Markets

Energy Market Commentary: Investors Awaiting On A Variety Of Policy Decisions

Wednesday, November 01, 2017

Sector Commentary

The energy sector is set to kick off the new month higher, lifted by further strength in the crude complex and major sector indices. The gains come amid an uptick in earnings results and ahead of a flurry of market events still ahead this week including policy decisions from the Federal Reserve and the Bank of England, pending announcements on the Fed's future leadership and tax policy.

WTI and Brent crude oil futures are both up ~1% in early trading, with WTI slightly outpacing its UK counterpart which is continuing to trade at two-year highs. Data that showed OPEC had significantly improved compliance with its pledged supply cuts and expectations that Russia will also keep to the deal helped lift futures on both sides of the Atlantic but WTI inched out a lead after the weekly API data showed crude stocks dipped 5.1mm shares last week versus expectations of a 1.2 draw. Futures are also still feeling support from yesterday’s EIA news that U.S. crude output had edged down in August, falling to 9.203 million barrels a day from 9.234 million barrels a day in July. Traders will be looking to today’s government inventory report to show U.S. crude oil and product stockpiles fell last week.

Natural gas futures were marginally higher in early trading, lifted ahead of tomorrow’s inventory report while warmer weather forecasts in the northeast and southwest kept a cap on the upside.

U.S. INTEGRATEDs

Press Release - Statoil Brasil Oleo e Gas Ltd., a subsidiary of Statoil ASA, entered into an agreement to sell 6.5% interest in BM-S-8 block located in Santos Basin, offshore Brazil, to ExxonMobil Exploracao Brasil Ltda., a subsidiary of Exxon Mobil Corp, and Petrogal Brasil, S.A., a subsidiary of Galp Energia SGPS SA, for a sale consideration of approximately US$250 million.

INTERNATIONAL INTEGRATEDS

Press Release - Gazprom has already built 1,120 km of the Power of Siberia gas pipeline.

Press Release - Royal Dutch Shell and its partners won three, 35-year production sharing contracts for pre-salt blocks located in the Santos Basin, offshore Brazil. Shell will pay its share of the total signing bonuses, equating for all bids, of to approximately USD $100-million

Reuters - Royal Dutch Shell opened its third largest lubricants plant globally in western Singapore to serve as a production hub to meet demand within Asia.

Press Release - The package of assets consists of Shell's interests in Buzzard, Beryl, Bressay, Elgin-Franklin, J-Area, the Greater Armada cluster, Everest, Lomond and Erskine, plus a 10% stake in Schiehallion. Shell retains a significant, more focused and strengthened presence in the UK North Sea, to which it remains committed. 253 staff transferred from Shell to Chrysaor upon completion of the transaction. In Q4 2017, Shell will record an accounting gain on sale of $1.0bn against the values of both the Shell and former BG assets included in the package. Completion of this deal shows the clear momentum behind Shell's $30bn divestment programme and is in line with Shell's drive to simplify the upstream portfolio and re-shape the company into a world class investment.

Press Release - From 1 November 2017, the shares in Statoil at Oslo Børs and American Depository Receipts in Statoil listed at New York Stock Exchange will be traded ex dividend USD 0.2201 and ex rights to participate in the dividend issue for second quarter 2017.

Press Release - Statoil Brasil Oleo e Gas Ltd., a subsidiary of Statoil ASA, entered into an agreement to sell 6.5% interest in BM-S-8 block located in Santos Basin, offshore Brazil, to ExxonMobil Exploracao Brasil Ltda., a subsidiary of Exxon Mobil Corp, and Petrogal Brasil, S.A., a subsidiary of Galp Energia SGPS SA, for a sale consideration of approximately US$250 million.

U.S. E&P

(Late Tuesday) Press Release - Anadarko Petroleum announced its third-quarter 2017 results, reporting a net loss attributable to common stockholders of $699 million, or $1.27 per share. These results include certain items typically excluded by the investment community in published estimates. In total, these items increased the net loss by $272 million, or $0.50 per share, on an after-tax basis.

(Late Tuesday) Press Release - For the third quarter of 2017, Bill Barrett reported a net loss of $28.8 million, or $0.39 per diluted share. Adjusted net income for the third quarter of 2017 was a net loss of $5.9 million, or $0.08 per diluted share. EBITDAX for the third quarter of 2017 was $47.9 million.

Press Release - Concho Resources reported net loss for third quarter of 2017 of $113 million, or $0.77 per diluted share, compared to net loss of $51 million, or $0.38 per diluted share, for the third quarter of 2016. Adjusted net income (non-GAAP), which excludes non-cash and unusual items, for the third quarter of 2017 was $67 million, or $0.45 per diluted share, compared with adjusted net income (non-GAAP) of $44 million, or $0.32 per diluted share, for the third quarter of 2016.

Press Release - Devon Energy reported Q3 adjusted core earnings per share of $0.46 excluding items and a quarterly total revenue and other of $‍3,156​million versus $4,233 million.

(Late Tuesday) Press Release - Newfield Exploration recorded net income of $87 million, or $0.44 per diluted share (all per share amounts are on a diluted basis). Earnings were impacted by one time tax benefits of $17 million, or $0.09 per share, due to the carryback of net operating losses, and an unrealized derivative loss of $34 million, or $0.17 per share.

OIL SERVICES

Press Release - Emerge Energy Services reported net income of $5.0 million, or $0.16 per diluted unit, for the three months ended September 30, 2017. For the three months ended September 30, 2016, net income was $5.1 million, or $0.21 per diluted unit, mainly due to a $31.7 million gain on sale of the Fuel business last year. Adjusted EBITDA was $18.7 million for the three months ended September 30, 2017 compared to $(8.1) million for the three months ended September 30, 2016. Emerge Energy generated Distributable Cash Flow of $14.1 million for the three months ended September 30, 2017.

Press Release - McDermott International reported third quarter 2017 revenues of $958.5 million, an increase of $400.0 million, compared to revenues of $558.5 million for the prior-year third quarter. Third quarter 2017 earnings attributable to McDermott stockholders, computed in accordance with U.S. generally accepted accounting principles, were $94.7 million, or $0.33 per fully diluted share, compared to $16.1 million, or $0.06 per fully diluted share, for the prior-year third quarter.

Press Release - McDermott International announced a letter of award for a significant* contract for the engineering, procurement, construction and installation services for an offshore Middle East redevelopment project. McDermott plans to fabricate and install four wellhead topsides, a manifold platform and jacket together with associated subsea pipelines and brownfield tie-in works. The combined total weight of the structures is approximately 7,000 tons (6,400 metric tons) and includes 47 miles (75 kilometers) of onshore and offshore pipeline and umbilicals.

Press Release - McDermott International announced a letter of award for a significant* contract from Reliance Industries Ltd. for the KG-D6 subsea field development in the Krishna Godavari Basin, located off the east coast of India.

Seaport Global Securities upgraded Weatherford International to ‘Buy’ from ‘Neutral’.

Press Release - Weatherford International reported a net loss of $256 million, or a loss of $0.26 per share, and a non-GAAP net loss of $221 million before charges and credits ($0.22 non-GAAP loss per share) on revenues of $1.46 billion for the third quarter of 2017.

DRILLERS

(Late Tuesday) Press Release - Precision Drilling reported that its revenue this quarter was $315 million which is 47% higher than the third quarter of 2016. Adjusted EBITDA this quarter was $73 million, an increase of $32 million from the third quarter of 2016.

Press Release - Rowan Companies reported a net loss of $20.9 million, or $0.17 net loss per diluted share, compared to net income of $5.5 million, or $0.04 per diluted share, in the third quarter of 2016. The net income for the prior-year quarter included a $34.3 million (after tax), or $0.27 per diluted share, non-cash asset impairment charge and a $1.4 million (after tax), or $0.01 per share, credit from a litigation-related matter.

REFINERs

Press Release - HollyFrontier reported third quarter net income attributable to HollyFrontier stockholders of $272.0 million or $1.53 per diluted share for the quarter ended September 30, 2017, compared to $74.5 million or $0.42 per diluted share for the quarter ended September 30, 2016. During the period, HFC declared and paid a dividend of $0.33 per share to shareholders totaling $58.8 million.

Press Release - HollyFrontier and Holly Energy Partners closed the IDR Simplification transaction previously announced on October 19, 2017. As a result, HollyFrontier holds 59.6 million Holly Energy common units, representing 59% of the outstanding common units, with a market value of $2.0 billion based on today’s closing price of $34.19.

MLPs & Pipeline

Press Release - Energy Transfer Partners announced that its wholly owned subsidiaries, Energy Transfer Interstate Holdings, LLC and ET Rover Pipeline LLC, have closed the previously announced sale of a 49.9% interest in HoldCo. HoldCo owns a 65% interest in Rover Pipeline LLC. As a result of this closing, HoldCo is now owned 50.1% by Energy Transfer and 49.9% by Blackstone Energy Partners.

(Late Tuesday) Press Release - EnLink Midstream Partners reported net income of $28.7 million and net income attributable to ENLK after non-controlling interest of $25.5 million for the quarter ended September 30, 2017. ENLK achieved $216.8 million of adjusted EBITDA net to ENLK for the same period. Distributable cash flow attributable to ENLK's common units was $150.1 million for the third quarter of 2017, as compared to $154.4 million for the third quarter of 2016.

Press Release - HollyFrontier and Holly Energy Partners closed the IDR Simplification transaction previously announced on October 19, 2017. As a result, HollyFrontier holds 59.6 million Holly Energy common units, representing 59% of the outstanding common units, with a market value of $2.0 billion based on today’s closing price of $34.19.

(Late Tuesday) Press Release - ONEOK reported third-quarter 2017 net income attributable to ONEOK and adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) totaled $165.7 million and $517.2 million, respectively. It also declared in October 2017 a third-quarter 2017 dividend of 74.5 cents per share, or $2.98 per share on an annualized basis.

(Late Tuesday) Press Release - Western Gas Partners net income (loss) available to limited partners for the third quarter of 2017 totaled $65.1 million, or $0.38 per common unit (diluted), with third-quarter 2017 Adjusted EBITDA of $257.8 million and third-quarter 2017 Distributable cash flow of $231.9 million. WES previously declared a quarterly distribution of $0.905 per unit for the third quarter of 2017. This distribution represented a 2% increase over the prior quarter's distribution and a 7% increase over the third-quarter 2016 distribution of $0.845 per unit.

MARKET COMMENTARY

Wall Street aimed to kick off November with a higher opening, ahead of a statement at the end of the Fed's latest policy meeting due later. The decision on the next Fed chair remains in the spotlight. Quarterly reports from Facebook, Qualcomm, Metlife are on the radar, while traders also await the ADP National Employment Report and October car sales data. The dollar steadied, while gold edged higher. Bitcoin surged to a record high, on bets the crypto-currency might enter the financial mainstream after CME Group said it would launch bitcoin futures trading. European shares reached a two-year high and Asia markets closed at 10-year peak.


Nasdaq Advisory Services Energy Team Nasdaq's Advisory Services Tamar Essner
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