28
May

T.G.I.F.

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We remember them and they have our gratitude. 

 

In today's post please find:

  • the natural gas review (bigger than expected injection; next week the heat kicks in and the injection should be slightly smaller),
  • SWN cheat sheet update,
  • Gassy Players update - Liquids Rich Group
  • and some other odds and ends.

Ecodata Watch:

  • We get personal income at 8:30 am EST (F = -14%, last read was + 21.1%),
  • We get consumer spending at 8:30 am EST (F = 0.5%, last read was 4.2%),
  • We get core inflation at 8:30 am EST (F = 0.6%, last read was 0.4%),
  • We get advance trade in goods at 8:30 am EST (no forecast, last read was -$90.6B),
  • W get Chicago PMI at 9:45 am EST (F = 68.0, last read was 72.1),
  • We get Consumer Sentiment at 10 am EST (F = 83.0, last read was 82.8).

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watc​h
  3. Natural Gas Inventory Review
  4. Stuff We Care About Today - SWN, Gassy Players (wetter end) Update
  5. Odds & Ends

 

Holdings Watch:

ZLT

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

Commodity Watch:

Crude oil closed up $0.64 yesterday at $66.85 on a weaker dollar, better than expected economic data, and source comments regarding OPEC+'s meeting next week when no change to the prior plan to modestly increase volumes is expected. This morning crude is trading up slightly.

Natural gas closed down $0.07 at $2.96 after EIA reported a larger than expected injection to storage.

  • We expect a slightly smaller injection next week as demand increasingly shifts to cooling load.
  • This morning gas is trading up slightly.

NGL Price Watch

Short Term Supply / Demand Watch:

Natural Gas Storage Review 

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Stuff We Care About Today

SWN (Unowned) Cheat Sheet Update 

Gassy Players Update - Liquids Rich (this post is archived under "gassy")

Other Stuff

  • Look for requested name updates next week,
  • Look for the WIOWIO updates to resume next week,
  • Look for a Gassy Players update with Pro Forma COG/XEC (both unowned) next week.

Housekeeping Watch: 

  • Are we using the correct email for you?  If you're not getting ZBLAST's or are getting them at the wrong address contact zman@zmansenergybrain.com
  • Have a happy and safe long weekend. I will be in and out today as the interns are out of school.
  • Our next post will be the Wrap on Saturday followed by the Tuesday post. 

Odds & Ends

Analyst Watch:

  • TBA in comments

32 Responses to “T.G.I.F.”

  1. 1
    nrgyman Says:

    Thanks for the liquids rich player update. Do you have the FCF and FCF per share numbers for these names? I found the FCF per share useful in determining the FCF yield, which is a different valuation metric that is helpful for comp purposes.

  2. 2
    Zorgnak Says:

    QS Good volume on this latest bounce….29.90 is resistance…
    https://i.postimg.cc/gJ0wBfwx/qs.png

  3. 3
    Zorgnak Says:

    ACTC standing out this morning as other EVs faded..

  4. 4
    zman Says:

    re 1 – hey, out of pocket at the moment, will amend table this weekend.

  5. 5
    zman Says:

    adding to 4 – SWN – unowned – has a fcf section.

  6. 6
    zman Says:

    RRC – unowned – Street fcf is $300 mm for 21

  7. 7
    zman Says:

    AR Street fcf is about $600 mm

  8. 8
    Zorgnak Says:

    ARRY Relative strength leader in solar today…Breaking above this weeks value area..
    https://i.postimg.cc/FKYQR4Bb/arry-1.png

  9. 9
    zman Says:

    re 8 – thanks – ENPH too.

  10. 10
    zman Says:

    Also good to see VWDRY edging at $13.

  11. 11
    nrgyman Says:

    RE 5-7: Thank you! Using those FCF estimates and yesterday’s closing prices I calculate the FCF yield for those three names as follows:

    AR 14.8%
    SWN 10.4%
    RRC 8.89%

    Recall that top gassy names had FCF yields as follows:

    GDP 7%
    VEI 6.6%
    CNX 6.6%
    COG 6.3%

    Also note that XEC/COG pro-forma est FCF yield is 9.7% using mgt estimates.

    AR is still the star among these names using the FCF yield valuation metric, suggesting AR valuation is too cheap.

  12. 12
    zman Says:

    re 11 – agreed.

  13. 13
    zman Says:

    Good to see the action in MGY, we added twice last week below $12. Now on this run it sits at #3 in the portfolio. At $12.85 it’s still relatively inexpensive for what you get and 9% below our base case 6 month target of $14 (that’s a really conservative multiple for what is happening here on debt and return of capital and assumes no good results in Fayette Count exploration wells) and then it’s 50% below our Stretch case of $19.25 which is a 6x multiple of $70 type oil for this year. Rest assured we have no plans to sell at $14. We may sell it back a little as it moves to upper teens, depending on oil price background.

  14. 14
    zman Says:

    These were those MGY trades:

    5/20/21 – MGY – Added to Magnolia at $11.83. They remain an oily, unhedged, high margin, underspend by design, low debt (0.4x net debt to annualized 1Q EBITDA) name that is free cash flowing in a big way at current prices ($100 mm in 1Q21) with production growth this year as well results continue to impress in their newer play at Giddings. Along with growth the name will offer exploration potential later this year in a new area for them in Giddings. They plan to initiate a dividend in 3Q21 while continuing to repurchase shares at a rate of roughly 1% of outstanding shares per quarter (we expect them to be active share repurchasers near current prices). This is our 2nd largest oily position after BCEI and our 5th largest position overall. This is our first add since February when we added just under $9 and takes our cost basis to $9.10.
    5/25/21 – MGY – Another added at $11.75. Modest growth, planned underspend, low debt, share repurchases ongoing, dividend to begin 3Q20. Good update with management today. Cheat sheet update in tomorrow’s post.

    Again, this is our kind of boring.

  15. 15
    nrgyman Says:

    RE 11: The liquids-rich names have notably higher FCF yields. This is mostly attributed to the strong margins provided by their NGL/oil production AND the lack of hedges on them, which has robustly moved their FCF higher.

    In contrast VEI (for example), a very cheap pure natgas name, lacks liquids FCF benefits and has most of its natgas production hedged in 2021–limiting its FCF yield this year. As hedges fall off going into 2022 we should see the VEI FCF yield climb, all else being equal. Of course, all else is usually not equal. Would love to see VEI share price climb as the hedges fall off.

  16. 16
    zman Says:

    re 15 – has good margins but is smaller as well.

  17. 17
    zman Says:

    Rig Count Watch

    Oil up 3 to 359 vs 222 a year ago
    NG down 1 to 98 vs 77
    HZ up 3 to 415 vs 271

  18. 18
    Anonymous Says:

    CNBC commentator stating that the solar space is in a bubble. Huh? Where has she been for the past 3 months?

  19. 19
    Skeptcl Says:

    18–Hmmm. This was me, skeptcl. Not sure why it comes up anonymous

  20. 20
    nrgyman Says:

    RE 11: Also note that for BCEI/XOG mgt is estimating a pro-forma 2021 FCF yield of 20%, trouncing everyone else.

  21. 21
    Zorgnak Says:

    Nat Gas Futures… First time I’ve seen balance trading around acceptance at this level (currently 2.96) in Nat Gas in a year or more..Demand volume is tailing off some now. Value area low is 2.86..
    https://i.postimg.cc/8cYXwNrp/ngdd.png

  22. 22
    nrgyman Says:

    RE 11, 20: For MGY, using $400mm as the 2021 FCF estimate (could be low), the FCF yield is 13.1%. Given the low net debt and very low debt metrics this is excellent. The policy of using that FCF to buy back the cheap shares this year will raise the FCF yield estimates even more next year, all else being equal. Highlights the undervalued nature of MGY, especially since most of their comps have higher debt loads and single-digit FCF yields.

  23. 23
    Zorgnak Says:

    PLUG Broke above a key level at 30 today on analysts comments. Demand volume continues to support higher prices..Support at 30 now…It has been on quite a run from the lows…13% short
    https://i.postimg.cc/HL4pNPzD/plug.png

  24. 24
    Skeptcl Says:

    Z, are you familiar with CLNE? Renewable natural gas company. I was reading a Barron’s article from May 3rd, an interview with a PM from GMO which piqued my interest. Looks like they signed a deal with AMZN that the market didnt like due to the potential for dilution. The chart looks interesting tho.

  25. 25
    Zorgnak Says:

    ACTC I posted this chart last night….18.50 is the next major level of interest..closing in on it now…
    https://i.postimg.cc/B6ftRKHk/actc-4.png

  26. 26
    zman Says:

    re 24 – yes but it’s been a long time since I looked. It’s been around a very long time and their plans never seem to come together/always seem to be over the horizon.

  27. 27
    Skeptcl Says:

    26–that was one impression I got. I recall losing money 10 years or so ago on another cant miss bio fuel type play.

  28. 28
    zman Says:

    Beerthirty, have a good long weekend.

  29. 29
    snuhart Says:

    Zorg: Thank you for 25.
    That’s a very interesting chart that offers a good measure of potential, Should it materialize.

  30. 30
    Zorgnak Says:

    #29 you’re welcome…Looks good to me too…

  31. 31
    zman Says:

    Test

  32. 32
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