The energy sector is poised for a higher start, backed by strength in the crude complex and broader equity indices which rose on easing trade worries, upbeat earnings and while investors awaited an almost certain cut in interest rates by the Federal Reserve this afternoon. Trading will also be dictated by a host of earnings results today from across the space.
WTI crude oil futures extended the climb higher for the fifth-straight session and are up roughly 1% in early trading, marginally outpacing Brent, supported by last night’s API report and expectations that the Fed will cut interest rates later today. The industry inventory read showed crude inventories fell by 6 million barrels last week versus analysts’ forecasts for a drop of 2.6 million barrels. The data also showed declines in gasoline and distillate inventories. Traders will be looking to the official EIA inventory data later this morning as the next major catalyst.
Natural gas futures jumped ~2% this morning, supported by warming weather forecasts that should stir demand and broader macro drivers.
Reuters - Indonesia's oil and gas regulator SKK Migas said the authorities want to speed up talks with Chevron over the Indonesia Deepwater Development (IDD) gas project to meet the onstream target of 2024.
(Late Tuesday) Press Release - Enterprise Products Partners and Chevron U.S.A. Inc., a wholly-owned subsidiary of Chevron, announced the execution of long-term agreements for crude oil transportation, storage and marine terminaling services. This suite of agreements, together with other customer agreements, support expansion of Enterprise’s crude oil system from the Permian Basin to Enterprise’s ECHO terminal in Houston, Texas.
Reuters - Oil firm DNO is casting an eye over ExxonMobil's Norwegian assets as it looks for more deals after buying London-based peer Faroe earlier this year.
Jefferies upgraded BP to ‘Buy’ from ‘Hold.’
Reuters - Eni signed an exploration and production sharing agreement for block 77, onshore Oman. During exploration phase, Eni and BP will each hold 50% of exploration and production sharing agreement for block 77.
Press Release - The Abu Dhabi National Oil Company, ADNOC, announced that it has closed its landmark strategic equity partnerships with the Eni and the Austrian oil and gas company, OMV, covering both the existing ADNOC Refining business and a new trading joint venture. Under the terms of the deal, Eni and OMV have acquired 20 percent and 15 percent shares respectively in ADNOC Refining, which refines in excess of 922,000 barrels per day of crude and condensate at its Ruwais and Abu Dhabi based refineries. The transaction reflects the scale, quality, and growth potential of ADNOC Refining's assets.
Press Release - Halliburton Company announced the execution of an integrated services contract with Petroleo Brasileiro SA Petrobras for pre-salt development in the Santos Basin. The two-year and six month contract will provide drilling and completion services to drive greater efficiency by applying pre-salt expertise and integrating multiple product offerings and technologies.
(Late Tuesday) Press Release - Shell Offshore Inc, a subsidiary of Royal Dutch Shell, has completed the sale of 22.45% non-operated interest in the Caesar-Tonga asset in the US Gulf of Mexico to Equinor Gulf of Mexico LLC (Equinor), a subsidiary of Equinor ASA, subject to approval of the lease assignments by the regulator. The total cash consideration was $965 million.
Morgan Stanley downgraded Total to ‘Equal Weight’ from ‘Overweight.’
Reuters - The 180,000 barrels per day Zeeland refinery in the Netherlands said in a statement it is expanding its diesel-producing hydrocracker unit with a third reactor. The new unit arrived on July 18 and will be connected to the existing plant in 2020. The plant is owned by Total and Russia's Lukoil. The firms invested 40 million euros ($44.59 million) in the new unit. The addition is part of a global drive to increase diesel production ahead of a major change in marine fuel standards next year that requires vessel to use lower-sulphur fuels.
Press Release - Continental Resources announced the sale of its eastern STACK water gathering and recycling system in Blaine County, Oklahoma for $85 million to Lagoon Water Solutions. Along with the divestiture, Continental has entered into a long-term arrangement with Lagoon to provide water sourcing, gathering and disposal services for Continental's future development in the area.
Press Release - Hess reported a net loss of $6 million, or $0.02 per common share, in the second quarter of 2019, compared with a net loss of $130 million, or $0.48 per common share, in the second quarter of 2018. On an adjusted basis, the Corporation reported a net loss of $28 million, or $0.09 per common share, in the second quarter of 2019, compared with an adjusted net loss of $56 million, or $0.23 per common share, in the prior-year quarter. The improved after-tax adjusted results reflect increased U.S. crude oil production and reduced exploration expenses, partially offset by the impact of lower realized selling prices and higher depreciation, depletion and amortization expenses.
JP Morgan upgraded Laredo Petroleum to ‘Neutral’ from ‘Underweight.’
KeyBanc Capital Markets initiated coverage of Noble Energy at ‘Sector Weight.’
Press Release - Sundance Energy Australia announced average second quarter sales volumes of approximately 13,890 Boe/d, at the high end of second quarter sales volume guidance of 13,500 to 14,000 Boe/d.
Press Release - Ultra Petroleum announced that The Nasdaq Stock Market has initiated proceedings to delist the Company’s common stock, effective August 8, 2019, as a result of the Company not regaining compliance with the $1.00 per share minimum bid price requirement for continued inclusion on Nasdaq based on Listing Rule 5550(a)(2). The Company expects that its common stock will begin to trade on OTCQX beginning August 8, 2019 and expects to trade under the symbol “UPLC.”
Press Release - Encana announced that its Board of Directors had declared a quarterly dividend of $0.01875 per share on the Corporation’s outstanding common shares. The dividend is payable on September 30, 2019 to holders of record at the close of business on September 13, 2019.
Press Release - Encana announced its second quarter 2019 financial and operating results. For the second quarter of 2019, Encana posted net earnings of $336 million, or $0.24/share. Non-GAAP operating earnings for the second quarter were $290 million, or $0.21/share. Cash from operating activities in the second quarter was $906 million. Non-GAAP cash flow increased 50 percent over the comparable period in 2018 to $877 million, or $0.64/share. Non-GAAP cash flow in the second quarter was impacted by $19 million of restructuring and acquisition costs. Through the end of the second quarter, the Company had repurchased 149.4 million Encana common shares at an average price of $6.94 per share. Investment in the program to date totals $1,037 million.
(Late Tuesday) Press Release - MEG Energy reported its second quarter 2019 operational and financial results. The company reported record free cash flow of $195 million and adjusted funds flow of $227 million ($0.76 per share) in the quarter. For the 6 months ended June 30, 2019 MEG generated free cash flow of $293 million. Subsequent to the quarter, MEG repaid the outstanding 1st lien term loan balance of approximately $285 million and amended and restated its existing credit facilities to have new 5-year terms and total available credit of $1.3 billion. MEG remains committed to debt reduction going forward and will continue to direct available free cash flow to debt repayment. Cash cost savings of approximately $42 million per year are expected from the combination of the reduction in credit fees under the new credit facilities, the 1st lien debt repayment and the disposal or sale of non-core assets announced in the quarter.
Press Release - Seven Generations Energy delivered $355 million of adjusted funds flow, $1.00 per share, and $44 million of free cash flow in the second quarter of 2019. Sales volumes averaged 201,800 boe/d, ahead of the company’s guidance and up 8 percent year over year. Condensate sales of 75,900 bbl/d represent an increase of 10 percent compared to condensate sales during the same period in 2018. Operating costs averaged $5.00 per boe in the quarter. With significant planned maintenance events now largely completed, 7G is modifying its original annual 2019 operating cost guidance to a range of $5.00 - $5.25 per boe, from $5.00 - $5.50 per boe, to reflect an improving cost structure.
Press Release - Baker Hughes, a GE company, reported adjusted operating income (a non-GAAP measure) for the second quarter of 2019 of $361 million, which excludes adjustments totaling $90 million before tax, mainly related to restructuring charges and separation and merger related costs. Adjusted operating income for the second quarter was up 32% sequentially and up 25% year-over-year driven by increased volume and productivity. Cash flows from operating activities were $593 million for the second quarter of 2019. Free cash flow (a non-GAAP measure) for the quarter was $355 million.
Press Release - Halliburton announced the execution of an integrated services contract with Petrobras for pre-salt development in the Santos Basin. The two-year and six month contract will provide drilling and completion services to drive greater efficiency by applying pre-salt expertise and integrating multiple product offerings and technologies.
Press Release - KBR announced second quarter 2019 financial results. Overall revenue growth of 12% is attributable to the following: 19% growth in Government Solutions, 16% organic, underpinned by on-contract growth and new work awarded under our portfolio of well-positioned contracting vehicles; on-contract growth across our logistics business; continued disaster recovery work for the U.S. Air Force at Tyndall Air Force Base; expansion of systems engineering, test and evaluation, modernization, systems integration and program management services in our US engineering business; and growth from SGT, acquired in late April 2018; 29% organic revenue growth in Technology Solutions attributable to strong execution across our chemical, petrochemical, refining and ammonia projects and expanded proprietary equipment sales; Equity earnings favorably impacted by an EPC project close-out and continued strong performance by Brown & Root Industrial Services in our Energy Solutions business; SG&A increased related to launch of our new brand and website and some continued ERP implementation expenses; and Interest expense and income taxes are in line with expectations.
(Late Tuesday) Press Release - McDermott International and Baker Hughes, a GE company announced that the companies were awarded contracts to provide a joint URF and SPS solution for the INPEX-operated Ichthys Liquefied Natural Gas (LNG) field development, located off the northwest coast of Western Australia.
Goldman Sachs and Citigroup both upgraded National Oilwell Varco to ‘Buy’ from ‘Neutral.’
Seaport Global Securities upgraded National Oilwell Varco to ‘Neutral’ from ‘Sell.’
(Late Tuesday) Press Release - Newpark Resources announced results for its second quarter ended June 30, 2019. Total revenues for the second quarter of 2019 were $216.4 million compared to $211.5 million for the first quarter of 2019 and $236.3 million for the second quarter of 2018. Net income for the second quarter of 2019 was $4.3 million, or $0.05 per diluted share, compared to $1.3 million, or $0.01 per diluted share, for the first quarter of 2019, and $10.8 million, or $0.12 per diluted share, for the second quarter of 2018.
Press Release - Pioneer Energy Services reported financial and operating results for the quarter ended June 30, 2019. Revenues for the second quarter of 2019 were $152.8 million, up 4% from revenues of $146.6 million in the first quarter of 2019. Net loss for the second quarter of 2019 was $12.9 million, or $0.17 per share, compared with net loss of $15.1 million, or $0.19 per share, in the prior quarter. Adjusted net loss for the second quarter was $11.8 million, and adjusted EPS was a loss of $0.15 per share. These results compare to an adjusted net loss of $10.5 million, and an adjusted EPS loss of $0.13 per share in the prior quarter which had higher adjustments for impairment charges and valuation allowance adjustments on deferred tax assets. Second quarter adjusted EBITDA was $20.7 million, up from $19.9 million in the prior quarter.
(Late Tuesday) Press Release - Secure Energy Services announced its operational and financial results for the three and six months ended June 30, 2019. The company achieved Adjusted EBITDA of $35.0 million during the second quarter of 2019, a 12% increase from the three months ended June 30, 2018 despite lower oil and gas activity levels. During the quarter, Secure renewed the normal course issuer bid ("NCIB") first initiated in May 2018. During the three months ended June 30, 2019, Secure purchased and cancelled 3,070,100 common shares of the Corporation ("shares") at a weighted average price per share of $7.30 for a total of $22.4 million. Subsequent to quarter end, the Corporation has purchased 450,900 additional shares. In total, Secure has repurchased and cancelled 9,199,173 shares since May 2018, representing approximately 6% of the number of common shares outstanding at the time of commencement. The Corporation believes that, at times, the prevailing market price for Secure's shares does not reflect their underlying value.
MLPS & PIPELINES
Credit Suisse suspended coverage of Andeavor Logistics.
Stifel Nicolaus upgraded Crestwood Equity Partners to ‘Buy’ from ‘Hold.’
Press Release - Enterprise Products Partners announced its financial results for the three months ended June 30, 2019. Enterprise reported a 41 percent increase in gross operating margin to $2.1 billion for the second quarter of 2019 compared to $1.5 billion for the second quarter of 2018. Included in gross operating margin for the second quarters of 2019 and 2018 were net non-cash, mark-to-market losses of $13 million and $322 million, respectively.
(Late Tuesday) Press Release - Enterprise Products Partners and Chevron U.S.A. Inc., a wholly-owned subsidiary of Chevron Corporation, announced the execution of long-term agreements for crude oil transportation, storage and marine terminaling services. This suite of agreements, together with other customer agreements, support expansion of Enterprise’s crude oil system from the Permian Basin to Enterprise’s ECHO terminal in Houston, Texas.
Press Release - Holly Energy Partners reported financial results for the second quarter of 2019. Net income attributable to HEP for the second quarter was $45.7 million ($0.43 per basic and diluted limited partner unit) compared to $40.1 million ($0.38 per basic and diluted limited partner unit) for the second quarter of 2018. Distributable cash flow was $67.5 million for the quarter, an increase of $2.3 million, or 3.5% compared to the second quarter of 2018. HEP announced its 59th consecutive distribution increase on July 18, 2019, raising the quarterly distribution from $0.6700 to $0.6725 per unit, which represents an increase of 1.9% over the distribution for the second quarter of 2018.
(Late Tuesday) Press Release - ONEOK announced higher second-quarter 2019 financial results, compared with the second quarter 2018, and maintained 2019 financial guidance. Compared with second quarter 2018, the company reported an 11% increase in net income to $312.0 million, or 75 cents per diluted share, 5% increase in adjusted EBITDA to $632.4 million, 1.51 times dividend coverage ratio, 11% increase in NGL raw feed throughput volumes, and 8% increase in natural gas volumes processed.
(Late Tuesday) Reuters - TC Energy said it would sell stakes in three Ontario natural gas-fired power plants to a unit of Ontario Power Generation Inc for about C$2.87 billion ($2.18 billion). The sale, which is expected to close late-2019, includes the 683-megawatt Halton Hills power plant, the 900-megawatt Napanee generating station that is nearing completion and TC Energy's 50% stake in the 550-megawatt Portlands Energy Centre.
(Late Tuesday) Press Release - Ontario Power Generation, under a new subsidiary, has entered into a purchase agreement with affiliates of TC Energy (formerly TransCanada Corporation) to acquire a portfolio of combined-cycle natural gas-fired plants in Ontario.
(Late Tuesday) Press Release - TC Energy announced that it has entered into an agreement through its wholly-owned subsidiary, TransCanada Energy Ltd., to sell interests in three Ontario natural gas-fired power plants to a subsidiary of Ontario Power Generation Inc., for approximately $2.87 billion. The facilities include the 683-megawatt Halton Hills power plant, the 900-megawatt Napanee generating station which is nearing completion and TC Energy’s 50 per cent interest in the 550-megawatt Portlands Energy Centre. The transaction is expected to close in late 2019 subject to a number of closing conditions which include regulatory approvals and Napanee reaching commercial operations as outlined in the agreement.
(Late Tuesday) Press Release - DCP Midstream announced that it has signed a long-term agreement with Western Midstream Partners that will provide DCP with up to 225 million cubic feet per day of incremental processing capacity at Western’s DJ Basin gas processing complex, which includes the Latham II plant that is presently under construction. The facility will be well-integrated, with natural gas liquids takeaway via DCP’s DJ Southern Hills extension, as well as the Front Range pipeline, and residue gas takeaway via the Cheyenne Connector. This project will increase DCP’s total natural gas processing and bypass capacity in the DJ Basin to approximately 1.5 billion cubic feet per day.
(Late Tuesday) Press Release - Western Midstream Partners announced second-quarter 2019 financial and operating results. Net income (loss) available to limited partners for the second quarter of 2019 totaled $169.6 million, or $0.37 per common unit (diluted), with second-quarter 2019 Adjusted EBITDA of $432.9 million and second-quarter 2019 Distributable cash flow of $335.5 million. Net income (loss) and Adjusted EBITDA do not include $12.0 million of cash received during the quarter associated with revenue recognition accounting standard ASC 606. Financial and operational information has been recast to include the financial position and results attributable to the assets acquired from Anadarko Petroleum Corporation in February 2019 as if WES had owned them for all periods presented.
U.S stock index futures were higher ahead of the Federal Reserve’s interest rate policy decision and a day after upbeat results from Apple. Most of European and Asian shares fell after combative warnings from U.S. President Donald Trump cast a shadow over Sino-U.S. trade talks that concluded in Shanghai. The dollar hovered just off two-month highs. Oil prices rose for fifth session, supported by a drop in U.S. inventories. Spot gold prices were slightly higher. Qualcomm, Sprint, MetLife and Occidental Petroleum are among the companies scheduled to report results after the closing bell.
NASDAQ ENERGY TEAM THOUGHT LEADERSHIP
- 5/2/19 - CNBC Worldwide Exchange – Energy sector M&A
- 4/23/19 - Bloomberg Daybreak Asia – Iran sanctions implications
- 3/26/19 - CNBC World Wide Exchange – Energy sector performance
- 3/18/19 - Bloomberg Daybreak Asia – OPEC meeting, Iran sanctions
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