01
Jun

Hurricane Friday!!!

Print Friendly

Topics in today's post:

1) Natural Gas Review

2) PSW/ZMAN Radio

3) Oil Review

4) Holdings Watch -liquidation mode.

5) (END) News

The title refers not to stormy weather but what I'll be drinking after the close. While that won't be a record we did set a new one yesterday. The 107 Bcf natural gas injection was the largest on record for that week in history. To be clear, I'm not gripped with bearish thoughts for the gas markets at present.  I'm just pointing out that we're seeing some sizable injections with all this mild early summer weather and greater Tx production and resurgent imports yada, yada, yada. Natural gas prices are likely to remain in a trading range awaiting the first real blow in the Gulf.

 Natural Gas Report Review:

  • We got a 107 Bcf injection versus my expectation of 110 to 115.
  • Gas Inventories Are Now 22% Above The Five Year Average,
  • And Only 8% Below Year Ago Levels.
    • Storage as of May 25, 2007: 2,053 Bcf
    • Max storage for this week in history: 2,243 Bcf (2006). At present gas storage is at it’s 2nd highest level in history for this date.
    • We are now down 8% (190 Bcf) relative to year ago storage levels. Due to the larger injection this past week relative to the year ago comparable week we cut the YoY deficit by another 2% (see second chart below). As you can see in the chart, the YoY deficit has fallen pretty sharply from five weeks ago when it stood at a bulging 16%.
    • We are now 22% (367 Bcf) above the 5 year average which includes 2006’s record levels (see third chart below).

    Looking Ahead:

    Here’s some quick stats for the period running from the end of the second week in May through the end of October (the traditional end of the injection season). I’ve included both the three and ten year averages for your viewing pleasure.

    natural-gas-storage-table-053107.jpg

    Aside from 2006, this is the earliest we've crested the 2 Tcf mark by two weeks.

    gas-storage-053107.jpg

    PSW/ZMAN Radio Watch: I got about 2 minutes notice and was late popping into the interview as such but we had some good, live picks as the two EIA reports hit the wires. Listen to the replay . This may become a weekly feature at MW1.com; I'll keep you posted.

    Oil Review: Generally bearish. Oil rallied, slumped then rallied hard to close at just over $64.

    • Crude: 2 million barrel draw vs a 700,000 expected build. Some commentators and journalist blamed the late day rally in crude prices on the unexpected draw in crude stocks. I say you can't have it both ways. Either crude is high because gasoline is high or vice versa. Clearly from the chart below there is plenty of black gold splashing about.

    crude-stocks-053107.jpg

    • Gasoline: 1.3 million barrel BUILD - in line except for a few perma bulls who expected as much as a 2 mm bbs draw.
    • Production Continued To Rise. Despite a slight dip in utilization rates to 91.1% gasoline production rose 55,000 bpd to 9.258 mm bpd. Note from the following chart that this is the highest level of production for this week in the past five years.

    gas-production-053107.jpg

    • Imports Hit Third Highest Level On Record. A week ago I wrote that perhaps a glitch in the system had caused a fleeting decline in imports. I expected them to ramp up in this week's report and boy did they hitting a high for 2007 and the third highest level of all time.

    gaso-imports-053107.jpg

    • Demand - Flattening Trend Continues

    gaso-demand-053107.jpg

    • Reformulated Gas Production Has Really Taken Off  In The Last Few Weeks. Check out that hockey stick!

    rbob-prod-053107.jpg

    • Stocks Remain Low But They're Improving

    gaso-stocks-053107.jpg

     Odds & Ends:

    Analyst Watch: nada

    Nigeria Watch: Shell forced to shutter another 150,000 bopd today due to unrest. This brings total shutterings in the country to 900,000 bopd or ~25% of capacity.

    OPEC Watch: OPEC 10 production rose 110,000 bopd in May  from April. According to Reuters higher output from Algeria and the UAE offset more than offset lower production from Nigeria. Cheat, cheat, cheat.

    Holdings Watch: I'm in liquidation mode for my trip mid June. I neglected to post the May 30th trades in yesterday's post so they are included here.

    Calls:

    May 30th Sold

    • 1/3 of (HK) position in June $12.50 Calls at $3.60 for 57% gain on a position held since April 23.
    • (NFX) June $45 sold for $3.60 for a 39% gain in 1x position held since May 14th.
    • (NE) June 90s sold for 3.60 for an average gain of 55% in a 3x position that was accumulated beginning early May.

    May 31: Sold

    • (GRP) June 55 Calls for $2.85. Nice  55% gain on my 7 day 2x position.
    • (HAL) June $35 Calls for $1.40. 155% gain  on 1x position held since May 11th.

    Puts: No action. Still holding small (TSO) and (MRO) positions

    Stocks: No action.

    END Update: PR regarding Enoch start up.

    • Enoch development online at 1,000 bopd net. 2007 full company guidance remained unchanged 8,800 to 9,200 Boepd.
    • My sense is that they'll be reluctantly raising production guidance at the 2Q conference call.
    • Recall that they produced just over 10,100 boepd in 1Q and even with declines (which aren't occuring everywhere as fast as expected) they just added a 1,000 bopd to the mix but 2007 guidance remains around 8,800-9,200. Talk about under promise and over deliver.
    • One last thing. The CFO resigned to join up with Dan Pickering's new bank and work with an old Goldman buddy. If the stock takes any heat for this I'd add more.
    • Balgownie should be at TD in the next two weeks. I think your risk is a decline to $1.75 on a miss with reward of a move to $2.50 with success. Balgownie is a size targewhich management puts a 1 in 3 chance of success on. This is exploration and no reason to buy a stock. One in three is pretty good for the N. Sea but the safer route is to take an opening position and reaccess after the well is announced. Either way, the stock is not garnering the attention their progress over a short time warrents.

    69 Responses to “Hurricane Friday!!!”

    1. 1
      JTC Says:

      ZMAN,

      Where do you get your production and import data for natural gas? Do you find it on the web?

      Thanks,

      JTC

    2. 2
      zman Says:

      Production: EIA, Texas RRC, various state O&G commissions.

      Import: monthly from EIA, weekly I get from Apache who I believe get it from O&G Investor or one of the other industry pubs.

      Part of the reason for considering going pay around here is access to data of the later kind which costs.

    3. 3
      zman Says:

      NFX on fire…something’s up. Up 3% on the open with no news is not like them.

    4. 4
      zman Says:

      GST had another nice deep Bosier well with 100 feet of pay and expects better results from this one than prior wells. They’re setting production casing and we’ll know if they right in 30 days. Pretty likely they are.

    5. 5
      zman Says:

      NFX up almost 5% and over $50

    6. 6
      zman Says:

      NFX: up over 5%. I’d say we have either assets sold in North Sea, China or both. They’re setting themselves up to get taken out. Massive call volume in the June $50 and $55s

    7. 7
      cowboy Says:

      Z – just listened to the podcast of your interview yesterday. Very enjoyable and insightful.

    8. 8
      zman Says:

      NFX now up 7.5% Is anybody out there today?

    9. 9
      zman Says:

      Cowboy – I must have sounded like an idiot b/c everybody’s taken the day off the site today! NFX is out of hand. Call volume has doubled to over 2K contracts in both the $50 and $55 June calls. This stock simply doesn’t trade like this. They’re about due for their monthly @NFX update, bet it’s next week…if they’re still their own company then!

    10. 10
      H Says:

      Congratulations To Zman on the radio show- I enjoyed hearing you live, you sounded very professional, easy to understand what you were explaining and the knowladge was an eduction for any investor/ trader! can I duck out now-

    11. 11
      cowboy Says:

      NFX – I’m guessing that I missed the train on this one. Not sure I want to chase.

    12. 12
      Sambone Says:

      Z, Your Da man. Loved the radio.

    13. 13
      zman Says:

      Cowboy – Hear ya, I’m out for now as I was liquidating all my positions for my trip mid month. I’ll own some $50s and may a tine $55 position before the calls on a “merger Monday”. Not enough to hurt if it fails but enough to have some fun if it actually happens.

      Thanks H and Sambone. It appears they want to build a show around us every Wednesday at 9:20 CST. Next time we’ll be a little more prepared and you can watch the show with pre prepared graphs on their tv show style internet broadcast.

    14. 14
      Sambone Says:

      Will there be a link? and if so, can you post it?

    15. 15
      zman Says:

      NFX $50 Calls taken for $2.15
      NFX $55 trying at $0.55

    16. 16
      Gas Guy Says:

      hey Z. Thanks for your continued work.

      Question…What is your take on UNG?

      I HATE USO. But I have a sick interest in playing the probable valuation surge on this if we move out into steep backwardation.

      Thoughts?

    17. 17
      zman Says:

      Sambone, this is the archive where they’ll keep the podcasts.
      http://feeds.mn1.com/coffey_phil_053107_1.htm

      I think the live event will be on the main part of mn1.com

    18. 18
      zman Says:

      Gas Guy,

      Re UNG – I think it, like USO is set up to lose money but it’s trend to roll out ETFs and I like having it as a live quote on my regular trading platform. I would not but it nor will I play options on it as they’re currently very thin.

    19. 19
      H Says:

      Hey z, The only point i can make for the show, is that you guys , mainly Phil have to be more subtale with your trading calls, P has to explain that an option rec can move very fast and hard against you– I know it takes the fun out of the talk but he really has to inform the listerners that they are not for the faint oh heart or grannys type thing– otherwise some listerners may get burned, and what if they track you calls from week to week, look at phils calls yesterday… RSD.A 75 P’s and xle 67 puts…

    20. 20
      H Says:

      z R thoese jun or july on the nfx?

    21. 21
      zman Says:

      June and I’d add that those can definitely burn you! lol.

    22. 22
      H Says:

      Missed the run, not chasing, just asking, Good luck~

    23. 23
      zman Says:

      got my July $55 for $0.55. Amazing how the spreads is on those right now and damn liquid!

      NFX back up 8%+ now at $52

    24. 24
      Stephen Says:

      There must be some news to back up the move on NFX. Just have to figure out what the news is.

      I’ve been busy looking at some pharma stocks in the run up to the cancer conferences.

    25. 25
      zman Says:

      PQ up another 1,5%. and another week goes by the board (bored) with no well news.

    26. 26
      zman Says:

      NFX – rumor that their China stuff and potentially there N. Sea assets have been sold. Of course, nothing substantiated.

    27. 27
      zman Says:

      Agreed WTI probably has a little further to run up.

      MRO and TSO. At this point I’m waiting for a group pullback. We’ll see.

    28. 28
      H Says:

      Zman, if earnings were released for the 2nd Q today on TSO and MRO- with flat guildance to slighty up/down….What do you think would happen to the stocks?

    29. 29
      zman Says:

      TSO – would probably fall.

      MRO – highly dependent on what they say about exploration. they’ve been hitting em out of the park.

    30. 30
      Popeye Says:

      Crude looking strong.

    31. 31
      H Says:

      THANK YOU Z MAN As Always!

    32. 32
      H Says:

      Popeye, howdo you like the Green leafy stuff?

    33. 33
      zman Says:

      Nicky can I get your RBOB thoughts? This looks like the last two times we got seemingly bearish/reversal type EIA reports and gas ran up following a dip.

    34. 34
      Popeye Says:

      H, I refuse to answer that question on the grounds of self incrimination.

    35. 35
      zman Says:

      You know it’s a slow news day when the discovery of 2,100 year old melon makes the top news headline on Yahoo.

    36. 36
      zman Says:

      Fred Thompson to join race:

      http://www.politico.com/news/stories/0507/4243.html

    37. 37
      H Says:

      P-LOL

      Z- Sounds Yummy~

      and

      I am in MRO JUN 125 P’s at 2.10- may dump today if I can get .50

    38. 38
      H Says:

      VLO 75 JUN PUT at 110 in ..

    39. 39
      H Says:

      HELLO_______: ) Cute HUH?

    40. 40
      Sambone Says:

      Looks like we have a votex in the GOM

      http://vortex.accuweather.com/adc2004/pub/includes/columns/community/2007/isavfls601a.gif

      Look at bottom left hand corner, water temp about 83 degrees

    41. 41
      Popeye Says:

      I wonder if that is what is driving crude today.

    42. 42
      H Says:

      I think action in the middle east, plus the numbers a preived as not enough to be bearish…plus you got weather…

    43. 43
      H Says:

      Yup…looks like a rally into the close, or at least I think their will be buying today, after 3pm…I’m out of whatever puts I brought for a tiny tniy its bitzie loss!

    44. 44
      H Says:

      Nicky–HI

      N- Whats a “wave move” or a wave ? and it looks like it wants to correct to the upside! numbers are being looked in the pits as bullish-

    45. 45
      H Says:

      I would say a pullback could happen, but the reason for a rally would also incluse @nd Q earnings…in both OIH and Xle- Y/Y 2Q earnings will be much higher then curent expections….what say to that?

    46. 46
      homan Says:

      hey zman way to tell everyone to be out of tso your a real genius. I mean who needs a double

    47. 47
      H Says:

      whats the guy above me? and whats he yapping about/ very in-co-hear-int!

    48. 48
      H Says:

      N whats a wave and a wave move?

    49. 49
      Sambone Says:

      H – See this http://www.elliottwave.com/

    50. 50
      john Says:

      Is there a link for the price of NG for the N.Sea. TIA

    51. 51
      zman Says:

      Went for a swim, just got back.

      John – N. Sea gas is trading about $4.50 right now. I don’t have a link but it’s been down there for some time. Got that number from END last night.

      Sambone – nice animated of that swirl. Still a low pressure system expected to cause rain over Fl and nothing more I take it.

      Homan – alway nice to get sarcasm on a Friday. What’s that handle stand for?

      Nicky – thanks on the RBOB. I agree on the doubtful cycle top at that time.

    52. 52
      zman Says:

      Hey Homan – here’s some for you. If you haven’t taken the opportunity to vote for this site as best business blog, the button is in the upper right hand corner of the site. lol.

    53. 53
      zman Says:

      NFX – Looks like people want to be in for the open on Monday. Shooting for a HOD close.

    54. 54
      Popeye Says:

      I would have expected the OIH to more closely follow the price of crude than it did today. Such is life.

    55. 55
      zman Says:

      Oh I just saw, didn’t hit my trading system, NFX announced an hour before the close startup of the ABU field in Malaysia, and that Wrigley is close and that the proposed sale of assets will occur in the 3Q. Very odd headline says its a reuters updated story but I don’t see anything today with an earlier time stamp.

      The two developments were part of a three pronged mantra the company had for 2007 and as such are very much expected. Being able to say the asset sale will go forward in 3Q is a big deal since there was no certainty they could get a good price for their N. Sea stuff (nor Bohai Bay for that matter).

    56. 56
      Jbosh Says:

      Good info on the drillers.

      Hercules Offshore Inc. (HERO) expected a quick recovery in natural gas exploration at the shallow end of the Gulf of Mexico when it launched a $2.4 billion bid in March to buy the largest drilling fleet in the area. The deal, to acquire Todco (THE), received regulatory approval on Wednesday, and will be put to a shareholder vote in July. But while the 2007 gas price outlook has actually improved since

      the deal was announced, it hasn’t translated into an increased drilling in the shallow-water U.S. Gulf. Analysts and jackup operators have pushed back hopes of a summer rebound to late fall, or even early 2008.

    57. 57
      zman Says:

      Thanks Jbosh, nice info. Shallow water activity has been down. Maybe recovery is set for late ’07?

    58. 58
      Jbosh Says:

      Driller info was from

      http://www.rigzone.com

    59. 59
      zman Says:

      Wow Nicky – thanks, maybe that’ll soften prices up a bit at the pump!

      Also saw saw Barry weakened to a tropical depression.

    60. 60
      zman Says:

      Si senora, Barry, he is all wet but no impact.

    61. 61
      scoop006 Says:

      Z- In your opinion is it plausible that NBL would tender for NFX ?

    62. 62
      zman Says:

      Got a note saying that’s what the H. Chronicle is “guessing”. It’s certainly plausible.

      1) They could certainly do it.
      2) The fit would be good and require little paring unlike some E&Ps I can think of.
      3) I’d hate to see them go for under $65 given the potential both onshore and in the DW GOM.
      4) thought it was funny to see a story out on Friday afternoon about the Abu field startup with no PR and no @NFX from the company.

    63. 63
      zman Says:

      Just red the HC article. Not much there. “investors” think it’s NBL, that’s all. Guess we’ll know Monday.

    64. 64
      scoop006 Says:

      I heard NBL will offer one NBL share for each NFX share. Do you see any competing higher offers if this happens.?

    65. 65
      zman Says:

      Scoop006. When you put it that way the numbers work pretty nicely.

      Based on Friday’s NBL close of $63.17 and NFX’s close of %52.61 that gives you exactly a 20% premium (personally I think that premium is a bit light since they’re undervalued and I’d hope they work out something better). I assume they’d just assume the debt. If it is a 1 for 1 you’re about 10% dilutive on this year’s and next year’s earnings if consensus is close to accurate for both. Their debt to total cap is pretty low so I’d bet they throw in a little cash to make the dilution a little more palatable for this year’s numbers and then talk about synergistic opportunities for cost cutting to get ’08 acretive.

      There’s not a big history of queering other guys’ deals in E&P. So I would not expect a white knight.

    66. 66
      scoop006 Says:

      Thank you for your informative response.
      I purchased 5o July 55 opt. contracts @.70 FRI.AM AND SOLD 25 CONTRACTS @$1.60 at Fri.’s close.
      Wish all my speculative plays were as profitable.
      If you decide to go the subscription route I’m in.
      Thanks again for sharing your knowledge.

      PS I’m still holding June MRO 120 puts and June VLO 75 puts. Any advise?

    67. 67
      zman Says:

      I’d be mad at myself over the MRO’s except that I’m only 1x there and at this point I’m just waiting for a bad day in the group to get out, not to DD. They’ve had an incredible string of hits of late, don’t want to call it luck but man, they’re on fire. I tried to sell, missed and then got busy doing other stuff when I should have been setting a stop the next day. NFX action won’t help Monday as the group rallies madly if it turns out to be a true rumor.

      VLO I like long. Cheap to group and the tightness in the gulf coast and mid-con will likely last long than that of the coasts. I’d say TSO or HOC in a short against a VLO long but I’m gun shy on TSO and HOC options stink on the spread and OI. I’m like Frontier against VLO though, pricey little dude.

      Anyway, my mindset is a bit skewed this month as I’m liquidating all options for a trip mid month where I’ll be completely out of touch. By the way, thanks for vote of confidence. Don’t forget to vote for this site at upper right!

    68. 68
      scoop006 Says:

      voted last week. is 1x = to one contract?

    69. 69
      zman Says:

      Hardly ever unless I don’t get a complete fill. It’s usually an even number and often 4 to 10 contracts. Then 2x means I doubled up, down, sideways, etc.

      I sometimes open with a 2x if I’m confident in more than just the idea or the timing. 3x triple, sometimes you’ll see a 4x and 5x although it’s pretty rare and probably a sign I’m doubling down (which often ends badly).

    Leave a Reply

    You must be logged in to post a comment.

    Zman’s Energy Brain ~ oil, gas, stocks, etc… is is proudly powered by Wordpress
    Navigation Theme by GPS Gazette

    s2Member®
    Get Adobe Flash player
    %d bloggers like this: