SECTOR COMMENTARY
SECTOR COMMENTARY
Power shares are set for a combined to increased begin, again by delicate energy within the crude advanced and broader index futures which reversed in a single day losses and after hitting ‘restrict down’ because the Federal Reserve mentioned it will launch an asset buy program with no limits to help the financial system. Buyers will probably be retaining an in depth eye on any new developments out of Washington for indicators of a stimulus package deal being signed after Congress didn’t move the invoice over the weekend.
Each WTI and Brent pared earlier losses and rose consistent with broader index futures following the announcement that the Federal Reserve would launch an asset buy settlement to help the financial system. WTI is outperforming Brent this morning whereas RBOB underperforms each as extra lockdowns and journey restrictions over the weekend added to already important demand losses domestically and globally. “Set towards this dismal outlook, the downward spiral in oil costs is poised to proceed and should properly attain the mid-teens. Put merely, the seek for a worth flooring is in no way over,” PVM analysts mentioned in a word.
Pure fuel futures are off ~1.5% and to new lows not seen since 1995 after a 14.4% drop final week, pressured by above-seasonal climate forecasts for the subsequent two weeks which ought to damage demand.
U.S. INTEGRATEDS
Press Launch – Aker Options has entered a grasp settlement to offer umbilicals for Chevron-operated oil and fuel fields within the US Gulf of Mexico. The corporate additionally secured the primary work order underneath the brand new grasp settlement, to offer 24 kilometers (15 miles) of umbilicals for Chevron’s Anchor challenge. The scope of the Chevron settlement contains the supply of engineering, design and manufacturing of dynamic and static management umbilicals, dynamic and static energy umbilicals, and repair and set up help. This settlement lays the inspiration for a long-term collaborative relationship incentivizing each Chevron and Aker Options to collectively enhance long-term efficiency each technically and commercially by way of multi-project synergies, execution excellence and repeatability, and life-of-field pondering.
(Late Friday) Reuters – Chevron minimize manufacturing at its 269,000 barrel-per-day El Segundo, California, refinery to match decreased demand as a consequence of efforts h to halt the unfold of the coronavirus, mentioned sources acquainted with plant operations on Friday. The minimize in manufacturing comes at some point after California Governor Gavin Newsom advised California’s 40 million residents to remain at house to forestall the unfold of the illness.
(Sunday) Reuters – Exxon Mobil is notifying contractors and distributors of deliberate near-term cuts in capital and working bills due to the coronavirus pandemic, a spokesman for the corporate mentioned. Exxon will announce its discount plans as soon as they’re last, mentioned spokesman Jeremy Eikenberry.
(Sunday) Reuters – Exxon Mobil minimize manufacturing on March 21 at its 502,500 barrel-per-day Baton Rouge, Louisiana, refinery as poor demand has pushed up inventories and stuffed storage tanks, mentioned sources acquainted with plant operations. The variety of contract employees on the Baton Rouge refinery was minimize by 1,800 folks on Friday as Exxon begun informing service firms of deliberate spending cuts. The refinery’s manufacturing was minimize to about 440,000 bpd on Saturday, the sources mentioned. Exxon spokesman Jeremy Eikenberry mentioned the spending cuts will probably be introduced when last selections are made.
(Late Friday) Reuters – Mexico’s oil regulator accepted on March 20 a request by Complete to surrender its exploration and manufacturing rights to a deep water block within the southern Gulf of Mexico that the agency had gained at public sale in 2016. The regulator mentioned Complete determined to return the block as a result of outcomes it had obtained so far, and should pay a superb of $21.2 million for failing to adjust to its contract’s minimal exploration work necessities. Complete, the challenge’s operator, had gained rights to the realm in a consortium that additionally included ExxonMobil.
(Late Friday) Reuters – Exxon Mobil is more likely to delay the greenlighting of its $30 billion liquefied pure fuel (LNG) challenge in Mozambique because the coronavirus disrupts early works and a depressed fuel market makes buyers cautious, six sources advised Reuters. Prime U.S. oil and fuel firm Exxon mentioned on March 17 it was evaluating “important” cuts to capital spending and working bills. Power corporations worldwide have slashed spending this month as oil costs plummeted to 18-year lows after international journey curbs and decreased financial exercise destroyed demand.
INTERNATIONAL INTEGRATEDS
(Late Friday) Reuters – A 160,000 barrel-per-day (bpd) refinery owned by BP and Husky Power in Toledo, Ohio has shut a 3,000 bpd alkylation unit, in accordance with a supply acquainted with plant operations. It’s unclear when the unit will resume working. The plant has additionally despatched house greater than 1,000 exterior contractors who have been performing work on the plant, in accordance with the supply. The contractors are set to return in roughly 2-Three weeks. Upkeep on vital initiatives equivalent to tanker repairs remains to be ongoing with roughly 200 employees nonetheless on the plant.
Press Launch – Because the COVID-19 virus spreads the world over, Shell is placing the security and well being of its folks and clients first, together with the secure operations of all its companies. On the identical time, the Firm is taking decisive motion to bolster the monetary energy and resilience of its enterprise in order that it’s well-positioned for the eventual financial restoration. With a view to ship sustainable money circulate era, Shell is actively managing all its operational and monetary levers – from specializing in sustaining secure and dependable operations every day to lowering capital spend and working bills. The Firm introduced that it has launched into a collection of operational and monetary initiatives which might be anticipated to lead to: discount of underlying working prices by $3-Four billion every year over the subsequent 12 months in comparison with 2019 ranges; discount of money capital expenditure to $20 billion or beneath for 2020 from a deliberate degree of round $25 billion; and materials reductions in working capital. Collectively, these initiatives are anticipated to contribute $8 – 9 billion of free money circulate on a pre-tax foundation. Shell remains to be dedicated to its divestment programme of greater than $10 billion of belongings in 2019-20 however timing depends upon market circumstances. The Board of Royal Dutch Shell has determined to not proceed with the subsequent tranche of the share buyback programme following the completion of the present share buyback tranche.
Press Launch – Patrick Pouyanné, Chairman & CEO of Complete, addressed the Group’s staff on March 19 to mobilize them within the face of the challenges forward. He recalled the resilience that the Group’s groups demonstrated throughout the 2015-16 oil disaster in addition to the 2 pillars of the Group’s technique that are the natural pre-dividend breakeven of lower than $25/b and the low gearing to face this excessive volatility. In a context of oil costs on the order of $30 per barrel, he introduced an motion plan to be applied instantly based mostly on the next three axes: Natural Capex cuts of greater than $Three billion, ie. greater than 20%, lowering 2020 web investments to lower than $15 billion. These financial savings are primarily within the type of short-cycle versatile Capex, which could be arbitrated contractually over a really brief time interval; $800 million of financial savings in 2020 on working prices in comparison with 2019, as an alternative of the $300 million beforehand introduced; Suspension of the buyback program – the corporate introduced a $2 billion buyback for 2020 in a 60 $/b atmosphere; it purchased again $550 million within the first two months.
(Late Friday) Reuters – Mexico’s oil regulator accepted on March 20 a request by Complete to surrender its exploration and manufacturing rights to a deep water block within the southern Gulf of Mexico that the agency had gained at public sale in 2016. The regulator mentioned Complete determined to return the block as a result of outcomes it had obtained so far, and should pay a superb of $21.2 million for failing to adjust to its contract’s minimal exploration work necessities. Complete, the challenge’s operator, had gained rights to the realm in a consortium that additionally included ExxonMobil.
CANADIAN INTEGRATEDS
(Late Friday) Reuters – A 160,000 barrel-per-day (bpd) refinery owned by BP and Husky Power in Toledo, Ohio has shut a 3,000 bpd alkylation unit, in accordance with a supply acquainted with plant operations. It’s unclear when the unit will resume working. The plant has additionally despatched house greater than 1,000 exterior contractors who have been performing work on the plant, in accordance with the supply. The contractors are set to return in roughly 2-Three weeks. Upkeep on vital initiatives equivalent to tanker repairs remains to be ongoing with roughly 200 employees nonetheless on the plant.
(Sunday) Press Launch – Husky Power introduced that it’s going to start a systematic and orderly suspension of main building actions associated to the West White Rose Mission. The choice reinforces Husky’s goal to forestall the transmission of the COVID-19 virus amongst its staff, contractors, and the group. The Firm rigorously assessed the dangers and decided they may not be adequately mitigated for such a big building workforce.
U.S. E&PS
(Sunday) Reuters – Occidental Petroleum is nearing an settlement with activist investor Carl Icahn to halt a proxy battle in return for board seats, in accordance with an individual acquainted with the matter. The settlement might put an finish to a bitter battle over Occidental’s ill-timed buy of rival Anadarko Petroleum final yr, a wager on the continued progress of U.S. shale. After closing that deal, the market turned towards Occidental, with oil costs diving greater than 60% this yr as the worldwide coronavirus outbreak minimize oil demand and OPEC and Russia launched an oil-price warfare. If the settlement talks conclude efficiently, Icahn associates Andrew Langham and Nicholas Graziano would get board seats, and Icahn would have a say within the naming of a 3rd unbiased director, the supply mentioned. An announcement might come later this week, alongside an official announcement on the appointment of former Occidental CEO Stephen Chazen as Occidental’s new chairman, the supply mentioned. The Wall Road Journal was the primary to report that Occidental was nearing a truce within the proxy battle with Icahn.
Press Launch – Talos Power introduced up to date full yr 2020 monetary steering, inclusive of $170.Zero million of reductions in capital, working and G&A bills. The Firm will proceed to judge extra alternatives to additional scale back 2020 prices. These reductions could be incremental to the $170.Zero million already recognized. Talos continues to anticipate to generate constructive free money circulate in 2020 regardless of the present commodity atmosphere. We imagine that these value discount measures, coupled with Talos’s low money value construction and strong hedge e-book, enable the Firm to generate free money circulate in 2020, after capital expenditures and curiosity expense, within the mid-$20’s per barrel common WTI costs for the stability of the yr.
Press Launch – Pursuant to the Italian Authorities’s decree issued on March 22, 2020 relating to COVID-19, Westport Gas Methods introduced it’ll briefly droop manufacturing at its services in Cherasco and Albinea, Italy. The directive is in impact till April 03, 2020. The non permanent suspension of the Firm’s manufacturing in Brescia, Italy introduced on March 16, 2020, will probably be prolonged to align with this newest directive.
Press Launch – W&T Offshore introduced the Firm was the obvious excessive bidder on two blocks within the Gulf of Mexico Lease Sale 254 held by the Bureau of Ocean Power Administration on March 18, 2020. W&T was the obvious excessive bidder on one deepwater block, Backyard Banks block 782, and one shallow water block, Eugene Island Space South Addition block 345. These two blocks cowl a complete of roughly 10,760 acres and, if awarded, the Firm pays roughly $708,500 for the awarded leases mixed, which displays a 100% working curiosity within the acreage. The shallow water block has a five-year lease time period and 12.5% royalty, whereas the deepwater block has a seven-year lease time period and an 18.75% royalty. Regardless of submitting the obvious excessive bid on these leases, the BOEM reserves the suitable to not award the blocks based mostly on their minimal bidding standards. W&T expects to obtain the ultimate award outcomes over the subsequent 90 days.
CANADIAN E&PS
(Late Friday) Press Launch – Canacol Power introduced the appointment of Mr. Ari Merenstein as an unbiased director to the board of the Company.
OILFIELD SERVICES
Press Launch – Black Hills introduced an replace relating to the actions it’s taking in response to COVID-19 and the associated impacts on the corporate’s enterprise. The corporate is executing its enterprise continuity plan and stays centered on prioritizing the well being and security of its clients, staff, enterprise companions and communities. Black Hills continues to watch its operations and believes the basics of its utility-focused enterprise stay sound. Operations and supply of vitality to its 1.Three million clients haven’t been materially impacted. So far, Black Hills has not skilled important reductions in gross sales volumes throughout its enterprise and is carefully monitoring potential impacts as a result of states’ and the nation’s COVID-19 pandemic responses. The corporate continues to take care of enough liquidity to function its companies and fund its capital program. The corporate is shifting its short-term funding from its business paper program to its $750 million revolving credit score facility, which expires July 30, 2023. The credit score facility has two one-year renewal choices and accommodates an accordion characteristic that permits Black Hills to extend complete commitments as much as $1 billion underneath sure circumstances.
Press Launch – KBR introduced that it has been awarded a $26.Eight million activity order to offer extra cybersecurity engineering help to the U.S. Air Power Life Cycle Administration Middle (AFLCMC) Engineering Directorate Cyber Methods Engineering Division.
DRILLERS
Press Launch – Helmerich & Payne introduced it’s implementing extra value controls and re-evaluating its capital allocation to proactively protect its sturdy monetary place in response to a mix of a weakened commodity worth atmosphere, broader uncertainties associated to COVID-19 and the ensuing excessive market volatility. Concurrently, as a result of quickly evolving market circumstances over the previous few weeks, the Firm feels that it’s applicable to withdraw its fiscal second quarter steering, which was beforehand supplied on February 3, 2020. The Firm usually opinions its prices, each operational and SG&A, in addition to capital expenditures and is doing so now in mild of the precipitous fall within the lively rig depend following the current OPEC assembly in mid-March 2020 and the rising considerations over the final word influence of COVID-19, which collectively manifested within the lowest oil costs in 20 years this previous week. H&P is reassessing its value construction based mostly on newly creating rig exercise ranges and can present up to date steering as a part of the upcoming fiscal second quarter outcomes course of. Along with these measures, the Firm and its Board of Administrators are presently reassessing optimum money deployment plans, together with the degrees of future dividends, as a way to stability the Firm’s dedication to shareholder returns whereas sustaining its ongoing monetary energy. On the identical time, H&P stays dedicated to paying the beforehand introduced $0.71 per share dividend on June 1, 2020, to stockholders of report on the shut of enterprise Could 11, 2020.
MLPS & PIPELINES
Press Launch – In response to extraordinary and risky market circumstances, DCP Midstream introduced the next decisive actions. First, the board of administrators of its basic companion accepted a plan to cut back quarterly distributions to its frequent unitholders to $0.39 per unit or $1.56 yearly, starting with the primary quarter 2020 distribution, payable in Could 2020. This 50% distribution discount leads to $325 million of money that will probably be totally utilized to cut back leverage and strengthen the stability sheet. Second, DCP will scale back its 2020 progress capital program by 75%, to roughly $150 million for the yr, down from a steering midpoint of $600 million. This remaining capital spend is required for crucial and strategic initiatives which might be already underway. The $450 million progress capital discount contains the strategic choice to defer a 30% possession possibility in Phillips 66’s Sweeny Frac 2 and three initiatives, which was projected to be exercised on the finish of 2020. Though DCP doesn’t anticipate to train the choice in 2020, Phillips 66 and DCP are contemplating an possibility in later years that will be mutually useful for each firms. Extra progress capital reductions have been made on a basin-specific foundation. Seeking to 2021, DCP has supplied a progress capital vary of $50 million to $150 million and the corporate anticipates concentrating on the low finish of the vary. Third, by way of focused value and sustaining capital reductions, DCP expects to attenuate the damaging influence of the commodity worth atmosphere by roughly $80 to $100 million in 2020. To attain this purpose, DCP plans to decrease prices by no less than $50 million enterprise-wide, scale back sustaining capital by $30 million, and additional drive DCP 2.Zero innovation efforts by as much as $20 million to enhance money flows.
(Late Friday) Reuters – Power Switch’s new building on the Mariner East pipeline challenge is being briefly suspended after Pennsylvania Governor Tom Wolf ordered all “non-life-sustaining companies” within the state shut down as coronavirus instances proceed to rise, Power Switch mentioned on Friday. The pipeline system and services in service have been deemed “life-saving” and ongoing work on the present traces of Mariner East will proceed, Power Switch ET.N mentioned. “We’re working to securely adjust to the Governor’s order relating to the non permanent suspension of our ongoing building actions,” an organization spokesperson mentioned in an emailed assertion. The governor issued the order on Thursday. Power Switch is working with state regulators inside an exemption course of outlined by the administration giving it time to securely droop lively building over an inexpensive time period, on condition that some actions have an extended shut-down course of, the spokesperson added. The corporate didn’t reply to touch upon whether or not the Mariner East 2X pipeline is on monitor to be accomplished by mid-2020 as previously introduced. As soon as full the pipeline will add one other 250,000 barrels per day to the Mariner East system.
Nationwide Financial institution of Canada upgraded Gibson Power and TC Power to ‘Outperform’ from ‘Sector Carry out’.
Suntrust Robinson upgraded Magellan Midstream Companions to ‘Purchase’ from ‘Maintain’.
MARKET COMMENTARY
U.S. inventory index futures tumbled, mirroring world shares, as lockdowns by varied international locations threatened to overwhelm the efforts by policymakers to cushion what’s more likely to be a deep international recession. The greenback index was barely decrease. Spot gold fell as buyers unloaded bullion in trade for money. Oil costs prolonged their fall with demand sliding as journey and industrial exercise contracted throughout the globe.
NASDAQ ENERGY TEAM THOUGHT LEADERSHIP
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