Wrap – Week Ended 02/27/09



Holdings Watch: We entered a few new positions this week as earnings season drew to a close. Most of those are still open and available on the holdings Wiki link.

  • We did a 2 day trade in and out of (LINE) as they reported their year end, selling our calls for a 80% gain after they kept their distribution guidance flat for 2009. For investors seeking yield this remains my favorite MLP:
    • 100% hedged on oil and gas expected production for 2009, 2010, and 2011.
    • Distributable cash flow to expected distribution of 1.2x to 1.1x
    • Maintenance Budge: $150 mm, in line with previous guidance, designed as mostly a maintenance budget (not really grow production, just keep it flat). This is one of the benefits of having a high reserves / production (or RP) ratio, their wells aren’t declining rapidly so they can slow down spending quite a bit (in this case by 2/3 rds on drilling) and still offset production declines.
    • Dividend yield of 16.8%
    • See the Thursday post for more details on the quarter and outlook and coverage of the conference call in the comments section. 
  • Earnings trade on SWN, March dated Calls are still held after a strong quarter, good guidance, and a positive conference call. See the SWN pre call note here.
  • FSLR - Great quarter, poor word choice by management on the conference call led to an after hours shakeout in the shares. Many analysts actually took their 2009 earnings up following the call but have adopted what appears to be a more cautionary near term outlook about the stock. Very tough one to play on anything other than dips which is where we are now. I continue to hold calls here.
  • GMXR - dodged a bullet, even if it was an undeserved on by avoiding the trade pre call. Well results have so far left many analysts non-plussed but management did a good job on the call of pointing out that :
    • (GMXR)'s first three East Texas Haynesvill /Bossier tests (IPs in the  7 to 8,000 MMcfepd ball park) were better by double versus (CHK)'s first wells over in N.W. Louisiana and that a Haynesville completion is not a Haynesville completion is not a Haynesville completion.
    • Down hole pressures in E. Texas are lower to be sure but EURs look to be comparable to the 6.5 Bcfe estimate (CHK) has been fielding if not the upgraded 7.5 Bcfe number sported by (HK).
    • With 84% growth and gas prices hovering near $4, I see no reason for management to worry over accelerating growth further at present.
    • They will, if the next 23 or so wells drilled this year match the first three, put up strong reserve growth and F&D costs in 2009.
    • Stock was off 10% following the 4Q numbers and call and I'll be watching this week for an opportunity to go long.
    • You can see my pre call note here.

Two Months Down And The U.S. Market Is Off 20%. Not the best way to start the year. It may not be the end of the world as we know it but from time to time it has certainly felt that way. When looking at the current year earnings for the S&P 500 sectors, energy is still one of the few areas (not all subsectors of it but many) that shows strong cash flows and historically cheap forward multiples. Note the commodities are starting to show signs of bottoming or at least stabilizing.

Rig Count Continues To Tumble. More on this in the Monday post. See the Friday post for a look at the U.S. supply situation as we start to see signs of rollover in key growth states. 



One Response to “Wrap – Week Ended 02/27/09”

  1. 1
    Wyoming Says:

    Good or Bad?


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