Weekly Energy Market Review
- Global markets corrected from recent highs this week, blamed on rising tensions between the US and North Korea. Money rotated into safe-haven assets such as US treasuries and gold.
- Despite a pullback in the US dollar and falling crude stockpiles, oil prices declined again this week after both OPEC and the IEA reported significant increases in global crude production last month.
- US energy stocks retreated almost 3%, pulling back to the lows of last April. Canadian energy stocks also gave back 2%.
The US dollar sank again on Friday after the release of weak inflation data, giving back gains of the previous week. The Canadian dollar also sank late Friday, declining over 1% from the previous week.
Gasoline stockpiles surged 3.4 million barrels, the first increase in 2 months. The increase is being blamed on stubbornly high imports, which more than doubled last week to 1.1 million bbl/day.
Baker-Hughes reported 3 more oil rigs in service this week in the US, bringing the total to 768. Canada also added 3 rigs, bringing the total to 127. The US also lost 8 natural gas rigs this week.
|GEOPOLITICS||A war of words between President Donald Trump and North Korea continues to hover over world markets. US sanctions against Venezuelan crude imports remain off the table for now.|
|USD INDEX||The US dollar gave back gains from the previous week on weaker than expected inflation data released Friday.|
Russia's Gazprom jolted oil markets after it says it would be "economically feasible" to resume production in mature fields after its agreement with OPEC expires. Both OPEC and the IEA reported a big increase in production last month, driven by OPEC and non-OPEC producers.
|DEMAND||OPEC revised its 2017 global demand forecast to 96.49 million bbl/day, up 100,000 bbl/day from its previous forecast on better than expected data out of OECD countries.|
|SENTIMENT||WTI briefly touched US$50 again this week but once again broke down by the end of the week. Both WTI and Brent are stuck at the low end of their respective trading ranges.|
World equity markets corrected across the board this week. Most of the declines occurred on Thursday, blamed on rising tensions between the US and North Korea.
Most sectors ended the week lower, led by declines in the more heavily-weighted energy and financials stocks. More defensive sectors, such as utilities and staples, were the best performers ending the week almost unchanged. The Canadian materials sector also benefited from a 2% increase in gold prices.
The US energy sector underperformed its Canadian counterpart this week, falling almost 3%. US energy stocks on average are back to the lows of last spring. Declines were seen in all energy subsectors with only a handful of stocks ending the week positive. A number of stocks hit fresh 52-week lows on both sides of the border.
Second quarter net earnings at Keyera (KEY) rose 12% y/y to $67 million. Capital investment is expected to be between $800 and $900 million for the full year, including the first phase of the Wapiti gathering and processing complex. Keyera's Norlite condensate pipeline was also put into service last May. Norlite is a joint-venture with Enbridge.
Inter Pipeline (IPL) reported a net income of $102 million for the second quarter, as funds from operations increased 5% to $207 million. Pipeline volumes averaged 1.326 million bbl/day in Q2.
Ensign Energy Services (ESI) reported a second quarter loss of $33.8 million, down from a net loss of $40 million the previous year. Revenues increased 32% to $232 million. The company has revised its capital spending program to a range of $90 to $95 million, up from a previous forecast of $61 million.
Enerflex (EFX) reported much better-than-expected revenues of $433 million for the second quarter. Profits improved 27% to $21.3 million while bookings more than doubled to $400 million. The company says it sees solid momentum in the US and internationally, while Canadian customers remain "cautious."
Enerplus (ERF) reported a second quarter profit of $129 million, up from a $169 million loss for the same time last year. Q2/2017 production averaged 86,209 boe/day, weighted 48% liquids. Operating expenses are down 19% so far over the past 12 months.
Second quarter revenues at Essential Energy Services (ESN) jumped to $27.6 million as the number of operating hours doubled from the same time last year. Q2 losses narrowed to $5 million.
Revenues at Trican Well Service (TCW) more than tripled to $137 million in the second quarter, narrowing losses to $4 million. The company says it has seen a steady increase in demand during the past nine months.
CES Energy Solutions (CES) reported second quarter revenues of $238 million, slightly better than analysts were expecting and more than double the same time last year. The company posted a $6.9 million profit in Q2, much improved from a $25.6 million loss in Q2/2016.
Paramount Resources (POU) reported a second quarter net income of $45 million as funds from operations improved to $35.2 million. The company says August volumes from its Karr-Gold Creek facility will be impacted by outages on a third-party natural gas facility and pipeline.
Obsidian Energy (OBE), formerly known as Penn West, reported a second quarter net loss of $9 million, down from a $132 million loss for the same time last year. Second quarter revenues declined almost 50% to $111 million as Q2 production was cut in half to 30,436 boe/day. Capital spending for the full year has been reduced by $20 million to $160 million. Obsidian says the next few months will be "very important" as the company begins its "most active development program in three years".
Peyto Exploration (PEY) reported second quarter earnings of $40 million as funds from operations rose 31% to $133 million. The company produced 97,531 boe/day in Q2, up 11% from the same time last year.
Second quarter losses at Bellatrix Exploration (BXE) widened to $69 million, versus $55 million in Q2/2016, due to property dispositions and deferred tax expenses. Second quarter revenues jumped 54% to $74 million. Production volumes averaged 37,916 boe/day for the quarter, tracking well ahead of full year guidance. Bellatrix says it hopes to exit 2017 at 36,500 boe/day.
Birchcliff Energy (BIR) swung to a $17 million profit during the second quarter as funds from operations jumped from $13 million to $89 million. Production averaged 64,636 boe/day for the quarter, a 64% increase from the same time last year. The 2017 capital budget has also been increased to $404 million.
Second quarter revenues rose 7% at Shawcor (SCL) to $384 million. Net income also improved 7% to $16.1 million. The pipe fabricator says it has started to see "the early stages of recovery" in spending in the global energy patch.
This week's 52-week lows on the TSX include Altagas (ALA), Black Diamond Group (BDI), Crescent Point Energy (CPG), Ensign Energy Services (ESI), Inter Pipeline (IPL), Keyera (KEY), Obsidian Energy (OBE), Pengrowth Energy (PGF), Peyto Exploration (PEY), Raging River Exploration (RRX), Seven Generations (VII), Spartan Energy (SPE), Tourmaline Oil (TOU) and Western Energy Services (WRG).
Andeavor (ANDV), formerly Tesoro Corp, reported an operating income of US$448 million for the second quarter, versus US$806 million for the same quarter last year. The company says is expects to save US$350-$425 million annually on its US$5.8 billion acquisition of Western Refining. Andeavor's board of directors also approved a 7.3% increase in the quarterly dividend.
Energy Transfer Partners (ETP) reported a second quarter net profit of $292 million, down from US$472 million for the same time last year. The reduction was blamed on write-downs on the sale of Sunoco's retail business and deferred taxes.
Continental Resources (CLR) posted a second quarter net loss of US$63.6 million, down from a loss of US$119 million last year. The company cut its 2017 capital budget from US$1.95 billion to a range of US$1.75-$1.95 billion.
Second quarter production at Cimarex (XEC) rose 9% y/y to 192,700 boe/day as the company swung to a profit of US$97 million, up from a US$214 million loss for the same quarter last year.
Holly Energy Partners (HEP) has acquired a 50% interest in the Frontier Aspen Pipeline and a 75% interest in the SLC Pipeline from an affiliate of Plains All American (PAA) for US$250 million in cash.
ConocoPhillips (COP) has closed on the sale of its assets in the San Juan Basin to an affiliate of Hilcorp Energy for US$3 billion. The company says proceeds will be used for general accounting purposes.
This week's 52-week lows on the NYSE include Apache Corp (APA), Chesapeake Energy (CHK), Exxon Mobil (XOM), Helmerich & Payne (HP), National Oilwell Varco (NOV), Noble Energy (NBL), Pioneer National Resources (PXV), Range Resources (RRC), Schlumberger (SLB) and Whiting Petroleum (WLL).
Royal Dutch Shell's ADR (RDS.A) touched a new 12-month high on Wednesday before pulling back by the end of the week.
- BP (NYSE:BP): Upgraded from Neutral to Overweight at Piper Jaffray.
- Clean Harbors (NYSE:CLH): Upgraded from Underweight to Equal Weight at Barclays.
- CNOOC (NYSE:CEO): Upgraded from Neutral to Buy at Goldman Sachs Group.
- Energen (NYSE:EGN): Upgraded from Sell to Neutral at Jefferies Group.
- Extraction Oil & Gas (NYSE:XOG): Upgraded from Market Perform to Outperform at BMO.
- Hess Midstream Partners (NYSE:HESM): Upgraded from Neutral to Buy at Eight Capital.
- Noble Energy (NYSE:NBL): Upgraded from Sell to Neutral at Seaport Global Securities.
- Total Energy Services (TSX:TOT): Upgraded from Market Perform to Outperform at BMO.
- Cardinal Energy (TSX:CJ): Downgraded from Outperform to Sector Perform at Scotiabank.
- Granite Oil Corp (TSX:GXO): Downgraded from Outperform to Sector Perform at National Bank and from Strong Buy to Outperform at Raymond James.
- Plains All American Pipeline (NYSE:PAA): Downgraded from Overweight to Equal Weight at Morgan Stanley, from Sector Outperform to Sector Perform at Howard Weil, from Outperform to Neutral at Robert W. Baird and from Outperform to Hold at Scotiabank.