Monday, September 10, 2012

SECTOR COMMENTARY

The energy sector ended a volatile day of trading mostly lower on relatively light volume, selling off into the close as investors were reluctant to continue to bid up equities at multi-year highs following a slew of weak economic readings overseas and after Friday’s market-wide rally. Refiners continued to buck the trend and posted a slight gain on the day due to another rise in crack spreads while services and drillers fared best throughout the trading day with investors continuing to take on riskier positions in the higher-beta names within the space while bellwether names lagged.

WTI crude nudged out a slight gain on the day, ending higher by $0.12 or 0.12%, at $96.54 while Brent crude outpaced its U.S. counterpart with an approximate 0.30% jump, both in thin, choppy trading. Supportive expectations that the U.S. Federal Reserve would act to stimulate the economy countered pressure from weak Chinese data that raised concerns about future demand for oil.

Natural gas futures rallied $0.130 or 4.85% at $2.812, gaining for the first time in four sessions, driven by technical buying after last week's slide and expectations for another light weekly inventory build on Thursday. Technical traders agreed the gas market became oversold last week and was due for a bounce after closing lower in three previous sessions and losing 4% for the week. Traders also said Gulf of Mexico production shut-ins last week from Hurricane Isaac of more than 11 billion cubic feet could lead to another light, supportive weekly inventory build. Despite today's gains, many traders remain skeptical of the upside with inventories still at record highs for this time of year and production flowing at or near an all-time peak.

INTERNATIONAL INTEGRATEDS

Press Release - BP announced it has agreed to sell its interests in a number of oil and gas fields in the deepwater US Gulf of Mexico to Plains Exploration and Production Company for a total of $5.55 billion, as part of a previously-announced plan to divest the assets and position its Gulf portfolio for long-term growth.

Reuters - Russia's top gas producer Gazprom will repay around 1 billion euros ($1.28 billion) to its European clients in the April through December period of this year as part of an agreement to cut gas prices, a Gazprom official said. Gazprom had agreed to tweak long-term deals with key European customers who claimed that the Russian gas prices were too high.

Reuters - Russia's state gas pipeline operator, Gazprom, said it was suspending purchases of gas from so-called "independent" non-Gazprom producers in Russia. "The reason is unstable demand for gas on the domestic market at the current time," Gazprom's press office said in a statement.

Press Release - Royal Dutch Shell plc announced today it has agreed to sell its 50% working interest in the Holstein Field, comprised of Green Canyon Blocks 644, 645 and 688 in the Gulf of Mexico, to Plains Exploration & Production for approximately $560 million, subject to closing.

US E&Ps

Stifel Nicolaus upgraded Cabot Oil & Gas to ‘Buy’ from ‘Hold’ believing that investors should be positioned in the name ahead of its second half earnings release, as well as Stifel’s view that gas could be making a structural bottom this fall.

Reuters - Plains Exploration & Production Co said it entered into an agreement to buy BP PLC's interests in certain deepwater Gulf of Mexico oil and gas properties for $5.55 billion. The properties were producing an estimated 59,500 barrels of oil equivalent net per day at the end of July.

Press Release - Royal Dutch Shell plc announced it has agreed to sell its 50% working interest in the Holstein Field, comprised of Green Canyon Blocks 644, 645 and 688 in the Gulf of Mexico, to Plains Exploration & Production for approximately $560 million, subject to closing.

Canadian E&Ps

Press Release - AltaGas Ltd. announced that the Board of Directors has approved a dividend increase of 4.3 percent or $0.06 per common share per year. The annual dividend increased to $1.44 per common share ($0.12 per month) from $1.38 ($0.115 per month).

Press Release - Talisman Energy Inc. announced that John A. Manzoni, President and Chief Executive Officer, has agreed to step down, effective immediately. Hal Kvisle, former President and Chief Executive Officer of TransCanada Corporation and current director of Talisman Energy, is appointed President and Chief Executive Officer.

Drillers

HSBC cut their rating of Seadrill to ‘Neutral’ from ‘Overweight’ citing valuation.

Reuters - Oslo-listed oil driller Seadrill intends to issue $1.0 billion in unsecured notes due 2017 in a private offering, the firm said.

Press Release – Transocean Ltd. is in discussions with the U.S. Justice Department to pay $1.5 billion to resolve civil and criminal claims from the 2010 Deepwater Horizon oil spill in the Gulf of Mexico, the Swiss-based company said.

Reuters - Transocean Ltd., owner of the world's largest offshore drilling fleet, said it will sell 38 shallow-water drilling rigs to Shelf Drilling International Holdings Ltd for about $855 million in cash. The sale price includes $195 million in seller financing, bringing the total deal value to about $1.05 billion. Seller financing will be in the form of preference shares issued by an affiliate of Shelf Drilling, the company said.

(Sunday) Press Release - Transocean Ltd. announced that Esa Ikäheimonen will succeed Gregory L. Cauthen as Executive Vice President and Chief Financial Officer on November 15, 2012. Based in Geneva, Mr. Ikäheimonen will report to Steven L. Newman, President and CEO.

Refiners

(Saturday) Press Release - Sunoco, Inc. and The Carlyle Group, L.P. have completed the formation of Philadelphia Energy Solutions, a joint venture that will operate the Philadelphia Refinery. The refinery processes 330,000 barrels of crude oil per day into various refined products.

mlps

Dahlman Rose initiated coverage of PetroLogistics LP with a ‘Buy’ rating and a $16 price target. The analyst said it expects the propane/propylene spread to widen as a result of supply compression and improving demand.

market Commentary

Wall Street fell as investors locked in gains on a recent rally ahead of possible policy action from the Federal Reserve later this week, while weakness in Intel shares weighed on the Nasdaq.

TOP NEWS

American International Group shares fell after the U.S. Treasury Department said it will sell $18 billion of the insurance company's shares.

Weak Chinese trade data underlined the likelihood of more Beijing-backed spending to deal with the damage done to the domestic economy by firms cutting production, inventories and imports in the face of anemic global demand.