Of Energy companies, Venezuala’s Bond Oil Woes Limited to COP

Since the lawsuit has been announced between Conoco Phillips and Venezuala’s PDVSA, COP’s stock is down 5.68%.

Venezuelan President Nicolas Maduro and his energy minister Eulogio del Pino are going on a tour of the world’s crude producers to drum up support for a deal to limit output just as a critical deadline for investors to swap bonds in the state oil company nears at 5PM EST, today.

Two of the largest oil-field services companies beat Wall Street profit targets this week, renewing expectations of higher third-quarter earnings for energy companies amid stabilizing oil-futures prices.

Oil and gas giants Exxon Corp. and Chevron Corp. report next week, as do major refiners. Smaller energy companies will report in early November.

Small and medium exploration and production companies have snapped up assets and, in some cases, already increased capital spending plans this year (Apache Corp. which hiked its spending blueprint to develop an oil field in west Texas’ Permian region that it called “massive,” is the most notable example).  Crude Oil up $0.22 or 0.43%.  CHK shorts may be piling on, despite several brokerage houses upping their signals, thinking the Venezualan issues will affect the company, down $0.23 or 3.33%, another great entry point, since as explained below, turmoil in Venezuala will have a negative affect on supply.  COP, up $0.05 or 0.12%, signals the lawsuit is baked into the market and the probability of default or, perhaps, another extension, is highly likely, as detailed by Barron’s here.

If there’s any sign that Maduro will be kicked out of office, we suspect that he will take PDVSA down with him, which could point to more unexpected supply outages.

If the default does happen, and the political chaos continues, Venezuela is at further risk of seeing more production declines. The momentum of the decline would be too late to stop as fields continue to be neglected and result in more supply outages than the current consensus believes.

The issues in Venezuela is a serious one. And whatever comes next for Venezuela has very meaningful implications to the oil markets.   If you are interested in reading SeekingAlpha.com HFI Research’s outlook, please consider signing up here.

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