Monday Morning – Gas Macro Slideshow Update



Market Sentiment Watch: Welcome to 2Q17. The ZEB Long Term portfolio ended last week up a little over 6% and for the quarter was down 6.7% vs the XOP ending the quarter down 9.6%. In today's post please find the natural gas macro slide shows (Lower 48 natural gas production down 2.6 Bcfgpd YoY (down 3.4%) and down 0.4 Bcfgpd from December levels, net imports down 3.0 Bcfgpd YoY and increasingly pointing to the U.S. as a net exporter, and weak demand as expected on mild January weather though Industrial notched a new January despite the lack of need for district heating), The Week That Was, and some other odds and ends. 

Ecodata Watch:

  • We get ISM manufacturing at 10 am EST (no forecast, last read was 57.7),
  • We get construction spending at 10 am EST (no forecast, last read was -1.0%),
  • We get car sales over the course of the day (no forecast, last read was 17.5 mm)

The Week Ahead: 

  • Tuesday - trade deficit, factory orders, 
  • Wednesday - ADP employment, ISM nonmanufacturing, 
  • Thursday - Jobless claims, 
  • Friday - NFP, unemployment, average hourly earnings, wholesale inventories, consumer credit.  

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Macro - Production 
  4. Natural Gas Macro - Imports 
  5. Natural Gas Macro - Demand
  6. The Week That Was
  7. Stuff We Care About Today
  8. Odds & Ends


Holdings Watch:

ZLT (Zman Long Term portfolio)

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

Commodity Watch

Crude oil rose 5% to close at $50.60 last week after EIA reported a much better looking set of weekly data last week including a drop in net imports, record time of year refiner throughput, and record for time of year gasoline demand. Stocks continued to improve vs their five year average levels. Brent closed up 4% at $52.96 while the OPEC basket was up 4% closing at $50.20. Please see The Week That Was section below for additional color. This morning crude is trading around $50.75.

  • Russia Watch: Russian oil production eases to 11.05 mm bopd in March from 11.25 mm bopd in October, aligning with curb goal comments made by Novak (down 200,000 bopd from October levels by March with a goal of down 300,000 bopd by the end of April).
  • Iraq Watch: Iraq said to comply with OPEC agreement while taking productive capacity to 5 mm bopd by YE17.
  • Libya Watch: Partial recovery of last week's 250,000 bopd outage expected this week. 

Price Deck Watch: The average price for oil came for 1Q17 came in $51.78 vs our estimate of $50 (-$2.50 to +$5) and the Street's point consensus estimate of $53. We remain confident in our $55 full year deck (-$6 to +$4). 

Natural gas rose 1% to close at $3.19 last week on an in line build and has held up in recent days a bit better than expected which is a positive as we head into the limited demand time of the first shoulder season. The withdrawal season is very nearly at an end (maybe already there) and we remain comfortable with our numbers.  Please see The Week That Was section below for additional details.  This morning gas is trading up 1%.

Price Deck Watch: The average price for natural gas came in at $3.06 vs the Street's consensus of $3.10. We remain confident in our $3.25 average price for 2017. 

  • Natural Gas Production: January Lower 48 natural gas production was down 0.4 Bcfgpd from December and was down 2.6 Bcfgpd on a YoY basis with onshore Lower 48 volumes down 2.5 Bcfgpd. We note that despite recent press commentary about the "sharp" rise in Permian volumes since the May 2016, overall TX volumes remain down 1.9 Bcfgpd YoY and were essentially flat month to month. Please see charts below. 
  • Natural Gas Imports:  January 2017 net imports of 0.6 Bcfgpd vs January 2016 of 3.6 Bcfgpd. Lower Canada imports, higher LNG and Mexico exports. We normally see a pretty good rise in winter imports but not seeing as much this year. We expect to see a number of negative (net exports) as monthly averages this year. Please see charts below. 
  • Natural Gas Demand: Weaker on mild weather but note the strong Industrial demand. Please see charts below. 

Weather Watch:

  • Last week:  Last week Gas Weighted Heating Degree Days came in at a better than forecast 99 vs 122 normal and 115 in the prior week and the original forecast for the week of 87 HDDs. 
  • This week's forecast:  This week, CPC predicts HDDs will fall to 75 vs 110 normal. 

Natural Gas Production


Natural Gas Imports

Natural Gas Demand

The Week That Was

Stuff We Care About Today


Other Stuff

  • Look for a ZEB Positions graph update in the Tuesday post,
  • Look for the full Permian Players update soon,
  • Look for a Gassy Quick Multiples table soon, 
  • Look for independent hedge tables soon,
  • MCF and TAT quick looks soon. 

Odds & Ends

Analyst Watch:

  • WRD - Piper starts coverage with Overweight and $22 target.

57 Responses to “Monday Morning – Gas Macro Slideshow Update”

  1. 1
    brodway Says:

    BMO Capital upgraded Oasis Petroleum (OAS) to Outperform and target $18
    Past Rating: Market Perform

  2. 2
    zman Says:

    re 1 – thanks

    Here. working on the larger Permian update, shout if you need something. 

  3. 3
    zman Says:

    Oil even on day as Libya back on counterbalances Russia comments


  4. 4
    nrgyman Says:

    AR:  midstream operator AM saw its GP (AMGP) file for an IPO.  AR owns 59% of AM, but owns nothing (zero) of the GP and receives no IDRs from it.  The owner of AMGP is private equity firm Warburg Pincus (WP).  So AR receives no benefit from this IPO.  Pressure on the prices of AR and AM recently may be due in part to this IPO announcement, as some investors sell these positions for funds to buy AMGP.  The conflicts of interest between WP and AR also have been highlighted by this IPO filing.  From the filing: "Antero Resources does not own our (AM's) general partner and is under no obligation to adopt a business strategy that favors us (AM)."  "Our general partner's affiliates and the Sponsors (WP) may compete with us (AM)."

    AR's market price has also undoubtedly been hurt by WP's recent massive reduction in its holdings of AR.  Up until the past year, WP held over 70% of AR's shares.  The AMGP filing indicates WP now holds 31.5% of AR.  This means that around 40% of AR's outstanding shares have been distributed into the market by WP in recent months.  



  5. 5
    nrgyman Says:

    This Wood Mac view says GOM BEs are at $50 or below and projects are now growing:


  6. 6
    zman Says:

    re 5 – saw it, the comments from HAL and SLB are that the number of projects are growing but they are tie back oriented, not the bigger projects. The big projects have slowed to a trickle. 

  7. 7
    zman Says:


  8. 8
    Robert Says:

    Was reading a great article on EOG can't remember where old age.  The jest was there hiring computer type people to develop apps to be used internally.  They now have the ability to turn the drill bit within five minutes.  A geologist can be sitting in Houston obtains information and can communicate to the driller where he wants that bit to drill.

    The article talked about EOG drilling 14 wells in the Barnett unsuccessfully and it wasn't until they drilled the 15th well till they figured it out.  Whereas it took them 38 days to drill they can now drill it in 20 days.  They don't use Schulmberjay or Halliburton but do use small companies who are more flexible in their pricing.

    The article discussed the Eagle Ford and their aggressive production of oil, where competitors believe their strategy is harmful to the wells EOG believes contrary to standard belief's this does not harm to overall production.

    I wish I could remember where I read the article.

  9. 9
    zman Says:

    re 8 – cool re apps. My wife works for a time management software firm and is working on mobile aps for process management in the field.  As to drill times, everyone has experienced rapid cycle time compression in the last two years.

  10. 10
    nrgyman Says:

    RE 4:  The monetization of AMGP by WP looks like WP is positioning AMGP for sale.  An acquirer will not need to buy E&P AR to own AMGP, so the natural acquirer will likely be a larger midstream operator.  This may not be a near term scenario but a PE firm's main objective is to sell into a strong market at a significant profit.  WP looks like it is positioning AMGP for this.  

  11. 11
    DrLink Says:

    Re:8 That article was in the March 31 WSJ cover page

  12. 12
    zman Says:

    re 11 – thanks

  13. 13
    zman Says:

    Anyone see Genscape for Cushing yet?

    Early read for this Wednesday's report is very benign, small crude build, modest product draws.  That's pretty much how we expect trend to be near term, but can vary a lot in a week due to imports. 

  14. 14
    tomdavis12 Says:

    Listened to CPR this morning. Headed in right direction. May have to show some patience. Not trying to grow too rapidly.

  15. 15
    tomdavis12 Says:

    14.  CPE

  16. 16
    zman Says:

    re 14/15 – right, IPAA, anything new?

  17. 17
    zman Says:

    Group trading in lock step with SPX, down 1.5x vs it on the day. Not a lot of news, not sure what took the SPX off last hour but it took group with it. Volumes are not excessive on average. 

  18. 18
    Boutros Noujaim Says:

    re 14 – thanks ofr this – was it at a conference?  Do you think the growth rates that Z and/ or the street has might be too ambitious compared to what they said this am? They still seem like rather healthy growth rates that do not really need upward surprise for the stock to be attractive again no?

  19. 19
    tomdavis12 Says:

    Not many I want to listen to

  20. 20
    zman Says:

    IPAA is underway now. Generally at the Spring one companies have very little new to say that they didn't on the 4Q call from last month. 

    In addressing the growth rate, they'd put out new numbers were they to talk anything down. Really don't expect much new, would be very surprised to here them bring it. Yes to your last. 

  21. 21
    zman Says:

    Here's the schedule of presenters for IPAA


  22. 22
    zman Says:

    AREX (unowned) – for the record, still can't see owning it. Maybe late this year. 

  23. 23
    brodway Says:

    re: 22

    with CPE trading 3x 2019 earnings with low debt, why would i want to own anything else? πŸ™‚

  24. 24
    zman Says:

    re 23 – I hear ya, with the caveat that 2019 is not really something to hang one's hat heavily upon at this point in time. 

  25. 25
    brodway Says:

    re: 24

    if we could somehow predict the future, all the analysis would be moot

  26. 26
    zman Says:

    re 25 – I know right? But instead it's just work, work, work all the time πŸ˜‰ 

  27. 27
    brodway Says:

    PDCE looks interesting to me on a chart…..has been bottoming along the 60 handle for last two weeks….i like risk/reward here based on your last write up….technically and fundamentally 

  28. 28
    zman Says:

    re 27 – I like the fundies, the technical is on the edge in my book. Needs to hold at $59 or it gets more inexpensive. 

  29. 29
    zman Says:

    We'll have the full Permian table update in the morning with notes. Also the short form multiple tables will be included and AREX and XEC will be added to the short form Permian table. 

  30. 30
    zman Says:

    Tom – so nothing new at CPE today?

  31. 31
    tomdavis12 Says:

    Z. CPE nothing you have not covered. I am more impressed with Joe G than Fred C.

  32. 32
    zman Says:

    re 31 – understood. 

  33. 33
    zman Says:

    Offtopicthirty, grabbing lunch, back in a bit. 

  34. 34
    zman Says:

    Oil about to close north of $50, around 40 cents off the day, most of the pressure coming from Libya from what I see. Yawn


  35. 35
    zman Says:

    Street looking for an 11 Bcf read on the early gas storage look for Thursday. Makes sense given the mildness that was highlighted by the PointLogic demand data shown last Friday and reiterated in today's post. We're basically either at or very close to storage bottom now.  Soon this warm weather is going to translate into greater than normal cooling load. 

  36. 36
    snoles Says:

    re 34 – FWIW read a Goldman technical research note citing WTI needing to close above 200 dma of $51.34 to break out.  Other tech guys may have a differing opinion.  

  37. 37
    zman Says:

    re 36 – makes sense. 

  38. 38
    zman Says:

    Reuters now showing crude stocks expected to fall this week. 

  39. 39
    snoles Says:

    re 38 – wondered what was causing the bounce.

  40. 40
    zman Says:

    re 39 – that and the broad market sorting itself out a little better in the last hour. Honestly I think traders are watching the SC nomination process on MSNBC instead of stocks on CNBC at the moment. 

  41. 41
    brodway Says:


    i'm with Goldman on this one….technically, i'm looking for WTI as well as individual names to move up and above going up through major levels…. 200dma in most instances… 

  42. 42
    ctb14 Says:

    Genscape Cushing +762k

  43. 43
    james T Says:

    re 38 – Floating storage in Gulf of Mexico is basically empty.    Nationwide ports busy with recent movements,  so killer number may be in store next week, although I assume this weeks number to be decent.  

    Z -how many days to get a refiner up to speed ?

  44. 44
    zman Says:

    re 43 – you mean from a maintenance turn? If so, very short amount of time, power up and go. If it's coming back up after a fire, days to weeks. 

  45. 45
    brodway Says:

    starting to like the way XOG is acting technically….looks like a move above 19 and about a quarter starts to get stock above first resistance level….and on the way to the next resistance around 20…looks like stock attempted that break today touched 19.03 and retreated….maybe another day


  46. 46
    tomdavis12 Says:

    Rumor of the day:  PXD buys PE so the Sheffield dynasty continues.

  47. 47
    tomdavis12 Says:

    CPE  left NYC to go to Boston and some investment bankers.

  48. 48
    tomdavis12 Says:

    OAS very impressive cost reduction on a per well basis ( I remember the $10mm+ cost wells). NAPL shaving off some differential costs. Second stringer gave presentation. 

  49. 49
    zman Says:

    re 46 – it's a big slug of acreage, might make sense, as rumors go. 

  50. 50
    zman Says:

    re 48 – Re OAS, yep, $5.5 mm for Wildbasin wells this year on the 4 mm lb jobs. They're doing a lot of 10 mm pound and 20 mm pound jobs but the production forecast is not based on the full uplift seen in the 10 mm pounders. 

  51. 51
    zman Says:

    Beerthirty, back in a bit. 

  52. 52
    tomdavis12 Says:

    49 Both companies overpriced somewhat so stock deal would be the guess.

  53. 53
    snoles Says:

    re 46 – The combined company would have an amazing drilling inventory.  Probably take 2-3 more generations of Sheffield's to get through it all.  

  54. 54
    zman Says:

    re 52 – I've heard from guys who are closer to PE who say he's got absolutely no interest in selling out near term. 

  55. 55
    tomdavis12 Says:

    54  I was hearing Bryan would not have to be operator deluxe but maybe even more of a figurehead. Does not make too much sense to me.

  56. 56
    tomdavis12 Says:

    Z  Does the grandfather's estate own mucho PXD?

  57. 57
    zman Says:

    re 56 – apologies, dunno. 

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