Energy Prospectus

Opening Prices:
> WTI is down 23c to $71.68/Bbl, and Brent is down 27c to $73.52/Bbl.
> Natural gas is down 1.0c to $3.993/MMBtu.

AEGIS Notes
Oil

West Texas Intermediate staged a solid comeback this week following Monday’s price plunge
Oil prices were routed on Monday by over 7% as the delta variant’s spread put the oil demand recovery in doubt
However, prices recovered Monday’s losses over the week on expectations that the oil demand recovery hasn’t been derailed
Plus, when the Wall Street Gang took a hard look at the OPEC+ deal they discovered it still leaves the global oil market short oil

Bloomberg estimates that big oil’s combined free-cash-flow rose to $22.1 billion in 2Q 2021 versus $19.3 billion in Q1
The combination of capital discipline and oil’s impressive rebound this year should result in much better profits
For reference, from 1Q 2020 to 1Q 2021, big oil (BP, Shell, Total, Chevron, Exxon) averaged $6.98 billion in combined free-cash-flow

Schlumberger echoed Baker Hughes this week in saying that the rebound in US shale will likely slow this year as producers moderate spending (Bloomberg)
The mantra this time around among the largest shale explorers has been to keep output mostly flat and return cash to shareholders
“In North America, we anticipate the growth to moderate,” Schlumberger CEO Olivier Le Peuch said in a statement. “However, drilling activity could still surprise to the upside due to private E&P operator spending.”

Natural Gas

Warmer weather, low inventory levels, and lagging production has helped gas gain 32c this week to eclipse $4 for the first time since December 2018
Despite rising prices, E&P companies have remained fiscally disciplined, holding drilling rigs and completion crews on the sidelines.
During oilfield-service providers Halliburton and Baker Hughes 2Q2021 earnings calls, company executives said that they expect a strong return in demand for their services through the end of 2022 as pent up demand returns
EBW analytics group forecast above-average temperatures will cover much of the Southeast and by early August, most of Texas. The warm weather in this region is particularly bullish for gas prices, as the region is the largest consumer of gas for power generation

EIA reported a build of 49 Bcf for the week ending July 16, in contrast with the average estimate of 41 Bcf
Inventories for the US are now at a deficit of 532 Bcf to last year and a deficit of 176 Bcf to the five-year average
This week’s stat marked the second consecutive mild injection from a weather-adjusted S&D standpoint. The current EOS stat on ICE is around 3.63 Tcf, which would require an average weekly build of 61 Bcf through the end of the injection season

From Zacks Equity Research 7/23/2021 AM
Natural Gas Pushes Through $4 on Sizzling Summer Forecasts

The NYMEX AUG21 is trading at $4.035 at the time of this post

Natural gas prices broke the $4 threshold in trading on Thursday to finish the day at $4.003 per million British thermal units (MMBtu). That was the highest settlement since December 2018 and came despite a bearish inventory report by the U.S. Energy Department.

Stockpiles held in underground storage in the lower 48 states rose by 49 billion cubic feet (Bcf) for the week ended Jul 16 compared to the guidance of a 43 Bcf addition per the analysts surveyed by S&P Global Platts. The larger-than-expected injection reflected average, mid-summer temperatures in certain parts of the nation.

Investors shrugged off the bearish inventory numbers and instead focused on the prospect of more weather-related demand through the remainder of summer. The markets are responding primarily to bullish forecasts, as expectations of warmer days ahead are providing a boost to prices.

The latest models are anticipating higher temperature-driven consumption in August with air conditioners likely to run at full throttle. With natural gas being the primary U.S. power plant fuel, prices have soared.

As a matter of fact, in most parts of the country, record-breaking heat has led to a higher power burn (or cooling demand) for the fuel. With healthy LNG export likely to provide further support to U.S. natural gas futures, the price action continues to be favorable.

Meanwhile, current natural gas stocks — at 2,678 billion cubic feet (Bcf) — are 532 Bcf (16.6%) below the 2020 level at this time and 176 Bcf (6.2%) lower than the five-year (2016-2020) average. The low stockpile levels have also buoyed the price of the energy commodity with the apprehension that the market might enter the winter withdrawal season with supplies in storage well below normal.

This why you pay BIG BUCKS for your EPG membership: Overall, given natural gas’ fundamental set-up, prices are expected to stay strong. This should aid gas-weighted producers like SilverBow Resources SBOW, Range Resources Corporation RRC and Antero Resources AR. SilverBow and Range Resources sport a Zacks Rank #1 (Strong Buy), while Antero carries a Zacks Rank #2 (Buy).

Over 30 days, SilverBow has seen the Zacks Consensus Estimate for 2021 increase 3.2%. SilverBow controls 165,000 net acres in the Eagle Ford and around 80% of its total output comprises natural gas. SilverBow Resources’ exposure to premium markets and focus on costs and margins should help it to benefit from rising natural gas prices.

Range Resources has a strong footing in the prolific Appalachian Basin. In the gas-rich resource, the upstream firm has huge inventories of low-risk drilling sites that are likely to provide production for several decades. Over 30 days, Range Resources has seen the Zacks Consensus Estimate for 2021 increase 11.2%.

Antero Resources’ asset base — primarily focused on natural gas — is also concentrated on the Appalachian Basin. Antero Resources has amassed approximately 513,000 net acres of rich properties located in West Virginia and Ohio. Over 30 days, the firm has seen the Zacks Consensus Estimate for 2021 increase 10.6%.

For natural gas operators like Comstock Resources CRK and EQT Corporation EQT, investors should preferably wait for a better entry point before buying their shares. Both companies carry a Zacks Rank #3 (Hold). < I disagree with this recommendation. CRK and EQT are both trading today an super low prices compared to their net asset valuations based on $3.00 natural gas price.

Its amazing to me that energy stocks are down today with the market up 185 points , oil flat and NG making new highs 4.04 at the time of this writing ..the names are down 2-5 % today..it makes no sense. Every name is down. Are people shorting these names to hedge being long the commodity?

Talo's high was 18.93 on 6/23, today low 10.82 down 43 % in one month!

Clr cash flow is pushing 2 b from 1 b and the name is down 15 % in 2 weeks

Este 11.81 on 7/14 to 9.58 today , down 19 % in 9 days!

I am expecting all of our Sweet 16 and Small-Cap Growth portfolio companies to report solid Q2 results and bullish guidance for the remainder of the year. They are all generating lots of free cash flow. We are just in the "quite period" before Q2 results come pouring out next week. At current oil, gas and NGL prices the rest of 2021 and 2022 looks very good for these companies. The "gassers" are in MUCH BETTER shape than their share prices would indicate.

From OilPrice.com
Despite a major oil price crash on Monday, oil prices are now on course to close out the week more or less unchanged.
The news of OPEC+ bringing back withheld production in August 2021, following through with 400kbpd monthly increments over the remainder of this year, triggered a spectacular tumble in oil prices earlier this week. Despite pandemic-related risks surging in Southeast Asia and U.S. crude inventories rising for the first time since May, the second half of the week saw a surprising rebound as the market has grown to realize that additional OPEC+ supply would be more than offset by recovering global demand.

As I said in the newsletter, the small increase in U.S. crude oil inventories was just timing difference of tankers reaching the Gulf Coast. Tropical storm activity has in impact on week to week crude oil inventories. U.S. refiners will continue to process a lot more oil than we are producing.