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Jan. 16-20: Trump sworn in; activist investors eye NRG

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Jan. 16-20: Trump sworn in; activist investors eye NRG

A brief look back at successes and setbacks in the energy industry.

Highs

TRUMP — Donald Trump was sworn in Jan. 20 as the 45th president of the United States, ushering in what is likely to be a new national energy policy characterized by fewer regulations and a more pro-fossil fuel development stance. Trump's inauguration capped a week in which his selections for energy-related cabinet positions emerged from confirmation hearings largely unscathed. Interior nominee Rep. Ryan Zinke, R-Mont., faced little direct opposition in his hearing, nor did Secretary of Energy nominee Rick Perry. At a packed hearing Jan. 18, Oklahoma Attorney General Scott Pruitt, Trump's pick to lead the U.S. EPA, faced tough questions from Democrats on his environmental record and previous litigation against the agency he seeks to lead.

GULFPORT ENERGY Gulfport Energy Corp. saw shares climb 3% Jan. 18 after the company reported 2016 oil and gas production up 31% compared to 2015, despite a sharp decline in capital expenditures. Gulfport did not report its CapEx, but analysts estimated it spent $555 million on CapEx in 2016, about 26% less than the $747 million spent in 2015. Gulfport reported fourth-quarter 2016 production of 787 MMcfe/d, made up of 87% gas, 9% liquids and 4% oil.

KINDER MORGAN — Kinder Morgan Inc. notched a fourth-quarter profit in 2016 and hit consensus, a significant improvement over fourth-quarter 2015, when the company reported a loss of $721 million, or negative 32 cents per share. Kinder Morgan reported fourth-quarter 2016 net income of $170 million, or 8 cents per share. Normalized earnings were 18 cents per share in the fourth quarter of 2016, matching the S&P Capital IQ consensus. For full-year 2016, Kinder Morgan reported net income of $552 million, or 25 cents per share, up from $227 million, or 10 cents per share in 2015. Executive Chairman Richard Kinder also said the company is weighing a joint venture or IPO for its Trans Mountain oil pipeline expansion project.

FIRSTENERGY — FirstEnergy Corp. took a major step forward in its exit from the merchant business with its Jan. 19 announcement of a $925 million all-cash deal to sell nearly 1,600 MW of competitive generation capacity to LS Power Group. Wall Street analysts said the deal values the assets at nearly $600/kW. "All told, we viewed yesterday's announcement favorably as the cash proceeds were higher than we estimated for [FirstEnergy subsidiary Allegheny Energy Supply Co.]'s portfolio," Wells Fargo analyst Neil Kalton wrote.

Between

NRG — NRG Energy Inc. shares rallied more than 5% on Jan. 17 after news broke that an activist investor group led by Elliott Management Corp. and a former TXU Corp. CEO acquired 9.4% of the merchant generator's shares, with the goal of boosting shareholder value. Elliott and its partner, private equity firm Bluescape Energy Partners LLC, which is chaired by former TXU CEO John Wilder, said they see NRG securities as "deeply undervalued" and that "numerous opportunities" exist which could be pursued to drive improvements. Analysts widely expect those strategic improvements to include potential exits from NRG's holdings in NRG Yield Inc. or its GenOn Energy Inc. fleet. "[W]e believe that there may be opportunities to lower operating costs at NRG's fleet either through efficiencies or rationalization of supply that may be uneconomic in the longer term," Barclays Capital Inc. analysts wrote.

Lows

ENERGY TRANSFER — A federal judge denied a request filed Jan. 16 by Energy Transfer Partners LP to stop the U.S. Army Corps of Engineers from launching an environmental review of the nearly complete Dakota Access pipeline. Judge James Boasberg of the U.S. District Court for the District of Columbia denied Dakota Access the order it sought restraining the Corps from opening the environmental impact statement process, saying Dakota Access had not overcome the bar of irreparable harm required for a restraining order. The EIS review could further delay completion of the $3.7 billion pipeline, though some observers noted that it is possible the incoming Trump administration could reverse the Corps' action.

WYOMING RENEWABLES — Wyoming state legislators are pushing a bill that would forbid utilities from selling power to customers from utility-scale wind and solar installations. The legislation would impact PacifiCorp's Rocky Mountain Power division and Black Hills Corp. subsidiary Black Hills Energy. Describing it as a kind of reverse renewable portfolio standard, Powder River Basin Resource Council attorney Shannon Anderson noted that the bill has not yet been assigned to committee and that may be a sign it does not have much support.

DON BLANKENSHIP — Despite flagging some issues with the way the lower court handled the case, the U.S. Court of Appeals for the Fourth Circuit on Jan. 19 upheld the conviction of former Massey Energy CEO Don Blankenship. The court affirmed the judgment of the U.S. District Court for the Southern District of West Virginia. Blankenship was convicted by a jury on charges that he conspired to violate mine safety laws.