Friday, November 02, 2018
Sector Commentary
The energy sector is poised for a mixed to higher start, highlighted by a rise in U.S. stock index futures following better-than-expected employment data while oil prices trade flat to lower following yesterday's more than 2% retreat. The US economy added 250,000 jobs relative to expectations of 190,000 and broader optimism was stoked on news that President Donald Trump asked officials to start drafting a potential trade deal with China.
In company news, Exxon Mobil reported a quarterly profit that topped analysts' estimate on higher prices received for its oil and natural gas but its production volumes fell on a year-over-year basis. Chevron also reported better than expected financial results and both stocks are trading higher in the pre-market.
Oil prices steadied after a week of heavy falls as markets braced for the imposition next week of U.S. sanctions on Iran, which Washington hopes will halt exports of Iranian oil. However, the US has agreed to let eight countries continue to buy Iranian oil, which is limiting upside support for prices.
Natural gas futures are lower, adding to yesterday's losses, as forecasts for mid-November holding cold, but preliminary estimates for the next two EIA storage reports indicate builds larger than 5 year averages.
US INTEGRATEDS
Press Release - Exxon Mobil announced estimated third quarter 2018 earnings of $6.2 billion, or $1.46 per share assuming dilution, compared with $4 billion a year earlier. Cash flow from operations and asset sales was $12.6 billion, including proceeds associated with asset sales of $1.5 billion. During the quarter, the company distributed $3.5 billion in dividends to shareholders. Capital and exploration expenditures were $6.6 billion, up 10 percent from the prior year.
(Late Thursday) Reuters - Exxon Mobil began overhauling a small crude distillation unit at its 502,500-barrel-per-day (bpd) Baton Rouge, Louisiana, refinery. Workers will remove carbon deposits from the furnaces and replace valves on the 90,000-bpd Pipestill 7 CDU.
(Late Thursday) Reuters - Exxon Mobil was looking at heavy rain as the cause of an unplanned shutdown of the hydrocracker at Exxon Mobil's 560,500 bpd Baytown, Texas refinery. The 25,000 bpd hydrocracker was shut at about the time heavy rain inundated Baytown.
Press Release - Chevron Corporation reported earnings of $4.0 billion ($2.11 per share - diluted) for third quarter 2018, compared with $2.0 billion ($1.03 per share - diluted) in the third quarter of 2017. Included in the current quarter were a write-off, an asset impairment, and a non-recurring contractual settlement totaling $930 million in the upstream segment, and a gain of $350 million on the sale of southern Africa refining, marketing and lubricant assets. Foreign currency effects decreased earnings in the 2018 third quarter by $51 million, compared with a decrease of $112 million a year earlier. Net income in the quarter rose from $3.95 billion a year ago to $6.24 billion. Oil-equivalent production was down 2.4% year over year from 3.88 million barrels a day last year to 3.79 million barrels a day.
INTERNATIONAL INTEGRATEDS
Press Release - BHP Billiton will return $10.4bn (£8bn) to investors having completed the sale of its US shale fields to BP . The payout will be split evenly between a buy-back of its Australian shares and a special dividend to be paid in January. It draws a line under a costly saga for BHP, which sank $40bn into its American misadventure.
CANADIAN INTEGRATEDS
Press Release - Imperial Oil reported net income of $749 million or $0.94 per share on a diluted basis, an increase of $378 million compared to net income of $371 million or $0.44 per share in the third quarter of 2017. Third quarter results for 2018 include a non-cash impairment charge of $33 million ($0.04 per share) associated with the Government of Ontario's revocation of its carbon emission cap and trade regulation. Dividends paid and share purchases totalled $573 million in the third quarter of 2018, including the purchase of approximately 10 million shares at a cost of $418 million.
Press Release - Imperial Oil declared a quarterly dividend of 19 cents per share on the outstanding common shares of the company, payable on January 1, 2019, to shareholders of record at the close of business on December 3, 2018. This fourth quarter 2018 dividend compares with the third quarter 2018 dividend of 19 cents per share.
U.S. E&PS
Macquarie upgraded Apache to 'Neutral' from 'Underperform'.
(Late Thursday) Press Release - California Resources reported net income attributable to common stock (CRC net income) of $66 million, or $1.32 per diluted share, for the third quarter of 2018. Adjusted net income for the third quarter of 2018 was $41 million, or $0.81 per diluted share.
(Late Thursday) Press Release - EOG Resources reported third quarter 2018 net income of $1.2 billion, or $2.05 per share. This compares to third quarter 2017 net income of $101 million, or $0.17 per share. Net cash from operating activities in the third quarter 2018 was $2.2 billion. Adjusted non-GAAP net income for the third quarter 2018 was $1.0 billion, or $1.75 per share, compared to adjusted non-GAAP net income of $111 million, or $0.19 per share, for the same prior year period.
(Late Thursday) Press Release - Gulfport Energy reported net income of $95.2 million, or $0.55 per diluted share, on revenues of $361.0 million for the third quarter of 2018.
(Late Thursday) Press Release - Gulfport Energy announced that its Board of Directors has appointed Donnie Moore to serve as Interim Chief Executive Officer, effective immediately. Donnie Moore succeeds Michael G. Moore who, effective October 29, 2018, stepped down from his position as Chief Executive Officer and President of Gulfport and resigned from the Company's Board of Directors.
Reuters - Newfield Exploration said if board of directors makes a change of recommendation, the company shall be required to pay Encana a termination fee of $150 million. If Encana board of directors makes a change of recommendation, Encana shall be required to pay a termination fee of $300 million.
Susquehanna downgraded Newfield Exploration to 'Neutral' from 'Positive'.
Citigroup downgraded Newfield Exploration to 'Neutral' from 'Buy'.
(Late Thursday) Press Release - Parsley Energy recorded net income attributable to its stockholders of $113.3 million, or $0.41 per share, during 3Q18, compared to net income attributable to its stockholders of $119.2 million, or $0.44 per share, during 2Q18. Excluding, on a tax-adjusted basis, certain items that the Company does not view as indicative of its ongoing financial performance, adjusted net income for 3Q18 was $126.2 million, or $0.45 per share, compared to $106.4 million, or $0.39 per share, in 2Q18.
(Late Thursday) Press Release - Range Resources announced that Steve Gray has been appointed to the Company's Board of Directors. Mr. Gray's appointment is effective October 30, and was mutually agreed upon by the Company's Board of Directors and SailingStone Capital Partners, LLC. Mr. Gray will serve on the Board's compensation committee.
(Late Thursday) Press Release - Rogers reported 2018 third quarter net sales of $226.9 million, which was within the Company's previously announced guidance of $220 to $230 million. Q3 2018 net sales increased $12.2 million (+5.7%) over Q2 2018 net sales and $20.1 million (+9.7%) over Q3 2017 net sales. Currency exchange rates negatively impacted 2018 third quarter net sales by $4.2 million compared to the 2018 second quarter but had favorable impact of $0.8 million on 2018 third quarter revenues compared to the 2017 third quarter.
(Late Thursday) Press Release - SM Energy reported third quarter of 2018 adjusted net loss of ($1.0) million, or ($0.01) per diluted common share, compared with an adjusted net loss of ($27.5) million, or ($0.25) per diluted common share, in the third quarter of 2017.
CANADIAN E&PS
(Late Thursday) Press Release - Advantage Oil & Gas announced the appointment of Mr. Michael Belenkie to the position of Chief Operating Officer.
(Late Thursday) Press Release - Advantage Oil & Gas announced strong third quarter 2018 results which included record production of 45,611 boe/d (273.7 mmcfe/d), up 29% from the second quarter of 2018 and up 20% from the same period in 2017. Liquids production increased 69% to a record 1,804 bbls/d compared to the second quarter of 2018, up 29% from the same period of 2017. Advantage exited the third quarter of 2018 with liquids production of 2,100 bbls/d which was comprised of approximately 67% condensate ("C5+"). Adjusted funds flow during the quarter was $32 million or $0.17/share supported by realized hedging and marketing diversification gains of $9.5 million and industry leading low total cash costs of $6.12/boe ($1.02/mcfe), down 12% from the first half of 2018.
Press Release - Baytex Energy reported generated adjusted funds flow of $171 million ($0.46 per basic share) in Q3/2018, compared to $107 million ($0.45 per basic share) in Q2/2018 and $77 million ($0.33 per basic share) in Q3/2017. Excluding financial derivatives losses, adjusted funds flow in Q3/2018 was $202 million, compared to $136 million in Q2/2018. The increase in adjusted funds flow is largely attributable to an initial contribution from the high netback Raging River production.
(Late Thursday) Press Release - Bonavista Energy reported that it maintained quarterly production at 68,036 boe per day, while spending only 61% of adjusted funds flow. The company generated $83.7 million of surplus funds flow exceeding the mid-point of the annual goal of $70 to $90 million in less than nine months.
CIBC downgraded Encana to 'Underperformer' from 'Neutral'.
(Late Thursday) Press Release - Gran Tierra Energy reported high net income of $75 million ($0.19 per share, basic), funds flow from operations of $85 million ($0.22 per share, basic), EBITDA of $117 million and annualized return on capital employed of 18%
(Late Thursday) Press Release - NuVista Energy announced that it has entered into an agreement as anchor tenant with Veresen Midstream Limited Partnership for firm transportation and processing of 100 MMcf/d of raw gas from the newly acquired Pipestone North block of lands. The processing capacity will be added in two incremental steps of 50 MMcf/d, each commencing in late 2020 and late 2021. NuVista has the flexibility to push the timing of half of the 2021 tranche to 2022 if desired.
OILFIELD SERVICES
(Late Thursday) Press Release - Basic Energy Services reported third quarter 2018 revenue decreased to $246.3 million from $253.4 million in the second quarter of 2018 with $6.0 million of the sequential drop due to lower sand volumes as the company relocated its Permian and Delaware Basin frac equipment to the Mid-Continent and SCOOP/STACK, with an additional $2.6 million of revenue decline due to the closure and divestment of certain yards as part of the strategic realignment initiative. For the third quarter of 2018, Basic reported a net loss of $27.3 million, or a loss of $1.03 per basic and diluted share.
(Late Thursday) Press Release - Black Hills issued 6.37 million shares of its common stock related to the conversion of the equity units that were issued in November 2015 to partially fund the acquisition of SourceGas Holdings. Gross proceeds from the transaction of approximately $299 million will be used to repay the $250 million Senior Notes due January 2019 and short-term debt.
(Late Thursday) Press Release - Fluor reported earnings attributable to the company for the third quarter were $77 million, or $0.55 per diluted share, compared to $94 million, or $0.67 per diluted share a year ago. The effective tax rate for the quarter was 34%, due to the company being unable to recognize tax benefits on certain foreign charges. Consolidated segment profit for the quarter was $207 million, compared to $203 million a year ago. Third quarter revenue was $4.7 billion compared to $4.9 billion in the prior year.
Barclays downgraded Hi Crush Partners to 'Underweight' from 'Equal Weight'.
(Late Thursday) Press Release - Weatherford International announced it has completed the sale of its land drilling operations in Kuwait, including 12 drilling rigs to ADES International Holding $123 million in cash, and an additional $12 million in cash pending the delivery of two idle land drilling rigs in South Iraq.
REFINERS
(Late Thursday) Press Release - Marathon Petroleum intends to temporarily suspend its practice of providing certain financial and statistical "Market Data" information that it has previously provided through its Investor Relations website. The Company is considering revisions to the format of the information provided in light of its recent acquisition of Andeavor . The Company will provide further notification when its provision of such information is scheduled to resume.
MLPS & PIPELINES
Press Release - Buckeye Partners reported a net loss attributable to Buckeye's unitholders for the third quarter of 2018 of $745.8 million compared to net income attributable to Buckeye's unitholders for the third quarter of 2017 of $116.2 million. Buckeye also announced that its general partner declared a cash distribution of $0.75 per LP Unit for the quarter ended September 30, 2018, compared to $1.2625 per LP Unit for the year ago quarter. As a result of the distribution reduction, the 6.7 million Class C Units outstanding as of September 30, 2018 will convert into LP Units on a one-for-one basis on November 5, 2018. The distribution will be payable on November 20, 2018 to unitholders of record on November 13, 2018. Buckeye has paid distributions in each quarter since its formation in 1986.
Press Release - Buckeye Partners announced that as a result of its strategic review it is taking several actions designed to: (1) maintain Buckeye's investment grade credit rating by reducing leverage; (2) provide increased financial flexibility, eliminating the need for Buckeye to access the public equity markets to fund annual growth capital; and (3) reallocate capital to the higher return growth opportunities across the remaining assets.
Press Release - Enbridge reported GAAP loss of $90 million or $0.05 loss per common share for the third quarter, compared to earnings of $765 million or $0.47 earnings per common share in the third quarter of 2017, both including the impact of a number of unusual, non-recurring or non-operating factors. Adjusted earnings were $933 million or $0.55 per common share for the third quarter, compared to $632 million or $0.39 per common share in the third quarter of 2017.
Press Release - Enbridge announced that the Company has determined to suspend, effective immediately, its dividend reinvestment and share purchase plan (DRIP) until further notice. As a result, shareholders only receive dividends in cash effective with the dividend currently scheduled to be paid on December 1, 2018, to shareholders of record on November 15, 2018. If Enbridge elects to reinstate the DRIP in the future, the shareholders that were enrolled in the DRIP at suspension and remained enrolled at reinstatement will automatically resume participation in the DRIP.
(Late Thursday) Press Release - Enbridge announced that it does not intend to exercise its right to redeem its currently outstanding Cumulative Redeemable Preference Shares, Series N (Series N Shares) (TSX: ENB.PR.N) on December 1, 2018. As a result, subject to certain conditions, the holders of the Series N Shares have the right to convert all or part of their Series N Shares on a one-for-one basis into Cumulative Redeemable Preference Shares, Series O of Enbridge (Series O Shares) on December 1, 2018. Holders who do not exercise their right to convert their Series N Shares into Series O Shares will retain their Series N Shares.
(Late Thursday) Press Release - Enbridge Energy Partners reported net income of $207 million, of which $104 million is attributable to EEP's controlling interests, for the third quarter ended September 30, 2018, with net income per unit of $0.21. The third quarter results included net non-recurring special items of $9 million, which increased net income per unit by $0.02.
(Late Thursday) Reuters - Magellan Midstream Partners became the latest company to join a crowded group looking to build an oil export terminal on the U.S. Gulf Coast designed to load supertankers. U.S. oil exports are expanding rapidly, but volumes are constrained because the country's shores have limited capability to load giant vessels that can carry about 2 million barrels of crude oil.
(Late Thursday) Press Release - Pembina Pipeline reported third quarter and year-to-date earnings of $334 million and $910 million, a 201 percent and 108 percent increase, respectively, over the same periods in 2017. For the third quarter, $37 million of take-or-pay revenue in excess of physical deliveries has been collected and deferred and revenue of $60 million related to take-or-pay deferral was recognized during the period.
(Late Thursday) Press Release - Pembina Pipeline announced that it has entered (directly and through its joint venture affiliates) into long-term, take-or-pay agreements to backstop development of new pipeline and processing infrastructure totaling approximately $1.3 billion. These agreements include related service for liquids transportation on Peace Pipeline, natural gas transmission service and fractionation services at Pembina's Redwater Facility.
(Late Thursday) Press Release - Shell Midstream Partners reported net income attributable to the partnership of $148.3 million for the third quarter of 2018, which equated to $0.50 per common limited partner unit. Shell Midstream Partners also generated adjusted earnings before interest, income taxes, depreciation and amortization attributable to the partnership of $187.0 million. The Board of Directors of the general partner previously declared a cash distribution of $0.382 per limited partnership unit for the third quarter of 2018. This distribution represented an increase of 4.7% over the second quarter 2018 distribution and a 20% increase over the third quarter 2017 distribution. This represents the fifteenth consecutive quarter of distribution growth, which demonstrates the Partnership's intent to increase distributions by 20% in 2018.
(Late Thursday) Press Release - Spectra EnergyPartners reported net income of $377 million, of which $366 million is attributable to SEP's controlling interests, for the third quarter ended September 30, 2018, with earnings per limited partner unit of $0.75.
MARKET COMMENTARY
U.S. stock futures rose, tracking a global relief rally, propelled by a report that U.S. President Donald Trump is seeking a trade agreement with Chinese President Xi Jinping. The signals triggered a global surge in risk appetite, pushing the dollar lower. Gold prices steadied as investors remained cautious ahead of a U.S. jobs report, which could provide clues on the pace of further interest rate hikes. Oil prices were little changed.
NASDAQ ENERGY TEAM THOUGHT LEADERSHIP
- Bloomberg TV Commodities Edge - Q2'18 Earnings Themes
- Bloomberg TV DayBreak Americas - (Discussion with Kevin Holt, CIO of Invesco, begins at 0:56:58 - 1:05:22)
- TD Ameritrade Network - Trade Tariff Effects on Market & Interest Rates
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
