Apologies but we are experiencing a server outage on the main site. We will advise when services are restored.
Market Sentiment Watch: Yoyo market in progress with better housing data causing the rally which is somewhat more of an excuse than a reason as the preceding down swing of the yoyo came upon glum moods out of the homebuilder’s survey (which basically said our costs are up and our buyers are having trouble getting credit to buy new homes). Commodities and equities reversed course anyway and the slightly better Industrial Production number from yesterday helped to further buoy markets. I’m continuing to alternate between sitting on my hands on up days and adding opportunistically (on weakness) to stories I like on a measured basis. In today’s post please find comments with highlights from yesterday’s IPAA presentations and some other odds and ends.
- We get the Beige Book at 2 pm EST.
In Today’s Post:
- Holdings Watch
- Commodity Watch
- Oil Inventory Preview
- Stuff We Care About Today – IPAA Wraps, IPAA Today, TPLM,
- Odds & Ends
Please click the link right below this to
ZMT (Zman Medium Term portfolio):
ZLT (Zman Long Term portfolio)
Crude oil closed up a whopping penny at $88.72 yesterday, after falling to a new 2013 low on Monday. After the close, the API released another mixed bag of a report (big draw on crude stocks but small builds in products and a big and unwelcome build at Cushing) (see below). This morning crude is trading back to $88, dipping with a sharp drop in equity futures.
- Crude Supply: U.S. up to be sure and we are still thinking it goes to 7.3 mm bopd for an average this year (slightly over half of North American production) but the rest of the world is growing at a much slower pace. More than manageable (for Saudi and Kuwait) given another year of record global demand.
Natural gas inched back up two cents to close the day at $4.16 yesterday in another day of fairly light volume trading. Prices are supported at the moment by a) the current level of storage b) ongoing cool weather in the consuming regions and c) higher than average nuclear plant outages. Next price swing will key off the first injection of the season this week (see below). This morning gas is trading up 5 cents.
Early Read On Natural Gas Storage:
Street is at +37 BCF for tomorrow’s report.
- Last Week: -14 Bcf
- Last Year: +21 Bcf
- 5 Year Average: +39 Bcf
- 10 year Hi: +87 Bcf
- 10 year Low: -46 Bcf
Oil Inventory Preview
- Crude: Down 6.7 mm barrels; Up 1.1 mm barrels at Cushing
- Gasoline: Up 0.25 mm barrels,
- Distillates: Up 1.26 mm barrels.
Stuff We Care About Today
IPAA Wraps – we spent day two taking notes on companies we hold and some names from the past that we don’t. Here are the high points
- “we’re trading at 60% of our NAV”
- Prices still holding at $20 > WTI
- Horizontal program performing as expected
- Don’t expect much in terms of production ramps until 2H13 (calendar)
- Pendragon a 2H13 event (at least June)
- Ultra Deep – Lineham Creek to TD next 3 to 4 months, much longer for Lamond and I didn’t hear Davy Jones mentioned but that will be a late summer attempt.
- Sticking with 51.5 to 52.5 cents per quarter distribution by 4Q13, which equates to 9% annualized yield
- This ability to grow it comes from organic (including acquisitions made at end of last year)
- We expect them to add accretive deals this year and grow the distribution concurrent with the production adds
- As a reminder, they are 99% oil, and they are highly hedged (76% in 2013 @ $98 and 70% in 2014 @ $93)
- Reiterated the “years and years of 20 to 25% production growth” mantra
- And the focus on growth per share (shares are precious)
- And that CFPS will outgrow production growth as unit costs fall on the higher volumes
- Reiterated they are making 470 mm/d from 6% of their SW PA acreage … which when you do the math gets to some really big multi Bcfgpd numbers
- As we said the other day, hitting on all cylinders with very high returns and their non Marcellus stuff is interesting as well
- Saying they have thicker Eaglebine section than the traditional play to the north of them
- Looking at doing more asset monetizations
- JV with EOG will start driving production numbers (although no good handle on how high yet)
- They did hold back acreage in the center of the section to develop at their leisure or haste as prices warrant,
- On their present budget and with JV proceeds coming in they are fully funded for 2013,
- They have another block of Eagle Ford acreage to monetize and the balance sheet is now better looking than the stock was at twice the price some I’m going to take a fresh look here soon but management’s ability to execute remains in doubt so we’ll just have to look and see if it’s compelling enough to warrant following it.
- Another name from past but highly re-worked
- Claiming Marcellus program is worth $4 per share
- Not a lot to add to recent comments except that they really dry up drilling in the Marcellus by late this year as they run out of locations but they transition to Utica up there.
- The name is EFS driven but they think the Utica returns could rival the Eagle Ford ones
- Noted they think they will come in near the high end of the range for 1Q13 oil volumes
- Gas prices at current levels don’t sound like they are tempting them to add dry gas acreage or to go and drill some of their legacy gas areas.
- Little new but to reiterate:
- Columbia currently pays for G&A so that all capital coming out of ground in OK goes back into ground in OK
- 8 gross wells on production now and production is ramping
- 12 gross wells in various stages now
- adding 2 to 3 gross wells per month
- well practices have improved
- all Logan County acreage to be HBP by end of 2014
- Didn’t really touch on the two other projects to the east but we’ll hear about those pretty soon
- I will see them later this Spring.
- Most acreage they seem to care about is essentially HBP’d
- Balance sheet in good shape and they are funded for this year
- And they said they’d be in free cash flow mode around year end 2013
- Said to look for about 20% sequential growth in each of 1Q and 2Q and then stronger growth into year end 2013
- Reiterated guidance for this year of 29,000 to 31,000 BOEpd (up about 110%) a number of times in the presentation
- Fast run through of the story by the new guy
- Basically we’re cheap on all metrics
- Told Tom they need to get the story out there better … I think to get the stock up they need to deliver on production guidance and capex guidance this year.
- Story has not changed, all Williston Basin, 90% oil, 335,000 net acres (305 K is core and of that 87% is HBP)
- Calling locations at 2,000 gross, this is a little higher than in past presentations due to the inclusion of more densely spaced wells and more Three Forks wells
- Running 10 rigs now (that’s up 1 from last check)
- Budget is $100 mm less than last year with same well count
- Average well costs fell 16% last year
- Were down to $8.8 mm at year end and still on track to be $8 mm average for YE13
- Use 2013 to further delineate TFS (now think delineated on 1/3 to 1/2 of acreage)
- Also going to full pad drilling and testing tighter spacing this year
- “OWS has performed better than any of us expected” … this is their in house frac spread
- Paid it out in 1 year ($25 mm cost) … all doing in house work
- As of the beginning of this quarter they were moving 80% of oil production via pipe and from there to rail terminals and they are railing out 90% of their production now. This month they are moving 100% of oil by rail. That just crushes their differentials.
- Otherwise, song remains the same, no trouble growing it, lots of liquidity, it gets cheap on the metrics with each passing quarter that the stock doesn’t move up.
Today At IPAA (all times EST)
- LPI – 9:10 am
- EOX – 9:10 am (I’ll be on this one but will circle back for LPI)
- TAT – 9:35 am (sure, why not listen?)
- REXX – 10 am
- SSN – 10:30 am
- CXPO – 1:35 pm
- BBEP – 2 pm
- ATXDY – 2:25 pm (want to hear the pitch on this little Miss Lime minnow as I see the reserves as extremely aggressively booked)
- Link to webcasts
- Refiner update – we should have a quick update out here tomorrow.
- TPLM filed an NT 10-K (inability to file their 10 K on time filing). I don’t think it’s a huge deal but if it gets hit on this today I will very likely find room for more as that’s probably pretty silly. Here’s the simple text from the filing:
Triangle Petroleum Corporation (the “Company”) has determined that it will be unable to file its Annual Report on Form 10-K for the fiscal year ended January 31, 2013 (the “2013 Form 10-K”) by April 16, 2013, without unreasonable effort or expense because of outstanding comments that the Company received from the Securities and Exchange Commission (the “SEC”). These comments were received in connection with SEC’s periodic review of the Company’s reports. The SEC and the Company are currently in discussions to resolve the SEC’s comments relating to its Form 10-Q for the fiscal quarter ended October 31, 2012 concerning the appropriate consolidated accounting treatment of certain income recognized by the Company from pressure pumping services provided by a subsidiary of the Company, RockPile Energy Services, LLC (“RockPile”), to wells in which the Company held an economic interest. Management believes that resolution of the SEC’s comments will neither affect RockPile’s standalone results for such period nor impact the previously issued fiscal year 2014 financial guidance for Rockpile, which was furnished on a standalone basis. Because the Company had similar arrangements in place with Rockpile in the fiscal fourth quarter for the period ended January 31, 2013 and will have such arrangements in the foreseeable future, the Company believes that it is in the best interests of investors to resolve the SEC comments prior to filing the 2013 Form 10-K. The Company expects to file the 2013 Form 10-K as promptly as practicable following resolution of the SEC’s comments.