TUESDAY, SEPTEMBER 25, 2012

SECTOR COMMENTARY

Energy stocks closed lower, accelerating losses in the final hour of trading following reports that Spanish protesters clashed with police in Madrid as the government prepares a new round of unpopular austerity measures. Stocks opened higher and meandered most of the day ahead of the reports. The drillers were the worst performing group, led by Nabors Industries, which fell over 5% on a downgrade from Global Hunter Securities.

In other sector news, oil services stocks, especially smaller caps were hit hard after Key Energy Services warned that its third quarter would miss expectations due to a continuing decline in U.S. activity. The stock fell over 12% on the day.

WTI crude fell $0.56 or 0.61% to $91.37 as investors worried that demand for petroleum would be hit by the economic problems that led the Fed and central banks in Japan and Europe to act to bolster the global economy. "The oil market remains caught between supply risks and the prospect of fresh liquidity from the central banks on the one hand, and plentiful supply and economic concerns on the other," Commerzbank oil analyst Carsten Fritsch said. However, Brent crude rose in choppy trading as rising tensions over Iran reinforced the geopolitical fear premium.

Natural gas futures rose $0.087 or 3.07% to $2.924, reversing yesterday's weakness on technical buying. The gains came despite the National Weather Service's six-to-10 day outlook that called for normal or below-normal temperatures for the eastern half of the nation.

U.S. INTEGRATEDS

(Late Monday) Reuters - Chevron Corp needs a few more weeks to assess damage at its plant in Richmond, California, and does not yet know how long it will need to repair its crude unit after an early August fire damaged the state's second-biggest refinery, its general manager said on Monday.

(Late Monday) Reuters - Exxon Mobil Corp said its 502,500 barrel-per-day refinery in Baton Rouge, Louisiana, has returned to normal operations.

INTERNATIONAL INTEGRATEDS

Reuters - As part of Iraq's drive to attract investment to develop its energy sector, the cabinet has approved three oil and gas contracts awarded to foreign firms in a May auction, the government spokesman said. Cabinet approved an initial gas exploration contract with Pakistan Petroleum for gas block 8 and another deal with a group led by Lukoil to develop Iraq's oil block 10, spokesman Ali al-Dabbagh said

Reuters - France's highest court upheld a conviction against oil giant Total on Tuesday over an 1999 oil spill, in a blow to the company which had hoped it would be absolved of blame for one of France's worst environmental disasters.

CANADIAN INTEGRATEDS

Reuters - Husky Energy Inc declared on Monday it had reached an impasse with the United Steelworkers (USW) union in a four-month strike at the company's 155,000 barrel-per-day Lima, Ohio, refinery.

U.S. E&PS

JP Morgan increased its rating on Approach Resources to ‘Overweight’ from ‘Neutral’ based on catalysts and valuation.

(Late Monday) Press Release - Chesapeake Energy Corporation today announced that its Board of Directors has declared a $0.0875 per share quarterly dividend that will be paid on October 31, 2012 to common shareholders of record on October 15, 2012. Chesapeake has approximately 665 million common shares outstanding. In addition, Chesapeake’s Board has declared dividends on its outstanding convertible preferred stock issues, as stated below.

(Late Monday) Reuters - A trio of state-run Indian oil companies has bid $5 billion for stakes in Canadian oil sands holdings owned by ConocoPhillips, two sources said, as the world's No. 4 oil importer continues to search for supplies to power its near $2 trillion economy.

Reuters - India's Oil and Natural Gas Corp has not yet made a bid for stakes in Canadian oil sands assets owned by ConocoPhillips, the head of the state-run oil explorer said on Tuesday.

Reuters - McMoRan Exploration Co to sell package of Gulf of Mexico shelf oil and gas properties in Eugene Island Area to Arena energy. Says deal for cash consideration of $36.8 million and the assumption of related abandonment obligations.

CANADIAN E&PS

Reuters - Altagas Ltd announces $350 million medium-term note offering. Says proceeds resulting from the issuance of the notes will be used by Altagas to reduce bank indebtedness.

Press Release – Canacol Energy Ltd. is pleased to provide the following update with respect to its ongoing exploration programs in Colombia for the remainder of calendar 2012. The Corporation plans to drill a total of 9 exploration wells targeting conventional light and heavy oil, as well as non-conventional light oil from fractured shales during the remainder of calendar 2012.

CIBC cut its rating on Pacific Rubiales Energy to ‘Sector Performer’ rating.

BMO lowered its rating on Penn West Exploration to ‘Market Perform’ from ‘Outperform’.

(Late Monday) Press Release - Southern Pacific Reports is pleased to announce its financial and operational results for the year ended June 30, 2012. Cash Flow of $46.9 Million for the year. Completed construction of Phase 1 of the STP-McKay Thermal Project. Increased proven and probable reserves ("2P") by 38% to 249 million barrels. Announced a 6,000 barrel per day ("bbl/day") expansion plan for its STP Phase 1.

OIL SERVICES

(Late Monday) Press Release - Key Energy Services, Inc. expects third quarter 2012 consolidated results from continuing operations to be below prior expectations. Compared to the previous quarter, consolidated revenue is expected to decline 4% to 5%, and operating income margins are expected to decline 250 to 350 basis points.

DRILLERS

Global Hunter Securities lowered its rating on Nabors Industries Ltd to ‘Neutral’ from ‘Accumulate’.

REFINERS

Reuters - Sunoco Inc entered into MOU with plaintiffs to settle putative class action filed in court challenging the merger with ETP. Under terms of the proposed settlement, Co. agreed to make certain supplemental disclosures related to proposed merger. Agreed to provide limited outplacement assistance services to Philadelphia-area employees adversely affected by merger.

MLPS

(Late Monday) Press Release - Atlas Pipeline Partners, L.P. announced that it intends to offer $300 million of Senior Notes due 2020 in a private placement, subject to market conditions. The Partnership intends to use the net proceeds from this offering to repay a portion of its outstanding indebtedness under its revolving credit facility.

Press Release - Cheniere Energy Partners, L.P. announced today the closing of its previously announced underwritten public offering of common units representing limited partner interests of Cheniere Partners. The previously announced 8,000,000 common units were sold to the public at a price of $25.07 per unit

(Late Monday) Press Release - Enterprise Products Partners L.P. announced the commencement of a public offering of 8,000,000 common units representing limited partner interests in the partnership.

Press Release - Enterprise Products Partners L.P. today announced that it has priced a public offering of 8,000,000 common units representing limited partner interests in the partnership at a public offering price of $53.07 per common unit.

(Late Monday) Press Release - ONEOK Partners, L.P. announced that its 2013 net income is expected to increase 10 percent compared with the partnership's current 2012 earnings guidance that was updated July 31, 2012. ONEOK Partners' 2013 net income is expected to be in the range of $935 million to $1.015 billion compared with its current 2012 earnings guidance range of $860 million to $910 million.

MARKET COMMENTARY

Stocks fell, pulled lower by declines in heavy equipment maker Caterpillar after it cut its profit outlook, the latest high-profile company to signal growth will fall short of expectations.

TOP NEWS

U.S. home prices rose for a sixth straight month in July in the latest sign of a sustainable housing market recovery, while a jump in consumer confidence this month offered a harbinger that Americans are ready to loosen their spending.