11
Feb

Monday Morning – Looking for a Green Open

Print Friendly

Good morning and welcome to the fourth week of energy earnings. This week the pace slows a little but does contain stalwart holding (NFX) which reports tonight and which I plan on owning by the end of the day. The weekend saw a bomb threat hoax in the North Sea which may re-raise security concerns among traders this week and the weather has once again decided to turn cooler. I will be quick to take profits and losses early in the week as this market has a difficult time putting together more than 2 green days in a row. The large cap E&Ps which all reported better than expected results have been met with varied stock performance in the wake of 4Q reports. (APC) is now rebounding after being sorely used despite a strong 2007 showing, (APA) faired better and is surging over $101 in early trading, and (EOG), which we picked up Friday after very strong earnings may have a little umph left in it and while I took March's there I still have both eyes focused on the market which has been a killjoy year to date. Service stocks, have suffered a 16% beating since the beginning of the year are showing some signs that the end is not, in fact, near.

 

Commodity Watch

  • Crude oil traded as much as a buck higher in the overnight electronic session after Venezuela's Hugo Chavez reiterated his threat to shut off oil flows to the U.S. over last week's seizure of Venezuelan funds authorized by U.S. and British courts. This morning crude is trading only slightly higher.
  • Hugo Watch:  And I quote:

"If you freeze us, if you really manage to freeze us, if you damage us, then we will hurt you. Do you know how? We are not going to send oil to the US, Mr Bush, Mr Danger,"..."Never again will they rob us - the ExxonMobil bandits. They are imperial American bandits, white-collared thieves. They turn governments corrupt, they oust governments. Comment: Says the guy who "appropriated" Exxon's heavy oil upgrading project.

 

  • Amount of oil Venezuela produces: 2.5 million bopd (Hugo says its more like 3 mm bopd but even his pals in the Cartel cast doubt on that number)
  • Amount of oil Vz sends to the U.S. every day: 1.33 million bopd or 53% of total production. Fat chance finding a home for even half of that Hugo. haven't you heard there's a recession on?
  • Venezuela Is Oily Through and Through: (from the CIA Factbook on Venezuela):

Venezuela remains highly dependent on oil revenues, which account for roughly 90% of export earnings, more than 50% of the federal budget revenues, and around 30% of GDP. In the dictionary, under "empty threat" they should have a Hugo Chavez' picture. See also Thief, Liar, and no doubt future Time Magazine Man of the Year. 

  • Thunderhorse Watch: BP warns employees not to send emails or text messages on undisclosed problems at oft-delayed  "billion barrel" Gomex deepwater project.

 

  • Natural gas set to rally. After a strong week last week which saw gas prices rally --% after a larger than expected withdrawal from storage gas is headed higher again in the early session, up $0.20 to just crest the $8.50 mark on the resurgent cold.
  • Weather Watch: Gas-weighted degree days for last week have not yet been reported due to a glitch at the Climate Prediction Center. Looking ahead the CPC sees HDD's recovering to 213 this week. I suspect that when the CPC's final numbers for last week are straightened out they will be revised higher.

Earnings This Week 

week-4-earnings.jpg

 

Holdings Watch: I made quite a few changes at the end of last week. Click here to see the updated list.

Stocks We Care About Today Watch: 

IOC Watch: still nothing. Could be lots of reasons for this, some good, some bad, and some non-committal.

(COP) Awarded LNG Facility Contract in Angola. Though probably three years from completion this is the first LNG facility in Angola on the Atlantic side of the country, from which, demand promises to be high.  

(RRC) Snapshot On The Weekend Post. Click here.  

(PBR) Testing Marlim Leste Field. This is the second test (different location) of the Marlim Leste field in Brazil's Campos Basin as PBR prepares to begin production in 2H08 of 180,000 bopd from the field. This is good news in the sense that its yet another PBR development project coming to fruition but also after long delays with the FPSO here PBR now seems to be working out the kinks.

Odds & Ends

Analyst Watch: (SNP) upgraded to Buy at Deustche, (GMR) and (FRO) raised to over-weight and neutral respectively at JP Morgan, PETD gets a material price target upgrade at Stiffel, while (SWN) and (BTU) gets a smaller, 5%, PT upgrades at FBR.

89 Responses to “Monday Morning – Looking for a Green Open”

  1. 1
    Sambone Says:

    7:46 am EST

    Crude Steady, Market Weighs Supply, Economy Fears

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil prices held near to Friday’s closes in London Monday as oil traders balanced renewed supply concerns with ongoing fears of a slowdown in the U.S. economy.

    Venezuelan threats to cut oil shipments to the U.S. helped keep prices close to $92 a barrel Monday, but uncertainty surrounded how sustainable support for current prices will be given uncertainty over future oil demand from an ailing U.S. economy.

    “The markets are still tight, and although there has been constant pressure on oil prices amid concerns over slowing demand growth, geopolitical concerns still remain, which is causing increased volatility in the market,” said Nimit Khamar at Sucden Research in London.

    At 1226 GMT, the front-month March Brent contract on London’s ICE futures exchange was down 27 cents at $91.67 a barrel.

    The front-month March light, sweet, crude contract on the New York Mercantile Exchange was trading 2 cents higher at $91.79 a barrel.

    The ICE’s gasoil contract for February delivery was up $7.25 at $825 a metric ton, while Nymex gasoline for March delivery was down 24 points at 235.48 cents a gallon.

    “After a relatively uneventful few weeks, the news cycle has swung rather abruptly back towards a more bullish geopolitical/supply backdrop and away from a weakening U.S. macro picture,” said Edward Meir, analyst at MF Global in New York.

    Adding to supply anxiety following declaration of force majeure on some Nigerian exports by Royal Dutch Shell last week, Venezuela’s President Hugo Chavez Sunday threatened to stop oil sales to the U.S. if an attempt by Exxon Mobil Corp. to freeze billions of dollars in Venezuelan assets succeeds.

    Exxon Mobil is seeking an injunction against assets of Venezuelan state oil company Petroleos de Venezuela in U.S., U.K. and Dutch courts as it challenges the nationalization of a multibillion dollar oil project by Chavez’s government.

    A U.K. court has issued an injunction “freezing” as much as $12 billion in assets.

    “If you end up freezing (Venezuelan assets) and it harms us, we’re going to harm you,” Chavez said during his weekly radio and television program. “Do you know how? We aren’t going to send oil to the U.S.”

    Given both the importance of oil revenues to the Venezuelan economy, and similar comments from Chavez in the past, a disruption to oil supplies is unlikely, some suggested, although the situation should be closely monitored for its impact on crude prices.

    “We do not believe that there is any serious risk to oil supplies but with the increased rhetoric we would be cautious before concluding that this development should be already fully discounted,” said Olivier Jakob of Petromatrix in Switzerland.

    Reviewing Friday’s more-than $3 rally, many analysts Monday attributed much of the gains to technical trading and short covering, leaving questions marks over whether prices can continue to push higher amid ongoing economic uncertainty.

    “We are not sure if we should see Friday’s activity as a sign that prices can make an assault on their all-time highs, seen early in 2008, or if this was just a sharp, short-covering rally in a market that still wants to go lower,” said Peter Beutel of trading advisory firm Cameron Hanover.

    Despite forecasts of a U.S. recession, recent actions by key decision makers — including Federal Reserve rate cuts, the Organization of Petroleum Exporting Countries keeping output unchanged and U.S. Senate approval of a $168 billion economic stimulus plan — should bolster a fundamentally constructive outlook for commodity prices, analysts at Goldman Sachs said.

    “Although we expect that commodity prices, and in particular energy prices, will remain vulnerable in the near term to liquidation of speculative positions triggered by negative economic news flow, we continue to view these price pullbacks as buying opportunities,” Goldman Sachs said.

    —By Nick Heath, Dow Jones Newswires

  2. 2
    zman Says:

    HDDs for last week came in down 2 at 167. A little surprised gas is still maintaining a $0.18 to $0.20 advance in early trading, however this week’s weather is seen as being much colder and colder than normal (though not as cold as last year) and that is pretty supportive this time of year.

    Deustche has an interesting piece out on natural gas supply and demand which argues for higher than Street consensus prices this year due to flat drilling, a decline in Canadian volumes (I agree) and flat LNG (very tough call to make but I think they may be using recent history a bit too much as a guide there). Will take a look at some their domestic supply assumptions and comment in tomorrow’s post but it is the second Street report of late looking for higher gas prices which is somewhat rare these days and also probably good for banking revenues.

  3. 3
    zman Says:

    Oil down $0.40 having failed to hold $92 into the open. Like I said in the post, Hugo’s threat is pretty empty but it, and its occasional fist pumping reiteration, will cause a lot of volatility this week.

  4. 4
    zman Says:

    ZTRADE: Out APA Feb $100 Calls for $3 and 22% gain since Feb 1. Just ran out of time and am being cautious in this market.

  5. 5
    zman Says:

    DSX signs a 57 to 60 month time charter with Cargill for a Panamax with a contract value of ~ $59 million, or $34,500 per day. You would expect a longer time charter price to below lower than spot and the stock is rallying on the news and with the group. DRYS making a move over $75 and is definitely working to break the down trend for the bulkers.

    Spot prices for today are out:
    Capesize up another $3,000 per day to $111,800
    Panamax up $1,600 (it has been lagging the capesize pricing move) but is now at the $50,000 per day mark.

  6. 6
    zman Says:

    Broad market thoughts anyone? Energy looks like it wants to go higher given a chance but the broad market seems to be in a continuous fade.

  7. 7
    redjack Says:

    Z…thanks for the RRC analysis

    did you see this?:
    “The rumor of the moment is that of a takeover of Frontier by Valero,” said Rebecca Engmann Darst, equity options analyst at Interactive Brokers Group in Greenwich, Connecticut.

    “That elicited call buying in the February $35 and $40 calls, with interest in the $40 calls extending into the March contract.”

  8. 8
    Sambone Says:

    9:29 am EST

    Nymex Crude Steady As Economy, Venezuela Weighed

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures were steady Monday, torn between a threatened export cut from Venezuela and concerns demand will suffer in a slower economy.

    Venezuelan President Hugo Chavez on Sunday threatened to stop selling oil to the U.S. in response to Exxon Mobil Corp.’s (XOM) recent legal moves to freeze assets of Venezuela’s state oil company after the country nationalized an oil project last summer.

    At about 1.2 million barrels a day, Venezuela is the U.S.’s fourth-largest supplier of crude oil, according to the Energy Information Administration. Chavez has made similar threats in the past.

    “Given the importance of the U.S. market to Venezuela, there is little chance that Chavez will make good on his threats,” said Addison Armstrong, an analyst at TFS Energy Futures in Stamford, Conn. “However, traders reacted bullishly to the possibility,” he said, as it followed Royal Dutch Shell PLC’s (RDSA) shut-in of additional production in Nigeria last week.

    Light, sweet crude for March delivery was recently down 13 cents, or 0.1%, at $91.64 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange was 26 cents lower at $91.68 a barrel.

    Supply risks in Venezuela, Nigeria and elsewhere have come to the forefront of trading in recent days, helping drive prices for the Nymex contract up $2.81 a barrel last week.

    Oil remains off its record highs of last month, however, on concerns a global economic slowdown could harm demand.

    In a note to clients, analysts at Goldman Sachs said the impact of a U.S. recession on oil demand growth “is likely to be meaningful,” but maintained its forecast that benchmark West Texas Intermediate crude will be trading at $105 a barrel a year from now amid tight supplies from the Organization of Petroleum Exporting Countries, active U.S. fiscal and monetary policies and growing demand in developing countries.

    “Net, while further investor liquidation on the back of recession concerns may continue to put pressure on prices in the near term, we believe that fundamentals remain supportive and maintain our 20% energy return forecast on a 12-month horizon,” said Goldman, a major energy trader.

    Front-month March reformulated gasoline blendstock, or RBOB, was down 22 points, or 0.1% at $2.3550 a gallon. Amid cold Northeast temperatures, March heating oil was up 64 points, or 0.3%, to $2.5605 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  9. 9
    Dman Says:

    Z – you said you were bored with the same old stocks. I’d really like to see some alt-energy stocks. How about ZOLT for a clean one and HW for a dirty one 🙂

  10. 10
    kaman Says:

    Broad market? Thought we might get pin action in tech sector off of Yahoo/MSFT slap-fight. Who knows anymore? I do feel CME is way oversold…cheers-K

  11. 11
    zman Says:

    RJ – I did not, thanks. Was that from today as the stock is lower. It would make some sense for VLO as I think the managements face some of the same challenges in the same ways and of course it would only be a small snack for VLO.

    EOG starting to get that follow through from Friday’s run. I still like my Marches there as we trade into all time highs.

    Drybulks still barely positive despite the 100 point drop… They probably recover pretty quick and I may snap up a little more QMAR march call volume if the market doesn’t look like a complete failure.

    Thanks Sam for the story, nice to see others think Hugo’s threat is pretty empty. He could probably carry it out for a day or two but its already had the effect that greedy little man desired.

    D – About Zolt all I can say is I’ve heard the ticker. About HW …I lump them in the same class with Evergreen EEE…just not that interesting to me. I used to loosely follow the hype there when I covered KFX, now EEE. Ugghh. Stock driven by bills in the Senate not for me. Will have a look at all three for kicks in the near future.

  12. 12
    zman Says:

    K – isn’t CME facing a very real problem if they are not the only ones clearing trades?

  13. 13
    redjack Says:

    Z…I just came across the FTO bit this morning, but it was dated 2/7…

  14. 14
    kaman Says:

    On that premise , yes. My thesis is that’s like trying to knock off Goliath. I beleive in miracles, but don’t bet on them. My two cents. Trying to read the tea leaves, most pundits say the Department of Justice memo last week was a ripple…no teeth, stock got over-punished.

  15. 15
    zman Says:

    RJ – well it sounds plausible and FTO hasn’t been this cheap in awhile. However, I’ve had the square root of 0 success trying to play takeouts with options.

  16. 16
    zman Says:

    Hear ya K, you on the CME calls.

    I’m an absolute idiot for missing NFX on the dip this morning. I’ll end up paying up for some Feb 50s (sort of risky) and/or March $50s. They’ve released a lot of the good news on Woodford results over the last week to little notice.

  17. 17
    Sambone Says:

    Z – #6 Don’t get me started. What I find funny is that these “Suits, i.e. bankers” are now having to drink their toxic brew.
    http://www.forbes.com/home/forbes/2008/0225/036a.html

  18. 18
    Dman Says:

    Z – if HW is a downer then don’t waste your time on it. But ZOLT I’d be more interested in. It’s a play on materials going into wind turbines. Down huge after being a momentum favourite last year. But wind is ramping up fast (45% growth in total US capacity last year)

    http://www.awea.org/newsroom/releases/AWEA_Market_Release_Q4_011708.html

    So the Q is: will ZOLT be back?

  19. 19
    rseidman Says:

    Z: Do you have a target for CHK
    Febs?

  20. 20
    zman Says:

    BTU back up to $55. Should I stay or should I go? Probably time to take the 90% hit on that one.

    D – thanks on the Zolt I knew I’d heard of it somewhere recently and its an area that very much interests me.

    RS – CHK Febs, well we’ve come a long way since they were a quarter bid last week, lol, so I guess sometimes its better to be lucky than good. I’d say I want to break even and I did double down so at $1.85 bid I’m not far off my $1.95 average but in the market I’m the only one who cares where I bought an option and that just doesn’t matter. Since they’re in the money again and trending in a friendly manner I’ll probably put a $1.50 stop on them and see if they can run a bit more. As you know I added the Marchs last week.

  21. 21
    zman Says:

    RS – I would also note that the last two expiration weeks started out well if I recall and ended up going south by Tuesday afternoon with little sunshine seen until Friday when it was mostly too late. When in doubt, sell half.

  22. 22
    Dman Says:

    SII escaping its 2008 down-channel

  23. 23
    Sambone Says:

    Uncle Phil

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

  24. 24
    zman Says:

    Popeye, RS & Co. – some other food for thought I meant to include in the weekend look at RRC.

    RRC: Total Enterprise Value: $9.5B Booked Reserves: 2.0 Tcfe

    SWN: TEV: $10.5 B; Reserves 1 Tcfe

    CHK: TEV: $31 B; Reserves: about 11 Tcfe.

    CHK remains the Rodney Dangerfield of E&P companies. What does it take to get them more respect. Reduced F&D costs. We have to see that on Feb 20 report or its another year of sub group multiples. I think there is a decent shot that they show an improvement this year.

    Those CHK Feb $37.50s are now at $2. Sort of tempted to take them out of my worry list now.

  25. 25
    zman Says:

    EOG soaring.

    Me kicking self in back of head over the NFX run.

    APC’s recovering nicely, back to black there.

    NG up $0.24, search me….shorts ticked up again last week and are getting spanked for their efforts now.

    Bulks reasserting a rally, really liking the action in DSX here which has also broken the down channel trend.

  26. 26
    zman Says:

    Fadel Gheit, FBR’s senior E&P analyst, a very smart and all around good guy spoke in a podcast this morning hosted by WallSt.net about XOM, CVX, OXY, DVN, and EOG. In the test quotes he sounds more bullish on 2008 vs 2007 oil prices than I last remember him.

    http://radio.wallst.net

  27. 27
    zman Says:

    Crude suddenly up $1.70, I see no news. Anyone see anything, we were a dollar high just minutes ago?

  28. 28
    Dman Says:

    Briefing.com sez HK reports Feb 27 before market (but “unconfirmed” so it could be, well, completely wrong)

  29. 29
    gaamblor Says:

    FYI, I think your YGE EPS is in RMB which explains the multiple

    http://ir.yinglisolar.com/e/press_detail.php?pkey=17&news_date_year=2007&keyword_search=

  30. 30
    Denise Says:

    Good morning-
    Just read our resident bear Mr.Kass is adding to his short dug and
    he pennened a (very rare for him) colulmn this am he was covering all trading shorts-thinks bad news is in and expects a up to 5% rally
    He is usually early
    My wave voodoo man thinks this week will be up
    One last comment Doug thinks Dug is ridiculously undervalued
    Is’s nice to have friends!

  31. 31
    zman Says:

    g- aw nutts. my estimate service shows estimates and price in same currency but it looks like you are correct.

    CHK cresting $40.

    Re HK – yahoofinance has them on the 28th…will look for their PR before we get to that week.

  32. 32
    zman Says:

    ZTRADE:

    Out EOG March Calls for $3.50. 94% gain Friday to Monday and this pop in crude that’s driving it looks a little flimsy.

  33. 33
    scoop006 Says:

    THE Difference between the Teacher and the Student. Teacher holds his CHK Feb.$37.50calls, Student sells them @.80.

  34. 34
    zman Says:

    sorry grasshopper…me not very good teacher then.

    $2.60 bid too tempting.

  35. 35
    zman Says:

    Scoop – you know I just got lucky.

  36. 36
    Dman Says:

    CHK is thru the 08 declining channel. Making a move on the Nov-Feb line.

  37. 37
    zman Says:

    D – agreed, what do you think of OII technically?

  38. 38
    zman Says:

    Vz transferring bank accounts to Switzerland, kind of ups the ante on their oil curtailment threat.

  39. 39
    Dman Says:

    Z – OII has escaped those nasty trends but there is a lot of congestion overhead. So I would have thought it needs a catalyst to move up a lot near term. Something like earnings on 21 Feb and OIH rebound 🙂

    NB: As a technician I’m strictly an amateur…

  40. 40
    Dman Says:

    Re OII: I guess it also is a question of deepwater sentimet (which seems to have gotten wobbly lately for no apparent reason other than huge decline in OIH). Judging by FTI/RIG/NOV, maybe deepwater sentiment is on the mend (NOV emphasized deepwater orders in their call).

  41. 41
    Sambone Says:

    12:10 pm EST

    Nymex Crude Spikes On Delaware Refinery Outage

    BY GREGORY MEYER
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures spiked to a one-month high Monday on fears that a Delaware refinery had suffered a major failure, but pared gains after further examination revealed key units were operating again.

    Light, sweet crude for March delivery was recently up $1.55, or 1.7%, at $93.32 a barrel on the New York Mercantile Exchange. It had briefly spiked to $94.72 a barrel, the highest price for a front-month contract since Jan. 10, after news media reported that a Valero Energy Corp. (VLO) refinery in Delaware City, Del., suffered an equipment failure Sunday that environmental records described as “catastrophic.”

    Power has been fully restored to the refinery, and other units at the refinery were restarting, Valero said.

    “That was clearly a headline-driven spike,” said Nauman Barakat, senior vice president at Macquarie Futures USA in New York.

    Brent crude on the ICE futures exchange also jumped to an intraday high of $94.52 a barrel and was recently trading at $93.26 a barrel, up $1.32.

    Earlier, oil futures had traded modestly higher, torn between a threatened export cut from Venezuela and concerns demand will suffer in a slower economy.

    Venezuelan President Hugo Chavez on Sunday threatened to stop selling oil to the U.S. in response to Exxon Mobil Corp.’s (XOM) recent legal moves to freeze assets of Venezuela’s state oil company after the country nationalized an oil project last summer.

    At about 1.2 million barrels a day, Venezuela is the U.S.’s fourth-largest supplier of crude oil, according to the Energy Information Administration. Chavez has made similar threats in the past.

    “Given the importance of the U.S. market to Venezuela, there is little chance that Chavez will make good on his threats,” said Addison Armstrong, an analyst at TFS Energy Futures in Stamford, Conn. “However, traders reacted bullishly to the possibility,” he said, as it followed Royal Dutch Shell PLC’s (RDSA) shut-in of additional production in Nigeria last week.

    Supply risks in Venezuela, Nigeria and elsewhere have come to the forefront of trading in recent days, helping drive prices for the Nymex contract up $2.81 a barrel last week.

    Oil remains off its record highs of last month, however, on concerns a global economic slowdown could harm demand.

    In a note to clients, analysts at Goldman Sachs said the impact of a U.S. recession on oil demand growth “is likely to be meaningful,” but maintained their forecast that benchmark West Texas Intermediate crude will be trading at $105 a barrel a year from now amid tight supplies from the Organization of Petroleum Exporting Countries, active U.S. fiscal and monetary policies and growing demand in developing countries.

    “Net, while further investor liquidation on the back of recession concerns may continue to put pressure on prices in the near term, we believe that fundamentals remain supportive and maintain our 20% energy return forecast on a 12-month horizon,” said Goldman, a major energy trader.

    Front-month March reformulated gasoline blendstock, or RBOB, was up 4.48 cents, or 1.9%, at $2.4020 a gallon. Amid cold Northeast temperatures, March heating oil was up 5.61 cents, or 2.2%, to $2.6102 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  42. 42
    zman Says:

    Dman – thanks…last time it was the comments and not the numbers that failed to impress….pretty conservative. Toss up as to whether they use the same language one quarter later. Agree read on chart. Probably take a small piece for the call.

    Sam – thanks for the story, sounds like a non-event, so why are we still up $1.65 on crude?

  43. 43
    zman Says:

    NG getting squeezed.

  44. 44
    Sambone Says:

    #42 – The “Crowd” and GS statement, IMO

  45. 45
    Dman Says:

    Denise – I’m confused about Doug. He’s adding to his short on DUG but thinks it is “ridiculously undervalued”? Do you mean the DJ Oil&Gas index ??

    Z- I guess I was thinking of a possible OII run into earnings rather than a pop on the day, but with this zany market…hmm. I’m holding April 55’s because I think it’s probably bottomed & expect some sort of further recovery sometime.

    Doug being bullish is good: his timing has been alright lately 🙂

  46. 46
    zman Says:

    Dman – that’s been the shape of the season so far…run ’em up into earnings and if you hold through the report be prepared to hang on to your butt.

    Wish Ram was around today. CHK up almost $2, he’d never believe it.

  47. 47
    ram Says:

    I’m tuning in for a little bit today.

  48. 48
    Dman Says:

    Z – just looking at the 5 year chart on CHK. I can’t see any precedent for these two huge back-to-back days. The closest would be 30/31 Aug 2005. So it’s gotta mean *something*. Right? I guess the day ain’t over yet.

  49. 49
    Denise Says:

    D-he thinks the “space” is undervalued
    He usually buys baskets and I assume a DUG short(up 3.5%) versus a xle (up 1.5ish) is a more super charged way to play. I think dug is a double short inverse etf? Not sure if the holdings are exactly the same as XLE

  50. 50
    zman Says:

    Hey Ram – see comment 24 re CHK. One of these days, they will get some respect.

    D – more on CHK. Part of the problem is that they are perceived as having paid to much to enter their Barnett acreage…that they are marginally profitable there. This reserve report could help alleviate some of that. Then there’s the debt. At $8 gas they’ll be paring that back too. That leaves the fear of a deal which is gone now as they sell off asset package after asset package. The VPP they did recently of non-core production was a nice monetization of some low upside stuff which left an exploratory potential untouched. The Street will take time to come around. One thought on the chart is that there maybe a rumor that they best 11.0 Tcfe in the reserve report next week, could happen. Will do a little snooping.

  51. 51
    Dman Says:

    Denise – thanks, the “space” thing makes sense.

  52. 52
    Denise Says:

    Z-re CHK-I have a friend who is an attorney in the oil/gas biz representing sellers (Ft Worth)and he made the comment 6 months ago they seemed willing to pay anything on some of these leases

  53. 53
    Dman Says:

    CHK debate: I guess in the background is that CHK management are clearly *very* long-term bullish on NG, so when a decent winter comes along…they get some respect for that notion.

  54. 54
    scoop006 Says:

    Z Is CHK a takeover candidate and if so any idea by whom?

  55. 55
    zman Says:

    True, you see Aubrey’s conviction with $20 million lots every other month or so…and he’s been doing that since the stock was a single-digit-midget. Second richest guy in OK (next to the guy who runs CLR). Of course, Aubrey used to have the best deal in the business with a working interest in every well back when they were drilling the Austin Chalk as fast as they could sink the wells (sounds familiar?). He just reinvested the cash in the stock.

    Scoop – its pretty big $31 B TEV so you’re most likely talking a major. COP sopped up Burlington so they’re probably gassy enough. CVX might do it as they tout themselves as the great American green major but I haven’t heard of it being bandied about recently. Any of the majors could do a stock deal and be accretive day 1 given the discount but it gets back to paying a premium for CHK’s position which is perceived as too costly. I do think that if anyone bought it they would be very happy three years down the road.

  56. 56
    scoop006 Says:

    How about XOM

  57. 57
    Dman Says:

    Z: ALY for a catch up play? I recall you had some positive comments on them a while back.

  58. 58
    zman Says:

    I agree with Cramer on at least one issue (if not more) pigs get slaughtered. This is the kind of day that is pretty rare …especially in this broader malevolent market environment.

  59. 59
    zman Says:

    Scoop – when was the last time XOM was interested in growing domestic production, LOL? I don’t think so although it might be a good idea as the state of Texas is unlikely to steal all your infrastructure and kick you out.

    Dman – ALY, fell completely off my DD radar
    until earnings, saw it caught a downgrade the other day, think Wachovia, and figured the guy knew more than me, something about not trusting the S. American rollout which is what peaked my interest in the first place.

  60. 60
    zman Says:

    Because I have the March and because I can’t believe my good fortune I’m going to punt the CHK Febs this afternoon. Fair warning.

  61. 61
    Dman Says:

    CHK thru the last round-number voodoo zone …

  62. 62
    QUARRYMAN Says:

    Z.

    Watching the oil peaking on Hugo, etc.

    Whaddya think of some MAR DUG calls?

    Q.

  63. 63
    zman Says:

    Probably not a bad idea for some downside protection. This is $6.50 per barrel in two days…a little nutty. Even if Hugo carried it out (still doubt it but the chap is nutty) he could only keep it up a short while and as a guest on CNBC pointed out, the tankers are like musical chairs…send some away from the US and others will come to the US. Probably not very quickly but again, he needs us more than we need him. Yeah, not a bad idea.

  64. 64
    zman Says:

    but man do those DUG call spreads stink!

  65. 65
    ram Says:

    Any other FEB’s besides the CHK’s that might go? Thanks.

  66. 66
    zman Says:

    Ram – Feb’s On The Brink of Punting

    HAL a bit better than breakeven, need to be in March here.

    BTU almost a complete loss but covering ground remarkably fast, likely punt on strength (if any) tomorrow.

    XOM – I feel I might as well hold

    APC $100s – finally in the black here…what a difference a week makes…Now the Street suddenly likes after whacking five days of TV out of me.

    RIG $140s I can’t give away.

  67. 67
    Nicky Says:

    Afternoon all. Wow what a move in crude!!!!
    Several possibilities out there (groan!). One of which is that we top out near here. But really nothing to say we can’t go back and retest the highs.

  68. 68
    Nicky Says:

    Broader market so far behaving well today. Dow made a slightly lower low which looked like v down and then reversed on cue! We need to take out 12350 for this to get some legs though…

  69. 69
    zman Says:

    Nicky – Flynn got stopped out of his crude short.

  70. 70
    Nicky Says:

    Aye he took quite a hit I saw on that….
    They reckoned it was short covering that took it higher – there was no new news.

  71. 71
    zman Says:

    NFX starting to come in a little; will buy some calls if it touches but holds $52

  72. 72
    zman Says:

    Denise – re 52, I’m sounding out a local on whether or not that’s still the case, I had thought they had recently backed off a bit on lease prices.

  73. 73
    zman Says:

    ZTRADE: Entered NFX March $55 Calls for $1.70. Somewhat risky with the earnings call in the morning.

  74. 74
    xweto Says:

    Z: what’s your pick for trading Crude on a swing basis. Also re: a gassy play I’ve have a good position in ECA & am thinking diversification, ideas? Tx for all your good work, Jim

  75. 75
    Sambone Says:

    For Nicky

    Bond Insurers’ Next Challenge: CDO Defaults

    By ROMY VARGHESE
    A DOW JONES NEWSWIRES COLUMN

    NEW YORK — Technical defaults have reached $97 billion of collateralized debt obligations — an ominous sign for bond insurers who guaranteed such securities.

    Called event of default, this mechanism is triggered when the collateral underlying these complex investments deteriorates below a certain threshold. Such defaults can lead to liquidation of the CDOs — typically the worst scenario for bond insurers.

    To be sure, liquidation, which is often favored by banks that hold CDOs, isn’t the inevitable outcome of an event of default. Controlling noteholders can also vote to redirect cash the CDOs generate to insulate the most senior noteholders — those holding triple-A slices representing the safest notes — from losses. Called acceleration, it is an option generally preferred by bond insurers since it is less likely they would have to initiate any payouts to investors. As controlling noteholders in some CDOs, they may have the votes to block a liquidation.

    If CDOs are collapsed and the assets sold, however, the insurers stand to lose big.

    The guarantors could be on the hook for around $20 billion if $230 billion of CDOs are liquidated, under a scenario envisioned by Barclays Capital analysts in which most events of default progress to liquidation.

    Standard & Poor’s said that of the 81 CDOS that had events of default as of Feb. 5, one was liquidated and 18 had notices of liquidation.

    Other deals, totaling 27, had so-called acceleration notices, which means funds received by the CDO will flow to the senior-most and subordinate classes before the junior classes see payment, if any. Acceleration must precede any vote for liquidation.

    Different Structures
    Each CDO is different, with documents that can vary on important factors such as the payment flow in acceleration and voting stakes from noteholders. Still, one can see that bond insurers would prefer acceleration, which could potentially save them from paying out any claims. Some insurers have guaranteed classes lower in the CDO’s structure, however.

    Banks that hold senior-most classes are likely to vote for liquidation, since they have already booked their mark to market losses or hedged their exposures. But bond insurers, who don’t pay paper losses, would generally want to wait it out and forestall actual losses as long as possible.

    It was only a few weeks ago that top bond insurers Ambac Financial Group (ABK) and MBIA Inc. (MBI) acknowledged they will pay claims on their portfolios. Ambac in its fourth-quarter report said it expects actual losses of $1.1 billion on subprime mortgage-backed CDOs, and MBIA said it will see $200 million in losses from three CDO-squareds, which are CDOs backed by CDOs.

    Bond insurers had long claimed that their position in a CDO would prevent them from such a situation. Since they guaranteed the safest and most senior notes in a CDO, others who held riskier notes that were lower in the CDO structure would absorb any losses.

    “At the very beginning, they were arguing their subordination levels would protect them from any losses,” said CreditSights analyst Rob Haines. “That story changed.”

    The losses are likely to spike higher amid the weakness in mortgages underlying the securities, and a roadmap could be the event of default notices. Most have been triggered by the downgrades of mortgage-backed bonds that form the collateral of the CDOs. So far, S&P has either downgraded or warned of a potential cut on $270 billion subprime residential mortgage-backed securities and $342 billion of CDOs.

    As the downgrades grow, so have the number of events of default. In January, S&P received notices of technical defaults on $66 billion in 57 CDOs; that figure increased to $97 billion in 81 CDOs by February. The first events of default occurred after the initial round of massive mortgage bond downgrades in October.

    “Things have definitely sped up,” said David Havens, UBS analyst. He expects the pace of the deterioration to pressure the bond insurers even more as they scramble to preserve their top triple-A ratings. “The timing is compressed even further.”

    Barclays Capital analysts cite the snowballing numbers of mortgage bond downgrades for reasoning that “massive” technical default notices will occur. In addition, “we expect future downgrade activity to remain severe” as loans other than 2006 and 2007 subprime loans are reviewed, they wrote in a recent report.

    The performance of mortgage securities that originated over the past two years is bad enough. In the most recent figures that S&P has received, 54 CDOs that received events of default were backed by residential mortgages securities that originated in 2007. The remaining 27 were backed by those originating in 2006.

    Banc of America Securities analyst Tamara Kravec anticipates MBIA alone to see $600 million to $700 million impairment for the year. And Fitch Ratings suggested that the losses to be incurred by the bond insurers wouldn’t justify triple-A ratings, no matter how much capital is raised.

    Over the year, losses from the insurers are likely to accelerate, Haines said.

    “We’re beginning to see what everyone expects to materialize,” he said. “This is just the beginning.”

    (Romy Varghese covers investment-grade corporate debt for Dow Jones Newswires)

    —By Romy Varghese, Dow Jones Newswires

  76. 76
    Nicky Says:

    That shoe could drop later this week Sam….

    More of the same:

    http://www.marketoracle.co.uk/Article3643.html

  77. 77
    zman Says:

    NFX: CapRe just filed a 13G showing a big drop in their ownership…nice….no impact so far and we’re talking year end numbers so they were selling during 4Q which would make since given the price…they could easily be buying more back now. They are smart guys and still hold the 2nd biggest position (9 mm shares) after Wellington.

  78. 78
    Sambone Says:

    N – Agreed, it’s just beginning. Scary

  79. 79
    zman Says:

    Jim,

    For crude: APA, simply has the highest leverage to changes in the price of oil. About $0.20 to annual CFPS per $1 change in oil (in round numbers). Second would be SU.

    For natural gas ECA is a good company obviously. We talking stocks for the long term or options. For stocks how you beat CHK I do not know. NFX likely gets bought. HK same. For swing plays in options SWN is a general favorite although RRC trades like water and will continue to do well with elevated gas prices. Hope that helps. Let me know if you want more because I can literally type all day long.

  80. 80
    Sambone Says:

    3:38 pm EST

    Nymex Crude Up On Venezuela, Refineries, Cold

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures surged to their highest close in nearly a month Monday, propelled by tensions in oil exporting countries, a pair of refinery outages and a stubborn cold snap in the U.S. Northeast.

    Light, sweet crude for March delivery rose $1.82, or 2%, to $93.59 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange closed at $93.50 a barrel, up $1.56.

    Oil markets climbed after Venezuelan President Hugo Chavez on Sunday threatened to stop selling oil to the U.S. in response to ExxonMobil Corp.’s (XOM) recent legal moves to freeze assets of Venezuela’s state oil company after the country nationalized an oil project last summer.

    Analysts doubted Chavez will deliver on his statements, noting he has issued similar threats in the past and any embargo would harm Citgo, the refining and marketing arm owned by a unit of Petroleos de Venezuela, the state oil company. But the rhetoric was enough to spook the market.

    “The oil market has been confronting geopolitical threats for the past half-decade as supply and demand balances have tightened into a fragile equilibrium,” Lehman Brothers analysts Edward Morse and James Crandell said in a note to clients. “The Venezuelan threat serves as a reminder that internal strife in Nigeria or Iraq or an attack on Iran to stop its development of nuclear energy could have significant price repercussions.”

    Word of a partial outage at Citgo’s Lake Charles Manufacturing Complex in Louisiana and a power failure at a Valero Energy Corp. (VLO) refinery in Delaware City, Del., also spurred buying. Though both problems appeared short-lived, “in this market, any refinery outage is clearly not good news,” said Peter Beutel, president of Cameron Hanover, an energy risk management firm in New Canaan, Conn. “Having a single unit go down right now is a big blow to the supply side of the equation.”

    Bitter cold in the Northeast, the world’s largest heating oil market, also pushed prices higher. Front-month March heating oil settled 5.03 cents, or 2%, higher at $2.6044 a gallon. March reformulated gasoline blendstock, or RBOB, rose 3.90 cents, or 1.7%, to settle at $2.3962 a gallon.

    After cresting above $100 a barrel as the year began, crude futures fell as low as $86.24 a barrel on Thursday amid snowballing concerns an economic slowdown could eat into oil demand growth. But they have staged a comeback of more than $5 a barrel in the last two sessions as attention shifts toward supply risks.

    Some analysts theorized that a large amount of open interest in March call options expiring Thursday has helped drive buying. As of Friday, March call options with a strike price of $100 a barrel constituted the largest share of open interest in any crude-oil calls, at nearly 31,000 options, according to Nymex data. Call options give holders the right to buy futures contracts at a set price before the options expire.

    Some market watchers said large holders of these March options may be trying to drag Nymex crude back above $100 a barrel in order to exercise them.

    Later in the week, traders are expected to watch for U.S. oil inventories for direction. U.S. Energy Information Administration data due Wednesday is expected to show that crude inventories grew by 2.5 million barrels last week, according to the mean of 10 analysts surveyed by Dow Jones Newswires.

    Gasoline inventories are expected to have grown by 1.5 million barrels, while stockpiles of distillates, which include heating oil and diesel fuel, are seen falling by 1.4 million barrels, according to the analyst average.

    Refinery use is seen unchanged at 84.3% of capacity.

    —By Gregory Meyer, Dow Jones Newswires

  81. 81
    xweto Says:

    Z: Thx for the info – I do try your options ideas, but some are too ST for my free-time on the net so I have to pass on many. I use cvrd calls but also like to buy dips and sell tops with options on stocks with clear trends. BTW, currently my tech-anal suggests (barring big geo political stuff) Crude is looking tired and ready for a correction … but what do I know!

  82. 82
    Sambone Says:

    Tini time!

  83. 83
    zman Says:

    X – agreed re crude although it could tap on $95 first.

    Dentist time, check you guys later.

  84. 84
    Nicky Says:

    Z – you about?

    Looking at nat gas and chart is looking pretty bullish. That said we have now had six up days in a row and I am wondering what the inventory draw is going to look like compared to last year this week?

  85. 85
    zman Says:

    Nicky,

    You know I’m always about. The comp will be very small to last year. Absolutely huge variance in heating degree days. You need actual numbers?

  86. 86
    dooch Says:

    what did you think about the NFX earnings release?

  87. 87
    Nicky Says:

    Just to confirm – you mean it was a much bigger draw last year?

  88. 88
    zman Says:

    Dooch – still reading NFX…they’ve released a lot of the goods in past releases…4Q CFPS was 1.97 vs 2.00 expected, not wild about that but need to look at volumes, prices, costs etc…

    Nicky – year ago week saw heating degree days of 267 (which is massive) vs 167 this year (which is mild). The week ago year saw a big draw of 254 Bcf. This week should ring in close to the low 100s. Not sure people care though as degree days ramp back up to 213 this week in the forecast (same as last as the week end Feb 2 when we got a 200 Bcf draw)

  89. 89
    Nicky Says:

    Thanks Z – maybe we just see a small pullback before it takes off again then.

Leave a Reply

You must be logged in to post a comment.

Zman’s Energy Brain ~ oil, gas, stocks, etc… is is proudly powered by Wordpress
Navigation Theme by GPS Gazette

s2Member®
Get Adobe Flash player
%d bloggers like this: