27
Jun
Monday Morning
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Market Sentiment Watch: This is the final week of the quarter with a good amount of key economic data, the OPEC+ meeting, and then the oddness out of EIA's release troubles. Expect volatility. Also, note the end of quarter buying in the gassy names last week despite the move in gas. This is the positive kind of action we are looking for to add on. As always, our adds our DCA's and not swings for the fences.
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In today's post please find:
- The Week That Was,
- The Five Things,
- and some other odds and ends.
Eco Data Watch:
- We get durable goods at 8:30 am EST (F = 0.2%, last read was 0.5%),
- We get the pending home sales index at 10 am EST (F = -0.4%, last read was -3.9%)
- We are supposed to get an update on future EIA weekly releases today.
The Week Ahead:
- Tuesday - Trade in goods, Case-Shiller home price index, consumer confidence (big fall expected),
- Wednesday - 1Q22 GDP revision, EIA Oil Inventories (maybe),
- Thursday - OPEC+ Meeting, Jobless claims, PCE inflation, disposable income, consumer spending, Chicago PMI, EIA Natural Gas Storage (this could also be a maybe),
- Friday - ISM manufacturing, construction spending.
In Today’s Post:
- Holdings Watch
- Commodity Watch
- The Week That Was
- Stuff We Care About Today – The Five Things, Subscriber Mailbag Watch
- Odds & Ends
Holdings Watch:
ZLT (Zman Long Term portfolio)
- Last Week’s Trades:
- We added small cap completion company RES to the portfolio. This is a Starter position and our average cost is $7.57. We see them a core holding and potential target for others names in the space including names we own.
- We added to USWS, have just over a 3% position now and an average cost of $0.69 and see the name as a discount way to participate in PFHC, a mid cap frac player than we expect to have a strong second half. We are not looking to wait out the close of the deal in 4Q22 here but plan to trade out of this when PFHC reaches mid $20's to close to $30.
- The Blotter is updated.
Commodity Watch:
Crude oil ebbed 0.3% to close at $107.62 after a volatile holiday shortened data lacking week that nearly saw a $100 test on recession fears.
- EIA failed to update their weekly oil statistics report. We don't know at post time whether or not we will get one or two or no reports this week.
- Oil directed rigs continue to head higher and the CFTC data shows we are still just inside what we see as elevated long to short territory. All eyes will be, more than usual, on the EIA commentary. We expect to see a near term lift in refining (this week or next) and strong exports over summer (no idea this week).
- China Watch: Shanghai again easing restrictions.
- Travel Watch: U.S. screened a pandemic period high number of travels last Friday.
- Libya Watch: May see further curtailments this week as protests threaten production/exports.
- This morning crude is trading up slightly.
Natural gas fell 10.4% to close last week at $0.104 after EIA reported a bigger than consensus that was in line with the top end of our expected range. We suspect prices were also helped lower by follow through from the prior week's Freeport LNG outage news and despite ongoing reduced flows from Russia to Europe.
- Look for a smaller build in a range of +60 to 70 Bcf this week (if we get the report).
- EU/ Russia Watch: European Commission issues statement requiring EU member states to fill natural gas storage to 80% capacity by November this year and 90% in subsequent years.
- LNG Watch: LNG shipments to Europe are up 75% since March vs 2021. LNG shipments from the U.S. to Europe are up nearly three fold.
- This morning gas is trading down slightly.
Weather Watch: Warm but less hot
- Last week: Cooling Degree Days (CDDs) came in at 64 vs 57 normal, a forecast of 66 and 72 in the prior week.
- This week's forecast: This week, CPC predicts CDDs will increase to 69 vs 64 normal.
The Week That Was
Stuff We Care About Today
The Five Things ~ (Significant changes or re-highlights in RED)
Subscriber Mailbag Watch:
Q) "Z, Where do you see the opportunity to trade? You wrote this in your comments: "We've also reviewed several unowned names lately that are falling back to what some, not us, but some would call generational buying opportunities. We think they are definitely worth a look for the trade oriented. Ask about them in the comments section." "
Z4 Comments: In lots of places, including our Owned names as well which I'm happy to expound upon in comments today but in the "Unowned" arena:
- Three Permians:
- CPE (unowned) - well run, high margin (oily) Permian with a leverage - no yield but significant free cash flow channeled to balance sheet improvement and modest growth. Here in mid June we said "We will be watching it more closely and may add the name should the group or it take a large dip that brought the forward multiple below 3x." Wrote that at $55.69. At Friday's close just under $41 it's at 3.1x. This should be a target in a round of consolidation that we see coming in 2023.
- CDEV (unowned) - Also written up mid June, 27% off in < 2 weeks, less leverage, lightly hedged, just doubled it's production with an acquisition, offering a modest yield and should be ready to buy back shares at these levels rapidly. The name is super cheap on our $80, let alone our $100 math. This may also be an acquisition target.
- FANG (unowned) - super well run big cap Permian, in maintenance mode and unlikely to change that. Look for an update from us soon here.
- One unowned gassy name - CHK.
- CRGY - we own it but not a lot, cheap.
- Service - PFHC - at these prices it's very cheap to group. That said, we have an interest given they are buying our USWS.
- There are others but these leap out for cheapness.
Other Stuff
- VWDRY - look several several order announcements this week (running late this quarter),
- VWDRY - establishes new Digital Solutions function to "digitally transform our business to enable stronger customer focus, scalability and profitability."
Odds & Ends
Analyst Watch:
- TBA in comments
