22
Jul
Unusually Uncertain Thursday – Natural Gas Preview and Oil Review
Market Sentiment Watch: Volatile. Months ago people were worried that Ben didn't have an exit plan. Now they are worried that he won't need one. Yesterday, Bernanke's testimony can be summed up as: 1) we don't know if the economy will improve or not but that's forecast (3 to 3.5% = GDP growth), and 2) if the economy instead goes down, we have tools to combat that, however we have not examined which tools we might use (which may signal that he's not yet worried about it that much because again, there's that growth forecast). Today, Eurozone PMI was better than expected (largely on the back of Germany) inspiring confidence in European markets, the Euro which is challenging the key 1.30 level from below, and U.S. futures are rebounding. Tomorrow, the results of the Eurozone's stress tests will be released. Surprises outside of the PIGS will be unwelcome.
Ecodata Watch:
- Jobless Claims were 464K vs 450K expected and 429 K last week
- We get leading economics indicators (F = -0.3%) and existing home sales (F = 5.1 mm) at 10 am EST
BP Spill Watch:
- BP, weather permitting, may attempt a static kill (same as top kill but you have the cap in place) over the weekend.
- Relief well operations suspended. BP has put a storm plug in place and is mulling moving the rigs off location depending on the weather. They have not yet cemented the last string of casing but are within 60 feet vertical and 4 feet lateral of intersecting the target.
- CVX, COP, XOM and Shell start $1B oil spill containment fund.
In Today's Post:
- Holdings Watch
- Commodity Watch
- Stuff We Care About Today – NFX operations update, CLB earnings and some other odds and ends.
- Odds & Ends
Holdings Watch: ZCAT (Zman Catalyst portfolio):
- $7,400
- 71% Cash
- Positions are updated on the ZCAT, ZIM, ZLT
- Yesterday's:
- BP – Added (10) BP August $45 calls for $0.29 with the stock at $36.28. Thinking that as we approach the weekend and the relief well inches closer to its target, we will see a speculative move in the name. Going for high leverage on it and don't need the stock to get close to the strike for the trade to work. May add more in next couple of days.
ZIM (Zman Inefficient Markets portfolio)
- $2,400
- 6% Cash
- Positions are updated on the ZCAT, ZIM, ZLT page.
- Yesterday’s Trades:
- ECA – Added (10) ECA August $34 Calls for $0.30 as the conference call starts. See post for details on the quarter. The stock came off a little over 4% pre call on the higher spending plan. My sense is they will flesh this out on the call to the Street's satisfaction. See the site for further comments as the call progresses.
ZLT (Zman Long Term portfolio)
- SSN – Out on half of my position at an average cost of $1.30, up 110% to my average cost. Stock could still travel higher and may if they get their acreage sale at the high end of the range by July 26th but the recent action in the name has discounted much of the move and at the present time it seems prudent to take some profits.
Commodity Watch:
Crude oil sank $1.02 to close at $76.56, after the EIA reported a build in crude inventories. The Build was driven by imports and crude started to make a recovery as gasoline showed renewed signs of demand but sell back off later in the day as the dollar rallied on Ben's words of uncertainty. This morning crude is trading slightly higher.
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Natural gas fell 8 cents, reversing the prior day's gain to close at $4.51 yesterday. This morning gas is trading up slightly.
- Water Watch: COG given 60 days to "permanently fix water supplies" affected by their drilling in Susquehanna County, PA.
- Tropics Watch: That wave north of Hispaniola and east of Cuba and targeting the Gulf for this weekend is now given a 70% chance of development in the next 48 hours. Another possible storm is cropping up in the south western Gulf (Bay of Campeche) but should not be a threat to anything as it develops while moving ashore in Mexico. Season is heating back up and it is still very early days.
Natural Gas Inventory Preview:
I'm at 47 Bcf for today's number. Weather: HOT
- 93 Cooling Degree Days vs 88 in the prior week,
- 73 CDDs last year when we saw an injection of 70 Bcf and
- 80 CDDs reported for the week of 6/26/10 which produced the lowest injection of this year so far at 60 Bcf.
- Note that the forecast for this week is 101 CDDs so look for a smaller injection next week.
Imports: Up slightly week to week but not enough to matter.
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- Last Week: 78 Bcf Injection
- Last Year: 70 Bcf Injection
- 5 Year Average: 52 Bcf Injection
- 10 year Hi: 87 Bcf Injection
- 10 year Low: (7) Bcf Injection
The Street is at 51 BCF today.
Oil Inventory Review:
ZComment: A surge in imports drove a higher than expected crude inventory number. Main concern for oil is stock levels at Cushing which shot up again. Gasoline demand recovered as expected and that should start to filter through to inventory levels in the next few weeks.
Crude oil: 
Gasoline: 
Distillates: 
Stuff We Care About Today
Earnings Briefs:
CLB Reports Strong Earnings The 2Q Numbers:
- Revenues of $198.9 mm vs $189.5 mm expected
- EPS of $0.75 ($0.79 ex currency issues) vs $0.72 expected
Highlights:
- 3Q Guidance: EPS $0.76 to $0.78 vs Street at $0.76 (range of $0.70 to $0.87)
- Special dividend of $0.65 per share
- CLB sees increased Reservoir Description from international arena in 2H10
- Production Enhancement division revenues and profits continue to surge (up 53% and 91% respectively YoY), strength from US and abroad completions and fracture diagnostics. Not a shock from the U.S. when you look at the horizontal rig count. Saw particularly strong demand from the Bakken and Eagle Ford shales.
- Reservoir Management – still small relative to the other two divisions but growing as they take on extended studies in newer plays (mentions Montney and Eagle Ford shales this quarter)
Conference Call: 8:30 am EST. I don't own it but listen for industry updates. NFX Issues Strong Operations Update
- Earnings due out Friday.
- Pre-releasing 2Q10 production of 73 Bcfe, at the top of the range 70 to 73 Bcfe
- up 9% seq. and up 13% YoY
- Maintaining 2010 guidance of 283-288 Bcfe which was expected given shut in Malaysia announced earlier this month. Interesting that they dropped the language about coming in at the bottom of the range and just said we're maintaining the range.
- Play Update:
- Williston Basin (Bakken):
- Current production > 4,000 BOEpd, first time I recall them putting a number in print
- Exit rate target is 6,500 BOEpd
- Activity in the basin is stepping up, 13 wells in 1H going to 18 wells in 2H10.
- To date drilling has been short laterals; over half of 2H10 wells will be 9,000 feet + wells
- A number of nice short lateral wells to report, IPs ranging from 1,232 to 3,816 BOEpd with an average north of 2,400 BOEpd.
- Putting EURs at 500 to 700,000 BOE
- Uinta Basin (Monument Butte)
- Production hits another record at 22,600 Bopd for the quarter, up 30% this year
- Exit rate target of 25,000 Bopd
- Drilling their post holes faster and faster here, new record 2.8 days from rig up to rig release. Lots of running room left here.
- Montana – Southern Alberta Basin
- 2 wells at total depth, 6 more planned in their assessment program.
- 230,000 net acres
- Hopefully they'll be more forthcoming on the call
- Eagle Ford Shale
- Completion of first well next week
- Already moving to a 4 rig program with plans to drill 15 wells by year end. Must have liked what they saw while drilling but also liking what they see out of their peers.
- > 300,000 net acres
- They had this listed under "Oil plays"
- Granite Wash
- Seeing more liquids as the test more zones of the play (few things beat stacked pays)
- 85 MM/d net from 23 wells drilled to date
- 46,000 net acres
- Woodford Shale
- Segment to get hit by reduced drilling due to low gas prices
- 4 rigs running now down from 9 at the beginning of this year
- 220 MM/d net vs 210 MM/d net last quarter
- Deep Water Gulf of Mexico –
- Little to no impact on 2H10 development operations
- NFX essentially pointing out that "hey, it's only 10% of our ops"
- Williston Basin (Bakken):
Other Stuff
- DO misses, reduces special dividend – CC at 10 am EST
- ESV misses – CC at 11 am EST
- OAS – waiting on initiations to begin
- SSN – waiting on acreage sale confirmation, due by July 26th.
- NFX and SLB report after the close with quarterly calls tomorrow.
Odds & Ends Analyst Watch:
- WFT – Raymond James raises price target from $17 to $20.
- ECA – UBS cuts to Neutral
- CLB – FBR reiterates Outperform/Top pick rating
- BEXP – Initiated at Stifel with Buy and $24 target
Addendum – added for reference due to the LINE news
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