Natural Gas - July EIA 914 - Yr/Yr Declines Surface
SECTOR REVIEW
8 pages - 123 KB - 8 Exhibits
Link: sendspace.com
Research Analysts
Jonathan Wolff, CFA
Anish Patel, CFA
Excerpt:
July 914 Report Shows 1% Sequential Drop. The EIA-914 data released
this afternoon showed Lower 48 U.S. natural gas (wet) production fell 1.1%
mo/mo (0.7 Bcf/d) after rising 0.5% sequentially in June. The declines were
led by the onshore, which was down 1.5% mo/mo (0.9 Bcf/d) somewhat
offset by continued sequential growth in the offshore (+2.4% or +0.2 Bcf/d)
on restored shut-ins (which offset Independence Hub maintenance). We had
expected declines of 0.5% sequentially so today’s report appears
incrementally bullish. However, several potentially non-recurring factors may
have led to lower onshore July production such as Wyoming plant
maintenance and producer shut-ins, downtime on the Boardwalk pipeline
(550 MMcf/d) for 13 days and reduced run-times at Independence Hub.
Initial Yr/Yr Declines Now Surface. The July report shows initial signs of
yr/yr volume declines. On a year-over-year basis, Lower 48 production is
now down 1.4% or 0.9 Bcf/d versus the 0.7% or 0.4 Bcf/d growth seen in
June. Initial yr/yr declines have also kicked in for the onshore, which is now
down 1.4% or 0.8 Bcf/d versus the 1% or 0.5 Bcf/d growth seen in June.
(see Exhibit 2)
Further Declines Likely Q3, but Could Soften in Q4
We continue to see production falling in Q3 (perhaps down 3% qtr/qtr), but we would note
that declines could be overstated given 1) price and capacity induced shut ins, 2)
downtime on the Boardwalk pipeline (550 MMcf/d), and 3) reduced run times at
Independence Hub in the deepwater Gulf (run times of 22-44% expected through end of
Sept.). However, continued increases in the natural gas rig count (up 45 rigs or +7%) and
a backlog of well completions could lead to improving output in Q4.
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Flash Note: Transocean Inc (RIG)
New Ultra-Deepwater Contract Confirms Bullish Outlook
9 Pages - 157 KB - 1 Figure
citigroupgeo.com
Excerpt:
Buy/High Risk 1H
Price (29 Sep 09) US$85.16
Target price US$100.00
Expected share price return 17.4%
Expected dividend yield 0.0%
Expected total return 17.4%
Market Cap US$27,341M
New Deepwater Contract — Yesterday BP awarded Transocean a three-year
contract extension on the ultra-deepwater semisubmersible Deepwater
Horizon. The extension is from September 2010 to September 2013 at a rate
of approximately $500,000 per day. This rig recently drilled BP’s successful
Tiber oil discovery in the Gulf of Mexico Keathley Canyon Block 102. We
believe the rig will continue to work in the deep Gulf of Mexico as BP conducts
further appraisal work of its large Lower Tertiary oil find.
Additional Contracts Are Likely to Be Signed Soon — The Horizon is the first of
three ultra-deepwater rigs expected to receive multi-year commitments before
the end of 2009. The other two rigs are expected to achieve comparable day
rates to the Horizon. In addition, Transocean is close to securing a contract to
build an arctic-class offshore drilling rig that could fetch a rate of $1,000,000
per day. These data points are positive for Transocean’s share performance.
Deepwater Rig Availability Remains Limited — Only six of Transocean’s 28
ultra-deepwater rigs currently operating or under construction have availability
before year end 2011 (see Figure 1). Ultra-deepwater rig availability remains
tight, as evidenced by the 3-year term and the day rate on the Horizon. We are
confident that the remaining four rigs will receive commitments by early 2011.
Estimates and Target Unchanged — The Horizon contract extension has no
effect on our EPS estimates. The roughly $500,000 per day rate is in line with
our current day rate assumptions. We reiterate our Buy/High-Risk rating and
$100 price target on RIG shares. Transocean is the most levered of all offshore
drillers to the capacity constrained ultra-deepwater market. |
