Today - Tuesday, August 30, 2016
- Phillips 66 (PSX +0.6%) has cut production by ~5% at its 238K bbl/day refinery in Linden, N.J., amid weak refining margins, Reuters reports.
- PSX joins Monroe Energy's 185K bbl/day refinery in Trainer, Pa., in making economic run cuts on the U.S. east coast; the Delta Air Lines (DAL +1.9%) subsidiary continues to run the refinery at ~150K bbl/day following run cuts that began in July, according to the report.
- Philadelphia Energy Solutions, the largest east coast refinery, reportedly is currently running at full capacity; it is not yet known whether PBF Energy (PBF -0.1%) has made cuts at either of its refineries in Delaware City, Del., and in Paulsboro, N.J.
- Analysts say Royal Dutch Shell's (RDS.A, RDS.B) first oilfield sale after its BG Group acquisition bodes well for its sale talks in the North Sea, Gabon and New Zealand, signaling that buyers will meet the company's expectations on value.
- The $425M sale of the Brutus/Glider fields has an implied oil price of ~$60/bbl, more than $10/bbl above current prices, according to UBS analysts who say "we may now be entering a period where both buyer and seller can see acceptable relative value, unlocking the A&D [acquisition and divestiture] market."
- But analysts also say further deals may prove harder to clinch, as activity in the U.S. market picked up faster than other areas; among various places, Shell is trying to sell a large portfolio of fields in the U.K. North Sea, an aging basin with high production costs and strict regulatory requirements.
- Shell has sold $2B of assets YTD, leaving little time to hit its $6B-$8B target.
- Gazprom (OTCPK:OGZPY) says its Q2 net income fell 17% Y/Y to 244.9B rubles ($3.8B), but that's a less than expected reduction as a strengthening ruble helped ease the debt burden at the world’s biggest natural gas producer.
- Q2 revenue rose 4.9% Y/Y to 1.33T rubles, while net debt fell 15% from the start or the year to 1.76T rubles, mostly because of the currency strengthening.
- “The second quarter was the worst for Gazprom this year, [but] the results are better than expected,” says an analyst at Raiffeisen Bank in Moscow. "Gazprom even has a chance to see a positive cash flow - close to zero but still positive - if oil remains at about $50 a barrel and depending on the cold season.”
- The average gas price for Europe and other countries fell 18% to nearly 13K rubles per thousand cm during H1, while supply volumes grew to 109.4B cm from 80.4B cm in the year-earlier period.
- Iran's government says it will invite international oil companies to submit bids in October for development of the South Azadegan field on Iran’s southwestern border under a long-awaited new contract model for energy investors.
- Big oil companies from Europe and Asia, including France’s Total (NYSE:TOT) and Italy's Eni (NYSE:E), have expressed interest in developing Iran’s under-utilized reserves since international sanctions were eased in January.
- Iran's oil minister has said the country will give priority to developing oil and gas fields it shares with neighbors; South Azadegan is part of a deposit straddling the border with Iraq, where Royal Dutch Shell (RDS.A, RDS.B) leads operations pumping 210K bbl/day.
- France's Total (TOT +0.8%) and U.K.'s Tullow Oil (OTCPK:TUWLF, OTCPK:TUWOY) are issued eight oil production licenses in Uganda, which is seeking to move more quickly toward crude production.
- Commercial oil reserves were discovered in Uganda a decade ago, but production has been delayed amid disputes over taxation and field development strategy.
- Uganda's energy minister says the companies, together with China's Cnooc (NYSE:CEO), are expected to invest $8B to develop the oil fields, which will involve drilling more than 500 oil wells and producing 200K-230K bbl/day of crude; the country's total oil assets are believed to contain ~6.5B barrels of crude.
- Petrobras (NYSE:PBR) signs a partnership deal with Norway's Statoil (NYSE:STO) to co-operate on opportunities in producing Brazilian oil fields.
- The companies say the agreement allows for the evaluation of joint participation in future tenders for exploration areas and to increase upstream collaboration in producing fields in the Santos and Campos offshore basins.
- PBR CEO Pedro Parente points out that STO boasts high levels of oil recovery in its producing fields; STO CEO Eldar Saetre says the agreement reflects the company's long-term commitment to Brazil and PBR.
- Adams Resources & Energy (NYSEMKT:AE) says CFO Richard Abshire will retire effective Aug. 31, but will continue to advise the company as a consultant for the next few months.
- Abshire has worked for the company since 1985.
- Current Executive VP and COO Sharon Davis will assume the duties of CFO and Treasurer on an interim basis.
- Ocean Power Technologies (NASDAQ:OPTT) names Matthew Shafer as its new CFO, effective Sept. 7, succeeding Mark Featherstone, who is resigning from the Company.
- Shafer previously served as a VP of Finance and Corporate Controller for CMF Associates and as Senior Director of Finance at Valeant Pharmaceuticals.
- Featherstone has been OPTT's CFO since 2013, and previously had spent five years as CFO of Quaker Chemical.
- Statoil (NYSE:STO) says its Gullfaks Rimfaksdalen project has come onstream four months ahead of schedule and cost more than 1B kroner ($120M) less than original costs estimates of 4.8B kroner.
- "We have re-used infrastructure that we maybe hadn't considered before, we have boosted drilling efficiency, and adapted solutions that were more fit for this project," STO's head of Norwegian operations says.
- STO recently has announced a string of cost cuts at its biggest projects, including the giant Johan Sverdrup field in the North Sea; the company says it has lowered the average breakeven price of upcoming projects to below $41/bbl on average, from $70/bbl three years ago.
- STO also says it plans to conduct a major exploration campaign in several parts of the Barents Sea in 2017, and is working on obtaining approval from partners and authorities for an exploration campaign covering 5-7 wells.
- Chevron (NYSE:CVX) has signed a 10-year term supply deal with China's ENN to supply up to 650K metric tons per annum of LNG, which could boost the formation of a spot market for the fuel in Asia.
- More gas is coming on board from Statoil (NYSE:STO) after its Gullfaks Rimfaksdalen field started production four months ahead of schedule.
- KKR-backed Samson Resources has reached a new agreement with creditors that aims to bring the company out of Chapter 11 under the ownership of its second-lien lenders.
Monday, August 29, 2016
- The U.S. government's top offshore drilling regulator is warning subsea oil drillers and equipment makers that bolt failures in the Gulf of Mexico could result in an oil spill on the scale of the Deepwater Horizon disaster.
- Regulators and makers of oil production equipment - including General Electric (NYSE:GE), Schlumberger (NYSE:SLB) and National Oilwell Varco (NYSE:NOV) - are trying to determine what is causing the problems, which have been found over the past four years on safety equipment in underwater oil production, including on blowout preventers, which are designed as a last defense against a major oil spill such as the 2010 Deepwater Horizon incident.
- The offshore drilling industry had discussed possibly replacing all the bolts in question in the Gulf over a period of years, but Brian Salerno, director of the Bureau of Safety and Environmental Enforcement, says the discussions have ended after a better understanding of the problem.
- GE issued a global recall after its bolts on a piece of undersea equipment in the Gulf of Mexico failed in 2012, an incident that was reported to the government, but government officials say many more were not, masking the extent of the problem.
- Williams Capital believes oil industry fundamentals are solid despite current commodity price levels but is cautious overall and advises investors not to chase the recent run at current valuations.
- However, the firm recommends select underappreciated companies with lower expectations and re-rating potential, and thinks companies situated in core resource plays that can demonstrate further capital efficiency improvements with catalysts will continue to garner top valuations and M&A premiums.
- Two of Williams' favorites are SM Energy (NYSE:SM), which the firm says remains one of the cheapest names in the sector with a solid balance sheet and assets as well as a conservative management team, and Newfield Exploration (NYSE:NFX), which Williams sees thriving through the current downturn given its strong balance sheet, ample financial liquidity and strong hedge book.
- Also initiated with Buy ratings: Cabot Oil & Gas (NYSE:COG), Energen (NYSE:EGN), Gulfport Energy (NASDAQ:GPOR), Oasis Petroleum (NYSE:OAS), PDC Energy (NASDAQ:PDCE), Pioneer Natural Resources (NYSE:PXD).
- Driven largely by valuation, Williams assigns Hold ratings on Diamondback Energy (NASDAQ:FANG), Gastar Exploration (NYSEMKT:GST), Laredo Petroleum (NYSE:LPI), Parsley Energy (NYSE:PE), Rice Energy (NYSE:RICE) and Cimarex Energy (NYSE:XEC).
- Lime Energy (NASDAQ:LIME) says it received notice from Nasdaq that shares will be delisted and trading will be suspended on Aug. 31.
- Lime says it has not yet determined whether to appeal the ruling, as its operating and financial plans do not project compliance with Nasdaq continued listing standards within the next 180 days.
- Lime says it is optimistic that ongoing cost-control measures and revenue growth initiatives will position it to achieve profitability on a GAAP net income from continuing operations basis by FY 2017.
- Crude oil markets will continue to be plagued by volatility in the short and medium term, according to executives from ConocoPhillips (NYSE:COP) and other oil companies at the ONS Conference in Norway.
- "Volatility is here to stay,” COP CEO Ryan Lance said at the conference, one of the industry's biggest. Market rebalancing “will extend into 2017. The inventory levels are still quite high."
- The huge global oil oversupply that has weighed on prices for the past two years may not clear until H2 2017, according to Royal Dutch Shell (RDS.A, RDS.B) chief energy adviser Wim Thomas.
- Not everyone is so pessimistic: IHS Markit's Daniel Yergin said oil supply and demand will balance this year, adding that spending on onshore oil and gas will increase in 2017.
- But that does not mean a turnaround is imminent, according to Pioneer Natural Resources (NYSE:PXD) CEO Scott Sheffield: “The downturn’s behind us, but the question is how long do we stay in a $45-$50 oil-price scenario? I think 2017 could be another tough year," adding that things could turn around in 2018.
- ETFs: USO, OIL, UWTI, UCO, DWTI, SCO, BNO, DBO, DTO, USL, DNO, OLO, SZO, OLEM
- Royal Dutch Shell (RDS.A, RDS.B) agrees to sell its Brutus/Gilder assets in the Gulf of Mexico to Houston-based EnVen Energy for $425M plus royalty interests.
- EnVen will gain control of four blocks in the Gulf plus the platform and subsea pipeline network that funnel crude from the fields to shore; Shell says the assets have a combined current production estimate of ~25K bbl/day of oil, or 5.8% of Shell’s Gulf of Mexico production.
- Shell, the biggest oil producer in the U.S. Gulf, has been canceling projects and cutting capex to cope with the plunge in oil markets and its $54B purchase of BG Group in February.
- Bonanza Creek Energy (NYSE:BCEI) says it has been notified by the NYSE that it is not in compliance with continued listing standards requiring the trailing 30-day average closing share price to remain above $1.00.
- The company says it will notify the NYSE of its intention to regain compliance within the Exchange's six month cure period.
- Separately, BCEI says it will pay interest on its senior unsecured notes due 2023; interest had been due on Aug. 1, but the company elected at that time not to make the payment and enter into a 30-day grace period.
- KNOT Offshore Partners (KNOP +1.1%) is higher after announcing a 12-month extension of its stock buyback program for up to 1M common units.
- The program launched in August a year ago and had been scheduled to run through Aug. 31.
- Under terms of the company's authorization, KNOP could reurchase up to 666,667 units while the company's KNOT Offshore Partners general partner was authorized to buy back up to 333,333 units.
- KNOP so far has repurchased 180,906 units and can buy back up to 485,761 additional units, while the general partners have bought back 242,965 units and are authorized to buy back up to another 242,965.
- Petrobras (PBR +3.1%) is in the final stages of selling its Nova Transportadora do Sudeste natural gas distribution network to a group led by Brookfield Asset Management, and could sell more than a previously planned 81%, Bloomberg reports.
- PBR may agree on the sale of the gas pipelines and storage unit before the end of September in a deal estimated at $5.5B-$6B, according to the report.
- "Petrobras is desperately trying to spin off assets as it faces a mountain of debt due in 2017, 2018 and 2019," says analyst with the FGE consultancy group.
- PBR also is enjoying a lift along with other Brazilian stocks as investors bet that Pres. Rousseff will be permanently removed from office this week.
- Norwegian energy safety officials are asking Italy's Eni (E -0.1%) to present plans on how to avoid power disruptions at its Goliat oil platform in the Barents Sea, after production at Norway's only Arctic oil field was shut on Friday due to loss of power supply from shore, prompting a partial evacuation, and a similar shutdown occurred in May after the field's startup in March.
- The government wants Eni to present the plan by Sept. 5, and calls on Eni, which holds a 65% stake in the license, and partner Statoil (STO +0.9%) to meet officials to discuss the planned measures.
- The field in the Barents Sea is estimated to contain ~180M barrels of oil, and was currently produces ~72K bbl/day of oil.
- The Canadian government's planned additional review of Kinder Morgan’s (KMI +1.3%) Trans Mountain pipeline expansion will lend credibility to the final decision by allowing more opponents to be heard, Natural Resources Minister Jim Carr says.
- A government-appointed panel has held meetings throughout the summer along the pipeline route, hearing from proponents and opponents of the project, ahead of a report to be submitted in November and a decision from Prime Minister Trudeau’s cabinet by Dec. 19.
- KMI plans to triple Trans Mountain’s capacity to 890K bbl/day by twinning the existing 1,150-km line that is the only pipeline from Alberta to the Pacific coast and connects the oil sands directly to a port with reach to markets outside North America.
- Oil and natural gas explorers escape a vote in Colorado that could have severely limited drilling in the state, as two measures that would have allowed local communities to ban hydraulic fracturing fail to garner enough support for the November ballot.
- A proposal that would have restricted drilling near homes fell ~21K valid signatures short of the total needed to qualify for a ballot vote, and a measure allowing local governments to ban fracking also failed to attract enough signatures, according to the Colorado Secretary of State's office.
- Colorado's top producers include Anadarko Petroleum (APC +1.3%), Encana (ECA +0.4%), Noble Energy (NBL +1.4%), PDC Energy (PDCE +1.6%), Whiting Petroleum (WLL +1.9%), Bill Barrett (BBG +5.3%), Carrizo Oil and Gas (CRZO +2.2%) and Synergy Resources (SYRG +5.2%).
- Investment companies backed by some of the world’s biggest P-E firms have expressed interest in North Sea assets being sold by Royal Dutch Shell (RDS.A, RDS.B), Financial Times reports.
- Neptune, funded by Carlyle Group and CVC Capital Partners, and Siccar Point Energy, whose owners include Blackstone, are among potential bidders for a package of North Sea assets offered by Shell as part of the company's $30B disposal program, according to the report.
- Shell has insisted that it will not abandon the North Sea, where it has 33 platforms and interests in 65 fields.
- Atlas Resource Partners (NYSE:ARP) receives bankruptcy court approval of its prepackaged restructuring, and expects to emerge as Titan Energy on Sept. 1.
- The prepackaged plan was approved by 100% of lenders in ARP's revolving credit facility and by all of its lenders in a second lien credit facility.
- Canada's National Energy Board cancels the first day of hearings in Montreal on TransCanada's (TRP -0.1%) proposed Energy East pipeline after protesters disrupted the session.
- Montreal Mayor Coderre had been the first scheduled speaker this morning, and has not said if he will try again tomorrow; mayors, environmentalists and citizen groups are scheduled to give presentations throughout the week; similar sessions already have taken place in New Brunswick, and will happen in Quebec City in October.
- Environmental groups against oil sands development oppose the 1.1M bbl/day Energy East pipeline, which would carry crude oil from Alberta to Canada's Atlantic coast.
- Sinopec (SNP -0.1%) says its H1 net profit fell 22% to 19.9B yuan ($2.98B) from 25.4B yuan in the year-ago quarter, but that's more than double its net income in H2 of last year when it posted its weakest earnings since 2002.
- SNP outshined domestic state-run rivals PetroChina (PTR -0.3%) and Cnooc (CEO -0.3%) in H1 as its refining business helped it weather the drops in crude oil and natural gas prices.
- SNP's H1 refining margin rose nearly 48% Y/Y to 514.4 yuan/ton, processing 115.9M tons of crude into fuels (4.67M bbl/day).
- However, SNP's H1 crude production fell to 154.2M barrels, down 11.4% Y/Y, nearly all from domestic operations, which accounts for more than 80% of its crude output; SNP forecasts total H2 production will slip to 147M barrels.
- Williams Cos. (WMB -0.2%) appoints three new independent directors to its board, bringing the board to 10 members - nine of whom are independent - down from 13 this summer.
- WMB is adding Stephen Bergstrom, a director at American Midstream Partners, Scott Sheffield, Chairman and CEO of Pioneer Natural Resources, and William Spence, Chairman and CEO of PPL Corp.
- Activist investor Keith Meister said last week that his Corvex Management hedge would seek his own board nominees and plans to identify a totally new board before shareholders vote at the Nov. 23 annual meeting, although Meister said before WMB named the three new directors that he may consider them depending on their qualifications.
- BlackRock funds withheld support from two high-profile directors at Exxon Mobil (XOM +0.4%) at the oil company's May 25 shareholder meeting, securities filings show, in a rare dispute apparently driven by a board communications policy.
- Funds including the $45B BlackRock Global Allocation Fund withheld support from XOM directors Jay Fishman and Kenneth Frazier this year.
- Reuters reports that BlackRock execs tried to discuss strategy and capital allocation with independent directors of an unnamed "large oil and gas corporation," but were rebuffed because of a policy against such talks, so BlackRock withheld support from the company's lead independent director and the chair of the committee that set the policy; the two were re-elected with 88% and 90% of votes cast, respectively, down from 95% and 98% in 2015.
- BlackRock is XOM's second-largest shareholder with ~6% of its stock.
- NextEra Energy (NYSE:NEE) says it reached agreement with global financial institutions related to its bid to acquire Energy Future's Oncor Electric Delivery utility in Texas.
- As part of the agreement, NEE says it will fund $9.5B, primarily for the repayment of nearly all Energy Future Intermediate Holding Co. debt; NEE previously agreed to buy all of the equity of reorganized Energy Future and some of its direct and indirect subsidiaries, including Energy Future's 80% indirect interest in Oncor.
- The transaction is subject to approval of the merger agreement and Energy Future’s reorganization plan from the bankruptcy court and the Public Utility Commission of Texas.
- Delek US Holdings (NYSE:DK) agrees to sell its 348 MAPCO Express gasoline stations and convenience stores to Compania de Petroleos de Chile for $535M.
- DK says the deal provides additional financial flexibility, which can be used to support Delek Logistics Partners (NYSE:DKL) as it explores growth opportunities.
- COPEC owns Chile's largest convenience store network with more than 900 owned and affiliated sites.
- DK says it will continue to supply fuel to certain MAPCO retail locations under an 18-month supply agreement.
- Statoil (NYSE:STO) lowers development costs for the start-up of its giant Johan Sverdrup oilfield by 24B kroner ($2.9B) to 99B kroner ($11.96B), with total spending including a second phase of investment and capacity expansion now projected at 140B-170B kroner from an earlier outlook for 170B-220B kroner.
- After successful work on “optimizing the processing facility,” STO also is raising phase 1 production capacity to 440K bbl/day of oil, up from an original estimate of 315K-380K bbl/day, and says later phases in the project that will add a processing platform on the field center will increase full production capacity to 660K bbl/day, up from a previous estimate of 550K-650K.
- STO now estimates the price of oil at which the project will be profitable at below $25/bbl, down from a previous forecast of less than $30/bbl given in February and below $40/bbl a year ago.
- The Sverdrup field holds as much as 3B barrels of crude and is expected to contribute ~40% of Norway’s total crude oil output in the 2020s.
- D.E. Shaw & Co is weighing a bid for SunEdison's (OTCPK:SUNEQ) controlling stake in TerraForm Power (NASDAQ:TERP), the bankrupt renewable energy producer's most valuable asset, Reuters reports.
- The hedge fund and its affiliates already own some TERP common shares after receiving them in an agreement announced last year upon forgiving debt owed by SunEdison.
- Appaloosa Management and Brookfield Asset Management (NYSE:BAM) have separately announced plans to jointly bid on the so-called "Class B" shares of TerraForm Power.
Friday, August 26, 2016
- BP, ConocoPhillips (NYSE:COP) and Exxon Mobil (NYSE:XOM) tell state legislators that they will not proceed further with the Alaska LNG project as it is currently structured, saying they support a state takeover of the project.
- The companies say the project is still not economical even after cost estimates have been trimmed to the lower range of a previous estimate of $45B-$65B.
- Energy consultant Wood MacKenzie says the traditional model of a producer owned and financed gasline would be the least competitive of major LNG projects now being planned, although alternatives such as third party investors or full state ownership and tax-exempt status could make the project more competitive.
- The Department of Energy has issued a license to Alaska LNG to export up to 20M metric tons/year of liquefied natural gas, which would make it one of the world's largest LNG projects.
- China’s struggling oil sector is entering a long-term decline of its domestic production, a development that has significant global implications including the potential for higher crude oil prices over time as China steps up imports to meet rising demand at home, WSJ reports.
- Oil production in China is believed that have peaked last year at ~4.3M bbl/day, as output fell 5% in H1 2016 and 8% in July to 3.95M bbl/day, its lowest daily average in nearly five years; the country’s three biggest oil fields likely experienced production declines of 7%-9% during H1.
- It means that the assets that long served as the cornerstone for revenue for China's energy giants PetroChina (NYSE:PTR), Sinopec (NYSE:SNP) and Cnooc (NYSE:CEO) are drying up, and if the companies want to be more profitable - as outside investors and China’s government are pressuring them to do - they will need to diversify their revenue sources and expand their global presence.
- Seadrill (NYSE:SDRL) is maintained with a Sell rating and a $2 stock price target at Evercore ISI, which issued a report today highlighting the company's massive amount of debt coming due during the next 12 months.
- The firm notes that Q2 results showed SDRL generated $303M in cash from operations and lowered capex to just $13M in Q2 from $37M in the prior quarter; the company built cash by $195M to $1.287B, and Evercore expects SDRL to continue to build cash as $2.388B of debt is due in the next 12 months, and believes additional debt-for-equity swaps and potential new equity issuances are likely.
- With ~20% of SDRL's floater fleet cold stacked and another 20% of the floater and jackup fleet idle, the firm thinks more cold stackings are likely, as well as deferral of five newbuild floaters and eight jackups through at least 2017.
- Holly Energy Partners (HEP -0.4%) is resumed with a Neutral rating and $36 price target at Goldman Sachs, which expects HEP's distribution growth to come in largely consistent with its broader sector coverage.
- Goldman sees HEP generating 8% distribution growth in 2017 and 5% annually thereafter, driven by accretive dropdown acquisitions from its parent, HollyFrontier, and to a lesser extent base asset growth.
- The firm foresees dropdown acquisitions of $250M in 2017 and $100M in 2018 at an average multiple of 8x, consistent with historical transactions.
- AMEC Foster Wheeler (AMFW +5.5%) is upgraded to Overweight from Equal Weight at Morgan Stanley on potential restructuring benefits to be announced by the new CEO.
- Stanley says the new savings cost plan, likely to be announced at the company's Nov. 15 strategy update, should offer more than enough scope to offset the loss of ~£80M EBITDA associated with £500M of asset disposals.
- The analyst predicts £100M of further annualized savings starting from H1 2017 with full impact in 2019, and expects the stock to re-rate as the cost savings story develops and the cycle continues to improve.
- The planned sale of 49% in India’s Essar Oil to Rosneft (OTC:RNFTF) may have run afoul of the U.S., which has the Russian company on the list of sanctions it had imposed over Russia’s annexation of Crimea.
- The Times of India reports that many Indian banks, which are heavily exposed to Essar Oil with extended loans, may be reluctant to back the sale for fear of facing scrutiny and reaction by the U.S.
- Essar has been in talks with oil trader Trafigura about the sale of another 25% of the company, but Trafigura has close relations with Rosneft since it handles much of Russia’s crude exports, and the sale reportedly hinges on the Rosneft deal being completed.
- EQT Corp. (EQT -0.3%) is upgraded to Buy from Hold with an $87 price target at Stifel, citing the company's high-quality asset base, industry-leading balance sheet and valuable and growing midstream platform,
- After backing out the value of EQT GP Holdings (NYSE:EQGP), Stifel estimates that EQT trades at 8.4x 2017 EBITDA, an 18% discount to its Appalachian peers.
- The firm says it new $87/share target assumes that EQT's E&P assets trade in line with its Appalachian peer group at ~10x.
- Sentiment is improving and "recovery emerging” around energy MLPs, Citi's Faisel Khan says, citing Improving commodity prices and tighter credit spreads as the main reasons, as some companies are positioning for volume growth.
- The analyst offers six "value picks": TRGP, OKS, NS, BWP, TLLP and CQP.
- Khan's "key thematic picks" are Energy Products Partners (NYSE:EPD), as a play on growth in natural gas liquids, Plains All American Pipeline (NYSE:PAA) and Plains GP Holdings (NYSE:PAGP) on growth in the Permian basin, and EnLink Midstream (NYSE:ENLC), as a play on Oklahoma expansion.
- Petrobras (PBR -0.3%) is upgraded to Neutral from Underperform with an $8.60 price target, hiked from $2, at Credit Suisse, saying conditions clearly have improved in recent months, especially for liquidity, but that the company's ultimate success likely still depends on oil prices rebounding to $80/bbl.
- "Management can add considerable value through cost and capex efficiency, divestments, fuel pricing, and strategic changes," the firm writes, adding that its rating assumes that all those measures succeed but "they're not enough to make value converge to prices."
- The U.S. oil rig count remains unchanged at 406 following eight consecutive weekly gains, Baker Hughes says in its latest survey.
- The total U.S. rig count, which includes a drop of 2 rigs drilling for natural gas to 81, fell by 2 to 489.
- Since last year at this time, the total rig count down 44% from last year's count of 877, with oil rigs down from 40% from 676, and gas rigs off 60% from 202 a year ago.
- ETFs: USO, UNG, OIL, UWTI, UGAZ, UCO, DGAZ, DWTI, SCO, BNO, BOIL, DBO, GAZ, DTO, USL, KOLD, UNL, DNO, OLO, SZO, DCNG, OLEM
- Vaalco Energy (EGY +3.8%) is higher after saying it resumed production from a shut-in well at the Avouma platform offshore Gabon after installing a new electric submersible pump.
- EGY says the 2-H well at Avouma Platform in the Etame Marin permit is now producing "at a stable rate" of 1,850 gross bbl/day, or 450 bbl/day net to the company.
- EGY says the well was producing ~2,700 gross bbl/day prior to the first pump failure but is flowing the well at a lower rate as it monitors performance of the new pump.
- Iran’s revival as a crude oil exporter appears to have stalled, seven months after Western sanctions were lifted, casting uncertainty over the country’s willingness to cooperate with other producers on limiting output, WSJ reports.
- Iran has refused to consider joining fellow OPEC members in taking action to raise crude prices by limiting output until its exports and production reach pre-sanctions levels, but its ability to reach pre-sanctions levels above 4M bbl/day are now in question.
- Iran has been pumping 3.85M bbl/day this month, the country’s oil minister says, up from less than 3M bbl/day from before the sanctions were lifted in January but little changed from 3.8M bbl/day he cited in June and short of the country’s stated goals.
- The country has told OPEC that it plans to participate in next month's meeting and reportedly has suggested a greater willingness to consider joint action, but it has not said it would soften its conditions for actually joining in production limits.
- ETFs: USO, OIL, UWTI, UCO, DWTI, SCO, BNO, DBO, DTO, USL, DNO, OLO, SZO, OLEM
- The initiative pushed by anti-fracking activists in Colorado that could virtually eliminate hydraulic fracturing in the state is "extremely unlikely" to make it to the November ballot needed to become law, Wells Fargo analysts say.
- The proposal would move the distance for a hydraulic fracturing operation from 500 ft. or more to a minimum of 2,500 ft. or more from an "area of special concern" such as occupied housing, drinking water sources, sports fields and parks.
- The stock market already is assuming that the proposal will fail, the firm says, based on recent gains in share prices of companies that operate in the Niobrara/DJ Basin, including PDC Energy (PDCE +0.2%), Anadarko Petroleum (APC +1.3%), Bill Barrett (BBG +3.5%) and Whiting Petroleum (WLL +4.4%).
- PetroChina (PTR +1.1%) says it plans to raise natural gas as a share of its production to account for half its output by the end of the decade from 37% currently.
- PTR also says it seeks to raise total output by ~30% to produce more than 300M tons of oil and gas equivalent (6.02M boe/day) by 2030, with half coming from overseas projects vs. 14.4% in H1 of this year.
- PTR's global crude output in H1 fell 1.4% Y/Y to 470.6M barrels, gas production rose 7.4% to 1.66B cf, and total oil and gas output was 748.2M boe, up 1.7 Y/Y but down 1.3% vs. H2 2015.
- PetroQuest Energy (NYSE:PQ) +35.2% premarket after announcing private exchange offers and a consent solicitation, as well as a lender commitment for a four-year $50M term loan facility.
- The move could ease concerns over PQ's liquidity and the September 2017 maturity of certain notes, which earlier this month prompted the company to add a potential bankruptcy filing to its list of risk factors.
- Share are upgraded to Buy at Johnson Rice and Seaport Global.
- Phillips 66 Partners (NYSE:PSXP) agrees to acquire a natural gas liquids system in southeast Louisiana from Chevron (NYSE:CVX); financial terms are not disclosed.
- PSXP says the system includes ~500 miles of pipelines and a storage cavern connecting multiple fractionation facilities, refineries and a petrochemical facility.
- PSXP expects EBITDA from the acquired assets of ~$25M in 2017.
- The Iowa Utilities Board yesterday denied a request by a group of landowners to halt construction of the Dakota Access oil pipeline beyond this week.
- The board concluded that the landowners have little chance of success in their lawsuit against it and that the Dakota Access developers would be financially harmed by delays.
- Construction still has not resumed, as ~300 protesters remain camped out in opposition to the $3.8B pipeline; a judge said earlier this week that he would rule by Sept. 9 on a request by the Standing Rock Sioux tribe to stop construction near their reservation.
- The builders, led by Energy Transfer Partners (NYSE:ETP) and its Sunoco Logistics Partners (NYSE:SXL) affiliate, say 22% of the pipeline in Iowa has been built, and 75% of the route has been cleared.
- A voluntary layoff program at Petrobras (NYSE:PBR) has been accepted by 6,100 employees, a number that could rise by the company's deadline at the end of this month, Reuters reports.
- If all ~12K eligible employees - 21% of the eligible workforce - accept the voluntary layoff program, PBR would face an immediate cost of 4.4B reais ($1.3B) but save 33B reais in salaries over the next four years.
- Blackstone yesterday announced an agreement to invest $1.5B in a pair of drilling deals in West Texas, and committed another $500M to a group who has just purchased 16K acres in another area of the Permian Basin. The money for the deals came from an $8B pool raised early last year, but had mostly sat untapped.
- Other investors of late include Wilbur Ross, EIG Global Energy Partners, and Apollo Global. Wall Street's rush could be a sign of a bottom ... or a bubble - in some cases properties are going for higher prices that exceed those paid when oil was above $100 per barrel two years ago.
- "There’s this one corner of the world, the Permian Basin, where investors will keep financing you to keep on acquiring,” says Parsley Energy (NYSE:PE) CEO Bryan Sheffield, whose company has sold stock to buy land five times since 2014 (including a sale last week). PDC Energy (NASDAQ:PDCE) shot higher earlier this week on an agreement to buy $1.5B of Permian fields fro a NY investment firm.
- “It’s like musical chairs,” says a Dallas portfolio manager. “At some point in time, there’s not going to be a chair, and [oil producers] want to make sure they have a seat.”
Thursday, August 25, 2016
- Blackstone Group (NYSE:BX) says it will invest ~$1.5B in the Permian Basin in Texas and New Mexico to make strategic acquisitions through two new ventures.
- The P-E firm says it will partner with privately-held Jetta Operating to pursue asset and leasehold acquisitions in the Delaware sub-basin of the Permian, and with start-up Guidon Energy to form a new company focused on the Midland sub-basin of the Permian to purchase an initial acreage position.
- Lucas Energy (NYSEMKT:LEI) +9.8% AH after reaching agreement with its senior lender to borrow $1M toward the drilling and completion of Eagle Ford wells under a joint operating agreement with Lonestar Resources and improvement maintenance operations on its existing assets.
- LEI says the agreement with LONE covers more than 1,450 gross acres, and the company says its participation will vary between 8%-14% working interest in the units.
- LyondellBasell (NYSE:LYB) has retained Bank of America Merrill Lynch to help with the potential sale of its 263K bbl/day refinery in Houston, Reuters reports.
- Saudi Aramco, Valero Energy (NYSE:VLO), Cenovus Energy (NYSE:CVE) and Suncor Energy (NYSE:SU) are among the companies that have expressed interest, according to the report.
- LYB CEO Bob Patel said earlier this year that he expected the refinery eventually would go on sale, but he has not offered any time frame.
- Berkshire Hathaway (BRK.A, BRK.B) now controls more than 15% of Phillips 66 (PSX +1.8%) after buying more shares in the oil refiner this week, bringing its total number of PSX shares close to 79.5M as Warren Buffett continues his steady buildup of shares since 2012.
- Buffett bought 704,181 shares at an average price of $77.45/share between Aug. 22 and Aug. 24, which would be valued at ~$6.17B.
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