John M. White, (949) 720-7115 [email protected]Sales (800) 933-6830, Trading (800) 933-6820 INDUSTRY NOTE | EQUITY RESEARCH | February 10, 2020 Resources E&P Update-Relative Value Tables On February 7 Reuters reported Russia said on Friday it needed more time to decide whether to join any additional oil output cuts by OPEC, saying U.S. crude production growth would slow and global demand remained solid. Energy Minister Alexander Novak was speaking as OPEC pushes Moscow to make a decision on whether to cut output more in response to the coronavirus outbreak that has hit the global economy. A technical panel that advises OPEC and its allies, proposed on Thursday a provisional cut of 600,000 b/d, three sources told Reuters. Producers in OPEC+ are scheduled to meet in Vienna on March 5-6, although the meeting could be brought forward depending on how the coronavirus outbreak affects oil prices. Novak said Moscow needed more time to assess the situation, stopping short of giving a clear Russian position on the proposal. Oil prices have come under pressure recently in the absence of a Russian response to calls for more output cuts. "I can't tell you about my position right now, maybe we will say it next week," Novak said when asked about Moscow's position. "Russia needs a few days for market analysis." On February 5 Reuters reported short-term sales of crude oil and liquefied natural gas into China almost ground to a halt this week as the corona virus slows economic activity and cuts demand and buyers ponder legal action to avoid having to honor purchase agreements, trade sources said. Typically, trade would have revived after the Lunar New Year holiday at the end of January, but China has extended the break into February to try to contain the fast-spreading corona virus. As a result, commodity supply chains have been disrupted with shipments canceled or delayed and stocks piling up, especially as mild weather had already slowed heating fuel demand. Spot crude trade into Shandong, home to independent refiners that account for a fifth of China's imports, is at a halt, three traders said, speaking on condition of anonymity. "We managed to sell some cargoes even for April arrival (before Chinese New Year) but this week everything stopped," a Singapore-based trader said. Sellers were reluctant to offer cargoes for sale because of concern the buyer might declare force majeure on previous deals, traders said. Companies invoke force majeure when they cannot meet their contractual obligations because of circumstances beyond their control. In the liquefied natural gas (LNG) market, some Chinese buyers said they were considering invoking the force majeure clause on imports, although some producers said they had not received any such notices. Reason for Report: Industry Update Roth Covered Companies Mentioned in this Report: AMPY $5.41 Buy CHAP $0.96 Buy CPE $3.01 Buy EPM $5.00 Buy ESTE $4.51 Buy FANG $74.24 Buy GDP $6.35 Buy LONE $1.61 Buy REI $2.11 Buy TALO $18.64 Buy WTI $4.06 Buy Stock prices are as of previous day's close, if not otherwise specified Important Disclosures & Regulation AC Certification(s) are located on page 35 to 35 of this report. Roth Capital Partners, LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC
INDUSTRY NOTE | EQUITY RESEARCH | February 10, 2020
ResourcesE&P Update-Relative Value Tables
On February 7 Reuters reported Russia said on Friday it needed more time to decide whether tojoin any additional oil output cuts by OPEC, saying U.S. crude production growth would slow andglobal demand remained solid. Energy Minister Alexander Novak was speaking as OPEC pushesMoscow to make a decision on whether to cut output more in response to the coronavirus outbreakthat has hit the global economy. A technical panel that advises OPEC and its allies, proposedon Thursday a provisional cut of 600,000 b/d, three sources told Reuters. Producers in OPEC+are scheduled to meet in Vienna on March 5-6, although the meeting could be brought forwarddepending on how the coronavirus outbreak affects oil prices.
Novak said Moscow needed more time to assess the situation, stopping short of giving a clearRussian position on the proposal. Oil prices have come under pressure recently in the absenceof a Russian response to calls for more output cuts. "I can't tell you about my position right now,maybe we will say it next week," Novak said when asked about Moscow's position. "Russia needsa few days for market analysis."
On February 5 Reuters reported short-term sales of crude oil and liquefied natural gas into Chinaalmost ground to a halt this week as the corona virus slows economic activity and cuts demandand buyers ponder legal action to avoid having to honor purchase agreements, trade sourcessaid. Typically, trade would have revived after the Lunar New Year holiday at the end of January,but China has extended the break into February to try to contain the fast-spreading corona virus.As a result, commodity supply chains have been disrupted with shipments canceled or delayedand stocks piling up, especially as mild weather had already slowed heating fuel demand.
Spot crude trade into Shandong, home to independent refiners that account for a fifth of China'simports, is at a halt, three traders said, speaking on condition of anonymity. "We managed to sellsome cargoes even for April arrival (before Chinese New Year) but this week everything stopped,"a Singapore-based trader said. Sellers were reluctant to offer cargoes for sale because of concernthe buyer might declare force majeure on previous deals, traders said. Companies invoke forcemajeure when they cannot meet their contractual obligations because of circumstances beyondtheir control. In the liquefied natural gas (LNG) market, some Chinese buyers said they wereconsidering invoking the force majeure clause on imports, although some producers said they hadnot received any such notices.
Reason for Report:Industry Update
Roth Covered CompaniesMentioned in this Report:AMPY $5.41 BuyCHAP $0.96 BuyCPE $3.01 BuyEPM $5.00 BuyESTE $4.51 BuyFANG $74.24 BuyGDP $6.35 BuyLONE $1.61 BuyREI $2.11 BuyTALO $18.64 BuyWTI $4.06 BuyStock prices are as of previous day'sclose, if not otherwise specified
Important Disclosures & Regulation AC Certification(s) are located on page 35 to 35 of this report.Roth Capital Partners, LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC
EXPLORATION & PRODUCTION Industry Note - February 10, 2020
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifiesthe following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views aboutthe subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be,directly or indirectly, related to the specific recommendations or views expressed in this report.
For important disclosure information regarding the companies in this summary report, please contact: The Director ofResearch at (800) 678-9147 or write to: ROTH Capital Partners, LLC, Attention: Director of Research, 888 San ClementeDrive, Newport Beach, CA 92660
Disclosures:ROTH makes a market in shares of Amplify Energy Corp., Chaparral Energy, Inc., Callon Petroleum Company, EvolutionPetroleum Corporation, Earthstone Energy, Inc., Diamondback Energy, Inc., Goodrich Petroleum Corp., Lonestar ResourcesUS Inc., Ring Energy, Inc., Talos Energy, Inc. and W&T Offshore, Inc. and as such, buys and sells from customers on aprincipal basis.
Shares of Chaparral Energy, Inc., Callon Petroleum Company, Lonestar Resources US Inc., Ring Energy, Inc. and W&TOffshore, Inc. may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth salespractice requirements for certain low-priced securities.
A Research Analyst and/or a member of the Analyst's household own(s) debt or equity securities of Goodrich PetroleumCorp. stock.
Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to arating or price target, except for the first box, which may only represent the first note written during the past three years.Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliatereceived compensation for investment banking services in the past 12 month.
Distribution of IB Services FirmwideIB Serv./Past 12 Mos.
Our rating system attempts to incorporate industry, company and/or overall market risk and volatility. Consequently, at anygiven point in time, our investment rating on a stock and its implied price movement may not correspond to the stated 12-month price target.
Ratings System Definitions - ROTH employs a rating system based on the following:
Buy: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return of at least10% over the next 12 months.
Neutral: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return betweennegative 10% and 10% over the next 12 months.
Sell: A rating, which at the time it is instituted and or reiterated, that indicates an expectation that the price will depreciateby more than 10% over the next 12 months.
Under Review [UR]: A rating, which at the time it is instituted and or reiterated, indicates the temporary removal of theprior rating, price target and estimates for the security. Prior rating, price target and estimates should no longer be reliedupon for UR-rated securities.
Not Covered [NC]: ROTH does not publish research or have an opinion about this security.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other businessrelationships with the covered companies mentioned in this report in the next three months. The material, information andfacts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are fromsources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be usedas a complete analysis of the company, industry or security discussed in the report. Additional information is available uponrequest. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report aresubject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actualresults to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a highdegree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without theexpress written permission of ROTH. Copyright 2020. Member: FINRA/SIPC.
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EXPLORATION & PRODUCTION Industry Note - February 10, 2020
