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Our thoughts are with Texas and the Gulf Coast.
Housekeeping Watch: Are we using the correct email for you? If you're not getting ZBLAST's or are getting them at the wrong address contact zman@zmansenergybrain.com
In today's post please find:
- the natural gas review (slightly smaller than expected though that was due to last minute raised expectations; next week look for the 2nd highest (maybe the highest) storage withdrawal on record),
- the oil inventory review (better than expected and positive as weeklies go, next week will be an oddball report),
- and some other odds and ends.
Ecodata Watch:
- We get existing home sales at 10 am EST (F = 6.66 mm, last read was 6.76 mm).
In Today’s Post:
- Holdings Watch
- Commodity Watch - short term supply / demand table and graphs
- Natural Gas Inventory Review
- Oil Inventory Review
- Stuff We Care About Today - a few thoughts on the week, Calendar revision
- Odds & Ends
Holdings Watch:
ZLT
Yesterday's Trades:
- AR - We increased our position in AR at average $8.88, bolstering our position by 50%. The conference call is ongoing, please see our comments on the quarter in today's post and see our notes in the comments section.
The Blotter is updated.
Commodity Watch:
Crude oil closed down $0.08 yesterday at $61.06 after EIA reported an across the board better than expected weekly inventory report. As always, we take away less from the individual weeklies and more from the trending of the parts. Please see Oil Inventory Review section below. This morning crude is trading off a little over a buck early.
Natural gas closed down $0.14 at $3.08 after EIA reported a natural gas withdrawal that was modestly below expectations that had been raised as this week progressed. In our view that's rounding error and it combined nicely with profit taking that was already underway.
- Next week's number should be massive, well over 300 Bcf and potentially record setting (record was -359 Bcf).
- That puts us well into deficit territory for the 5 year average.
- Over the next couple of weeks industry watchers will note the recovery in natural gas production. We would also note there were offsets in coming up with next week's report with both LNG and exports to Mexico taking a hit from supply and logistical issues. Those too will recover.
- This morning gas is trading up 2 cents.
Short Term Supply / Demand Watch:
Key Demand and Production Graphs - demand never higher in this period last 3 years and supply never lower last 3 years than this week. Even with the slump in net exports this key drivers should prompt a near record withdrawal next Thursday.
NGL Price Watch - annual highs for the composite, propane and most components.
Natural Gas Storage Review
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Oil Inventory Review
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Stuff We Care About Today
Key Items This Week - Today we had planned to cover COG but as noted below they postponed the quarter call until next week due to Texas weather (Marcellus operations but the HQ is in Houston). Unowned names LPI and PXD also postponed their 4Q reports.
- VCVC - new development center announced in front of expected demand. Speculation regarding which OEM's will run with REE has been running high since the SPAC was announced while the share price has retreated from deal announcement levels. We see Toyota, Honda, Mitsubishi, Mahindra as kind of the obvious potential partners. A number of what appear to be EV laggards like Subaru could make some sense while a name like Mazda makes a bit less. Several larger names including Ford appear to be leaning in more in the EV space with increased focus in recent days.
- GOEV - commentary out there they may be leaning more towards sales and less towards subscription.
- QS - 4 layer cells, representing an important step stone on the way towards commercialization. Management's teach in of a 4Q call on batteries and their solution prompted a 30% ish rally in the shares this week.
- QELL - nothing new but the SPAC patch is seeing almost daily announcements.
- BCEI - strong quarter on pre announced volumes and confirmation of prior plan. We had a piece ready to go pre quarter and this week they set a date of March 12th for a shareholder vote. We see this deal as happening. They will be in maintenance mode pro forma HPR (unowned and set to fall with the deal) and yesterday they went from flat to slightly down to more of a flattish outlook. Please our article here.
- Wind ... got blamed by some with anti wind agendas for the troubles in Texas power. Happy to discuss but know that those pushing this angle have been anti wind, like to ignore facts, and uninformed or disingenuous. Simply put, this was a very rare colder weather event that took down a lot more natural gas fired generation. For wind, cold weather packages solve this.
- VWDRY - two items. Layoffs in Colorado may have taken some by surprise but align with prior comments on US demand levels. Also they invested in a wood tower startup with the idea of making light but strong wood (we'd assume onshore only) wind towers that greatly reduce (80%) emissions of tower making and transport. This may be a small quiet weight on BWEN shares.
- BWEN by the way added itself to the list of names reporting next week. Note that BWEN warned for 4Q last month. We expect a go/no go decision on offshore wind between next week and mid year.
- TPIC - came off with the rest of the wind space, we think likely on some of the "wind noise" coming out of Texas.
- Super rare weather - refining in going to take likely more time to come back up than production. We have heard at peak roughly 4 mm bopd were offline. Wells are coming back in the Rockies and Texas now. Gas was hit hard as noted above and that two will be coming back on line. We note that in the Rockies BCEI noted that hits to production so far this year actually saw less impact on oil than natural gas but again, are coming back up now.
- AR - good quarter for free cash generation. People look to EPS and EBITDA first which were modest misses. The bigger news of the quarter was over looked on a rough day in energy which was a JV to add wells without raising baseline maintenance capex that increased cash flow by more rapidly filling their firm transport capacity reducing charges there. NGL pricing increases (see that chart earlier in the post) are helping as well (note the sensitivity of $2 per barrel or $0.05 per gallon = $97 mm in incremental cash flow). When you view the 2021 to 2025 free cash generation here it becomes apparent that this once over leveraged player is getting its balance sheet in order more rapidly than expected which means buy backs (substantial ones) and a maybe a dividend as early as next year.
- PLUG - saw heavy profit taking this week on a bit of break in the chart after announcing another big JV in Europe. This to us is healthy.
- STPK - strong run on grid resiliency followed by profit taking yesterday with everything else. We have a starter taken below $40 and we'd not be averse to adding a little but are not rushing in.
- ACTC - Proterra announced a deal for urban delivery truck maker Volta to use their batteries this week which was met with yawns. That's fine. We are here for the long term.
- MGY - nothing new this week but looking forward to this call next week. Please see our recent comments on this name using the pulldown menu at upper left.
- Drilling dayrates remain soft. Some are seeing completion cost traction.
4Q20 Calendar Revision
Odds & Ends
Analyst Watch:
