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Oil

Oil Extends Losses Amid Weakening Demand Outlook

SECTOR COMMENTARY:

The energy sector is set for a lower start, pressured by weakness in the crude complex. Meanwhile, the major equity futures are edging higher and treasury yields are lower as investors cheers falling labor costs.  In sector news, JP Morgan issued a number of ratings changes across its E&P coverage universe, while ExxonMobil updated its corporate plan outlook, upping its buyback program to $20 billion in stock for 2024, and updating 2024 capex to $23 billion to $25 billion versus the 2023 budget of $23 billion.

WTI and Brent crude oil futures are extending losses for the fifth-consecutive session as market participants do not expect recent voluntary cuts to have a major impact on oil prices, amid a weakening demand outlook. Concerns over China's economic health following yesterday’s credit rating decrease by Moody’s, also weighed on prices. Traders will now turn to inventory data due later today after digesting last night’s API print, which showed a build of 594K barrels and greatly differs from Reuter’s 1.4-million-barrel draw estimate.

Natural gas futures are higher this morning as analysts expect a large-than-average decline in storage levels. Consensus is looking for a draw of (104) Bcf vs the 5-yr average of (48) Bcf.

BY SECTOR:

US INTEGRATEDS

Exxon Mobil will increase annual project spending to between $22 billion and $27 billion through 2027, the company said in an update that largely continues existing spending and production targets. The plan leaves out expected gains from the $60 billion acquisition of Pioneer Natural Resources, which is expected to close next year. Exxon has received two requests for information on the deal from the U.S. Federal Trade Commission. Exxon bought Pioneer in October for nearly $60 billion in a all-stock deal due to close in the first half of 2024, saying it plans to more than tripling production in the U.S. shale to 2 million barrels per day by 2027. Exxon's spending outlook will raise outlays for its energy transition unit, called Low Carbon Solutions, to $20 billion between 2022 and 2027, from $17 billion. But the higher spending will require government support. "We need technology-neutral durable policy support, transparent carbon pricing and accounting, and ultimately, customer commitments to support increased investment," Chief Executive Darren Woods said in a statement. Exxon will increase its share buybacks to $20 billion annually through 2025, from $17.5 billion currently, after the Pioneer merger closes. The company forecasts production of 3.8 million barrels of oil equivalent per day (boepd) in 2024, from 3.7 million bpd this year, as the top U.S. oil producer bets on a lift from the Permian shale basin and Guyana. Spending on new projects will expand to between $23 billion and $25 billion next year, with a range that has a mid-point spending of $24.5 billion annually from 2025 through 2027. The company has said it expected output to be flat until the end of this year, at 3.7 million boepd, due to its withdrawal from Russia.

INTERNATIONAL INTEGRATEDS 

Saudi Arabia has lowered prices for the flagship Arab light crude it sells to Asia in January for the first time in seven months, to $3.50 a barrel above the Oman/Dubai average, Aramco said.

Petrobras said it has begun moving a rig to the northeastern Rio Grande do Norte state which it will use to drill a potentially oil-rich area known as the 'equatorial margin'. Petrobras said in a statement it expects drilling in the Potiguar basin to start this month.

Shell shortlisted at least four companies including state-run China National Offshore Oil Corp (CNOOC) and top global energy trader Vitol as bidders for its Singapore refinery assets, sources with knowledge of the matter said. Two privately controlled Chinese chemical producers - Eversun Holdings in Fujian province and Shandong province-based Befar Group - were also shortlisted, sources said. The companies have been asked to submit formal bids by the end of February, two of the sources said. Two sources also said Shell aims to close a transaction by the end of 2024.

The first test flight to demonstrate the potential for converting Methanol to SAF (Sustainable Aviation Fuel) has taken place in Dubai on the sidelines of COP28 in the UAE. Masdar, TotalEnergies, the UAE General Civil Aviation Authority, Airbus, Falcon Aviation Services and technology licensor Axens all contributed to the successful flight.

TotalEnergies's CEO gave his backing to an international pledge to triple renewable energy generation at the COP28 climate summit, calling it necessary to phase out fossil fuels and decarbonise. "It's the right way to frame the object, tripling renewables, because if we don't do that, there's no way to phase out fossil energy," Patrick Pouyanne told Reuters in an interview on the sidelines of the summit in Dubai.

CANADIAN INTEGRATEDS

Suncor Energy forecast higher production in 2024 compared to 2023, as the energy firm bets on strong performance from its Fort Hills asset. The Calgary, Alberta-based company expects upstream production to be between 770,000 and 810,000 barrels per day (bpd) next year, 7% higher compared with its 2023 production estimate.

U.S. E&PS

Crescent Energy announced that its indirect subsidiary Crescent Energy Finance LLC has priced its previously announced private placement pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, to eligible purchasers of $150 million aggregate principal amount of 9.250% Senior Notes due 2028. The Notes mature on February 15, 2028 and pay interest at the rate of 9.250% per year, payable on February 15 and August 15 of each year, with interest payments on the Notes commencing on February 15, 2024. The Notes were priced at 102.125% of par, plus accrued and unpaid interest from August 15, 2023. The Issuer intends to use the net proceeds from this offering to repay a portion of the amounts outstanding under its revolving credit facility. This offering is expected to close on December 8, 2023, subject to customary closing conditions.

The U.S. Federal Trade Commission has sent shale oil producer Pioneer Natural Resources and Exxon Mobil a second request for more information on their $60 billion takeover deal, Pioneer said. The companies are working with the FTC and continue to expect that the deal will be completed in the first half of 2024, Pioneer said in a regulatory filing. U.S. Senate Majority Leader Charles Schumer and 22 other Democratic senators wrote to the FTC in November saying multibillion-dollar acquisitions by major oil and gas companies Exxon and Chevron could lead to higher prices for consumers. Schumer reiterated his interest, saying that the Exxon deal "has all the hallmarks of harmful, anticompetitive effects."

KeyBanc initiated coverage of Vital Energy with Overweight rating and a $58 price target.

JP Morgan made recommendation changes on the following companies: upgraded Ovintiv to Overweight from Neutral; upgraded Devon Energy to Overweight from Neutral; upgraded Southwestern Energy to Neutral from Underweight; downgraded EOG Resources to Neutral from Overweight; downgraded Range Resources to Underweight from Neutral.

CANADIAN E&PS 

No significant news.

OILFIELD SERVICES

Cobra Acquisitions LLC, a wholly owned subsidiary of Mammoth Energy Services, Inc., announced that, on December 1, 2023, it entered into an agreement to transfer approximately $54.4 million of its outstanding receivable with the Puerto Rico Electric Power Authority to SPCP Group, LLC in exchange for net proceeds of $46.3 million.

Trican Well Service provided an update on its revolving credit facility. Trican has entered into an agreement with a syndicate of Canadian banks which amends and extends its RCF. The principal changes included in the Amended RCF are as follows: a two-year extension of the maturity date from December 5, 2024 to December 4, 2026; updates to certain pricing metrics reflecting current bank market conditions and the Company's strong financial position; and an increase in available borrowing capacity to $150 million from $125 million to provide additional liquidity and credit availability throughout the extended term of the agreement. There were no changes to the financial covenant package or permitted indebtedness terms. Trican believes that this Amended RCF provides ample liquidity for its existing business, as Trican exited Q3 2023 with available cash of $44.5 million and no amounts drawn on the RCF. The Amended RCF continues to be led by The Bank of Nova Scotia acting as lead arranger, sole bookrunner and administrative agent and is comprised of five banks - all of which were participants in the previous facility. Trican will pay customary fees and expenses at prevailing market rates to the lending syndicate as a condition of this amendment.

DRILLERS

Stifel initiated coverage of Seadrill with Buy rating and a $72 price target. 

REFINERS

No significant news.

MLPS & PIPELINES

No significant news.

MARKET COMMENTARY

Wall Street futures inched higher as investors remained hopeful about rate cuts from the Federal Reserve starting early next year, while waiting for more data on the labor market. European shares were in the green, led by miners, travel, and leisure stocks, while Germany's benchmark DAX scaled a fresh all-time high on a boost from carmaker Volkswagen. Japan's Nikkei ended sharply higher as investors bought back beaten-down chip-related stocks. The dollar held steady against a basket of currencies. Gold prices edged higher on lower bond yields. Oil prices fell against a backdrop of worsening demand outlook from China and skepticism about the impact of OPEC cuts. U.S. private payrolls and international trade balance data are scheduled for release later in the day.


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  Rich Pontillo.


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Nasdaq Energy News

Nasdaq Advisory Services Energy Team is part of Nasdaq's Advisory Services. 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.

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