27
Apr
Wrap – Week Ended 4/26/24
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The ZLT was up 5.4% on the week last week. This was the second week of the 1Q24 energy reporting season and results were largely better than expected as we saw a number of large cap gassy names report solid numbers despite weak gas prices and remain disciplined with regard to spending. Gassy names on the whole were more bullish on medium term demand growth expectations adding another wedge to the demand pie in the form of rising data center tied power burn. We had one name, SLCA, acquired during the week. We see many of them as more than fully valued near term. Next week we get reports from a number of key oily upstream names. Please see the calendar link at left for the latest schedule.
Free Stuff Watch:
- US Silica (SLCA) acquired for $15.50 a share; highlights valuation gap for smaller peer SmartSand (SND) - This was a quick piece released shortly after the deal was announced and it was fairly popular as sand stories go.
- PEDEVCO - Interesting very oily micro cap.
Holdings Watch: Busy week
- 4/26/24 - SLCA – POSITION EXIT UP 22%. This morning we sold our SLCA (and player) position at $15.60, after Apollo Funds announced a $15.50 cash offer for the shares. SLCA was our 11th largest holding and this represents a 22% gain over our $12.82 average cost. We find the move to buy SLCA now, while gas prices are low, and activity is subdued, as interesting and forward thinking.We note that this deal values SLCA near 5x TEV/ 2024 E EBITDA. Our 2nd largest holding, SND, trades just under 2x TEV/2024 EBITDA ahead of what is expected by us to be a record quarter and volume year, while maintaining a strong balance sheet. Lastly, SND’s largest customer is EQT (unowned) and we note that over time Appalachia is likely to be the location of increased power demand for data centers given the large, low cost, well defined natural gas resources in the play. We expect activity to begin picking up in the play next year and expect SND to benefit from their relationship with EQT and other large cap gas players in the basin.
- We added to SND before and after the SLCA deal was announced.
- We added to two of our more speculative small cap oily plays.
- We added to ENPH post report ($106 to $108 after hours) and the following day snagging more shares at $99.16 the day after the call.
- The Blotter is updated here.
Have a great weekend,
Z
For those interested in PED’s development plan in the PERMIAN please see slides 14 & 15 of the attached Evolution Petroleum Investor presentation:
https://ir.evolutionpetroleum.com/static-files/19f86e72-5378-439f-848a-351d95ff2063.
Just 16 months to recover 100% of the cost to recenter the existing vertical well ore and drill & complete the Horizontal section makes this very attractive……….with a potential of over 100 wells….would hope they accelerate the 7 wells/year in the current plan as they prove up the concept of using unconventional technology in an existing field of old vertical wells.
This concept should have other potential locations if it proves up per thr plan…..
April 27th, 2024 at 7:40 pmHey, energy bros — anyone else have this game, King Oil, as a kid? My sister and I used to play it a fair amount. It had three disks stacked on each other under the main board that had holes in varying locations. You’d use an oil derrick with a plunger to see how good/bad of a well you just paid to drill. If the plunger went through all three disks it was a dry well, but if it was stopped prior to that you had varying levels of a gusher.
Prior to starting a new game, you’d rotate the three disks in varying amounts, which would not only move the location of the gushers, but completely mix up the pattern (of which there were apparently over 1,700 combinations). A pretty ingenious game, really! I had forgotten all about it, but it just popped back into my nugget with all this oil talk. LOL!
https://boardgamegeek.com/boardgame/2608/king-oil
April 28th, 2024 at 9:27 amre 1 – thanks. See also PED’s presentation:
https://irp.cdn-website.com/d2b1c715/files/uploaded/PEDEVCO%20Investor%20Presentation%20Winter%202024-4018ddc8.pdf
Slides 16 and 17
April 28th, 2024 at 5:21 pmre 2 – ha, nice. That needs a shale update.
April 28th, 2024 at 5:22 pmtest
April 28th, 2024 at 9:57 pm