| Johnson Rice Conferences / Marketing Events |
| To view or print complete Johnson Rice Marketing Calendar click here.
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| VALUATION SUMMARY |
| JRCO Coverage Statistical Summary: click here
E&P Coverage Statistical Summary by Basin: click here |
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| FROM THE TRADING DESK
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| Energy Data Releases |
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| · Tuesday the API reported U.S. Crude inventories were up 9.88 million barrels from the previous week. Gasoline inventories were down 2.8 million barrels and distillates were down 2.4 million barrels. Crude stocks at Cushing were up 971,000 barrels.
· 9:30 a.m. Central – 10/19 EIA Weekly Petroleum Status Report. Bloomberg consensus estimates are for a crude build of 3.7 million barrels, a gasoline draw of 1.75 million barrels and a distillate draw of 2.0 million barrels. Crude inventories in Cushing, Okla., increased 1.5 million barrels in week ended Oct. 19, according to a proprietary forecast compiled by Bloomberg. |
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| WEEKLY MACRO UPDATE
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| Exploration & Production: click here
Oilfield Services Weekly: click here |
| OILFIELD SERVICES
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| Helix Energy Solutions Group, Inc. ( HLX – $9.90 , AC rated): HLX 3Q18 Follow Up: Maintain Accumulate Rating; Raise TP to $12 |
| HLX reported 3Q18 earnings per share of $0.18 versus our estimate of $0.09 and consensus of $0.11. 3Q18 adjusted EBITDA of $58.6MM was above our estimate of $50.7MM and consensus of $53.4MM. 3Q18 results benefited from sequential improvement in the Robotics segment with increased trenching operations as well as high utilization for HLX’s intervention vessels. Robotics revenues increased 39% q/q and chartered vessel utilization was 98% in 3Q18 vs. 70% in 2Q18.
HLX should demonstrate improved results during 2019 as the company’s end markets improve, a reduced cost structure for the robotics segment and ability to modestly move pricing up well intervention in the North Sea. The company continues to pursue opportunities (Brazil, N. Sea and West Africa) to bring the Q7000 out mid-2019 and we look for an update on these efforts with the 4Q18 earnings release when the company will provide 2019 guidance. Our updated 12-month target price is $12 based on 8.1x our 2020 EBITDA estimate of $233.0MM. |
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| RPC Inc. ( RES – $13.94 , H rated): Sales Note: Q318 EBITDA Below Expectations; Tech Services Margin Compresses |
| RES reported Q318 EBITDA of $97 million, short of our $109 million/consensus $106 million. Sequential decremental in the core Technical Services segment was a higher-than-anticipated 68%, accounting for much of the shortfall. Tech Services revenue dipped 6% seqly and 8% y-y. RES expresses the view that frac efficiency – rather than Permian takeaway – has presented headwinds for the frac industry, exacerbated by the entry of new horsepower. We see the result as falling on the weaker side of expectations, though in a market we view as fully cognizant we’re in the midst of a negative revision cycle in U.S. fracturing. |
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| Superior Energy Services Inc. ( SPN – $8.23 , AC rated): Q318 Recap – Updating Estimates |
| Weakening hydraulic fracturing results overshadowed a healthy performance from SPN’s DPS (rentals) and completion tools services lines in Q318. We’re in the midst of a negative earnings revision cycle in the pumping business, but SPN isn’t a U.S. frac pureplay; and we’re highly cognizant of improving fundamentals across a number of other SPN service lines, particularly aforementioned downhole rentals. But while SPN’s overall operational leverage to frac is below group average, financial gearing is higher and remains a background concern. We believe a key catalyst for SPN is transitioning to positive free cash generation (on an OCF less capex basis). This target has receded for 2018, though we think it remains achievable in 2019 as U.S. pumping stabilizes and SPN’s International and Offshore-leveraged service lines continue to grow. |
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| EXPLORATION & PRODUCTION
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| Lilis Energy Inc. ( LLEX – $2.97 , B rated): Wells tracking type curves; Curtailments/delays almost thing of the past |
| While Lilis has clearly underperformed its peers over the past couple of weeks due to a the pull-back in its 3Q production estimates, the updated investor presentation confirms the lower production is a function of curtailments related to third-party equipment upgrades and trunk-line construction delays impacting the timing of the hook-up of new wells, especially on the eastern portion of its acreage. The production curves for its 1-mile laterals continue to track its type curve, while the early data from its 1.5 mile laterals are running ahead of its type curve. As a result, the questions surround the quality of its rock appear overblown. In addition, its proved reserves have increase 300+% since year-end, highlighting its reserve engineer’s confidence in its well performance/rock quality. With the delays/curtailments negatively impacting 3Q production by ~2.1 mboe/d, its adjusted 3Q production level would have come in ahead of prior expectations. Importantly, the construction delays and curtailments are mostly in the past with the issues expected to be fully resolved within the next month With a current production level of 6.5-7.0 mboe/d, ~1.0 mboe/d remaining curtailed and 5 wells in various stages of flowback/completions, Lilis remains on track to meet (if not exceed) its targeted exit rate of 8 mboe/d. While we are not changing our 4Q:18 and 2019 estimates at this time, the bias appears to be shifting to the upside, with its upcoming completions and its planned 2-rig program targeting 1.5 mile laterals set to begin to deliver more predictable sequential growth. |
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| Range Resources Corp. ( RRC – $16.47 , B rated): De-leveraging ahead of plan with asset sales; 3Q beat across the board |
| Range reported 3Q:18 CFPS/EBITDA of $1.05/$313.3 million, versus our estimate of $0.90/ $281.0 million and consensus of $0.97/$290.9 million, with the beat driven by better than expected production (2% above JRCO and consensus) and realized pricing across all three commodities (please see attached variance). As it relates to pricing outlook, increased pipeline outlets, seasonally low storage and compressed basis across Appalachia and the Midwest, has pushed Range to lower its FY:18 gas differential guidance to HH-$0.08 (vs prior guidance of HH-$0.10). Range remains on track to hit its 11% production growth target, despite the recent ORRI sale and the Mid-Con sale earlier this year. Additionally, we remain confident Range will execute on additional asset sales, with most on the street (including ourselves) anticipating the next divestiture to be its NE Pennsylvania assets (~90,000 net acres and ~115 mmcf/d of production). With Atlantic Sunrise now up and running, the improving differentials in NE PA should only help to improve the marketability of the asset and, using implied values of $2,000-$2,500 per daily flowing mmcf/d and an acreage value of $2,000-$3,000 per acre, its NE PA assets could generate $450- $550 million of proceeds. With the sale of an ORRI on its SW PA already accelerating its de-levering process by as much as 2 years (vs its 5-year plan outlined earlier in 2018). Despite the 2 asset sales this year, Range remains on track to deliver 11% growth in 2018 while funding its activity out of cash flows and its 2018 capital spending expected to come in below budget. With Range currently trading at a 20% discount to Cabot on a 2019 EV/EBITDA basis, recapturing half of that discount would result in 25%+ upside to ~$22.50 per share (which remains below our price target of ~$30 per share).Conference call info: 8:00 CDT (9:00 EDT); 866-900-7525; passcode: 8399762. |
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Trading
(800) 842-6229Sales (Main)
(504) 525-3767; (800) 443-5924Oilfield Services
Daniel Burke, (504) 584-1213, dburke@jrco.com
Georg Venturatos, (504) 584-1233, georg@jrco.com
Exploration and Production
Ron Mills, (504) 584-1217, rmills@jrco.com
Dun McIntosh, (504) 584-1257, dun@jrco.com
Charles Meade, (504) 584-1274, cmeade@jrco.com
Brian Corales, (504) 584-1230, bcorales@jrco.com
Lenny Raymond, (504) 584-1235, lraymond@jrco.com
Energy Infrastructure
Martin Malloy, (504) 584-1205, mmalloy@jrco.com |
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