Today - Friday, December 20, 2013
- Kinder Morgan Partners (KMP) and Magellan Midstream Partners (MMP) reach agreement with Anadarko Petroleum (APC) to transport Eagle Ford Shale production from Gardendale, Tex., to the Houston Ship Channel via the KMCC Pipeline.
- The KMP-MMP joint venture plan to build 160K barrels of storage capacity and a pump station at Gardendale, a ~10-mile pipeline to connect the Double Eagle Pipeline and KMCC Pipeline, and 240K barrels of storage at its Helena Station; completion is expected by early 2015.
- Imperial Capital initiates coverage of both FX Energy (FXEN) and Bill Barrett (BBG) with In-Line ratings.
- While the firm sees FXEN as undervalued on a risked net asset value basis, it thinks investors may sit on the sidelines until further delineation of the Tuchola discovery or positive results come from other near-term drilling; FXEN's results in Poland have been plagued by delays that are essentially out of its control - its Polish state oil company partner and the country's slow pace of permitting.
- BBG continues its transition towards a more balanced oil and gas portfolio, the firm writes; with acreage in the core of the Wattenberg, investors await the continued de-risking of BBG's acreage position, particularly as its drilling program moves to the southern portion of its Northeast Wattenberg acreage.
- Foster Wheeler (FWLT +0.2%) says it has won contracts by Saudi Aramco for engineering and project management services for the development of the Fadhili Gas Program in Saudi Arabia.
- FWLT will execute front-end engineering design services for the grassroots Fadhili Gas Plant, which has a planned total processing capacity of 1.5B cf/day of non-associated gas; FWLT's scope also will include the onshore Khursaniyah upstream facilities, the Fadhili downstream pipelines, a residential camp and industrial support facilities at the new gas plant.
- FWLT did not disclose the contract’s value.
- Brean cuts Chesapeake Utilities (CPK +2.5%) to Hold from Buy.
- The move is a valuation call, as analyst Michael Gaugler still considers the company "a core holding for small cap utility and dividend investors, given its very strong organic growth profile and opportunities for continued investments across its entire operating footprint."
- Price target is $61.
- Shrinking crude spreads - WTI has gained 7.2% while Brent has risen just 1.7% so far in December - likely will hold back refiners during the first six months of 2014, Cowen's Sam Margolin says.
- Extremely favorable refining conditions from last month are deteriorating amid higher utilization and continued reduction in crude imports, limiting supply and causing U.S. prices to melt higher, the firm explains, adding that investors need to "manage near-term expectations" while "remain(ing) constructive on the refining story for 2014."
- Margolin keeps Outperform ratings for Western Refining (WNR +4%), Marathon Petroleum (MPC +2.6%), Tesoro (TSO +0.4%), Valero (VLO +1.4%) and PBF Energy (PBF +1.7%); HollyFrontier (HFC +2.4%), Delek (DK +2.3%), Northern Tier (NTI +0.6%), Alon USA (ALJ +1.7%) and Calumet Specialty Products (CLMT +3.8%).
- Kinder Morgan Partners (KMP +0.4%) and Imperial Oil (IMO -0.4%) form a 50-50 joint venture to build a crude oil rail-loading facility in Alberta for ~$170M.
- IMO will be the base load customer and has subscribed for the start-up capacity through a long-term contract, as the partners market possible expansion capacity to potential third-party customers.
- In addition, KMP will invest ~$100M in pipeline connections and two new staging tanks to be constructed within its Edmonton storage facility.
- Vale (VALE -2.4%) is forming a joint venture with power company Cemig to manage some energy assets and to sell part of its stake in the controversial Belo Monte hydroelectric dam in the Amazon forest, part of its efforts to cut costs and focus on its main iron ore mining business.
- The JV will comprise Vale and Cemig stakes in six hydroelectric power plants, with a total installed capacity of 1,158 MW.
- Vale doesn't disclose the potential value of the assets to be included in the new company, but Cemig says its 45% stake is valued at 2.03B Brazilian reais ($874M).
- Moving forward with its plan to exit noncore businesses, Morgan Stanley (MS +0.4%) sells the Global Merchandising unit of its Commodities division to a subsidiary of Rosneft Oil for an undisclosed amount. The sale is expected to close in 2014 H2 and is not expected to have a material impact on Morgan's financial results.
- Morgan says it's looking at options for its stake in TransMontaigne Partners (TLP +1.2%), which isn't part of the Rosneft deal.
- Previous coverage
- Press release
- MarkWest Energy (MWE +0.6%) and the Energy & Minerals P-E group enter into an agreement with Gulfport Energy (GPOR +1.8%) to develop condensate solutions in the Utica Shale in Ohio.
- MWE and EMG will form a joint venture to provide infrastructural support, starting with a stabilization unit at an initial capacity of 23K bbl/day, plus necessary logistics and storage terminals, expected to come online by Q3 of next year.
- GPOR has more than 147K net acres in the Utica and is in the process of developing its assets in the emerging oil-rich areas of the shale.
- Williams Partners (WPZ +0.8%) says it delivered a record amount of natural gas on its 10,200-mile Transco interstate gas pipeline to meet demand driven by recent cold weather in markets on the U.S. Eastern Seaboard.
- Transco delivered a record-breaking 10.83M dekatherms in its market area stretching from Mississippi to New York City on Dec. 12, which represents enough gas to heat nearly 50M U.S. homes.
- Two recently completed expansions of Transco enabled the new record.
- With the threat of more supply hanging over the market, Credit Suisse narrows its list of top energy stock picks for 2014 to those that can truly have top upside gains in 2014.
- Chevron (CVX) is the only major domestic integrated on the Credit Suisse list; it may be looking to expand domestic production by acquiring one of the top E&P stocks, CS says.
- Phillips 66 (PSX) and Tesoro (TSO) are the firm's best-liked refiners.
- The firm's three favorite E&P names - PDC Energy (PDCE), Diamondback Energy (FANG) and EOG Resources (EOG) - were all considered takeover candidates during 2013.
- Among oil services companies, the firm thinks Halliburton (HAL) is making a strong comeback in the North American drilling market.
- Offshore driller Rowan (RDC) should roughly double its EBITDA in two years, CS says.
- Kinder Morgan Partners (KMP +0.1%) and Targa Resources Partners (NGLS +1.2%) plan to form a joint venture to construct new natural gas liquids fractionation facilities at Mont Belvieu, Tex.
- The companies see the fractionation JV, in combination with the proposed Utica Marcellus Texas Pipeline to be developed by KMP and MarkWest, as providing a long-term liquids solution for production growth in the Utica and Marcellus shale resource plays.
- The facilities will be located adjacent to Targa’s existing fractionation facilities at Mont Belvieu and serve up to 150K bbl/day, with potential to serve up to 400K bbl/day of maximum pipeline capacity over time.
11:24 AM| Comment!
- Magnum Hunter (MHR +3.8%) is on the rise after providing an operational update on new wells drilled in the Marcellus and Utica shale plays.
- MHR has drilled and completed three wells at the Ormet Pad in Ohio and four wells at the Collins Pad in West Virginia; at the latter site, one well tested at 10K cf/day and another at 9,850 cf/day.
- Transocean (RIG +0.2%) and Diamond Offshore (DO +0.4%) are downgraded to Sell from Neutral with a $40 price target at Citigroup as part of a negative call on the offshore drilling services sector.
- Pricing power is beginning to erode in the sector, the firm says, believing a clear shift in the balance of power at the bargaining table is occurring.
- RIG opens flattish but slipped 1.8% yesterday after issuing its latest fleet status report which showed the Cajun Express deepwater rig received a contract to operate six wells at a dayrate of $495K vs. the previous rate of $600K.
- Citi also cuts Noble Corp. (NE +0.5%), to Neutral from Buy.
- Others to watch: RDC, ESV, SDRL, HERO, VTG.
- Petrobras (PBR) estimates its Franco prospect and two other fields off Brazil’s southeastern coast hold ~3.6B barrels of commercial reserves.
- Franco holds 3.06B boe, Carioca has 459M and Sul de Tupi has 128M, PBR said in regulatory filings, declaring the fields commercial with "good quality” oil.
- Franco is "a giant... [whose] total potential could be substantially larger, though any additional barrels currently belong to the government," BofA analysts say.
- Gazprom (OGZPY) is likely to sign a contract with China to supply natural gas by the end of January, Gazprom CEO Alexei Miller says.
- China National Petroleum (PTR) and Gazprom agreed in September on the basic terms of an agreement, including volume, the date of the first delivery, payment and a take-or-pay amendment, but both countries failed to secure the most important detail: a price.
- California regulators yesterday doubled a fine against PG&E's Pacific Gas & Electric (PCG) utility to $14.4M for submitting wrong data about an aging San Francisco-area natural gas pipeline and not correcting the error for more than a year.
- The California Public Utilities Commission is cracking down on misinformation of this type because the pipeline is similar to one PG&E operated in San Bruno that exploded in 2010, killing eight people and injuring 58 others.
- PG&E considers the fine excessive but admits its communication efforts fell short of expectations.
- Development of the North Sea's giant Johan Sverdrup oilfield will be delayed by a year, to late 2019 rather than Q4 2018, as the project continues to grow in complexity and cost.
- Norway's Statoil (STO), Det norske (DETNF) and Petoro, Sweden's Lundin Petroleum (LNDNY) and Denmark's Maersk Oil were expected to announce this month which type of installation they would use to develop the field.
- The first phase of the project is now expected to cost $16B-$21B, more than had been anticipated.
- Analysts say the present value of Johan Sverdrup has been reduced by ~20%, 12% due to lower reserves and 8% due to the delay.