26
Jun

¡Hola! ¿Como Es Usted Amigos?

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Nicky Appreciation Watch! My deepest thanks to Nicky for keeping the site alive in my absence. To that let me add a Happy Belated Birthday as well. To everyone else who kept coming by commenting and answering questions you also have my greatest appreciation.

Honduras was incredible! Beautiful people and country. Lots of needs though. If you have an old computer you're itching to replace please let me know. We need them for the schools as well as for computer repair classes.

Back To Work. While I was out a lot of noise (Nigeria, Iran, etc) entered and exited the market and I won't bother to recap. Here's what I see as salient for the commodities:

Oil: Giant build last week. Oil stocks now look like a moon shot:

crude-stocks-062507.jpg

  • Imports - the build was attributabe to a spike in imports, not the drop in refinery utilization (more on that in a second).

Gasoline: What A Rollercoaster! That looks like a double top brought about by the crude rally which was brought about by noise, not fundamentals. I'm still content to bet against gasoline here.

  • Stocks UP 1.8 million barrels. Resuming the recovery
  • Refinery Utilization - DOWN AGAIN But No Reason To Panic Because... This time off a whopping 1.6% to 87.6%. Not the direction you'd think is normal this time of year but really an inconsequential number with production going the other direction.
  • ...Production was UP again. That's yet another record for PADD1 (East Coast) and nearly a record for aggregate U.S. production. TOO MUCH FOCUS ON THE UTILIZATION NUMBER AND NOT ENOUGH ON THE SIMPLE FACT THAT REFINERS HAVE BECOME MUCH MORE EFFICIENT. You have to be more efficient when fewer barrels going in the front end yield more product at the tail pipe!. If we get back to the 93 to 95% utilization level that is said to be typical for this time of year there will be plenty of gasoline for everyone's favorite boat, plane and SUV.

util-vs-prod-062607.jpg

  • Imports - recovered slightly 1.284 million bpd. Week before last I suggested that the sharp dip we saw in the prior week was anomalous and not the beginning of the end for the surge in imports. This week's number needs to rally again
  • Demand - UP to 9.591. That's a bit strong and a record for this week of the year but not an all time record.

Natural Gas. 89 Bcf injection last week, on trend with the five year average and it continued the process of eroding the deficit to year ago levels. Weakness in gas over the past week is attributable to:

  1. A lull on the part of the hurricane cheerleading section due to an utter lack of, well, anything that even remotely resembles a rotating storm,
  2. NOAA's statement that La Nina will miss the party and it's subsequent downgrade of the "tropicalness" of the hurricane season,
  3. Mild early summer weather, although that looks to be about to change.

That 19% SURPLUS to the 5 year average has started to weigh on the commodity. I think we're closer to a near term bottom then we are to another big leg down BUT the close below $7 is a major psychological blow to the longs (what few of them there are left). As such, I'm getting ready to be long gas and gassy stocks again (but not yet).CFTC Watch: New record short position. I continue to see this as a near term bullish sign for natural gas since once the first shout of hurricane in the theatre is heard the doors won't accomodate the stampede to cover.

Odds & Ends

Analyst Watch: nada - looks like a lot of folks are on vacation.

Holdings Watch: No action today as I reacclimate/recover.

Petrohawk Watch: (HK) is setting up an MLP (told you this would be the "in" thing for 2007!) and punting their Gulf of Mexico assets to focus on Arkansas and Louisiana. Reaction has been favorable to the MLP and I still like the name here although I don't currently have a position.

(END) Watch: Operational Update Conference Call Today. 9:30 EST. 1 (800) 811-7286. Here comes the increased production guidance. Slides and the call can be viewed/heard at endeavourcorp.com.

(CLR) Vs (PINN), A Tale of Two IPOs. Back in mid May I wrote about two E&Ps that were just coming public. Oily Oklahoma headquartered Continental Resources was reviewed here with a very positive mention and I took a position later that da. Gassy (PINN) was reviewed the day before CLR here and I said I wait for coverage and then wait some more. Here's the checkup so far. (Please click on the chart to view it entirely).

clr-vs-pinn-062607.jpg

In summary, thanks to everyone who kept the site alive and especially to Nicky. I'll be in and out today as I seem to have picked up a bug down there but I'll try to get back to your questions promptly. Have a great day!

37 Responses to “¡Hola! ¿Como Es Usted Amigos?”

  1. 1
    Sambone Says:

    Welcome back.

  2. 2
    Lije Says:

    Welcome back and hope you feel better

  3. 3
    scoop006@yahoo.com Says:

    Welcome home. Was good to read today’s analysis.Clear your system of those evil parasites and lets make $$$$$$$.

  4. 4
    H Says:

    Lovly Day All! and glad to see you back Z-hope the trip was relaxing-

    Hey their Z- I have 3 perfect boxes if your intrested, drop me an email and let me know what your gonna do with them and maybe we could arange to get them to you-

  5. 5
    zman Says:

    Thanks guys.

    CLR getting those buy rated initiations of coverage as promised.

    Tiny SCU mounting another run after getting a permanent CEO while I was out.

    Gasoline putting in that double top. Any thoughts on that being a double top Nicky?

    END call in 10 minutes. I’ll let you know what I think live.

  6. 6
    zman Says:

    H – Thanks a lot. I was on a mission trip to finish building a school among other projects. Lot of hard work and sweat but relaxing in a way as there was little contact with the outside world and my fill of rum and cerveza at the end of each day. lol.

    I’ll send you that email later.

  7. 7
    zman Says:

    OIH looks bound for a test of 170.

  8. 8
    zman Says:

    My bad on the END conference call. It’s at 11:30 am EST. So another hour away.

    Refiners refuse to fall.

  9. 9
    T-Tupp Says:

    z- i dont know if i agree with your double top asumption for rbob. we havent hit the closing or intraday high we had from early May. plus we ned at least a > 28.8% bounce from the previous 30 days trend to confirm it. personally i think the fundamentals are to tight, and all it wil take is one refinery to blow up to send it through the roof

  10. 10
    zman Says:

    Definitely looks like a double top for RBOB. Refiners of course do not care.

    END conference call at 11:30 EST, probably upgrade production guidance but they may also have news on another exploratory well (good / bad only they know) so playing pre call is a gamble.

    Here’s the decision tree. I’d say to wait until the PR hits and:
    1) If there is upped guidance (old range was 8,800 to 9,200 BOEpd) and no well news then I’d go long for a trade.
    2) If you get upped guide but bad well news probably stay away unless the guide is just that good.
    3) Obviously good guide and good well it’s a buy as this puppy (dog) is dirt cheap trading at below 2x NTM CFPS.

  11. 11
    zman Says:

    Hey Tupp – well I said I’m no TA specialist. Still looks like what I’d call a double top with a lower high put in on the right shoulder. A lot depends on tomorrows report and that’s probably why the stocks aren’t moving.

  12. 12
    T-Tupp Says:

    if we get bearish numbers tomorrow this will be a good entry point for tso.

    some nice entries are panning out for E&P’s too, like ECA…. well not untill the net sorm spotting….

  13. 13
    zman Says:

    Nicky – thanks again.

    Regarding Nat Gas, on the August contract, it looks to me like we’re at support from March. Much below this and it’s a long drop to $6, from a TA perspective.

    Below $6.50 and I think you’ll see some Rockies curtailment announcements.

  14. 14
    zman Says:

    oops just saw comment $16. Those are August comment levels, yes?

    N – what do you think about Aug RBOB here? Simply stated, that looks like a lower high to me and if we get a reversal on the utilization number and another build it could get dropped. How far would RBOB have to fall before you say, that’s a double top?

  15. 15
    zman Says:

    Table of estimated shut in Nigerian production (bopd):

    Forcados Terminal & EA Platform (Shell): 477000
    Nembe Creek (Shell’s Bonny Light field): 77,000
    Olero Creek (CNL): 70,000
    Unknown locale (AGIP): 15,000
    Okono and Okpoh (AGIP): 65,000
    Ogbainbiri (AGIP): 37,000

    Total: 741,000

    This is down from the estimated 881,000 bopd that were shut in as of June 19.

  16. 16
    zman Says:

    Here comes more Ahmed rhetoric. The House Foreign Affairs Committee just voted 37 to 1 tighten sanctions on Iran. This will come as no surprise to anyone but oil traders.

  17. 17
    zman Says:

    END – just got through the slides. It’s a pitchbook update, not a news driven conf call.

    NO change to guidance or other news other than they’re EMU prospect spud on the 11th of June (I think that’s a 45 day well but I’ll have to check).

    Demonstrates why they should be priced higher but I don’t think there’s much new there. No Action.

  18. 18
    zman Says:

    Crack spread page updated.

    http://zmansenergybrain.com/?page_id=60

    The second set of graphs is through the 22 and shows a very minor recover in cracks.

    Overall cracks have fallen 30 to 40% depending on which region of the country you’re looking at. Distillate cracks are mostly off as well but not nearly so much.

  19. 19
    zman Says:

    Wow, RBOB really getting smoked and not just the front month. August to October down around a nickel apiece. November on out down as well.

  20. 20
    zman Says:

    tempted to take EOG 75 calls here as a DT on an afternoon oil bounce. Too busy catching up to jump in for now but tempted.

  21. 21
    Art Says:

    Z,
    Guten tag!! Here’s a few q’s from the “greengo”. 1. Where can one trade internationally (Canada) live and get streaming bids/offers? 2. Before you left for your “R&R”, we briefly discussed BBP.v. If they have a “good” discovery on West Cameron 332, how will that effect the stock? And, can one determine from their web site presentation the potential from this project? http://www.bayoubendpetroleum.com They spudded on June 2. 66’WD, 13600′ Thanks for your thoughts, Art

  22. 22
    zman Says:

    Wow. There goes oil up, splitting B/A on the EOG.

    Art I’ll check and get back with you re BBP. Don’t know on the Canada live.

  23. 23
    zman Says:

    Art – good management there.

    WC332 is not one of their bigger tests this year, success only brings you about 10 Bcfe of reserves net on a ~ $670 million C$ dollar mkt cap company. Success is never bad but this isn’t one to push the stock much unless it’s seen as confirming a play. I doubt it but it might be spun that way.

  24. 24
    Art Says:

    Z,
    Thanks. Some other ideas to follow.

  25. 25
    Art Says:

    Z,
    When you have a moment, let me know how you got 10 Bcfe of reserves? And, did you get that from their web site presentation? Thanks.

  26. 26
    zman Says:

    Art – it was a 41 Bcfe gross unrisked reserve potential target of which they have 25%. It would actually be just shy of 10 Bcfe after you figure in royalties. I got the 41 from their presentation, slide 19.

  27. 27
    zman Says:

    Took the EOG 75 calls @ $1.45. It’s been beat down to support and trades highly correl to oil. Muey risky.

    Biggest risk is the story I just read while catching up that the 19 million barrels of GOM tanker storage is not being re-leased. This is probably part of what caused the big surge in imports last week and could again tomorrow. If anyone has greater clarity on the timing of those barrels please let me know.

    We have pump failure. Oil taking a dive now.

  28. 28
    J Says:

    Z, Welcome back.

    I’m glad the Sandinistas didn’t get a hold of you. They aren’t too keen on you free market capitalist types.

    Great call on CLR, its been holding up well, seems to have a lot of support around $16.

    PDE holding fast today. Nice little pump on options out of the gate.

  29. 29
    zman Says:

    J – Thanks, its good to be back and thanks on the CLR as well. Worked out well as a paired trade with PINN if you could have borrowed PINN.

    KWK SWN getting whacked a little too hard. Looks like the indexes are trying for the easy levels quickly this afternoon.

    Out for a little bit, buggy, buggy, buggy.

  30. 30
    zman Says:

    Wow – refiners finally starting to take a crack on the chin. Even FTO responding here.

  31. 31
    Art Says:

    Z,
    I saw those #s. The word, “unrisked” through me. Thanks.

  32. 32
    zman Says:

    Art – risked numbers would be lower.

    ZEB performance tab has been updated to reflect current option (not many) and stock positions.

  33. 33
    zman Says:

    Citigroup cuts the refiners. (SUN) to hold, (VLO) and (TSO) to sell.

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