Oil Slides, Pressured by Global Economic Outlook Concerns
SECTOR COMMENTARY:
The energy sector is poised for a mixed to lower start, driven by weakness in the underlying commodities and in the major equity futures which fell this morning as the markets continue to digest earnings.
Earnings for the OFS continued to heat up with both Halliburton and ChampionX reporting better than expected results. Halliburton’s 1Q numbers topped estimates as a tight services and equipment market have helped drive demand and improve its pricing. ChampionX results also beat, highlighted by their 1Q EBITDA that came in above estimates on strong margin performance.
After two-straight days of strong gains, WTI and Brent crude oil futures slid lower this morning, pressured by global economic outlook concerns and strength in the dollar which outweighed optimism about growing demand in China and expectations of a drop in U.S. crude inventories. Traders remain wary about central banks potentially raising interest rates further to curb inflation, a move that would further dampen economic growth and dent energy demand. Futures found a floor thanks to investor optimism that holiday travel in China would boost fuel demand and by expectations that the latest EIA report will show U.S. crude dropped 1.7 million barrels last week.
Natural gas futures dropped ~2.6% this morning, erasing yesterday’s gains amid moderating weather forecast that should stunt demand.
BY SECTOR:
US INTEGRATEDS
No significant news.
INTERNATIONAL INTEGRATEDS
Shell said it has decided to pull out of the Northern Endurance Partnership carbon capture and storage (CCS) project in northern England.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Stephens initiated Range Resources with an Overweight, Chesapeake Energy with an Equal-Weight, Coterra Energy with an Overweight, and Talos Energy with an Overweight, EQT with an Equal-Weight, CNX Resources with an Equal-Weight, and Earthstone Energy with an Overweight.
NET Power, LLC and Rice Acquisition announced an additional $275 million of PIPE commitments in connection with their proposed business combination. Occidentalhas increased its commitment to the PIPE by $250 million, bringing its total investment to $350 million, while the Rice family has committed an additional $25 million to the PIPE, bringing their total investment to $125 million.
Benchmark upgraded Range Resources to a Buy.
RANGE RESOURCES announced its first quarter 2023 financial results. GAAP revenues for first quarter 2023 totaled $1.2 billion, GAAP net cash provided from operating activities (including changes in working capital) was $475 million, and GAAP net income was $481 million ($1.95 per diluted share). First quarter earnings results include a $368 million mark-to-market derivative gain due to decreases in commodity prices. Non-GAAP revenues for first quarter 2023 totaled $853 million, and cash flow from operations before changes in working capital, a non-GAAP measure, was $400 million. Adjusted net income comparable to analysts’ estimates, a non-GAAP measure, was $239 million ($0.99 per diluted share) in first quarter 2023. During the first quarter, Range purchased 400,000 shares at an average price of approximately $24.16 per share. Range currently has approximately 241 million shares outstanding and $1.1 billion of availability on the share repurchase program.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
ChampionX announced first quarter of 2023 results. Revenue was $948.3 million, net income attributable to ChampionX was $63.5 million, and adjusted EBITDA was $175.6 million. Income before income taxes margin was 9.7% and adjusted EBITDA margin was 18.5%. Cash from operating activities was $92.4 million and free cash flow was $69.4 million.
Granite announced that it has completed the acquisition of Coast Mountain Resources (2020) Ltd., a construction aggregate producer based in British Columbia, Canada on Malahat First Nation land. Coast Mountain Resources operates the Bamberton Quarry on Vancouver Island, which is strategically located on the deep water of the Saanich Inlet. Granite has been a customer of the quarry due to its high-quality aggregate and strategic proximity to our home markets.
Halliburton Company announced net income of $651 million, or $0.72 per diluted share, for the first quarter of 2023. This compares to net income for the first quarter of 2022 of $263 million, or $0.29 per diluted share. Halliburton's total revenue for the first quarter of 2023 was $5.7 billion compared to total revenue of $4.3 billion in the first quarter of 2022. Reported operating income was $977 million in the first quarter of 2023 compared to reported operating income of $511 million and adjusted operating income, excluding impairments and other charges, of $533 million in the first quarter of 2022.
National Bank of Canada upgraded Pason Systems to Outperform from Sector Perform.
DRILLERS
Nabors Industries reported first quarter 2023 operating revenues of $779 million, an increase of 2.5%, compared to operating revenues of $760 million in the fourth quarter of 2022. The net income attributable to Nabors shareholders for the quarter was $49 million, or $4.11 per diluted share. This compares to a loss of $69 million, or $7.87 per diluted share, in the fourth quarter. The first quarter results included a gain, related to mark-to-market treatment of Nabors warrants, of $34 million, or $3.48 per diluted share. The quarter also included a $25 million, or $2.06 per diluted share, gain on the redemption of debt. Results for the fourth quarter of 2022 included a mark-to-market charge of $36 million, or $3.98 per diluted share, for the warrants. Excluding the impact of the Nabors warrants on each quarter's results and the debt redemption gain, the net loss improved sequentially by $28 million. First quarter adjusted EBITDA was $240 million, compared to $230 million in the previous quarter.
REFINERS
Calumet Specialty Products Partners announced that its Montana Renewables subsidiary ("MRL") completed the startup of its Sustainable Aviation Fuel ("SAF") and Pretreatment units. Calumet and its SAF off-taker plan to hold a ribbon cutting ceremony on May 10, 2023 to recognize this important milestone.
MLPS & PIPELINES
No significant news.
MARKET COMMENTARY
U.S. stock index futures slipped as shares of First Republic Bank dived after the regional lender reported a plunge in deposits, while investors parsed through earnings reports for clues on the health of corporate America and the U.S. economy. European shares fell with a focus on comments by European Central Bank policymakers on the outlook for interest rates. Japan's Nikkei index touched the highest level in eight months on expanded government subsidies for chip production. Gold prices eased as the dollar firmed. Oil prices were in the red on economic worries. Big Technology firms Alphabet and Microsoft are expected to report financial results after market closes.
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.
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