Thursday, January 29, 2015
- Occidental Petroleum (NYSE:OXY) CEO Stephen Chazen quipped during today's earnings conference call that Chevron (NYSE:CVX) was too poor to buy his company, but the offhand remark may have given a boost to OXY's stock, Reuters reports.
- With oil prices sharply lower and profits slipping, an M&A wave could be ahead, and when Chazen was asked if OXY was for sale, the CEO casually mentioned that he had "looked at Chevron and they don't have any free cash."
- An OXY spokesperson said the comments were in jest, but OXY shares, which had been falling, reversed course and finished up 2.3%, well ahead of most energy stocks.
- The remarks more likely were the result of a history of strained relations between the companies, and most energy stocks climbed off early lows as crude oil prices recovered.
- Earlier: Occidental Petro racks up big writedowns on lower oil prices
- The internal investigation into alleged corruption at Petrobras (NYSE:PBR) will cost the company ~$57M this year and could last up to two years, CEO Maria das Gracas Silva Foster said today during a conference call.
- The company reported its delayed Q3 yesterday but did not include an expected writedown of assets related to scandal, a move that disappointed investors and sent company shares down more than 12%.
- Q4 audited financial statements, due by the end of April under bond covenants or contractual obligations to bondholders, could be delayed until June or later, which would require negotiations with creditors, CFO Almir Barbassa says.
- Earlier: Petrobras may delay dividends, cut investment as it faces cash crunch
- Transocean (NYSE:RIG) and Diamond Offshore (NYSE:DO) "will think twice about an outright suspension” of their dividends after watching what happened to Seadrill (NYSE:SDRL), Credit Suisse analysts write.
- The situation at RIG is tricky, as Swiss law requires a shareholder vote to increase or lower the dividend; Credit Suisse says a dividend suspension would be the prudent thing to do, but RIG and DO likely will refrain from taking such a step after the selloff in SDRL; since SDRL suspended its dividend, shares have underperformed RIG by 1,200 bps and DO by 3,600 bps.
- Advanced Emissions Solutions (NASDAQ:ADES) -5.3% AH on news that KPMG has resigned as its independent accounting firm, citing in an SEC filing "an inappropriate tone at the top, discontent with the company's timeliness and responsiveness to its requests for information."
- ADES also says it is unlikely to regain compliance with SEC filing requirements by the previously reported March 27 deadline, and expects to be delisted from the Nasdaq market.
- In its earnings conference call today, Helmerich & Payne (NYSE:HP) confirmed it may cut 2,000 jobs as it begins to idle rigs amid lower crude oil prices.
- "The rig count reduction thus far has been more swift than many expected," CEO John Lindsay said during the call.
- HP also said it would now build only two high-tech FlexRigs per month this year, down from the four rigs it had planned.
- HP shares fell as much as 10% to a 52-week low $54 before recovering somewhat to end -3.7%, as a weak forecast for 2015 margins and revenue overshadowed better than expected FQ1 earnings.
- Canadian Oil Sands (OTCQX:COSWF) says it is cutting its quarterly dividend to $0.05/share from $0.35 to preserve balance sheet strength after collapsing crude prices took away more than two-thirds of its market value in six months.
- The company reported Q4 EPS of $0.05 vs. $0.40 in the year-earlier period, as it sold 108K bbl/day of synthetic crude vs. 112K bbl/day a year ago; Q4 cash flow was $207M vs. $391M in the same period of 2013.
- Shares had been halted from trading about an hour before the close of the Toronto Stock Exchange after falling ~7% to a 52-week low of $6.51.
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5:09 PM| Comment!
- The U.S. Senate passes a bill approving construction of the Keystone XL (NYSE:TRP) oil pipeline; the bill's 62 votes meant it earned some support from Democrats but not enough to overcome an expected veto from Pres. Obama.
- The Senate bill includes amendments not attached to a House-passed version; the House could now pass the Senate bill or lawmakers from each chamber could meet to work out a new version.
- Cameron International (CAM -0.1%) CEO Jack Moore tried to reassure investors that while oil producers are asking for price concessions, the company expects it will be able to sell more products to its key customers.
- Rather than "roll over and concede pricing,” CAM plans to push its more efficient surface units and other technology as falling oil prices forces oil companies to cut spending, the CEO Jack Moore said in today's earnings conference call.
- Moore expects CAM will be able to "offset the discounts through more efficiencies internally. But we will not be able to escape it totally.”
- CAM beat Q4 earnings expectations on higher sales from its drilling and surface businesses, but demand is softening for oil equipment as oil prices fall and new orders declined Y/Y to $2B from $3.1B; its year-end 2014 $9.5B backlog was down from $11.1B the previous year.
- Phillips 66 (PSX +3.2%) hits session highs following better than expected Q4 earnings as profit from the sale of gasoline and other fuels tripled.
- PSX profited as pump prices for gasoline and diesel did not fall as quickly as oil prices, says Edward Jones analyst Rob Desai, noting that "as oil prices fell, they were able to basically squeeze out some extra margin from gasoline and retail customers so that’s really what helped that segment to report stronger results."
- Q4 earnings at PSX's marketing and specialties unit, which sells gasoline, diesel and aviation fuel through Phillips 66, Conoco and 76 brand stations, totaled $367M from $105M a year earlier.
- Earnings for the refining segment grew 23% to $517M, while the chemicals segment gained 2.3% to $267M.
- The company’s investment in DCP Midstream - a joint effort with Spectra Energy - resulted in a $12M loss; CEO Greg Garland says in today's earnings conference call that if natural gas liquids prices remain at current levels, “that probably doesn’t fix DCP for 2015. We’re still talking about restructuring options."
- Enterprise Products Partners (EPD +3.1%) is higher after reporting higher volumes while lower energy prices weighed on Q4 results.
- Total volume for natural gas liquids, crude oil, refined products and petrochemicals in Q4 rose 3.7% Y/Y to 5.4M bbl/day.
- Q4 gross operating margin was up by ~5%; operating margin at EPD's natural gas liquids pipeline and services business slipped to $705M from $737M in the year-ago period, mostly due to lower returns on processing NGLs and lower ethane production.
- The average market price for NGLs at Mont Belvieu, Tex., was $0.74/gal in Q4 vs. $1.08/gal for Q4 2013.
- EPD says it will have ~$358M in distributable cash left over after investors are paid; it already had said it would pay distributions of $0.37/unit, up 6% Y/Y.
- In EPD's earnings conference call today, executives said they were prepared for a price downturn and already had turned to cutting costs.
- Valero Energy (VLO +0.4%) is modestly higher following better than expected Q4 earnings as higher product margins helped offset lower oil prices.
- Q4 refining segment throughput volumes averaged 2.8M bbl/day in the quarter, a Y/Y increase of 41K bbl/day from a year earlier, and operating income in the unit grew to $1.9B from $1.5B - 20% higher than forecast - as assets performed at 98% utilization and refining margins outperformed estimates by more than $1/bbl in all four operating regions.
- In the ethanol segment, operating income fell 49% Y/Y to $158M but that was ~50% better than expected due to higher margins and throughput.
- Says it is targeting an estimated $1B of dropdown transactions to Valero Energy Partners (NYSE:VLP) in 2015.
- Cowen analysts say VLO turned lemons into lemonade in the quarter, and expects domestic demand improvement in 2015 as a result of lower prices to provide additional earnings support.
- It's worth noting that VLO has an advantage over many rivals because it processes heavy crude from Canada and Mexico, which is even cheaper than the benchmark U.S. oil price.
- Petrobras (PBR -1.9%) CEO Maria das Graças Foster says the company plans to sell assets, cut investments and probably delay dividend payments as it faces a credit crunch resulting from the corruption scandal.
- PBR's new investment plan for 2015-19 will be "more selective" and focus on controlling debt levels, the CEO says, adding that the company plans to raise $3B from asset sales this year while reducing its exploration plans to the "minimum necessary."
- Earlier: Petrobras resumes slide after another analyst downgrade
- Gazprom (OTCPK:OGZPY) reports its its weakest quarterly earnings since 2008, warning that any further decline in crude oil prices may adversely affect its business and its capital investment.
- Gazprom's says its pre-tax profit for the nine months to Sept. 30 fell 31% Y/Y to RUB756.8B ($10.6B); although revenues for the first nine months rose 6.2% to RUB4T ($56.1B), operating profit fell 15.6% to $14B.
- The Russian company says the weak results confirm that it needed to sell more gas to Turkey and the Asia-Pacific region, while acknowledging its revenue will remain dependent on Europe.
- France's Total (TOT +1.5%) is one of the day's few energy gainers after the surprise announcement of a new deal to operate some of the Persian Gulf's largest onshore oil fields in the United Arab Emirates.
- TOT is taking a 10% stake for 40 years in a joint venture with Abu Dhabi National Oil Company to extract crude in the 15 main fields in the UAE with a total output of 1.6M bbl/day.
- Four oil majors - TOT, Exxon Mobil (NYSE:XOM), Royal Dutch Shell (RDS.A, RDS.B) and BP - had each held 9.5% equity stakes in the ADCO concession since the 1970s.
- Concessions for international oil companies to produce on in the Persian Gulf Arab states such as the UAE are rare and highly prized due to the size of reserves and low production costs.
- Petrobras (PBR -0.6%) bounces off sharply early lows as HSBC became the latest in a string of analysts expressing cautious or outright bearish sentiment toward the Brazilian company.
- The firm cut shares to Underweight from Neutral after BMO similarly lowered its rating to Underperform from Market Perform.
- Shares tumbled 10% yesterday after PBR’s Q3 earnings report failed to include an expected impairment charge on assets allegedly affected by the massive corruption scheme.
- Meanwhile, former CEO Jose Sergio Gabrielli reportedly has had his assets frozen by a Brazilian court as part of the corruption probe.
- Cobalt International Energy (CIE -2.4%) says the SEC has dropped its bribery probe of the company's activities in Angola and will not recommend any enforcement action.
- The move is an about-face for the agency, which had indicated it would take action against CIE on the matter.
- The SEC’s bribery probe of CIE began in 2011 with allegations of an unspecified connection between senior Angolan officials and an Angolan company that was involved with an offshore project CIE is undertaking.
- Statoil (STO -1.3%) calls off further drilling in the Barents Sea off Norway this year as the world’s most active explorer in Arctic waters last year scales back on exploration amid low oil prices.
- STO says it is still planning a “strong” application in Norway’s current licensing round, which offers its northernmost blocks ever in a new area of the Barents Sea formerly disputed by Russia.
- Plunging oil prices have pushed companies to rein in spending on already marginally profitable projects such as Arctic developments; STO already had signaled that it may be forced to delay its Johan Castberg oil project in the Barents for a third time.
- Royal Dutch Shell (RDS.A, RDS.B) and Exxon Mobil (NYSE:XOM) sell their respective 25% stakes in the Sean field in the North Sea to Oranje-Nassau Energie for an undisclosed sum, as the collapse in oil prices since June has added to pressure on drillers to sell aging North Sea wells.
- Shell says it may close its Draugen oil field in the Norwegian Sea much earlier than it had expected because of rising costs and falling oil prices, and two other fields in the area are still up for sale.
- Royal Dutch Shell (RDS.A -3.2%) opens lower as Q4 earnings rose from a poor year-ago quarter but came in below analyst estimates, partly due to its money-losing North American shale business.
- Analysts at Liberum Capital in London wrote that the results were "disappointing... 20% below consensus.”
- Shell plans to cut $15B in costs over the next three years but says it does not want to "overreact" to the 60% slide in oil prices since last summer; the company also warned that its stock buyback program could be curtailed.
- Shell said it would pay a Q4 dividend of $0.47/share, up 4% Y/Y but flat Q/Q, and pledged to maintain the same dividend in Q1.
- Despite the spending curbs, Shell remains intent on drilling for oil in Alaska, where it already has spent $5B; CEO Ben van Beurden said the company hopes to drill this summer in the Chukchi Sea if it receives the necessary permits and overcomes legal challenges.
- Shell's average price received for oil during Q4 was ~$72/bbl, down 25% Y/Y, with natural gas prices down 12%, contributing to a 30% fall in E&P earnings to $1.73B from $2.48B, as lower oil prices offset benefits such as increased high-margin liquids production; with oil prices even lower now, the slump is likely to worsen in 2015.
- Helmerich & Payne (HP -6.9%) opens sharply lower after reporting better than expected FQ1 earnings due to compensation from the early termination of contracts, and warning that results for the rest of 2015 would be hurt by lower oil prices.
- In FQ2, HP expects revenue days (activity) in the U.S. land segment to decrease by ~25% Q/Q, with average rig revenue per day falling from $28.6K in FQ1 to $27K-$27.5K; in the offshore segment, HP sees revenue days remaining flat Q/Q, with average rig margin per day of ~$19.5K from $20.7K in FQ1.
- Citigroup downgrades HP shares to Sell from Neutral and cuts its price target to $55 from $71, believing "the defensive shine on the stock is tarnished by a collapse in rig pricing and utilization, as well as rising risk of contract cancellations/resets."
- Bellatrix Exploration (NYSE:BXE) +4.3% premarket on news it plans to cut its 2015 capital spending budget to $200M from its previously announced $300M.
- BXE lowers its FY 2015 production guidance by 8% to 43K-44K boe/day from 47K-48K boe/day (67% natural gas weighted), but this still reflects ~14% Y/Y growth vs. estimated 2014 average daily production of 38.1K boe/day.
- Says it has entered into a series of natural gas fixed price swap contracts that provide downside commodity protection through the summer natural gas season.
- Harvest Natural Resources (NYSE:HNR) -20% premarket after announcing it has withdrawn its request for international arbitration proceedings against Venezuela over what it had considered the thwarting of its investments in the country.
- HNR says it remains committed to protecting the value of its Venezuelan investment, but it cannot promptly pursue its claims without going through a process established in the shareholders' agreement with Petroandina or obtaining a waiver of that process.
8:49 AM| 1 Comment
- Occidental Petroleum (NYSE:OXY) -0.5% premarket after posting an unadjusted Q4 earnings loss, thanks to net writedowns totaling ~$4B as a result of the slump in oil prices.
- OXY says it is planning a 2015 capital spending budget of $5.8B, down by a third from 2014 levels, as the company says it is focused on cutting costs, which includes renegotiating supplier contracts.
- OXY plans to focus on core assets in the Permian Basin and parts of the Middle East, and is minimizing development activities in the Williston Basin, domestic gas properties, Bahrain, and the Joslyn oil sands project.
- OXY also reports year-end 2014 preliminary worldwide proved reserves of 2.82B boe, up 3% Y/Y; preliminary domestic proved reserves totaled 1.78B boe, up 6.5% Y/Y.
8:12 AM| Comment!
- ConocoPhillips (NYSE:COP) is flat premarket after adjusted Q4 earnings met expectations but fell to $0.60/share from $1.40 in the year-ago quarter.
- COP, which already had announced plans to cut 2015 spending by 20%, cuts planned capex by another 15% and now expects to spend $11.5B rather than $13.5B; reductions since the earlier announcement will come mostly from deferral of onshore drilling and exploration programs in the continental U.S.
- Nevertheless, COP still expects to deliver 2%-3% production growth in 2015 from continuing operations; Q1 production seen at 1.57B-1.61B boe/day.
- COP says adjusted Q4 earnings were lower Y/Y primarily due to lower realized prices, increased dry hole expense, higher operating costs and depreciation expense associated with increased volumes, partially offset by higher volumes.
- Q4 production edged up to 1.567B boe/day, excluding Libya
- Average realized price in Q4 fell 19% Y/Y to $52.88/bbl.
7:12 AM| Comment!
6:44 AM| 1 Comment
- WTI futures are little changed following Wednesday’s 3.9% drop, after the Energy Information Administration reported record-high inventories in the U.S. and raised more anxieties about the global oil glut.
- Domestic crude inventories rose by almost 9M barrels last week to reach nearly 407M, the highest level since the government began keeping records in 1982.
- WTI flat at $44.46/bbl.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
6:17 AM| 2 Comments
6:06 AM| 2 Comments
- Resisting slumping oil prices, Royal Dutch Shell (RDS.A, RDS.B) posted Q4 profit of $4.2B, compared with $2.2B for same quarter a year earlier, although it said it would lower capex in 2015 and curtail overall spending by a total of $15B over the next 3 years.
- Unlike rivals, Shell had been forecast to suffer less of a year-over-year impact in the quarter because its 2013 Q4 earnings were dragged down by issues including high spending and poor refining margins.
- This would be a much slower recovery than previous downturns, when oil prices recovered in an average of 17 months, UBS says.
- Oil faces a different reality than in the crashes of 2008 and of 1997/1998, which were driven largely by weaker demand; the current selloff is being driven by oversupply.
- UBS estimates oil supply is overshooting demand by 1.3M b/d in the 93M b/d global market, and notes the industry “finds itself without the OPEC safety net to manage downside risk for oil prices for the first time since the 1980s."
- Previously: Oil prices could rise sooner than expected (Jan. 28)
- Previously: OPEC official warns of spike to $200 (Jan. 26)
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, OLEM
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