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Positive outlook regarding short-term headwinds on transitory Permian takeaway constraints

Tuesday, September 11, 2018

Sector Commentary

Energy stocks are poised for a lower opening on dual headwinds of weaker broader index futures as well as flat oil prices. Corporate news is light as the macro tape continues to dominate the trade flows.

The sell-side was active with several ratings changes and research initiations today including Stifel Nicolas launching coverage on several service providers and land drillers with a positive outlook regarding what it calls “short-term headwinds on transitory Permian takeaway constraints.”

Crude oil prices are moderately higher this morning on signs that the impact of sanction on Iranian crude is beginning to be felt by the market and has Hurricane Florence maintains its category four status. Traders are watching for impact to the Colonial Pipeline as well as the inventory data to be released tonight as well as tomorrow.

Natural gas futures are moderately lower after jumping by more than 1% higher yesterday on reduced demand ahead of the Hurricane.

US INTEGRATEDS

Berenberg initiated Chevron and Exxon Mobil at ‘Hold’.

Reuters - Chiyoda wins contract to build ethylene plant in the; plant estimated to cost 150 billion yen. Chiyoda ethylene plant is a joint project by Exxon Mobil and Saudi Basic Industries and the start of operations targeted for 2022.

Press Release - A second Alaska petroleum producer has committed to an outline of key terms for the sale of natural gas for a proposed major liquefied natural gas project. The state-sanctioned Alaska Gasline Development Corp. announced that Exxon Mobil has committed to a price and volume basis for the sale of Alaska North Slope natural gas.

INTERNATIONAL INTEGRATEDS

Berenberg initiated BP, Repsol and Total at ‘Buy’.

Berenberg initiated Eni and Royal Dutch Shell at ‘Hold’.

Barclays downgraded Eni to ‘Underweight’ from ‘Equal Weight’.

Barclays upgraded Repsol to ‘Overweight’ from ‘Equal Weight’.

U.S. E&PS

Goldman Sachs downgraded CNX Resources to ‘Sell’ from ‘Hold’.

Eclipse Resources was upgraded to neutral from sell at Goldman Sachs.

(Late Monday) Press Release - Penn Virginia announced that V. Frank Pottow has joined the Board of Directors as a new independent member, effective September 10, 2018.

(Late Monday) Press Release - SandRidge Energy announced that it has concluded its formal strategic review process following the thorough evaluation of multiple potential transactions, all of which the Board of Directors believes significantly undervalue either the Company or its resources. The Board believes several impermanent items may have impacted bid valuations, including Colorado's ballot initiative 97, which would significantly restrict drilling on the North Park property, the current lack of a pipeline connection in Jackson County, Colorado where our North Park acreage is located, and a lack of current market interest in the Mississippian Lime play. When the highest cash bids were totaled, the Company's implied liquidation value was approximately $12.00-$13.00 per share, which the Board believes meaningfully undervalues the Company.

Press Release - WildHorse Resource Development announced plans to construct a wholly-owned in-field oil and produced water gathering system. The project will be constructed and operated by WRD with completion expected in mid-2019.

CANADIAN E&PS

JPMorgan started MEG Energy at ‘Underweight’.

(Late Monday) Press Release - Pengrowth Energy has provided a model of potential cash flows for 2018 to 2020 at various WTI pricing. It expects production to be reduced by 40 per cent for seven days as a result of scheduled maintenance work at Lindbergh later this month.

OILFIELD SERVICES

Stifel Nicolaus initiated coverage of Baker Hughes, Halliburton, National Oilwell Varco, Oil States International, Tetra Technologies and U.S. Silica Holdings at ‘Buy’.

Press Release - CGG announced that the Board of Directors has unanimously approved the voluntary delisting of its American Depositary Shares from the New York Stock Exchange and its voluntary deregistration with the United States Securities and Exchange Commission.

Stifel Nicolaus initiated coverage of Core Laboratories, Pioneer Energy Services, Schlumberger, Superior Energy Services and Weatherford International at ‘Hold’.

Press Release - KBR announced that it has been awarded a license, engineering and proprietary equipment contract for KBR Weatherly's Nitric Acid technology by Kemerovo Azot JSC.

DRILLERS

Stifel Nicolaus initiated coverage of RPC at ‘Hold’.

MLPS & PIPELINES

(Late Monday) Reuters - Buckeye Partners said it expects to begin full repair work this week on a closed jet fuel pipeline that breached over the weekend, spilling 8,000 gallons of fuel into the St. Marys River in Indiana.

Press Release - ONEOK, Inc. today announced plans to invest approximately $295 million to expand its West Texas LPG Limited Partnership (West Texas LPG) pipeline system, which provides natural gas liquids (NGL) takeaway capacity for Permian Basin producers.

Press Release - Targa Resources announced that it has elected Ms. Beth A. Bowman to the Board effective September 7, 2018 and increased the size of its Board of Directors from ten to eleven directors.

MARKET COMMENTARY

Wall Street looked to open lower as markets remained under pressure from the growing Sino-U.S. trade tensions as China moved to WTO against U.S. The mood was similar in Europe and Asia, while Nikkei gained on weaker yen. The dollar remained flat against a basket of major currencies, but gold prices dipped with investors concerned the greenback could resume its rally. Oil prices rose as U.S. sanctions on Iran squeezed supply.

NASDAQ ENERGY TEAM THOUGHT LEADERSHIP


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