Monday Morning – Busy Day



Market Sentiment Watch:

  • Much lighter week on the economic data front,
  • On the energy front we get the monthly EIA STEO and monthly reports from OPEC and IEA.

Please see the Housekeeping Watch near the bottom of today's post.

In today's post please find:

  • The Week That Was,
  • The Five Things,
  • 1Q21 So Far,
  • the updated 1Q21 calendar,
  • BCEI - another deal?
  • LPI transaction(s) comments,
  • and some other odds and ends.

In case you missed The Wrap please click here. Note under this post a number of charts from Zorg, with our thanks.

Ecodata Watch:

  • No economic data release scheduled. 

The Week Ahead: 

  • Tuesday - NFIB small-business index, job openings, EIA STEO, OPEC Monthly,
  • Wednesday - CPI, federal budget, EIA oil inventory report, IEA Monthly,
  • Thursday - Jobless claims, PPI, EIA natural gas storage report, 
  • Friday - Retail sales, import price index, industrial production, capacity utilization, consumer sentiment, business inventories. 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. The Week That Was
  4. Stuff We Care About Today – The Five Things, BCEI, LPI, 1Q21 Calendar, 1Q21 So Far
  5. Odds & Ends

Holdings Watch:

ZLT (Zman Long Term portfolio)

  • Last Week’s Trades:
    • We sold our remaining PLUG position up 370%.
    • We added to ACTC.
    • We added ENPH for the first time (small, starter).
  • The Blotter is updated.

Commodity Watch:

Crude oil closed up 2.1% last week at $64.90 and remains within our near term expected range. EIA data of late has been price supportive. OPEC data has been more mixed.  This morning crude is trading up 50 cents.

  • Cyber Attach Watch: Colonial Pipeline's two mainlines supply the east coast with 45% of gasoline needs remained down through the weekend after a ransomware attack shuttered some of the company's back office functions and they opted to shut in the lines for safety. 

Natural gas rose 0.9% front month to end last week at $2.96 with the strip up 0.7% to reach $2.99. We have long said below $3 is too low and the market has corrected higher even as we weather the shoulder months on lower than expected injections due to favorable weather and strong export demand. Gas fired generation is about to pick up and should lend further support.

  • TExpect a similar sized if slightly large injection this week vs last week.
  • This morning gas is trading down 2 cents.

Weather Watch: Still mild. 

  • Last week:  Gas weighted Heating  Degree Days (HDDs) came in at 51 vs 55 normal and 53 in the prior week.
  • This week's forecast:  This week, CPC predicts HDDs will edge up to 55 vs 45 normal.

Strip Watch:   Improving. 

Rig Count Watch:

The Week That Was

Stuff We Care About Today

The FIVE Things  (Changes or re-highlights in RED)

Biden Administration: :

    1. Renewables. We have seen and continue to see Green/Renewable space names doing well under Biden - our sense is that after a fairly brief post inauguration dip that green space names will begin to base and then carry higher.  WE SEE BASING PERIOD AS HAVING BEGUN IN LATE MARCH. 
    2. Iran negotiating.
      1. Iran has moved to enrich to 20% 60% and has threated to enrich higher.
      2. U.S. has said it's mulling lifting some sanctions.  U.S. reiterated this week of 4/30/21
      3. Israel has said it will prevent Iran from obtaining a nuclear weapon.
      4. Iran made false claims about progress (refuted by US State Department) on 5/2/21.
    3. Executive Orders On ESG & some other local government moves. 
        1. Paris Climate Accord re-entry.  Done. 
        2. We DID NOT see a federal lease frac or permit ban day one. We do see a 12 month study on health impacts relative to drill and frac setbacks.  
        3. A federal lands new permit suspension for 60 days. Done. We thought to see some news here in April but did not.
        4. We expect year 1 to contain some form of reserve liability component. This is potentially a big threat to upstream valuations. This could be included in 2021 reserve reports due in early 2022. This one is a wildcard as we don't know timing for sure and certainly not how the calculation will run.  It's possible some Democrats will side against this measure (Manchin of West Virginia seems a likely one but there are probably others). Not yet announced. 
        5. We expect moves via executive order and legislation for renewable supportive policies. In progress. 
  1. Coronavirus:
    1. U.S. opening up, some parts of Europe, Middle East, Asia, Latin America locking down again. 
    2. Africa cases are not high compared to expectations.
    3. Increasing number of variants but these appear to be largely well addressed by vaccines.
    4. Vaccine efficacy for young kids shown to be high.
    5. India setting new global high records almost daily resulting in U.S. travel ban
    6. Regardless, expect very strong summer 2021 travel season, very very strong. 
  2. Oil Production / Sentiment:
        1. U.S. Production - Headed very gradually lower but expected to stall and turn very slowly up later this year. 
        2. Rigs - Recent increase was year end positioning for 2021 and it slowed as expected into 2Q20. We do NOT expect another BIG jump without > $60 area looking sustainably. 1Q21 calls were marked by discipline comments relative to original budgets. 
        3. Frac Spreads:  221 last week.  New pandemic period high. Our play here is very much LBRT.  
          1. LBRT thinks:
            1. 165 spreads needed to hold U.S. flat in 2021. That's just oil.
            2. and we need 25 to 30 more spreads to maintain natural gas production.
            3. additional 80 spreads to grow U.S. oil production by 1 mm bopd in 2021.
            4. Therefore, to MAINTAIN oil and gas production in 2021, at end of 2020 levels, we need 190 to 200 spreads (as an average for the year).
            5. we expect spreads to rise in 1H21 to handle DUC completions.
        4. STEO sees modest lower US oil production 2020 to 2021 with volumes rising by 3Q21.
        5. Storage levels:
          1. Crude stocks are modestly below with five year average.
          2. Gasoline stocks are modestly below five year average.
          3. Distillate stocks are modestly below the five year now.  
          4. Expect positive YoY comparisons on U.S. throughput near term with weak stocks and strong cracks where they are.
        6. Sentiment - Improved with vaccine approvals.  STRONG VACATION TRAVEL SEASON AT HAND ~ work related demand and further sentiment improvement. 
        7. OPEC viewed as taking a MEASURED, CONSTRUCTIVE approach to early 2021. OPEC+ seems to have finally figured out how to play the new game of sell less, make more money. 
    1. Supply is weak
      1. LNG exports are holding near record high levels.
      2. Mexico exports holding near record high levels. 
      3. Imports from Canada will edge lower after shoulder.  
      4. Production is essentially flat now with year ago levels, still well off peak. 
      5. Therefore, Net supply is down significantly YoY and not set to improve until later this year.  
    2. Non heating demand remains solid to near record and below $3.25 ish expect a record summer for gas-fired generation.
    3. Shorts have grown increasingly confident again, poised for typical shoulder season weakness. The more to cover later.
    4. We simply expect better sentiment from gassy upstream names than we saw in 2020. 
    5. Storage is NOT in record territory. It's in deficit to year ago and five year average levels now. 
    6. NGL prices are near 1 year plus highs. Good for names like AR, and unowned RRC and SWN (but given where propane is, especially good for our AR.
      1. Propane prices inventories are very low. Propane and ethane pricing are counter-seasonally strong.
  4. Renewables: 
    1. Sentiment is weak but the stocks appear to be basing. Expect bottom fish action soon, especially within solar and middle tier EV. 
    2. Renewables are ~ 50% of assets in the portfolio via 12 names.
      1. We want to add more grid exposure and that means AMSC (unowned) or more STEM.
      2. We are working to balance our renewable holdings among Wind, Fuel Cells, Solar, EV, and Storage/Grid resiliency.   We are currently heavily skewed towards Wind and Fuel Cells.

1Q21 Calendar

1Q21 So Far

Other Stuff

BCEI - Wall Street Journal reporting sources say BCEI to acquire XOG (unowned) in all stock, no premium deal. 

  • WSJ says the company to be largest DJ Basin player, to be renamed Civitas Resources.
  • BCEI has spoke to still wanting to scale up in the wake of the HPR acquisition.
  • We'll update this section if / when we see a press release.
    • XOG:
      • reemerged from bankruptcy in January and has much lower leverage now (and expected to be lower by mid year with net debt of $100 to $125mm).
      • was expected to hold a conference call for 1Q21 results on May 14th.
      • has 140,000 net acres,
      • had preliminary volumes in 1Q21 of 71.6 MBOEpd (36% oil, 26% NGLs)
        • compare to BCEI's guidance for the rest of this year pro forma HPR of 40 to 42 MBOEpd.
      • XOG was guiding full year 2021 to maintenance in a range of 66 to 74 MBOEpd.
      • All stock, no premium implies an exchange ratio of about 1.16x and would mean, about 35 mm shares issued on top of the < 31 mm BCEI has out now.

LPI announces "transformative transactions"

    • Selling gassy legacy PDP assets (37.5% of total PCD) for $405 mm (25,000 BOEpd, but 23% oil by production; 94 MMBOE 18% oil by reserves)
    • Buy oily acreage as a direct offset of their oily assets and current focus in Howard:
      • for $715 mm (14,500 BOEpd, 83% oil)
      • Maintenance capex not provided.
      • Reserves not provided.
      • 35% first year decline called low.
    • They call it long term accretive to Free Cash Flow and EBITDA. The put company cumulative FCF at > $700 mm due to this deal. .
    • The non funded portion will go on the revolver.
    • Long term deleveraging to 1.0x expected by 2025.
    • We do not see that they are holding a conference call for these transactions but will check again in the morning.
    • Their short presentation can be viewed here. 
    • Nutshell: Intuitively this makes sense. Swap gassy legacy for oily more core acreage makes sense.  Our view is that they are paying up due to high prices ($49K per flowing BOEpd seems quite high) to accelerate a move to free cash flow status and generate more free cash flow over the next five years.

Housekeeping Watch: Intern #1 has her last State Cup this week before high school graduation. We will post a Thursday and Friday post early Thursday morning but I will be out of pocket much of both days for travel and sideline coaching.  

Odds & Ends

Analyst Watch:

  • TBA in comments.

50 Responses to “Monday Morning – Busy Day”

  1. 1
    zman Says:

    It’s official, BCEI and XOG are merging. We will update the section above after reading. Likely a pro forma piece out tomorrow.

  2. 2
    zman Says:

    BCEI and XOG Merger in All Stock Deal

    425,000 net acres
    117 MBOEpd pro forma 1Q21 product level
    BCEI pro forma HPR was 42.3 MBOEpd. 
    All stock deal at 1.1711 shares of BCEI for each XOG share. 
    This should result in about 35 mm additional shares on top of BCEI’s 30.7 mm out now. 
    Leverage to be < 0.3x on a 1Q21 net debt to 2021 E EBITDA basis. 
    Long term to target < 0.5x. 
    Annual $1.40 dividend announced by BCEI to increase to $1.60 as the new company. 
    Closing expected 3Q21.
    Company to be named Civitas.
    PF TEV / their minimum read on 2021 E EBITDA puts them at 3.6x.  Inexpensive. 
    BCEI is the 2nd largest position in the ZLT. 
    Conference call at 9 am EST. 

  3. 3
    zman Says:

    adding to 2

    They see free cash at $485 mm this year. 
    The $1.60 dividend would only consume about $104 mm of this.
    At present BCEI price, the implied forward on the new dividend is > 4% 

  4. 4
    zman Says:

    Looks like Brant Demuth out, replaced by XOG’s CFO. Hmm.

  5. 5
    crysball Says:

    Are you on the cc?

  6. 6
    crysball Says:

    CFO for Civitas will be from XoG

  7. 7
    zman Says:


    re 5/6 – yes, taking notes.

  8. 8
    zman Says:

    BCEI + XOG (unowned)

    • management has worked together at XOG, PDCE (unowned) and NBL (unowned).
    • Eric Greagor of BCEI will be CEO
    • Demuth I assume is moving on

    Lot of ESG focus – Scope 1,2 neutral on day 1 – this addressed on slide 16.
    – using offsets to offset what emissions they cannot yet curtail.
    – good graphs of GHG reductions so far,
    – they are making a big pitch to generalist investors and Colorado with the amount of ESG items here, continues on slide 17
    – EV fleet, community solar, air monitoring
    – they will be Colorado’s first Net-Zero operator.

    Low opex (a given given the two names).

    Going to Q&A 20 minutes in …

  9. 9
    zman Says:

    MGY and AR breakout mode.

    Taking notes on Q&A

  10. 10
    zman Says:

    LBRT as well.

  11. 11
    zman Says:

    Wind names all off 5% ish early on not exactly high volumes.

  12. 12
    zman Says:

    BCEI (Z4 #2 position) + XOG (unowned) Q&A

    Q) synergy question on the $25 mm expected save.
    A) it’s primarily G&A. There’s not a lot of field overlap and therefore not a lot of reduction there. It’s not all people: notes real estate, back office functions, trade group functions.

    Notes they made good progress synergy savings on HPR deal despite the lengthy close progress. 80% of real estate and 80% of people costs done there now. And well on way in terms of back office integration. Given we had made so much progress already this gave confidence in going ahead and doing this next deal.

    Q) looking ahead, see Civitas as a preferred consolidator, do you see this process as similar, low premium.
    A) they will all be a little different but count on us being disciplined and searching values. Notes massive synergies now possible on both the eastern and western flank of the DJ. Low cost, low leverage, looking to max returns. A&D or blocking up or organic.

    Q) XOG – permit inventory and suburban
    A) he’s in the camp that consolidation in the DJ as inevitable – this allows BCEI to now have the urban corridor experience … again, sounds like they are not done.

    Q) – moving ahead together.
    A) two operating companies until close, both of us have ~$160 mm budgets, will be working to link up before close. Will be a mostly flat production profile, taking the best projects first.

    Q) production profile
    A) it’s a result, it’s a dependent variable, it will be what it is based on maximization of FCF. This is nothing new.

    Q) management team determination
    A) decision was made at board level. Not privy to all of that, positions determined by experience with the combined asset.

    Q) midstream
    A) RMI – no change in plans for the eastern flank (BCEI)
    – on the west, they no longer own Elevate, so they don’t have a company owned gathering/processing. Maybe RMI will build out there, but not sure yet.

    Q) D&C costs vs peers.
    A) $500 to $525 / foot (D&C only – XRL to SRL)
    on the west – in Greely and Broomfield areas – the designs are less intense, they are at $400 to $410 per foot (and that D&C fully loaded given they have to spend more on gather vs BCEI).

    Q) price environment
    A) as price improves our best opportunities get better, notes both oil and natural gas now, notes they dynamic algo to continuously optimize prices vs costs vs type curve.

    Q) hedging
    A) backwardation makes it tough, but don’t expect to do a lot, given the strength of the balance sheet. We can go to “austerity” very quickly. We get exposure to the upside. If we do hedge we like wide, cashless collars.

    Call tone congratulatory.

  13. 13
    zman Says:

    BCEI up 5% at end of call at $39.40. It’s our second largest holding. If a sellside guy writes a negative note overnight on the added suburban exposure or some other negative we can’t currently come up with (maybe mix) then we will mull adds later this week.

  14. 14
    zman Says:

    We have submitted a merger noted to SA.

  15. 15
    zman Says:

    FYI – NG estimates rise to highest price estimates in 3 years.

    Analysts now at $2.89 (come get us, we’ve been at $3.00 a long time).

  16. 16
    zman Says:

    Natural Gas Storage Preview:  Street is at +77 Bcf for Thursday’s report. 

    Last Week: +60 Bcf
    Last Year: +104 Bcf
    5 Year Average: +82 Bcf

  17. 17
    zman Says:

    Colonial – saying it will take time to restore production.

  18. 18
    zman Says:

    Gaza really in heavy unrest now.

  19. 19
    zman Says:

    OT – grabbing lunch, back in a bit.

  20. 20
    Anonymous Says:

    Analyst Watch

    LBRT – JPM ups target from $10 to $11.

    With the stock near $14. Ok buddy.

  21. 21
    Zorgnak Says:

    TPIC breaking below support. Lots of trades but not a lot of volume. Next lower downside acceptance at 43.33, if it doesn’t slow there….major support 36.40-38.40 .
    65 minute

  22. 22
    zman Says:

    re 21 – hear ya, sloppy trader, both directions, agree volume is meh. I don’t see a downgrade but it was a late reporter last week, could be one, there were a couple of more dubious sounding analysts on the call.

  23. 23
    zman Says:

    AR – new 52 week high

  24. 24
    Zorgnak Says:

    STEM…Not a lot of trades but but relatively high volume nibblers off the LOD..Defined support at 18..Defined resistance 21.86…Trading within a volume gap…can move quickly in either direction with or without much volume..

  25. 25
    zman Says:

    I’m told SA will publish the BCEI + XOG piece in 26 minutes.

  26. 26
    zman Says:

    re 24 – thanks, renewables weak today.

    Solar again taking a good sized hit. Wind as well.

  27. 27
    zman Says:



  28. 28
    Zorgnak Says:

    #22 PBW Clean energy ETF…high volume towel throwing through major support last week…I’m pretty much resigned to seeing next defined support at 72 tested next…

  29. 29
    Zorgnak Says:

    Bounce or break time for the Nasdaq

  30. 30
    zman Says:

    re 29 – thanks

  31. 31
    Zorgnak Says:

    VEI…Very tight…waiting for the catalyst..

  32. 32
    zman Says:

    TPIC may be catching some negative sentiment from WKHS (unowned) reaction to earnings and production guidance reduction today. It’s not that big of a piece of business for TPIC. Over reaction.

  33. 33
    Zorgnak Says:

    TAN Solars at last remaining support/acceptance around 70-72. Below 69 there is little visible support….

  34. 34
    Zorgnak Says:

    Solar installers getting crushed….NOVA RUN
    NOVA daily

  35. 35
    zman Says:

    Thanks, we own no installers at this time. We do have RUN (unowned) in the queue for a requested update.

  36. 36
    Zorgnak Says:

    #35 RUN…selling way below major acceptance (56. Now at value area low for the past 52 weeks…

  37. 37
    zman Says:

    Beerthirty, back in a bit.

  38. 38
    crysball Says:

    Re XOG
    How much, if any, of their acreage is on federal land?
    Do you know the breakdown of their NGL’s?

  39. 39
    Jason Says:

    re 27 LOL whattt?!

  40. 40
    Anonymous Says:

    27 leave it to our gov’t: how on earth could you enforce that when they have little idea who has been receiving their helicopter money.

  41. 41
    zman Says:

    re 38 – would be very little, most fed is NE corner.

    they are 25% by production NGLs.

    re 39/40 – It struck me as an odd headline.

  42. 42
    zman Says:

    Our piece on BCEI in case you missed it:


  43. 43
    zman Says:

    Nasdaq down 2.55% today.

  44. 44
    zman Says:

    PLUG (unowned) – on the tape with a business update, reading.

  45. 45
    zman Says:


  46. 46
    zman Says:

    PLUG (unowned)

    1Q21 – > $70 mm gross billings (preliminary), up > 60% from 1Q20.
    1Q21 – > $67 mm net revenue.
    Reaffirms 2021 annual guidance
    says to file 10K in next 5 days
    Cash on the balance sheet > $5 B.

    Guides to 2Q21 to > $102 mm revenue, up > 50%.

    “The fundamentals of our business remain robust with record first quarter gross billings. As evidenced by the continued advancement of our strategic pipeline, we remain firmly committed to executing on our mission to build out the hydrogen economy in North America and beyond. We continue to deliver state-of-the-art fuel cell and green hydrogen solutions to our customers, and remain confident in the growth trajectory of the business. We are working to complete our previously announced financial restatement as expeditiously as possible.”

  47. 47
    zman Says:

    re 46 – both of the 1Q and the 2Q revenue numbers would be a bit light to Street (there is the > in there so hard to say but at $67, 1Q is $10 mm light).

  48. 48
    Zorgnak Says:

    PLUG Hitting an area of interest today at 19.50.

  49. 49
    zman Says:

    Thanks Zorg.

  50. 50
    zman Says:

    FDA approves Pfizer for ages 12 to 15.

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