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E&P Earnings... Round 1

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E&P Earnings... Round 1

Matt Sterett
Jan 31, 2020
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E&P Earnings... Round 1

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“Fear, left unchecked, can spread like a virus” - Lish McBride


***The Coronavirus Update is the last section of today’s newsletter***

FKA ENCANA.

Ovintiv - the ridiculous new name of the company formerly known as Encana.

When said aloud, it sounds like a noise muttered by a scantily clad woman on the sidewalk of Hamburg’s Reeperbahn (don’t Google it).

Speaking of Google - they think Encana’s new name is Maltese:

We could keep going, but we’ll keep it constructive:

***Consult the Wolff Olins Naming Handbook before naming anything***

Encana did not.

For now, we’ll be referring to Ovintiv as “fka Encana”.

Oh, fka Encana did provide an operational update.

We’ll pass on commenting -


MURPHY.

Yesterday, before open, Murphy reported - initially falling ~10%.

They missed their production forecast due to:

  • Terra Nova well going offline

  • Equipment malfunction at their Neidermeyer field

  • And - workover issues on Eagle Ford wells

The later raises flags for us, for what should by now be obvious reasons -


HESS.

Pierre - one of this newsletter’s contributors - has strong opinions about Hess.

For context - we’d previously looked at Bakken wells a while back & were generally unimpressed with the economics (nothing revolutionary).

We also built a PSC model for Guyana…

… also, not surprising - that looks 💯.

Earlier this week - when Hess provided an operational update - they announced ~5% increase in their North Dakota CapEx (page 14).

Pierre’s take - to which there was no disagreement among our contributors - was that they should cut that Bakken spend in half.

Decrease leverage, or deploy capital elsewhere.

We’ve seen more recent Bakken vintages under-perform…

So, why spend it there?


SHELL.

The Good News:

Image

The Bad News (well, aside from low gas prices):

“Chemicals are really at the floor,” Ben van Beurden (Shell’s CEO)

Chemical plant utilization rates are diving, on increased supply / competition.

The coronavirus - hurting demand - won’t make this situation any better.

Exxon’s the biggest player.

They report this morning (as does Chevron).

The Chemicals story will continue…


CRUDE.

1x Tweet says it all:

Twitter avatar for @JavierBlas
Javier Blas @JavierBlas
What happens if Libyan oil returns to the market? Brent April trading below $58 a barrel WTI April trading just above $52 a barrel #OOTT #coronavirus #OPEC
10:04 AM ∙ Jan 30, 2020
46Likes20Retweets

CORONAVIRUS UPDATE.

  • Click here for the model

  • To download a copy, go to the file tab

*The coronavirus situation is forecastable*

To do it right, you need to build a model on a cohort basis, by region (if not by metro).

Each metro will have likely a unique R0, and the decline (hopefully no increases) in that rate will also need to be forecasted on metro-by-metro basis (due to different levels success w/ quarantine strategies).

For Oil - aside from China - India is probably the biggest risk.

In terms of data, we like this visualization from Johns Hopkins:

When we make a more granular model, we’ll use their data-set.

The main constraint in this exercise is the accuracy in reported figures.

There’s probably a lag on confirmed cases - that just has to be taken into consideration.


That’s it for this week. Chiefs 34 / 49ers 23, so take the over - enjoy the weekend -

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