Monday, April 20, 2015
10:00 PM| Comment!
- Two oil-related dividend cuts provoked sharply different responses in today's trade: San Juan Basin Royalty Trust (NYSE:SJT) slumped 9% after announcing it would have no cash distribution for April, but Legacy Reserves (NASDAQ:LGCY) jumped 9% after finally caving in to pressure to cut its dividend.
- At SJT, a distribution normally would be made in April based principally upon production during February, but the Trust said no cash distributions would be distributed until future net proceeds are sufficient to pay then-current Trust liabilities and replenish cash reserves.
- In contrast, LGCY cut its Q1 dividend to $0.35 from $0.61 in Q4 but it also reaffirmed its $30M capital spending budget for the year and said it is realizing better than expected reductions in operating and capital costs - plus, a bit of straight talk from the CEO may have helped reassure investors.
- The possibility of a do-over came up at today's appeals court hearing that pitted Chevron (NYSE:CVX) against lawyer Steven Donziger, the attorney who won a $9.5B environmental damage award against the company in a legal battle that has dragged on for 22 years.
- U.S. Circuit Judge Richard Wesley asked lawyers on both sides whether they would support a retrial in the U.S. of the 2011 ruling by an Ecuadorean court, which found CVX was responsible for the pollution; CVX lawyers clearly did not like the idea after last year winning a ruling from a New York judge that Donziger’s victory had been obtained through bribery and fraud.
- The other two judges on the appeals panel did not offer a hint of interest in Wesley's notion, but enough was left unsaid to make it impossible to guess at this point what the appeals court could do - or to know if Wesley was serious with his idea or putting the attorneys through some kind of law school Socratic exercise.
- El Paso Pipeline Partners was found liable for $171M in damages in a Delaware court today for overpaying in a pipeline deal that the judge said was forced on it by its parent.
- The directors of the partnership, a unit of Kinder Morgan's (NYSE:KMI) El Paso Corp., agreed to buy El Paso's interests in gas pipelines at inflated prices "against their better judgment," the court found, to the detriment of investors.
- The pipeline partnership was brought into Kinder Morgan's umbrella as part of the company's $44B consolidation last summer.
6:08 PM| Comment!
6:05 PM| Comment!
- Schlumberger (SLB +0.3%) is maintained with a Buy rating but a higher stock price target of $110, up from $95, at UBS, which notes that while expecting industry conditions to remain challenging this year and next, the company has impressively cut costs and stayed ahead of the curve leading to lower decremental margins than widely expected.
- However, UBS still believes the industry capacity will remain over-supplied in 2015-16, thus dampening pricing; additionally, SLB and the firm expect only a moderate recovery in North America drilling; however, strong cost management and lower decrementals leads the firm to increase its EPS forecast for SLB by 15%-24% in 2015-17.
- Halliburton (HAL +3%) powers higher after reporting Q1 results that were viewed as "much better than feared," and recovery potential outweighs near term profitability in terms of stock drivers today.
- In its earnings conference call, HAL said it is seeing substantial pricing pressure in all its product lines in North America and that a significant amount of service capacity is looking for work, but the region likely will bounce back faster than any other when crude prices rise again.
- HAL President Jeff Miller calls the U.S. shale business the most adaptable in the world, one that could boost HAL’s bottom line significantly during a recovery; he says oil producers have stashed crude in ~4K drilled but uncompleted wells, and once prices go back up, there could be a surge of completion work for oil field service companies such as HAL.
- Miller says he is "not going to call the bottom, but historically it has taken rig count three quarters to move from peak to trough."
- Gazprom (OTCPK:OGZPY) CEO Alexei Miller will meet with Greek Prime Minister Tsipras in Athens tomorrow, as reports say the two countries are set to sign a pipeline deal in which Russia would make billions in an advance payment to cash-strapped Greece.
- A Greek official says the two countries will sign an agreement to extend the planned Turkish Stream pipeline to Greece.
- If the deal actually is reached, any advance payment would be a welcome source of revenues for Greece, which is struggling to unlock desperately needed international bailout funds, but analysts are skeptical, as the Turkish Stream pipeline is not expected to come into service until 2019 and Turkey and Russia are struggling to come to a final deal.
- Enbridge (NYSE:ENB) wants to build the 730-mile Northern Gateway pipeline to ship Canadian oil to west coast port, but the chief of a reserve for indigenous people is promising to block the project running alongside the reserve’s territory.
- The pipeline is meant to help ship oil to Asia, but the Tl’azt’en nation and other indigenous communities have been emboldened by a recent Supreme Court of Canada decision on aboriginal land rights to fight a project they say risks damaging their environment and culture.
- Aboriginal groups and environmental protesters also have challenged an expansion of Kinder Morgan’s (NYSE:KMI) Trans Mountain pipeline outside Vancouver, as well as TransCanada's (NYSE:TRP) proposed Energy East pipeline that would ship crude from Alberta to the Atlantic.
- Encana (ECA +3.1%) is seeking buyers for its natural gas properties in Louisiana as it focuses on drilling for oil and other liquids in Texas and Canada, Bloomberg reports.
- Citigroup is said to be soliciting offers from P-E firms, energy explorers and other potential buyers for ECA's Haynesville Shale basin acreage, which is valued at as much as $1B; ECA holds more than 350K acres in the area.
- Chevron (CVX +2.1%) will go head-to-head in a U.S. appeals court starting today against Stephen Donziger, the lawyer who has tried for years to get the company to pay a $9.5B environmental damage award.
- The appeal is another twist in a complex legal battle that has played out for decades across countries and continents, with the latest twist coming last year when a U.S. district judge overturn the decision of an Ecuador court upon finding that the $9.5B award against CVX was bsed on corruption and misconduct by Donziger.
- A win for CVX would support the company’s efforts to shield its assets from seizure, including in foreign jurisdictions outside the U.S., and potentially set a framework for how multinational companies can use RICO in battling similar lawsuits in the future.
- Trading is halted in ForceField Energy (FNRG -21.6%) following a disclosure that founder and majority shareholder Richard St-Julien has resigned as Chairman and all other positions with the company.
- FNRG says St-Julien's resignation is the result of his April 17 arrest; the company says it does not know the basis of the arrest, but Bloomberg reports that he will be charged with alleged conspiracy to manipulate share prices with help from stock promoters.
- FNRG also issues a business update, which includes news that it divested its interest in Trans Pacific Energy and its TCS business, which the company says will enable it to focus on its LED business.
- A blog post late last week from MoxReports said FNRG was little more than a stock promotion and accused some company execs of having close ties to past fraudulent companies and activities.
- Marathon Oil (MRO +2.3%) is upgraded to Overweight from Equal Weight with a $37 price target, raised from $25, at Morgan Stanley, as shares currently trade at a discount to peers despite the company's above average production.
- MRO has significantly lagged in the 2015 recovery in the E&P segment, and the firm says its discounted valuation has been traditionally justified by the company's shorter than peer inventory life, but the oil price driven pullback in activity has narrowed the gap.
- Stanley says MRO's downspacing efforts and enhanced completion are expected to provide a steady stream of catalysts in the near to medium term, leading to an increased NAV of $56/share.
- The European Union’s competition regulator reportedly plans to file formal antitrust charges against Gazprom (OTCPK:OGZPY) this Wednesday, a step sure to escalate tensions between Europe and Russia.
- Sources familiar with Gazprom say the company had signaled its willingness to settle the case to the commission as recently as last week, after formal settlement talks broke down last year after Russia annexed the Crimean peninsula from Ukraine.
- The European Commission started a formal investigation into Gazprom’s business practices in some eastern and southern European countries in 2012, saying it suspected the company of abusing its dominant position in those countries’ natural gas supply.
- World Fuel Services (INT +1.5%) opens higher following a favorable weekend profile in Barron's, which calls the stock "a great hedge against volatile oil prices."
- INT shares had been pressured by the November bankruptcy of Denmark's O.W. Bunker, the world's largest supplier of ship fuel, but investors have begun to believe that Bunker's problems were more about the company than the industry; INT has rebounded 36%, and some analysts think they can rise as much as another 15% in coming months.
- "Sooner or later, companies will look to lock in the cost savings” they have realized in recent months and tap the distributors for more supply, says Stephens analyst Jack Atkins, who also sees parallels to 2008 when INT's EPS jumped as oil price volatility spiked.
- Exterran Partners (EXLP +2.2%) agrees to acquire assets, including customer contracts serving 60 customers and 244 compressor units used to provide compression services under those contracts, from Exterran Holdings (EXH +2.8%) in an all-stock transaction valued at ~$102M.
- The compressor units represent ~151K HP of compression and ~4% of the combined U.S. contract operations business of EXLP and EXH.
- The acquisition also includes 179 compressor units comprising 66K HP leased from EXH to EXLP.
- BP says it has been lifting more crude oil cargoes in recent months as payment for its work in southern Iraq, and says it is comfortable with the level of shipments.
- Low oil prices and the fight against Islamic State have forced Iraq to delay billions of dollars of cash payments which it owes to international oil companies, so they have been allowed to take oil shipments instead.
- BP's president in the Middle East says current total production from Iraq's Rumaila field is ~1.4M bbl/day and is expected to remain steady in 2015.
- The U.A.E.'s national oil company says it is still in talks with major global oil companies about concessions at its largest fields and has not set a deadline for deciding on the awards.
- Total (NYSE:TOT) is the only company to be awarded a stake in Abu Dhabi National Oil's new venture so far, agreeing in February to pay a $2.2B signing bonus for a 10% share in the onshore concession.
- TOT, along with BP, Shell (RDS.A, RDS.B) and Exxon (NYSE:XOM) were all partners in a previous concession that operated the same onshore fields in Abu Dhabi for 75 years until it expired in January 2014; XOM balked at the new terms and decided not to seek to renew its concession.
- Abu Dhabi plans to boost capacity for producing crude oil to 3.5M bbl/day by 2017 from ~3M bbl/day currently.
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