Monday, March 2, 2015
- The crude oil aboard the train that derailed and exploded two weeks ago in West Virginia contained so much combustible gas that it would have been barred from rail transport under safety regulations set to go into effect next month, WSJ reports.
- The oil’s vapor pressure was 13.9 psi, which exceeds the limit of 13.7 psi that North Dakota is set to impose in April on oil moving by truck or rail from the Bakken Shale.
- Plains All American Pipeline (NYSE:PAA), which shipped the oil, says it follows regulations governing the shipping and testing of crude; CSX, the railroad that carried the oil, says it had stepped up its inspections of the track along the route.
- The new information about the West Virginia accident likely will increase regulators’ focus on the makeup of oil being shipped by train; oil from sahle formations is known to contain far more combustible gas than traditional crude oil, which has a vapor pressure of ~6 psi.
- Top Bakken producers: CLR, EOG, WLL, HES, XOM, OAS, NOG, EOX, MRO
- Shares of Pioneer Natural Resources (NYSE:PXD) have been on the rebound since a disappointing Q4 earnings report, in part because the company’s debt levels and development costs are lower than its competitors, which puts it in a strong position to weather the oil slump, according to a Bloomberg profile.
- PXD’s debt is ~1.4x a projection for its 2015 EBITDA, according to calculations by RBC analyst Leo Mariani, who says the result is ~25% lower than its competitors, including Concho Resources (NYSE:CXO) and Newfield Exploration (NYSE:NFX).
- Investors are watching to see if PXD can close above the intraday low of $160.50 from Nov. 26, the last trading day before a plunge in oil prices sent shares down 11%, Miller Tabak's Matt Maley says, and that it would be a bullish technical indicator if the stock can “fill the gap.”
- Walter Energy (NYSE:WLT) -1.2% AH after disclosed that it agreed to issue 8.65M common shares in exchange for $66.72M aggregate principal amount of 8.5% senior notes due 2021 held by a noteholder.
- WLT says it executed the transaction to reduce its debt and interest cost, increase equity, and improve its balance sheet.
- WLT will receive no cash proceeds as a result of the exchange.
- McDermott (NYSE:MDR) +21.8% AH after reporting a surprise Q4 profit and better than expected revenues, as well as strong revenue guidance for 2015.
- MDR issues upside guidance for FY 2015, forecasting revenues of $3.3B-$3.6B vs. $2.79B analyst consensus estimate, and operating income of $25M-$50M; the company plans to lay off ~10% of its workers by the end of the year.
- MDR expects 2015 cash savings from its restructuring, before costs, of ~$50M, with cash savings of $100M/year beginning in 2016.
- At year-end 2014, contract backlog stood at $3.6B, down from $4B in Q3 and $4.8B at the end of 2013; 57% of the backlog is tied to subsea operations, and 43% to offshore operations.
- Also announces contract wins for two separate offshore construction projects in the Middle East: a significant power supply system replacement contract by Saudi Aramco for the Marjan field offshore Saudi Arabia, and a project for new jacket, temporary deck and replacement umbilical by Qatar Petroleum for the North Field Alpha gas development offshore Qatar.
- Nabors Industries (NYSE:NBR) -2.7% AH after missing expectations for Q4 earnings and revenues.
- Unadjusted earnings swung to an $891M Q4 loss, which included a $612M impairment NBR booked on its older rigs which have become less valuable as they are used less and the company is no longer able to justify maintenance, and a $387M writedown related to goodwill; NBR reported an unadjusted $152M profit in the year-ago quarter.
- NBR says its drilling operations posted a Q/Q improvement in operating income, primarily attributable to new rig deployments and the seasonal ramp-up in Alaska, and its international drilling segment also benefited from new rig deployments and contract renewals, but rig services and completion and production services operations were hurt by lower activity and increased pricing competitiveness compared with the previous quarter.
- Petrobras (NYSE:PBR) says it plans to sell ~$13.7B worth of assets in 2015 and 2016, far above the $5B-$11B outlined in its five-year $221B capital spending plan previously announced in February 2014, as the company continues to slim down in the wake of the vast corruption scandal in Brazil.
- PBR expects divestitures in exploration and production locally and overseas to account for 30% of asset sales targeted in the period, while gas and energy assets account for 40% and the remaining coming from assets related to distribution.
- The moves are part of a plan “to reduce leverage, preserve cash and focus on priority investments,” PBR says.
- WPX Energy (NYSE:WPX) says it is cutting ~8% of its company-wide workforce of nearly 1,000 employees and consolidating its regional office staff in Denver with personnel at its Tulsa headquarters.
- WPX says its decision is in response to a dramatic drop in the price of the two main energy sources WPX produces.
- WPX said last month it was cutting its 2015 capital spending to $725M, about half of spending in 2014.
- American Eagle Energy (NYSEMKT:AMZG) says it has suspended its 2015 capital plans until the oil price and service cost environment come into balance.
- AMZG says it stopped drilling in Nov. 2014 after its Huffman 15-34S well, and that the two gross wells that were drilled during Q4 will not be completed until pricing conditions improve.
- The Huffman well was brought on production in December and averaged 261 boe/day during the first 30 days of production, and averaged 266 boe/day during February.
- Layne Christensen (NASDAQ:LAYN) -7.5% AH after lowering its Q4 outlook because of the continued decline in commodity prices, now seeing a per-share loss of $1.10-$1.25 vs. a loss of $0.60-$0.65 forecast in December.
- LAYN says roughly half the anticipated loss is due to non-cash expenses that were not connsidered in the prior guidance, and says it mineral services business continues to be hurt by weakness in commodity prices and the associated reduction in global exploration budgets by mining companies.
- Shares are trading after a brief halt.
- The NYSE says it is suspending trading in BPZ Energy (BPZ -36%) and will begin delisting proceedings, as the share price is "abnormally low" and no longer suitable for a listing on the exchange.
- BPZ earlier said it is exercising a 10-day grace period for repaying the $62M in principal and interest owed on its convertible bonds, and that it is in talks with some of the bondholders about a potential restructuring of the debt.
- The Dutch government apologizes for ignoring risks posed by earthquakes caused by production of natural gas from the Groningen field, following a report last month by the country's safety board that found the government, together with Royal Dutch Shell (RDS.A, RDS.B) and Exxon Mobil (NYSE:XOM), had put profits before safety in exploiting the field.
- The economic minister has ordered production at Gronignen to be cut by 16% for H1 2015, with another decision on production at the field expected on July 1.
- The Groningen field accounts for two-thirds of Dutch gas production, and the Netherlands supplies ~15% of Europe's total natural gas, providing an important alternative for Russian gas.
- Rose Rock Midstream (RRMS +1.2%) is upgraded to Buy from Hold with a $55 price target at MLV, which says RRMS has positioned itself for a successful 2015 as growth initiatives will begin contributing to performance.
- RRMS enjoyed a successful 2014 in expanding its field services business, completing multiple expansion projects, growing distributions by 25%, improving financial flexibility, and providing clear visibility into 2015 and beyond, according to MLV.
- The firm also says RRMS eventually will benefit from visible, well-covered, multi-year distribution growth, fueled by a robust inventory of potential dropdowns by a well incentivized sponsor, SemGroup (NYSE:SEMG).
- BP's Bob Dudley joins other oil explorers calling for less onerous conditions from Mexico as the country opens its crude and natural gas reserves to outsiders for the first time in 75 years.
- Preliminary terms being offered by Mexico "need to be a little more competitive” in the wake of oil's collapse, the CEO says, echoing sentiments of Occidental Petroleum's (NYSE:OXY) Stephen Chazen that OXY would rather develop U.S. projects than “fool around with some ridiculous contract” in Mexico.
- Alfa (OTCPK:ALFFF), which has a partnership with Pacific Rubiales Energy (OTCPK:PEGFF), said last week that requirements to participate in the fields are "extremely high."
- Production sharing contracts for 14 Mexican shallow water blocks to be auctioned this year include a 60% cost recovery limit and 25% local content in the first year, terms that analysts say may be pricing the country out of the market as would-be investors take a more cautious approach.
- Gran Tierra Energy (GTE -3.7%) is lower after posting disappointing Q4 results, which included a decision to halt further development of its Bretana heavy oil field in Peru due to the current low commodity price environment.
- Associated with the decision to no longer commit capital to Peru, GTE was required to recognize $265M of Peruvian-related asset impairments for FY 2014.
- In maintaining its Buy rating and C$4.50 price target, Canaccord says the upside to the move is that it makes available nearly all GTE's $332M in cash resources to refocus into new growth areas in the coming years.
- MarkWest Energy (MWE -0.3%) is downgraded to Hold from Buy with a $70 price target, down from $75, at Wunderlich, which says significant uncertainty remains with few near-term catalysts.
- While Q4 results and 2015 guidance on adjusted EBITDA and distributable cash flow were better than many had feared, the firm says MWE's current valuation fairly reflects a reduced near-term distribution growth outlook.
- Wunderlich says it is heartened that some parts of its thesis have materialized via MWE's revised guidance, such as the ability to delay capex while taking plant utilization rates higher, and limited 2015 equity needs relative to capex.
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