Wednesday Morning – Earnings Avalanche Part 1



Market Sentiment Watch: Fed day.  Powell is said to be walking a fine line with today's press conference so as not to draw the ire of the White House. Weird. Venezuela "coup" appears to have fizzled. In today's post please find the oil inventory preview, the early read on natural gas inventories, comments on the LBRT quarter (beat, outlook improved), several comments on a number of names of interest, and some other other odds and ends.  Some of our comments may be more brief than usual due to elevated call volume; if something is not clear please ask.  

Ecodata Watch:

  • We get ADP employment at 8:15 am EST (no forecast, last read was 120,000),
  • We get ISM manufacturing at 10 am EST (F = 54.8%, last read was 55.3%),
  • We get construction spending at 10 am EST (F = -0.4%, last read was 1.0%),
  • We get FOMC statement at 2 pm EST (forecast is for no move), 
  • Jerome Powell press conference is set for 2:30 pm EST,
  • We get car sales over the course of the day (F = 16.9 mm, down from prior 17.5 mm).

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h - with oil and natural gas inventory previews
  3. Stuff We Care About Today - LBRT, CXO, SOI, VNOM, SLCA
  4. Odds & Ends

Click the link directly below this to ... .

Holdings Watch:   


  • Yesterday's Trades:   LBRT - We added to our position in LBRT at average $15.58 (position average cost is now $17.72).  This is the second time we have added here (the initial buy was in January 2018 with the follow up doubling in February 2018) and takes our position in the ZLT from 2% to 5% of assets.  Earnings are out tonight.  This is not a call on those numbers.  We expect a return to more of an upbeat outlook for EBITDA per adjusted fleet.  Estimates have fallen substantially since the last call on concerns regarding pricing and activity levels.  While pricing is likely to be labeled "competitive" for much of the remainder of 2019 we see their premium fleet as staying very active and pricing as likely stabilizing as their large peers fail to add capacity allowing working horsepower in the Lower 48 to decline.  
  • The Blotter is updated.
  • Look for additional rebalancing trades soon. 

Commodity Watch:

Crude oil closed up $0.41 yesterday at $63.91 after early morning on profit taking related to Venezuela thoughts (a coup could mean a quick end to sanctions) reversed with the help of an EIA 914 report that showed a 1.6% drop month to month in U.S. oil production from January (11.87 MMBOpd and unrevised from the prior month's report) to February (11.683 MMBOpd). We note the EIA STEO is likely to be downwardly revised following this number for both 1Q19 and 2Q19. Typical of EIA of late to over estimate and later push their production growth forecast out into the future. After the close, API reported the mixed bag of data noted below. This morning crude is trading off slightly on API.


Oil Inventory Preview

This Week In History Watch:

API Watch:

  • Crude:  Up 6.8 mm barrels,
  • Gasoline: Down 1.2 mm barrels.
  • Distillates: Down 2.4 mm barrels.   

Natural gas closed off 2 cents to end yesterday at $2.58 as the front month continues to move about in fairly narrow trading session after session. This morning gas is trading flat. 

Natural Gas Storage Preview

Street is at +107 Bcf (Bloomberg survey) to +113 Bcf (Reuters) for tomorrow's report. 

  • Last Week: +92 Bcf
  • Last Year: +50 Bcf
  • 5 Year Average: +70 Bcf

Stuff We Care About Today

LBRT Reports 1Q19 Beat, Per Spread EBITDA Rallies; Spread #23 Activated At End of 1Q19; Estimates to Rise.

1Q19 Notable Numbers:

  • TTM ROCE at 33%,
  • EBITDA per annualized spread turned the corner as noted in the table above; the full year EBITDA average assuming 22 spreads is < $15 mm each (vs the $15.4 mm of 1Q19), 
  • Spreads in service were 22.3.  Last known spread count was 22 so spread 23 entered into service late in the quarter,
  • Share count continues to decline; 1.3 mm shares repurchased since last quarter, with $99 mm remaining on the second $100 mm share authorization.

Favorite Quote Watch:

"Based on visibility into our customer activity pipeline for the year, demand for Liberty fleets remains high and at the end of the first quarter we activated our new Tier 4 frac fleet, taking the active fleet count to 23 as of March 31, 2019. This additional fleet was deployed to the long-term customer that it was promised to when it was ordered in 2018."

"While there continues to be an oversupply of frac fleets in the market, we believe that roughly 20% of the frac fleets that were active in the summer of 2018 are now either idle or in the process of being idled. As supply of active frac equipment balances with demand we expect pricing to potentially improve later this year."

Other Items:

  • Fleet 24 update - not mentioned, look for color on the call as to timing (they have previously said one of the two fleets that were nearly completed as of last call could still be idle by YE19 so look for questions here as this could swing 2019 estimates modestly and 2020 estimates more significantly. 

Balance Sheet:  Super solid. 

  • Net debt to 1Q19 annualized EBITDA: 0.1x.  The revolver remains undrawn. 

Nutshell: Nice beat. Nice macro color. LBRT remains committed to generating strong return on capital employed and on sending cash back to shareholders in a sustainable manner.  Note that current Street estimates likely incorporated 22.5 spreads (22 in 1H, 23 in 2H) for the full year and timing of rig Fleet 23 activation means estimates are likely to travel higher by a modest amount (less than 10% but we'll know more after the call).  We own a ~ 5% position in LBRT in the ZLT.  

Other Stuff:

SOI (Unowned) Reports 1Q19 Beat

  • Revenue of $55.1 mm vs $54 mm expected, 
  • EBITDA of $35.1 mm vs $31 mm expected,
  • EPS of $0.46 vs $0.37 expected,
  • No change in guidance of full year capex of $40 to $60 mm,
  • Sees itself as market leader in wellsite proppant storage at 1/3 of total market,
  • We don't know the name; no play by us at this time; plan to take a look post quarterly reporting season.  
  • Conference Call: Today, 8:30 am EST. We will be on a replay here. 

SLCA (Unowned sand) Reported Better Than Expected 1Q19 Results; Company Points to Improved Outlook

  • Revenue of $379 mm vs $355 mm expected, 
  • EBITDA of $68.8 mm vs $56 mm expected,
  • EPS of ($0.08) vs ($0.13) expected,
  • Sandbox segment saw record revenues and they expect a 15% seqential rise in volumes, 
  • No change to prior capex guidance,
  • Company highlights a number strong 1Q19 U.S. economic data factors as boding well for the Industrial side of their business,
  • Company notes Northern White pricing and demand rebounded in 1Q19 and they see greater activity in coming quarters (would like to hear a lot more about this vs reports we've heard of in basin sand taking more share this year from Northern White and pressure prices),
  • Balance sheet:  Leverage here is high at 3.9x net debt to 1Q19 annualized EBITDA,
  • Nutshell: Better than expected quarter and stronger than expected (at least by us) outlook. We're just keeping tabs for now.
  • Conference Call: Today, 8:30 am EST. We will be on a replay here. 

CXO (personal only) Reports 1Q19 Beat; Oil Volume Growth Inched Up; Capex Guidance Maintained (though they outspent guidance in 1Q)

  • Production of 328 MBOEpd (64% oil) vs 306 MBOEpd (65% oil) expected, 
  • EBITDA of $755 mm vs $735 mm expected,
  • EPS of $0.72 vs $0.79 expected (we don't care much about EPS vs EBITDA),
  • Guidance: Volume growth increased to 27 to 31% (prior range was 26 to 30%),
  •     2Q19 volume guidance of 316 to 322 MBOEpd vs Street of 321 MBOEpd,
  • Guidance: Capex guidance of $2.9 B maintained, 
  •     Things that could trip the stock today:  1Q19 spending exceeded guidance (it was going to be front end loaded anyway but went over, coming in at $926 mm for the quarter vs guidance for 1Q of 825 to $875 mm and a non operated capital increase of $40 mm being given as the majority of the above estimate spend). 
  • Dividend was repeated at $0.125 /quarter.
  • Company highlighted a 10 bagger on midstream asset investment with Oryx deal ($45 mm spent since end of 2015 monetized for $457 mm during 1Q),
  • Net debt to annualizaed 1Q19 EBITDA sits at a comfortalbe 1.5x
  • Rig Counts falling as expected. 34 rigs in 4Q, 33 rigs in 1Q, 29 rigs at present. 
  • Conference Call: Today, 9 am EST.


VNOM (Unowned) Reports Softer Than Expected 1Q19 Results; Reiterates Full Year Guidance

  • Production of 19.042 MBOEpd (67% oil (lower end of guidance range)) vs 20.9 MBOEpd (69% oil) expected,
  •      Production was off due to a lack of new well completions, 
  •      Production guidance for 1H19 was 20,500 to 22,000 BOEpd, 
  • Oil differential of ($9.43)  vs ($10.54) in 4Q,
  • EBITDA of $57.3 mm vs $59 mm expected,
  • Distribution of $0.38 vs $0.51 last quarter, 
  • 2Q19/3Q19 guidane of 19 to 21,000 MBOEpd,
  •     2Q19 Street is 21.6 MBOEpd,
  •     3Q19 Street is 22.4 MBOepd.
  • Full year previous guidance reaffirmed.
  • FANG plans to complete another 12 wells during 3Q19, 
  • Company sees improving differentials beginning with 2Q19,
  • Nutshell: We do not own the name.  Quarter and guidance are a touch light and light respectively. Stock likely takes a breather on the release. 
  • Conference Call: Today, 10 am EST.

1Q19 Energy Earnings Week 3 Calendar

Other Stuff

  • MR does not report until next week (please disregard the entry in the table above); no delay on their part, we just had trouble with our calendar.

Odds & Ends

Analyst Watch:

  • TBA in comments. 

101 Responses to “Wednesday Morning – Earnings Avalanche Part 1”

  1. 1
    zman Says:

    ADP of 275 K vs 180 K expected.

  2. 2
    zman Says:


  3. 3
    bill Says:

    Anything on SM– (down in premarket)

  4. 4
    zman Says:

    Bill I do not show anything on them today. Down 11% pre market, light volume. 

  5. 5
    zman Says:

    Analyst Watch

    VNOM (unowned) – Stephens calling miss and tepid near term guidance a buying oppy.   Stock called down a bit over 3% pre market. 

  6. 6
    zman Says:

    CXO call in 10 minutes, notes to follow. 

  7. 7
    zman Says:

    OPEC crude output rose by 25,000 b/d to 30.3 million in April: BBG survey

  8. 8
    Viper1 Says:

    SOI notes 

    SOI call  Growing customer base cash flow positive for the first time should stay positive, New chemical division field trials going well 14 silos should be built Q2. Still in development 7 units in the field, some paid for others testing the systems

    small revs generations from chem silo's Q1

  9. 9
    zman Says:

    CXO 1Q19 Call Notes

    – Production above high end of guidance, new projects plus non op activity

    – noted capex above during the quarter; 

    – said on track to stay in capex range for year,

    – not surprised by M&A focus in the basin given how good the Permian is.

    – 1Q19 was supposed to be highest spend of year and that will fall off rest of year as previously noted

    – the net debt in the post does not include the midstream sale cash of $300 mm which arrives during this quarter

    – "goal is to have a fortress balance sheet"

    Going to Q&A 8 minutes in  … 

  10. 10
    zman Says:

    FYI this got posted to SA this morning:


  11. 11
    zman Says:

    CXO 1Q19 Q&A

    Q) Question on CVX / APC – your thoughts generally on M&A and your thoughts on gap to your NAV

    A) Not surprising that CXO pops out as something people would want to buy.  We have a long term plan and can win under any scenario.  We have been building a lot of value. 

    Q) Cadence on activity

    A) 33 rigs 1Q, 29 today, low 20's later in summer

        Back half of the year has the majority of the production adds. 

    Q)  Longer lateral success

    A) Delaware – pushing to 2 miles, in Midland pushing beyond 2 milers.  Land swaps helping to allow them to get longer.  Historically they've been seen as a shorter lateral name. 

    Q) Maintenance capital needed to hold flat. 

    A)  We could sustain our production rate with half our cash flow, that's a 15 rig level. 

  12. 12
    zman Says:



  13. 13
    Baylor Says:

    Any chance LBRT reinstates some buyback?  They’ve been very aggressive there in the Past. Took them from $15 to $22 or so a year to 18 months ago


  14. 14
    zman Says:

    re 13 – it's in progress now, how aggressive they get depends on pricing progression this year, so free cash after dividends, but they spent $18 mm in 1Q19 as per:

    On September 10, 2018 the Board approved a $100 million share repurchase plan which was fully completed in January 2019. On January 22, 2019 the Board approved an additional $100 million share repurchase plan which expires on January 31, 2021. During the quarter ended March 31, 2019, Liberty repurchased and retired 1,303,003 shares of Class A common stock for approximately $18 million. The total remaining authorization for future common share repurchases as of March 31, 2019 was approximately $99 million.

  15. 15
    zman Says:

    VNOM (unowned) – opening off ~ 7%

  16. 16
    zman Says:

    Oil volatile, $63.85 WTI at equity open. 


  17. 17
    zman Says:

    CXO 1Q19 Q&A 2

    Q) development questions

    A) using Dominator project as example – tightest yet, still playing with spacing and landing zones and the interaction therein.  Still a lot to learn but must learn while delivering competitive results.  Dominator was drilled on 50% tighter spacing than what they normally do, not at the 60 day point on the wells yet which is when they normally talk but early returns look good. 

    Q) another capex question

    A)  we are already contemplating cutting operated activity to stay in budget. 

        inflation – circle to TRANSCRIPT, didn't hear it. 

    Q) gas prices and takeaway

    A) we don't see it as a governor on our plans this year. 

    Q) capex cadence

    A) 2Q will be less, but still 2nd highest spend of the year and then tails on down

    Q) Non op rates of return vs your

    A) all over the board, some incredible, some poor (which we try to swap acres on) and we get a lot of intelligence from them, notes that as everyone goes to bigger projects the non op $ can get bigger on them. 

    Q) land swaps

    A) built a sizable team focused on this, trying to get deals done, did 15 trades of significance in 2018, did 5 so far this year, cadence is picking up, a lot to come. 

    Q) returns on Midland vs Delaware, can Midland keep up with the Delaware – Delaware 60 day rates are higher

    A)  he notes the 60 day rates but also notes Midland wells tend to be cheaper and don't decline as fast.   30 and 60 day rates are not as good of an indicator of how good a well is given that bigger projects make us very mindful of how we flow them back

        (Zcommnet – you should not flow them back as hard on the bigger projects as you have to size your surface facilities appropriate and not to just meet a big pad's flush production should you go open choke).  What he's saying makes complete sense.  



  18. 18
    zman Says:

    LBRt opens up 8% – call in 25 minutes. 

  19. 19
    Viper1 Says:

    WELL Done  Z LBRT

  20. 20
    zman Says:

    re 19 – thanks!  Blind squirrel finds nut!

  21. 21
    zman Says:

    CXO call going well, last quarter they got hit hard, this quarter pretty flat on the beat, capex is the biggest fear.  They said they are contemplating operated capex cuts to stay within budget. 

    Q) the usual question – if you cut capex in 2H19 then how does 2020 look

    A) at a very high level, we see rig count trending down over the year, but in 2020 we see a flat to maybe up rig count next year. 

    Reiterates – "we will land our capex this year. "

  22. 22
    zman Says:

    Latest EIA oil inventory Bloomb consensus

       Crude Up 1.5 mm

       Gasoline down 0.85 mm

       Distillates down 0.6 mm 

  23. 23
    zman Says:

    CXO call over, stock off 30 cents at end of call. As we continue to rebalance, keep these guys in mind. We only own it personally now. 

  24. 24
    zman Says:

    LBRT call at top of hour, I will be on that call. 

    If anyone can post a few notes from the concurrent VNOM (unowned) call that would be great. 

  25. 25
    elduque Says:

    Commodity stocks in general for sale so far this morning. Not sure what I am missing. 

  26. 26
    james T Says:

    re22 I am hearing a Up 4.00 mm number

  27. 27
    zman Says:

    re 25 – probably oil in front of inventories

  28. 28
    zman Says:

    LBRT 1Q19 Call Notes

    – returned $24 mm cash to shareholders, divs and repurchase

    – demand for our fleets remains high

    – fleet 23 activated by end of quarter; went to work for the customer it was planned to when it was orders back in 2018

    – pricing comment

        A) structural decline in pricing helps our customers but does't hurt us – this is sand

        B) cyclical decline – there was too much capacity out there, prices still competitive but frac capacity falling as noted in post – sees potential for higher pricing later this year.

    – focused on delivering free cash this year. 

    – taking delivery of final equipment for fleet #24 this quarter; not yet giving a deployment date.  

    – we expect flat to slightly down results in the near term with potential to strengthen in rest of year.   This would be the comment that I would expect, if anything, to trip the gains in the stock today. 

         – note that they said EBITDA would be flat in 1Q vs 4Q. Instead was $85 vs the $70 mm they implied. 

    – investing in innovation, quiet fleets,etc. 



  29. 29
    zman Says:

    US ISM Manufacturing Index Apr: 52.8 (est 55.0; prev 55.3)

  30. 30
    zman Says:

    re 26 – could be, really up to net imports. I expect net imports to back off this week. Mostly concerned with the internals (throughput, product demand, L48 prod (flat or even down))

  31. 31
    zman Says:

    LBRT 1Q19 Q&A (went to Q&A 14 minutes in)

     – noted they see increasing amount of equipment out there they see as permanently retired due to mainteance needs

    Q) confidence that 4Q18 was trough on a per fleet EBITDA basis

    A) fleet startup costs are pretty modest.  4Q had utilization changes, very short term work halts

      So yes we see that as a bottom in EBITDA/fleet

       1Q19 was very high on utilization and efficiency

    Q) Permian customer mix in Permian – is in the same with same people now back to work

    A) in the Permian customer base is very much the same, changes in customer makeup are very slow for us, we tend to have long term relationships. 

    There is excess demand for our fleets so any gaps are likely to be filled, including via some privates, given oil prices now.  Then just notes that 4Q is always going to see struggles.

    "hey guys, great quarter"

    Q) what are your remanufacturing efforts going to be in 2019 vs prior year levels

    A) we are 8 years old, some of our early fleets will be in rebuild mode, suspect a little more this year than last, costs $2 to $3 mm per fleet to rebuild.   

       Follow up Q: So how many of the 23 fleets get rebuilt each year

       A) in the 10% range, we have a fairly steady of aging of fleets. 

       So it's not a big number and it's a number they can definitely afford. 


  32. 32
    Viper1 Says:

    Spanish trail concerns on parent child wells addressed on VNOM call should lift FANG

  33. 33
    zman Says:

    EIA Oil Inventory Quick Look

    Crude at $63.53 just prior to inventories

    Crude Up 9.9 mm barrels (vs exp of up 1.5 mm)

        – throughput  – down slightly week to week to 16.45 mm bopd

        – imports – up 0.265 mm bopd (somewhat surprising)

        – exports – down 0.07 mm bopd to 2.6 mm bopd (strong but not super strong)

        – L48 oil production:  Listed as up 0.1 mm bopd.  Whatever EIA. 

    Gasoline – up 0.9 mm barrels  (vs exp down 0.85 mm)

         – demand – down nearly 0.2 mm bpd week to week to 9.2 mm bpd

    Distillates – down 1.3 mm barrels  (vs exp down 0.6 mm)

          – demand – up 0.4 mm bpd week to week, strong for time of year level of 4.2 mm bpd.

    Nutshell: Negative report as weeklies go.  Flipside is it should be one to push OPEC+  to maintain discipline. 

  34. 34
    zman Says:

    re 32 – thanks

  35. 35
    zman Says:

    LBRT 1Q19 Q&A

    Q) how are you looking at dual fuel kits

    A) we have always been intrigued by that due to the cheapness of nat gas vs diesel, also lower CO2, SOx, NOx, particulates.  

      Almost half of our fleets are dual fuel.  

       You have to have gas in the field sufficient to run the frac fleet.  Sees this increasing over time. 

       Everything we build now is dual fuel. 

    Q) question on EBITDA near term 

    A) average price is almost down for sure in Q2 vs Q1, a little, not a lot, and then efficiency (although 1Q was a winter quarter so that could be a push). 

    Q) how much better can you get on efficiency

    A) near term tough, but expect long term improvement to be significant, could see some improvement by later this year.  It has been a lumpy upward trend as to how much they can pump per hour

    Q) Electric frac fleet

    A) not yet.  We already have quiet fleets and can run gas .. those electric fleets are pricey.  

    Q) 24th fleet – how likely goes to work this year

    A) we are in a number of dialogues.  It has to go to a strategic customer that makes sense – may or may not happen this year. It's not a macro call. 

    Q) other capex

    A) investing in the rest of the articulated arm rollout, also some investments to improve operating efficiency. 

       We are not in the mode of operating equipment for a future fleet #25 

    Q) Pricing clarification

    A) had pricing declines in 1Q that fully roll through in 2Q, then it is "much more likely" that pricing is up a bit … not predicting a big up (which would be nuts) … basically just wanted to say it's flattish from here but more likely up than down. 

    Good call, all questions well addressed. 

  36. 36
    zman Says:

    re 32 – can you expand on that when you get a chance?

  37. 37
    zman Says:

    LBRT up 10% at end of call, fell off with comments on 2Q EBITDA being flattish with 1Q, this is more a function of analysts not really getting how to model them as well yet, pricing is far less transparent than in commodity markets. 

        Still – I would point out that Street 2Q EBITDA is $77 mm.  Flat to slightly up as they indicated would be $85 mm plus. No need to get panties in a bunch of the small stuff. 

  38. 38
    zman Says:

    Oil off 10 to 15 cents since inventories


  39. 39
    Viper1 Says:

    will do in a few Z. 

  40. 40
    james T Says:

    re38 Seems markets not totally buying the number.   

  41. 41
    zman Says:

  42. 42
    Viper1 Says:

    Travis was asked a question about The Spanish Trail and the Parent-child well relationships he stated they are no concerns for FANG on that acerage. I need to listen to it again to review the comments. Sorry busy day

  43. 43
    zman Says:

    re 40 – right or they are and are thinking that being 16% over the 10 year average and back over the 5 year as well will stiff OPEC+ discipline.

    re 42 – thanks much, will read it later as well.   

  44. 44
    nrgyman Says:

    RE 43:  Is that global inventories 16% over or US only?  Extended maintenance season impacting this?  

  45. 45
    zman Says:

    re 44 – US, yes. 

  46. 46
    zman Says:

    Adding to 45:

  47. 47
    Viper1 Says:

    Travis statement on the Parent/Child well issue  Spanish trail we been drilling there 6 yrs, and we drilled Parent wells, child wells grandchild wells. We have addressed this in the past, My take no issue at FANG the problem is with the Street, lack of understanding, looking for all the negatives. Also, differentials rolling off as of April 1 so VNOM will realize 11 more a barrel.FANG Moving from 8 well pads @SB to 12 in the 3rd Qtr. Sorry to be so brief and not as detailed as this should be.

  48. 48
    nrgyman Says:

    RE 45, 46:  Thanks.  What are your thoughts about the impact of the IMO standards set to begin next year?  Will this increase demand for low-sulphur medium/heavy crudes?  How will this impact demand for US production, which is increasingly of the lighter API grades?  Wider WTI discounts?

  49. 49
    james T Says:

    re Inventories:   NGL's  and propane being counted as crude also help distort total crude inventory.   EIA unaccounted oil number hit a record of 1145 as well.

  50. 50
    zman Says:

    More food for thought:

  51. 51
    zman Says:

    re 47 – perfect, thank much

  52. 52
    zman Says:

    re 48 – remains to be seen, experts on this seem to be of mixed minds. I don't see it as a driver of U.S. oil production trends from a short, medium or long term perspective. (maybe some impact longer term).   Could be some wider discounts. 

    Sidebar:  There were calls yesterday by some Republicans to Trump to abandon IMO 2020.  

  53. 53
    Viper1 Says:

    THX for the comments on inventories Z


  54. 54
    zman Says:

    Adding to 52 – refiner comments that they will run max distillates this year.  Usually they back way off distillates in the summer as they push for more gasoline and don't need as much diesel. Starting to rise now.  If that really shows in the data it will be price supportive for crude as it helps keep gasoline stocks lower than they otherwise would have been. Noted a move to record distillate production for time of year this week and that's will refiner throughput well off record levels. 

  55. 55
    nrgyman Says:

    RE 52:  Thanks.  Read some commentary that it is too late to abandon IMO 2000.  The global shipping industry will be implementing it.  No sure what happens to the US shipping industry if they abandon it.  Lose some business?  The US shipping industry is prepping to implement it so even if Trump abandons it US ships will be going with it anyway.  

  56. 56
    zman Says:

    re 53 – anytime

  57. 57
    zman Says:

    I will say with the big build, even if imports driven (with a bit of help from sluggish refiners) it is somewhat surprising to see no big sell off in WTI, given the monster net long speculative position now in place.  You don't want to see a number of monster builds (and they are still obviously possible this time of year) in a row or it may tip those longs into profit taking. 

  58. 58
    zman Says:

    re 55 – yeah, I would tend to agree. There are ways to not enforce it however that if the U.S. doesn't take the lead on could lead to shoddy implementation/cheating.  I agree with you completely, U.S. shipping will back it.  I was actually thinking of some foreign flagged ships that move from Africa to the U.S. that could cheat if the U.S. fails to enforce. 

    Also saw there was a meeting on Jones Act rules with Trump today.  Have not heard a peep about what was said. 

  59. 59
    zman Says:

    CXO down 5%.  They did everything but swear a blood oath they are going to stay on target for spend in 2019. 

  60. 60
    nrgyman Says:

    RE 54:  With the ramp in diesel production likely this year to meet demand from IMO 2020 implementation and the VZ production declines (heavy crude), doesn't that put pressure on refiners to pay up for available medium/heavy crudes vs light sweet?  This appears to have cost the refiners in the last Q due to refining margins slipping on higher prices paid for medium/heavy grades.  

  61. 61
    zman Says:

    re 60 – It's really not my pond. That's a global refining question.  What I have read says people have been paying more for medium sours. I didn't see anything in there about using less light sweet if that's the implication of the question.  More exports of light sweet are expected. And domestically there is still the ability to take on some more light, though estimates on how much more as a % of slate vary.  The domestic refining inputs, in API have been getting lighted for some time now, Feb was the highest in decades at 33.09. This is from under 30 in the early 2000's and around 31 in 2014 which I recall people asking how much lighter can these guys go.   But you're really on the edge of my area and I'd rather say I don't know that pretend to. 

  62. 62
    zman Says:

    Two wind names and a pressure pumper the only green on my screen. Going to lunch, back in a bit. 

  63. 63
    nrgyman Says:

    RE61:  Thanks for the insight Z.  Trying to get an understanding of the impacts on WTI and possibly the demand for Canadian heavy as a substitute for VZ crude in a growing heavy demand environment.  Want to gauge the relative merits of non-WTI based producers.  

  64. 64
    nrgyman Says:

    RE 62:  The solar names are up, even after a solid run and a pullback since YE.  Check out ENPH (+29% today).  They convert DC from the panels to AC for use, but instead of centralizing the conversion in a large inverter it distributes it throughout the system with micro-inverters.  Reduces risk of downtime when the inverters fail, which they do.  Centralized inversion failures take down the entire system whereas distributed inverters may take down a panel or a section of panels.  They are getting more business from panel makers, who are less interested in building their own and who are moving toward distributed micro-inverters.  After reversing higher in 2017, this is the third year in a row of monster stock performance.  Wish I could say I owned it, but never did pull the trigger.  

  65. 65
    zman Says:


  66. 66
    zman Says:

    re 64 – thanks, added to that mkt watch tab

  67. 67
    nrgyman Says:

    RE 64:  The link for today's quarterly results on ENPH:


  68. 68
    zman Says:

    WPX reports post close. No comment here on the quarterly numbers but very little worry from a capex standpoint this year (little change of a guidance boost)

    We do expect them to potentially accelerate time line to 2020 from prior 2021 comment on significant return of cash to shareholders. 

  69. 69
    zman Says:

    Also expect WPX to show off better diffs this quarter; much better on the Bakken side especially. 

  70. 70
    james T Says:

    re64 Yeah in North Jersey we have a small panel on every few telephone poles,  two boxes underneath each panel.   Obviously one is the inverter.

  71. 71
    zman Says:

    OII (personal only) pushing for $20.  Planned hold time is around 3 months (next quarterly report), then decide or $25+, which ever comes first. 

  72. 72
    elduque Says:

    nrgyman- any thoughts on AR tonight. 

  73. 73
    zman Says:

    Probably not a shocker but no rate change. Press conference worth a watch to watch Powell walk tightest of ropes. 

  74. 74
    Viper1 Says:

    CNBC china deal possible by next Friday

  75. 75
    zman Says:

    PE – slightly elevated chance of volumes coming in above Street in 1Q (growth was to be very slight as they guided oil only in a range that was tight to 4Q).  Massive linear footage completed in 4Q.  Not a big deal either way. 

    Potentially they shift cash neutral comment a bit forward from last known 4Q19. 

    Will show of a 3 mile lateral this quarter (not sure people care right now but if well done that's a better use of capital)

    Probably some follow on commentary about efforts to make stronger child wells (people should like that)

  76. 76
    zman Says:


  77. 77
    zman Says:

    MR getting hit on high volume, no news I see. 

  78. 78
    nrgyman Says:

    RE 72:  No insight for tonight's report.  I am wondering when the liquidation will stop.  Often that indicates an expectation for a poor report, but AR has sponsor PE money that wants out so who knows?  Has to be the lowest multiple in the natgas peer group atm (a 2x handle) and a net debt ratio <1x (net of AM holdings).  The currently low natgas prices don't affect them much this year due to 100% hedges at prices >$3.   The unhedged NGL prices do affect them, but those prices have risen since YE.  AM has come in significantly as well–now yields about 10% on the existing dividend, is a c-corp, has the lowest debt/ebitda multiple in the sector (just below MMP, the historical sector leader) and is expecting strong DCF growth (15%+ CAGR) over the next 3 years.  

  79. 79
    zman Says:

    re 78 – tied with COG on the annualized debt multiple if you take net debt as debt less AM for AR. 

  80. 80
    zman Says:

    at 0.7x on the 4Q annualized ebitda figure. 

    Too true on the TEV/EBITDA of AR though, super cheap. 

  81. 81
    nrgyman Says:

    Crude prices are now above the pre-inventory level, but E&Ps are not liked atm.  Amazing the hyper-sensitivity to capex spending by the market.  Almost a no-confidence vote in sector mgt teams, like it doesn't believe they received the message.  The elevated inventory levels don't help with that perspective.  The extended maintenance season this year (due to IMO 2020) is perpetuating this perspective.  

  82. 82
    zman Says:

    Odd action both PXD and FANG, a little post APC news profit taking before both report next week. 

  83. 83
    zman Says:

    XOP giving up more than we are, back to end of March levels.  

  84. 84
    Viper1 Says:

    RE 82   agree 

  85. 85
    zman Says:

    PES – mid day bottom fishing pre earnings.  Expect their outlook to be more upbeat. 

  86. 86
    zman Says:

    This is going around:

    Montage Resources Corp (NYSE:MR) – Equities researchers at Seaport Global Securities decreased their Q1 2019 EPS estimates for Montage Resources in a research report issued to clients and investors on Monday, April 29th. Seaport Global Securities analyst M. Kelly now expects that the medical instruments supplier will earn ($0.98) per share for the quarter, down from their previous estimate of ($0.03).

    Last time I checked they produced gas, not medical instruments.  Says it was out Monday, maybe it was, but odd it's going around today on the internet.  Mike Kelly is a real analyst.  Only reason you'd cut that much is a special item. Seems kind of fishy. 

    Anyone with Seaport coverage feel free to forward anything they wrote on Monday to me. 


  87. 87
    zman Says:

    Broad market reversing lower post Powell.

  88. 88
    zman Says:

    I've got a note in with a Seaport client for MR comments. 

    Beerthirty – ton of reports this afternoon, back every once in awhile with comment for the next several hours. 

  89. 89
    elduque Says:

    AR- trading higher in after market. Figures and outlook look good to me. 

  90. 90
    zman Says:

    re 89 – comments in a bit on a few names

  91. 91
    zman Says:

    LPI (unowned) – might be one of more interesting movers tomorrow. Beat and raise of capex and modest increase to 2019/20 volumes.  Details tomorrow's post. 

  92. 92
    zman Says:

    From tomorrow's post:

    TPIC Warns On Previously Announced Two Items –  Updates Guidance

    • TPIC previously noted concern over one client, Senvion as financially in trouble. 
    • Senvion filed BK; Senvion consumed 4% of their total global blade capacity, 
    • TPIC puts the full year impact of $16 mm due to an impairment 
    • TPIC has the right to sell the blades it has made for Senvion directly to the wind farms Senvion would have, 
    • TPI will also take a $25 mm charge related to the previously disclosed labor dispute in Mexico and resulting shipment delays, 

    Revising guidance:

    • Initiated 1Q19 net sales guidance of $300 mm 
    • Initiated 1Q19 EBITDA guidance falls to $2.9 mm
    • 2019 net sales moves to $1.45 B to $1.5 B  (prior guidance was $1.5 to $1.6 B)
    • and 2019 EBITDA moves to $80 to $85 mm (prior guidance was $120 to $130 mm). 
    • They reaffirmed 2020 sales and EBITDA targes of $1.7 to $1.9 B and $170 to $190 mm respectively. 

    Favorite Quote Watch: "We remain confident and committed to our overall business model, strategy and our plan to double the company’s revenue over a three-year period.  The fundamentals of our business remain strong, wind markets around the globe continue to grow at an attractive pace and our customers and potential customers are demanding increasing quantities of blades to serve a very strong U.S. market as well as the many fast-growing emerging markets.  Along with our customers, we continue to invest heavily in 2019 into new line start-ups and existing lines transitions.  Our mature operations are performing at or above our expectations which gives us confidence in our ability to navigate these challenging times and return to the profit levels we expect."

    Nutshell:  Stock will take a hit on the news and we may add to our position after the dust settles next week. 

  93. 93
    zman Says:

    From tomorrow's post (draft)

    AR (Unowned) Reports 1Q19 Beat; No change to volume or spending plans

    • Production of 3.099 Bcfepd (29% liquids) vs 3.16 Bcfepd (29.5% liquids) expected,
    •     Liquids make up 35% of revenues prior to hedges, 
    •     Liquids pricing improved towards the end of the quarter rising from 58% of WTI for 1Q average to 61% of WTI for Feb/Mar average (shipping via Mariner East 2 to Marcus Hook for export began in Feb, (getting premium now to Mont Belvieu pricing which are at historic lows),
    •     Natural gas received a 15 cent premium to Nymex, 
    • EBITDA of $443 mm vs $487 mm expected,
    • EPS of $0.35 vs $0.31 expected,
    • Reported positive cash flow of $68 mm for 1Q19,
    • The name remains extremely well hedged (big hedge at strong prices, see the link below), 
    • Net debt to EBITDA now 2.1x,
    • Guidance change:  $4 / barrel increase in guidance vs early year guidance for the heavier end of the NGL barrel,
    • No change in spending guidance, 
    • We recently provided an updated cheat sheet here.  We are monitoring the stock as it retreats on soft pricing.  
    • Conference Call: Today, 11 am EST.
  94. 94
    nrgyman Says:

    RE 60:  In Feb, US refiners processed the 'least-dense' crude since 1985.


    If they want more diesel, but process lighter crudes to get it, won't that configuration eventually lead to overproduction of gasoline?  

  95. 95
    zman Says:

    re 94 – not necessarily, they can tweak the system to produce more, they are doing this now, can go to 36 to 37% vs recent 31% now 34%. 

  96. 96
    zman Says:

    adding to 95 – it's shown in the F1a chart in the Thursday deck. 

  97. 97
    zman Says:

    Not sure if this will paste in properly but here goes:

  98. 98
    zman Says:

    Trump pledges not to remove Jones Act. 

  99. 99
    zman Says:

    Beat and reiterate guidance:

  100. 100
    zman Says:

    Meet and reiterate guidance:

  101. 101
    zman Says:

    In line, miss on mix and EBITDA is weather and an asset sale explicable, reiterates spending and volume guidance:

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