01
Jun
Macro Friday
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Market Sentiment Watch: Payrolls Friday. Market on edge as major trading partners swap tariff proclamations. In today's post please find a number of slide shows: the the natural gas review (smaller than expected injection one more shot at triple digits next week and then eroding injections even as we sit at +8 Bcfgpd YoY for production and half a Tcf under the five year average on storage), the oil inventory review (positive side of neutral), the oil inventory by State and region production graphs (essentially it's all about TX and NM), the natural gas macro slide shows (another record month for production, imports continue to tread in slight net export territory, and demand hit another new high for the month on the back of record Industrial demand and a tie for the record on Electrical), and some other odds and ends.
Ecodata Watch:
- We get Nonfarm Payrolls at 8:30 am EST (F = 202,000, last month was 164,000),
- We get the unemployment rate at 8:30 am EST (F = 3.9%, last month was 3.9%),
- We get average hourly earnings at 8:30 am EST (F = 0.2%, last read was 0.1%),
- We get ISM manufacturing index at 10 am EST (F = 58.9%, last read was 57.3%),
- We get construction spending at 10 am EST (F = 1.0%, last month was -1.7%),
- We get car sales over the course of the day (F = 16.9 mm, last reading was a 17.2 mm annualized rate).
In Today’s Post:
- Holdings Watch
- Commodity Watc​h
- Natural Gas Inventory Review
- Oil Inventory Review
- Oil Production by State - growth increasingly focused on the Permian
- Natural Gas Production - another new high
- Natural Gas Net Imports - (notably high net exports relative to same period in 2017)
- Natural Gas Demand - record for March driven by Industrial and Electrical
- Stuff We Care About Today - CPE
- Odds & Ends
Holdings Watch:
ZLT
- Yesterday's Trades: None
- The Blotter is updated.
- ZLT Cash: 19%.
- Look for EFS ZLT weight increase near term.
ZLT 52 week highs and lows:
- OAS scored a fresh 52 week high yesterday.
Commodity Watch:
Crude oil closed off $1.17 yesterday at $67.04 on higher volumes than in recent relatively high volume sessions. The long Brent short WTI likely played a part as did expiry for Brent. As noted in yesterday's post, expect some near term higher volatility in crude prices. The inventory report was largely benign (better than the prior week's report) but the EIA 914 data (see oil by states section way below in the post) highlighted strong month to month volume output gains from Texas and New Mexico as the Permian continues to be the most actively drilled play in the U.S. by a wide and increasing margin. This morning crude is trading off 55 cents.
- Rig Count Watch: Look for a near term deceleration. Upstream comments have been pointing to a flattening in 2H18 and in some cases a rig departure (here and there) within the Permian. Major commentary has cooled as well with operators in multiple onshore plays looking to potentially reallocate to LLS priced basins.
Natural gas closed up 7 cents at $2.95 after EIA reported a smaller than expected injection (see table and graphs below) that was also smaller than the five year average injection for the week leaving storage exactly half a TCF below the five year average for this time of year. We now expect builds to start moving lower week after next. This morning gas is trading flat.
- Manipulated Markets Watch: The U.S. was once called the Saudi Arabia of coal but now we could easily argue they could has said natural gas. The administration bailing out aging coal and nukes is misguided and not needed.
PointLogic Watch:
Natural Gas Storage Review
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Oil Inventory Review
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Oil Production by State - Growth narrowly focused on the Permian
Natural Gas Production - Relentless gains
Natural Gas Net Imports
Natural Gas Demand
Stuff We Care About Today
Other Stuff
- CPE upsized their senior notes offering from $300 mm to $400 mm as expected. Revolver wiped clean. Net debt to 1Q18 pro forma EBITDA a reasonable 2.2x. CPE expected to be done with large bolt ons for some time now.
- PE - filed for a mixed shelf. As always, we don't see these filings as a negative,
- Look for additional cheat sheet updates next week,
- Look for the Permian Players Part 2 Update next week,
- MGY (TPGE) - call with management soon.
Odds & Ends
Analyst Watch:
- TBA in comments
Analyst Watch
GS out highlighting owned names PXD and LBRT today with regard to Permian issues. Longer term they highlight FANG. They have widened their differential expectations but don't see larger operators altering plans. They do note 64 rigs in the basin are run by 1 rig largely private operators and those are vulnerable in the face of wide diffs (they're less efficient and held in many cases by less well financial backed operators, not private equity rigs).
June 1st, 2018 at 7:21 amMay NFP 223,000
3.8%
June 1st, 2018 at 7:37 amRover pipeline: FERC granted approval for full operation of the entire Rover system, starting today.
https://seekingalpha.com/pr/17179773-energy-transfer-announces-ferc-approval-place-rover-pipeline-s-full-mainline-b-service?ifp=0
June 1st, 2018 at 8:04 amre 3 – Thanks. Right on time, benefits ECR, SWN, AR (unowned) and some other players including Ascent (uncertain when they bring this Aubrey inspired name public, was to be last year, the Marcellus segment went BK this year, but doesn't impact the Utica piece).
June 1st, 2018 at 8:16 amCLR: CEO reportedly bought $8.88 mm in stock.
http://aheadsup.com/twitter/newsentiment.html?user=usequities&symbol=CLR&page=1
June 1st, 2018 at 8:31 amOil down 1.1% at equity open
https://www.investing.com/commodities/crude-oil
June 1st, 2018 at 8:31 amWanted to add to yesterday's CXO comment…..looking at chart, there is a good bit of support at 135 as evidenced by continuing moves above that level in the November – December 2017 period when stock tested that level 3x and finding support. Stock had tested the 200dma on 2 other occasions since that time and had bounced on both of those instances. This is the third retest which comes at an odd time as oil has been in bullish mode and RSPP acquisition has not been viewed as a negative move by the company. Should it test 135 i would get much more aggressive than i am now, even if i did sell 135 puts yesterday at 2.35 and 2.40 in a small way.
June 1st, 2018 at 8:34 amre 7 – oil sideways, differentials lower. CXO has good flow assurance but about 40% exposure to Mid-Cush in 2018.
June 1st, 2018 at 8:38 amre: 8
thanks for your thoughts …..was offering technical view only…..still see them better off today than 6 months ago….same price
June 1st, 2018 at 8:41 amAdding to 8 – I think you are really going to see names like PXD highlight tight realized pricing in 2Q18, fear and trepidation in front of other Permian 2Q reports quite possible. Guys like LPI (unowned) in an especially poor position but they won't be alone. CPE one of the less covered. JAG about 60% covered. You can see these in the recent Cheat Sheet updates.
June 1st, 2018 at 8:42 amre 9 – hear ya from that perspective, just adding my Friday 2 cents to your comments. Beyond the valley of the differentials, the combo of CXO/RSPP is a good one.
June 1st, 2018 at 8:46 amre: 10
my understanding is that pricing is a transitory issue and will eventually work itself out…..still rather be selling oil at 60 then 40….
June 1st, 2018 at 8:48 amJAG getting beat up again out of the gate…..not sure if its shorts on a Friday type action or there is a seller who is desperate to get out
June 1st, 2018 at 8:49 amre 12 – by 3Q19
June 1st, 2018 at 8:49 amre: 14
that's a year from now…..not as short as i had thought…..
June 1st, 2018 at 8:51 amCPE: Just filled the March 20 opening gap at $11.62 and completed the 61.8% Fib retracement of the Feb-May rally. Also broke below the 200 dma to do it, then bounced. Support area.
June 1st, 2018 at 8:52 amMTDR hanging out at dangerous levels….the way i see it has to hold around 27…..or risk being traded down to 24
June 1st, 2018 at 8:56 amre: 16
see that ….thinking other names attempting same…
June 1st, 2018 at 8:59 amre 13
– Permian diff fears. CXO and FANG off early, PXD much less but off.
– JAG is / very much appears to be technical, same support zone comments yesterday, see it needing to hold $11 but no real difference between $11 and $12.
– Weak oil day, weak diff day, continuation of yesterday.
– % move outsized on the weak chart and lower PPS
– Combined with the rest of the prior days, weeks, months comments on the decision to not up guidance while announcing 2Q volumes that were above Street, to scale back on rigs (very slightly and just to get more 3D in house to drill right instead of add more DUCs that are less well landed than they could be … if anything cutting a rig and not cutting volume guidance is a plus as it speaks well to well outperformance) …
– … all left Street thinking 70 to 80%-ish growth, outspend handles easily by liquidity, strong balance sheet (1.0x net debt/1Q ann EBITA), hedges that are just OK, … so Street is ho hum and not defending even as it cheapens.
– Wouldn't it be nice if others slowed their Permian roll?
June 1st, 2018 at 9:00 amJAG (-7.4% atm) approaching all-time lows. With WTI at $66.50.
June 1st, 2018 at 9:03 amZTRADE – RSPP
RSPP – Sold RSPP to 5% position from 12% at $42.67, up 81% to our average coverage. We plan to continue to hold RSPP (CXO) as a core but have long planned to reduce our over weight in the wake of the deal.
June 1st, 2018 at 9:10 amre 20 – over done to the downside but people are way less concerned with the WTI price and much more concerned with that translating to $40 at some point on the non basis hedged portion of their volumes.
June 1st, 2018 at 9:13 amre: 21
Zman….why the sell now and not at 50 where it traded a few weeks ago? are you sensing a degree of risk continuing to be overexposed in the name at 42?
June 1st, 2018 at 9:13 amMarket playing non-permian vs permian. It has been a long time since EOG traded at a higher dollar price than FANG.
June 1st, 2018 at 9:14 amPlanning to maintain cash near 20%. Trades soon.
June 1st, 2018 at 9:14 amCXO at 133 now 30 points off May highs….getting close to retesting April low at 132
June 1st, 2018 at 9:17 amCXO just filled the April 10 opening gap at $133.38. Next gap lower is the Sept 25 opening gap at $127.06, which also coincides with a low-volume trading zone on the daily chart.
June 1st, 2018 at 9:22 amre 23
A) it's trading on a multiple of CXO. With diffs blowing again that chart looks particularly weak.
B) I have long planned to reduce it.
C) It's our largest position and it made sense to rebalance it …. I am not a trader, I am a long term guy but I am protecting profits there in light of A) and B)
D) 5% is no small position. If it rallies next 6 months through the highs that's great, the CXO/RSPP story is strong and this is a hiccup but as I look to next twelve months that's a bit less exposure in our Permian overweight and a bit more exposure in our LLS capturing crowd.
…
June 1st, 2018 at 9:23 amZTRADE – ZLT – Starter Core in TPGE
TPGE (soon to be MGY) – added at just under $10.50. Please see our Eagle Ford comments and cheat sheet update for this name here: http://zmansenergybrain.com/2018/05/30/wednesday-morning-magnolia/
June 1st, 2018 at 9:25 amPVAC seems extended technical, otherwise would be adding it now too.
June 1st, 2018 at 9:29 amre: 28
ok….just want to make sure i'm following the transition that is going on…..
June 1st, 2018 at 9:36 amre: 29
what % of the ZLT does that purchase represent?
June 1st, 2018 at 9:40 amre 31 – it's subtle. Not running away from the Permian Hills …
ZTRADE – ZLT – PXD
PXD – We have owned it in the personal accounts for a couple of months now. Adding a 3% starter core at average $193.34. A bullet proof and improving balance sheet, a story that's going pure Permian over the course of the year, and strong basis and flow assurance … we see as a "goto" name for those wanting Permian exposure over the next year, allowing the name to trade to a premium 2019 multiple.
June 1st, 2018 at 9:45 amre 32 – 2.5% on the button. Still waiting on their call. I'll go 5 to 7.5% if they make me happy.
June 1st, 2018 at 9:48 amre 33 – we own more $ wise in personal accounts here from the add in April but I have been wanting to get it into the ZLT.
June 1st, 2018 at 9:50 amZman…
do you see MTDR being affected by differentials in a big way?
June 1st, 2018 at 9:51 amre 36 – not in a big way but they will be impacted, yes.
So just walking through it:
They are 80% Delaware / 20% ish EFS
Oil is 58% of total and of the Delaware 60% is oil. So their oil is 85% Delaware, of that they have basis hedges on 14.3 Mbopd this year (or 64% of Delaware only oil). On the rest of the Del they should take the differential hit and on the small portion from the EFS they should be in line, maybe small $ either side of WTI.
Company was one of the ones to say Diffs were over blown at time of 1Q call and would fall so they get a little bit of a knock from investors on that.
They also did the equity issuance the other day with no deal in hand which may be viewed as "timely but telling" in the sense that they basically topticked the stock.
Data from the cheat sheet below which reflects exposure vs expected volumes for the total company.
XOG – toying with pushing further above 52 week highs in the "I am not a Permian" rush. Normal to see Wattenberg diffs off $9 from WTI and the names are generally in the 60/40 oil/gas cut range with normally sub Permian oil name EBITDA / BOE rising non Permian tide lifts. They are our sole direct exposure to the DJ at this time (EOG has some exposure but it's not a swing on the name).
June 1st, 2018 at 10:07 amPUTIN AT MEETING WITH CROWN PRINCE OF ABU DHABI: WE WILL CONTINUE ENERGY COOPERATION, WHICH HAS ALREADY HELPED STABILIZE OIL PRICES: IFX
Trial balloons released and they didn't really care for the reaction, ha.
June 1st, 2018 at 10:08 amre: 37
Yeah….doesn't help when you have misjudged the situation….getting punished for it…..
June 1st, 2018 at 10:09 amAR and RRC up a bit again
Broadway, Nrygman what gassers are on your watch lists other than ZLT companies, obviously I am watching them.
June 1st, 2018 at 10:14 amJames….
COG (insider purchases last/this week) AR, RRC, ECR. SWN
June 1st, 2018 at 10:23 amand CRZO (kind of gassy)
June 1st, 2018 at 10:24 amNoting an extension higher in NFX (STACK/SCOOP, Bakken, Uinta)
June 1st, 2018 at 10:24 amAnd OAS 52 week high.
June 1st, 2018 at 10:25 amRE 41: I own COG and AR, having added them on this latest pull back. I have been playing the natgas growth story mainly via the midstream space but felt the producers were overly cheap and basing, with some recent signs of turning slowly. AR and COG are probably the 'safest' names in the space (along with EQT) but when the market moves to 'buy' mode in the natgas space I do expect the less safe names to outperform. GPOR, ECR, RRC and SWN are all depressed but the charts show them to be basing and beginning to see more buying–imo they outperform in a group rally.
June 1st, 2018 at 10:33 amre: 44/45
feels like a stampede out of Permians and into other basins…..nimble markets
June 1st, 2018 at 10:34 amre 47 – PXD green. A few others as well. Volumes are not overly high save for CXO and JAG.
June 1st, 2018 at 10:37 amRE 46: Note the natgas names getting attention again, due in part to the Rover pipeline system going into full service today.
June 1st, 2018 at 10:37 amMTDR CPE off heavy too…..i'm patient, just don't want to hold the bag if my portfolio can outperform in the short term
June 1st, 2018 at 10:39 amre42/43 thanks CRZO was one I bought a while back, MRO looking good as well ?
June 1st, 2018 at 10:40 amwhere does one find the differentials.
Thank you
June 1st, 2018 at 10:54 amre 52 – Bloomberg. They are not really something that's out in the free public space. You can get an idea via some Argus pages but Bloomberg's are deemed accurate.
June 1st, 2018 at 10:56 amThis is the only free one I have seen that puts it in the ballpark
http://www.cmegroup.com/trading/energy/crude-oil/wts-argus-vs-wti-calendar-spread-swap-futures_quotes_globex.html
June 1st, 2018 at 11:06 amVNOM (unowned) – first time in awhile they have been grouped in with the Permians on a red-diff day.
June 1st, 2018 at 11:09 amCXO just brok that double bottom. Looks headed for the September gap, about $127.53, would expect a bounce there all other items being equal.
June 1st, 2018 at 11:25 amOil waffling about in front of rigs:
https://www.investing.com/commodities/crude-oil
June 1st, 2018 at 11:54 amSWN – base bottom break out in progress. We continue to own a 3+% position in the name.
June 1st, 2018 at 11:56 amre46 Thanks on gassers.
Roughly four times normal volume this time of day for CXO
June 1st, 2018 at 11:56 amre 59 – massive volume there and JAG. MTDR high as well.
June 1st, 2018 at 12:00 pmand VNOM (unowned) and CPE.
June 1st, 2018 at 12:01 pmOil count said to be up 2 rigs, waiting on details page.
June 1st, 2018 at 12:02 pmVNOM Large players have been gently taking money off the table ever since 27 dollar range on the upside. Small players were buying and kept it up and now they are taking some profits. It was a great run. We need some better EIA reports.
June 1st, 2018 at 12:04 pmPE – being shopped. Any serious buyers would have been well aware of differential widening this year. PXD currency staying aloft relative to the group. Hmmm.
June 1st, 2018 at 12:06 pmre 63 – thanks
Baker has the wrong file attached for the 6/1/18 update, still awaiting rig count details.
OT – grabbing lunch, back shortly.
June 1st, 2018 at 12:10 pmJAG tapped 5.1.17 low of $10.96 to the penny. Day like this would not expect it to hold.
June 1st, 2018 at 12:15 pmre 25 – Z : You plan to maintain cash near 20%, but in the last uptrend before 2016 you maintained it at about half that, around 10%.
What, exactly, is your reason for maintaining double the cash this time than you held in the previous up market?
June 1st, 2018 at 12:18 pmBack to flat on week. Polled twitter for free diff to Midland. Same page as we have been indicating but said to switch to settle tab and from there switch from prelim to prior day and that lines up with what I see from Bloom pages.
So you would go here:
http://www.cmegroup.com/trading/energy/crude-oil/wts-argus-vs-wti-calendar-spread-swap-futures_quotes_settlements_futures.html#tradeDate=05%2F31%2F2018
Then click the second tab, "settlements", then change the day to yesterday
Hope that helps El-D.
June 1st, 2018 at 12:20 pmNo one mentioned SJT
June 1st, 2018 at 12:20 pmRig Count posted as 6/1/18:
Oil +2, Natgas -1
Hz +3, Vert +0, Dir -2
Oil rigs: Permian -1, DJ +1, Williston -1, EFS +2, Cana +3, Miss +1 for a total of +5, so -3 oil rigs in stealth areas
Natgas rigs: All zeroes, so -1 rigs in a stealth area.
June 1st, 2018 at 12:25 pmre 67 – Re "exactly": Combination of fewer held names now vs then with a focus on higher margin, lower debt/EBITDA, opportunity capital at the ready, caution as to how our larger weightings play out in light of differentials, and degree of OPEC shift in policy later this month.
June 1st, 2018 at 12:25 pmre 70 – thanks. Much more benign report than last few weeks.
June 1st, 2018 at 12:26 pmAgreed:
https://www.bloomberg.com/view/articles/2018-06-01/trump-energy-plan-is-about-insecurity-not-national-security?utm_campaign=socialflow-organic&utm_source=twitter&utm_content=business&cmpid=socialflow-twitter-business&utm_medium=social
June 1st, 2018 at 12:27 pmAdding to 73 – not to get political but the move to stem plant closures is purely that and for anyone at DOE to suggest natural gas fired plants are not reliable is pure fantasy.
June 1st, 2018 at 12:28 pmthanks Z for 68.
June 1st, 2018 at 12:42 pmre 71 – thanks
June 1st, 2018 at 12:47 pmOK Brod – I think your comment re Permians is turning into a Friday shellacking for the group. PXD just rolled rapidly so some of the thoughtfulness/bifurcation is eroding.
June 1st, 2018 at 12:49 pmRE 73,74: Trump is playing to his base, fulfilling campaign promises, regardless of economics. Also, he clearly wants low energy prices both for US consumers and for exports. Coal and nuclear props, aside from the economic losers they are, do keep pressure on natgas prices which help consumers and exports. Also Trump gets to promote the jobs he is saving in the coal/nuclear industries (but will say nothing about lost job opportunities in competing industries). Hopefully the electric utilities will continue to move away from coal/old nuclear despite this administration's support for them.
June 1st, 2018 at 12:49 pmJAG hit all-time lows below the previous lows at $10.96.
June 1st, 2018 at 12:51 pmBuy a call on CXO ? July
June 1st, 2018 at 12:52 pmre 78
– coal and nuclear appear very much set to continue to see declining nameplate capacity.
– Investors don't want it in their utility generation portfolios (increasingly) and insurers are getting more inclined to walk away as well.
– I just had to post as I used to follow 90 some odd U.S. reactors weekly as part of our NG demand electricity sub model and in the early 2000's the nukes were exhausting their collective ability to uprate those units. The plants were old then and we were seeing more extended reactor turn times as increasingly costly maintenance issues cropped up that had to be fixed either with the refueling or randomly through the year.
– The coal fired base was far older and clean coal efforts increased maintenance items (you want to burn low SOX PRB coal, it's wet, have fun with that, and yeah it's way cheaper than Ill. Basin but it's low BTU so you have to blend and burn more. I guess if you kill the clean air regs ….
June 1st, 2018 at 12:57 pmre 79 – yes. I generally think in terms of closing lows as a bit more important but it certainly can travel lower next week and would have 0 chart support at that point. Majors with acreage appetite should be snooping but probably for needle moving fish.
June 1st, 2018 at 1:02 pmWith all the emphasis on differentials, have you changed your margins on the various permians, or as I suspect most of this is just noise created by technical traders.
June 1st, 2018 at 1:05 pmCrude sitting on a trend line started last August
June 1st, 2018 at 1:07 pmArent the effect of hedges eliminated as proforma ebitda is used as if the bad or good hedges dont exist?
June 1st, 2018 at 1:10 pmre 83 – they are coming off, it's hard to determine how far to take them at the moment, the operators basically say the same thing.
June 1st, 2018 at 1:10 pmWTI at $66 after hitting $65.89, down 1.5%. Yet many non-Permian E&P names are green. Exodus out of the Permian into non-Permian names, regardless of quality or hedge/basis effects. Equal opportunity ugliness for the Permian names today. Wonder if this is a wake-up call to slow down D&C in the Permian over the next year? Those with excess FT to the Gulf Coast can continue to grow production, or sell that excess FT capacity for a good price to someone who really needs it. Either way, a production slowdown should be on the horizon. Perhaps Papa will prove to be mostly correct about EIA overestimating shale production for this year, not that it is helping his stock–which just filled a downside gap target at $16.57.
June 1st, 2018 at 1:11 pmre 85 – I use actual EBITDA (historic and projected). I know some companies speak to pre hedge EBITDA to give an idea of margins had they not taken the hedges they had to allow for comparisons but I don't employ unhedged EBITDA in my thoughts. I do look at cash field costs which itself is not impacted by hedges.
June 1st, 2018 at 1:13 pmre 87 – Goldman rather pointedly said no re diffs and programs today. As noted in the post, I think it will impact the little guys who have got to be at least in part wondering if spending that next $10 mm is wise if $65 oil means a $45 realization. Agree re slowdown, definitely see 2019 growth less than 2018.
Re CDEV (unowned) – thanks for the headsup. Unhedged name at a time when lower hedges hurt more than help.
June 1st, 2018 at 1:16 pmre87 Hopefully they will slow down on drilling permits in the Permian a bit.
June 1st, 2018 at 1:30 pmSeems like there was a pair trade on this morning short Permian buy Non Permian upstream…..Then they decided lets just sell them all. Not a surprising move for a Friday
June 1st, 2018 at 1:34 pmFANG finding support. This level is close to our recent buy in. Kind of neckline.
June 1st, 2018 at 1:35 pmRE 27: CXO just filled the gap at $127.06. RSPP is not far from filling the Mar 28 opening gap at $38.92, which is just above the 200 dma atm.
June 1st, 2018 at 1:38 pmby the way did anyone ask Floyd Wilson what he is doing to offset the differentials in the Permian…..he did claim he was the smartest man in the room(or was it the basin?)
June 1st, 2018 at 1:46 pmPXD right back to the 50dma….has now been there 3x….Hopefully 3 times' the charm
June 1st, 2018 at 1:46 pmZ, to the extent that your Permian names have local basis exposure how much of that exposure has been discounted already in the stock prices? Perhaps the market is attempting to discover how wide the basis will eventually become–and for how long–but many larger (and some smaller) names will have only a minor ebitda impact. The somewhat indiscriminate sell-off across the Permian board should be creating solid entry prices for certain names. What names, regardless of your present holdings, are presenting the best looking entry points?
June 1st, 2018 at 1:47 pmZ: What makes you say PE is being shopped?
June 1st, 2018 at 1:58 pmre 96
– depends on how wide diffs are going to get, if the diff strip is correct or not or if guys like Papa are
– seems more like fear and less like discovery
– EBITDA impacts to be case by case. Fear in the market place is diffs create misses as the 2Q numbers hit.
– PXD least exposed, too low, so we added, PE. JAG is overly discounting most likely (unless we are looking at a lot bigger blowout) but as noted it's trading technically. Same CXO. CDEV as noted benefits from the lack of hedges. CPE is pretty exposed, coming off today with group but otherwise also already discounting a pretty big hit. MTDR better covered as noted above and overly discounting my view. REI should have less price worry as a CBP player (according to them) but am waiting to see 2Q before considering adds (still getting to know phase). Permian Group 2 will be out next week, in that group ROSE and VNOM may be of interest.
June 1st, 2018 at 2:04 pmre 97 – No change from prior comments, been saying this for months, rumor mill, just noted it on a weak day Friday that it's gotten slightly cheaper while some potential buyers have really not.
June 1st, 2018 at 2:14 pmRE 98: Thanks Z. Thinking here the various combos of low hedges, basis exposure, capex outspend, higher than best debt metrics and D&C cost exposure could make some names almost untouchable atm. Agree on PXD, CXO and CDEV as looking more attractive. Would add FANG, but they didn't signal that their basis exposure was solved at the end of Q1–still waiting on a FT announcement.
WPX is acting really well as a mostly Permian name, but I'm more interested in buying the big dips in the Permian.
June 1st, 2018 at 2:20 pmre 98 – calls into one of those, wanting to gage how they are steering 2Q est process (roughly re price), will circle back next week. 2Q EBITDA early part of quarterly reporting going to be messy.
June 1st, 2018 at 2:20 pmre 100 – hear ya "still waiting" FANG …. crickets since 1Q18 CC
June 1st, 2018 at 2:22 pmWould not be at all surprised to see halving of current red on the day in the Permians. Useless comment but it's late and totally possible. #notatrader
June 1st, 2018 at 2:32 pmEnding the week down 0.5%
Have a good weekend.
The Wrap will be out on Sunday.
Beerthirty
June 1st, 2018 at 2:58 pmRE 98: REI with a big pullback from recent highs. Fundies looked solid for them. Approaching a gap fill at $13.30. Could be a solid entry level.
June 1st, 2018 at 3:02 pmThe site will be down for maintenance Sunday from 11 to 12 am EST.
June 1st, 2018 at 10:17 pmPlease bookmark the back up site just in case:
https://zmanbackup.wordpress.com/
June 1st, 2018 at 10:18 pmZ – could you do a write up on the blowout in the permian? Seems it caught a lot of people by surpise and in a matter of weeks the "go to" space has now become pariah.
Now that may present buying opportunities of course. I'm curious of the following:
1) who's most / least affected? (although, like hedging, this doesn't seem to matter at all as hedging may help a company survive, it doesn't seem to have much meaningful impact on outperformance vs peers from what i've seen over the last 48 months)
2) how long do we expect this to go on?
3) what actions are or can be taken by companies or other to help them through this problem?
4) Given 2 and 3 above, is this an opportunity to accumulate or much like 2014-2016 is it better to sit on hands and let things bottom out based on thoughts on #2 above?
5) why does this seem to have caught many by surprise? Is there a better way to see this coming to position portfolio to avoid these types of issues? I know you've been mentioning but looking back in time in the twitter space and other places, no alarms were really going off elsewhere
Thanks!
June 2nd, 2018 at 11:54 am