Dec. 19, 2014, 3:33 PM
- U.S. energy producers continued to idle rigs for a second straight week, as the number of rigs searching and drilling for oil and gas across the U.S. fell by 18 this week to 1,875, according to the latest weekly data from Baker Hughes (NYSE:BHI).
- The rig count has fallen for the past two weeks, but a serious cutback in drilling remains in its early stages, as the count is still 107 higher than last year’s count at this date of 1,768.
- According to estimates by Raymond James and Wunderlich Securities, rig counts may have to fall by more than as 500 before supply and demand in the oil market reach an equilibrium.
- ETFs: USO, OIL, UCO, OIH, SCO, XOP, BNO, DTO, DBO, XES, IEO, CRUD, IEZ, UWTI, PXE, USL, DWTI, DNO
Dec. 18, 2014, 9:59 AM
- RBC recommends increasing weightings and exposure to oil service stocks (OIH +2.5%) heading into 2015, as it says oil prices will start to improve in H2 of next year and that oil service stocks typically discount this move by 6-9 months.
- Down cycles such as 2000-02 and 2008-09 suggest North American land drillers and service companies provide the best returns off business cycle lows, RBC says as it expects a similar dynamic this time.
- RBC upgrades Key Energy (KEG +24.6%) and Superior Energy (SPN +7.5%) to Outperform, and downgrades FMC Tech (FTI +1.8%), Franks (FI +4.9%), Oceaneering (OII +0.2%) and Oil States (OIS +2.3%) to Sector Perform; the firm also says since 1985 three of the top five performing stocks off lows have been Patterson-UTI (PTEN +6.6%), Precision Drilling (PDS +4%) and Nabors (NBR +7.2%).
Dec. 12, 2014, 6:27 PM
- U.S. oil drillers idled the most rigs in almost two years last week, dropping by 29 to 1,546 for the lowest level since June and the biggest decline since December 2012, according to Baker Hughes' (NYSE:BHI) latest survey.
- This week’s slowdown is one of the first significant drops seen in the rig count since oil began to fall from highs of more than $100/bbl this summer; nearly all of the idled oil rigs were in Texas.
- Rig counts remain higher across the board in 2014 than a year ago, but "the bulk of the cuts are yet to come,” says a Wood Mackenzie analyst. “The trend is pointing down and we’re entering into a period of new budgets. January and February are the months to watch.”
- ETFs: USO, OIL, UCO, OIH, SCO, XOP, BNO, DTO, DBO, XES, IEO, CRUD, IEZ, UWTI, PXE, USL, DWTI, DNO
Dec. 12, 2014, 3:27 PM
- Off 3.8% today to $57.68 per barrel, WTI crude oil (USO -3.4%) has tumbled 12% for the week, 16% since Thanksgiving when OPEC couldn't agree on production cuts, and nearly 50% since its peak for the year in mid-June.
- A bear market like this hardly needs an excuse to go lower, but today's cut in estimated 2015 oil demand by the IEA makes for a nice reason.
- Unsurprisingly, the XLE - down 1.3% on the session - is underperforming most sectors and the broad averages.
- On the bright side: The crash in oil prices appears to be boosting consumer sentiment which unexpectedly jumped to its highest level in seven years.
- ETFs: USO, OIL, UCO, SCO, BNO, UGA, DTO, DBO, CRUD, UWTI, USL, DWTI, UHN, DNO, SZO, OLO, OLEM, TWTI, XLE, ERX, VDE, OIH, ERY, DIG, DUG, IYE, FENY, PXJ, RYE, FXN, DDG
Dec. 10, 2014, 3:49 PM
- OPEC no longer exists in any meaningful sense and crude prices will slump to $50/bbl over coming months as market forces shake out the weakest producers, Bank of America warns.
- Francisco Blanch, BofA’s commodity chief, says OPEC is “effectively dissolved” after it failed to stabilize prices at its last meeting, and “the consequences are profound and long-lasting.”
- At least 15% of U.S. shale producers are losing money at current prices, and more than half will be under water if U.S. crude falls below $55, the bank says, adding that the high-cost producers in the Permian basin will be the first to feel the pain and may have to cut back on production soon.
- Following the 40% drop in oil prices, "the bulk of the damage to the sector is now done," Deutsche Ban's Lucas Herrmann says, "but it's hard to see what's going to drive share prices higher."
- Nevertheless, Herrmann upgrades BP to Buy from Hold, citing the likelihood that its troubles in the Gulf of Mexico and Russia will see a turning point in 2015.
- ETFs: XLE, ERX, VDE, OIH, XOP, ERY, FCG, DIG, GASL, DUG, IYE, XES, IEO, IEZ, PXE, FENY, PXJ, RYE, FXN, DDG
Dec. 10, 2014, 12:58 PM
- Energy stocks are slammed across the board as oil prices take another nosedive (I, II), with the losses heaviest on shares of small, U.S.-based oil and gas producers.
- “Financial leverage is being thrown out the window, and everything else is being purged as well,” says Simmons analyst Bill Herbert, who adds that cuts to production budgets in the coming year likely will mean more pain for oil service companies.
- Among the hardest-hit shares: TPLM -15.2%, CRK -12.4%, GDP -11.9%, NOG -9.5%, AREX -8.6%.
- Investors have been less quick to dump shares of integrated oil companies, but today they have been smacked too: XOM -2.8%, CVX -2.9%, COP -2.3%, BP -2%, RDS.A -2.2%, TOT -2.3%.
- Today's worst performers on the S&P 500 include OKE -8.2%, DNR -7.4%, NE -5.6%.
- Service companies also are down: SLB -2.6%, HAL -2.7%, WFT -6.6%, BHI -2%.
- ETFs: XLE, ERX, VDE, OIH, ERY, DIG, DUG, IYE, XES, IEZ, PXI, FENY, PXJ, RYE, FXN, DDG
Dec. 8, 2014, 7:05 PM
- "Not much else bad can happen" to Seadrill (NYSE:SDRL), Credit Suisse analyst Gregory Lewis said this morning in maintaining his Neutral rating while edging his target price lower to $15 - 6x the firm's 2016 EBITDA estimate, a discount to the peer average but warranted given SDRL’s above average leverage (~56% and rising) and no dividend.
- However, a lawsuit was filed today in U.S. District Court citing "materially false or misleading statements with respect [SDRL’s] commitment and ability to continuing to pay a dividend to the exclusion of other opportunities and needs for the same capital.”
- Oilfield service companies and contractors, whose revenues depend on drilling activity, fell today in reaction to continually declining crude oil prices and ConocoPhillips' reduced capex guidance: SDRL -6.1%, SDLP -5.8%, NADL -17.9%, RIG -4.9%, RIGP -3%, ESV -7.2%, RDC -3.7%, PACD -6.8%, OIH -4.5%, but DO +1.3%.
Dec. 8, 2014, 11:15 AM
- Brent crude slumps to a new five-year lows after Morgan Stanley cut its 2015 Brent forecast, saying prices could average as little as $53/bbl although its base case scenario was for $70; the firm's earlier outlook saw oil at $98.
- "Oil prices face their greatest threat since 2009," analysts Adam Longson and Elizabeth Volynsky say, with Q2 2015 likely marking the peak period of dislocation in the absence of OPEC intervention.
- Brent -3.4% to $66.71, WTI -3.1% to $63.81.
- Energy stocks are getting smashed again, exacerbated by ConocoPhillips' (COP -3.3%) 20% reduction of its 2015 capex plans to $13.5B.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, DIG, BNO, DTO, DBO, DUG, IYE, XES, IEO, CRUD, IEZ, UWTI, PXE, USL, PXI, FENY, DWTI, PXJ, DNO, RYE, SZO, FXN, OLO, DDG, OLEM, TWTI
Dec. 5, 2014, 9:57 AM
- The American Petroleum Institute says it would accept proposed rules on pollution from oil wells if it heads off a broad federal standard for methane leaks.
- The lobby group says it is willing to meet EPA limits on the release of smog-forming compounds from hydraulically fractured wells; such rules are in place for gas wells, and the EPA is considering expanding them to oil wells.
- Environmental advocates are pushing the EPA to regulate methane throughout production and refining - not just when gas and oil are extracted from underground - as the only way to reduce the volumes of gas being leaked.
- ETFs: XLE, ERX, VDE, OIH, XOP, ERY, DIG, DUG, IYE, XES, IEO, IEZ, PXE, FENY, PXJ, RYE, FXN, DDG
Dec. 3, 2014, 2:05 AM
- Falling oil prices sparked a decline of almost 40% in new well permits issued across the U.S. in November, with only 4,520 new well permits approved last month, down from 7,227 in October.
- New permits, which outline what drilling rigs will be doing 60-90 days in the future, showed heavy declines for the first time this year across the top three U.S. onshore fields: the Permian Basin, Eagle Ford and Bakken shale.
- ETFs: XLE, ERX, VDE, OIH, ERY, DIG, DUG, IYE, FENY, PXJ, RYE, FXN, DDG
Dec. 2, 2014, 10:33 AM
- BofA Merrill Lynch downgrades the energy sector to Marketweight following OPEC’s decision to maintain rather than cut production, now seeing $70-$75 as Brent crude's 2015 range, while warning of value traps.
- "With the collapse in crude, the sector now trades at a 20% discount to the S&P 500, where it has historically traded in-line with the market," the firm says, "but further estimate cuts are likely to come, [as] prices are falling faster than earnings are deteriorating."
- Seeing WTI possibly falling as low as $50 in the coming month, BofA warns that "volatility in oil prices translates to volatility in earnings."
- For exposure to the sector, the firm prefers big, lower beta stocks such as Exxon Mobil (XOM +0.5%).
- Citi also cautions against assuming that oil prices have found a bottom, and wants to see a more thorough confirmation of a technical base of support before proclaiming anything more than the latest trading bottom; however, Citi's Scott Gruber recommends moving aggressively on oil services if WTI crude falls into the $50s - his top picks, in order, are Baker Hughes (BHI +0.1%), Halliburton (HAL -1.3%) and Weatherford (WFT +2.7%).
- ETFs: XLE, ERX, VDE, OIH, XOP, ERY, FCG, DIG, GASL, DUG, IYE, XES, IEO, IEZ, PXE, PXI, FENY, PXJ, RYE, FXN, DDG
Dec. 1, 2014, 12:21 PM
- Oil prices are rebounding, with both WTI and Brent crude up ~2%, but only a handful of energy stocks are rising.
- Exxon Mobil (XOM +1.4%) and Chevron (CVX +1.3%) are both up more than 1%, but the vast majority of energy stocks - led by Denbury Resources (DNR -8.9%), Newfield Exploration (NFX -7.6%) and Goodrich Petroleum (GDP -22.3%) - are seeing heavy selling.
- The SPDR Energy Select Sector ETF (XLE -1.2%) is lower despite gains in XOM and CVX, XLE’s two most heavily weighted stocks, as 38 of its 43 equity components trade lower; the ETF has now lost 7.5% since OPEC sent oil prices plunging by agreeing last Thursday not to cut production.
- Among XLE’s most actively traded components, Kinder Morgan (KMI -3.3%), Halliburton (HAL -3.4%), Transocean (RIG -6.1%) and Schlumberger (SLB -2.1%) are sharply lower.
- Other big decliners include BBEP -17.8%, SD -12.1%, SN -13%, CWEI -8.8%, CPE -14.6%, EXXI -18.9%, LRE -22.8%, REI -16.9%, SSE -15.3%.
- Other ETFs: ERX, VDE, OIH, XOP, ERY, DIG, DUG, IYE, XES, IEO, IEZ, PXE, FENY, PXJ, RYE, FXN, DDG
Nov. 28, 2014, 12:52 PM
- "OPEC, like Rockefeller, ultimately damned itself," writes Wolfe Research's Paul Sankey. He doesn't see oil demand ratcheting upwards because of the drop in oil prices; instead, he says, the market will only clear at the point of U.S. supply growth destruction.
- This could take months and a price of around $50 per barrel ... "And then we squeeze radically higher. As a result, the world accelerates its move away from oil."
- "This is going to be volatile, and we can't understand how that helps the Saudis. Volatility sells Teslas."
- WTI crude (NYSEARCA:USO) tried bouncing earlier, but is now lower by 8.5% at $67.43 per barrel. The Energy Select SPDR (XLE -6.6%) is also set to close today's shortened session on the lows.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, DIG, BNO, UGA, DTO, DBO, DUG, IYE, XES, IEO, CRUD, IEZ, UWTI, PXE, USL, FENY, PXJ, DWTI, DBE, DNO, PSCE, RJN, RYE, SZO, FXN, OLO, JJE, DDG, ONG, RGRE, OLEM, TWTI, UBN
Nov. 28, 2014, 7:25 AM
- OPEC yesterday decided to hold production numbers despite the bear market in oil. WTI crude is down about $5 per barrel to $69.
- A premarket look at the top 10 holdings of the XLE: Exxon Mobil (NYSE:XOM) -4.1%, Chevron (NYSE:CVX) -4.1%, Schlumberger (NYSE:SLB) -4.6%, ConocoPhillips (NYSE:COP) -4.4%, EOG Resources (NYSE:EOG) -4.3%, Pioneer Natural Resources (NYSE:PXD) -4.8%, Occidental Petroleum (NYSE:OXY) -4.3%, Haliburton (NYSE:HAL) -4.7%, Anadarko Petroleum (NYSE:APC) -5%, Williams Companies (NYSE:WMB) -1.6%.
- ETFs: ERX, VDE, OIH, XOP, ERY, FCG, DIG, PBW, GASL, DUG, IYE, XES, IEO, QCLN, IEZ, PXE, PXI, FENY, PXJ, PSCE, RYE, PUW, FXN, DDG, HECO
Nov. 26, 2014, 1:05 PM
- The EPA formally proposes reducing ground-level emissions limits to 65-70 ppb from their current level of 75 ppb, and says it will take comments on possibly cutting limits to 60 ppb, a standard favored by environmental and public health groups.
- The American Fuel & Petrochemical Manufacturers warns, “This regulation promises to be the most expensive in U.S. history," which it says could lead to millions of jobs lost and hundreds of billions of dollars every year in costs to U.S. businesses.
- Back in 2011, the EPA itself estimated that such a standard could cost businesses as much as $90B/year; in the new proposal, the EPA estimates costs of no more than $15B in 2025.
- ETFs: XLE, XLU, ERX, VDE, IDU, KOL, OIH, VPU, ERY, DIG, DUG, IYE, FENY, PXJ, RYU, UPW, RYE, FUTY, FXN, FXU, SDP, DDG
Nov. 26, 2014, 10:42 AM
- Seadrill (SDRL -19.2%) shares are plunging after the drilling contractor suspended dividend payments due to "significant deterioration" in the broader markets, and North Atlantic Drilling (NADL -13.8%) suspends its dividend because of the delay of its agreement with Rosneft as well as the weaker market.
- The move is slamming the entire sector, and Wells Fargo says that although SDRL is the first driller to cut its dividend, Diamond Offshore (DO -8.3%) and Transocean (RIG -4.7%) will "ultimately have to follow suit."
- Also: SDLP -6.6%, ESV -4.8%, ATW -4.3%, RDC -3.3%, NE -3.2%, PACD -6.5%, ORIG -2.7%, HP -1.1%, RIGP -2.5%.
- ETF: OIH
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