Thursday Morning – Oil Review, Gas Preview, Renewables, BE, MGY, VWDRY

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Market Sentiment Watch: D.C. and China front and center. In today's post please find the oil inventory review (mixed bag, crude stocks in line with 5 year average as net imports continue to make week of year record lows, both products improved vs their year ago and five year average levels), the natural gas preview, a new page on renewables, comments on MGY, comments on BE, and some other odds and ends. 

Housekeeping Watch:  A few words on our focus.  I am an oil and gas analyst.  I cover U.S. upstream names. I have done this for about 20 years and about 15 years in this format. We cover and own a few Service names and pay attention to some names in related spaces (refining though I don't and won't be modeling any of those names).  Recently I have added some renewables to what we plan to cover long term (2 winds, a fuel cell name, and 5 solars so far). We loosely tracked several solar names for years but have decided the time is right to formalize our coverage with the same macro level of comprehension combined with bullet points and cheat sheet formats for the companies. This is incremental to our oil and gas work.   We are in NO WAY scaling back our oil and gas macro or our company specific work.  We hope you will join us on this path.

Ecodata Watch:

  • Jobless claims came in at 213,000 (inline) vs last week's 208,000,
  • The 2Q19 GDP revision came in at 2.0% vs a forecast of 2.1%, flat to prior reading,
  • We get pending home sales at 10 am EST (no forecast, last read was -2.5%). 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h
  3. Oil Inventory Review 
  4. Stuff We Care About Today - Renewables, MGY, BE, VWDRY
  5. Odds & Ends

Click the link directly below this to ... .

Holdings Watch:   


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

Commodity Watch:

Crude oil closed down $0.80 yesterday at $56.49. Prices rose into the close in the weak of a slightly negative weekly inventory report out of EIA. We see the Middle East North Africa risk premium as too low (Iran, Saudi, Libya).  This morning crude is trading flat. 


Natural gas closed flat at $2.50 in another light volume session as traders prepare for the roll to the November contract. This morning gas is trading up slightly.

  • Production Watch:  Refinitiv noted yesterday that U.S dry gas was off 1.0 Bcfgpd from mid August levels due to small declines in a number of states. Interesting.

Interesting Chart Watch:  This is EIA's long term view of U.S. natural gas production with oil at $58 or less:

Interesting Chart Watch 2:  Meanwhile due to global demand ....

Natural Gas Storage Preview

Street is at +92 Bcf for today's report. 

  • Last Week: +84 Bcf
  • Last Year: +51 Bcf
  • 5 Year Average: +74 Bcf

Oil Inventory Review


Stuff We Care About Today

Renewables page

  • A new page link at upper left entitled Renewables contains handy information on solar, wind, carbon and other items
  • This post is archived under Renewables.
  • This new page will continue to grow. If you have related data or links you think are appropriate for inclusion please drop them in the comments section or send them to us at zman@zmansenergybrain.com

Other Stuff:

Spoke with MGY last night

  • No change to prior operating plan or guidance,
  • 2H19 likely to be closer to a spending rate of 50% of EBITDA vs usual plan of 60%. They have previously said this and no plans to change at this time.
  • No change to buying assets vs return of capital via share repurchase. If they find good deals they will bolt on.  If not they will buy back shares.
  • Probably no catalyst type news out of the Giddings program with the 3Q call.
  • Non operated activity has slowed more in 3Q.  EOG (unowned) activity is pretty steady but other operator activity has slowed some.
  • Highland #2 still not in their plans as has been rumored.  The current gas flow and cash flow is super steady.
  • Asked about ESG - it's not a big focus for young name in growth mode. They try to be good stewards like all E&Ps but not a big focus for a corporate responsibility report near term. This  is not at all surprising.  They control the controllable.
  • Please see our recent cheat sheet update and comments on MGY here.

BE - Plans Fuel Cell Powered Ships

  • BE is teaming up with Samsung Heavy Industries to build ships powered by fuel cells.
  • "SHI aims to be the first shipbuilder to deliver a large cargo ship for ocean operation powered by fuel cells running on natural gas. "
  • Key to this deal: "Such an innovation will play a key role in helping the company exceed the 50 percent emissions reduction target, compared to 2008 levels, that the International Maritime Organization (IMO) has mandated all shipbuilders should achieve by 2050."
  • The pair have also received approval to design fuel cell powered Aframax oil tankers.
  • Samsung Heavy is the first shipbuilder to secure marine fuel cell technology.
  • Nutshell: Pretty interesting as we approach IMO2020.  As they note, "80 percent of the world’s shipping fleet runs on heavy fuel oil, or bunker fuel. The combustion of this fuel to provide propulsion and auxiliary power to ships causes the marine transport industry to produce between 2% and 3% of global carbon emissions.  If the global marine shipping industry was a country, it would be the sixth largest producer of greenhouse gas (GHG) emissions in the world."  We view this as a pretty heavy weight seal of approval from one of the major players in the shipping business but also a validation of BE's tech in the green space that runs counter to a recent short seller slam piece.
  • Please see our recent write up and updated cheat sheet here on the recent fall of BE (roughly from $13 to $3).  
  • Please see our initial write up here. 
  • BE is currently 24% of float short.

VWDRY Announces Multiple Orders This Week

  • 88 MW order for Greece for delivery in 2020 with 20 year service contract (announced today),
  • 54 MW also for Greece (announced today),
  • 43 MW also for Greece with 20 year contract (announced earlier this week),
  • 168 MW for Mexico with 5 year operations and service contract (73m blades sourced from TPIC's Matamoros site) (announced today),
  • Order intake for 3Q19 listed at > 1.9 GW. YTD this is 64% of expectations.  Expect a big 4Q for orders.
  • Please see our cheat sheet update in yesterday's post.

Odds and Ends

Analyst Watch:

  • TBA in comments

72 Responses to “Thursday Morning – Oil Review, Gas Preview, Renewables, BE, MGY, VWDRY”

  1. 1
    zman Says:

    WTI at $56 just prior to equity open, Brent holding roughly $6 premium.


  2. 2
    zman Says:


    BE – added at $3.57, please see today’s post with comments on the Samsung Heavy announcement to incorporate BE fuel cells in cargo containers and cargo ships as well as links in the post that go to our recent piece on why BE has fallen so dramatically from pre 2Q levels.

  3. 3
    zman Says:

    BE announces unit placed at Fordham University.

  4. 4
    zman Says:

    TPIC included in a Vestas press release today as noted in post. If you missed our write up here recently here is the public version:


  5. 5
    zman Says:

    On a call, back shortly.

  6. 6
    zman Says:


    The Saudi’s have made quite a bit of show out of getting volumes back on line. Sometimes referred to as supply or production. But exports are another matter. The H2S removal capacity at Abqaiq cannot be simply circumvented nor can the need for lowering vapor pressure prior to loading. Note export loadings down nearly 1 mm bopd still. You’ve got some replacement from storage but they still have impaired ability to drop vapor pressure to tanker ready levels.

  7. 7
    zman Says:

    Order in below market for second piece of JKS.

  8. 8
    zman Says:

    Lot of ears on DNI testimony at the moment.

  9. 9
    zman Says:

    Natural Gas Quick Look

    +102 Bcf (10 more than expected)

    Storage now at 3,205 Bcf

    16.1% > year ago
    1.4% < 5 year average.

  10. 10
    zman Says:

    NG just under near term support, crossing $2.45 to $2.43. Not giving anyone a reason to own gassy names prior to quarter end.


  11. 11
    zman Says:

    TPIC slightly green in sea of red. Companies quiet into quarter end. Here, reading, shout if you need something.

  12. 12
    Baylor Says:

    Wow. 102? I’d expect some Massive RE-shorting coming

  13. 13
    zman Says:

    Prompt NG off a dime since this time last week.

  14. 14
    nrgyman Says:

    RE 9, 13: KMI’s Permian Express natgas pipeline was put into service this week, ahead of schedule. Said to reduce Permian flaring, which means more natgas supply without additional production. Better pricing will help producers.


  15. 15
    zman Says:

    re 12 – so far it’s hanging in there OK ($2.44). Historically speaking we are still low on storage, just below five year but also 4th lowest out of last decade for this week of year storage. We are headed over the five year with a peak just above it, no change to that. But would not be surprised to see a bit more cover in this week’s report and then shorting again showing up in next week’s piece. No reason for a bully rally, no reason for shorts to do a long term shift and cover to be sure.

    It was interesting to see Refinitiv showing dry gas off 1 Bcfgpd, as they note due to small drops in a number of states. Collapsing rig count and collapsing frac spread count meets already much slower dry gas production growth expectation next year meets higher LNG exports, weaker imports from Canada and higher generation next year from gas fired = long term strip that’s too low. But the shorts will not give up the trade easily and the covering we have seen last few weeks hasn’t moved the needle much over extremely short.

  16. 16
    zman Says:

    re 14 – thanks Nrgy.

    Couple of points for you re IMO 2020.

    1) see BE news this morning. Trapped long selling offset but we took a first piece as that is an interesting validation of the tech by an industrial powerhouse.

    2) there is a story out there about the ability of VLCCs, bulk carriers to use oil instead of using low sulfur bunker fuel. Basically they are using heavy sweet, with a little blend and running it into the engines to meet 2020 standards.

  17. 17
    zman Says:

    Market is sending AR (unowned) and others a message regarding their plan to grow ad nauseam.

    Anyone see news CRK (unowned) – quite the PT session there.

  18. 18
    zman Says:

    JKS rapidly coming to me.

  19. 19
    zman Says:

    JKS order down near $18, getting coffee, back in 15 minutes.

  20. 20
    nrgyman Says:

    Appa natgas names returning toward the recent lows. AR near $3, RRC near $4 and SWN under $2. Those three names should merge together, eliminate the overhead of two of them, synergize operations, derive economies and efficiencies, and better control overall production. Gradually sell off non-core assets. Shareholders of all three would win, imo. AM a big winner. 2 mgt teams would lose out. Seems like a fair trade off.

  21. 21
    zman Says:

    re 20 – I hear ya. So little in the way of impetus for a SWN to really kill themselves off by doing a deal.

  22. 22
    nrgyman Says:

    RE 21: Doubt any mgt team in that group wants to give up their positions for the betterment of their shareholders. This is where the the key question must be asked: who is in charge? Mgt supposedly serves at the pleasure of shareholders, none of whom can be happy with the current situation. If BODs are truly independent they would make moves to favor shareholders, even at the expense of mgt.

  23. 23
    zman Says:

    re 22 – thoughts

    Boards are changing, look around, you’ll see what I mean.

    Managements with greater stock holdings should be interested in the “no premium stock for stock deals” if they make sense from a metrics standpoint.

  24. 24
    brodway Says:

    technically there is a good amount of support in JKS at $18….should hold there unless markets take a leg down from current levels

  25. 25
    zman Says:

    CRK (unowned) taking out GDP (unowned) would make a lot of sense. Take Gil’s name and salary out of the equation, assets make more sense.

  26. 26
    zman Says:

    re 24 – thank you, I’m sitting just above it. Of course, a break of that on the daily, weekly chart and I get to really average down.

  27. 27
    zman Says:

    I wonder if Bolton is the whistle blower.

  28. 28
    zman Says:


  29. 29
    zman Says:

    Solars all off with market, post UN profit taking.

  30. 30
    zman Says:

    States that have 100% renewable mandates by 2050 or sooner

    All sectors electricity cost
    Cents/ kWh July U.S. Avg
    ME 12.87 11.06
    NY 16.22
    DC 11.41
    NV 9.28
    CA 18.42
    NM 10.21
    HA 29.81

  31. 31
    zman Says:

    Platts reporting Saudi NGL supplies partly restored.

  32. 32
    zman Says:


    Airstrikes anyone?

  33. 33
    zman Says:

    Analyst Watch

    JPM out saying buy Energy.

    “Low Valuation, Crowded Short, Insider Buying, and Fundamentals to Improve”

  34. 34
    zman Says:

    OT grabbing lunch, back in a bit.

  35. 35
    zman Says:


    JKS – Took our second position in JKS at $18.05. Please see our recent write up from September 24th on the site.  Solar space in general weak today and we are opting to continue to slowly wade in. 

  36. 36
    nrgyman Says:

    USO still has not filled the opening gap created by the SA bombing ($11.44), but came closer when hitting a low of $11.56 today.

    XOP has filled the SA event gap and is now just above filling the Sept 9 opening gap at $22.13. There is a lower gap still unfilled at $21.09 left from the opening on Sept 4 and another near the lows at $20.53 left from the opening on Aug 28.

  37. 37
    zman Says:


  38. 38
    Natus Says:

    re 30 – “HA” state ?

  39. 39
    zman Says:

    The Blotter is updated.


  40. 40
    Michael Says:

    Is the market telling us that oil is going to $40?

  41. 41
    zman Says:

    re 38 – apologies, HI

  42. 42
    zman Says:

    re 40 – I don’t see that. It’s just under $56. I see some low end of range testing with names trading like we’re $50 but $40? No, I don’t see that kind of signal.

    Technical trading in motion on things like FANG however. Goldman stepped up yesterday reiterating a Buy. To no avail but their comments were nonetheless on point.

  43. 43
    zman Says:

    FANG should be buying their full 3Q allocation of stock back in here.

  44. 44
    zman Says:

    re 36 – thanks for keeping track of it.

  45. 45
    zman Says:

    Adding to 42 on 40 – apathy, end of quarter, dressing.

  46. 46
    Michael Says:

    One of my energy guys mentioned this week that a houston-based l/s energy team was getting blown out this week.

  47. 47
    Baylor Says:

    When LBRT has initiated buybacks in the past we’d see massive run ups. Once from about $16 to $20 and beyond

  48. 48
    zman Says:

    re 46 – I heard concern for one research team in the wake of a conference.

    re 47 – pricing down, utilization a concern though not as much for them as others, end of quarter. We have free cash flow expansion there next year. Likely in 1H20 you get the last spread to go ahead and activate and then they don’t add anything new beyond it next year. Spend almost all maintenance capex which is pretty limited on a per spread basis (their stuff is mostly new, they do it year end and year out so no catch up maintenance). May see a little extra $ for some incremental per spread items but I doubt you see $35 to $40 mm outlay for another spread next year.

  49. 49
    zman Says:

    Interesting nymex closing action on WTI, up 75 cents in the last few minutes.


  50. 50
    zman Says:


  51. 51
    Michael Says:



  52. 52
    Skipton Says:

    Z te 30
    It is nearly impossible to get to 100% renewable . A base load technology such as NG Coal pumped storage ,nuclear geo etc will always be needed
    Batteries just don’t hack it . They can be use for peak load lopping and frequency regulation but not for base load ) at least not at any reasonable cost)

  53. 53
    nrgyman Says:

    Z, what do the valuation metrics on PDCE look like post SRCI merger? Market liked the deal and now it has pulled back to its 50 dma, forming what looks like an inverted H&S pattern with a neckline at $36.49. Your thoughts on PDCE?

  54. 54
    zman Says:

    re 51 – yeah, likely that was the end of nymex day boost.

    re 52 – right, just noting their “plans”

    re 53 – I don’t own either one of them, don’t actively model either of them, don’t have an M&A on them, given a few days I can circle back.

  55. 55
    zman Says:

    Green shoots.

  56. 56
    zman Says:


  57. 57
    james T Says:

    Should be bigger exports next week EIA number. So Saudi has drawn down its stockpile of all products by how much roughly. 45 – 50 mm barrels at least since attack ?

  58. 58
    zman Says:

    Relatively higher volumes today, still mostly light of 20 day averages, grinding market, into close of quarter.

  59. 59
    zman Says:

    re 57 – haven’t seen anything on products, saw a 14 mm barrel drop on crude stocks a couple of days ago.

  60. 60
    zman Says:

    AR (unowned) – no notable change in production for 2019 or 2020; EBITDA estimates off 7% for both years (pricing),

    COG – 1% dip in 2020 production as estimates continue to ease after 2Q19 guidance for the year; 2% and 5% reduction in expected EBITDA for 2019 and 2020 respectively on lower expected natural gas prices.  COG remains lightly hedged as of last notice but we expect coverage to have been increased for 2020 on the recent bump higher in prices. 

    CRK (unowned) – modest reduction in 2020 volume estimates, well below mid point guidance now. 2020 EBITDA estimates down 14% this month. 

    GDP (unowned) – no notable change on production (slight dip 2020 estimates vs a month ago, that’s common guess now); EBITDA off 4% for 2020 since last update (should be more, not well hedged). 

    GPOR (unowned) – volumes inched up slightly; 2019 EBITDA essentially unchanged, 2020 down 6% from a month ago. 

    MR – flattish 2019 vs prior estimates, inching higher on 2020 (makes sense vs positive 2Q19 volumes and commentary); EBITDA for 2019 and 2020 down 6% and 10% respectively on lower price decks for NG and NGLs; Street now close to the lower end of our 2019 range for $2.50 gas price for this year (a number we see as too low on average).  

    RRC (unowned) – estimates down 1% and 3% for 2019 and 2020 respectively, no guidance shift during this time, sense would be sellside sees a COG like move to further restrain spending in the face of weak prices as in the cards for the 3Q19 call.  Recall these guys are highly hedged this year but only lightly hedged in 2020.  EBITDA down 3% and 5% for 2019 and 2020 and EBITDA now moves to flat YoY 2020 vs 2019.  We’d expect them to have stepped up 2020 hedging in the very recent past (announced with 3Q call). 

    SWN (unowned) – production flat and down 2% respectively for 2019 and 2020 volume estimates.  Same sense as with RRC that analysts are looking for lower spend before management formally communicates lower spend.  EBITDA down 2% and 7% for the two years; hedges are quite light next year with just over one-quarter of gas hedged. 

  61. 61
    zman Says:

    Set to 1 m charts


    Straight up into nymex close on Saudi Patriot news and then tight and flat.

  62. 62
    zman Says:

    XOM (unowned)

    Punting Norway upstream operations,
    $4.5 B, 20 fields,
    Focused on assets with greater long term value.

    Says part of plan to divest $15 B through 2021 as they highgrade the upstream.

    Freeing up $ for an acquisition in the states?

  63. 63
    zman Says:

    Gassy Players update, to go with 60 above, in tomorrow’s post.

    Beerthirty, back in a bit.

  64. 64
    reefguy Says:

    Z, didn’t you see Paulsen CPE letter? They said XOM should buy CPE…LOL

  65. 65
    zman Says:


  66. 66
    zman Says:

    re 64 – Reef …. my bad.

  67. 67
    zman Says:

    Looking for a considerably bigger injection next week. Refinitiv data showing lower volumes not reflected in OPIS data for this week.

  68. 68
    zman Says:

    5 to 10 Bcf bigger it looks.

  69. 69
    zman Says:

    No progress on the NGL price front this week although propane looks OK, just very slow.

  70. 70
    zman Says:

    Platts says U.S. oil exports could hit 4 mm bopd before YE19. Capacity only growing 2020 and 2021.

  71. 71
    zman Says:

    Analyst Watch

    Morgan Stanley sees XOM and CVX (both unowned) as well positioned for U.S. acquisitions with modest premiums. Notes other deals along lines of PDCE’s (unowned) recent no premium deal should be better received than traditional M&A.

  72. 72
    zman Says:

    re 71 – their screens would seem to highlight FANG. Nice.

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