Couple of other positives, their oil sands, guess this is positive and Enlink, that's around $7 billion of value, vehicle for putting more midstream assets in, not sure that's something XOM would want. Although Chevron had mentioned in past the poss of doing it.
Today, Devon looks like a great target for an XOM, 1.2mm acres Permian, Delaware. Also EF and Anadarko, two of their core areas. Could do DVN and WLL and spend about the same as the XTO deal. New CEO could be issue, WLL, not an issue. Would bet CLR will be in the mix, WLL or OAS. APA and OXY have big Permian positions but other global baggage.
What is more galling to me is this is not a recent development, he had this in mind all along. Probably going back to selling drill partnerships in ATLS.
My guess is he getting what he can from ARP before it goes to $2 or whatever and tries to build ATLS. The losers, ARP unit holders. ATLS won't care about increasing the ARP dist, which probably can't be done anyway. At the current strip, without hedges, there would be no distribution. What's ARP worth with no dist. Kind of bleak scenario.
Something struck me that no one wants to make the worst mistake ever made, tightening in the Depression. The could be surpassed by keeping rates too low for too long. As Grant said, we'll find out in a decade.
Quicksilver bit he dust today. A bunch has happened in a few years with the Barnett, Haynesville,and the Marcellus coming from zero to 20 bcf/d or whatever the number is. Saw that gas prod was up 12% y/y for December and the price stinks.
Looks like the S3 covers the entire ARP units. So what does it do to the ATLS distribution. I do jump to conclusions but with Cohen, it's usually justified. Again, unbelievable. Who knows, he just might step in something again. But I would bet on that with ATLS and at lower prices. He now has more capital to do another deal, time will tell.
Listened to Grant on CNBC, kind of half listened because it seems we are just saying the same things over and over for the past few years. But his final comment, do agree, we will find out how this plays out in a decade or so. While that happens, WTI is below $50 for the rest of the year and gas is below $3, those aren't good numbers to generate enough cash to keep drilling. Hedges help but not forever.
I didn't spend a bunch of time with it but it looked like the preferred plus 20mm units. How many does ATLS own at the moment. I don't own any units but find it interesting watching what he does next, it will be creative and I would bet destructive for his equity owners, while he does well.
Looks like ATLS is selling ARP units. No press release that I could find to explain rationale. This guy never stops. Gets more capital to reinvest? Can't be good for anyone other than Cohen. Unbelievable.
ARP guidance for this year. Futures shows nat gas in $2.90s and oil at high $40s WTI for the rest of the year. Run the numbers at those prices. Marcellus gas is selling in the
The point is 80% of production is gas, 10% oil, seems if you want to play a rebound in oil, a co that is 80% oil is the easier choice, and consider the scenario where oil goes up and gas stays where it is. Still don't think this is a good bet on oil. Leave aside the debt issue.
Seems most are missing the point that this is a nat gas company. And one with not very good assets. And too much debt. If you want a bet on recovering oil, imo, this isn't a good pick. And we aren't past the possibility of a storage fill and $30 oil, not saying it will be still remains a possibility. If won't matter that oil will probably end next year at $75. And gas will still be in the $3s.
Doesn't surprise me, just looking at the cost structure for Permian, $20 prod costs including G and A, $10 finding costs, might be a stretch. No interest. So you can produce for $30. 60% oil, 20% NGL, 20% gas at $75, $35, $4, netback would be $50 per boe. Take out maybe $5 per b for interest and you make $15 per barrel. For a company producing 40k per day, at $100 per b, $4 billion EV, making $600mm free cash, that's about 15% return. That feels about right. For Bakken, the net back at 90% oil, 10% gas, netback would be $70, seems the Bakken is still a good bet with the higher oil cut. Bakken would lose some on the trans, maybe $10 and finding costs may be somewhat higher. Not very precise numbers, but seems $40 oil, $3 gas are a long ways from prices that will keep production up. CLR make a run at WLL? Wouldn't surprise me.
I don't think the Saudis are doing anything other than letting the market determine the equilibrium price, they don't have the ability anymore to do otherwise. My guess is the e and p mlp form is a dinosaur before this cycle plays out, most will cut distributions, to zip, no growth, dwindling production. Will go the way of the royalty trusts of the past. My feeling, cut the losses while you can. The MLPs tend to be more gassy, poor rocks, and high debt, not a good combination, imo.
ARP is a gas company and gas doesn't get out of the $3s for five years if you believe the futures. No way ARP can begin to pay a dist and even maintain volumes. Oil may get back to $75 next year and gas is still at $3, doesn't help them much. Think about the environment without hedges, looks bleak to me. The distribution seems to be blurring the reality of the business, it ain't good. I'm not sure how much equity value is there.
Here's a prediction, that before this cycle runs its course, distributions for most e and p MLPs will be cut again if not eliminated. Investors are still focused on distributions which seem highly at risk. Look at the c corp e and ps, most are doing secondaries and cutting capex significantly, they don't act like there will be a quick recovery. ATLS GP IDR value is worthless. NRP, coal based, about half, is yielding 20%. ATLS at 70 cents and 20% yield, $3.50 unit value. Cuts to dist and becomes an option value on survival. Like to hear how Cohen spins it. Guess he will talk about all of the value he has created over the years.
Don't have any facts to back it up, but today feels like it might be around the low for this cycle, at least we revisited the oil low and the cos haven't reached new lows. Saw comments today that Marcellus gas prod is decelerating, still a lot of gas being produced there. Associated gas should come down. Not sure I would buy gas now unless you have a very long time frame. BCEI seems about as good a bet as any, great shale opp, relatively low debt, concentrated asset. Wonder if they would sell Arkansas. I think I'm going to buy something, just haven't figured out what. Still seems WLL is on the block and a good price would help everyone, it should get $50 at least.
Topeka has a list of potenial buyout candidates, 3 in Appalchia, 3 in Permian and OAS. The gassy ones don't make sense to me. The Permian names, LPI has the highest debt load. And OAS as well, but not sure mgt wants to exit now. Will be interesting to see how it plays out. BCEI could be on the lists. One happens and the whole group gets reset.
That is a good analogy. At least they are 95% oil which is an advantage on the revenue side, gas equivalent per barrel is $20 vs $40s on oil today. Not sure why they picked the EOR route although I remember them talking about EOR's better returns than their Bakken assets, might have been the case at the time. Now it seems that the shales are getting bigger reserves, and costs are down 25% or whatever. The returns you used to make at $80 WTI can now be had at $60. This is a generalization but not sure EOR gets the same cost benefits as the shales, better technology and lower drill/frac expenses. Again seems like they didn't pick the lowest cost reserves to focus on. But then again, some cos chose deep water and some picked oil sands. At $100 oil they will look good. And the $80 cost reserves will be back in business also. I'm not going back to DNR any time soon.