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Energy & Utilities Roundup: Market TalkDow Jones Institutional News; New York [New York]. 03 Feb 2023. The latest Market Talks covering Energy and Utilities. Published exclusively on at 4:20 ET, 12:20 ET and 16:50 ET. 0846 GMT - There is unlikely to be an immediate impact on Adani Group's various rated entities and securities, following fraud allegations from U.S. based short seller Hindenburg Research, Fitch Ratings says in a release. Fitch also doesn't expect any material impact to its forecast cash flow. Adani doesn't have any significant offshore bonds maturing in the near term,the ratings agency adds. Fitch currently has ratings on eight entities under the Adani Group, including Adani Transmission. "Our ongoing monitoring will be looking closely at any major changes to the rated entities' access to financing or cost of financing on a long-term basis, unfavorable regulatory/legal developments or ESG-related matters that could affect credit profiles," Fitch Ratings adds. (yiwei.wong@wsj.com) 0523 GMT - Adani Group stocks' recent selloff raises the risk that they could be removed from indexes, which could further weigh on investor confidence, says Saxo Markets market strategist Charu Chanana in an email. "One of the big risk factors to watch for now is if more indices remove Adani stocks, as was done recently by the Dow Jones Sustainability Indices. This can result in foreign outflows as funds sell Adani stocks, further aggravating confidence issues," the strategist says. However, she thinks that Adani companies will still be able to service near-term debt obligations despite Adani's flagship company calling off its follow-on public offering. Adani Group's shares extended losses this week, led by flagship company Adani Enterprises, which is down 35% at INR1,017.10. (yiwei.wong@wsj.com) 0242 GMT - CSE Global's earnings stand to benefit from its recent acquisition of Radio One Group in the U.S., UOB Kay Hian analysts say in a research note. They upgrade the stock to buy from hold and raise the target price to S$0.45 from S$0.37. The brokerage views the deal positively, as the acquisition's valuation seems attractive and is highly accretive because it may boost CSE Global's 2023 earnings by roughly 20%, assuming Radio One Group's 2022 earnings can be maintained. Also, the Singapore-listed provider of systems integration and IT solutions has won two major contracts worth S$87 million in the U.S. and Singapore, the analysts add. Shares are 1.3% lower at S$0.39. (ronnie.harui@wsj.com) 2106 GMT - National Fuel Gas lowers its outlook for the remainder of FY23 given the decline in natural-gas prices. The natural-gas producer and distributor guides for EPS between $5.35 and $5.75, down from its prior forecast between $6.40 and $6.90. The company also says it's now assuming that the Nymex natural gas prices will average $3.25 per MMBtu for the remainder of FY23, down from $5.17 per MMBtu average in its prior assumption. Shares rise 1.4% after hours. (denny.jacob@wsj.com; @pennedbyden) 1920 GMT - Stifel is sticking with its S&P 500 prediction of 4,300 by spring 2023, but the investment bank now says it sees risk likely rising in 2H. Strategist Barry Bannister says an economic slowdown may coalesce around mid-2023 just as investor confidence is rising, and although he sees inflation falling through 3Q the inflation rate may turn up again on energy or China concerns late this year, which would alarm the Fed. Bannister says such elements as a widening of corporate spreads could then cause a sell-off later in 2H as the loosening of financial conditions in 1H proves temporary and the S&P 500 in 2H potentially gives back some of 1H gains. (patrick.sheridan@wsj.com) 1541 GMT - A Kinder Morgan pipeline that's been shut for 17 months due to a blast that killed a father and his daughter and has made already-high natural gas prices on the West Coast even higher, may restart soon, says East Daley Analytics. Kinder Morgan late last month asked for regulatory approval to reopen the EL Paso Line 2000. "East Daley expects El Paso to be fully back online within the next month, increasing capacity to California by 620 MMcf/d," the Colorado-based analytics firm says in a note. While benchmark US natural gas prices have plunged 60% in seven weeks to around $2.50/mmBtu, prices on the West Coast are still fetching $10 or higher. (dan.molinski@wsj.com) 1518 GMT - There remains some uncertainty over project risk for TC Energy, but its shares look to have priced in enough negativity, CIBC reckons. The C$3.3B increase in the projected cost for the Coastal GasLink pipeline project was more than the C$2B CIBC anticipated, and CIBC notes there could be a further C$1.2B in costs if construction lags into 2024 and the funding plan for the cost overrun relies on asset sales. Still, CIBC says that disposals could start to be announced midyear, allowing for a close by year end, which could serve as a catalyst for the shares. TC also is maintaining its 3%-5% dividend growth outlook. CIBC trims its target by C$1 to C$62. TC shares are up 1.5% at C$54.93. (robb.stewart@wsj.com; @RobbMStewart) 1552 GMT - Esken has at least two years of financial headroom to realize longer-term value, dispose of non-core assets, and wait out aviation's recovery, Canaccord Genuity analyst Damian Brewer says in a note. FY 2024 estimates for the infrastructure company are supported by renewed funding to November 2025-26, a strategic review, FY 2024 renewables Ebitda set to lift to around GBP23 million, and aviation Ebidta losses which have the scope for significant upside operating leverage as market demand recovers in London, Brewer says. "Esken shares carry significant risk but also scope for upside potential, due to its debt to equity enterprise value mix, and Aviation's upside leverage into demand recovery after the U.K. recession," they say. Canaccord rates the stock buy. (anthony.orunagoriainoff@dowjones.com) 1415 GMT - Raizen SA will likely encounter a much stronger backdrop in the 2023-2024 crop year that starts in April, said BTG Pactual analysts in a research note. The Brazilian sugar ethanol and ethanol maker and fuel distributer is scheduled to publish its 4Q earnings report on Feb. 14. Sugar and ethanol companies' quarterly earnings are generally not very meaningful because they can sell inventories in any given period, but prices for the sweetener and the alternative fuel should improve later this year, and fuel distribution should offer predictable cash flow generation, said BTG, which has a buy rating for Raizen. (jeffrey.lewis@wsj.com) 1357 GMT - ConocoPhillips' 4Q earnings report shows the company is producing more than expected while also building up a stronger base of reserves for future output, says Third Bridge's Peter McNally. "ConocoPhillips finished 2022 on a solid note with production volumes exceeding consensus forecasts by 1.5%, and the US-based oil producer delivered a very strong reserve replacement ratio of 177%," McNally says. "Adjusted earnings per share in the fourth quarter were $2.71 were essentially in line with analyst estimates. Looking ahead to 2023, ConocoPhillips plans to invest equally in its asset base as shareholder returns ... Total shareholder returns through dividends and share repurchases are expected to be US$11 billion." Shares fall 4.9%. (dan.molinski@wsj.com) 1349 GMT - Raymond James remains bullish on TC Energy, arguing the cost overruns to the company's Coastal GasLink pipeline project aren't as extreme as the market is pricing in. Since warning of cost pressures in late November, the question has been the magnitude of the overrun, which TC Energy has now answered with an updated C$14.5B budget, up C3.3B. But Raymond James notes C$12B has been cut from TC Energy's equity value since November, which it says suggests the fall in the shares is overdone and results in a valuation hard to justify. Or ignore. It has a C$62 target on the shares, which are up 1.1% at C$54.75. (robb.stewart@wsj.com; @RobbMStewart) 0955 GMT - Shell needs to be wary of negative public and political reaction to its announcement of record annual profit, AJ Bell says. While shareholders will inevitably be pleased, "the optics aren't great" and will do nothing to quieten demands for further windfall taxes, Bell says. Legal action that the company is facing over claims that oil spills have caused pollution in Nigeria also cast questions over its environmental, social and governance credentials, Bell says. "Shell needs to be careful--already oil and gas prices have retreated from their 2022 highs and if it pursues profit today at the expense of making the business sustainable for the future, the markets may judge it harshly," Bell's investment director Russ Mould writes. (philip.waller@wsj.com) (END) February 03, 2023 04:20 ET (09:20 GMT) |
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