07
May

Wednesday – Oil Inventory Preview + News From HK, DVN, XCO, PXD, RIG

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HK announced a good quarter (reviewed below) and about $1 billion in debt and equity offerings that are going to pressure the shares this morning. They're accelerating activity on many fronts and have staked a claim as the #2 name in the Haynesville before their well is at total depth which speaks to either massive folly or the fact that they understand something about the play that the Street has only caught a glimmer of to date. Given their track record and the track record of that other big fan of the play based in OK City I'd have to say it's not folly. I'll be listening to the call and likely adding on deal based weakness soon.  

In other news (DVN) and (XCO) (not held but likely soon to be) both absolutely crushed 1Q expectations. See below for pre call notes. RIG also provided a nice beat and the upward pull should help our remaining DO calls. I'll take some (ATW) for Friday if the opportunity presents itself. 

In Today's Post:

  1. Holdings Watch with currently open trades table.
  2. Commodity Watch -  oil inventory preview
  3. Stocks We Care About Today - HK, DVN, XCO
  4. Odds & Ends

Holdings Watch:

  • CHK - Sold the May $55 calls for $2.23, up 78%. Raising a little cash into this energy rally.

My currently open trades: the May's are highlighted in red as they will be punted soon.

open-050608.jpg

Commodity Watch:

Crude Oil - soared $1.27 to close at $121.84 on Goldman Sachs Super-Duper Spike induced buying. Oil is starting to trade in the leaps and fits of a commodity that is looking down the road toward potential supply bottlenecks. Looking down the road beyond a near term soft U.S. and global economy. This will lead to increased volatility. This morning oil is trading up slightly.

  • Nigeria Watch: Carter MENDs Old Wounds. Or at least the former president is trying to get MEND to come to the negotiation table and in the meantime offer up a ceasefire. They said they will consider it but the trial in secret of former MEND leader Henry Okah is likely to keep tensions high (oil fires burning) this Summer. 

Inventory Preview (from the  Dow Jones survey)

exp-050208.jpg

ZCOMMENT:  Imports remained high last week for a second week in a row and normally I would say that they are likely to pull back this week. It still could occur but seasonally this is the time when imports are due to start trickling higher. If imports do pull back look resulting in a draw down on crude stocks look for traders to attack the $125 mark on crude. This is also the time of year when refineries really start ramping gasoline production in earnest. So far they have managed to produce relatively high levels of products without consuming as much crude as one would think. Hello blending products! If the refiners do step up their use of crude then that $125 is a lock.

I still look for $4 gasoline to be the national average sometime in May as demand for gas is barely below last year's record levels. I see guys on TV saying the gas demand is way off. This is simply false. My advice would be to buy hybrids or better yet, a bicycle. But judging by the line of SUVs that resembles a presidential security force I see in the pickup queue at my daughter's school habits are hard to change. One in 10 vehicles in that line are non-SUVS and the entire fleet of gas guzzlers was purchased in the last 12 months. Sorry for the rant but my point is that Americans are not changing their driving habits ... give them a gas tax holiday and they'll just drive more. You don't cure cancer by making cigarettes cheaper but I guess you do get the smoker vote.

Natural Gas: closed off 3 cents to $11.15. This is just noise and not a sign of hope for my UNG puts. Gas continues to be led around by the nose by oil. This morning natural gas is trading flat.

Stocks We Care About Today Watch:

DVN Crushes 1Q08 Expectations

The 1Q Numbers:

  • EPS  of $2.74 vs $2.33 Street Consensus,
  • CFPS of $5.79 vs $4.55 expected,
  • Production of 640 MBOEpd  vs 631.5 MBOEpd in 4Q07 (from non-divested properties)
  • LOE inched up 7% YoY

Guidance:  None given, here are the priors.

  • 2008 was - 240 to 247 MMBOE vs retained production comp of 223 from 2007
  • 2009 was 259 to 274

Operations Update: Not a lot of details in the pr but here are the highlights.

Barnett Shale Update:

  • Still the biggest producer and lease holder in the play
  • Production average 995 MMcfedp in 1Q08, up from a YE07 exit rate of 950 MMcfepd (0.95 Bcfepd),
  • now over the 1 Bcfgpd mark
  • in the Gooseneck area, they had 3 horizontal wells IP at 19 MMcfepd. Wow. There are going to be lots of questions on the call about this. They had 100% WI in two of these and 93% in the third.

Lower Tertiary Trend, Deepwater Gulf of Mexico: 

Progress Being Made At Jack and St Malo Discoveries. Chevron subsea general manager Randall Kubota, yesterday confirmed at the Offshore Technology Conference that a full front-end engineering and design study will be launched this summer for the Jack and St Malo ultra-deep discoveries in the Gulf of Mexico. Devon has 25% of Jack and 22.5% of St Malo.

No word on the Chuck Prospect - first DVN operated Lower Tertiary trend test, 39.5% working interest, and has been drilling for the better part of a year now.

Canada Update: oil sands and another play mentioned but scant details.

Brazil - Polvo Update - did not get an update here either. Probably some news on the conference call.

Conference Call: 11 EST 

HK Reports 1Q08 Results Good Results; Announces Share and Debt Offerings; Jacks Up Budget and Attacks The Haynesville In Almost Chesapeake Fashion.

My sense is that the stock dips in the early morning hours. Even some analysts may attempt to decry the wanton levels of spending. This will pass. I will likely buy more if it is still low during the conference call. At the end of the day, their growth to 150,000 shares will propel them to the forefront of the Haynesville mania. There are a number of very solid developments in the PR which I’m chewing on now.

The 1Q Numbers:

  • EPS  of $0.15 (ex item) vs $0.16 Street Consensus,
  • CFPS of $0.72 vs $0.70 expected,
  • Revenue of $215mm vs $202mm expected,
  • Production of 261,000 Mcfepd vs guidance of 250 to 260,000 Mcfepd (91% natural gas),
  • Lease operating expense was a low, low $0.52 / Mcfe.

The Offerings:

  • 21 million shares - 11% of the outstanding, should raise just over $500 million. An overallotment would increase the dilution by 3.15 shares or to 12.5% which is I bet what occurs. Book is being run by Lehman and Merrill Lynch ... so expect an upgrade by Merrill the day after the secondary. 
  • $500 million Senior notes.
  • Half and half offering keeps the capital structure relatively balanced 

 

Guidance:

  • Production Guidance:
  • 2008 reaffirmed at  295 to 315 MMcfepd
  • 2Q08 initiated at 280 to 290 MMcfepd, the mid point of which would equate to 9% sequential growth.
    • Capital budget increased 62% from $800 million to $1.3 billion. Additional dollars go to fund:
      • Haynesville acreage grab
      • $150 mm additional to drilling in the Haynesville, WEHLU (read on), and the Jame Lime JV (read on),
      • building gathering systems in the Fayetteville shale,
      • further corporate liquidity, and
      • total company rig count to increase to 30 from the low 20s now.

hk-2008-revised-budget.jpg

  • Gross resource potential (unproven reserves) now at 10.3 Tcfe versus year end company reserves of 1.06 Tcfe.   

 

Operations Update:

  • Haynesville Shale Update:  Haynesville Shale exposure now at 150,000 acres up from "more than 70,000 net acres" in early April. Plan is to go to 400,000.
    • drilling the 4,000 foot lateral on their first well now
    • a second rig will be in the field in May and they will move to a 5 to 6 rig program by 4Q08.
    • New acreage bumps them up on the Haynesville leverage chart:

haynesville-play-exposure-050608.jpg

 

  • Elm Grove Update:
    • Business as usual in the regular Lower Cotton Valley program with an 8 rig 140 program on schedule. 
    • Taylor Sand Horizontal Cotton Valley Tests: one IP at 13 MMcfepd and one at 6 MMcfepd with a 42% NRI for 8 MMcfepd net combined. I think a third well here was dry but those are very nice rates from this normally resource style field.
    • Davis Sand Horizontal: completed one well with an IP of 4.5 MMcfepd, again a nice rate, I think a little better than they expect from the Davis which is tighter than the Taylor.
    • Fayetteville Shale: 
      • Production: 76 MMcfepd gross, 43 net. This is up slightly from early April.
      • Drilling costs are falling as they get more efficient. Wells are being drilled more quickly even with longer laterals. Overall, costs fell 12% YoY while IP's increased 20%.
      • 6 rig program on track to drill 140 wells.
  • WEHLU - West Edmond Hunton Lime Unit.
    • 30,000 acres
    • 15 horizontal wells drilled to date
    • latest well doing 485 boepd gross, don't know WI% yet here
    • plan to drill 16 more, half of them horizontals, looks like lots of room to run
  • East Texas James Lime JV With EOG - 30,000 net acres in Nacogdoches and Shelby Counties, Texas. A five well (EOG) operated pilot begins this quarter. 

Conference Call: 9 EST

XCO Reports Record 1Q08; Blows Out The Numbers

The 1Q Numbers:

  • EPS of $0.28 vs $0.16 Street Consensus,
  • CFPS of $2.13 vs $1.77 expected,
  • Revenue of $329 vs $297 mm expected,
  • Production of 386 MMcfepd, up 100% from 1Q07. Current production > 400 MMcfepd.
  • LOE fell to $0.95 / Mcfe from $0.97 in 4Q and $1.25 in 1Q07

Operations Update: 

East Texas / North Louisiana

  • Haynesville position now over 100,000 acres - no surprise here, at last count I had 154,000 acres, much of it is held by production
  • they are drilling to delineate and say they are encouraged by initial results and will be adding another well to drill horizontals by mid 08
  • they see 2 to 5 Tcfe potential here.
  • they'll be upping their budget in the play
  • conventional development programs in the area (Vernon and Holly/Caspiana) look a little better than expected.

Appalachia

  • 415,000 Marcellus acres now held, largely by shallow production and a majority of it in the play fairway in Pennsylvania. First horizontal has spud
  • 121,000 acres in the Huron Shale
  • they see net reserve potential of 7 to 12 Tcfe in these two plays

Conference Call: 2 Est.

PXD Announces New Initiatives, Plays and Successes

The 1Q Numbers:

  • EPS of $1.01 (ex non recurring items) vs $0.84 Street Consensus,
  • CFPS of $2.41 vs $2.60 expected, normally I would say this miss 
  • Production of 110 MBOEpd, up 24% from 1Q07.
  • LOE appears high but not unreasonable.

Guidance: 2Q08: 110 to 115,000 BOEpd.

 

Operations Update:

Announces initiative to capture 1 billion barrels from the Sprayberry. Funny how we were just chatting about the Sprayberry on the site yesterday. This goes to show you that if the price of oil is high enough, people will find more of it, especially in the older and once thought to be "drilled up" fields. PXD sees 15% growth from the Sprayberry (west Texas) through 2011.

Announces Pierre Shale gas play. Say it has net resource potential > 2 Tcf. This is in the Raton Basin under the existing coal bed methane production which they picked up in the Evergreen Resources acquisition. Bet  PXD director Mark Sexton, EVG's former president is practicing the fine art of kicking oneself in the head over that cheap sale. They will start a horizontal program this summer but the results from 10 vertical wells are encouraging.

Valuation: This one I commented on months ago and did nothing about. At the time I wondered why it was so cheap. Well, its still cheap at 4.6x 2009 CFPS estimates which are likely to rally from here. Conference Call 10 EST.

RIG Beats The Street

  • EPS of 3.71 vs 3.34 expected ...part tof the beat is related to maintenance on some rigs which was deferred into next year.
  • fleet utilization continues to climb, increasing 1% to 91% in 1Q08. Notably, jack up utilization was up sequentially and YOY. There has been a lot of trepidation from analysts regarding a flood of new jackups and rigs going without work...not so far.
  • total fleet day rates climbed to $229,000 in 1Q08 from $224kpd in 4Q and $198kpd a year ago.
  • yesterday they announced another long term ultra deep capable rig contracted at a $550,000 per day level. This is becoming common place
  • Conference Call at 10 EST.

Odds & Ends

Analyst Watch: (APC) getting some big price target upgrades, as high as $95 at FBR.

198 Responses to “Wednesday – Oil Inventory Preview + News From HK, DVN, XCO, PXD, RIG”

  1. 1
    zman Says:

    Anybody see any news / broker comments on CHK? Bid $58.

  2. 2
    kyleandy Says:

    lots of listening today for u. hope your ears hold up!!!

  3. 3
    zman Says:

    Thanks Ky, at least they mostly don’t over lap.

    NFX signs 50/50 JV with Exxon to explore/develop south Texas 87,000 acres – Vicksburg trend. NFX has identified multiple prospects and plans to drill them commencing this year and extending for several years. I would add that Exxon doesn’t care about little stuff but will drill an oil well with anyone if you pay them. Not sure who’s the operator here but I’d bet its NFX. Otherwise you’re in for some pretty tweaked out and high dollar wells, lol.

  4. 4
    zman Says:

    HK conference call starting – pre market stock trading down 1.62 @ 24.75 for reference.

  5. 5
    scoop006 Says:

    Cramer last night

  6. 6
    ellwodo Says:

    HK – how do you access the call? I can’t find the webcast on their site and the conf tel nu doesn’t work.

  7. 7
    zman Says:

    scoop – ah, thanks.

  8. 8
    zman Says:

    elwo – go to it on yahoo finance

  9. 9
    ellwodo Says:

    thanks

  10. 10
    zman Says:

    HK – just told any Haynesville acreage owners on the call to get off the call and call them, they want to talk.

  11. 11
    zman Says:

    going into Q&A now on the HK call.

    They mentioned shortage of tubulars too. I may just take a little (TS) which I think I saw miss their number.

  12. 12
    zman Says:

    HK Conf call

    they said 25+% production growth – same as before but basically said they will be taking numbers up as the year progresses.

  13. 13
    ram Says:

    Adding to HK?

  14. 14
    zman Says:

    still listening but yes, I will be

  15. 15
    zman Says:

    looks like need to be quick/.

  16. 16
    zman Says:

    ram – nevermind, not adding its almost even now.

  17. 17
    zman Says:

    can’t believe no one on the HK call is asking about what rates the HK guys are hearing. maybe some specifics on the data they mentioned at the beginning of the call. Sleepiest bunch of analysts following E&P these days …Sheesh!

  18. 18
    zman Says:

    HK flat 40 minutes into the call

  19. 19
    T-Tupp Says:

    dvn is a nice dip play with stops at yesterdays close, most definately will retake pre-market highs and more.

    spreads are still wide as usual in the the first 15 min of market hours. why is this z? do the MM’s not post bids fully until after the first 15/20 min. of trading?

  20. 20
    Dman Says:

    Z – re #11: actual shortage or just pricey?

  21. 21
    zman Says:

    some shortage but not bad, definitely tubular providers in the drivers seat on price.

  22. 22
    T-Tupp Says:

    do they ever stream these cc’s?

  23. 23
    reefguy Says:

    20- US Steel told Dallas Wildcatters last month that the shortage is becoming physical

  24. 24
    zman Says:

    T – yes, doing it right now. they stream all of them

  25. 25
    zman Says:

    TS owns the old maverick tube, going to do some work on that name in a bit.

  26. 26
    Dman Says:

    Z – you expecting the HK secondary to go thru today?

  27. 27
    zman Says:

    what is up with analysts these dayss? push them with your questions. act like ya gotta pair. Weak questions on the HK call. why come to work in the morning if your not going to say, “so you want to raise a billion bucks, what is so good at the Haynesville”

    They are using 5 Bcfe, dry gas, good btu content, $6 – 7 mm. That EUR is up a Bcfe per well from March notes.

  28. 28
    elijahwc Says:

    Z (eight toe one)On the stocks to care about today. FTO?

  29. 29
    T-Tupp Says:

    what the hell is going on with dvn??!!

  30. 30
    isleworth Says:

    TSO and VLO moving……

  31. 31
    zman Says:

    Eli – FTO have not looked at the numbers yet, I’d say they beat, eh?

    T – group traded off, for a bit, this is pre call noise. That was a stellar quarter. They may have a dry hole at Chuck as they did not mention it. I think a dip of less than 2% hardly warrants profanity, lol.

    Isle – I still hold the little bit of worthless TSO, guess its moving on the FTO.

  32. 32
    uop Says:

    zman:

    just bought VLO, sep 50,

    HK off 87 cts, good to buy what month ?

  33. 33
    zman Says:

    ZTRADE: little late notice but it’s cheaper now and I was on a call when it popped off. XCO June $25 calls taken for $1.65. Bid 1.25 now.

  34. 34
    zman Says:

    Uop – I’m thinking June or longer date.

  35. 35
    T-Tupp Says:

    i know but it was so srong pre-market and had a rediculous quarter. sorry im just a hot head i guess.

    wow look at the IV deflation on HK mays

  36. 36
    zman Says:

    Tupp – Same for XCO. Think it may be a little fear pre oil inventories.

    Listening to RIG CC

  37. 37
    T-Tupp Says:

    on PSW he was talking about a huge draw one of these weeks due to traders canceling 400,000 contracts and rolling only a small amount of them therefore creating and artificial shortage in one of the reportng weeks in may….. just a thought… might get things moving for us.

  38. 38
    zman Says:

    Canceling contracts does not affect the physical market.

  39. 39
    reefguy Says:

    mmr moving

  40. 40
    zman Says:

    reef – check out the move in TISDZ yesterday

  41. 41
    reefguy Says:

    tisdz is Treasure island equity?

  42. 42
    zman Says:

    yes, warrants

  43. 43
    reefguy Says:

    isn’t that SPAC there as well. XXI?

  44. 44
    reefguy Says:

    43- Having senior moment- what is spac name for BN?

  45. 45
    zman Says:

    reef – having same kind of moment

    2 minutes to EIA.

  46. 46
    zman Says:

    increased 5.7 mm barrels

  47. 47
    zman Says:

    that’s going to pop oil for 3 to $5

  48. 48
    zman Says:

    imports were up again and refiners took a break with utilization still at 85%. I’m shocked the selling is n’t more tat this point.

  49. 49
    zman Says:

    CNBC guest saying the market is more concerned about global supply problem than this week’s data. Almost like a set play here as they were saying the “data wouldn’t matter” early this morning and that oil would definitely going to $125 no matter the data.

  50. 50
    T-Tupp Says:

    but thats a larger than expected build how is that supportive of crude?

  51. 51
    T-Tupp Says:

    z- re 37, i didnt think it had an effect on actual inventories. in my mind it only has an effect on prices of physicals… do you have any idea about what he’s talking about?

    dvn standing hard on 118. might really good or really bad pre-call DD.

  52. 52
    T-Tupp Says:

    what was util last week? i assume it was higher since finished products production was down w/w

  53. 53
    zman Says:

    Reported inventory numbers:

    oil: up 5.7 mm barrels
    gas: up 0.8 mm barrels
    dist: down 0.1 mm barrels

    utilization: 85%
    crude imports: 10.6 mm barrels – that’s a pretty big number.
    gasoline demand: 9.311 million barrels per day. That’s off a whopping 0.3% from last year. Again, not seeing that drop in driving you would expect.

  54. 54
    zman Says:

    T – its not supportive and I was not saying it was, just telling you what the talking heads are saying. For it to be only down a buck at this point is pretty surprising to me.

    I don’t know what he’s talking about. He’s not an oil guy so I’m going to try to it out some conspiracy theory.

    85.4%

  55. 55
    zman Says:

    Reef – is that you playing on the Treasure Island?

  56. 56
    T-Tupp Says:

    but z i must contest we have been seeing ~3% y/o demand growth 06/07 & 05/06 correct? so even though its basically a flatish to sligtly negative that is still a bigh change in my eyes. i don’t know im just thinking out loud.

  57. 57
    md Says:

    Total inventories are in Thosuands DN 8, WOW and weekly chg. from YOY 990

  58. 58
    reefguy Says:

    55-No, but I have a clue who. That clue is in the SPAC, senior moment cannot remember name…

  59. 59
    zman Says:

    crickey – gas prices are up something like 40% yoy, you gotta think there is some price elasticity. and there’s a recession on or whatever you want to call. I’m saying the people who say demand is falling off a cliff, those were the exact words of one guest on CNBC I heard Monday, and out of people at Alaron who are big shorts, need to have their eyes examined.

  60. 60
    zman Says:

    md – I did not follow 57

    Reef – hear ya. Personally I like to make my bets at a green table but hey, maybe they know something about that re-entry.

  61. 61
    reefguy Says:

    Energy XXI

  62. 62
    reefguy Says:

    EXXI-

  63. 63
    reefguy Says:

    Look at 5 day change

  64. 64
    zman Says:

    people really liking the PXD results.

    I think XCO will improve during the call which begins 2 EST banning a capitulation in oil prices which I don’t see right now

    RIG call – good long term stuff, nothing earth shaking.

    DVN call in 5 minutes

  65. 65
    zman Says:

    what’s that symbol?

  66. 66
    zman Says:

    oil just went green, go figure

  67. 67
    reefguy Says:

    exxi

  68. 68
    zman Says:

    oh …. wow. are they in blackbeard?

  69. 69
    sane Says:

    API

    Crude UP 621K
    Gasoline UP 1.4M
    Distillate Down 1.3M

  70. 70
    reefguy Says:

    yes-blackjack

  71. 71
    zman Says:

    Is Blackjack what they are calling the re-entry? Ya know, NFX has interest here too.

  72. 72
    reefguy Says:

    XXI is blackjack

  73. 73
    zman Says:

    DVN talking some very big wells in Grossbeck area, near Carthage. Anybody know exactly where that is?

  74. 74
    Nicky Says:

    Morning all. I think we said yesterday that bearish data would make no difference to the bulls. Total fake out after the numbers.

    The bulls still need to see a higher high believe it or not to give us an impulse. It can still be a ‘b’ wave of an expanded flat although much above 126.00 and that goes out of the window.

    Argggh they are bringing Kilduff on CNBC.

  75. 75
    zman Says:

    Chuck a dry hole for Devon.

  76. 76
    zman Says:

    So far stock not reacting to what is probably a $200 million dollar (gross) drywhole.

    I’m still holding. Quite a bit of good news in the deepwater, Barnett – which they see growing from current levels of 1.0 Bcfgpd (2% of U.S. total gas production) to as much as 1.6 to 2.0 Bcfgpd at some point in the future.

  77. 77
    T-Tupp Says:

    Carthage? lol

    http://maps.google.ca/maps?client=firefox-a&rls=org.mozilla:en-US:official&hl=en&tab=wl&q=Carthage

  78. 78
    Nicky Says:

    Well they were at least pointing the finger at the speculator. Kilduff points out that if money moves back into equities it will come out of oil. Also said what happens to China after the Olympics and how they need to raise the heavily subsidised prices in China, India and Venezuela.

  79. 79
    zman Says:

    Groesbeck is in Freestone County, Tx, just wondering which part of the county.

    CLR coming back up…knew they couldn’t stay away from this one for long.

    Thinking of selling my Devon – it may go up from here but I was playing for a CHUCK pop and it may fall back given their guidance is on the low end of the production side.

  80. 80
    zman Says:

    ZTRADE: Sold DVN June $125 calls for $4, up 13% to average cost.

  81. 81
    zman Says:

    actually I was down a percent there, oh well.

  82. 82
    uop Says:

    zman;

    what is your take:

    you saw the oil numbers:

    COP and APC are at almost 52 high,
    I think I will short these ?

  83. 83
    zman Says:

    Uop – Good luck with that. Lots of things are at their 52 week highs. Those are both gassy stocks. COP is the cheapest of the majors. If you think oil is going to fall I’d think you’d want to pick an oil stock like SU or the USO etf.

  84. 84
    zman Says:

    Morning Nicky – were they saying that those countries would be pinching off demand ?

  85. 85
    zman Says:

    DVN just said seeing pricing pressure (upwards) on steel tubulars.

  86. 86
    T-Tupp Says:

    z- you think we have some hk upgrades coming today and thru the rest of the week?

  87. 87
    zman Says:

    not until after the deal, don’t know when they price it, could be a week.

  88. 88
    scoop006 Says:

    Z If you did not double down on DVN and were holding the June $125 would you still of sold now for $4.00

  89. 89
    T-Tupp Says:

    z that tube co you mentioned this am – do they make those buoyant pipe/ drill sections they use on deep water floaters that are needing more and more sections because of the depths they are now drilling to?

  90. 90
    zman Says:

    yep, I try very hard not to care what I paid for something when considering a sell. Logically, your purchase price does not matter to the sell decision. Maybe it does to your pride but not to your wallet. I will say it could go higher, I’m just out b/c I was looking for a pop on Chuck and I didn’t get it. I didn’t get it but I in general like what I’m hearing on the call. Just maintaining discipline.

  91. 91
    zman Says:

    T – I dunno.

  92. 92
    Nicky Says:

    Broader market – this move down still looks corrective and I favor a higher high still out there but 1430 – 1438 will be huge resistance and could well cap it.

  93. 93
    T-Tupp Says:

    so hk’s a keeper until everyone digests the new larger balance sheet i take it

  94. 94
    ram Says:

    ZMAN – When you were thinking of longer dated HK’s, was SEP 30’s on the radar?

  95. 95
    ellwodo Says:

    XCO – I’m with you, just added June 25s, bought Sept 30s earlier today. I’m still holding May 25s. Surely T Boone has taught them how to get the most out of a PR opportunity.

  96. 96
    zman Says:

    T – I’m on the bubble on the May position, may sell and redeploy to June but in general I think it goes higher.

  97. 97
    zman Says:

    Ram – I was thinking a little closer in but those are not out of the realm of possibility.

    Good luck to us then Elwo! I think this is one of Reef’s favorite names and I should have listened to him when he was yelling about it at $16.

  98. 98
    T-Tupp Says:

    like on a land based oil well i dont even know really how its done- i know they cement in a casing near the surface, but do they drill with hollow sections until the pay area then let it flow out through a raw hole with ts own pressure that it is naturally under?

    i watched “theyre will be blood” last night about an oil man in the 20’s, obv things have change quite a bit but i feel silly trading these co’s and not even know how they physically get oil out of the ground

  99. 99
    zman Says:

    T – I’d suggest:

    The Nontechnical Guide to Petroleum Geology, Exploration, Drilling and Production by PennWell Publishing, I think its about $45 on Amazon, about the size of a dictionary and can answer just about any question like that you have.

  100. 100
    ram Says:

    ZMAN – Did the RIG CC do anything for you?

  101. 101
    T-Tupp Says:

    yea i took the mays too because Monday morning they were cheap on the IV side, and most prudent exp. for an earnings pop. even if they stay flat they will lose about $5c/day.

    im going to see it DVN holds on to $117 before i sell although the broad market looks due for a violent correction

  102. 102
    T-Tupp Says:

    thx

  103. 103
    zman Says:

    Ram – re RIG – It was all very positive from a long term standpoint, nothing tradeable from a near term perspective that I heard. Hard to tell if the analysts were very awake.

  104. 104
    Nicky Says:

    ECB and BOE interest rate decisions tomorrow – both expected to keep rates on hold.
    Its interesting that the ECB who have steadfastly held the line over inflation (making the situation even worse) and a refusal to lower rates actually have the potential to pop one of their inflation concerns. If they were to lower rates or even hint at it then the dollar should take off. I am not expecting it tomorrow but there have been some very weak economic signs coming out of Europe recently including their retail sales this morning which were far lower than expected and the lowest since records began so in my opinion it is only a question of time before they start to ease.

  105. 105
    ram Says:

    ZMAN – What is the reason APC is still en fuego? Can the reasons spill over into any other stocks?

  106. 106
    zman Says:

    couple of upgrades re APC up 3%. Doubtful. If they go up it will be due to a last minute rally in crude or a market move up after crude closes for the day. But me answering questions like that is as good a guess. Obviously I don’t think the stocks are on the precipice of a big decline or that table in today’s post would be full of puts. But do I know if they will go up today? No, I don’t have crystal ball.

  107. 107
    gaamblor Says:

    z,

    after hearing most/all of the companies report any guesstimate of domestic gas production will look like this time next year compared to this year?

  108. 108
    ram Says:

    ZMAN – Not asking for a crystal ball answer. I was curious if the upward move is due to discoveries, additional purchases of acreages somewhere, etc. It seems my inquiry was inapropriate. I assure you, it was meant with good intentions.

  109. 109
    zman Says:

    G – I would say 3 to 5% YoY Lower 48 gas production growth. 3% only if the Gomex resumes its normal declines. Could be higher than 5% but I don’t want to sound like a loon.

    Ram – It was not inappropriate question. Just trying to say my answer was probably not worth much.

  110. 110
    apbd Says:

    EGLE went long. Screaming. Bulk rate on a charter for Aug way up. First time I’ve been excited about bulks in a while.
    apbd

  111. 111
    xweto Says:

    Z: are you staying with June NBRs

  112. 112
    zman Says:

    A – nice move, think I missed it and the coals. ug.

    X – yes, if it has another dip I’ll likely add more June or longer exposure.

  113. 113
    zman Says:

    X – I have some May 35s which may get sold at any time however.

  114. 114
    zman Says:

    Tomorrow’s crude review is going to be in a different format than usual. In a nutshell it will be shorter and I’ll experimenting with alternating between my usually overly charty (some tell), overly verbose Thursday post and a shorter, to the point version. If you have any charts you can’t live without speak up now. Thanks

  115. 115
    john11 Says:

    Z, what do you have for XCO cashflow/sh for the qtr., is $2.13 accurate? TIA

  116. 116
    zman Says:

    Group is greening. We’re getting that end of day rally in crude I was musing about above a little early, now up 50 cents at 122.30.

    Trying to buy a little May 90 COP call position for a quick trade. If people are going to take a quick (but possibly short lived move on refiners) I’d rather be there than in the independents.

  117. 117
    zman Says:

    ZTRADE: Bought May $90 COP calls for a quick trade for $0.90. If people are going to take a quick (but possibly short lived move on refiners) Iā€™d rather be there than in the independents.

  118. 118
    zman Says:

    John 11 – that’s what I get, why do you ask? I didn’t botch the math did I?

  119. 119
    john11 Says:

    No I’m sorry i didn’t notice your original post..i was just surprised at how big a number it was..just added more XCO. Thanks for all of your great work, so happy to have joined your site.

  120. 120
    zman Says:

    No, I didn’t botch it, just rounded the shares down instead of up. Shaves a penny.

    $222 million CF from ops (pre changes to working cap) / 104.6 mm shares = $2.12. Inconsequential in light of th $1.77 Wall Street was expecting.

    Hey, no problem to check, did that one kind of rush, rush. Glad to have you here…tell your friends and you can fly free ya know.

  121. 121
    zman Says:

    CLR popping, I see no news.

  122. 122
    Dman Says:

    Z – I like all the charts, especially the dramatic little red circles showing where we are. No really, I do! I’d start a “save the charts” petition if they were going to vanish entirely but I gather they’ll make an every-other-week appearance (?)

    Also I guess if something dramatic caught your eye in a non-charty week you might sneak the relevant chart in anyways…

    …with the little red circle, naturally šŸ™‚

  123. 123
    zman Says:

    ok, but I’m changing the little circles to teal.

  124. 124
    zman Says:

    (COPER) added to the wiki

    DVN taken off although that stock is doing much better now and easily may end the day green.

  125. 125
    ram Says:

    APC has more buying power now. It would be less out of pocket if combo stock and cash.

  126. 126
    uop Says:

    zman;

    have gone the opposite way:
    have bought junCOP PUTS and sold my COP june Calls.

    Good luck.

  127. 127
    zman Says:

    How do you not buy the solar co’s here? NG up 1 to 2% per day. By next summer every utility in the country will have filed rate hike requests and they will get them. People will be scrambling to solarize their homes at a time when the economy may be in recovery mode. Just thinking out loud. I think a solar installer IPO is coming or has come public this week.

  128. 128
    zman Says:

    Uop – I don’t get why you’d short the cheapest name in the group but heh, that’s what makes markets. Good luck to you sir.

  129. 129
    Jay Reynolds Says:

    ENER, established, very good PV MFG (their ads on the Michigan CNBC promos) has their call tomorrow, 10 am EST. Division in UniSolar – no silicon, no toxics. Followed them closely for 8 years, new CEO, may surprise.

  130. 130
    zman Says:

    Thanks JR. May dip a toe privately there.

    XCO call in 10 minutes, stock still getting no love.

    CLR at all time high.

  131. 131
    Garyinhou Says:

    Hey Zman – Re: CLR, is it possible an analyst has made a re-iteration or raised target and it’s not released yet or something like that

  132. 132
    zman Says:

    Gary – yep. My system does not let me see all of them.

  133. 133
    Nicky Says:

    I suppose there is no point asking if there is any news behind today’s rally in energy – as its really not relevant and it would be up anyway.

  134. 134
    zman Says:

    Nicky – I saw no news to prompt a rally, looks technical to me although have not looked at the volume. Nat gas price to the moon in linkage with crude. Amusing how inventories and the dollar don’t seem to matter sometimes when the traders are focused on a round number. What’s bothersome is the stocks will get dropped more than they popped on this move.

  135. 135
    Nicky Says:

    Well every man and his dog must now be long so its potentially very dangerous….

  136. 136
    zman Says:

    XCO call starting now.

    Ya know, I find CNBC much more tolerable with the sound off, especially during Erin segment.

  137. 137
    Garyinhou Says:

    But you’ll miss Pisani’s excitement as he jumps from bandwagon to bandwagon…

  138. 138
    scoop006 Says:

    Cramer says oil and oil stocks are priced to let you buy now.

  139. 139
    zman Says:

    XCO – just said their is a shortage of steel tubulars, pricing going up, see prices rise, saw 1 rise in the last 30 days and expect to see two more prices.

  140. 140
    zman Says:

    Anybody got a good steel mini-mill name?

  141. 141
    Dman Says:

    Alt-energy stock ideas = good

    … are there any that don’t have crazy valuations ??

  142. 142
    Jason Says:

    Re #140 – I have a good friend who works at Nucor (NUE) and says they are pretty much naming their prices. Also have a cousin that works at Steel Dynamics (STLD). They are also working at capacity.

  143. 143
    zman Says:

    Jason – thanks, was just looking at NUE, X, CMC. X has had a big run and I don’t have valuations worked up but when you hear something from one industry over and over and over again it is wise to pay attention. I’ll be taking NUE or X soon.

  144. 144
    js1 Says:

    maybe STLD, i recall they bought a recycler to try and keep input costs down. Also, next to last thing you should do is take invesment recos from me.

  145. 145
    zman Says:

    XCO – saying they are seeing rig rates start to rise everywhere. More reason to own NBR.

  146. 146
    zman Says:

    JS1, no, I appreciate the input and caveat, lol.

  147. 147
    Jay Reynolds Says:

    RE 141 = ENER NiHM batteries, hybrid battery pack & intergrated solutions via Cobasys JV w/ Chevron/Texaco. Far and above most durable PV product, IP portfolio approx 1,400 base technology patents.

    Big sleeper (lots of seemingly disparate efforts but all are linked through company’s having pioneered entirely new field of amorphous materials sciences) is non volatile memory (PRAM), jvs w/ Intel and a host of others.

  148. 148
    reefguy Says:

    MMR- press release on Blackbeard, I bought EXXI common

  149. 149
    ellwodo Says:

    XCO – what am I missing on the call? Sounds great and stock keeps going down.

  150. 150
    zman Says:

    XCO – saying they are very encouraged by Haynesville vertical wells they’ve drilled (declined to give a rate) and said they are adding a rig to do hz wells by mid 08

    Elwo – search me, hearing the same thing. dunno. maybe they wanted a big rate but that’s not going to happen.

  151. 151
    elijahwc Says:

    CLR:
    Deutsche Bank upped target price to $53 and maintained buy

  152. 152
    zman Says:

    Thanks Eli – $53?

  153. 153
    zman Says:

    Think XCO is fading with the broad market and the selling accelerates as people feel like they missed something on the call. I think it will end the week higher but I’m in Junes to be a little safer.

  154. 154
    zman Says:

    XCO – NO EQUITY OFFERING, which management said was a rumor. Equity is not on the table and they are not considering the debt market. Maybe that will lift it.

  155. 155
    Nicky Says:

    Oil finally taking its toll on the broader market – long overdue.

  156. 156
    ram Says:

    ZMAN – Any thoughts to adding to CHK with a pause here?

  157. 157
    Nicky Says:

    CNBC reporting that Exxon have lifted their Force Majeure in Nigeria…that was an hour ago and up it went!

  158. 158
    zman Says:

    I’m not adding but I’ve got a chunk right now between common and calls.

    If I had none I might buy a little here. Of course, it will go down with everything else if the broad market gets thumped due to Nicky.

  159. 159
    zman Says:

    XCO – “there are no 1,500 to 2,000 hp rigs available in Texas. They are all headed to North Louisiana”

  160. 160
    Nicky Says:

    I can’t imagine the energy stocks are falling Z are they – everything else must be though..
    That said I have to say I think we could be very close to an ‘interim’ top – maybe a pop over 124 in the morning that falls shy of 125.
    Even Ms Eppppperson said the headlines were more bearish than bullish and put this down to Goldman.

  161. 161
    Wyoming Says:

    Pipe comments are valid, we doubled our pipe order just in 1 large project and then doubled that again. Adding rigs above initial plan.

  162. 162
    zman Says:

    Afternoon Wyo – think the tube companies like TS are the play there or the steel co’s?

    XCO just said they are sandbagging people on their expected growth this year. At least they’re honest, LOL. Estimates will be going up here.

  163. 163
    Wyoming Says:

    Yes, I was actual thinking about doing the DD on X and TS myself. Sat next to an X guy last fall after a golf thing when it was at $99, never knew it was going to jump this much. Now we are looking at having issues with rigs because we might not get our regular program filled much less an expanded schedule. Thus the double then double.

    Just dipped into HAL. What do you think?

  164. 164
    bill Says:

    all bulkers up

    remember drys low in the 50’s now 95

    egle a good long term name

    nm

    drys

    exm

    buy them all

  165. 165
    zman Says:

    Wyo – I concur. Lots of the tubing comes from mini mill sources steel so I was think NUE. Everybody talking pipe constraints and its not just price but physical lack of pipe.

    HAL – I think from every call I listen the direction for pressure pumping is flat to inching up, everything else onshore service is up. XCO really pounded home the comment on rig rates going up and that is something that other E&Ps have been more cagey about. As long as 125 oil (my guess is tomorrow) does not kill the equity market I think service is becoming more the place than E&P (although E&P is still going to do quite well I think service inflation is going to start sapping momentum).

  166. 166
    reefguy Says:

    Haynesville sisters all being roughed up

  167. 167
    Wyoming Says:

    On pipe, we don’t even talk much about $/ft, just how much to punch in the AFE.

    The main point is the CFPS must be huge for them to march up our programs.

    I thought there might be some Pressure creep on the cost side but it is not. Still a lot of excess capacity in the Barnett. Might see it get pulled away. Frac Tech can burn down more crews and it won’t matter, they can crank out about 12 pumps per month (24k HHP).

    T – I meant to comment that I did not understand floating pipe. I think you might be describing riser pipe. Sea floor to rig floor, drill pipe is run inside it. I believe that would be NOV, not a deepwater guy. FMC and CAM best in show for the WH equipment as I understand.

  168. 168
    Popeye Says:

    DRYS selling off hard.

  169. 169
    zman Says:

    Pop – probably just the market, energy stocks seeing some pretty good profit taking last hour or so too. Mr market not liking this oil price is the best explanation I’ve heard for the broad market sell off. Or maybe its that people are selling equities to buy oil šŸ˜‰

  170. 170
    zman Says:

    Wyo – NOV bought Varco right? Do they have any interesting new rack systems or anything else that can cut drill times further still?

  171. 171
    Wyoming Says:

    Check out the TESCO folks;

    http://www.tescocorp.com/bins/index.asp

    We put one of their casing running systems on an H&P rig in North Africa. Got tired of the US company dropping casing in the hole, anything would have sped up that process.

    They also have casing drilling. Not readily accepted and there are some application issues.

  172. 172
    zman Says:

    I have looked at Tesco. NFX is drilling a Woodford well with their drilling with casing system. You think that has wide applicability, seems like it saves on time and materials.

  173. 173
    Wyoming Says:

    Saves a bunch of time, next paradigm shift since the top drive. Other cost savings items out there for Shale type work:

    WFT has a wet shoe, skips Tubing Conveyed Perforating (TCP), about $25k per well, multiply by 100 wells per year. We run them in the Barnett.

    Another rig time saver is multi-bowl systems. This is a link to CAM’s. There are other mftrs.

    http://www.c-a-m.com/content/products/product_detail.cfm?pid=2772

  174. 174
    T-Tupp Says:

    jay r- do you know what companies are making all this eqiptment for hybrid cars? like the entire modules or the just the batteries and motors ect. i haven’t heard anything but would seem to me like a good growth sub-sector. i like t now with GM rolling out Escalate and Silverado hybrids

  175. 175
    zman Says:

    Thanks Wyo

  176. 176
    T-Tupp Says:

    re tubing- there is a guy in our city (wealthiest man in Windsor , on, canada probably) who inherited a co called atlas tube about 15 to 20 yrs ago from his father. they specialize in this type of tubing along with other types of steel. i don’t know if they are public, buti know they acquired another company down in the states last year to make more tubing.

    canada only has a handful of billionaires ~1-200, and he’s one of them on the back of this stel tube… crazy. wasen’t X trading at like $2 a share way back when? takan out of the dow too?

  177. 177
    T-Tupp Says:

    its like hk & dvn were plugging their ears to the broad markets today…. good relative strength

  178. 178
    Wyoming Says:

    Believe they also owned MRO at one time.

  179. 179
    zman Says:

    Al Gore ties Burma cyclone to global warming. What about the winter we just had Al?

  180. 180
    cadillac Says:

    Looking at Tubing…has anyone investigated WSP Holdings NYSE(WH)?

    I can’t seem to find alot of good data…however, it looks like its a Chinese Tubing Co. with a very low p/e. I have Never traded a Chinese Holding Co…

    It seems to me that with the demand growth in China, this would be a natural. However, if it is so great the price would be a heck of lot higher …something must be holding it back. Does anyone have any insights?

  181. 181
    zman Says:

    Cadillac – those estimates are in USD so it looks like they are trading at about 7x 2009 EPS. Website is http://www.wsphl.com, they announce 1Q next week. They’re expanding production capacity and margins seem to be rising.

  182. 182
    cadillac Says:

    I checked out the website and noticed that it didn’t have any quarterly statements under the IR section that always makes me a little nervous.

    I may throw some funny money at it before next week and take a chance.

  183. 183
    zman Says:

    unfortunately no options on WH but at $7, it almost is an option.

    the press releases are at wsphl.com/etouzi.asp

    the 4Q release is short and pretty sweet

  184. 184
    cadillac Says:

    Yeah, if you can believe it…I am very leary of something that seems to good.

  185. 185
    zman Says:

    Anybody have any other public pipe companies? I only have two, TS and WH.

  186. 186
    T-Tupp Says:

    yea Chinese holding co’s scare me too with all the pseudo capitalism that goes on there

  187. 187
    zman Says:

    T – surely someone makes pipe in Canada

  188. 188
    Wyoming Says:

    #185 MT and X are the others to add to TS and WH

  189. 189
    zman Says:

    thanks and I added AKS. Listened to the TS call replay. Pretty optimistic that things improve from here. According to Pipe Logic, OCTG inventories were at a 5 year low in the U.S. as of the end of 1Q.

  190. 190
    zman Says:

    nevermind, taking aks off, no sign they are in octg

  191. 191
    Wyoming Says:

    Another angle on the steel is on incaloy, nickle and chromium specialty steels. This is used by HAL, BHI etc.. for corrosive environments. Packer, subsurface safety valves. As the plays get more sour, more of this is needed.

  192. 192
    Jay Reynolds Says:

    Tubulars: As a general rule, nothing that we buy locally for the oil patch from China is ready for use, irrespective of their “API Grade” rating.

    Most of the tubulars we get from outside of the US that I see are Hecho en Mexico.

  193. 193
    T-Tupp Says:

    z- re 187, yea i mentioned above. atlas pipe 2,000,000 sqft pipe plant in my city– atlas tube. the guy who lives down the street from me with the 32,000sqft house who is filthy rich, gulfstream g5 rich bastard lol. wanna know something funny z his last name is Zukelman but everyone calls him Z-man too- his race boat has a mural of superman on the full thing with a “z” in the chest instead of a “S”.

    i took this picture in his hanger; check out the every-day driver Mercedes Mclaren SLR in the foreground….

    http://i291.photobucket.com/albums/ll308/T-Tupp/n513900686_520072_7209.jpg

    i don’t think his company(Atlas Tube) is public. they bought another company in alabama last summer maybe they do this type of work. i will see him at the gym in the am and ask about co’s he knows of. what type of pipe are we talking here?

  194. 194
    zman Says:

    Nice rides!

    just ask him about OCTG – oil country tubular goods …I have TS and WH (China) on the strictly tubular side but X is the big player in tubing after an acquistion (Lone Star) last year. NUE and MT are also on the list. These things are all pretty cheap (barely double digit forward multiples ) and they are not expected to grow EPS much …yet. I’m like to take X as the most liquid trader, and maybe a little nibble at the China name (I know, scary) before earnings next week. I’ll have a table and some comments in the post tomorrow. Thanks for your help and thanks to everyone who posted notes and sent emails with stories. Huge help, like having my own staff.

  195. 195
    T-Tupp Says:

    i personally like NUE. they are getting into the recycling business in a major way via recent aquisitions. this business model sounds to me like a margin & multiple expander.

    also too it hasn’t had the ridiculous run-up the X has. lots o’ momo /fastmoney/cratemer money tied up there

  196. 196
    zman Says:

    yep, NUE is up 33% vs 39% for X just YTD. I know scrap prices, the raw material used at minimills, are going bonkers so I’m not sure that margins are expanding although I’ve read they are passing along some surcharges to customers. Someone else said earlier they can name their price and I read something earlier to that effect. X is just bigger in the OCTG market. Thought maybe I’d pick em as they pull back if we get tough broad market tomorrow. Of the list from earlier, only that China name is down (20% ytd).

  197. 197
    texana Says:

    observations: some of these good ol boys need to take some lessons on how to give a conf call, it might be a swan but they make it sound like a duck. this haynesville play has huge amounts of money being thrown at when u starting totaling it all up, at least a billion l,d &c spending. first mover is going to be big, but the real cream is the cos that have the hbp acreage. it will be hard to drill all that leased acreage in 3 years with rig & pipe shortages. the other takeway from the conf calls is that most of the e&p cos are not looking to make acquistions at these prices but grow thru the drill bit. that would not include the majors who usually buy at the top. probably just a rumor but a major from holland is suppose to be looking to acquire a north american e&p co before yearend,from a consultant for this co. most of the cos followed on the board don’t need to be acq to continue share price appreciation. but who doesn’t love the romance of a takeover. congrats looks like your following continues to grow & a lot of good trades. musing t

  198. 198
    zman Says:

    Tex – I concur with your HBP statement. XCO did a good job of pointing that out and the risks of running up a big lease bill and not being able to drill it. I think CHK can get it away with it b/c they will throw rigs at the play like mad while still deriving economies of scale from being the most active operator in N. America. HK I think is a good company with lots of potential but I am cognizant of past spending cycles in E&P where price rallies induced run away capex and service inflation spiraled out of control. Don’t think we are there yet but the signs of some shale mania look a lot like CBM mania of the late 1990s.

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