21
Nov

Monday Morning – Holdings Thoughts and CXO

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Market Sentiment Watch: Holiday shortened week. Expect volatility on Wednesday with the FOMC minutes and potentially with further OPEC commentary (OPEC members that matter and the Russians became increasingly optimistic regarding a deal last week). In today's post please find additional comments in the Holdings Watch section (no really, please check it out), The Week That Was, comments on solid CXO bolt on in the Northern Delaware, and some other odds and ends. 

Ecodata Watch:

  • We get Chicago Fed at 8:30 am EST (no forecast, last read was -0.14).

The Week Ahead: 

  • Tuesday - Existing home sales,
  • Wednesday - Jobless Claims, durable goods, core capital equipment orders, new home sales, consumer sentiment, FOMC minutes, 
  • Thursday - Thanksgiving, market closed.
  • Friday - Advance trade in goods, Markit services (flash), market closes early.  

In Today’s Post:

  1. Holdings Watch - Please Please Please see additional detailed comments below.
  2. Commodity Watch
  3. The Week That Was
  4. Stuff We Care About Today – CXO
  5. Odds & Ends

Click the link directly below this to ...

break

Holdings Watch:

ZLT (Zman Long Term portfolio)

  • Last Week’s Trades: None
  • ​The Blotter is updated.

 

Some Year To Date Performance Comments:

  • XOP: Up 26.9% YTD
  • Average Major:  Up 8% (BP UP 7%, COP DOWN 4%, TOT UP 4%, XOM UP 9%, CVX UP 21%). We don't follow the Majors. To me its not a difference of covering Coke vs Pepsi in terms of the difference between the Majors and the small and medium cap E&Ps. It's the difference between covering Paint and Coke. Just not at all the same thing. If you are looking for Major coverage you're not going to see more than cursory comments by us here, generally as it pertains to the macro.
  • We note that MUR, a once mini major, punted their Refining segment to become more like an independent back in 2013.  Similarly, HES punted its refining and gas marketing segments in 2013 and 2014 to pursue the upstream concept more purely. We own neither of the names and note MUR up 37% and HES up 5% YTD.  These are in our view still overly diversified around the globe and therefore not of interest to us either.
  • Average large cap: Up 34% YTD (APA up 39%, APC, up 27%, CHK up 33%, DVN up 38%, EOG up 32%). We own EOG out of this list and like their plan and management the best. 

Turning to what we do do. Small and Mid Cap E&Ps and a bit of Oil Service.

  • The top 10 ZLT names are roughly two-thirds of the ZLT assets and are up an equally weighted 67% on average YTD.  PE UP 95%, RSPP UP 68%, OAS UP 70%, NFX UP 23%, CPE UP 74%, RICE UP 120%, SWN UP 48%, CRZO 25%, PDCE UP 23%, WPX UP 120%.
  • Note that it's not just a function of owning mostly Permians. Permians we don't own YTD change:  FANG up 45%, XEC  up 41%, EGN up 38%. Our Permians in the ZLT Top 10, as noted above, have largely done better. 
  • Our one service name: HAL. It is Up 45% YTD and we note the OIH (service ETF) is up 14.1% YTD.
  • We are now 15% in cash, down from 20% earlier this year.
  • We made some changes this year to shed names where the balance sheet became too risky and in some cases we let the names get the better of us before doing so (TPLM sold at $0.56 and BCEI sold at $2.61 this year for example - both now unowned).  
  • We are likely to sell NOG and HK soon.
  • For adds we have mostly clung to the Shopping List published late last year. High growth, lower debt, good position, hedged if they needed to be, and acceptable forward multiples. 
  • Finally, a fews word on the macro. Our call on oil of $43.75 oil and $2.50 natural gas has not been far off the mark with prices average $41.50 and $2.35 through the first 3 quarters with both commodities and especially natural gas having coming up closer to our annual average numbers since. 
  • We called for gas in storage to peak at 3.95 to 4.05 Tcf in November last Spring. We're at 4.047 Tcf due to a warm weather start to the season and that's pretty much on target.  We also called for dwindling net imports and last week, for the first time, PointLogic showed the U.S. was a net natural gas exporter. It won't always be such but the days of 5 and 6 Bcfgpd of net imports are past for the foreseeable future. 
  • On the oil side we called last year for oil in storage to rise at a much slower pace this year and despite a rise in imports that too has come to pass to the point that no shorts that we know of are trying to stress oil bulls over storage capacity this season.
  • In short, we're not saying we always get it right. We are saying we work hard on the macro and the individual companies and we feel pretty good about our judgment.   

Commodity Watch

Crude oil rallied 5% to close at $45.69 last week with improved OPEC and major non OPEC player sentiment for a constructive meeting on November 30th driving what likely was a bit of short covering after a rapid short pile had been position over the preceding few weeks. Brent closed up 5% as well while the OPEC basket was essentially flat at $42.83. We expect continued wide swing volatility this week and next with occasional sessions of boredom.  This morning crude is trading near $47.25.

  • Iraq Watch: Iraq on Sunday said it will offer 3 new proposals this week in Vienna to implement the OPEC cut at the Nov 30th meeting. No details on what the proposals are but Iraq says they will make it easier for OPEC members to decide on cuts and noted they are in line with OPEC policy and promote unity of the group. On Friday Iraq said it was confident a deal would be reached at the regular OPEC meeting.  
  • Russia Watch:  Putin says he sees no difficulty in freezing oil production levels. Putin also sees OPEC deal as likely.
  • ZComment:  As noted for the last couple of weeks, we see the odds of the OPEC cut deal as described in September as greater than even. Consensus view until last week was that no deal would occur.  T- Minus nine days and counting until we know for sure. 

 

Natural gas rose 8% to close at $2.84 yesterday after an in line with expected but larger than normal late season injection was report. We see prices having been oversold and bouncing in fairly normal looking fashion. We also note, and this wasn't factored into prices last week as the news came late, that during the prior week, the U.S. was a net exporter of natural gas. Please see additional details in The Week That Was section below.  This morning gas is trading up about 3%.

 

Weather Watch:

  • Last week:  Last week Cooling Degree Days came in at 4 vs 3 normal and 6 in the prior week. 
  • Last week:  Last week Gas Weighted Heating Degree Days came in at 98 vs 139 normal and 86 in the prior week. 
  • This week's forecast:  This week the CPC projection was not available at post time. 

The Week That Was

weekly-wrap-111816

Stuff We Care About Today

CXO Announces North Delaware Bolt On 

The Assets:

  • 16,400 net acres, complementary to existing Lea County, NM holdings
  • Associated production of 2,500 BOEpd (69% oil). We note that the mix is spot on with their recent average well in the Northern Delaware for a 30 day rate 

The Deal:

  • $430 mm or a production adjusted ~ $18,600 / acre ... that should be seen as somewhat of bargain given recent basin pricing. 
  • Paid for via cash and stock: a) $150 mm cash (their $2.5 B credit facility was previously untapped though they mentioned they could fund the cash component via non core sales), and b) 2.18 mm shares of stock. 

Impacts:

  • Cash flow accretive,
  • Leverage neutral (from a metric standpoint),
  • Adds 10,000 net acres to their Red Hills Northern Delaware (southern Lea County - Avalon, Bone Spring, Wolfcamp) area taking the area to 47,000 net and "more than doubles" the long lateral potential there. As per #q guidance, the area was to see lateral lengths grow to 7K', which is the shortest average length of their core segments. ,
  • Northern Delaware goes to 8 rigs from 7,
  • 2017 guidance increased: Total volumes range guidance increased from range of 17 to 20% to new range of 18 to 21% with oil up in excess of 20%. 
  • 2017 capex - no change to the prior range of $1.4 to $1.6 B. 
  • 2017 - no change to plan to fund the budget from within cash flow. 

Nutshell:  Nice bolt on. Hard not to like it given the location in their focus area within the Northern Delaware and the low price tag. Red Hills is super thick 5,000+' oily hydrocarbon country where they just announced record wells (two big upper WC wells that were oilier were announced in 3Q with 30 day IPs of 2,385 (84% oil) and the add will help with lateral lengths. And we like how they are paying for it via a more balanced method that puts shares in the hands of the sellers (unnamed) and gives a nod to weighted average cost of capital instead of just issuing shares to the seller and the public to fund the rest which has been trend of late. Would expect the deal to be well received given their strong performance of late in the Northern Delaware and their already over-weighting of capex there (35%) in the 2017 budget. Estimates will be nudged higher on the bolted on volumes and the extra rig

cxo-111816-acq

Other Stuff

  • Look for additional Permian and Bakken Player Cheat Sheets this week.

Odds & Ends

Analyst Watch:

  • AR - Deutsche ups to Buy from Hold, ups target by $3 to $30,
  • RICE - Deutsche ups to Buy from Hold, ups target by $3 to $33.

72 Responses to “Monday Morning – Holdings Thoughts and CXO”

  1. 1
    zman Says:

    We're going ballistic maverick

    $47.50

    http://www.cx-portal.com/wti/oil_en.html

    That recently accumulated size short position not exactly smart money. 

  2. 2
    zman Says:

    The big short

    http://www.zerohedge.com/news/2016-11-21/oil-wagers-surge-9-year-highs-opec-decision-looms

  3. 3
    ButlerBaby Says:

    Zman your holdings have taken a marked shift away from Bakken names, where this used to represent a substantial portion of your portfolio. What is your general outlook for that region and do you see yourself moving back in there if conditions align?

  4. 4
    zman Says:

    re 3 – The portfolio took that shift last year. Williston differentials are greatly improved, completed well costs have plummeted and LOE is down for the better players and the core and tier 1 acreage is seeing better economics at current prices. We are primarily playing via OAS now but others there are making solid and improving wells but are not pure play players (NFX, EOG for example recently talking positively on the area).  Long term we see it as a slow recovery as a Basin at $50 to $60 oil. There should be brighter points within it due to management and positioning, like OAS, which some saw, at the beginning of the year, as a great short idea.  We increased our holdings there over the course of 2016 (see blotter June, July, August, September, October adds).  Meanwhile, we sold our WLL/KOG position and continue to monitor them and CLR (unowned) and a few others. Even at current prices, we see the Basin eventually though slowly crawling back as enhanced fracs leave the core of core to test better core edge and tier 1 acreage and move the play from 2 zones (m Bakken and TFS 1) down to deeper Three Forks benches. We note that if you look at oily OAS you'll see a strong EBITDA margin ($/BOE) on par with and above some of the better, oilier Permian players yet due to lack of significant relative growth vs those names, a somewhat more levered balance sheet and a much thinner vertical stratigraphic column it won't sport the kind of multiples it used to until prices improve sentiment more broadly. 

  5. 5
    tomdavis12 Says:

    ECR – KLR Group initiates buy. 

  6. 6
    zman Says:

    Anyone see who Swift (unowned) is selling Lake Washington to? That's one heck of a salt dome. 

  7. 7
    zman Says:

    re 5 – thanks. 

    Anyone see news on OAS? I have a news bug but no headline or story. 

  8. 8
    zman Says:

    MTDR likely getting a bit of a boost for CXO's move to take more Lea County acreage. 

  9. 9
    zman Says:

    OAS sporting a $13 handle, new high for 2016. 

  10. 10
    zman Says:

    RSPP – less than 50 cents from all time high. As we noted on 10/13 and again on the quarterly update, out year volumes were set to rise dramatically and have and that's still in progress. At just over $42, it's 12.5x of TEV/ 2017 Z4 EBITDA . See that able to get to a 14 to 15x number in a few months which takes it to low $50s. 

  11. 11
    zman Says:

    CXO – up $6+, 5% … well received bolt on. Don't see it going over $145 to $150 next several months without help from oil prices above current. $150 is going to take it toward 14.5x pro forma today's guidance. 

  12. 12
    zman Says:

    Here, updating some models, shout if you need something. 

  13. 13
    tomdavis12 Says:

    SXL buying ETP. Both were down 10%. The major players in the Dakota Access Pipe. Still much protesting going on.

  14. 14
    zman Says:

    re 13 – I appreciate the heads up. 

  15. 15
    zman Says:

    $48

    http://www.cx-portal.com/wti/oil_en.html

  16. 16
    zman Says:

    Holiday weeks. Always so quiet. Remind me to take the next one off. 

  17. 17
    zman Says:

    RB or Brod or anyone. Got an TA thoughts for the site?  I think profit taking is pretty wise for those with shorter term time frames. They're now discounting a deal getting done. 

  18. 18
    nrgyman Says:

    RE 16:  Love quiet days like this!  OPEC anticipation, new POTUS more favorably inclined toward E&P and midstream, A&D, M&A, cats and dogs …  🙂

  19. 19
    zman Says:

    re 18 – ha, I know. Just making sure my mega phone is hooked up. 

  20. 20
    zman Says:

    Two gaps up in the XOP this month. Hmmm. 

  21. 21
    nrgyman Says:

    Jeff Currie on CNBC now

     

  22. 22
    RB Says:

    Market technicians have been watching something called the Zweig Breadth thrust.  It occurs over a 10 day period.  the indicator is based on the 10-day EMA of NYSE Advances divided by the sum of NYSE Advances plus NYSE Declines (A/(A+D). A breadth thrust occurs when the indicators moves from below .40 to above .615 within ten trading days. A similar move outside the ten trading day requirement does not count as a breadth thrust.  

    So, we were set up for it to happen on Friday, but it failed.  Didn't come close.  There were some thrusts in breadth earlier this year that didn't quite qualify that worked quite well, but you can see from the attached chart that these thrusts eventually moved the distance, just not in the time frame.  So far we are nowhere near moving the distance….. https://stockcharts.com/h-sc/ui?s=%21BINYBT&p=D&yr=1&mn=0&dy=0&id=p07956617772&a=487774980

  23. 23
    zman Says:

    re 21 – saw his latest this morning. He basically said things are worse because production is up but that things are better because declines next year are more likely now and demand is better so OPEC is more likely now to act. 

  24. 24
    RB Says:

    So, I hear Jimmy Cramer spouting that if we get Mitt Romney as SOS and a Wall St. guy as Sec. of Treasury the markets will zoom.  That may well be, but at the present time momentum is waning to the upside and on the SPX charts there are negative momentum divergences on the weekly and hourly charts that tell me this move is waning.  So, I have been booking some profits in XOP and in CXO.  Wasn't trading much so didn't have a lot on.  Didn't sell all, by any means but I think we will rock back and for some more before we know which way things are gonna go.

     

  25. 25
    nrgyman Says:

    Currie says GS is looking for an OPEC cut.  Says market will rebalance by H2 2017.  Looks for inventory drawdown and backwardation of the futures curve.  Looks for $55 sometime in H2 2017.  $50 by YE 2016.

  26. 26
    zman Says:

    re 24 – thanks for the read

    re 25 – thanks

  27. 27
    nrgyman Says:

    Currie on natgas:  has already won the war on coal.  Natgas will benefit from climate deal relaxation by new POTUS.  Crude to dollar correlation breaking down.  He doesn't like gold either.  

     

  28. 28
    zman Says:

    HAL – our only Service name, new 52 week and 2016 high. No concerns re valuation at this time. 

  29. 29
    Baylor Says:

    Z – in a $50-60 oil range over the next 2 years or so, what would you anticipate has the most upside of the Z oil portfolio?

    2) if you could answer the same question regarding OAS vs PE

  30. 30
    zman Says:

    re 29 – Kind of a broad question but I'll bit. Towards the lower end end of the range, our top 10 that has been working, will continue to work, especially Permian though there may be some widening of differentials as volumes mount in the 2nd year. CPE will thrive in that kind of price range and the rest of our Permians, as they transition to 2018 multiples (mid 2017) should be in line for further strong gains as they keep their balance sheets in check. Towards the upper end of the range, just from a PE vs OAS view, likely OAS would have more upside though that's pretty apples to apples beyond mix and margin.  You'd probably get stronger percentage moves out of more debt distressed and currently margin distressed names towards the upper end fo the range as well since they will be expanding EBITDA/BOE at a bigger clip than will those who don't have such low margins at present. So that gets into your AREX's (unowned) as well as you LPI's.  At that upper end you should also see the non pure play names come back more strongly, names like a WPX. 

  31. 31
    Baylor Says:

    Broadway, I saw your thoughts on PE in comment 32 on 11/15 about it potentially being a triple should oil prices do x, y z.

    That would take PE market cap to almost $24B

    Do you think that's realistic on a market cap size?  That would be approaching PXD current market cap and almost 30% bigger than CLR current market cap

  32. 32
    zman Says:

    re 31 – I didn't make a comment on that but simply moving to $60 would not get you a 3x from here at least in the near term (noting no timeline was given in the comment). You'd need growth over the next 3 years or so to accomplish that.  Best case I see is a double by late next year there if all goes to plan and the 2018 current view looks like to come to pass.  

  33. 33
    Baylor Says:

    Re 32, agreed.  Just spitball with you and the z crew here.  I was overly heavy in OAS and have freed up some capital there so looking to re-deploy.  Would prefer a big red day though instead of today but don't want to miss the boat.

  34. 34
    zman Says:

    re 33 – hear ya. We try not to get too cute with the entries unless they are for trades but have been, adding on days where others are running away. 

  35. 35
    tomdavis12 Says:

    RDC announced an agreement to form an offshore 50/50 JV with Saudi Aramco.

  36. 36
    zman Says:

    re 35 – Thanks, 5 rigs to start next year, then adds 2 more in 2018, so should not be a huge needle mover.

    http://www.reuters.com/article/us-rowan-saudi-aramco-idUSKBN13G142 

  37. 37
    zman Says:

    IRAQI OPEC DELEGATE FALAH AL-AMRI: 'WE ARE SMILING' AT VIENNA MEETING: DOW JONES

  38. 38
    RB Says:

    Before I was a chart monkey/CPA type, I was a musician.  I love long "low basses"….I really, really like the WLL chart.  I know there are better positioned entities and all that, but this pattern is very tight and the evidence of large accumulation is all over this chart….so being what I am I am buying this one…..https://stockcharts.com/h-sc/ui?s=WLL&p=W&b=5&g=0&id=p67780756736&a=488749396&listNum=42

    there is a breakout on the daily on good volume today too….!

  39. 39
    RB Says:

    BTW…my off topic pick of Boot Barn is up something over 40%…I love that place.  

  40. 40
    zman Says:

    re 38/39 – thanks and ha, thanks. We view WLL as a Permian laggard, kind of same thoughts for it as espoused for AREX noted above (though it doesn't have the same league of debt troubles and has better margins than an AREX) 

  41. 41
    nrgyman Says:

    RE 38:  WLL today scored a Bullish Catapult Breakout on its P&F chart.  

  42. 42
    zman Says:

    Offtopicthirty, grabbing lunch, back in a bit. 

  43. 43
    sc4 Says:

    Z- is there in your experience any direct correlation between domestic oil prices and international oil prices? I ask because  other than shipments to Mexico and Canada , the u.s. does not export much oil. As such one could ask how does a world price impact on domestic prices in the U.S? put differently, if  opec agrees to a production reduction say of  5% for example? what impact would you expect that to have on u.s. pricing?

    My further thought is if world prices go up and u.s. producers respond with more production, then what happens to that production? we have modest growth of D but that will be outstripped by production growth. If that happens , what do you expect will happen to domestic prices.? It seems to me that we could see declines in domestic prices rather than the gradual growth you project. I'm not saying you are wrong. Rather I'm trying to understand the dynamics. tia

  44. 44
    zman Says:

    re 43 

    Yes – they move in the same general direction together. 

    The U.S. just started exports of size recently as the ban was lifted. Not a big quantity of oil in the overall picture. 

    The U.S is the largest consumer of oil and produces roughly half of what consumes.

    Re OPEC – that kind of cut is not on the table. More like 1 to 2% depending upon which end of the Aligers meeting range they settle on vs current production.  If they cut it is price support in the sense that 1H17 inventories on a global basis will increase less and then in 2H17, which is going to be your higher demand period, we should be in global deficit.

    The production growth in the US has for the last several years supplanted imports. I would certainly not call demand growth modest so far. It's been quite strong and the US has been exporting record finished products. It become iterative. Price goes up and capex is applied. Production goes and prices settle in. I am at $55 next year.  If production rises too fast and imports don't ease (which they should with other parts of the world coming off as previously described) and OPEC applying the break then prices ease to a point of capex reduction.    

  45. 45
    zman Says:

    As of today

    Street is now up to $53 consensus. 

    Range is $38 to $64. 

    Forward curve is $49.62. 

    Street is now at $60 consensus for 2018. I'm not there yet. 

     

  46. 46
    james T Says:

    Z  Are some of these stock a bit ahead of themselves today ?   

  47. 47
    zman Says:

    LPI – full metal breakout. 

  48. 48
    zman Says:

    re 46 – too broad a question for me to fairly address. Which ones did you have in mind?  From a TA standpoint maybe.  From an FA standpoint nothing I own has reached levels that I see as too much. I'm a forward multiples guy and if some get stretched by running too far too fast then I am likely to reduce positions.  We don't own a few of the pricier Permians but they were ahead of themselves today including Papa's CDEV (unowned).  

  49. 49
    zman Says:

    MTDR – finally took at the $25 barrier for quad top breakout. Volume is not noteworthy. 

  50. 50
    RB Says:

    re: 46…when we get next week's paper we'll all know.  I personally think the action today is based on Goldman coming out and more or less divining that we'd see some sort of cut and $55 oil, on average, in the first half of the year.  You never know with Goldman…they might want to sell a lot of their book and just created a rally to do it into.  They are a slimy bunch of thieves…but they got nice game tickets and that sort of stuff if you wanna be their client and let them scratch your freaking eyes out!

  51. 51
    zman Says:

    Good to see gassy names responding to the inflection in natural gas prices. Nice moves for SWN, RRC, RICE  … and for riskier ECR.  AR, basically hedged, less of a move, muted performance with group of late, not down as much, not up as much, longer term the strong hedges and improving basis are things we like. Valuation there is a little rich though. 

  52. 52
    zman Says:

    re 50 – ha, yeah, Conviction Buy list takes on a whole new meaning for clients vs people who just get their headlines. 

  53. 53
    brodway Says:

    re: 31

    Baylor….if price of oil moves up considerably over that time period, i don't think its unrealistic to see $100 handle…..it could be aggressive, but not out of the realm of possibility. i don't look at market caps as a measure of expectation. if the earnings keep moving up than the price component should rise as well. i must also note that we have gone through 25 months of chaotic trade in the oil markets. there is much money on the sidelines and hasn't entered the sector yet. if the jitters of being invested in the energy sector should start to subside and if in fact 2016 proves to put energy on the 1/2 spot as best performing sector, why would you not think investors start to re-enter the sector in a big way. would it be far fetched to think energy could be the best performing sector in 2017? if so, why not believe higher multiples are in store for this sector? if the growth rate starts to move up considerably due to increasing oil prices and continued lower production and operational costs (US companies have learned to operate leaner), why would a scenario that enables oil companies generate better margins not be plausible?  

    was it not just a few years ago that there was talk of not enough oil to meet world demand at the rate of growth (is it 1.2 million barrels per year?) being experienced? other than perception are the oil fields in SA become better real estate? 

    the political backdrop can also offer support to the sector. if in fact the new energy secretary starts to become pro American oil, why would one not expect the sector to outperform and higher multiples be placed on valuations of companies.

    there are many if's that need to come to fruition….but the times that XOM is once again regarded as the cornerstone of American strength may not be completely out of the realm of possibility once again. 

    call me a dreamer, but i'm not the only one 🙂

  54. 54
    zman Says:

    re 53 – No intent to squash your enthusiasm.  My comment was more limited in time frame and indicative of the TEV/EBITDA forward multiple that I think the name could support in that time frame given a price rise to $60.  It is now our #1 holding having risen through the ranks through stock price appreciation after we added to the core there at $18 in February '16  and December of  '15 as our last adds. 

  55. 55
    james T Says:

    re48 – Guess I meant from a traders point of view.   I know they can go higher for the most part.   Although the floating storage is still down at 3.6 million in Houston.   The high was close to 12 million I think 4 weeks ago.  

     

  56. 56
    zman Says:

    re 55 – understood, you're thinking in a shorter time frames than I was.  I'll leave that to the TA types as that generally rules the shorter periods aside from the odd valuation based downgrade from the sellside, something we've seen infrequently of late. During an upcycle those generally don't play out well for the analysts.  If prices rise the analyst looks dumb. If prices tread sideways long enough, the analyst looks dumb as the name can shift to the out year which, in the case of healthy names likely means they're cheaper than when downgraded at the same price … leading the analyst to go back to his flock and say "remember that name I told you to sell? Yeah, about that, it's on the buy list again, 20% higher". 

  57. 57
    brodway Says:

    re: 54

    i wasn't specific as to time frame in my original comment….i'll be perfectly happy to hold it beyond your time frame if it triples from Friday's close….

  58. 58
    brodway Says:

    wrote that quickly Baylor and should have stated earnings growth instead of "growth rate" in post 53……

  59. 59
    zman Says:

    re 57 – ha. Me too. When we get to 2018 expect service inflation, slower growth rate (for 2019 and beyond due simply to size), potential slight differential expansion, and less impact from efficiency gains to translated into a somewhat lower than current forward EBITDA (or cash flow) multiple range.  If they get up to 15 to 16x we generally plan to ease back our weighting in the names like this one so if they get there too fast you may see that action and then re-adds when they've come off and settled in.   

     

  60. 60
    brodway Says:

    WTI/Brent spread continues to trade within a narrow range

  61. 61
    brodway Says:

    PDCE starts to view 52 week as the next target……

  62. 62
    sc4 Says:

    44.  Thanks your explanation.

    l. Of the 50% oil imports consumed in the U.S.  about what percent is oil grades and qualities that are not domestically available and what percent are easily available from domestic u.s. production. Put  differently, how much of what is imported can be substituted by domestic production?

     Is it correct to assume that most oil exports from the u.s. will come in the form of finished product? I've been thinking crude which could be a mistake.

    Thanks. Apologies for asking big picture questions but I'm struggling to understand how prices in the u.s. relate to world pricing.While people often speak of the link between the two, I'm not sure I see why that would be if we are largely a closed system. But it is a very complex issue. thanks you thoughts. sc

  63. 63
    zman Says:

    re 61 – that looked under valued at the time of the Delaware buy and subsequent offering to fund it. Still does to me. 

  64. 64
    zman Says:

    Beerthirty – back in a bit. 

  65. 65
    ctb14 Says:

    Genscape Cushing +663k to 11/18

  66. 66
    j Says:

    WHITING PETROLEUM CORPORATION ENTERS INTO SALES AGREEMENTS FOR NORTH DAKOTA MIDSTREAM ASSETS – Reuters

  67. 67
    zman Says:

    re 62 

    Imports

        The U.S. imports little in the way of the upper end of light crudes (like most Bakken crudes (40ish degrees) or the condensates seen in some portions of some of the shales like the Utica and parts of the EFS and Permian)  – less than 5% for a long while now – currently near 2%).  However, light crude from 30 to 45 degrees is about 34% imports or about 2.7 mm bopd still coming in.  That's vulnerable to being supplanted near current prices by slightly light crudes.   

       20+% or 1.6 mm bopd is heavy. (<=20 degrees). The heavy end is highly likely to be safe from erosion near term.

        The rest is somewhere around 40% of imports or about 3+ mm bopd is medium and is vulnerable, especially if additional heavier crudes can be sourced externally (we've seen high volumes of heavy this year so should be possible even with VZ issues).

     

    Production

        The US produces a bell curve of weights centered on the lighter end of light (40 to 45 degrees) with about 30% falling in that range but a full 65% falling in the 30 to 45 degree range. 

    Over the last few years light crudes have been falling in terms of what the US imports. Mediums have come off too.  As the refining complex has repeatedly showed over the last decade, more light can be used as it's blended with the heavy, even in the Gulf Coast facilities that were initially configured to deal with Mars Medium and heavier oils from down south.  

    Crude exports (that's oil, not products) hit a new weekly high of 0.7 mm bopd a few weeks ago and was around 0.5 mm bopd last week. Exports of products are a different matter and gasoline hit a new high there in the last two weeks. Exports can be viewed in graphs at the bottom of the Inventory Review section of each Thursday post. 

    Re closed system. I don't know what that means if we have imports and exports. The old adage, oil is global, gas is local remains. 

    Here's an old graph of WTI vs Brent I have on hand, no reason to update to see the relationship between the two I think. 

    brent-vs-wti

     

  68. 68
    zman Says:

    re 65/66 – thanks. 

  69. 69
    Terry Barton Says:

    re 66.

     

    More info

    Whiting Petroleum to Net $375M from Bakken Gas Plants Deal — Market Talk
    Monday 11/21/2016 05:25 PM ET – Dow Jones News
    17:25 ET – Whiting Petroleum (WLL) unloaded a pair of natural-gas processing plants in North Dakota on Monday, saying it expects to net $375M in the deal with a unit of Tesoro Logistics (TLLP). The major Bakken Shale oil producer expressed interest earlier this year in selling its 50% stake in the two plants and associated infrastructure, which it has said are profitable. Tesoro will spend a total of $700M on the deal, which also includes minority stakes owned by GBK Investments and WBI Energy Midstream. The plants can process up to 170M cubic feet of natural gas per day from fields in the nearby Williston Basin of western North Dakota, where gas is a byproduct of shale oil production. (chester.dawson@wsj.com; @DeleverTheFirm)

  70. 70
    zman Says:

    re 69 – thank you sir. 

  71. 71
    RB Says:

    re:  69…guess that could explain the big volume breakout today.  The weekly chart is the one I posted.  I love the tight bars on that chart and the soaring on balance volume.  someone has been buying that in size over a period of time.  it's been dead money for a while and I've owned it a long time but I increased my stake about 30% today when I saw the breakout and looked at the weekly chart.  Time will tell…pay your money, take your chances and have an exit plan…both good and bad….

  72. 72
    Baylor Says:

    BRODWAY – Re 53 thx for faking the time to share your thoughts. 

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