Wednesday, December 11, 2013
6:34 PMCN Rail's Mongeau: Moving dangerous goods by rail "integral to our way of life"
- Canadian National Railway (CNI) chief Claude Mongeau says he appreciates concerns about moving dangerous goods by rail through urban areas in the wake of last summer's Lac-Mégantic disaster, but he says it would be impractical to reroute the shipments because many of the goods are integral to the way we live.
- While much of the focus has been on the movement of crude oil, even more dangerous and flammable goods are moved every day - styrene to make shoes and rubber, polypropylenes that make eyeglasses and other plastics, chlorine to purify water, propane for home use.
- Despite a string of recent derailments, the CEO says CNI has one of the best safety records among large North American rails.
- "The dangerous goods we move are worth $25B... and we move them very safely," Mongeau says.
5:54 PMChevron unveils $39.8B 2014 capex program, ~$2B less than 2013
- Chevron (CVX) announces plans for a $39.8B capital spending budget next year, ~$2B less than expected for 2013, which it says was a relative peak year for such spending.
- The bulk of the new capex program is budgeted for upstream crude oil and natural gas exploration and product projects, with only 8% of spending planned for downstream businesses that manufacture, transport and sell gasoline and other fuel products.
- CVX also expects 2014 will represent a peak year for spending on its Australian liquefied natural gas projects as they move closer to starting production.
- Separately, former Utah governor and U.S. ambassador to China Jon Huntsman is named to the company's board.
5:53 PMOld Dominion, Brunswick replacing Arch Coal, Regis in S&P 400
- Old Dominion (ODFL) and Brunswick (BC) will be replacing Arch Coal (ACI) and Regis (RGS) in the S&P MidCap 400 following the Dec. 20 close. The latter companies will take the positions held by the former ones in the S&P SmallCap 600.
- Also: Teradyne, which is getting kicked out of the S&P 500 to make room for Facebook, will replace Scholastic (SCHL) in the S&P 400. Scholastic, in turn, will replace Lincoln Educational (LINC) in the S&P 600.
- ODFL +0.7% AH. ACI +0.9%.
5:43 PMReuters: Morgan Stanley launches sale of U.S. oil terminal business
- Morgan Stanley (MS) has launched a formal effort to sell its controlling stake in U.S. oil terminal and transport business TransMontaigne (TLP), Reuters reports, in what appears to be its first definitive step toward disassembling its vast energy trading group.
- The TransMontaigne MLP includes 48 fuel terminals with nearly 24M barrels of storage capacity on the Gulf coast, in Florida, the Midwest and across the Southeast, including along the strategically important Colonial Pipeline that ships gasoline and diesel from the Gulf to the East Coast.
- Stanley's trading division accounts for ~60% of the MLP's revenues due to long-term contracts to use its terminals, and some of these contracts could be sold as part of the package.
- A number of potential buyers including Qatar, a Chinese oil major and Russia's Rosneft have been rumored in the past year, but this report says likely potential buyers include MLP subsidiaries of major refiners or midstream companies.
4:48 PMUNS Energy +30% AH after Fortis agrees to acquire for $60.25/share
- UNS Energy (UNS) agrees to be acquired by Fortis (FRTSF), Canada's largest investor-owned gas and electric distribution utility, for $60.25/share, a 31% premium to today's closing price.
- The $4.3B deal, which includes the assumption of ~$1.8B in debt, would provide additional capital and new resources for UNS subsidiaries including Tucson Electric Power and UniSource Energy Services.
- Fortis serves more than 2.4M through its electric utilities in five Canadian provinces and two Caribbean countries, a natural gas company in British Columbia, and a gas and electric utility in New York.
- UNS +30.2% AH.
3:58 PMEPA official says exceeding 10% ethanol in fuel isn't feasible
- Shares of ethanol makers slide as an EPA official tells a congressional panel it’s not feasible for gasoline refiners to use as much ethanol next year as had been mandated, which is why the agency proposed easing the requirement.
- Producers of ethanol, biodiesel and advanced biofuels have criticized the EPA’s proposal, saying it undercuts a growing, domestic industry.
- ADM -1.5%, BIOF -3%, GPRE -3.8%, REGI -4.8%, SYNM -5.7%, PEIX -9.6%, KIOR -12.8%.
3:51 PMBarron's: Forestar trades at a big discount to NAV
- The 20% dip in Forestar (FOR +1.7%) shares since mid-October looks like a buying opportunity, Barron's writes, as FOR sells lots and realizes income from its oil and gas properties over the next year.
- FOR, which owns 132K acres of real estate in 10 states including in attractive markets in Texas, is on track to sell ~1,900 residential lots this year, more than double last year's 926 lots, and production in its burgeoning oil and gas unit is up 170% Y/Y.
- Proceeds from a recent equity offering, which raised $145M, while dilutive, will further develop FOR's real estate and energy properties in 2014, which could lead to a higher NAV over time.
3:40 PMKeystone seen as bigger for oil sands producers than builder TransCanada
- The U.S. decision on the Keystone XL pipeline is becoming more critical for oil sands producers such as Canadian Natural Resources (CNQ) and Suncor (SU) than pipeline builder TransCanada (TRP); for producers, Keystone is the earliest export line scheduled to ease bottlenecks which have helped push Canadian heavy crude $27/bbl below the U.S. benchmark.
- CNQ, with 120K bbl/day of capacity booked on Keystone XL, may gain 5% while other producers such as SU, Cenovus (CVE), Husky Energy (HUSKF) and Imperial Oil (IMO) may rise if the State Department’s review is positive, Cormark predicts, while a negative report could spur a 3% drop for CNQ.
- On the other hand, Keystone XL is only worth C$1.50 to TRP shares whether or not the project is approved, as the company has invested in other projects, according to some analysts.
- John Podesta’s return to the White House places a Keystone opponent within Pres. Obama's inner circle, although he supposedly is recusing himself from issues surrounding the controversial project.
3:08 PMDeutsche Bank talks utilities, adjusts targets
- Deutsche Bank is out with some commentary on the utilities going into year-end.
- Analyst Jonathan Arnold says that with the group "set to finish the year last among sectors for the second straight year, it is surely tempting to argue for a rebound in 2014."
- Nevertheless, Arnold thinks that "with the Fed exit still [upcoming] and a continuing overhang from challenging power business fundamentals, investors have plenty of reason to proceed with caution."
- Rundown: ETR cut to Hold from Buy, price target cut to $64 from $70; DUK reiterated at Buy, price target hiked to $76 from $74; PCG reiterated at Buy, price target cut to $46 from $48.50; CPN reiterated at Buy, price target cut to $23 from $24; AEP reiterated at Hold, price target raised to $50 from $48; D reiterated at Hold, price target raised to $66 from $64; DTE reiterated at Hold, price target lifted to $72 from $71; NU reiterated at Hold, price target lifted slightly.
2:59 PMFBR starts Cameco at Market Perform amid favorable long-term outlook
- Cameco (CCJ -1%) is initiated with a Market Perform rating and $24 target price at FBR Capital, driven by CCJ's leading position in the nuclear energy industry, solid production growth profile, high-quality asset base and a strong long-term contracting book.
- FBR has a favorable longer-term outlook for the uranium industry, given the 71 nuclear reactors under construction, which alone reflect ~23% of the current annual demand.
- In the near term, however, the industry remains plagued by an oversupply situation, idled nuclear reactors in Japan reducing demand and building up utility stockpiles, all of which could keep pricing below economic return levels and lead to industry-wide production cuts.
- ETFs: NLR, NUCL
12:52 PMTesoro -1.8% despite positive comments after analyst day
- Tesoro (TSO -1.8%) apparently didn't offer enough good news at yesterday's analyst day, as shares tumble despite the general perception from the meeting as "incrementally positive."
- The key messages in the meeting surrounded progress of the synergy capture from the Carson acquisition, continued margin improvement through feedstock and product optimization and driving additional logistics growth.
- TSO sees rail unloading capacity along the U.S. west coast for North Dakota crude oil growing to nearly 1M bbl/day through 2015; TSO's $100M rail-to-barge project in Washington is the largest of the offloading projects announced so far.
- Imperial Capital raises its TSO price target TSO to $63 from $57, and Howard Weil lifts its target to $66 from $62.
- Other refiners are lower too: VLO -1.3%, PSX -0.7%, MPC -1.8%, WNR -2.6%, HFC -1.6%, ALJ -1%, NTI -0.2%, DK -1.9%, CLMT -2.7%.
12:11 PMPDC Energy -6.7% after unveiling $647M capex budget for 2014
- PDC Energy (PDCE -6.7%) slides after announcing a 2014 capital budget of $647M, targeting organic growth within its inventory of liquid-rich projects in the core Wattenberg Field and Utica Shale.
- Production for 2014 is seen averaging 9.5M-10M boe/day, up 34% Y/Y, with 60% in crude oil and natural gas liquids; guidance includes a reduction in dry gas volumes due to the anticipated closing of the sale of its shallow Upper Devonian assets and the suspension of drilling in its Marcellus Shale assets.
11:55 AMBP says Shah Deniz FID on Trans Atlantic Pipeline expected Dec. 17
- The BP-led (BP +0.6%) Shah Deniz consortium likely will make the financial investment decision on the Trans Adriatic Pipeline on Dec. 17, a BP official says.
- In June, the consortium - which also includes Statoil (STO), Total (TOT) and Azerbaijan state-owned Socar - chose TAP to transport natural gas from Shah Deniz in Azerbaijan via Turkey, Greece, Albania, across the Adriatic Sea and into Europe.
- The final shareholder structure in the planned Trans Anatolia natural gas pipeline also will be made clearer next week; sources have said TOT may not pick up an option to acquire a 5% stake in the pipeline, while STO may take a smaller stake than its option for a 12% holding.
11:21 AMGevo -27% after raising $25M to restart biofuel plant
- Gevo (GEVO -27.7%) plunges to 52-week lows after pricing a public offering of 18.53M common shares at $1.35 each.
- Funds raised by the offering will be used to restart biofuel production at its facility in Luverne, Minn., and repay $5.1M in long-term debt; Gevo halted production of isobutanol in Luverne in Sept. 2012 after contamination issues prompted an adjustment of its manufacturing process.
- Gevo cancels plans to issue convertible senior notes.
10:06 AMHusky Energy sets $4.8B capex budget for 2014
- Husky Energy (HUSKF +1.1%) says it plans capital spending of ~C$4.8B in 2014, slightly less than in 2013, and is track for substantial production growth next year, helped by the start of production from the Liwan Gas Project in the South China Sea.
- Husky sees 2014 output averaging 330K-355K boe/day, vs. estimated 2013 production of 312K boe/day; its five-year compound annual production growth target through 2017 is 5%-8% through 2017.
9:02 AMBP, Reliance Industries aim to quadruple gas output in India by 2020
- BP and joint venture partner Reliance Industries (RLNIY) will invest up to $10B to quadruple their natural gas output in India from the current level of ~12M metric cubic meters/day by 2020, the head of BP's Indian unit says.
- Production from India's east coast KG-D6 block, the country's richest gas deposit, has declined from nearly 70M metric cubic meters/day in 2010; the companies have cited geological complexities as the main reason for the output fall.
8:49 AMCB&I reaffirms 2013 guidance, sees 2014 EPS and revenue in-line
- CB&I (CBI) reaffirms guidance for 2013, seeing EPS of $4.00-$4.35 vs. $4.16 consensus estimate and revenue of $10.7B-$11.2B vs. $11.17B consensus.
- Issues in-line guidance for 2014, seeing EPS of $4.80-$5.65 vs. $5.16 consensus estimate and revenue of $12.6B-$13.2B vs. $12.98B consensus. (Investor Day slides)
- CBI +1.9% premarket.
8:34 AMEncana to spend $2.4B-$2.5B in 2014, grow liquids production by 30%
- Encana (ECA) says it plans to increase natural gas liquids production by 30% in 2014, focusing three-quarters of its planned $2.4B-$2.5B capital spending in 2014 on the Montney, Duvernay, DJ Basin, San Juan Basin and Tuscaloosa Marine Shale regions.
- Total cash flow is expected at $2.4B-$2.5B; sees natural gas production of 2.6B-2.8B cf/day and total liquids production between 70K-75K bbl/day.
- Plans to conduct an IPO of its Clearwater Royalty business in 2014.
8:16 AMCameron adds $750M to stock buyback program
- Cameron (CAM) says it plans to increase its stock buyback program by an additional $750M, bringing its total remaining repurchase authorization to $1.04B.
- CAM also intends to add debt to its capital structure in the near term while continuing to maintain a strong investment-grade profile.
- Shares +0.9% premarket.
7:59 AMRio Tinto says no environmental impact from two radioactive spills
- Rio Tinto (RIO) says there is no environmental impact from two separate incidents in which radioactive slurry spilled from its operations in Namibia and Australia.
- Rio experienced a low-grade slurry spill at its Ranger uranium mine in Australia's Northern Territory, just days after a similar incident occurred at its Rossing uranium mine in Namibia.
- The causes of the incidents are under investigation.
7:43 AMMarathon Oil to buy back more shares, announces $5.9B capex budget
- Marathon Oil (MRO) says it will increase its remaining stock buyback authorization to 2.5B, and announces a $5.9B capital spending budget for 2014, more than 60% percent of which is directed toward its liquids-rich North America resource assets.
- MRO plans to accelerating Eagle Ford and Bakken rig activity 20% each, including drilling 80-90 net new Bakken wells, and expects to double activity for the Oklahoma Woodford.
- Plans to market U.K. and Norway assets to continue its portfolio optimization strategy.
- Expects production to average 405K-430K boe/day in 2014, excluding production from Alaska and Libya.