Energy Market Commentary: Strength In Crude Driving Energy Stocks

Friday, December 15, 2017

Sector Commentary

Energy stocks are expected to open higher behind the strength of crude oil prices and broader equity futures. Today is quadruple witching expiration, along with several index rebalances, so volatility will be elevated, especially near the closing bell.

Additionally, JP Morgan made a handful of recommendation changes across its E&P coverage, while Marathon Petroleum was the latest refiner to exchange economic interests, including IDRs, for its MLP, MPLX. Further, Hess shares will be in focus following a media report indicating that activist investor Elliott Management is preparing to recommend changes to Hess, including potential asset divestitures, reduction or elimination of the dividend, and possible management change.

WTI crude oil futures are higher in early trading, lifted by the Forties pipeline outage in the North Sea, ongoing OPEC-led production cuts and a decline in global stocks, although rising U.S. output kept a lid on markets. While the pipeline outage physically mostly affects the North Sea region, it is of global relevance as the crude it supplies is part of the deliveries that underpin the Brent price benchmark. Beyond the North Sea supply disruption, traders and analysts said markets were generally supported by efforts led by OPEC and Russia to withhold production to prop up prices.

Natural gas futures were rebounding modestly this morning following yesterday's drop after the weekly inventory report.


(Late Thursday) Reuters - Chevron Corp has reached preliminary agreement with oil services firm Schlumberger NV to drill six wells in a Brazilian offshore field, two sources said this week, in a bid to lift its output in the South American country after a 2011 oil spill there cut production.

Press Release - Eni has completed the sale of a 25 percent indirect interest in the natural gas-rich Area 4 of the Rovuma Basin to ExxonMobil Development Africa B.V. ('ExxonMobil').

Press Release - Petrobras and ExxonMobil signed a memorandum of understanding regarding a strategic alliance to jointly identify and evaluate potential business opportunities.


Press Release - Lightsource and BP announced that they have agreed to form a strategic partnership, bringing Lightsource's solar development and management expertise together with BP's global scale, relationships and trading capabilities to drive further growth across the world.

(Late Thursday) Press Release - A Gazprom delegation headed by Alexey Miller, Chairman of the Company's Management Committee, paid a working visit to the Islamic Republic of Iran. In the course of the visit, Alexey Miller met with Bijan Namdar Zangeneh, Iran's Minister of Petroleum. The parties confirmed their interest in advancing their partnership on a large scale and discussed potential areas of bilateral cooperation.

(Late Thursday) - Repsol and Microsoft have signed a strategic agreement that will allow the energy company to advance its digitalization process, and allow the software and cloud computing company to develop innovative solutions for the energy industry.

(Late Thursday) Press Release - Statoil and Queiroz Galvao Exploracao e Producao (QGEP) have completed their transaction announced in July 2017, whereby Statoil has acquired QGEP's 10% interest in the BM-S-8 block in Brazil's Santos basin for a total consideration of USD 379 million.


(Late Thursday) Press Release - The board of directors of Apache has declared the regular cash dividend on the company's common shares. The dividend on common shares is payable Feb. 22, 2018, to stockholders of record on Jan. 22, 2018, at a rate of 25 cents per share.

JP Morgan downgraded Energen to ‘Underweight’ from ‘Neutral.’

JP Morgan upgraded Gulfport Energy to ‘Overweight’ from ‘Neutral.’

JP Morgan downgraded Hess to ‘Underweight’ from ‘Neutral.’

JP Morgan downgraded Laredo Petroleum to ‘Underweight’ from ‘Neutral.’

JP Morgan downgraded Newfield Exploration to ‘Neutral’ from ‘Overweight.’

JP Morgan upgraded Marathon Oil to ‘Neutral’ from ‘Underweight.’

JP Morgan downgraded Noble Energy to ‘Neutral’ from ‘Overweight.’

Press Release - Noble Energy announced that it has signed a definitive agreement with CNX Resources to divest the Company’s 50 percent interest in CONE Gathering LLC (“CONE Gathering”) for cash consideration of $305 million. CONE Gathering owns the general partner of CONE Midstream Partners LP (NYSE: CNNX) (“CONE Midstream”). Noble Energy is retaining its 21.7 million common limited partner units and plans to maximize value through the divestment of the units over the next few years.

JP Morgan downgraded Sanchez Energy to ‘Underweight’ from ‘Neutral.’


(Late Thursday) Press Release - Obsidian Energy Ltd. is pleased to announce that Mr. Gordon Ritchie has been appointed to the Obsidian Energy Board of Directors (the 'Board').

Press Release - Whitecap Resources borrowing base has increased to $1.7-billion and it intends to issue $195-million in 3.9 per cent senior notes. The company has closed its acquisition of light oil assets in Saskatchewan.


(Late Thursday) Reuters - Chevron Corp has reached preliminary agreement with oil services firm Schlumberger NV to drill six wells in a Brazilian offshore field, two sources said this week, in a bid to lift its output in the South American country after a 2011 oil spill there cut production.

(Late Thursday) Press Release - SEACOR Holdings announced that its SEA-Vista subsidiary has reached an agreement to sell one of its ECO-Class tankers for approximately $135 million. In conjunction with the sale, SEA-Vista will lease the vessel from the purchaser and simultaneously bareboat the vessel to an oil major for the duration of the lease. The transaction is expected to close before year end.

Barclays initiated Hi-Crush Partners LP at ‘Equal-weight.’


(Late Thursday) Press Release - Trinidad Drilling Ltd. announces its 2018 capital spending budget of approximately $40 million, comprised largely of maintenance capital to be spent on its North American fleet. In addition, Trinidad has been awarded a contract in Bahrain with operations expected to start in early 2018.


Press Release - Marathon Petroleum and MPLX LP announced a definitive agreement for MPC to exchange its general partner (GP) economic interests in MPLX, which include incentive distribution rights (IDRs), for 275 million newly issued MPLX common (LP) units valued at approximately $10.1 billion based on the volume-weighted average price of MPLX over the past 10 days.

MLPs & Pipelines

Press Release - Enterprise Products Partners L.P. announced that it will adopt five new quality specifications for sweet crude oil, also referred to as West Texas Intermediate (“WTI”) at its terminal in Cushing, Oklahoma. Enterprise’s Cushing terminal is a physical delivery point for NYMEX WTI futures.

Press Release - Kinder Morgan Canada is pleased to announce that it has completed its previously announced offering of cumulative redeemable minimum rate reset preferred shares, Series 3 (the "Series 3 Preferred Shares") for aggregate gross proceeds of $250 million. The Company issued 10,000,000 Series 3 Preferred Shares, including 2,000,000 Series 3 shares issued as a result of the full exercise of the underwriter's option, through a syndicate of underwriters led by CIBC Capital Markets, Scotiabank, RBC Capital Markets and TD Securities.

(Late Thursday) Press Release - SunCoke Energy Partners, L.P. announced that it and its wholly owned subsidiary, SunCoke Energy Partners Finance ("Finance Corp." and together, the "Issuers"), have priced their previously announced private offering to eligible purchasers of an additional $70 million aggregate principal amount of their 7.50% senior unsecured notes due 2025 (the "New Notes"). SXCP expects to close the sale of the New Notes on December 19, 2017, subject to the satisfaction of customary closing conditions. The New Notes will be issued at a price equal to $104.25 of the principal amount thereof, plus accrued interest from December 15, 2017, resulting in a yield to worst of 6.565%.


U.S. stock index futures rose amidst nagging uncertainty about a U.S. tax cuts package while world shares dipped. The dollar weakened against the Japanese yen, while gold prices rose. Oil prices edged up, lifted by a decline in global stocks, although rising U.S. output kept a lid on markets.

Nasdaq Advisory Services Energy Team is part of Nasdaq's Advisory Services -- the most experienced team in the industry. The team delivers unmatched shareholder analysis, a comprehensive view of trading and investor activity, and insights into how best to manage investor relations outreach efforts. For questions, please contact Tamar Essner.
This communication and the content found by following any link herein are being provided to you by Corporate Solutions, a business of Nasdaq, Inc. and certain of its subsidiaries (collectively, “Nasdaq”), for informational purposes only. Nasdaq makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Sources include Reuters, TR IBES, WSJ, The Financial Times and proprietary Nasdaq research.

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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