 capital budget is targeted at approximately $4.3 billion, $0.5 billion less than 2017, excluding the Athabasca Oil Sands Project acquisition capital. The Company targets to deliver 2018 production growth of approximately 17% at the midpoint of 2018 budget guidance with targeted maintenance capital at approximately $3.0 billion, demonstrating the benefit of a long life low decline asset base. The Company's 2018 funds flow from operations is targeted to be approximately $7.9 billion to $8.3 billion. Free cash flow is targeted to be approximately $2.3 billion to $2.7 billion, after budgeted capital and the current dividend, based upon average annual WTI strip pricing of US$52.03/bbl and AECO strip pricing of C$2.11/GJ.

OIL SERVICES

Press Release - CWC Energy Services completed the previously announced acquisition of all of the service and swabbing rig assets and continuing operations of C&J Energy Production Services-Canada Ltd. from C&J Energy Services for total consideration of $37.5-million in cash.

(Late Monday) Press Release - Calfrac Well Services is pleased to announce that Alberta Investment Management exercised its warrants which were issued in conjunction with the senior secured second lien term loan facility announced on June 10, 2016.

Reuters - U.S. Silica Holdings announced third quarter 2017 results *Q3 earnings per share $0.50 *Q3 revenue $345 million versus I/B/E/S view $330.7 million *Q3 earnings per share view $0.48 -- Thomson Reuters I/B/E/S *Q3 earnings per share $0.51 excluding items *U.S. Silica Holdings Inc qtrly ‍overall tons sold totaled 4.075 million, up 63% compared to 2.493 million tons sold in Q3 of 2016​ *U.S. Silica Holdings Inc - sees capex for full year 2017 will be at high end of Q2 guidance or approximately $375 million​.

DRILLERS

(Late Monday) Press Release - Nabors Industries and Tesco jointly provided a status update of the previously announced acquisition of Tesco Corporation by Nabors Industries Ltd. The two companies have recently received anti-trust clearance from the U.S. Department of Justice and the Canada Competition Bureau. In addition, the approval process with the Federal Antimonopoly Service of the Russian Federation was initiated, with its determination expected in the next few weeks. The companies further stated that a joint integration team has been working since early September to plan the integration of Tesco and Nabors and assure rapid realization of the anticipated synergies.

REFINERs

Press Release - HollyFrontier announced that its Board of Directors appointed Anne-Marie N. Ainsworth and Anna C. Catalano to the Board effective November 6, 2017. These appointments increase the size of the Board to eleven directors and increase the number of independent directors on the Board from seven to nine.

MLPs & PipelinES

Press Release - NuStar Energy reported net income applicable to common limited partners of $14 million, or $0.15 per unit, down 63% from $39 million, or $0.49 per unit for third quarter 2016, while earnings before interest, taxes, depreciation and amortization were $156 million, up 9% from $142 million for third quarter 2016. As previously announced on October 18, 2017, the third quarter 2017 Series A preferred unit distribution of $0.53125 per unit and Series B preferred unit distribution of $0.47657 per unit will be paid on December 15, 2017 to holders of record as of December 1, 2017. In addition, the third quarter 2017 common unit distribution of $1.095 per unit will be paid on November 14, 2017 to holders of record as of November 9, 2017.

(Late Monday) Reuters - Plains All American Pipeline *Greg Armstrong has informed board of his plans to retire as CEO at end of 2018​ *Willie Chiang, current EVP and COO - U.S., will become CEO upon Armstrong's retirement​ *Armstrong will continue as non-executive chairman of board of directors through December 2019​

(Late Monday) Reuters - Plains All American Pipeline reported qtrly diluted net loss per common unit $0.01 *Plains All American Pipeline LP qtrly diluted adjusted net income per common unit $0.21 *Q3 earnings per share view $0.23 -- Thomson Reuters I/B/E/S *Plains All American Pipeline LP - qtrly revenues $‍5,873​ million versus $5,170 million *Q3 revenue view $6.06 billion -- Thomson Reuters I/B/E/S

(Late Monday) Press Release - Pembina Pipeline announced that it has executed further agreements whereby the Company will construct and operate the first tranche of infrastructure development under its previously announced 20-year infrastructure development and service agreement with Chevron Canada Limited. The Agreement includes over 230,000 acres of land dedication by Chevron in the liquids-rich Kaybob region of the Duvernay.

Wells Fargo Securities downgraded Targa Resources to 'Market Perform' from 'Outperform'.

Press Release - TransCanada announced the appointment of a new independent director, Thierry Vandal.

MARKET COMMENTARY

U.S. stock futures were little changed as third quarter earnings continued and a speech by Federal Reserve Chair Janet Yellen on tap for the day. JOLTS job openings and consumer credit numbers are scheduled for release. The MSCI 47-country 'All World' index crossed the 500 barrier and Nikkei peaked above its 26-year high. The dollar gained while euro hit its lowest since July and gold slipped. Oil eased.

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.