06
Sep
Wednesday Morning – ECR
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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:
- Holdings Watch
- Commodity Watch
- Stuff We Care About Today – ECR
- 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.
Guidance:
- 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.
With five minutes to go until equity open
Oil over $49
http://www.cx-portal.com/wti/oil_en.html
NG back over $3 (see change in near price thoughts (higher) in yesterday's post).
https://www.investing.com/commodities/natural-gas
September 6th, 2017 at 8:26 amReuters 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.
September 6th, 2017 at 8:29 amGreen open, nearly across the board.
September 6th, 2017 at 8:31 amStay 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.
September 6th, 2017 at 8:34 amXOP up 1.5% 20 minutes in, rare strong move on a day when the SPX is actually up too.
September 6th, 2017 at 8:49 amBloomberg 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
September 6th, 2017 at 8:58 amCOG featured in "Don't Ignore This Chart" on stockcharts.com. They are showing a constructive weekly chart with breakout to new two year highs….
September 6th, 2017 at 9:04 amre 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.
September 6th, 2017 at 9:06 amAtlantic and Gulf like a hatchery this year.
TS Katie just formed in the southern Gulf. Tracking to Mexico. May disrupt exports from Mex.
September 6th, 2017 at 9:11 amStrong moves out of the Bakkens and Wattenbergs
September 6th, 2017 at 9:13 amThanks!
September 6th, 2017 at 9:21 amre 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.
September 6th, 2017 at 9:26 amHAL and PES both puting on strong 2 day moves now. PES up 8%. Worry over Harvey likely way down now.
September 6th, 2017 at 10:26 amHere, working on an update, shout if you need something. Quietly green.
September 6th, 2017 at 10:35 amMTDR again making a move back above its very flat 200 day sma.
September 6th, 2017 at 10:36 amFor those keeping score, oil is well above pre Harvey levels. Storm recovery and OPEC chatter helping.
http://www.cx-portal.com/wti/oil_en.html
September 6th, 2017 at 11:00 amHere 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
September 6th, 2017 at 11:02 amre 18 – recommended reading.
Offtopicthirty, grabbing a run, back in a bit.
September 6th, 2017 at 11:05 amMarket pretty flat line green today.
September 6th, 2017 at 11:55 amTS Katie appears nearly stalled in south-western Gulf. Now may become hurricane prior to hitting Mexico.
http://www.nhc.noaa.gov/refresh/graphics_at3+shtml/144007.shtml?tswind120#contents
September 6th, 2017 at 12:02 pmRSPP- has a presentation for the Barclay's conf. Is there anything new?
September 6th, 2017 at 12:15 pmre 21 – have not looked at it yet, noted they are not webcasting.
September 6th, 2017 at 12:16 pmIrma 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.
September 6th, 2017 at 12:18 pmre 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.
September 6th, 2017 at 12:29 pmthank you
September 6th, 2017 at 12:40 pmBBG consensus has risen to +3.7 mm barrels for tomorrow's report.
September 6th, 2017 at 12:46 pmIt looks like CRC will be ready for tomorrow's post.
September 6th, 2017 at 1:03 pmZ Are you expecting crude price to weaken next couple weeks somewhat ?
September 6th, 2017 at 1:18 pmBP 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.
September 6th, 2017 at 1:20 pmre29 – One explanation for higher Crude today I guess.
September 6th, 2017 at 1:24 pmre 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.
September 6th, 2017 at 1:25 pmre 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.
September 6th, 2017 at 1:27 pm#27, excellent!
September 6th, 2017 at 1:29 pmre 28 – we put short term thoughts for oil in the Monday post each week. Right now it's $46 to $51 for oil.
September 6th, 2017 at 1:36 pmAdding to 34, this was the comment from The Week That Was this week:
re -28 – 35 thanks.
September 6th, 2017 at 2:24 pmPES 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.
September 6th, 2017 at 2:29 pmHAL 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.
September 6th, 2017 at 2:32 pmre 36 – yes sir, any time.
September 6th, 2017 at 2:33 pmFWIW, 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.
September 6th, 2017 at 2:53 pmBeerthirty, back in a bit.
September 6th, 2017 at 2:58 pmAPI Watch:
Crude +2.791MM
Gasoline -2.544MM
Distillate -603K
Cushing +669K
September 6th, 2017 at 3:38 pmre: 17
RB
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
September 6th, 2017 at 8:05 pmAnyone see news NFX?
September 13th, 2017 at 12:12 pmre 43 – I think he's on vacation rest of week.
September 13th, 2017 at 12:27 pmDebt Collectors
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