Monday Morning – Enercom Day 1

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Market Sentiment Watch: Look for the weak ahead to be dominated by fears over housing, jobless claims, and the GDP revision at week's end. Pretty much everything is pointing to a fairly rapid deceleration. In energy land this week, all eyes should be focused squarely on presentations at Enercom, the first of the energy conferences of the Fall season. Click here for the Enercom schedule (all times Mountain) (see comments in Stuff section below.

The Week Ahead:

  • Monday 8/23: None
  • Tuesday 8/24: Existing home sales (F = 4.78 mm, last 5.37 mm)
  • Wednesday 8/25:  EIA Oil Inventory Report, Durable goods orders (F = 2.5%), new home sales (F = 339K)
  • Thursday 8/26: EIA Natural Storage Report, jobless claims (F = 495K, last week 500K)
  • Friday 8/27:  2Q GDP revision (F = 1.4%, original 2.4%), consumer sentiment (F= 68.5, last read 69.6), we get an updated look at natural gas supplies on 8/30.

In Today's Post:

  • Holdings Watch
  • Commodity  Watch
  • Wrap Table
  • Stuff We Care About Today – Enercom (SSN and the ones I'll be listening to)
  • Odds & Ends

Holdings Watch: ZCAT (Zman Catalyst portfolio):

  • $5,200
  • 100% Cash

ZIM (Zman Inefficient Markets portfolio)

  • $3,400
  • 56% Cash

Commodity  Watch:

Crude oil ended last week off 3% to close at $73.45. The 12 month crude strip now trades at $76.55. This morning crude is trading up slightly.

  • Rig Count Watch: Rigs drilling for oil jumped again last week to 655, up 135% YoY. No sign this is about to plateau and good news for the likes of HAL, SLB, BHI, HP, CRR etc.
  • Ahmed Is A Nutbag Watch: Iran commenced operations at their first nuclear power facility over the weekend. Quick as always to allay concerns that it may be used to enrich materials to weapons grade, they also unveiled a large drone bomb, that looks a lot like buzz bombs from WW II and can probably deliver a nuclear warhead with some tweaks. "The jet, as well as being an ambassador of death for the enemies of humanity, has a main message of peace and friendship," said Ahmadinejad

Natural gas fell 5% last week to close at $4.12, and gas now looks like thisThe 12 month strip is now trading at a paltry $4.55. This morning gas is trading off a few pennies.

  • Weather Watch: Heat is breaking.

    • Week before last: Cooling Degree Days of 92 which yielded an injection of 27 Bcf.
    • Last Week: CDDs of 84, in line with the forecast for the week.
    • This Week's Forecast: 69 CDDs, still slightly warmer than normal and last year.

Tropics Watch: Storm 6 is mid Altantic and is on track to be an East Coast hurricane strike. Else, things are pretty calm. 

Wrap Watch:

Stuff We Care About Today

Enercom Conference Today: (names we care about, all times EST)

  • RRC 10 am
  • CLB 10:25
  • VQ 11:40 - worth watching.
  • WLL 12:05
  • XEC 12:30
  • EXXI 12:55
  • OAS 1:20pm - don't expect to see a lot of well level detail but it's their first appearance at a conference so maybe we start to see a little broader interest in the name.
  • CRR 3:55 - they can barely keep up with ceramic proppant demand.
  • BEXP 4:20
  • SSN 4:45 - presentation was available last night; some new items:
    • Niobrara deal still assumed to be done and calling for it to be at the high end of the range, "around $76mm" which puts my back of the envelope NAV at about $1.70.
    • Slide 31 of 33 in their presentation looks a lot like my high end back of the envelop valuation and they come up with $1.84 for a "near term valuation"
    • Note that based on SSN's read of 413,000 BOE per well and 1 well every 160 acres, the company comes up with an NAV on the Niobrara potential reserves of $799 mm or > $8.50 per share. Since they are north of much of recent industry activity I'm not yet willing to go valuing based on barrels and will instead stick with my $ per acre assumption for now.
    • New acreage maps show the deal is more likely to be NBL than EOG. And I've been finding NBL more interesting among the big cap E&Ps for awhile now. Probably going to do more work there shortly.
    • Niobrara wells - 2 wells to spud 1Q11

Odds & Ends

Analyst Watch:

  • ROSE - Suntrust ups to Outperform
  • SHIP - Rodman starts with Outperform and $1.25 target

Interesting Reading Watch:

101 Responses to “Monday Morning – Enercom Day 1”

  1. 1
    zman Says:

    SSN bidding up on their presentation still showing high end of deal range for their Niobrara sale.

  2. 2
    bill Says:

    bdi up again


    the bulkers have to move with these rates

  3. 3
    crysball Says:

    EGY………SE Etame new Gamba Sands and the Separate Etame fault block where well ET1-V amd ET7-H (currently being drilled) are separate fields….not one field . This was determined by comparative analysis of the oil from the wells).

    The separate Etame fault block is larger than expected and SE Etame is slightly smaller than expected.

    Given the fields are separate and SE Etame is slightly smaller than expected this likely leans Vaalco toward a separate prodcutiion platform for SE Etame…..and codeveloping the N. Tchibala field using this platform.

    ET7-H will be a subsea completion and tieback to the FPSO.

    All IMHO

  4. 4
    jat Says:

    You say VQ is worth watching… what’re you thinking there?

  5. 5
    zman Says:

    VQ = Monterey shale in CA. Big potential, early in the shale play over old production, lots of data, lots of acreage, lots of potential to work it up and then get bought by a bigger California producer.

  6. 6
    zman Says:

    WLL on the tape announcing 4 big Sanish Field well IPs (3,805 to 1,768 BOEpd – 3 from the Bakken, one from the Three Forks). The high IP well was the second well in a 2 section unit, producing the 3800 boepd from a 30 stage frac vs 1400 boepd from a 10 stage frac for the first well in the unit.

    They also announced the highest rate from a Three Fork test to date with 1,768 boepd IP in the middle of the field.

  7. 7
    zman Says:

    Highest rate for them from a TFS well I should have said.

  8. 8
    ram Says:

    How can the Monterey shale be a big mover for VQ or a major when you have to fight local politics?

  9. 9
    zman Says:

    re 8 – They seem to be making progress. The chart doesn’t look like politics is hurting them much more than other names. But if you don’t like California then you probably ought to just ignore that one.

  10. 10
    BirdsofpreyRcool Says:

    crys — thank you, as always, for keeping us up to date on mini-EGY. Sounds like it’s slightly positive news.

  11. 11
    BirdsofpreyRcool Says:

    Sent over from HT this morning… represents his current World View


  12. 12
    PackMan Says:

    HAL getting sold down a bit pre market … you sometimes see funny moves at the open post option expiration …

    most other names seem to be bid up.

  13. 13
    zman Says:

    California is the 3rd largest oil producing state at about 620,000 Bopd (about 11% of total U.S.), just shy of Alaska with Texas holding the top spot.

  14. 14
    zman Says:

    Pack – agreed, see that often. Someone should do a study on the Monday-morning-after effect.

  15. 15
    zman Says:

    This week I could see the BP spill names under intermittent pressure as the Coast Guard hearings start back up, the BOP lifted off the sea floor (or at least the start of the operation to do that), etc. BP actually up.

  16. 16
    zman Says:

    Note in the SSN presentation, their long term all in NAV is > $10 per barrel with the near term valuation at $1.84. I’d say let’s not get ahead of ourselves. When the deal is down they will have about $0.78 in cash, a sliver of a Bakken asset (6 sections) and 16,000 Niobrara acres as the most prominent stuff. Then you’ve got a whole bunch of little stuff scattered here and there, down to the Gulf Coast. It sounds like more of that will be for sale.

  17. 17
    zman Says:

    Morning Nicky – Got levels.

    Re 11. Very funny, thanks.

  18. 18
    BirdsofpreyRcool Says:

    #11 — there was supposed to be an article attached…. NOT an add… will try again

  19. 19
    BirdsofpreyRcool Says:

    KOG and EGY should be OK for a couple of days… which is good, as I’m going to be out until Thursday. So, make Mr. Market Play Nice, for the next coupla days, ok z?


  20. 20
    PackMan Says:

    Z – well I was a buyer of HAL stock at the open; sold it all … nice quick trade; the kind I love !

  21. 21
    zman Says:

    BOP – Will do all I can to. Thanks.

    Pack – You do that well, much better than I do.

  22. 22
    RMD Says:


    is an interactive Enercom link.

  23. 23
    zman Says:

    Thanks RMD.

  24. 24
    jat Says:

    re 8, onshore is less an issue than offshore, a la T-Ridge vs. Sac Basin / Monterey. New severance headlines crop up every now and then but have been noise over the last few years. OXY has done fine in Cali despite the tree hugger problem.

    I’d argue against a near term VQ takeout by OXY though… OXY has an enormous position already and doesn’t need to pay up multiple-wise for anything in Cali…

  25. 25
    zman Says:

    RRC about to start, not all that interested at the moment but if I was going to look at a gassy, gassy name it would be on the list.

  26. 26
    RMD Says:

    Bob Farrell comments the TNX is overbought and the AMZ has had massive $ inflows and is overbought.

  27. 27
    zman Says:

    RMD – thanks again, that’s the MLP index for those who don’t know.

  28. 28
    zman Says:

    Jat – thanks, do you have a handle on who is in the lead on the Monterey. My thinking on a takeout should have been longer term. Was thinking that someone like an OXY or a CVX would be a likely candidate down the road, after XOM’s takeout of XTO in part due to Bakken, this would be a small nibble. Maybe it will be somelike DVN who could work on the gas in the SAC basin as well as the Monterey.

  29. 29
    TEXWS6 Says:

    I worked the Monterey Shale for OXY out in CA 7-8 years ago. Tons of potential, but OXY has quite a bit of it locked up.

  30. 30
    ram Says:

    Re 24, thanks JAT. I was focusing more on the immediate area of Monterey, offshore or onshore. Very hostile versus the likes Bakersfield, etc.

  31. 31
    zman Says:

    Thanks Tex, that was all vertical, right?

  32. 32
    zman Says:

    RRC call – nothing new, economics still strong, like having $7+ gas right now given their liquids and high BTU content gas (after processing).

  33. 33
    zman Says:

    CLB call about to start.

  34. 34
    zman Says:

    EOG actually waking up.

  35. 35
    PackMan Says:

    21 – Z – sometimes … you know the joke about the blind squirrel ?

  36. 36
    zman Says:

    CLB talking peak oil.

    Saying we are plateaud at 88 mm bopd of supply with demand now at about 86 mm bopd. Saying they don’t see a lot of big new fields that will be discovered. They are in a good position to make statements like that as they do reservoir monitoring, enhancement all over the world.

  37. 37
    zman Says:

    Pacj – yeah, I love that guy.

  38. 38
    zman Says:

    CLB does work in 1,050 of the 4,000 oil fields of size in the world.

  39. 39
    zman Says:

    CLB giving a good history/geology lesson, starting with Pangaea.

  40. 40
    TEXWS6 Says:

    Re #31:

    We were just starting the horizontals when I left. Those guys are WAY behind the learning curve when it comes to horizontal well completions.

  41. 41
    zman Says:

    Tex – “those” refers to VQ or players in the play?

  42. 42
    zman Says:

    JB – have you taken a look at Core Labs, CLB before. Interesting chart.

  43. 43
    zman Says:

    COG call about to start, thanks again to RMD for the interactive link table to all the presentations, saves a lot of time.

  44. 44
    zman Says:

    EGLE having trouble getting through $5, BALT back to $11. Still watching more closely than usual, the moves of the stocks and the BDI.

    Bill – did you see SHIP get a nod from Rodman this morning. Don’t know that one.

  45. 45
    zman Says:

    COG – noting in part PA that they knew there was methane in some of the water wells before they started drilling but that they didn’t test the wells. Their mistake. They are now installing methane removal equipment for those affected families.

  46. 46
    zman Says:

    S&P just rolled over, market looks directionless, bored, waiting on summer to end and fearful of this week’s data. I don’t recall a lot GDP revisions that are expected to be as large as the one that will be announced on Friday. A week ago, consensus was that it would fall 0.5%. As of yesterday, consensus had it down a full point, to 1.4% from the initial reading of 2.4%.

  47. 47
    Jerome Blank Says:

    RE: #42, CLB, on a P&F buy signal in X’s, currently consolidating into a triangle, the most relevant support is the 50 day SMA at $77.37, this falls right at lower lower triangle trendline support, $80 has been tought resistance as of late…

  48. 48
    Jerome Blank Says:

    CLB charts added…


  49. 49
    zman Says:

    Thanks much JB, looking at the weekly, it looks extended but has for quite some time now.

  50. 50
    zman Says:

    SD – slipping. Wondering when I go back in there.

  51. 51
    milepost_43 Says:

    S Korea pension group bids for 23% Colonial PL —

    Wonder if this could happen to a MLP pipeline system……will be very interesting to see how this plays out politically…ala Dubai bid for port…..

    Aug. 23, 2010, 6:05 a.m. EDT
    Korean state fund bids for Colonial Pipeline http://www.colpipe.com/ab_oc.asp stake

    HONG KONG (MarketWatch) — South Korea’s National Pension Service said Monday it is seeking to acquire a 23% stake in Colonial Pipeline Co. from Chevron Corp. (NYSE:CVX) , according to reports, which cited a statement issued by the pension group. Chevron is expected to name a preferred bidder for the stake, tipped to fetch around 1 trillion won ($845 million), in coming weeks, according to the reports. In pursuing the acquisition, the state-run pension group is believed to be seeking to broaden its holdings of infrastructure assets into North America, as well as gear more to the stable-rate-of-return outlook of the energy sector, reports said. Colonial Pipeline operates 8,900 kilometers of oil pipelines in the U.S., running mainly between New York and Te

  52. 52
    zman Says:

    DWSN presentation started, interesting little name, I listen to at these meetings, but have never bought.

  53. 53
    zman Says:


    Back in 2007/08, they were probably 95% focused on gathering seismic on gas plays. Now they are closer to evenly balanced.

    Moving towards helping with frac orientation in oil shale plays.

    MP – re 51. Thanks, probably the outcome of a 2% 10 year note.

  54. 54
    zman Says:

    DWSN – interesting chart, says they are seeing revenue trend turn back up, says they are seeing increased demand everywhere and margins are turning back up. I always have a hard time getting excited about seismic names and don’t see myself nibbling here.

  55. 55
    zman Says:

    SSN likely to top Friday’s volumes by lunch.

    VQ call starting now.

  56. 56
    zman Says:

    VQ Notes:

    Pure California oil and gas play.

    Biggest gas producer in norther California

    $220 mm budget for 2010

    SAC basin gas, one of the most economic gas plays in the country and get premium nat gas prices there (about $0.30 premium to NYMEX)

    “we think low gas prices for year to come.

    They get a 25% IRR on $3.50 equivalent NYMEX in the Sacramento Basin. Going to slow down a bit next year after drilling 100 wells this year and 250 recompletions.

    Good hedges out 3 years, with floors at 6.48 / Mcf next year.

    Monterey Shale: (3 basins in the play)
    3 billion barrels already found in the play.
    They have lots of data on it
    Average cumulative production of 5 mm barrels

    There will be a Monterey discussion tomorrow at Enercom.

    158,000 acres onshore now, goal to get to 300,000 net acres by end of 2011.

    “Probably the riches shale play in the country” in terms of OOIP.

    If so great, why hasn’t it all been snapped up?

    The majors control 77 to 78% of CA production, and have been focused on shallow heavy oil fields. They had no incentive to drill anything deeper as the heavy oil stuff was cheap top produce.

    VQ – most levered company to the Monterey.

  57. 57
    zman Says:

    VQ Notes 2

    No frac in the Monterey, flows naturally, much lower completed well cost than at a play like the Bakken.

    Participating in biggest 3D shoot in CA history with OXY (500 sq mi)

  58. 58
    redjack Says:

    Z…are you listening to the Whiting call?

  59. 59
    zman Says:

    Yep, just about to start. Nice wells this morning’s press release, will be interesting to see if they can share more on the wells to the southwest at Lewis and Clarke. That acreage position has ballooned.

  60. 60
    zman Says:

    Sent in from Nicky

    Will be on in a bit. Meanwhile looks like we are setting up for a test of last weeks lows. Should move higher off that area. Support at 1063 and 1056/7

  61. 61
    bill Says:

    ship yes seaenergy
    was 10 now 1

    Don’t follow too closely.

    The bulkers started off strong and then fell with the market

    I nibbled at nm, egle, and balt

  62. 62
    zman Says:

    WLL Notes

    – just went from 3rd to 2nd largest oil producer in North Dakota.

    – Their 2P reserves are 3rd party engineered at 2x their proved reserves, located in Parshal and Sanish fields and their 2 EOR projects in TX and OK

  63. 63
    zman Says:

    Thanks Bill, yeah 10 to 1 and lots of debt for their little balance sheet. Wonder if they are worth a trade, have not seen what Rodman said.

  64. 64
    Geno Says:

    See the EXXI change in management

  65. 65
    zman Says:

    WLL Notes 2

    – 80% of budget goes to areas that produce 94% of their production

    – $830 mm budget … we didn’t raise it even though we raised our production guidance …. good that he gets that people are sick of that.

    – 45% of budget directed toward finding new reserves

    – acreage – they reeled off 4 project names that they won’t tell where they are but that they have the same rock properties as what they like at Sanish/Parshal/Lewis & Clark.

  66. 66
    zman Says:

    Geno – don’t see anything new there, you?

  67. 67
    zman Says:

    WLL Notes 3

    – They have been getting off 98% of their fracs, talking about 750 foot frac wings on either side of the wellbore, didn’t realize they had gotten that far out.

    – Takeaway capacity had been an issue, no longer, Enbridge line taking all the production that WLL wants to give them, think abut 90% of their production will be carried away by pipeline by October, saves on differential.

    – Lewis and Clark – 60 miles SW of Sanish, 220,000 net acres setting up 550 locations, 3 wells drilling now, 3 wells completing now, hope to have results by end of September.
    Saying the federal well has held up better than expected with 3
    months of production now:
    IP 1,970 BOEpd
    30 day 695
    60 day 531
    90 day 447

  68. 68
    zman Says:

    WLL with hands down the best presentation of the day so far.

    Up next XEC.

  69. 69
    redjack Says:

    re: Whiting…what did he predict for next year’s discretionary cash flow?

  70. 70
    zman Says:

    Salazar on the tape saying more regulatory changes need to be made before deepwater drilling can resume. Says the days of risk business in the deepwater are over.

  71. 71
    zman Says:

    re 69 > $1 B

  72. 72
    zman Says:

    Coals almost all red today. Could be weak gas prices are sapping them.

  73. 73
    zman Says:

    West – the XEC may beat the WLL for best call of the day.

  74. 74
    zman Says:

    Good for hydrocarbon consumption, 9 day (and counting) Beijing traffic jam.


    EXXI about to start

  75. 75
    zman Says:

    Bill – MCF on the tape with a quick operations update, all good but no one cares today. They speak at Enercom on Wednesday.

  76. 76
    zman Says:

    EXXI Notes:

    DJ 2 at 12,000′, long way to go

    Blackbeard East at 21,000′ (faster than expected), going to about 30,000′. Should see 4 to 5,000 feet of extra sand over the original well at BBeard West.

  77. 77
    zman Says:

    OAS Call starting

  78. 78
    zman Says:

    OAS – uneventful presentation. Nothing wrong just little new here. Will be interested to hear more on their Montana Bakken effort with ZEnergy, probably on the 3Q call.

    Not planning to listen to HNR, anyone?

  79. 79
    bondbuddha Says:

    Floyd Wilson just on Fox news, no real news

  80. 80
    zman Says:

    BB – he speaks tomorrow at enercom

    October crude just under $73 at the moment,

    Natural gas still tripping lower, down 6 cents at 4.06. The UNG chart looks kind of ugly to me but still at support.

  81. 81
    1520sbroad Says:

    Z, TEX or other engineering types – ever heard of Ely and Associates? Engineering/consulting/stimulation/frac specialist? Any opinion? Looking for more of a feel/opinion?

  82. 82
    zman Says:

    1520 – sorry, no, don’t know them.

  83. 83
    zman Says:

    WLL off now on that news? Market not paying much in the way of attention to relevant news.

    BEXP running a bit pre presentation.

  84. 84
    zman Says:

    Crown weather showing another potential storm behind TS Daniel emerging off the coast of Africa, already at 40% chance of development.

  85. 85
    1520sbroad Says:

    #82 – thanks – if anyone else knows them let me know

  86. 86
    zman Says:

    BEXP presentation available now, just a couple of new items.


    Slide 20 – you can see east Montana heating up with permits by EOG, OAS, CLR, Slawson and Zenergy

  87. 87
    zman Says:

    BEXP – Slide 22, you can see where they spent the money as they recently upped their lease budget. Area bridges the gap between Rough Rider and Pale Rider.

  88. 88
    zman Says:

    GST getting cheaper, they speak later this week.

    SSN at 675K, not quite double Friday’s volume. Next real leg up should Sept. 6, assuming they close the deal. So far so good on the updates there. I do think it is NBL that is the buyer.

  89. 89
    zman Says:

    GDP speaking in 5 minutes. Hard to get me excited about the name these days with gas where it is but will listen all the same. Gil is a good guy and they have been known to pull off some smart, fast moves to adapt to changing commodity prices from time to time.

  90. 90
    TEXWS6 Says:

    Re #81:

    Ely & Associates, are they going public? Sorry to pry for info, but you got me asking questions as to how John Ely’s name got brought up on Zman’s site!

  91. 91
    zman Says:

    GDP Notes

    Southern Frio and Norther LaSalle counties, 40,000 net acres in the EFS and also Buda potential.

    Thinking 350,000 boe EUR, at $5.5 mm, calling it an IRR of 40% at $80 oil.

  92. 92
    zman Says:

    GDP notes 2

    Haynesville – east Texas well about to complete, this is near the big EOG and ECA recent wells, in San Augustine county.

    Slowing drilling in some of the original areas due to low gas prices

    EURs inching up for them.

  93. 93
    zman Says:

    GDP – sounds like a story that could surprise to the upside on gas production out of E. Texas.

    Beerthirty – will be on the BEXP call in 30 minutes and the SSN call in about an hour.

  94. 94
    1520sbroad Says:

    #90 – I don’t have any info on Ely & Associates going public. I was just doing some research on frac related companies and came across their website. I have been researching the whole “cleaner” frac idea particularly after RRC revelaed frac ingredients last week. Ely had some comments on some new research that Ecoshpere put out on their system. Ecoshpere has struggled with credibility and I was just trying to see how Ely and Assoc fit in.

  95. 95
    1520sbroad Says:

    Tex – see John Ely quote in here – http://ir.stockpr.com/ecospheretech/company-news/detail/323/ecosphere-technologies-announces-positive-results-of-scale-testing-on-woodford-shale-and-fayetteville-shale-produced-waters

    I think you looked at Ecosphere a while back – I have continued to watch them.

  96. 96
    bill Says:

    On Mcff

    increased 2011 cap ex from 50 to to 85m

    cash is up 10 m in one month
    generating 15m pretax 10m after tax monthly at 4.25 ng

    If they give a special dividend , i dont expect more than 2 dollars.

  97. 97
    zman Says:

    Thanks Bill, have not looked at their onshore stuff yet.

    BEXP call – company humming along, in the doghouse pre 2Q for not getting bigger well results time after time and post 2Q for the increased budget. But man are they set to grow.

  98. 98
    zman Says:

    SSN call started.

  99. 99
    zman Says:

    SSN Notes

    2 Bakken wells fraccing this week, so look for results next week, followed by the deal announcement on Sept 6.

    They plan to sell their Jonah field gas assets later this year, which will provide a tax loss to offset the Niobrara sale proceeds.

  100. 100
    zman Says:

    BALT on the tape taking another vessel into inventory.

  101. 101
    TEXWS6 Says:

    I truly believe the whole Ecosphere/recycled water initiative is crap, but that’s my $.02. It really doesn’t make sense unless you are in the Marcellus and it costs an arm and a leg to dispose of your flowback fluid.

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