Discounts on Canadian Light and condensate widen to record levels, sending prices to new lows

Discounts on Canadian Light and condensate widen to record levels, sending prices to new lows

Today's energy market summary:

  • Global oil prices declined across the board today, after several media outlets reported big gains in output from OPEC and Russia. Reuters says production out of OPEC rose 390,000 bbl/day, rising to 33.3 million bbl/day in October, the highest since late 2016. According to Bloomberg, total oil output from Russia also swelled to 11.4 million bbl/day for the month.

  • Brent and WTI sank 3.5% and 2.4%, respectively. Both benchmarks are now down 15% from the highs of early October

  • The differentials on all Canadian oil benchmarks widened again today, with the Canadian Light and Edmonton Condensate (C5+) discounts to WTI rising to a record US$37.20 and US$19.50/bbl, respectively.

  • The differential on Canadian heavy also declined another US$2.70, sending Western Canadian Select (WCS) lower by 19%. All Canadian benchmarks are now back to the lows of February 2016.

  • After falling sharply on Wednesday, gasoline prices sank another 2%.

  • Global equity markets continue to rally, with both the TSX and S&P 500 rising about 1%. In Toronto, the energy sector rose 0.7%, led higher by midstream stocks. The SPX energy sector rose 0.8%, with gains seen across all subsectors.

Today's notable energy news:

  • Enbridge (ENB.TO +1.2%) says it has completed repairs on its 36" natural gas pipeline near Prince George that ruptured in early October. The line is currently being put back into service, with flows gradually increasing to 80% of normal operating pressures. Enbridge's T-South system normally delivers up to 900 MMcf/day of gas to BC's Lower Mainland and the US Pacific Northwest.

  • Keyera Corp (KEY.TO +1.0%) says its Alberta EnviroFuels (AEF) facility will be taken offline for the first two weeks of November for preventative maintenance. The company says the plant operated "very well" this year and continues to maintain high utilization rates. The shutdown is not expected to have a material impact on Q4 results, due to lower demand for iso-octane in winter months.

  • Pembina Pipeline (PPL.TO +1.5%) announced new long-term, take-or-pay agreements for liquids transportation on its Peace Pipeline, natural gas transmission service and fractionation services at the company's Redwater Facility, at an estimated cost of $1.3 billion. Combined with these new projects, Pembina's current portfolio of secured projects rises to $3.1 billion.

  • NuVista Energy (NVA.TO 3.0%) has received approvals from its board and Alberta regulators to begin construction of its Pipestone South compressor station, located west of Grande Prairie, Alberta. The station has been upsized 50% to 15,000 boe/day with the first stage scheduled for start up by the end of 2019. 

  • NuVista also announced an agreement with SemCAMS to construct the Pipestone Pipeline Project, which includes a raw gas pipeline connecting the Pipestone South compressor station to SemCAMS's Wapiti plant for gas processing. Construction is slated to begin this fall. SemCAMS is one of the largest sour gas processors in Alberta, owned by Tulsa-based SemGroup (SEMG +5.5%).

  • Phillips 66 (PSX -0.3%) and Renewable Energy Group (REGI +0.4%) announced plans for a large-scale renewable diesel facility, using a mix of vegetable oils, animal fats and used cooking oils as feedstock. The plant will be located adjacent to PSX's Ferndale Refinery in Washington state, and is expected to begin production in 2021.

Today's M&A activity:

  • Calgary-based Encana (ECA.TO -12.2%) has agreed to buy Newfield Exploration (NFX +16.1%) for US$5.5 billion in stock, including US$2.2 billion in Newfield debt. Newfield shareholders will receive 2.6719 ECA shares for each NFX share held. Upon closing, Encana shareholders will own 63.5% of the combined company, leaving Newfield with the remaining 36.5%. The deal widens Encana's footprint in the Permian, Eagle Ford and Anadarko basins, as well the Montney and Duvernay regions in BC and Alberta, boosting total production to 577,000 boe/day, weighted over 50% liquids. Encana also says it intends to raise its dividend 25% and expand its share buyback program to $1.5 billion after the deal closes, which is expected sometime in the first quarter of next year. The merger has been unanimously approved by both boards but is still subject to shareholder approval.

  • Brazil’s PetroBras (PBR -0.6%) announced the sale of its 50% stake in Petrobras Africa to a consortium led by oil trader Vitol for US$1.53 billion. Petrobras Africa is a Nigerian oil and gas exploration venture, owned jointly with Brazilian investment bank BTG Pactual.

Today's third quarter earnings on the TSX:

  • Profits at Canadian Natural Resources (CNQ.TO +4.8%) more than doubled to $1.8 billion in Q3, as cash flow from operations rose 39% to $3.6 billion. Total production rose 1% y/y to 1.06 million boe/day, weighted 76% liquids, thanks to higher output from Horizon and new wells drilled in the North Sea. The company reduced its debt by $1.8 billion in Q3 (versus Q3/2017) and had its debt rating upgraded from Baa3 to Baa2 at Moody's.

  • TransCanada (TRP.TO +2.6%) posted a 52% increase in quarterly profits, rising to $928 million in Q3, thanks to a strong showing from its US gas business, Alberta liquids division, lower US tax rates and higher revenues out of Mexico. Revenue dipped 1% to $3.16 billion due to a drop in revenues from its Canadian natural gas operations. The company says it put $7 billion of growth projects into service over the last twelve months, with another $36 billion of secured growth projects currently underway.

  • MEG Energy (MEG.TO -3.8%) reported an operating loss of $19 million in Q3, narrower than a $43 million loss for the same quarter last year. Bitumen production volumes hit a record 98,751 bbl/day during the quarter, with annual guidance on-track for 87,000 to 90,000 bbl/day. Bitumen realization prices averaged $49.58/bbl, up 24% y/y, while net operating costs hit a record low of $4.34/bbl. Q3 net earnings rose 40% y/y to $118 million, including a $166 million gain on foreign exchange and hedging contracts.

  • Revenues at Pembina Pipeline (PPL.TO +1.5%) doubled to $2.0 billion in the third quarter. Cash flow from operations grew 59% to $481 million, while earnings tripled, rising to $334 million. Total volumes hit a record of 3.465 million boe/day in Q3, up 40% y/y.

  • Total third quarter production at Encana (ECA.TO -12.2%) rose 33% to 378,200 boe/day. The company posted a profit of $39 million for the quarter, including a $164 million hedging loss. Cash flow from operations rose almost 150% to $885 million.

  • Net losses at Bellatrix Exploration (BXE.TO +1.8%) narrowed to $8.9 million, down from $22.1 million for the same time last year. Cash flow fell by two-thirds to $7.6 million, as production declined 11% to 33,530 boe/day. The drop was blamed on natural declines and output reductions due to weak gas prices. Revenues rose 7% to $51.5 million.

  • Net losses at Bonavista Exploration (BNP.TO +4.8%) widened to $17.8 million in the third quarter, up from a $1.7 million loss for the same time last year. Production declined 4% y/y to 68,036 boe/day.

  • Whitecap Resources (WCP.TO +2.2%) posted a net profit of $69.5 million in Q3, up from $3.7 million for the same time last year. Production rose 30% y/y to 75,529 boe/day.

Today's US/global energy earnings:

  • Royal Dutch Shell (RDS.A -0.1%) posted a Q3 profit of US$5.8 billion, up 43% from the same quarter last year. Cash flow from operations grew 59% to US$12.1 billion. Total production for the first 9 months of this year remains relatively flat at 3.6 million boe/day, while capital spend for the same period dipped 2.5% to US$16.8 billion. Q3 cash flow from operations rose to US$12.1 billion, which was sufficient to cover its dividend, interest payments, share buybacks and debt repayments.

  • Marathon Petroleum (MPC +0.9%) posted an 18% decline in quarterly profits, falling to US$737 million due to lower crack spreads in the Midwest and Gulf Coast. Total revenue increased 19% y/y to US$23.13 billion. After having purchased Andeavor earlier this year, Marathon is now the largest US refiner by capacity.

  • EOG Resources (EOG +1.5%) posted a net profit of US$1.2 billion in the third quarter, up from US$101 million for the same time last year. The company produced 415,000 boe/day in Q3, up 27% y/y. EOG raised it full-year production growth forecast to 19%.

  • Magellan Midstream Partners (MMP -0.6%) reported a net income of US$595 million in Q3, about triple the same quarter last year.

  • Third quarter revenues at WPX Energy (WPX +1.1%) more than tripled to US$484 million, as production grew 54% y/y to an average of 83,400 bbl/day.

OIL PRICES - DAILY % CHANGE
WTI DIFFERENTIALS
STREAM CLOSE %CHG L 52WK H
BRENT$72.89▼3.457.37
 
86.29
WTI$63.69▼2.551.47
 
76.41
CDN LT$26.50▼11.926.50
 
69.32
C5+$44.19▼14.844.19
 
71.40
WCS$18.00▼19.318.00
 
56.21
CRUDE OIL FUTURES CURVES
BRENT
WTI
█ NOV 1   █ OCT 25   █ OCT 18   █ OCT 11   (USD/BBL)
MARKET OVERVIEW
MARKETS
CURRENCIES & YIELDS
    TSX SECTORS
52-WK
    SPX SECTORS
52-WK
ENERGY SECTORS

TSX ENERGY SUB-SECTORS

SPX ENERGY SUB-SECTORS
TSX ENERGY STOCKS
TSX BULLISH INDICATORS
TOP 5
  • Paramount Resources (POU +4.8%)
  • Cdn Natural Res (CNQ +4.8%)
  • Baytex Energy (BTE +3.4%)
  • Mullen Group (MTL +3.1%)
  • Cenovus Energy (CVE +3.1%)
  • 12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • TSX BEARISH INDICATORS
    BOTTOM
    5
  • Encana (ECA -12.2%)
  • Altagas Ltd (ALA -4.1%)
  • MEG Energy (MEG -3.8%)
  • Pason Systems (PSI -1.9%)
  • Husky Energy (HSE -1.4%)
  • 12-MO LOWS
  • Encana (ECA -12.2%)
  • Altagas Ltd (ALA -4.1%)
  • 10-YR LOWS
  • None
  • DEATH CROSSES
  • Keyera (KEY +1%)
  • Encana (ECA -12.2%)
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    INTEGRATED
    SuncorSU44.06▼-0.240.49
     
    55.4720D   W
    Imperial OilIMO41.50▲0.933.43
     
    44.9179D   W
    Husky EnergyHSE18.35▼-1.415.09
     
    22.9933D   W
    MIDSTREAM
    EnbridgeENB41.53▲1.237.36
     
    51.0466D   W
    TransCanadaTRP50.92▲2.648.92
     
    65.1833D   W
    Pembina PipelinePPL43.23▲1.537.60
     
    47.8478D   W
    Inter PipelineIPL21.54▲0.920.68
     
    27.9236D   W
    Keyera KEY33.14▲1.031.20
     
    38.9140D   W
    Gibson EnergyGEI21.00▲0.815.68
     
    23.0496D   W
    LARGE CAP E&P
    Cdn Natural ResCNQ37.84▲4.835.31
     
    49.0818D   W
    EncanaECA11.80▼-12.211.03
     
    18.544D   W
    Cenovus EnergyCVE11.49▲3.19.03
     
    14.8425D   W
    TourmalineTOU19.29▲0.517.78
     
    27.2612D   W
    Seven GenerationsVII14.44▲2.312.82
     
    21.2517D   W
    SERVICES
    ShawcorSCL24.18▲1.323.04
     
    29.5041D   W
    Pason SystemsPSI19.50▼-1.916.05
     
    22.1072D   W
    Mullen Group MTL14.13▲3.113.43
     
    17.1232D   W
    EnerflexEFX16.27▲2.513.55
     
    17.8285D   W
    Secure EnergySES8.67▲1.16.98
     
    9.8294D   W
    REFINING & MARKETING
    Parkland FuelPKI44.48▲0.624.97
     
    47.4598D   W
    S&P 500 ENERGY STOCKS
    SPX BULLISH INDICATORS
    TOP 5
  • Newfield Exploration (NFX +16.1%)
  • Williams Co (WMB +5.8%)
  • Noble Energy (NBL +5.6%)
  • Concho Resources (CXO +3.3%)
  • Anadarko Petroleum (APC +3.1%)
  • 12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • SPX BEARISH INDICATORS
    BOTTOM
    5
  • Apache (APA -3.8%)
  • Baker Hughes (BHGE -3%)
  • Marathon Oil (MRO -2%)
  • ONEOK (OKE -1.2%)
  • Ntl-Oilwell Varco (NOV -0.8%)
  • 12-MO LOWS
  • None
  • 10-YR LOWS
  • None
  • DEATH CROSSES
  • None
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    INTEGRATED
    Exxon MobilXOM80.67▲1.372.16
     
    89.3062D   W
    ChevronCVX111.17▼-0.4107.54
     
    133.8824D   W
    MIDSTREAM
    Kinder MorganKMI17.16▲0.814.69
     
    19.8365D   W
    Williams CoWMB25.75▲5.823.54
     
    33.6744D   W
    ONEOKOKE64.81▼-1.249.65
     
    71.9956D   W
    LARGE CAP E&P
    ConocoPhillipsCOP69.58▼-0.548.97
     
    80.2460D   W
    EOG ResourcesEOG106.89▲1.596.54
     
    133.5321D   W
    Occidental PetroleumOXY68.35▲1.962.47
     
    87.6715D   W
    Anadarko PetroleumAPC54.86▲3.146.80
     
    76.706D   W
    Concho ResourcesCXO143.65▲3.3123.63
     
    163.1147D   W
    SERVICES
    SchlumbergerSLB51.66▲0.750.80
     
    80.353D   W
    HalliburtonHAL34.77▲0.333.73
     
    57.862D   W
    Ntl-Oilwell VarcoNOV36.51▼-0.831.47
     
    49.0816D   W
    TechnipFMCFTI26.52▲0.825.36
     
    35.009D   W
    Baker HughesBHGE25.89▼-3.025.53
     
    37.762D   W
    REFINERS
    Phillips 66PSX102.50▼-0.389.14
     
    123.9727D   W
    Valero EnergyVLO92.51▲1.679.07
     
    126.989D   W
    Marathon PetroleumMPC71.08▲0.960.07
     
    88.4528D   W
    HollyFrontierHFC67.26▼-0.337.63
     
    83.2872D   W
    NYSE ADRs
    ADRs BULLISH INDICATORS
    12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • ADRs BEARISH INDICATORS
    12-MO LOWS
  • None
  • 10-YR LOWS
  • None
  • DEATH CROSSES
  • None
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    Royal Dutch ShellRDS.A63.13▼-0.160.53
     
    73.8636D   W
    TotalTOT57.82▼-1.353.37
     
    65.6936D   W
    BPBP42.65▼-1.736.15
     
    47.8346D   W
    EniE35.21▼-0.432.13
     
    40.1541D   W
    EquinorEQNR25.56▼-0.519.76
     
    28.9353↓D   W
    ANALYST RATINGS

    UPGRADES

    • PHX Energy Services (PHX.TO): Upgraded from Hold to Buy at GMP Securities.

    • Chesapeake Energy (CHK): Upgraded from Market Perform to Outperform at Raymond James.

    • Concho Resources (CXO): Upgraded from Market Perform to Outperform at Sanford C. Bernstein.

    • Valero Energy (VLO): Upgraded from Neutral to Outperform at Credit Suisse.

    • Wildhorse Resource Dev’t (WRD): Upgraded from Market Perform to Outperform at Raymond James.

    DOWNGRADES

    • Baker Hughes (BHGE): Downgraded from Hold to Neutral at Guggenheim.

    • Encana (ECA.TO): Downgraded from Neutral to Sector Underperform at CIBC.


    UPDATED: DAILY (END-OF-DAY)

    SOURCES:
    • OIL PRICES REFLECT NEAR MONTH CONTRACT FROM THE NYMEX/CME GROUP
    • EQUITY PRICES PROVIDED BY NYSE & TMX GROUP
    • CHARTPACKS COURTESY STOCKCHARTS.COM (DIVIDEND ADJUSTED)

    NOTES:
    • OIL PRICES, FUTURES AND DIFFERENTIALS IN USD/BBL
    • C5+ = EDMONTON CONDENSATE
    • FUTURES CURVES SHOW PRICES FOR NEAR-MONTH CONTRACT (C1) AND NEXT 5-MONTHS (C2-C6)
    • TSX SHARE PRICES IN CAD; S&P 500 PRICES IN USD
    • ADR: AMERICAN DEPOSITORY RECEIPTS LISTED ON NYSE IN USD
    • SHARE PRICE CHANGES (INCL. NEW HIGHS & LOWS) EXCLUDE DIVIDENDS

    RANK:
    • BASED ON STOCKCHARTS TECHNICAL RANK (SCTR)
    • REFLECTS RELATIVE STRENGTH AMONG OTHER ENERGY STOCKS (PERCENTILE RANKING)
    • RISING RANK (↑) REFLECTS INCREASING RELATIVE STRENGTH
    • FALLING RANK (↓) REFLECTS DECREASING RELATIVE STRENGTH.
    Oil prices mark fifth day of losses as concerns over supply shortages dissipate

    Oil prices mark fifth day of losses as concerns over supply shortages dissipate

    Energy stocks post second day of gains despite lower oil prices

    Energy stocks post second day of gains despite lower oil prices

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