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Lingering Concerns Cause Dips In Energy Sector

Wednesday, October 10, 2018

Sector Commentary

The energy sector is poised for another mixed to lower start, weighed down by weakness in the crude complex and as broader equity indices dipped on lingering concerns around slowing global growth. The expected weakness also comes amid a light news day for the sector while broadly, traders are looking towards the producer price data for a reading on inflation.

WTI and Brent crude oil futures inched lower this morning, retreating from yesterday’s pop after the IMF cut its global economic growth forecasts for 2018 and 2019, saying that trade policy tensions and the imposition of import tariffs were taking a toll on commerce while emerging markets struggle with tighter financial conditions and capital outflows. Losses however were capped as Hurricane Michael closed nearly 40% of U.S. Gulf of Mexico oil output and U.S. sanctions restricted Iranian exports. Traders will also be looking towards the API data after the close today and the EIA data tomorrow, both delayed a day due to Monday’s holiday.

Natural gas futures jumped over 2% in early trading, lifted by reports of production coming offline due to Hurricane Michael.

US INTEGRATEDS

Reuters - Chevron will become the first oil major to formally exit the Norwegian continental shelf (NCS) as it transfers its last stake in an exploration license. Chevron is also seeking to sell assets in the British North Sea in order to focus on growing U.S. onshore shale production as well as the giant Tengiz field in Kazakhstan.

(Late Tuesday) Reuters - Exxon Mobil’s latest shift on climate includes a $1 million donation to a political action committee's lobbying campaign to promote a U.S. tax on carbon-gas emissions, a central factor in global warming.

INTERNATIONAL INTEGRATEDS

Press Release - Shell Lubricants, a subsidiary of Royal Dutch Shell, announced the launch of a new grade of premium, semi synthetic engine oil under the Shell Advance AX7 range. An increasing number of automobile OEM's are looking to improve fuel economy of their vehicles by using appropriate low-viscosity, friction reducing engine oils.

Press Release - Shell Chemical Appalachia, a subsidiary of Royal Dutch Shell, announced the successful installation of its quench tower – the largest piece of equipment at its Pennsylvania Petrochemicals Complex, currently under construction. The heavy lift of the quench tower, undertaken October 7, marked an important milestone in the project.

U.S. E&PS

(Late Tuesday) Press Release - On October 8, 2018, Delaware Basin Midstream, a wholly owned subsidiary of Western Gas Partners and Anadarko E&P Onshore, a wholly owned subsidiary of Anadarko Petroleum, entered into a Gas Gathering Agreement for the provision of gas gathering services to AEP in the Delaware Basin in West Texas.

(Late Tuesday) Press Release - On October 5, 2018, Devon Energy entered into a new $3 billion revolving Credit Agreement by and among the Company, as the U.S. borrower, Devon Canada Corporation, a wholly-owned subsidiary of the Company, as the Canadian borrower, each lender from time to time party thereto each letter of credit issuer from time to time party thereto and Bank of America, N.A., as administrative agent and swing line lender.

(Late Tuesday) Press Release - For the third quarter of 2018, EOG Resources anticipates a non-cash net loss of $52.1 million on the mark-to-market of its financial commodity derivative contracts. During the third quarter of 2018, the net cash paid for settlements of financial commodity derivative contracts was $91.9 million.

Press Release - Kosmos Energy announced that it has completed drilling the Pontoenoe-1 exploration well in Block 42 offshore Suriname. In addition, Kosmos provided an operational and financial update in advance of releasing its third quarter 2018 results given the closure of the Deep Gulf Energy acquisition on September 14, and the incorporation of the assets into Kosmos’ third quarter results from closure to quarter end: Kosmos continues its evolution into a full-cycle exploration and production company positioned to deliver sustainable growth from a balanced portfolio. For the full year 2018, Kosmos expects to generate substantial free cash flow and remains on track to meet the Company’s previously communicated year-end 2018 net leverage target. This strong cash flow generation will allow Kosmos to initiate a dividend in the first quarter of 2019.

Press Release - SM Energy Company announced that Carla J. Bailo has been appointed to serve as a director of the Company. Ms. Bailo will serve as an independent director and as a member of the Audit Committee of the Board of Directors.

(Late Tuesday) Reuters - A consortium led by Talos Energy is looking to partner with Mexico's state-run energy firm Pemex next year on a plan to jointly develop a potentially lucrative oil and gas discovery pending more drilling.

CANADIAN E&PS

Press Release - Gran Tierra Energy announced that its common stock is expected to be admitted to the standard listing segment of the Official List of the Financial Conduct Authority and to trading on the main market of the London Stock Exchange for listed securities under the ticker “GTE”. The Company’s common stock will also continue to trade on the NYSE American and on the Toronto Stock Exchange.

National Bank of Canada downgraded Meg Energy to ‘Sector Perform’ from ‘Outperform’.

Press Release - OBSIDIAN ENERGY announced an operational update and timing details for our third quarter results and Investor Day. Obsidian Energy is on track to deliver meaningful 2019 light oil production growth from our Willesden Green Cardium program. The second half 2018 Cardium drilling program has been evaluated across a range of pricing and crude oil differentials. With the expected well rates and costs, Obsidian Energy anticipates competitive economic returns with the current outlook on Canadian dollar light oil differentials.

OILFIELD SERVICES

(Late Tuesday) Press Release - Black Hills announced that its Arkansas gas utility, Black Hills Energy, received approval for a general rate increase from the Arkansas Public Service Commission to recover investments in safety, reliability and system integrity for natural gas service for more than 169,000 customers in Arkansas.

(Late Tuesday) Press Release - The Board of Supervisory Directors of Core Laboratories has announced a cash dividend of $0.55 per share of common stock payable in the fourth quarter of 2018. This fourth quarter dividend means a total payout of $2.20 per share of common stock resulting from the four dividends declared and paid during the year 2018. The quarterly $0.55 per share cash dividend will be payable on Tuesday, 20 November 2018, to shareholders of record on Friday, 19 October 2018. Dutch withholding tax will be deducted from the dividend at a rate of 15%.

Press Release - Pelican Energy Partners announced the sale of Houston Global Heat Transfer to Forum Energy Technologies. Baker Botts L.L.P. served as the lead sell-side counsel on the transaction. Simmons & Company International, the energy specialists of Piper Jaffray, served as the company's financial advisor for the transaction and also conducted the sales process.

Press Release - McDermott International announced that it has been awarded a sizeable technology contract by INEOS for the license and engineering of a planned propane dehydrogenation unit in Europe. The unit will utilize McDermott's Lummus Technology CATOFIN dehydrogenation process to produce 750,000 metric tons of propylene per year. It will also utilize CATOFIN catalyst and heat generating material from Clariant. This process provides high conversion of propane to propylene which results in lower investment and operating costs for owners.

(Late Tuesday) Press Release - Secure Energy Services announced the light oil feeder pipeline system and receipt terminal in the Kindersley-Kerrobert region of Saskatchewan was completed on time and on budget and began commercial operations on October 1. Secure commenced construction of the Kerrobert Light Pipeline System in September of 2017 as part of the Corporation's growth strategy to continually expand its midstream infrastructure by adding long-term contracted transportation and commercial related services in support of value creation for customers.

DRILLERS

Press Release - Rowan Companies announced that it has concluded the sale of two LeTourneau TARZAN Class jack-up rigs, the Scooter Yeargain and the Hank Boswell, to ARO Drilling. The net economic impact of this transaction was that Rowan received approximately $90 million in cash and $176 million in shareholder notes from ARO Drilling as consideration for the two rigs. In addition to Rowan's 50% equity stake in ARO Drilling, Rowan now has a total of $445 million of shareholder notes from ARO Drilling. By agreement of the parties, this transaction will be reflected to have occurred as of October 1, 2018, at which point the Scooter Yeargain and Hank Boswell each will be deemed to have commenced a new three-year contract with Saudi Aramco.

MLPS & PIPELINES

(Late Tuesday) Reuters - Enterprise Products Partners’ Seaway crude pipeline will not achieve a targeted increase in capacity to 950,000 barrels per day because of issues unrelated to the expansion. Enterprise and its joint venture partner, Canadian pipeline operator Enbridge, originally expected to begin taking an additional 100,000 bpd in September. In recent days, it began adding a friction-reducing agent to increase the potential capacity of the 760-mile (1223 km) pipeline.

(Late Tuesday) Press Release - On October 8, 2018, Delaware Basin Midstream, a wholly owned subsidiary of Western Gas Partners and Anadarko E&P Onshore, a wholly owned subsidiary of Anadarko Petroleum, entered into a Gas Gathering Agreement for the provision of gas gathering services to AEP in the Delaware Basin in West Texas.

MARKET COMMENTARY

U.S. stock futures were little changed as investors assessed fears for global economic growth, while oil prices slipped. European shares fell and Asian markets traded sideways. Gold prices dipped. The dollar was near flat against a basket of currencies. Producer Price Index for final demand and wholesale inventory data are on the tap for the day.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP


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