SECTOR COMMENTARY

The energy sector outperformed the broader equity markets, led by drillers and oil services sectors, while E&Ps underperformed and were brought down by natural gas levered names as the commodity slid. Shares of drilling rig operator Transocean were up nearly 4% after a judge accepted a plea related to the Macondo well incident in 2010.

U.S. crude oil futures ended the day higher by $0.30 or 0.31% to $97.31, outperforming Brent futures which were higher by 0.1%. Prices rose as fears about gasoline supply pulled the complex higher, outweighing concerns of weakening economic output in the euro zone. Gasoline prices rose more than 2% today on the expectation that a busy refinery maintenance season could draw down stockpiles, despite current healthy levels. "About the only thing going on is a panic attack regarding gasoline. There is a fear in the marketplace that gasoline supplies will fall short," said Tim Evans, an energy analyst for Citi Futures perspective. Additional support came after the International Atomic Energy Agency failed to reach a deal to set a date to inspect Iranian nuclear facilities, causing supply concerns.

Natural gas futures were sharply lower down $0.143 or 4.33% to $3.163 after the weekly EIA inventory report showed a smaller than expected decline in U.S. working gas in storage last week. Traders shook off forecasts for cold weather after the weekly inventory report showed that working gas in storage fell 157 Bcf last week, while expecting to see a draw of 162 Bcf. This marks the third straight week of lower than expected declines in inventory. Stocks were 270 Bcf less than last year at this time, but 248 Bcf above the five-year average.

U.S. INTEGRATEDS

Reuters - U.S. energy major Chevron is moving towards exploration for shale gas in eastern Romania but still needs at least two more permits before it can start drilling, the environment ministry said on Thursday.

CANADIAN INTEGRATEDS

• CVE-T reported 4Q’12 EPS of C($0.16) versus Thomson Reuters I/B/E/S estimate of C$0.38.

Press Release - Cenovus Energy Inc. delivered another year of predictable, reliable performance in 2012. In addition to growing its reserves and resources base, the company recorded solid operational results driven by significant production growth and a strong contribution from its downstream refining business. Those results offset the impact of a reduction in average realized prices for crude oil and natural gas when compared with 2011.

U.S. E&PS

• APA reported 4Q’12 EPS of $2.27 versus Thomson Reuters I/B/E/S estimate of $2.30.
• EOG reported 4Q’12 EPS of $1.61 versus Thomson Reuters I/B/E/S estimate of $1.35.
• PXD reported 4Q’12 EPS of $0.83 versus Thomson Reuters I/B/E/S estimate of $0.87.

Press Release - Apache Corporation today reported record overall production for its fourth consecutive year, as well as record oil and liquids production. These results contributed to full-year 2012 earnings of $1.9 billion or $4.92 per diluted common share, compared with $4.5 billion or $11.47 per share in 2011. Excluding certain items that management believes affect the comparability of operating results, such as the impact of a ceiling test write-down due primarily to substantially weaker Canadian natural gas prices, Apache reported adjusted earnings* of $3.8 billion or $9.48 per share, compared with $4.7 billion or $11.83 per share in 2011. Cash from operations before changes in operating assets and liabilities* was $10.2 billion, sustaining the record level achieved the prior year even with lower average North American natural gas prices.

Endeavour International was downgraded to ‘Neutral’ from ‘Buy’ at Suntrust Robinson.

Endeavour International was downgraded to ‘Sell’ from ‘Buy’ at Wunderlich Securities.

Press Release - Endeavour International Corporation announced today that its Board of Directors has authorized the Company's management team to explore a broad range of strategic alternatives to further enhance shareholder value. Tudor, Pickering, Holt & Co. and Lambert Energy Advisory Ltd. have been engaged as the Company's financial advisors in this process.

(Late Wednesday) Press Release - EOG Resources, Inc. today reported full year 2012 net income of $570.3 million, or $2.11 per share, as compared to $1,091.1 million, or $4.10 per share, for the full year 2011. For the fourth quarter 2012, EOG reported a net loss of $505.0 million, or $1.88 per share. This compares to fourth quarter 2011 net income of $120.7 million, or $0.45 per share.

Pioneer Natural Resources was downgraded to ‘Neutral’ from ‘Outperform’ at Macquarie.

(Late Wednesday) Press Release - Newfield Exploration Company today announced that its Board of Directors has approved a three-year plan and outlined the Company's production growth outlook and planned capital investment ranges for 2013-15.

(Late Wednesday) Press Release - Newfield Exploration Company today announced that its Board of Directors has authorized the evaluation of strategic alternatives for the Company's international assets, which consist of offshore oil and natural gas developments in Malaysia and China, and has provided significant updates on year-end results.

(Late Wednesday) Press Release - Pioneer Natural Resources Company today announced financial and operating results for the quarter ended December 31, 2012, and announced its 2013 capital budget. Pioneer reported fourth quarter net income attributable to common stockholders of $29 million, or $0.22 per diluted share (see attached schedule for a description of the net income per diluted share calculation). Without the effect of noncash derivative mark-to-market gains and other unusual items, adjusted income for the fourth quarter was $107 million after tax, or $0.83 per diluted share.

Whiting Petroleum was lifted to ‘Outperform’ from ‘Market Perform’ at BMO.

CANADIAN E&PS

• ECA-N reported 4Q’12 EPS of $0.40 versus Thomson Reuters I/B/E/S estimate of $0.34.

Press Release - Canacol Energy Ltd. announced today its financial and operating results for the three and six months ended December 31, 2012. The Corporation recorded net income of $3.1 million and a net loss of $3.0 million for the three and six months ended December 31, 2012, respectively.

Press Release - Encana Corporation finished the year ahead of 2012 guidance as the company reported annual cash flow of $3.5 billion, or $4.80 per share, and $997 million in operating earnings, or $1.35 per share. In the fourth quarter of 2012 the company generated cash flow of $809 million, or $1.10 per share, and operating earnings of $296 million, or $0.40 per share. In addition, Encana ended the year with $3.2 billion in cash and cash equivalents, far exceeding the $2.5 billion Encana had targeted in 2012, due in part to the company's success with signing major agreements with subsidiaries of PetroChina Company Limited (PetroChina), Mitsubishi Corporation (Mitsubishi) and Toyota Tsusho Corporation.

OIL SERVICES

• IO reported 4Q’12 EPS of $0.17 versus Thomson Reuters I/B/E/S estimate of $0.13.
• CJES reported 4Q’12 EPS of $0.65 versus Thomson Reuters I/B/E/S estimate of $0.67.
• OII reported 4Q’12 EPS of $0.74 versus Thomson Reuters I/B/E/S estimate of $0.72.
• PDS reported 4Q’12 EPS of C$0.22 versus Thomson Reuters I/B/E/S estimate of C$0.07.
• PGS-OS reported 4Q’12 EPS of $0.19 versus Thomson Reuters I/B/E/S estimate of $0.18.

(Late Wednesday) Press Release - C&J Energy Services, Inc. today reported net income of $30.4 million, or $0.56 per diluted share, for the fourth quarter of 2012. Net income was $53.4 million, or $1.00 per diluted share, in the fourth quarter of 2011 and $49.3 million, or $0.91 per diluted share, in the third quarter of 2012. Adjusted net income (1) for the fourth quarter of 2012 was $35.2 million, or $0.65 per diluted share(2), excluding a $3.8 million after-tax ($0.07 per diluted share) one-time charge related to a legal settlement with a former equity holder and also excluding additional income tax expense associated with a true-up of our effective tax rate for the prior three quarters ($0.02 per diluted share).

(Late Wednesday) Press Release - ION Geophysical Corporation today reported fourth quarter 2012 revenues of $173.1 million, an 8% increase from revenues of $159.9 million in fourth quarter 2011. Fourth quarter 2012 net income increased to $26.8 million, or $0.17 per diluted share, compared to net income of $12.0 million, or $0.08 per diluted share in fourth quarter 2011. Adjusted EBITDA increased 6% to $62.7 million compared to $59.0 million in fourth quarter 2011.

(Late Wednesday) Press Release - Oceaneering International, Inc. today reported record fourth quarter and annual earnings for the periods ended December 31, 2012. For the fourth quarter of 2012, Oceaneering earned net income of $80.6 million, or $0.74 per share, on revenue of $780.9 million. During the corresponding period in 2011, net income was $58.3 million, or $0.54 per share, on revenue of $574.2 million.
Press Release - Petroleum Geo-Services ASA Fourth Quarter and Preliminary Full Year 2012 Results. "2012 performance was strong with operating profit more than doubling from previous year. The fourth quarter was coloured by some weakness in MultiClient late sales, high steaming activity, challenging mobilization and delayed project start-ups. The marine seismic market improved during 2012. A stronger market combined with our unique GeoStreamer® offering contributed to higher margins.

Reuters - Oilfield services company Poseidon Concepts Corp said it would restate results for the first three quarters of 2012, sending its stock plunging almost 80 percent to a life-low.

Poseidon Concepts Corp was downgraded to ‘Sell’ from ‘Hold’ at Canaccord Genuity.

Press Release - PRECISION DRILLING CORPORATION ANNOUNCES 2013 FIRST QUARTER DIVIDEND AND 2012 FOURTH QUARTER AND YEAR END. Precision reported a net loss of $116 million or $0.42 per diluted share for the three months ended December 31, 2012 compared to net earnings of $28 million for the fourth quarter of 2011. In the quarter Precision recognized an after tax asset decommissioning charge and goodwill impairment charge that combined reduced net earnings by $179 million and net earnings per diluted share by $0.63 compared to the prior year when an after tax asset decommissioning charge was recognized that reduced net earnings by $76 million and net earnings per diluted share by $0.26.

DRILLERS

Goldman Sachs upgraded Nabors Industries to ‘Buy’ from ‘Neutral.’

Reuters - A federal judge on Thursday accepted a guilty plea by rig contractor Transocean Ltd for violating the U.S. Clean Water Act along with a $400 million criminal fine for its role in the 2010 disaster at BP Plc's Macondo well.

REFINERS

Valero Energy Corp. was raised to ‘Outperform’ from ‘Neutral’ at Macquarie.

MLPS

Press Release - Enbridge Energy Partners, L.P.'s key financial results for the fourth quarter of 2012, compared to the same period in 2011, were as follows: Adjusted net income for the three and twelve month periods ended December 31, 2012, reported above, eliminates the impact of: (a) additional environmental costs, net of insurance recoveries, associated with the incidents on Lines 14 and 6B; and (b) non-cash, mark-to-market net gains and losses; among other adjustments.

Press Release - Targa Resources Partners LP and Targa Resources Corp. today reported fourth quarter and full year 2012 results. Fourth quarter 2012 net income attributable to Targa Resources Partners was $33.5 million compared to $75.5 million for the fourth quarter of 2011. Net income per diluted limited partner unit was $0.14 in the fourth quarter of 2012 compared to $0.75 for the fourth quarter of 2011. The Partnership reported earnings before interest, income taxes, depreciation and amortization, gains or losses on debt repurchases and redemptions, early debt extinguishments and asset disposals and non-cash risk management activities related to derivative instruments ("Adjusted EBITDA") of $130.6 million for the fourth quarter of 2012 compared to $146.3 million for the fourth quarter of 2011.