Monday Morning



Market Sentiment Watch:  This is the final week of the quarter with a good amount of key economic data, the OPEC+ meeting, and then the oddness out of EIA's release troubles. Expect volatility. Also, note the end of quarter buying in the gassy names last week despite the move in gas. This is the positive kind of action we are looking for to add on. As always, our adds our DCA's and not swings for the fences. 

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    In today's post please find:

    • The Week That Was,
    • The Five Things,
    • and some other odds and ends.

    In case you missed The Wrap.

    Eco Data Watch: 

    • We get durable goods at 8:30 am EST (F = 0.2%, last read was 0.5%),
    • We get the pending home sales index at 10 am EST (F = -0.4%, last read was -3.9%)
    • We are supposed to get an update on future EIA weekly releases today. 

    The Week Ahead: 

    • Tuesday - Trade in goods, Case-Shiller home price index, consumer confidence (big fall expected),
    • Wednesday - 1Q22 GDP revision, EIA Oil Inventories (maybe)
    • Thursday - OPEC+ Meeting, Jobless claims, PCE inflation, disposable income, consumer spending, Chicago PMI, EIA Natural Gas Storage (this could also be a maybe),
    • Friday - ISM manufacturing, construction spending.

    In Today’s Post:

    1. Holdings Watch
    2. Commodity Watch
    3. The Week That Was
    4. Stuff We Care About Today – The Five Things, Subscriber Mailbag Watch
    5. Odds & Ends

    Holdings Watch:

    ZLT (Zman Long Term portfolio)

    • Last Week’s Trades:
      • We added small cap completion company RES to the portfolio. This is a Starter position and our average cost is $7.57. We see them a core holding and potential target for others names in the space including names we own. 
      • We added to USWS, have just over a 3% position now and an average cost of $0.69 and see the name as a discount way to participate in PFHC, a mid cap frac player than we expect to have a strong second half. We are not looking to wait out the close of the deal in 4Q22 here but plan to trade out of this when PFHC reaches mid $20's to close to $30.
    • ​The Blotter is updated.

    Commodity Watch:

    Crude oil ebbed 0.3% to close at $107.62 after a volatile holiday shortened data lacking week that nearly saw a $100 test on recession fears.

    • EIA failed to update their weekly oil statistics report. We don't know at post time whether or not we will get one or two or no reports this week. 
    • Oil directed rigs continue to head higher and the CFTC data shows we are still just inside what we see as elevated long to short territory. All eyes will be, more than usual, on the EIA commentary.  We expect to see a near term lift in refining (this week or next) and strong exports over summer (no idea this week). 
    • China Watch:  Shanghai again easing restrictions.
    • Travel Watch: U.S. screened a pandemic period high number of travels last Friday. 
    • Libya Watch:  May see further curtailments this week as protests threaten production/exports.
    • This morning crude is trading up slightly. 

    Natural gas fell 10.4% to close last week at $0.104 after EIA reported a bigger than consensus that was in line with the top end of our expected range. We suspect prices were also helped lower by follow through from the prior week's Freeport LNG outage news and despite ongoing reduced flows from Russia to Europe. 

    • Look for a smaller build in a range of +60 to 70 Bcf this week (if we get the report).
    • EU/ Russia Watch:  European Commission issues statement requiring EU member states to fill natural gas storage to 80% capacity by November this year and 90% in subsequent years. 
    • LNG Watch:  LNG shipments to Europe are up 75% since March vs 2021. LNG shipments from the U.S. to Europe are up nearly three fold.
    • This morning gas is trading down slightly.  

    Weather Watch: Warm but less hot

    • Last week:  Cooling Degree Days (CDDs) came in at 64 vs 57 normal, a forecast of 66 and 72 in the prior week.
    • This week's forecast:  This week, CPC predicts CDDs will increase to 69 vs 64 normal.

      The Week That Was

      Stuff We Care About Today

      The Five Things ~ (Significant changes or re-highlights in RED)

        Subscriber Mailbag Watch:

        Q) "Z, Where do you see the opportunity to trade? You wrote this in your comments: "We've also reviewed several unowned names lately that are falling back to what some, not us, but some would call generational buying opportunities. We think they are definitely worth a look for the trade oriented. Ask about them in the comments section." "

        Z4 Comments: In lots of places, including our Owned names as well which I'm happy to expound upon in comments today but in the "Unowned" arena:

        1. Three Permians:
          1. CPE (unowned) - well run, high margin (oily) Permian with a leverage - no yield but significant free cash flow channeled to balance sheet improvement and modest growth. Here in mid June we said "We will be watching it more closely and may add the name should the group or it take a large dip that brought the forward multiple below 3x." Wrote that at $55.69.  At Friday's close just under $41 it's at 3.1x.  This should be a target in a round of consolidation that we see coming in 2023. 
          2. CDEV (unowned) -  Also written up mid June, 27% off in < 2 weeks, less leverage, lightly hedged, just doubled it's production with an acquisition, offering a modest yield and should be ready to buy back shares at these levels rapidly. The name is super cheap on our $80, let alone our $100 math.  This may also be an acquisition target. 
          3. FANG (unowned) - super well run big cap Permian, in maintenance mode and unlikely to change that. Look for an update from us soon here.
        2. One unowned gassy name - CHK.
        3. CRGY - we own it but not a lot, cheap.
        4. Service - PFHC - at these prices it's very cheap to group. That said, we have an interest given they are buying our USWS.
        5. There are others but these leap out for cheapness.

        Other Stuff

        • VWDRY - look several several order announcements this week (running late this quarter),
        • VWDRY - establishes new Digital Solutions function to "digitally transform our business to enable stronger customer focus, scalability and profitability."

        Odds & Ends

        Analyst Watch:

        • TBA in comments

        68 Responses to “Monday Morning”

        1. 1
          zman Says:

          re Other Stuff … here we go …

          VWDRY announces 30 MW (very small) floating (interesting) wind park off France in the Med.

          3 x 10 MW turbines. 2024 commissioning with a 15 year management contract.

          Likely many more announcements today to Thursday.

        2. 2
          zman Says:

          ENPH – another in it’s weekly series of progress updates – this one in Washington state regarding IQ8 adoption and storage.


        3. 3
          zman Says:

          Got a mailed in question on the US frac cycle. Don’t think they’d mind if we shared part of our response.

          Some thoughts on US frac capacity.

          1) it’s virtually sold out now. There are probably 10 spreads depending on how you count a spread that could be activated this year without significant maintenance.
          2) costs beyond that are likely $15 to $20 mm for stacked spreads.
          3) conversion kits are cheap for tier ii going to tier iv but they are in somewhat short supply.
          4) new builds are $40 mm+ (although USWS says their efleets are actually a little cheap to build now than a new tier iv DGB fleet. Other efleets are well north of $60 mm.
          5) long lead times for key items mean new builds really don’t impact this year and maybe some do next
          6) fleet attrition due to bigger jobs and group discipline should keep industry capacity growth to a minimum in 2023 (others seeing the same retire, replace as a good thing).

          So while we see rates slowing in 2023 flattish oil and lower natural gas we don’t see net pricing beating a retreat. DUCs are already starting to build. Maybe downcycle in 2024 as this industry is, well this industry but we expect a plateau next year which augers for strong revenue and EBITDA growth over 2022. We also see frac looking to replicate E&P’s return of capital approach to shareholders. We shall see on that.

        4. 4
          zman Says:

          Analyst Watch:

          Citigroup cut targets across the gassy space and parts of the oily space (on gas price assumptions) today. Many names received substantial target reductions.

          This is kind of typical analyst action. We don’t know how much they cut their price deck but would note they did it after Freeport and the price dip. We don’t let gyrations in short term pricing move our thoughts on the group. But this is healthy in our view and we don’t expect investors to care but instead see it for what it is, an analyst who doesn’t want to get fired and does want to ring the register for his sales desk.

        5. 5
          zman Says:


          Not new and unlikely to be a big production bump for the U.S. but activity said to be up. Was not a major topic last few calls. We would see this as modestly incremental to the macro and not revolutionary.

        6. 6
          Anonymous Says:

          Morning Z, did you see anything on Friday that caused the solars to be weak on a big up day?

        7. 7
          zman Says:

          re 6 – did not, strong week for that group but odd action on Friday, could be an analyst of note cut thoughts there but didn’t see anything.

        8. 8
          zman Says:

          At equity open

          WTI down slightly
          NG down 2.5%

        9. 9
          nrgyman Says:

          MVP seeking a 4 yr extension from FERC to complete project.


        10. 10
          zman Says:

          re 9 – Thanks. We noted they got some court relief last week in the 5 Things above but are not thinking it’s a near term fix. Given the number of obstacles it makes sense to ask for more than enough time to get through them.

        11. 11
          zman Says:

          In case you missed our free piece on PFHC + USWS


        12. 12
          zman Says:

          3 X’s on the map


        13. 13
          zman Says:

          Early Read on Storage:
          Consensus: +70 Bcf (vs our +60 to +70 Bcf range),
          Last Week: +74 Bcf, 
          Last Year: +73 Bcf, 
          5 Year Average: +73 Bcf

        14. 14
          Skeptcl Says:


        15. 15
          zman Says:

          re 14 – gorup largely green again today, led by Chinese names and then inverters.

        16. 16
          zman Says:

          USWS – constructive move as PFHC edges up to $20, reducing the arb gap to 10%.

          $20 PFHC x 0.0561x = $1.12 vs the current $1.01 USWS

        17. 17
          zman Says:

          Heading to an appointment, back in an hour.

        18. 18
          zman Says:

          Back, working on an update, shout if you need something.

          EIA says it had a voltage problem with a couple of processors. Still doesn’t have a timeframe for return of weekly reports.

        19. 19
          Zorgnak Says:

          Good Morning…
          ZLT stocks ranked from % change since open..

        20. 20
          zman Says:

          re 19 – morning Zorg, thanks.

        21. 21
          Zorgnak Says:

          Crude Oil Continues to trade in value. Value area high/low 102-111.
          USO In value. Testing value area high.

        22. 22
          zman Says:

          Putin hit residential buildings with cruise missiles including in Kiev during G7 meeting.

          Hit a couple of malls today, one with a 1,000 people inside during the NATO meeting.

          Message re peace seems pretty clear. He’s not backing down.

        23. 23
          Zorgnak Says:

          Nat Gas Very low volume continues here. Absolute volume and short term demand volume trend (10 days) fell off a cliff but the more intermediate demand volume trends remain positive.

        24. 24
          zman Says:

          ENPH looking constructive Zorg.

        25. 25
          Zorgnak Says:

          The volume on the ZLT nat gas names on Friday was pretty eye popping…
          SWN as an example

        26. 26
          Zorgnak Says:

          #24 re ENPH Back to that long and short term level of interest.
          Daily The volume profile bell curve is for the last two years..A break higher rejects that as too low.
          Weekly Shows the base break of this years value area highs…

        27. 27
          Zorgnak Says:

          Broad Market
          S&P Futs back to the 3900 level which as been a magnet on both the downside and now upside…
          Demand volume remains anemic. EOM retirement flows might bump it to 4000?

        28. 28
          Zorgnak Says:

          XOP All the markings of a swing low last week. Extreme oversold buy setup with a high volume reversal at multiple levels of potential support.
          Testing resistance/value area lows at 128.54…

        29. 29
          zman Says:

          re 25 – yes it was, 2 to 5x the 20 day average. Should be seeming filings soon as those were way beyond what retail could account for.

          Again, the group is easier to buy with down gas than up. What Citi did this morning is helping with bottoming.

        30. 30
          zman Says:

          re 26 – thanks – got thoughts on PFHC / USWS?

        31. 31
          Zorgnak Says:

          AR Back in value. Extreme high volume reversal after the oversold setup.

        32. 32
          zman Says:

          re 31 – remains our 3rd largest position. Amazing the pullback from 52 week highs, set this month, this group had.

        33. 33
          Zorgnak Says:

          CIVI 53.91 is major acceptance. Very high volume buying at that level last week. Trading back in value this morning.
          Weekly Dashed line is major acceptance since beginning of trading.

        34. 34
          Zorgnak Says:

          USWS Short term. .999 was the hump last week. Appears to be eating thru that level this morning. Opens up the next lump of supply and major acceptance at 1.12 as the next upside magnet.
          65 Minute Chart

        35. 35
          zman Says:

          re 34 – thanks.

          Quiet Monday in summer, nice to see no drive to knock E&P and Service into quarter end.

          Here, working on a FANG (unowned) update for tomorrow’s post.

        36. 36
          zman Says:

          CRK – Call volume flagged. Some much for investor faith in the Citi call to lower target there.

        37. 37
          Zorgnak Says:

          PFHC Last week…Hard rejection of it’s IPO volume base and previous major acceptance at too low.
          Nice bounce consolidating between breakout of IPO base and trapped longs at 20.58, the next short term level of supply.
          65 Minute

        38. 38
          zman Says:

          OT – grabbing lunch, back in a bit.

        39. 39
          Zorgnak Says:

          RRC A common chart on the nat gas stocks..
          Very high volume reversal on the extreme oversold setup at previous acceptance and other technical levels of interest..Back in value..

        40. 40
          zman Says:

          Here, reading, shout if you need something.

        41. 41
          nrgyman Says:

          Toby Rice (EQT CEO) just on CNBC (he is their go-to CEO for natgas comments). He claimed that without red tape and legal challenges the US could build LNG facilities and pipelines within 2 years to supply the world (and US ) with all of the natgas it needs. Europe would see $9 natgas prices ($30 now) and the US would see $4 natgas ($6.50 now). He claims the US industry would be modestly profitable and consumers everywhere would benefit. No tax increases or gov’t funding needed–it would be provided by industry. And natgas could replace coal globally, reducing pollution and CO2 emissions substantially.

        42. 42
          zman Says:

          re 41 – yeah, more yada non real world from him. Lots of enthusiasm, detailed what if plan, but those “withouts” are kind of key. Not going to happen. FID’s will increase and the U.S. will add significant new annual capacity, incrementally over time.

        43. 43
          nrgyman Says:

          RE 41: Rice also said the current admin is not responsible for the energy crisis (claims it has been building for 10 years and the ESG movement has built huge legal and regulatory impediments) but this admin is responsible for if and how we resolve it.

        44. 44
          zman Says:

          ROCC (unowned) – no news, bounced off a rebound above 200 day. Recent update from us, should be on the Trade oppy list with the others from today.

        45. 45
          zman Says:

          re 43 – yeah that first part is fair. I think it’s largely beyond one Admin’s ability to control, especially pipeline related issues.

        46. 46
          zman Says:

          SPR reports another 6.9 mm barrel withdrawal.

          Still no firm word from EIA on when weekly reports will resume.

        47. 47
          nrgyman Says:

          RE 45: RE pipeline issues: FERC is not really the problem either. The problems arise from the legal challenges related to the various environmental regimes in place. Impact studies, water crossings, etc., that are not streamlined and take excessive amounts of time due to challenges, raising costs and the lengthening timelines–if they are even allowed. How does an admin fix that? Perhaps Congress could with new laws/regs but even that would be no doubt challenged if it was perceived as easing environmental standards.

        48. 48
          zman Says:

          Analyst Watch – some of the Citi target drops

          CRK – $22 to $16

          RRC – $35 to $26

          SWN – $8.25 to $7

          CTRA (the old COG + NEX – cut from Buy to Neutral, target from $40 to $27

        49. 49
          zman Says:

          re 47 – exactly, they don’t. On the oil side, it’s really refining that needs to increase and would not again that nothing concrete emerged from that meeting last week. Barring the Admin acquiring and repairing recently shuttered capacity (really would not recommend that) there’s not much they can do to get refiners to quickly add to throughput.

        50. 50
          nrgyman Says:

          RE 48: Good to see the natgas names rally in the face of that downgrade.

        51. 51
          zman Says:

          re 18 – here’s the statement. Still no timeline for resumption of the weeklies.


        52. 52
          nrgyman Says:

          RE 49: They could stop the conversion of 2 refineries to biofuels, which could bring extra capacity online fairly quickly, but the admin rejected that option.

        53. 53
          Zorgnak Says:

          CRGY Extreme oversold setup last week approaching 2 year value area lows at 11.66…recent acceptance higher at 13.78 appears to be upside magnet…Two year, major acceptance at 18…Low volume stock

        54. 54
          zman Says:

          re 52 – Would expect that to wind up in the courts.

        55. 55
          zman Says:

          re 53 – CRK holding support.

        56. 56
          zman Says:

          CIVI taking a look at breaking back up through it’s 200 day now.

          At $57, TEV to our 2022 EBIDA cases show extremely inexpensive.

          Base Case ~ $80 oil, NGLs 40% of WTI, $6.00 NG 2.9x
          Stretch Case ~ $100 oil, NGLs 40% of WTI, $6.00 NG 2.3x

          and extremely high implied combined yield:

          Base Case Implied Variable $5.38 $5.38 12.7%
          Stretch Case Implied Variable $8.37 $8.37 17.9%

        57. 57
          zman Says:


        58. 58
          zman Says:

          WTI settled at $109.57

        59. 59
          Zorgnak Says:

          ZLT Ranked by % change since open. Far right column is the relative position in each stock’s daily range. A lot of near HODs going into the close.

        60. 60
          zman Says:

          re 59 – yeah, this is more of our preferred type of Monday, up 4+% on the day.

        61. 61
          Zorgnak Says:

          USO Broke back above it’s value area highs, and the 20, 50 MAs. Gap close at 84.11

        62. 62
          Zorgnak Says:

          RES Recent addition to the ZLT.
          Weekly Extreme oversold took it back close to the long term volume base.
          Daily High volume reversal on extreme oversold setup on the daily time frame.Low volume area begins at 7.19, ST upside magnet at 8 (previous acceptance.)

        63. 63
          zman Says:

          Beerthirty, back in a bit.

        64. 64
          zman Says:

          The request line for name updates is open.

        65. 65
          crysball Says:

          Quaise Energy

          An interesting disruptive technology which will be tested in 2024.


        66. 66
          Justin Says:

          Any interest in NOG? I’m impressed with their new team.

        67. 67
          zman Says:

          re 66 – I don’t have an opinion now but will take a look.

        68. 68
          zman Says:

          CHK (unowned) – as Nrgy noted over the weekend, COO buys 1,700 shares at $75.19

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