08
May

Thursday – Gas Preview & Oil Review + Tubular Thoughts and More

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A little change in format today. I'm going to just hit the highlights for the oil review in an effort to reduce your reading load. I knew you'd like that. I plan to alternate between long form and just the salient charts form from week to week from now on. If anyone has a chart that they want to see every week just let me know and I'll include it in a post or send it to you. Thanks ~ Z 

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stocks We Care About Today - Steel stocks (X, NUE, MT, TS, WH); CLR, NFX, 
  4. Odds & Ends - (END)

Holdings Watch: (the Wiki tab is updated)

  • DVN - Sold the June $125 Calls for $4, flat.
  • XCO - Entered the June $25 calls (XCOFE) for $1.65.
  • COP - Entered the May $90 calls (COPER) for $0.90. Then the market decided to tank. Last bid $0.58.

 

Commodity Watch:

Natural Gas: closed up $0.18 to $11.33 as oil rallied to record highs. This morning gas is trading up 5 to 10 cents in anticipation of a smallish injection compared to year ago levels.

  • My Number: 70 Bcf Injection vs a year ago injection of 94 Bcf (milder weather then)
    • Weather: Heating degree days ramped back up last week to 74, roughly double the year ago reading when 96 Bcf were injected into storage.
    • Imports: down 3.4 Bcfgpd relative to the year ago week.

ng-imports-051108.jpg

  • Street Consensus: 62 Bcf injection according to a 15 analyst survey by Bloomberg.
So What About Your UNG Puts? Well, they are next to worthless. If there is no miraculous triple build today in storage (and I would be beyond stunned to see one) I will punt the scraps and sit on the sidelines for a bit. 

Crude Oil: fell briefly after a larger than expected build in crude inventories was reported. This weakness was never pronounced and last about 90 minutes before crude broke higher into record territory closing up $1.69 to $123.53. This is the second week in a row of bigger than expected storage builds (read on) with only a yawn from traders before an upward surge in prices. Obviously sentiment regarding current and feared supply disruptions along with mounting evidence of rising non-US demand is pushing prices higher at present. Traders' sites remain fixed on $125 and then $130. This morning oil is trading flattish.

  • "evidence of rising non-US demand" ???!!!. What evidence? Well, to be fair, most of it is anecdotal but from time to time I can spot a trend in a chart just like the next guy. In this case I'm thinking of diesel demand to produce electricity. The U.S. uses very little oil to generate electricity (maybe 3% in a big year) but that's not the case around the globe. According to Upstream ~ "Tight power supplies in China, South Africa, Chile, Argentina and parts of the Middle East have set off a worldwide boom in demand for diesel for use in electric generators." You can hear this on the conference calls of names like VLO and you can see it in the exports of petroleum products from the U.S. (see a new chart below in the distillates section). There are other examples of rising demand from gasoline in Mexico, India, and China but the numbers are hard to pin down.

The Oil Inventory Review - abridged version.

exp-vs-act-050208.jpg

 

Oil Inventories Trend Watch:

  • gasoline demand remains higher than one would logically think given the nearly 20% increase in pump prices.
  • gasoline production is being augmented to a big degree by blending which is helping to boost prices above where I would think they would be given relatively comfortable gasoline inventory levels.
  • oil itself is well stored on the whole but low at Cushing giving something for NYMEX traders to talk about as prices move higher on technical trading. 

CRUDE OIL: Much bigger than expected build in stocks.

    • Utilization eased from 85.4% to 85%.
    • Imports maintained high volumes for a third straight week at 10.6 mm bopd. This is down about 0.3 mm bopd from last year's levels.
    • crude-imports-050208.jpg

In Summary, Crude Stocks Remain Quite Well Stocked.

crude-stocks-050208.jpg

 

GASOLINE: Smallish build as demand remains lofty, at least given prices.

 

gasoline-demand-050208.jpg

 

gasoline-price-050208.jpg

Gasoline Stocks Are Also Very Well In Hand.

gasoline-stocks-050208.jpg

DISTILLATES: Unexpected drop in diesel stocks.  

dist-imports-vs-exports-050208.jpg

Distillate Stocks: This is the only area where inventories are not more than robust.

dist-stocks-050208.jpg

Stocks We Care About Today Watch:

Steel Going Into The Ground At Record Rates: Just lining up my ducks to make a play here.

Emerging/Converging Trend Watch:

  • 1) Capital budgets rising nearly across the board from E&P land. This is translating into more rigs (higher fleet utilization and in some areas hard to get rigs and high day rates) which is why I hold (NBR). As an aside, on the (XCO) call yesterday, management really pounded home the concept that rig dayrates are up everywhere they look.
  • 2) Tubular goods becoming hard to get in some plays - anecdotal evidence from company 1Q calls is mounting with companies saying not only are prices rising but that pipe is becoming harder to get in some plays and orders are being cut back by suppliers (so the E&P company just ups its order). XCO indicated they just swallowed one OCTG price increase and expect to see two more in the next three months.
  • 3) U.S. oil country tubular goods (OCTG) at 5 year low as of the end of the quarter ~ from the Tenaris (TS) 1Q08 conference call. According to Pipe Logic U.S. pipe prices for a basket of seamless were up 15% in April and are up 22% YTD.
  • 4) According to Purchasingdata.com, order lead times have risen 30% in the last 6 months.
  • 5) Chinese exporters have about 20% of North American OCTG market. Not seeing signs of their imports to the U.S. slowing.  Chinese tubulars typically runs 25% under domestic products and there have been comments about quality, especially in the harsh environment and specialized tubing areas. It's notable that while shipments decline on the whole last year in North America as inventory was depleted except for the Chinese shipments which continued to grow.

The Players: OCTG Suppliers and Traditional Steel Companies

octg-valuation.jpg

Takeaways

  • (TS) - This is the big tubular supplier on the block. They expect 2Q and the rest of the year to pick up. Increasing employee count as demand increases.Costs are rising swiftly as well. They announced earnings yesterday and Citigroup cut them to a hold this morning.
  • (WH) - This is a recently IPO'd Chinese tubular company. They report 1Q08 numbers next week and expanding capacity and have seen high margins in their most recent quarter.
  • While prices are going up so is the cost of making their product. Also, there's a lag between price hikes and that flowing through to high priced pipe going out the door.
  • The steel companies on the above table have shot higher this year with metals prices. (MT) appears to be the bargain in the group but as they say "it may be cheap for a reason" and in the case of leverage to rising OCTG prices it probably has the least leverage given its size. (X) is the overall market share leader in OCTG

CLR - Post Call  Update: Street Taking Number Up. On Monday I was saying that numbers would have to come up here. Here's my note for reference. At the bottom you can see my back of the envelope model has CFPS in 2009 running a dollar high to the Street which on Monday was at $5.09. I wrote that this was conservative. A friend of the site sent me a RJ notes in which they take their '09 CFPS estimate for (CLR) from $5.49 to $7.12. As of last night the Street had taken numbers up to $5.80 which will no doubt continue to climb as more estimates come in over the $6 (and in some cases $7) mark. The next big thing here will be the Three Fork Sanish (TFS) well which is currently completing. Raymond James notes that private operater Petro-hunt has drilled the best well to date in the Bakken and that it is a TFS well near CLR's acreage. Given their strong double digit growth and potential for upside to current estimates the stock is not anything like expensive at 7.3x an '09 CFPS estimate of $7.

NFX - JV With XOM Announced Yesterday. Nobody really noticed as it was a pretty red day but NFX signed a 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.. On their conference call, Newfield indicated they had a string of projects they were going to be able to talk about soon. This was the first. Mancos shale tests in the next few weeks to months could be the next.  

Odds & Ends

Analyst Watch: (TS) cut by Citigroup to hold, (EGLE) cut to hold by BS, (RIG) cut to hold at Stifel

(END) Reports 1Q08 Resuts

  • EPS of ($0.02) (after excluding items) vs $0.03 expected, - there are only 2 analysts covering them at present
  • CFPS of $0.23 vs $0.20 exp,
  • Revenue of $61.3 mm vs $66 exp. Oil liftings were weak in the quarter and will play catch up in 2Q so this really is not a miss.
  • Production was strong at 10,128 bopd, up 4% from 9,767 in 1Q07 and up 24% sequentially

Guidance remains unchanged for volumes at 8,600 to 9,000 bopd in 2008.

Hard to get excited about the guidance despite or maybe I should say in light of the 1Q volumes. Development operations continue to go well but the stock is a grinder until they start drilling successful exploratory wells (maybe the Norwegian Sea will be better for them than the North Sea. Confernece call is at 10 EST. I'll have more to say after the call.

(RAIL) to take charge on employee arbitration ruling. They  see a hit to 1Q earnings of $1.11 to $1.32. This is worth watching, especially if it pummels the shares. 

 

178 Responses to “Thursday – Gas Preview & Oil Review + Tubular Thoughts and More”

  1. 1
    Sambone Says:

    6:30 am EST

    ICE Brent Crude Climbs To New High $122.79/Bbl

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — ICE Brent crude futures peeped a cent above their previous $122.78 record high in London trade Thursday.

    Crude prices remain shored up by a continuing bullish technical outlook, an abatement of earlier U.S. dollar strengthening and ongoing concerns about global crude supply/demand balances.

    “It seems difficult to argue with the bulls who remain focused on the prospect of strong emerging market demand growth, while supply growth remains increasingly uncertain,” said Michael Davies, head of research at Sucden in London.

    At 1009 GMT, the front-month June Brent contract on London’s ICE futures exchange was up 33 cents at $122.65 a barrel, just off the new high of $122.79 a barrel.

    The front-month June light, sweet, crude contract on the New York Mercantile Exchange was trading 13 cents higher at $123.66 a barrel.

    The ICE’s gasoil contract for May delivery was up $29 at $1,152.50 a metric ton, while Nymex gasoline for June delivery was up 53 points at 312.35 cents a gallon.

    —By Nick Heath; Dow Jones Newswires

  2. 2
    zman Says:

    there’s more of that anecdotal evidence regarding emerging market demand. pretty hard to measure but as the guy in Sam’s article say, “difficult to argue with”

    RIG getting dropped pre mkt on that downgrade.

  3. 3
    zman Says:

    PBR split 2 for 1

    Anybody see an analyst comment on PQ since the 1Q results. Ditto request on HK? Thanks.

  4. 4
    tater Says:

    Absolutely love the steel discussion. Was going to send the purchasing.com article but you are all over everything as usual.

    http://www.purchasing.com/article/CA6320310.html

    Quick read of TS results, two questions. You think it has problems with bottom line due to overly strong euro, so investment decision vs. X is a $US dollar analysis? And what should I get out of TS saying Canada drilling is still down 5% YOY? Or did SLB cover that in depth and I need to re-read call?

    http://www.tenaris.com/media/pr/prFiles/1838.pdf

  5. 5
    Sambone Says:

    PQ – FBR yesterday raised target to 27.50 from 20. Nothing on HK on my radar.

  6. 6
    zman Says:

    Tater – someone sent me that purchasing article but thanks. The Canadian thing is expected and actually better than people thought at the beginning of the year. An upturn there and names like PDS get very interesting.

    I’m thinking of putting a little $ to work in the common of that Chinese tube player WH. I mean a little too as those things can be like playing roulette despite high EPS estimates. I’m hearing people are accepting less grades of pipe just to get pipe and that means more demand for Chinese OCTG.

  7. 7
    zman Says:

    Tater – I thought TS statements on their call were a bit of a mixed bag with the price increases for tubes not flowing through for a couple of quarters due to contract pricing while they are getting hit on steel costs. I guess the Citi analyst thought it had run enough too. Ultimately the best play, at least on the options side may be X….big run there and have not yet checked to see what kind of leverage their OCTG segment has on total company earnings.

  8. 8
    isleworth Says:

    Pioneer Natural upgraded to Strong buy from Outperform at Raymond James

  9. 9
    tater Says:

    Too much shrinkage on my part for the WH. I think I’ll wait for the usual ebb and flow in the daily market and look for a pullback in X. Good luck today

  10. 10
    zman Says:

    Isle – thanks, FBR took their pt up there too.

    MMR, one of reef’s favorites, looks to be breaking out here. They are re-drilling a big well (Blackbeard) which is putting upward pressure on them EXXI and TISDZ.

  11. 11
    uop Says:

    ZMAN:
    YOU GAMBLER,

    wh HAS SO LITTLE VOLUME.

    of course, with all your gains you can take a chance.

    good luck.

  12. 12
    zman Says:

    Uop – for shame. Gains should not lead to excessive risk taking. Thanks but I have not made up my mind yet on pipes to play or not to play. Still working on the thesis as I am a bit slow sometimes.

    NBR moving on up

    HK in the green

    Reading the GDP transcript from their call, interesting but no data point worth noting in the Haynesville.

    ENER = WOW. Should have listened to the man on that one.

  13. 13
    scoop006 Says:

    Z At what price does TSO become attractive to buy the common to put away for a long term hold

  14. 14
    tater Says:

    Trading help. Pretty much everything that I like has had a good run and I don’t short good companies individually, I’d rather short a sector or index. As OIH is weighted so heavily to just a couple of names, are you aware of a more evenly distributed ETF for the E&P or services?

  15. 15
    zman Says:

    Getting on the END 1Q Call

    Anybody see any analyst comments on PQ?

  16. 16
    zman Says:

    Scoop – in the bad times these things can go single digits. It may be awhile. Lots of smart people have tried to call a bottom with no luck so I guess it depends on your time horizon. I have not done any asset valuation work but at some point, there’s a floor provided by that.

    Tater – XNG for E&P is I think more evenly weighted, OIH is horribly skewed to three names. Let me listen to this call and then I’ll have more.

  17. 17
    zman Says:

    Tater – but again, I think a transition to oil service (call it a re-weighting) is coming for me with the lightening coming on the E&P side for awhile. Thinking they need to rest a bit, not all of them but some.

  18. 18
    tater Says:

    Thanks

  19. 19
    bill Says:

    tso 120 to 23

    what the hell happened there

  20. 20
    bill Says:

    your cop options are back in the green

  21. 21
    zman Says:

    TSO – there’s a split in there so its really a $60 ish to $23 move. Oil went up more than gasoline. Then they got all proud and put in a poison pill and then the Street gave them the high hat.

  22. 22
    zman Says:

    Bill- I’m in at 0.90 and they are at 77. you must have bought em better than me, good for you. Congrats on the dry bulks. Unreal.

  23. 23
    zman Says:

    HK looks like its going to do a little recovery run. I plan to lose the May calls into as they are bloated and I don’t need the risk of a downgrade. Will milk it today but likely to kill near the close.

  24. 24
    zman Says:

    Bidding some June X calls

  25. 25
    kyleandy Says:

    z= re 23 when u said bloated went looking for one to sell against my stock, but the only one with a premium is the 25’s, and then it’s only about 50 cents. u are far more experienced in these things , do u consider them bloated?

  26. 26
    Dman Says:

    NOV up 6%

    Any clues anyone?

  27. 27
    scoop006 Says:

    Cramer bought for his trust and said its going to $80

  28. 28
    zman Says:

    Ky – I meant my position in that strike was bloated given the time to expiry being 7 days.

    I don’t consider them to be high premium. The bite there could be a significant Merrill / Lehman pump following the deal. I have still not seen a date for the secondary to close

    NG number in 30 seconds

  29. 29
    zman Says:

    END – one question in the Q&A. Yawn.

    65 Bcf – in between me and consensus. Gas down 5 cents at time of report, bouncing.

  30. 30
    zman Says:

    ZTRADE: June $180 X Calls (BXWFP)- US Steel bought for $8. Starting small. See steel discussion in today’s post.

  31. 31
    zman Says:

    CNBC doing a story talking abou the statistical increase in the chance of a hurricane hitting the U.S. coast and citing the Burma cyclone. How Al Gore of them.

  32. 32
    Dman Says:

    Scoop, I just realized your #27 was an answer to #26. Thanx

  33. 33
    kyleandy Says:

    z- -now i understand my stk position also bloated.
    re IOC I’ve sold a lot of may 35 calls against my position. thot it was money in the bank, but now am wondering if they announce a good hit on their well, with the large short position (which must be getting smaller) how high do u think it can go? i feel somebody knows something w/ this good run. maybe REEF has some ideas

  34. 34
    Nicky Says:

    CNBC need to find something else bullish to say about oil – push it up another couple of bucks.

    In the meantime NYMEX have increased the margin requirement for trading crude oil.

  35. 35
    zman Says:

    D – yep, I thought he covered it nicely so I said nada. Thanks Scoop.

    Go HK Go

    Ky – were they to get production test results out it could go to $40+ easily as its make or break. Don’t know if they can get that out by then. Reef would have a better idea on timing.

  36. 36
    uop Says:

    zman;
    wow, your WH is exploding.

  37. 37
    zman Says:

    Morning Nicky – I did not see the margin up req. How much did they up it?? Of course, if its the Chinese it just won’t matter.

  38. 38
    zman Says:

    WH – not mine yet

  39. 39
    zman Says:

    PBR $130 May calls change symbol from PMJEF to PMJEM. I’m about break even on them now.

  40. 40
    Nicky Says:

    61% was all I saw.

  41. 41
    zman Says:

    now I’m back to break even on the COPER

    Offering some May $22.50 HK calls for 3.70 if anyone wants them.

  42. 42
    scoop006 Says:

    COP options in GREEN

  43. 43
    Dman Says:

    Energy sentiment indicator: the latest “Top Ten Most Searched Stocks on TheStreet.com”:

    AAPL APC AUY BWEN FWLT MO NOV NYX POT V

    So 4 energy stocks : APC, BWEN. FWLT (energy infra) & NOV

    Cramu has been thumping BWEN as a wind play.

    Also 2 other commodity stocks (AUY, POT)

    leaving 2 finance & related (V, NYX)

    one lonely tech (AAPL)

    and one merchant-of-death (MO)

    A few weeks ago there was just one energy play (I forget what it was).

    So sentiment is up a little, not surprisingly.

  44. 44
    zman Says:

    TISDZ – wow

  45. 45
    zman Says:

    Dman – I’m doing what I can.

  46. 46
    uop Says:

    zman:

    How did you get to the steel stuff today?

    They are all way up>>>>
    Sorry: you should have told us yesterday (kidding you).

    also: you only sell your HK may because your are DITM and expiration is around the corner,

    but you keep HK for the coming months ?

  47. 47
    zman Says:

    Uop – what do you mean by the first question.

    On HK – yes, exactly right, well put.

  48. 48
    uop Says:

    zman:

    the day steel companies move up strongly,
    you publish a steel report,

    so, i am impressed.

  49. 49
    zman Says:

    Uop – like I said, I’m a little slow, could have done that to better affect on Monday but I was too busy noticing it and not doing anything about it

  50. 50
    zman Says:

    Canceled my 30 contracts of HK 22.50 for sale as none of you wanted it. Stock looks like it may go higher so I’ll just hit the bid closer to the end of the day.

  51. 51
    uop Says:

    zman:

    you are the HK man:
    I still hold jun22.,5 and sep 25,
    HK is almost at 52 week high,

    it might get dragged down with oil behavior to 22.5 again 5/1 price, not long ago).

    What is your thinking:
    is HK good for more positions from jun to dec ?

  52. 52
    scoop006 Says:

    #46 The power of the ZMAN SITE. Actually bought some TS yesterday, not cooperating

  53. 53
    zman Says:

    I see no reason to rush into HK pre deal closing. I still have not seen when they expect the secondary to close.

    Going to be in Austin over Memorial Day, any new restaurants I need to hit.

    Also, we’ll be broadcasting live from IPAA OGIS in San Fransisco in early October from the Palace Hotel…I’m buying at the bar.

  54. 54
    zman Says:

    One exception to HK May call sale today, if they break yesterday’s high of 26.71, I’ll hold out for the morning with part of my position and risk weathering a downgrade.

  55. 55
    uop Says:

    zman:
    what is the HK pre deal closing ?

  56. 56
    zman Says:

    they announced a secondary offering. It has not yet closed. 21 million shares coming to market. Usually it takes a week to 10 days to get the new shares to market. They had an existing mixed shelf already filed so this may be a little quicker.

  57. 57
    zman Says:

    Um, little help here? Would someone with a lehman contact find out if HK is doing a roadshow and when they expect the deal to close. Thanks in advance.

  58. 58
    zman Says:

    what’s suddenly down with crude today?

  59. 59
    zman Says:

    Sign of the times:

    http://www.optionsxpress.com/promos/crudeoil.aspx?intcmp=pro_hpncoil

  60. 60
    ram Says:

    Hopefully it’s not like putting a bull on the cover of TIME mag!

  61. 61
    ram Says:

    ZMAN – Did you ever get info. that could contrib. to PQ weakness?

  62. 62
    zman Says:

    just listening to the last X conf call.

    Ram – could be…

    heating oil advancing, natural gas back in the green. unless crude falls out of bed soon I would imagine that a rally will take it green from down $1.40 at present.

  63. 63
    zman Says:

    Ram – No but now it’s weakness is in line with everything else’s weakness.

  64. 64
    xweto Says:

    Pls update NBR

  65. 65
    zman Says:

    Xweto – how do you mean?

  66. 66
    tater Says:

    Any more thoughts on the increase in the NYMEX margin requirement? Would love to hear more as I have been spewing quite a bit of vitriol about the main driver of this run-up being the ease at which big players can leverage the moves (please nobody start a peak-oil discussion) Want to know if I have to prepare to eat crow.

  67. 67
    ram Says:

    ZMAN – Do you recall the earnings release of ATW?

  68. 68
    zman Says:

    Tater – it’s a factor but not likely a game changer. Same was done at several firms (not the NYMEX) earlier this year in the grains and rice and it didn’t affect their run.

    ATW is tonight I think, call is Friday at 10 cst

  69. 69
    redjack Says:

    interesing reading…
    http://www.khaleejtimes.com/DisplayArticleNew.asp?xfile=data/opinion/2008/May/opinion_May27.xml&section=opinion&col=

  70. 70
    xweto Says:

    Re: NBR June calls – contine hold. Like your X idea, am thinking of using proceeds to buy some X

  71. 71
    md Says:

    At what price does TSO and VLO look attractive considering your lack of appetite for refiners

  72. 72
    zman Says:

    thanks rj – about to read, interesting perspective.

    X – I still hold it, need to lose the Mays soon but not stressed about it. Will continue to hold the Junes and very likely to add longer dated calls. I know it does not move that much but the spreads are fair and the stock is just cheap cheap cheap

    Refiner ? TSO sub $20 and VLO at $45 sounds like interesting but hard to say a price really as it will depend on what cracks are doing.

  73. 73
    Alhambra Says:

    Z – Can you include a quick rundown of Posco (PKX) into the steel analysis? They are the #3 steel supplier in the world, Korean co. There is also an angle that these guys supply the shipyards. I remember reading about some union probs a little while back, which (I believe) led their stock to stay down while the rest of the steel companies took off, but it’s been a while since I did any DD on them.
    http://www.posco.com/homepage/docs/eng/html/company/product/s91e3010010c.html
    Thanks

  74. 74
    zman Says:

    A – will do, the same comments that apply to Chinese pipe apply to pipe from Mex, India, S Koria, at least in the commodity tubulars end of the business. Left them out to get some sleep last night but will add for the morrow.

  75. 75
    uop Says:

    zman:
    #72, X is cheap??

  76. 76
    apbd Says:

    RIG is backing off after the downgrade.
    Is this an opportunity?
    apbd

  77. 77
    zman Says:

    RE: X

    Trading at 12x ’09 EPS when EPS is expected to be flat YoY at present in a rapidly advancing price and volumes environment.

    What I like about them vs the foreign firms is the relative insulation to raw mats prices, the weak dollar, the lack of need to pay dry bulk shipping rates to get the pipe into the burgeoning N. American gas drilling market. The foreign pipe may be cheaper priced but their margins are eroded by the weak dollar, high transportation costs, and a little bit weaker market from places like Saudi Arabia who are seen slowing this year. So X has a bit of a geographical and dollar based advantage. Still building the thesis and listening to X conf calls so going in lightly to start.

  78. 78
    zman Says:

    A – I’m waiting re RIG. They had great earnings and a good call, but its catching some valuation downgrades after a good run. May pull back more.

  79. 79
    tater Says:

    Other than yourself, what company would likely be the first to give news (press release or unusual option action or some other indicator) of the success of a Sanish play? EOG, CLR? Rig movements?

  80. 80
    zman Says:

    PQ going green…that was an odd dip.

    Tater – Other me = that’s funny. I’d have to say CLR. Plan to do some Friday night snooping on the N. Dakota site tonight.

    Group starting to re-green as oil comes off its lows.

  81. 81
    zman Says:

    Re 80 – did not mean to imply a TFS test could be out there yet, just updating activity in the Bakken. I think CLR may be a week or longer away from results on the TFS. Will be looking to see if Petro-hunt has any more TFS data.

  82. 82
    tater Says:

    Thanks. I just figure from the way companies keep talking about it, seems to be the “big secret”, at least for now. Actually fairly exciting if it were to come to fruition.

  83. 83
    zman Says:

    Tater – yep, that the big kahuna out there in the Bakken. Although there is a sleeper play on the Canadian side of the border that may be interesting too. Working on it in my spare time.

  84. 84
    tater Says:

    Ever want me to run your spam campaign, give me a holler 🙂

  85. 85
    zman Says:

    Very tempted to just take a little TISDZ and hold my breath, now up 35% today.

  86. 86
    ram Says:

    What’s the push behind TISDZ?

  87. 87
    Jay Reynolds Says:

    Boy am I kicking myself for not pulling the trigger on ENER calls yesterday. Oh well. Perfect storm for them 25% short.

    Re question yesterday re battery mfg for hybrids, looks like ECD’s battery division is being sold to GM.

  88. 88
    doc Says:

    Are you buying any calls on mmr or wlt?

  89. 89
    Dman Says:

    Z – DVN, NFX both down some. You likey?

  90. 90
    zman Says:

    RE TISDZ. -these are warrants on what could be a huge offshore hydrocarbon acuumulation. MMR drilling very deep (31,000 feet) Gomex shelf test – Blackbeard, its actually a re-entry of a previous dryhole. If I bought it would be pretty much a rank dice roll. EXXI may be a better play on it as I think they have 20% of the well. No options there.

    Doc – I’m not right now but I may take MMR or EXXI or TISDZ. Dice roll.

    WLT – no, I think I missed the move

    Was just chatting with a pretty smart manager re Bakken. Toying with a new name there.

    Dman – Think its just noise in the names, need to part from my May NFX so this is not the action I’m looking for. I’d add to NFX longer if I did not already own it but since I do I’m not. 😉

  91. 91
    Dman Says:

    Z – but no DVN just now. Would the dry hole justify further weakness?

  92. 92
    zman Says:

    Dman – I wouldn’t think it would cause them any more trouble. No one puts that kind of thing into forward estimates any way so the initial reaction might have taken a buck out. Had it been a hit it would like have been up $10. Oil and NG will have more of an influence going forward. It was a good quarter and call, and I could be back in at any time. Just busy chasing other names.

  93. 93
    zman Says:

    Quarreyman could not have been more right with his long call on WLT several months back.

  94. 94
    ram Says:

    ZMAN – Did you mention that BEXP might be a pump and dump stock?

  95. 95
    zman Says:

    BEXP is absolutely the target of a pump and dump artist.

  96. 96
    ram Says:

    TISDZ is still running. Could this be a major discovery?

  97. 97
    uop Says:

    zman:

    i know you only buy options, true ?

    I see NUE at a 52 week high,
    now I like to short it, buy a put or sell acall,

    you think NUE is done ?

  98. 98
    zman Says:

    Ram – if its a commercial hole it would be a major, historic discovery as this play has not been successfully tapped from a shallow water location.

    right now your guess is as good as mine as to whether its successful. yesterday MMR said they were deepening the hole but that they had already found pay. Don’t know if it is commercial quantity so this run is pure spec.

  99. 99
    zman Says:

    Uop – No, I hold common is a few names. See ZEB Stocks tab and add CHK to the list there.

    NUE – I don’t have an opinion. 52 week highs don’t necessarily point out a good short. They are often followed by new 52 week highs.

  100. 100
    Dman Says:

    UOP – things usually are at 52 week highs for a reason. Wouldn’t you need a bit more than that to want to short it?

  101. 101
    zman Says:

    In fact, X is a good case in point as it is doing that now after making two other 52 week highs in the last 3 days. These things are being driven higher by increasing demand, not just for tubulars. They are not expensive. If you are just basing you opinion on technicals that may be , I’m not a good guy with charts.

  102. 102
    zman Says:

    Anybody have a Lehman or Merrill guy they can call about the timing of the HK deal and whether or not the company is doing a road show. The number on the pr is just for a prospectus by mail info line and the email address they gave in the pr bounces.

  103. 103
    irished Says:

    Z
    Have the NFX May 60 which is down 40%.Do you have any gut reaction/thoughts on next few days? Have the June as well.
    Thanks.

  104. 104
    uop Says:

    Dman:
    i believe in reversals when stocks have run up substantially,

    herd mentality on steel can run up things,

  105. 105
    uop Says:

    did not cramer pump steel last night ?

  106. 106
    zman Says:

    Irish – No catalyst between now and expiry that I can reasonably expect to occur. This means it will probably move with the group and my gut is the group moves a little higher in the near term but I’m very close to punting my remaining May’s now and I’m in the May 65s on that one as well as the June so you may see the Mays leave at any time.

  107. 107
    BossmanG Says:

    Z, when do you plan to punt May HAL’s, NBR’s, or PQ’s?

  108. 108
    irished Says:

    As we used to say in the aviation business, X is climbing like a raped ape. Hopefully no offense to anyone. Good call.
    Thanks for NFX info

  109. 109
    Sambone Says:

    Uncle Phil

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

  110. 110
    zman Says:

    hmm, back in the green again on the day. stilling thing oil closes green in the next 20 minutes.

    Boss – most likely before the weekend. NBR probably last to go of that list but any of them could go as they are getting shorter on time than I like and I’m longer than I need to be in May’s.

    Irish – that’s a new one on me. Is that a reference to the end sequence in King Kong? We always said “scaled cat” but I was never a flyboy.

    Left a message with HK re my questions.

  111. 111
    zman Says:

    Ram – RE BEXP – got this from RBC – “lowering our 2008 production profile as they transition portfolio” – basically they are moving into the Bakken and transferring focus away from or at less of it on higher decline rate Gulf Coast. I’ve never been a fan of the company and they were in my favorite former home town. Will have a look with a clean attitude.

  112. 112
    zman Says:

    well what do ya know, oil going green

  113. 113
    irished Says:

    I worked with a very “expressive” group! No King Kong. Believe it was just a beast climbing better than normal. There was an accepted rate of climb and occassionaly a maniac would be “balls to the wall” climbing. Each pilot was unique and some quite “interesting”, although almost all extremely professional. Have lots of stories but you might give up flying. I personally drive the motorhome and only fly across the big ponds.

  114. 114
    zman Says:

    Selling those HK May calls at $4 now partial fill, so far

  115. 115
    zman Says:

    ZTRADE: HK May $22.50s punted for $4 (HKEX) , up 105% since April 29 entry. Still holding my longer dated positions.

  116. 116
    zman Says:

    They are $4 bid now so other sellers can I’m sure do better than I did, stock is ripping towards pre -deal announcement levels.

  117. 117
    kyleandy Says:

    z -good patience on the HK Calls

  118. 118
    zman Says:

    Thank K, I’m more proud of that one than I have been on some recent bigger gains just due to all the trepidation of the past week. Nice to be long the longer dated still too.

  119. 119
    rseidman Says:

    Z: Are you expecting a jump in HAL? When do you plan to sell HALEW?

    Thanks,

    Bob

  120. 120
    apbd Says:

    HAL starting to move now. Oh boy.
    apbd

  121. 121
    zman Says:

    R – I’m going to let that one and NBR simmer a little longer, not expecting a big jump, just a trickle up to new highs. The Mays can go at any time but I don’t see taking out either the HAL or the NBR mays today.

  122. 122
    ram Says:

    TY, TY, TY.

  123. 123
    zman Says:

    I see it A and helps along my NBR which I really thing is the stronger play in terms of sentiment reversal (positive), upward earnings revision momentum (still waiting for confirmation on this but the anecdotal evidence is piling up) – XCO said yesterday they are seeing rig dayrate rallies every where they operate. Three weeks ago you were not hearing that and it does not mean everywhere there are rigs but they are in some hot plays and in those plays rigs are getting tight. Some may argue this is not the case and I’m just passing along what XCO said.

    But the direction on rig rates, especially the powerful rigs you need (1000-1500 and in some cases 2000 hp) to drill down nearly 2 miles and then horizontally half a mile to 5000 feet, is up.

  124. 124
    zman Says:

    good day in Ram-land I trust?

  125. 125
    Nicky Says:

    Err so much for increasing the margin requirements – mind you I don’t know how much notice they have given them.

  126. 126
    ram Says:

    ZMAN – Should the qty of the options of PBR double? If not – carumba!

  127. 127
    zman Says:

    the strike gets cut in half so the quantity doubles, yes

  128. 128
    Sambone Says:

    Oil Firms Focus On Buybacks, Not Renewables

    By ISABEL ORDONEZ
    Of DOW JONES NEWSWIRES

    HOUSTON — The most recent earnings reports from the oil giants show that despite pressures to spend part of their eye-popping profits in alternative-energy projects, oil companies are sticking to their guns by bolstering share-buyback programs and putting off major portfolio diversification.

    As the companies continue to garner plenty of cash from high oil prices, which reached record highs of more than $123 a barrel this week on the New York Mercantile Exchange, they continue to steer their funds to share repurchases and avoid any major jump into unconventional fuels.

    These decisions speak to the industry’s belief that fossil fuels will remain the prominent source of energy in the future and also its uncertainty about the viability of alternative-energy technologies and how companies should reorganize their portfolios.

    “ConocoPhillips favors developing all forms of energy — conventional, renewable and alternative. However, we recognize that even with aggressive implementation of alternative energy, most sources estimate that fossil fuels must still supply two-thirds of world energy in 2030,” said ConocoPhillips (COP) spokesman Bill Tanner. “We cannot attain an alternative-energy future in a few short decades. We must disavow the misconception that alternative sources can quickly and easily assume the energy burden.”

    Jim Grimsley, an executive partner at the management consultant firm Accenture Ltd., said, “Companies have started investing on alternatives, but if they are not sure which technology is going to be the winner, they have to look to other options to get a return on their investment until they know where they want to place their bet.”

    As oil prices doubled in the last three years, oil majors’ profits have skyrocketed, leaving companies in the quandary of what to do with so much cash. Companies have increased their capital investments, but just enough to catch up with cost inflation, restraining themselves from investing more aggressively in conventional oil-and-gas projects as a labor shortage and increasing cost pressures become more acute.

    Investing part of oil companies’ hefty profits in alternative-energy business has emerged as a popular idea among environmentalists, politicians and even shareholders as a way to find innovative solutions to today’s energy and environmental dilemmas. Alternative energy is seen as a way to reduce U.S. dependence on foreign sources of petroleum fuels as well as a potential way to help reduce greenhouse gases.

    Oil companies’ current investment in alternatives is small compared with the billions spent on buying back shares. Among the U.S. oil giants, the trend has been most pronounced with Exxon Mobil Corp. (XOM), which has said current alternative-energy technologies aren’t viable. The world’s largest nongovernment-controlled oil company by market capitalization has bolstered its share-buyback program by $1 billion a quarter and is on track to spend $24 billion this year on its own shares.

    Exxon also increased its capital expenditure by more than 25% this year to $25 billion to $30 billion, with the majority of the money going to produce crude oil, natural gas, chemicals and gasoline.

    Exxon spokesman Alan Jeffers said the company is investing in alternative-energy and low-emission technologies by supporting “in-house” technology development and supporting research at leading universities. He said the company bolstered its share-buyback program because it was the most appropriate way to distribute available cash to stakeholders.

    Companies generally buy their own shares when they consider their stock to be undervalued.

    Chevron Plans Buyback Of Up To $15B
    Smaller peers Chevron Crop. (CVX) and ConocoPhillips have made bigger commitments than Exxon toward investing in renewable fuels; however, they are investing much more in buying back their own shares.

    While Chevron said last year it will spend up to $15 billion in share buybacks over the next three years, the company will invest $2.5 billion from 2007 to 2009 in renewable-energy projects and energy-efficiency services.

    “We are investing aggressively in new energy projects to boost production, and we are looking for researching opportunities,” said Chevron spokesman Kurt Glaubitz.

    ConocoPhillips Chief Executive Jim Mulva said two weeks ago that if the Houston company finds itself with extra cash at the end of the year, it will likely increase its share-repurchase program rather than bolster its project investment. Mulva said in March, however, that ConocoPhillips, the third-largest U.S. oil company by market value, could spend up to $3 billion acquiring a non-corn-based ethanol business. He said any larger acquisitions were unlikely.

    Among alternative fuels, biofuels have sparked the biggest interest from major oil companies. ConocoPhillips and Tyson Foods Inc. (TSN) announced last year they are teaming up to produce and market biodiesel made from the fat of pigs and poultry. ConocoPhillips said it will invest about $100 million in the deal. The company is also working to develop biofuels from agricultural waste and funding university research into the next generation of renewable fuels, like cellulosic ethanol.

    Some see the oil industry’s cautious approach to alternative energy as a way to preserve shareholders’ interests.

    “We believe management should be applauded for avoiding “feel-good” strategies like biofuels, where long-term benefits to shareholders and the environment are highly questionable,” Goldman Sachs analyst Arjun Murti said in a recent note to clients. “We would not view positively Exxon meaningfully increasing its exposure to “alternative energy,” simply to appease critics.”

    Also, given the early stage of alternative-energy development, some are uncertain about the oil companies’ role in the renewable business.

    “My honest opinion is that none of these companies is going to be the one to figure out what the alternative-energy solution is,” said Phil Weiss, an analyst at Argus Research, in New York. “If you read about innovation, historically, the companies who were the leaders in their industry are not the leaders when their industry has a massive change.”

    Weiss added that leading companies have to spend so much time protecting their “turf” that it is difficult for them to take the time and risk required to come up with the next solution.

    That leaves big oil companies trying to understand how their portfolios should look in the future.

    “Their assumptions about what percentage of energy will be coming from wind, what percentage will be coming from biofuels, nuclear and solar will define how and where they pace their investments,” said Grimsley of Accenture. “We are seeing companies trying to figure out what their strategy is going to be.”

    (Isabel Ordonez covers the U.S.-based integrated oil and gas companies for Dow Jones Newswires.)

    —By Isabel Ordonez, Dow Jones Newswires

  129. 129
    Nicky Says:

    Just turned on CNBC to see they are focusing on energy all day with lots of different segments. This will probably turn out to be a good contrarian indicator. We haven’t seen our blow off spike but this may be the start of it into the close today.

  130. 130
    Nicky Says:

    BTW Trichet was again hawkish on inflation today which only served the purpose of further fuelling the commodity rally. Another missed opportunity….

  131. 131
    zman Says:

    Sam – thanks for posting 128. I cannot tell you how much the attitude that anyone but the oil companies should decide what to do with the oil company’s profits angers me. It is galling and it smacks of socialism. Why don’t we demand that the car companies invent teleportation. Or that Microsoft, who has margins roughly 4 times those of Exxon find a way to unplug people from the PC or give up a huge chunk of those profits. BP, CVX, COP, XOM have all made great strides in alternative energy and in developing hard to access reserves. What about an Ipod tax, they make lots of cash, some might say unreasonable levels of cash. Want to know how to reduce or dependence on foreign oil? Limit the primary season to a week long series of teleconferences.

  132. 132
    zman Says:

    Refiners circling the drain, even FTO which had a good quarter

  133. 133
    sane Says:

    I find it ironic that we are acting like the socialists. Tax the crap out of everyone ( we disguise the tax as inflation ) to bail out those who made stupid descisions. Tell certian industries what they can and cannot do ( i.e. drill here but not here even though there is oil here ) and tax the crap out of them when they make money. Congress should pull up the balance shee of some of these oil companies back from the late 80’s to early 90’s, because they were making so so so much money then.

  134. 134
    zman Says:

    1998: $12 oil, massive oil service layoffs. Congress could have care less.

  135. 135
    zman Says:

    Stepping out for 30 minutes, back before the close.

    Go COP Go

  136. 136
    tomdavis12 Says:

    HK secondary tonight Lehman & Merrill

  137. 137
    Nicky Says:

    Crude just did a 40 point move over 124

  138. 138
    Nicky Says:

    now at 124.21

  139. 139
    Nicky Says:

    and the broader market sells off….

  140. 140
    sane Says:

    It annoys the hell out of me when these knuckleheads on the hill act like they are experts on everything ( energy, computers, etc…. ). 90% of those on the hill are lawyers and lib art majors. Talk is all they know and talk is cheap. I find it funny that they are telling companies what to do with their money, yet the gov can’t be responsible with their own money.
    Maybe if the government is so concierned with the “energy problem” they should have taken that $3T they have spent in Iraq and invested it alt energy. Talk about calling the kettle black.

    Sorry for the rant.

  141. 141
    isleworth Says:

    Z- amazing we haven’t seen any numbers increase or upgrades on PQ with the exception of the price chg to $27.50 by FBR. Looks like a great opportunity to back up the truck.

    Have you seen any other analyst changes on PQ?

  142. 142
    Popeye Says:

    Lots of news articles dated today that HK increased Haynesville holdings from unnamed companies to 70K acres.

  143. 143
    uop Says:

    OIL (petroleum):

    what live charts can I watch ?

    anybody knows ??

    Txs

  144. 144
    Jason Says:

    uop – Here’s what I look at
    http://nymexdatardc.cme.com/index.html

  145. 145
    uop Says:

    Jason:

    no charts ?

  146. 146
    apbd Says:

    Sane: Rants are good. I agree with everything you said. I used to live in MA where we sent ouir best and brightest to Congress: Frank, Kennedy, Kerry, Markey, etc. The sun is setting on the USA and rising on Asia.
    apbd

  147. 147
    uop Says:

    jason: I mean curves

  148. 148
    Nicky Says:

    Uop – here’s another one

    http://www.livecharts.co.uk/MarketCharts/crude.php

    If you click the options button you can get different time frames.

  149. 149
    apbd Says:

    Z: Great call on the ” X ” factor.
    apbd

  150. 150
    uop Says:

    nicky: txs, that is what i need,

  151. 151
    Nicky Says:

    Broader market rally looked corrective this morning. Looks like lower lows ahead. Next cycle low is due 12th May plus or minus a day.

    Interestingly rbob has a cycle high due on the 12th May.

  152. 152
    zman Says:

    Tom – thanks – sounds almost like a PIPE deal given the speed involved. It will be intersting to see what glowing note Merrill writes about them in the morning…surely they won’t keep the “heavy discount on their Haynesville acreage comment”

  153. 153
    Sambone Says:

    Anybody know anything about FTO?

  154. 154
    Sambone Says:

    3:28 pm EST

    Nymex Crude Settles At Record On Distillates

    BY GREGORY MEYER
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures eked out a new record Thursday, bolstered by strength in heating oil.

    Light, sweet crude for June delivery settled 16 cents, or 0.1%, higher at $123.69 a barrel on the New York Mercantile Exchange, later rising to a record intraday high of $124.40. Brent crude on the ICE futures exchange closed up 62 cents at $122.94 a barrel.

    Front-month June heating oil futures jumped 6.25 cents, or 1.8%, to settle at an all-time high $3.5098 a gallon.

    U.S. distillate stockpiles, which include heating oil and diesel, last week fell by a surprise 100,000 barrels. Heating oil prices soared as buyers sought distillates ahead the South American winter, traders said.

    “What you’re seeing is a real global competition for the middle distillate barrel,” said Andy Lebow, senior vice president for energy at brokerage MF Global in New York. “That is really what’s behind this strong rally we’ve seen in heating oil.”

    With buying sentiment strong, some traders now see crude pushing higher in the near future.

    “It just seems like from a technical standpoint, we’re going right to $125,” said Bob Haberkorn, senior market strategist at brokerage Lind-Waldock in Chicago. “I think we will sell off right from there.”

    Oil’s record run has fueled inflation fears around the globe. In remarks Thursday, John Lipsky, first deputy managing director of the International Monetary Fund, said accelerating inflation “creates potentially significant challenges to economic stability that could undermine prospects for restoring the combination of solid growth and low inflation that prevailed earlier in this decade.”

    To help restore a balance between supply and demand in oil markets, governments should allow the rise in prices to pass through to the local economy to bring about the “inevitable demand response” and encourage conservation, he said. On the supply side, he said, oil producers should foster investment.

    The group that supplies 42% of the world’s crude reiterated its view that the oil market is not suffering a shortage. The Organization of Petroleum Exporting Countries said it has no plans to increase output despite consuming nations’ call for more.

    “There is clearly no shortage of oil in the market,” OPEC Secretary General Abdalla Salem El-Badri said in a statement. El-Badri said the group, “stands ready to act if the market shows a need for any further measures.”

    Separately, Saudi Arabia’s state-run shipper Vela International Marine Ltd. has booked six crude oil tankers for export to the U.S. Gulf Coast spot market, people familiar with the situation said Thursday.

    “It’s a little bit of supply relief,” Lebow said. “Is it going to change the trend? No.”

    Front-month June reformulated gasoline blendstock, or RBOB, rose 1.96 cents, or 0.6%, to $3.1378 a gallon, a record.

    —By Gregory Meyer, Dow Jones Newswires

  155. 155
    zman Says:

    Sam – yes, good quarter, good refiner, tiny in the big scheme of things, but well positioned and making money even in this environment unlike many of their peers.

  156. 156
    Nicky Says:

    Actually cyle high is due in rbob on the 11th so it should come on either the 9th or 12th. We are into the target areas too.

  157. 157
    zman Says:

    EOG at all time high. Nice. Bakken, bakken, bakken.

    HAL really moving now.
    NBR at all time high

    Oil up $1.03 now. Anyone smell smoke?

    X – aw, just got lucky on that one.

  158. 158
    zman Says:

    PQ – I have not seen any upgrades, numbers must be coming up though.

    I’m buying more July calls now. ZTRADE: July PQ $25 for 1.10

  159. 159
    zman Says:

    sorry for the late trade but its not moving with the group and should be moving better than the group. I’ll punch out of the May’s tomorrow or early next week.

  160. 160
    zman Says:

    COP just jamiing higher into the close. , nice day.

  161. 161
    tater Says:

    Z, if you are still around, companies like NOG and UTS that have a biz plan of getting their hands on leases and then selling off the opportunity to be a partner, in your experience do these seem to pay off for the shareholders, or are you more comfortable with plans like CLR where they are usually the operator. Just trying to get a grasp on liquidity troubles that seem to still be around and whether that can crush a company that just sits and waits. Not looking for company analysis, more of a comment on biz plans if you have an opinion.

  162. 162
    texana Says:

    acoording to rmoj the #1 producing oil well in nd is petro-hunt horiz usa #2d-3-1h sw-se 2-153-95w mckenzie co in the charleson field . it prod 29,149 bo & 36.2 mmcfg during the month of feb. comp in 10-06 this well has com over 407,000 bo & 501 mmcfg. i believe this is ne of clr’s test. as u know u can go to the nd site & pull up the field on the map. this does show to be a bakken producer

  163. 163
    zman Says:

    Thanks Texana – that was the well RJ was talking about.

    Check out SWN bumping capex and production guidance. That has positive implications for CHK, HK, PQ, and even tiny little Storm Cat Energy. In the 1Q reports we saw a lot of “reaffirmations of 2008” guidance with some names like XCO blatantly winking and nodding to analysts about increasing guidance to come on their calls. This may set off the wave over the next 1 to 2 months of resource play focused gas players announcing increases to guidance.

  164. 164
    doc Says:

    I bought x for 173 and sold june 180 covered call for 9.37

  165. 165
    zman Says:

    Nice Doc. I’ll sell you my calls when you need to buy it back, lol. Good luck.

  166. 166
    Jay Reynolds Says:

    HS moving North in Caddo Parish.

    $5,000/ac for land between Hwy 1 and 71 (Crawford Road).

  167. 167
    zman Says:

    Thanks Jay – that’s going to give some folks a pretty nice retirement. Drove through that area awhile back. Pretty low rent.

  168. 168
    Jay Reynolds Says:

    There’s going to be some major litigation as to what HS is HBP in some areas but worse case is GOOD for producers. If they take the stand that the old lease is good (ie, defining the CV as including all down to the Smackover, ie including the various shales series below the previously productive CV sands) then their NRI is probably going to be higher through a farmin…

    If they have a top lease, hedging the resolution of the CV definition, it’s payable later at probably at lower cost from the landowner than if there was not this confusion.

    In any case, if there is confusion, drilling will go on unabated and any disputed funds to the farm-inee (is that a word) or lessor will carry a lower acquisition cost than if that confusion had not existed.

    I’d expect to see some demand letters go out too under Title 31 covenants for further development but have not yet seen those yet, only if a purported leasehold owner is not quick enough to drill…. Bubba is not gonna take it too well if his neighbor is raking in high five figures a month while his acreage is going undrilled.

    I was leasing in Springhill in the 80’s when Crystal Oil Co busted open a lot of Hunt and Placid’s acreage in the Pettit… know how it goes. Had 13 rigs running in the city limits of a small town at one point.

    (Just trying to be as salient as Wyoming at this point)

    JR

  169. 169
    Wyoming Says:

    I like the hammer and wrench end of the business, people in suits are better at the legal stuff. I would say one thing…Pugh clause.
    http://www.landmen.net/ClausesForms/ClausesForms.htm

  170. 170
    Jay Reynolds Says:

    Oh they’ve had Pugh Clauses, both vertical and horizontal. The twist is going to come down to the interpretation of the VPC’s that have relied on a “term of the time” such as “to the base of the CV” at a time when that was commonly understood to mean to the base of the productive CV sands. Thing is, nowadays it could pay handsomely to argue that the CV “series” extends well below the CV Sands to the top of the Smackover.

    Language matures with experience. Won’t have much impact, if any to a producer, the folks holding the marginal HBP CV plays. Ie, the potential payoff to litigation I can see is to the prospective lessor who argue that their HS acreage is not HBP. An then it really won’t matter. The acreage will be drilled, the disputed sums will be escrowed/suspensed and the fact that the language is in dispute will be used to reduce “what if” lease bonus payments to prospective lessors.

    Overall, winners will be CHK and their ilk who can top lease and/or benefit from class action litigation to clarify the situation.

  171. 171
    zman Says:

    Tater – give me some time to thin that one through.

  172. 172
    zman Says:

    Oil up $1 to 124.70 tonight in Asia. – the news is calling it computer-generated buying on light volume

  173. 173
    zman Says:

    Heating oil is up a dime or almost 3%, buying frenzy underway, this could be your blowout top Nicky.

    I will be quick to take profits if the group gets a pop at open which may be short lived as I have to this $2 up on oil has to whack the market.

  174. 174
    zman Says:

    need to take a look at UPL, see it on CNBC as part of the JEF top 10 picks and I like that analyst group. Probably take another look there over the weekend.

    SD call gong very well.

  175. 175
    zman Says:

    thanks G

    I’ll be out of the office for an hour starting at 10 EST.

  176. 176
    zman Says:

    SD – into Q&A now, not going to add today, lots of moving pieces and possibly an equity deal next year. Very good results but it is already pretty richly valued and I was planning to do a little more homework pre call than I got done.

    Crude slapping the broad market along with AIG.

    The volatility in many of the names is unreal , tells me more crowd or hot money than every in here.

    Irish – nothing fresh, am watching but I’d bet it moves high as the H word gets dropped more and more as we head towards June.

  177. 177
    zman Says:

    Thanks for the input Eli: he reminds me that the tout on BEXP is Tobin Smith from Changewave.

  178. 178
    zman Says:

    natural gas will likely reverse when oil does. I see no reason to try to pick a top in the name with people exploring the out limits on crude prices. Near term neg catalyst would be the restart of Independence hub which will bump domestic production about 2% but NG is going for $16 in Europe and higher in Japan which is keeping LNG away from US shores. Also, you’ve got a continuous cover and reshort going on in gas and we are headed into hurricane season which will provide supportive sentiment.

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