Drillinginfo’s New Executive Deal Summary is Like Zillow for O&G Investors

Drillinginfo’s New Executive Deal Summary is Like Zillow for O&G Investors

 

If you’re a real estate investor evaluating a potential deal, you don’t have a lot of time to spend on research. Other investors are probably eyeing the same opportunity. So, you log in to one app like LoopNet or Zillow which serves as your single source for all relevant information such as recent deals in the area and pricing forecasts. You collect and analyze all the data you need to make a decision before another investor does.

 

Oil & gas industry investors and executives need that same combination of speed, access to historical data, and ease-of-use. After all, deals can be won or lost in a matter of days. But they typically have to spend a week or longer researching, analyzing, and consolidating volumes of raw data from multiple sources. As time ticks by, the risk of a competitor snatching a new investment opportunity out of their hands increases.

 

Our new Executive Deal Summary (EDS) platform eliminates that risk by delivering a concise, yet detailed presentation less than 48 hours after the announcement of a significant investment transaction.

 

The EDS publication provides all relevant information such as total acreage, drilling locations, rig counts, and net production impact. It also places the new transaction in historical context by comparing it to relevant past deals. Its unique capability to quickly compile such detailed reports will make it invaluable to investors and senior executives, not to mention their teams of researchers and analysts.

 

EDS represents the power of the first true integration of Drillinginfo, PLS, and 1Derrick data and analysis since Drillinginfo acquired both companies earlier this year.

 

I’ve met with users of all three platforms, and many had the same feedback: the culmination of their Drillinginfo, PLS, and 1Derrick workflows are very similar. After generating their reports, they spend hours, even days, merging them into one slide deck. Executive Deal Summary takes that workload off their shoulders and speeds the process for sourcing and analyzing the most critical factors that will inform decisions related to their own investments.

 

We have combined the three databases into one enormous virtual vault of historical data that includes more than 2.5 million source slides. EDS draws from it and from current market data, such as production data and rigs and leases to create an easy-to-read publication. No other company can build such an enormous library from scratch or match the speed at which we can now tap into our data stores to deliver an analysis of a significant new deal.

 

Let’s look at a real-world example of a publication Executive Deal Summary created following Cimarex Energy’s recent announcement that it will buy Resolute Energy in a deal valued at $1.6 billion:

 

The introductory slide includes the deal’s highlights such as how many acres it adds to Cimarex’s current net acreage in Reeves County, and the expected impact to Cimarex’s production in its Delaware Basin core area:

 

The second slide dives into the details without getting into the weeds. Again, the goal is to provide investors and executives with just the information they need to decide their next steps:

 

 

The next few slides bring context to the deal by overlaying historical comparables surrounding the acreage with initial production statistics for key wells that have been publicly reported by operators:

 

 

Notice that the above slide on the Initial Production (30-day average) includes direct links to source documents in the Drillinginfo database. Clicking on one of those links brings you to the relevant source document, like the one below which shows the comps, type curves, and IP data.

 

 

Back to the EDS publication, the following slides include all relevant information and historical data you need to conduct a thorough initial analysis, including type curves, rigs and permits, and leasing:

 

 

The final slide draws from our Private Equity Database to show private equity-backed operators around this transaction and identifies each PE company along with its commitment and fund year. Notice this slide includes links directly to the PE database which has detailed information on operators’ strategies, executive team summaries, and primary operational and M&A focus:

The Executive Deal Summary publication also includes hyperlinks directly to the transaction’s  source documents and deal sheets in the Drillinginfo M&A database. Every EDS report will be archived so you can revisit them for future research projects.

 

To paraphrase the television infomercial, “But wait, there’s more!”

 

You do not have to take the time to build a new workspace from scratch in the Drillinginfo web application and import EDS components each time a new deal occurs. EDS will automatically populate pre-built workspaces based on your content preferences. This means that you can immediately start diving further down into details on a dynamic platform that is always current, even if the deal occurred months ago.

 

Below you see that EDS has automatically populated a pre-built workspace in Drillinginfo with relevant information on the Cimarex-Resolute deal, including:

 

A slide that shows all active rigs and recent permits around the transaction sorted by operator:

 

First month production for key wells in the area bubbled by PracIP and colored by operator alias:

 

 

A map displaying leasing and rigs, and recent permit locations with a heat map for leases filed over the last 6 months:

Executive Deal Summary is available now at no additional cost to all subscribers of Drillinginfo’s new M&A database. For more information, click here.

 

We’ll be adding new features and functionalities to EDS in the coming weeks and months. It will also be a key feature of our new Drillinginfo M&A Dealmaker Platform which is on schedule to launch early next year.

 

You can follow our progress on this blog and by following us on Twitter and Facebook.

Gas Storage Injection Meets Expectations

Gas Storage Injection Meets Expectations

Natural gas storage inventories decreased 77 Bcf for the week ending December 7, according to the EIA’s weekly report. This week’s draw is roughly in line with market expectations, which were 79 Bcf. The East, Midwest, and Pacific regions led the draw, accounting for 64 Bcf of the 77 Bcf.

At the time of writing, the January 2019 contract was trading flat to yesterday’s close of $4.136/MMBtu. Weather forecasts have moderated over the past week, causing the January ’19 contract to hit its lowest point this month as of yesterday’s close, at $4.136/MMBtu.

Working gas storage inventories now sit at 2.914 Tcf, which is 722 Bcf below last year and 723 Bcf below the five-year average.

Winter prices continue to be volatile and driven by the fundamentals. Weather forecasts are currently one of the biggest drivers of the winter prices, and will continue to be throughout the winter. As the fundamentals: supply, demand, and weather forecasts, continue to change, volatility is expected to remain.

Salts have continued to build, adding 8 Bcf to inventory on this week’s release, leaving total inventories at 271 Bcf. Even with the salts continuing to build, they are below last year (360 Bcf) and the five-year average (352 Bcf). Salt caverns play a significant role in storage due to the high injection/withdrawal rates they are capable of producing. As storage facilities start depleting inventory, ratchets will make more of an impact on non-salt storage.

See the chart below for projections of the end-of-season storage inventories as of November 1, the end of the injection season.

This Week in Fundamentals
The summary below is based on Bloomberg’s flow data and DI analysis for the week ending December 13, 2018.

Supply:

  • Dry gas production decreased 1.76 Bcf/d on the week, largely because of decreases in the South Central/Gulf (-1.12 Bcf/d) and the East region (-0.52 Bcf/d). A bulk of the decrease in the South Central/Gulf came from Louisiana (-0.57 Bcf/), while the East region was mainly attributable to decreases in Pennsylvania (-0.37 Bcf/d).
  • Canadian imports increased 0.62 Bcf/d. A majority of the increase came from Iroquois, which received ~0.50 Bcf/d of incremental Canadian gas week over week.

Demand:

  • Domestic natural gas demand increased 9.45 Bcf/d week over week. Cooler temperatures caused Res/Com demand to increase 7.04 Bcf/d. Power and Industrial demand also increased 1.63 Bcf/d and 0.78 Bcf/d, respectively.
  • LNG and Mexican exports both remained relatively flat week-over-week.

Total supply is down 1.13 Bcf/d, and total demand increased 9.70 Bcf/d week-over-week. With the increase in demand and the decrease in supply, expect the EIA to report a stronger draw next week. The ICE Financial Weekly Index report is currently expecting a draw of 140 Bcf for next week. Last year, the same week was a draw of 182 Bcf, while the five-year average is a draw of 152 Bcf.

Prices Get Little Support From Crude Withdrawal, Concerns Over Demand Growth Keeps The Pressure On Prices

Prices Get Little Support From Crude Withdrawal, Concerns Over Demand Growth Keeps The Pressure On Prices

US crude oil stocks posted a decrease of 1.2 MMBbl last week. Gasoline inventories increased 2.1 MMBbl while distillate inventories posted a decline of 1.5 MMBbl. Yesterday afternoon, API reported a large crude oil draw of 10.18 MMBbl alongside a gasoline draw of 2.5 MMBbl and a distillate build of 0.71 MMBbl. Analysts were expecting a smaller crude oil draw of 2.99 MMBbl. The most important number to keep an eye on, total petroleum inventory levels, posted a decrease of 6.0 MMBbl. For a summary of the crude oil and petroleum product stock movements, see the table below.

US crude oil production decreased 100 MBbl/d ast week, per EIA. Crude oil imports were up 174 MBbl/d last week, to an average of 7.4 MMBbl/d. Refinery inputs averaged 17.4 MMBbl/d (51 MBbl/d less than last week), leading to a utilization rate of 95.1%. Crude oil withdrawal and temporary supply outages in Libya are supporting prices. Meanwhile growing concerns on OPEC’s supply cuts not being enough to compensate the supply overhang and a slowdown in global economic and demand growth are pressuring prices. Prompt-month WTI was trading up $0.41/Bbl, at $52.06/Bbl at the time of writing.

Prices traded in the $51/Bbl-$53/Bbl range last week. The OPEC meeting boosted prices on Friday, as the group announced it will lower overall production by 0.8 MMBbl/d from October levels for six months starting in January. OPEC also announced that Russia and non-OPEC countries in a joint effort will reduce production by 0.4 MMBbl/d in the same time frame, which brings the total supply-cut level to 1.2 MMBbl/d.

The increase in prices due to OPEC’s meeting failed to extend gains in to this week. The market’s anticipation of a higher supply cut and the growing concerns over a slowdown in global economic growth and energy demand pressured prices downward, offsetting the gains on Friday. Prices saw further pressure on Tuesday as Russia’s remarks on cutting oil output by 50-60 MBbl/d in January and gradually reaching 220 MBbl/d increased the skepticism about whether the country will stick to its commitment and reach that number. On the bullish side, prices got support from a shutdown in production in Libya, where the National Oil Company (NOC) declared force majeure on exports from the country’s largest field, El Sharara, due to an attack by a militia group. NOC stated the force majeure would result in a total loss of nearly 400 MBbl/d. This recent news from Libya will provide some support for prices in the near term.

Although OPEC formally announced the highly anticipated supply cuts, the fundamentals currently remain the same and point to supply overhang moving into 2019, as the world’s top three producers (Russia, the US, and Saudi Arabia) all are still producing at record levels and demand growth projections remain weak. In order for supply overhang to reverse course, OPEC and non-OPEC countries, including Russia, will need to stay loyal to proposed supply cuts and execute on them, while demand for oil products needs to increase.

The positive gains at the end of the week relieved some of the oversold conditions within the trade. Expect the market to consolidate the past five weeks’ bearish collapse in prices and develop a new range for prices for the remainder of 2018. The high side of the range has $57.44/Bbl, providing significant selling, while the lows from October 2017 ($49.18/Bbl) will find buying in the near term as the market digests the recent fundamental adjustment to expectations. Drillinginfo continues to believe the long-term range for prices will occur between $60/Bbl and $65/Bbl after the market fully digests the global supply and demand profile. Getting to that fundamental understanding will take an extended period of time, during which the near-term range, between $51/Bbl and $61/Bbl, will hold the trade.

Petroleum Stocks Chart

The Week Ahead For Crude Oil, Gas and NGLs Markets – Dec. 10, 2018

The Week Ahead For Crude Oil, Gas and NGLs Markets – Dec. 10, 2018

CRUDE OIL

  • US crude oil inventories decreased significantly, falling 7.3 MMBbl, according to the weekly EIA report. Gasoline and distillates inventories increased 1.7 MMBbl and 3.8 MMBbl, respectively. Total petroleum inventories showed a sizeable decrease of 8.3 MMBbl. US crude oil production remained unchanged from the prior week. Crude oil imports were down 943 MBbl/d to an average of 7.2 MMBbl/d versus the week prior.
  • Prices re-tested the previous week’s lows by declining to $50.08/Bbl on Thursday after the OPEC meeting did not produce a formal decision on supply cuts. Those concerns were mitigated on Friday when the OPEC and non-OPEC member countries agreed to cut 1.2 MMBbl/d. The news had the crude markets rallying with WTI trading briefly up to $54.22/Bbl.
  • WTI started the week stronger on news that the Alberta Premier, Rachel Notley, ordered oil companies to reduce supply levels by nearly 9% next year. This surprise was followed with optimism after the G20 meeting. President Trump and Chinese President Xi Jinping agreed to halt new tariffs (effective Jan 1st) for 90 days while the trade talks continue.
  • The EIA’s data release showed the first decline in crude supplies in the past 11 weeks. It will likely provide enough support at the low end of the recent range ($49.41/Bbl) to hold off any further lower probes. The next directional move should be a continuation of the counter-trend run that started Friday with the production cuts announcement.
  • The CFTC report showed little change in the positions of traders. Managed money long positions liquidated 13,137 contracts while short positions declined by 8,631 contracts, likely on profit taking as the market became extremely oversold.
  • The positive gains at the end of the week relieved some of the oversold conditions within the trade. Expect the market to consolidate the past 5 weeks’ bearish collapse in prices and develop a new range for prices for the remainder of 2018. The high side of the range has $57.44/Bbl, providing significant selling, while the lows from October 2017 ($49.18/Bbl) will find buying near-term as the market digests the recent fundamental adjustment to expectations.
  • Drillinginfo continues to believe the long-term range for prices will occur between $60 and $65/Bbl after the market fully digests the global supply and demand profile. Getting to that fundamental understanding will take an extended period of time, during which the near-term range, between $51 and $61/Bbl, will hold the trade.

NATURAL GAS

  • Natural gas dry production decreased last week, falling 0.22 Bcf/d. Canadian imports increased 0.28 Bcf/d.
  • With temperatures falling last week, Res/Com demand gained 3.89 Bcf/d. Power and Industrial demand increased 0.58 Bcf/d and 0.35 Bcf/d, respectively. LNG exports increased 0.03 Bcf/d, while Mexican exports decreased 0.13 Bcf/d week-over-week. For the week, supply gained 0.06 Bcf/d while demand gained 4.84 Bcf/d.
  • The storage report last week came in with a draw of 63 Bcf. The release continued to support the gains that had already been made early in the trade on Friday.
  • The CFTC report dated Nov 27th was released, showing little adjustment by the trading participants. Managed Money Spreading traders continued liquidation of positions, closing 19,173 contracts. The Managed Money long and short positions were reduced 5,851 and 6,451 contracts, respectively.
  • The recent range trading between $4.15 and $4.80 has given prices a chance to consolidate before the next move. Last week provided a higher weekly low and brought prices back within 2 standard deviations of the 20-week average. The range trade also softened the extreme overbought momentum status in prices. The market internals confirmed the range trade environment with volume lower and open interest showing only a slight increase until Friday, which indicated growing open interest. Prices will need open interest gains to confirm the bullish bias has the support to break out above the range. Prices also provided insight to a possible extension of the rally with the summer ’19 strip gaining nearly $0.11 while the 1Q19 months were basically flat on the week. In weeks prior, the remaining winter price gains have far outpaced the summer gains.
  • Weather forecasts will continue to have the greatest influence on volatility and direction of price movements. Warming forecasts will send prices to initial support at last week’s low down to major support at $4.10. Current forecasts have temperature moderation short term, while weather models are inconclusive for the long term. Should the forecasts revert back to below normal temperatures, the November highs will be targeted.

NGLs

  • An administrative judge will rule on an emergency petition to shut down the construction on the Mariner East pipeline on December 11th. Residents have asked the Pennsylvania Public Utilities Commission for the shutdown because they claim that Energy Transfer’s emergency management plan is not adequate for the safety of the community. This would cause lower netbacks in the Northeast, as the region has already been experiencing increased NGL production and tightness in the transportation market.
  • Week over week, normal butane and isobutane are up 13.2% and 10.8%, respectively, to 88 and 95 cpg. Ethane, propane and natural gasoline remain relatively flat at 32, 71 and 107 cpg, respectively.
  • The spread between Mont Belvieu and Conway propane prices tightened to $2.75, a difference not seen since January of 2018.
  • The EIA reported a draw of 1.3 MMBbl in this past week’s inventories. Propane stocks now sit at 79.8 MMBbl, approximately 6.7 higher than with this time last year and 3.8 MMBbl lower than the 5-year average.

Another Draw Takes Inventories Below 3.0 Tcf

Another Draw Takes Inventories Below 3.0 Tcf

Natural gas storage inventories decreased 63 Bcf for the week ending November 30, according to the EIA’s weekly report. This week’s draw is above market expectations, which were 59 Bcf. The East and Midwest regions accounted for a majority of the draw, accounting for 50 Bcf of the 63 Bcf.

At the time of writing, the January 2019 contract was trading at $4.477/MMBtu, ~$0.150/MMBtu above the January 2019 close of $4.327/MMBtu yesterday. A majority of this increase occurred before the storage report release, but gains continued after the release.

Working gas storage inventories now sit at 2.991 Tcf, which is 704 Bcf below last year and 725 Bcf below the five-year average.

The January 2019 contract has traded in a range of $4.327/MMBtu to $4.477/MMBtu in December. This range is more narrow than last month’s range, but the volatility has continued, as expected. As early winter cold has forced draws that now leave inventories below 3.00 Tcf, expect the volatility to continue with fluctuation in the fundamentals.

See the chart below for projections of the end-of-season storage inventories as of November 1, the end of the injection season.

This Week in Fundamentals
The summary below is based on Bloomberg’s flow data and DI analysis for the week ending December 7, 2018.

Supply:

  • Dry gas production decreased 0.22 Bcf/d on the week. The supply decrease can be attributed mainly to the South Central and Gulf regions (-0.26 Bcf/d) and the Mountain region (-0.17 Bcf/d). There was a slight offset to the decrease, with the Northeast gaining 0.20 Bcf/d.
  • Canadian imports increased 0.28 Bcf/d week-over-week.

Demand:

  • Domestic natural gas demand increased 4.82 Bcf/d week-over-week. Res/Com demand was the leading contributor to the increase, gaining 3.89 Bcf/d. Power and Industrial demand also increased 0.58 Bcf/d and 0.35 Bcf/d, respectively.
  • LNG exports increased 0.03 Bcf/d week-over-week, while Mexican exports decreased by 0.13 Bcf/d.

Total supply is up 0.06 Bcf/d, and total demand is up 4.84 Bcf/d week-over-week. With the increase in demand over the increase in supply, expect the EIA to report a stronger draw next week. The ICE Financial Weekly Index report is currently expecting a draw of 80 Bcf for next week. Last year, the same week was a draw of 69 Bcf, while the five-year average is a draw of 79 Bcf.

Prices Fell On Growing concerns About OPEC Output Cuts Despite Of The Inventory Declines

Prices Fell On Growing concerns About OPEC Output Cuts Despite Of The Inventory Declines

US crude oil stocks posted a large decrease of 7.3 MMBbl last week. Gasoline and distillate inventories increased 1.7 MMBbl and 3.8 MMBbl, respectively. This week, API reported a crude oil build of 5.36 MMBbl alongside gasoline and distillate builds of 3.61 MMBbl and 4.32 MMBbl, respectively. Analysts were expecting a smaller crude oil build of 2.27 MMBbl. The most important number to keep an eye on, total petroleum inventory levels, posted a sizeable decrease of 8.3 MMBbl. For a summary of the crude oil and petroleum product stock movements, see the table below.

US crude oil production remained unchanged last week, per EIA. Crude oil imports were down 943 MBbl/d last week, to an average of 7.2 MMBbl/d. Refinery inputs averaged 17.5 MMBbl/d (66 MBbl/d less than last week), leading to a utilization rate of 95.5%. The report is bullish due to the large draws in crude oil and total petroleum stocks. However,  prices are being pressured by growing concerns if OPEC can agree on aggressive supply cuts, as the group concluded the meeting in Vienna without a final decision. OPEC delayed the decision on supply cuts until after it meets with other producers on Friday. Prompt-month WTI was trading down $2.30/Bbl, at $50.59/Bbl at the time of writing.

Prices found some support following the G20 meeting and in anticipation of the upcoming OPEC meeting and traded in the $52/Bbl-$54/Bbl range last week.

Prices rose nearly 4 percent on Monday as optimism about a potential supply cut by OPEC and Russia increased following the G20 meeting. Russian President Vladimir Putin said he and Saudi Crown Prince Mohammed Bin Salman agreed to extend the output cuts. The meeting between US President Donald Trump and Chinese President XI Jinping during the G20 meeting also gave some support to prices, as an agreement was reached to halt new tariffs for 90 days that were to be implemented on Jan.1, while the trade talks continue. In addition to bullish news about supply cuts and easing of trade tensions, a surprise announcement by Alberta Premier Rachel Notley, who ordered oil companies in the Canadian province to reduce supply levels by nearly 9 % next year, also gave a boost to prices.

The news from the G20 meeting certainly increased the bullish sentiment in terms of production cuts and trade disputes. Although statements by Russian and Saudi officials point to a decision in favor of supply cuts, a final decision will be made during the OPEC meeting. Russia’s previous stance on supply cuts until the G20 meeting and remarks by Iran’s OPEC governor Hossein Kazempour Ardebili are keeping the market cautious ahead of the OPEC meeting. Kazempour said there were tensions between members of the cartel, with some unhappy about others’ large production increases in recent months. He also stated that even if an agreement is reached, some members will not join it. Also increasing the skepticism about a sizeable supply cut agreement, led by Saudi Arabia, is the decision by Donald Trump to refrain from acting against Saudi Arabi over the assassination of the journalist Jamal Khashoggi and possibly to use this as leverage to convince the Kingdom either not to cut supply or to keep cuts as low as possible.

Although recent news has increased the bullish sentiment, the fundamentals remain the same and point to supply overhang moving into 2019, as the world’s top three producers (Russia, the US, and Saudi Arabia) are all producing at record levels and demand growth projections remain weak. In order for supply overhang to reverse course, OPEC will need to agree on sizeable production cuts and execute on them, while demand for oil products need to increase.

Even with the small weekly rise in prices, the market remains oversold. The close on Friday has prices beyond two standard deviations below the 20-week moving average. The weekly momentum indicator is oversold to levels not seen since the declines of August 2015. Open interest in the WTI market continues to decline, while the volume showed a slight gain on the week. The market is due for a countertrend rally to alleviate the pressure from the seven-week liquidation. If last week’s gains and the bullish news provide a base for a countertrend rally, price action should become volatile and could take prices potentially up to $57.44/Bbl, especially if the results of the OPEC meeting point to a significant supply reduction. Drillinginfo continues to believe the long-term range for prices will occur between $60/Bbl and $65/Bbl for an extended period. However, the market may trade within the range of $51/Bbl-$61/Bbl in the near term as the market assesses the potential supply changes coming up.