Today - Tuesday, January 27, 2015
- Marathon Oil (MRO -1.3%), Cobalt International Energy (CIE -0.3%) and RSP Permian (RSPP +0.8%) are downgraded to Neutral from Buy at UBS, as the firm cuts its 2015 Brent/WTI crude forecasts to a respective $52.50/bbl and $49/bbl, and lowers 2016 Brent/WTI crude estimates to $67.50 and $62.50.
- UBS also is cautious on several energy names with large free cash flow deficits, slowing growth profiles and rich relative valuations: COP, DVN, MUR, UPL, RRC, DNR, MHR.
- The firm's top Buys are APC, CHK and EOG.
- The Obama administration proposes opening up oil and gas exploration off the Atlantic coast from Virginia to Georgia, and will seek public comment on whether such a move is too environmentally sensitive.
- The Interior Department plan contemplates expanded drilling between 2017 and 2022, it would conduct one auction in the Atlantic and keep a 50-mile buffer from the shore.
- The plan comes as the administration also plans to limit oil and gas drilling in Alaska; Republicans don’t like the Alaska idea, and now the environmentalists don’t like the Atlantic proposal.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
- Analysts say Energy Transfer Partners (ETP -1.4%) $11B deal to consolidate its Regency Energy Partners (NYSE:RGP) unit under one roof could be a harbinger of more M&A action to come for energy companies whose balance sheets are being strained by cheap crude oil prices.
- Pipelines, processing units and storage tanks have retained their value better than drilling acreage and equipment, prompting some producers to put their pipes up for sale to raise cash needed to prop up drilling operations and resulting in plenty of buying opportunities for companies seeking to expand their reach or fill in blank spots in their networks.
- Buckeye Partners (NYSE:BPL), NuStar Energy (NYSE:NS) and World Point Terminals (NYSE:WPT) are considered attractive candidates for large pipeline owners able to do deals now, some analysts say, because almost all of their cash flow comes from contracted fees that do not change with commodity prices.
- The value of new projects obtained by engineering and construction companies could drop 25%-30% in 2015 due to the sharp drop in oil prices, Deutsche Bank says as it downgrades two names in the group, Fluor (FLR -3.1%) and KBR (KBR -3.4%), to Hold from Buy.
- Many energy-related projects that had been boosting the results of E&C companies are no longer economically viable, and oil price volatility will make it difficult for companies to approve new projects even if they can generate acceptable returns at current oil prices, DB analyst Vishai Shah writes.
- Fluor and KBR have the greatest risk of reporting weaker than expected 2015 results, and their valuations are higher than average for the sector, Shah says; however, expectations are low for Chicago Bridge & Iron (CBI -1.7%), whose results could benefit from an acceleration in gas-fired power plant projects this year, the analyst says in maintaining a Buy rating on CBI.
- U.S. exports of condensate have been given an important boost by Enterprise Products Partners (NYSE:EPD) agreements for contracts with at least two major trading companies to sell the light crude, according to a Reuters report.
- EPD has contracts with Mitsubishi's Petro-Diamond Singapore oil trading arm and independent oil trader Vitol for 1.2M bbl/month of U.S. condensate in 2015, trade sources say, which should give it a head start before other companies win approval to export condensate produced from shale operations.
- Royal Dutch Shell (RDS.A, RDS.B) also has approvals to export U.S. light crudes, while ConocoPhillips (NYSE:COP) is seeking a license and BHP Billiton (NYSE:BHP) also has sold at least two cargoes.
- Peabody Energy's (BTU -6.7%) move to slash its quarterly dividend to less than a penny a share is helping push coal company stocks (NYSEARCA:KOL) lower: WLT -1.6%, ACI -1%, CNX -1.8%, CLD -2%, WLB -5.4%, ARLP -1.2%.
- Cowen analysts see the move as "a prudent move amid uncertain coal markets," and Sterne Agee says the dividend cut will save BTU $100M in annual cash payments.
- Citigroup's Brian Hu maintains a Buy rating on BTU, saying that although management expects U.S. thermal coal demand to fall by 50M-60M tons in 2015, "BTU is better insulated due to their heavily contracted position and Y/Y improvement in Southern PRB rail performance.”
- NextEra Energy's (NEE +0.6%) Q4 earnings missed expectations in part due to fueling outages in its nuclear unit but revenue surged 29% and beat estimates on stronger than expected demand for new renewable energy projects.
- Q4 earnings at Florida Power & Light rose 15% Y/Y to $286M, driven by more customer accounts, while income at the NextEra Energy Resources business rose more than sevenfold to $614M.
- Reafirms FY 2015 EPS guidance of $5.40-$5.70 vs. $5.64 analyst consensus estimate.
- CEO Jim Robo says NEE hopes to use the recent deal to acquire most of Hawaiian Electric Industries for ~$2.6B to leverage its position in other parts of North America, adding that he is optimistic due to high demand for new projects.
- Peabody Energy (NYSE:BTU) -6.4% premarket after falling far short of expectations for Q4 earnings and reducing its quarterly dividend to $0.0025/share from $0.085.
- BTU says Q4 overall revenue fell 3.3% Y/Y to $1.68B while sales volume slipped 0.5%; revenue fell 2.2% to $983M in its U.S. mining operations as revenue/ton dropped 5.8%, while revenue declined 5.6% to $676M in its Australian mining operations as revenue/ton fell 17%.
- For 2015, BTU expects sales volumes of 245M-265M tons with U.S. operations seeing a 2%-4% decline in revenues/ton and costs/ton; expects Australia metallurgical coal sales of 15M-16M tons, export thermal sales of 12M-13M tons, and cost/tons lower by 2%-4%.
- Plans $180M-$200M in 2015 capex, mostly allocated to sustaining capital items; specific projects include the Gateway North extension to replace production from the existing operation, and the Wolf Creek development in Colorado.
- For Q1, BTU targets adjusted EBITDA of $160M-$200M and an EPS loss of $0.39-$0.32 vs. analyst consensus estimate for a $0.24 loss.
- Allete (NYSE:ALE) agrees to acquire U.S. Water Services, initially purchasing 87% of the industrial water management company for $168M with plans to buy the remaining 13% in the future for a contingent amount based on future earnings.
- ALE says the acquisition is consistent with its strategy of investing in energy infrastructure and related services to complement its core regulated utility, balance exposure to business cycles and changing demand, and provide long-term earnings growth.
8:03 AM| 1 Comment
- Carrizo Oil & Gas (NASDAQ:CRZO) announces a 2015 drilling and completion capex plan of $450M-$470M, a ~35% decline from 2014 spending.
- Reports preliminary total production estimate for Q4 is 37.7K boe/day and 22.1K bbl/day of oil, both exceeding the high end of company guidance.
- CRZO increasing its type curve EUR for the Eagle Ford Shale to 510K boe per well from 499K boe due to continued strong performance across its position.
- In the Utica Shale, CRZO's second well, the Brown 1H, was brought online Jan. 15, which averaged 502 bbl/day of condensate and 1.1M cf/day of rich natural through the first five days of production.
- Oil gave up earlier gains to trade near an almost six-year low after shrugging off comments from OPEC's Secretary-General.
- Abdullah al-Badri commented yesterday that prices may have bottomed and warned of a risk of a future jump to $200 a barrel if investment in new supplies was too low.
- Brent crude and WTI are both down 0.2%, at $48.06 and $45.06 a barrel, respectively.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
- Siemens (OTCPK:SIEGY) net profit for its first quarter slid nearly 25%, hurt in part by economic challenges in Europe and the drop in global crude prices.
- Facing questions about the company's $7.6B takeover of oilfield equipment Dresser-Rand (NYSE:DRC), CEO Joe Kaeser defended the move despite a low oil price environment.
- "Absolutely it does make sense," declared Kaeser in a CNBC interview. "We are in here through the cycle and we are in here for the long term."
- Previously: Siemens CEO to face questions over Dresser-Rand price (Jan. 26 2015)
- Democrats in the U.S. Senate blocked the Keystone XL (NYSE:TRP) pipeline bill from moving forward on Monday, prolonging the chamber’s debate over the project.
- Senators voted 53-39 against a motion that would have allowed a vote on a final bill; it needed 60 to pass.
- Citing a continuing review process by the State Department, the White House has said President Obama would veto the measure should it reach his desk.
Monday, January 26, 2015
- The Obama administration will propose laws preserving almost 13M acres of land in the 19.8M-acre Arctic National Wildlife Refuge, including 1.5M acres of coastal plains believed to have rich oil and natural gas resources, and says it is drafting an offshore leasing plan expected to include more limits on future Alaska oil and gas output.
- Alaska's governor and congressional delegation were harshly critical of what they consider an unprecedented assault on the state that would have long-lasting impacts on its economy and U.S. energy security.
- The action would effectively ban oil and gas activity in major portions of the Beaufort and Chukchi seas, although its impact on areas where Shell (RDS.A, RDS.B), ConocoPhillips (NYSE:COP) and Statoil (NYSE:STO) already have leases is not clear.
- It was a great day for energy stocks in at least one group of high-yield dividend dogs, as the five energy names making up the top six stocks in David Fish's Dec. 31 composite list of Champions, Contenders and Challengers list all enjoyed substantial gains: EVEP +10.7%, BBEP +21.5%, VNR +12%, CLMT +6.1% and WPZ +0.4%.
- So far in January, most results for the energy stocks in the group are still lower: EVEP -24%, BBEP -6.3%, VNR -0.7%, CLMT +16.2%, WPZ -2.5%.
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs
Next headline on your portfolio: