Posted by: zmanbackup | November 18, 2014

Tuesday 11/18/14 – Site Temporarily Off Line

Hello,

Our primary site is currently down and we are working to restore the connection.

Apologies for any inconvenience this may cause.  If you have questions please ask them here until further notice.

Tuesday’s Post:

Market Sentiment Watch: Expect low E&P news flow but rising OPEC chatter between now and month end. On the oil watch side of things, prices continue to be suppressed in front of events at the end of the month. Not surprisingly, in E&P, buyers remain on strike. In today’s post please find a couple of cheat sheet updates with notes as we play catchup post quarter.

Ecodata Watch:

  • We get PPI at 8:30 am EST (F = -0.1%, last read -0.1%),
  • We get the Home builders’ index at 10 am EST (F = 55, last read was 54).

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today – Cheat Sheet Updates (MRD, MTDR)
  4. Odds & Ends

Click the link directly below this to …

break

Holdings Watch:

ZMT (Zman Medium Term portfolio):

Yesterday’s Trades: None

ZLT (Zman Long Term portfolio)

Yesterday’s Trades: None

​The Blotter is updated.

Commodity Watch

Crude oil eased $0.18 to close at $75.64 yesterday, moving lower with the contraction in Japanese GPD and the commensurate move higher in the dollar index and with a lack of further meaningful commentary out of OPEC players.  This morning crude is trading flat.

  • From Russia With Love Watch: Russian oil tsar to attend OPEC meeting. IF other people get to say “this time it’s different” then maybe this time it will be for Russia, who gets the invite to the semi annual meeting but always gives OPEC the high hat as far as actually agreeing to help out at the end fo the day. See story here.
  • Early Read on Oil Inventories:
    • Crude: Down 0.4 mm barrels
    • Gasoline: Up 0.2 mm barrels
    • Distillates: Down 2.0 mm barrels

Natural gas jumped $0.32 (8%) to close at $4.34 yesterday on the colder than forecast weather last week and the much colder than normal forecast for this week. The front month now looks like this but we would expect gains to prove fleeting (with a warming spell forecast for the week end. We’ll prolonged cold to sustain prices north of $4 given current record high production volumes.  This morning gas is trading down 4 pennies.

Stuff We Care About Today

MRD Cheat Sheet Update

  • One of the few names we track and hold that is not only not planning to reduce capex in 2015 but is also a) looking to significantly increase it (by ~ 30% on the mid given the 2015 preliminary budget AND b) still not outspending cash flow.  We would label this combination rare for 2015.
  • They remain gassy at 78% of volumes in 3Q14 but have hedges covering about 88% of expected 2015 natural gas production at about $4,
  • Much of the current program is proving up acreage outside of their original 3P boundary suggesting a large increase in reserves with the report next April which will help make the name look increasingly cheap in the land of I’m-gassy-and-I-have-monster-wells-in-three-and-maybe-four-stacked-pays-and-I’m-not outstpending-my-cash-flow-and-I-have-excess-liquidity players
  • Valuation isn’t wildly compelling here on a TEV / forward EBITDA basis but as with all of gassy names, valuation under depressed pricing scenarios keys more off of the large potential reserve base that is currently only partially delineated.
  • We continue to own a half Core position in the ZLT and plan to bolster it opportunistically over time.

MRD 111714

MTDR Cheat Sheet Update and Comments

  • If oil stays at $80 in 2015, expect them to hold spending flat or just under 2014 levels at $570
  • On a flat budget they see growth in 2015 of 50%,
  • Balance sheet remains in very good shape at 0.9x debt to 2014E EBITDA,
  • Production mix is 57% and should edge slightly higher in 2015; hedges cover only about a quarter of expected oil production next year with floors in the low $80s so that like,
  • At $80 oil in 2015, we see debt metrics remaining solid as project EBITDA of roughly $330 mm leading to an entirely manageable level outspend next year (would take debt to roughly 1.5x debt/EBITDA in 2015),
  • Value: Never more BOE’s backing up each share and rarely cheap on a flowing BOE basis.
  • MTDR remains a Core Position in the ZLT.

MTDR 111714

Other Stuff

  • Look for the Bakken Players update slide show later this week

Odds & Ends

Analyst Watch:

  • TBA in comments.
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