Crude Falls on Rising Coronavirus Cases, Strong Dollar
SECTOR COMMENTARY
Energy stocks are set to open mixed to lower, weighed down by weakness in the crude complex while U.S. stock index futures edged higher on positive vaccine news from Pfizer while Lawmakers in Washington continued to send mixed signals about progress toward a stimulus deal.
In sector news, shares of top oilfield services provider Schlumberger edged slightly lower in pre-market trading after posting its third straight quarterly loss as this year's prolonged slump in oil prices due to the COVID-19 pandemic compelled its major energy customers to shun drilling.
Oil prices fell in early trading, dragged down by concerns that a spike in COVID-19 cases in Europe and the United States is curtailing demand in two of the world's biggest fuel consuming regions, while a stronger U.S. dollar also pressured prices. "The reality is that we're now seeing a pretty active spread of the pandemic across Europe and it's spreading again in North America, and that potentially will weigh on oil demand recovery," said Lachlan Shaw, head of commodity research at the National Bank of Australia. Both benchmarks dipped the previous day but remain barely unchanged from a week earlier.
Natural gas futures are trading in positive territory on forecasts for warmer-than-average temperatures across the east coast and cooler-than-average temperatures for areas west of the Mississippi river stretching to the Pacific Northwest, which should boost demand.
INTERNATIONAL INTEGRATEDS
Reuters - BP is set to make around 7,500 compulsory redundancies after roughly 2,500 staff - or just over one in ten of those eligible - applied for voluntary severance, according to an internal memo seen by Reuters and company sources.
Reuters - The problem-plagued Limetree Bay refinery in St. Croix, Virgin Islands, may lose its main supplier of crude, oil major BP, if it isn't successfully up and running by December, according to two people familiar with the matter. The Caribbean refinery's owner, Limetree Bay Ventures, has spent at least $2.7 billion restoring the facility, initially hoping to tap rising demand for low-sulfur fuels and markets in Latin American and Caribbean. But the plant's restart date has been delayed by nearly a year now.
Reuters - Petrobras has decided to delay its oil producing zone known as the Parque das Baleias project by one year to 2024 because of the coronavirus pandemic, according to a securities filing.
(Late Thursday) Reuters - Petrobras has begun the binding phase for the sale of a cluster of onshore and shallow-water oilfields in the nation's northeast known as Polo Alagoas, the state-run oil company said in a securities filing on Thursday night. Polo Alagoas produced an average of 2,300 barrels per day of oil from January through September and 878,000 cubic meters of gas, the company said.
U.S. E&PS
RBC downgraded WPX Energy to ‘Sector Perform’ from ‘Outperform’.
CANADIAN E&PS
National Bank of Canada upgraded Paramount Resources to ‘Sector Perform’ from ‘Underperform’.
(Late Thursday) Press Release - Whitecap Resources confirmed that a cash dividend of Cdn. $0.01425 per common share in respect of October operations will be paid on November 16, 2020 to shareholders of record on October 31, 2020. This dividend is an eligible dividend for the purposes of the Income Tax Act (Canada).
OILFIELD SERVICES
(Late Thursday) Press Release - Black Hills announced that utility subsidiary Cheyenne Light, Fuel and Power Co., doing business as Black Hills Energy, and power generation subsidiary Black Hills Wyoming received approval of their joint application for a proposed 60-megawatt power purchase agreement from the Federal Energy Regulatory Commission. Under the approved agreement, Black Hills Wyoming will continue to deliver 60 megawatts of base load capacity and energy to Cheyenne Light from its Wygen I power plant. The new agreement will commence on Jan. 1, 2022, replacing the existing power purchase agreement, and will continue for 11 years, ending Dec. 31, 2032. The Wygen I power plant is located near Gillette in northeast Wyoming and is a mine-mouth operation with the adjacent mining complex.
(Late Thursday) Press Release - The Board of Supervisory Directors of Core Laboratories has announced a cash dividend of $0.01 per share of common stock payable in the fourth quarter of 2020. This fourth quarter dividend amount, when added to the Q1 2020 dividend of $0.25 per share, the Q2 2020 dividend of $0.01 per share and the Q3 2020 dividend of $0.01, means a total payout for the year 2020 of $0.28 per share of common stock. The fourth quarter $0.01 per share cash dividend will be payable on 17 November 2020, to shareholders of record on 26 October 2020. Dutch withholding tax will be deducted from the dividend at a rate of 15%.
Press Release - Schlumberger reported the following results for the third quarter of 2020: worldwide revenue of $5.3 billion decreased 2% sequentially; international revenue of $4.1 billion decreased 1% sequentially; North America revenue of $1.2 billion decreased 2% sequentially; GAAP loss per share, including charges and credits of $0.22 per share, was $0.06; EPS, excluding charges and credits, was $0.16; and cash flow from operations was $479 million and free cash flow was $226 million. During the third quarter, Schlumberger issued $500 million of 1.400% Senior Notes due 2025 and $350 million of 2.650% Senior Notes due 2030. On October 15, 2020, Schlumberger’s Board of Directors approved a quarterly cash dividend of $0.125 per share of outstanding common stock, payable on January 14, 2021 to stockholders of record on December 2, 2020.
REFINERS
(Late Thursday) Reuters - Andeavor LLC agreed to pay $20 million in penalties to the Securities and Exchange Commission (SEC) for inadequate controls over a stock buyback plan it executed while it was in talks to be bought by Marathon Petroleum in 2018. The securities regulator said that Andeavor's chief executive officer had directed its finance chief to initiate a $250 million stock buyback two days before the two companies were set to resume talks about a potential deal.
MLPS & PIPELINES
Press Release - AltaGas announced that AltaGas Idemitsu Joint Venture Limited Partnership and SAM Holdings have entered a definitive agreement with respect to the put process surrounding Petrogas Energy, which was originally announced on January 2, 2020. Pursuant to the agreement, AltaGas is indirectly acquiring an additional 37% of Petrogas' equity for total consideration of approximately $715 million. This consideration includes the acquisition of 4,751,733 shares of Petrogas and incorporates working capital normalization and certain other factors. Post-closing, AltaGas' indirect ownership in Petrogas will increase to approximately 74% with Idemitsu Kosan owning the remaining approximate 26%. Upon closing AltaGas plans to fully consolidate Petrogas' financial results, where previously the company only captured Petrogas' historical performance through an equity pick up via AltaGas' non-controlling interest and preferred dividends received.
(Late Thursday) Press Release - BP Midstream Partners LP announced that the Board of Directors of BP Midstream Partners GP LLC, the general partner of the Partnership, declared a quarterly cash distribution of $0.3475 per unit for the third quarter of 2020, consistent with the level of distribution in the second quarter 2020, continuing to demonstrate stability in a turbulent period. The third quarter 2020 distribution will be payable on November 12, 2020, to unitholders of record as of October 29, 2020, with an ex-distribution date of October 28, 2020.
(Late Thursday) Press Release - Crestwood Equity Partners LP announced that the board of directors of its general partner has declared the partnership’s quarterly cash distribution of $0.625 per limited partner unit ($2.50 annually) for the quarter ended September 30, 2020, which is flat quarter over quarter. In addition, Crestwood announced a quarterly cash distribution of $0.2111 per Class A preferred equity unit ($0.8444 annually). Both common and preferred distributions will be made on November 13, 2020, to unitholders of record as of November 6, 2020.
Press Release - Summit Midstream Partners announced that on October 15, 2020, Double E Pipeline, a joint venture in which SMLP owns a 70% equity interest and serves as operator, received Federal Energy Regulatory Commission approval of its application to construct and operate the Double E Pipeline Project, pursuant to Section 7(c) of the Natural Gas Act. Double E is a new interstate natural gas pipeline that is currently under development and, upon completion, will provide up to 1.35 million dekatherms of firm transportation service from the Delaware Basin in southeast New Mexico and west Texas to delivery points near Waha in Reeves and Pecos Counties, Texas. Upon fulfilling certain remaining requirements, including finalizing a right-of-way grant from the Bureau of Land Management and filing an implementation plan with the FERC, Double E expects to receive FERC's notice to proceed with construction. This notice to proceed is expected within the next 90 days.
(Late Thursday) Press Release - Seadrill Partners has secured additional work for the West Vela in the US Gulf of Mexico with BP. The contract value for the firm portion is expected to be $23.8 million and the contract is expected to run until early of April 2021.
(Late Thursday) Press Release - Targa Resources announced its quarterly dividend on common shares and its quarterly dividend on Series A preferred shares with respect to the third quarter of 2020. Targa announced that its board of directors has declared a quarterly cash dividend of $0.10 per common share, or $0.40 per common share on an annualized basis, for the third quarter of 2020. This cash dividend will be paid November 16, 2020 on all outstanding common shares to holders of record as of the close of business on October 30, 2020. Targa also announced that its board of directors has declared a quarterly cash dividend of $23.75 per Series A preferred share for the third quarter of 2020. This cash dividend will be paid November 13, 2020 on all outstanding Series A preferred shares to holders of record as of the close of business on October 30, 2020.
MARKET COMMENTARY
U.S. stock index futures and European shares rose as Pfizer said it could apply for emergency use of its COVID-19 vaccine candidate as early as November. Japan's Nikkei fell as new coronavirus curbs in Europe dimmed hopes of a swift global economic recovery. Gold steadied as the dollar eased. Oil prices slid, dragged down by concerns that a spike in COVID-19 cases in Europe and the U.S. is curtailing demand in two of the world's biggest fuel consuming regions. On the U.S. economic schedule, retail sales, industrial production and manufacturing output numbers are due later in the day.
NASDAQ ENERGY TEAM THOUGHT LEADERSHIP
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- 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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