Crude Falls as Weak Economic Data From China Stokes Fears of Global Recession
The energy sector is set for a slightly higher start despite weakness in the crude complex and as the major market futures trade near the flat-line. U.S stock futures are flat as weak economic data from China worried investors who are already concerned over aggressive policy tightening by the Federal Reserve.
In deal news, Diamondback Energy, Inc. and Rattler Midstream LP announced that, on May 15, 2022, they entered into a definitive agreement for Diamondback to acquire all of the publicly held common units representing the limited partner interests in Rattler not already owned by Diamondback and its subsidiaries. The agreement provides for an all-stock transaction whereby each public unitholder of Rattler would receive 0.113 of a share of common stock in Diamondback in exchange for each Rattler common unit owned, an exchange ratio that implies a premium of 17.3% for Rattler common units based on the closing prices of Rattler’s common units and Diamondback’s common stock as of May 13, 2022, and a premium of 9.3% based on Rattler’s and Diamondback’s 30 day volume-weighted average trading price as of the same date.
WTI and Brent crude oil futures fell in early trading as COVID-19 related lockdowns in China and weak economic data in the country increased concerns about a possible global recession. However, the market found some support as Western leaders come closer to an import ban on Russian crude. Economic data from Beijing shows a year to year decline of 11% in retails sales and a 2.5% decline in factory production. China also processed 11% less crude oil in April, with daily throughput the lowest since March 2020. A senior EU diplomat said Western Leaders are set to come to an agreement regarding the sixth wave of sanctions towards Russia.
Natural gas futures rose on forecasts for higher demand and the possibility of a European ban on Russian crude in the coming days.
BY SECTOR:
US INTEGRATEDS
Exxon Mobil has gone to court seeking to force local California government officials to allow shipment of crude oil from coastal facilities to inland refineries by dozens of tanker trucks a day until replacement of a pipeline that burst in 2015, causing a major spill.
INTERNATIONAL INTEGRATEDS
Norway's Hammerfest LNG plant is now expected to restart on May 23, six days later than the previous plan and further delaying operations since a fire in 2020, Norwegian gas system manager Gassco and operator Equinor said.
Petrobras, regarding the news published in the media, clarified that it is not discussing changes in its pricing policy with the Ministry of Mines and Energy. Petrobras reiterates its commitment to the practice of competitive prices and in balance with the market, following the variations up and down, while avoiding the immediate pass-through of volatility to domestic prices.
Petrobras said on Friday it decided to terminate the process for the partial sale of four concessions located in deep waters in the Sergipe-Alagoas Basin.
The Saudi Arabian Oil Company (Aramco) announced its first quarter 2022 financial results, posting an 82% year-on-year (YoY) increase in net income to $39.5 billion — and setting a new quarterly earnings record for the Company since its Initial Public Offering in 2019. Aramco also declared a Q1 dividend of $18.8 billion to be paid in the second quarter, and has approved the distribution of one bonus share for every 10 shares held in the Company. The results were underpinned by higher crude oil prices and volumes sold, and improved downstream margins. Aramco achieved a record quarterly net income of $39.5 billion in Q1, an 82% increase from $21.7 billion in Q1 2021, primarily driven by higher crude oil prices and volumes sold, and improved downstream margins.
TotalEnergies and Ørsted have joined forces to jointly submit bids for the two Dutch offshore wind tenders “Holland Coast West” with the aim to achieve net positive impact on biodiversity and the Dutch energy system. The Holland Coast West wind farms are located approximately 53 km off the Dutch coast and have a combined capacity of nearly 1.5 gigawatts (GW).
Casino said in a statement it has launched a process to sell its renewable energy unit GreenYellow with a view to a potential transaction by the end of the year. On Friday, French financial daily Les Echos reported that TotalEnergies and Engie are eyeing the acquisition of GreenYellow, valued at around 1.5 billion euros ($1.6 billion).
Reuters reported that Deutsche Bank is not financing a pipeline in Africa that environmental campaigners have said will displace thousands of families and disrupt nature reserves, a person with knowledge of the matter said on Sunday. Germany's largest lender has come under pressure to clarify its stance on the financing of the planned $3.5 billion East African Crude Oil Pipeline (EACOP), which would stretch more than 1,400 kilometres from Uganda to Tanzania. Total, which is developing the pipeline with China National Offshore Oil, has said it was taking steps to mitigate the environmental and human impact of the project.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Diamondback Energy and Rattler Midstream LP announced that, on May 15, 2022, they entered into a definitive agreement for Diamondback to acquire all of the publicly held common units representing the limited partner interests in Rattler not already owned by Diamondback and its subsidiaries. The agreement provides for an all-stock transaction whereby each public unitholder of Rattler would receive 0.113 of a share of common stock in Diamondback in exchange for each Rattler common unit owned, an exchange ratio that implies a premium of 17.3% for Rattler common units based on the closing prices of Rattler’s common units and Diamondback’s common stock as of May 13, 2022, and a premium of 9.3% based on Rattler’s and Diamondback’s 30 day volume-weighted average trading price as of the same date.
Occidental announced that it has commenced cash tender offers to purchase its outstanding notes in three separate pools. Occidental’s obligation to accept for purchase, based on the Acceptance Priority Levels, and pay for Notes that are validly tendered and not validly withdrawn is limited to an aggregate amount (including principal and premium but excluding accrued and unpaid interest) of (a) $700,000,000 (as such amount may be increased or waived pursuant to the terms of the Offer to Purchase) for all of the Pool 1 Notes, (b) $650,000,000 (as such amount may be increased or waived pursuant to the terms of the Offer to Purchase) for all of the Pool 2 Notes and (c) $650,000,000 (as such amount may be increased or waived pursuant to the terms of the Offer to Purchase) for all of the Pool 3 Notes. The Offers are being made on the terms and subject to the conditions set forth in the Offer to Purchase dated May 16, 2022.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
DMC Global Inc President and CEO Kevin Longe discloses sale of 10K shares.
ATB Capital Markets upgraded Shawcor to Outperform from Sector Perform.
BMO Capital Markets upgraded Shawcor to Outperform from Market Perform.
TD Securities upgraded Shawcor to Buy from Hold.
US Well Services Inc Q1 EPS ($0.45) vs 2 FS estimates of ($0.27), revenue $41.2M vs FactSet $39.9M, adj EBITDA ($3.5M) vs FactSet ($1.1M). Q1 averaged 4.4 fully-utilized fleets vs 4.1 fully-utilized fleets.
Vulcan Materials provided an update with respect to its Mexican SAC TUN operations. Vulcan Materials confirmed that the Mexican government has suspended the three-year customs permit granted in March 2022 to the Mexican subsidiary of the Company and has begun a proceeding that could result in the revocation of that permit. A decision to maintain or revoke the permit will be made within weeks.
The Board of Directors of Vulcan Materials declared a quarterly cash dividend of $0.40 cents per share on its common stock. The dividend will be payable on June 10, 2022, to shareholders of record at the close of business on May 27, 2022.
DRILLERS
No significant news.
REFINERS
HF Sinclair Corp was upgraded to buy from neutral at Goldman Sachs, target to $56 from $46.
Marathon Petroleum reported on Saturday that its Wilmington facility in Los Angeles, California was offline after a power outage occurred at the refinery.
According to Reuters, Phillips 66 said that the shareholder proposal regarding greenhouse gas emissions targets was not approved at its annual meeting.
MLPS & PIPELINES
Cheniere Energy Inc, Icahn decreases its position to 9.7M from 12.1M.
Keller Rohrback L.L.P. announced that Plains All American Pipeline has agreed to pay a total of $230 million to resolve the class action litigation brought by members of the local Santa Barbara fishing community and local property owners, stemming from the May 19, 2015 oil spill in Santa Barbara County.
Tellurian Inc COO Keith Teague is retiring from full time employment and will continue with Tellurian in an advisory role. Tellurian has hired former McDermott International, Ltd EVP and COO Samik Mukherjee who will serve in the role of EVP and President, Driftwood Assets.
MARKET COMMENTARY
U.S. stock index futures were lower, tracking global equity markets, after unexpectedly weak economic data from China highlighted fears about a slowdown in growth. The Australian dollar and the Chinese yuan came under pressure from the weak Chinese economic data, while gold prices fell as the dollar consolidated gains near a 20-year peak and dampened bullion demand. Oil prices were lower amid widespread lockdowns in China, though the market found some support as the European Union stepped closer to an import ban on Russian crude.
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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