02
Oct

Tuesday – What Was I Thinking Watch + Much, Much, More

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Commodities Watch: Lower oil; natural gas so far bucking the trend.

  • Crude Oil: November crude fell $1.42 to  $80.24 yesterday as profit taking, combined with a technical failure to breach new highs and a sharp decline in the dollar all contributed to the weakness. This morning crude is off another buck.

The Euro Vs November Crude. Note how the rising Euro, slash plummeting dollar drives crude to record levels. No doubt the supply / demand equation for crude will become tighter this Fall and Winter but the impact of the move in the dollar from mid August should not be discounted.  Note: if you can't see the right handside of any of my charts either click on them or use that as an excuse to buy a widescreen monitor.

dollar-vs-crude.jpg

 

  • Natural Gas: Rallied $0.18 to $7.05 yesterday. This morning November natural gas is trading up nickel despite the decline in crude as it eyes the following and a recent drop in natural gas imports and warmer than expected weather (see below)
  • Tropics Watch: Less of a threat to the Gomex. Still watching a disturbance south of Florida. Most models agree it will develop into either a tropical or sub tropical storm in coming days as it moves into the GOMEX and that it will come ashore in Texas. 

What Was I Thinking Watch:  Aka - The Crappy Trades 

  • (VLO) - Refiners ailing under weak but not "dreadful" crack spreads.
    • Position: I hold a double dose of the VLO $70s with an average cost of $1.48 and a last bid of $0.90.
    • Over the last 6 months refiners went from darling to dog (when we were short) to darling (we were long again) and lastly to sideways trading.
    • At present crack spreads are continuing to weaken although 3Q levels were by no means horrible.
    • The story is still very much intact and VLO should have less maintenance than it's peers during the fourth quarter, a quarter which promises to be maintenance intense meaning prices should be elevated for the larger than normal piece of production they will have on line.
    • Bottom Line: I will cut bait here if I don't see good numbers on Wednesday and look to roll into November strikes next week. If I add anything soon it will likely be the $67.50s unless the report on Wednesday is very products strong in which case I might grab another load of the $70s as they will be slower to move on a big gasoline draw or any heating oil draw.

  • (ESV) - Shallow water driller:
    • Position: October 50 PUTS (near worthless) and October 55 PUTS (down by half)
    • I believe this one may reduce 4Q guidance (on or before the 3Q call on October 25th) due to rig mobilizations and upgrades as it runs screaming from the GOMEX to higher value (for now) Jack Up contracts in international markets.
    • In late August these cats cut guidance and simultaneously announced a $500 million buyback(6% of the outstanding common). So the story goes, "Here's a bit of bad news but wait, ignore that, we're buying ourselves back so don't worry, be happy."
    • Now analysts will tell it is cheap, at least some of them anyway (the few who haven't cut their rating yet), and on the surface that appears to be true. With a consensus estimate of $8.04 in 2008 which at $57 yields a forward multiple of just over 7.1x I would agree.
    • But I think analysts are making a bit much out of the strength of the international shallow water Jack Up market and some analysts agree as the 2008 estimate range is rather large here (from $9.04 on the high end to $5.45 on the low side). There's cheap and there's cheap for a reason. Out of the last 17 estimate changes 14 have been to the downside.
    • According to Rigzone: "More than 60 new shallow-water rigs will be available for work through the end of 2008, while nowhere near that number of jobs are expected to open up." That's because these rigs are far easier to build and the building cycle did not anticipate the rapidity of the move to deepwater drilling and service companies placed orders for new rigs that in hindsight appear unneeded.
    • Bottom Line: Still waiting for a bad day in energy to dump the October $50 puts as I think they are just too far out of the money to get back close to even. The Oct $55s will likely be swapped out for similar strike November puts.
  • BTU - Premier Coal Player: Ok it's down also but we are two days in on a contract that doesn't expire until November and we're just a couple of bucks short of the strike.  I like the company and coal moves roughly in line with natural gas prices which appear to be firming up as imports decline from high summer levels (see next section).

Gas vs Coal Prices.  Although gas, the red line, is much more volatile note that the two commodities move in generally the same direction.

coal-vs-gas-100107.jpg

Holdings Watch:

CALLS

  • (CHK): Closed out my $35 Octobers for $1.40, up 56%; like I said when I entered it last Thursday, this was meant to be a quick trade. Still holding the October $32.50s (paid $2.05 way back on September 5; last bid $3.60) and Jan $37.50 Calls  (paid $2.30 way, way back on July 10th, last bid $1.65). I still of course like (CHK) long term but I'm loath not to book profits in a stock that trades as circumspectly as Chesapeake has of late. From a purely technical standpoint, take a look at a monthly chart. Hmmm...Long base back to June of 2005, flat to declining volume since and now inching towards the high end of that range. Hmmmm....I've said it many times before and I'll say it again...these guys get gobbled up for the lint in the pockets of a couple of majors I can think of and are immediately accretive. Like Newfield, they're selling off unwanted non-core assets for top dollar. That reminds me, I still need to get back some NFX exposure pre earnings.
  • (TSO): Entered the November $47.50s at $2.60.Last bid $2.75 and I may add more or bail depending on the Wednesday invetory report Just seems overdone to me with the stock trading below 7.6x 08. This stock was $51 plus on 9/24 and the estimate for 2008 is actually up a touch since then.

For Current Open Positions click here.

For A List of Recently Closed Trades Click The Thumbnail: september-closed-positions-100107.jpg

Natural Gas Thoughts:

Weather Watch 

  • CDDs 40 which is a nice rebound relative to the prior week and nearly double year ago levels.
  • HDDs 16 (gas population weighted) which as you'd expect is only half of last year. 

 

Natural Gas Imports Down 1.3 Bcfgpd Week To Week and Down 0.4 Bcfgpd YoY.

imports-092807a.jpg

  • LNG Imports Fell Again. Last week LNG shipments fell to 1.1 Bcfgpd, the lowest level this year. This level was also 0.2 Bcfgpd less than year ago levels which is the first time since June that 2007 hasn't set the pace for LNG shipments. The drop was the result of three factors: 1) maintenance at the gassification plant in Trinidad, 2) stepped up buying from Japan for electricity generation and from Europe where prices have mounted a strong recovery from the giveaway prices seen this past summer.
  • Pipeline Imports Also Down Sharply. Gross pipeline imports fell sharply from 10.0 Bcfgpd in the prior week to 9.1 Bcfgpd last week. Is this the start of the long awaited decline in Canadian imports. Most likely not. It will be more gradual. This is more likely pipeline maintenance. If the decline lingers I'll do a little more looking around to pin it down.

Stocks We Care About Today:

(SNP) - ABN Amro cuts it's stake by 1.5%. This and the other Chinese oil fall under the category of "too far, too fast" but I won't be stepping in front of that freight train of a stock on the short side except for the occasional trade. Buffet has been cutting his exposure to (PTR) for months and it's done nothing but go up.  

(RIG) - secures $15 billion 1 year bridge loan from Goldman and Lehman to help pay for the acquisition of (GSF). Comment: It's nice to have two bulge bracket firms on the hook for that much dough...I'll bet their respective research departments can't wait to release the most glowing reports yet on the combined entity.

(PQ) - tightening 3Q production guidance around the top end of the previous range. They also announced another strong well in their fifth Woodford Shale test with a test rate of 4.2 Mmcfgpd. At last check they had 25,000 acres in this trend giving them 300 to 600 locations which is significant when you pair that potential with the 85.5 to 87.5 Mmcfepd they now expect for 3Q07. I've got one of my little book reports almost ready on this one and will be looking at Oct and long calls today depending on what the stock and the energy market does.

(NBL) to join S&P 500. Funny, I thought it was already in there. Looking for a 2% plus pop on the open but I will not be playing

(CAM) splitting 2 for 1 and adopting rights plan. The company is in the subsea deepwater sweetspot but its chart looks a bit extended to me.

Odds & Ends

Analyst Watch: (NOV) cut to add from buy at Calyon. 

Friends of Hugo Watch: Ecuadorian President Correa won enough seats in Congress to rewrite the country's constitution yesterday. Drafts of the re-write demonstrate that it will boost Ecuador's share of all natural resource ventures with foreign firms to a majority position. 

134 Responses to “Tuesday – What Was I Thinking Watch + Much, Much, More”

  1. 1
    zman Says:

    Sambone, it looks to me like the high shear to the south of Florida could mess up the low. Is it close enough to break up the low or inhibit development? Crude ignoring it but gas looks to be paying a lot of attention.

    http://cimss.ssec.wisc.edu/tropic/real-time/atlantic/winds/wg8shr.GIF

  2. 2
    Sambone Says:

    7:58 am EST

    ICE Brent Falls Over $1 As Correction Continues

    By David Elliott
    Of DOW JONES NEWSWIRES

    LONDON — Brent and WTI crude oil futures fell more than $1 a barrel Tuesday morning in London as the corrective selloff from recent highs continued.

    Traders said investors have taken WTI’s failure to breach new highs late last week as a signal to sell and expect further losses if U.S. and Mexican production escapes the worst of the Atlantic Hurricane season unscathed.

    This view becomes more likely as the refinery maintenance season, when demand for crude is expected to taper off, approaches although bulls maintain this will be negated by the maintenance at crude production facilities in the United Arab Emirates.

    “The fact we’ve seen a correction is not a surprise after the speed of the rally from $70 a barrel,” said a broker in London. “The question is have we seen the highs for now? I think so, at least in the short term, although the longer-term fundamentals mean any further dip will be shallow.”

    At 1149 GMT, the front-month November Brent contract on London’s ICE futures exchange was down 100 cents at $76.64 a barrel, having earlier fallen to $76.36

    The front-month November contract on the New York Mercantile Exchange was trading $0.97 lower at $79.27 a barrel, having earlier fallen to $79.05.

    ICE’s gasoil contract for October delivery was down $13.75 at $674.75 a metric ton, while Nymex gasoline futures for November delivery were down 213 points at 196.00 cents a gallon.

    Weak technical indicators have been the main drivers of this latest bout of selling and are expected to play a significant part in dictating short-term direction.

    The near double top at the WTI November contract’s all-time high of $83.90 a barrel is the most obvious weight on sentiment and action since then.

    Technical analysts at Barclays Capital said WTI November is now targeting $78.44 a barrel, the Sept. 26 low, and $78.36 a barrel, the 21-day moving average and a close below these levels would suggest another $1-$3 of downside.

    Allowing the technical indicators prominence is a less-bullish short-term fundamental picture with the threat to oil production from Atlantic hurricanes seemingly waning.

    But while weather disturbances over the last few days have petered out without threatening oil production facilities, it may be worthwhile adopting a cautious stance.

    “There is only a month of the hurricane season to go. So far we have had four hurricanes,” said Colin Smith, an analyst at Dresdner Kleinwort in London. “So there is still some threat left but not as much as a month ago.”

    Olivier Jakob of Petromatrix said a disturbance over Florida, which has bolstered natural gas futures, is starting to move toward the U.S. Gulf on a path similar to Tropical Depression 10.

    While still poorly defined, the current low could yet be a threat to oil companies.

    “The previous disturbance caused a significant amount of precautionary shutdowns, for a storm that never really materialized,” he said.

    Aside from the risk to production from hurricanes, the main driver of prices at present is the underlying perception of a tight supply-and-demand balance for the rest of 2007 and throughout 2008.

    And it’s this factor that bulls in the market maintain will make sure any further correction from current levels is short lived.

    Even worries of a slowdown in key consumers Japan and the U.S. can’t muddy the outlook, said analysts at Goldman Sachs.

    “While these renewed concerns highlight the risk of some additional fund liquidation, we believe that any resulting downward correction in prices will likely prove temporary as supply has failed so far to show any sign of significant rebound,” they said.

    As a result they maintain a WTI year-end price estimate of $85 a barrel and, looking further ahead, other investment banks are also becoming more bullish.

    Credit Suisse lifted its average price estimate for WTI from 2008 to 2010 to $70 a barrel Tuesday while JP Morgan has upped its 2008 price forecast by $3 to $62.75 a barrel.

    And it’s the interest of the funds — the sector that has been largely responsible for the selling over the last few days — that is backing JP Morgan’s view.

    “Recent flows suggest that, since the U.S. Fed moved to cut interest rates in September, the influence of investor flows into commodities seems to be back in the list of bullish variables,” it said.

    —By David Elliott; Dow Jones Newswir

  3. 3
    Sambone Says:

    Z – 90L, Looks to me like shear may impact. Remember, Warm waters, this baby could spin up quickly.

  4. 4
    zman Says:

    Article on NFX and the Woodford Shale:

    http://www.tulsaworld.com/business/article.aspx?articleID=071002_5_E4_hThes38352

  5. 5
    calvino Says:

    G morn.. what is happening to SU in the pre-market, off 10%?? Is this the albertastan new tax playing havoc?

  6. 6
    calvino Says:

    Oh that was just another big trader dumping his block of hundred.. must have needed the money, real bad.

  7. 7
    zman Says:

    CAl – I saw a bunch of hinky trades on one of my systems this morning. Several $10 to $12 off early quotes. My other box shows a slightly lower opening on same stocks so I’d say its bad data.

  8. 8
    zman Says:

    Cal – It happened in a lot of stocks so I’d say someone either made a mistake or tried to induce panic

  9. 9
    zman Says:

    Nat gas through the first of Nicky’s resistance levels from yesterday.

  10. 10
    calvino Says:

    JP Morgan is inducing a panic in me. $62.50 on crude for 2008. I do not think that would be propitious for my portfolio. Thoughts?

  11. 11
    zman Says:

    Depends on what’s in the portfolio but the E&Ps for instance are still using $40 to $50 long term oil targets for the go / no go on new projects. Has Morgan cut the number or just not raised it yet? A lot of analysts are using 65 to 70 now for ’08.

  12. 12
    calvino Says:

    btw, that little windmill has not had a down day in a spell.

  13. 13
    calvino Says:

    It’s from Sam’s post up above, that’s actually after a three dollar bump up. I’m about half to two thirds in E&P’s in the great white north, and a bit in the little alt engs trying to catch crumbs from huge oil’s table. High oil is good, Goldman good, JP morgan bad.

  14. 14
    zman Says:

    Cal – I hear ya in general but growing production profiles and good cost control can see a rising share price even with JP’s forecast.

    DRYS – wow.

    Energy Red pretty much across the board unless you are going into the S&P 500 (NBL)
    or a Chinese oil co.

  15. 15
    Sambone Says:

    8:57 am EST

    Oil Falls On Stronger Dollar, Less Storm Risk

    DOW JONES NEWSWIRES
    From MARKET TALK
    8:52 (Dow Jones) Nymex crude trades close to $79 after losing about $1 in overnight trading. US dollar’s rebound and the decreasing risk of substantial hurricanes are factors in declining crude prices, analysts say. The crude market may be “destined for further declines to the $77.30 area” unless the dollar weakens again or tomorrow’s EIA data brings positive news for prices, Ritterbusch & Assoc. says in a note. Nymex crude recently down 92c at $79.32. (ENL)

  16. 16
    zman Says:

    PQ – someone scarfed up 200 of the OCT and 200 of the NOV 10 calls early…not me but they were nice buys.

  17. 17
    Sambone Says:

    Yesterday’s post from Nicky’s buddy

    http://www.321energy.com/reports/flynn/current.html

  18. 18
    zman Says:

    DRYS bouncing around $100. CEO was on Bloomberg TV last night, interview on their website.

    Not chasing PQ…should have been long already. Will wait for it to back and fill a bit.

    Majors getting hit for 1.5 to 2% across the board today.

    Other than NFX their is a noted lack of response to the rally in natural gas prices among the E&Ps

  19. 19
    calvino Says:

    All I see is red. I am going to lay keep a little cash, and tilt a little at that windmill manufacturer. If it’s green today, it’s a good sign. Today seems like a good day to take small haircuts, so that they don’t turn into buzzcuts. Seems like oil needs to take profits.

  20. 20
    zman Says:

    Hear ya – very red and very volatile.

    Except for PQ which is up 9%, 🙁

  21. 21
    Sambone Says:

    Today’s PF

    http://www.321energy.com/reports/flynn/current.html

  22. 22
    zman Says:

    something is up with NFX (up almost 2%), can’t just be a Tulsa paper article reiterating what we already know. No options volume though.

    Holy cow PF flipped again, now he’s a bear saying I told you so because of the shoulder season’s weak demand. Then he ends with buy natural gas $0.80 lower than present levels. Hey, nice idea, I’d buy a lot of things 10% lower and then immediately sell them. That’s like printing money. So nat gas isn’t on “borrowed time” and is not subject to the shoulder season?! I also note that his posts keep getting shorter….maybe he’s running out of corny metaphors and anecdotes.

  23. 23
    zman Says:

    DRYS just gave back $3 in 30 minutes. Too volatile for my blood at least on an October strike, I’ll be looking to sell the first real bounce I see or before lunch, whichever comes first. Will re-enter after it has a bad day.

  24. 24
    Sambone Says:

    10:38 am EST

    Nymex Crude Hovers Near $80 Amid Storm Concerns

    DOW JONES NEWSWIRES
    From MARKET TALK:
    [Dow Jones] Nymex crude hovers in the $79 range after briefly touching $80. Concerns about storm developments in the Gulf of Mexico may support prices, while the strengthening dollar continues to weigh down commodity prices generally, says Eric Wittenauer at AG Edwards in St. Louis. Traders are also taking the profits they have accrued over the past four weeks, Wittenauer says. Colorado State forecasters predict four more named storms, with two becoming hurricanes, for the remainder of the Atlantic season. Nymex crude -71c at $79.53.(elizabeth.landau@dowjones.com)

  25. 25
    zman Says:

    Hey Sambone, is that CO prediction up down or sideways from last statement?

  26. 26
    calvino Says:

    Phil Flynn should have been a football player, but he got that injury and instead of the college ride, he married a big hair red head, had a couple of fruit loop kids and sold shoes. I enjoy his tv shows.

  27. 27
    zman Says:

    Cal – LOL

    DRYS getting my bounce

    NG up 4.25%…accuweather says conditions look good for strengthening/development of 90L on Wednesday as an upper level low moves out of the way to the southwest.

    Chinese and US big oils getting taken to the woodshed. Unlike like PF, I’ve been saying oil will fall back to the mid to high 70s for some time now. As such, I think we have another buck or so and then a bounce, data depending of course.

  28. 28
    calvino Says:

    I am on the sidelines, building cash, trying to sell what’s left of fcel buy from fri, now $.1 under my avg. The canroys are also taking a nice red bath. shorted amd again.

  29. 29
    zman Says:

    Hear ya cash…majors are getting cashed out which is setting the tone.

    PQ up 10% ugggh.

    From the NHC on 90L

    1130 AM EDT TUE OCT 2 2007

    FOR THE NORTH ATLANTIC…CARIBBEAN SEA AND THE GULF OF MEXICO…

    SHOWERS AND THUNDERSTORMS EXTEND FROM THE SOUTHEASTERN GULF OF
    MEXICO NORTHEASTWARD ACROSS THE FLORIDA PENINSULA AND INTO THE
    WESTERN ATLANTIC. THIS ACTIVITY IS ASSOCIATED WITH AN UPPER-LEVEL
    LOW…A FRONTAL BOUNDARY…AND A SURFACE LOW CENTERED ABOUT 100
    MILES WEST-SOUTHWEST OF KEY WEST. THE SYSTEM IS ALREADY PRODUCING
    WINDS TO NEAR GALE FORCE IN THE EASTERN GULF OF MEXICO… AND HAS
    THE POTENTIAL TO EVOLVE INTO A SUBTROPICAL OR TROPICAL CYCLONE IN
    THE CENTRAL GULF OF MEXICO OVER THE NEXT DAY OR SO AS IT MOVES TO
    THE WEST OR WEST-NORTHWEST AT ABOUT 10 MPH.

  30. 30
    zman Says:

    Nicky – any new level thoughts on NG?

  31. 31
    Nicky Says:

    Morning all – haven’t posted as the levels remain the same as yesterday.
    Nat gas has almost made it to the 7.374 level. Any move above that would satisfy the wave ii count but it could get as high as 7.850.

  32. 32
    zman Says:

    …and above 7.85 is pretty close to hat eating time for the Floridian!

  33. 33
    Nicky Says:

    Just to add a note about the broader markets – whilst yesterdays rally pushed the Dow to new highs the technical action was actually very bearish if you measure it by by the number of stocks advancing compared to declining. Financials, banks and housing are also lagging. So something has to give here -either the technicals improve and there is some sector rotation or the negative divergences take the market down. This happened at the 1990 top.

  34. 34
    calvino Says:

    Going to get a coffee, leaving the house with no open orders. Maybe I should leave bid for NG 10% under market though – in case someone needs some money really really badly right away.

  35. 35
    Nicky Says:

    z – sadly for you that bet was never placed! Next time!

    Nat gas has resistance at 7.399 and 7.760. A move below 6.700 says the upside is done.

  36. 36
    Sambone Says:

    Z – Just got back, CO? What’s that?

  37. 37
    Nicky Says:

    Distillates sitting on some strong support here.

  38. 38
    zman Says:

    CO = Colorado, I was just wondering the storm count from your post was more or less than the last one.

    ESV below $56 looks weak but there has been steady buying at that level…maybe the company.

    Denise – re BPZ, not sure if it matters to them but the news from Ecuador this morning in the post may not be good for them.

  39. 39
    Sambone Says:

    less

  40. 40
    zman Says:

    ESV

    Over the last two years ESV officers have bought a total of 10,000 shares (via 4 purchases) and sold 3.1 million shares (via 162 sales).

    They continue to exercise and sell despite the big buyback. So it’s the best thing for them so sell but not the shareholders.

    I like the phrase: “people sell stock for lots of reasons, they only buy for one”…but when you have this many sales and a buyback…well it doesn’t reek of confidence.

  41. 41
    scoop006 Says:

    Z CLR-%+?

  42. 42
    zman Says:

    Scoop – yeah, I still own it from the $14s and I have no idea for the run here, could be a broker comment that I don’t see….just wish it had options.

  43. 43
    zman Says:

    Oil back into the 78s

  44. 44
    zman Says:

    Scoop RE CLR – Raymond James upped it to Strong Buy from Market Perform. Better late than never.

  45. 45
    scoop006 Says:

    Per Yahoo message board:
    Raymond James upped to STRONG BUY from outperform

  46. 46
    Nicky Says:

    The EIA demand data report released earlier was hardly supportive of the market showing a contraction year on year of 0.5% and the lowest since July 2003.

  47. 47
    Sambone Says:

    90L – Not expecting it to do anything except rain. Should hit the TX/LA coast on Thursday/Friday. Cold core, has to heat up, and it won’t have time.
    http://www.ssd.noaa.gov/goes/flt/t1/loop-wv.html

  48. 48
    zman Says:

    Nicky – funny how they always seem to be revising demand down…how the weekly report overestimates but the more accurate monthly brings it down.

    Sambone – thanks, stocks obviously don’t believe the rally in gas will come to anything today.

  49. 49
    drdavis124 Says:

    Not a great day. Longs almost all RED Shorts all green

    SNG Canadian Superior Oil, Following it 7 years. see 5 yr chart. they were drilling off Nova Scotia & quit. In
    Trinidad they may hit. Financing is good & the drilling is being done by a Chinese Company.
    -Todays presention below. Haven’t read it. Stock worth a shot.

    http://www.cansup.com/pdf_files/2007CAPP.pdf

  50. 50
    zman Says:

    Thanks Dr D. Will have a look. Regarding the day, yep, it’s one of those although I’ve been seeing more green over the last 2 hours and my single short is making new lows so it’s not all bad.

  51. 51
    jimbo Says:

    From Crown Weather this morning

    Possible New Tropical Cyclone Development Late This Week into Early Next Week:
    I just about fell out of my chair this morning when I saw the GFS model’s forecast of a tropical cyclone developing in the northwestern Bahamas on Saturday. So, I took a look at some of the other computer forecast models and they agree in one way or another that there may be some sort of true tropical cyclone development somewhere from the northwest Caribbean northeastward to the Bahamas this weekend. This potential development stems from a couple of areas. One is some deep convection east of the Bahamas, another is an area of convection in the central Caribbean southeast of Jamaica and yet another is the energy from the remanants of Karen now located to the east of the Leeward Islands. Somehow it seems that all three areas could combine in some way to form some sort of tropical storm this weekend….

    http://crownweather.com/tropdisc.html

  52. 52
    QUARRYMAN Says:

    Ah- hmmm.

    Anyone bother to look at VMC today?

    Just logging in.

    Did anyone sell their DRYS?

  53. 53
    drdavis124 Says:

    SNG Listening to talk now. Starts with rock music

    http://www.cansup.com/pdf_files/2007CAPP.pdf

  54. 54
    calvino Says:

    Same thing here, only the short is green – and I don’t like that. Only trying to cover the losses. Unless it was GE, them I would like to short way down.

  55. 55
    zman Says:

    DR D – that thing is run by Greg Noval. You’re a wild man! Is Greg giving the talk, he’s notorious.

    VMC – nice

    DRYS – been mulling a sale all day…Could of had 16 for my 85s vs the 12.70 bid at present. Like I said above, too volatile for me in an industry I’m not yet comfortable with and in the near month option.

  56. 56
    calvino Says:

    ah, fcel turned green, and true is about the only e&p on my screens that’s green, by three cents though.

  57. 57
    Sambone Says:

    Looks like Ecuador is doing a Chavez. Reporting that they are going to redo contracts with 5 oil companies.

  58. 58
    zman Says:

    my E&P list is about 1/4 to 1/3 green at present. Its big oil and service that are getting dashed against the rocks

  59. 59
    zman Says:

    Sambone – saw that coming in today’s post with the re-write of their constitution comment.

  60. 60
    zman Says:

    Dr D – something to keep in mind about selling gas in Trinidad re SNG. I’m sure you are aware of this but here’s the financials on EOG, which sells gas to be put on LNG carriers in Trinidad. It’s low cost stuff to be sure but in 2Q07 they realized a price of $2.04 / Mcf

    http://www.shareholder.com/eogresources/news/q207/20070802-258221.pdf

  61. 61
    calvino Says:

    Never heard of Greg Noval, what’s the scoop?

  62. 62
    zman Says:

    google him…pretty amazing character. Great oil man, does not play well with others.

    I still love the corporate hockey jersey’s he had when running Canadian 88 several years ago. On the back it said “kickin’ ass in oil and gas”

  63. 63
    Sambone Says:

    Z – Have you ever heard of Jeffrey Gendell and if so, what kind of performance has he done in the past.

  64. 64
    Brian08 Says:

    Nicky Re: 33…I’ve been waiting for that for 2 weeks now…Probably a little late for my OCT 134, 133, 132s…BUT NOT too late for the NOV 136s and 135s!!!!

  65. 65
    zman Says:

    So SNG is Mostly Albertan oil and gas production with Nova Scotia and Trinidad exploration.

    Lots of stacked fat sands in that Columbian basin of Trinidad Tobago. Rig delays but that’s normal and they look to be getting close. They just won over the former head of BGs T&T division which is a huge player down there.

    Off Nova Scotia they’ve got a lot of acreage but nothing discovered yet that I see. It’s tricky out there so I would heavily discount the value of the acreage

    Balance sheet is unlevered…that’s a plus and rare for a minnow like this.

    Would love to see a production profile but it wasn’t in the presentation. Production has been growing but not enough to offset Canadian gas price plummet.

    Valuation: it’s pricey to 08 CFPS est of 0.29 but I’ve only got a number from one guy so I don’t know good that is. Anybody got Canadian CFPS I’d like to see it. It also looks pretty pricey to booked reserves at YE06 of about 5 mm boe (vs a market cap of over $500)

    Reserve additions from Trinida could be very large but again as per my comment to Dr D, a Tcf is not a Tcf is not a Tcf. Depending on where you find gas prices range widely and the market for gas in Trinidad has been close to $2 for some time now.

    Management: big risk takers

    Question For Canadians in the know: Will the proposed increase in taxes be applied to CBM or just conventional reserves

    anyway, worth a look, I might take a closer look soon.

  66. 66
    zman Says:

    crude rally into the close?

  67. 67
    Nicky Says:

    RBOB goes positive and makes it to the 23.6% retracement of the move down.

  68. 68
    zman Says:

    wow, look at the turn on VLO and TSO…oil moving high now.

    TRADE: COP OCT 85 CALLs for $2.15.

  69. 69
    zman Says:

    On the COP trade I’m scaling in, just so you know. Not banging away with every gun of the broadside. Oil could easily roll back over and carry this sucker another point lower.

  70. 70
    calvino Says:

    I understood that the tar will get the worst shot, and logically since the are sucking dry the athabasca. The cbm i did not understand, although I think so. Here is the whole jack in the box.

    http://www.albertaroyaltyreview.ca/panel/final_report.pdf

  71. 71
    QUARRYMAN Says:

    DRYS seems to have bounced off a bottom.

    May be the end of day sell opp., Z.

  72. 72
    zman Says:

    Thanks Cal

    105 pages!

    Looks like nat gas goes from 58% to 63%.

    I’m still waiting on Tupp to tell me how this is a good thing for the Canadian producers,lol

  73. 73
    zman Says:

    Q – Thanks. I’m watching it and the Dow and if they close higher I’ll hold out for a morning bounce…then hope it get’s tagged so I can roll to Novembers, heh, heh, heh

  74. 74
    QUARRYMAN Says:

    explain, pls:

    Do you mean hold out on selling for a morning UPwards bounce?

    Or take 10.50 today, and wait for a DOWNward bounce tomorrow to buy back?

    I’m half out at 10.50: GO DRYS!

  75. 75
    Sambone Says:

    Cal – I have COSWF on the books and this won’t really effect them on the Royality boost.

  76. 76
    QUARRYMAN Says:

    Got it, at $10.50

    I’m HAPPY with 106%

    Now the other half is free.

  77. 77
    QUARRYMAN Says:

    BTW,

    Thanks, Z-man!

    Q.

  78. 78
    zman Says:

    Q – You beat me on the half out as I think I only got $10 for mine.

    On the second half I meant if it closes strong I’ll “probably” wait for a higher morning open to sell it. But I’ve got my finger on the trigger if it looks like its rolling over this afternoon.

    Then I hope it gets into some serious profit taking so I can go long again.

    Q – it’s nice when you get to play with house money, eh?

  79. 79
    zman Says:

    Oil trying for positive at the close…so I guess PF will be bull in another 10 minutes, hahahahahah

  80. 80
    zman Says:

    Somebody is buying a lot of the HK $17.50s Oct and Nov.

    If there were one stock where I would kick myself more than I am for not being long the PQ well before earnings it’s HK. They beat, they guide higher, its that simple.

  81. 81
    zman Says:

    NG up 0.37 to 7.42 – Technically driven short covering? You’d think no storm = look out below but maybe not. The warm weather is forcing the south, south atlantic, central regions of the country to aircondition much more than is normal this time of year. That and a broken pipe out west may make it difficult to get storage to the 3.5 Tcf level many fear it will top by Halloween.

  82. 82
    QUARRYMAN Says:

    I’d set an order (ridiculously) low on XLE Jan 76 puts and it clicked off last week.

    Somehow, I don’t think I’ll regret it.

    For fun: compare the charts of WLT and BTU today. Those two don’t correlate well.

    What’s the analog for WLT?

  83. 83
    zman Says:

    Q – WLT vs DJCOA (dow jones coal index) perfect fit.

    On my screen BTU and WLT are also a very good fit.

    WLT sure doesn’t trade with TOL

  84. 84
    QUARRYMAN Says:

    Thanks, never heard of the DJCOA.

    What is the symbol?

    Is there an optionable ETF for coal-related stuff?

  85. 85
    zman Says:

    SWN starting to believe gas up here, KWK about to run positive.

    COP should move soon (higher)/ APC too.

    Q – the symbol on my system is .DJCOA

    on yahoo it is: ^DJUSCL but their history only goes back a few days for some reason. My long term chart charts have WLT married to the thing going way back…will put in tomorrow’s post.

    COAL ETF: don’t know of any such animal.

  86. 86
    calvino Says:

    yea quarry, they call it china

  87. 87
    zman Says:

    see now that’s funny, Cal – you from Canada?

  88. 88
    calvino Says:

    amd valiantly battling off the citi downgrade

  89. 89
    calvino Says:

    connecticut

  90. 90
    Sambone Says:

    2:21 pm EST

    Crude Heads Above $80 Near Session Close

    DOW JONES NEWSWIRES
    From MARKET TALK:
    [Dow Jones] Nymex crude is making a late rally in the last half-hour before settlement, rising briefly above $80/bbl. Nov crude now -26c at $79.98 after spending most of the session trying to decide whether or not to head below $79. (matt.chambers@dowjones.com)

    [Dow Jones] Nymex crude hovers in the $79 range after briefly touching $80. Concerns about storm developments in the Gulf of Mexico may support prices, while the strengthening dollar continues to weigh down commodity prices generally, says Eric Wittenauer at AG Edwards in St. Louis. Traders are also taking the profits they have accrued over the past four weeks, Wittenauer says. Colorado State forecasters predict four more named storms, with two becoming hurricanes, for the remainder of the Atlantic season. Nymex crude -71c at $79.53.(elizabeth.landau@dowjones.com)

  91. 91
    QUARRYMAN Says:

    Check out WLTJE, OCT 25s, for 3.50 … only .27 premium

    or WLTKE, Nov 25s, for $4.00, .87 premium

    what are your thoughts, ITM calls or spec on some cheap 30 strike calls/

  92. 92
    QUARRYMAN Says:

    Cal,

    guess your right, that’s why W didn’t need to sign the Kyoto agreement: he’d outsourced all of our carbon growth to China!

    NPR this morning had the Environmental minister from Japan on and they’re 14% off their goal of dropping carbon emissions for the economy. Not the industrial emissions either. It was the burgeoning penchant of their people to have more electrical appliances.

    Katy bar the door for emissions from that hedonisticly consumptive, hungry horde of mainland Chinese!

    I think I’ll go buy some more FXI calls.

    Look at BIDU today.

  93. 93
    calvino Says:

    cibc calling for 100 oil, or 140 oil by 2012. xom says don’t worry about it.

  94. 94
    TTupp Says:

    z- i never said it was good for the canadian producers, whats with the hostility lately?

  95. 95
    TTupp Says:

    i will say that at the end of the day the royalty increase will get squashed and the name will rally

  96. 96
    TTupp Says:

    *names*

  97. 97
    calvino Says:

    quarry – what the hell do we need jobs here for, we’ll just keep a couple of hundred thousand guys in iraq.

  98. 98
    zman Says:

    Didn’t intend any. You just said the other day I had the issue wrong and I asked for clarification but gone none. Seriously thought I had something backwards. If you just meant that it won’t go through I understand your meaning.

  99. 99
    zman Says:

    $100 oil but only in the afternoon. When it’s off in the morning they think the run is done. The need some prozac in that studio.

  100. 100
    calvino Says:

    Supposedly low volume – tired fields producers will get a tax break out of the plan, but I don’t see any of them ones I follow say they are happy.

  101. 101
    calvino Says:

    Z, CIBC, not bimbo TV. These guys are serious.
    http://www.marketwatch.com/News/Story/Story.aspx?guid={2D5D7DA1-1C71-4FB3-AAE6-F4B66CDE7F63}&siteid=nbi

  102. 102
    QUARRYMAN Says:

    Speaking of outsourcing, who needs an army when your have Blackwater.

    I want to own some options on Blackwater.

    Talk about a growth company!
    (as in cancerous growth)

    What’s their stock symbol?

    DFA (Death from Above)
    LAL (LockandLoad)
    MERC (oops, already taken)
    RPA (Rumsfeld’s private Army)
    NMA (No Media Allowed)
    HNB (Hillary’s No Better)

    … funny that Whitewater almost brought her down!

  103. 103
    TTupp Says:

    yea man its on the news here every night

    thought i told you that it was going to effect to smaller producers with declining assets… thats all i read on the bmo site… they didnt really make a big deal out of it so i figure its going to be one of those situations where it gets squashed. id probably bet on it…. alberta is probably one on the most conservative, pro business provinces

  104. 104
    Sambone Says:

    Q – Hmmm, tells us how you really feel. LOL

  105. 105
    calvino Says:

    quarry , lol

  106. 106
    zman Says:

    Tupp – you might have and I missed it. My apologies.

    Upstream ran an article last night that made it sound like they’re going to push it through despite threats from ECA and others.

    Cal – couldn’t get that link

    Independence Hub at 440 mm/d last count was 250. That takes a little bull out of those import declines.

  107. 107
    Sambone Says:

    TT – I believe it will go through. See “Halloween surprise”.

  108. 108
    zman Says:

    Ok – Quarry must be from Canada re that Blackwater stuff, lol

    DRYS hanging tough up $2

  109. 109
    zman Says:

    Crescent Point energy trust says they will put their entire budget $150mm into….Saskatchewan next year. Sorry Albie, we don’t like takes that much.

    Tupp, you’re probably right, if they do it they’ll get nailed by the people who can walk, not the oil sands but the conventional oil and gas types with lots of land in multiple provinces.

  110. 110
    QUARRYMAN Says:

    My oldest nephew is E-6 Marine back from Anbar/Fallujah/Haditha.

    … many stories about BW guys.

    There’s more paid mercs/consultants than military over there.

    … as to Canada, nope, but funding BW and the others is why our ‘Northern Dollar’ is at parity or better to Uncle Sugar.

    Not only do we need a passport to go there, we can’t even get change back from a USD!

    Next thing we know, Bush will be speaking French at a state dinner in Ottawa.

    ’nuff said

    HAVE A GREAT DAY ALL!

  111. 111
    Nicky Says:

    Energy complex – Brent, distillates and rbob have now made a deep enough correction to the downside but wti looks incomplete so we may only have seen the first leg down of 5 and currently be in ii up. If this is the case obviously the rest of the complex will trade lower too.

  112. 112
    calvino Says:

    http://www.marketwatch.com/News/Story/Story.aspx?guid={2D5D7DA1-1C71-4FB3-AAE6-F4B66CDE7F63}&siteid=nbi

  113. 113
    calvino Says:

    Try and past the whole thing in to the browser, it’s getting cut off here.

  114. 114
    zman Says:

    Oil flat on the day in the after market.

    Q – don’t hold back

    N – thanks

    Anybody got a small cap they want reviewed for the post…first come first serve

  115. 115
    Sambone Says:

    W can speak french? Wow, who would have thunk it.

  116. 116
    calvino Says:

    guid={2D5D7DA1-1C71-4FB3-AAE6-F4B66CDE7F63}&siteid=nbi

  117. 117
    calvino Says:

    ok, here it is in two halves, splice them together at the guid=

  118. 118
    calvino Says:

    Z, Saskatchewan is loving it, so is BC. Many of these guys are happy enough to work In wyoming in powder river as well.

  119. 119
    calvino Says:

    Funny thing is the last conference I heard, Peters, they had a section devoted to saska.

  120. 120
    zman Says:

    Thanks I got it Cal – I don’t think it’s the 9th inning, more like the 6 or 7. You get prices up that high and we’ll ring colorado with trend and heat the oil of shale by the bucket full.

    Even so , it’s a great reason to own RIG, DO, and NE as the only way to get size reserves with good economics is to go deep offshore.

  121. 121
    zman Says:

    wow nfx, swn, and kwk did indeed rally.

    majors may be starting a late day recovery

    oil green now

  122. 122
    Nicky Says:

    spectacular sell off by Google in the last hour…
    metals and commodities starting to show some signs of reversal ie gold, silver, wheat

  123. 123
    zman Says:

    Thank Nicky – don’t forget to tell me when to buy OJ

  124. 124
    zman Says:

    That Monthly chart of CHK is pretty compelling. Nice long base, about to break out to the upside. Another 2 point and I’d bet it plays catch up to some of the other large cap E&P names with higher multiples.

  125. 125
    zman Says:

    Thanks guys, not a bad day considering the turn. Out for awhile.

  126. 126
    Nicky Says:

    Quite a bounce since the close. Insurance ahead of tomorrow I guess.
    Z – you think the inventory data will be worse of better than expected. I am reading that it is likely to be more bearish than they are predicting.

  127. 127
    zman Says:

    Good evening Nicky,

    Up $0.30 since close.

    Expectations are pretty close to par, small decline in crude, small builds in mogas and distillates. Historically we should be getting builds in crude this time of year but I don’t put a lot of faith in averages and people apparently only cares what happens at cushing and there I have no idea, lol

    The only number I have a problem with is gasoline being a small build…I think its warm but not too hot and people are out driving to parks and stuff like that. Don’t laugh, it happens. Call it a prequel to an Indian Summer. Anyway, that can drive up demand for short periods.

    Sorry, don’t have a great feel for the numbers tomorrow. Maybe I’ll come across something later tonight.

  128. 128
    Nicky Says:

    Thanks Z.

  129. 129
    zman Says:

    N – crude imports took a big jump last week, those generally swing up one week and back the next, could put that crude well back into negative territory (which I’m sure PF would hoot and holler about)

  130. 130
    calvino Says:

    A pertinent article on Bloomsberg to your BTU aspirations. Appears that the Chicoms just pinched our S. Korea allies for an extra $25/ton. The Aussies are also doing quite well, in requiting Japan with a huge markup from last year. Seems like the dirty rocks are heating up, and that BTU buy in Koalaland last summer turning very auspicious.http://www.bloomberg.com/apps/news?pid=20601087&sid=aSO1L05oew.I&refer=home

    It would may be an interesting trade tomorrow, if you have some time to delve into the particulars.

  131. 131
    zman Says:

    Hey Cal – thanks for the heads up!

  132. 132
    fraser921 Says:

    http://biz.yahoo.com/ap/071002/tesoro_ethanol_blending.html?.v=1

    ethanol is weak

  133. 133
    fraser921 Says:

    Re Drys

    I am somewhat suprised with drys swift move. I thought earnings would be the catylst. In august the stock was below 50. So it has doubled in 1 month!!!My current strategy is covered calls.

    I think 100 is a good place to sell with a risk of a 10 to 15 5 down move.

    Longer term, the earnings will be blow out in q 3 and q4 and they have 99 % of their days unfixed for 2008.

    So who knows, how high this can go. My gut tells me it will be a 10 bagger. So a move to 150 is doable but the easy money has been made.

    Im long big all covered with short calls.

    for instance at yesterdays closing prices

    long 100 at 98.71 short a oct 90 call at 11 would give you an annualized return of 55 % if the stock stays above 90 over the next 16 days. (its even better as you get a dividend during this period.

    Its too volitile for a straight call purchase, except a few days before earnings, imho or after a big hit 15 % or more

  134. 134
    Tory Says:

    Sample design…
    This is super.
    Ok! Best regards!

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