Markets

FOMC Expected To Raise Rates For Fourth Time This Year

Wednesday, December 19, 2018

Sector Commentary

The energy sector is poised for a mixed to higher start, supported by some mild strength in crude futures and major equity indices which climbed ahead of the FOMC policy decision later today. The Fed is expected to announce it will raise rates for the fourth time this year at the end of its two-day policy meeting but the focus will be on whether it still hints at three increases next year as it did in September. Fed funds futures are pricing in only one more rate rise next year.

WTI crude oil futures are marginally higher on the last day of trading for the front month, outpacing Brent which was flat with trading in both benchmarks stabilizing after closing yesterday with steep declines and at lows not seen since August'17 and October'17, respectively. The gains come despite last night's API report which showed U.S. crude stocks rose unexpectedly last week, while gasoline inventories increased but traders will be looking to the EIA data later this morning to confirm. Lingering concerns of oversupply and of a slowing global economy also kept a cap on sentiment. Analysts polled by Reuters expect the DOE report to show crude stock fell last week by 2.4mm barrels while gasoline and distillate stocks rose by 1.2mm and 0.6mm barrels, respectively.

Natural gas futures were off nearly 5% in early trading, pulling back from yesterday's 8.8% rally on updated forecasts that call for milder weather in key consuming regions than originally anticipated.

INTERNATIONAL INTEGRATEDS

Reuters - BP has launched the sale of U.S. oil and gas onshore assets that could raise more than $3 billion to help pay for other fields in the United States it bought in October from BHP BHP.AX, industry and banking sources said.

(Late Tuesday) Press Release - Petróleo Brasileiro , in compliance with the provisions of Instruction no. 358 of January 3, 2002, issued by the Securities and Exchange Commission of Brazil, hereby informs that the Board of Directors , in a meeting held today, approved the 6th issuance of simple, non-convertible unsecured debentures, in up to 3 series, with allocation of volumes among the series to be defined in a bookbuilding procedure, in the initial amount of R$ 3,000,000,000.00 for public distribution, under a regime of better placement efforts, pursuant to CVM Instruction 400, of December 29, 2003, as in force, considering the procedure indicated for issuers with large exposure in the market, according to articles 6 -A and 6-B of said instruction.

Reuters - Royal Dutch Shell agreed to acquire a 49 percent stake in Asia-focused firm Cleantech Solar, the energy giant's second investment in solar power this year.

(Late Tuesday) Reuters - Royal Dutch Shell brought the hydrocracker at its at its 209,787-barrel-per-day Convent, Louisiana, refinery back into production after fixing a malfunction on Tuesday.

U.S. E&PS

Raymond James downgraded Antero Resources to 'Underperform' from 'Outperform'.

Reuters - Antero Resources sees 2018 net daily production about 2.7 bcfe/d and 2018 net liquids production of 130,000 bbl/d.

Press Release - Diamondback Energy announced its 2019 capital and production guidance, reflecting an operating plan focused on disciplined growth within cash flow and a growing dividend in the current commodity price environment. 2019 estimated annual production guidance is 275 - 290 MBoe/d (68% - 70% oil), midpoint implies over 28% pro forma year over year production growth and over 30% pro forma year over year oil production growth within cash flow at current commodity prices.

Reuters - Rice brothers ask EQT Corp to replace CEO with Toby Rice. Elliott Management supports the Rice brothers in their quest to shake up the board, according to the report. Other top 10 holders are also said to support the move.

(Late Tuesday) Press Release - Kosmos Energy filed with the U.S. Securities and Exchange Commission a Form 8-K concerning its election to discontinue from Bermuda and redomesticate in the State of Delaware.

Credit Suisse Downgraded Oasis Petroleum to 'Underperform' from 'Neutral'.

Press Release - Matador Resources announced that a wholly-owned subsidiary of its midstream joint venture, San Mateo Midstream, LLC, has placed into service its crude oil gathering and transportation system in the Rustler Breaks asset area in Eddy County, New Mexico following a successful open season to gauge shipper interest in committed crude oil interstate transportation service on the Rustler Breaks Pipeline System earlier this year. The Rustler Breaks Pipeline System includes approximately 17 miles of 10-inch diameter crude oil gathering and transportation pipelines from origin points in Eddy County, New Mexico to an interconnect with Plains Pipeline, L.P.

Credit Suisse Downgraded Laredo Petroleum to 'Neutral' from 'Outperform'.

(Late Tuesday) Press Release - Resolute Energy announced that its Board of Directors declared a cash dividend of $20.3125 per share on its 8⅛% Series B Cumulative Perpetual Convertible Preferred Stock, payable on January 15, 2019, to holders of record at the close of business on January 1, 2019. The dividend is for the period beginning on October 16, 2018 and ending on January 15, 2019.

(Late Tuesday) Press Release - Ring Energy provided an update today on its current operations for the fourth quarter of 2018. Mr. Danny Wilson, Executive Vice President of Operations, commented, "In late November, early December, we began experiencing delays on a few of the new wells during the completion process and clean-up prior to going into production. Historically, this process varies from well to well, taking anywhere from 30 to 90 days. We had budgeted for fewer new horizontal wells to be drilled in the fourth quarter than in the third quarter, but remained hopeful that even with drilling fewer wells, the added carry-over from the third quarter would allow us to achieve our goal of increasing our current production approximately 10+% over the prior quarter. With the delays lasting longer than expected, we will not meet that goal but are confident the fourth quarter will show production growth over the third quarter of 2018. We remain on budget and are extremely pleased with the results we are seeing from the new wells we have completed. As stated in our revised capital expenditure budget released in September, we will drill 56 new horizontal wells in 2018 and project an approximate 60% increase in annualized production over 2017, exceeding all internal projections. We will provide a more detailed overview in our fourth quarter operations update which we will release by mid-January."

CANADIAN E&PS

(Late Tuesday) Press Release - Parex Resources announced that its strategic repositioning review process has been completed and did not result in an acceptable proposal; Parex believes that the market price of its common shares does not reflect their underlying value. As such, subject to regulatory approval, Parex intends to immediately implement a normal course issuer bid to actively and aggressively purchase up to 10% of the public float of the outstanding common shares for cancellation.

OILFIELD SERVICES

Credit Suisse upgraded Baker Hughes to 'Outperform' from 'Neutral'.

Credit Suisse downgraded C&J Energy Services,Core Laboratories, Patterson-UTI Energy, Schlumberger and Superior Energy Services to 'Neutral' from 'Outperform'.

Kepler Cheuvreux upgraded Petrofac to 'Buy' from 'Hold'.

Reuters - Iraq has agreed a deal with Schlumberger to drill 40 oil wells in the giant southern Majnoon oilfield.

DRILLERS

Credit Suisse downgraded Rowan Companies to 'Neutral' from 'Outperform'.

(Late Tuesday) Press Release - Ensign Energy Services and Trinidad Drilling remind shareholders that Ensign's offer to purchase all the common shares of Trinidad for $1.68 per share will reach its final expiry at 5 p.m. Toronto time on Dec. 21, 2018. There will be no further extensions of the offer.

MLPS & PIPELINES

JPMorgan started AltaGas with a 'Neutral' rating.

(Late Tuesday) Press Release - Buckeye Partners announced that it completed the sale of a package of domestic pipeline and terminal assets to a subsidiary of InstarAGF Asset Management Inc. for cash proceeds of $450 million.

MARKET COMMENTARY

U.S. stock futures were up, while global equities attempted a tentative recovery after three days of sharp losses ahead of the Federal Reserve decision. The dollar weakened and gold prices stayed near a five-month peak. On economic front, existing home sales data is on the radar.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP

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.