Thursday Morning – More food for thought



Market Sentiment Watch:  The thought of a pandemic with an 18 month or longer duration, possibly characterized by multiple waves has markets on edge.  So grab an extra cup of coffee and dive in.

  1. Jobless claims to spike near term. First the restaurants and bars closed, now Ford and GM are shuttering factories (really good car deals coming if you care) but also looking into producing ventilators. Even the casinos are closing. This will have negative impacts on gasoline, diesel and natural gas demand. It's early to say how much but it won't be small.  Upstream capital cuts will send thousands to the unemployment line before tax day.
  2. Saudi and Russia are still at odds and MIA from the negotiating talbe. Russia again offered an olive branch yesterday, this time in the form of a comment from the Kremlin that they would like to see higher oil prices.  Seems a bit late. Within minutes Saudi responded by reiterating their vow to pump at record rates in April (12 mm bopd from the ground and 0.3 mm bopd from storage we thin).  Brinksmanship has been set to 11.
    1. U.S. rig and active frac spread counts are going to get crushed. After a brief uptick in 1Q20 for the annual upstream capex reload things are going to head back south, rapidly. Frac spreads are a little faster to react and we saw that start last week. Rigs will finish drill ops on the latest well and maybe the pad and then get stacked.   There are 8 to 10 employees per shift (2 shifts) per rig plus 20 or so workers in support at the well site and the company man. Outside figure is 40 paychecks per rig though the last 20 would cover multiple rigs. For the frac spreads, you're looking at 15 per crew and 2 crews and another 20 in support. Call that 50 paychecks per spread. According to API, the industry directly and indirectly supports over 10 mm U.S. jobs.  You might keep them in your thoughts when you see the counts cliff dive. This is a group that never wants a handout.
    2. Developing countries who are oil revenue dependent and who will need cash to fight the virus are set to lose over 85% of their oil revenues.
    3. The next EIA Short Term Energy Outlook in April should show another big downward revision to U.S. output . Note that we've long said EIA will miss the turn lower in U.S. production.  They've shown volumes heading up and to the right well into the future for years now.  And then this month's STEO cut the 2021 forecast by almost 1 mm bopd, largely due to their perception of the impact of lower prices.  We again suggest to EIA that a key missing component of their model is active frac spreads and actual completions vs (modeled rig count) X  (a wells per rig per month assumption) X (a new well productivity assumption) delayed by a short time lag between spud and completion but with an assumption that such wells will automatically be turned to sales. They will not. For many, they will be 15 to 20,000 foot long test tubes that will soak in their fluids, remaining unperfed and unfracced at current prices.
  3. Covid Tracker sites, two we watch and find helpful:
    1. Maps and data.
    2. Graphs and data. Both are bookmarked at upper left on the site.
    3. Our sense is the market is waking up to the likelihood that this will not be a one and done event.
      1. Some antivirals are showing positive results in China and Japan. These would be available far before a vaccine.
    4. Rio shows solidarity with the afflicted.
  4. There is a growing cadre of congressman who oppose "bailouts" for the "fossil fuel" industry. Some thoughts:

    1. We at Z4 Research are generally opposed to bail outs ...  However, moves to support key industries can take a number of forms. We've seen this with autos (loans that were paid back with interest) and we hope to see similar forms for industries like the airline industry (not just cash to an industry that likes to buy shares but not bolster it's balance sheet). Or they can take the form of protective tariffs to prevent deliberate dumping and damaging of domestic interests.   Or they can take the form of forced pooling of entities as we saw with the financial crisis of 2008. Or perhaps some combination of all three would be appropriate for industries deemed vital to national security interests.
    2. ... and while the oil and gas in the U.S. is much maligned ...  But it's cleaner than oil and gas in other countries. Growth in the States has led to modern history lows for oil net imports (imports less exports) and natural gas is well into net export territory. The industry directly employs 10's of thousands of workers and indirectly supports multiples more. It pays taxes. You might not think so as some have said it doesn't but it pays massive amounts of production taxes which are crucial for local economies (everything from playgrounds to services to schools). And it keeps America's lights on. It's not just what goes into your gas tank.  It heats homes, cooks food, and it powers that Tesla. You can't just flick a switch to replace it and if you try by, for instance, implementing a frac ban and half mile nationwide setback, the low prices you enjoy now will slam higher. We read Bernie's plan and it offered no solutions, just an abrupt, price spiking shut off of an American industry that would benefit less clean foreign options. Moreover, if you attempt to go all electric you'll be looking at massive costs to replace package units, water heaters, and gas cooktops. And that leads us to point #3.
    3. ... there is no quick replacement for natural gas. Natural gas is key to heating and power in the U.S.  Here are some basic numbers regarding just the U.S. electrical generation pie followed by an annual generation table to share with friends or people you want to bore/annoy on the internet or at the appropriate social distance in your currently empty super market aisle:
      1. Nukes were 18% of generation in the States last August and are generally stuck at ~ 20% on an annual basis. We use August as that's generally the summer peak for demand (sometimes it's July).  This aging fleet of reactors has been uprated multiple times. I did a lot of work on this at my time at Jefferies and many were on their 3rd uprate back then and as such, the industry has pretty much hit a generation wall. There is no near term possibility of significant further expansion here (I know Biden is a fan of mini reactors and that's interesting) but there is nothing that could be done fast enough to warrant not viewing natural gas as vital as per above.
      2. Coal was 23%. As we have previously detailed the coal fired generation industry is in the dying process. Sites are being shutter monthly and no new meaningful additions are being attempted. Early in the 21st century this was half of U.S. generation but it's dirty in a lot of ways and I've worked on clean coal concepts and a better word for them is schemes. They are simply not start to finish clean.
      3. Hydro is variable each year with a lot depending on snowfall. In the summer months, when U.S. electricity demand is at peak, hydro generation is often down from spring levels. Last August it was just 5% of generation. As a generation source, hydro is generally not being expanded.
      4. Wind was 5% of generation last August. Wind is set to grow rapidly and 3 of our largest positions are now wind tied (turbines, blades, and towers). But it can't come close, any time soon, just talking logistics here, just physical realities, to replacing natural gas. We also note that generation by wind turbines in the summer months is generally lower than the rest of the year.
      5. That brings us to solar. We have a lot of hope for solar.  Solar generation has grown rapidly in recent years and will continue to through the decade and beyond. But solar is tiny and that rapid growth came from a small base level. Utility scale solar power in the U.S. was just under 2% of generation last August.  And the same logistics for growing it that apply to wind apply it. It simply cannot replace natural gas any time soon.

        1. Sidebar:  We have seen a number of fear mongering stories over the last week regarding renewable investments. These stories have ranged from pointing out global social distancing and it's impact of carbon footprints as a reason for coming slack renewable project completion to estimates of billions in projects simply going up in smoke. We have seen no such phenomenon. We have gotten updates in the last two weeks from a number of wind and solar participants and supply chain disruptions range from minor to not yet a factor. We have seen no project cancellations. These are large, bid projects, with months of planning involved, done with PTC safe harbor considerations in mind.  They may see some push out in the calendar due to worker considerations (transportation, installation) but to date we have not seen that and to suggest that billions in planned investment will go up in smoke due to Covid-19 is more fear mongering than reality based. We do see the potential for further subsidy time period extensions and for some governmental stimulus to actually increase renewable investment. We see these stories as feeding into a certain market panic mania underway which is now presenting in the form of far cheaper than 2019 type multiples as names come in from recent highs in shoot first, understand later behavior.
      6. You'll note that oil isn't in the table ... that's because in the U.S. we basically don't use oil to any great extent for generation. 
      7. Meanwhile, natural gas accounted for easily the largest wedge of August 2019 generation (proxy for summer) at 44% of total and averaged 38% last year.
      8. Here's a table with a number of years of generation data. We've boxed certain portions for emphasis:

In today's post please find: 

  • the oil inventory review (better than expected on the headline numbers, strong oil exports (for now) and implied record demand for gasoline for this week of the year),
  • the natural gas preview (small draw expected, likely bigger draw next week). We may see a small build before withdrawals are over. This is normal as the storage pull season winds down. We are on track to land within or now long forecast 1,800 to 2,000 Bcf range. Expect strong gas fired demand in the shoulder and with the start of cooling season but know that commercial demand is now in jeopardy due to facility closures.
  • the capex dashboard (adds several more companies to the list of names slashing budgets),
  • and some other odds and ends.

Ecodata Watch:

  • We get jobless claims at 8:30 am EST (F = 220,000, last week was 211,000).  This is going to zoom higher in coming weeks,
  • We get Philly Fed at 8:30 am EST (F = 8.0, last read was 36.7),
  • We get leading indicators at 10 am EST (no forecast, last read was 0.8%).

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h
  3. Oil Inventory Review
  4. Stuff We Care About Today - Capex Dashboard, Free Posts This Week
  5. Odds & Ends

Holdings Watch:   


  • Yesterday's Trades: NONE as we continue to await a more rationale market.
  • The Blotter is updated.

Commodity Watch:

Crude oil fell $6.58 (24.4%, the 3rd largest single day drop on record) yesterday to close at $20.37 despite EIA reporting a better than expected set of weekly data. Please see the EIA Inventory Review section below for details (at the moment U.S. inventory levels are fine for time of year).  Early this morning crude is trading up 12% to ~ $22.80.

  • OPEC+ Watch: OPEC chatter is unusually light.
  • Russia Watch:  Russia's finance ministers sees oil revenues some $40 B light to plan now and his country's budget in deficit. Ya know it's like he didn't see this reaction coming which is odd because most saw a deal with OPEC ... or this.
  • Mid Cush Watch:  Discount to WTI now $4.16 in April and showing a gradual improvement back into premium territory by December.
  • Colorado Watch:  San Miguel County enforces shelter in place ordinance with no cases in the county yet.  In case you are wondering this is far and away from the Wattenberg. We do have to wonder what effect such shelter in place ordinances, should they spread, have on drilling and completion ops.


Natural gas closed off $0.125 at $1.604 in a more modest volume session, moving lower with crude, the poor market backdrop, and a warmer forecast out of Maxar.  This is a 24.5 year prompt month low and for once we look forward to getting out of the withdrawal season and into the shoulder when the negative read on heating demand is not present. A warmer than normal spring for natural gas would be welcome.  No change to our thoughts of a landing this spring between 1,800 and 2,000 Bcf. No changes to our thoughts that this is not an end of world type spring trough storage level. At current prices, electricity generation is going to record to epic record. While we expect commercial facility demand reductions to play into electric generation needs we expect that to be distributed across the entire generation sector save nuclear with coal likely taking the brunt of the hit. We are watching closely for signs of weakness in LNG and Mexico export volumes. We expect volumes headed south from Canada to be at record lows this year. We continue to expect that we have seen the current cycle lows for U.S. production with last November's numbers.   In the early morning hours gas is trading flat.


Natural Gas Storage Preview

Street is at - 3 Bcf for today's report.   This is rounding error and we could see the first injection of the season today.  Next week we expect a larger withdrawal.

  • Last Week: - 48 Bcf
  • Last Year: - 91 Bcf
  • 5 Year Average: - 63 Bcf

Oil Inventory Review



Stuff We Care About Today

Capex Dashboard

  • We do not own all of these names, please see our Positions page and blotter for holdings.

Other Stuff

Free Posts This Week:

Odds and Ends

Analyst Watch:

  • TBA in comments

122 Responses to “Thursday Morning – More food for thought”

  1. 1
    elduque Says:

    Wonderful synopsis. Big thank you.

  2. 2
    zman Says:

    re 1 – thanks, feel free to share the link around, it’s open to the public today.

  3. 3
    zman Says:

    JKS chairman announces he’s bought his planned 200K shares, company also buying shares.

  4. 4
    zman Says:

    RTLR (unowned) – heads up, withdrawing prior guidance.

    VNOM (unowned) – also on tape with altered guidance, will update the mini model there in tomorrow’s post.

    FANG (unowned) – announces minimum one month break (a completion holiday) for all frac crews. 9 crews will go to 3 to 5 when they start reactivating. This is the second reduction so far here and note that it differs from the table above, also adds the capex this time (we said it was less granular than needed with the first iteration last week). Capex drops form $2.9 B on mid to $1.7 B on mid.

    FANG not ready to re guide 2020 production yet (again, that frac holiday is a minimum of a month) yet but said it expects volumes to fall from 1Q20 through YE20 and expects oil volumes to be down for the full year from 4Q19 levels.

  5. 5
    zman Says:

    30 minutes before equity open, $22, up 8% after the 3rd worst day for WTI in history.


    DJIA futs all over the map, were down > 800 at one point last night, down 250 at the moment.

  6. 6
    zman Says:

    Not my pond so you won’t see it in the capex dashboard above but ironic.


  7. 7
    zman Says:

    from the post above:

    “We get jobless claims at 8:30 am EST (F = 220,000, last week was 211,000). This is going to zoom higher in coming weeks,”

    Came in at 281,000.

  8. 8
    zman Says:

    Philly Fed = -12.7

  9. 9
    zman Says:


  10. 10
    zman Says:



  11. 11
    brodway Says:

    S&P continues to hover in the 2350 range after temporarily breaking it yesterday. I’ve found the 2350 level as an area of interest. Barring any further shocks should stabilize here.

  12. 12
    zman Says:

    re 11 – hear ya, thanks.

    Seeing signs of group traction as we approach the open but this is an extremely fast moving market and some of the headlines will fuel further caution/panic.

  13. 13
    zman Says:

    WTI at 22.40
    Brent at $25.30, premium fell below a buck yesterday before lifting.
    at eq

  14. 14
    zman Says:

    SPR Watch

    We went from DOE announces notice of sale of crude from SPR on Feb 28


    DOE announces notice of solicitation to purchase 30 mm barrels on March 19

  15. 15
    zman Says:

    “DOE is moving quickly to support U.S. oil producers facing potentially catastrophic losses from the impacts of COVID-19 and the intentional disruption to world oil markets by foreign actors” – Dan Brouillette.

    Having the SPR buy oil, and again it’s problematic given what the SPR can store relative to what the U.S. average API is going to be, is at best a half measure.

    That last bit about intentional disruption by foreign actors is key though and sounds like a job for the Commerce Department.

  16. 16
    zman Says:

    Hear, reading, shout if you need something, natural gas inventories at the bottom of the hour.

    Sorting through capex reductions, the coming cliff dive in rigs and spreads is going to be beyond epic.

  17. 17
    tomdavis12 Says:

    Offshore: NE Restucturing seems inevitable. S Butz EVP- CFO leaving after 3 months. Rolloffs this year – 7 JU’s including Lloyd Noble 9/1/2020 dayrate $451K. End of year ’19 cash $104M, LOC $660M. ST Debt $62.5M LT Debt $3.8B. Notes coming due ’21, ’22 & ’24

  18. 18
    zman Says:

    re 17 – yeah, I’d say you’ve got that right.

    This low oil price also represents a bloodbath for global reserve replacement as long lead time projects get deferred. I’m not going to spin DW wells off Africa for $25 Brent or in the GOM for whatever Mars is trading for today. Not if I’m not willing to spud short lead time stuff like Permian currently getting about $17 as of last night or the Williston getting under $15. Too much uncertainty for hugely expensive offshore (even if the finding costs are low the raw $ figure and risk is high and less of a sure thing respectively). Saudi/Russia are ultimately and arguably hitting the mega projects from Canada to the offshores more than shale and setting up a huge supply based rally in prices down the road.

  19. 19
    tomdavis12 Says:

    Another drawback to offshore NE is the 3 rigs they have working for XOM in Guyana are structured to be repriced to market conditions every 6months. No big dayrates locked in anymore.

  20. 20
    tomdavis12 Says:

    Reading that Russia because of more diversified economics can withstand this envoirnment longer than SA.

  21. 21
    zman Says:

    Natural Gas Inventory Quick Look

    Storage is now -9 Bcf,
    76% above year ago.
    16% above the five year average.

    • We expect a bigger withdrawal next week.

    • We continue to expect a trough between 1,800 and 2,000 Bcf (likely upper half of range given the weather).

    • We then expect a shallower slope to the injection line as cooling load will be high but caution that Covdi-19 is going to begin to impact Commercial and Industrial demand to some extent likely with next week’s data

  22. 22
    zman Says:

    re 20 – yeah, I’ve seen articles on both sides. For Russia currency flux has helped. Neither side is please, both are well below budget. I think saying you can last 6 or more years at current prices is a lot more talk than something you actually want to do.

  23. 23
    zman Says:

    If Exxon is so going to remain so Permian focused then it really should buy PE this weekend while it’s on fire sale.

  24. 24
    zman Says:

    reasury Secretary Steven Mnuchin said he
    will recommend President Donald Trump ask Congress for as much
    as $20 billion to keep the Strategic Petroleum Reserve full for
    a decade.
    “Let’s go out and buy,” Mnuchin said in a Fox Business
    Network interview. “Fill up the reserve.”
    Trump has already said he wants to take advantage of a
    crash in oil prices to fill the SPR. West Texas Intermediate
    crude for April delivery, which expires Friday, climbed $1.70 to
    $22.07 a barrel as of 8:55 a.m. in New York.
    “At $22 for WTI crude we should be filling up the reserve
    for the next 10 years,” Mnuchin said. “We are energy
    independent, but obviously at these prices we’re going to have
    issues producing energy.”
    The Department of Energy said in a statement Thursday that
    Trump has instructed the agency to fill the reserve “to its
    maximum capacity by purchasing 77 million barrels of American-
    made crude oil.”

  25. 25
    zman Says:

    re 24

    • the U.S. is not energy independent.
    • this is a quarter measure at best if they are trying to help the industry.
  26. 26
    Baylor Says:

    How much lower can XOM go here near term?

  27. 27
    zman Says:

    re 26 – apologies, not my pond but rational valuation is out the window until they re-guide in my view.

  28. 28
    zman Says:

    More capex clarity in upstream giving some bounce to names that give it vs names that have not yet.

  29. 29
    james T Says:

    In the fall of 2014 Energy would firm up a bit into options expires each month (last couple days) then resume the ugliness on monday. You guys feel that going to be the Scenario ?

  30. 30
    zman Says:

    re 29
    – no idea regarding opex influence this time.
    – broad market sentiment, U.S. actions, and R/S back to table are key to moves in all time frames to my eye.

  31. 31
    elduque Says:

    FANG- why is underperforming relative to peer group?

  32. 32
    james T Says:

    re30 Opec upped production in Sept of 2014 then we got screwed at the Thanksgiving meeting to the tune of a $10.drop. Looking back that sure seems planned. This seems the same we are vulnerable and they put the screws to us. This was not something that just happened between Novak and Saudi officials. Damn the media, it all fake news.

  33. 33
    zman Says:

    re 31 – time frame?

  34. 34
    elduque Says:

    5 day, 10 day, 28 day and one year.

  35. 35
    zman Says:

    re 34 – OK thanks, that helps.

    Relative to other Permians

    • the longer term, related to last year would be wider basis differentials (vs peers, they had locked in a good bit of mid-cush at <-$6)


    a 3Q19 snafu related to guiding production impacts for offset well fracs (more impact due to a larger than expected by Street number of wells shut in for neighboring completions which led to a softer than expected 3Q19 volume level)

    • in the most recent time frames I’d chalk that lack of specificity in the capex re-guidance last week (they became granular on guidance this morning as noted above).

    • we don’t own the name having sold it recently during the down turn for the very reason that it was not acting well.

    • radio silence is death and the name’s more recent communications (today) appear to be ameliorating some extreme uncertainty related fear there.

  36. 36
    elduque Says:

    Thank you.

  37. 37
    zman Says:

    Have not been listening but apparently Covid-19 task force speaking to therapies that can be available sooner than a vaccine. Good to see a per our comment on antivirals in the post header.

  38. 38
    zman Says:

    Extreme volatility during these task force pressers.

  39. 39
    zman Says:

    From Zorg re COG

    Buyers continue to show up above major acceptance at 17.18…..Looking for another test of the recent highs…

  40. 40
    zman Says:



  41. 41
    zman Says:

    WTI to $25 for a few seconds, back under $24 again


  42. 42
    Wildcatter01 Says:

    Why wouldn’t all companies now just cut development capex to $0 and buyback their stock. Hard to imagine a new well coming online in the next 6 months having an irr more than cost of capital considering high decline nature of shale and most hedge books. It is easy to see stock buybacks at these prices being a double in 2021 and they would preserve inventory. I understand if they have a large lease with a continuous drilling obligation but in that case a DUC and a buyback would be better return. I see a lot of companies doing major cuts in capex and major cuts in stock buybacks and it seems counter intuitive to me.

  43. 43
    Wildcatter01 Says:

    minor cuts in capex and major cuts in buybacks

  44. 44
    brodway Says:

    TSLA and some former high fliers convincingly in green territory. There was significant selling exhaustion so these could be temporary bounces, but being optimistic and hoping springs eternal

  45. 45
    nrgyman Says:

    RE 42: Why wouldn’t E&Ps pay down debt (if they have it) instead of buybacks? Debt is a big reason for the low stock prices. Cutting it gives room for prices to lift. The entire industry needs a reset in terms of acceptable debt levels/metrics. BCEI, MGY, EOG and PXD are setting good examples.

  46. 46
    Wildcatter01 Says:

    Re 45 I agree if it is public debt that could be bought at a lower price like a lot of the bonds are trading which would give it a bigger return than drilling.

  47. 47
    zman Says:

    Covid Presser

    Working very closely with company soon on anti viral treatment, can’t say by law when. That’s what markets and people want to hear about.

    Supply of masks “greatly expanded”

    My opinion is that Trump is doing a better job with these pressers. I don’t know if he called it the Chinese virus or not but he needs to cut that out, that’s crap.

    But otherwise he and his team seem to be gradually more on top of this. Not a political comment but early days they really took the wrong approach in my view. Way too much back patting for a job not yet done and denial of the issue. That’s largely gone now, at least the denial.

  48. 48
    rmd Says:

    42 & 45 the history of buybacks is there are done too early at high prices. When results change for the worse & stock prices go down, fear, liquidity, and debt levels preclude buybacks.
    Buying back debt at a discount is the best hope.

  49. 49
    rmd Says:

    Someone pointed out inside buys at MTDR which have been going on all the way down. Mgt still buying at ~$2 (vs. losing courage pre #48).

  50. 50
    tomdavis12 Says:

    PXD seeing bids on calls out a few months. Not large enough to warrant action. Just first I have seen since SA action.

  51. 51
    zman Says:

    re 42

    • hear ya, balance sheets may simply not allow that but directionally I get it.
    • the faster you were just growing, the more your base decline will be if you just stop completing wells.
    • now, the flipside is, if everyone does it, you get a different P in the PxV= Revenue end of things.
    • I think the cuts in buybacks are names like COP where they’ve gone from $750 mm /qtr to $250 mm, no? In that case, it’s not buying back enough of the outstanding share count relative to preserve net debt levels, to me at least.
    • for smaller names though I totally agree and I’ve had a bit of back and forth with one name in particular on this subject, with me saying “doesn’t it make sense, given pricing now, given that your wells see half their oil in the first six months, to use capital to drill in your own shares” and they nodded over the phone. I wrote about this last week and I assume they are heavily in the market now.
  52. 52
    rmd Says:

    Schwab started charging to borrow stock this week. Seems 2% is common. Even the SPY is .75%. Harder borrows are higher: WLL is 71% down from ~ 84% yesterday.
    I wish I knew how significant this is relative to John Q. getting short indicating a (short term?) bottom.

  53. 53
    zman Says:

    re 45 – very true.

    The name I was thinking of has very little debt.

    re 48 – also true, if your debt is elevated.

    And anyone that gets the permission to buyback shares with their revolver near term will get punted by me almost 100% of the time.

    re 49 – he was buying pretty strongly in the mid teens last I saw. Hard to fault them for buying their own stock then though given no one saw Russia/Saudi/Corona coming back when they did those buys at much higher levels.

  54. 54
    zman Says:

    Just noting that Trump spoke to hydroxychloroquine today. This is what we were talking about last week, along with zinc.

    Chloroquine is a prescription drug. It’s cheap and I’ve taken it as a anti malarial in the past.

    I’m not a doctor.

    Consult your physician but know that we’ve seen some doctors speaking to zinc being taken up into the cells (it’s not just enough to get it into your body) with the help of chloroquine.

    But also Quercetin which you can get anywhere for about $20 a bottle (Amazon, GNC, your grocery store). Zinc is commonly $5 or $6 bucks a bottle. Again, consult your physician but it’s worth knowing.

  55. 55
    zman Says:


    That would be awkward.

  56. 56
    zman Says:

    re 52 – good luck.

  57. 57
    nrgyman Says:

    Currie on CNBC saying more downside in crude.

  58. 58
    nrgyman Says:

    RE 57: $20 target for him.

  59. 59
    zman Says:

    re 57 – he said $30 for 2Q and 3Q last week for Brent.

  60. 60
    james T Says:

    re54 Yup Chinese and South Korea doctors using it with good results, just today or yesterday French doctors saying it works, just listened to CNN Dr. Guptja saying slow down, its not approved blah blah, FDA and CDC part of swamp, These people don’t want a cure, its been around since world war II. Laura Ingraham said she took it 3 times in her life before traveling to Africa as a preventative. Cleary its not a very dangerous medicine.

  61. 61
    zman Says:

    re 60 – oh, I think they want a cure. I honestly think everyone wants a cure.

  62. 62
    nrgyman Says:

    The WTI move today contrasts sharply with Brent’s move. Saudi/OPEC+ plans to flood the market will over-saturate storage, according to Currie, and force prices lower. Meanwhile, potential US efforts to support US producers (including SPR purchases from US production) is helping WTI.

  63. 63
    zman Says:

    re 62 – true

  64. 64
    james T Says:

    Let see if Where its warm cases drop like state of Florida, I am guessing not because it has been engineered to do what it is doing.

    RE 57 No one at Goldman has the Virus yet ?

    CBS NYC had to shut down, local NYC weatherman broadcasted from the Laundromat here in N.J. on Sunday.

  65. 65
    james T Says:

    Portion of large article Borrowed:
    A tropical disease doctor turns his sights on the coronavirus
    If all goes well, hundreds of healthcare workers across the country will soon get a package at their door containing a packet of 65-year-old pills and a set of instructions.

    The pills contain either an anti-malarial medication called hydroxychloroquine or placebo, and the instructions contain the protocol for the United States’ fourth coronavirus clinical trial. The brain child of a tropical disease researcher well acquainted with malaria, the study could soon tell us if there’s a way to help protect those most exposed to the virus from falling ill.

    David Boulware
    “This is not what I do on a day-to-day basis,” University of Minnesota professor David Boulware, who normally works on HIV and tuberculosis meningitis, told Endpoints News. “But this is such a public health crisis that someone had to do something.”

    Boulware began planning the trial last week as the US outbreak began. Hydroxychloroquine and its analog, chloroquine, have been used for decades to treat malaria — turning up the pH in cells and interfering with the proteins the virus uses for infections. Chinese doctors turned to it early in the coronavirus outbreak in their scramble for potential therapies, and in the last few days, as the global need for treatments has sharpened and as enough time has passed for patches of data to come out, the drug has emerged as a leading candidate to treat Covid-19.
    The World Health Organization said yesterday it would be one of four drugs they test in a global, multi-arm study. Early data from a 24-person non-randomized study in France suggested it might be vastly superior to standard of care in clearing the virus (the full data complicated matters). It’s garnered proponents both in Nature and on Twitter.

    Boulware’s study, though, takes a different approach than most of the handful of hydroxychloroquine clinical trials underway worldwide — and a different design, he said, than he or the FDA had ever seen.

    “We had a call with FDA this morning and they were like, ‘yeah this is kind of interesting, yeah we’ve never seen this before,’” Boulware said.

    Rather than treating patients who are already sick and hospitalized, the study is testing the drug as post-exposure prophylaxis, i.e. trying to prevent infection in those who have been exposed but have not yet shown symptoms. It could potentially provide a method to help protect the most vulnerable, particularly healthcare workers. An Oxford team is trying a similar idea, although not all coronavirus experts see potential.

  66. 66
    zman Says:

    This has not updated yet but Italy just past China official death toll.


    re 64 – Austalia in summer now, cases appears to rising at faster pace there which is of concern.

    re 64 – I’m not going to traffic in conspiracy theories don’t really see any point in that. I’ll leave that to my state senator.

  67. 67
    zman Says:

    re 65 – thanks, please make sure you have permission to borrow, otherwise please use a link so that we are not in violation of copyright law.

  68. 68
    Baylor Says:

    Italy has 2nd oldest population on Earth behind japan. Probably a factor

  69. 69
    zman Says:

    re 68

    • to be certain.
    • and I don’t think it’s a conspiracy theory to cast a critical eye on the Chinese numbers. It is well known, and I mean no offense, that economic data from the country are often massaged. Not speaking to the death toll but the number of new cases just hit a wall a few days ago and that could be due to draconian quarantine efforts but it’s also possible that in a less transparent market such as China numbers are suppressed.

    • just listed to a rheumatologist saying she’s excited by the idea of hydroxychloroquine, saying something about changing the ph that the virus wants to operate in, and said that trials are starting immediately after noting it’s a very safe drug (again I took it, no problems).

  70. 70
    zman Says:

    Note the action in COG
    – went from “it’s not oil”
    – “source of funds”

    in a day.

  71. 71
    zman Says:

    JT – I do appreciate the color.

  72. 72
    zman Says:

    Check out the recovery vs death rate chart here.


    This is highly skewed by under testing no doubt.

  73. 73
    zman Says:

    … I mean, just simply based on the fact that they deny tests to anyone who is asymptomatic, people quoting the current 9.5% rate in that chart is falling subject to bad math and helping to create panic.

  74. 74
    james T Says:

    re66 Not asking you too.

    re68 Yup

  75. 75
    zman Says:


  76. 76
    zman Says:


  77. 77
    zman Says:


  78. 78
    tomdavis12 Says:

    Maybe we should ask Tom Hanks (and wife) to explain his Virus experience. I believe they have been released from Australian hospital and are back in USA. Seems like we get new cases and deaths every day. Maybe how cured and experience would be helpful to lessen panic.

  79. 79
    zman Says:

    re 78 – there are a ton of videos out there detailing it. Wide range from what I’ve seen. But I am big fan of Tom (since the Money Pit) and I’m glad Houston does not have a problem.

  80. 80
    zman Says:

    re 78 – but also agree and sure he’ll be on somewhere with it.

    There’s a super lot of bad info out there.

    Idris Elba who has it had to speak out and say yes, black people can get it. I mean, wow, ya know, when people are spreading things about certain groups can’t get it they really ought to, I don’t know, stop that.

  81. 81
    zman Says:

    Good to see Vestas reverse and gain traction. I’ve found some really irresponsible claims out there about renewables being hit for $B’s by sources that use nothing to back that up and are not, apparently, in the same conversations and conference calls, that I am.

  82. 82
    zman Says:

    I’ve gone so far as to inquire with one author for numbers or sources ….

    … crickets ….

  83. 83
    tomdavis12 Says:

    79 I believe he is perceived to be a Walter Cronkite type trustworthy guy. Would expect the Democrats to grab him.

  84. 84
    zman Says:

    By the way, in about 4 days, a lab in Austin, Everly, will be offering a mail in home test Covid-19 kit. Others will follow.

  85. 85
    zman Says:

    re 83 – totally.

  86. 86
    zman Says:

    Saudi King just said they will provide everything their citizens need. Not some kind of oil peace accord speech.

    OT, grabbing lunch

  87. 87
    zman Says:

    Bayer is donating chloroquine

  88. 88
    zman Says:

    WPX up 26% today, to $2.65. May update on the positive capex move there was written at $2.95 earlier this week, see link at bottom of post. Crazy.

  89. 89
    zman Says:

    MGY up 30% now. Kind of meaningless to talk %s for the time being.

  90. 90
    zman Says:

    re 89 – but they’re the guys I was referring to above re buybacks.

  91. 91
    james T Says:

    Re 88 WPX was the one I was saying was high on the list of effective volume a few days ago, but I’m getting a bit frazzled.

  92. 92
    zman Says:


  93. 93
    zman Says:

    re 91 – I recall, thanks. Long term like it, but I am not willing to trust this move, don’t mind buying many things higher than here. Crude move is interesting, some short covering no doubt, one big trader was very public about going all in short late last week so ….

  94. 94
    zman Says:

    Rewiring the VNOM (unowned) mini model to take hedges into account, shout if you need something.

  95. 95
    zman Says:

    Epidemiologist on news just now saying very excited about hydroxychloroquine, says we know it well, would expect trials to take just a few months.

  96. 96
    james T Says:

    Anyone ever look at SRLP has a nice dividend, held up better than most in this disaster ?

  97. 97
    zman Says:

    In our last VNOM update, we used 25000 boepd at $30 and 28,500 at $40 and $50 cases. They just went to 24,750 but also add hedges. We will show $20, $30, and $40 cases tomorrow.

  98. 98
    zman Says:

    State Department raises global travel advisory to level 4. Basically means if you are US citizen you should return to the US immediately.

  99. 99
    james T Says:

    re95 Takes 6 days if you give to someone that sick, they get better, But if you give to healthy health care workers takes two months to figure out what happened ????? Sounds like Big Pharma still in the mix. Still happy they are doing that at least. I hope they give the healthcare workers the Zinc as well because that is what targets and surrounds the Virus cells. Malaria medicine facilitates a pathway for the zinc to the Virus cells. Otherwise it won’t work.

  100. 100
    zman Says:

    Texas RRC said to be mulling invoking production curbs.

    Ya don’t get to type that every day.

  101. 101
    zman Says:



  102. 102
    james T Says:

    re100 Our Texas Opec

  103. 103
    zman Says:

    re 99 – thanks

  104. 104
    zman Says:

    Beerthirty, back in 2 hours.

  105. 105
    Baylor Says:

    re 69 one key side effect of hydroquinine (SP?) is interference with the QT signals of the beating heart which can lead to cardiac arrest.

    Just make sure one does their DD before consuming if so inclined. It does help get Zinc into cells though according to many things i’ve read the last 2 weeks.

  106. 106
    Baylor Says:

    re 72, i wish there would be some honesty in journalism but those days are longggggggg behind us. Show that charg compared to the flu which has killed almost 10,000 americans in March alone. It may help bring some calm and some perspective as appropriate.

    I have no idea or bias of how this plays out. I just look at data.

  107. 107
    zman Says:

    re 105 – see that’s good to know.

    re 106 – same, so when I see bias in my space, I call it out.

  108. 108
    nrgyman Says:

    MGY CEO Chazen to become Chairman of OXY:


  109. 109
    zman Says:

    The Friday post will be out around 1 am EST.

  110. 110
    zman Says:

    re 108 – I like him a lot. I’m not going to go buy OXY and I don’t see that as an OXY/MGY tie up for sure. But it’s an interesting move as OXY’s debt has plummeted.

    Chazen hates debt.
    Chazen likes dividends.
    Chazen is a big fan of free cash flow.

  111. 111
    nrgyman Says:

    RE 110: Icahn wanted him on the BD. OXY making him chair is an appeasement to reduce conflict with Icahn. Good choice for OXY (unowned).

    OXY debt was downgraded to junk status.

  112. 112
    zman Says:

    re 111 – yeah, just into the top of that range today, I think it was Moody’s I saw.

  113. 113
    zman Says:

    AR (not in ZLT but own a little personally)< $1. Super highly hedged. Missing the turn my sense re analysts who put in another round of gassy name downgrades there this week including Wells today cutting it from $3 to $1.

  114. 114
    zman Says:

    Early data says flattish withdrawal to slight smaller, not bigger as expected.

    Power very strong,
    Industrial very strong.

    Res and Com weak (on weather so far but the C part will suffer to a degree soon).

    LNG holding up so far. Not at the highs due to maintenance but still up at 8.0 Bcfgpd.

  115. 115
    zman Says:

    $26 and change


  116. 116
    zman Says:

    CA issues statewide stay at home order beginning tonight.

  117. 117
    PackMan Says:

    Seems to me that the President ought to be exerting some max pressure on Saudi / MBS to lay off the oil production / price war.

    Why ? Because of how damaging this is to our economy, the oil and gas industry (capital markets & jobs) The benefit to consumers of low prices is overstated; take a look outside and you will see nobody on the roads at this country is in lockdown. Roads empty. Trains, buses, planes, all empty and on highly reduced schedules. 99 cent gasoline isn’t gonna fix this. We can have low prices, just not too low, what we have now is harmful to our economy and our long term economic security.

    Buying for the SPR (if they actually go ahead and buy) is a welcome step, but Trump and Mnuchin need to lay down the law to Saudi. At the very least, economic depression in TX and other oil areas won’t be good for Trump’s political prospects.

  118. 118
    zman Says:

    WTI is $27+.

    Brent is $25.30.

  119. 119
    zman Says:

    re 117 – rumor is that he is. I had comments on this in the opening of today’s post (SPR, jobs)

  120. 120
    zman Says:

    re 118 – disregard, bad quote I guess. Showing Brent at $29+ now

  121. 121
    T.G.I.F. | Zman's Energy Brain ~ oil, gas, stocks, etc… Says:

    […] zman on Thursday Morning – More food for thought […]

  122. 122
    Wrap – Week Ended 03/20/20 | Zman's Energy Brain ~ oil, gas, stocks, etc… Says:

    […] Thursday's post, […]

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