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Monday's Energy Stocks: Energy equities enjoy gains on global oil output cuts

A global pact to slash crude production bolstered energy stocks on Monday, Dec. 12, allowing energy equities to pick up gains while broader indexes opened the week in mixed trading.

The SNL Energy Index advanced 0.41% to 277.01, along with the Dow Jones Industrial Average, which increased 0.20% to 19,796.43, though the S&P 500 slipped 0.11% to 2,256.96.

OPEC managed to secure the support of 11 other oil-exporting nations in a joint output-cut pact Dec. 10, highlighting a show of strength and unity across global producers. The deal will amount to an extra 258,000 bbl/d to the 1.5 million bbl/d in cuts agreed upon between OPEC and Russia on Nov. 30 in Vienna.

While OPEC said it was not targeting prices, Gary Ross, executive chairman of Pira Energy Group, noted that there are two objectives at work: eliminating surplus stocks and keeping prices in a $50 to $60 range by targeting $60 a barrel.

Electric utilities topped energy equities, as the SNL Electric Company advanced 0.69% to 419.17. Among outperformers, Consolidated Edison Inc. posted the highest gains, climbing 1.93% on average volume to close at $72.82. This was followed by Southern Co., which earned 1.63% in below-average trading to settle at $48.72, and American Electric Power Co. Inc. climbed 1.57% in below-average volume to finish at $61.95.

Fortis Inc. also shed 0.42% on light volume to finish at C$40.27, after it closed an offering of C$500 million of 2.85% senior unsecured notes, to repay short-term debt and for general corporate purposes. The notes are due Dec. 12, 2023.

Among midstream companies, Cheniere Energy Inc. lost 0.02% on robust volume to settle at $43.00, after Credit Suisse analysts lowered their target for the company following the termination of its attempted takeover of its master limited partnership. The analysts set their target price for Cheniere at $52, down from $54.

EQT Midstream Partners LP also saw its shares fall 1.28% in above-average trading to close at $71.79, after it reported an increased distributions forecast in 2017 on the back of new gathering projects and a 9% growth in shale gas production from its producer sponsor, EQT Corp.

The midstream master limited partnership said 2017 net income should be between $555 million and $595 million, 32% more at the midpoint than analysts' expectations reported to S&P Global Market Intelligence before the Dec. 12 announcement. It said distributable cash flow should grow enough to support a 20% increase in per-unit distributions for 2016.

EQT Corp. which gave up 6.43% on more than four times average volume to close at $69.90.

Meanwhile, Valero Energy Partners LP gained 0.60% on weak volume to end at $40.07, after it completed its underwritten public offering of $500 million of 4.375% senior notes due 2026. The notes received an investment-grade rating Dec. 2, the day they were offered, thus freeing Valero Partners Operating Co. LLC from guarantees of obligations under the partnership's revolving credit facility and from subordinated loan agreements with Valero Energy Corp., according to a Form 8-K filed Dec. 8.

The SNL Midstream Energy Index lost 0.18% to 117.23, while the SNL Merchant Generator retreated 0.40% to 83.44. Dynegy Inc. dropped 7.35% to $8.32 on above-average volume and NRG Energy Inc. declined 2.02% to $12.60 in heavy trading.

January 2017 natural gas tumbled Monday as moderating weather outlooks looked to sap demand and limit the amount of natural gas drawn from stocks. The contract was last seen 23.9 cents lower at $3.507/MMBtu.

Market prices and index values are current as of the time of publication and are subject to change.