Markets

Energy Market Commentary January 23, 2017: Nasdaq Advisory Services

MONDAY, JANUARY 23, 2017

SECTOR COMMENTARY

The energy sector is poised for a lower start, tracking the underlying commodities and broader equity markets as the markets digested the developments concerning the new Trump administration and as earnings season starts to ramp up. Investors sought clarity on his fiscal and trade policies at the start of President Trump's first full week in office.

Following in-line results on Friday from Schlumberger, Halliburton this morning reported its first quarterly operating profit in North America in a year as oil producers put more rigs back to work in North American shale fields, however, revenue fell in its fourth quarter. Management also commented that the market in North America was on the upswing and similar to Schlumberger, warned of weakness in markets outside North America.

WTI and Brent crude oil futures are both trading lower by over 1% this morning with WTI trailing its UK counterpart, pressured by strong signs that the recovery in U.S. oil drilling activity outweighed news that OPEC and non-OPEC producers were on track to meet output reduction goals set in December. Baker Hughes rig count data Friday showed U.S. drillers added the most rigs in nearly four years last week, extending an eight-month recovery. Ministers representing members of the OPEC and non-OPEC producers said at a meeting in Vienna on Sunday that of almost 1.8 million barrels per day (bpd) they had agreed to be taken out of the market, 1.5 million bpd had already gone. Weakness in the dollar helped to buoy the losses.

Natural gas futures extended their trend lower, pressured by forecasts for continued warmer-than-normal weather and light heating demand for another week. Forecast though will shift next week for colder than normal while temperatures in February would be near normal on average and March would be warmer than normal.

U.S. INTEGRATEDS

(Sunday) Reuters - Exxon Mobil reported boiler trip due to severe weather and compressor trip at Baytwon Texas refinery.

INTERNATIONAL INTEGRATEDS

Reuters - Talisman Vietnam 07/03 B.V. has via letter of intent dated 20 Jan 2017 agreed to enter into exclusive negotiations with unit. Talisman Vietnam 07/03 B.V. Is a wholly owned subsidiary of Repsol.

(Sunday) Press Release - Royal Dutch Shell announced that it has been chosen by Rolls-Royce Motor Cars as the exclusive manufacturer and supplier of Rolls-Royce Motor Cars Genuine Engine Oil. From October 2016, this oil has started to become available to Rolls-Royce Motor Cars Dealers around the world.

(Sunday) Reuters - Saudi Basic Industries signed an agreement to acquire the remaining stake of its joint venture with Shell Arabia, a unit of Royal Dutch Shell in Saudi Arabia for $820 million.

CANADIAN INTEGRATEDS

Goldman Sachs downgraded Cenovus Energy to ‘Sell’ from ‘Buy.’

Goldman Sachs upgraded Husky Energy to ‘Buy’ from ‘Neutral.’

U.S. E&PS

Barclays upgraded Cabot Oil & Gas to ‘Overweight’ from ‘Equal Weight.’

(Late Friday) Press Release - Chesapeake Energy announced that its Board of Directors reinstated the payment of dividends on its outstanding convertible preferred stock. Holders of record on February 1, 2017 for the 4.5%, 5.0%, 5.75% and 5.75% Convertible Preferred Stock will receive four quarterly payments of dividends in arrears on February 15, 2017.

Johnson Rice & Company downgraded Clayton Williams Energy to ‘Hold’ from ‘Accumulate.’

Suntrust Robinsons Humphrey Capital Markets dropped coverage of Clayton Williams Energy.

Wunderlich Securities dropped coverage of Clayton Williams Energy.

Press Release - Sanchez Energy announced operating results for 2016. During the fourth quarter 2016, the Company spud 21 gross wells and completed 12 gross wells. Full year 2016 production of approximately 19.5 million barrels of oil equivalent, or approximately 53,350 barrels of oil equivalent per day, exceeded the high end of the Company’s 48,000 to 52,000 Boe/d guidance for the full year.

Barclays upgraded Southwestern Energy to ‘Equal Weight’ from ‘Underweight.’

Jefferies upgraded Williams Companies to ‘Buy’ from ‘Hold.’

CANADIAN E&PS

(Late Friday) Press Release - Baytex Energy announced the closing of its previously announced acquisition of heavy oil assets located in the Peace River area of northern Alberta.

Press Release - Gran Tierra Energy announced the Company's 2016 year-end estimated reserves as evaluated by the Company's independent qualified reserve evaluator McDaniel & Associates Consultants in a report with an effective date of December 31, 2016. During 2016, Gran Tierra's total 2P WI reserves increased by 91% compared with year-end 2015, while the Company's 3P WI reserves increased by 146% over the same time period.

Press Release - Gran Tierra Energy is pleased to provide an operational update. During December 2016, Gran Tierra averaged working interest production before royalties of 31,700 barrels of oil equivalent per day. The recently acquired Acordionero field is meeting our expectations, and we expect it to average 8,000 - 9,000 barrels of oil per day during 2017.

Press Release - Touchstone Exploration achieved a fourth quarter 2016 production average of 1,245 barrels of oil per day, 2% below the third quarter 2016 average of 1,276 bopd. Touchstone's fourth quarter realized oil price was approximately US$46.22, as compared with the third quarter 2016 average oil price of US$40.24.

OIL SERVICES

  • HAL reported 4Q’16 EPS of $0.04 versus Thomson Reuters I/B/E/S estimate of $0.02.

Press Release - CGG and CGG's Norwegian subsidiary Exploration Investment Resources II have entered into agreements to substantially reduce the cash burden of the charter agreements in respect of three cold-stacked seismic vessels in exchange for agreed settlement amounts. As part of the agreements to settle those amounts on a non-cash basis, CGG on January 20 issued $58.6 million in aggregate principal amount of its 6.50% Senior Notes due 2021 to the relevant charter counterparties.

Press Release - Halliburton Company announced a loss from continuing operations of $149 million, or $0.17 per diluted share, for the fourth quarter of 2016. Adjusted income from continuing operations for the fourth quarter of 2016, excluding impairments and other charges and a class action lawsuit settlement, was $35 million, or $0.04 per diluted share.

Stephens downgraded Schlumberger to ‘Equal Weight’ from ‘Overweight.’

REFINERS

(Sunday) Reuters - Valero Energy’s Port Arthur, Texas, refinery reported emissions from complex 6, diesel hydro-treater unit 246.

MLPs & PIPELINES

Press Release - The EnLink Midstream companies, EnLink Midstream Partners and EnLink Midstream, LLC announced 2017 guidance and provided an operational update. Its net income projected to range from $80 million to $120 million. Also, its adjusted EBITDA net to ENLK projected to range from $815 million to $885 million, representing more than 10 percent annual mid-point growth over the prior year's mid-point guidance provided in 2016. 2017 guidance reflects a reduction to adjusted EBITDA related to announced non-core asset sales.

Press Release - Targa Resources announced that it has commenced an underwritten public offering of 7,000,000 shares of its common stock. The Company also intends to grant a 30-day option to the underwriter to purchase up to an additional 1,050,000 shares of common stock.

Press Release - Targa Resources announced it executed definitive agreements for its subsidiary, Targa Resources Partners LP, to acquire 100% of the membership interests of Outrigger Delaware Operating, LLC, Outrigger Southern Delaware Operating, LLC and Outrigger Midland Operating, LLC.

(Late Friday) Press Release - The Board of Directors of Valero Energy Partners GP LLC, the general partner of Valero Energy Partners, approved the Partnership’s fourth quarter 2016 cash distribution of $0.4065 per unit. This distribution represents a 5.6 percent increase over the Partnership’s previous quarterly distribution.

(Late Friday) Press Release - Veresen announced that its Board of Directors has declared a cash dividend for January 2017 of $0.0833 per common share. The dividend will be paid on February 23, 2017 to shareholders of record at the close of business on January 31, 2017.

BMO Capital Markets upgraded Williams Partners to ‘Outperform’ from ‘Market Perform.’

MARKET COMMENTARY

Tracking weakness in European shares, U.S. stock index futures were down and the dollar hit a six-week low after President Donald Trump’s protectionist speech pushed investors into safe-haven assets. Asian markets closed mostly higher, though Japan's Nikkei index and shares in Australia dropped after Trump's administration also declared its intention to withdraw from the Trans-Pacific Partnership, a 12-nation trade pact that Japan and Australia have signed. Oil fell as signs of U.S. output rise overshadowed OPEC-led cuts, while gold touched its highest level in two months.


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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