WEDNESDAY, SEPTEMBER 12, 2012

SECTOR COMMENTARY

The energy space closed higher in choppy trading as investors looked ahead to the Federal Reserve’s two-day policy meeting. Energy stocks were led by refiners after the subsector reached a new high on widening crack spreads. Natural gas levered E&P companies were higher after a rise natural gas futures. Shares of Chesapeake Energy fell over 1 percent on the day after the natural-gas producer said it entered into multiple agreements to sell most of its Permian properties and substantially all of its midstream assets for about $6.9 billion in cash.

WTI crude oil slipped $0.16 or 0.16% to $97.01 in choppy trading on Wednesday as data showing an unexpected rebound in U.S. crude inventories pulled prices back after they received a lift from a German court ruling affirming the legality of the euro zone bailout fund. Brent pared gains after the EIA's weekly report showed crude oil inventories rose 1.99 million barrels last week in the United States, against expectations of a 2.6-million barrel draw due to Hurricane Isaac's impact on output.

Natural gas futures surged $0.071 or 2.37% to close at $3.063, in anticipation of a bullish weekly inventory report on Thursday, with the front contract setting a five-month high, despite moderating U.S. weather that should slow air conditioning use. Expectations are for a very light weekly inventory build in the government's storage report on Thursday. But with inventories still at record highs for this time of year and production flowing at or near an all-time peak, most traders remain skeptical of the upside, particularly with air conditioning needs starting to taper. In its 6 to 10 day and 11 to 15 day outlooks, private forecaster MDA EarthSat expects temperatures for most of the eastern two-thirds of the nation to average normal or below normal.

U.S. INTEGRATEDS

Reuters - The wall of a key pipe in the investigation of Chevron Corp's Richmond refinery fire last month had thinned to 20 percent of its original design thickness, the Chemical Safety Board said on Tuesday.

Press Release - Chevron Corp. announced that its subsidiary, Chevron U.S.A. Inc., has agreed to acquire 246,000 net leasehold acres in the Delaware Basin in New Mexico, a part of the Permian Basin, from Chesapeake Energy Corporation.

Reuters - ExxonMobil said nitrogen oxide had been released from a flare stack due to an equipment malfunction at its 238,600 barrel-per-day refinery in Joliet, Illinois.

(Late Tuesday) Reuters - ExxonMobil reported shutdown of a flexicoker unit after emissions due to a heat exchanger tube leak at its 560,640 barrel-per-day refinery in Baytown, Texas, it said in a filing with state pollution regulators.

INTERNATIONAL INTEGRATEDS

Reuters - Russian oil firm TNK-BP is planning to hold a $2 billion tender by the end of the year for the supply of steel pipes from overseas suppliers, Interfax quoted a company executive as saying on Wednesday.

Reuters - The Lisichansk refinery, controlled by Anglo-Russian oil producer TNK-BP, has attracted interest from a number of buyers, one of the company's major shareholders, German Khan, told reporters on Wednesday.

Reuters - Russia's top natural gas producer Gazprom is looking to increase its stake in German gas trader Wingas as it seeks to expand its presence in marketing and storage, Interfax news agency reported, citing gas market sources.

Reuters - Poland wants its natural gas monopoly PGNiG to double production to more than 8 billion cubic metres (bcm) a year by 2019, when it is due to start renegotiating its long-term contract with Russia's Gazprom, the treasury minister said on Wednesday.

Reuters - Brazil's state-led oil company Petrobras will have a civil lawsuit over its water treatment policies on offshore oil platforms judged in a Campos regional court rather than in Rio de Janeiro, prosecutors said in a statement.

US E&PS

Reuters - Apache Corp. and its partners in Canada's Kitimat liquefied natural gas (LNG) export project are looking to sell about 20 percent of their stake to large investors, a company executive said Wednesday.

Press Release - Callon Petroleum Company provided an update regarding the impact of hurricane Isaac on the Company's Gulf of Mexico operations. Following site visits, Callon has determined that damage to its producing facilities in the Gulf of Mexico was minimal. The Company's shallow water production has been restored to pre-hurricane levels and deepwater production is in the final stages of returning to normal operations. The Company expects its total net GoM production to be restored to a pre-hurricane rate of approximately 2,850 barrels of oil equivalent per day in the next few days.

Press Release - Chevron Corp. announced that its subsidiary, Chevron U.S.A. Inc., has agreed to acquire 246,000 net leasehold acres in the Delaware Basin in New Mexico, a part of the Permian Basin, from Chesapeake Energy Corporation.

Press Release - Forest Oil Corporation announced that the Company’s Board of Directors has completed its executive search process and named Patrick R. McDonald as President and Chief Executive Officer, effective immediately. Mr. McDonald has served as Interim Chief Executive Officer since June 21, 2012.

Press Release - Forest Oil Corporation announced updated second half 2012 net sales volumes and capital expenditures guidance and provided its current hedge position. For the second half of 2012, Forest expects net sales volumes to average approximately 330 - 340 MMcfe/d (66% natural gas and 34% oil and natural gas liquids). This represents an increase of 3% compared to the previous guidance of 320 - 330 MMcfe/d (67% natural gas and 33% oil and natural gas liquids) provided on July 9, 2012.

Press Release - Halcon Resources Corporation announced the commencement of an underwritten secondary offering of 35,000,000 shares of its common stock offered by EnCap Energy Capital Fund VIII L.P. The underwriters will also have a 30-day option to purchase up to 5,250,000 additional shares (100% secondary) of common stock from the Selling Shareholder. Halcon will not sell any shares or receive any proceeds from the offering.

CANADIAN E&PS

Press Release - Petrobank Energy and Resources Ltd. announced that it has renewed our normal course issuer bid (the "NCIB") and have entered into a pre-defined plan with a designated broker to allow for the repurchase of our common shares.

RBC downgraded Petrominerales Ltd. to ‘Sector Perform’ from ‘Outperform.’

Press Release - Petrominerales Ltd. provided an operational update highlighted by a new oil discovery on the corcel block. The company said production averaged 25,235 bopd during August, before the addition of Mambo-1 discovery

OIL SERVICES

Global Hunter Securities initiated coverage of McDermott International, Inc. with a ‘Buy’ rating.

DRILLERS

Macquarie downgraded Nabors Industries Ltd. to ‘Neutral’ from ‘Outperform.’

Reuters - Offshore oil driller Seadrill plans to list its Seabras unit in Brazil next summer after several delays, Chief Executive Alf Thorkildsen told reporters on the sidelines of an industry conference on Wednesday.

Reuters - Transocean Ltd., the world's largest offshore rig contractor, said on Wednesday its $1.05 billion sale of 38 rigs would be modestly dilutive to its 2013 earnings. The company said 2013 revenue would decline by $1.15 billion to $1.2 billion as a result of the sale, while costs would be reduced by $750 million to $825 million. Analysts have been looking for 2013 revenue of about $11 billion, according to Thomson Reuters I/B/E/S.

REFINERS

Reuters - Marathon Petroleum Corp. reported an equipment malfunction in a coker unit at its 490,000 barrel-per-day (bpd) refinery in Garyville, Louisiana, according to a filing with the U.S. National Response Center on Wednesday.

Reuters - Phillips 66 reported a benzene release from a thermal oxidizer at its 247,000-barrel-per-day Sweeny, Texas refinery, according to a filing with national pollution regulators.

Reuters - Tesoro Corp. said operations were running normally at its 166,000-barrels-per-day Golden Eagle refinery in Martinez, California after an acid leak this week.

MLPS

Bank of America/Merrill Lynch downgraded Holly Energy Partners L.P. to ‘Underperform’ from ‘Neutral.’

MARKET COMMENTARY

Wall Street closed little changed, erasing early gains as investors turned cautious ahead of a Federal Reserve decision on another round of monetary stimulus to boost the economy.

TOP NEWS

Germany's Constitutional Court gave a green light for the country to ratify Europe's new bailout fund, boosting hopes that the single currency bloc is finally putting in place the tools to resolve its three-year old debt crisis.

U.S. wholesale inventories in July rose by the most in five months, beating forecasts and suggesting economic growth started the third quarter on slightly better footing than expected.

Chesapeake Energy’s $6.9 billion deal to sell gas fields and pipelines will help stabilize the troubled company for the rest of the year and give it time to figure out how it will fund 2013 operations.