Wrap – Week Ended 03/11/16



Interesting week as more bulls emerged from hibernation, given fresh spine by further OPEC/non OPEC freeze chatter and IEA's erratic commentary (this month far less dire than last). Several analysts are calling a bottom (we know Goldman, not you). We are not calling a bottom but are encouraged by the ongoing tightening. What we are doing is sticking to our quarterly view of oil prices (published in every Monday post) which is lining up well with reality year to date (certainly better than last year) and doing our homework. We do have a few names we plan to sell into rallies and a few we are giving more time before adding more shares ... several of which we have no qualms about adding a bit higher, later (mostly gassy names). The past week included a number of post quarter wrap and cheats and the Bakken and Wattenberg quarterly update mini tables which are good reference pieces when viewed with the latest updated pieces on individual names. 


The ZLT was up 5% on the week vs the XOP up 3% and the rest of energy groups that were flat to up 2%. With this the ZLT goes green on the year (up 4%).


We have made 3 core position adds year to date which is record low activity for us and we've not sold shares in anything.  


The Blotter is updated. 


Questions under The Wrap will be addressed in the Monday Post. 


Have a good weekend. 

wrap 031116

4 Responses to “Wrap – Week Ended 03/11/16”

  1. 1
    RMD Says:

    Last week's Watt vs Bakken comparison struck me how interest expense/boe was high for the all the Bakkens, esp. relative to the (2 debt-free) Watts. Also the Watt's cash costs/boe are much lower as well.

    The side-by-side comparison of the 2 areas is really useful. Thanks.

    SYRG's 4Q to 4Q SG&A stands out as the founders helped themselves on the way out the door. 

    Answer to your question: I'm gone but still paying attention to SYRG. I think the St. est on Eda is high (though less high now with newer numbers), and I feel I have to pay up in the name as with all the "safe survivor" names because 'must own something' investors are hiding there. 
    suggestion box:    add BBG to the Watt names.  If BCEI does go splat, being next door makes them the logical buyer if they could cobble together the money.

  2. 2
    zman Says:

    You're welcome

  3. 3
    Baylor Says:

    Just looking over the portfolio as I'm wont to do on a Sunday afternoon. 

    OAS was trading at $57 in late July of 2014 when the long grind down began and later that year hit the turbo button on the Turkey Day Massacre of 2014.

    That said, if oil recovers to $50-60 this year and stays there or above for a couple of years, given the cost reductions they (and all others have experienced), is it foreseeable that they could crest that type of stock price again in the next 5 years? 

    That's a specific example.  I'm trying to get a more general sense of what type of price action we may see for the names that survive.  Looking back on the Z portfolios, there was a several hundred % recovery in the portfolios in 2009 – 2010.  Could we be in for another recovery of that magnitude if we can somehow avoid a recession in the next couple of years? 

    (we do have Soros pal Jim Rogers prediction a 100% recession in the next 12 months as one example – http://www.bloomberg.com/news/articles/2016-03-04/jim-rogers-there-s-a-100-probability-of-a-u-s-recession-within-a-year)



  4. 4
    zman Says:

    re 3

    – Re OAS – Five Years? Yes.

    – Re general sense – I don't look for that kind of bounce but I do see a substantial move for the ones that do make it over the next couple of year. We're not adding to names that are more questionable as to viability in a $30 ish price range, assuming we are high with our $43.75 deck this year. I don't think we will be (it's our deck) but it's possible we come in low.  In that past cycle, we sold nothing and were overexposed to some of the smaller names that had big bounces. We're more balanced now and therefore less risky but I don't expect the mega sized triple digit type move over the next 12 or 24 months.  

    The safer names are the Shopping List names.  Right now few of them look cheap (PDCE and CPE for example look cheap to me).  The rest can look cheaper as prices rise (our expectation on a quarterly basis for this year with a higher price next year).  So standing still they get cheaper as prices rise. I expect the Shopping List to do quite well under our price deck. Some of the non Shopping List names will likely outperform as their debt rallies and the pressure comes off the common.  But we expect Shopping List to be the less frustrating, easier to watch path and still to do as noted, quite well.  Note that the Shopping List names are holding there own better during short term down turns in oil prices vs the little risky names. The little names may pop  more short term on oil bounces but then, given the reasons they are down there, quickly retreat with a subtle fade in oil prices. That might be good for Traders but it's not what I focus on.  

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