WTI Outpacing Brent as Traders Consider Uncertain Global Demand, Geopolitical Tensions and Positive Economic Data from China
SECTOR COMMENTARY:
The energy sector is set for a lower start, pressured by weakness in the major equity futures as market participants are worried about a higher-for-longer interest rate environment.
WTI crude oil futures are higher and outpacing Brent crude contracts which are in negative territory as traders weigh in an uncertain outlook for global demand, geopolitical tensions, and positive economic data from China. There was no settlement for WTI on Monday due to Presidents Day, but crude futures were moderately lower amid a quiet session as demand concerns were in focus. In China, tourism revenue during the Lunar New Year holiday (ended Saturday) rose by over +47% y/y, surpassing pre-covid levels while that government today announced its largest ever reduction in the benchmark mortgage rate in an effort to support the housing market. As attacks on ships in the Red Sea continues, the Iran-aligned Houthis hit at least four more vessels since Friday. According to Reuters, the United States has proposed a draft calling for a temporary ceasefire in the Israel-Hamas war which opposes a major ground offensive by its ally Israel in Rafah.
Natural gas futures are lower as the NOAA 6-10 day forecast on Monday afternoon put a high probability of temperatures everywhere East of the Mississippi running above normal.
BY SECTOR:
US INTEGRATEDS
ExxonMobil has warned it would withhold billions of dollars in climate-related investments in Europe unless Brussels cuts environmental red tape, which the company blames for the "deindustrialisation of the European economy", the Financial Times reported.
INTERNATIONAL INTEGRATEDS
Aramco will likely issue a bond in 2024, CFO Ziad Al-Murshed said at the Saudi Capital Markets Forum. Aramco will be prioritising mid-to-long-term bonds of 15-50 year duration, Al Murshed said.
BF Spa announced that, together with its subsidiaries Consorzi Agrari d'Italia Spa and SIS - Società Italiana Sementi Spa, it has signed an investment agreement with Eni Natural Energies Spa, a subsidiary of Eni Spa. Specifically, the investment agreement envisages ENE's investment in the share capital of SIS for a total amount of EUR25 million, after which ENE's shareholding will amount to approximately 17%; this investment will be realized through the subscription of a share capital increase of SIS reserved for ENE and the transfer to ENE of a share in the share capital of SIS owned by CAI.
Equinor said it had signed a 15-year agreement to supply liquefied natural gas to Indian fertiliser and petrochemical company Deepak Fertilisers from 2026.
Morgan Stanley upgraded Equinor to Equal Weight from Underweight.
Morgan Stanley upgraded Repsol to Overweight from Equal Weight.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Gran Tierra Energy announced the Company’s financial and operating results for the fourth quarter and year ended December 31, 2023. Gran Tierra realized a net loss of $6.3 million or $0.19 per share (basic and diluted), compared to net income of $139.0 million, or $3.81 per share (basic) and $3.76 per share (diluted) in 2022. The Company realized Adjusted EBITDA of $399.4 million, a decrease of 17% from $481.9 million in 2022, commensurate with the decrease in the Brent oil price. Gran Tierra realized funds flow from operations of $276.8 million, compared to $366.0 million in 2022.
CNX Resources announced the final results and expiration of its previously announced cash tender offer to purchase any and all of the $350 million aggregate principal amount outstanding of its 7.250% Senior Notes due 2027. As of 5:00 p.m., New York City time, on February 16, 2024, the expiration time for the Tender Offer (the "Expiration Time"), CNX had received tenders for an aggregate principal amount of $312,227,000 of the outstanding 2027 Notes, or 89.21% of the aggregate principal amount of 2027 Notes outstanding. These amounts exclude any 2027 Notes that may be tendered pursuant to the guaranteed delivery procedures described in the Offer to Purchase and the Notice of Guaranteed Delivery.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Forum Energy Technologies announced preliminary full year 2023 results. Fourth quarter 2023 revenue was $185 million, a $6 million increase from the third quarter. Adjusted EBITDA for the fourth quarter 2023 is expected to be in the range of $15 to $17 million. Free cash flow for the fourth quarter 2023 was $9 million. The company also forecasting 2024 adjusted EBITDA of $100 to $120 million and free cash flow of $40 to $60 million.
Oil States International reported net income of $6.0 million, or $0.09 per share, and Adjusted EBITDA of $24.0 million for the fourth quarter of 2023 on revenues of $208.3 million. Reported fourth quarter 2023 net income included facility consolidation charges of $0.8 million ($0.7 million after-tax, or $0.01 per share) and patent defense costs of $0.6 million ($0.5 million after-tax, or $0.01 per share). These results compare to revenues of $194.3 million, net income of $4.2 million, or $0.07 per share, and Adjusted EBITDA of $23.4 million reported in the third quarter of 2023, which included facility consolidation charges of $1.6 million ($1.3 million after-tax, or $0.02 per share)
DRILLERS
Transocean reported a net loss attributable to controlling interest of $104 million, $0.13 per diluted share, for the three months ended December 31, 2023. Fourth quarter results included net unfavorable items of $30 million, $0.04 per diluted share as follows: $24 million, $0.03 per diluted share, loss on conversion of debt to equity; $5 million, $0.01 per diluted share, loss on impairment of our investment in an unconsolidated affiliate; and $3 million, discrete tax items, net. After consideration of these net unfavorable items, fourth quarter 2023 adjusted net loss was $74 million, $0.09 per diluted share. Contract drilling revenues for the three months ended December 31, 2023 increased sequentially by $28 million to $741 million due to increased average daily revenue and higher fleet revenue efficiency.
KCF Technologies announced an integration with Nabors Industries, pioneer of the RigCLOUD digital drilling platform, enabling customers to bring data from their wireless machine sensors into the open cloud system.
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, Inc. For the period from and including February 12, 2024, through February 16, 2024, the Company purchased a total of 231,677 shares at an average price of $43.10 per share. The transactions effected through the agreement with Fearnley comprise all the transactions effected by or on behalf of the Company during the period.
REFINERS
No significant news.
MLPS & PIPELINES
No significant news.
MARKET COMMENTARY
Wall Street futures slipped as hopes for early interest rate cuts from the Federal Reserve waned, while investors assessed quarterly earnings from U.S. retail giants including Walmart. European shares fell as metal and mining stocks dipped, with traders evaluating key eurozone wage data. In Asian equity markets, China's shares closed up after the country announced its biggest ever reduction in the benchmark mortgage rate to prop up the struggling property market and broader economy, while Japan's Nikkei struggled for traction to close lower. Gold prices rose as the dollar pulled back. Oil prices declined but remained near three-week highs as heightened Middle East tensions did not offset demand worries.
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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