Crude Slips on Record U.S. Inventories, Resurgence in Coronavirus Cases
SECTOR COMMENTARY
Energy stocks are set to extend yesterday’s declines, with another decline in broader index futures (-0.7%) and oil prices (-2%) influencing trading. A handful of analyst recommendation changes are the primary sector news points this morning.
Brent crude oil slipped below $40 and WTI neared $37-even on Thursday after a more than 5% fall the previous session, as record-high U.S. crude inventories and a resurgence in coronavirus cases cast doubt on a recovery in fuel demand. U.S. crude stocks rose 1.4 million barrels, the EIA said on Wednesday. This weighed on crude prices, although other details the EIA reported such as a fall in gasoline stocks as demand rose, lent limited support. "The report was another nail in the bulls' coffin although it was not as depressing as the price fall suggests," said Tamas Varga of oil broker PVM. "On the positive side, oil consumption is healthy."
Natural gas futures fell another 2% Thursday morning, to their lowest level since April on expectations for a big weekly storage build. The decline came despite forecasts for a continued slowdown in output and an increase in air conditioning demand and exports. U.S. utilities likely injected a higher-than-normal 106 bcf of gas into storage last week as the weather turned cooler and the coronavirus pandemic continued to dent demand, according to a Reuters poll.
INTERNATIONAL INTEGRATEDS
Reuters - Repsol signed an agreement with Kia to install electric vehicles charging infrastructures in Spain.
Reuters - Algerian state energy company Sonatrach signed a deal with France's Totalto extend its supply of 2 million tonnes a year of liquefied natural gas (LNG) to the French market for another three years, it said. Relations between Sonatrach and Total had deteriorated after Algeria blocked the sale of Anadarko assets to the French company, energy sources said.
U.S. E&PS
Wells Fargo initiated coverage of CNX Resources at ‘Overweight’, Range Resources at ‘Equal Weight’, and Southwestern Energy at ‘Underweight’.
SunTrust Robinson upgraded Diamondback Energy, Earthstone Energy, and Pioneer Natural Resources to ‘Buy’ from ‘Hold’.
Wells Fargo downgraded Marathon Oil to ‘Equal Weight’ from ‘Overweight’.
MKM Partners initiated coverage of Talos Energy at ‘Buy’.
CANADIAN E&PS
(Late Wednesday) Press Release - Parex Resources provided an operational update. The company expects to gradually increase production into Q4 2020 with a targeted range of 44,000-48,000 boe/d. Production is currently above 40,000 boe/d and Parex estimates Q3 2020 production to average 42,000-44,000 boe/d. To date the June 2020 Vasconia differential to Brent oil price has averaged approximately $3.50/bbl. The Company is preparing to re-activate its development and exploration program. The company estimated H1 2020 invested capital to be $80-$85 million and a potential H2 2020 capital program of $65-$70 million for a total full-year 2020 capital of $145-$155 million. To date, the Company has repurchased for cancellation 4.7 million common shares under the normal course issuer bid that commenced on December 23, 2019. As of June 19, 2020, Parex has 138.9 million basic shares outstanding compared to 149.4 million basic shares outstanding as at March 31, 2019.
OILFIELD SERVICES
Press Release - Calfrac Well Services announced its financial and operating results for the three months ended March 31, 2020. Revenue in the first quarter of 2020 was $305.5 million, a decrease of 36 percent from the same period in 2019. The Company's consolidated revenue per fracturing job decreased by 30 percent mainly due to a combination of lower pricing in the United States and a greater proportion of customers providing their own sand while fracturing job count decreased by 9 percent. Cementing activity in Argentina was higher by 3 percent while consolidated coiled tubing activity decreased by 36 percent as a result of lower activity in Canada, Argentina and Russia. Net loss was $122.9 million or $0.85 per share diluted compared to a net loss of $36.3 or $0.25 per share diluted in the same period last year. The Company recorded a gain on debt exchange of $130.4 million, a $115.6 million deferred tax expense related to the write-off of the Company's deferred tax asset, and an impairment of PP&E and other assets of $54.0 million during the first quarter in 2020.
Press Release - Agilyx announced the exclusive collaboration with TechnipFMC to jointly develop a process to purify Agilyx Styrene Oil to high purity styrene. This collaboration has been the result of over a year of evaluation, and their desire to expand their energy transition and circular economy offerings. The collaboration between Agilyx and TechnipFMC, will leverage the expertise of each company enabling a new production path of styrene via post-use polystyrene products. The developed purification process will bolt on to Agilyx's existing depolymerization technology and will accelerate the presence of recycled styrene and recycled polystyrene in the market. While manufactured from post-use polystyrene, the recycled styrene is expected to retain all of the properties and functionality of traditionally manufactured styrene.
(Late Wednesday) Press Release - Weatherford International announced its Production Optimization Software Platform increased production by nearly 6,000 barrels per day, boosting revenue by $156 million over three years for a Middle East operator. The Weatherford production optimization software platform enabled the customer to automate production monitoring, analysis, and optimization asset-wide for 1,700 Electric Submersible Pump (ESP) wells. Once the Weatherford team mapped and identified the data requirements needed to build and sustain an automated ESP well model, they instituted automated data gathering, model tuning, and data-quality validation. These steps enabled the customer to proactively manage failures and opportunities in real time across all wells from a single, integrated platform.
DRILLERS
(Late Wednesday) Press Release - Dril-Quip and Proserv Group announced an agreement pursuant to which Dril-Quip will rely upon Proserv for the development and manufacturing of its subsea control systems as a supplier. The mutually beneficial arrangement allows Dril-Quip to continue to support its existing subsea controls customers with the support of Proserv. The arrangement follows Dril-Quip’s strategic decision to consolidate the supply and development of control systems with a dedicated subsea controls provider.
REFINERS
(Late Wednesday) Reuters - Valero Energy plans to restart production on the large hydrocracker at its 335,000-barrel-per-day (bpd) Port Arthur, Texas, refinery by Friday, June 26, said sources familiar with plant operations. Valero began on Tuesday, June 23, preparing the 57,000-bpd hydrocracker to return to production, the sources said. The hydrocracker was shut on May 11 for a planned overhaul.
MLPS & PIPELINES
Press Release - On June 24, 2020, Enterprise Products Partners, Enterprise Products OLPGP, Inc., Enterprise Products Operating LLC and Skyline North Americas, Inc., a wholly owned subsidiary of Marquard & Bahls AG, a German corporation, entered into an equity distribution agreement with Morgan Stanley & Co. LLC, pursuant to which the Selling Unitholder may offer and sell from time to time through the Sales Agent common units representing limited partner interests in the Partnership having an aggregate offering price of up to $500 million.
MARKET COMMENTARY
Wall Street futures fell and Asian markets ended in the red as coronavirus cases surged globally and IMF’s downgrade to economic projections dented hopes of economic recovery. European stocks rebounded due to gains in Lufthansa and Bayer shares. The dollar edged up as demand for safe-haven currencies improved. An additional 1.48 million Americans filed for unemployment benefits last week, the Labor Department said. Economists polled by Dow Jones expected a print of 1.35 million. This marks the second straight week that U.S. jobless claims data were worse than expected.
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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