Oil prices mark fifth day of losses as concerns over supply shortages dissipate
Today's energy market summary:
A mixed bag in oil markets on Friday as Brent ended the day roughly unchanged, while WTI and Edmonton Condensate (C5+) both declined about 1%. Canadian Light recovered almost 5% as the differential to WTI narrowed by about US$2. Western Canadian Select (WCS) ended the week down 0.4%.
On the supply front, the Trump Administration confirmed it will be granting waivers to eight countries, including China, India, Japan, South Korea, and possibly Turkey, allowing them to continue importing Iranian crude despite the reinstatement of US sanctions.
Chinese equity markets shot up overnight after President Trump confirmed trade talks with China are going "nicely." Japan's Nikkei was the best performer, gaining 2.6%. The tech-heavy NASDAQ was the worst performer, falling 1%.
The S&P 500 declined 0.6%, with technology leading to the downside. The SPX energy sector ended the day roughly unchanged, as gains in heavy-weights ExxonMobil (XOM +1.6%) and Chevron (CVX +3.2) offset losses in most other components.
In Toronto, the TSX dipped 0.2%, led lower by a 1.4% drop in energy stocks. Losses were were broadly based across most subsectors.
European ADRs listed on the NYSE also sank on Friday as the US dollar ticked up 0.3%.
Today's notable energy news:
After yesterday's purchase of Newfield Exploration (NFX -6.8%), brokerage firms were tripping over each other today to downgrade Encana (ECA.TO -4.9%) and reduce price targets for the stock. Price targets were cut at RBC, CIBC and Jefferies, while Raymond James downgraded the stock based on the quality of the assets purchased. ECA ended Friday down 17% since the deal was announced, now 40% below the highs of last August.
Energy Transfer (ET -1.1%) has received regulatory approval to begin natural gas deliveries on the final laterals of its Rover Pipeline, which has been in service for more than a year. This final approval adds an additional receipt point in West Virginia. Rover delivers up to 3.25 Bcf/day of natural gas from the Marcellus and Utica Shale into Michigan and southern Ontario.
Buckeye Partners (BPL -0.2%) announced the sale of its 50% stake in the VTTI BV partnership for US$975 million, and a package of pipeline and terminal assets for US$450 million. The company also slashed its dividend 40% in order to reduce debt and maintain its investment grade rating.
Today's third quarter earnings on the TSX:
Enbridge (ENB.TO -0.8%) reported a third quarter net loss of $90 million, versus a profit of $765 million for the same time last year. The figures include a $1 billion write down on an asset sale. Cash flow from operations declined 7% to $1.46 billion. The company transported 2.58 million bbl/day of crude on its Mainline system, up 4% y/y. Enbridge expects to put $7 billion of new projects into service this year, and remains on track for $22 billion in capital spend by 2020. The company says it plans to grow its dividend 10% annually through 2020, but suspended its DRIP program.
Imperial Oil (IMO.TO +1.3%) posted a $749 million profit for the third quarter, about double the same time last year. Cash flow from operations grew 40% to $1.2 billion, the highest in four years. Production at Kearl averaged a record 244,000 bbl/day in Q3, bringing the annualized average to 202,000 bbl/day to date. Total upstream production ticked up 1% to 393,000 boe/day.
Parkland Fuel (PKI.TO -7.9%) posted a net profit of $49 million in Q3, more than double the same time last year, on earnings of $3.85 billion, up 48% y/y. The company delivered 4.2 billion litres of fuel and petroleum products during the quarter, up 18% y/y. The Burnaby Refinery averaged a utilization rate of 97.7% in Q3. Parkland's dividend payout ratio has dropped from over 90% a few years ago to just 35% in the third quarter.
Baytex Energy (BTE.TO -3.6%) posted a $27.4 million profit for Q3, much improved from a $9.2 million loss for the same time last year. Sales rose almost 70% to $437 million, as total production increased almost 20% y/y to 82,412 boe/day, weighted 81% liquids.
Advantage Oil and Gas (AAV.TO -3.1%) posted an $8.9 million loss for Q3, versus a $13.0 million profit for the same time year. Cash flow from operations declined 46% to $30.8 million. Production hit a record 45,611 boe/day, up 20% y/y.
Today's US energy earnings:
ExxonMobil (XOM +1.6%) reported a US$6.2 billion profit in Q3, up 57% y/y. Cash flow from operations hit US$11.1 billion, the highest since Q3/2014. Total revenues rose 25% to US$76.6 billion. Upstream production dipped 2% to 3.8 million boe/day, blamed mostly on lower natural gas output. Exxon says cheap oil from the Permian and Western Canada is actually a net benefit to the company, improving refining margins in its downstream operations.
Chevron (CVX +3.2%) reported a net profit of US$4.1 billion, more than double the same time last year. Profits from the company's downstream business declined 24% y/y due to lower margins and asset sales. Total production rose 9% y/y to 2.96 million boe/day.
|CURRENCIES & YIELDS|
|Imperial Oil||IMO||42.03||▲1.3||33.43||44.91||86||D W|
|Husky Energy||HSE||17.94||▼-2.2||15.09||22.99||23||D W|
|Pembina Pipeline||PPL||43.26||▲0.1||37.60||47.84||68||D W|
|Inter Pipeline||IPL||21.59||▲0.2||20.68||27.92||34||D W|
|Gibson Energy||GEI||20.87||▼-0.6||15.68||23.04||96||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||37.50||▼-0.9||35.31||49.08||18||D W|
|Cenovus Energy||CVE||11.47||▼-0.2||9.03||14.84||24||D W|
|Seven Generations||VII||13.68||▼-5.3||12.82||21.25||13||D W|
|Pason Systems||PSI||19.54||▲0.2||16.05||22.10||54||D W|
|Mullen Group||MTL||13.81||▼-2.3||13.43||16.95||25||D W|
|Secure Energy||SES||8.38||▼-3.3||6.98||9.82||87||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||40.95||▼-7.9||24.97||47.45||97||D W|
|Exxon Mobil||XOM||81.95||▲1.6||72.16||89.30||71||D W|
|Kinder Morgan||KMI||16.86||▼-1.8||14.69||19.83||61||D W|
|Williams Co||WMB||25.58||▼-0.7||23.54||33.67||44||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||102.35||▼-4.3||96.54||133.53||10||D W|
|Occidental Petroleum||OXY||68.31||▼-0.1||62.47||87.67||16||D W|
|Anadarko Petroleum||APC||53.21||▼-3.0||46.80||76.70||3||D W|
|Concho Resources||CXO||141.05||▼-1.8||123.63||163.11||36||D W|
|Ntl-Oilwell Varco||NOV||36.11||▼-1.1||31.47||49.08||13||D W|
|Baker Hughes||BHGE||26.07||▲0.7||25.53||37.76||2||D W|
|Phillips 66||PSX||99.01||▼-3.4||89.14||123.97||15||D W|
|Valero Energy||VLO||91.83||▼-0.7||80.00||126.98||8||D W|
|Marathon Petroleum||MPC||69.49||▼-2.2||60.10||88.45||21||D W|
Apache (APA): Upgraded from Underperform to Neutral at Macquarie.
Blackbird Energy (BBI.V): Upgraded from Sector Perform to Outperform at RBC.
Buckeye Partners (BPL): Upgraded from Sell to Hold at SunTrust Banks.
Keane Group (FRAC): Upgraded from Market Perform to Outperform at Wells Fargo.
Genesis Energy (GEL): Upgraded from Sector Perform to Outperform at RBC.
Noble (NE): Upgraded from Hold to Buy at Tudor Pickering.
Encana (ECA.TO): Downgraded from Buy to Hold at Desjardins, from Strong Buy to Outperform at Raymond James and from Outperform to Market Perform at BMO.
NewField Exploration (NFX): Downgraded from Buy to Neutral at Citigroup, from Outperform to Sector Perform at RBC and from Positive to Neutral at UBS.
Source Energy Services (SHLE): Downgraded from Neutral to Underperform at CIBC.
UPDATED: DAILY (END-OF-DAY)
• OIL PRICES REFLECT NEAR MONTH CONTRACT FROM THE NYMEX/CME GROUP
• EQUITY PRICES PROVIDED BY NYSE & TMX GROUP
• CHARTPACKS COURTESY STOCKCHARTS.COM (DIVIDEND ADJUSTED)
• 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
• 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.