18
Dec

Tumultuous Tuesday

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OPEC Internal Consumption Watch: More attention is being focused on the rapid development of infrastructure in the major oil producing countries. This development is the source of increasing oil consumption and part of the tightness I keep harping on. Case in point from the London Times: Saudi is planning to power a new Aluminum smelter with a dedicated oil-fired electricity generation facility to the tune of 60,000 bopd. They want 10 of these facilities. In the state we get half our power from coal, 20% from nukes, nearly 20% from natural gas and the remainder from wind, solar, geothermal, dung and oh, yes oil (about 2 to 3%). OPEC on the other hand gets a majority of their electricity from oil which makes sense since they are surrounded by it (although you'd think all that sand could be turned into solar panels) and to a much lessor extent natural gas. 10 facilities at 60,000 bopd and suddenly you're talking about 5 to 6% of currently capacity that's no longer crossing the border. And its not just infrastructure but also the people who are demanding oil for transportation. According to the Apache, Saudi Arabia, Bahrain, Kuwait, Qatar and the UAE all surpass the U.S. in per capita oil consumption. This is a recent and likely irreversible pattern. Saudi alone increase their consumption of oil over the last decade by 55% while they grew production only 10%. Combine this with other countries like Mexico which may flip from exporter to importer in as little as five years and Houston, We Have A Problem! Anyway, food for thought.

Commodity Watch

  • Crude oil fell $0.64 to $90.63 in the second to the last day of trading in the January contract. Trading was in the red all day with the contract traveling as low as $89.49 before a late day rally. Expect a more volatile as the contract goes off the boards today. This morning crude is trading up about $1.50 to regain the $92 mark.
  • Turkey On The Move Watch: First by artillery, then by planes over this past weekend and no a ground incursion into northern Iraq. The size of incursion meant to root out Kurdish rebels has so far been portrayed as "light".
  • French Refinery Strike. Workers haves been on strike at 5 refineries since Monday. That 35 hour work week is just too much some times.
  • MEND called on other Nigerian militant groups to "unite and cripple the oil industry". There has been a bit of an uptick in sub-Saharan militant group action in recent weeks and I guess MEND was feeling that the guys at JEM were stealing their lime light.
  • EIA projects YE07 crude stocks of 292.6 MM barrels, the lowest level since January 2005. This would be 8.5% below year ago levels whereas last week, stocks stood at 304.5 MM barrels and were 9% below year ago levels. 
  • Early Read on Oil Inventories (from the Dow Jones survey)
    • Crude down 1.3 mm barrels
    • Gasoline up 0.7 mm barrels
    • Distillates off 0.3 mm barrels
  • OPEC Watch: "I would not exclude the possibility of increasing production if the market wants it," said Chakib Khelil, Algeria's oil minister, who takes over as president of the Organization of Petroleum Exporting Countries on Jan. 1. So the tone may be a bit more production hike friendly from the figure head (still smarting about the low quota his fast growing country received) but without Saudi backing him the increase won't be material.
  • China Fuel Rationing: More stories this morning about lines over half a mile long to buy gasoline. 
  • Natural Gas yesterday traded up $0.01 to just reclaim $7 after a brief morning dip into the $6's. This morning gas is trading up 4 pennies.
  • Imports rose 1.1 Bcfgpd week to week. The boost came from a 1 Bcfgpd bounce in Canadian volumes. Gross imports ran 0.1 Bcfgpd ahead of year ago levels. Taken together with slightly warmer weather than the comparable week one year ago and higher production I'd expect a number in the low 100s for a draw which won't be enough to completely erode the YoY surplus this week.  

ng-imports-121707.jpgclick to expand

  • Yet another weather watch: Verdict ...still calling for a warmer than normal winter. Despite the fact that so far the early part of winter November and the first 3 weeks of December are going to be pretty close to normal winter is apparently going to warm up. From Dow Jones ~ "All signs point to this winter becoming one of the warmest on record in the U.S.", AccuWeather.com meteorologist Joe Bastardi has said. The National Oceanic and Atmospheric Administration has also predicted a mild winter, with above-normal temperatures expected across most of the U.S., with the exception of the Pacific Coast and the northern tier of the U.S. from Montana westward, from November through January. Zcomment: Reminds me of the hurricane season forecast: "its going to be very busy...its going to be busy...its going to be sort of busy....next year is going to be busy". Sure doesn't feel like the tropics here in the southeastern U.S.

Stocks Of Interest 

  • (CVX) signs 30 year production sharing agreement with China National Petroleum Corp. The two will jointly develop a block of at least six fields in the gas rich Sichuan province of central China. Reserves are estimated at 5 Tcf and ultimate production will be around 0.74 Bcfgpd. CVX to operate with a 49% interest.
  • (PBR) to acquire the 50% of the 150,000 bpd Pasadena, Tx refinery they don't already own. PBR plans to expand the refineries capacity to 200,000 bpd. 

Technical Watch: Every once in a while I take a look at the indexes. Last go around they were looking fairly bullish. As you know, I'm not a tech analysis guy but I have been known to look at a chart or two. The energy sector charts appear to be basing (some might cry double top in the case of the gassy XNG but even there I suspect downside is limited. 

  • XOI - treading water within a stones throw of its old high. The oil XOI appears to be consolidating for a move higher. Valuations here are not extreme and I would expect a move up early next year crude willing (sideways crude not falling through $86 which remains a key line of defense).
  • XNG - maybe a double top but maybe not. Can you blame it with gas where it is? Back off the daily chart and look at the monthly and you'll see a new range forming between 540 and 570. Again valuations are not nearly as rich as they were at the beginning of the year as fast growing resource players have put up some serious cash flow in the last 12 months. I get concerned below 540 on the index and below $7.00 on the 18 month strip (which will likely produce capex reductions in some higher threshold plays (non-core Barnett, East Tx Cotton Valley etc which could result in guidance reductions which would be ugly for the group). Currently the 18 month strip is $7.71.
  • OIH - in general the OIH is fearful of increased capacity coming head to head with falling commodity prices. Deflation in a word sucks. However, the 15- members of the OIH at present are seen quite comfortably pumping out continued double-digit earnings growth through 2009. 

oih-multiple-121707.jpg

Refiner Multiple: Cracks treading water, stocks are fairly cheap but I'm feeling pretty defensive now.

cracks-121707.jpg

refiner-multiple-121707.jpg

Key Refiner takeaways:

1) Cracks appear (once again) to be bottoming with unexpected draws on heating oil and an "as expected" draw in crude serving to prop up prices. Gasoline demand has been especially resilient in the face of reduced consumer confidence. Apparently a worried consumer still has to go to work and shop for presents. Heck, maybe people end up driving around more looking for the ultimate bargain to stretch their imploding dollar.

2)  Refining estimates are getting trimmed almost daily for the fourth quarter. Analysts bricked 3Q and now it appears they were overzealous with their 4Q numbers.

3) out year numbers (2008 and 2009) are in general being inched higher. This is due to a combination of slightly lower crude price expectations next year (not lower than this year's average but lower than what they thought when $100 by year end was all but a certainty), continued growth in domestic consumption of gasoline and distillates, and increased assumptions for foreign consumption in producing countries which will serve to constrain imports to the U.S. from growing materially.

4) As you'll see below I am currently out of the refiners having sold my last piece of VLO calls. If I were to go back into the sector it would be back to VLO. FTO is tempting but I probably won't play before year end as there will probably be some tax loss selling pressuring on it and the other smaller refining sector plays.  

Holdings Watch:

CALLS

  • VLO  - Out January $67.50s for $3.10, up 72% since December 12th entry.
  • PBR - Adding to Jan PBR $115 calls for $2.05. Brings my average down to $3.40.

Odds & Ends

Analyst Watch: Tudor Pickering starts (SD) at buy. (ATW) and (GLF) upped to buy at B of A, (GRP) cut to hold at Citi in the wake of yesterday's takeover offer from (NOV), B of A bumping price targets for several drillers: (DO) goes from $109 to $159; (RIG) from $112 to $175. (those are the two biggest moves). FBR ups targets substantially on mini-majors (HES), (MUR), and (MRO). Lehman bumps targets on JASO, WFR and STP in the solar realm.

 

My three IPOs piece has been delayed on account of laziness on my part. I'll get it out this evening with any luck. 

47 Responses to “Tumultuous Tuesday”

  1. 1
    Sambone Says:

    7:43 am EST

    Crude Rises On Turkey, Refinery Strike

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures climbed over $1 higher in London Tuesday in reaction to news of a Turkish ground incursion into Northern Iraq and strikes at a number of French refineries.

    Having traded in a tight range overnight, the latest developments offered the market a hint of direction amid thin trade Tuesday, with further indications expected with the publication of weekly U.S. Department of Energy inventory data out Wednesday.

    “Overnight we had a light incursion into Iraq from Turkey, we’ve got the strikes…take all of this, and it will be hard to sell the market right now,” said Olivier Jakob, an analyst at Petromatrix in Switzerland.

    At 1227 GMT, the front-month February Brent contract on London’s ICE futures exchange was up 79 cents at $92.08 a barrel.

    The front-month January light, sweet, crude contract on the New York Mercantile Exchange was trading 93 cents higher at $91.56 a barrel, down from $91.84 a barrel earlier.

    The ICE’s gasoil contract for January delivery was up $8 at $822.75 a metric ton, while Nymex gasoline for January delivery was up 206 points at 235.60 cents a gallon.

    “The situation in terms of the Turkish troops is the main factor this morning,” said Nas Nijjar, a trader with CMC Markets in London.

    Turkish troops entered northern Iraq early Tuesday in an attempt to flush out Kurdish rebels who seek Kurdish self-rule in south east Turkey.

    The operation was the first reported ground incursion by the Turkish military inside Iraq since tension between Turkey and Iraq mounted over the Kurdish rebel issue in October.

    Tuesday’s news followed weekend reports that Turkish aircraft had bombed Kurdish rebel positions inside Iraq Sunday, stoking concerns the issue may be escalating again having appeared to ameliorate in recent weeks.

    Crude oil prices climbed sharply earlier this year as tensions between the two sides grew, with the markets fearful of disruption to crude oil infrastructure and regional instability.

    French oil major Total SA (TOT) Tuesday confirmed workers at five of its six refineries in France have been on strike over wages since Monday. The company was unable to confirm how long the strike was expected to last, nor how much production was affected.

    Prices reacted higher to the news, although the duration of industrial action is expected to be instrumental in determining any lasting impact on crude and refined products prices.

    “I don’t think it will last that long — you’d expect it to get resolved relatively quickly — but if it does drag on, it will have an impact on the market,” a London-based broker said.

    Analysts also looked ahead to Wednesday’s weekly U.S. Department of Energy report as a possible indicator of direction for crude prices, but expected that reaction could be muted given thinner trading conditions.

    “Tomorrow’s EIA numbers, coupled with a crop of U.S. macro numbers due out over the course of the week, should lend the complex more direction, but we suspect that major moves will probably be deferred until after the holiday period,” said Edward Meir, an analyst with MF Global in New York.

    The average forecast of a Dow Jones survey of analysts suggests U.S. crude supplies fell by 1.3 million barrels in the week ended Dec. 14.

    Distillate inventories, which include heating oil and diesel fuel, are seen falling by about 400,000 barrels, while gasoline stockpiles are expected to rise by 700,000 barrels, according to the average of the survey’s nine analysts’ forecasts.

    Traders and analysts will be keen to gauge any impact of fog in the Houston Shipping Channel which may have disrupted U.S. crude oil imports during the week, as well as any effects from the shutdown of a number of U.S. Midwest pipelines and oil terminals at the start of last week after freezing weather conditions.

    Crude oil price movements remained volatile Tuesday, as trading volumes continued to dwindle ahead of the Christmas holidays. The expiry of the Nymex January light, sweet crude contract Tuesday is also expected to contribute to choppy trading later in the day.

    —By Nick Heath; Dow Jones Newswires

  2. 2
    zman Says:

    Good article on the Turkish move, sounds very light (300 guys just 3 km over the border)…fear is it could inspire a pipeline bombing or two…reality is those pipelines are quite some distance for the Kurds to get to.

    http://www.economist.com/world/africa/displaystory.cfm?story_id=10318490

  3. 3
    zman Says:

    Green day, nice bounce in PBR

    people absolutely loving KWK’s 2008 capital budget, sending the stock up 14% which is a bit excessive given their multiple is already stout.

    Crude strip not up as much as the front month on this expiration day. Strip is pretty flat as well with the first five months currently in the $92s.

  4. 4
    TTupp Says:

    vlcc rates officially off the chart on intertano.com

  5. 5
    zman Says:

    tankers and bulkers doing well this am.

  6. 6
    TTupp Says:

    re br: the razil bovesba is up 3%

  7. 7
    TTupp Says:

    that should read pbr

  8. 8
    zman Says:

    rally in the group lacks conviction

  9. 9
    zman Says:

    market looks to be already be on holiday. I’m here if anybody needs anything, just catching up on some reading.

  10. 10
    TTupp Says:

    z- who did pbr buy that refinery off ?

  11. 11
    zman Says:

    Astra Oil, a California subsidiary of Belgian Capagne Nationale (NAT.BT). They’re paying $350 mm which is the same amount they paid for the first half of it. That values a non-greenfield facility at $4,666 per daily barrel of capacity which is not a bad deal although I don’t know how updated the facility is.

  12. 12
    zman Says:

    BP announces the 230,000 boepd (87% oil) capacity Atlantis deepwater Gomex development finally online. Expect 6 to 12 months to reach full capacity. Partner here is BHP.

  13. 13
    Sambone Says:

    11:11 am EST

    Nymex Crude Pares Early Gains, Slips Below $92

    Nymex crude slips back below $92 a barrel in thin trading as U.S. stocks turn flat after earlier gains. January crude up $1.03 at $91.66 a gallon after earlier rising as high as $92.88. A Turkish incursion into Northern Iraq is still keeping prices positive.

  14. 14
    ram Says:

    Z – Do you use a stocks location within its BB’s on any part of your decision making?

  15. 15
    zman Says:

    R – yes, unless there’s immediate news that over-rides

  16. 16
    zman Says:

    oil now down $0.40 to $90.20 …stocks continue to have no conviction.

  17. 17
    ram Says:

    Did you see the Moody’s negative review on CHK?

  18. 18
    Sambone Says:

    Z – I was home sick yesterday, and I watched some of the “Talking heads” on CNBC. I now confirm that they don’t have a clue. I’d rather watch Jerry Springer than watch that drool.

  19. 19
    Sambone Says:

    Part 1

    Oil Expected To Climb Back Toward $100/Barrel In 2008

    By STEVE GELSI

    After a record-smashing year with oil peaking at $99 a barrel in 2007, a world of triple-digit crude oil awaits in the coming year, energy experts say.

    Trading below $51 a barrel less than 12 months ago, crude prices hit their first in a fusillade of all-time highs in July and never looked back.

    While some blame the frothy crude market on speculation rather than the simple rules of supply and demand, the only force that managed to slow prices down at all this year was fear of an economic slowdown, as oil fell below $90 a barrel just weeks after hitting a record.

    But as the U.S. Federal Reserve cut interest rates and moved to inject liquidity into the financial sector, oil prices have been creeping back as 2007 draws to a close.

    With its price spiking so quickly, the impact of record crude has yet to fully filter through the economy, but that’s expected to change next year.

    Gasoline prices, which have held at about $3 a gallon for much of the year, could rise to about $4 in the new year, for example.

    “We think $100 per barrel oil is on the horizon in 2008, perhaps in the spring,” said Brian Hicks, co-manager of the Global Resources Fund. “Our forecast sees an average oil price around $80-$85, up from about an average of $70 in 2007.”

    He’s far from alone. About 54% of a Barclays survey of 150 commodity investors expect the average price of oil over the next five years to top $100 a barrel, with 27% responding that it would be $80-$100 a barrel and 16% expecting $60-$80 a barrel.

    This view is largely backed up by the Energy Information Administration, the official statistics center of the U.S., which just upped its oil price outlook to an average of $84.93 in 2008, from its earlier view of $80 a month earlier.

    “Expectations that tight market conditions will persist into 2008 are keeping oil prices high,” the EIA said in its latest short-term outlook. “Despite the OPEC decision…to hold production quotas steady and downward revisions to projected consumption growth in 2008, the oil balance outlook remains characterized by rising consumption, modest growth in non-OPEC supply, fairly low surplus capacity, and continuing risks of supply disruptions in a number of major producing nations.”

    Eric Bolling, an independent oil trader at the Nymex, said conditions that led to a record-breaking year will likely persist over the next 12 months at least.

    “It’s a weak dollar, it’s a strong global economy, it’s China growing quickly at 13%,” he said. “It’s been a perfect storm for a commodity bull run. That’s going to continue to go. There’s no signs of its slowing down, by any means.”

    He sees oil ranging from $60 to $120 a barrel next year, with spikes as high as $130 or more in the case of a major hurricane or geopolitical flare-up.

    “Oil is going to be very volatile,” he said. “It’s an election year, there’s going to be a possible recession…”

    That could translate to gasoline prices of about $4 a gallon by the time the hot summer driving season arrives, he said.

  20. 20
    Sambone Says:

    Part II

    Recap Of Wild Ride
    The year 2007 began quietly enough, with oil prices at $61.05, comfortably below the previous record of $77.03 set July 14, 2006.

    It fell to a low of $50.48 on Jan. 18 only to begin an upward climb, cracking $60 on Feb. 21 and $70 on June 29.

    On July 31, the first of several all-time records began rewriting the books with a closing trade at $78.21, up $1.38, on the heels of a six-year high in consumer confidence.

    “What’s great about this rally is that it is being driven by good economic news and not some type of bad news — no hurricane, war — just good old fashion demand and rising demand expectations,” Alaron Trading Senior Analyst Phil Flynn said at the time.

    The next record of $78.23 came on Sept. 11 after OPEC moved to boost production by 500,000 barrels, amid doubts that the group could actually achieve the increase. Six out of the next seven sessions saw fresh records amid speculation over recession, OPEC and other issues.

    Oil broke through $80 for the first time on Sept. 13. It continued setting records in subsequent trading days until hitting $83.32 on Sept. 20 on jitters about refinery shutdowns in the Gulf of Mexico as the 10th storm of the Atlantic hurricane season bore down.

    That record lasted less than a month, until oil jumped to $83.69 on Oct. 12, and then rose another $2.44 the next trading day to close at a fresh record of $86.13 on Oct. 15. The rise still wasn’t over, as records fell at $87.61 on Oct. 16 and $89.47 on Oct. 18.

    With the dollar weakening against foreign currencies, oil staged yet another rally within a couple of weeks, breaking through the $90 barrier on Oct. 25 and hitting $95.93 a barrel on Nov. 2.

    Finally, oil came within just 71 cents of $100 a barrel, hitting an all-time intraday high of $99.29 a barrel in electronic trading early on Nov. 21.

    The record closing price of $98.18 was set on Nov. 23 in thin Thanksgiving holiday trading.

    During the record run, Tesoro Corp. (TSO) economist Lynn Westfall blamed speculators for the oil rally that was squeezing the profits of refiners because of the rising cost of raw materials to refine into gasoline and other products.

    Pushing back against the prevailing thought of tighter supply, Westfall said oil should rightly be priced at about $60 a barrel.

    Along with record oil prices, shares in energy companies rallied even as the Dow Jones Industrial Average and other indexes struggled at times this year. Money flowed out of the financial sector and into energy.

  21. 21
    Sambone Says:

    Part III

    How To Play $100 Oil
    Stephen Leeb of Leeb Capital Management — who also expects oil prices to break $100 a barrel next year — said an economic slowdown could push prices down, but he’s not betting on it.

    “OPEC didn’t raise production at its December meeting because they don’t have much more to sell,” he said.

    He pointed to rumors that Saudi Arabia’s main oil field could be reaching peak capacity and that the country lacks the political will to develop its energy infrastructure amid a tight labor market and political dissent.

    As these oil rich nations develop, they’re going to need their oil to fuel their own economies, instead of exporting it to the U.S., he added.

    Leeb said he’s eying the oil services sector for fatter profits in 2008 as it grows more costly to extract precious energy from caches deeper underground.

    Leeb, fund manager of Leeb Capital Management, said he likes Transocean Inc. (RIG), Schlumberger Ltd. (SLB) and Diamond Offshore Drilling Inc. (DO).

    “They’re all cheap, with multiples toward the low end of historical levels,” he said in an interview with MarketWatch.

    Fund manager Brian Hicks said markets could get a bit of a break from greater refinery utilization of an estimated 90% next year, up from 88% in 2007 after outages heading into the summer driving seasons.

    However, gasoline inventories could begin the year at lower levels, and crude supplies will be at their lowest levels in four years heading into 2008, he said.

    “OPEC has grown accustomed to higher oil prices, particularly in the face of the falling dollar,” Hicks said. “OPEC will likely keep production back because we still have not seen meaningful demand destruction from higher prices.”

    Hicks said big oil stocks appear attractive, since their stock prices appear to reflect a world of $50-$55 oil, rather than $80-$100 oil.

    “We like Marathon Oil (MRO) because of its combination of low valuation, strong refining business and steady upstream production growth,” Hicks said.

    Like Leeb, Hicks is also bullish on oil services stocks such as Schlumberger as oil majors boost exploration spending to an estimated $370 billion next year.

    Keith Wirtz, chief investment officer for Fifth Third Asset Management, said even if oil fails to crack $100 next year, the world still faces the end of the era of cheap oil.

    “We will never see oil trade below $30 a barrel again,” he said. “From an investor’s vantage point, that represents a paradigm shift. Because of a lot of geopolitical and other factors, oil is under tremendous demand as the world goes through an expansion. If anything, investors have to get used to it.”

    —Steve Gelsi

  22. 22
    zman Says:

    Ram – I did not but I’ve found that both Moody’s and Standard and Poors debt reviews have little to do with stock prices (or reality) for E&P companies.

    Sam – I didn’t know you guys got sick…hope you’re feeling better. Yeah, the talking heads aren’t worth much of your attention except for one of the bond guys and the occasional guest.

  23. 23
    zman Says:

    agree with the guy in #21 obviously, but I’d swap SLB for HAL – see today’s table on the OIH…same growth rate and HAL likely to benefit from the boom in middle eastern infrastructure build out more than SLB. Then you’ve got the fact that HAL is much cheaper on a trailing and forward basis and I don’t know why the PM would pick the slob over HAL.

  24. 24
    zman Says:

    Interesting that the energy group is now trending more to the green despite a weak market and sub 90 oil.

    Nicky, if you’re not busy shopping I’d like you opinion / levels on RBOB and HO. They’re taking a bigger hit today than I would have thought.

  25. 25
    Sambone Says:

    #22 – Year end and tax time we don’t get sick with the flu.

  26. 26
    zman Says:

    Hear ya, we always play hurt or we get benched.

  27. 27
    zman Says:

    Oil not just a front month failure. The 12 month strip is off $1.30 to $1.50.

  28. 28
    ram Says:

    O.K. Moody’s also downgraded the stock as well because of high debt and increased spending. Apparently, as you mentioned, not a major influence.

  29. 29
    zman Says:

    Ram – I think a lot of E&P management teams have nothing but disdain from the rating agency analysts because they’re not very good at valuing reserves. And their ratings (like negative) convey the wrong message. If you look at a chart of LTD to total cap for CHK you’ll see it has done nothing but drop since the early 2000s and now stands at 39.6%…I say what’s the problem with that?

    Also, Aubrey revises his reserves up quarterly and its clear reserves will be around 11 Tcfe at year end (meeting their target), up from 8.96 Tcfe at YE06. Reserves were at 10.6 Tcfe as of 3Q07. I’d bet that because the ratings agencies wait for the year-end SEC PV10 on reserves they aren’t taking into account the growth in reserves over the year. The reserves help you determine the borrowing base and so it may appear to the agencies that CHK is carrying more debt than it is relative to assets.

    Here is what Moody’s said:
    Moody’s Investors Service on Tuesday reduced its ratings on oil and natural gas producer Chesapeake Energy Corp. and downgraded its outlook to “Negative,” citing high debt and increased spending.

    The credit rating agency reduced Chesapeake Energy’s senior unsecured note rating to “Ba3” from “Ba2,” and cut its speculative grade liquidity rating to “SGL-3” from “SGL-2.”

    The company’s increased spending related to core expansion and acquisitions is expanding debt, Moody’s said, and puts it at risk as profits in the sector as a whole are under pressure.

    Moody’s said the company’s ratings could stabilize if the company shows the ability to generate strong production growth at competitive costs.

    I really scoff at that last one as they are generating double digit production growth and have been for the foreseeable past and are generating record cash flow (wells must be profitable). If the true concern here is gas prices then they should have included that in what they said. Also, what’s that crap about acquisitions….memo to Moody’s, CHK is punting asset packages to the tune of $500 million every six months while still generating 20%ish production growth. Sorry for the rant.

  30. 30
    apbd Says:

    DRYS moving a little. Any news?
    It has a long way to go for me.
    apbd

  31. 31
    zman Says:

    A – it appear to be tied to the markets which look pretty sketchy at this juncture. You saw the news yesterday that no one but no one liked, right?

  32. 32
    Sambone Says:

    Z – R U still a buyer of HK here?

  33. 33
    zman Says:

    Sam – yes, of the common.

  34. 34
    apbd Says:

    Z: Thanks, I’m up-to-date now. My granddaughter has been staying here, so I haven’t been on the computer too much.
    Quite a departure for a dry carrier. In class, I’ve always taught: ” Stick to the knitting.” Concentrate on what you do best. Of course to them this just might be a ” hands off ” investment.
    apbd

  35. 35
    zman Says:

    A – I agree completely unless your big enough to buy the talent to manage it or broker the deal. I also think you’re right in that its an investment, not a new business line.

  36. 36
    Sambone Says:

    1:23 pm EST

    Nymex Crude Down As US Shares Fall, Turks Withdraw

    By Matt Chambers
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures headed lower for a fourth straight session Tuesday, giving back gains and falling below $90 a barrel as the U.S. stock market turned negative and reports said Turkish troops who entered northern Iraq earlier in the day had began to leave.

    Prices slumped after earlier gains in choppy trade amid low volumes and the expiration of the front-month New York crude contract. Earlier, prices rose as high as $92.88 a barrel on a jump in the stock market and the reports of Turkish troops entering northern Iraq, threatening recent supply increases.

    Light, sweet crude for January delivery on the New York Mercantile Exchange was recently down $1.40, or 1.5%, at $89.23 a barrel. The contract expires at the end of the session. February crude was down $1.54 at $89.51. February Brent crude on the ICE futures exchange fell $1.58 to $89.71 a barrel.

    “Further declines in the stock market will conjure up increased concerns over a recession that could further restrict oil demand,” said Jim Ritterbusch, president of trading advisory firm Ritterbusch and Associates in Galena, Ill.

    Stocks pared early gains partly after Goldman Sachs (GS), the earlier earnings of which had pushed the Dow Jones Industrial Average to open higher, said it was “cautious” about future growth, both for the company and the U.S. economy. The DJIA was recently down 51.5 points at 13115.7 after earlier trading as high as 13256.

    Turkish troops “have started to withdraw back into Turkish territory” and there were no clashes, Masoud Barzani, president of Iraq’s northern Kurdish government, said in a statement. The incursion came two days after Turkish war plans bombed villages along the border targeting bases of the rebel Kurdistan Workers Party, or PKK, which is fighting for self-rule in southeastern Turkey.

    The area is important for oil prices because of pipelines that run through it. The Paris-based International Energy Agency last week said Iraq’s oil output was back to pre-U.S. invasion levels, largely on the reinstatement of shipments from oil fields near Kirkuk to the port of Ceyhan in Turkey.

    Traders will be focused on the release of key U.S. inventory data Wednesday that is expected to show crude oil stockpiles fell by 1.5 million barrels last week. The Energy Department data is also expected to show a 400,000-barrel draw in distillates, which include heating oil and diesel fuel, and a 700,000 barrel build in gasoline, according to the mean estimate in a Dow Jones Newswires survey of analysts. Refinery use is seen growing by 0.3 percentage point to 89.1% of operable capacity.

    Front-month January reformulated gasoline blendstock, or RBOB, fell 3.69 cents, or 1.6%, to $2.2985 a gallon. January heating oil fell 5.89 cents, or 2.3%, to $2.539 a gallon.

    —By Matt Chambers, Dow Jones Newswires

  37. 37
    scoop006 Says:

    Z If market closes + you think it has legs into tomorrow?
    Sold DRYS Dec.$75 for $5.20 that I bought yesterday for $2.50.

  38. 38
    zman Says:

    Scoop,

    Nice trade! And I was happy with my bottom fish on PBR…only 25% in the last 24 hours but then I didn’t take Decembers.

    I don’t trust this broad market for any length of time. We don’t have any economic data Wednesday so that leaves the crude report as the most important item of the day. Tomorrow’s storage report very hard to predict crude moves as we had both fog in the HSC and the pipeline freezes in OK.

  39. 39
    kaman Says:

    Scoop – tried to get in on those Dec’s this morning myself but gapped up too much too fast….possible short squeeze underway now. cheers-K

  40. 40
    Sambone Says:

    Broad market – So far today a 174 point spread. The overall market is weaking. More sellers than buyers. After the year end window dressing, it should get very interesting the first 10 days of the new year, since portfolio managers have a whole year to play. Looking for a “selling climax” soon. IMO

  41. 41
    Sambone Says:

    5 Minutes to “Tini time”.

  42. 42
    kaman Says:

    Level II quote for DRYS close anyone?

  43. 43
    Alhambra Says:

    http://www.bloomberg.com/apps/news?pid=20601109&sid=akl2_VyG3GIY&refer=home

    Hey Z, who else do you think would benefit from this? (besides PBR 🙂 as mentioned in the article)

  44. 44
    zman Says:

    A:

    IF the Mexican Congress can agree to let foreign firms share some of the burden of refining and distribution (and that’s a big if since they are pretty xenophobic when it comes to natural resources) I think XOM, CVX, VLO benefit in time. They refine quite a bit of Maya heavy crude as it is.

    The quick beneficiaries would be the jackup rig companies, ESV, RDC, up to the deepwater drillers ATW, DO, RIG. If capital is freed up then the quickest route to reversing their declining production profile is through more drilling in the Gomex.

    Notice the article doesn’t say they are considering partnering in the wells with outside firms. U.S. firms would want a piece of the reserves and that currently is forbidden. The mention of low tech level of PEMEX is true and they could benefit greatly from drilling some wells with the likes of APC in the deepwater or APA in the deepshelf. But it still doesn’t sound like that’s anywhere near happening.

    As such, PBR because they have a toe in the water and ESV because they are cheap , just recently contracted their first rigs to Pemex and this could be the piece of news that turns day rates in the Gulf back up. Again, just off the top of my head and I don’t see it as option playable unless they actually make a decision. I’ll give it some more thought in coming days, thanks for the headsup.

  45. 45
    Alhambra Says:

    Thanks Z, now that I think about it DVR also does some jackups with Pemex (through their acquisistion of Horizon Offshore)… ok, have a good evening!

  46. 46
    bill Says:

    interesting story that has implications for coal and coal use vs natural gas

    http://www.hellenicshippingnews.com/index.php?mod=article&cat=Freightnews&article=6233

  47. 47
    bill Says:

    on drys

    http://www.streetinsider.com/Analyst+Comments/DryShips+(DRYS):+Shares+are+extremely+oversold+-+Jefferies/3207481.html

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