Friday, March 27, 2015
- Realty Income (NYSE:O) is up 3.3% in after-hours trade as it's set to join the S&P 500, replacing Windstream Holdings (NASDAQ:WIN), itself down 5.1% today and -0.5% after hours.
- Windstream -- spinning off assets into a REIT -- will head to the S&P MidCap 400 to replace International Game Technology (NYSE:IGT), which is being acquired by GTECH. Meanwhile, Douglas Emmett (DEI, up 2.1% after hours) will replace Realty Income in the MidCap 400 after trading on April 6.
- In other moves, Gentherm (THRM, +1.8% late) replaces buyout target Aviv REIT (NYSE:AVIV) in the S&P SmallCap 600 after trading on April 1; and Echo Global Logistics (ECHO, +1.9% late) will replace C&J Energy Services (NYSE:CJES) in the SmallCap 600 after trading April 1, as C&J is merging with part of Nabors.
- Russia is preparing for the possibility that Exxon Mobil (NYSE:XOM) will file an arbitration claim over as much as $500M in taxes as a statute of limitation for part of a disputed payment at its offshore project expires this week, Bloomberg reports.
- XOM is believed to be seeking a reduced profit tax for the 30%-owned Sakhalin-1 oil venture it operates in Russia Far East, and wants to get back tax it paid above the reduced rate for the past seven years.
- XOM CEO Rex Tillerson, who expanded drilling rights in Russia fivefold in 2014, traveled to Moscow last week but is said to have left without a deal on the tax dispute.
- The statute of limitation over payments for 2008, the first year in dispute, apparently expires March 28; XOM probably would demand taxes for seven years, not just 2008, if it files a claim.
- Royal Dutch Shell (RDS.A, RDS.B) is moving oil rigs to Alaska in anticipation of the possible resumption of its Arctic drilling program two years after the grounding of a rig led to a huge uproar from environmental groups.
- Also, Shell’s Arctic oil spill response system is undergoing drills in waters near Bellingham, Wash., with government officials observing the exercises; the drills were set to begin in earnest today and span several days, and are meant to put the equipment through its paces for regulators who will decide whether the company wins other critical government approvals.
- “Bellingham, Wash. in March is not Barrow, Alaska in October," Greenpeace retorts. "Even if these tests appear successful, they have almost no bearing on whether or not Shell can safely drill in the Arctic.”
- While Deutsche Bank analysts see oil poised for a modest recovery, they nevertheless downgrade Pioneer Energy (PES -8.1%) and Precision Drilling (PDS -3.7%) to Hold from Buy, believing that some of the traditional early cycle winners - specifically land drillers - will trade up in the near-term but the strong earnings recovery required to justify such a move will disappoint.
- But the firm does not think investors should avoid all oil services stocks, saying well service companies such as Basic Energy Services (BAS -2.8%) and Key Energy Services (KEG flat) could be the biggest beneficiaries, actually helped by a more cautious environment in which operators can generate high returns and quick paybacks by enhancing production from existing wells.
- Cnooc (CEO +4.8%) says it will shelve its shale gas project in Anhui province, in the latest sign that the U.S. shale gas revolution is unlikely to replicate itself in China.
- CEO Li Fanrong says the company had drilled near Wuhu, in southern Anhui, since late 2011, but decided the block is not suitable for development on a large scale.
- Cnooc joins PetroChina (NYSE:PTR), which has already sharply cut back on a shale project in Sichuan province it was developing with Royal Dutch Shell.
- Cnooc tried but failed to interest foreign investors in the Wuhu block, but potential partners have shied away in part because of the dense population in the area; similar concerns held back the PetroChina-Shell project in Sichuan.
- Earlier: Cnooc surprises with 6.5% profit gain despite oil price plunge
- The FERC directs the partnership behind the Nexus natural gas pipeline proposed for northeast Ohio to investigate an alternative route that would relocate the $2B project to less populated areas.
- The agency's move comes a day after the city of Green proposed moving 103 miles of the pipeline through the Akron-Canton area to locations that would conflict less with residential areas.
- Nexus, a partnership of Spectra Energy (SE, SEP) and DTE Energy (NYSE:DTE), would transport as much as 2B cf/day of gas from the Utica Shale formations in eastern Ohio.
- The total U.S. rig count fell by another 21 units to 1,048 in the 16th consecutive week of decline, but at a much slower rate than in recent weeks, according to Baker Hughes (NYSE:BHI) latest weekly survey.
- Oil rigs fell by 12 to 813, down 50% since its October 2014 peak, while gas rigs fell by 9 to 233, down 27% since October.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
- More than 98% of voting shareholders from both companies approve the $34.6B megadeal for Halliburton (HAL -0.4%) to acquire Baker Hughes (BHI -0.2%).
- The combination of the two oilfield services giants is not expected to close until H2 of this year after going through the regulatory process and the sales of some business units and assets by both companies.
- Both companies have been downsizing sharply, citing the oil crash rather than the merger; HAL is cutting up to 6.5K jobs from its 80K global headcount while BHI is shedding 7K of its nearly 60K jobs.
- Trade unions Unite and GMB say members working in the U.K. North Sea are showing overwhelming support for industrial action over proposed changes to their terms and conditions, voting 93.5% in favor of proceeding to a strike ballot and increasing the likelihood of North Sea strike action for the first time in a generation.
- It is not yet clear how many workers any eventual strike action would involve, but the unions still must cobble together an electoral register that is robust enough to withstand any potential legal challenges, a process which could take some time.
- Companies are broadly cutting headcount in their North Sea operations to trim costs, with hundreds of job losses announced at Shell (RDS.A, RDS.B), BP, Talisman (NYSE:TLM), Chevron (NYSE:CVX) and ConocoPhillips (NYSE:COP) since oil prices plunged in 2014.
- PetroChina (NYSE:PTR) says it is actively involved in talks with international oil companies about swapping assets in North America to help it ride out lower crude oil prices.
- Because of weak oil prices, "any asset disposal will lead to big losses for any big international oil companies. If we could strengthen co-operation and swap assets, it will help us restructure overseas assets and complement each other,” Vice Chairman Wang Dongjin says, without naming the companies involved in the negotiations.
- PTR plans to cut nearly 10% from E&P spending compared with last year, joining the rest of the industry in trimming budgets in response to the nearly 50% plunge in oil prices since last summer.
- ConocoPhillips (COP -0.7%) says it has hired the Bank of Nova Scotia to advise on the sale of ~20% of its production in western Canada outside of the oil sands.
- Production from the properties in Alberta, British Columbia and Saskatchewan is mostly gas and totals ~35K boe/day.
- COP has operations across western Canada and the country’s Arctic region, including ~1.1M acres of land in the oil sands.
- Royal Dutch Shell (RDS.A, RDS.B) is among oil companies that are scaling back investments in China amid falling prices and expensive and geologically risky projects, WSJ reports.
- Shell isn't alone: In the past year, Anadarko (NYSE:APC) and Noble Energy (NYSE:NBL) have completed deals to sell operations in China, Hess (NYSE:HES) says it is quitting a shale exploration deal with PetroChina, and BP has withdrawn from three exploratory blocks in the South China Sea.
- "These companies thought $100 oil was going to stay," says the regional head of Asia-Pacific oil and gas research at Nomura. "They have to prioritize the projects based on returns, and the projects in China tend to be lower return, other things being equal, simply because of higher costs."
- Ultra Petroleum (UPL -0.6%) is initiated with an Outperform rating and a $19 price target at Imperial Capital, which says UPL is the most leveraged company, operationally and financially, to Rocky Mountain natural gas available in the U.S. E&P sector.
- UPL is the leading operator in the Pinedale Anticline of Wyoming and was involved in deploying some of the first modern drilling and completion technologies that turned the natural gas field into a 40T cfe field.
- Since 2000, UPL has drilled more wells there than any other operator (1,670 wells), and is the lowest cost company in a very low cost, long-life tight gas play, the firm says.
- Petrobras (PBR -2%) says it is nominating Vale CEO Murilo Ferreira as its next chairman, to be voted on at the company's next shareholders meeting on April 29.
- Yesterday, PBR said it had named Luciano Coutinho, head of the BNDES development bank, as its new chairman but failed to make clear that the appointment was only on an interim basis.
- The choice of Ferreira breaks from a tradition of political appointees, and earlier speculation had highlighted the Vale CEO as someone who could help improve the view of Petrobras as more market friendly; the initial reaction to Coutinho's apparent selection was negative.
- CrossAmerica Partners (CAPL -0.6%) says Joe Topper will retire as CEO effective Sept. 30 and resign as President effective immediately.
- Jeremy Bergeron, who served as CST Brands' (CST +0.3%) senior VP of integration and development operations, is appointed as CAPL's new President.
- Topper will continue to serve on the boards of both CAPL and CST after he formally steps down as CEO.
- Tesoro (NYSE:TSO) says it expects to restart its 166K bbl/day Golden Eagle refinery in Martinez, Calif., today, in a sequenced start-up that should take about two weeks.
- TSO workers walked off their jobs at the refinery on Feb. 1 as part of the national strike that later spread to 15 plants, but ratified a new contract on Wednesday.
- As the strike ends, TSO is turning its attention to $390M in planned upgrades at its Anacortes, Wash., oil refinery, partly intended to improve its export capabilities.
- Cnooc (NYSE:CEO) reports a 6.5% increase in full-year profit, attributing cost cuts and higher output that helped offset the slide in global oil prices.
- China's biggest offshore energy explorer says its net income rose to 60.2B yuan ($9.7B) from 56.5B yuan a year earlier, well ahead of the analyst consensus estimate of 52.3B yuan, but sales slipped 4% to 275B yuan.
- Cnooc credits much of its improved profit to a 6% drop in its production cost to $42.30/boe, even while its oil and gas output rose 5.1% Y/Y to 432M boe, as more than 10 new projects started production, including Liwan 3-1, the first major deepwater gas field offshore China.
- Cnooc says it achieved a reserve replacement ratio of 112% last year, and had net proven reserves of 4.48B boe at year-end.
- Cnooc has said it plans to increase production by as much as 15% in 2015, while cutting capital expenditure by as much as 35% to 70B yuan.
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