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The energy sector is set for a lower start, pressured by weakness in the underlying commodities and the broader markets. The major market futures moved lower after a WSJ article published citing the Fed will likely raise rates by 75 basis points at its next meeting. Sector news will be active as corporates provide updates at the Barclays CEO Power and Energy Conference.

WTI and Brent crude oil are slightly down during a choppy morning of trading as the market tries to balance demand worries related to concerns of a slowing economy with fears that Russia will halt energy supplies to Europe. Futures contracts recovered some losses after Russian President Vladimir Putin threatened to halt all oil and gas supplies if price caps are imposed on Russia’s energy resources. The European Union proposed to cap Russian gas a few moments after. Analysts already expect oil supply to be tight on both sides of the Atlantic for the last quarter of the year. Additionally, the possibility of an economic slowdown continues to grapple the markets as credit rating agency Fitch said the halting of the Nord Stream 1 pipeline has increased the likelihood of a recession in the euro zone.

Natural gas futures are lower in early trading as output levels remain at record highs and on forecasts for cooler weather than previously expected.

BY SECTOR:

US INTEGRATEDS

Strive Asset Management sent a shareholder letter to Chevron – marking the company’s first shareholder engagement letter on behalf of its clients. Strive calls on Chevron to liberate itself from constraints imposed by its ESG-promoting “shareholders” and to focus exclusively on maximizing long run value for the company’s ultimate owners.

According to Reuters, Russia’s energy minister said the recovery of oil production at the Sakhalin-1 oil and gas project in Russia’s Far East would depend to a large extent on the position of ExxonMobil, Russian news agencies reported.

INTERNATIONAL INTEGRATEDS

According to Reuters, BP restored production at its 435,000-barrel-per-day Whiting, Indiana, refinery on Sunday, sources familiar with plant operations said on Tuesday. The refinery was shut after an electrical fire on Aug. 24 knocked out key utilities required to operate the plant. BP began restarting the refinery on Wednesday and planned to restore production over the weekend.

Eni announced that it has agreed to acquire BP business in Algeria, including the two gas-producing concessions “In Amenas” and “In Salah” (45.89% and 33.15% working interest respectively). The transaction is subject to the approvals of the competent authorities.

EIG announced that it has entered into a definitive agreement with Repsol to acquire a 25% stake in Repsol Upstream, a newly-formed global exploration & production company comprising Repsol’s entire global upstream oil and gas business. The strategic partnership delivers upfront capital to Repsol to increase its investment in the energy transition, specifically to support the growth of Repsol’s renewable power generation, renewable fuels, and circular products segments. Under the terms of the agreement, a newly formed, wholly owned subsidiary of EIG, Breakwater Energy, will acquire the 25% interest in Repsol Upstream for total consideration of approximately $4.8 billion, including debt, with Repsol holding the remaining 75%, indicating a total enterprise value of approximately $19.0 billion for Repsol Upstream. The company will be majority controlled by Repsol and will be consolidated in the accounts of Repsol.The transaction is expected to close within the coming six months, subject to customary closing conditions.

According to Reuters, Novatek said it does not want to acquire the Russian assets of Finland’s Fortum, and that France’s TotalEnergies was set to stay actively involved in the Russian energy industry. CEO Leonid Mikhelson said TotalEnergies were interested in the Yamal LNG and Arctic LNG-2 projects to exploit Russia’s liquefied natural gas reserves.

CANADIAN INTEGRATEDS

No significant news.

U.S. E&PS

Crescent Energy Co announces 5M share offering for holder, Independence Energy Aggregator L.P, concurrent purchase of units. Concurrently with the closing of the offering, the company intends to purchase from PT Independence Energy Holdings LLC an aggregate of 2.2M units of Crescent Energy OpCo LLC at a price per share equal to the price per share at which the underwriters purchase shares of Class A common stock in the offering and cancel a corresponding number of shares of the company’s Class B common stock.

Devon Energy, ONEOK and Williams, venture capital firm Energy Innovation Capital and tech-focused non-profit Tulsa Innovation Labs have joined together to transform America’s heartland into a hub for energy technology startups and redefine a sector that has shaped the region’s economy for more than a century. Spearheaded by EIC, the first-of-its-kind initiative aims to attract energy technology startups to the region with access to resources including free office space and custom startup support services. EIC will also provide access to early-stage capital with a $50 million fund and assist startups to pilot forward-looking technologies with founding corporate partners, Devon Energy, ONEOK and Williams. By fueling R&D and innovation, the project is expected to create more than 1,700 jobs across the energy industry.

EQT announced that it has entered into a purchase agreement with THQ Appalachia I, LLC and THQ-XcL Holdings I, LLC whereby to which EQT has agreed to acquire Tug Hill’s upstream assets and XcL Midstream’s gathering and processing assets, for total consideration of $5.2 billion. Tug Hill and XcL Midstream are backed by equity commitments from funds managed by Quantum Energy Partners. The transaction is expected to close in the fourth quarter of 2022, with an effective date of July 1, 2022. Subject to the transaction close and EQT’s regular board approval process, Wil VanLoh, Founder and CEO of Quantum Energy Partners, will join EQT’s board of directors.

SM Energy Company announced that its Board of Directors has approved a return of capital strategy that includes: share repurchase authorization of up to $500 million through year-end 2024 and fixed dividend increased to $0.60 per share annually.

CANADIAN E&PS

No significant news.

OILFIELD SERVICES

Select Energy Services announced that its Board of Directors has approved the initiation of a dividend program under which the Company intends to pay an initial quarterly cash dividend of $0.05 per Class A common share, beginning after the third quarter of 2022. A comparable distribution of $0.05 per unit has also been approved to the other unitholder of SES Holdings, who holds all the Company’s Class B common shares. Select intends to pay regular quarterly dividends, with all future dividend payments subject to quarterly review and approval by its Board of Directors. The Company will announce the record date and payment date for each future dividend following completion of the relevant fiscal quarter.

DRILLERS

Transocean announced that the ultra-deepwater drillship, Deepwater Asgard, received two contract awards in the U.S. Gulf of Mexico for a total of approximately 14 months of work, adding $181 million in firm backlog. The first award is a one-well contract with Murphy Oil Corporation at $395,000 per day. The contract is expected to commence late this fall after the rig completes its current contract and a planned out-of-service period. The contract also includes an option for a second well at the same dayrate. The backlog for the firm contract is approximately $20 million. The second award, a one-year contract with another operator at $440,000 per day (plus up to $40,000 per day for additional products and services), is expected to commence in the first half of 2023. This contract also includes three, one-year option periods at mutually agreed dayrates. The firm backlog associated with the contract is estimated to be approximately $161 million, excluding any revenue associated with the additional products and services.

Valaris announced that it has received a payment of $40 million from its joint venture ARO Drilling, representing a partial early repayment of its shareholder notes receivable. Following this payment, Valaris has shareholder notes receivable totaling approximately $403 million, with $225 million due in October 2027 and approximately $178 million due in October 2028.

REFINERS

No significant news.

MLPS & PIPELINES

According to SEC filing, on September 6, 2022, Enterprise Products Operating, a Texas limited liability company and the operating subsidiary of Enterprise Products Partners, entered into a 364-Day Revolving Credit Agreement among EPO, as Borrower, the Lenders party thereto, Citibank, as Administrative Agent, and certain financial institutions named therein, as Co-Syndication Agents and Co-Documentation Agents. Under the terms of the 364-Day Credit Agreement, EPO may borrow up to $1.5 billion (which may be increased by up to $200 million to $1.7 billion at EPO’s election, provided certain conditions are met) at a variable interest rate for a term of 364 days, subject to the terms and conditions set forth therein.

Scorpio Tankers announced an update on Q3 2022 events, including the Q3 2022 quarter to date Daily TCE Revenues and the exercise of purchase options on eight ships. The Company has given notice to exercise its purchase options on two Handymax product tankers (STI Battersea and STI Wembley), four MR product tankers (STI Ville, STI Texas City, STI Meraux and STI Brooklyn), and two LR2 product tankers (STI Rose and STI Rambla). These vessels were sold and leased back by the Company in the third quarter of 2018. The leases bear interest at LIBOR plus a margin of 3.60% – 3.70% per annum. The purchases, which are expected to occur in the fourth quarter of 2022, are expected to result in a debt reduction of $133 million for the Company and a reduction of the breakeven by approximately $665 per day. The Company estimates that the fully diluted weighted average number of shares for the earnings per share calculation under the if-converted method will be approximately 63 million shares for the three months ended September 30, 2022.

According to SEC filing, on September 2, 2022, Targa Resources Partners, a subsidiary of Targa Resources Corp., and Targa Receivables, a bankruptcy-remote special purpose entity that is an indirect wholly-owned subsidiary of the Partnership, entered into a Thirteenth Amendment to the Receivables Purchase Agreement among the SPV, as seller, the Partnership, as servicer, the conduit purchasers, the committed purchasers, the purchaser agents and the letter of credit participants party thereto and PNC Bank, National Association, as administrator and issuer of letters of credit, which amends the Receivables Purchase Agreement, dated as of January 10, 2013, as amended, governing the SPV’s accounts receivable securitization facility by, among other things, (i) increasing the Facility size from $400 million to $800 million and (ii) extending the Facility Termination Date of the Facility to September 1, 2023. As of September 2,2022, after giving effect to the Purchase Agreement Amendment, there were approximately $400 million of trade receivable purchases outstanding under the Facility.

MARKET COMMENTARY

U.S. stock index futures were little changed and the dollar was up after the U.S. economic data reinforced expectations of aggressive Federal Reserve rate hikes. European shares fell as investors fretted over global demand outlook for metals following trade data from China. Japanese stocks fell over concerns of an economic slowdown. Oil prices rose on threats that Russia will walk away from its energy supply contracts. Gold prices edged up.

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.