Thursday Morning – MTDR, ECR and More

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Market Sentiment Watch:  In today's post please find the oil inventory review (positive report (as weeklies go), the natural gas preview (still expecting a smaller than usual sized build today and therefore another expansion of the storage deficit which is already setting at decade plus lows), comments on forgotten little ECR's quarter (beat and improved guidance for volumes, differentials, and cash costs and positive news from Flat Castle ... overdone to the down side), comments on the MTDR quarter (big beat (record volumes, record Delaware volumes, record EBITDA), guiding up slightly, monster wells), and some other odds and ends (HK, WPX, NFX).  Due to increased reporting volume some of our comments may be more brief than usual. If something isn't clear please ask. 

Ecodata Watch:

  • We get jobless claims at 8:30 am EST (F = 212,000, last read was 215,000),
  • We get productivity at 8:30 am EST (F= 2.3%, last read was 2.9%)
  • We get unit labor costs at 8:30 am EST (F= 1.1%, last read was -1.0%)
  • We get ISM manufacturing at 10 am EST (F= 58.7%, last read was 59.8%)
  • We get construction spending at 10 am EST (F= 0.2%, last read was 0.1%)
  • We get car sales over the course of the day (F = 17.2, down from lat month's 17.4 mm annual rate estimate)

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h
  3. Oil Inventory Review 
  4. Stuff We Care About Today - ECR, MTDR, NFX, WPX, HK
  5. Odds & Ends


Holding Watch:   


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

Personal Account:

Yesterday's Trades 

  • SWN – sold the extra trading position taken 9/7/18 at $4.98 for $5.42 (up 9%).  We are backing off the Personal Account holding by 1/3. No change to the ZLT's also recently increased position in SWN, just taking that extra trading piece off the table up 9%. 
  • ECR – taking a trading position at ~ $1.09, also in the Personal Account, with the stock hammered of late and earnings tonight. Not looking for a beat but instead a clear statement of the pro forma company (bigger, higher margins, reduced debt) as they approach deal close and the combined 4Q18. This would normally be risky other than the name is already off sharply and overly cheap in our view (just completely cast aside with many other gassy names). If they disappoint on guidance the name could come under further sharp pressure so be advised, not for feint of heart but also not doing this on a whim. Please see our pro forma cheat sheet post from August 28th here when the stock was at $1.49: http://zmansenergybrain.com/2018/08/28/tuesday-morning-ecr/

Commodity Watch:

Crude oil closed down $0.87 yesterday at $65.31 after a better than expected weekly inventory report was offset later in the morning yesterday EIA released its latest batch of data for production with August volumes showing a marked uptick, rising 3.8% month to month to yield a Lower 48 states level of 10.9 mm bopd which is well above the current weekly data of 10.7 mm bopd. It is likely that the coming weeklies and the next STEO show a much bigger growth trajectory for 2018 as this data forces them to update their models, even as completions in the real world slow down. This is a likely near term headwind for oil price sentiment. This morning crude is trading close to $65. 

  • OPEC Watch: Reuters' October survey showed OPEC up 0.39 mm bopd (report out yesterday morning). 
  • Libya Watch:  Libya's El Sharara field was said to be experiencing slightly reduced output (down 40,000 bopd) yesterday due to "deteriorating security" according to Platts. 
  • Iran Watch:  Bolton says some countries may not be able to go to "zero" immediately for Iranian oil imports, saying the U.S. does not want to hurt its allies.  Overnight India was granted a waiver to import oil from Iran until March 2019 (essentially holding flat at October import levels which were down about one-third vs prior plan. South Korea also said to be agreeing to a waiver strurcture. 


Natural gas closed up $0.07 at $3.26 as the front month continues to yoyo about (north of $3 we note) with the daily changes in the weather forecast and despite the strong growth noted in the latest EIA 914 data.   This morning gas is trading up 5 cents. 

Natural Gas Storage Preview

Street is at +53 Bcf (Bloomberg survey) for today's report. 

  • Last Week: Reporting +58 Bcf (implied flow +63 Bcf)
  • Last Year: +65 Bcf
  • 5 Year Average: +62 Bcf

Oil Inventory Review





Stuff We Care About Today

ECR Reports 3Q18 Beat, Guidance Boosted; Flat Castle Looks Strong (Early Days)

The 3Q18 Numbers:

  • Natural Gas differentials: ($0.04) off Nymex vs ($0.08) in 2Q18. 
  • NGLs realized 40% of WTI vs 34% in 2Q.
  • Per unit cash production costs were $1.46 per Mcfe (of which $0.48 was firm transport expense) vs $1.47 in 2Q18 (of which $0.41 was FT)

Guidance:  Boosted volumes, better realized pricing guidance and trimmed costs

  • 2018 volume guidance:  Increased to a range of 337 to 442 MMcfepd vs prior guidance of 325 to 335 MM/d, 
  •      4Q18 pro forma volume guidance was increased to 560 to 600 MM/d from prior range of 500 to 560 MM/d,
  •      4Q18 pro forma EBITDA was increased to a new range of $100 to $115 mm vs a prior range of $90 to $110 mm, (as noted above, this compares to 3Q18's $66.8 mm) 
  •      This equates to 4Q18 pro forma mid point EBITDA per Mcfe of $2.01 vs $1.86 per Mcfe standalone in 4Q17.
  • 2018 gas price differential:  Improved to a range ($0.10) to ($0.15) vs prior guidance of ($0.25) to ($0.35) (excluding transportation)
  • Cash production cost guidance was reduced to a range of $1.45 to 1.50 per Mcfe from a prior range of $1.55 to $1.60 per Mcfe. 
  • Cash G&A was revised slightly lower as well. 
  • 2018 capex:  Maintained at prior guidance of $250 mm, 
  • 2019 - not yet. Look for questions on the call but we expect to hear about at least mid 20%s type growth in December after the merger closes. 

Operational Highlights:

Flat Castle: First NE PA Utica well looking good.

  • Target rate of 32 MM/d achieved "quickly" and has held this level for > 30 days 
  • Monitoring - look for lots of questions but it will be too early to speak to rate per foot EURs here. 

​Core Ohio Utica: - Noted 4 well Yellow Rose pad on at combined 170 MM/d (2 wells at 50 MM/d apiece)

Marcellus stacked test update - Stalder Pad - continues to outperform type curve (10 months now)

Guernsey County - condensate wells coming on above expectation (we note slightly lower gas and slightly higher liquids in the full year guidance). 

Balance sheet:

  • Liquidity quote watch:  "Pending completion of the merger, the Company has received nonbinding commitments supporting an increase in the Company’s revolving credit facility borrowing base of $150 million to $375 million, while extending the maturity of the credit facility to five years from the close." 
  • Target debt for 4Q18 was previously guided to 1.5 to 1.7x and we see them as well on track to achieve the range and go below it on an 4Q pro forma annualized basis.

Nutshell: Nice quarter and guidance. The name appears very much overly beaten down and trades at extremely low multiples of next year's projected EBITDA. We would expect 2018 and 2019 estimates to travel modestly higher in the wake of the release. Enthusiasm for the new area at Flat Castle along with recently improved gas prices could inspire some increased sellsider attention for this largely ignored name. We continue to own ECR in the ZLT and added a position yesterday in one of the Personal Accounts. 


MTDR Reports Big 3Q18 Beat; Boost Guidance; Shows Off More Record Wells

The 3Q18 Numbers:

  • Oil differential: ($12.36) vs ($6.47) in 2Q. This is going to be a pretty normal looking differential in 3Q. 
  • Costs did well:  Production taxes and processing down 4% sequentially, LOE down 14% sequentially, and G&A down 9% sequentially.   This puts cash costs at $12.17 per BOE, in line with year ago levels despite the oilier mix (59% now vs 56% then).  


  • 2018 volumes: Increased to 51.5 to 52 (up 33% for total with oil up 41%) vs prior guidance of 50.0 to 51.3 MBOEpd (up 30% on mid), (increased due to well performance)
  •      Guiding 4Q flat with 3Q due to offset shut ins.  The Street was expect growth from 3Q to 4Q but is in line given that they were below the company for 3Q.
  • 2018 capex increased slightly to $743 mm on mid vs prior guidance of $715 mm (D&C of $620 to $650 mm plus infrastructure, on mid), (increased due to previously noted rig add in the Eagle Ford),
  • 2019 volumes - No mention vs prior guidance of 55.0 MBOEpd (we previously called this likely biased higher), up 19%.
  • 2019 capex - No mention vs prior guidance of $575 to $650 mm (D&C only)


Permian:  (Delaware Basin)

  • 6 rigs
  • Record WC A (lower) well in Antelope Ridge - The Strong 14 well, it's a 24 hour IP but still, at 3,670 BOEpd or 760 BOEpd / 1,000' (77% oil) it is not a rate/ft (especially with that much oil cut) we normally see in print. Best IP for them in the Delaware to date and a follow up to the Leo Thorsness well (also WC L) that has cummed 250,000 BOE (73% oil) in its first 7 months. 
  • Long lateral update - first two miler for them - the David Edelstein State well - WC A-XY in Rustler Breaks - 247 BOEpd (77% oil) in Rustler Breaks and they note a shallower decline vs their one milers in this key area.  Look for questions about how much of the area is conducive to 2 mile drilling (majority) and how costs per foot are looking. 
  • Again, it's a busy day, we're not going granular here but their areas are in strong get stronger mode as the quarters roll by.

Eagle Ford: 

  • 1 rig added during 4Q18
  • Look for well comments on the 4Q release as they kick this program back into gear. 

Balance sheet:

  • Liquidity: Borrowing base expanded to $1.5 B and commitment level boosted from $400 to $500 mm (they are $325 mm drawn currently after recent acreage adds).
  • Net debt to annualized EBITDA of 1.6x vs 1.6x at 2Q18 (despite acreage adds).

Nutshell: Big beat and raise. If you have never listened to one of their calls we strongly urge you attend if possible. I will be on the ECR call as the two conflict and circling back to the transcript here as time permits. We continue to own MTDR in the ZLT as a roughly 6% position. 

Other Stuff:

NFX (Unowned) Announces 3Q18 Volumes Beat, in line EBITDA; capex and volume guidance edged slightly up  

  • Production of 202 MBOEpd (38% oil, 62% liquids) vs 194.1 MBOEpd (40% oil) expected and above the top end of guidance of 198 MBOEpd.
  •      Production outperformance was again driven by the Anadarko Basin  (total Anadarko Basin volumes up 11% sequentially with liquids up 8%)
  • Bakken volumes are essentially holding flat ytd. 
  • EBITDA of $393 mm vs $392 mm expected,
  • EPS of $1.01 vs $0.87 expected, 
  • Capex Guidance: Increased from $1.35 B to $1.4 B on an accelerated program in the Anadarko and a longer than expected program in the Uinta.  They increased it $50 mm 2Q over 1Q as well. 
  • Volume guidance tightened higher from 180 to 190 MBOEpd to 185 to 190 MBOEpd.
  • Net debt to adjusted EBITDA is 1.5x
  • Conference Call: Today, 10 am EST. 
  • Nutshell: For the first time a very long time, we don't own the name during earnings season. Our since has been that an increasing domestic gas cut and outspend has kept the shares on the sidelines despite strong returns I will be on replay here as time permits. 

WPX (Unowned) Reports 3Q18 Miss 

  • Production of 123.8 MBOEpd (67% oil) vs 131.6 MBOEpd (64% oil) expected,
  • EBITDA of $288 mm vs $331 mm expected,
  • EPS of $0.07 vs $0.09 expected, 
  • Guidance: Tightened around prior guidance. 
  • Showed off some impressive wells in the quarter. 
  • Conference Call: Today, 10 am EST. 
  • Nutshell: We don't currently own the name but have started to watch it again. The divergence from Street on volumes and EBITDA is odd. We plan to catch up on the name again post reporting season but have no plans in the wake of these numbers to jump in after the recent dip. 



Other Other Stuff

NBL (unowned) Colorado comments

  • Nothing regarding Prop 112 in the release. Conference call at 9 am EST. 

HK Announces Midstream Sale

  • They are selling their Delaware Basin water infrastructure assets (gathering, SWD and fresh water wells, and recycling) for $200 mm cash and $125 mm over a five year period based upon meeting economic thresholds. 
  • None of their non water infrastructure is included in this deal (oil and gas gathering and compression).  Ostensibly these can be sold at a future date. 
  • Pro forma 2Q18 net debt to EBITDA improves from 6.0x to 3.7x while liquidity approaches $0.5 B.
  • How the market views this is likely to depend on how they spin it on the 3Q call (not yet scheduled).  On the last call Wilson scoffed at a $300 mm figure for their midstream assets and while this is not their entire package they did refer to the rest as being retained for now for being less mature which sounds a lot like forget about anything near term.  

Odds & Ends

Analyst Watch:

  • TBA in comments

101 Responses to “Thursday Morning – MTDR, ECR and More”

  1. 1
    elduque Says:

    NFX sold to ECA in an all stock plus assumption of NFX debt. 

  2. 2
    zman Says:

    re 1 – yeah.  Probably good for ECA long term, weird to go with all stock when your currency is weak itself. 

    The release is odd, have not seen deal terms, I get $27.50 if they mean $5.5 B in mkt cap plus debt. 

    I don't own it and planned to be on the NBL (unowned) call listening for CO Prop 112 notes.

    I have no thoughts to bottom fishing ECA at this time as I've never been a big fan. I do think NFX is giving up the goods for too little.  


  3. 3
    zman Says:

    Scratch that, I'll check the NBL (unowned) transcript.  

    Sorry to see NFX (unowned) go for so little. Will listen to ECA.  Odd that no news release on the NFX site yet. 

  4. 4
    zman Says:

    HK called up 14% on the water asset monetization. 

    ECR should have a pretty good day today on the quarter and guide. 

    MTDR – one I really never worry about in terms of how they do, should have a good day too.  

  5. 5
    zman Says:

    ECA / NFX (both unowned) 

    Um, did anyone tell NFX  (crickets on their site under press releases)


    All dollars are U.S. dollars

    Excited about NFX merger

     – accretive to ECA's 5 year plan and improves liquids

     – STACK/SCOOP adds 3rd postion vs Permian and Montney

    – makes them NAM's 2nd largest unconventional company

     – move buyback to $1.5 B for 2019

     – increase dividend by 25%

           – paid via cash on hand and FCF

    – noting strong liquids from NFX gives them more liquids growth which has been their plan

    – they like the multi basin approach – EOG pulls this off well, others … 

    – Kingfisher STACK is the sweet spot – called play in the early innings, saying most wells on 1s and 2s (not really agree but OK, NFX release speaks to row drilling guys)

    – this acquisition is the direct outcome of our detailed analysis of the Anadarko Basin 

    –  to my friends at NFX, you let it  too cheap. 

         – no comments from Boothby?   Packer?   Not given speaking rolls ?  They do have a webcast at 10 am EST, not sure if that's till on or not. 

         – no mention of what portion of NFX team ECA will keep 


  6. 6
    zman Says:

    ECA/ NFX (both unowned)

    – no mention of NFX's Bakken, Uinta, China  … if you are talking about increased liquids from a name that has a lower oil cut than you (ECA) because of the acquisition it seems odd to not mention if you will monetize those assets that actually drive the liquids as the Anadarko has made the name gassier. Hmmm. 

    Going to Q&A 21 minutes in … 

  7. 7
    zman Says:

    NG up slightly as we approach equity open


  8. 8
    zman Says:

    Oil bounced back from the overnight $65 test, up 5 cents 


  9. 9
    zman Says:

    ECA / NFX (both unowned) Q&A

    Q) what happens to the other assets NFX has  (ha re 6)

    A) says the growth will be focused on Anadarko.  We don't comment on the future of the portfolio.   Those other three assets are very high quality.  

        ZComment – so the non Anadarko will be monetized. 

    Q) why a new core area, why not expand the Permian

    A) we have been watching this basin for five years, we think it has big opportunity, great overpressured acreage position. Said NFX did a great job of assembling the position.   

         True – what about the team. 

    Q) Is criterion still if an asset can't get to 50,000 boepd that it gets punted

       – yes  

      Note Bakken and Uinta are about 20,000 boepd and China is dying off around 5,000 boepd. 

    Sees 2019 as the inflection point for STACK in terms of moving back to a rising oil mix, can't say what quarter. 

    … jumping over to NBL (unowned)

  10. 10
    zman Says:

    Comments on NBL call says Prop 112 polling as unlikely to pass. 

  11. 11
    zman Says:

    PES – waking further up nicely. 

    Please see our notes from Tuesday on it:


    Last add was last week:

    • 10/24/18 PES – Personal Account – Added at $2.29, down 54% since the date of the 2Q call.  Overdone to the downside in our view given the guidance and warning post guidance (nudged things slightly lower but also spoke to US rig contracts rolling over to higher day rates).  2H18 weakness appears well discounted now as the forward multiple is now 5x (vs close to 6x before) on an estimate that's come in substantially for 2019 (despite the bigger service names pointing to bigger, reloaded capital budgets in 2019).   Could it miss on the quarter? Sure but we see a miss as largely discounted at this time.  As DUCs reach record levels there will be a need for increased well services in 2019 which should help this temporarily slowed portion of the business. At the same, we see no reduction in demand for their small but high spec US rig fleet. Speculative trade, will be volatile. 
  12. 12
    sea bull Says:

    Z – I'm really struggling to understand the timing on NFX selling.  Why would a company suffer through several years of low oil pricing and then sell out at this price?  I can kind of understand PVAC, as their heart was never really in this business at the highest levels, but NFX seemed positioned to have a nice run with the improvement in oil prices. 

  13. 13
    zman Says:

    Comments from NBL (unowned) – Amend 74 – polling like its going to pass. This is the "taking" amendment. 

  14. 14
    brodway Says:

    Last 3 deals, namely NFX, WRD and PVA seem more like take unders than take overs …..Can't say i feel warm and fuzzy having held on to my NFX shares

  15. 15
    zman Says:

    re 12 – we owned it for years before giving up earlier this year as they repeatedly beat, raised, and got no respect as this from the blotter:

    • 9/13/18 – NFX – Sold the long held remaining portion of NFX at $26.64, up 11%. Reallocating funds. We can't make the stock go up any more than they can with beats. Much positive fundamental news but the name gets gassier with STACK/SCOOP growth as time passes and the gassiness hurts sentiment. Good assets and well run but the diversified nature of the asset base has not helped them in the eyes of the Street and no rush to free cash (which we see as the right decision) has left the sellside unimpressed despite a string of quarterly beats.  No reason to fight it. We will move on but monitor.  We have exited our 4% of ZLT position. Reallocation near term. 

    With oil, and now natural gas firming, it is a headscratcher to me.  I wonder if they will hold the 3Q call in 15 minutes (they should but it may be that they hold no Q&A, would not be surprising)

    I will be on the ECR call given overlap but will be circling back to MTDR and will grab the NFX transcript after that. I didn't ever really care to follow ECA (unowned) and don't have a model to mash the two together with and I'm unlikely to try to bottom fish the combined entity. 

  16. 16
    zman Says:

    re 14 – hear ya, We know PE is "for sale" .  Expect a premium there but given the knock in the stock and the currencies of the names that would take it out, it may not be > of $35. 

  17. 17
    zman Says:

    Noble Energy had prepared comments for Prop 112 at the top of the call, will circle back for those in transcript. 

    ECR and MTDR calls in 10 minutes, will be on ECR, notes to follow. 

  18. 18
    zman Says:

    ECR run off bottom should be far from done. 

  19. 19
    zman Says:

    Notes on ECR in a bit, up 10% pre call. 

    If anyone will be on the MTDR call feel free to relay notes.  If you have never been on a MTDR call and have the time, it is a different experience and well worth an hour as they bring 30 people to the table to field the Q&A.


  20. 20
    zman Says:

    Don't be surprised on the Personal on PES later today as this segment from the Wednesday post still applies (plus the run today)

    • PES rose 32% yesterday in the wake of the 3Q report yesterday. We continue to see the name as overdone to the downside having added before the report, Personally last week at $2.29 and in the ZLT in July at $3.73 (not that I or the market care but the ZLT average cost is $2.72) and we may add more in coming days in the ZLT should it remain near here or especially should the name see a short term profit taking pullback. 
    • PES, with regard to the Personal account –  this was taken as a trade and a 30+% gain in a week is not something we shy away from harvesting. So you may see the Personal Account punt soon and the ZLT add.   At the time of then entry here and five days before the 3Q report we wrote:



      • "10/24/18 PES – Personal Account – Added at $2.29, down 54% since the date of the 2Q call.  Overdone to the downside in our view given the guidance and warning post guidance (nudged things slightly lower but also spoke to US rig contracts rolling over to higher day rates). 2H18 weakness appears well discounted now as the forward multiple is now 5x (vs close to 6x before) on an estimate that's come in substantially for 2019 (despite the bigger service names pointing to bigger, reloaded capital budgets in 2019).   Could it miss on the quarter? Sure but we see a miss as largely discounted at this time.  As DUCs reach record levels there will be a need for increased well services in 2019 which should help this temporarily slowed portion of the business. At the same, we see no reduction in demand for their small but high spec US rig fleet. Speculative trade, will be volatile. "
  21. 21
    brodway Says:

    Imperial Capital reiterated Whiting Petroleum (WLL) coverage with In-line rating and price target $45
    Previous price target: $55

  22. 22
    brodway Says:

    Seems as  though street pre-sold the oil drop…..Equities greening into sub $65 WTI ….Seems as though investors don't believe oil has much more to the downside…Risk appetite is coming back…..

    HAL seems weaker than it should….my only guess is that funds want to get out before end of year  (possibly for tax loss purposes) possibly returning into it after 30 days…..

  23. 23
    brodway Says:

    Stifel maintained Matador Resources Company (MTDR) coverage with Buy and target $38
    Past Target Price: $39

  24. 24
    zman Says:

    Taking notes on ECR

    Natural Gas Inventories in 15 minutes. 

  25. 25
    zman Says:

    ECR 3Q18 Call Notes

    10Q out shortly

    Will not take merger questions on the call

    Noting the receipt of non binding commitments for borrowing base increase as per post above

    Noting the increased pro forma 4Q guidance given Blue Ridge's higher than anticipated 4Q run rate

    ECR standalone results below here

    – pleased to exceed consensus expectations

    – noting the record revenue and EBITDA

        – see table above

    – noting the rising liquids (inching up)

    – noting the strong diffs 

    6 wells in the quarter (14.5 K' avg)

    Completions costs were at to slightly below AFE (auth for expenditure)

    See substantial reduction in future completion costs

    6.8 net wells turned to sell

    Flat Castle – Painter 2H well – hit target rate – 32 mm/d and stayed there beyond initial 30 day expectation (he's basically hitting the pr highlights)

    Same for rest of ops noted in post (better everywhere)

    48% of revenue from liquids

    (One wonders if Singer at GS can turn the stock back over or if he's on board now)

    NG diff before transportation was ($0.04) – better in basin pricing and sold gas into spare FT of others at prices that were at premium to in basin.  Including Rover volumes getting to Gulf and Dawn. NICE.

    Sees Transportation expense declining over time now – in basin and unutilized FT owned by others. 

    NGL improved to 40% of WTI

    Going forward we are comfortable in funding from cash flow and revolver next year with goal of free cash near end of 2019.

    No Q&A due to the merger. Bummer.  Would have liked more comments on Flat Castle next steps. 




  26. 26
    elduque Says:

    Dollar down sharply, should be price supportive for crude


  27. 27
    zman Says:

    Jumped on MTDR call 19 minutes in, already in Q&A, notes in a bit. 

  28. 28
    zman Says:

    re 26 – thanks and thanks Brod for the comments above. 

  29. 29
    zman Says:

    wow PES

  30. 30
    zman Says:

    Anyone check to see if NFX is holding a call or not? 

  31. 31
    zman Says:

    Natural Gas Inventory Quick – expanded the deficit

    NG at $3.28 just prior to the report

    +48 Bcf vs +53 Bcf consensus

    Storage now 3,143 Bcf

      16.5% below year ago levels

       16.9% below the five year average, expands to 638 Bcf below (vs 624 Bcf under last week)

    We are still at 3.3 Tcf for peak (but now edging below that, will take a harder look later today on the remaining weeks) which is gas price supportive and would be the lowest peak level since 2005 and potentially the lowest since 2003.

  32. 32
    bill Says:

    31 ng traded down 1 % on the eia numbers..I dont know what traders want

  33. 33
    bill Says:

    29 nice call..wish i had some.. these mini caps are moving…even unloved SN is up .40 cents from interday low

  34. 34
    tomdavis12 Says:

    Now Shell, BP and COP have all had very good quarters. Expect the same from CVX & XOM tomorrow. The downstream holdings seem to be helping. Will try to monitor production increases or not. IOC's may show interest in lower 48 assets if they see production not moving faster than replacement needs. 

  35. 35
    elduque Says:

    NFX- very short call, already on replay

  36. 36
    tomdavis12 Says:

    Cramer buying APC as his Colo. play.

  37. 37
    nrgyman Says:

    Z, congrats on the calls for all three single-digit midgets you recently invested in:  PES, HK and ECR.  Made some nice money in the 2 names from this group I took a position in following your recent investment moves in them.

  38. 38
    zman Says:

    MTDR 3Q18 Q&A (joined in progress)

    Q) Thorsness well question vs the new Strong 14 well, improvement ? 

    A) use of 3D with good steering in the L WC A, – saying the guys are running 7 days on 7 days off, 24/7 when on and they are staying in zone better (max coms) … really improving things. Joked they took the room he was going to use for a board room … but they are staying in zone with everyone shoulder to shoulder (so your live feed gives geologist sitting next to the drilling engineer constantly chatting as the lateral progresses).

    Q) Eagle Ford rig add – what prompted?  LLS price, WI% on the 10 wells, costs per well

    A) all of the above, weighted differently. Picked up a high spec PTEN (unowned) – immediately drilled the fastest two wells they've done in the EFS yet as soon as the rig went in.  Will frac first two late 18.

    WI% essentially 100%

    Cost is $5.0 mm +/- on one mile and $7 to $8 mm for 1.5 to 2.0 milers

        6 of the 10 will be longer laterals 

        Austin Chalk will be 1 or 2 of the wells, have not done that before. 

    Q) takeaway and differentials

    A) rock solid in their areas, they secured FT.  So far we have not had much issue getting that done. We call, they say yet, then it's about price.   Only 1% gas flaring (part of the nice thing about having the midstream) … nothing curtailed due to lack of access to markets.  

    "congrats on a very nice quarter"

    Q) 3 E&P transactions this week alone – all stock deals – how do you view the M&A market. 

    A) we talk about this almost every day. We are guided by being a public company with a public trust and we are going to play a straight game.  (love em)

    – when a serious offer comes in we consider it

     – we are not going to reduce ourselves down to a single basin company  … several companies now talking about the wisdom of being a multi-basin

     – if someone offers enough to us for an asset we are always ready to talk, trade, JV, if it makes sense to MTDR. 

     – but then he adds, most people try to buy things like the Haynesville or the Eagle Ford on the cheap.  That won't work. 

    – what we have done in the past has made sense

    – we want to grow, but we want to do so at a measured pace. 

        – this was like a 15 minute answer, basically its a thoughtful, opportunistic, consistent approach

    Q) reinvestment rate question and free cash flow in 2019

    A)  Outspend – whenever is discused there are 2 key variables

         a) how much

         b) what are you getting for it  ….whatever we outspend on is on a very select basis

    We talk about this and at some point our oppy's won't be as robust and you 'll see us flip to free cash and we are narrowing that.

    Notes he started it with $270K and had to outspend to get, lol 

    Also notes they practice financial discipline and never had a layoff in 35 years. 

    As to 2019 guidance (likely after Jan 1), we will expect to have some outspend next year … we could go free cash flow next year (but not optimal).  Speaks to new acreage adds and getting after it later next year.  He thinks it will be a couple of years before FCF (they see FCF as an outcome, not necessarily a goal, may not be what analysts want to hear but given how they run it I am find with it and the balance sheet).   

    Q) how to be more capital efficient

    A) early on shorter laterals to HBP acreage and then the midstream development … so as time goes buy they naturally get more efficient with infill and utilizing infrastructure in place. 

    Average base of their 138,000 net acres is $11K per acre (including minerals), largely done "brick by brick" , saying that's a highly efficient but not fully appreciated effort. 

    Good call tone

    Q) Eagle Ford – locations, production

    A) couple of hundred locations (all Lower) – will test the Upper and A Chalk which we think are prospective

    about 8% of total on volumes, think said 2,400 bopd of that, headed to about 6,000 boepd from the 10 wells. 

    call still going ….


  39. 39
    zman Says:

    MTDR Notes – remaining silent on a well, getting some more acreage around it, missed where as I was scrolling up to comments above (circle back, know was Delaware, don't know which pod) Think it looks good, saying want a little more data before saying something, getting away from IP's and giving more 90's. 

    "high class problems, nice quarter guys"

    Please come see us, we'll buy you lunch or dinner and let you get to know us.  

    Call over 1:12 in. 

  40. 40
    nrgyman Says:

    RE 39:  Is there anyone out there in the E&P space who does a better CC than MTDR?  That team is really professional.  Easy to like them.  Market not caring much atm, probably due to algos reading "outspend" and selling.  

  41. 41
    zman Says:

    re 32 – it's been quite resilient, BTRSTN – more concerned with what the strip is doing (firming over last few months)

    re 35 – thanks, will read the transcript, no interest by me in moving into it or Encana at this time. 

    re 36 – so many other ways …. 

    re 37 – thanks, good to know. 

    re 40 – it's held up well and nobody does a call like that but many do do a good job.  Appreciate their attitude. 

  42. 42
    zman Says:

    Pressure on the group from oil due to Bolton's comments yesterday and moves overnight to grant waivers to India and S Korea. Oil with a $63 handle. 

  43. 43
    nrgyman Says:

    CLR:  down -2% today on a green tape after a very solid Q3.  NFX 'take under' sale may be related.  For as hyped as the Anadarko Basin has been the market has not been so excited by it.  The wells have a heavy natgas component which doesn't produce the kind of margins the market likes.  Supposedly the wells make up for it on volume but we haven't seen the market really buy into that.  The CEO of MGY specifically said the Anadarko was too gassy and much preferred the EFS–which is where he invested.  

  44. 44
    james T Says:

    What is street consensus for price of Oil 1st quarter 2019  average ?


  45. 45
    zman Says:

    From tomorrow's post:

  46. 46
    zman Says:

    re 44 – $68

    re 43 – yep

  47. 47
    zman Says:

    From tomorrow's post

  48. 48
    zman Says:

    Oil is overdone, down $2. 

    Today U.S. grants waivers. 

    Next week OPEC notes easing the throttle.  

  49. 49
    nrgyman Says:

    Crude continues its selloff–starting to 'catch up' with the energy equity selling of the past month.  USO currently in process of filling the June 22 opening gap (fills at $13.31).  The 200 dma did not hold.  The April 9 opening gap at $12.51 is the lowest significant gap that remains– which is low 60s for WTI.  RSI is under 30 and USO is now in oversold territory.  

  50. 50
    zman Says:

    re 49 – midterms next week, OPEC+ going to get chatty just after. 

  51. 51
    zman Says:

    Highly likely we add a Personal in PE before the report. 

    PE is largest in ZLT so now add there. 

    Down 25% since the 2Q report date. 

    EBITDA estimates (this is just consensus) (MM)

      at 2Q18 pr at 3Q18 pr Change
    2018E 1,341 1,408 5%
    2019E 1,765 1,863 6%
    2020E 2,357 2,424 3%
  52. 52
    zman Says:

    Looking forward to more Austin Chalk well color tomorrow from EOG – MGY is right there.  Very little in the last PR but the call had this:

    In the Austin Chalk, the average lateral length of the five wells drilled during the second quarter was the longest yet at 7,900 feet. Average initial 30-day production exceeded 3,000 barrels of oil equivalent per day. Austin Chalk wells on average pay out in just over three months.

    We continue to examine the Austin Chalk's prospectivity in our South Texas Eagle Ford acreage. The target is less consistent than the Eagle Ford shale. However, where it is prospective, it consistently delivers prolific results. Earlier this year, one of our first successful Austin Chalk wells, the Kilimanjaro, reached 1 million barrels of oil in less than two years, averaging more than 1,500 barrels of oil per day for 626 days. Furthermore, the play is in an advantageous location with well-developed infrastructure close to the Gulf Coast and benefits from our extensive seismic and log control collected through our Eagle Ford development program.

  53. 53
    snuhart Says:


    When does PE report?    TIA

  54. 54
    zman Says:

    re 53 – after the close, call in the morning. 

    The calendar can be viewed here:


  55. 55
    zman Says:

    Here, reading, then out to an appointment, shout if you need something and I will get to it either before 2:30 pm EST or after the close. 

  56. 56
    nrgyman Says:

    Z, do the waivers granted to India, etc for buying Iranian crude signal that there are no other viable options for them to acquire crude?  If such options exists why grant waivers?  If not then aren't the oil markets tight, which could limit the downside to crude prices?  

  57. 57
    zman Says:

    PE – Added a personal account trading position at average $23.895.  The 3Q18 report is due out after the close and we could wait but with the stock off 25% since the last report and with estimates having risen mid single digits 2018 to 2020 since then and with our expectation of one of the best if not the best differentials among "Permians" this quarter (again) we see the name as overdone and trading well below where it should on forward multiples. It's also entirely possible we get a sneak peek at 2019 (higher volumes, lower costs, narrowed outspend) as they roll the simplified development program forward. And we may see a small asset sale. We continue to own PE as the largest position in the ZLT or I'd likely add more there as well. 

  58. 58
    zman Says:

    re 56 – in the very near term, yeah, it suggests that kind of tightness. KSA is running full tilt to supply Asia. Also likely has to do with some grade issues.   It goes into a escrow and barter system as I understand it, it's not final and it ends early in 2019 (March it seems). 

  59. 59
    zman Says:

    Getting on a call, back shortly. 

  60. 60
    zman Says:

    LBRT – most likely active with the repurchase program now.  Look for an update and reload on or before the 4Q call. 2019 to be a bigger free cash year. 

  61. 61
    snuhart Says:


    The current value of the NFX buy out is 23.05.  With the exception of the last few days this is the lowest price  in About five years .

    I m an old stale long. Probably it is for the better to go on to something else.

  62. 62
    snuhart Says:

     End it does seem very strange that in the five or six training days prior to the announcement the price of the stock decline approximately 25% 

  63. 63
    snuhart Says:

    Re 61-62. Please forgive typo s

  64. 64
    zman Says:

    re 61-63 – just getting to listen to the call (wow, 6 whole minutes long)

  65. 65
    zman Says:

    NFX (unowned) – back to where it was trading … a week ago.  Sheesh, ugh, etc.

    Call was 6 minutes long.

    Boothby confident its in best interests of the owners. 

    He sounds like someone shot his dog while trying to spin it as good for the dog. 

    Puts it on mandate from biggest shareholders for return of capital  … I really don't think this is what people had in mind (just a comment for any of my names considering selling themselves at cycle lows)  



  66. 66
    james T Says:

    NFX  -Who upgraded/recommended NFX around Sept 18 – 20 time period, large players dumped it and small players bought.

  67. 67
    zman Says:

    re 66 – dunno.  I don't own it but that's just a betrayal on valuation in my view. 

  68. 68
    elduque Says:

    NFX- perhaps that is why they did the stock deal. Must admit like COG, I really do like cos that are going to return cash to shareholders. 

    Would you be willing to comment on the "cube" technique. Must admit I hadn't heard it talked about before listening to the ECA call. There must be pros and cons? 


  69. 69
    Wyoming Says:

    The Cube is similar to our Row Drilling.  Essentially, all the horizons are drilled and completed at once.  No returning back to thread more wells or Add another horizon.  Row Drilling is also used by Cimarex and Devon in the Cana play (west of STACK).

  70. 70
    Baylor Says:

    Pretty shocking re NFX

    id hate to see PE lost to a takeunder at like $25 


  71. 71
    snuhart Says:

    Re 65:  

    ‘“ mandate of….”  pretty empty explanation. I d bet dollars to donuts there’ll be an examination by regulatory authorities of the past week’s trading. 

    A lawyer s field day. I ll sign on to the class, for the 1st time in my 50+ Years  of trading.

  72. 72
    elduque Says:

    Snuhart- you must be almost as old as I am. Started trading in Toronto in 1964. 

  73. 73
    snuhart Says:

    Re 72: you re a tenderfoot! Started in NY in ‘60!

  74. 74
    nrgyman Says:

    Z, are you planning to do anything to play the CO vote?

  75. 75
    nrgyman Says:

    RE 74:  you are on a roll with the washed out names that you added to:   SWN, ECR, PES and HK.  

    Wondered if you are looking for more–and the Watty names are washed out.  But they might become even more so if the vote goes the wrong way.  

  76. 76
    elduque Says:

    Anybody have any feel as to how much of a discount to conversion NFX should trade at.

  77. 77
    snoles Says:

    VNOM rolling over a bit today.  Is there news i'm missing?  

  78. 78
    Sean J Says:

    WLL getting taken to the cleaners.  Any thoughts there, Z (or anyone)?  TIA

  79. 79
    nrgyman Says:

    RE 77-78:  With WTI down -2.8% today I'm a little surprised the energy sector is green.  WLL looks technical, as today WLL has traded down to fill yesterday's opening gap–which is where it sits atm.  Normally for me this is a better spot to buy.  I haven't analyzed the Q3 for them so please DYODD.  VNOM reported Q3 yesterday and sold off heavily–then rebounded, which also looked technical.  Oil is down today and VNOM is retreating perhaps trying to establish a base, which makes sense to me.  Both names are somewhat volatile, which exaggerates moves.  

  80. 80
    james T Says:

    re77 Small players selling all day, large players buying or neutral until 3:00pm and then selling last half hour.   Do they HFT trade stocks like this  ?

  81. 81
    bill Says:

    PE results are in…for your reading pleasure


  82. 82
    nrgyman Says:

    Tudor speculating that more takeovers are going to happen.  Names mentioned are OAS and CRZO.


  83. 83
    zman Says:

    Hey guys, back at my desk, catching up, PE is a beat.  Brief details in a bit.  

    Will circle to questions after that, also have the latest detailed Prop 112 poll data to post. 

  84. 84
    ram Says:

    Zman, Re 25,  "Will not take merger questions on the call "  is ECR being aquired?

  85. 85
    nrgyman Says:

    GPOR CEO resigns and leaves the Board.  They have had a difficult go of it since the Wexford people left.


  86. 86
    bill Says:

    Interesting article


  87. 87
    zman Says:

    PE – beat, no change to gudiance

    record volumes, in line with expect oil cut (just more oil)

    Differential was ($6.66) or a 7.43 premium to the average Midland Price

        – we expect most Permians to be closer to $10 to $13 off WTI in 3Q

    Record low G&A/BOE, basically tied low for LOE/BOE

    Sand helping cut D&C costs. 

    Announcing $170 mm in asset sales to high grade portfolio (the small asset sale possible noted in the ZTRADE above) … won't impact guidance. 

     Net debt to 3Q18 ann EBITDA of 1.3x vs 1.5x for 2Q (not pro forma the asset sale

    More details tomorrow's post. 

  88. 88
    zman Says:

    re 84 – they were addressing the pending merger with Blue Ridge.

  89. 89
    nrgyman Says:

    RE 87:  PE's improving debt metrics, strong margins with low diffs, continuing strong production growth and the 5.3x 2019 multiple (for what they offer) all look really attractive.  Seems mispriced, perhaps significantly.

  90. 90
    nrgyman Says:

    EOG out with what looks like a solid beat:


  91. 91
    bill Says:

    90  Looks very solid to me…but what do I know

  92. 92
    Baylor Says:

    Re 89 yes been saying this for a while as well. It’s almost as if everyone will have an EV soon and ooo won’t be needed. Good luck with that

    the way it just floats between $21-$30 and retreats is pretty frustrating given their results


  93. 93
    zman Says:

    EOG just crushed it

    upper end of range production

    EBITDA of $2.35 B vs $2.184 B

    $503 mm in free cash in 3Q (after dividends)

    Net debt to annualized 3Q EBITDA was 0.4x

    Inched up oil guidance to up 19% over 2017

    Raising capex but securing services for next year at lower costs, sounds like they wanted to keep running instead of hit budget exhaustion. Wells costs to be down 5% this year which is the odd man out vs industry but was expected of them. 

    They noted 14 wells in the Austin Chalk (watching for MGY read through) – big wells for their length (eyeball of the table says biggest IP30 per foot this quarter and oily), will/should get questions on the call. 

    Details in tomorrow's post 

  94. 94
    zman Says:

    Working through some stuff for tomorrow' 

    Re 74 – still mulling an add. It may be post vote but the polling looks good for Prop 112 – defeat.

    re WLL (unowned) – have not listened to their call yet. Will do probably tomorrow afternoon. 

    re VNOM (unowned) – I have not seen any news but noticed it fall earlier, may have caught a downgrade from someone who's news feed I don't get. 



  95. 95
    zman Says:

    Adding to 94 – and given that VNOM is unhedged and oil fell pretty sharply today it may just be that people are walking away (right before OPEC goes back into price support mode). 

  96. 96
    zman Says:

    Record high net NG exports this week, hit 4.8 Bcfgpd net (leaving the country).

    Next week's injection looks slightly bigger however, weaker heat load and stronger dry gas prod.  

  97. 97
    zman Says:

    re 69 – thanks much Wyoming, didn't see your comment.   CLR (unowned) also marching across with big rows. 


  98. 98
    Portable Electrical Appliance Testing dursley Says:

    Gloucester Electrician


  99. 99
    dursley motorcycle towing Says:

    emergency towing brockworth


  100. 100
    Rafaela Killelea Says:

    More Tips


  101. 101
    Ebonie Haller Says:

    Lanell Costell

    Thursday Morning – MTDR, ECR and More | Zman

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