Energy Market Commentary: Investors Digesting Earnings

Wednesday, January 24, 2018

Sector Commentary

The energy sector is poised for a mixed to higher start, supported by continued strength in the major equity indices and mild strength in the crude complex. Earnings season is continuing to ramp up with Baker Hughes GE topping headlines for the sector this morning while broadly, investors are digesting a host of other announcements.

WTI crude oil futures are up over 0.35% in early trading, outpacing Brent which is flat. Weakness in the dollar, a spate of outages, rising geopolitical risks and coordinated production cuts helped to support prices. Meanwhile, last night's API report showing a large build kept a cap on gains ahead of the EIA data later this morning.

Natural gas futures continued to rally higher and are up a further +2.75% this morning, backed by cooler weather forecasts for the start of February that should stir demand for heating.


Reuters - Chevron could face tougher emissions curbs at Wheatstone LNG in Western Australia after the state reviews environmental conditions imposed on the $34-billion project.


Press Release - The ministry of oil signed a memorandum of understanding with BP international company to rehabilitate the oil fields in Kirkuk governorate.

Press Release - Naftogaz obliged by an international court to pay over $2 billion to Gazprom , has no plans to implement the ruling and will keep accumulating penalty fees until the dispute is solved.

(Late Tuesday) Reuters - Royal Dutch Shell shut the small crude distillation unit at its 325,700-barrel-per-day joint-venture Deer Park, Texas, refinery on Tuesday for repairs.

(Late Tuesday) Reuters - Royal Dutch Shell began a planned overhaul of the hydrocracking unit at its 225,800-bpd Norco, Louisiana, refinery on Tuesday.

(Late Tuesday) Reuters - Royal Dutch Shell reported that its Norco manufacturing site in Louisiana had initiated a planned turnaround of several units this week.

Press Release - Subsea 7 S.A. announced the award of a sizeable contract from Statoil for the Johan Castberg field development, located 240 km from Hammerfest in Norway.

Credit Suisse upgraded Statoil to 'Outperform' from 'Underperform'.

Reuters - Total has agreed to buy Samson Offshore Anchor LLC, in a deal which Total said would strengthen its presence in the Gulf of Mexico region.


Morgan Stanley downgraded Husky Energy to 'Underweight' from 'Equal Weight'.


Press Release - Carrizo Oil & Gas completed the sale of its oil and gas assets located in Denver-Julesburg Basin, Colorado, the US, for a sale consideration of up to US$151.6 million.

Press Release - Diamondback Energy announced that it proposes to offer, subject to market conditions and other factors, $250.0 million aggregate principal amount of its 5.375% Senior Notes due 2025 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act.

Press Release - Eclipse Resources completed the acquisition of oil and gas assets in Flat Castle project area located in Tioga and Potter counties in the Appalachian Basin, Pennsylvania, the US, from Travis Peak Resources, LLC, for a purchase consideration of US$92.2 million.

Morgan Stanley upgraded Energen to 'Overweight' from 'Equal Weight'.

Press Release - Marathon Oil intends to sell operated working interest in certain oil and gas assets located in Clare, Crawford, Gladwin, Isabella, Kalkaska, Midland, Missaukee, Otsego, and Roscommon counties in the Michigan Basin, Michigan, the US.

Reuters - Noble Energy said it plans to expand in Israel ahead of the 2019 start of production at the large Leviathan natural gas site off Israel's Mediterranean coast.

Morgan Stanley downgraded Range Resources to 'Underweight' from 'Equal Weight'.

(Late Tuesday) Reuters - SandRidge Energy said it was not in the shale oil producer's best interest to accept activist investor Carl Icahn's proposal to replace two of its five directors.


Morgan Stanley upgraded Encana to 'Overweight' from 'Equal Weight'.

Press Release - Frontera Energy achieved exit rate production, after royalties and internal consumption, of 71,015 barrels of oil equivalent per day as of Dec. 31, 2017, which was within the company's exit guidance range of 70,000 to 75,000 boe/d.


Reuters - Baker Hughes posted a fourth-quarter loss as expenses surged. The GE unit reported a net loss of $82 million in the three months ended Dec. 31, compared with a profit of $147 million a year earlier. On a per-share basis, Baker Hughes posted a loss of 7 cents in the reported quarter. Total expenses rose 81 percent to $5.86 billion. Revenue was up 64 percent to $5.76 billion.

(Late Tuesday) Reuters - Baker Hughes announced that the BHGE Board of Directors declared a cash dividend of $.18 per share of Class A common stock payable on February 16, 2018 to holders of record on February 5, 2018.

Press Release - McDermott International announced a large contract award from Saudi Aramco for the engineering, procurement, construction and installation of 13 jackets in the Zuluf, Marjan, Berri and Abu Safah fields, offshore Saudi Arabia.

Press Release - McDermott International sees FY18 share of $0.42 - $0.52 and revenues of $3.1 billion to $3.3 billion.

KeyBanc upgraded McDermott International to 'Overweight' from 'Sector Weight'.


Barclays downgraded Diamond Offshore Drilling and Rowan Companies to 'Underweight' from 'Equal Weight'.

Press Release - RPC reported that for the quarter ended December 31, 2017, revenues increased by 93.4 percent to $427.3 million compared to $221.0 million in the fourth quarter of last year. Revenues increased compared to the prior year due to higher activity levels and improved pricing for our services, higher service intensity, and activation of previously idled revenue-producing equipment. Operating profit for the quarter was $60.3 million compared to an operating loss of $32.2 million in the prior year. Net income for the fourth quarter was $57.7 million or $0.27 diluted earnings per share. Its Board of Directors announced that its Board of Directors declared a 43 percent increase to the regular quarterly cash dividend from $0.07 per share to $0.10 per share payable March 9, 2018 to common stockholders of record at the close of business on February 9, 2018.

(Late Tuesday) Press Release - Transocean announced that the voluntary exchange offer by Transocean Ltd. And Transocean Inc. to acquire all shares in Songa Offshore SE expired on January 23, 2018 at16:30, with a total of 175,720,167 Songa Offshore shares representing approximately 91.5 % of the total shares in Songa Offshore ona fully diluted basis having accepted the Offer.


Press Release - Delek US Holdings announced that it closed a transaction to repurchase 2.0 million shares of Delek common stock from Alon Israel Oil Company, Ltd. in connection with Delek's rights pursuant to a Stock Purchase Agreement dated April 14, 2015, by and between Delek and Alon Israel.

(Late Tuesday) Press Release - The Board of Directors of Valero Energy has approved an increase in the company's regular quarterly cash dividend on common stock from $0.70 per share to $0.80 per share, effective with the quarterly dividend the Board has declared to be payable on March 6, 2018, to holders of record at the close of business on February 13, 2018. The increase in the dividend raises the annualized cash dividend rate on Valero's common stock to $3.20 per share.

MLPs & PipelinES

(Late Tuesday) Press Release - DCP Midstream announced that the board of directors of its general partner declared a fourth quarter 2017 common unit distribution of $0.78 per unit, or $3.12 per unit on an annualized basis. This quarterly cash distribution will be paid February 14, 2018 to unitholders of record at the close of business on February 7, 2018.

(Late Tuesday) Press Release - The board of directors of Magellan Midstream Partners increased the partnership's quarterly cash distribution to 92 cents per unit for the period Oct. 1 through Dec. 31, 2017, representing the 63(rd) distribution increase since its initial public offering in 2001. The fourth-quarter 2017 distribution is 8% higher than the fourth-quarter 2016 distribution of 85.5 cents per unit and represents a 2% increase over the third-quarter 2017 distribution of 90.5 cents. For the year, Magellan declared distributions of $3.5875 per unit for 2017, or 8% higher than distributions of $3.315 per unit for 2016.


U.S. stock index futures rose as investors keenly awaited a flurry of corporate earnings throughout the day. A weaker dollar propped up commodity prices, including oil and gold. Losses in utility and tech shares dragged Britain's FTSE lower. Most Asian stocks closed higher. Data for monthly home prices, Markit's PMI and existing home sales are scheduled on the economic calendar. Ford will report after markets close.

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.