Investor Relations

Energy Market Commentary October 5, 2016: Nasdaq Advisory Services

Wednesday, October 5, 2016

Sector Commentary

The energy sector is poised for a higher open after Tuesday’s retreat, lifted by strong support in underlying oil prices following yesterday evening’s API report and ahead of a slew of macro-drivers including a report on private sector hiring.

WTI crude oil futures are up roughly 1.9% in early trading, marginally outpacing Brent, lifted by the API data which showed U.S. crude stocks tumbled unexpectedly last week as imports dropped, while gasoline inventories increased and distillate stocks drew. The data comes ahead of today’s more closely watched EIA data which analysts expect to show crude stocks likely rose last week, after four weeks of unexpected drawdowns including the largest plunge since 1999.The API report showed Crude inventories fell 7.6 million barrels in the week to September 30 to 498.9 million, compared with analysts' expectations for an increase of 2.6 million barrels while crude stocks at the Cushing, Oklahoma rose by 435,000 barrels and U.S. crude imports fell last week by 862,000 barrels per day to 7 million bpd. Additionally, gasoline stocks rose 2.9 million barrels, compared with analysts' expectations in a Reuters poll for a 702,000-barrel gain and distillate fuels stockpiles, which include diesel and heating oil, fell 1.3 million barrels, compared with expectations for a 700,000-barrel drop.

Natural gas futures are trading down roughly 1% in early trading after yesterday’s pop, pressured by forecasts indicating that demand would decline and despite expectations that production would drop to a two-year low.

INTERNATIONAL INTEGRATEDS

Reuters - Korea Gas said that it signed a conditional sales contract with BP to supply around 330,000 tonnes of liquefied natural gas from its Mozambique gas field.

Deutsche Bank upgraded Eni to ‘Buy’ from ‘Hold.’

(Late Tuesday) Reuters - Petroleo Brasileiro confirmed it will relaunch the process to order a Floating Production Storage Offloading vessel to explore the presalt area.

(Late Tuesday) Reuters - Petroleo Brasileiro and Statoil are expanding a partnership to help the Brazilian state-controlled company arrest declining production at aging wells in the offshore Campos Basin.

Reuters - Royal Dutch Shell is expecting to restart its ethylene cracker at Pulau Bukom, Singapore, in the next few weeks following an unplanned shutdown last week.

Panmure Gordon initiated coverage of Royal Dutch Shell with a ‘Buy’ rating.

(Late Tuesday) Reuters - Ivory Coast signed a partnership pact to create a consortium headed by Total to build a liquid natural gas import terminal that could begin receiving gas shipments by mid-2018.

U.S. E&PS

(Late Tuesday) Press Release - Concho Resources completed its previously announced acquisition of approximately 40,000 net acres in the core of the Midland Basin from Reliance Energy for approximately $1.625 billion.

(Late Tuesday) Press Release - EOG Resources completed its previously announced mergers and related asset purchase transactions with Yates Petroleum, Abo Petroleum, MYCO Industries and certain affiliated entities.

Stephens resumed coverage of Halcon Resources with an ‘Equal Weight’ rating.

Press Release - SM Energy announced that the Company closed the previously announced acquisition of 24,783 net acres in Howard County, Texas, from Rock Oil Holdings for $980 million, before customary purchase price adjustments. The company also increased borrowing base to $1.35 billion.

CANADIAN E&PS

(Late Tuesday) Press Release - Parex Resources is pleased to announce the appointments of Mr. Bob MacDougall and Mr. Glenn McNamara to the Board of Directors effective immediately.

OIL SERVICES

Reuters - CGG acquired Saturno multi-client survey over Santos Basin Offshore Brazil.

(Late Tuesday) Press Release - Mitcham Industries announced that it has declared a quarterly cash dividend on its 9.00% Series A Cumulative Preferred Stock for the third quarter of the fiscal year ending January 31, 2017.

Reuters - Oil States International’s agreement has been amended to allow for certain intercompany transactions between or among co, its subsidiaries. It entered into a consent and amendment No. 1 to its credit agreement dated as of May 28, 2014.

Press Release - Patterson-UTI Energy reported that for the month of September 2016, the Company had an average of 62 drilling rigs operating in the United States and two rigs in Canada. For the three months ended September 30, 2016, the Company had an average of 60 drilling rigs operating in the United States and two rigs in Canada.

DRILLERS

(Late Tuesday) Press Release - Ensco extended the maturity date with respect to certain commitments under its Fourth Amended and Restated Credit Agreement, dated as of May 7, 2013, by one year from September 30, 2019 to September 30, 2020.

Press Release - Pacific Drilling announced that it has extended its previously announced consent solicitation by its indirect wholly-owned subsidiary, Pacific Drilling V Limited in respect of the Company’s 7.250% Senior Secured Notes due 2017 and increased the consent payment offered to consenting holders.

REFINERS

Reuters - Phillips 66 Borger, Texas, refinery reported a third party steam facility will be taken down to replace a leaking steam valve.

MLPs & Pipelines

Wells Fargo Securities upgraded Plains All American Pipeline to ‘Outperform’ from ‘Market Perform.’

MARKET COMMENTARY

U.S. stock index futures edged down, taking cues from European markets on speculation that the European Central Bank would eventually be winding down its bond-buying stimulus program. Investors await a flurry of economic indicators, including ADP’s employment data, trade figures and Markit’s PMI data amongst others. Asian stocks closed mixed. Britain's pound traded below $1.27 for the first time since 1985, and a five-year low versus the euro. Gold held steady. Oil advanced, hitting its highest since June, supported by American Petroleum Institute’s report that U.S. inventories likely fell for a fifth straight week and OPEC's deal to cut supply.


Nasdaq Advisory Services Energy Team Tamar Essner
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