08
Jan

T.G.I.F.

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Market Sentiment Watch:

  • Eyes probably a bit less focused on D.C. but we note President Elect Biden is now speaking to $2k checks and a $3 T package which includes infrastructure (please see our recent comments on infrastructure being a likely under-followed piece of the story at BWEN),
  • Eyes on Covid vaccine deliver numbers but not intensely so,
  • Eyes on what's expected to be a really poor NFP number today,
  • Next week we get the OPEC and IEA monthlies and the EIA STEO.

Housekeeping Watch: 

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    • Pro tip - when you find a post you are looking for, use your browser's "find function" to quickly scan the post for the section you are looking for. Scanning by ticker is generally the best way. 
    • All trades are noted on the blotter. The blotter is updated daily. 
    • Positions are located on the page near the top left labeled ZLT Positions.  We are not traders and this gets updated every other week or so as position sizes don't shift rapidly (moving more with price than with share changes).   Look for an update here Sunday. 
  • I will be in and out of pocket today in meetings. Please ask questions in the comments section and I will address when possible. 

In today's post please find:

  • the natural gas review,
  • a few brief comments on COG and cheat sheet update,
  • a few brief comments on MGY and a cheat sheet update,
  • a speculative comment on GOEV,
  • and some other odds and ends.

Ecodata Watch:

  • We get December Nonfarm Payrolls at 8:30 am EST (F = 50,000, last read was 245,000),
  • We get the unemployment rate at 8:30 am EST (F = 6.8%, last read was 6.7%),
  • We get average hourly earnings at 8:30 am EST (F = 0.2%, last read was 0.3%),
  • We get wholesale inventories at 10 am EST (F = -0.1%, last read was 1.1%).

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h
  3. Natural Gas Inventory Review
  4. Stuff We Care About Today - COG, MGY, GOEV
  5. Odds & Ends

Holdings Watch:

ZLT

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

Commodity Watch:

Crude oil closed up $0.20 yesterday at $50.83 (closing on an 11 month high)

  • WTI strip continues to trade above our near term expectation due to the surprise move by Saudi,
  • Libya seeing undisclosed volume of export restrictions due to guard "sit-in" at one port,
  • This morning crude is trading up 50 cents in part on some Iranian saber rattling overnight.

 

Natural gas closed up $0.013 at $2.729 with the forecast for the second half of January transitioning colder (and again threatening to turn into a polar vortex). 

  • EIA reported a slightly smaller than expected withdrawal.
  • The withdrawal was still well above the five year average and multiples of the year ago pull from storage resulting in a contraction of the surplus to both comparisons vs current storage.
  • We expect a modestly smaller withdrawal next week.
  • This morning gas is trading off 9 cents.

NGL Price Watch (good for our SWN and AR positions)

Short Term Supply / Demand Watch:

Natural Gas Storage Review 

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Stuff We Care About Today

COG - Super Quick Comments and Cheat Sheet Update

Key points:

  • 100% NE Marcellus natural gas
  • Lightly hedged
  • Strong balance sheet
  • 2.3% implied yield
  • In maintenance mode and free cash flow in the mid $2s is quite significant. Channels to:
    • some short term debt reductions
    • easy potential to boost dividend
    • potential to resume the share buyback
  • Short interest: 4.6% of float,   The short story here is a lack of inventory or a lack of quality inventory which management disputes.
  • Nutshell:  The name has historically traded at a premium.  It has increasingly tightened to the group despite being low cost with a strong balance sheet. Our patience with this name is not endless. Our sense continues to be that management needs to do a better job of speaking to inventories and local area takeaway/demand issues.  Please see our CNX (unowned) comments from earlier in the week.

MGY - a few comments from yesterday's comment section and a cheat sheet update. 

  • Quick TA Thoughts:
    • Cup and handle break out achieved.
    • This occurred with a pre breakout decline in volume followed by larger than normal volumes on the move. We favor these kinds of volume based moves.
  • Upside Target Thoughts:
    • MGY has reached $8.50 which was our recently upgraded stretch target which was based on a 6.5x multiple of our 2021 estimate at $40 oil.
    • With oil at/around $50 now, that’s a bit of a different story.
    • We noted the other day an intention not to sell it back yet (we have core and trading positions on here).
    • On a $50 deck (and note that we are officially $45 for 2021),
      • using same methodology as before,
      • but giving a little more multiple to the name because at $50 they will get more than at $40
      • while also generating more EBITDA and having a higher production rate (our model is iterative on volumes with higher or lower prices),
      • the stretch target is $13.50.
      • This a 59% gap to last night's close. We would likely take off the Trading portion we hold now north of $10 and leave the Core position alone until the lower teens at least.
  • We expect them to be at > $200 mm in cash by year end.
  • We expect Karnes completion activity to return this year.
  • Management is hugely invested here and buys shares from time to time still.
  • They do not see paying a dividend without increased scale.
  • Nutshell:  Very strong balance sheet under spend by design name. Given no dividend and an eventual need for an exit plan for the CEO we expect them to be a nice snack for someone. We own a ~5% position in MGY and it's the #7 position in the ZLT.  Our cost basis, for those that care, is $9.03. Our 2020 additions to the name came in June in the $5's and most recently in October at $5.25 and $5.00.

 

Other Stuff

  • Look for the Gassy Players update next week,
  • GOEV
    • We were sent a story on a potential Apple - Hyundai hook up last night by a friend of the site. The story is pretty short on details and it's unclear at this time if the deal relates to Apple's rumored EV or not but it sharply boosted Hyundai shares.
    • We would refer readers back to our original piece on HCAC (now GOEV) and the ties between Hyundai and the company including 2021 which is set to see significant engineering related revenue ($120 mm from basically nothing this year) and that will include volumes from Hyundai.
    • In that original piece we wrote: "They have a partnership with Hyundai to jointly develop a platform based on the skateboard for future Hyundai and Kia EVs and electric purpose built vehicles (PBVs). At present they are doing contract engineering for Hyundai to customize their tech for Hyundai applications. We noted previously some of the videos from CES this year may be construed to show skateboard influence in Hyundai's PBV plans.  This could lead to a skateboard licensing deal."
    • Note that the 2021 CES is next week.
    • Hat tip to Crysball for bringing the Apple/Hyundai story from last night to our attention.

Odds & Ends

Analyst Watch:

  • TBA in comments

59 Responses to “T.G.I.F.”

  1. 1
    zman Says:

    Analyst Watch:

    AR – Scotia ups from $5 to $7

  2. 2
    zman Says:

    Our BWEN free piece from December 23rd, penned at $5.85, 16 days back, now topping $10.

    https://seekingalpha.com/article/4395962-broadwind-wind-think-big-slogan-applies-to-2021-and-beyond

  3. 3
    zman Says:

    FLMN – up 45% return since we wrote this 49 days ago but all still applies. Oily, unhedged, implied yield still double digits on a $40 deck. Mid teens % on a $50.

    https://seekingalpha.com/article/4390710-falcon-minerals-steeply-discounted-eagle-ford-yield-player

  4. 4
    zman Says:

    PLUG looking to gap up another 10%. Largest position with a $4.89 cost.

  5. 5
    zman Says:

    From the top of the post:

    “Eyes on what’s expected to be a really poor NFP number today,”

    Ok, didn’t expect it to be this poor.

    -140,000 nonfarm payrolls.

  6. 6
    zman Says:

    and of course the $2K payment and $3 T infrastructure bill just became a lot more probable.

  7. 7
    zman Says:

    Here is Hyundai at last year’s CES

    That’s very likely part Canoo tech/engineering.

    Note the big $120 mm revenue jump this year … that’s in part Hyundai.

    CES 2021 is next week. Apple and Hyundai are rumored to be hooking up on an EV.

  8. 8
    Viper1 Says:

    Nice work on the alternative energy plays, Z !!!

  9. 9
    zman Says:

    Expect to see several HFCEV bits of news out of CES next week. More potential for PLUG from that, but also from BLDP, despite the recent sale of their drone segment.

  10. 10
    zman Says:

    re 8 – TY, glad to see the oily names, some of the gassy upstream names, and our two oil service names performing a good bit better for the last few months as well.

  11. 11
    zman Says:

    Rumors QELL could bring this name public

    https://ree.auto/

    https://www.greencarreports.com/news/1129879_ree-automotive-shows-its-3-modular-ev-platforms-in-motion

    REE was at CES last year. Have not found them on the list next week just yet.

  12. 12
    zman Says:

    More on Hyundai / Apple EV potential tie up.

    https://www.greencarreports.com/news/1130861_hyundai-and-apple-are-in-talks-to-jointly-develop-self-driving-electric-cars

  13. 13
    zman Says:

    re 12 – scroll to the E-GMP platform.

  14. 14
    zman Says:

    PLUG called over $50.

  15. 15
    zman Says:

    Analyst Watch:

    Piper – “In other news, Hyundai Motor said it in was in early discussions with AAPL to cooperate on the development of electric cars and batteries”

    We try to give a bit more color than the headlines.

  16. 16
    zman Says:

    Analyst Watch:

    Goldman – “For Oil Services, the conference was most favorable vs. expectations for offshore”

    Positive for our OII (oh eye eye).

    Offshore: The outlook for the level of offshore activity in 2021 and 2022 was
    more encouraging than expected, with tendering back to pre-COVID levels
    and returning to numbers not seen since 2013.

  17. 17
    zman Says:

    Analyst Watch

    MGY – Goldman labels them “best in class” balance sheet (true).

    • GS says MGY spoke to potential for instituting a fixed and/or variable dividend.

    Thoughts:
    1) I’ve heard it before pal, believe it when I see it but I’ve been on this name a lot longer than GS,
    2) they’ve consistently said they want more scale first
    3) they should be > $200 mm in cash now (barring a PDP acquisition) and they’ve also said that simply building cash on the BS doesn’t make sense.

  18. 18
    zman Says:

    At equity open:

    WTI up 80 cents at 51.66 – our view remains that it’s a bid ahead of itself but dollar likely in charge for awhile longer.

    NG down 6 cents at 2.67 … not exactly discounting improved heating demand in the second half of January and early Feb that would result if the polar vortex that’s back in the headlines materializes.

  19. 19
    zman Says:

    PLUG – best levels since 2007

  20. 20
    zman Says:

    $10 handle on BWEN – we started covering in the $1’s and have a $1.73 cost here. Please see recent comments on the potential for a secondary.

  21. 21
    zman Says:

    OT – as noted above, have meetings today, back in a bit.

  22. 22
    zman Says:

    One last thing, JB or NRGY would you give a PnF read on BWEN?

    Ok, back in about 45 minutes.

  23. 23
    nrgyman Says:

    RE 22: BWEN scored an Ascending Triple Top Breakout on Jan 6 (Wed). Following through since. No near term resistance. LT resistance at $13.50-14.

  24. 24
    kennyb Says:

    Holy Hydrogen Zman, Plug is on fire!

  25. 25
    zman Says:

    re 23 – thanks much. Sense again is, if they have a deal close enough to pop, it’s very close to secondary time, guarantee with the covering crew they have you are probably looking at a deal priced 15% in the hole instead of 10% but given the run, take the money and gun up the new facility would be my thought as long as the overall deal makes sense. Also lean more than 50/50 to equity side.

  26. 26
    zman Says:

    re 24 – largest position, sitting up 1000% right now on the 3/4 position we have remaining. It remains our #1 position (by a very long way now). Giga factory news coming (all signs point to Rochester NY). Could be interesting tidbits from partners at CES next week but not counting on it.

  27. 27
    zman Says:

    TESLA: $25,000 ELECTRIC CAR COULD BE COMING SOONER THAN WE THOUGHT: ELECTREK

  28. 28
    zman Says:

    ZTRADE – ZLT – GOEV

    GOEV (Canoo) – We added to our position at average $14.95. This is part of our plan to DCA into a modestly more meaningful position and takes it to nearly 3% of ZLT assets and our average cost to $12.83. It’s possible but not guaranteed that GOEV will benefit from a potential venture between Apple and Hyundai given GOEV’s relationship with Hyundai. In our initial piece on Canoo we noted the relationship and the strong early revenues that were not units based but engineering related. We also noted a vehicle that could be tied to Canoo’s technology in Hyundai’s presentation at the Consumer Electronics Show last year. The virtual CES 2021 is next week and as such we are increasing our exposure now with more plans to grow it as the year progresses. Lastly, we expect a pickup tophat model to be announced fairly soon and CES would be a good opportunity to highlight both that and the recently announced multi-purpose vehicle.

  29. 29
    R F Says:

    NG – So correct me where and if I”m wrong – net supply is down more than total demand, but not by a large percentage, and no big story in the storage levels. Well counts are way down. I know many companies say they are in maint mode etc..but the production levels sure don’t look like maint. levels.

    I understand LNG prices and exports may help support AR and SWN to some degree.

    As NG wells come back online, and oil prices rise (more associated gas becomes available) we are, once again, flooded with NG.
    Renewables may take an increasing market share away from NG, though not a large factor yet.

    Granted, if true winter arrives, we may see a short term spike in NG prices and demand.

    It seems like there is no cause to be overly bullish in the near or mid-term, at this point?

  30. 30
    zman Says:

    The blotter is updated:

    https://zmansenergybrain.com/subscriber-data/zeb-zlt-blotter-ii/

  31. 31
    zman Says:

    re 29 thoughts

    • maintenance means flattening and not growing and that’s pretty much what they are doing.

    • not LNG. You mean NGL’s. Natural gas liquids, your ethane, butane, natural gasolines, propane etc.

    • the wells really are not shut in/curtailed much at this point. the only way to “flood” would be to complete more wells than they have been or open chokes. Unlikely they do much of either.

    • Most of your gassy space names are going to be high 20%s to mid 30%s annual base decline. So you have to offset that before you think of growing. Prices for natural gas are not sufficient to drive growth (although GDP is small and planning to grow they are an exception).

    • there is an increasing threated or rising associated / casinghead gas due to rising oil prices although this too is likely small near term. We’ll know more with the 4Q20 reports from the oilier names in the Permian, and from the Eagle Fords, the Wattenbergs, the Bakkens … right now no one is looking to grow big. Those names will attempt maintain on a strip that’s below $50 and may edge capex up a bit above it but largely they don’t want to rock the boat and they have to have to have to get on board with less debt and more return of capital.

    • I am not overly bullish. I think gas is under priced and the situation is fairly constructive.

  32. 32
    R F Says:

    re 31 – Thank you for your thoughts! and the excellent NG report today.

  33. 33
    Anonymous Says:

    Here s a Copy of the email I sent to Z Man:post mentioning that you are hopeful that many of us subscribers have participated in your recent successful recommendations. I didn’t want to respond on the site because I was afraid it would be taken as boastful or braggadocio. I never bought GDP or ar or LBRT . But more than tripled my Money in QS, made a nice profit on BLDp , and I am still long everyone Else on the list.
    Thanks is not a strong enough word to express my gratitude for your efforts and professionalism. As I mentioned to you on the phone I am astonished that you were able to make such a powerful switch from the traditional energy companies to those of the moment. Would’ve taken me years!

  34. 34
    Snuhart Says:

    Post 33 is from me.

  35. 35
    zman Says:

    re 33 – again, thanks very much and too kind.

    And I almost entirely missed solar (we had a nice run in JKS (now unowned) and are watching several now but are current on the solar sidelines. Wind and fuel cells have worked better than expected. And we are still 35% ish upstream and oil service and have not taken our hat at all out of that realm.

  36. 36
    zman Says:

    re 34 – thanks so much Snuhart.

    OT – I have to run to another thing, back pre rig counts.

  37. 37
    Anonymous Says:

    #34 Well said…..

  38. 38
    Anonymous Says:

    CNX Continues it’s breakout…high relative strength to the group and market today…
    https://i.postimg.cc/501N18fh/cnx-1.png

  39. 39
    Zorgnak Says:

    #37 and #38 was me..

  40. 40
    Zorgnak Says:

    QELL Trading in a very narrow range around major acceptance this week…waiting news….buyers at 12.32 and below…breakout level well defined at 12.86
    https://i.postimg.cc/VLPtrDX3/qell.png

  41. 41
    zman Says:

    Thanks Zorg.

  42. 42
    zman Says:

    Rig Count Watch

    Oil up 8 to 275 vs 659 year ago
    NG up 1 to 84 vs 119
    HZ up 7 to 320 vs 698

    Marcellus up 4 to 30 vs 41
    Permian up 4 to 179 vs 397

    Uticant down 2 to 4 vs 10
    Bakken flat at 11 vs 51

  43. 43
    zman Says:

    There’s a conflict site I follow on twitter retweeting a story about Iran moving to 90% enrichment. That news would be a big deal if true. They have recent gone to 20% and going from 2 to 20% is a lot more work than 20 to 90% from what I understand. Nuclear guys feel free to help my understanding there.

    Point is that’s the headline of the story. No where in the story does it back that up. Capable of going 90%? Yes. Plan to? Does not say.

    I told the site of this and their response was “I didn’t write it”.

    That’s lame. If they read this fine. That’s still lame. Words matter. If someone sees a quote from an Iranian outlet I’d like to see it but headlines and stories should match and if they don’t I think that’s important.

  44. 44
    zman Says:

    In case you are wondering about the sell off, Manchin just flexed his new muscles, said he will absolutely not support $2k checks.

  45. 45
    zman Says:

    OT – grabbing lunch, back in a bit.

  46. 46
    zman Says:

    Goldman penned a 3 paragraph noted outlining why they believe Manchin will not stop $2k total checks.

  47. 47
    BirdsofpreyRcool Says:

    #28 – followed you into some more GOEV. Thank you, and crysball (!), for posting about the Apple/Hyundai connection. Frankly, the GOEV prototype vehicles LOOK like something APPL would make…

  48. 48
    zman Says:

    re 47 – thanks for the feedback. It’s an almost 3% position for us now, #12 in the portfolio. I’m probably done adding for a bit unless it dips significantly on no news. My thought would be that it’s a piece of the tech within the chassis and not any of the tophats.

    It could be Hyundai’s PBV too which is not a car but more of an autonomous transit system – Canoo works on this with Hyundai.

    page 21 here:
    https://d1io3yog0oux5.cloudfront.net/_67b7a63eb526dc4c1b3903f4618c259b/canoo/db/1087/9680/pdf/HCAC+Canoo+-+Investor+Presentation+-+FINAL.pdf

    The PBV mentioned is the same as the ones in the CES video noted above.

  49. 49
    zman Says:

    WTI closed at $52.24, 11 month high.

  50. 50
    Snuhart Says:

    Hi BOP,

    for the moment it looks like we are OK for the next few interest payments on our CPE bonds

  51. 51
    BirdsofpreyRcool Says:

    Hi Snu – as long as WTI stays over $35, the CPE bonds should be in good shape. Not to say that the company may try to take them out at a price below par someday. But that day is not any time in the horizon, that I can see. So, I plan on clipping $8.25/bond coupons for a good, long while.

  52. 52
    zman Says:

    re 51 – thank you

  53. 53
    Snuhart Says:

    Re 51

    As usual you’re comments are much appreciated.
    Thanks and happy new year.

  54. 54
    BirdsofpreyRcool Says:

    #51 – lots of typos and a few missed words… but you get my point. And since the bonds are $1,000 face value, make that $82.50/bond per year.

  55. 55
    zman Says:

    re 54 – hey BOP, is that this one?

    144577AJ2

    http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C695907&symbol=CPE4514613

    Nice rally rally of late, nice call.

  56. 56
    Anonymous Says:

    Re 55 yes

  57. 57
    Snuhart Says:

    56 that was me

  58. 58
    zman Says:

    Ending the week and 2021 ytd up about 18%.

    The Wrap will be out on Sunday or Saturday if I get to a couple of things earlier than expected.

    Have a nice weekend.

    Z

  59. 59
    Zman's Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Wrap – Week Ended 01/08/21 Says:

    […] zman on T.G.I.F. […]

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