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Richard Zeits

 
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  • Natural Gas: A 'Soft Landing' Scenario [View article]
    Curious O&G Investor,

    The current price is still within what I would call a soft landing range (that I would define as $3.50/MMBtu-$4.50/MMBtu). Having said that, the "signal" to the industry to slow down is obviously harsher and is taking place earlier in the season (as I argued, we still have 9 months before containment by storage capacity).

    It is difficult to say how many Bcf/d need to come off line - it is also a function of the winter weather demand. It appeared to me that the volume was minimal, perhaps 1-2 Bcf/d - certainly can be taken care of via natural declines.

    I should get my thoughts together and post an update note.
    Dec 10, 2014. 05:07 PM | 1 Like Like |Link to Comment
  • Can EOG Resources Grow At 25% With Oil At $65? [View article]
    Hammer1,

    Good point. I will try to cover in the next note. I would just say here that published PV-10 use flat price decks. The market should be able to discount the expected cyclicality of the commodity price in stock valuations. So I am not sure that investors will blindly follow last quarter's EBITDA or the PV-10 without giving some consideration to the longer-term macro outlook.

    However, the latest decline gives a very vivid illustration that taking $100 per barrel oil for granted may be a mistake. It also appears that the new paradigm is yet to crystallize in investors' perception.
    Dec 10, 2014. 12:44 PM | Likes Like |Link to Comment
  • Can Continental Grow At 25% With Oil At $65? [View article]
    Looiesoccer23,

    I would not rush to conclude that EOG sells at local price point - don't forget that EOG was one of the early adopters of crude by rail and has a strong marketing department.

    Also, I am not sure where the -20% IRR estimate comes from. I actually think it is very incorrect.
    Dec 10, 2014. 12:01 PM | 2 Likes Like |Link to Comment
  • Can EOG Resources Grow At 25% With Oil At $65? [View article]
    Aemac,

    I am not sure I understand your concern. I don't think any facts are misstated (the article above says "the majority" of assets in Canada are being sold, and so does the company's press release). Besides this is just a reminder to readers that divestitures remain a source of capital and are still possible, despite the decline in the price of oil. Readers who follow EOG have likely seen both the headline and read the press release - no need to copy and paste the entire press release here, IMO.
    Dec 10, 2014. 11:53 AM | 3 Likes Like |Link to Comment
  • Can Continental Grow At 25% With Oil At $65? [View article]
    Tim,

    Again, I don't think one can yet say that this is "growing fro growth's sake." The company has a certain set of opportunities that are NPV-positive (depending on your assumptions). So as long as the company has reasonably-price financing, there is nothing wrong with drilling NPV-positive wells. Leverage (as in safe leverage) is the limiting factor.

    Buying back is a gimmick in most cases. Since it is an equivalent of paying dividend, I don't think opportunity-rich E&P companies should be paying dividends (or gamble in the stock market - this is not what management is there for; they are there to operate the assets).
    Dec 9, 2014. 09:17 PM | 2 Likes Like |Link to Comment
  • SandRidge Permian Trust: Stress-Testing At $50 Per Barrel [View article]
    Daan Everts,

    I would not call it a transfer. I would call it: Common units are the first in line for distribution up to the Subordination Threshold. So I guess the answer is yes, that's what the spreadsheet is designed to calculate.

    So, for example, if you look at my "$60 per barrel" case, distribution per common unit in Q2 2015 is $0.36(2). If you multiply that by 39.375 million common units outstanding, you will get $14.263 million. That's all that is available for distribution, under the model. Sub units get nothing.
    Dec 9, 2014. 09:12 PM | Likes Like |Link to Comment
  • SandRidge Permian Trust: Stress-Testing At $50 Per Barrel [View article]
    Daan Everts,

    Again, I would recommend that you run my production volume assumptions through your own model spreadsheet and see where the difference is. All my figures are in front of you, I am not hiding anything.

    Could there be a glitch in my spreadsheet or an assumption that you might disagree with? Of course, human error is always a possibility (if there is any anywhere, I apologize in advance) and judgment is often subjective. However, I do not sense that you have done the calculation and therefore have left yourself guessing. It really is a simple spreadsheet, it would take five minutes to build if you are doing it for just one quarter - would be delighted to compare notes when you have the result.
    Dec 9, 2014. 01:22 PM | 1 Like Like |Link to Comment
  • Can Continental Grow At 25% With Oil At $65? [View article]
    Reach,

    Delaying maga-projects by several years (and, importantly, increasing hurdles for new projects) would be a very favorable outcome for a producer like SA. Let's not forget about the demographics. Demand continues to grow. So a sharp pain for a year may mean oil price higher for longer. And as Scooter-Pop suggests, Russia's economic crisis may be an unintended consequence but would delay many massive projects for a very long time (let's not forget, many of those projects have the purpose of spending budget money, not making profit).
    Dec 9, 2014. 08:55 AM | 1 Like Like |Link to Comment
  • EQT Corp: A Monetization Of GP Interest In EQT Midstream Partners May Be On The Way [View article]
    Wignewton,

    I don't think there are major implications for EQM. I hope to post a more detailed update shortly.
    Dec 9, 2014. 08:44 AM | Likes Like |Link to Comment
  • Can Continental Grow At 25% With Oil At $65? [View article]
    Vibro1,

    "...the remaining working interest will not work out given to pay off a well's depreciation (90%) the first year..."

    90% depreciation in the first year? CLR must have refocused on the Miss Lime... :)
    Dec 8, 2014. 09:28 PM | 4 Likes Like |Link to Comment
  • I Wouldn't Get Used To $65 Oil [View article]
    TOT,

    I am afraid a lot of people feel the same way. This has been one VERY STEEP correction. Brings in me memories of September and October 2008.
    Dec 8, 2014. 08:48 PM | Likes Like |Link to Comment
  • SandRidge Permian Trust: Stress-Testing At $50 Per Barrel [View article]
    Daan Everts,

    Are you getting different numbers for 2015 when you run my assumptions through your spreadsheet?
    Dec 8, 2014. 07:41 PM | Likes Like |Link to Comment
  • SandRidge Permian Trust: Stress-Testing At $50 Per Barrel [View article]
    Daan Everts,

    Oil hedges are the driver. You may find it interesting to compare across different scenarios.
    Dec 8, 2014. 05:26 PM | Likes Like |Link to Comment
  • Can Continental Grow At 25% With Oil At $65? [View article]
    Tiekone and Zimmerit,

    I would give CLR some credit. Drilling wells is not the only component of capex and costs. Growing production at a 30% rate per year is not bad at all. That said, the return estimates deserve very close analysis, of course.
    Dec 8, 2014. 05:14 PM | 3 Likes Like |Link to Comment
  • Can Continental Grow At 25% With Oil At $65? [View article]
    Fracjob,

    It is a great question. I would argue that in a similar fashion they signaled an $80 price two months ago and, via Kuwait, a $75 price. Those signals are, however, interpretations. SA never said that they will not sell oil below $80, for example. Therefore, $80 is just as good as as $40.
    Dec 8, 2014. 05:11 PM | 2 Likes Like |Link to Comment
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