A roundup of some of the North American equities making moves in both directions today
On the rise
Cenovus Energy Inc. (CVE-T) was up almost 12 per cent after announcing before the bell a near 32-per-cent cut to its capital spending for the year and a temporary suspension of its crude-by-rail program as an erupting Saudi-Russia oil price war dealt a blow to the struggling Canadian oil industry.
Crude prices suffered their biggest one-day rout since the 1991 Gulf War on Monday as top producers Saudi Arabia and Russia began a price war that threatens to overwhelm global oil markets with supply.
The Toronto Stock Exchange energy index plunged 27 per cent on Monday, while Cenovus Energy dropped more than 50 per cent.
The company said as a result of the temporary suspension of crude-by-rail program, it will no longer be making use of credits under Alberta’s special production allowance and expects oil sands production to average between 350,000 barrels per day (bbls/d) and 400,000 bbls/d for the year.
This is about 6 per cent lower than the company’s earlier forecast.
Cenovus said it will continue to monitor the macro-economic and oil price environment and will look for additional opportunities to reduce operating and capital spending if necessary, and was deferring final investment decisions on major growth projects.
Franco-Nevada Corp. (FNV-T) increased 1 per cent after releasing better-than-anticipated fourth-quarter financial results after the bell on Monday.
Industrial Alliance Securities analyst George Topping said: “Year-to-date, FNV is up 10 per cent, gold is up 10 per cent, while the GDX (gold ETF) is down 7 per cent, and S&P 500 and TSX are down 15 per cent each. As mentioned in our Metal Price Update, with so much capital chasing a relatively tiny gold market (the top 10 gold equities account for $150-billion or 10 per cent of Apple’s [AAPL-Q, Not Rated] market capitalization), generalists looking for a quality, dividend paying, safe gold equity will continue to pick FNV. The current market gives Franco the upper hand in sourcing new royalties. We maintain our Buy rating and C$180.00/share target price.”
Chevron Corp. (CVX-N) was 5.3 per cent higher after saying it is looking at ways to cut spending, which could lead to lower near-term oil and gas production, following the recent collapse in the oil price.
The U.S. company is the first oil major to confirm it is reassessing its spending in the wake of the price collapse.
Oil prices have dropped by around a third over the past week after OPEC and allies led by Russia failed to agree on new output cuts and have let production curbs lapse this month.
The move was seen as an attempt to stymie the rapidly growing American shale oil industry which turned the United States to an oil exporter in recent years.
Chevron has said it plans to sharply boost its shale oil output in the coming years, but did not mention shale production specifically in its statement.
“We are reviewing alternatives to reduce capital expenditures, that are expected to lower short-term production and preserve long-term value,” Chevron said in a statement to Reuters late on Monday.
Unlike many oil and gas projects such as deepwater fields which require years of development, shale drilling can be switched on and off within weeks in most cases.
Chevron requires an oil price of around US$55 a barrel in order to fully cover its spending program as well as dividend payouts and share buybacks, according to JP Morgan analysts.
Tesla Inc. (TSLA-Q) increased 6.1 per cent after a government document viewed by Reuters revealed it plans to increase its production capacity for certain car parts at its US$2-billion factory in China, as it pushes to localize its supply chain in the world’s biggest auto market.
The U.S. automaker, which started delivering Model 3 electric sedans from its Shanghai factory in December, plans to add lines to make more battery packs, electric motors, and motor controllers, according to the document submitted by Tesla to Shanghai government.
Tesla, which as of end-December used about 70-per-cent imported parts for the cars it made in China, did not immediately respond to a Reuters request for comment.
But according to the document, Tesla wants to almost double its annual building capacity for cooling pipes, a key part in a car’s heat management system, to 260,000 sets a year from 150,000. It did not provide capacity details for other parts.
American Airlines Inc. (AAL-Q) and Delta Air Lines Inc. (DAL-N) rose 15.1 per cent and 4.5 per cent, respectively, after suspending 2020 financial forecasts on Tuesday and taking drastic further measures to combat the impact of the coronavirus.
Meanwhile, United Continental Holdings (UAL-Q) was up 12.4 per cent after announcing a capital raising and said it would post a first-quarter loss.
The sector has been hard-hit in the fast-spreading epidemic as tourists cancel trips and businesses across the globe clamp down on anything other than essential travel.
“This clearly is not an economic event. This is a fear event, probably more akin to what we saw at 9/11 than necessarily what we saw in 2009,” Delta Chief Executive Officer Ed Bastian told an industry conference.
Delta said it was cutting domestic capacity by 10 per cent to 15 per cent and international by 20 per cent to 25 per cent and freezing hiring across the company, offering voluntary leave options to staff and looking at early retirement of older aircraft.
It said it had seen net bookings fall by as much as 25 per cent to 30 per cent and expected the situation to worsen further.
American said it would cut domestic capacity by 7.5 per cent in April and international by 10% for the upcoming summer season, but has not announced major new steps on costs.
The airline said it had over US$7.3-billion in available capital as of March 9, and was “well-positioned” to manage through the crisis, noting that a fall in fuel prices is expected to drive about US$3-billion in 2020 cost savings. Oil sank to around a fifth in value on Monday.
United, which had already announced capacity cuts, said it had raised an extra US$2-billion in financing, bringing total liquidity to US$8-billion, while slashing its 2020 capital expenditure by more than a third to about US$4.5-billion.
Marathon Oil Corp. (MRO-N) jumped over 21 per cent after saying on Tuesday it has scaled back drilling activity and cut spending by at least 30 per cent from a year earlier, joining other shale oil producers in paring back day-to-day operations as oil prices tumble.
Crude prices suffered their biggest one-day rout since the 1991 Gulf War on Monday, as top oil producers Saudi Arabia and Russia began a price war that threatens to overwhelm global oil markets with supply.
Diamondback Energy Inc and Parsley Energy Inc , two of the largest shale independents, on Monday cut drilling to maintain cash flow above ongoing expenses. Parsley said it would cut its drilling rigs to 12 from 15 as soon as possible.
Marathon said it was reducing its 2020 capital to US$1.9-billion, US$500-million less than its 2019 spending.
“In response to the recent commodity price volatility from simultaneous supply and demand shocks, we’re taking swift and decisive action to defend our cash flow generation, protect our balance sheet, and fund our dividend,” said Chief Executive Officer Lee Tillman.
Honeywell International Inc. (HON-N) rose 5.8 per cent after reaffirming its first-quarter and full-year forecasts, and said it was monitoring the global macro-economic situation.
The company has previously said it expects 2020 sales of between US$36.7-billion and US$37.8-billion, and earnings per share of US$8.6 to US$9.
Honeywell, which makes everything from aircraft engine parts to warehouse automation equipment, said last month it was increasing production at multiple locations globally to address the growing demand for protective face masks in North America, Europe, India and China due to the rapid spread of the coronavirus outbreak.
The company released its presentation ahead of the J.P. Morgan Industrials Conference.
Blackstone Group Inc. (BX-N) was 7.8 per cent higher amid reports it is in exclusive talks to take SOHO China Ltd private in a US$4-billion deal, in one of its biggest bets yet on the Chinese market and which sent the target’s shares to a 21-month high.
The U.S. private equity firm entered exclusive discussions in early February with Hong Kong-listed SOHO China, a major prime office developer in China. The U.S. firm offered HK$6 ($0.77) per share to take the company private, said the people with direct knowledge of the matter.
The price represents an almost 100-per-cent premium to the HK$3.03 average price of SOHO China’s shares in January.
With files from staff and wires