Oil Prices Bounce Back on Renewed Supply Concerns
The energy sector is set for a higher start, supported by strength in the underlying commodities and the major market indices. U.S. stocks edged up as bond yields trickled lower and investors assessed the impact on company earnings and the economy from the war in Ukraine. As earnings season progresses, Baker Hughes on Wednesday reported a higher quarterly profit from a year earlier, but missed Wall Street estimates after facing a "volatile market" in early 2022 that prompted mixed results across its reporting units.
WTI and Brent crude oil futures are trading higher as a drop in U.S. oil inventories and concerns over tighter supplies from Russia and Libya drove a recovery from yesterday’s losses. Oil production in Libya is continuing to slow down as the blockades on major fields and export terminals is causing Libya to lose more than 550,000 barrels per day in oil production, the National Oil Corporation media office said. Following the sanctions on Russia over their invasion of Ukraine, nine tankers carrying Russian-origin crude and fuel oil have discharged in the United States in April, likely the last ones to deliver before a wind-down set by Washington expires this week. The United States last month set an April 22 ban on imports of Russian crude and refined products and gave importers of Russian petroleum, liquefied natural gas and coal 45 days to take in route and under-contract cargoes. Additionally, the Caspian Pipeline Consortium's Black Sea terminal could return to full capacity as early as Wednesday, Kazak Energy Minister Bloat Akchulakov said. The CP pipeline and terminal, which ship about 80% of Kazak crude exports, have been working at half usual capacity after a storm damaged two of its three mooring points last month.
Natural gas futures rebounded this morning after yesterday’s sharp losses as concerns over future Russian gas supplies linger and amid high demand for LNG exports.
BY SECTOR:
US INTEGRATEDS
Exxon Mobil estimates there will be a $4 trillion market by 2050 for capturing carbon dioxide and storing it underground, the company said in a presentation.
INTERNATIONAL INTEGRATEDS
Petrobras, the operator, and Equinor successfully started production from the first two wells of the increased oil recovery (IOR) project at Roncador. This represents an important milestone in the development of the field, increasing recovery rates, adding valuable production and demonstrating the potential to leverage new technology. The two wells are the first of a series of IOR wells to reach production. Start-up is almost five months ahead of schedule and at half of the planned cost. The wells add a combined ~20,000 barrels of oil equivalent per day to Roncador, bringing daily production to approximately 150,000 barrels and reducing the carbon intensity (emissions per barrel produced) of the field.
Shell aims to meet its goal to cut carbon emissions to net zero by the middle of the century regardless of progress by customers and broader society, its chief executive said. Shell previously said that it aims to become a net-zero greenhouse gas emissions business by 2050 "in step with society and our customers".
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
APA said that international adjusted production is forecast to be 111 Mboe/d, compared to guidance of 115 Mboe/d, with the difference attributable primarily to the production sharing contract impact of higher oil prices in Egypt. Unplanned maintenance downtime on the Forties Echo platform in the North Sea also impacted oil production by approximately 1,000 barrels of oil per day. U.S. production for the period is forecast to be 211 Mboe/d, compared to guidance of 212 Mboe/d. The variance is attributable to weather and third-party facility disruptions to gas and NGL volumes, partially offset by better-than-expected oil volumes.
Exelon Corporation was upgraded to overweight from neutral at JP Morgan.
Gran Tierra Energy Inc Q1 2022 Production: Gran Tierra's total average production was 29,362 BOPD during Q1 of 2022, which was approximately flat when compared with Q4 2021 production and up 20% from Q1 2021's level. The company's Q1 2022 production was in-line with management expectations. Expect to Meet 2022 Production Guidance: Gran Tierra believes its ability to keep production flat quarter-on-quarter demonstrates the ongoing successful results from the company's waterflooding efforts in all major assets. The ongoing infill development drilling campaigns in the Acordionero and Costayaco oil fields are expected to increase the company's full year 2022 average production into the guidance range of 30,500-32,500 BOPD. The ramp up in production from Q1 2022's level is expected to begin in the latter half of Q2 2022 as new Acordionero and Costayaco oil wells are brought online. Significant Debt Reduction: Gran Tierra's credit facility has been reduced to a remaining balance of $40M as of 31-Mar-22, down $27.5M or 41% from a balance of $67.5M as of 31-Dec-21, and down $164M from 31-Mar-20.
As per SEC filing, on April 13, 2022, Laredo Petroleum entered into the Eighth Amendment to the Fifth Amended and Restated Credit Agreement among the Company, as borrower, Wells Fargo, as administrative agent, the Guarantors and the bank signatory thereto. The Eighth Amendment, among other things, (i) increases the borrowing base from $1.0 billion to $1.25 billion and the aggregate elected commitment from $725 million to $1.0 billion, (ii) increases, from closing through December 31, 2022, the $50 million bond buyback and distributions baskets to $250 million, subject to certain conditions, (iii) adds an energy transition and technology commercialization investment basket of $25 million, subject to certain conditions, (iv) allows for the designation of Unrestricted Subsidiaries and (v) amends certain other provisions relating to certain commercial agreements and the administration of the Loans, in each case, subject to the terms of the Eighth Amendment and the Amended Credit Facility.
CANADIAN E&PS
Vermilion Energy announced the pricing of its previously announced private offering of up to US$400 million of 8 year senior unsecured notes. The New Notes will be issued in the aggregate principal amount of US$400 million, and will have a maturity date of May 1, 2030 and a fixed coupon of 6.875% per annum, to be paid semi-annually. The notes were priced at 99.241% of par. The offering of the New Notes is expected to close on or about April 26, 2022, subject to customary closing conditions. The Company intends to use the net proceeds from the New Notes to reduce the amount outstanding on our credit facility. Contingent upon the completion of the Offering, it is our intention to reduce the size of our credit facility from $2.1 billion to $1.6 billion. The completion of the Offering is not subject to the reduction of the size of the credit facility.
OILFIELD SERVICES
Baker Hughes announced results for the first quarter of 2022. Revenue for the quarter was $4,835 million, a decrease of 12%, sequentially. The decrease in revenue was driven primarily by lower volume in all segments. GAAP earnings per share was $0.08 for the quarter which included $0.07 per share of adjusting items. Adjusted earnings per share (a non-GAAP measure) was $0.15.
Baker Hughes has acquired Mosaic Materials to further develop and scale its next-generation capture technology for carbon dioxide ( CO2 ) reduction from stationary sources and CO2 removal (CDR) from the atmosphere.
Geospace Technologies awarded $7M in ocean bottom node rental contracts. The company announced two contracts together valued at over $7M for the rental of OBX ocean bottom nodes for both deepwater and shallow water marine seismic surveys. The first of the two contracts is with an international marine geophysical services provider who will rent approximately 7,500 OBX-750E seabed ocean bottom wireless seismic data acquisition nodes. These nodes are designed to operate at a maximum depth of 750 meters and are used primarily for shallow offshore waters and transition zones, which include estuaries, marsh wetlands, and freshwater environments, such as rivers and lakes. The second contract is with another international marine geophysical service provider who will rent 1,900 OBX2-90 and OBX2-125 nodes to conduct a seismic survey in the North Sea, which is scheduled to start in the second calendar quarter of 2022. The Geospace OBX2-90 and OBX2-125 will be used in combination with towed streamers for highly reliable subsurface seismic imaging.
Halliburton Co downgraded to equal-weight from overweight at Stephens. Target increased however to $40 from $37, 3% downside.
ION Geophysical announced that it has been awarded a five-year contract by Brunei Shell Petroleum Co. (BSP), a joint venture between the Government of Brunei and Shell, for a digital solution to manage Marine Logistics.
KBR announced that it has been awarded a 7-year contract with an option to extend for another 3 years, for the provision of General Maintenance Services (GMS) by Saudi Aramco TOTAL Refining and Petrochemical Company (SATORP), for its project in Jubail, Kingdom of Saudi Arabia.
Matson announced preliminary first quarter financial results, provided a business update and announced that its first quarter earnings call will be held on May 3, 2022. "Matson is off to a solid start in 2022 with higher year-over-year operating income in both Ocean Transportation and Logistics," said Chairman and Chief Executive Officer Matt Cox. Mr. Cox added, "In our domestic ocean tradelanes, we continued to see steady demand with higher year-over-year volumes in Alaska and Guam, and demand in Hawaii comparable to the level achieved in the year ago period. In Logistics, operating income increased year-over-year with strength across all of the business lines as as we continued to see elevated goods consumption, inventory restocking and favorable supply and demand fundamentals in our core markets. As a result, Matson expects first quarter operating income for Ocean Transportation of $410.0 to $415.0 million and Logistics operating income of $16.0 to $17.0 million. We also expect first quarter 2022 net income and diluted EPS to be $329.5 to $338.0 million and $8.00 to $8.20, respectively."
TechnipFMC has been awarded a significant integrated Engineering, Procurement, Construction, and Installation contract by Wintershall Dea Norge AS for its Maria revitalization project. The project will boost production at the existing Maria field in the Norwegian Continental Shelf. The contract includes subsea trees, spools, jumpers, and flexible pipes.
U.S. Silica Holdings said that part of its Industrial and Specialty Products business will increase prices for most of its non-contracted diatomaceous earth, perlite and cellulose products used primarily in food and beverage filtration, renewable diesel, catalysts, paints and coatings, plastics and industrial oil. Price increases will range up to 25 percent, depending on the product and grade. The price increases are effective for shipments starting May 15, 2022.
DRILLERS
No significant news.
REFINERS
No significant news.
MLPS & PIPELINES
DT Midstream announced that it has joined Cheniere Energy, other midstream companies, technology providers, and leading academic institutions to implement quantification, monitoring, reporting and verification (QMRV) of greenhouse gas (GHG) emissions from midstream systems serving Cheniere’s LNG terminal. The collaborative intends to improve the overall understanding of GHG emissions and further the deployment of advanced monitoring technologies and operating protocols throughout the natural gas supply chain.
DCP Midstream, LP announced that the board of directors of its general partner declared a first quarter 2022 Common Unit cash distribution of $0.39 per unit, or $1.56 per unit on an annualized basis. This quarterly Common Unit distribution will be paid May 13, 2022 to common unitholders of record at the close of business on April 29, 2022. In addition, the board of directors declared distributions for preferred units. A semi-annual Series A Preferred Unit cash distribution of $36.875 per unit will be paid June 15, 2022 to preferred unitholders of record at the close of business on June 1, 2022. A quarterly Series B Preferred Unit cash distribution of $0.4922 per unit will be paid June 15, 2022 to preferred unitholders of record at the close of business on June 1, 2022. A quarterly Series C Preferred Unit cash distribution of $0.4969 per unit will be paid July 15, 2022 to preferred unitholders of record at the close of business on July 1, 2022.
Barksdale Air Force Base in Louisiana reported two injuries along with a small fire from a natural gas pipeline explosion on the East Reservation of the base. The explosion resulted in a small fire that impacted about half an acre of land, with no further damage to installation property, the U.S. Air Force said in a statement. The incident occurred on a 10-inch (25.4 cm) natural gas gathering line located on the base, a spokesperson for Energy Transfer LP said, adding, "the line was immediately shut in and the area is secure."
EnLink Midstream, LLC’s Board of Directors declared a cash distribution of $0.1125 per common unit for the first quarter of 2022, which is unchanged from the fourth quarter 2021 distribution. The first quarter 2022 cash distribution will be paid on May 13, 2022, to unitholders of record on April 29, 2022.
MARKET COMMENTARY
U.S. stock index futures were little changed ahead of key earnings from major growth and technology companies like Tesla, while Netflix plunged after saying it lost subscribers in the first quarter. European shares rose after a few positive earnings reports lifted sentiment. In major Asian stock markets, China shares closed lower after the central bank surprisingly kept its benchmark lending rates unchanged, while Japanese stocks advanced as heavyweight technology stocks tracked overnight Wall Street gains. Meanwhile, the dollar climbed to a fresh two-decade peak to the yen in Asian trading after the Bank of Japan stepped into the market again to defend its ultra low interest rate policy, but eased later to trade lower against the Japanese currency. In commodities, oil prices rebounded from sharp losses in the previous session as a drop in U.S. oil inventories and concerns about tighter supplies from Russia and Libya drove a recovery, while gold prices were little changed. Later in the day, the U.S. Federal Reserve issues its "Beige Book" of economic conditions from late February to early April.
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