Posted by: zmanbackup | November 24, 2016

Thanksgiving 2016


Our normal site is offline due to technical difficulties. We are working with our host to remedy the issue.

Thanks for understanding, have a happy rest of your Thanksgiving, and Best,


Posted by: zmanbackup | December 8, 2014

Monday Morning – 12/8/14

We are experiencing technical difficulties withe main site today. Please comment here if you can’t find us there and we will get back to you.

Posted by: zmanbackup | November 30, 2014

Sunday Evening

Main site is undergoing server maintenance.

Posted by: zmanbackup | November 28, 2014

Friday Back Up Post

Market Sentiment Watch: No cut by OPEC, analysts, reporters, traders disappointed. Please see our notes from the conference below as there is going to be a lot of press spin on this and not everything was negative.  In today’s post please find the natural gas and inventory reviews and notes and thoughts from the OPEC meeting. It’s going to be an ugly open and we plan on doing some shopping at lower E&P prices but likely not until next week. In our view, we’d rather let oil find a new comfortable trading range before attempting to catch falling knives in good or riskier names. It will be interesting to see if the gassy names see any interest now that OPEC is out of the way (lower oil prices are good for them in some ways). Likely on this shortened session we don’t see a lot of discriminating among E&Ps however. All eyes will be on crude, looking for the reversal of the now 4 month plus long trade against crude to occur.

Ecodata Watch: 

  • No economic data release

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Natural Gas Inventory Preview
  5. Stuff We Care About Today – OPEC
  6. Odds & Ends

Please click the link right below this toHoldings 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 fell $0.40 to close at $73.69 on Wednesday but is trading off $4.50 this morning at $69 after OPEC’s decision not to cut it’s 30 MM bopd official quota (after falling to as low as $67.75 overnight). This is is the expected test of $70 on OPEC inaction on the quota front. Everyone seemed to expect no cut but actually hearing no cut and an oft repeated comment that OPEc will produce 30 MM/d next year is prompting a break down in Brent and WTI and global prices in general to fresh four year lows. Would also not be surprised to see a near term key reversal day (ugly red open, green close) as the move is really just extending prices lower after a rapid and significant down draft in the face of no meaningful fundamental shift since summer. Please see our comments below in the Stuff section.

Oil Inventory Review

exp vs act 112114


EIA 112114 A


EIA 112114 B

Natural gas closed off five cents at $4.36 on Wednesday as it yoyo’d about before and after the record withdrawal announced a day early due to the holiday. The massive 162 Bcf withdrawal provides a better than expected early salvo in the withdrawal season, something traders will like to see as it provides cover relative to ongoing new record high lower 48 production levels.  This morning gas is trading a dime plus.

Natural Gas Storage Review

gas table 112114


gas graph 112114

Stuff We Care About Today  

OPEC notes from yesterday’s meeting – augmented where noted.

OPEC Watch: The Opening Address with ZComments as noted in ():

  • OPEC said they spoke of improving stability at the last meeting 5 months ago,
  • Economic recovery has continued to improve since then
  • OPEC sees 3.2% growth in 2014 (global GDP), sees 3.6% growth in 2015.  This is verbatim from the November OPEC monthly,
  • OPEC sees 1.1 mm bopd growth to 92.3 mm bopd in 2015 (also unchanged from recent guidance)
  • Demand growth mostly from non-OECD countries (this has been the case for quite some time now with no expectation of significant growth from US and Europe),
  • OPEC sees non OPEC supply up 1.4 mm bopd in 2015, mostly from North America, some Brazil,
  • Oil pricing has changed in last few months, after having been stable for 3.5 years (no kidding)
  • The fall in prices may not be completely attributed to oil market fundamentals; stronger dollar and economic uncertainty and speculators have played a roll
  • If negative price path continues expansion plans may be put at risk,
  • Pricing action suggests market is searching for stability and balance.
  • Discussions will focus on balance, looking for the good for consumers and producers alike (boiler plate comment)
  • OPEC encouraged by talks with non OPEC producers and agencies like IEA (they later said it’s not about cooperation).

OPEC Watch 2: Closing Address

  • Stable oil prices that didn’t affect growth projects and were good for producers is what is being sought (key message, don’t panic)
  • Maintaining the 30 mm bopd output level (same level they have had since December 2011)
  • Will continue to closely monitor developments in supply and demand (at the current Strip, demand should rise above current estimates)
  • Next meeting June 5, 2015 (as expected, not projecting any sense of urgency on prices)

OPEC Watch 3: Post meeting Q&A

  • Q) Reuters – are your members pleased with the agreement and do you see members complying?
  • A) Ministers are happy.  I’m sure members will comply. Debated prices and fundamentals for 2 to 3 hours. Result of that debate was to say at 30 mm bopd
  • Q) Are you happy to let prices drift lower to protect share, is that the signal you are sending?
  • A) We don’t want to panic, we’re not sending a signal, prices have been good for a long time, decline of the price does not reflect the fundamentals, again not sending a signal, we have no target price, just a fair price. (I think they are putting a little doubt into NAM capex plans but also not seeing as big a gap next year now as their “Call on OPEC” numbers indicate).
  • Q) cooperation with non-OPEC and Russia in particular?
  • A) we compare our numbers with them but have no cooperation. (that answer will be seen as a disappointment, especially as it pertains to Russia
  • Q) Asked to talk about production specifically in the first half of 2015.
  • A) “We cannot produce 30 mm bopd” – this is the cut.  ZComment: Quota cut no, coming production cut yes. They act to balance markets and will do so, as usual in light of seasonal concerns. 

OPEC Watch 4:  More ZComments.

  • This is not the end of the world.  We would have preferred to see a quota reduction to 29.2 to 29.5 mm bopd (to get close to the “Call” on OPEC, but as noted in the post, individual member country allocations are no longer in play, not since 2006, and as noted a number of times, Saudi sees no reason to be the offset valve at the quota level to non-OPEC supply growth.
  • However, a small change would have been doable as evidenced by comments from some players pre meeting. I do not buy the argument being made by some that OPEC has lost control of its members or that it has lost power in the market place. They are a third of the market.
  • We continue to see OPEC as managing production through the seasonal demand dip of 1H15 to ensure balance.  OPEC is not dumb. They have a good grasp of this (and graph of it).
  • While a 0.5 mm bopd cut may have soothed markets it would not have been enough, by itself, to balance markets in 2015.  A bigger cut however might have signaled panic, as was the case in how the market took the 4.8 mm bopd in 4Q08.
  • We see more upside than downside from a mid $70’s price level, let alone the sub $70 level WTI traded to just after the meeting. Said that before the meeting and still see that.
  • This is not my first rodeo. Recall we had prices trailing lower into YE2014 in a post here at the end of YE2013. Please take a look at it. We’ll have a version out for 2015 close to the end of the year. We do expect lower prices to increase demand. We do expect lower prices to prompt lower spending in the U.S. and to reduce U.S. production growth (see note above in the oil production section of the Oil Inventory slide show – it still will grow but less than expected in estimates currently describing the Call on OPEC).
  • When items from the preceding bullet point become plain we expect a modest rebound in prices, the magnitude of which will in large part depend on the moves by US E&P to trim spending/rigs and by the improved global economy on lower energy prices.
  • Our near term sense is that 4Q will end in the $70’s not the $60s but near term price projections are not generally our thing. We see 2015 pricing as likely rising as the year progresses as the market takes into account OPEC production cuts that will occur in 1H15.

Odds & Ends

Analyst Watch:

No stock specific comments that we see.

Posted by: zmanbackup | November 18, 2014

Tuesday 11/18/14 – Site Temporarily Off Line


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 …


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.
Posted by: zmanbackup | July 8, 2014

Tuesday Post – Backup Site Activated

Market Sentiment Watch: The energy groups are taking a pause pre 2Q14 reporting season, continuing the move that began two weeks ago as momentum continues to fade. Gassier names are seeing the most profit taking as natural gas fades due to a slow start to summer and record production levels. In today’s post please find a pre 2Q14 look at OAS and some other odds and ends.  In coming days look for more of pre quarter updates on names we care about.

Ecodata Watch:

  • The NFIB small business index came in at 95 vs last month’s read of 96.6,
  • We get Job Openings at 10 am EST (no forecast, last read was 4.5 mm),
  • We get Consumer Credit at 3 pm EST (no forecast, last read was $27 B).

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today – OAS
  4. Odds & Ends

Click the link directly below this to …

Unknown Object


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 $0.53 to close at $103.53 yesterday, in a quiet, low volume session that added to a week of steady declines. This morning crude is trading flat.

  • Libya Watch:  Reuters reports Libyan production is off the recent sub 200 MBopd lows, at 360 MBopd but that production from key fields remain offline.
  • Early Read on Oil Inventories:
    • Crude: Down 1.95 mm barrels,
    • Gasoline: Down 0.8 mm barrels,
    • Distillates: Up 0.9 mm barrels.

Natural gas fell $0.18 (-4.1%) to close at $4.23 yesterday after breaking recent trading range support. energy headlines blamed a cooler forecast in some regions.  The front month now looks like this.  Our sense is that without early heat and with recent gains in hand some non-commercial longs (speculators) continue to lock in increasingly small profits. We have not seen a big jump in shorts but the summer looks more iffy now and the rapid erosion of the YoY and 5 year deficits and the move to new highs for production is obviously wearing on trader’s bullish thinking here. Our sense also is that downside will be limited and that lower pricing will help on the electricity generation share front vs coal.   This morning gas is trading off slightly.

Stuff We Care About Today

OAS Quick Update

  • Name continues to perform as expected in 2014 after taking a brief, weather related pause, like many of its Bakken peers, now moving up in the expected “Bakken follows Permians” higher move,
  • We see volumes as being on track for a return to sequential growth this quarter as completions play catch-up to drilling and with 16 rigs running and better weather we are looking for a substantial move higher here (street is just above the mid point of quarterly guidance)

​As previously noted, the name is a bit less catalyst driven than many of their peers and they’ve never been the types to press released lots of detailed well results and while that’s not about to change some items of consequence to watch for in the coming quarter include:

  • Slickwater completion longer term results and additional lower bench TFS testing will likely be the buzz of the 2Q14 call.  Look for results form the White Unit in their Indian Hills area (northern McKenzie County) that combines both the new completion methods and tighter spacing from the middle Bakken down through the TFS benches 1, 2 and 3 with the 2Q14 call.  Also look for new area tests of slickwater completions with 2Q (some of these are in areas that have been lower EUR for them so it will be interesting to see if they achieve the same kind of uplift as they’ve achieved in the core (up 25+% first 90 days)). This may lead them to up the percentage of acreage where they see economic benefit from slickwater completions, now at 20% of total acreage.
  • Additional catalysts are likely to come from increased frac size testing in the deeper core,
  • Finally, with the better weather and move to multipad per DSU development we should get confirmation of a further slide in average CWC (although this will increasing be offset by the increasing number of slickwater wells in the mix).

The balance sheet remains strong:

  • With debt to TTM EBITDA at 2.7x and liquidity of close to $1.5 B with only ​modest outspend expected this year (much smaller than in past years) and they should arrive at cash flow break even late in 2014.
  • There is no need for an equity deal at this time or any time soon barring another significant Williston Basin acquisition (and we really don’t see them leaving the Basin in the near or medium term unless they find a really good deal),

Implied EBITDA per BOE for the quarter using Street estimates is $62.42 which based upon oil prices during the quarter and their hedges and their growth would appear light to us, implying that a meet on oil volumes (pretty likely) will result in a beat for the quarter at the EBITDA line. Not a big to deal us as we don’t invest for quarters but the positive spin from the numbers should be supportive given the run in the run in the shares.​

We’re not looking for increased guidance for 2014 with the 2Q release, either for volumes (expected up 42% (mid point of guidance and exact Consensus at the moment) nor for capex ($1.4 B budget should be intact).

OAS generally reports 2Q results in early August. Typically OAS has not pre-released 2Q volumes.


  • Rarely cheaper on a TEV / flowing BOE basis at ~ $149,000.
  • On a TEV to EBITDA basis they are trading at just under 6x the 2015 estimate which is pretty middle of the range for them (see historic TEV chart in cheat sheet below) and not excessive in our view given the size of the location inventory (17 years even with the current 16 rig program), strong balance sheet, steady approach to growth with decreasing risk and approach cash flow neutral status.

We continue to hold OAS a top 3 position in the ZLT (about 8.5% of the greater ZLT).

OAS 070714


Other Stuff


ECR – Just watching ECR continue to fail lower post IPO.  See our initial too-expensive-for-my-taste piece on it here.

Look for an E&P IPO review soon.

SSN Operations Update:

  • Nice monthly sequential increase in production with June moving to 694 BOEpd (86% oil).  Production was 273 BOEpd (68% oil) in January so SSN is making progress on the back of their non-operated effort at North Stockyard,
  • They noted their Blackdog well has produced 81,000 bo in 4 months (average 675 Bopd) and is well above their internal gross curve of 52,250 bo (for 4 months) and the curve Ryder uses for their wells at 33,900 bo.  My thought is one well does not a population make,
  • 5 more drilled but not yet completed wells are in the queue,
  • 8 additional TFS wells are in process,
  • Over in the Rainbow Prospect area, CLR has spud the first well.
  • Nutshell:  Slowly improving, best in terms of production we’ve seen out of them but no real cause for celebration given the increasingly stretched nature of the balance sheet. No plans to add additional shares and we’ll likely punt into significant strength here as it’s more of a long term distraction than something we want to hold for another 3 years.  We’ll likely see how Rainbow looks and see the outcome of the Permo-Penn test in Goshen WY looks before finally taking leave of the name.

Odds & Ends

Analyst Watch:

  • MRD – Barclays initiates at Overweight with a $33 target,
  • MRD – Citi starts with Buy and $30 target,
  • MRD – Wells starts with Outperform,
  • MRD – RBC starts with Outperform and $28 target,
  • MRD – Stifel starts at Buy,
  • MRD – B of A starts at Buy with $32 target,
  • MRD – Raymond James starts at Strong Buy,
  • MRD – Howard Weil starts at $33,
  • See our original MRD piece here
  • BCEI – SunTrust ups target by $12 to $74, stays Buy,
  • SYRG – SunTrust ups target by $2 to $15, stays Buy,
  • PDCE – SunTrust cuts target by $2 to $63, stays Neutral,
  • REXX – KLR cuts target by $2 to $20, stays Accumulate,
  • RRC – KLR raises to Hold from Reduce, ups target by a buck to $86
Posted by: zmanbackup | April 24, 2013

Back up post for Wednesday

We are experiencing a site outage on the main site.  We hope to have this resolved soon.

Posted by: zmanbackup | April 23, 2013

Backup Post for 4/23/13

Apologies but we are experiencing site difficulties. 

Here is today’s post for now: 

Market Sentiment Watch: Chinese Flash PMI came in below expectations overnight falling to a 2 month low. In energy land that news helps to send crude lower again but we don’t see the Chinese demand growth faltering this year. Strangely, more eyes appear to be focused on AAPL at this point as this mixed bag of an earnings season marches on.  In energyland the tone remains cautious after the dip in oil and the soft patch for natural gas demand and several weaker than expected domestic economic numbers likely are not helping sentiment either. This will soon pass. Today we have a lull in earnings before they pick up the rest of this week and get really busy next week.  In today’s post please find comments on GST, the ECA 1Q13 results (pretty meh), and some other odds and ends as earnings season heats up. 

Ecodata Watch:

  • Market flash PMI came in at 50.5 vs 51.5 Consensus and last month’s reading of 51.6,
  • We get the FHFA home price index at 9 am EST (no forecast, last read was +6.5% YoY)
  • We get New Home Sales at 10 am EST (F = 421,000, last read was 411,000)

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today – GST, HAL, ECA
  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
      • GST – Added at $2.32 on news as described in comment 18 (sale of East Texas program) under today’s post.   Have been watching the name fall with the group since it rallied on it’s repurchase of shares and a limestone play from CHK. May not hold this as a core but have been doing a little work here so will have more to say in a post soon.

The Blotter is updated.

Commodity Watch

Crude oil recovered $0.92 to close at $89.19 yesterday on the June 2013 contract which takes over front month duty this morning. This morning crude is trading off $0.90.

  • Flaring Watch: North Dakota passes anti-flaring bill with a carrot instead of a stick approach, offering tax exemptions for an additional year (they get one now) to producers who divert natural gas that would have have been flared gas to power generation or other near site uses. 
  • Early Read on Oil Inventories:
    • Crude: UP 1.4  mm barrels
    • Gasoline: FLAT
    • Distillates: UP 0.2 mm barrels

Natural gas fell $0.14 (- 3.2%) to close at $4.27 yesterday on mild (on average) weather. There are still some extreme weather events going on about the Lower 48 and the start of the injection season will as usual be sloppy. We continue to look for bouts of profit taking to last days, not weeks but don’t see much in the way of near term upside for the commodity until warmer weather sets in and until we have another round of monthly supply and demand data out of EIA. This morning gas is trading flat. 

Stuff We Care About Today

ECA Reports In Line Top Line 1Q13 Results; Points to Strong Liquids Growth

  • No table here as they don’t report (at least initially) things like revenue or EPS.
  • The volumes were in line with expectations at 3.14 Bcfepd (92% natural gas)
  • We didn’t have a CFPS estimate on them but they reported $0.79 … hard to back into EBITDA from there as they don’t release an income statement with the quarterly results. 


  • Strong liquids growth, up 48% YoY, with exit to exit growth of roughly double.
  • Natural gas volumes fell 12%
  • The quarterly update is all about the liquids plays of which there are several:
    • Tuscaloosa Marine Shale – 6 wells on, 2 more about to be, no rates given but they say they are “gaining confidence in the potential of the play as it nears commerciality”. They also said the Mississippi lowered its severance tax from 6% to 1.3% for the first 30 months of a horizontal well’s life. Most TMS wells are in LA but we like MS’s move to encourage drilling in their state. The “gaining confidence” comment may have positive effects for names like GDP and may trickle down to the likes of HK.
    • San Juan Basin – deemed a commercial oil play. Look for color on the call
    • Niobrara ramping rapidly for them,
    • And three Canadian plays moving ahead as well. 

Nutshell: We only listen for color on natural gas markets and NGL pricing.  The lack of specifics in their reporting is one of the reasons we don’t bother to own the name. With the upturn in natural gas prices one would think that this gas giant (they produced 2.9 Bcfgpd in 1Q13) would be a no brainer in garnering Street attention but so far no joy on that account. 

HAL 1Q13 Wrap

  • Management sees North American margins as having bottomed in 4Q12 and sees them rising into year end
  • No real change in thinking on activity levels either in NAM or in International
  • They see higher service intensity from pad drilling
  • And note that they see margins rising in the States because they have the right customer mix who gets using more of their technology in an effort to make better wells (it was kind of a vague attempt at answering the question of why they see rising margins)
  • As with other Service names before them they pointed to strong Gulf of Mexico and International deepwater activyt
  • And strong results out of several international areas including Saudi and Brazil. They look for the important Mexico Service market to improve in 2H13,
  • They noted the current international opportunity set is A) the largest they have seen and B) comprised of many medium size opportunities and not out of only a few large ones,
  • On rising natural gas prices they indicated a pick up in activity is a 2014, not a 2013, event.
  • They remain cheap to their peers:

  • We have Call exposure here but have not felt compelled to buy back into the stock … our thinking on this evolving. Next catalyst will likely either come from news regarding the Macondo negotiated settlement talks or from 2Q results when higher NAM margins would likely push the name higher. 

GST Quick Thoughts on Yesterday’s Trading Buy

  • Gassy getting oily, small cap name from the past.
  • Refocused on:
    • the Marcellus in the northern West Virginia, liquids rich part, of the play and
    • the Hunton Lime play in central Oklahoma
  • Trouble area for them was technically difficult, expensive deep play in Texas (Hilltop) which was announced as sold yesterday. Note that we have reduced the outstanding amount on the revolver and the borrowing capacity to reflect the sale. 
  • Proceeds free up room on the revolver to help fund recent de-linkage from CHK (end of CHK’s lawsuit against GST and repurchase of GST shares held at CHK).  Note we have assumed additional financing in the full needed for the deals with CHK and have not assumed proceeds from a JV that they are in discussions with other parties over to help fund the deals and to accelerate in the Hunton. 
  • Leaves the company with assets listed in the table below
  • In the Hunton Lime they should have results on a 3rd operated well in the play in May which should be a pivotal well for name. 
  • Nutshell: Gassy getting oily story that once upon a time learned to pay down their debt and not go back into a sea of debt and yet, they seem to be doing it again. Why did I bother?  It’s become much simpler without CHK around them and without the exploratory play in East Texas to tempt them when gas prices rise. They should be in excess of 20% liquids now and will likely climb towards 30% liquids into next year (we don’t have a model here and we may be quick to leave here as this is nor our first time around this management team … so no excuses if they start missing targets.  Valuation is not what we’d call overly compelling at this point but I’ll give them a quarter to settle into their new look and see how the Hunton Lime results come in as that program could more rapidly change the mix of the company relative to Street expectations. 

GST 042213

Other Stuff

  • This week’s earnings calendar has been added to the Calendar tab at upper left. 
  • We get reports with calls tomorrow from NFX (they’ve got some explaining to do) and OII (expecting top of range performance and if they miss by a penny, which is possible given where the Street is, a dip in the name would be welcome)
  • Look for a quick picture on COG tomorrow
  • MCF – until John pointed this out yesterday, we missed passing of an industry great, Ken Peak, founder of MCF. Over the years, we listened to Peak speak numerous times. He was one of a kind as was the company he ran. No one has ever done as good of a job of explaining that the government is your biggest partner when drilling in the States or that your company shares should be treated like precious objects and not toilet paper and certainly not while quoting from the Big Lebowski. He didn’t need the Street. People who only buy their shares back and don’t do offerings generally don’t. It will be interesting to see how the company evolves in his wake as they pursue exploration projects on the Shelf while taking a look at the Tuscaloosa onshore. 

Odds & Ends

Analyst Watch:

  • HAL post earnings: (I am not alone watch … at least on the ones I have seen so far)
    • Jefco ups by $2 to $49, rating Buy
    • JPM ups a buck to $53, rating (notably JPM trimmed their targets on BHI, RDC (rigs), and SLB)
    • MLV ups target by $2 to $54, rating Buy
    • BMO ups target by $4 to $56, rating Outperform
    • Bernstein ups target by $2 to $54, rating Outpeform
  • SunTrust cuts targets on the Bakken Players
    • CLR from $80 to $73, Neutral
    • EOX from $9 to $8.50, Buy
    • KOG from $9 to $8, Neutral
    • NOG from $20 to $19, Buy
    • WLL from $56 to $49, Neutral
  • ROSE – Wunderlich trims by $2 to $63, stays Buy
  • MHR – Canaccord cuts from $7 to $5.50, stays Buy
Posted by: zmanbackup | April 17, 2013

IPAA Wednesday – Site Outage

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.

Ecodata Watch:

  • We get the Beige Book at 2 pm EST.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today –  IPAA Wraps, IPAA Today,  TPLM,
  5. Odds & Ends

Please click the link right below this to

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 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.

crude supply 041613





















































































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

API Watch: 

  • 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

Other Stuff:

  • 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.

Posted by: zmanbackup | March 26, 2013

Backup Site Post for Tuesday 3/26/13

We seem to be experiencing an outage on the main site. Our apologies for the inconvenience, we are investigating the issue. Please post comments on this site in the  interim.

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