By Sarfaraz A. Khan
WTI crude oil: $52.61 a barrel
Brent crude: $61.67 a barrel
Natural gas: $4.49 per MMBtu
Crude oil prices settled higher as OPEC announced 1.2
million barrels per day production cuts which, as per BNP Paribas global oil
strategist Harry Tchilinguirian, should “attenuate but not eliminate expected
implied global inventory builds” in H1-2019. Wood Mackenzie forecasts Brent climbing
to more than $70 by Q3-2019.
EOG Resources (EOG) received an upgrade from J.P. Morgan to
Overweight from Neutral with a $118 price target. JPM analyst Arun Jayaram likes
EOG's defensive characteristics and expects the shares to outperform the peer
group assuming oil prices remain near strip levels. The upgrade, combined with
improvement in oil prices, has pushed the stock higher. (Source)
The oil rig count in
the US dropped by 10 units to 877 rigs which marks the biggest weekly
decline since May 2016, as per data from Baker Hughes for the week ended December
7, 2018. The number of gas rigs, however, jumped by 9 to 198. As a result, the
total U.S. rig count dropped by 1 to 1,075. This comes after EIA reported a 7.3
million barrel drop in crude oil inventories, which was bigger than the
consensus of a drop of 0.9 million barrels. (Source)
The Trump
administration moves to boost oil and gas drilling by rolling back sage grouse
protections. This could potentially open millions of acres of public lands to
new oil and gas drilling and mining. The Bureau of Land Management is expected to
finalize a proposal by early 2019. Miners, oil drillers and ranchers have been
calling for an end to the Obama-era plan which they believed unnecessarily dragged
economic development. (Source)
Chesapeake Energy (CHK) stock bounced off 10-month lows following
improvement in crude oil prices which outweighed a J.P. Morgan downgrade. JPM
has cut CHK rating to Underweight
from Neutral as the firm believes
that Chesapeake faces headwinds related to its $4 billion acquisition of
WildHorse Resource. Although the oil-rich purchase will improve Chesapeake’s
production profile, "the stock will likely be a 'show me' situation"
as investors weren’t really excited about the Texas’s Eagle Ford play, the JPMorgan
analyst Arun Jayaram said. (Source)
The U.S. became a net oil exporter last week for first time
on record following the shale oil boom which triggered a surge in drilling and
slashed the country’s reliance on foreign energy sources. The Department of
Energy reported the U.S. exported a net 211,000 bpd of crude oil for the week ended
Nov. 30 as exports rose to a weekly record of more than 3.2 million bpd. The
overall U.S. production has increased to a record 11.7 million bpd. (Source)
Chevron (CVX) unveiled a $20 billion capital budget for
2019. The company says it will invest in " high-return short-cycle
projects, with more than two-thirds of spend projected to realize cash flow
within two years." For the oil and gas production business, Chevron has earmarked
$10.4 billion for sustaining and growing current production, including $3.6
billion for the Permian Basin in the Texas and New Mexico and $1.6 billion for
other shale and tight oil investments. Almost $5.1 billion of the upstream
program is planned for major capital projects, including $4.3 billion for the
Future Growth Project at the Tengiz field in Kazakhstan. In the downstream
businesses, which includes oil refineries and petrochemical plants, Chevron
will invest $2.5 billion. (Source)
Permian Basin’s less
drilled Delaware Basin region could hold twice as much oil as the Midland Basin,
US Geological Survey says. The Delaware's Wolfcamp and Bone Spring formations
hold an estimated 46.3 billion barrels of oil and 281 trillion cf of natural
gas reserves. Major Permian Basin producers are Chevron, Exxon Mobil, EOG
Resources, Pioneer Natural Resources, Laredo Petroleum, Diamondback Energy , Concho
Resources, Devon Energy, Newfield Exploration, Occidental Petroleum, Anadarko Petroleum, Apache Corporation, Jagged Peak Energy, and SM
Energy. (Source)
Exxon Mobil (XOM) can make Guyana one of South America’s top
oil producers, as per Wood Mackenzie. Exxon Mobil has recently increased
its reserve estimates for offshore Guyana by 25% to 5 billion boe as the company
continues to explore in the deepwater Stabroek block. Wood Mackenzie believes
that the oil giant has done some of the most impressive exploration work in
recent times. "If Venezuela and Mexico fail to address production
declines, Guyana could quickly surpass them to number two" among South
American oil producers. (Source)
Kinder Morgan has
maintained its Q1-2019 startup target for Georgia LNG project. The pipeline
operator moves 42% of the current U.S. liquefaction capacity with feedgas that
moves through its pipelines. Its market share will increase as more terminals
come online, including the Elba Island facility near Savannah, Georgia. (Source)
