Seeking Alpha

Richard Zeits

 
View as an RSS Feed
View Richard Zeits' Comments BY TICKER:
Latest  |  Highest rated
  • Oil & Gas Stocks: Pain, Then More Pain... When Is The Gain? [View article]
    Garthilk,

    Just a word of caution. You may wish to look at what happened on December 9. TPLM: +48%; HK: +21%; CLR: +7%; OAS: +5%, etc, etc. Without any visible fundamental change in the macros.
    Dec 15, 2014. 01:14 AM | 5 Likes Like |Link to Comment
  • Oil & Gas Stocks: Pain, Then More Pain... When Is The Gain? [View article]
    Randyeyler,

    I agree, there is some redundancy. But when I have 300+ Oil & Gas stocks on my screen, with many of them jumping up and down 10%-20% per day, I personally find it useful to have a simple tracking tool that would tell me where we stand. Helps me to sort through the chaos.

    I thought if this is useful to me, it might be useful to someone else. So I posted it.
    Dec 15, 2014. 12:14 AM | 21 Likes Like |Link to Comment
  • Oil & Gas Stocks: Pain, Then More Pain... When Is The Gain? [View article]
    Alex,

    Thank you for pointing out - meant November.

    I should say, for every Black Friday there is a Green Monday, one day. There is interesting math: a 75% decline on the way down equals to 300% return on the way up, if returning to the same level. The trick, of course, is not to run out of capital too early.
    Dec 14, 2014. 10:21 PM | 6 Likes Like |Link to Comment
  • Oil & Gas Stocks: Pain, Then More Pain... When Is The Gain? [View article]
    Texcritic,

    Thank you for pointing out, it is indeed a bad data point. Will fix.
    Dec 14, 2014. 09:36 PM | 1 Like Like |Link to Comment
  • Halcón Resources: Eagle Ford Production Regains Production Momentum [View article]
    Alex from Houston,

    I would guess low oil prices should bring relief to differentials relatively soon. As to HK's rig count, I do not know what contractual commitments they have. My guess would be two rigs in each play with deferred completions.
    Dec 14, 2014. 09:31 PM | Likes Like |Link to Comment
  • Oil & Gas Stocks: Pain, Then More Pain... When Is The Gain? [View article]
    RS055,

    I am afraid you are missing two factors. First, the oil & gas industry is coming off a very strong upcycle. A lot of equity has been accumulated to support debt. Second, before the operator faces liquidity issues, it often has the option to eliminate capex which leads to very strong free cash flow in the immediate term, typically more than sufficient to service debt... And then the upcycle may arrive to rescue.
    Dec 14, 2014. 07:14 PM | 15 Likes Like |Link to Comment
  • Oil & Gas Stocks: Pain, Then More Pain... When Is The Gain? [View article]
    Aricool,

    I was of course talking about existing production cots - cash costs. Those do not included DD&A (non-cash). I would also argue that in the immediate term G&A and Interest Expenses are sunk costs. If some portion of gathering and transportation cost is internalized or committed to on a take-or-pay basis, it may also be effectively sunk.

    Again, a lot of operators may not think of a $20/barrel WTI price (or even $50, for that reason) as something that they should expect to last.
    Dec 14, 2014. 07:02 PM | 3 Likes Like |Link to Comment
  • Oil & Gas Stocks: Pain, Then More Pain... When Is The Gain? [View article]
    Allupside,

    Great point - perhaps the stage is set for a somewhat quicker cycle this time.
    Dec 14, 2014. 05:31 PM | 4 Likes Like |Link to Comment
  • Oil & Gas Stocks: Pain, Then More Pain... When Is The Gain? [View article]
    Justbor,

    I would distinguish the breakeven price for existing production and for new projects.

    In a place like the Eagle Ford, existing wells could break even at $10-$20 WTI on a cash basis (variable LOE and production taxes are low and everything else is often sunk cost in the immediate term).

    The breakeven cost for new production is substantially higher. EOG, for example, has stated that it can generate 10%+ returns in the Eagle Ford at $40 per barrel and current cost structure (which reflects $100 per barrel oil). Can an operator survive on a 10% return? Certainly not in a long term, in my opinion.

    All these questions are somewhat irrelevant, however. First, operators will begin shutting in production well before cash breakeven costs are reached. Second, what matters most is the price at which the industry as a whole would be able to attract capital sufficient to grow production at an annual rate of at least 1 million barrels per day a year. Given natural declines, this takes a tremendous amount of capital.

    Capital availability may not be sufficient to feed that minimal growth if oil stayed at $60, in my opinion. Something would have to give - either costs or the price.
    Dec 14, 2014. 05:29 PM | 13 Likes Like |Link to Comment
  • Is This The End Of The 'Shale Oil Bubble?' Or The Beginning? [View article]
    Gigem77,

    Very fair points. However, I would not call the U.S. storage situation a "glut" yet - the 12-month WTI contango just started widening and does not appear to be at a point yet where one can believe that storage is unavailable.

    Having said that, the situation varies by region (and is to some degree a function of pipeline connectivity). I should post some graphs for everyone to share thoughts. In fact, quite interesting.
    Dec 13, 2014. 05:39 PM | 2 Likes Like |Link to Comment
  • Is This The End Of The 'Shale Oil Bubble?' Or The Beginning? [View article]
    Badbernanke,

    I don't think Russia has any ability to define oil prices as long as Saudi Arabia has sufficient spare capacity, which it does.
    Dec 13, 2014. 02:12 PM | 1 Like Like |Link to Comment
  • Is This The End Of The 'Shale Oil Bubble?' Or The Beginning? [View article]
    Rockinr,

    You wrote: "...he checked on the pipelines and found they were turned down to a trickle because there was no place to store it."

    Where was that, I wonder? You may wish to look at Cushing, OK situation (the Nymex delivery point) - still very low storage level by historical standards.
    Dec 12, 2014. 11:29 PM | 3 Likes Like |Link to Comment
  • Is This The End Of The 'Shale Oil Bubble?' Or The Beginning? [View article]
    Cashewking,

    I don't think Saudi Arabia is specifically targeting our energy industry. That would be a wrong interpretation.

    If my interpretation is correct, Saudi Arabia may be concerned with the pace of capital investment in Global Oil spinning out of control. Once many mega-projects break ground, they become a freight train that is very difficult to stop. Once all such capacity comes online, we may end up in a prolonged overproduction downcycle that would hurt the entire industry worldwide.

    Besides, as I argued, a sharp price correction in fact benefits North American producers.
    Dec 12, 2014. 03:44 PM | 7 Likes Like |Link to Comment
  • Is This The End Of The 'Shale Oil Bubble?' Or The Beginning? [View article]
    WayneinOregon,

    I agree with you, higher oil prices correlate with stronger growth. One thought though, upcycles arrive just as unexpectedly as downcycles. Upcycles just tend to be more gradual in their build-up whereas downcycles can resemble an avalanche.

    The biggest concern that the unexpected drop in the price of oil brings - could it be a harbinger of much bigger macro trends developing? I hope not.
    Dec 12, 2014. 03:27 PM | 3 Likes Like |Link to Comment
  • Is This The End Of The 'Shale Oil Bubble?' Or The Beginning? [View article]
    Scooter-Pop,

    Great point. Every time roughnecks end up at walmarts and than the industry complains that it has shortage of skilled workers.

    In an ideal world the industry would choke back wells, schedule workover work, defer completions, perform system maintenance, schedule extended holiday breaks, etc.

    However, this is a highly fragmented and competitive industry. Everything falls down to the lowest possible denominator.
    Dec 12, 2014. 03:23 PM | 5 Likes Like |Link to Comment
COMMENTS STATS
1,390 Comments
1,784 Likes