03
May

Thrashing Thursday

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TSO's 1Q07 earnngs miss will be the story of the day (at least around these parts!)

Oil Inventory Report Review. Slightly smaller than expected draw in gasoline prompts modest declines in crude and gasoline prices.

  • Crude - up 1.1 million barrels vs expectation of up 1.5 mm bbs. June crude fell for the third straight day settling at $63.68.
  • Gasoline - down 1.1 million barrels vs expectation of down 1.3 mm bbs. June gasoline eased back to $2.22 on the slightly less bullish report.
  • Utilization & Production - utilization increased to 88.3% but production fell by nearly 130,000 bpd to 8.536 mm bpd. That's actually higher than the year ago week when 8.47 mm bpd were produced.
  • Imports - rose from 1.039 mm bpd to 1.164
  • Demand - up ever so slightly.

Gasoline stocks now stand at 4.7% below year ago levels. Taken together with demand that year to date has run 1.9% higher than last year, the days supply metric has fallen to 20.8 (or just above where it was at the end of last summer).

gaso-stocks-and-days-sup-050207.JPG

Natural Gas Preview

  • My expectation: 65 to 90 Bcf Injection.
    • Heating degree days fell by over half from the prior week (which saw an injection) to a reading of 44, the lowest level recorded this year.
    • That's roughly one-third below normal and year ago levels when 53 Bcf were pullled from storage.

Holdings Watch:

  • CALLS: CHK, EOG, NFX, SWN, and VLO (see refinery sale comments below) each had better than 3% days yesterday. This resulted in doubles for positions taken on Tuesday in CHK, EOG, and SWN. My HAL position is also inching higher.
  • PUTS: For the most part, another drubbing.
    • My ill-fated and soon to be abandoned put position in (APC) actually made a little headway south today. This is an old position and I'll hold only as long as the chart continues to fall. No way I want to be short them after May (other than for quick trades).
    • (TSO) continued to kick my teeth in. I added May $120 puts in the morning on the initial rise. See more on TSO below for earnings.
  • STOCKS - No changes.

Earnings Watch:

  • (KWK) - Good quarter
    • Earnings: A little light at first glance but operating cash flow rose 16%. Analysts were probably off on the cash/deferred split on taxes or underestimated the DD&A rate as revenues came in spot on with consensus.
    • Production: up 21% YoY and 5% sequentially (on a daily basis).
    • KWK's Barnett Shale production has risen 125% over the last year and accounted for just over a quarter of total company production, up from 15% a year ago.
    • LOE per Mcfe rose 10% to $1.69/Mcfe from $1.54/Mcfe in 1Q06. This is up from 4Q06 of $1.52/Mcfe
    • Guidance: production is expected to be up ~ 25% in 2007, double digit growth comment about the next several years.
  • (TSO) -Miss - $1.67 vs expectation of $1.86. Stock is off $6+ pre market.
  • (SUN) - Miss - Top line dissappoints due to extended maintenance. After backing out a gain, bottom line of $0.70 is less than half of expectations. People weren't happy selling the stock off 4% in after hours trading.

Odds & Ends

Analyst Watch: nada

VLO's Lima Refinery Sold to Canadian oil sands producer Huskey. The tab came to $1.9 billion plus the odd $200 million in associated working capital (oil inventory).

From the things you should know file: From EIA ~ Over time, WTI production has dropped sharply to levels currently averaging no more than 400 thousand barrels per day, a relatively thin volume to represent price movements in a 15 to 16 million barrel per day U.S. market that increasingly depends on heavy, sour crude oils. Comment: Maybe we should use a global basket price and price it in Euros.
Service Costs Not Going Down Soon. Great article from the Houston Chronicle about why service costs are rising and why they’re not likely to retrench soon.


84 Responses to “Thrashing Thursday”

  1. 1
    sane Says:

    Hey z,

    Did you mean a 65 to 90 injection on nat? 😛

    Sane

  2. 2
    zman Says:

    yes, sorry, thanks sane.

  3. 3
    Attacking Mid Says:

    Hey Big H, I sold my TSO puts yesterday at a loss and flipped to calls on your recommendation. What do I do now?

    😉 Just kiddin’ ya. I sold my puts at the open today for a tidy 67% gain. Will sit back and watch, but will probably not play TSO again in the near future.

    AM.

  4. 4
    zman Says:

    Pay the piper watch: The trick is to benefit from other people having their refineries down. SUN and TSO seemed to have played hooky that day at refinery camp. VLO got away with it b/c everybody knew it was their refinery that started the chain of dominoes that has yielded $3 gasoline at the pump.

    The refiners are now charging larger premiums between grades. Somebody please explain that one to me. Or better yet, call the attourney general. We used to see a dime between grades but now it’sa $0.15 to mid grade and another $0.20 to premium. That’s gouging. This is going to get press soon.

  5. 5
    zman Says:

    PQ – strong results – good guidance, stock starting to move back up.

  6. 6
    zman Says:

    SUN missed,

    WNR missed as well

    Can HOC be far behind? It’s not easy to trade but these guys have had a refinery problem going on for aw quite some time now. They’re tiny (that refinery VLO sold yesterday is bigger than their entire operation) and and they trading at a 14x fwd multiple with the group close to 8 to 10x. They report May 8.

  7. 7
    zman Says:

    VLO up now!!!

  8. 8
    zman Says:

    TSO down $8. Love to hear Cramer and the Fast Money guys tonight. Betting Cramer says its the first in a series of drops, and the FMF say to buy it now.

  9. 9
    Marie Says:

    Z- is TSO put still in play?

  10. 10
    J Says:

    Anyone hear about PPP being in play?

  11. 11
    zman Says:

    Thanks Nicky!!! Hope you made some cash.

    Now the question is what do the analysts, the ones who are still Buy rated, say tomorrow. I can’t see how an $8 drop gets Goldmann to updgrade but the miss may foster some additional downgrades.

    HOC looks vulnerable.

    I may add to my CHK calls if nat gas doesn’t fall too far apart on today’s injection.

  12. 12
    zman Says:

    Marie – I’m still loaded with strikes down in the $100 to $110 range which I won’t be adding to but am not rushing to sell this morning. I’m holding the $120s from yesterday as well. You can check my positions on the perf page to see where I’m at. It’s a few days out of date but I’ll updated after the gas number.

  13. 13
    zman Says:

    J – I’ll check. I say they were dumping their GOM shelf assets which is smart from a “fight the declines by punting the play ” perspective and it cuts their LOE.

  14. 14
    zman Says:

    87 Bcf

  15. 15
    zman Says:

    For those of you w/o live trading accouts, you can watch UNG to get an idea of how gas is holding up post report.

  16. 16
    zman Says:

    out of APC puts at $0.65

  17. 17
    zman Says:

    TUPP – how’s the silly put play on TSO now. LOL :-).

    VLO actually up today.

  18. 18
    Marie Says:

    VLO new 52 week high

  19. 19
    zman Says:

    Marie – Good point! Tupp, where are you Tupp?

    NFX starting to get that respect I was talking about. Up another 2%. Need to close above $46 before I’d call it a breakout.

  20. 20
    Stephen Says:

    Anyone follow the geophysical oil service companies CGV, DWSN, and PGS?

    Cramer called CGV and it is up 4.3% on the day.

  21. 21
    Big H Says:

    Yea Hey: Attacking Mid ,

    I never ever said buy calls, if I did I’m sure my post contained CLEAR EMOTION and just sarcasim at the run of the stk!

    And I also made a nice return at my first tso may 129 p’s

    and

    zman and co.

    as I said the first time I beorght puts, and I had to buy,

    well yesterday at the close based on what I was seeing and some gut feelings, I brought the 120’s may puts again…. at 2.8/2.85. sold at the open-

  22. 22
    zman Says:

    Stephen – I used to follow them. It’s times like these (high prices and icreasing drilling activity) that is very good to these companies. Some have libraries they sell and resell while all of them continuously gather more datasets. What was cramers tack?

    Big H – Congrats to you!

  23. 23
    Big H Says:

    Thank you. I was ticking some ABX calls tues, and see that your friend Phil is to, I think ABX looks very good here-

  24. 24
    sane Says:

    Late Wednesday, the Energy Department said it will “suspend direct purchases of oil for the SPR until at least the end of the summer-driving season,” Dow Jones Newswires reported. The purchases would’ve taken up to 129,033 barrels a day of crude oil off the market during a time when U.S. refiners boost production to meet peak summer demand, the report said.

    Sane

  25. 25
    Stephen Says:

    Cramer says CGV is best-of-breed is third biggest offshore geophysical surveyor behind the Chinese and a SLB subsidiary, and is biggest producer of seismic equipment with 60% market share.

    Also says that they will be opening up the Atlantic for drilling in 2011, and surveying should start in 2008, so plenty of demand.

    I’ve been eyeing up CGV and PGS, but had been waiting for a pull back.

  26. 26
    zman Says:

    Thanks Sane

    I wonder what tipped them off that it might be a good idea not to refill it right now???!!!

    Thanks Stephen, I may have to do some snooping around there.

  27. 27
    zman Says:

    TSO said on conf call they’ll be taking their recently purchased refinery in Los Angeles offline for upgrade/maintenance in May as soon as they take control of it May 11. It will keep the facility offline for the rest of May and into April.

    That’s put a spark back in gasoline prices. I guess the overhaul couldn’t wait??? It’s running now but you want to shut it down and clean it up before you put your logo on it??? That’s weak.

  28. 28
    zman Says:

    Actually it was already offline. Seems like a very long turn.

  29. 29
    lawdymama Says:

    Just another $10 and my TSO 105s will be ITM…

  30. 30
    Big H Says:

    My post from yesterday, funny thing happened as I was sending it, I clicked the sumbit botton, but for some reason MY full post was not typed in as i throught it was, you can see it at the end, ( mr.Ma) or something what I wanted to post was that MR MARKET THINKS TSO IS CHEEP AT YESTERDAYS PRICE AND THAT ALL THE BUYERS DO TO””‘

  31. 31
    lawdymama Says:

    and I’d like to thank Cramer for the CGV call. Nice financials and good outlook but I’ve been holding this for a couple of months and it’s gone nowhere.

  32. 32
    sane Says:

    z, TSO is just doing there part to support gas prices 😉

    Sane

  33. 33
    zman Says:

    TSO sees West Coast no longer having much of a seasonal weakness given chroniclily low west coast gas stocks

  34. 34
    zman Says:

    TSO in free fall post conference call.

  35. 35
    Big H Says:

    Sane . Z

    I was thinking about doing what no one would buying some XLE PUTS MAY 65ish, tommorow or monday, or tuesday IF the xle comples runs some more with buyers and gas, was thinking about doing it ahead of wendays eia numbers, I know it nuts and their could be a big surprise to pimp gas higher but it could go the other way too

  36. 36
    zman Says:

    Fast Money Five – Bollinger’s favorite idea has been TSO. Got to watch that show tonight.

    CHK drifting higher. Look at the interest on the May 35 CHK calls today!!! I added to my CHK June 35s at $1.85.

  37. 37
    Big H Says:

    OMG ! I JUST SHORTED GASIE JUST BROUGHT THE JUN 35 GDP PUT FOR .70!

    You know what I LOVE GDP and it has a lot of upside on the chart, I traded it long, and just rolled some profit into the put, thinking that if gas dose come in in time this will see 32 30 31, but if gas flys its done!

  38. 38
    zman Says:

    Just punted by TSO May 120s for $7, bought yesterday for $3.10.

  39. 39
    zman Says:

    GDP = goodrich petro?

  40. 40
    jon Says:

    TSO may be in a free-fall from the crazy high price, but wasn’t everyone saying it was overpriced when it passed $80? Hey guys, we’re paying $3.50 for unleaded out here in Seattle! TSO’s business isn’t so bad when they can sell less product and double earnings.

    Tonight Bolling will bring out his chart of gaso prices showing the peak in May every year and tell us that we can sell the refiners now.

    Also watch ALJ, his other favorite.

  41. 41
    zman Says:

    Hey, It’s a good company but in my opinion still an overpriced stock.

  42. 42
    zman Says:

    Wow! VLO up $0.80.

  43. 43
    jon Says:

    We can laugh at the Fast Money guys for pushing refiners but if we’d gone long TSO and ALJ when Bolling said so in Feb we’d be up only about 50%…

  44. 44
    Big H Says:

    GDP = goodrich petro? YES!

    and whats happening with oih and xle today that their getting brought/bids again? Is it the TSO refiner news? I have A really bad head cold here in NY, and cannot get into anything with a clogged brain??? TIA!

  45. 45
    zman Says:

    No it’s a very good point but my problem with them is the lack of numbers analysis. They see gaso go aup and cracks and say by the stock. I shorted the stock after the first big run and they kept pumping. Then I went long VLO and shorted more of the TSO. They’ll probably say buy more TSO tonight

  46. 46
    Sambone Says:

    CHK – My charts say $45.00, support $33.00. Next resistance is $40.00.

  47. 47
    Big H Says:

    OMG THe gulf coast ‘cains are comming early I just feel it in my bones! I AM LOADING ON GOLD CALLS ( BUILDING A POSTION A BIT AT A TIME LEGGING AND SPACING)

  48. 48
    Big H Says:

    By chance is weather in dallas tx causing any oil/gas price moves today?

  49. 49
    Jessy Says:

    Z, What do you think of PTEN?

    I am thinking of buying it. Any thoughts??

  50. 50
    zman Says:

    Thanks Sambone — just got to get through earnings unscathed tonight and then I agree. Working well so far today.

    No caines talk here!!! lol. I have a weatehr page just for you crazy caines talkers

  51. 51
    zman Says:

    PTEN – love it here. Chart’s great but strong n gas is the name of the game. Pressur epumping biz should be hitting aopn all cylinders as well.Thanks for pointing out to me! BRNC, PKD, too. I’ve had my head donw in refining and E&P land.

  52. 52
    zman Says:

    nat gas up on that data = short squeeze

  53. 53
    Kevin Says:

    Z,..how long are you planning on holding VLO? I picked up some cheap share in premarket at $72. I had to get back in with the refinery sale. GL

  54. 54
    zman Says:

    HAL will benefit on the rise in nat gas. SLB too but HAL’s been long term beat up.

    Out of COP puts at a nice ~50% loss at $1.30

  55. 55
    zman Says:

    Kevin – I’m playing it by ear. I think they’ve got a ways to appreciate but unfortunaely my position is a bit of a stretch for current prices (May $75 calls). I thinkking of closing soon (by tomorrow and going long more but in June)

  56. 56
    zman Says:

    Nicky – it was modestly bearish… kind of on top of analkyst estimates actually but their a squeeze on that large short position the CFTC numbers have been showing.

  57. 57
    zman Says:

    Who asked about Vaalco? Lawdy was that you? Ok if I get to it on the weekend, I’m fairly jammed for time and wouldn’t want to just wing something at you.

    Although, I like HLX down 6% today. That’s a very good company (with even better people at the top) getting unjustly whipped. I won’t touch it today but next week I’ll be keeping a weather eye.

  58. 58
    Big H Says:

    Zman and Co.

    don’t laugh my wanting to buy xle puts -way too early, made me do it! No i didn’t buy them , but i did but TSO MAY 115 calls @ 3.75, its a quick one, gas is still heading up/and has mo -plently lest , and they taking down the wst cost refinery will help gas. How long I stay i will know in a day , two maybe less!

  59. 59
    zman Says:

    Big H – hey, to each his own, I’ve been toying with the idea myself. I just think you could see a downgrade in the morning and this one migbht actually matter.

  60. 60
    Big H Says:

    ZMAN

  61. 61
    Big H Says:

    for some reason I’m having trouble posting, what I ment to say up their, was

    The downgrades came to mind about 3 minutes after I brought, I went to look at some analyst notes, and reliezed it will hppen tommorow, and I said to myself IDOT!

  62. 62
    Big H Says:

    Zman, but you were touing with the idea, why? whats your stratagy, just a flip/ your thinking to make you buy a tso call ?

  63. 63
    zman Says:

    Hey, maybe they’ll say $8 is enough and stop there. To me, the chart looks like its bound for at least $110.

  64. 64
    slm Says:

    Nat Gas short squeeze?

  65. 65
    Big H Says:

    true…….thats me….disipline out the window! any tips to streagthen my weak spot( I can’t wait thingy ) would help and be appricated!

  66. 66
    zman Says:

    slm – welcome!

    Yeah, I’ve been writing about the growing and now near record net short position as depicted in the CFTC numbers. I have to think that it’s lending support to nat gas prices.

  67. 67
    zman Says:

    Big H –

    My suggestion would be to get help from an option pro, which I am not. I know a thing or two about energy. I’d suggest going to philstockworld.com and reading some of the material there. I think they even have posts on discipline if you search the sight.

    Also, if things are going the way you want, ease back, paper trade 2 out of 3 ideas for month and gage in a spreadsheet how you’re really doing. Keep a trading journal. It really helps. Your reading mine write now. Wrinting down my ideas helps me organize and critique my them (and it helps my memory too as this site is fully searchable as well).

    The last thing is corny but true. No one ever lost money by not trading. Opportunity sure, but it wasn’t you’re money, it was the market’s money. So make some simple rules (or borrow from those who’ve gone done this road before you) and stick with them, modifying over time as necessary.

    Mine should be on the site and I have a page set up but it’s only a draft and I think it comes off aa a little pretentious since I know my situation and it has nothing to do with your situation etc, etc, etc… Maybe someday I’ll activate that page.

    Quick rules:
    1) Set stops and stick with them – I violate this one all the time
    2) Scale in – never go for perfect timing with all the cash you want to place (bet ) on a position. I usually go in 20 to 25% at a time. (When I say 2x position that means I just took half of what intend on taking down…although that number can change as the trade draws out)
    3) Have in mind where you think the stock is going near term and only let winners run with a non hard stop trailing them
    4) never worry about what price you got in for – until you’ve sold. Sounds strange but all the talk of % gain is just me patting myself on the back. It’s not how I trade. The market doesn’t care at what level you bought a stock so trying to get even is not really very logical.
    5) if you wouldn’t make the trade again today you should probably sell. I often make trades early, like TSO and get beat up but I have a target date, in this case earnings + a few other items, that’s on my mind.
    6) never be afraid to change your position and alway be open to questioning your thinking.

    Jeez that sounded pretentious…

  68. 68
    zman Says:

    sorry meant to say “if things are not going the way you want”

  69. 69
    zman Says:

    here’s a great one I live by from PSW: “when in doubt, sell half”

  70. 70
    slm Says:

    I wonder about the CFTC numers though, they don’t include all of the swaps done driectly with banks and on ICE. I do all of my gas trades through a bank, uless they lay my position off on the NYMEX, it will never show up, correct?

  71. 71
    Big H Says:

    Zman, Thanks for your time and effort, your advice is sage, its 100% on the mark, and at this juncture for me I wa goining ti start to work on my discipline,(bad spell sorry )… and use some of what you say if not all, I will use all of what you say it was well put and fits in with what I wanted to do, you just vadilated it and made it easy…I will keep you poeted, but I can still do my thing just wanting to get better at certain weak spots….we are always looking to grwo in this game 1

  72. 72
    Big H Says:

    I got to say, by the looks of trading now at the EOD, this XLE complex BS looks tired….

  73. 73
    zman Says:

    slm – I would think you’re covered as you bank is a reporting entity. I could however be wrong on that. ICE is a differnet matter and they are definitely going to dilute the usefullness of the CFTC numbers a time passes. Still, I like to see what the specs on NYMEX are.

  74. 74
    Big H Says:

    II could be wrong. But I think this hole OIH thing is getting streached, SHORT TERM I MEAN AT LEAST, if theirs not another bump in gas or more more bullishness on the group, before next weeks numbers I think we see selling some time soon …

  75. 75
    lawdymama Says:

    Z – yes, that was me asking about Vaalco (EGY). And anytime is fine; I’m holding a few shares but not planning a immediate move on it. I’ve followed that stock for a year or so and they seem well-positioned – lots of cash, decent if declining reserves – but, at the same time, the stock isn’t going anywhere and their earnings are mediocre (that said, at least they have earnings…). Appreciate your thoughts.

  76. 76
    lawdymama Says:

    I always enjoy watching a stock in the last 10 minutes of the day…to see if there are people on the sideline waiting to get in or vice-versa. I don’t know if there’s any scientific basis in that, and it’s more of a comfort thing than something I use to make decisions. After a day like today, I could easily see people rushing to pick up some TSO at the close, figuring that there had to be a bounce tomorrow. But…it dropped another $0.40 in the last 10 minutes. For a $115 stock, that’s not a lot but, then again, it didn’t go up. So maybe there’s some more downside opportunity left.

  77. 77
    Big H Says:

    Hey , U BET THEIR IS I BROUGHT 115MAY CALLS TODAY_

  78. 78
    lawdymama Says:

    CHK beat the non-gaap estimate but the after-market doesn’t seem to be treating them well. Maybe it’s the old “mark to market” psuedo impact on earnings.

  79. 79
    Big H Says:

    http://cgi.ebay.com/ebaymotors/ws/eBayISAPI.dll?ViewItem&ih=015&sspagename=STRK%3AMEWA%3AIT&viewitem=&item=250108256198&rd=1,1

  80. 80
    Big H Says:

    lol,on that charger, the Duke is selling a painted shell, with a motor, and his name Glee….

  81. 81
    zman Says:

    Hey gang, thanks for all the comments today. lively talk is good talk.

    the options postions are update on the zeb perf page so you can see exactly what I’m in.

    CHK is taking a drubbing in the AH. We’ll see hou it looks in the morning. but I’m likely to listen to the cc before adding or substracting unless the stock gets really stupid.

  82. 82
    T-Tupp Says:

    z- you email me that???

  83. 83
    Kevin Says:

    Z,…CHK management team strikes again. They seem to find a way to mess things up. GL

  84. 84
    Kevin Says:

    Oh noooo,..Cramer is bullish on VLO. That’s NOT good, run could be over for awhile guys.

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