BKR Rig Count- The U.S. onshore rig count was +2 last week to 764 rigs, which will close out November at +12 rigs for the month.
Source Daniel Energy Partners/Baker Hughes
WSJ- Stock Futures, Oil Slide Amid Protests in China Link
WSJ- More Venezuelan Oil Unlikely to Reach Markets Soon Despite New Chevron License Link
WSJ- Exxon Mobil Has a Potash Problem in the Permian Basin- Link
Upcoming DEP Events and Travel:
- Boston/NYC this week for the Piper Sandler Energy & Power Symposium
- CapitalOne Securities Energy Conference in Houston on December 6th
- Dallas meetings / Dallas Stars game on December 6-7th
- DEP Christmas Party – Sean Mitchell’s house on December 8th
- Denver – December 14th
- As always, let us know if you are around and open to meeting
First, hope everyone had a great Thanksgiving. Second, as expected, limited news this past week, not to mention the flu, so a dumbed down note this weekend. We kick off with a brief summary of recent company meetings. In addition, we include our latest podcast with Sam Sledge, CEO of ProPetro Services. Next Sunday we hope to publish our podcast with the team from Infinity Water Solutions.
New Podcast Out: While in Midland two weeks ago, the team sat down with Sam Sledge, CEO of ProPetro Services. The conversation revolved around current frac activity, Q3 earnings, the Silvertip transaction and a view into operational activity over the next few quarters. Take a listen when you have time and if you are willing to be on a DEP podcast, please let us know.
Denver E&P/Investor Observations (Authored by Geoff Jay): We met with a mix of investors and E&Ps before the holiday this week. We talked about a wide range of topics, but overall, the tone was generally upbeat, despite crude’s shellacking. One investor we met with came away from BofA last week concerned that everyone is too complacent about high oil prices, since all of the conference questions focused solely on cash-return levels. The E&P’s we spoke with, meanwhile, were more focused on inflation. One explained how C-suites right now are plotting rates of return against various inflation assumptions to finalize their 2023 program. When asked about inflation next year, the E&Ps we met with (without commenting on their own internal forecasts) expressed some confusion about commentary on the Q3 conference calls: Was the 10-15% increase for 2023 average to average? Or was it from today’s pricing? Our general impression is that producers are girding themselves against the latter. The usual suspects are still contributing to inflation: OCTG, sand, labor, etc. Diesel is the one input cost that’s going down, but no one is excited to save money there, as they are naturally hedged. As for activity next year, producers generally believe rigs are available (at a price), but these additions won’t be headache-free. One executive wondered whether they could secure enough OCTG for a full-year program once they added the rig. Another worried that green hats would make new additions too inefficient. Even with all of these cost pressures, no one we spoke to felt like the best days were in the rearview mirror for the upstream sector. To paraphrase one of our meetings: For most companies, balance sheets are now pristine. The pressure to hedge is less, so a lot of underwater hedges are rolling off, and the industry should see some margin improvement in that scenario.
Calfrac Q4 Pre-Release: CFW.T pre-announced anticipated Q4 results. Revs guided to $460M – $480M with Adjusted EBITDA of $80M – $90M (margins = 17-19%). This compares to consensus expectations (as of Friday) of $463M and $82M, respectively. By comparison, Q3 revs totaled $438M with Adjusted EBITDA of $91M (~21%). No operational color provided in the release. One would assume the q/q pull-back in margins is due to seasonal factors.
DEP Trivia Answers: Last Sunday we conducted a DEP trivia contest as we correctly assumed there would be limited news this past week and we wanted something to include in this week’s note. To the basket of people who replied – thank you! It’s good to know someone actually reads our note. As for winners, only one DEP subscriber answered the trivia question correctly: Congratulations to Darryl Radke from NXL Technologies – just one problem – he’s based in the Middle East, so Darryl has a standing invite to dinner in Houston upon his return. Given our love of a good steak, we are offering consolation prizes. These go to those individuals who didn’t make fun of Statement #2 or who have suffered through our stories too many times. Therefore, congratulations to: Mary Atkinson, Grayson Mill Energy; Mike Warren, Aethon Energy, and Don Crist, Johnson Rice. As all three are in different cities, we’ll create a customized reward for each of you.
- Statement #1 – My parents have consecutive social security numbers. TRUE. Back in the day, according to my father, not everyone in his generation was given a social security number at birth. At age 13, he received his social security number when he filled out an application to work as a page in the North Carolina General Assembly. Just so happens, my mom also applied for a similar page position that same year. Best we can figure is their applications were processed concurrently as they were born six months apart and grew up in different towns. Makes you wonder if my mom and dad were in the same line at the same time. One interesting tidbit. Years later, my parents applied for a home loan and were rejected because of their consecutive numbers. Apparently, the loan officer thought either the application was fraudulent and/or my folks were in the witness protection program. Thus, they had to do further digging before a loan could be extended.
- Statement #2 – I came in second place in power lifting in college. TRUE. Don’t laugh. I used to work out. Sadly, replies to this statement stung as the DEP subscriber base contains no shortage of wise-ass clients. It’s a good thing we at DEP are forgiving. Thankfully, two of our readers are polite, thus a free meal to them. As for my brief weight-lifting career, I entered a bench press competition my senior year of college. Go figure, I came in second place, losing to a guy who was just a shade over five feet tall. He didn’t have the same distance to lift, so not fair. Also, there weren’t many contestants. Maybe two, but that’s beside the point. Further, the competition was based on one’s weight class, thus I wasn’t competing against the college football team, just the band’s oboe and flute section.
- Statement #3 – My wife was held at gunpoint and handcuffed outside the White House. TRUE. This was not the case of a Girl’s Gone Wild video gone wrong. Rather, it was a case of mistaken identity. You see, my wife planned a trip to take my son to a Washington Capital’s game. She flew to Dulles, rented a car, and then picked him up at boarding school before driving to the Hampton Inn in D.C. (happens to be about two blocks from the White House). As she was driving near the White House, she was stopped by five federal law enforcement folks at gunpoint in what turned out to be a felony stop. With guns drawn, the agents told her to throw her keys on the hood, open the door with her right hand and then exit the vehicle. Once outside the car, hands on the head, step backwards and then handcuffed. All the time at gun point with my son in the car. Turns out, months earlier the rental car was not turned in on time and reported stolen by the car rental company. Subsequently, the car gets turned in, but the rental car agency accidentally didn’t correct the stolen vehicle report, thus in the eyes of the law, it’s stolen. My wife happens to get that car and apparently camera systems in D.C. are really good and catch what appears to be a stolen vehicle, thus an alert goes out. She’s busted. Here’s the cool part of the story. The agents turned out to be awesome folks. They simply conducted the proper felony stop as they had reason to believe it was a stolen vehicle. Don’t blame them. And, while I would have liked them to keep my wife for a few days so I could have used the hockey tickets, they quickly released her and my son once everything was figured out. Before doing so, my son got to meet a bunch of agents including at least one senior department official. He received some law enforcement memorabilia and even had photos taken with the agents. Ultimately, this was a great learning experience for him where he got to meet tier-1 law enforcement folks. Moreover, we got free rental cars for several years afterwards. No need for us to bring in lawyers on an obvious innocent mistake. The rental car company was equally great and very quickly accommodated our request. Lesson learned, however, is to keep a copy of the rental agreement in the car as that helped quickly resolve the situation.
Now everyone knows a bit more about me and I have nothing else interesting to share, so not sure what we’ll do for next year’s Thanksgiving note. Thankfully, we have a year to plan.