FRIDAY, SEPTEMBER 28, 2012

SECTOR COMMENTARY

Energy stocks closed lower, tracking the major equity indices as sentiment soured after a poor reading on manufacturing activity in the Chicago area. The size of the decline caught economists by surprise, which actually showed an outright contraction in activity. However, stocks closed off the worst levels of the day after the results of the Spanish bank stress tests hit the wires. Most subgroups closed lower with the exception of the refiners, which finished in slight positive territory.

WTI crude oil rose $0.34 or 0.37% to $92.19 in choppy trading. Today's seesaw oil price trajectory followed the previous session's gains after Spain announced a 2013 crisis budget based mostly on spending cuts and the U.S. speech by Israeli Prime Minister Benjamin Netanyahu in which he drew his "red line" for Iran's nuclear program. U.S. gasoline futures continued their push higher, adding on to the more than 20-cent rise in the previous four sessions.

Front-month natural gas futures rose $0.023 or 0.70% to $3.320, continuing yesterday's rally that occurred despite a slightly larger-than-expected injection in the weekly inventory report. Energy producers this week trimmed the number of U.S. rigs drilling for natural gas to another 13-year low as relatively low gas prices continued to squeeze profits and force some to shift operations to more profitable oil and gas liquids wells. The gas-directed rig count slid this week by 19 to 435, the fourth drop in the last five weeks and the lowest since June 1999, data from Houston oil services firm Baker Hughes showed.

U.S. INTEGRATEDS

Reuters - Chevron Corp said its 330,000 barrels-per-day (bpd) refinery in Pascagoula, Mississippi, was operating normally on Friday in the aftermath of Hurricane Isaac, which hit the Louisiana and Mississippi coasts late last month.

(Late Thursday) Reuters - Chevron Corp the second-largest U.S. oil company, paid a 35.1 million real ($17.3 million) fine levied by Brazil's petroleum regulator for irregularities related to a November oil spill, the regulator said in a statement.

INTERNATIONAL INTEGRATEDS

(Late Thursday) Reuters - BP Plc's division that oversees North American refineries has agreed to pay a $210,000 fine for violating federal regulations regarding spill response drills at a Maryland refined product terminal, regulators said.

(Late Thursday) Reuters - Brazil's state-led oil company Petrobras will hold talks with South Korean-American refiner GS Caltex next week about forming a partnership to build an $11 billion refinery in Brazil, sources close to the companies told Reuters.

Press Release - Transocean Ltd. announced that it has been awarded 10-year contracts for four newbuild dynamically positioned ultra-deepwater drillships by Royal Dutch Shell. Shipyard delivery for the first drillship is scheduled for mid-2015.

Reuters - Norwegian oil services firm Aker Solutions has won a contract from Statoil worth 250 million crowns ($43.68 million), the firm said.

CANADIAN INTEGRATEDS

Reuters - Husky Energy Inc said it was weighing an offer by union members to return to work at its Lima, Ohio, refinery, a day after they ended a four-month strike.

Reuters - Members of United Steelworkers union Local 624 ended a four-month strike at Husky Energy Inc.'s 155,000 barrel per day (bpd) Lima, Ohio refinery late on Thursday night, just hours after the company began a search for replacement workers.

Reuters - Enbridge Inc has won regulatory approval to add an Alberta crude pipeline at a cost of up to C$1.4 billion ($1.4 billion) to move output from Imperial Oil Ltd's Kearl oil sands project and increasing production from others in the region, the company said.

(Late Thursday) Reuters - Imperial Oil Ltd reported flaring at its 187,000 barrel-per-day Strathcona refinery in Alberta, according to a message posted on a community information telephone line.

U.S. E&PS

Press Release - The Board of Directors of Apache Corporation has declared regular cash dividends on the company's common shares and 6% Mandatory Convertible Preferred Stock, Series D.

Credit Suisse initiated coverage on Devon Energy Corp with an ‘Outperform’ rating believe shares are poised to rerate on structural logistical upgrades, further evidence of DVN’s capital efficient model and improving gas sentiment in 2013.

(Late Thursday) Canaccord Genuity upgraded Endeavour International to ‘Buy’ from ‘Hold’ believing there is still an unjustified hangover in the stock as a result of a large North Sea acquisition (Alba) that almost fell apart earlier this year.

(Late Thursday) Canaccord Genuity initiated coverage on Halcon Resources with a ‘Buy’ rating with the company positioned itself for significant near-term reserve and production growth, with substantial resource potential across a diversified portfolio of liquids-rich assets.

(Late Thursday) Canaccord Genuity upgraded Magnum Hunter Resources to ‘Buy’ from ‘Hold’ following a multi-year repositioning, mainly through acquisitions.

(Late Thursday) Canaccord Genuity upgraded Oasis Petroleum to ‘Buy’ from ‘Hold’ with production has been growing rapidly

Credit Suisse initiated coverage on Plains Exploration & Production with a “neutral’ rating citing valuation.

Press Release - SM Energy Company announces that it commenced an offer to exchange $400 million of its 6 1/2% Senior Notes due 2023, which have been registered under the Securities Act of 1933 (the "Exchange Notes") in exchange for $400 million of its outstanding 6 1/2% Senior Notes due 2023, which were issued on June 29, 2012, in a private placement (the "Outstanding Notes").

CANADIAN E&PS

CNE-T reported 4Q’12 EPS of $0.01 versus Thomson Reuters I/B/E/S estimate of $0.02.

Press Release - Canacol Energy Ltd. is pleased to report its financial results for the fiscal year ended June 30, 2012. This reporting period is the Corporation's fourth under International Financial Reporting Standards. As a result, the accounting policies of the Corporation have been adjusted to comply with IFRS beginning with the balance sheet as at July 1, 2010.

(Late Thursday) Reuters - Two former top aides to Canadian Prime Minister Stephen Harper said on Thursday he should approve a $15.1 billion bid by China's CNOOC Ltd to take over Canadian oil producer Nexen Inc, saying the benefits outweigh the risks.

(Late Thursday) Press Release - Pacific Rubiales Energy Corp. announced the closing of a U.S.$400 million revolving credit facility as well as a Colombia peso equivalent revolving credit facility in the amount of U.S.$300 million.

UBS Downgraded Western Energy Services to ‘Neutral’ from Buy’.

OIL SERVICES

Press Release - PATTERSON-UTI ENERGY, INC. announced that the Company has entered into a $600 million, five-year credit agreement with a group of financial institutions led by Wells Fargo Bank, N.A. The credit agreement replaces the Company's 2010 credit agreement, which was scheduled to mature in less than one year.

DRILLERS

Guggenheim Partners upgraded Atwood Oceanics to ‘Buy’ from ‘Neutral’ based on valuation.

(Late Thursday) Atwood Oceanics, Inc. announced that one of its subsidiaries had entered into a turnkey construction contract with Daewoo Shipbuilding and Marine Engineering Co., Ltd. to construct a third ultra-deepwater drillship, to be named the Atwood Admiral, at the DSME yard in South Korea.

Press Release - Transocean Ltd. announced that it has been awarded 10-year contracts for four newbuild dynamically positioned ultra-deepwater drillships by Royal Dutch Shell. Shipyard delivery for the first drillship is scheduled for mid-2015.

(Late Thursday) Reuters - Transocean Ltd said it was served with a preliminary injunction by a federal court in Brazil that would require the drilling contractor's nine rigs operating in waters off the country to cease operations in 30 days.

REFINERS

Reuters - CVR Energy reported a planned maintenance on unspecified units at its 70,000 barrel per day Wynnewood, Oklahoma, refinery, according to a filing with regulators.

Reuters - Phillips 66 said it shut down unspecified units for planned maintenance at its joint-venture 362,000-barrels-per-day Wood River refinery in Roxana, Illinois on Thursday, according to a filing with state regulators.

(Late Thursday) Reuters - Valero Energy Corp is selling its retail business through an auction that could fetch more than $3.5 billion and has lured the interest of private equity firms and convenience-store operators, people familiar with the matter said.

MLPS

Stephens initiated coverage on Atlas Pipeline Partners, MarkWest Energy Partners and Plains All American Pipeline with ‘Overweight’ rating.

(Late Thursday) Press Release - Enbridge Inc. announced that it has entered into an agreement with Suncor Energy Oil Sands Limited Partnership to expand the existing infrastructure at the Enbridge Athabasca Terminal to accommodate the incremental bitumen volumes from Suncor's Firebag 3 and 4 developments. The approximately $150 million expansion is expected to be in-service in the second quarter 2013.

(Late Thursday) Press Release - Enbridge Pipelines Inc., an affiliate of Enbridge Inc., has received approval from the Alberta Energy Resources Conservation Board to construct the Woodland Pipeline Extension Project.

Press Release - NuStar Energy L.P. announced that it has closed on the sale of a 50% voting interest in its asphalt operations to an affiliate of Lindsay Goldberg LLC, a private investment firm. In conjunction with the sale, a joint venture was created that owns and operates NuStar’s asphalt refining assets, including asphalt refineries located in Paulsboro, New Jersey and Savannah, Georgia, and related working capital. NuStar and Lindsay Goldberg each have a 50% voting interest.

(Late Thursday) Press Release - Regency Energy Partners LP announced the pricing of its public offering of $700 million aggregate principal amount of 51/2% Senior Notes due 2023. Due to favorable market conditions, the size of the offering was increased from $500 million to $700 million. Regency Energy Finance Corp., a wholly owned direct subsidiary of Regency, will serve as the co-issuer of the notes. The sale of the notes is expected to settle on October 2, 2012, subject to the satisfaction of customary closing conditions. Regency intends to use the net proceeds from the offering to repay outstanding borrowings under its revolving credit facility.

MARKET COMMENTARY

Wall Street closed its best third quarter since 2010 after a wave of central bank actions sparked a dramatic reversal in equity markets, but signs of weakness in the economy pushed stocks lower for the day.

TOP NEWS

U.S. consumer spending rose in August as households stretched to pay for higher gasoline prices and factory activity in the Midwest contracted this month for the first time in three years, pointing to lackluster economic growth.