08
Jun

TGIF – The End For (END)?…No, Just A Gut Check

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I'll get to END and their miss at Balgownie in a minute. First, the Gas Review:

Gas Inventory Update: My estimate: 90 -110 Bcf Injection. Actual 110. I was a little surprised by the number given the dip in both LNG and Canadian imports last week and the slightly warmer weather. However, the Street was clustered in a range of 105 to 115 and consensus was said to be 107 Bcf just before the number was released but yesterday I wrote:

Since analysts are setting the mark pretty high this week I’d say the over/under for gas is at least 105. Comment: The 107 Bcf number caused gas to tumble $0.255, or 3.2% to $7.825. So the number may have been expected but it certainly wasn't welcomed.

Most Important Chart of the Day Watch: Injections Continue To Run High. Triple digit and rising with lower imports and more heat. Hmmm. Something tells me those Texas figures for March that showed a 1.8 Bcfgpd YoY rise look even higher now. Almost certainly Wyoming as well.

However, shorts be nimble, shorts be quick. The first sign of sub triple digit injections is likely to send gas right back above $8. Also, if prices fall to far, say to $7 which I really don't think will happen you'll start to see lower LNG imports and the whole scheme becomes a self correcting prophecy.

gas-injections-060107.jpg

Gas Inventories Are Now 21% Above The Five Year Average, But Only 7% Below Year Ago Levels.

  • Storage as of June 1, 2007: 2,163 Bcf (updated June 7, 2007).

gas-storage-060107.jpg

  • Max storage for this week in history: 2,320 Bcf (2006). At present gas storage is at it’s 2nd highest level in history for this date.
  • We are now down 7% (157 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 1%. As you can see in the chart, the YoY deficity has fallen pretty sharply from six weeks ago when it stood at a bulging 16%.
  • We are now 21% (379 Bcf) above the 5 year average which includes 2006’s record levels.

Here’s some quick stats for the period running from the end May through the end of October (the traditional end of the injection season).

gas-table-060707.jpg

Moving On To Oil and Products...

Oil Rallied On A Variety of Geopolitcal/Fear/Storm/Technical Concerns Yesterday. July crude advanced $0.97 to $67.93 yesterday as traders weighed news of a potential strike in the non export country of Brazil, the threat of Turkish Hordes, OPEC belligerence over U.S. ethanol aims, and the remnants of Gonu which closed Oman ports for a short time, shorter according to their operator than to CNBC , and restricted traffic through the Strait of Hormuz.

Gasoline Failed To Rally. An early rally in gasoline, brought about by the rising tide of oil failed before the close of trading with July crude closing essentially flat at $2.19. I still think it's going lower still as the YoY deficit, which has been behind the rally, continues to erode. That being said, EIA numbers tend to balance out along a linear path, and any one outlier, like the 3.5 million barrel build yesterday, often results in a corrective report in the subsequent week. Not that I mean we'll see a draw but you might see a much smaller build next week even as utilization rebounds. Which it looks like it should.

Odds & Ends

Analyst Watch: (END) - downgraded by Jp Morgan from Overweight to Underweight - this from an analyst who couldn't pronounce Balgownie on the last conference call, who didn't know if it was an oil or gas prospect and had the estimated reserve size off by a factor of 6. He was "betting" 2 rating levels on one well?! He must like to put the paycheck on the wheel when he goes to Vegas. (APC) upped to buy at Citi. FBR ups (PQ) price target from $14 to $16. (GRP) price target upped a few bucks at Stifel. Finally, BofA raised price targets for all of the coals. I've been looking at the coals again, especially with SO2 allowances trading so high fostering greater demand for more low sulfur Wyoming coal  but have not yet gotten the pullback I'd like to see.

END - Balgownie dry hole. They found 130 feet of pay in the targetted sand but the hydrocarbons present were of non-commerical quantity.

Now what?

  • They Move The Rig To The Emu Prospect. 25% interest in an estimated 38 mm boe reserve target. Spuds on the heels of Balgownie and takes about 45 day to reach TD. It’s a Johnston field analogue and development would be a multi well plan tied back to either nearby Babage or Johnston facilities. “A little higher risk than Balgownie.”
  • They report 2Q Numbers And Probably Raise 2007 Production Guidance.
  • Today only the miss matters and the stock is likely to trade well under $2 initially. I plan to wait and see how hard the selling is in the morning before committing further capital. If it get's blasted by some ridiculous amount, say dropping to $1.50 I'll be adding. I suspect the stock will be dead money after an initial recovery/dead cat bounce until earnings or Emu results, whichever come first.

Holdings Watch:

Calls:

  • (CRK) - got stopped out of my CRK postion for a 14% loss. I'd roll this to July or further out if I weren't headed out of town soon.
  • (HK) - sold half my June $12.50 puts for a 48% gain on a six week hold.

Puts: No action. (TSO) and (MRO) June 120 Put positions starting to wake up a little in this down market. I'll run away from (MRO) soon as it's just too strong/resilient and has been having too much exploration success.

Stocks: No action.

OPEC Production Increases Expected To Slow A Bit. From Upsteam ~

Roy Mason of consultancy Oil Movements estimated Opec seaborne exports will rise to 24.31 million barrels per day from 24.19 million bpd in the four weeks to 26 May as refineries step up fuel production to meet summer demand. "The increase is a seasonal thing but it is not very much," Mason said. "It's nothing like what happened this time last year." The forecast marks the fifth week that Oil Movements has reported a rise in shipments and suggests adherence by the producer's club to agreed supply curbs is slipping, Reuters reported. Comment: So they're still cheating on their quotas but the rate of cheating is slowing.

 

 

 

 

 

 

 

 

 

 

 

 

85 Responses to “TGIF – The End For (END)?…No, Just A Gut Check”

  1. 1
    zman Says:

    Art Papale – if you’ll register with the site I will send you an email. Thanks.

  2. 2
    zman Says:

    Oil and gasoline getting hit pretty hard early.

  3. 3
    zman Says:

    Cowboy – re TSO and other refiners. I think they’re rolling over with cracks. I still hold TSO puts but am not adding b/c of my trip so know that first things first. I may do a trade though b/c it’s a hard “habit” to fight but anything I do will be for a very quick turn. I like the pair of VLO longand the smaller ones short (FTO first, then HOC and WNR. TSO despite it’s recent tumble below $60 is still a favorite son of the Street and can turn on a dime and eat yours!

  4. 4
    zman Says:

    Morning N – I think RBOB tests that $2.11 level in coming days. Agree that distillates starting to look doubtful for a rally as well. With all that said, refer to comment 4 for my thoughts on refiners.

  5. 5
    bill fraser Says:

    >this from an analyst who couldn’t pronounce Balgownie

    does the analyst get credit that his sell was recomended at 2.10 even though no one can get that price

  6. 6
    T-Tupp Says:

    tso baby!ridin her down. nicky what are some key levels on this stock?

  7. 7
    zman Says:

    Bill – sure. Not to harp on Joe but he’s been an E&P analyst long enough to say that this is pretty rookie league behavior. Two ratings…are you trying to bash the stock?

  8. 8
    Stephen Says:

    END not down much at all, how can you explain that?

  9. 9
    bill fraser Says:

    I got out of END (5,000 at 1.98) only losing 2 cents

  10. 10
    zman Says:

    TSO down another 2%.

  11. 11
    zman Says:

    Stephen – it’s early. It may get bashed. Like I said before, this was a one in three shot meaning the odds were that it would miss. The stock had not really run up into the announcement. In fact, the well results were probably a week early which is good if you miss since a lot of people playing it just for the TD on the well hadn’t got in yet. The other explanation is that investors are acting with cooler heads than JP Morgan.

    Nice safe $0.02 loss Bill. Fast fingers there.

  12. 12
    zman Says:

    Oil down $0.90 / RBOB down $0.045. If we hold here we’ll have the third week of down cracks.

  13. 13
    T-Tupp Says:

    z this is the reversal i was telling you to wait forr in tso. doubled down 15 after open….

    higher trading spreads that vlo eh? 🙁

  14. 14
    H Says:

    Good Day Z Man’s Brain-

    Z– I got out of my FRO, at 42, place the oder when I saw oil and gas this morning— to week for a bigger biunce…still got out with a .75 gain..weee!

  15. 15
    zman Says:

    Tupp agreed – little guys are getting pounded too.

  16. 16
    H Says:

    end looks ok

  17. 17
    H Says:

    Zman- you hit the nail with that 1.75 T&A …on end

  18. 18
    zman Says:

    Thanks H – so far it’s held the risk side ($1.75) of my risk / reward scenario.

  19. 19
    zman Says:

    Nicky check your email.

  20. 20
    H Says:

    Zman–Is their any news ( geo or what have you ) today that can come to thre front that can put a pop in iol ? anything you think or expect maight happen say between now and monday?

    I know it sounds like a stupied ? but its me? hunting and hounding-

  21. 21
    Art Papale Says:

    Z, thanks for responding. I thought I was registered. I will try again.

  22. 22
    zman Says:

    Nicky – very nice explanation.

    You should ghost write “Elliott Wave for Dummies”…you’d make a fortune and I know a website that would promote the book ad nauseum! LOL!!!

  23. 23
    zman Says:

    Art – then just login in to the site, you can tell by looking at your name in comments. If it is grey, you’re not logged in. See how H’s is blue and underlined. Then send me a comment and I’ll e you back.

    H – IOL?

  24. 24
    H Says:

    Man that is one ULGY chart on END. NOT SAYING ITS DEATH SPRIAL, JUST NOT TO PRETTY.

  25. 25
    H Says:

    O their gose me showing off how not to operate hevery mechiny ( PC keyboard )

    O I L.

  26. 26
    zman Says:

    Ohhhhh. Oiiiiillll. Well let’s see, there’s the slacker Brazilians (I kid because I love.lol), there’s Nigeria which the Brits just ordered their people away from. And of course, something could brew up in the Atlatic or Carib.

  27. 27
    zman Says:

    Art – check email.

  28. 28
    zman Says:

    END – Ferris Baker Watts reiterates Buy.

  29. 29
    zman Says:

    Nicky – if US refinery demand picks up and Brent stays up, could you see a situation where products roll lower while crude remains pretty elevated? I’ve seen that happen before but I’m not sure the technicals matched up then.

    Ferris, you’re my hero

  30. 30
    tom2oc Says:

    Hey hi Z!

    I’ve been out of trading since the a few weeks due to a new challenge but from what I saw by reading your site and Phil’s site lately, it looks like you 2 are doing really good. Big congrats.

    Just wanted to let you and Phil know that I updated my take on the market for whatever it’s worth. So if you’re interested, check the post on the blog before it disappear once again this weekend.

    Cheers!

  31. 31
    zman Says:

    Tom2oc – good to hear from you. I’ll check it out and I’ll pass along to the PSW crew who used to love GOAX. Best Regards, Z

  32. 32
    H Says:

    should have not put an oder to dump my fro…..but I did junp on oih jun 170’s at a buck this morning.

  33. 33
    zman Says:

    Not buying the bounce in refiners here. They’re trying to put in a Friday bounce but gasoline just keeps sliding. DD my TSO $120 June 120 puts for a $2.

  34. 34
    tom2oc Says:

    thanks Z. Have a great summer!!

  35. 35
    H Says:

    OUT OF MY CALLS At 145/150…makes me feel better about selling fro at the open….in and out…

  36. 36
    zman Says:

    Thanks Nicky. That scenario works out to be less positive for the refiners than the recent environment has been.

    Nice H.

    END holding the line. I’m not adding or subtracting for now.

  37. 37
    Stephen Says:

    I picked up some DO in the pull back and I will pick up some HAL as well.

    I think HAL will have a good 2Q, I heard they will book the sale of KBR and the move to Dubai will reduce their taxes, but I’m not sure how much of an impact the taxes will have and whether it will appear in the 2Q.

  38. 38
    zman Says:

    Stephen – business should be booming for HAL and DO now.

  39. 39
    zman Says:

    Here’s a lesson in how not to be stupid. When you are lucky enough to make money on a buyout rumor that doesn’t immediately pan out sell and take your profits. I did not in NFX and I’ll probably lose a majority of that capital.

  40. 40
    zman Says:

    Here’s a heating oil chart for you “home gamers” keeping up with Nicky’s levels.

    http://tinyurl.com/2vqflj

  41. 41
    H Says:

    Why such hge volume on the: XLE JULY 65 Puts’s –

    74000 contracts,compared to 2000 on the 66 and 300 on the 67 ?

  42. 42
    H Says:

    yea. Z — happens all the time, hey anot all trades can come out winners at the top, on even be a winner..never.

    Look I may have metioned I brought the CLF JUN PUTS 90/85. when the stk went bullestic for a few days, and know wanted to give in ..I took a chance with small amounts of captial, and you know the rest. ( it should be in my posts )

    Zman if you could take a look at my XLE July volume Put question, it would be appricated.. TIA.

  43. 43
    zman Says:

    Sane if you’re around. I’d like your spin on why the red line in this chart, freight transport appears to be moving lower. The data is form March so any thoughts you can add to get us closer to the present would be appreciated.

    http://www.bts.gov/xml/tsi/src/index.xml

    My sense would be that you’re fleet and intermodal carriers are to blame for the rollover. Is it that simple?

  44. 44
    zman Says:

    H – Somebody took a big bet against energy here. Very interesting and its not just the front month. The 65s and 68s are seeing incredible volume June as are the 65s and 69s in July. Nothing really beyond that. I haven’t pulled time and trades yet but it will be interesting to see how big the pieces are.

    Nice catch H! Will pass along to the PSW guys.

  45. 45
    H Says:

    aah…z, the CLF thing, its over and done, its off the cliff now..(lol)

  46. 46
    H Says:

    Zman, OT: Being a luvly friday, and everyone headed out to the Hamtpons, in NYC, ( I live in NYC ) I always wanted to know where you swim, I am a swimer to, all my life, a pure water bug–

  47. 47
    H Says:

    Nicky, you looking for another drubbing, ? today ? before the close..?

  48. 48
    zman Says:

    Nicky – I was just looking at TSO, I know you don’t follow the stocks but I was just thinking the same regarding the bounce in the stocks. TSO tapped it’s 50 day sma and bounced back to flat on the day.

    RBOB seems stalled down $0.04 to $0.05 which is enough for a day in my opinion. I see no reason, other than storm/strife that RBOB fundamentals shouldn’t assert themselves and result in RBOB through 2.10 next week.

    H: state secret given that everyone from the Refining Assoc. of America to the Peak Oil conspiracy types, to MEND has hitmen looking for me. LOL. I’ll tell you that it’s at a club, not a beach, but occasionally at a bluewater hole in Tx.

  49. 49
    H Says:

    N- I agree….

    Z- Sounds nice.

  50. 50
    zman Says:

    H – too many kids now that school’s out. Need to put a pool in at the house.

    END still hold the level, barely. 2.3 mm shares traded and still very active.

  51. 51
    H Says:

    O O …looks like they wanna sell, to get out early and hit the sand!

  52. 52
    zman Says:

    Nicky – you’re too fast. I was just about to type that 212.91 level from earlier. I agree, the close is pretty important but an intraday low below 2.11 wouldn’t be exactly bullish even if it then bounced to 2.13.

    Very technical right now, fundies just happen to agree with the selling.

    Which is what I like about fundamentals. As the good folks at CNBC said yesterday, once WTI broke through a key level the gains multiplied…there was no real basis for the move higher. As now, USO is getting kicked down hard. I would expect it to fall apart like products but again, the selloff is gaining momentum as we lose key levels.

  53. 53
    zman Says:

    FTO July 35 puts taken for a quick trade at $0.60.

  54. 54
    zman Says:

    mixed bag. the big indexes to watch the XOI (oily) and the XNG (gassy) are off about 0.4% which is much less than you’d think given the commodities. But they’ve been trading more with the broad market for some time now.

  55. 55
    Stephen Says:

    Is natural gas going to drop? I’m still waiting for HAL to drop to my buy order.

  56. 56
    zman Says:

    Refiners starting to weaken, tankers strong except for the one I own, lol.

    Oil service, getting hit for 2% which is a bit odd to me at least.

  57. 57
    Art Says:

    This is a test.

  58. 58
    zman Says:

    Stephen – I wouldn’t expect much further weakness in natural gas unless oil just falls out of bed. We’ll know more this afternoon with the CFTC numbers and rig counts adding their input. It may trade sideways until next week’s number though, say between $7.70 and $8.

    Brent may be off $1.60 but it’s still over $71/barrel. Pretty stout!

  59. 59
    zman Says:

    ha,ha,ha.ha…and that’s what makes a market.lol. If I were you Stephen I’d go with the womans’ intuition!

  60. 60
    zman Says:

    zoicks! I just looked at upstream’s ticker for mine but this also shows it over $71.

    http://quote.barchart.com/quote.asp?sym=SCY00&code=BSTK

  61. 61
    zman Says:

    gotcha, thanks.you ever look at USO, the WTI EFT? It looks like it could have another day like to day in store for it Monday.

  62. 62
    sane Says:

    Last I saw brent was at 69 on Bloomberg

    Sane

  63. 63
    zman Says:

    Sane did you see my comment #55 today?

  64. 64
    zman Says:

    TSO split at $120

  65. 65
    sane Says:

    TSO had a stock split.

    Sane

  66. 66
    sane Says:

    Sorry z, Didn’t see it. I am taking a look now.

    Sane

  67. 67
    H Says:

    Whats going with MEND today?

  68. 68
    scoop006 Says:

    Z
    Can you account for the stength in WNR ?

  69. 69
    zman Says:

    Re WNR: The refiners are all remarkably resilient. Go figure. They had a little drubbing this week but it’s nothing compared to the contraction in the crack spreads.

    I do like EOG and CHK a little more here as they seem to be finding a bottom.

  70. 70
    zman Says:

    MEND wants one of their big guys back.

    New Nigerian President Yar’Adua sent envoy Johnathon “he’ll need it” Goodluck to the US to hire a conflict resolution firm to work things out with MEND.

  71. 71
    H Says:

    Looks like their pushing their pushing the demand, and saying they will offer more free tourism to forginers if the demand is not met !

    Z N– anyone thinks oil bottomed for the day ? I need a quick reply..TIA.

  72. 72
    H Says:

    Thanks N !!!

  73. 73
    zman Says:

    ditto – gotta run some errands, back in a few.

  74. 74
    H Says:

    what about the big increase in rig counts, z- how do you look at this?

  75. 75
    sane Says:

    Z,

    Looking at that chart, and from what I am seeing right now, overall freight transport has slowed some d/t slowing economy. The lull you see during 06 is due to fuel costs. We saw intermodal pick up in 06 ( especially in rail volume ) Vs. long haul to offset some of the drop. I would look for the TSI-Freight to go neutral to lower in the coming months, before picking back up again around September / October.

    Sane

    Sane

  76. 76
    H Says:

    BIG NEWS IN LETTER X , moving the averages !

    Gotta wish you brought this old american icon on the last dip~

  77. 77
    H Says:

    Wanna thank everyone for a great week, Z- as always you morning anology has been great this week, and N- great T&A which really makes the picture clear…

    I went cowboy today, and brought OIH jun 170 C’s again, and just sold them again, made .35 nice for me…

    Now a Z says time for a dip, I gonna check out the little fishies, and see what shinks- and schinks!

    HAVE A GREAT WEEKEND ALL ! ITS BEEN MY PLEASURE !

  78. 78
    sane Says:

    Ok z more trucking info for ya.

    Between March 1 and June 1 there has been a noted downturn in Intermodal freight. I have seen in some places as much as a 15% drop. Over the road freight has had an uptick over the same 3 months. Looking at our data I am still seeing flat to down.

    Sane

  79. 79
    sane Says:

    Looks to me domestic production up imports down d/t dollar drop.

    Sane

  80. 80
    Art Says:

    Z,
    The site says: “logged in as Art but Art is grayed out. Is that a problem and does the site update automatically?

  81. 81
    zman Says:

    Art – ok. that’s a new one and I’m a pretty much a technotard. I’ll have to look into. Usually it means you didn’t give the system something it wanted. Maybe it only blues up for a URL – see Nicky is gray as well but H is in blue.

    Sane – thanks you very much.

    N – agreed, charts look bearish.

    END down below my level on 13 million shares at $1.69.

  82. 82
    zman Says:

    END 9,999,900 block print at $1.67 @ 2:58 pm. This is the exact amount owned by their largest shareholder Palo Alto. Got this from a friend with more up to date states than yahoo’s holdings page. With that seller washed out it should take some pressure off the stock. Guess they got tired of waiting.

  83. 83
    Stephen Says:

    Wow, and Bill got out at $1.98 this morning, I’m just surprised, where do you find the buyers for 40 times the average volume in one day, it did drop by 19%, but that still is a lot of shares to shift, about 8% of the company.

  84. 84
    zman Says:

    CFTC chart page updated. Short and longs increased but shorts ruled the week pushing us back towards a record net short position in non-commercial natural gas contracts.

  85. 85
    bill fraser Says:

    ng at 7.58 on Monday morning.. a week ago people were tripping over themselves buying over 8

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