Avance Gas Holding (AVACF) Q4 2016 Results

Christian Andersen – President

A more open FOB/CIF spread differential drives cargo capacity

“…in a market where you have the spread between the FOB prices in U.S. Gulf and the CIF prices in Far East, when the spread is open there would be a lot more activity, and we will see the last few additional cargoes being lifted. This happened in fourth quarter and we saw the activity, as I said towards end of 2016 increase. Of course the spread was opening and people saw the lifting more tones, more cargoes. This continued into 2017 and activity in January was also quite interesting. So, I’m saying that in order to have a full cargo capacity export of U.S. Gulf we are more dependent on the FOB/CIF differential, the spread to be open….So with the FOB/CIF differential wide open and with the volumes being cut down in Middle East there is upside for a higher export from U.S. in 2017 compared to 2016.”

Product market in Conango in Spring

“Last year, 52% of the 21 million tons went from U.S. to Far East. Most of this is using Panama, but we do expect as we come into spring and early summer that we will see more of these cargoes going via Cape. The product market is normally more in Contango when we come to the spring market and the trade is a more interested to use the long route rather than short route to play a bit Contango in the product market.”

Contango in spring leads to a stonger freight market in the summer

“If the contango is very strong this spring and summer, it’s quite likely that we might see a stronger freight market in the summer, but some people are divided, some people believe really that the freight the strongest in the winter and some believe that it’s — as it has been the last couple years with a strong summer market.”

Market outlook past 2017 looks very good

“The good news in this market is of course that they owe in 2017, there’s hardly any ships for order. Right now, there are four ships for order in 2018. So once we get the 2017 order book delivered and absorbed into the market there’s good the outlook for 2018 and 2019….We don’t think there would be a lot of more 2018 deliveries added to the order book, and we don’t really expect to see a lot 2019 orders either. So the outlook past 2017 is very good.”

Range Resources 4Q14 Earnings Call Notes

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

Gas demand expected to increase, production response help bring market into balance

“Gas demand is projected to increase in 2015 from coal plant retirements, gas exports to Mexico and later this year LNG exports. Given the large capital cuts from a large number of companies in our industry which is resulting in a rapidly declining rig count and deferred completions we may see a production response in oil, natural gas and natural gas liquids later this year. The combination of slowing supply growth coupled with increasing demand should help bring the market closer in balanced this year.”

The rock rules

“Number two most importantly and one of my favorite sayings, the rock rules, and this has proven to be the case throughout history across many plays and through multiple commodity price cycles. It simply means that where you find the best reservoir quality, meaning the best rock the economics are substantially better than non-core acreage. And when a company can maintain a low cost structure in the core play that company can sustain its growth at attractive economics across the up and down cycles of commodity prices.”

Range’s core positions

“Range has what we believe is a core position in the Marcellus, Upper Devonian and Utica allowing us to focus capital in those areas with the best economics, whether they are dry, wet or super-rich and continue to achieve production growth in 2015 and beyond.”

A good year for range

“2014 was a record year for Range. Cash flow was over $1 billion for the first time in the company’s history, reserves reached a new record level of 10.3 Tcfe with the Conger-Nora swap we now have operational control over essentially all of our property. We ended the year with lower debt and improved bank facility with plenty of liquidity and no bond maturities until 2020.”

Chesapeake at Deutsche Bank Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

This company has transformed itself

“I have the unique perspective on the team of having been at Chesapeake now for six years, and so I’ve seen the rapid growth, I’ve seen the issues in 2012 and really prior and I have seen the transformation and participated in that first hand and it is truly remarkable where we sit today and how far we’ve come. The company has changed every aspect of how we do business and it starts with laying out our strategies which we have on this page and so our two key strategies are to have financial discipline and profitable and efficient growth from captured resources and those two things of course go hand-in-hand.”

It’s time to grow without increasing the capital base

“for a number of years positioned itself to take advantage of the advances in horizontal drilling and completion technology to advance and increase its leasehold position in unconventional plays across the United States. Really no hold barred to the amount of capital that it took to build up position. That’s left us in a fantastic asset place but it’s also left us with a significant capital base. And so when we talk about financial discipline, what we are really trying to make sure that we convey to investors is that we are cognizant of the fact that, at this point in our progression as a company, it’s time for us to grow without increasing our capital base.”

Our capital allocation process is fundamentally different

“Our portfolio management and capital allocation process is fundamentally different than it ever has been before. As we were capturing all the acreage that we captured and we needed to hold it all by production we had to chase the lease expiration schedule. That lease expiration schedule does not create the best near-term and long-term shareholder value; it creates an opportunity to go create shareholder value by holding that leasehold.”

Range Resources at Capital One Conference

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

“If you look at the Marcellus, today I think there’s well over 7,000 wells that have either been drilled, completed, or in some phase of waiting to come online. It’s an unbelievable story – in 2004, with the discovery well; in 2007, Range had a little bit less than a million today. Today, I think the field is by last account a little over 13 Bcf a day, largest gas-producing field in North America and a lot of people, including me, think it could be one of the largest fields in the world in not too many years in the future.”

“If you look at them on an absolute basis, we have five of the top 10 wells in the basin, including the Utica and Point Pleasant operations to the west of us. If you look at it on a normalized per-thousand foot or lateral length basis, in other words kind of normalized into the same lateral length, we have eight of the top 10 wells, so we’ve had some really, really great success in our super-rich area.”

“Going forward, we’re looking at about 4,500-foot laterals with 22 stages on average. It’s important to say we will drill some pretty long laterals over the next year or so, but our average we expect to be in that 4,500-foot range with 22 stages, half a million pounds of frac sand per stage. ”

“When you look at that, the economics are very impressive – close to 100%, and net present value at $15 million a well, so this is really attractive stuff, lots of liquids, lots of condensate. Our costs today are about $6.4 million.”

“The wet area of the Marcellus is about 220,000 acres in that southwest PA area. ..these wells on an EUR per thousand foot basis are some of the best wells in the basin when you look at that way. About 12.3 Bcf equivalent going forward. We expect them to be average of, again, around 4,200 feet lateral length with 21 stages and about 400,000 pounds of frac sand per stage. About $6.1 million – again, over 100% rate of return, and about $15 million present value, so these are again really attractive wells, lots of liquids.”

“if we exit this year at Bcf equivalent per day, we’re going to be at 2; three or four years out, we’re going to be at 4. That’s an aggressive schedule. We’ve very confident in it.”

Comparing Oil and Gas Company Reserves

Below is a comparison of oil and gas reserves for a handful of mid-sized exploration and production companies along with the enterprise value per Barrel of Oil Equivalent (BoE) that the market is currently placing on the reserves.

$CHK, $APA and $DVN trade at the low end of the range of value assigned to a barrel of oil in the ground.  Meanwhile $COG and $SWN trade at the high end, despite heavy concentrations of natural gas reserves.  Given that they trade at premiums, $EOG and $APC are slightly more gassy than I would’ve expected with 64% and 54% of their reserves in natural gas, respectively.  Note that $OXY is a little skewed by its downstream operations.

Oil Reserves Mid Sized CompaniesValues as of most recent 10-k filing