Oil Slips Lower, Wavering Amid Gaza Ceasefire Talks, Upcoming U.S. Inflation Data and Whether OPEC+ Will Extend Voluntary Cuts in March
SECTOR COMMENTARY:
The energy sector is poised for a mixed to lower start, pressured by weakness in the crude complex while major equity futures steadied following their recent rally.
WTI and Brent crude oil futures slipped lower this morning, wavering as traders kept their powder dry on the outcome of Gaza ceasefire talks, upcoming U.S. inflation data and whether OPEC+ will extend voluntary cuts in March. Mixed signals came from the Middle East after President Biden said Israel is ready to halt its Gaza attacks for the Muslim holy month of Ramadan in a ceasefire that could be signed as soon as next week. But Hamas officials said Biden's remarks were premature as it studies a truce offer. Also potentially countering the oil price impact of Biden's comments, Yemen's Houthi spokesperson said the group's operations in the Red Sea, waged in support of Palestinians in Gaza, will only stop when Israeli "aggression" on Gaza ends and the siege is lifted. The January U.S. personal consumption expenditures price index, the Fed's preferred measure of inflation and a key factor in rate decisions, is due on Thursday. Elsewhere, eyes are on the OPEC+ producer group, with a decision coming in March on whether to extend voluntary production cuts to bolster prices. Also in focus today, Russian authorities announced a six-month ban on gasoline exports from March 1 to compensate for rising demand and to allow for refinery maintenance.
On the final day of trading as the front month-contract, March natural gas futures are higher on some fund short covering ahead of the expiration. Warming weather forecast in key consuming regions kept a cap on gains.
BY SECTOR:
US INTEGRATEDS
Chevron said it is in talks with Exxon Mobil and China's CNOOC over whether the two have a right of first refusal to acquire Hess Corp.'s stake in the Stabroek oil block in Guyana.
INTERNATIONAL INTEGRATEDS
Saudi state oil company Aramco has signed procurement agreements worth $6 billion with local vendors, widening its domestic supply base. The agreements span the supply of a range of products comprising strategic commodities, such as instrumentation, and electrical and drilling equipment.
Petrobras informed that it has signed a Memorandum of Understanding with the aim of studying potential mutually beneficial business models in the low carbon economy with Arcelor Mittal Brasil. The companies will seek to identify commercial opportunities and potential partnerships in Brazil that are aligned with diversification and decarbonization strategies.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
APA announced that the applicable statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired on Feb. 22, 2024. Assuming both APA and Callon shareholder approvals are obtained, the closing of the acquisition is expected to occur on or about April 1, 2024. APA and Callon have scheduled separate shareholder meetings for March 27, 2024, for their respective shareholders to vote on the transaction.
Callon Petroleum reported fourth quarter and full year 2023 financial and operating results. Fourth quarter 2023 net income of $169.0 million, or $2.51 per share, (all share amounts are stated on a diluted basis), and adjusted EBITDAX of $325.8 million. Adjusted income was $109.0 million, or $1.62 per share. Fourth quarter production was above the high end of guidance and averaged 103.4 MBoe/d (57% oil and 79% liquids). During the quarter, 14 gross wells were TIL. Notably, cumulative oil production from fourth quarter wells were 51% more productive on a per lateral foot basis in the first 90 days of production (6,848 Bbl / 1,000 lateral ft.) compared to third quarter 2023 wells.
Jefferies initiated coverage of Crescent Point Energy at Buy rating.
Chevron said it is in talks with Exxon Mobil and China's CNOOC over whether the two have a right of first refusal to acquire Hess Corp.'s stake in the Stabroek oil block in Guyana.
CANADIAN E&PS
Jefferies initiated coverage of Tourmaline Oil at Buy rating.
OILFIELD SERVICES
ChampionX announced the acquisition of Artificial Lift Performance Limited, a provider of advanced analytics solutions for enhancing oil and gas production performance. Based in Edinburgh, Scotland, ALP has extensive expertise in developing artificial lift optimization software designed to maximize production and extend the life of artificial lift equipment.
Solaris Oilfield Infrastructure announced fourth quarter and full year 2023 financial and operational results. Net income was $7 million, or $0.14 per diluted Class A share, for fourth quarter 2023, compared to third quarter 2023 net income of $8 million, or $0.16 per diluted Class A share, and fourth quarter 2022 net income of $8 million, or $0.15 per diluted Class A share. Adjusted pro forma net income for fourth quarter 2023 was $7 million, or $0.15 per fully diluted share, compared to third quarter 2023 adjusted pro forma net income of $9 million, or $0.19 per fully diluted share, and fourth quarter 2022 adjusted pro forma net income of $10 million, or $0.22 per fully diluted share. Revenue was $63 million for fourth quarter 2023, which was down 9% from third quarter 2023 and down 25% from fourth quarter 2022.
U.S. Silica Holdings announced its fourth quarter and full year results for the period ended December 31, 2023. Net income for the fourth quarter ended December 31, 2023 was $29.1 million, or $0.37 per diluted share. The fourth quarter results were impacted by $9.1 million pre-tax, or $0.09 per diluted share after-tax, of gains primarily related to asset sales, partially offset by facility closure costs, business optimization, and the loss on extinguishment of debt, resulting in adjusted EPS (a non-GAAP measure) of $0.28 per diluted share.
DRILLERS
Dril-Quip reported operational and financial results for the fourth quarter and full year 2023. Revenue of $126.3 million increased 8% sequentially and 31% year-over-year. Net Bookings of $122.7 million increased $76.2 million sequentially and $24.4 million year-over-year. Net Income of $1.8 million increased $8.9 million sequentially and $2.1 million year-over-year. Adjusted EBITDA of $16.5 million increased 34% sequentially and 61% year-over-year. Gross Margin of 27.4% improved 44 basis points sequentially and decreased 381 basis points year-over-year.
Seadrill Limited initiated a share repurchase program December 14, 2023 to repurchase up to $250 million of the Company's common shares in open market transactions on the OSE and NYSE until no later than September 30, 2024 pursuant to an agreement with Fearnley Securities AS and its subsidiary, Fearnley Securities.
REFINERS
Delek US Holdings announced financial results for its fourth quarter ended December 31, 2023. Net loss of $164.9 million or $2.57 per share, adjusted net loss of $93.2 million or $1.46 per share, adjusted EBITDA of $60.6 million. Returned $35.4 million to shareholders through dividends and share buybacks. Reduced debt by $38.2 million.
MLPS & PIPELINES
Delek Logistics Partners, LP announced its financial results for the fourth quarter 2023, with reported net income attributable to all partners of $22.1 million, or $0.51 per diluted common limited partner unit. This compares to net income attributable to all partners of $42.7 million, or $0.98 per diluted common limited partner unit, in the fourth quarter 2022. The decrease in net income attributable to all partners was driven by higher interest expense and a fourth quarter 2023 goodwill impairment. Net cash provided in operating activities was $114.7 million in the fourth quarter 2023 compared to net cash used in operating activities of $105.3 million in the fourth quarter 2022. Distributable cash flow was $64.6 million in the fourth quarter 2023, compared to $51.4 million in the fourth quarter 2022. For the fourth quarter 2023, earnings before interest, taxes, depreciation and amortization was $86.1 million. Excluding the goodwill impairment, adjusted EBITDA was $100.9 million compared to $92.5 million in the fourth quarter 2022.
Jefferies initiated coverage of Enbridge at Buy rating.
Jefferies downgraded FLEX LNG to Underperform from Hold.
ONEOK announced full-year 2023 results and 2024 financial guidance. ONEOK reported full-year 2023 net income and adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) of $2.7 billion and $5.2 billion, respectively. Higher 2023 results were driven primarily by higher volumes across ONEOK's systems, higher average fee rates, and higher natural gas storage and transportation services. Results included higher operating costs due primarily to higher employee-related costs and higher outside services due to the growth of ONEOK's operations.
Jefferies initiated coverage of TC Energy at Hold rating.
MARKET COMMENTARY
Wall Street futures were subdued as caution prevailed ahead of this week's economic data, including a crucial inflation report, that will provide cues on Federal Reserve's next moves on interest rates. European shares ticked lower. Japan's Nikkei average ended the session nearly flat as investors sold shares of chip heavyweight Advantest. Gold prices firmed on a weakening dollar. Oil prices ticked lower as investors weighed up Gaza ceasefire signals. Durable goods data is expected for release 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 Rich Pontillo.
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