TUESDAY, OCTOBER 23, 2012

SECTOR COMMENTARY

Energy and materials stocks led the broader markets sharply lower with all key S&P sectors in the red as commodities plummeted after some disappointing earnings results and amid worries over Spain's economy. Morgan Stanley downgraded the energy sector to ‘Underweight’ from ‘Market weight’ and all oil and gas sub-industries experienced steep losses.

Refiners were slight underperformers, weighed down as Deutsche Bank reduced the group to a ‘Neutral’ rating. Shares of Helix Energy plummeted more than 7% after reporting earnings that were adversely impacted by hurricane issues and lowered its annual production guidance in its E&P division.

WTI crude oil sank by $1.98 or 2.23% to $86.67, falling for a fourth consecutive session after TransCanada Corp said yesterday that it had restarted its major Keystone pipeline to the central United States from Canada following a five-day outage and ahead of expectations that tomorrow’s EIA inventory report will show a build in supplies as imports recovered. Meanwhile, Brent futures slumped for a sixth straight session, hitting $107.31 intraday, and the lowest level since Sept. 20 and below the 100-day moving average of $107.42. The market overlooked the delay to the restart in Buzzard production in the North Sea and the declaration by Shell of force majeure on Bonny and Forcados exports.

Natural gas futures rallied by $0.083 or 2.40% to $3.535 reversing yesterday's nearly 5% decline, underpinned by technical buying and by colder Northeast and Midwest weather forecasts for later this week and next that should stir more heating demand.

U.S. INTEGRATEDS

Reuters - Exxon Mobil Corp said it expects minimal impact to production at its 238,600 barrel-per-day refinery in Joliet, Illinois, due to shutdown of a process unit.

Reuters - Exxon Mobil Corp said there is leak of hydrogen sulfide at its 192,500 barrel-per-day joint-venture refinery in Chalmette, Louisiana, as a result of a loss of cooling water due to failure of a pump.

INTERNATIONAL INTEGRATEDS

Cheuvreux lowered its rating on Repsol SA to ‘Outperform’ from ‘Selected List.’

Reuters - Rosneft which has announced a $55 billion deal to buy BP and its partners out of rival producer TNK-BP, said Rosneft would sustain dividend payouts at 25% of net profits after consolidation.

Reuters - Russia's anti-monopoly regulator warned state-controlled oil producer Rosneft on Tuesday that the $55 billion deal to buy rival producer TNK-BP would probably be its last big acquisition.

Reuters - Russia's government has no objections to Rosneft's deal to buy TNK-BP on anti-trust grounds, Interfax reported the country's economy Minister Andrei Belousov saying on Tuesday.

Reuters – Royal Dutch Shell cannot yet say when a force majeure on exports of Nigeria's Bonny and Forcados crude that has cut about 20 percent of its exports will be lifted, after a stoppage caused by theft and flooding in the Niger Delta, the company said on Tuesday.

Reuters - Total expects to take a final investment decision next year on the Yamal gas project in Russia, after initially expecting a decision before the end of this year, the French oil group said on Tuesday.

Reuters - Total is not among potential bidders for Repsol's liquefied natural gas (LNG) assets, a senior Total executive said on Tuesday.

Reuters - French oil major Total said on Tuesday that it holds 40 percent of the onshore OML 58 block in Nigeria..

CANADIAN INTEGRATEDS

(Late Monday) Press Release - Suncor Energy provides update on Firebag operations. Suncor's Firebag oil sands facility has reached full design capacity of nearly 120,000 barrels per day (bbls/day). First oil at stage 3 of the facility was brought online in August of last year and with the application of infill well technology, the pace of production ramp-up at Firebag stage 3 exceeded previous expectations. Production at the Firebag complex averaged 113,000 bbls/day in the third quarter of 2012, with exit rates of approximately 120,000 bbls/day. Quarterly production was up over 100% from last year's third quarter production of approximately 55,000 bbls/day.

U.S. E&PS

(Late Monday) Press Release - Chesapeake Energy Corp announced today it has completed the sale of its previously announced asset packages in the Permian Basin. The Permian Basin assets sold produced approximately 21,000 barrels of liquids and 90 million cubic feet of natural gas per day during the 2012 second quarter, or approximately 5.7% of Chesapeake’s production during the quarter.

(Late Monday) Reuters - Chesapeake Energy Corp has paid off more than half of a pricey $4 billion bridge loan after receiving $2.8 billion in cash from the sale of some of its oil and gas properties in the Permian Basin.

Reuters - Danish shipping group A.P. Moller-Maersk said on Tuesday its Maersk Drilling unit had signed a contract from ConocoPhillips and Marathon Oil Company worth $694 million for one of its new build drillships.

(Late Monday) Press Release - Endeavour International Corp announced that it has completed the redemption, in full, of the remaining $25.1 million of outstanding 12% Senior Subordinated Notes Due 2014.

Press Release - Plains Exploration & Production Company announced today that it intends to offer, subject to market and other conditions, $2.25 billion of senior notes issued in an underwritten public offering.

(Late Monday) Press Release - Stone Energy Corporation announced that it intends, subject to market conditions, to publicly offer $300 million aggregate principal amount of Senior Notes due 2022. Stone intends to use the net proceeds from the offering for general corporate purposes, which may include repayment of its existing 6¾% Senior Subordinated Notes due 2014.

(Late Monday) Reuters - Whiting Petroleum Corp on October 19, co, unit Whiting Oil and Gas Corp entered into the third amendment to credit agreement. Says amendment amends credit agreement to increase aggregate commitments of lenders to $2.0 billion-SEC filing. Says amendment also amends credit agreement to increase the borrowing base from $1.5 billion to $2.5 billion

OIL SERVICES

• HLX reported 3Q EPS of $0.35 versus Thomson Reuters I/B/E/S estimate of $0.39.

(Late Monday) Societe Generale lowered their rating on Baker Hughes to 'Hold' from 'Buy.'

(Late Monday) Press Release - Helix Energy Solutions Group, Inc. reported net income of $14.9 million, or $0.14 per diluted share, for the third quarter of 2012 compared with net income of $46.0 million, or $0.43 per diluted share, for the same period in 2011, and net income of $44.6 million, or $0.42 per diluted share, in the second quarter of 2012.

MLPS

UBS downgraded Access Midstream Partners LP to ‘Neutral’ from ‘Buy’ on valuations.

(Late Monday) Press Release - Cheniere Energy Partners, L.P. today declared a cash distribution per common unit of $0.425 ($1.70 annualized) to unitholders of record as of November 1, 2012, and the related distribution to its general partner. All of these distributions are payable on November 14, 2012.

(Late Monday) Press Release - The Crosstex Energy companies today announced the declaration of the quarterly distribution for Crosstex Energy, L.P. and the quarterly dividend for Crosstex Energy, Inc. from the third quarter of 2012.

(Late Monday) Reuters - Targa Resources Partners LP prices $400 million offering of senior notes. Notes were priced at 99.50 percent of the principal amount to yield 5.313 percent.

(Late Monday) Reuters - TransCanada Corp said on Monday it had restarted its 590,000 barrel a day Keystone oil pipeline to the central United States from Canada after inspecting the line for a potential defect.

(Late Monday) Janney Capital initiated coverage of Western Gas Partners, LP with a ‘BUY.’

MARKET COMMENTARY

Stocks fell, driving the Dow industrials to its biggest drop since June 21, as weak results from index members DuPont and United Technologies showed profit growth is slowing.