Crude Slips as Surging Virus Cases Fuel Demand Concerns
SECTOR COMMENTARY
Energy stocks are lower in pre-market trading taking cues from weak oil prices and broader benchmarks. Traders are in risk-off mode after President-elect Joe Biden announced details of a $1.9 trillion stimulus plan and major banks released their quarterly results, kicking off the earnings reporting season. Biden’s proposal, called the American Rescue Plan, includes increasing the additional federal unemployment payments to $400 per week and extending them through September, direct payments to many Americans of $1,400, and extending the federal moratoriums on evictions and foreclosures through September.
Shares of Exxon Mobil are lower in early trading on news of an SEC investigation. Shares of Delek are also in focus following a public letter from Icahn’s CVR Energy denying any interest in acquiring Delek. As a 15% owner of Delek, CVR Energy said the stock is undervalued and that the company would benefit greatly from a board refreshment and a renewed focus on value enhancing ideas, such as prioritizing free cash flow over growth, monetizing retail and focusing on core refineries while exiting from others.
Oil prices are down more than 1% this morning, although oil-specific headlines today are pretty thin, with the market taking in Biden's stimulus relief plans last night. Despite the stimulus headlines, the dollar is trading higher, which is putting pressure on oil prices. Reports on Russia month-to-date production through yesterday indicates levels above its OPEC+ output ceiling. The BKR weekly rig count comes out at 1pm EST and traders are expecting a double-digit rig count increase.
Natural gas futures are extending strength on elevated LNG exports.
U.S. INTEGRATEDS
Reuters - The U.S Securities and Exchange Commission has launched an investigation into Exxon Mobil following a whistleblower complaint that the oil major overvalued a key asset in Texas' Permian Basin, the Wall street Journal reported on Friday.
INTERNATIONAL INTEGRATEDS
Societe Generale downgraded Royal Dutch Shell to Hold from Buy.
CANADIAN INTEGRATEDS
CIBC initiated coverage of Cenovus Energy with an Outperformer rating.
U.S. E&PS
California Resources announced the pricing of its private offering of $600 million in aggregate principal amount of its 7.125% senior unsecured notes due 2026 at par. The Notes will be guaranteed by all of the Company’s existing subsidiaries that guarantee its revolving credit facility and certain future subsidiaries. The offering is expected to close on January 20, 2021, subject to customary closing conditions. The Company estimates that the net proceeds from the offering will be approximately $589 million after deducting the initial purchasers' discount and estimated expenses.
ConocoPhillips announced the extension of the expiration date of the offers to eligible holders to exchange any and all outstanding notes issued by Concho Resources Inc. for (1) up to $3,900,000,000 aggregate principal amount of new notes to be issued by ConocoPhillips and fully and unconditionally guaranteed by ConocoPhillips Company to adopt certain proposed amendments to each of the indentures governing the Existing Concho Notes. ConocoPhillips hereby extends such expiration date from 5:00 p.m., New York City time, on Jan. 15, 2021, to 5:00 p.m., New York City time, on Feb. 4, 2021.
JPMorgan initiated coverage of CNX Resources with an Overweight rating.
Pioneer Natural Resources announced that it has priced a public offering of $750.0 million of 0.750% Senior Notes that will mature January 15, 2024, $750.0 million of 1.125% Senior Notes that will mature January 15, 2026 and $1.0 billion of 2.150% Senior Notes that will mature January 15, 2031, pursuant to an effective shelf registration statement that was previously filed with the Securities and Exchange Commission. The price to the public for the 2024 Notes is 99.959% of the principal amount, the price to the public for the 2026 Notes is 99.981% of the principal amount and the price to the public for the 2031 Notes is 99.742% of the principal amount. The Company intends to use the net proceeds of approximately $2.5 billion from the offering, after deducting underwriting discounts (excluding fees and expenses of the offering), to refinance certain senior notes issued by Parsley Energy, LLC and certain of its subsidiaries.
Talos Energy announced that the Company has completed a series of capital markets activities to refinance the Company's near-term bond maturities, significantly enhance liquidity and provide the Company with greater strategic flexibility entering 2021. Since mid-December 2020, Talos has cumulatively raised over $670 million of gross proceeds across three transactions, allowing for retirement of Talos's previous second lien notes maturing in April 2022 as well as reducing the current utilization under the Company's credit facility. Talos has extended its bond maturity until 2026 and is expected to have over $550 million of liquidity pro forma for the transactions. The new second lien notes received credit ratings from all three major rating agencies and the indenture added flexibility for financings related to potential future M&A transactions and substantial room for project financing related to the development of the world class Zama discovery.
OILFIELD SERVICES
Stifel resumed coverage of Calfrac Well Services with a Hold rating.
Oceaneering International announced that its Subsea Robotics segment won multiple contracts during the fourth quarter of 2020, with anticipated aggregate revenue in excess of $225 million. These contracts are with international oil and gas operators and marine construction companies, and range in duration from several months to five years. The work scopes are primarily for remotely operated vehicle (ROV) services delivered from floating drilling rigs and multi-service, subsea intervention, and construction vessels. Also included among the contracted scopes are ROV tooling, survey, positioning, and autonomous underwater vehicle (AUV) services.
National Bank of Canada upgraded Pason Systems to Outperform from Sector Perform.
REFINERS
Delek US Holdings issued the following statement in response to the letter received from and disclosed by CVR Energy, a majority owned subsidiary of Icahn Enterprises L.P.: Delek US welcomes dialogue with its shareholders and constructive input related to enhancing shareholder value. The Company's Board of Directors and management team are committed to acting in the best interest of all shareholders, and regularly evaluate all available options to create and deliver value. Under the leadership of an engaged and experienced Board and management team, Delek US has built a broad portfolio of integrated assets in strategically important geographies, providing substantial value for its customers and partners. We have run at refinery utilization rates above industry average throughout 2020, driven by our positioning in attractive niche markets. Contributions from recent midstream investments are expected to gain momentum into 2021 and 2022.
MARKET COMMENTARY
U.S. stock futures fell, in line with world equity markets, as stricter lockdowns in France and Germany and a resurgence of COVID-19 cases in China dented hopes of a global economic recovery. Risk aversion bets pushed the dollar higher against a basket of currencies. Oil prices dropped as surging virus cases fueled demand concerns. Gold prices edged up on dovish policy cues from the U.S. Fed. Retail sales, industrial production, producer prices are among the slew of economic data scheduled for release later in the day.
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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