03
Feb

Wednesday Morning

Print Friendly

.

.

Market Sentiment Watch: Most eyes on oil and NFP at week's end and then the Fed Chairman's testimony next week.  Energyland has resumed trading in fear of inventory levels that are elevated but not swelling out of line with normal growth this time of year due to seasonally lower refinery maintenance levels. So far, monster sized crude builds have been few compared to the same period in 2015 reflecting lower production levels and higher refiner throughput. News flow remains at a trickle levels as we await a raft of earnings later in the month. Mild weather is putting a cap on distillate demand and natural gas sentiment. In today's post please find a wrap and cheat on COG (big budget cuts yesterday but nearly maintaining same volume guidance as they tap the DUCs), comments on MRD, and a few other odds and ends. 

Ecodata Watch:

  • We get ADP employment at 8:15 am EST (no forecast, last read of 257,000),
  • We get ISM nonmanufacturing at 10 am EST (F = 55.2%, last read was 55.3%). 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h - with oil and natural gas inventory previews
  3. Stuff We Care About Today - COG Cheat, MRD 
  4. Odds & Ends

Click the link directly below this to ...  Continue Reading »


02
Feb

Tuesday Morning – CPE, Permian

Print Friendly

.

.

Market Sentiment Watch:  Quiet day on the economic data front before the storm of data on Friday. Oil continues to move with the OPEC / Non OPEC cooperation or lack thereof rumor mill. We continue to do our homework and sit on our hands as far as trades in front of what was expected to be and what has so far been a soft opening quarter of the year. In today's post please find a wrap and cheat for CPE's (Shopping List name) 2016 outlook (strong stuff vs most) and a mini Permian Player update table to match, along with a number of other odds and ends. 

Ecodata Watch:

  • We get car sales over the course of the day (F = 17.2 mm, last read = 17.2 mm) 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today – CPE, Permian Mini Update, COG, APC
  4. Odds & Ends

Click the link directly below this to ...

Continue Reading »


01
Feb

Macro Monday Morning

Print Friendly

.

.

Market Sentiment Watch: China PMI came in at 49.4 for January vs 49.7 in December and consensus of 49.6. U.S. economic releases and earnings should dominate this week's market mood more than last week.  In energyland, interesting earnings move back to a trickle this week though we do expect more names to release updated preliminary reads on budgets. In today's post please find The Week That Was, comments on the U.S. monthly oil production data (negligible revisions this month with the new November data showing the month down 52.5 MBopd from October, the natural gas macro update, comments on CPE, and a few other odds and ends. 

Ecodata Watch:

  • We get Personal Income at 8:30 am EST (F = 0.2%, last read was 0.3%),
  • We get Consumer Spending at 8:30 am EST ( = 0.0%, last read was 0.3%), 
  • We get Core inflation at 8:30 am EST (F = 0.1%, last read was 0.1%).
  • We get ISM at 10 am EST (F = 48.0%, last read was 48.2%),
  • We get Construction Spending at 10 am EST (F = 0.6%, last read was -0.4%).

The Week Ahead:

  • Tuesday 2/2: Motor Vehicle Sales (F = 17.2 mm, flat with last read),
  • Wednesday 2/3: ADP employment, ISM nonmanufacturing,
  • Thursday 2/4: Jobless claims, productivity, unit labor costs, factory orders, 
  • Friday 2/5: Nonfarm Payrolls, unemployment rate, average hourly earnings, trade deficit, consumer credit.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h
  3. Natural Gas Production
  4. Natural Gas Imports
  5. Natural Gas Demand
  6. The Week That Was
  7. Stuff We Care About Today - CPE
  8. Odds & Ends

Click the link directly below this to ...  Continue Reading »


30
Jan

Wrap – Week Ended 01/29/16

Print Friendly

.

.

The ZLT D ended the week up 8% (roughly in line with the energy indexes) and is down 6% year to date (also in line with the oilier benchmarks).

The Blotter remains updated as we have not added to any positions so far in 2016 having expected a rough time in the group in 1Q16.

Questions and comments under the wrap will be addressed in the Monday post.    

 

Click the link directly below this to ...  Continue Reading »


29
Jan

Friday Morning

Print Friendly

.

.

Market Sentiment Watch:  Next week becomes busier on the economic data front and our suspicion would be that oil prices will again come under pressure without actual action from OPEC / non OPEC (which we don't expect) given the time of year (maintenance season) and the propensity for larger crude inventory builds (though product stocks should ease). In today's post please find the natural gas storage review (spot on withdrawal estimate vs consensus but we see this time of year as full of noise masking fundamental improvements in the natural gas macro picture), some key play comments on the oil macro (CLB), a set of update shale production charts (quite clearly rolling lower now) and thoughts and an updated pro forma cheat sheet for OAS and some other odds and ends. 

Ecodata Watch:

  • We get the initial look at 4Q15 GDP at 8:30 am EST (F = 0.7% vs 3Q15 at 2.0%), 
  • We get the Employment Cost Index at 8:30 am EST (F = 0.6% vs 0.6% last read), 
  • We get Consumer Sentiment at 10 am EST (F = 92.8, last read was 92.6)
  • Next we get the beginning of month raft of economic data culminating in nonfarm payrolls at week's end. 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h
  3. Natural Gas Inventory Review 
  4. Stuff We Care About Today - OAS, HK 
  5. Odds & Ends

 

Holdings Watch:   

ZMT, ZLT, Z42016 (still 100% cash)

  • Yesterday's Trades: None

The Blotter is updated.

ZLT Pie - look for an updated Pie next week. 

Commodity Watch:

Crude oil closed up $0.92 yesterday at $33.22 moving higher early on high volume amidst more comments out of Russia and OPEC members of a possible meeting where a cut may be discussed. That's a lot of air guitar to be sure but it builds upon recent comments so while we're not saying it can't happen and as always we're not counting on it the strength is somewhat interesting. While we have not been adding to positions year to date, oil price bounce inflated levels due to this chatter don't do much to make us want to nibble before we had planned to (February lightly into March ... we're still not feeling rushed to dip buy). Today at some point before the close we expect to see EIA 914 data through November and it's likely going to reflect another month to month decline in Lower 48 volumes but also revisions higher in recent months' data. We will add a chart to the post once we have the data in hand. This morning crude is trading flat. 

  • Iran Watch:  Exports are set to hit 2 year high, up 20% YoY and expected to rise to 1.5 mm bopd in January before ebbing slightly to 1.44 mm bopd in February, according to Reuters. We note this is out of a recent ~ 2.9 mm bopd of production of which less than 1.3 mm bopd was officially exported last year and down from pre sanction 2011 levels when Iran exported ~ 2.6 mm bopd (much of which are lower value condensate volumes).  The current plan appears to be to add 0.5 mm bopd in exports near term sending an incremental 0.2 mm bopd to Europe (which took in > 0.6 mm bopd of Iranian volumes pre sanctions)  and pushing volumes to India to 0.3 mm bopd (up from recent ~ 0.2 mm bopd). Separately Reuters notes that Iran, who is refined product short, is importing more gasoline despite a recent increase (unquantified) in refining capacity to meet domestic demand.  
  • From Russia With Confusion Watch:  Russia's Foreign Minister Lavrov to discuss oil prices on a visit to UAE.  UAE has been quick to quash all talk of OPEC production cuts and cooperation with non OPEC players to stabilize prices by tempering over supply.  In other Russian news, Russia's Deputy PM noted their energy industry is largely private and not controlled by the State while Energy Minister Novak said Russia is ready to discussing oil output but said no decision has been made. As usual, Russia remains a confusing tease and we remain skeptical that they do more than talk. 
  • Operation Cooperation Watch:  According to Reuters, two OPEC delegates said ministers were discussing the idea of holding an OPEC / Non OPEC meeting to discuss prices. One said it's the "best idea" vs an OPEC emergency meeting (which likely wouldn't happen or where nothing would be accomplished) and said the timing could be February or early March and that such a meeting might be at the expert level rather than the ministerial level (meaning they could develop a plan without authority to act and then move on that plan, or not, later). 
  • VLO Comments Watch: VLO sees continued strong gasoline demand (cited SUV sales, increased miles driven stats.
  • CLB U.S. Comments Watch:   1) "Core believes that the worldwide crude oil supply and demand markets will balance in the second half of 2016.",  2) "U.S. unconventional production peaked at approximately 5.5 million barrels of oil per day in March of 2015, has since fallen by over 600,000 barrels a day owing to high decline curve rates associated with tight oil reservoirs" (offset by unsustainable adds of 250,000 bopd (we had noticed the adjustments in the data stream).  3) "The sharp declines from U.S. land production will continue into 2016 and Core believes these decreases could reach 900,000 barrels a day by the year-end 2016. Lower levels of new wells and delayed production maintenance will exacerbate this 2016 fall in U.S. land production." 4) "the short gains from legacy deepwater Gulf of Mexico projects will not materialize in 2016 to offset the significant decreases in U.S. land production as they did in late 2015." 5) "Core estimates that the current production decline curve rate for U.S. production is approximately 7.8% net which will expand as 2016 progresses and could reach 10% net by the end of the year 2016."
  • CLB Global Comments Watch:   1) "Globally, Core estimates that crude oil production decline curve has expanded to 3.1% net, up some 60 basis points from year earlier estimates. Applying the 3.1% net decline curve rate to the worldwide crude oil production base of approximately 85 million barrels a day means that the planet will need to produce approximately 2.6 million new barrels by this date next year to maintain current worldwide production totals." 2) "With the long-term worldwide spare capacity nearing zero, Core believes that worldwide producers will not be able to offset the estimated 3.1% net production decline curve rate in 2016, leading to falling global crude oil production by the second half of 2016." 3) "Therefore, Core believes crude oil markets rationalize in the second half of 2016 and price stability followed by price increases return to the energy complex. Remember, the immutable laws of physics and thermodynamics mean that the crude oil production decline curve always wins and that it never sleeps."
  • BHI Comments Watch:  BHI warned that global rig counts could fall 30% in 2016.

 

Natural gas closed up 2.5 cents at $2.18 after EIA reported an in line with expectations withdrawal of 221 Bcf that eroded the overhang to the five year average and year ago levels as noted below (you can see the gap to year ago and gap to record territory tighten in Chart A1 below). Gas fired power generation, according to Bentek, was 14% higher than year ago levels.  Warm near term forecasts are keeping a lid on prices but we see this period before March as largely noise with the mild winter forecast continuing to mask fundamental improvements in the macro picture for natural gas. We see gas as becoming more constructive after we trough under 2012's record high spring trough level just under 2.4 Tcf. Before the close today we should get EIA 914 data (better chance than usual of positive (lower) production news), After the close we will receive more dta and will include our macro slide show update in the Monday post.  This morning gas is trading up 4% at post time likely due to another round of colder air moving into the eastern third of the US in the 6 to 10 day and 8 to 14 day outlooks.  

Shale Data Watch:  EIA updated their view of production from the primary shale gas plays using their data and that of Drilling Info's data as they do about once per month. The data below runs through December 2015.  Note that Marcellus growth has stalled. Rig counts there have plummeted but we do suspect as much as 0.5 Bcgpd of the move off peak is curtailments.  Nice departure having watched it rise almost monthly since 2010. Note the other gassy and associated gas shales aside from the Utica are in decline now and the Utica's time will come likely in 2017. The Fayetteville now has no active rigs and once a key piece of the growth wedge is now slipping.  Lastly, please note the first two graphs run through October 2015 (we'll get November later today) and the rest of the play graphs are through December 2015. 

shale dec 2015 A

.

shale dec 2015 B

.

shale dec 2015 C

Bentek Data Watch:

  • Dry gas production:  Crossing over.  Bentek noted production was up 0.4% week to week (due to lower curtailments during winter) but is now only up 0.1% compared with year ago rates (recall last year at this time production was rising rapidly). On average over the last 12 months, production has been up 5.1 Bcfgpd on a YOY basis but was slowing in recent months and now appears to be up less than 1 Bcfgpd YoY. 
  • Imports / Exports: Imports from Canada were down 5.3% last week and were in line with year ago levels. Exports to Mexico were down 4.2% week to week but were near all time highs.

 

Natural Gas Storage Review

gas table 012216

.

gas graphs 012216

.

gas graphs 012216b

 

Stuff We Care About Today

OAS Quick Wrap

Please see yesterday's post for comments in addition to the ones below. Please find below an updated cheat sheet pro forma yesterdays offering. Key points:

The Offering:

  • Assuming 34.0 mm plus the full shoe of 5.1 mm shares we would expect a net capital raise of  ~ $175 mm,

Impact:

  • Lifts cash to ~ $185 to $190 mm and takes liquidity to ~$1.6 B, 
  • Revolver stays 9% drawn as they didn't label proceeds for credit facility reduction. We note the draw on the revolver was down from 12% drawn at the end of the 3Q15 as they free cash flowed in 4Q, 
  • Net debt to TTM EBITDA and net debt to 3Q15 annualized EBITDA inch down to 2.3x and 2.8x respectively on the cash build.
  • On our $43.75 and $2.50 deck we put 2016 EBITDA at ~ $400 mm with a swing of $45 mm (10%) for a $10 drop in oil.  This incorporates additional hedged announced yesterday. 
  • This puts YE16 net debt to EBITDA at 5.4x on just above midpoint volumes (49,000 BOEpd) which we'd expect them to best (vs 4.5x using current Street EBITDA) and assuming no external financing is obtained for midstream build out. 

Nutshell: Necessary action to keep revolver relatively clear and be able to expand infrastructure in Wild Basin (core of core highest return asset they hold) in preparation for growth there in late 2016 into 2017.  They may still monetize a portion of the midstream later this year which would reduce the $140 mm midstream wedge in the budget.  Removes near term pressure in our view and buys management more time (instead of adding to debt while waiting for higher prices). At this point it would seem to be appropriate for management to start openly buying shares.  We continue to own the name in the ZLT as a Core Bakken position with a core of core Williston Basin program and in our view top flight management. While the name is not our our Shopping List due to leverage concerns relative to low oil prices we see it as overdone to the downside (more than we see oil that way and we do see oil that way) and it is on our Blue Light Special list of names under consideration for additional Trading Share adds near term. 

OAS 012816

 

Other Stuff

Odds & Ends

Analyst Watch:

  • TBA in comments. 

Zman’s Energy Brain ~ oil, gas, stocks, etc… is is proudly powered by Wordpress
Navigation Theme by GPS Gazette

s2Member®