Wednesday Morning – ECR



Market Sentiment Watch: Group seeking to maintain recent traction this week in the face of crude builds, product draws, and a much bigger gas injection (interesting test of recent firming). In today's post please find the early read on oil inventories (our view is that the Street is looking for too small of a build but that the next two reports are transitory and as such less important than they may look on the surface), the early read on natural gas inventories (a notably large injection is expected), comments and an updated cheat sheet on ECR, and some other odds and ends. Please note, we should get API today after the close and then the EIA oil inventory weekly report tomorrow (and it'll be a bit wild) due to the holiday. 

Ecodata Watch:

  • We get Markit PMI Services at 9:45 am EST (no forecast, last read was 56.9),
  • We get ISM nonmanufacturing at 10 am EST (F = 56.0%, last read was 53.9%),
  • We get the Beige Book at 2 pm EST.  

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today – ECR
  4. Odds & Ends


Holdings Watch:

ZLT (Zman Long Term portfolio)

  • Yesterday’s Trades: None
  • ​The Blotter is updated.
  • ZLT Cash: ~ 23%. 
  • Plans: Being patient. Watching VNOM (unowned) and XOG for potential adds. 

Commodity Watch

Crude oil jumped $1.37 to close at $48.66 yesterday, moving higher as more Harvey impacted refineries announced plans to get back on line.  This morning crude is trading above $49.

  • Venezuela Watch: Venezuela arrests head of PDVSA and 8 other top executives.  Will be interesting to see how much further this falls. 

  • Libya Watch:  El Sharara field said to be open again. Nearly 300,000 bopd yoyoing almost daily now. 
  • SPR Watch: 5.3 mm barrels requested so far. Expect the majority of those to show up in next week's data set.  We note, that only 0.3 mm barrels were reported as released from the SPR out of the total through last week (will be in this week's report).  Would expect the total release to fall short now but show a bigger release in next week's report.  It's an exchange so anything taken out will be replaced in time. 
  • Production Outage Watch:  (offshore only due to Harvey). After the rapid recovery in the wake of Harvey we expect to see this reverse course due to Irma in coming days. 

  • Rough Guess Watch:

Early Read on Oil Inventories: (as noted, we get EIA inventories this week on Thursday, not Wednesday)

  • Crude: Up 2.8 mm barrels (we see this as too low a build as per above)
  • Gasoline:  Down 6.2 mm barrels
  • Distillates: Down 3.9 mm barrels

Natural gas dropped a dime to close at $2.97 yesterday on the milder than expected September forecast that was released on Friday. Also, as noted Friday and yesterday, this week is set to see a much larger injection. On Tuesday, the first early read on the natural gas injection for this week formed up at +67 Bcf, vs +30 Bcf last week, +38 Bcf last year, and a five year average for the week of +58 Bcf.  This morning gas is trading flat. 

Stuff We Care About Today

ECR Cheat Sheet Update

Brief comments to go with the cheat sheet:

2Q17 Quick:

  • Volumes were 7% above the mid point of guidance, were 5% above Street, and flat sequentially. 
  • EBITDA came in came in ahead of estimates with volumes and better than expected costs. 
  • They announced a JV to further protect the balance sheet while maintaining growth profile. 
  • Well results continued to outperform expecations. 


  • 3Q17 volume guidance was essentially as expected reflecting a sharp jump up at 22% sequential growth,
  • Guidance for 2017 remained unchanged reflecting YoY growth of 39%. 
  • Rig count to remain at 2 as per prior plan. 

Catalysts abound:

  • Gen 3+ (may turn into Gen 4) completions - showing strong results, look for them in the longer laterals noted next bullet. 
  • Super Lateral Utica wells - 3 more of these by year end, with better completion methods than the original Purple Hayes well, 
  • Marcellus wells - 2 wells by year end, nothing in valuation for the locations they could have here, also, first time for them to go after this free play under their rock with up to date fracs. 

Rover Update:

  • Approval of Phase 1a was announced by FERC last Friday,
  • We note that since our last update at the end of June, Street consensus has fallen from growth of 32% for 2018 to growth of 25%.  This trimming was likely majority attributable to concern over takeaway.
  • We see this concern as eradicated now and in fact see growth as bolstered by the recently announced JV and the Rover process moving ahead. 

Takeaway capacity is adequate to meet growth:

We added more ECR in the Personal Accounts last week. We maintain a ~5.5% position in ECR in the ZLT (our 8th largest position in the portfolio and our largest gassy position). We saw the jump with 2Q results as appropriate given the outlook, then subsequent slump with the group as unwarranted.  


Other Stuff

  • Look for additional gassy name updates this week,
  • Look for requested name updates this week. 

Odds & Ends

Analyst Watch:

  • TBA in comments if we see any. 

53 Responses to “Wednesday Morning – ECR”

  1. 1
    zman Says:

    With five minutes to go until equity open

    Oil over $49


    NG back over $3  (see change in near price thoughts (higher) in yesterday's post).


  2. 2
    zman Says:

    Reuters reports OPEC August exports down 0.37 mm bopd to 25.19 mm bopd, lowest level in 4 months, and we expect subtantially lower in September.  

  3. 3
    zman Says:

    Green open, nearly across the board. 

  4. 4
    zman Says:

    Stay safe Florida folks, this thing looks like a bomb went off on the islands.  Some more tracks now pointing east of a direct Florida strike, let us hope so. 

  5. 5
    zman Says:

    XOP up 1.5% 20 minutes in, rare strong move on a day when the SPX is actually up too. 

  6. 6
    zman Says:

    Bloomberg now showing +3.2 mm barrels for tomorrow's crude build vs what's in the post which was yesterday's number. Still think it will be closer to +6 

  7. 7
    RB Says:

    COG featured in "Don't Ignore This Chart" on stockcharts.com.  They are showing a constructive weekly chart with breakout to new two year highs….

  8. 8
    zman Says:

    re 7 – good to know, thanks. I'd tell them to add ECR to that as well, completely different chart but bigger % bang likely on same fundamental bullet points. 

  9. 9
    zman Says:

    Atlantic and Gulf like a hatchery this year. 

    TS Katie just formed in the southern Gulf.  Tracking to Mexico. May disrupt exports from Mex. 

  10. 10
    zman Says:

    Strong moves out of the Bakkens and Wattenbergs


  11. 11
    ram Says:


  12. 12
    zman Says:

    re 11 – you bet, be safe Ram.  Just saw a note from Richard Bransen that his crew in the VI is headed into the concrete bunker wine cellar to ride it out. Not sure wisdom of that move but maybe he's on a hillside. 

  13. 13
    zman Says:

    HAL and PES both puting on strong 2 day moves now. PES up 8%. Worry over Harvey likely way down now. 

  14. 14
    zman Says:

    Here, working on an update, shout if you need something.  Quietly green. 

  15. 15
    zman Says:

    MTDR again making a move back above its very flat 200 day sma. 

  16. 16
    zman Says:

    For those keeping score, oil is well above pre Harvey levels. Storm recovery and OPEC chatter helping. 


  17. 17
    RB Says:

    Here is a chart of XOP with three panes. The top pane is a candlestick chart of XOP with some notations, trendlines etc.  The middle is a candlestick chart of the SPX and the bottom chart is a price relative of the XOP to the SPX.

    The XOP has been a heart breaker since a big nasty down candle that occurred back in December.  Remember we were originally winners following the Nov. election but not so since Dec.  There have been a few double bottoms along the way, but we've yet to penetrate the blue downtrend line I present.  

    If you will note we put in a double bottom in June/July and then failed to complete a triple bottom in August and we began an additional few trading sessions of distribution.

    I like the bounce in our stocks and had put on a smallish ERX position a few sessions ago.  I will feel better when and if we penetrate the downtrend line and stay above it a few trading sessions.  Some Wycoff traders call breaking a downtrend line like that "jumping the creek"…

    If we can "jump the creek" and get any help at all from the general markets, I think we can embark on a multi month and perhaps even a multi year rally in the oil/gas stocks.  We are at a 13+ year low in relative strength and  the sector is at a historically low percentage representation within the SPX.

    Anyhow, here's my chart….I've put it out here before but it is always updating and revealing something new…..  https://stockcharts.com/h-sc/ui?s=XOP&p=D&b=4&g=0&id=p56414474312&a=529248746

  18. 18
    zman Says:

    re 18 – recommended reading. 

    Offtopicthirty, grabbing a run, back in a bit. 

  19. 19
    zman Says:

    Market pretty flat line green today. 


  20. 20
    zman Says:

    TS Katie appears nearly stalled in south-western Gulf.  Now may become hurricane prior to hitting Mexico.


  21. 21
    elduque Says:

    RSPP- has a presentation for the Barclay's conf. Is there anything new?

  22. 22
    zman Says:

    re 21 – have not looked at it yet, noted they are not webcasting. 

  23. 23
    nrgyman Says:

    Irma path projections are turning east from previous estimates.  Previously, Irma was projected to head directly over Key West and into the eastern Gulf.  Production sites were seriously threatened.  Now the projected path is directly over Miami and south FL.  O&G production sites are less threatened under this scenario and the trend is moving further away from this threat.  Crude rally could pause.  However, this Cat 5 storm (185 mph sustained winds for over 24 hrs) could be a catastrophic disaster for south FL.  In 1992 hurricane Andrew was also a Cat 5 storm with winds estimated at 200 mph hit south of Miami and left utter devastation in its wake.  Wiped out Homestead.  But Andrew was narrow (and dry).  Irma, now called the Atlantic's most powerful hurricane ever, is very wide (over 400 miles wide) and if it hits Miami as now projected will reak devastation like we haven't seen throughout south FL.  Path projections are still uncertain and the trend is moving east, so it is possible Irma will skirt the east coast of FL and lessen impact consequences.  Over the years, Miami has been threatened by hurricanes but largely escaped serious damage.  That could happen again, and will if the storm continues to turn further east, but the potential for wind damage (not so much flooding) in south FL is indeed scary.  Lived through several of these past storms in the Miami area, but this is one that looks worse than any other and I would suggest getting out of town if possible.

  24. 24
    zman Says:

    re 21 – 

    same length, reshuffled from 2Q pres. 

    acres same

    guidance unchanged

    minute dip in expected growth by analysts for 2017E on debt adjusted basis 

    No changes to spacing comments

    4 new wells with early day production on the Midland well slide, nothing monumental about that though one well pair is west edge Midland in the WC A / LS that looks pretty good.  Keytstone and Parks Bell wells in the WC A – see next.  

    Noting it adds 20 to 30 locations on the west side where they didn't carry loc's before – slide 16 walks through that. 

    Over in the Delaware I see no new well results since 2Q report. 

  25. 25
    elduque Says:

    thank you


  26. 26
    zman Says:

    BBG consensus has risen to +3.7 mm barrels for tomorrow's report. 

  27. 27
    zman Says:

    It looks like CRC will be ready for tomorrow's post. 

  28. 28
    james T Says:

    Z   Are you expecting crude price to weaken next couple weeks somewhat ?

  29. 29
    zman Says:

    BP evacuating non essentials from Thunderhorse, largest platform in the Gulf. 

    That's a big one, 250,000 bopd capacity, due south of the part of AL that reaches the sand. Deepwater. 

  30. 30
    james T Says:

    re29 – One explanation for higher Crude today I guess.

  31. 31
    zman Says:

    re 28 – not by much, it's right in the middle of our short term 4 week outlook at the moment, slightly to the high side but please note the next few weeks are not my focus. 

  32. 32
    zman Says:

    re 30 – that just hit but Irma potenital impacts part of it. I think the Saudi, Russia, Kuwait comments noted in yesterday's post re OPEC+  looking to perhaps extend the curtailment beyond March is most of it this week plus refiners coming back faster from Harvey.  I listed a bunch of potentially supportive elements in yesterday's post including nearly 1.7 mm bopd of refining capacity coming back on line as of Monday and more has been added to that since. 

  33. 33
    choices Says:

    #27, excellent!

  34. 34
    zman Says:

    re 28 – we put short term thoughts for oil in the Monday post each week. Right now it's $46 to $51 for oil. 

  35. 35
    zman Says:

    Adding to 34, this was the comment from The Week That Was this week:

    Near Term (next 4 weeks) Outlook: We continue to see crude trading in a near term range of $46 to as much as $51 but expect more volatility over the next few weeks due to Harvey impacts and could see moves outside of this band for brief periods. Our 2017 average price is $51.25 as outlined below, revised from $52.50 as we go ahead and mark our 3Q17 deck closer to market. As expected the Street has fallen towards and bit past our 2017 expected price. 
  36. 36
    james T Says:

    re -28 – 35  thanks.

  37. 37
    zman Says:

    PES reclaims $2, up 14% today.

    We last added to the name prior to the 2Q report at $1.84 in early July. Before that we added higher.  Name was well over done on the run lower as upstream and service dropped sharply mid 2Q reporting season for no really good reasons but with PXD (unowned) acting as a catalyst for the group hit. 


  38. 38
    zman Says:

    HAL up another 3% as well today, good to see some traction under the Service names. They've been falling much of the time their fundamentals have been improving during 2017 so as rig growth eases to flat it may seem odd the drop stalls but makes sense given we work on expectations which are now arriving and are not terrible for that group in terms of pricing or activity. 

  39. 39
    zman Says:

    re 36 – yes sir, any time. 

  40. 40
    zman Says:

    FWIW, Reuters consensus now at + 4.0 mm barrels crude build tomorrow. 

    Lee Saks, who has been pretty good has a range that's covers a smaller build to a small draw.

    I'm still at + 6.0 mm barrels.  

  41. 41
    zman Says:

    Beerthirty, back in a bit. 

  42. 42
    zman Says:

    API Watch:

    Crude +2.791MM

    Gasoline -2.544MM

    Distillate -603K

    Cushing +669K

  43. 43
    brodway Says:

    re: 17 


    i'm sensing a bit of contrarian thinking in your note

    agree with your thought. 

    i see the realization of several events help propel the sector in next 3-6 months

  44. 44
    zman Says:

    Anyone see news NFX?

  45. 45
    zman Says:

    re 43 – I think he's on vacation rest of week. 

  46. 46
    Debt Collectors Says:

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  47. 47
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  48. 48


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  49. 49
    Clubs&Diamonds Says:


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  50. 50
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  51. 51
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  52. 52
    تجهیزات میکروتیک Says:

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  53. 53
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