Crude Dips on Renewed COVID Restrictions in China
The energy sector is poised for a lower start, pressured by weakness in the underlying commodities and in the major equity indices. U.S. stock index futures fell as gloomy forecasts from megacaps Amazon and Apple heightened fears that the Federal Reserve's aggressive interest rate hikes were finally slowing the economy and could hammer corporate earnings.
In earnings news, Chevron Corp. reported third-quarter net income of $11.23 billion. The San Ramon, California-based company said it had profit of $5.78 per share. Earnings, adjusted for non-recurring gains, came to $5.56 per share, topping Wall Street expectations. The oil company posted revenue of $66.64 billion in the period, which also beat Street forecasts. Exxon Mobil Corp. reported third-quarter profit of $19.66 billion. On a per-share basis, the Irving, a Texas-based company said it had profit of $4.68. Earnings, adjusted for non-recurring gains, came to $4.45 per share, also topping expectations.
WTI and Brent crude oil futures are down in early trading after top crude importer China widened its COVID-19 curbs, though benchmarks were poised for a weekly gain on supply concerns and surprisingly positive economic data. The declines came after Chinese cities ramped up COVID-19 curbs on Thursday, sealing up buildings and locking down districts in a scramble to halt widening outbreaks. Limiting losses, however, was a strong rebound in U.S. gross domestic product in the third quarter, highlighting the resilience of the world's largest economy and oil consumer.
Natural gas futures are trading lower, but tracking higher on the week with Preliminary estimates for EIA storage week-ending today having a build of +95 to +105 Bcf.
BY SECTOR:
US INTEGRATEDS
Chevron reported earnings of $11.2 billion ($5.78 per share - diluted) for third quarter 2022, compared with $6.1 billion ($3.19 per share - diluted) in third quarter 2021. Included in the current quarter were pension settlement costs of $177 million. Foreign currency effects increased earnings by $624 million. Adjusted earnings of $10.8 billion ($5.56 per share - diluted) in third quarter 2022 compares to adjusted earnings of $5.7 billion ($2.96 per share - diluted) in third quarter 2021. Sales and other operating revenues in third quarter 2022 were $64 billion, compared to $43 billion in the year-ago period.
Exxon Mobil announced third-quarter 2022 earnings of $19.7 billion, or $4.68 per share assuming dilution. Third-quarter results included net favorable identified items of nearly $1 billion associated with the completion of the XTO Energy Canada and Romania Upstream affiliate divestments and one-time benefits from tax and other reserve adjustments, partly offset by impairments. Capital and exploration expenditures were $5.7 billion in the third quarter, bringing year-to-date 2022 investments to $15.2 billion, on track with full-year guidance of $21 billion to $24 billion. The Corporation declared a fourth-quarter dividend of $0.91 per share, payable on December 9th. The increase of $0.03 per share reflects confidence in strategy, businesses performance, and financial strength, and marks 40 consecutive years of annual dividend growth.
Cepsa and ExxonMobil Petroleum & Chemical BV have renewed their agreement for the manufacture, distribution and supply of ExxonMobil marine lubricants in Spain, Portugal and Gibraltar. The business relationship has been renewed for 10 years and expands the geographical scope of the collaboration to include distributing and supplying the lubricants in Morocco.
INTERNATIONAL INTEGRATEDS
Eni announced results for the third quarter of 2022. Group adjusted EBIT was €5.77 billion in the third quarter of 2022, in line with the previous quarter, despite weaker crude oil prices, sharply lower refining margins and unplanned production downtime and other issues, plus the reclassification of Azule Energy to associates. These effects were offset by continuing optimization initiatives and cost savings across all business lines. Group adjusted net profit in the third quarter of 2022 was €3.73 billion (€10.81 billion in the nine months of 2022), in line with the previous quarter (up by €8.2 billion in the nine months) reflecting a strong underlying performance and better results in equity-accounted entities. The Group adjusted tax rate, not considering a one-time Italian windfall taxation reported as special item, has stabilized at around 40%, driven by a better geographical mix of pre-tax profits, particularly in E&P.
Equinor delivered adjusted earnings of USD 24.3 billion and USD 6.72 billion after tax in the third quarter of 2022. Net operating income was USD 26.1 billion and the net income was reported at USD 9.37 billion. The Board of Directors has decided a cash dividend of USD 0.20 per share. Based on continued strong earnings in the quarter the Board of Directors has in addition decided to increase the extraordinary cash dividend from USD 0.50 per share to USD 0.70 per share for third quarter 2022. Furthermore, based on the strength of the brent price, balance sheet and the outlook for commodity prices, the Board of Directors has decided to initiate a fourth and final tranche of USD 1.83 billion of the 2022 share buy-back programme of USD 6 billion. The fourth tranche will commence on 31 October and will end no later than 27 January 2023.
The price of gas in Europe will remain high for years to come following the cuts in deliveries from Russia, the chief executive of Norway's Equinor said.
Petrobras informed that it has started the opportunity disclosure stage (teaser), regarding the sale of its entire shareholding, corresponding to 50% of the voting capital and 34.54% of the total capital, in the company METANOR S/A - Metanol do Nordeste (Metanor), headquartered in Camaçari, in the state of Bahia.
Brazil's central government posted a better-than-expected primary budget surplus in September, Treasury data showed, boosted by dividends from the state-owned oil company Petrobras and higher tax revenues.
Shell's outgoing Chief Executive Ben van Beurden will get one-year base salary of 1.42 million pounds ($1.64 million) as compensation after leaving the position at the end of the year, the oil giant said.
U.S. President Joe Biden blasted Shell for funneling profits to shareholders rather than lowering gas prices, after the British oil giant said it would boost its dividend and buy back shares.
Keppel Data Centres Holding Pte Ltd. and Shell Eastern Petroleum (Pte) Ltd have signed a Memorandum of Understanding to jointly study the feasibility of developing a low-carbon energy hub and microgrid system in Singapore.
TotalEnergies ENEOS and PT Gunung Raja Paksi Tbk (GRP), a member of Gunung Steel Group and one of the largest private steelmakers in Indonesia, announced the signing of power contracts to solarize the rooftops of a GRP production site in Cikarang, Jakarta. This will be one the largest solar projects in Indonesia and the largest solar rooftop in the world.
CANADIAN INTEGRATEDS
Imperial Oil reported net income of $2,031 million or $3.24 per share on a diluted basis, up from $908 million or $1.29 per share in the third quarter of 2021. Net income excluding identified items of $1,823 million in the third quarter of 2022, up from $908 million in the same period of 2021.
Imperial Oil announced that the Board of Directors, on the recommendation of a special committee of independent directors, has authorized the initiation of a substantial issuer bid pursuant to which the company will offer to purchase for cancellation up to $1,500,000,000 of its common shares. The company anticipates that the terms and pricing will be determined, and the Offer will commence, during the next two weeks and will be completed before the end of December 2022.
Imperial Oil declared a quarterly dividend of 44 cents per share on the outstanding common shares of the company, payable on January 1, 2023, to shareholders of record at the close of business on December 2, 2022.
U.S. E&PS
Denbury announced that its subsidiary, Denbury Carbon Solutions, LLC., has executed a 20-year definitive agreement to provide CO2 transportation and storage services to Lake Charles Methanol in association with LCM’s planned “blue” methanol project.
Occidental’s Low Carbon Ventures (OLCV) subsidiary and Natural Resource Partners L.P. , announced the execution of an agreement for the evaluation and potential development of a permanent carbon dioxide (CO2) sequestration hub located in southeast Texas. OLCV expects the development of the project will be completed by its subsidiary 1PointFive.
Pioneer Natural Resources reported financial and operating results for the quarter ended September 30, 2022. Pioneer reported third quarter net income attributable to common stockholders of $2.0 billion, or $7.93 per diluted share. These results include the effects of noncash mark-to-market adjustments and certain other unusual items. Excluding these items, non-GAAP adjusted income for the third quarter was $1.9 billion, or $7.48 per diluted share. Cash flow from operating activities for the third quarter was $3.0 billion.
Pioneer Natural Resources announced that its Board of Directors declared a quarterly base-plus-variable cash dividend of $5.71 per common share. The dividend is payable December 15, 2022, to stockholders of record at the close of business on November 30, 2022.
Pioneer Natural Resources announced the participation in two renewable energy projects that will supply low-cost, renewable power to the Company’s Permian Basin operations and the Texas electric grid.
For the quarter ended September 30, 2022, Southwestern Energy recorded net income of $450 million, or $0.40 per diluted share. Adjusting for the impact of the Company’s valuation allowance and other one-time items, adjusted net income (non-GAAP) was $360 million, or $0.32 per diluted share, and adjusted EBITDA (non-GAAP) was $824 million. Net cash provided by operating activities was $797 million, net cash flow (non-GAAP) was $765 million and free cash flow (non-GAAP) was $222 million.
Talos Energy announced that Talos Production, a wholly owned subsidiary of the Company, has successfully completed its previously announced consent solicitation with respect to its 12.00% Second-Priority Senior Secured Notes due 2026 to approve certain amendments to the indenture governing the Notes.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Baker Hughes announced that the Baker Hughes Board of Directors declared an increased quarterly cash dividend of $.19 per share of Class A common stock payable on November 18, 2022, to holders of record on November 7, 2022. The dividend increase reflects a 5.5% growth rate, or $.01, over the previous quarter’s dividend. Baker Hughes also announced that its Board of Directors authorized Baker Hughes Holdings LLC to repurchase up to $2 billion of additional common units, increasing its existing share repurchase authorization, which was announced in July 2021, by $2 billion to $4 billion. The Company will use the proceeds from the sale of its BHH LLC common units to repurchase its Class A shares. Baker Hughes has repurchased approximately $1.2 billion of Class A shares under the current share repurchase authorization as of September 30, 2022.
The Board of Directors of Matson declared a fourth quarter dividend of $0.31 per common share. The dividend will be paid on December 1, 2022 to all shareholders of record as of the close of business on November 10, 2022.
Minerals Technologies reported diluted earnings per share of $1.35, excluding special items, for the third quarter ended October 2, 2022, compared with $1.30 in the prior year. Reported diluted earnings per share were $0.41 compared with $1.22 in the prior year.
NOV reported third quarter 2022 revenues of $1.89 billion, an increase of 9 percent compared to the second quarter of 2022 and an increase of 41 percent compared to the third quarter of 2021. Net income for the third quarter of 2022 was $32 million, or 1.7 percent of sales, which included $63 million of Other Items. Operating profit was $55 million, or 2.9 percent of sales, and included $63 million of Other Items. Adjusted EBITDA increased sequentially to $195 million, or 10.3 percent of sales.
Oil States International reported net income of $2.1 million, or $0.03 per share, for the third quarter of 2022. Reported results included a gain of $6.1 million ($4.6 million after-tax, or $0.07 per share) recognized in connection with the settlement of a litigation matter. During the third quarter of 2022, the Company generated revenues of $189.4 million and Adjusted Consolidated EBITDA (Note A) of $22.0 million. These results compare to revenues of $181.8 million, a net loss of $5.1 million ($0.08 per share) and Adjusted Consolidated EBITDA of $17.0 million reported in the second quarter of 2022.
Select Energy Services announced that its Board of Directors declared a quarterly cash dividend of $0.05 per share of Class A common stock, to be paid on November 17, 2022 to holders of record as of the close of business on November 7, 2022. A comparable distribution of $0.05 per unit has also been approved to the unitholders of SES Holdings, LLC, which will be subject to the same payment and record dates. Select intends to pay regular quarterly dividends, with all future dividend payments subject to market conditions, capital availability and quarterly review and approval by its Board of Directors.
U.S. Silica Holdings announced net income of $32.1 million, or $0.41 per diluted share, for the third quarter ended September 30, 2022. The third quarter results were negatively impacted by $2.1 million pre-tax, or $0.02 per diluted share after-tax, of charges primarily related to merger and acquisition related expenses and optimization costs, partially offset by the gain on extinguishment of debt, resulting in adjusted EPS (a non-GAAP measure) of $0.43 per diluted share.
DRILLERS
Dril-Quip reported operational and financial results for the third quarter of 2022. Results for the third quarter of 2022 included: Revenue of $88.1 million for the third quarter of 2022, a decrease of $5.8 million from the second quarter of 2022 driven by unfavorable foreign exchange rate impacts, supply chain delays in downhole tools and reduced leasing revenues in subsea service; Net income of $15.2 million, or $0.45 earnings per share, an increase of $20.8 million, or $0.61 per share compared to the second quarter of 2022, due to the gain on sale of the Houston forge facility, lower income taxes, and lower restructuring costs in the period.
REFINERS
No significant news.
MLPS & PIPELINES
NuStar Energy L.P. announced that its Board of Directors has declared a third quarter 2022 common unit distribution of $0.40 per unit. The third quarter common unit distribution will be paid on November 14, 2022 to holders of record as of November 7, 2022. NuStar Energy L.P.’s Board of Directors also declared a third quarter 2022 Series A preferred unit distribution of $0.64059 per unit, a Series B preferred unit distribution of $0.57040 per unit and a Series C preferred unit distribution of $0.56250 per unit. The preferred unit distributions will be paid on December 15, 2022 to holders of record as of December 1, 2022.
NuStar Energy L.P. announced that Bill Greehey will step down from his position as NuStar’s chairman of the board and become chairman emeritus, effective immediately. The board of directors has elected Brad Barron, president and CEO, as the new chairman.
MARKET COMMENTARY
U.S. stock index futures tumbled as gloomy forecasts from megacaps Amazon and Apple heightened fears that the Federal Reserve's aggressive interest rate hikes were finally slowing the economy and could hammer corporate earnings. European shares fell, knocked by weaker commodity prices and mixed earnings reports. Japan's Nikkei closed lower as weakness on Wall Street and some poor domestic earnings results took a toll on sentiment. The yen weakened as the Bank of Japan held to its dovish stance. The U.S. dollar was higher, while gold was down. Oil prices fell after China, the world's top crude oil importer, widened its COVID-19 curbs, but were poised for a weekly gain on supply concerns ahead of Europe's pending cut-off of Russian imports. PCE and home sales data are scheduled for release.
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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