Markets

Oil Prices Dip As Long-Term Bearish Factors Come Into Focus

Friday, August 03, 2018

Sector Commentary

Energy stocks are set for a mixed start, tracking losses in the crude complex, as U.S. stock future indexes pare earlier gains after the U.S. jobs data missed expectations. In company news, Noble Energy said it plans to reallocate some near-term investments to U.S. oilfields outside of the Permian Basin due to supply constraints and reported weaker-than-expected quarterly profit. Transportation bottlenecks have driven down prices of regional crude, compared with the U.S. benchmark, and threaten to dampen the outlook for continued output growth from the top U.S. shale basin.

Oil prices on both sides of the Atlantic are lower in AM trading, as the market re-focused on bearish longer term factors following a bounce in the previous session as U.S. crude inventories in a key hub fell to their lowest in nearly four years. Stocks at the key Cushing storage hub in Oklahoma fell by 1.3 million barrels, the lowest level since October 2014, according to data from the Energy Information Administration, and helped push Brent futures to close $1 a barrel higher on yesterday.

Natural gas futures are trading higher this morning, after yesterday's weekly inventory data showed a smaller than expected 35 Bcf build in supplies.

INTERNATIONAL INTEGRATEDS

Reuters - Petroleo Brasileiro earned a net profit of 10.072 billion reais ($2.69 billion), well above the 360 million reais it posted a year earlier, when the firm was hit by a one-off tax-related charge. Adjusted earnings before interest, taxes, depreciation and amortization, a gauge of operational profit known as EBITDA, hit 30.067 billion reais, compared with 19.094 billion reais in the same period last year.

(Late Thursday) Reuters - Royal Dutch Shell completed the restart of the crude distillation unit at its 218,200 barrel per day Norco, Louisiana, refinery.

UBS Securities upgraded Total to 'Buy' from 'Neutral'.

U.S. E&PS

Press Release - California Resources reported a net loss attributable to common stock (CRC net loss) of $82 million, or $1.70 per diluted share, for the second quarter of 2018. Adjusted net loss for the second quarter of 2018 was $14 million, or $0.29 per diluted share.

(Late Thursday) Press Release - For the second quarter of 2018, Eclipse Resources was able to achieve revenue of $103.6 million, a 20% increase over the second quarter of 2017, while also posting a 29% increase in adjusted EBITDAX1 over the second quarter of 2017, which came in at $51.1 million.

(Late Thursday) Press Release - EOG Resources reported second quarter 2018 net income of $696.7 million, or $1.20 per share. This compares to second quarter 2017 net income of $23.1 million, or $0.04 per share. Adjusted non-GAAP net income for the second quarter 2018 was $794.9 million, or $1.37 per share, compared to adjusted non-GAAP net income of $46.7 million, or $0.08 per share, for the same prior year period. EOG's Board of Directors increased the cash dividend on the common stock by 19 percent. Effective with the dividend payable October 31, 2018, to holders of record as of October 17, 2018, the board declared a quarterly dividend of $0.22 per share on the common stock. The indicated annual rate is $0.88 per share.

Press Release - For the second quarter of 2018, Midstates Petroleum Company reported a net loss of $1.5 million, or $0.06 per share, which included the impact of a $7.8 million non-cash charge related to the Company's commodity derivative contracts. In the same period in 2017, the Company reported net income of $13.7 million, or $0.53 per share, and in the first quarter of 2018 reported net income of $4.0 million, or $0.15 per share. In the second quarter of 2018, Midstates generated Adjusted EBITDA of $27.0 million, excluding advisory fees and costs incurred for strategic reviews. This compares to $29.1 million for the same quarter in 2017 and $29.7 million for the first quarter of 2018.

Press Release - Noble Energy reported a second quarter net loss attributable to Noble Energy of $23 million, or $0.05 per diluted share. Excluding the impact of items not typically considered by analysts in formulating estimates, the Company generated adjusted net income and adjusted net income per share attributable to Noble Energy for the quarter of $81 million, or $0.17 per diluted share. The adjustment items were primarily the Company's mark to market on unrealized commodity derivative positions and gains on divestitures. Adjusted EBITDAX was $698 million. During the quarter, the Company repurchased 1.8 million shares of Noble Energy stock, bringing the total year to date to 4 million shares, or 17 percent of the authorized $750 million share repurchase program. In addition, the Company announced a 10 percent increase to its quarterly dividend beginning with the May 2018 dividend payment.

Press Release - Southwestern Energy reported adjusted net income attributable to common stock was $105 million, or $0.18 per diluted share for the second quarter of 2018 and adjusted earnings before interest, taxes and amortization was $317 million, a 13% increase compared to the second quarter of 2017.

CANADIAN E&PS

(Late Wednesday) Press Release - Gran Tierra Energy reported net income of $20 million ($0.05 per share, basic), funds flow from operations of $95 million ($0.24 per share, basic) and capital expenditures of $84 million.

Press Release - Frontera Energy reported net loss of $184.4 million, or $1.84/share, which includes an impairment of $107.7 million relating to the carrying value of the investment in Bicentenario, as a result of the termination of the BIC pipeline ship-or-pay agreement. This compares to a net loss of $3.1 million or $0.03/share, in the first quarter of 2018 and a net loss of $51.5 million or $0.52/share in the second quarter of 2017.

National Bank Financial initiated Meg Energy at 'Outperform'.

Press Release - Pengrowth Energy reported funds flow from operations of $7.2 million ($0.01 per share), compared to funds flow of $26.9 million ($0.05 per share) for the same period in 2017.

OILFIELD SERVICES

Press Release - Patterson-UTI Energy reported that for the month of July 2018, the Company had an average of 178 drilling rigs operating.

DRILLERS

(Late Thursday) Press Release - Noble Corporation reported a net loss attributable to the Company for the three months ended June 30, 2018 of $628 million, or $2.55 per diluted share, on revenues of $258 million. The results included a non-cash charge totaling $793 million, or $2.06 per diluted share, ($507 million, net of tax and noncontrolling interests) relating to the impairment of three rigs and certain capital spares. Excluding the non-cash charge, the Company's net loss attributable to Noble Corporation for the three months ended June 30, 2018 would have been $121 million, or $0.49 per diluted share.

MLPS & PIPELINES

Press Release - Buckeye Partners reported its financial results for the second quarter of 2018. Buckeye reported net income attributable to Buckeye's unitholders for the second quarter of 2018 of $91.9 million compared to net income attributable to Buckeye's unitholders for the second quarter of 2017 of $112.7 million. Adjusted EBITDA for the second quarter of 2018 was $254.9 million compared to $269.2 million for the second quarter of 2017. Buckeye also announced today that its general partner declared a cash distribution of $1.2625 per LP Unit for the quarter ended June 30, 2018, which is unchanged from the previous four quarters. Buckeye has elected to issue additional Class C Units to its Class C Unitholders in lieu of a cash distribution. The distributions will be payable on August 20, 2018 to unitholders of record on August 13, 2018.

(Late Thursday) Press Release - Enbridge Energy Partners reported second quarter 2018 financial results and provided a quarterly business update. EEP reported net income of $187 million, of which $95 million is attributable to EEP's controlling interests, for the second quarter ended June 30, 2018, with net income per unit of $0.19. The second quarter results included net non-recurring special items of $17 million, which increased net income per unit by $0.04. It also announced quarterly distribution of $0.35 per unit, or $1.40 on an annualized basis, for the quarter ended June 30, 2018.

Press Release - Noble Midstream Partners reported net income of $44 million, or $37 million attributable to the Partnership. It also declared a 20% annual increase in distribution per unit to $0.5348, with a distribution coverage ratio(1) of 1.8x.

(Late Thursday) Press Release - Pembina Pipeline generated second quarter and year-to-date earnings of $246 million and $576 million, a 110 percent and 76 percent increase, respectively, over the same periods of the prior year, due to increased net revenue and share of profit from equity accounted investees. It declared dividends of $0.18 per qualifying common share in April and $0.19 per qualifying common share in May and June for the applicable record dates.

(Late Thursday) Press Release - Spectra Energy Partners reported net income of $391 million, of which $381 million is attributable to SEP's controlling interests, for the second quarter ended June 30, 2018, with earnings per limited partner unit of $0.78. The company announced that the board of directors of the general partner declared a quarterly cash distribution to unitholders of $0.76375 per unit, an increase of 1.25 cents over the previous level of $0.75125 per unit and a 7 percent increase compared to the second quarter 2017. The cash distribution is payable on August 29, 2018, to unitholders of record at the close of business on August 15, 2018. This quarterly cash distribution equates to $3.055 per unit on an annual basis.

MARKET COMMENTARY

Futures pointed to a slightly higher open for Wall Street as investors cautiously await the July U.S. jobs report due later in the day. European shares were buoyed by strength in tech and financial stocks. Asian markets closed mostly higher, but lingering trade tensions capped gains. The dollar edged lower against a basket of major currencies. Oil prices rose slightly after the previous day's rally, which was driven by an industry report suggesting U.S. crude stockpiles would soon decline again after a surprise rise in the latest week. Gold prices were little changed. International trade balance and ISM non-manufacturing PMI are also scheduled for release.

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 . This communication and the content found by following any link herein are being provided to you by Corporate Solutions, a business of Nasdaq, Inc. and certain of its subsidiaries (collectively, "Nasdaq"), for informational purposes only. Nasdaq makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Sources include Reuters, TR IBES, WSJ, The Financial Times and proprietary Nasdaq research.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.