Oil Extends Gain in Longest Streak in Two Years
SECTOR COMMENTARY
The energy sector is poised for a higher start, backed by strength in the crude complex and major equity futures which hit fresh record highs this morning on the backs of fiscal aide optimism and ahead of inflation data and a speech by the Fed Chair.
WTI and Brent crude oil futures extended their trends higher for the ninth-consecutive session, their longest winning streak in two years, supported by last night industry supply report showing a surprise drop in crude stocks and rising hopes that the vaccine rollouts will drive a recovery in demand. Ahead of the official EIA data later today, last night API report showed Crude inventories fell by 3.5 million barrels last week, compared with analysts' expectations for a build of 985,000 barrels while gasoline stocks rose significantly more than expected. The U.S. government is set to begin shipping of COVID-19 vaccines directly to community health centers next week in an effort to speed up inoculations.
Natural gas futures bounced off earlier lows and ticked higher this morning, lifted by expectations that next week's daily peak will set a new record high and forecasts calling for slightly colder weather and higher heating demand over the next two weeks. Forecasts for less cold weather in late February put a cap on gains.
US INTEGRATEDS
According to Reuters, Exxon Mobil plans to finish an overhaul of the large gasoline-producing fluidic catalytic cracker (FCC) at its 560,500 barrel-per-day Baytown, Texas, refinery by April, said sources familiar with plant operations. The 125,000-bpd FCC 3 was shut in early January because of low demand during the COVID-19 pandemic, the sources said. Exxon decided to carry out the overhaul while the unit is shut.
According to Reuters, Exxon Mobil said it will convert its 72-year-old Altona refinery in Australia, the country's smallest, to a fuel import terminal. The U.S. oil major said it was no longer economically viable to continue the refinery, bringing down the number of refineries in Australia down to two.
U.S. E&PS
Apache announced the appointment of Lamar McKay to its board of directors.
A consortium of Talos Energy, private equity firm EIG Global Energy Partners, Enauta Participacoes and 3R Petroleum Oleo e Gas has submitted a non-binding offer for Brazilian oilfields Albacora and Albacora Leste, four sources familiar with the matter toldReuters.
CANADIAN E&PS
ATB Capital Markets initiated coverage of MEG Energy with a Sector Perform rating.
OILFIELD SERVICES
Black Hills announced financial results for the fourth quarter ended Dec. 31, 2020. The company reported 2020 GAAP EPS of $3.65 and EPS of $3.73, as adjusted. In addition,it increases 2021 guidance to $3.80 to $4.00 per share and initiated 2022 guidance of $3.95 to $4.15 per share. It also targets 5% to 7% long-term EPS growth rate and increases expected five-year capital investment to $3.0+ billion.
Barclays upgraded PGS ASA to Overweight from Equal Weight.
DRILLERS
Helmerich & Payne reported a net loss of $70 million or $(0.66) per diluted share from operating revenues of $246 million for the quarter ended December 31, 2020, compared to a net loss of $59 million, or $(0.55) per diluted share, on revenues of $208 million for the quarter ended September 30, 2020. The net losses per diluted share for the first quarter of fiscal year 2021 and the fourth quarter of fiscal year 2020 include $0.16 and $0.19, respectively, of after-tax gains and losses comprised of select items.
Precision Drilling announced 2020 fourth quarter highlights. Revenue of $202 million was a decrease of 46% compared with the fourth quarter of 2019. Net loss was $38 million or $2.74 per diluted share compared to a net loss of $1 million or $0.08 per diluted share in 2019.
MLPS & PIPELINES
Keyera announced its 2020 year-end financial results. Keyera delivered adjusted earnings before interest, taxes, depreciation, and amortization for the fourth quarter of $168 million, contributing to $874 million for 2020. Net earnings were negative $75 million for the fourth quarter and $62 million for the full year, compared to $30 million and $444 million, respectively, for the same periods in 2019. The decrease is largely attributable to an overall 2020 impairment expense of $371 million, of which $123 million was taken in Q4. In addition, 2020 dividends declared to shareholders were $423 million or $1.92 per share, a 7% increase over dividends declared in 2019. This represents a 59% payout ratio from distributable cash flow1, which was well within the targeted ratio of 50 to 70%.
MARKET COMMENTARY
U.S. stock index futures edged higher as investors betted on prospects of a speedy economic recovery supported by fiscal stimulus and swift vaccine rollouts. European shares rose as upbeat earnings reports from firms including SocGen helped boost optimism around a broader economic rebound. Asian shares were higher on improving outlook for the global economy. The dollar was little changed, while gold prices climbed. Oil extended its rally supported by producer supply cuts and a recovery in demand. Consumer price inflation data is due later in the day.
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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