Wrap – Week Ended 5/29/15



Questions and comments under the wrap will be addressed in the Monday post. 

wrap 052915

8 Responses to “Wrap – Week Ended 5/29/15”

  1. 1
    zman Says:

    Natural gas macro slide shows in the Monday post. Fairly bullish looking new data. 

  2. 2
    nrgyman Says:

    Z, what is the supply/demand outlook for natgas in the southwestern region?  With the drought, high temps, the closing of the San Onofre nuclear power plant, exports to Mexico and regional growth, the demand picture there looks interesting.  Granted, solar power is booming in CA, which should fill some of the supply gap.  I'm wondering if the western region natgas producers have any advantages?  In particular, it would appear that CRC, WPX–with its strong Piceance Basin position, and even potentially the Delaware associated natgas production might get more attractive pricing due to these demand characteristics.  This region is somewhat isolated from the monster production of the Utica/Marcellus, which is driving down prices in the eastern 2/3 of the US.  Just wondering if natgas E&Ps have a more attractive future in the southwest than other regions given all of the above considerations, or if solar is the place to be, or both?  Or neither?

  3. 3
    elduque Says:

    re 2- when you listened to the UPL quarterly, they sure thought they had an advantage.

  4. 4
    nrgyman Says:

    RE 3:  Agreed.  Didn't mean to exclude UPL.  Was thinking some of the producers closer to the southwest may have more of an advantage in that region.  UPL might have more advantage in the growing northwest area, but Canadian natgas competition is a consideration there.  Also, UPL was banking on growth from the REX pipeline into the midwest, but the Utica/Marcellus is now connecting to the REX and bringing its gas into the midwest (and possibly the west), providing formidable competition in that region.  UPL might be able to benefit from the western region growth, though, along with others mentioned.  I'd like Z's take on this topic when he gets a chance.  

  5. 5
    zman Says:

    re 2 – a bit more price supportive picture in the west for the things you named, Mexico hit a new high with the March data. We own WPX for this reason. The others we own as we see them as overly cheap as we approach a time of lower differentials. Solar is tiny compared to NG, not a lot of worry there. Balancing the bullishness is the still over stored nature of West region inventories at the moment. We covered UPL in a post here not that far back. Note the Nutshell on that one: http://zmansenergybrain.com/2015/03/27/t-g-i-f-98/  

  6. 6
    zman Says:

    Can expound more tomorrow in comments, have to be out of the office this evening. 

  7. 7
    nrgyman Says:

    RE 5,6:  Thanks, Z.

  8. 8
    nrgyman Says:

    WSJ article out today paints a somewhat bearish picture on crude prices due to excess capital available seeking returns going into the energy sector, which they say will translate into more drilling coming back later this year.  “A lot of the industry seems to function that if you give them a dollar, they will spend it. That leaves the capital markets as the only source of discipline,” said Michael Levi, a senior fellow at the Council on Foreign Relations. “If there is more capital than is warranted, you are going to see companies pick up drilling in the second half of the year and that will put pressure on prices.”  Gives a simplistic (and probably misleading) example of XEC dropping from 20 rigs to 6, with plans to go back to 20 by year end.  Regardless of the veracity of the comments made, the bears will likely jump on this Monday.


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