25
Jan

Friday Morning – Oil & Gas Inventory Review + Plus Stocks of Interest

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The first iteration of the fourth quarter calendar is on the aptly named Calendar tab which can be accessed at left or here

Commodity Watch:

  • Natural gas traded up $0.20 to close at $7.82 on what was essentially an inline withdrawal from storage of 155 Bcf (Street was at 158 Bcf; I was at 175 Bcf). This morning gas is trading flat this morning.

See last night's gas thoughts post here.

  • Crude Oil jumped $2.42 to $89.41, reversing a two week slide in prices from a high of $99.77 after word came out that a U.S. stimulus package had tentatively been agreed upon. This morning crude is trading back above $90.

exp-vs-act-011808.jpg

Crude Thoughts:

CRUDE: The build was consistent with what's normal for this time of year and with expectations.

Refinery Utilization dropped to 86.5%, lower than average and last year. The Street was looking for a slight uptick and goes a step towards confirming that low margins are causing refiners to enter the maintenance season early. The reduced product make took about 100,000 barrels of crude demand relative to consumption levels from the prior week. 

utilization-011808.jpg

Imports fell by over 200,000 bopd from the prior week, remaining within historic and recent norms.

crude-imports-011808.jpg

Crude Stocks Remain 10% Below Year Ago Levels and 2% Below The Five Year Average.

crude-stocks-011808.jpg

 

GASOLINE: Much bigger than anticipated build as a surge in imports and falling demand more than offset a slight decline in production. In general demand slips seasonal during this period but it has been a long time since it fell below the 9 mm bpd market and if this continues for another week I'd be willing to say prices are finally damping off some consumption and this will result in lower wholesale prices in February, with or without help from falling crude. I fully expect prices to recover after the maintenance season has begun in earnest and to regain its winter highs by April if oil is still hugging $90 by then.

Production was off a fraction.

gasoline-productin-011808.jpg

Imports jumped nearly 300,000 bpd or almost a third relative to the prior week. 

Demand falls below 9 mm bopd. Another week of this I get utterly bearish on near term gasoline prices.

 gasoline-demand-012408.jpg

Gasoline Inventories Now Even More Bloated Than Before.

gasoline-stocks-012408.jpg

 

DISTILLATES: Total distillate stocks remain low to year ago and the five year average their are not too many weeks left for this to have as great an influence on oil prices as the heating season starts to wane. While overall stocks are a touch low, ultra low sulfur inventories remain well stocked.

dist-stocks-011808.jpg

 

 

Stocks of Interest & Earnings Watch

HK Plans Secondary Offering, Gives Guidance and Operations Update.

  • Capex bumped from $700 to $800 million for 2008. This stems from:
  • increased exploration plans in the Taylor sand at the Elm Grove field
  • and in the Gray sand and deep Bossier formations at the Terryville Field.
  • and better than expected results in the northern portion of the Fayetteville shale play which will cause them to step up both drilling and infrastructure build out.
  • Potential drilling locations now exceed 10,500
  • 4Q guidance stays same
  • 2008 production guidance increased from a range of 265 to 285 MMcfepd to a range of 295 to 315 MMcfepd the midpoint of which equates to a 25% YoY increase in production once you back the impact of the Gulf Coast division sale which closes this quarter.
  • Expenses remain well contained and best in class with LOE/Mcfe expected to come in at between $0.50 and $0.60 / Mcfe which is attributable to their inexpensive legacy production and their focus on punting higher cost properties. 
  • Currently operating 18 rigs, plan to go to 22 this year.
  • Some highlights:
    • previously announced first horizontal at Elm Grove which had an IP of 16.5 mm/d on Jan 7 is now producing 15 mm/d. Offset to the well spud and two more horizontals will spud by mid Feb.
    • two gray sand producers completed at Terryville: one with an IP of 11 mm/d in December now producing 10 mm/d drilled from their new seismic. second well did not have volumes reported
    • 4 wells in the Bossier at Terryville, all from the new seismic, average production 4.3 mm/d apiece.
    • Fayetteville - 20 wells in the Hurricane prospect area, average of 2.3 mm/d which is not world beater but they are certainly economic. They are moving to a six rig program soon drilling horizontal wells with a spudder rig to save time and cost.
  • MLP delayed due to market conditions
  • Hedge volumes are mentioned but they remain relatively small % of total production.
  • See model here next week.

Holdings Watch:

Calls:

  • Entered APC Feb $55s for $2.80.
  • CHK Feb $37.50 for $0.80, doubling my initial position.

Odds & Ends

Analyst Watch: will add in comments after the open.

 

 

54 Responses to “Friday Morning – Oil & Gas Inventory Review + Plus Stocks of Interest”

  1. 1
    zman Says:

    Denise, saw your question, have to miss the opening for a kid thing but will get back to you in a bit.

  2. 2
    Sambone Says:

    9:04 am EST

    Nymex Crude, Powered By Equities, Rises Past $90

    Dow Jones Newswires
    From Market Talk
    [Dow Jones] Nymex crude was trading above $90/bbl for the first time in three sessions, powered by strength in global equities after US government and Fed moves to arrest a slowing economy and prevent recession. Mar crude +$1.14 at $90.55. “This week’s emergency interest rate cut by the Fed and the economic stimulus plan proffered by Congress appear to have, for now, stemmed fears of a looming recession in the US,” says TFS Energy Futures.

    (matt.chambers@dowjones.com)

  3. 3
    freeflow Says:

    I read an article today on BP that mentioned solar energy and how they are “pioneers” and “a big player” in the industry.

    Maybe this one will run with the solars if more people get to know this information.

    Any comments?

  4. 4
    Dman Says:

    Z- HK secondary, but no price and no timing?

    Confused as to what that means…

  5. 5
    apbd Says:

    Drys opened in the money on the 60’s.
    Maybe their gonna make up for my past losses with them. GO DRYS.
    apbd

  6. 6
    zman Says:

    Ok, I’m back…nice open!

    Loving the APC, COP, PBR, RIG, DRYS moves!

    Denise – in a nutshell 7-8 ish for the next couple of months, then a little lower say, $6.50. Production is still very strong and gas should weaken into the first shoulder season.

    FF – I’ve been doing a lot of reading on solar and will post some stuff gleaned from other analysts on the basics soon. BP has been around forever and is a big player. Don’t see a way to play it b/c its such a small part of what they do but maybe they’ll spin it out.

    Dman – I’d expect it to price as soon as they can put it together. Say 15 mm shares at $15. The stock is doing the usual “oh no, a secondary move” which is an opportunity and going to cause me to buy more shares. Your talking about 9% dilution to capture at least another 10% in production growth. People alway sell off secondaries but once it’s priced the results should make them very happy. We used to do ones like this after the close with a syndicated and it would be well oversubscribed with a story like this.

    A – I think its time for a group turn but I’m going to be quick to take profits after the up days as there is an overhang of holders who still just want out having bought in very recently at much higher prices.

  7. 7
    zman Says:

    crap BTU! missed again!

  8. 8
    zman Says:

    ZTRADE:

    Out PBR Feb $105 Calls for $6.60, up 207% since 1/22. Still hold the Feb $110 Calls, down slightly.

  9. 9
    zman Says:

    ZTRADE:

    Out COP Feb 70s, for average $7.15 up 160% since 1/22.

  10. 10
    Denise Says:

    Comment in my T/A newsletter last night re Drys-
    seconds Z’s observations-lots of trapped longs in the stock-does not see it moving back up too much (Her philosophy-last year winners are rarely this years)

  11. 11
    freeflow Says:

    I sold everything I had into strength this morning and I’m waiting to buy it all cheaper next week.

    No way this market goes up for four days straight. Lots of bad news potentially coming.

  12. 12
    kaman Says:

    Z- Agreed, BTU and BHP should both fly going into February Chinese New Years.

  13. 13
    Sambone Says:

    9:58 am EST

    Nymex Crude Gains As US Stocks Rally

    By MATT CHAMBERS
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures hit a one-week intraday high Friday, buoyed by strength in U.S. equities after concerns the economy is headed for recession diminished, boding well for energy demand.

    Light, sweet crude for March delivery on the New York Mercantile Exchange was recently up $1.42, or 1.6%, at $90.86 a barrel, after rising as high as $91.23, the highest for a front-month contract since Jan. 18. Brent crude on the ICE futures exchange rose $1.65 to $90.72 a barrel.

    The Dow Jones Industrial Average opened higher after strong earnings outlooks from Microsoft, Caterpillar and Honeywell International, helping crude extend gains made Thursday after the Bush administration and Congressional leaders agreed on a fiscal stimulus package. A surprise, three-quarter percentage point cut in U.S. interest rates also buoyed prices. The DJIA was recently up 0.6%.

    “This week’s emergency interest rate cut by the Fed and the economic stimulus plan proffered by Congress appear to have, for now, stemmed fears of a looming recession in the U.S.,” Addison Armstrong, an analyst at TFS Energy Futures in New York, said in a research note.

    The extent to which oil markets have honed in on equities markets and other indicators of the strength of the U.S. economy was evident Thursday when builds in U.S. crude oil and gasoline stockpiles, and a big drop in gasoline demand, were shrugged off as concerns about a recession eased.

    “Crude’s own fundamentals are starting to tilt more toward the more bearish side,” said Edward Meir, an analyst at brokerage MF Global in New York. The U.S. inventory data “make the case that demand seems to be flat-lining just as supplies and stocks (of oil and products) are rising. This backdrop should hold rallies in check, especially on any moves to the mid-$90s mark on crude, where we would be keen sellers.”

    On Wednesday, prices slumped to a three-month closing low of $86.99 a barrel, more than 13% below their intraday record $100.09 a barrel reached Jan. 3. The slide came mostly on concerns a U.S. economic slowdown could severely crimp global oil demand.

    Front-month February reformulated gasoline blendstock, or RBOB, rose 4.1 cents, or 1.8%, to $2.3239 a gallon. February heating oil rose 4.37 cents, or 1.8%, to $2.52 a gallon.

    —By Matt Chambers, Dow Jones Newswires

  14. 14
    Sambone Says:

    market going red

  15. 15
    zman Says:

    I should be slapped for bottoming fishing DRYS without rebuying BTU after the undeserved beating it took.

    FF – agreed, just closing out my bottom fishes from the other day when everything was blood red. Better safe than “shoulda, woulda, coulda”

  16. 16
    zman Says:

    RAIL exploding to upside – increased rail car demand to move all that coal to boats to get it to China.

  17. 17
    TTupp Says:

    rick santelli vs cramer

    hahaha i knew id find it. this guy is a joke

    http://thelearningcurve.blogspot.com/2008/01/rick-santelli-vs-jim-cramer.html

  18. 18
    TTupp Says:

    how great is that guys. we need to find one calling out Nickys buddy

  19. 19
    Sambone Says:

    T – Well done, I like Maria’s laugh.

  20. 20
    Popeye Says:

    RS vs JC priceless.

  21. 21
    zman Says:

    will watch in a bit, thanks for finding it T.

  22. 22
    TTupp Says:

    i dont think people will hold positions over the weekend

  23. 23
    Sambone Says:

    11:11 am EST

    Nymex Crude Pares Gains As US Stocks Slip

    DOW JONES NEWSWIRES

    [Dow Jones] Nymex crude slips from a one-week intraday high, paring gains as the DJIA reversed an early rally. Mar crude +$1.04 at $90.45/bbl after earlier rising as high as $91.38, its highest since Jan. 18. DJIA now down 0.2%. Optimism that a US fiscal stimulus package can stop a recession is keeping prices above $90. (matt.chambers@dowjones.com)

  24. 24
    TTupp Says:

    hopefully the markets trying to put in a reversal here.

  25. 25
    Dman Says:

    Z – any thoughts on HAL ahead of its report Monday?

  26. 26
    Sambone Says:

    Hmmm, GS laying off 5% of work force. What does that tell ya.

  27. 27
    zman Says:

    Dman – I’m tempted to take a little. I think they are going to say the same stuff about North America that SLB did – that’s its slow and tough but then they are going to spend a lot of time highlighting the middle east venture…which is probably why its up so much today. Feb $35 calls are flying off the shelves.

  28. 28
    zman Says:

    GS – I thought they were the masters of the universe. hmmmm.

    By the way, did everybody see the 4Q calendar tab. Its up and to the left and includes all your favorite energy company report dates, estimates, and multiples.

  29. 29
    Dman Says:

    Sam: they don’t need their subprime slicers & dicers anymore?

  30. 30
    TTupp Says:

    sambone: i thin that was confirmed as a rumor.

  31. 31
    Dman Says:

    Z- yep, looked at the calendar. Trying to figure out what CFPS is & why the E&Ps have that instead of EPS.

  32. 32
    zman Says:

    CFPS = cash flow per share. Its what E&Ps are judged on, not earnings, since they are in the business of reinvesting cash flows. Up until the last couple of years, it was normal for E&P companies to never have positive earnings but to carry on growing businesses nonetheless. As prices shot through the moon, E&P companies actually started reporting EPS but valuations between companies are still better compared on a P/CF or TEV to EBITDA basis.

    I generally used P/CF unless debt is high and then the total enterprise value to earnings before interest, taxes, depreciation, and amortization begins to have more equivalizing power.

  33. 33
    Bob Says:

    Z-Any reason you know of why your shipping analyst’s TOPS favorite is up more than 20% today?

  34. 34
    zman Says:

    To get to cash flow from ops or CFPS a quick rule is to take net income and add back depreciation, deferred (non) cash taxes, and any other non-cash expenses. Net income is a silly way of looking at a company’s results because it does not reflect the cash generating ability of the business with all those non cash items like DD&A that reduce it for tax purposes but are not actual “expenses”

    When results come out I often look at field margins as a quick gage of how the E&P is doing in relation to others and in relation to its guidance. You convert revenue and cash costs to “per Mcfe” units, then subtract the costs from the revenues to arrive at what they are yielding on a per unit basis in the field.

    For example: take the oil and gas revenues and divide them by the production. This gives you revenues per Mcfe. From that subtract lease operating expense (the cost of running your wells), production taxes, and G&A expenses – each divided by the period’s production. That will yield field margins which you can compare from one operator to the next. This gives you an idea of how efficient different companies are in managing their plays. Price obviously plays a role but you can see those costs over time and the guys with the lowest costs generally will do well over the long haul.

  35. 35
    zman Says:

    Bob:

    All I see is a block trade from yesterday that had to be an institution bottom fishing this poor beat up thing. Just looking at the chart you’d have to say it is way oversold and due a pop.

    Bill if you are around and have any thoughts our ears are wide open.

  36. 36
    zman Says:

    crude at 91

  37. 37
    zman Says:

    SLB getting dropped; HAL getting popped before earnings. I gotta nibble.

  38. 38
    Sambone Says:

    There she goes

  39. 39
    zman Says:

    Sam – make HAL fall some too.

  40. 40
    Sambone Says:

    Don’t wanna, bght some in the 30 range.

  41. 41
    zman Says:

    how about COP, I’d like to buy it back.

  42. 42
    Sambone Says:

    Ok, can do on COP. I want to buy more in the 70 range. LOL

  43. 43
    zman Says:

    thanks, your a peach And a funny guy.

  44. 44
    zman Says:

    game, set, match…traders done for the week…done buying that is.

    SLB getting popped.

  45. 45
    zman Says:

    sinking market trips up oil. just fell below 90 and sinking towards red fast. This market has no conviction.

  46. 46
    zman Says:

    ZTRADE:

    Entering HAL Feb $32.50 calls for $1.95.

  47. 47
    redjack Says:

    Z…have you ever looked at Pioneer (PXD)?
    Some of their employees are real upbeat on their prospects in Alaska..says it could be huge for them.

  48. 48
    zman Says:

    RJ – I have and I think its cheap on the surface but I’ve never done a work up on them nor did I follow them in my former life. That being said, thanks for the heads ups, will look into it.

  49. 49
    Popeye Says:

    Looks like maybe the bargain hunters woke up.

  50. 50
    zman Says:

    oil and ng ended very strong.

    it does look like the bargain hunters are about, sector greening up into the close.

    tini-time has come early for me…see you Sunday for the wrap.

  51. 51
    zman Says:

    I’m outta here, have a good weekend.

  52. 52
    Sambone Says:

    3:31 pm EST

    Nymex Crude Climbs Again As Recession Fears Ease

    By MATT CHAMBERS
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures rose to a one-week high Friday, logging their first two-session rally for the year as concern the U.S. economy is headed for recession diminished.

    Light, sweet crude for March delivery on the New York Mercantile Exchange rose $1.30, or 1.5%, to $90.71 a barrel, the highest settlement for a front-month contract since Jan. 18. March Brent crude on the ICE futures exchange settled up $1.83 to $90.90 a barrel, closing higher than New York crude for the time since Dec. 19.

    Crude extended gains made Thursday, which were the biggest for the year, after the Bush administration and congressional leaders agreed on a fiscal stimulus package. A surprise, three-quarter percentage-point cut in U.S. interest rates earlier in the week also buoyed prices.

    “I think we’ve turned a corner, we’re a little more upbeat on the economic front, there’s a growing feeling we’ve bottomed and more buyers are coming back into the market again,” said Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York.

    On Wednesday, prices slumped to a three-month closing low of $86.99 a barrel, more than 13% below their intraday record $100.09 a barrel reached Jan. 3. The slide came mostly on concerns a U.S. economic slowdown could severely crimp global oil demand.

    Also buoying prices, a fire at Valero Energy Corp.’s Aruba refinery shut the plant for an unspecified amount of time. The refinery has the capacity to process 255,000 barrels of crude a day. It produces feedstock used at other refineries, and some diesel fuel, but doesn’t produce gasoline.

    The extent to which oil markets have homed in on indicators of the strength of the U.S. economy was evident Thursday when builds in U.S. crude oil and gasoline stockpiles, and a big drop in gasoline demand, were shrugged off as concerns about a recession eased.

    “Crude’s own fundamentals are starting to tilt more toward the more bearish side,” said Edward Meir, an analyst at brokerage MF Global in New York. The U.S. inventory data “make the case that demand seems to be flat-lining just as supplies and stocks (of oil and products) are rising. This backdrop should hold rallies in check, especially on any moves to the mid-$90s mark on crude, where we would be keen sellers.”

    Front-month February reformulated gasoline blendstock, or RBOB, rose 3.54 cents, or 1.6%, to $2.3182 a gallon. February heating oil rose 2.42 cents, or 1%, to $2.5005 a gallon.

    —By Matt Chambers, Dow Jones Newswires

  53. 53
    Sambone Says:

    There she goes again

  54. 54
    TTupp Says:

    good call on spx resistance of 1360 Nicky.

    When do you think we will get the final leg down in the dow to 11,500 you were talking about?

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