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Energy Market Commentary February 15, 2017: Nasdaq Advisory Services

WEDNESDAY, FEBRUARY 15, 2017

SECTOR COMMENTARY

The energy sector is set for a mixed to lower start, tracking the broader equity markets ahead of a busy day on the economic data front, weakness in the crude complex leading into the EIA inventory report and lingering comments from Federal Reserve Chair Janet Yellen, who painted a largely upbeat picture of the economy yesterday. Today’s choppy start comes a day after all four major U.S. equity indices and the TSX touched fresh record levels.

WTI and Brent crude oil futures are down roughly ~0.6% in early trading, weighed down by strength in the dollar and yesterday’s bearish API report showing U.S. crude stocks rose by 9.9 million barrels to 513.5 million, compared with analysts' expectations for an increase of 3.5 million barrels, while gasoline and distillate stocks also built unexpectedly. Investors, however, are looking forward to the more closely watched EIA report due out later today, which is expected to show crude inventories rising for a sixth straight week, while refined product stockpiles likely fell.

Natural gas futures were up over 2% this morning following their recent string of gains, edging higher after not breaking below a key support level yesterday despite forecasts continuing to call for warmer-than-normal weather. The front-month closed on Tuesday at its lowest since Nov. 18, but remained just above its 200-day moving average. The contract has not dropped below the 200-day since May.

INTERNATIONAL INTEGRATEDS

Reuters - Russian gas exports to Europe and Turkey rose 25 percent year-on-year between Jan. 1 and Feb. 14 to 27.6 billion cubic metres, Kremlin-controlled Gazprom said. It said gas supplies to Germany rose by 27.6 percent, by 53 percent to France, and by 109.8 percent to Austria in the period.

(Late Tuesday) Reuters - Royal Dutch Shell said it received notice of a request for indictment related to a 2011 settlement of long-standing disputes over an offshore block in Nigeria (OPL 245). The tribunal of Milan has fixed the preliminary hearing for 20 April 2017 according to the company statement.

U.S. E&PS

  • DVN reported 4Q’16 EPS of $0.25 versus Thomson Reuters I/B/E/S estimate of $0.22.
  • FANG reported 4Q’16 EPS of $0.90 versus Thomson Reuters I/B/E/S estimate of $0.54.

(Late Tuesday) Press Release - Devon Energy reported operational and financial results for the fourth quarter and full-year 2016. Also included within the release is the company's guidance outlook for the first quarter and full-year 2017. Highlights include: exceeded fourth-quarter production expectations; achieved record-setting well productivity in 2016; reduced operating expenses in U.S. by 42 percent from peak rates; attained $1.3 billion in annual cost savings; delivered proved reserves growth at attractive finding costs; improved growth outlook driven by accelerated capital investment.

(Late Tuesday) Press Release - Diamondback Energy announced financial and operating results for the fourth quarter ended December 31, 2016. Q4 2016 production of 51.9 Mboe/d (73% oil). FY’16 production of 43.0 Mboe/d (73% oil). 4Q’16 average realized prices were $46.72 per barrel of oil, $2.53 per Mcf of natural gas and $17.70 per barrel of natural gas liquids, resulting in a total equivalent price of $38.72/boe, up 13% from the Q3 2016 total equivalent price of $34.39/boe. 4Q’16 cash operating costs of $8.48/boe, including LOE of $4.89/boe and cash G&A of $0.92/boe. Proved reserves as of December 31, 2016 of 205.5 MMboe (68% oil), up 31% year over year; proved developed finding and development costs of $7.26/boe. Increasing pro forma full year 2017 production guidance to 69.0 to 76.0 Mboe/d, up from 64.0 to 73.0 Mboe/d. Operating six horizontal rigs, including first operated rig in the Southern Delaware Basin, with plans to add two additional rigs after the closing of the pending Brigham Resources acquisition.

CANADIAN E&PS

Reuters - Workers at Canadian Natural Resources' Baobab and Espoir oil and gas fields in Ivory Coast ended a strike over employment conditions launched last week according to the head of their union.

JP Morgan initiated Encana with an ‘Overweight’ rating.

OIL SERVICES

(Late Tuesday) Press Release - Halliburton announced that it will redeem the entire outstanding principal amount of its 5.90% Senior Notes due September 2018 and 6.15% Senior Notes due September 2019. The redemption date for the Notes is March 15, 2017. The aggregate principal amount of the Notes outstanding is $1.4 billion.

(Late Tuesday) Press Release - Oceaneering International announced that Roderick A. Larson, who currently serves as Oceaneering's President, has been designated to succeed M. Kevin McEvoy as Chief Executive Officer, immediately following Oceaneering's 2017 Annual Meeting of Shareholders, which is scheduled to be held on May 5, 2017.

RBC initiated SHAWCOR with a ‘Sector Perform’ rating.

REFINERS

(Late Tuesday) Reuters - CVR Energy will not pay a penalty over allegations that it made inadequate disclosures to investors during its unsuccessful defense against billionaire Carl Icahn's 2012 hostile takeover according to the U.S. Securities and Exchange Commission.

(Late Tuesday) Reuters - The gasoline-producing fluidic catalytic cracking unit at Phillips 66's 247,000 barrel per day (bpd) Alliance, Louisiana, refinery was running at reduced production level after completing a restart, said a source familiar with plant operations.

MLPs & PIPELINES

(Late Tuesday) Press Release - EnLink Midstream Partners, LP reported financial results for the fourth quarter and full-year 2016, reaffirmed guidance outlook for full-year 2017, and provided an operational update. ENLK reported a net loss of approximately $565 million for the year ended December 31, 2016. ENLK achieved approximately $775 million of adjusted EBITDA net to ENLK for the same period, exceeding guidance for the year.

(Late Tuesday) Press Release - Keyera announced its 2016 year end results. Keyera delivered strong financial results in 2016 with net earnings of $217 million ($1.21 per share) compared to $202 million ($1.19 per share) reported in 2015. The Gathering and Processing segment recorded an operating margin of $290 million in the year while the Liquids Infrastructure segment reported an operating margin of $246 million. Adjusted EBITDA was $605 million compared to $705 million in 2015. Distributable cash flow was $460 million ($2.56 per share) in 2016 compared to $482 million ($2.84 per share) recorded in 2015. The company also announced a cash dividend for February 2017 of 13.25 cents per common share. The dividend will be payable on March 15, 2017, to shareholders of record on February 23, 2017.

Press Release - Targa Resources reported fourth quarter and full year 2016 results. Fourth quarter 2016 net income (loss) attributable to Targa Resources Corp. was ($150.8) million compared to $27.0 million for the fourth quarter of 2015. For the full year 2016, net income (loss) attributable to Targa Resources was ($187.3) million compared to $58.3 million for 2015. The Company reported Adjusted EBITDA of $297.6 million for the fourth quarter of 2016 compared to $326.0 million for the fourth quarter of 2015. For the full year 2016, Adjusted EBITDA was $1,064.9 million compared to $1,191.7 million for 2015.

MARKET COMMENTARY

U.S. stock index futures were little changed a day after hitting record highs on Federal Reserve Chair Janet Yellen's comments that suggested an interest rate hike next month. The day’s economic calendar carries inflation, industrial production and retail sales data. Cisco, Kraft Heinz, Marriott and Applied Materials are some of the top companies scheduled to report results after the closing bell. European markets rose on a busy day of corporate earnings and Asian shares closed mostly higher. Dollar gained against a basket of major currencies. Oil fell as U.S. crude inventories jumped and gold rose.


Nasdaq Advisory Services Energy Team 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.

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