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Energy Stocks in Focus as Crude Looks to Extend Gains on Saudi-Driven Output Cuts

Tuesday, February 19, 2019

SECTOR COMMENTARY

Energy stocks are stronger in the pre-market as crude oil prices extend last week’s gains on Saudi-driven output cuts. Meanwhile, broader futures are under pressure as traders waited for new details to emerge from the latest round of U.S.-China trade talks, which are set to take place today.

WTI futures are higher by nearly 1%, outpacing Brent as the spread between the two begins to narrow after reaching three month highs last week. Broadly, oil prices are up on new shipping data shows that Saudi oil exports continued to fall as well as comments from that the Kingdom will be unable to revive shipments given production issues at its largest field. "The market is slowly regaining its bullish footing, subject to the perception of economic risks tied to U.S.-China trade talks," said Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas. However, demand worries remain an issue and investors are cautious on taking large new positions before the outcome of Tuesday’s talks between China and the US.

Natural gas futures are flat after last week’s 1.6% on mixed weather forecasts.

US INTEGRATEDS

(Monday) Press Release - Air Products announced an agreement to provide its proprietary LNG technology, equipment, and related process license to Golden Pass Products LLC, a joint venture between Qatar Petroleum and ExxonMobil for the Golden Pass LNG Export Project in Sabine Pass, Texas.

INTERNATIONAL INTEGRATEDS

Reuters - BP plans to ramp up production at Azerbaijan's Shah Deniz gas field and keep output flat at the Azeri-Chirag-Guneshli (ACG) oilfields this year, a senior regional official at the British oil major said. A BP-led consortium said last week that it produced on average 584,000 barrels per day of oil at ACG last year, a total of 29 million tonnes, almost unchanged from 2017 volumes.

(Monday) Press Release - TechnipFMC and DOF Subsea (DOF) announced that the Skandi Olinda, a Brazilian-flagged flexible lay and construction vessel owned by the joint venture formed between TechnipFMC (50%) and DOF (50%), has commenced its 8-year charter contract with Petróleo Brasileiro. Under the TechnipFMC/DOF joint venture agreement, TechnipFMC will manage flexible pipelay, and DOF will be responsible for marine operations.

(Monday) Reuters - Total’s 225,500 barrel per day (bpd) Port Arthur, Texas, refinery began raising production after restarting a sulfur recovery unit (SRU). The SRU was shut on Saturday to repair a hole in its reactor, the sources said. Production was cut on the 150,000 bpd ACU-1 crude distillation unit (CDU), the 76,000-bpd gasoline-producing fluidic catalytic cracking unit (FCCU) and the 60,000-bpd coker unit while the repairs were underway.

(Monday) Reuters - Total said it had acquired unlisted plastics recycling company Synova for an undisclosed amount, in a move that expands Total's plastics recycling business and helps to curb plastics waste.

(Monday) Reuters - Total, Ørsted and Elicio announced the creation of an industrial consortium to submit a joint bid for the Dunkirk offshore wind farm project for a power capacity of up to 600 MW. The project is Total's foray into offshore wind projects in over a decade.

(Sunday) Reuters - Total cut the output at its 225,500 barrel-per-day (bpd) Port Arthur, Texas, oil refinery on Saturday after a sulfur recovery unit (SRU) was shut for repairs. Production was cut at the 150,000 bpd ACU-1 crude distillation unit (CDU), the 76,000-bpd gasoline-producing fluidic catalytic cracking unit (FCCU) and the 60,000-bpd coker unit because the SRU was shut to fix a hole in its reactor.

U.S. E&PS

Press Release - Anadarko Petroleum announced Mozambique LNG1 Company Pte. Ltd., the jointly owned sales entity of the Mozambique Area 1 co-venturers, has signed a Sale and Purchase Agreement (SPA) with Pertamina. The SPA is for 1 million tonnes per annum (MTPA) for a term of 20 years.

(Monday) Press Release - Continental Resources reported net income of $197.7 million, or $0.53 per diluted share, for the quarter ended December 31, 2018. In fourth quarter 2018, typically excluded items in aggregate represented $3.9 million, or $0.01 per diluted share, of Continental's reported net income. Adjusted net income for fourth quarter 2018 was $201.7 million, or $0.54 per diluted share (non-GAAP). Net cash provided by operating activities for fourth quarter 2018 was $955.3 million and EBITDAX was $850.6 million (non-GAAP).

(Late Friday) Press Release - Chaparral Energy announced that Joseph O. Evans, its Chief Financial Officer and Executive Vice President, has elected to retire from the Company effective March 15, 2019, following 14 years of service as Chief Financial Officer. Scott Pittman will be joining Chaparral effective February 28, 2019, and will be appointed Chief Financial Officer and Executive Vice President of the Company effective March 16, 2019.

(Late Friday) Press Release - ConocoPhillips announced that it has received notice of an unsolicited mini-tender offer by Baker Mills LLC (Baker Mills) to purchase up to 50,000 shares of ConocoPhillips common stock from the stockholders of ConocoPhillips. The offer represents approximately 0.004 percent of the outstanding shares of ConocoPhillips common stock. The offer price of $55.00 per share is approximately 16.99 percent lower than the $66.26 closing share price of ConocoPhillips common stock on the New York Stock Exchange on Feb. 8, 2019, the last trading day prior to the offer date.

(Monday) Press Release - Kosmos Energy announced that Chief Exploration Officer and Founding Partner Brian F. Maxted has decided to retire from the company effective February 15, 2019. Mr. Maxted will remain on the Board of Directors and continue to serve as a special advisor on matters related to exploration. Ms. Tracey Henderson will assume the role of Chief Exploration Officer upon Mr. Maxted's retirement.

Press Release - Noble Energy reported fourth quarter net loss attributable to Noble Energy of $824 million, or $1.72 per diluted share. Net loss including non-controlling interest was $802 million. Excluding items impacting comparability, the Company generated adjusted net income and adjusted net income per share attributable to Noble Energy for the quarter of $56 million, or $0.12 per diluted share.

SunTrust Robinson upgraded Matador Resources to ‘Buy’ from ‘Hold’.

(Late Friday) Press Release - Midstates Petroleum Company announced the final results of its tender offer to purchase for cash up to 5,000,000 shares of its common stock at a price of $10.00 per share, which expired at 5:00 p.m., New York City time, on February 12, 2019. Midstates has accepted for purchase 5,000,000 shares of its common stock at a purchase price of $10.00 per share, for an aggregate purchase price of approximately $50 million, excluding fees and expenses relating to the offer.

Jefferies dropped coverage of Newfield Exploration.

Press Release - Ultra Petroleum announced that during the fourth quarter of 2018, the Company’s production averaged 699 million cubic feet equivalent (“MMcfe”) per day, coming within previously announced guidance. Production volumes include 61.5 billion cubic feet (“Bcf”) of natural gas and 473,000 barrels of oil and condensate. During the quarter, the Company completed and turned 23 vertical wells to sales as it continued its three-rig drilling pace in Pinedale.

CANADIAN E&PS

(Late Friday) Press Release - Peyto Exploration & Development confirmed that the monthly dividend with respect to February 2019 of $0.02 per common share is to be paid on March 15, 2019, for shareholders of record on February 28, 2019. The ex-dividend date is February 27, 2019.

Press Release - Touchstone Exploration announced that it intends to complete a private placement directed towards United Kingdom institutional investors. The Company expects to raise gross proceeds of £3.8 million (approximately C$6.5 million) by way of a placing of 31,666,667 new common shares of no par value at a price of 12 pence (approximately C$0.205) per New Common Share. The Placement Price represents a 4 percent discount to 12.5 pence, which was the closing price of the Company's common shares on the AIM market of the London Stock Exchange on February 18, 2019.

(Late Friday) Press Release - TORC Oil & Gas confirmed that a dividend of $0.022 per common share will be paid on March 15, 2019 to common shareholders of record on February 28, 2019. The ex-dividend date is February 27, 2019, with payment to be made in cash or common shares at the election of the shareholder.

OILFIELD SERVICES

(Monday) Press Release - Forum Energy Technologies announced that it has promoted John C. Ivascu to serve as Senior Vice President, General Counsel and Secretary, effective February 15, 2019. James L. McCulloch, Forum’s General Counsel since 2010, has transitioned to serve as Chief Compliance Officer and as an advisor to the Chief Executive Officer.

(Monday) Press Release - Helix Energy SolutionsGroup reported a net loss of $13.7 million, or $(0.09) per diluted share, for the fourth quarter of 2018 compared to net income of $50.6 million, or $0.34 per diluted share, for the same period in 2017 and net income of $27.1 million, or $0.18 per diluted share, for the third quarter of 2018. Net income for the year ended December 31, 2018 was $28.6 million, or $0.19 per diluted share, compared to net income of $30.1 million, or $0.20 per diluted share, for the year ended December 31, 2017. Net income in the fourth quarter of 2017 included a non-cash benefit of approximately $51.6 million, or $0.35 per diluted share, related to the U.S. tax law changes enacted in December 2017.

Press Release - Mitcham Industries announced that it has made key additions to its business development team. Thomas Meurling has joined Mitcham in the newly created position of Vice President and Chief Business Development Officer. Additionally, Michael Zwick has joined the Company as Vice President – Sales for its Seamap subsidiary. In this role,

(Monday) Press Release - McDermott International announced two sizeable contracts, one from Sarawak Shell Berhad (SSB) and one from Sapura Exploration and Production (SEP), to provide transportation and installation of offshore structures, pipelines and pre-commissioning work for the Pan Malaysia field development located off the shore of Sarawak, Malaysia.

Press Release - Pioneer Energy Services reported revenues for the fourth quarter of 2018 were $141.5 million, down 5% from revenues of $149.3 million in the third quarter of 2018. Net loss for the fourth quarter of 2018 was $14.5 million, or $0.19 per share, compared with net loss of $5.2 million, or $0.07 per share, in the prior quarter. Adjusted net loss for the fourth quarter was $13.6 million, and adjusted EPS was a loss of $0.17 per share. These results compare to an adjusted net loss of $5.6 million, and an adjusted EPS loss of $0.07 per share in the prior quarter. Fourth quarter adjusted EBITDA was $20.8 million, down from $28.6 million in the prior quarter.

HSBC downgraded Petrofac to ‘Hold’ from ‘Buy’.

(Monday) Press Release - Superior Energy Services announced a net loss from continuing operations for the fourth quarter of 2018 of $750.2 million, or $4.85 per share, on revenue of $539.3 million. This compares to a net loss from continuing operations of $21.8 million, or $0.14 per share, for the third quarter of 2018, on revenue of $573.1 million and net income from continuing operations of $21.9 million, or $0.14 per share for the fourth quarter of 2017, on revenue of $497.0 million.

(Monday) Reuters - Qatar Petroleum signed preliminary deals worth more than 9 billion Qatari riyals ($2.47 billion) with oil services firms Schlumberger and Baker Hughes to boost the local energy industry.

(Monday) Press Release - TechnipFMC and DOF Subsea (DOF) announced that the Skandi Olinda, a Brazilian-flagged flexible lay and construction vessel owned by the joint venture formed between TechnipFMC (50%) and DOF (50%), has commenced its 8-year charter contract with Petróleo Brasileiro. Under the TechnipFMC/DOF joint venture agreement, TechnipFMC will manage flexible pipelay, and DOF will be responsible for marine operations.

Press Release - U.S. Silica announced a net loss of $256.1 million, or $(3.44) per basic and diluted share, for the fourth quarter ended December 31, 2018, compared with net income of $72.0 million, or $0.89 per basic and $0.88 per diluted share, for the fourth quarter of 2017. The fourth quarter results were negatively impacted by $265.7 million or $3.15 per share in impairment expenses, $14.0 million or $0.14 per share in costs related to plant startup and expansion expenses, $5.7 million or $0.06 per share related to merger and acquisition expenses, $2.5 million or $0.03 per share in contract termination costs and $1.9 million or $0.02 per share in other adjustments, resulting in adjusted EPS for the fourth quarter of $(0.04) per basic and diluted share.

DRILLERS

(Monday) Press Release - Transocean reported net loss attributable to controlling interest of $242 million, $0.48 per diluted share, for the three months ended December 31, 2018. Fourth quarter 2018 results included unfavorable items of $71 million, or $0.14 per diluted share, as follows: $18 million, $0.03 per diluted share, loss on impairment primarily for three floaters previously announced for retirement; $12 million, $0.02 per diluted share, in acquisition costs; and $52 million, $0.11 per diluted share, related to discrete tax expense. These unfavorable items were partially offset by: $11 million, $0.02 per diluted share, bargain purchase gain and other favorable items. After consideration of these net favorable items, fourth quarter 2018 adjusted net loss was $171 million, or $0.34 per diluted share.

(Monday) Press Release - Transocean announced that it has entered into an agreement with its customer, Equinor, to license and install Automated Drilling Control (“ADC”) systems on four high-specification, harsh environment rigs currently on contract in Norway and a fifth semisubmersible that is expected to commence operations in the Norwegian sea this summer.

(Saturday) Press Release - Trinidad Drilling will be delisted from the TSX at the close on Feb. 19, 2019. Ensign Energy Services has acquired the company's shares for $1.68 per share.

MLPS & PIPELINES

Press Release - Crestwood Equity Partners reported fourth quarter 2018 net income of $59.6 million, compared to a net loss of $119.6 million in fourth quarter 2017. Fourth quarter 2018 Adjusted EBITDA was $114.1 million, compared to $110.9 million in the fourth quarter 2017. Fourth quarter 2018 distributable cash flow to common unitholders was $64.3 million. The fourth quarter 2018 coverage ratio was approximately 1.51x.

Press Release - Enable Midstream Partners reported net income attributable to limited partners was $174 million for fourth quarter 2018, an increase of $66 million compared to $108 million for fourth quarter 2017. Net income attributable to common units was $165 million for fourth quarter 2018, an increase of $66 million compared to $99 million for fourth quarter 2017.

GMP downgraded Inter Pipeline to ‘Hold’ from ‘Buy’.

Press Release - Holly Energy Partners reported net income attributable to HEP for the fourth quarter was $47.5 million ($0.45 per basic and diluted limited partner unit) compared to $86.1 million ($0.96 per basic and diluted limited partner unit) for the fourth quarter of 2017. Distributable cash flow was $64.2 million for the quarter, down $1.3 million, or 2.0%, compared to the fourth quarter of 2017. HEP announced its 57thconsecutive distribution increase on January 24, 2019, raising the quarterly distribution from $0.665 to $0.6675 per unit, which represents an increase of 3% over the distribution for the fourth quarter of 2017.

Press Release - Targa Resources announced that it has entered into definitive agreements to sell a 45 percent interest in Targa Badlands, the entity that holds all of Targa’s assets in North Dakota, to funds managed by GSO Capital Partners and Blackstone Tactical Opportunities (collectively, “Blackstone”) for $1.6 billion in cash. Under the terms of the executed agreements, Targa will continue to be the operator and will hold majority governance rights in Badlands. Future growth capital is expected to be funded on a pro rata basis. Badlands will pay a minimum quarterly distribution to Blackstone and to Targa based on their initial investments, and Blackstone’s capital contributions will have a liquidation preference upon a sale of Badlands.

MARKET COMMENTARY

Futures traded lower, after Wall Street rallied on Friday, with the Dow and the Nasdaq posting their eighth consecutive weekly gains. European markets fell, on anxiety over potential tariffs on European car imports to the U.S, while Asian markets ended mixed. Swedish crown hit lowest level since 2016, after weak inflation data, while the dollar was little changed. U.S. light crude rose, supported by OPEC-led supply cuts. Palladium hit a record high due to a prolonged supply deficit.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP


Nasdaq Advisory Services Energy Team Nasdaq's Advisory Services Tamar Essner
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