Thursday Morning



Market Sentiment Watch:

  • China says new outbreak under control after significant lock down of Beijing,
  • U.S. Covid outbreaks of increasing concern (sporadically on the market's mind),
  • WHO voices optimism regarding vaccine pipeline,
  • China / India border skirmish deescalation,
  • Bolton book making headlines,
  • Renewable utility scale U.S. projects seeing little in the way of Covid delay (jives with comments we've gotten from our green names).

In today's post please find:

  • the oil inventory review (much more benign looking report expected, all eyes on gasoline),
  • the natural gas preview (heat prompting smaller builds despite LNG softness),
  • comments and a cheat sheet update on CRK,
  • comment and a cheat sheet update on HPR,
  • and some other odds and ends.

Ecodata Watch:

  • We get jobless claims at 8:30 am EST (F = 1.35 mm, last read was 1.54 mm),
  • We get Philly Fed at 8:30 am EST (F = -20.0, last read was -43.1),
  • We get leading indicators at 10 am EST (no forecast, last read was -4.4%).

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h
  3. Oil Inventory Review
  4. Stuff We Care About Today - CRK, HPR, VWDRY
  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 off $0.42 yesterday at $37.96 on a stronger dollar, weak equity market and Covid-19 concerns and inched off the lows after the EIA report which was better than the last several. Please see the review section below. This morning crude is trading up nearly a percent at post time.

  • Norway Watch:  Norway notes better than expected stabilization of oil markets. Country plans to continue cuts through year end but has no plan to make deeper cuts.
  • Iran Watch:  Iran's navy reported to have test fired cruise missiles in the Gulf of Oman.


Natural gas closed up $0.024 at $1.638, edging up on a warmer forecast for the Midwest and Northeast over the next five days. Noise but the front month does appear set for a near term bounce. We also note that while we have been looking for record generation this summer we had expected higher prices at this point. This in turn leads to the likelihood that our power burn forecast is becoming increasingly conservative. This morning gas is trading flat.


Natural Gas Storage Preview

Street is at +83 Bcf (Bloom) and +84 Bcf (Reuters) for today's report. 

  • Last Week: +93 Bcf
  • Last Year: +111 Bcf
  • 5 Year Average: +87 Bcf

Oil Inventory Review


Stuff We Care About Today

CRK (unowned) - Cheat Sheet Update pro forma notes offering

  • Yesterday CRK announced pricing of $500 mm in 9.75% seniors (tack on offering), priced at 90 for net proceeds of $441 mm,
  • They also announced the borrowing base was reaffirmed at $1.4 B,
  • Proceeds go to the revolver, moving it from 88% drawn to 57% drawn.
  • This should result in an annual increase in interest expense of about $30 mm.  Note that interest expense here is on the high end for the gassy space.
  • Net debt to EBITDA (including the remaining preferred as debt) is 3.7x,
  • Their 9.75% seniors are trading near 90 showing a surprising lack of fear given the leverage.
  • We may use the name as a risk play from time to time if it presents opportunities close to $4 again. We do not own the name at this time.
  • At this time valuation is OK on a forward TEV basis. We can't call it cheap given the debt level.

HPR (unowned) - Requested Cheat Sheet Update

  • Net debt to TTM EBITDA is just over 2.1x. This will grow this year as the quarters pass and EBITDA contracts.
  • Almost half of the debt matures in late 2022. We expect them try to refinance it for a higher coupon sometime this year.
  • In the 1Q20 Q they noted "As a result of current market conditions, the Company expects its borrowing capacity could be reduced by an amount up to 50% and may include higher LIBOR margin pricing."
  • In an 8K filing in late May they noted the borrowing base and elected commitment amount were reduced from $500 mm to $300 mm.
  • Their senior notes are trading in the low 20s on the dollar.
  • The things that made this one interesting at $50 + oil are not present at prices this low. Hereford and it's much oilier content is now back in decline as is the oil cut. NE Wattenberg is also seeing slipping oil mix and production levels.  While one would expect plays to become more gassy over time this is a rapid shift. The only way this gets arrested and reversed is more capital expenditure (more DUCs and then more wells). This is tough when prices are this low and you have this much debt.
  • This one is on the upper end of risk. If you view it as a call option be prepared to lose all as we can't say whether or not they will make it. While the debt metrics don't look entirely terrible at this point, debt/EBITDA it is set to continuously expand as 2020 drags on and production ebbs (and the mix becomes gassier) with more of the same expected for 2021. Concurrently, the name becomes more expensive as time passes and the EBITDA ebbs (we included 2022 here as well which is a guess on the part of the Street but does reflect what happens when you are this constrained by debt and your production profile).

Other Stuff

  • VWDRY - 18 MW order in Italy, delivery in 1Q21, 10 year service contract. Vesta's notes they've installed 4.3 GW since 1991 in Italy and have 40% of the market there.
  • Look for more owned name cheat sheet updates soon,
  • Look for a new green name piece next week.
  • ENPH (unowned) was hit by a short piece yesterday. No press release from the company so far. Stock is likely to be defended by sellside today. Stock saw a host of law firm investigations last night.

Odds and Ends

Interesting reading watch: 

Analyst Watch:

  • TBA in comments.

63 Responses to “Thursday Morning”

  1. 1
    zman Says:

    NKLA (unowned) – interesting reading watch:


  2. 2
    elduque Says:

    Thanks for both CRK and HPR.

  3. 3
    zman Says:

    re 2 – you bet. CRK continues to be interesting but unowned here.

    Kind of pricey (and I say that in full awareness of COG valuation) given the level of debt.

    In a natural gas price rally it likely does quite well. At present gas is suppressed by storage levels and LNG headlines. It’s hot out. We’re seeing big daily/weekly gas fired power burn as expected.

    Part of their valuation is their low cost, part is location and the tight diffs they see and part is the high profile and liquid nature of the name. When gas prices do lift this one should run well.

    You can see how they stack up here in the gassy players piece from earlier this week:


  4. 4
    zman Says:


  5. 5
    zman Says:


  6. 6
    zman Says:

    ENPH (unowned) – no press release so far. More class action lawsuits being filed (which means nothing since those guys file if they think they can turn a coin).

  7. 7
    nrgyman Says:

    ENPH defended by analysts:


  8. 8
    elduque Says:

    Seems like the market ignores the effect of conv stk until a co exercises it, like in the case of CRK.

  9. 9
    zman Says:

    re 8 – I’ve never liked it. I know other sellside guys who feel the same way. Lots of CFO’s get addicted to it. It is high cost. They’d do well to convert Jones and simplify the structure.

  10. 10
    zman Says:

    re 7 – thanks

  11. 11
    zman Says:

    WTI prompt $37.75 at equity open


  12. 12
    zman Says:

    NG down 2 pennies at open


  13. 13
    zman Says:

    Here, reading, shout if you need something.

  14. 14
    zman Says:

    We plan to send the 2021 BWEN piece to SA tomorrow.

  15. 15
    nrgyman Says:

    RE 13: Saw an analyst yesterday chose 2 natgas names to outperform peers: CRK and CNX.

    CNX is a name that might be worth a review. Used to be a coal name but that is now gone, so now they are just a SW Appa natgas name. They own the mineral rights on a good chunk of acreage. Also owns CNXM, a midstream business. Thoughts?

  16. 16
    zman Says:

    re 15 – see here for CNX (unowned) stats


  17. 17
    james T Says:

    Large players did not buy ENPH this morning, small players bought late yesterday and todays open.

  18. 18
    zman Says:

    OPEC JMMC – still underway, reporter notes those counties who have not got a plan to get in line are “getting told off”.

  19. 19
    zman Says:


    “what’s my blood type” surges to top of Google stats.

  20. 20
    zman Says:

    re 17 – ok

  21. 21
    james T Says:

    O-positive: 38 percent.
    O-negative: 7 percent.
    A-positive: 34 percent.
    A-negative: 6 percent.
    B-positive: 9 percent.
    B-negative: 2 percent.
    AB-positive: 3 percent.
    AB-negative: 1 percent.
    Which Type O ??? If they did not specify big diff.

  22. 22
    james T Says:

    re21 Maybe both positive and negative ?

  23. 23
    zman Says:

    It just said type O. Seems like a bit of positive news.

  24. 24
    zman Says:

    Natural gas inventories in 5 minutes, prompt NG down a penny at $1.63.


  25. 25
    zman Says:

    Bit of tomorrow’s post:

    1Q20 orders: 3.311 GW (including 1.247 GW that were not announced during the quarter)
    2Q20 orders to date:  1.388 GW (this excludes the 1.14 GW order offshore Scotland).  Look for several additions to the total over the next 10 days as orders general accelerate into quarter end.

    For comparison – 2Q19 orders:  5.696 GW.  Note that 2.238 GW were announced in the last 12 days of the quarter and another 1.095 GW were not announced until after the quarter.

    Unannounced orders have been on the rise for the last several quarters.
    2Q has historically been the big quarter for order flow of the year.

    Putting the 1.14 GW offshore order in perspective for the MHI Vestas segment:
    Offshore installs to date: 5.0 GW (1,230 turbines),
    Order book: 3.4 GW (before the 1.14 GW) with another 2.1 in conditional orders (did not include the Scotland order).

    6 offshore projects were in progress during 1Q20

  26. 26
    zman Says:

    Natural Gas Quick Look – IN LINE

    +85 Bcf, vs expectations of 83 to 84 Bcf (consensus eased during the week)

    • this is modestly better than we expected vs our read from last Friday’s post.

    Storage now at 2,892 Bcf
    up 33.3% YoY
    up 16.9% to the 5 yr avg

  27. 27
    Denise Says:

    Z question re your “We also note that while we have been looking for record generation this summer we had expected higher prices at this point. This in turn leads to the likelihood that our power burn forecast is becoming increasingly conservative.”

    Are you seeing warmer forecasts for more than next 5 days?

    I went back to buying ung 2022 Jan out of money calls the last few days. Seems like a low risk bet on higher nat gas prices.

  28. 28
    zman Says:

    re 27 – hey D,

    “The Commodity Weather Group on Wednesday said temperatures in the Midwest and Northeast are expected to be above average over the next five days with heat lingering in the North through the end of the month.”

  29. 29
    james T Says:

    Its both blood type O, so 38% plus 7% is a big portion of the population.

  30. 30
    zman Says:

    re 29 – right, see, good news.

  31. 31
    Denise Says:

    Thanks…we are just now starting to get our usual summer heat in Texas.

  32. 32
    zman Says:

    re 31 – right, mild spring here as well, now a good deal warmer than normal.

  33. 33
    zman Says:


    Glad he’s aware.

  34. 34
    zman Says:

    Press play on U.S. temp map at right:


    Just getting temps hot in the right places and we are already at record for time of year natural gas power burn due to coal’s weakness.

  35. 35
    nrgyman Says:

    LNG–when do you expect US LNG exports to climb back to full capacity? LNG sentiment appears to be the anvil sitting on natgas prices atm. Seems inevitable LNG will rebound as a global coal replacement.

  36. 36
    Denise Says:

    Z-thx…for showing EIA ng dashboard-some easy to read charts for those of us that have not looked at a Govt website in years (they have improved)

  37. 37
    zman Says:

    re 35 – Thoughts

    I don’t model it back to full capacity this year.

    Summer average used is 4.5 Bcfgpd (a little under half peak).

    This was week #25

    Model uses:
    Week 23-26 4.5
    Week 27-30 4.0
    Week 31-35 5.0
    Week 36-40 5.0

    Agree re anvil.

    There is also a seasonal impact from Asia given widespread newbuild gassification for heating and lack of local supply.

  38. 38
    zman Says:

    re 36 – they have. EIA gets a lot of flak but have to say the website has improved greatly over the 20+ years I’ve been visiting. I will say it’s harder to get someone on the phone there these days but the email response is pretty good if you can get someone to give you the right name.

  39. 39
    Denise Says:

    Zero Hedge article worth a read from the other day about LNG and China and Russia getting cozier


  40. 40
    nrgyman Says:

    Cowen analyst covering NKLA on CNBC now.

  41. 41
    zman Says:

    re 39/40 – thanks

  42. 42
    nrgyman Says:

    RE 40: He claimed the NKLA sales targets are actually conservative. Also said many companies are determined to drive down their emissions footprint but that long-haul shipping is the most problematic, so NKLA products will have a solid demand as they meet clear need with little competition.

  43. 43
    zman Says:

    re 39 – thanks, good piece. Think the impact on LNG from a US export perspective might be less than they sort of imply.

    This is as of March (LNG only and yes Mexico gets some LNG in addition to cross border pipe gas).

    Belgium 2%
    Brazil 3%
    China 7%
    France 10%
    Greece 4%
    India 7%
    Italy 4%
    Japan 9%
    Mexico 3%
    Netherlands 6%
    South Korea 12%
    Spain 10%
    UK 8%

    Not sure France and UK will get Russian gas, Germany will but they are not on here.

    China is on this list but it just popped back on after complete shut down.

    This is as of March, back when US averaged almost 7.9 Bcfgpd LNG ex.

  44. 44
    zman Says:

    re 43 – those are the bigger ones, lots of places get a boat every other month or so, rounding out the total to 100%.

  45. 45
    zman Says:

    re 42 – thanks, he’s confident. I think he’s going to have competition from a lot of corners. That could be OK, has not hurt TSLA (owned by wife) as of yet despite all car makers entering the market. As noted, PLUG has a last mile, and medium and long haul product in place. According to PLUG, Amazon and Walmart are helping with introduction having been pleased with the materials handling side for years now.

  46. 46
    zman Says:

    Analyst Watch

    J Rice sees gasoline demand skyrocketing at some point this summer.

    From his keyboard to your driving habits.

  47. 47
    zman Says:

    Analyst Watch

    ENPH – Johnson Rice ups from Accum to Buy

  48. 48
    nrgyman Says:

    RE 45: To be clear, that was the Cowen analyst talking, not the NKLA CEO. Agree, should be room for perhaps several competitors due to size of market. Not many have committed to H2 for long-haul atm. One challenge is cost. Could be critical. NKLA is taking the JV path and, so far, has some heavy hitters with them. Possible this could expand. Wonder if energy names focused on the oil chain would have an interest?

  49. 49
    zman Says:

    OT – grabbing lunch, back shortly.

  50. 50
    zman Says:

    re 48 – thanks much

  51. 51
    zman Says:

    KS just designated AR a Covid hotspot. 14 day quarantine required for any travel to AR and back.

    Strange days

  52. 52
    Denise Says:

    re 51 Had seen that infamous picture of all those people partying on your beautiful lakes over Memorial Day weekend from St Louis…Chicago…ect

    approx two weeks ago?


  53. 53
    zman Says:

    re 52 – yep. Brain trust party there.

  54. 54
    zman Says:

    Natural gas traders re storage report, “meh”


  55. 55
    zman Says:

    On a call, shout if you need something.

    Zorg noting positive setup on LBRT.

    Which was the subject of yesterday’s post.


  56. 56
    zman Says:

    Here, reading, market looks a little bored.

  57. 57
    zman Says:

    Wind macro stuff tomorrow’s post.


    Back in about 1 hour with some NG ST Supply/Demand comments

  58. 58
    zman Says:

    Next week’s implied build is much larger.

  59. 59
    Baylor Says:

    What’s up with MGY? Up to almost $8 and seems to have support around $5.84 with it languishing around $6-$6.30

  60. 60
    zman Says:

    re 59 – Thought I addressed yesterday.

    It’s oily
    It’s got very little debt
    It’s a low float name so not a lot of attention when oil momentum wanes.
    It’s unhedged.
    It’s under spending by design.
    There is nothing new since the 1Q20 call.

  61. 61
    zman Says:

    and it looks like a lot of other oily names.

    Big bounce since oil sold off in March and then as oil momentum slowed, so did it.

  62. 62
    zman Says:

    There is nothing new to add on the name since our last update in the most recent post here.


  63. 63
    Baylor Says:

    Re 60 – maybe you did. I didn’t recall reading it. I may have even asked and forgotten 🤣🤣🤣

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