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.
- French electricity and gas company GDF Suez (OTCPK:GDFZY, OTCPK:GDSZF) says it is changing its name to Engie as a reflection of the rapid changes in the energy industry toward renewables.
- Outgoing CEO Gerard Mestrallet and incoming chief Isabelle Kocher say the new name is easier to associate with the group’s business - energy - and that it is reminiscent of the French word "énergie” to keep faithful to its roots.
- The company ranks as the world's no. 3 importer of liquefied natural gas and the top independent electricity producer, and it is investing heavily in renewables, which already account for 22% of its power capacity.
- Chesapeake Energy (CHK -0.2%) will create a $25M compensation fund as part of a settlement of antitrust and racketeering charges brought by the state of Michigan, Reuters reports.
- CHK also agrees to plead no contest to one count each of attempted antitrust violation and false pretenses, charges that the court would dismiss after 11 months if CHK adheres to the settlement terms.
- The antitrust charge brought by the Michigan AG alleged that CHK colluded with a competitor, Encana, to suppress oil and gas land lease prices at a 2010 state land lease auction; Encana agreed to pay $5M in a civil settlement with the state in May 2014.
- American Electric Power (AEP +1.9%) is upgraded to Buy from Hold with a $62.50 price target at Deutsche Bank, which believes AEP has made great strides toward becoming a more predictable, higher quality regulated utility, with improved execution and a clearer strategy in place.
- The firm sees the trend continuing in 2015 as AEP likely will exit its merchant generation business, which should reduce volatility and allow for multiple expansion.
- AEP trades in line with regulated peers absent any value for the generation segment, DB says, implying minimal downside even if the sale price or proceeds deployment disappoint.
- Cabot Oil and Gas (COG +0.1%) inches higher following Q1 earnings and revenues that topped expectations, but earnings nevertheless fell 54% Y/Y and revenue slipped 9% to $465M even as production volume rose 43% to 171.4B cfe.
- The falling price of gas meant COG fetched a price of $2.46/MMcf for its gas in Q1, nearly a third less than last year; COG expects its Q2 natural gas price realizations before the impact of hedges to average $0.82-$0.92 below Nymex settlement prices.
- COG provides Q2 net production guidance of 1,375MM-1,425MM cf/day of natural gas and 17.5K-18.25K bbl/day for liquids, and forecasts full-year production growth of 10%-18% vs. an earlier estimate of 20%-30% growth.
- COG says it will drop one rig in the Eagle Ford Shale, reducing its portfolio to a single rig in the play; it operates three rigs in the Marcellus Shale, which it plans to continue to run but plans to slow its production there to drop output by 50M cf/day.
- Petrobras (PBR +6%) racks up a second straight day of strong gains after it released financial statements that had been delayed by the corruption scandal and on news that it will report Q1 earnings on May 15.
- Providing some short-term relief to investors, Fitch Ratings says PBR had averted the risk of an imminent credit downgrade but could still lose its investment grade over the next couple of years.
- Cowen analysts raise their price target on PBR shares to $11.50 from $9, applauding the company's "new emphasis" on de-leveraging, capital discipline and a "more shareholder friendly strategy."
- However, J.P. Morgan says it is "not very convinced" with PBR's plan and says further strength would provide an opportunity for investors to reduce risk on the bonds.
- U.S. oil drillers took another 31 rigs out of service last week, falling for the 20th consecutive week and bringing the total number of active rigs down to 703 from their October peak of ~1,600, according to the latest weekly survey from Baker Hughes (NYSE:BHI).
- More than half of the oil rigs idled this week were in in Texas, as the state’s rig count fell by 19 to 393, down from 894 a year ago; of that number, a dozen were sidelined in the Permian Basin in west Texas.
- The total U.S. natural gas rig count rose by eight to 225 rigs; the overall total U.S. rig count declined 22 to 932 (four rigs were listed as miscellaneous).
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, TWTI, OLEM
- TransCanada (TRP -0.1%) - still twisting in the wind over delays involving its Keystone XL project - is asking the U.S. government to permit a new and different pipeline project, filing an application to receive a presidential permit that will let it construct a 200-mile pipeline across the U.S.-Canadian border.
- TRP's proposed $600M Upland pipeline project aims to transport up to 300K bbl/day of North Dakota crude to a connection in Saskatchewan, where ~70K barrels would flow on TRP’s planned Energy East pipeline, which aims to ship up to 1.1M bbl/day nearly 3K miles across Canada to refineries and ports along the country’s east coast.
- The move indicates TRP is not giving up on its oil shipping plans despite being embroiled in the political battle over Keystone since 2008.
- Total (TOT -0.5%) is looking to sell its fuel distribution business in Turkey and has asked Societe Generale to lead the process, Reuters reports.
- Turkey has some of the steepest fuel prices in Europe but heavy taxes and other regulations leave little profit margin for retailers, prompting TOT to seek an exit from the country, according to the report.
- TOT's market share of Turkey's fuel distribution is relatively small, with just 5% of the 80B lira ($29.4B) market.
- LyondellBasell (LYB +2.8%) is higher after recording a strong Q1 earnings beat, although evenues fell a worse than expected 26.5%.
- LYB says cheap raw materials, a tight market for some of its chemicals, and increased production, helped it offset lower prices for the products it makes and sells; for example, the price of ethylene fell by $0.13/lb, the company says.
- LYB says its olefins and polyolefins segment in the Americas, which makes products such as ethylene, posted Q1 operating income of $934M, up from $656M in the year-ago quarter; operating profit at its refining segment totaled $74M, vs. $86M a year earlier.
- The spread between the cost of feedstock and the price of refined products has narrowed since Q1, slicing in to LYBl’s margins, but the margins are still healthy, CEO Bob Patel says.
- Norway's government asks parliament to approve the $15B Statoil-operated (NYSE:STO) Johan Sverdrup project in the North Sea, saying the giant field requires an oil price of only $32/bbl to be profitable; the company previously has said the field would be profitable at below $40/bbl.
- STO estimates the Johan Sverdrup project could create more than 50K domestic jobs between 2014 and 2026; the oil sector employs ~9% of Norway's workforce and contributed nearly 20% of the country's economic activity and 46% of export revenue in 2014.
- The field is seen as the cornerstone of Norway's oil production and could contribute 30% of the country's crude oil in 2025.
- Foresight Energy (NYSE:FELP) is resumed with a Buy rating and $23 stock price at Deutsche Bank, which considers FELP among the lowest cost producers operating in the Illinois Basin, a region set to gain share in the U.S. thermal coal market due to its high energy content and low delivered cost.
- The firm says FELP's new partnership with Murray Energy could lead to significant synergies, which in turn could lead to even lower mining costs and provide future growth for both companies through integrations and future drop-downs of other assets into the public MLP.
- Kinder Morgan (KMI -0.2%) says it is considering another expansion along a pipeline linking its natural gas system to Mexico.
- An expansion would add another 200M cf of capacity along the Mier-Monterrey pipeline, which runs 95 miles from the U.S.-Mexico border to Monterrey; if KMI moves forward, the project would add a new compressor station and boost total capacity along the line to 840M cf/day.
- If shippers sign on, KMI says it could complete the $38M upgrade by mid-2017.
- Emerge Energy Services (NYSE:EMES) -7.7% premarket after announcing it is cutting its quarterly distribution by 29% to $1.00/unit from $1.41, as the slowdown in drilling activity hits proppant suppliers and other industry suppliers.
- EMES also revises its full year distribution guidance to ~$3.00/unit.
- Baird downgrades EMES to Underperform from Neutral and lowers its price target to $30 from $50, and expects other frac sand miners such as HCLP and SLCA to sell off on the news (Briefing.com).
- PPL Corp. (NYSE:PPL) says the U.S Justice Department has completed its review of the spinoff of its competitive electricity generation holdings, in the final regulatory decision needed to close the transaction.
- Talen Energy will be an independent publicly-traded company listed on the NYSE operating the combined competitive power generation businesses of PPL Energy Supply and P-E firm Riverstone Holdings.
- The companies say they are on track to close on the deal during the current quarter.
- China's Cnooc (NYSE:CEO) says Q1 revenues fell nearly 40% Y/Y to 36.72B yuan ($5.93B) from 60.46B yuan, dragged down by the fall in global oil prices.
- Q1 net crude oil and natural gas output rose 9.4% Y/Y to 118.3M boe, compared with 15.5% growth last year; overseas production growth was flat, held down by falling output at its Nexen operations in Canada.
- Cnooc’s average realized oil price fell 49% to $53.40/bbl from $104.63 in the same period last year; capital spending in quarter fell 16% to 15.94B yuan, led by a 35% drop in exploration costs.
- Bernstein analyst Neil Beveridge, which rates CEO at Outperform, expects further progress on lifting cost reduction with service industry deflation; “With a recovery in oil prices in the second half, we are confident Cnooc are on the right track.”
- The company did not release Q1 net profit figures.
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