Today - Tuesday, November 25, 2014
- Total (TOT -1.2%) will face trial in France over claims of corruption related to Iranian contracts dating from the 1990s and early 2000s, the Paris prosecutor’s office says.
- TOT agreed last year to pay $398M to settle U.S. criminal and civil allegations that it had paid ~$60M in bribes to win oil and gas contracts in Iran; at the time, the Paris prosecutor recommended that TOT and its now-deceased CEO Christophe de Margerie be brought to trial.
- The company is now facing trial in France for similar issues; TOT last year said it hoped the U.S. fine would draw a line under the issue and that it had “not committed any offense under applicable French law."
- Nuverra Environmental Solutions (NES +11.3%) agrees to provide water-related pipeline services in North Dakota for Exxon Mobil (NYSE:XOM) subsidiary XTO Energy.
- NES will build the 150-mile McKenzie County pipeline network to provide produced water gathering and disposal services and fresh water delivery as part of a long-term, fee-based gathering agreement.
- The network is projected to cost $125M-$150M, with completion expected by Q4 2015.
- Crude oil prices tumble, with West Texas crude hitting session lows and slipping below $75/bbl, on news that meetings among Saudi Arabia, Venezuela, Mexico and Russia oil minister failed to produce any agreements for oil production cuts.
- January WTI crude now -1.7% at $74.49/bbl.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, USL, UWTI, DWTI, DNO, SZO, OLO, OLEM, TWTI
- A federal appeals court says Chesapeake Energy (CHK -1.1%) had no right to redeem $1.3B of notes early because it waited too long to tell investors of its plans, reversing a 2013 ruling by a district court.
- The 2-1 decision agrees with Bank of New York Mellon, the notes' trustee, that the notice from CHK to redeem its 6.775% notes maturing in 2019 was untimely, referring the case back to the district court.
- C&J Energy Services (CJES +3.6%) says it plans to appeal a Delaware court ruling that requires it to solicit offers from other buyers for 30 days before it can merge with a unit of Nabors Industries (NBR -0.5%).
- NBR announced in June that it would merge its completion and production business with CJES and receive $2.86B in cash and stock; the deal is structured as a Reverse Morris Trust, a transaction that allows a parent company to sell its unit in a tax-efficient manner.
- But CJES shares are higher, as investor appetite for the deal had been waning given the integration risk and less favorable industry outlook.
- Petrobras (PBR +4.1%) says it has received a subpoena from the SEC asking for documents related to an unspecified investigation it is pursuing, as the domestic probe of the company spreads beyond Brazil's borders.
- PBR also is under investigation by a U.S. Department of Justice unit that looks into potential violations of the U.S. Foreign Corrupt Practices Act, a source tells Reuters.
- Prosecutors in Brazil allege the company systematically overpaid for work by contractors and that the excess funds were then illegally funneled to political parties, including that of Pres. Rousseff.
- Nevertheless, PBR opens higher as Citigroup upgrades shares to Buy from Neutral.
- SinoCoking Coal (NASDAQ:SCOK) +23.6% premarket after announcing that its Pingdingshan above-ground facility for the conversion of carbon dioxide into clean-burning syngas is operating a full capacity and has achieved its initial production target of 25K cm/hour.
- SCOK says the facility is generating gross revenues of ~$83K/day, based on the current price of $0.139/cm for syngas, and expects gross profit margins of 45%-50%.
7:03 AM| Comment!
Monday, November 24, 2014
- A Delaware court today ordered a 30-day hold on the C&J Energy (NYSE:CJES) acquisition of a Nabors Industries (NYSE:NBR) unit, finding C&J’s board did not adequately shop the company and telling it to feel out other potential buyers, WSJ reports.
- The deal, announced in June, was unusual as CJES was the nominal buyer, agreeing to pay NBR 62.5M shares and $940M in cash for the fracking services unit, but NBR is to retain control of the combined entity with a 53% stake to CJES shareholders’ 47%.
- The judge found that because CJES shareholders essentially were turning over control of their investment to NBR, the deal was subject to a corporate law theory that required the board to take steps to get the best possible price.
- Kinder Morgan (NYSE:KMI) sold $6B of notes today to help fund the estimated $44B consolidation of its family of oil pipeline entities.
- The largest portion of the five-part offering was $1.75B of 5.55% bonds due June 2045, issued at a yield of 2.55 percentage points above similar maturity Treasury bonds, according to Bloomberg; KMI also sold $1.5B portions of 3.05% five-year notes and 4.3% bonds due June 2025, $750M of 5.3% 20-year securities, and $500M of 2% three-year notes.
- S&P, Fitch and Moody’s all recently upgraded KMI’s credit ratings to the lowest rungs of investment-grade status.
- Hedge funds are betting that some of the largest U.S. coal companies are heading for the financial slag heap by snapping up their bonds on the cheap; if the companies go bankrupt, they aim to swap the debt for controlling shares, and mines and other assets can be sold at a profit once coal prices rebound.
- These vulture funds have used these tactics in other ailing industries such as air travel and paper manufacturing, but an improving economy has left them with few new targets this year; more of the funds are descending on big coal as declining coal prices catch up with mining companies that borrowed too heavily.
- Walter Energy (NYSE:WLT) is said to be a favorite of distressed-debt investors, since it owns some low-cost mines that produce metallurgical coal and could be profitable immediately if they aren’t saddled with WLT’s debt; Alpha Natural Resources (NYSE:ANR) and Arch Coal (NYSE:ACI) also have seen heavy interest.
- Plains All American Pipeline (NYSE:PAA) says it plans to provide additional pumps to increase the takeaway capacity of the Cactus Pipeline in response to higher regional production forecasts and shipper demand.
- Installation of booster stations along the Texas pipeline will result in an increase in throughput from ~250K bbl/day to ~330K bbl/day.
- The Cactus Pipeline is expected to be in service in April 2015; the expansion will be completed in Q4 2015.
- Oil at $75/bbl would have little impact on U.S. shale production because investments in wells and production already have been made, Dow Chemical (NYSE:DOW) Andrew Liveris says.
- Some U.S. shale producers are getting hurt by the drop in oil prices, but Dow sells enough different products that it can withstand lower crude, Liveris says.
- $75/bbl has been mentioned as a price where some shale regions in Texas are no longer considered profitable.
- Enterprise Products Partners (EPD -0.9%), which obtained U.S. approval to ship condensate overseas this year, is seeking to sell the lightly processed oil to Asian buyers in 2015, Bloomberg reports.
- EPD is said to be offering to export 600K barrels/month of condensate from the Eagle Ford formation, and potential buyers were required to make their bids by Nov. 22, according to the report.
3:39 PM| 45 Comments
- Uranium prices have reversed recent gains, plunging $6/lb. (~13.5%) to $38 over the past week in their biggest weekly drop since 1996.
- TD Securities' Greg Barnes thinks the current volatility is more reflective of trader positioning in a thinly traded market than utilities exhibiting strong fundamental demand; the analyst is not convinced that the rapid drop will be enough to trigger a wave of buying by utilities.
- Uranium names are broadly lower today: CCJ -3%, DNN -3.8%, UEC -1.6%, URG -5.7%, URZ -4.4%, UUUU -1.5%, URRE -0.4%.
- ETFs: URA, NLR, NUCL
- Earlier: Uranium spot prices could pass $50/lb. in next 12 months, analyst says
- Analysts weigh in on Shell Midstream Partners (SHLX +3.6%) and its strong post-IPO performance after the end of the MLP's quiet period.
- UBS initiates SHLX with a Buy rating and $40 price target of $40, as it expects Royal Dutch Shell (RDS.A, RDS.B) to drop assets to the company faster than necessary to drive a 25.7% distribution growth compound annual growth rate during 2015-18, motivated to build scale quickly to make the MLP a meaningful entity within the company and to provide greater flexibility to finance growth projects and/or make acquisitions; it sees upside potential to $56 should Shell accelerate its drops to $1B of EBITDA by year-end 2016.
- Citigroup also starts SHLX at Buy, while Barclays begins coverage at Outperform and Morgan Stanley at Equal Weight.
- Founded in 2004, Dallas-based Alerian manages highly popular indexes tracking energy and infrastructure companies, and could be valued at more than $1B, reports Bloomberg, which says the company expects to select a advisor after the holiday.
- More than $21B is linked to Alerian's indexes, including the Alerian MLP Index and the Alerian Infrastructure Index, and demand for MLPs continues to rise.
- Earlier this year, London Stock Exchange Group purchased Frank Russell Co. for $2.7B, and Barclays - which put its index operation on the block - found the unit might fetch about $1B, more than double what the bank initially expected.