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Crude Climbs on Increased Chinese Demand, Russia Escalates War Effort

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Energy stocks are set to rebound from yesterday’s losses in the sector and broader markets. Rising oil prices amid ratcheting geopolitical tensions, circulating in Russia, and improving demand in China are lifting shares across the group. Meanwhile, broader futures are vacillating between slight gains and losses in the premarket. News flow across the sector is light.

Oil rose on Thursday as the prospect of higher Chinese demand and heightened geopolitical risks outweighed recession fears after a flurry of central bank interest rate hikes, including from the Bank of England.  Prices rose by more than $1 earlier in the session on news that crude oil demand in China, the world’s largest oil importer, is rebounding, having been dampened by strict COVID-19 restrictions. At least three Chinese state oil refineries and a privately run mega refiner are considering increasing runs by up to 10% in October from September, eyeing stronger demand and a possible surge in fourth-quarter fuel exports, people with knowledge of the matter said.  Meanwhile, Russia pushed ahead on Thursday with its biggest conscription since World War Two, raising concerns an escalation of the war in Ukraine could further hurt supply. “[Russian President Vladimir Putin’s] frequent irrational actions and reactions are what will keep the market volatile and violent on occasions,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.

Natural gas futures are lower by a dime, trading around $7.70, ahead of weekly inventory data.  Analysts expect a build of 92 bcf versus the five-year average of +81 bcf.

BY SECTOR:

US INTEGRATEDS

No significant news.

INTERNATIONAL INTEGRATEDS

Plenitude – a Società Benefit wholly owned by Eni, has entered a new partnership with Infrastrutture S.p.A. to develop solar and wind power projects in Italy and Spain by acquiring a 65% stake in Hergo Renewables S.P.A., a company that holds a portfolio of projects in the two countries with a total capacity of approximately 1.5GW. Infrastrutture will retain the remaining 35% stake. The first project is a photovoltaic plant in Montalto di Castro (VT) with a capacity of 37 MW. Works will commence in the coming weeks. The plant is expected to come into operation in the second half of 2023.

Petrobras informed that its Board of Directors, at a meeting, approved the early termination of the term of Mr. Juliano de Carvalho Dantas as the Company’s Chief Digital Transformation and Innovation Officer and elected Mr. Paulo Palaia Sica as the new Chief Digital Transformation and Innovation Officer.

TotalEnergies E&P Suriname, Suriname Branch has exercised an option to add the drilling of one additional well in Block 58 offshore Suriname to the work scope of the drillship Maersk Valiant. The contract extension is expected to commence in January 2023, in direct continuation of the rig’s current work scope, with an estimated duration of 100 days. The contract value of the extension is approximately USD 24.7m, including integrated services provided and a fee for the use of managed pressure drilling.

CANADIAN INTEGRATEDS

No significant news.

U.S. E&PS

Talos Energy announced the execution of definitive agreements to acquire EnVen Energy, a private operator in the deepwater U.S. Gulf of Mexico, for $1.1 billion. The strategic transaction expands Talos’s Gulf of Mexico operations with high margin, oil-weighted assets, is accretive to Talos shareholders on 2023E Free Cash Flow per Share and is immediately de-leveraging. There are no anticipated changes to Talos senior management resulting from the transaction. Tim Duncan will remain Chief Executive Officer and will retain one seat on the expanded Board of Directors, which will include six Talos directors (CEO and five independents) and two independents from the EnVen Board of Directors, Shandell Szabo and Richard Sherrill. The Board of Directors will have no private equity representatives post-closing. Robert Tichio, the appointed Riverstone Holdings representative currently on Talos’s Board of Directors, will resign from the Board simultaneous with closing of the transaction. Riverstone Holdings (~10% pro forma ownership) and EnVen’s top two equity holders (~20% pro forma combined) will enter lock-up agreements at closing.

CANADIAN E&PS

No significant news.

OILFIELD SERVICES

KBR announced that it has signed a master license and engineering agreement with Giammarco-Vertrocoke S.R.L. for KBR to license its carbon capture technology globally.

As per SEC filing, on September 21, 2022, Martin Marietta Materials and its wholly‐owned subsidiary, Martin Marietta Funding LLC, entered into the Fourteenth Amendment to its Credit and Security Agreement with Truist Bank, successor by merger to SunTrust Bank, dated as of April 19, 2013. Pursuant to the Fourteenth Amendment, (i) the scheduled maturity date of the facility was extended to September 20, 2023, (ii) SOFR was established as the benchmark rate in replacement of LIBOR and (iii) other related terms and provisions were revised accordingly.

Schlumberger announced that it has been selected by Wintershall Dea as its preferred partner on the acceleration of its Terra Nova subsurface transformation program. Working with Microsoft, Schlumberger was first to contribute the open source code of its DELFI Data Ecosystem to the OSDU—a single reference cloud-based data platform—which Wintershall Dea will leverage to accelerate the delivery of its subsurface data platform to support its business in making smarter decisions, faster.

Schlumberger has announced the introduction of Neuro autonomous solutions. These solutions use advanced cloud-based software and connected intelligent systems that create a continuous feedback loop between surface and downhole. This significantly increases the efficiency and consistency of E&P operations while reducing human intervention and footprint. The announcement was made at the Schlumberger Digital Forum, which is taking place this week in Lucerne, Switzerland.

Schlumberger has announced the introduction of ProcessOps on DELFI. This collaborative, cloud-based solution creates a digital facility twin that uses artificial intelligence (AI) and automation with data and physics-based models to transform facilities workflows-maximizing throughput for the asset and reducing carbon intensity. The announcement was made at the Schlumberger Digital Forum, which is taking place this week in Lucerne, Switzerland.

CPC Corporation, Taiwan has signed a Global Strategic Cooperation Framework Agreement with Schlumberger Oilfield Holdings to collaborate on digital transformation, the deployment of a cloud-based cognitive Exploration & Production platform, carbon capture, utilization and sequestration and the assessment of geothermal prospects, in line with Taiwan’s Pathway to Net-Zero Emissions in 2050.

Shawcor announced that the Toronto Stock Exchange has approved the Company’s notice of intention to commence a normal course issuer bid for common shares of the Company. Pursuant to the Bid, Shawcor may purchase for cancellation up to 5,685,630 Common Shares, representing approximately 10% of Shawcor’s public float. Pursuant to the terms of the notes indenture dated December 10, 2021 governing Shawcor’s senior unsecured notes, Shawcor is limited to purchasing a maximum of C$25 million in aggregate repurchases of Common Shares under the Bid based on the actual price paid for such repurchased Common Shares pursuant to the Bid.

TETRA Technologies announced the completion of its maiden inferred bromine and lithium brine resource estimation report for its brine minerals leased acreage in the Smackover Formation in Southwest Arkansas. The technical report summary reflects the following: The brine resource underlying the approximately 40,000 gross acres where TETRA holds the bromine mineral rights is estimated to contain an inferred resource of 5.25 million short tons (4.763 million metric tonnes) of elemental bromine; and the brine resource underlying the approximately 5,000 gross acres where TETRA holds lithium mineral rights that are not subject to a lithium option agreement with Standard Lithium, is estimated to contain an inferred resource of 44,000 short tons (40,000 metric tonnes) of elemental lithium. Using a conversion factor of 5.323 to convert elemental lithium to Lithium Carbonate Equivalent (LCE) it is estimated to contain 234,000 short tons of LCE (212,000 metric tonnes of LCE).

DRILLERS

An Akin Gump team represented Tamboran Resources Ltd., a public natural gas company headquartered in Australia, in its A$60 million acquisition of Origin Energy’s Beetaloo Basin position, joint ventures with Bryan Sheffield and Helmerich and Payne, and approximately A$195 million capital raise.

OMV and Wintershall Dea have awarded a rig contract to Transocean for the use of “Transocean Norge” for 17 wells, and at the same time entered into an exclusive partnership with Transocean for the use of “Transocean Norge” for drilling of all firm and additional potential wells in the period 2023 to 2027.

REFINERS

Phillips 66 reported release due to a fire at the facility with the reformer unit which resulted in material burning up at the Wilmington, California refinery on Sept. 16, a filing with the California Emergency Management Agency shows.

MLPS & PIPELINES

Brooge Energy announced that it has engaged thyssenkrupp Uhde, a leading German chemical technology and EPC provider, including climate protection, to undertake the technical study of its planned Green Hydrogen and Green Ammonia plant.

Scorpio Tankers announced that it has purchased its common shares in the open market and exercised a purchase option for an LR2 product tanker that is currently leased. The Company purchased 137,459 of its common shares in the open market at an average price of $43.27 per share as part of the Company’s securities repurchase program. The Company has given notice to exercise its purchase option on an LR2 product tanker (STI Sanctity). This vessel was acquired as part of the acquisition of Navig8 Product Tankers Inc. in 2017. The lease bears interest at LIBOR plus a margin of 5.40% per annum. The purchase, which is expected to occur in the first quarter of 2023, is expected to result in a debt reduction of $27.8 million for the Company.

Pieridae Energy, one of the companies proposing a liquefied natural (LNG) gas terminal on Canada’s east coast, has asked the federal government to help ensure pipeline operator TC Energy would be able secure permits to expand gas supply pipelines in a timely fashion.

MARKET COMMENTARY

U.S. stock index futures were slightly higher, after Wall Street slumped in the previous session as the Federal Reserve delivered another supersized interest rate hike and signaled more increases in its fight against inflation. European shares were down, hurt by technology stocks. Japan’s Nikkei fell as investors reacted to the Bank of Japan’s decision to maintain its ultra-easy monetary policy. The Japanese yen strengthened sharply after authorities intervened in the foreign exchange market for the first time since 1998 to support the currency. Oil rose on the prospect of higher Chinese demand and geopolitical risks. Gold prices were in the negative territory.


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. 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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