Markets

Energy Market Commentary February 22, 2017: Nasdaq Advisory Services

WEDNESDAY, FEBRUARY 22, 2017

SECTOR COMMENTARY

Following yesterday’s gains on muted trading, the energy sector is poised for a mixed to lower start amid weakness in the crude complex, broader equity indices and ahead of an uptick in earnings over the next two days.

WTI and Brent crude oil futures are both down roughly 0.6% in early trading, pressured by a continued rise in the dollar, mixed signals from Goldman Sachs report and ahead of this evening API report. Optimistic signals from OPEC over its deal with other producers to curb output, however, kept a cap on the losses. Both OPEC's Barkindo and Goldman Sachs commented they expect global inventories to fall, which would boost prices, however, GS noted that the rebound in U.S. drilling activity had exceeded even its own above-consensus expectations and stocks are likely to rise in the U.S. With little other announcements scheduled this week, API and EIA crude oil inventory data will potentially guide the markets for the rest of the week. Analysts expect the reports to show U.S. commercial crude inventories likely extended their build for the seventh straight week, while distillate and gasoline stockpiles probably declined.

Natural gas futures are up roughly 1% this morning, rebounding marginally from yesterday’s over 9.5% slide which brought the front month down to its lowest in more than three months. Continued expectations that heating demand would decline over the next two weeks due to an outlook for warmer-than-normal temperatures kept a cap on gains.

U.S. INTEGRATEDS

(Late Tuesday) Reuters - Chevron is in talks with the Angolan government and state oil firm Sonangol to revise tax terms and future investment will hinge on those talks.

(Late Tuesday) Reuters - Zhenhua Oil signed a preliminary deal with Chevron to buy the U.S. oil major's natural gas fields in Bangladesh that are worth about $2 billion.

INTERNATIONAL INTEGRATEDS

Reuters - The Norwegian government does not plan to cut its stake in Statoil.

(Late Tuesday) Press Release - From 22 February 2017, the shares in Statoil at Oslo Børs will be traded ex dividend USD 0.2201 and ex rights to participate in the dividend issue for third quarter 2016.

U.S. E&PS

  • CXO reported 4Q’16 EPS of $0.20 versus Thomson Reuters I/B/E/S estimate of ($0.07).
  • NFX reported 4Q’16 EPS of $0.49 versus Thomson Reuters I/B/E/S estimate of $0.37.
  • SN reported 4Q’16 EPS of $0.16 versus Thomson Reuters I/B/E/S estimate of $0.11.
  • WLL reported 4Q’16 EPS of ($0.28) versus Thomson Reuters I/B/E/S estimate of ($0.32).

(Late Tuesday) Press Release - Concho Resources reported a quarterly net loss of $125.1 million, or $0.86 per diluted share. Its adjusted net income totaled $29.0 million, or $0.20 per diluted share. It said that generated $397.2 million of EBITDAX in the fourth quarter of 2016.

(Late Tuesday) Reuters - ConocoPhillips revised down over a billion barrels of oil sands reserves because of low global crude prices, a company filing showed on Tuesday, the latest sign that some of Canada's vast hydrocarbon potential may be left untapped.

(Late Tuesday) Press Release - Newfield Exploration recorded net income of $13 million, or

$0.07 per diluted share. After adjusting for the effect of unrealized derivative losses, net income would have been $98 million, or $0.49 per share. Revenues for the fourth quarter were $415 million. Net cash provided by operating activities was $239 million. Discretionary cash flow from operations was $229 million. Newfield's capital budget for 2017 is approximately $1.0 billion, excluding about $120 million in capitalized interest and internal costs.

Press Release - Sanchez Energy announced its net income of $48 million for the fourth quarter 2016. For the year ended December 31, 2016, the company reported a net loss of $273 million. Fourth quarter 2016 revenues were approximately $126 million, an increase of approximately 15% percent when compared to the fourth quarter 2015. Also, adjusted revenue, inclusive of hedge settlement gains, was approximately $145 million during the fourth quarter 2016. Separately, it said that its Partnership with Blackstone Energy Partners to acquire Anadarko Petroleum interests in the Western Eagle Ford for approximately $2.3 billion, subject to normal and customary closing conditions announced January 12, 2017.

(Late Tuesday) Press Release - Sanchez Energy announced that the Board of Directors has declared a quarterly dividend of $0.609375 per share on its 4.875% Convertible Perpetual Preferred Stock, Series A and $0.812500 per share on its 6.500% Convertible Perpetual Preferred Stock, Series B.

Seaport Global Securities resumed SandRidge Energy at ‘Buy.’

Press Release - Ultra Petroleum reported adjusted net income of $119.2 million, or $0.77 per diluted share for the quarter ended December 31, 2016. Operating cash flow was $145.1 million for the quarter ended December 31, 2016.

(Late Tuesday) Reuters - Whiting Petroleum reported net loss available to common shareholders widened to $173.3 million, or 59 cents per share, in the fourth quarter ended Dec. 31 from $98.7 million, or 48 cents per share, a year earlier. Production fell 23.4 percent to 118,890 barrels of oil equivalent per day. It also nearly doubled its 2017 budget for capital spending as crude prices stabilize following a two-year rout.

OIL SERVICES

  • SPN reported 4Q’16 EPS of ($0.74) versus Thomson Reuters I/B/E/S estimate of ($0.77).

(Late Tuesday) Press Release - Hi-Crush Partners reported fourth quarter and full year 2016 results. Revenues for the quarter ended December 31, 2016 totaled $67.3 million on sales of 1,358,511 tons of frac sand. This compares to $46.6 million of revenues on sales of 1,082,974 tons of frac sand in the third quarter of 2016. The limited partners' interest in net loss was $(7.2) million for the fourth quarter of 2016, resulting in basic and diluted loss of $(0.11) per limited partner unit. Distributable cash flow attributable to the limited partners for the fourth quarter of 2016 was $(4.4) million.

(Late Tuesday) Press Release - Superior Energy Services announced a net loss from continuing operations for the fourth quarter of 2016 of $166.3 million, or $1.10 per share, on revenue of $354.4 million. This compares to a net loss from continuing operations of $113.9 million, or $0.75 per share for the third quarter of 2016, on revenue of $326.2 million and a net loss from continuing operations of $214.5 million, or $1.43 per share for the fourth quarter of 2015, on revenue of $545.2 million.

DRILLERS

(Late Tuesday) Press Release - Ensco announced that its Board of Directors has declared a regular quarterly cash dividend of US$0.01 per Class A ordinary share payable on 17 March 2017. The ex-dividend date for this payment is expected to be 2 March 2017 with a record date of 6 March 2017.

Evercore ISI reinstated Nabors Industries with a ‘Buy’ rating.

(Late Tuesday) Press Release - Parker Drilling announced that it is commencing a registered public offering of 12,000,000 shares of its common stock. The Company also expects to grant the underwriter a 30-day option to purchase up to an additional 1,800,000 shares of common stock.

Susquehanna Financial initiated RPC at ‘Neutral.’

(Late Tuesday) Reuters - Seadrill postponed its fourth-quarter earnings report and will restate earnings from 2015 onwards to correctly account for hedges and swaps relating to currencies and interest rates. Restating its 2015 earnings will boost the company's shareholder equity by between $100 million and $150 million, while a restatement for the first three quarters of 2016 will add another $20 million to $60 million, it added.

REFINERS

  • HFC reported 4Q’16 EPS of ($0.06) versus Thomson Reuters I/B/E/S estimate of ($0.07).

Press Release - HollyFrontier reported fourth quarter net income attributable to HollyFrontier stockholders of $53.2 million or $0.30 per diluted share for the quarter ended December 31, 2016, compared to a net loss of $(43.9) million or $(0.24) per diluted share for the quarter ended December 31, 2015. For the fourth quarter of 2016, net cash provided by operations totaled $164.3 million. During the period, we declared a regular dividend of $0.33 per share to shareholders totaling approximately $58.8 million.

(Late Tuesday) Reuters - Marathon Petroleum provides 10 days pre-notification that the facility will be shutting down to perform scheduled maintenance.

MLPs & PIPELINES

UBS Equities upgraded DCP Midstream Partners to ‘Buy’ from ‘Neutral.’

(Late Tuesday) Press Release - Keyera announced that its Alberta EnviroFuels facility located in Edmonton, Alberta has been shut down for repairs following an operational issue that developed this past weekend. Upon initial investigation, Keyera identified a damaged piece of equipment that will require repair before operations can resume.

(Late Tuesday) Press Release - Tesoro Logistics announced the commencement of an underwritten public offering of 5,000,000 common units representing limited partner interests in the Partnership.

MARKET COMMENTARY

U.S. stock index futures were little changed, while the dollar rose ahead of minutes from the Federal Reserve’s latest meeting that may shed some light on the central bank’s interest rate strategy. Shares of Hewlett-Packard, Tesla Motors and Transocean will be in focus as they report quarterly results after the closing bell. Existing home sales data occupies the economic calendar. Solid corporate results helped the European shares hit a 14-month high and Asian stocks ended the day higher. Oil prices slipped, while gold steadied.


Nasdaq Advisory Services Energy Team Advisory Services Tamar Essner
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