Energy Sector Update for 03/13/2018: GHM, KOS, OBE

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Energy stocks were narrowly lower Tuesday, with the NYSE Energy Sector Index falling almost 0.2% while shares of energy companies in the S&P 500 were down nearly 0.2% as a group. Crude oil for April delivery was slipping 83 cents to $60.53 per barrel in New York while the benchmark Brent crude April contract was declining 47 cents to $64.48 per barrel. April gas futures were a penny higher at $2.79 per 1 million BTU. Among energy-related ETFs, United States Oil was down nearly 1.1% while United States Natural Gas was down less than 0.1%. The Philadephia oil-service sector index was down more than 0.5%.

In industry news:

Oil prices fell again on Tuesday, declining for the second session in a row, after the Energy Information Administration Monday estimated daily U.S. shale-oil output will increase by 131,000 barrels in April. The EIA said Monday it is expecting production from U.S. shale formations to rise to a record 6.95 million barrels per day next month, led by large gains from the Permian field in Texas, where April output is expected to rise by around 80,000 barrels to 3.16 million barrels per day. The projections also reinforced market worries that a rapid build-up in U.S. oil production could more than offset production limits by OPEC member countries and Russia that helped draw down bloated oil inventories globally that sent crude oil prices crashing in 2014.

Also, Saudi Arabia reportedly is weighing whether to bring the expected initial public offering for Saudi Aramco to a regional exchange rather than an international stage such as London or New York, sources close to the process told Reuters. The kingdom also is counting on being awarded emerging market status by index complier MSCI in June to help the Saudi petroleum and natural gas company attract Western funds, in addition to cornerstone investors from China, Japan and South Korea, the sources said. Saudi Arabia is expected to sell about 5% of Saudi Aramco through an IPO valuing Aramco as high as $2 trillion and becoming the world's largest oil company as measured by market capitalization.

Among energy stocks moving on news:

+ Graham Corp ( GHM ) climbed almost 2% on Tuesday, touching a session high of $22.11 a share before turning lower this afternoon after the capital equipment supplier for the petroleum industry disclosed new orders from three refinery companies worth $5.5 million. Two of the orders call on the company to replace components within its existing installed base, including a Graham steam surface condenser installed at a North American refinery over 45 years ago and will be updated with more corrosion resistant material. Graham also will replace a condenser in an ejector system it installed at a refinery in southeastern Asia in 1980. The final order has the company installing a new ejector system as part of a broader renovaton project at a Chinese refinery. Delivery of all three equipment orders are expected during the second half of 2017.

In other sector news

+ Kosmos Energy ( KOS ) jumped almost 11% higher Tuesday, reaching a session high of $6.52 a share, after analysts at Jefferies & Co raised their investment call for the oil and natural gas producer to Buy from Hold.

- Obsidian Energy ( OBE ) declined Tuesday, falling more than 3% to a session low of 94 cents a share in U.S. trade, after the Canadian oil and natural gas producer said the New York Stock Exchange has warned the company its stock no longer complies with NYSE listing rules requiring the company to maintain an average closing price over $1 a share. The delisting warning was automatically issued after Obsidian's stock price averaged 99 cents a share over the previous 30 trading sessions through last Thursday, March 8, it said. Under NYSE rules, the company now has 180 days to lift its share price back above the $1 threshold. Companies also often receive another 180 days to keep working to regain compliance if they are unable to accomplish the feat during the initial remediation period.

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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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