Friday Morning – SLB, HAL, Other Stuff



Market Sentiment Watch: Four days of the week have made it through 3 big agency monthlies and the weekly oil report with oil up slightly. In today's post please find the the natural gas review (bigger than expected pull but still quite small for time of year; look for another weak report next week; see thoughts on prices in the Natural Gas review slide section and note a streamlined view of weekly supply/demand look), comments on the SLB quarter (better than expected, nice NAM/macro comments), the HAL earnings preview (earnings next Tuesday), and some other odds and ends.

Ecodata Watch:

  • We get housing starts at 8:30 am EST (F = 1.375 mm, last read was 1.365 mm),
  • We get building permits at 8: 30 am EST (F = 1.473 mm, last read was 1.474 mm),
  • We get industrial production at 9:15 am EST (F = -0.3%, last read was 1.1%),
  • We get capacity utilization at 9:15 am EST (F = 76.9%, last read was 77.3),
  • We get consumer sentiment at 10 am EST (F = 99.6, last read was 99.3),
  • We get job openings at 10 am EST (no forecast, last read was 7.3 mm).

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h
  3. Natural Gas Inventory Review
  4. Stuff We Care About Today - -SLB, HAL, JKS
  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 up $0.71 yesterday at $58.58, rising, apparently, with positive U.S. economic data (and a lack of further short term profit taking as the oil market exhaled in the wake of the monthly reports from EIA, OPEC, and IEA, none of which were markedly more bearish than their prior iterations). This morning crude is trading up slightly.

  • Norway Watch: Oil production in December up 4.3% over November to 1.759 mm bopd, up 17% YoY.  This is due to one large field startup (Sverdrup).
  • China Watch: Oil production for December was down 1.9% YoY.  Full year China output rose 0.8%.  Full year China refiner demand was up 7.6%.
  • Libya Watch:  Increased potential for oil field curtailment near term due to unrest over local pay, government priority of paying foreign militias for peacekeeping.
  • U.S. / Iran Watch:  U.S. revises comments on Iran attacks last week on military bases in Iraq to go from zero U.S. troops wounded to 11 U.S. troops wounded.  Good to see record set straight (NYT and others had this news on Monday).
  • Iran Watch 1:  Supreme Leader Khamenei says US should get out of ME, says Quds Force are "fighters without borders".
  • Iran Watch 2:  President Rouhani says Iran is enriching more uranium now and its nuclear industry is thriving more now than it was before it signed the nuclear deal in 2015.


Natural gas closed down 4 cents at $2.077, barely moving after EIA reported a larger than expected withdrawal from storage but selling off later in the day on a bearish revision to the very short term forecast.  We expect another weak withdrawal next week but also please see our thoughts on storage levels at season's end and where prices are now and what we've seen in past for higher troughs (suffice to say we think pricing is overly weak and the warm winter is masking positive developments). This morning gas is trading off 4 cents early.

NGL Price Watch - another week, another failure to rally (likely some with butane, isobutane rich barrels are going to beat Street estimates for the quarter but it's a stretch that matters in a meaningful, EBITDA line manner)

PointLogic Watch:

Natural Gas Storage Review Comment:

  • We drew some arrows on slides (E to E1 to F) below linking some important periods and natural gas prices.
  • We've seen this weak winter leading to a higher trough before. This happened 2015/2016.
  • We are at ~ 3 Tcf now.
  • We expect inventories to be below 2 Tcf at end of March.
  • In 2016 they troughed at 2,472 Bcf,  But even at that high trough level they failed to mark a high peak the next fall.
  • After heating season is over we go into injections at a level that is NOT A RECORD HIGH FOR STORAGE and we have a lot more non heating demand now than we did three years ago.  I think bears are going to be very disappointed as I am seeing people talk about A disaster for storage and prices and it's just not set up that way.

Natural Gas Storage Review 


Stuff We Care About Today

SLB (Unowned) Reports 4Q19 Beat; Turning the Corner

The 4Q19 Highlights:

  • Free cash flow of $1.5 B vs $1.1 B last quarter; full year $2.7 B free cash.
  • $0.50 / quarter dividend maintained (again)
  • Repurchases: Not shares this quarter but instead note, taking in $1.1 B in Seniors.
  • Drilling revenue down 1% sequentially and down 1% for the year.
  • Reservoir Characterization down 1% sequentially but up 5% for the year.
  • Production revenue down 9% sequential, down 2% yoy.
  • Margins were above year ago levels.



  • Revenue: Down 14% sequentially on lower activity and pricing.
  •       Onshore down 19% sequentially.
  •               OneStim revenue down 33% sequentially.
  •       This weakness should already be reflected in HAL and more importantly to us in our larger holding in LBRT, it's not going to apply as much ... SLB was stacking during the quarter. LBRT was not.
  •       Offshore UP 3% seq.  May not have bleed over as a positive for OII (personal only);  noting a contract with CVX for the Anchor field - potential positive for OII.
  • Margins:  Looking ahead they are cautiously optimistic on NAM land margin improving due to right sizing of assets and an asset-light approach.
  • Favorite Quote Watch: "Production revenue declined 9% sequentially primarily due to the 33% sequential drop in OneStim revenue as we continued to right-size our hydraulic fracturing capacity by stacking more fleets in the face of lower demand. This is part of the scale-to-fit strategy we are deploying in North America land—rationalizing our business portfolio to achieve improved returns and better profitability."


  • Revenue:
    • LAM up 1% sequentially but this was all on sales in Gomex (Campeche) by WesternGeco - lower Argentina, lower Ecuador.
    • Europe / CIS/ Africa - down 2% seq, seasonal impacts,
    • Middle East / Asia - up 5% sequentially, look for this to slow 1H before reaccelerating (
  • Growth comment:  International capex to rise mid single digit %'s.
  •      - they see their International section growth at same rate or higher.
  •      - they see international capex as weighted towards 2H20. This should have the effect of delaying production response from spending into 2021+.
  •      - they see increase in offshore in 2H20. Good for our OII (personal only).  Noting a large contract project award offshore Senegal.
  • Favorite Quote Watch: "This quarter delivered the first sequential growth in international margin in any fourth quarter since 2014. We are therefore confident we have turned the corner, particularly as we have now seen sequential international margin growth for the last three quarters as a result of our discipline and focus on execution performance."

Macro Comments: 

  1. "we ended the year with 2020 oil demand growth sentiment turning positive as uncertainty reduced following the progress made toward a US-China trade deal. "
  2. "The fall in the North America production growth estimate of between 400,000 to 800,000 bpd should continue to support the thesis for international investment. "
  3. "As the year progresses, the effect of slowing North America production growth is likely to cause tightness in the market and further stimulate international operators to step up their investments in the second half of the year and beyond."

Guidance:  SLB's own 2020 capex to be flat with 2019 levels.

Nutshell: Strong report in a tough environment. Quarterly beat and upbeat tone.  Strong free cash and a good outlook should lift the shares today. Expect modest bleed to HAL as HAL will be perceived to be in the weaker of the two segments SLB is speaking to but also the beneficiary of SLB's relentless stacking program. Expect LBRT to slip higher on this (our recent piece noted an expectation of the 4Q super softness being more than adequately discounted a month back).  Massive HP stacking in NAM means better LBRT utilization and an acceleration of time to pricing traction. Less commentary upfront about digital but suspect a lot of chatter on it on the call.

HAL - 4Q19 Preview

Other Stuff

  • JKS - sets new efficiency records for P-type PERC and N-type HOT bifacial solar modules at 21.82% and 22.49% respectively.  They note this will drop LCOE (levelized cost of energy) for customers as they move towards grid parity. They note they will accelerate the use of new tech application into their mass production of modules.

Other Other Stuff

  • The 4Q19 calendar is on the calendar tab at upper left,
  • We've been working up to the 2020 Natural Gas Macro piece with a series of supply and demand charts and thoughts - look for the piece next week.

Odds & Ends

Analyst Watch:

  • TBA in comments

51 Responses to “Friday Morning – SLB, HAL, Other Stuff”

  1. 1
    zman Says:

    Grabbing coffee, back before SLB.

  2. 2
    zman Says:

    BE – City of Santa Clara loses battle to keep Bloom Servers out.

  3. 3
    zman Says:

    LBRT – no better gift for them than SLB taking large amounts of horsepower out of service in the U.S.

  4. 4
    zman Says:

    Our last public piece on LBRT


  5. 5
    zman Says:

    SLB call in 5 minutes, notes to follow.


  6. 6
    zman Says:

    SLB (unowned) 4Q19 Call Notes

    Stock called $39.80 (up 2.6%) at start of call.

    noting the $1.3 B debt redux in the quarter.

    – most lines will experience usual seasonal decline.
    – international – high single digit decline (higher seasonal impact)
    NAM – low single seq digit decline

    Iraq – visibly reduced due to risk.

    U.S./China – reduced risk to demand

    1.2 mm bopd demand in 2020,

    US prod to slow in 2020, coming well below 2019 growth.

    This will, over time create pull on OPEC+ volumes.

    Will stimulate investment as the year progresses.

    E&P – mid single digit int’l range.

    NAM land – spend down high single to low double digit %s

    For SLB 2020
    – international – as noted in post
    – NAM – contain decline to low single digit decline.

    Offshore to shift more to DW in late 2020.

    Sees Int’l margins to further expand in 2020.

    Sees NAM margins up in 2020 as well on right size, cost cut, focus.

    NAM strategy
    – review ongoing but keys to share today.

    OneStim – will repurpose across 3 hubs, decentralize. Cut HP by 50% vs capacity
    25% site reduction
    1,400 worker reduction already.

  7. 7
    zman Says:

    Michael – more NOG (unowned) debt news.

  8. 8
    zman Says:

    SLB 4Q19 Q&A

    Q) 2H20 – revenue quality improvement question as that relates to margins
    A) Intl’l in line to slightly better than mid single digits (ex asset sales of 2%), 2H will be more robust, especially offhsore DW, exploration, and dev. Margin expansion, will be > 100 bps for full year.

    Q) re full year, we have stronger 2h, will that make up for the weaker 1Q you outlined.
    A) 2Q mix expected to improve; provides support for growth for EPS from 2Q on.

    Q) framework for 2020 – you are looking for margin expansion for both NAM and Int’l – macro vs self help.
    A) Contrast NAM and Int’l
    Int’l poised for further growth with more offshore with DW late in year. Combines to give good mix.
    NAM – depends on our execution – there is downside risk as to capex. More self here.

    Q) NAM horsepower – stacked vs scrapping and there other divests for NAM coming.
    A) decided to cut deployed capacity by 30% vs 3Q19 levels. This is 50% of capacity offline and that’s a cap. We do not expect to increase our capacity.

  9. 9
    zman Says:

    re 8 – that’s huge for $LBRT

  10. 10
    zman Says:

    SLB 4Q19 Q&A

    Q) OneStim
    A) not consuming cash, reorg is helping OneStim margins.

    NAM remains important.

    Q) NAM – digit question – how do you see revenue progress in the reservoir characterization, does revenue fall at 1st as people move to subscription based model.
    A) will develop digital revenue over the next few years. We don’t see the dip. Will get more specific over time on this.

    Q) Middle East – is much of your business there nat gas driven.
    A) business in ME very steady but seeing some business being delayed by OPEC+ cuts. Gas sounds fine.

    Q) FCF margin in 2020; do we get double digit
    A) looking at 2019, we consumed in 1H19, payments of bonuses, in 2H19 working cap management in improved and fcf achieved as desired.
    In 1Q20, will consume cash again but then reverses and sees better in 2020. Double digit is an objective and full year 2020 probably won’t reach that.

  11. 11
    zman Says:

    WTI $58.70 just before equity open


  12. 12
    zman Says:

    SLB 4Q19 Q&A 3

    Q) pressure pumping – Analyst question on how much is warm, cold stacked, he guessed 700,000 HP stacked. How much $ to bring it back.

    A) our intention is not to cold stack and bring back. We don’t intend to bring back capacity going forward.

    Key message to close call:
    1) 4Q was solid, international progress, momo across org is very positive as is

    2) 2020 positive on Int’l, back end loaded, better mix, offshore DW, driving further margin expansion in 2H

    3)NAM – declining activity year but actions will reverse, improve margins and grow cash flow.

    Call over.

    Stock up 0.5% at open.

  13. 13
    zman Says:


    LBRT – added to our position in LBRT at $10.92 average in the wake of the SLB call this morning. SLB announced they have/are cutting NAM pressure pumping capacity by 30% relative to levels in 3Q19. SLB capacity now down 50% of prior capacity and they announced no intention to bring this capacity back. This should both increase utilization and accelerate pricing traction for high end pressure pumper LBRT. Please see recent updates on the site for further details on LBRT.

  14. 14
    zman Says:

    Notes to SA in the hopper on COG and BWEN

    Grabbing coffee.

  15. 15
    zman Says:

    RMD – your small cap solar idea is probably not my bag.

  16. 16
    zman Says:

    … but thanks for sending it along.

  17. 17
    zman Says:

    HAL reaction to SLB call so far as expected as per nutshell above.

    “Nutshell: Strong report in a tough environment. Quarterly beat and upbeat tone. Strong free cash and a good outlook should lift the shares today. Expect modest bleed to HAL as HAL will be perceived to be in the weaker of the two segments SLB is speaking to but also the beneficiary of SLB’s relentless stacking program. Expect LBRT to slip higher on this (our recent piece noted an expectation of the 4Q super softness being more than adequately discounted a month back). Massive HP stacking in NAM means better LBRT utilization and an acceleration of time to pricing traction. Less commentary upfront about digital but suspect a lot of chatter on it on the call.”

  18. 18
    zman Says:

    All the gassy names watching NG for a break of $2.

    Shorts near record high.

    EVERYONE sees lower prices.

    Could it break $2. Of course.

    Still, see post comments in the Commodity section above.

  19. 19
    zman Says:


  20. 20
    zman Says:

    Option expiry day. Yawn.

  21. 21
    zman Says:

    BE with a $10 handle again on the court ruling in CA.

  22. 22
    RMD Says:

    15 It wasn’t my bag either, I’d just stumbled on the name randomly.

    Small scale, industrial Wind funding problems:


  23. 23
    zman Says:

    re 22 – thanks, will have a look

  24. 24
    zman Says:

    TPIC looking to extend the recent push ahead of investor day and 2020 guidance early next month.

    Our recent article over on SA, just under $19 at the time but still quite inexpensive:


  25. 25
    zman Says:

    March gas < $2 now. Noting Kemp noting this is a strong message to gas-fired generators to burn more. Agree. Expecting record year for gas-fired gen in 2020, exceeding prior record year in 2018 and 2019 (on pace to be a record but we don't have final data yet) on low prices and decline in coal-fired capacity.

  26. 26
    zman Says:

    JT – re your question under the Thursday post regarding a couple of good weekly EIA reports.


    We had a string of them in December. There is a calendar function at upper left.

    Are you talking about oil or natural gas?

    Summaries of oil inventory reports are always on Thursday with gas on Friday unless there is a holiday.

    We also always summarize both in the Monday posts in The Week That Was section.

  27. 27
    zman Says:

    Gassy space off 1% to 6%

    CRK (unowned) and COG at low end

    MR (owned) and RRC and AR (both unowned) at the upper end.

    MR is a lot oilier (by % of revenues) than the others and > 60% hedged for natural gas @ $2.64 this year but pulling back anyways on knee jerk, shoot first, profit protect action. Was $8 earlier this month, headed apparently for a $5 test now. Inexpensive on our math on a number of decks.

  28. 28
    zman Says:

    Rig Count Watch

    Oil rigs up 14 to 673 vs 852 a year ago

    Natural Gas up 1 to 120 vs 198

    Horizontal up 11 to 709 vs 929

    Permians up 6 to 403 vs 481

  29. 29
    zman Says:

    Some sawing in the rig count to be expected in 1Q due to capex reload.

    OT – grabbing lunch, back in a bit

  30. 30
    Baylor Says:

    Why would city of Santa Clara want bloom servers out?

  31. 31
    Skipton Says:

    Re 30
    To protect their municipal electricity company

  32. 32
    zman Says:

    re 31 – yep

    It was effectively a ban on future Bloom Server deployments.

    re 30 – done in the name of natural gas banning as well.



  33. 33
    zman Says:

    Tom – noting UDW and harsh environment rig rates edging up.

  34. 34
    zman Says:

    Interns are out early for the 3 day.

    Everyone have a great long weekend.

    The Wrap will be out on Sunday.

    I’ll be in and around all weekend. Shout if you need something.

    We get HAL before the open on Tuesday.

    We will have an updated positions page up tomorrow.

    We will have an updated calendar up tomorrow as a few more names have given report dates.

    BWEN will be a late Feb reporter.

    Have a restful weekend.

  35. 35
    zman Says:

    Frac spreads seeing the capex reload.

    Bounce from 275 last week to 289 this week.

  36. 36
    zman Says:

    re 35 – this is expected and what you want to see as an owner of LBRT. Let spreads available, more demand signaled by the rise = better fleet utilization (of what’s still working) and acceleration of pricing traction.

  37. 37
    Michael Says:

    Thx for heads up NOG. No doubt this is the main catalyst for near-term weakness, but longer term this is very bullish for the stock imho.

  38. 38
    zman Says:

    re 37- yep

  39. 39
    Michael Says:

    My estimate of net debt is now $1056 vs $221 mm pref. Think this took lev below 2x. Think the new CEO Nick O’Grady is very savvy.

  40. 40
    zman Says:

    Natural gas shorts hit new record high.

    Short position up 60% since Oct 1.

    Will be covered in The Wrap.

    Have a nice long weekend.


  41. 41
    zman Says:

    re 39 – thanks, we don’t own it but mmaking a note to again renew the cheat sheet and repost soon.

  42. 42
    Michael Says:

    Think you should. Would love to hear your thoughts. It’s one of my favorite names right now, Bakken notwithstanding.

  43. 43
    zman Says:

    Just going to update numbers, thinking likely won’t change from here, four weeks ago,


  44. 44
    RMD Says:

    39 the history of small E&Ps relying on preferreds for long term finance is awful; I’d look into the footnotes of the pfds with some care (which I have not done).

  45. 45
    Michael Says:

    Given all the hype around ESG, I was wondering if anyone here has taken a hard look at how best to invest in solar. I’m constantly probing for blind spots in my energy thesis but am worried about longer-term disruption. Outside of nuclear (which ain’t happening), it seems to me that solar/battery storage is the most scalable global solution. I just don’t see an obvious way to play, as there doesn’t seem to be a consistent place in the value chain that can extract economic rents consistently. But I admit I only know enough to be dangerous at this point, which is why I’m throwing this out there.

  46. 46
    Baylor Says:

    What does shutting in some production like COG is about to do is think, do to their stock price?

  47. 47
    zman Says:

    I am out of pocket today and not able to field email or site questions until tomorrow. The Wrap will be out on Sunday.

  48. 48
    zman Says:

    Someone sent this in earlier

    “From Reuters News:
    Just as you predicted…..good sized dent in daily exports (-700,000 bopd)
    Oil exports from eastern and central Libyan oil ports to be shut: NOC source

    Oil exports from eastern and central Libyan oil ports will be shut from Saturday resulting in the loss of 700,000 barrels a day, a source at state oil firm NOC said on Friday.”

  49. 49
    zman Says:

    re 45 – we have, we own one name in the space right now and own wind and fuel cell names as well. I’ve covered a number of solar names, please see the pulldown menu at upper left.

    re 46 – that’s an assumption on COG, they said they would if prices got super weak in Jan, but I’ve not seen them make an announcement yet. It happens. Generally not a lot of reaction to it in the share price unless word really gets out and multiple names join in as they produce about 2.4 Bcfgpd into a 95+ Bcfgpd market.

  50. 50
    zman Says:

    More on Libya


    Oil prod off 0.8 mm bopd.

  51. 51
    Baylor Says:

    49 Would seem many of these guys are drilling themselves to death…literally

    Hopefully they learn from the last near decade from the upstream guys. At least if they want shareholders

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