The energy sector is pointing to a lower start, weighed down by weakness in the crude complex and major equity futures which dropped on renewed recession fears. Trading levels are also expected to be muted as no U.S. economic data releases and a quiet Federal Reserve in its blackout period is keeping investors on the sidelines.
WTI and Brent crude oil futures were flat to lower in early trading, seesawing as the market balanced risk sentiment with supply concerns and the prospect of higher demand as China relaxes its COVID curbs. Beijing and commercial hub Shanghai have been returning to normal in recent days after two months of painful lockdowns to stem outbreaks of the Omicron variant, alleviating the recent sluggish price action. The U.S. State department authorization for Eni and Repsol to start shipping Venezuelan crude to Europe from July to replace lost Russian barrels has also weighed on prices in recent days.
Natural gas futures carried over their gains for the third-straight session, backed by forecasts for hotter weather and higher demand than previously expected, a decline in output, rising LNG exports and record power demand in Texas. Power demand in Texas broke the June record yesterday and will continue rising until it breaks the all-time high later this week as economic growth boosts overall usage and hot weather causes homes and businesses to crank up their air conditioners.
BY SECTOR:
US INTEGRATEDS
Chevron Phillips Chemical plans to expand its polyalphaolefins (pao) business with construction of a new unit in Beringen, Belgium.
Evercore ISI upgraded Exxon to Outperform from In-Line
INTERNATIONAL INTEGRATEDS
Equinor has awarded an additional nine firm wells plus two one-well options to its ongoing contract with offshore drilling contractor Transocean for the harsh environment semi-submersible Transocean Spitsbergen.
Danske Commodities, a subsidiary of Equinor, has signed a power purchase agreement for one of the largest energy-from-waste facilities in the UK, the energy trading company said. Under its first such agreement for an energy-from-waste facility, Danske Commodities will provide services to market power produced at the Riverside 1 plant in London which is operated by Cory Group, it said.
CANADIAN INTEGRATEDS
No significant news.
U.S. E&PS
Callon Petroleum announced an updated operational capital budget range of $790 to $810 million in 2022, compared to the initial forecast of $725 million provided in February. This revised guidance is the product of inflationary service cost pressures that have resulted in average price increases of approximately 20% related to key drilling and completion items over 2021 levels. This represents incremental inflation of approximately 10% over the 10% inflation rate assumed for the initial 2022 budget. The Company also increased its expectations for adjusted free cash flow to over $900 million in 2022 based on prevailing commodity prices and reaffirmed guidance for production and all expense categories.
Evercore ISI downgraded Devon Energy and Occidental Petroleum to In-Line from Outperform
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
ChampionX announced it has refinanced its existing credit facilities with a restated senior secured credit facility, amending and restating its 2018 senior secured credit facility. The restated agreement provides a $625M 7-year term loan B and a $700M 5-year revolving credit facility.
Granite announced that it has acquired and will start development on a new aggregate operation near Grantsville, Utah. Located approximately 30 miles west of Salt Lake City on Interstate 80, the site covers approximately 640 acres. The material comes from an alluvial deposit containing 99 million tons of recoverable rock.
SECURE ENERGY Services announced that Grant Billing, Chairman of the Board of Directors of the Corporation has retired from the Board effective June 6, 2022. Effective June 6, 2022, current member of the Board, Brad Munro, has been elected as the independent interim Chairman of the Board while the Board further evaluates its composition and considers the appointment of a permanent Chair.
Technip Energies has been awarded a Bankable Feasibility Study (BFS) contract by Viridian Lithium for the construction of the first lithium refining and conversion plant in Europe.
DRILLERS
Dril-Quip has set its decarbonization targets to align with a 1.5°C global warming pathway and the ambitions of the Paris Agreement, which seeks to limit global warming to well below 2°C above pre-industrial levels.
Transocean announced that Equinor Energy AS has awarded an additional nine wells plus two, one-well options to the contract for the harsh environment semisubmersible Transocean Spitsbergen for work offshore Norway. The firm part of the contract extension, with an estimated backlog of $181 million, is expected to begin in October 2023 and conclude in April 2025. The estimated firm backlog excludes revenue associated with performance incentives, additional services, and option periods provided for in the contract.
REFINERS
No significant news.
MLPS & PIPELINES
No significant news.
MARKET COMMENTARY
Wall Street futures fell, mirroring European shares over concerns of aggressive rate hikes ahead of U.S. inflation data. In Asian equity markets, Japan’s Nikkei ended flat, while Chinese stocks closed higher, helped by gains in the consumer sector in hopes of a demand recovery. The dollar hit a fresh 20-year peak against the yen. Gold prices were up.
Nasdaq Advisory Services Energy Team is part of Nasdaq’s Advisory Services – the most experienced team in the industry. The team delivers unmatched shareholder analysis, a comprehensive view of trading and investor activity, and insights into how best to manage investor relations outreach efforts. For questions, please contact Tamar Essner.
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