FRIDAY, SEPTEMBER 14, 2012

SECTOR COMMENTARY

Oil and gas stocks closed higher, helped by broader market gains as well as increases in both WTI and Brent crude. The oil services led the way higher, as a note from Wells Fargo highlighting the positive impact on a few oil service companies due to Chesapeake Energy’s sale of its Permian properties. Wells Fargo believes that this will result in a 7-8% increase in rig count, which would directly benefit companies in the space which have exposure to the region. The refiners and the integrateds were relative laggards on the day.

WTI crude oil prices closed higher by $0.69 or 0.70% at $99.00. Earlier in the session, the contract hit a high of $100.42, its first time over $100 since May 4 when it touched $102.72. Brent was up a seventh straight session as the dollar fell broadly, dropping to a four-month low versus the euro, after the Fed's Thursday announcement of a third bond-buying program.

Money managers raised their net long U.S. crude futures and options positions in the week to September 11, the U.S. Commodity Futures Trading Commission said on Friday. The speculator group raise its combined futures and options position in New York and London by 32,486 contracts to 225,298 during the period.

On NYMEX, the front-month contract fell $0.094 or 3.10%, to settle at $2.943, pressured by milder weather and lighter weekend industrial demand from shuttered businesses. This is a continuation of yesterday's losses despite the fact that the weekly inventory report showed a smaller-than-expected injection. Baker Hughes on Friday said the number of rigs drilling for natural gas in the United States slid by four to a 13-year low of 448. The count was down for the 15th time in 17 weeks. The nearly steady decline in gas-directed drilling over the last 10 months has fed expectations that producers were getting serious about stemming the flood of record supplies, however, there is little evidence that gas output is slowing.

U.S. INTEGRATEDS

Reuters – Chevron Corp's output in Brazil will be less than half the production levels it had before a November oil spill if the courts allow the company to restart operations, Magda Chambriard, head of Brazil's petroleum regulator ANP.

Reuters - Argentine energy company YPF and Chevron Corp signed an accord to consider jointly exploring for shale oil and natural gas in the South American country's Vaca Muerta field.

Reuters - Exxon Mobil Corp's 149,500 barrel-per-day (bpd) Los Angeles-area refinery in Torrance, California, returned to normal operations after a Thursday malfunction, according to a company spokeswoman.

Reuters - Exxon Mobil Corp reported a flaring event at its 344,500-barrel-per-day Beaumont, Texas, refinery, according to a message on a community information line.

(Late Thursday) Reuters - Exxon Mobil Corp reported flaring due to an upset in a fractionation tower on the crude light ends unit at its Baytown facility in Texas, according to a filing with state pollution regulators.

(Late Thursday) Reuters - Exxon Mobil Corp reported unplanned flaring due to a breakdown at its 149,500 barrels-per-day refinery in Torrance, California, in a filing with state regulators.

INTERNATIONAL INTEGRATEDS

(Late Thursday) Reuters - Petrobras said that production has begun at its Chinook oil and gas field in the deepwater Gulf of Mexico.

Reuters - Royal Dutch Shell said it had cancelled its storage contract with Odfjell's Rotterdam oil terminal, in the latest sign of fallout from a seven-week closure of parts of the facility over safety concerns.

CANADIAN INTEGRATEDS

Press Release - Cenovus Energy Inc. has been included in the Dow Jones Sustainability World Index for the first time. Cenovus is the only Canadian integrated oil and gas company to make the World Index this year and one of just 11 Canadian corporations overall. The Dow Jones Sustainability Indexes (DJSI) recognizes companies around the world for leadership in corporate responsibility. Cenovus was also named to the DJSI North America Index for the third year in a row.

CANADIAN E&PS

Reuters - The Canadian government's decision on whether to allow a $15.1 billion takeover of Canadian oil producer Nexen Inc by China's CNOOC Ltd is important for the future of the country, Finance Minister Jim Flaherty said.

(Late Thursday) Fraser Mackenzie initiated coverage on Petrobakken Energy with a ‘Strong Buy’ rating.

(Late Thursday) Reuters - Talisman Energy Inc is giving up its eight-year-long effort to produce oil in Peru, the company said, as it continues to shed assets in a bid to boost its share price.

DRILLERS

Guggenheim Partners downgraded Transocean Ltd. To ‘Neutral’ from ‘Buy’ as the drivers of their discount to NAV shift from rig efficiency/downtime and Macondo liability overhangs to incremental capital budgeting and divestiture risk.

REFINERS

Reuters - Alon USA Energy reported emissions from gasoline-making fluid catalytic cracking unit (FCCU) during a maintenance activity at its 67,000 barrel-per-day (bpd) Big Spring, Texas, refinery, according to a filing with state pollution regulators.

Wells Fargo upgraded HollyFrontier to ‘Outperform’ from ‘Market Perform’ based on valuation.

(Late Thursday) Press Release - Tesoro Corporation announced the pricing of its $450 million 4 1/4% Senior Notes due 2017 and $475 million 5 3/8% Senior Notes due 2022 (together, the "Notes Offering").

Reuters - Valero Energy Corp said there was no material impact to production from a sulfur recovery unit (SRU) upset at its 185,000-barrel-per-day St. Charles refinery in Norco, Louisiana.

Reuters - Valero Energy Corp reported that the tailgas incinerator on the sulfur recovery unit (SRU) was not functioning at its 185,000 barrel-per-day (bpd) St. Charles refinery in Norco, Louisiana.

MLPS

Press Release - The Crosstex Energy companies, Crosstex Energy, L.P. and Crosstex Energy, Inc., announced that the Partnership has completed its funding for its previously announced strategic growth initiatives – Phase I of the Cajun-Sibon natural gas liquids pipeline expansion, Phase II of the Riverside crude project and its Ohio River Valley business expansion. Exchange Commission.

Reuters - Trunkline, a unit of Energy Transfer Partners rejected end user claims that its planned conversion of a natural gas pipeline to carry crude oil would lead to supply shortages, according to a filing made with federal regulators.

Reuters - Magellan Midstream Partners LP opened a new biodiesel storage and blending system at its Des Moines, Iowa, terminal, as refiners and blenders work to meet federally mandated levels of biomass fuel.

(Late Thursday) Wunderlich Securities dropped coverage on Spectra Energy Partners.

Reuters - Sunoco Inc reported the shutdown of the cumene unit 1733 for maintenance at the Girard point section of its 335,000-barrel-per-day refinery in Philadelphia on Wednesday, Philadelphia pollution regulators said.

MARKET COMMENTARY

Stocks rose for a fourth straight session to close out the week at nearly five-year highs after the Federal Reserve took bold action to spur the economy, a move that could keep equities buoyed in the coming months.

TOP NEWS

A jump in the cost of gasoline pushed U.S. consumer prices up in August at the fastest pace in more than three years, squeezing spending on other items and threatening to slow economic growth.