WEDNESDAY, SEPTEMBER 26, 2012

SECTOR COMMENTARY

Oil and gas stocks finished the day lower, leading the S&P 500 to its fifth-straight decline, as investors remained on edge over the euro zone's ongoing financial issues. Concerns over Spain and Greece intensified early in the trading day, as Greek trade unions embarked on a general strike over austerity measures.

WTI crude oil fell $1.39 or 1.52% to $89.98 and Brent oil fell below $110 a barrel as the euro zone debt crisis escalated, highlighted by a continued slowdown in Spain's economy and clashes between anti-austerity demonstrators and police in Athens and Madrid. The euro hit a two-week low against the dollar and the dollar index strengthened, adding to pressure on dollar-denominated commodities. Developments in Europe overshadowed any bullish sentiment generated by government data showing U.S. crude inventories fell 2.45 million barrels last week, against analyst expectations that they would be higher. U.S. RBOB gasoline futures pushed back above $3 a gallon during Wednesday's session, even as the rest of the oil complex stumbled. Gasoline got a lift from a report of an explosion at Irving Oil's 300,000 barrel-per-day refinery in New Brunswick, Canada. Seasonal maintenance at refineries on both sides of the Atlantic ahead of Northern Hemisphere winter fuel demand added support to futures prices.

Natural gas futures rallied to close at $3.033 up $0.099 or 3.39% for a second straight day, with technical buying and forecasts for cooler weather next month lifting the expiring October contract. Extended forecasts show cooler weather slipping into the Midwest and possibly the East in early or mid October. But with storage and production still running at or near record highs, many traders remained skeptical of the upside for prices despite some book squaring or technical buying before October went off the board. U.S. spot natural gas prices rose across the country, most for a third straight session, as the high number of nuclear power plants offline for maintenance boosted near-term demand, and stronger gas futures added to upside momentum.

U.S. INTEGRATEDS

Reuters - Chevron Corp. said its unit would explore for oil in two deepwater blocks located offshore Sierra Leone. Oil exploration has been booming in West Africa but it is still unclear whether Sierra Leone, still recovering from a war that ended in 2002, has commercial quantities.

INTERNATIONAL INTEGRATEDS

Reuters - The billionaire quartet that owns half of Anglo-Russian oil firm TNK-BP is interested in buying out BP's 50 percent stake, and will make a binding all-cash offer by mid-October, a source familiar with the matter said on Wednesday.

(Late Tuesday) Reuters - Petrobras unionized workers approved a 24-hour strike against the company's Brazilian operations on Wednesday over wages, the country's National Oilworkers' Federation (FUP) said in a statement on Tuesday.

(Late Tuesday) Reuters - Brazil's state-led oil company Petrobras said it offered a record 91.4 million cubic meters (3.2 billion cubic feet) of natural gas to the market on Tuesday, beating its previous record of 35.9 million cubic meters from Nov. 12, 2010.

Reuters - Iraq said on Wednesday that Royal Dutch Shell has denied starting talks with Iraqi Kurdistan to sign energy deals with the semi-autonomous region.

Reuters - Royal Dutch Shell said it was restarting an unspecified unit at the upgrader facility of its 100,000-barrel-per-day Scotford refinery near Edmonton, Alberta, a notice on a community information line showed on Wednesday.

Reuters - Nigeria's leading oil producer Royal Dutch Shell thinks the tax terms in a landmark oil bill are so uncompetitive they risk rendering offshore oil and gas projects unviable, the firm's managing director and industry sources said.

Nordea downgraded Statoil to ‘Sell’ from ‘Neutral.’

Reuters - Energy companies should not drill for crude oil in Arctic waters because the environmental risks are too high, Total Chief Executive Officer Christophe de Margerie said in the Financial Times on Wednesday.

U.S. E&PS

Stifel Nicolaus downgraded Chesapeake Energy to ‘Hold’ from ‘Buy.’

Stifel Nicolaus downgraded EPL Oil & Gas, Inc. ‘Hold’ from ‘Buy.’

Capital One Southcoast initiated EPL Oil & Gas, Inc. with an ‘Add’ rating.

Press Release - Magnum Hunter Resources Corporation provided an update today on its current production in the Appalachia region. As previously reported by the Company, the Company's production was significantly impacted in late June and early July due to a severe thunderstorm in the area that knocked out electric service. In early August, full power was restored to the region allowing the Company to begin bringing its production in the region back online.

Press Release - Williams announced that the company has signed a new long-term gas processing agreement with a producer in the Canadian oil sands. Under the new long-term agreement, Williams will extract, transport, fractionate, own and market the natural gas liquids (NGLs) and olefins recovered from the offgas at the oil sands producer's upgrader near Fort McMurray, Alberta. Under the agreement, the NGL/olefins recovered are expected to be approximately 12,000 barrels per day (bpd) by mid-2015 and growing to approximately 15,000 bpd by 2018.

CANADIAN E&PS

Reuters - Talisman Energy Inc. will have new crude oil and condensate production coming online in Vietnam and Papua New Guinea in the next two years to meet growing demand in Asia, a company official said on Wednesday.

OIL SERVICES

Johnson Rice initiated Basic Energy Services, Inc. with an ‘Overweight’ rating.

(Late Tuesday) Press Release - McDermott International, Inc. announced that William H. Schumann, III has been appointed to its Board of Directors, effective September 24, 2012. Mr. Schumann will also serve on the Company's Audit and Governance Committees.

(Late Tuesday) Reuters - Oilfield services company Weatherford International Ltd has been given more time to work out tax structure problems that have already led to more than $800 million in additional expenses spread over the past five years.

DRILLERS

Johnson Rice initiated RPC, Inc. with an ‘Equal-Weight’ rating.

Goldman Sachs upgraded Transocean Ltd. to ‘Neutral’ from ‘Sell’ following its significant underperformance over the past three months, with the stock underperforming other offshore drillers and large cap service companies.

REFINERS

Reuters - Phillips 66 reported a release due to a unit shutdown for planned maintenance at its joint-venture 362,000 barrel-per-day (bpd) Wood River refinery in Roxana, Illinois, according to a filing with state pollution regulators.

Reuters - Valero Energy Corp. said planned work on the crude unit at its 270,000-barrels-per-day Pembroke refinery in Britain was under way.

(Late Tuesday) Reuters - Valero Energy Corp. reported a power supply malfunction in Complex 7 at the east plant of its 142,000 barrel-per-day (bpd) refinery in Corpus Christi, Texas, on Tuesday, according to a filing with state pollution regulators.

(Late Tuesday) Reuters - Valero Energy Corp. said there was no material impact to production from power issues in a sulfur recovery unit (SRU) at its 142,000 barrel-per-day (bpd) refinery in Corpus Christi, Texas.

MLPS

(Late Tuesday) Press Release - Atlas Pipeline Partners, L.P. its subsidiary, Atlas Pipeline Finance Corporation, announced that it has priced a private offering of $325 million aggregate principal amount of 6.625% Senior Notes due 2020. The aggregate principal amount was increased from the previously announced aggregate principal amount of $300 million.

(Late Tuesday) Press Release - Enterprise Products Partners L.P. announced that the underwriters of its common unit offering, which priced this morning, have exercised their full over-allotment option to purchase 1,200,000 additional common units. These units represent limited partner interests in Enterprise and were priced to the public at $53.07 per common unit.

Reuters - Kinder Morgan Energy Partners L.P. said that it will ration space on the Guernsey, Wyoming, to Wood River, Illinois, segment of its Platte oil pipeline in October as nominations for space exceeded the line's capacity.

MARKET COMMENTARY

Stocks fell as protests in Spain and Greece over euro zone austerity measures, raising fresh concerns over Europe's ability to get its debt crisis under control.

TOP NEWS

Greece's international lenders are at loggerheads over how to solve Athens' debt crisis, threatening more trouble for the euro as the IMF demands European governments write off some of the Greek debt they hold.

New U.S. single-family home sales held near two-year highs in August and prices vaulted to their highest level in more than five years, adding to signs of a broadening housing market recovery.