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Clayton Williams: Farming Out 15,000 Acres In Reeves County
- The farmout covers the western fringe portion of CWEI's Bone Spring/Wolfcamp position in Reeves County, Texas.
- Following the recent sale of eastern non-core acreage, the company will retain 56,000 core acres in the heart of the Wolfcamp fairway.
- The move is logical and prudent, given oil price uncertainties, CWEI's capital constraints and the vast opportunity set the company has.
Rice Energy: Dry Gas Utica Success Confirmed
- Rice reported continued drilling success in the dry gas Utica play.
- Two new wells are performing in line with the first well, the Bigfoot 9H. The Bigfoot is outperforming initial expectations.
- The company provided a type curve for the play.
- Firm transportation remains a critical component of the growth plan, with FT costs making a big dent in drilling returns.
Halcón Resources: 'We Are A Two Core Play Company,' For Now
- The note discusses Halcón’s recent operating results in the TMS play.
- The company plans to focus its effort on its two de-risked plays, the Bakken and El Halcón.
- These two core plays are expected to drive 15%-20% year-on-year production growth in 2015.
Hess Corporation: Taking An Alternative Path In The Bakken
- Hess makes a compelling case for its low-cost completion design approach in the Bakken.
- The company’s progress in well cost reductions and design optimization is impressive and presents an interesting case study of a resource play’s evolution.
- The Bakken is by far the most important asset in the company’s portfolio with a multi-year growth trajectory.
Halcón Resources: 3Q Earnings Review
- Halcón reported an in-line Q3 and indicated that production volumes for the full year will be at the high end of the guidance range.
- Positive commentary in the press release regarding Bakken and El Halcón wells performance.
- The reduction capital budget for 2015 is a logical development given commodity price uncertainties, but still implies outspending.
- 15%-20% production growth guidance for 2015.
Rosetta Resources: Hybrid Completions Show Strong Improvement In Well Performance
- Rosetta’s latest well results confirm the success of the modified frac that includes hybrid fluid design and increased proppant loadings.
- The company expects Reeves County Wolfcamp A economics to be comparable to the Eagle Ford.
- Preliminary 2015 budget reduced by ~20% relative to the earlier indication. Production still expected to grow by 20% year-on-year.
- The company’s Q3 operating report provides a strong positive read-across to Clayton Williams.
Goodrich Petroleum: The TMS Is Making Steady Progress
- Goodrich posted two strong TMS well results.
- The company expects its typical well to yield 700 Mboe, with well-level returns in the 46% range, assuming $85 oil price and two-well pads.
- Several additional wells are likely to be reported by Halcon and Encana next week.
Sanchez Energy: Excellent Early Results From Catarina
- Sanchez’s first 11 operated completions on the Catarina block beat previous operator’s results by 70% on average.
- All the 11 wells are completed in the Upper Eagle Ford, which initially was viewed as the secondary target.
- While additional production history and more wells will be needed to anchor a type curve, the early data is very encouraging.
- The Catarina asset has the scale and quality to become the defining asset for Sanchez.
- The company had ~$600 million of cash at the end of the third quarter.
SandRidge Energy: A Major Spending Cut On The Horizon
- SandRidge delivered a solid operating quarter, driven by strong NGL and natural gas volumes.
- I estimate SandRidge’s cash balance at the end of 2014 to decline to ~$240 million.
- This compares to $1.35 billion as of the end of February 2014.
- The company’s 2015 capital budget will have to be reduced substantially below the initial ~$1.5 billion continued spending plan.
Shale Oil Stocks: Do Not Count On A Major Slowdown In The U.S. Oil Production Growth
- The presumption that North American shale oil production is the “swing” component of global supply may be incorrect.
- Supply cutbacks from other sources may come first.
- Growth momentum in North American unconventional oil production will likely carry on into 2015, with little impact from lower oil prices on the next two quarters’ volumes.
- The current oil price does not represent a structural “economic floor” for North American unconventional oil production.
Halcón Resources: East Texas Eagle Ford Update - November 2014
- Halcón’s latest (through September) well performance data in the Eagle Ford is analyzed.
- El Halcón production has remained approximately flat June through September; Q3 volumes may show ~10% decline from Q2.
- Based on completion activity in September, I expect October volumes to increase ~6%-10% month-on-month, even if no new wells are turned to sales in October.
- Given Halcón's acreage retention objectives and strong oil hedge portfolio in 2015, I do not expect significant slow-down of the company's drilling activity in El Halcón.
Oil & Gas Stocks: Does This Correction Have Logic To It?
- The article provides "correction scorecards" by stock and by group versus commodities.
- In the past two weeks, natural gas-focused stocks outperformed, as natural gas prices firmed up.
- The Oil Super-majors (Exxon, Chevron and Shell) appear to follow the S&P 500 more than they follow the oil price.
- Small- and mid-capitalization oil-focused E&Ps have slid further, alongside oil, with size and leverage amplifying the underperformance.
- Oil service stocks have been the worst performing group in the Oil & Gas Sector.
SandRidge Mississippian Trust II: Oil Volumes Drop Sharply
- The Trust’s oil production reported for Q3 represents a major negative surprise, requiring another re-assessment of the units’ intrinsic value.
- The transition to the new gathering contract leads to an uplift in natural gas sales price.
- An illustrative financial model is included.
EXCO Resources: Still Waiting For An Operational Inflection Point
- EXCO’s guidance midpoint for Q4 suggests very weak production and EBITDA growth, despite continued outspending.
- Operational success in the Eagle Ford, which is yet to be demonstrated, is critical to the share price.
- Leverage remains a challenge and a risk factor and may require additional balance sheet-enhancing initiatives.
SandRidge Mississippian Trust I: Oil Volumes Disappoint Again, But NGLs Provide An Uplift
- The transition to the new gathering contract leads to an uplift in natural gas sales price.
- The Trust’s hedges may make a significant contribution to the Trust’s distributions in the next several quarters.
- An illustrative financial model is included.
Synergy Resources: Strong Production Growth Visible Through Fiscal Q2
- 27%-44% sequential production growth guidance for fiscal Q1 2015 confirmed with "upward confidence."
- Production ramp-up will accelerate in fiscal Q2, with three large pads scheduled for tie-ins.
- Strong well productivity and downspacing potential in the Wattenberg Core drive valuation.
- Noble Energy's press release and conference call provide a positive read-across with regard to potential well density.
Carrizo Oil & Gas: Increasing Footprint In The Eagle Ford
- Carrizo acquires core-quality Eagle Ford acreage in a consolidating transaction.
- The company continues to impress with solid execution and the ability to grow its asset footprint in its core areas.
- The oil production beat in Q3 is significant, and highlights strong drilling results in the Eagle Ford.
- Despite a slight miss on operating costs, Q3 will be a strong quarter from an operating perspective.
Cabot Oil & Gas: A 2016 'Story'
- Pricing outlook for 2015 in the Marcellus North remains challenging.
- In the longer term, relief will come mostly from transporting gas out of the basin (Constitution, Atlantic Sunrise), not necessarily from local basis contracting, in my opinion.
- While 2015 will be a slow-growth year, Cabot’s longer-term growth trajectory in the Marcellus remains intact.
- The company’s Marcellus production will likely more than double by 2018, from ~1.5 Bcf/d (gross) during the latest quarter.
- Q4 2014 is shaping up as a strong production quarter, with 2014 exit rate in the Marcellus expected in 1.8-2.0 Bcf/d range (gross).
Clayton Williams Energy: Valuation Compelling Again
- The note provides well performance data for Clayton Williams’ Eagle Ford and horizontal Wolfcamp wells.
- Management believes both the Permian and Eagle Ford assets work in $80 per barrel oil price environment, with ~30% well-level returns.
- After the correction, the shares again look compelling on value, assuming the oil price weakness is transitory.
- The company’s two major resource play positions have strategic value and should help support the share price in a downcycle.
SandRidge Energy: A Challenging Quarter Report Ahead?
- Weak 24-hour test rates in Oklahoma in Q3 to date may indicate a slow-growth quarter.
- Q3 2014 results may resemble the sequentially weak Q3 2013, when SD’s production in the Mississippian grew only 1% from the prior strong quarter.
- Expect additional headwinds from sequentially weaker oil and natural gas price realizations and the drilling carries being fully utilized.
- SandRidge will report Q3 results on November 5. Discretionary cash flow will likely decline sequentially and the Leverage Ratio show an uptick.
Oil & Gas Correction Scorecard: The Dawn Of A Recovery?
- The article provides detailed "correction scorecards" by stock and by group versus commodities.
- Small- and mid-capitalization E&P stocks continue to underperform by very wide margin. Exxon stands out as the least impacted stock.
- The correction has created a wide menu of opportunities for investors who believe that the sector’s fundamentals remain in tact.
Continental Resources: More Big Wells And 9 Rigs Running In The Springer Shale
- Continental emphasizes shallow declines observed in its Springer early production data.
- Given high oil yields (70% of current production) and prolific wells, the Springer may beat other formations in the stack in terms of drilling economics.
- Expect quick delineation as the Springer is mapped out and held by production by existing Woodford wells.
Oil & Gas Stocks: Is This Correction Over?
- Is the oil market indeed oversupplied?
- Do North American shale oil producers have to curtail production?
- Where will oil production curtailments come from?
- How does the Oil & Gas sector’s risk/reward balance look like currently?
Is EOG Resources Reaching Success In The Eaglebine?
- ZaZa Energy reported strong well performance for its EOG-operated joint venture in the Eaglebine play area.
- ZaZa indicates that drilling returns may exceed 50%, assuming $80 per barrel WTI and $3.70/MMBtu Henry Hub.
- The read-across may be relevant to SM Energy and Contango Oil & Gas.
Will OPEC Save The Oil Price?
- U.S. shale oil production has grown to become a significant factor in the global oil supply/demand balance.
- However, it does not seem to explain the recent sharp move in the price of oil.
- The thesis that global oil supply would outpace demand, unless prices declined substantially below $100 per barrel, is not supported by market dynamics seen in the past four years.
- There is no evidence that OPEC has a “policy” in place aimed at achieving oil price stability or willingness to act.
QEP Resources: Intrinsic Value Highlighted
- The $2.5 billion price received in the Field Services divestiture is adequate.
- The sale achieves the purpose of highlighting the stock’s intrinsic value.
- QEP has ample liquidity to weather oil price decline and accelerate the delineation of its Permian asset.
- Further divestitures are likely, although asset valuations may face headwinds.
Marcellus Differentials: What To Expect From The Earnings Season?
- Investors should brace for a challenging reporting season as it relates to Marcellus- and Utica-focused stocks.
- Price realization uncertainties going into Q4 and in 2015 will likely dominate conference call discussions.
- While such uncertainties are transitory, very little assurance can be given with regard to the timing of the price relief.
- So far, operators have shown little discipline curtailing production in the face of weak local demand and insufficient takeaway capacity.
Southwestern Energy: The Acquired Assets Are Top Quality, But Not Inexpensive
- The CHK acquisition adds a high quality, multi-decade development backlog to Southwestern’s portfolio.
- An equity issuance transaction may be announced within a month.
- A divestiture of the midstream assets and the New Venture portfolio may be potential sources of funding to accelerate the development of the acquired assets.
- Impact of legacy gathering contracts on drilling economics is a potential concern.
Chesapeake Energy: Marcellus South Sale Highlights Sum-Of-The-Parts Value
- The $5.4 billion divestiture of the Marcellus South addresses leverage concerns and delivers an adequate value for a major asset in the portfolio.
- The transaction is logical in the context of Chesapeake’s asset-rich but capital-poor situation.
- The divestiture may not be the last strategic step that the company may decide to pursue.
Antero Resources: It's All About The Midstream
- The correction brings Antero’s shares 33% below their 52-week high, substantially reducing the stock’s overvaluation relative to fundamentals.
- While Antero continues to trade at a premium to many peer stocks, the valuation can be rationalized, particularly under a bullish scenario for natural gas.
- The company continues to execute very well on its business plan, although leverage will likely increase, as spending remains above internally generated cash flow.
A New Source Of Power For Tesla?
- Lockheed Martin stated that it achieved a breakthrough in developing a compact nuclear fusion reactor technology.
- The reactor can be “developed and deployed” in as little as ten years.
- A test version of the reactor may be ready already in a year.
LINN Energy: Recent Correction Closes Valuation Gap
- LINN lost over $3 billion in market capitalization since early July.
- The units’ re-pricing largely addressed the wide gap that existed earlier between the enterprise value and the PV-10 of proved reserves.
- While the recent price move is way exaggerated at this point, the correction highlights the units' vulnerability due to high debt, high G&A and dispersed, high-cost asset base.