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.
In Today's Post:
- Commodity Watch
- Holdings Watch
- Stocks We Care About Today – (SD), (HK), the refiners
- Analyst 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.
- 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 email@example.com
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