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Oil Prices Look To Extend Yesterday's Gains

Tuesday, August 07, 2018

Sector Commentary

Energy stocks are set for a higher opening as oil prices extend gains from yesterday as bulls focus on the US sanctions on Iran coming into effect today. Additionally, a handful of small-cap E&Ps reported results that beat expectations on either EPS or EBITDA metrics while production figures were generally only in line or below and capex continued to be at the upper end of ranges.

Both WTI and Brent futures are advancing in the pre-market as investors shift focus to the potential of a tightening spare capacity following sanctions on Iran, especially after recent news of lighter output from Saudi than expected. The first round of sanctions on Iran goes into effect today, while oil will not be sanctioned until November. Analysts estimate that supply losses could range from 600,000 to 1.5 million bpd.

Natural gas futures are moderately higher, holding at four week highs, on expectations that hot weather this week would keep the amount of gas available to go into storage low, despite record production.

US INTEGRATEDS

Reuters - ExxonMobil has offered to sell a liquefied natural gas cargo from the 15.6-million-tonnes-a-year Gorgon LNG plant in Australia for August to September delivery.

Reuters - Exxon Mobil's Papua New Guinea liquefied natural gas export plant has offered a cargo for delivery in September.

INTERNATIONAL INTEGRATEDS

Press Release - McDermott International announced a contract from Shell Exploration and Production Company Inc., a subsidiary of Royal Dutch Shell, for subsea umbilical and flowline installation at the Perdido development, located 230 miles south of Galveston, Texas, in the Gulf of Mexico.

U.S. E&PS

(Late Monday) Press Release - Bonanza Creek Energy announced that it has entered into an agreement and simultaneously closed on the divestiture of its operations in the Mid-Continent region to an undisclosed buyer for $117 million in cash, subject to customary terms and conditions and purchase price adjustments based on a February 1, 2018 effective date.

(Late Monday) Press Release - For the quarter ended June 30, 2018, Callon Petroleum reported total revenue of $137.1 million and total revenue including cash-settled derivatives of $129.1 million, including the impact of an $8.0 million loss from the settlement of derivative contracts.

Press Release - Carrizo Oil & Gas reported second quarter of 2018 net income attributable to common shareholders of $30.1 million, or $0.37 and $0.36 per basic and diluted share, respectively, compared to net income attributable to common shareholders of $56.3 million, or $0.86 and $0.85 per basic and diluted share, respectively in the second quarter of 2017.

(Late Monday) Press Release - Continental Resources announced that Franco-Nevada has agreed to pay approximately $220 million for a stake in a newly-formed minerals subsidiary. In accordance with the deal terms, the Company will receive the proceeds at closing, offsetting the majority of previously incurred capital expenditures.

Press Release - Denbury Resources announced net income of $30 million, or $0.07 per diluted share, for the second quarter of 2018. Its adjusted EBITDAX was $153 million for Q2 2018, up from $142 million in Q1 2018 and $86 million in Q2 2017.

Press Release - For the 3 months ended June 30, 2018, Energen reported GAAP net income from all operations of $68.3 million, or $0.70 per diluted share. Adjusting for non-cash items, including a $7.7 million loss on mark-to-market derivatives and a $0.6 million gain associated primarily with a property swap, Energen had adjusted income in 2Q18 of $75.4 million, or $0.77 per diluted share. This compares with adjusted income in 2Q17 of $5.4 million, or $0.06 per diluted share.

Macquarie Research downgraded Extraction Oil & Gas and PDC Energy to ‘Neutral’ from ‘Outperform’.

Press Release - Goodrich Petroleum reported that revenues totaled $17.8 million in the quarter, versus $12.5 million in the prior year period. Average realized price per unit was $3.23 per Mcfe in the quarter, versus $3.67 per Mcfe in the prior year period.

Press Release - Matador Resources announced that it has commenced a cash tender offer to purchase any and all of its $575 million in aggregate principal amount of outstanding 6.875% Senior Notes due 2023.

Press Release - Matador Resources announced that, subject to market conditions, it intends to offer $700 million of senior unsecured notes due 2026 in a private placement to eligible purchasers.

(Late Monday) Press Release - For the second quarter of 2018, Oasis Petroleum reported net loss of $320.2 million, or $1.02 per diluted share, as compared to a net income of $16.6 million, or $0.07 per diluted share, for the second quarter of 2017. Excluding certain non-cash items and their tax effect, Adjusted Net Income Attributable to Oasis (non-GAAP) was $31.2 million, or $0.10 per diluted share, in the second quarter of 2018, as compared to Adjusted Net Loss Attributable to Oasis of $11.2 million, or $0.05 per diluted share, in the second quarter of 2017.

Reuters - PetroQuest Energy reported Q2 loss per share $0.10.

(Late Monday) Press Release - Sanchez Energy reported a net loss of $35.0 million, which includes a non-cash mark-to-market hedging loss of $43.6 million and compares to net income of $53.0 million for the second quarter 2017.

(Late Monday) Press Release - SM Energy announced that it has priced an offering of $500.0 million aggregate principal amount of its 6.625% senior unsecured notes due 2027. The Notes will be issued at par.

OILFIELD SERVICES

Press Release - Baker Hughes announced that the Baker Hughes international rig count for July 2018 was 997, up 38 from the 959 counted in June 2018, and up 38 from the 959 counted in July 2017. The international offshore rig count for July 2018 was 217, up 22 from the 195 counted in June 2018, and up 13 from the 204 counted in July 2017.

Press Release - Ensign Energy Services reported revenue for the second quarter of 2018 was $263.1 million, an increase of 13 percent from revenue for the second quarter of 2017 of $232.2 million. Revenue for the six months ended June 30, 2018 was $521.5 million, an increase of eight percent from revenue for the six months ended June 30, 2017 of $483.5 million. The Company declared a third quarter cash dividend on common shares of $0.12 per common share, payable on October 4, 2018.

Simmons and Company downgraded Hi-Crush Partners to ‘Neutral’ from ‘Overweight’.

Press Release - McDermott International announced a contract from Shell Exploration and Production Company Inc., a subsidiary of Royal Dutch Shell, for subsea umbilical and flowline installation at the Perdido development, located 230 miles south of Galveston, Texas, in the Gulf of Mexico.

(Late Monday) Reuters - Schlumberger has appointed shale pioneer Mark Papa and energy researcher Tatiana Mitrova to its board of directors.

REFINERS

Press Release - Andeavor reported second quarter earnings of $515 million, or $3.38 per diluted share, compared to $40 million, or $0.31 per diluted share a year ago. Consolidated net earnings were $582 million for the second quarter 2018 compared to $87 million for the same period last year. EBITDA for the second quarter 2018 was $1.15 billion compared to $479 million last year. Andeavor paid cash dividends of $89 million in the second quarter. Additionally, Andeavor announced that the board of directors has declared a quarterly cash dividend of $0.59 per share payable on September 14, 2018 to all holders of record as of August 31, 2018.

MLPS & PIPELINES

Press Release - Andeavor Logistics LP today reported record second quarter net earnings of $148 million, or $0.63 per diluted common limited partner unit, and EBITDA of $289 million. Growth in the quarter was led by record performance in the Terminalling and Transportation segment due to strong utilization and continued improving fundamentals in Gathering and Processing. Gas Gathering and Processing results for the quarter were impacted by $5 million in lower earnings due to planned downtime for an expansion project at the Robinson Lake gas processing facility to support increased demand in the Bakken.

Press Release - For the second quarter of 2018, NuStar Energy reported net income applicable to common limited partners of $13.7 million, or $0.15 per unit, up $9.3 million from $4.4 million in the second quarter 2017, while earnings before interest, taxes, depreciation and amortization were $157.1 million, up 11% from $141.1 million for the second quarter 2017. Distributable Cash Flow available to common limited partners was $82.1 million for the second quarter of 2018, up $21.8 million or 36% compared to $60.3 million in the second quarter of 2017. The distribution coverage ratio to the common limited partners for the second quarter of 2018 was 1.28 times, and 1.45 times for the six months ended June 30, 2018.

Stifel Nicolaus initiated William Cos. At ‘Buy’.

MARKET COMMENTARY

Tracking global sentiment, Wall Street futures advanced with higher Chinese stocks that made their biggest jump in over two years on hopes of fresh government spending. Strength in bank shares buoyed European markets as investors cheered UniCredit’s results. Gold was boosted by a weaker dollar. Oil rose with renewed U.S. sanctions against Iran. Consumer credit and JOLTS job openings are on the economic tap. Walt Disney is scheduled to report after markets close.


Nasdaq Advisory Services Energy Team Nasdaq's Advisory Services Tamar Essner
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