Today - Tuesday, September 16, 2014
- A new study finds that it's not the actual process of fracking that can cause water pollution; the bigger problem is faulty well construction.
- The real concern, according to an analysis published yesterday by the peer-reviewed Proceedings of the National Academy of Sciences, are leaks in the steel-and-cement casings surrounding the well bore, which let gas escape before it gets to the surface, making water undrinkable and in some cases explosive.
- "Where contamination occurs, it related strictly to well integrity," says a co-author of the study, who adds, "The answer is not to stop drilling. The fix is better executions on the construction of the well and improving well integrity."
- The study is fueling calls for stricter standards for well construction that could increase costs for energy companies.
- ETFs: XLE, ERX, VDE, OIH, ERY, FCG, XOP, DIG, GASL, DUG, IYE, XES, IEO, IEZ, GASX, PXE, PXJ, DBE, FENY, RJN, RYE, FXN, JJE, DDG, ONG, RGRE, UBN
- Argentina’s oil-producing provinces and the federal government agree to revise a 1967 energy bill to include shale, two provincial officials tell Bloomberg.
- State-run producer YPF is seen benefiting most from the new legislation, which should ease political tensions stemming from unclear rules governing the country’s shale boom and attract investors to areas such as Vaca Muerta, the huge shale formation where companies such as Chevron (NYSE:CVX), Shell (RDS.A, RDS.B) and Exxon (NYSE:XOM) are drilling wells.
- The new bill would allow energy companies that invest $250M over a five-year period to sell 20% of production in international markets without paying export taxes and to keep some export revenue outside the country for shale and conventional projects.
- Sunoco Logistics Partners (NYSE:SXL) announces a public offering of 7.7M common units, with an underwriters option to purchase up to another 1.155M units.
- SXL says it intends to use the proceeds to repay outstanding borrowings under its $1.5B revolving credit facility and for general partnership purposes.
- Genie Energy (GNE -0.4%) adds to its oil shale exploration acreage in Mongolia after agreeing to a deal to explore a 25K sq. km track in the center of the country.
- The deal means GNE now has exclusive rights to explore for oil shale over ~60K sq. km of Mongolian territory.
- GNE believes the license area "may contain world class deposits of thick and rich oil shale well-suited for our in-situ extraction technology.”
- Ocean shipping of dry bulk commodities and oil will nearly double earnings capacity during the next several years while the smaller container ship industry will tread water, Deutsche Bank says.
- The firm believes the industry is "on the cusp of entering a new era of prosperity," driven by improved supply/demand dynamics, increased fleet utilization and abundant capital to fund profitable growth.
- On average, DB forecasts a near doubling of earnings power across its coverage universe by 2016 vs. 2013, led by shippers in the Dry Bulk and Oil trades.
- Initiated with Buy ratings: TNK +9.8%, CPLP +2.5%, DSX +2.8%, DRYS +5.5%, DLNG +2.4%, NNA +2.1%, SALT +0.8%, SSW +1.3%, GASS +3.3%.
- Started at Hold: TK +1.2%, NMM +0.3%, FRO +3.3%, TGH -0.6%.
- FMC Tech (FTI -0.8%) is downgraded to Market Perform from Outperform which a $58 price target, down from $68, at FBR Capital, which cuts estimates and price targets for several subsea rig stocks.
- FTI's subsea processing effort on the boosting side may be struggling competitively more than anticipated, FBR says, where the company has not booked a single order since commercially entering the niche in 2012 even though it has placed several bids, and rival OneSubsea has won multiple awards.
- For the subsea sector, the firm still expects net growth and a recovery inflection by H1 2016 but now at a slower pace, as it cuts its five-year compound average growth rate through 2018 to 4% from 7%; price targets also are cut for Dril-Quip (DRQ -0.7%) to $120 from $137 and Frank's International (FI -1.2%)to $24 from $28.
- Apache (APA +1.2%) is seeking to raise as much as $840M from the sale of oil and gas projects in Alberta, according to a Bloomberg report.
- APA is working with Bank of Nova Scotia to sell the assets in the Provost region, which produce nearly 10K boe/year and have an annualized net operating income of $119M.
- Based on their production, APA could expect the assets to fetch $400M-$500M before factoring in the additional value of pipelines, infrastructure and real estate attached to the projects, Global Hunter analysts say; with the additions, APA may hit its target.
- CMS Energy (CMS +0.8%) unit Consumers Energy, the second-largest utility in Michigan, agrees to spend $1B to upgrade pollution controls at five coal-fired powered plants in the state under a settlement reached with the Justice Department.
- The settlement requires payment of a $2.75M civil penalty of $2.75M to resolve Clean Air Act violations and spending at least $7.7M on environmental projects to help mitigate the harmful effects of air pollution on the environment and benefit local communities.
- The EPA expects the actions required by the settlement will reduce harmful emissions by 46.5K tons/year.
- Occidental Petroleum (OXY +0.8%) is downgraded to Equal Weight from Overweight with a $109 price target, down from $117, at Barclays, which believes any restructuring may disappoint.
- The firm says OXY's MENA strategy has been difficult to implement; expected spinoffs and asset sales will leave OXY with a concentrated Permian Basin position along with a diverse MENA portfolio as well as chemicals, midstream and Latin American assets.
- Barclays also believes OXY has been slower than peers to begin moving towards unconventional drilling opportunities, which will be reflected in at best a peer average multiple.
- The Chinese exploration rig at the center of a tense South China Sea standoff with Vietnam earlier this year has made its first deep sea gas discovery in the area.
- Cnooc (CEO +2.9%) says the discovery was made about a month after its rig withdrew in July from Vietnam's exclusive economic zone to less-contested waters closer to China.
- It is unclear whether the discovery will become commercially viable, but the news represents a significant step in China’s ability to seek resources beneath the South China Sea.
- Endeavour International (END -5.6%) says the Rochelle field, one of its North Sea producing fields, will be offline until repairs to the dry gas export compressors on the Scott platform are completed.
- Due to the unplanned downtime at the Rochelle site, END lowers its Q3 production guidance by 500 boe/day to 9K-10K boe/day.
- END expects the Rochelle field to come back online later this month.
- SinoCoking Coal (SCOK +40%) says the local government of Pingdingshan has agreed to provide it with an extensive gas pipeline distribution network and gas storage system as well as a land allotment of ~7.5 sq. miles of high-quality coal, in support of the development and continuing operations of SCOK's recently announced $300M underground mine coal-to-syngas conversion project.
- The gas pipeline network and storage system will connect each of SCOK's four mines in Henan Province with most of its major population and industrial centers.
- PG&E (PCG -0.8%) says it has fired three executives, including its VP of regulatory relations, following inappropriate email exchanges with California's Public Utilities Commission.
- In the emails, the VP complained about an administrative law judge the PUC assigned to rule on a natural gas rate case concerning energy prices passed along to consumers and asked that a different judge be assigned to the case.
- PG&E says it is creating a new role of chief regulatory compliance officer, and is hiring former U.S. Secretary of the Interior Ken Salazar to advise it on improving its interactions with regulators.
- China says it will enact new laws banning the import and local sale of low-grade coal starting next year in a bid to curb its air pollution problem, with tough requirements in major coastal cities set to hit Australian miners such as BHP Billiton (BHP -0.4%), Rio Tinto (RIO -0.6%) and Glencore (OTCPK:GLCNF, OTCPK:GLNCY).
- China accounts for ~25% of Australia's coal exports, taking 54M metric tons of thermal coal and 30M metric tons of metallurgical coal from Australia in 2013; consultant Wood Mackenzie says all the thermal coal exceeded the new ash limit, while the met coal was below the limit.
- The most stringent requirements are for cities in the southern Pearl River Delta, the eastern Yangtze River Delta and three northern cities including Beijing, Tianjin and Hebei; the areas will be banned from burning coal that has more than 16% ash and 1% sulfur.
- Also, YZC -0.5%, KOL -0.4%.
- Canadian Natural Resources (CNQ +1.1%) will be allowed to resume production at its Primrose East oil sands site in Alberta which has been plagued by unexplained leaks of crude that seeped to the surface, the province’s energy regulator said yesterday.
- The decision partially lifts restrictions on CNQ's operations that had been in place since mid-2013 after mysterious leaks of crude were detected at four separate locations at the site.
- Last month, CNQ lowered its annual production forecast, citing delays in the resumption of operations at Primrose East.
- BP says it will cut ~275 staff and contractor jobs in its Alaska operations by early next year following the April sale of its interests in four oil fields in the North Slope area.
- The latest cuts are evidence of BP making divestments to simplify its business globally, though it has further to go, Barclays analysts say.
- "What it has not done is simplify the cost base... This is set to be the next focus for the group and supports our view that material efficiency gains can be made," Barclays says.
- Uranium Energy (NYSEMKT:UEC) +5% premarket after reporting a positive preliminary economic assessment on its Anderson project in Arizona, which includes a pre-tax project internal rate of return as high as 63%.
- Anderson's anticipated mine life is 14 years, during which it is expected to produce ~16M lbs. of uranium at an average annual rate of slightly more than 1M lbs./year.
- Project capex is estimated at $8M for pre-production costs and ~$44M for initial capital.
- Spectra Energy (NYSE:SE) and Northeast Utilities (NYSE:NU) announce plans for a $3B pipeline expansion to meet rising demand for natural gas for power and heating in New England.
- The proposed $3B Access Northeast project would boost capacity on the Algonquin and Maritimes pipeline systems by as much as 1B cf/day.
- The project includes the expansion of existing pipelines, partnerships with regional storage facilities to supply natural gas for power plants and home heating, and additional Algonquin and Maritimes delivery points for local distribution companies; the companies hope to complete the project by late 2018.
- Blueknight Energy (NASDAQ:BKEP) announces plans to sell 8.5M units in a public offering, with an underwriters option to purchase up to 1.275M additional units.
- BKEP plans to use the proceeds for general partnership purposes, including the repayment of a portion of the outstanding borrowings under its credit facility and partially funding the previously announced $300M Eaglebine pipeline project.
- Magnum Hunter Resources (NYSE:MHR) says it is bringing in Morgan Stanley as a partner in its Eureka Hunter natural gas gathering subsidiary in the Marcellus and Utica shale fields, giving the two co-ownership in the business valued at $1B.
- Morgan Stanley Infrastructure (NYSE:MS) agrees to pay $65M to MHR for a 6.5% stake and will buy ArcLight Capital Partners' 41% stake in the business for an unspecified amount.