Wednesday, December 24, 2014
- Pacific Coast Oil Trust (NYSE:ROYT) fell to a new record low today after cutting its January cash distribution by 28% from the previous month's payout, the sixth month in a row ROYT has reduced the amount it pays to unitholders.
- The $2M January distribution works out to $0.05256/unit, and follows a 17% cut in the December distribution; the distribution has now dropped nearly 65% since July's $5.7M payout, largely following the price of crude oil lower.
- ROYT has now fallen 56% YTD.
- Cheniere Energy (NYSEMKT:LNG) CEO Charif Souki - the highest-paid CEO in the U.S., with a $142M pay package last year - has seen his base salary cut to $1 following a shareholder revolt earlier this year.
- Cash bonuses and employee benefits for Souki will be calculated using a notational $1M salary, so he will still enjoy a $2.4M cash award at the end of the year, based on this year’s performance.
- The announcement did not mention any changes to Souki's stock awards, which totaled $132M last year.
- Moody’s places Petrobras (PBR -2.2%) on review for a downgrade, citing concerns about "potential liquidity pressures that could arise if the company does not meet requirements under its bond indenture for the delivery of financial statements and holders choose to take actions that could lead to acceleration.”
- Moody’s also says a downgrade could occur should leverage remain above 5x debt-to-EBTIDA, and signals the volatility in foreign exchange rates and Brazil’s history of using the company to manage inflation as possible risks to the credit.
- While bondholders could take action against the company, Janney Capital's Jody Lurie sees the investigations related to the corruption scandal as the larger issue.
- This week’s settlement with Alstom (OTCPK:ALSMY) over its bribery schemes appears to mean that there's little cause for worry when buying a company with a history of corruption around the world as long as the company’s sins look to be in its past.
- GE will not need to worry about Alstom’s $772M criminal fine when it buys most of the French company next year, according to the U.S. Department of Justice; in fact, as part of guilty plea deal reached with Alstom, prosecutors "insisted” that none of the penalty be passed to back to GE.
- Prosecutors let GE off the hook even though allegations of Alstom’s bribe schemes were known for years, but one goal of DoJ enforcement of the Foreign Corrupt Practices Act actually is to encourage the sale of companies that have engaged in misconduct.
- Gazprom (OTCPK:OGZPY) says it expects to produce 444.4M cm of natural gas this year, an all-time low and down from 487.4B cm in 2013.
- Gazprom had expected to pump 496.4B cm in 2015, before cutting the target to 463B cm in September.
- Gazprom also confirms receipt of a $1.65B payment from Ukraine to cover the country's gas debts.
- Russia's energy minister says he is ready to discuss the possibility of providing Ukraine with more gas discounts in spring 2015 as the winter plan expires.
- Crude oil losses mount in the wake of a surprise buildup of oil inventories, as the EIA reported that inventories rose by 7.3M barrels in the week ending Dec. 19; consensus had called for a draw of 2.4M.
- Oil prices have been slammed since mid-summer by oversupply concerns, and today Nymex -2.3% to $55.81/bbl and Brent -2.7% at $60.02.
- U.S. energy stocks are under pressure; the Energy Select Sector SPDR (NYSEARCA:XLE) -1.2% while the broader market is higher.
- ETFs: USO, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, DIG, BNO, DTO, DBO, DUG, IYE, XES, IEO, CRUD, IEZ, UWTI, PXE, USL, FENY, DWTI, PXJ, DNO, RYE, SZO, FXN, OLO, DDG, OLEM, TWTI
- Magnum Hunter (MHR -3.5%) says a leak at a natural gas fracking well that had forced the evacuation of some eastern Ohio homes for several days has been brought under control and temporarily capped.
- The Ohio Department of Natural Resources says it will investigate what caused the well to begin leaking uncontrollably Dec. 13, and will ensure the integrity of the well before its operator, MHR subsidiary Triad Hunter, may proceed with operations.
- MHR says there is no evidence of environmental damage as a result of the blowout, and expects all wells on the Stalder Pad will be placed on production sometime in January.
- Golar LNG (GLNG +5.4%) says it has signed a heads of agreement for the development of a floating liquefied natural gas export project offshore Cameroon that could lead to output from early 2017.
- GLNG will provide the liquefaction facilities and services under a tolling agreement to SNH and Perenco as owners of the upstream joint venture; GLNG expects allocated reserves will be produced at the rate of ~1.2M metric tons/year of LNG over eight years.
- The project will be the first floating LNG export project in Africa; production is expected to begin in H1 2017.
- TECO Energy (TE +1.2%) says it has agreed to extend the closing date for the sale of its coal mining business by nearly two months.
- TE said in October that it had agreed to sell TECO Coal and its subsidiaries to Cambrian Coal for $170M.
- TE says the extension allows it to exit the coal business in a timely manner while still receiving fair value for the unit.
- Petrobras (NYSE:PBR) has authorized the creation of a special committee that will serve as a reporting line for an existing independent internal investigation amid ongoing corruption allegations.
- PBR says the committee will consist of three people, including a former president of Brazil's Supreme Court, a former chief compliance officer at Siemens, and PBR's newly created chief of compliance, risk and governance.
- PBR says the committee will be responsible for certain tasks, including the approval of the investigation plan.
- Navigator Holdings (NYSE:NVGS) +8.1% premarket after Jim Cramer touted the stock last night on Mad Money, saying the shipper of natural gas has been wrongly punished with the rest of the energy sector.
- Cramer thinks NVGS could be a great bargain at current prices, and notes that the company's business has no exposure to the price of oil.
- "Investors get spooked out of the stock because they fail to understand that the value of the company's ships is simply not correlated with energy prices," according to Cramer.
- BP is in discussions with Russia's Rosneft (OTC:RNFTF) that could give it a direct stake in an eastern Siberia oil field believed to have large petroleum reserves, according to multiple reports.
- A proposed deal for the Taas-Yuriakh field, which could be valued at $700M-$800M, probably would not be subject to Western sanctions that prohibit companies from exporting technology for tapping shale and Arctic reserves to Russia.
- Output from the field, located near a pipeline to the Pacific coast, will be used to supply eastern refineries and China; production is expected to exceed 100K bbl/day in 2017, and the area also holds 155B cm of natural gas reserves.
- Giving up some of the previous session's gains, crude prices are on the decline after trading near their highest prices in almost two weeks.
- The gains yesterday came as revised Commerce Department data reported U.S. GDP surging 5% in Q3, its strongest growth in more than a decade.
- Brent crude is down $0.39 at $61.30 after settling up $1.58 in the previous session. WTI is down 0.7% at $56.70, paring a 3.4% gain yesterday.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
Tuesday, December 23, 2014
- Goldman Sachs' David Kostin thinks it’s time for patient investors with at least a 12-month time horizon to begin loading up on energy companies.
- The Goldman team recommends refiners such as Marathon Petroleum (NYSE:MPC) and Phillips 66 (NYSE:PSX), as well as midstream companies that are less sensitive to oil prices and offer the potential for dividend growth, including EQT Midstream Partners (NYSE:EQM), Kinder Morgan (NYSE:KMI) and Cheniere Energy (NYSEMKT:LNG).
- With capital spending sure to take a hit and oil prices likely to remain volatile, oil service companies probably aren’t the way to go, but Goldman considers the more defensive names such as Atwood Oceanics (NYSE:ATW), Schlumberger (NYSE:SLB) and Oceaneering (NYSE:OII) as the best of a bad lot.
- Although the energy sector led today's stock advance, a raft of companies downgraded by Global Hunter mostly took it on the chin - none more so than Key Energy (NYSE:KEG), which plunged 15% after shares were cut to Reduce from Neutral with a $1.50 price target that was reduced from $2.50.
- Also downgraded to Reduce were HERO -6.1%, NBR -3.2%, DO +1.3%.
- Lowered to Neutral were HAL +0.5%, GEOS -8.9%, HP -2.9%, BAS -2.5%, PKD -2.5%, BHI +0.6%, BBEP -0.2%, MEP +0.1%.
- Downgraded to Accumulate: PES -3.5%, PTEN -1.1%, NGLS +2.9%.
- The firm upgraded five stocks - ATW, NOV, OII, RES and SPN - all of which gained in today's trading.
- Three of the five worst performers in the S&P 500 this year are offshore rig contractors Transocean (NYSE:RIG), Noble Corp. (NYSE:NE) and Ensco (NYSE:ESV) - plus non-S&P company Hercules Offshore (NASDAQ:HERO), the largest provider of shallow-water rigs in the Gulf of Mexico, has plunged 84% YTD - and analysts say next year may be worse with “grievous” cuts coming for exploration plans.
- Earnings for the world’s five biggest offshore rig contractors are expected to fall an average of 18%, and only Seadrill (NYSE:SDRL) is seen increasing profit in 2015, since 75% of its rigs are backed by contracts next year, highest among the five.
- To preserve cash, rig owners already have begun scrapping older rigs to balance supply and demand; Bloomberg says ~140 older rigs would need to be culled to make way for new vessels scheduled for delivery by 2020, double the number scrapped in the previous six years.
- If the industry is to return to a healthy state, older rigs will have to be scrapped, not spun off into separate companies as has been the case, SDRL CEO Per Wullf says.
- Noble Energy (NYSE:NBL) tumbled 3.8% today after Israel’s antitrust regulator threatened to break the NBL-led consortium's hold on the country’s gas resources.
- NBL and its partners are requesting a hearing after the antitrust authority said it would not agree to final approval on the drilling plan for the Leviathan field, one of the largest gas fields to have been found in recent years.
- The group has reached preliminary deals to export substantial quantities of Leviathan gas to Jordan and to liquefied natural gas facilities in Egypt.
- A move by the regulator to break up the consortium likely would lead to further delays on Leviathan, which already has proved difficult to develop.
- Marathon Oil (NYSE:MRO) has evacuated non-essential workers from a pair of production platforms at the Brae complex in the North Sea following a Monday power outage.
- BBC reported earlier that ~75 workers were transferred to shore from the Brae Alpha and Brae Bravo platforms, but ~170 people remained.
- U.S. Silica (SLCA +2.9%) is higher a day after its board authorized an increase in the company's share repurchase program to as much as $50M from $25M, which the company says reflects confidence in its long-term strategy.
- Also, SLCA has been seeing some recent insider buying, including nearly $47K in purchases yesterday from two company directors.
- Calumet Specialty Products Partners (CLMT +5.7%) is resumed with a Buy rating and $30.50 price target at MLV, which sees units poised for a 2015 rebound as maintenance capex declines and leverage should continue to moderate from a peak of 7x debt/EBITDA toward 4x.
- MLV also sees potential for a modest distribution increase in H2 2015 as LTM coverage should exceed 1x, and projects the specialty products segment - which accounts for ~75% of profit - will benefit from lower crude costs.