Episode #4: Harnessing my inner mean girl
what's up participation DFW host of the heartache. PODCAST with the hot take lower your commute talking about the week of January. Sixth coming off of a quiet week the week before with new years and coming back into work and this week. We had some some excitement that we're going to get into. I was in New York just getting back and had a great trip. Got To spend some time with Alex Steele on commodities edge talking about stocks hedging gas natural gas and expectations for q hugh for earnings. So if you haven't seen that check that out it's on the website and Should be going back on in late February to talk real earnings Harnessing the mean girls in me I went went to mean girls while I was in New York might be might seem a little strange for a solo dude in New York to go choose to go to the mean girls musical and and I will say that. The male female ratio was about nine to one But I was able to harness my Inner Regina George because I do get a little bit of Shit sometimes the perhaps not nice enough to management teams in. That's that's where we're going to start this week reign resources. I'm going to give them a shout out they They opt their game on the investor relations presentation side in in two thousand eighteen. So I guess two thousand Nineteen January. They were guiding capital for twenty nineteen. The press release was maybe four lines and it said we will spend seven hundred twenty million nine dollars this year and a fresh lease so not a lot not a lot of information there when you're trying to tell your investors why you should be drilling gas when it's two dollars and and fifteen cents an MCSE so we're gonNA start with my anti mean girl. Call out of the week to range resources. Well done good improvement on your press. Release he talked about your Capex this year compared to last year you talked about hedging you talked about Production expectations and you went into your smog year end valuation a number of Putz. I mean if I could come up with a template for all the other people out there all the other companies that want to issue their q four four and two thousand twenty guidance looked arrange. I'll give you shut up now in fairness range is producing gas and gases two dollars and fifty cents offense and it's very hard to be bullish on that next week. We're going to have Chris callen on the show to walk us through the countinent ventures acquisition of the Devon Barnett gas asset. So really excited about that. I think he can give some A different perspective on what natural gas is coming so Tune in for that but range also came out this week with a dead offering to refinance a mold that and because of them being natural gas but also a relatively high leverage each player their interest rate looks to be about nine and a half percent for the five hundred million notes. They've come out with now. Compare that to another company that came out this week. They'll leap E. X.. Who with the Felix transactions paying nine hundred million in cash plus some stock by Felix W was able to get their deal done or at least guiding into four and a half percent? And I think that. That's a really key thing. Is We think about mergers and acquisitions in two thousand twenty range trying to refinance debt with a bad balance sheet and they're coming coming in at nine and a half percent so while the press release was informative and certainly there smog. Valuation looks attractive to me. The leverage is a problem and the commodity is a problem album on the other hand you have w PX who you know in Q.. Three guided that they had probably not enough inventory in the box to keep them going they came out bought Felix. Six added a huge amount of inventory in Delaware cutting. GNA daleks really accretive. And then they were able to get a deal done so I think that this is again like like we talked about on the podcast last week with Cowan correze. Oh that's not an indication that it was a bad that the deals can't get done. That was a bad deal to do on the other hand. PD CNS RC. Was a good deal to do because they overlapped entirely consolidates. GNA So we're seeing these differences and so while we're on the subject of Gina. Lena Surrey Emini. Gina is also part of emanate. And we're GONNA talk about that with Apache oxy coming up a little bit later in the show but mentioned in. PVC and SRC deal closes next week. January fourteenth that company will go from two to one and like in all manet the best way to save money money is to cut headcount. It's an unfortunate byproduct of the state of the industry right now but in order to have cash flow. You're basically cutting heads to generate capital to drill wells and drill your returns. And that's the only way to go speaking of acquisitions closing on Friday January tenth breath jagged peak was formally acquired by partially energy and they will be transitioning some of their staff to partially in Austin and and obviously terminating some other positions so for Denver itself to you know in independent medium small size. EMP's gone consolidated one to Austin with Parsley and one to PD which is already in Denver. So look for debt and more MEA. I think we're going to see some amendment this week. I say that every week but I do think we're going to have some fun on merger Monday. Let's talk headcount reduction. So news this week oxy He moved from a voluntary retirement program into an involuntary separation program. An Apache announced that they'll be closing their office in San Antonio on March sixth so again a lot of jobs impacted in the Houston San Antonio area Sign of the Times. We're able to do more with less in terms of detecting. We have the skills we have. Plus we are not ramping up. The industry is seven hundred horizontal rigs right now. I think we're GONNA Hennessy. Six hundred and twenty at some time in calendar twenty twenty the completion paces down from where we were at the beginning of last year And I would expect for the rest of the year are probably around. Eleven hundred fifty oily completions a month and about a hundred to one hundred and fifty gas completions. But the real driver on the rig count that I talked. What about dropping to six twenty is if you look at the Hanes from the Marcellus is two of the key drivers of natural gas and you look at two dollars and fifteen cents in the dead of winter? What happens when we come into spring and shoulder season? I mean you have to think at this point. The gas is going to be trading from one to one fifty and if you do an overlay we're back to to the same price environment that we were in two thousand sixteen and in two thousand sixteen. There were eleven. Hanes Ville rigs running and twenty-one Marcellus rigs running which would be about vowed fifty below where we are today then take that plus consolidation. So we've seen partially take jagged we've seen SEM PDC merge we've seen oxy take Anadarko uh-huh and in all those cases that's resulted in consolidation activity and a lowering of rig count. So if we see another ten or fifteen deals this year which I expect that we will. I expect that the rest of the rig attrition will come from not drilling less core assets in the combined company and we're going to see that ramp down especially if we see some mergers coming out here in Q.. One so that kinda catches up on the big news of the week some debt some Mea some layoffs closing on the layoffs. That's always you know I'd take zero joy in reporting that jobs. Jobs are being lost. But as I said that is the unfortunate side effect of the crisis balance sheets and the inability to ramp up and the demand of investors for their cash back and since we can't raise equity if you can cut fifty million dollars. GNA for ten million dollar while he gets a drill five wells which should have an Roi of too so you can turn fifty million into one hundred million which turns into a boring base and you get a little bit more runway. So that's what companies are doing in oxy's case in particular. They didn't have enough voluntary retirements. And quite honestly I'm happy that they're forcing retirements. Because you know again into those who who were caught up in this You know perhaps you can Send some comments and tell me I'm full of Shit but some people probably we weren't the right cultural fit and hopefully these Layoffs are going to improve the remaining company That's all we can hope for and on the Apache side. It's always disappointing to see an entire office get close. That's GONNA IMPACT San Antonio Lot but the reality is Apache. Surprised is the market tremendously in the last week or two with both the. JV that they did with hotel and then the results they have on the Suriname well that releases some capital that they can access success for their US onshore development or for Egyptian development and to me given their smog and we talk about this a lot there smog net net of debt negative three years. GNA An interest to me Apaches at ten dollar stock. They're trading thirty two if I'm sitting in B. D. out of patchy I have a strong relative value equity and I'm using that equity to by someone in the Permian Basin to grow my inventory. Move Me Away from the Alpine high until gas prices. Come back in the next two or three years. Maybe and give me some inventory that I can use my equity to really bolster the value of my company to reduce my leverage and get access to the capital markets. So I have a patchy is one of the number one acquirers. I think they're going to be I. I so that's that's that's my heartache. For this week thank you for joining us on the heartache. Over your commute podcast I am David. Ramstein would check us out on the web. WWW dot heartache of the day dot com where you can find archive editions and check me out with my book. What is wrong with everybody else? What they didn't teach you in business school available now on Amazon? Thanks for joining beep. Good be safe and have a great week mm-hmm mm-hmm.