Thursday Morning – Oil Inventory Review and Natural Gas Preview

Market Sentiment Watch: Cease-fire signed for Ukraine. 10 months of fighting to end (that's the plan) on Sunday. In today's post please find the natural gas inventory preview, the oil inventory review (please take a moment to read the summary section today and the look over the charts) and see the Commodity Watch for some key points from the inventory report and from the PXD call yesterday, comments on RSPP, the OII quarter, and some other odds and ends.


Ecodata Watch: 

  • We get jobless claims at 8:30 am EST (F = 296,000, last read was 278,000),
  • We get Philly Fed at 10 am EST (F = 7.7, last read was 6.3), 
  • We get Leading Indicators at 10 am EST (no forecast, last read was 0.5%).

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch - with natural gas storage preview
  3. Oil Inventory Review
  4. Stuff We Care About Today - RSPP, OII, CPE
  5. Odds & Ends

Please click the link right below this toHoldings Watch:

ZMT (Zman Medium Term portfolio):

Yesterday’s Trades: None

ZLT (Zman Long Term portfolio)

Yesterday’s Trades: None

The Blotter is updated.

ZLT PIE will be included in Friday's post. 

Commodity Watch:

Crude oil fell $1.18 (2.4%) to close at $48.84 yesterday on a bearish looking weekly EIA oil inventory report. Production inched up to a new high, imports scored a new low for this time of year, and throughput edged higher but should really turn the corner in the next 2 to 6 weeks.  Please see the summary section below for key comments. This morning crude is trading up back over $50 on the Ukraine news and perhaps on a weather related shut in of all exports out of Kuwait. Fear over a weaker Europe and globe due to sanctions on Russia related to their moves in Ukraine has been part of the pressure on crude. Conspiracy theories have suggested that part of the Saudi / OPEC action not to shore up prices has been a tit for tat with the U.S. (U.S. got more aggressive with ISIS while Saudi helped hurt Russia via oil price).

PXD Watch: Some key macro points from their 4Q14 call yesterday:

  • With regard to 2015 U.S. oil production: They see U.S. production stalling around mid year and going into decline in the second half.
  • With regard to global oil situation: the world is very, very tight, only 2 mm bopd of excess supply, couple that with declining U.S. production and they don't see low oil prices playing out for long.   
  • With regard to condensate exports: Expect more companies to being exporting condensate; they saw a significant uplift in pricing of exports vs domestic sales. 
  • With regard to completed well costs: At 10% now, expect 20% reduction from 2014 by YE15 or more. 

​Demand Watch:

  • Demand for oil by refineries: Up 0.14 MM bopd YTD vs same period in 2014. 
  •    Demand for gasoline: Up 0.43 mm bpd (up 5.2%) YTD vs same period in 2014. 
  •    Demand for distillates: Up 0.2 mm bpd (up 5.4%) YTD vs same period in 2014.

Production Watch: U.S. oil production up 1.1 mm bopd YTD vs same period in 2014. 

Imports Watch: U.S. oil imports down 0.6 mm bopd YTD vs same period in 2014. 

A quick graph for those that don't want to view the slideshows below:

FWC 021115

Natural gas closed up $0.12 at $2.80 yesterday on an improvement in the forecast/dead cat bounce (take your pick). Natural gas continues to need sustained cold over a broad swath of the lower 48. Without that we see these kind of range moves as noise. With sustained cold, we would get a better starting point for the shoulder season but we still see 2015 as a treadwater year for prices with a higher tail into year end. That by the way is not as bad of a statement as it probably sounds since our names are still growing and will be pushing unit costs lower and our sense is that coming takeaway capacity in Appalachia means that wide differentials will mark their lows in 2015. This morning gas is trading up slightly. 


Natural Gas Storage Preview Watch:

  • Street is at - 165 Bcf for today's report. 
  • Last Week: - 115 Bcf
  • Last Year: - 230 Bcf
  • 5 Year Average: - 180 Bcf
  • 10 Year High: - 230 Bcf
  • 10 Year Low: - 113 Bcf

Oil Inventory Review

exp vs act 020615


EIA 020615 A


EIA 020615 B


EIA 020615 C

Stuff We Care About Today  

RSPP Quick Update - walking through our bigger names as they report soonish 

Outlook: They guided for 2015 in late January so that's unlikely to be changed with the 4Q14 report. To briefly sum up:

  • 2015 volumes guided to 17.5 to 18.5 MBOEpd, up 53% on the mid,
  • Street is now at 17.6 MBOEpd (down from 18.8 MBOEpd prior to the company's updated guidance) so they took the spoon feeding to the conservative end of the range, 
  • 2015 spending guided to $400 to $495 mm,  
  • Street EBITDA went from $303 mm to a new $266 mm

Implied Outspend:  

  • On Street level EBITDA, this implies outspend of about $196 mm.
  • Our $77.50 deck which is now likely a touch high puts outspend at $190 mm while the low $55 per barrel oil forecast, something we don't see puts, outspend closer to $225 to $230 mm (assuming mid point spending and mid point volumess).

Balance Sheet:

  • Nothing was drawn on their revolver as of 3Q14, 
  • It's likely little to nothing was drawn at the end of the year either due to cash balance availability,
  • And it's likely leverage was at roughly 2.3x debt to TTM EBITDA at YE14 (vs 2.5x at the end of 3Q14) 
  • Based upon a $55 oil price, we see net debt to EBITDA at the end of YE15 of 2.7x. 
  • Liquidity is probably at just under $600 mm leaving room for the expected outspend noted above.  Given that 2014 proved reserves were not included in the Fall redetermination and given their rapid growth, we do not expect a marked reduction in the in revolver in the Spring. 
  • Covenants - should be no trouble in 2015. 

Nutshell: TEV to EBITDA on the $55 oil deck is roughly 11x. The higher multiple would not be all that appealing were it not for the higher growth rate and solid balance sheet. Given that the growth is largely a function of the production ramp at the end of 2014 we can see why the shares are trading somewhat in limbo (they have not taken a sustained dive with the group but they are not getting traction) either.  On other metrics they are fairly well priced as well (per flowing BOE of $142,000 is cheap for them to be sure but not a screaming bargain and 2014 reserves have not yet been released but they will trade at a premium to most oily players when they are).  So why do I continue to hold the name as our largest Permian Core holding? First, I don't oil down turn as something that has $40 oil written on it for very long and would expect them to move up as oil prices move up as they have some very good real estate in the one of the core of core portions of the Permian . Second, even at low oil prices, their projects are likely to be economic longer than many players' and given the lack of real leverage issues here we think they can opportunistically add to their position if prices do stay lower for longer.  Third, continuity. By that I mean I'm not a trader. I plan on owning them for quite awhile and if they do weaken later this year we may core up from other names into them. RSPP is set to report 4Q results on March 2. 

RSPP 021115

OII Reported In Line EPS, Light Revenue 4Q14 Results; Cuts Outlook

OII 4Q14

We still do not own the name


  • Record operation income, record year for ROVs (more ROV's in service, high utilization, subsea projects (on back of deepwater and Angola), and subsea products (high demand for all major product lines), 
  • Backlog decline from $906 to $690 mm YoY due to lower umbilical orders. Lots of questions will focus on that. 
  • Bought back 8.9 mm shares last year (8%) and authorized repurchase of another 10 mm (about 10% of outstanding now)

Key Quotes Watch

"Heading into 2015 we are faced with a slowdown in deepwater activity attributable to the significant decline in the price of Brent crude oil since our last quarterly earnings release, and the growing prospect that this depressed oil price environment could be prolonged.  This has led to announcements by our customers of reductions to their 2015 exploration and development expenditures, which have adversely impacted our earnings prospects.  While work on most deepwater projects already approved and underway is likely to continue, the urgency to start new projects is in question until the commodity price environment stabilizes and improves.

"Compared to 2014, our revised 2015 forecast assumptions are that demand and pricing for many of the services and products we offer will be down.  Consequently, we are projecting that all of our oilfield business segments will have lower operating income in 2015 than in 2014.  We are resetting our 2015 EPS guidance to a range of $3.10 to $3.50 on an estimated number of 100.3 million diluted common shares outstanding.  

Street was at $3.92 for 2015 prior to this release. 

  • Rightsizing initiatives are underway. 

Nutshell: We listen to these guys each quarter for color on the offshore markets and await a time when we can grab it on the cheap. It's likely still early for that.  However, the company is not in dire shape in any way, has strong liquidity and cash flow will be nearly 3x capex this year despite the downturn. So as it falls, we get increasingly interested. 


Other Stuff:

  • CPE on tape with $400 mix shelf filing. Normally I'd say it would spook people but that's its good to have around. Same comment applies now.

Odds & Ends

Analyst Watch:

TBA in comments. 

103 Responses to “Thursday Morning – Oil Inventory Review and Natural Gas Preview”

  1. 1
    Zorgnak Says:

    S&P 500 Futures Short Term Levels 2/12 8:36 AM 2076.75 SPY Levels in ()

    Notes……….. Market trading at the top of a wide balance/ range within increasing acceptance above the major CHVN at 1953.75. Demand volume positivel. Ease of movement positive.  Small cap breadth extreme overbought.  Fear and Greed = Greed.   

     Thoughts………Market extending from the 3+ month range from 1972-2067.

    2067             Minor CLVN/Resistance (206.66)

    1972.50        Minor CLVN Support(198.44)

    1953.75        CHVN

    SP500 Futures  (ES)


  2. 2
    Zorgnak Says:

    Crude Oil Chart still has a positive short term bias with buyers showing up at previous acceptance (47.77) once again. Resistance at 55.19


    XOP Buyers yesterday at previously rejected acceptance at 49.53. . Still setting up positively below key CLVN resistance at 54


    $USD  Trading in balance at 94.81. 93.65 support



  3. 3
    Zorgnak Says:

    ZLT In order of % of float short.


  4. 4
    Zorgnak Says:

    PVA  Held like a tight at defined resistance yesterday. 32% short. Break of 7 works higher to 8+. 


    REXX Working off recent run at acceptance (5.06), tested and held support yesterday. 28% short. Rejection of 5.06 CHVN as too low works to 6.60.


    ​EOX Trading in balance at 1.01. Break of 1.12 secondary price levels has room to run to 1.25.


  5. 5
    Zorgnak Says:

    EOX 27% short.

    OAS Closed above CLVN support at 15.53. 18% short..and a little nervous at the close. A little recent supply at 16.39. Above that level has room to run to 18.62, with further volume gap above that.


  6. 6
    zman Says:

    Zorg – thanks for the levels. Someone sent me this yesterday as to shorts in the group having gone parabolic, check the chart out …


  7. 7
    Zorgnak Says:

    LPI Textbook pullback setup to defined CLVN support, found buyers.11% short.


    CRZO Another pullback finding buyers at support.


    BCEI Ditto. 12%Short and room to run above 30


  8. 8
    Zorgnak Says:

    PXD  Found buyers at previous acceptance.


  9. 9
    Zorgnak Says:

    #6 Re short interest…Thanks….Should be entertaining. 

  10. 10
    elduque Says:

    Brent/WTI at 6.2

    TNX at 1.997


  11. 11
    zman Says:

    Key points of the Ukraine deal


  12. 12
    zman Says:

    re 9 – hear ya, mother of all squeezes around the corner. 

  13. 13
    BirdsofpreyRcool Says:

    Morgan Stanley commenting this morning that WLL and RRC would "benefit most" from a stock secondary.

  14. 14
    elduque Says:

    APA- on the tape- rig count will be at 27 at end of the month, was at 91 at the end of the third quarter. frac crews down 50%. 

  15. 15
    Wayne G Says:

    Oil Prices to ‘Snap Back’ to $65-$70/Bbl by Yr-End: Haywood 
       Oil oversupply to be erased starting 2Q, likely to “snap back” quicker than many expect in 3Q, 4Q, Haywood analyst Darrell Bishop said in note. 

  16. 16
    zman Says:

    re 13 – thanks, I don't see it as a "benefit most" worthy situation vs some others but maybe they mean of size. But definitely people are thinking WLL is going to do one. 

    re 14 – thanks much, they also note their offshore and international 2015 exit to be flat with 2015 average. But NAM onshore to be flat with 2014 average rate. 


  17. 17
    zman Says:

    re 15 – I have a higher price in mind but I'm with him on all points. Wayne – did you see my question for Sara/Sully to ask of the next equity oil bear they have one as to just who it is that will be growing oil volumes this year vs exit 2014. No one big. 

  18. 18
    zman Says:

    Group continues to gain pockets of traction, in danger of 3 weeks in a row of green performance. 

  19. 19
    zman Says:

    SC4 – I'm doing a "best deals I see now in the ZLT and maybe a few outside of it" type piece. 

  20. 20
    zman Says:

    CPE not down early in the face of a mixed shelf filing. Interesting. 

  21. 21
    zman Says:

    HK – pushing into new 2015 territory. Resist the urge Mr Wilson, resist the urge. 

  22. 22
    zman Says:

    Anyone see anything interesting at NAPE let me know. 

  23. 23
    zman Says:

    APA call at 2 pm EST, will be on it for macro comments. 

  24. 24
    Baylor Says:

    Re 21 z How long do you want him to resist the urge and why?And when do you think would be an appropriate time?

  25. 25
    zman Says:

    Unowned by watched listed. 

    ECR closed a private placement of … 62.5 mm shares at $7.04, makes them nearly debt free. Thought it was expensive before the deal (still) and still do but low debt and offering out of the way will attract attention. Will run numbers again here. 

    CRC – rallied sharply of the floor with oil, unhedged name, good amount of debt as per our write up. Follows on BOP's line of thinking that when oil prices rise names with leverage and lack of hedges move swiftly.  

  26. 26
    Wayne G Says:

    re 17 – No, what was the question? Sorry, I've been a bit under the weather.

  27. 27
    Wayne G Says:

    ah sorry haha out of it. I'll send to ask

  28. 28
    elduque Says:

    Dollar down .8% to 94.238


  29. 29
    Zorgnak Says:

    Relative Volume For Time Of Day..Bakken rockn'

    Bakken Permian


    Wattenburg  EFS  Ect.


  30. 30
    zman Says:

    re 24 – good questions. Thoughts:

    HK's budget is pretty small now at about 1/3 of 2015 levels. He's not outspending EBITDA this year but he's got a good slug of financial obligations so it will be close. 

    To pay off the revolver, which could as much as half drawn, with $2 stock would be very dilutive. $3 is better , $4 is better, etc. They've been really quiet and I don't know if asset sales are going to be done before the Spring redetermination so a deal could be in the offing on this rise as we have seen with so many names (a few a week now).  Unless it's absolutely necessary to avoid being pinched in the Spring on a lower redetermination, I'd like him to wait, otherwise you get into the situation of a truly monstrous share count that recovers more slowly when oil does. 


  31. 31
    Roger Says:

    Re 17,19    Z, if you expect oil to be higher than 65-70 by year end, then I assume that would translate into some very big moves in our stock prices as well. To take advantage of this, do you plan to deploy some of your cash reserves into the "best deals" or are you content to watch your current holdings bounce back up ?

  32. 32
    Zorgnak Says:

    Crude Oil Futs  Point of control moving up here for traders…to 50…short term stuff but, one step at a time. 49.67 now support


  33. 33
    zman Says:

    Thanks Wayne, they tried to ask the GS guy but in fairness to him, he is a commodity guy.  Basic question for him / them though is that if all the big, well balance sheet having E&Ps are not growing oil past 4Q14 levels or 2014 exits, then where is the growth coming from beyond a quarter or two?  Then just a point that the comments on the rig count being rigs that were not working, were working in areas that were not economic or were all vertical is just non sense. If you cut a rig from a non core area, that's still 10 to 20 wells per year that are not being drilled, being completed and adding to the production pile. So we've cored up an are drilling our best wells now. Fine.  Rig efficiencies were already slowing, you'll get more as more people go to pads, no problem with that thought and the wells will get bigger … but not big enough to offset 100s of rigs taking 1,000's of potential wells out of play.  A cross of Baker well count data and drilling efficiency report and the drilling report by basin from the EIA is pretty simple and shows we're below hold flat levels vs play declines using strong new well additions vs history for both the Bakken and the EFS. Permian takes long but will get there.  And the all verticals comment is simply false. Horizontal rig count is falling like a stone, down 284 rigs since peak mid November, or 21%. 

  34. 34
    Zorgnak Says:

    XOP  Levels of interest at 54, Key resistance with volume gap above  and minor (short term) CLVN and Major CHVN at 49 which has been twice rejected as too low. 


  35. 35
    james T Says:

    re19- I would like to see that, I thing rig counts didn't matter to some extent until the last two near 100.

  36. 36
    nrgyman Says:

    RE 33:  "A cross of Baker well count data and drilling efficiency report and the drilling report by basin from the EIA is pretty simple and shows we're below hold flat levels vs play declines using strong new well additions vs history for both the Bakken and the EFS. Permian takes long but will get there."

    That piece of info is a moneymaker and just not found in most places.  Thanks for your diligent analysis.

  37. 37
    zman Says:

    re 31 – fair question. As you know I am very long now, excluding reserves. I was sitting on the PXD call yesterday listening to the COO and CFO talk about what they wanted to see to add rigs back later this year. It struck me as similar to what I want to see to add fresh dollars. They want to see firmer oil, they want to things moving in the right direct in terms of cost reductions, they want to see demand accelerate for products and oil due to low prices, and they want to see producion in the states flatten then decline by late 2015 (I think earlier than that by a bit). So, I'm plenty long now. And I think prices will do what I think they will (which is rise into year end – I'm already wrong on 1Q but that's fine), but I'd like to see those same signs and I'd like to see that the banks are playing nice this Spring. If we get to peak storage in April or May and have the out months still up they way they are, and storage in fact goes beyond peak then prices could be shallow to my thoughts for 2Q and the rest of the year. And the group would see a retrenchment from current levels. At that point, I'm pretty likely to add a portion from reserves as we'll be below current stock prices, all eyes will be on a recovery in 2016 and global demand will be that much higher and right in front of us for the year end crescendo. So I'm more likely to not add if we simply start a sideways trade that moves up from here.  To me adding in a big way has to be more obvious. Doesn't mean I won't core up some things, especially if a few managements handle this current environment in a way I don't like.  I can't say that if I had nothing in now that I'd go in heavy now as that's a hypothetical.  I can say that I would definitely not be out of the market (I never am) and would be adding to quality and risky names in probably disproportionately weighted to quality type names. If we some kind of event, like OPEC decides to play ball seasonally this Spring I'd like put a chunk to work immediately, in lower hedged names I like.  

    Or I could have said, I'll add if it turns out I'm early on a recovery and our group pulls back. Or if OPEC comes back into play in a balancing way. But am unlikely to if we just drift up. 

  38. 38
    zman Says:

    re 35 – they matter, just not to people on the other side of the trade. But physics are physics as CLB would say. Those rigs were not idle, they were adding to the base. That's not to say they won't swing the group the other way  when they come out when the decline starts to moderate but that is not at all what I am speaking to. 

    re 36 – thanks and you're welcome, that stuff was what was used in some of the comments in the post the other day on Pressure Relief Valves. 


  39. 39
    zman Says:

    EIA Natural Gas Report

    160 Bcf withdrawal, a tiny bit light

    We are now at 2,268 Bcf in story

    31.4% OVER last year when we had a winter outside of NY and Boston

    and 0.5% under the five year average for this week of the year. 

    Nutshell: Meh. 


  40. 40
    zman Says:

    TPLM looking primed for a move higher. 

  41. 41
    brodway Says:


    i've been sensing less than bullish sentiment on PE in the last few weeks….am i misinterpreting your view here, or is there some need for concern?

  42. 42
    Roger Says:

    Re 37  Probably wise to go that route and not try to hit a home run by being early to add. It is all about risk management and capital preservation.

  43. 43
    zman Says:

    re 41 – well it's just a bit pricey on an oil deck near here, RSPP isn't wildly cheap either, no sense of urgency to add until we see things firm. There's going to be a lot of that going around and people send me emails saying XYZ is down so much it's cheap and I look at XYZ and it's fallen 75% from last summer and it's more expensive on a forward multiple than it was then and that's normal when you get a big price pullback like this.  But when they get over 10x in an environment where people don't really care about how good your wells are and they don't have monster growth or very low debt balance sheet I hold but don't feel compelled to do much more than add on significant dips. 

    re 42 – Ya know, 2008 really reinforced that with me. 2009 reinforced the "have a game plan and stick to it patience" that I try to live by. 

  44. 44
    elduque Says:

    Brent continues to trade better than WTI spread at the moment is 6.9

  45. 45
    zman Says:

    re 44 – thanks. 

    OII call in 10 minutes, macro related notes to follow. As expected deepwater activity that was already underway to mostly continue but visibility on projects and products tied to project that are more nascent has become a lot more murky. 

  46. 46
    zman Says:

    re 44 – LLS back to $4 over WTI, from $2 over a couple of days back. Nice for the Eagle Fords and Permians. 

  47. 47
    zman Says:

    OII 4Q14 Call Notes

    Heading into 2015 we are faced with … he's reading the press release, see quote in post above. 


  48. 48
    elduque Says:

    Robry continues to do a better job forecasting, not right but closer to the mark. 

  49. 49
    zman Says:

    West region gas unchanged on the week  +40% YoY storage, +11.4% to the 5 year aveage. Part weather, part pipeline to the west outage.  Rockies gas has been holding up pretty well however.  Pipe should be back on line now so look for resumption there next week. Might have taken as much as 5 Bcf out of the storage number. 

  50. 50
    Wayne G Says:

    Situation in Yemen’s Oil-Rich Marib ’Very Tense,’ Benomar Says 

  51. 51
    zman Says:

    OII 4Q Notes

    In some cases, customers are asking to renegotiate contracts; working with them to avoid this

    Operating margins to be down over 200 bps over 2014

    Expect liquidity and cash flow to meet capex needs (easily)

    Capex coming off on lower ROV spend. 

    Mostly pr script, headed to Q&A

  52. 52
    Wayne G Says:

    Capex Cuts to Help Oil Rebound to Marginal Cost, BlackRock Says 
       Cuts in spending and increased demand will bolster crude prices, BlackRock analysts say in media call. 
    • Oil needs to be in middle $60s to support 94-95m b/d global output
    • A country’s output has climbed by 1m b/d or more in a year 15 times since 1965
    • 10 times by Saudi Arabia, 1 by Iran, 1 by Libya, last 3 yrs by U.S.

  53. 53
    zman Says:

    OII 4Q Q&A

    Q) lower demand for ROV – question about where 

    A) expecting across the board pressure on pricing plus some rigs idle, see Gulf of Mexico as the bright spot, and Africa from a drill rig standpoint is declining.

    Q) in 2008 and 2009 vs now 

    A) 2008 and 2009 was a blip, deepwater was not impacted. This time deepwater is being impacted. 

    Q) Contract vs uncontracted 


    Project work – outside of Angola, mostly projects with short term visibility

    On ROVs – 55 ROVs on 82 rigs that have contract ends during 2015.  

    Q) share repo vs dividend increases

    A) growth first, dividends second, repo of shares third priority, always. 

    Q) Segments hit most to least

    A) ROVs, Product, Projects, Asset Integrity 4th, tech heading up – kind of terse management during Q&A, more than usual. 

    Q) thoughts on cycle to stabilize, if oil not above $75 for 2 years?

    A) We're not taking a position on what prices will do.  We think deepwater has more potential for coming back/not going as low as land utilization, and coming back faster than land. But it really is a matter of oil price visibility, if it goes back to $75 then we would expect to see some recovery in 2016, adding that oil companies are not going to stop drilling in deepwater, but that the big oil companies in deepwater are going to restructure their deepwater costs now, even if oil prices come back up quickly, they have not been very efficient and are going to be "changing the way they are doing their business" … in talks with them now to make these changes, will not go back to business as usual, as they were getting beat up on rising costs before oil prices fell. Didn't get into how long that's going to take.  But deepwater around the globe is also something people have really not been focused on as a decrement to supply. 

  54. 54
    zman Says:

    FANG filing, Wellington goes from 10.8% to 12.4% … follows with points from Pressure Release piece, seeing more ups that down holdings moves now. 

  55. 55
    Baylor Says:

    Re 30 thx z

  56. 56
    zman Says:

    re 52 – good points. 

  57. 57
    james T Says:

    UGA  Gasoline ETF continues to creep up.

  58. 58
    zman Says:

    FANG breaking up through 200 day sma for the first time since crossing it back in October. Good to see mid cap leadership lead. Debt not an issue here, pro forma the deal they have net nothing on the revolver, just the small senior deal, trading at 14x 2015 E EBITDA (street). Makes neighbor RSPP look cheap, relatively speaking.  

    OII comment – we are not commenting on ROV utilization this year, too many variables, just lower than last year. 

  59. 59
    zman Says:

    OII call over, as expected less visible than usual, no action by us.  Interesting comments on how it's going to be different this time for gobal deepwater. 

  60. 60
    nrgyman Says:

    RE 54:  Good to see.  This contrasts with Wexford selling off shares via secondaries.  The buying has more credibility since Wexford still has a big position, they've been in it since the beginning and they want to balance positions in the portfolios.  One advantage FANG has is they hold the mineral rights on chunks of their holdings (through VNOM) which enhances their value and cash flow.  IMO, VNOM should be buying up more mineral rights now while the market is cheap.  

  61. 61
    zman Says:

    re 60 – hear ya, although, from a couple of recent comments (one Permain, one EFS) buyers and sellers have rarely been further apart on price. 

  62. 62
    zman Says:

    Offtopicthirty, grabbing lunch, back in a bit. 

  63. 63
    nrgyman Says:

    RE 61:  Hear ya on sellers wanting to hold on instead of selling out at what they think are depressed prices.  They no doubt feel that a rebound will occur within the next year or so and want better values than the perceived low-ball deals they see.  A key question for them 'is how long will the depressed market persist?'  Still VNOM can offer an opportunity to pool their mineral interests with others and earn a current income with upside instead of waiting (possibly for a long time due to drilling rig laydowns and uneconomic crude prices for their holdings) for a risky possible future income on their specific holdings.  Perhaps a tough sell but VNOM does offer an intriguing option for mineral rights holders.

  64. 64
    zman Says:

    re 63 – agreed re VNOM

  65. 65
    DaveH Says:

    Re: 3 Zorg, you didn't include NOG which is 38% of float short and HK which is 33% of float short.  They would be near the top of the list.   You can add a column to the Interactive Brokers TWS screen to show % of float short, which makes some interesting reading.    SN, although not in the ZLT, is at 43%.   That might make it worth buying a few shares as Z said on 2/2/15 "Quality name  …. but the cheapness is tempting and with a stabilization in oil prices (not necessarily even with a bounce in oil) we expect a good sized bounce in the common here".    

    IB data shows a bit different ordering that the Finviz data.   IB data is as of Jan. 31.    I don't know if Finviz has later data.    NOG is higher than EXXI's 34% in IB data.

  66. 66
    Wayne G Says:

    Canada Light Oil Output ‘Unlikely’ to Rise in 2015: NEB

  67. 67
    zman Says:

    re 66 – nice … thanks. 

  68. 68
    nrgyman Says:

    RE 58:  FANG scored a triple top breakout on the P&F chart today.  

  69. 69
    Mark Wetzler Says:

    Re FANG & VNOM  The Wexford boys have recently said they were preparing to make substantial investments in E&P  and leases when they find distressed sellers or through distressed bonds. I would expect any merger activity from their sponsored names only after Wexford has acquired new positions. In the past they have done joint ventures with GPOR to form FANG and I anticipate they will use the same MO in the not too distant future.

    Zman, while I know you don't normally follow MLPs, perhaps you could  do a review of VNOM given its connection to RSPP and FANG. I stayed away from it initially due to the discrepancy between what was paid for the mineral rights and where it was valued after the IPO. Maybe it is now becoming a reasonable income alternative.

  70. 70
    zman Says:

    re 69 – me too and good point and will do. 

  71. 71
    nrgyman Says:

    RE 69:  Wexford has proven to be shrewd and thoughtful in their dealings.  They have made their investors huge returns on energy investments (EPL, GPOR, FANG, etc along with smaller private service firms to support them) by investing early (often sponsoring) and making timely sales.  Following what they do could prove to be a wise thing to do.  BTW, Wexford is one of the largest direct institutional holders of VNOM.  They also own VNOM indirectly through FANG, but this position is shrinking.  So since the VNOM IPO, Wexford has been selling FANG and buying VNOM (not necessarily in the same amounts).

  72. 72
    tomdavis12 Says:

    Z:  PXD got to reread the CC. Thanks for your notes. If they gain confidence in 3 of the 4 areas – oil pricing, costs, demand & production by say Mid July and start up more rigs, when would pricing for E&P shares show the most improvement. 1. Now  2. 2-3 months from now  3. Summerish. Just looking for guesstimate type stuff. After rereading call it seems their cost containment will keep them as a leader of the pack.   

  73. 73
    nrgyman Says:

    RE 71:  Also, I read Wexford is behind a move that could materialize to buy up mineral rights in the Utica region in conjunction with GPOR, similar to what they did with VNOM/FANG in the Permian.  There is value in holding such rights, if they can be acquired at a reasonable price.  APC just called the Wattenberg the top performing asset in it's entire massive portfolio, due in part to its huge mineral rights holdings there that they acquired very inexpensively.  Just thinking about what a value boost it would be if APC spun out its Wattenberg assets (including the mineral rights) into a public stock.  That would quickly become the go-to, institutional favorite name in the Wattenberg and would receive a premium valuation. 

  74. 74
    zman Says:

    re 72 – Expecting a gradual turn higher, less levered names and play leadership names first, then the reverse of that as the group moves into good sized short squeeze (buyers panic) that precedes a significant move higher in the price of oil. Depends on what causes the return of confidence (OPEC shift or other unexpected outage vs gradual shift in non-OPEC supply meets higher than expected developed and developing country global demand due to low prices and maybe a better outlook for Europe).  

  75. 75
    elduque Says:

    re 74- still think that there is a direct correlation to oil price and conflict with Russia. 

  76. 76
    zman Says:

    re 75 – I hear ya. 

    APA call starting in 5 minutes, notes to follow for macro purposes only. 

  77. 77
    nrgyman Says:

    RE 74:  My guess is that the Bakken names will outperform other E&P names on a move higher in crude prices as they are the most highly leveraged to oil and have been sold off the most in the panic.  Also, they are debt-leveraged and some have weak hedges (esp CLR and WLL) as well, so potentially they could get the largest ebitda turn-around.  Still waiting for WLL's Q4 report and updated plans.  WLL looks most interesting to me atm, but those reports could change that.  An offering may present another add opportunity.  OAS also looks really cheap here.

  78. 78
    DaveH Says:

    RE: 73 Nrgyman, where do you find info on what Wexford is doing?

  79. 79
    Wayne G Says:

    Venezuela, Ecuador, Russia Commit to ‘Strengthen’ Oil Price

  80. 80
    Mark Wetzler Says:

    #73 Nrgyman, we should start a cooperative effort to elicit the distressed paper Wexford is acquiring so we can get an early entry.

  81. 81
    zman Says:

    APA 4Q14 Call Notes and Q&A

    Choosing to lay down rigs that are under long term contract in some cases that were contracted under $100 environment 

    As noted earlier 91 rigs goes to 27

    Frac spreads down > 50%

    Capex cut 60%

    NAM onshore 300 to 305,000 BOEpd in 1Q, down slightly after adjusting for asset sales, from 4Q.  This takes into account weather in the Permian and planned completion deferrals. 

    Productivity per rig ?  Hard to put a percentage on it. Highgrading but only drilling what we need to drill. 

    Q) How are you able to keep production flat with such a rig drop? 

    A) We come into 2015 with a deep backlog of wells but we are pushing those back in time to get lower completion costs.  

    That's going to be common and it's likely to smooth the decline. 

    Q) at what oil price would you accelerate

    A) what we are drilling now is economic. Our limit is cash flow. Don't want to tap the balance sheet to drill wells that don't make economic sense.

    Q) how much service costs down

    A) down 10 to 15% in the EFS (for example) ytd 2015 (said over $8 mm late 2013, $7 mm CWC late 2014, just did one for $6.5 mm)

    CEO noting that one good thing about slowing down is that not all of the cost reductions will come from lower service costs, so when they accelerate, they expect to keep much of the reduced costs in place, even as oil prices rise.  I get what he means, slowing down helps to hone the process but not sure how much of these big cost savings will be kept in a return to $90+ down the road. 


  82. 82
    Mark Wetzler Says:

    #78 DaveH  I follow a guy on twitter @whalewisdom who posts pertinent filings by most HF guys.

  83. 83
    zman Says:

    APA – about 200 wells deferred for completion across their portfolio, lion's share in Permian

  84. 84
    DaveH Says:

    Re: 78 Thanks, Mark

  85. 85
    nrgyman Says:

    RE 78:  For Wexford, mainly I read up on FANG/VNOM and GPOR.  Wexford is the elephant in the room behind both names and they have made plenty of moves in each over the last few years, reducing/eliminating FANG and GPOR at a great profit to investors.  They were also a main sponsor of EPL and sold out at a great time.  Wexford appears to like VNOM though and apparently is interested in similar investments in the Utica.  Beyond these sources I don't follow them closely as they are a private firm and it is difficult to know what they are doing until it becomes public info.  

  86. 86
    DaveH Says:

    Re: 85 Thanks, nrgyman

  87. 87
    zman Says:

    APA comment

    Asked about index pricing for services,

    Said it is one of the things they are looking at with the Service guys now … makes sense. 


  88. 88
    tomdavis12 Says:

    87  Seems like the later the CC or budget plans have been issued, the deeper the cuts. 

  89. 89
    nrgyman Says:

    RE 87:  Wouldn't index pricing on services hurt the E&P names now more than the service providers?  E&Ps get a big benefit when oil turns around and goes higher, with service costs typically lagging oil indices, just as service prices have lagged on the way down to the benefit of the service names. Moving to an index now would accelerate service cost increases more rapidly when oil increases than under the current set-up, would it not?

  90. 90
    besherman Says:


    In your opinion, is today's jump in oil just noise? I know you don't  worry much about day-to-day gyrations but I keep reading that today's oil price rally was in reaction to the (supposed) cease fire agreement in Ukraine. That makes NO sense to me. If it is a real deal and if it holds (two giant "ifs") then the market faces the prospect of relaxed sanctions against Russia (Kerry said so today). Relaxed sanctions would be bearish–not bullish–for oil prices.

    What gives here?

  91. 91
    zman Says:

    re 89 – depends on how you do it, it would be an attempt to avoid boom bust cycles, which can be costly in other ways as you loose skilled labor force, have to come back up the curve with crews, etc. It would be a time lagged I'm sure, kind of a moving average. 

    re 90 – Russia / Ukraine and sanctions on Russia put a dent in global growth forecasts as Russia is tied to Europe. So a path towards peace makes sense to strengthen the euro against the dollar and give a little lift to crude on two fronts (currency and potential for demand stabilization). So I get the initial reaction. Also you have an attempt at bottoming going on in crude for the reasons discussed this week and over the past several months as our sense has been and continues to be that the decline was over done given the short term nature of the issue with supply. OPEC comments this week are as important (call on OPEC raised on lower non-OPEC supply, and also on the hint of a turn back up in demand on price pull which is something el-Badri spoke to as a desired outcome in November) as a ceasefire (assuming it leads somewhere) but it all adds up to increased traction.  

  92. 92
    zman Says:

    re 88 – we were at an unweighted capex declared by names we care about going into this week average of down ~ 35% YoY. It's starting to flatten here but still have more to cut/announce and some, like PVA, we expect to be pretty sharp drops.

  93. 93
    besherman Says:


    Thank you!

  94. 94
    nrgyman Says:

    RE 90:  Another view (the bull case) is that relaxed sanctions is bullish for the European and Russian economies, especially with QE and the lowered Euro.  There is likely to be a bullish crude oil demand response as a result.  Also, a significant pick-up in Russian production from relaxed sanctions is likely to be over the longer term, as it takes time to acquire and implement new technology.  Russia also has to overcome decline rates first before production growth can be realized.   

  95. 95
    zman Says:

    REXX- Goldman 13G out showing GS asset management at 10.9% vs prior 10.3%.  

  96. 96
    zman Says:

    re 94 – 94  yep, that's part of what I was conveying in the post. Europe never recovered in terms of oil demand post 2008, this year still expected to be offslightly. Resoution would help flatten that and when you are talking going from -0.2 to 0.0 on a 1.2 mm bopd demand growth for the globe number that would be nice. 

  97. 97
    nrgyman Says:

    With natgas down today, most natgas names are underperforming.  But there are notable exceptions, like REXX, UPL, GPOR and WPX.  REXX and UPL not acting like natgas stocks today, likely because each has been so overdone in the panic selloff.

  98. 98
    zman Says:

    Meanwhile Moody's takes REXX credit facility rating to B3, negative. Nothing on the revolver, but the debt to EBITDA multiple gets high on low prices this year. 


  99. 99
    zman Says:

    Beerthirty, back in a bit

  100. 100
    zman Says:

    NBR reschedules 4Q CC to allow additional time to review financials, due to acquisition of CJES. 

  101. 101
    zman Says:

    WPX on the tape with 2015 guidance, reading … 

  102. 102
    james T Says:

    Feb 3 about Morgan and oil storage


  103. 103
    organic Foods And there facts about saturn Says:

    organic Foods And there facts about saturn

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