SECTOR COMMENTARY:
Energy stocks are set to open lower, pressured by weakness in the crude complex and in major equity futures which carried over yesterday’s retreat into this morning’s session amid another round of weak earnings. Earnings season continued to ramp up for the space today with Schlumberger reporting a rise in fourth-quarter profit that beat expectations.
WTI and Brent crude oil futures are down slightly in early trading, pressured by yesterday’s EIA report that showed an unexpected rise in U.S. crude and fuel inventories while investors took profits after the global benchmarks touched seven-year highs this week. The EIA reported the first U.S. stock build since November with gasoline inventories at an 11-month high, against industry expectations. The EIA also reported a slight decline in refinery runs, indicating lower demand for crude. Oil majors Total Energies and Chevron Corp, partners in a major gas project in Myanmar, said they were withdrawing from the country, citing the worsening humanitarian situation following last year’s coup.
Natural gas futures rose more than 3% on what is expected to be the country’s biggest gas demand day on record with forecasts for more cold weather and higher heating demand over the next two weeks than previously expected. In addition to boosting gas demand, the cold this week cut gas output to its lowest in four months as wells and other equipment in Texas, Pennsylvania and several other producing states freeze.
BY SECTOR:
US INTEGRATEDS
Chevron said it is working on a planned orderly transition leading to an exit from the Yadana gas joint venture in Myanmar.
INTERNATIONAL INTEGRATEDS
Equinor has formally submitted plans for its ‘Hydrogen to Humber (H2H) Saltend’ hydrogen production facility into phase two of the Government’s Cluster Sequencing Process, supported by a series of co-operation agreements with prospective regional hydrogen users, which could be a world first and a catalyst for the Humber to achieve net zero.
The U.S. House Committee on Oversight and Reform panel has asked board members at oil companies ExxonMobil, BP, Chevron and Shell Oil to testify on climate disinformation at a hearing next month, the Washington Post reported.
Brazil’s President Jair Bolsonaro said that Suriname will give Petrobras priority in the exploration of oil and gas reserves recently discovered off-shore.
Shell Oil Company, a subsidiary of Royal Dutch Shell plc, has completed the sale of its interest in Deer Park Refining Limited Partnership, a 50-50 joint venture between Shell Oil Company and P.M.I. Norteamerica, S.A. De C.V. (a subsidiary of Petroleos Mexicanos, or Pemex) for $596 million, a combination of cash and debt.
According to Reuters, Shell said that it it no longer holds exploration licences in Myanmar.
TotalEnergies has decided to withdraw from Myanmar as a result of the civil unrest in the country, the company said.
TotalEnergies has told a rights group that it backs the imposition of sanctions on its payments to Myanmar’s junta from gas operations in the country and that it has asked the French government to put in place a legal framework for sanctions.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Goldman Sachs upgraded Antero Resources to Buy from Neutral.
JPMorgan downgraded Callon Petroleum to Underweight from Neutral.
Goldman Sachs downgraded Devon Energy to Neutral from Buy.
Goldman Sachs reinstated coverage on Southwestern Energy with a Neutral rating.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Fluor announced that Tricia Thibodeaux, Fluor’s executive director of global Health, Safety and Environmental, has been named vice chair of the Construction Industry Institute (CII) for 2022.
Schlumberger announced fourth-quarter 2021 results. Fourth-quarter revenue of $6.22 billion increased 6% sequentially and 13% year-on-year. Fourth-quarter GAAP EPS of $0.42 increased 8% sequentially and 56% year-on-year. Fourth-quarter EPS, excluding charges and credits, of $0.41 increased 14% sequentially and 86% year-on-year. The Board approved a quarterly cash dividend of $0.125 per share.
DRILLERS
Seadrill and Seadrill New Finance Limited announced that the Issuer has emerged from chapter 11 after successfully completing its pre-packaged restructuring pursuant to its chapter 11 plan of reorganization. All conditions precedent to the restructuring contemplated by the Plan have been satisfied or otherwise waived. Seadrill New Finance Limited will shortly be renamed Paratus Energy Services Ltd. In accordance with the Plan, post emergence the board of directors of the Issuer shall consist of between three and five members, up to four of which shall be appointed by the Issuer’s noteholders, with the remaining director to be appointed by Seadrill. As such, a newly constituted board of directors of the Issuer was appointed, consisting of Mei Mei Chow, Jim LaChance, Matt Lyne, and James Ayers. Sergio Delgado will initially act as an observer.
REFINERS
The Board of Directors of Valero Energy has declared a regular quarterly cash dividend on common stock of $0.98 per share. The dividend is payable on March 3, 2022 to holders of record at the close of business on February 3, 2022.
MLPS & PIPELINES
Crestwood Equity Partners LP announced that the board of directors of its general partner has declared the partnership’s quarterly cash distribution of $0.625 per limited partner unit ($2.50 annually) for the quarter ended December 31, 2021, which is flat quarter over quarter. Crestwood expects the previously announced acquisition of Oasis Midstream Partners LP to close on February 1, 2022. Upon close, legacy OMP unitholders will have their ownership converted to Crestwood units at the previously disclosed exchange ratio. All legacy OMP unitholders that remain Crestwood unitholders as of the February 7, 2022 record date will receive Crestwood’s $0.625 per limited partner unit distribution attributed to the fourth quarter 2021.
Tudor Pickering Holt downgraded Enbridge to Hold from Buy.
Energy Transfer LP said this week it would continue providing natural gas to Vistra Corp’s power plants in Texas, after Vistra complained to state regulators that Energy Transfer threatened to stop supplying fuel in a dispute over charges from last February’s freeze.
Targa Resources announced that its board of directors has declared a quarterly cash dividend of $0.35 per common share, or $1.40 per common share on an annualized basis, for the fourth quarter of 2021, consistent with previously disclosed expectations. This cash dividend will be paid February 15, 2022 on all outstanding common shares to holders of record as of the close of business on January 31, 2022. This dividend represents a 350 percent increase over the common dividend declared with respect to the third quarter of 2021.
MARKET COMMENTARY
U.S. stock markets futures fell as fears about the pace of monetary policy tightening and weaker-than-expected earnings from companies that soared in the pandemic hit investor confidence. European and Asian shares were down too. The U.S. dollar fell against major currencies. Gold prices fell on inflationary concerns. An unexpected rise in U.S. crude and fuel inventories pushed oil futures down.
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