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The market, the Dow: after being up overnight, Dow futures are now slightly negative.
NOG: we'll get to
the earnings report later, but NOG is up almost 10% pre-market trading; up 21 cents; up 9.46%; and, trading at $2.43. In early trading, NOG up 4.5%; up ten cents; trading at $2.32. Conversations of traders:
- price target, $4 (well below the current earnings of $2.00 or thereabouts)
- great EPS
- huge earnings beat
- "this should be trading much higher"
- beat earnings estimate by 80%
XLNX: closed up 2.79% yesterday, and is up slightly this morning in pre-market trading. Trading at $122/share, XLNX was trading for $70 in late October, 2018.
Shell:
Bloomberg is reporting that Royal Dutch Shell is "hunting" for deals to bulk up its position in the Permian Basin, where it rivals ExxonMobil and Chevron. So much for all those stories suggesting problems in the Permian.
Shell
is considering a bid for Endeavor Energy Resources LP, one of the
Permian’s largest-private operators, people familiar with knowledge of
the matter said earlier this year. Sawan declined to comment on that or
any specific targets but said any purchase would have “to afford our
shareholders a very strong return on investment.”
Exxon
and Chevron last week announced audacious plans to produce nearly 2
million barrels of oil between them from the Permian by the mid 2020s,
more than OPEC member Nigeria. While the two U.S. explorers emphasized
organic growth, Shell is looking for takeovers to take advantage of
smaller drillers squeezed by cost pressures and investors hungry for
returns.
Shell
currently produces 145,000 barrels of oil equivalent a day from its
existing Permian operations and plans to increase production by 30
percent a year for the forseeable future, the company’s U.S. President
Gretchen Watkins said in an interview. Shell’s overall shale production,
which includes Argentina and Canada, will reach half a million barrels a
day by 2020.
First, regarding the termination of the QEP-Helis Grail-Advantage Energy deal:
I'll now spend a few minutes discussing the status of the Williston
Basin transaction. As you're aware, QEP and Advantage Energy signed a
purchase and sale agreement for the Williston assets on November 6,
2018. At that time oil was trading at $62 per barrel. The near-term
price subsequently dropped to $40 a barrel before recovering to
approximately $57 a barrel today. Given the deterioration in product
price and that it became unlikely that the conditions to closing would
be satisfied, Advantage and QEP agreed to terminate the purchase and
sale agreement. We now intend to move forward with a pace development of
the remaining high return Williston inventory to maximize the value of
the asset. The Williston assets are well understood, remain cash flow
positive at current oil price for the foreseeable future and are aligned
with QEP's strategic focus on oil versus natural gas.
Q: My question on the Bakken. How do you anticipate maximizing the value and minimizing
decline through this year and into 2020?
A: Yes. So we've got two opportunities.
We have a drilling package that
looks very attractive. We also, I think worked through the refracs last
year, worked through some mechanical issues and we're confident we have
quite a large inventory of refracs.
With the asset coming back into the
fold, we didn't want to go too hard too fast, and we also want to live
with an overall cash flow for company.
The Williston Basin delivers free cash flow both on an asset level and with the corporate
overhead included.
..... picking up the rig this year,
drilling 7 wells will basically halt the decline.
We're also coming
lower on the hyperbolic curve on individual wells.
So it's going to be,
the decline's going to slow naturally by itself. And as we go forward,
we have the opportunity if we want to see some growth [with] increasing
price, we'll turn into the refracs.
And then ultimately, we have enough
inventory to pick up probably -- we're going out probably 1 year, 1 1/2
years, pick up a second rig. So we've got our hands on the throttle. We
can move that pretty quickly; our confidence aside on the results of the
refracs, especially now we've gotten through a few mechanical issues.
So again, pretty simple outcome. It dropped pretty hard.
Q; And I'm just wondering, will that focus be in any one area? I mean is it in Bakken, the Permian or just sort of broad-based?
A: The D&A cuts are the hardest thing we have to do; they impact
people. I know we have a lot of our employees listening. And it's across
the board. We were a company that were in multiple basins, and in a
fairly short period of time it reduced down. So the G&A in the past
had been fairly competitive.
If we do nothing, our G&A going forward
into '19, '20, gets up into the $5 to $6 range. It's unacceptable. And
so we need to pull back pretty hard. So we've taken a hard look at that.
That was underway before I got here. And we've accelerated to certain
things. And now we're looking at, we believe, when I look at the
benchmark data, something at $3 or below is going to be very
competitive. As we increase volumes in the Permian, you'll see that $3
per barrel come down with time.
I really don't think we're going to need
to add a whole lot of G&A as we go forward. So we're trying to do a
fundamental reset to what do we need? And we're going to remove
everything that's kind of a nice to have and we're going to keep
everything that's a need to have. And the most important thing is,
through all the things that are going on and all the outside influences
we've had and now the announcement on the strategic initiative, the most
important thing we need to do is maintain good trust and communication
with our employees; we've got some of the best in the industry.
We're
doing some of our most interesting and best things in our Permian and
now back into the Williston assets. And so that's going to be kind of
our core challenge and our core focus. But it's something that has to
happen. Talked to our employees about this and we're going to
communicate more fully as we go forward over the next several days. But I
hope that helps.
Q: The comment earlier that you can hold Bakken production flat with one
rig, is that off of 4Q levels or is that off the low 20s levels implied
by the guidance you gave earlier?
A: I'm saying once we hit kind of the level we've given guidance on for
'19, by running one rig and doing the 7 wells and continuing on into the
following year, we'd be able to keep the production flat.
If we want to
see an increase in that or we want to offset that if we see some
decline, we also have the refracs we can mobilize on pretty quickly.
