Oil Prices Climb on Renewed Russia-Ukraine Tensions
The energy sector is set for a higher start, supported by strength in the underlying commodities but pressured by the major equity futures which are trading lower as investors wait for minutes of the Federal Reserve’s last meeting. The market is also digesting consumer data released this morning which show retail sales surged 3.8% in January, much more than expected amid inflation rise. Western skepticism over Russian claims of a withdrawal of some troops near Ukraine kept caution in the air as U.S President Joe Biden said there was no proof of a pullback yet. Additionally, Kyiv hinted at Russian involvement in a cyber-attack on Ukraine’s defense ministry website.
WIT and Brent crude oil futures are trading higher as investors weighed conflicting statements on the possible withdrawal of some Russian troops from around Ukraine amid tight global supplies and recovering fuel demand. Moscow announced a partial pullback of troops from Ukraine's borders, but NATO Secretary-General Jens Stoltenberg said on Wednesday that the alliance had not seen any de-escalation and that Russia was continuing its military build-up. Moscow is also prepared to re-route supplies to other markets should new Western sanctions target its energy companies. Russia’s Finance minister Anton Siluanov did not say how the nation would divert its energy exports but said that the country’s foreign exchange reserves, National Wealth Fund and a budget surplus should shield its economy and banks from any possible sanctions hit, which has led the U.S. and its allies to consider new sanctions against Russia.
Natural gas futures jumped more than 6% to a near two-week high on forecasts for colder temperatures and higher heating demand through early March than previously expected. Traders noted the price increase came despite the continued slow return of U.S. production from cold weather-related reductions over the past month, and a 9% drop in European gas futures due to what looks like an easing of tensions between Russia and Ukraine.
BY SECTOR:
US INTEGRATEDS
ExxonMobil welcomed an upcoming vote by workers at its Beaumont, Texas, refinery on a new contract offer, saying its terms ensure the refinery can stay profitable over the long-term.
INTERNATIONAL INTEGRATEDS
BP said it would shut down one oil platform and one gas platform in Azerbaijan in 2022 for planned maintenance, without giving a planned timeline.
Shares of Vaar Energi fell 4.9% as it made its Oslo stock market debut on Wednesday. A spin-off from Italy's Eni, Vaar declined to 26.64 crowns from 28 crowns in the initial public offering (IPO), which had valued the group at 69.9 billion crowns ($7.85 billion).
Versalis, Eni's chemical company, announced that it has begun the production of bioethanol from lignocellulosic biomass at Crescentino (Vercelli).
On behalf of the partnerships Equinor is exercising options worth NOK 8 billion with Archer, KCA Deutag and Odfjell Drilling. The contracts include drilling, completion, intervention services, plugging, maintenance and modifications on 19 of Equinor's permanent installations, maintaining strong ripple effects.
The Petroleum Safety Authority Norway has given Repsol Norge consent for life extension of the Blane field.
Petrobras said it has started the non-binding phase for the sale of its 20% stake in Texas-based MP Gulf of Mexico LLC, which owns offshore oilfields in the region.
Petrobras, following up on the release disclosed on 04/09/21, informed that it concluded, together with its subsidiary Petrobras Gás S.A., the transaction to finalize the pending litigation with Termogás S.A. As a result of this transaction, Termogás acquired the shares of Companhia Maranhense de Gás (Gasmar) held by Gaspetro, which correspond to 23.5% of the total capital stock.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Comstock Resources reported revenues in the fourth quarter of 2021 totaled $379.9 million (inclusive of realized hedging losses of $275.5 million). Net cash provided by operating activities (excluding changes in working capital) generated in the fourth quarter was $249.8 million, and net income available to common stockholders for the fourth quarter of 2021 was $356.0 million ($1.30 per diluted share). Net income in the quarter included a pre-tax $469.8 million unrealized gain on hedging contracts held for risk management and a $162.2 million loss on the sale of the Company's Bakken assets. Excluding these items and certain other unusual items, adjusted net income available to common stockholders for the fourth quarter of 2021 was $98.8 million, or $0.37 per diluted share.
Crescent Energy Co is set to acquire Uinta Basin assets previously owned by EP Energy for $815M, all cash. Acquiring over 400 producing vertical and horizontal wells. Will provide Crescent with more than 145,000 contiguous net acres in Utah. 2022 preliminary pro forma outlook: Crescent plans to operate two rigs in the Uinta Basin for the remainder of the year. The capital associated with this program is expected to be $225 - $275M and Crescent's revised 2022 capital budget is expected to be $600 - $700M. Annualized pre forma mid-point: Adj EBITDA $1.260B, production 148K boed.
Devon Energy reported net earnings of $1.5 billion, or $2.23 per diluted share, in the fourth quarter of 2021. Adjusting for items analysts typically exclude from estimates, the company’s core earnings were $935 million, or $1.39 per diluted share.
Devon Energy announced its board of directors declared a record high fixed-plus-variable dividend of $1.00 per share based on the fourth-quarter financial performance. The dividend is payable on Mar. 31, 2022 to shareholders of record at the close of business on Mar. 14, 2022. As part of the fourth-quarter dividend announcement, the board approved an increase in the fixed dividend of 45 percent or $0.05 per share. After the fixed dividend is funded, up to 50 percent of the excess free cash flow each quarter will be distributed to shareholders through the variable dividend. The company also accelerated cash returns through the execution of its share-repurchase program. In the fourth quarter, Devon repurchased 14 million shares at a total cost of $589 million. Given this substantial progress, the board has expanded the company’s share-repurchase authorization by 60 percent to $1.6 billion, which is equivalent to 5 percent of Devon’s market capitalization.
Earthstone Energy provided an operations update, released 2022 guidance and announced its year-end 2021 estimated proved reserves. The Company has estimated its oil and gas sales volumes for the fourth quarter of 2021 to be approximately 2.78 MMBoe or an average of approximately 30,244 Boepd (43% oil). For the year ended December 31, 2021, the Company estimates its annual sales volumes grew 62% to approximately 9.06 MMBoe, or an average of approximately 24,809 Boepd (48% oil) compared to 15,276 Boepd (57% oil) reported for 2020. The Company also announced its year-end 2021 SEC total estimated proved reserves of approximately 147.6 MMBoe and $2.0 billion of PV-10. Incorporating the closing of the Chisholm Acquisition and the pending Bighorn Acquisition and utilizing NYMEX strip pricing, total reserves as of year-end were 330.2 MMBoe and $3.9 billion of PV-10.
Talos Energy announced that it had reached an agreement with a large Louisiana landowner to lease approximately 26,000 acres along the Mississippi River industrial corridor for future carbon capture and sequestration projects. Talos also announced today, in a separate press release, its entry into a memorandum of understanding with EnLink Midstream, LLC to provide integrated CO2 transportation solutions in the region. These announcements mark the first major CCS project in the Baton Rouge / New Orleans area, known as the "River Bend CCS" project, and the first with an integrated midstream solution dedicated to permanent sequestration activities. Talos will be the project manager and operator of the injection, storage and monitoring and will be joined by its partner, Storegga Limited.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
MRC Global reported net loss attributable to common stockholders for the fourth quarter of 2021 was ($10) million, or ($0.12) per diluted share, as compared to a net loss of ($11) million, or ($0.13) per diluted share in the fourth quarter of 2020. Adjusted net income attributable to common stockholders for the fourth quarter of 2021 was $14 million, or $0.17 per diluted share, as compared to an adjusted net loss of ($4) million, or ($0.05) per diluted share in the fourth quarter of 2020. MRC Global’s fourth quarter 2021 gross profit was $107 million, or 15.6% of sales, as compared to gross profit of $90 million, or 15.5% of sales, in the fourth quarter of 2020. Gross profit for the fourth quarter of 2021 and 2020 each reflect expense of $30 million and $1 million, respectively, in cost of sales relating to the use of the last-in, first out (LIFO) method of inventory cost accounting. Gross profit for the fourth quarter of 2020 was also negatively impacted by $12 million of pre-tax charges related to the non-cash write-off of excess and obsolete inventory. Adjusted gross profit, which excludes these items, as well as others, was 21.6% in the fourth quarter of 2021 and 19.7% in the fourth quarter of 2020.
Vulcan Materials announced results for the quarter ended December 31, 2021. Total revenues increased 37 percent to $1.606 billion, driven by the addition of U.S. Concrete (USCR) operations as well as strong growth in the Company's legacy aggregates business. Earnings attributable to Vulcan from continuing operations were $1.04 per diluted share. Excluding discrete charges adjusted out of EBITDA, earnings from continuing operations were $1.25 per diluted share.
Vulcan Materials announced that Suzanne Wood has decided to retire as Senior Vice President and Chief Financial Officer effective September 1, 2022. Ms. Wood will then remain with the Company in a consulting capacity until the end of the year. The Board of Directors has appointed Mary Andrews Carlisle, Vice President – Finance, as Ms. Wood's successor, effective September 1, 2022. Additionally, Vulcan announced that Darren Hicks, who is currently Vulcan's Vice President – Human Resources, has been appointed to the newly-created role of Senior Vice President and Chief Human Resources Officer, effective March 1, 2022.
DRILLERS
No significant news.
REFINERS
Valero Energy announced the early tender results of its previously announced cash tender offers to purchase its outstanding 3.650% Senior Notes due 2025, its outstanding 2.850% Senior Notes due 2025, the outstanding 4.375% Senior Notes due 2026 issued by Valero Energy Partners LP and guaranteed by Valero, its outstanding 3.400% Senior Notes due 2026, its outstanding 2.150% Senior Notes due 2027, its outstanding 4.350% Senior Notes due 2028 and the outstanding 4.500% Senior Notes due 2028 issued by Valero Energy Partners LP and guaranteed by Valero, and that it has (1) increased the Series Tender Cap (as defined in the Offer to Purchase dated February 2, 2022) for the 3.650% 2025 Notes and 2.850% 2025 Notes from a maximum aggregate principal amount of $500,000,000 to a maximum aggregate principal amount of $579,319,000 and (2) increased the maximum aggregate purchase price for the Tender Offers from up to a maximum aggregate purchase price of $1,000,000,000 to up to a maximum aggregate purchase price sufficient to purchase all of the 3.400% 2026 Notes validly tendered and not validly withdrawn at or prior to the Early Tender Date.
MLPS & PIPELINES
EnLink Midstream, LLC reported net income of $88.6 million and $142.9 million for the fourth quarter of 2021 and full-year 2021, respectively, and net cash provided by operations of $258.1 million and $857.3 million for the fourth quarter and full-year 2021, respectively.
Sunoco LP Q4 adj EBITDA $198M vs FactSet $194.8M, DCF $143M vs Fs $133.6M, EPS $0.95 vs Fs $1.08, revenue $4.83B vs FS $4.72B. 2022 guidance: Adj EBITDA $770-$810M vs FactSet $787.1M, fuel volumes 7.7 and 8.1 billion gallons, fuel margins $0.105 and $0.115/gallon, opex $490-$500M, growth capex at least $150M, maintenance capex $50M
SFL Corporation announced its preliminary financial results for the quarter ended December 31, 2021: Operating revenue of approximately $152.1 million, and net profit of $80.1 million in the fourth quarter; Adjusted EBITDA of $113.4 million from consolidated subsidiaries, plus an additional $7.9 million adjusted EBITDA from associated companies. The Board of Directors has declared a quarterly cash dividend of $0.20 per share. The dividend will be paid on or around March 29, to shareholders on record as of March 16, and the ex-dividend date on the New York Stock Exchange will be March 15, 2022.
CIBC downgraded TC Energy to Neutral from Outperformer.
Raymond James downgraded TC Energy to Outperform from Strong Buy.
MARKET COMMENTARY
Futures of major U.S. indexes edged lower, ahead of the minutes from the Fed's January meeting, as investors turned cautious after a sharp rally in the previous session while keeping an eye on Russia-Ukraine tensions. Most European stocks made limited gains, although accelerating inflation kept a lid on Britain's blue-chip index. Shares in Hong Kong and China ended higher as slowing inflation in the world's second-largest economy raised hopes of more policy easing. The dollar shed some of its geo-political premium, enhancing appeal for greenback-denominated bullion. Oil prices recouped losses to trade higher. Data including retail sales, manufacturing output; and import and export prices are scheduled for release later in the day. Nvidia, American International Group and Applied Materials are expected to post their earnings after market close.
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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