Markets

Energy Market Commentary January 26, 2017: Nasdaq Advisory Services

THURSDAY, JANUARY 26, 2017

SECTOR COMMENTARY

Oil and gas stocks are set for a mixed to higher open as the commodity complex is higher and with U.S. equity futures struggling to find direction in the pre-market session. Earnings season continues in a light fashion with Baker Hughes and Murphy oil headlining today’s releases. The former, despite posting a larger than expected loss on the bottom line, unveiled a strong quarter highlighted by margin growth and operational efficiency. Meanwhile, the latter, showed a slight miss, but announced some weaker than expected 2017 guidance which was hampering the stock in the pre-market session.

Crude oil futures are higher on both sides of the Atlantic this morning, with both futures clinging on to earlier gains despite a swift rally in the U.S. Dollar. However, gains this morning were capped by data from the EIA showing an increase of 2.84 million barrels last week in U.S. crude inventories to 488.3 million barrels, pointing to ample supply in the world's biggest market. Rising U.S. output and inventories are likely to limit the impact of the agreement by OPEC and other producers, including Russia, to cut supplies in an effort to reduce a global glut.

Natural gas futures jumped to its highest price in more than a week ahead of a weekly storage report on forecasts for colder-than-normal weather through the second week of February. Analysts forecast utilities pulled 117 billion cubic feet of gas from storage during the warmer-than-usual week ended Jan. 20, the least for that week since 2015, due primarily to light heating demand. That compared with draws of 202 bcf a year earlier and a five-year average of 176 bcf for that week.

U.S. INTEGRATEDS

(Late Wednesday) – Press Release - The Board of Directors of Chevron declared a quarterly dividend of one dollar and eight cents ($1.08) per share, payable March 10, 2017, to all holders of common stock as shown on the transfer records of the Corporation at the close of business February 16, 2017. The Company also announced that Michael K. Wirth, executive vice president of Midstream and Development, has been named vice chairman, effective February 1, 2017. In assuming his new role, Wirth will join the company's Board of Directors and add Policy, Government & Public Affairs to his existing portfolio of responsibilities.

INTERNATIONAL INTEGRATEDS

Reuters - Eni said its Versalis unit and Sonatrach have signed a Memorandum of Understanding (MoU) to carry out joint feasibility studies for a petrochemical complex to be built in Algeria.

Press Release - Petrobras announced that holders of US$4,885,558,000 and EUR631,553,000 principal amount of the outstanding notes of the series set forth in the table below (all such notes, collectively, the "Old Notes" and each a "series" of Old Notes), issued by its wholly-owned subsidiary Petrobras Global Finance B.V., tendered their Old Notes at or prior to 5:00 p.m., New York City time, on January 25, 2017, pursuant to PGF's previously announced cash tender offers..

U.S. E&PS

  • MUR reported 4Q’16 EPS of ($0.16) versus Thomson Reuters I/B/E/S estimate of ($0.18).

(Late Wednesday) Press Release - Abraxas Petroleum announced the closing of its public offering of 25,000,000 shares of common stock at a price of $2.40 per share, less applicable underwriting discounts.

Press Release - Comstock Resources announced that its proved oil and natural gas reserves as of December 31, 2016 were estimated at 7.3 million barrels of crude oil and 872 billion cubic feet ("Bcf") of natural gas or 916 billion cubic feet of natural gas equivalent ("Bcfe") as compared to total proved reserves of 365 Bcfe as of December 31, 2015.

(Late Wednesday) Press Release - Continental Resources announced a 2017 capital expenditures budget of $1.95 billion, which is expected to accelerate production growth in second half 2017 to an exit rate of 250,000 to 260,000 barrels of oil equivalent (Boe) per day. Crude oil is projected to account for approximately 59% of total production by year end, compared with approximately 55% in the fourth quarter 2016. Of the total $1.95 billion budget, the Company is allocating $1.72 billion to drilling and completion activities, with the remainder planned to be invested in other opportunities including leasehold and facilities.

(Late Wednesday) Press Release - Marathon Oil announced that the Company's board of directors has declared a dividend of 5 cents per share on Marathon Oil Corporation common stock. The dividend is payable on March 10, 2017, to stockholders of record on Feb. 15, 2017.

(Late Wednesday) Press Release - Murphy Oil announced its preliminary financial and operating results for the fourth quarter ended December 31, 2016, including a net loss of $64 million, or $0.37 per diluted share. Operating and financial highlights for the fourth quarter and full year 2016 include: produced volumes of 168 Mboepd in the fourth quarter and 176 Mboepd for full year, spent $605 million on capital investments for full year, excluding acquisitions, lowered lease operating expense per barrel by approximately 15% year-over-year, excluding Syncrude, reduced selling and general expenses by approximately 14% year-over-year, generated $1.2 billion cash from non-core asset divestitures during the year, continued streamlining onshore portfolio by entering into an agreement to divest Canadian heavy oil asset at Seal and expanded exploration portfolio by farming into a successfully drilled prospect in the Gulf of Mexico as well as capturing a block in Mexico's deepwater bid round.

Press Release - W&T Offshore announced that the Ship Shoal 349 A-18 well, its most recently completed well in its Mahogany field, was successfully brought on production on January 17, 2017.

OIL SERVICES

  • BHI reported 4Q’16 EPS of ($0.30) versus Thomson Reuters I/B/E/S estimate of ($0.11).
  • CLB reported 4Q’16 EPS of $0.41 versus Thomson Reuters I/B/E/S estimate of $0.40.
  • CRR reported 4Q’16 EPS of ($0.57) versus Thomson Reuters I/B/E/S estimate of ($0.69).

Press Release - Baker Hughes announced results for the fourth quarter and full year of 2016. The Company reported revenue of $2.4 billion for the quarter, up 2% sequentially. Full-year revenue was $9.8 billion while GAAP net loss attributable to Baker Hughes of $417 million for the quarter includes the negative impact of $291 million of adjusting items and $107 million of income taxes. Adjusted EBITDA (non-GAAP measure) was $266 million for the quarter and $493 million for the year while cash flows from operating activities were $632 million for the quarter and $4.2 billion for the year.

Press Release – CARBO Announces Fourth Quarter and Fiscal Year 2016 Results Conference Call Scheduled for Today, 10:30 a.m. Central Time- Revenue for the fourth quarter of 2016 increased 44% sequentially.- Ceramic sales volumes for the fourth quarter of 2016 increased 41% sequentially.- Recently signed long-term commercial agreements with two of our largest customers.- Quarterly revenues of $29.1 million, with GAAP net loss of $15.2 million, or a loss of $0.57 per share.- GAAP net loss included $7.3 million, or $0.28 per share, of after-tax costs associated with slowing and idling production and $0.7 million, or $0.03 per share, of after-tax charges.

(Late Wednesday) Press Release - Core Laboratories reported fourth quarter 2016 revenue of $149,500,000, up over 4% sequentially from the third quarter 2016, with EPS of $0.35 in accordance with U.S. generally accepted accounting principles ("GAAP"). Excluding foreign currency translations ("ex-fx") and a higher than guided tax rate (collectively with ex-fx, "ex-items"), EPS was $0.41, up 8% sequentially from the prior quarter. Net income for the fourth quarter 2016 increased to $18,300,000; and operating income increased to $21,900,000, up sequentially 9% and 2%, respectively, ex-items, with operating margins of 15%. On a GAAP basis, fourth quarter net income was $15,500,000, and operating income was $21,500,000, with operating margins of 14%. During the fourth quarter 2016, Core generated $19,600,000 of free cash flow, defined as cash from operations less capital expenditures. For the year, Core generated $120,500,000 in FCF, converting 20% of every revenue dollar to free cash.

(Late Wednesday) Press Release - GulfMark Offshore announced that it has successfully entered into two new long-term contracts. The first is a two year plus options contract for the M/V Highland Prince. ASCO Marine has chartered the 2010-built Highland Prince, a high specification PSV, equipped with diesel electric, fuel efficient propulsion, dynamic positioning Class 2, and a double hull, clean design vessel, for its operations on the U.K. continental shelf. The second award is a four year plus options charter for the M/V Highland Defender to support drilling operations on a central North Sea development with a U.K. operator. The Highland Defender, built in 2013, is a state of the art dynamically positioned PSV with oil recovery capability, clean design and the special purpose ship classification.

DRILLERS

  • HP reported 1Q’17 EPS of ($0.33) versus Thomson Reuters I/B/E/S estimate of ($0.36).

Press Release - Helmerich & Payne reported a net loss of $35 million (negative $0.33 per diluted share) from operating revenues of $369 million for the first quarter of fiscal 2017, compared to net income of $16 million ($0.15 per diluted share) from operating revenues of $488 million during the first quarter of fiscal 2016, and a net loss of $73 million (negative $0.68 per diluted share) from operating revenues of $332 million during the fourth quarter of fiscal 2016. Included in net income (loss) per diluted share for both this year’s first fiscal quarter and last year’s first fiscal quarter are approximately $0.08 and $0.10, respectively, in after-tax income related to a combination of select items described in a separate section of this press release. Included in net loss per diluted share for last year’s fourth fiscal quarter is approximately $0.35 in after-tax losses related to a combination of select items.

Credit Suisse upgraded RPC to ‘Outperform’ from ‘Neutral’.

MLPs & PIPELINES

(Late Wednesday) Press Release - AltaGas and WGL Holdings announced the entering into of a definitive agreement and plan of merger for AltaGas to acquire WGL in an all cash transaction valued at approximately C$8.4 billion. The Transaction enhances AltaGas' position as a leading, diversified North American energy infrastructure company, with assets of approximately C$22 billion. AltaGas will have, on a combined basis, natural gas rate base assets of C$4.5 billion and over C$7 billion of identified capital investment opportunities identified through to 2021 in highly attractive clean energy lines of business. The Company also announced that it has entered into an agreement with a syndicate of underwriters led by TD Securities, RBC Capital Markets and J.P. Morgan Securities Canada to issue 67,800,000 subscription receipts, on a bought deal basis, at an issue price of $31.00 per Subscription Receipt, for total gross proceeds of approximately $2.1 billion. The net proceeds from the Public Offering and the Private Placement will be used to partially finance the previously announced $8.4 billion acquisition of WGL Holdings.

Press Release - Delek Logistics Partners declared its quarterly cash distribution for the fourth quarter 2016 of $0.68 per limited partner unit, or $2.72 per limited partner unit on an annualized basis. This distribution represents a 3.8 percent increase from the distribution for the third quarter 2016 of $0.655 per limited partner unit ($2.62 per limited partner unit annualized) and a 15.3 percent increase over Delek Logistics' distribution for the fourth quarter 2015 of $0.59 per limited partner unit ($2.36 per limited partner unit annualized). The fourth quarter 2016 cash distribution is payable on February 14, 2017 to unitholders of record on February 7, 2017. (Late Wednesday) Reuters - Kinder Morgan said February crude oil nominations for Trans Mountain pipeline system are oversubscribed by 27 percent for the total system for the month. The company said February total nominations accepted are: 326,280 barrels per day (bpd) for Trans Mountain, 146,833 bpd for Puget Sound and 81,888 bpd for Westridge Dock.

(Late Wednesday) Press Release - PennTex Midstream Partners announced a quarterly cash distribution for the fourth quarter ended December 31, 2016 of $0.295 per unit, or $1.18 per unit on an annualized basis. This cash distribution is the same amount as the Partnership's cash distribution for the third quarter of 2016 and will be paid on February 14, 2017 to unitholders of record as of the close of business on February 7, 2017.

Press Release - SunCoke Energy Partners reported fourth quarter 2016 net income attributable to SXCP of $45.9 million, up $9.6 million versus the same prior year period. Fourth quarter Adjusted EBITDA attributable to SXCP was $76.7 million, up $19.9 million versus the prior year period primarily due to the recognition of CMT deferred revenue. Full-year 2016 net income attributable to SXCP was $119.1 million, representing a $33.7 million increase versus the same prior year period. The Company delivered full-year 2016 Adjusted EBITDA attributable to SXCP of $209.7 million which was $18.2 million higher than full-year 2015 and in line with its full-year guidance of between $207 million and $217 million.

MARKET COMMENTARY

U.S. stock index futures were higher, with investors basking in the afterglow of a break past 20,000 points for Wall Street’s record high Dow Jones index. Markets will watch for corporate results of major companies such as Starbucks, Microsoft, Intel and Google scheduled to report after the closing bell. Initial claims, Markit composite and services PMI, leading index, new home sales, national activity index, wholesale inventory and goods trade balance data are on the economic calendar. European shares tracked gains in Asian markets. Gold was down as riskier assets gained traction, while oil rose driven by a weakening dollar.


Nasdaq Advisory Services Energy Team Tamar Essner
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