Kinder Morgan Inc.’s (KMI) dividend cut after market close Tuesday lifted shares in Wednesday’s trading. Some analysts and investors were relieved that KMI would retain its investment-grade credit rating and not be accessing unattractive equity markets to fund growth.
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Persistently weak oil and natural gas prices, combined with OPEC’s decision last week to hold production steady, likely will reduce spending plans for many U.S. producers in 2016, but the debt-laden operators face even more pressure as they consider how to finance their go-forward plans.
December natural gas is expected to open 8 cents lower Tuesday morning at $2.31 as longer-term weather forecasts turned milder and traders mull market support sustained by low cash prices. Overnight oil markets fell.
Despite cuts in capital expenditures (capex), oil and natural gas producers worldwide are seeing greater declines in their operating cash flow and, consequently, lower cash balances, trends that could continue into 3Q2015 if crude oil prices continue to fall, the U.S. Energy Information Administration (EIA) said.
Balance sheet stress is intensifying in the U.S. natural gas and oil sector, which means more takeovers and asset sales are likely by the end of this year, researchers said Thursday.
Chesapeake Energy Corp. and Encana Corp. have the highest maintenance capital costs and debt in their peer group, while EOG Resources Inc., Range Resources Corp., and EQT Corp. may be among those best positioned, enabling them more easily to replace forecasted production this year with cash flow, according to IHS Inc.
Chesapeake Energy Corp. is eliminating its dividend and selling some onshore properties to cope with the continuing slump in natural gas and oil prices.
Devon Energy Corp. expects to achieve 14% more production this year than it did in 2013, a 3% higher forecast from a few months ago, after surpassing expectations from Texas oilfields during the third quarter.
The U.S. natural gas and oil industry should see higher and more sustainable growth over the coming decade as production growth and efficiency improvements create a paradigm shift, Raymond James & Associates Inc. analysts said Monday.