Thursday Morning – Earnings Avalanche Day 2



Market Sentiment Watch:

  • Did not know yesterday was National Nurses Day.  Definitely a loud shout out to all nurses with a big thank you!
  • This is a high volume reporting day. Some of our comments are more brief than usual. If something is not clear please ask in the comments section.

In today's post please find:

  • the oil inventory review (better than expected report as oil production fall accelerated and throughput moved up while gasoline demand bounced),
  • the natural gas preview,
  • comments on a half dozen 1Q20 reports,
  • and some other odds and ends.

Ecodata Watch:

  • We get jobless claims at 8:30 am EST (F = 3.1 mm, last read was 3.84 mm),
  • We get productivity at 8:30 am EST (F = -5.5%, last month was +1.2%),
  • We get unit labor costs at 8:30 am EST (F = 5.5%, last month was 0.9%),
  • We get April Nonfarm Payrolls tomorrow. Right now, the estimate calls for -22 mm.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h
  3. Oil Inventory Review
  4. Stuff We Care About Today - Today's call line up, GDP, WPX, PLUG, LPI, EQT, CRK, PXD, MUR
  5. Odds & Ends


Holdings Watch:   


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

Commodity Watch:

Crude oil closed off $0.57 yesterday at $23.99 after EIA reported a largely better than expected report as weeklies go vs estimates.  Crude and distillates still built vs year ago and five year averages and distillate demand is poor and needs to pick up soon. We think oil, now near the middle of our near term range, is basically in a volatile holding pattern until we see more pick up for throughput and gasoline (saw it with this report, expect to see more in coming weeks). See the review section below for more details.  This morning crude is trading up 10% after Saudi Arabia increased official selling prices to all regions for June (US prices hiked $1.50, Europe hiked $6.55, Asia hiked $1.40).


Natural gas fell $0.19 (9%) at $1.94, pulling back from the 16 week high reached the day before. This morning gas is trading up slightly.


Natural Gas Storage Preview

Street is at +104 Bcf (Reuters survey) to +109 Bcf (Bloomberg) for today's report. 

  • Last Week: +70 Bcf
  • Last Year: +96 Bcf
  • 5 Year Average: +74 Bcf

Oil Inventory Review


Stuff We Care About Today

Today's Call Lineup

Please see our comments on WPX's quarter at the bottom of Wednesday's post in the addendum section as we had that one done last night. 

GDP Reported Slightly Light 1Q20 Results; Guidance Reiterated with minor changes, borrowing base saw very slight trim.

The 1Q20 Numbers:
  • Natural gas differential pre hedge was only 6 cents below Henry Hub.
  • LOE (ex workovers) of $0.23 / Mcfe vs annual guidance range of $0.20 to $0.25.
  • Transportation of $0.39 / Mcfe vs annual guidance range of $0.30 to $0.40.
  • G&A per Mcfe of $0.30 which is at the upper end of annual guidance.
  • Capex in the quarter was $18.4 mm with work on 4.0 net wells (Completed 1.8 net wells in the quarter (1 in January, 0.8 in March).

Guidance: Capex and Production Unchanged

  • Capex: No change vs prior guidance $40 to $50 mm (5.0 net wells vs prior plan of 4.2 net)
  • Production: No change vs prior guidance 137 to 142 MM/d.
  • Differential guidance was $0.15 to $0.25 below Henry Hub vs prior guidance of $0.20 to $0.25 below Hub.
  • Transportation was $0.25 to $0.40 per Mcfe and is now $0.30 to $0.40


  • Seeing service costs 15 to 20% lower for its next wells yielding the expected increase in completed wells for the same budget as noted above.
  • ROCE was 12.5%. Rare for little names to be positive on this metric.
  • 0% gas flaring.

Balance Sheet:

  • Net debt to quarterly annualized EBITDA of 1.6x, compared to 1.3x last quarter.  1.3x on a TTM basis. Target is < 1.5x.
  • Borrowing base was lowered by $5 mm to $120 mm.  Bit of a sigh of relief, given prices that could have been a steeper cut.

Nutshell: OK quarter, slightly light but ahead on the EPS line. Guidance is essentially unchanged with a modest change to diffs offset by a modest change to expected transportation. While volumes were a bit light this appears to be timing and the additional well count should bolster confidence in the annual production guidance expectation. We took a new position here in mid April and added slightly to the position near the close yesterday. The name remains a low debt, cheap, gassy micro cap player. Would expect it to move better as natural gas prices moved better this summer.


PLUG Reports Strong Than Expected 1Q20 Revenues, Miss on Covid19 costs; 2020 And Longer Term Guidance Reaffirmed


  • That was record for 1Q billings.  They deployed > 1,000 fuel cell systems in the quarter and worked on 4 hydrogen infrastructure projects.
  • 1Q20 EBITDA was a 30% improved over year ago levels.
  • Company says Covid-19 drove higher costs
  • Notes 99% uptime for hydrogen and fuel cells products at Amazon, Walmart, and other grocers experiencing high demand due to Covid, with activity levels sustained above peak holiday levels. Note: When your supply center is running to meet unprecedented virus related demand, you want fuel cells that can be quickly refueled vs a battery bin hot swap type of operation.
  • They noted Walmart consumed 30% above normal hydrogen in March noting they have over 10,000 fuel cells systems across the Walmart footprint.
  • They highlighted the previously announced launch of their Class 6,7,8 true 125kW ProGen fuel cell engine. This is the last link in the transportation chain (aside from ships and planes). They have 200 to 400 mile range options for this design.  This is the so called "middle mile" for deliveries.
  • They noted the larger ProGen comes on the heels of the 2019 successful launch of the 30kW ProGen engine (sized for deliver vans and light cargo trucks) ...we'd like to hear more about uptake of this engine.  This is the "last mile".
  • Favorite Quote Watch:  "According to KPMG’s most recent report, hydrogen fuel cell electric vehicles have replaced battery electric vehicles as the most important trend in the automotive industry through 2025. "
  • Second Favorite Quote Watch: "Plug Power is the largest user of liquid hydrogen and has built more hydrogen refueling stations than anyone else in the world.  Customers have performed more than 27.7 million fills, dispensing more than 27 tons of hydrogen daily. These numbers remain unmatched by any other company in our industry. "
  • They reaffirmed plans for $300 mm in sales this year despite Covid19.  There is mix shift in the number as mission critical applications see increased demand relative to manufacturers like automakers. They note that long term sales contracts represent "at least" 30% of sales which is above our last understanding.
  • Long Term Plan Reaffirmed: By 2024 using 85 tons of hydrogen a day with over 50% as green hydrogen, annual billings of $1 B and $200 mm in adjusted annual EBITDA.
  •    They are pursuing two acquisitions now to aid them in their vertical integration plans (the companies are involved in generation and distribution - United Hydrogen of PA and an unnamed electrolyzer company with a broad size range of products). They see both potentially being completed by the end of 2Q20.
  • The term loan facility was increased by $100 mm while the interest rate was cut from 12% to 9.5%.

Nutshell: Strong sales, impacted on the price side by the virus. We're excited by the long term vision and moves to achieve that vision here. The importance of mission critical applications at this time and this kind of uptime should be a key point on the call but we also see the middle and last mile and vertical integration efforts as the real price here. We continue to have a modest position here (almost 5%) and continue to learn.

Other Stuff

LPI (unowned) Reported Production Beat, EBITDA Miss; Debt Remains High Cost After the Refi and Stressed.

  • Volumes of 86.532 MBOEpd (34% oil) vs 82.5 MBOEpd (33% oil) expected,
  • EBITDA of $116.8 mm vs $125 mm expected,
  • EPS of $0.09 vs $0.09,
  • Guidance - Capex - cut again to $265 mm from $290 mm (which was already cut from $450 mm)
  • Guidance - Production - reiterated at flat YoY.
  • Balance Sheet: Net debt to quarterly annualized EBITDA of 2.7x, compared to 2.0x last quarter.
  • Borrowing base was redetermined lows, moves from $950 mm to $725 mm.  They have $275 mm drawn and $5 mm in cash.
  • They are 100% hedged for oil in 2020.
  • This is tempting for a trade (we've done that once in recent months to good and then bad effect). As to the ZLT, for now, given the current price environment this is more debt than we are comfortable with in this type of name and we expect the debt metric to expand here during 2Q20.  We note that their recently issued very high costs seniors are trading in the 40's.
  • Conference Call: Today, 8:30 am EST.

EQT (unowned) Reports Beat; Guidance Unchanged,

  • Volumes of 4.2 Bcfepd vs 4.05 Bcfepd expected,
  • EBITDA of $468 mm vs $436 mm expected,
  • Guidance -No change vs prior guidance of $1.125 B on mid,
  • Guidance - No change vs prior guidance of 1.45 to 1.5 Bcfe (95% natural gas),
  • Free cash flow of $251 mm in the quarter and reduced net debt by $270 mm in the quarter.
  • Sees asset sails of $125 mm in 2Q20.
  • Balance Sheet: Net debt to quarterly annualized EBITDA of 2.7x, compared to 2.9x last quarter.
  • Conference Call: Today, 10:30 am EST.

Nutshell:  Nice beat. Leverage came down despite the lower priced quarter. Should be well received.

CRK (unowned) Reports Stronger Than Expected Quarter; No Change in Guidance; Borrowing base reduced

  • Volumes of 1.38 Bcfepd (98% natural gas) vs 1.34 Bcfepd expected,
  • EBITDAX of $201.6 mm vs $189 mm expected
    • Capex was $130.5 mm in the quarter vs operating cash flow of $156 mm.
  • Guidance - Capex: No change vs prior guidance of $421 mm.
  • Guidance - Production: No change vs prior guidance of 1.25 to 1.45 Bcfepd.
  • Operations have not been impacted by Covid-19 outside of safety procedure modifications.
  • Favorite Quote Watch:  "While natural gas prices are expected to remain low in the near-term as we manage through an oversupplied market resulting from the winter heating season, we anticipate a much healthier supply and demand balance for natural gas later this year and in 2021.  Our improved outlook for the natural gas markets is primarily driven by our expectation for significant declines in natural gas supply in 2020 and 2021 due to a continued reduction in natural gas directed drilling and completion activity and less associated gas production from reduced activity in oil basins driven by the very low oil prices post COVID-19.”
  • Balance Sheet: Net debt to quarterly annualized EBITDA of 3.1x (ex preferred) or 3.6x with it.
  • Borrowing base reduced From $1.575 B to $1.4 B with commitments reduced from $1.5 B to $1.4 B.
  • Conference Call: Today, 11 am EST.

Nutshell: Solid quarter, guidance unchanged. Debt remains higher than we like to see and bank trimmed a bit more substantially here. Please see our last update on this name here.

Other Other Stuff

  • PXD (unowned) - 1Q20 super quick look:
    • EPS of $1.15 vs $1.18 expected.
    • $100 mm free cash on underspend of budget
    • Guidance is now 341 to 359 MBOEpd.
    • Reducing capex by another $300 mm, now down 55% from original plan (now $1.3 to $1.5 B)
    • Buyback continues
    • Curtailments of only 7,000 Bopd in current guidance.
  • We get TPIC after the close and will have notes on the quarter and call in tomorrow's post.

Thinking Out Loud Watch:  MUR (unowned) announced the closure of their historic HQ in El Dorado, AR. They are no longer a refiner and they are closing this office and one in Calgary and consolidating in Houston. Why do this now?  It's done in the name of cost cutting. Or maybe in the name of streamlining in front of an acquisition. There was no reason to be in El Dorado any longer (it's not close to a play, they don't run the refinery in town, it's not a draw for young talent).  Leaving Canada however is kind of interesting, given they see strong potential for both their oil and natural gas assets. They will no doubt keep small satellite offices in Canada but they had more people at the main office than in the HQ ... many won't go to Houston.  Makes one wonder about their thoughts on further growth there. In the U.S. they are an Eagle Ford player.  Outside of NAM they are offshore explorationists.  My sense would be within 2 years they are owned by a Major or Conoco. The assets fit nicely with a number of players' footprints. Some of whom are in the same offshore regions and Canada.  They announced their 1Q20 last night. It's not a story I am on top of.  Of note they are adding oil hedges for this quarter in the mid $20's (not something one does with great excitement), they cut the dividend in half (which won't be pleasing to many large shareholders that share the company name), and their EBITDAX is small for a company of their long term stature (just $307 mm or just under $18/BOE and that will tumble with 2Q's pricing) ... this all seems odd or desperate.  Net debt to annualized EBITDAX is 2.0x which is pretty middle of the road but we note some of their bonds are trading in fairly distressed territory.  Call today for their 1Q20 is at 9 am EST.  I will listen likely over the weekend.

Odds and Ends

Analyst Watch:

  • TBA in comments

64 Responses to “Thursday Morning – Earnings Avalanche Day 2”

  1. 1
    zman Says:

    LPI (unowned) call about to begin, light notes there in a bit.

  2. 2
    zman Says:

    Initial jobless claims at 3.17 mm vs 3.1 mm forecast and 3.85 mm last week.

  3. 3
    zman Says:

    re 1 – slides:

  4. 4
    zman Says:

    LPI (unowned) 1Q20 notes

    LOE and G&A beat guidance,

    LPI 4 rigs now, down to 1 by 3Q, plan to keep 1 running through 2020 in Howard.

    Will exit 2020 with 40 DUCs (compares to 33 completions this year on 55 spuds … could set up a year of largely DUC completions in 2021 for a cheaper budget on similar completed well count).

    Cline competitive with WC. Two new wells, first in 2 years, added in 1Q, cheaper than expected.

    Seeing improvement in natural gas prices due to drop in oil volumes from curtailments in the Permian basin.

    Bolting on more Howard acreage at lower prices.

    They did maintain drilling and completion efficiency gains and reduced costs to $630 /ft even with the move from legacy to Howard County. This was a promise they made, pretty snappy (peers are close to $800/ft)

    They see going to $550 / foot (at or below).

    Highlighted LOE+G&A/BOE at $4.13, really low but again, they are really gassy vs peers. Some of the comps shown like a CPE (unowned) are much much oilier and your LOE is going to be higher for wells that oily.

    Shut in evaluation in progress focused on:
    – older verticals

    They do not see shutting in volumes due to 3rd party constraints.

    Going to Q&A 25 minutes in …

  5. 5
    zman Says:

    LPI (unowned) 1Q20 Q&A

    Q) 2021 plan
    A) probably maintenance at a $30 oil price, with focus on free cash flow.

    Q) Acquisition thoughts vs balance sheet
    A) We’ve added 1,300 acres so far this year at historic low prices, lots oppys, see set up to be successful due to low costs yada yada. Sounds like organic, not big stuff.

    Q) service costs
    A) have seen some big drops in the last 2 months, the forecast now uses current service costs, right now we can do the wells at $550/foot.

    Q) GS questions – price point to complete DUCs and price point for bringing back the rigs, both oil and natural gas.
    A) slide 7 and 8 – sensitivities – as low as $35 on oil on a new well, lower on the DUCs and then on the natural gas, and notes the Cline wells have strong economics as they are oilier but have significant gas production (circle to slide 8).

    Q) debt at a discount.
    A) balancing free cash gen, bring down debt/ebitda, notes the hedge position provides flex. (broke up, circle)

    Q) infrastructure projects done now on the cheap?
    A) not now, mostly done.

    Q) how split costs (D&C and LOE) for efficiency vs service pricing.
    A) lot of it in 2019 was efficiency, in 2020 it’s more service cost (so less sticky as prices rise.

    Fairly positive tone from sellside. No plan to add it back by us today. Will take another look soon.

  6. 6
    zman Says:

    As we approach equity open:

    June WTI at $26+ (up 9%, thank Saudi OSP decision)

    Brent at $31.40, up 5.5%

    Prompt NG up 2% to $1.98. Inventories in an hour.

  7. 7
    zman Says:

    Prior on Storage:

    Street is at +104 Bcf (Reuters survey) to +109 Bcf (Bloomberg) for today’s report.

    Last Week: +70 Bcf
    Last Year: +96 Bcf
    5 Year Average: +74 Bcf

    Now Bloom +111 Bcf

    This report is a bit irrelevant. We’re setting up a situation in which late shoulder and summer injections will be lower mid to lower end of range, definitely not record.

  8. 8
    zman Says:

    GDP up 12% on open – nice but no real volume yet; that was a 4/16 add with a bolt on pre close last night.

  9. 9
    zman Says:

    WPX up 5%, we dropped a piece to Seeking Alpha there which can be shared to all your friends here:


    That WPX remodel was fast and I likely will tweak it a bit post call next few days but think I am tight ballpark on a $30 crude outlook under the 2 scenarios.

  10. 10
    zman Says:

    AR – bouncing back from the two insider sales yesterday that scared people but were a function of taxes … should have been a footnote on the Form 4. Saw one story near the close that even said insiders are dumping which is clueless.

  11. 11
    zman Says:

    BCEI – interesting action pre call. Remains the cheapest small cap E&P we follow on a forward basis. Plan to reach $0 debt by YE20 playing well with investors and is completely achievable on our model.

  12. 12
    tomdavis12 Says:

    Z: Will be on PXD call if not on your list. +10%. Had left message for PE about my bond question. Will follow up.

  13. 13
    zman Says:

    re 12 – thanks, please pass along anything of relevance on that call, not planning on being on it live.

  14. 14
    zman Says:

    COP – again, combination of low leverage, free cash, return of capital combined with a strengthening technical set up. Liquid large cap deliveries what large investors say they want.

  15. 15
    tomdavis12 Says:

    13 My notes never up to your standards but a starting point for anyone with an interest.

  16. 16
    zman Says:

    re 14 – OPEC+ March 6 meeting failure gap fill in progress.

  17. 17
    zman Says:

    re 15 – anything helps, any high points at all, much appreciated Tom.

  18. 18
    zman Says:

    EQT (unowned) – flat to red initial reaction – recent strength may be playing like COG did into and after earnings. Given the beat a little surprising though.

  19. 19
    zman Says:

    Grabbing coffee, WPX call at the top of the hour, stock up 6% ish pre call.

  20. 20
    tomdavis12 Says:

    14 Saw 2 sellsiders move from XOM – CVX to COP. For those still with an interest in XOM, I would look elsewhere. Bond rating has gone from AAA to AA-. Have not earned their dividend over the last 5 years. Just borrowed $18B this year to make sure the dividend is covered $15B. Their downstream assets (refining & chemical) which used to generate $8-9B are down to $1B. Most recent CC did not address ESG. Seems a little clueless in this area.

  21. 21
    zman Says:

    WPX Slides


  22. 22
    zman Says:

    Note MUR (unowned) musing in the post.

    Taking notes on WPX

  23. 23
    zman Says:

    WPX 1Q20 Call Notes

    WPX up 4% at start of call

    Upside from all this. Shale 2.0 or 3.0, this was already underway, Covid-19 accelerates this.

    Strong companies will get stronger and the sector will be more attractive to investors.

    90% of oil protected at ~ $57 for rest of 2020.

    $150 mm FCF

    Reaffirmed borrowing base

    Notes the lack of significant debt mats until 2023

    Bolstered the story with Felix

    A few weeks ago at > 250,000 boepd with > 150,000 bopd.

    – curtailing as noted in post.
    – cutting costs
    – cutting capex
    – no rig release penalties so far, if more then some but not big $ (15 rigs go to 6, 4 frac spreads went to 0)
    – very little impact to EBITDA given the changes.
    – noting the 2 levels of maintenance capex depending on YE20 exit. Slide 5.

    Going to Q&A 16 minutes in …

  24. 24
    zman Says:

    Natural Gas Inventory Quick Look

    +109 Bcf (vs +111 Bcf bloom)

    Storage is now at 2,319 Bcf

    52.3% over year ago
    20.5% over 5 year avg

  25. 25
    zman Says:

    WPX 1Q20 Q&A 1

    Q) Operational savings in guidance
    A) For budgeting we are using costs we can do a well for today in 2020 budget and then assuming no improvement in those costs for the 2021 maintenance capex levels.

    Cost reduction has been more than expected and most of it has been taking best ideas from both companies and combining into the latest wells.

    Q) scenarios – guideposts to go with one or the other.
    A) it’s about shape of the curve late this year and 2021 curve. How supply/demand fundamentals are shaping up. Don’t want to get back to work and then have curve fall out from underneath. Don’t have a $# in mind.

    Q) how many DUCs consumed in the maintenance capex in 2021.
    A) we would certainly hit the DUCs first, assuming the economic back drop allowed it, but they go first.

    Q) 5 year vision, base decline moderation, dividend, free cash flow, leverage.
    A) still laser focused on all, will be a little more delayed getting to improved leverage.

    Can generate the same kind of returns in a $35 oil world vs the $50 oil world due to lower costs. (rough quote)

    Q) free cash flow
    A) laser focused on FCF generation in 2020 and 2021. It will go to the balance sheet first, to the revolver.
    Notes the $79 mm senior note of 2022 (recall they redeemed a big chunk of that in mid 2019).

    Q) Shutins – June – still shut in given current pricing now.
    A) June – will be thoughtful, don’t want to give our barrels away. From an industry perspective we all need to take barrels off the market to deal with the storage situation. Thinks others will shut in barrels for the next couple of months. We have flex, not in a pinch on FT or on leases or drill commits.

    Q) What prices need to see to add 2021 hedges.
    A) didn’t answer

    Q) another shut in – is this takeaway issues or is it purely economic and how long to bring back on line.
    A) this is all economic, we could sell the barrels, many options to market. Return to production is a myriad of things, we can remotely open chokes or speed up ESPs in some cases, other cases will need workovers. Sounds pretty quick. We have shut the wells in in the right way to preserve value and mitigate ramifications to EUR.

    Q) WTL pricing – so far not an impact on your pricing but can you address go forward.
    A) we have long term contracts in place.

    Q) maintenance capex – analyst loves them – how sustainable.
    A) we get the benefit of the DUCs and then later your base decline is supporting – it’s self reinforcing. In 2022 it may be a little more challenging as you don’t have the DUCs that 2021 has but the base decline is falling and so it is quite sustainable.

  26. 26
    zman Says:

    WPX 1Q20 Q&A 2

    Q) D&C costs
    A) Bakken is more stable, didn’t have the inflation, not getting the deflation, now $6 to $6.5 mm

    Q) GS question – leverage to below 1x in the LT plan. How important is that in getting to growth.
    A) we are laser focused on FCF. We are less inclined to outspend, will use the FCF to cut debt … getting there then allows you to better ride out these cycles. We are less reliant on oil prices going back up than many who are going to really need to see $45 to $50 by YE20.

    Q) diffs
    A) Bakken $4 to $6 off WTI, Permian widened May, improving now.

    Noting they have a big discussion with the board re growth, market was rewarding an outcome of 10% type growth, not as a target but FCF first.

    Noting adding Felix helped bring base decline down.

    Was at 44% at end of 2019 (as he said, pretty high)

    See at high 30%s exiting 2020.

    Call wrapping up, jumping to GDP call.

  27. 27
    zman Says:

    WPX at +3% at end of call

    GDP at +4% at start of call, notes in a bit.

  28. 28
    tomdavis12 Says:

    PXD – Capex down 55% from original budget. CEO salary down 70% – guess he wanted more than the 50% at PE. Priorities 1) BS 2) Divy 3) Capital spending. FCF 100mm. Net debt to ebitdax .5x. Average for year 5-8 rigs now at 7. Frac fleet 2-3 now 1. Always points out Midland cheaper than Delaware and companies with both have been putting more capex into Midland. Most questions were about cost savings now and going forward. Expecting 45-50 WTI – Brent to be equilibrium. New capital to drill only if above that. Was up 10% at start of call now +8.5%. Will be a survivor.

  29. 29
    zman Says:

    GDP call messed up, missed first 10 minutes of call.

  30. 30
    zman Says:

    GDP slides:


  31. 31
    zman Says:

    re 28 – thank you very much

  32. 32
    zman Says:

    GDP 1Q20 Notes

    Now have 40% of current volume level hedged for 2021.

    Focus on free cash flow this year – no change to prior guidance on this.

    Noting the almost 1 extra net well on the same budget now (so 5.0)

    Noting they rank 5th on ROCE out of 52 peer group and that’s including 1Q20 while the peers are still on the higher baked in prices of just going through 4Q19. Slide 10

    Low debt slide 11

    Noting they are only trading at just over 2x EV/EBITDA, low on the same peer group. Slide 12

    “they are hopeful they will see more institutional interest given their leverage to natural gas” …

    See 15 to 25% EBITDA growth next year on 15 to 20% last capital.

    Shelby Trough – need color on current activity, noting Blackstone acq in the area.

    Haynesville – noting the new bigger frac are outperforming – says will pull up the type curve, said 2.8 Bcf / 1,000′ (their type curve is about 2.5 / 1K’)

    Driven by rock, better completion, optimized flow back.

    Economics improved – slide 20 – at $2.25 gas now at 60% IRR. At $2.50 to 98% IRR.

    That’s stout.

    Going to Q&A 24 minutes in … stock up 5%.

  33. 33
    zman Says:

    GDP 1Q20 Q&A

    Q) question on capex
    A) notes that even with the extra almost 1 extra net well they could come in at low end of $40 to $50 mm.

    Dont’ expect to see non op from CHK (unowned) – CHK has it’s hands full at the moment I’d say.

    Q) rigs
    A) Day rates that were $20K per day 3 or 4 months ago, now $15 to $16 K per day.

    • called frac spread rates “incredibly impressive”

  34. 34
    zman Says:

    GDP 1Q20 Q&A

    Generally just trying to maintain production and generate as much free cash flow as possible.

    ZComment: He’s not looking to accelerate near term.

    Q) debt question

    A) They basically said they would look at paying off the 2nd Lien note potentially in 2021 … that assumes they get a positive fall redetermination due to higher prices.

    Q) service costs

    Key thought – gas prices can rise but if oil is subdued you may not see the increase in service costs in 2021. That’s an interesting thought and very good for gassy names.

  35. 35
    zman Says:

    GDP 1Q20 Q&A

    • noting private equity types are backing off, reasons for drilling was to either:

    1) grow and IPO
    2) feed a mistream unit and sell that.

    Saying 1 hasn’t happened
    Saying 2 has seen some and now they too can moderate.

    Sees Haynesville flat to down on rigs rest of year.

    Notes some small sellside guys who now looking at $3.00 to $3.50 forecast price for 2021.

    Call over, positive tone, good amount of interest for a micro, stock up 9% at end of call.

  36. 36
    zman Says:

    PLUG call at 1 pm EST – grabbing lunch, back pre call.

  37. 37
    zman Says:

    PLUG call in 10 minutes, notes to follow

  38. 38
    nrgyman Says:

    VTIQ: This is the Nikola SPAC. Soon to change stock symbol. Fuel cell trucks and hydrogen dist’n network. The TSLA crowd that owns it because of the dearth of alternative energy options in the transportation sector might start looking at PLUG and VTIQ as a realistic alternative.

  39. 39
    zman Says:

    re 38 – thanks, saw some stuff on them awhile back, have not seen any financials. I read a lot of green tech news (last night spruce towers for windmills but don’t worry about BWEN, that’s a ways off) and I see a ground swell of renewed interest in hydrogen.

  40. 40
    zman Says:

    PLUG 1Q20 Call Notes

    Going over highlights that are in the post.

    More than 30% of food on people’s tables in the United States moved through plug power devices.

    Seeing unforeseen orders with some customers due to accelerated demand related to Covid-19.

  41. 41
    zman Says:

    Going to Q&A 5 minutes in …

  42. 42
    nrgyman Says:

    SEDG (-12.6%) vs ENPH (+24% incl yesterday)

    These are the post Q1 report results. ENPH differentiating itself by performance in the solar inverter space.

  43. 43
    zman Says:

    re 40 – that’s a pretty monster statement.

    PUG 1Q20

    We usually are 75% in hand on guidance at this point of the year.

    This year they have $290 mm of the $300 mm billings target in hand now.

    Food and retail and internet retail – we have received new orders in 1Q20, more than offsets slack (delays, not cancellations) in the automotive segment.

  44. 44
    zman Says:

    re 42 – the gross margin chatter was super impressive at ENPH (unowned) – did not have time to check the SEDG (unowned) quarter.

  45. 45
    zman Says:

    ZTRADE – ZLT – Adding to PLUG

    PLUG – Added to the PLUG position at $4.32 in the wake of the quarter and during the call. 2020 guidance is well in hand. Covid-19 is not materially impacting the top line. Favorite quote: “More than 30% of food on people’s tables in the United States moved through plug power devices.” They are now seeing unanticipated orders from food, retail and internet retail customers. They are seeing good traction on the last mile and middle mile customers; saying Walmart and Amazon are more than willing to introduce them to the Tier 1 OEMs (light to medium duty transports).

  46. 46
    zman Says:


    AR – Sold a portion of our recently taken AR position at $3.04, up 125%. Rose faster than expected and may be subject to near term profit taking in the wake of reporting season. Don’t want to be greedy with the majority of the position.

  47. 47
    zman Says:

    PLUG 1Q20 Q&A 2

    • calling the electrolyzer target a natural fit for them.

    Q) are those proposed acquisitions incremental or were they assumed into that $1 B by 2024 revenue target.

    A) the large scale back up power may be larger than expected while the onroad may be slightly smaller. Margin improvements are associated with having own ability to generate hydrogen. Sounds like moving higher.

    Q) cost savings of fuel cells
    A) some of these guys are putting out 30% more food than before, there is a recognition without PLUG savings related to their cells they would not be able to do that.

    Q) United Hydrogen
    A) will be significant in improving margins of the hydrogen business. Target for hydrogen is 30% by 2024 and this helps us getting there.

    Q) balance sheet need for the two acquisitions.
    A) our current facility well finances PLUG’s materials handing business. Circle back here.

    Q) hydrogen – on electrolyzer – how does that expand the path to other customers; thoughts on electrolyzers vs stream reformer based.
    A) Customers are very much focused on sustainability – they are listening to their customers.

    Look for cheat sheet update on this name next week.

  48. 48
    zman Says:

    PLUG 1Q20 Q&A 3

    Noted that United Hydrogen is the first company in the U.S. to deploy a successful liquifier. Makes extremely low cost hydrogen.

    Q) you have big hydrogen demand in the future.
    A) they are big plans, would still love to partner on hydrogen, could be a customer, could be an industrial gas player, could be someone new to the area.

    Q) top line resilient to Covid, but on the cost side can you describe.
    A) 98% uptime in 4Q, now over 99.5% uptime – getting to that took an investment during 1Q, now we are in maintenance mode. Noting they continue to improve the units. Then circled back to having now spent to get fleet up to get > 99% reliable level and now steady state.

    Q) you already owned 30% of United
    A) 10 tpy of hydrogen represents about 25% of our current usage, this helps to drive margins.

    Q) Daimler and Volvo just announced strategic 10 year partnership for hydrogen fueled trucks
    A) it’s a statement of the viability of the industry.
    – notes the 14% of all US power and 18% of global power by 2050 projection to come from hydrogen.

    • we are the leader in hydrogen, we are the biggest user of it, and now we are going to make our own green hydrogen.

    Q) analyst noting WMT food sales up 400%.
    A) saying they have gotten new orders this year for this year which is really unusual, usually it’s locked in prior to the year.

    Q) United Hydrogen – question about United’s cheap source from being on Olin site,
    A) it’s transferable (to PLUG) and it is multi-decade (so no renogotiate anytime soon) and they have room to expand it.

    Q) New facilities
    A) fuel cells are no brainer as you don’t have to have the batter area for the lifts. Seeing big oppy to grow beyond anything they have previously outlined.

    Q) growth rate of greenfield distribution
    A) sees it more in terms of transition – for those retailers needing to compete for the first time on line vs existing online, the proposition of using fuel cell material handling is easy sell.

    Calling wrapping up.

    Very much stand behind this year and 2024 targets. Positive analyst and management tone.

    Q) trucks size
    A) 3.5 mm opportunities

  49. 49
    zman Says:

    Grabbing coffee, back in a bit.

  50. 50
    zman Says:


  51. 51
    zman Says:

    U.S. to removed patriot missile batteries from KSA. Hmmm….

  52. 52
    ram Says:

    Re Do these guys walk/ride bikes everywhere they go?

  53. 53
    zman Says:

    June WTI and the strip for that matter gave back the Saudi OSP spike up.

  54. 54
    zman Says:

    re 52 – or use copious amounts of fire wood for heating and cooking?

  55. 55
    james T Says:

    Re53 Trump talked about not supplying them with U.S. protection days ago.

  56. 56
    james T Says:

    re52 They all have nat gas fireplaces I am sure.

  57. 57
    zman Says:

    TPIC call tonight,

    tomorrow’s calls:

            All times EST

    FLMN Eagle Ford minerals 9:00 AM
    MR Appalachia NG player 10:00 AM
    GPOR Natural gas player 10:00 AM
    BCEI Wattenberg upstream 11:00 AM
    BWEN Wind Towers + 11:00 AM

  58. 58
    zman Says:

    re 56 – lol

  59. 59
    zman Says:

    Beerthirty, back in an hour or so with some reporting name comments if we have them by then.

  60. 60
    zman Says:

    TPIC – big revenue beat, more blades, higher prices, EBITDA slight beat and that’s after a size impact from shutting China ops down temporarily.

    On the transportation size they got a contract (no name) for components for an EV. They were speaking to future potential of this at Investor Day but didn’t have a contract at that time. I’m going to guess Lordstowne Motors but that’s just a guess. Their new equipment has some unique casting abilities for structural composite components and it could be a major car company as well get non shell parts.

  61. 61
    zman Says:

    Nice NGL price bounce in progress, see graph tomorrow’s post.

  62. 62
    zman Says:

    GPOR (unowned) – 50% hair cut to the borrowing base. Worst one I have seen this quarter by far.

  63. 63
    Wrap – Week Ended 5/10/20 | Zman's Energy Brain ~ oil, gas, stocks, etc… Says:

    […] Last Thursday's post. […]

  64. 64
    Wrap – Week Ended 05/15/20 | Zman's Energy Brain ~ oil, gas, stocks, etc… Says:

    […] Also the Thursday post from a week ago. […]

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