Show Summaries Hide summaries
Monday, August 3, 2015
- Royal Dutch Shell (RDS.A, RDS.B) plans to swap a stake in one of its international energy assets for part of Gazprom’s (OTCPK:OGZPY) Sakhalin-3 project, as it seeks greater involvement in the world’s biggest gas reserves.
- While producers slash spending and mothball projects as oil slides, they need to add reserves to sustain future output, and Russia has the world's fifth-biggest oil deposits and costs that are as much as two-thirds below the global average for Shell.
- Gazprom last year produced a barrel of oil equivalent for $5.66, vs. costs of $14.74 per boe for Shell, according to Bloomberg data, while Shell’s oil and gas production has dropped in 10 of the last 12 years.
- Russia is attracting other big western oil companies such as BP and Total (NYSE:TOT) even as U.S. and European sanctions limit certain types of investment; sanctions place restrictions on exploration for shale, Arctic and deepwater oil, but they do not bar companies from drilling in onshore fields or investing in gas export projects.
- Coal miners and related companies tumbled following today's announcement of the Obama administration's final Clean Power Plan, which aims to shift the U.S. energy mix towards renewable energy such as wind and solar while significantly limiting power plant carbon dioxide emissions.
- Pres. Obama called the plan the “single most important step America has taken in the fight against global climate change," even though U.S. power plant emissions account for just 5% of global carbon emissions.
- The final EPA rule requires a 32% cut in power plant carbon dioxide emissions by 2030 from 2005 levels, an increase from the 30% target proposed last year.
- Industry officials are concerned about the plan’s cost, and Republicans and states hardest hit by the plan say they will fight it; more than a dozen states and the coal industry plan to sue the EPA, and several states say they will refuse to comply.
- ETFs: XLE, XLU, VDE, ERX, OIH, KOL, UTG, IDU, VPU, ERY, DIG, DUG, BGR, IYE, GUT, BUI, FENY, PXJ, FIF, RYE, FUTY, RYU, UPW, FXN, FXU, DDG, PUI, SDP, PSCU, FUGAX
- Petrobras (NYSE:PBR) has failed to present its board with a promised plan to bring domestic fuel prices in line with world levels, Reuters reports.
- The lack of a policy threatens PBR's already-fragile finances and could delay efforts to sell refineries and other assets, according to the report.
- The biggest risk of a lack of a price policy could be a revival of fuel price subsidies which caused 60B reais ($17.4B) of fuel sales losses in recent years.
- Plug Power (NASDAQ:PLUG) -4.2% AH after filing for a ~7.89M share common stock offering by selling shareholders.
- Plug says the sale is in connection with last week's announced purchase of the remaining 80% it does not already own in its HyPulsion European joint venture with Air Liquide.
- Plug will receive no proceeds from any resale of the shares.
- BP has halted its deepwater exploration activities off Uruguay, says an official at the country's state-owned oil company, as the company prioritizes lower-risk projects at a time of weak global oil prices.
- BP will relinquish control of three offshore blocks, covering an area of almost 26K sq. km in waters 50-2,000 meters deep, to Uruguay in October.
- Chevron (CVX -3.4%) continues to suffer analysts' wrath after disappointing Q2 results, as Barclays reiterates its Equal Weight rating on the stock but lowers its price target to $99 from $110, believing the “wave of development delays and outages” will hurt CVX in the near-term.
- The firm also notes that CVX's stronger production volumes in Q2 did not translate to higher upstream earnings and its cash flow remains a source of disappointment and concern.
- Last Friday, CVX was cut to Hold from Buy with a $96 12-month price target, cut from $125, at S&P Capital IQ.
- Barclays also lowers its price target on ConocoPhillips (COP -1.2%) to $64 from $75, pointing out the while COP reported a strong operational quarter, financial performance was challenged and cash flow neutrality remains a concern among investors (Briefing.com).
- U.S. crude oil sank to five-month lows today while Brent crude finished below $50/bbl, as crude continues to be weighed by a worldwide glut and uncertainty over economic growth, as well as last week’s downbeat assessment (I, II) of market prospects by Exxon and Chevron.
- U.S. WTI crude dropped $1.82, or 3.9%, to $45.29/bbl, the lowest level for a most-active contract since March, while Brent crude on London’s ICE Futures exchange sank $2.35, or 4.5%, to $49.84/bbl.
- "Economic weakness has set the tone," says Matt Smith, director of commodity research at Clipperdata, adding that "the gasoline crack spread is also unraveling."
- Iran’s oil minister also added to the bearish tone, saying over the weekend that the country could lift production by 500K bbl/day within a week of the lifting of sanctions and by 1M bbl/a day within a month after that.
- Speculators have grown cold on oil, as money managers retreated to their weakest bullish stance on U.S. crude in nearly five years last week, according to data released by the CFTC late on Friday.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, OLEM
- Abengoa (ABGB -30.4%) shares and bonds plummet as the Spanish renewable energy company’s plan to shore up capital fails to reassure investors that it can stop burning cash.
- ABGB says it is seeking to raise €650M ($713M) of capital and dispose of €500M of assets, stepping up disposal plans from €400M as recently as Friday, when it also told investors that 2015 free cash flow will total as much as €800M lower than previously forecast.
- ABGB’s €375M of 7% notes maturing in April 2020 fell to the lowest since they issued, pushing the yield up to 17.2%, according to Bloomberg data.
- ABY -2.5%.
- Helmerich & Payne (HP -0.8%) is upgraded to Accumulate from Neutral with a $65 price target at Global Hunter, which suggests "judiciously" building a position as the stock is trading at two-and-a-half-year lows.
- Land drillers tend to be early beneficiaries of cyclical recoveries, and Hunter continues to believe a U.S. onshore recovery is intact, beginning in 2016; however, the firm's views are tempered as consensus estimates suggest earnings risk on term-to-spot mix shift headwinds and an industry challenged by increased E&P rig efficiency and an 1,00-plus+ idle rig overhang.
- Texas-based oilfield service companies National Oilwell Varco (NOV -1.9%) and Cal Dive (OTCPK:CDVIQ) International are cutting a combined 276 jobs in the state this month, according to state regulators.
- NOV says its wellbore technologies unit is closing a facility in Willis, Tex., over the next few months, laying off 150 employees starting in mid-August, while Cal Dive will close two facilities and cut 126 employees beginning Aug. 31.
- Oil industry recruiter Swift Worldwide estimates worldwide oilfield layoffs have reached ~176K so far, up from its previous estimate of 150K in mid-June.
- Linn Energy (LINE -18.7%) and LinnCo (LNCO -15.9%) continue their three-day slide which began last Thursday following their surprise announcement to suspend distributions; both have suffered ~50% declines during the period.
- At least two more analysts weighed in with negative comments today following two downgrades last Friday; RBC Capital cut LINE and LNCO to Sector Perform from Outperform while lowering its price target for both to $5, saying the lack of a dividend means “investor appetite is likely to remain anemic for the foreseeable future" even though the dividend suspension was "the right step," and Citi also lowers its price target to $5 but keeps a neutral High Risk rating on LINE/LNCO.
- Barron’s Andrew Bary also jumped in over the weekend, writing that LINE/LNCO could lose many retail investors without a fat distribution, and may find itself valued based on conventional energy-company methods.
- With Alpha Natural Resources (NYSE:ANR) filing for bankruptcy, Fitch Ratings among others thinks Arch Coal (NYSE:ACI) is next, but Cowen analysts believe ACI may escape ANR’s fate.
- The firm cuts its rating on ACI to Market Perform from Outperform with a $0.25 price target but believes investors should not give up on the stock entirely, noting the company has been “proactive in addressing debt levels with a private debt offering, has managed its cash burn, and is pursuing a reverse stock split.”
- ACI is better positioned than ANR or Walter Energy (NYSE:WLT), Cowen says, as its operations were cash margin positive in H1, cash flow is expected to be break even to slightly up for the rest of the year, and a majority of its open Powder River Basin book is skewed towards higher Btu coal which commands better pricing.
- Today, ACI announced an extension of its private debt exchange offer.
- PetroChina (PTR -2.3%) has turned into a speculative bet on how much money the Chinese government is plowing into the stock market that day, resulting in a surge in volatility to the highest level among the world’s 100 biggest companies and topping 95% of the stocks in the Russell 2000 index, according to a Bloomberg analysis.
- PTR’s top weighting in the benchmark Shanghai Composite Index makes it an ideal target for funds trying to influence the broader market, the report says.
- PTR shares have shed 25% in the past three months, while Sinopec (SNP -1.5%) and Cnooc (CEO -1.2%) have lost a respective 22% and 29% during the period.
- Whiting Petroleum (WLL -2%) is lower even after Canaccord upgrades shares to Buy from Hold with a $38 price target, finding WLL a compelling value as it notes the company's ~737K net acre position in the core of the Williston Basin, bolstered by last year's acquisition of Kodiak Oil & Gas, and that it is a leader in employing enhanced completion techniques in the play.
- While WLL's decision to scale back development and completion activity is unlikely to drive shares higher in the ST, Canaccord believes the stock is now very compelling at current levels given the quality of its Williston asset base and its substantial dry powder; the firm thinks both factors should enable WLL to ramp activity quickly and begin to grow production again once commodity prices recover.
- Canaccord also says WLL’s financial position continues to be "very strong," with liquidity at $3.6 billion at the end of Q2.
- Shares of Gulf Keystone (OTCPK:GUKYF +20%), Genel Energy (OTCPK:GEGYF +7.1%) and DNO (OTCPK:DTNOF) are surging after the government of Iraqi Kurdistan said it would start paying them for oil exports next month.
- The Kurdistan Regional Government says it will begin allocating part of revenue from oil exports to producers on a monthly basis from September to cover their running expenses, and may make additional revenue available to the companies to start paying dues for past exports as shipments rise next year.
- The payments would be the first stable compensation for the companies’ exports, which have been caught for years in a dispute over revenue sharing between the KRG and Iraq’s federal government.
- Noble Energy (NBL -2.2%) opens lower after reporting better than expected Q2 earnings but also a 47% Y/Y revenue decline and costs that are not falling as much as sales.
- While NBL's Q2 sales volumes rose 3.1% Y/Y to 299K boe/day, crude oil and condensate sales were cut in half to $483M, and natural gas revenue fell 28% Y/Y to $215M.
- NBL attributes the modest rise in Q2 total sales volume to the continued development of the DJ Basin and Marcellus shale plays, where combined production rose 28%.
- NBL raises its full-year sales volume forecast to 305K-320K boe/day from 300K-315K boe/day, and says it expects more than 15% annual production growth from assets recently acquired from Rosetta Resources, which includes 50K acres in the Eagle Ford Shale and 54K acres in the Permian.
- NBL says total organic capital spending in 2015 remains unchanged at $2.9B for legacy assets; Q2 costs fell 17% Y/Y and 13% Q/Q.
- Alpha Natural Resources (NYSE:ANR) confirms it has filed for Chapter 11 bankruptcy protection, in an effort to cut its more than $3B debt load.
- ANR says it has secured an 18-month debtor-in-possession financing package totaling up to ~$692M, arranged by Citigroup, and led by a group of both its first and second lien lenders.
- ANR chose to file for bankruptcy rather than repaying a convertible bond due at the start of this month, despite having $476M in cash as of March 31.
- NextEra Energy (NYSE:NEE) reports better than expected Q2 earnings and revenues, and raises its long-term earnings forecast.
- NEE reaffirms its 2015 EPS guidance of $5.40-$5.70 vs $5.63 analyst consensus estimate, but says it now expects 2016 EPS of $5.85-$6.35, ahead of its previous forecast of $5.75-$6.25; it foresees EPS of $6.60-$7.10 in 2018.
- NEE says profit at its Florida Power & Light unit rose to $435M from $423M a year ago, while profit at NextEra Energy Resources grew to $273M from $81M a year ago.
- Meanwhile, NextEra Energy Partners (NYSE:NEP), which also released Q2 results, agrees to acquire privately-held NET Midstream in a $2.1B deal, which will add seven natural gas pipelines in Texas to its portfolio.
- Devon Energy (NYSE:DVN) appoints COO Dave Hager as its new President and CEO, succeeding John Richels, who announced plans to retire in December.
- Hager assumed his new roles on Aug. 1, the day after Richels' retirement became effective.
- Hager joined DVN in 2009, when he was named executive VP of exploration and production, after 30 previous years of experience in the oil and gas industry.
- Emirates National Oil Co. has raised its takeover bid for Dragon Oil (OTCPK:DRAGF) to 800 pence/share, which wins the backing of Dragon's two largest minority shareholders.
- ENOC, which owns 54% of Dragon, needed acceptance from another 23% of the company's shareholders for the takeover to go through, and said it had achieved 29.92% shareholder acceptance and would delist the firm shortly.
- The higher price secured the backing of the oil producer’s two largest minority shareholders, Elliott Advisors and Baillie Gifford, companies that rejected Enoc’s offer in June.
- Sempra Energy's (NYSE:SRE) Mexican subsidiary said late Friday it will take full control of a Mexican natural gas pipeline business in a deal valued at $1.33B.
- SRE's IEnova unit owned 50% of the Gasoductos de Chihuahua joint venture, and Mexico's state oil company Pemex owned the other half, and now expects to buy Pemex's stake within the next 120 days, pending approval from Mexican regulators.
- Gasoductos de Chihuahua owns three natural gas pipelines, an ethane pipeline, a liquid natural gas pipeline and a liquid natural gas storage terminal.
- SRE said the purchase will add ~$0.05/share to its annual profit in 2016, and ~$0.10/share by 2019.
- Although it still looks shaky, Halliburton (NYSE:HAL) has received a request from the European Commission for additional information about its proposed $35B merger with rival Baker Hughes (NYSE:BHI).
- Halliburton has also responded to a second request made by U.S. antitrust officials considering whether to approve the merger.
- Should the deal go through, the combined company would overtake Schlumberger as the world's No. 1 oilfield services provider.
- Previously: Report: Halliburton facing antitrust scrutiny in planned Baker Hughes deal (Jul. 22 2015)
Visit Seeking Alpha’s new Earnings Center
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs