Monday, March 10, 2014
- Canadian Natural Resources (CNQ) remains haunted after nearly a year of unexplained leaks at its Primrose oil sands production site, as Alberta's energy regulator turned down its application to resume steaming operations in the affected area "in light of the ongoing investigation into the leaks at Primrose."
- The decision came on Friday, just a day after CNQ CEO Steve Laut told analysts the issue was “totally solvable” and that the company hoped to restart steaming in the impacted area in March or April.
- The mysterious subterranean leaks of oily water, which now total more than 7K barrels of crude, were first detected last May and led regulators to impose an indefinite ban on some steaming operations at Primrose.
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- Summit Midstream Partners (SMLP) announces a public offering of 8M common units, with 5.3M units offered by SMLP and 2.7M by SMP Holdings.
- SMLP plans to use the proceeds from the offering to fund a portion of the pending $305M acquisition of Red Rock Gathering, a natural gas gathering and processing system located in the Piceance Basin in Colorado and Utah.
- SMLP will not receive any proceeds from the units sold by SMP Holdings.
- SMLP -1.2% AH.
- American Eagle Energy (AMZG) -5.9% AH on news of the company's plans for a public offering of 10M common shares after giving effect to a one-for-four reverse stock split that will occur concurrently with pricing of the offering.
- AMZG says it plans to use the proceeds to fund the exercise of its purchase option to acquire a portion of its joint venture partner's interests in its existing acreage and wells in the Spyglass Area, to fund part of its 2014 capital budget, and for general corporate purposes.
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- Royal Dutch Shell's (RDS.A, RDS.B) Ho-Ho pipeline in Texas remains closed for a fifth day after to a reported leak.
- The pipeline connecting Houston and Hourma, La., has been shut since Thursday when construction crew members accidentally punctured the pipeline during work near Port Neches, Texas, ~100 miles east of Houston.
- Shell also had closed the pipeline earlier this year, slightly more than a month after reversing the pipeline's flow and beginning commercial service.
- Walter Energy (WLT -10.7%) plunges more than 10% after revealing it is negotiating an amendment to its credit agreement to refinance debt, according to an 8-K filing.
- WLT is seeking lender permission to repay its $407M loan and refinance the debt with looser restrictions, pushing to carry out the transaction without making repayments on the $978M term loan B as mandated by the current agreement.
- The amendment should be viewed as a short-term positive since it gives WLT some "much needed runway," UBS credit analysts say, but met coal fundamentals remain weak, possibly heading towards "the lowest quarterly benchmark settlement on record."
- Libyan naval vessels have surrounded a tanker at the rebel-controlled As Sidra port which is loaded with millions of dollars of crude that a separatist militia is trying to sell.
- Libya's National Oil Corp. says the crude oil on the tanker - which is capable of carrying 225M barrel - is the property of the company and its consortium partners, ConocoPhillips (COP), Marathon Oil (MRO) and Hess (HES).
- The confrontation is the most serious standoff between militias that have paralyzed the country's oil industry and a weak central government struggling to exert its authority.
- Barron's touted high-yield energy plays CVR Refining (CVRR +4.6%) and Northern Tier Energy (NTI +0.9%) over the weekend as looking attractive on a long-term perspective after both currently go for just 6x this year's projected earnings.
- Wall Street analysts estimate NTI will pay out 44% of its unit price in total over three years through 2016; for CVRR, estimated payments over three years work out to 37% of its recent price.
- Average analyst price targets suggest 13% upside for NTI over the next year and 19% for CVRR; add that to projected yields this year of 15% for each, and the result is potential for returns of more than 30%.
- Iranian officials say foreign oil companies hoping to invest in Iran as sanctions are relaxed won't be able to count Iranian reserves among their assets under the draft terms of new contracts; the ability to book reserves has been a key demand from Western companies looking to enter Iran.
- But overseas oil companies may be allowed to wholly own Iranian oil services companies as part of the country's privatization program, and Iran could sweeten some of its investment terms to attract to Western investors to its oil sector.
- Iranian oil officials are said to have discussed potential joint ventures with Total (TOT), Eni (E), Statoil (STO), Gazprom (OGZPY) and Lukoil (LUKOY); Iran would like to enter TOT's Iraqi Kurdish acreage or its Asian liquefied natural gas terminals, or partner with Lukoil and Gazprom in China or Africa.
- BP, once the Pentagon’s top fuel supplier, is now the biggest loser among U.S. government vendors, according to data compiled by Bloomberg.
- A combination of no big contracts awarded and promised military work withdrawn left BP with a net loss of $654M in federal contracts in the fiscal year that ended Sept. 30, compared with $2.5B in awards in FY 2012.
- BP was suspended from new federal contracts and other work after the 2010 Gulf of Mexico oil spill; the Defense Department, by far the government’s biggest buyer of petroleum products, also withdrew promised funding of more than $400M last year, which BP is challenging in court.
- In FY 2011, BP was the largest seller of fuel to the military, with $1.37B in prime contracts, and a year later it ranked just below top-ranked Shell; in 2013, closely held Refinery Associates was the no. 1 supplier, with $1.34B, followed by World Fuel Services (INT), with $1.19B.
- Pioneer Natural Resources (PXD -1%) is expanding its fleet of drilling rigs in the northern part of Texas’ Spraberry field to 16 from five this quarter, bucking the trend among bigger explorers such as Shell that are writing down U.S. shale assets and shrinking their footprints after drilling money-losing wells.
- Escalating costs are creating a squeeze on the biggest oil producers that is eroding profitability, Chevron CEO John Watson says, but PXD's lack of exposure to the costliest and riskiest international projects, such as liquefied natural gas complexes and ultra-deepwater oil platforms, shields it from some of the pressures impacting larger peers.
- PXD’s cost to extract the equivalent of a barrel of crude declined 4.8% to $13.36 during Q4 2013.
- PXD is spending ~$8M per well to drill sideways through the Spraberry field, and some of those wells probably will gush 1M barrels or more before they peter out decades from now, according to a presentation published on the company’s website March 7.
- Petrobras (PBR -3%) jumps into the global bond market with plans to raise at least $3B from the sale of six sets of dollar-denominated bonds, including fixed-rate bonds and floating-rate debt; total demand for the bonds reportedly has reached ~$12B so far.
- PBR is borrowing to finance the development of offshore oil fields that account for a large part of its $221B spending plan for the next five years, which has turned PBR into the region's most indebted company.
- Kirby Corp. (KEX -1.1%) is added to the Top Picks list at FBR Capital, which notes KEX's core marine transportation unit continues to exhibit solid growth, driven by the transport of petrochemicals, black oil and refined products, and the firm expects demand for these volumes to only accelerate over the next three years.
- FBR thinks fundamentals driving KEX's diesel engine services unit bottomed in 2013, and it expects the segment to be a major contributor to earnings growth in 2014 and beyond.
- While expecting steady, consistent growth in the marine business, the firm says it "would not be surprised" to see growth juiced by M&A activity in the near term, particularly in the coastal barge market.
- Husky Energy (HUSKF) says its reserves growth outpaced production last year as a result of the addition of reserves in its oil sands business, the full-scale development of the Ansell liquids-rich gas resource play and increased heavy oil recovery from thermal developments in western Canada.
- Husky's 2013 reserves replacement ratio was 166%, and the average proved reserves replacement ratio realized over the past three years was 172%.
- Husky raises its 2014 production guidance to 330K-355K boe/day and says it is on track to achieve its 2012-17 production growth rate target of 5%-8%.
- Last week's momentum in alternative energy shares continues into the new week, as Plug Power (PLUG +10.4%), FuelCell Energy (FCEL +11.6%), Ballard Power (BLDP +10.2%) and ZBB Energy (ZBB +15.1%) open sharply higher.
- FCEL earnings come out after the close today, and PLUG results are set for a Thursday release.
- Callon Petroleum (CPE) reaches agreement with Lone Star Value Management to expand the size of its board to eight directors from six, and appoints two of the hedge fund's suggested candidates to fill the newly-created directorships.
- Earlier this year, Lone Star had called for a review of strategic alternatives at CPE, which initially had labeled the criticisms "ill-advised and self-serving."
- U.S. Geothermal (HTM) says its Oregon USG Holdings subsidiary has made its first distribution of profits from the Neal Hot Springs geothermal project.
- HTM's share of this first distribution is $4.6M out of a total distribution to the partners of $7.7M, which represents profits generated from the project since initial operation began in Nov. 2012.
- Oregon USG is owned 60% by HTM and 40% by Enbridge (ENB).
- Sasol (SSL) says its fiscal first-half profit rose 26% Y/Y, helped by higher chemical prices and a weaker rand against the dollar.
- Earnings excluding one-time items rose to 18.4B rand, or 30.19 rand/share in the six months through December, from 14B rand, or 24.01/share a year earlier.
- SSL will pay a record interim dividend of 8 rand/share, a 40% increase Y/Y.
- Says it was hit by a one-time 5.7B rand writedown due to costs associated with its Canadian shale gas operation and sale of its stake in Iran-based Arya Sasol Polymer Co.
- Says its Louisiana plant that converts ethylene into other chemical products will be fully operational by the middle of this year.