Oil

Oil Steadies After Bearish API Report

WTI crude oil futures were flat to higher in early trading, in line with Brent and off overnight lows, driven by last night’s bearish API report and comments from both the IEA and Saudi Arabia.

Wednesday, April 24, 2019

SECTOR COMMENTARY

The energy sector is poised for a mixed start, driven by some modest support in the crude complex while major equity futures were flat, taking a break after the S&P 500 and Nasdaq closed at record highs yesterday and ahead of an uptick in earnings. In deal news, shares of Anadarko Petroleum are trading sharply higher in pre-market trading after Occidental Petroleum put out a rival bid for the company worth $57 billion. The new bid is a 20% premium to $33B deal with Chevron and has the potential to make Occidental the largest producer in the Permian.

WTI crude oil futures were flat to higher in early trading, in line with Brent and off overnight lows, driven by last night’s bearish API report and comments from both the IEA and Saudi Arabia. The industry report showed crude stocks jumped 6.86mm bbls last week compared to analyst consensus 800k bbls build while gasoline stockpiles rose ~2M bbls vs an expectations of a draw. The International Energy Agency commented that the markets are "adequately supplied" and that "global spare production capacity remains at comfortable levels. The comments were in line with remarks made by Saudi Arabia Energy Minister this morning who said global inventories are continuing to rise and he doesn't see a need to do anything immediately. Traders however are looking toward the EIA report later today as the next major catalyst.

Natural gas futures popped ~0.75%, rebounding after closing at its lowest levels yesterday since June ’16 yesterday and ahead of the front month’s expiration on Friday. Warm weather forecasts that should limit demand kept a cap to the upside.

U.S. INTEGRATEDS

Reuters - Occidental Petroleum offered to buy rival Anadarko Petroleum in a $57 billion deal, topping Chevron’s agreement to buy Anadarko for $50 billion. Both cash-and-stock deals include Anadarko's debt. Occidental's $76 per share offer comprises $38 in cash and 0.6094 shares of Occidental for each share of Anadarko, representing a premium of 19 percent to Anadarko's closing price on April 23.

(Late Tuesday) Reuters - As You Sow urges Exxon shareholders vote for proposal asking company to publish report on public health hazards from petrochemical operations due to increasing extreme weather disruptions.

(Late Tuesday) Reuters - Royal Dutch Shell is in talks to buy BP's stake in the Shearwater oil and gas field in the British North Sea for around $250 million. Shell has a 28 percent stake in Shearwater, BP holds 27.5 percent and Exxon Mobil has the remaining 44.5 percent.

INTERNATIONAL INTEGRATEDS

Reuters - Eni stuck to its production growth targets for the year, as it reported profits for the first quarter coming in below market expectations. Adjusted net profit in the quarter rose 4 percent to 992 million euros ($1.1 billion), below an analyst consensus provided by the company of 1.05 billion euros. The oil major confirmed its oil and gas production would grow by 2.5 percent in 2019 with Brent at $62 per barrel and net of portfolio transactions.

(Late Tuesday) Reuters - Royal Dutch Shell is in talks to buy BP's stake in the Shearwater oil and gas field in the British North Sea for around $250 million. Shell has a 28 percent stake in Shearwater, BP holds 27.5 percent and Exxon Mobil has the remaining 44.5 percent.

CANADIAN INTEGRATEDS

Press Release - Cenovus Energy delivered strong operating and financial performance in the first quarter of 2019, generating more than $1 billion of adjusted funds flow, $731 million of free funds flow and cash from operating activities of $436 million. Over the first four months of this year, the company further reduced its total debt outstanding by repurchasing US$515 million of unsecured notes at a discount. Cenovus managed its first-quarter oil sands production to comply with the Government of Alberta’s mandatory curtailment program, producing approximately 343,000 barrels per day (bbls/d). For the second quarter of 2019, the Board of Directors declared a dividend of $0.05 per share, payable on June 28, 2019 to common shareholders of record as of June 14, 2019. Based on the April 23, 2019 closing share price on the Toronto Stock Exchange of $14.01, this represents an annualized yield of approximately 1.4%. Declaration of dividends is at the sole discretion of the Board and will continue to be evaluated on a quarterly basis.        

U.S. E&PS

Press Release - Occidental Petroleum delivered a letter to the Board of Directors of Anadarko Petroleum setting forth the terms of a superior proposal by Occidental to acquire Anadarko for $76.00 per share, in which Anadarko shareholders would receive $38.00 in cash and 0.6094 shares of Occidental common stock for each share of Anadarko common stock. Occidental’s proposal represents a premium of approximately 20% to the value of Anadarko’s pending transaction as of April 23, 2019.

OILFIELD SERVICES

(Late Tuesday) Press Release - Superior Energy Services announced a net loss from continuing operations for the first quarter of 2019 of $47.7 million, or $0.31 per share, on revenue of $467.2 million. This compares to a net loss from continuing operations of $750.2 million, or $4.85 per share, for the fourth quarter of 2018, on revenue of $539.3 million and a net loss from continuing operations of $59.9 million, or $0.39 per share for the first quarter of 2018, on revenue of $482.3 million.

DRILLERS

Press Release - RPC reported that for the quarter ended March 31, 2019, revenues were $334.7 million, a decrease of 23.3 percent, compared with $436.3 million in the first quarter of 2018. Operating loss for the quarter was $2.2 million compared to operating profit of $60.8 million in the same period of the prior year. Net loss for the first quarter of 2019 was $739 thousand, or $0.00 per share, compared to net income of $52.1 million, or $0.24 diluted earnings per share, in the first quarter of 2018. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter were $40.8 million, a decrease of 60.7 percent, compared to $103.7 million in the same period of the prior year.

Press Release - RPC announced that its Board of Directors reduced the quarterly cash dividend from $0.10 per share to $0.05 per share. The dividend will be payable June 10, 2019 to common stockholders of record at the close of business on May 10, 2019. In light of the uncertainty in the oilfield market, this reduced dividend strengthens our capital structure and enhances our ability to maintain a conservative balance sheet.

MLPS & PIPELINES

(Late Tuesday) Press Release - DCP Midstream announced that the board of directors of its general partner declared a first quarter 2019 common unit distribution of $0.78 per unit, or $3.12 per unit on an annualized basis. This quarterly common unit distribution will be paid May 15, 2019 to common unitholders of record at the close of business on May 3, 2019.

(Late Tuesday) Press Release - The Board of Directors for Enbridge has declared a quarterly dividend of $0.73800 per common share, payable on June 1, 2019 to shareholders of record on May 15, 2019. The amount of the dividend is consistent with the March 1, 2019 dividend.

Press Release - SunCoke Energy announced that revenues during the first quarter 2019 increased $40.8 million compared to the prior year period, primarily reflecting the pass-through of higher coal prices as well as higher sales volumes in our Domestic Coke segment. Adjusted EBITDA during the first quarter 2019 increased $3.3 million to $67.3 million, driven by improved performance in our Domestic Coke segment. Net income attributable to SXC was $9.8 million, or $0.15 per share, for the first quarter 2019.

MARKET COMMENTARY

Wall Street futures were flat ahead of major earnings from bellwethers Boeing and Caterpillar, after S&P 500 and Nasdaq closed at record highs in the previous session. European shares edged up after upbeat Credit Suisse earnings, while Asian indexes faltered on China stimulus worries. The dollar index held steady and gold prices were also little changed. Facebook, Microsoft, Tesla and Visa will report results after close of markets.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP


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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