Investor Relations

Nasdaq Advisory Services Energy Commentary May 4, 2016

Wednesday, May 4, 2016

SECTOR COMMENTARY

Oil and gas stocks are expected to open mixed this morning following declines overseas, mixed earning results and despite strength in the commodities complex. Devon Energy is outperforming in pre-market trading after posting a narrower loss for its first quarter, helped in part by a 36% decline in expenses as the oil-and-gas producer responded to depressed energy prices with a deep cut of its workforce. Conversely, shares of Royal Dutch Shell are lower after the company reduced its 2016 spending plans by another 10% from the target set in February when it completed the acquisition of BG Group, and said it could cut further if needed. In its first results since the deal that transformed it into the world's top liquefied natural gas producer, Shell trimmed spending to $30 billion by cancelling projects such as the sour gas project in Abu Dhabi, and by slashing exploration costs.

Crude oil futures are higher this morning as reduced production in Canada's oil sands region lent support, although expectations U.S. crude inventories will rise further from a record put a cap on gains. Brent crude has fallen more than 7% from a 2016 high hit on Friday in response to rising output from the OPEC, signs of economic slowdown in the United States and Asia, and a stronger dollar. The Canadian province of Alberta was evacuating the entire population of Fort McMurray where a wildfire was taking hold in the heart of the country's oil sands region, prompting some companies to cut output. Suncor Energy, whose oil sands operations are closest to the city, said its main plant north of Fort McMurray, was safe, but it was reducing crude production in the region to allow employees and families to get to safety. On Tuesday evening, the API said U.S. crude inventories rose by 1.3 million barrels. Stocks in the previous week were at a record high. Still, this was not as large as the 1.7 million-barrel increase analysts expected.

Henry Hub futures are higher this morning, recovering earlier losses as traders cover short positions. In early estimates, analysts said utilities likely added 63 billion cubic feet of gas into storage during the week ended April 29. That compares with builds of 73 billion cubic feet in the preceding seven-day period, 77 billion cubic feet in the same time frame a year ago and a five-year average increase for that week of 64 billion cubic feet. To prevent stockpiles from hitting peak capacity levels at the end of the April-October injection season after utilities left record amounts of fuel in storage following a warm winter, analysts said prices will have to remain low this year to pressure producers to cut output and encourage power generators to burn even more gas instead of coal.

U.S. INTEGRATEDS

(Late Tuesday) Reuters - Exxon Mobil was preparing on Tuesday to return to production the second-largest crude distillation unit at the 560,500 barrel per day Baytown, Texas, refinery later this week.

INTERNATIONAL INTEGRATEDS

  • RDS reported 1Q’16 CCS, EPS of $0.44.

  • (Late Tuesday) Press Release - BP will conduct planned maintenance on its 315,000 barrels per day Olympic Pipeline in the U.S. Pacific Northwest starting Thursday through May 9.
  • (Late Tuesday) Press Release - Petroleo Brasileiro said on Tuesday it concluded the sale of a 67.2 percent stake in Petrobras Argentina to Argentina's Pampa Energia for $892 million.
  • Press Release - Royal Dutch Shell reported first quarter 2016 unaudited results. The company’s cash flow from operating activities for Q1 2016 was $0.7 billion, which included negative working capital movements of $3.9 billion and total dividends distributed to shareholders in quarter were $3.7 billion, of which $1.5 billion were settled by issuing 65.7 million a shares under scrip dividend programme. Their interim dividend in respect of the first quarter of 2016 was US$0.47 per A ordinary share and B ordinary, equal to the US dollar dividend for the same quarter last year. Shell also completed the acquisition of BG for a purchase consideration of $54,034 million. They also reported it plans to reduce 2016 spending by around 10 percent to $30 billion due to low oil prices, after reporting better than expected first quarter results.

U.S. E&PS

  • CRK reported 1Q’16 EPS of ($1.03) versus Thomson Reuters I/B/E/S estimate of ($1.11).
  • CRZO reported 1Q’16 EPS of $0.16 versus Thomson Reuters I/B/E/S estimate of $0.13.
  • DVN reported 1Q’16 EPS of ($0.53) versus Thomson Reuters I/B/E/S estimate of ($0.64).
  • FANG reported 1Q’16 EPS of $0.02 versus Thomson Reuters I/B/E/S estimate of ($0.05).
  • MTDR reported 1Q’16 EPS of ($0.16) versus Thomson Reuters I/B/E/S estimate of ($0.17).
  • NBL reported 1Q’16 EPS of ($0.53) versus Thomson Reuters I/B/E/S estimate of ($0.57).
  • NFX reported 1Q’16 EPS of ($0.09) versus Thomson Reuters I/B/E/S estimate of ($0.11).
  • SM reported 1Q’16 EPS of ($0.83) versus Thomson Reuters I/B/E/S estimate of ($0.84).
  • XCO reported 1Q’16 EPS of ($0.07) versus Thomson Reuters I/B/E/S estimate of ($0.12).

Alembic Global Advisors downgraded Anadarko Petroleum to ‘Neutral’ from ‘Overweight.’

Credit Suisse downgraded Anadarko Petroleum to ‘Neutral’ from ‘Outperform.’

BMO Capital Markets downgraded Anadarko Petroleum to ‘Market Perform’ from ‘Outperform.’

  • Press Release - Carrizo Oil & Gas reported a first quarter of 2016 loss from continuing operations of $311.4 million, or $5.34 per basic and diluted share compared to a loss from continuing operations of $21.5 million, or $0.46 per basic and diluted share in the first quarter of 2015. The loss from continuing operations for the first quarter of 2016 includes certain items typically excluded from published estimates by the investment community, including the full cost ceiling test impairment recognized this quarter. Adjusted net income, which excludes the impact of these items as described in the statements of operations included below, for the first quarter of 2016 was $9.2 million, or $0.16 per basic and diluted share compared to $6.4 million, or $0.14 per basic and diluted share in the first quarter of 2015.
  • Press Release - Comstock Resources reported its oil and natural gas prices declined further in the first quarter of 2016. Comstock's average realized natural gas price, including hedging gains, decreased 25% to $1.89 per Mcf in the first quarter of 2016 as compared to $2.51 per Mcf realized in the first quarter of 2015. The Company's average realized oil price declined by 40% to $26.44 per barrel in the first quarter of 2016 as compared to $44.34 per barrel in the first quarter of 2015. The lower realized prices resulted in oil and gas sales declining by 44% to $37.2 million as compared to 2015's first quarter sales of $66.5 million. EBITDAX, or earnings before interest, taxes, depreciation, depletion, amortization, exploration expense and other noncash expenses, was $14.7 million in the first quarter of 2016 as compared to EBITDAX of $39.8 million in the first quarter of 2015.
  • Press Release - Denbury Resources announced that it has entered into privately negotiated exchange agreements with holders of approximately $839.4 million in aggregate principal amount of its outstanding senior subordinated notes to exchange that principal amount of Old Notes for approximately $482.9 million in aggregate principal amount of the Company`s new 9% Senior Secured Second Lien Notes due 2021 and approximately 33.6 million shares of the Company`s common stock.
  • (Late Tuesday) Reuters - Devon Energy reported the following: (i) raised full-year production guidance by 3 percent; (ii) lowered 2016 operating cost outlook by $50 million; (iii) Q1 total operating revenue $2,126 million versus $3,265 million last year; (iv) Q1 adjusted core loss per share $0.53 excluding items; and (v) lowering its full-year LOE outlook by $50 million to a range of $1.75 billion to $1.85 billion.
  • (Late Tuesday) Press Release - Diamondback Energy reported it incurred an impairment charge of $31 million as a result of depressed commodity prices. Diamondback recorded a net loss of $33 million for the quarter. The company`s first quarter 2016 adjusted net income attributable to Diamondback Energy was $2 million, or $0.02 per share. First quarter 2016 Adjusted EBITDA was $58 million and first quarter 2016 revenues were $87 million.
  • (Late Tuesday) Press Release - EXCO Resources reported its adjusted EBITDA, a non-GAAP measure, was $19 million for the first quarter 2016, 62% below adjusted EBITDA for the fourth quarter 2015, primarily due to lower cash receipts on derivative contracts, commodity prices and production. Adjusted net loss, a non-GAAP measure, was $20 million, or $0.07 per diluted share, and GAAP net loss was $130 million, or $0.47 per diluted share, for the first quarter 2016. The GAAP net loss was primarily due to the $135 million impairment of oil and natural gas properties pursuant to the ceiling test in accordance with full cost accounting. They produced 295 Mmcfe per day, or 27 Bcfe, for the first quarter 2016, in line with the mid-point of guidance. Production decreased 24 Mmcfe per day, or 8%, from the fourth quarter 2015, primarily due to normal production declines and timing of wells turned-to-sales.
  • (Late Tuesday) Press Release - Matador Resources reported adjusted EBITDA, a non-GAAP financial measure, decreased 66% from $50.1 million during the first quarter of 2015 to $17.2 million in the first quarter of 2016. The company also announced its net loss of approximately $107.7 million and a loss of $1.26 per diluted common share on a GAAP basis, as compared to a net loss of approximately $50.2 million and a loss of $0.68 per diluted common share in the first quarter of 2015.
  • (Late Tuesday) Press Release - Newfield Exploration reported a net loss of $624 million, or $3.52 per diluted share. The loss was primarily related to a full-cost ceiling test impairment of $506 million, or $2.85 per share. After adjusting for the effect of impairments, credit facility amendment fees and unrealized derivative losses, the net loss for the first quarter would have been $16 million, or $0.09 per share. Revenues for the first quarter were $284 million. Net cash provided by operating activities was approximately $72 million. Net cash provided by operating activities before changes in operating assets and liabilities was $170 million.
  • Press Release - Noble Energy announced results for the first quarter of 2016, including an adjusted net loss (1) of $228 million, or $0.53 per diluted share, excluding the impact of certain items not typically considered by analysts in published estimates. The reported net loss for the quarter was $287 million or $0.67 per diluted share. EBITDAX (1) (earnings before interest expense, income taxes, depreciation, depletion, and amortization, and exploration expenses) and Adjusted EBITDAX (1) were $406 million and $518 million, respectively. Capital expenditures for the quarter were $374 million.
  • (Late Tuesday) Press Release - Noble Energy announced that it has signed a definitive agreement to divest certain oil and natural gas properties in the Greeley Crescent area of Weld County, Colorado. The transaction includes the sale of approximately 33,100 primarily undeveloped net acres within the DJ Basin to Synergy Resources for $505 million. The effective date of the transaction is April 1, 2016, and closing is expected to occur as early as June 2016, subject to customary terms and conditions.
  • Raymond James upgraded RSP Permian to ‘Strong Buy’ from ‘Outperform.’
  • (Late Tuesday) Press Release - SM Energy reported first quarter production of 13.4 MMBoe, or 147,500 Boe per day, was 31% oil, 25% NGLs and 44% natural gas. The Company`s adjusted EBITDAX for the first quarter of 2016 was $182.3 million compared with $311.9 million in the first quarter of 2015 and net loss was $347.2 million, or $5.10 per diluted common share, compared with a net loss of $53.1 million, or $0.79 per diluted common share, in the first quarter of 2015.

CANADIAN E&PS

  • GTE-T reported 1Q’16 EPS of ($0.16) versus Thomson Reuters I/B/E/S estimate of ($0.14).
  • PGF-T reported 1Q’16 EPS of C$0.05 versus Thomson Reuters I/B/E/S estimate of C$0.10.

  • (Late Tuesday) Press Release - Baytex Energy reported its generated production of 75,776 boe/d in Q1/2016. It delivered funds from operations of $45.6 million in Q1/2016 and realized an operating netback in Q1/2016 of $5.82/boe. The company also produced 41,067 boe/d in the Eagle Ford, an increase of 2% from Q4/2015 and 5% from Q3/2015. Its 2016 production guidance remains at 68,000 to 72,000 boe/d with budgeted exploration and development expenditures of $225 to $265 million and they’re targeting capital expenditures to approximate funds from operations in order to minimize additional bank borrowings.
  • Press Release - Gran Tierra Energy reported its net loss for the quarter was $45.0 million, or $0.15 per share basic and diluted, compared with a net loss of $82.7 million, or $0.29 per share basic and diluted, in the Prior Quarter. The loss recorded in the first quarter of 2016 included an $11.7 million gain which arose on the acquisition of Petroamerica and $34.5 million of non-cash impairment losses, net of income tax recovery, resulting from the continued low commodity price environment.
  • (Late Tuesday) Press Release - Pengrowth Energy reported first quarter average production of 62,056 boe per day, a decline of nine percent compared to 67,934 boe per day in the fourth quarter 2015 primarily due to 5,000 boe per day of asset dispositions closed in the fourth quarter. It generated first quarter funds flow from operations of $106.2 million, down approximately seven percent from the fourth quarter 2015 funds flow of $114.2, despite a 16 percent decline in commodity prices quarter over quarter. Its first quarter adjusted net income was $0.5 million compared to an adjusted net loss of $463.4 million in the fourth quarter of 2015.

OIL SERVICES

  • NGS reported 1Q’16 EPS of $0.20 versus Thomson Reuters I/B/E/S estimate of $0.16.

  • (Late Tuesday) Press Release - Emerge Energy Services announced that, in accordance with its cash distribution policy as determined by the board of directors of its general partner, it will not make cash distribution on its common units in respect of the three months ended March 31, 2016. Emerge Energy did not generate available cash to distribute for the three months ended March 31, 2016 due to the challenging oil and natural gas frac sand market and the volatility in wholesale fuel prices during this period.
  • Societe Generale downgraded National Oilwell Varco to ‘Sell’ from ‘Hold.’
  • Press Release - Natural Gas Services Group reported total revenue was $21.6 million, a decrease from $24.7 million, or 13%, for the three months ended March 31, 2016 compared to the same period ended March 31, 2015. This change was attributable to a decrease in rental revenue related to reduce activity in the upstream oil and gas industry due to low commodity prices. Total revenue decreased between consecutive quarters by $4.2 million to $21.6 million from $25.8 million, primarily due to a combination of lower compressor unit sales and decline in rental revenues.
  • Press Release - Patterson-UTI Energy reported that for the month of April 2016, the Company had an average of 56 drilling rigs operating in the United States, and no operating rigs in Canada due to the industry downturn and spring breakup.

DRILLERS

  • PKD reported 1Q’16 EPS of ($0.18) versus Thomson Reuters I/B/E/S estimate of ($0.21).
  • RDC reported 1Q’16 EPS of $0.98 versus Thomson Reuters I/B/E/S estimate of $0.72.

  • (Late Tuesday) Press Release - Parker Drilling announced results for the first quarter ended March 31, 2016, including a reported net loss of $95.8 million, or a $0.78 loss per share, on revenues of $130.5 million.
  • Press Release - Rowan Companies reported net income of $122.8 million, or $0.98 per share, compared to $123.7 million, or $0.99 per share in the first quarter of 2015. Rowan's revenues were $500.2 million in the first quarter of 2016, down by 9% from the prior-year quarter due primarily to lower utilization of jack-up rigs. The lower jack-up utilization was partially offset by contributions from the Company's third and fourth new build ultra-deep water drillships, which began operating in February and June of 2015, respectively.

REFINERS

  • HFC reported 1Q’16 EPS of ($0.06) versus Thomson Reuters I/B/E/S estimate of $0.07.

  • Press Release - HollyFrontier reported first quarter net income attributable to HollyFrontier stockholders of $21.3 million or $0.12 per diluted share for the quarter ended March 31, 2016, compared to $226.9 million or $1.16 per diluted share for the quarter ended March 31, 2015. Included in the current quarter results was a non-cash inventory valuation adjustment that increased after-tax earnings by $37.0 million, or $0.21 per share.

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  • (Late Tuesday) Press Release - EnLink Midstream Partners realized adjusted EBITDA of $195.0 million and distributable cash flow of $155.4 million in the first quarter of 2016, compared with adjusted EBITDA of $129.9 million and distributable cash flow of $98.7 million in the first quarter of 2015. The Partnership's net loss was $562.9 million and net cash provided by operating activities was $189.1 million in the first quarter of 2016, compared with net income of $35.7 million and net cash provided by operating activities of $171.7 million in the first quarter of 2015.
  • CIBC downgraded Gibson Energy to ‘Sector Underperformer’ from ‘Sector Performer.’
  • National Bank Financial downgraded Gibson Energy to ‘Sector Perform’ from ‘Outperform.’
  • (Late Tuesday) Press Release - Gibson Energy reported segment profit was $80 million in the first quarter of 2016, buoyed by the Infrastructure segment's year over year volume and revenue increases at both of the Company's key storage hubs in Edmonton and Hardisty. Its Pro Forma Adjusted EBITDA was $347 million for the twelve months ending March 31, 2016 and distributable Cash Flow generated for the twelve months ending March 31, 2016 was $181 million while dividends declared during the period were $163 million. Its Board of Directors approved a quarterly dividend of $0.33 per common share payable on July 15, 2016, to shareholders of record at the close of business on June 30, 2016.
  • Piper Jaffray upgraded ONEOK Partners to ‘Overweight’ from ‘Neutral.’
  • (Late Tuesday) Press Release - ONEOK Partners reported first-quarter 2016 distribution coverage of 1.06 times and maintained its 2016 adjusted EBITDA guidance of approximately $1.88 billion and DCF guidance of approximately $1.39 billion. They’re completing the first phase of the Roadrunner Gas Transmission pipeline project, which provides 170 million cubic feet per day of capacity to markets in Mexico and El Paso, Texas. Once fully complete, the pipeline, which is fully subscribed under 25-year firm fee-based commitments, will have a total capacity of 640 MMcf/d. The company also declared in April 2016 its first-quarter 2016 distribution of 79 cents per unit, or $3.16 per unit on an annualized basis.
  • Press Release - Spectra Energy reported first quarter 2016 financial results. For the quarter, ongoing earnings before interest, taxes, depreciation and amortization were $757 million, compared with $788 million in the prior-year quarter. Ongoing net income from controlling interests was $238 million, or $0.35 diluted earnings per share, compared with $274 million, or $0.41 diluted EPS in first quarter 2015. Reported net income from controlling interests was $234 million, or $0.35 diluted EPS, compared with $267 million, or $0.40 diluted EPS in first quarter 2015.
  • Press Release - Spectra Energy Partners announced that the board of directors of its general partner declared a quarterly cash distribution to unitholders of $0.65125 per unit, an increase of 1.25 cents over the previous level of $0.63875 per unit. This is the 34th consecutive quarter that Spectra Energy Partners has increased its quarterly cash distribution. The cash distribution is payable on May 27, 2016, to unitholders of record at the close of business on May 16, 2016. This quarterly cash distribution equates to $2.605 per unit on an annual basis.
  • (Late Tuesday) Press Release - Western Gas Partners reported net income (loss) available to limited partners for the first quarter of 2016 totaled $47.0 million, or $0.31 per common unit (diluted), with first-quarter 2016 Adjusted EBITDA(1) of $231.1 million and first-quarter 2016 Distributable cash flow(1) of $191.9 million. WES previously declared a quarterly distribution of $0.815 per unit for the first quarter of 2016. This distribution represented a 2% increase over the prior quarter's distribution and a 12% increase over the first-quarter 2015 distribution of $0.725 per unit.

MARKET COMMENTARY

Futures are pointing to a lower open tracking the global markets as European stocks traded more than half a percent lower, while Asian equities ended lower, with the Shanghai composite off only 0.05 percent. Japanese markets remained closed for a holiday. Ahead of Friday's closely watched nonfarm payrolls figures, ADP reported the U.S. labor market added 156,000 new jobs in the private sector, marking a slowdown. The trade deficit narrowed in March as imports fell faster than exports, underscoring slow growth at home and abroad in the opening months of the year. The trade gap decreased 13.9% from February to a seasonally adjusted $40.44 billion, the Commerce Department said Wednesday. Exports of goods and services fell 0.9% while imports dropped 3.6%. Weekly mortgage application volume fell 3.4 percent, according to the Mortgage Bankers Association.


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.

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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