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Msg  137565 of 139054  at  6/15/2022 9:41:54 AM  by


Energy & Utilities Roundup: Market Talk

Dow Jones Institutional News; New York [New York]. 14 June 2022.

The latest Market Talks covering Energy and Utilities. Published exclusively on at 4:20 ET, 12:20 ET and 16:50 ET.

1046 ET - Harold Hamm made an offer of $70 a share to take Continental Resources private, but Bill Smead of Smead Capital Management tells WSJ he sees the offer as too low. Smead Capital is the largest institutional shareholder of CLR with 1.99% of the company, or 7.4M shares. Smead says he isn't surprised to see a move to go private being that the stock market has undervalued oil stocks while overcapitalizing green-energy stocks. He suspects Hamm believes institutional firms don't know the value of oil companies, saying the minimum bid for CLR should be $100/share at least. Smead believes that with analysts using $70 a barrel for oil, Hamm will only be paying 60 cents on the dollar for CLR shares. At $110/bbl, it's worth $110 or more. (

0959 ET - Natural gas prices drop 16% to $7.211/mmBtu after Freeport LNG, the nation's second-largest LNG exporter, says in an email it's not likely to see operations fully back to normal until late 2022 following last week's fire and explosion that shut down the plant completely. It says, however, that the plant could see a resumption of "partial operations" in about 90 days. The company previously said it would be shut down for at least three months, and so this news of even a partial restart still being three months away is bearish in that overall feedgas to LNG facilities demand could remain subdued for a while. (

0953 ET - Continental Resources got a $70/share "take private" offer from Harold Hamm on Tuesday, but Truist analyst Neal Dingmann said that may not be the final price. He sees the non-binding offer as a potential door opener to competing bids from large cap public peers. Truist has a price target of $95 a share for Continental stock. Hamm assures little change to compensation and operations, and that may lower the expectation of a winning outside bid. Truist says the deal says more about the M&A market and differing views on oil prices, that the Hamm family hasn't already had an outside bid prior to this offer, and expects the shares to trade with a very small discount or even a premium to the $70/share offer in the near term as investors anticipate potential outside offers. Continental shares rise 14% to $73.33. (

0726 ET - The benefits of the merger proposal between Tullow Oil and Capricorn Energy are heavily skewed to Tullow largely on cash-backed valuation grounds, Bank of America says in a note. This reinforces the bank's view that the necessary 75% shareholder approval is unlikely to be obtained, although its analysts don't rule out a completion. "We don't rule out a Capricorn-Tullow merger completing, but we expect that improved terms would be needed to obtain shareholder approval and most likely via a cash return component," the bank says. BofA estimates a fair value of 400 pence a share for Capricorn, almost double the value implied via the proposed share exchange. (

0611 ET - A project to boost the exchange of electricity between Spain and France through a subsea link has been pushed back, Spain's grid operator Redeia, formerly Red Electrica, said Monday. The new subsea cables will start operating between 2026 and 2027, two years after initially planned. The project, which will result in an increase in the Spanish-French interconnection capacity from 2.8 gigawatts to 5 gigawatts, would help guarantee the supply of electricity as the European Union works to end energy imports from Russia by 2027. Redeia's long-term projects are going to increase its capital work-in-progress, which is set to peak at EUR1.8bn in 2024, analysts at RBC Capital Markets say in a note, adding that they expect it to fall to roughly EUR1.1bn in 2027. (

0545 ET - The merger between upstream companies Tullow Oil and Capricorn Energy makes sense strategically because of the combined scale that it brings, Jefferies says in a note. The deal would create a group with production potential of more than 120,000 oil-equivalent barrels a day in 2025. At the moment, there are only five European-listed upstream companies producing more than 100,000 barrels a day, Jefferies notes. But the proposal has received a mixed response from investors and the value ascribed to Capricorn in the all-share ratio (47%) appears one of the issues being questioned, Jefferies says. The merger is seen by the market as more positive for Tullow because of the improved balance sheet provided by Capricorn, the bank says. (

2200 ET - The extended outage at AGL Energy's Loy Yang A coal-fired power plant could limit maintenance opportunities over the Australian summer, Macquarie analysts say in a note. The increased risk is more of a concern to the analysts than the outage's hit on pretax earnings, which they estimate at A$40 million in FY 2023. AGL had initially hoped to have the affected unit operating again by Aug. 1, but said last week it would reopen about six weeks after that due to a shortage of materials. AGL's board appears to be looking for external skills for its new CEO, the Macquarie team adds. Macquarie is unrated on the stock, which is down 2.5% at A$8.52. (; @StuartLCondie)

1856 ET [Dow Jones]--Authorities' responses to the current gas shortage gripping eastern Australia could benefit pipeline operator APA, Macquarie research analysts say in a note. The crisis will likely add momentum for having more gas storage options, which can be accessed to top up supply, Macquarie says. There are potential locations in Victoria, South Australia or Queensland where there are existing facilities, says Macquarie. "All the locations offer potential for pipeline expansions," the bank says. An upgrade of the Iona gas processing and storage facility in Victoria through a development of the Heytesbury fields could add 4 petajoules of gas to storage, Macquarie says. Still, the timeline for development is three years. Alternatives are storage at Moomba in South Australia or Roma in Queensland. (

1849 ET--Santos shares could move higher if the Australian energy company provided a more precise dividend policy, Macquarie research analysts say in a note. Currently, Santos aims to pay out more than 40% of free cash flow when oil prices are above US$65/bbl. It has also launched a program to buy back shares worth up to US$250 million. "Following asset sales (Alaska and Papua New Guinea), Santos may be able to provide more clarity on this (particularly if shares have re-rated to more than A$10/share as we expect)," Macquarie says. Santos ended Friday at A$8.53. (; @dwinningWSJ)

1838 ET - Australian fuel refiner and marketer Ampol has the edge over Viva Energy in UBS's view. That is because Ampol has more earnings growth that is separate from the ongoing recovery in fuel demand, analyst Joseph Wong says in a note. "We forecast A$100 million of Ebit growth over FY 2022-2025 (or 24% of total Ebit growth ex Lytton) that is separate from the fuel-volume recovery," Wong says. "Most of this growth will be from additional trading arbitrage opportunities (of A$50 million) from the integration of Z Energy." UBS also expects A$30 million of Ebit growth from Ampol's Convenience Retail business as the company realizes benefits from initiatives implemented over the past two years to optimize labor costs and close poorly performing sites. (; @dwinningWSJ)


June 14, 2022 16:50 ET (20:50 GMT)

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