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Energy Market Commentary October 7, 2016: Nasdaq Advisory Services

Friday, October 7, 2016

Sector Commentary

Energy stocks are poised for a stronger opening despite weakness in oil prices. The sector is being lifted by momentum in broader equity futures which are higher after the jobs data fell short of estimates, showing that 156,000 new jobs were added in September, against expectations for 176,000. The jobs data reinforced expectations for easy monetary policy, which is seen as beneficial for equities.

Crude prices are fractionally lower this morning, paring back from losses of 1% earlier in the session on profit-taking from the near 5% gains experienced so far this week. Notably, both front-months are above $50 now, lifting the entire forward curve. Pressuring oil prices this morning, however, is the strength in the USD despite a weaker jobs report which would have dovish implications for Fed policy and which should pressure the greenback. However, helping to lift the dollar today is the severe weakness in the British pound, which lost a tenth of its value within minutes earlier this morning after the French President said the EU needed to remain firm with Britain and as it appeared that Britain had opted for a tougher exit from Europe.

Elsewhere in the oil markets, traders are looking ahead to more informal OPEC talks this weekend in Turkey, which will include Russia. Additionally, the weekly rig count will be in focus later this afternoon for signs that recent commodity strength is supporting further rig expansion.

Natural gas futures are maintaining resiliency, continuing to rise above $3 to levels not seen since January of last year. The market is overlooking unseasonably warm temperature forecasts for the near-term and instead is looking further out, towards winter demand.

INTERNATIONAL INTEGRATEDS

Reuters - Gazprom is preparing to issue in October-November two tranches of Eurobonds denominated in Swiss francs and possibly in euros.

Reuters - Royal Dutch Shell up 2 pct, BP up 1.5 pct, and Shell up 8.7 percent this week while BP is up 7.6 percent over the same period, supported by gains in oil prices and the weakening of the British pound.

Reuters - Total agreed to sell its specialty chemicals arm Atotech for $3.2 billion to private equity firm Carlyle Group, part of a programme under which the French oil company hopes to divest $10 billion worth of non-core assets by 2017.

CAnadian INTEGRATEDS

(Late Thursday) Press Release - Suncor Energy UK announced it has closed the previously announced purchase of a 30 per cent participating interest in the U.K. North Sea Rosebank project from OMV. Suncor Energy UK Limited operates as a subsidiary of Suncor Energy.

U.S. E&PS

(Late Thursday) Press Release - ConocoPhillips announced a quarterly dividend of 25 cents per share, payable Dec. 1, 2016, to stockholders of record at the close of business on Oct. 17, 2016.

(Late Thursday) Press Release - Devon Energy announced that it has completed the sale of its 50 percent ownership interest in Access Pipeline to Wolf Midstream for CAD $1.4 billion, or USD $1.1 billion.

Evercore initiated coverage of QEP Resources with a ‘Hold’ rating.

JPMorgan upgraded coverage of Range Resources to ‘Overweight’ from ‘Neutral.’

(Late Thursday) Press Release - Sanchez Energy announced that the Company has executed definitive agreements with Sanchez Production Partners pursuant to which the Company anticipates that SPP will acquire the Company’s 50% interest in Carnero Processing for an initial payment of approximately $47.7.

CANADIAN E&PS

(Late Thursday) Press Release - Pengrowth Energy announced that GLJ Petroleum Consultants has provided an update of bitumen reserves and contingent resources for its 100 percent owned Lindbergh project in east central Alberta, as of September 30, 2016.

OIL SERVICES

Press Release - Baker Hughes announced that the international rig count for September 2016 was 934 down 3 from the 937 counted in August 2016, and down 206 from the 1,140 counted in September 2015. The international offshore rig count for September 2016 was 221, down 7 from the 228 counted in August 2016, and down 47 from the 268 counted in September 2015.

DRILLERS

Seaport Global downgraded Diamond Offshore Drilling and Noble Corporation to ‘Neutral’ from ‘Accumulate.’

Seaport Global downgraded Rowan Companies to ‘Neutral’ from ‘Buy.’

Press Release - Transocean announced that Transocean Phoenix 2 Limited, one of its wholly-owned indirect subsidiaries, has priced an offering of senior secured notes. The Issuer will issue U.S. $600 million in aggregate principal amount of senior secured notes due 2024 pursuant to Rule 144A/Regulation S to eligible purchasers.

MLPs & Pipelines

Wolfe Research initiated coverage of Energy Transfer Partners with a ‘Peer Perform’ rating.

Wolfe Research initiated coverage of Enterprise Products Partners with an ‘Outperform’ rating.

(Late Thursday) Reuters - Tortoise Capital Advisors reported 13.4 percent passive stake in Noble Midstream Partners as of Sept. 30.

Wolfe Research initiated coverage of Sunoco Logistics Partners with an ‘Underperform’ rating.

(Late Thursday) Press Release - Western Gas Partners announced that it has priced an offering of an additional $200,000,000 in aggregate principal amount of 5.45% senior notes due 2044 at a price to the public of 102.776% of their face value, equating to a yield of 5.256%.

MARKET COMMENTARY

U.S. stock index futures pointed to a higher open on Friday as traders digested a key employment report that missed expectations. The U.S. economy added 156,000 jobs last month, the Labor Department said. U.S. nonfarm payrolls were expected to show that 176,000 jobs were added in September, compared with the 151,000 increase in jobs a month earlier. Elsewhere on the data front, wholesale trade is due at 10:00 a.m. ET, with consumer credit set to come out at 3:00 p.m. ET. In Europe, the pan-European Stoxx-600 index was 0.7 percent lower on Friday. Sterling plunged to its lowest level in three decades overnight, dropping 6 percent in just two minutes before recovering to trade about 2 percent lower. In Asia, Japan's Nikkei closed 0.23 percent lower.


Nasdaq Advisory Services Energy Team Tamar Essner
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