Market Sentiment Watch: Market seems to want slightly bad news these days in hopes of keeping stimulus dreams alive. In more relevant news or in energy land, natural gas storage turned in a record low injection last week, below expectations, showing that the flatter slope theory of this year's injection line is alive and well. Natural gas trader's didn't budge to the bullish side due to a near term mild forecast but the writing is on the wall with regard to a near term cross over out of record storage territory and coming reversal to average and then deficit storage territory. The longer natural gas stays in sub $3 the quicker the transition will occur. In today's post please find a lot more on the natural gas storage numbers as well as Catalyst List Update Part III. Next week look for the remainder of the Catalyst List to be updated, a full Bakken Players update, the ZLT stats slide show, and a new company review. Continue also to expect some name trimming from within the ZLT.
- We get consumer sentiment at 9:55 am EST (F = 71.8, last read 72.3)
- We get leading indicators at 10 am EST (F = +0.3%, last read was -0.3%)
In Today’s Post:
- Holdings Watch
- Commodity Watch
- Natural Gas Inventory Review
- Stuff We Care About Today – Catalyst List Update Part III, LINE
- Odds & Ends
Please click the link right below this to
ZMT (Zman Medium Term portfolio):
- Yesterday’s Trades:
- XCO – Added a starter position for the ZMT of 100 shares of XCO at $7.53. Leveraged, almost all gassy, growth story, with falling costs, just waiting for a rebound in natural gas prices.
ZLT (Zman Long Term portfolio)
- Yesterday’s Trades:
- TPLM – Added another trading position at $6.38. Expecting the name to continue to gain acceptance as a real player in the Bakken space, in the wake of the recent financing and strong five five well operated results as well as their cost cutting efforts as they partially vertically integrate via their in house frac spread. Look for them to reiterate prior strong exit rate guidance on their next quarterly call (probably in early September) which will set up another strong year in 2013.
The Trading Blotter is updated.
Crude oil rallied $1.27 to close at $95.60 yesterday, a three month high, moving step with the broad markets and a smallish decline in the dollar. This morning crude is trading off slightly.
- Bakken Watch: And Bakken crude goes to even with WTI
- SPR Release Watch: With oil prices moving back up the White House is taking a look at a SPR release. Shocking. Note that when prices dipped from May to July they didn't bother to refill the last release.
Natural gas closed off two cents at 2.72 yesterday, in volatile trading after EIA reported another better than expected injection to storage. We continue to make big strides in getting back into the historic trading band (see details below). Little surprises me with regard to daily moves in natural gas and the market's reaction was one of near term thinking about a cooling trend but the cross over into non-record storage territory remains imminent and gas prices near term should start to reflect the coming move of storage transitioning from surplus, to average, to deficit over the next several months. This morning gas is trading flat.
Natural Gas Storage Review:
- We are now 363 Bcf above the 5 year average, down from 927 Bcf over it at the end of March
- This was a record low storage number for this week in history (see chart F).
- We are now 57 Bcf above the 2009 level (note in chart A1 below its getting hard to see the space between the two years). 2009 represents the upper band of the historical range for storage shown in Chart A below. We are likely to cross over into non record territory in the next 2 weeks.
- Cumulative gas injections for 2012 are running 4.1 Bcfgpd behind the five year average. This means that on average we have packed away nearly 29 Bcf less each week in the first 21 weeks of the injection season than we have in years past.
Stuff We Care About Today
Catalyst Update Part III
MPO – Two Insider Buys, no doubt to send a message – need to see more after several missteps out of the IPO gate. The stock needs some confidence building and non-underwriter based support but for now its restricted time post Miss Lime deal.
PVA - Files $250 mm Mixed Shelf. Expecting an offering until closer to year end, if then.
LINE – Hogshooter comments from Enercom yesterday
- Corporate Mix – 45% liquids / 55% natural gas
- Acquisitions have ramped greatly this year
- 2010 – 13 acquisitions for $1.4 B
- 2011 – 12 for $1.5 B
- 2012 YTD – 4 for $2.8 B
- New Stuff Operations Update
- Jonah Field
- bought into the play in July for $1.025 B
- Long lived gas assets (liking they are buying gas reserves while they are cheap as they said they would early in 2011)
- 650 locations and 1.2 Tcfe of proved reserves so finding costs under a buck.
- Production mix of 73% natural gas, 23% NGLs, 4% oil
- hedged out expected production through 2017
- Anadarko Salt Creek JV
- Signed JV in April with APC as operator ($600 mm cost over next 3 to 6 years)
- CO2 flood in Wyoming
- Net production of 1,600 bopd expect net production to double by 2016
- Hugoton Field (Kansas)
- Bought in in March for $1.2 B
- 730 Bcfe of proved reserves
- 37% NGLs / 63% natural gas
- 800 future locations + 500 recompletion opportunities
- 110 MM/d at acquisition, still doing that 4 months later and haven't really done much with it yet, but it was a BPasset and that means it was likely underexploited but "well taken care of".
- Jonah Field
- Non New Stuff
- Granite Wash
- Acreage HBP'd
- Planning 20 Hogshooter wells by year end
- They're modeling Hogshooters as average 1,700 BOEpd IP wells but IP's have been bigger (should see a well from NFX in the not too distant future)
- Look for a bunch of Hogshooters on their 3Q call
- 100% hedged on natural gas and oil through 2016/17
- On about one-third of their oil they have open tops (floors but no ceilings)
- Back to growing at 15% per year clip
- Liquidity: $1B now … and see plenty of opportunity to continue to grow it as they grow reserves and they see little competition and lots of properties to acquire.
- Granite Wash
- Nutshell: I no long own the name, know some of you guys do and am mulling re-entry.
Odds & Ends
- TBA in comments.
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