Market Sentiment Watch: Yo-Yo market continues. Non farm Payrolls came in at 54,000 vs consensus expectations of 125,000, which had been revised sharply lower since the end of last week. The unemployment rate is now 9.1% vs the 8.9% expected. This rounds out a bad week for monkeys with handguns economists and their forecasts. Hopefully some of them will join the ranks of the unemployed soon. In energy land, another day, another update out of SSN and while much of the material is rote as per Australian rules, there is some Goshen news to contemplate and its CHK news, not HAL news, and that's new news (see the Stuff section for comments). In today's post please find reviews of yesterday's oil and natural gas inventory reports plus a Eagle Ford Shale players update. Thanks much for reading the post and contributing in comments and have a good weekend.
Ecodata Watch:
We get ISM nonmanufacturing data at 10 am EST (F = 54%, last read was 52.8%)
In today's post:
- Holdings Watch
- Commodity Watch
- Natural Gas Inventory Preview
- Stuff We Care About Today – Eagle Ford Shale Players Update, SSN
- Odds & Ends
Holdings Watch:
Please click the link right below this to
- $6,100
- 100% Cash
- Yesterday’s Trades: None
ZIM (Zman Inefficient Markets portfolio)
- $8,500
- 99% Cash
- Yesterday’s Trades: None
Commodity Watch
Crude oil inched up $0.11 to close at $100.40 yesterday, rebounding from lows reached immediately following a bigger than expected crude build, likely on seasonally rising gasoline demand data. This morning crude is trading off $1.50+ in sympathy with equity futures.
Natural gas rallied smartly on a smaller than expected storage injection, ending the day up $0.17 +3.6%) to close at $4.79. The front month chart now looks like this and could prompt some short covering in a position that has become legendary in both size and duration. So far we have not seen the dip in gas prices I expected following the release of the March production numbers which were worse (higher) than expected. This morning gas is trading off five cents.
Oil Inventory Review
ZComment: Good to see gasoline demand surge on cue, but one week does not a trend make and given that we are at the beginning of the driving season, elevated demand for early summer vacations and due to lower pump prices will probably both prove fleeting.
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Natural Gas Inventory Review
ZComment: Good to see heat have an impact on gas demand early in the season. If we get a string of these gas will likely briefly pierce, the $5 mark this month. However, we will still need to see a production rollover for gas prices to hold this level into the second shoulder season.
Stuff We Care About Today
Eagle Ford Shale Players Update - A Slide Show
The Reason For The Update - MRO's $3.5 billion bolt in the play, which I covered in the Wednesday but didn't have adequate time to address what the rising valuation metrics mean to other Eagle Ford Players. I copying that post in here for reference before continuing on with some nice maps, tables, and graphs. From the Wednesday post ...
MRO Acquires Eagle Ford Position from private Hilcorp Resources
- 141,000 net acres in Atascosa, Karnes, Gonzales, and DeWitt counties, TX
- Production of 7,000 BOEpd net, 80% liquids
- with expected exit rate of 12,000 BOEpd
- and increase to 80,000 BOEpd by 2016
- MRO is calling net resource potential $400 to 500 mm BOE
- Price Tag: $3.5 B. That works out to:
- a whopping $24,822 / acre on a straight dollars for acreage basis
- If we back out current production at $100,000 per flowing BOE, then the acreage price dips to a still lofty $19,858 /acre
- And using the exit rate we get to $16,312 / acre
- a whopping $24,822 / acre on a straight dollars for acreage basis
- Recent deals have been done for around $20,000 per acre
- Other names that could benefit from the attention to their counties:
- GEOI and MHR have acreage in Atascosa and Gonzales counties
- HK's Red Hawk area is located in DeWitt and Karnes counties
- ROSE has acreage in Gonzales county
- EOG and PXD are along that entire range
The Best Latest Map I Could Find - clearly shows the oil, gas/condensate-- , and dry gas windows of the play
Map of Texas Counties - compare the map below to the map above to get an idea of which counties we are talking about being in which windows (from black oil to dry gas). The county names are more legible on this one.
Who's Got What and Where?
And What Have They Done And/Or What Do They Plan To Do?
Potential Reserves vs Company Wide Booked Reserves ... I broke these into size groups for easier viewing. As you'd guess, the relatively small acreage positions of the small and mid caps mean a lot more to them, relative to their current proved reserve base, than the monster acreage positions held by the big caps do to them.
... Or Looked At Another Way, What Do The Acreage Positions Held By The Players Imply As Potention Reserves as a Multiple of Their Current Proved Reserves? Wow, names over 2.0x on this scale have mucho leverage to the play. For the preceding three graphs and the one to follow I used company estimates where available and fairly conservative estimates for spacing and EUR's from their peers when they were not.
Valued At $20,000 per Acre That Leaves The Rest The Company At. The following table simply takes the $20,000 per acre figure from the MRO / Hilltop deal, applies it to each of the Eagle Ford Players' acreage positions, then subtracts that from the TEV of the company and says, "what's left for all of the rest of the firms?" The answer in the case of some is close to $0 (including SM which Eli pointed to in comments yesterday) which I find sort of interesting.
Other Stuff
SSN Operations Update
North Stockyard (Bakken)
- 5th well stuck pipe fishing expedition was completed successfully. Recall the well's flow increased to 1,200 BOEpd once the tubing was pulled out of the horizontal portion of the well earlier this week. They will be off the well for a week due to flooding, something you will likely be hearing more about as the quarter end approaches with the Bakken names, before they finish completing the well.
- Sidebar: Weather like this should not be a condemnable offense by the group and any analyst who feels compelled to cut ratings or price targets is doing us a favor.
Hawk Springs (Goshen County, WY - Niobrara Play)
- CHK proposed 2 Niobrara wells to SSN
- They are on the southern border of SSN's Goshen County, WY acreage on CHK's position acquired from SSN last year. Given the close proximity of the wells to the boundary, SSN would have a partial interest as the sections cross the line into SSN's position.
- The two proposed wells are the:
- State 24-63 14-1H in which SSN would have a 12.5% working interest,
- and the State 24-63 10-1H where SSN would have a 25% WI
- These 4,300' horizontal wells would spud in September and October of this year.
- SSN has until July 12 to participate or go non-consent in the wells.
- Notably, the HAL/SSN well is to the north and west of the wells.
- Nutshell: I find it more than a little bit interesting that CHK is planning to drill two consecutive horizontal tests right up to the border of SSN's Niobrara position. Recall that we understand that CHK wanted SSN's entire position but that SSN would not sell them what they say is the arguably the best piece of their original pie here. While CHK has been relatively quiet about their well performance to date, the new proposed spuds make it crystal clear, at least to me, that they were not disappointed in their early efforts in this area of the Niobrara play. Furthermore, the CHK wells will help to accelerate the de-risking of a substantial portion of SSN's position play, whether SSN elects to participate or not. I continue to hold SSN in the ZLT.
EOG Sells Some Bakken Midstream Assets
- $185 mm for a gas condensate recovery plant and a gas pipeline
- Not a big deal but noteworthy in that it represents more monetization progress from EOG
Odds & Ends
Analyst Watch:
- WLL, KOG, and GEOI - Upped to Accumulate at Global Hunter
- NE - FBR raises to Outperform ahead of what it sees as rising jackup dayrates. Target bumped from $48 to $55.
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