Wrap – Week Ended 2/9/24

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Better week for the portfolio but sentiment for the U.S. upstream and oil service remains fairly (and overly) poor.

• Oilier E&P names, which represent the largest wedge of our portfolio, are showing signs of bottoming as oil does. Multiples are overly contracted while balance sheets and yields remain in good territory. Oilier mid cap reports have not really kicked off yet but will in a couple of weeks and we expect "maintenance plus" type programs for 2024 on flattish YoY capex.
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• The gassy names represent a smaller portion of our portfolio and are down far less than prompt gas as they eye elevated but not terrible natural gas storage levels, growing non-heating related demand, and supply (production plus net imports and exports) that is in plateau. Last week we added a further downside case for a gassy names in their 2024 models, the Basement case, at $2.50 gas for 2024. Please see Thursday's post for the Gassy Players Liquids Rich update. We have two top 15 positions and three much small holdings that are natural gas centric.  We continue to slowly build the small, re-entry position in AR (having previously sold our large position there at $26.90, up 70%, last September). So far in the 4Q23 reporting season only one of the big cap gassy names has reportec but this will change in the coming week and we expect many to be looking at 1H24 production dips with a ramp up late in 2024 to achieve another maintenance year on lower capex.
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• On the oil service front, our holdings are largely frac and sand tied and sentiment there is OK/holding pattern/poor depending on Basin focus. We note that rigs have bottomed and are edging up in 1Q24 a little more slowly than expected while the active frac spread count is rebounding rouhgly as expected. So far earnings here have been upbeat and discipline focused. We had not expected a lot of new iron to hit the fields in 2023 or 2024 and so far outlooks point to new horsepower set to replace less capable, aging horsepower, and not to be incremental.
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On the renewables front, 2023 headwinds are shifting to 2024 tailwinds for our top names.

We are through 18 reports of interest and or owned names in the 4Q23 reporting season and have 58 more to go as things heat up by mid February and early March. Our latest calendar may be viewed here. 

Free Stuff Last Week:

• GRNT update. If this link is not free to you feel free to contact us at the email below.

Holdings Watch: Last week's trades (abbreviated) 

• We added to our position in ENPH just ahead of the 4Q23 earnings release at $99.
• We added to our position in AR at the end of the week at $21.08
• The Blotter is updated.

Questions and comments about the site may be directed to zmanalpha@gmail.com.  You can also send a note there if you'd like to take a Test Drive. 

Questions and comments under The Wrap will be addressed either this weekend on in the Monday post. If you have something you'd like to see us cover or comment on drop a note in the comments section.

Thanks for reading. Have a good weekend,

Z

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