26
Mar

Wednesday – Yesterday was a good day

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Thank you Mr. Aubrey for sending Petrohawk soaring to an all time high. Thanks also for sending the big cap E&Ps back towards their recent highs. As my long time readers know, I think CHK is the most well run little large cap E&P name out there. It certainly is the biggest on the growth front for a company of its size and yet, despite outperforming expectations ad infinitum, it remains the Rodney Dangerfield of the E&P universe. By way of comparison, last month, (EOG) upped its guidance, announced it found a way to produce oil in the Barnett and that it was after a sizable new, but remote, gas shale play and the already richly valued name jumped 20% that day. They had good news and the Street reacted accordingly. On the flip side, CHK announces 8 shale plays, including 5 oil shales and more reserve potential in these alone than they currently have on their books, says the Haynesville Shale could be the biggest play they have ever been involved in and we see a leap, a bound, a giant surge of 3%. Well I call that an opportunity.  See last night's wrap post on (CHK) and (HK) here.

Commodity Watch:

  • Crude Oil: Sold off early in the morning but then the dollar lost its way. This allowed crude to recover from a low of $99.13 a positive close at 101.22. This morning crude is trading up $1.30 on further dollar weakness and clashes in Basra (Iraq's oil hub).

Expectations for the EIA Oil Inventory Report (from the Dow Jones survey)

exp-032108.jpg

ZComment: Two of Mexico's ports were closed for the latter half of last week. These two ports represent 80% of Mexico's export capability to the U.S. Generally speaking, one or even two days of disruption can often be made up by moving tankers about more quickly...anything longer and you are looking at down volumes. Anyway, this could result in a second week of low imports numbers and a miss on that expected crude build. It still of course depends on how hard the refineries were running last week. 

  • Natural Gas: After a strong start which saw April gas (contract expires tomorrow) gas closed up $0.03 to to $9.45 yesterday. We've gotten the pop I was looking for after exiting the remaining UNG puts last week but I'll wait to see if a last unseasonably large withdrawal can propel it higher tomorrow before going back on the short side here. This morning gas is trading slightly higher.
  • Imports remain low. Gross imports to the U.S. remained down 1.5 Bcfgpd relative to year ago levels. LNG, or lack thereof, was responsible for a majority of the deficit notching another week at just 0.6 Bcfgpd, less than a quarter of year ago levels. With Winter demand abating, Canada sent 8.9 Bcfgpd south of the border, 0.7 bcfgpd higher than year ago levels.
  • Freeport LNG Near Completion. The onshore Texas regas facility, the first of its kind in 25 years in the U.S. is scheduled to begin operations at the end of April. It has a send out capacity of 1.5 Bcfgpd ... now all it needs is supply. These things are being built like spec homes in 2005 or with a "If I build it, they'll send gas" mentality. The U.S. has 6.0 Bcfgpd of regas capacity now with another 7 on the way...makes you wonder what price it will take to fill their tanks.
  • T Boone Pickens Is Long Natural Gas Again. Apparently he has bailed on his recent short of NG. You gotta love how all the oil and gas experts talk their book for the masses. His BTU exchange rate argument (6 Mcf to 1 Barrel of oil and therefore so should their prices roughly equate) makes the same sense now as it did two months ago when he said he was short gas (back in the low $8s). Not very much. I like T Boone, I really do. No disrespect intended but you've got to do better than talk the BTU exchange rate on the two fuels for me to get on board with double digit NG prices when we have some of the highest unit volume growth on tap in modern history for gas supply. 

Noteworthy Trend Changes: Gas-Service Looking Up.

Notes From The Field Watch: From Reefguy: Service companies and suppliers. Tubulars, Fracs, sand (small mesh 100 high quality very short supply) devices to mix and pump large fluid and sand slurrys at high volumes. Hal, Schlumberger and BJ are competitors for fracs.  Top drive, 1500-2000 hp rig to drill 12000 foot verticals and 4000' laterals with large hook load capabilities.  Barnett rigs probably do not fit pistol. frac pressures at 12000' likely to be in excess of 8500#.  Much more HP per well per frac stage to achieve slurry densities.

Frac Jobs: (HAL), (SLB), (BJS). Like Reef said, all compete for frac jobs in the U.S. I'm in HAL right now but may expand that position to one or both of the others soon.

  • Definition Watch: Frac Job (well stimulation): Specially engineered fluids are pumped at high into the target zone, a shale or tight gas sand for instance. This pressure causes fractures to open through which hydrocarbons can flow into the well bore. Proppant is tiny engineered particles that are mixed with the stimulation fluid to maintain the fractures after the frac job is completed. So essentially, the frac forces open wedges through which allow oil and gas can flow in an otherwise tight (low permeability) zone   

Proppant: (CRR). These guys make a number of different grades of high quality proppant. Not exactly cheap at 14x 2009 earnings estimates but the name rarely is and rising activity in the shales should move the 2009 estimates higher. A little thin on the options trading front and definitely one to take care in buying.

Oil Country Tubulars: (TS). In a nutshell they produce steel pipe. Ditto the thinly traded option comment but earnings growth looks solid and more wells means more pipe, in the wells themselves and in the gathering systems...they do both.

Land Drillers: Cheap and beaten down group, especially those with Canadian exposure. Just putting back on my main watch page now.

land-drillers-032508.jpg

Holdings Watch:

CALLS: 

  • CHK - Added the CHK May $50 Calls (CHKEJ) for $1.30.
  • CHK - Added the CHK April $47.50 Calls (CHKDS) for $1.45.

PUTS: No trades

Odds & Ends

Analyst Watch: (APA) and (XTO) upped to outperform at Bernstein, Citi ups (TLM) to buy.

APC's Hackett Was On Cramer Last Night. Hopefully someone will put the interview on youtube but in a nutshell Jim Hacketts, CEO of Anadarko should run for president of the U.S.  Great insight into the energy issues facing the U.S. and the world, I literally agreed with everything he said.

111 Responses to “Wednesday – Yesterday was a good day”

  1. 1
    Sambone Says:

    6:23 am EST

    Nymex Crude Up $1 On Dollar, Ahead Of Stock Data

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures rose by more than $1 in London trade Wednesday as further erosion of the dollar against most major currencies sparked buying of oil and other commodities.

    Prices were also steered by traders adjusting their positions ahead of weekly U.S. Department of Energy inventory data due 1430 GMT Wednesday, expected to reveal builds in U.S. crude oil stocks, and declines in gasoline and distillate inventories.

    At 0958 GMT, the front-month May Brent contract on London’s ICE futures exchange was up 88 cents at $101.48 a barrel.

    The front-month May light, sweet, crude contract on the New York Mercantile Exchange was trading $1.08 higher at $102.30 a barrel.

    The ICE’s gasoil contract for April delivery was up $10.75 at $920 a metric ton, while Nymex gasoline for April delivery was up 143 points at 269.45 cents a gallon.

    —By Nick Heath, Dow Jones Newswires

  2. 2
    Denise Says:

    Good morning
    Print copy of Cramer’s Mad Money last night-on public site
    http://www.thestreet.com/print/story/10409212.html

  3. 3
    texana Says:

    z great art on chk & hk. I went back & listened to the hk cast. They brought on 35 mmcf/d production this yr from the fayett & have more to come. a well that makes 1mmcf/d from 1200′ prints money. I wonder if chk lack of respect has to do with the fact that they have only completed/or drilled 5 wells in the haynesville (is that correct). in the hk call they said they already had 200 landmen working the play so i believe chk. did u notice the shot across the bow aubry did to eca over the core sample & that he had the best people. the p&f chart on hk is at a major breakout point and should move higher especially with a little squeeze action. I must admit these shorts don’t flinch easy as they have kicked me in the knee several times. only possible negative is if the forces interven to protect $ the oil complex goes lower. thx t

  4. 4
    scoop006 Says:

    Z The Cramer interview with Jim Hackett can be found on Yahoo / APC

  5. 5
    zman Says:

    Tex – At Haynesville I have 7 wells drilled by CHK: 4 vert, 3 Hz, with poor results vertical, 1 Hz IP at 2.8 mm/d.

    HK only one vert test to date (results not dsiclosed)

    my negative thought is the broad market, not the sector.

    Scoop – thanks very much for that, will post later. I had the pleasure of having lunch with Jim Hackett twice when he headed Ocean Energy and he’s one of those guys you expect to see running XOM one day (if he wanted the job which he probably does not). Great, solid guy. Everybody should listen to that interview as I’m a mirror image in my thinking on the big picture topics it covered. Cramer barely yells or jumps up and down at all.

  6. 6
    zman Says:

    Tex – I missed the slight to ECA, what did Aubrey say. I was right by the way in my contention that HK outed them before they would have liked here. Not its like a gold rush on lease prices there.

  7. 7
    zman Says:

    APA loving the Citi upgrade,

    group acting well,

    CHK topping $47 now, needs $50 for a continuation of last months breakout.

    HK flat to down slightly but after a 10% rise yesterday we may see a small pullback. With the group as green as it is I would not expect it to be too pronounced. Sub $22 its a gift.

  8. 8
    texana Says:

    z-he said that a co had a core for over a year & had not realized the potential of the rock as his newly est lab in ok was able to do. My understanding is that THE CORE is from an ECA well. Its the way he said it.

  9. 9
    zman Says:

    Tex – ok, yeah I did hear that. Something along the lines of others not appreciating what they were onto with it right under their noses.

    Can’t believe the action in QBIK on this yesterday. I’m not a fan of penny stocks (expensive lesson there) but one vertical well into the Haynesville and the stock pops 27%.

    Dman’s comment from yesterday applies again today “oh yeah, energy, I forgot”

    HK at new all time high.

  10. 10
    Sambone Says:

    My question is; Why would ANY oil company want to do business in Venezuela?

    http://news.xinhuanet.com/english/2008-03/25/content_7855217.htm

  11. 11
    Dman Says:

    Some serious lerv for the service sector given the market backdrop.

    OII has broken the Jan-March downchannel. CLB on the move.

    CHK is somehow a bridesmaid at its own wedding, with HK taking the flowers and the groom. Or something like that. Gets a bit weird to push the analogy too far.

    Market backdrop not pretty, but at least not down 400 as per usual of late.

  12. 12
    Sambone Says:

    9:24 am EST

    Crude Higher On Dollar Ahead Of Stock Data

    DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures rose Wednesday on the weakening dollar, as the market awaited U.S. oil inventory data.

    Light, sweet crude for May delivery traded 96 cents higher, or 1%, at $102.18 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 65 cents higher at $101.25 a barrel.

    Futures traded higher as the dollar weakened against the euro. Investors have tended to buy commodities as a means of insulating themselves against the weakening dollar and potential inflation that could result.

    But after rising early, the market paused, in anticipation of oil and product inventory data expected to be released at 10:30 a.m. EDT by the U.S. Energy Information Administration. The inventory data has jolted oil prices in recent weeks, but the effect has rarely lasted more than a few hours. With futures off about 10% since March 17, but flat this week, another large increase in oil inventories could be seized upon by traders looking to send prices on their next big move, analysts said.

    “This week the inventory data will be paid more attention to than maybe anytime in the last (month) or so,” said Peter Beutel, president of trading advisory firm Cameron Hanover. “The momentum seems to be more toward the downside, but…the market could very easily go right back up again.”

    A Dow Jones survey found an average analyst prediction of a 1.7 million barrel increase for the week ending March 21, as well as an 800,000 barrel decrease in gasoline inventories and a 1.6 million barrel draw in distillate stocks.

    “The overall tone of the market looks rather sluggish to us,” wrote Ed Meir with brokerage MF Global. “That could be a recipe for another leg down, with poor EIA numbers possibly providing the trigger.”

    Front-month April reformulated gasoline blendstock, or RBOB, recently traded up 70 points, or 0.3%, at $2.6872 a gallon. April heating oil traded 3.37 cents, or 1.2%, higher at $2.9585 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  13. 13
    zman Says:

    who woulda thought Berstein had such swing? APA up $5+.

    Almost back to even on my bottom fish trade there from a week ago.

    The lesson there is premiums on the month following expiry inflate in the week prior to front month expiration, then rapidly deflate. When you combine that with a down market that sucks the stocks lower, it takes a lot to get back to even.

    Dman = LOL

  14. 14
    zman Says:

    COP recovered yesterday’s losses.

    On CHK’s still muted reaction. Brokers apparently don’t like the thought of them returning to outspending cash flow, no matter how slight. When you consider that much of the activity sets up future growth (acquiring lease acreage) while the acceleration of drilling in places like the Fayetteville assures them of keeping already bought leases by getting production on them (HBP or held by production) the analysts are again being short sighted. Sometimes I get a little jaded by the whole, “we don’t want you to go to the capital markets … unless of course you include us in the syndicate” mentality of the Street. Sometimes being 24/7. CHK did what the Street wanted, delivered growth and stopped the flow of capital market deals. Yet there was not a single upgrade of the stock today nor any change to price target that I have seen.

    uop – you can remind me again how much I missed the DVN trade again, lol, ug.

  15. 15
    zman Says:

    weekly chart on HK looks fantastic.

    go HAL go!

  16. 16
    zman Says:

    15 minutes to inventory. This greening of the group could all reverse on those numbers so consider that fair warning.

    Oil looking for pretty bullish number here, maybe they are thinking Mexico shutdown had an impact. Oil up $2.30.

  17. 17
    antrimshale74 Says:

    http://www.cnbc.com/id/15840232?video=696461663&play=1

    Cramer interview with Hackett can be found here.

  18. 18
    zman Says:

    Thanks A74!

  19. 19
    zman Says:

    3.8 down on gasoline, probably SUN is a buy for a trade.

    oil unchanged – imports were very low

    distillates down 2.2 mm barrels.

  20. 20
    zman Says:

    very bullish numbers.

  21. 21
    zman Says:

    oil up $3.50, gasoline and heating oil pacing the gains.

    NG following it up $0.15.

  22. 22
    zman Says:

    Sane – got your feedback and thanks and duly noted re alt energy. In the tradition of great minds I’ve got another site under construction that should ultimately fit the bill for the alt energy stuff. Decided I wanted to keep it separate and free and for now I’m not writing on it but the plan is there.

    Let me know when you see the API, can’t believe the Street bricked on the crude number with the seemingly obvious hit imports almost had to take.

  23. 23
    zman Says:

    HK moving on up into the 19.60s now, think we see it make a run on $20 this week, may take some of my $20 apr calls off the table. ….quiet around here, this must be the heart of Spring break.

  24. 24
    kaman Says:

    Lurking, but here…K

  25. 25
    zman Says:

    Thanks K – at least I know my mike is on.

  26. 26
    uop Says:

    Z:
    whats the verdict after the oil/gasoline etc figures ?

    the oil and Ng stocks and services are way up.

    Phil is shorting CHK ans SU

  27. 27
    scoop006 Says:

    Z- Re#17 Why SUN and not other refiners

  28. 28
    zman Says:

    uop – very bullish report, continuing to hold all my longs at this point.

    Not adding any refiners on this although they are collectively making the right move by cutting utilization. At 82.2% that’s a low for this time of year.

    Re Phil – I guess that’s what makes markets. I obviously think that is a mistake and I know he’s not as close to the metrics of the group or those stories as I am. He also thinks energy companies are evil. Enough said.

    Remember the adage “what happens at Zman’s Energy Brain stays at Zman’s Energy Brain”. I’m not affiliated with PSW or Phil in any way and I don’t want his crowd crowding my bids or getting free research. It is a violation of this site’s terms and conditions to share anything here without my express consent. Not trying to be harsh but this is my livelihood and Uop that’s not specifically directed at you but worth pointing out to all the new members who may have only glanced over the site’s terms.

    Scoop – it had taken more of beating since VLO warned than the others…I’m not doing it myself.

  29. 29
    uop Says:

    Z:

    good point
    and
    absolutely, if they want info they should subscribe.

    He is bitching that refiners cut back and ignoring the economics of inventories.

    His shorting has to do with daytrading.

  30. 30
    zman Says:

    uop – thanks for understanding. Phil is a very good trader and a more articulate host than I am. I personally don’t get griping about what is reality and what makes good economic sense for the refiners. Crack spreads stink. Gasoline inventories are somewhat bloated. Refineries have put off a lot of maintenance since Katrina. That causes problems soon or later. Combine those factors and their decision to cut production isn’t evil, its good business. It’s not like they’re making a killing at the pump on those prices, not given where oil is. If you want to blame someone, blame GM who can’t make a car worth driving with a mileage above 30 mpg. Blame the consumer who can’t seem to drive less (gas demand was off 0.3% YoY, big deal). Overweight Americans need to air up their bicycle tires and hit the trails this Spring (myself included). Sorry for the rant but its an equation, supply AND demand.

  31. 31
    uop Says:

    Z:

    man I like what you say in 28.

  32. 32
    zman Says:

    uop listen to that link in 15 when you get a chance. Jim Hackett does a much better job of laying out those thoughts but they have been mine since the late 1990s. I’m actually going to add a tab, yes another tab to the site, called Z’s Beliefs or something like that just so people know where I’m coming from. It’s on a list of to do’s along with refining my FAQ and publishing my trading methodology which I’m still attempting to put on paper.

    Wow HK: $19.80; even CHK up $1.20

    HAL almost a double …may ease off and roll out longer on a red day. Could reach $40 on this move.

    APA – approaching its all time high, up $6+ now. Love to know what Bernstein said if anyone has the comments.

    Feels a little overdone here…probably should be taking profits.

  33. 33
    uop Says:

    Z:
    the categories of interest in the enerysector to me are the economic factors and facts which determine market pricemovements:

    oil/petroleum
    NG
    oil exploration
    oil services
    shipping
    alternative energies

    Do you list/issue a daily/weekly/monthly summary of the situation in these categories and where and when ?

    Of course, in your comments etc, this info appears all the time.

  34. 34
    zman Says:

    uop – no I don’t, not in a formalized manner. its a good idea and I will start to think about how to address it. some of those factors move at a good clip, some move glacially (like a recovery in rates for the land drillers it seems). again, good thought, putting down in my little black book.

    DVN – wow, ug.

  35. 35
    sane Says:

    API

    Crude Down 500K
    Gasoline Up 300K
    Distillates Up 400K

  36. 36
    zman Says:

    impressive move in HK continues…really thinking about letting someone have my $20s

  37. 37
    Sambone Says:

    11:23 am EST

    Crude Rises On Flat Oil Stocks, Product Draws

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures rose after government data showed refinery utilization dropping to the lowest point since October 2005.

    Light, sweet crude for May delivery traded $3.21, or 3.2%, higher at $104.43 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $2.47 higher at $103.07 a barrel.

    Futures were already trading about $2 higher before the U.S. Energy Information Administration released oil and product inventory data, adding another $1 after the release. The data showed refinery utilization at 82.2%, the lowest level since October 2005. After prices fell about 10% over a one-week period starting March 17, the market appears to have begun a rebound, now fueled by the EIA figures. Reformulated gasoline blendstock, or RBOB, hit a new record Wednesday after the data showed a larger-than-expected draw in gasoline inventories.

    “The numbers are very supportive,” said Tom Bentz, with BNP Paribas. “(The market) is building on gains already achieved this morning.”

    Having survived last week’s correction, the market is now testing new heights, analysts and traders said. Oil prices fell last week over concerns about the struggling U.S. economy slowing demand, as well as the strengthening dollar. The dollar is back on the retreat against the euro, helping to send futures higher Wednesday.

    But this rally may not have the staying power of the last one, said Walter Zimmermann, a technical analyst at ICAP/United Energy in Jersey City, N.J.

    “The trend has been up for so long that the kneejerk reaction is after the panic passes to buy in again,” he said. “We’re not at all convinced that new highs are ahead. It’s prudent to treat this as a bear market.”

    The EIA data showed a 88,000 barrel build in oil inventories for the week ending March 21. Gasoline stocks fell by 3.3 million barrels, more than four times what analysts expected, while distillates fell by 2.1 million barrels, also more than forecasted.

    Tim Evans, with Citigroup, called the surprises a “managed development,” as refineries bought less oil and reduced rates due to weak product demand.

    Front-month April RBOB recently traded up 5.48 cents, or 2%, higher at $2.7350 a gallon, after hitting a record $2.7752 a gallon. April heating oil traded 9.52 cents, or 3.3%, higher at $3.0200 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  38. 38
    ram Says:

    I like the attitude in #34. Especialy when you can almost recover the cost of the 17.5’s and the 20’s and the 20’s aren’t even in the money yet. Like a gift horse in the mouth – sort of.

  39. 39
    Popeye Says:

    Looks like HK wants to test 20.

  40. 40
    zman Says:

    Thanks Sane

    CNBC guests all loving on RIG right now

  41. 41
    zman Says:

    ZTRADE: Half out April HK $20 calls (HKDD) for average $0.97, up 94%. Time to play with house money. Still holding the April $17.50s.

  42. 42
    zman Says:

    APA absolutely on fire.

    That COP weakness yesterday was indeed fleeting.

  43. 43
    zman Says:

    comments 2 and 10 from Denise and Sambone were caught in the spamfilter but are there now. Will tune down the sensitivity there.

  44. 44
    zman Says:

    yona or anyone, anybody see gas storage withdrawal consensus for the morning?

    Also, if anyone has one of those giant color coded (by owner) lease block maps of the GOMEX I could have there’s a free month on the site for you. My last map is from Vastar (just a bit dated).

  45. 45
    uop Says:

    Z:
    any change in view on NG price and UNG puts,
    have not rolled to May,todat oil drags NG up again with it,
    what is weather forecast for up North ?

  46. 46
    zman Says:

    Uop – Just want to make sure you know I’m not in any UNG puts since last week. I’m not touching them yet although gas has gotten a lot of bump that I was looking for in recent comments when I said I may go back into them. I think gas could have a little more in it before folding and indeed could go back to the recent $10 plus high. Contract expires tomorrow and we should be getting an abnormally (unseasonably) large withdrawal given the weather so it could be a wild day. If I were short I’d be nervous, at least about the next 2 days. After that I think it softens and you still have 20 some odd days left on Aprils. Its hard for me to say how I feel on a virtual trade (for me) as I don’t have money on it and have not been focused on it, scratching a backstay as it were, to get it to go my way. Hope that helps.

  47. 47
    zman Says:

    I’ll lay odds that next week sees a sizable build in crude stocks.

  48. 48
    Denise Says:

    Good afternoon
    Mr K is agreeing with you Z
    He just bought dug-new market rating 4-4

  49. 49
    zman Says:

    A kind friend of the blog sent along the Bernstein piece. Turns out APA is pretty far down on the list of outperform rated energy names they like. NFX is well ahead of it on their ordered list of buys. Kind of strange presentation in that they rank service and E&P together.

    NBR and PTEN head the list, both for being gas-leveraged land drillers…sort of funny when you look at the table in today’s post.

  50. 50
    Denise Says:

    Anyone notice MVO is inversely correlated to oil? Makes no sense-
    also why is BP so unloved?

  51. 51
    zman Says:

    Bernstein’s favorite E&P: TLM … too funny, I wouldn’t put it there except for the long term but I do like the name a lot.

  52. 52
    zman Says:

    Denise – BP is a company on the mend but very complex. This is why I stick (mostly) to E&P. To me it’s like the difference between analytical geometry and multiplication tables to me. Also, the majors have big cross currents at the moment. Upstream great, downstream (refining and marketing) not so great.

  53. 53
    zman Says:

    more from Bernstein: they like HAL and think pressure pumping biz bottoms YE (probably right, maybe before that) and they think SLB is too risky given its multiple (not sure I agree that hasn’t been factored in by the most recent drubbing there).

  54. 54
    uop Says:

    Z:
    oil is bound to retreat ?

    have DUG and aprPuts on USO.

  55. 55
    scoop006 Says:

    Z- BP a Cramer favorite he owns for the charitible trust.

    If the GDP#’s cause a market selloff tomorrow do you think the energy sector will be invovled

  56. 56
    zman Says:

    More Bernstein – they like APA now but it is on the bottom of the pile of names the like, maybe a Buy minus? Anyway, suggesting that rising international gas prices are key to their recommendation which is something EOG benefits from as well and something everyone has taken notice of …and it’s what keeping LNG out of the States.

    Uop – I think it may very well soften next week. Kind of depends on what the Street is looking for with next week’s numbers which we won’t know until at earliest Monday afternoon.

    Scoop – seems likely they would be included in that. Especially if it turns really multi-hundred point ugly and people need to take recent profits to cover bad trades on the Fin’s, housing, whatever. Plus, we’re up like 3 1/2 days in a row now for the sector after today … how can they not decide to hate it. I may shear off some more positions in a bit. Probably lose the APA which was a stretch, was crushed is back in the black and I can trade it again for an ultimate move back through $120.

  57. 57
    scoop006 Says:

    Volume on USO April $83 puts =25,000 contracts.

  58. 58
    kyleandy Says:

    denise what is the lowest u have seen kass go?? does he ever get to 1-1?? trying to gauge how bearish he is. thks

  59. 59
    ram Says:

    Are energy stocks getting “tired” at their current levels? Anything left from this run?

  60. 60
    Denise Says:

    Kyleandy-his number system is new-but In the last 10 years I have seen him be so bullish he buys on margin and extremely bearish where he is 100% short
    He started shorting yesterday-oil is new today
    Most oscillators say we are oversold
    Quarter end this week
    My voodoo fibonacci wiz says we are due for 2 to 3 day pullback and Cramer posted a snotty column today about “where are all the oil bears”
    I am booking a lot of profits
    better safe

  61. 61
    Denise Says:

    Z-are you feeling any temptation to go back to IOC?

  62. 62
    zman Says:

    Denise, that’s hilarious re Cramer and I’ve got to agree with him. They are such fair weather fans…will come out of the woodwork to make a quote on every platform from CNBC to PBS when oil is off a couple of bucks but where are they today?

  63. 63
    zman Says:

    D – IOC – if so ONLY well hedged. Not doing it yet.

    Ram – Depends on the name as the moves have been rather widely distributed and your time frame. I think we go higher than current levels for some service and for E&P into the Spring and Summer. They just keep getting cheaper even as they go up due to much higher than expected prices and in some cases like EOG, CHK, APA higher unit volumes. In the very short term there is definitely some volatility on the way. I’m close to pulling the rip cord on a few names and if they go up more rest of week so be it. I can buy them back after some blood red days that must be coming (nothing related to the group on that), just this market.

  64. 64
    antrimshale74 Says:

    Re: BP, I think the Russian situation is dominating the stock price right now which should explain why they aren’t really reacting to the recent sector bullishness. There was a pretty scary article in the Financial Times today referencing Gazprom’s eyes on their assets and we all know how things like this turn out. Also, Russia is a very sizeable piece of their reserves.

  65. 65
    zman Says:

    Thanks Antrim. I laid off the Putin watch after I started getting hits from Red Square.

  66. 66
    ram Says:

    #63 Understood, especially last statement. I’m with Denise – lightening up as the day goes on. Martin Zweig “can’t lose money by taking profits” circa 1984 or so.

  67. 67
    zman Says:

    Ram – no shame in taking profits and no going broke either.

    Wow – HAL options a double+ right now.

  68. 68
    uop Says:

    HAL calls, sold 1/2.

  69. 69
    ram Says:

    ZMAN – Do you think any of the horizontal well news is priced into HK?

  70. 70
    zman Says:

    Maybe a little, impossible to tell. I can tell you if they announce 2 mid teens Hz wells, say IP (initial production) of 15,000 Mcfepd, the stock almost certainly goes up.

    Wow – APA up $7 (6%) on the Bernstein comment. Cheaper (NFX) is up 2% and Bernstein likes it more amongst E&Ps. Silly investors. What’s getting people excited re APA is the big jump in mark to market related earnings adjustment. Bernstein took its 2008 EPS number up $2 from just under $10 to just under $12. Remember that wicked leverage to oil prices I always point to on APA …. well there you go. Street is at $11 so you figure a bunch more brokers will be taking their numbers up here soon. Still holding/milking this one.

  71. 71
    zman Says:

    CHK at HOD up $1.25. To me it seems funds are used to the slow up move here, need convincing that CHK won’t be getting back into the debt game in earnest, and they still can’t believe the move it has put on over the last month or so. Despite that move and especially in light of the increased production guidance, it remains extremely cheap.

  72. 72
    zman Says:

    with 4 minutes to the Nymex close, oil is trying to close 106+, up $4.80 on the day…seems like people are reading a lot into crude stocks which on a chart appear to be poised to start going down. I really think this stagnation of the crude inventory levels is imports related and will correct itself rather sharply with next week’s number.

  73. 73
    ram Says:

    ZMAN – Do the HK May 20’s look expensive?

  74. 74
    zman Says:

    Ram – I’m kind of torn about buying it after this run in the group, even though I agree with Chandra on the $10 and with the wells coming. I was looking at the May 17.50s…may just take a taste there.

    Just notice SWN is trading post 2 for 1. That once could pop again if we get one last big gas number tomorrow. Still have not seen a consensus for the gas number.

  75. 75
    Dman Says:

    Z – I meant to ask re. the $10 per share thing for HK. Dumb question but I just wanted to clarify: does that mean he is valuing HK at around $30 per share?

  76. 76
    zman Says:

    Dman – good question. Probably not re $30 although I have not seen his review of it. Often analysts will have their price target based on one metric like P/CF or TEV/EBITDA or a combo of those and NAV. His $10 number looks more like a back of the envelope statement than a sum of the parts (NAV) statement. So I doubt when he was sitting at the HK management presentation on the 12th and they started talking about their new play, the Haynesville Shale, that he added $10 to his price target. It sounds more like a talking point to me, to say “hey they’re cheap, that new stuff alone is probably worth $10 a share” At least that’s what I would have done and that’s my assumption here. Using some of CHK’s math, he could have gotten to a higher per share value but I don’t know yet if the shale characteristics are homogeneous enough across the whole play to make that leap so I don’t know if that would be appropriate. The $10 statement for what they’ve got is probably fair though.

  77. 77
    zman Says:

    Sharon on CNBC saying gasoline helped fuel the crude rally. Hmmm, rbob up 2%, crude up 4.6%.

  78. 78
    zman Says:

    think Efferson on CNBC said the expected draw for tomorrow is 42 Bcf…anybody confirm that?

  79. 79
    Webloner Says:

    zman do you see ng coming down. we getting nice weather and summer just been around the corner

  80. 80
    zman Says:

    Afternoon W – Very near term I think they could see $10+ recent high, then they should to come off as slack demand meets burgeoning supply. Maybe see the high tomorrow to Friday. Warmer weather should knock the degree day numbers down next Monday.

  81. 81
    ram Says:

    Is #78 a positive #? If so, will APC, SU, and CHK benefit if no other effects from markets?

  82. 82
    Sambone Says:

    Way, way off subject, but if you get tired of constant basketball this weekend, turn to ESPNU at 2 pm EST. John Hopkins and UNC Chapel Hill will be playing Lacrosse and I promise it will be a dog fight. I have a son who plays for UNC and this game is a must win for both teams.

  83. 83
    zman Says:

    If its bigger than 42 (if that’s the number) when the storage number is reported tomorrow than gas would likely go up. I was thinking a bit bigger number than that but we’re getting towards the first shoulder season where these numbers get a little more slippery than usual to forecast. A bigger number might be perceived as positive for the group, at least more so than an unexpected build in inventories or a small number. It would be more impactful either way to APC and CHK. SU’s all oil.

  84. 84
    ram Says:

    Thank you.

  85. 85
    zman Says:

    Awesome Sam. What’s his #, will set the Tivo.

  86. 86
    Sambone Says:

    Freshman – Third string goalie, #46, stands at the end of the line. He hasn’t had any playing time yet this year yet, but who knows.

  87. 87
    zman Says:

    ESPNU only? I don’t get that. Need something to watch N. Carolina spanked my Hogs right out of the tournament.

  88. 88
    zman Says:

    Anyone have thoughts or see anything re expectation for GDP revision tomorrow?

  89. 89
    kaman Says:

    Arkansas was strong in SEC tourney (denied my Vols), and gave NC a good match. Lacrosse sounds like a good diversion – cheers

  90. 90
    zman Says:

    ZTRADE: Out Half HAL Calls for $2.10, up 110%.

  91. 91
    zman Says:

    Thanks K – nice of you to say but our last game looked like high school vs NBA.

  92. 92
    ram Says:

    If we do get a spike down because of numbers reaction, I believe from previous numbers here, 1320 must hold on the S&P. Does that sound about right?

  93. 93
    scoop006 Says:

    Z- any idea why SUN was the only refiner negative today? excluding FTO & WNR down pennies.

  94. 94
    zman Says:

    Scoop – no, some analyst must have said something unkind.

  95. 95
    zman Says:

    Ram – that sounds about right as it was resistance a couple of weeks ago.

  96. 96
    Sambone Says:

    Tini time

  97. 97
    zman Says:

    Another great day, now my oil stocks seem to be in the hands of Oracle? Market needs a tini.

  98. 98
    rseidman Says:

    Z: Is this announcement a real negative?
    Chesapeake Energy announces it will commence a 20 mln share common stock
    offering, pursuant to an effective shelf registration (47.36 +0.96)

  99. 99
    rseidman Says:

    Z: Chesapeake Energy announces it will commence a 20 mln share common stock
    offering, pursuant to an effective shelf registration (47.36 +0.96)
    Is this a real negative in your view

  100. 100
    zman Says:

    CHK announces 20 mm share offering …proceeds to pay down revolver.

    That will knock the stock in the morning.

  101. 101
    jy Says:

    Yep, you had to figure all that info released the last few days was not totally driven by full disclosure.

  102. 102
    zman Says:

    jy – point taken, still, that’s a bigger deal than I thought we’d see. They’re going to give back yesterday and today’s gains on the open I’d bet. Bet they were counting on a bigger move in the stock given their news so when they announced this deal they could price it in the hole and raise $1 B. Now in the hole is $45 and you get $900 mm. On the call they sounded like another VPP was right around the corner so the need to so quickly announce this deal is going to make many feel a bit sand bagged.

  103. 103
    ram Says:

    ZMAN – I see the selling of shares in the AH trading. Although I am curious on why there are big blocks that traded at HOD.

  104. 104
    texana Says:

    z, i haven’t seen anything about these wells that hk is suppose to announce r they taylor sand @ elm grove? what do u think the prospects r that they get taken out. I remember a couple of qtrs ago in the q&a they were asked if they might sell & they said the market was not right. with the above news on chk i don’t think it will be them. maybe eca they haven’t bought anybody in a while. that would put a burr under aubrey’s saddle & they have $ to really move the play. hbp acreage right in the heart of the haynesville , plus tery & fay. The barrnet is @ $25,000/ac & this is better. Some big e&p co late to the party has to be playing catch up. no unusual call activity to speak of, hasn’t most the june calls already been in place? Probably because of preceived hi prices there has not been much m&a in the e&p in a while. just thinking, thx t

  105. 105
    zman Says:

    ram – I think those were probably just late settling trades.

    Tex – they are Hz taylor sand at Elm grove. I think it makes sense for someone to take them out, not CHK, maybe an EOG or XTO but that’s just a mad swing at a guess. ECA maybe.

  106. 106
    reefguy Says:

    z- Shell drilling a deep joint venture well with ECA with a vertical Haynesville shale section at 13,500′. How about Shell as an aquisition candidate to by HK?

  107. 107
    zman Says:

    Reef – hard to get my head around a Major caring about the U.S. onshore but if the play is as big as the CHK induced mania surrounding it then maybe. Wouldn’t Shell rather just take out CHK, I mean that’s the cheap one and it’s reserves would actually matter to them. Hard to get by regulators probably though. I’d think HK gets gobbled by someone like APC who has notably not gone after the big resource plays yet (although I think they are bulking up on a few plays quietly)

  108. 108
    reefguy Says:

    z- That would mean apc would be buying adjacent position they just sold XCO.

  109. 109
    zman Says:

    right and I don’t see them going into the acquisition waters just yet. By the way, we are posting this on Wednesday’s post.

  110. 110
    zman Says:

    maybe ECA could do it. It would give them a nice, significant position here and in Fay

  111. 111
    isleworth Says:

    El Paso CEO bought 50,000 shares at about $15.80 average

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