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Sep. 11, 2015, 5:31 PM
- After meeting with ConocoPhillips (NYSE:COP) management, RBC analysts report that the company is confident it can reach cash flow neutrality by 2017.
- The analysts say COP management indicated it is prepared to exercise more capital discipline and anticipates spending just under the 2015 budget of $11.5B and lower in 2016 if current oil prices persist.
- There is more capital flexibility ($2.0B-$2.5B) with major project spending subsiding, the analysts say, adding that maintenance capex is $9B but more cost deflation exists at $60/bbl, reducing maintenance capex to $8B.
- RBC also notes that COP remains committed to its dividend and recently raised it by $0.01/share to $0.74, providing a peer-leading yield of 6.1%.
Sep. 9, 2015, 6:55 PM
- The selloff in megacap oil stocks such as Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), Occidental Petroleum (NYSE:OXY) and ConocoPhillips (NYSE:COP) still has not “placed them in value territory," Credit Suisse analyst Edward Westlake says.
- But CVX looks like the most interesting of the four, Westlake says, as it will have an increased share of long lived cash flows to support the 5.6% dividend yield once Gorgon and Wheatstone are on stream; he also likes CVX's "enviable position" in the Permian, some giant discoveries in the Gulf of Mexico and a profitable expansion of Tengiz.
- XOM is well run with an excellent balance sheet and lower cost of capital, but is not immune from a collapse in revenues, according to Westlake.
- COP's cash flow will benefit from new projects, cost cutting and shale growth over the next few years, but its $3.6B/year dividend outlay may be better off redeployed into its low cost shale portfolio, the analyst says.
Sep. 8, 2015, 2:19 PM
- A U.S. District Court upholds a ruling from the International Chamber of Commerce in granting ConocoPhillips (COP +2.9%) sole ownership of a coking unit at the 247K bbl/day Sweeny, Tex., refinery, ending a long-running dispute over the asset with Venezuela's PDVSA.
- In addition to PDVSA's loss of the asset, contracts between the parties could still require PDVSA to supply crude to the Sweeny unit, according to the ruling.
- COP also is waiting for a broader arbitration ruling in a case filed in 2007 before a World Bank tribunal over its oil assets in Venezuela that were nationalized.
Sep. 5, 2015, 8:25 AM
- ConocoPhillips (NYSE:COP) says it could support a United Nations climate change agreement if it met its own policy principles, including creating a "level playing field" among energy sources and between countries, and avoiding technology mandates.
- COP's partial endorsement comes as pressure grows on U.S. oil majors to join European peers including Shell (RDS.A, RDS.B), BP, Total (NYSE:TOT) and Statoil (NYSE:STO) who backed UN climate negotiations and a global carbon pricing system to reduce carbon emissions.
- COP and U.S. peers such as Exxon (NYSE:XOM) and Chevron (NYSE:CVX) face competing demands from green and investor activist groups as well as industry lobby groups worried that a UN deal will call for a total phase-out of fossil fuels.
Sep. 2, 2015, 7:07 PM
- Exxon Mobil (NYSE:XOM) could outperform the market during the next 12 months thanks to a dividend yield that’s nearly twice as high as the S&P 500′s, Barclays Paul Cheng says.
- XOM’s relative yield has jumped to a recent high of 180% from 127% and compared to the 25-year average of 138%, Cheng calculates, adding that when XOM's relative yield exceeds 170%, it outperformed the S&P 500 in the subsequent one-, three- and 12-month periods by respective averages of 1.8%, 3.9% and 6.8%.
- Although Cheng thinks the energy sector’s downside risk relative to the market may be limited from current levels and that XOM may have reached near-term lows, he maintain an Underweight rating on the stock and sees better risk-reward opportunities in Suncor Energy (NYSE:SU), Imperial Oil (NYSEMKT:IMO) and ConocoPhillips (NYSE:COP).
Sep. 1, 2015, 3:58 PM
- Citigroup's energy analysts defend their bullish take on big oil stocks such as ConocoPhillips (COP -2.6%), Total (TOT -2.1%) and Statoil (STO -4.5%), pointing to 30-year valuation lows, upside asymmetric risk on oil prices and signs that managements are doing enough to turn the corner on better capital allocation and cost-cutting.
- Favoring COP, TOT and STO, the firm says its sector investment criteria are (1) growth - companies that have near-term growth are less reliant on simply cutting costs; (2) better capital allocation - combined with growth, it should deliver 2-3x the ROE uplift than cost-cutting can; and (3) a strong enough balance sheet to manage the early part of the cycle.
- Citi is staying away from Exxon Mobil (XOM -4%) because of its valuation premium to peers and low growth and from Chevron (CVX -3.2%) due to its slow response in a lower commodity world.
Sep. 1, 2015, 2:46 PM
- ConocoPhillips (COP -3.3%) says it is laying off 400 employees and 100 contractors in Canada, ~15% of its workforce in Canada, as part of a 10% global workforce reduction amid low oil prices.
- COP plans to cut 500 jobs at its Houston headquarters out of the 3,750 workers it employs there.
- "We don’t see a lot of correction in the short-term... It’s really kind of changing the way we work," a COP spokesperson says.
- News of the cuts came on the same day COP announced first oil at its new Surmont 2 thermal project in northern Alberta.
Sep. 1, 2015, 12:59 PM
- ConocoPhillips (COP -3.6%) says it has safely delivered its first barrels of oil at its Surmont 2 in-situ oil sands facility in Canada that has been under construction for five years.
- COP says the project in northwestern Alberta will extract heavy oil buried too deep to mine using steam to heat up the thick crude to allow it to flow; the company says Surmont is the largest steam-assisted gravity drainage system in the world.
- It is COP's second and larger phase of a 50/50 joint venture in the Canadian oil sands with Total (NYSE:TOT); the two projects combined are expected to bring up 150K bbl/day, with the second facility building up production to 118K bbl/day through 2017.
Aug. 31, 2015, 6:48 PM
- Pres. Obama - visiting Alaska this week - agreed earlier this month to allow Royal Dutch Shell to resume Arctic oil exploration, yet Alaska officials say it may not be enough to save the 800-mile Trans-Alaska Pipeline System, the state’s economic lifeline for the past 40 years.
- Volume on the pipeline, which funnels crude to Valdez in the south from Prudhoe Bay in the north, has declined along with North Slope oil production during the past three decades; flows are dropping ~5%/year and slid to 513K bbl/day in 2014 from a peak of 2M in 1988.
- Alaska projects North Slope crude production to fall to ~320K bbl/day by 2024, and officials say a drop below 300K would trigger a “fundamental change” in operations and perhaps make the pipeline unfeasible.
- Three major oil companies - BP, ConocoPhillips (NYSE:COP) and Exxon Mobil (NYSE:XOM) - mostly fund Trans-Alaska operator Alyeska Pipeline Service.
Aug. 31, 2015, 3:49 PM
- West Texas crude oil surged 8.8% to $49.19/bbl, capping a three-day rally that added more than 27% to the price - the largest three-day rally since January 2009 - after U.S. oil production data showed output falling and OPEC said it would talk with other producers about low prices.
- Brent crude rallied 7.4% to $53.80, as the spread between the two benchmarks widened to more than $5 intraday after narrowing to $4.33.
- "Oil markets are hungry for any evidence of a fall in production, anywhere,” says Global Hunter's Robert Hastings.
- The SPDR Energy ETF (XLE +1.2%) jumped after being down as much as 2.5% early in the day, and the Market Vectors Oil Services ETF (OIH +2.3%) reversed a 2.6% loss at its intraday low.
- However, trading volumes were lower and volatility perhaps greater than usual due to a U.K. holiday.
- Andrew Keene tells CNBC he is selling today's pop, noting that XLE is again trading at its 20-day MA and "we haven't traded above this moving average since May."
- Among the shares of some of the more active energy companies, Chevron (CVX +0.5%) and Exxon Mobil (XOM +0.4%) are higher after respective early losses of 3.1% and 2.4%; also, COP +5%, PSX +2.6%, SLB +2.2%, RIG +4.1%, HAL +2.4%, WLL +8.3%, MRO +3.4%, NFX +5.1%, LINE +5.7%.
- Other ETFs: VDE, ERX, XOP, ERY, FCG, DIG, GASL, DUG, BGR, XES, IYE, IEO, IEZ, FENY, PXE, PXI, FIF, PXJ, NDP, RYE, FXN, DDG
Aug. 25, 2015, 10:20 AM
- Alaska Gov. Walker says he plans to recommend that the state buy out TransCanada's (TRP +2.3%) position in the major liquefied natural gas project Alaska is pursuing.
- Walker estimates buyout costs would total ~$100M.
- The other partners in the project are Exxon Mobil (NYSE:XOM), BP, ConocoPhillips (NYSE:COP) and the Alaska Gasline Development Corp., which would hold the state's interest in liquefaction facilities.
- No decision has been made yet on whether to build the project, which is in a phase of preliminary engineering and design.
Aug. 24, 2015, 3:27 PM
- Chevron (CVX -5%) is upgraded to Neutral from Underperform with a $100 price target at BofA Merrill, which expects CVX’s net debt to stabilize with major projects beginning to contribute in 2017 and a drop in spending to maintenance levels.
- The firm says it has been concerned throughout the past year that CVX's cash burn would dilute equity value through peak spending at the same time that oil prices collapsed, but it no longer sees a risk, as CVX is discounting below strip prices but with a dividend.
- CVX requires sustained spending of $15B-$16B to hold production flat for an extended period,” BofA's Doug Leggate explains, adding that at $45-$50 oil, cash flow by 2017 would be closer to $29B so that the dividend is "more than covered" by cash flow in an ex-growth environment.
- ConocoPhillips (COP -6.2%) is the firm's top pick among the big oils after the stock has been hit hard, which the analyst thinks reflected unwarranted concerns regarding COP's dividend; at current strip prices, Leggate believes COP's upside is second only to Buy-rated Exxon Mobil (XOM -5.3%).
- However, the firm downgrades HollyFrontier (HFC -3.5%), Marathon Petroleum (MPC -7.2%) and Valero (VLO -4.7%) to Underperform and cuts Continental Resources (CLR -10.1%), Marathon Oil (MRO -8.4%), Noble Energy (NBL -5.4%) and Whiting Petroleum (WLL -8%) to Neutral.
Aug. 19, 2015, 11:18 AM
- It's a broad decline for stocks this morning, with the S&P 500, DJIA, and Nasdaq all lower by 1% or more. Leading the way down are the energy names (XLE -2.5%) after an unexpected jump in oil inventories has sent the price of black gold down to new bear market lows at $41.30 per barrel.
- Chevron (CVX -2.9%), ConocoPhillips (COP -3.8%), EOG Resources (EOG -4.3%), Apache (APA -4.1%), Hess (HES -3.6%), Marathon Oil (MRO -5.5%), Noble Energy (NBL -3.1%), Anadarko (APC -3.6%).
- ETFs: XLE, VDE, ERX, OIH, XOP, ERY, DIG, DUG, BGR, IYE, IEO, FENY, PXE, FIF, PXJ, NDP, RYE, FXN, DDG, DRIP, GUSH
Aug. 18, 2015, 11:47 AM
- Having been "multi-year cautious" on Big Oil, Citigroup's Alastair Syme is getting more bullish, believing current valuations are giving very little chance to the restoration of the group's long-term profitability to long-run averages.
- He notes the sector price-to-book ratio of 1.2x is now below the Q1 2009 and Q4 1998 troughs, even with books marked to reflect world oil in the $50-$70 range.
- "This will be a long process, but the repair (cost-cutting, better capital allocation) has now started," says Syme, recommending investors at least get to benchmark weight in the group. His favored ways to play are ConocoPhillips (NYSE:COP), Statoil (NYSE:STO), Total (NYSE:TOT), and BG Group (OTCQX:BRGYY) as a cheaper way to get into Shell (NYSE:RDS.A).
- Notably not on the list are ExxonMobil (NYSE:XOM) thanks to its valuation premium and low growth (through the strong balance sheet is worth a look), and Chevron (NYSE:CVX) - "slow to adjust to a lower commodity world."
- Previously: BAML: Capitulation in emerging markets, commodities, and energy-related stocks (Aug. 18)
Aug. 14, 2015, 12:47 PM
- The Obama administration will allow limited sales of crude oil to Mexico for the first time, Reuters reports, citing a senior administration official who says the U.S. Commerce Department is "acting favorably on a number of applications" to export U.S. crude in exchange for imported Mexican oil.
- The shipments, likely to be lighter, high-quality shale oil, would help Mexico's aging refineries produce more premium fuels, while U.S. refiners would continue to get Mexican heavy oil, a better match for them than the light oil coming from Texas and North Dakota.
- Although limited in scope, the move toward freeing up trade will please U.S. oil producers such as Pioneer Natural Resources (NYSE:PXD) and ConocoPhillips (NYSE:COP), which say the restrictions force them to sell oil at below global market rates, and may add momentum to efforts mostly to repeal what advocates see as a relic of the 1970s.
- Among relevant oil stocks: XOM, CVX, BP, RDS.A, RDS.B, OAS, NOG, CLR, WLL, EOX, SM, SFY, PVA, GST, SN, CRK, BBG, CWEI
- Relevant refining stocks: VLO, HFC, MPC, TSO, WNR, ALJ, PSX, PBF, DK, NTI, ALDW
- ETFs: XLE, XOP, XES, IEO, IEZ, PXE, NDP
Aug. 13, 2015, 7:27 PM
- Oil companies are bracing for "lower for longer” prices as a global supply glut persists, dragging U.S. crude to the lowest close since March 2009 at just above $42/bbl.
- More capitulation notes are out; Oppenheimer's Fadel Gheit wrote today that the "new normal" for oil in a recovery would be $65-$75, and that "the vast majority of oil companies are living beyond their means, with operating cash flow falling short of capital investments and dividend... Unless oil prices rebound significantly above future strip prices, oil stocks could sink further, as takeover premiums shrink with potential sellers significantly outnumbering potential buyers."
- The world’s biggest producers will need to trim investments by another $26B, Jefferies believes; capital spending will have to fall 10% next year, according to Banco Santander.
- CNBC's Bob Pisani says when energy stocks staged a brief bounce recently, investors repeated a frequent mistake: They tried to buy oil stocks ahead of a recovery in crude oil, instead of the other way around.
- The result today was heavy losses for many of the sector's big names: CHK -6.6%, MRO -5.4%, COP -2.8%, APC -2.4%, SWN -4.2%, RRC -4.4%, RIG -6.5%, DVN -3.9%, APA -2.6%, BHI -2.9%, CAM -3.5%.
- ETFs: XLE, VDE, ERX, OIH, XOP, ERY, DIG, DUG, BGR, XES, IYE, IEO, IEZ, FENY, PXE, PXI, FIF, PXJ, NDP, RYE, FXN, DDG
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