Investor Relations

Energy Market Commentary November 10, 2016: Nasdaq Advisory Services

Thursday, November 10, 2016

Sector Commentary

Oil and gas stocks are set for a mixed opening with pressure coming from early morning weakness in the commodity complex while some strength in the broader equity markets should provide some support. Shares of ConocoPhillips are reacting positively in the pre-market session after the company announced an updated capital strategy for 2017 in a press release ahead of their analyst day in New York. The company unveiled plans for 2017 that include a $3 billion share buyback and the sale of $5 billion to $8 billion of assets focused on North American natural gas.

Crude oil futures gave up some light gains seen earlier this morning and are now trading lower on both sides of the Atlantic after data showed production among OPEC members rising to a record high. The findings in the monthly oil market report from the IEA underscored the challenge OPEC will have in hammering out a plan to cut output at its meeting later in November. The group also said that global supply rose by 800,000 barrels per day in October to 97.8 million bpd, led by record OPEC output and rising production from non-OPEC members such as Russia, Brazil, Canada and Kazakhstan. These reports piled onto growing concerns over increasing supplies domestically after the EIA reported a second consecutive large build in US crude stocks yesterday.

Natural gas futures are trending lower mainly on forecasts for slowing demand as key consumption regions are forecast for more milder winters and as analysts await this morning’s EIA inventory report. Analysts are expecting a build of 55 bcf, a relatively flat week over week build in inventories, which would put inventories at a new high heading into the winter season.

U.S. INTEGRATEDS

(Late Wednesday) Press Release - Sunoco Logistics Partners announced a strategic joint venture with ExxonMobil in which the companies will form Permian Express Partners LLC to combine certain of their key crude oil logistics assets. Sunoco Logistics will contribute its Permian Express 1, Permian Express 2 and Permian Longview and Louisiana Access pipelines.

INTERNATIONAL INTEGRATEDS

Press Release - Puma Energy today announced that it has signed a purchase agreement with BP to buy its bulk storage fuel terminal in Belfast, Northern Ireland.

Reuter - Eni has won Surgutneftegaz's tender for 1.2 million tonnes of Urals crude oil with loading from Baltic ports in January-June 2017.

HSBC raised its rating on Gazprom to ‘Hold’ from ‘Reduce’.

(Late Wednesday) Reuters - Royal Dutch Shell has shut down an Escravos crude oil flow station in Nigeria's Niger Delta after villagers demanding aid staged a Protest.

U.S. E&PS

(Late Wednesday) Press Release - Approach Resources announced that it has completed its fall 2016 semiannual borrowing base redetermination of its revolving credit facility. The borrowing base was unanimously reaffirmed by the bank group at $325 million and there were no changes to the existing terms or conditions of the credit agreement.

Jefferies upgraded Chesapeake Energy to ‘Hold’ from ‘Underperform.’

Reuters - ConocoPhillips said it was looking to raise $5 billion to $8 billion from the sale of assets, particularly natural gas-producing operations in North America. The company also said that it would reduce its capital budget by 4 percent to $5 billion next year due to technology gains, cost cuts and other improvements. The company also announced a $3 billion share repurchase Program.

(Late Wednesday) Press Release - Halcón Resources generated total revenues of $102.5 million for the third quarter of 2016. In addition, Halcón realized a net gain on settled derivative contracts of $80.0 million during the quarter.

Societe Generale upgraded Newfield Exploration to ‘Buy’ from ‘Hold.’

Deutsche Bank upgraded OASIS Petroleum to ‘Buy’ from ‘Hold.’

Citi added Oasis Petroleum to its ‘SMID Focus List’ after raising its overall rating on the U.S. SMID Industrials and Energy Sector to ‘Overweight’ from ‘Market Weight’.

Press Release - PetroQuest Energy announced that it has entered into East Texas joint venture agreements to develop the Cotton Valley formation with a group of investors, whereby the Partners acquired an approximate 20% working interest in the Company's 6,400 gross acre project area. The joint venture does not include existing vertical and horizontal producing wells within the defined project area.

KLR Group upgraded Southwestern Energy to ‘Buy’ from ‘Accumulate.’

CANADIAN E&PS

Reuters - Crescent Point Energy reported a smaller quarterly loss on Thursday, helped by lower costs. The company's net loss narrowed to C$108.5 million, or 21 Canadian cents per share, in the third quarter ended Sept. 30, from C$201.3 million, or 40 Canadian cents per share, a year earlier. Total average daily production fell 6.9 percent to 160,610 barrels of oil equivalent per day.

Press Release - Touchstone Exploration recorded a net loss of $702,000 versus a net loss of $2,553,000 in the second quarter of 2016 and a net loss of $12,666,000 recognized in the prior year comparative quarter. Touchstone announces that Mr. Trevor Mitzel has resigned from the Company's Board of Directors, effective November 9, 2016.

OIL SERVICES

• GLF reported 3Q’16 EPS of ($0.91) versus Thomson Reuters I/B/E/S estimate of ($0.70).

• SCL reported 3Q’16 EPS of (C$2.71) versus Thomson Reuters I/B/E/S estimate of (C$0.15).

• TCW-T reported 3Q’16 EPS of (C$0.06) versus Thomson Reuters I/B/E/S estimate of (C$0.12).

Deutsche Bank downgraded Basic Energy Services to ‘Hold’ from ‘Buy.’

(Late Wednesday) Press Release - GulfMark Offshore reported consolidated revenue for the third quarter of 2016 was $27.8 million, compared with $30.5 million in the previous quarter. Consolidated revenue fell due to a 9% sequential decrease in average day rate to $9,966 from $10,939 in the previous quarter, offset somewhat by an increase in utilization to 44% from 41% in the second quarter.

(Late Wednesday) Press Release - National Oilwell Varco entered into settlement agreements to resolve investigations by the U.S. Department of Justice, the Department of

Commerce, Bureau of Industry and Security, the U.S. Department of Treasury, Office of Foreign Assets Control and the U.S. Immigration and Customs Enforcement regarding NOV’s compliance with U.S. export trade laws and regulations. NOV will pay a total of $25 million to resolve the investigations, an amount which was preliminarily agreed upon in 2010 and which was fully accrued around that time.

Reuters - British oil and gas explorer Ophir Energy said it had signed an agreement with OneLNGSM, a joint venture between units of Golar LNG and Schlumberger, to develop the Fortuna project in Equatorial Guinea.

(Late Wednesday) Press Release - Shawcor’s Board of Directors declared a dividend of fifteen cents per share on the outstanding common shares of the Corporation payable on the 30(th) day of November 2016, to shareholders of record at the close of business on the 18(th) day of November 2016.

(Late Wednesday) Press Release - Shawcor announced third quarter revenue of $259 million increased by 1% from the $255 million reported in the second quarter of 2016 but was 47% lower than the $485 million reported in the third quarter of 2015. Its adjusted EBITDA in the third quarter of 2016 was $6.9 million, compared with a loss of $20.3 million in the second quarter of 2016 and versus $74.8 million in the third quarter of 2015. Adjusted EBITDA excludes impairment charges of $155.9 million in the third quarter of 2016.

(Late Wednesday) Press Release - Trican Well Service reported Consolidated revenue from continuing operations for the third quarter of 2016 was $78.0 million, a decrease of 59% compared to the third quarter of 2015. The adjusted operating loss for the quarter was $3.2 million which is $35.4 million less than the operating income experienced in Q3 2015. The large revenue drop experienced was partially mitigated by ongoing cost control initiatives that were implemented in the last few quarters.

(Late Wednesday) Press Release - U.S. Silica Holdings announced that it has commenced an underwritten public offering of 9,000,000 shares of U.S. Silica common stock. The underwriters will be granted a 30-day option to purchase up to an additional 1,350,000 shares of common stock.

CLSA upgraded Weatherford International to ‘Buy’ from ‘Underperform.’

(Late Wednesday) Press Release - Weatherford International said on Wednesday Chief Executive Bernard Duroc-Danner has left the company, effective immediately, and the oilfield services company named Chief Financial Officer Krishna Shivram its interim CEO.

REFINERS

(Late Tuesday) Reuters - HollyFrontier reported that Michael C. Jennings notified board that he will retire from his position as executive chairman.

(Late Tuesday) Press Release - HollyFrontier announced that its Board of Directors declared a regular quarterly dividend in the amount of $0.33 per share, payable on December 16, 2016 to holders of record of common stock on November 28, 2016.

(Late Tuesday) Reuters - The large crude distillation unit at Valero Energy's 335,000-barrel-per-day Port Arthur, Texas, refinery has been running at a reduced production level since restarting from an overhaul.

(Late Tuesday) Reuters - Valero Energy plans to return the hydrocracking unit to production at its 190,000 barrel-per-day Memphis, Tennessee, refinery by early next week after completing a planned overhaul.

MLPs & Pipelines

(Late Wednesday) Press Release - Energy Transfer Equity reported net income attributable to partners was $209 million for the three months ended September 30, 2016 compared to $293 million for the three months ended September 30, 2015. Distributable Cash Flow, as adjusted, for the three months ended September 30, 2016 was $281 million compared to $325 million for the three months ended September 30, 2015. The decreases in net income attributable to partners and Distributable Cash Flow, as adjusted, were primarily driven by an $85 million reduction in incentive distributions from ETP.

(Late Wednesday) Press Release - Sunoco Logistics Partners announced net income attributable to partners for the nine months ended September 30, 2016 was $501 million, compared to $368 million for the prior year period. Adjusted EBITDA for the nine months ended September 30, 2016 was $906 million, compared to $836 million for the prior year period. Net income attributable to partners for the three months ended September 30, 2016 was $154 million, compared to $56 million for the prior year period. Adjusted EBITDA was $312 million for the three months ended September 30, 2016, compared to $289 million for the prior year period.

(Late Wednesday) Press Release - Sunoco Logistics Partners announced a strategic joint venture with ExxonMobil in which the companies will form Permian Express Partners LLC to combine certain of their key crude oil logistics assets. Sunoco Logistics will contribute its Permian Express 1, Permian Express 2 and Permian Longview and Louisiana Access pipelines. Distribution increase to $0.51 for the third quarter 2016

MARKET COMMENTARY

U.S. stock index futures advanced, as investors took respite after a massive sell-off in risky assets and absorbed Republican Donald Trump's U.S. presidential win. Weekly jobless claims and federal budget data are on the economic calendar, while Walt Disney and Nvidia are scheduled to report results later in the day. European stocks rose, following extraordinary gains in Asia. The dollar recouped losses against a basket of major currencies. Uncertainty over the economic policies of Trump, supported gold prices. U.S. crude surrendered gains.


Nasdaq Advisory Services Energy Team Tamar Essner
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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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