Energy stocks continue to recover from the lows of late December
Today's energy market summary:
- Brent and WTI perked up slightly on Monday, rising 0.5% and 1.2%, respectively.
- The Canadian heavy discount continues to narrow, falling below US$12/bbl. The differential on Canadian Light also narrowed to about US$3.50.
- US natural gas prices sank another 3.3%, once again falling below US$3/MMBtu. AECO gas rose 2% on Monday, ending the day at US$1.21/MMBtu.
- Gasoline and heating oil were roughly unchanged.
- The US dollar declined another 0.5%, helping the loonie close out Monday at a 1-month high.
- Goldman Sachs slashed its 2019 WTI forecast from US$64.50 to US$55.50 a barrel, citing growing production out of US shale and slowing demand. The investment firm also lowered its Brent forecast from US$70 to US$62.50.
Today's equity market action:
- North American equity markets continue to rally from the lows of late December. Markets in Japan and China also gained ground on optimism over China/US trade talks.
- The S&P 500 rose 0.7% while the TSX rose 0.5%. Markets were in offensive mode on Monday. Losses were primarily focused in US staples, utilities and Canadian precious metals stocks.
- In the energy space, the TSX energy sector was roughly unchanged while SPX energy rose 1.3%.
- In Canadian energy markets, midstream stocks posted the biggest gains, while integrated names Imperial Oil (IMO.TO -0.6%) and Husky Energy (HSE.TO -1.2%) were the biggest drags.
- All US energy subsectors ended the day in the positive, with beaten-down oilfield services stocks posting the biggest increases.
Today's production forecasts:
- Suncor Energy (SU.TO +0.6%) says it expects to produce a record 831,000 boe/day in the Q4/2018, up 13% y/y thanks to record production out of Fort Hills and Syncrude. Full year 2019 guidance was left unchanged at about 800,000 boe/day, reflecting Alberta's recently mandated production caps. The company is scheduled to release Q4 and full year 2018 results on February 5.
- Yangarra Resources (YGR.TO -2.9%) says it expects 2018 production to average 9,400 boe/day, with Q4 output expected closer to 12,200 boe/day. The company has approved a 2019 capital budget of $100 million, with production guidance set at 13,000 to 14,000 boe/day, assuming $65/bbl for Canadian Light and $1.75/GJ for AECO natural gas.
Today's other notable energy news:
- Husky Energy (HSE.TO -1.2%) reminded MEG Energy (MEG.TO -2.3%) shareholders they have until January 16 to tender their shares. The company did not disclose how may shares have been tendered so far. Husky needs to acquire at least two-thirds of all MEG shares for the takeover to be completed.
- TransCanada (TRP.TO +1.0%) has filed an application with US federal regulators (FERC) to reduce tolls on its Marketlink pipeline, which runs from Cushing, Oklahoma, to Part Arthur and Houston, TX. The price cut would be temporary, in order to move volumes out of the Midwest and into the Gulf Coast region for export.
- Hedge fund Elliott Management has offered to buy QEP Resources (QEP +40.3%) for US$2.1 billion, a 44% premium on QEP's closing price on Friday. QEP is focused primarily in the Permian Basin.
- Occidental Petroleum (OXY +2.0%) says it will cut its 2019 capital spending budget by US$200 to US$400 million if WTI remains stuck near US$50/bbl. Production growth is still expected at about 8-10%, rising to as much 13% if WTI rises to US$60.
- According to Bloomberg, BP (BP +0.3%) is mulling the sale of its 28% stake in its Shearwater North Sea assets, located off the east coast of Scotland. The properties are operated by Royal Dutch Shell (RDS.A +0.1%) and jointly held with ExxonMobil (XOM +0.5%).
- Royal Dutch Shell (RDS.A +0.1%) announced the start of production of the fourth alpha olefins unit at its Geismar petrochemicals facility in Louisiana. The 425,000 t/y expansion brings total production to more than 1.3 million t/y.
|CURRENCIES & YIELDS|
|Suncor Energy||SU||39.52||▲0.6||35.53||55.47||D W|
|Imperial Oil||IMO||34.83||▼-0.6||33.43||44.91||D W|
|Husky Energy||HSE||14.62||▼-1.2||13.33||22.99||D W|
|Pembina Pipeline||PPL||42.39||▲0.4||37.60||47.84||D W|
|Inter Pipeline||IPL||20.49||▲1.6||18.60||26.37||D W|
|Gibson Energy||GEI||19.73||▲0.2||15.68||23.32||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||34.47||▼-0.5||30.11||49.08||D W|
|Cenovus Energy||CVE||10.34||▲0.4||8.74||14.84||D W|
|Vermilion Energy||VET||30.71||▲0.0||26.67||50.46||D W|
|Pason Systems||PSI||18.54||▲0.5||16.05||24.57||D W|
|Mullen Group||MTL||12.54||▲1.5||11.39||16.93||D W|
|Secure Energy||SES||7.34||▲4.1||6.25||9.82||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||34.30||▼-1.1||26.70||47.45||D W|
|Exxon Mobil||XOM||71.52||▲0.5||64.65||89.30||D W|
|Kinder Morgan||KMI||16.59||▲2.1||14.62||19.83||D W|
|Williams Co||WMB||24.15||▲2.6||20.36||33.67||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||94.51||▲0.6||82.04||133.53||D W|
|Occidental Petro||OXY||64.48||▲2.0||56.83||87.67||D W|
|Anadarko Petro||APC||46.99||▲1.6||40.40||76.70||D W|
|Pioneer Natural Res||PXD||142.32||▲2.2||119.08||213.40||D W|
|Baker Hughes||BHGE||22.55||▲2.7||20.09||37.76||D W|
|Ntl-Oilwell Varco||NOV||27.73||▲3.7||24.27||49.08||D W|
|Marathon Petro||MPC||62.26||▲1.0||54.29||88.45||D W|
|Phillips 66||PSX||91.47||▲0.7||78.44||123.97||D W|
|Valero Energy||VLO||77.09||▲0.1||68.81||126.98||D W|
Cabot Oil & Gas (COG): Upgraded from Hold to Buy at Jefferies.
Continental Resources (CLR): Upgraded from Market Perform to Outperform at BMO.
California Resources (CRC): Upgraded from Neutral to Buy at BofA Merrill Lynch.
Chevron (CVX): Upgraded from Neutral to Buy at BofA Merrill Lynch.
Crescent Point Energy (CPG.TO): Upgraded from Hold to Buy at TD Securities.
Crew Energy (CR.TO): Upgraded from Hold to Buy at TD Securities.
Diamondback Energy (FANG): Upgraded from Market Perform to Outperform at BMO.
Encana (ECA.TO): Upgraded from Market Perform to Outperform at BMO and from Sector Perform to Outperform at AltaCorp.
Enbridge (ENB.TO): Upgraded from Market Perform to Outperform at Wolfe Research.
EOG Resources (EOG): Upgraded from Sector Perform to Outperform at RBC.
PDC Energy (PDCE): Upgraded from Market Perform to Outperform at BMO.
Range Resources (RRC): Upgraded from Hold to Buy at TD Securities.
Shawcor (SCL.TO): Upgraded from Hold to Buy at TD Securities.
Bonavista Energy (BNP): Downgraded from Sector Perform to Underperform at AltaCorp.
Cardinal Energy (CJ.TO): Downgraded from Buy to Hold at TD Securities.
Carrizo Oil & Gas (CRZO): Downgraded from Outperform to Market Perform at BMO.
Cenovus Energy (CVE.TO): Downgraded from Outperform to Sector Perform at AltaCorp.
Centennial Resources (CDEV): Downgraded from Neutral to Underperform at BofA Merrill Lynch.
Chesapeake Energy (CHK): Downgraded from Neutral to Underperform at BofA Merrill Lynch.
ConocoPhillips (COP): Downgraded from Buy to Neutral at BofA Merrill Lynch.
Delek US (DK): Downgraded from Outperform to Sector Perform at RBC.
EOG Resources (EOG): Downgraded from Buy to Neutral at BofA Merrill Lynch.
EQT (EQT): Downgraded from Outperform to Sector Perform at RBC.
Gear Energy (GXE): Downgraded from Outperform to Sector Perform at AltaCorp.
Halcon Resources (HK): Downgraded from Neutral to Underperform at BofA Merrill Lynch.
Imperial Oil (IMO.TO): Downgraded from Sector Perform to Underperform at AltaCorp.
MEG Energy (MEG.TO): Downgraded from Outperform to Sector Perform at RBC.
Oasis Petroleum (OAS): Downgraded from Outperform to Market Perform at BMO.
PDC Energy (PDCE): Downgraded from Buy to Neutral at BofA Merrill Lynch.
Pengrowth Energy (PGF): Downgraded from Sector Perform to Underperform at AltaCorp.
Peyto Exploration & Development (PEY.TO): Downgraded from Outperform to Sector Perform at RBC.
Pine Cliff Energy (PNE): Downgraded from Sector Perform to Underperform at AltaCorp.
Range Resources (RRC): Downgraded from Outperform to Market Perform at BMO from Neutral to Underperform at BofA Merrill Lynch.
RPC (RES): Downgraded from Market Perform to Underperform at Wells Fargo.
Southwestern Energy (SWN): Downgraded from Neutral to Underperform at BofA Merrill Lynch.
Superior Energy Services (SPN): Downgraded from Outperform to Market Perform at Wells Fargo.
Total Energy Services (TOT.TO): Downgraded from Buy to Hold at TD Securities.
TC Pipelines (TCP): Downgraded from Market Perform to Underperform at Wolfe Research.
TransCanada (TRP.TO): Downgraded from Outperform to Market Perform at Wolfe Research.
UPDATED: DAILY (END-OF-DAY)
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