07
May

Monday Morning – Earnings in Earnest Week 2 (the small fry reporteth)

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If you missed the weekend wrap post, stop reading and click this link. Done? Ok, on with the show!

Oil Continues To Slip. June Crude fell every day last week and now has its sites set firmly on $60. Sorry Phil Flynn, your $68, 10 day target just wasn't meant to be. Nor was the flip back to the normal Brent discount to WTI (that'll take months, not weeks). The fact that WTI is an inconsequential scrap of production and that we need to find a different standard, a world oil price, is an entirely different matter. But that's ok, I'm sure CNBC won't mention it and will get you in front of a camera to defend oil before it falls to far.

  • Opec Watch: Cheating. April production was up 50,000 bopd (0.2%) for the Opec 12 to 30 mm bopd according to Bloomberg. I've been waiting for a retrenchment in (TK) since I sold my calls over the second half of April. Between incremental supplies from Nigeria and  cheating on the part of the other OPEC countries "bound" by quotas the tanker routes are going to be increasingly crowded.
  • Nigeria Watch: More of the same. More kidnappings over the weekend including a British worker off a (RIG) rig, 12 workers at a power plant in the delta, and a protest that shut down a Chevron flow station which feeds a 160,000 bopd export terminal. Meanwhile, (AXC.to), by employing predominantly domestic workers gingerly sidesteps most of the hubbub here (and the stock continues to edge higher but still remains woefully undervalued).

Even RBOB is slipping (down another two cents) in pre market trading this morning. I'm sticking to my prediction of an earlier than normal peak in gasoline this year as we've come "too far, too fast" for the fundamentals.

Natural Gas:  Remains Lofty. Yes we have a lot it in storage. Yes production is rising not only in Tx, Wy, Ok and in places not conventionally normally known for their gassiness but also in the Gulf of Mexico (I'd add with the benefit of a fairly lofty gas rig count). But then you've got an expected decline in Canadian gas imports and another increase in volumes sent south of the border to feed gas-fired generators in Mexico. These two will likely offset the expected surge in LNG imports this year (maybe doubling it). However, industrial demand, in the form of ehtanol and fertilizer consumption my tick up a bit this year, so, relative to recent years the supply demand balance should be tightening. I'll be doing an update piece on natural gas soon and will let you know.

"Everytime I Think I'm Out ...They Pull Me Back In."Another item supporting gas is that everyone (everyone with money on the line that is) believes gas will fall as evidenced by the record short position amongst speculators.  Each time gas has started to correct over the past two weeks it has been met with fervent buying (short covering?). See my latest thougts on gas storage here.

Odds & EndsEarnings Watch:

  • Monday, May 7: (BDE), (CRK), (FST)
  • Tuesday, May 8: (ATW), (BBG), (BRNC), (HOC), (PKD), (SGY),
  • Wednesday, May 9:  (CRZO),  (FTO), (GDP), (PEIX),
  • Thursday, May 10:  (HK),
  • Friday, May 11:  (PBR)

Analyst Watch: (DPTR) picked up as a Buy at Deutsche, (RIG) downgraded to neutral at AG Edwards. (CHK) price target increased from $35 to $38 at Calyon who rates the stock "add" (who along with a lot of analysts are missing the boat here). Add because you think it's worht $2.50 more than you did Friday when it was $1+ over your target? If you're not going to keep up with your prices target don't bother.

How Soon Our Memory Fades Watch: (BRK) has cut it's exposure to hurricane losses by half this year due to falling catastrophe reinsurance prices.

BPI Energy Misses The Mark At Shelby Pilot. That's Ok, it's good news if you didn't get in when I first wrote up this little gem back in early April. Click here for a snapshot of company. (BPG) will continue to monitor one of it's pilot CBM projects that so far has shown lower coal thickness and gas content than it's other core plays in the Illinois Basin. The pilot represents a fraction of the company's acreage and if the news knocks the stock for a loop I'll be looking at taking a toehold here. Remember that management and science here are world class and their decision to delay expending capital on what may be a marginal pilot speaks volumes about discipline/forward thinking.

28 Responses to “Monday Morning – Earnings in Earnest Week 2 (the small fry reporteth)”

  1. 1
    zman Says:

    GST quietly climbing in a down group environment.

    BPG knocked for that loop this morning. Down 10%. watching and waiting.

  2. 2
    zman Says:

    Option positions updated on ZEB Performance page:

    http://zmansenergybrain.com/?page_id=72

  3. 3
    zman Says:

    BPG down 20%, hovering at a buck a share.

  4. 4
    Loren Says:

    From Stratfor, sub req…

    “May 07, 2007 1211 GMT
    Villagers protesting at Chevron’s Ebite flow station in Nigeria’s western Niger Delta on May 7 forced the company to shut down production. The villagers, waving sticks and machetes, were protesting alleged delays in compensation for an oil spill. The flow station is the feed point for the Escravos export terminal, which handles 160,000 barrels per day.”

  5. 5
    zman Says:

    BPG down 30%

  6. 6
    Loren Says:

    Actually, that’s just from a situation report, no sub required to see that.

  7. 7
    Sambone Says:

    TLM – Positive “Cup and handle” chart. Negative is relative strength is 67, low volume on the breakout last week,and forecasting declining earnings. Watching it close.

  8. 8
    zman Says:

    Loren – Thanks for the tip! Stratfor looks interesting. I’ll bookmark.

    Morning Sambone. – TLM = great company, has always traded at a discount. It’s been heavily rumored to be taken out 2 weeks ago. I’d blame the low volume last week on the fact that it wasn’t acquired immediately. Thanks.

  9. 9
    p.wilmington Says:

    For my relative, who has invested heavily in BPG, I hope you are right. But I have stayed away, for the following –

    uncertainty that the Illinois basis will be cost-effective for CBM;

    BPI’s history of lawsuits – most of their only producing area, Delta, was lost in a lawsuit;

    only 10 million in the till as of 1/31/7 and probably less than $5 million right now;

    no definitive prospect of another producing property on the horizon.

  10. 10
    zman Says:

    P – Your relative should have cashed on the April/May double. lol.

    Their core appears very attactive from an F&D standpoint.

    Didn’t the lawsuit stemmed from before the new influx of talent arrived? Is there anything still going on?

  11. 11
    zman Says:

    Bad news for some is good news for others:

    Natural gas pipeline explodes in Ukraiine shutting off gas to Europe. Maybe this will get UK gas prices out of the cellar for ZEB holdings END and NFX.

  12. 12
    p.wilmington Says:

    Z – First lawsuit involved the same management, but without the current technical team – Craddock, et.al.

    They are in another recent lawsuit with Drummond Coal over acreage in their “Northern Basin”. Regarding this last lawsuit, you would have never known about it, unless you read SEC reports. So, management has been somewhat less than forthcoming.

  13. 13
    zman Says:

    Ahhh, thanks P. I assume they said the usual garbage about it having no merit, etc,etc?

  14. 14
    zman Says:

    Gasoline off $0.06. Chavez is exporting again. More refineries back on line and an expected build in gasoline stocks this week. Cracks are coming down.

  15. 15
    zman Says:

    TK !!!!!!

  16. 16
    T-Tupp Says:

    why has tk taken off like that z-man?

  17. 17
    zman Says:

    Morning Tupp: Two words: Quota cheating. and Vz shipping gasoline again. Rates have been up.

    Did you send that password?

  18. 18
    zman Says:

    mulling June puts on SU – I know it’s been rumored as a takout but the lackluster prod guidance, the continuing problems, falling crude and elevated gas prices do not bode well for earings.

  19. 19
    Attacking Mid Says:

    I took May SU puts this morning, watched the stock drop nicely, drove to my office only to find the stock had rebounded. Am only down a smidgeon at the moment.

    I took the May 85’s with minimal time value in them.

    I wasn’t going to post this, as….. you know what happens whenever I post one of my trades…..

    AM.

  20. 20
    zman Says:

    AM – What up with that property BQI is accelerating development of?

    Thanks for the tip on SU but it’s too late, I in an opener in the SU80 June puts.

  21. 21
    Attacking Mid Says:

    On BQI – nothing’s really changed – I just think Chris Hopkins is trying to alleviate some of the concerns that have contributed to keeping the stock price depressed (along with me). I still believe this thing will be a big winner in the long run. I just would like to see it become a small winner in the short run!

    As I’ve said in the past….. stick some shares in your long term account, and I think you’ll have a good chance for excellent gains.

    AM.

  22. 22
    zman Says:

    Thanks AM – I’m still watching for a play, I’d like oil and the stock to cooperqte for a call entry when its trading around $3.

  23. 23
    slm Says:

    Are there any estimates for when BQI will start real commercial development. I saw that they are accelerating the pace of developement, but is any real cashflow 5 years out?

  24. 24
    zman Says:

    EGY – for LM

    Not a bad company, probably grows production 20+% this year based on recent new field hookup. They have just under a 30% interest in two fields on one block in Gabon and they operate. My favorite Swiss E&P, ACT.to has a slightly larger interest than EGY in one of the two fields.

    Balance sheet looks good, lots of cash, little debt.

    Reserve replacement has been negative which combined with 4Q down production probably is what has been pressuring the stock.

    Production comes via tieback to an FPSO so you have some lifting – timing risk which may provide good entries if they are late lifting for a quarter.

    Next big growth doesn’t come until early 2008 (Ebouri discovery) but you may have some exploration catalyst off Gabon and Angola but no increases in production beyond the ramp of their second field (Avouma) this year.

    It’s interesting, I plan to do more work on it and will listen to their 1Q call this week (May 10) should be interesting with regard to the new field and it’s 2 waterless horizontal wells.

    The company has a few wells along in Texas and in the GOM which I assume are legacy assets as there seems to be no plan for advancing activity in the states. I’d sell em but maybe they carry sentimental value or allow for some data access or some such.

  25. 25
    zman Says:

    Gotta late lunch, back in an hour.

  26. 26
    T-Tupp Says:

    outlook is giving me a prob;em, you didnt get my email?

  27. 27
    zman Says:

    Sorry no.

  28. 28
    rocket french Says:

    rocket french

    rocket french

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