Tuesday, June 30, 2015
- UIL Holdings (UIL -3.7%) tumbles as Connecticut regulators rejected its proposed merger with the U.S. operations of Iberdrola (OTCPK:IBDSF,OTCPK:IBDRY).
- The state Public Utilities Regulatory Authority says in a draft decision that although Iberdrola has the technical experience and financial resources to complete the merger, the lack of certain corporate safeguards could "weaken" the Connecticut utilities.
- The transaction was announced in February and was still subject to regulatory and UIL shareholder approvals.
- NiSource (NI -0.2%) is downgraded to Sell from Hold at Argus ahead of its July 1 spinoff of the faster-growing Columbia Pipeline Partners.
- The downgrade reflects the firm's view that the standalone post-spinoff NI will be worth ~$21/share, based on an initial annualized dividend of $0.62 which assumes the stock yields ~3.5%, in line with similar utilities.
- The $21 estimated value is well below the $26 NI share price implied by Argus' $49 sum-of-the-parts valuation for the combined entities.
- Gastar Exploration (GST -2.5%) reports strong results from its second dry gas Utica/Point Pleasant well in West Virginia, continuing a trend of solid production records from the eastern part of the shale play.
- GST says the Blake U-7H well produced at a peak 48-hour gross sales rate of 36.8MM cf/day of natural gas, with post peak rate 30-day production averaging 20.2 MM cf/day.
- GST owns a 50% working interest in Blake U-7H and a 41.1% net revenue interest in the well.
- Alpha Natural Resources' (ANR -3.2%) creditors have hired advisers to prepare for possible restructuring talks ahead of an August debt payment, WSJ reports.
- Creditors reportedly expect restructuring talks to heat up ahead of the Aug. 1 repayment deadline for some of ANR’s convertible bonds; the company has been buying back the notes, but $109M worth remained outstanding as of March 31.
- CB&I (CBI +0.6%) says it has been awarded a contract to build storage as part of a $1.5B petrochemical project owned by Occidental Petroleum (NYSE:OXY).
- CBI says it will build the project’s ethylene storage facility near Houston, and has a new $115M contract to engineer and build the surface facilities and piping at the salt cavern storage location.
- OXY announced the overall project in 2013 with a projected 2017 opening to take advantage of cheap shale gas feedstock.
- Amyris (AMRS +22.2%) shares skyrocket on news the renewable products company will restructure its fuels joint venture with Total (NYSE:TOT) in an effort to commercialize its jet fuel technology.
- In conjunction with the restructuring, debtholders TOT and Temasek Holdings agree to convert $138M of AMRS' outstanding debt to common stock at $2.30/share; also, $37M of AMRS outstanding convertible debt will be restructured to eliminate AMRS' repayment obligation and require conversion to AMRS common stock.
- Following the restructuring, TOT would own 75% of the JV with AMRS.
- New Petrobras (PBR +0.2%) CEO Aldemir Bendine is winning rave reviews for yesterday's presentation of the company's new investment plan, which included a 37% reduction in its five-year capital spending budget, an expanded asset sale program and a pledge not to issue new shares through 2019.
- Analysts say the decision to stay away from equity offerings brings some relief to shareholders, and may show PBR’s financing needs are not as big as investors feared.
- "We are no longer in a market in which we can just keep on expanding and leveraging up the company," Bendine said, unusual language from a company otten criticized as being more concerned with implementing government policy than creating shareholder value.
- With oil prices hovering at little more than half their year-ago levels, PBR could have trouble raising as much cash as it hopes, but Bendine said recent bond sales and loan agreements - some with Chinese state banks - show that the company still has the ability to raise financing.
- However, Morgan Stanley reiterates its Underperform rating on the stock and cut its price target to $8 from $8.50, saying the plan raises more questions than answers.
- Coal companies (KOL -0.8%) are surrendering much of the gains they enjoyed following yesterday's Supreme Court decision against the EPA's mercury emissions regulations, as the initial reaction may prove rosier than the actual benefit to the coal industry.
- The consensus is that the ruling might force the EPA to be less aggressive about its efforts to cut pollution but will not help coal overcome competition from gas and alternative energy; also, the oversupply of natural gas likely will continue to depress the price of gas and reduce coal sales.
- The ruling could prove too late to provide a reprieve for most of the utilities that already had spent the resources to retrofit or retire, Sterne Agee analysts say, but lower MATS compliance operating costs could help some PRB coal power plants compete more aggressively on the margin with gas-fired power plants.
- Citigroup notes the news has important implications for the Clean Power Plan proposal scheduled to be finalized mid-summer 2015, and views the ruling as a net positive for the U.S. thermal coal market and miners such as Peabody Energy (BTU -11.3%), Alliance Resource Partners (ARLP +1.5%),Alliance Holdings (AHGP -0.1%) and Foresight Energy (FELP +0.1%).
- Also: ACI -4.7%, ANR -6.9%, CLD -7%, WLB -2.9%, WLT -12.9%.
- Pengrowth Energy (PGH +1.6%) says it plans to sell up to C$600M in non-core assets by the end of the year, a move it says is part of its ongoing effort to strengthen its balance sheet.
- PGH also says construction and commissioning of its insulated sales line connecting the Lindbergh commercial facilities with the Husky pipeline has been completed on time.
- PGH says current production from the project is ~14.4K bbl/day; production ramp-up remains on track to achieve production rates of 16K bbl/day by year-end.
- Statoil (NYSE:STO) awards Samsung Heavy Industries (OTC:SMSHF) a NOK7B ($888M) contract to build two platform decks for its giant Johan Sverdrup development in the North Sea.
- STO says 65% of Johan Sverdrup equipment contracts so far have been awarded to suppliers with Norwegian billing addresses.
- The total investment costs for phase one of the Johan Sverdrup development are estimated at NOK117B and include installing the accommodation, processing, drilling and riser platforms as well as three subsea templates; production is expected towards the end of 2019.
- Earlier: First steel cut for Johan Sverdrup platform, Statoil says (Jun 29)
- Israel's energy ministry unveils proposed guidelines for the country's natural gas sector that would leave the largest offshore project, Leviathan, in control of a U.S.-Israeli consortium while opening the industry to new competition.
- The new plan requires Noble Energy (NYSE:NBL) and Israel’s Delek Group (OTCPK:DGRLY) to sell stakes in smaller fields while maintaining their grip on the larger Leviathan field, and requires companies to cap prices for a number of years until competition is developed.
- Delek will have six years to sell its entire stake in a second large field, Tamar, and NBL must decrease its stake in the field to 25% from 36%.
- Thousands demonstrated in Tel Aviv over the weekend against the expected plan, fearing the proposal fails to break up a monopoly and will result in high prices for Israeli consumers.
- Daqo ;New Energy (NYSE:DQ) appoints Ming Yang as its new CFO, while acting CFO Shihua Su is named chief marketing officer.
- Yang was a management consultant at McKinsey, where he specialized in the clean tech and solar sectors.
- Separately, DQ says it has started pilot production of the newly added 6K metric ton polysilicon capacity at its Xinjiang site.
- Cenovus Energy (NYSE:CVE) confirms it has agreed to sell its royalty lands business to Ontario Teachers' Pension Plan for ~C$3.3B ($2.66B).
- Heritage Royalty Limited Partnership owns ~4.8M acres in Alberta, Saskatchewan and Manitoba.
- CVE says its consolidated production will be reduced by 7,800 boe/day of third-party royalty interest volumes.
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