Oil Prices Decline on Poor Trade Data From China
SECTOR COMMENTARY:
The energy sector is poised for a lower start, ending a three-day winning streak amid further weakness in the crude complex and after major equity futures turned lower. Investor sentiment took a hit this morning after Moody’s downgraded their credit rating on several banks and warned of possible cuts to others, driving the entire sector lower and reigniting fears of the health of the U.S. banking systems. Earnings season continued to wind down today with just a handful of producers and midstream operators announcing results but earnings will start to take a back seat as attention shifts to Thursday’s July CPI print, this week's key macro event.
WTI and Brent crude oil futures extended yesterday’s declines into this morning’s session, pressured by Chinese trade data which showed imports and exports fell much more than expected in July, strength in the dollar and as traders begin to assess the impending end of the U.S. summer driving season. Overall, China's imports contracted by 12.4% in July, far steeper than the expected 5% drop, while exports fell by 14.5%, compared with a fall of 12.5% tipped by economists. Imports were down 18.8% from the previous month to the lowest daily rate since January but still up 17% from a year earlier. The dollar index also continued to rise for the second-straight session following comments from Fed officials, which supports additional interest rate hikes.
After three-consecutive days of strong gains, natural gas futures steadied this morning with attention still on ongoing heat warnings across the U.S. and forecasts turning hotter for the third week of August.
BY SECTOR:
US INTEGRATEDS
Reuters reported that ExxonMobil shut a heater on the coker at its 619,000-barrel-per-day (bpd) Beaumont, Texas refinery for maintenance, people familiar with plant operations said.
INTERNATIONAL INTEGRATEDS
Venture Global LNG lashed out at some customers signed up to take liquefied natural gas (LNG) cargoes from a Louisiana export facility, claiming they "have chosen to misrepresent confidential long-term contracts." A public spat is heating up over the lack of shipments to Venture Global LNG customers' BP, Shell, Edison International, Repsol and Portuguese energy company GALP Energia.
Stanlow Terminals has signed a Memorandum of Understanding (MoU) with Eni UK, the UK subsidiary of Eni, to explore the development of carbon dioxide (CO2) collection, shipping, and storage at the Stanlow Terminal location and then delivering the received CO2 into Eni UK's carbon transport and storage infrastructures currently being developed in the NW region of the UK.
Equinor announced that the Norwegian government has approved the Snøhvit partners' plans for the future operation of Snøhvit and Hammerfest LNG, subject to certain conditions. The approval entails onshore compression from 2028, and electrification of the plant from 2030.
Petrobras informed that the Strategic Plan 2024- 2028 will have as a driver, among others, the forecast of low-carbon CAPEX for the range between 6% and 15% of the total CAPEX for the first five years of the new Plan, in compliance with current governance practices, the commitment to value creation and the Company's long-term financial sustainability.
Saudi Steel Pipe Company announced the award of an order amounting to SAR 301.9 Million for the supply of Oil & Gas Steel Pipes to Saudi Aramco.
Baoshan Iron & Steel has signed a joint research agreement for carbon capture, utilisation, and storage (CCUS) with Sinopec, Shell and BASF, the company said on its WeChat account late on Monday.
Reuters reported that TotalEnergies plans to shut the large crude distillation unit (CDU), gasoline-producing fluidic catalytic cracker (FCC) and alkylation unit at its 238,000 barrel-per-day (bpd) Port Arthur, Texas, refinery on Aug. 18 for a planned overhaul, said people familiar with plant operations.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Coterra Energy reported second-quarter 2023 financial results. Net Income (GAAP) totaled $209 million, or $0.28 per share. Adjusted Net Income (non-GAAP) was $291 million, or $0.39 per share. On August 7, 2023, Coterra's Board of Directors approved a quarterly base dividend of $0.20 per share, which will be paid on August 31, 2023 to holders of record on August 17, 2023.
WaterBridge NDB LLC, a portfolio company of Five Point Energy LLC, announced the formation of NDB Midstream LLC, a strategic partnership with WPX Energy Permian, LLC, a subsidiary of Devon Energy. The partnership between two technical leaders, WaterBridge NDB within the produced water handling sector and Devon with 50-plus years of innovation in oil and gas, yields the largest private water infrastructure system in the prolific Stateline region of the Delaware Basin in Loving County, Texas and Lea and Eddy counties in New Mexico. In connection with the transaction, Devon and NDB Midstream entered into a long-term agreement pursuant to which Devon has committed all of its produced water within a large area of mutual interest, including an initial dedication of ~52,000 acres, and contributed to NDB Midstream 18 SWDs with ~375,000 bpd of permitted capacity and ~210 miles of produced water pipelines for gathering, transportation, disposal and reuse. As part of the transaction, Devon received a 30% equity interest in NDB Midstream as well as a commitment by Five Point to fund a portion of the initial build of the system expansion.
Earthstone Energy announced that Warburg Pincus LLC and its affiliates recently sold its remaining 12.9 million shares of Earthstone’s Class A common stock. Effective with this sale, Warburg Pincus no longer holds any shares of Earthstone’s Class A or Class B common stock.
As per SEC filing, on August 1, 2023, the LNG Sale and Purchase Agreement, dated as of May 27, 2021, as amended, between Driftwood LNG LLC, a wholly owned subsidiary of Tellurian, and Gunvor Singapore Pte Ltd was terminated. The parties were unable to reach agreement on the commercial terms of an amendment to the agreement. The Company’s focus continues being on investment-grade counterparties.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Baker Hughes announced a memorandum of understanding (MoU) with airport management and operations company Avports to develop, implement and operate onsite microgrid solutions for the airport industry. The collaboration agreement addresses emissions reduction and the global industry’s goal to focus on zero-emission buildings, horizontal airport infrastructure, vehicles and aircraft systems.
Ranger Energy Services announced its results for the second quarter ended June 30, 2023. Revenue was $163.2 million, a 6% increase from $153.6 million in second quarter 2022. Net income was $6.1 million, or $0.24 per fully diluted share, up from a net loss of $0.4 million, or $0.02 loss per share in second quarter of 2022. The Company is initiating a quarterly dividend of $0.05 per share of common stock, payable on September 8, 2023 to all stockholders of record as of August 18, 2023.
DRILLERS
Valaris and its wholly-owned subsidiary, Valaris Finance Company LLC, announced the pricing of their private placement under Rule 144A and Regulation S of the Securities Act of 1933, as amended, of $400 million in aggregate principal amount of additional 8.375% Senior Secured Second Lien Notes due 2030. The Offering was upsized to $400 million in aggregate principal amount of Additional Notes from the original offering size of $350 million in aggregate principal amount of Additional Notes. The Additional Notes mature on April 30, 2030 and will be issued at 100.75% of par. The Offering is expected to close on August 21, 2023, subject to customary closing conditions.
REFINERS
Par Pacific Holdings reported net income of $30.0 million, or $0.49 per diluted share, for the quarter ended June 30, 2023, compared to net income of $149.1 million, or $2.50 per diluted share, for the same quarter in 2022. Second quarter 2023 Adjusted Net Income was $105.6 million, compared to an Adjusted Net Income of $197.2 million in the second quarter of 2022. Second quarter 2023 Adjusted EBITDA was $150.8 million, compared to $242.1 million in the second quarter of 2022. The strong results are due to excellent operational and commercial execution, especially when considering market cracks during the second quarter of 2023, which are materially below the record market cracks realized during the second quarter of 2022.
Reuters reported that Phillips 66 and grain trader Archer-Daniels-Midland are discussing a biofuels joint venture with an aim toward producing lower-carbon jet fuel.
MLPS & PIPELINES
New Fortress Energy reported its financial results for the second quarter of 2023. Adjusted EBITDA was $246 million in the second quarter of 2023 and $686 million in the first half of 2023. Net income was $120 million in the second quarter of 2023 and $272 million in the first half of 2023. Adjusted EPS was $0.58 on a fully diluted basis in the second quarter of 2023 and $1.48 in the first half of 2023.
New Fortress Energy said the second and third production units of its Fast LNG (liquefied natural gas) were under construction and it expects operations to begin in the first quarter of 2025.
ONEOK announced higher second quarter 2023 results and increased full-year 2023 financial guidance. Compared With Second Quarter 2022: 13% increase in net income to $468 million, resulting in $1.04 per diluted share. 10% increase in adjusted EBITDA to $971 million (includes $31 million of third-party fractionation costs and $9 million related to the pending merger transaction). ONEOK increased 2023 net income guidance to a range of $2.39 billion to $2.59 billion, compared with the previously announced range of $2.26 billion to $2.56 billion. Adjusted EBITDA guidance increased to a range of $4.575 billion to $4.775 billion, compared with ONEOK's previously announced range of $4.425 billion to $4.725 billion.
Williams announced that it has priced a public offering of $350 million of its 5.400% Senior Notes due 2026 at a price of 100.181 percent of par and $900 million of its 5.300% Senior Notes due 2028 at a price of 99.886 percent of par. The new 2026 notes are an additional issuance of Williams’ 5.400% Senior Notes due 2026 issued on March 2, 2023 and will trade interchangeably with the $750 million aggregate principal amount of such notes outstanding, resulting in $1.1 billion aggregate principal amount of such notes outstanding. The expected settlement date for the offering is August 10, 2023, subject to customary closing conditions.
MARKET COMMENTARY
Futures tracking Wall Street eased with financial stocks falling after Moody's cut credit ratings of several small- to mid-sized U.S. banks and said it may downgrade some of the nation's biggest lenders. European bank stocks fell sharply after Italy approved a 40% windfall tax on lenders for 2023, while London's FTSE 100 index slid, hurt by declines in the mining sector after Glencore's dour earnings. On the Asian front, Japan's Nikkei share average ended higher, tracking gains in U.S. stocks overnight. Meanwhile, Chinese stocks slipped on disappointing exports and imports data. Gold declined as the dollar climbed. Oil prices fell on weak Chinese trade data.
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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