.The Texas Energy Report

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.The Texas Energy Report

Moody’s Downgrades AEP, AEP Texas, OK PSO and Ohio OPCo Senior Unsecured Notes, But Secure Outlook

“Weakened financial profiles…large capital programs…increased use of leverage.” Yet AEP reported strong 2Q growth earlier on Thursday.

 

August 7, 2020

Moody’s Investors Service said on Thursday it’s downgraded the long-term ratings of American Electric Power Company, Inc. senior unsecured down to to Baa2 from Baa1 and subsidiary AEP Texas Inc., with senior unsecured down to Baa2 from Baa1.

Moody’s also said it downgraded Ohio Power Company (OPCo) senior unsecured to A3 from A2, and Public Service Company of Oklahoma (PSO) senior unsecured to Baa1 from A3.

At the same time, Moody’s revised the outlooks for AEP, AEP Texas, OPCo and PSO to stable from negative.

AEP earlier on Thursday had reported strong second-quarter 2020 GAAP earnings of $1.05 per share; second-quarter 2020 operating earnings of $1.08 per share and reaffirmed 2020 operating earnings (non-GAAP) guidance range of $4.25 to $4.45 per share and 5% to 7% long-term growth rate…….
 

TXOGA Statement on Railroad Commission Actions to End Routine Flaring

August 5, 2020

“The data provided by the Railroad Commission confirms that both industry and regulators are continuing to make great strides on environmental progress. The rate of flaring being reduced by 79% is highly significant when you consider, at minimum, more than one-third of the reduction came before the curtailment of production in response to the pandemic. The focus on implementing a greater use of technology will continue to spur innovation which is a hallmark of this industry. I appreciate the Commissioners’ leadership and the member companies who participate in the Texas Methane & Flaring Coalition. The Coalition looks forward to reviewing the proposal and remains committed to its goal of ending routine flaring in Texas.”….
 

Economic Contraction Hits Petroleum Companies Hard

By Alex Mills

 

August 6, 2020

Financial analysts within the petroleum industry suspected that the news was going to be bad, but the severity of the downturn has been overwhelming.

The financial performance of the upstream oil and gas producing companies during the first half of 2020 was at record lows. Even the large integrated companies announced recently second quarter losses. It is unusual that the major oil companies all report losses. ExxonMobil reported a loss of $1.1 billion, Chevron $8.3 billion and BP $17.7 billion.

Others reporting this week were Diamondback Energy, based in Midland, stating a loss of $2.39 billion, Continental Resources, based in Oklahoma City, announcing $239 million loss, offshore producers Noble Corp. and Fieldwood filing for bankruptcy protection under Chapter 11.

Overall, 23 North American petroleum companies, with some $30 billion in debt, have filed for bankruptcy this year, according to the law firm of Haynes and Boone….
 

How Utility Customers Will Pay for the Pandemic

By Andrew G. Campbell, Energy Institute at Haas

 

August 4, 2020

The coronavirus pandemic has thrown public finances into turmoil. Legislators and city councils are wrestling with what services to cut—health care, education, public safety. They’re also starting to look at what taxes to increase. Universities and many private sector industries are facing similar fiscal crises. Meanwhile, regulated electric utilities are in pretty good financial shape, but this isn’t because their businesses have been insulated from the pandemic.

Utilities have had to adopt more expensive operational practices to keep workers safe, more customers aren’t able to pay their bills, and electricity sales have dropped. The Energy Information Administration projects that electricity consumption will drop by 4% from 2019 to 2020. That would be the biggest annual percentage drop in electricity sales in over 20 years. The commercial sector demand is forecasted to drop 7%.

In the face of such significant challenges, you might expect public utilities commissions and utility corporate board rooms to mirror legislatures with tough decisions being made that trade off customer costs, reliability, safety and company profits. But that’s not the case. Utilities can continue spending in the face of lost revenues with confidence that they’ll be able to charge customers for the losses in the near-future….
 

TIPRO Releases 2020 Midyear “State of Energy” Report

August 1, 2020

A new report released Wednesday, July 29, 2020, by the Texas Independent Producers & Royalty Owners Association (TIPRO) shares data and analysis on oil and natural gas production and employment trends over the first half of the year. TIPRO’s 2020 Midyear Texas Energy Report, part of the association’s “State of Energy” report series, projects the oil and gas industry supported 321,455 direct jobs in the state of Texas during the first half of 2020, representing an estimated decrease of over 39,500 jobs compared to the previous year. Oil and gas jobs in Texas paid 130 percent higher wages than the private sector, with annual industry wages averaging $134,000 and state payroll totaling $43 billion, a decrease of $400 million in direct oil and gas payroll compared to 2019, cites new findings from the TIPRO report.

“Despite an unprecedented array of challenges facing our industry, the Texas oil and gas sector remains one of the most significant economic contributors in the Lone Star State, as evidenced by findings of the new midyear TIPRO report,” said Eugene Garcia, chairman of TIPRO and president of San Antonio-based Hurd Enterprises. “In the first half of the year, the Texas oil and gas industry yet again accounted for 40 percent of all oil and gas jobs nationwide, and today is still the largest producer of oil and natural gas in the country by a substantial margin.”

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Energy consumption falls amid COVID-19 pandemic

By Alex Mills

 

July 30, 2020

Demand for energy dropped to historic lows across the United States in April, according to a new report from the Energy Information Administration.

The COVID-19 pandemic created a collapse in economic activity since the beginning of the year. The oil and gas industry has been especially hard hit. The three largest service companies – Schlumberger, Halliburton, and Baker Hughes (BJ Services) – announced recently massive layoffs. Schlumberger, the largest, said 21,000 employees will lose their jobs.

During the next several weeks, all public companies will be announcing their second quarter financial reports and it will be a surprise if any company can report a profit.

EIA reported on Wednesday that American consumers used the lowest amount of energy in April since September 1989, and consumption fell 14 percent compared to April 2019, which was the largest year-over-year decrease since EIA started monitoring energy consumption in 1973.

April was the height of stay-at-home measures enacted to mitigate the spread of COVID-19, which caused a large drop in transportation, industrial, and commercial sector energy consumption, EIA stated.

The huge decline in consumption has been a major contributor to an oversupply of oil and natural gas, which has resulted in lower prices and lower prices have resulted in negative financial performance. Oil prices dropped from $60 per barrel in January to $15 on April 1, the first day of the second quarter. Oil closed at $41.30 on Wednesday for West Texas Intermediate (WTI).

Meanwhile, crude oil inventories declined from 536 million barrels last week to 525 million barrels this week. Inventories remain near the record high of 540 million barrels set just a month ago….
 

Update: Mont Belvieu Pipeline Explosion Caused By Contractor Cut

Update includes statement from Lone Star NGL

July 29, 2020 updated 10;21 pm

Firefighters are battling flames at the Lone Star NGL facility east of Houston at Mont Belvieu, where a natural gas pipeline apparently exploded and materials caught fire after being accidentally cut Wednesday afternoon by a contractor.

At about 4:45 p.m., the rupture and fire was reported on the line owned by Lone Star NGL, company officials said.

Officials say the fire “is contained,” describing it as an “industrial accident” which will be allowed to burn out overnight…….
 

Kinder Morgan Sees $1 Billion Write Down, Shows $637 Million Loss in 2Q

Kinder Morgan wrote down $1 billion in the second quarter, leaving it with an overall loss of $637 million.

That’s compared with a $518 million profit in 2Q last year.

The Houston pipeline and storage company announced quarterly earnings of $0.17 per share on Wednesday, missing the Zacks Consensus Estimate of $0.18 per share.

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