30
Jun

Monday Morning – ¿Qué tal?

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It's good to be back! Flew in just after midnight so forgive the short post. I thought I'd do the wrap and comments in my new fangled Spanglish but lack of sleep kills my sense of innovation. So here's the wrap table followed by an abridged Monday post. Look for me to be back to my overly verbose self tomorrow.

wrap-062708bbb.jpg

In Today's Post:

  1. Commodity Watch
  2. Holdings Watch
  3. Stocks We Care About Today - (SD), (HK), the refiners
  4. Analyst Watch  

Commodity Watch:

  • Crude Oil. Holy smokes, oil through $140 last week despite the Saudi's wet blanket party and a MEND "unilateral ceasefire". Blame a weak dollar if you want but growing fear on the Street is that the Saudi's simply don't have the spare capacity. This morning crude is up $1.50 to $2 having breached $143 in the early morning hours as tensions between the Israel (the U.S.) and Iran escalate.
  • Iran Watch #1: The head of Iran's Revolutionary Guard threatened to "impose control on the Persian Gulf and Strait of Hormuz" if attacked and threatened neighbor states with reprisals if the cooperate in any U.S. or Israeli operations against Iran's nuclear facilities. Ah, summer in the Middle East.
  • Iran Watch #2: Iranian oil production reached 4.23 mm bopd, it's highest level since the overthrow of the Shah in 1979. They plan to take production to 4.28 mm bopd by year and with volumes like that, don't look for them to smoke a peace hookah anytime soon.

iran-production.jpg

  • Natural Gas closed up less than a percent at $13.19 last week as another sub par injection was recorded. Imports remained down nearly 3 Bcfgpd in the preceding week and I don't see any near term help from the LNG side of the equation which is 2/3rds of the YoY deficit.  This morning gas is trading up a dime plus with the rally in oil
  • Weather Watch: Cooling degree days came in at 65 up from 54 in the prior and even with year ago levels when we saw an injection into storage of 84 Bcf. My early read having not yet seen imports would be for a similar number or slightly larger number to be released this Thursday. 
  • Tropics Watch: Four tropical waves are making their way across the Atlantic but no near term development is expected.

Holdings Watch: I was up very slightly in my absence last week as I sat on a larger than normal cash and stock position (59% cash, 23% stocks, 18% long options). I'll be slowly wading back into greater oil service call exposure this week as the evidence of a resurgence in North American drilling continues to mount (that's a new record for gas directed and horizontal rigs in the table above). On the E&P front, there wasn't a lot of news out of the trendy Haynesville players last week and the Bakken's too appear to have been rather quiet as we approach 2Q earnings season. I will be slowly moving back into some of my favorite names in this space as well as mark to market earnings adjustment season is now in full swing and I expect further runs in many of our favorite names as we approach catalytic news items before and during their 2Q calls.  To see my current option holdings click the ZEB Holdings Wiki tab at upper left.    

Stocks We Care About Today:

(SD) CO2 Deal With (OXY). Oxy will fund a CO2 removal plant in West Texas that keeps (SD) on the path to producing 350 MMcfgpd by 2011 from its high CO2 content gas reserves in the western side of the West Texas Overthrust. In exchange for the $1.1 billion price tag Oxy keeps the CO2 for its own W. Texas tertiary recovery efforts while SD nets out the methane. They also announced a fire at their Grey plant occurred on Friday which is expected to result in the loss of 16.5 MMcfgpd (or about 6% of 1Q volumes) for 90 days. A non-event in my book and both news items leave my thoughts unchanged on the common, still long, but am looking for a re-entry point on calls prior to earnings.

Refiners Continue To Wither. I can't say enough "sometimes the best trade you make is the one you avoid". Bottom fishing this group has been the equivalent of financial hari kari. Look for an update on the space tomorrow.   

(HK) - Announces Biggest Haynesville Result To Date & Updates Leasehold.

  • First horizontal well (Elm Grove Plantation #63, Bossier Parish) completed at a whopping 16.8 MMcfgpd choked down to 24/64"" with an 11 stage frac. Looking at the chart it looks like the news started to leak last week prompting the PR which given the high level of activity and rising head counts in the region is going to be increasingly the case.
  • 3 horizontals drilling at present
  • leasehold now at 275,000 net Haynesville acres.
  • Plan to have 6 rigs running by mid September and 10 by year end.
  • Glad I hold the common and the September $40s as well as positions in (CHK)
  • Should see across the board buying in the Haynesville names (CHK), (GMXR), (GDP), (PVA), (CRK) etc (see fully list on the E&P tab and even tiny (QBIK). 

Odds & Ends

Analyst Watch: FBR hikes its pt for (DVN) from $125 to $140.

Housekeeping Watch: Glad to see how active the site was last week. The number of emails I received while away was shocking and will take awhile to go through. If you have anything pressing shoot me a note at zmanalpha@gmail.com

 

 

117 Responses to “Monday Morning – ¿Qué tal?”

  1. 1
    zman Says:

    HK – in addition to the stuff in the post I should add this will prompt both NAV upgrades and higher production growth forecasts on the part of the Street. Up until now most analysts should not be including any Haynesville volumes in their forecasts. That changes now. Similarly HK will need to alter their guidance, probably on the 2Q call to account for the new volumes in the 2H which they pointed out are being taken to market via existing infrastructure at Elm Grove. The stock is bid > $45 and I will likely chase in the first hour. Its great to be back!!!

  2. 2
    Petra – ZEBAdmin Says:

    test test test

  3. 3
    Sambone Says:

    I’m up now

  4. 4
    Sambone Says:

    7:01 am EST

    Crude At Record Highs Above $143 A Barrel

    By LANANH NGUYEN
    Dow Jones Newswires

    LONDON — Crude oil futures surged to fresh record highs Monday as a lower U.S. dollar against most major currencies continued to buoy oil prices.

    Concerns over Nigerian oil supplies also drew a line under prices, as news of a weekend attack on an oil facility there kept market participants on their toes.

    At 1041 GMT, the front-month August Brent contract on London’s ICE futures exchange was up $3.44 at $143.75 a barrel after earlier touching new record high at $143.91 a barrel.

    The front-month August contract on the New York Mercantile Exchange was trading $3.24 higher at $143.45 a barrel after earlier hitting a high of $143.67 a barrel. The ICE’s gasoil contract for July delivery was up $24.25 at $1,291 a metric ton, while Nymex gasoline for July delivery was up 638 points at 356.50 cents a gallon.

    —–By Lananh Nguyen, Dow Jones Newswires

  5. 5
    Sambone Says:

    3:56 am EST

    BP Says Supply, Demand Driving Oil Price

    Dow Jones Newswires

    MADRID — High oil prices are not the result of speculation but of a fundamental shift in consumption, BP PLC’s (BP) chief executive reiterated Monday, a contrast with many statements by oil producers and others.

    Speaking at the World Petroleum Congress here, Tony Hayward dismissed what he said was the “myth” of higher oil prices being the product of speculation.

    Instead, they had stemmed from booming hydrocarbons consumption in Asia and the U.S. in recent years.

    Members of the Organization of the Petroleum Exporting Countries have blamed high oil prices on speculators. Earlier Monday, world oil prices reached close to $142 a barrel. The CEO said the world wasn’t running out of oil but that oil production was hindered by rising costs.

    “Supply is not responding adequately to rising demand,” Hayward said in a speech here.

    In order to sate markets, Hayward said governments should “keep markets liquid and accessible” instead of keeping high import tariffs.

    Taxes on production are also too high and should be lowered to release funds for investment, he said.

    Separately, the CEO called for a global cap-and-trade system of carbon emissions, where players sell credit on carbon they don’t produce. “A global price of carbon will soon emerge,” he said.

    —By Benoit Faucon, Dow Jones Newswires

  6. 6
    tater Says:

    Has anybody heard anything that would cause WLL jump in volume at end of Friday trading similar to HK?

  7. 7
    zman Says:

    Tater – WLL and HK moved from the Russell 2000 to the larger cap 1000 index after the close on Friday.

  8. 8
    tater Says:

    So a bunch of index funds have to add them. Got it, thanks

  9. 9
    Sambone Says:

    By Isabel Ordonez, Jason Womack and Hyun Young Lee
    Of DOW JONES NEWSWIRES

    HOUSTON (Dow Jones)–Small oil and gas companies generally off Wall Street’s
    radar could be the biggest winners under the Securities and Exchange
    Commission’s proposal to update the way energy companies report reserves.
    The SEC proposed new regulations Thursday to overhaul the system for reporting
    reserves, a critical valuation benchmark to Wall Street. One of the proposed
    changes would allow the industry to report “probable” and “possible” reserves
    in company financial statements, a shift the industry has argued would provide
    a more accurate picture of the resources they control.
    The change, if codified, is expected to increase the official amount of
    reserves reported by companies across the entire oil and gas sector.
    Unlike Exxon Mobil Corp. (XOM) and other giants, smaller exploration and
    production companies aren’t often given the benefit of the doubt when they tout
    resources that don’t meet the SEC’s strict guidelines for “proved reserves.”
    The changes proposed Thursday are seen likely to legitimize more of the smaller
    companies’ holdings.
    “The change would favor small companies because analysts will have more
    information about them and put more substance to their numbers,” said Phil
    Weiss, energy analyst at Argus Research in New York.
    Friday, most energy companies were still studying the proposed changes. “We
    support updating the rules but need time to understand the effects of the
    proposed changes,” said a spokesman for Chevron Corp. (CVX).
    Officials with Devon Energy Corp. (CVN) and ExxonMobil also said they were
    studying the revisions.
    But a senior executive with Continental Resources Inc. (CLR), an
    Oklahoma-based independent oil and gas producer, said the company’s reserves
    could jump significantly under the proposed changes.
    The bulk of Continental’s reserves, about 83%, are in unconventional plays
    like the Bakken shale, an oil-rich formation in Montana and North Dakota.
    Continental President Mark Monroe said the proposed changes could boost the
    company’s total reserves in the Bakken from 7 million barrels of oil to more
    than 100 million barrels.
    “You are talking about hundreds of thousands of acres of running room,” Monroe
    said. “That’s a lot of probable and possible reserves.”
    The change would also allow producers in Alberta, Canada’s massive oil sands
    to classify the holdings as oil reserves. Currently, the industry can report
    the oilsands in their SEC filings – but they are usually counted as mining
    operations, not oil reserves.
    But oilsands players, which tend to be oil majors and large independents, may
    continue to split out oilsands reserves from conventional crude to reassure
    investors that they’re not shielding poor reserve replacement ratios behind
    massive oil sands figures, said Simon Wardell, a London-based oil analyst at
    consultancy Global Insight.
    Smaller companies that operate in the oilsands tend to list only on the
    Toronto Stock Exchange, rather than in New York.
    The bigger benefit to Canadian players may come from the proposal that
    producers use a 12-month average price to estimate reserves, rather than
    year-end prices, which is the current rule. Bitumen prices tend to be more
    volatile than conventional oil and gas.
    “Two or three years ago, a number of the major oil companies reported no
    reserves in their major oilsands projects” because bitumen prices, which trade
    at a discount to light, sweet crude oil, had slumped dramatically at the end of
    the year, said Gord Graham, a Calgary-based partner at Ernst & Young. “But
    three weeks earlier or later, you would have been doing quite nicely.”
    The proposal is open to public comments for 60 days. After that time the SEC
    will analyze the public input and vote on a final rule, said SEC spokesman
    Kevin Callahan. There isn’t a specific timeline for either formulating a final
    rule or deciding on the effective date companies might start reporting under
    the possible new rule, he added.
    Thursday’s announcement follows a more preliminary move by the SEC in December
    2007 to seek comments on a proposed update of the rules. The oil industry has
    been pressing for a revision in recent years, arguing that the present system
    undercounts their holdings.
    The reserves issue also soared to the forefront in 2004, when Royal-Dutch
    Shell PLC (RDSA) announced a major downward revision of its holdings, a move
    that resulted in major enforcement from U.S. and European regulators and led to
    a shakeup in Shell’s corporate leadership.
    -By Isabel Ordonez, Jason Womack and Hyun Young Lee, Dow Jones Newswires;
    Dow Jones Newswires
    06-30-08 0738ET

  10. 10
    zman Says:

    Sam – re the SEC change, I can think of few companies who would benefit more from probables and possibles going on the books than CHK.

  11. 11
    zman Says:

    HK bid 47 and will probably top 50 this week.

  12. 12
    Sambone Says:

    BQI

  13. 13
    zman Says:

    I’m likely to go back in PQ, where I hold the common now, as they have higher leverage to the play than the Street is generally acknowledging. I am also likely to take more CHK action, probably July and August calls.

  14. 14
    zman Says:

    Sorry, meant U.S. and companies that are severely discounted to NAV with established, growing production and reserve bases.

  15. 15
    Sambone Says:

    Ngas stocks – Wow

  16. 16
    zman Says:

    No kidding, nice day to come back.

    Watching the first retrenchment of HK for addition point in near term calls.

  17. 17
    ram Says:

    Good Morning ZMAN – glad to read that you are back.

  18. 18
    zman Says:

    ZTRADE: HK $50 July Calls entered for $2.10. See today’s post for comments on their first successful Haynesville test. I continue to hold the September $40 calls and the common.

  19. 19
    zman Says:

    KOG out with a pretty non-event operations update although they are making progress towards Bakken results. The one thing of note and what I think will become more widely seen in the near term is the comment about having bought all the pipe they need to drill future wells there. The concern has now turned from “gotta get the acreage” to “gotta be able to drill and complete wells on the acreage”. Just more good news for TS,X, WH (drill pipe) and HAL, SLB, WFT, NBR

  20. 20
    kiaora Says:

    Good morning ZMAN..any comments on why SD is not joining in today?

  21. 21
    Bob Says:

    K-Fire at plant. Out of service for at least 90 days. Sold my sept 80’s at open

  22. 22
    kiaora Says:

    B..Thanks

  23. 23
    zman Says:

    K – re SD – had both news items in the post. That’s a nice plant OXY is building for them but the news was expected. The 6% of lost production is just delayed and one of those things companies get a “get out of jail free” pass for from analysts unless it takes longer or happens at another facilities and then people start to wonder. If it gets socked, which I doubt, I will be buying and I will most likely be long for the 2Q call. The move eastwards in the WTO is providing less CO2 content AND bigger gas wells. Two things we at ZEB like to see, lol.

  24. 24
    zman Says:

    wow QBIK. up 8.7% at $4.24.

  25. 25
    isleworth Says:

    Welcome back Z. What is PQ Haynesville exposure?

  26. 26
    zman Says:

    Isle – PQ has at last count about 25,000 acres exposure which at first blush doesn’t sound like a lot but when you take a look at reserve potential vs their current bookings it puts them at the upper end of the 20 or so stocks with leverage to the play.

  27. 27
    ellwodo Says:

    HK – I’ve joined you in HKGJ, surprised it’s not moving up even faster but happy to get in.

  28. 28
    isleworth Says:

    Tks mucho Z

  29. 29
    zman Says:

    Elwo – still think it takes out $50 this week. These often move big on the news, pull back and then relaunch late day once the analysts have had time to put pencil to paper.

    denada

    stepping out for 15 minutes.

  30. 30
    Popeye Says:

    CNBC just pumped HK and it jumped immediately.

  31. 31
    zman Says:

    Popeye – thanks, that was nice of them. About to go back to NBR where I currently only hold Septembers, it’s not participating and the rig counts were as good for them as they were for anyone and the stock remains relatively cheap despite the move.

  32. 32
    zman Says:

    Thanks Redjack, stay close to port.

    Morgan Stanley raising targets on several service co’s. NBR to $46 with the stock at $49+ isn’t helping the cause but is setting up a buying op relative to the others.

    Nicky, if you’re around broad market thoughts would be welcome.

  33. 33
    BossmanG Says:

    Z, any thoughts on NFX/OII?

  34. 34
    Sambone Says:

    “Out of the mouth of babes”! LOL

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aN1AoP_vbv78&refer=home

  35. 35
    Sambone Says:

    Hmmmm, a little side action!

    http://news.yahoo.com/s/nm/20080627/od_nm/manure_dc;_ylt=Ag_RM7odKdcTQs6FCRtMilys0NUE

  36. 36
    antrimshale74 Says:

    KWK is continuing to be weak. Perhaps this is simply a result of the $750 million note offering?

  37. 37
    Sambone Says:

    Now I feel better!

    MADRID, June 30 (Reuters) – Oil prices at record highs have
    helped boost tax revenues of western governments and that money
    could be used to help to ease the consumers’ suffering, OPEC’s
    President Chakib Khelil said on Monday.
    “Taxes on petroleum products are 80 percent. So for every
    dollar that OPEC gets, western countries get $4. They could
    actually transfer some of the revenues to sectors which suffer
    the most,” Khelil told reporters on the sidelines of the World
    Petroleum Congress in Madrid.
    Khelil, who is also Algeria’s oil minister, said the
    international oil industry faced several challenges in producing
    more.
    He said during the era of low oil prices during the
    mid-1980s to late-1990s, the global oil industry did little to
    spend money to boost production.
    International oil majors shed their workforce and thousands
    left the industry for good. Companies also spent a lot of their
    cash in buying back their shares from the market.
    “Now everybody is going and investing at the same time. The
    big problem is to find people as there are not enough people to
    do projects,” he said, adding that a glut of orders meant that
    crucial equipment was taking longer to produce, the price of
    steel had tripled and oil service companies were harder to find.
    “So the industry is facing a big problem in meeting demand.
    But I think it’s just a question of the period. There is no
    problem about the world having enough oil and gas to satisfy the
    needs of the world for the next 50 years,” Khelil said.
    Khelil reiterated comments made last week that the price of
    oil, which hit a record high above $143 a barrel on Monday,
    could rise to $150-$170 during the summer, but ease toward the
    end of the year.
    (Reporting by Santosh Menon, Mon Jun 30 15:07:33 2008 -GMT-

  38. 38
    zman Says:

    Bossman – NFX, still waiting on news, will need to punt the $70s soon. Will hold the $65 calls.

    Re OII – nothing at present, think it goes higher as hurricane season progresses. Good quarter likely on the way 2Q.

  39. 39
    zman Says:

    Sam – too funny re 37.

    Antrim – its a great story, don’t know how long deal hangover lasts but I’d bet not long.

  40. 40
    antrimshale74 Says:

    OK. What’s with the strength of the dollar today? All the news seems to be negative. Perhaps this is just a bounce, but I’m thinking it’s putting a limit on commodity upside this AM.

  41. 41
    zman Says:

    oil going into red, will take some juice out of the stocks but will allow the broad market a bit of a breather. Didn’t see anything regarding a cause for the sell down but the reasons for the rally were pretty thin as well.

    dollar strength pretty modest here. Probably just a dead cat bounce off a three week low as of Friday.

  42. 42
    antrimshale74 Says:

    I’m seeing pretty strong moves against Canada and Australia which are very much commodity currencies, but I guess this pretty much mimics the weakness in oil. I must add that the trade above parity with Canada is pretty much a thing of pride in these parts along the northern border.

  43. 43
    Sambone Says:

    #41 – EIA out with release. Awaiting full report. That’s why crude is down.

  44. 44
    antrimshale74 Says:

    I guess this gives my silly airline hedge a chance to work! LOL!

  45. 45
    zman Says:

    Sam – not seeing anything out of EIA on their site, don’t see a headline either. What do you see?

  46. 46
    zman Says:

    Anyone see any broker comment yet re HK?

  47. 47
    bill Says:

    how big is the news on hk vis a vis flow rate and depth of the find

    who in your opinion is the mostly undervalued haynesville player chk,pq,hk??

  48. 48
    Sambone Says:

    Z – headlines started at 11:20

    US revised oil usage in April down 3.9% vs 2007

    Lowest since 2002

    Gasoline usage down 1.25% in April vs 2007

    Oil futures turn negative on weak demand, Strong dollar

  49. 49
    zman Says:

    Bill, that’s big rate for not that big of a lateral (sub 4,000 feet). At 16.8 MMcfgpd it’s bigger than PVA’s promised non-constrained rate and is approaching the CHK rumored rates. It’s a lot of volume and if commensurate with EUR would mean, which in the shales is possible, it means the current assumptions being used in the play of 5 Bcfe per well are off by as much as half. So then reserve potential of the play could be double holding risking of acreage and all other assumptions liking spacing where they were before. We should see some big upgrades here.

    Who is cheapest? Probably PQ but they are not considered a mainstream HS play and therefore it is likely to take some more time for them to get a bump in multiple like some of the other players here. I’ll have some updated tables out in the morning.

    One thing the rate does here is bump estimates immediately and while I wouldn’t call HK cheap it did just get cheaper.

  50. 50
    zman Says:

    Thanks for the HK notes, pretty much what I thought. The analysts are “wowed” by the first well and are in the process of re-evaluating their NAV’s and estimates. They too expect a steady stream of news out of the play as 2Q approaches and into the actual earnings releases. I’ll look at adding more exposure to the play as the days pass towards 2Q where we should start seeing reports around July 20. Oil and gas prices willing I think we are very likely to see a test of the morning highs for the Haynesville players before the end of the day as everyone anticipates multiple analyst comments with more teeth than today’s for the morning.

  51. 51
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures briefly turned negative Monday on new
    indications of sinking U.S. demand and a rebound by the dollar.
    Light, sweet crude for August delivery recently traded 30 cents, or 0.2%,
    higher at $140.51 a barrel on the New York Mercantile Exchange. Futures had hit
    a record high of $143.67 a barrel in electronic trading. Brent crude on the ICE
    futures exchange traded traded 50 cents higher at $140.81 a barrel.
    U.S. oil use in April was down 3.9% from a year ago and the lowest for that
    month since 2002, according to the U.S. Energy Information Administration, the
    statistical arm of the Department of Energy. Gasoline use was the lowest for
    April since 2003.
    The data provided yet more proof that high oil prices are taking a toll on
    consumption in the world’s largest market for crude. While the market has in
    the past proven willing to move up after receiving similar reports, futures
    hadn’t generated enough momentum on Monday to continue pushing higher.
    “(The market) still hasn’t made what I would call a clean break of this
    congestion area,” between $132 and $140 a barrel, said Matt Zeman,head of
    trading at LaSalle Futures Group.
    Zeman sees futures hitting $150 a barrel soon, but added that large investors
    are likely waiting for prices to edge up to at least $144 a barrel before
    making the final push.
    “It’s a dangerous trade right now,” he said of bets that futures will move
    significantly higher.
    As the EIA released its revised April data, the dollar strengthened against
    the euro, providing a second reason for oil prices to fall, as investors use
    commodities as a hedge against the weakening dollar. The euro recently traded
    at $1.5750.
    “The market has achieved many upside targets, but mostly it’s the dollar
    getting stronger in the last hour,” said Tom Bentz, a broker and analyst with
    BNP Paribas.
    Front-month July reformulated gasoline blendstock, or RBOB, recently traded up
    58 points, or 0.2%, at $3.5070 a gallon. July heating oil traded up 1.27 cents,
    or 0.3%, at $3.9193 a gallon.

    -By Brian Baskin, Dow Jones Newswires;

    Dow Jones Newswires
    06-30-08 1156ET

  52. 52
    Fred Says:

    HOUSTON, June 30 /PRNewswire-FirstCall/ — Petrohawk Energy Corporation (“Petrohawk” or the “Company”) (NYSE: HK – News) today announced that it has completed its initial horizontal well in the Haynesville Shale. On June 27, 2008, the Elm Grove Plantation #63 (100% working interest) was placed on production. On June 29, 2008, the well produced at an average rate of approximately 16.8 million cubic feet of natural gas per day with 5,600 pounds flowing casing pressure on a 26/64″ choke. The pilot hole drilled on the well encountered approximately 212 net feet of Haynesville Shale. The targeted interval in the reservoir was at 11,005 feet true vertical depth, and a lateral of 3,880 feet in length was drilled. The completion of the well included eleven stages of fracture stimulation. The Elm Grove Plantation #63 is located in Section 9 – Township 16 North – Range 11 West, Bossier Parish, Louisiana.

  53. 53
    bill Says:

    z ty for 49

  54. 54
    crysball Says:

    Z,
    Are you still anticipating CHK will make some Haynesville well results announcement(s) prior to July option expiration (especially in light of the HK well result announcement)?

  55. 55
    zman Says:

    Bill – no problema. I’d probably doulbing down on my open or the Aug $45s but I’m in “coming back to the real world mode” and am in no rush. It was nice of them to delay the press release until I got back though, LOL!

  56. 56
    zman Says:

    Crys – I expect CHK to announce them with their earnings at the latest but that they could drop them in before. I expected others to precede them (like HK today and maybe GDP soon). I don’t see that CHK has released its 2Q report date yet and options expire on the 19th. I’ll be flipping out of my $65s next week and may roll into Augusts at any time.

  57. 57
    Sambone Says:

    FYI – Equity market closes at 1 pm on Thursday. Bond market closes at 2 pm.

  58. 58
    antrimshale74 Says:

    SUN smoking higher.

  59. 59
    Sambone Says:

    By David Bird
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–U.S. oil demand fell 3.9%, or 811,000 barrels a day, to
    19.768 million barrels a day in April – the lowest level in the month since
    2002 – data released Monday by the Energy Information Administration show.
    Preliminary data had shown a modest 52,000 barrels a day year-on-year rise for
    the month, putting demand at a record for the month, at above 20.6 million
    barrels a day, or more than 860,000 barrels a day greater than the revised
    figure.
    Total petroleum demand was up 36,000 barrels a day in April from the March
    level.
    April marked the fourth straight month of year-on-year declines, with U.S. oil
    demand falling an average of 885,500 barrels a day, or 4.2%, from a year in the
    period. It’s the first time since 1991 that demand in the first four months of
    the year lagged a year ago.
    Demand for gasoline, the most widely used petroleum product, averaged 9.117
    million barrels a day in April, down 1.25%, or 115,000 barrels a day, revised
    data show. That’s the lowest level in April since 2003 and up 48,000 barrels a
    day from March.
    Preliminary data showed April gasoline demand rising 32,000 barrels a day, to
    a record level for the month.
    Demand for distillate fuel (heating oil and diesel) fell 2.5%, or 104,000
    barrels a day, from a year ago to 4.108 million barrels a day. That’s the
    lowest in any month since July 2007 and the least in April since 2005, EIA data
    show.
    Preliminary data suggested a slim gain in distillate demand April that would
    have topped the February 2008 level and marked an April record at 4.216 million
    barrels a day.

    -By David Bird, Dow Jones Newswires;
    Dow Jones Newswires
    06-30-08 1208ET

  60. 60
    zman Says:

    ZTRADE: Added NBR August $50 Calls (NBRHJ) for $2.80.

  61. 61
    texana Says:

    do u have an op on fst r crk? thx t

  62. 62
    zman Says:

    Hey Tex. Not close to the FST story other than the random conf I listen to so no help there. Re CRK I’ve always liked but missed the big move here and am not willing to chase, plus it is not a good option trader. Good improving story, but not up to date on them at present. 🙁

  63. 63
    doc Says:

    I bought a few suncor july calls last week when crude was lower in price but the stock continues to go down. Whats up with that?

  64. 64
    Dman Says:

    Hi Z,

    hope you had a good trip. No hurricanes followed you and the press releases waited for you: it must be the year of Z 🙂

    ZEB performance and ZEB holdings disagree about CHK calls but I recall you closed them and replaced with stock. You still have the calls?

    Interesting that Iran can increase flows: isn’t their infrastructure supposed to be kaput? Wonder if they are wrecking the fields to get this flow.

  65. 65
    zman Says:

    SU headlines last week were a slight negative. Probably just a blip long term.

    Re SUN and the rest of the refiners bouncing, started with VLO and moved to the others when oil sagged. Lot of money sitting on the sidelines or more likely heavily in profit on E&P and service and looking to rotate in for a bottom fish with the end of the quarter. Looks like they are jumping the gun a bit with the whole “these things are cheap” rant when you’re looking at what will likely be falling numbers in 3Q too.

    Dman – I’ve got the July $65 calls on CHK. Will put it on the wiki. Those were added 6/19 and I’m break even on them.

  66. 66
    Sambone Says:

    Wow, this makes me feel even better!

    http://www.bloomberg.com/apps/news?pid=20601087&sid=ap0MkRz1T4s0&refer=home

  67. 67
    Fiveanddimer Says:

    Doc, re 63: In last weeks webcast, Don Coxe talked about the oil sands companies running into trouble with some of our more environmentally oriented congressmembers. They are talking about refusing to accept oil sands production because of environmental concerns. How do these people get elected? They must live in a dream world.

  68. 68
    Hoss Says:

    Welcome back Z

    ATW – Didn’t get to kiss this girl – missed the dance. However, she’s had a pretty good run since Tuesday night press release. Presented at a Wachovia Conference Wed last week – haven’t listened yet. Caught an upgrade from Credit Suisse – available thru Schwab research.
    Press Release 6/24/08
    The ATWOOD HUNTER, owned by our wholly-owned subsidiary, Atwood Oceanics Pacific Limited (“AOPL”), has been awarded contracts by Noble Energy, Inc. (“Noble Energy”) for work in the eastern Mediterranean Sea and by Kosmos Energy Ghana HC (“Kosmos”) and Noble Energy for work offshore West Africa for a combined term of four years. These contracts provide for an operating dayrate of US$511,000 while working in the eastern Mediterranean Sea, approximately US$538,000 while working offshore Ghana and approximately US$545,000 while working in other West African designated areas. All dayrates are subject to adjustments pursuant to cost escalation provisions of the contracts. The Kosmos/Noble Energy contract provides for a one year option at mutually agreed rates.

    Immediately upon the ATWOOD HUNTER completing its current work offshore Mauritania (estimated September 2008), the rig will be relocated to the eastern Mediterranean Sea (estimated to take 35 days) to perform the Noble Energy contract (estimated to take 80 to 160 days to complete) and then mobilized to West Africa (estimated to take 55 days) to commence the combined Kosmos and Noble Energy contract, with the rig being moved between Ghana and other designated areas at various intervals. The initial work in Ghana for Kosmos is estimated to take 270 days to complete. These contracts provide that Noble Energy and Kosmos will provide all tow vessels and pay a dayrate of approximately $460,000 during all mobilization periods

    On June 11, 2008, Atwood Oceanics, Inc. (the “Company”) announced that its Board of Directors approved a two-for-one stock split of its common stock to be effected in the form of a 100% stock dividend payable July 11, 2008, on all shares of common stock outstanding as of the close of business on June 27, 2008.

    Trivia – HP owned 4M shares of ATW and 1.14M Shares SLB as of September 30, 2007 and it looks like they sell it down from time to time for working capital, capex, ect…

  69. 69
    uop Says:

    zman:
    bienvenidos en USA,

    survived the sticky and hot climate down there? did you have AC ?

    was kind of boring without your comments last week.

    With oil dropping the input into refineries will be cheaper, but what about the crack spread situation. Is there already justification for investment in VLO, TSO I think not.

  70. 70
    zman Says:

    Hoss – I picked up a copy of IBD over the weekend, saw the move in ATW and groaned. To me its not worth chasing up here but maybe after the next big red day in the offshore driller segment.

    Uop – thanks, yes survived, not a lot AC but did have it in our rooms.

    Re the refiners, cracks definitely got worse last week, will have update in tomorrow’s piece, they may get a run this week as people try to bottom fish but with oil holding $130+ easily and now $140 I don’t see a lot of running room before they trip again. Were I to go it would not be SUN or any of the small fry. Likely VLO and TSO which has just been thumped.

  71. 71
    uop Says:

    zman;

    how far out in time is HK attractive ?

  72. 72
    Sambone Says:

    Gone for day – GFD and will not be here Tuesday. See ya Wednesday!

  73. 73
    zman Says:

    Thanks for keeping the site informed last week Sam! Have a great one.

  74. 74
    crysball Says:

    Z,
    The Israeli’s are bottom fishing for another small US refinery ………MRO’s facility in Robinson, IL , along with Marathon service stations and conveneience store gasoline operations comes to mind as meeting the spec’s, however, there are others.

    “Delek US in talks on $1b fuel deal
    The deal includes a US oil refinery and supply contracts.
    Lior Baron 29 Jun 08 09:59
    Delek Group Ltd. (TASE: DLEKG) subsidiary Delek US Holdings Inc. (NYSE:DK) notified the US Securities and Exchange Commission (SEC) on Friday that it “is currently exploring the potential acquisition of certain petroleum refining, retail, and wholesale marketing assets in the US” for $1 billion.”

    The assets include a petroleum refinery with a capacity of 75,000-100,000 barrels per day that produces mainly light products, a refined products terminal, fuel transportation trucks. The deal also includes buying, or entry into, wholesale supply agreements with 400 to 450 stores. The company was granted an exclusive negotiation period that expires at the end of July 2008 and will conduct due diligence until then. Delek US has asked Delek Group to provide it with a non-binding letter of intent expressing Delek Group’s willingness to provide Delek US with financial support up to $200 million if the deal is closed. “

  75. 75
    BossmanG Says:

    Z or anyone, regarding any newspaper/media subscriptions, do you have any favourites?
    (i.e. barrons, wlj, etc.)
    IBD?

  76. 76
    zman Says:

    Thanks Crys. That kind of event will not get me back in that group as it generally creates a very short lived buzz.

    Bossman – WSJ online is hard to beat for the price, that and the free links at upper right are pretty helpful.

  77. 77
    crysball Says:

    Incidentally, The Illinois Basin crude which feeds the MRO Robinson, IL {Southern Illinois) refienry is sold at significant discounts [many small independent operators of low volume stripper wells], and refineries in or around Chicago are not set up to process the Illinois basin feedstock, so the MRO Robinson refinery is the catbird seat for Crack spread.

    Refiners must be near a bottom if Delek is shopping.

  78. 78
    zman Says:

    Uop – just spotted 71. I’m holding near, September and the common so I think it’s long term picture is pretty bright. That’s a game changer of well in my book. These are 60 day wells so you have to wonder how far along they are on #s2-4. Also, that’s a heck of an increase in acreage and they continue to add. If you look at 10 rigs running in ’09 at 60 days per well that gets you to something like 5.5 to 6 wells per rig or a 60 rig program so next year we could be looking at some sizable growth in volumes and reserves.

  79. 79
    Hoss Says:

    crysball

    Here’s your long/short list.

    http://www.eia.doe.gov/neic/rankings/refineries.htm

    FTO executive was asked about acquistions and mergers at recent presentation.

    Q. FTO and SUN merger?
    A. Good luck getting that thru FTC.

    Q. Potential Acquistions?
    A. There is an attractive asset out there, but it is too dependent upon Louisiana Light Sweet.

    Q. Coffeyville?
    A. No thanks.

    Common theme throughout all refinery CC’s and presentations is move to handle more sour crudes particularily those from Canadian Oil Sands and increase distallate production. Almost all mentioned working capital problems – FTO just increased their revolver, but I don’t think they drew down.

    Problems throughout the food chain:
    http://www.ft.com/cms/s/0/5f119852-3973-11dd-90d7-0000779fd2ac,dwp_uuid=f2b40164-cfea-11dc-9309-0000779fd2ac.html

  80. 80
    zman Says:

    Hoss – thanks, good points.

    Crude closing off slightly to flat.

    NG closing up $0.16

    Ironically, QBIK best performer in the Haynesville players with GDP and PVA outstripping HK who had the news. GDP will likely be the next to talk as they have been very active with the drill bit although it may be verticals they discuss first.

  81. 81
    Dman Says:

    Z – re #78 will they have any trouble getting the rigs?

  82. 82
    zman Says:

    Dman – things are getting tighter but there is still spare capacity. They may have more trouble getting the drill pipe. Wyoming might have a fresher thought there than me.

  83. 83
    zman Says:

    very holiday week like feel to the trading today, not a lot of momentum to carry anything above the morning’s levels. Maybe an acceleration into the close now that oil is closed flat but not a great deal of volume in the names without news.

  84. 84
    douglas51 Says:

    anyone: What are the chances Bush releases oil from the Strategic Oil Reserve? Would that drop oil price down by a lot? Drive speculators out?

  85. 85
    zman Says:

    D51 Re SPR

    Bush has long resisted releasing volumes from the SPR for anything other than a a serious supply disruption. In recent weeks he has made statements that appear to be more amenable to the idea.

    Impact. Likely minimal. Its really products and not oil we need more of right now to ease political pressure via gasoline prices. I think that certain members of OPEC would openly remove a similar amount of production from the supply chain offsetting the impact of SPR release.

    In a nutshell, I don’t think Bush would do it and if he did I think the impact would be nullified.

  86. 86
    arodeen Says:

    Re #82: Casing is also becoming an issue. Some operators are considering changing thier well plans to accomodate casing availability. This could affect drilling efficiency, but unknown as to how it would affect production.

  87. 87
    zman Says:

    arodeen – agreed, also experienced people in short supply but that is nothing new. I say put some of the newly released bankers to work in the Haynesville.

  88. 88
    Dman Says:

    Z – what do you make of PDS here, now that GW has rejected their “final” offer ??

  89. 89
    arodeen Says:

    Z – Do you think DVN runs up higher on the recent upgrade? I’m trying to decide when to pitch the AUG 110 calls.

  90. 90
    zman Says:

    PDS – saw they made a third offer, also low ball. I dunno where they went to school but that too was destined to fail; just to slim over the deal in hand. I want to watch it for a few days as the GW deal is now completely dead and investors here are disappointed that that growth avenue is shot. Maybe they go after another small cap in the U.S., they obviously want to shop and the unknown price they will have to pay may put a lid on the shares.

    On a sort of related topic I’m not liking the action in WH and will not add but will likely wait out the next quarter. Have the feeling I am missing something there while I watch TS tick up daily on the same underlying fundamental story. Ugg.

  91. 91
    zman Says:

    I think DVN moves higher along with the big cap E&Ps as we enter mark to market season in earnest and more brokers take up price targets in the group. Nothing specific to them, just group going up with numbers action.

  92. 92
    Dman Says:

    “Report: U.S. ‘preparing the battlefield’ in Iran”

    http://www.cnn.com/2008/WORLD/meast/06/29/us.iran/index.html

    This refers to Seymour Hersh’s latest piece, alleging that the war with Iran has started already in the form of what amounts to an espionage and terrorism campaign inside Iran, staged from Afghanistan. Haven’t read the Hersh piece yet, just going by the CNN article. Defence declines to deny the substance. They usually avoid denying Hersh’s allegations, perhaps because they usually turn out to be true.

    On the other side of the “will they or won’t they” ledger, I saw a piece recently (I think it was in Haaretz) saying that Israel’s PM *did not* get assurances from Bush that he would bomb Iran. This is very different from most of the coverage and from the PM’s statements after the recent meeting with Bush, where he *implied*, without actually stating, that he had received such assurances.

  93. 93
    zman Says:

    Zerrata: today’s table contained a bad crack number for the 3-2-1 crack spread. The % down does not change but the absolute number was off by a magnitude of 3 from a bad formula. The table has been corrected.

  94. 94
    Dman Says:

    Z – yes I thought the 3rd PDS offer was bizarre & it just made it look like they don’t know how the game is played.

    I recall you mentioned that EOG might be a good stealth shale play here, since it hasn’t done much for a while. Any more thoughts on that?

  95. 95
    zman Says:

    A little behind on updating BIO tab from the last week. Will add latest bio’s tonight.

  96. 96
    zman Says:

    Dman – I plan to own a little going into earnings. Have not figured out what is holding their feet to the floor other than digestion of the massive run they had on their analyst day. 2Q could see more results from the Bakken and the Barnett OIL Shale play. Very interesting.

  97. 97
    Garyinhou Says:

    Welcome Back Z.. you’re quite the catalyst

  98. 98
    zman Says:

    SD definitely being “let out of jail” this afternoon.

    Gary – I do my best, lol, thanks.

  99. 99
    bhr5491 Says:

    Re: #90, tariffs on Chinese pipes may be affecting WH?

    http://www.bloomberg.com/apps/news?sid=a3V7ZYOjEc4E&pid=20601103

  100. 100
    zman Says:

    Bhr – I saw that but did not see that it applied to drill pipe. Will do a little more digging.

  101. 101
    apbd Says:

    Z:
    Welcome back. Market extends best wishes also. Sam, Nicky and rest did a great job last week but it’s good to see the count over 100 again.
    apbd

  102. 102
    zman Says:

    Thanks A, good to be back. Will have my stuff together a little better on the morrow.

  103. 103
    zman Says:

    rum thirty!

  104. 104
    Jason Says:

    Welcome Back Z – Took your advice on a comment you made just before you left and picked up some GDP July 65’s….best non-official Z Trade ever! Thanks, Z!

  105. 105
    Nicky Says:

    Hey afternoon all – good to see the boss back! We missed ya Z!

  106. 106
    Nicky Says:

    Broader market looks to be in a wave iv correction to me. May not carry much further than 1310 spx and 11600 dow before further downside. Even those levels may be a push. I think Thursday is going to be huge… non farm payrolls and Trichet….

  107. 107
    Bleemus Says:

    FST Forest Oil updates Haynesville/Bossier shale acreage and development plan; 5 Tcfe of additional net unrisked potential identified (74.50 +0.68)

    The co announces that it has increased its acreage position in East Texas/North Louisiana to approximately 143,000 gross acres (113,000 net acres) through acquisitions and leasing activity. Forest believes that approximately 114,000 gross acres (90,000 net acres) are prospective for the Haynesville/Bossier Shale trend in the current area of heightened activity in East Texas/North Louisiana. The majority of Forest’s acreage is in Harrison County, Texas and Red River, Webster and Bienville Parishes of Louisiana.

  108. 108
    Wyoming Says:

    Dman / Arodeen;

    #82 Rig demand. Money talks, suckers walk. Everyone HP, NBR, PTEN has rigs coming out for the right amount of money. You will know when things are bad if someone picks up a 3k HHP rig when they only need 1k or 1.5k. The 3k rigs are actually cheaper on day costs but require more time and $$ to move, thus they are equal in essence for a Barnett well example. Bigger question is the crews to run the jump. Don’t think the out of work union auto worker will fit in too well.

    #86 casing design, completions should not be too effected. Might have higher risks of failure. Might back off some of the safety factors. Drillers can be funny creatures and have a little over design in some sections but are quick to drop the luxury. Some anal types of engineers might be offended with this comment, they expect lab results where hammers and buckets rule. They probably work for a Major, offense intended, and I doubt any of them would have the nuts to be in this portal.

    WH – I had buck fever, did read the tariff stuff. All I can say is that our pipe costs on certain items have doubled in less than a year. We are also going non-API spec, offers the same performance but lower cost or better availability. It’s a Chinese thing that I don’t understand. Like a paper cut with lemon juice, hurts but kind of feels good.

  109. 109
    zman Says:

    Thanks Wyo – little late to be picking fights with the M guys but it’s a free country and they know they drill some of the most over-engineered and priced wells out there. Offense not intended but if the shoe fits from time to time, well, there you have it. Ask any little guy who has been AFE’d to death by one of them.

  110. 110
    Wyoming Says:

    EOG in the Barnett oil. Heard that some of the flowback number included their frac fluid which was hydrocarbon based, also heard that their results were short lived and did not amount to much.

    As always, believe half of what you hear. I have no fact on this one, but I could see it.

  111. 111
    zman Says:

    Thanks Wyo, still considering going back into that one pre earnings. Hearing anything about those undisclosed CHK oil shale plays?

  112. 112
    Wyoming Says:

    Never miss an opportunity to make a dig at a Major, they make money despite themselves.

  113. 113
    Wyoming Says:

    No, vendor probably wicked pissed at me. Our field guy tried out a competitor unit at the last minute. He will be alright, we will double our rigs in H2 and then double again in 2009, he will have work.

  114. 114
    ram Says:

    I have been called nuts and then some. Sometimes it’s about product liability, consumer protection, but I thinks it’s good to have an intent to be cautious.

  115. 115
    rseidman Says:

    test from rs

  116. 116
    independence bowl Says:

    independence bowl

  117. 117
    ice makers texas Says:

    ice makers texas

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