Crude Drops as Trump Tests Positive for COVID-19
SECTOR COMMENTARY
Energy stocks are set to extend yesterday’s losses, pressured by further declines in the underlying commodities and U.S. stock index futures which tumbled on the news that President Trump and the First Lady tested positive for COVID-19 overnight, sparking renewed fears of the impact of the virus. Adding to the negative sentiment, law makers have still not come to agreements on further fiscal stimulus while the September’s jobs report came in lower than expected, however, unemployment ticked lower.
Oil prices on both sides of the Atlantic are reacting to the news President Trump and the First Lady had tested positive for COVID-19 just 32 days before the election. Market uncertainty arising from that comes after WTI and Brent yesterday were down (3.7%) and (3.2%), respectively on a combination of failed coronavirus relief package talks, rising OPEC+ exports in September and reports more than half of OPEC+ nations required to provide production compensation plans have yet to do so.
Natural gas futures are also lower, weighed down by declines in the crude oil markets following yesterday’s weekly storage report that came in line with expectations. The 8-14 day forecasts continues to be above-seasonal. Shorter-term, demand today and into the weekend will improve on cooling demand in the West and heating demand in the Midwest with some locations at/below freezing.
U.S. INTEGRATEDS
Reuters - Chevron has resumed arbitration proceedings with Thailand to resolve a dispute over who should pay for removing offshore oil and gas platforms in the Erawan gas field, the company told Reuters.
Reuters - Vietnam's port city of Haiphong said authorities had approved a $5.09 billion liquefied natural gas power and terminal project due to be developed by Exxon Mobiland to start power generation in 2026-27. In a statement issued late on Thursday, the city's People's Committee said the power plant would have an initial capacity of 2.25 gigawatts (GW) and that would be expanded to 4.5 GW by 2029-2030. It said the project would also include a terminal with a capacity of six million tonnes of LNG per year.
INTERNATIONAL INTEGRATEDS
(Late Thursday) Reuters - The board of Brazil's Petrobras has approved an agreement to settle 4.3 billion reais ($762 million) of fines and interest relating to disputed tax payments, the company said in a securities filing. In the filing, Petroleo Brasileiro SA, as the company is formally known, said that it will pay 2 billion reais to the states of Rio de Janeiro and Espirito Santo as part of the deal. The agreement in Rio is contingent on the official publication of a relevant state law.
(Late Thursday) Reuters - Brazil's Supreme Court voted to allow state-run oil company Petroleo Brasileiro SA to sell eight refineries without the approval of Congress. The divestitures are expected to raise billions of dollars for Petrobras, as the company is commonly known, and are key for the company's debt reduction goals.
U.S. E&PS
(Late Thursday) Press Release - Devon Energy announced that it has completed the sale of its assets in the Barnett Shale to Banpu Kalnin Ventures (BKV). Devon received a cash payment of $320 million from BKV at closing, after adjusting for a $170 million deposit received in April and purchase-price adjustments that, among other things, allocate revenues and expenses based on a Sept. 1, 2019, effective date. The sale agreement with BKV provides Devon the opportunity for contingent cash payments of up to $260 million based upon future commodity prices, with upside participation beginning at either a $2.75 Henry Hub natural gas price or a $50 West Texas Intermediate oil price. The contingent payment period commences on Jan. 1, 2021 and has a term of four years. The contingent payments are earned and paid on an annual basis.
(Late Thursday) Press Release - EP Energy announced it has successfully completed its financial restructuring and emerged from Chapter 11 better positioned for the long-term with significantly reduced debt, a stronger balance sheet and enhanced financial flexibility. Through the financial restructuring process, EP Energy has reduced its pre-petition debt by approximately $4.4 billion. Pursuant to the Company's Amended Plan of Reorganization, EP Energy closed on a new $629 million senior secured reserve based loan facility from the Company's existing revolving loan lenders. The three-year RBL facility is backed by a $650 million borrowing base supported by the Company's oil and gas reserves. EP Energy is well-capitalized and is moving forward with over $200 million of available liquidity and approximately $400 million of debt net of unrestricted cash.
(Late Thursday) Press Release - Marathon Oil announced that its board of directors has declared a dividend of 3 cents per share on Marathon Oil Corporation common stock. The dividend is payable on Dec. 10, 2020 to stockholders of record on Nov. 18, 2020. Consistent with prior announcements, Marathon Oil also announced it has completed a cash tender for an aggregate principal amount of $500 million of its outstanding $1 billion 2.8% Senior Notes due November 2022. The tender proactively addresses the Company's next significant debt maturity and was funded from cash on hand. The preliminary cash balance at Sept. 30, prior to funding the tender, was approximately $1.1 billion, which includes the recently completed remarketing of $400 million tax exempt bonds at a weighted interest rate of 2.25%, as well as free cash flow generated during third quarter 2020. The $500 million tender will result in a gross debt reduction of $100 million relative to the Company's second quarter ending debt balance. Both the $100 million gross debt reduction and fourth quarter dividend are more than fully funded by third quarter free cash flow generation.
CANADIAN E&PS
(Late Thursday) Press Release - Painted Pony Energy announced that at a special meeting held on October 1, its shareholders and optionholders voted to approve its previously announced proposed transaction with Canadian Natural Resources. Painted Pony and Canadian Natural entered into a definitive agreement on August 10, 2020 for the proposed acquisition of Painted Pony by Canadian Natural under a plan of arrangement, pursuant to which Canadian Natural will acquire all of the issued and outstanding Painted Pony Shares for cash consideration of $0.69 per Painted Pony Share, subject to the terms and conditions of the Arrangement Agreement, following which Painted Pony will become a wholly-owned subsidiary of Canadian Natural.
OILFIELD SERVICES
(Late Thursday) Press Release - TechnipFMC announced that Margareth Øvrum, Executive Vice President of Equinor ASA, Development and Production Brazil, has been appointed to its Board of Directors, effective October 1, 2020.
Kepler Cheuvreux upgraded TechnipFMC to ‘Buy’ from ‘Hold’.
BMO Capital Markets initiated coverage of Baker Hughes, Halliburton and TechnipFMC at ‘Market Perform’.
BMO Capital Markets initiated coverage of Schlumberger at ‘Outperform’.
BMO Capital Markets initiated coverage of National Oilwell Varco at ‘Underperform’.
MLPS & PIPELINES
Raymond James upgraded Targa Resources to ‘Strong Buy’ from ‘Outperform’.
MARKET COMMENTARY
U.S. futures dropped Friday morning after President Donald Trump and First Lady Melania Trump tested positive for coronavirus.
Futures tied to the Dow Jones Industrial Average lost 400 points, or 1.4%. The move indicated an opening loss of about 410 points. S&P 500 futures fell 1.4%. Nasdaq 100 futures declined 2.0%.
Also weighing on the sentiment was a worse-than-expected September jobs report. Nonfarm payroll rose by 661,000 in September, the Labor Department said Friday in the final jobs report before the November election. Economists surveyed by Dow Jones expected a jobs gain of 800,000. The unemployment rate fell to 7.9% last month.
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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