Today - Friday, November 28, 2014
- "OPEC, like Rockefeller, ultimately damned itself," writes Wolfe Research's Paul Sankey. He doesn't see oil demand ratcheting upwards because of the drop in oil prices; instead, he says, the market will only clear at the point of U.S. supply growth destruction.
- This could take months and a price of around $50 per barrel ... "And then we squeeze radically higher. As a result, the world accelerates its move away from oil."
- "This is going to be volatile, and we can't understand how that helps the Saudis. Volatility sels Teslas."
- WTI crude (NYSEARCA:USO) tried bouncing earlier, but is now lower by 8.5% at $67.43 per barrel. The Energy Select SPDR (XLE -6.6%) is also set to close today's shortened session on the lows.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, DIG, BNO, UGA, DTO, DBO, DUG, IYE, XES, IEO, CRUD, IEZ, UWTI, PXE, USL, FENY, PXJ, DWTI, DBE, DNO, PSCE, RJN, RYE, SZO, FXN, OLO, JJE, DDG, ONG, RGRE, OLEM, TWTI, UBN
- Fracking sand plays U.S. Silica (SLCA -26.3%), Hi-Crush Partners (HCLP -17.3%), and Emerge Energy (EMES -16.5%) are among the many energy names sporting double-digit declines in response to OPEC's decision not to cut crude production, and the resulting plunge in crude prices. As are proppant providers Carbo Ceramics (CRR -16.2%) and FMSA Holdings (FMSA -16.5%).
- Wells Fargo's Wednesday downgrade of U.S. Silica was well-timed.
- Solar stocks are getting hit hard (TAN -5.1%) after OPEC opted against cutting oil production, leading crude prices to plunge below $70/barrel and sparking huge selloffs in energy/commodity stocks. Fuel cell stocks aren't faring much better.
- Solar decliners: FSLR -6.8%. SPWR -6%. SUNE -5.7%. SCTY -2.9%. CSIQ -10.7%. SOL -9.1%. YGE -7.3%. DQ -7.2%. ENPH -6.8%. TSL -6.9%. JASO -7.5%. RGSE -3.9%. JKS -6.9%. CSUN -3.5%. VSLR -3.7%. HSOL -3.8%.
- Fuel cell decliners: BLDP -6.1%. FCEL -4.5%. PLUG -2.3%. HYGS -5.3%.
- Oil service companies mull OPEC's threat to the U.S. shale boom by its decision to hold production and the resulting tumble in oil prices.
- C&J Energy (CJES -17.6%), RPC, Inc. (RES -14.5%), GreenHunter Resources (GRH -9.5%), Seventy Seven Energy (SSE -16.5%), Pioneer Energy (PES -13%).
- Larger names: Halliburton (HAL -11.5%), Schlumberger (SLB -9.7%), Superior Energy (SPN -15%), Baker Hughes (BHI -9.1%).
- Ladenburg Thalman throws in the towel on Oasis Petroleum (OAS -30%), Denbury Resources (DNR -14.9%), Resolute Energy (REN -18.3%) following OPEC's decision yesterday to hold production levels and the resulting tumble in crude oil, with WTI crude -6.4% to $69.95 per barrel.
- Some others: Bonanza Creek (BCEI -21.5%), Northern Oil & Gas (NOG -16.2%), Warren Resources (WRES -16.3%), Halcon Resources (HK -22%), Triangle Petroleum (TPLM -21%), Emerald Oil (EOX -26.4%), Kodiak Oil & Gas (KOG -19.3%).
- OPEC's Thursday decision to keep oil production unchanged has sparked a commodity stock rout, one that hasn't left coal stocks unscathed.
- Major decliners: BTU -6%. ACI -6.6%. ANR -6.2%. CLD -4.3%. CNX -2.8%. NRP -3.5%. ARLP -3%. CLF -3.6%.
- Thermal coal prices have already fallen sharply this year.
- ETF: KOL
- With OPEC having seemingly handed the market responsibility for removing the ~1mb/d of supply needed to achieve balance into 2015, our concern is that the lack of transparency around the price at which supply breaks and speed/scale of a non-OPEC response leaves oil equities facing a period of uncertainty," writes analyst Lucas Hermann, downgrading Statoil (STO -13.2%) to Hold.
- On a brighter note for the oil majors, Hermann notes on a 12-month view, the sector's relative valuation is at levels last seen in 2009, maybe meaning "absolute support" for names like Shell (RDS.A -6.2%) "where we have real conviction in the solidity of distributions."
- The sector was wrecked on Wednesday as Seadrill suspended its dividend amid "significant deterioration" in the oil market, and its North Atlantic Drilling suspended its payout because of the same combined with the delay in its Rosneft deal.
- The market "deteriorates" even further today with OPEC's decision yesterday not to cut production. WTI crude is "off the lows" as they say, but still down 5.8% at $69.43 per barrel.
- Seadrill (SDLP), North Atlantic Drilling (NADL -8.3%), ENSCO (ESV -8.8%), Atwood (ATW -7.7%), Rowan (RDC -7.2%), Pacific Drilling (PACD -4.5%).
8:43 AM| Comment!
- The oil market will need to balance via slower U.S. shale growth and OPEC cuts at some later date (their next meeting is on June 5), says Goldman's Brian Singer, maintaining his team's WTI oil price outlook of $70-$75 per barrel for next year.
- Among the energy sub-sectors, refiners and pipelines continue as favorites, and five of Goldman's eleven energy and utilities stocks on the Americas Conviction Buy list are from midstream/refining: KMI, MWE, PAGP, TRGP, TSO (all are lower premarket on oil's tumble).
- Not buyers of oil services and E&P names, Goldman nevertheless does have favorites in these areas: CRR, BAS, RIG.
- OPEC yesterday decided to hold production numbers despite the bear market in oil. WTI crude is down about $5 per barrel to $69.
- A premarket look at the top 10 holdings of the XLE: Exxon Mobile (NYSE:XOM) -4.1%, Chevron (NYSE:CVX) -4.1%, Schlumberger (NYSE:SLB) -4.6%, ConocoPhillips (NYSE:COP) -4.4%, EOG Resources (NYSE:EOG) -4.3%, Pioneer Natural Resources (NYSE:PXD) -4.8%, Occidental Petroleum (NYSE:OXY) -4.3%, Haliburton (NYSE:HAL) -4.7%, Anadarko Petroleum (NYSE:APC) -5%, The Williams Companies (NYSE:WMB) -1.6%.
- ETFs: ERX, VDE, OIH, XOP, ERY, FCG, DIG, PBW, GASL, DUG, IYE, XES, IEO, QCLN, IEZ, PXE, PXI, FENY, PXJ, PSCE, RYE, PUW, FXN, DDG, HECO
- Lukoil (OTCPK:LUKOY) vice-president Leonid Fedun warns that falling oil prices and western sanctions will lead to a bigger fall in Russian oil production than previously forecast.
- Although the decline would not be "dramatic", he predicts a drop from a peak of about 525m tonnes this year to 490m tonnes within four to five years.
- Lukoil announced yesterday that profits had more than halved in Q3 due to tumbling oil prices and a weak rouble.
Thursday, November 27, 2014
- Oil and Natural Gas Sales for H1 2015 amounted to $5.8M vs. $4.9M for the same period last year (19% increase).
- Cash generated from operating activities continued its trend and increased to $1,241,000 in H1 2015 from $850,000 one year ago (46% increase). It increased to $99,000 for Q2 2015, compared to a loss of $185,000 for the same quarter one year ago.
- Net income of $170,000 in H1 2015 versus a net loss of $246,000 for the same period last year.
- Source: press release
- Arctic Securities maintains its Sell rating and lowers its price and dividend targets on Statoil (NYSE:STO).
- Notes that “run rate” 2015 operational cash flow is currently at NOK 104B while CAPEX is currently guided at NOK 138B. Consensus dividend expectation is NOK 7.54/share, or NOK 24B. "Statoil will hence before any divestments have to borrow NOK 58B next year to bridge the funding gap."
- "Statoil is not in a position to continue the current dividend policy." Says oil prices would need to rise to $130/bbl for 2015 and $115/bbl for 2016 to make dividend sustainable.
- Lowers price target to NOK 115 and dividend estimate by NOK 1.75/share to NOK 5.75 and NOK 6.00 in 2015 and 2016.
- Shares are -24.6% since Arctic first pegged STO with a Sell rating on July 23. They fell 4.75% today to NOK 142.30.
- Previously: Crude now -7.6% on OPEC rollover
- “There’s no sign that we’re going to cure the overhang in the oil market” - Citigroup analyst Seth Kleinman.
- “If you really need to hit shale production, oil’s going to have to be below $60."
- “Coming into this meeting, OPEC needed to take big action and they needed to be united, and they’ve failed to do that completely.”
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, UWTI, USL, DWTI, DNO, SZO, OLO, OLEM
- OPEC's decision to maintain its output target is “unambiguously bearish,” SocGen's Mike Wittner says.
- “This will reverberate for years.”
- OPEC is saying: “bring on lower prices and let the market do the job of throttling U.S. shale oil growth.”
- Crude futures -3.7% to $70.97.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, UWTI, USL, DWTI, DNO, SZO, OLO, OLEM
- Oil futures sank to new four-year lows overnight ahead of an OPEC meeting in Vienna, where ministers are expected to come to a decision today on whether to cut production.
- Brent crude is down -1.4% at $76.67. WTI is down -0.8% at $73.08.
- An announcement to cut output is growing unlikely, following Saudi Oil Minister Ali al-Naimi's statement yesterday that the oil market will "stabilize itself eventually."
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, UWTI, USL, DWTI, DNO, SZO, OLO, OLEM, TWTI
Wednesday, November 26, 2014
5:37 PM| 1 Comment