SECTOR COMMENTARY

Energy stocks closed lower with most subgroups falling at least 1% on the day, underperforming the broader markets. E&Ps fared the worst, dropping by over 2% on the day. In the drillers space, Transocean Ltd. fell over 5% after releasing its Fleet Status Report which showed increased downtimes and spurred a downgrade to 'Sell' from Deutsche Bank.

Money managers raised their net long U.S. crude futures and options positions in the week to February 12, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday. The speculator group raises its combined futures and options position in New York and London by 17,145 contracts to 244,777 during the period.

WTI crude fell by $1.45 or 1.49% to $95.86 and Brent was slightly lower after an unexpected dip in U.S. industrial production spurred concerns about lagging economic activity. Technical selling was also at play for U.S. crude. "We gave (U.S.) oil many chances to get above $98 and test $100 a barrel. And it becomes a situation where we can't rally, so we sell it," said Richard Ilczyszyn, chief market strategist at iitrader.com LLC in Chicago.

Natural gas futures ticked lower by $0.010 or 0.32% to $3.153 as morning gains were reversed. The number of rigs drilling for natural gas in the United States fell this week as low gas prices continued to slow drilling activity, data from Houston-based oil services firm Baker Hughes Inc showed on Friday. The gas-directed rig count dropped by four to 421, the fifth fall in six weeks, according to Baker Hughes.

U.S. INTEGRATEDS

Reuters - Exxon Mobil Corp reported flaring due to valve malfunction at the alkylation unit of its 238,600 barrel-per-day Joliet refinery in Channahon, Illinois, according to a filing with federal regulators.

(Late Thursday) Press Release - Occidental Petroleum Corporation announced that as part of the Company’s succession planning process, the Board has formed a search committee to undertake a review of internal and external candidates to succeed President and Chief Executive Officer, Stephen I. Chazen, with the assistance of a leading executive search firm. The Company has not set a timetable for completion of the search. As previously announced, Dr. Ray R. Irani, who continues to serve as Executive Chairman, will retire at the end of 2014.

INTERNATIONAL INTEGRATEDS

(Late Thursday) Reuters - BP Plc warned of a planned flaring at its 265,000 barrel-per-day (bpd) Los Angeles-area refinery in Carson, California, according to a filing with state pollution regulators.

Reuters - Italian oil and gas company Eni expects its hydrocarbon production in 2013 to grow at a rate of more than 3 percent, a slide in the company's analyst presentation said.

Reuters - Italian oil and gas major Eni delivered an upbeat production outlook on Friday after output rose in the final quarter of 2012, driving an increase in profits that comforted investors anxious about problems besetting its key projects. Eni confirmed previous growth forecasts of more than 3 percent for 2013 and said production at its giant Kashagan field in Kazakhstan - a project that had been marred by cost overruns and delays - was expected to start before June, with around 200,000 barrels per day on tap by the end of the year.

Investec raised Eni to ‘Hold’.

Reuters - Indian state-run gas company GAIL, in a tie up with EDF, has placed a non-binding bid for Repsol's LNG assets in Trinidad and Tobago, Canada and Peru, the Indian company's chairman said.

Reuters - Norwegian oil and gas firm Statoil said it expects to make a final decision on investments in the Bressay heavy oil field this year and that the UK government has approved the development plan.

U.S. E&PS

• UPL reported 4Q’12 EPS of $0.51 versus Thomson Reuters I/B/E/S estimate of $0.52.

Macquarie Research downgraded Apache Corp to ‘Neutral’ from ‘Outperform’ based on valuation.

Press Release – Cub Energy Inc., a Ukraine-focused upstream oil and gas company, announces that the North Makeevskoye-2 ("NM-2") exploration well, has been abandoned after wireline logs and other information obtained during the drilling operation did not indicate any prospective zones. The NM-2 well commenced drilling in early December 2012 and was drilled to a depth of 3,150 metres. The NM-2 is operated by KUB-Gas LLC ("KUB-Gas"), a partially-owned subsidiary in which Cub has a 30% ownership interest.

Sterne Agee Research upgraded QEP Resources to ‘Neutral’ from ‘Underperform’.

FBR resumed coverage on Pioneer Natural Resources with an ‘Outperform’ rating.

Canaccord Genuity cut its rating on Pioneer Natural Resources to ‘Sell’ from ‘Buy’.

(Late Thursday) Press Release – Pioneer Natural Resources Company announced that it has priced a public offering of its common stock at $128.00 per share. The size of the offering has been upsized from 8 million shares to 9 million shares. Pioneer will receive total gross proceeds (before underwriters’ discounts and commissions and estimated expenses) of approximately $1.152 billion. Citigroup, Goldman, Sachs & Co., J.P. Morgan and RBC Capital Markets are joint book-running managers for the offering. The Company has also granted the underwriters an option for 30 days to purchase up to an additional 1.35 million shares of the Company’s common stock. The offering is expected to close on or about February 21, 2013.

Reuters - A majority of SandRidge Energy Corp's directors should be replaced, proxy advisory firm ISS said in a report. "The apparent failures of stewardship on this board are legion," ISS wrote in its report, citing among other factors the company's weak capital discipline and compensation practices. SandRidge shares rose 12 cents, or 2 percent, to $5.99 in afternoon New York Stock Exchange trading.

Press Release – Ultra Petroleum Corp. reported fourth quarter and full-year 2012 operating and financial results. Achieved record annual natural gas and crude oil production of 257.0 Bcfe for 2012. Reported operating cash flow (1) of $713.1 million, or $4.67 per diluted share for the year ended December 31, 2012. Invested $610.9 million in net capital expenditures, generating approximately $100.0 million of free cash flow. Earnings of $328.6 million for the full-year 2012, or $2.15 per diluted share –adjusted (3). Monetized liquids gathering system in Pinedale for $228.0 million. Strong margins in 2012 (adjusted): 64 percent operating cash flow margin (5) and 29 percent net income margin (4).

CANADIAN E&PS

Press Release – PetroBakken Energy Ltd. is pleased to announce that our cash dividend for the month of February will be paid on March 15, 2013 to all PetroBakken shareholders of record on February 28, 2013. The February dividend will be $0.08 per PetroBakken share. The ex-dividend date is February 26, 2013.

OIL SERVICES

• FET reported 4Q’12 EPS of $0.28 versus Thomson Reuters I/B/E/S estimate of $0.28.
• KEG reported 4Q’12 EPS of $0.09 versus Thomson Reuters I/B/E/S estimate of $0.08.
• VTG reported 4Q’12 EPS of $(0.04) versus Thomson Reuters I/B/E/S estimate of $(0.02).

(Late Thursday) Press Release – Basic Energy Services, Inc. reported selected operating data for the month of January 2013. Basic's well servicing rig count remained unchanged at 425. Well servicing rig hours for the month were 72,200 producing a rig utilization rate of 67%, compared to 61% and 76% in December 2012 and January 2012, respectively.

(Late Thursday) Press Release – Forum Energy Technologies, Inc. reported fourth quarter 2012 revenue of $330 million compared to $337 million for the fourth quarter 2011. Net income for the fourth quarter 2012 was $24 million, down from fourth quarter 2011 net income of $32 million. Diluted earnings per share for the fourth quarter 2012 were $0.26, compared to fourth quarter 2011 diluted earnings of $0.43 per share. Included in the fourth quarter 2012 results was $0.02 per share of charges for transaction expenses, severance and foreign exchange losses. The fourth quarter 2011 diluted earnings per share did not include the impact of the 16.6 million shares issued in connection with Forum's initial public offering in April 2012.

Raymond James downgraded Helix Energy Solutions to ‘Market Perform’ from ‘Outperform’.

(Late Thursday) Press Release – Key Energy Services, Inc. reported fourth quarter 2012 consolidated revenues of $466.5 million, generating income from continuing operations of $13.5 million, or $0.09 per share. Third quarter 2012 consolidated revenues were $490.9 million with income from continuing operations of $22.1 million, or $0.15 per share.

Iberia Capital upgraded Oceaneering International to ‘Outperform’ from ‘Sector Perform’.

Global Hunter dropped coverage on Poseidon Concepts.

Raymond James upgraded Precision Drilling to ‘Outperform’ from ‘Market Perform’.

Press Release – Vantage Drilling Company reports a net loss for the three months ended December 31, 2012 of $11.5 million or ($0.04) per diluted share excluding approximately $122.1 million of charges for the early retirement of debt, as compared to a net loss of $9.3 million or ($0.03) per diluted share for the three months ended December 31, 2011. Including the charges for the early retirement of debt, the Company reports a net loss of $133.6 million or ($.45) per diluted share for the three months ended December 31, 2012.

DRILLERS

S&P Capital IQ downgraded Noble Corp to ‘Hold’ from ‘Buy’.

Press Release – Parker Drilling Company, an international drilling contractor, drilling services and rental tools provider, today announced that the Company has reached an agreement in principle with the United States Department of Justice (DOJ) and the staff of the United States Securities and Exchange Commission (SEC) related to parallel investigations that the DOJ and SEC conducted regarding possible violations of U.S. law, including the Foreign Corrupt Practices Act (FCPA), by the Company. Parker Drilling has recorded a charge of $15.85 million, or $0.13 per diluted share, for the fourth quarter of 2012, associated with the proposed settlement of these matters. The charge, which is included in general and administrative expense, is subject to change based on the results of any final settlement with the DOJ and SEC relating to these matters.

Deutsche Bank downgraded Transocean Ltd to ‘Sell’ from ‘Hold’ after yesterday's fleet status report showed a 7% increase in '13 downtime and the first estimate of 2014 downtime is up an additional 5% vs. 2013.

Susquehanna Financial Group downgraded Transocean Ltd to ‘Neutral’ from ‘Positive’ citing 1) higher than expected downtime in 2014, 2) a disproportionate amount of downtime allocated to high-spec assets, and 3) aggressive assumptions of EBITDA contribution from newbuild rigs will drive consensus 2014 EPS estimates lower.

(Late Thursday) Press Release – Transocean Ltd. issued a monthly fleet update summary which includes new contracts, significant changes to existing contracts, and changes in estimated planned out of service time of 15 or more days associated with continuing operations since January 17, 2013. The value of new contracts or extensions since the January 17, 2013 fleet status report is approximately $530 million.

REFINERS

Reuters - Phillips 66 reported restart of a process unit after emissions from the Unit 27 fluid catalytic cracking unit (FCCU) and a coker at its 247,000 barrel-per-day (bpd) refinery in Sweeny, Texas, according to a filing with state pollution regulators.

Reuters - Phillips 66 reported an equipment malfunction led to a compressor loss at its 247,000 barrel-per-day Alliance refinery in Belle Chasse, Louisiana, according to a filing with federal pollution regulators.

(Late Thursday) Reuters - Phillips 66 reported part of a gasoline-making fluid catalytic cracking unit (FCCU) was under maintenance until Feb. 15 at its 100,000 barrel-per-day (bpd) refinery in Ferndale, Washington, according to a filing with the Northwest Clean Air Agency.

(Late Thursday) Reuters - Tesoro Corp reported an upset with a residuum oil supercritical extraction unit on Feb. 7 at its 120,000-barrel-per-day refinery in Anacortes, Washington, according to a filing with Northwest Clean Air Agency.

MLPS

Press Release – Enbridge Inc. and Energy Transfer Partners announced today that they have entered into an agreement on the terms for the joint development of a project to provide crude oil pipeline access to the eastern Gulf Coast refinery market from the Patoka, Illinois hub.