THURSDAY, JULY 12, 2012

SECTOR COMMENTARY

Oil and gas stocks recovered a portion of its earlier session’s losses in the last few hours of trading as commodities rebounded to close higher following the U.S. Treasury Department’s announcement of more sanctions against Iran’s nuclear programs. On the domestic front, the weekly jobless claims numbers which declined to 350K in the prior week implied strength in the labor market and the U.S. budget deficit narrowed as tax revenues rose by 3% from the prior year.

The S&P Energy sector closed the volatile session lower by 0.42%. The sector traded in the negative territory throughout most of the session primarily driven by sluggish global growth headlines. S&P Integrateds posted the smallest losses, closing down by 0.27%, while the E&Ps and Refiners were the lead underperformers despite a drop in crack spreads, down 0.86% and 0.70% respectively.

In company news, Wells Fargo initiated coverage of HollyFrontier, Marathon Petroleum, Tesoro Corp, Valero Energy and Western Refining, helping those names to experience gains on the session, while Barclays initiated coverage of Penn Virginia Resource.

WTI crude oil prices closed higher by $0.27, or 0.31%, at $86.08, while Brent crude oil prices closed above $100. The rebound in the oil prices occurred in the last 30 minutes of trading driven by additional sanctions against Iran.

Natural gas prices rebounded from the morning’s weakness, and ended the session up by $0.021, or 0.74%, to close at $2.874 on forecasts for hot weather despite the EIA report of a net increase of 33 Bcf from the previous week, which was bearish versus estimates for a 26 bcf rise.

U.S. INTEGRATEDS

(Late Wednesday) JPMorgan upgraded its rating on Chevron Corp to ‘Neutral’ from ‘Underweight’ on improved risk/reward outlook project queue delivers substantial growth in long-lived production.

(Late Wednesday) Press Release - Chevron Corporation reported in its interim update that earnings for the second quarter 2012 are expected to be higher than first quarter 2012. Upstream results are projected to be lower between sequential quarters, due to lower average crude oil prices, partially offset by foreign exchange gains. Downstream earnings in the second quarter are expected to be significantly higher, reflecting improved refining margins and gains on asset sales.

(Late Wednesday) Press Release - Magellan Midstream Partners, L.P. and Occidental Petroleum Corporation announced a one-week extension of their binding open season initiated on June 11, 2012 to solicit capacity commitments from shippers to transport crude oil from Colorado City, Texas to the Houston Gulf Coast area on the proposed BridgeTex Pipeline. Binding commitments are now due on July 18, 2012.

INTERNATIONAL INTEGRATEDS

Reuters - A gigantic explosion on March 23, 2005 at BP Plc's 400,780-barrel-per-day Texas City, Texas, refinery -- the sixth largest in the United States -- killed 15 workers and injured 180 others and was the first in a series of mishaps over five years for the London-based energy giant that led to record fines and legal settlements.

(Late Wednesday) Reuters - U.S. workplace safety regulators plan to announce a settlement on Thursday with BP Plc's U.S. refining subsidiary over safety violations found at the company's Texas City, Texas, refinery in 2009, according to a statement.

Reuters - A new crude oil pipeline from a key terminal in Louisiana to refineries near Port Arthur, Texas, will be built at about half the size envisioned late last year, Shell Pipeline LP said after securing customer commitments for the project. The Westward Ho Pipeline, which will carry crude oil from St. James, Louisiana, to Gulf of Mexico refiners just across the Texas border, will have an initial capacity of 300,000 barrels per day, the subsidiary of Royal Dutch Shell said.

Reuters - Norway's Statoil on Tuesday temporarily stopped production at its Snoehvit liquefied natural gas (LNG) plant in the Barents Sea after water leaked into the gas dryers, the company said.

Reuters - Statoil has drilled a dry well in the Tordis field in the North Sea, the Norwegian Petroleum Directorate (NPD) said.

Reuters - French major Total's Leuna refinery in Germany was restarting a fluid catalytic cracker (FCC), which makes gasoline, after a unplanned shutdown that lasted several weeks, traders said.

Reuters - French oil group Total has increased its stake in the $34 billion Ichthys liquefied natural gas (LNG) project in Australia to 30 pct from 24 percent, the company said.

Reuters - Bulgaria has chosen French oil major Total to carry out exploration works at a deepwater gas field off the country's Black Sea coast, near a site in Romanian waters where a successful gas discovery was made, officials said.

Jefferies upgraded Tullow Oil to ‘Buy’ from ‘Hold’.

U.S. E&PS

Reuters - The trial between oil and gas producer Anadarko Petroleum and paint materials company Tronox has been adjourned for one week so the two companies can work toward a settlement, according to court filings. The two companies are locked in a $25 billion court battle over environmental liabilities related to the spinoff of Tronox from Kerr-McGee Corp, which was purchased by Anadarko.

Press Release - Apache Corporation was joined by the Lafayette, La., city-parish president and other local dignitaries to commemorate the opening of the company's first public-access compressed natural gas (CNG) fueling station in Louisiana.

Press Release - Magnum Hunter Resources Corporation has provided a status update on the Company's shut-in production in the Appalachia region from a severe thunderstorm that hit the area almost two weeks ago. Due to loss of electricity in the region, the Company has continued to experience gas production curtailments at the tailgate of its pipeline into Dominion Transmission at their Hastings processing facility located in Hastings, West Virginia.

Press Release - RANGE RESOURCES CORPORATION announced its second quarter 2012 production results, preliminary realized prices and an update on its hedging status. On an equivalent basis, production volumes exceeded guidance with second quarter production averaging 719.3 Mmcfe net per day, a 42% increase over the prior-year quarter and 10% greater than the first quarter 2012.

CANADIAN E&PS

Press Release - Ivanhoe Energy Inc. announced that it is continuing to make progress with its priority initiatives and the following provides a summary of that activity. The Company continues to advance its primary objectives of building reserves and commercializing the Heavy-to-Light (HTLTM) technology. By the end of 2012 the Company expects to make substantial progress on exploring, developing and upgrading heavy oil.

Reuters - Talisman Energy Inc said it has no immediate plan to put 140 workers back on the platform at its Yme oil project in the Norwegian North Sea after evacuating them this week in the latest in a series of problems at the troubled development. Talisman, Canada's No. 5 independent oil explorer, said it removed the staff as a precaution on Tuesday, citing a lack of safety documentation from the contractor, SBM Offshore NV, pertaining to the jack-up portion of the platform. Yme is now well over a year behind its initial start-up schedule.

OIL SERVICES

Reuters - Anton Oilfield Services Group plans to strengthen ties with Schlumberger Ltd in shale gas development in China after the North American oilfield services company took a stake in it, the Hong Kong-listed Chinese company said. Shale gas development is still at an early stage in China, the world's largest energy user, where technically recoverable reserves of the unconventional fuel are estimated to be even higher than in the United States.

REFINERS

(Late Wednesday) Wells Fargo initiated coverage on HollyFrontier with a ‘Market Perform’ rating and initiated Marathon Petroleum, Tesoro Corp, Valero Energy and Western Refining with an ‘Outperform’ rating based on recent spinoffs increasing the profile of the sector, many smaller or fringe refining participants have sold or shuttered units across the United States, Europe, and the Caribbean. This is creating a healthier sector, as the focus and accountability for management teams has increased and weaker units have closed.

Barclays Capital initiated coverage on Penn Virginia Resource with an ‘Overweight’ rating.

Howard Weil raised Tesoro Corp to ‘Market Perform’ from ‘Perform’ and cut Marathon Petroleum to ‘Market Perform’ from ‘Outperform’.

MLPS

Press Release - Cheniere Energy Partners, L.P. announced that it has received executed firm financial commitments in aggregate of approximately $3.4 billion to fund the costs of developing, constructing and placing into service the first two liquefaction trains of the Sabine Pass LNG liquefaction project (the "Liquefaction Project"). Commitments for a Term Loan A ("Credit Facility") were received from all of the previously announced joint lead arranger banks and from additional banks and financial institutions ("Lenders"). As a result, Cheniere Partners has decided to upsize the Credit Facility and withdraw the previously announced syndication of a $1.25 billion Term Loan B facility.

(Late Wednesday) Press Release - Enterprise Products Partners L.P. announced that the board of directors of its general partner declared an increase in the quarterly cash distribution rate paid to partners to $0.6350 per common unit, or $2.54 per unit on an annualized basis. The quarterly distribution will be paid on Wednesday, August 8, 2012, to unitholders of record as of close of business on Tuesday, July 31, 2012. This distribution rate, which represents a 5 percent increase over the $0.6050 per unit distribution rate declared with respect to the second quarter of 2011, is the 41st distribution increase since Enterprise’s initial public offering in 1998 and the 32nd consecutive quarterly increase.

(Late Wednesday) Press Release - Magellan Midstream Partners, L.P. and Occidental Petroleum Corporation announced a one-week extension of their binding open season initiated on June 11, 2012 to solicit capacity commitments from shippers to transport crude oil from Colorado City, Texas to the Houston Gulf Coast area on the proposed BridgeTex Pipeline. Binding commitments are now due on July 18, 2012.