Tuesday Morning – IPO Preview



Market Sentiment Watch: Group continues to experience nervousness and baby and bathwater action in front of quarter end and what could be a string of bigger than expected oil inventory increases due to strong domestic production and the normal seasonal retreat in refinery utilization. News flow remains more muted than expected from the E&P group. We continue to exercise patience with regard to new additions to the portfolios. In today's post please find an IPO preview in the Stuff section and some other odds and ends. 

Ecodata Watch:

  • We get FHFA home prices at 9 am EST (no forecast, last read was 5.1% YoY),
  • Markit "flash" PMI came in at 50.5. 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today – IPO Preview
  4. Odds & Ends

Click the link directly below this to ...


Holdings Watch:

ZLT (Zman Long Term portfolio)

Yesterday’s Trades: None

​The Blotter is updated.

Commodity Watch

Crude oil eased $0.78 to close at $90.88 yesterday on the November contract which takes over front month duty today. Our sense continues to be that we are likely to see a test of $90 in the very near future, likely this week, on a bigger than usual crude inventory build.  At that point, we'd expect more saber rattling from the hawk crowd within OPEC.  The 12 month strip is now trading at just under $90 and the curve is very flat at this point with Feb through October 2015 priced just under $90 and above $89.  While it can go lower this is not a sign that traders expect further rapid declines in prices.   This morning crude is trading up $0.65, as least in part on concern over U.S. operations in Syria.

Natural gas inched up a penny to close at $3.85 yesterday after light volume, drifting session. We continue to see this period as noise.  The front month now looks like this.  This morning gas is trading up slightly. 

Stuff We Care About Today

Vantage Energy IPO - Marcellus / Barnett Player

The Basic Story:  Small cap, low cost, gassy E&P focused on just four counties in the U.S. in two plays, the Marcellus and the Barnett where they are in the core of the cores for both. Balance sheet will be essentially wiped clean by the offering at the assumed mid point of the range at $25.50.  It's probably a bad week to bring the deal and we would not be surprised to see it delayed or poorly received (better for us as it's not coming at an overdone valuation) which could ultimately result in an opportunity to own it lower. 

The Plays:

Marcellus / Upper Devonian - Greene County, in Southwest PA

  • VEI is the largest leaseholder in Greene County with 57,545 net acres with well over 700 identified locations between the Marcellus (dry gas) and the Upper Devonian (also dry gas) based on a risked view of 750' spacing (they think it will likely go to 500' spacing),
  • Greene County has proven to be hot acreage and we have ownership in RICE who has recently upped their exposure there, EQT (unowned) is in the area drilling at 500' spacing, and RRC just permitted a well near VEI's acreage,
  • 2 rig program with VEI operating,
  • Average Marcellus well EUR estimated at 2.0 Bcfe per 1,000' of lateral which is in line with peers RICE (2.0 Bcfe), AR (1.7 Bcfe), using 150' stage spacing.  
  • Average well has been IP'ing at 10 MM/d and holding near flat for the first 6 months prior to commencement of a fairly gentle decline path,
  • Marcellus economics point to 84% IRR at $4.25 natural gas with a $6.7 mm assumed completed well cost. That's pretty solid and as with others, the CWC has been falling over the last 24 months per lateral foot and expect further reductions going forward (plan is to cut $200 / lateral foot or $1 mm per well from current levels). 
  • Upper Devonian = lower EUR per 1,000' of lateral to date and 20% IRR. They do see the U Devonian as best in Greene County and have drilled 4 wells that will be on line in 2015. 
  • Plan is to rapidly grow production while continuing to add in fill acreage.  
  • A word on Utica - it's here and should be high quality but will be deeper and costlier.  Likely something they test in a couple of years after industry tests this year and next (EQT). 

Barnett - Also core, dry and wet gas windows. 

  • 23,400 net acres in the core of the play with additional acreage that is not currently their focus, 
  • Core is essentially derisked and largely held by production,
  • 2 rig program underway with 58 net wells in the 2014 program, 
  • IRR of 49% in the wet, 69% in the dry with the same gas price assumption and a $31 per barrel assumed price for NGLs with a $3 mm CWC. 

Production:  Characterized by recent rapid ramp, mix at 83% natural gas.  

Other Items 

The Offering:

  • Raising a net ~ $378 mm based on 15.7 mm shares priced on the mid point of the expected range of  $24 to $27.50,
  • Use of proceeds: Pays off second lien note and majority of pre IPO revolver. 
  • There is a smaller selling shareholder secondary that will be floated with the IPO. 

Pro Forma Balance Sheet and Capex:

  • Nearly debt free post offering (0.8x LTM EBITDA, 3% net debt to cap),
  • Liquidity should be $234 mm post deal assuming the mid point of the range,
  • The 2014 budget is described in the table below and the drilling component is split roughly 70% Marcellus and 30% Barnett. Given expected EBITDA and current liquidity which should grow nicely over the next year as they add reserves through a potentially larger program in the Marcellus and the arrival of free cash flow in the Barnett segment we see no need for external debt or equity financing through late 2015. 

Management:  Largely former Encana employees headed by former ECA president (2000 to 2006). 

Commodity Pricing Comments:

  • Greene County - 14.3 Bcfgdp total incremental new capacity through 2016, mostly brown field projects, that will send natural gas in all cardinal directions from Greene County,
  • Much of the gas, 8.3 Bcfgpd, will be pulled to the southeast due to natural gas power plant conversions.
  • Natural gas price basis expected for this new capacity is generally in a range of $0.80 to $1.00 off NYMEX (higher than historic norms but that's the current market),
  • 115  MM/d of firm transportation in place now vs Marcellus segment volumes of 100  MM/d in August, and will be adding more. 
  • They note basis has never been wider, currently about $1.20 per MMBTU, but that historically speaking, and I agree with this, that once capacity is back to being adequate for takeaway, basis retreats back towards the cost of transporting the molecules (much closer to NYMEX hub pricing).   As such, they see pricing becoming much more balanced over the next 18 to 24 months. 
  • They're 99% hedged for 2015.

Valuation: Pretty OK

  • Not pricey on our back of the envelope 2015 EBITDA estimate at just 6.3x.
  • Not expensive on a proved reserves in the ground basis at $1.59 / Mcfe,
  • Or on a flowing Mcfe basis, at just over $11, VEI also looks cheap to its peers AR ($21), RICE ($18) (who are both bumped up by their Utica programs) and is line with more Marcellus focused REXX ($9.50).
  • And our production growth estimate for 2015 is likely to be low as management suggested guidance will be well over double the August 2014 rate (which means well over 300 MM/d) and given the flattish early days decline rates we can get to the number with the 2 rig Marcellus program driving the lion's share of incremental volumes without difficulty.

VEI comps 092214

Nutshell: Refreshing to see a not-so-loftily-priced IPO being brought to market after a number of pricier ones in the same general vicinity.  The deal should position them well for at least the next 18 months as to external capital needs unless they see a large patch of acreage they feel the need to bolt on.  It will be more interesting if they bring the name to market and weak action end of quarter issues drive it lower from the start. Expect pricing 9/25/14 for first trade on Friday. We'll be watching.  

VEI IPO 092214
Sidebar Watch: ECR is now trading at just over $16; at only 5.8x 2015 E EBITDA.   See our recent comments on it here. 

Other Stuff

Today at IPAA (all times EST

​Subscriber Mailbag Watch

We got asked a question about bargain hunting in the group after the recent drop. It's a good question and while my first thought is to point to the Top 10 in the ZLT I think it's probably better addressed with an updated issue of What Price When.  We'll get that out this week. 

Odds & Ends

Analyst Watch:

  • LPI - KLR ups to Accumulate from Hold​

​​Interesting Reading Watch: Bakken crude stabilization comments

88 Responses to “Tuesday Morning – IPO Preview”

  1. 1
    Wayne G Says:

    Z – I have not done any work on ECR? You like it? Did you do a write up on it?

  2. 2
    zman Says:

    re 2 – yes, wrote it up pre IPO, said it was expensive. 

    See first (June) and most recent one (September) here:


    It's coming into range but in my view not there yet. 

  3. 3
    Wayne G Says:



  4. 4
    elduque Says:

    Good morning:

    Brent/WTI at 5.6

    TNX at 2.553


  5. 5
    elduque Says:

    TAT- new presentation showing completion of two Molla wells. Amount of time and money accumulating 3D last year seems to be paying off.

  6. 6
    zman Says:

    re 4 – good morning and thanks. Walking through the charts for a piece, the declines in 3Q have been absurdly high, it looks like someone flipped a switch on 7/1/14, on average just beyond commodity price declines (both oil and natural gas are off 11% QTD).  Yesterday looked a lot like capitulation although the volumes were elevated but not all that overly high in many places. 


  7. 7
    zman Says:

    re 5 – thanks.  Buyers strike continues in group with red SPX open. 

  8. 8
    sc4 Says:

    Z  thanks the piece  today but looking at the numbers Rexx seems to be more interesting. While it is early days, how do you see the two stacking up? One does not need too much gass and the question becomes why VEI  over REXX. I know you are not saying that but in looking at the two how do you see them- tia

  9. 9
    reefguy Says:


  10. 10
    elduque Says:

    re market- has the feel of a major fund dumping their positions?? 

  11. 11
    zman Says:

    re 8 & 9 – I own a bunch of REXX. I said I'd be watching VEI. REXX is definitely more interesting to me.  I don't put up two stocks side by side and choose one. 

    re 10 – window dressing, not just one fund. 

  12. 12
    zman Says:

    Adding to 11, REXX has higher margins as it's got more liquids and it's got liquids rich Utica to the west that's going to drive that higher over time. And as noted it is still cheaper on a flowing units basis. 

  13. 13
    tomdavis12 Says:

    SDRL – JFred bought 2mm shares in open market. 

  14. 14
    zman Says:

    re 13 – that's a big number. 

  15. 15
    tomdavis12 Says:

    14 – I believe total was $56.7M. Guess he is showing a commitment to his largest holding. Maybe interim support area.

  16. 16
    zman Says:

    Big swing in the group today, not thinking to buy the first greenish tinged day myself. Quarter ends in a week. Not feeling rushed. 

  17. 17
    Zorgnak Says:

    S&P 500 Futures Short Term Levels 9/23 10:13 am 1985.75 SPY Levels in ()

    Notes…… Market trading back to the  1995 CHVN. Demand volume  and ease of movement negative. Breadth oversold..  Nasdaq relative strength. Small Cap relative weakness. Fear and Greed = Extreme Fear, increasing. Primary uptrend intact.

    Thoughts……. Market caught between two acceptance areas and now testing support at the 1986.75 CLVN (198.58). A break of this level targets previous acceptance at 1967.75. Short term choppy downside bias below 1995 CHVN.

    1995                 CHVN/Volume Pivot(200.34)

    1986.75           CLVN/Support (198.58)

    1967.75           Upper CHVN/Volume pivot(197.34)

    SP500 Futures  (ES)




  18. 18
    zman Says:

    re 9 – would be nice if a lot of people thought that later this week. 

  19. 19
    zman Says:

    Street at 97 Bcf for Thursday. 

  20. 20
    Zorgnak Says:

    Relative Volume…..

    Mostly Bakken and Permian


    Nat Gas and others


  21. 21
    tomdavis12 Says:

    Z: If I were to make a case for lower crude – E&P pricing it would be Deflation. China with better PMI numbers today but the disturbing comment from yesterday was content with slowing growth (even after last Friday's liquidity injection for the banks). Yesterday ECB board member saying it is "too early to know if additional stimulus is needed". Looks like much talk and no action over there. It took us much action and our economy is better but muted. Stronger US dollar. If S&P 500 near high has a 4 – 5% correction may be difficult for energyland to rally significantly.  

    These comments are not meant to rain on our parade here. Just looking at the other side to see if you agree with any reasons for caution.      I see that our names are cheap but in this global economy it seems we can be smacked by not just our foolish politicans here but maybe also  any others out there that make foolish decisions.  Thoughts Z

  22. 22
    macguyver Says:

    anyone have info on TPLM comments at IPAA pls pass along…many thanks!!

  23. 23
    zman Says:

    re 21 – sure.  I see 1 to 1.2 mm bopd oil growth this year and next globally. No growth from US, no growth from Europe.  China is a piece of that growth but it's not the majority.  Europe and US and rest of OECD remain well off pre 2008 highs in terms of oil demand.   So that's up 2 mm bopd in demand over 2013 average levels, US grows, FSU flat, LAM flattish, Europe flat to down, China up slightly, therefore OPEC accomodates, OECD inventories are not currently bloated and as such oil prices should stabilize under $100 without some kind of rout in prices. If Europe become 

    Re S&P500 correction, sure, it would likely sap strength from the group.  They generally trade in the same basic direction although they diverged in 3Q14, making it possible for E&P, in a stable oil price, to get more traction despite the drop, perhaps after the initial, "SPX is falling swing"


  24. 24
    zman Says:

    Tom – things like this are out there too. 


  25. 25
    zman Says:

    HAL Watch – Moody's changes HAL outlook to Stable. 

  26. 26
    life’s-a-gas Says:

    Z, on VEI, why the comps with MRD? Also, do you know the average cost of VEI's 115 MMcf/d of firm transportation?

  27. 27
    tomdavis12 Says:

    24  So do you put any stock in worldwide deflation which could dampen worldwide commodity demand and pricing?.

  28. 28
    zman Says:

    re 26 – MRD – just put it in as another gassy name with assets not in the Basin, since VEI has some Barnett, no other reason. Re basis, assumed it as $0.80 off. 

  29. 29
    zman Says:

    re 27 – If people believe Europe is going into a defationary spiral that could spook prices lower.  The impact on demand however would likely be more, not less, consumption. 

  30. 30
    zman Says:

    For you GDP fans, GDP had a stuck pipe issue in a TMS well, they drilled around it and are drilling ahead. May have been part of the recent further than even group decline there, which also like pushed on HK a bit. 

  31. 31
    zman Says:

    Tom – I'd like to hear about deflation (the bad kind) relative to depression of oil demand. 

  32. 32
    zman Says:

    CPE speaking in 5 minutes at IPAA, notes to follow. 

  33. 33
    brodway Says:

    re: 13

    Tom…i saw that news early morning on SDRL and was thinking to do same…i've sold out of a few other income generating positions, and feeling nostalgic over good income coming in on a quarterly basis.

  34. 34
    tomdavis12 Says:

    31  Deflation hasn't happened enough to come up with easy measureables. Maybe you can look at Japan for the last 20 years. In that envoirnment if you want to buy a widget you wait because you think it will be cheaper tomorrow. Everything gets delayed or pushed back. Was demand in Japan lower over time. I do not have that data. If a place like Alibaba allows four widget makers globally to sell their wares it might cut margins for all 4 makers pushing prices lower for that product. 

  35. 35
    zman Says:

    CPE IPAA Notes

    – 40 wells next year, big inventory, 1,100 locations, 20 years at that rate, almost all Midland County

    – expect continued operational efficiencies

    – recent acquisition – near their current fields, nothing new at all here, very basic so far

    – acquisition to close 1st or 2nd week Oct – reserves and production all come from vertical production

    – no change in guidance, exit at 7,000 boepd this year, 10,000 next

    – suggesting they've been conservative on economic claims/EURS

    – new zones to test as per Catalyst List 

    Name continues to chug along as expected. I think the deal sort of took the wind out of the sails due to guidance but after digestion would suggest that it's going to viewed as less cheap than it was but longer term still a rapid grower with big inventory and a balance sheet that's in good shape. 



  36. 36
    Wayne G Says:

    LLS up 1.25 today. Strange spike given brent negative 

  37. 37
    zman Says:

    re 34 – Yeah, I get the concept, I guess I don't see the hit on oil out of it. There's bad deflation, like the kind you describe where people wait to buy cheaper  (not around my house but I guess somewhere) and then there is also good deflation where the cost of the supply chain falls, faster than price, peole buy more cheaper widgets and the manufacturer makes more money.  

  38. 38
    Wayne G Says:

    Iranian Sales Chief Sees Oil at $90/Barrel by Winter’s End: WSJ  12:36

  39. 39
    zman Says:

    re 38 – he'd likely be referring to OPEC basket which was a little over $94 close yesterday.  

  40. 40
    besherman Says:

    RE-38 I suspect that he's trying to lay the groundwork for production cutbacks to boost oil prices.

  41. 41
    zman Says:

    re 40 – yes. Iran is a notorious caller for OPEC quota cuts and a cheater, when able relative to their own quotas.  None of the other big names really seem to listen to them (Saudi, Kuwait, UAE) as Iran always wants higher oil prices. 

  42. 42
    Wayne G Says:

    LLS spike – chatter bc of drop in imports. 


  43. 43
    nrgyman Says:

    FANG:  TEV is around $4.62B, but the TEV of VNOM is around $2.1B and FANG did own about 85% of VNOM–which amounts to about $1.785B owned by FANG.  In calculating FANG metrics do you back out the VNOM TEV to calculate the FANG TEV-related metrics?  The FANG ownership is probably diffferent now with the recent VNOM secondary, but the general question remains.  

  44. 44
    zman Says:

    re 42 – well it is certainly time, should get more on that post close with API release and then tomorrow with EIA. We have to have them fall off in the next several weeks or the jump in crude stocks is going to put short term pressure on prices from here. 

    re 43 – it should be 88% now as they sold 3.5 mm more units, Was thinking about that last night, didn't come to a conclusion, it's not like it's shown in marketable secutirities on the FANG balance sheet since it's a subsidiary.  I don't hold either of them and would need to take a deeper look as to that, but it seems that appropriate treatment is to leave it in, not back it out.  The production from Viper is part of FANG's consolidated statement and FANG pays the LOE on those BOE's.  Buy again, I don't own either of them, have not given that a whole of thought. 

  45. 45
    nrgyman Says:

    RE 44:  Thanks.  Do most operators pay the LOE on BOEs produced in which the mineral rights holders collect their revenues?

  46. 46
    zman Says:

    re 45 – yes, because the mineral interest guy gets his slice off the top.  I've been a working interest owner, much less fun, espeically when an ESP burns out and you get a bill instead of a check while the mineral interest guy just gets a smaller check that month. 

  47. 47
    zman Says:

    Market has a very stalled look to it. Much of the energy dead cat bounce of this morning has faded. Sitting. On. Hands. 

  48. 48
    nrgyman Says:

    RE 46:  So for E&Ps, the value of the mineral interest holders assets (assuming one could know the value of those interests) is not included in the TEV of the E&P firm.  Yet for FANG, the value of the mineral interests (VNOM, which has a market value) is included in their TEV.  Seems like, for comparison purposes among peers in the E&P business, the TEV of VNOM should be backed out from the FANG TEV to make apples to apples comparisons.  Additonally, FANG is likely to use VNOM as a source of funds for capex–it will be converted to cash over time, just as GPOR does with FANG stock.  Cash is backed out for TEV determinations.  Just some food for thought.  A FANG TEV of $4.62B is much different than $2.78B when determining TEV/ebitda multiples and other valuation metrics.

  49. 49
    nrgyman Says:

    Fear and Greed Index at 17:  Extreme Fear.  Under 20 is historically a good time to do some buying, but it can stay under 20 for some time while the market declines/consolidates.  On the last trip down it reached 5.  A plausible risk-reduction strategy is to wait this to start rising from under 20–it is still falling now.  It can turn quickly though and it is reaching extreme levels.  Closely watching some names for purchase.  This week is historically weak and the end of month is approaching.  For E&P names, much seems to depend on Saudi production and US import activity atm.  

  50. 50
    Mark Wetzler Says:

    #48 I believe FANG only paid $475mm for their VNOM interest and 9 mos later brought it public at a huge profit.

  51. 51
    zman Says:

    re 50 – yes, that's correct. 

  52. 52
    brodway Says:


    i'm a bit puzzled over yoru CRZO chart from yesterday where you noted that the stock was at minor support. looking at chart would it be correct to deduce that the major support is down in the high 40's or am i reading it wrong?

  53. 53
    zman Says:

    OAS coming into support now. 

  54. 54
    brodway Says:

    re: 35

    seems CPE is focused on greater production numbers….amazing what kind of disconnect the markets can bear between actual companies and share price

  55. 55
    elduque Says:

    TAT- pretty interesting, were forecasting down prod. out of the Thrace, now with a new discovery thinks that it could be positive. Purchase of the fields in Albania look promising. I like the fact that they are not running around like a chicken with its head cut off. Something they were doing 3 years ago. 



  56. 56
    zman Says:

    re 55 – agreed. 

  57. 57
    brodway Says:

    re: 53

    Zman…love it when you get technical….

  58. 58
    zman Says:

    re 57 – have been planning to add since Hamm's comments at the CLR analyst day displeased the Street on the Bakken.  Almost there now. 

  59. 59
    Stewart Says:

    Z.curious how this drubbing shapes up against other drubbings in the group.. I recall when TPLM once traded under net cash and just seemd too cheap.  Anything stand out to you like that today?  PVA ?  seems silly no?

  60. 60
    Zorgnak Says:

    #52 yes to your question about major support. I have it at 47.36, using the confluence of the major CLVN and price. There are two possible minor areas of potential support at the 55.14 and 53.08 minor CLVNs. Given the oversold state of the group and in this stock as well as the major CHVN being above at 57.50, I consider these areas of interest. I'd have to see some volume buying to consider any action. 


  61. 61
    zman Says:

    re 59 – If you can bear with me, I think the answer to your questions will be in the subject of tomorrow's post. 

  62. 62
    Stewart Says:

    re 61..sure..look forward to it. thanks.

  63. 63
    zman Says:

    re 62 – thank you. 

  64. 64
    Zorgnak Says:

    XOP  Not much to say here but the obvious…

    Price moved easlily through the low volume area below the Head & Shoulder pattern at 72.81.. It also broke throught the long term uptrend line. Currently the group is in extreme oversold as measured by price and selling volume(lower panel).  Bounce back tested resistance at 71.29 today. I expect it to be tested again. Above that there is room to move quickly to 72.81 for a retest of the H&S neckline, if/when. Head and shoulder tops are one of the most reliable patterns. Group needs to retake 72.81 to negate it.




  65. 65
    zman Says:

    re 64 – thanks Zorg, sometimes that's all that's needed. 

  66. 66
    Zorgnak Says:


    General Market  Not that dire looking to my eyes….lots of fear but the major underpinnings don't seem to be anywhere near scary….

    Nasdaq  Trading above major support


    Financials Trading above major support


    Small Caps Trading oversold at long term acceptance


  67. 67
    Zorgnak Says:

    S&P 500…Futs….

    Trading above the major CHVN/volume pivot at 1967.50 bulls need to hold it there or above…..Watching 1955 as the level wbelow which selling would be most likely to really start to pickup….


    SPY gives a little cleaner volume profile than the futures at the moment…   It's trading in congestion but still above the major accetance levels.


  68. 68
    nrgyman Says:

    COG:  now with a $31 handle.  Looks like it might be breaking down from support.  P&F on verge of a breakdown.  Zorg, thoughts on this chart?

  69. 69
    zman Says:

    Beerthirty, back in a bit. 

  70. 70
    pirnakc1 Says:

    RSPP announces 500mm senior unsecured notes at 6.625%

  71. 71
    Zorgnak Says:

    #68 Re thoughts on COG chart…..I have same sort of  thoughts and they're not pretty…I've been seeing the obvious and very well defined long term CLVN around 32  as support, but as you pointed out that is breaking down. Unfortunately, there's a very little volume structure leaving 10% downside that could happen in a hurry with or without much volume. 

    Weekly chart



  72. 72
    Zorgnak Says:

    COG  adding to #71 Noting that today's break came on 2X avearge volume (far right chart)….ugly


  73. 73
    zman Says:

    re 70 – thanks, that's a decent rate. 


  74. 74
    Zorgnak Says:

    Oil Producer Index  PnF breakdown..


  75. 75
    Zorgnak Says:

    COG  PnF from last night


  76. 76
    nrgyman Says:

    One positive takeaway from today is that despite the broad market selloff, including the Russell 2000 down about 1%, the XOP was unchanged.  Small wins.  With all of the high volume selling in the group, especially in the past week, perhaps we will start to see some sideways movement.  The hourly chart over the past two days is showing signs of it.  Perceptions of lower crude prices predominate atm and anything that changes that negative view into a more supportive price structure is likely to turn around the E&P names.  

  77. 77
    brodway Says:

    re: 58

    Zman…CLR on its own is starting to look pretty interesting….i've wrote it off my radar when stock ran over $100 prior to the split, but given its size in the Bakken and its appeal to larger players (i know this is never your angle), it's back on my radar….although WLL based on you last note is probably a better investment.


  78. 78
    Stewart Says:

    COG falling out of this pattern looks very vulnerable..26-27 looks like support there..wow

  79. 79
    nrgyman Says:

    Fear and Greed Index closed at 15.  Only the VIX component is neutral.  The other six sub-components are showing extreme fear or fear.  

  80. 80
    besherman Says:

    SAN FRANCISCO (MarketWatch) — U.S. crude inventories declined 6.5 million barrels in the week ended Sept. 19, the American Petroleum Institute said late Tuesday, according to reports. Gasoline inventories added 100,000 barrels, while supplies of distillates rose 3 million barrels, the trade group said. The API data come a day ahead of the more closely watched report by the U.S. Energy Information Administration due Wednesday. Analysts polled by Platts expect the EIA to report an increase of 1 million barrels in crude supplies for the week. Gasoline supplies are seen down 600,000 barrels, while distillates stocks are expected to increase 160,000 barrels, according to the Platts survey.

  81. 81
    zman Says:

    API Watch

    Crude off 6.5 mm barrels … likely imports tilted hard inthe right direction. 

    Gasoline up 0.1 mm barrels 

    Distillates up 3.0 mm barrels

  82. 82
    RB Says:

    like that API…

  83. 83
    brodway Says:


    thank you for the response in 60. i find it difficult to read where there's not much structure below a certain price point…this is examplified in your chart in COG and also CPE where i'm having difficulty rationalizing a collapse to the next support level. I guess time will tell.

    also find posts 64,66 and 67 quite useful as i agree that longer term bull market is intact. There's a bit of sector rotation into financials now as there is a general prognosis for higher rates in the not so distant future. unfortunately, energy has been the recepient of the short end of the stick where the outflow of capital is currently out of that sector.

    IMHO that much of the selling in the energy sector that took place in the last 2 days is a function of lower oil prices and herd mentality where selling begets selling. In addition, no money manager wants to be caught holding energy stocks that are 25-35% below recent prices as the quarter comes to an end. Add a bit of general market sell off and its a perfect storm.

    This has been traditionally a weak week leading up to the Jewish New Year and then a period of high holy days where Wall Street traders tend to avoid committing large capital into any ideas.  After the end of the high holy days, however, a relief rally usually follows. 

    I'm baffled by the lack of buying in energy shares after such a large correction, but i have to remind myself that markets rarely price efficiently and i can not convince myself that the American shale revolution has run out of steam.  Which by the way is the only sound argument i can think of why from a technical standpoint i'm still long going into tomorrow.


  84. 84
    nrgyman Says:

    RE 44, 48:  FANG metrics without VNOM.  Did some rough calcs using your data from the Permian Cheat Sheet and 9/10/14 pricing.  I found FANG's TEV (less 93% of VNOM's TEV) on 9/10 to be $2.69B.  FANG's TEV/Ebitda without the VNOM TEV included on 9/10/14 was 6.36X for 2014 and 4.27X for 2015.  That would make FANG among the cheapest Permian and ZLT names, with 161% ebitda growth in 2014 and 49% for 2015.  Using current pricing, FANG has a TEV (net of 88% of VNOM TEV) of $2.772B.  The multiples are 6.55X for 2014 and 4.4X for 2015.  In other words, FANG's TEV actually increased since 9/10 (despite a price drop from $76.80 to $72.84) due to the drop in VNOM TEV during that period.  If these numbers are correct, that is interesting.  But more interesting is that FANG (ex-VNOM) is trading at at TEV/ebitda multiple of just 4.4X on 2015 estimates.  Maybe that is why FANG (ex VNOM) actually rose in TEV in this last week's market turmoil.  I know you don't own FANG, but this casts a different light on FANG's relative valuation.  Of course I could have messed up the numbers because VNOM had an equity offering during that period, but I did adjust FANG's share of VNOM's TEV from 93% on 9/10 to 88% current.  Note that I used the Ebitda estimates from your Permian Cheat Sheet and did not back out any distributions from VNOM to FANG because 1) I don't know what they will be (haven't paid any yet) and 2) I don't know if those are included in the Ebitda estimates.   From this analysis it appears VNOM is masking an attractively valued FANG, when comparing FANG on similar terms to other E&P names by backing out VNOM.  Thoughts?

  85. 85
    zman Says:

    re 84 – you'd have to pull the VNOM EBITDA out of the FANG EBITDA number as well as they are consolidated. 

  86. 86
    Zorgnak Says:

    #83…You are welcome…and I agree…we shall see




  87. 87
    nrgyman Says:

    RE 85:  OK, that makes sense if they are consolidated.  Explains why FANG's Ebitda/BOE margins are so high–they are including the mineral rights in them.  Most E&Ps don't own the mineral rights on their production so they don't include them.  Technically, FANG doesn't own them either–VNOM owns them directly.  But since FANG owns 88% of VNOM they can consolidate it.  VNOM plans to distribute 100% of Ebitda through mid-2015, so Ebitda and distributions are essentially the same.  As I noted above, I don't know how much VNOM Ebitda is included in the FANG Ebitda estimates.  For the first 6 months of 2014 VNOM's adjusted Ebitda was $30.35 million.  Don't know the full year 2014 or 2015 estimates, but the proportion of VNOM's ebitda to FANG's ebitda is likely to be significantly smaller than the proportion of VNOM's TEV to FANG's overall TEV–which is about 40% now.  So FANG's TEV/Ebitda multiple is likely to be significantly reduced by backing out VNOM.  

    Still think the best way to compare E&P names is on an apples to apples basis.  To do so for FANG, VNOM's ebitda and TEV should be backed out from FANG's data to determine a comparable valuation.  I did the TEV part above but don't know the amount of VNOM Ebitda included in FANG's full year 2014 and 2015 Ebitda estimates from the Permian Cheat Sheet.  I'm thinking FANG is more attractively valued than I realised.

  88. 88
    Baylor Says:

    Given the significant price reduction in some babes, would this be a time when more acquisitions may occur?

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