From the Global Oil and Gas Patch: January 27, 2011
Current Long Positions in Hedgeye Virtual Portfolio……
Oil (etf OIL) – Initiated 1/19/11 @ $24.82
Current Short Positions in Hedgeye Virtual Portfolio……
Canadian Natural (CNQ) – Initiated 1/26/11 @ $42.65
Chart of the Day……
Key Metrics……
Must Know News……
MUR Misses Quarter…….Murphy (MUR) delivered a poor quarter last night, missing on EPS but beating revenue. EPS came in at $0.91 vs. $1.01 expected; revenue was $6.51B vs. $5.62B expected. Production in the quarter averaged 117k b/d vs. 138k b/d in 4Q09. For guidance, the company expects EPS in 1Q11 to be in the range of $0.55 - $0.95 vs. consensus estimate of $1.47. The company said that this estimate includes exploration expense of between $70 million and $160 million and downstream earnings of approximately $8 million during the quarter. (Company statements)
Hedgeye Energy’s Take: The quarter delivered from MUR was not a strong one, as higher production and exploration costs appear to have crimp margins. The stock is down ~12% this morning. We will have full details on MUR’s quarter after the company’s conference call today.
TNK-BP Shareholders File to Halt BP-Rosneft Deal……Russian billionaire shareholders in TNK-BP asked a London court to halt the share swap and Arctic exploration deal between BP Plc and OAO Rosneft, according to a copy of the filing read by Bloomberg News. The application was made to a commercial court in London yesterday and a hearing is scheduled for Feb. 1, according to the filing. BP shares fell on concern the move will reignite the disputes between the two companies that led to current BP Chief Executive Officer Robert Dudley being ousted as head of TNK-BP in 2008. TNK-BP accounts for about a quarter of BP’s production and a fifth of reserves. (Bloomberg)
Hedgeye Energy’s Take: TNK-BP, the Russian BP joint venture, feels left out in the cold and is playing hard ball, and they have a case. TNK-BP have an agreement with BP that any exploration by BP in Russia must be first agreed upon by TNK-BP, since the genesis of the TNK-BP arrangement was to function as an exclusive operating (E&P) unit within Russia only. BP’s agreement with Rosneft allows BP to participate in exploration deals within Russia without TNK-BP’s approval or participation. TNK-BP wants in a piece of the action and may get it. But they will have to deal with Putin who blessed the BP Rosneft deal, which is why they filed in London. We will keep our eyes on this one, always great to see Russians go at it amongst themselves.
CNOOC will Increase CapEx in 2011……Top Chinese offshore oil and gas producer CNOOC Ltd (CEO) plans to raise oil and gas output in 2011, the company said in a statement on Thursday. State-backed CNOOC said it aimed to produce 355-365 million barrels of oil equivalent (boe), compared with estimated output for 2010 of 327-329 million boe. CNOOC said it had targeted $8.8 billion (B) in capital expenditure for 2011, compared with $7.9 billon in 2010. (Reuters)
Hedgeye Energy’s Take: We think CEO could hit the above production targets, growing overall boe production ~12.5% in 2011 from 2010. At current prices and with a spending program of $8.8 B in 2011, CEO is expected to be significantly net cash flow positive after spending and dividends in 2011, possibly doubling from 2010 to ~$10/ADR and for successive years. E arnings look set to grow ~40% in 2011 to ~$22/ADR from 2010.
Lou Gagliardi
Kevin Kaiser