Today - Monday, March 30, 2015
- Dynegy (DYN +5.4%) opens higher after announcing late Friday that it won approval from the FERC to buy power plants in Illinois, Ohio and Pennsylvania from Duke Energy (DUK +0.5%) and Energy Capital Partners for $6.25B.
- The approval clears the way for DYN to complete its acquisition, which was announced last August.
- In buying the units, which sell power in competitive wholesale markets, DYN will nearly double its electricity generation capacity, owning and operating nearly 26K MW of fuel-diverse power generating facilities, primarily in the Midwest and Northeast.
- Seadrill (SDRL, SDLP) says BP has terminated a contract for its West Sirius semi-submersible drilling rig, resulting in a $160M decrease to its backlog, while extending a deal with another rig.
- SDRL says the termination will take effect by May, following the rig completing the current well and demobilization; it is now operating in the U.S. Gulf of Mexico.
- Prior to the cancellation notice, the dayrate and term for the West Sirius and West Capricorn contracts were swapped; the West Sirius dayrate was cut by $40K/day and the term decreased by two years to expire in July 2017, while the dayrate for the West Capricorn was raised by $40K/day and the term extended by two years to expire in July 2019.
- Resolute Energy (NYSE:REN) agrees to sell non-core assets in the Midland Basin portion of the Permian Basin in west Texas to a private party for $42M.
- REN says the sale marks the first step in its plan to pursue non-core asset sales to reduce debt and improve liquidity.
- REN also says two of its board members have resigned, reducing the board to six members.
- Statoil (NYSE:STO) says it has made another natural gas discovery at the Mdalasini-1 exploration well offshore Tanzania.
- STO says the discovery of an additional 1T-1.8T cf of natural gas at the well brings the total of in-place volumes to ~22T cf in Block 2.
- STO believes more discoveries can be made in the area, but that it will now concentrate on appraising one of its previous seven discoveries.
- Unlike the previous discoveries in the block, where Exxon Mobil participated with a 35%, STO says it had paid 100% of the cost for the latest well.
- Harvest Natural Resources (NYSE:HNR) -5.7% premarket after its Q4 net loss widens to ~$180M and warning that it is facing a severe cash crunch and will consider restructuring if it fails to obtain sufficient funding.
- HNR says it is experiencing severe liquidity constraints brought about by the failure of the Venezuelan government to approve the company's sale of its Venezuelan assets, the failure to pay dividends and other contractual breaches related to its Petrodelta joint venture with Petroleos de Venezuela.
- The Q4 loss was mostly due to the writedown of its investment in the Petrodelta JV; HNR also calls its Dussafu project off Gabon “economically marginal” due to the collapse in oil prices.
- Breitburn Energy Partners (NASDAQ:BBEP) agrees to sell $1B of convertible preferred units and senior secured notes in private offerings to investment funds managed by EIG Global Energy Partners and other purchasers.
- EIG, which specializes in energy-related debt and equity investments, will purchase $350M of convertible preferred equity, which pays monthly dividends that equal 8%/year and give EIG a ~18% voting interest in BBEP; EIG also gets to appoint one director to BBEP’s board.
- The $650M of senior secured notes mature in 2020, will pay a 9.25% annual interest rate and rank senior to BBEP’s existing debt and any future unsecured debt.
- BBEP says it plans to cut its annual common distribution to $0.50/unit in conjunction with the offerings.
- BBEP says the capital infusion provides additional liquidity and allows it to "opportunistically pursue strategic acquisitions” made possible by depressed commodity prices.
- BBEP also says it is revising its borrowing base under its credit facility to $1.8B through April 2016.
- BBEP -2.2% premarket.
- India rejects a request from BP to be allowed to sell jet fuel to its aviation market, which is dominated by state-run refiners; the oil ministry does not cite a precise reason for the rejection.
- Consumption of aviation fuel in India could rise sharply as domestic air traffic is estimated to almost triple this decade, with more of India's 1.25B people starting to fly and as airlines connect smaller cities.
- BP is not the only foreign company interested in India's jet fuel retail business; Royal Dutch Shell (RDS.A, RDS.B) already sells a small volume of jet fuel in a tie-up with a state-run firm.
- Oil prices are heading south again as traders focus on whether Iran and six world powers will reach a deal that could add more crude to an already oversupplied market if sanctions against Tehran are lifted.
- Diplomats remain divided over the pace of easing sanctions on the Islamic Republic and the limits to be imposed on its nuclear program, but a deadline to find a preliminary agreement has been set for Tuesday, with a detailed accord coming by the end of June.
- Crude futures -1.9% to $47.92/bbl.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
- In Asia's biggest block deal this year, Chevron (NYSE:CVX) has sold its entire stake in Caltex Australia (OTC:CTXAY), the country's biggest refiner, for A$4.7B ($3.7B).
- Offshore institutional investor demand for the 50% holding was strong, with bidding driving the final price to A$35 a share.
- Previously: Chevron looks to sell Caltex Australia stake (Mar. 27 2015)
Sunday, March 29, 2015
Saturday, March 28, 2015
- The number of companies with the worst below-investment grade debt ratings has jumped to a two-year high of 184 firms, with the oil price rout pushing a record 25 U.S. energy producers onto this month's list at Moody’s.
- The oil-and-gas and oil services companies listed account for a record 13.6% of the total of stressed companies rated B3 - six notches into junk territory - with a negative outlook for future ratings changes or lower; historically, oil firms have averaged ~8% of the firms on the list.
- During Q1, a dozen oil companies including Energy XXI (NASDAQ:EXXI), Midstates Petroleum (NYSE:MPO) and Halcon Resources (NYSE:HK), were added.
- If oil firms’ liquidity issues do not get fixed and they keep getting downgraded, the industry likely will see more debt defaults, Moody’s analyst Julia Chursin says.
- The total of 184 financially stressed companies is up 16% Y/Y but still far short of the 290 borrowers at the peak of the financial crisis in Q1 2009.
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.
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