Energy stocks rally despite continued weakness in oil prices
Today's energy market summary:
- Except for natural gas, most commodities retreated on Monday, as the US dollar continues to strengthen.
- Brent declined 1%, while WTI and Canadian Light dipped 0.6%.
- WCS declined 1.2% as the differential to WTI widened slightly.
- Gasoline prices sank 2%, while heating oil fell about 1%.
- After last week's 5% drop, Henry Hub prices gained over 2% on Monday.
Today in equities, treasuries and currencies:
- Bond yields recovered some of last week's losses, including the US, Canada, the UK and Germany.
- The US dollar gained another 0.5%, now returning to the highs of mid-December.
- The Euro, pound and yen declined about 0.6%, while the loonie gave back about 0.2%.
- North American markets were little changed on Monday, including the NYSE and NASDAQ.
- Overnight, markets in Europe and China mostly ended the day in the positive, averaging a gain of about 1%.
- The TSX declined 0.4%, dragged lower by materials and industrial stocks.
- The S&P 500 was unchanged, despite gains in the industrials and energy sectors.
- The Canadian energy sector rose 0.8% while the US energy sector rose 0.5%. Energy service providers were the best performing stocks on both sides of the border.
Today's notable energy news:
- TransCanada has declared force majeure on sections of its 590,000 bbl/day Keystone pipeline, after a leak was discovered in Missouri last week. The closure affects the segment between Steele City, Nebraska, and Patoka, Illinois. The cause of the spill is still unknown and the company has not provided a timeline for restart.
- US federal regulators have approved TransCanada’s request to put more sections of its 880 MMcf/day Gulf XPress natural gas pipeline into service. The US$600 million expansion includes seven new compressor stations in the states of Kentucky, Mississippi and Tennessee.
- Phillips 66's 330,000 bbl/day Wood River refinery in Illinois was disrupted on Sunday, after fire broke out in one of its crude distillation units (CDU), injuring one worker. The same refinery was hit by a cold snap at the end of January, and was in the process of returning to normal operations. The 120,000 bbl/day CDU remains offline. Wood River is jointly owned with Cenovus Energy.
- Phillips 66 and Kinder Morgan have launched open season on their Gray Oak Pipeline, which would transport 900,000 bb/day of crude and condensate from the Permian Basin to export terminals near Houston.
- BP announced the start of gas production from the second stage of production of its West Nile Delta project offshore Egypt. A third phase of expansion is expected to begin by the end of this year, bringing total production capacity to 1.4 Bcf/day.
Today's Q4/2018 earnings, reserves and 2019 guidance updates:
- Obsidian Energy says it will defer four wells due to the Alberta's curtailment program, reducing capital expenditures by $20 million in the first half of 2019. Full year 2019 production guidance was reduced by 2,250 boe/day to about 28,500 boe/day, while capital spend was unchanged at $120 million. Total proved plus probable reserves was estimated at 125 million barrels of oil equivalent at the end of 2018, weighted more than 50% liquids.
- PrairieSky Royalty averaged 23,458 boe/day in 2018, down about 8% from the previous year. Funds from operations declined 20% to $230 million, primarily due to lower natural gas prices. Full year profits declined 35% to $79 million. PrairieSky expects crude oil volumes to be impacted by about 200 bbl/day in Q1 due to the province's production caps.
- DCP Midstream reported a Q4 profit of US$94 million, up almost 60% y/y, while full-year 2018 earnings rose 30% to US$298 million. The company expects to spend US$700 to US$900 million this year in growth and maintenance capital.
|CURRENCIES & YIELDS|
|Suncor Energy||SU||42.99||▲0.4||35.53||55.47||D W|
|Imperial Oil||IMO||35.62||▲0.4||33.43||44.91||D W|
|Husky Energy||HSE||15.16||▲1.4||13.33||22.99||D W|
|Pembina Pipeline||PPL||46.85||▼-0.5||37.60||47.84||D W|
|Inter Pipeline||IPL||21.10||▲0.8||18.60||25.66||D W|
|Gibson Energy||GEI||19.59||▼-0.1||15.68||23.32||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||34.70||▲1.6||30.11||49.08||D W|
|Cenovus Energy||CVE||10.04||▲1.1||8.74||14.84||D W|
|Vermilion Energy||VET||31.42||▲0.9||26.67||49.67||D W|
|Pason Systems||PSI||19.80||▲1.0||16.05||24.57||D W|
|Mullen Group||MTL||11.72||▲1.8||11.26||16.93||D W|
|Secure Energy||SES||7.83||▲1.6||6.25||8.91||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||37.30||▲0.3||27.36||47.45||D W|
|Exxon Mobil||XOM||74.10||▲0.2||64.65||87.36||D W|
|Kinder Morgan||KMI||18.27||▲1.4||14.62||18.67||D W|
|Williams Co||WMB||26.72||▼-0.6||20.36||32.22||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||94.21||▲1.9||82.04||133.53||D W|
|Occidental Petro||OXY||64.84||▼-0.2||56.83||87.67||D W|
|Anadarko Petro||APC||42.56||▲1.7||40.40||76.70||D W|
|Pioneer Natural Res||PXD||137.65||▲1.4||119.08||213.40||D W|
|Baker Hughes||BHGE||24.82||▲0.9||20.09||37.76||D W|
|Ntl-Oilwell Varco||NOV||28.83||▲1.7||24.27||49.08||D W|
|Marathon Petro||MPC||61.72||▼-1.6||54.29||88.45||D W|
|Phillips 66||PSX||94.23||▲0.8||78.44||123.97||D W|
|Valero Energy||VLO||83.34||▼-1.0||68.81||126.98||D W|
Cimarex Energy (XEC): Downgraded from Positive to Neutral at Susquehanna Bancshares.
Equinor (EQNR): Downgraded from Overweight to Neutral at Piper Jaffray.
Phillips 66 Partners (PSXP): Downgraded from Buy to Hold at Stifel Nicolaus.
Sasol (SSL): Downgraded from Buy to Neutral at BofA.
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