Welcome To December – Macro Thursday



Welcome To December:  Subscriptions to Zman's Energy Brain make great stocking stuffers. 

Market Sentiment Watch: Just monster moves up yesterday with 15 to 20% moves in our core names being common by the end of the day. We're keeping a close eye on valuation and will prune where necessary. In energyland, look for news flow to begin picking up as early as the week after next with the OPEC decision prompting 2017 programs towards the upper end of the ranges hinted at out during the 3Q16 reporting season. Also look for estimates to begin traveling higher as the lower end of the Street oil price estimates (some analysts were down as low as $37 for 2017) to begin marching up, taking consensus towards or a bit above our 2017 target.  In today's post please find comments on the OPEC meeting (exceeded our expectations and we were definitely in the camp that they would get a deal done going into the meeting), the oil inventory review (mixed bag), the monthly oil slide show (down but it's largely offshore and temporary, still onshore is still slipping), the natural gas inventory preview, the natural gas macro update slide show (a further easing in production, record low monthly net imports, and record high (for September) natural gas demand), and some other odds and ends. 

Ecodata Watch:

  • We get jobless claims at 8:30 am EST (F = 250,000, last read was 251,000),
  • We get the Markit manufacturing PMI survey at 9:45 am EST (no forecast, last read was 53.9),
  • We get ISM at 10 am EST (F = 52.5%, last read was 51.9%),
  • We get construction spending at 10 am EST (F = 0.7%, last read was 0.7%),
  • We get car sales over the course of the day (F= 17.7 mm, last read was 18.0 mm). 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h - OPEC, Oil monthly production data update 
  3. Oil Inventory Review 
  4. Natural Gas Macro - Production
  5. Natural Gas Macro - Imports
  6. Natural Gas Macro - Demand 
  7. Stuff We Care About Today
  8. Odds & Ends

Click the link directly below this to ... .

Holdings Watch:   


  • Yesterday's Trades: None
  • The Blotter is updated.

Commodity Watch:

Crude oil closed up $4.21 (+9.3%) yesterday at $49.44 after OPEC decided to agree on larger than expected cuts. EIA's weekly inventory report was a pretty mixed bag this week (see details below) and was completely overshadowed by the OPEC news.  This morning crude is trading either side of $50 early. 

OPEC Watch: OPEC came and acted, better than even we expected.

  • OPEC decided to cut 1.2 mm bopd from October production levels to achieve 32.5 mm bopd.
  • Saudi is cutting production by 0.486 mm bopd and other OPEC players, aside from Indonesia, are also cutting including Iran,
  • The link to the per country data is here,  
  • Deal is set to start Jan 1 with an initial duration of 6 months and will be reviewed and extended or not at the mid year meeting,
  • A compliance committee has been established to implement and monitor the deal,
  • This OPEC 14 production which includes Indonesia who was excluded from the deal.  Libya and Nigeria also did not see reductions.
  • The drop amounts to a 3.6% reduction with Saudi taking the lead with a 486,000 bopd but all participants taking about a 4.6% reduction from their October level volumes as reported by secondary sources. The deal will work off secondary sources and not primary reporting.

Non OPEC Watch: Non OPEC players are also expected to participate 

  • They also said they have agreements almost in place to cut non OPEC production by 0.6 mm bopd with Russia taking on half the cut.
  • A meeting between OPEC and Non OPEC key players will occur in early December. 

Price Deck Watch:

  • For 2016, the Street was at $51.25 at the start of the year and is now at $43.15.
  • For 2017, the Street is at an average of $53 (range of $37 to $64). We expect the average to rise yielding higher estimates price targets as we move towards year end.
  • For 2016, we were at $55 at the start of the year but cut this back to $43.75 in the first week of January 2016 and have been at that price ever since. We expect to be within a buck of that mark this year.
  • For 2017 we are at $55 (+$5/-$5) and we may increase the upper end of the spread on that (probably to $55 +$10/-$5) soon but will continue to use $55 as our official deck for modeling purposes. 

EIA 914 Watch: EIA reported a drop of 167,000 bopd or 1.9% to 8.58 mm bopd for September from August. August revisions were de minimis.  The lion's share of of the drop came from the Gulf of Mexico with production down 139,000 bopd month to month (in part due to shut ins). We expect a very modest reduction to no reduction to the 4Q16 and 1Q17 production outlook in the STEO next week based on this data. We continue to see EIA as overestimating near term production. Here's how the U.S. large pieces look now:


Natural gas closed up $0.037 at $3.35 yesterday as is in our view a bit ahead of itself from a near term standpoint. We note that the December forecast in general, for the U.S. Lower 48, has recently improved (cooled) relative to some earlier forecasts.  This morning gas is trading up four cents. 

  • Natural Gas Production Watch: Lower 48 natural gas production eased 0.55 Bcfgpd month to month for September and is down 3.25 Bcfgpd YoY (or 4.1%). Texas gas production is now down 14% YoY or down 3.1 Bcfgpd. We expect less of a decline in 2017 to flattish levels of production.  See detailed breakout slide show below. 
  • Natural Gas Imports Watch: Net imports fell to 1.16 Bcfgpd in September, a new low, down 0.4 Bcfgpd sequentially and YoY. We know that at least during one month in November net imports went negative (making the U.S. a net gas exporter that week). The trend of lower and now flattening Canadian volumes and offsetting Mexico and LNG exports has yielded the expected result ... making imports a non factor, down by over 10 Bcfgpd from levels seen a decade ago. Please see detailed breakout slide show below. 
  • Natural Gas Demand Watch: New high for September demand at 65.2 Bcfgpd, up 1.2 Bcfgpd from year ago levels led by record (for September) gas fired generation and Industrial demand. Gas continued to take generation share despite higher prices and Industrial remained (and has since as well remained) resilient in the face of higher prices seen during 3Q and now 4Q.  See detailed breakout slide show below. 


Natural Gas Storage Preview

Street is at - 56 Bcf for today's report. 

  • Last Week: -2 Bcf
  • Last Year: -53 Bcf
  • 5 Year Average: -60 Bcf
  • 10 Year High: +9 Bcf
  • 10 Year Low:  -162 Bcf

Oil Inventory Review







Natural Gas Macro - Production




Natural Gas Macro - Imports


Natural Gas Macro - Demand


Stuff We Care About Today


Other Stuff and Thoughts

  • WFT (unowned) - idled its frac fleet as rumored. This should help pricing for HAL and other names like RES (unowned).  Also hurts customer loyalty for WFT and further aids the strong ties HAL has with their base,
  • Would not be surprised to see some secondaries soon on these higher levels though as people gear for a busier 2017,
  • We would not be surprised to see names who have been play chasing or basin shifting to attempt to sell more of what was their story before at better prices in the new year,
  • Look for updated valuation matrix graphs for the Permians, Bakkens, and Wattenbergs in tomorrow's post.
  • Look for Gassy Players cheat sheets next week.
  • This post has been archived under Natural Gas Supply and Oil Macro under the pulldown menu at upper left for future reference.

Odds & Ends

Analyst Watch:

  • Raymond James reaffirms $55 2017 target after OPEC,
  • EOG - Stifel up to Buy from Hold,
  • SM (unowned) - Stifel up to Buy from Hold,
  • WLL (unowned) - Stifel up to Buy from Hold,
  • We expect to see more lifted ratings and targets in the next two weeks.

95 Responses to “Welcome To December – Macro Thursday”

  1. 1
    zman Says:

    OAS – 5% further increase on volume, an hour before open, no news other than name moving on OPEC move which is pretty no much a no kidding comment. Upper teens there will have us taking some Trading Shares off added earlier this year.  Recall at Seeking Alpha OAS was a number one short pick for the year. Ha. 


  2. 2
    zman Says:

    Oil trading $50.35 a hour before equity open


  3. 3
    zman Says:

    NG trading up 2.2% an hour before equity open


  4. 4
    zman Says:

    Crude moving on $51


  5. 5
    zman Says:

    Another big open on tap. Several top 10 names about to score new all time highs. Valuation matrix updates in tomorrow's post. 

  6. 6
    james T Says:

    From Yesterday ,  Baylor, I think you are right wall street will be salivating to do more secondary offerings, etc.


  7. 7
    zman Says:

    re 6 – As per bottom of post. Note that this time of year we generally see some clean-up-the-revolver secondaries.  Service names have also spoke to an expected dearth of business, worse than usual after Thanksgiving, in terms of completions. Sense is that changes a bit now and that people try to hit the ground running a little faster, which means a a slight forward draw on 2017 capex but also greater than expected or upper end of expectation spending for oilier names that have given preliminary guidance on 2017. All the more reason to bolster liquidity. I'd expect to see some smaller, non acreage related secondaries prior to the holidays and then again in January.  

  8. 8
    zman Says:

    Here, working on updates, shout if you need something. 

  9. 9
    zman Says:

    Seeing a bit of profit taking off the gap open in the group with oil above $50.50. No sales by us yet, a few names are getting towards the upper end of next 6 months expected ranges but not doing anything yet. 

  10. 10
    Baylor Says:



  11. 11
    zman Says:

    re 10 – December forecast has gotten colder since issued by CPC the 3rd Friday of November, noted in post today, had not seen this graph but yep, it's getting colder.  It's jacking up the near months a bit. Good to see as we got a slow start to winter and missed out on normal temps for the first 15% or so of the season. We're not concerned about natural gas price making our $3 deck for 2017 given fundamental ongoing change in demand and supply as noted in post. You've got record non heating season demand, you've got record low net imports, and natural gas production is off a whopping 3+ Bcfgpd YoY as Texas flags and offsets growth from the Marcellus.  So 2017 you get flattish production and elevated demand (though not record) and anemic imports. That's $3+ natural gas even with the storage overhang. So an extra bump from winter actually making an appearance doesn't hurt either and can help boost local trapped gas demand in Appalachia to forestall fears of wide diffs to Nymex. 

  12. 12
    BirdsofpreyRcool Says:

    File Under:  Pigs are flying in a frozen-over Hell.

    Gary Evans just announced that his new company, Energy Hunter Resources, has made a whopping acquisition in the Permian.  17.5% interest in an 80 acre block in Reagan County.  The 80 acres is HBP and the purchase price is undisclosed. 

    On the back of this Momentous Announcement, Gary went on to add that he has now begun marketing his IPO roadshow.

    >>>> crickets <<<<

  13. 13
    BirdsofpreyRcool Says:

    #12 — said another way:  This will be a good, real-life test of the intersection between H.L. Mencken’s theory that “nobody ever went broke underestimating the intelligence of the American People” and P.T. Barnum’s observation that “there’s a sucker born every minute.”

  14. 14
    zman Says:

    re 12 – 80 gross acres. 14 acres net.  NRI of, say, 12 acres. Monster. 

  15. 15
    zman Says:

    re 13 – heh, we missed ya. 

    NG inventories in 5 minutes. 

  16. 16
    zman Says:

    Natural Gas Inventory Quick

    – 50 Bcf (slightly light)

    We now have 3,995 Bcf in storage

    Up 0.6% Yoy (vs up 1.0% last week)

    And up 6.3% to the 5 year average (vs up 6.3% to it last week)

  17. 17
    zman Says:

    NG up a dime pre and post report


  18. 18
    nrgyman Says:

    RE 17:  Natgas at highest price since Dec 2014 on the CME continuous contract.  Actually it filled an upside gap left from Dec 15 2014 at $3.44. 

  19. 19
    BirdsofpreyRcool Says:

    Just for grins… how about an interim update on the current Contest?  In light of all these monster moves… or, is that Bad Karma…

  20. 20
    zman Says:

    re 19 – OK but I'm pretty sure I'm winning 😎  will update it next week. 

  21. 21
    BirdsofpreyRcool Says:

    what was your pick again?

  22. 22
    zman Says:

    re 21 – The ZLT. 

  23. 23
    zman Says:

    Unofficially it was OAS but someone said it would be un cool if I excluded that one. 

  24. 24
    BirdsofpreyRcool Says:

    Yep… you're definitely a Conten-DA!

  25. 25
    zman Says:

    Noting distressed names getting a nice boost here but not hugely outperforming. A little price stability north of $50 and that may change. 

  26. 26
    zman Says:

    Wonder when/if Hamm gets the nod and what they actually plan for water borne imports


  27. 27
    BirdsofpreyRcool Says:

    BCEI feeling the distressed luuuuuuuuuv.  But not sure their capital structure, when matched up with their asset base, makes sense.  Even at $50 oil.

    Still, their bonds have rallied from 40 to 50.  So there's that…

  28. 28
    zman Says:

    Crude trading $51


    Natural gas trading $3.47, unphased by the 50 Bcf draw


    We get the first update from PointLogic in two weeks (they skipped one over the holiday) – will be interesting to see if we net exported again and if Industrial remained as strong as it looks like it did during the period. 

  29. 29
    zman Says:

    re 27 – yeah, and a bit of odd decision making by them doesn't make me want to go back.  

    Do see SYRG as a bit overdone here.  One more pushing into $10 and $11 has us likely taking profits and watching from the sidelines again. 

  30. 30
    BirdsofpreyRcool Says:

    #26 — well, the way the press / nattering nabobs of negativity are these days, Harold would have to divest of all his CLR stock in order to take the post.

    Funny thing, I don't think George Washington sold his thriving business at Mount Vernon, in order to be President.  Of course, those were simpler times (??).

  31. 31
    nrgyman Says:

    RE 26:  Hamm was just on CNBC (minutes ago) and said he wants to help the new admin any way he can but not as Energy Sec.  He wants to run CLR.  He also was not supportive of the XL pipeline (doesn't want a flood of Canadian imports).  Hamm said 30% of US refineries are owned by foreign interests who shut out US crude from refining (a Saudi strategy) and wants this issue addressed.  Hamm strongly supported the DAPL, even though he in not an investor in it–makes his crude more cost competitive.

  32. 32
    BirdsofpreyRcool Says:

    SYRG… you may be right on valuation.  But they will begin to complete on their Bestway pad in mid-December.  Combine that with an update on production from the Fagerberg wells and you may have another run up.  Just thinking/noodling out loud…

  33. 33
    zman Says:

    re 32 – yeah, I hear ya re Lynn's comments that they are about to complete as much linear feet in the next couple of months as about 80% of company history. Could be and if it just drifts at $10 for 6 months that's fine as it then goes really cheap on 2018 EBITDA. 

    re 31 – thanks. Makes sense on all points. We've had a big surge from up north last couple of years. Good for blending for US Gulf Coast refiners to offset lower VZ volumes so he might not wish to pick on Canada, also some of it would be re-exported. 

  34. 34
    BirdsofpreyRcool Says:

    Hearing that operators are hedging like mad today…

  35. 35
    zman Says:

    re 34 – I would be and note how flat we are into next year, time spreads got thumped (market sees the deficit coming … now arriving at backwardation station. 

  36. 36
    zman Says:

    Mexico bought puts at $38 for next year, majority of expected output. That action helped stall prices over the summer. They need a better contact at OPEC. 

  37. 37
    zman Says:

    Adding to $35, especially since $50 is the new $80 for a lot of my guys. 

  38. 38
    Justin Says:

    Sundance – did I miss our on something by not converting my pink sheets to the ADR?  I've got some SDCJF that shows no move.

  39. 39
    nrgyman Says:

    Natgas producers have been hedging as well:


    Note the hedge table by producer.  For 2017 production this is how much is hedged:  AR 100%, RICE 85%, CHK 70%, SWN 68%, ECR 62%, etc, all as of end of Q3.  At current prices more hedging is likely.  Note that COG has only about 12% of 2017 production hedged, by far the lowest among major natgas producers.  Would not be surprised to see them putting on hedges now.  

  40. 40
    zman Says:

    re 38 – I don't see how.  It's thin, the move in SNDE is on 200 shares today. The SDCJF has simply not traded. 

  41. 41
    zman Says:

    re 39  AR and RICE have been well hedged for a long time. AR actually swapped some 2018 and 2017 volumes around a few months back but on the whole they hedge out several years in majority of expect volumes. These hedged volumes are noted in our cheat updates just beneath the revenue section. 

  42. 42
    zman Says:

    re 69 – for instance, in the case of SWN, the section just under revenues:

    Hedges Bcf      
    2017 natural gas  296 Swapped at $3.04  
      103 Floors at  $2.94  
      135 Floors at  $2.93 w Sub Fl at $2.29
      534 69% of Street expected gas volumes
  43. 43
    Justin Says:

    Re 40 SDJCF – thanks, I should have paid closer attention to the SDNE volume.  

  44. 44
    zman Says:

    re 43 – no worries, sleeper name, I think I owe you an update there. I too own a slug of SDCJF but not SNDE. 

  45. 45
    JMlr Says:

    looking forward to tomorrow's updated valuation matrix.  For someone not as long as I'd like are there any Z stocks that look particularly reasonable in price even after this monster move?  I was hoping to get into PE, CRZO, CXO, RSPP as top contenders but funny thing happened yesterday…

    Thanks Z

  46. 46
    zman Says:

    re 42 – that's just an FYI in cased anyone missed that it was in the cheats. 

  47. 47
    nrgyman Says:

    RE 40,41:  SWN is notable for its increased hedge exposure.  Went from among the lowest to the among the highest in hedged production.  Big jump in Q3.  Same for RRC and CHK.  COG and EQT remain the least hedged as of Q3 end–and both have excellent balance sheets.  Perhaps they can wait longer for higher natgas prices.  More levered names have been more aggressive in acquiring hedge security.

  48. 48
    zman Says:

    re 45 – Ha, yeah, OPEC, those nutty guys ….

    Going through valuations now, will let ya know before the close if anything really stands out.  Did note XOG which we don't yet own popped with everything else but is substantially cheap to SYRG at this point which is kind of interesting. And then when you glance over to PDCE  (which we do very much own) it's just uber cheap (and to be sure not a pure play Wattenberg due to the big Delaware add and as such even more of a reason for it's valuation not to be loafing where it is).   

  49. 49
    zman Says:

    re 47 – yep and basis matters. 

    BOP – on SYRG – I probably should note that if pricing turns out to be closer to my 2017 case than people thought 24 hours ago then SYRG does get a bit more of a multiple boost allowance since they are low debt name that plans to outspend next year (not that much actually $ but the % on the delta from ebitda to capex is one of the bigger ones). That higher price = less outspend. 

  50. 50
    zman Says:

    Adding to 49 – so that's my long winded way of saying I should cut Lynn a bit more slack on the multiple. And again, 2018 still looks really cheap, even for a WAG. 

  51. 51
    nrgyman Says:

    RE 48:  To what do you attribute the cheapness of PDCE?  Expected equity issuance capping upside for now?

  52. 52
    zman Says:

    re 51 – I don't really, other than mix and margins and even that should not do it.  I think they are kind of done for equity issuance for a bit having knocked out the second piece in September for Delaware.They'll close on that this month and have liquidity of near $1 B and nothing on the revolver. We had stated at the time of the Delaware deal that we expected margin expansion over time through mid 2017 or so and that seems to be slowly working out to be the case. When viewed on the matrix it's pretty glaring and I don't expect that to stay that way. 

  53. 53
    Zorgnak Says:

    Greetings….I couldn't see this nice turn happen without thinking of you all. Best wishes for all now and in the coming year.


  54. 54
    zman Says:

    re 53 – ho-lee-cow.   Had I known all I had to do was to replace the Saudi oil minister and head of OPEC to get you to check in I would have arranged for it sooner.

    You've been greatly missed but I understand the call of the beach.  I hope you and yours are very well!

  55. 55
    james T Says:

    ECR  moving a little  

  56. 56
    Zorgnak Says:

    It certainly got my attention….good work!


  57. 57
    zman Says:

    re 55 /56 – nice to see. 

  58. 58
    Natus Says:

    re 53 – GREAT to hear from you, Zorg. We miss ya…

  59. 59
    brodway Says:

    As WTI approached 52, going to start looking at taking a bit of profit on overweight positions and perhaps selling some out of the money calls for income….longer term i think there's a bit of room for equities to continue to move higher, so this is strictly short term thinking…..


    Have missed you daily charting very much…..was learning so much from you and your sudden departure has left me yearning for knowledge….Hope you are in good health and enjoying your time off…..There's so much more that remains unlearned, so hoping you will join us if time permits….



  60. 60
    zman Says:

    re 59 – yeah, makes sense. 

  61. 61
    BirdsofpreyRcool Says:

    SYRG thoughts… you have to look through 2017 to 2018 in terms of production.  But the valuation and growth potential is there.  Nearer-term (April 2017 or so), really looking forward to the Evans pad coming on line.  That will also take care of any lingering take-or-pay pipeline commitments.  Thus bringing their oil price basis differential down.

    Any tightening in basis diff is pure dollars to the bottom line.

  62. 62
    Zorgnak Says:

    #58 and 59  Thanks a lot….. 


  63. 63
    zman Says:

    re 61 – good point

  64. 64
    james T Says:

    Z   What is your latest nutshell on ECR,  if it finally get colder, I assume this one heads higher slowly ?

  65. 65
    zman Says:

    re 64

    Solid wells that get longer on average in 2017, rising production, still falling rig costs, non core asset sale being worked on, may add another rig, differentials set to drop sharply this quarter, the higher debt is there but it's manageable and the borrowing base was reaffirmed in the fall. They've got some upcoming tests in the super long lateral category that they will hit with the bigger Gen 3 fracs than they did on Purple Hayes, and have a 2 of them (19K' laterals) that will be on the same pad with two 10K' laterals to test whether or not they are being efficient in the toe of the well.

    It's about a 2% position for us and we may add more prior to the 4Q call. 

    It's been well hedged but is levered so we've been adding on weakness as per:

    • 5/5/16 ECR –  (non ZLT D- Trading Only Add) – ECR – Added first of two expected positions at $2.49. Call underway. Expecting the name to benefit from expected tightening in natural gas market over the course of the year and to rally on the thought of a return to higher production levels (they are currently heavily curtailed) and more drilling activity.  Describing a step change in cost reduction due to drilling of a ~ 3 mile lateral they see as repeatable. 
    • 6/9/16 – ECR – Sold the Trading only position taken 5/5/16 for $2.48 for $3.86 (up 55%).  We are not done with the name and will revisit in the ZLT but it has run more rapidly than expected. 
    • 6/29/16 – ECR – Added Starter Core position at average $3.52 on post secondary weakness. Please see the Gassy Update post on Tuesday and today's post for details. 
    • 7/5/16 – ECR – Doubled the Starter Core taken last week at $3.52 for just under $2.79 on group related natural gas induced weakness.
    • 8/2/16 – ECR – Added a Trading position at $2.96 to the Starter Core in front of earnings tomorrow (which have been largely pre-announced).
    • 9/29/16 – ECR – Added to the Core position at $3.33, gassy levered name, still smallish in the portfolio, as expected they announced a return to growth mode just prior to the 2Q16 cal and that should turn out to be a smart move given the gradual improvement in the fundamental picture for the NAM natural gas macro.
    • 10/25/16 – ECR – Added a Trading Position in ECR at just under $2.99. We had noted we planned to add after the 2Q call on significant weakness between then and the end of October. Trading sub $3 qualifies. Earnings next week and should be able to talk about the impact of higher sand loads on the DUCs they've been completing. They are extremely well hedged and should see improving debt metrics on expanding EBITDA from lower costs and 30+% growth in 2017. 

    • 10/26/16 – ECR – Added a Trading position in ECR at just under $2.67 as it continues to come off sharply with the gassy group. We see the move as overdone. 

  66. 66
    zman Says:

    Offtopicthirty, off for a cold run, back in a bit. 

  67. 67
    james T Says:

    re65 Thanks,  yeah I know about the trades, just needed refresh of the details.   

  68. 68
    crysball Says:

    Regarding  Sundance conversion of   the  SDCJF [ Pinksheet ADR's]  to SNDE [NASDAQ common]

    BNY Mellon    on behalf of Sundance  issued  a release   on  November 15th………..   that  they  will  do   a  100 to 1 exchange  free of any fees for the period from 11/15/16 to 12/15/16.    Prior to that  my  brokerage  was  refusing  to do the conversion, but  toaday  said they would do it immeidately when  I brought  the   News  Release  to  their  attention. 

  69. 69
    zman Says:

    re 68 – thanks much

  70. 70
    tomdavis12 Says:

    Looks like OPEC awakened the Stifel analyst. APC $63 > $86, EOG $95 > $120, WLL $8 > $15. Or maybe he smells some equity deals. 

  71. 71
    zman Says:

    re 70 – heh. 

  72. 72
    zman Says:

    NFX – solid day 2 extension to test the August on normal volume. Good to see that. 

  73. 73
    Justin Says:

    Thanks re SDCJF.  As mentioned, it seems like a sleeper as Eagleford IRRs improve w/ the commodity.  The illiquid issue won't go up in a straight line, but it seems the co would be ripe to get eaten when someone goes shopping.  Z, I'd love the workup when the action slows.

  74. 74
    zman Says:

    re 73 – I'll promise for next week and try not to be a sloth and beg off again. 

  75. 75
    james T Says:

    Anyone – How does latest OPEC decision sit with refiners,   watching VLO go lower, do they have a better year next year, or more of the same.

  76. 76
    zman Says:

    re 75

    – Price supportive action from OPEC is not great for refiners as it makes their feedstock costs rise.

    – Natural gas higher as well, another cost for them.

     – Do finished product prices rise enough to keep or improve on cracks? I think not. While prices are going to rise at the pump that will likely curb demand growth especially on a YoY basis in summer 2017 and recall we are in record territory for time of year now in the States for gasoline stocks. 

     – To me this scenario favors upstream over downstream (in very broad strokes at least). I don't think it's a disaster for the industry on the whole but they certainly would prefer more supply of their main COGS over less.

    – Caveat 1 would be that this is a 6 month deal and when the higher demand period of 3Q hits next year the deal will have expired unless they renew it. So it's possible refining stocks ski lower into spring and then begin to rebound in anticipation of that incremental supply being restored. Caveat 2 would be that if U.S. production does now ramp more rapidly than expected it could trip oil prices into staying in the $40s, something the market does not now see and that would be likely a better scenario for refining crowd. 

  77. 77
    nrgyman Says:

    RE 75, 76:  Agree with Z's take.  More thoughts:  The RIN fiasco could go away under Trump–that would help refiners at the margin.  They are currently penalized by the RINs.  Another factor is what will Trump do to create more "fair trade" with foreign oil producers who sell into the US market?  That could negatively affect refiners who might need to use more US crude vs cheaper (in an unfair trade view) imports.  Finally, what happens if the XL pipeline and ENB's Line 3 are built?  More cheaper Canadian crude would help refiners.  Or what happens if the Jones Act is reformed so that outrageous shipping rates (compared to global competition) are reduced, allowing more domestic production to be used by coastal refineries (esp East Coast)?  In general, the "remove regulations" and "make it in the USA" themes favor US producers and mid-stream over refiners.

  78. 78
    zman Says:

    re 77 – good points, I just addressed the OPEC vs price vs stocks aspect. 

  79. 79
    james T Says:

    re76 – Ok makes sense.  

    Oil Trading over $51,   runs into resistance I assume.

  80. 80
    zman Says:

    re 79 – seeing profit taking for last hours in the equities, would not be surprised to see some pretty good swings in here given the quick pop. Also coming off weakness into the Nymex close. Yawn. 

  81. 81
    nrgyman Says:

    Natgas at $3.51.  For low-cost producers to hedge at these prices is very ebitda enhancing.  With the differential caveat, though that should improve over the next year as pipes come online.  Be interesting to see what the production response will be.  Associated production from TX, CO and OK oil basins will play a role.  

  82. 82
    brodway Says:

    Profit taking in full force…..was to be expected……..watching closely if any of the ZLT names get oversold which may create a trading opportunity….

  83. 83
    zman Says:

    re 82 – hear ya, I'm very likely to give it a few more days to calm down before considering adds but may nibble on one item. 

  84. 84
    zman Says:

    Beerthirty, back in an hour. 

  85. 85
    RMD Says:

    Z I read Seaport's writeup of SNDE driving through KS (OK, my wife was driving). Interestingly Jon Kruljac , ex of SYRG, is there as IR and 'capital markets'.

    Quick impressions:

    serial stock issuer! in 05, 06, 10, 13, 14,  & 2 in '16.

    played drop/add with various assets over time, giving me the impression Eric McCrady didn't know hwat assets/areas he should really own.

    Eric started as CFO in '10, became CEO in '11. Unclear if he 'created any value'.

    maybe the key value-add is their 19,000 acres in mid/western Dimmitt cty in the condensate window (NFX to the north, CHK to the south).  IRRs listed as 19% at $55/3 using old completions; question is will Gen 2 or 3 completions be a biggie?

    BofD all insiders (suprise! it's listed in Australia)

    while  one  knows a co. at initiation, but model inconsistent: debt up ~40% in '16, interest costs down (lower rates?) Mid you I didn't spend lots of time with the model.

    12.5mm ADRs, boy is it thin.


  86. 86
    zman Says:

    re 85 – thanks. Have owned it a long time. Story has moved about a bit until focusing on EFS. Looks cheapish now but thanks for the input. 

    Speaking of Seaport, noted they cut OII (unowned) to Hold to today.  So they've been at Buy for how long, lol?

  87. 87
    zman Says:

    Re 45 / 48 – CPE still stands out.  Pe and RSPP fine too. CXO a bit rich. 

  88. 88
    brodway Says:

    re: 82

    yeah….i didn't mean today….thinking eventually the OPEC news will fade and sellers/shorts step in taking equities down. should they come in and this weeks news is  ignored discounting what in my mind is a change of direction and sentiment, for longer term holders lower prices should present a buying opportunity…. i think this is an important time to identify the companies they would like their portfolio to hold for next year as the environment improves for oil companies,  the investment community is more receptive to oil investments and acquirers start to eye US oil assets.

  89. 89
    zman Says:

    re 88 – investment community yep, pretty quick.  Majors likely take quite awhile to really dip a toe in the upstream as far as corporate deals go. 

  90. 90
    brodway Says:

    re: 89

    would you change your mind if oil trades in the 60's going into q3 2017? i'm thinking margins should look very healthy for many Permian producers if that happens. Also if the new administration is receptive to US shale development, which i think they've indicated the would be, i think the majors start making moves as they would want their hands on very profitable operations on US land

  91. 91
    brodway Says:

    re: 87

    by the way i've always thought CXO and FANG for that matter are rich because they have bit of premium built in as they would be more attractive for a thirsty acquirer for their size

  92. 92
    zman Says:

    re 90 – not sayng they won't but Majors generally get it wrong, they often buy at the highs. 

  93. 93
    brodway Says:

    re: 92

    i remember when XTO acquisition started off a healthy run in energy sector….it came during a gloomy time in American investment, at the end of 2009 when the markets were attempting to find footing post the great recession lows. i guess we shall see. its going to be more fun next year for our sector that's for sure.

  94. 94
    Baylor Says:

    More outlets talking of freakishly cold weather across the entire US


  95. 95
    Baylor Says:

    A Zorgnak sighting!  I wish i had been online when it happened.  All the best Zorg.  I miss the zorg daily levels.

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