MONDAY, OCTOBER 15, 2012

SECTOR COMMENTARY

The energy sector ended the day mostly higher, with overall drillers and integrateds outperforming while refiners and E&Ps lagged on the day.

Brent crude futures rose approximately 0.9% while WTI crude futures slipped a modest $0.01 or 0.01% to close at $91.85, recovering from a roughly 1% decline earlier in the day after testing support near the 100-day moving average. Middle East turmoil and supportive economic data tempered price pressure from slowing economic growth and an offer from Iran to negotiate the halting of higher grade uranium enrichment. Brent was lifted on Monday by news of more delays in restarting Nexen's Buzzard field, Britain's largest North Sea field, after maintenance. A stronger dollar index also provided pressure, as the euro fell against the greenback as investors waited for more clarity on a potential bailout for Spain. That bailout was expected to be dealt with alongside a revised loan program for Greece and a bailout for Cyprus.

Natural gas futures slipped $0.125 or 3.46% to close at $3.846, off their 2012 high after rising for four straight sessions, as forecasts for moderating weather looked set to cut demand. The U.S. Climate Prediction Center's six to ten-day forecast issued on Sunday gave a 33-to-65% chance of above-normal temperatures in the West, Southwest and upper Northeast, and a 33 percent chance of below-normal temperatures for parts of the Midwest and Southeast. Outages at U.S. nuclear power plants totaled about 24,500 megawatts (MW), or 24 percent of capacity, up from 20 percent on Friday.

INTERNATIONAL INTEGRATEDS

Reuters - BP Plc and Husky Energy Inc's joint-venture, 135,000-barrels-per-day refinery in Toledo, Ohio has restarted units upon wrapping up a month of planned work, sources familiar with the plant's operations said. A gasoline-making fluid catalytic cracking unit, crude distillation unit and coker have been restarted, the sources said.

Reuters - Italy's Eni said it had completed the sale of just under 30 percent of gas transport group Snam to state-controlled Cassa Depositi e Prestiti in a deal that will sharply cut the oil and gas group's debt. Eni, which used to control Snam, said it will see an improvement in its net debt situation of around 14.7 billion euros.

(Sunday) Reuters - Royal Dutch Shell Plc said it was restarting an unspecified unit on Sunday at its 100,000 barrel-per-day Scotford refinery near Edmonton, Alberta, according to a message posted on a community information line.

(Late Friday) Press Release - Statoil ASA announced that Stale Tungesvik has taken over as president of its Canadian operations. Tungesvik replaces Lars Christian Bacher who has been appointed executive vice president for Statoil's Development and Production International.

CANADIAN INTEGRATEDS

Reuters - BP Plc and Husky Energy Inc's joint-venture, 135,000-barrels-per-day refinery in Toledo, Ohio has restarted units upon wrapping up a month of planned work, sources familiar with the plant's operations said. A gasoline-making fluid catalytic cracking unit, crude distillation unit and coker have been restarted, the sources said.

U.S. E&PS

Press Release - Warren Resources, Inc. announced that it has closed the purchase and sale transaction under the previously announced agreement to acquire certain additional natural gas and midstream assets from subsidiaries of Anadarko Petroleum Corporation in the Atlantic Rim Project area, Washakie Basin, Wyoming.

Press Release - Callon Petroleum Company announced the completion of a scheduled redetermination under its $200 million revolving credit facility. After review of the company's mid-year reserves, the borrowing base was increased from $60 million to $80 million. The next redetermination of the borrowing base is scheduled for March 31, 2013.

Press Release - Carrizo Oil & Gas, Inc. announced the closing of the sale of the majority of its mineral lease position in the northern portion of the Utica Shale play to an unrelated third party for net cash proceeds of $43 million. Immediately preceding the property sale, Carrizo elected to exercise a mineral lease purchase option to increase its ownership from a 10% to a 50% undivided interest in the same properties from a subsidiary of its financial partner, Avista Capital Holdings, L.P.

Reuters - A consortium of three state-run Indian oil companies has been shortlisted as one of the three finalists for stakes in ConocoPhillips oil sands holdings in Canada, a source at one of the Indian bidders said. The bid from the group, which comprises of oil producers Oil and Natural Gas Corp and Oil India Ltd along with refiner and retailer Indian Oil Corp, is the first such attempt by Indian energy companies for assets in Canada.

Reuters - Marathon Oil Corp is selling nearly 100,000 acres of undeveloped oil and gas properties in the Eagle Ford basin in south Texas, an area that the U.S. oil and gas company views as a major source of production growth. Marathon is selling about 97,000 acres in Wilson, Karnes and Bee Counties, according to a marketing brochure from its adviser on the sale. The company has 325,000 acres in the Eagle Ford.

SunTrust Robinson Humphrey increased their rating of Penn Virginia Corporation to ‘Buy’ from ‘Neutral’ citing sizable share price upside despite potential dilution.

Press Release - SM Energy Company announced that its Board of Directors has approved a semi-annual cash dividend of $0.05 per share of common stock outstanding. The dividend will be paid on November 7, 2012, to stockholders of record as of the close of business on October 26, 2012.

CANADIAN E&PS

Press Release - Ivanhoe Energy Inc. announced that its wholly owned subsidiary, Sunwing Zitong Energy, has signed the definitive Sale and Purchase Agreement with Shell China Exploration and Production Co.

Reuters - Britain's largest oilfield is due to restart after a maintenance shutdown three to four days later than planned, a trade source said on Monday, in what could further delay shipments of the oil that sets the Brent benchmark. Nexen's Buzzard field is the largest of the North Sea fields that contribute to the Forties crude blend. Forties is the most important of the North Sea crudes underpinning the Brent crude contract.

OIL SERVICES

Press Release – Basic Energy Services Inc. received a subpoena issued by the SEC on October 4 and the company announced today that they believe the SEC is investigating if it violated federal securities laws concerning a June 2011 operating data press release.

Press Release - Petroleum Geo-Services ASA has exercised its options to order another two Ramform Titan-class vessels at Mitsubishi Heavy Industries Ltd. Two vessels were ordered in 2011. The two additional vessels will be vessel number three and four in the Ramform Titan Class. When completed, the four new builds will be a part of the 11 vessel fleet of Ramform icons. The first vessels in the series have a planned delivery 1st quarter 2013.

DRILLERS

Macquarie Equities Research has downgraded their rating of Hercules Offshore Inc. to ‘Neutral’ from ‘Outperform’ on valuation.

Press Release - Seadrill Partners LLC, a wholly-owned subsidiary of Seadrill Limited announced that it has commenced an initial public offering of 8,750,000 common units, representing limited liability company interests, pursuant to a registration statement on Form F-1 (including a prospectus) previously filed with the U.S. Securities and Exchange Commission.

Macquarie Research upgraded Transocean Ltd to ‘Outperform’ from ‘Neutral’ based valuation and on a risk-on thesis.

REFINERS

Press Release - Alon USA Energy, Inc. announced that it has engaged Credit Suisse Securities (USA) LLC and Goldman Sachs Lending Partners LLC to assist it with the arrangement of a secured term loan facility in an aggregate principal amount of up to $450 million.

Reuters - Valero Energy Corp said the crude unit was approaching planned rates at its 125,000-barrel-per-day Meraux, Louisiana, refinery. The unit was restarted last week after being shut in July following a fire.

Press Release - Valero Energy Corp began a planned maintenance at its 156,000 barrels-per-day (bpd) McKee refinery in Sunray, Texas, the company said in a filing with Texas pollution regulators. The work might result in emissions at the refinery from Oct. 15 to Oct. 24, the filing showed.

MLPS

MARKET COMMENTARY

Stocks rose, rebounding from last week's losses after Citigroup's earnings and retail sales sharply exceeded expectations.

TOP NEWS

Citigroup made more money from trading in the third quarter, and its lending profitability rose, surprising investors.

U.S. retail sales rose in September as Americans stepped up purchases of everything from cars to electronics, a sign that consumer spending is driving faster economic growth.

Press Release - Magellan Midstream Partners, L.P. has completed the previously announced two-for-one split of its limited partner units, which will begin trading on a post-split basis today.