Wrap – Week Ended 4/28/17



The ZLT was off 0.1% last week and is off 13.9% on the year. The XOP was off 0.5% last week and is off 15.6% on the year. 

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

The calendar for Energy Earnings Week 3 and the latest So Far This Quarter has been updated on the Calendar tab at upper left or can be accessed here

The Blotter has been updated for last week's trades here.


5 Responses to “Wrap – Week Ended 4/28/17”

  1. 1
    zman Says:

    Stolen from tomorrow's post:

    • Production Watch: Lower 48 production was reported as up 1.7 Bcfgpd (2.3%) month to month in February to 76.3 Bcfgpd, back to levels seen last August after almost continuous slippage since then.  The jump was driven by Texas, PA, OK, and the "other states".  On a YOY basis, gas production remains down 2.2 Bcfgpd (-2.8%) vs 2.6 Bcfpgd lower as of January.  The bump was sharper than expected but jives with our thinking of 1.4 Bcfgpd of growth this year over 2016 levels which is more growth than EIA's revised STEO currently projects. 
    • Net Imports Watch: No net imports in February. This is the lowest level on record at 0.01 Bcfgpd and compares to 3.0 Bcfgpd in February of 2016. We've been edging lower for months now to this new low and this coming summer we expect modestly negative (net export) readings for months at a time as opposed to the occasional weekly net export figure.
    • Demand Watch: February demand was weak at 82.8 Bcfgpd vs the five year average of 94.6 Bcfgpd as gas-weighted degree days were 24% below normal in the month driving the Residential and Commercial components of demand to a record low for the month and suppressing electrical sharply as well. This was weather and expected and we note that Industrial demand, which has a substantial district heating component remained strong. 
  2. 2
    Baylor Says:

    At what point do these higher NG prices translate into increased likelihood of survival for REXX?

  3. 3
    zman Says:

    Re REXX – they help but REXX largely has floors for 2017 at $3.02 (80%) so $3.20+ is an incremental help. Every quarter that passes helps with the one covenant that really matters, the secured debt to TTM metric, taking it lower with the new quarter's EBITDA replacing the lower one from a year ago.  Lower volumes mitigate some of the increase so again, it's only an incremental boost. They need more equity for debt conversions to really right the ship. It's not a BK risk so much as it as perpetually under funded issue until they take care of the debt. In 2018, the interest rate on the 2nd lien notes reverts to 8% interest, from the current 1% level.  They've laid out a 2 year plan that sees them through 2018 and you'll note they plan to spend less again in 2018 than in 2017 due to that constrained balance sheet. If they take care of the debt via swaps then they should be able to spend more, grow faster, drive per unit costs lower and expand margins for a given gas price. 

  4. 4
    Baylor Says:

    Assuming they do that over tue next 18 months, would you expect any material increase in share price 18-24 months from now?

    im way underwater on avg price but hanging on to them for now. 

  5. 5
    zman Says:

    re 4

    – We have repeatedly said we are not adding to the position under current conditions (gas prices, NGL prices, and their balance sheet and lack of ability to adequately fund their program. When good news has arrived in the form of asset sales or strong wells we have voiced restraint in added to the position and the name has popped and pretty rapidly dropped more than once.

    – Significant rise over that time frame will require further reworking of the debt in our view or a much higher natural gas price. We don't see prices moving high enough in your time frame to overcome the debt issue so further dilution will likely be needed.   

    – the market does not care about my cost basis so as far decisions go I don't either. "Getting back to even" is also not a viable investment strategy so I don't play that game ever. Lastly, at present REXX is less than 0.4% of our total assets, not worth selling unless I want to take a tax loss.  

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