Wrap – 2019



Happy New Year!

A few thoughts.

2019 was a bumpy one. A rally into spring was sold with abandon and for little good fundamental reason in the summer and early fall, only to see a sharp rally during the fourth quarter. Not terrible as we closed just under par and better than the XOP but poor in terms of performance relative to oil and the broader markets. We see the gap as an opportunity in a select group of names.

Our upstream holdings are weighted to oil. But they're also now better positioned in a number of ways not currently reflected in their forward valuations even after the end of year pop. They have better balance sheets now than for any period in many years, more ability to generate sustainable free cash than basically ever, and less reliance on flashy IP or new zone discoveries than just about ever as well.

The December group bounce ran contrary to a number of fears/short theories (tax loss selling into year end was a certainty, managers are young and won't buy the names, the names are the new coal as coal was the new cigarettes).  Yet, the names are cleaning up their act (slowing growth, acting with discipline with an eye on return of capital and not just return on capital, publishing meaningful ESG reports) and the average 20+% bounce in December alone is hard to align with those fears.

Meanwhile, demand continues to rise. Non OPEC supply growth is slowing. WTI at $60 is a good price for our names. We expect most of them to plan on $50+/- when budgets are released over the next few weeks. Please see our Oil Macro 2020 piece in last Tuesday's post.  Please look for our Natural Gas Macro 2020 piece in a post next week.

A few more thoughts. We cover a variety of renewables / green energy names. In fact the portfolio is approaching 30% wind, solar, and other green.  Come check out the new coverage.

One last thought. Balance is key. We rarely swing for the fences and we don't get buried in names for the sake of averaging down to get out even. That's not to say we don't make mistakes, hardly, but we do try to learn from them and the current portfolio weightings (see positions page) are a reflection of that learning process. We do add to names, up or down from our initial entry, that are in our view making the right moves. We plan to be a little quicker technically on the draw with some of these in 2020 and may be more patient to add when fundamentals and the shares prices are out of joint. But a majority of our bigger names are sub 1x debt, low to no revolver draw, under spending, fairly oil (with good diffs), not overly pricey in terms of cash flow or reserves, and are looking for ways to send us cash. Smaller positions in the portfolio are on a path to that.

Anyway, our very best to you and yours, thanks for reading and contributing to the site and we hope you have a Happy and Prosperous 2020,



Curious about the site?

  • We cover upstream U.S. plays and players, the oil and natural gas macros, select oil service, and wind, solar, and a smattering of other renewable names.

  • What you get:

    • 6 posts a week, with the weekday posts available before 8:30 am EST.

    •     These cover the basics on oil and gas for the day, often include company write ups and cheat sheets, and the oil inventory and natural gas inventory slide shows each week ending the week with this Wrap.

    • Access to our entire company and topic archive going back to 2006, searchable by ticker and topic.

    • Access to a community of energy interested individuals who build off of each other's ideas in a constructive manner.  This is not your brother in law's hot chat room.

    • Access to my 30 years of experience in the financial markets (25 years in energy) from banking, to buyside, to sellside ... and now myside/yourside. Want a company in my space researched? Ask and if it's in my wheelhouse I'll make it happen.

    •       I'm on the site fielding questions five days a week before, during, and after market hours.

    • Access through me and / or the site to industry professionals who bring a wealth of insight to a wide variety of industry and related topics.

    • Site notice and email blasts of all of our trades. These are not recommendations but they are what I am doing and why and they only occur after the story has been communicated (generally several times) on the site.  We keep a trading blotter of every trade and the primary portfolio shows all positions and basic stats on each.

    • Last but not least, we're on 40 or so calls each quarter with pre call notes and live commentary during the calls.

    • Got questions? Inquire at zman@zmansenergybrain.com


2 Responses to “Wrap – 2019”

  1. 1
    zman Says:

    The positions page will be updated later Wednesday.

  2. 2
    zman Says:

    re 2 – updated


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