Energy stocks are set to open higher, lifted by rising oil and natural gas prices and continued inflation expectations and rotations out of growth and into value equities. The 10-year yield is back at 3-year highs, trading above 2.6%.
In sector news, Piper Sandler upgraded five separate E&Ps, along with TotalEnergies, and the bank also increased a number of price targets across its E&P coverage.
Oil prices remain firm, up over 1%, as global oil demand and tight supplies are expected to keep prices at elevated levels. Additionally, austere Covid-related shutdowns in China are expected to further limit near-term demand increases.
Natural gas futures are higher by nearly 2%, trading around $6.15, ahead of weekly inventory data. Analysts expect a draw of 28 bcf.
Portugal’s Galp Energia, a partner in an Exxon Mobil-led gas consortium in Mozambique, said it hoped to start building onshore plants in the southern African country in 2024, but only if security has been guaranteed first.
Danish energy trader Danske Commodities posted a six-fold rise in full-year 2021 operating profits amid unprecedented market volatility and an expansion of its business, the company said. Danske Commodities, a subsidiary of Equinor and trading in 40 markets worldwide, said adjusted earnings before income and tax (EBIT) rose to 272 million euros ($297 million) from 43.5 million euros in 2020.
The Canadian government approved a $12 billion offshore oil project proposed by Equinor, after an environmental assessment concluded it would not cause significant adverse effects. The Bay du Nord project would involve building a floating platform to drill an estimated resource of 300 million barrels of light crude oil in the Atlantic Ocean, about 500 km (310 miles) off the coast of Canada’s Newfoundland and Labrador province.
Brazil’s government tapped Jose Mauro Coelho, a high-ranking technocrat with expertise in the nation’s oil and gas sector, as the next chief executive of state-run oil company Petrobras. Also on Wednesday evening, the government appointed current board member Marcio Andrade Weber as Petrobras’ next chairman. The nominations have to be approved at the company’s annual shareholders’ meeting on April 13 to become official.
According to Reuters, Repsol signed a collaboration agreement with Spanish Air Force in field of sustainable air mobility.
Reuters reported that at least two Indian refiners plan to buy less Saudi oil than usual in May, after the kingdom raised the official selling price (OSP) to record highs for Asia, as India increases purchases of cheap Russian crude. State oil producer Saudi Aramco has raised crude prices for all regions, with those to Asia hitting all-time highs.
Shell provided an update to the first quarter 2022 outlook. For the first quarter 2022 results, the post-tax impact from impairment of non-current assets and additional charges (e.g. write-downs of receivable, expected credit losses, and onerous contracts) relating to Russia activities are expected to be $4 to $5 billion. These charges are expected to be identified and therefore will not impact Adjusted Earnings. Corporate segment Adjusted Earnings are expected to be a net expense of $450 to $650 million for the fourth quarter. This excludes the impact of currency exchange rate effects.
Japan’s Mitsubishi and Shell aim to produce 400,000 tonnes of “green hydrogen” in 2030 through the companies’ European offshore wind power project, the Yomiuri newspaper reported.
Piper Sandler downgraded TotalEnergies SE to Neutral from Overweight.
Canada’s Environment Minister warned Suncor Energy that the environmental impact of a proposed extension to its oil sands base mine, as it currently stands, would be “unacceptable.” Calgary-based Suncor has been granted a nine-month extension to a deadline to submit an impact statement for the proposed project near Fort McMurray in northern Alberta.
Piper Sandler upgraded Berry Corporation, Centennial Resources, Laredo Petroleum, Murphy Oil and Occidental Petroleum to Overweight from Neutral.
No significant news.
Granite announced that GARCO’s San Jose Testing Laboratory recently joined the California Green Business Network. The testing facility functions as the base of operations for materials testing across Granite’s Coastal California Region. As part of the Green Business certification, the facility satisfied targets for energy efficiency, water conservation, procurement, and materials management.
KBR announced it has won an ammonia technology contract from DL E&C for NeuRizer’s (formerly Leigh Creek Energy Ltd) carbon-neutral fertilizer project in Australia. Under the terms of the contract, KBR will provide technology licensing and engineering for the 1,600 MTPD ammonia plant based on KBR’s highly efficient Purifier process.
Valaris announced new contracts and contract extensions, with associated contract backlog of $181 million, awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2022: Two-year contract extensions with BP in the U.S. Gulf of Mexico for managed rigs Mad Dog and Thunder Horse. The contract extensions were effective on January 27, 2022. One-well contract extension with TotalEnergies EP Brazil, offshore Brazil for drillship VALARIS DS-15. The option well is in direct continuation of the current firm program and has an estimated duration of 100 days. ARO Drilling awarded a three-year contract with Saudi Aramco for standard duty modern jackup VALARIS 140. This contract relates to the previously disclosed three-year bareboat charter agreement between Valaris and ARO Drilling. Contract backlog associated with the bareboat charter agreement is included in the total contract backlog of $181 million awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2022. The previously disclosed contract awarded to VALARIS DS-11 for an eight-well contract for a deepwater project in the U.S. Gulf of Mexico has been novated from TotalEnergies to Equinor. No material changes to the contract resulted from the novation, including with respect to the termination provisions in the event the project does not receive final investment decision (FID). VALARIS 67 has been sold and retired from the offshore drilling fleet.
No significant news.
MLPS & PIPELINES
Frontline Ltd. and Euronav NV announced that the companies have signed a term sheet that has been unanimously approved by their Board of Directors and Supervisory Board, respectively, on a potential stock-for-stock combination between the two companies, based on an exchange ratio of 1.45 FRO shares for every EURN share resulting in Euronav and Frontline shareholders owning approximately 59% and 41%, respectively, of the combined group. It is anticipated that Euronav will pay total dividends of up to 12 cents before the closing of the business combination with no impact on the exchange ratio. If the combination materializes, the combined group would continue under the name Frontline and would continue to operate from Belgium, Norway, UK, Singapore, Greece and the US. The combined group will be headed by Mr. Hugo De Stoop as the Chief Executive Officer and the Board of Directors of the combined group is expected to consist of seven members, including three current independent Euronav Supervisory Board members, two nominated by Hemen Holding Limited and two additional new independent directors. Frontline’s largest shareholder Hemen, and related companies owning shares in Euronav, have committed to support the potential transaction.
Genesis Energy, L.P. announced that, on April 6, 2022, the Board of Directors of its general partner declared a distribution on Genesis’ common units and 8.75% Class A Convertible Preferred Units attributable to the quarter ended March 31, 2022. These distributions will be paid on May 13, 2022 to holders of record at the close of business on April 29, 2022. Each holder of common units will be paid a quarterly cash distribution of $0.15 ($0.60 on an annualized basis) for each common unit held of record. With respect to the preferred units, Genesis will pay a cash distribution of $0.7374 ($2.9496 on an annualized basis) for each preferred unit held of record.
Holly Energy Partners, L.P. announced that it and its wholly owned subsidiary, Holly Energy Finance Corp., have finalized the terms of their previously announced offering of $400 million in aggregate principal amount of 6.375% senior notes due 2027 in a private placement under Rule 144A and Regulation S of the Securities Act of 1933, as amended to eligible purchasers. The Notes will be issued at a price equal to 100% of the principal amount thereof.
TEN Ltd. announced that its Board of Directors declared the regular quarterly cash dividend of approximately $0.59375 per share for its Series F Cumulative Redeemable Perpetual Preferred Shares.
Wall Street futures are flat, after Fed minutes released the previous day did nothing to add to the rate-hike momentum already priced into markets. European shares recovered from a selloff, as healthcare stocks surged. Asian equities ended lower as war in Ukraine and COVID-19 lockdowns in China hurt sentiment. The dollar hovered near two-year highs against a basket of major currencies.
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