19
Jul

Friday Post – Part 1

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Market Sentiment Watch: Energy news flow engaged. The energy sector is shuffling off the summer doldrums as we approach 2Q13 reporting season. From a broad market perspective, it's interesting to see the markets surging on good ecodata items and treading water whenever a number like the housing stats earlier this week hit the tape. Market has that "I want to go higher feeling" and that's likely sidelined money wanting in. We've been long all along. Oil is taking this same kind of tack, moving up on headline numbers and short term refiner demand and pretty much ignoring a coming reversal that, due to high local production, will result in a rapid rebuild of U.S. inventories. Near term we think oil is overdone and the funny thing is that our price target for 3Q13 at the beginning of this year of $107.50 now would appear to be less zany than the Street would have thought (Street was at $100 for 3Q13 at the beginning of the year) and that's fine as the Street's consensus generally likes to be led around the nose by the Strip. That's not what I get paid for and we took our 3Q13 number down mid year (to $97.50) as demand in the States and as export demand from the States failed to materialize as we expected. The pendulum often swings too far with oil and with natural gas and while we are by no means panicking over prices at this point in time we do feel that much more of this type of crude action will cause us to pull some trading positions, leaving cores in place, instead of opting to ride out the coming oil retest of $100 with our now even more overweight positions, as we would normally do. We don't like rapid price shifts in oil. As long time readers know, those shifts lead to hangovers in the E&P group which are worse than the exuberance that preceded them was good.  As always, we don't make recommedations, we simply tell you what we are thinking and doing, and, well, there you have it. In today's post please find comments on the natural gas inventory report (first really better than expected report in weeks and it yielded a 5% bounce off what we've been calling bottoming levels) as well as comments on the SLB quarter (strong with a strong outlook), the BHI quarter (mixed bag), NOG's operations update (we were looking for a sequentially flat volumes quarter, but some on the Street were oddly high ... what were they smoking?), comments on APA's big Gomex Shelf sale (sets up at least a 10% pay down of debt and a nice $2 B stock buy back (30 mm shares or 7% of the diluted count which will likely be met with investor applause) and some other odds and ends. Also today look for a Part II post at around 5 pm EST.  You won't find a book report on TAT in today's posts as it's not quite done yet (look for it next week). 

Ecodata Watch: 

  • G20 meeting ​

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Inventory Review
  4. Stuff We Care About Today - SLB, BHI, NOG, APA, CLR, SSN  
  5. Odds & Ends

Please click the link right below this to

Holdings Watch:

ZMT (Zman Medium Term portfolio):

Yesterday’s Trades: 

SWN - Added (10) SWN August $40 calls for $0.70 with the stock at $38.85, after a better than expected storage injection and on the thought that next week's will be the smallest injection of the summer season so far giving a little spring to the step of the gassier names. Just a short term trade and we continue to hold SWN in the ZLT as a top 5 position. 

ZLT (Zman Long Term portfolio)

Yesterday’s Trades:​ None

The blotter remains updated.

Commodity Watch:

Crude oil rallied on the back of a strong equity market which was strong itself on the back of benign statements from Bernanke and stronger than expected jobless claims and Philly Fed data. WTI ended up $1.56 to close at $108.04 yesterday.  Too fast but simply too far in our book. We are quite long oily names but will consider paring back trading positions in some of the ones that have had better runs of late if this move continues much longer. We think oil needs to pull back and trade sideways for a time. The front month contract now looks like this. Notably and with yesterday's comments in mind. Brent was up $0.09 on the day to end at 108.70, taking the closing spread to WTI under a buck. This is the closest close for the two yet this cycle. We think the cross over of the two is likely something traders will at least test but which also may signal time for an unwind of the long WTI, short Brent trade. See Thursday's post for those comparisons of regional production. This morning crude is trading close to $108.75 pre market. 

  • API Watch: API released demand figures for June showing U.S. gasoline demand was down 1.9% from year ago levels with total oil and product demand down 1% YoY. Pretty much confirms the tepid demand we saw out of EIA on a weekly basis at the beginning of summer. 
  • Exports Watch:  Reuters out with a story noting U.S. refiners are seeing a sudden summer surge in exports, noting 77 tankers have been booked this month to ship to South America, Asia, and yes, even Africa as VLO noted on their last call. This is the increase in exports that we've been expecting to show up in the once a month updated weekly numbers on exported products but which so far we've only been able to infer via higher than generally normal summer distillate demand. 

Natural gas jumped $0.18 (5%)  to $3.81 after EIA reported the first truly smaller than expected storage injection this season. Gas in storage is still well in hand at 13% under year ago levels and 1% under the five year average. We should see a much smaller injection next week based on this week's weather but we note that the South Atlantic region as well as parts of the central southern regions (where you have a lot of gas fired demand) are not getting as much of the heat wave as they did this time last year, at least so far this season.  This morning gas is trading off sligthly. 

  • Tropics Watch: All quiet on the tropical front. 

Natural Gas Storage Review:

gas table 071213

.

 gas graphs 071213

Stuff We Care About Today

SLB Reports 2Q13 Beat; Future Looks Stronger Now

SLB 2Q13

Highlights:

  • Strong results due to "significantly higher international activity, both on and offshore",
  • Showed improvement in NAM despite onshore pricing environment and impact a longer than usual breakup season in Canada,
  • All 3 segments (Resevoir Characterization, Drilling, and Production) showed sequential and YoY increases in revenues and operating income.  
  • Operating margins improved for all three segments sequentials and Reservoir Description and Drilling saw substantial improvments in YoY margins while Production margins held firm despite the well known headwinds (sounds like they might have taken some share in U.S. pressure pumping), 
  • Laundry list of operations highlights included in the press release, a bit longer than usual, reflecting improved product acceptance on widespread geographic basis.  
  • Notably while the U.S. rig count remains mired near cycle lows for natural gas and has ebbed all year on the oil side they do note stage counts being up this year, consistent with our E&P covered company comments regarding rig efficiency. 
  • They noted that the pace of decline in U.S. pricing in pressure pumping moderated sequentially, which should be welcome commentary to CJES, BHI, and HAL anong others. 
  • Balance sheet remains in quite solid shape with net debt to cap at 8%. 
  • $7.8 B share buyback nearly exhausted and renewed with $10 B plan through 2018. 

Nutshell: Strong report from the first bellweather Service name to report for the 2Q13 season. We don't own it (opting to own cheaper in our view HAL instead who reports next week) but given the beat and better margins, especially the ongoing improvement in reservoir characterization margins look for estimates to nudge higher beyond the quarter's outperformance.  International continues to impress and deepwater signals continue to point to growth (good for currently unowned by us OII). 

BHI Reports 2Q Top Line Beat, Bottom Line Miss on Weaker NAM Margins

BHI 2Q13

Highlights

  • Calls international operations "mixed" for the quarter
  • Eastern Hemisphere activity continuing to rise, including Russia 
  • But they were hurt by weaker activity in Latin America (Brazil and Mexico) and said they began taking actions to reduce costs in Latin America during 2Q with improvements felt 2H13 (really 4Q),
  • Favorite quote watch: "Our U.S. Pressure Pumping business continues to improve as recent share gains and operational improvements are increasing fleet utilization and profitability. "  We always find it interesting when all 3 of the Big 3 point to market share gains in a quarter and are doubtful that HAL will talk about giving ground next week. 
  • They did say that with Canada improving (seasonal) they foresee a "strong rebound" in NAM operating margins in 3Q. Guessing that's a sequential comment. 
  • Nutshell:  Not as much of a compelling quarter as the one noted above for SLB. We'll jump on the call in a few minutes and have more notes before the open. 

Other Stuff

APA Sells Gulf of Mexico Shell Operations for $3.75 B

  • APA selling all Gulf of Mexico Shelf assets for $3.75 B in cash to an affiiate of a private Fieldwood Energy LLC. APA had previously said it would be monetizing $4 B in assets this year. 
  • Fieldwood also assumes all P&A liability valued at $1.5 B.
  • APA retains some interests in some exploration blocks and what it calls high potential deep hydrocarbon plays that are being tested now, this is some of the stuff with EXXI.
  • We don't own APA but pay attention to what they do. A Shelf exit makes sense as they look to derisk the portfolio and chase oil over natural gas. Also, the Shelf has not been the focus for NAM growth for some time now and last quarter it was dwarfed by onshore NAM volumes.  And I recall when they bought big pieces of this from the Majors over a decade ago so my thought is that they plucked most of the low hanging, larger fruit and are moving on while keeping the deeper, oilier potential.  Use of proceeds probably goes to debt pay down first (they've said $2 B in the past for this) and then to buy back $2 B in shares (and they made the buy back comment when the shares were right here in the mid $80s) when they get to asset sales of $4 B for 2013 so we're pretty much there.  The idea of the buyback alone should be a crowd pleaser. I'd then expect to see extensional acquisitions in the Permian (lookout FANG or LPI as they like Midland portion of the Permian) or Anadarko Basins or maybe a step up their activity in the Rockies. I don't own them but have lots of respect for management here and may play it for a trade. 

NOG Operations Update

  • After the close yesterday, NOG pre-released guidance for 2Q13 production of 10,900 BOEpd, down 2% with 1Q13 volumes. We call that roughly flat.  
  • Despite hints on the last quarterly call to the contrary, the Street, was expecting volumes of ~ 12,000 BOEpd for the quarter.  We know that a few analysts were above the crowd, dragging consensus higher here. 
  • The lack of growth this quarter is due to a low net well add count during the quarter at 5.7 net wells (recall they have a mid 40's net well plan). They put the low count on weather, which was tough during the quarter and more pad drilling.   They had previously noted road restrictions would be in place for much of the quarter which makes completing wells difficult when the frac spread can't get to the well site. Net wells awaiting completion at quarter end jumped 43% due to this weather impact.  
  • The stock probably takes a short term hit but this is basically what we were expecting: a flat spot from the second quarter before a 2H13 ramp. I do think it's fair at this point to call into question the high end of the range for the full year of 30% growth but management could provide a current rate with the 2Q13 call to give a little more guidance on trajectory. 

CLR Files Mixed Shelf

  • CLR filed a mixed shelf offering (common, preferred, debt) with no size listed in the filing
  • It always makes sense to have one on hand but given the run in the common of the last few weeks and given their somewhat elevated debt to cap levels offering shares at this time would make some sense.
  • Further, some of their smaller mid cap peers now trade at production adjusted per acre levels that would appear to be attractive and adding contiguous operated acreage in the Williston has become difficult to do in sizes that would move the needle for CLR. 
  • Wild thought would be that they want to buy NFX (who's decent sized in the Bakken and in the Cana Woodford).  

​SSN Operations Update

  • 2nd Bakken well of the 2013 program, the Billabong well, making good time, spud (from surface casing point yesterday at just over 2,000') today at 6,500', they should be done drilling in another week. Look for them to talk about a completion schedule next week and I'd still guess they get this zipper frac done by late July at the earliest. 
  • 1st South Prarie a dry hole. Cost them $175,000 DHC (cost from spud to P&A point). Didn't have good closure and the oil had migrated away.  Saying next well will be along the salt edge where they think the salt will be intact and provide a better seal. Makes sense, cheap enough to drill a few of these vertical wells to test the concept. They got an experienced operator here so while not good news not end of world either. 

Odds & Ends

Housekeeping Watch:  We will be on the second half of our one week long summer vacation next week from Monday to Wednesday around noon. I will have limited connectivity during this time but will check in from time to time and plan to take notes on a couple of conference calls including NFX Wednesday morning. Please use the Part II post (to be posted later this afternoon) for comments Monday through Wednesday. If you have any issues we can be contacted at zmanalpha@gmail.com.

Analyst Watch:

  • BBEP - Raymond James ups to Outperform
  • FRO - Global Hunter ups to Neutral - note the comment on tanker hirings from the U.S. in the Commodity Watch above. 

124 Responses to “Friday Post – Part 1”

  1. 1
    zman Says:

    BHI call staring in 5 to be followed by the more upbeat SLB call an hour later, notes in a bit. 

  2. 2
    zman Says:

    BHI call starting, notes in a bit. 

    Noting South Sudan production going to be curtailed and move to full shutdown after talks fail. 

  3. 3
    zman Says:

    BHI 2Q13 Notes

    Eastern Hemisphere saw record revenues

    NAM revenue up 3% sequential despite Canada break up weakness

    This was all offset by weak Latin America

    – Brazil ramp down timing hurt them, was disorderly

    – northern Mexico activity hit

    – unfortunately these issue overshadowed other good stuff (out of the Eastern Hemisphere)

    Quarter saw best revenue out of gomex

    Pressur pumping saw second quarter of improvement, think he said highest stage count pumped of any quarter … didn't hear a comment on pricing in there. See post on SLB comments saying the decline in pricing is slowing. 

  4. 4
    zman Says:

    BHI walking through financials truing up GAAP to ex items, more notes in a bit, 

    Excluding an inventory charge, operating profits in NAM would have been only slightly down, due to higher pressure pumping activity (though this a lot lower margin business than drilling in Canada). 

    Saw record profits for upstream chemicals  … we don't own BHI but do hold FTK as a Core in the ZLT. 

    Comments on Mexico (Chicontepec) don't exactly bode well for NBR today, but should not be news to anyone. View on when PEMEX gets off butt and gets back to turning drillbit to the right will be key. 

    Sidebar Watch: HAL getting an early boost from the SLB press release. 

     

  5. 5
    zman Says:

    BHI 2Q13 Notes

    – see NAM margins improving in 3Q13

    – International – rig count strong – should see increase in margins in 2H13

    – In Latin America they are adding contracts in Argentina and Columbia to help backfill the near term hit from Mex and Brazil

    – Eastern Hemisphere – "I'm very excited about the outlook"

    – Russia – working on largest frac-pack (sand control) project to date in country

    – Africa – big, longer term contracts spread across 4 central Africa contries

    – Middle East – Saudi and Oman working on shale natural gas … sees uncoventional in the ME as an increasing driving

    NAM

    Announced last night – the launch of the Baker Hughes WELL count – this will help over and above the BHI RIG counts.  Will be able to get at wells per rig per Basin in the US. This will be a quarterly number and we will integrate it into our thinking near term. 

  6. 6
    Zorgnak Says:

    S&P Areas of Interest  7/19 8:30 AM ES 1680

     

    Notes…. Market continues to build acceptance near all time highs.  Poor market structure.  Small caps leading with strong/extended demand volume & breadth. Risk sectors all positive. Long term demand volume positive. POMO supportive through the end of the month. $USD trading in balance, mid range.

    Thoughts …….Market continues to build acceptance above the 1670 and at all time highs. Gap risk below.  Plenty room to fall and still be in a long term uptrend. No edge here for me.  Taking some profits .  Reducing risk. Expecting dips to get bought.

    Glossary   http://www.futurestrader71.com/?page_id=1280

    1677

    1670 Minor CHVN

    1666 Minor CLVN/Support

    1655 CLVN  Minor support with range transition area above

    1644.75 Minor CHVN/Short term volume pivot/Volume gaps below

    1629.50 Minor CLVN/Support

    1620.25 CHVN

    SP500 Futures

    http://www.charthub.com/charts/2013/07/19/es_master_1307190506

    $USD Long term

    http://www.charthub.com/charts/2013/07/19/dxy_master_1307190521

  7. 7
    zman Says:

    BHI 2Q13 

    – Announcing new ultimate recovery product

    – new Flex Pump ESP – engineered to operate in lower flow wells down to 50 bopd, have tested in the Eagle Ford, Bakken, Permian, and central basins, said they have seen up to 30% increase in production. 

    – saying this is an incremental $1 B market … not a small deal that one. 

    Q&A about to begin … 

     

  8. 8
    zman Says:

    Morning Zorg, thanks for the levels

  9. 9
    zman Says:

    BHI 2Q13 Q&A

    Q) Margin gap to peers, is there a structural impairment to closing the gap and if not when to close that gap?

    A) No structural impairment. It's getting there, the slope of the curve to get there is increasing, we like our portfolio in NAM and our product line and the non pressure pumping businesses are performing "extremely, extremely well". Realignments with people and costs have been made and customer mix is good and move to 24/7 helped, rest of the fix is logistics. We DONT EXPECT ANY MORE PRICE EROSION GOING FORWARD. 

    Q) Margins

    A) Sounds like high teens longer term, not initially though, not this year, probably double digits but not in low teen %s in 2H13

    Q) Latin America top and margins for 3Q?

    A) Revenues for second half better, view 2Q as an anomaly, so revenues to be up a little bit

    Q) Saudi market growth?

    A) 6 months ago everyone was excited about the rig adds there. Saudi didn't do as expected and the big rig adds are now centered on the end of 2014 (pushed out 18 months). 

  10. 10
    zman Says:

    Crude at $109. Pendulum swinging too far. 

  11. 11
    Zorgnak Says:

    #8  Morning boss..thanks for all you do

     

  12. 12
    Zorgnak Says:

    Krugman on China

    http://www.nytimes.com/2013/07/19/opinion/krugman-hitting-chinas-wall.html?_r=0

  13. 13
    zman Says:

    Analyst Watch

    CLB

    – Sterne Agee ups target from $133 to $146, stays Neutral

    – Barclays ups from $133 to $163, rating stays Overweight

    – Nataxis ups from $134 to $158, stays Neutral 

  14. 14
    Zorgnak Says:

    Echoing your remarks on crude oil…

    Prices vs Implied demand

    http://stocktwits.com/message/14673457

  15. 15
    Zorgnak Says:

    Largest  inflows into equity market since 2008

    http://www.businessinsider.com/us-sees-largest-weekly-equity-inflow-since-june-2008-2013-7

  16. 16
    zman Says:

    re 14 – thanks, that spike on the demand line (which is refinery throughput in barrels) is caused by distillate export demand and will be pretty fleeting, seasonally we will be back in the 14 to 14.5 mm bopd in the Fall. It's an interesting chart but he needs to toss in a second chart of imports and domestic production. Decline in imports working to offset rise in production. As those imports don't hit US shores they pressure Brent, taking away some of the advantage of US sourced distillates. And $109 WTI will not hold. OPEC bump in 2014 demand is a help, don't get me wrong, but those guys HAVE TO cut in December. 

  17. 17
    zman Says:

    Zorg – SLB was priced pretty much to perfection going into the quarter, call starts in bit, expecting them to end strong on the day, expecting outlook comments to be a little more postive than their generally conservative stuff.  Should impact HAL positively. 

  18. 18
    zman Says:

    SLB call starting now, notes in a bit … 

  19. 19
    zman Says:

    Analyst Watch:

    LINE / LNCO upgraded to Overweight at Sterne Agee

  20. 20
    brodway Says:

    re: 15

    Zorg those bond redemptions need a home. Stocks are the only game in town right now.

  21. 21
    zman Says:

    re 20 – Brodway – saw your comment last night late, thanks much. 

  22. 22
    zman Says:

    SLB 2Q13 Notes (just what's not covered above)

    – revenue rig continues to increase

    – Latin America – flat revenue sequentially. Focused on cost control, outlook flat to slightly down rest of year, with 2013 seen as a transition year

    – ME/Asia – strong growth – Saudi and Iraq spearheaded growth, but also grew in other markets. Noted they are gaining share in ME, Iraq really starting to perform, both in north and south of the country. Iraq shaping up to be a very interesting market for us. 

    – China lead Asia growth, seeing upswing offshore.   Note a story on Pearl River basin activity jump the other day.  Could be a help as NFX tries to sell its segment in the region. 

    – Russia – one of our fastest growing markets in 2013 … echos BHI comments

      …

  23. 23
    brodway Says:

    watching the GDP chart trying to understand whether its a candidate for a breakout. Zorg care to give it a look?

  24. 24
    Zorgnak Says:

    Re#17.HAL/SLB..thanks for the heads up

  25. 25
    zman Says:

    SLB 2Q13 Notes

    Bigger picture stuff

    – noted recent E&P spending updates were revised up, making 4th year of capex growth

    – said call on OPEC crude remains aligned with 30 mm bopd production quotas, said augers for Brent in triple digits

    – called NAM gas prices market fragile due to steady production switching – no kidding

    Q&A starting …

  26. 26
    Zorgnak Says:

    HAL  Trading in balance above prior quarters acceptance at 41.99 and CLVN and Trendline support at 41.46. 45.75 would be a breakout on the weekly and Macondo breakdown levels.

    http://www.charthub.com/charts/2013/07/19/stock_master390_1307190622

    Long term with major areas of interest

    http://www.charthub.com/charts/2013/07/19/stock_master390_1307190624

  27. 27
    elduque Says:

    BDI -8 TO 1138

     

    Brent/WTI at .4

     

    TYX at 3.602

     

  28. 28
    zman Says:

    re 26 – thanks chief. 

  29. 29
    zman Says:

    Thanks Eld – showing prompt month WTI just nosed over prompt month Brent

  30. 30
    brodway Says:

    re: 20

    Zman, you can't imagine how much better i'm doing this year over last. Just a few differences in shifting assets at appropriated times made a huge difference.

  31. 31
    zman Says:

    SLB Q&A

    Q) Mexico – strong next year, any reason to think PEMEX doesn't follow through?

    A) No reason to think that, interesting market for us

    Q) NAM margins – near and long term 

    A) over the past year, we've had good margin resilience with the pressure pumping headwinds, expect that resilience to continue, can't say when it rises but looking to move it higher (kind of a non answer there)

    Q) E&P spending thoughts

    A) optimistic 2014 will be higher to fight declines and due to the size and complexity of the projects especially on the international front. Sees a shift from more infrastructure spend towards drilling capex. 

    Q) US oil production growth view?

    A) Good question. Very impressive growth out of US liquids. Too early to conclude trend on Bakken (many are looking at the flattening here). He's going to duck the question and say its too early to extrapolate the growth trend beyond near term for U.S. 

     

  32. 32
    Justin Says:

    Z- You took some KOG trading postions in anticiapation of the ops update.  Any thoughts on some calls?  I'm trying to decide if $109 WTI could amplify a good ops report or this mini-bubble pops while I'm holding the contracts.

  33. 33
    zman Says:

    re 30 – excellent, glad it's working for you. 

  34. 34
    skimo Says:

    OT last nite's 113 STSI – Williams has been on front page for weeks in Governor's gift scandal. Can't help, but if product works should be st problem.

  35. 35
    zman Says:

    re 32 – yeah, mulling, probably wait to a bit closer to the report.  Probably Aug $8 or $9 strikes. 

  36. 36
    zman Says:

    BHI – not the flavor of the day. SLB call going well. HAL taking note. 

  37. 37
    zman Says:

    WTI and Brent kissed, WTI backing off hard. And the refiners sort of try to wake up. Not shocking.  Comes on option expiry day so price action there is likely to be noise but if that long WTI / short Brent trade unwinds it will move fast and the direct beneficiary is the bigger US exporting indie refiners like a VLO. 

  38. 38
    zman Says:

    Re APA deal – absolute 0 reaction from the other Shelf players: EXXI, WTI, SGY, CPE (sort of), MCF, EPL

  39. 39
    Mark Wetzler Says:

    Does anyone have any insight as to why oil has skyrocketed and why Brent/ WTI has returned to traditional quality spread? I understand there is speculation surrounding activities in Egypt/Suez but that doesn't appear to explain what's going on.

  40. 40
    zman Says:

    NOG news likely translating into a bit of fear in the rest of the Bakken names for 2Q volumes. Not overly concerned. Still expect 20% sequential out of KOG and then a real ramp into year end and that catalyst type pilots will be the news of the day at CLR, OAS, KOG, EOX this quarter. 

  41. 41
    zman Says:

    re 39 – function of import drop at peak time in US and that allowing more OPEC barrels to flood into Europe while their demand is poor. Big trade has been too go long WTI and short Brent. Goldman called that trade finished about a week back but it had legs beyond them which is pretty typical. Broad market strength also plays into WTI hands as does some slightly better looking overall US ecodata releases. Finally, those weaker imports at a time when they are normally strong, combined with strong utilization suddenly from the midwest and strong Gulf Coast demand allowed a pulldown to sub YoY levels on crude stocks at Cushing.  So I can see the impetus for the up on WTI and the down on Brent but I think its a bit out of hand or maybe better put as unsustainable.  

  42. 42
    zman Says:

    HK – shrugging off the Morgan Stanley 2 step downgrade yesterday, maybe they will send him a free calendar. 

  43. 43
    zman Says:

    SLB call over, positive tone throughout, heard no holes pokes vs what's in today's post. 

  44. 44
    RB Says:

    shared the morning post with a little trading group I chat with

  45. 45
    zman Says:

    Expect MCEP distribution next week, flat to up 2%, if flat up rest of year, and again next on order of low double digit %s.   They should be a little over 2/3 hedged for 2014 in the lower $90s for oil unless they've been busy adding collars during this upturn. They should protect the kind of distribution growth we are looking for there. 

  46. 46
    zman Says:

    re 44 – much obliged. 

    NFX next reports week – expect strong quarter and greater clarity on international sale. Analyst consensus on sale price has been too low in our view so color on the sale process should be a help. A second quarter of strong results in the Williston, Cana Woodford, and Uinta will give analysts a little more spine (most were somewhat neutral with an "OK, do it again" attitude last quarter). I think once the analysts get away from worring about how much specifically Malaysia / China brings in to pay down debt (and they will get to bring back almost all of the proceeds and we do think its more than $1.5 B) and focuses on what the company looks like from a more streamlined point of view, with US assets that the company will actually get value for and the ability to take good teams, make volume progress in the US and have it count more as they grow a smaller base … well, we think that the outcome of that process is that the name gets more recognition and turns into the sleeper story of the back half of 2013.  They probably go FCF by late 2015 on our model (with a lower deck that the strip out until then so maybe sooner?) so given the size of the U.S. asset base, this boring story could get much more interesting. It's also possible they get clear of the international segments, then barely move, say into the lower $30's and become a target for someone like a CLR who has good footprint overlap in ND and OK and could then dominate in a third state with NFX's Uinta position. 

  47. 47
    zman Says:

    Offtopicthirty, grabbing coffee. 

  48. 48
    Zorgnak Says:

    LINE   guessing that Hedgeye just reshorted it as they're bad mouthing it again…calling for a 18.84 price target

  49. 49
    zman Says:

    re 48 – Ha, be nice, he can see our comments today. ;-).   I'll go ask him. 

    Zorg – note the VLO pickup with the flip of the switch on WTI. 

  50. 50
    Zorgnak Says:

    #49  VLO  saw that…33.03 support still looks good

  51. 51
    zman Says:

    TPLM – still going with "they will like it higher" … definitely expect them to up guidance on the 2Q call, which should take place about a month after everyone elses 2Q call, so we've got a bit of time. Stock taking out highs.

  52. 52
    Zorgnak Says:

    PVA still has traction above 5.03…still looks promising

  53. 53
    elduque Says:

    PWE- looks like another break of an inverse head and shoulders. Stock looks technically strong. 20 day above 200 day and stock above both. 

  54. 54
    zman Says:

    Positions 1,2, 4 in ZLT pushing towards new highs. Keep this up much longer as we move into earnings season, which really gets into full swing for most E&Ps week after next and we will ease some trading positions back.  

  55. 55
    Zorgnak Says:

    Re #53  PWE  big level alright

    http://www.charthub.com/charts/2013/07/19/stock_master390_1307190832

  56. 56
    choices Says:

    #22-SLB/BHI-"Russia one of our fastest growing markets."  Z, Russia is faced with a massive rebuild of its previously obsolete energy sector-prob several yrs if not decades length projects on the drawing boards.  Z, do you see any direct benefits to our names besides the SLB/BHI/HAL names.  I am thinking of NOV primarily-this may too indirect to follow-not sure.

    Thanks.

  57. 57
    snoles Says:

    48 – A dumb question I'm sure, but isnt there some SEC rule against what this Hedgeye guy is doing?  Seems it should be illegal.

  58. 58
    zman Says:

    re 56 – Russia has been on again, off again good business, agree aging infrastructure and right now they are producing more than Saudi, so a lot of declines to fight there as they feed Europe, themselves, China. 

    I thinks it's good HAL and I'm just wathing NOV for now. If pressure pumping turns that will filter down into smaller names like CJES and the wireline guys like KEG, that's out a ways I think. Will be intersting to here HALs comments early next week. 

    re 57 – as I understand it, only if it is classified as a bear raid, not sure how they judge that. 

  59. 59
    zman Says:

    Offtopicthirty, grabbing lunch. 

  60. 60
    RMD Says:

    BHI-SLB readthru to FTK sounds OK:

    record upstream chemical margins at BHI, international strength and visibility at SLB.

  61. 61
    Mark Wetzler Says:

    #57   Hedgeye, as I understand it, is a research firm and advisor. They can say pretty much what they want as long as they don't run ahead of their customers or their letters. In some circumstances they can perhaps take positions ahead of a newsletter but I believe that has to be disclosed. It's really nothing more than talking their book.

  62. 62
    gdr Says:

    51—TPLM: they will like it higher. I get the story, but I know you think oil pulls back to sub 100's. I'd expect TPLM will suffer with the rest of them if they take a dive.

    Is the oil price relevant to your investment thesis here?

  63. 63
    zman Says:

    Analyst Asleep At The Wheel Watch – NOG Edition

    1) We understand at least one analyst was simply gonzo high, dragging the average up too much … lazy or deliberate we do not know but having listened to presentations and CC's with management you could arrive at big ups sequentially when they warned about road restrictions in their neck of the Bakken is simply beyond me. 

    2) Another analyst quit and had stale numbers from before 1Q, but as the new guy hadn't resumed coverage, the firm's estimates remained stale and helped drag up consensus.  Nice. 

     

  64. 64
    choices Says:

    "Shale Revolution"

    Good summary interview on SA:  "The Shale Revolution: Interview With Oppenheimer's Fadel Gheit"

    -Gheit is respected in the industry.

  65. 65
    Roger Says:

    Z, TPLM approaching 8. It has been there several times the past 3 years only to fall back to 5 or less each time. Do you expect it to have better staying power this time ?

  66. 66
    zman Says:

    re 62 – yes. My thoughts on oil and gas decks are always relevant to my thinking in a name.  I see them as undervalued at $8 with prices in the mid $90s, let alone here. The fact that they are highly likely to raise guidance for their FY on the next calls is gravy to the ongoing longer term story which is one of high production growth and falling per well capital costs and falling per unit operating costs. When I say people "will like it higher" it's kind of a jab at the chart only types, who seem to like to pay more for a name, surrounded by the fact that others too are paying more. I see so many of these guys who know it's an oil company and the ticker but never pick up a Q or listen to a CC or view a presentation. They see oil going up and then they find a nice chart pattern. Not my game but I understand it and I got my start in the business reading Oneil charts for a PM in the early 90's. This is part of why we have Cores and Trading positions.  Cores established when we like the story over the initial few months and trading positions established when the market disagrees with us from time to time, either for company specific or big bad red market hates all days.  I added trading positions relentlessly in the name in 2011 and 2012 and we did pare some back earlier this Spring there but it remains quite over weight in the #2/#3 spot in the greater ZLT portfolio (running neck and neck with BCEI at the moment). 

  67. 67
    zman Says:

    re 65 – I can't say near term that it will but we do expect them to hike production guidance on the next call. If it goes much over $8 we'll be looking at pulling some of the trading position off the table but not planning on touching the core there. I think Samuels gets it. I think the move to having an in house frac spread (now 2 of them) and moving into wireline was risky and it occurred at a time when the Bakken rig count flattened and services eased up in the Williston Basin. I think it was the right move but it clouded what was a non-operated to operated move that would have given them ultimately a good looking growth story with higher costs.  Instead they have a high growth story with lower costs (but more moving pieces). Same goes for Caliber (their midstream operations). Great idea to get as much of the liquids logistics in pipes and off trucks as you can but they did it early and you don't see that with most firms.  OAS has all this stuff too but they are much bigger and so their frac spread revenues and EBITDA don't see a confusing accounting lesson the quarterly call. That was the case 2 calls ago for TPLM.  Now people get it and they can focus on the P, production, and not worry so much about the other two pieces. But back to your question, I think the chart guys coudl take them through the longer term triple top here if we get oil to hold up in the low $100s until the call in the Fall. If not, then it's a guessing game. As a reminder, my cores are taken with the idea of 2 to 3 year or more hold periods. My trading positions are 3 to 9 months. My trading postions there range from below $5 to near hear but the average is certainly lower than current levels. Those are getting long in the tooth. If it runs hard on a catch up  to leadership in the Basin, hey, great. If I sell the trading positions or some of them and it then runs further hey, great, I've still at least got the core. And if it peals back with the market or oil, I wait for it to settle down and then perhaps start reloading the traders. 

  68. 68
    zman Says:

    OIH in full breakout on the SLB inspried strength. 

  69. 69
    zman Says:

    adding to 67 – I recall telling DaveH something about some charts that will show not just TEV/EBITDA over time with Production Bars on the other axis as we do now in the ZLT stats update pieces but also one that show the spilt on TEV (primarily debt vs market cap).  We'll have these out soon so you can see the impact of going to FCF as we will with OAS and KOG around year end.  Idea there is debt stops growing as they become self funding and that leaves multiple compression (some makes sense as they mature and slow the growth rate) and some extra move to the stock … as future growth in BOE's is put more on the back of the shares themselves. 

  70. 70
    zman Says:

    re 64 – he's a very smart guy. 

  71. 71
    zman Says:

    HAL getting happy over SLB now. 

  72. 72
    Zorgnak Says:

    HK  5.50 was last quarter's CHVN/acceptance level. 5.60 found buyers after latest "news".  

    http://www.charthub.com/charts/2013/07/19/stock_master390_1307191003

  73. 73
    Zorgnak Says:

    HAL breakout on good volume

    http://www.charthub.com/charts/2013/07/19/stock_master390_1307191009

  74. 74
    zman Says:

    Lot of pinning acting setting in. 

    OAS setting up to press breakout. Just not expensive up here. 

  75. 75
    Zorgnak Says:

    Energy volume for time of day pretty good .. 33 of 80 above avererage

    53 of 80 green

  76. 76
    Wildcatter01 Says:

    I saw where AZZEF halted trading yesterday.  Any thoughts on what would cause them to do that?

  77. 77
    zman Says:

    re 76 – says pending news release. Would guess it has to do with the sale of the Permian. 

  78. 78
    zman Says:

    Around 5 pm EST – we'll post part II of today's post, including the Wrap, The Week That Was, and the 2Q13 EW2 Calendar

     

  79. 79
    brodway Says:

    re: 63

    Zman. its amazing how disjointed the analysts are from reality. Rehashing old news or maybe new news to them because they never bothered to read the old news. This happened in HK and now NOG. Misconception creates opportunity and i've made another purchase today at 13.25. also sold some 13 puts at 40 cents. so if they do want to sell some more at 12.60…bring it on.

  80. 80
    brodway Says:

    anyone watching ROSE drifting higher?

  81. 81
    zman Says:

    re 79 – not adding on this, given the math it's a good bet they have to guide lower on the 2Q call, if I add, it's probably then, but I'm probably in the camp with several others that own enough for now. 

  82. 82
    brodway Says:

    for those that follow it EVEP attempting to make take on another hurdle higher

  83. 83
    zman Says:

    re 80 – yeah, no news earings in a couple weeks, expecting a longer range download on the plan of attack in the Permian. New management stamp on the company in progess. 

  84. 84
    zman Says:

    re 82 – our last 2 pieces on EVEP

    http://zmansenergybrain.com/category/evep/

  85. 85
    zman Says:

    Anyone see a broker comment or other news on GULTU, I've got a new bug but no story and noting on Edgar. Seeming some volume buys come into the name. 

  86. 86
    zman Says:

    OAS going for an all time high. I love it when a plan comes together.   This is for my friend who at a little get together mentioned the other day they still held NOG but no other of our Bakken players. I said somethning along the lines of "why do you own just one? No OAS?"   Big frown as a response. 

    From December 23:

    http://seekingalpha.com/article/1079491-oasis-petroleum-fundamentals-in-overdrive-stock-in-neutral-but-not-for-long

    and 

    February:

    http://seekingalpha.com/article/1223311-oasis-reports-solid-4q12-results-margins-reach-new-highs-steaming-ahead-as-planned

    and then all of these from the site itself:

    http://zmansenergybrain.com/category/oas/

    See the WIOWIO page and look at the designation, "easier to own, or not" 

     

     

  87. 87
    zman Says:

    AZZEF – small trade went through, don't see news after the requested trading halt. Ah, weirdness from the single digit midget crowd. 

  88. 88
    elijahwc Says:

    #56:  FTK

     

    I keep hearing rumblings that after two years of talking about it that they have finally made inroads into Russia.  I don't know if it is a result of their partner Basins work or thatof another in which case HAL would be logical as FTK is represented in HAL's CleanStem line.

     

    On a sidebar all the talk of int'l strenght implies that that ultimate laggard WFT may have the greatest upside.  Especially since they have recently become 'institutionally acceptable' once more.

  89. 89
    zman Says:

    Names we care about reporting next week watch:

    Monday

    HAL,

    Tuesday

    BTU, VLO,

    Wednesday

    COG,

    Thursday

    NFX, NBL, EQT, OII, WLL, CRR

  90. 90
    zman Says:

    Thanks Eli, BAS also reporting next week but left them off my list 

     

  91. 91
    zman Says:

    Rig Count Watch:

    Oil up 4 to 1,395 vs 1,414 a year ago

    NG up 7 to 369, vs 518 a year ago … starting to see a little drift up their finally. 

  92. 92
    DaveH Says:

    RE: 67, Z, I appreciate you outlining your strategy.  Your results since 2009 have been enviable.  I am shifting more and more to your approach.   One friend of mine uses a "Ladder to Success" approach which buys more when the stock or mutual fund goes down.  Of course that only works if it eventually turns around.   But the "buy more" approach seems like a good one if the stock is well researched with solid fundamentals, as yours are.  There are of course a few like NOG that defy all logical analysis for long periods of time.

  93. 93
    zman Says:

    Playing with the new BHI well count by basin data, fun fun fun. 

    Really fun in that everyone looks for the oil basins and expects to see down or flat rig count but up wells translating into a higehr wells / rig per Basin count. Then you look to the Haynesvile. And the opposite is true. Less rigs and they are moving slower. 

  94. 94
    RMD Says:

    SYRG catchup from last Q:

    really just steady-as-she-goes until fireworks start in 1QF14 with 1st hz pad starting production. Co. implied they expecting increased attention from the St.now that volume hits 500m shares at times; maybe production ramp attracts;  MS just 'discovered' BBG's Wattenberg play yesterday, who knows maybe they will find SYRG.

    I think run rate will dazzle by 4Q14: St. is too high for SGA, LOE/boe esp. in 2H (I guess 4Q up small, 1Q starts downtrend, DDA/boe will be down on reserve increases. LOE was up in 3Q to get % production increase to an optically correct level; St. obviously OK with a flat 4Q Q-Q given '14 growth. Well costs probably under guidance as using older, slower, cheaper rigs and older proven methods (as opposed to WLL's plug &perf). Non-op interest could average 20% (dk where St. est. is). 

    2nd Greenhorn well (Oct) will be 1st well in n/e extention area.  Will also be 1st datapoint on Vecta's seismic reads. Well will test vertical D sand first: low odds of success in D, oily target, highest ROI if works. Then use well for hz Greenhorn and Nio.

    None of the St. writeups mentioned what I thought was most imp't comment: rigs are coming into Neb. nw , it is a "very viable vertical play now". Pvt co.s have very encouraging results and rigs follow the capital.

    I got a circumstantial, but very positive,  read on the quality and commitment of mgt. as well.

     

     

  95. 95
    zman Says:

    Re 92 – hear ya and as you know I don't always add down, I often add higher, just depends on what the forward view (macro and micro is from there). I don't have a whole lot of hard and fast rules besides DCA'ing into my cores and being slow to buy and slow to sell in general. I try not to play with the kneejerk crowd. I do shake my head when people "want" a name to go higher like a NOG and other than oil the timing is just not right this year yet but at the same time, those same people don't own leadership names, names that may have risen in stock price but are by no means expensive. Boggles my brain. 

    re 94 – thanks much, NBL to speak next week. Expecting a lot more long lateral Nio B comments that could help you higher.  Did yo ever find out who the private player with strong results in Nebraska is? I have not toyed with the State site to see if I could track that down. Also, is that a fractured carbonate they are chasing?  

  96. 96
    RMD Says:

    95 Murfin and others new to me.

  97. 97
    zman Says:

    re 96 – thanks, that's a help

  98. 98
    choices Says:

    from alpha:

    "The spread is dead," Global Hunter proclaims, as WTI crude (USOrises above Brent (BNO) for the first time in nearly three years two days after the EIA reported a third consecutive weekly supply decline.

  99. 99
    Zorgnak Says:

    COG  alot of eyeballs on this one..

    http://www.charthub.com/charts/2013/07/19/stock_master390_1307191205

  100. 100
    Zorgnak Says:

    Keith McCullough ‏@KeithMcCullough3m

    Kaiser pinned the tail on the donkey re-shorting $LINE today at 10:04AM EST, $28.74

  101. 101
    Zorgnak Says:

    SWN   40 is a big number 

    http://www.charthub.com/charts/2013/07/19/stock_master390_1307191210

  102. 102
    Zorgnak Says:

    COG-like

    http://www.charthub.com/charts/2013/07/19/stock_master390_1307191212

  103. 103
    Paul in Kansas City Says:

    Re-86: Looking at these companies and building a basket is a great  portfolio and money management approach;  plus the idea of trading versus core positions.  I have been a subscriber for 5 years now and this has really helped!

  104. 104
    zman Says:

    re 100 – well there ya go. 

    re 101 – kind of an anti catalytic quarter from a new ventures standpoint, likely too soon for data out of Marmaton / Atoka in CO and likely not time for the next horizontal well in the Brown Dense (they said as much recently).  Look for the acceleration from the Marcellus and more talk about what their plan is for the new acreage with regard to 2014. Dependable as far as numbers goes, so should not be a worry on that, doubt they raise this quarter but could happen, certainly not expecting them to go lower on guidance.  

  105. 105
    zman Says:

    re 103 – much appreciated Paul. 

  106. 106
    zman Says:

    OAS setting up for an all time close high. Helping to drag the rest of the Bakken Players with it. 

  107. 107
    DaveH Says:

    RE: 100 LINE stopped its nice upward motion at exactly the time Hedgeye put out their new short call. So maybe they do have some following, regardless of the fact that several respected analysts and brokerage houses have said after their last short call that there is nothing wrong with LINE's accounting and the Hedgeye analysis is erroneous.   The stock has gone sideways since 12:24ET so it will be interesting to see if the new Hedgeye call causes any further move down when people read about it over the weekend.  I am still in and thinking it will be much higher soon.

  108. 108
    Zorgnak Says:

    FCG   Headed for the top of range and volume base again.

    http://www.charthub.com/charts/2013/07/19/stock_master390_1307191231

  109. 109
    zman Says:

    re 107 – ask me about it next week … I have boating-on-the-lake-on-the-brainitus at the moment. 

  110. 110
    Andy Moore Says:

    z   as my acct is at all time high just want to say thks  hope your subscriber total doing equally well!.                                                    OT  have been selling AAPL weekly calls and doing very well. just looked at them for my friday weekly sale and they all selling for double what they normally sell for  anybody have thoughts about why?

  111. 111
    zman Says:

    re 110 – Andy – congrats on that!

  112. 112
    DaveH Says:

    Re: 109 have a good vacation!

  113. 113
    DaveH Says:

    Nice to see S&P heading up at the end of Friday so people not afraid to hold over the weekend.   Nasdaq not doing that.  Seems some earnings releases causing a little tech fear.  GOOG and MSFT.

  114. 114
    choices Says:

    #110-Congrats, Andy-the bernank notwithstanding.

    Thanks much, Z.

  115. 115
    r09traveler Says:

    Agree wholeheartedly with 103

  116. 116
    zman Says:

    Beerthirty – have a great weekend, second Friday post out in 30 minutes. 

  117. 117
    Andy Moore Says:

    z    –  wondered what i was gonna do w/o u next week – then remembered what the mkt does everytime u go on vacation

     

  118. 118
    zman Says:

    re 115 – thanks much

    re 117 – I know right, good riddance to me!

    The second Friday post is now up. 

  119. 119
    PackMan Says:

    110 – AAPL earnings next week – volatility premium.  Be careful with those.

  120. 120
    crysball Says:

    WLL monetizes   interest  in  Breitburn  facilites…………….$858 million…………….not  chump change.

  121. 121
    crysball Says:

    DOE  Study…………..Fracking  Chemicals    do  NOT   contaminate  water  supply!!!!!!!!

    http://www.rigzone.com/news/article.asp?hpf=1&a_id=127864

     

  122. 122
    crysball Says:

    re:120    Here  is  the  8-K  information  in  the  WLL monetization:

    On July 15, 2013, Whiting Oil and Gas Corporation (“WOGC”), a subsidiary of Whiting Petroleum Corporation (“Whiting”), completed a sale (the “Sale”) to BreitBurn Operating L.P. (“BreitBurn”), a subsidiary of Breitburn Energy Partners L.P., of Whiting’s interests in certain oil and gas producing properties located in its enhanced oil recovery projects in the Postle and Northeast Hardesty field in Texas County, Oklahoma, including the related Dry Trail plant gathering and processing facilities, oil delivery pipeline, 60% interest in the 120-mile Transpetco CO 2  pipeline, CO 2  supply contracts, certain crude oil swaps and other related assets and liabilities. The Sale was pursuant to the Purchase and Sale Agreement (the “Agreement”), dated June 22, 2013, by and between WOGC and BreitBurn and was effective April 1, 2013. The cash purchase price pursuant to the Agreement was $859.8 million, subject to closing and post-closing adjustments. The net proceeds from the Sale were $836.9 million after selling costs and closing adjustments, which is also subject to post-closing adjustments.

    A copy of the Agreement is filed as Exhibit 10.1 to this Current Report on Form 8-K. The foregoing description of the Agreement and the transactions contemplated therein are qualified in their entirety by reference to such exhibit. There are representations and warranties contained in the Agreement, which were made by the parties to each other as of specific dates. The assertions embodied in these representations and warranties were made solely for purposes of the Agreement and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating their terms. Moreover, certain representations and warranties may not be accurate or complete as of any specified date because they are subject to a contractual standard of materiality that is different from certain standards generally applicable to stockholders or were used for the purpose of allocating risk between the parties rather than establishing matters as facts. Based upon the foregoing reasons, investors should not rely on the representations and warranties as statements of factual information.

     

  123. 123
    Wildcatter01 Says:

    Re – 95.  I just wanted to check my portfolio against your comment in 95.  What are the leadership names that have risen but are still not expensive?

  124. 124
    hd video watch Says:

    hd video watch

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