Today - Tuesday, March 11, 2014
- The Keystone XL pipeline is the safest and most environmentally sound way to transport Canadian and North Dakota oil to Gulf Coast refineries, TransCanada (TRP) says in its last-ditch appeal for approval, along with more than 100K other opinions during a government public comment period that ended Friday.
- More than a dozen environmental groups said in joint comments that Keystone XL would boost air pollution at refineries, carry the risk of tough-to-clean spills and “would not lead to energy independence."
- Whatever Pres. Obama's decision, he's going to anger either environmental activists or labor unions; leaders of various U.S. building trades unions gathered in D.C. today and suggested the wrong decision could mean consequences for Democrats in the November elections.
- Hillary Clinton also faces a quandary: Some wealthy Democrat environmentalists are considering withholding support for a 2016 presidential bid unless she reassures them about killing Keystone.
- BP's latest bid to temporarily halt payments under its $9.2B oil spill settlement in order to establish improved accounting and fraud safeguards was rejected today by Judge Barbier in New Orleans.
- BP, which believes widespread fraud and a faulty interpretation of settlement terms have prompted the payment of millions of dollars in unwarranted claims for damage from the 2010 Gulf of Mexico oil spill, was requesting new computer cross-checking programs to automatically single out claims from some regions and industries or in excess of certain amounts for "enhanced due diligence and closer scrutiny."
- Atlas Pipeline Partners (APL) says it has retained Citigroup to begin a strategic review of its ownership interest in West Texas LPG Pipeline, which owns a 2,295-mile common carrier natural gas liquids pipeline operated by Chevron (CVX); APL owns a 20% interest.
- APL says potential proceeds in the event of a sale would be used to fund part of its growth opportunities in its core operating areas.
- Oil-linked liquefied natural gas prices make the most sense for Asian buyers, but a lack of consensus among buyers and sellers could impact proposed projects, Chevron (CVX) CEO John Watson says.
- In that vein, CVX and partner (APA) are proposing the Kitimat LNG export project on Canada's west coast, but CVX did not include Kitimat in the list of projects expected to get a final investment decision by 2016 in today's presentation to investors; CVX says it first must secure long-term supply deals for 60%-70% of production.
- Shell also is proposing a project on the British Columbia coast but has backing from Asian partners, while Asian companies Cnooc and Petronas also are eyeing projects to feed their home markets.
- BP denies that any of its currency traders had engaged in inappropriate trading activity, after a Bloomberg report alleged one of them had received information from a dealer at Lloyds.
- Many foreign exchange traders say sharing information is vital in allowing banks and others to manage their risk when agreeing to fulfill orders for clients and their own needs, but there's a distinction between that and cartel-like collusion to move the market or breaking confidentiality agreements with clients by sharing details of their orders.
- Allegations of possible manipulation of the $5.3T-a-day forex market have so far centered on major banks.
- Seadrill Partners (SDLP) agrees to acquire the West Auriga ultra-deepwater drillship from Seadrill (SDRL) for ~$797M.
- The drillship is expected to carry out operations in the Gulf of Mexico until the end of its contract in Oct. 2020 at a dayrate of $565K/day.
- SDLP will recommend an increase in cash distributions of $0.13-$0.15/unit, which would take effect in the June 2014 quarter.
- SDLP plans a public offering of 10.4M common units to fund the transaction; SDRL has committed to purchase at least $50M worth of the units at the public offering price.
- SDRL +0.9%, SDLP -2.4% AH.
- The collapse in Plug Power (PLUG -40.8%) has pulled down other alternative fuel shares, as investors turned away from FuelCell Energy's (FCEL -21.6%) better than expected Q4 results to focus on Citron Research's report that said PLUG would be fairly valued at 50 cents.
- Citron's Andrew Left has since taken to the CNBC airwaves to say PLUG has no unique technology and PLUG's management cannot be trusted.
- Ballard Power (BLDP -26.6%), which earned 11% of its revenue last year by supplying the fuel cell stacks that run PLUG’s forklifts, also takes a beating.
- Faring better is Capstone Turbine (CPST +7.9%), off earlier five-year highs but still sharply higher, as the maker of microturbines has been moving slowly toward profitability.
- Brazil's federal tax authority filed a series of new tax claims against Petrobras (PBR -1.5%) between October and January, and the state-run company is challenging five tax assessments that total 8.77B Brazilian reais ($3.74B).
- PBR says it has presented its defense against each of the claims and is awaiting judgment; the company considers the chance of losses to be "possible, but not probable, and accordingly we have not established any provision."
- But investors should not brush off the claims; Vale agreed to pay 22.33B reais to settle a similar series of disputes over taxes on its foreign operations, which contributed to a record $6.45B Q4 net loss.
- Two contractors performing maintenance work at Tesoro’s (TSO -0.4%) Golden Eagle refinery in northern California suffered burns yesterday when they were splashed with sulfuric acid, an accident that occurred in the same processing unit where two employees were burned by acid last month.
- The first incident prompted state and federal regulators to raise broader questions about how TSO runs the plant; TSO said an investigation by the U.S. Chemical Safety Board was biased and that the agency overstepped its bounds.
- TSO claims yesterday's accident is unrelated to the Feb. 12 chemical release.
- NRG Energy (NRG +1.7%) agrees to acquire Dominion Resources' (D -0.2%) retail electric business for an undisclosed sum, in a bid to expand its presence in the northeastern U.S. and Texas.
- Dominion's retail electric business serves more than 600K customers in northern states from Illinois to New York, while its Cirro Energy brand is focused on Texas.
- NRG has made a steady series of deals to boost its retail power business and its collection of power plants; it became the biggest wholesale electric company in the U.S. last year after it acquired GenOn Energy for ~$1.7B, and it is buying coal plants, wind farms and other assets out of bankruptcy from an Edison International subsidiary.
- Edison Mission Energy wins court approval of a plan to exit Chapter 11 protection through a $2.64B asset sale to NRG Energy (NRG +1.7%) that will give NRG coal-burning power plants in the Midwest that may boost revenue if natural gas prices rebound.
- Edison Mission’s non-bankrupt parent, Edison International (EIX -1%), agreed last month to a nearly $1B settlement that resolved the unit’s tax, pension and other liabilities.
- NRG is paying $2.29B in cash and $350M in stock for the assets; EIX will continue to own what’s left of Edison Mission after the sale.
- The meteoric rise in Plug Power (PLUG +2%) is weakened after Citron Research says the fair value of the stock is a mere $0.50, which is a blended average of all of the company's recent capital raises.
- PLUG will issue earnings and guidance on Thursday and warns investors they "cannot trust management guidance... not even a little bit," saying the company has "a history of broken promises and failure to deliver."
- Citron claims Wal-Mart and Fedex are PLUG customers only to take advantage of the 1063 Treasury Program that gives tax credits for renewable energy.
- The summary from Citron's report: "No profits. No unique technology. No scalability. No demand. No brand equity. No media hype. No analyst support."
- The stand-off appears to have ended in Libya, where the country’s navy has taken control of a North Korea-flagged oil tanker that was attempting to buy $30M-plus of crude from a militia that took control of the country’s three biggest ports last summer.
- Though the militia controls the As Sidra port, the oil belongs to Waha Oil, a joint venture between Libya’s state-run National Oil Corp. and western companies Marathon Oil (MRO), Hess (HES) and ConocoPhillips (COP).
- Libya holds Africa’s largest oil reserves, including some of the world's highest-grade crude, yet production has slumped to ~275K bbl/day from 1.4M last July.
- Recon Technology (RCON +6.7%) says its BHD petroleum technology division received a new oilfield access certificate authorizing it to provide horizontal fracturing equipment and services for Sinopec (SNP).
- RCON and partner Baker Hughes (BHI) have so far provided fracturing equipment utilized at one of SNP's Northeast oilfield's wells.
- Roth Capital raises its price target on high-flying Hydrogenics (HYGS -2.7%) to $40 from $14 and keeps its Buy rating following recent Q4 results.
- The firm notes Q4 gross margin was light at 24.6% and profit missed on higher than expected operating expenses; the company affirmed guidance, which calls for a 30% gain in profits in 2014 and achieving profitability in H2 2014.
- Roth expects power-to-gas to serve as a source of long-term revenue growth, while in the short term HYGS is seeing increased customer interest for larger projects; although it is difficult to predict timing, it believes HYGS may secure large-scale orders in 2014.
- Despite today's losses, shares have gained 68% YTD.
- Knightsbridge Tankers (VLCCF +11.1%) is upgraded to Buy from Neutral with a $16 target price at Global Hunter following yesterday's news of an agreement to purchase six Capesize bulk carriers.
- Global Hunter views the deal as especially well timed considering the recent strength of the dry bulk market, particularly the Capesize segment; the firm says the $360M cost is in line with its assessments of such vessels.
- The firm believes VLCCF is now positioned to generate substantial cash flow and pay a growing dividend.
- PowerSecure International (POWR +10.2%) surges to a new all-time high following a strong Q4 earnings beat on a 57% surge in revenue, driven by gains in its energy efficiency and utility infrastructure businesses.
- Revenue backlog stands at an all-time high of $248M; operating margin decreased to 4.8% vs. 6.7% in the year-ago quarter, driven by the decrease in gross margins and partially offset by a decrease in operating expenses as a percentage of revenues.
- POWR is upgraded to Buy from Hold with a $30 price target at Maxim Group, which cites the record backlog, its pipeline of opportunities and expectations for margins to gravitate higher throughout 2014-15; Baird raises its price target to $29, also citing expected margin expansion.