Seeking Alpha

Richard Zeits

 
View as an RSS Feed
View Richard Zeits' Comments BY TICKER:
Latest  |  Highest rated
  • Chesapeake Energy: A Spin-Off For Southern Marcellus? [View article]
    Masayokato,

    A have already submitted a quick-read note on SWN and a CHK note is coming very soon.

    I think this is a terrific asset. It would have been under-utilized under CHK management (barring an equity issuance to finance it).

    SWN has a better financial position, but the acquisition cost is not low. They stand a chance to make a solid return in the long run. But I don't think it will be a true "steal." Overall moderately positive for the stock, IMHO.
    Oct 16, 2014. 11:32 AM | 1 Like Like |Link to Comment
  • A New Source Of Power For Tesla? [View article]
    :) :)

    Just to make sure: all I meant, if nuclear fusion proved to be a disruptive technology, nuclear power might win over fossil fuels on cost, perhaps several decades from now, and electric cars might be the cars of the future.

    I did not suggest that a miniature nuclear plant would be mounted in a car's or truck's glove compartment. But I like the direction of this thought: a nuclear power fueled family car, ultimate distributed power generation, - a bit futuristic, but what a beautiful thought!
    Oct 15, 2014. 11:57 PM | 5 Likes Like |Link to Comment
  • Oil & Gas Correction Scorecard: Have We Seen The 'Capitulation' Yet? [View article]
    Curious O&G Investor,

    Just to clarify, I am not claiming that there is no oversupply. All I am saying is that I personally have not been able to find any convincing signs of imbalance (and the market, I would argue, could not either, since crude oil was selling above $100 a barrel just a few months ago). I am sure there are much more sophisticated students of the oil market who might be able to share their thoughts.

    The backwardation evaporated, that is true. But how can one discern oversupply from simple seasonality of demand, at least at this point? Was a $20 per barrel backwardation a normal condition to begin with?

    In terms of convincing signs, have we seen significant forced production cutbacks by OPEC? Or massive inventory builds?

    Also, I do not read from reports of what Saudi Arabia and Kuwait have communicated to the market that they believe that there is an oversupply. Did they say that? Or did they say that there is no economic sense in trying to defend a price that may be overly stimulative in the face of growing supply from the US, deepwater and Russia?

    I do not think that they necessarily "reduced prices." They just said that they will not defend prices above $80 at this point. The effect may be the same, even the intent (who can read their mind?), but the stated mechanism is different. The market will decide what the price should be as long as it is floating above $80. But shouldn't that have been the market's expectation anyway?

    My final point, even with all the alarming production growth in the US, I am not sure I have conviction to think that we will not see oil at $110 come next driving season. Do you?
    Oct 15, 2014. 04:31 PM | 1 Like Like |Link to Comment
  • LINN Energy: Recent Correction Closes Valuation Gap [View article]
    AstonMartin1965,

    I would give a different interpretation to the message sent to the markets by Saudi Arabia and Kuwait. In my understanding, all they said is that if oversupply is indeed building, only market forces would be able to contain it. Therefore, they have no intention of stepping in and defending the price above $80. That makes all sense. Even if they did not communicate that, it is almost obvious.

    However, what is not obvious, in my opinion, is that oversupply is already a problem and not just a reflection of seasonality and better than expected supply for some places like Libya. I would refer to my note:

    http://bit.ly/Zr1Opb
    Oct 14, 2014. 06:02 PM | 3 Likes Like |Link to Comment
  • Oil & Gas Correction Scorecard: Have We Seen The 'Capitulation' Yet? [View article]
    User 353732,

    Terrific comment. I just posted some thoughts that may be relevant and curious to think about:

    http://seekingalpha.co...
    Oct 14, 2014. 10:12 AM | 1 Like Like |Link to Comment
  • Oil & Gas Correction Scorecard: Have We Seen The 'Capitulation' Yet? [View article]
    Lolhammer,

    I do not think that stock price declines are necessarily indicative of a play's economics - there are many other stocks that have declined by comparable percentages that operate in much more established plays.

    The TMS is still an emerging play that will need upfront capital investment for at least couple more years before one can tell with certainty that it works (or not) and, if it does, before the play starts generating project-level returns.

    So the bigger question, in my opinion, is not whether the TMS works economically - ultimately it may prove to be no worse than many other areas that are being actively drilled - but whether operators will continue to have access to external capital to fund their programs all the way to full development mode. Both Goodrich and Halcon (and other operators in the play, for that matter) will depend on that capital to maintain and accelerate the pace of drilling.
    Oct 14, 2014. 08:40 AM | 2 Likes Like |Link to Comment
  • Oil & Gas Correction Scorecard: Have We Seen The 'Capitulation' Yet? [View article]
    Hhmiles,

    Bankruptcies are not uncommon, but I would not hurry to interpret stock price declines as a signal of approaching bankruptcies. Let's not forget, one interesting attribute of oil and gas companies, they can drop their capex to zero and their free cash flow available to service debt skyrockets. It things get really bad. And if drilling rigs go idle, production with be almost certain to decline in the U.S., helping to balance the market.
    Oct 13, 2014. 05:22 PM | 17 Likes Like |Link to Comment
  • Crude Oil: Has The Price Paradigm Changed? [View article]
    Brooks1988,

    It might be. I cannot claim any expertise on this virus. However, just to mention, it is less transmittable than one would think, based on what I understand. Also, I am not sure what the spread of this virus is so far.
    Oct 13, 2014. 05:18 PM | Likes Like |Link to Comment
  • EXCO Resources: Interpreting A Cryptic Press Release [View article]
    DeepValueLover,

    I would not hurry to conclude that prices will continue to fall or cannot recover. But commodity prices are indeed a big risk for producers. Let's not forget that EXCO is predominantly a natural gas producer where prices may prove reasonably stable.

    The bigger question is, whether there a liability associated with the KKR deal if oil prices decline to a level where drilling economics in the Eagle Ford become unattractive.
    Oct 13, 2014. 04:12 PM | Likes Like |Link to Comment
  • Oil & Gas Correction Scorecard: Have We Seen The 'Capitulation' Yet? [View article]
    By way of update, today proved to be another very painful day for Oil & Gas stocks (the article was submitted in the morning, with all stock price data based on last Friday's close). Many small-capitalization stocks suffered further large declines. Some are trading in what I would consider "irrational" territory that does not reflect asset quality or financial leverage.

    In another worrisome development, some other economically sensitive sectors - such as Airlines - showed weakness.
    Oct 13, 2014. 04:01 PM | 13 Likes Like |Link to Comment
  • Natural Gas: Marcellus Pipeline Boom Sets Stage For A 30 Bcf A Day Tsunami [View article]
    Murjames,

    I agree with you, this correction is in an "irrational" territory. I submitted a note on the topic this morning. I am sure readers will have a lot of their own views to share.
    Oct 13, 2014. 02:35 PM | 1 Like Like |Link to Comment
  • Natural Gas: Marcellus Pipeline Boom Sets Stage For A 30 Bcf A Day Tsunami [View article]
    Energex,

    I agree with you, there are several pricing points in the Marcellus area that have recently traded at $1.50-$2.25/MMBtu. This means "don't" produce economics for any operator. However, my entire point is that only a portion of production is being sold at that price. Operators have little choice to face this type of uncertainty or to contract for transportation. Strategy of contracting is very complex, by the way. But looking forward, it looks like the lion's share of gas will be produced under firm transportation arrangements of various sorts and average price realization will likely be much higher than what we currently see in those select pricing points.

    I will try to provide an overview of Marcellus producers. In fact you are very welcome to have a look at some of the notes that I have posted already, there are some very detailed ones.
    Oct 13, 2014. 01:38 PM | Likes Like |Link to Comment
  • Natural Gas: Marcellus Pipeline Boom Sets Stage For A 30 Bcf A Day Tsunami [View article]
    Energex,

    I am not sure I agree with the math you are using. Marcellus gas producers do not want to sell at 2/Mcf. Rather they would sell into New England market, via Constitution Pipeline, or into Henry Hub. In the first case, they may hope to make $5 in a good year, less $0.75 transportation cost. With Henry Hub, they can probably net slightly over $3/MMBtu, using the current prices. For some operators, this means very healthy returns + hope for additional upside from better macro environment. That is why these companies are contracting for future transportation.

    Also, let's not generalize. How much debt does Cabot have? How much debt does EQT have? How much debt does Southwestern have? In reality, there is a broad category of companies that are already cash flow positive, they just re-invest the surplus.
    Oct 13, 2014. 01:07 PM | 2 Likes Like |Link to Comment
  • Natural Gas: Marcellus Pipeline Boom Sets Stage For A 30 Bcf A Day Tsunami [View article]
    Energex,

    Producers will invest "to contracted takeaway capacity." That's is one of the key points of my note. Investing beyond that level, I agree, may not make immediate economic sense. But the contracted takeaway capacity is impressive.
    Oct 11, 2014. 11:34 PM | 2 Likes Like |Link to Comment
  • Natural Gas: Marcellus Pipeline Boom Sets Stage For A 30 Bcf A Day Tsunami [View article]
    Avolossov,

    These are important trends indeed, but what do they have to do with Cabot? Their cost of borrowing is actually quite low. I discussed in my most recent note I believe. Oil production is still a rounding error to their gas production. So it is all about Marcellus takeaway capacity, in this specific case and several others.
    Oct 11, 2014. 01:07 PM | 5 Likes Like |Link to Comment
COMMENTS STATS
1,220 Comments
1,353 Likes