06
Jun

TGIF – Please Sir May I Have Another?!

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Yesterday was a pretty good day. Ya know, the more things go up, the more we get accustomed to big numbers. In the mid 1990s, a 10 point move up in the Nasdaq Composite was a monster day.  Now 50 point swings get barely a raised eyebrow. And just two years ago, a $1 move in crude was a news headline. Yesterday crude scored its largest ever one day dollar gain ... after the chorus of traders calling for a top in crude prices reached a deafening crescendo on CNBC. This is all noise. But it did lead to large gains in the E&P and Oil Service names (sorry refiners but it wasn't your day). As you know I don't give advice but I'll tell you what I remind myself when my portfolio hits record high after record high and the Robb Report starts looking interesting. I tell myself, "self, don't get used to these gains, and moreover, don't become complacent about them. You speculate in energy related equity options, and those are wasting assets; take profits, and buy them back lower ... later."    

In Today's Post:

  1. Holdings Watch - busy day
  2. Commodity Watch
  3. Stocks We Care About Today - CHK updates Haynesville activities, CXO buys Permian reserves
  4. Odds & Ends

Holdings Watch: The Performance and Wiki tabs are updated.

  • (NFX) - Bought the NFX $65 September calls (NFXIM) for $5.40. I'll hold them for Mancos and Bakken well news. I also hold the July $70 calls here which may or may not go out the door before I leave town later this month.
  • (NBR) - Bought the NBR $42.50 June Calls (NBRFV) for $1.45 for a quick trade as the stock was breaking out. Will not hold onto these for long but am likely to continue to play in and out of the name around a core position in July and soon to be longer dated calls. 
  • (HK) - Sold the HK July $30 Calls (HKGF) for $4.80, up 300% 
  • (CLR) - Sold the CLR July $65 Calls (CLRGM for $7.10, up 87%
  • (HAL) - Sold the HAL June $47.50 Calls (HALFW) for $2.30, up 28%. I continue to hold the June $50 (not for long) and July $50 calls here.

Commodity Watch:

  • Crude Oil closed up $5.49 at $127.79 yesterday. A weaker dollar and renewed rumors of U.S. plans to attack Iran fueled prices at first and then technicals and short covering rode the rally higher. This morning oil is trading up $2 to $3 and above the $130 mark and I would bet the broader market will take notice (fall) if these prices prove sustainable through the day.
  • Saudi Watch: Saudiaramco says it plans to expand its refined product capacity by 80% in the next five years via a string of JV's with IOC's. I don't know what their current capacity is other than "large" but they do plan to focus on processing heavier and more sour grades of crude, something the globe desperately needs. Expect even more demand for steel and expect delays in getting this done.
  • Dollar Watch: ECB President Jean-Claude Trichet said yesterday the bank could raise rates thereby further punishing the dollar. This morning the jobs report is further depressing the dollar. 
  • Morgan Stanley Eyes $150 Oil...Soon. The I-bank said oil may hit $150 a barrel "within a month" as demand from Asia increases and inventories there decline.
  • Nigeria Watch: Another labor strike is reportedly near at hand.
  • Natural Gas closed up $0.19 at $12.57 after the EIA reported an injection into gas storage of 105 Bcf. I was at 100 Bcf and so was the Street and the delta is rounding error. Stocks remain low to last year and in line with the five year average. Gas price momentum remains to the upside despite rising production ... same story different week. This morning gas is trading up another dime.

Stocks We Care About Today 

 

How To Be Coy Watch: CHK Updates Its Haynesville Activities (Sort Of)

  • 500,000 acre leasehold goal achieved,
  • 2 more horizontal wells completed at rates comparable to those of the first 4 wells bringing them to 6 successful wells to date (not that they have ever said what the first 4 did),
  • 2 more Hz wells expected to be completed by end June,
  • They have 5 rigs running now, will be at 12 by year end and 30 in 2009
  • They are not done leasing, saying they continue to add (no size offered) due to the drilling success (again no size offered),
  • Well results are simply deemed "impressive". Rumors for IPs on these wells range from 10 to 30 MMcfepd.
  • Penn Virginia (PVA) holds the mark for highest rate in the play announced to date with their Fogle well which is producing at a pipeline capacity constrained 8 MM/d and which the company believes could do 10 - 15 MM/d. We should know by the end of June when they get a bigger pipe installed and open her up.
  • As best I can tell, all of CHK's wells to date are in the Johnson Branch area of Caddo Parish, about 20 miles east of the (PVA) wells where the Haynesville is thought to be about 200 feet thick vs the 300 foot thickness for (PVA).
  • The implication here continues to be that results are so good they can't risk telling us about them and increasing the competition for acres in the play, a play which may extend across 3,000 square miles (1.9 million acres). 

CHK Shareholders Meeting: Today at 11 EST available via webcast from their site.  We continue to hold the stocks

 

Acquisition Watch: Concho Buys Henry. Concho (CXO) paying $565 million in cash for Permian Basin private E&P Henry Petroleum. 1P reserves of 163 Bcfe yield an acquisition price of $3.47 / Mcfe but they have identified an additional 283 Bcfe of probable and possible reserves. Hair cut those by 50% and the F&D cost drops to a more palatable $1.86/Mcfe. These are Sprayberry/Wolfberry assets in the Permian of W. Texas, Concho's backyard, and the stock should rally strongly on the purchase.

  • Based on CXO's TEV prior to the acquisition the market had been valuing Concho's reserves (546 Bcfe, 99% Permian) at $5 / Mcfe so they got these assets cheap. 
  • They've id'd 1,650 drilling locations, greatly bolstering the 2,500 location CXO had in inventory.
  • They are hedging an undisclosed amount of the production from the acquisition, wise.
  • They are a low cost producer with LOE at about $1 per Mcfe this year. Yields a high cash margin business.
  • They trade at just under 7x 2009 CFPS estimates which is not high given the 26% production growth (prior to the acquisition) guidance for 2008 and an 18 year reserve life.
  • They have plans for the Bakken (42,000 acres) 

(APA) Says 2 Months To Restore Partial Gas Flow In Australia After Accident. I continue to watch this unfold and while the market helped me to miss the dip buying opportunity on the initial news there are cost ramifications for producers of  ore in the region including (AA) and (BHP). 

Odds & Ends

Analyst Watch: (ESV) price target increased from $74 to $86 by FBR (seeing an upgraded trend in the name), (BTU) upgraded from neutral to buy at Merrill. 

 

255 Responses to “TGIF – Please Sir May I Have Another?!”

  1. 1
    Sambone Says:

    8:34 am EST

    Oil Higher As Dollar Prompts Short-Covering

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures climbed more than $2 to back above $130 a barrel in European trade Friday after a sharp drop in the value of the dollar overshadowed burgeoning demand concerns and sent investors rushing to cover short positions.

    While fresh weakening in the greenback against the euro appeared to trigger the steep climbs Thursday, many traders suggested that the dollar alone couldn’t be held responsible for the swift moves higher. Oil prices continued to climb Friday despite the dollar holding steady against the euro and most other major currencies.

    “The dollar is definitely playing a bit part because people are talking about it — but it’s not enough to drive the market up $5.50,” one London-based crude trader said. He suggested that crude prices rising through key technical resistance levels near $123 and $125 Thursday had sparked a flurry of short-covering by some funds, and warned that further covering and fresh buying could be expected Friday if prices continued to strengthen.

    At 1131 GMT, the front-month July Brent contract on London’s ICE futures exchange was up $1.81 at $129.35 a barrel, down from an intraday high of $129.97 a barrel.

    The front-month July light, sweet, crude contract on the New York Mercantile Exchange was trading $2.15 higher at $129.94 a barrel, having earlier peaked at $130.58 a barrel.

    The ICE’s gasoil contract for June delivery was up $57.50 at $1,211.25 a metric ton, while Nymex gasoline for July delivery was up 401 points at 337.46 cents a gallon.

    European Central Bank president Jean-Claude Trichet’s comments Thursday, that the ECB may raise interest rates next month, sent the greenback into a swift dive against the single currency, and reversed the effects of the U.S. Federal Reserve chairman’s comments on inflation that had strengthened the dollar earlier in the week.

    Investors have used oil as a hedge against the weakening dollar for much of the last year, a trend that has helped spur crude on it’s path to record prices.

    “In the first part of the week oil had been under pressure partly due to statements from Mr. Bernanke showing some understanding of the correlation between rate decisions, the dollar and the price of oil,” said Olivier Jakob of Swiss consultancy Petromatrix.

    “Oil fundamentals had recently started to reassert themselves with worries about demand destruction, but Mr. Trichet chased them away.”

    As prices rose back above $130 a barrel, some suggested Friday that a recovery in oil futures back towards their recent highs above $135 a barrel had little fundamental justification.

    “Outside of currency, there does not seem to be anything significantly different in the crude market’s fundamentals to warrant a retracement to the old highs. If anything, the supply/demand picture seems to be getting more comfortable,” said Edward Meir, analyst at MF Global in New York.

    Concerns that oil demand erosion due to higher costs have weighed on prices this week, and had prompted an increasing number of investors to take short positions in crude futures as they bet on further price falls.

    However, some questioned the likely demand impact of recent cuts in some Asian economies’ fuel subsidies — India and Malaysia the latest additions to the list this week — which have stoked consumption fears. Economic growth is the key driver of oil demand growth in Asia, said analysts at Barclays Capital, not low prices.

    “If Asian economic growth starts to move discontinuously, then all should start looking at the demand numbers very closely, but in our view, the recent retail price changes are not game changers,” they said.

    Analysts’ predictions were again cited in helping push up prices Friday. Ole Slorer, a shipping analyst at Morgan Stanley called for a “short-term spike in oil prices” to $150 a barrel by July 4 this year.

    “Distribution patterns of crude oil out of the Middle East are mimicking those of last year as we exited 3Q07, when we predicted an oil price spike into year-end based on our projections of sharp inventory draws in the Atlantic basin,” he said. “That same pattern is now again upon us, and we are making an identical call, only this time we are starting from a much tighter Atlantic Basin inventory backdrop.”

    Meanwhile, geopolitical concerns were prodded by reports from Israel Friday that the country could launch an attack on Iran’s nuclear facilities.

    “If Iran continues its nuclear weapons program, we will attack it,” Shaoul Mofaz, an Israeli deputy prime minister and also the country’s transportation minister, told the Yediot Aharonot daily. But Mofaz, who hopes to replace troubled Ehud Olmert as prime minister, stressed such an operation could only be conducted with U.S. support.

    —By Nick Heath; Dow Jones Newswires

  2. 2
    Sambone Says:

    IEA Casts Crude Demand Doubts

    Dow Jones Newswires

    TOKYO — The head of the International Energy Agency said Friday that high crude prices could see its global oil demand forecasts cut further and that billions of dollars of investments are required to boost energy efficiency and cut emissions.

    “The high prices have already triggered a demand fall…in some countries, demand is slowing down,” IEA Executive Director Nobuo Tanaka said at a press briefing in Tokyo ahead of a meeting of G8 energy ministers and Tuesday’s release of the Paris-based agency’s widely watched monthly Oil Market Report.

    Oil futures traded in New York were $129 a barrel earlier Friday, some 4% below the record $135.09 a barrel hit May 22.

    “(While) we still see robust demand from India and China,” there’s a chance for global oil demand forecasts to be reduced further, he said.

    While there are enough oil reserves across the world, resources nationalism, misappropriation of invested money, and other factors have hampered sufficient cash from flowing into new oil projects.

    Recent high oil prices have prompted some countries to call for an output hike from the Organization of the Petroleum Exporting Countries. OPEC countries, however, have only partly addressed these calls, saying speculative buying is responsible for the rise. This has angered consumer countries, leading to calls to dissolve OPEC.

    But Tanaka didn’t blame the cartel. “Since we are not OPEC, we cannot tell them what to do. It’s their decision,” he said.

    “What we can do as energy consuming countries is to become energy efficient,” he added.

    The IEA, the energy security watchdog of the Organization for Economic Cooperation and Development, May 13 cut its forecast for global oil demand growth this year for the second consecutive month, citing increasing evidence high prices were hurting demand in the U.S. and Europe.

    In last month’s report, demand growth was revised down by 230,000 barrels a day to 1 million, or up 1.2% from 2007.

    Emissions

    Tanaka, reiterating past warnings, said countries around the world would have to jack-up spending on measures to cut carbon emissions, which are set to rise by 130% from current levels by 2050 if policies in place aren’t changed.

    The IEA chief said investments of $100 billion to $200 billion a year in the coming decade, and $1 trillion to $2 trillion a year in later decades, will be needed in measures like energy efficiency and carbon capture programs and new nuclear plants to cut carbon emissions in half by 2050.

    Total investments of $45 trillion, or 1.1%, of average annual global economic activity are needed in carbon-cutting measures over the period to achieve a 50% cut in emissions by the middle of the century, Tanaka said.

    The estimates include the cost of building 32 nuclear power plants a year globally between now and 2050, as part of the battle to cut carbon emissions. Nuclear plants emit virtually no emissions, but are opposed by most environmentalists because of the radioactive waste they produce.

    —By Mari Iwata, Dow Jones Newswires;

  3. 3
    Nicky Says:

    Morning all.

    Posted this earlier under a different heading but interesting to see that Morgan Stanley continue with the blatant ramping even as they come under scrutiny.
    This supply/demand argument is such garbage. Take a look at this mornings’ non farm payroll data. When is the US gonna wake up to the fact that their economy is in serious trouble?

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aV2ZR71o4rUQ&refer=home

  4. 4
    Sambone Says:

    Nicky – Economy in serious trouble?! No way, just listen to the talking bubbleheads on CNBS. Hey retail sales up because of the $600.00 borrowed check. MBI just downgraded and nobody notices. This thing is a joke! I feel better now!

  5. 5
    Nicky Says:

    Sam – its the arrogancy and complacency that really gets to me! Like ‘hell this is the USA it can’t possibly happen to us!”

  6. 6
    zman Says:

    Nicky – Before you throw a rock at me too note that I said in today’s piece not to get complacent, lol.

  7. 7
    Sambone Says:

    N – The way I see it is that most of these “Hedgies” and fund managers have never really seen a bad market (See 72-74). History does repeat. I’m out of the way, long energy, short the market, etc.

  8. 8
    Nicky Says:

    Apparently popping on the fact that Israel say a strike on Iran is possible and of course the Morgan Stanley commentary.

  9. 9
    Nicky Says:

    I don’t doubt that energy can’t move up short term but everything points to a major correction there too. Demand will be off a cliff.

  10. 10
    zman Says:

    Also, dollar continuing to weaken.

    Re Demand: for refined products yes, crude will take longer to slack off as it is still rising this time of year and if you look at the graph for crude stocks in the US they have fallen off the cliff too. Then you have Asia which is either spiraling higher or completely peaked for now depending on who writes the story that day at Dow Jones.

    CHK bid up nicely.

  11. 11
    Nicky Says:

    We may as well just do the 150 today and be done with it.

  12. 12
    zman Says:

    current portfolio:
    30% cash
    15% equities
    55% equity options – almost entirely long

    I will continue to raise my cash component into this rally.

    Oil up $4.66 at $132.50

  13. 13
    Nicky Says:

    I don’t buy the $ reason Z – its just used on any given day when it suits. Plenty of days the dollar has rallied and so has crude.

  14. 14
    Nicky Says:

    But then you know I dont buy any of the fundamental reasons that have been thrown at this rally. As Jeff Mackie said yesterday when oil goes up $6 on no news this is a bubble fuelled by speculators and nothing else.

  15. 15
    zman Says:

    Nicky, not saying its all the reason but it is an exacerbating factor on a day like today.

    I used to work with Art Hogan who is on CNBC right now saying Morgan Stanley may be right about $150 oil for the wrong reasons. He is suggesting oil could get there over Trichet’s comments yesterday and those comments are not yet fully reflected in the dollar and oil knows and is acting as a hedge. You may be short and not like it but that’s how I see it and more importantly, Art’s a very smart guy.

  16. 16
    scoop006 Says:

    Z Where can I get a premarket quote for CHK

  17. 17
    zman Says:

    We can debate it but it is what it is and I will continue to sell into these kind of rallies and think about beach real estate.

    Here’s one for you to try on. If Obama takes the White House and tries to break up XOM as he has alluded he might, and a Congress bent on threatening OPEC is in charge, welcome to $200 oil.

  18. 18
    Nicky Says:

    A $14 dollar rise in less than 24 hours and you don’t think those comments are yet reflected in the price of oil? You have to be kidding.

  19. 19
    kyleandy Says:

    scoop where do u trade? all 3 0f my online accts have pre-market quotes scottrade, fidelity, bank of america

  20. 20
    Hoss Says:

    Morning Z

    CHK – Meow!

  21. 21
    texana Says:

    the heir apparrant @ henry recently left and along with several of the upper crust started their own co. they r working the same wolfberry play. cxo will get a lot of hbp ac which is multilayered & very prospective………haynesville shale, after watching the pva webcast i see where aubry is coming from in his enthus…added some pva doesn’t seem to trade options @ this time. may not get a pullback anytime soon, to buy. but definitely like: hk,gdp,pva,xco,eac

  22. 22
    Nicky Says:

    Don’t blame you for dreaming about beach real estate – its off 50% from the top here on the Gulf coast and I gather its down 70% in the Panhandle. Not exactly been a great investment for those who bought two years ago.

  23. 23
    zman Says:

    Nicky – I didn’t say any such thing. I said I was selling into the rally.

    Scoop – I think yahoo finance has it but my trade system has reliable pre market quotes as do most brokers.

    CHK opening up $2.50

  24. 24
    zman Says:

    Texana – thanks for the added color on CXO, watching but it is opening up 8%.

  25. 25
    Nicky Says:

    Look for oil to trade above 135.09 for confirmation of much higher highs to come.

  26. 26
    zman Says:

    I’d buy in but sand and PC’s don’t mix plus how do I manage 5 screens from a hammock?

  27. 27
    zman Says:

    Refiners again not feeling the love. Continuing to stay away although the early dip in FTO is tempting to act upon long.

  28. 28
    Nicky Says:

    Sorry Z – what didnt’ you say? I thought you said you were dreaming about beach real estate. I didn’t say you were buying it…

  29. 29
    Nicky Says:

    Crude tanking the broader market

  30. 30
    Nicky Says:

    Could see a small wave ii pullback in oil anytime. Only a move below yesterdays (!) 121.61 would negate the bullish count.

  31. 31
    VTZ Says:

    Nicky – I was short gas and my friend was short oil and gas because of what I thought the fundamentals meant. So really I agree with everything you say.

    That being said, I ditched the last of my short because the market is being completely irrational and I think it is going to take a TONNE to break the momentum and not only the momentum but the mindsets traders currently have.

  32. 32
    BossmanG Says:

    holly molly SD

  33. 33
    BossmanG Says:

    Z, when do you plan to unload SD?

  34. 34
    zman Says:

    SD = Soon, today or next week.

    Thinking about killing my CHK June $60 call position here.

  35. 35
    VTZ Says:

    Also, I don’t think the traders feel they have any downside until the momentum slows.

  36. 36
    sane Says:

    I think the $ reason is BS too, but this market will continue to be gamed as long as supply and demand is tight. I find it hard to say it is not somewhat manipulated when financial houses that have massive money in oil call for $150+. I find it repulsive that some ( GS ) talk like they are a savior ( there comments about high prices and alternatives ). I just can’t see how it is good to eviscerate the economy and the working class in-order to propragate a change in our energy system.

  37. 37
    VTZ Says:

    Sane – I agree. I threw up in my mouth a little when Goldman said that they are doing the world a favor by raising prices so people could go explore and produce harder to find oil.

  38. 38
    isleworth Says:

    ” Please Sir May I have Another” – hey Z you got it pal !!

  39. 39
    Nicky Says:

    Yes VTZ – agree totally. What’s interesting that this is classic fifth wave elliott action. Normally highly volatile, absolutely gut wrenching and they wreak of fear!

  40. 40
    jazzkool Says:

    I sold a lot of stuff this am too soon. TOS has to get its bid and ask in line with trading prices. I had no idea what I should be entering as a limit order when the bid and asks at 0940 are still at yesterday’s close. Oh well, could come down later and maybe I will be happy with the prices I got.

    Jazz

  41. 41
    zman Says:

    ZTRADE: Out June $60 CHK calls (CHKFL) for $2.40, up 222%. Continuing to hold July Calls and the Common.

  42. 42
    Sambone Says:

    9:39 am EST

    Oil Above $134/Bbl In Dollar-Driven Surge

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude-oil futures jumped by more than $6 as the weakening dollar returned as a force moving energy markets higher.

    Light, sweet crude for July delivery traded $6, or 4.7%, higher at $133.79 on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $4.70 higher at $132.24 a barrel.

    Futures have surged more than $11 above Wednesday’s settlement of $122.30 a barrel, with analysts citing the weak dollar as an excuse for investors who saw the downward correction as too deep to bid oil prices higher. The dollar fell Friday after the Bureau of Labor Statistics reported that the U.S. unemployment rate increased from 5.1% in April to 5.5% in May, the biggest monthly increase in 12 years. The euro recently traded at $1.5701, a seven-session high. Traders have bought oil as a hedge against the weakening dollar for months, though that trade had receded to the background in May, as the U.S. currency firmed against the euro. The dollar’s dramatic move over the last two days has renewed the connection to oil, however.

    “As has been the case for more than a year, a quick shift in the value of the dollar is capable of igniting a disproportionate swing in oil prices,” wrote Jim Ritterbusch, president of Ritterbusch & Assoc. in Galena, Ill.

    Some were unwilling to credit the dollar for oil’s latest rally, however.

    “Don’t kid yourself, “dollar weakness” had nothing to do with yesterday’s rebound,” wrote Stephen Schork, editor of the Schork Report, an energy newsletter. “Rather, what we witnessed .. was nothing but the latest sequel to the bear’s horror movie.”

    Oil prices have dipped by around $10 on an almost monthly basis this year, only to jump to new heights. Although world oil demand is seen as shaky due to fuel price hikes in Asia and lower demand in the U.S., supplies are still tight, wrote Ole Slorer, an analyst with Morgan Stanley (MS). The bank now calls for oil prices to hit $150 a barrel by July 4.

    “Middle East oil exports are stable, but Asia is taking an unprecedented share,” he wrote. “(The U.S. is) unlikely to break this trend of sharply drawing inventories on “surprisingly low imports” anytime soon.”

    Front-month July reformulated gasoline blendstock, or RBOB, recently traded up 9.20 cents, or 2.8%, at $3.4265 a gallon. July heating oil traded 14.67 cents, or 4%, higher at $3.8275 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  43. 43
    Nicky Says:

    #36 you said it better than i ever could Sane!

  44. 44
    zman Says:

    Jazz – you need a better trading platform. I suggest Street Smart Pro from Schwab. It is free, it has Level II so you can see size and it is real time with excellent execution.

    All remaining June Calls now on the bubble for immediate sale with any weakness. This include June HAL and NBR calls.

  45. 45
    ram Says:

    Quite the fall in CHK.

  46. 46
    zman Says:

    Ram – yeah, can’t blame them for a little PT from $60 as it was at $50 a few days ago. Annual meeting starts in an hour and I would expect them to re-energize the shares prior to its start.

  47. 47
    ram Says:

    Thoughts on the trade of CHK a few minutes ago and now – the quick difference.

  48. 48
    zman Says:

    ZTRADE: Out remaining SD July $55 Calls for $6.20, up 254%.

  49. 49
    zman Says:

    ZTRADE: Out June NBR $2.50 Calls for $2.15, up 48%.

  50. 50
    Nicky Says:

    Well it goes without saying that this is only good if you are long energy stocks as the only two dow stocks up are Exxon and Chevron. Everyone else is being trashed. What a washout.
    John Kilduff saying that technically we have to get through 135 or it could spell a double top which of course ultimately would be bearish.

  51. 51
    Popeye Says:

    Z, what does Schwab charge for a option contract?

  52. 52
    zman Says:

    P – I think it $8.95 + tad per contract. It’s not the cheapest but I like how it works. Some of the cheaper guys don’t have the software or execution ability I get there.

  53. 53
    Sambone Says:

    Atlantic/GOM – Nothing on my radar at the moment. Looks like a slow weekend.

  54. 54
    BossmanG Says:

    What trading platform does anyone from Canada use here?
    I’m personally with thinkorswim
    I don’t think schwab is offered to canadian clients.

  55. 55
    zman Says:

    from the shoulda woulda coulda file, talked about CXO last week after UBS, and this morning, now up 15%. ug.

  56. 56
    tater Says:

    Nicky, not to try to turn this site into TA argument but,…love that word… I’m not as big on Eliot Wave theory as you are, but I’m aware of it. How do you figure that today’s pop up is part of wave 5?
    Jan 07 to Aug 07 = wave 1
    lat Aug 07 to Nov 07 = wave 3
    Feb 08 to late May 08 = wave 5

    That’s why I don’t really subscribe to it. You can’t just lump this jump into wave 5, what about the pullback we just saw?

    There is NOTHING on WTI chart that currently denotes an end to the trend. No break anywhere, not monthly, weekly, daily, or basic trendline or chart pattern formation analysis. Your comments would be appreciated as I would like to know what I am missing. Thanks

  57. 57
    zman Says:

    WLL shot through $100 early, still above it now, continuing to hold Septembers there for Bakken potential.

    NFX through Tater’s technical levels from yesterday. I expect Bakken and maybe Mancos news in near future.

  58. 58
    zman Says:

    Nicky – re 50. Surging oil prices are not good for all “oil” companies. XOM down now as products just not keeping up.

    Independent refiners getting knocked about:

    VLO down 4+%
    TSO down 6%
    FTO down 4%

    Sometimes the best trade is the one you don’t make.

  59. 59
    Pete Says:

    Z, Is a steel stock(common) like X good for longer term play?

  60. 60
    tater Says:

    Nice volume on that NFX run yesterday to add to it’s confirmation. Nicky, re-read that post and it sounds bitchy on my part. Sorry, just trying to be brief and clear.

  61. 61
    zman Says:

    ZTRADE: Out HAL June $50 calls for $1.45, up 18%.

  62. 62
    Sambone Says:

    Z – You bitchy? LOL, it’s Friday baby!

  63. 63
    MMarkkk Says:

    Sane: you said “I just can’t see how it is good to eviscerate the economy and the working class in-order to propragate a change in our energy system.” Do you hold the same feelings toward the BS being spouted re Global sWarming? The laws being floated in our Congress, by the 3…er 2 Prez Candidates and most of Europe will do more damage to our economy than $200/BO oil. The carbon tax/cap/trade or whatever they want to call it will add $30+ per barrel of oil and then will be the gift that keeps on giving as it pertains to the cost of running any business. Folks may want to put in a call to their Senators and get this travesty of Lieberman/Warner/Boxer put to pasture. It died today but I’m sure it will be resurrected after the election when we have a more left-leaning Congress and White House. Both Bomomma and MacTheKnife support it, which doesn’t surprise me. Both are just left of Lenin. There will be a bill passed by end of 09 so folks better start working this issue or you will pay dearly for it. Hello $6/gallon gasoline and the end of economic life as we know it. Yes, it is that bad, but no one wants to say it and upset the Greenies.

  64. 64
    zman Says:

    I appreciate a spirited debate as much as the next guy and I opened the door this morning with my political comment above. Everybody play nice and try to make money. Marrrkkk good to see you back after a long absence.

  65. 65
    texana Says:

    bo sep 45 kwk @2.8 for bounce off recent lo

  66. 66
    zman Says:

    Texana – you don’t need me to tell you that’s a good idea. What a great story, especially the NGL price angle. Wow.

  67. 67
    Nicky Says:

    Tater – i didn’t read your comments as bitchy at all so no worries. As previously commented the ‘flaw’ with Elliott wave is the endless possibilities!
    5 was not done at the end of May imo. What we have seen since then is 4 of 5 and we are now in 5 of 5 up. Actually calling the top at the end of May had worried me as I had mentioned several times on here because parabolic moves like we have seen do not tend to end with a whimper but more a blow off top. The move off that high at the end of May had looked increasingly corrective which was arguing for another push up. To be honest this now has a much better look to it. I am looking for a day with a big reversal – it could go higher or end today but we will know it when we see it.

  68. 68
    VTZ Says:

    Z – Do you feel this sell-off in equities since the open just profit taking?

  69. 69
    zman Says:

    those HK september deep in the money calls we took last week are approaching triple digit % territory. Maybe CHK can say something to inspire them higher on their call in 10 minutes.

    Agreed need to see a sharp intraday reversal as a sign crude due for a bit of a drop. Once again, companies I play in don’t need oil at these levels to make a mint and are priced as if oil were in the $90s, not the $130s.

  70. 70
    irished Says:

    ZMAN your #49 NBR trade. You wrote it like yesterday, or the day before or recently. Wrong strike. I think we know what you mean. Tough to find a 2.50 strike on a $44 stock. Maybe your typewriter number 4 is stuck. LOL.

  71. 71
    zman Says:

    V – yes and the stocks popped with oil and oil killed the broad market beyond what the jobs report did to it. I prefer to sell into these kind of days and not chase as there will be a day or two or three soon where the market thinks its time to buy airlines, or banks, or homebuilders or solent green and dumps the energy names.

  72. 72
    sane Says:

    MMMAArrrkk,

    The idea of “Global Warming” to me is a rouse. Woking in the sciences field for a number of years I see a lot of bad science in it.

    My main beef with the greens is the lack of common sense and knowledge.

  73. 73
    zman Says:

    Irish – $42.50 NBR June

    Sane – yes, big lack of knowledge amongst the greens. As they fly from continent to continent preaching about carbon footprints and staging rock concerts in the arctic, lol.

  74. 74
    Nicky Says:

    Going back to the Elliott wave count – what is not clear either yet whether this high will only turn out to be 1 of 5 or whether it is 5 of 5 and the whole move up is done. Either way we will see a very big correction soon. But if it is only 1 of 5 then likely we are going to see 250 dollar oil before the whole move is done. But that is some time away and not before a correction imo.

  75. 75
    zman Says:

    wow QBIK

    CHK meeting about to start.

  76. 76
    uop Says:

    zman:
    I just arrived in CA at my son’s place,
    tough to follow things,

    have you sold CHK into this ?

  77. 77
    zman Says:

    Hey Uop, I sold the June calls yes, am holding the common and the July’s and Aubrey is just starting to speak at their meeting.

  78. 78
    ram Says:

    ZMAN – I believe everyone has an opinion and everyone should respect others opinion. You have an incredible open air repectful site. Other sites couldn’t hold a candle.

  79. 79
    tater Says:

    Nicky re 67, 74. Thanks for the conversation. I guess that’s why I tend to discount the Elliot analysis a bit because for one thing it’s really difficult, and for another, I think it’s better in hind site. I have a lot of difficulty using it to make any money in the present time frame.
    Much agreed on the blow-off top, but what goes hand-in-hand with that is the opportunity to grab a bunch of cash on that last move. Good luck to you

  80. 80
    MMarkkk Says:

    Z- sorry about that. It is energy related as to costs added but…..

    Its Friday so I’ve got a bit of time. Trying to get in and out of a few trades. CHK working great. Just wish I’d have jumped on Concho. I’ve been bit by NFX over the last few months as I’m missed moves by a day or so. That’s what happens when you are out of the country or in the air for long periods of time.

    For the most part I’m selling most all of my positions into the rallies in anticipation of a pretty bloody summer. I’ve got some long term oil/gas I’ll hold like CHK and a limited few others where I like the long term value proposition. Plus some big integrateds cuz they are long term security (COP, CVX). But even those I’m selling parts because I think the selling will cut across many areas as the economy slows/screeches.

    Thing to own now: mineral rights in the Northwest Louisiana Northeast Texas area. People are paying “stupid money” for leases these days. Thing not to own: the actual surface rights as most of the players up there are a little less worried about aesthetics, etc. If minerals are severed from surface, you could be in a world of hurt!

    Give this market till lunch time and then its margarita time! Or Negra Modela time. Or both!

  81. 81
    Sambone Says:

    11:04 am EST

    Oil At $134/Bbl In Dollar-Driven Surge

    DOW JONES NEWSWIRES

    [Dow Jones] The panic buying that characterized New York morning trading has subsided a bit as prices stabilize. Nymex crude rose more than $4 in morning trade alone, adding to the gains marked up overnight. Traders say oil jumped on the dollar, which fell against the euro following US data showing that unemployment rose to an unexpectedly high 5.5%. Oil has once again proven its mettle as a safe haven, together with gold and Treasurys, in times of economic uncertainty. Nymex Jul crude +$6.21 at $134/bbl. All-time intraday record high is $135.09. (anna.raff@dowjones.com)

  82. 82
    zman Says:

    Mark – Looks to me like Concho just stole that Sprayberry stuff.

    Want to see something stupid, look at QBIK.

  83. 83
    sane Says:

    Z,

    The whole carbon thing is a perverse commodities market, you have to pay someone for your production.

    In the whole “energy crisis” issue, I see too much of “It is my way or no way”. I hear from some people; no more oil, we just need to move away from oil and into biofuels, but they don’t understand that the infastructure just doesn’t appear overnight. I hear from other people we need to drill more, but then I say what happens when demand catches up with the additional production. Some say we just need to reduce consumption, but there is a baseline demand somewhere and there are still billions of people in the world who don’t have cars. What happens if they all get cars even at 60mpg? What I rarely hear are people saying we need to throw the book at the problem if we are going to meet demand in the future at a reasonable price with minimal economic impact.

  84. 84
    zman Says:

    Aubrey still going through the management roster at CHK giving em all adaboys, lol. Stock reacting as expected, up about a buck over that low.

  85. 85
    sane Says:

    btw, I have never felt as if someone was assulting me over an idea or comment on this board, and I hope I have never made anybody else fell that way.

    Thanks All

  86. 86
    MMarkkk Says:

    Is Aubrey handing out checks with those “attaboys”??

    As long as Aubrey is buying millions of dollars of his own shares, I feel pretty good with that investment. When he starts selling, run, don’t walk, for the doors. That guy is shrewd and when he’s selling, I’m selling. Since his trades have a few more zero’s after them than mine, he’s got a lot more to lose/win!!

  87. 87
    zman Says:

    Sane – you know I believe in throwing the book at it, starting with text books. We need to train more engineers, G&G types, etc. We need to hit it from every side, new sources of petro, more efficient engines, new fuels etc. You can’t do one without all the pieces. It’s like the people who say ANWR is only X barrels and that would only supply the US for 2 years at present consumption and then be gone. Its a waypoint in getting to the future and they have no idea what they are talking about. They act like you stick a straw in, suck it out and then its empty, not like it is a piece of a larger puzzle. Uggg.

    Aubrey still going through the roster, impressive as it is.

  88. 88
    Dman Says:

    OK, I’ve had enough, time for my 2 cents on Global Warming. I’m a research physicist by profession & I’ve looked into the question closely enough to see that the atmospheric physics people do know what they are talking about. James Hansen at NASA does know what he is doing. All the scientists working on it are basically terrified because the warming is already virtually out of control. The UN panel is lowballing the problem because they are quasi-govenment and they have to achieve consensus.

    Consensus means everyone has to agree, including those who have got it wrong. So it gets lowballed. This is what Hansen has been saying and I think he is right.

    Science has got nothing at all to do with consensus. Nothing at all to do with what the media says and nothing to do with what XOM pays people to say. It is about which theory is right and that is all.

    Reminds me of a quote from Einstein, when he was told about a group of Nazi scientists who wrote a manifesto called “1000 against Einstein”, claiming that the Theory of Relativity was wrong. Reporters asked him what he thought about the 1000 scientists. He said “one would have been enough”.

    Likewise, it doesn’t matter how many GW “skeptics” can be hauled in front of a camera. One would be enough if they had any decent evidence or reasoning. But they don’t and for this reason I can assure you that in scientific circles, the reality of GW is a settled issue. For at least 20 years the evidence has been going in one direction only and it was pretty strong to begin with.

    What is not settled is what to do about it. I personally don’t think that cutting CO2 emissions is going to work. I mean, it would work if it could be done quickly and uniformly, but instead nothing is really happening and I can’t see it happening in time so I think it will fail.

    Then we are left with planetary engineering (eg launching particulates into the stratosphere). Sound like fiction, but actually quite cheap and you can’t really stop anyone from doing it. So when NY has to decide whether they want to lose their coastline, I think they’ll probably decide to launch some stuff into the stratosphere instead.

  89. 89
    zman Says:

    Dug up nearly a % now which is hard to believe until you see XOM.

  90. 90
    scoop006 Says:

    MMarkkk I think Aubrey will sell CHK to a major, think XOM/CHK and we will all tender our shares at the same time.JMHO

  91. 91
    texana Says:

    kog kinda like qbik trade but on the bakken. 2 large tracts on indian reservation that is offsetting recent discovery. they just got permitted to start drlg. se of clr 3fsnh well

  92. 92
    sane Says:

    I mothballed my DUG’s last month and gave up on it 😛

  93. 93
    zman Says:

    Texana – agree re KOG, listened to their RBC presentation and it looks like they have their, um, stuff together on mineral rights to get busy drilling.

    RE DUG – I have them as price shock protection only…in case Goldman says oil is going to $50 or some such, lol. I’m happy to hold them and let them expire worthless but I’ll probably take them off the table soon.

    CHK going through various votes

  94. 94
    MMarkkk Says:

    Dman:
    Good input. Like that idea of blasting stuff into outer space. Of course, there is probably some NIMBY group who will decide that Mars is their “back yard” and scream about it!!

    My opinion: yes its warming. But it was cooling before that. and warming before then. and cooling. and warming.

    I like the idea of less CO2 in the air. may need to talk to the cows, though. Stinky buggers. But I don’t like the idea of government mandating it and I certainly don’t like the idea of adding $30/BO to induce it. Prefer to see high prices driving people’s habits to change.

    Alternatives are becoming economic at $130/Bo oil so we may not need as much mandatign from gov’t. Of course, there are people who will always fight anything/everything. Big wind farm being built in South Texas on PRIVATE land and with PRIVATE money. Guess what? The environmentalists are fighting it! Go figure.

  95. 95
    Nicky Says:

    Interesting re Dug as they turned up a few days ahead of the fall in energy futures a week or so back.

  96. 96
    jazzkool Says:

    Z, I can see the level two quotes on the stock. It’s the price of the options that are behind time. In other words,as I am entering an option trade, I can look and see that CHK is up 3.00 but how does that convert into a bid and ask for the underlying options that I own. It’s not the platform. Eventually, you get the option quotes. It just takes 15 minutes for quotes to be consistent with the trading. I have told them about this before and they say it didn’t happen. I will look at Street Smart, but they have to have accurate quotes on the stock and underlying when I am entering the trade. Thanks,

    Jazz

  97. 97
    occam Says:

    Here is a vote for NO politics and NO global warming stuff here

  98. 98
    sane Says:

    Dman,

    I have no qualms with saying that the globe may be warming. Saying that it has not is like saying the global climate has not changed many times over the last 100,000,000 years. I agree with you in the idea that cutting co2 emissions may not work. My $1,000,000 question is, do we try to prevent, which may not work, or do we adapt, which we have been doing for 10’s of thousands of years?

  99. 99
    zman Says:

    Jazz – in the morning there is a lag in pricing of options relative to stocks, it is always dangerous to trade options on the open. It varies from option to option and stock to stock but the reason for this is that the early morning market is often illiquid and therefore it take a little time for the option to adjust to it. Otherwise people would game the system constantly, buying a small amount of stock above market and then dumping their calls bought the prior day into the option bid.

  100. 100
    BossmanG Says:

    jazzkool, are you looking at the level II? or just from the underlying screen?

  101. 101
    zman Says:

    CHK now starting their company presentation…will let ya know if anything earth shattering is said.

  102. 102
    sane Says:

    MMarrk,

    Funny the resistance in things like wind farms. They are building a large windfarm about 35 miles south of me. The farmers and community love it and it has brought many jobs to a relativly poor area. They are now rumbelling about building a windfarm off the shore of Lake Michigan here, and ArcelorMittal has shown a lot of interest in the offshore windfarm here.

  103. 103
    Dman Says:

    Sane – the planetary engineering idea is pretty wild, no doubt about that. It would solve the warming, but what else would it do? Probably cause all sorts of havoc (eg the monsoon in India could fail, leaving hundreds of millions to starve). The reason I think it will happen is simply that it only takes one goverment to do it and it can’t really be stopped by anyone. There have been proposals to do it in a measured way, so that side effects can be observed/compensated/avoided & in an ideal world, that’s what would happen. Not sure we’re in an ideal world.

  104. 104
    zman Says:

    Haynesville Shale comments:

    6,250 locations on their current acrage

    says not arguing with 4.5 to 8.5 Bcfe per well. Nothing new here.

  105. 105
    Fred Says:

    If humans induced GW then how do you explain the poles on Mars are melting?
    Sorry had to say it.

    http://news.nationalgeographic.com/news/2007/02/070228-mars-warming.html

  106. 106
    zman Says:

    CHK Q&A – hilarious.

  107. 107
    sane Says:

    🙂 Planetary Engineering

    Every time I hear that I think of Aliens.

    “Nuke the site from orbit, it is the only way to be sure”

    I personally like the planetary engineering, but with much caution.

  108. 108
    MMarkkk Says:

    Looking at a few slides from CHK’s presentation. Their hedging program has locked down 2008 results. On slide 22, they show that if gas prices are $8/mcf, they earn $1.949 billion in Net Income; if gas prices go up 25% to $10/mcf, they earn $1.970. I’m guessing there is not much growth beyond $10 but hey, that’s okay. You can say with confidence what your revenue stream is! Subsequent slides show more sensitivity. In 2009 at $10 gas, they make $2.3 billion, an 18% gain.

  109. 109
    zman Says:

    Q&A

    no stock split

    LNG? CHK didn’t buy the idea that the US would be awash in LNG. Sees demand for electricity all over the world being met by gas-fired turbines, so it is not able to come here. Also says rise of “resource nationalism” so that countries around the worlds are less willing to help the US lower prices while the U.S. refuses to drill off its own coasts.

  110. 110
    MMarkkk Says:

    Slide 27: At $9 gas, they calculate NAV to be $97/share or a 73% premium to yesterday’s price. WOW!

  111. 111
    zman Says:

    MMark – yep, they are about 70% hedge and that has held the stock back a little but not much over the last while.

    They are getting a union heckler now, too funny….labor dispute.

  112. 112
    zman Says:

    Aubrey slamming this WV union guy, saying they want a lot more sick time and vacation time than over CHK employees.

  113. 113
    MMarkkk Says:

    Union guy better watch out. Aubrey’s liable to just fire them all and import some Okies to do the work with high quality and much less headaches.

  114. 114
    zman Says:

    Mark – he handled it admirably and ending on a positive note. Guy was a sarcastic type. Meeting over.

  115. 115
    Denise Says:

    Good morning,
    Catching up and thought this was worth a post-especially today! (Forgive me for those who read the article) interesting column in FT by E Chancellor about how the whaling industry parallels the rise in crude.

    There was a paper written by James Coleman-“American Whale Industry-A look back to the future of the petroleum industry” (you can find it via Google fascinating read) in 1995.

    In 1851 whale oil sold for $1200 a barrel. Remember it was our version of crude during this period providing lamp fuel, tapers, ect.. This was peak and spurred technological advances- In 1859 Colonel Drake struck oil in Titusville, Penn.

    He makes a number of points-Whale oil prices were not mean reverting-climbed for 50 years.

    Large profits attracted competition and new discoveries of fishing grounds so the price of whale oil was volatile.

    At peak it became extremely volatile –a bell curve pattern. Whale oil output conforms to Hubbert’s “peak oil thesis”
    Demand rising faster than supply provides the incentive for substitutes.

    He says it is hardly a coincidence that the crude oil industry got started within a decade of Whale oil production peak.

    Capitalism works.

  116. 116
    uop Says:

    zman:
    is there any interesting energy stock down today ???

  117. 117
    Nicky Says:

    SPX has good support here at 1375. Has to hold or we could be another 10 points lower quickly.

  118. 118
    zman Says:

    Uop – I think CHK is still cheap here, same PQ.

  119. 119
    MMarkkk Says:

    Z – agreed on CHK. I donated a bunch to our church to avoid some income taxes. Then bought those back at $50. Raised my tax basis from upper 20’s to 50, and saved some big bucks. Will look to add more on any weakness but may have to wait until NG prices fall (which they probably will in the next few weeks).

  120. 120
    zman Says:

    Mark – agreed re potential weakness in NG although I don’t give it more than $2 downside until we see a pop in LNG or a sustained cool front in the Northeast.

    Did you see that single digit midget player in the Haynesville I wrote up earlier in the week, QBIK? The stock is an option. Very hard to support the price up here but I’d bet it goes higher as news flow increases from the play.

  121. 121
    MMarkkk Says:

    QBIK – the move over the last few days is pretty impressive. I’m going to do a bit of studying this weekend and make a few calls. I know several people who live up that way and own property. Can get a pretty good idea of what’s going on. Wish I could make a trip and actually speak to folks in person. Barber shops, coffee shops, etc…are the best source of information. Also bars where the rig hands have had more than their allotted alcohol!!

  122. 122
    MMarkkk Says:

    Agree gas weakness should be limited, $2 seems right or maybe $3. It won’t impact CHK’s revenues due to their hedges but the market sentiment will bring it down with the rest of the group. A lower market price will actually help CHK’s earnings as the hedges will be marked-to-market at a lower loss. Screwy SEC guidelines!

    Still waiting on more LNG cargoes to hit the US. Will be waiting for a while I think. Cheniere Energy is really hurting!

  123. 123
    zman Says:

    Mark – Jay Reynolds on this site lives there, is in touch with the area and the play, and I might add has a deal with Helmerich on some equipment under development. You guys should chat.

    On QBIK I ran through the numbers and you can’t get there on acreaage value even at prices like 25,000 an acre which I have not seen there yet but it is probably coming. On recoverable gas though, versus the COG deal and the GDP deal you might see a substantially higher price for the takeout, especially given their proximity to CHK as they become a doughnut hole in the Johnson Ranch and in the Bethany Longstreet Fields.

  124. 124
    zman Says:

    Oil up $8, going to buy DUG calls.

  125. 125
    zman Says:

    let me amend 124 to say I’m watching it and thinking hard about it.

  126. 126
    BigJim Says:

    Zman – Any ideas why so many NBR calls purchased for June.

  127. 127
    Sambone Says:

    Wow, 136

  128. 128
    BossmanG Says:

    Z, what do you think about afternoon rally?

  129. 129
    BossmanG Says:

    or profit taking…

  130. 130
    apbd Says:

    USO at day’s high.
    apbd

  131. 131
    MMarkkk Says:

    Doughnut hole: why is it that those darned holes are worth so much!! 🙂

  132. 132
    zman Says:

    Ok, oil up $9. Did I say something in the post about getting accustomed to large numbers? Well, there ya go.

    I detest moves like this as they make the stocks and the commodity trade as one. Stories become unimportant. On the offhand chance that traders decide to take profits on Monday that’s down $5 oil in a blink. And the sentiment will take the names lower. Makes me like my big cash position all the more.

    Refiners getting crushed on this. I got no idea on the afternoon up versus down. I feel a little fat with massive profits which can lead to complacency which is akin to death. Very surprised to see DJIA off only 280 and not 400.

  133. 133
    zman Says:

    Mark – because they are full of kerogen.

  134. 134
    xweto Says:

    HAL Jun 50s have come a looong way back, roll over time?

  135. 135
    zman Says:

    RE: HAL June, sold mine earlier, not in a buying mode right now but holding my July $50s.

  136. 136
    zman Says:

    Does anyone smell smoke? Surely the US blew something up somewhere. Or maybe MEND?

    Oil up $9 at almost $137. Nicky, got any levels? Also, volume looks pretty strong for this time of day.

    Goldman is going to be jealous as this Morgan move smokes their most recent commentary’s spike.

  137. 137
    Sambone Says:

    Isn’t the stop at $10.00 on crude?

  138. 138
    scoop006 Says:

    Z My bone head trade of the week. Bought WLL Sept $100 avg. $8.45 on Wed., sold yesterday early am $9.80,last trade $14.10.This is what you get for DAY TRADING.

  139. 139
    zman Says:

    $10 on the floor
    $20 for electronic trading which is where most of the volume is.

  140. 140
    elijahwc Says:

    The following is borrowed from another venue I follow. No it’s not chat and please don’t shoot the messinger.

    Re: CHK – Haynesville Shale … —

    A contrarian view for CHK lovers out there. My consulting company has been working the Lousiana and Texas sides of this for many years, long before the term “Haynesville Shale” was being thrown around. There is a debate brewing in the area that could lead to a lot of lititagation. This is the story.

    There has been for years a very prolificproducing formation in the area know as the Cotton Valley formation. CHK has “coined” the term “Haynesville Shale”, supposedly to furhter promote the “shale du jour” nationiwide story. There is a growing group of geologists, etc. that beleive that the so called Haynesville Shale is really just a component of the lower Cotton Valley Formation, or so the story goes, for now.

    Why is this important you might ask. Well, many of the rights CHK, PetroHawk and others have purchased over the past two years, are rights contractually limited to only the depths below the base of the Cotton Valley Formation. This could mean that if it is proven the Haynesville Shale is actually a part of the Cotton Valley formation, then, someone else besides CHK would own those rights. If proven, then CHK could be looking at massive title failure under the some the wells already drilled and to be drilled. As one can imagine, this could get quite “dicey”.

    At this point, just a debate, we shall see.

  141. 141
    zman Says:

    Scoop – still, that kind of gain is a problem to have. Guys who buy just stocks would kill for that kind of return.

  142. 142
    Sambone Says:

    Stop at 10, 5 minute delay then new 10 stop.

  143. 143
    zman Says:

    Eli – This is not shooting the messenger but whether you call Haynesville or Bossier, it is a shale underlying the sands and limestones found in the Cotton Valley. CHK is not stupid and I don’t buy the efficacy of the claim made by a consultant firm who is probably short their shares. You simply don’t do what CHK has done for 20 years with the size of their operation and make a blunder/bend the truth like that. Sorry, I don’t buy it. Could someone try to make a stink? We have some guys on here who may refute or agree with me but I’ve seen those kinds of “rights arguments” before and it has always been generated in one way or another with a shorty. Again, not shooting the messenger but this isn’t CHK’s first rodeo and that would be a deliberate and rookie move on their part and I just emphatically don’t believe it.

  144. 144
    kaman Says:

    Legging into USO puts (July 109’s)

  145. 145
    uop Says:

    zman:

    any idea why EOG is not running with the other guys?

  146. 146
    zman Says:

    Uop – It outperformed yesterday moving up $7 would be my best first guess. My second would be that money is flowing down into lower dollar and in some cases riskier energy stories which are perceived by the hot money crowd to be easier to move up than a trip digit stock.

  147. 147
    zman Says:

    Eli – I should add thanks for bringing it to my attention as I had not heard it yet.

    “Keep your stocks close, keep your rumors closer” ~ Z

  148. 148
    Popeye Says:

    Anyone have an idea why DRYS is off today?

  149. 149
    zman Says:

    DRYS I’m sure off just due to economy, market pressure.

    Bush speaking on economy , taxes now. Mkt down 283.

  150. 150
    VTZ Says:

    PQ not participating at all today.

  151. 151
    el_vogel Says:

    as i’ve come to learn to appreciate, 8.45 – 9.8 is far better than 8.45 – 4.45, or having to wait for 4.45 to try and recover…

  152. 152
    zman Says:

    A little Birdy dropped a CHK analyst review of the PR today and to make a long story short they think acreage could eventually go for $45,000 to 50,000 per acre!

    At $50,000 per acre that would value QBIK at at $4.10 on a fully diluted share count.

    V – they can’t go up everyday, that’s been my point in taking profits in several names. Also note that PQ is not alone, everything is off its highs, and the XNG (which represents the gassy stocks ) is up 1.3%, big deal when you’ve got oil up 7%. At these prices, Oil is the enemy of even energy share prices. The XOI which contains the Majors is just barely green.

  153. 153
    uop Says:

    zman:
    I see that KWK ahd a big move, any idea why ?
    where are they operating ?

  154. 154
    elijahwc Says:

    Z
    Point well taken. I agree with you relative to CHK many rodeos

  155. 155
    zman Says:

    KWK just rebounding from a recent down draft. They operate primarily Barnett and in a liquids rich part of it so they get very high realizations (north of $14 per Mcfe produced ) while being a gas company as they strip out the high value liquids from the gas stream. Fast grower, good acreage position, good management, extremely long reserve life.

  156. 156
    Jay Reynolds Says:

    RE 140: At a meeting this week on Unitization of the Haynesville Shale, Jim Broussard of the La Dept of Consv of Nat Resources said clearing the HS is BELOW and not a part of the CV series.

    Lease bonuses now north of $15K/ac, trust dept at Commercial Nat Bank of Shreveport just turned 30K acres to yet unnamed buyer.

  157. 157
    Nicky Says:

    John Kilduff on CNBC saying that the USA have given their permission to Israel to attack Iran – he is all panicky of course and implying it will be this weekend!

    More like propanda on the part of the Israeli transport secretary as he seeks to oust Omert the Israeli PM.

  158. 158
    Nicky Says:

    Heating oil is above limit up again so how does that work?

  159. 159
    Nicky Says:

    1375 now gone on spx. next support is 1363 – 1365, then 1350 and then 1340, then 1330…..

  160. 160
    Nicky Says:

    Limit up should come in here on oil

  161. 161
    VTZ Says:

    What is limit up?

  162. 162
    zman Says:

    I’m going to publish my mkt watch so you guys can watch the same list, or at least the same basic list of stocks I do. I have several hundred stocks in different tabs I watch and I sometimes forget that when you guys ask why a stock is flat it may be that your sample of stocks in the energy space is small. I have found that relative performance is more important for trading that the performance of a single issue. Having a good list of each sector of the energy market is a whale of a help when you are wondering why “your” stock is down.

    Movie quote for Friday
    “they’re moving in herds, they do move in herds.”

    Thanks J R – you and Mark should chat, see way above on local NW LA issues.

  163. 163
    scoop006 Says:

    el_vogel- You are correct my friend . Working hard to learn not to second guess my trades

  164. 164
    BossmanG Says:

    Z, that would be great, also if you can provide of any other indexes you watch? or which futures…etc.

  165. 165
    MMarkkk Says:

    Jay
    The Rockhounds I talk with are also very sure of the Haynesville/Bossier Shale NOT being part of the CV.

    Do you see a lot of severed mineral interests in the Caddo parish area like exist in the Denton County Barnett area? These aren’t nearly as urbanized as Fort Worth but this could slow things down a bit.

    The 30k doesn’t surpise me as I’ve heard some folks justifying 20k/acre publicly which means they can and will spend lots more. Look at the Piceance in Colorado. Paying big premiums there too.

  166. 166
    zman Says:

    Kilduff said yesterday this was definitely a top. I honestly could care less what he thinks as he just talks his book. He must be back to long again.

    There are floor limits and electronic trading limits which are higher.

    For oil the limit is 10 on the floor and another 10 on electronic

    Scoop – you know I never beat myself up or second guess a trade unless it is to reverse it.

    Bossman – will do. For indexes: XOI, OIH, XNG for futures CL/N8 to Cl/M9 (12 month strip) same for NG, then just the summer for UJ (gasoline) and HO. East and west coal but not so much during the day as they are thin.

  167. 167
    Nicky Says:

    Wow I hope after all this the attack on Iran is on this weekend or else they are going to look somewhat stupid.

  168. 168
    zman Says:

    oil up 10.74

  169. 169
    zman Says:

    Nicky – hear ya but I prefer they not do it.

  170. 170
    zman Says:

    Looking at the stocks there is obviously some disbelief in the sustainability of an $11 move. Filling up the cars as soon as the market closes.

  171. 171
    Sambone Says:

    Jurassic Park, 1993

  172. 172
    js1 Says:

    just flushed my OII again, 71.55-78.04. been lucky on this one twice now. I thought it might go to 82, but my chickenbone has gotten the best of me.

    plus its up 4 straight which looks like what this one is good for.

  173. 173
    Nicky Says:

    Z – who cares anyway if they do attack Iran. Gets the job over and done and we move on with Iran being out of the equation. It would be a very short blip in my view. And the USA have filled the SPR for such an event. It would hurt Iran far more than us if they cut off supply.

  174. 174
    zman Says:

    Sam wins the prize!

  175. 175
    zman Says:

    JS1 – not a bad idea. SLB rolled negative, service gains coming off.

  176. 176
    gaamblor Says:

    CHK needs to shift their charts and show what happens with nat gas at 12, was there any discussion on their hedging for ’09 and 10? this would seem to be the type of market where they usually lock in the big numbers

  177. 177
    Brian08 Says:

    These last 2 days have been insanity, pure, pure insanity…

    I’m going into all cash outta these energy names…Not that I doubt any of you longs here, but I think all these things are gonna get killed on Monday and I think I’ll get ’em back at a better price…

  178. 178
    sane Says:

    You have to wonder sometimes if GS and the like have an inroad to the White House. I wish they would just attack Iran and get it over with.

  179. 179
    zman Says:

    Brian – I am half cash now. Agreed there is the potential for a snapback.

    g – they have a significant hedge in 2009 and then it fall off in terms of volumes and rises in price. They will continue to hedge to reduce the volatility of their cash flow stream, that’s pretty much a quote from Aubrey.

  180. 180
    Sambone Says:

    N- # 173, yea we should care. If Iran is attacked the first thing they will do is mine the Strait of Hormuz. Then the US navy begins shelling the islands in the Strait. Speed boats, Harpoon/Silk missles on carriers in the pond, Next thing you know Iran launches missles at Israel. US backs Israel. It escalates. tankers don’t move. Crude goes above $200.00 overnight. SPR is good for what 90 days?

  181. 181
    Nicky Says:

    Brian I am sure everyone agrees with your statement about insanity.
    Unfortunately looking at the charts we have yet to see the set up for a reversal. Its possible we see a ii back (Monday?) and then the final push which is likely to take us to 150 or close anyway.
    Alternatively we spike Monday and reverse…but we need a catalyst and I am a non believer in the Israel story.

  182. 182
    Fred Says:

    Yeah sane Paulson. If they attack we get drawn in for sure and all those extra tankers in the gulf will be sunk in an attempt to close off access. Big mess!

  183. 183
    zman Says:

    ZTRADE: Added DUG June $27 calls for $1.70 for a little reversal protection. These gain in value if the energy stocks pull back.

  184. 184
    Brian08 Says:

    Don’t doubt it Nicky…But it would just seem as if traders run it up ~$6 yesterday and $10+ today that there HAS to be some selling come Monday (at least some profit taking, which is what I’m setting myself up for)…It’s gonna be a hella dangerous game of “Who Is Gonna Be Left Holding The Bad”…

  185. 185
    Brian08 Says:

    edit: “Who’s Left Holding The Bag”

  186. 186
    MMarkkk Says:

    gaamblor: check out this link with the slides from their presentation. Check out slides 22-24 for the details on their hedging and its impact.

    http://library.corporate-ir.net/library/10/104/104617/items/297048/2008%20Annual%20Shareholders%20Meeting_rev01.pdf

  187. 187
    Nicky Says:

    No Sam – I read SPR is good for 9 months. They have to have looked at this scenario – as you say we know how it will play out. And I still think yes it would spike but it would not last long. And at the end of the day the threat of Iran in the background lurks all the time supporting the price of oil and pushing it higher. Take it out of the way.

  188. 188
    Nicky Says:

    Agree Brian. I have heard comment that it would have caused chaos to the market if legislation had come in and caught all the longs offside. This way they are all offloading up here I am sure and making a graceful exit. Classic distribution going on I would bet. The big boys won’t lose…

  189. 189
    sane Says:

    The SPR can pump 4.1MMbls/day for the first 3 months diminishing after that

  190. 190
    Nicky Says:

    But Iran is not the only one to supply us with oil so SPR is only gonna make up the shortfall surely?

  191. 191
    Brian08 Says:

    Nicky, reminds me of “The Sorpranos”…The big guys NEVER lose there either…

  192. 192
    zman Says:

    Just for fun:

    SPR has 704 mm barrel in it now
    U.S. received 77 mm barrel per month from the Persian Gulf, so that gets you to the nine month figure. Might lose more than that as Venezuela would likely protest for a few days as well.

    oil up $11.20.

  193. 193
    zman Says:

    ZTRADE: Out WLL September $105 calls for $11.10, up 79%. Just not liking the impact of oil up $11.

  194. 194
    Sambone Says:

    Venezuela will blow air but they won’t stop selling to the US. US refiners are the only ones that can refine their dirty oil. What will happen is that Japan, France, etc. will not be able to get their oil from the pond, so the spot price will go through the roof, overnight. Chinese have to pay more because crude is priced in US$’s. They may get pissed and sell their US treasuries, which will really put a hurt on the US.

  195. 195
    benbobby Says:

    Since when do we get oil from Iran?

  196. 196
    Jay Reynolds Says:

    >Do you see a lot of severed mineral interests in the Caddo parish area like exist in the Denton County Barnett area?

    No, several large difference, much easier for an operator.

    1) Minerals rights “prescribe” (ie are automatically transferred to the current owner of the surface) if they are not produced within 10 years. In the absence of production, this sort of “automatically” cleans up title over time.

    Net results is that you don’t see zillions of fractional mineral interests like you do in TX, AK, etc..

    Metro areas are not packed, lots of rural acreage, larger leases negoiated, cheaper acquisition.

    But, what has been learned in the Barnett has whole sections of the city banding together to negoiate their leasehold rights as a package.

  197. 197
    texana Says:

    on cv & hs problem pva is in tx & doesn’t have that depth clause on lse

  198. 198
    Nicky Says:

    Out of interest does anybody on here give any credence to the Israel threat? I mean is it really imminent?

    Sam- isn’t it a question of eventually something has to give with Iran though? Or if the Democrats get in do we go back to a period of more negotiation with them rather than Bush’s sabre rattling?

  199. 199
    sane Says:

    Re 194.

    The deal with Iran is that if we attack it will be bad for everybody.

  200. 200
    Nicky Says:

    How Asia react to this Sunday night is somewhat of a concern. We could get a very bloody open on Monday which I would expect the US to buy up.

  201. 201
    Brian08 Says:

    CNBC just showed a national map and average gas prices around the country…

    Good call on the $4 gas Z! Unfortunately for my SUV you were right…

  202. 202
    zman Says:

    Sane – agreed

    CNBC = absolutely worthless. On down oil days they interview bears, on up oil days they bring in a guy who says we’ve had it good until now and that there is no end in sight to the rally. What brilliant reporting and analysis. About as useful as telling some one standing in the rain that it is raining.

  203. 203
    VTZ Says:

    One thing I don’t understand about the people who think that 150 dollar oil, for example, is overly outrageous is that everyone will still drive. The only thing that will change is that other things will get cut out of budgets.

    If a family has two cars and one is an SUV and both are used every day. They are not about to go buy a new car, for the most part.

    I personally do not believe too much in demand destruction until levels much higher than people currently cite as a level where it will occur. That being said, high oil prices will curb use in less fortunate countries.

  204. 204
    Sambone Says:

    N – If Israel is gonna attack, we won’t know when. It won’t be this weekend. If they do attack, it will be between now and January 2009.

    Not sure what the answer is, but the US has painted itself in a corner, Catch 22.

  205. 205
    Nicky Says:

    Interesting comment I have just seen on another board that there is very good chance by the middle of next week the President of Iran may have backed off from his statements about destroying Israel. I guess when you think about it Iran don’t want this either!

    If SPX can’t get back above 1378 then chances are we see 1353 next week.

  206. 206
    zman Says:

    Refiners getting hammered.

    OIH has gone red as has the XOI. XNG slipping and the DJIA looks like it wants to be down 400 at the close.

    DUG starting to rally.

  207. 207
    Nicky Says:

    Broader market – cycles are calling for a low early next week…

    I suspect we gap down Monday morning and it will look evil….

    Pentagon announcing that they know of no imminent Israeli attack on Iran.

  208. 208
    Nicky Says:

    Oil now off over a dollar.

  209. 209
    zman Says:

    Nicky – I’d like to see it peel off another five as it would ease pressure on the stocks.

  210. 210
    Nicky Says:

    No positive response from the broader market right now.

  211. 211
    sane Says:

    I’d like to see it peel off another $10

  212. 212
    VTZ Says:

    What logic do people use to justify selling energy stocks because the broader market is off as a result of energy? I don’t get it.

  213. 213
    Nicky Says:

    Well I would like to get short and then see it peel off $40!

  214. 214
    zman Says:

    VTZ – it is convoluted logic but as they told me in tax class many years ago, don’t ask why, just understand that it is so.

  215. 215
    Nicky Says:

    Anyway that was your pullback – enjoy it – all of $1. Now we can move on up….

  216. 216
    Brian08 Says:

    Re; #212…Let me give you a tidbit I learned in my last semester of B-school in my Behavorial Finance class…

    People are stupid…I think that sums it up pretty well…

  217. 217
    VTZ Says:

    People are selling energy equities to go long the commodity, haha.

  218. 218
    zman Says:

    V – I don’t have to agree with it, I just have to understand and profit by it.

  219. 219
    VTZ Says:

    Re 216 and 214.

    All of us engineers have a rough time with lack of logic. It makes no sense to us.

  220. 220
    zman Says:

    movie quote #2:

    God Help Us; We’re In The Hands Of Engineers

  221. 221
    VTZ Says:

    Z – Agreed. I understand that it happens and I enjoy profiting from it, but I was just curious if there was any logic whatsoever

  222. 222
    Brian08 Says:

    V, as a former chemist myself I know what you are talking about…Irrationality makes no sense to me personally, but at the same time makes a helluva lot of sense because that’s the way people seem to act (at least when it comes to trading/money)…

  223. 223
    ram Says:

    HEY…

  224. 224
    ram Says:

    I didn’t get a good CHK exit. Hopefully early next week.

  225. 225
    sane Says:

    Jurassic Park again

  226. 226
    zman Says:

    V – I know, I know, just feeling a little lazy on a Friday afternoon. The logic is sort of laid out in my as of yet unpublished and highly updated FAQ section which THEY PROMISE ME will be ready before I got to Honduras. Or it will be in my book.

    DJIA going right to my down 400 target, lol

    Also, aren’t you glad not to be back bottom fishing in the refiners today? I’ll look hard at them again on numbers next week and the week after. No joy for now and too cheap to feel right taking puts.

  227. 227
    Nicky Says:

    Well talking illogical oil has bounced right back – even when they refute the catalyst that took it $11 higher today!
    Will no doubt find another reason to ramp it Monday.

  228. 228
    Sambone Says:

    #171, again

  229. 229
    zman Says:

    Ram – ‘m pretty encouraged by CHK’s ability to not give it all back like most of the hot names in the group.

    Sane gets prize too.

  230. 230
    Sambone Says:

    B – #216, LOL, it’s true, they are “Lemmings”.

  231. 231
    zman Says:

    Brian – understanding irrationality and having a thesis are key to options trading, less so on the former in stock investing. But the number 1 enemy of the option trader is emotion.

  232. 232
    BossmanG Says:

    Z, whats your latest opinion on the way SD acts? just wondering if it can test its high next week

  233. 233
    Sambone Says:

    My favorite quote: “But, John. But if the Pirates of the Caribbean breaks down, the pirates don’t eat the tourists”

  234. 234
    zman Says:

    Boss – I sold mine ealier but if the market holds together it would be one that I would think would punch to new highs.

  235. 235
    Nicky Says:

    Just thinking that when I asked the question in #198 – I wasn’t actually expecting an answer from the Pentagon! But you did say you had some pretty big subscribers Z!!

  236. 236
    zman Says:

    down 392

  237. 237
    sane Says:

    Nickey,

    The real catalyst is Morgan Stanley calling for $150 in less than a month.

    Gotta love self fufilling prophicies. All you have to do is be right a couple of times and all of the lemmings will follow.

  238. 238
    Brian08 Says:

    There you go Z, 400…

  239. 239
    MMarkkk Says:

    ding ding ding

    margaritaville here i come!!!!!

    have a great weekend all.

  240. 240
    Sambone Says:

    Tini time, have a good weekend!

  241. 241
    zman Says:

    Nicky – you would not believe the people who are in here if I sent it to you.

    Beer Thirty!

  242. 242
    zman Says:

    Thanks for a great week gang!

  243. 243
    tater Says:

    Careful with that NFX, I’ve been out all afternoon, closed at that number 65.50 and printed an ugly little reversal day doji.

  244. 244
    Nicky Says:

    Sane re # 237 – what a great game eh. Clearly they have no worries that there is any substance behind the talk they are gaming the market. Otherwise I can’t think they would have done this.
    To a certain extent they can hide behind the Iran news anyway on this one.

  245. 245
    sane Says:

    agreed Nickey

    Have a great one all 🙂

  246. 246
    zman Says:

    Airline for the environmentally conscious

    http://flyderrie-air.com

  247. 247
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