Friday, January 30, 2015
- Chevron (NYSE:CVX) recovered much of its earlier losses prompted by a halt in its stock buyback program, as perhaps investors were somewhat reassured when CEO John Watson stressed that the company's dividend, currently $1.07/quarter, remained the "highest priority."
- The buyback freeze and announced 13% capex cut for 2015 are part of CVX's efforts to curb spending, with "significant cost-reduction efforts underway," Watson said during today's earnings conference call, adding that layoffs are possible.
- As part of that effort, CVX will significantly slow spending on the Kitimat liquefied natural gas project in Canada, although it will continue to develop gas fields in B.C.’s Liard Basin to support the export facility, secure permits and reach agreements with aboriginal groups.
- CVX does not plan to make final decisions on any projects this year other than for its Tengiz field in Kazakhstan, Watson said.
- Colombia's government reportedly is discussing several measures to aid the country's battered oil industry, including a reduction of the country’s stake in oil company projects, allowing more revenue to flow back to companies, reducing the time it takes to get environmental approvals, and giving companies more time to discover oil before exploration and production blocks must be handed back to the state.
- Colombia’s two main producers have suffered in the global oil downturn, with shares of state-controlled Ecopetrol (NYSE:EC) falling more than 50% since mid-July and those of independent Pacific Rubiales (OTCPK:PEGFF) down 85% in the same period and tumbling Thursday to a record low C$2.79 on the Toronto Stock Exchange.
- Colombia's government receives ~20% of its revenues from oil.
- Lower oil prices should spark more U.S. consumer spending, which will stimulate demand for commercial trucks this year, Paccar (NASDAQ:PCAR) CEO Ron Armstrong said during today's earnings conference call.
- PCAR expects industry-wide retail sales of heavy-duty trucks weighing above 33K lbs. in the U.S. and Canada to rise ~6% Y/Y in 2015 to 250K-280K vehicles.
- Armstrong dismissed concerns that higher 2014 truck sales were mainly caused by oil and gas producers' need for more trucks as they accelerated exploration and drilling activity, noting that 10% or less of the company's volume is related to the oil and gas industry; such concerns apparently drove shares 6% lower today.
- PCAR's 2014 sales volumes rose 4% Y/Y to 142,900 trucks, but unit sales in the U.S. and Canada jumped 23%, helping offset declines in the rest of the world.
- Earlier: Double-digit growth for Paccar in Q4
5:43 PM| Comment!
- Royal Dutch Shell (RDS.A, RDS.B) says it overstated its Q4 results by $178M due to an error in the valuation of its fuel inventory, but adds that its underlying Q4 earnings were unaffected by the mistake.
- However, the error reduces Shell's Q4 income to shareholders to $595M from $773M, and FY 2014 income was cut to $14.87B from $15.05B.
- Shares of Advanced Emissions Solutions (ADES -47.7%) are nearly cut in half after the developer of clean coal technology said late yesterday that KPMG had resigned as its accounting firm.
- ADES says it is seeking a new accountant but expects to have its shares delisted from the Nasdaq because it does not believe it can make the required financial filings and regain compliance.
- Cowen analyst Jeff Osborne downgrades shares to Market Perform, saying that "while we believe the company has compelling technology solutions, the lack of transparency in financial statements” and ongoing accounting issues “gives us pause."
- The broad averages are moderately in the red, and would be even more so if it wasn't for energy (XLE +1%), solidly higher as oil flies upward by nearly 8% into the close.
- ETFs: XLE, ERX, VDE, OIH, ERY, DIG, DUG, IYE, FENY, PXJ, RYE, FXN, DDG
- What's doing worse than energy this year? That would be financials, and the XLF is lower by another 0.95% in today's session. Also faring poorly are utilities (XLU -1.3%), health care (XLV -0.8%), and consumer staples (XLP -1.2%).
- Devon Energy (DVN +2.9%) is upgraded to Buy from Hold at Deutsche Bank, which views DVN as particularly well positioned relative to large-cap E&Ps to again grow production into a firming commodity price environment.
- The firm believes DVN's 2014 asset transactions reposition the portfolio to highlight underlying growth potential, high-grade the portfolio towards fewer and key plays, and improve the cost of capital via the EnLink transaction; it also cites DVN's best-in-class hedge position.
- On the other hand, Deutsche Bank lowers Encana (ECA +1.8%) to Hold from Buy, saying ECA is more dependent than peers on the broader commodity price outlook again returning to growth; the firm believes the move to fund the Athlon acquisition with cash on the balance sheet has left ECA with significantly reduced financial flexibility.
- The number of oil and gas rigs active in the U.S. fell another 90 units to 1,543 for the biggest one-week decline for oil rigs since 1987, according to the latest weekly survey from Baker Hughes (NYSE:BHI).
- The total is the lowest since June 2010, and 242 units fewer than in the same week a year ago; the count has now fallen in nine consecutive weeks, losing 377 units during the period.
- Oil rigs plunged 94 units to 1,223, while gas rigs gained three units to 319.
- In Texas, 58 rigs were taken off the market, cutting the state’s count to 695 rigs, down from 840 at the beginning of this month.
- ETFs: USO, OIL, UCO, OIH, SCO, BNO, DTO, DBO, XES, IEZ, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
- Valero Energy Partners (VLP +1.7%) is upgraded to Outperform from Neutral with a $57 price target at Credit Suisse, which notes that parent Valero Energy (VLO +0.9%) plans to drop down $1B worth of assets into VLP, perhaps carrying EBITDA of ~$100M.
- Credit Suisse says the total is well above the level of dropdowns it had expected; the firm now expects VLP to grow distributions 25% in 2015, with similar growth continuing through 2017 and at 20% through 2020.
- PetroChina (PTR -1.1%) reportedly has started trial operations at a crude pipeline in Myanmar that could shorten the time for shipments to reach refineries.
- A VLCC capable of hauling 300K metric tons discharged oil into tanks at Myanmar’s Ma-de island port, the pipeline’s starting point, facility operator China National Petroleum says on its website.
- The project will help CNPC’s listed unit to take delivery of crude bought from the Middle East and Africa; China is seeking to diversify its sources of crude supply to improve energy security, as the share of imports needed to meet domestic demand is forecast to surpass 60% this year for the first time ever.
- Cameron International (CAM +2.2%) is higher despite a downgrade from RBC to Sector Perform from Outperform, which includes a price target cut to $50 from $60.
- RBC believes CAM faces headwinds across all of its business segments in 2015, including immediate pressure in its short cycle businesses and declining backlogs in its longer cycle businesses, adding that Street estimates are too high.
- CAM CEO Jack Moore reassured investors yesterday that he expects the company will be able to sell more products to its key customers.
11:56 AM| 1 Comment
- Chevron (CVX -2.9%) turns sharply lower after saying during its earnings conference call that it is suspending its share buyback program for 2015 given the change in market conditions.
- The company also says it is reviewing staff levels around the world.
- Other oil majors also turn lower: XOM -1%, COP -1.7%, BP -0.9%, RDS.A -2.1%.
- Pump prices may have dropped below $2/gal in many parts of the U.S., but investors are starting to notice losses from energy companies in their portfolios to the tune of $393B since June, according to a Bloomberg analysis.
- The losses sometimes show up in indirect ways, via investment funds, retirement accounts and bank balance sheets.
- The article cites the example of Energy XXI (NASDAQ:EXXI), whose bond offering eight months ago enjoyed so much demand that it more than doubled the size of the offering, but the debt is now trading for less than $0.50 on the dollar and its stock has declined 88%.
- EXXI’s second-largest reported shareholder is a group of funds managed by Vanguard, and the top reported owner of the bonds EXXI issued in May is Franklin Templeton; the stocks of three banks that extended a $1.5B credit line to EXXI - Zions (NASDAQ:ZION), Comerica (NYSE:CMA) and Hancock (NASDAQ:HBHC) - are down 10%-15% this month.
- Petrobras (PBR -5.9%) bonds plunged the most on record after Moody’s late yesterday downgraded the oil company's debt ratings to the edge of junk status - the agency's third downgrade of PBR in four months - and said the ratings remain on review for a further cut.
- Moody’s said it downgraded PBR’s unsecured debt to Baa3 from Baa2 and cut the baseline credit assessment to ba2 from ba1, based on “concerns about corruption investigations” and "uncertainty about the timely delivery of audited financial statements [that] could lead to significant liquidity pressures.”
- The ratings agency also cited PBR's lack of progress in disclosing writedowns related to the ongoing corruption probe as "not an encouraging sign for the timely release of audited year-end financial statements."
- Southern Co. (SO -1.7%) says the firms building its new nuclear power plant in Georgia estimate the project will be delayed 18 months, potentially costing it $720M in new charges.
- Westinghouse Electric and Chicago Bridge & Iron (CBI -12.2%) expect the first reactor at Plant Vogtle will be complete in mid-2019, and the second reactor will come online in mid-2020, SO says in an SEC filing; SO already has been in litigation with the two companies over previous delays and cost increases.
- SO does not tally its total costs in the filing but says each month of a delay would cost $40M in new capital and financing charges; if the project stretched an additional 18 months, the total could grow to $720M.
- Deutsche Bank comments that the further delay to be particularly negative for CBI shares and potentially remain an overhang over the near term, given that it may take more than a year to resolve the dispute.
- Gulf Resources (GURE +46.6%) soars at the open after announcing it has found natural gas under its bromine well in China's Sichuan province.
- In 2014, CNPC discovered 440B cm of proven geological natural gas reserves, of which 308B cm was technically recoverable in the Moxi block of the An'yue field; GURE says the area is very close to where it is exploring for bromine.
- Plains All American Pipeline's (PAA -0.2%) Canadian subsidiary says it is beginning to look for workers at its new crude-by-rail unit train terminal in Kerrobert, Saskatchewan, due to start up mid-2015.
- Initial capacity at the terminal will be one unit train, or 70K bbl/day, with capacity to expand to two trains daily.
- PAA also ships crude from other manifest terminals in Western Canada, and will have capacity to transport around 100K bbl/day once Kerrobert is operating.
- Chevron (NYSE:CVX) -1% premarket after reporting better than expected Q4 earnings but cutting its 2015 capital budget to $35B to help offset the impact of low oil prices.
- CVX plans most of its spending - $23.4B - on projects outside the U.S., as some of the its largest growth projects are in Australia, Argentina and Kazakhstan.
- "Improved downstream results and higher gains on asset sales related to our divestment program partially offset the effect of lower crude prices," CEO John Watson says.
- During Q4, refining, marketing and chemical operations (downstream) earnings surged to $1.52B from $390M a year earlier; earnings from exploration and production fell to $2.67B from $4.85B in the year-ago quarter.
- Q4 global oil-equivalent production averaged 2.58M bbl/day, unchanged from a year ago.
- Says its Q4 average sale price for a barrel of crude oil and natural gas liquids was $66 for the U.S., down from $90 a year ago, and $68 globally, compared to $101 in the year-ago quarter.
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