Energy Prospectus

Comments below from John White at Roth Capital:

Crude Oil: U.S. vehicle miles traveled (VMT): Travel on all roads and streets changed by +2.0% (+5.5 billion vehicle miles) for May 2016 as compared with May 2015. This is a slowing growth rate, in the short term, compared to the +2.5% in April and +4.9% in March.

Natural gas in storage: The EIA reported a build of 34 Bcf, again below the forecast build of 40 Bcf and below last year's build of 59 Bcf. U.S. working gas in storage is now at 3,277 Bcf, which is 21% above the five-year average of 2,718 Bcf, and 17% above last year's level of 2,806 Bcf. Weather forecasts for the U.S. over the next six to 10 days, once again, call for above-average temperatures across the majority of the Lower 48. In our view, while natural gas storage remains at record levels, the level of injections continue to trend below last year and suggest a re-balancing over the course of the summer. This could, in our opinion, result in storage levels at the end of the summer season at five-year average levels, assuming normal weather.

U.S. Rig Count: The U.S. Onshore rotary rig count from Baker Hughes (BHI-NC) was up 18 at 440 for the week of 7/22/2016, as compared to the previous week. The number of rotary rigs drilling for oil was up 14 at 371. Rigs directed toward natural gas were down 1 at 90. The balance of the increase was in the miscellaneous category.

Weekly Stock Price Performance: Oil prices settled lower on Friday, losing 4% on the week. This was due in part, in our view, by the increase in the rig count and U.S. dollar's rally to a four month high, which hurt's demand for greenback-denominated oil among holders of the Euro and other currencies. This resulted in a tough week for E&P stocks, with the XOP down right at 2%.

In the Roth coverage, CWEI: +7.7%, RSPP: +1.1%, REI: +1.1% and ESTE: +0.7% all outperformed the XOP.

In the Super E&P peer group, names that had a strong week were: CHK: +23.9%, APC: +1.3% and DVN: +0.5%.

Large Cap-Natural Gas companies that exceeded the XOP this week include: SWN: +9.9%, AR: +1.2% RICE: +1.2% and XEC: +1.0%.

Four Large Cap-Oil weighted companies: CXO: +1.8%, NFX: +1.7%, SM: +1.6% and EPE: +1.2% surpassed the XOP.

Among the Mid Cap-Oil weighted names, CWEI: +7.7% leads while SN: +1.3%, RSPP: 1.1%, PE: +0.4% and BBG: +0.1% also rose above the XOP.

In the Small and Mid-Cap Natural gas weighted group, ECR: +5.7% and REXX: +3.2% had a stand out week.

For the Small Cap-Oil Weighted group, GST: +3.8%, REI: +1.1%, REI: +1.1% and ESTE: +0.7% rose above the XOP.

John M. White
http://rworld/Images/Resources/RCP%20Orange.jpg
Senior Research Analyst
12 Greenway Plaza, Suite 1100
Houston, Texas 77046
jwhite@roth.com

Gas and oil sure not getting any love in this mkt

Hi Dan, You do a great job keeping abreast of the data for domestic energy production. What sort of numbers
are determining international production?

The "talking heads" are blaming the dip in oil prices on the increase in the active rig count. We are not even close to the number of active rigs needed to stop U.S. production from falling. In fact, we may not complete enough wells this year to offset the decline from those completed last year. Yes the rig count is up 50 from the record low, but the active rig count declined by 300 in the first half of this year.

CapEx spending is way down all over the world. I've heard that Latin American production is falling by over 100,000 BOPD month after month and North Sea production is also falling.

Listen to the Core Labs Q2 conference call and you will get a better feeling for this. Their comments about the global oil supply decline start around minute 5 of the webcast.