THURSDAY, AUGUST 09, 2012

SECTOR COMMENTARY

Energy stocks closed mostly higher, while the broader markets were mixed in a choppy session as investors digested a better-than-expected jobless claims report against waning optimism over the ECB's willingness to tackle the region's debt crisis.

Oilfield service providers and drillers were the leaders, spurred by optimism after National-Oilwell Varco, the largest U.S. oilfield equipment maker, said it will buy Robbins & Myers Inc, an equipment manufacturer for the energy, industrial, pharma and chemical industries for $2.54 billion in cash, reflecting a 28% premium to the stock's closing price yesterday. Meanwhile, integrateds and refiners lagged on profit-taking.

WTI crude oil gained $0.01 or 0.01% to $93.36 while Brent jumped 1% to $113.23, supported by worries about potential supply disruptions in the Gulf of Mexico due to Tropical Storm Ernesto and a lower outlook for North Sea Brent production. "The general mood is bullish — any dip is still being used as a buying opportunity," said Carsten Fritsch, an energy analyst at Commerzbank in Frankfurt. "Given the supply risk, with falling North Sea output and the closure of three oil ports in Mexico, all this should lend support to prices."

Natural gas futures climbed $0.012 or 0.41% to $2.945 but thereafter lost all gains in the electronic market, where the front month contract was last seen as down nearly 1%. The commodity initially spiked after the EIA reported that supplies rose by 24 Bcf, which was bullish as compared to the expected build of 30 Bcf and was also smaller than the 31 Bcf injection booked last year. Regarding the late day reversal in prices, one Massachusetts-based trader said, "It (the EIA build) was more constructive than we've seen in the last few weeks, but summer is running out, and as prices move higher, the coal (switching) load comes into question, which should cap the upside.”

U.S. INTEGRATEDS

(Late Wednesday) Reuters - A sinkhole the size of a football field in southern Louisiana has forced energy companies to halt nearby natural gas pipeline activity and draw down fuel from a local storage cavern. Chevron Corp's subsidiary Bridgeline Holdings declared force majeure on new injections into its salt dome storage facility near the sinkhole and the town of Napoleonville, through the rest of the year. Customers were also asked to begin reducing their current storage inventory to 40 percent of each of their currently contracted amount, according to the Bridgeline filing.

(Late Wednesday) Reuters - Chevron Corp's fire-damaged 245,000 barrel per day (bpd) Richmond, California, refinery continues to make transportation fuel at reduced levels following a Monday blaze that shut the refinery's core crude distillation unit, a company official said on Wednesday.

INTERNATIONAL INTEGRATEDS

Reuters - The Trans Adriatic Pipeline project said on Thursday it had reached agreement with members of the Shah Deniz gas consortium – BP Plc, Socar and Total to secure funding for its pipeline.

Reuters - BP Plc began restarting a coker unit this week at its 337,000-barrels-per-day (bpd) refinery in Whiting, Indiana, that had been shut for repairs in late July after a brief fire, according to sources familiar with refinery operations.

US E&PS

• CLR reported 2Q’12 EPS of $0.68 versus Thomson Reuters I/B/E/S estimate of $0.74.
• CPE reported 2Q’12 EPS of $0.01 versus Thomson Reuters I/B/E/S estimate of $(0.02).
• EXXI reported FY4Q’11 EPS of $0.88 versus Thomson Reuters I/B/E/S estimate of $0.88.
• GMXR reported 2Q’12 EPS of $(0.18) versus Thomson Reuters I/B/E/S estimate of $(0.19).
• LPI reported 2Q’12 EPS of $0.18 versus Thomson Reuters I/B/E/S estimate of $0.19.
• MHR reported 2Q’12 EPS of $(0.04) versus Thomson Reuters I/B/E/S estimate of $(0.04).
• NOG reported 2Q’12 EPS of $0.22 versus Thomson Reuters I/B/E/S estimate of $0.24.

(Late Wednesday) Reuters - Anadarko Petroleum Corp said on Wednesday that it still expects to win a case brought by paint materials company Tronox Inc but a settlement of the $25 billion lawsuit is less likely. While the company does not expect to lose at trial, Anadarko estimated a potential loss of $1.4 billion, the company said in a filing with the U.S. Securities.

(Late Wednesday) Press Release - Callon Petroleum Company reported results of operations for the three-month period ended June 30, 2012.The company announced second quarter revenue of $25.4 million, net income of $0.09 per diluted share and discretionary cash flow, a non-GAAP financial measure, of $0.31 per diluted share. The company raised the 2012 capital expenditure budget by $13.5 million to $152.5 million to advance horizontal drilling plans and acquire additional acreage in the Midland Basin.

(Late Wednesday) Press Release - Continental Resources Inc announced record production for the second quarter ended June 30, 2012. Continental reported net income of $405.7 million, or $2.25 per diluted share, for the second quarter of 2012, compared with net income of $239.2 million, or $1.33 per diluted share for the second quarter of 2011. The year-over-year growth in net income reflected Continental's crude oil-weighted production growth.

(Late Wednesday) Press Release - Energy XXI announced fiscal fourth-quarter and full-year financial and operating results for the period ended June 30, 2012, and provided an operational update. Net income available for common shareholders in the 2012 fiscal fourth quarter totaled $78.3 million, or $0.93 per diluted share, compared with fiscal 2011 fourth-quarter net income available for common shareholders, excluding special items, of $26.8 million, or $0.36 per diluted share.

(Late Wednesday) Press Release - GMX Resources Inc reported the financial and operating results for the second quarter ended June 30, 2012. Net loss applicable to common shareholders was $106.1 million, or $1.52 per basic and fully diluted share, and $146.7 million, or $2.23 per basic and fully diluted share, for the three and six months ended June 30, 2012, respectively.

Press Release - Laredo Petroleum Holdings Inc announced second-quarter 2012 financial and operating results. Second-quarter 2012 net income was $31.0 million ($0.24 per diluted share) compared to $41.1 million reported in the second quarter of 2011.

Reuters - Magnum Hunter Resources Corp reported financial results for the second quarter of 2012 and six months ended June 30, 2012. The Q2 non-GAAP loss per share was $0.04 and a Q2 loss per share of $0.10.

Press Release - Northern Oil and Gas Inc today announced 2012 second quarter results of operations and an updated 2012 drilling and acreage plan. The highlights included: quarterly production of 947,468 barrels of oil equivalent (“Boe”), or 10,412 average boe per day; Oil and Gas Sales of $70.4 million, representing a 99% year-over-year increase; and, net income of $43.6 million, or $0.70 per diluted share.

CANADIAN E&PS

• IE-T reported 2Q’12 EPS of $(0.01) versus Thomson Reuters I/B/E/S estimate of $(0.03).

Press Release - Ivanhoe Energy Inc reported its financial results for the second quarter of 2012 and an update regarding its Ecuador operations. In the second quarter of 2012, the Company had a net loss of $4.7 million, $(0.01) per share, as compared to $4.1 million net loss in the same period of 2011.

Macquarie Research upgraded Pacific Rubiales Energy to an ‘Outperform’ rating.

OIL SERVICES

• CJES reported 2Q’12 EPS of $1.00 versus Thomson Reuters I/B/E/S estimate of $0.92.
• PSN-T reported 2Q’12 EPS of C$0.38 versus Thomson Reuters I/B/E/S estimate of C$0.36.

Societe Generale upgraded Baker Hughes to a ‘Buy’ from ‘Hold,’ and downgraded Oceaneering International to a ‘Hold’ from ‘Buy.’

(Late Wednesday) Press Release - C&J Energy Services Inc reported net income of $53.3 million, or $0.99 per diluted share, for the second quarter of 2012, compared to net income of $33.2 million, or $0.68 per diluted share, in the second quarter of 2011. Net income for the first quarter of 2012 was $49.4 million, or $0.92 per diluted share. Second quarter 2012 results included the impact of approximately $0.5 million in transaction costs incurred in connection with the acquisition of Casedhole Holdings, Inc. and its subsidiaries.

Press Release - National Oilwell Varco, Inc. and Robbins & Myers have entered into an agreement under which National Oilwell Varco will acquire Robbins & Myers, Inc. in an all cash transaction that values Robbins & Myers at approximately $2.5 billion. Under the agreement, Robbins & Myers’ shareholders will receive $60.00 per share in cash in return for each of the approximately 42.4 million shares outstanding (“the Transaction”.) The Boards of Directors of National Oilwell Varco and Robbins & Myers have unanimously approved the transaction.

(Late Wednesday) Press Release - Poseidon Concepts Corp announced record second quarter financial and operating results and maintains 2012 guidance. The company announced Q2 earnings per share of C$0.38, Q2 revenue rose 469 percent to C$54.9 million, and forecast 2012 EBITDA of $210 million and growth in the tank fleet to 500 units at end of Q3’12.

REFINERS

• ALJ reported 2Q’12 EPS of $0.63 versus Thomson Reuters I/B/E/S estimate of $0.68.

Press Release - Alon USA Energy, Inc. announced results for the second quarter of 2012. Net income for the second quarter of 2012 was $43.1 million, or $0.77 per share, compared to net income of $13.7 million, or $0.25 per share, for the same period last year. Excluding special items, Alon recorded net income of $35.2 million, or $0.63 per share, for the second quarter of 2012, compared to net income of $16.7 million, or $0.30 per share, for the same period last year.

MLPS

(Late Wednesday) Press Release - Copano Energy, L.L.C. announced its financial results for the three months ended June 30, 2012. Revenue for the second quarter of 2012 decreased 8% from the second quarter of 2011 to $317.3 million, and 6% from the first quarter of 2012. Net income to common was $12.2 million for the second quarter of 2012, compared to net loss of $17.4 million for the second quarter of 2011.

Global Hunter Securities downgraded Crosstex Energy LP to ‘Neutral’ from ‘Accumulate.’

(Late Wednesday) Press Release - Oiltanking Partners, L.P. reported second quarter 2012 net income of $16.6 million, or $0.41 per unit on a basic and diluted basis, compared to second quarter 2011 net income of $7.6 million. Adjusted EBITDA for the second quarter of 2012 was $21.1 million, an increase of 25% over $16.9 million for the second quarter of 2011. Adjusted EBITDA, which is a financial measure that is not presented in accordance with U.S. generally accepted accounting principles, is defined and reconciled to net income below.

Press Release - Sunoco Logistics Partners L.P. announced that it will commence a binding Open Season for Project Mariner East. This Open Season is for the pipeline project to deliver propane and ethane from the liquid-rich Marcellus Shale areas in Western Pennsylvania, including MarkWest Energy Partners, L.P.’s processing and fractionation complex in Houston, Pennsylvania, to Southeastern Pennsylvania. The project is anticipated to have an initial capacity to transport approximately 65,000 barrels per day of natural gas liquids and can be scaled to support higher volumes as needed. Mariner East is expected to have the ability to transport propane by the second half of 2014. Mariner East is scheduled to be fully operational to deliver propane and ethane in the first half of 2015.

MARKET COMMENTARY

The S&P 500 extended its winning streak for a fifth day, again notching only slight gains as lingering expectations for economic stimulus from central banks lent support to a market lacking new catalysts.

The number of Americans filing new claims for jobless benefits unexpectedly fell last week, offering hope that some of last month's improvement in job growth could be sustained and give the economy a lift.