24
Apr

Tuesday Morning – Waiting For Data Plus Another Long Idea

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Good morning. My apologies for the lack of accessibility, but I was muzzled for most of yesterday by a technical glitch. Perhaps it was an act of MEND. My site host assures me it won't happen again (soon).

Early Read On Oil Inventories This Week: (from the Dow Jones survey)

  • Crude - down 1.2 million barrels. Starting to fall from elevated levels now that the refineries are coming back to life.
  • Gasoline - UP 200,000 barrels. This would be the first increase in 11 weeks and comes right on time (historically) for inventories to build. I'm looking for a small bump in refinery capacity utilization but the real wildcards are demand and imports.
  • Distillate - up 400,000 barrels.

Stocks of Interest: A new section on the performance page shows a list of stocks that ZEB has either profiled with a report or snapshot and performance to date.

Nigeria Watch. From Reuters, Nigeria's ruling party's candidate Umaru Yar' Adua was declared the winner of the presidential poll, but observers and opposition groups said the result was manipulated through violence and rigging. Comment: June crude surged $1.78 to $65.89 yesterday on the back of supply disruption worries here yesterday. Gasoline jumped another nickel as well.

Natural Gas Rallied With Everything Else. I'm not touching E&P big cap shorts right now given the (PXD) Master Limited Parnership news yesterday. It may become commonplace to take a resources play, like a basin that has long reserve life but is pretty drilled up, and be able to package it and sell it to the market place with a 5 to 7% yield on it as an MLP. In that case then (APC), (CHK), (DVN), (EOG), (KWK) and even (COP) can/will do just that, thereby unlocking a pretty heft chunk of value and people are going to start bidding these stocks up in anticipation . Some of the MLPs are already in the works and even announced, others are many months away.

Odds & Ends

Regional Cracks Spreads Are Leveling Off. Once Nigeria cools off and utilization (and domestic production of gasoline) contiues to rise, I think crack spreads will start to roll over a bit.

cracks-042407.JPG

Analyst Watch: (XOM) buy to hold at AG Edwards - (that's the second chop in 2 days), (GRP) got at least two price target upgrades after speaking at IPAA yesterday.

HK Comments:

  • was planning production growth fo 10-15% in 2007, upped that this morning to 13-16%
  • 1Q07 to exceed top end of production guidance
  • falling cost structure,
  • are way below NAV. Like maybe 30 to 40% below
  • and have a very good hedge position (costless collars) >70% of production at >$7 gas and $63 oil floors with lots high ceilings.
  • This morning HK raised it's capital budget.
  • Thursday is the company's annual analyst conference.

They speak at IPAA this morning and I bought an opening position in the June $12.50 calls for $2.30 yesterday. If you're interested in an option play on this name check with Phil at Phil's Stock World.

36 Responses to “Tuesday Morning – Waiting For Data Plus Another Long Idea”

  1. 1
    zman Says:

    BP says Whiting refinery hydrotreater and maintenance back up by early May…no change from previously announced schedule despite Dow Jones stories to the contrary this morning. If you work for the press, you just can’t get enough of a bad thing!

  2. 2
    zman Says:

    HK running…I really think it keeps going up through today and tomorrow. You’ve got some fence sitters on the name who’ve got to be itching to raise ratings here , maybe before the analyst meeting Thursday. Either way, with the production bump it just got cheaper.

  3. 3
    zman Says:

    Contango – MCF announces successful production test of Dutch #2.

    Back in early April see ZEB snapshot on them in the report section.

    Reserves are now being booked at 43.5 Bcf vs 28 Bcf for whole company at Dec 31. – nothing new there.

    Dutch #1 is flowing at 40 mmcfepd, and combined (#1&#2) they’re expected 55 to 60. They have just under a third of this discovery so call it a bump of 20 versus the 12 they were producing in February.

  4. 4
    zman Says:

    NFX IPAA: Not much new. I’d bet they’re saving real news for earnings on Thursday.
    They added a rig in the Woodford: now 16 with 3 spud rigs. China production is up a touch, other than that, pretty same ‘ol, same ‘ol.

    Thursday we should get more on the timing of new prod from Grove in the N Sea as well as an update of progress at increasing EUR in the Woodford.

  5. 5
    zman Says:

    Ahhhh, SCU.

  6. 6
    zman Says:

    Where is everyone?

  7. 7
    Stephen Says:

    Got an opinion on WHQ? It’s cheap as far as oil service goes, but it does focus mostly on onshore, earnings out Friday morning, what say you?

  8. 8
    zman Says:

    WHQ – Actually yes.

    I like them. They’re cheaper than the group and direct bigger cap peers (which makes them an ideal takeout and the industry is already overwrought with takeout rumors).

    I wish they’d trade more but they’re small.

    Geographically, they’re in the right spots (US gulf coast) and expanding into int’l which will almost certainly expand their margins at least in the near term 1 to 2 years) and not in the slow ones (Canada)

  9. 9
    Kevin Says:

    Refiners are still holding,…any idea as to why considering inventories tomorrow that very well could and should show a build of gasoline? Lunchtime VLO breakout? Are you kidding me?

  10. 10
    lawdymama Says:

    Z – have been in agreement w/you re: run-up in refiners and was really expecting to see a drop in gas prices this week. But yesterday and today, at least so far, aren’t supporting my expectations. So..wondering what are your thoughts about the May TSO puts…have some 105s…bail out or hold and hope for better news?

  11. 11
    zman Says:

    VLO – Lake Charles facility announced down for 2 or more weeks this morning. Pretty ridiculous action on CNBC with all the talk of $4 gas coming every hour and hyping the Nigeria situation.

    When this passes, and it either does or it doesn’t tomorrow with another higher utilization report from the EIA, then I make a decision on the $105 TSO.

    I’ve got several lower strikes that I’ll be taking out on the first reall weak day in the stock. The $105 and $110 I probably roll into June.

    In other words, I think it’s coming but we need more data, a week or two of it, to get the ball rolling down hill. I originally took the May puts b/c I thought the Aprils were too dangerous, not enough time, but the May’s are getting pretty short as well.

  12. 12
    zman Says:

    Rebels stormed a Chinese-run oil field at dawn in eastern Ethiopia on Tuesday, killing 74 workers and destroying the facility, the guerrilla group and government officials said.

  13. 13
    Kevin Says:

    That Ethiopia news is a non-event relating to oil,..CNBC keeps using it though,..they are shameless, aren’t they.

  14. 14
    Kevin Says:

    A non-event as far as global production is concerned. Obviously,..the loss of life is sad.

  15. 15
    zman Says:

    Kevin – knew what you meant.

    CNBC is pretty shameless. The piece of the VLO plant they’re talking about is 60,000 bpd. Let see, US refining capacity is over 17 million bpd, which makes this less than half a percent down for two weeks. Is that worth $0.07 on RBOB or about 3% in two days? On top of the massive gain we’ve seen since mid January? I don’t think so.

  16. 16
    zman Says:

    Shameless self plug: Hey SCU and HK are the #2 and #3 performers today on the list of IPAA attendees despite oil being off a buck. NFX is up a little but ranks a lowly 15th.

  17. 17
    sane Says:

    Hey z,

    The weathergirl will tell you with a gleam in her eye.

    Sane

  18. 18
    Kevin Says:

    HA,..TSO hits new daily low,..COP has fallen also,..c’mon VLO,..time to follow suit or at least start acting like a refining company.

  19. 19
    zman Says:

    I noticed, I kid you not, the weather girl said ” 74 dead, most of them Ethiopian, but 7 Chinese as well”.

    What’s the deal there? Is an ethiopian dying in an oil field less shock value for them?

  20. 20
    Kevin Says:

    Sane,..

    Is that an Anchorman reference? LOL

  21. 21
    zman Says:

    I’m not in my office at present.Can anyone wathcing CNBC let know when cash gasoline gone negative? tia

  22. 22
    zman Says:

    Kevin – it’s from the Don Henley song Dirty Laundry.

    CNBc weathergirls get that misty eyed look whenever there’s death in oil land or a hurricane on the surface of the earth.

  23. 23
    sane Says:

    Kevin,

    You need to remember in refining you can blow up your own refinery and your stock will go up 🙂

    Sane

  24. 24
    zman Says:

    I just added this blog to the blogroll at right. Should have been there a long time ago. Good story today on the machinations at Cushing.

    http://energyoutlook.blogspot.com/

  25. 25
    Kevin Says:

    That is true,..invest in matches instead of fire extinguishers,..LOL

  26. 26
    zman Says:

    TSO getting ransacked.

    A little profit taking before inventories and VLO’s report on Thursday.

  27. 27
    zman Says:

    NFX outperforming the group nicely now.

  28. 28
    Kevin Says:

    Note to CNBC,..Hedge funds make a killing beacause they insider trade. You know,..wink, wink stuff. They act like they make all this money due to skill. That could be just my opinion though.

  29. 29
    zman Says:

    gasoline negative eh?

    In true Colbert fasion I give a wag of my finger to CNBC!

  30. 30
    zman Says:

    Happy Trading on Phil’s Site just asked my thoughts on TSO as he said it looks like it’s breaking down now.

    My response:
    Happy – Funny you should ask, I was just working up my thoughts for tomorrow’s post.

    We’re supposed to get a BUILD in gasoline of 200,000.

    Utilization is likely to rise smallish say ~ 91% but I’ll have a better guestimate for tomorrow. Definitely up though.

    Imports – who knows but they need to stay over 1 mm bpd for prices to back off.

    Demand – actually fell in last week’s report but that’s too early to call it a trend. With the Nor’easter’s impact squarely in last week’s numbers I bet demand dips close to 9.1 mm bopd (down a few % week to week)

    As to TSO, they’ve been downgraded by no less than 5 firms in the last 3 weeks. Everybody is saying valuation, not that it’s a bad company, just it’s gone too far too fast.

    It goes back to what Phil was saying about VLO earings. We know they’re good but they’ve got to be fan-f’ing-tastic to support the near double in the stock of TSO in the past 4 months. Rigth now, analysts are looking at VLO and saying buy it and sell TSO.

  31. 31
    Kevin Says:

    CNBC bringing on the PUMPERS,..LOL Shameless they are!

  32. 32
    sane Says:

    PUMPERS just in time for the 2 o’clock pump job.

    Sane

  33. 33
    zman Says:

    Check out the “Wag of the finger to $4 gasoline” post on the Colbert message board.

    http://www.comedycentral.com/shows/the_colbert_report/message_board.jhtml

  34. 34
    zman Says:

    Look at VLO go.

    Bought another two sets of the June HK $12.50 at $2.40 on this dip.

  35. 35
    sane Says:

    oil fell off a cliff.

    Sane

  36. 36
    zman Says:

    NFX closes up $1.13 or 2.6% on a day like today?! Tells me the breakout sessions went well at IPAA which tells me the conference call is going to go well on Thursday.

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