Discount on Canadian Light blows out to US$35, sending prices tumbling 20%
Today's energy market summary:
Global oil prices declined again on Tuesday, with both Brent and WTI sliding over 1%.
The discount on Canadian Light jumped US$7 to US$35 a barrel, sending Canada's light oil benchmark plunging 20%.
The American Petroleum Institute (API) is forecasting a 5.7 million barrel build in US crude stockpiles. Official numbers from the EIA are due tomorrow morning.
The US dollar edged up again today, rising 0.5% to end Tuesday at a 16-month high (barely).
Equity markets rebounded in the US, Canada and select emerging markets, with the NASDAQ, Dow, NYSE and S&P 500 all gaining just under 2%. In Toronto, the TSX rose 1.2%.
US energy stocks outperformed Canadian counterparts today, as the SPX energy basket gained 2.3%, versus a 0.7% increase on the TSX.
Midstream stocks were the worst performing energy subsectors on the TSX, with TransCanada (TRP.TO +0.8%) and Inter Pipeline (IPL.TO -2.0%) reaching new 12-month lows. Plenty of producers and a handful of service stocks also hit new intraday lows on Tuesday.
All US energy subsectors averaged gains for the day, with refining stocks leading to the upside.
Today's notable market movers:
Tidewater Midstream (TWM.TO +3.0%) has been given the green light by Alberta regulators to proceed with its 120 km natural gas pipeline, connecting its Brazeau River Complex to two of TransAlta's (TA.TO -1.0%) coal-fired power plants, slated for conversion to gas-burning facilities. The pipeline will have an initial capacity of 130 MMcf/day, which may later be expanded to 440 MMcf/day. The company says it already has a 15 year take-or-pay commitment with TransAlta. The pipeline is expected to commence construction in November, and should be in-service in the second half of next year.
Cheniere Energy (LNG +3.0%) says it will commission its first LNG cargo from the new Corpus Christi terminal in mid-November, several months ahead of schedule. This is Cheniere’s second LNG export facility and the third major export facility in the US.
According to Reuters, Petrobras (PBR +5.5%) is mulling the sale of another US$20 billion in assets through 2019. A deal is reportedly in the works to sell the company's Pasadena refinery in Texas, potentially to Chevron (CVX +1.8%), and two Brazilian offshore oilfields, likely before year-end.
Today’s M&A activity:
Inter Pipeline (IPL.TO -2.0%) has agreed to buy NuStar Energy's (NS -0.9%) European Bulk Liquid Storage Business for US$270 million. The acquisition includes seven coastal terminals with 9.1 million barrels of storage located in Amsterdam and throughout the UK. The transaction is expected to close in the fourth quarter.
Calgary-based Blackbird Energy (BBI.V n/c) and privately-help Pipestone Oil have agreed to a $310 million merger, structured in stock and debt. The combined company will operate under the name Pipestone Energy, which now becomes a pure-play in the condensate-rich Montney region near Grande Prairie.
Chesapeake Energy (CHK -12.1%) has agreed to buy WildHorse Resource Development (WRD +6.4%) for about US$4 billion in cash and stock, including US$930 million of WRD debt. Chesapeake says the deal will effectively double its oil production to as much as 170,000 bbl/day by 2020.
Today's notable third quarter earnings:
Revenues at AltaGas (ALA.TO -16.2%) doubled to US$1.04 billion in Q3, reflecting its recent acquisition of WGL. The company says it is making progress on the repayment of its bridge loan, with the remaining US$1.2 billion expected to be repaid by the end of the year. CEO Tim Watson says the company plans to sell $1.5 to $2 billion of additional assets in the near-term to raise funds for capital projects and streamline the company's operations. AltaGas swung to a net loss of $726 million in Q3 and will be suspending their DRIP program at the end of this year.
Third quarter revenues at Secure Energy Services (SES.TO +2.6%) rose 35% y/y to $829 million, bringing net profits to $6.8 million. The company completed its light oil feeder pipeline system and receipt terminal in the Kindersley-Kerrobert region of Saskatchewan, which began service at the beginning of October. Two more storage tanks are expected to be added by the middle of next year.
Third quarter earnings at BP (BP +2.9%) rose to US$3.8 billion, more than double the same quarter last year. Revenues rose 32% y/y to US$79.5 billion, while total oil and gas production averaged 3.6 million boe/day. BP's refineries in the US Midwest ran at 96% of design rates, taking full advantage of discounted Canadian crude. The company expects continued production growth through the fourth quarter, as it integrates US shale assets recently purchased from BHP Billiton.
Baker Hughes (BHGE +2.5%) reported third quarter revenues of US$5.7 billion, up 7% y/y. Orders totalled US$5.75 billion in Q3, down 5% from Q2 but unchanged from the same time last year. Operating income rose 30% to US$377 million, bringing adjusted profits to US$78 million, almost double the same time last year. The company says they are "encouraged by the improved outlook for the macro environment," expecting both domestic and international markets to grow next year, particularly offshore, as customers increase spending.
Anadarko Petroleum (APC +1.0%) reported an adjusted profit of US$411 million in Q3, up from a US$427 million loss for the same quarter last year. Production rose 9% y/y to 682,000 boe/day, while margins increased to US$33.68 per barrel, up almost 60% y/y. Revenues also rose 48% to US$3.7 billion.
Chesapeake Energy (CHK -12.1%) posted a net profit of US$60 million in Q3, up from a US$41 million loss for the same quarter last year. Total production averaged 537,000 boe/day, up 5% y/y.
Pipeline operator ONEOK (OKE +0.1%) reported a 40% jump in operating income, rising to US$496 million in Q3. Net income almost doubled to US$313 million. For the full-year 2018, net income is expected to be in the range of US$1.14 to US$1.2 billion, slightly better than previous guidance.
Whiting Petroleum (WLL +3.1%) reported an adjusted net profit of US$121 million, up from a US$286 million loss for the same quarter last year. Q3 production averaged 128,680 boe/day, up 13% y/y.
Holly Energy Partners (HEP -0.3%) posted a net profit of US$45 million, up 3% y/y. Cash flow rose 12% to US$67 million on higher crude gathering volumes in the Permian. The company also increased its quarterly dividend 3% to US$0.665 per share, its 56th consecutive increase.
CNX Resources (CNX +7.3%) reported a net profit of US$147 million in the third quarter, up from a net loss of US$26 million for the same time last year. Gas and liquids production rose almost 18% y/y to 1.29 Bcfe/day.
|CURRENCIES & YIELDS|
|Imperial Oil||IMO||41.26||▲0.6||33.43||44.91||83||D W|
|Husky Energy||HSE||18.46||▲1.0||15.09||22.99||47||D W|
|Pembina Pipeline||PPL||42.53||▼-0.5||37.60||47.84||75↓||D W|
|Inter Pipeline||IPL||20.87||▼-2.0||20.68||27.92||30||D W|
|Gibson Energy||GEI||20.41||▼-0.4||15.68||23.04||97||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||36.37||▲1.7||35.31||49.08||15||D W|
|Cenovus Energy||CVE||11.09||▲2.0||9.03||14.84||22||D W|
|Seven Generations||VII||13.27||▲1.4||12.82||21.25||10||D W|
|Pason Systems||PSI||19.53||▲0.3||16.05||22.10||87||D W|
|Mullen Group||MTL||13.61||▲1.3||13.43||17.12||26||D W|
|Secure Energy||SES||8.16||▲2.6||6.98||9.82||87||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||43.31||▲2.6||24.97||47.45||99||D W|
|Exxon Mobil||XOM||78.78||▲2.3||72.16||89.30||59||D W|
|Kinder Morgan||KMI||16.76||▲3.1||14.69||19.83||64||D W|
|Williams Co||WMB||24.20||▲0.7||23.54||33.67||25↓||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||105.51||▲3.4||96.54||133.53||24||D W|
|Occidental Petroleum||OXY||67.55||▲1.6||62.47||87.67||21||D W|
|Anadarko Petroleum||APC||56.45||▲1.0||46.80||76.70||16||D W|
|Concho Resources||CXO||135.75||▲3.7||123.63||163.11||34||D W|
|Ntl-Oilwell Varco||NOV||37.13||▲5.8||31.47||49.08||31||D W|
|Baker Hughes||BHGE||27.26||▲2.8||25.53||37.76||10||D W|
|Phillips 66||PSX||102.06||▲3.6||89.14||123.97||37||D W|
|Valero Energy||VLO||90.10||▲3.1||77.72||126.98||12||D W|
|Marathon Petroleum||MPC||68.80||▲2.3||58.25||88.45||25||D W|
Cenovus Energy (CVE.TO): Upgraded from Sector Perform to Buy at Scotiabank.
Ensco (ESV): Upgraded from Sell to Hold at DNB Markets.
Hess (HES): Upgraded from Underweight to Equal Weight at Barclays.
Phillips 66 (PSX): Upgraded from Neutral to Overweight at JPMorgan.
Transocean (RIG): Upgraded from Sell to Hold at DNB Markets.
C&J Energy Services (CJ): Downgraded from Buy to Neutral at Cleveland Research.
Rowan Companies (RDC): Downgraded from Buy to Hold at DNB Markets.
Weatherford International (WFT): Downgraded from Neutral to Sell at Citigroup.
UPDATED: DAILY (END-OF-DAY)
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