Oil Prices Ease, OPEC+ Maintains Output Agreement
Energy stocks are set to open lower, tracking a sharp drop in the broader index futures and more than 1% declines in oil prices. A wide earning miss and weak near-term forecast from Meta Platforms is weighing broadly on social media and technology stocks, which comprise the largest sector weighting in the market. Meanwhile, earnings from the likes of ConocoPhillips and Shell continued to exceed expectations, while both remained focused on bolstering total returns in the forms of dividends and share repurchases.
Oil prices eased on Thursday following weak U.S. payrolls data and some profit-taking, but remained underpinned by tight supply as OPEC+ producers stuck to planned moderate output increases. Still, tight global supplies and geopolitical tensions in Eastern Europe and the Middle East have boosted oil prices by about 15% so far this year. OPEC+ agreed on Wednesday to stick to moderate rises of 400,000 bpd oil output despite pressure from top consumers to raise output more quickly.
Natural gas futures on the front-end are down 10%, or just over 50 cents, giving back some of yesterday’s 15% gains, as prices remain volatile and ahead of weekly inventory data. Analysts expect a draw of 280 bcf to be reported.
BY SECTOR:
US INTEGRATEDS
No significant news.
INTERNATIONAL INTEGRATEDS
bp has acquired a 30% stake in Green Biofuels Ltd, the UK’s largest provider of hydrogenated vegetable oil (HVO). GBF’s products are made from renewable feedstocks such as vegetable oils, animal oils and fat. The product range includes HVO Gd+, a low emission advanced HVO fuel that can be used as a direct drop-in replacement for diesel.
Petrobras sees its dividends potentially reaching "much higher levels" than in the past, Chief Financial Officer Rodrigo Araujo said.
Reuters reported that Repsol is struggling to find buyers for a minority stake in its new renewable energy arm, with investors wary of the size and structure of a deal that would limit their say in key decisions.
Charles River has entered into a virtual power purchase agreement (VPPA) with Repsol for wind energy in Spain. The contract is for 30.5 megawatts (MW) of renewable energy, which is equivalent to avoiding carbon emissions from the annual electricity consumption of more than 28,000 homes.
Fourth quarter 2021 income attributable to Shell plc shareholders was $11.5 billion, which included non-cash gains of $3.2 billion due to the fair value accounting of commodity derivatives and net gains on sale of assets of $3.0 billion, partly offset by post-tax impairment charges of $0.8 billion. Adjusted Earnings for the quarter were $6.4 billion. Cost of supplies adjustment attributable to Shell plc shareholders for the fourth quarter 2021 was negative $0.4 billion. Dividends declared to Shell plc shareholders for the quarter amount to $0.24 per share. The Board expects that the first quarter 2022 interim dividend will be $0.25 per share, an increase of ~4% over the US dollar dividend for the fourth quarter 2021. During the fourth quarter 2021, $1.7 billion of share buybacks were completed. Share buybacks of $8.5 billion for the first half of 2022 were announced today including $5.5 billion of Permian divestment proceeds.
Shell will step in to help supply Europe with natural gas in case of disruptions linked to tensions between Russia and the West, Chief Executive Ben van Beurden said.
A windfall tax on North Sea oil and gas producers will do little to alleviate a recent surge in energy prices in Britain, Shell Chief Executive Ben van Beurden said.
UAE oil firm ADNOC announced a gas discovery off Abu Dhabi. Interim results from the first exploration well in Abu Dhabi's Offshore Block 2 concession operated by Italy's ENI indicate between 1.5 and 2 trillion standard cubic feet (TSCF) of raw gas in place, ADNOC said in a statement.
CANADIAN INTEGRATEDS
Suncor Energy reported adjusted funds from operations increased to $3.144 billion ($2.17 per common share) in the fourth quarter of 2021, compared to $1.221 billion ($0.80 per common share) in the prior year quarter. The company recorded adjusted operating earnings of $1.294 billion ($0.89 per common share) in the fourth quarter of 2021, compared to an adjusted operating loss of $109 million ($0.07 per common share) in the prior year quarter. The company had net earnings of $1.553 billion ($1.07 per common share) in the fourth quarter of 2021, compared to a net loss of $168 million ($0.11 per common share) in the prior year quarter.
Suncor Energy's Board of Directors has approved a quarterly dividend of $0.42 per share on its common shares, payable March 25, 2022 to shareholders of record at the close of business on March 4, 2022.
U.S. E&PS
ConocoPhillips reported fourth-quarter 2021 earnings of $2.6 billion, or $1.98 per share, compared with a fourth-quarter 2020 loss of $0.8 billion, or ($0.72) per share. Excluding special items, fourth-quarter 2021 adjusted earnings were $3.0 billion, or $2.27 per share, compared with a fourth-quarter 2020 adjusted loss of $0.2 billion, or ($0.19) per share. In addition, ConocoPhillips announced a $1 billion increase in expected 2022 return of capital to shareholders to a new total of $8 billion, an increase of more than 30% over 2021. The company declared both an ordinary dividend of 46 cents per share and a second-quarter variable return of cash (VROC) payment of 30 cents per share, a 50% increase over the first-quarter VROC. Combined, the targeted 2022 ordinary dividend and VROC represent a more than 50% increase in cash return to shareholders compared to 2021.
Enerplus announced preliminary fourth quarter 2021 production and capital spending, along with plans to initiate a divestment process for its Canadian assets. In addition, the Company announced its intention to change its reporting currency to U.S. dollars and the future presentation of its production volumes to a "net", after deduction of royalty basis. Fourth quarter 2021 total production was 128,000 BOE per day, which was at the high-end of the Company's guidance of 124,500 to 128,500 BOE per day. Fourth quarter liquids production was 81,000 barrels per day, in line with the Company's guidance of 80,000 to 83,000 barrels per day. Capital spending in the fourth quarter was C$102 million.
At the recommendation of the Corporate Governance and Nominating Committee, the Board of Directors of Hess elected Raymond J. McGuire to serve as a director of the Company, effective immediately. On January 27, 2022, Joaquin Duato, a member of the Board, notified the Board that he will resign effective immediately due to increased professional commitments as Chief Executive Officer of Johnson & Johnson.
PDC Energy announced that it appointed Pamela R. Butcher to its board of directors on February 2, 2022.
CANADIAN E&PS
Canadian Natural Resources provided an update on its 2021 sustainability reporting for Environmental, Social and Governance performance. The Company aligns its reporting with recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) and the reporting framework from the Sustainability Accounting Standards Board (SASB). Canadian Natural targets publication of its 2021 Stewardship Report to Stakeholders in Q3 2022. Canadian Natural's 2021 report will include third-party independent "reasonable assurance" on its scope 1 and 2 emissions (including methane emissions) and "limited assurance" on its scope 3 emissions.
OILFIELD SERVICES
Core Laboratories N.V. reported fourth quarter 2021 revenue of $125,100,000. Core's operating income was $14,200,000, yielding operating margins of 11%, with earnings per diluted share of $0.06, all in accordance with U.S. generally accepted accounting principles. EPS, ex-items, a non-GAAP financial measure, was $0.20. Income tax expense in the fourth quarter of 2021 was elevated primarily due to significant fluctuations in foreign currency exchange rates.
Granite Construction announced several actions designed to position the Company to focus on efficiently growing its core civil construction and materials business. It entered into a definitive agreement with Inland Pipe Rehabilitation, a portfolio company of investment affiliates of J.F. Lehman & Company to sell Inliner for a purchase price of $159.7 million. The sale has been unanimously approved by the Company’s Board of Directors and is subject to customary covenants and closing conditions. The transaction is expected to close in the next two to four months. The Company intends to divest the two remaining businesses within the Water and Mineral Services operating group (“WMS”), Water Resources and Mineral Services. As such, WMS will be considered held for sale and presented as discontinued operations as of December 31, 2021. The Board of Directors authorized an increase in the share repurchase program from $157 million to $300 million.
Scana-owned PSW Technology has signed an exclusive licence agreement with global oil service provider Cameron, a Schlumberger company. The agreement, which is the first in Norway for both Cameron and PSW, will enable PSW to recertify Cameron marine risers as per OEM (Original Equipment Manufacturer) standards. PSW will perform all work, exchange parts, weld and certify the equipment and Cameron will treat PSW's certificate of conformity (COC) as OEM original.
U.S. Silica Holdings said that a portion of its Industrial and Specialty Products business will increase prices for the majority of its non-contracted engineered clay products used primarily in edible oil, industrial oil and petrochemical processes. Price increases will range up to 15 percent, depending on the product and grade. The price increases are effective for shipments starting March 1, 2022.
DRILLERS
No news.
REFINERS
Reuters reported that the United Steelworkers union (USW) will conduct meetings to consider the next steps in talks for a new contract covering workers at U.S. refineries, chemical plants and oil pipelines. The USW and Marathon Petroleum, the lead oil industry negotiator, agreed on Monday night to extend talks for a new contract on a rolling-24-hour basis.
Valero Energy announced that it has priced a public offering of $650,000,000 aggregate principal amount of 4.000% Senior Notes due 2052.
MLPS & PIPELINES
Enbridge and the First Nation Capital Investment Partnership (FNCIP) have reached an agreement to advance the proposed Open Access Wabamun Carbon Hub west of Edmonton. The Hub is being developed as an innovative combination of carbon transportation and storage solutions to support recently announced carbon capture projects from Capital Power, Lehigh Hanson Materials Limited (Lehigh Cement), and potentially others.
Equitrans Midstream issued the following statement regarding the Mountain Valley Pipeline (MVP) project: “On Wednesday, February 2, 2022, the U.S. Fourth Circuit Court of Appeals issued a decision vacating MVP’s Biological Opinion and remanding it on specific issues. The Court’s written decision was initially issued under seal, due to the potential identification of and reference to endangered species locations, and it is expected the seal will be lifted shortly. The MVP project team is taking time to thoroughly review the information outlined in the decision and is evaluating the project’s next steps regarding the Biological Opinion. We remain committed to completing the MVP project and believe the concerns associated with MVP’s Biological Opinion can be addressed by the agency.”
NuStar Energy L.P. reported net income of $58 million for the fourth quarter of 2021, or $0.19 per unit, compared to net income of $16 million, or a $0.19 net loss per unit, for the fourth quarter of 2020. Results for the fourth quarter of 2021 include a $5 million gain from insurance proceeds to rebuild tanks at its Selby terminal. Excluding the effects of the gain, adjusted net income was $52 million for the fourth quarter of 2021, or $0.14 per unit, compared to adjusted net income of $50 million, or $0.13 per unit, for the fourth quarter of 2020.
Williams announced that its Board of Directors has appointed Richard E. Muncrief and Jesse J. Tyson as independent directors on the Board, effective March 1, 2022.
MARKET COMMENTARY
U.S. stock index futures fell, with Nasdaq 100 futures sinking over 2%, as disappointing earnings forecast from Meta Platforms triggered a slump in other social media companies. Investors’ focus will be set on earnings reports from Amazon.com and Ford, scheduled to report after markets close. European stocks slipped on concerns over interest rate hikes and monetary policy tightening from key central banks. Japanese equities ended lower, dragged down by Sony and Panasonic shares. Souring risk appetite strengthened the dollar, while gold fell.
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