SECTOR COMMENTARY

Oil and gas stocks underperformed the broader markets with services and drillers leading the space lower. RBC Capital lowered estimates on the group believing offshore drilling remains the most challenged subsector in oilfield services due to a lack of fundamental momentum.

WTI closed at $92.33 down $1.34 or 1.43% after government data showed large builds in crude stockpiles at the U.S. benchmark delivery point. A stronger U.S. dollar also weighed on crude prices as the U.S. dollar index rose to the highest level since late November. Brent crude erased early gains but its losses were limited by continued concerns over Libya's oil supply, and the widening losses in U.S. crude boosted Brent's premium over WTI oil to a fresh one-month high of close to $15 a barrel.

Henry Hub futures fell $0.083 or 1.93% to close at $4.216 as forecasts for warmer weather countered expectations for strong drawdowns in storage. Drawdowns in natural gas storage for the week ending Jan. 3 will be releasedThursday by the EIA. Analysts polled by Reuters on average predicted a drawdown of 157 billion cubic feet, much higher than a drawdown of 97 bcf reported the week prior.

U.S. INTEGRATEDS

Howard Weil downgraded Chevron Corp. to ‘Sector Perform’ from ‘Sector Outperform.’

Howard Weil upgraded ExxonMobil to ‘Sector Outperform’ from ‘Sector Perform.’

Reuters - ExxonMobil’s 238,600-barrel-per-day (bpd) Joliet, Illinois, refinery reported problems with process units on Tuesday due to cold weather which caused flaring, according to a notice filed with U.S. pollution regulators.

Reuters - Hess Corporation announced today that Hess Retail Corporation, its wholly owned subsidiary, has filed a Form 10 Registration Statement with the U.S. Securities and Exchange Commission (SEC). The Form 10 contains a preliminary information statement about the potential terms and conditions of a spin-off of Hess Retail Corporation to the stockholders of Hess Corporation.

INTERNATIONAL INTEGRATEDS

Howard Weil upgraded BP to ‘Sector Outperform’ from ‘Sector Perform.’

(Late Tuesday) Reuters - Brazil's state-run oil company Petrobras refined an average 2.03 million barrels a day of crude in the first 11 months of 2013, an amount equivalent to about 97 percent of its capacity.

Reuters - Royal Dutch Shell said on Wednesday that its facility in Deer Park, Texas, which houses a 327,000 barrel-per-day (bpd) refinery and a chemical plant, experienced an operational upset in an unspecified unit.

Reuters - Norwegian energy firm Statoil has resumed production at its Hammerfest liquefied natural gas plant, which processes gas from the Snoehvit field in the Arctic, after gas leak forced a shutdown on Sunday, it said in a statement on Wednesday.

Howard Weil downgraded Total to ‘Sector Perform’ from ‘Sector Outperform.’

(Late Tuesday) Reuters - Total reported a shutdown of a sulfur recovery unit (SRU) at its 225,500-barrel-per-day (bpd) Port Arthur, Texas, refinery on Tuesday, according to a notice filed with Texas pollution regulators.

U.S. E&PS

Howard Weil downgraded Apache Corp. and Occidental Petroleum to ‘Sector Perform’ from ‘Sector Outperform.’

Press Release - BPZ Energy provided an update on its multi-well development drilling campaign at Block Z-1 offshore as well as the onshore exploration program at Block XXIII. President and CEO Manolo Zuniga commented, "I'm excited to have entered 2014 with good well results at the Albacora A-18D well, boosting current Block Z-1 gross production levels in excess of 4,900 barrels of oil per day, of which we have a 51% interest. We look forward to continued production growth as we drill additional Z-1 development oil wells.

Howard Weil upgraded Concho Resources, GoodRich Petroleum, andWhiting Petroleum to ‘Focus Stock’ from ‘Sector Outperform.’

(Late Tuesday) Press Release - ConocoPhillips today provided an update on fourth-quarter production guidance. The recent quarter's average production was negatively impacted by significant weather-related downtime in several operational areas, notably in the Lower 48 and the North Sea. As a result, fourth-quarter production for continuing operations is expected to be approximately 1,475 thousand barrels of oil equivalent per day (MBOED).

Howard Weil downgraded Marathon Oil Corp. to ‘Sector Outperform’ from ‘Focus Stock.’

Wells Fargo upgraded PDC Energy Inc. to ‘Outperform’ from ‘Market Perform.’

CANADIAN E&PS

Reuters – Athabasca Oil announced that Kim Anderson has accepted an appointment to become the company's chief financial officer.

OIL SERVICES

RBC downgraded Baker Hughes to ‘Sector Perform’ from ‘Outperform.’

RBC downgraded Cameron International to ‘Outperform’ from ‘Top Pick.’

(Late Tuesday) Press Release - Forum Energy Technologies, Inc. is pleased to announce the appointment of Prady Iyyanki to the position of Chief Operating Officer. In this newly created role, he will be responsible for leading Forum's global operations and driving growth and operational excellence across the organization.

RBC downgraded National Oilwell Varco to ‘Sector Perform’ from ‘Outperform.’

RBC upgraded Oceaneering International to ‘Outperform’ from ‘Sector Perform.’

RBC upgraded Patterson-UTI Energy to ‘Outperform’ from ‘Sector Perform.’

DRILLERS

RBC upgraded Helmerich & Payne, Nabors Industries, and Rowan Companies PLC to ‘Outperform’ from ‘Sector Perform.’

RBC downgraded Noble Corp. and Transocean Ltd. to ‘Sector Perform’ from Outperform.’

(Late Tuesday) Press Release - Parker Drilling Company announced that it has priced its previously announced private placement of $360 million in aggregate principal amount of its Senior Notes due 2022 at par, for a yield to maturity of 6.750%.

REFINERS

Reuters - Phillips 66 reported an unspecified unit upset leading to sulfur dioxide emissions at its 239,400-barrel-per-day Lake Charles refinery in Westlake, Louisiana, said a filing with the U.S. National Response Center.

MLPS

Morgan Stanley downgraded Kinder Morgan to ‘Underweight’ from ‘Equal Weight.’

Morgan Stanley upgraded Targa Resources to ‘Overweight’ from ‘Equal Weight.’