Markets

Energy Market Commentary: Light Trading; Energy Stocks Mixed Despite Market Strength

Tuesday, August 15, 2017

Sector Commentary

Energy stocks are mixed on continued weakness in oil prices despite strength in the broader markets after economic data surpassed expectations while tensions around North Korea show signs of alleviating. Corporate news and trading volumes are light.

After yesterday’s 2% losses, crude oil prices are down again today at more than three-week lows following a surge in the dollar and signs of weaker demand in China. Chinese oil refineries operated in July at their slowest daily rates since September. The drop was steeper than expected, raising concerns over the state of Chinese demand and level of domestic stockpiles. An announcement by the Nigerian subsidiary of Royal Dutch Shell that it had lifted a force majeure on Bonny Light crude exports also added to the market surplus. The dollar gained momentum on news that North Korea delayed a decision on firing missiles towards the U.S. Pacific territory of Guam and that helped to pressure crude oil.

Natural gas futures are extending yesterday’s weakness with traders noting some profit taking after prices rose +7.5% last week and ahead of inventory data that is expected to show a smaller than usual seasonal decline in supplies.

INTERNATIONAL INTEGRATEDS

Press Release - BP confirmed the start of production from another two of the seven Upstream major projects that it expects to come online in 2017.

Press Release - LUKOIL Group’s daily hydrocarbon production excluding West Qurna-2 project for the first six months of 2017 increased by 1.5% year-on-year to 2,217 thousand boe per day.

CAnadian INTergrateds

Press Release - Calumet Specialty Products Partners announced that it signed definitive agreements to sell the ownership of its Superior, Wisconsin refinery and various related assets to Husky Superior Refining Holding Corporation, a wholly owned unit of Husky Energy. Under the agreement, Husky has agreed to pay $435 million in cash plus an additional payment for net working capital, inventories, and reimbursement of certain capital spending. Had the transaction closed on June 30, the additional payment would have been $61.5 million.

U.S. E&PS

Imperial Capital started Callon Petroleum, Parsley Energy and RSP Permian at ‘Outperform’.

(Late Monday) Press Release - Newfield Exploration announced that effective August 11, 2017, Edgar R. "Bud" Giesinger, 60, a former managing and audit engagement partner, KPMG LLP, has been appointed to Newfield's Board of Directors.

(Late Monday) Press Release - Noble Energy announced the pricing of its previously announced cash tender offer for any and all of its $1 billion 8.25% senior notes due 2019, which expired on August 14, 2017.

Press Release - Penn Virginia announced that its Board of Directors appointed John A. Brooks as President and Chief Executive Officer and as a director of the Company.

CANADIAN E&PS

(Late Monday) Press Release - Pengrowth Energy generated funds flow from operations of $29.3 million ($0.05 per share) during the second quarter and $56.2 million ($0.10 per share) for the first half of 2017. It also agreed in principle on the key elements on an amendment with a group of noteholders, subject to final legal documentation, that temporarily relaxes covenants for a period up to and including the period ending September 30, 2019.

DRILLERS

Guggenheim Securities upgraded Nabors Industries to ‘Buy’ from ‘Neutral’.

Press Release - Seadrill Limited announced that it has amended the term credit facility provided to Seadrill Eminence Ltd., a wholly owned subsidiary of the Company, to mature on September 14, 2017.

Press Release - Transocean reached an agreement with Songa Offshore SE whereby it will, subject to certain conditions, make a Voluntary Exchange Offer to acquire 100 percent of the issued and outstanding shares of Songa Offshore, including shares issued before expiry of the offer period as a result of the exercise of warrants, convertible loans and other subscription rights.

REFINERs

Press Release - Calumet Specialty Products Partners announced that it signed definitive agreements to sell the ownership of its Superior, Wisconsin refinery and various related assets to Husky Superior Refining Holding Corporation, a wholly owned unit of Husky Energy. Under the agreement, Husky has agreed to pay $435 million in cash plus an additional payment for net working capital, inventories, and reimbursement of certain capital spending. Had the transaction closed on June 30, the additional payment would have been $61.5 million.

MLPs & Pipelines

Press Release - Energy Transfer Partners announced it has commenced a public offering of 54,000,000 common units representing limited partner interests, with a 30-day option for the underwriter to purchase up to an additional 8,100,000 common units.

Reuters - Cheniere Energy is setting up an office in Beijing to help it clinch long-term supply deals with Chinese buyers.

Press Release - A Texas private equity firm is suing Pembina Pipeline for a half-billion dollars, arguing one of its investments was driven into receivership by the pipeline company.

Press Release - Pembina Pipeline said Monday that it has agreed to issue $600 million of senior unsecured medium-term notes, which will be conducted in two tranches.

Press Release - SunCoke Energy announced that Susan R. Landahl has been appointed to the Company's Board of Directors, for a term commencing September 1, 2017. Landahl will be a member of the Governance Committee of the board, and will serve in the class of directors standing for election at the Company's Annual Meeting of Stockholders in May 2018.

MARKET COMMENTARY

U.S. stock index futures pointed to a higher open on Tuesday after economic data surpassed expectations while tensions around North Korea show signs of alleviating. Investors also breathed a sigh of relief after North Korea's leader Kim Jong Un stated that he would hold fire on making a decision surrounding a missile strike on Guam. Kim is reportedly looking for future actions by the U.S. before making a decision, Reuters reported citing the KCNA.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.