28
Jan
Wrap – Week Ended 1/27/23
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It was a fairly busy second week in the energy earnings 4Q22 reporting season with reports from one large cap gassy upstream player, an indie refiner, a Major, and several oil service names posting largely better than expected results and as expected guidance and outlooks. CNX (unowned here) was a modest exception to our 5 Things list of items to expect for 4Q22 in terms of volume guidance (most will be in maintenance mode), with a down 3% forecast on one off items whose effects will cascade through 2023 (so, "maintenance minus"). Please see yesterday's So Far This Quarter update that covers the high points of the season name by name from SLB at the start of season through mid week and look for the next iteration next Tuesday.
The portfolio ended the week up 0.8% in a lackluster week for the commodities. This is noise in our view and our outlook remains constructive for oil and increasingly constructive for natural gas.
Please also see our comments and cheat sheet update for the TXO IPO in last Thursday's post. The deal priced in the middle of the range at $20 and ended Friday at $22. Still a nice yield there in this low float small cap SJB and Permian gassy partnership.
Holdings Watch:
- Busy trade week as the ZLT goes with adds to one solar tied name, one frac name (multiple trades), one sand name, and two of our smaller upstream gassy positions where we've been fairly patient adders through the shoulder and the mild spots this winter.
- The trading blotter is updated here.
A few brief comments on The Wrap table below:
- Oil
- The EIA weekly was much less sloppy this period delivering on our thoughts of higher throughput and much lower net imports (3rd lowest weekly figure on record and the lowest for this week of the year).
- Implied demand as portrayed by EIA remains, in the words of Valero management, "low to us" and the expect those numbers to get corrected going forward.
- Cracks remain extremely elevated as gasoline and especially distillates are well under-stored to the five year average.
- The WTI - Brent spread remains conducive to elevated exports even as we saw a second week of zero SPR barrel release.
- Natural Gas
- Last week's withdrawal was modestly above Street consensus and was in line with our "near 90 Bcf" comment.
- We are looking for a "near 145 Bcf" pull this coming Thursday and at last check the consensus was at -138 BCf.
- Storage is modestly above year ago and five year average levels. This is fine.
- Freeport LNG has begun the long awaited process of getting its 2.1 Bcfgpd of capacity back on line. Look for larger feed gas volumes in coming days as they cool down and then more news from them and FERC on next steps.
- We have heard several traders and hedge funds are in the 4+ Tcf camp EOS camp and have gotten the most short they've been in 3 year. We're not in that camp. We see higher LNG this year vs last and only modestly higher dry gas production (CNX may not be the only ones to speak to lower 2023 volumes or at least lower 1H23 volumes). Meanwhile, we expect another year of record demand.
- Look for an updated macro piece from us in about a week.
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Iran Watch: Multiple sources including Iran reported widespread attacks Saturday night (at least 7 locations) across. Appears to be drones and larger munitions targeting a refinery, the defense ministry building, underground missile storage and ammunition manufacturing sites. Iran has called an emergency meeting of their security council.
January 29th, 2023 at 9:22 am