Today - Thursday, March 5, 2015
- Peabody Energy’s (NYSE:BTU) borrowing ability is being capped by lenders who are extracting concessions in return for allowing the company to raise $1B in the bond market, Bloomberg reports.
- BTU is said to have changed terms on its proposed second-lien notes, which would have allowed it to issue another $1B of junior-ranking debt; that limit has been cut to $500M, and may borrow an additional $500M if it is successful in raising $250M in equity.
- A successful deal would mean BTU’s next significant debt maturity would not arrive until 2018, according to Bloomberg.
- A BNSF Railway (BRK.A, BRK.B) train with 103 crude cars and two sand cars derailed this afternoon near Galena, Ill., with at least eight cars reportedly off the tracks and at least one emitting smoke.
- The county sheriff’s reportedly said several cars have caught fire but that it had not yet prompted any evacuations.
- Guyana's government says Exxon Mobil (NYSE:XOM) will start exploration drilling at the Stabroek Block off its coast, in a move that could inflame a long-running dispute with neighboring Venezuela.
- Officials say the country's president met XOM representative in the capital this week and the company's exploration rig ship is now in position at the concession area.
- The waters lie off a border region claimed by Venezuela in a territorial controversy dating back more than a century.
- Occidental Petroleum (NYSE:OXY) reaches a settlement with indigenous communities that sued it over contamination in Peru's northern Amazon, with the company agreeing to pay an undisclosed sum.
- Five Achuar communities, along with the environmental group Amazon Watch, sued OXY in 2007, alleging oil spills and toxic dumpings in their territory over three decades ending in 2001 caused premature deaths, birth defects and other health problems.
- The settlement was reached in 2013 in Los Angeles federal court but not announced until today.
- NGL Energy Partners (NYSE:NGL) -3.4% AH after announcing a public offering of 6.25M common shares, with an underwriters option to purchase up to an additional 937.5K shares.
- NGL says it will use the proceeds to repay borrowings under its revolving credit facility and for general partnership purposes, including capital expenditures and potential acquisitions.
- Oppenheimer's Fadel Gheit raises his price target on BP (BP -0.8%) to $50 from $45 while maintaining an Outperform rating, projecting the company to be free cash flow positive in 2016.
- Gheit calculates BP's operating cash flow at $22.5B in 2015 and $27.3B in 2016, after funding $20B in capex and a $5.95B dividend in each year, and expects the company to have a free cash flow deficit of $3.6B in 2015 but turn positive by $1.3B the following year.
- "Management believes the portfolio is diverse enough to balance fiscal and geopolitical risk while allowing it to focus on its strengths, which provides a unique platform for the future," Gheit writes.
- SandRidge Energy (SD -5.1%) stumbles as Barclays sets a $0.50 price target for the shares as it sees continued losses, and the firm moves its EPS estimate from a loss of $0.15 to a loss of $0.30 for the current fiscal year and a $0.45 for next year.
- Barclays is concerned about the significant reduction in SD's 2015 capital budget, expecting a mid-teens percentage decrease in production from Q4 2014 to Q4 2015.
- The firm also expects SD to incur a ~$450M cash flow deficit this year despite the reduced capital spending, noting that "the vast majority of SD's operating cash flow this year will be supported by higher priced oil and gas hedges that roll off next year."
- Barclays projects "lower hedging gains coupled with lower production in 2016 could result in higher leverage ratios, which could further restrict the company's ability to invest sufficient capital to arrest declining production."
- The Obama administration will decide soon whether to grant Royal Dutch Shell’s (RDS.A, RDS.B) request for extra time to hunt for oil in Arctic waters, Interior Secretary Sally Jewell said yesterday.
- Without action, Shell’s oil and gas leases in the Beaufort Sea will begin expiring in 2017, followed by its drilling rights in the neighboring Chukchi Sea two years later; the same fate awaits Chukchi Sea leases sold in 2008 to Statoil (NYSE:STO) and ConocoPhillips (NYSE:COP), which have made similar appeals for more time, citing regulatory uncertainty, legal challenges and other obstacles.
- The companies’ bids for “suspensions of operation” would effectively stop the clock ticking on their 10-year leases.
- STO and COP have no active plans to drill in U.S. Arctic waters, but Shell is preparing to resume exploration in the Chukchi Sea this summer.
- Canadian Natural Resources (CNQ +4.7%) confirms that it plans to spin off or sell its royalty land business this year once energy prices have stabilized.
- “We target this monetization in 2015,” CNQ President Steve Laut said on today's earnings conference call without specifying how the company would do so; CNQ has publicly discussed "monetizing" the business over the past year after Encana raised more than $4B in an IPO and secondary offering of its royalty business, spun out as PrairieSky Royalty.
- Shares have been strong all day following better than expected Q4 earnings as more oil was pumped to counter the effect of plunging prices, and CNQ's move to raise its dividend even as other oil producers have cut or eliminated dividends.
- New Jersey officially announces a $225M settlement with Exxon Mobil (XOM -0.3%) that state officials say is the largest environmental settlement in state history, but it is criticized for totaling a mere fraction of the nearly $9B initially sought.
- The state AG's office says the settlement over refinery sites in Linden and Bayonne is separate from XOM's obligation to clean up the sites at its own expense.
- A NYT story yesterday suggested that the state's 11-year battle for damages resulted in the settlement only when Gov. Christie's chief counsel became involved.
- The decision to settle for "roughly three cents on the dollar" after years of litigation is an "embarrassment," writes Bradley Campbell, commissioner of the state's Department of Environmental Protection when the case was filed in 2004.
- Legislators and environmentalists are calling for investigations and rejection of the deal.
- Oasis Petroleum (OAS -2.3%) is downgraded to Hold from Buy with a $15 price target, lowered from $17, at Canaccord, which says the dilution from its recent equity offering knocks down its net asset value target and takes away any sufficient upside in the stock to warrant a higher rating.
- The upsized 32M-share offering is dilutive to EPS and cash flow per share, the firm says as it sets new 2015 EPS and CFPS estimates to $0.59 and $4.28 from $0.76 and $5.51 previously.
- Canaccord still likes OAS as one of the largest players in the Williston Basin, with a large inventory of Bakken and Three Forks locations in many of the best areas of the play.
- Golar LNG (GLNG +10.8%) shoots higher on heavy volume after signing a preliminary agreement with Russia's Rosneft (OTC:RNFTF) to develop floating liquefied natural gas plants in Latin America and potentially elsewhere.
- GLNG says it aims to sign two agreements that would give Rosneft capacity from its floating gas liquefaction plants under development.
- The new concept of floating LNG production has yet to be tested, and the first such plant - owned by Pacific Rubiales (OTCPK:PEGFF) and whose output is earmarked for sale to Russia's Gazprom (OTCPK:OGZPY) - is expected to come on stream later this year.
- Expect tough times to continue in the offshore drilling sector, RBC analyst Robert Pinkard says but adds that M&A activity in such a fragmented market could make him more positive.
- Pinkard expects any deals to be almost entirely with equity given already stretched balance sheets, and he doubts premiums paid would be big enough to re-rate the entire group; he views Rowan (RDC -1.6%) as the most attractive M&A target due to the combination of a strong balance sheet and quality of rigs, with Diamond Offshore (DO +1%), Ensco (ESV -0.4%) and Noble Energy (NE -1.8%) as the most likely potential acquirers.
- Otherwise, the analyst prefers “companies with better contract coverage/visibility" such as ESV, NE and RDC to those with more exposure, such as DO and Transocean (RIG -0.7%).
- Exxon Mobil (XOM -0.5%), with $17.9B in free cash flow to end 2014, is under much less pressure to cut spending than smaller rivals, which are coming under varying degrees of financial strain amid lower oil prices; 2015 capex is being cut by 12%, a striking display of stability when compared to 30%-40% capex cuts generally announced by small and midsized E&P companies.
- CEO Rex Tillerson says being able to keep spending at rates that others can't provides XOM "a whole lot of different kinds of opportunities” in two main areas: cutting costs and acquiring assets.
- On acquisitions, Tillerson’s comment that “there really is no limitation on what we might be interested in or considering" in terms of possible deals suggests he is prepared to be ambitious.
- While a rumored bid for BP is not impossible, most analysts are doubtful due to the political sensitivities of such a deal and uncertainty about liabilities from the 2010 Gulf of Mexico oil spill; Wolfe Research's Paul Sankey thinks XOM is most interested in a U.S.-focused midsized oil company, with “key potential targets” including HES, CLR, DVN, APA and APC.
- Canada's National Energy Board says it received 1,800 applications to participate in hearings on TransCanada’s (TRP +1.2%) proposed Energy East pipeline project, but many of the applications appear to be copies of the same letter.
- Various individuals, companies, organizations and municipalities - such as the city of Winnipeg, which says a spill from the pipeline could affect its source of drinking water - submitted applications, as well as an unknown number of individuals that copied and pasted Greenpeace’s letter into their applications; not all applicants will be allowed to participate in the review process.
- The identical applications want the regulator's approval process to include a review of Energy East’s potential contributions to climate change.
- Energy East is a $12B project that would carry 1.1M bbl/day of oil from Alberta and Saskatchewan to refineries in Quebec and New Brunswick, and has sparked debate across Canada about climate change.
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