Oil prices begin January with a bang, but end the month with a whimper
Today's energy market summary:
- After posting major gains at the beginning of the month, oil prices continue to trend sideways.
- Brent rose 0.4% on Thursday, the last trading day for the March contract.
- WTI lost almost 1%, reversing some of yesterday's gains.
- Most Canadian benchmarks also gave back about 1%. Differentials were little changed from yesterday's close.
- Gasoline, heating oil and US natural gas prices also declined on Thursday, each falling over 1%.
- Supply out of OPEC took a big haircut in January, falling 890,000 bbl/day to 31 million bbl/day, the largest monthly drop since January 2017. Most of those cuts came from Saudi Arabia, with Libya, Iran and Venezuela also posting declines for the month.
Today's equity, treasury and currency market action:
- Bond yields continue to inch lower on both sides of the border. The US dollar gained 0.3%, reversing some of yesterday's losses.
- North American equity markets mostly posted gains on Thursday, led higher by the tech-heavy Nasdaq (+1.4%). The S&P 500 gained almost 1% today, thanks to a good showing by communications stocks. In Toronto, the TSX gained 0.4%.
- The Canadian energy sector declined 1.1%, led lower by larger-cap producers. The US energy sector rose 0.7%, with refining stocks posting the largest gains. Energy services stocks were the worst performers south of the border.
Today's political energy news:
- The Alberta government has eased up slightly on its curtailment program for the months of February and March, raising the production cap by 75,000 bbl/day to 3.63 million bbl/day. Inventories in the province have declined by 5 million barrels since the program was announced late last year.
- Canada's Supreme Court has ruled that environmental liabilities take precedence over funds owed to creditors during the sale of bankrupt oil companies. The ruling overturns a lower court decision in favour of the Alberta Energy Regulator, who find themselves on the hook for over 3,000 abandoned wells.
Elsewhere in Canada:
- Pembina Pipeline has sanctioned another expansion of its Peace Pipeline system (Phase VIII), to accommodate additional demand for production out of the Montney region. Phase VIII has an estimated capital cost of $500 million and its expected to commence service in 2020.
- Husky Energy has resumed production from its White Rose platform off the coast of Newfoundland, after being offline for more than two months due to a leaky flowline connector. The province's offshore regulator has placed a number of conditions on the restart, while it continues its investigation into the incident.
- AltaGas has closed on the sale of BC power assets for net proceeds of about $1.4 billion, bringing total divestitures to $3.8 billion since its purchase of WGL last summer. The company plans to sells another $1.5 to $2 billion in non-core assets this year, as it strives to strengthen its balance sheet.
- Trinidad Drilling shareholders have approved the company's sale to Ensign Energy Services. Ensign has offered $1.68 per Trinidad share, valuing the deal at $460 million.
Today's US energy news:
- ExxonMobil outlined plans to reorganize its upstream business unit, creating three new divisions - Upstream Oil & Gas, Upstream Business Development and Upstream Integrated Solutions. The company says the new structure will help it double its profits by 2025, and better align its exploration business unit with its logistics and refining operations.
- Texas COLT has submitted an application with the US Maritime Administration for its planned deepwater crude oil export terminal, off the coast of Freeport, Texas. The project will include up to 15 million barrels of onshore storage, an offshore platform and two offshore mooring buoys capable of loading 2 million barrel VLCCs. Texas COLT is a joint-venture between Enbridge, Kinder Morgan and Gemany's Oiltanking. The terminal has a planned start date of 2022.
- TechnipFMC was awarded a "large" EPC contract for ExxonMobil's refinery expansion in Beaumont, said to be worth between US$500 million and US$1 billion. The scope of work includes the addition of four new units, to be integrated into the existing refinery.
- After rejecting the initial offer from Shell yesterday, the United Steelworkers Union (USW) has tentatively agreed to the company's latest offer, which includes an 11% pay raise over the next three years. The deal, which covers some 30,000 US refinery and petrochemical employees, was reached just hours before the current contract expires. Shell has been leading negotiations on behalf of other US refiners since 1997.
Around the world on Thursday:
- According to Bloomberg, ConocoPhillips has abandoned talks with Ineos to sell its UK North Sea assets. The assets, worth an estimated US$3 billion, are now open to other bidders. Chevron is also reportedly still looking to sell its properties in the region.
- According to Reuters, PetroChina plans to dump Venezuela's PDVSA as a 40% equity partner in its planned US$10 billion refinery and petrochemical plant in southern China. The company says the move was not in response to recent US sanctions agains the Venezuelan state-owned oil major.
Today's Q4/2018 earnings results:
- Valero Energy reported a 9% increase in fourth quarter revenues, rising to US$29 billion, bringing net profits to US$952 million. Refining margins improved 25%, attributed in part to a record volume of discounted Canadian heavy crude processed this past quarter. The company says it won't be impacted by potential sanctions on Venezuelan crude, and has already cut its purchases to zero. Capacity utilization was 96%, with throughput volumes averaging 3.0 million bbl/day in Q4.
- Profits at ConocoPhillips rose to US$1.31 billion, more than double the same time last year. Total production, excluding Libya, rose 94,000 boe/day to 1.33 million boe/day. The company also confirmed it has received US$430 million in payments to-date from Venezuela's PDVSA, as part of a US$2 billion arbitration agreement.
- Profits at Baker Hughes jumped 85% to US$120 million, thanks to higher demand for its oilfield services business, which accounts for about half of total sales. Revenue rose 8% to US$6.2 billion, while adjusted profits almost doubled to US$120 million. The company says it saw an improved LNG market in 2018, helping it secure new contracts for its modular turbocompressor technology, including LNG Canada’s recently sanctioned facility in Kitimat, BC.
- Royal Dutch Shell reported an adjusted net profit of US$21.4 billion for the full-year 2018, a 36% improvement over 2017 and the highest since 2014. Cash flow from operations grew 49% last year to US$53 billion. The company says it remains on track to buy back at least US$25 billion of its shares by the end of 2020.
- Murphy Oil reported a Q4 profit of US$103 million, on revenues of US$692 million. For the full year, production averaged 171,000 boe/day, up 4% y/y.
- Magellan Midstream Partners reported a Q4 profit of US$314 million, up over 30% from the same quarter last year. The company says it expects to boost its dividend by 5% this year.
|CURRENCIES & YIELDS|
|Suncor Energy||SU||42.38||▼-0.3||35.53||55.47||D W|
|Imperial Oil||IMO||37.28||▲0.0||33.43||44.91||D W|
|Husky Energy||HSE||15.59||0.0||13.33||22.99||D W|
|Pembina Pipeline||PPL||46.82||▲0.5||37.60||47.84||D W|
|Inter Pipeline||IPL||21.12||▼-0.5||18.60||25.66||D W|
|Gibson Energy||GEI||19.91||▲1.6||15.68||23.32||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||35.27||▼-1.3||30.11||49.08||D W|
|Cenovus Energy||CVE||10.26||▼-2.7||8.74||14.84||D W|
|Vermilion Energy||VET||32.20||▲0.3||26.67||49.67||D W|
|Pason Systems||PSI||20.67||▲0.3||16.05||24.57||D W|
|Mullen Group||MTL||12.04||▼-1.1||11.39||16.93||D W|
|Secure Energy||SES||8.12||▲2.7||6.25||9.20||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||37.59||▲2.9||27.36||47.45||D W|
|Exxon Mobil||XOM||73.28||▲1.4||64.65||89.25||D W|
|Kinder Morgan||KMI||18.10||▼0.0||14.62||18.67||D W|
|Williams Co||WMB||26.93||▼-0.3||20.36||32.22||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||99.20||▼-0.3||82.04||133.53||D W|
|Occidental Petro||OXY||66.78||▼-0.3||56.83||87.67||D W|
|Anadarko Petro||APC||47.33||▼-1.1||40.40||76.70||D W|
|Pioneer Natural Res||PXD||142.32||▲0.6||119.08||213.40||D W|
|Baker Hughes||BHGE||23.57||▼-1.6||20.09||37.76||D W|
|Ntl-Oilwell Varco||NOV||29.48||▼-1.4||24.27||49.08||D W|
|Marathon Petro||MPC||66.26||▲1.5||54.29||88.45||D W|
|Phillips 66||PSX||95.41||▲0.9||78.44||123.97||D W|
|Valero Energy||VLO||87.82||▲5.5||68.81||126.98||D W|
Encana (ECA.TO): Upgraded from Sector Underperform to Neutral at CIBC.
Helmerich & Payne (HP): Upgraded from Neutral to Buy at BofA.
UPDATED: DAILY (END-OF-DAY)
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