30
Oct

Trying Tuesday – EOG Guides Big, NM To Push Dry Bulks, Oil Off Before Fed

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Site Trouble Watch: The main site appears to be functioning well this morning after some midnight maintenance on a router. We will attempt to run the site from there today.

Commodity Watch:

  • Crude Oil: another big day closing up $1.67 at $93.53 on the back of a seemingly perpetually falling dollar. This morning crude is trading of $1.70 to just under $92 as profit taking steps in. This is the dip towards $90 I've been talking about and I don't expect much damage to occur with the Fed tomorrow. If the Fed lowers rates tomorrow I would expect a resumption in the dollar's decline and a resurgence in crude.
  • MEND frees six hostages in Nigeria.
  • Sudanese Rebels, "Leave the Sudan or become targets.
  • Qatar's oil minister: oil markets are out of control and a supply increase from Opec will not contain them.
  • Mexico is getting 600,000 bopd of shut in production back on line in the wake of high seas.
  • Natural Gas: The December gas contract traded up $0.16 yesterday as a combination of higher oil and lower reported imports, especially LNG where volumes are running half of year ago levels, supported prices near the $8 mark. This morning gas is trade +/- a couple of pennies this morning.

Holdings Watch:

CALLS:

  • (EOG) - Entered the November $85s for $1.80. Last bid $1.75. See earnings watch below.
  • (EXM) - Entered the November $80s for $5.40. Last bid $5.80. See (NM) earnings below which should bode well for the sector today.
  • (RIG) - Added the November 120s for $3.50, last bid $3.80. Still hold the November $115s which are back in the green now by about 25%. RIG reports Wednesday and I'm likely to punt the $115s before the close today.

Earnings Watch:

EOG reported another nice quarter.

From Yesterday's Blast and Comment On The Block: Anyone looking for a fairly risky trade with pretty good potential return, EOG reports tonight, generally don’t disappoint and they should be very happy with current gas prices. Their shuts in the rockies are unlikely to let them up 2007 guide (4Q) but they may talk a little about next year. Expect another record quarter out of the Barnett. ZTRADE: EOG $85 for $1.80 with the stock at $82.30

  • Let me address that in pieces:[they] generally don’t disappoint:
  • Reported EPS of $0.79 (after backing out non cash items) versus $0.81 expected. But that's EPS, and we don't care about EPS. For E&P companies it's all about the cash flow, production, and costs.
  • CFPS: $2.79 vs $2.69 Consensus. (First Call range was $2.38 to $2.85, median $2.74)
  • Production: Up Big. In the U.S., EOG's crude volumes rose 24% versus the year ago quarter. NG and NGL volumes rose 19% vs 3Q06. While EOG didn't specific quidance for the quarter these volumes should please just about everyone as they were up just over 11% for the 9 month period, which is in line with EOG's 2007 full year guidance. (more on guidance below)
  • Cash Costs Are Under Control on A Per Unit Basis. 3Q07 cash costs (the costs of getting it out of the ground and sold: LOE, production taxes, transportation, G&A, and interest expense) crept up to $1.68/Mcfe from $1.57 in the year ago quarter. This is a very manageable rate of growth and it means EOG remains one of the lowest cost operators around. While the sequential quarter actually showed a large decline in costs it's not an apples to apples comparison as there were some extra items included with last quarter's production taxes. Still, LOE dropped to $0.74 from the second quarters $0.79 due to increased production from lower cost (higher return) projects in both the Bakken oil play (North Dakota) and the Barnett Shale.

Their shut-ins in the rockies are unlikely to let them up 2007 guidance: No mention of 2007 guidance other than to say that the Barnett Shale was performing better than expected but more on that in a second.

They may talk a little about next year. This is where they really delivered offering the first guidance for 2008.

  • Range is up 13 to 17% for the total company. That's better than the 11.5% target for this year which they appear to be on track to besting.
  • The range is price dependent with a $7 natural gas price deck yielding the low end of the range and a $8 deck yielding the upper band.
  • Oil production is expected to rise 33% irregardless of price. That simply means EOG will be getting a lot oilier which isn't a bad thing given prices and the fact that they are still the gassiest large cap E&P out there (currently 89% of production is natural gas). See Bakken Field discussion below.
  • Trinidad, Canada, and the UK are expected to remain flat YoY, which is as good as anyone should have expected.

Expect another record quarter out of the Barnett. Mission Accomplished. Last quarter EOG highlighted some monster Shale wells (12mm/d IPs) and this quarter they are boosting their expected 2007 exit rate for the Barnett from 300 to 350 MMfepd. Wow. They reference a more efficient drilling program and improved well results but are leaving the details for the Q&A.

Bakken Play. EOG's big oil play continues to improve. The cited multiple new wells coming in at 2,000 bopd rates and one pretty long range step out (9 miles) that allowed them to expand reserve estimates here by a third from 60 to 80 million barrels. This will significantly increase the drilling locations as well. In July, EOg was running 4 rigs continuously here, that has since been stepped up to six and they plan to be running 8 rigs by early 2008.

Conference call at 10 EST

Other earnings of interest out this morning:

  • (FTI) - Reported a beat of $0.60 versus $0.55 Street consensus. Raised 4Q07 guidance range slightly, with the bottom end of the new range equaling current consensus. Huge inbound orders and record backlog in subsea which will have positive implications for CAM and OII. Also, spinning off some non-core operations which combined with the guidance will likely mean a pretty strong stock today. Conference call 9 EST.
  • (NM) - Announced intent to buy three (potentially five) Capsize vessels after the close yesterday. Blew top line($213mm vs $134mm expected) and EBITDA estimates away. Conference call at 8:30 EST.

Crack Spreads: The left coast continues to outperform last years averages however the incredible rally in crude caught up and sent both west coast and pacific northwest cracks lower last week. The only region not suffering in the last few weeks has been the east coast which I would say would bode for fewer estimate reductions for (SUN) however the quarter still has two months left. We need to see a continuance of the heating related demand evidenced in last week's EIA inventory report.

cracks-102907.jpg

Odds & Ends

Analyst Watch: (NXY) and (PCZ) upped to outperform at FBR, (TGP) to outperform at Wachovia, (SU) raised to neutral at FBR with a $106 price target.

COP / BTU: Sign deal to site Coal to Gas facility in Kentucky. More on this later.

194 Responses to “Trying Tuesday – EOG Guides Big, NM To Push Dry Bulks, Oil Off Before Fed”

  1. 1
    aitrader Says:

    Persian Gulf Oil-Tanker Rates May Drop Amid Oversupply of Ships

    — Bloomberg

    http://www.bloomberg.com/apps/news?pid=20601072&sid=agLuE6gQS4k8&refer=energy

  2. 2
    scoop006 Says:

    Z- Why sell the RIG 115 & hold the 120

  3. 3
    zman Says:

    Scoop – that’s probably the plan. They report in the morning.

  4. 4
    zman Says:

    EOG – UBS ups pt from 83 to 88, maintain neutral…useless…why follow it dude?

    FBR upping pts on TLM, ECA, CNQ

    FBR picks up KGS with an outperform rating…this is KWK’s spinout

  5. 5
    Sambone Says:

    Test

  6. 6
    Sambone Says:

    5:54 am EST

    Crude Down $1/BBl On Profit Taking

    Dow Jones Newswires

    LONDON — Crude oil futures fell by more than $1 in London trade Tuesday as traders booked profits ahead of Wednesday’s weekly U.S. Department of Energy oil inventory data.

    Traders sought to pocket gains after Monday’s record highs, but many suggested that the move was likely to be a correction in the ongoing uptrend.

    “To us, the markets still seem to be in the throes of a very aggressive push higher, as evidenced by yesterday’s 20,000-lot expansion in open interest and most likely more to follow,” said MG Global analyst Ed Meir.

    “Given the market’s myopic focus on the upside, we think corrections will remain short-lived, and we could very well could plow right through tomorrow’s EIA numbers, as participants gun for the $100 target on crude.”

    At 0941 GMT, the front-month December Brent contract on London’s ICE futures exchange was down $1.23 at $89.09 a barrel.

    The front-month December contract on the New York Mercantile Exchange was trading $1.29 lower at $92.24 a barrel.

    The ICE’s gasoil contract for November delivery was down $3 at $767.25 a metric ton, while Nymex gasoline for November delivery was down 255 points at 230.19 cents a gallon.

    —By Nick Heath

  7. 7
    zman Says:

    This is a test of the emergency oil sell off system. This is only a test. If this had actually been an emergency oil would be breaking below $90. Since it is now rallying north of $92 look forward to higher prices soon.

  8. 8
    scoop006 Says:

    #7 cute

  9. 9
    kaman Says:

    Seriously, my feeling is that having breached 93, traders will take it on up to 100….just because its within reach, and establishes a psychological level. Is there anybody that foresees a return to sub $70? cheers K

  10. 10
    zman Says:

    CLR @ $24.67. That’s a double from the IPO.

    EOG would be at least $1 higher in a favorable oil day environment. It’s early and I’m hanging on to my position.

  11. 11
    zman Says:

    K – not soon, not with winter approaching, maybe in January you see sub $70s. I do think that once it gets to $100 a lot of “fast” money will pull out and go to gold, silver, used tires, whatever, in a profit selling slump that will test $90 very quickly.

    Is the general consensus 25 or 50 bips for tomorrow?

  12. 12
    zman Says:

    EOG headlines this morning:

    ” -profit hit by weak NG market” ~ market watch

    “EOG 3Q profit falls on costs” ~ AP

    “profit off on lower natural gas” ~ Reuters

    They just don’t get it.

  13. 13
    scoop006 Says:

    #11 no cut

  14. 14
    zman Says:

    Tex – great ? I don’t know the answer to. Will check during the EOG call and get back with it. When will the CLR guys get on the with trading options???!!!

  15. 15
    O.W. Says:

    #11 – 25bps is consensus… although some say they might not cut at all this time.. that scenario of course, would quite hurt our portfolio…

  16. 16
    O.W. Says:

    re #12 .. the more the rest don’t get it, the better for you long term!

  17. 17
    zman Says:

    Texana – re Bakken and CLR / EOG link – obviously people construing EOG’s recent performance their with big upside for CLR. CLR is in several fields here and it’s a big piece of their Rockies reserves – 33%

    OW – truue on the port hit and on 12 although it looks like they’re wising up now with the stock at $85…CCall starting now…notes to follow….

  18. 18
    zman Says:

    EOG – Notes

    punting McKensie stuff…delays in pipeline, worry over tariff, mixed drilling results

    warm winter case gets you the 13% growth

    crude will increase due to Bakken and to shift to Canadian oil projects.

    all growth coming from organic US

    the oil projects are 100+% IRR

  19. 19
    zman Says:

    Bakken

    22 hz wells drilled to date
    $7.50 F&D
    > 175,000 acres
    sweet oil
    receiving WTI less $6 and see it shrinking to $3 with completion of a new pipeline in December.

    stepout drilling started. pr contains only 1 of these more ongoing.

    think field is 20 miles long and several miles wide.

    they think the 80 million barrels will expand via stepout and downspacing. they’re on 640 acre spacing, soon drill pilot at 320 acre spacing.

  20. 20
    O.W. Says:

    Everything is deep red with the exception of EOG.. NM unchanged much

  21. 21
    zman Says:

    Barnett

    avg 450 mmcfgpd in 2008 (ye 2007 exit of 350 expected now). That’s in the $7 case, in the $8 case it’s slightly higher.

    Frac cost reductions. Purchased sand mine.
    This saves 350K per well, can use the leased equipment for about 35% of their planned drilling in the Barnett.

    Look for bigger savings 1Q08.

  22. 22
    dooch Says:

    FTI getting crushed!!!!!!!!!!!1

  23. 23
    zman Says:

    Trinidad – flat next year. up with contracts in both 2009 and again in 2010.

    Overall non-Barnett growth is “spot-on” so far in 2007

    FTI – yes and it’s banging OII and CAM

  24. 24
    aitrader Says:

    Any EIA consensus estimates for tomorrow yet? Rumour mill says a build but I don’t have specifics.

  25. 25
    zman Says:

    EOG CEO saying the GOMex gas rig count is a bigger deal than people know as it will be a harbinger of future weak activity and therefore is supportive of NG prices.

    Hedge: 18% hedged for gas over $8 and will likely add more.

    Oil – no hedges.

  26. 26
    Sambone Says:

    9:58 am EST

    Nymex Crude Down As Goldman Calls For Profit Taking

    By Elizabeth Landau
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude-oil futures slid more than $1 Tuesday, taking a breather after four sessions of settling higher as traders took profits before the Wednesday release of U.S. petroleum inventory data.

    News that state-owned oil company Petroleos Mexicanos, or Pemex, will restart some oil production shut in over the weekend also pushed down prices.

    Light, sweet crude for December delivery was recently down $1.50, or 1.6%, at $92.03 a barrel on the New York Mercantile Exchange. The front-month contract settled at a record high of $93.53 and hit an all-time intraday high of $93.80 Monday. Brent crude on the ICE futures exchange was down $1.22, or 1.4%, at $89.10.

    Concerns about a large gap between global oil supply and demand have boosted crude more than 30% over the last two months. Tensions in the Middle East and a weak dollar have also helped futures climb to ever-higher records in recent weeks.

    Futures retreated slightly from all-time record highs Tuesday as Goldman Sachs (GS) recommended that investors book profits, even though the bank warned that prices could climb further and surpass $100 a barrel.

    “We believe that the risks are now becoming more balanced and that the downside risks we have embedded in our end of first quarter 2008 oil price target of $80” a barrel “are already gaining momentum,” the bank said. Goldman Sachs, which in the past has made waves with its oil price predictions, says “we are not trying to call a top here.”

    Traders were also positioning themselves ahead of inventory data from the U.S. Department of Energy, due Wednesday at 10:30 a.m. EDT. The data is expected to show a 100,000-barrel build in crude stocks and a 0.5 percentage point increase in refinery use for the week ended Oct. 26. In each of the last five years, the data for this week has shown an increase in refinery use and crude-oil stocks, said Peter Beutel, president of energy risk management firm Cameron Hanover.

    “(There’s) a little profit taking here thinking that if the history shows up again, we could see an increase in utilization and crude oil stocks,” Beutel said. “If we see a decline in utilization and stocks, it will be doubly bullish.”

    Prices rose on Monday when Pemex said it had taken 600,000 barrels a day of production off line. The company says it will restart that production Tuesday or Wednesday, sending negative signals for crude prices.

    The pullback in crude futures prices represents a slight correction, and prices will probably resume their upward trek, analysts said.

    “The crude market’s overnight selloff looks like a well-deserved correction that could easily be followed by another run at new highs in tomorrow’s trade,” Jim Ritterbusch of Ritterbusch & Associates in Galena, Ill., said in a note.

    Ministers of the Organization of Petroleum Exporting Countries on Tuesday ruled out putting more crude onto the market in addition to the increase that OPEC already promised. The 12-member group is due to add 500,000 barrels a day of output from Nov. 1.

    November heating oil was recently down 1.96 cents, or 0.8%, at $2.4450 a gallon, after hitting an intraday record high of $2.4723 a gallon Monday. November reformulated-gasoline blendstock was recently 3.23 cents, or 1.4%, lower at $2.2951 a gallon.

    —By Elizabeth Landau, Dow Jones Newswires

  27. 27
    zman Says:

    AI see Sam’s post

  28. 28
    Popeye Says:

    Reuters – 1 hour ago
    MIAMI, Oct 30 (Reuters) – “Tropical Storm Noel weakened slightly as it moved inland over northern Cuba on Tuesday, but the storm that killed more than a dozen people in the Dominican Republic was expected to briefly become a hurricane later in the week …”

  29. 29
    zman Says:

    Noel has NG up another $0.15 this amto over $8 on the December contract. Sam – any thoughts?

  30. 30
    aitrader Says:

    Zman – just to run some “silly logic” by you. a) Ships sitting empty in the P gulf, b) big drop in imports last week creates drop in stocks, c) low crack spreads and low demand = d) producers are holding off crude purchases due to high oil price + low demand…???

    “Silly” or “possibly sound” in your opinion??

  31. 31
    zman Says:

    ZTRADE: adding to the RIG $120 November calls for $2.55 with the stock down $2.90-$3.

  32. 32
    zman Says:

    I think the big drop in imports was more local (Mexico) but other sources could have been slow to get here. Refiners are definitely dragging their feet on delivers and working (to a higher %) from their tanks. That makes sense. I would not characterize product demand as low at this time except maybe for HO but that’s a small market and about to crank up.

  33. 33
    Sambone Says:

    Z – No clue on Ngas. Nothing in the news. All I can think of is they are worried about Noel. Noel will not go to the GOMEX, period.

  34. 34
    zman Says:

    Runaway pain in energy now which speaks more to fear over the rate cut than today’s oil and gas prices or earnings results or warnings that I’ve seen. You name it, it’s red from majors to drillers to ships.

    Thanks Sam, that’s what I was looking for re Noel.

  35. 35
    scoop006 Says:

    Z- now a good time to sell SUXS?

  36. 36
    O.W. Says:

    scoop – we have the December SUXS, so there’s still some time.. while the trade still SUXS… looks like the only downward hedge we have right now.. Z will stand me corrected, of course.

  37. 37
    zman Says:

    yeah. You know it ran up with oil, failed to tumble during the Alberta Royalty scare and now the brokerages are telling you they won’t be impacted. I didn’t buy the put for the Royalty, I was looking at it as a hedge if oil fell…just not working for me.

  38. 38
    zman Says:

    all that said, I’m still hold the SU XS put

  39. 39
    aitrader Says:

    DRYS now back in its old range with EXM following close behind. Seems like a good time to go long.

  40. 40
    zman Says:

    Agreed, I’m sitting on hands until later in the day. Like to see a reversal here but it’s the day before the Fed so who knows.

    EOG Q&A still ongoing…very well received. Bakken reserve upgrade was a risked number which is probably pretty conservative. Also , earlier said Bakken play was 20 miles long by “several” wide. They just said several = 6 to 7 miles wide. That’s a big play.

    Their Alberta stuff will see little problem from the royalty hike since its low volume.

  41. 41
    O.W. Says:

    from Phil Davis today:

    I am so happy we loaded up on TSO and XOM puts!

    We’re not out of the woods yet but I’m very glad that we pressed, rather than panicked out of our positions on Friday’s ridiculous run-up based on the Kirkoren news. On Friday morning, as I was advocating shorting the hell out of TSO at $65 I said: “I’ll tell you what bothers me about TSO – why would he announce he wants to buy 28M shares at $64 with the stock at $55. That is irrational behavior, he’s not buying the whole company, just 16% of it (and now he’s paying for 17.3% worth). The scam is that Tracinda already owns 5.5M shares and now all he has to do is say they couldn’t come to an agreement, dump his 5.5M shares ahead of earnings and he gets away clean while everyone else eats the stock. That’s my theory and I’m sticking to it! Earnings are on the 1st.”

    Z, are you having similiar concerns?

  42. 42
    zman Says:

    starting to see a little late morning recovery. VLO held $70, BTU taking a bit of a bounce.

    Re TSO: I would ask that you not share ANY of this with his site or any other site but since you ask.

    1) Phil: is negative on energy companies from a moral standpoint.He believes they are evil. I think Phil is a smart guy but our politics don’t mesh there. So know that first about his oil related comments.

    2) Tricenda is not doing a pump and dump. When you buy a 1,000 shares you call your broker. When you want to buy $22 million you tally what you think the market will bear and make an offer. Simple as that. If he were to just start buying in the open market he is likely to drive the stock well over that price getting there. Kerkorian is not known to be a P&D artist.

    3) TSO may tell investors to reject the deal b/c they don’t want that big of activist shareholder in their stock. I think this would be unwise and potentially a violation of the fiduciary responsibilities to seek the best price for their stock.

    4) Phil’s move to short at the $65 mark is what I should have done since any idiot but myself could see that an arb spread would open. At this point I think the spread is over large.

  43. 43
    O.W. Says:

    Thanks, Z.. that’s part of his free website as well..never have and never will share info from members’ area .. that is for your members’ eyes only..vice versa for his members’ area… I was just seeing the huge difference in forward opinion (real huge) and I value you both very much so frankly it has completely puzzled me.. because both arguments look convincing to me.. I do regard you as the better expert in the field, and if you say emotions are involved in this that by itself kind of lowers validity of the argument.. that being said.. he is a shorter term momentum trader and a very good one at that.. so I guess it does work for him.. just as much as it works phenomenally on a different time frame over here… back to market

  44. 44
    aitrader Says:

    Not sure what the spreads are today but I went short and long on TSO with Nov 62.50 calls and 60 puts. My break even is about $4 but this seems to be a good bet given the possibilities. If the board rejects the offer then it’s likely back to 55. If not then 65+ for a spell. If I get lucky I can do both 🙂

    Made the trade after running by Mr. Z. Thx again Z.

  45. 45
    zman Says:

    OW – I just have to say it for the new folks every once in awhile. Phil is admittedly a better trader than I and he has sharp market instincts.

    AIT – nice job! Wish I had followed you there.

    Cracks improving but refiners don’t yet care.

    E&P getting hit hard. NFX pullback is inexplicable to say least given cheap, gassy nature and prices this morning. Not a lot of logic to these down moves other than fear of tomorrow.

    25 bips or no cut, what’s the latest?

  46. 46
    O.W. Says:

    DJ US Stocks Look Feeble Ahead Of Fed

    ——————————————————————————–
    Tue Oct 30 12:31:45 2007 EDT

    Until now, the market has displayed
    near certainty that the Fed will deliver a 0.25 percentage-point cut to its
    target for the federal-funds rate, and some on Wall Street have even started to
    expect a half-percentage-point cut to that key overnight bank lending rate.

    But The Wall Street Journal reported that Fed policy makers are considering
    making no cut at all, a blow to market hopes for an aggressive easing of the
    cost of borrowing. “(There is) just a bit of uncertainty and cautiousness
    heading into the Fed (decision) tomorrow,” said Robert Pavlik, chief investment
    officer at Oaktree Asset Management.

  47. 47
    zman Says:

    Crude getting hit hard all of the sudden, down $2.25 more than reversing yesterday’s gains. Hey Nicky, you out there?

  48. 48
    zman Says:

    biggest volume of the day for crude in last few minutes BUYING crude off this bottom between 91.10 and 91.30.

  49. 49
    Sambone Says:

    Where is Nicky? Havn’t heard from her in awhile

  50. 50
    O.W. Says:

    new sector LOD

  51. 51
    zman Says:

    Ugly – and even with oil off $2+ the mkt is stuck in a 10 point range. Days like today, what’s red gets redder, what’s green get’s less green until you reach some catalyst for change. With nothing out of the fed I can’t imagine what that would be unless something blows up in energy land (rebels or otherwise)

  52. 52
    Sambone Says:

    GS saids “Take profits”

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aK8JKWDdg0vM&refer=home

  53. 53
    zman Says:

    Sam – on oils or everything?

  54. 54
    Sambone Says:

    Oil

  55. 55
    zman Says:

    Thanks Sam. sorry, asked before I read.

    What a pump and dump shop. The problem with this is it implies a sale in the equities which are by no means discounting oil over $70 let alone over $90.

  56. 56
    zman Says:

    That story says they said $95 in July which is true but it fails to mention that they reiterated this call in the last month. Now they are saying the fundamentals for 1Q are changing? Gotta say BS to that. It’s a good trading call on taking profits but they helped push oil up here, not fundamentals and the “fundamentals” have not changed in this short period.

  57. 57
    zman Says:

    Sam – got mkt targets for a now cut outcome? Think we break 13,500 dow, 13,100?

  58. 58
    Sambone Says:

    Dow – 1st support is 13697. 2nd support is 13324. Oil – 1st support is 86.45. 2nd support is 81.10. GS – My opinion is that they went short yesterday in their portfolios.

  59. 59
    Sambone Says:

    Say, Say, Say

    An article on Bloomberg discusses how Frederic Mishkin, the newest Fed member, may be the harbinger of impending Fed action. The article notes that in two talks just prior to the September 18, 2007 FOMC rate decision, Mr. Mishkin gave clues that the Fed would cut aggressively. In September he advocated a preemptive approach. The Fed then cut both Fed Funds and the Discount rate by 50 basis points. Why do we care about what Mr. Mishkin has to say? Because he is a close ally of Fed Chairman Bernanke and is thought to carry much weight in the decision making process. Last month he stated that he is very concerned with the tightening credit conditions and published a research paper which was read at the Fed’s symposium in Jackson Hole, Wyoming which which he stated that the Fed can be more successful in lowering rates “aggressively” in response to a deep slump in home prices. If Mr. Mishkin still has Mr. Bernanke’s ear, a Fed Funds rate cut of at least 25 basis points appears to be in the cards for tomorrow.

  60. 60
    zman Says:

    S – thanks. So Bernanke is Mishkins…boy.

  61. 61
    cattleman Says:

    Z Focusing on the refiners, what are your thoughts on November calls? You know, the ones purchased last week in response to the Tracinda excitement.

  62. 62
    zman Says:

    C – I’m going to hold them through report dates and TSO’s 10 days of examination of the Tricenda offer. Not adding…just holding.

  63. 63
    zman Says:

    Margins took a dip last week but should be improving this week…would like to see estimates for tomorrow’s numbers. The products expectations are once again hard to locate.

  64. 64
    cattleman Says:

    Z Can we anticipate a positive response in the cracks to reduction in crude?

  65. 65
    ram Says:

    ZMAN – Almost every energy related is getting killed – does it seem to be on lower volume?

  66. 66
    cattleman Says:

    You answered before I asked, thanks. Back to the cattle, easier to figure out but just as hard to manage.

  67. 67
    zman Says:

    so far all I’ve seen is an expectation of a rise in crude stocks of between 100 and 400,000 barrels and a drop in distillates of 1.0 million.

    C – yes, for instance yesterday’s move up in crude saw a better move in products, resulting in a rise in cracks, especially on the gulf coast gasoline crack.

    Today oil is off 2.15% (Dec)
    unleaded off 1.6%
    HO off just 0.7%

    so cracks are rising again today. But every time you have a big move in crude, the refiners will trade with it and not the cracks, at least at first.

    WNR is getting beat harder than it should be on some UBS comments that were sort of backhanded when they raised it from sell to neutral yesterday, siting it’s high degree of earnings sensitivity to refining margins…so if that’s the case, why sell it off hardest now when they are in the process of bottoming.

  68. 68
    O.W. Says:

    ram – I hope it won’t matter this time around, but it’s on higher volume… XLE already doubling yesterday’s volume and it’s only 13:30 EST

  69. 69
    zman Says:

    Ram – given the time of day I’d call it average volume as I just checked a handful of individual stocks cop, xom, wnr, rig

    xle – a lot of that was early and it appear to have been a big bought of selling followed by an almost as big bought of buying. We’re basically sideways since then with quite a bit of volatility.

    OIH same pattern, volume a little ahead of yesterday’s total.

    This does not look like sector dumping

  70. 70
    zman Says:

    EOG Thoughts:

    I’m going to hold on to EOG a little longer but I don’t trust this market. Today’s good results will be old news by tomorrow if the tone turns more unfriendly. Right now, it’s hovering at my strike and I really don’t want to overstay my welcome. If the Fed weren’t on the roster and GS weren’t playing their reindeer games I’d be a buyer here. But I’d just as happily buy it $5 south of here as well.

  71. 71
    ram Says:

    A liitle longer means you will be gone before the bell rings?

  72. 72
    Sambone Says:

    Z – You may want to cast an eye towards BQI. It has a “Cup and handle” chart, and the street is expecting the independent lab results at anytime. It’s got a little option action on the Nov and Dec 5’s.

  73. 73
    zman Says:

    I’m going to milk it for all its worth …right now it’s 50% in a day and how can you argue with that on a day like today? Tempted to set a stop here. If oil improves into the close, which is very possible, EOG will go on to new highs and I don’t want to just punt and miss a potential double. But tomorrow is another day. If you can tell me 100% what the Fed is going to do I’ll tell you what I’m going to do, LOL.

  74. 74
    zman Says:

    Sam – remind me when they expect to actually get their sludge out of the ground? 2010? Do you have an NAV worked up here (copy of one?). Nice chart I’m just still far afield from knowing the story. Also, they are NOT in Alberta, right?

  75. 75
    zman Says:

    By the way, while we’re dishes, how’s the cup and handle look on EOG and is that a failed one on NFX or is it just a buying opportunity. I’m only asking for the TA as you guys/gals already know my FA opinions here.

  76. 76
    Sambone Says:

    Not Alberta. Expecting a JV announcement sometime in 1H 08. XOM or CEO could take them out easy. My long term target is $20us. I think they will be taken out before steel in ground, because they will have the reserves that the big boys want.

  77. 77
    zman Says:

    Sam – got a handle on the reserves per share? I’ve heard billions which begs the question, why is it stuck a $5 and what drove it to $8 in ’06?

  78. 78
    Sambone Says:

    Both look like cup and handles to me. Dorsey Wright still has EOG with X’s which means breaking out to the upside but NFX has 0’s, which anit good.

  79. 79
    zman Says:

    Sam – thanks …need one that tells me when the OOOs are coming before they actually get here. How did the DW look yesterday?

    how about CHK while you’re at it and RIG…you’re not busy are you? 😉

  80. 80
    aitrader Says:

    NBR hit a new 52-wk low today at 26.82. Looks like nothing but downside ahead.

  81. 81
    O.W. Says:

    we need VLO to close above $71 to make the outlook there a little better…

  82. 82
    aitrader Says:

    Oil just broke below 91.

  83. 83
    zman Says:

    AI – hear ya, I’m a schmuck for not being in puts there.

    This is the anticipated sell off to $90 (or thereabouts), numbers could easily turn this back up tomorrow but Fed will be more important

  84. 84
    aitrader Says:

    Well you were the one that seconded my NBR puts trade the other day so thx again. Sorry you aren’t on the ride tho!

  85. 85
    zman Says:

    massive volume on this crude sell off into the NYMEX close.

  86. 86
    zman Says:

    oil hit 90.02, still very active after the close and may be starting a bounce.

  87. 87
    Sambone Says:

    Reserves on BQI – Company has 10 billion. We’ll know when lab results come out.
    NFX – DW had three x’s which means it was breaking out to the upside yesterday. I have a buddy who can read it better than I can, so I’ll get back to ya on NFX, CHK, and RIG.

  88. 88
    aitrader Says:

    Z – looking at EXM, DRYS, and DSX calls now DSX seems to have the lowest premium and reports tomorrow. Any reason they’d be a poorer choice among shippers against EXM or DRYS calls?

  89. 89
    zman Says:

    No, they are more time charter than spot than the other two which is a hinderance when rates are moving up in terms of getting the earnings jump from rising rates (at least immediately). But if rates come down, DRYS and other non chart guys will get marked to the market as well.

  90. 90
    jiveyjr Says:

    Bloomberg says DSX reports 11/14

  91. 91
    zman Says:

    The day to day swings like this in RIG are frustrating since we’re talking about a company that already has a heavy % of bookings into 2011 and less longer. Earnings, hopefully tonight, maybe in morning.

    DRYS getting clocked now.

    Thanks Jivey – I’ve got a bad date on my calendar for them, will amend tonight.

  92. 92
    jiveyjr Says:

    11/14 before open on DXS..per BB

  93. 93
    zman Says:

    woops, oil through 90

  94. 94
    O.W. Says:

    oil broke 90 this is going from bad to worse..

  95. 95
    zman Says:

    RIG just release 8K with revised rig rates/utilization. Quick glance down the last rate vs current shows big ups. That’s the current spike on the chart and why we aren’t still down $4 but less than $3 and should rally more into close. This is great stuff for them to talk about on the conf call. Will check it more thoroughly and get back.

  96. 96
    zman Says:

    RIG

    see at least one $600,000 per day day rate out in 2009…I’m pretty sure that’s a record for a drillship.

  97. 97
    zman Says:

    here’s the file:

    http://www.sec.gov/Archives/edgar/data/1083269/000136231007002587/c71395exv99w1.htm

    only look at the ones in bold, those are the changes and they are almost entirely positive, in some cases double and triple the previous rates.

  98. 98
    Sambone Says:

    2:33 pm EST

    Nymex Crude Down As Goldman Calls For Profit Taking

    By Elizabeth Landau
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude-oil futures slid more than $1 Tuesday, taking a breather after four sessions of settling higher as traders took profits before the Wednesday release of U.S. petroleum inventory data.

    News that state-owned oil company Petroleos Mexicanos, or Pemex, will restart some oil production shut in over the weekend also pushed down prices.

    Light, sweet crude for December delivery was recently down $1.50, or 1.6%, at $92.03 a barrel on the New York Mercantile Exchange. The front-month contract settled at a record high of $93.53 and hit an all-time intraday high of $93.80 Monday. Brent crude on the ICE futures exchange was down $1.22, or 1.4%, at $89.10.

    Concerns about a large gap between global oil supply and demand have boosted crude more than 30% over the last two months. Tensions in the Middle East and a weak dollar have also helped futures climb to ever-higher records in recent weeks.

    Futures retreated slightly from all-time record highs Tuesday as Goldman Sachs (GS) recommended that investors book profits, even though the bank warned that prices could climb further and surpass $100 a barrel.

    “We believe that the risks are now becoming more balanced and that the downside risks we have embedded in our end of first quarter 2008 oil price target of $80” a barrel “are already gaining momentum,” the bank said. Goldman Sachs, which in the past has made waves with its oil price predictions, says “we are not trying to call a top here.”

    Traders were also positioning themselves ahead of inventory data from the U.S. Department of Energy, due Wednesday at 10:30 a.m. EDT. The data is expected to show a 100,000-barrel build in crude stocks and a 0.5 percentage point increase in refinery use for the week ended Oct. 26. In each of the last five years, the data for this week has shown an increase in refinery use and crude-oil stocks, said Peter Beutel, president of energy risk management firm Cameron Hanover.

    “(There’s) a little profit taking here thinking that if the history shows up again, we could see an increase in utilization and crude oil stocks,” Beutel said. “If we see a decline in utilization and stocks, it will be doubly bullish.”

    Prices rose on Monday when Pemex said it had taken 600,000 barrels a day of production off line. The company says it will restart that production Tuesday or Wednesday, sending negative signals for crude prices.

    The pullback in crude futures prices represents a slight correction, and prices will probably resume their upward trek, analysts said.

    “The crude market’s overnight selloff looks like a well-deserved correction that could easily be followed by another run at new highs in tomorrow’s trade,” Jim Ritterbusch of Ritterbusch & Associates in Galena, Ill., said in a note.

    Ministers of the Organization of Petroleum Exporting Countries on Tuesday ruled out putting more crude onto the market in addition to the increase that OPEC already promised. The 12-member group is due to add 500,000 barrels a day of output from Nov. 1.

    November heating oil was recently down 1.96 cents, or 0.8%, at $2.4450 a gallon, after hitting an intraday record high of $2.4723 a gallon Monday. November reformulated-gasoline blendstock was recently 3.23 cents, or 1.4%, lower at $2.2951 a gallon.

    —By Elizabeth Landau, Dow Jones Newswires

  99. 99
    Sambone Says:

    Z – In regards to RIG, I go here and then read the “State of the Fleet” report. BIGA NUMBERS!
    http://www.deepwater.com/fw/main/Fleet_Update_Report-58.html

  100. 100
    zman Says:

    Sam, thanks it’s the same thing. I was just commenting on it b/c it came out at the very LOD and the stock ahs done nothing but rally since. $600K per day on one ship! That’s huge since analysts have been classifying these new ships for estimates in the slightly over $500Kpd range…This is an up to estimates by itself but also I see several re-contractings for much rates across a wide range of their fleet. This is what these guys talk about in the Q&A and while $500 is fantastic, $600 is the holy grail. Not to mention that the rest of the fleet looks pretty busy as well.

  101. 101
    O.W. Says:

    Zacks research issues a buy on VLO based on 180$ mm contract with DoD.
    http://www.zacks.com/rank/zcommentary/?id=6216

  102. 102
    zman Says:

    DRYS / ESM – getting crushed.

    Thanks OW but please make sure it’s ok to post that here. It’s likely copywrite work. And I’ll have to remove until the guy sends me written approval post it. You’d be surprised how quick people are to call their lawyers over that kind of post.

    Thanks also for the VLO headsup…hope it has some effect, oil back over 90 I see.

    EOG over 86…wow.

  103. 103
    zman Says:

    Tupp – you out there? You adding some DRYS now?

    Bill, any thoughts, this has gotten very ugly?

    Najarian was on early this morning trash talking Bloggers while telling people that call activity was saying DRYS was about to breakout given the volumes he was seeing on his heat-seeker.

  104. 104
    QUARRYMAN Says:

    VMC News: Earnings flat, revenue down $24mm

    I say they’re doing a great job in a poor short term environment: low housing starts. The GEM of this company is their wonderful permitted stone reserves near prime markets.

    Keep an eye on this stock, it’s great long-term value.

    Here’s what the CEO says:
    CEO Don James said Vulcan (NYSE:VMC – News) has been resilient despite the “sharp downturn” in residential construction and he is optimistic that the company’s geographic expansion will help the bottom line in the long term.

    “The attractive long-term attributes of the aggregates business have added value for our shareholders through different economic cycles,” James said. “Our strategic geographic footprint and diverse end-use markets, in conjunction with the recognition of the increasing value of permitted reserves in fast-growing metropolitan markets, have enabled us to grow earnings even as aggregates volumes have declined due to reduced levels of residential construction activity

  105. 105
    O.W. Says:

    Z – I only post free stuff.. that’s part of his free stuff.. I guarantee that . You get that PDF reserach weekly by signing up for free on his website. http://www.tradertom.com

  106. 106
    TTupp Says:

    re #74 thay are in saskachewan

  107. 107
    zman Says:

    Thanks OW – Even free lifted from individual guys is risky without their permission. Sorry but my lawyer reads this daily and would have a crock if he saw me pass what is and isn’t copasetic .

  108. 108
    TTupp Says:

    wholly crap does anyone see a catalyst here?

  109. 109
    zman Says:

    DRYS down $20; EXM down $10+

  110. 110
    TTupp Says:

    also, re #103, i am going to take a heat-seeker to he gay ass pony tail. and then send an option monster after his wife and kids– i heard they could be quite ferocious

  111. 111
    zman Says:

    T – it just kind of spiralled out of control but it doesn’t look like panic energy …drybulk however looks like their ships are sinking.

  112. 112
    zman Says:

    T – lol

    Baltic dry index said to be off a lot. Don’t have a live quote on the thing.

  113. 113
    ram Says:

    Did their rates get cut in half?

  114. 114
    Popeye Says:

    We need Nicky about now.

  115. 115
    zman Says:

    Can’t see rates until tomorrow on these:
    http://investmenttools.com/futures/bdi_baltic_dry_index.htm

    Story I said it was a “large decline”

    now the market is joining in. at least SU is falling off some.

  116. 116
    TTupp Says:

    im id of scared , i put my entire partnership in OTM, front month, EXM calls yesterday- i will have a legacy as the Canadian amaranth.

  117. 117
    ram Says:

    ZMAN – What are you thinking about EOG, which also happens to be the only bright spot today?

  118. 118
    zman Says:

    T – surely you jest

  119. 119
    TTupp Says:

    kidding

  120. 120
    zman Says:

    I’m thinking a wise man would take profits but I am going to hold into tomorrow.

  121. 121
    TTupp Says:

    this is fed action boys

  122. 122
    zman Says:

    T – duuuuuddddeee. That’s not funny.

    RIG down $4 again….nothing matters today unless you were already up when good news came out.

    $65 look like support on EXM. Bill, if you are around now would be a good time to speak up about the BDI

  123. 123
    Denise Says:

    Good afternoon all-remember it is mutual fund profit taking /selling week-there year end

  124. 124
    TTupp Says:

    im mulling some options on sp500 futures for tomorrow afternoon.

    this action / uncertainty looks like it will continue until tomorrow afternoon- and imho, just like last meeting, will catapult upwards after they announce the inevitable.

    also inventories might make things interesting– vlo re-entry anyone? i punted in the irrational exuberance of early friday morning… honestly what benefit could a monster like VLO derive from a geriatric billionare on an ego trip? has no bearing, and its value has taken a hit since with no reason

  125. 125
    ram Says:

    What’s deffinitely not funny is the sea of red in nearly all energy related. Hopefully this ship (yikes) gets turned around.

  126. 126
    ram Says:

    Speaking about end of month, this is usually a positive time – usually.

  127. 127
    TTupp Says:

    i tried to find a site publishing the dry bulk rates with no avail.

  128. 128
    TTupp Says:

    z- look at eog go! you barstarrrrd! i tried to push through my order yesterday but it didnt get filled at 1/4 to 4. boo mee

  129. 129
    aitrader Says:

    Unless there is some kind of fundamental shift going on (which seems doubtful), this would be an ideal opportunity to load up on DRYS, EXM, or DSX calls me thinks.

  130. 130
    zman Says:

    aitrader – absolutely, just tell what the fed is doing tomorrow and I’m in.

  131. 131
    zman Says:

    EXM down 21%; DRYS down 18% etc….. this is why I hate momentum stocks.

  132. 132
    aitrader Says:

    Hehe – well my logic this AM ran something like “if Bernanke doesn’t cut he gets blamed for subprime, illiquidity, housing, dollar, Bush’s hemmoroids yada yada -ergo he must cut.” I also read the BB article about his right hand guy and the hints he’s dropped for a cut the last month or so.

    I have been known to be wrong. Very wrong at times. So grain o’ salt and all…

  133. 133
    TTupp Says:

    anything happen to the baltic rates??? anyone???

  134. 134
    Popeye Says:

    I thought I heard CNBC say there was
    a rumor that dry bulk rates will be off in 08′.

  135. 135
    zman Says:

    T – all I saw was that they were down big, in a story about 20 or 30 minutes ago.

  136. 136
    TTupp Says:

    well…. if i would have bought exm puts instead yesterday i would have had a 5 bagger.

  137. 137
    Denise Says:

    regarding shipping rates just read –
    Panamax rates are said lower and mid-size dry bulk tanker rates are said to be sharply lower compared to the previous quote.
    Also where is support on the chart of drys? Look at the volume today

  138. 138
    TTupp Says:

    like stock price?

    whats their respective 08 multiple now?

  139. 139
    TTupp Says:

    138 -> Z

  140. 140
    zman Says:

    Drys 7x ’08’s $15.07 consensus

  141. 141
    zman Says:

    so its even cheaper now, question is what rates are those estimates based on? Most oil and gas analysts are going to pretty severely discount oil and gas prices in making their estimates. Don’t know how conservative this group of analysts but estimates have been flying up of late which means that $15.07 could be a useless number in another 2 weeks, just don’t know.

  142. 142
    TTupp Says:

    whre have dry bulkies traded in pe terms in the past?

  143. 143
    zman Says:

    varies widely but mid single digits to mid teens from what I can tell. There’s not much public history of these to go on.

  144. 144
    TTupp Says:

    IV on EXM and DRYS jumped like 35% today, jeez. what are these biotech stock?

  145. 145
    TTupp Says:

    i would really like to see a chart of the baltic index, is it updated weekly?

    on this topic too? what determines coal prices? it’s al OTC right?

  146. 146
    TTupp Says:

    rediculous volume in DEC CL

  147. 147
    zman Says:

    EXM off $16 (20%) on no news

    DRYS off $23 (18%) also no news,just the rates being down. This is 1 day after their was “unconfirmed buyout chatter”

    …what a buzz saw…

    see link on #115

    you can see a chart of Appalachia coal priced daily here:

    http://charts3.barchart.com/chart.asp?sym=QLZ7&data=A&jav=adv&vol=Y&divd=Y&evnt=adv&grid=Y&code=BSTK&org=stk&fix=

  148. 148
    cadillac Says:

    Z,

    re: post 95 RIG. The 8-K showed rediculous increases almost across the board in future contracts. Revenue is going to go up substantially. Can costs go up as fast??? not ever looked at the expense structure of these ventures…are they seeing huge inflation of costs? or are we looking at another opportunity to buy

  149. 149
    TTupp Says:

    i cant find coal anywhere on the barchart.com unless i go there using your link… certainly isn’t under energies..

  150. 150
    apbd Says:

    Bueler? Bueler? Anyone? Anyone?
    apbd

  151. 151
    TTupp Says:

    QLZ7

  152. 152
    TTupp Says:

    QL z7

  153. 153
    TTupp Says:

    what the hell, its not letting me post my entire thing i wrote

  154. 154
    Alhambra Says:

    U.S. Raises Royalty Rate
    For Gulf Oil Exploration
    By RUSSELL GOLD, Wall Street Journal

    MMS raises royalty rate for production in leased blocks to 18.75% from 16.67% (% set from sale last month).

    Check out the article for those with subscription (I think)

  155. 155
    TTupp Says:

    Z- you around?

  156. 156
    zman Says:

    What’s up T? Having a problem

  157. 157
    TTupp Says:

    yea, just a question. these baltic rates, are they updated weekly?

  158. 158
    zman Says:

    thought they were through yesterday…will check.

  159. 159
    TTupp Says:

    i was just curious if they come out mondays (for subscribers to a service) and get published to the public in tuesdays

  160. 160
    TTupp Says:

    or wednesdays i mean

  161. 161
    bill Says:

    Regarding Dry Sector

    There was no negative news as far as I could see.

    Here are the daily capesize spot rates for October:

    Cost Per Day

    10/1
    10/2
    10/3 165,698
    10/4 161,055
    10/5 160,759
    10/8 166,655
    10/9 172,188
    10/10 179,030
    10/11 183,816
    10/12 184,469
    10/15 183,997
    10/16 182,268
    10/17 180,840
    10/18 181,157
    10/19 182,765
    10/22 183,682
    10/23 184,216
    10/24 183,922
    10/25 182,829
    10/26 181,730
    10/29 179,887
    10/30 172,087

    average 177,945

    Note it dropped to 172 k per day which is below average but this did not cause drop.

    the selling started around 2 pm and selling caused more selling and that selling caused more selling

    CNBC comes on at end of day and say rumors of rate drops.

    Rumor?? It either is a drop or not. I don’t see any drop

  162. 162
    bill Says:

    Regarding anamax rates ( a smaller ship, about 60 % of a capesized)

    here are rates (actuals)

    10/1 76,615
    10/2 76,298
    10/3 77,245
    10/4 77,811
    10/5 77,989
    10/8 78,281
    10/9 79,700
    10/10 83,219
    10/11 85,675
    10/12 88,379
    10/15 88,885
    10/16 88,513
    10/17 88,013
    10/18 87,499
    10/19 87,901
    10/22 88,396
    10/23 90,248
    10/24 91,235
    10/25 91,975
    10/26 93,301
    10/29 94,387
    10/30 94,977

    avg 86,245

    Does anyione see a drop here??

    Navious NM reported great results and most of their ships are on fixed time chartes. For q3 they averaged 31,122 per day.

    There is a huge dif between 31 k per day and current spot rates.

    IE capesized 177 and panamax 86 k

    Even if they dropped 20 % (which they havent) Companies like DRYS will have obscene profits

  163. 163
    bill Says:

    Here is a pretty good link to info on the shipping sector both wet and dry

    http://shipping.capitallink.com/

    at 11:27 am this showed up

    October 30, 2007 11:27 AM
    Hard landing for dry bulk rates — At a poll held at the Coaltrans 2007, which recently took place in Rome, nearly 60% of the participants expressed the expectation that shipping rates will see a hard landing; some 30% said they expect the market to come down albeit “softly”. At the same time, 55% of the delegates feels that the dry bulk shipping market has not reached its peak yet. -bmti.de

    Ok, so all i can see is a poll that says a hard landing. The same poll says 55 % says it hasn’t hit a peak yet

    Id say the same thing too in the future like 2009 or 2010 as the owners are making obscene money have ordered new ships for delivery in 2010.

    Tankers are being converted to carry bulk.

    So rates eventually will come down from the present ridiculous high levels.

  164. 164
    bill Says:

    One final link

    This is the closet to real time data

    Its a link of done deals done for shipping

    http://www.skaarupshipbrokers.com/fixtures.php

    The first deal reported is a 2 year charter of a capesize at 150,000 per day

    “‘Great Navigator’ 2006 176303 dwt dely Mizushima 15/16 Nov 24 months trading redel worldwide $150000 daily – Daebo”

    thats fantastic rate

    As I mentioned before the current spot rate for capes is 172 k per day. Thats for a 30 day commitment

    the futures as of 10/29 are q4 180.0
    2008 142.0
    2009 94.0
    2010 64.0
    2011 46.0

    As you can see the futures rates for 2011 are 46 per day as all the newly ordered ships come into the market

    A simple avg for 2008 and 2009 is 118 k per day (142+94)/2

    So the futures market is at 118 k when a deal for a phyiscal ship was just done at 150 k.

    this indicates the futures will rise

    The selling today was a classic blowoff and i expect a quick recovery.

    I was buying calls at the close.

    LOL Cramer just said rates fell but I don’t see any evidence of lower rates

  165. 165
    bill Says:

    My investment advice

    Dont buy on margin

    Add on down days like this

    Write a call against the long position

    So a covered call position

    ImHO

    Drys will have an earnings explosion next year

    Q3 will be great but doesnt fully reflect the spot exposure they will have in 2008.

    Maybe the best way to value these things is a dcf analysis of cash flows using the rates in the futures market for a baseline case.

    Most are selling at a multiple to book (execpt Topt).

    Topt will report a q3 loss

    So what drives stocks earnings or value?

  166. 166
    aitrader Says:

    World’s Scariest Stock: DryShips

    “If DryShips can’t generate free cash flow on sky-high margins, I shudder to think what will happen when those profit margins splash back down to sea level. And you should to — because this is the scariest stock in the world.

    Spread the word. Go to CAPS and rate it an underperformer now.”

    Motley Fool
    Oct 29, 2007

    http://www.fool.com/investing/small-cap/2007/10/29/dryships-is-haunted.aspx

    ——————-

    I wonder if this and other similar articles were part of what caused the stampede? Cramer just recommended it on CNBC so the herd may jump back in as fast as they left.

  167. 167
    cadillac Says:

    Bill,

    Have the fundamentals for NAT changed or do you still see a big loss ahead for them?

    Your insights have been and are greatly appreciated.

    Thanks

  168. 168
    zman Says:

    Thanks Bill…higher bids post close. This was obviously an over-reaction but they have flown up of late and a lot of people in them don’t know if they ship grain or oil. They know little more than the ticker.

    Will use your data for tomorrow’s posts. Thanks for the update.

  169. 169
    zman Says:

    Motley Fool’s writeups have gone from somewhat investigative reporting to fluff journalism with little more than surface detail over the last several years. Now they are getting into stock manipulation. How sad. Their recent work in refining and E&P has completely missed the boat showing they don’t even understand the basics of evaluating energy.

  170. 170
    TTupp Says:

    bill where did you get these figures?

  171. 171
    bill Says:

    Who says they can’t generate cash flow??

    They have generated 235 of cash in the first 6 months and forecasted to generate 900 m in the next 6 qtrs.

    Btw, those are conservative estimates assuming cape rates of 90 k and panamax rates of 45 k

    http://www.irwebpage.com/dryships/files/drys2q2007.pdf see page 13

    the quote you used was from a clueless poster on the Motley Fool board not unlike what you would dfind on Yahoo.

    He implores his readers to :

    Spread the word. Go to CAPS and rate it an underperformer now.” lol

    Thats like me coming on here and saying to Zman readers to go to Yahoo board and tell everyone to buy. It’s ridiculous.

    I am amazed the press picked up his missive.

    One thing you do point out , is that there is so much disinformation out there, an average investor is just throwing darts

  172. 172
    bill Says:

    I get my data from the links provided.

    For the daily rates, I keep a spreadsheet of the daily numbers which are posted daily on the drys website

    right here

    http://www.dryships.com/index.cfm?get=report

  173. 173
    aitrader Says:

    Bill – the poster may have been some clueless blogger but The Fool has showcased it on their main web page as “The World’s Scariest Stocks” with a link to the story and a video clip. Both make the story *seem* legit. Not sure if it explains the massive move today but it probably contributed.

    Great buying opportunity on DRYS, EXM, DSX, etc IMHO. I picked up DSX calls after Z said it was as solid as the rest – hope it’s good for at least a double 🙂

  174. 174
    TTupp Says:

    when i read blogs like that one and te comments y blood pressure goes through the roof. all morons

  175. 175
    bill Says:

    The move today had NOTHING to do with Motley Fool as this thing showed up on Monday and the stock went up from 123 to 130.

    One of the Motleys writers, a year ago , penned a negative article and has personal animus on the stock that Barrons picked up on. They said the stock would go to 0. this was when the stock was 15.
    Obviously, the editors still have an axe to grind.

    http://www.irwebpage.com/dryships/files/dryshipsjefferies2007.pdf

    see page 9

    DryShips is especially risky, as a careful scrutinizing of the company’s SEC filings
    should be enough to turn any investor’s hair white.”
    September 1,2006 Motley Fool

    Interestingly, the CEO, took on his critics at a Jefferies conference

  176. 176
    bill Says:

    Z

    i saw one an anlysis on PQ on seeking Alpha. This was issued to the news wires

    How do they decide which one to promote?

  177. 177
    bill Says:

    one of your analysis..sorry

  178. 178
    bill Says:

    Read this from Motley Fool

    written in dec 2005

    thr bdi was 2500 now it is 11,000

    The guy’s timing is a bit off ..

    http://www.fool.com/investing/value/2005/12/21/a-rising-tide-lifts-all-boats.aspx

    now if the bdi goes from 11,000 back to 2,500 all the dry bulkers will get slaughtered

    But if risk bothers you buy a cd

    Oil could go back to 25 a barrel

  179. 179
    bill Says:

    The current motley blogger main premise is

    “Sure, it gets the best margins of the bunch, but that just raises more flags. Reviewing DryShips’ results, we see that much of its profit over the past year was derived from gains on the sale of assets. Meanwhile, the firm’s cash flow statements don’t show this supposedly wildly profitable firm generating any cash profits since its IPO. On the contrary, over the last year, the firm has burned through nearly $500 million in free cash flow, as its long-term debt ballooned from $418 million to $728 million. Somewhere, this corporate ship has sprung a leak.”

    ________________________________________

    This rookie is measuring cash flow by looking at debt on the balance sheet and noticing it (debt) went up ergo (no cash flow)

    This asshole is a burger flipper and has never read a 10 Q in his life

    The simple answer is drys is pouring its cash flow in buying more ships and letting his long term charters run off so he can have spot exposure.

    So far , his strategy is right on as he bought ships 50 % lower than current price and spot rates have soared

  180. 180
    TTupp Says:

    bill you certainly know your stuff. great due diligence. my compliments are few and far between… lol 😉

  181. 181
    TTupp Says:

    this burger flipper needs a donkey punch

  182. 182
    zman Says:

    Bill – agreed….the guy is completely without sense.

  183. 183
    bill Says:

    Last post tonight, I promise

    Here is a technical trader take on drys

    http://www.slopeofhope.com/2007/10/drys-hump.html

    The question i still need to answer– is given the current market, whats a fair price for drys.

    Remind me to lighten up next time it approaches 130

  184. 184
    bill Says:

    I lied

    http://www.forbes.com/2007/10/30/drybulk-shipping-diana-markets-equity-cx_ra_1030markets41.html?partner=yahootix

    note last paragraph

    Natasha Boyden, an analyst at Cantor Fitzgerald, said she sees absolutely no change in the fundamentals in the dry bulk shipping sector. Boyden says the decrease in stock price should be seen as a buying opportunity.

    Rupinksi agreed. He said the earnings power of these companies will continue to grow even at the current levels.

  185. 185
    kaman Says:

    Ben just called my cell…sounded like he’s getting plastered. Let it slip we’re getting 50 basis points tomorrow. The guy’s an animal. cheers-

  186. 186
    PackMan Says:

    DRYS etc.
    Perfect type day for a shakeout.
    Pre – Fed, stocks have been out of control, throw in a little rumor, some basis in fact, and ergo, 20% selloff.

    I am no expert on the sector, but things like this just don’t change overnight.

    Picked up some DRYS stock near close, see it has rebounded AH a bit.

  187. 187
    PackMan Says:

    Zman, given the smackdown of the oil sector, can you review some of your recommendations .. as in are they still valid ? FTO, WNR, RIG, etc. ?

    Also, what is your philosophy on exiting if things don’t go your way. Do you use stop losses ? Do you hang in there ?

    Also, do you send out alerts when you sell a position, in addition to when you buy ?

    Apologies for so many questions. Just asking.

  188. 188
    zman Says:

    PackMan – agree re thesis on the dry bulks…and on oil for that matter…I was just writing up a piece on that.

    Other than the small refiners I’m very comfortable right now with my positions. Recent and longer term positions. Most of them fall into the cheap category, COP, VLO, RIG, HAL, NFX, HK. Others are a little more speculative like OII with large, long term potential

    First on exits I do announce them. Stops are rarely employed unless it’s to protect profits. I gut out 3 to 4 complete washouts (scuds) per month.

    But generally, I stick to fundamentals which have served me pretty well. Red days like today always seem like the end of the world to many but I’m looking at adding to names like OII, (probably wait for earnings Friday) and HAL a little sooner once things have settled down. NFX is likely to see me buy another tranche of calls soon, PQ an initial call position and HK a double. The SU puts I won’t be adding to.

    The refiners will depend on numbers tomorrow if I add or not this week. I’m unlikely to fold tent on the sector just yet as cracks are still bottoming and likely to go higher as seasonal demand puts pressure on inventories.

    Ask as many question as you like but I don’t you use hard stops or hard and fast trading rules.

  189. 189
    zman Says:

    kaman, you’re a funny guy!

    Bill re PQ: it depends on the editor who picks it up at SeekingAlpha. I have two and the female seems to send more of my stuff to the wire services than if it happens to be the guy’s turn at bat. Just lucky with the ladies I guess.

  190. 190
    PackMan Says:

    Thanks Z … would you still buy FTO Nov calls for example ? I have general concern about Nov calls for anything given 13 days to expiry, but I am willing to be persuaded.

    One other question, how many contracts (or what dollar size) do you typically commit to each position tranche ? are they consistently applied or does it vary based on your conviction level or other factors ?

    Thanks.

  191. 191
    zman Says:

    Packman

    Not right now until I see the group stabilize a bit and those oil numbers tomorrow. Oil is off another $123 right now and I would likely go closer to and in the money on longer dated calls when I do enter the next set. Those were pretty speculative and they aren’t yet working out as GS tripped me up. I’m not fast to double down and when I do it will be on a cheaper stock with a clear fundamental picture. Those are a trade and a bad one so far…I’ll let them run a bit longer though.

    As far as positions go I scale in to every position…I almost never swing for the fence at the onset instead taking a quarter to a third of my ultimate desired position at a time. I’d rather add up then double down and I will take off half an initial position if it runs fast (like the EOG today should have done) and play the remaining with house money. Given the mark down oil is getting tonight, some analyst or two will have to say some very nice things in the morning for EOG not to rejoin the pack and head lower at the open. Not smart on my part. Conversely, many use the sell the initial excitement rule, which I find to be good if you don’t know exactly what the news means, only that it’s good. In EOG’s case, I would have been selling for $2 on the open so with a $3.10 close I have a little lee way.

    They are fairly consistently applied.

  192. 192
    aitrader Says:

    Holymoly – RIG hit one out of the park!

    http://phx.corporate-ir.net/phoenix.zhtml?c=113031&p=irol-newsArticle&ID=1070181&highlight=

  193. 193
    zman Says:

    Looks good on surface, back out the gain to get apples to apples EPS and you have a six cent beat.

    Utilization dipped 2 pts to 89% sequentially which they will need to address pronto on the call but day rates advanced 8.5% seq. to a new record and they did it in all rig categories.

  194. 194
    aitrader Says:

    Guess it’s just a “moly” then. If the Fed cuts and the market corrects today or tomorrow these guys should bust through their 52 wk high in short order. Heck – even without a cut they should do well.

    Nice call on the 115’s and 120’s Z! Glad I followed you there 🙂

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