Oil Slips Amid Rising Crude Supply in Libya and Norway
SECTOR COMMENTARY:
The energy sector is poised for a mixed to lower start, seesawing in early trading amid weakness in the underlying commodities while major equity futures steadied after the Dow and S&P 500 both hit fresh record highs.
In earnings news, Halliburton reported 4Q results that topped analyst expectation, driven by strength in offshore and overseas markets. The company also raised their dividend and reported they returned $1.4 billion of cash to shareholders through stock repurchases and dividends in 2023, representing over 60% of its free cash flow.
WTI and Brent crude oil futures are handing back some of the previous day's strong gains, slipping as traders weigh rising crude supply in Libya and Norway against simmering geopolitical tensions in several regions and production outages in the domestically. Norway's crude production rose to 1.85 million bpd in December, up from 1.81 million bpd the previous month and beating analysts' forecasts of 1.81 million bpd, according to the Norwegian Offshore Directorate. Meanwhile in Libya, production at the 300,000 bpd Sharara oilfield restarted on Jan. 21 after the end of protests that had halted output since early this month. Supply, however, remains constrained in the U.S. with as much as 20% of North Dakota's oil output still shut as of Monday night. Traders are also still assessing the Ukrainian drone strike on Novatek's Ust-Luga Baltic fuel export terminal yesterday and reports from last night that U.S. and British forces carried out a second joint round of strikes on Houthi positions in Yemen. Attention will start to shift the latest round of inventory reports which will give a clear read on the impact that weather-induced shutdowns over the last week had on production. Analyst expect that U.S. crude oil inventories fall by about 3 million barrels in the week to Jan. 19.
Natural gas futures extended yesterday’s steep declines into today’s session, reeling amid updated weather forecast that temperatures through the first week of February could be some of the warmest seasonally in decades.
BY SECTOR:
US INTEGRATEDS
According to Reuters, Exxon Mobil began on Saturday a planned overhaul on a fluidic catalytic cracker and the hydrocracker at its 522,500 barrel-per-day (bpd) Baton Rouge, Louisiana, refinery, people familiar with plant operations said.
TD Cowen upgraded Exxonmobil to Outperform from Market Perform.
TD Cowen downgraded Chevron to Market Perform from Outperform.
INTERNATIONAL INTEGRATEDS
Petrobras will this year start buying stakes in domestic onshore wind and solar projects to create a roughly 2 gigawatts renewable energy portfolio, the firm's chief executive told Reuters.
Solstad Offshore ASA announced a new contract for the CSV "Normand Fortress" with Petrobras. The contract has a duration of 2 years firm with possibility of 2 years extension. The vessel will provide accommodation services to support production activities on Brazilian continental shelf. Commencement of the contract is 2Q 2024.
The water supply was restored to TotalEnergies 238,000 barrel-per-day Port Arthur, Texas, oil refinery that has been shut down, people familiar with plant operations said.
TotalEnergies has signed a new agreement with European Energy to develop offshore wind projects in three Nordic countries: Denmark, Finland and Sweden. This agreement for offshore wind projects follows a previous agreement between TotalEnergies and European Energy in September 2023 to jointly develop, build and operate onshore renewable projects in multiple geographies.
TotalEnergies has signed an agreement to acquire from its three founders the entire share capital of Kyon Energy, one of the leading developers of battery storage systems in the country. The consideration consists of a €90 million upfront payment, plus some earn out payments linked to the achievement of development targets.
BP is set to confirm Kate Thomson as its permanent chief financial officer after naming Murray Auchincloss as CEO last week, completing a leadership reshuffle following Bernard Looney's abrupt resignation in September.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Talos Energy announced that Talos Production, a wholly owned subsidiary of Talos, has commenced an offering of $1,000 million in aggregate principal amount of new Second-Priority Senior Secured Notes, consisting of Second-Priority Senior Secured Notes due 2029 and Second-Priority Senior Secured Notes due 2031. The Company intends to use the net proceeds from the Offering to (i) fund a portion of the cash consideration for the Company's recently announced pending acquisition of QuarterNorth Energy, Inc., (ii) fund the redemption of all of the outstanding 12.00% Second-Priority Senior Secured Notes due 2026 issued by the Company (the "2026 Notes"), and (iii) pay any premiums, fees and expenses related to the Redemption and the issuance of the New Notes. The Company intends to use any remaining net proceeds for general corporate purposes, which may include the repayment of a portion of the outstanding borrowings under its senior reserves-based revolving credit facility.
Stifel downgraded Callon Petroleum to Hold from Buy.
Stifel downgraded Southwestern Energy to Hold from Buy.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Expro Group Holdings secured a new Carbon Capture Utilization and Storage contract with INPEX Corporation for the Kashiwazaki Clean Hydrogen/Ammonia project which is Japan’s first clean hydrogen production demonstration project.
Halliburton announced net income of $661 million, or $0.74 per diluted share, for the fourth quarter of 2023. This compares to net income for the third quarter of 2023 of $716 million, or $0.79 per diluted share. Adjusted net income for the fourth quarter of 2023, excluding losses in Argentina primarily due to the currency devaluation, was $769 million, or $0.86 per diluted share. Halliburton's total revenue for the fourth quarter of 2023 was $5.7 billion, flat when compared to the third quarter of 2023. Operating income was $1.1 billion in the fourth quarter of 2023, a 2% increase when compared to the third quarter of 2023. Total revenue for the full year of 2023 was $23.0 billion, an increase of $2.7 billion, or 13% from 2022. Operating income for 2023 was $4.1 billion, compared to 2022 operating income of $2.7 billion and adjusted operating income4 of $3.1 billion, excluding impairments and other charges related to our exit from Russia. Additionally, Halliburton's 2024 first quarter dividend increased by $0.01 per share to $0.17 per share.
DRILLERS
Seadrill Limited initiated a share repurchase program December 14, 2023 to repurchase up to $250 million of the Company’s common shares in open market transactions on the OSE and NYSE until no later than September 30, 2024 pursuant to an agreement with Fearnley Securities AS and its subsidiary, Fearnley Securities, Inc.
REFINERS
PBF Energy is preparing to shut the 80,000 barrel per day fluid catalytic cracker at its refinery in Delaware City, according to a source familiar with the matter. The fuel-producing unit will be offline for five to six weeks for planned maintenance, the source said.
Vertex Energy provided operational update for fourth quarter 2023. Conventional throughput volumes anticipated at approximately 67,000 bpd, vs. previously forecasted 68,000-71,000 bpd. Expected fourth quarter finished product yield of 65%-67%, in line with previously forecasted range of 64%-68%. Renewable throughput volumes anticipated at approximately 3,900 bpd, at the low end of previously forecasted 4,000-6,000 bpd. Expected renewable production yield at approximately 96% vs. prior forecasted range of 97%-98%. Average fourth quarter crack spreads on finished refined products declined 40% vs. third quarter average levels.
MLPS & PIPELINES
No significant news.
MARKET COMMENTARY
Wall Street futures were subdued, with investors now awaiting a peak in the earnings season and economic data in a major test for Wall Street's sustenance of a recent rally that saw the S&P 500 scale record highs and enter a bull market. European equities edged lower as investors remained cautious ahead of the European Central Bank's policy meeting later this week. Japan's Nikkei closed higher following the Bank of Japan's decision to keep ultra-easy policy settings intact. Chinese stocks staged a more muted recovery, having touched their lowest in five years the previous day. Oil prices fell as traders weighed simmering geopolitical tensions in several regions with supply outages in the U.S. and returning production in Libya. Gold prices gained, helped by a weaker dollar. Netflix, Texas Instruments and Baker Hughes are scheduled to report their quarterly results after the closing bell.
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 Rich Pontillo.
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