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Baker Hughes profit to fall on Mideast Unrest, weather: Baker Hughes Inc.
expects profit to fall by $0.04 to $0.07 in the first quarter because of disruptions from
unrest in the Middle East and colder weather in North America. All customer activity in
Libya has ceased, and normal operations have resumed in Tunisia and Egypt, the
company said in a U.S. Securities and Exchange Commission filing. In addition, colder-
than-normal weather in North America has caused customers to postpone some work
from January and February to March, the company said. (Bloomberg)
Industry News
Oil heads for fifth weekly gain on Libya violence, U.S. demand: Oil rose, headed
for a fifth weekly gain in London, as civil unrest in Libya fueled concern that supply
disruptions will be prolonged while economic data from the U.S. showed signs of growing
demand. Brent crude gained as much as 1.2%, rebounding from yesterday’s decline, as
Libyan opposition leaders rejected a mediation offer by Venezuelan President Hugo
Chavez, an ally of Muammar Qaddafi, and armed rebels held out against regime attacks
and prepared to push toward the capital of Tripoli. A government report today may show
U.S. employers added workers last month, according to a Bloomberg News survey of
economists. (Bloomberg)
U.S. corporate credit-default swaps fall as oil prices ease: The cost of protecting
corporate bonds from default in the U.S. fell the most since Jan. 11 as oil retreated for the
first time in three days and stocks advanced. The Markit CDX North America Investment
Grade Index declined 2.5 basis points to a mid-price of 82.5 basis according to index
administrator Markit Group Ltd. Swaps on Weatherford International Ltd. fell a day after
the oilfield services company said it will have to restate past earnings (Bloomberg)
Oil-tankers rising 18-fold show refiners’ rush for crude: An 18-fold surge in oil-
tanker rates in two weeks is a sign that European refineries are rushing to secure cargoes
of crude from Libya as an uprising against leader Muammar Qaddafi disrupts supply.
Rental income from aframax tankers, capable of carrying about 600,000 barrels of oil,
was at $46,330 a day today, from $2,511 on Feb. 14, data from the Baltic Exchange in
London show. (Bloomberg)
Oil-spill panel's Reilly faults regulators: The co-chairman of the presidential panel
that investigated last year's Gulf of Mexico oil spill said the "regulatory apparatus" that
oversees offshore drilling "is not one we can rely on. "William Reilly said he is concerned
federal offshore-oil-rig inspectors and regulators are "undertrained and overworked" and
"that will change slowly or not at all." The Interior Department's decision to delay issuing
new permits until earlier this week suggests "the secretary of interior may not have
confidence in his agency." (The Wall Street Journal)
IEA: Libya unrest starting to hit oil supplies: Unrest in Libya is starting to affect
Europe's oil supplies, although no member country of the International Energy Agency
has requested permission to release strategic oil stocks, IEA Executive Director Nobuo
Tanaka said. Unrest in North Africa has sent crude-oil prices sharply higher in recent
weeks, as markets worry that the popular uprising that has brought regime change in
Tunisia and Egypt could spread eastward to key oil suppliers, such as Saudi Arabia. The
IEA said that between 850,000 and one million barrels a day of Libyan crude is currently
shut in. (The Wall Street Journal)
U.S. utilities seek middle ground in pending air pollution rules: Tougher
federal air-pollution rules pending in Washington could make or break U.S. utilities that
burn coal to generate electricity and could cause power prices to rise, potentially hurting
the U.S. economy, the head of American Electric Power Co. Inc. said. Some analysts have
estimated that as much as one-third of U.S. coal-fired power plants could be shut down,
primarily aging, inefficient plants, as a consequence of stricter clean-air regulations the
U.S. Environmental Protection Agency has been considering. That estimate depends on
the approach that the EPA takes toward coal-burning utilities, which serve a large chunk
of the U.S. industrial sector, said Mike Morris. AEP and other utilities want flexible rules
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High Grade Energy Headlines WELLS FARGO SECURITIES, LLC
March 4, 2011 FIXED INCOME RESEARCH
that provide a smooth pathway for utilities to shut down older plants and replace them
with new, more efficient power plants. (Dow Jones Newswires)
Norway drillers suffer worst dry spell in decades: Statoil ASA and Eni SpA are
among companies with plans to drill a record number of wells in Norway’s far north this
year to help the world’s second-largest gas exporter to sustain output. So far, they’ve
struck out. All four wells drilled in the Barents and Norwegian seas this year have failed to
find oil or gas, adding to two dry wells in the North Sea, the biggest number of failures to
start the year since the country’s oil era began in 1966, according to government data. Oil
companies plan as many as 22 wells in Norway’s Arctic this year, up from 12 last year.
(Bloomberg)
U.S. house Democrat seeks new fees for nonproducing oil leases: The top
Democrat on the U.S. House Natural Resources Committee will introduce a bill that
imposes new fees on energy companies for failing to produce oil and gas on federal lands
they lease. Rep. Ed Markey, a Democrat from Massachusetts, said charging fees on such
nonproducing leases will "encourage energy companies to produce more oil and gas and
increase the revenue collected by the federal government." (Dow Jones Newswires)
Unconventional gas in Asia, Europe to impact less than U.S.: Wood Mackenzie
says unlocking the estimated 280 trillion cubic feet (tcf) of unconventional gas resource
in Europe, India and China poses a huge infrastructure and logistical challenge, and in
contrast to the impact of unconventional gas in North America markets, this significant
gas resource will have an incremental affect on the global gas markets rather than a
disruptive one, particularly over the next 15 years. The estimates are that these major and
growing gas importers have enough unconventional gas production potential to meet, in
aggregate, over 20% of demand in their own markets by 2030. (Rig Zone)
Fitch: Long production cut biggest MENA threat: Long interruption of production
represents the largest threat from political turmoil to the financial stability of oil and gas
companies with operations in the Middle East and North Africa but remains unlikely, an
international credit-reporting agency says. A recent Fitch report covering North
American companies with operations in the MENA region said credit pressures from
unrest in Egypt, Libya, and other countries of concern are manageable. Credit ratings are
most sensitive to “widespread and long-lasting production” upsets, which Fitch doesn’t
expect “due to the importance of oil revenues to the region’s economies.” Apache Corp.
has the highest exposure among North American producers to any single country
experiencing turmoil, Fitch said. Apache’s 163,300 boe/d of output in Egypt is 24% of
Fitch’s assessment of the company’s recent total production. Exposure levels in Libya
include Marathon, 12% of total production; Suncor Energy Inc., 8%; Hess Corp., 5%;
ConocoPhillips, 3%, and Occidental Petroleum Corp., 1%. Fitch called Algeria “the other
North African country that could present the largest concerns for North American-based
upstream companies.” There, sizable exposure levels include Anadarko Petroleum Corp.,
7% of total production, and Hess, 3%. ConocoPhillips produced 14,000 boe/d in Algeria
in the third quarter last year, less than 1% of total production, according to Fitch
estimates. North American companies with production in restive Yemen include Nexen
Inc., 11% of estimated total production, and Oxy, 6%. (Oil and Gas Journal)
3
DISCLOSURE APPENDIX
Wells Fargo Securities, LLC, or any of its affiliates, has beneficial ownership of 1% or more of any class of common stock of
Hess Corporation.
Wells Fargo Securities, LLC or its affiliates may have a significant financial interest in Canadian Natural Resources Limited,
Apache Corporation, ConocoPhillips, Anadarko Petroleum Corporation, Occidental Petroleum Corporation, Baker Hughes
Incorporated, Hess Corporation.
Wells Fargo Securities, LLC, or any of its affiliates, intends to seek or expects to receive compensation for investment
banking services from Apache Corporation, Occidental Petroleum Corporation, Hess Corporation, Baker Hughes
Incorporated, Anadarko Petroleum Corporation in the next three months.
Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from Hess Corporation,
Apache Corporation, Occidental Petroleum Corporation, Baker Hughes Incorporated, Anadarko Petroleum Corporation in
the past 12 months.
Wells Fargo Securities, LLC received compensation for products or services other than investment banking services from
Apache Corporation, Anadarko Petroleum Corporation, Baker Hughes Incorporated, ConocoPhillips in the past 12 months.
Anadarko Petroleum Corporation, Baker Hughes Incorporated, Occidental Petroleum Corporation, Hess Corporation,
Apache Corporation currently is, or during the 12 month period preceding the date of distribution of the research report
was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided investment banking services to Anadarko
Petroleum Corporation, Baker Hughes Incorporated, Occidental Petroleum Corporation, Hess Corporation, Apache
Corporation.
Baker Hughes Incorporated, Apache Corporation, ConocoPhillips currently is, or during the 12-month period preceding the
date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided
non-investment banking securities-related services to Baker Hughes Incorporated, Apache Corporation, ConocoPhillips.
Anadarko Petroleum Corporation currently is, or during the 12 month period preceding the date of distribution of the
research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided non-securities services to
Anadarko Petroleum Corporation.
Wells Fargo Securities, LLC, or its affiliates, managed or co-managed a public offering of securities for Baker Hughes
Incorporated, Occidental Petroleum Corporation, Anadarko Petroleum Corporation, Apache Corporation within the past 12
months.
Wells Fargo Securities, LLC may sell or buy the subject securities to/from customers on a principal basis or act as a liquidity
provider in such securities.
Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions.
Wells Fargo Securities, LLC research analysts receive compensation that is based on and affected by the overall profitability
of their respective department and the firm, which includes, but is not limited to, investment banking revenue.
Wells Fargo Securities, LLC Fixed Income Research analysts interact with the firm’s trading and sales personnel in the
ordinary course of business. The firm trades or may trade as a principal in the securities or related derivatives mentioned
herein. The firm’s interests may conflict with the interests of investors in those instruments.
For additional disclosure information please go to: www.wellsfargo.com/research.
Analyst’s Certification
The research analyst(s) principally responsible for the report certifies to the following: all views expressed in this research
report accurately reflect the analysts’ personal views about any and all of the subject securities or issuers discussed; and no
part of the research analysts’ compensation was, is, or will be, directly or indirectly, related to the specific recommendations
or views expressed by the research analyst(s) in this research report.
Distribution of Ratings
As of 3/4/2011
0.6% of issuers and securities covered by Wells Fargo Wells Fargo Securities, LLC has provided investment
Securities, LLC Fixed Income Research are rated Buy. banking services for 75% of its Fixed Income Buy-rated
issuers.
33.4% of issuers and securities covered by Wells Fargo Wells Fargo Securities, LLC has provided investment
Securities, LLC Fixed Income Research are rated banking services for 32.1% of its Fixed Income Outperform-
Outperform. rated issuers.
48.2% of issuers and securities covered by Wells Fargo Wells Fargo Securities, LLC has provided investment
Securities, LLC Fixed Income Research are rated Market banking services for 32.9% of its Fixed Income Market
Perform. Perform-rated issuers.
17.6% of issuers and securities covered by Wells Fargo Wells Fargo Securities, LLC has provided investment
Securities, LLC Fixed Income Research are rated banking services for 16.8% of its Fixed Income
Underperform. Underperform-rated issuers.
0.2% of issuers and securities covered by Wells Fargo Wells Fargo Securities, LLC has provided investment
Securities, LLC Fixed Income Research are rated Sell. banking services for 0% of its Fixed Income Sell-rated
issuers.