Oil

Weakness in Crude Complex Pushing Energy Sector Lower

The energy sector is poised for a lower start, tracking weakness in the crude complex and in the broader equity futures

TUESDAY, JULY 28, 2020

SECTOR COMMENTARY

The energy sector is poised for a lower start, tracking weakness in the crude complex and in the broader equity futures which slipped as lawmakers geared up to debate the latest COVID-19 relief deal while investor optimism ebbed during the busiest week of earnings season.

WTI crude oil futures inched lower in early trading, trailing Brent, pressured by rising demand concerns due to a rise in coronavirus cases worldwide which has undermined the support coming from hopes of additional U.S. economic stimulus measures. A U.S. fiscal package that could boost oil prices is in deadlocked talks between Democrats who made a $3 trillion proposal and Republicans who have a $1 trillion plan yesterday.

Natural gas futures bucked the trend and are up ~2.5% so far this morning, backed by reports showing pipeline exports increased and despite forecasts for less hot weather and lower air conditioning demand over the next two weeks than previously expected.

US INTEGRATEDS 

Reuters - Chevron expects to restart Train 2 of its Gorgon liquefied natural gas (LNG) plant in Australia in early September after completing repairs.

INTERNATIONAL INTEGRATEDS

Reuters - Eni said new oil discovery and new production in South West Meleiha concession, in western desert of Egypt. New well has been drilled close to existing production facilities and is already connected to production network.

(Late Monday) Reuters - Petrobras said that it had published a prospectus regarding the sale of its stake in an exploratory block in Colombia, located in the Guajira bay. The block is known as Tayrona. Petrobras for the past few years has been divesting many of its assets in a bid to raise cash and reduce debt.

Reuters - Total said that, along with its partners BP and ENI, it had made a gas discovery at a well off the coast of Egypt. Total said the discovery had been made at the Bashrush well on the North El Hammad licence, located eleven kilometres (6.8 miles) off the Egyptian coast. ENI and BP both have 37.5% stakes in the North El Hammad licence, while Total has a 25% stake.

CANADIAN INTEGRATEDS 

(Late Monday) Reuters - Husky Energy restarted a coker at its 185,000-barrel-per-day refinery in Lima, Ohio. The coker had been taken offline after a mechanical upset on July 22.

U.S. E&PS

Suntrust Robinson upgraded Concho Resources to ‘Buy’ from ‘Hold’.

CANADIAN E&PS 

(Late Monday) Press Release - MEG Energy reported its second quarter 2020 operational and financial results. Free cash flow of $69 million driven by adjusted funds flow of $89 million ($0.29 per share) and disciplined capital spending of $20 million. On May 4, the Corporation suspended full year 2020 production guidance due to the global crude oil price environment at that time, which was experiencing multi-decade lows coupled with extreme levels of volatility driven by the unprecedented demand shock due to COVID-19. Since that time, crude oil price levels and volatility have stabilized to a level that allows the Corporation to re-instate full year production guidance which is now targeted at 78,000 – 80,000 bbls/d. Compared to the original guidance of 94,000 – 97,000 bbls/d announced November 21, 2019, approximately half of the difference is due to the impact of the scheduled 70-day major turnaround at the Christina Lake Phase 1 and 2 facilities announced May 4, 2020. Guidance for non-energy operating costs, G&A expense and capital expenditures remain unchanged from the revised guidance announced May 4, 2020.

OILFIELD SERVICES 

(Late Monday) Press Release - Black Hills announced that its board of directors declared a quarterly dividend on the common stock at a meeting held July 27, 2020. Common shareholders of record at the close of business on Aug. 18, 2020, will receive $0.535 per share, payable Sept. 1, 2020.

Press Release - Halliburton announced it received a scope expansion from Petroliam Nasional Berhad (PETRONAS) to support their upstream digitalization initiatives and reduce exploration time by increasing collaboration and efficiency. PETRONAS is the custodian of Malaysia’s oil and gas resources and a Fortune Global 500 energy company with a presence in more than 50 countries.

Press Release - National Oilwell Varco reported second quarter 2020 revenues of $1.50 billion, a decrease of 21 percent compared to the first quarter of 2020 and a decrease of 30 percent compared to the second quarter of 2019. Net loss for the second quarter of 2020 was $93 million, or -6.2 percent of sales, which included non-cash, pre-tax charges of $102 million. Adjusted EBITDA (operating profit excluding depreciation, amortization, and other items) decreased $94 million sequentially to $84 million, or 5.6 percent of sales.

(Late Monday) Press Release - SEACOR Holdings announced its results for the second quarter ended June 30, 2020: Net income attributable to stockholders for the quarter ended June 30, 2020 was $7.9 million ($0.39 per diluted share) compared with $14.6 million ($0.76 per diluted share) for the quarter ended June 30, 2019. The prior year quarter included $10.5 million ($0.53 per diluted share) of net mark-to-market gains on marketable securities. Operating income for the quarter ended June 30, 2020 was $13.7 million compared with $11.1 million for the quarter ended June 30, 2019.

MLPS & PIPELINES

(Late Monday) Press Release - Martin Midstream Partners announced its financial results for the second quarter of 2020. The company reported net loss of $2.2 million and net income of $6.6 million for the three and six months ended June 30, 2020, respectively. Its adjusted EBITDA was $23.9 million and $54.9 million for the three and six months ended June 30, 2020, respectively. The Partnership has declared a quarterly cash distribution of $0.005 per unit for the quarter ended June 30, 2020. The distribution is payable on August 14, 2020 to common unitholders of record as of the close of business on August 7, 2020. The ex-dividend date for the cash distribution is August 6, 2020.

MARKET COMMENTARY

U.S. stock index futures retreated as lawmakers geared up to debate a coronavirus relief deal to limit the economic damage from the pandemic. European shares fell due to underwhelming quarterly earnings from luxury goods makers. Japan's Nikkei closed lower. Gold slipped after scaling record highs, as the dollar gained ahead of a two-day Federal Reserve meeting. Oil prices dipped. Consumer confidence index data is on the economic radar. Visa is due to report later in the day.

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