Oil Extends Yesterday’s Declines, Pressured by Lingering Concerns Over The Potential Fall Out of China’s Evergrande Being Liquidated

SECTOR COMMENTARY:

The energy sector is poised for a lower start, reeling amid weakness in both the crude complex and broader equity futures. With the benchmark indices hovering around fresh record highs, investors are stepping back this morning as they digest a wave of corporate earnings and ahead of the Fed’s policy announcement tomorrow.

Traders are also reacting to headlines that Saudi Aramco halted their production capacity expansion plans, driving the OFS sharply lower ahead of the bell.

WTI and Brent crude oil futures extended yesterday’s declines into the new session, pressured by lingering concerns over the potential fall out of China's Evergrande being liquidated and reports OPEC+ export data suggests a sluggish start to supply cuts being made. The markets are also positioning themselves ahead of this week’s OPEC+ meeting and while expectations are low that the group will make a decision on oil policy for April, analysts are hoping it could still shed some light on production plans. Aramco, in an indication for the future demand outlook, said it had received a directive from the energy ministry to maintain its maximum sustainable capacity at 12 million barrels a day, and not to continue increasing it to 13 million barrels per day. Meanwhile, Washington vowed to take "all necessary actions" to defend its troops following a deadly drone attack in Jordan by Iran-backed militants, the first U.S. military deaths since the Israel-Gaza war began, putting markets on edge.

On the first day of trading as the front month contract, March natural gas futures are up over 1.5% in early trading, bouncing off yesterday’s sharp pullback. Warmer weather forecasts and continued outages at Freeport LNG export plant continued to dampen sentiment.

BY SECTOR:

US INTEGRATEDS

No significant news.

INTERNATIONAL INTEGRATEDS 

Saudi Aramco said it was asked to cut its planned maximum sustainable oil production capacity to 12 million barrels a day (bpd), having raised it to 13 million bpd almost four years ago. The move in no way reflects a change of views on future oil demand scenarios, a source with direct knowledge of the matter told Reuters.

TotalEnergies and Wenea announced an agreement in view of building a leading player in electric mobility in Spain by developing a network of high-power charging hubs. As a first step, TotalEnergies announces that it has acquired Nordian CPO, a subsidiary of Wenea group, which owns 200 charging sites from Wenea's branded network. These 200 sites, supplied entirely with renewable electricity, are located along major highways and in urban and peri-urban areas in all 17 regions of Spain. Moreover, TotalEnergies and Wenea are pursuing their discussion to establish a strategic partnership in view of pooling their expertise and skills in infrastructure, power distribution and mobility to build and invest together in high-power charging hubs. 

CANADIAN INTEGRATEDS

No significant news.

U.S. E&PS

Permian Resources announced a series of recent portfolio optimization transactions consisting of two bolt-on acquisitions, a sizeable acreage swap, a divestiture of non-core assets and additional grassroots acquisitions. 

CANADIAN E&PS

No significant news.

OILFIELD SERVICES

No significant news.

DRILLERS

Helmerich & Payne reported net income of $95 million, or $0.94 per diluted share, from operating revenues of $677 million for the quarter ended December 31, 2023, compared to net income of $78 million, or $0.77 per diluted share, from operating revenues of $660 million for the quarter ended September 30, 2023. The net income per diluted share for the first quarter of fiscal 2024 and fourth quarter of fiscal 2023 include $(0.03) and $0.08 of after-tax losses and gains, respectively, comprised of select items. For the first quarter of fiscal year 2024, select items were comprised of: $(0.03) of after-tax losses related to the non-cash fair market value adjustments to our equity investments.

Seadrill Limited initiated a share repurchase program December 14, 2023 to repurchase up to $250 million of the Company's common shares in open market transactions on the OSE and NYSE until no later than September 30, 2024 pursuant to an agreement with Fearnley Securities AS and its subsidiary, Fearnley Securities, Inc.

Seadrill Limited also announced multiple contract awards totalling approximately $97.5 million in value, in addition to an update on the West Auriga. 

REFINERS

Marathon Petroleum reported net income attributable to MPC of $1.5 billion, or $3.84 per diluted share, for the fourth quarter of 2023. This compares to net income attributable to MPC of $3.3 billion, or $7.09 per diluted share, for the fourth quarter of 2022. Adjusted net income was $1.5 billion, or $3.98 per diluted share, for the fourth quarter of 2023. This compares to adjusted net income of $3.1 billion, or $6.65 per diluted share, for the fourth quarter of 2022. Adjustments are shown in the accompanying release tables. The fourth quarter of 2023 adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) was $3.5 billion, compared with $5.8 billion for the fourth quarter of 2022. Adjustments are shown in the accompanying release tables.

MLPS & PIPELINES 

MPLX reported fourth-quarter 2023 net income attributable to MPLX of $1,134 million, compared with $816 million for the fourth quarter of 2022. Fourth-quarter 2023 net income includes a $92 million non-cash gain arising from the acquisition of the remaining interest of a Permian basin joint venture. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) attributable to MPLX was $1,623 million, compared with $1,454 million for the fourth quarter of 2022. Logistics and Storage (L&S) segment adjusted EBITDA for the fourth quarter of 2023 was $1,089 million, compared with $979 million for the fourth quarter of 2022. Gathering and Processing (G&P) segment adjusted EBITDA for the fourth quarter of 2023 was $534 million, compared with $475 million for the fourth quarter of 2022. During the quarter, MPLX generated $1,489 million in net cash provided by operating activities, $1,384 million of distributable cash flow, and adjusted free cash flow of $964 million. MPLX announced a fourth-quarter 2023 distribution of $0.85 per common unit, resulting in distribution coverage of 1.6x for the quarter. The leverage ratio was 3.3x at the end of the quarter. For the full year 2023, MPLX generated $5,397 million in net cash provided by operating activities, $5,340 million of distributable cash flow, and $4,135 million of adjusted free cash flow, compared to $5,019 million, $4,981 million and $4,069 million, respectively, in 2022.

MARKET COMMENTARY

U.S. main index futures were muted at the start of a week packed with major events including the Federal Reserve's interest rate decision and big-ticket tech earnings that could set the tone for Wall Street after a record-breaking rally. European equities edged higher, helped by strength across the energy sector. In Asia, Chinese stocks fell despite fresh government curbs on short selling, while Japan's Nikkei closed higher. The dollar gained ahead of Fed meeting in a data-heavy week. Gold prices firmed as escalating tensions in the Middle East lifted bullion's safe-haven appeal. Oil prices rose on supply disruption concerns.

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