Crude Climbs on Continued OPEC+ Oil Output Cuts
SECTOR COMMENTARY
Energy stocks are set to continue their recent upward momentum, gaining from improving oil price fundamentals, which have lifted benchmark prices to one-year highs, while an increasing industry focus on returns, cash flow and ESG-awareness are also aiding. Earnings across the sector continue to rollout.
WT crude oil prices extended gains on Thursday after the OPEC+ alliance of producers stuck to its reduced output policy and U.S. crude stocks fell, with optimism over a new U.S. pandemic relief bill adding further price support. "Supporting factors outweigh negative developments at the moment," said PVM Oil Associates analyst Tamas Varga, citing high compliance with OPEC+ production cuts and its declared target to accelerate stock depletion. "The extra 1 million barrel per day (bpd) Saudi cuts that started this month imply further stock draws until at least the end of the first quarter," Varga added.
Natural gas futures edged up on Thursday on forecasts for much colder weather in mid-February ahead of a federal report expected to show last week's storage withdrawal was bigger than usual. That small increase comes despite forecasts for a little less heating demand this week and next than previously expected. Analysts forecast U.S. utilities pulled 192 bcf of gas from storage during the colder than normal week ended January 29. That compares with a decrease of 155 bcf in the same week last year and a five-year (2016-2020) average withdrawal of 146 bcf.
INTERNATIONAL INTEGRATEDS
Reuters - BP's output at its projects in Azerbaijan totalled 23.6 million tonnes in 2020, the company said on Thursday.
Press Release - Royal Dutch Shell reported income attributable to Royal Dutch Shell plc shareholders amounted to a loss of $4.0 billion for the fourth quarter 2020, which included post-tax impairment charges of $2.7 billion and charges of $1.1 billion mainly due to onerous contract provisions. Adjusted Earnings were $0.4 billion for the fourth quarter 2020, reflecting lower realised prices for oil and LNG as well as lower production volumes and realised refining margins compared with the fourth quarter 2019. Total dividends distributed to Royal Dutch Shell plc shareholders in the quarter were $1.3 billion. The Board expects that the first quarter 2021 interim dividend will be US$0.1735 per share, an increase of ~4% over the US dollar dividend for the fourth quarter 2020.
Press Release - Total joins the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping as a strategic partner and accelerates its R&D program for carbon neutral shipping solutions in line with its commitment to work together with its key customers to get to Net Zero.
CANADIAN INTEGRATEDS
Press Release - Suncor Energy delivered strong operational results during the fourth quarter. Suncor’s net loss was $168 million ($0.11 per common share) in the fourth quarter of 2020, compared to a net loss of $2.335 billion ($1.52 per common share) in the prior year quarter. In addition to the factors impacting operating (loss) earnings, the net loss for the fourth quarter of 2020 included a $539 million unrealized after-tax foreign exchange gain on the revaluation of U.S. dollar denominated debt, a $423 million non-cash after-tax asset impairment charge and a $142 million after-tax transportation provision related to the Keystone XL pipeline project. The net loss in the prior year quarter included $3.352 billion of non-cash after-tax asset impairment charges partially offset by a $235 million unrealized after-tax foreign exchange gain on the revaluation of U.S. dollar denominated debt. Subsequent to the fourth quarter of 2020, Suncor’s Board of Directors approved a quarterly dividend of $0.21 per common share.
U.S. E&PS
KeyBanc downgraded Murphy Oil to ‘Sector Weight’ from ‘Overweight.’
Press Release - Northern Oil and Gas announced that it has entered into a definitive agreement to acquire certain non-operated assets in the Appalachian Basin from the Seller. The Seller is a subsidiary of Reliance Industries, Ltd. Total consideration to be paid to Seller, net to Northern, consists of $175 million in cash and approximately 3.25 million warrants to purchase shares of Northern’s common stock at an exercise price of $14.00 per share. The cash portion of the consideration is subject to typical closing and post-closing adjustments. The transaction has an effective date of July 1, 2020 and is expected to close in April 2021, subject to the satisfaction of customary closing conditions.
Press Release - Northern Oil and Gas announced that it has commenced an underwritten public offering of 12,500,000 shares of its common stock. The Company intends to grant the underwriters a 30-day option to purchase up to an additional 1,875,000 shares of its common stock. The Offering is subject to market and other conditions, and there can be no assurance as to whether or when the Offering may be completed, or as to the actual size or terms of the Offering.
Press Release - Northern Oil and Gas announced that it intends to offer for sale in a private placement under Rule 144A and Regulation S of the Securities Exchange Act of 1933, as amended, to eligible purchasers, $500.0 million in aggregate principal amount of new senior notes due 2028.
OILFIELD SERVICES
Press Release – KBR announced that a subsidiary of CVR Energy is proceeding with the next phase of the KBR Solid Acid Alkylation Technology (K-SAATTM) project for its refinery in Wynnewood, Oklahoma.
D.A. Davidson downgraded KBR to ‘Neutral’ from ‘Buy.’
Press Release – Patterson-UTI Energy reported financial results for the three months and year ended December 31, 2020. The Company reported a net loss of $107 million, or $0.57 per share, for the fourth quarter of 2020, compared to a net loss of $85.9 million, or $0.44 per share, for the fourth quarter of 2019. Revenues for the fourth quarter of 2020 were $221 million, compared to $492 million for the fourth quarter of 2019. In addition, the Company declared a quarterly dividend on its common stock of $0.02 per share, payable on March 18, 2021, to holders of record as of March 4, 2021.
Press Release - Patterson-UTI Energy reported that for the month of January 2021, the Company had an average of 67 drilling rigs operating.
Press Release – PGS reported Segment Revenues and Other Income of $595.9 million, as compared to $880.1 million in 2019. Segment EBITDA was $397.7 million, compared to $556.1 million in 2019. As Reported revenues and Other Income according to IFRS was $512.0 million and an EBIT loss was $188.0 million, compared to $930.8 million and EBIT of $54.6 million, respectively, in 2019. In addition, PGS expects the improved oil price, a likely global recovery from the Covid-19 pandemic, and the effects of deferred projects from last year to support a gradual increase of demand for seismic services in 2021. Despite the impacts of the Covid-19 crisis, energy consumption is expected to continue to increase longer term with oil and gas being an important part of the energy mix as the global energy transition evolves. Offshore reserves will be vital for future supply and support demand for marine seismic services.
Press Release - TechnipFMC announced the timing and details regarding its previously announced separation into two industry-leading, independent, publicly traded companies: TechnipFMC, a fully integrated technology and services provider; and Technip Energies, a leading engineering and technology player. The transaction is structured as a spin-off of a majority stake in TechnipFMC’s Technip Energies segment in the form of a share dividend pursuant to which holders of TechnipFMC shares will receive shares of Technip Energies.
REFINERS
Reuters - Marathon Petroleum plans to shut the gasoline-producing fluidic catalytic cracker 3 (FCC 3) at its 585,000 barrel-per-day (bpd) Galveston Bay Refinery in Texas City, Texas, in mid-February for a planned overhaul, said sources familiar with plant operations on Wednesday. The 140,000-bpd FCC 3, 31,500-bpd alkylation unit 3 (Alky 3) and 75,000-bpd Ultraformer 3 (UU 3), along with a hydrotreater, will shut for the overhaul, scheduled to finish by the end of March, the sources said.
MLPS & PIPELINES
Press Release – NuStar Energy announced its fourth quarter 2020 earnings results.NuStar's fourth quarter 2020 adjusted net income was $50 million compared to net income of $78 million in 2019 and adjusted EPU were $0.13 per unit compared to EPU of $0.40 per unit in 2019. Adjusted EBITDA for the quarter was $181 million, compared to EBITDA of $196 million in the fourth quarter of 2019, and adjusted DCF was $63 million, compared to DCF of $107 million in the fourth quarter of 2019. The distribution coverage ratio to common limited partners from continuing operations for the fourth quarter was 1.44 times. In addition, it expect NuStar’s 2021 EBITDA to be comparable to its 2020 results, less the EBITDA associated with the Texas City terminals, which it sold in December. With regard to 2021 capital spending estimates, it expect to spend $140 to $170 million on strategic capital, all of which will be funded by internally generated cash flows.
Press Release - Pembina Pipeline announced that its Board of Directors declared a common share cash dividend for February 2021 of $0.21 per share to be paid, subject to applicable law, on March 15, 2021 to shareholders of record on February 25, 2021. This dividend is designated an "eligible dividend" for Canadian income tax purposes. For non-resident shareholders, Pembina's common share dividends should be considered "qualified dividends" and may be subject to Canadian withholding tax.
Press Release - SunCoke Energy reported fourth quarter and full-year 2020 results.Revenues decreased $87.1 million and $267.3 million for the fourth quarter and full-year 2020, respectively, primarily reflecting lower sales volumes in both Domestic Coke and Logistics segments. Net loss attributable to SXC for the fourth quarter 2020 increased $3.6 million from the same prior year period. Net income attributable to SXC for the full-year 2020 increased $156.0 million as compared to 2019 driven largely by the absence of non-cash impairment related charges at Logistics, net of taxes, of $174.8 million recorded during the third quarter of 2019. In addition, domestic coke total production is expected to be approximately 4.1 million tons. Consolidated Adjusted EBITDA is expected to be $215 million to $230 million. Capital expenditures are projected to be approximately $80 million.
Press Release - SunCoke Energy announced that its Board of Directors declared a cash dividend of $0.06 per share of the Company's common stock to be paid March 1, 2021 to stockholders of record at the close of business on February 19, 2021.
MARKET COMMENTARY
U.S. stock index futures edged higher as investors focused on corporate earnings and economic recovery. Weekly jobless claims totaled 779,000, which was below the estimate of 830,000. European shares rose on hopes of a faster global economic recovery, while most Asian shares ended lower on concerns over China’s policy tightening prospects. The dollar strengthened on improved economic outlook, while gold and silver prices slipped.
NASDAQ ENERGY TEAM THOUGHT LEADERSHIP
- 1/8/20 – CNBC’s Squawk Alley: Oil market reaction to US-Iran tensions
- 1/8/20 – Bloomberg Day Break – Steady escalation of US-Iran tensions
- 12/5/19 – Bloomberg Balance of Power – OPEC's Limited Efficacy
- 9/17/19 – Oil's New Risk Premium Discussion on CNBC TV
- 9/16/19 – Discussion on Bloomberg TV about Impact of Abqaiq Attack
Nasdaq Advisory Services Energy Team is part of Nasdaq's Advisory Services – the most experienced team in the industry. The team delivers unmatched shareholder analysis, a comprehensive view of trading and investor activity, and insights into how best to manage investor relations outreach efforts. For questions, please contact Tamar Essner.
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