Energy

  • Today - Tuesday, September 25, 2018
    • The big oil price rally may be short-lived, according to Janet Kong, who heads BP’s (BP +2.6%) Asia trading business, comments that stand in contrast to views from officials at oil trading firms Trafigura and Mercuria that see a looming supply crunch driving Brent crude to $100/bbl.
    • Any spike on the loss of Iranian supply due to U.S. sanctions likely will not prove sustainable in the long run, Kong says, because the negative impact on demand from the U.S.-China trade war has not yet been priced into crude.
    • “The market is very fixated on the loss of barrels on the supply side,” Kong says. "The market has overlooked the results of the U.S.-China trade war, how that might impact the global economy, China’s growth and the regional economy in Asia."
    • A “meaningful tightening” of the market could occur in the next 3-6 months as Iranian oil exports shrink, but demand may be affected next year due to the trade war, Kong says, adding that within the next 12 months, supply probably will grow as OPEC raises production and the U.S. pumps more in 2019 after lifting production by 1.3M bbl/day this year.
    • ETFs: USO, XLE, OIL, UWT, UCO, VDE, XOP, DWT, ERX, OIH, SCO, BNO, DBO, ERY, DIG, BGR, GUSH, DTO, FENY, USL, IYE, DUG, DRIP, IEO, FIF, DNO, NDP, PXE, OLO, RYE, PXJ, SZO, CRAK, FXN, OLEM, WTIU, DDG, OILK, NANR, OILX, WTID, USOI, USOU, USOD, FTXN, JHME, ERYY, ERGF, OILD, OILU, USAI
    • General Electric (GE -2.6%) shares slide deeper into the red after French power utility EDF (OTCPK:ECIFF, OTCPK:ECIFY) says it shut down a GE turbine at its Bouchain power plant for a month due to a turbine blade issue that has shut down similar plants in the U.S.
    • EDF says it took the action over the weekend after GE said last week it had halted four of its turbines at Exelon facilities in Texas when one of them suffered a blade failure.
    • “The [Bouchain] plant will be closed until Oct. 22 to proceed with controls and maintenance as advised by GE," EDF says.
    • Public hearings begin today to review Teck Resources' (TECK -0.6%) proposed $20B, 260K bbl/day Frontier oil sands mine project in Alberta, a rare positive sign for Canada's oil sands industry.
    • "We believe the long-term outlook for the global oil market is favourable for projects like Frontier," says Doug Brown, Teck's director of public affairs. "Given the current project timing, and the future demand we see, we think it's a strong project to move ahead."
    • Teck believes the oil sands industry slowdown should mean construction and operating costs will be lower than during the boom years and the company should be able to integrate the latest and most efficient technologies.
    • But Teck's estimates suggest the strip mine project will cost ~$80K per flowing barrel of oil, which is much higher than the $40k-$50K estimated to build a new steam-driven thermal oil sands project, says Kevin Birn, VP of North American crude oil markets for IHS Markit.
    • Frontier could be a financial stretch for Teck, as the estimated $20B price tag would make the project more expensive than Teck’s $18B market cap.
    • Hess (HES -0.1%) has no intention to sell its assets in Asia, as the region provides steady cash flow and a stable political environment, President and COO Greg Hill tells Reuters.
    • While Hess sold assets in Thailand and Indonesia a few years ago as it saw little growth there, Southeast Asia still plays a key role in its portfolio, Hill says, noting that the company supplies 25% of gas for peninsular Malaysia.
    • Hess has a collection of gas fields in the North Malay Basin offshore Malaysia and in the Malaysia-Thailand Joint Development Area as a 50-50 partner with Petronas.
    • Reuters reported last month that Hess' Southeast Asian offshore gas assets, estimated to be worth as much as $5B, had attracted takeover interest.
    • Chesapeake Energy (CHK +0.1%) edges higher despite receiving a downgrade to Hold from Buy with a $5 price target by SunTrust analyst Neal Dingmann, who says the company's turnaround could take longer than expected.
    • Dingmann thinks CHK is approaching an inflection point where cash flow will begin to outpace spending but the turnaround could be "a 2020 and 2019 event."
    • "Though we believe [net asset value] remains strong and [Chesapeake] has made strides reducing debt by decreasing spending/executing a number of non-core asset sales, leverage remains higher than the peer group and a likely outspend in the next few quarters," Dingmann writes.
    • Shares have surged 17% during a five-session winning streak through yesterday but are still 4.7% lower over the past three months.
    • Denison Mines (DNN +2.8%) says it has selected the low-cost in-situ recovery mining method for the development of the high-grade Phoenix deposit at its flagship Wheeler River uranium project in Saskatchewan, marking the first deposit identified for ISR mining in Canada’s Athabasca basin.
    • ISR is considered the world's lowest-cost uranium mining method, and DNN says using it for the Phoenix deposit yields an estimated operating cost of C$4.33/lb. (US$3.33/lb.) of uranium oxide.
    • Combined with the Gryphon deposit, which is seen as complementary to Phoenix and designed as an underground mining operation, DNN estimates the Wheeler River project to have mine production of 109.4M lbs. of uranium oxide over a 14-year mine life, with a base case pre-tax net present value of $1.31B, an internal rate of return of 38.7%, and initial pre-production capex of $322M.
    • PG&E (PCG -0.6%) says it wants the U.S. government to keep its current auto emission standards, which it says is critical to advance the adoption of electric cars.
    • The California utility plans to spend $360M to support electric car charging infrastructure and seeks “a stable environment for our investors and customers,” it said Monday at a hearing in Fresno to discuss a federal proposal to freeze fuel efficiency requirements for autos at 37 mpg in 2020 instead of rising to 47 mpg by 2025 under Obama administration regulations.
    • “Transportation electrification is a key element of PG&E business strategy,” PG&E told the hearing.
    • Helmerich & Payne (NYSE:HP) jumps at the open after B. Riley FBR upgrades shares to Buy from Neutral and raises its price target to $83 from $68, citing valuation as well as HP's technology and super spec strategy.
    • The firm foresees HP reaping the rewards from a proven growth strategy for a U.S. super-spec land drilling market with bullish cyclical and secular dynamics, and potential earnings upside that could be generated by HP's AutoSlide automated directional drilling service, which is set for commercial launch in H1 2019.
    • In a full catch-up for CY Q2 results and guidance as well as recent land drilling market trends, B. Riley raises its outlook for EBITDA and EPS for FY 2018 and 2019 from $608M/$0.02 and $795M/$1.28 to $625M/$0.13 and $901M/$1.95.
    • Clearway Energy (CWEN, CWEN.A) -2.8% pre-market after commencing a public offering of more than 3.9M class C common shares to help fund its acquisition of the 527 MW Carlsbad natural gas fired project in California.
    • Earlier this month, CWEN priced a $600M offering of senior notes due 2025, with part of the proceeds directed to help fund the Carlsbad acquisition.
    • Global Infrastructure Partners recently completed its acquisition of NRG Energy's interest in NRG Yield, which then changed its name to Clearway Energy.
    • Basic Energy Services (NYSE:BAS) says its board rejected the unsolicited merger proposal from Key Energy Services (NYSE:KEG), saying only that the deal is not in the best interests of the company and its shareholders.
    • Key proposed a stock-for-stock combination at a fixed exchange ratio of 0.733x shares of Key for each share of Basic, which it said represented $9.80 per Basic share based on Key’s 10-day volume weighted average closing price of $13.36 as of Sept. 19.
  • Monday, September 24, 2018
    • The fate of the last nuclear plant being built in the U.S. remains uncertain, as the co-owners of Georgia's Vogtle plant agreed to another deadline extension until 5:00 p.m. ET Tuesday after one sought to impose conditions to control costs.
    • Oglethorpe Power, one of the three owners, says it voted to continue construction on the project and agree to a recent $2.2B increase in the projected cost if lead partner Southern Co. (NYSE:SO) could provide a cost cap or other fiscal protection against additional cost overruns.
    • The project is now expected to cost more than $27B, more than twice the original estimate, and Oglethorpe says additional costs should be shouldered by Southern and its shareholders.
    • While Southern supports moving forward with Vogtle, it is not certain if the utility would agree to the conditions or seek a different deal.
    • The third partner, Municipal Electric Authority of Georgia, voted earlier on Monday to proceed with the project without conditions.
    • The Oil and Gas Climate Initiative, which U.S. giants Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) joined just last week, commits to cutting methane emissions to an intensity of 0.25% of all fossil fuel the group of 13 member companies produces by 2025.
    • The pledge could be cut further to 0.2% intensity, which would echo targets set individually by group members BP, Royal Dutch Shell (RDS.A, RDS.B) and XOM to reduce methane emissions.
    • “Our aim is to work towards near zero methane emissions from the full gas value chain in support of achieving the goals of the Paris [Climate] Agreement,” the heads of the OGCI members say.
    • The OGCI represents nearly a third of global oil and gas production and also includes France’s Total (NYSE:TOT) as well as national oil companies of China, Mexico, Brazil and Saudi Arabia.
    • Basic Energy Services (NYSE:BAS+6.7% after-hours as Key Energy Services (NYSE:KEG) proposes an all-stock merger at a fixed exchange ratio of 0.733x shares of KEG for each share of BAS.
    • Under the deal terms, KEG shareholders would own ~51% of the combined company and BAS shareholders would own 49%, which KEG says represents a 15% premium to BAS's share price based on the volume-weighted average closing price of the preceding 10 market sessions.
    • KEG says the pro forma combined company would have estimated 2019 revenue of $1.8B and EBITDA of more than $275M, including the impact of estimated synergies, with a run-rate of $65M.
    • CenterPoint Energy (NYSE:CNP) -4.5% after-hours as it commences concurrent public offerings of $1.5B in common shares and $750M in depositary shares, with an underwriters option to purchase up to an additional $225M of common shares and up to an additional 2.25M depositary shares.
    • CNP says it plans to use the net proceeds to finance part of the cash consideration in its pending merger with Vectren (NYSE:VVC).
    • Dominion Energy (NYSE:D) agrees to sell its interests in three merchant electric generation assets in two separate transactions for $1.32B.
    • Dominion says it is selling the Fairless Power Station, a 1,240 MW combined-cycle gas turbine in Pennsylvania; the Manchester Street Power Station, a 468 MW combined-cycle gas turbine in Rhode Island; and its 25% stake in Catalyst Old River Hydroelectric, which owns a 192 MW hydroelectric generating station in Louisiana.
    • Dominion says the sales complete the credit improvement initiatives announced earlier this year, although it is still evaluating its 50% interest in the Blue Racer Midstream joint venture.
    • The Municipal Electric Authority of Georgia, one of the owners of the only remaining nuclear power plant being built in the U.S., votes to proceed with construction of the Vogtle project.
    • Southern Co.’s (SO -0.4%) Georgia Power unit owns 45.7% of the plant, while Oglethorpe Power owns 30% and MEAG holds 22.7%; Oglethorpe also is expected to vote today on whether to stay in the project.
    • Georgia Power, which has said it wants to move forward, said earlier this year that costs had climbed by $2.2B, which triggered a requirement that the other major owners vote on whether to proceed.
    • The partners have come under criticism from power customers and others who say the project - which is now expected to cost at least $27B, more than twice the original estimate - has become a boondoggle that will cause higher utility rates for years.
    • Siemens (OTCPK:SIEGY +0.9%) says CEO Joe Kaeser met Iraq Prime Minister Al-Abadi on Sunday to discuss a proposal to expand the country’s power production by 11 GW of capacity over four years, boosting Iraq’s capacity by nearly 50%.
    • Siemens does not provide financial information, but such a contract would be worth several billion euros based on previous comparable deals.
    • Iraq has a wide gap between electricity consumption and supply, with peak demand in the summer of ~21 GW, far exceeding the 13 GW the grid currently provides.
    • In 2015, Siemens signed an €8B ($9.4B) deal with Egypt to supply gas and wind power plants to add 16.4 GW of capacity to the country’s power grid, in the company’s single biggest order.
    • Enable Midstream Partners (ENBL -1.4%) says it plans to develop the 165-mile Gulf Run natural gas pipeline, designed to link its existing transportation infrastructure to liquefied natural gas production and export terminals on the U.S. Gulf Coast; cost estimates are not provided.
    • ENBL says the project is backed by an agreement with an unnamed cornerstone shipper for a 20-year, 1.1B cf/day of firm capacity service.
    • ENBL launches a non-binding open season for the project through Oct. 26 to gather additional interest for firm transportation capacity; Gulf Run is expected to be placed into service in 2022.
    • Royal Dutch Shell's (RDS.A, RDS.B) final investment decision on its proposed LNG Canada that would export as much as 26M tons/year of liquefied natural gas to Asia - making it potentially Canada’s largest-ever infrastructure project - will not be affected by the Trans Mountain pipeline debacle, says Andy Calitz, the top executive for the project.
    • “The overall conditions for LNG Canada to go ahead in 2018 are quite good,” Calitz tells Financial Post. “That is, and feels, so very different to 2016 when the project was delayed.”
    • Calitz says that since 2016, the project has become more competitive, reducing by 6% the price at which a unit of gas can be delivered to Asia from its proposed site in Kitimat, B.C., and global LNG demand is booming, particularly from China and other Asian nations.
    • Shell and its four partners - Mitsubishi, Malaysia’s Petronas, PetroChina (NYSE:PTR) and Korea Gas - are set decide whether to build the complex by the end of this year.
    • Duke Energy (DUK -0.2%) says water quality tests on the Cape Fear River in North Carolina near its flooded Sutton Power Plant show elevated levels of arsenic and heavy metals downstream from last week's dam breach of one of the plant’s coal ash containment ponds.
    • But levels remain “well within the rigorous state water quality standards in place to protect the environment,” DUK says; for example, the highest test result for arsenic was 0.00111 mg/liter of water, well below the 0.05 mg limit set in state standards.
    • DUK says it cannot yet categorically rule the possibility that some coal ash made its way into the Cape Fear River "but the important thing right now is that the water quality has not been harmed."
    • Also, DUK says both nuclear units at its Brunswick plant near Wilmington, N.C., returned to service over the weekend after shutting for a week during Hurricane Florence.
    • Shareholders of Marathon Petroleum (MPC +3.1%) and Andeavor (ANDV +2.9%) have voted to approve a merger to create the largest U.S. oil refiner, surpassing Valero Energy (VLO +3.4%).
    • MPC, currently the second largest U.S. refiner, will acquire ANDV, ranked no. 5, in a deal valued at $35.6B including debt.
    • Separately, two refineries owned by ANDV are among six with direct access to oil out of the Permian Basin that are making margins above $15/bbl ($9M/day) when processing West Texas Intermediate, West Texas Sour or a mix of the two, according to a Morningstar report.
    • The refineries also include one each run by VLO, HollyFrontier (HFC +5.1%), Delek US Holdings (DK +2.6%), and a joint venture by Philips 66 (PSX +1.8%) and Cenovus Energy (CVE +2.9%).
    • Plains All American (PAA, PAGP) will begin operations to expand its Sunrise oil pipeline in west Texas on Nov. 1, according to a filing with the Federal Energy Regulatory Commission, helping to ease a bottleneck that has weighed on Midland crude prices for months.
    • PAA this month began filling its extended Sunrise pipeline, which when completed will add 500K bbl/day from Midland to Wichita Falls, Tex., with connections to the main U.S. crude storage hub in Cushing, Okla.
    • By Oct. 31, Sunrise will be full and “fully operational and capable of providing transportation services” the next day, according to the Aug. 31 filing that has not been widely circulated; PAA previously said it hoped to start shipping crude in Q4.
    • The pipeline will be capable of transporting 360K bbl/day by Q1 2019, enough new capacity that Permian producers can expand production over the following six months, according to analysts at East Daley Capital Advisors.
    • Pembina Pipeline (NYSE:PBA) says it is raising its FY 2018 adjusted EBITDA guidance to $2.75B-$2.85B from $2.65B-$2.75B previously, citing strong YTD results.
    • PBA also says it will develop $120M worth of additional pipeline and terminalling infrastructure in the Wapiti region in Alberta and in northeastern British Columbia in conjunction with incremental volume commitments from customers on the Peace pipeline.
    • "We are seeing increased throughput on our conventional pipelines and fractionators, strong results from the assets acquired previously from Veresen and higher marketing revenues due to widening frac spreads," says CFO Scott Burrows.
    • Tullow Oil (OTCPK:TUWLF, OTCPK:TUWOY) says it has plugged and abandoned its Cormorant-1 exploration well in offshore Namibia after finding "non-commercial" hydrocarbons; it was the company sole 2018 exploration well.
    • But Tullow also says data gathered in the project indicated drilling could be successful in another attempt, saying "gas readings while drilling continue to support the concept that there is a working oil system in the area."
    • "Most investors are likely to turn their attention to the next potential catalyst - the completion of the Uganda farm-out deal," RBC analysts say; Tullow has said it would reach final investment decisions on its onshore projects in Uganda by year-end 2018 and in Kenya next year.
    • Total (NYSE:TOT) says it made a major gas discovery at its Glendronach prospect off the coast of the Shetland islands in the U.K. North Sea.
    • TOT says preliminary tests on the discovery confirm recoverable resources estimated at ~1T cf; it drilled a well to a final depth of 4,312 meters and encountered a gas column of 42 meters of net pay in a high quality Lower Cretaceous reservoir.
    • “Glendronach is a significant discovery for Total which gives us access to additional gas resources in one of our core areas and validates our exploration strategy,” says Arnaud Breuillac, head of TOT’s Exploration & Production division.
  • Saturday, September 22, 2018
    • Nigeria's two main oil unions have prepared their members for possible nationwide industrial action over a staffing dispute with Chevron (NYSE:CVX).
    • They accuse the U.S. oil major of attempting to sack thousands of workers in violation of their contracts.
    • Nigeria, an OPEC member, is Africa’s largest oil producer and crude sales make up around two-thirds of government revenues.
  • Friday, September 21, 2018
    • The U.S. State Department issues an environmental assessment of a revised route for TransCanada's (NYSE:TRP) Keystone XL pipeline that concludes it would not harm water or wildlife.
    • Implementing the revised route would have “no significant direct, indirect or cumulative effects on the quality of the natural or human environments," says the nearly 340-page draft review.
    • A federal judge in Montana last month ordered the State Department to conduct the review of Keystone XL's revised route to take into account new information relevant to a permit it issued for the pipeline last year.
    • RBC analyst Robert Kwan says the draft review is a “positive step” for Keystone XL.
    • TRP CEO Russ Girling said last month that the company could make a final investment decision on the project late this year or early 2019, pending regulatory approvals and court challenges.
    • The largest coal-fired plant in the western U.S. suffered a new setback this week in an effort to keep the plant running until 2040, as Middle River Power said it would not move forward with the purchase of the Navajo Generating Station in Arizona.
    • Peabody Energy (NYSE:BTU), which supplies NGS with its coal, has been looking for buyers to take ownership after most of its original owners opted to sell the plant last year; the federal government owns a 25% stake.
    • While Middle River did not specify the developments had led to its change of heart, coal facilities continue to close as they become less economical than cheap natural gas and renewables.
    • A number of groups, including the Trump administration, want the Navajo plant to stay open, but there are no takers yet for the power it produces.
    • The U.K.’s largest labor union Unite says its ~2,500 members working on 106 North Sea oil platforms covered by the Offshore Contractors Association will vote on a possible strike action.
    • Unite members will be asked whether they want to support industrial action and action short of striking, such as an overtime ban.
    • The move comes after workers rejected a revised pay offer by the OCA covering overall pay, terms and conditions following a consultative ballot in July; the workers are seeking a 4% basic pay and allowances increase.
    • Potentially related tickers include RDS.A, RDS.B, BP, TOT, EQNR
    • General Electric (GE -1.4%) extends yesterday's losses after saying the turbine blade oxidation which has idled four electric power units in Texas also affects another model, widening the potential impact.
    • GE says the oxidation, which recently caused the shut downs at Exelon plants in Texas, also could occur in 9FB turbines, in addition to HA-Class turbines the company disclosed yesterday.
    • GE says the 9FB is “a legacy fleet that comprises less than 1% of the company’s global gas turbine fleet.”
    • Pacific Ethanol (PEIX -5.1%) gives back a chunk of yesterday's 18% surge after the Environmental Protection Agency introduced new transparency into a program that the renewable fuel company relies on.
    • The EPA created a website related to its Renewable Fuel Standard program, which now includes public disclosures of exemptions from the mandate - a step praised by corn growers - although the site still does not disclose the agency's standards for granting waivers.
    • Waivers over the past year cost corn growers and ethanol producers the opportunity sell 2.25B gallons of fuel, says Kevin Skunes, president of the National Corn Growers Association, adding that 11 new petitions for waivers are pending for 2018.
    • ETFs: PBW, QCLN, FUE, PUW, HECO
    • Exxon Mobil (XOM +0.4%) edges higher as RBC Capital reiterates an Outperform rating and $115 stock price target, saying new projects, higher oil prices and increased shareholder returns should spell better times ahead.
    • The reiteration follows XOM's four-day roadshow - unusual for XOM, which is attempting more investor outreach - and RBC's Biraj Borkhataria says he was encouraged that the company was so “candid” about past mistakes, including “harvesting” the portfolio in recent years while neglecting to build out a new pipeline, which led to peer-lagging cash generation and dwindling share repurchases.
    • Bears have argued that XOM lacks near-term catalysts, but Borkhataria is bullish, arguing that 2018 will be a trough year for both upstream volumes and cash generation but followed by “material growth” into 2019.
    • PG&E (PCG +0.4%), Edison International (EIX +1.3%) and Sempra Energy (SRE +1.3%) all move higher after California Gov. Brown signs legislation to strengthen wildfire prevention and recovery.
    • Senate Bill 901, recently passed by the state legislature, boosts California’s forest management activities, updates requirements for the maintenance and operation of utility infrastructure to reflect changing climate conditions, and protects ratepayers and utility workers.
    • The legislation allows utilities to issue bonds to help pay wildfire damages, with a surcharge paid for by customers to help cover interest payments.
    • Antero Resources (AR -3.6%) is sharply lower as BMO Capital downgrades shares to Market Perform from Outperform with a $21 price target, saying the 17% rally since early September likely has run its course.
    • The rally in natural gas liquids prices is fully priced into AR shares and the stock lacks a clear long-term catalyst, says BMO's Philip Jungwirth.
    • Although AR is just 2.4% higher overall this year, the stock has outperformed dry gas peers EQT Corp. (EQT -0.5%) and Cabot Oil & Gas (COG +1.4%) by more than 20% YTD, and Jungwirth believes AR is now valued in-line with the rest of the Marcellus group.
    • Big oil companies like Chevron (NYSE:CVX) are using their size to their advantage in new shale drilling ventures in places such as Canada, according to a WSJ analysis.
    • CVX is laying the groundwork for what it calls a “factory model” for shale drilling, master planning an entire region of small shale wells by locking up labor, building infrastructure and securing sand and other needed materials, all at once.
    • Shale drilling has run into growing pains in places such as the Permian Basin, as producers struggle with pipeline bottlenecks and rising labor and material costs.
    • Big oil companies seeking to re-create the U.S. shale boom in countries including Canada and Argentina are trying to avoid such problems by managing shale sites in concert to prevent logistical difficulties and streamline operations, similar to the way they run traditional oil megaprojects.
    • Already in Texas, evidence is mounting that larger companies such as CVX and Exxon Mobil (NYSE:XOM) are weathering the bottlenecks and rising costs better than smaller rivals while still increasing production because they have the economies of scale and wherewithal to develop their own solutions to the problems.
    • Primoris Services (PRIM +1.6%) is higher after saying it has resumed work on the Atlantic Coast Pipeline project after the Federal Energy Regulatory Commission recently allowed the resumption of activities.
    • Winter weather is expected to curtail some activities in West Virginia later this year, but PRIM anticipates that weather permitting, work in North Carolina will continue through the winter months.
    • PRIM estimates that during the five weeks impacted by the FERC stop work order, its ACP-related revenue was ~$35M less than originally planned.
    • Legacy Reserves (NASDAQ:LGCY) rises ~13% as the company completes its planned corporate reorganization.
    • LGCY transitions from an upstream MLP to a C-Corp structure for tax purposes, amid challenges faced by the oil market downturn.
    • The company holds a sizable acreage position in Permian Basin, and the new corporate structure will give flexibility to focus on developing its drillable land in the region.
    • Previously: Legacy Reserves unveils plan to become C-Corp (March 26)
    • Transocean (RIG +5.6%) shoots higher for a fourth straight session after Equinor (EQNR +0.7%) awards a six-well contract for use of the newbuild, harsh environment Transocean Norge semi-submersible rig.
    • The rig is expected to spend ~300 days drilling in the Norwegian Continental Shelf beginning in July 2019; the contract is valued at ~$89M.
    • EQNR says the deal is a part of a previously signed framework agreement between the two companies that saw use of the Transocean Spitsbergen rig, the company’s first rig to be included according to the framework terms, and Transocean Norge will be the second.
    • RIG shares have surged 15% this week after receiving multiple analyst recommendations (I, II).
    • Duke Energy (DUK -2.1%) slides on headlines that a dam has been breached at its Sutton plant in North Carolina and that coal ash may be flowing into the nearby Cape Fear River.
    • Hurricane Florence had caused floodwaters to overtop a dike at Sutton Lake, the 1,100-acre reservoir at DUK's Sutton Power Station near Wilmington, N.C., causing breaches in the dam on the south end of the lake which are flowing back into the river.
    • DUK activated an emergency alert at the plant yesterday, raising concerns of a potential breach.
    • Noble Corp. (NE +5.5%) is higher after announcing the purchase of a newbuild jack-up rig from Singapore's PaxOcean for $93.75M and securing an initial contract award for the rig.
    • NE says $33.75M of the $93.75M purchase price in cash, with the remainder seller-financed at a 4.25% interest rate paid in cash and 1.25% paid in kind over the term of the financing.
    • In connection with the purchase, NE says it has entered into a new drilling contract in the Middle East with a three-year primary term, plus a one-year option, with an expected start in early 2019.
    • NE also has an option for the purchase of a second newbuild CJ46 jack-up from PaxOcean.
    • Energy XXI (EGC +21.4%) says it continues to work toward closing its merger with affiliates of Cox Oil on Oct. 10.
    • EGC says it received the two-thirds stockholder approval required for shareholders to approve the merger.
    • The company also says the FTSE Russell 200 index began the process to remove its stock ahead of the merger close.
    • WildHorse Resource (WRD +2.8%) says it has executed and closed two separate acquisitions of a combined 20.3K net acres in the Eagle Ford and Austin Chalk shale plays in Texas, and lease another 10.7K acres nearby, for $43M.
    • WRD says the bolt-on acquisitions boost its total ownership in the Eagle Ford to more than 418K net acres.
    • WRD recently announced plans to spend ~$75M to build a sand mine to provide proppant for its fracking in the region and another $50M on an oil and produced water gathering pipeline system to transport production in the area and reduce its reliance on trucking.
    • Ur-Energy (NYSEMKT:URG) has priced public offering of 12,195,122 common shares and accompanying warrants to purchase up to 6,097,561 common shares, at a combined public offering price of $0.82 per common share and accompanying warrant.
    • Each whole warrant will have an exercise price of $1.00 and will expire three years from the date of issuance.
    • Underwriters over-allotment is an additional 1,829,268 common shares and warrants to purchase up to an aggregate of 914,634 common shares on the same terms.
    • The gross proceeds are expected to be $10M. Closing date is on or about September 25.
    • Net proceeds from the offering will be utilised to maintain and enhance operational readiness; additionally, proceeds may be used for working capital and general corporate purposes.
    • URG -9.97% premarket.
    • Repsol (OTCQX:REPYF, OTCQX:REPYY) -3% overseas after Spain's CaixaBank said it would sell its entire stake in the company by Q1 2019.
    • Caixa has a 9.4% stake in Repsol, worth more than €2.5B ($2.93B), according to Thursday's closing price.
    • Also, Caixa's Chairman Jordi Gual and CEO Gonzalo Gortazar have stepped down from Repsol's board.
    • Talos Energy (NYSE:TALO) says it has reached a preliminary agreement with Mexico's Pemex to evaluate whether the Talos-led consortium's oil discovery in the Gulf of Mexico extends into a neighboring Pemex block.
    • The deal, which covers territory in the shallow waters of the Gulf of Mexico, is the first of its kind for Pemex and will be in force for two years.
    • Last year, the consortium, which includes the U.K.’s Premier Oil (OTCPK:PMOIF) and Mexico’s Sierra Oil and Gas, said its Zama-1 well drilled in the Area 7 shallow water block confirmed the discovery of a deposit that could hold 1.2B-1.8B barrels of oil.
    • The project will be subject to a review by Mexico's incoming government led by president-elect Obrador.
    • SandRidge Energy (NYSE:SD) says interim President and CEO Bill Griffin will not be a candidate to continue with the positions on a permanent basis but will continue in the role s until a successor is appointed and will remain on the board.
    • SD ousted CEO James Bennett in February following pressure from activist investor Carl Icahn, who objected to Bennett's pay and the attempt to buy rival Bonanza Creek Energy.
    • SD has formed a four-member search committee to evaluate candidates to serve as permanent President and CEO and lead the execution of its growth plan announced during its strategic review process.
    • Peabody Energy (NYSE:BTU) agrees to acquire the Shoal Creek metallurgical coal mine from private coal producer Drummond Co. for $400M.
    • BTU says Shoal Creek represents the next phase of its initiative to upgrade its met coal platform, an adds ~2M tons/year of high quality hard coking coal sales that are expected to expand the company's met coal volumes and margins.
    • BTU says the mine, which serves Asian and European steel mills with high-vol A coking coal, sold 2.1M tons in 2017.
  • Thursday, September 20, 2018
    • Environmental groups file legal challenges asking the Fourth U.S. Circuit Court of Appeals to intervene in recent federal actions that cleared the way for construction to resume on the 600-mile Atlantic Coast Pipeline.
    • The groups contend the National Park Service and the U.S. Fish and Wildlife made rushed and inadequate findings in issuing a new right-of-way permit for construction across the Blue Ridge Parkway and an environmental opinion protecting endangered species.
    • Both new permits were developed within five weeks of previous decisions by the appeals court, which had ruled that construction could not continue until the agencies took actions on the matters, and the Federal Energy Regulatory Commission then allowed construction on the pipeline to resume in West Virginia and North Carolina.
    • A pipeline spokesperson says the agencies' actions address all issues raised by the court.
    • Atlantic Coast Pipeline is owned by Dominion Energy (NYSE:D), Duke Energy (NYSE:DUK) and Southern Co. (NYSE:SO)
    • Royal Dutch Shell (RDS.A, RDS.B) is in talks to sell its interest in the Caesar Tongo oilfield in Gulf of Mexico oilfield to Focus Oil, Bloomberg reports.
    • Shell has a 22.5% working interest in the field, with the rest owned by companies including field operator Anadarko Petroleum (NYSE:APC), Equinor (NYSE:EQNR) and Chevron (NYSE:CVX); a sale could value Shell’s stake at ~$1.3B, according to the report.
    • A sale could advance Shell’s attempts to dispose of mature assets to free up cash for shareholder returns, improve growth prospects and as well as help pay down debt after the company spent more than $50B buying BG Group in 2016.
    • Atlantic Power (NYSE:AT) agrees to acquire two biomass plants in South Carolina from EDF Renewables (OTCPK:ECIFY) for $13M.
    • Closing of the deal is expected to occur in Q3 or Q4 2019, following a restructuring of the plants' ownership structure by EDF Renewables after the end of relevant tax credit recapture periods.
    • The two plants, each with a capacity of 20 MW, have been in commercial operation since 2013; all output of the two plants is sold to utility Santee Cooper under power purchase agreements that run to 2043.
    • Late volatility in San Juan Basin Royalty Trust (SJT -4.5%) followed the release of Hilcorp’s revised 2018 capital spending plan, which now estimates Q4 capex of $662K; units closed -4.5%.
    • Hilcorp’s revised FY 2018 capex plan of $3.92M includes two facility projects and 17 well recompletions, vs. its initial capex estimate of $547K for SJT’s subject interests, which at that time included two facility projects and just seven well recompletions.
    • “The growth in production and increase in investment activity is due to Hilcorp finding high quality projects to pursue, even after the beginning of the year budget estimates were provided," Hilcorp tells SJT. "These projects were not identified by the previous operator."
    • Consolidated Edison (NYSE:ED) agrees to acquire Sempra Energy's (NYSE:SRE) U.S. non-utility operating solar assets, solar and battery storage development projects and a wind facility for $1.54B.
    • The sale comprises ~981 MW AC of operating renewable electric production projects in Nevada, Arizona, California and Nebraska, including SRE's 379 MW AC share of projects it owns jointly with ED subsidiaries; the projects have $576M of existing project debt.
    • ED says the deal will increase its utility-scale, renewable energy production portfolio to 2,600 MW AC, of which 85% is solar and 15% is wind.
    • Brazil's ANP oil regulator will approve an additional payment of 700M reais ($171M) to Petrobras (PBR +0.8%) for diesel subsidies, Reuters reports.
    • Earlier this week, ANP said it approved an 887M reais payment to the company, the first since the subsidy program was introduced in May to end a truckers strike over high diesel prices.
    • The subsidy plan raised fears of further Brazilian government meddling in PBR and has prompted criticism over its low diesel pricing and lack of timely payment.
    • National Oilwell Varco (NOV -3.4%) tumbles more than 3% after Piper Jaffray analyst Bill Herbert lowers the company's estimates and stock price target to $52 from $53, while maintaining an Overweight rating.
    • Herbert cuts his H2 2018 and FY 2019 EBITDA estimates for NOV by 4%-5% and trims 2020-21 estimates by 1%-1.5%, citing flattening drilling and completions cadence in the Permian Basin, and in particular the "ensuing softening in frac utilization and pricing."
    • Separately, Morgan Stanley earlier this week initiated NOV at Equal Weight with a $50  price target, calling the company a "high-quality and well-managed business," although the capital equipment cycle likely will prove slower to accelerate.
    • Duke Energy (DUK +0.5%) has activated an emergency alert at the Sutton power plant in Wilmington, N.C., AP reports, as floodwaters from the nearby Cape Fear River overtopped a cooling lake at the facility and inundated Lake Sutton, raising concerns of a potential breach.
    • DUK says the dam containing Sutton Lake appears stable and company officials are monitoring it with helicopters and drones.
    • DUK says Sutton's ash basins currently are not affected by the incident, and the 625 MW natural gas combined cycle plant at Sutton continues to operate safely; Sutton's 575 MW coal plant was retired in 2013 and the units were demolished in 2017.
    • Next-day natural gas prices at the Permian Basin's Waha hub sank 60% to their lowest on record due to pipeline constraints limiting the amount of gas that can move out of the region.
    • Prices at the Waha hub fell nearly $1 to $0.66/MMBtu, vs. an average of $2.25/MMBtu so far this year, $2.71 in 2017 and a five-year average of $3.11.
    • Traders say Waha’s price plunge was caused by a pair of force majeures in Kinder Morgan’s (KMI -1.2%) NGPL system that are expected to restrict gas flows from west Texas to the Midwest.
    • Waha's spread vs. the Henry Hub benchmark in Louisiana rose to $2.45/MMBtu, its widest since November 2008 and far above the average YTD discount of $0.70, $0.27 in 2017 and a five-year average of $0.14.
    • ETFs: UNG, UGAZ, DGAZ, BOIL, KOLD, UNL, DCNG, GAZB
    • Egypt has signed a $352M contract with Siemens (OTCPK:SIEGY +1.3%) to manage three new power plants, each generating 4.8 GW of power, built to plug a gap in the country's electricity needs, the state news agency MENA reports.
    • Egypt Pres. al-Sisi opened the power stations in July, which were built by Siemens at a total cost of €6B ($7B).
    • Egypt's Electricity Holding Co. says Siemens would contract experts from the state-run firm to manage, operate and maintain the power stations after they receive training in Germany.
    • Royal Dutch Shell (RDS.A, RDS.B) has won a 15-year contract to provide liquefied natural gas to a Chinese company’s 441 MW power plant under construction in Panama, Reuters reports.
    • The $900M power project expects to begin taking LNG deliveries in 2020, according to the report, but the facility would require ~400K metric tons/year of LNG.
    • The Shell deal comes as China imposed retaliatory tariffs on $60B of U.S. goods, including a 10% tax on LNG imports.
    • General Electric (GE -3.2%) says four of its power turbines in the U.S. have been shut down due to a problem with turbine blades that was discovered at an electrical power plant in Texas owned by Exelon (EXC +0.6%).
    • Reuters says GE's emailed statement goes beyond the company's earlier acknowledgement that the problem had shut down only one turbine, known as the 7HA, but likely would affect others.
    • “We have 14 7HA units in service in the United States and 10 units are running and accumulating hours,” GE reportedly says in the email. “The process requires an impacted turbine to be shut down for a limited amount of time. We are working with Exelon and expect the units to return to service soon.”
    • Also: JPMorgan cuts General Electric PT to $10 (Sep. 20)
    • NiSource's (NI -0.5%) Columbia Gas of Massachusetts says it is withdrawing a plan to raise rates for consumers by $33.2M in the wake of the gas explosions and fires in three towns in the Boston area.
    • Earlier this year, Columbia Gas proposed a $44.5M distribution rate hike for its 321K customers beginning Nov. 1, which later was reduced under a settlement with the Massachusetts Attorney General's office; yesterday, the utility said it would pull the settlement, which still required approval from the state's Department of Public Utilities.
    • When it first proposed the rate hike in April, Columbia Gas told the DPU that it faced increased operating and maintenance costs to comply with federal and state safety regulations.
    • Range Resources (RRC +1.8%) is higher after B. Riley FBR upgrades shares to Buy from Neutral with a $22 price target, raised from $17, citing the firm's constructive outlook on natural gas prices.
    • Riley says RRC's multi-year effort to align its Appalachian infrastructure toward maximization of value and prices for its natural gas production uniquely positions the company to participate in the recent run-up in NGL prices, which the firm believes to be sustainable during the next 12-24 months.
    • The resulting increase in realized prices has the potential to materially increase free cash flows and re-rate RRC shares, Riley says, as it raises its forecasts for EPS and cash flow per share for H2 2018 through 2020.
    • North Africa-focused SDX Energy says it is in discussions with BP (BP +0.8%) to buy a "significant package of assets" in Egypt.
    • BP has no comment, but Reuters reported earlier this year that the company was seeking buyers for its stake in its 50-year-old oil and gas business in Egypt, then estimated to be worth ~$500M.
    • SPX says the acquisition would constitute a reverse takeover under AIM rules, thus its shares are suspended from London trading until a deal is announced.
    • Transocean (NYSE:RIG) +3.8% pre-market after RBC Capital upgrades shares to Outperform from Sector Perform with a $30 price target, doubled from the firm's previous $15 target, citing "definitive improvement" in offshore drilling activity and higher asset utilization leading to renewed offshore spending.
    • Hallead also lowers his implied enterprise value to expected EBITDA for 2022 multiple to 8.2x from 8.9x while raising his mid-cycle 2022 EPS target to $2.94 from $1.35 to reflect RIG's "meaningful and sustained pricing power."
    • RBC also upgrades Rowan (NYSE:RDC), Diamond Offshore (NYSE:DO) and Helmerich & Payne (NYSE:HP) to Outperform from Sector Perform.
    • RIG rose 4% yesterday after Wells Fargo upgraded the stock and Morgan Stanley named RIG one of its favorites among smaller caps in the offshore drilling sector.
    • Cnooc (NYSE:CEO) has sold access to its Yuedong liquefied natural gas terminal to state-owned Zhenhua Oil and others for the first time, in a move viewed as part of the Chinese government's plan to open up its gas sector.
    • Cnooc has sold LNG in auctions on the Shanghai exchange this year, but this is the first time it has auctioned space at a receiving terminal.
    • Other state-owned companies such as PetroChina (NYSE:PTR) have leased terminals to third-party users before in private deals, but the auction from Cnooc gave third-party players equal opportunity to bid for access.
    • Ballard Power Systems (NASDAQ:BLDP+9.8% pre-market after unveiling its newest zero-emission liquid-cooled fuel cell stack, the FCgen-LCS, at the IAA Commercial Vehicles Trade Fair and Convention in Hannover, Germany.
    • BLDP says the stack will be a core technology component of its eighth-generation power module portfolio for use in heavy duty motive applications - including buses, commercial trucks and trains - planned for launch in 2019, and other applications such as forklifts.
    • Among the benefits cited by the company of the FCgen-LCS compared to the current generation liquid-cooled fuel cell stack are an expected 40% reduction in total cost of ownership, Planned operating lifetime of more than 30K hours and a 33% increase in power density thus reducing physical stack size for a given amount of power.