"Everyone is always saying rates will rise; it is almost comical,” says Jeff Gundlach, speaking at ETF.com's Inside Fixed Income conference. It's a mistake looking at past economic recoveries as a template for this one, he says, because persistent deflation - owing to a number of factors - makes this cycle different.
While the Fed realizes QE doesn't do a lot of good and is ending it, he adds, the central bank has no reason to hike rates anytime soon.
Gundlach never sticks with just fixed income, and this time he turns to oil, which he believes is headed far lower. "I'm convinced Saudi Arabia wants oil at $70. They love turning the screws on people who mean them harm in the Middle East." Seventy dollar oil, however, will also hurt the booming energy sector here in the States as fracking is hardly worth it at that price.
Core Labs (NYSE:CLB) -7.9% AH after reporting mixed Q3 results but offering reduced guidance for Q4.
CLB now sees Q4 EPS of $1.53-$1.56 vs. $1.61 analyst consensus estimate and lowered from a prior outlook for $1.56-$1.61, on revenues of $275M-$280M vs. $292M consensus; also sees Q4 operating margin of 33%, exiting the year at 34%.
CLB expects Q4 North American activity will continue to increase slightly for emerging unconventional oil plays while remain at stable levels in established unconventional tight oil and gas plays; internationally, flat activity levels are seen through year-end 2014 and entering 2015 in response to weaker Brent crude prices.
Nabors Industries (NYSE:NBR) fell today along with most energy companies as oil prices resumed their recent slide, but CEO Anthony Petrello sees something of a silver lining through the market for the company's advanced drilling rigs.
If oil prices hover ~$80/bbl, producers will aim to drill more efficiently, prompting them to turn to NBR’s newest models - which may offset declines in U.S. drilling activity - Petrello said in today's earnings conference call.
"We can’t eliminate the risk [of falling commodity prices] but we can do our best to minimize it," the CEO said.
The advanced rigs may be eating into the U.S. market for old mechanical models, but some of the aging units have found a home in North Dakota, where Petrello says "they perform really well, [and] we’re going to keep running them until they’re no longer useful.”
EnLink Midstream Partners (NYSE:ENLK) agrees to acquire equity interests in E2 Appalachian Compression and E2 Energy Services from EnLink Midstream (NYSE:ENLC) for ~$193M.
ENLK says the E2 entities will provide condensate stabilization and gas compression services for growing production in the Utica shale play.
The E2 assets are supported by a long-term, fee-based contract with Antero Resources (NYSE:AR); once all E2 stabilization and compression facilities are complete in H1 2015, they are expected to generate $20M-$25M/year of adjusted EBITDA.
The deal marks the first drop down from ENLC to ENLK as part of the partnership's strategic growth plan.
MarkWest Energy (NYSE:MWE) raises guidance for 2014 distributable cash flow to $680M-$700M and 2014 adjusted EBITDA to $860M-$880M; achieving the mid-point of the ranges would result in Y/Y growth of 43% for DCF and 44% for adjusted EBITDA.
MWE also raises its Q3 cash distribution to $0.89/unit, up from $0.88.
In an operational update, MWE says Q3 average utilization of all Marcellus processing facilities rose to 84% from 79% in Q2, and average utilization of Utica processing facilities increased to 63% from 56%.
Phillips 66 Partners (NYSE:PSXP) agrees to acquire from Phillips 66 (NYSE:PSX) two newly constructed crude oil rail unloading facilities, located in N.J. and Wash., for $330M, plus certain assets associated with the Cross-Channel Connector Pipeline for an additional $10M.
The project is expected to have $12.4M of additional capital costs and is underwritten by long-term transportation service agreements with multiple shippers.
The pipeline system will have an initial capacity of up to 180K bbl/day and is anticipated to begin commercial operations in Q2 2015.
Rosneft (OTC:RNFTF) has asked the Russian government for more than 2T rubles ($49B) in aid to help withstand western sanctions, Finance Minister Anton Siluanov says.
Rosneft, which has a net debt of ~$55B, has been targeted by western sanctions against Russia in response to the country’s annexation of Crimea and its support of pro-Russian separatists in eastern Ukraine.
Shares of Willbros Group (WG -35.9%) are cut by more than a third after the energy infrastructure engineering company says it intends to restate its Q2 financial statements, citing a $22M-$24M error in the estimation process of a "significant pipeline construction project."
WG says the restatement will result in the reversal of ~$8M in recognized pre-tax income and the recognition of $14M-$16M in estimated pre-tax losses at completion.
Yesterday, WG named a new CEO and a new President.
Hess (HES +0.6%) is upgraded to Buy from Neutral with a $100 price target at UBS, which sees HES as having an attractive valuation risk/reward, strong liquidity to withstand a potential period of low oil prices, strong leverage to oil to benefit from a recovery, and several catalysts on the horizon to improve its valuation.
At the firm's $95/bbl base case, UBS says HES should deliver debt-adjusted cash flow/share growth of 8% vs peers' 7%.
UBS says HES' portfolio has long-term visibility, but it also sees potential for an increased growth rate if prices recover and the company chooses to accelerate Bakken and Utica development activity.
Chesapeake Energy (CHK +3.3%) is upgraded to Buy from Neutral with a $27 price target, up from $24, at UBS, which says new CEO Doug Lawler has removed most of the firm's bear arguments concerning high leverage, lack of transparency, and material free cash flow outspend.
CHK's turnaround is not reflected in discounted valuation, the firm says, adding that high leverage has been reduced, visibility has increased, and free cash flow deficit has been narrowed.
Given CHK's strong liquidity, below average oil inventory and attractive market valuations, UBS believes CHK may pursue an acquisition targeting oil-weighted U.S. resource assets.
The Federal Highway Administration tells Trinity Industries (TRN -0.3%) it must perform additional crash tests on its ET-Plus highway guardrails, a day after a Texas jury found the company had defrauded the agency and failed to report possibly hazardous design changes to the guardrails.
The ET-Plus units are in almost every state, and while states are ultimately responsible for their highway equipment, the FHA provides guidance on which products are eligible for federal reimbursement.
At least 14 lawsuits blame the guardrails for five deaths and more injuries.
Chevron (CVX +0.3%) says Indonesia’s Supreme Court has upheld a graft verdict against a local employee of the U.S. company issued last year.
The employee was sentenced to prison last year by an anti-corruption court for his role in a bio-remediation project on the oil-rich island of Sumatra in western Indonesia; three other employees also were convicted at the time, and the Supreme Court has yet to rule on their appeals.
The verdicts last year sent shock waves through the business community, sparking fears of an increasing trend in the criminalization of business disputes in the country.