16
Dec

Monday Morning – WPX

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Market Sentiment Watch: Last week oil edged higher with the help of benign commentary out of the OPEC and IEA monthlies and positive trade chatter.  ZLT up 10% last two weeks. In today's post please find The Week That Was, comments on a big Delaware acquisition by WPX (call is at 8:30 am EST), and several other odds and ends.  In case you missed The Wrap please click here.

 

Ecodata Watch:

  • We get Empire State at 8:30 am EST (no forecast, last month was 2.9),
  • We get the Homebuilders index at 10 am EST (no forecast, last read was 70).

The Week Ahead: 

  • Tuesday - Housing starts, building permits, industrial production, capacity utilization, job openings.
  • Wednesday - No economic data release scheduled,
  • Thursday - Jobless claims, Philly Fed, current account, existing home sales, leading indicators
  • Friday - 3Q19 GDP revision (expected to be up slightly), personal income, consumer spending, core inflation, consumer sentiment.

In Today’s Post:

  1. Holdings Watch - two trade additions last week.
  2. Commodity Watch
  3. The Week That Was
  4. Stuff We Care About Today – The Five Things, WPX, Our two weeks ahead, Wind Watch
  5. Odds & Ends

 

Holdings Watch:

ZLT (Zman Long Term portfolio)

Last Week’s Trades:

  • We added to FLMN at $6.38
  • We added 50% to our BCEI holdings at $19.50.

​The Blotter is updated.

Commodity Watch:

Crude oil rose 1% to close at $60.07 last week with OPEC and IEA giving the market no surprises and the EIA weekly, while poor quality last week, was seen as less important (also EIA moved it's view of L48 production down 0.1 mm bopd). Brent closed up 1% at $65.22 leaving the premium to WTI just over $5 again. This morning crude is trading just over $60.

 

Natural gas eased 2% to close the week at $2.30 on milder late December weather expectations and a storage withdrawal that was just below consensus expectations. Expect a bigger but sub 5 year average pull from storage this week.   This morning gas is trading off 3 cents.

  • Weather Watch:  Gas Weighted Heating Degree Days (HDDs) came in at 176 vs 193 normal and 170 in the prior week.
  • This week's forecast:  This week, CPC predicts HDDs will rise to 202 vs 205 normal.

 

The Week That Was

Stuff We Care About Today

 WPX Announces Felix Buy - accretive on cash flow, free cash flow, debt metrics improve based on a $50 oil deck for 2020

  • $2.5 B buy of private Permian player Felix
  •      $1.6 B in WPX stock (153 mm shares)
  •      $900 mm in cash via new WPX senior notes offering
  •      Equals 3.5x estimated 2020 Felix EBITDA on $50 oil (implies 2020 $50 EBITDA of $715 mm)
  • Accretive on all key metrics,
  • What Felix Brings: 
  •     - 2020 production estimate of 60 MBOEpd (70% oil)
  •     - 1,500 gross locations (2 mile lateral) on 58,500 net acres in the Stateline area of the Delaware - this acreage is well thought of.
  •     - Only 25 more wells hold all Wolfcamp and 3rd Bone Spring locations so it's basically HBP'd
  •     - Recent pads with 12 month production at 240,000 bopd (oil only rate) - this is strong
  • Free Cash flow. At $50 they forecast significant free cash flow.
  •     They are implementing a $0.10 per share dividend
  •     They see buying shares back opportunistically.
  • Balance Sheet improves:
  •     Pre deal WPX at 1.6x net debt / EBITDA
  •     Pro forma (using the $50 priced EBITDA), they would be at 1.5x using our estimate for WPX EBITDA at $50 oil.
  • Quotes: "Now we can accomplish these objectives for shareholders more quickly and efficiently with the irrefutable benefits of the Felix transaction.  Delivering on our plan ahead of schedule in a highly de-risked, leverage-neutral manner is consistent with our opportunistic approach,”
  • Conference Call: Today, 8:30 am EST.
  • We hold a just under 4% position in WPX. Expect the stock to dip and expect us to add on the dip likely today.

The Five Things

  1. 2020 Guidance: With OPEC out of the way look for upstream names to watch oil prices and slowly begin releasing their 2020 outlooks (from just before the holidays through February). Capex is likely to be down modestly across the board (see next bullet). Service names are likely to guide one quarter at a time with 1Q set to see a modest bounce relative to 3Q and 4Q19 levels.
  2. Free Cash Flow Vs Growth:  A majority of our names will look to generate free cash flow at $50+ in 2020 (some lower) and some gassy names will look to be cash neutral to slightly cash flow positive at a roughly $2.50 or $2.60 strip.  Expect upstream growth to take a backseat again in 2020 with FCF optimization (mix of volumes, price, cost vs capex) at forefront. While 2020 isn't official yet for most names the determination to be better than cash neutral to be free cash flowing in a sustainable measure is majority view and deemed critical by many.
  3. U.S. Production Directionality:  Pace of Lower 48 production growth is retreating - rigs falling, frac spreads falling (frac spread count down 29% since April, down hard again last week), spending for 2019 was front end loaded, spending in 2020 likely down for most names (10 to 20%).  We see EIA as missing the turn in production now, although, the latest EIA Drilling Productivity Report clearly anticipates rapid unconventional growth deceleration even as the DUC count starts to really drop.
  4. Natural Gas sentiment - remains in poor territory, production and weather driven. While exports hit almost weekly new highs (LNG set another record last week) and demand remains solid the market is more focused on record production levels (also at new highs) and the expected warmer than normal U.S. winter.
  5. 2020 Presidential Candidates:  Iowa closing in, moderates leading. Watching the rhetoric and plans which range from the extreme (frac bans, revamp of SEC reporting to reflect climate change liability) to measured (a push for further improvement of ESG).  Frac bans are generally thought to be only applicable on federal lands which are generally western U.S.  Also, the political climate in CA appears to be worsening (more on that tonight from CRC) while CO appears the same to us for now at least. Two late entrants - one moderate, one definitely anti oil and gas (we don't see Bloomberg as likely nominee, the other, the former governor of MA is interesting and not anti frac that we are aware of).  On the California front - steam assist and permits for normal fracture stimulation are on hold for review. We see CA as increasingly anti oil and gas and suspect the heat is only turned up on names like CRC and BRY (unowned) in 2020.  We see some of this same anti O&G as weighing more on sentiment than reality in Colorado names like BCEI and HPR.  We currently hold 27.5% of the portfolio in Wind, Solar, and fuel cells.

Questions on the 5?  We wanted to keep it short for the post but please feel free to ask in comments.

 Our Two Weeks Ahead

  • WPX - We will have a pro forma Cheat Sheet in tomorrow's post,
  • Comments/graphs on U.S. Generation,
  • Additional cheat sheet update for top 10 ZLT names with additional price target levels,
  • NOG (unowned) requested update,
  • Oil Macro 2020,
  • Natural Gas Macro 2020.

Other Stuff

Interesting reading watch: US has only one offshore wind energy farm, but a $70 billion market is on the way. Good for GE as noted in the story but also TPIC and VWDRY. Our #3 and #4 holdings.

Wind Watch: Onshore U.S. wind reached 100 GW capacity at the end of 3Q according to EIA.

  • 7.2 GW are expected to be added this month alone.
  • 14.3 GW is planned for installation in 2020, representing ~ 20% growth between 3Q19 and 4Q20.

Odds & Ends

Analyst Watch:

  • WPX - SunTrust cut the name to Hold and its target from $16 to $12 before seeing the Felix press release or listening to the call.

84 Responses to “Monday Morning – WPX”

  1. 1
    zman Says:

    WPX call in 10 minutes.

    Using so much stock and giving EBITDA on a low price deck, stock barely getting marked down early.

  2. 2
    zman Says:

    Notes on the call in a bit.

    Pro Forma cheat sheet update tomorrow’s post.

  3. 3
    zman Says:

    https://www.wpxenergy.com/investors/presentations/

  4. 4
    zman Says:

    WPX call about to begin, our December 5 comments and cheat sheet update here:

    https://zmansenergybrain.com/2019/12/05/thursday-morning-wpx-4/

  5. 5
    zman Says:

    WPX – Felix Acquisition Call

    Felix 60 MBOEpd at time of close (70% oil)

    Not showing synergies in metrics but they exist.

    Accretive on margin per BOE

    Dividend is $0.10 per share annualized.

    Good standalone vs pf on slide 4 showing 5 year target acceleration. Big acceleration to reach targets on FCF and ROCE.

    Slide 5 – shows the per acre cost < $12K / acre and price paid per undeveloped acquisition (only 30% allocated to undeveloped in this deal) Table bottom right shows PDP value at various oil prices, at $65 the acreage is free as all value is on PDP. Slide 6 - free cash flow at $60 of $500 mm - FCF of $200 mm at $50 oil. Plan to drop to 2 rigs in Williston PF budget is $1.740 mm for 2020 Decades of inventory at $50 WTI Slide 7 - inventory quality slide - Felix pads. - guess it was cheap to buy Felix instead of MTDR (unowned) Noting - the acreage is all in TX - that's a nod to Warren's fed frac ban. On target to be at 1.0x leverage by end of 2021 at $50 oil. PF guidance is on slide 11 Going to Q&A 15 minutes in ...

  6. 6
    zman Says:

    WPX Q&A

    Q) is slide 7 representative to the 1,500 and is there anything you will do different.

    A) it is representative. Really likes that it strong from north to south. Some have said east side is weak but calls attention to the Grizzly State pad, very strong. What’s shown is all the wells on those pads, not cherry picked.

    Makes a note on looking at short term, 1 month, 3 month – says Felix uses a “slowback” early time flow back, produces long flat period, up to 18 months, and crosses over, thinks it makes a lot of sense.

    Q) no synergy number. Can you speak to scale or impacts on capex of having bigger position.
    A) it’s about 15 to 20 miles from Rustler Breaks (again, hello MTDR), “we think the northern Del is a sweet place to be”
    We see oppy’s to compare approaches on both acreage sets, excited about it. Field tours made ops team excited, sees critical mass, sees a lot of value creation

    BUT, none of synergies are baked into the base case.

    “congrats on the transaction”

    Q) How midstream fits in
    A) We will have contracts in place, good contracts, around the Felix assets, good counterparties, good protections (the Felix midstream is being sold seperately so they’re saying they are covered).

    Q) 14 rigs in total post deal (12 in Permian) – do you have staff for that scale?
    A) We’re always looking for talent. Looking to add high end engineers, said much will be field operations, from G&A perspective (no real add), the field ops is covered by LOE.

    Q) background of the deal ?
    A) healthy respect for each other, Felix previously thought they’d sell the whole co, that didn’t happen so this worked out well for us, the high oil cut, the timing, over the last 12 months, Felix has stepped east and south and other zones and that delineation has been incredibly valuable to arrive at value.

    Q) locations
    A) more than sticks on a map, slide 12 shows by zones. Have economics on those locations. Pro forma – they have 2700 to 2800 laterals that are very long, very oily.

    No question from SunTrust yet (see bottom of post).

    Q) choke management
    A) it does influence base decline. Because of their choke management, their base is upper 30%, which is accretive to our base decline because we have grown so aggressive in the Williston and Permian so the add helps us get to the 30% type range sooner.

    Q) why are their margins so good
    A) high oil cut, good gathering agreements, revenue / BOE is starting out higher, then moderate LOE and then very low G&A.

  7. 7
    zman Says:

    WPX Q&A 2

    Q) how were you able to close
    A) we think the larger company’s are not in the market right now. We think they are focused on getting their own operations in line.
    Notes other aggressive public E&Ps had already done deals (he means FANG and PE)
    Notes Felix was confident in WPX, notes reshaping of debt towers last few months (see last cheat sheet noted above from Dec 5).

    “especially at the price that you got it for”

    Q)investment in this displace spending other assets in portfolio.
    A) no, had already high graded.

    3 rigs in Williston, goes to 2 during 2020, start with lower and ramp some for Felix (5 goes to 7) – average is 12 Permian and the 2 Willison.

  8. 8
    zman Says:

    MR piece released from Seeking Alpha

    https://seekingalpha.com/article/4312710-montage-resources-oily-natural-gas-player-still-inexpensive-despite-4q19-run

  9. 9
    zman Says:

    MTDR – up 5% early, not shocking.

  10. 10
    zman Says:

    WPX Q&A 3

    Q) lockup ?’s
    A) 2/3 of the 153 mm shares locked up for 180 days. I think they will stick around for a long time. Will they monetize some? Sure, but they get 2 board seats (they being EnCap)and there are incentives for them to stick around.

    Q) Slide 7 – time span for the cumulative oil figures. The grey (all operators), what is vintage on that?
    A) 12 months for the cumulative and then 2016 and forward, all industry wells.

    Q) H2S
    A) sees more to east, will have all safety all in place on that side, impressed with the way Felix has operated that area.

    Q) dividend – future increases vs buyback.
    A) dividend will be highest priority – will still be committed to buybacks, that’s for opportunistic.
    The dime is about a 1% yield. But given the additional free cash flow these assets bring in 2020+ you have more flex to maintain and potentially growing it over the next 2 to 3 years.

  11. 11
    zman Says:

    BE tapping $7 which is 100% for us since our late September entry.

  12. 12
    zman Says:

    VWDRY – look for several more PTC end related big MW orders between tomorrow and YE19.

  13. 13
    zman Says:

    WPX opens up 1%. Ha.

  14. 14
    zman Says:

    Still taking notes on WPX

    Group opening up 1+%.

  15. 15
    zman Says:

    WPX Q&A 4

    Q) scale

    A) much easier to move equipment around, and planning for wells (take as big a bite in terms of wells while still checking all efficiency boxes).

    Again, there is nothing in the base plan (Capex) for those synergies.

    Q) Investment grade acceleration
    A) this moves us up, one of things the rating agencies look at in their grid is scale. It’s not a goal of ours but its an eventual outcome he thinks.

    Q) Joe A question – inventory – remind us what inventory pre deal was. Quality of inventory.

    A) we were at 3,500 before, now 5,000 gross Delaware combined.
    Felix comes in top quartile in our opportunity sale.
    We are always looking for trades.
    – Williston Basin will continue to be the king of free cash flow.
    – This is free cash flow positive year 1

    Q) Bakken locations
    A) about 200, have never shied away from that, team is looking for ways to increase inventory. But it’s a very mature basin. Always looking for deals, swaps, bolt ons.

    Q) Jagged Peak – not competitive
    A) we had been keeping in touch with Felix over last few years, only got serious over the last 30 to 45 days. Lot of others are on the sidelines for one reason or another (as noted above) and it was the perfect time for us.

    So don’t think this was unattractive.

    Notes this is the first deal we’ve done in 3 years. We have looked at A LOT of deals.

    Q) Debt and revolver and free cash flow generation.

    A) we have no debt, we are assuming no debt, just using debt early next year to pay the cash piece.

    $70 mm free cash from these assets in 2020. At $50 oil. They are just at the transition to free cash in 1Q20.

    Closing
    1) it checks all the boxes
    2) will have doubters – we have track record of removing those doubts
    3) these assets at this price helps us to improve our 5 year plan, look forward to getting after them.

    Call over at 1:10 mark.

  16. 16
    zman Says:

    Crude hanging just over $60.

    https://www.dailyfx.com/crude-oil

  17. 17
    zman Says:

    MR opening up 2%,

    See our piece here:
    https://seekingalpha.com/article/4312710-montage-resources-oily-natural-gas-player-still-inexpensive-despite-q4-19-run

    SA notes this only went out to 239 recipients which is pretty low as upstream pieces go for us, will take time to get any traction.

  18. 18
    zman Says:

    WPX up 2+% at end of call.

    We own right at 4% as of now. Likely we add by 50% near here ($11.20 ish). Wanted a 10% deal drop but not getting that.

  19. 19
    zman Says:

    ZTRADE – ZLT – WPX

    WPX – added to our position in WPX at $11.23 average. The name is up 3% on the day after announcing the acquisition of private Delaware Basin player Felix in a mostly stock transaction. Debt metrics will be neutral at $50 oil. Margins improve, free cash improves, they’ve added a $0.10 annual dividend and will continue to support the opportunistic buyback. Please see our December 5th post for WPX standalone comments and a cheat sheet and pro forma comments in today’s post. We will have a pro forma cheat sheet for the deal in tomorrow’s post. We hold a 5% position here and plan to go 6% as early as today.

  20. 20
    zman Says:

    OT – grabbing coffee, back in 15 minutes.

  21. 21
    zman Says:

    TPIC – should hear about rescheduled annual investor day soon (probably hold it in February, could be sooner though). Blade demand is going to be dramatically higher 2020.

  22. 22
    zman Says:

    LPI – still moving better:

    Our last SA piece still applies from November
    https://seekingalpha.com/article/4307816-laredo-petroleum-exiting-penalty-box

    But we had more last week here with more defined scenario based price targets.
    https://zmansenergybrain.com/2019/12/10/tuesday-morning-debt-stats-lpi-mr/

  23. 23
    zman Says:

    PE about to tap 200 day sma from below. 1% away.

    LPI right above it for a 2nd day, this one is a Trade for us, doubled up at $2.40 with initial at $2.10. We have markers on value in that second link in 22. Please see them.

  24. 24
    zman Says:

    Here, reading, shout if you need something.

  25. 25
    zman Says:

    BCEI remains uber cheap at $20, 1.8x our 2020 EBITDA figure on $60 oil, about 2.1 our 2020 @ $50. Oily, very little debt. Name broke up through the 50 day last week, eying the 200 day at $21.28 next.

  26. 26
    zman Says:

    WPX up 6% now.

    Much as the 0 premium Permian deal became the mantra last quarter.

    Expect people to say, mostly stock is the new way. People abhor debt right now and even if your stock is depressed if you can buy good assets on the cheap and immediate speak to free cash flow and low debt metrics and higher margins (oil), you’re king.

  27. 27
    zman Says:

    re 25 – speaking of DJ players, little HPR is coming up nicely of late, we have a Core and an overweight Trading position on there. Quite underwater on it to be sure but it remains fairly cheap and overdone to the downside on several metrics at this time due to life in Colorado.

    OK – getting into a model, shout if you need something.

  28. 28
    tomdavis12 Says:

    CVX The write-off of the Atlas assets have any negatives for other Marcellus names?

  29. 29
    zman Says:

    re 28 – not in our view. That’s not to say gassy players won’t have non cash write downs this year due to price. But Marcellus was not a focus for them.

    This is what we wrote at the time that was announced:

    CVX Announces $11 B Write Down (> half Appalachia)

    Given where gas prices are this is not surprising for those that follow the name. It’s a ceiling test writedown – part Appalachia, part Kitimat LNG, part one GOM platform. It’s a non cash charge, they basically have to write down the assets due to prices.
    They’re not a huge gas player as Appalachian / Marcellus players go. Marcellus appears one time in the Q and it’s not related to volumes but to falling service costs. They don’t speak to the asset in their quarterly pr either. Turning to the Annual from 2018, they mention they bought the Marcellus from Atlas in 2011 … nothing more. As to Appalachia they include it as having been part of extensions and discoveries each of the last 3 years. So they’ve been marking it up in size. It’s just not important to them though the $ size does sound big and scary.
    Total gas in 3Q for the U.S. was 1.243 MM/d, largely from the Permian.
    By contrast – their Gordon and Wheatstone LNG projects in Australia are 4.2 Bcfgpd.
    CVX said over half the write down was Appalachian … well, it sounds like they had but can’t really tell. I have names in the gassy players space with lower caps than that with higher production that that. Price may be part, likely costs a part as well.
    By the way, CVX total budget is $20 B. Basically flat for 3 years now.
    This won’t be the last write down we see from upstream or service this season.

  30. 30
    zman Says:

    FLMN – up 5%, technically becoming more interesting in the wake of a tightening wedge.

  31. 31
    zman Says:

    Test

  32. 32
    zman Says:

    COG – US says no to NY rehearing request on Constitution.

    New York has been blaming utilities for not hooking up new gas clients, threatening them with expulsion … while blocking new gas from entering the state. I bet that continues but right now this is a step forward in moving Constitution forward which is good for Marcells pricing in general in the long term but has no impact near term (positive for sentiment).

  33. 33
    reefguy Says:

    WPX up 9%
    Funny how fast the market changed from Hating the CPE/Crzo all stock to the WPX stock and $900MM.

  34. 34
    reefguy Says:

    CPE us 6% now.

  35. 35
    zman Says:

    WPX up 9% now.

  36. 36
    zman Says:

    re 33/34 – yep. Also funny how fast the market turned to taking note of improved fundamentals in the space.

    Tax loss selling out.

    Cover loss buying in.

  37. 37
    zman Says:

    LPI up 8%

    HPR up 10%

  38. 38
    zman Says:

    Would someone click on the MR piece and let me know if they can see it or if they get an error? Thanks.

    https://seekingalpha.com/article/4312710-montage-resources-oily-natural-gas-player-still-inexpensive-despite-q4-19-run

  39. 39
    zman Says:

    TPIC – poised to begin post 3Q gap fill. Please see our post 3Q write up on the name. In a brief nutshell, they’re doing well, management goofed explanation for delaying the annual investor day call, prompting panic when none was necessary. See wind comments bottom of post. That’s just the U.S. Lot of blades, bigger blades needed.

  40. 40
    zman Says:

    TPIC is our #3 ZLT position, a bit over 8% followed closely by VWDRY in the #4 slot at 8%. TPIC is overweight in the wake of the declines from 1Q, 2Q, 3Q and our subsequent adds. Like VWDRY more in this space but TPIC is well overdone and VWDRY isn’t exactly cheap now from a near term EBITDA perspective (just hitting on all blades now).

  41. 41
    zman Says:

    Up 10% on our LBRT piece since posting this last week:

    https://seekingalpha.com/article/4311986-liberty-oilfield-services-high-quality-pressure-pumper-set-to-rebound

  42. 42
    zman Says:

    Have questions about the site?

    Email them to zman@zmansenergybrain.com

  43. 43
    zman Says:

    From Zorg

    “MGY Indeed! Coming into previous major acceptance at 12.41….looking for sideways action around that level….Thanks for pointing me at this one”

  44. 44
    snuhart Says:

    Re 38 I clicked on the link and the article came up immediately

  45. 45
    zman Says:

    re 44 – OK, thanks much.

  46. 46
    Ray Ganssle Says:

    Re 38 – I clicked on the link to your MR article and it popped with no problem.

  47. 47
    zman Says:

    Here, working on the pro forma, everything lining up pretty well, LOE was apparently very low at Felix.

  48. 48
    zman Says:

    re 46 – thanks for checking.

  49. 49
    zman Says:

    Got told BCEI would never hit $20 again when I wrote the piece for SA the other day. Never came early.

  50. 50
    zman Says:

    From Zorg:

    TPIC – “Trading above major acceptance (17.71) now….a move above 18.20 would be lovely…I’ll read your write up and keep it on my list. Thanks”

  51. 51
    Viper1 Says:

    BZ: Callon Petroleum Special Meeting Of Shareholders Scheduled To Be Reconvened To Consider & Vote On Proposals On Dec. 20. Believe we see a move up in CRZO CPE after this deal is put to rest

  52. 52
    zman Says:

    Thanks Viper.

  53. 53
    Michael Says:

    https://oilprice.com/Energy/Energy-General/Is-Trump-Preparing-A-New-Iran-Nuclear-Deal.html

    What does the group think of this as a risk? To me, this is the biggest wildcard. Trump pulled the rug out under the oil market/Saudi after Khashoggi. One would think that MbS is once bitten, twice shy, but what if 1.8 mm bpd comes back from Iran? Curious how folks see this playing out.

  54. 54
    zman Says:

    re 53 thoughts

    1) sure, could happen. Trump has apparently long thought that pump prices are super important to his re-election which is dated thinking but it is what it is. He should be more worried about jobs in the US patch and knock on impacts of sub $50 oil should he suddenly fall in love with Rhouhani. Also, people have been saying he’d do this and/or use the SPR to a bigger degree next year for months now.

    2) Saudi, UAE, Kuwait would have to accommodate to support prices. Unlikely Russia would help much.

    3) what does Iran have to do to comply? In the past they’ve not been willing to re-negotiate the JCPOA.

    4) that site is an oil bear site, regardless of their name, always glass 3/4 empty so be advised on that.

  55. 55
    zman Says:

    From Zorg

    Re FLMN – “Back to the starting line at $6.72…above that room to move quickly to $7.36”.

    Please see our recent write up with multiple scenarios and forecast from last week here:

    https://zmansenergybrain.com/2019/12/12/thursday-morning-oil-inventory-review-flmn-vwdry/

  56. 56
    zman Says:

    From earlier:

    WPX – Suntrust shoots first, guess will ask questions later, cuts from Buy to Hold, cuts target from $16 to $12 with no real news, belated attempt to front run a headline that’s only rumored now. Not helpful to a single client to just guess at Felix/no Felix.

    And it’s up 10% at $12. So, um, mission accomplished?

  57. 57
    zman Says:

    From Zorg:

    “HPR continues to unwind.. first upside target at 1.77 still looking good…”

    Our post 3Q thoughts:
    https://seekingalpha.com/article/4302494-highpoint-tops-estimates-highlights-even-better-hereford-results

  58. 58
    zman Says:

    WPX with this move takes out the gently descending 200 day sma.

    Its a little cheaper on a pro forma EBITDA basis than it was, a buck lower, on the Friday close on a standalone basis. Nice.

  59. 59
    snuhart Says:

    I don t think you ve had any interest or comment ECA since the NFX
    Purchase but I d appreciate knowing your current thoughts , if any.

  60. 60
    zman Says:

    From Zorg

    Re WPX

    “Zman stocks are on a tear. Nice pop to well defined area of interest….pullback towards 11.68 looks attractive..a little extended from just off the chart for me….”

  61. 61
    zman Says:

    re 59

    – we sold NFX prior to the takeout.
    – I’ve never liked ECA – always seemed like play chasers to me.
    – they got way too good a deal for NFX and that didn’t budget the stock. They also let a lot of knowledge go with attrition post deal.
    – recently ECA said they would redomicile to the US – that didn’t either.
    – not following closely enough to give commentary on valuation of the combined at this time.
    – I can take a deeper dive if you like with a new cheat sheet and comments as to how it looks to me know, just let me know and give me about a week.

  62. 62
    reefguy Says:

    WPX-saw in Twitter world where Felix is keeping the midstream?

  63. 63
    zman Says:

    Grabbing lunch, back in a bit.

  64. 64
    zman Says:

    re 62 – yes. Management addressed saying they’ve got it covered with contracts, didn’t elaborate with $#’s.

  65. 65
    Viper1 Says:

    Re WPX great write up Z

  66. 66
    snuhart Says:

    Re 59.
    I would be very grateful if you would do a cheat sheet and offer your comments. There is no rush please do it at your own convenience I would just be happy to have some information to help me figure out how to get out of the trap I allowed myself to get in.

  67. 67
    Wyoming Says:

    66, you’re not alone.

  68. 68
    zman Says:

    re 65 – thanks!

    re 66/67 – OK then, it’s on the list.

  69. 69
    snuhart Says:

    Re 67

    Sorry to hear.
    I was afraid I was not the only one who “froze”.
    I wish we could have been together in a better stock.

  70. 70
    zman Says:

    EIA DPR is out

    Shale seen growing by 30,000 bopd in January,

    this compares to 49,000 bopd they saw for growth in December.

    Slowing rapidly, though some of that would also be frac holiday related (if their model took that into account).

  71. 71
    Wyoming Says:

    It’s all good, it is more than the stock for my experience and time will work out for ECA. It has a decent CF and they do a good job at minimizing costs / leveraging their purchasing power. Their short comings are the low C suite participation in their stock and they do not employ the brightest (veterans still making newb mistakes).

  72. 72
    zman Says:

    On the natural gas side:

    EIA shows January gas production rising 77 MMcfgpd.

    That’s less than 0.1 Bcfgpd.

    A few months ago they were pointing to jumps of 1 Bcfgpd per month.

  73. 73
    zman Says:

    re 72 – this ties into my comments from last week showing the plateau in the STEO forecast for natural gas production by quarter next year. Even EIA sees the gas slowing coming.

    By the way, someone asked me about flaring and more gas capture driving gas production up and my thought is we will capture and are capturing more and though it sounds like a lot, flaring is about 1.3 Bcfgpd now (mostly Permian and Bakken, having at one time been a lot more in the EFS) and that partial extra capture on that is up against a 95 Bcfgpd market so it’s manageable and far less than the growth in LNG ex and MexEx we see in 2020.

    Beerthirty, back in a bit.

  74. 74
    zman Says:

    Story on Iran / Trump / Rhouhani and hardliners

    https://www.bloomberg.com/news/articles/2019-12-16/trump-offensive-leaves-iran-s-hardliners-ascendant-as-poll-nears

  75. 75
    zman Says:

    MR – COB out, going to another job, no disagreement noted, adding from within to replace (Albert, former coo of Consol’s gas segment)

  76. 76
    zman Says:

    TAT (unowned) – on the tap forming committee to evaluate any potential offer from Malone.

  77. 77
    zman Says:

    First Elba Island LNG cargo sent.

  78. 78
    zman Says:

    Natural gas futures short position at Nymex + ICE now 2nd highest in history.

  79. 79
    zman Says:

    Early Read on Oil Inventories:

    Crude: Down 1.9 mm barrels
    Gasoline: Up 2.1 mm barrels
    Distillates: Up 0.2 mm barrels

  80. 80
    brodway Says:

    Zman

    is the gov’t done with their 2019 release from SPR? and have they announced next years release if any

  81. 81
    zman Says:

    re 80

    – good question

    – they operate on a fiscal year ending in October. So there has been some for fiscal 2020 already and I can’t tell you the very near term plan (timing of the BBA – see below).

    – two weeks ago (last week’s report) it ebbed to 0.2 mm barrels on the week and they usual start small increase and then die off so we could be 0 for last week (Wednesday’s report) – checked with SPR earlier, not out yet.

    – as to this year’s plan, I asked a guy at EIA and got a partial response as follows:

    “This is the #2 person at SPR and a former EIA employee. We had 2 Congressional sales in CY 19. In the Spring we delivered 4.2 million barrels. This Fall we will deliver 9.9 million barrels.”

    The old chart we used to show from EIA I am told is dated. It showed too much coming out in 2019.

    For 2020 I think it’s still good (Bipartisan Budget Act), not going to be more than say 15 mm barrels though. That link is here:
    https://www.eia.gov/todayinenergy/detail.php?id=29692

    And then you could have discretionary releases on top of that.

  82. 82
    zman Says:

    WPX director bought 10K shares at $11.31 today (would have been just after the call, along side me).

  83. 83
    zman Says:

    Adding to 81 – you can always check the change on the SPR here:

    https://www.spr.doe.gov/dir/dir.html

    Show’s last week available. Tomorrow they will update for week ended Dec 13.

  84. 84
    Wrap – Week Ended 12/20/19 | Zman's Energy Brain ~ oil, gas, stocks, etc… Says:

    […] out the Monday and Tuesday posts from this […]

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