Oil Trades Near $45 As U.S. Continues Drilling Expansion

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Friday, October 20, 2017

Sector Commentary

Energy stocks are expected to open near yesterday's closing levels, as weaker crude prices clash with broader equity market strength. The oil services space will be in focus today as both Schlumberger and Baker Hughes reported results with both warning of a slowdown in North America and a challenging year ahead as crude oil prices stay volatile.

WTI crude oil futures are modestly lower in early trading, adding to yesterday's losses, as investors sought to book profits, despite tensions in the Middle East that have slashed supplies of crude. "There's a little bit of profit-taking," said Olivier Jakob, chief strategist at consultancy Petromatrix. "The market has really been treading a small range all of this week without any true momentum." Iraqi troops regained control of two major oilfields northwest of Kirkuk from Kurdish Peshmerga forces this week, and the oil ministry in Baghdad expects to bring the fields back on stream on Sunday.

Natural gas futures were slightly higher in early trading, continuing momentum from yesterday's inventory-induced mini rally.

U.S. INTEGRATEDs

Reuters -

Chevron approved an investment to increase output from its Captain oilfield by using a new water-injection technology for the first time in the North Sea.

INTERNATIONAL INTEGRATEDS

Press Release -

BP announced that Carl-Henric Svanberg, the chairman who presided over the company during the Deepwater Horizon spill, has decided to retire.

(Late Thursday) Reuters -

Eni is keen to strengthen ties with Russia's Rosneft and could forge a partnership in the liquefied natural gas sector.

Finam upgraded

Gazprom to 'Buy' from 'Hold'.

(Late Thursday) Press Release -

Petrobras reported that its total oil and natural gas production in September was 2.79 million barrels of oil equivalent per day, with 2.68 million boed produced in Brazil and 106 thousand boed produced abroad.

Reuters -

Royal Dutch Shell agreed to sell its 9 percent stake in the Polarled gas pipeline venture and a 3 percent stake in the Nyhamna gas processing plant to Cape Omega for an undisclosed sum *Says Shell will retain a 12.03 percent stake in Nyhamna *Says Shell's holding in the Ormen Lange field, supplying gas to Nyhamna, will remain unchanged at 17.8 percent *Cape Omega is owned by private equity investment firm HitecVision *Polarled pipeline expected to start transporting gas from Norway's Arctic Aasta Hansteen field to Nyhamna in 2018

Reuters -

Statoil said that the board of directors and Chief Executive Eldar Saetre agreed that Saetre will continue as CEO after he turns 62 in February 2018.

Reuters - South Africa is expected to renew

Total 's offshore exploration right next year.

(Late Thursday) Press Release - Ensco just reported its first fleet status report after the acquisition of Atwood. Ensco DS-7 was awarded a six-well contract with Noble Energy. The rig will work in the Mediterranean Sea from March 2018 to December 2018. Earlier, DS-7 completed a one-well contract with

Total on the Ivory Coast and will continue to receive daily termination fees through November 2017. Ensco did not disclose the dayrate for DS-7. Based on the recent contract achieved by Transocean, I estimate a backlog of about $45 million.

U.S. E&PS

(Late Thursday) Press Release -

Approach Resources remained on track to deliver full-year production volumes consistent with the lower end of previously announced guidance, despite impacts from Hurricane Harvey, while capital spending is expected to be below the lower end, and 20% below the midpoint, of prior guidance. It also completed two wells in the third quarter. Both wells are outperforming a 700 MBoe type curve, normalized to a 7,500 feet lateral. Both wells were completed on the Company's University Lands acreage, with 180 feet stage spacing and approximately 2,000 pounds of sand per perforated lateral foot.

(Late Thursday) Press Release - Ensco just reported its first fleet status report after the acquisition of Atwood. Ensco DS-7 was awarded a six-well contract with

Noble Energy . The rig will work in the Mediterranean Sea from March 2018 to December 2018. Earlier, DS-7 completed a one-well contract with Total on the Ivory Coast and will continue to receive daily termination fees through November 2017. Ensco did not disclose the dayrate for DS-7. Based on the recent contract achieved by Transocean, I estimate a backlog of about $45 million.

Goldman Sachs upgraded

Oasis Petroleum to 'Neutral' from 'Sell'.

(Late Thursday) Press Release -

Rex Energy announced that its Board of Directors declared a quarterly dividend of $150.00 per share of its 6.0% Series A convertible perpetual preferred stock

Press Release - Rice Midstream Partners, a partnership formed by

Rice Energy , announced the Board of Directors of its general partner has approved a cash distribution of $0.2814 per unit for the third quarter 2017, an increase of $0.0103 per unit, or 4% above the second quarter 2017 distribution. The distribution is payable on November 16, 2017, to unitholders of record on November 7, 2017.

OIL SERVICES

Press Release -

Baker Hughes reported revenue of $5.4 billion for the quarter, down 1% sequentially and flat year-over-year on a combined business basis. Its GAAP operating loss was $122 million for the quarter decreased 17% sequentially and decreased 22% year-over-year on a combined business basis. BHGE also said that its adjusted operating income was $240 million for the quarter, up 105% sequentially and down 13% year-over-year on a combined business basis. GAAP net loss per share of $(0.24) for the quarter which included $0.29 per share of adjusting items. Basic loss per share was $(0.24) for the quarter, adjusted basic earnings per share were $0.05.

Reuters -

Schlumberger posted a bigger quarterly profit, as its North American business continues to be helped by strong shale drilling. Net profit attributable to SLB rose to $545 million, or 39 cents per share, for the third quarter ended Sept. 30, from $176 million, or 13 cents per share, last year. Revenue rose to $7.91 billion from $7.02 billion in the same quarter last year. On October 18, 2017, the Company's Board of Directors approved a quarterly cash dividend of $0.50 per share of outstanding common stock, payable on January 12, 2018 to stockholders of record on December 6, 2017.

Press Release -

Western Energy Services completed the bought deal public offering of 9.1 million shares, at a price of C$1.25 per share, for gross proceeds of C$11.38 MM.

DRILLERS

(Late Thursday) Press Release -

Ensco just reported its first fleet status report after the acquisition of Atwood. Ensco DS-7 was awarded a six-well contract with Noble Energy. The rig will work in the Mediterranean Sea from March 2018 to December 2018. Earlier, DS-7 completed a one-well contract with Total on the Ivory Coast and will continue to receive daily termination fees through November 2017. Ensco did not disclose the dayrate for DS-7. Based on the recent contract achieved by

Transocean , I estimate a backlog of about $45 million.

MLPs & Pipelines

(Late Thursday) Press Release -

DCP Midstream announced that the board of directors of its general partner declared a quarterly cash distribution of $0.78 per common unit for the quarter ended September 30, 2017, or $3.12 per unit on an annualized basis, which remains unchanged from the previous quarter.

Press Release -

EnLink Midstream Partners reported a quarterly distribution on ENLK's common units of $0.39 per common unit. This cash distribution will be paid on November 13, 2017 to unitholders of record on November 1, 2017.

JPMorgan downgraded

Kinder Morgan to 'Underweight' from 'Neutral'.

(Late Thursday) Press Release -

Kinder Morgan is in advanced talks with shippers for its Gulf Coast Express expansion targeting associated gas from the Permian Basin, and the Houston-based midstreamer could make a final investment decision on the project during the fourth quarter.

Press Release - On October 18, 2017, Gerard B. Paulides, a member of the Board of Directors of Shell Midstream Partners GP LLC, the general partner of

Shell Midstream Partners, L.P. , resigned as a director of the Board to pursue other opportunities.

(Late Thursday) Press Release - The Board of Directors of Valero Energy Partners GP LLC, the general partner of

Valero Energy Partners , approved the Partnership's third quarter 2017 cash distribution of $0.48 per unit. This distribution represents a 5.5 percent increase over the Partnership's previous quarterly distribution.

MARKET COMMENTARY

Stock futures indicated a higher opening for Wall Street after the U.S. Senate approved a budget blueprint for the 2018 fiscal year that paves the way for tax cuts. The dollar also gained support, while gold inched lower. Existing home sales data for September is due. Earning reports from Volvo and Ericsson and high German producer-price inflation numbers pushed European stocks higher. Japan's Nikkei stock index logged its longest winning streak in more than half a century. Oil prices fell on profit booking.

Nasdaq Advisory Services Energy Team is part of Nasdaq's Advisory Services -- the most experienced team in the industry. The team delivers unmatched shareholder analysis, a comprehensive view of trading and investor activity, and insights into how best to manage investor relations outreach efforts. For questions, please contact Tamar Essner . This communication and the content found by following any link herein are being provided to you by Corporate Solutions, a business of Nasdaq, Inc. and certain of its subsidiaries (collectively, "Nasdaq"), for informational purposes only. Nasdaq makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Sources include Reuters, TR IBES, WSJ, The Financial Times and proprietary Nasdaq research.

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