01
Jun

Macro Friday

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Market Sentiment Watch: Payrolls Friday. Market on edge as major trading partners swap tariff proclamations.  In today's post please find a number of slide shows: the the natural gas review (smaller than expected injection one more shot at triple digits next week and then eroding injections even as we sit at +8 Bcfgpd YoY for production and half a Tcf under the five year average on storage), the oil inventory review (positive side of neutral), the oil inventory by State and region production graphs (essentially it's all about TX and NM), the natural gas macro slide shows (another record month for production, imports continue to tread in slight net export territory, and demand hit another new high for the month on the back of record Industrial demand and a tie for the record on Electrical), and some other odds and ends. 

Ecodata Watch:

  • We get Nonfarm Payrolls at 8:30 am EST (F = 202,000, last month was 164,000),
  • We get the unemployment rate at 8:30 am EST (F = 3.9%, last month was 3.9%),
  • We get average hourly earnings at 8:30 am EST (F = 0.2%, last read was 0.1%),
  • We get ISM manufacturing index at 10 am EST (F = 58.9%, last read was 57.3%),
  • We get construction spending at 10 am EST (F = 1.0%, last month was -1.7%),
  • We get car sales over the course of the day (F = 16.9 mm, last reading was a 17.2 mm annualized rate).

In Today’s Post:

  1.  Holdings Watch
  2. Commodity Watc​h
  3. Natural Gas Inventory Review 
  4. Oil Inventory Review
  5. Oil Production by State - growth increasingly focused on the Permian
  6. Natural Gas Production - another new high
  7. Natural Gas Net Imports - (notably high net exports relative to same period in 2017)
  8. Natural Gas Demand - record for March driven by Industrial and Electrical 
  9. Stuff We Care About Today - CPE
  10. Odds & Ends 

 

Holdings Watch:   

ZLT

  • Yesterday's Trades: None
  • The Blotter is updated.
  • ZLT Cash: 19%.
  • Look for EFS ZLT weight increase near term. 

ZLT 52 week highs and lows:

  •  OAS scored a fresh 52 week high yesterday.

Commodity Watch:

Crude oil closed off $1.17 yesterday at $67.04 on higher volumes than in recent relatively high volume sessions. The long Brent short WTI likely played a part as did expiry for Brent. As noted in yesterday's post, expect some near term higher volatility in crude prices. The inventory report was largely benign (better than the prior week's report) but the EIA 914 data (see oil by states section way below in the post) highlighted strong month to month volume output gains from Texas and New Mexico as the Permian continues to be the most actively drilled play in the U.S. by a wide and increasing margin.  This morning crude is trading off 55 cents.

  • Rig Count Watch:  Look for a near term deceleration.  Upstream comments have been pointing to a flattening in 2H18 and in some cases a rig departure (here and there) within the Permian.  Major commentary has cooled as well with operators in multiple onshore plays looking to potentially reallocate to LLS priced basins.   

 

Natural gas closed up 7 cents at $2.95 after EIA reported a smaller than expected injection (see table and graphs below) that was also smaller than the five year average injection for the week leaving storage exactly half a TCF below the five year average for this time of year.  We now expect builds to start moving lower week after next. This morning gas is trading flat. 

PointLogic Watch:

Natural Gas Storage Review 

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Oil Inventory Review

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Oil Production by State - Growth narrowly focused on the Permian

Natural Gas Production - Relentless gains

Natural Gas Net Imports 

Natural Gas Demand

Stuff We Care About Today

Other Stuff

  • CPE upsized their senior notes offering from $300 mm to $400 mm as expected. Revolver wiped clean.  Net debt to 1Q18 pro forma EBITDA a reasonable 2.2x.  CPE expected to be done with large bolt ons for some time now. 
  • PE - filed for a mixed shelf. As always, we don't see these filings as a negative,
  • Look for additional cheat sheet updates next week,
  • Look for the Permian Players Part 2 Update next week,
  • MGY (TPGE) - call with management soon.

Odds & Ends

Analyst Watch:

  • TBA in comments

108 Responses to “Macro Friday”

  1. 1
    zman Says:

    Analyst Watch

    GS out highlighting owned names PXD and LBRT today with regard to Permian issues. Longer term they highlight FANG.  They have widened their differential expectations but don't see larger operators altering plans. They do note 64 rigs in the basin are run by 1 rig largely private operators and those are vulnerable in the face of wide diffs (they're less efficient and held in many cases by less well financial backed operators, not private equity rigs). 

  2. 2
    zman Says:

    May NFP 223,000

    3.8%

  3. 3
    nrgyman Says:

    Rover pipeline:  FERC granted approval for full operation of the entire Rover system, starting today.

    https://seekingalpha.com/pr/17179773-energy-transfer-announces-ferc-approval-place-rover-pipeline-s-full-mainline-b-service?ifp=0

  4. 4
    zman Says:

    re 3 – Thanks. Right on time, benefits ECR, SWN, AR (unowned) and some other players including Ascent (uncertain when they bring this Aubrey inspired name public, was to be last year, the Marcellus segment went BK this year, but doesn't impact the Utica piece).

  5. 5
    nrgyman Says:

    CLR:  CEO reportedly bought $8.88 mm in stock.

    http://aheadsup.com/twitter/newsentiment.html?user=usequities&symbol=CLR&page=1

  6. 6
    zman Says:

    Oil down 1.1% at equity open

    https://www.investing.com/commodities/crude-oil

  7. 7
    brodway Says:

    Wanted to add to yesterday's CXO comment…..looking at chart, there is a good bit of support at 135 as evidenced by continuing moves above that level in the November – December 2017 period when stock tested that level 3x and finding support.  Stock had tested the 200dma on 2 other occasions since that time and had bounced on both of those instances. This is the third retest which comes at an odd time as oil has been in bullish mode and RSPP acquisition has not been viewed as a negative move by the company. Should it test 135 i would get much more aggressive than i am now, even if i did sell 135 puts yesterday at 2.35 and 2.40 in a small way.

  8. 8
    zman Says:

    re 7 – oil sideways, differentials lower. CXO has good flow assurance but about 40% exposure to Mid-Cush in 2018. 

  9. 9
    brodway Says:

    re: 8

    thanks for your thoughts …..was offering technical view only…..still see them better off today than 6 months ago….same price

  10. 10
    zman Says:

    Adding to 8 – I think you are really going to see names like PXD highlight tight realized pricing in 2Q18, fear and trepidation in front of other Permian 2Q reports quite possible. Guys like LPI (unowned) in an especially poor position but they won't be alone.   CPE one of the less covered.  JAG about 60% covered. You can see these in the recent Cheat Sheet updates. 

     

  11. 11
    zman Says:

    re 9 – hear ya from that perspective, just adding my Friday 2 cents to your comments. Beyond the valley of the differentials, the combo of CXO/RSPP is a good one. 

  12. 12
    brodway Says:

    re: 10

    my understanding is that pricing is a transitory issue and will eventually work itself out…..still rather be selling oil at 60 then 40….

  13. 13
    brodway Says:

    JAG getting beat up again out of the gate…..not sure if its shorts on a Friday type action or there is a seller who is desperate to get out

  14. 14
    zman Says:

    re 12 – by 3Q19

  15. 15
    brodway Says:

    re: 14

    that's a year from now…..not as short as i had thought…..

  16. 16
    nrgyman Says:

    CPE:  Just filled the March 20 opening gap at $11.62 and completed the 61.8% Fib retracement of the Feb-May rally.  Also broke below the 200 dma to do it, then bounced.  Support area.  

  17. 17
    brodway Says:

    MTDR hanging out at dangerous levels….the way i see it has to hold around 27…..or risk being traded down to 24

  18. 18
    brodway Says:

    re: 16

    see that ….thinking other names attempting same…

  19. 19
    zman Says:

    re 13

    – Permian diff fears. CXO and FANG off early, PXD much less but off. 

    – JAG is / very much appears to be technical, same support zone comments yesterday, see it needing to hold $11 but no real difference between $11 and $12.

    – Weak oil day, weak diff day, continuation of yesterday. 

    – % move outsized on the weak chart and lower PPS

    – Combined with the rest of the prior days, weeks, months comments on the decision to not up guidance while announcing 2Q volumes that were above Street, to scale back on rigs (very slightly and just to get more 3D in house to drill right instead of add more DUCs that are less well landed than they could be … if anything cutting a rig and not cutting volume guidance is a plus as it speaks well to well outperformance) …

    –  … all left Street thinking 70 to 80%-ish growth, outspend handles easily by liquidity, strong balance sheet (1.0x net debt/1Q ann EBITA), hedges that are just OK,  … so Street is ho hum and not defending even as it cheapens.

    – Wouldn't it be nice if others slowed their Permian roll? 

  20. 20
    nrgyman Says:

    JAG (-7.4% atm) approaching all-time lows.  With WTI at $66.50.  

  21. 21
    zman Says:

    ZTRADE – RSPP

    RSPP – Sold RSPP to 5% position from 12% at $42.67, up 81% to our average coverage.  We plan to continue to hold RSPP (CXO) as a core but have long planned to reduce our over weight in the wake of the deal. 

  22. 22
    zman Says:

    re 20 – over done to the downside but people are way less concerned with the WTI price and much more concerned with that translating to $40 at some point on the non basis hedged portion of their volumes. 

  23. 23
    brodway Says:

    re: 21

    Zman….why the sell now and not at 50 where it traded a few weeks ago? are you sensing a degree of risk continuing to be overexposed in the name at 42? 

  24. 24
    elduque Says:

    Market playing non-permian vs permian. It has been a long time since EOG traded at a higher dollar price than FANG.

  25. 25
    zman Says:

    Planning to maintain cash near 20%.  Trades soon. 

  26. 26
    brodway Says:

    CXO at 133 now 30 points off May highs….getting close to retesting April low at 132

  27. 27
    nrgyman Says:

    CXO just filled the April 10 opening gap at $133.38.  Next gap lower is the Sept 25 opening gap at $127.06, which also coincides with a low-volume trading zone on the daily chart.  

  28. 28
    zman Says:

    re 23

     A) it's trading on a multiple of CXO.  With diffs blowing again that chart looks particularly weak. 

    B) I have long planned to reduce it. 

    C) It's our largest position and it made sense to rebalance it …. I am not a trader, I am a long term guy but I am protecting profits there in light of A) and B)

    D) 5% is no small position.  If it rallies next 6 months through the highs that's great, the CXO/RSPP story is strong and this is a hiccup but as I look to next twelve months that's a bit less exposure in our Permian overweight and a bit more exposure in our LLS capturing crowd. 

    … 

  29. 29
    zman Says:

    ZTRADE – ZLT – Starter Core in TPGE

    TPGE (soon to be MGY) – added at just under $10.50.  Please see our Eagle Ford comments and cheat sheet update for this name here: http://zmansenergybrain.com/2018/05/30/wednesday-morning-magnolia/

  30. 30
    zman Says:

    PVAC seems extended technical, otherwise would be adding it now too. 

  31. 31
    brodway Says:

    re: 28

    ok….just want to make sure i'm following the transition that is going on…..

  32. 32
    brodway Says:

    re: 29

    what % of the ZLT does that purchase represent?

  33. 33
    zman Says:

    re 31 – it's subtle. Not running away from the Permian Hills …

    ZTRADE – ZLT – PXD

    PXD – We have owned it in the personal accounts for a couple of months now. Adding a 3% starter core at average $193.34.  A bullet proof and improving balance sheet, a story that's going pure Permian over the course of the year, and strong basis and flow assurance … we see as a "goto" name for those wanting Permian exposure over the next year, allowing the name to trade to a premium 2019 multiple.  

     

  34. 34
    zman Says:

    re 32 – 2.5% on the button. Still waiting on their call. I'll go 5 to 7.5% if they make me happy. 

  35. 35
    zman Says:

    re 33 – we own more $ wise in personal accounts here from the add in April but I have been wanting to get it into the ZLT. 

  36. 36
    brodway Says:

    Zman…

    do you see MTDR being affected by differentials in a big way?

  37. 37
    zman Says:

    re 36 – not in a big way but they will be impacted, yes.  

    So just walking through it:

    They are 80% Delaware / 20% ish EFS

    Oil is 58% of total and of the Delaware 60% is oil. So their oil is 85% Delaware, of that they have basis hedges on  14.3 Mbopd this year (or 64% of Delaware only oil).  On the rest of the Del they should take the differential hit and on the small portion from the EFS they should be in line, maybe small $ either side of WTI. 

    Company was one of the ones to say Diffs were over blown at time of 1Q call and would fall so they get a little bit of a knock from investors on that. 

    They also did the equity issuance the other day with no deal in hand which may be viewed as "timely but telling" in the sense that they basically topticked the stock. 

    Data from the cheat sheet below which reflects exposure vs expected volumes for the total company. 

    Hedges Volumes      
             
    2018 –  Oil        
       Collars to WTI          7,123 bopd ($44 floor x $60 ceiling)  
       Collars to LLS          1,918 bopd ($44 floor x $60 ceiling)  
       3 Ways          4,932 bopd ($50 x $64 x $67)  
              13,973 52%  of expected 2018 oil volumes 
             
    2018 Oil Basis Swaps         14,301 53%  of expected oil @ $1.02 off WTI 
             
    2018 – Natural Gas               42 MMcfgpd ($2.58 floor, $3.67 ceiling)
             
             
  38. 38
    zman Says:

    XOG – toying with pushing further above 52 week highs in the "I am not a Permian" rush.  Normal to see Wattenberg diffs off $9 from WTI and the names are generally in the 60/40 oil/gas cut range with normally sub Permian oil name EBITDA / BOE rising non Permian tide lifts.  They are our sole direct exposure to the DJ at this time (EOG has some exposure but it's not a swing on the name). 

  39. 39
    zman Says:

    PUTIN AT MEETING WITH CROWN PRINCE OF ABU DHABI: WE WILL CONTINUE ENERGY COOPERATION, WHICH HAS ALREADY HELPED STABILIZE OIL PRICES: IFX

    Trial balloons released and they didn't really care for the reaction, ha. 

  40. 40
    brodway Says:

    re: 37

    Company was one of the ones to say Diffs were over blown at time of 1Q call and would fall so they get a little bit of a knock from investors on that. 

    Yeah….doesn't help when you have misjudged the situation….getting punished for it…..

  41. 41
    james T Says:

    AR and RRC up a bit again

    Broadway, Nrygman what gassers are on your watch lists other than ZLT companies, obviously I am watching them.  

  42. 42
    brodway Says:

    James….

    COG (insider purchases last/this week) AR, RRC, ECR. SWN

  43. 43
    brodway Says:

    and CRZO (kind of gassy)

  44. 44
    zman Says:

    Noting an extension higher in NFX (STACK/SCOOP, Bakken, Uinta)

  45. 45
    zman Says:

    And OAS 52 week high. 

  46. 46
    nrgyman Says:

    RE 41:  I own COG and AR, having added them on this latest pull back.  I have been playing the natgas growth story mainly via the midstream space but felt the producers were overly cheap and basing, with some recent signs of turning slowly.  AR and COG are probably the 'safest' names in the space (along with EQT) but when the market moves to 'buy' mode in the natgas space I do expect the less safe names to outperform.  GPOR, ECR, RRC and SWN are all depressed but the charts show them to be basing and beginning to see more buying–imo they outperform in a group rally.

  47. 47
    brodway Says:

    re: 44/45

    feels like a stampede out of Permians and into other basins…..nimble markets

  48. 48
    zman Says:

    re 47 – PXD green. A few others as well.  Volumes are not overly high save for CXO and JAG. 

  49. 49
    nrgyman Says:

    RE 46:  Note the natgas names getting attention again, due in part to the Rover pipeline system going into full service today.

  50. 50
    brodway Says:

    MTDR CPE off heavy too…..i'm patient, just don't want to hold the bag if my portfolio can outperform in the short term

  51. 51
    james T Says:

    re42/43 thanks CRZO was one I bought a while back,  MRO looking good as well  ?

  52. 52
    elduque Says:

    where does one find the differentials. 

    Thank you

  53. 53
    zman Says:

    re 52 – Bloomberg.  They are not really something that's out in the free public space. You can get an idea via some Argus pages but Bloomberg's are deemed accurate. 

  54. 54
    zman Says:

    This is the only free one I have seen that puts it in the ballpark

    http://www.cmegroup.com/trading/energy/crude-oil/wts-argus-vs-wti-calendar-spread-swap-futures_quotes_globex.html

  55. 55
    zman Says:

    VNOM (unowned) – first time in awhile they have been grouped in with the Permians on a red-diff day. 

  56. 56
    zman Says:

    CXO just brok that double bottom.  Looks headed for the September gap, about $127.53, would expect a bounce there all other items being equal. 

  57. 57
    zman Says:

    Oil waffling about in front of rigs:

    https://www.investing.com/commodities/crude-oil

  58. 58
    zman Says:

    SWN – base bottom break out in progress. We continue to own a 3+% position in the name.

  59. 59
    james T Says:

    re46  Thanks on gassers.

    Roughly four times  normal volume this time of day for CXO  

  60. 60
    zman Says:

    re 59 – massive volume there and JAG.  MTDR high as well. 

  61. 61
    zman Says:

    and VNOM (unowned) and CPE. 

  62. 62
    zman Says:

    Oil count said to be up 2 rigs, waiting on details page. 

  63. 63
    james T Says:

    VNOM  Large players have been gently taking money off the table ever since 27 dollar range on the upside.  Small players were buying and kept it up and now they are taking some profits.   It was a great run.    We need some better EIA reports.

  64. 64
    zman Says:

    PE – being shopped. Any serious buyers would have been well aware of differential widening this year. PXD currency staying aloft relative to the group. Hmmm. 

  65. 65
    zman Says:

    re 63 – thanks

    Baker has the wrong file attached for the 6/1/18 update, still awaiting rig count details. 

    OT – grabbing lunch, back shortly. 

  66. 66
    zman Says:

    JAG tapped 5.1.17 low of $10.96 to the penny.  Day like this would not expect it to hold. 

  67. 67
    Natus Says:

    re 25 – Z :  You plan to maintain cash near 20%, but in the last uptrend before 2016 you maintained it at about half that, around 10%.

    What, exactly, is your reason for maintaining double the cash this time than you held in the previous up market?

  68. 68
    zman Says:

    Back to flat on week.  Polled twitter for free diff to Midland.  Same page as we have been indicating but said to switch to settle tab and from there switch from prelim to prior day and that lines up with what I see from Bloom pages. 

    So you would go here:

    http://www.cmegroup.com/trading/energy/crude-oil/wts-argus-vs-wti-calendar-spread-swap-futures_quotes_settlements_futures.html#tradeDate=05%2F31%2F2018

    Then click the second tab, "settlements", then change the day to yesterday

    Hope that helps El-D.

  69. 69
    james T Says:

    No one mentioned SJT  

  70. 70
    nrgyman Says:

    Rig Count posted as 6/1/18:

    Oil +2, Natgas -1

    Hz +3, Vert +0, Dir -2

    Oil rigs:  Permian -1, DJ +1, Williston -1, EFS +2, Cana +3, Miss +1 for a total of +5, so -3 oil rigs in stealth areas

    Natgas rigs:  All zeroes, so -1 rigs in a stealth area.

  71. 71
    zman Says:

    re 67 – Re "exactly":  Combination of fewer held names now vs then with a focus on higher margin, lower debt/EBITDA, opportunity capital at the ready, caution as to how our larger weightings play out in light of differentials, and degree of OPEC shift in policy later this month. 

  72. 72
    zman Says:

    re 70 – thanks.  Much more benign report than last few weeks. 

  73. 73
    zman Says:

    Agreed:

    https://www.bloomberg.com/view/articles/2018-06-01/trump-energy-plan-is-about-insecurity-not-national-security?utm_campaign=socialflow-organic&utm_source=twitter&utm_content=business&cmpid=socialflow-twitter-business&utm_medium=social

  74. 74
    zman Says:

    Adding to 73 – not to get political but the move to stem plant closures is purely that and for anyone at DOE to suggest natural gas fired plants are not reliable is pure fantasy. 

  75. 75
    elduque Says:

    thanks Z for 68.

  76. 76
    Natus Says:

    re 71 – thanks

  77. 77
    zman Says:

    OK Brod – I think your comment re Permians is turning into a Friday shellacking for the group.   PXD just rolled rapidly so some of the thoughtfulness/bifurcation is eroding. 

  78. 78
    nrgyman Says:

    RE 73,74:  Trump is playing to his base, fulfilling campaign promises, regardless of economics.  Also, he clearly wants low energy prices both for US consumers and for exports.  Coal and nuclear props, aside from the economic losers they are, do keep pressure on natgas prices which help consumers and exports.  Also Trump gets to promote the jobs he is saving in the coal/nuclear industries (but will say nothing about lost job opportunities in competing industries).  Hopefully the electric utilities will continue to move away from coal/old nuclear despite this administration's support for them.

  79. 79
    nrgyman Says:

    JAG hit all-time lows below the previous lows at $10.96.  

  80. 80
    james T Says:

    Buy a call on CXO ?  July

  81. 81
    zman Says:

    re 78

    – coal and nuclear appear very much set to continue to see declining nameplate capacity. 

    – Investors don't want it in their utility generation portfolios (increasingly) and insurers are getting more inclined to walk away as well. 

    – I just had to post as I used to follow 90 some odd U.S. reactors weekly as part of our NG demand electricity sub model and in the early 2000's the nukes were exhausting their collective ability to uprate those units.  The plants were old then and we were seeing more extended reactor turn times as increasingly costly maintenance issues cropped up that had to be fixed either with the refueling or randomly through the year. 

    – The coal fired base was far older and clean coal efforts increased maintenance items (you want to burn low SOX PRB coal, it's wet, have fun with that, and yeah it's way cheaper than Ill. Basin but it's low BTU so you have to blend and burn more.   I guess if you kill the clean air regs …. 

  82. 82
    zman Says:

    re 79 – yes.  I generally think in terms of closing lows as a bit more important but it certainly can travel lower next week and would have 0 chart support at that point.  Majors with acreage appetite should be snooping but probably for needle moving fish. 

  83. 83
    elduque Says:

    With all the emphasis on differentials, have you changed your margins on the various permians, or as I suspect most of this is just noise created by technical traders. 

  84. 84
    elduque Says:

    Crude sitting on a trend line started last August

     

  85. 85
    bill Says:

    Arent the effect of hedges eliminated as proforma ebitda is used as if the bad or good hedges dont exist?

  86. 86
    zman Says:

    re 83 – they are coming off, it's hard to determine how far to take them at the moment, the operators basically say the same thing. 

  87. 87
    nrgyman Says:

    WTI at $66 after hitting $65.89, down 1.5%.  Yet many non-Permian E&P names are green.  Exodus out of the Permian into non-Permian names, regardless of quality or hedge/basis effects.  Equal opportunity ugliness for the Permian names today.  Wonder if this is a wake-up call to slow down D&C in the Permian over the next year?  Those with excess FT to the Gulf Coast can continue to grow production, or sell that excess FT capacity for a good price to someone who really needs it.  Either way, a production slowdown should be on the horizon.  Perhaps Papa will prove to be mostly correct about EIA overestimating shale production for this year, not that it is helping his stock–which just filled a downside gap target at $16.57.

  88. 88
    zman Says:

    re 85 – I use actual EBITDA (historic and projected).  I know some companies speak to pre hedge EBITDA to give an idea of margins had they not taken the hedges they had to allow for comparisons but I don't employ unhedged EBITDA in my thoughts. I do look at cash field costs which itself is not impacted by hedges. 

  89. 89
    zman Says:

    re 87 – Goldman rather pointedly said no re diffs and programs today.  As noted in the post, I think it will impact the little guys who have got to be at least in part wondering if spending that next $10 mm is wise if $65 oil means a $45 realization. Agree re slowdown, definitely see 2019 growth less than 2018.

    Re CDEV (unowned) – thanks for the headsup.  Unhedged name at a time when lower hedges hurt more than help. 

  90. 90
    james T Says:

    re87 Hopefully they will slow down on drilling permits in the Permian a bit.   

  91. 91
    brodway Says:

    Seems like there was a pair trade on this morning short Permian buy Non Permian upstream…..Then they decided lets just sell them all. Not a surprising move for a Friday

  92. 92
    zman Says:

    FANG finding support.  This level is close to our recent buy in. Kind of neckline. 

  93. 93
    nrgyman Says:

    RE 27:  CXO just filled the gap at $127.06.  RSPP is not far from filling the Mar 28 opening gap at $38.92, which is just above the 200 dma atm.

  94. 94
    brodway Says:

    by the way did anyone ask Floyd Wilson what he is doing to offset the differentials in the Permian…..he did claim he was the smartest man in the room(or was it the basin?)

  95. 95
    brodway Says:

    PXD right back to the 50dma….has now been there 3x….Hopefully 3 times' the charm

  96. 96
    nrgyman Says:

    Z, to the extent that your Permian names have local basis exposure how much of that exposure has been discounted already in the stock prices?  Perhaps the market is attempting to discover how wide the basis will eventually become–and for how long–but many larger (and some smaller) names will have only a minor ebitda impact.  The somewhat indiscriminate sell-off across the Permian board should be creating solid entry prices for certain names.  What names, regardless of your present holdings, are presenting the best looking entry points?

  97. 97
    tomdavis12 Says:

    Z:  What makes you say PE is being shopped?

  98. 98
    zman Says:

    re 96

    – depends on how wide diffs are going to get, if the diff strip is correct or not or if guys like Papa are

    – seems more like fear and less like discovery

    – EBITDA impacts to be case by case. Fear in the market place is diffs create misses as the 2Q numbers hit. 

    – PXD least exposed, too low, so we added, PE.  JAG is overly discounting most likely (unless we are looking at a lot bigger blowout) but as noted it's trading technically.  Same CXO.  CDEV as noted benefits from the lack of hedges.  CPE is pretty exposed, coming off today with group but otherwise also already discounting a pretty big hit. MTDR better covered as noted above and overly discounting my view. REI should have less price worry as a CBP player (according to them) but am waiting to see 2Q before considering adds (still getting to know phase).  Permian Group 2 will be out next week, in that group ROSE and VNOM may be of interest. 

  99. 99
    zman Says:

    re 97 – No change from prior comments, been saying this for months, rumor mill, just noted it on a weak day Friday that it's gotten slightly cheaper while some potential buyers have really not. 

  100. 100
    nrgyman Says:

    RE 98:  Thanks Z.  Thinking here the various combos of low hedges, basis exposure, capex outspend, higher than best debt metrics and D&C cost exposure could make some names almost untouchable atm.  Agree on PXD, CXO and CDEV as looking more attractive.  Would add FANG, but they didn't signal that their basis exposure was solved at the end of Q1–still waiting on a FT announcement.  

    WPX is acting really well as a mostly Permian name, but I'm more interested in buying the big dips in the Permian.

  101. 101
    zman Says:

    re 98 – calls into one of those, wanting to gage how they are steering 2Q est process (roughly re price), will circle back next week.   2Q EBITDA early part of quarterly reporting going to be messy. 

  102. 102
    zman Says:

    re 100 – hear ya "still waiting" FANG …. crickets since 1Q18 CC

     

  103. 103
    zman Says:

    Would not be at all surprised to see halving of current red on the day in the Permians.  Useless comment but it's late and totally possible. #notatrader

  104. 104
    zman Says:

    Ending the week down 0.5%

    Have a good weekend. 

    The Wrap will be out on Sunday. 

    Beerthirty

  105. 105
    nrgyman Says:

    RE 98:  REI with a big pullback from recent highs.  Fundies looked solid for them.  Approaching a gap fill at $13.30.  Could be a solid entry level.

  106. 106
    zman Says:

    The site will be down for maintenance Sunday from 11 to 12 am EST.  

  107. 107
    zman Says:

    Please bookmark the back up site just in case:

    https://zmanbackup.wordpress.com/

  108. 108
    Baylor Says:

    Z – could you do a write up on the blowout in the permian?  Seems it caught a lot of people by surpise and in a matter of weeks the "go to" space has now become pariah. 

    Now that may present buying opportunities of course.  I'm curious of the following:

    1) who's most / least affected? (although, like hedging, this doesn't seem to matter at all as hedging may help a company survive, it doesn't seem to have much meaningful impact on outperformance vs peers from what i've seen over the last 48 months)

    2) how long do we expect this to go on?

    3) what actions are or can be taken by companies or other to help them through this problem?

    4) Given 2 and 3 above, is this an opportunity to accumulate or much like 2014-2016 is it better to sit on hands and let things bottom out based on thoughts on #2 above?

    5) why does this seem to have caught many by surprise?  Is there a better way to see this coming to position portfolio to avoid these types of issues?  I know you've been mentioning but looking back in time in the twitter space and other places, no alarms were really going off elsewhere

    Thanks!

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