For the week ending August 8, 2014, the number of horizontal rigs increased by 19 to 1,317 from 1,298 a week ago. This also marks a record for the number of horizontal rigs.
The U.S. onshore—or land-based—rig count increased by 18 rigs, from 1,814 to 1,832, during the week ending August 8. The number of offshore rigs increased by four, to 62 compared to 58 during the prior week.
The U.S. total drilling rig count increased by 19 rigs, from 1,889 to 1,908, during the week ending August 8, according to Baker Hughes, which publishes rig counts every week.
VLO and MPC have similar EV’s—roughly the summation of a company’s equity and net debt—ranging between $25 and $29 billion—VLO has the lower EV to earnings before interest, taxes, depreciation, and amortization (or EBITDA) multiple of 4.6x.
Crude differentials to Brent are important to domestic refiners because they determine their margins—refiners buy domestic crude to produce refined products, like gasoline and diesel, which are then sold based on international Brent benchmarked prices.
Throughput margins were higher on account of wider discounts on light sweet, medium sour, and heavy crude oil in the Gulf Coast—the Quebec refinery’s increased consumption of North American light crude in the second quarter, also played a role in driving margins higher.
Net income reported for this quarter reflected discontinued operations at Valero’s Aruba refinery—as a result of this, the company recognized a loss of $63 million associated with asset retirement and other obligations related to the Aruba refinery.
VLO noted that the increase in throughput volumes was due to fewer of VLO’s plants undergoing maintenance, and higher utilization rates that were driven by the availability of discounted North American light crude oil on the U.S. Gulf Coast.
Prices increased slightly last week due to expectations of warmer weather—implying increased usage of air conditioners which increased demand for natural gas—however, expectations were short-lived as cool weather settled in once again.
Natural gas prices directly affect earnings of gas-weighted producers such as Chesapeake Energy (CHK), Cabot Oil and Gas (COG), Anadarko (APC), and Devon Energy (DVN).
The WTI-Brent spread closed at $7.67 per barrel on Thursday, August 6, compared to $7.85 per barrel at the prior week’s close—the spread has now expanded back to well over $8—levels last seen in June.
The drop in Cushing inventories in the past few months is a result of expanded pipeline takeaway capacity and unusually high refinery runs this year.
Distillates inventories, much like gasoline inventories, showed an unexpected decline of 1.8 million barrels versus analysts’ expectation of an addition of 0.6 million barrels.
While crude inventories have been falling for six consecutive weeks, the latest decline is the smallest in the period—last weeks’ decline in crude inventories was 3.7 million barrels.
If the increase in crude inventories is more than expected, it implies either greater supply or weaker demand than anticipated—a more-than-expected increase in crude inventories pulls crude prices lower.
XOM’s total debt is the lowest in the group—since it has the highest EBITDA figure, its debt-to-EBITDA multiple, at 0.3, is the lowest in the group.
From 2Q13 to 2Q14, XOM’s total production of natural gas and liquids decreased 5.7% on an oil equivalent basis—the fall was even higher on a sequential basis.
XOM’s underperformance over the industry index and the broader market signals investor’s lack of confidence in the company’s performance—however, the company has consistently improved its earnings over the past five quarters.
XOM acquired the property from Linn Energy (LINE) in exchange of its interest in the Hugoton gas field in Kansas and Oklahoma—the property’s current production capacity is 2,000 barrels of oil equivalent per day (or Boe/d).
Natural gas production decreased to 10.7 billion cubic feet per day in 2Q14 from 11.3 billion cubic feet per day in 2Q13—a decline of 5.3%.