16
May

Wrap -Week Ended 5/14/10 (In Progress)

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7 Responses to “Wrap -Week Ended 5/14/10 (In Progress)”

  1. 1
    BirdsofpreyRcool Says:

    Thank goodness!!!! Sounds like BP is making some positive headway. News of that subsurface “oil plume” is terrifying.

  2. 2
    zman Says:

    BP says statements to govt. have been “absolutely consistent”. White House again yesterday demanded clarification on BP paying. How about they ask if BP needs any help with the mess and bill them? Sheesh. What part “we’re paying for the clean up” does the President not get?

    BP also says now siphoning oil to the surface. “So far it’s working extremely well.”

  3. 3
    zman Says:

    60 Minutes doing a piece on Deepwater Horizon now.

  4. 4
    mimster90 Says:

    zman,

    60 minute piece was quite interesting. Does anyone know if the captain and Andrea survived?

    If you would prefer I send info like the below to you instead of posting directly on the forums please let me know.

    CS on HK
    To start with, the CS report is headed HK: Executing in the Eagle Ford. FWIW, the report is projecting overall an increase from $.38 a share net profit in 2010 to $2.00 by end of 2012.

    They have reduced the target price, explained. Recall they have previously noted that’s a moving target likely to move up sharply in time. But that current Target is carrying a healthy discount.

    Barry mentioned EOG, a much larger and older company, e.g. their 2004 production was well above 1 bdfed. One thing I noted though was that they’ve booked asset potential of 900 million bbls in EF while HK has done 300 million, without doing very much.

    The reference to the potential for the May 24th investor session would probably move in Fog’s direction of giving them something that can’t be ignored. Or maybe they’ll push it back into the future.

    On dry gas, I still think that HK has healthy margins and in any event they need to drill to HBP in HA. But I doubt that they would be drilling at the same pace for NG were it not for that need. In a situation like this, CHK would keep adding acreage and floating the cost through JVs and discounting its value in advance. What Wilson prefers in contrast is to building a heavy asset company which isn’t sold off in pieces before the value has become moor recognized.

    From the CS report dated 5./12.

    ■ On Track…edit..HK is executing operationally, with a third successful test in the Eagle Ford oil window (‘Black Hawk’) and rising productivity in the Haynesville due to restricted rate practices (higher EURs) and drilling efficiencies. We reduce our 2011/12 EPS by 3%/5% on modestly higher cash costs. Our NAV-parity based target falls to $30 from $32 given higher debt post Q1 acreage adds and higher well costs estimates.

    ■ Unlocking Eagle Ford Potential. HK’s 350k+ net acres in the Eagle Ford now rival the Haynesville and should deliver higher margin growth in liquids. Of the total, HK estimates 225k net acres (65%) are liquids-rich. In the 53k net acre Black Hawk oily area (DeWitt County), HK had a third successful test that came on at 1.261 MBoe/d (59% liquids). HK has 8 rigs running in the play, suggesting a string of results are likely to be released on its May 24 Analyst Day. This would include its second test in the 87k net acre Red Hawk oil prospect (first well IP’d at 350 Bbl/d) in Zavala County.

    ■ Growth Unchanged, More Liquids in ’11. HK is sticking to 31% growth for 2010 and guided to a 15-20% liquids mix (~12-16% condensate) on 2011 exit rate volumes (above our prior 5% est.). We model 22% growth in ’11.

    ■ Adds Acreage, Projects $1.2B of Liquidity at YE’10. HK raised its leasehold budget to $500MM (from $300MM) post $306MM spent in Q1 on Eagle Ford adds and core Haynesville adds contracted in ’09. For 2011, mgmt. hinted at a flattish $1.35B drill-bit budget. HK’s borrowing base was recently set at $1.1B pro-forma asset sales, while YE’10 liquidity is projected to be $1.2B and sufficient to cover our ‘11 spending gap est. of $915MM.

    Valuation. HK trades at a 32% discount to our $30 ‘PD Plus’ NAV. On ‘11 unhedged, strip EBITDA, HK trades at 7.9x vs. 7.5x for the gassy E&Ps.

  5. 5
    zman Says:

    Thanks Mim.

  6. 6
    zman Says:

    Dollar rally resumes, crude down $1.40 at $70.22.

  7. 7
    zman Says:

    Had some technical difficulties, post will be out closer to the open.

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