FRIDAY, SEPTEMBER 07, 2012

SECTOR COMMENTARY

Energy stocks outperformed the broader markets, with each subgroup ending with gains that were better than 1%. The services, E&Ps, and refiners led the way on the upside, while the drillers were relative underperformers. The equity markets lacked direction after another weak jobs report sapped bullishness before the opening bell.

Oil prices rose in volatile trading after a disappointing U.S. August jobs report weakened the dollar and bolstered expectations for stimulus from the U.S. Federal Reserve, even while denting the outlook for petroleum demand. WTI crude closed up $0.89 or 0.93% to $96.42.

Natural gas futures closed lower by $0.094 or 3.39% to $2.682. NYMEX halted electronic futures trading for nearly one hour this morning due to a technical problem, the second glitch this year to roil trade on the world's biggest energy exchange. The National Weather Service's six-to-10-day outlook issued on Thursday called for mostly normal temperatures in consuming regions in the Northeast and Midwest and below-normal readings in Florida and along the West Coast.

The U.S. natural gas directed rig count sank to a fresh 13-year low on Friday, indicating that the market is still feeling effects of oversupply as producers slowly pull back on drilling for gas. The number of rigs drilling for natural gas in the U.S. fell by 21 this week to 452, marking the 14th drop in 16 weeks, data from oil services firm Baker Hughes showed on Friday.

U.S. INTEGRATEDS

Press Release - Hess Corporation announced it has agreed to sell its 2.72 percent interest in the Azeri, Chirag and Guneshli Fields (ACG) in Azerbaijan and its 2.36 percent interest in the associated BTC pipeline to ONGC Videsh Ltd. for $1 billion. The transaction, expected to close in the first quarter of 2013, is subject to Indian and other government and regulatory approvals.

INTERNATIONAL INTEGRATEDS

Reuters - BP Plc reported an ultracracker compressor tripped at its 406,570 barrel-per-day refinery in Texas City, Texas, according to a filing with state pollution regulators.

(Late Thursday) Reuters - BP Plc reported scheduled maintenance at its 225,000 barrel-per-day (bpd) refinery in Cherry Point, Washington, on Sept. 4, in a report filed with the Northwest Clean Air Agency that was released.

(Late Thursday) Reuters – BP Plc executives wanted to concentrate blame for the Deepwater Horizon oil spill disaster o n "blue collar rig workers" in order to save themselves, U.S. government lawyers wrote in a court document that until Thursday was partially redacted.

Reuters - Energy firm Eni has received indication of hydrocarbons presence in the Salina prospect in the Arctic Barents sea, Det norske oljeselskap, one of its partners in the project said.

Reuters - Russian gas export monopoly Gazprom will not reduce supplies in retaliation for the launch of a European Union competition investigation into its gas sales, the Kremlin said.

Reuters - Startup of Norway's Sleipner gas field in the North Sea has been delayed for two days until Sunday morning, gas system operator Gassco said. The Statoil operated facility was expected to restart production on Friday at 0400 GMT after a planned maintenance, which started on August 18.

CANADIAN INTEGRATEDS

Reuters - Suncor Energy Inc has begun a planned six-week maintenance turnaround on a vacuum tower for an upgrader at its northern Alberta oil sands operations, Sneh Seetal, a spokeswoman for the company, said.

US E&PS

Sterne Agee raised its rating on Denbury Resources to ‘Buy’ from ‘Neutral’ on attractive relative valuations.

Societe Generale lowered its rating on EOG Resources to ‘Hold’ from ‘Buy’ citing valuation since the stock is up 30% over the last three months.

(Late Thursday) Press Release - The Board of Directors of EOG Resources, Inc. has declared a dividend of $0.17 per share on EOG's Common Stock, payable October 31, 2012, to stockholders of record as of October 17, 2012. The indicated annual rate is $0.68.

Press Release - GMX Resources Inc announced that it had received, as of immediately after 11:59 p.m., Eastern Time, on September 6, 2012 tenders from the holders of approximately $24.8 million in aggregate principal amount, or approximately 48%, of its outstanding 5.00% Senior Convertible Notes due 2013 (the "2013 Notes") and approximately $36.9 million in aggregate principal amount, or approximately 43%, of its outstanding 4.50% Senior Convertible Notes due 2015 (the "2015 Notes" and, together with the 2013 Notes, the "Convertible Notes") in connection with its previously announced exchange offers for the Convertible Notes, which commenced on August 9, 2012.

Press Release - Magnum Hunter Resources Corporation announced that it has priced an underwritten public offering of its non-convertible 8.0% Series D Cumulative Preferred Stock. The Company is offering 1,050,000 shares of Series D Cumulative Preferred Stock (liquidation preference of $50.00 per share) at a public offering price of $44.00 per share.

Macquarie Equities Research downgraded Valiant Petroleum to ‘Underperform’ from ‘Neutral’ seeing a merger rather than a corporate sale as the likely outcome.

Peel Hunt downgraded Valiant Petroleum to ‘Hold from ‘Buy’ based on valuation.

CANADIAN E&PS

(Late Thursday) Reuters - Canada will study CNOOC's $15.1 billion bid for oil producer Nexen particularly closely because the deal is large and the Chinese oil company is a state-owned enterprise, Prime Minister Stephen Harper said.

OIL SERVICES

BMO Capital Markets upgraded Patterson-UTI Energy to ‘Outperform’ from ‘Underperform’ based on valuation.

(Late Thursday) Press Release - Precision Drilling Corporation announced that it has amended its Secured Credit Facility ("Secured Facility") with a syndicate of lenders and Royal Bank of Canada as the administrative agent. The amendment increases the amount available under the Secured Facility to US$850 million from US$550 million and extends the maturity date from November 17, 2015 to November 17, 2017. Amounts borrowed under the Secured Facility may be used for general corporate purposes.

REFINERS

Reuters - Phillips 66 reported a process upset at its joint-venture 146,000 barrel-per-day (bpd) Borger, Texas, refinery, according to a filing with state pollution regulators.

Reuters - Members of the Teamsters Union at Phillips 66's 238,000 barrel-per-day Bayway refinery in Linden, New Jersey, will vote Friday on whether to ratify their latest labor contract, as recommended by the union's executive board.

(Late Thursday) Reuters - Phillips 66 reported an equipment malfunction at its 100,000 barrel-per-day (bpd) refinery in Ferndale, Washington, according to a filing with the Northwest Clean Air Agency made public.

(Late Thursday) Citi Research downgraded Sunoco Inc to ‘Neutral’ from ‘Buy’ ahead of the close of the acquisition by Energy Transfer Partners.

MLPS

(Late Thursday) Reuters - A natural gas gathering pipeline exploded about 10 miles (16 kilometers) north of Alice, Texas, said a spokesman for pipeline owner Copano Energy LLC.

Press Release - The Crosstex Energy companies, Crosstex Energy, L.P. and Crosstex Energy, Inc., announced that the Partnership’s assets in southern Louisiana sustained no physical damage due to Hurricane Isaac. All the Partnership’s facilities along the Gulf Coast, which include six natural gas processing plants and three natural gas liquids fractionation plants, are operational and were off-line only for a few days due to the storm. It is expected that the interruptions will have minimal impact on the Partnership’s third-quarter 2012 financial results.

MARKET COMMENTARY

Stocks held steady at four-year highs, closing out their best week since June as a disappointing jobs report only fueled expectations that the Federal Reserve would act to stimulate the economy next week.

TOP NEWS

U.S. jobs growth slowed sharply in August, setting the stage for the Federal Reserve to pump additional money into the sluggish economy next week and dealing a blow to President Barack Obama as he seeks re-election.