03
May

Wednesday Morning – CPE, NFX, RSPP, FANG, VNOM

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Market Sentiment Watch: Nervous group conditions persist as oil tests recent lows. In today's post please find the oil and natural gas inventory previews, comments on the CPE quarter (beat and reiterate), comments on the NFX quarter (beat and raise with new exploration on the horizon and monster outperformance from the enhanced STACK fracs), comments on the RSPP quarter (beat and reiterate, strong new wells), comments on the FANG quarter, comments on the VNOM quarter, and some other odds and ends.  Given the timing and number of calls today some our comments may be more brief than usual and questions under the comments section will be addressed as time permits. Thank you for your patience. 

Ecodata Watch:

  • We get ADP employment at 8:15 am EST (no forecast, last read was 263,000),
  • We get ISM nonmanufacturing at 10 am EST (F = 55.8%, last read was 55.2%),
  • We get the FOMC announcement at 2 pm EST (no change to rates is expected this month).

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h - with oil and natural gas inventory previews
  3. Stuff We Care About Today - CPE, NFX, RSPP, FANG, VNOM
  4. Odds & Ends

Click the link directly below this to ... .

Holdings Watch:   

ZLT

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

Commodity Watch:

Crude oil closed off $1.18 yesterday at $47.66 on pre inventory fears, comments out of Saudi (late in the session) that austerity measures could be re-imposed, and all of the recent concerns noted below. The front month contract now looks like this.  The decline in gasoline prices, along with worry over shale production, Libya's rebound (still highly likely to be short lived), fear over what Russia may or may not do later this month have been pressuring crude. After the close, API reported a much more bullish (as weekly data goes) set of numbers than consensus was looking for (see below).  This morning crude is trading up slightly. 

 

OPEC Watch:  Bloomberg survey shows OPEC at 102% of compliance in April with April down 40,000 bopd from March to 31.895 mm bopd. 

API Watch:

  • Crude:  Down 4.16 mm barrels,
  • Cushing: Down 0.2 mm barrels, (Bloom consensus was down 1.26 mm barrels)
  • Gasoline: Down 1.93 mm barrels (either a leg up in demand or lower imports, likely both)
  • Distillates: Down 0.44 mm barrels.   

Oil Inventory Preview

 

Natural gas closed off two pennies at $3.195 even as the consensus for this week's injection to be reported tomorrow ground lower. As noted yesterday but worth repeating often, we expect near term volatility as shoulder season weather varies wildly with an expectation of an in line with the five year average type injection tomorrow but next week likely headed back to a bigger than average injection again on mild weather. However, in the next several weeks we expect a flatter slope of the injection line to form up as Canadian volumes continue to ebb seasonally pushing the U.S. into net exporter status more frequently and as generation begins to pick up. This morning gas is trading flat. 

 

Natural Gas Storage Preview

Street is at +55 Bcf (Bloomberg) or + 66 Bcf (Reuters) for tomorrow's report. 

  • Last Week: +74 Bcf
  • Last Year: +68 Bcf
  • 5 Year Average: +63 Bcf

Stuff We Care About Today

Today's Calls (all times EST)

CPE Reported Strong 1Q17 Results; Reiterates Guidance; Boosts Key Area Type Curve; Shows Off Impressive Early Delaware Data. 

The 1Q17 Numbers:

  • Oil differential: $1.70 off NYMEX.
  • LOE:  $6.61 per BOE vs guidance of $6.75 to $7.50/ BOE as power and SWD improvements helped; this compares to a loftier than usual $8.36/BOE last quarter (up on workovers).
  • Rigs: 3 rigs now, expanding to 4 during 3Q17 (leaving them at 2 in the Midland and 2 in the Delaware).

Guidance:

  • 2017 volumes:  Unchanged from prior guidance of 22.5 to 25.5 MBOEpd, up 58% on mid over 2016, and vs current Street of 24.2 MBOEpd; Z4 was at 25 MBOEpd prior to the release.
  • 2Q17 volumes: Established at 21.5 to 23.5 MBOEdp vs current Street of 22.9 MBOEpd, 
  • 2017 capex: Unchanged vs prior guidance of $365 to $395 mm.

Highlights:

Midland Basin:  Running 2 rigs at Wildhorse, 1 at Monarch.  Rigs likely to be moving between operating areas more soon. 

  • WildHorse -Howard County - Sidewinder field (North Howard County) Wolfcamp A type curve increased to 1.3 MMBOE (this is the area containing the monster Silver City well which is at 300,000 BOE less than 250 days in), up 85% from the 700 MBOE acquisition type curve in 2016.  
  • Wildhorse - Wright Adams WC A well, 289 BOEpd /1,000' 30 day IP (90% oil) and also tracking over that 1.3 MMBOE type curve. 
  • Wildhore - they've got 4 more wells to announce near term (3 LS, one longer WC A).
  • These are all being boosted by 50% increases to the sand loading and so far this has yielded a 90% increase in 30 day IP/ft.   

Delaware Basin (Spur):

  • 10K' Lower WC A - the Corbets 34 well, 100 MBOE 90 days, 90% oil. Solid. Two more WC A 10K' wells, an upper and a lower are planned for 4Q17,
  • 10K' WC B - the Saratoga well, is flowing back (no color provided, data likely on or just before the 2Q17 call).  A second 10K' offset will spud in 3Q17,
  • Activity will ramp here mid year in line with infrastructure updrades.  
  • Acreage increased to 19,300 net with the addition of 2,600 acres in Ward County for $54 mm (pending close) or $20,700 per acre.  The acreage add allows 93 locations in Spur to be lengthened from 5,000' laterals to 9,200 laterals and adds a net 41 locations (or adds the equivalent of 67  8,000' locations.
  • They only have 3 producing zones here and offset operators have shown as many as 3 more to be productive.

Balance Sheet:

  • Net debt to 1Q17 Annualized EBITDA of 1.7x vs 1.9x as of 4Q16; on a TTM basis and pro forma for the Ward County acreage leasing they are at a comfortable 1.8x,
  • Liquidity of $535 mm with an undrawn revolver at quarter end moves to ~ $480 mm pro forma Ward. 

Nutshell: Solid quarter. Oilier than expected and in line with thoughts of maintain an upper 70%'s oil mix this year. The operations update is strong and with development now set to regularly occur in all 4 operating areas we see additional catalyst potential and potential out year guidance increases as likely. We continue to own CPE as a top five position in the ZLT. 

NFX Report 1Q17 Beat; Increases Volume Guidance; Shows Off Big Kingfisher County STACK Well, Announces New Exploration on Current Footprint

The 1Q17 Numbers:

  • All in LOE of $4.35 per BOE 
  • Rigs: Likely at 10 even with the move to explore more of the vertical column (see below)

Guidance:

  • 2017 volumes:  Increased to 155.1 MBOEpd (new range of 149.4 to 160.8 MBOEpd) vs prior guidance of 149.85 MBOEpd, essentially flat with 2016.  
  •    For references, the  Street is at 152.9 MBOEpd,
  • Recall guidance on the 4Q16 call was lower than expected, 
  • 2017 capex:  Also increased to $1.1 B vs prior guidance of $1.0 B.
  • They note they have allocated $100 mm to test new zones on existing SCOOP acreage.  

New acronym watch: SCORE - Sycamore, Caney, Osage, Resource Expansion.  

Highlights:

Anadarko Basin (SCOOP and STACK):   (63% of domestic, 71% of "Core" domestic, and 60% of total company production in the quarter).  Note that the Anadarko was flat with the prior quarter and that it peaked in 3Q17 due to well hookup timing but it should now be heading higher on a quarterly basis and should in time get oilier. 

  • Enhanced completions - 2,100 #/ft and 2,100 gallon/ft wells continue to outperform the 1.1 MMBOE type curve (60% oil). Recent southern Kingfisher County well, the Burgess 1H-18 well, doing well over a 1.5 MMBOE curve (70% oil), with 30 day and 60 day oil only rates of 355 and 323 bopd per 1,000' of lateral respectively.  Look for questions on what's different with this one. 
  • Downspacing tests - over a dozen pilots in progress, look for color on the call as to spacing the ultimately roll with as they said in the release they are near to moving ahead with full field development. 
  • SCORE - we've been waiting for them to test the Osage and other potential zones ... this should set up a list of late 2H17 and early 2018 catalysts.
  • Anadarko Basin 4Q17 now seen 108 to 118 MBOEpd range (up 3 MBOEpd from prior).  They listed the 2018 and 2019 exits as subject to future update.
  • Expanding midstream options.  

Other Areas:

  • Williston Basin (Bakken/Three Forks)- 13% of domestic production but not likely a sale candidate. Enhanced completions of a 3 well pad yielded a 30 day average IP (including 1 TFS well) of 2,445 BOEpd (75% oil) (10 mm pound completions for an all in completed well cost of $6.1 mm).  Other than a blurb in the press release they saw no further mention in the accompanying slide show however and given the Anadarko Basin priority on spending we see the program as slightly better than tread water. 
  • Uinta - no mention in the release. Monetization a possibility though timing is not the best for that now. 
  • China - no update, project in natural decline. 

Balance Sheet:

  • No incremental borrowings from year end,
  • Net debt to 1Q17 Annualized EBITDA of 1.7x vs 1.7x at 4Q16,  with net debt to TTM EBITDA at 1.9x. They see executing their long range plan while remaining in the 1.5x to 2.5x debt to trailing EBITDA range. 
  • Liquidity of $2.4 B with an undrawn revolver and cash hoard of $0.5 B. 

Nutshell: Nice beat and raise. STACK outperforming expectations and is likely to continue to improve. The idea of other zones under the same acreage has long been an analyst favorite question so the SCORE should be welcome news. Look for sellside impatience with the noted timeline for delineation there, not this quarter but by the 3Q report. We could care less. Given the guidance estimates will be on the rise making this increasingly STACK story even cheaper as the Street begins to value it on 2018 forward EBITDA. We continue to own NFX in the top 5 positions in the ZLT.

 

RSPP Reports Strong 1Q17 Results; Reiterates Guidance and Plan

The 1Q17 Numbers: 

  • Oil differential:  Pre hedge oil price was $1.90 off NYMEX vs $2.06 per barrel off NYMEX WTI last quarter. 
  • LOE: $5.40 per BOE vs $4.41 last quarter. Guidance has this easing as the year progresses. 
  • Rigs: 6 now going to 8 by year end as per prior plan. Looking to add 2 rigs per year in 2018 and 2019. 

Guidance:

  • 2017 volumes:  Reiterated prior guidance of 53 to 57 MBOEpd, up 89% on mid (including inorganic growth) over 2016. The Street is at 55.5 MBOEpd. 
  • 2017 capex: Maintained prior guidance of $625 to $700 mm,
  • Longer term guidance for 2018 and 2019 left in place (30%+ per year with CF neutral in 2018 on $55 oil after a modest outspend in 2017).

Highlights:

Midland Basin: Just the quick stuff

  • One of best wells completed by RSPP so far, the Spanish Trail 344 1H (WC A) well, 147,000 BOE in the first 90 days, the WC A.
  • Ector County - completed furthest west well yet in the Midland for RSPP, the Parks Bell well, in the WC A with a 1,552 BOEpd (83% oil) 30 day rate. They also added acreage just south of this well during 1Q17.  Look for location add type questions on the call. 

Delaware Basin: 

  • First start to finish RSPP well, the Crockett Reese well, Wolfcamp A, with a 7 day rate of 1,882 BOEpd (71% oil). Looks comparable. 

Balance Sheet:

  • Net debt to 1Q17 Annualized EBITDA of 2.2x (2.0x TTM on a pro forma basis) vs 2.4x as of 4Q16 (including Silver Hill EBITDA), 
  • Liquidity of $954 mm with an undrawn revolver. 

Nutshell: Strong quarter that in a vacuum should be well received. We like the lack of a move to add more rigs at this time keeping to the strong prior guidance level. Estimates likely to be unchanged in the wake of the call. Potential for modest increases in guidance are elevated.  We continue to own RSPP as the largest Permian position in the ZLT.

Other Stuff:

FANG (unowned) reports 1Q17 Beat; Guidance Unchanged. 

  • Production of 61.6 MBOEpd (organic sequential growth of 13% in the quartert) vs 59.8 MBOEpd expected,
  • Oil differential of $2.11 off NYMEX WTI
  • LOE of $4.80 per BOE,
  • EBITDA of $175 mm vs $162 mm expected
  • Guidance: 2017 at 69 to 76 MBOEpd, unchanged from prior guidance. Capex unchanged as well.
  • Rigs: 8 rigs running as per prior plan (6 running in 1Q, added two, as per plan, since), no expected rig adds rest of year. 
  • Ward County WC A - first one for them, 15 day rate of 210 BOEpd/1,000' (89% oil). 
  • Conference Call: Today, 9:30 am EST. 

VNOM (unowned) Reports Stellar 1Q17 results; Guidance Increased

  • Production of 8.5 MBOEpd vs 8.2 MBOEpd expected,
  • EBITDA of $29.9 mm vs $26.7 mm expected
  • Cash available for distribution of $0.302 vs $0.149 a year ago. 
  • 2017 Volume Guidance: Increased. Raised guidance to 8.5 to 9.0 MBOEpd vs prior range of 8 to 8.5 MBOEpd.  
  • This growth is driven by operators on Spanish Trail (primarily FANG and RSPP). 
  • We will issue an updated model here soon but estimates are traveling higher.  
  • Conference Call: Today, 10:30 am EST.  

Other Other Stuff

  • REXX - opts to pay quarterly preferred dividend in cash instead of shares. 

Odds & Ends

Analyst Watch:

  • SRCI - Wells Fargo cuts to Market Perform from Outperform, 
  • XOG - Wells Fargo cuts to Market Perform from Outperform. 

105 Responses to “Wednesday Morning – CPE, NFX, RSPP, FANG, VNOM”

  1. 1
    zman Says:

    http://www.timescall.com/carbon-valley-news/ci_30959619/firestone-explosion-started-by-gas-from-cut-flow

     

  2. 2
    zman Says:

    Likely the Wells Fargo downgrades noted above are in relation to this finding regarding the APC (unowned) well. We see that as a knee jerk reaction to something that while unfortunate can happen, related to APC, and not the companies in question and is not something that's endemic to companies operating in CO. It will and has caused near term concern but its unlikely to be a major interruption for the names going forward.  Look for comments from SRCI on Friday's call and XOG next week. 

  3. 3
    zman Says:

    CPE call in 10 minutes, notes to follow. 

    Oil at $47.90 with 40 minutes to go until equity open, off yesterday's lows on API but unable to hold $48 overnight

    NG flat at $3.20. 

  4. 4
    zman Says:

    Analyst Watch

    OAS – SunTrust raises to Buy, 1Q17 results there next week. 

  5. 5
    zman Says:

    Analyst Watch

    RSPP – Morgan Stanley, Overweight, target $61, says buy now in front of 2H17 catalyst. 

  6. 6
    zman Says:

    CPE presentation here:

    http://www.callon.com/news/presentations

    Notes in a few minutes

  7. 7
    zman Says:

    CPE 1Q17 Notes

    LS and WC – tracking 1.0 MMBOE type curves (average) across all areas

    Wildhorse – noting the north Howard 1.3 MMBOE (85% oil) type curve revision for the WC A

    Encouraged by results and see additional flow units (zones)

    Wildhorse – in full development with 2 rigs- 6 wells in 3 zones in 2Q (adds a Wolfcamp B test)

    In other parts of Midland Basin (Monarch and Ranger) – more wells in LS, WC A, WC B in 2Q

    Spur – first CPE well in 3Q

    2018 – Spur (Delaware) will be a new growth wedge, see 40,000 BOEpd exit from 2018

    Operational Performance

       LOE back in better shape and expect to improve on a per unit as year progresses, see LOE down 50 to 60 cents per BOE using permanent power for lift and better SWD. 

    WildHorse – slide 8 – 2 rig program

       Infrastructure progress being made, tank batteries, water gathering, adding SWD and 3rd party SWD, 

       See aggregate of 12 CPE drilled and completed wells in 3 zones completed by end of 2Q17. 

       Central Howard WC A type curve could go up 2H17

        Lower Spraberry – longer to dewater, other offset operator wells have taken a new trajectory above the 850 MBOE type curve they use after dewater

      Plan for rest of 2017 on slide 11 – combo of WC A 2 well pads, stack of LS, WCA, WCB, LS and WCA pad and WCA and WCB pad

     Spur 

    – completed a WC B, the Corbet well, drilled by prior, completed by CPE – strong at 90 MBOE, 90% oil, analyzing core for future landing zones (slide 13 – thinking outsized proppant loading not needed, will do some 2,000 to 2,500 #/ft loading in rest of year's tests),

    – dedicated rig expected early July and thinking 2 rigs by early 2018

    Slide 15 shows flow units (zones) by area proved up so far. 

  8. 8
    zman Says:

    CPE 1Q17 Notes 2

    – borrowing base review in progress, will add Spur, see up

    – forecasting sequential growth of 10% and further LOE reduction

    – expect average well performance to trend higher over time 

    Going to Q&A 20 minutes in … 

  9. 9
    zman Says:

    CPE 1Q17 Q&A

    Q) Wright Adams looking like the Silver City well, how does flowing pressure compare 

    A) Very excited about that well, pressures are good, also include the Cheek Unit well  … excited, may move that curve up again, just need more time and need more water management infrastructure as these wells are held back a bit.

    Q) Spraberry at WildHorse – dewatering used to take 60 to 90 days, is there a rule of thumb on how much frac load to recover

    A)  It's between 90 and 180 days before we can tell how they are going to really perform. Spraberry is an interesting opportunity across the basin, it was deposited form the north, bigger grain size, more porosity, perm, oil, trying to refine by pulling back on frac load to better refine dewater.

    Q) Maverick area (central Howard)

    A) It's early days, the Garrett Reed WC A – management convinced its not showing full potential due to water handling, excited about it, but confident can do better down there … this is the alluded to potential 2H17 type curve move higher.  Need more time and need more wells here to do that. 

    Q) Longer term plan

    A) Hope to do better than the current exit rate guidance for 2018, thinking that 5th rig in 2018 now may go to Delaware instead of Midland. 

    Q) Thoughts on vertical and horizontal spacing

    A) Focused on figuring that out, want to get to a very efficient program development, so not yet. WildHorse – will have more data next several months in the WC A and then the B will be after that.  Further along at Monarch.  Then at Spur, tremendous potential, noting the tremendous results being reported by others and then that leaves Ranger which is solid, happy to have it, good returns and its HBP.  So no real answer yet on spacing but he's excited to figure it out to run an efficient program in 2018 on the bigger rig program. 

    Q) Spacing

    A) Don't have a number we want to share in Howard.  In Monarch (Midland) working the idea of moving up to 13 wells per section.  

    – The Monarch 3 well pad testing two LS and WC on the pad – just flowing back now, next call. This could move it to the 13 wells vs the current 11 well thinking, so we could see a good sized location bump on 2Q17 call. 

    … that comment helping to move the stock now. …

  10. 10
    zman Says:

    CPE remains quite cheap below $15 in our view, has room to easily go to $20 on stable oil by late this year. 

  11. 11
    zman Says:

    CPE 1Q17 Q&A part 2

    Q) Garrett Reed – Maverick area, central Howard, are those normalized, it's a short well

    A) Not normalized, it's 1,000' short of the type curve length of 7,500'

    Q) Oil mix – a bit high, anything there

    A) Early time production is oilier, and then Howard is north of 90% oil … if we see that continue over time there could be a little upside to mix for the full year. 

    Q) Delaware – Corbett – more color on refining landing zone in relation to how well it's actually done. Also was the WC B well (the Saratoga) landed in optimal zone

    A)  Corbett after 4 months, still strong production and pressure, great well.  Generally though we would change the landing zone to improve it.  On the Saratoga, we would take it slightly higher, it started flowing back 5 days ago, real strong pressure.

    What we are learning from the core is how to best confine the frac to capitalize on some of the natural fractures seen in the core to improve further.

    Q) Ward County add in spur, was that post quarter

    A) Sought running room around the position that was truly contiguous, identified opportunity sets, there will be more to come, working on them now, also some trades that will also lengthen laterals meaningfully. Will roll through cash flow statement in 2Q, will be high working interest acres (75 to 80%). 

    Q) Going back to Ranger – what zone and when Wolfcamp C

    A) All in the Lower WC B in Reagan County. Very excited about the C, noting a PE well, not yet on the schedule but looking to get to it. 

    "You're excitement is certainly clear"

    Q) Wolfcamp C vs B, it it better rock with more oil saturation?

    A) Yes

    Q) Withing WildHorse – moving south from Sidewinder, is Fairway better or worse than Maverick  (Maverick is the middle field between Sidewinder and Fairway north to south within Howard), 

    A) Very excited about it, don't see them worse, will be able to tell you about it next quarter, the Colonial Pad, two WC A wells there, completed same way as the Silver City well.  Now we see it as equivalent to Maverick.  Wow. 

    Call over, very positive tone, both management and sellside. 

  12. 12
    RB Says:

    Here's my current chart of CPE with a note on it.  The stock has pulled down hard and there is a lot of overhead resistance, the thickest being around $14.50.  I'd say that target is achievable on a swing.  News can affect the stock so today is about the worst day possible to opine, and especially just before the inventory report.  That said, my goal would be to buy it along the lower trend line around $11.50.  It may not allow that chance today and after a little time a different chart config, might make me buy higher but today I wouldn't.

     https://stockcharts.com/h-sc/ui?s=CPE&p=D&b=4&g=0&id=p95011618055&a=521623130&listNum=77

  13. 13
    zman Says:

    CPE up 3%, NFX up 3 to 4%, RSPP up 3+%

    Potential to rise further today on positive EIA but that's not my thing, all stronger after today from longer term standpoint.  

  14. 14
    zman Says:

    re 12 – thanks for the thoughts. If it gets weak on EIA I'm a likely Trading position adder. 

  15. 15
    zman Says:

    If anyone has notes from the APC (unowned) call feel free to share.  Worry over their vertical well shut ins in CO is taking SRCI and XOG and PDCE down again today, helped by downgrades as noted in post for two of them. 

  16. 16
    zman Says:

    SLCA (unowned) leading sand name breaking support to fresh 8 month lows. 

  17. 17
    nrgyman Says:

    Howard Co looks like it is emerging as a top core area for CPE.  

  18. 18
    james T Says:

    re15 Read news,  french drain line intersected flow line from well.   APC turned on the well in 2017 but maybe contractor putting in french drain should have been looking for pipes.   I am assuming french drain is part of housing development nothing to do with oil wells ?

  19. 19
    zman Says:

    re 17 – It will be interesting to see if PE starts talking about Howard County now, in the wake of the DBLE buy. They surround CPE there, have good wells in the WC A, WC B, LS.  I know PE said they are done with buying things for a time and in digestion mode but CPE is cheap now. 

  20. 20
    zman Says:

    re 18 – what I took away from the story at the top of today's comment stack was that the flow lines were not properly abandoned form an old well.   I'll go check APC's transcript … this is playing a lot like Colorado worries of last year over legislation that attempted to increase the set back distance to occupied structures for new drilling. Seems overmuch.  

    Oil inventories in 10 minutes. 

  21. 21
    zman Says:

    Adding to 20, I have a friend at a local gas company. They have guys that drive around all night in cars teched out to detect minute traces of natural gas. They pick up all kinds of gasses and then the crews look for that. If this is an old cut of an improperly abandoned flow line that had gas in it and it was seeping out over time I'm surprised they didn't detect it. He tells me they can detect a tiny leak, you can't smell (that would be treated gas) in your home, from outside driving by slowly in the middle of the night. 

  22. 22
    tomdavis12 Says:

    CPE  did make a comment that they might scale back on their rig commitments if crude were to go below $45. I guess that will be the line in the sand to scale back our own commitments. 

  23. 23
    james T Says:

    re20  correct.

  24. 24
    zman Says:

    NFX call n 35 minutes, up 5+% now. 

    The way I structure my portfolio, the top 10 names are roughly 60 to 70% of assets. The top 5 are generally 40+% of assets. The tope five are OAS, PE, RSPP, NFX, and CPE. Group action has had those bleeding back of late on no news. Nice to see some snap back with positive results and outlooks. The more risky names are far lower %s of the portfolio with a name like REXX now well under 1%.  COG who I don't see as risky recently raised to 3% and NG names in general still near the underside of 20% of total. 

  25. 25
    nrgyman Says:

    RE 18:  Read that it was a gas line from a well that was not in use but was not capped.  Implication was when the well was re-started this line wasn't checked and the gas flowed into the home area.  A properly capped pipe would not have caused the problem.  APC acquired the well form NBL, and there were two previous owners.  The pipe likely was not properly capped by one of these previous owners.  Investigation still ongoing.  This area of CO is not where an accident like this is going to be hidden from view.  Could re-open more political issues, though this incident has been described as "unusual" (as in not normal) by investigators.  Analysts are taking their shot, perhaps the pols will as well.  Meanwhile APC shut in over 3000 wells to insure proper security.  If this would have happened to a smaller player, like SRCI or XOG, perhaps it would be more devastating to them than for a big name like APC.  That is a market concern for the smaller names.  Multiple depressing for now, until this is worked out and ultimately forgotten.  Another incident though will reinforce the dangers and could raise longer term multiple concerns.

  26. 26
    zman Says:

    EIA Oil Inventory Quick  (oil at $47.90 just prior) 

    Crude Dow 0.9 mm barrels

         Throughput – near flat week to week at 17.2 mm bopd  

         Imports – down 0.65 mm bopd from prior week 

         Exports – big week to week drop, cut in half, been seeing a lot of yoyo action here. 

         Lower 48 produciton – reported as up 25,000 bopd week to week 

    Gasoline – Up 0.2 mm barrels

         Demand – OK, off slightly from prior week.   Export demand picked up. 

    Distillates – Down 0.6 mm barrels 

         Demand – big jump, up 0.6 mm bpd week to week, very high for time of year.  Export demand remained solid. 

    Nutshell:  Smaller than Street expected decline in crude, tripped up by a sharp week to week reversal in crude exports. Refiner throughput held up nicely and yet both products did better in terms of not build as much or at all (distillates). A true mixed bag, likely reads as a bit negative for oil give size of miss and since seasonal driving demand has not yet shown up in the data. 

    Crude at $47.50 as I get this out 6 minutes after the report. 

  27. 27
    nrgyman Says:

    RE 19:  FANG would also be a logical buyer of CPE.  They have Howard Co assets nearby to CPE and their Delaware assets are nearby CPE.  FANG has a big multiple to do an accretive deal.  CPE would be a good match for them and they might be in a better position than PE atm to do an acquisition.

  28. 28
    james T Says:

    Z – comments on SPR draw and adjustment # ?

  29. 29
    zman Says:
      Refiner Throughput (000 bopd)
    YTD 2016                                      15,943
    YTD 2017                                      16,200
    Delta                                           257
    Delta % 1.6%
       
    Three weeks ago                                      16,697
    Two weeks ago                                      16,938
    Last week                                      17,285
    This week                                      17,177
  30. 30
    zman Says:

    SPR was drawn 1.5 mm barrels

    Still working through numbers. 

  31. 31
    zman Says:
    Net imports  (000 bopd) 
    YTD 2016                                    7,453
    YTD 2017                                    7,428
      YoY Delta                                       (26)
      % Delta -0.3%
       
    Four weeks ago                                    7,275
    Three weeks ago                                    7,189
    Two weeks ago                                    7,245
    Last week                                    7,760
    This week                                    7,726
  32. 32
    zman Says:

    EIA showing weekly production now crossed over year ago

    U.S. oil production  M bopd 
    YTD 2016                        9,077
    YTD 2017                        9,087
       
    Last week                        9,265
    This week                        9,293
  33. 33
    zman Says:
    Crude Stocks Change (000 barrels)
    YTD Build '15                                 109,375
    YTD Build '16                                  61,139
    YTD Build '17                                  48,800
       
    2016 to 2017 Delta                                  (12,339)
    % 16 to 17 Delta -20.2%
  34. 34
    zman Says:

    NFX call in 10 minutes

    Slides can be found here:

    http://ir.newfield.com/phoenix.zhtml?c=63798&p=irol-presentations

  35. 35
    zman Says:

    Cushing now 400,000 barrels over year ago level, or 1%. 

  36. 36
    zman Says:

    NFX call about to begin, notes in a bit. 

  37. 37
    zman Says:

    NFX 1Q17 Call Notes

    Boothby comments

    See near term business plan as aligned with market realities (Global inventories worked down with the help of OPEC cuts)

    Minimized outspend in 2017

    Spending levels set to maintain strong balance sheet

    Plan was built to learn more about STACK via multi well spacing tests

    SCORE – (new) – must understand it to develop, said they are very encouraged from early results

    In February some of you ?'d our ability to go faster, we are leaning in now (higher guidance)

    Running ahead of production, beat domestic estimates by 6,000 boepd, momentum continues into rest of year.

    Trajectory of 2017 will impact 2018 and 2019 as well (as noted in post, those 2018 and 2019 exits are subject to upward revision)

    … 

     

  38. 38
    zman Says:

    NFX 1Q17 Call Notes 2

    Cash flow was close to capex during quarter

    Noting cash opex was below guidance

    Anadarko Basin update

     – 85% of capex to SCOOP/STACK

     – Enhanced completions – standard is the 2,100#/ft/2,100 gal/ft … testing significantly larger ones, also tweaking several things in the 2100/2100 frac

        – 15 wells YTD at 2,100/2,100 – all outperforming 1.1 MMBOE type curve

    – Spacing comments

    – have not completed a new well in the last 60 days due to big pad drilling and completions

    – controlling everything

       1) gas takeaway – new 10 yr agreement starting late 2018 (brownfield expansion, 

       2) good access to oil takeaway to Cushing

       3) water management – network of pipes and storage and recycling. 

    SCORE – actively accessing these zones – must understand economics on this, update with some data later this year.   Sounds like they have some results in hand. 

    Going to Q&A 15 minutes in …

       

  39. 39
    nrgyman Says:

    Solid reports today from Permian names CPE, RSPP and FANG.  So naturally the biggest gainer atm is JAG–now in its 3rd consecutive up day.

  40. 40
    zman Says:

    COG – noting COG now above pre release price again. Glad to have had the oppy to double our position on the silly weakness during the call. 

  41. 41
    zman Says:

    re 39 – I like it as shown in prior posts

    http://zmansenergybrain.com/category/jag/

    but don't own it yet, it's bouncing off all time lows, not going to own it prior to the call next week. 

  42. 42
    nrgyman Says:

    CPE:  Analysts liking it:

    https://seekingalpha.com/news/3262841-callon-petroleum-plus-2-percent-analyst-says-q1-shows-prior-ops-issues-transitory?app=1&uprof=51#email_link

  43. 43
    zman Says:

    NFX 1Q17 Q&A

    Q) Burgess well

    A) Only a 5,000' lateral, it's larger than our 2,100 / 2,100 frac.  It's right in the middle of our STACK black oil acreage.  

    Q) Bigger fracs and interferance

    A) Most wells were single wells up until 12 months ago.  As we move closer laterally and vertically … testing that. 

    Q) asset sales

    A) $0.5 B in cash. no active asset sale discussions at this time. 

    Q) Last outlook used $50 to $60 oil with double digit growth and reach CF neutral … could that go to more of a $50 to $55 level?

    A) he talked around that answer, clearly there is upside … we like being conservative. We're in a great place today, momo on our side, team working to make the wells better every day. 

    "Not losing any sleep over bottle necks in SCOOP and STACK"

    Q) Goldman – question – how do you end up at the upper end of the debt range, since you are under the middle of that range now?

    A) What price environment – it matters what kind of acquisitions we do, but absent that its about what kind of oil price environment. If we see low $40s, we have to adjust accordingly. 

    SCORE – all zones known to be oil saturated, produced vertically, we're going to test HZ

    Being a big coy regarding that Burgess well – that thing is a monsters outperformer – see slide 4.

    All of our rigs are tied up on multi well pads – again, not a single completion in last 60 days

    Q) Bakken – called it a lost asset 

    A) It's not lost, it's a good performer, 1 rig program, see comments in post. 

    Q) What's needed prior to bumping STACK type curves – more time or more testing. 

    A) Working every day to figure out full field development. Encouraged by the 40 to 45% uplift of these 15 wells but the challenge is how to translate that back to full field. These are bigger jobs but can't say these are going to be the ultimate size. Asking for patience. Makes sense. 

    Q) Bakken – when get more capex or sell

    A) I love the Bakken. I love the team. I love the results. We will make the right decisions over time. A lot of you wanted us to sell it at $26 oil. Don't think that would have been appropriate. We've actually grown production with a 1 rig program and we drill the program and somehow stay at 300 locations. 

    Someone should ask re China, Uinta. 

    Call over, very positive tone, hitting on all cylinders, etc. Should see some target ups there next few days. 

     

  44. 44
    zman Says:

    re 42 – yeah I do. 

  45. 45
    pac10jd Says:

    XOG down over 7%?  Have not seen any news.

  46. 46
    brodway Says:

    Zman..

    you were right on PDCE getting to low 50's….sitting there now….i'm thinking its extremely cheap here but not in a hurry to add as there is considerable weakness in the space

  47. 47
    zman Says:

    re 45 – it's related to APC's decision to shut in their vertical wells in Colorado after a house fire killed 2 people. That's tanked APC and pushed SRCI, PDCE and XOG lower.   SRCI reports Friday and will likely address it on the call or in the Q&A. 

  48. 48
    zman Says:

    SPR release now total's 5.8 mm barrels YTD … it appears 2017 planned sales are 10 mm barrels.  So those figures I show each week on YTD build would be lower for the 2017 one were it just a function of market forces. This week's was the biggest so far this season at 1.5 mm barrels. 

  49. 49
    nrgyman Says:

    RE 47:  NBL is the largest Wattenberg producer and it is down -5.7% today, along with APC (2nd largest) down -8.81% today.  These two names are far more diversified than the smaller names, yet they're still taking a big hit.  At some point (possibly soon) all of these names are likely going to be a solid trading opportunity.  

  50. 50
    zman Says:

    re 49 – much like the ballot box issues of last year, they should all speak to this on their calls, exposure, plans. This was a very old vertical well. BOP, care to chime in with thoughts re SRCI?

  51. 51
    zman Says:

    RSPP call at 2 pm EST. 

    Stock still up 3+% on results and despite the group ease post inventories.

     All of the reporting names in today's post remain up despite the XOP rollover. Good to see some good news matters. Not a big deal but at times with worry over the commodity, you often seen baby and bathwater action and we're not seeing that. 

  52. 52
    zman Says:

    SLCA (unowned) – down 5%, daily chart broken, appears to be questing for a bottom in the low $30s. 

  53. 53
    tomdavis12 Says:

    RRC  new low. Should have some support $23 – $24.

  54. 54
    zman Says:

    re 53 – just unrelenting move there. 

  55. 55
    nrgyman Says:

    RE 51:  FANG pumped by JPM, saying it is their top smid-cap E&P name:

    https://seekingalpha.com/news/3262844-diamondback-energy-plus-2-percent-big-q1-beat-j-p-morgan-says-top-midcap-e-and-p?app=1&uprof=51#email_link

  56. 56
    zman Says:

    JT – have to say those trackers were directionally correct on the exports dip. Pretty close there.  

  57. 57
    james T Says:

    re48 – SPR site shows total of 6.4 thru April 28. 

  58. 58
    brodway Says:

    re: 54

    i still think its related to shoulder season partially…..this is not the time that traders want to bet on nat gas…that will change in a several weeks

  59. 59
    zman Says:

    Hmm – looking at EIA site, shows 5.8 ytd. Dunno, will check into later

    Offtopicthirty, signing off for lunch and expected quarter sized hail. Back in 30 minutes. 

  60. 60
    nrgyman Says:

    RE 59:  As I understand it, the SPR release is scheduled over time.  In the immediate time frame (next few weeks) less than 1 mm bbls remain to be released.  Later this year it could pick up again.  As for why the SPR is releasing stored crude into an over-stored market, I don't fully understand it.  

  61. 61
    zman Says:

    Re 60 – part of this year is to pay for maintenance for the SPR as well as functional  testing to make sure it works as expected. The later part of year stuff is congress robbing the piggy bank for highway related spending. 

  62. 62
    james T Says:

    I used this link to SPR,  dated April 28 ?   https://http://www.spr.doe.gov/dir/dir.html

     

  63. 63
    zman Says:

    re 62 – understood, thanks, they don't match what EIA shows. 

    EIA's end of year 2016 total was 695.1 mm barrels

    Current is 689.3 mm barrels 

    for a drop of 5.8 mm barrels

     

  64. 64
    zman Says:

    Imports from Saudi were down about 100,000 bopd week to week. 

  65. 65
    james T Says:

    re63 – Naturally they don't match, what was I thinking ?  

  66. 66
    zman Says:

    re 65 – your tax dollars at work. 

  67. 67
    zman Says:

    APC down almost 10% now, dragging the Wattenbergs down with it, especially SRCI and XOG. 

  68. 68
    zman Says:

    OT – Puerto Rico files BK. Owes $70 B. 

  69. 69
    zman Says:

    RSPP call in 20 minutes, stock holding up about 4% on day at $39. 

  70. 70
    zman Says:

    No further Saudi or Canadian flood of crude this week:

  71. 71
    zman Says:

    RSPP call about to begin, notes in a bit. 

    Presentation link:

    http://rsppermian.investorroom.com/presentations

     

  72. 72
    nrgyman Says:

    RE 70:  With oil sands production down and Canadian imports steady, the Canadians must be shipping out of their inventories.  So Canadian inventories should be dropping, but that doesn't seem to matter to oil markets.  

  73. 73
    zman Says:

    RSPP 1Q17 Notes

    Results were in line with to exceeding expectations

    Pleased with infrastructure build out to support growth in 2H17

    Slide 4 – Crockett Resse – still cleaning up, 2,500 psi, first operated well in Delaware – see post 

    APC operates wells #5 and #8 on slide 4 which RSPP as non op – good wells, flow back 

    Ector County well – we do not carry WC locations in this area … highly economic

    Midland – Spanish Trail 344 1H – 147 MBOE – per foot basis – one of best wells 

    North Midland County – Mask wells 231 MBOE and and 218 MBOE in first 180 days. 

    Our average well pays out in less than a year

    No borrowings on revolver. 

    Hedges but with upside exposure. 

    See ability to drive efficient growth in Delaware Basin as have in Midland Basin 

    Midland – 4 rigs

    Delaware – 1 to 2 rigs in the quarter.  Goes to 3 rigs in May vs prior July.  

    8th rig by YE – total no change, just a little faster with that rig #7 (3rd in Delaware)

    18 operated DUCs at quarter end

    Noting the acre adds noted in post. Blocking up via bolts and swaps. 

    EBITDA exceeded capex in the quarter. 

    Leverage falls below 2x at $55 this year with slight outspend

    CF neutral in 2018 at $55 as per previous guidance. 

    Going to Q&A 15 minutes in … 

     

     

  74. 74
    crysball Says:

    Incidentally, Canada has no SPR

  75. 75
    snoles Says:

    re 72 – Agree with the thesis.  Does anyone follow Canadian inventory data?  Do they have anything similar to our EIA or does the API publish a number?

  76. 76
    nrgyman Says:

    RE 66:  More tax dollars at work:  Add to SPR reserves when there is a shortage of oil and prices are high, then sell reserves when there is an oil glut and prices are low.  Has anyone figured out how much this 'management' has cost the taxpayers?  

  77. 77
    zman Says:

    re 75 – you're looking for this:

    https://www.neb-one.gc.ca/nrg/sttstc/crdlndptrlmprdct/index-eng.html

    Taking notes on a call

  78. 78
    james T Says:

    Chatter from Saudi and Opec types seems quiet this week compared to previous weeks , maybe just me.

  79. 79
    RB Says:

    BB says the short interest in CPE is roughly 18%.  We saw a nice early bounce and that has given way to some selling, albeit not nearly on as strong a volume as what pushed it up this morning.  Will be important to see where it closes in the range today.  I won't be around, but I will be looking this evening at how the stock traded in the last half hour and especially the last 15 minutes.  

    A close high in todays range, with some follow thru buying in the morning would be enough to get it on its way, after it gets past the previous pivot high, which is around $12.50…g/l 

  80. 80
    zman Says:

    RSPP 1Q17 Q&A

    Q) Ector County- locations, how many intervals, why not before in. 

    A) they get thinner to the west, also transitions from shale to a carbonate but the WC A is shale there still, definitely exceed our expectations, see 20 to 30 locations that could be added over there. Does not see adding WC B locations over there 

    Q) New Mexico 

    A) not ruling it out, just have not seen compelling reasons to go over there 

    Q) Delaware – Winkler County – WC B prospectivity

    A) We like the WC A nad WC B – the WC A looses the x/y sands but keeps all the shale A … shooting 3D now, like what we see from offset operators, then will see us drill some in Winkler (Catalyst)

    Q) LOE in Delaware

    A) Trucked water has been the real reason for the elevated LOE, will alleviate that and bring LOE down

    Q) Delaware – how to think about optimal pad vs cash flow

    A) can't give a straight answer, will test different zones, adding 2nd and 3rd bone and a different landing in the WC A , so will have to answer that first.

    Q) 3D status

    A) helps in our geosteering, have used it well in Midland Basin, will use it Delaware – need 3D in the east and south in the Delaware, have it in the west (top part of Loving County)

    Bone Spring well with 17K' lateral!? – missed where 

    Q) Crockett Reese – completion

    A) stages were shorter than conventional design, doubt it will be typical of their go forward, 2,500 #/ft and tighter clusters

    Q) 2 mile Middle Spraberry (catalyst list item)

    A) Drilling 2 of those 10K' at Spanish Trail – results before end of year.

    Q)  Inflation

    A) varies a lot, sand and steel have gone up drastically (20 to 30%), other things only marginally, leaving well costs up 10 to 15% since YE (this is what they said before … then said 15%. 

    Q) Day rates – new rigs vs last year

    A) $17.5 to $18.5K per day – this would be up off the lows but down for them 

    Q) Delaware delineation in 2017 and 2018

    A) WC A – looks like the primary target. 70% of Delaware capital in the WC A,  but 30% looks at other zones including the B and the Bone Springs, and then spacing and then infrastructure, hope to have better idea of zones and spacing 

    Q) any other gating factors aside from own infrastructure in the Delaware. 

    A) good question, no don't think so. 

    "fantastic, great update guys"

    Call over – extremely positive tone. 

     

  81. 81
    brodway Says:

    re: 76

    you took that right out of my mouth Nrgyman…..

    great observation….

  82. 82
    zman Says:

    re 79 – thanks for the follow up there. 

    re 78 – comments supporting deal this week from Iraq, UAE, and Nigeria so far. 

  83. 83
    zman Says:

    RSPP tied for HOD at end of call. 

  84. 84
    nrgyman Says:

    Any whispers about who acquired the NBL Marcellus leasehold?

  85. 85
    zman Says:

    re 84 – not loud enough for me to hear. 

  86. 86
    zman Says:

    Back to Canada.

    I generally don't bother with looking at their inventory levels, they generally send what they send, it's pretty range bound of late.  

    Production was off a bit in 1Q but not notably.

    They have several large hubs for storage. 

    The NEB makes EIA look like a pro shop. Just not great. 

    There's also Statistic Canada that charges for public data which I always found odd but it's also generally way out of date and/or annual. 

    Maybe we should send Rick Perry up there to advise on how to report to the masses. 

    I sent a note to a Canadian sub who would know better and will advise when he does. 

  87. 87
    zman Says:

    NFX and RSPP up 5%, CPE up 2.5% – good to see that kind of post quarter, post call reaction despite oil. 

    NG names more mixed, but noting COG recovery continues, back into the handle of the cup and handle.

     

  88. 88
    nrgyman Says:

    RE 87:  We get RICE tonight.  Looking forward to that.  RICE appears cheap, especially since they own over 90% of the GP & IDRs of fast growing RMP.  No peers except EQT have that going for them.  

  89. 89
    zman Says:

    Boutros – is the biggest problem at the moment with SLCA (unowned) more chart than anything fundamental. Or is there a sense creeping in that without $50 oil pricing will grow cooler. And if pricing does not, that demand will cool. SLCA being lumped in unfairly? 

  90. 90
    nrgyman Says:

    APC:  more color on the CO home fire from an APC well during the CC today:

    https://seekingalpha.com/news/3262894-anadarko-petro-minus-7_5-percent-worries-grow-fatal-gas-blast-linked-well?app=1&uprof=51#email_link

  91. 91
    zman Says:

    re 88 – highly hedged, likes to set beatable guidance, not expensive, and due to adds there and lower SWN pps now our largest gassy position. Diffs should be playing into their hands, not generally a catalyst well driven name, may see some Vantage area well shout outs. 

  92. 92
    zman Says:

    re 90 – thanks

  93. 93
    zman Says:

    After the close we get reports from 

    LPI
    CXO
    RICE
    MTDR
    PXD
    WPX
    CLR

    PXD and CLR we listen to for a variety of macro thoughts and play color but do not own. 

    I'll have earnings quick views as I work through them. 

     

  94. 94
    nrgyman Says:

    CLR:  do you see any pin action for them from the NFX report, especially Re upside from extra SCOOP pay zones?

  95. 95
    zman Says:

    Catching up on a few other items 

    DVN (unowned) – 30 day IP of 3,000 BOEpd (80% oil), the Fighting Okra well, a 9,000' WC A well in southern Lea County.  DVN to follow with a 10 well pad in 4Q. 

    Maybe a little read through to RSPP today  as they are just south in north Loving

  96. 96
    zman Says:

    re 94 – sure, no problem. The extra STACK area zones and maybe the Merge area wells too.   They're putting more money into Bakken than into the Anadarko Basin this year which I find to be great, please do, announce big wells, then pin action moves to OAS and WLL. 

  97. 97
    nrgyman Says:

    More color on Wells Fargo's downgrade of Wattenberg names:

    https://seekingalpha.com/news/3262896-anadarkos-dj-basin-peers-downgraded-wells-fargo?app=1&uprof=51#email_link

  98. 98
    zman Says:

    Beerthirty – back in a bit with quick views as time permits. 

  99. 99
    j Says:

    PE – FILES FOR STOCK SHELF – SEC FILING – for 39.8mm shares of co's class A common. 

  100. 100
    zman Says:

    re 99 – thanks

  101. 101
    snoles Says:

    re 100 – this was part of the already announced Double Eagle acquisition right?

  102. 102
    zman Says:

    re 101 – have not had a chance to look yet but the share counts line up with the private placement for that in Feb, yes, so it's automatic. 

  103. 103
    zman Says:

    We'll have very brief comments out on the names that have now all reported later this evening. 

  104. 104
    zman Says:

    WPX – miss, some strong well results, may get tossed from the portfolio post quarter

    CXO – cover knocked off ball, edged up guidance

    MTDR – very strong, big EBITDA beat, oilier than expected, reiterates guidance 

    RICE – volumes miss and EBITDA and EPS miss, puts forth longer term guidance that appears in line with Street (ex the part of Vantage that's Barnett), 

    PXD (unowned) big beat, after market dip, not sure cause yet. 

    CLR (unowned) miss – touts the Sycamore (the "S" in NFX's SCORE)

    LPI – low end of range, timing of completions related, reiterated guidance, strong well results continue

    Details in the morning post. 

  105. 105
    james T Says:

    Z who is on monday, earnings ?   

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