Oil Reverses Some of Yesterday’s Losses Amid a Drop in Euro Zone Inflation
SECTOR COMMENTARY:
The energy sector is set for a mixed start, supported by strength in the broader markets and the underlying commodities, despite weakness in the sector as investors digest third quarter results from oil giant BP. BP reported quarterly adjusted earnings of $1.14 per share for the quarter ended in September, lower than the mean expectation of nine analysts for earnings of $1.38 per share.
WTI and Brent crude oil futures are reversing some of yesterday’s losses on a drop in euro zone inflation, which offset weak economic data from China and concerns over the likelihood of supply disruptions in the Middle East. Euro zone inflation dropped to its lowest level in over two years in October, on a drop in energy prices and a high interest rate environment. China's manufacturing activity unexpectedly contracted in October, as the official purchasing managers' index (PMI) fell to 49.5 in October from 50.2, dipping back below the 50-point level demarcating contraction from expansion, and missing a forecast of 50.2. Investors continue to be wary of other countries in the region entering the Israel-Hamas conflict, but don’t expect it to affect supply.
Natural gas futures are higher on forecasts for cooler temperatures in key consuming regions.
BY SECTOR:
US INTEGRATEDS
An Australian union alliance's members voted in support to endorse deals on pay and conditions at Chevron's two liquefied natural gas (LNG) facilities in Australia, the union said. Earlier this month, the union called off strikes originally planned at the U.S. energy major's Gorgon and Wheatstone projects in Western Australia, which supply around 6% of the world's LNG. The breakthrough followed days of talks mediated by Australia's industrial arbitrator, the Fair Work Commission, to try and revive an in-principle deal reached in September that ended weeks of strikes.
Cabinda Gulf Oil Company Limited (CABGOC), Chevron’s subsidiary in Angola, hosted in Luanda a signature of a Memorandum of Understanding (MOU) between Chevron New Energies, a Chevron U.S.A. Inc. division, and the Angola Government to explore potential lower carbon business opportunities in Angola. Chevron and the Angola Government plan to evaluate various projects related to nature-based and technological carbon offsets, lower-carbon intensity biofuels and products such as hydrogen, carbon capture and storage, and the creation of a regional center of excellence to incentivize and attract lower carbon investments.
INTERNATIONAL INTEGRATEDS
BP announced the group results. Profit attributable to bp shareholders in the third quarter and nine months was $4.9 billion and $14.9 billion respectively, compared with a loss of $2.2 billion and $13.3 billion in the same periods of 2022.
BP said it booked a $540 million pretax impairment on its wind power projects offshore New York after officials rejected a request for better terms to reflect what BP referred to as "inflationary pressures and permitting delays."
BP announced that it is to commence a share buyback programme to repurchase ordinary shares in the capital of the Company. The purpose of the Programme is to reduce the issued share capital of the Company towards distributing 60% of surplus cash flow generated in 2023 as announced by the Company on 31 October 2023. The maximum amount allocated to the Programme is around $1.5 billion for a period up to and including 2 February 2024. The Programme will be carried out on the London Stock Exchange and/or Cboe (UK) and will be effected within certain pre-set parameters.
BP does not need new oil and gas resources in the United States, CEO Murray Auchincloss told Reuters. "We do not need resources in the United States. We have a ton of resources. They're very high quality, and they've got incredible growth rates that rival what has been done by some of the competition," Auchincloss said. He would not comment directly on a Reuters report that BP was seeking to form joint ventures around its U.S. onshore natural gas fields, but said that "these rumours in the press about BPX are not true" referring to BP's shale business.
At least three Chinese companies including state giant China National Offshore Oil Company (CNOOC) are evaluating Shell's Singapore assets and considering non-binding bids in coming weeks for the city-state's oldest refinery, according to several sources familiar with the matter. Reuters reported in August that Shell had hired Goldman Sachs to explore a potential sale of its refining and petrochemical plants in Singapore as part of a broader strategic review globally to become a lower-carbon operator. A buyer of Shell's assets on Bukom and Jurong islands would gain a foothold in Asia's main oil trading hub but would also face competition from newer refineries elsewhere - the Bukom facility opened in 1961 - as well as a Singapore carbon tax set to rise sharply in 2024. CNOOC, Eversun Holdings and Wanhua Chemical are among those that have started early evaluations of Shell assets that include a 237,000 barrels per day (bpd) refinery and a one million metric ton per year (tpy) ethylene cracker, the sources said.
Clean Energy Fuels and TotalEnergies announced that renewable natural gas (RNG) from Del Rio Dairy in Friona, TX, began flowing in June to the transportation market and recently began generating D3 renewable identification numbers (RINs) credits under the U.S. Environmental Protection Agency’s (EPA) Renewable Fuel Standard, as well as credits through Oregon’s low carbon fuel standard (LCFS) program. The RNG produced at Del Rio Dairy and injected into the country’s natural gas pipeline system represents a major milestone in Clean Energy’s strategy to become the leader in both producing and selling a fuel that is so clean, the California Air Resources Board gives it an average carbon-intensity rating of -331.
CANADIAN INTEGRATEDS
Imperial Oil announced the terms of its substantial issuer bid pursuant to which the company will offer to purchase for cancellation up to $1,500,000,000 of its common shares. Subject to obtaining certain exemptive relief under applicable securities laws in the United States, the Offer will proceed by way of a modified Dutch auction that includes the ability for shareholders to participate via a proportionate tender. The modified Dutch auction procedure will have a tender price range from $78.50 per Share to $94.00 per Share. All amounts are in Canadian dollars.
U.S. E&PS
Comstock Resources reported financial and operating results for the quarter ended September 30, 2023. Comstock's natural gas and oil sales in the third quarter of 2023 totaled $315.8 million (including realized hedging gains of $10.3 million). Operating cash flow (excluding changes in working capital) generated in the third quarter of 2023 was $167.2 million, and net income available to common stockholders for the third quarter was $14.7 million or $0.05 per share. Net income in the quarter included a pre-tax $3.9 million unrealized gain on hedging contracts held for risk management. Excluding this item and certain other items, adjusted net income available to common stockholders for the third quarter of 2023 was $11.7 million, or $0.04 per diluted share.
Northern Oil and Gas’ Board of Directors has declared a cash dividend in the amount of $0.40 per share, representing a ~5% increase from the prior quarterly dividend. The dividend is payable on January 31, 2024, to stockholders of record as of the close of business on December 28, 2023. The Company also announced its current plan with respect to quarterly dividends for 2024. NOG currently anticipates maintaining a $0.40 per share quarterly dividend throughout 2024. If approved, total per share dividends declared in 2024 would increase ~7% versus 2023. Under Delaware law, the Board may not declare a dividend more than 60 days before the record date, and NOG can make no assurances that current dividend rates or any future dividends will be declared.
On October 30, 2023, the board of directors of Permian Resources approved, in accordance with the terms of the Merger Agreement, increasing the size of the Board to consist of 11 members, effective as of closing of the Transactions. On October 30, 2023, in connection with the Transactions, Matthew G. Hyde resigned from the Board, effective as of closing of the Transactions. At the time of his resignation, Mr. Hyde served as chair of the Nominating, Environmental, Social and Governance Committee (the "NESG Committee") and as a member of the Compensation Committee. The resignation of Mr. Hyde was not a result of any disagreement with the Company. On October 30, 2023, the Board appointed Robert J. Anderson and Frost W. Cochran to the Board, effective as of closing of the Transactions. Messrs. Anderson and Cochran previously served on the board of directors of Earthstone. Biographical information for Messrs. Anderson and Cochran is set forth in Earthstone's Definitive Proxy Statement filed with the Securities and Exchange Commission (the "SEC") on April 27, 2023, which information is incorporated herein by reference.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
IDEX announced that it has entered into a definitive agreement to acquire STC Material Solutions, an integrated provider of advanced material science solutions, from Artemis for cash consideration of $206 million USD, subject to customary post-closing adjustments. STC specializes in the design and manufacturing of technical ceramics and hermetic sealing products for the most extreme, mission critical applications. The company has relationships with leading manufacturers in the semiconductor, aerospace and defense, industrial technology, medical technology, and energy sectors. Headquartered in St. Albans, Vermont, STC also has operations in Santa Ana, California (USA).
NCS Multistage Holdings announced its results for the quarter ended September 30, 2023. Total revenues were $38.3 million for the quarter ended September 30, 2023, which was a decrease of 22% compared to the third quarter of 2022. Net income was $4.4 million, or $1.77 per diluted share, for the quarter ended September 30, 2023 compared to net income of $3.9 million, or $1.58 per diluted share for the quarter ended September 30, 2022. Adjusted EBITDA was $6.8 million for the quarter ended September 30, 2023, a decrease of $1.6 million compared to the same period a year ago. This decrease is primarily the result of lower revenues and gross profit compared to the third quarter of 2022 partially offset by lower SG&A expense and an increase in other income.
Ranger Energy Services announced its results for the third quarter ended September 30, 2023. For the third quarter of 2023, revenue was $164.4 million, a decrease from $177.0 million in the prior year period, and an increase from $163.2 million in the prior quarter. Revenue decreases from the prior year were attributable to reduced activity in our wireline and ancillary services segment. Year-to-date revenue was $485.1 million, an increase of 7%, or $30.9 million from $454.2 million in the prior year due to increasing operating activity and pricing improvements across high specification rigs and wireline segments. Fully diluted earnings per share was $0.38 for the third quarter of 2023 compared to $0.54 in the prior year period and $0.24 in the prior quarter. Fully diluted earnings per share for year-to-date was $0.86 compared to $0.33 in the prior year.
Ranger Energy Services announced the appointment of Carla Mashinski and Sean Woolverton to its Board of Directors, effective January 1, 2024. In conjunction with the appointment of Ms. Mashinski and Mr. Woolverton, William Austin, Ranger’s Chairman of the Board, and Richard Agee will retire from the Ranger Board of Directors, effective December 31, 2023. The Board has unanimously elected Michael Kearney to succeed Mr. Austin as Chairman upon his retirement.
TETRA Technologies announced third quarter 2023 financial results. Third quarter revenue of $151.5 million increased 12% year-over-year. Net income before discontinued operations was $5.5 million and net income per share attributable to TETRA stockholders was $0.04, each improved from break-even in the same quarter a year ago. Net cash provided by operating activities was $14.0 million while adjusted free cash flow was $7.1 million. Adjusted EBITDA of $26.1 million increased 40% year-over-year.
Toromont Industries reported its financial results for the third quarter ended September 30, 2023. Revenue increased $87.5 million or 8% in the third quarter compared to the similar period last year, with higher revenues in both groups. Equipment Group was up 7% in the quarter on higher equipment sales (up 7%), product support revenues (up 7%) and rental activity (up 11%). CIMCO revenue increased 15%, with progress on package sales (up 2%) and strong product support growth (up 29%). Revenue increased $408.5 million (14%) to $3.4 billion for the year-to-date period. Revenue increased in both groups, with the Equipment Group up 13% and CIMCO up 17% year-to-date, on similar trends as noted for the quarter. Net earnings from continuing operations increased $25.1 million or 21% in the quarter versus a year ago to $145.6 million or $1.77 EPS (basic) and $1.76 EPS (fully diluted). For the year-to-date period, net earnings from continuing operations increased $83.2 million or 29% to $375.1 million, or $4.56 EPS (basic) and $4.52 EPS (fully diluted).
DRILLERS
Transocean reported a net loss attributable to controlling interest of $220 million, $0.28 per diluted share, for the three months ended September 30, 2023. Total contract drilling revenues were $713 million, compared to $729 million in the second quarter of 2023 (total adjusted contract drilling revenues of $721 million, compared to $748 million in the second quarter of 2023); Revenue efficiency was 95.4%, compared to 97.2% in the prior quarter; Operating and maintenance expense was $524 million, compared to $484 million in the prior quarter; Net loss attributable to controlling interest was $220 million, $0.28 per diluted share, compared to $165 million, $0.22 per diluted share, in the second quarter of 2023; Adjusted EBITDA was $162 million, compared to $237 million in the prior quarter.
REFINERS
CVR Energy announced net income of $353 million, or $3.51 per diluted share, on net sales of $2.5 billion for the third quarter of 2023, compared to net income of $93 million, or 92 cents per diluted share, on net sales of $2.7 billion for the third quarter of 2022. Adjusted earnings for the third quarter of 2023 was $1.89 per diluted share compared to adjusted earnings of $1.90 per diluted share in the third quarter of 2022. Third quarter 2023 EBITDA was $530 million, compared to third quarter 2022 EBITDA of $181 million. Adjusted EBITDA for the third quarter of 2023 was $313 million, compared to Adjusted EBITDA of $313 million in the third quarter of 2022.
Marathon Petroleum reported net income attributable to MPC of $3.3 billion, or $8.28 per diluted share, for the third quarter of 2023, compared with net income attributable to MPC of $4.5 billion, or $9.06 per diluted share, for the third quarter of 2022. Adjusted net income was $3.2 billion, or $8.14 per diluted share, for the third quarter of 2023. This compares to adjusted net income of $3.9 billion, or $7.81 per diluted share, for the third quarter of 2022.
MLPS & PIPELINES
Enterprise Products Partners announced its financial results for the three and nine months ended September 30, 2023. Enterprise reported net income attributable to common unitholders of $1.3 billion, or $0.60 per common unit on a fully diluted basis for the third quarter of 2023, compared to $1.4 billion, or $0.62 per common unit on a fully diluted basis, for the third quarter of 2022.
Enterprise Products Partners announced four new capital projects to support continuing production growth in the Permian Basin. The partnership also announced it has begun initial steps to return the Seminole Pipeline, which has a capacity of 210,000 barrels per day of crude oil, to natural gas liquid transportation service in December 2023. The four projects include two natural gas processing plants, the Bahia NGL pipeline, NGL fractionator 14 and an associated deisobutanizer (“DIB”) at Enterprise’s Chambers County, Texas complex. Each of these projects is expected to begin service during 2025.
MPLX reported third-quarter 2023 net income attributable to MPLX of $918 million, compared with $1,428 million for the third quarter of 2022. Third-quarter 2022 net income included a $509 million non-cash gain from the reclassification of a third-party contract. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) attributable to MPLX was $1,596 million, compared with $1,471 million for the third quarter of 2022. Logistics and Storage (L&S) segment adjusted EBITDA for the third quarter of 2023 was $1,091 million, compared with $969 million for the third quarter of 2022. Gathering and Processing (G&P) segment adjusted EBITDA for the third quarter of 2023 was $505 million, compared with $502 million for the third quarter of 2022.
New Fortress Energy announced the closing of its $856 million aggregate principal amount of a senior secured term loan credit facility due 2028. The Term Loan will bear interest at SOFR + 5.00% per annum and will include a prepayment option. The Company intends to use the net proceeds from the offering, together with cash on hand, to invest in projects and repay our existing bridge facility.
MARKET COMMENTARY
Wall Street futures rose, with investors focusing on the Federal Reserve policy meeting that kicks off later in the day, while a fresh batch of earnings reports will also be on the radar. European shares climbed, led by real estate and chemical stocks. Nikkei ended higher after the Bank of Japan tweaked its bond yield control policy. Oil gained as worries over supply due to the Middle East conflict offset dismal China data. Gold strengthened while dollar weakened.
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 Rich Pontillo.
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Nasdaq Advisory Services Energy Team is part of Nasdaq's Advisory Services. 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.
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