TPH Comments on Sweet 16
Posted: Fri Feb 23, 2018 11:41 am
Here is what Tudor Pickering Holt has to say:
Gulfport Energy (GPOR) with TPH Target Price of $18
Yesterday's outsized move of +14% vs. E&Ps +1% was driven by an overwhelmingly positive conference call on the conversation of buybacks. Lock out of buying back shares from the $100MM repurchase authorization through YE'18 announced three weeks ago is 48 hours after earnings (Monday), putting a floor on the equity. Additionally, a 2018 Strike Force drop and monetization of TUSK interest (TPHe combined proceeds totaling ~20-25% of market cap) could drive increases to buybacks further down the road given how cheap the equity is today. Therefore, tactically speaking, we still see room for the name to run on the potential for more buybacks.
Parsley Energy (PE) with TPH Target Price of $40
Stock closed +8% yesterday, as management did a good job addressing some of the technical and operational challenges faced in 2017 and why many of these will not be repeated in 2018. Though downspacing and delineation tests on a number of pads in 2017 impacted production by ~5mboepd, we see the opportunity to high-grade the 2018 program towards higher RoR, oilier, more productive rock in Upton / Northern Midland basin areas as drivers for production. Therefore, commentary from yesterday's call only reinforces the conclusion from our 2/8/18 deep dive update on why PE is a top pick in the SMID cap space.
Cimarex Energy (XEC) with TPH Target Price of $175
Cimarex announced this morning a doubling of its quarterly dividend to 16c/shr (0.6% annual yield). While we realize the yield is relatively small, this restores the dividend to levels prior to the February 2016 cut. Continue to like the name on beat and raise potential and the return focused DNA of management.
TPH's take on crude oil:
Crude + key products drew 3.7mmbbls (vs flat 5-yr norms) as Cushing continued to draw, down 2.7mmbbls, and national crude inventories fell 1.6mmbbls counter-seasonally. Cushing has drawn 21.4mmbbls over the past 8-wks. Coupled with the severe winter weather in late December & January, the EIA's estimate that US production has grown only 19kbpd over the past 2-wks biases us towards a soft print for next Wednesday's EIA 914 data (Dec '17 crude production). With refinery utilization rates migrating towards norms (currently, 2.0% above 5-yr norms vs 3.2% a week ago), products should resume tracking with norms. Distillates drew seasonally, down 2.4mmbbls, but gasoline built 0.3mmbbls counter-seasonally. Crude export strength (+722kbpd w/w) likely transient based upon historical precedents and given that the LOOP export test has concluded.
Gulfport Energy (GPOR) with TPH Target Price of $18
Yesterday's outsized move of +14% vs. E&Ps +1% was driven by an overwhelmingly positive conference call on the conversation of buybacks. Lock out of buying back shares from the $100MM repurchase authorization through YE'18 announced three weeks ago is 48 hours after earnings (Monday), putting a floor on the equity. Additionally, a 2018 Strike Force drop and monetization of TUSK interest (TPHe combined proceeds totaling ~20-25% of market cap) could drive increases to buybacks further down the road given how cheap the equity is today. Therefore, tactically speaking, we still see room for the name to run on the potential for more buybacks.
Parsley Energy (PE) with TPH Target Price of $40
Stock closed +8% yesterday, as management did a good job addressing some of the technical and operational challenges faced in 2017 and why many of these will not be repeated in 2018. Though downspacing and delineation tests on a number of pads in 2017 impacted production by ~5mboepd, we see the opportunity to high-grade the 2018 program towards higher RoR, oilier, more productive rock in Upton / Northern Midland basin areas as drivers for production. Therefore, commentary from yesterday's call only reinforces the conclusion from our 2/8/18 deep dive update on why PE is a top pick in the SMID cap space.
Cimarex Energy (XEC) with TPH Target Price of $175
Cimarex announced this morning a doubling of its quarterly dividend to 16c/shr (0.6% annual yield). While we realize the yield is relatively small, this restores the dividend to levels prior to the February 2016 cut. Continue to like the name on beat and raise potential and the return focused DNA of management.
TPH's take on crude oil:
Crude + key products drew 3.7mmbbls (vs flat 5-yr norms) as Cushing continued to draw, down 2.7mmbbls, and national crude inventories fell 1.6mmbbls counter-seasonally. Cushing has drawn 21.4mmbbls over the past 8-wks. Coupled with the severe winter weather in late December & January, the EIA's estimate that US production has grown only 19kbpd over the past 2-wks biases us towards a soft print for next Wednesday's EIA 914 data (Dec '17 crude production). With refinery utilization rates migrating towards norms (currently, 2.0% above 5-yr norms vs 3.2% a week ago), products should resume tracking with norms. Distillates drew seasonally, down 2.4mmbbls, but gasoline built 0.3mmbbls counter-seasonally. Crude export strength (+722kbpd w/w) likely transient based upon historical precedents and given that the LOOP export test has concluded.