Monday, September 9, 2013

TMS Market Sentiment

For all of the TMSers, it's been quite a roller coaster ride over the past few years.  The "highs and lows" have exhausted many, but the "little shale that could" continues to impress.

Examining market sentiment always provides some interesting lessons in psychology.  In most cases, understanding the "mass psychology" of the herd is the key.  The herd always moves in mass, and at times, very quickly.

Many believe that Goodrich Petroleum's stock price (GDP) is a great barometer for the TMS.  When comparing operators, Goodrich has the most leverage in the play.  The recent Devon acquisition would indicate that they are "all in" with regards to the TMS.  Stock prices are indicators of sentiment.  When the herd is positive and greedy, prices rise.  When feeling negative or fearful, prices decline.  

Having now authored this blog since March 2011, I have the ability to track viewing activity.  With these data, I can examine historical trends in usage.  The chart below integrates the monthly closing price for GDP and page views on this blog.  This geologist concludes that there is a nice, tight correlation between these disparate datasets.  I don't believe that one controls the other, but they are two separate indicators that align and indicate the trend of TMS market sentiment. 



To take it a step further, I've added recent transactions (yellow) on the chart below.  These offer additional evidence that there's been a significant shift in sentiment of late.  Whether you call the Devon sale "distressed" and the Sanchez deal "too close", the trend is still apparent.


Both Wall Street and U.S. operators have been very slow to migrate to this play.  The tide appears to be rapidly turning.  Goodrich's target of $5000 per acre might be the next quantum leap.

15 comments:

  1. Absolute genius! Who but you would have "thunk" it? ACtion

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    1. thank you Ronda! too many late nights pondering the TMS I guess.

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  2. Goodrich (GDP) stock price at $25.77 today with target price raised to $40 by SunTrust based on expectations for the CMR/Foster well, which should be flowing by end of week.

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  3. Sanchez recently said they will start drilling in the TMS early next year.

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  4. Mark,
    You seem to be a disgruntled unleased mineral owner. What is the section/township/range of your acreage? How many acres?

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  5. Mark,

    Yes, it would be advantageous to build as much acreage as you can with your neighbors. But, if the group holds out and then gets nothing then you will be to blame. So be very careful with your expectations and bringing in additional people.

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  6. Maybe you should hold out for even bigger money Mark and make fools out of everyone who has ever leased at any price.

    Today's news:

    $61,000 per acre EF deal:

    Sanchez expands in Eagle Ford Shale with $220 million Rock Oil asset buy

    Houston (Platts)--9Sep2013/508 pm EDT/2108 GMT

    Small upstream operator Sanchez Energy's Eagle Ford Shale operation in South Texas bulked up in that expansive play Monday after inking a deal to buy producing assets from privately held Rock Oil Company for about $220 million in cash.

    Under the definitive agreement, Houston-based Sanchez will purchase proved reserves of about 11 million barrels of oil equivalent and 2,000 boe/d of of production (81% oil, 8% natural gas liquids) spread across 3,600 net acres in McMullen County. Average working interest is 60%; 12 wells are currently producing on the properties.

    The transaction is due to close at the end of this month, the company said in a statement.

    http://www.platts.com/latest-news/oil/houston/sanchez-expands-in-eagle-ford-shale-with-220-21532669

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  7. FM,

    That's with 10 wells and is proven production. Mark does not fall in that type of property. Also, MS would allow him to be force pooled into a unit and he would get nothing as far as bonus. He needs to be careful what he asks for with only 40 acres.

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    1. I totally agree with you Joe. I leased for $300. I also do not think those of us who leased for a small bonus are fools as Mark opined. Had it not been for educated landowners who did lease, people like Mark and others who haven't leased, would never be getting an opportunity to lease at all, because it is very doubtful the TMS would have any oil wells at all today if landowners had demanded even $1000 per acre. Also, most of those $200 per acre leases were to landowners with +1000 acres - I doubt many of us,including Mark, would have kicked anyone offering us $200,000 and a chance to get an oilfield well and royalties out the door 3 years ago when the TMS play was a pipe dream. Greed has a way of punishing people one way or another in the end.IMO

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  8. The formation of landowner groups has been tried everywhere and can be helpful if you have a lot of acreage to offer in a prime location,but,1000 acres IMO is probably way to small to have any leverage with an operator in the TMS. It is more likely to cause them to avoid your group's acreage or get it force pooled. In the TMS they can simply go somewhere else in this several million acre play. It may help to form a group if your acreage is eventually found to be in the very heart of a super sweet spot that everyone wants but I don't see that happening in Amite County. You are more likely to get force pooled in your area if you hold out for more money. One well will probably get you more royalty than any extra bonus you might get by holding out or forming a group. Your lawyer might be the only winner if anyone. Opposing oil companies has historically not been a road to more profit in most cases, particularly in Ms. IMO

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  9. Too few wells have been drilled yet to be certain where the "prime" locations are or even to determine if there is such a thing as a prime location, but Amite County is a "good" location for sure. Amite may ultimately be the sweet spot but I wouldn't bet on it at this early stage - History tells us that simply because operators started drilling in a location 1st doesn't necessarily mean it must be the prime location. It took several years and a thousand wells to define the sweet spots in the Eagleford for example. You still have the problem in the TMS, as stated before, that there are too few operators in the TMS for competition to drive the prices substantially higher and there are few competitors for the reasons previously cited - primarily not any large blocks of land left available to lease because Devon,Goodrich,Encana,Sanchez and Amelia Resources have large blocks sewn up and the cost to drill is very high, which discourages a lot of would-be competitors. Now one of these operators might sell their leases and get +5000 an acre once they drill enough successful wells. Small land owners may at some point get a premium bonus but it will not be because of a land grab in the play IMO.I think all the land has been grabbed. Maybe Kirk can share his professional opinion here.

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  10. Mark, Free Medicine has wise words there. I agree with him. I am a mineral owner in Wilkinson Co. and a manager of an LLC (31 family members) that owns 48.19% of 8,072 acres. At this point in the TMS, marketing has not gotten us a lease and we have great contacts in the O&G business. I think anything over $300 bonus is way, way down the road. I am more interested in the percentage because that is where the money is. Bonus is nice but wells producing and paying monthly are better.Our group has resolved to be patient and wait. We run the risk of being passed over but we are willing to wait. Good luck to you.

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  12. Mark,
    You would be better off on gohaynesvilleshale.com. Lots of good chatter there and tales of $$$$. Some good oil company bashing too!
    This blog is mainly targeted at the oil industry professionals.

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