Markets

Energy Market Commentary: Energy Stocks Rallying Higher

Thursday, February 15, 2018

Sector Commentary

Energy stocks are set to open higher as rallying broader index futures help to offset modest losses in the oil market this morning and as investors digest a slew of operator earnings.

Brent crude oil slipped to just below $64 a barrel on Thursday as record U.S. production and rising inventories outweighed a weak dollar and Saudi Arabia's comments that OPEC and other producers were committed to their pact on cutting supplies. U.S. crude output hit a record 10.27 million barrels per day, the EIA said on Wednesday, making it a bigger producer than Saudi Arabia. U.S. crude and gasoline inventories rose last week, U.S. data showed.

U.S. natural gas futures slipped on Thursday on forecasts for less cold weather and heating demand next week than previously expected as the market waits for a weekly storage report expected to show a bigger than usual withdrawal. Analysts said utilities probably pulled a bigger-than-average 183 bcf of gas from storage during the cold week ended February 9.

INTERNATIONAL INTEGRATEDS

Reuters - Lukoil said oil production declined to 87.41 million tonnes in 2017 from 91.99 million tonnes in 2016. In 2017, hydrocarbon production increased by 2.4 percent year-on-year to 2.234 million barrels of oil equivalent per day.

Press Release - MODEC announced that Petroleo Brasileiro has extended its contract with a MODEC's Dutch subsidiary and an owner of the FPSO Cidade de Niteroi MV18, Opportunity MV18 B.V., for the time charter of the FPSO with effect from February 2018 to March 2024.

Reuters - Petroleo Brasileiro has set a late-March deadline to receive binding proposals for a controlling stake in gas pipeline network Transportadora Associada de Gás.

Norne Securities upgraded Statoil to ‘Buy’ from ‘Hold’.

CAnadian INTEGRATEDS

Press Release - Cenovus Energy recorded full-year operating earnings of $126 million compared with an operating loss of $377 million in 2016. It increased free funds flow by 216% compared with 2016. Adjusted funds flow per diluted share was $0.70. For the first quarter of 2018, the Board of Directors has declared a dividend of $0.05 per share, payable on March 29, 2018 to common shareholders of record as of March 15, 2018. Based on the February 14, 2018 closing share price on the Toronto Stock Exchange of $9.88, this represents an annualized yield of about 2%. Declaration of dividends is at the sole discretion of the Board and will continue to be evaluated on a quarterly basis.

U.S. E&PS

(Late Wednesday) Press Release - Cimarex Energy reported fourth quarter 2017 net income of $174.7 million, or $1.83 per share, compared to fourth quarter 2016 net income of $47.8 million, or $0.50 per share. Adjusted fourth quarter net income (non-GAAP) was $140.0 million, or $1.47 per share, compared to fourth quarter 2016 adjusted net income (non-GAAP) of $66.4 million, or $0.70 per share. Cash flow from operations was $340.8 million in the fourth quarter compared to $185.1 million in the fourth quarter of 2016. Adjusted cash flow from operations (non-GAAP) totaled $357.1 million in the fourth quarter, a 63 percent increase from 2016 levels. Cimarex announced projected 2018 exploration and development capital of $1.6 – 1.7 billion, a 29 percent increase from 2017 levels at the midpoint. An additional $80-90 million is earmarked for midstream and other infrastructure.

Reuters - EQT reported quarterly ‍adjusted earnings per share $0.76 and quarterly diluted shares of $5.83.​ Its quarterly total operating revenue for EQT and units was $1.13 billion versus $379 million.

Press Release - EQT Corp reported year-end 2017 proved reserves of 21.4 Tcfe, a 59% increase over 2016. This increase was primarily driven by acquisitions, which added 6.3 Tcfe of proved reserves. Excluding acquisitions, the Company added an additional 2.2 Tcfe of proved reserves, which was 245% more than the production for the year.

(Late Wednesday) Press Release - Laredo Petroleum announced that its board of directors has authorized a $200 million share repurchase program. The Company may purchase shares in accordance with applicable securities laws from time to time in open market or privately negotiated transactions.

(Late Wednesday) Press Release - Laredo Petroleum announced its 2017 fourth-quarter and full-year results. For the fourth quarter of 2017, the Company reported net income attributable to common stockholders of $408.6 million, or $1.70 per diluted share, which includes a $405.9 million gain on the sale of Laredo's investment in the Medallion-Midland Basin pipeline system. Adjusted Net Income, a non-GAAP financial measure, for the fourth quarter of 2017 was $44.8 million, or $0.19 per adjusted diluted share. Adjusted EBITDA, a non-GAAP financial measure, for the fourth quarter of 2017, was $133.8 million.

(Late Wednesday) Press Release - Marathon Oil announced a $2.3 billion returns-driven development capital budget for 2018, which is self-funding at $50 average WTI, including dividends, and generates meaningful free cash flow at $60 average WTI. The company reported a fourth quarter 2017 net loss of $28 million, or $0.03 per diluted share, which includes the impact of certain items not typically represented in analysts' earnings estimates and that would otherwise affect comparability of results. Adjusted net income was $56 million, or $0.07 per diluted share. Net operating cash flow was $501 million, or $637 million before changes in working capital and the one-time U.K. tax payment.

(Late Wednesday) Press Release - Sanchez Energy announced that it has closed its private offering to eligible purchasers of $500 million aggregate principal amount of 7.25% senior secured first lien notes due 2023 at an offering price equal to 98.973% of par.

Press Release - Williams Companies reported fourth-quarter 2017 Adjusted EBITDA of $1.160 billion, a $37 million increase from fourth-quarter 2016. Williams Partners' current businesses increased Adjusted EBITDA by $84 million in fourth-quarter 2017 vs. fourth-quarter 2016, driven in large part by $117 million increased fee-based revenues, due primarily to the growth in fee-based revenues in Williams Partners' Atlantic-Gulf and West businesses partially offset by $30 million in higher operating and maintenance expenses.

CANADIAN E&PS

Reuters - Encana posted a smaller quarterly loss on Thursday, helped by an increase in production and higher selling prices for oil. The company said net loss narrowed to $229 million in the fourth quarter ended Dec. 31, from $281 million, a year earlier. Total oil and gas production rose to 335,200 barrels of oil equivalent per day (boe/d) from 321,500 boe/d a year ago.

OIL SERVICES

(Late Wednesday) Press Release - Oil States International reported a net loss for the fourth quarter 2017 of $37.9 million, or $0.76 per diluted share, which included a pre-tax charge of $1.4 million of transaction-related costs and a one-time, non-cash income tax charge of $28.2 million, resulting from the recently enacted Tax Cuts and Jobs Act and the corresponding tax reform legislation in the United States. These results compare to a reported net loss for the fourth quarter of 2016 of $10.6 million, or $0.21 per diluted share, which included pre-tax charges of $0.6 million of severance and other downsizing charges.

DRILLERS

(Late Wednesday) Reuters - Noble Corporation announced redemption of senior notes due 2019 by wholly-owned subsidiaries. The company’s ‍redemption date for notes is February 20, 2018​. Noble, on behalf units, issuers to redeem entire remaining outstanding principal amount of 7.50% senior notes at redemption price of 105.512%.

(Late Wednesday) Press Release - Parker Drilling announced results for the fourth quarter ended December 31, 2017, including a reported net loss of $29.6 million, or a $0.21 loss per share, on revenues of $116.3 million. The net loss includes a non-cash pre-tax loss of $4.3 million of asset and inventory write-offs associated with the sale of a rig in Papua New Guinea and $3.3 million of asset and inventory write-offs associated with select international drilling assets. Excluding these items, the adjusted net loss was $22.0 million, or a $0.16 loss per share.

Press Release - Precision Drilling reported fourth quarter revenue of $347 million was an increase of 15% over the prior year comparative quarter. Its fourth quarter net loss was $47 million ($0.16 per share) compared with a net loss of $31 million ($0.10 per share) in the fourth quarter of 2016.

REFINERs

(Late Wednesday) Reuters - CVR Energy reported excess emissions from south vapor recovery flare at Wynnewood, Oklahoma refinery on Feb. 11 and Feb. 12.

Press Release - HollyFrontier announced that its Board of Directors declared a regular quarterly dividend in the amount of $0.33 per share, payable on March 14, 2018 to holders of record of common stock on February 28, 2018.

Press Release - PBF Energy reported fourth quarter 2017 income from operations of $253.5 million as compared to income from operations of $139.8 million for the fourth quarter of 2016. The company reported fourth quarter 2017 net income of $260.4 million, and net income attributable to PBF Energy Inc. of $241.9 million or $2.14 per share. Net income attributable to PBF Energy Inc. for the year-ended December 31, 2017 was $415.5 million, or $3.73 per share as compared to net income of $170.8 million, or $1.74 per share, for the year-ended December 31, 2016. Income from operations for the years ended December 31, 2017 and 2016 was $730.2 million and $498.9 million, respectively. The company announced that it will pay a quarterly dividend of $0.30 per share of Class A common stock on March 14, 2018, to holders of record as of February 28, 2018.

MLPs & PipelinES

Press Release - Targa Resources reported earnings before interest, income taxes, depreciation and amortization, and other non-cash items of $328.4 million for the fourth quarter of 2017 compared to $297.6 million for the fourth quarter of 2016. For the full year 2017, Adjusted EBITDA was $1,139.8 million compared to $1,064.9 million for 2016. Fourth quarter 2017 net income (loss) attributable to Targa Resources Corp. was $283.1 million compared to ($150.8) million for the fourth quarter of 2016. The company reported distributable cash flow for the fourth quarter of 2017 of $274.6 million compared to total common dividends to be paid of $199.1 million.

Press Release - TransCanada announced net income attributable to common shares for fourth quarter 2017 of $861 million or $0.98 per share compared to a net loss of $358 million or $0.43 per share for the same period in 2016. For the year ended December 31, 2017, net income attributable to common shares was $3.0 billion or $3.44 per share compared to net income of $124 million or $0.16 per share in 2016. Its Board of Directors declared a quarterly dividend of $0.69 per share for the quarter ending March 31, 2018 on TransCanada's outstanding common shares. This represents an increase in the dividend of 10.4 per cent from the previous dividend and is equivalent to $2.76 per common share on an annualized basis.

Press Release - TransCanada announced that it will move forward with a $2.4 billion expansion of its NGTL System to connect incremental supply and expand basin export capacity by one billion cubic feet of natural gas per day at the interconnection with its Canadian Mainline.

Press Release - Williams Partners reported fourth-quarter 2017 adjusted EBITDA of $1.150 billion, a $37 million increase over fourth-quarter 2016. Williams Partners' current businesses increased Adjusted EBITDA by $84 million in fourth-quarter 2017 vs. fourth-quarter 2016, driven by $117 million increased fee-based revenues, due primarily to the growth in fee-based revenues in the Atlantic-Gulf and West segments partially offset by $30 million in higher operating and maintenance expenses. The company recently announced a regular quarterly cash distribution of $0.60 per unit, payable Feb. 9, 2018, to its common unitholders of record at the close of business on Feb. 2, 2018.

MARKET COMMENTARY

Wall Street looked set to open higher. The dollar tumbled as concerns over twin deficits in the U.S. persisted, while gold was up. European shares rallied as investors focused on strong company results and Asian equities closed higher.


Nasdaq Advisory Services Energy Team Tamar Essner
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