By the skin of its teeth, the S&P 500 was able to muster a higher close as the market seemed please that European policymakers were once again at work trying to find a solution to the continent's sovereign debt woes. The Nasdaq suffered a small loss as did the Dow Jones Industrial Average where 18 of 30 constituents closed lower on the day.
At the stock-specific level, energy names were the big headline generators on the day for a variety of reasons. Natural gas futures spiked, if you can believe it, after Oklahoma-based Chesapeake Energy (CHK), the second-largest U.S. natural gas producer behind Exxon Mobil (XOM), snapped out of lengthy slide. The company said it will pare natural gas production and look for ways to boost its liquids (oil) output.
Chesapeake had 75 gas rigs operating in 2011 and that number has already fallen to 47, but the company is planning to cut that figure in half to 24. The company said it plans to raise to 85% the portion of its capital budget devoted to liquids exploration. To its credit, Chesapeake has been shedding billions of dollars worth of shale assets for a couple of years now. The problem is shares of Chesapeake have been waxed in recent months and the chart looks similar to the one of nat gas futures that I included below.
Nat Gas Chart
Speaking of stocks that snapped out of prolonged slumps, for one day at least, there is Petrobras (PBR), Brazil's state-controlled oil company. Petrobras ADRs surged 4.3% on better than double the average daily volume on news that Jose Sergio Gabrielli will be replaced as CEO, perhaps as soon as next month. Maria das Gracas Foster, 58, will replace Gabrielli, 62. Give Brazil credit for being somewhat progressive. A female president and a woman running the country's largest oil company. A lot of other countries cannot boast of one of those factoids let alone both.
I digress. When I saw this news break on Sunday I suspected Petrobras would go up today. I say that because while Gabrielli oversaw Petrobras making some of the most impressive oil discoveries the world has seen in decades, the stock has been dead money for two years. In fact, even BP (BP) has outperformed Petrobras by a wide margin in that time and that time includes the Gulf spill.
Investors apparently like the new leadership Petrobras is getting.
There was also some activity on the mergers and acquisitions front in the energy sector as Apache (APA) said it will pay $2.85 billion for privately held Cordillera Energy Partners III LLC, a deal that will boost Apache's presence in the Anadarko Basin of Texas and Oklahoma. Cordillera and its investors will receive $600 million in Apache shares and the rest of the deal price will be paid in cash funded by debt. The effective date of the transaction is Sept. 1, 2011, with closing anticipated in the second quarter, Apache said in a statement.
The deal will give Apache access to 14,000 new potential drilling locations in the Anadarko Basin along with proved reserves of 71.5 million barrels of oil equivalent and current production of 18,000 barrels per day. Apache said it was producing 40,000 barrels per day in the central region at the end of 2011 and that the deal to buy Cordillera could triple that number and that is likely one reason why Apache said the transaction will be accretive to earnings this year.
Cordillera has substantial operations that include approximately 254,000 net acres in the prolific Granite Wash, Tonkawa, Cleveland and Marmaton plays in western Oklahoma and the Texas Panhandle, according to the statement.
Bank of America put a $160 price target on Apache today, which as you can see, is well above current levels.
In other energy news of the rumor variety, the Sunday Times of London reported that BP (BP) may be interested in Cove Energy. Cove has been on the market for a few weeks now after a making a major gas discovery off the coast of Mozambique.
The Sunday Times also reported, and the story was picked up by some U.S. sources, that Anadarko Petroleum (APC) was looking to make move on Rockhopper, a U.K.-based explorer that has found as much as 700 million barrels of oil off the coast of the Falklan Islands. The Houston Business Journal reported Anadarko has agreed to make a $1.6 billion provisional investment in Rockhopper.
ConocoPhillips (COP), the third-largest U.S. oil company, fell slightly today after UBS downgraded the stock to "sell." The bank said Conoco's plans to spin-off its downstream business could impair the valuation and that the E&P company may face ''low organic free cash flow limiting future buybacks without asset sales & potential risk to dividend/growth in the event of a cyclical oil price pullback.''
In earnings news, shares of the world's second-largest provider of oilfield services, gave up 2% after the company said its fourth-quarter profit jumped 50% to $906 million, or 98 cents per share, from $605 million, or 66 cents per share, a year earlier. Revenue rose almost 37% to $7.06 billion. On an adjusted basis, Halliburton earned $1 a share. The company said it expects global revenue to increase this year.
My best guess regarding why Halliburton was off today, and I think I am correct, is the company's natural gas exposure. As in investors think the company is not oily enough.
While Petrobras was benefiting from a change at the helm, one stock that was not was downtrodden BlackBerry maker Research In Motion (RIMM). RIM slid almost 8.5% today on volume that was better than double the daily average after the company named Thorsten Heins as its new CEO replacing co-CEOs Mike Lazaridis and Jim Balsillie.
This is probably a case of too little too late. After quarter upon quarter of disappointing analysts and investors, missing on already lowered earnings estimates and getting its butt kicked by basically all of its key rivals, it is going to take a lot more than an executive change to get investors interested in RIM again. Personally, I have no problem with RIM or its products. I am not long nor I am short the stock, but I get the impression only an acquisition will save this company from more market share and stock price declines.
After-hours, stocks on the move include CSX (CSX). The railroad operator is a down almost 2.5% at this writing after saying it earned 43 cents a share in the fourth quarter while analysts were expecting 44 cents. Revenue was $3 billion, which was inline with Wall Street estimates. The problem was volumes. CSX said coal volume was off 8% while agricultural products and chemicals, fell 7% and 8%. Ag products and chemicals are CSXâ€™s two largest segments.
Semiconductor maker Texas Instruments (TXN) was up over 3% in after-hours trade despite forecasting a first-quarter profit of 16-24 cents a share on revenue of $3.02 billion to $3.28 billion. Analysts were expecting $3.22 billion and 32 cents. TI said it will shutter two factories, one in Japan and one in Texas, and layoff 1,000 workers as a result.
For the fourth quarter, TI posted a profit of $298 million, or 25 cents a share, compared with a profit of $942 million, or 78 cents a share, a year earlier. Revenue fell to $3.42 billion from $3.53 billion.
Texas Instruments Chart
Looking at the charts, the S&P 500's piddly move today does not change things from a technical perspective. There is still plenty of room to run to overhead resistance around 1345-1350. Support can be found in the 1295-1300 area. From there, next support is 1250-1260. There is an absolute avalanche of earnings reports this week with about 25% of the S&P 500 reporting, so even if Europe remains calm, and hopefully it will, there should be enough activity to spark some decent moves in the S&P 500.
S&P 500 Chart
Same goes for the Dow as not much changed today. Support is 12,600 and resistance is 12,750. Much of Friday's gains were attributable to IBM, but 12 Dow stocks, including many of the high-priced ones, step up to the earning plate this week. MCD gets the ball rolling tomorrow and Thursday could be an interesting day for the Dow with CAT and MMM reporting. CVX reports Friday.
As for the Nasdaq, support is 2700 and resistance can be spotted at 2875. Of course, the big deal is Apple (AAPL) reporting tomorrow after the bell. The Nasdaq has held up pretty following Googleâ€™s (GOOG) big disappointment last week, but I do not if it can withstand a sequel from Apple. Hopefully, that will not be a situation we have to contemplate tomorrow.
Apologies for cutting this wrap short, but today is my birthday and I am going to do some mild celebrating in a few minutes.