Oil Prices Down as China Renews Restrictions, Cancels Flights Due to Covid Resurgence
SECTOR COMMENTARY:
Energy stocks are reversing yesterday’s losses amid a rebound in broader markets and supported by very strong corporate earnings results throughout the sector. U.S. equity-index futures edged higher while stocks in Europe climbed to a record as mostly positive earnings reports helped offset fresh concerns about China’s clampdown on the gaming and technology sector. Energy shares led the advance index after BP Plc followed its Big Oil peers by increasing dividends and share buyback.
Oil prices are lower as China is renewing restrictions and canceling flights as a Covid-19 resurgence in Asia’s top oil consumer sends jitters across the crude market. “China’s economic activity continued to ease in July, with the official Manufacturing Purchasing Managers Index falling to 50.4 from 50.9 in June,” ANZ said. “Manufacturing activity also slowed in the U.S., with the ISM index falling to 59.5” - the lowest reading since January - from 60.6 in June.
Natural gas is up +1.1% to $3.978 on warm weather and bullish expectations for inventory data. Preliminary estimates for EIA weekly storage data due Thursday has a build of +15 to +25 Bcf which compares to the 5-year average of +30 Bcf.
BY SECTOR:
BP said it will lift its dividend by 4% and ramp up share buybacks after second-quarter profits rose to $2.8 billion on the back of higher oil and gas prices, beating expectations, Reuters reported. BP's underlying replacement cost profit, the company's definition of net earnings, reached $2.8 billion in the second quarter, compared with analysts' expectations for a $2.15 billion profit. That compares with $2.63 billion in profit in the first quarter of the year and a loss of $6.68 billion a year earlier when it took large non-cash charges. Reported profit for the quarter was $3.1 billion, compared with $4.7 billion for the first quarter 2021.
Shell Brasil Petróleo Ltda. (Shell Brasil) announced a final investment decision taken by the Libra consortium, operated by Petrobras, to contract the Mero-4 floating production, storage and offloading (FPSO) vessel to be deployed at the Mero field in the Santos Basin offshore Brazil. This is the fourth production system to be deployed in the Mero field. Final investment decisions were previously taken for the Mero 1, Mero 2 and Mero 3 FPSOs.
ConocoPhillips reported second-quarter 2021 earnings of $2.1 billion, or $1.55 per share, compared with second-quarter 2020 earnings of $0.3 billion, or $0.24 per share. Excluding special items, second-quarter 2021 adjusted earnings were $1.7 billion, or $1.27 per share, compared with a second-quarter 2020 adjusted loss of $1.0 billion, or ($0.92) per share. Special items for the current quarter included a gain on Cenovus Energy shares and a contingent payment from Cenovus associated with the 2017 Canadian disposition, partially offset by corporate expenses.
Continental Resources announced its second quarter 2021 operating and financial results. The Company reported net income of $289.3 million, or $0.79 per diluted share, for the quarter ended June 30, 2021. Adjusted net income for second quarter 2021 was $332.8 million, or $0.91 per diluted share (non-GAAP). The Company recently announced that the Board of Directors approved increasing the Company's quarterly fixed dividend to $0.15 per share. This dividend is a $0.04 increase to the Company's $0.11 per share quarterly dividend paid in second quarter 2021, triple the Company's initial dividend paid in fourth quarter 2019 and equates to an approximately 1.7% annualized dividend yield.
Diamondback Energy announced financial and operating results for the second quarter ended June 30, 2021. Diamondback's second quarter 2021 net income was $311 million, or $1.71 per diluted share. Adjusted net income was $437 million, or $2.40 per diluted share. In addition, the Company's Board of Directors declared a cash dividend of $0.45 per common share for the second quarter of 2021 payable on August 19, 2021, to stockholders of record at the close of business on August 12, 2021.
Pioneer Natural Resources reported financial and operating results for the quarter ended June 30, 2021. Pioneer reported second quarter net income attributable to common stockholders of $380 million, or $1.54 per diluted share. These results include the effects of noncash mark-to-market adjustments and certain other unusual items. Excluding these items, non-GAAP adjusted income for the second quarter was $629 million, or $2.55 per diluted share. Cash flow from operating activities for the second quarter was $1.5 billion.
Pioneer Natural Resources announced that its Board of Directors declared a quarterly cash variable dividend of $1.51 per share on Pioneer’s outstanding common stock, representing approximately $370 million of capital returned to shareholders. The dividend is payable September 17, 2021, to stockholders of record at the close of business on September 3, 2021.
Smart Sand announced that it has entered into a new multi-year Master Product Purchase Agreement with EQT Production Company, a subsidiary of EQT. Under the new agreement, the Company will continue to supply EQT with frac sand in the Appalachian Basin, including at a new transloading terminal in southwestern Pennsylvania that the Company intends to have in service by the end of the year. The agreement has a three-year term, subject to earlier termination if the new transloading terminal is not in service by the end of 2021.
Talos Energy announced the addition of an affiliate of DNB ASA to its reserves-based loan syndicate, adding an additional $75 million commitment to the credit facility, resulting in approximately $380 million of pro forma liquidity as of June 30, 2021. DNB has joined the Company's lending syndicate as a Joint Lead Arranger, Joint Bookrunner and Syndication Agent and is the thirteenth commercial bank in the credit facility, the maturity for which was recently extended to November 2024.
Canacol Energy provided the following information concerning its July 2021 natural gas sales, the Aguas Vivas appraisal drilling program, and the Corporations share buy back program. Realized contractual natural gas sales were 190 million standard cubic feet per day for July 2021, up from 175 MMscfpd in June 2021. The Aguas Vivas 2 appraisal well was spud on June 12, 2021 and reached a total depth of 8,728 feet measured depth on July 27, 2021.
Fluor announced that its joint venture with Austin Bridge & Road was selected by the Texas Department of Transportation (TxDOT) to design, construct and maintain Phase 2 of the Interstate 35E (I-35E) project from I-635 in Dallas to the Denton County line in Carrollton, Texas. Fluor will book its share of the approximately $640 million contract value in the third quarter of 2021.
KBR and Petron Scientech announced that they have signed an alliance agreement to license differentiated, energy-efficient, and sustainable technologies for renewable chemicals production.
NCS Multistage Holdings announced its results for the quarter ended June 30, 2021.Total revenues were $21.5 million, a 146% year-over-year increase. Net loss was $(5.8) million, a $3.0 million improvement compared to $(8.8) million in the second quarter of 2020; loss per diluted share of $(2.41). Adjusted net loss was $(4.9) million and adjusted loss per diluted share was $(2.04).
TETRA Technologies announced second quarter 2021 results. Second quarter 2021 revenue was $102 million, a sequential increase of 32% over the first quarter of 2021 reflecting improvements by all business segments, including the seasonal peak in Northern Europe chemicals sales. Net loss before discontinued operations was $6.7 million, inclusive of $4.7 million of non-recurring charges and expenses. Net loss per share from continuing operations in the second quarter was $0.05.
Transocean reported a net loss attributable to controlling interest of $103 million, $0.17 per diluted share, for the three months ended June 30, 2021. Second quarter 2021 results included net favorable item of $6 million, or $0.1 per diluted share, related to discrete tax items. After consideration of this net favorable item, second quarter 2021 adjusted net loss was $109 million, $0.18 per diluted share, compared to $117 million adjusted net loss, $0.19 per diluted share, in the first quarter of 2021.
Valaris reported second quarter 2021 results. Revenues were $203 million and $90 million for the Successor and Predecessor periods, respectively. Combined revenues declined to $293 million in the second quarter 2021 from $307 million in the first quarter. Excluding reimbursable items, Combined revenues declined to $261 million in the second quarter from $277 million in the prior quarter primarily due to lower revenues from the floater fleet as two drillships working in the first quarter were between contracts for most of the second quarter. Combined adjusted EBITDA of $17 million in the second quarter 2021 compared to $28 million in the prior quarter. Combined adjusted EBITDAR of $41 million in the second quarter 2021 compared to $39 million in the prior quarter.
CVR Energy announced a net loss of $6 million, or 6 cents per diluted share, on net sales of $1.8 billion for the second quarter of 2021, compared to net loss of $5 million, or 5 cents per diluted share, inclusive of a $41 million pre-tax charge related to a goodwill impairment recognized within its Nitrogen Fertilizer Segment, on net sales of $675 million for the second quarter of 2020. Second quarter 2021 EBITDA was $102 million, compared to second quarter 2020 EBITDA of $68 million.
HollyFrontier reported second quarter net income attributable to HollyFrontier stockholders of $168.9 million, or $1.03 per diluted share, for the quarter ended June 30, 2021, compared to a net loss of $(176.7) million, or $(1.09) per diluted share, for the quarter ended June 30, 2020.
The Sinclair Companies, a privately held company that wholly owns Sinclair Oil Corporation, announced that it has entered into definitive agreements to combine substantially all of Sinclair Oil’s refining, renewable diesel, and logistics assets with those of HollyFrontier and Holly Energy Partners. As part of the transaction, HollyFrontier will form a new parent company called “HF Sinclair Corporation” which will replace HollyFrontier as the public company trading on the NYSE.
Phillips 66 announced second-quarter 2021 earnings of $296 million, compared with a loss of $654 million in the first quarter of 2021. Excluding special items of $33 million, the company had adjusted earnings of $329 million in the second quarter, compared with a first-quarter adjusted loss of $509 million.
Energy Transfer joined The Environmental Partnership, a growing coalition of nearly 100 energy companies committed to continuously improving the industry’s environmental performance. The non-profit organization is focused on working with its members to adopt technology and best practices that will significantly reduce emissions.
Holly Energy Partners reported financial results for the second quarter of 2021. Net income attributable to HEP for the second quarter of 2021 was $55.7 million ($0.53 per basic and diluted limited partner unit), compared to $76.5 million ($0.73 per basic and diluted limited partner unit) for the second quarter of 2020. Revenues for the second quarter were $126.2 million, an increase of $11.4 million compared to the second quarter of 2020.
Phillips 66 Partners LP announced second-quarter 2021 earnings of $225 million, or $0.91 per diluted common unit. Cash from operations was $286 million, and distributable cash flow was $267 million. Adjusted EBITDA was $337 million in the second quarter, compared with $289 million in the prior quarter. On July 20, 2021, the general partner’s board of directors declared a second-quarter 2021 cash distribution of $0.875 per common unit, or $3.50 per unit on an annualized basis.
U.S. stock index futures rose as an upbeat corporate earnings season and a pickup in global M&A activity lifted demand for risky equities. Strong earnings updates from oil major BP, banks and others drove European stocks to record highs. In Asian equity markets, Japan's Nikkei index closed lower as rising cases of COVID-19 weighed on sentiment and Chinese shares were down on mounting regulatory concerns. Gold prices were caught in a tight range as investors held back from making large bets ahead of U.S. jobs data later this week, meanwhile the dollar lurked just off one-month lows. Oil prices rose on expectation of a continuous decline in U.S. oil inventories. Factory orders data is due for release later in the day.
NASDAQ ENERGY TEAM THOUGHT LEADERSHIP
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