Tuesday, April 15, 2014
- The plunge in coal prices that has sent smaller competitors into bankruptcy is alarming bondholders in Alpha Natural Resources (ANR), as the no. 2 U.S. coal producer consumes more cash than ever, Bloomberg reports.
- ANR’s $3.43B of debt equals 37.9x EBITDA, highest among U.S. coal producers, and its bonds have lost more than 9% this year, the most among met coal producers in the Bloomberg High Yield Corporate Bond Index.
- "It’s going to get worse before it starts getting better," one analyst says. "It’s a completely oversupplied market."
- Athlon Energy (ATHL) announces offerings for 11M shares of common stock and $500M in senior notes to fund potential and pending acquisitions and for general corporate purposes.
- Separately, ATHL says Q1 production reached a record quarterly high of nearly 17K boe/day, up 71% Y/Y, above the high end of its earlier guidance range; approves an increased 2014 capital budget for drilling expenditures of $700M.
- Shares -1.2% AH.
- Walter Energy (WLT +5%) moves sharply higher on news it will idle its Canadian mining operations, a move seen as positive for the coal miner's liquidity.
- With met coal prices at $120/ton for the hard coking variety, WLT's Canadian operations were losing ~$27M in annualized EBITDA, Brean Capital says; the firm thinks WLT may still pursue asset sales in Canada, although market conditions would make a transaction this year difficult.
- UBS sees no reason to lift its Sell rating on WLT; the decision to idle should lower the company's pace of cash burn and is a step in the right direction for the coal industry, but more production cuts are needed for met coal prices to rebound (Briefing.com).
- Basic Energy Services (BAS +3.8%) is upgraded to Hold from Sell with a $27 price target, up from $19, at Wunderlich, citing better market conditions while noting that much of the improvement is priced in.
- With weather improving from early 2014 and E&P budgets remaining robust, the firm believes most E&P companies are cramming 12 months of solid activity into 9-10 months, and the increase in spending should benefit players like BAS.
- The company's monthly update saw strong growth as the weather improved.
- The D.C. Court of Appeals upholds EPA regulations requiring power plants to limit emissions hazardous air pollutants, siding with the EPA's determination that its regulations were appropriate and necessary.
- The 2-1 court majority rejects arguments the agency should have considered the costs of its regulations before moving forward, while the dissenting judge warns the costs of the EPA regulations would amount to more than $9B/year.
- Related tickers: KOL, BTU, WLT, CNX, ACI, ANR, JRCC, YZC, PCXCQ, ARLP, NRP, PVR, PVA, OXF, CLD, WLB
- BP CEO (BP -0.2%) Bob Dudley says western sanctions over Russia's actions in Ukraine have not impacted its business in Russia, and reiterates that it stands "rock solid" with its investments in the country.
- Dudley is in Moscow to take part in a meeting of the Russian Geographical Society, where Dudley is a member of the board of trustees and Pres. Putin is the head, but it is not clear if the two will meet.
- BP owns a 19.75% stake in Kremlin-controlled Rosneft (RNFTF), accounting for about one third of its total global oil output.
- Talisman Energy (TLM) reportedly has delayed a new concept decision on the Yme field off Norway, and has not ruled out that the problematic project could be shelved altogether.
- Contractor SBM Offshore (SBFFF) last year decided to scrap the North Sea field’s newbuild mobile offshore production unit before it had even started operation due to costly technical issues, with the platform due to be removed next summer; TLM is estimated to have lost about half of its total investment of 10B kroner.
- TLM intends to sell out of its Norway assets, but CEO Hal Kvisle has said such a sale could be dependent on a workable solution being found to develop Yme to make the asset attractive to potential buyers.
- German utility RWE (RWEOY) formally agrees to supply Ukraine with natural gas this year, the first such deal by a European energy company after Ukraine's continuing political crisis put the country's traditional supplies from Russia in doubt.
- RWE says it will begin gas deliveries to Ukraine state-owned energy company Naftogaz via Poland immediately; the gas will be delivered at wholesale price levels, including delivery costs, but RWE does not provide an estimate of the expected volumes.
- Separately, the head of Gazprom (OGZPY) reportedly told a European energy leader that it will continue to provide a reliable supply of natural gas to the European market.
- Petrobras (PBR -4.4%) CEO Maria das Graças Foster defends the 2006 decision to buy a refinery in Pasadena, Tex., against allegations the company had dramatically overpaid, telling Brazil's congress it purchased the 100K bbl/day refinery to maximize returns on heavy Brazilian oil in the U.S. market.
- Opponents of Pres. Rousseff are pushing for a formal investigation into the $1.2B purchase, which they say was made for 20x the true value of the refinery.
- The figure comes from the $42.5M Belgium's Astra Oil supposedly paid for the refinery in 2005, but Foster says Astra actually paid $360M.
- Foster also reiterates Rousseff's recent claim that the approval of the 50% stake purchase by Petrobras' board was based on a faulty report from a former executive who was subsequently demoted.
- Italian Prime Minister Matteo Renzi replaces Eni (E -0.4%) CEO Paolo Scaroni with respected industry veteran Claudio Descalzi, head of E&P at the company; a change at Eni was widely expected by PM Renzi's new government in its pledge for a fresh start for Italy's economy.
- Descalzi's background in the upstream business suggests his promotion is validation of Eni's current strategy, Heard on the Street's Helen Thomas writes; Eni has discovered 2.5x its production during 2008-13 vs. 0.3x for its peers, and its organic reserve replacement ratio has averaged 130% in the past three years.
- Under Descalzi, Eni made the largest discovery in its history - a huge gas field off the cost of Mozambique - and has made huge oil finds off the Republic of Congo, but the successes have been tempered by the problems in Kashagan, the huge oilfield in Kazakhstan that has been dogged by cost overruns and delays.
- FX Energy (FXEN +19.4%) says its Tuchola-4K well in Poland reached its primary objective, the lower Zechstein Ca1 formation at 2,740 meters, with evidence of strong gas presence throughout.
- Tuchola-4K is an appraisal well of the Tuchola-3K discovery made in 2013, and FXEN is evaluating 220 sq. km of 3D seismic data in the area surrounding these wells to identify the next drill site; the company expects to start drilling another well later this year based on this seismic work.
- Trading in Samson Oil & Gas (SSN) remains halted after the company files for an offering of ~290M ADSs, ~87M warrants to purchase ordinary shares, and ~4.35M ADSs issuable upon the exercise of warrants.
- Separately, SSN says it is in the process of selling its interests in the Rennerfeldt 1-13H and the Rennerfeldt 2-13H well bores for a net $200K over the costs incurred to date.
- SSN had been headed lower in the premarket, -8.7% when the trading halt was called.
- Walter Energy (WLT) +3.3% premarket on news it will begin idling its Canadian operations, including the Wolverine and Brazion coal mines in British Columbia.
- WLT will place Wolverine on idle status effective immediately, with Brazion expected to be idled by July 2014; ~700 employees will be laid off.
- Expects to incur severance charges of ~$7M in Q2 in connection with the idling of the mines.
- Total (TOT) says its European refining margin dropped to $6.60/metric ton in Q1, vs. $10.10/ton in Q4 2013 and $26.90/ton in Q1 2013.
- The decline demonstrates the weak health of the European refining industry, which has been plagued by lower demand for oil products on the back of the economic crisis and stricter environmental regulations; it also faces more competition from refiners from other regions, notably the U.S. where refining costs are lower.
- Noble Energy (NBL) says Chairman/CEO Charles Davidson plans to retire by May 1, 2015.
- The board says it will propose the election of current President/COO David Stover as a director at its April 22 meeting, and it intends to appoint Stover as CEO in October.
- Davidson has served as CEO and a director since joining the company in 2000.
8:09 AM| Comment!
- Entergy (ETR) issues upside earnings guidance for Q1 and FY 2014, due in part to colder weather.
- ETR sees Q1 EPS of ~$2.28 vs. $1.15 analyst consensus estimate, reflecting cold winter weather and northeast pipeline infrastructure limitations.
- Raises FY 2014 projected EPS to $5.55-$6.75 from $4.60-$5.40 prior and $5.34 consensus, due to higher northeast spot and forward prices and market volatility, and favorable weather for the utility in Q1.
Monday, April 14, 2014
- Encana (ECA) says it filed a preliminary prospectus for the spinoff of its wholly owned properties in western Canada, as it continues a restructuring aimed at boosting profit while gas prices remain low.
- The new company, Prairie Sky Royalty, will control 5.2M acres of fee simple lands in Alberta, where the oil and gas production is free from government royalties; it will not explore for oil and gas, but will take royalties from other producers on the properties.
- Magellan Midstream Partners (MMP) hit a new 52-week high today before pulling back, capping recent bullishness primarily attributable to expectations of distributable cash flow of $730M, up 9% Y/Y, stated in its 2014 analyst meeting held April 8.
- MMP says it expects fee-based, low-risk activities to comprise ~85% of operating margin going forward, thus ensuring a low exposure to volatile commodity-related activities.
- Lucrative acquisitions and organic growth projects have been major contributors to MMP’s development; during the past 10 years, MMP has spent $3.7B in these activities, with another $950M planned during 2014-16.
- As Enbridge (ENB) reels from Kitimat, B.C., residents’ rejection of the Northern Gateway pipeline in a non-binding plebiscite during the weekend, a First Nations-backed consortium seeks to build an alternative pipeline linking Alberta’s oil sands to the British Columbia coast.
- Eagle Spirit Energy says its proposed pipeline connected to an upgrader in Alberta or B.C. would transport synthetic crude rather than bitumen, and minimize impacts on water, wildlife and neighboring communities.