27
May

Welcome Back Tuesday

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Welcome back for a short week. The analysts mostly slept in and its a slow news day. Government data is set back a day for oil to Thursday at 1 pm EST. Gas inventory data is apparently to be released at its regularly scheduled 9:30 EST time slot on Thursday.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stocks We Care About Today Watch
  4. Odds & Ends

Holdings Watch: Holdings Wiki Tab is updated.

Commodity Watch:

  • Crude Oil: July crude closed up 4.9% last week to $132.19. After trading up as much as a buck plus in the overnight session, oil is trading off just over a dollar this morning. Crude has had a monster run a pullback into at least the mid $120s is probably due if for no other reason than profit protection.
  • Saudi Aramco Reserves Tread Oil: 2007 results show deliveries fell 5.6% from 2006 levels due to OPEC quota cuts. The Kingdom discovered two new finds, allow it to keep reserves unchanged at 259.9 billion barrels in 2007. For those of you keeping score, using 2007 average production levels of 8.5 mm bopd that works out to an R/P ratio of about 84 years.
  • Cantarell Production Falls Again. Production from Mexico's largest field fell in April to 1.074 million bopd from 1.113 mm bopd in March, a far cry the 2 million barrels of oil per day produced as recently as 2004. Production from newer fields was not enough to replace the slip at Cantarell resulting in Pemex missing its 3 mm bopd monthly production target for a 7th straight month.
  • OPEC Headline Watch: OPEC president Chakib Khelil said "we are going to witness a price rise" unless the dollar strengthens. He added that if OPEC raises output "these hikes will not really lower the price."
  • Nigeria Watch: MEND blew up one of Shell's oil pipelines in the Nigerian Delta early Monday morning near the Awoba pumping station. Shell confirmed some oil leaked from the Nembe Creek pipeline with supplies crude to the Bonny export terminal. Shell confirmed it has shut in some production to help contain the leak. 
  • Natural Gas: July natural gas closed up 6.4% last week to $11.98. The June contract expires tomorrow and July natural gas is trading up $0.14 this morning to just over $12 per Mcf.
  • Weather Starting to Warm Up - heating degree days came in spot on with expectations for last week at 50. Cooling degree days are starting to mount and were higher than normal and the year ago week last week. 

Stocks We Care About Today Watch:

 

Rumor Watch: CEO Possibly Hunting Talisman. TLM has long suffered a discount to its U.S. E&P counterparts and CNOOC, (CEO), may be looking to change that. Even after its recent run, Talisman trades at 4.6x 2009 CFPS estimates, pretty light for the third largest producer in Canada and with the assets they now possess in southeast Asia.

Odds & Ends

Analyst Watch: (NFX) raised to Buy at Keybanc with a $77 price target, (FTI) cut to market perform at Raymond James

78 Responses to “Welcome Back Tuesday”

  1. 1
    Nicky Says:

    Morning all. Oil down sharply now – any news?

  2. 2
    zman Says:

    Crude falling like a stone now. Looks like one of those days where it either holds at round number supports $131, $130, $129 or it doesn’t and immediately falls to the next round number. Didn’t see a particular reason for the reversal from last night’s gains and most of the news out of the weekend would be considered short to long term bullish.

    Morning Nicky, Merrill out with a $150 oil price target, did not see the time horizon on that but that said recent price spike was completely a distillate related issue and not an oil supply issue.

  3. 3
    kiaora Says:

    Nicky–Am looking at my SPY weekly. With last weeks bearish engulfing, does this look like the end of leg two?

  4. 4
    reefguy Says:

    sd behaving

  5. 5
    zman Says:

    SD up a buck at the open in a mostly red energy space.

  6. 6
    Brian Smith Says:

    It’s not only energy involved in the sell off. Gold and silver got nailed also when the equity markets opened at 9:30. Kind of makes you wonder sometimes.

  7. 7
    zman Says:

    CNBC is blaming a rally in the dollar. When I pull up the dollar index I frankly don’t see it. This is commodity profit taking and it is pretty well contained.

    Bottom fishing in CHK is starting to occur.

  8. 8
    reefguy Says:

    z- I am holding SD July 55, at your prompt..

  9. 9
    zman Says:

    SD up nearly $2, anybody see a broker note?

    Reef – up about 30% since last week on SD, I’m in the July’s and will hold for a bit longer but this move is faster than expected. Those low CO2 east of Pinon w. Tx overthrust wells are getting people excited.

    CLR starting to bounce as well.

  10. 10
    Brian Smith Says:

    I try to keep an eye on the currencies, precious metals, as well as energy. One day last week, I posted a link for realtime quotes on currency, precious metals and Brent crude. I posted it after the market had closed, so maybe most did not see it. FWIW, here it is again:

    http://www.netdania.com/quotelist.asp

    Because this site streams realtime quotes 24 hr a day from markets around the world, the column titled “Change” does not represent the change from the previous day’s trading in the US. I think it represents the change based on some arbitrarily determined time, like midnight GMT. Nonetheless, I find the quotes very helpful in seeing relationships within the markets covered.

  11. 11
    john11 Says:

    Re SD…Barrons online had a nice blurb 5/24, on insider buying in SD and their growth rate going forward.

  12. 12
    isleworth Says:

    SD is up due to Barron’s piece on Tom Ward recent big insider purchases

  13. 13
    zman Says:

    Thanks John and Isle, that’s likely it…it rose on the same at the tail of last week and its amazing how inefficient moves become during vacation season. They need to run the same article on CHK where the insider buying has been and will continue to be much bigger.

    CLR is in that insider buying by Oklahoman’s camp too.

  14. 14
    zman Says:

    X continues to fall – I said I didn’t like how it was trading in the mid $180s and punted. Now at $167 I’m waiting for the chart to grab support. If it fails $165 another $10 drop may be in the offing.

  15. 15
    uop Says:

    zman:

    where is a chart of US gasoline demand ?

  16. 16
    zman Says:

    Morning Uop:

    From last Thursday’s post, about half way down:

    http://zmansenergybrain.com/2008/05/22/thursday-gas-preview-oil-review-5/

  17. 17
    zman Says:

    Merrill took price targets on SLB up to $130 from $110 and raised BHI to Buy with a $110 target. Muted response on a red day.

    I’ll probably buy back the SLB for a third time in a month (wild trader there) and a little BHI for the first time in a long time as it will benefit from the same improving drilling trends in North America I keep harping about for NBR and HAL.

  18. 18
    kiaora Says:

    Z- EOG starting to look good??

  19. 19
    zman Says:

    K – Re EOG – no reason not to own it other than a full mid-cap E&P plate. It has had a nice pull back but so have all of the big caps: APA, DVN, EOG, CHK, XTO … everything but APC which I still like quite a bit even up here. But the EOG will move faster than any of those names but APA in a group recovery, especially if oil is moving back towards recent highs at 135.

  20. 20
    zman Says:

    ZTRADE: Bought the SLB July $105 calls (SDBGA) for $4.40 on a Merrill upgrade. We’ve been in and out of this name successfully a couple of times in the last month both pre and post earnings and the stock after much gyration is little changed since the day after earnings. The thesis here is right in line with the pick up in North American drilling activity.

  21. 21
    scoop006 Says:

    Cramer just sold 1/2 his COP position = 500 shares for an 18% gain. Says it’s prudent to book profits in this market.

  22. 22
    zman Says:

    Thanks Scoop. It’s had a very good run and I’d consider another shot at it, all other things being equal, in the mid $80s.

    Nice to see HAL reverse reverse sharp at the open losses in a weak energy market.

  23. 23
    reefguy Says:

    MMR reversing course

  24. 24
    BossmanG Says:

    Z, whats your feeling/thought on OII?
    Thanks.

  25. 25
    zman Says:

    Analysts are writing news out on MMR in the next 2 weeks.

    OII – I’ve got july’s and 7 weeks is a lifetime in this name given its volatility. I think hurricane hype and continued strong reports of rising demand from places like Brazil. If it takes another good size hit I will average down into lower strike contracts.

  26. 26
    zman Says:

    Natural gas hanging out up a dime close to $12 on the June contract (expires tomorrow). Imports info shows yet another week at 0.7 Bcfgpd for LNG and lowish Canadian piped volumes as well at 7.4 Bcfgpd. Until LNG volumes rebound or oil comes off substantially gas is unlikely to break down.

  27. 27
    ram Says:

    Re #26: How does the NG hedging of CHK and the current NG price play into the stock price?

  28. 28
    elijahwc Says:

    11:11 PDE Pride Intl: Follow up on Seadrill comments (45.10 +0.14)

    As mentioned at 11:06, Bloomberg reported that Seadrill is in talks with Pride on “attractive opportunities.” These comments appear to have been taken from Seadrill’s earnings release, issued today. The release said in April, Seadrill disclosed a 9.9% ownership interest in the NYSE listed offshore drilling company Pride International. This investment has been based on thorough evaluation of the company’s underlying values. The Board has taken the initiative to a dialog with Pride’s management in order to look for attractive opportunities for both parties.

  29. 29
    zman Says:

    Ram – it limits their upside to some extent and along with their above peer group debt level contributes to their discounted multiple to their peers. However, as higher gas takes the group up, the 30% (or so) that remains unhedged provide upside to current estimates as will their “in the bag” near term production profile. The hedge provides stability and assures their Capex is there when they need which is important in setting up their future drilling program. Also, the high prices are allowing them to lock in some pretty nice longer term prices.

  30. 30
    Nicky Says:

    John Kilduff says the top is in for oil -hmmmm.
    Broader market – still looking for a low in this timeframe…..

  31. 31
    zman Says:

    Kilduff – didn’t give a time frame did he? Not days or weeks or months? Funny how they comment on the commodity when it moves in the direction of their call. He’s been a bull but been making bearish noises on red days. At least the cat over at Citi has been short and wrong since around $80 and is bearish every time he gives a quote.

  32. 32
    reefguy Says:

    mmr up a buck, Exxi down a quarter???

  33. 33
    zman Says:

    Anybody see any comments to spook steel today. Watching X, MT and even TS get beat about a bit.

    Reef- maybe its fear over Blackbeard sending dollars out of EXXI but keeping the potential upside in MMR which is stabilized by the increased pay found at Flatrock delineation well #3. That is one big play for MMR, with some unreal rate capable there.

  34. 34
    Nicky Says:

    Just said we saw capitulation last Wednesday – didn’t notice it myself!

  35. 35
    zman Says:

    Nicky – me either, he’s talking his book.

    DRYS – Weekly chart formed a nice double top. Day rates inching off there and I like Bill’s concept that the Olympics could punish traffic to China for a time and depress rates and the drybulk stocks.

  36. 36
    reefguy Says:

    z- 33 I agree,MMR move not related to BB

  37. 37
    scoop006 Says:

    Z re steel MT July $95Puts 1000 contracts

  38. 38
    zman Says:

    Scoop – what’s your thoughts there?

    Man its slow, even for a Monday. Must be vacation time. Oil service definitely outperforming. Getting closer to taking some PDS but not today.

    Hard to believe TLM down with a Chinese takeout rumor swirling.

  39. 39
    scoop006 Says:

    #38 Interesting play that they did not buy any June P’s. I think its a $500,000 hedge against price erosion

  40. 40
    zman Says:

    Thanks Scoop.

    Very low volatility day, almost feels like pinning action 3 weeks to go. Lotta people off this week so little conviction in energy or the broad market moves.

  41. 41
    ram Says:

    I’m trying to figure out my Blackberry. I should have known better when the salesperson said “teenagers have no problems setting these up”.

  42. 42
    zman Says:

    Ram – I picked up a new one on Friday. Pain to get back to where I was. The most important feature I use is the email ghosting and they set that up in the ATT store.

  43. 43
    ram Says:

    I am going back to the Verizon store and let their local teenager set up my email and internet.

  44. 44
    zman Says:

    Ram – by far the smartest choice.

  45. 45
    Brian Smith Says:

    Z — re 33
    Looks like all commodities are getting whacked today. Even agriculture-related stocks are suffering. Gold and especially silver are really taking it on the chin. I did read some comments from Fed Governor Yellen today where she said interest rates had been cut enough. That may be giving marginal support to the dollar and causing profit taking in hard assets.

  46. 46
    jazzkool Says:

    USO mentioned on another site as acting opposite the underlying. Reaction?

    Jazz

  47. 47
    zman Says:

    Jazz- I’m not sure what they are referring to.

    USO down 2.6%
    CL/N8 down 2.58% (July crude) as I type this.

  48. 48
    zman Says:

    To me crude needs to sell off into that mid $120s level, decent support at $124 vs the current $128.50 level. This would be better for the energy stocks than a re-rally to the old 135 high as it could get the broad market out of its slumber/stupor.

  49. 49
    zman Says:

    Daily chart on SD is interesting. Continuing to hold.

  50. 50
    VTZ Says:

    Z – Have you figured out what’s up with SD?

  51. 51
    VTZ Says:

    haha thinking the same thing.

  52. 52
    ram Says:

    SD putting on a good performance today. I saw the reason above. Any potential excitement from our plays this week in the DB conference?

  53. 53
    zman Says:

    VTZ – I see nothing but Barron’s article “news” which is old hat. Could be a loud mouth analyst touting the move eastward from the pinion into high rate, 0% CO2 drilling in the West Texas Overthrust and all that means for them as they are CO2 processing constrained at present. It could also be that in a market like this, what is up goes up more and what is down certainly has something wrong with it. Volume is not excessive and given the rally you’d want it to be. I continue to hold.

  54. 54
    VTZ Says:

    I’m going to cherish the fact that I was wondering the same thing, at the same time, about the same stock. I’m going to go ahead and assume it’s a small indication that I have a shade of your market prowess.

  55. 55
    zman Says:

    Ram – NFX could have catalytic news (Mancos / Bakken) but I think its a week further out at minimum.

    Would not look for any rate news out of CHK or HK or GDP or any other Haynesville names

    VTZ – well that can be a good thing and a bad thing sense sometimes my prowess gets thrown in front of a truck.

  56. 56
    reefguy Says:

    sd going orbital

  57. 57
    VTZ Says:

    Yeah I just looked at my book and then reality set in that my prowess is limited, haha.

  58. 58
    VTZ Says:

    There’s not really big volume on SD. No sellers?

  59. 59
    antrimshale74 Says:

    Gasoline and distillates appear to be holding up much better than oil. Any interest in refiners? They are off rather heavily today, as well… especially VLO.

  60. 60
    zman Says:

    Antrim – VLO is easily my best pick if you have no group exposure as of today. I’m in FTO, and standing pat for now. But if I weren’t there today I’d go after the VLO and I still may this week.

  61. 61
    ram Says:

    Reg gas has gone nuts in CAL. Does anybody know if the new summer formula is priced in yet?

  62. 62
    zman Says:

    Ram – I don’t know if you guys are in full CARBOB mode or not yet as far as requirements go but I’d bet your gasoline has price at the pump has further to rally over the next month.

    Oil down $4 on just over half of Friday’s volume.

  63. 63
    ram Says:

    further to rally… any more rally we will be above $5 by July 4. Reg unleaded is $4.35 in non beach communities – $4.75 near the coast.

  64. 64
    Popeye Says:

    I believe we are now using summer gas formula now in CA. Watch out for the storm that went thru here during the holiday. It dropped tornadoes here so I worry what it is going to do to the rest of the country.

  65. 65
    zman Says:

    # 63 … That has to be just crushing the consumer. Entire tax “rebate” going into the gasoline tank over the course of the summer at this point.

    Thanks Popeye, will do, as we say in the south, Heaven hates a trailer park.

  66. 66
    uop Says:

    ZMAN:

    ENERGY/COMMODITY DROP DRAGS hk DOWN, IS THIS TIME TO BUY MORE?/

  67. 67
    zman Says:

    Uop – you’ll be the first to know if I take more. I’d like to hear what GDP has to say about the Haynesville tomorrow morning before adding there.

  68. 68
    Nicky Says:

    Seems to be some concern in the energy pits that Mastercard will report a big drop in gasoline spending tomorrow. Fall still looks corrective to me.

  69. 69
    zman Says:

    ZTRADE: Entered NBR July $42.50 calls for $1.85. I continue to hold the June $40 and $42.50 calls here.

  70. 70
    jazzkool Says:

    Z, my mistake. I thought USO was ETF that tracked a basket of underlying. Didn’t know it reflected CL/N8 futures.

    Have to read more carefully. I actually read a description of USO before I posted.

    Jazz

  71. 71
    Dman Says:

    Hi Z, quiet day. Can you please ‘splain what it means when CO2 is mentioned in a resource play. ‘cos I’ve got no idea what that’s about.

    What are you looking for from GDP tomorrow?

  72. 72
    zman Says:

    Jazz – As I understand it’s meant to mirror the front month NYMEX WTI contract until a period of just before that contract expires and then its starts buying the next month and selling the front month. It may be more complex now but that’s how I remember it after it was launched and it generally tracks but underperforms what we think of as the price of oil.

    GDP – oh, just crossing fingers for a rate. Doubt we get it as they have little interest in bidding up the price of acreage out there any more than CHK or HK does. But they have several wells drilled that they could talk about and you never know …
    Dman – those are gas wells that produce methane AND carbon dioxide, CO2. The CO2 has to be taken out of the stream before the gas can be sold so you process it and either reinject the CO2 into another zone or use it for tertiary oil recovery or sell it to someone else to use for tertiary oil recovery. Either way you can’t burn it. In the West Texas Overthrust (WTO) where SD operates there is a high CO2 cut in the wells in their cornerstone property, the Pinon field. So while production of “gas” is high, its over 50% CO2 which has to be stripped out. Moving east of the Pinon they are finding some very economic gas wells that have much less CO2 (in some cases 0% CO2)and they are bumping up their drilling activity in this area quickly.

  73. 73
    Dman Says:

    Thanks Z. The Haynesville operators are in an interesting position where they have to avoid mentioning things that would jazz their stocks because it will hurt their costs to do so. So more buying opportunitues for us 🙂

  74. 74
    zman Says:

    Dman – that’s about the double-edge sword of it. Had HK not spilled the beans in March at their analyst day we might only now be learning to spell Haynesville or think of it as anything other than the Bossier (it’s E. Tx name).

    SD – Three minutes before the close, AP reporting CEO Tom Ward bought another 230,000 shares between 49.97 and 50.50. – Don’t know if that was what was in Barrons. The was spurred last week by a smaller purchase .

  75. 75
    PackMan Says:

    Gas in NY over $4 this past weekend. $4.10-4.50.

    NJ still under $4.

    Road traffic seemed VERY light on MEM Day weekend.

  76. 76
    john11 Says:

    That 230,000 shs is an additional buy re Tom Ward and SD.

  77. 77
    john11 Says:

    SWN into S&P 500 after close June 5th.

  78. 78
    zman Says:

    Thanks and thanks J11.

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