RJ EnergyGroup Thursday, January 25, 2007 8:50 AM
Daily Update
Energy Markets: Oil continued its climb yesterday, despite a bearish build to U.S. petroleum inventories and has risen over 10% since briefly touching below $50/Bbl last Thursday. Cold weather continues to blanket the northeast, which should drive winter fuel demand higher in the largest domestic heating oil markets. Also, while Bush's plans to double the U.S. Strategic Petroleum Reserve (SPR) by 2027 (from 0.75 billion barrels to 1.5 billion barrels) should provide only a slight incremental demand for crude, the announcement may in fact be causing traders to reevaluate their assumptions concerning the overall oil market.
On the natural gas front, prices are moderating slightly following the recent surge. The EIA will issue its weekly natural gas storage report today; we are expecting a withdrawal in the range of 173-183 Bcf, while the Street is looking for a withdrawal range of 170-173 Bcf.
Occidental Petroleum (OXY/$46.20/Strong Buy) Reports 4Q06 EPS; Record High Production in 2006. Occidental posted 4Q06 operating earnings of $0.98 per diluted share, slightly below our estimate of $1.00 but exceeding consensus of $0.93. The shortfall to our estimate came mainly from higher operating costs and DD&A expense along with lower-than-forecasted earnings from the chemical segment. Bottom line: While the numbers in 4Q06 came in slightly below our expectations, Occidental handily beat consensus estimates. Production from the company's oil and gas segment reached an all-time high in 2006, while cost efficiencies continue to show up on the bottom line. Key topics for the conference call: drilling program in Libya, Dolphin gas project.
Blame Canada: BJ Services (BJS/$27.96/Outperform) misses by 8%, with F1Q07 EPS of $0.70. BJ missed our estimate by $0.06 per share: U.S./Mexico $(0.01), International including Canada $(0.02), Oilfield Services Group $(0.01), and G&A $(0.02). Operating income out of Canada pressure pumping was less than half of last quarter's and the year-ago quarter's. However, management remains positive on Canada, expecting a 25% revenue improvement next quarter. BJ Services' new guidance for next quarter is a range of $0.73-0.75 per share.
SunPower Corp. (SPWR/$41.34/Outperform) reports record revenue, margin, EPS in 4Q06. SunPower posted 4Q06 operating earnings of $0.18 per diluted share, setting a new company record and beating our estimate (same as consensus) of $0.17. The upside came from a combination of slightly higher-than-expected revenue and gross margin. EPS soared nine-fold from $0.02 in the year-ago quarter. Reported net income of $0.15 per share, also a record, included amortization of intangible assets and stock-based compensation. Revenue in the quarter was a record $74.5 million, and the gross margin reached a record 30%.
ATP Oil and Gas (ATPG/$40.12/Market Perform) Announced Expansion at Gomez. ATP has acquired several properties adjacent to the Gomez area, including a 100% working interest in a discovery well MC 755 (Anduin), which the company plans to recomplete and establish production in the second half of the year. Once the MC 755 #2 well at Anduin has been completed, the company will earn interests in two other wells: a 50% working interest in MC 754 and a 25% working interest in MC 800 (Gladden). Drilling for MC 754 is planned in late 2007 with Gladden scheduled to be drilled in 2008.
Inergy (NRGY/$29.78/ Strong Buy), Global Partners (GLP/$25.70/Outperform), and Suburban Propane Partners (SPH/$37.50/Outperform) announce distribution increases. Global Partners' new distribution represents a 10.3% increase since the partnership's inception in September 2005. Suburban's distribution increase represents its 12th increase and is a 12% increase from its first quarter in 2006. Inergy continued its streak of distribution increases for the 21st consecutive quarter. Neither Global nor Suburban have announced reporting dates, but Inergy is on the calendar for February 7. |
