Oil Prices Surge, OPEC+ Agrees to Modest Output Increase
Energy stocks are set to open mostly higher, with surging profits being reported across the sector, and large gains in oil and natural gas prices this morning underpinning the sector. A slew of earnings releases across the E&P, OFS and driller groups reported last night and this morning were lifted by booming commodity prices, which has driven robust profits. The theme of passing through surplus cash flow to investors remained prevalent, with dividends boosted widely and share repurchase announcements both announced and increased.
ConocoPhillips, Shell, Pioneer Natural Resources, California Resources, Chesapeake Energy were among those that either increased dividends, and initiated or increased share repurchases.
Oil prices are surging, with WTI trading around $109.15 and Brent crude oil at $111.75, amid tight global oil supply-demand dynamics. Meanwhile, OPEC+ agreed on Thursday to another modest monthly oil output increase, arguing that the producer group could not be blamed for disruptions to Russian supply and saying China's coronavirus lockdowns threatened the outlook for demand.
Natural gas futures are higher by 0.8%, trading around $8.50, near fresh 13-year highs. Stable production, tight supply, and Russian embargos are all contributing. Analysts expect a build of 69 bcf in today’s weekly inventory report.
BY SECTOR:
US INTEGRATEDS
FuelCell Energy announced that it has extended the term of its joint development agreement with ExxonMobil Technology and Engineering Company through December 31, 2022. The agreement will enable the companies to continue working to advance fuel cell carbon capture and storage technology closer to commercialization and to explore market applications with a focus on three areas.
INTERNATIONAL INTEGRATEDS
Eni is in favour of a price cap on gas that is set at a European and not national level, the energy group's chief financial officer said.
Equinor and Aker BP have signed a memorandum of understanding (MoU) for transfer of the Krafla operatorship from Equinor to Aker BP, making Aker BP the operator of all discoveries in the NOAKA area - Krafla, Fulla and North of Alvheim.
Shell plc reported strong Q1 2022 Adjusted Earnings of $9.1 billion in a volatile geopolitical and macroeconomic environment. Adjusted EBITDA was $19.0 billion in Q1 2022 versus $16.3 billion in Q4 2021. Dividend increased by ~4% to $0.25 per share for Q1 2022.
Shell plc announced the commencement of trading in the second tranche of its US$ 8.5 billion share buyback programme previously announced on February 3, 2022. The company completed the first tranche of this share buyback programme on May 4, 2022.
A group of shareholders in TotalEnergies urged the country's financial watchdog AMF to make sure that a rejected climate resolution will be put on the agenda at the next shareholders' meeting. The group of 11 investors, which jointly holds 0.78% of TotalEnergies' share capital, cited an April 27 decision by the company's board to reject the proposed resolution "for legal reasons".
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
APA announced its financial and operational results for the first-quarter 2022. APA reported net income attributable to common stock of $1.9 billion, or $5.43 per diluted share. When adjusted for items that impact the comparability of results, most notably the gains on the closing of the Altus Midstream business combination in February and the sale of the Delaware Basin minerals package in March, APA’s first-quarter earnings were $668 million, or $1.92 per diluted share. Net cash provided by operating activities was $891 million, and adjusted EBITDAX was $1.7 billion. The company generated $675 million in free cash flow during the quarter, and at recent strip oil and gas prices, expects to generate approximately $2.9 billion of free cash flow for the full year 2022.
California Resources reported first quarter 2022 operational and financial results. Net loss attributable to common stock was $175 million, or a loss of $2.23 per diluted share. When adjusted for items analysts typically exclude from estimates including noncash mark-to-market losses and gains on asset divestitures, the Company’s adjusted net income was $91 million, or $1.13 per diluted share. CRC increased the Share Repurchase Program by $300 million to $650 million and extended the term of the program through June 30, 2023. After the repurchases through April 29, 2022, and the $300 million increase, CRC has $411 million available for future potential share repurchases.
NEXT Carbon Solutions, a subsidiary of NextDecade and California Resourcesjointly announced the execution of an agreement (Agreement) to further explore the decarbonization of CRC’s Elk Hills Power Plant. Through the deployment of NCS’ proprietary post-combustion carbon capture processes for CRC’s CalCapture CCS+ project, the companies seek to capture and utilize the emissions from the Elk Hills Power Plant for permanent storage in oil producing reservoirs.
Callon Petroleum reported results of operations for the three months ended March 31, 2022. The Company reported net income of $39.7 million, or $0.64 per diluted share, adjusted EBITDA of $393.7 million, and adjusted income of $212.7 million, or $3.43 per diluted share.
Chesapeake Energy reported 2022 first quarter financial results. Net loss totaled $764 million, or $6.32 per diluted share; adjusted net income of $436 million, or $3.09 per diluted share.
Kimmeridge, an activist investment firm that focuses on oil and gas exploration and production companies, told Reuters it has built a stake in Chesapeake Energy and started talks with the management team on changes to boost its value.
ConocoPhillips reported first-quarter 2022 earnings of $5.8 billion, or $4.39 per share, compared with first-quarter 2021 earnings of $1.0 billion, or $0.75 per share. Excluding special items, first-quarter 2022 adjusted earnings were $4.3 billion, or $3.27 per share, compared with first-quarter 2021 adjusted earnings of $0.9 billion, or $0.69 per share. Special items for the current quarter were primarily comprised of a tax benefit related to closure of an audit, a gain associated with the Indonesia divestiture and a gain on Cenovus Energy equity. In addition, ConocoPhillips announced a $2 billion increase in expected 2022 returns of capital to $10 billion. The company declared both an ordinary dividend of 46 cents per share and a third-quarter variable return of cash (VROC) payment of 70 cents per share.
Continental Resources announced its first quarter 2022 financial results, increased shareholder return of capital, and enhanced 2022 projections. Highlights include: $1.50 B Cash Flow from Operations (CFO) & $1.15 B Free Cash Flow (FCF) (Non-GAAP); $597.8 MM Net Income; $1.65 per Diluted Share ($960.0 MM Adj. Net Income; $2.65 per Adj. Share (Non-GAAP)). The Company's Board of Directors recently approved increasing the Company's quarterly dividend to $0.28 per share, payable on May 23, 2022, to stockholders of record on May 9, 2022. This dividend represents a $0.05, or approximately 22%, increase to the Company's $0.23 per share quarterly dividend paid in first quarter 2022 and equates to an approximate 2.0% annualized dividend yield, as of May 2, 2022, which exceeds the S&P 500 average yield. The Company continues to target maintaining a 2.0% or greater annualized dividend yield long term.
Denbury provided its first quarter 2022 financial and operating results. Total revenues and other income in the first quarter of 2022 were $412 million, a 64% increase over first quarter 2021 levels, supported predominantly by higher oil price realizations. Denbury’s first quarter 2022 average pre-hedge realized oil price was $93.17 per barrel (“Bbl”), which was $1.37 per Bbl below the daily average NYMEX WTI oil price for the period. The Company’s average oil price differential in both the Rocky Mountain and Gulf Coast regions has remained relatively consistent over the last several quarters, despite the significant increase in NYMEX oil prices.
Denbury announced that its Board of Directors has authorized a share repurchase program under which the Company may repurchase up to $250 million of its outstanding shares of common stock, which represent more than 7% of Denbury’s current market capitalization.
Earthstone Energy announced financial results for the three months ended March 31, 2022. Net loss attributable to Earthstone Energy was $33.5 million, or $(0.53) per Diluted Share. Net loss was $51.9 million, or $(0.53) per Adjusted Diluted Share. Adjusted net income was $76.2 million, or $0.78 per Adjusted Diluted Share.
Rising Phoenix Royalties reveals the purchase of an overriding royalty interest from an undisclosed seller in the SCOOP/Woodford Basin, located in McClain County, OK. EOG Resources is the well-site Operator.
For the first quarter of 2022, Laredo Petroleum reported a net loss attributable to common stockholders of $86.8 million, or $5.18 per diluted share, which included a non-cash loss on derivatives, net, of $200.4 million, or $11.95 per diluted share. Adjusted Net Income1 for the first quarter of 2022 was $88.2 million, or $5.17 per adjusted diluted share. Adjusted EBITDA for the first quarter of 2022 was $222.1 million.
Marathon Oil reported first quarter 2022 net income of $1,304 million, or $1.78 per diluted share, which includes the impact of certain items not typically represented in analysts' earnings estimates and that would otherwise affect comparability of results. The adjusted net income was $749 million, or $1.02 per diluted share. Net operating cash flow was $1,067 million, or $1,280 million before changes in working capital.
JPMorgan downgraded Murphy Oil to Neutral from Overweight.
Oasis Petroleum announced financial and operating results for the quarter ending March 31, 2022. Net cash provided by operating activities was $265.6MM and net loss from continuing operations was $19.6MM. It also declared a base dividend of $0.585 per share of common stock. The base dividend will be payable on June 1, 2022 to shareholders of record as of May 20, 2022; declared a variable dividend of $2.94 per share of common stock. The variable dividend will be payable on June 15, 2022 to shareholders of record as of June 1, 2022. Oasis and Whiting Petroleum continue to make progress and expect the merger to close in 3Q22. Oasis and Whiting each filed a premerger notification and report form under the HSR Act, and the waiting periods with respect thereto have expired. Oasis filed a registration statement on Form S-4 on April 28, 2022.
Warren Buffett's Berkshire Hathaway has bought another 5.9 million shares of Occidental Petroleum, boosting its stake in the oil company to about 15.2%.
PDC Energy announced its 2022 first quarter financial results. Net cash from operating activities was approximately $489 million, adjusted cash flows from operations, a non-U.S. GAAP metric, was approximately $539 million and oil and gas capital investments of approximately $220 million.
Pioneer Natural Resources reported financial and operating results for the quarter ended March 31, 2022. Pioneer reported first quarter net income attributable to common stockholders of $2.0 billion, or $7.85 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 first quarter was $2.0 billion, or $7.74 per diluted share. Cash flow from operating activities for the first quarter was $2.6 billion.
Pioneer Natural Resources announced that its Board of Directors declared a quarterly base-plus-variable cash dividend of $7.38 per common share. The dividend is payable June 14, 2022, to stockholders of record at the close of business on May 31, 2022.
Ranger Oil reported a first quarter 2022 net loss of $20.7 million primarily related to derivative losses of $167.9 million. Adjusted net income was $98.7 million for the first quarter of 2022, primarily due to non-cash derivative loss adjustments of $118.9 million. Benefitting from higher commodity prices and disciplined investments, Ranger posted Adjusted EBITDAX of $160.9 million and generated quarterly Free Cash Flow of $64.8 million during the quarter.
Talos Energy announced its operational and financial results for the first quarter of 2022 and the increase of its borrowing base under the Company's reserves-based lending credit facility as part of its semi-annual redetermination process. Revenue was $413.6 million, driven by realized prices (excluding hedges) of $93.42 per barrel for oil, $36.54 per barrel for natural gas liquids and $4.97 per thousand cubic feet for natural gas. Net Loss was $66.4 million, or $0.81 Net Loss per diluted share, and Adjusted Net Income was $64.0 million, or $0.77 Adjusted Net Income per diluted share.
W&T Offshore announced the promotion of Bart P. “Trey” Hartman, III to Vice President and Chief Accounting Officer.
Whiting Petroleum announced first quarter 2022 results. Revenue was $527 million for the quarter ending March 31, 2022. Net loss (GAAP) was $37 million or $0.95 per diluted share. Adjusted net income (non-GAAP) was $185 million or $4.61 per diluted share.
CANADIAN E&PS
Canadian Natural Resources delivered net earnings of approximately $3.1 billion and adjusted net earnings from operations of approximately $3.4 billion in Q1/22. Cash flows from operating activities were approximately $2.9 billion in Q1/22. Canadian Natural generated strong quarterly adjusted funds flow of approximately $5.0 billion in Q1/22, an increase of approximately $2.3 billion from Q1/21 levels.
Canadian Natural Resources announced that its Board of Directors has declared a quarterly cash dividend on its common shares of C$0.75 (seventy five cents) per common share. The dividend will be payable on July 5, 2022 to shareholders of record at the close of business on June 17, 2022.
OILFIELD SERVICES
Cactus announced financial results for the first quarter of 2022. Revenue was $145.9 million and income from operations was $31.0 million. Net income was $27.1 million and diluted earnings per Class A share was $0.34. Adjusted net income was $22.9 million and diluted earnings per share, as adjusted was $0.30.
Enerflex reported its financial results for the three months ended March 31, 2022. The Company experienced a healthy increase in revenue in the current quarter at $323 million compared to $203 million in the comparable quarter, mainly due to a stronger opening backlog, revenue recognition of the previously announced 10-year natural gas infrastructure project, higher rental utilizations, and the increased volume of work in all segments. Gross margin was $54 million or 17 percent for the first quarter of 2022 compared to $46 million or 22 percent for the comparable period. The higher gross margin in the current quarter is primarily due to the increased volume of work. However, the Company reported a lower gross margin percent due to a shift in the product mix, less government grants received, and competitive pricing pressures on materials and labour.
NOW announced results for the first quarter ended March 31, 2022. Revenue was $473 million for the first quarter of 2022. Net income was $30 million and non-GAAP net income excluding other costs was $15 million for the first quarter of 2022. Diluted earnings per share was $0.27 and non-GAAP diluted earnings per share excluding other costs was $0.14 for the first quarter of 2022. The Company is raising guidance for full-year 2022 revenue to now increase 20 percent with EBITDA to revenue incrementals approximating 20 percent, compared to full-year 2021.
Toromont Industries announced the appointment of Joel Couture to the newly created position of Chief Operating Officer, Toromont Cat, effective July 1, 2022. Toromont also welcomed Isabelle Leclerc as Toromont's Vice President, Human Resources.
DRILLERS
No significant news.
REFINERS
Phillips 66 announced the expiration and final results of the previously announced offers to exchange any and all validly tendered (and not validly withdrawn) and accepted notes of the seven series of notes issued by Phillips 66 Partners LP for notes to be issued by Phillips 66 Company, a wholly owned subsidiary of Phillips 66, and the related consent solicitations to certain proposed amendments to the corresponding indenture and to supplemental indentures pursuant to which such Old Notes were issued.
MLPS & PIPELINES
For the three months ended March 31, 2022, DCP Midstream had net income attributable to partners of $80 million, net cash provided by operating activities of $189 million, adjusted EBITDA of $436 million, and distributable cash flow of $337 million.
Enbridge held its Annual Meeting of Shareholders today. On a vote by ballot during the regular business proceedings at the meeting, shareholders approved the election of all 12 nominated directors proposed by management as listed in the Management Information Circular dated March 2, 2022. Enbridge is pleased to welcome Jason B. Few and Steven W. Williams to the Board.
Energy Transfer reported net income attributable to partners for the three months ended March 31, 2022 of $1.27 billion. For the three months ended March 31, 2022, net income per limited partner unit (basic) was $0.38 per unit. Adjusted EBITDA for the three months ended March 31, 2022 was $3.34 billion compared to $5.04 billion for the three months ended March 31, 2021. First quarter 2021 results were favorably impacted by earnings from the historic Winter Storm Uri. Excluding this contribution, Adjusted EBITDA would have increased over the prior period. Distributable Cash Flow attributable to partners, as adjusted, for the three months ended March 31, 2022 was $2.08 billion compared to $3.91 billion for the three months ended March 31, 2021. The decrease from the prior period was primarily driven by the favorable impact on the first quarter 2021 Adjusted EBITDA from Winter Storm Uri.
Magellan Midstream Partners, L.P. reported net income of $166 million for first quarter 2022 compared to $221 million for first quarter 2021. Diluted net income per common unit was 78 cents in first quarter 2022 and 99 cents in first quarter 2021. Diluted net income per unit excluding MTM commodity-related pricing adjustments, a non-generally accepted accounting principles (non-GAAP) financial measure, was $1.10 for first quarter 2022.
NuStar Energy L.P. announced solid results for the first quarter of 2022 fueled by strong volumes in its Permian Crude System and its refined products and crude oil pipelines. Last Friday, NuStar closed on its divestiture of the Point Tupper terminal facility in Canada for $60 million in proceeds, which it plans to utilize to build its financial flexibility and strengthen its balance sheet. Barron noted that the quarter’s results include a non-cash charge related to this divestiture. As a result of this non-cash charge, NuStar reported net income of $12 million for the first quarter of 2022, or a $0.22 net loss per unit, compared to net income of $42 million, or $0.05 per unit for the first quarter of 2021. On an adjusted basis, excluding the effect of the non-cash charge, NuStar reported net income of $57 million, or $0.19 per unit, in the first quarter of 2022, up $15 million or 36 percent, over net income of $42 million in the first quarter of 2021.
Plains All American Pipeline, L.P. and Plains GP Holdings reported first-quarter 2022 results and provided the following updates: Reported first-quarter Net income attributable to PAA of $187 million and Net cash provided by operating activities of $340 million; Reported strong first-quarter Adjusted EBITDA attributable to PAA of $614 million and increased full-year 2022 Adjusted EBITDA attributable to PAA guidance by $75 million to +/- $2.275 billion; Forecast Permian gathering volume growth of +/- 280 thousand barrels per day in 2022 (YE-21 to YE-22); Increased annualized common distribution by $0.15 to $0.87 per unit and repurchased $25 million of common units in the first quarter.
SEACOR Marine’s consolidated operating revenues from continuing operations for the first quarter of 2022 were $45.6 million, operating loss was $17.1 million, and direct vessel profit was $6.1 million. This compares to consolidated operating revenues from continuing operations of $36.5 million, operating loss of $16.6 million, and DVP of $10.2 million in the first quarter of 2021. For the first quarter of 2022, net loss from continuing operations was $14.8 million ($0.56 loss per basic and diluted share). This compares to a net loss from continuing operations for the first quarter of 2021 of $16.9 million ($0.67 loss per basic and diluted share). Sequentially, first quarter 2022 results compare to consolidated operating revenues from continuing operations of $48.0 million, operating loss from continuing operations of $14.7 million, and DVP of $12.9 million in the fourth quarter of 2021. For the fourth quarter of 2021, net loss from continuing operations was $15.8 million ($0.62 loss per basic and diluted share).
Targa Resources reported First quarter 2022 net income attributable to Targa Resources Corp. was $88.0 million compared to $146.4 million for the first quarter of 2021. The Company reported adjusted earnings before interest, income taxes, depreciation and amortization, and other non-cash items (“adjusted EBITDA”) of $625.8 million for the first quarter of 2022 compared to $515.7 million for the first quarter of 2021.
Williams announced that it has secured another tieback to Discovery’s Keathley Canyon Connector (KCC) pipeline, providing deepwater natural gas infrastructure services to operator LLOG Exploration Offshore, L.L.C., for its new Salamanca development in the Keathley Canyon area of the Gulf of Mexico. The Salamanca platform will handle production from the Leon and Castile fields and will be located 200 miles off the coast of Louisiana. Initial production is expected in the second quarter of 2025. Salamanca will be the third deepwater production tieback to the KCC pipeline, which went into service in 2015 as a primary natural gas corridor through the Central Gulf of Mexico, and fifth overall tieback to the Discovery system over the past two years.
MARKET COMMENTARY
U.S. stock index futures were lower, a day after a widely-expected interest-rate hike by the Federal Reserve powered a strong rally on Wall Street. European stocks climbed as the U.S. central bank's less hawkish tone lifted investor sentiment. Shanghai shares ended higher in a holiday-shortened week, led by consumers stocks. In currency markets, the dollar regained its footing after the Fed's move had caused its biggest drop in nearly two months, while the euro dropped against the greenback after German industrial orders fell more than expected. In commodities, oil prices extended gains on supply concerns and gold rose as less aggressive Fed calmed nerves.
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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