Markets

Energy Market Commentary January 25, 2017: Nasdaq Advisory Services

WEDNESDAY, JANUARY 25, 2017

SECTOR COMMENTARY

The energy sector is set for a mixed to choppy start following yesterday’s pop, pressured by mild weakness in the crude complex but supported by strength in broader equity markets with the S&P 500 index futures touching record intraday highs. Earnings momentum continued to pickup with producer bellwether Hess Corp reporting a smaller-than-expected loss, helped by a fall in total expenses. The company said its total costs and expenses fell by 15.7% to $3.09 billion in the fourth quarter, from a year earlier and commented they plan to spend a bulk of its $2.25 billion budget for the year on shale drilling in North Dakota's Bakken field.

WTI crude oil futures are down roughly 0.5% in early trading, faring marginally better than its U.K. counterpart after a bearish API report reinforced expectations that increasing shale output this year would reduce the impact of production cuts by OPEC and other major exporters. The API data showed U.S. crude, gasoline and diesel stocks all rose last week and ahead of expectations and ahead of the more closely watched EIA data. Analysts expect the government data to show U.S. commercial crude oil and gasoline inventories likely rose last week, extending their builds, while distillate stocks probably fell.

Natural gas futures continued to inch higher for the third-straight session, lifted by forecasts for steady, colder-than-normal weather and higher heating demand over the next two weeks.

INTERNATIONAL INTEGRATEDS

(Late Tuesday) Reuters - Shell and Phillips 66 together bought 6.4 million barrels of oil last week from the Strategic Petroleum Reserve.

CANADIAN INTEGRATEDS

RBC Capital Markets downgraded Husky Energy to ‘Sector Perform’ from ‘Outperform.’

U.S. E&PS

  • HES reported 4Q’16 EPS of ($1.01) versus Thomson Reuters I/B/E/S estimate of ($1.09).

(Late Tuesday) Press Release - Concho Resources and Frontier Midstream Solutions announced that they have entered into separate agreements to sell 100% of their respective ownership interests of Alpha Holding Company, LLC, the owner of the Alpha Crude Connector system, to Plains All American Pipeline for a combined total of $1.215 billion.

Stephens upgraded Halcón Resources to ‘Overweight’ from ‘Equal Weight.’

(Late Tuesday) Press Release - Halcón Resources announced it has entered into a purchase and sale agreement with a private operator to acquire 20,748 net acres in the Southern Delaware Basin for $705 million with a November 1, 2016 effective date, in addition to entering into an option agreement to purchase an additional 15,040 net acres in Ward County, Texas from a private operator for $11,000/acre.

(Late Tuesday) Press Release - Halcón Resources announced that it has entered into definitive agreements with institutional investors to sell, in a private offering, approximately 5,518 shares of automatically convertible preferred stock, each share of which will be convertible into 10,000 shares of its common stock, for anticipated gross proceeds of approximately $400 million, or $7.25 per common share.

Press Release - Hess Corporation reported a net loss of $4,892 million, or $15.65 per common share, in the fourth quarter of 2016 compared with a net loss of $1,821 million, or $6.43 per common share, in the fourth quarter of 2015.

OIL SERVICES

Press Release - McDermott International announced it was awarded an offshore pipelay contract in the Middle East.

Press Release - McDermott International announced it has been awarded a substantial contract from Saudi Aramco for engineering, procurement, construction and installation services in the Safaniya and Zuluf fields offshore Saudi Arabia.

(Late Tuesday) Press Release - Patterson-UTI Energy entered into an agreement with certain lenders under its revolving credit facility to exercise approximately $95.8 million of the $100 million commitment increase feature available thereunder in order to increase the aggregate commitments under the revolving credit facility to approximately $595.8 million.

(Late Tuesday) Press Release - Patterson-UTI Energy announced that it has priced an underwritten, upsized public offering of 15,800,000 shares of common stock at a price to the public of $26.45 per share of common stock. The 15,800,000 share offering represents a 1,000,000 share upsize to the originally proposed 14,800,000 share offering. The underwriters have an option for 30 days to purchase up to an additional 2,370,000 shares of common stock from the Company.

Credit Suisse initiated coverage of TechnipFMC with an ‘Outperform’ rating.

DRILLERS

Piper Jaffray upgraded Noble Corporation and Transocean to ‘Neutral’ from Underweight.’

Press Release - RPC announced that for the quarter ended December 31, 2016, revenues decreased 17.6 percent to $221.0 million compared to $268.1 million in the fourth quarter of last year. Revenues decreased compared to the prior year due to lower activity levels, equipment utilization and pricing for our services. Operating loss for the quarter was $32.2 million compared to an operating loss of $57.4 million in the prior year. Net loss for the quarter was $21.1 million or $0.10 loss per share, compared to net loss of $37.9 million or $0.18 loss per share last year.

Press Release - Trinidad Drilling announced the commencement of a cash tender offer to purchase any and all outstanding aggregate principal amount of its 7 7/8% Senior Notes due 2019. As of January 24, 2017, US$450,000,000 aggregate principal amount of the notes were outstanding. The tender offer is being made pursuant to an offer to purchase and related letter of transmittal

REFINERS

Citigroup upgraded Phillips 66 to ‘Buy’ from ‘Neutral.’

(Late Tuesday) Reuters - Shell and Phillips 66 together bought 6.4 million barrels of oil last week from the Strategic Petroleum Reserve.

MLPs & PIPELINES

(Late Tuesday) Press Release - The board of directors of Magellan Midstream Partners increased the partnership's quarterly cash distribution to 85.5 cents per unit for the period Oct. 1 through Dec. 31, 2016, representing the 59th distribution increase since its initial public offering in 2001.

Citigroup downgraded Oneok to ‘Neutral’ from ‘Buy.’

(Late Tuesday) Press Release - Concho Resources and Frontier Midstream Solutions announced that they have entered into separate agreements to sell 100% of their respective ownership interests of Alpha Holding Company, the owner of the Alpha Crude Connector system, to Plains All American Pipeline for a combined total of $1.215 billion.

(Late Tuesday) Press Release - Outrigger Energy and certain of its partners and affiliates, today announced the signing of definitive agreements with a subsidiary of Targa Resources Corp. whereby Targa has agreed to acquire Outrigger’s three midstream subsidiaries in the Permian Basin for cash consideration of up to $1.5 billion, subject to certain adjustments.

Press Release - Williams Partners and ACMP Finance announced that they have issued a notice of redemption to holders of the Issuers’ 6.125% Senior Notes due 2022, stating that the Issuers will redeem all of the outstanding Notes for cash on Feb. 23, 2017 at a redemption price equal to 103.063% of the principal amount of the Notes, plus accrued and unpaid interest to the Redemption Date.

(Late Tuesday) Press Release - Williams Partners announced a regular quarterly cash distribution of $0.85 per unit for its common unitholders. The board of directors of the partnership's general partner has approved the quarterly cash distribution, which is payable on Feb. 10, 2017, to common unitholders of record at the close of business on Feb. 3, 2017.

MARKET COMMENTARY

World stocks hit a 19-month high as strong Japanese trade data, stellar company earnings and hopes that U.S. President Donald Trump will press ahead with a large fiscal spending package, boosted investor sentiment. Markets will watch for corporate earnings from some major companies including AT&T, Boeing, eBay, Qualcomm and Western Digital. Monthly home prices data is on the economic calendar. The Aussie dollar slumped after inflation data undershot expectations, rekindling hopes of one more cut in interest rates, while U.S. dollar fell against the yen. Oil fell more than a percent on rising U.S. inventories. Gold traded lower as Chinese demand ebbed ahead of the Lunar New Year festival, with some analysts warning of further declines as prices for the metal could be due for a technical correction.


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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