19
Feb
Wrap – Week Ended 2/18/22
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Choppy week in the broader and energy markets with most eyes on Russia and not the U.S. economy with energy eyes also glancing at the ongoing talks with Iran. Volatility remains high regarding both the Ukraine situation and the JCPOA. We note the DJIA and SPX are now down 6% and 9% on the year respectively while the energy benchmarks range from up 6% (gassy names) to up 30% (oilfield service).
Meanwhile 4Q21 results continue to unfold largely as expected.
- 2022 maintenance mode very much engaged for gassy players.
- Modest service inflation.
- The latest version of 4Q21 So Far This Quarter can be found on the Calendar link at left (subscriber click here) summarizing reports from and outlooks for 20 names that have reported on our calendar of 65 names we care about this quarter.
- Next week we get more reports from owned names in Frac and owned and unowned oily and gassy names.
Holdings Watch:
- We sold our position in SLB, up 36%.
- We added to our CRK position ahead of earnings at $7.30 and we added a sand name to the portfolio.
- The Trading Blotter is updated
Free Stuff Last Week:
Numbers of Note From The Wrap Table Below:
- Oil.
- Prices were mixed on the week with Russia/Ukraine news causing hourly swings. WTI ended on a soft note but inventory news for the week was better than expected from EIA as well as by some key international measures.
- The basic U.S. 3-2-1 crack retreated modestly but remains in strong territory.
- Oil directed rigs hit a new pandemic high and we continued to expect modest 1H22 growth in the count as operators gradually skew from overwhelming to DUC depletion operations to frac spread follows new well spuds mode.
- Frac spreads hit another new pandemic period high.
- Sidebar: We hold 3 U.S. focused Frac companies and added a Sand name this week.
- Natural Gas.
- Prices were resilient due to a short term cooling in the U.S. forecast.
- The storage build was in line with lowered estimates.
- We are 400 Bcf away from our mid point EOS trough target.
- We expect a > 100 Bcf withdrawal next week.
- Gas directed rigs hit a new pandemic period high. Most of the rigs added were in the Haynesville.
- Sidebar: We added more Haynesville exposure earlier this week.
- Natural gas prices remain more than resilient as well as propane stocks spent a second week in below range territory.
- Renewables - After a soft opening to the year most names continue to largely tread water ahead of a 4Q21 reporting season that really doesn't arrive for most names until March.
Questions and comments under The Wrap will be addressed in the post post. Questions about the site may be directed to zman@zmansenergybrain.com.
Have a good weekend. Don't get invade if you can help it.
Z.
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Interesting Short Reading Watch:
https://www.bloomberg.com/news/articles/2022-02-20/u-s-oil-and-gas-permits-delayed-after-federal-court-ruling
Note the bit about NM permits, small so far but that will grow with time unless they sort this out quickly.
February 20th, 2022 at 10:09 amWeather Watch:
Last week: Gas-weighted Heating Degree Days (HDDs) came in at 198 vs 197 normal and 183 in the prior week.
This week’s forecast: This week, CPC predicts HDDs will ease to 181 vs 185 normal.
February 21st, 2022 at 10:58 amif you go to around the 59-minute mark, there is a very interesting discussion on Russian gas into the EU.
interesting quote “we have decided to do everything we can to get rid of this dependency”
February 21st, 2022 at 11:07 amre 3 – thanks
February 21st, 2022 at 11:30 amShell talking about a historic deficit market in LNG for the coming years. Supply growth significantly behind demand growth. They are talking their book, but Shell is not hype-y.
https://seekingalpha.com/news/3802229-shell-lng-market-update-historic-deficit-market-in-coming-years?mailingid=26782582&messageid=2900&serial=26782582.23132&utm_campaign=rta-stock-news&utm_content=link-3&utm_medium=email&utm_source=seeking_alpha&utm_term=26782582.23132
February 21st, 2022 at 11:44 amre 5 – agreed and thanks.
February 21st, 2022 at 11:44 amWe get 4Q21 reports from:
NEX
February 21st, 2022 at 1:00 pmand
SOI (unowned) after the close
and
BSM (unowned) before the open.
re 3 – “import roughly 90% of gas” … majority Russian gas.
Gazprom has delivered at contract lows for last 6 months. Normally they’d be maximizing.
Storage at 10 year low.
February 21st, 2022 at 2:31 pmPutin says Ukraine plans to develop nuclear weapons with technical support
February 21st, 2022 at 2:46 pmPutin to decide later Monday on recognizing independence of separatist regions in eastern Ukraine.
February 21st, 2022 at 2:48 pmre 11 – never mind, he just did.
February 21st, 2022 at 2:53 pmWTI up $2.60 to $92.81
https://www.investing.com/commodities/crude-oil
Brent > $96
February 21st, 2022 at 2:57 pmAMLO’s INCOMPETENCE is in full display, with the notification by KKR of intent to sue to recover $815 milllion +++, and force arbitration under former NAFTA provisions.
This will do IRREPARABLE HARM to Mexico’s ability to raise capital.
KKR vs. Mexico’s López Obrador by @MaryAnastasiaOG
https://www.wsj.com/articles/kkr-mexico-lopez-obrador-amlo-investment-monterra-energy-oil-terminal-export-monopoly-nafta-usmca-arbitration-tribunal-11645463328
February 21st, 2022 at 4:59 pmDraft from tomorrow’s post.
NEX is a big beat as expected.
Rev of $510 mm vs $502 mm exp
EBITDA of $80 at top of range and well above Street’s $57 mm
EPS of $0.08 vs ($0.02) exp.
4Q21 Numbers:
As expected, 30 deployed and 29 fully active fleets in the quarter vs 25 and 24 respectively in 3Q21.
Note the EBITDA margin at 15.7%. Best level since 2019.
Previously they had said to look for an end of 3Q exit rate of $18 to $20 mm per quarter (so $80 mm in 4Q which is the high of the guidance from early this year is good confirmation of their ability to forecast the short term at present).
Annualized EBITDA per fleet of $11.1 mm. Best level since 4Q19.
Guidance:
1Q22: 31 fleets expected with a 1Q exit rate of 32 fleets. This is in line with prior comments although they did experience supply chain related delays in deploying the 32nd fleet.
Revenue growth in the low to mid single digits.
Street is currently at $537 mm (up 5% sequentially)
Favorite Guidance Quote Watch: ” Despite continued supply chain challenges and inflationary pressures, we anticipate exiting the first quarter with double-digit annualized adjusted EBITDA per deployed frac fleet. We expect to exit the first quarter with ongoing momentum as the market backdrop continues to strengthen.”
2022 Capex is expected to be below 2021 levels and front end loaded.
FCF > $100 mm in 2022 and accelerating through year end.
Street at $135 mm now.
Highlights:
Favorite Quote Watch: “As our industry begins an upcycle driven by rapidly tightening markets for oil and gas and several years of global under-investment in energy production, the Company is well positioned to provide differentiated value for customers and investors during 2022.”
They see US frac momentum continuing in 2Q22 through the year.
Other Items:
Balance Sheet: 0.8x net debt to annualized 4Q21 EBITDA vs 2.0x at the end of 3Q.
Short Interest: Only 2% of float.
As previously announced they will hold an investor day on March 3.
Nutshell: Strong quarter. Strong momentum. 1Q22 guidance could give some pause but we don’t think for long. We own NEX as our #1 position in Frac (it’s overtaken LBRT since the start of the year as it essentially doubled off the lows and we added with the 4Q guidance) and it’s now the 5th largest position in the portfolio with an average cost of $4.12.
February 21st, 2022 at 5:27 pmPutin to decide later Monday on recognizing independence of separatist regions in eastern Ukraine.
This makes all the sense in the world is that is where the oil is. 1st make them separate with Russian leaning populations, then absorb or have to ‘protect’ them with occupation.
February 21st, 2022 at 6:21 pmDJ futures down 560.
February 21st, 2022 at 7:13 pmSOI (unowned) – modest beat, non granular guidance.
We are hearing strong sand pricing (over 100% increase in last nine months in some areas like the Permian).
February 21st, 2022 at 9:24 pmBSM (unowned) – nice beat on volumes, guidance for 2022 is light to Street on timing.
February 21st, 2022 at 9:25 pmRe 3
at 3:39 there is a very good speech by Boris Johnson. In it he suggests that Germany has agreed that if Russia invades Ukraine, they will not commission Nord 2.
February 22nd, 2022 at 6:31 amre 19 – yeah, Germany canned approval right after you posted. The Tuesday post is up:
https://zmansenergybrain.com/2022/02/22/tuesday-morning-energy-earnings-4q21-week-6-busy-busy/
February 22nd, 2022 at 7:30 am