SECTOR COMMENTARY:
The energy sector is poised for a lower start, pressured by weakness across the underlying commodities while major equity futures were flat as investors refrained from making big bets ahead of the conclusion of the Federal Reserve’s meeting, where policymakers are widely expected to signal the withdrawal of the pandemic-era support.
WTI and Brent crude oil futures dropped over 2% this morning, pressured by last night’s API report and mounting pressure for OPEC to increase supply. Ahead of the official EIA data later today, last night’s industry supply report showed crude stocks spiked 3.6 million barrels last week, significantly more than anticipated while gasoline inventories fell much less than anticipated. OPEC+ meets on tomorrow to review its policy and is expected to reconfirm plans for steady monthly increases despite calls for a raise.
Natural gas futures inched lower this morning after soaring about 7% in the prior session on forecasts for higher heating demand this week and expectations a jump in global gas prices will keep demand for U.S. LNG exports strong. Yesterday’s rally came despite near record U.S. output and forecasts for milder weather and lower heating demand next week than previously expected.
BY SECTOR:
US INTEGRATEDS
No significant news.
INTERNATIONAL INTEGRATEDS
Equinor said it will restart talks with Tanzania’s government next week on the possible revival of plans to develop major natural gas reserves found in the east African country’s waters, Reuters reported.
Infosys announced its strategic collaboration with Shell Global Solutions International B.V. (Shell), as the commercialization partner of the “Shell Inventory Optimizer” solution.
Shell announced the rebranding of group portfolio companies NewMotion and Greenlots to Shell Recharge Solutions as it further integrates its global electric vehicle (EV) charging offer. The rebrand will be completed in early 2022 and will tie together Shell’s regional EV charging businesses under a unified global brand.
TotalEnergies, Iberdrola and Norsk Havvind have joined forces to respond to the Norwegian authorities’ call for tenders for the development of floating and bottom-fixed wind projects for a cumulated capacity of 4.5 GW at two offshore sites in southern Norway.
CANADIAN INTEGRATEDS
Cenovus Energy continued its strong and reliable operating performance in the third quarter of 2021. Total upstream production of almost 805,000 barrels of oil equivalent per day (BOE/d)i drove solid financial results. The company generated third-quarter cash from operating activities of $2.1 billion and adjusted funds flow of $2.3 billion. Free funds flow of $1.7 billion and strategic refinancing transactions resulted in a reduction in net debt to about $11 billion at the end of the third quarter. Cenovus generated net earnings of $551 million in the third quarter, more than doubling second-quarter net earnings of $224 million, with the improvement largely driven by higher operating margin. The company expects to achieve its interim net debt target of below $10 billion imminently as a result of continued strong cash generation at current commodity prices and receipt of proceeds from announced asset sales. This will pave the way for Cenovus to increase investor returns by commencing a share buyback program of up to 146.5 million of the company’s common shares, representing approximately 10% of its public float, as defined by the Toronto Stock Exchange (TSX). To facilitate the buyback, Cenovus’s Board of Directors has approved filing an application with the TSX for a normal course issuer bid (NCIB). In addition, the Board has approved doubling Cenovus’s common share dividend effective in the fourth quarter of 2021.
U.S. E&PS
Berry Corporation announced improved third quarter results, including net income of $10 million or $0.12 per diluted share, Adjusted Net Income of $12 million or $0.14 per diluted share, and Adjusted EBITDA of $59.3 million, a 46% increase sequentially. The Board of Directors approved a quarterly common stock dividend of $0.06 per share for the fourth quarter of 2021, and a new total shareholder return model expected to be implemented in 2022.
Chesapeake Energy reported 2021 third quarter results. Net loss totaled $345 million, or $3.51 per diluted share. Adjusted net income was $269 million, or $2.38 per diluted share. During the 2021 third quarter, Chesapeake generated $443 million of operating cash flow and ended the quarter with $849 million of cash on hand. Consistent with the company’s strong liquidity, free cash flow generation and its previous announcement, Chesapeake’s Board of Directors increased its base quarterly dividend on its common shares to $0.4375 per share, representing a 27% increase compared to the previous dividend amount.
Comstock Resources reported financial and operating results for the quarter ended September 30, 2021. Revenues in the third quarter of 2021 totaled $394.0 million (after deducting realized losses on hedging of $117.1 million). Net cash provided by operating activities (excluding changes in working capital) generated in the third quarter was $255.4 million, and the Company reported a net loss available to common stockholders for the third quarter of $292.7 million ($1.26 per share). The net loss in the quarter was driven by a $392.9 million unrealized loss on hedging contracts held for risk management. The significant improvement in the outlook for natural gas prices generated the unrealized loss on the hedging contracts. Excluding this item and certain other unusual items, adjusted net income available to common stockholders for the third quarter of 2021 was $90.6 million, or $0.34 per diluted share.
Coterra Energy reported third-quarter 2021 financial and operating results. Net income for third-quarter 2021 totaled $62.7 million, or $0.16 per share. Adjusted net income (non-GAAP) for third-quarter 2021, excluding certain infrequent and non-cash items, was $207.0 million, or $0.52 per share.
Devon Energy reported financial and operational results for the third-quarter 2021.Devon reported net earnings of $838 million, or $1.24 per diluted share, in the third quarter of 2021. Adjusting for items analysts typically exclude from estimates, the company’s core earnings were $733 million, or $1.08 per diluted share.
Devon Energy announced that its board of directors has declared a fixed-plus-variable dividend of $0.84 per share based on the company’s third-quarter financial performance. This represents a 71 percent increase in the dividend payout compared to the previous quarter. The dividend is payable on Dec. 30, 2021 to shareholders of record at the close of business on Dec. 10, 2021. The company also announced the next step in its cash-return strategy with the authorization of a $1.0 billion share-repurchase program of its common stock through year-end 2022. This program is equivalent to approximately 4 percent of the company’s current market capitalization.
Benchmark initiated coverage of Earthstone Energy and EOG Resources with Buy ratings.
Laredo Petroleum announced its third-quarter 2021 financial and operating results.For the third quarter of 2021, the Company reported net income attributable to common stockholders of $136.8 million, or $8.56 per diluted share, which included a $95.2 million non-cash gain on sale of oil and natural gas properties, net. Adjusted Net Income for the third quarter of 2021 was $29.4 million, or $1.84 per adjusted diluted share. Adjusted EBITDA for the third quarter of 2021 was $133.4 million.
Ovintiv announced its third quarter 2021 financial and operating results. The Company recorded a net loss in the third quarter of $72 million, or $0.28 per diluted share of common stock. The results included the impact of net losses on risk management of $954 million, before-tax. As of October 31, 2021, Ovintiv had repurchased for cancellation, approximately 791 thousand of its common shares outstanding at an average price of $37.91 per share, for a total investment of approximately $30 million. During the fourth quarter, the Company plans to buyback shares equivalent to 25% of its third quarter free cash flow less base dividend payments, or approximately $111 million.
W&T Offshore reported operational and financial results for the third quarter 2021.For the third quarter of 2021, W&T reported a net loss of $38.0 million, or $0.27 per share. After primarily excluding a $43.1 million unrealized commodity derivative loss and $5.8 million non-cash tax benefit, the Company’s Adjusted Net Income was $0.1 million, or $0.00 per share. Adjusted EBITDA for the third quarter of 2021 totaled $45.3 million, a decrease of 9% compared to $49.8 million in the second quarter of 2021 primarily as a result of deferred production volumes due to Hurricane Ida and higher realized derivative losses. Revenues for the third quarter of 2021 of $133.9 million were up slightly compared to $132.8 million in the second quarter of 2021, and increased by 85% compared to $72.5 million in the third quarter of 2020.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
Zephirin Group downgraded Baker Hughes to Hold from Buy.
Compass Minerals announced a $45 million equity investment in FORTRESS North America (Fortress), an early-stage long-term fire retardant (LTR) company dedicated to developing and producing a portfolio of more environmentally friendly and carbon neutral fire retardants to combat the devastating effects of wildfires in North America and around the world. This builds upon the initial $5 million Series A investment Compass Minerals made in Fortress, meaningfully increasing its minority equity stake ownership to approximately 45%, with the opportunity to further increase that stake over time.
Eagle Materials announced that it has appointed Mauro Gregorio to its Board of Directors. Mr. Gregorio is the President of Performance Materials and Coatings at Dow. With annual sales of $9 Billion, this business provides innovative solutions to global markets in infrastructure and transportation as well as other segments. Mr. Gregorio also has executive oversight for Dow’s business in the Latin America Region.
Newpark Resources announced results for its third quarter ended September 30, 2021. Total revenues for the third quarter of 2021 were $151.8 million compared to $142.2 million for the second quarter of 2021 and $96.4 million for the third quarter of 2020. Net loss for the third quarter of 2021 was $10.5 million, or ($0.11) per share, compared to a net loss of $6.0 million, or ($0.07) per share, for the second quarter of 2021, and a net loss of $23.9 million, or ($0.26) per share, for the third quarter of 2020.
NOW announced results for the third quarter ended September 30, 2021. Revenue was $439 million for the third quarter of 2021. Net income was $5 million and non-GAAP net income excluding other costs was $6 million for the third quarter of 2021. Diluted earnings per share was $0.05 and non-GAAP diluted earnings per share excluding other costs was $0.05 for the third quarter of 2021.
Select Energy Services announced results for the quarter ended September 30, 2021. Revenue for the third quarter of 2021 was $204.6 million as compared to $161.1 million in the second quarter of 2021 and $101.2 million in the third quarter of 2020. Net loss for the third quarter of 2021 was $14.2 million as compared to a net loss of $19.6 million in the second quarter of 2021 and a net loss of $36.3 million in the third quarter of 2020.
DRILLERS
No significant news.
REFINERS
HollyFrontier reported third quarter net income attributable to HollyFrontier stockholders of $280.8 million, or $1.71 per diluted share, for the quarter ended September 30, 2021, compared to a net loss of $(2.4) million, or $(0.01) per diluted share, for the quarter ended September 30, 2020. The third quarter results reflect special items that collectively increased net income by a total of $70.8 million. On a pre-tax basis, these items include a gain on sale of real property of $86.0 million, partially offset by pre-close acquisition integration costs of $4.3 million and charges related to the Cheyenne Refinery conversion to renewable diesel production, including decommissioning charges of $6.7 million and severance charges totaling $0.2 million. Excluding these items, net income for the current quarter was $209.9 million ($1.28 per diluted share) compared to net loss of $(66.9) million ($(0.41) per diluted share) for the third quarter of 2020, which excludes certain items that collectively decreased net loss by $64.5 million.
Goldman Sachs added Phillips 66 to Conviction List. Meanwhile, the firm removed Marathon Petroleum from Conviction List.
MLPS & PIPELINES
DCP Midstream, LP reported its financial results for the three months ended September 30, 2021. For the respective three and nine months ended September 30, 2021, DCP had net income attributable to partners of $54 million and $76 million, net cash provided by operating activities of $187 million and $255 million, adjusted EBITDA of $353 million and $961 million, and distributable cash flow of $250 million and $650 million. The company generated $157 million of excess free cash flow for the three months ended September 30, 2021 and $378 million for the nine months ended September 30, 2021 after fully funding distributions and growth capital.
DHT Holdings announced that in the third quarter of 2021, the Company’s VLCCs achieved an average rate of $16,300 per day. Adjusted EBITDA for the third quarter of 2021 was $14.0 million. Net loss for the quarter was $21.0 million which equates to a loss of $0.13 per basic share. The result includes a gain related to sale of vessels of $1.6 million and non-cash gains in fair value related to interest rate derivatives of $2.3 million.
EnLink Midstream reported financial results for the third quarter of 2021. The company reported net income of $32.3 million, net cash provided by operating activities of $197.0 million, and adjusted EBITDA, net to EnLink, of $256.4 million for the third quarter of 2021, driven by strong producer activity and continued focus on operating efficiencies. Results were ahead of internal forecast, excluding temporary $4 million impact from Hurricane Ida during the quarter. Taking into account the third quarter results, EnLink expects to report 2021 net income within the guidance range provided in June of $125 to $165 million. EnLink also expects to report 2021 adjusted EBITDA in the upper end of guidance provided in June of $1.02 billion to $1.06 billion.
Plains All American Pipeline, L.P. and Plains GP Holdings reported third-quarter 2021 results. The company reported a net loss for the period of $59 million, including the non-cash impact of an approximately $220 million asset impairment charge. Q3 Non-GAAP EPS was $0.22 and GAAP EPS was -$0.15. It also reported its revenue of $10.78 billion. Third-quarter Adjusted EBITDA was $519 million and maintained full-year 2021 Adjusted EBITDA guidance of +/- $2.175 billion (includes approximately $40 million impact of Fort Saskatchewan incident and other timing-related items).
Summit Midstream Partners announced that Summit Midstream Holdings, LLC, a Delaware limited liability company and Summit Midstream Finance Corp., a Delaware corporation which are subsidiaries of the Partnership, closed a private offering of $700,000,000 aggregate principal amount of 8.50% Senior Secured Second Lien Notes due 2026. Concurrently with the closing of the Offering and the issuance of the Notes, Summit Holdings, as borrower, entered into a first-lien, senior secured credit agreement with the Partnership, certain subsidiaries of the Partnership party thereto, Bank of America, N.A., as agent and the several lenders and other agents party thereto, consisting of a $400.0 million asset-based revolving credit facility.
According to Reuters, Pembina Pipeline Corp is asking backers of two competing proposals for carbon capture hubs in the oil-producing province of Alberta to combine efforts with its own plan, the company’s chief executive said on Tuesday. Pembina and TC Energy said in June they were looking to develop a system to transport and sequester carbon. The Alberta government, which controls underground space for burying carbon, called for expressions of interest this autumn.
MARKET COMMENTARY
Wall Street futures were largely steady ahead of a crucial Federal Reserve decision, as investors await cues on the U.S. central bank’s plan to taper its pandemic-induced stimulus amid signs of rising inflation. European shares hit fresh record highs, as a recent run of upbeat corporate earnings and a recovery in metal prices helped limit losses from a slide in oil stocks. Most Asian markets ended lower ahead of the Fed decision. The dollar was little changed and gold prices slipped. Oil fell as industry data pointed to a big build in crude oil and distillate stocks in the United States, the world’s largest oil consumer, and as pressure mounted on OPEC to increase supply. Factory orders, private payrolls and PMI data is scheduled 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 Tamar Essner.
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