Housekeeping Watch: 

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In today's post please find:

  • the natural gas review (bigger than expected build, look for a flat to slightly larger build next week; storage trajectory remains on track to be price supportive but gas is in our view ahead of itself and likely seeing a good bit of short covering),
  • COP comments and a new cheat sheet,
  • and some other odds and ends.

Ecodata Watch:

  • We get consumer sentiment at 10 am EST (F = 72.0, last read was 70.3).

In Today’s Post:

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


Holdings Watch:


  • Yesterday's Trades:
    • ENPH - Added to our position at $152.50 on solar group weakness as a we through small bites build a new position here. Please see our post from 9/10 for additional color. https://zmansenergybrain.com/2021/09/10/t-g-i-f-223/
  • The Blotter is updated.

Commodity Watch:

Crude oil closed unchanged at $72.61 yesterday as exports from Libya resumed, U.S. crack spreads fell (natural gas hurts these), production continued to slowly creep back up in the U.S. Gulf (still down 0.5 mm bopd as of yesterday) and the dollar rallied.   This morning crude is trading down 50 cents.


Natural gas closed off $0.125 at $5.335 but moved sideways and ended slightly higher from the morning lowers however after EIA reported a bigger than expected weekly storage build (see table below).  Also Freeport LNG was offline Tuesday and Wednesday (no report for Thursday) due to Nicholas, and total LNG exports were back up to 10.5 Bcfgpd yesterday after dipping below 10 for a day on Wednesday. This morning gas is trading flat.

NGL Price Watch - New Cycle Highs (lower refining also means less NGL production as a by product)

Short Term Supply / Demand Watch:

Natural Gas Storage Review 


Stuff We Care About Today

COP Update ~ Free Cash Flow Machine, Unhedged, Natural Gas Levered

The lay person thinks of Exxon, Chevron, and Conoco as the same type of animal, mega cap oil and gas companies. But the former two have downstream and COP is just a really big E&P company. They're oily but they do have NGLs and gas. They really have little in common with their Major peers. The same things we look for in a mid or small cap E&P are present here (good management, good assets/inventory, a strong balance sheet, good margins/low costs, and a good operating plan that is not focused on growth and is focused on putting cash back in our pocket.   And they are unhedged. To us this a mega cap version (TEV of $90 B) of Magnolia (MGY)

Disciplined Spending: 

  • Maintenance mode remains very much engaged despite the strong 2021 price recovery.
  • The focus of their spending is increasingly on the home front.
    • 40% of capex in 2020 was spent in the Lower 48.
    • 60% will be spent in 2021 there (Permian, Eagle Ford, Bakken).

Production, Mix, Cost: 

  • They're a 1.58 mm bopd type producer
    • Oil at 53% of total volumes.
    • Natural gas is not small for them at 34% of volume but has long been a less significant revenue component ($1.2 B of revenues a year ago, $2.8 B in 2Q21).  This is set to get a lot bigger on the current strip and they receive a strong premium to hub. 
    • Opex is falling and set to fall further in the back half on a per unit basis, coming in close to $12/BOE.


  • They're unhedged. Zip, zero, nada Oil, Natural Gas, NGLs hedged.
  • For those seeking upstream players that are NOT HEDGED this name should be on their list

Strong Balance Sheet:

  • Net debt to TTM EBITDA of 0.8x.
  • They have $18.8 B in debt now and cash and short term investments totaling $8.8 B.
    • They want to eliminate the gross debt in the next few years and plan to retire senior debt as it comes due.
  • The revolving credit facility is undrawn and they have over $14 B in liquidity.

Rising Free Cash Flow:

  • With the mid year update COP revised it's 10 year plan from $50 B in free cash flow to $70 B.
    • The $70 B is based on $50 oil with a 2% escalator.
  • In 2Q21 they generated $2.8 B in free cash. There's a chart of their progress in the
  • Free cash flow yield using expected free cash this year is 11% (that's $8.8 B FCF / 1.35 B shares / $59 per share)
    • The net debt adjusted metric would be 10% which we view as strong.

Return of Capital:

  • Dividend:
    • 2.9% implied forward yield on the current $0.43 per share quarterly dividend.
    • This amounts to about $0.58 B per quarter.
    • We see the dividend as getting edged higher near term.
  • Repurchase Program:
    • $2.5 B program planned for 2021 expanded from $1.5 B as of the 2Q21 report.
    • It's likely excess cash flow relative to expectations goes here rather than a dividend increase (still expect the dividend to travel higher in time but see this getting majority of any "excess FCF".

Nutshell:  We plan to add more.

Other Stuff

  • Look for owned name updates next week.

Odds & Ends

Analyst Watch:

  • TBA in comments

70 Responses to “T.G.I.F.”

  1. 1
    zman Says:

    Analyst Watch

    AR – Truist bumps price target from $16 to $18.

  2. 2
    zman Says:

    MGY sitting at all time highs. Please see our recent commentary here:


    At $17 it is not expensive: ($MM EBITDA, TEV/EBITDA)

    Z4 2022 Cases
    2022 E Z4 ($50 oil, 33% NGL of WTI, $3.50 NG) 640 6.8x
    2022 E Z4 ($60 oil, 35% NGL of WTI, $3.50 NG) 770 5.7x
    2022 E Z4 ($70 oil, 35% NGL of WTI, $3.50 NG) 930 4.7x
    2022 E Z4 ($80 oil, 35% NGL of WTI, $3.50 NG) 1,070 4.1x

  3. 3
    zman Says:

    Analyst Watch

    ENPH – Piper says ENPH remains favorite solar name. Says check with management reaffirms near term outlook, better supply in 2H, stays at Overweight with $206 target.

  4. 4
    zman Says:

    At equity open

    WTI down $0.70
    NG down 13 cents

  5. 5
    zman Says:

    Holdings in order of size


  6. 6
    R F Says:

    why has vei been going up when the buy out share price was lower than current?

  7. 7
    zman Says:

    re 6 – the share price is tied to CHK, who is acquiring them.

  8. 8
    zman Says:

    STEM – flagged for upside on call activity.

  9. 9
    zman Says:


    SHLS – Added to our solar and soon EV EPC player at $33.10. Takes the position to the #9 slot in the ZLT portfolio with an average cost of $31.36. Technically the name appears poised for a gap fill but we wanted to be more long in advance of the 3Q report either way (likely flattish revenue to 2Q before the hockey stick in 4Q). Please see our 2Q update here:

  10. 10
    zman Says:

    The blotter is updated:


  11. 11
    zman Says:


    COP – Added to COP at $59. COP occupies the #11 slot in the portfolio. Good long term plan here with increasing free cash flow channeled to investors in the form of a 3% ish dividend (likely to be inched higher next year) and a large and growing repurchase program. Leverage is in good shape and they plan to retire near term maturities as they come do push debt down further. The name is also gassy and one of the few out there (like our MGY) that is unhedged. Please see today’s post for more details and a cheat sheet update.

  12. 12
    zman Says:

    The blotter is updated


  13. 13
    zman Says:

    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.

  14. 14
    zman Says:

    OT – grabbing coffee, back in 15.

  15. 15
    zman Says:

    NEX – breakout in progress. Please see our note earlier this week here:


    and our 50% increase to the position here:

    “9/13/21 – NEX – Added to pressure pumper NEX at $4.06 average cost, increasing our position by 50%. Look for sequential growth in active spreads, revenue and EBITDA for the next several quarters in the wake of the Alamo closure. At $4 the name trades at 4x next year’s EBITDA and our sense is given rising growth, rising utilization, rising margins and we think improving, if only incrementally, pricing, the name should with their solid balance sheet and liquidity and with a likely sharply higher free cash next year trade at a better multiple, especially given their focus on the Permian which is set to remain more active than any other basin in the U.S. near, medium, and likely longer term. Our average cost is now $3.91.”

  16. 16
    Zorgnak Says:

    STEM Key level..25.88 Value area high…Major acceptance test

  17. 17
    Zorgnak Says:

    SHLS trying to breakout….

  18. 18
    zman Says:

    re 16 – thanks, getting follow through on the Chile news earlier this week. Street coverage still limited to 2 analysts, expect one or more before 3Q pr/year end. Good chance of rising margin story here both for hardware and then more so from software sales as those mount. Like SHLS it’s going to be very back end loaded from revenue standpoint, so you may have some analysts wanting to get into print in front of a revenue crescendo in 3Q and 4Q accompanied by a bit of bump in margins. Given backlog should be able to guide well for 2022.

  19. 19
    zman Says:

    Oil ebbing a bit on Shell restoration of 100,000 bopd of Perdido platform GOM production. That along with broad market move coloring group reddish.

  20. 20
    zman Says:

    re 17 – thanks, added a bit more earlier.

  21. 21
    zman Says:

    JKS (unowned) said some modules are being stopped at the border by U.S. customs (yesterday’s news).

  22. 22
    R F Says:

    any news on swn – looks like relatively high volume for time of day

  23. 23
    zman Says:

    SWN breaking back down, looks like a gap fill close to $4.75 in play. We likely add more there.

  24. 24
    zman Says:

    re 22 – no, gassy players backing from < 1% to 3% today, NG down, Friday, people taking some profits.

    Volumes are 6.7 mm vs 20 day average of 14.1 mm, OK not super high for time of day.

    Type 23 as I noted the move before I saw your comment.

    I see as oppy to add on a chart that left a gap on 9/1/21. All other recent fundamental commentary very much still intact.

  25. 25
    zman Says:

    adding to 24

    See here:


  26. 26
    zman Says:

    Our average cost on the current SWN long is $5.05 and it’s our 6th largest position.

    We own A LOT more AR (2x the SWN hold).

    We can add more SWN on weakness and it is noted as a potential near term add name. Last two adds here 5.17 (September) and $4.27 (August).

    Having added it back in June as they announced Indigo (Haynesville) and then bolstered the position since.

    Prior sale of the total position for 22% gain in March.

    You can see all our trades on the blotter with accompanying brief trade thinking. Easy way to scroll through trades on a name is to use the “find” function on your browser and enter the ticker.

  27. 27
    R F Says:

    re 23-25 : Thanks!

  28. 28
    R F Says:

    re 26 : 👍

  29. 29
    zman Says:

    Sent in by a friend of the site:

    “RBC Capital Markets Say Natural-Gas Prices at RIsk of Spiking This Winter

    (MT Newswires)

    RBC Capital Markets on Friday said the price of natural gas, which touched the highest in more than seven years this week, could see further prices spikes as the U.S. market remains tight, though it noted the addition of liquified natural gas exports since the market last saw prices at current levels is clouding the forecast.

    “With gas prices still so elevated, there are plenty of risks this winter and given how the market has positioned to date on the basis of seasonal concerns rather than big new catalysts in our view, even our high scenario is at risk regardless of our conservative fundamental stance – particularly in a cold winter,” the investment bank noted. “Even in a warm scenario, price spike instances are a clear risk given the market’s attitude, but this winter especially so, as it isn’t even cold yet and prices have quickly covered significant ground. For the balance, there is less precedent to base expectations on than in recent past. The demand outlook has precedent, but both pipeline and LNG exports are in a new chapter, production is dissimilar to the pre-COVID shale era, and there’s now more connective tissue between US balances and the world, and LNG generally has added connective tissue to regional gas markets like Europe, Asia and beyond … What is clear this winter is that the market seems on edge, there are fewer historical precedents to base expectations on in this situation, and even our high scenario has been overtaken.””

  30. 30
    zman Says:

    Nymex for 2022 is at $4.03

    Street is at $3.17.

    Much more of this elevated pricing will forecast Street to revise their price deck and therefore their estimates and price targets higher for the gassy group.

    Nymex for 2023 is down at $3.24 as we remain sharply backwardated. $3.24 is a lot better than it was a year ago but this will temper analysts willingness to really mark up 2022 more than grudgingly towards the $3.25 to $3.50 type range.

    In the last 4 weeks the street has upped 2021 by 4 cents to 3.20 but they’ve not budged consensus from 2022 at $3.17 and 2023 at $3.00. This likely changes after we close 3Q, also as more forecasts for the winter come in.

  31. 31
    zman Says:

    Always, always, always DCA.

    I never expect the market to come to the same conclusion that I’m smarter than the rest of them the moment I fire off a trade.

  32. 32
    Zorgnak Says:

    SWN Support at 4.92…August value area high…

  33. 33
    zman Says:

    re 32 – thanks

  34. 34
    Zorgnak Says:

    AMRC One of my favs….Gap close..held June Value area highs….finding buyers at 50 EMA

  35. 35
    zman Says:

    re 34 – congrats.

  36. 36
    zman Says:

    Rig Count Watch

    Oil up 10 to 411 vs 179 a year ago (recovering from Ida dip)

    NG down 1 to 100 vs 73

    Permian up 5 to 259, a new cycle high

  37. 37
    Anonymous Says:

    EVs and renewables acting well in a down market.

  38. 38
    Skeptcl Says:

    37 is me

  39. 39
    zman Says:

    re 37/38 – hear ya, need to, especially on the EV side.

  40. 40
    zman Says:

    ENPH looking like it wants to hold the range and move back up.

  41. 41
    Zorgnak Says:

    IEA Bouncing off the June Value Area and Major acceptance..volume gap to 13
    65 Minute

  42. 42
    zman Says:

    re 41 – thanks for the read. Adds by us in the next two weeks likely below $13 and in the base.

  43. 43
    Zorgnak Says:

    Seeing reports that steel prices have peaked…
    SLX Steel Stock ETF breaking down…Go ARRY
    Steel ETF

  44. 44
    zman Says:

    re 43 – saw big drop in iron ore noted earlier today. Agreed. Good to see.

  45. 45
    zman Says:

    ARRY speaks at Roth virtual solar symposium next week. ENPH speaking too.

    In panels/upstream – Unowned names JKS and MAXN speaking as well.

  46. 46
    nrgyman Says:

    PXD seeking to sell its Delaware Basin assets:


  47. 47
    nrgyman Says:

    RE 43: US Steel (X) just announced it plans to build a new steel mill in the US. Sign of a top in steel prices or will steel prices remain relatively strong?

  48. 48
    Zorgnak Says:

    SP Futures Bulls don’t want to see a close below 4430…next support at the August range lows at 4377….

  49. 49
    zman Says:

    re 46 – thanks – for PE the Delaware was never really the focus, good Wolfcamp A, C and strong 3rd Bone (Pecos, Ward, Reeves).

    Potential buyer in FANG (unowned), less likely MTDR (unowned).

  50. 50
    Zorgnak Says:

    #47 sign of buy USA?

  51. 51
    zman Says:

    re 47 – ha, may depend on how they plan to fuel it.

  52. 52
    zman Says:

    re 50 – traceability meets $12,500 EV tax credit vs $7,500 EV credit for non dom players.

  53. 53
    nrgyman Says:

    RE 49: DVN is also a potential buyer. CPE has a big chunk of their Delaware assets nearby as well, but CPE is smaller and has debt concerns. Perhaps if CPE sold their EFS assets and traded their Midland assets plus cash for PXD’s Delaware footprint it could do it, but that’s too many hoops to jump through. Plus PXD may only want cash as they have enough Midland assets already.

  54. 54
    zman Says:

    re 53 – agreed.

  55. 55
    nrgyman Says:

    RE 49: FANG announced a $2B stock repurchase plan today. Interesting that PXD is looking for $2B for their Delaware assets. FANG could boost CF per share with either strategy so other considerations like synergies and scale efficiencies could factor in. Also, FANG was rewarded today with a nice stock price boost on the buyback plan so the market may not be inclined to support an acquisition instead.

  56. 56
    zman Says:

    re 55 – yeah, saw the buyback, maybe not, just noting the Pecos map on old PE cheat sheet would lay down really nicely with FANG Pecos now and FANG gathering really robust in that area, likely offering ability to get OPEX/BOE down pretty quick. FCF is set to balloon at FANG too (2Q was ~ $600 mm, lot more in 2H21) and FANG has some other sales in process raising cash. Just a thought, I don’t have a dog on this hunt.

  57. 57
    zman Says:

    Interesting Friday interest in ENPH, topping $160, a bit over 20 day avg full day volumes now.

  58. 58
    Zorgnak Says:

    QS You mentioned this one earlier this week…Finally higher lows…22.16 is a major price/volume pivot point coming up for a test..

  59. 59
    nrgyman Says:

    RE 56: FANG is a good thought. The assets do match up. One of the potential synergies is the midstream connection (RTLR) which could benefit from the acquisition. FANG’s asset sales process has been slow but that could boost their chances as well.

  60. 60
    zman Says:

    re 58 – thanks for the read. No adds contemplated at this time, holding.

  61. 61
    zman Says:

    re 59 – let me know if you see acres involved ( I knew of about 42K and production from it). This was prior to FANG taking in DBLE and I don’t have what their Delaware consisted of close at hand.

  62. 62
    zman Says:

    People suddenly discovering STEM on a Friday is good to see. Outlook has not changed but one wonders if it hasn’t leaked that additional coverage is around the corner.

  63. 63
    nrgyman Says:

    RE 55: One thing about stock repurchase plans is that they don’t specify when the shares will be repurchased. It gives mgt discretion as to if, when and how much. Having a plan in place could be useful if a company makes an acquisition, since the stock often sells off after such an announcement and a buyback might be well-timed in that occasion. FANG’s buyback plan does not preclude an acquisition and it could help afterwards.

  64. 64
    zman Says:

    Natural gas net short position back to most net short of year. 0.67x long to short.

  65. 65
    zman Says:

    re 63 – right. In the case of names like MGY, they plot a course of how much they want to buy but this varies with opportunity (more bought at less price than at higher price or as they can from their PE). In the past (like around 2017-2019) big announcements to buy back more shares were often grain of salted as the FCF just wasn’t there. I much prefer to see a sustainable common dividend developed over time along with a buyback that helps that dividend grow by shrinking the denominator. I think special dividends are worth less as I don’t need the street to be playing another guessing game “how big is the special going to be ?” and I don’t need special there to enforce discipline on management. We go for managements where discipline is already in place and where they can honestly saying buying their own shares back is the best use of capital vs M&A.

  66. 66
    Zorgnak Says:

    MAXN Trying to breakout…above 19.60 it begins to leave the volume base behind….wild trader

  67. 67
    zman Says:

    Ending up about 4% on the week.

    The Wrap will be out Saturday around noon EST.

    Have a good weekend.


  68. 68
    nrgyman Says:

    RE 61: PXD describes their Delaware position as “contiguous ~100,000 net acre position
    in the Delaware Basin with high oil cut
    and low royalty burden increases
    margins and drives free cash flow.” It is located at and around the confluence of Pecos, Ward and Reeves counties–straddling the edge of the productive Delaware border. FANG owns assets both west and south of PXD’s position, but nearly adjacent. Those PXD Delaware assets would be a perfect fit with FANG’s position.

  69. 69
    nrgyman Says:

    RE 68: CPE’s Delaware assets are located both north and west of FANG’s position, but nearly adjacent.

    If I recall correctly, PXD’s Delaware position was originally put together by Bud Brigham, then sold to PE, which was then acquired by PXD.

  70. 70
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