Today - Thursday, March 26, 2015
- Venezuela is seeking to recuse two arbitrators on a World Bank tribunal hearing in a dispute with ConocoPhillips (NYSE:COP), less than a year after the tribunal rejected a similar request regarding the same arbitrators.
- Both had shown "a marked attitude against the Republic," according to the country's oil ministry.
- The dispute stems from Hugo Chavez's 2007 takeover of COP's oil projects including two multi-billion dollar heavy oil operations; the International Centre for Settlement of Investment Disputes said in a partial ruling last year that the move was unlawful.
- BlackRock (NYSE:BLK) and P-E firm First Reserve have taken a joint stake worth ~$900M in the second phase of Mexico pipeline project Los Ramones, equivalent to 45% of the costs involved in the project's construction, according to the Pemex state-run oil company.
- Pemex says the move is BLK's first ever infrastructure investment in Mexico.
- Pemex said in September it would spend $2.5B on the second phase of the pipeline, which eventually will run from the U.S.-Mexico border to central Mexico to help satisfy growing demand for gas by boosting cheap imports from the U.S.
- After oil's drop from more than $100/bbl to ~$50 in just months, oil producers are using hedges as a source of income rather than just as a form of insurance to lock in minimum prices for oil, Dow Jones reports.
- Carrizo Oil & Gas (NASDAQ:CRZO), for example, has placed several hedges on ~12K bbl/day that guaranteed it at least $91/bbl on average, locking in a $166M gain which exceed its $163M in total revenue last quarter, and added new contracts guaranteeing a minimum price of $50/bbl for some of its oil this year and next as protection in case oil prices fall further.
- Continental Resources (NYSE:CLR) dropped nearly all its oil hedges when crude was still priced at ~$80 in early November, earning $433M from the move and using the cash to cover operating costs and keep its investment grade credit rating.
- Cashing in hedges is part of the survival strategy being used by Energy XXI (NASDAQ:EXXI), which booked a $377M loss in its latest quarter; it got $73M in January and February for cashing in some of this year's hedges, and put on new hedges at lower prices; similarly, Parsley Energy (NYSE:PE) says it brought in $63M in recent months by cashing in some of its hedges.
- But companies are notoriously bad at choosing when to put on and take off hedges; though many U.S. oil firms, especially smaller producers, routinely use hedges to lock in prices, many were less hedged than usual heading into the oil price plunge that started last June.
- NiSource (NYSE:NI) names Donald Brown as CFO, effective upon NI and Columbia Pipeline Group’s split into two companies, which is expected to be completed in mid-2015; Brown will become executive VP for NI's finance team effective April 6.
- Brown will stay in his current position as CFO of UGI Utilities (NYSE:UGI) until he assumes his role at NI.
- Current NI CFO Stephen Smith will become CFO for Columbia Pipeline.
- Ultrapetrol (NASDAQ:ULTR) says it renewed a contract with Petrobras which expired this month to employ the UP Turquoise for an additional four years at $30K/day, consistent with its previous contract.
- ULTR also confirms that the UP Opal has commenced its employment on a four-year contract with PBR at a dayrate of $31K, and expects the UP Coral to begin a six-year contract with PBR in mid-2015 as an ROV support vessel earning $87K/day.
- ULTR also expects to report adjusted EBITDA of $57M-$59M for FY 2014, after Q4 results were hurt by developments related to lower than expected North Sea spot rates and off-hire resulting from a now-resolved mechanical issue with a container feeder vessel.
- Con Edison (ED -2.8%) sinks into the close in a move some market watchers attribute to this afternoon's NYC building collapse, as an explosion in Manhattan's East Village reportedly injured ~30 people.
- Officials say the explosion, which occurred near Second Avenue and St. Marks Place, left a storefront blasted out.
- Italy's Eni (E -0.5%) and Korea Gas fail to find commercial hydrocarbons off Cyprus, the country's energy minister says, marking another strike out for energy exploration in what has been considered a promising region.
- A consortium between the two companies also failed to discover exploitable reserves during drilling at a different location within the same offshore block in 2014; France's Total also failed to find notable reserves to warrant drilling in Cypriot waters last year.
- The area's only major gas find so far is Noble Energy's 2011 discovery of a field with an estimated 4.5T cf of gas, but it is close to Israel's Leviathan with its estimated 22T cf of reserves.
- FutureFuel (FF -5.4%) falls sharply after an SEC filing reveals that Procter & Gamble has told the biofuels company it plans to end its purchase agreement on Dec. 31.
- PG said decision to terminate resulted from its need for flexibility to address declining market trends in the dry laundry additives marketplace.
- FF received $43.9M in revenue from PG during 2014, representing 12.8% of its total company revenue.
- Canada's government says it will give the National Energy Board until next year to deliver up-to-date guidelines for oil pipeline companies to improve safety and protect the environment.
- The instructions coincide with several major pipeline expansion projects proposed in Canada by companies such as Kinder Morgan (NYSE:KMI), Enbridge (NYSE:ENB) and TransCanada (NYSE:TRP).
- The Conservative government has promoted expansion of the oil and gas industry, pledging to make the country an "energy superpower."
- Meanwhile, the NEB reportedly is investigating up to a dozen new allegations of natural gas pipeline safety code violations at TRP, which would mark the second time in recent years the regulator has probed safety practices at TRP following complaints by a whistleblower.
- Sempra Energy (SRE -0.6%) slips a bit after providing an investor presentation that reaffirms its FY 2015 EPS guidance of $4.60-$5.00, compared with $4.84 analyst consensus estimate, but sees 2016 EPS of $4.80-$5.20, below $5.27 consensus.
- In longer-term guidance, SRE says a build-up of base plan earnings shows it has contracts in place that, in combination with utility operations, yield an ~11% compound annual growth rate, creating EPS in 2019 of $7.00-$7.50.
- Calumet Specialty Products Partners (CLMT -1.3%) appoints Bill Hatch as its interim CEO, as CEO Bill Grube takes the newly formed position of Executive Vice Chairman.
- Hatch retired as Vice President Operations and Chief Operating Executive of Citgo in 2008 after a 33-year career at the company.
- Grube co-founded CLMT in 1990 and has been CEO of Calumet GP since that time.
- Schlumberger (SLB +0.2%) must satisfy a list of conditions, in part linked to sanctions, to gain approval for its $1.7B bid to buy Russia's Eurasia Drilling, says the head of Russia’s commission on foreign investment, which will meet with SLB executives in the next 10 days.
- One condition could require SLB to sell Eurasia if sanctions impede the company’s work, according to the Russian official.
- Lukoil, Eurasia’s largest customer, is backing the deal, saying it would be good for Russia; Lukoil CEO Vagit Alekperov owns ~3% of the driller’s shares.
- Repsol (OTCQX:REPYY, OTCPK:REPYF) says Antonio Brufau, its Chairman and top executive for more than a decade, will hand over all executive powers to his number two man, CEO Josu Jon Imaz, effective April 30.
- Imaz has run day-to-day business at Repsol since he was promoted to the job last April, but Brufau had kept oversight of the finance and communication divisions and is still officially the company's top executive.
- Repsol says it will ask shareholders to re-elect Brufau as chairman in a non-executive capacity for four years, at a meeting also due on April 30.
- In its first set of annual results since its 2014 merger, Amec Foster Wheeler (AMFW -3.7%) says pre-tax earnings fell to £155M from £255M a year earlier but total revenue grew 2% Y/Y to £3.92B, in line with expectations as improvement in its clean energy business offset weakness in the U.S. and Europe and currency headwinds from a strong pound.
- Revenue from oil operations fell 5% Y/Y in 2014, while that from the power business including renewable energy and nuclear rose 16%, a trend the company expects to continue in 2015.
- AMFW expects its business to remain under pressure throughout 2015 while oil prices remain weak, but believes its acquisition of Foster Wheeler will benefit through increased exposure to lucrative emerging markets and the Middle East.
- Cowen analysts see plenty of room to go in gains for the refinery sector, and moves up Q1 earnings estimates for across the firm's coverage universe.
- Cowen acknowledges that while crack spreads should start moving back to normal levels as industry maintenance winds down after April, margins are still strong, and many expect one of the largest-ever travel seasons this summer.
- The six stocks rated Outperform at Cowen are Delek (NYSE:DK) with a $43 stock price target, Marathon Petroleum (NYSE:MPC) with a $120 target, PBF Energy (NYSE:PBF) at $35, Tesoro (NYSE:TSO) at $90, Valero (NYSE:VLO) at $70 and Western Refining (NYSE:WNR) with a $60 price target.
- Diamondback Energy (FANG +3.4%) is initiated with an Overweight rating and $90 price target at Morgan Stanley, which says FANG warrants a substantial premium given its superior assets, management and balance sheet.
- FANG offers oil exposure that should outperform in a sustained downturn and participate in any rebound if prices improve, the firm says.
- At the Howard Weil Energy Conference this week, FANG provided an investor presentation that included a 2015 capital budget of $325M-$375M; FANG says it is aggressively pursuing cost reductions and anticipates an overall reduction of at least 20%.
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