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Richard Zeits

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  • Halc√≥n Resources: New Eagle Ford Wells Announced [View article]
    Hi Gigem,
    Thank you for taking the time to read and for the kind word.
    Kind regards,
    Richard
    Apr 9 01:58 PM | 1 Like Like |Link to Comment
  • Mississippian Lime: Tom Ward's 600,000-Acre Comeback [View article]
    CK,

    Good point. I do not disagree about hugely different economics, core vs. fringe.

    However, I would not take for granted that every play has an identifiable Core. I should also add, there is certainly a class of plays where economics within their core is essentially similar to the economics outside their core - in that neither works using today's commodity prices and technology (West Texas Overthrust, just to give one example).

    800x multiple sounds impressive but, for all practical purposes, means dividing by zero. If one steps few miles further out in that comparison, that multiple, I suspect, would become infinity.
    Apr 8 03:56 PM | Likes Like |Link to Comment
  • Clayton Williams Energy: Asset Sale And Latest Well Results [View article]
    Valueconscious,

    Thank you very much. This is most helpful.
    Apr 7 06:46 PM | Likes Like |Link to Comment
  • The Debate Over Shale Oil Reserve Estimates Suggests EOG Resources Might Be A Good Short [View article]
    John001, sorry for the lingo - I certainly hope that no Petroleum Engineer or Petroleum Evaluation Engineer will take offence here :). Particularly given the substance of my comments and their context.
    Apr 7 03:20 PM | Likes Like |Link to Comment
  • The Debate Over Shale Oil Reserve Estimates Suggests EOG Resources Might Be A Good Short [View article]
    ngwarrior,

    on an unrelated topic - EOG has been experimenting with shale EOR in the Bakken and Eagle Ford (obviously, lab experiments for distant future needs)
    Apr 7 01:29 AM | Likes Like |Link to Comment
  • The Debate Over Shale Oil Reserve Estimates Suggests EOG Resources Might Be A Good Short [View article]
    @Michael Blair,

    It is wonderful that we can get a perspective in this forum from a Board member. I do remember Numac, it was a very fine company in the Canadian patch. I also remember Anderson Exploration (for some reason I thought they were the acquirer, but my memory must break down here, after more than a decade).

    As for the article in Businessweek, I thought it was an ok piece of journalism, but I did not find anything revealing in it. Facts that it states are accurate but the article does not come across as written by someone with much experience in the subject or good understanding of the issues. In any event, I did not take away from it the same sense of worry that your note (if I read it correctly) seems to convey - that reserve estimates are systemically overstated and are at risk. Even if some companies abuse the reporting or make honest mistakes, it does not necessarily mean that many other companies will not eventually write up their initial estimates to reflect better-than-booked well performance. In fact, I would argue, upward revisions have been more prevalent than downward revisions.
    Apr 6 11:39 PM | 2 Likes Like |Link to Comment
  • The Debate Over Shale Oil Reserve Estimates Suggests EOG Resources Might Be A Good Short [View article]
    Sorry David, what is TLP?
    Apr 6 05:00 PM | Likes Like |Link to Comment
  • The Debate Over Shale Oil Reserve Estimates Suggests EOG Resources Might Be A Good Short [View article]
    EOG "a rapidly expanding NG player"? Does NG stand for "natural gas"?
    Apr 6 04:27 PM | Likes Like |Link to Comment
  • The Debate Over Shale Oil Reserve Estimates Suggests EOG Resources Might Be A Good Short [View article]
    Dear Michael,

    I read your note with interest. While I do not agree or disagree with you main point that EOG is a good short, I am a bit surprised by the rationales that you are using to support this and other recommendations.

    "Most oil and gas investors have never heard of Jan Arps or seen his commonly-used formula for calculating Estimated Ultimate Recovery..."

    First, even if your assertion were true on its surface, I don't think it is valid in its substance. Well performance, production declines and EURs are typically analyzed and estimated by reserve engineers. It is a large and well established discipline. Suggesting that all estimates are overstated needs some substantiation. Investors do benefit from the knowledge and established practices and analytic standards developed and enforced by the industry. So, in substance, investors not only have "heard" of Arps math, but are routinely using a vastly more elaborate set of methods and practices (even if they do not know about it) when they listen to investor presentations or read 10-Ks.

    It is true, some investors would not be able to perform this type of analysis like professional reserve engineers can (equally, few investors are good forensic accountants). Many investors do not have same access to raw well performance data. However, based on my experience, the majority of energy-focused institutional investors and analysts can understand what stands behind the estimates and can think of these estimates critically. Reading your note, I almost get an impression that steep initial declines from fracked wells is a recent news and that the concept of a decline curve was first discovered in the article in Businessweek from last week that you refer to.

    "My personal view is that the Arps formula produces unreliable results for fracking, and investors should approach the area with caution."

    I wholeheartedly agree that investors should approach any area in investments with caution and avoid judgement based on superficial understanding. However, I do not agree with how you depict the process of estimating reserves (and drilling economics). In practice, this process is not (or, at least, should not be) a simple mechanical application of some mathematical formula - this would be a very simplistic and inadequate view of how the estimation is done by the industry.

    "My approach is buy oil & gas companies with diversified resource bases at prices of 5 to 7 times cash flows and reasonable balance sheets."

    I am surprised you are advocating to pay that high of a multiple. Every situation is different of course, but aren't there many well-established energy companies with diversified resource bases that are trading well below 5 to 7 times cash flows? 7x multiple, in my experience, is a sign of a high growth expectation.

    Just my to cents.

    Regards,

    Richard
    Apr 6 02:28 PM | 12 Likes Like |Link to Comment
  • Penn Virginia: Divestiture Announcement May Come As Early As This Month [View article]
    The transparent barrel,

    I would not be able to know. As I wrote, the data room is still open and it is a widely marketed divestiture. The asset is of good quality though, I can see high level of interest.
    Apr 5 04:24 PM | Likes Like |Link to Comment
  • Penn Virginia: Divestiture Announcement May Come As Early As This Month [View article]
    Pablomike,

    In fact future midstream rights have been an integral component of the majority midstream monetization transactions by E&P companies, from Chesapeake to the anticipated Antero deal. The structure and terms vary but the concept is almost universal. i should post a separate not on the subject - this is an interesting discussion theme.
    Apr 5 02:30 AM | 1 Like Like |Link to Comment
  • Apache Emerges As The Most Active Driller In East Texas Eagle Ford - Read-Across To Halcon, Clayton Williams And Comstock [View article]
    Bankstocks,

    You are making an important point - it would be incorrect to think of the East Texas Eagle Ford as a significant factor for APA's stock price. It may become more meaningful if the larger portion of APA's acreage position is proven productive. Not there yet.
    Apr 4 06:19 PM | Likes Like |Link to Comment
  • Penn Virginia: Divestiture Announcement May Come As Early As This Month [View article]
    Just a few additional thoughts on the timing of the anticipated divestiture announcement.

    Originally, the bids are due on April 10. Once all bids are in, it typically takes some time for the bids to be evaluated and, in select cases, negotiated before the PSA is signed. It is also fairly common for the seller's agent to extend bid deadlines to accommodate buyers in their process (due diligence, internal evaluation, approvals, financing, etc.) or to let more parties into the data room should interest prove strong.

    I should have stated more clearly in the article that the end of this month is the earliest when the results can be announced. More realistically, the announcement is a May event.
    Apr 4 12:44 PM | Likes Like |Link to Comment
  • SandRidge Energy: Sweet Spots And Duds Of The Mississippian Lime [View article]
    Pablomike - the article is on this site indeed. Here's an easy way to find it.

    You need to click on the my orange "zeits energy analytics" icon at the top of this article. It brings you to the author profile page. There, in the left-hand-side bar, click on "Articles." That will give you a list of articles. The one you are looking for is the number eight from the top.

    You can also use tickers at the top of that list to look up everything that an author wrote on a specific stock. Please note, many of my notes are not stock-specific. So you may wish to use the article list.
    Apr 4 12:12 PM | Likes Like |Link to Comment
  • Apache Emerges As The Most Active Driller In East Texas Eagle Ford - Read-Across To Halcon, Clayton Williams And Comstock [View article]
    Sailthesound, I certainly did take it as a well worded compliment - which I much appreciate. Thank you for taking the time to read and for the kind word. Glad it adds a cent to the bigger picture.
    Apr 3 06:24 PM | Likes Like |Link to Comment
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