09
Apr

Wednesday – EIA Preview Plus

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We've had a pretty good run of late and I plan to further reduce April positions in earnest this week as we approach expiry on the 18th.  

In Today's Post:

  1. Commodity Watch with EIA crude inventory expectations table
  2. Holdings Watch: nada, zippo, no action yesterday ... but it was a very good day.
  3. Stocks We Care About Today Watch: HK IPAA followup. 
  4. Haynesville Shale Addendum
  5. Odds & Ends 

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Commodity Watch

  • Crude Oil: eased $0.59 to close at $108.50 yesterday in rather direction-less trading in advance of today's data. This morning crude is trading just slightly lower
  • Iraq Watch: Moqtada al-Sadr threatens to end "ceasefire". Here comes more problems with Basra pipelines.
  • Street Consensus of EIA Report (from the Dow Jones survey)

exp-040408.jpg

ZComment: Refiners are expected to begin inching back towards something like normal utilization levels this week and if they do we could see a smaller than expected build in crude as I suspect imports will retreat slightly as well. However, I would not be looking for a huge drawdown in crude stocks either. On the gasoline front, a bigger draw is possible as Spring Break demand usually spikes for two weeks and this would be the second. So it's kind of a double edged sword in that if the refiners continue to "extend the maintenance season" the gasoline withdrawal will likely be bigger than expected, gas prices will go up and lead crude higher. If the refiners go back to work, they consume more crude, the crude build is somewhat smaller than expected and again crude goes higher. 

  • Natural Gas: backed off 9 cents with oil to close at 9.70. This morning May natural gas is trading up  $0.10 to $0.20 in anticipation of an increase in the activity of the Colorado State University Atlantic hurricane season forecast.


Holdings Watch: No trades yesterday. But it was a very good day. ZEB Holdings tab and wiki are up to date.

 

Stocks We Care About Today:

(HK) Follow Up Commentary. They gave their quick pitch at the IPAA Tuesday so here's a little follow up commentary on the name. (4/08/08 closed @ $21.82) 

  • Haynesville Shale Update: After bumping their Haynesville Shale exposure to "more than 70,000 net acres" they also bumped
    • their non-proved resource potential by 1.7 Tcfe or 36% from 4.7 to 6.4 Tcfe...
      • ... by increasing their Haynesville shale acreage by 40,000+ net acres (acquisition price was not disclosed but it will be higher later as CHK more than doubles their position) and 
      • by increasing their estimate of Haynesville EURs (estimated ultimate recovery) from 3.0 to 4.0 Bcfe per well on 60 acre spacing.
      • In a nutshell, they are getting more confident in the play
    • Note that they had proven reserves of 1.1 Tcfe booked at year end for the whole company (Elm Grove, Terryville, Fayetteville Shale and their Permian division)
  • Their first horizontal test is turning to the right as I type this on its way to 12,500 feet but I would not expect to see results until well after the 1Q08 conference call. HK plans to have 5 rigs targeting the Haynesville by year end.
  • Elm Grove Field: Taylor Sand - Lower Cotton Valley Horizontal Program: Still waiting on results. 
  • They did not release well results here yet but listed two wells, the Knighton#14-5 and the Killen #13-4 as completing. These wells straddle in close proximity, to the west and east, the Killeen #13-3 which had initial production of 16.5 mm/d back in January.
  • The Roos #8, a little further afield to the north west from the Killeen #13-3, is flowing back now so they should be able to announce a rate any day now although if it is of the smaller variety I imagine they will wait to lump it in with the previous two wells from the preceding bullet when they report 1Q results.
  • They plan to drill another 7 or  Taylor Sand horizontals here this year plus 10 Davis Sand horizontals but these last 10 are not of the same game changer potential as the Taylors. Success with more monster rate Taylor tests would likely auger for increased production guidance (currently mid-point guidance gets you to 25% YoY pro forma growth)
  • Fayetteville Shale Keeps Gunning Higher: Not much new to report as they just continue to drill wells and grow production at attractive rates of return. Gross operated production is close to 80 MMcfepd, up from a little over 70 at the time of the analyst meeting on March 12 and 2 MMcfepd one year ago. In a initiation of coverage report Monday, Merrill termed results here as "mixed" due to some lower rate wells in the northern section of the play which is the heart of (HK)'s acreage. However, in their IPAA presentation, a first slide in the Fayetteville section has a the new subtitle of "Multiple new well results suggest core is expanding to the north" which is telling. Merrill heavily discounts the company's Fayetteville acreage saying the "jury is still out" - which is a fair statement and goes on to write that this discounting "effectively excludes a significant portion of the company's northern acreage." - which is probably overly conservative. More data on the north will be an essential checkpoint on the 1Q conference call.  

Haynesville Shale Addendum: The Haynesville Shale is a massive area, prospective for over 3,000 square miles. I've prattled on for awhile now about (HK) but let me make some observations about the players here. First let's start with a graph of the reserve exposure to the play (relative to 2007 booked reserves) based on acreage held and some simple assumptions regarding EURs in the play. My assumptions are 65% of the acreage is prospective, net revenue interest is 80%, 60 acre spacing and the EUR or estimated ultimate recovery is 3.0 Bcf well.  For CHK and HK, who have provided their own EURs I'm using company data. The second graph shows how the stocks exposed to the Haynesville have performed since (CHK) started yelling about in on 3/23/08/.

haynesville-play-exposure-040808aaa.jpg

Key Takeaways:

1) CHK (highlighted in red) has had the third worst performance in the exposure group since their announcement as the secondary held the shares down. 

2) The group has had a good run. There is no denying that and I think the quick gains are over and we're probably close to a little profit taking action. I'll be lightening my exposure to HK, at least the near term options, soon.

3) PQ has underperformed despite solid news flow and big exposure here. 

Odds & Ends

Analyst Watch: (COG) started at overweight and (RRC) cut to equal weight at Morgan Stanley. (ACI) cut to neutral at HSBC.

141 Responses to “Wednesday – EIA Preview Plus”

  1. 1
    isleworth Says:

    Gas flying high….now up $.29. Yikes!

  2. 2
    reefguy Says:

    XCO- do you think a portion of the recent stock appreciation is attibutable to Marcellus position?

  3. 3
    zman Says:

    Isle – yes, breaking through $10 now on the prospect of a more active hurricane forecast…they said last week they would likely up the forecast today but any excuse to run it up with the lingering cold and there you go.

    Reef – you gotta think so plus its a cheap stock.

  4. 4
    uop Says:

    Zman:

    good morning,
    NG gives me a headache this am,

    looked at your interesting charts on Haynesville shale,

    my CHK, PQ might be ready to get out.

  5. 5
    zman Says:

    ZTRADE: Sold the last of the HK $17.50 April Calls (HKDW) for $4.80, up 500%. First batch was sold on 3/27 for $2.75. Still hold May and June calls here.

  6. 6
    zman Says:

    Trying to lose some CHK 47.50 april calls in here.

  7. 7
    reefguy Says:

    z- holding May HK 22.50 and 25 in case of buyout

  8. 8
    zman Says:

    Reef, I have the May 20s, 22.50s and 25s and some Junes in case people realize the potential here, lol.

    ZTRADE: Out CHK April $47.50 Calls for $1.70, up 31%. Still holding the April 45s but not for long and the May $50s.

  9. 9
    zman Says:

    If people, beyond gas traders, were truly concerned about the hurricane season they would be tripping over themselves to buy OII today.

  10. 10
    uop Says:

    Z:
    CHK may calls 45 and 47.5 are uo big,

    your comment 8: do you hold on to yours ?

  11. 11
    zman Says:

    Uop – For CHK, I hold April $45 calls and May $50 calls. The Aprils will exit the building soon.

  12. 12
    zman Says:

    ZTRADE: Out remaining April NBR $35 Calls for $0.90, up 55%. First half was sold for $1.25 last week. Continuing to hold the May $35 calls.

  13. 13
    zman Says:

    EIA data out in 5 minutes. I’ll be looking at TSO, VLO, and or FTO calls if the data for utilization remains depressed and if the gas withdrawal is bigger than expected.

  14. 14
    Nicky Says:

    Morning all – bulls look ready to rock the complex higher. Still think we may only see a thrust then a retracement.

  15. 15
    zman Says:

    Morning Nicky…I’ve been pulling in my April horns all morning.

  16. 16
    zman Says:

    down 3.2 on crude, imports way off again. utilization up. no buy from me on refiners.

    APA / SU may try

  17. 17
    zman Says:

    ZTRADE: SU April $110 calls for $0.85 for a fast, pretty risky trade.

  18. 18
    Nicky Says:

    why the huge draws? amazing how they can spin it. crude builds for 11 out of the last 13 weeks and I think it has rallied every week we have seen a build! just shows that it really makes no difference whether there is a draw of build as they are going to push it up either way.

  19. 19
    Nicky Says:

    looks like it is now harming the broader market…

  20. 20
    Nicky Says:

    this is worrying as the $ could take a hammering tomorrow when the ECB probably put an inflationary spin on everything and I am sure will not cut rates… crude has rallied all week even when the $ has bounced, now they are going to cite the $ falling as another reason to bounce crude….
    we need some sort of intervention now…

  21. 21
    zman Says:

    crude: down 3.2 mm barrels
    gasoline: down 3.4 mm barrels
    distillates: down 3.7 mm barrles

    all bigger than expected. Looks like gasoline demand did tick up slightly, the big driver on crude was a replunge on crude imports…pretty much what I was thinking could happen in the Zcomment this morning.

  22. 22
    Nicky Says:

    why the huge draw in distillates though?

  23. 23
    zman Says:

    Distillates were down on the high sulfur stuff and actually saw a build in ultra low sulfur so its not trucks using ULS. I’d bet its late season refill for dealers as this cold lingers.

    This is send NG through the roof. It needs to stay below 10.21 for my double top theory on the chart to hold water.

  24. 24
    Nicky Says:

    Well at least one can argue that the fundamentals supporting them running it this one week…

  25. 25
    Nicky Says:

    But this has to be the straw that breaks the camel’s back for the consumer. I have already heard that people are stopping at their gas stations and only putting in $ 4 – 5 a day – enough to get to and from work that day.

  26. 26
    isleworth Says:

    Z – your thoughts on pressing UNG puts here?

  27. 27
    zman Says:

    crude at 111.15

    utilization moved back up to 83%

    So people are marking their gas tanks to market now? Wow. This has got to be killing Starbucks.

    Sane, any API numbers…love to see a confirm of three bigger than expected numbers here.

    Isle – I need to see them start to roll over first. We should see similar moves in size to the downside if it fails to break the right side of the double top at 10.21. The first sign will be going back through 10. Also waiting for a reaction to the hurricane forecast which should be out sometime this morning…no sense stepping further in front of this train just yet.

  28. 28
    zman Says:

    Lots of all time new highs, ones we care about include
    HK
    NFX
    APA – although I’m still away from the name right now
    DVN – also away again

    APC (this will be the 3rd time to test 67) and CHK (needs to break 50) both closing in on one.

  29. 29
    Nicky Says:

    What a great job the Fed have done sorting this mess out…what with Alan Greenspan trying to make out he had nothing to do with it (I thought he was in charge for 18 years but I must have missed something) and now Bernanke who has got inflation on a tear… let’s hope they have something up their sleeves ….
    that said the charts tell me they have nothing up their sleeves! a better second half of the year and then a major bear market starting…

  30. 30
    Nicky Says:

    If the energy complex continues to run then nat gas could hit 10750 before this is done…..

  31. 31
    reefguy Says:

    XCO/HK new highs, they are my trading twins

  32. 32
    zman Says:

    Nicky – got a read for us on the S&P? I was in a local money manager’s shop yesterday afternoon and he pulled up a chart of the S&P with a chart of the Vix below it. Everytime the Vix dropped the S&P tanked and it looks like its about to do that again, combined with the fact that we are overbought and I get a little nervous for the broad market here.

  33. 33
    zman Says:

    Reef – I love it when a plan comes together. Wish I’d been there on the XCO and I still will but am waiting for some kind of cooling, just the first day of profit taking …have XCO on my screen all by itself so I don’t miss that.

    COP at 80.50, somebody asked the other day if it could get to 80 before expiry…pretty sure I said yes.

  34. 34
    Nicky Says:

    Z – I had thought the Dow would hit 12465 area and SPX the 1348 area and then we get another bounce towards 1412 on the SPX and 13000 on the Dow. I still think we have a bit more upside into next week but this market is very nervous about earnings and oil at 111 is gonna kill it. Although that said I guess it is the energy stocks propping it up alone right now.

  35. 35
    Nicky Says:

    RBOB looking very spiky – it will lead the complex back down when this turns…

  36. 36
    zman Says:

    Refiners underperforming now.

  37. 37
    Nicky Says:

    A move under 27600 RBOB would start to indicate this is done with 27400 providing better confirmation.

  38. 38
    Nicky Says:

    SPX has support at the 1359 – 60 which has held the downside all week so far. Firmer support is between 1336 and 1342.

  39. 39
    zman Says:

    ZTRADE: PQ May $17.50 calls added for $2.00. Positioning for their 1Q call. Still holding the May $20 calls and I’m not expecting a big, quick pop here.

  40. 40
    sane Says:

    API

    Crude UP 6M
    Gasoline UP 1.8M
    Distillate DOWN 177k

  41. 41
    zman Says:

    Thanks Nicky

    Sane – no joking?

  42. 42
    md Says:

    The YOY chnge
    CL -3820
    RBOB+2000
    HO- 3860

  43. 43
    sane Says:

    Not kidding

  44. 44
    sane Says:

    Talk about polar reports

  45. 45
    zman Says:

    I’d agree to pay less taxes if we could just use the API data.

  46. 46
    reefguy Says:

    pq-trying may 17.50@$2

  47. 47
    dmh Says:

    Z: Re your LNG comments yesterday.

    You don’t seem too optimistic on the prospects going forward for the gas itself, too much demand from Europe?

    LNG, (the stock) has been slaughtered, also CQP, their MLP stock. With the expected demand for LNG shouldn’t these stocks be doing better?

    Also in the same vein stocks like TGP, (Teekay LNG Partners)which ships LNG, had been hit quite a bit, even though I see buy recs for it and CQP.

    Any thoughts?

  48. 48
    zman Says:

    dmh – on a call will circle back on that

  49. 49
    Nicky Says:

    My God that API report is extraordinary in comparison…

  50. 50
    scoop006 Says:

    Z- PQ When is their 1st 1/4 call

  51. 51
    zman Says:

    May 6 for PQ

  52. 52
    scoop006 Says:

    can you update your calendar to indicate when co’s have conferences

  53. 53
    zman Says:

    I do that over the weekend

  54. 54
    md Says:

    Which numbers are right if any and will the market change course

  55. 55
    zman Says:

    md, do you mean between api and eia numbers?

  56. 56
    Sambone Says:

    11:07 am EST

    Nymex Crude Near Record On Stock Draw

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures traded higher Wednesday on data showing an unexpected draw on U.S. oil inventories.

    Light, sweet crude for May delivery recently traded at $111.16 a barrel, up $2.66, or 2.4% on the New York Mercantile Exchange. The all-time high of $111.80 was set March 17. Brent crude on the ICE futures exchange traded at $108.50, up $2.16, or 2%. Brent topped its old record of $108.22.

    Futures immediately jumped nearly $2 after the U.S. Energy Information Administration released its oil and product inventory data. The data showed a 3.2 million barrel drop in crude stocks for the week ending April 4, where analysts had expected a 2.4 million barrel build. Product inventories also fell by more than expected.

    “The data looked bullish in virtually all categories with both crude and product stocks drawing more than expected,” said Jim Ritterbusch, president of Ritterbusch & Assoc., a trading advisory service. Flat inventories at the closely watched Cushing, Okla., storage hub also helped push prices higher, he added.

    The data also pushed product futures significantly higher, with reformulated gasoline blendstock, or RBOB, futures setting a new record. Gasoline inventories fell by 3.4 million barrels, more than the 2.3 million barrel draw expected by analysts.

    Distillate stockpiles fell 3.7 million barrels, compared with analysts’ forecasts of a 1.2 million-barrel drawdown.

    “Product draws were also larger than expected, putting upward pressure on the market right across the board,” wrote Tim Evans, an analyst with Citigroup. He blamed the draw in crude inventories on low import levels for the week.

    Oil prices had already received a slight bump from a report by the International Monetary Fund predicting that the U.S. economy would sink into recession in 2008, with a 25% chance of a global recession as a result. The Commerce Department also said Wednesday that U.S. wholesale inventories grew by more than expected, usually a sign of falling demand.

    Both the IMF forecast and the wholesale data indicate the potential for lower demand for oil, but had the additional effect of sending the dollar lower against the euro. This triggered a rise in commodities, which have increased and decreased in value on the dollar’s moves, as traders hedge against inflation. The euro recently traded at $1.5768.

    Front-month May RBOB futures recently traded up 5.25 cents, or 1.9%, at $2.8029 a gallon. May heating oil traded 7.65 cents higher at $3.1867 a gallon, up 2.4%

    —By Brian Baskin, Dow Jones Newswires

  57. 57
    md Says:

    Yes

  58. 58
    zman Says:

    API performs what they say is a fairly comprehensive survey.

    EIA uses a combination of survey and estimation.

    The two often diverge but line up over longer periods pretty well. This is one of the bigger splits between the two I can remember. The answer on this week’s number is probably somewhere in the middle. The market almost always will pay attention to teh EIA numbers and they are more comprehensive in terms of the breadth of the data set by far.

  59. 59
    zman Says:

    Sharon Efferson is out of breath she’s so excited about $111 oil.

  60. 60
    ram Says:

    Nicky – Is your estimation of the EWT count that we are finishing up 2, setting the stage for 3 down?

  61. 61
    zman Says:

    Wow CLR

    HK given back all of today’s gains on profit taking. Could see a quick, significant sell down here in which case I’ll trade some more Aprils.

  62. 62
    scoop006 Says:

    CLR 2x in 1 year Too bad optionless

  63. 63
    zman Says:

    CLR has options now. Too bad I never had any calls there.

  64. 64
    ram Says:

    SU trade just a DT or looking for a target price?

  65. 65
    zman Says:

    Ram – good question I was just asking myself. I had thought it was an easy bet for $110 the other day but decided to cash my $100s on Monday with the stock at $105. Still thinking it goes to $110 but this market is peak-ed and I will probably punt between today and friday. Frankly, we may get a surge in crude to the record into today’s close and I’m not one to turn down a quick 30% to 50% one day gain…

  66. 66
    ram Says:

    Good man. You had mentioned that VLO could be in your radar. Are the JUN 52.5’s or 55’s starting to appeal?

  67. 67
    Dman Says:

    Z – re. the “Performance since CHK highlighted the play” chart.

    Looking at todays action, CHK seems to have been listening. We’re gonna have to call you the “Stock Whisperer”

  68. 68
    zman Says:

    Re 47

    You said, “You don’t seem too optimistic on the prospects going forward for the gas itself, too much demand from Europe?”

    If I follow you correctly your are asking about the prospects for LNG coming to the country and not gas prices. I’d answer too much demand from Europe, Asia/Japan. $10 gas has not prompted shipments to come this way and gas in Japan recently traded at $20/Mcf so you can see why. Also, right now LNG is really not needed at last years levels given the domestic growth we are putting on.

    You asked “LNG, (the stock) has been slaughtered, also CQP, their MLP stock. With the expected demand for LNG shouldn’t these stocks be doing better?” I think they are building unnecessary capacity…We have about 6 Bcfgpd at full capacity and we never approach that level. Sabine Pass adds 4 to that and by year end the total last I saw was going to be 13 Bcfgpd. Uhhhhhhh… hmmmmm. Just because you build it …

    You asked “Also in the same vein stocks like TGP, (Teekay LNG Partners)which ships LNG, had been hit quite a bit, even though I see buy recs for it and CQP.” — that might be the play as LNG is increasingly moving about, just not coming as much to the U.S. I still expect LNG to creep higher soon but not enough to justify those new regas plants

    Any thoughts?

  69. 69
    zman Says:

    ram – yes, getting closer although day’s like today in the action between crude and products deal setbacks to those recovering crack charts. If the refiners really want to recovery their lost glory they should break something somewhere.

    dman- I thought the divergence on PQ was even more interesting. HK could gobble them (they’ve done bigger deals when they were smaller) and come out looking better for a DVN target from it. Or maybe APC, lol. Somebody should look at HK/PQ ‘s total shale resource potential and see if a deal between them and APC (not a big name in resource plays) would make sense. Suddenly gets them exposed to three growing shale plays.

  70. 70
    Nicky Says:

    Z – do you think there is a reason that RBOB is underperforming. Surely everyone should be more worried about supplies for the driving season (even though demand is down) that distillates where the season is all but over?

    Ram – I actually think the low for this year may be in. If so the run up into the end of this year, beginning of next will either be 5 to take us to new highs (unlikely imo but not out of the question) or 2 which will fall short of last October’s highs. With either count the next move will be a big downdraft and I think will probably start around March of next year. That is the big picture.
    Intermediate term this looks like wave 1 up and the next significant pullback will take us back towards the lows of January but not break them. Very short term I think we are in wave 4 of 1 which is corrective and could finish anywhere from here to about the 12300 area before we get 5 of 1 up which should take us to the 13000 area.

  71. 71
    zman Says:

    And there goes the oil push higher, going for 112.

  72. 72
    ram Says:

    Thank you Nicky.

  73. 73
    ram Says:

    ZMAN – COP seems like it drags itself higher versus run like some of the other majors. Thoughts?

  74. 74
    Dman Says:

    Z – do I win the free Z quarter if HK for PQ happens?

    🙂

  75. 75
    zman Says:

    Is RBOB underperform or crude overperforming? I think RBOB lags due to uncertainty regarding summer demand and the large storage overhang….there’s plenty of it around.

    I like COP here and it outperformed all morning until we saw some profit taking. It’s my only exposure to refining right now so why not own the cheapest one when none of them (the Majors) try to grow their upstream US biz anyway. I’ll punt the Aprils soon just because we’re getting short on time and I’m so close to the money it could all evaporate on me. But will likely be in the Mays for their 1Q.

  76. 76
    Dman Says:

    Broad market not happy. Guess they aren’t quite so breathless about oil at $111.

  77. 77
    zman Says:

    Re 74, No, that’s my pick.

    Do you guys ever use Google alerts? Pretty good way to monitor the net for stuff you want to hear about when people write about it. I have one on HK and google sends me a note any time I say something public about them.

  78. 78
    scoop006 Says:

    Z You think $112 oil is sustainable thru exp. Friday

  79. 79
    Dman Says:

    Actually, I guess I get to *donate* a free Z quarter if HK for PQ happens. I shoulda thought of that in advance really…

  80. 80
    zman Says:

    Scoop – hope not, it’ll kill the market and the energy group along with it. They don’t need oil this high to make huge profits but they won’t go up for long if the broad market dies. That said, I have no idea if it stays up here. Nicky is the TA guru, not me but I’d bet we could easily see 115 , 120 just because they are the next big fat numbers. When it falls, it will fall quickly.

  81. 81
    scoop006 Says:

    Z- see volume on COP may $85. These are not all mine

  82. 82
    zman Says:

    Dman – I like how you think!

    Ram – those SU’s are bid $1.30 and forgive me but I’m a little tempted to punt.

  83. 83
    zman Says:

    scoop – wow, somebody else likes it too.

  84. 84
    Nicky Says:

    Yes Z – I actually have a Google alert on crude oil. Should be working overtime today!

  85. 85
    kaman Says:

    Balls-y bet: cost-average down with another 200 shares DCR at 6.60…gotta watch for crude closing over $111 for three consecutive days…cheers K

  86. 86
    zman Says:

    SD new all time high.

    Interesting that SWN, which spoke this morning at IPAA is down.

    Goodluck K

  87. 87
    T-Tupp Says:

    i sold mine for 1.35 z

  88. 88
    scoop006 Says:

    TT nice trade I’m holding mine Just bought TSO May $30calls

  89. 89
    Dman Says:

    FTI trying to break out. It may be a bit rich valuation-wise, but oil refusing to stay down could kick it into action…

  90. 90
    zman Says:

    Nice T

    Scoop – I’m mulling those myself. Everyone knows the quarter will stink so that’s ok. My trepidation is over run away train possibility on oil prices which will further crush these guys.

    Dman – yep, I missed that one this time. Surprise OII is not running…who do people think clean up the mess when a hurricane hits the gulf anyhow?

  91. 91
    Dman Says:

    Z – re. your chart today & SD making a move: I’m not up to date with your thinking on SD … can you point me to a post?

  92. 92
    Nicky Says:

    There seems to be nothing to stop this crude train and with the $ seemingly looking poised to absolutely tank I am not sure what is going to stop it. Margin requirements I think I have said before maybe a short term solution…

  93. 93
    Dman Says:

    Re 91 – no need, I just found the discussion in Tuesday’s post.

  94. 94
    zman Says:

    Dman re SD: It has been a buy and hold for me since shortly after the IPO

    Initial report:
    http://zmansenergybrain.com/2007/07/08/sandrigdge-initial-look-july-2007/

    Follow up report:
    http://zmansenergybrain.com/2007/12/03/sandridge-3q07-pre-call-notes/

    Last Thing I wrote: Still agree with stuff in this report including the PINN avoidance.
    http://seekingalpha.com/article/58531-a-tale-of-three-ipos-then-since-then-and-what-now

  95. 95
    isleworth Says:

    Z – what are you expecting for NG report tomorrow?

  96. 96
    zman Says:

    Working on firming up my number now. Thinking a withdrawal of 5 Bcf, +/- 10 Bcf.

  97. 97
    isleworth Says:

    NG looks like descending triple top on technical basis so far………

  98. 98
    zman Says:

    I have two words for Newfield to repeat again and again on their 1Q08 conference call: Mancos Shale. You don’t even have to drill a well into it, just tell people how many acres you have (that would be 130,000) underneath your own field (Monument Butte) held by production so you won’t have to go lease up expensive acreage. Feels like time to write this bad boy up before it gets “popular”.

  99. 99
    zman Says:

    Isle – agreed. A big withdrawal tomorrow, say 25 Bcf plus could spoil that chart for the downside move.

  100. 100
    zman Says:

    ZTRADE: Half out of the SU $110 April calls bought on the EIA release for $1.40, up 65%.

  101. 101
    Sambone Says:

    1:25 pm EST

    Nymex Crude Hits Record On Stock Draw Surprise

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures set a new all-time high Wednesday, in a strong reaction to unexpected draws on U.S. oil and product inventories.

    Light, sweet crude for May delivery recently traded $3.35, or 3.1%, higher at $111.85 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $2.83 higher at $109.17 a barrel, with the intraday high of $109.50 topping the old record of $108.02.

    Futures reached an intraday high of $112.21 before falling back slightly, topping the old record of $111.80, set on March 17. Energy contracts across the board had been trending higher since government data showed large declines in oil and product stocks. Analysts had expected a build in crude inventories and smaller declines in gasoline and distillate stocks. The inventory data provided the excuse the market needed to surge past its previous record.

    “It’s mostly the inventory data, but it’s really just a continuation of the bull trend,” said Tom Bentz, a broker and analyst with BNP Paribas in New York.

    The data may have some hidden downside for prices. The biggest surprise was the draw on oil inventories, which could be traced to a drop in imports last week. Import data is notoriously uneven from week to week

    “Since imports have fluctuated wildly week to week, a quick rebound in crude supply could be forthcoming,” said Jim Ritterbusch, president of trading advisory firm Ritterbusch and Associates in Galena, Ill.

    Even before the data release, the market was trading higher on the dollar, which had weakened against the euro. The dollar’s value fell on an International Monetary Fund report forecasting a U.S. recession this year, with a 25% chance that it could become a global downturn. U.S. wholesale inventories also rose by more than expected, according to the Commerce Department, also indicating an economic slowdown. The weaker dollar has burnished the appeal for investors to buy commodities as a hedge against inflation, while dollar-denominated oil is also cheaper for investors buying in other currencies.

    “It’s the same old, same old,” said Dean Hazelcorn, a trader with Coquest Inc. in Dallas. Hazelcorn predicts that crude could trade as high as $114.90 this week on the dollar as well as the inventory data.

    Gasoline and heating oil futures also set records Wednesday as the data showed larger-than-expected draws in related inventories.

    Front-month May reformulated gasoline blendstock, or RBOB, recently traded up 4.6 cents, or 1.7%, at $2.7964 a gallon. May heating oil traded 12.32 cents, or 4%, higher at $3.2334 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  102. 102
    Dman Says:

    Z – re #94 thanks

    Anything in particular with NFX prompting your #98?

  103. 103
    ram Says:

    ZMAN – Is that you on the NFX MAY 60’s? Do you think that is too soon of a strike?

  104. 104
    zman Says:

    Its not me today, I went longer because I got tired of running out of time on them just before they run.

  105. 105
    zman Says:

    They’re expecting snow in the midwest now and that move was exacerbated by a leak at independence hub in the Gomex (1 Bcfgpd). That leak is probably what has taken the wind from APC’s sails, more than the other large caps today. Unknown when it reopens.

  106. 106
    zman Says:

    That news on the Anadarko’s Independence hub may create a nice trading opportunity. It also may give them a “get out of jail free pass” for missing numbers on 2Q as disclosed events like that are generally quickly forgiven unless there is a real problem that is hard to fix or takes a long time to fix. Right now they say they don’t know the extent of the damage/leak or a timeline for fixing.

  107. 107
    Nicky Says:

    Ram – just a follow up on the ta for the broader markets. If my preferred count is wrong and that the lows for the year are not in then this move up which I still think should end in the 13000 Dow region could mark the end of wave 2 and then we get 3 down which would be a huge move. A move below 11700 would confirm his and target a head and shoulders objective at around 9750 on the Dow.

    One other possibility is that we are just tracing out a iv wave triangle, so something like down to 11900 up to 12250 and then a plunge lower in wave v but not much lower than the previous lows before we spend the rest of the year correcting this move.

    Hope this makes sense and is not too confusing!

  108. 108
    zman Says:

    SU – blazing trails higher.

  109. 109
    zman Says:

    Dman – SD just won’t stop, up 8% suddenly…guess you went out and bought a bunch after reading 94, lol.

    Re #98 … the part of the Street that was asleep at the wheel on HK and the Haynesville until CHK started banging a gong is also asleep on NFX regarding a at least three points: 1) they’re doing better than they expected in the Woodford with extended laterals 2) they are seeing nice returns and rate from Monument Butte field, and 3) the Mancos under monument butte is yet another massive, untapped gas charged shale and an evolving science project for them. Just lining up my ducks on it.

  110. 110
    ram Says:

    Nicky – Makes good sense. I recalled someone here mentioning the scenario of getting a wave 3 down around this time frame give or take a few weeks.

  111. 111
    reefguy Says:

    Mancos- I think this is going to wind up be a very oily shale. The encapsulated sandstone, called the Tocito makes a great oil pay when you can find these barrier bar sands. I am betting this is more akin to the oily barnett…

  112. 112
    zman Says:

    Reef – thanks, even better, who needs more gas, lol. Maybe that explains the statement “Haliburton is going to be running some logs we’ve never even heard of”. I though NFX said gas and not economic without the Mesa Verde and Blackhawk above but maybe I misheard them, those are oil uphole, have not yet read the USGS brief.

  113. 113
    reefguy Says:

    z- until EOG telling us shale oil can work in Barnett, if you called a tight shale anything other than gas you were either crazy or in the Bakken

  114. 114
    Dman Says:

    Z – sometimes you just gotta laugh. Instead of going out & buying some SD exposure, I decided to “wait for a little pullback”. With the market sliding & the rest of the E&P complex taking a breather, it seemed like a less-than-criminally-insane idea. But I forgot about cause and effect, i.e. my decision to wait *caused* the up 8% explosion.

  115. 115
    scoop006 Says:

    Strong call volume for VLO May $52.50

  116. 116
    zman Says:

    Re 113. Oil shale makes me think of the early 90s and some crazy schemes out west that lost investors a whole lotto money.

  117. 117
    zman Says:

    Scoop – I’m holding off, don’t like the pull of the broader market.

  118. 118
    reefguy Says:

    Lets see…$110/BBl A well costs $2MM makes 75k Bbls with a 75%NRI that yields
    56,250 net bbls at a F&D cost of $35.50BBL or an undiscounted cash flow of better than 2/1 after operating and taxes

  119. 119
    ram Says:

    #106 – Going to pinch APC in the short term for the April’s?

  120. 120
    reefguy Says:

    Mr. ugly/TMR up 15%

  121. 121
    zman Says:

    Ram – apparently. Smart thing for me to do would be to punt both sets this week. Of course, if its a quick fix, you get it back plus a little in a green day energy market.

    Anybody see what happened to SD?

    True reef

  122. 122
    reefguy Says:

    Does SD have exposure in Pieance Basin?

  123. 123
    zman Says:

    yes

  124. 124
    dmh Says:

    Nicky: Re your wave count.(if you are still on line)

    It’s hard for me to see an impulse wave up from the March low, it looks like a corrective wave to me an ABC so far.

    I am also looking at the possibility that the whole move from the Jan low is an ABC flat,and we are in wave C, especially as the Dow did not make a new low in March, unlike the S&P. If this is a flat it can still go quite a lot higher without topping out.

    Agreed it’s doubtful that we go to new
    highs. If the March low is the end of the first part of the correction of the bull mkt from 2003 than we can go considerable higher without making new highs. As usual time will tell.

  125. 125
    reefguy Says:

    sd- Rumor that private Meagher oil had big sale announced today with pieance assets. SD running because of this!?

  126. 126
    uop Says:

    Zman;

    just got online and I see lots of red in my UNG PUTS and also sharp decline in HK calls,

    you did not hold up the market while I played golf.

  127. 127
    zman Says:

    Uop – if you’re going to beat up on a little white ball in the middle of a Wednesday …

    Reef- Dunno, stunned re SD.

    NFX – I’ll add more soon.

    CHK – ditto for longer calls, will punt the near term stuff soon.

  128. 128
    reefguy Says:

    ioc was up a buck cause nobody knew better?

  129. 129
    zman Says:

    I’d add now but again, the broad market, I think we get more bad news for the dollar tomorrow though.

    Still, this has been a good string of days and usually when I think about doing something crazy like upgrading my office chair or buying a new boat its time to be selling not buying.

    IOC should be on channeling stocks dot com.

  130. 130
    Nicky Says:

    Hi DMH,

    If I understand correctly then I agree and our counts are aligned as this can be 2 up which is tracing out an abc and yes as you say could go considerably higher but yes it is looking corrective and not impulsive (don’t think I said it was impulsive) but I was probably confusing – it should take the shape of 3 waves to the upside.

    What you say makes me think you think we will roll over in 3 down once this correction plays out?

  131. 131
    dmh Says:

    Z. Re #68. Thank you for your very informative info. With LNG at $20 no wonder there’s not much demand here, with all that excess capacity I can’t imagine why anyone would recommend CQP unless for a long term hold. They will probably have difficulty making their dividend payments in the future, even though they have planned for the current div to be maintained through part of next year without revenues to back it up.

    Agreed the tankers make more sense as they can go anywhere where there is demand.

    I read pieces about the projected gradual decrease in the price of nat gas over the next year or so, at the same time it is touted for increased demand.

    Also LNG is purported to be essential in the future to meet our gas needs . I guess the question is ‘how far in the future’, and how many LNG terminals will we have. I understand Shell is building one, also Sempra Energy. Unless demand increases there won’t be enough LNG to meet capacity.

  132. 132
    reefguy Says:

    SD- Meagher was brokering a CHK pience asset set…

  133. 133
    zman Says:

    beer thirty!

  134. 134
    dmh Says:

    Nicky:

    When you said we are in 4 of 1 I took that to be impulsive. Agreed it is corrective.

    Re the major wave count. I think we could have ended an ABC down from the Oct highs in mid/late Jan, which would be Primary wave A as it was 3 waves only.

    Or Primary wave A ended in March with a 5 wave in the S&P and Nasdaq and a 5th wave failure in the Dow. The problem I have with the S&P last wave down into March is that it doesn’t subdivide into 5 waves, unless you can call it a diagonal triangle, and that doesn’t work as the 3rd wave in the shortest of the pattern.

    Either way we’re no doubt in Primary wave B, I believe.

  135. 135
    reefguy Says:

    chk- doing MLP of midstream, in patnership with an unnamed private equity firm. Aubrey says it will raise a Billion bucks net to CHK

  136. 136
    zman Says:

    Reef – thanks for the headsup. They said this was in the works and would be done within a month of their 8 shale play conference call two week ago which is why I was a little surprised by the size of the equity deal.

  137. 137
    zman Says:

    Oh, I thought you meant it was done. They’ve been talking about this for some time. They also should have another asset package for sale or VPP (volumetric production payment) soon.

  138. 138
    ellwodo Says:

    Your comments on SD seem pretty favorable, and I like what I can find out about it, but I notice you don’t have any holdings in it. Any particular reason?

  139. 139
    ellwodo Says:

    SD -I also like their 3/31 SEC filing amending employment contracts for some top officers, among other things doubled their payments in event of change of control. May not mean anything, but…

  140. 140
    zman Says:

    Ell – check out how much CEO stock Tom Ward owns.

    I added a ZEB stocks tab at upper left on the site. I used to put this table at the bottom of the holdings tab (now relabeled options ) but I rarely updated because I rarely do a trade. Also from it, you can see why I don’t often talk about the many penny stocks in the sector. I’ve been burned by single digit midgets more times than I care to count and there they are in all their lack of glory.

  141. 141
    ellwodo Says:

    Tom ward – I know, he must have got the habit from Aubrey at CHK. (Ward still owns just under 5% of CHK subject to a forward sae agreement).

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