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Richard Zeits  

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  • A Pair Trade For Oil E&Ps [View article]
    Let's just say, oil goes up $10 by August. I am not convinced one does not end up under water on this trade. Most importantly, I am not sure I understand the concept behind it. Some analysis as to why exactly the market is mispricing this pair would be helpful.

    I have not run the numbers on this trade, but what is the cost of carrying a trade like this versus volatility and expected return? Pair trades often eat up a lot of capital. There should be a compelling rationale why a pair trade is a right structure for the concept. Kind of missing in the article.
    Jun 16, 2015. 06:54 AM | 8 Likes Like |Link to Comment
  • Comstock Resources: Shifting Operating Priorities [View article]
    Armatima,

    Thank you for the question. I will try to cover in follow-up notes - would be difficult to cover adequately in a brief comment.
    Jun 15, 2015. 09:11 PM | 1 Like Like |Link to Comment
  • Has Halcon Resources Improved The Financial Situation Enough? [View article]
    Scooter-pop,

    In my humble opinion, at the current price North American production as a whole would have difficult time growing, as many assets, including some of Halcon's important assets, would remain economically under water.
    Jun 15, 2015. 11:02 AM | 1 Like Like |Link to Comment
  • Triangle Petroleum: A Higher Oil Price Needed For Prosperity [View article]
    Pablomike,

    Their differential was $7.68 in the reported quarter.
    Jun 13, 2015. 01:43 PM | 1 Like Like |Link to Comment
  • Triangle Petroleum: A Higher Oil Price Needed For Prosperity [View article]
    Pablomike,

    The differential has narrowed appreciably but here's what I would caution against:

    For each specific operator, the differential is a function of how that operator markets the oil. The majority of significant producers have marketing portfolios that effectively price a portion (or a significant portion) of production at price points outside the basin.

    So I would not look at one arbitrary pricing point, like Clearbrook for example, and assume that the Clearbrook/Cushing differential has much to do with the discount that the operator sees at the wellhead.

    Generally, I expect that typical Bakken differential in Q2 will be below $8 per barrel for big producers.
    Jun 13, 2015. 12:12 PM | 1 Like Like |Link to Comment
  • Has Halcon Resources Improved The Financial Situation Enough? [View article]
    Stone Fox,

    Thank you for a nice article.

    Just a few nuances:

    You wrote: "At the time, the company sold preferred shares to Apollo for $150 million with the potential to increase the shares from 150,000 to 400,000. The deal came at a price of an 8% annual dividend and a 4% overriding royalty interest in 75 net wells and up to 200 net wells, assuming full subscription of the preferred shares."

    Just wanted to mention that the preferred shares were not issued by "the company." The preferred was issued by HK TMS, LLC. There is a big structural difference. You may be overlooking the non-recourse nature of the structure.

    The increase in preferred shares from 150,000 to 400,000 would be in exchange for Apollo-managed funds increasing their cash contribution from $150 million to $400 million to fund additional drilling.

    There are also some structural nuances related to the override rate.

    With regard to the lack of discussion on the TMS most recently, the drilling results and the suspension of the drilling program was discussed in full detail two or three quarters ago, you may have missed it.

    Jun 13, 2015. 08:07 AM | 11 Likes Like |Link to Comment
  • Hess Corporation: Spectacular Midstream Valuation [View article]
    Frac4Crude,

    The note focuses solely on the incremental impact from the announcement. My point was that there appears to be a double surprise:

    - the sell-down + IPO vs. the much slower MLP route - the net effect is greater certainty and acceleration of the proceeds at the time when cash has significant value;
    - the valuation received is much higher than what was likely priced in the stock.
    Jun 12, 2015. 09:20 PM | 3 Likes Like |Link to Comment
  • Gulfport Energy: Opportunistic Consolidator In The Dry Gas Utica [View article]
    Pablomike,

    I agree. The name of the game has always been reselling land for profit. Making returns from drilling takes more effort and longer time.
    Jun 12, 2015. 01:54 PM | 1 Like Like |Link to Comment
  • Gulfport Energy: Opportunistic Consolidator In The Dry Gas Utica [View article]
    Pablomike,

    The price of acreage has clearly changed as commodity prices have changed. So selling at a loss is not surprising.

    I would also not rush to conclude that the sale is at a major loss as AEP is obviously selling those portions of the acreage that it cannot develop - most likely lower priority acreage.
    Jun 12, 2015. 11:21 AM | 1 Like Like |Link to Comment
  • Now Is The Time To Double The Strategic Petroleum Reserve [View article]
    TOT,

    Great point.
    Jun 11, 2015. 07:23 AM | Likes Like |Link to Comment
  • Now Is The Time To Double The Strategic Petroleum Reserve [View article]
    Aricool,

    Good question. One of the problems is that the SPR Gulf Coast locations are connected to pipes that have traditionally taken oil up north, to PADD 2. Several of those pipes have been reversed, as oil now is flowing from north to south. So site location is a potential issue.

    That being said, there seems to be an abundance of opportunities to create new caverns in salt domes. In fact, the DOE prospected locations for new facilities in the past, but the project never went ahead.

    If a new facility is built, its location may need to be evaluated in the context of the new structure of regional flows. It appears to me that PADD 1 and PADD 5 may need storage, but I am not sure geology is favorable in those areas for underground storage.
    Jun 10, 2015. 11:47 PM | 1 Like Like |Link to Comment
  • Halcón Resources: Taking Stock In The Eagle Ford [View article]
    lol wut,

    I generally agree, but only to a point.

    Imagine oil prices go higher by $10 and well cost goes to $7 million. Is there a contradiction? Nor necessarily.

    From that point, everything will depend on whether one can consistently drill better wells. I don't know if you have seen, but EOG puts 15+ million lbs of sand into some of its Bakken wells. Probably for a good reason.

    With the U.S. being a price taker, there is really no cap on profitability (as opposed to the situation in nat gas). So the macro "option" is something I would not underestimate.
    Jun 10, 2015. 02:05 PM | 3 Likes Like |Link to Comment
  • Now Is The Time To Double The Strategic Petroleum Reserve [View article]
    Richard B,

    I certainly appreciate your comments, very enriching to the discussion (even if you and I have drifted into technicals).

    Best regards,

    Richard
    Jun 10, 2015. 12:38 PM | 1 Like Like |Link to Comment
  • Halcón Resources: Taking Stock In The Eagle Ford [View article]
    JakSiemasz,

    I hope to find time to post some more in-depth analyses of well performance in the play (writing it up and formatting is obviously a bit time consuming).

    As I wrote above, it is not my purpose to advocate any point of view. I just hope that the detailed data is helpful to readers.

    However, I would just comment again: 200 Mboe - and even more so, 200 Mbo - produced in the first couple of years implies a very good well, in my estimation. I am not trying to derive any EUR or IRR from that. That is a separate and serious exercise - cavalier approaches in that area is not my modus operandi.
    Jun 10, 2015. 12:35 PM | Likes Like |Link to Comment
  • Halcón Resources: Taking Stock In The Eagle Ford [View article]
    Lol wut,

    "The East Eagle Ford acts a lot like the South Texas Eagle Ford. You end up producing close to 50% of your reserves in the first 18-24 months. The final 50% will come over the next 10 years."

    I would caution against generalizations. There is a wide variety of type curves within South Texas. What you are describing may be optimistic for "dead" oil areas but may be pessimistic for certain other areas. Also, a 12-year well life sounds short to me.

    I generally agree with you that 17% ROR is not something to build a successful business upon. However, the same is probably true about three-quarters of the industry's active asset base. Prices higher than the current $60 (or lower costs) are needed, in my opinion, so that the industry can grow and prosper.

    Please note, I am not advocating in any direction. I just hope that the detailed well data will save readers time searching for it and would allow to improve their understanding of the operating performance.
    Jun 10, 2015. 12:21 PM | 3 Likes Like |Link to Comment
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