Oil Prices Drop as Weak Growth in China Overshadows Potential Russian Crude Ban in Europe
The energy sector is set for a lower start, pressured by weakness in the crude complex and the major market futures. U.S. stocks fell and the dollar held near record highs as concerns about economic growth lingered ahead of an expected U.S. rate hike this week and data showed COVID-19 lockdowns have slowed down China’s factory activity.
WTI and Brent crude oil are down in early trading as concerns over weak economic growth in China overshadowed fears of a potential European ban on Russian crude which could increase supply constraints. As a result of ongoing COVID-19 lockdowns, China released data on Saturday showing that factory activity in the world's second-largest economy contracted for a second month to its lowest since February 2020. On the supply side, Libya's National Oil Corp said on Sunday it would temporarily resume operations at the Zueitina oil terminal after it declared force majeure in late April on some shipments as political protesters forced a number of oil facilities to suspend operations. Additionally, the increase in OPEC's oil output in April undershot the rise planned under a deal with allies, as declines in Libya and Nigeria offset supply increases by Saudi Arabia and other top producers.
Natural gas futures inched higher this morning as parts of the country move from heating demand to cooling demand, which could increase the amount of gas power generators burn to meet air conditioning loads and keep storage injections lower than usual in coming weeks.
BY SECTOR:
US INTEGRATEDS
Warren Buffett's Berkshire Hathaway dove into equity markets in the first quarter, spending more than $51 billion on stocks including a much larger stake in Chevron. The Chevron stake grew to $25.9 billion as of March 31 from just $4.5 billion three months earlier, as oil prices surged higher following Russia's invasion of Ukraine.
INTERNATIONAL INTEGRATEDS
Equinor announced that Hege Skryseth has been appointed executive vice president (EVP) for Technology, Digital & Innovation (TDI) business area. Elisabeth Birkeland will remain acting EVP until Skryseth joins Equinor.
Petrobras said that its Guanabara FPSO has started producing oil and natural gas at the Mero field, located in the pre-salt of the Santos Basin, on April 30.
Brazilian chemical maker Unigel is interested in purchasing a fertilizer project from Petrobras in the state of Mato Grosso do Sul, its chief executive told Reuters on Friday.
Shell Brasil Petróleo Ltda. (Shell Brasil), a subsidiary of Shell plc, announced the start of production of the FPSO Guanabara in the Mero field, offshore Santos Basin in Brazil. The FPSO Guanabara, which while under construction was also known as Mero-1, has an installed capacity of 12 million cubic meters of natural gas and 180,000 barrels of oil per day and initially has six producing wells and seven injector wells connected to the field.
TotalEnergies announced the start of production from the first development phase of the Mero field, located off the coast of Rio de Janeiro.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
As per SEC filing, on April 29, 2022, APA entered into two syndicated credit agreements for general corporate purposes that replaced and refinanced a syndicated credit agreement of its wholly owned subsidiary, Apache Corporation, a Delaware corporation. In connection with APA’s entry into the USD Agreement and the GBP Agreement, Apache terminatedUS$4.0 billion of commitments under the Credit Agreement, dated as of March 14, 2018, among Apache, the lenders and issuing banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and other agents party thereto. Apache has guaranteed obligations under each New Agreement effective until the aggregate principal amount of indebtedness under senior notes and debentures outstanding under Apache’s existing indentures is less than US$1.0 billion.
Civitas Resources Inc, names Chris Doyle President and CEO; effective 2-May-22.
ConocoPhillips announced that Tim Leach, previously executive vice president, Lower 48, has become advisor to the chief executive officer, effective May 1, 2022. In addition to his new role, Leach will continue serving as a member of the company’s board of directors. In conjunction with this change, the company also announced that Jack Harper, previously president, Permian for ConocoPhillips, and former president of Concho Resources, has assumed the role of executive vice president, Lower 48 and joined the ConocoPhillips executive leadership team, effective May 1, 2022.
Murphy Oil announced that it will redeem $200 million in aggregate principal amount of its 6.875% Senior Notes due 2024 on June 2, 2022, the redemption date for the Notes.
W&T Offshore announced the signing of a Memorandum of Understanding with Korea National Oil Corporation to jointly consider and pursue various opportunities in upstream oil and gas as well as other potential joint venture opportunities along the energy value chain in North America.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Halliburton announced senior executive leadership changes as part of its robust succession management process. Effective immediately, Lance Loeffler, executive vice president and chief financial officer (CFO) will assume the role of senior vice president of the Company’s Middle East North Africa (MENA) region. Halliburton Executive Vice President, Global Business Lines, and Chief Health, Safety & Environment Officer Eric Carre will assume the role of CFO.
KBR announced that it has embarked on a series of electric aircraft test flights for the UK Ministry of Defence (MoD) to assess the feasibility of environmentally friendly alternatives to current military aircraft, through its Affinity Capital Works Limited Joint Venture with Elbit Systems UK.
Pason Systems announced the director election results from its 2022 annual general meeting of shareholders held on April 28, 2022. Six nominees were elected as directors of Pason Systems to hold office until the next annual meeting of shareholders of Pason Systems or until their successors are elected or appointed.
Secure Energy Services announced that all of the nominees proposed as directors and listed in the management information circular and proxy statement dated March 15, 2022, were elected as directors of the Corporation at its Annual and Special Meeting of the Shareholders held on April 29, 2022.
US Silica Holdings Inc was downgraded to in line from outperform at Evercore ISI, target to $20 from $16.
US Well Services announces leadership changes. Kyle O'Neill to the position of President and CEO. Joel Broussard, the company's co-founder, President and CEO, will assume the role of chairman of the company's board. Josh Shapiro has been promoted to the role of CFO.
DRILLERS
In connection with the business combination between The Drilling Company of 1972 A/S (“Maersk Drilling”) and Noble announced on 10 November 2021, Noble has made a filing on Form 8-K providing an update on the ongoing merger control process for obtaining clearance in the UK for the Business Combination. The process remains ongoing following the UK Competition and Markets Authority’s Phase 1 decision on 22 April 2022 pursuant to which the UK CMA stated that the transaction gives rise to a realistic prospect of a substantial lessening of competition and that a remedy to address such effect would be required to avoid a reference to a Phase 2 review. As a result, Noble and possibly Maersk Drilling plan to offer to divest certain jackup rigs currently located in the North Sea to seek to obtain conditional antitrust clearance from the UK CMA in Phase 1 of the merger control process. The Remedy Rigs will comprise the Noble Hans Deul, Noble Sam Hartley, Noble Sam Turner, Noble Houston Colbert, and either the Maersk Innovator or the Noble Lloyd Noble, both of which are a CJ-70 design. The Parties expect there to be clarity on which of the CJ-70 rigs will be included in the Remedy Rigs in the coming weeks. On this basis, the Parties are examining different options to divest the Remedy Rigs. The duration and outcome of the UK CMA review process remains uncertain. If the Parties are able to obtain a conditional Phase 1 antitrust clearance from the UK CMA, the closing of the business combination is expected to occur in mid-2022.
REFINERS
Phillips 66 announced it is transitioning its site assessment program to IPSOS Channel Performance for all Phillips 66, 76 and Conoco branded sites. IPSOS Channel Performance will elevate the Phillips 66 Excellence in Action Site Assessment Program with valuable industry insights, thought leadership and better results.
MLPS & PIPELINES
Enterprise Products Partners L.P. reported net income attributable to common unitholders of $1.3 billion, or $0.59 per unit on a fully diluted basis, for the first quarter of 2022, compared to $1.3 billion, or $0.61 per unit on a fully diluted basis, for the first quarter of 2021. Net income for the first quarters of 2022 and 2021 was reduced by non-cash, asset impairment charges of approximately $14 million, or $0.01 per fully diluted unit, and $66 million, or $0.03 per fully diluted unit, respectively. Distributable Cash Flow was a record $1.8 billion for the first quarter of 2022 compared to $1.7 billion for the first quarter of 2021. Distributions declared with respect to the first quarter of 2022 increased 3.3 percent to $0.465 per unit, or $1.86 per unit annualized, compared to distributions declared for the first quarter of last year. DCF provided 1.8 times coverage of the distribution declared with regard to the first quarter of 2022. Enterprise retained $814 million of DCF for the first quarter of 2022. Adjusted cash flow from operations, which is defined as net cash flow provided by operating activities before the net effect of changes in operating accounts, was $2.0 billion for the first quarter of 2022 compared to $1.9 billion for the first quarter of 2021. Enterprise’s payout ratio, comprised of distributions to common unitholders and partnership unit buybacks, for the twelve months ended March 31, 2022 was 58 percent of Adjusted CFFO. Adjusted Free Cash Flow for the twelve months ended March 31, 2022 was $2.1 billion. After excluding $3.2 billion used for the acquisition of Navitas Midstream Partners, LLC, the partnership’s payout ratio of Adjusted FCF for this period was 80 percent.
Green Plains Partners LP Q1 EPS $0.44, distributable cash flow $11.2M vs FS $11.3M, adj EBITDA $12.6M vs 1 FS estimate of $12.6M.
NextDecade Corporation announced the execution of a 15-year sale and purchase agreement with ENGIE S.A. for the supply of liquefied natural gas from NextDecade's Rio Grande LNG export project in Brownsville, Texas.
NuStar Energy L.P. announced that it has closed on the sale of its terminal in Nova Scotia, Canada to EverWind Fuels for $60 million. The 7.8 million-barrel storage terminal is located at Point Tupper on the Strait of Canso, near Port Hawkesbury, Nova Scotia. The companies first announced this sale on February 14, 2022.
TC Energy announced that at its 2022 annual meeting of shareholders, each of the following 12 nominees were elected as directors of TC Energy on a vote by ballot to serve until the next annual meeting of shareholders of TC Energy, or until their successors are elected or earlier appointed.
MARKET COMMENTARY
U.S. stock index futures edged higher after closing out a rough April, as investors turned their attention to the Federal Reserve, which is widely expected to raise interest rates this week to curb overheating prices. European stocks fell as data that signaled a steeper pace of contraction in China's factory activity dampened risk appetite, while the closure of London and most Asian markets for a holiday reduced volumes. Meanwhile, Japanese shares ended lower in volatile trade. The dollar advanced, with investors preparing for a busy week of central bank meetings, while gold prices slipped. Oil prices fell on concerns about weak economic growth in China. Manufacturing PMI and construction spending numbers are due later in the day.
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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