Saturday, March 8, 2014
- After this week's scathing setback in a U.S. court, Ecuadorean villagers trying to get billions of dollars from Chevron (CVX) for pollution in the Amazon rainforest are ready to refocus on pending suits in other countries.
- While the U.S. district judge's decision will bar enforcement in the U.S. of the $18B judgment against Chevron in Ecuador because the villagers' American lawyer used "corrupt" means, it is not binding in cases elsewhere.
- Of cases pending in Canada, Brazil and Argentina, the Canadian case seems to have progressed the farthest, with an Ontario appeals court in December ruling that Canada should be a forum to hear Ecuadoreans' claims.
- The Patton Boggs law firm that assisted the U.S. lawyer trying to enforce the Ecuador judgment has suggested 24 countries where the plaintiffs could potentially find better luck.
- Chevron hopes this week's ruling will be a game changer for the remaining cases, but those cases could take several more years to fully play out.
Friday, March 7, 2014
- A drilling surge in the Permian Basin appears to account for this week's increase in the U.S. oil rig count, which jumped by 13 to a record high 1,443 in the latest tally by Baker Hughes (BHI).
- “While it’s one of the oldest fields in the U.S., there are multiple producing formations there, and companies are learning how to optimize horizontal drilling in them," WTRG Economics' James Williams says. "The growth is evidence that they’re figuring it out."
- Indeed, as Permian crude production per rig is expected to climb to 98K bbl/day this month, up from 83K a year ago, according to the U.S. Energy Department.
- While Pioneer Natural Resources (PXD), for example, is drilling in a 300-ft. thick shale shale formation in Texas' Eagle Ford play, the Permian offers shale depths of 3,500 ft., “so this is why this area has really substantial running room going forward,” COO Timothy Dove says.
- Other top Permian producers: CXO, APA, COG, CVX, OXY, EGN, END.
- YPF says Q4 profit surged 88% to 1.9B Argentine pesos ($241M) on higher revenue from sales and production, beating analysts’ estimates.
- YPF also says it boosted crude production by 6.3% Y/Y while natural gas output rose 10.2%.
- YPF produces ~35% of Argentina's oil and gas and accounts for more than half of the fuel sold in the country.
- Earlier this week, YPF said it signed two contracts totaling ~$1.2B to lease 15 drilling rigs to develop Vaca Muerta, which contains an estimated 27B barrels of shale oil; Helmerich & Payne (HP) will provide 10 of the rigs.
- Energy Transfer Partners (ETP) announces plans to build a pipeline to transport oil from the Bakken shale in North Dakota to multiple refineries in the Midwest and Gulf Coast regions.
- ETP says it will launch an open season next week to assess market interest in the project, but did not reveal the pipeline's capacity and provided few details.
- ETP already is developing the Trunkline conversion project designed to take up to 420K bbl/day Bakken and Canadian crude from Illinois to Louisiana.
- The growing consensus is that fuel cell companies are transitioning from money losers to money makers, "similar to where solar was in 2011 and 2012, compellingly priced and poised for share-price increase," and are no longer the pawns of short sellers.
- Cowen analysts, who helped kick off the craze early this week they said Plug Power (PLUG +26.1%) could amass more contracts with current customers and possibly expand overseas, are out today saying FuelCell Energy's (FCEL +14.3%) Q4 earnings, expected Monday, have the potential for upside.
- Fuel cell companies are capping a spectacular week: FCEL +79%, PLUG +71%, BLDP +42%, ZBB +132%.
2:57 PM| 3 Comments
- Royal Dutch Shell (RDS.A, RDS.B) says its Houston-to-Houma oil pipeline in southeast Texas leaked 364 barrels of oil yesterday when work crews accidentally punctured the line.
- The accident occurred in an open pasture in Port Neches, Tex.; the pipeline, which moves oil from Texas east into Louisiana, was shut down and isolated after the leak.
- Shell says it doesn't know when the line, which can carry up to 360K bbl/day, will resume operations.
- Alpha Natural Resources (ANR -9.4%) is hit hard after Goldman Sachs last night cut its rating on the shares to Sell and lowered its price estimates for coal; other sector names are following suit.
- Goldman also cut its price estimate for met coal this year to $141/metric ton from $150 and lowered projections for next year and 2016 following increased Australian output, an expected slowdown in the growth of Chinese imports, and “limited U.S. supply rationalization."
- The firm maintains a Neutral rating on Walter Energy (WLT -5.6%) but cuts its price target to $10 from $12.
- Also: BTU -4.2%, ACI -4%, CNX -1.5%, OXF -1.6%, JRCC -1.5%, CLD -0.7%, KOL -2.1%.
- Two energy investors presenting at Capital Link's MLP stress the desirability of crude oil and natural gas liquids over natural gas, and the importance of geographic diversity in suggesting six MLPs to buy now.
- Kyri Loupis, head of energy and infrastructure at Goldman Sachs, likes Oiltanking Partners (OILT), Lehigh Gas Partners (LGP) and EQT Midstream Partners (EQM) - smaller MLPs with strong growth prospects, healthy balance sheets and small distribution obligations to general partners.
- Dan Spears, a portfolio manager at Swank Capital, prefers larger pipeline players Access Midstream Partners (ACMP), Energy Transfer Equity (ETE) and NGL Energy Partners (NGL).
- Cabot Oil & Gas (COG +0.8%) is upgraded to Buy from Accumulate at KLR Group, which notes that COG's largest catalyst for growth is the Appalachian Basin Marcellus Shale, projecting ~41% production growth in 2014 as it plans to start a six-rig program to begin drilling this year.
- The firm's new $48 target price is based on the NPV of free cash flow over the life of a company using a reasonable discount rate; COG's valuation applies a 12.5% discount rate to determine the NPV of its free cash flow.
- Penn West Petroleum (PWE +2%) is on the rise despite reporting a Q4 loss of C$1.49/share, mainly due to C$742M in impairment charges, as investors seem willing to wait past the early stages of a turnaround with a new focus on its industry-leading light-oil position in western Canada.
- Backing out the loss, funds flow of $0.44/share was 29% lower than $0.62 reported in the year-ago quarter mostly due to asset sales completed over the past year, as well as a shrinking capital budget.
- A shrinking asset meant lower production volumes; in Q4, production was ~124K boe/day, down 19% Y/Y.
- Forecasts 2014 output of 101K-106K boe/day, with a planned $900M capital budget.
- BPZ Resources (BPZ +0.2%) is reiterated with a Buy rating and $6 price target at Wunderlich, which views recent test results at BPZ's Albacora A-19D well as positive news.
- The well tested at 2,106 bbl/day, in-line with the first new well A-18D, which tested at a 24-hour initial rate of 2,250 bbl/day, which the firm says shows the Albacora field is delivering consistent flow rate and the reservoir is behaving predictably.
- Q4 results were roughly in-line but the firm notes a big improvement in cost structure, as cash costs came in at $33/bbl vs. expectations of $54/bbl, and cash margin was $67/bbl vs. $33/bbl actual; the firm says BPZ could start going earnings-positive before Q1 2015 if the trend continues and stabilizes.
- Canadian Natural Resources (CNQ +0.8%) says it expects rising construction costs and delays at its Sturgeon refinery project in Alberta could double its equity commitment for the project to as much as C$680M.
- Sturgeon is designed to process 50K bbl/day of crude oil into refined products such as low-sulfur diesel and diluent used to dilute heavy oil for shipment.
- The cost overruns are a setback for Canada's second largest oil and gas company, which has prided itself on completing projects on time and within budget, and raises questions about the project's viability as other oil sands producers have abandoned similar upgrader plans.
- A disruption of natural gas supplies to Europe by an escalation of Russia’s military action in Ukraine may boost LNG demand and prices in Asia and South America, analysts say.
- Russia, which provides Europe with a quarter of its natural gas mainly though Ukraine, has cut supplies twice since 2006; while the current crisis hasn’t interrupted exports, LNG prices will “move through the roof” if flows transiting Ukraine are stopped, Societe Generale says.
- Any potential supply curbs could cause traders to stop selling LNG cargoes out of storage and instead hold them for domestic use, triggering competition for the fuel in South America and Asia.
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, KOLD, UNL, NAGS, DCNG
- FuelCell Energy (FCEL +5.6%) says it received a $2.8M continuation award from the U.S. Department of Energy to showcase the capabilities of its Direct FuelCell power plant for industrial applications; the plant is expected to be operational by the end of this year.
- Shares already have jumped more than 60% this week on the back of Plug Power's (PLUG +6.1%) substantial new order for fuel cell-powered forklifts at six of Walmart’s U.S. distribution centers.
- Also: BLDP +1.3%, ZBB +2.4%.
- More brinksmanship in the Ukraine crisis: Gazprom (OGZPY) says Ukraine has missed today's deadline in paying for February gas deliveries and is threatening to cut off the country's gas supply.
- Russian Pres. Putin and Gazprom already have said Russia will scrap price discounts for Ukraine as of April because Ukraine failed to pay for gas on time.
- Gazprom says Russian gas transit via Ukraine to Europe remains stable.
- Public Service Enterprise Group (PEG -0.1%) unveils a $12B five-year capital spending plan, including an additional $2B in utility transmission investments to $6.8B, in an effort to boost earnings growth at its utility segment.
- PEG expects its capital spending program to result in a double-digit increase in utility business earnings through 2016.
- PEG also will make additional investments to strengthen New Jersey's electric and gas systems against severe weather, if approved by the New Jersey Board of Public Utilities, which is expected to make a decision in April.
- Total (TOT) reportedly is exploring a sale of its TotalGaz liquefied petroleum gas marketing unit, and has engaged a pair of banks to look for buyers.
- TOT has set its sights on bringing in €700M ($1.04B) from the sale, with the sales process set to kick off next month, according to French newspaper Les Echos citing unidentified sources.
- TOT +0.6% premarket.
- W&T Offshore (WTI) -5.6% premarket after Q4 earnings swung to a loss despite rising production, due to deferred debt costs, an unplanned workover and higher than expected depreciation, depletion and amortization.
- The unplanned operation on the A-12 well at the offshore Mahogany field in Ship Shoal Block 349 to resolve "a casing pressure issue" resulted in additional Q4 cost of $13.6M.
- WTI produced an average of 56.1K boe/day during Q4, a 14.4% Y/Y increase; 35% was oil and 54% was natural gas.
- Sees Q1 total production of 4.3M-4.7M boe; sees FY 2014 total production of 17.1M-18.9M boe.
- Kazakhstan's government is suing foreign oil companies developing its huge Kashagan oilfield in the Caspian Sea, a tactic used earlier in securing the government large stakes in two of the three multinational energy projects on its territory.
- The development consortium, led by Exxon (XOM), Shell (RDS.A, RDS.B), Total (TOT) and Eni (E) as well as Kazakh state oil firm KazMunaiGas, may face Kazakhstan seizing a bigger stake in Kashagan or refusing to reimburse part of the $50B spent on bringing it onstream.
- Repeated delays at Kashagan have infuriated the government; production finally began in September after 13 years but was stopped a few weeks later after gas was found to be leaking from its pipelines.
- The government says its checks show the volume of gas burned off after the discovery of the leak totaled 2.8M cubic meters, and thus is claiming $737M against the consortium.