Today - Monday, April 27, 2015
- PetroChina (PTR +3.2%) is higher even after reporting a larger than expected 82% drop in Q1 profit due to lower international crude prices and inventory writedowns at its refining division.
- PTR's Q1 net profit tumbled to 6.15B yuan ($989M), its lowest since Q3 2007, from 34.2B in the year-ago period and well below the analyst consensus average of 9.98B yuan.
- Q1 sales fell 22% to 410B yuan and the average realized crude price was halved to $48.87/bbl from a year ago; oil and gas output rose 4.9% to 381M boe.
- Earlier: PetroChina, Sinopec surge on industry merger speculation
- The British's government signal that it would make life difficult for any potential bidder for BP indicates the company's vulnerability to a takeover bid and that a more politically palatable tie-up with Royal Dutch Shell (RDS.A, RDS.B) no longer seems to be an option, Reuters reports.
- Although the U.K. always has maintained a special interest in BP, in the past when the company has looked vulnerable there was always the notion that Shell would be OK as a white knight in a merger deal that would preserve British interests; but with Shell now tied up in a $70B takeover of BG, that seems much less likely, prompting the government to say it would oppose any bid for BP, according to the report.
- "Everyone is thinking that Shell is probably out of the... game for a while. So inevitably, it makes BP more vulnerable as you don't have Shell as a white knight anymore," says an unnamed oil investment banker.
- Sinopec (SNP, SHI) and PetroChina (NYSE:PTR) are dismissing reports that their parent companies could merge to create a state giant, saying they have never received any official information about such a restructuring.
- It is the first time Sinopec and PTR have formally downplayed Chinese and foreign media reports in recent months that the government is considering merging Sinopec's parent with China National Petroleum, which controls PTR.
- Shares are off earlier highs but still sport strong gains, particularly SHI, up nearly 15% in U.S. trading.
- Seadrill (SDRL +2.8%) moves higher even as shares are downgraded to Sell from Neutral with a 20%-plus downside at Citigroup, which sees SDRL breaching debt covenant levels in 2016 with risks in 2015 if contracts are renegotiated.
- While a waiver likely will be renegotiated in the short term, the firm sees SDRL's financing picture becoming more difficult, especially in the context of financing new deliveries and refinancing of existing debt.
- Despite a 40% drop in spot deepwater floater dayrates over the last 12 months, Citi sees a potential for another 30% fall before the cycle bottoms; for SDRL, at least 40% of the fleet is uncontracted in 2016, and Citi sees downside risks to both earnings as well as the market’s and lenders’ valuation of the fleet as more units become idled.
- SDLP +2.8%.
- Helmerich & Payne (HP +3.2%) is upgraded to Buy from Neutral with an $85 price target, raised from $51, at Goldman Sachs, which notes HP's high exposure to increased demand for high-spec U.S. land rigs in 2016.
- The firm foresees 1,500HP or larger rigs to see the sharpest increase in utilization, increasing from 62% currently to the mid-80% range by late 2016, and that HP will be the biggest beneficiary of the demand pick-up since it controls nearly 50% of such available rigs.
- Goldman also likes HP's pristine balance sheet, with estimates 2016 net debt/capital of less than 1% vs. a 20% average for land drilling peers, and projects HP to generate substantial free cash flow in 2016 which can be used for dividend increases or share buybacks.
- Precision Drilling (PDS +1.6%) opens higher after its Q1 earnings plunge 76% Y/Y on a 24% drop in revenue, but results beat expectations as job cuts and other cost-cutting measures helped maintain margins despite a steep decline in drilling activities.
- Contract drilling services operating expenses fell 21% Y/Y to C$251.2M, helping PDS mitigate demand for North American land drilling services that "failed to meet even the most pessimistic forecasts," CEO Kevin Neveu said.
- PDS's U.S. rig count fell to 80 in Q1 from 94 a year earlier, and Canada rig count fell to 69 from 127, and says it current workforce is 2,200 fewer (~28%) than at the end of 2014.
- However, PDS raises its 2015 capital spending forecast by 8.3% to C$506M due to a stronger dollar.
- PDS also says it will maintain its quarterly dividend at C$0.07/share.
- Statoil (STO +1.3%) must move ahead with the delayed expansion of the Snorre oil and gas field in the North Sea because it is a time-critical investment, Norway's energy minister says.
- STO last month delayed a decision on the $4B Snorre upgrade, which could yield an additional 300M barrels of oil, saying margins on the project were too low, particularly after the recent drop in crude prices; STO expects to decide in late 2016 whether to move ahead with building a new platform and extending the field's lifetime to 2040.
- Exxon Mobil (NYSE:XOM) owns a 17.4% share of Snorre.
- LSB Industries (NYSE:LXU) +4.1% premarket after reaching an agreement with activist investor Starboard Value regarding corporate governance and board composition.
- LXU says that, once its El Dorado facility expansion projects have been completed and brought online in 2016, it plans to separate its chemicals unit from its climate control unit and to explore an MLP structure for the chemicals business.
- LXU agrees to add five Starboard nominees as new directors, expanding the board to 13 from 10.
- Starboard, which has been critical of LXU's performance for nearly a year, owns ~7.6% of the company's outstanding shares.
- Kosmos Energy (NYSE:KOS) says it has made a "significant, play-opening gas discovery" at its Tortue-1 development well, drilled to test the Tortue West prospect, off Mauritania.
- KOS says Tortue-1 has far exceeded its pre-drill expectations, as seismic imaging indicates the areal extent of Tortue West could cover 90 sq. km that will be better defined with appraisal drilling, and has significantly de-risked its large and under-explored 27K sq. km deepwater position in Mauritania.
- Petrobras (NYSE:PBR) -2.9% premarket as Morgan Stanley cuts its rating to Sell, saying PBR’s debt level is too high to be supported by its operating cash flow.
- "Debt acceleration is no longer a threat and Petrobras is regaining access to debt markets. But fundamentals are not supportive with cash burn prevailing in the coming four years, as investments are expected to outpace operating cash generation by $6.0B on average," the firm writes, adding that cutting capex and intensifying divestments contribute to deleveraging but are not sufficient to completely fix the balance sheet.
- Stanley is cutting its 2015-16 earnings estimate by 30% and now has a $8.50 price target for the shares.
- PetroChina (NYSE:PTR) and Sinopec (SNP, SHI), China’s two largest oil explorers, jumped by their daily trading limit in Shanghai on speculation the government is considering consolidating the industry.
- PTR jumped 10% to 14.65 yuan, the highest in more than five years, and SNP also surged 10% to 8.56 yuan at the close in Shanghai; in U.S. premarket action, PTR +5%, SNP +5.7%, SHI +17.1%.
- A report also said China’s state-assets regulator may cut the number of government-owned enterprises to 40 from 112 through mergers and restructuring.
- Earlier: Chinese shares continue powerful ascent
- Tullow Oil (OTCPK:TUWLF, OTCPK:TUWOY) jumps as much as 9% in London after the International Tribunal of the Law of the Sea ruled that oil and gas development work can continue on its offshore TEN project, located in territory disputed by Ivory Coast and Ghana.
- ITLOS ruled that Ghana must stop all drilling in the disputed area, but dismissed Ivory Coast's call for a suspension of all petroleum operations.
- Tullow says it had already drilled all of the 10 wells expected to be operational when the field starts pumping oil.
- Tullow says the Jubilee field, a development operated and 35% owned by Tullow which produced 102K bbl/day in 2014, is not affected by the dispute.
6:32 AM| Comment!
- The British government has told BP (NYSE:BP) it would oppose any potential takeover of the company, which was seriously weakened by the huge bill incurred after the Deepwater Horizon disaster and a recent plunge in oil prices.
- Authorities acknowledge that the U.K. would have few formal powers to block a bid, but a senior City figure briefed on the government thinking said making its opposition so clear may deter any foreign company making an offer, FT reports.
- British officials have also said the government would be skeptical about any takeover - even if it involves Royal Dutch Shell (RDS.A, RDS.B) - because it wants the country to have two big global oil companies.
- Previously: BP's Dudley does not foresee wave of energy mergers, at least not yet (Apr. 21 2015)
Saturday, April 25, 2015
- Texas regulators have ordered Exxon Mobil's (NYSE:XOM) XTO Energy subsidiary and another company to prove their wells near Fort Worth are not causing earthquakes.
- On Friday the Texas Railroad Commission, which regulates the state’s oil and gas industry, told both companies they need to appear at hearings scheduled for June to justify why their wells should not be shut down.
- The action follows a Southern Methodist University study released this week that linked a rash of small earthquakes in the area to nearby natural gas wells and the injection of wastewater deep underground.
- Also this week, the U.S. Geological Survey reported that an increase in seismic activity in Texas, Oklahoma and six other states "very likely" was caused by wastewater injection from oil and gas operations.
- ETFs: XLE, VDE, ERX, OIH, XOP, ERY, DIG, DUG, XES, IYE, IEO, IEZ, FENY, PXE, PXJ, RYE, FXN, DDG
Friday, April 24, 2015
- EQT Corp. (NYSE:EQT) is reiterated with a Buy rating with a new $103 price target, up from $87, at Canaccord following Q1 earnings and revenues that easily beat analyst estimates.
- The firm believes EQT's execution - as evidenced by Q1 results that it expects to see continued throughout the year - coupled with a clean balance sheet, a liquidity event in the EQGP IPO, and potential for a NAV accretive acquisition, make a strong investment case for the company.
- EQT increased its 2015 guidance for production sales volume to 585B-600B cfe, including liquids volume of 9,000-10,000 Mbbls, and sees Q2 volumes at 145B-150B cfe with liquids of 2,300-2,400 Mbbls.
- Peabody Energy (NYSE:BTU) held steady a day after a larger than expected Q1 loss triggered a 7.6% pounding in the stock price.
- Sterne Agee's Michael Dudas is optimistic, noting BTU ended Q1 with liquidity of $2.2B following its recent refinancing; at cycle lows for pricing, strong current and anticipated cost reduction efforts, and liquidity to meet estimated fixed outlays, the firm thinks BTU shares should benefit once pricing resets to more normalized levels.
- BTU said during yesterday's earnings call that it has studied creating a coal MLP, and Clarkson analyst Jeremy Sussman says BTU's Illinois Basin and Southwest assets could prove a good fit for an MLP structure because of the long-term nature of contracts and general stability of pricing in those regions.
- However, Nomura reiterates its Reduce rating on the shares, citing concerns about cash flow generation.
- Canada issues an emergency directive aimed at slowing crude oil trains traveling through urban areas to a maximum of 40 mph and requiring increased inspections and risk assessments along key routes used for transporting dangerous goods.
- The directive is the latest in a series of steps by the Canadian government to boost rail safety in the wake of derailments as crude-by-rail shipments rise.
- Canada’s two biggest railroad operators - Canadian National (NYSE:CNI) and Canadian Pacific (NYSE:CP) - already have restricted train speeds to 35 mph in urban locations; in the U.S., rail operator BNSF (BRK.A, BRK.B) said last month it had begun slowing crude-carrying trains to 35 mph in cities with more than 100K residents.
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