Wrap – Week Ended 06/25/21



Another strong week for traditional oil and gas and traditionally tied groups including oil service. The renewable energy groups continue to edges towards a rebound having previously peaked in January and February. The ZLT was up 7% last week as we continue to be a well rounded mix of both.  We got busy this month, adding more weight within gassy, oil service, grid exposed and commercial EV names.  The oily names in our portfolio are outperforming the XOP and other oil name benchmarks noted in the table below on a year to date but more importantly on a two and three year basis as we've stuck with quality balance sheets over "high leverage must have higher commodity price" names.

The non commercial net oil long to short ratio hit 7.8x last week, the highest level of 2021. Anything of 6x we consider nose bleed territory, worth watching closely, and potential leading to a sharp (if brief) substantial pullback on not so apparently bearish news for oil (be it in the form of Iran sanctions lift or something unexpected like Venezuela or just a slightly bigger than expected increase in production from OPEC+ next week).

Natural gas continued it's recent surprising to most push higher. The rally is not surprising here (to us at least) beyond the magnitude of it as we've been calling for strength in exports (volumes to Mexico set another new record high last week while LNG is holding near record territory and imports from Canada have weakened as expected) and gas-fired generation demand to more than offset production gains on the activity rebound. We added more gassy exposure in low differential basis this quarter, month, and week.  The 2022 natural gas strip, which will be key as analysts and management teams ponder prices for out year cash flow and banks consider fall RBL levels has seen phenomenal change of late:

Holdings Watch:

  • Last week we added to natural gas names, one oil service name (multiple adds), a commercial EV name, and we entered a new grid name.
  • The blotter is updated 

Free Stuff Last Week:

Questions and comments under The Wrap will be addressed in the Monday post.

Questions about the site or for a low cost test drive subscription can be sent to zman@zmansenergybrain.com

Have a great rest of the weekend, and stay cool Pac northwest,



9 Responses to “Wrap – Week Ended 06/25/21”

  1. 1
    Zorgnak Says:

    FAN Wind Power ETF…Trading in a tight range on the weekly and daily time frames at major acceptance…Demand volume flat, waiting for a catalyst.

    VWDRY Trading a major acceptance…Demand volume positive ….Looking for a break above 13 for the next leg up.

    TPIC Choppy range bound trading since March…Monthly and weekly range tightening. Sporadic demand volume just began to turn up….

    BWEN Flat narrow range trading at major acceptance …Demand volume flat…next leg begins with a break above 5.15

  2. 2
    Zorgnak Says:

    Clean Energy ETFs
    PBW and ICLN both trading in narrow ranges at major acceptance…Demand volume positive. Nice setups…

  3. 3
    Zorgnak Says:

    XOP Friday’s close broke above June’s value area. Demand volume remains supportive of higher….reflected in all the Z4 O&G names

  4. 4
    Zorgnak Says:

    OIH..Demand volume tailed off some in most of the service stocks….Pull backs within uptrends…

  5. 5
    Zorgnak Says:

    QS Continues to recover from the hit piece…Trading well above previous acceptance at 27.54…Weekly and monthly acceptance shifting higher…Demand volume is positive

  6. 6
    Zorgnak Says:

    STEM Demand volume rolling off now at 34.25, previous major acceptance…Expecting back filling to continue within the value area highs/lows from 35.95 and 31.97…. A dip out of June valume has support at 29.68…Much above 36.50 sets up another leg higher if/when demand volume picks up again…

  7. 7
    zman Says:

    Thanks Zorg. Re 1 – VWDRY – agreed, lot of positive momentum into quarter end.

    Re 3 – the XOP chart is pretty telling, super strong.

  8. 8
    Zorgnak Says:

    noting….Not a Z4 stock..
    Highly speculative…Lithium stocks picking up…ALB, PLL
    PLL setting up a nice multi-month base..high short interest

  9. 9
    zman Says:

    Guy asking VEI FCF yield over on twitter.

    Response, it depends on year given the hedges but 2021 or 2022 it’s pretty solid.

        2021 Z4 E EBITDA at $3.25   = $675 mm (90% hedged @ $2.53)
        Interest ~  $140 mm 
        Capex (mid) $345 mm 
        FCF $190 mm 
        FCF/Sh  $2.52   
        FCF yield   16% 
        2022 Z4  EBITDA at $3.25  $753 mm (49% hedged at $2.73) 
        Interest ~  $140 for simplicity
        Capex (mid) $345 for simplicity
        FCF $268 
        FCF/Sh  $3.56   
        FCF yield   22%

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