02
Jul

Wednesday – Chesapeake Wows The Crowd

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What a beautiful day in the neighborhood! That is if the neighborhood in question is in NW Louisiana or East Texas with the Haynesville or Bossier shales lying nearly two miles under it. If that's the neighborhood then last night's deal between Cheasapeake and Plains Exploration (PXP) (see last night's note here) upped the ante on real estate to levels that would make leaseholders in the core of the Barnett Shale in downtown Fort Worth green with envy.

So its going to be another one of those days when the Haynesville crowd runs wild and the mania drives many of our favorite names well into all time new high territory. I plan to remain disciplined, taking profits in more near term calls a little sooner than I thought as recently as mid day yesterday. The July (CHK) and (HK) calls will be on the bubble for punting either today or during Thursday's short session. Do I think they are done at these levels? No. But the hot money can now spell Haynesville and knows what corner of the state of Louisiana, if not the names of the parishes it lies in, and that means greater volatility. The Augusts are likely to be taken on the first bout of profit taking.  (CRR) and (WFT) who both had dips yesterday may see an entry and an add respectively today as this is nothing but good news for them.  

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch - oil preview; natural gas supply update slideshow
  3. Stocks We Care About Today
  4. Odds & Ends

Holdings Watch: The Wiki and Performance tabs (for open positions) are updated.

  • (UNT) - Entered (UNT) August $90 Calls (UNTHR) for $2.85. I entered the position on capex increase news as their E&P arm targets the Marcellus, Bakken, Haynesville shales, all the right places to be plus their drilling unit should benefit from second half activity increases. This is a little diversification from my NBR positions and provides the optionality of an E&P segment. Look for a WIOWIO segment on the service names on Monday.

Commodity Watch:

Crude Oil traded up $0.97 to close at a record close of $140.97 yesterday after the IEA trimmed its medium term forecast for global oil supply and tensions (re-elevated?) between the Israel-Iran-U.S. triangle. This morning crude is trading flat. 

  • Unimaginably Fierce Response Watch: These are the words used by Iran's oil minister as he outlined the response to any attack on Iran adding, "nobody can imagine what would be the reaction of Iran [in the event of an attack]". He did say that Iran would not withhold its oil from world markets (in direct conflict with earlier statements).  

EIA Inventory Preview (estimates from the Bloomberg survey)

exp-062708.jpg

ZComment: Contrary to recent trends, today's EIA numbers are not the most important set of data in the history of EIA releases. I will be looking for further deterioration in refinery utilization levels this week for signs that the near term decline in crack spreads might take on a more muted slope. Still won't be wild about the group until we see demand pick back up on the gasoline side (last week was pretty respectable at 9.3 mm bpd given where pump prices are) and a softening of crude prices. Probably no luck on the latter unless we get a big dip in demand combined with a surge in imports (something I doubt will occur in today's numbers. Unless the numbers are wildly off the mark they will likely provide some short term volatility in this thinly traded week before being overshadowed by:

  • the war of words between Iran and Israel and the U.S. 5th Fleet,
  • OPEC's suggestion that it may cut investment due to concerns over long term global demand,
  • and the potential for strikes in Venezuela and Brazil to cripple exports.  
Natural Gas closed up $0.15 at $13.50 yesterday following crude higher and potential giving a slight nod to a tropical wave brewing off the coast of Africa. It was probably just crude and the fact that natural gas only knows one direction of late. This morning gas is surprisingly headed higher once more up another $0.15 in early trading.
  • Tropics Watch: The tropical wave mentioned above has been upgraded in status to a strong tropical wave and a medium probability of development into a tropical depression (20 to 50% chance) has been placed on it for the next 48 hours. In other words, gas is unlikely to take a breather going into the holiday weekend.

Natural Gas Supply Update Slideshow: The year over year pace of domestic production growth continues to be record breaking at 4.6 Bcfgpd (through April 2008, the most recently available data) with marketed gas production holding steady at a lofty 57.4 Bcfgpd for a second month. Expect the pace of growth to continue through at least 2009 if not 2010. At some point this growth may even be reflected in the price of natural gas but for now increased supply is being offset by lower imports from LNG and Canada and higher exports to Mexico. If a picture is worth a thousand words then the next several graphs must speak volumes. 

natural-gas-supply-070108aaa.jpg

 

Stocks We Care About Today

CHK Announces JV With PXP. Read all about it here in last night's post. The Haynesville list is bid up across the board this morning as Aubrey puts a valuation of S30,000 per acre on the score board. Conference call at 9 Est.

Odds & Ends

Analyst Watch: UBS hiked their price target on (CHK) to $89 from $76, Morgan Stanley cut their rating on (PXP) to equal weight, Morgan also cuts ratings on (DNR) and (TLM), FBR raised their price target on (HK) from $45 to $60. (ESV) cut to market perform at Wachovia and (XOM) upped to outperform at Bernstein.

Housekeeping Watch: Believe it or not I still have quite a few emails to address from my absence last week. I will be addressing them and adding sent in Bios over the next couple of days as things slow down but if you have any pressing issue send me a note at zmanalpha@gmail.com. 

152 Responses to “Wednesday – Chesapeake Wows The Crowd”

  1. 1
    zman Says:

    Saw a piece saying DVN may have 400,000 acres in the HS which is nearly triple my last count and that they may have well news on it. Will investigate. Also see GS as taking another look at their numbers on CHK as they are neutral rated now.

    Conf call in 20 minutes accessible via CHK’s website.

  2. 2
    Pete Says:

    ” Seeking Alpha by Zman” excellent article Z

  3. 3
    zman Says:

    Crysball – Regarding CHK’s deal with PXP and the potential for a similar deal in the Marcellus: I do indeed and I think you will get another similar deal in 2H and another $1 billion VPP in between, maybe as soon as the 2Q conference call.

    Thanks Pete

  4. 4
    zman Says:

    Oil retreating a bit here pre inventories despite more saber rattling and a weak dollar.

    CHK call still not started. Will add full notes to last nights post, now archived on the reports tab. Will put pertinent notes here.

  5. 5
    zman Says:

    Aubrey Comments: What is becoming “America’s largest gas field, and 4th largest gas field in the world”

    $2.5 billion invested here; worth $16.5 billion

    Think 250 Tcfe in place in the H.S., 5x the Barnett Shale

  6. 6
    zman Says:

    CHK Announced IP’s

    8 horizontal with IP 5 to 15 mm/d on very restricted chokes with high pressures (6,500 psi). Think the wells will get better over time.

  7. 7
    srp Says:

    Z- do you spend much time with RRC? Recent pullback and move of love away from Marcellus to Haynesville may open an opportunity.

  8. 8
    zman Says:

    SRP – on call back shortly.

    See EUR at 6.5 Bcfe on HS wells as conservative, use for now but it will go up.

  9. 9
    zman Says:

    Pursuing similar strategic partnerships in the Marcellus and Fayetteville. Think Fayetteville shale assets are worth $15 billion or $30 per share.

    Marcellus – 2 Horizontal – 9 mmcfgpd combined . Holy Smokes. See proving up $15 billion and $30 value per share here later this will with another monetization deal like yesterday’s

    Will not do a minority interest in the Barnett (where they are #2)

  10. 10
    zman Says:

    Aubrey outlined $150 per share of value. Saying the PXP deal is the first step in highlighting this value.

  11. 11
    Bleemus Says:

    http://www.nhc.noaa.gov/gtwo_atl.shtml

    Bit of weather on the way…

  12. 12
    zman Says:

    PXP Comments:

    Consistent high porosity throughout, overpressured, excellent recovery factors in all the wells they have seen to date.

    See doubling their reserves in the next three years at $1.85 / Mcfe.

    Production growth rate at 5-8%. This HS JV is expected to send their production growth rate > 20% per year beginning in 2009 for the next several years.

    Will likely take a piece of this as it is already trading at a pretty low multiple to the peers.

  13. 13
    zman Says:

    ZTRADE: Entered HK August $55 Calls for $4. Still holding the July, September calls and the common. Conference call at CHK very impressive.

  14. 14
    Bleemus Says:

    drats, broker isn’t showing the Aug 55s for some reason.

  15. 15
    zman Says:

    Bleemus, those are the HKHK’s

  16. 16
    Garyinhou Says:

    Good! mornin’ Z… what are your thoughts of HK, CHK getting back to morning frenzy highs today?

  17. 17
    Bleemus Says:

    Yeah, HKHK isn’t shown on thinkorswim for some reason. Trade desk is looking at it. Technical glitch.

  18. 18
    zman Says:

    UNT taking off this a.m.

    NBR, WFT getting a good bounce, even OII

    Gary – let’s let the q&a finish but I’d say the analysts are hitting the squawk boxes now and for the next 30 minutes. Numbers are going to be going up. There is no doubt about that. Right now the feeling on the call is pretty favorable. I’d give it a good chance of exceeding the highs, oil report willing of course.

  19. 19
    SkyKing Says:

    Strange, Etrade is showing blanks on the HKHK’s.
    The Sept 55’s are listed though.
    Probably a computer glitch.

  20. 20
    antrimshale74 Says:

    CNBC just mentioned CHK.

  21. 21
    zman Says:

    Esem – thanks for signing up. I don’t give advice or make recommendations but I do tell you what I am doing. Some people chose to follow my trades with their own. I would suggest taking the time to familiarize yourself with the features of the site and especially if you are new to option trading, which is a dangerous game, I might suggest paper trading until you get comfortable. I never swing for the fence but try to scale in to positions over time and this seems to work for me.

  22. 22
    SkyKing Says:

    HKHK’s showing on etrade now.

  23. 23
    zman Says:

    those hkhk’s are bid $3.60 now. Call sounds close to wrapping up as they are talking macro issues.

    Aubrey talking about using ng for cars again. Says $2.50 gallon equivalent would be $20/MMBTU for gas. Interesting way to look at it. He even highlighted the price of getting it into enough gas stations to make a difference ($400,000 per station for a total cost of $10 billion to retrofit to NG).

  24. 24
    antrimshale74 Says:

    Look at the selling of the coal stocks today.

  25. 25
    uop Says:

    zman:
    did you buy today some CHK ?

  26. 26
    zman Says:

    Uop – No, not yet. Looking to part with my July calls today or tomorrow or maybe next week and roll into longer dated ones.

  27. 27
    isleworth Says:

    PXP almost flat on day……opportunity?

  28. 28
    ram Says:

    Thank you for the information above ZMAN. CHK has come a long way from a year ago.

  29. 29
    zman Says:

    CHK confident they can get the rigs for their forecast.

    Hey Ram – yeah, I think it was 35 when it was a stuck in the mud stock and a source of frustration around here. My how times have changed.

    SRP – I don’t track RRC as closely as I’d like but you can’t kiss all the girls.

    SWN moving up on Aubrey comments about their valuation in the Fayetteville shale. CHK is #2 there, SWN is number #1 so that Aubrey’s asset value comment on the F.S. puts SWN north of current valuation.

  30. 30
    zman Says:

    Wow QBIK closing on $5

  31. 31
    isleworth Says:

    Z- PXP now negative on day. Any thoughts on this one beyond your earlier comments?

  32. 32
    ram Says:

    Coal stocks going down hard and fast.

  33. 33
    zman Says:

    CHK: They will be upping guidance on the 3Q call. Didn’t say it but they said it if you get me.

    GDP is right in the heart of the core with CHK and while it has had a run I would expect them to start talking about their well data soon and that that will move the stock higher in the next 2 months.

  34. 34
    Bob Says:

    Any interest in coal? WLT down more than 12 percent today

  35. 35
    zman Says:

    Re Coal – still on the call, not able to multi task there and figure out the slide, could be just pt in a thin market, note that natural gas has tripped lower this morning, reason un known but it has had a 30 cent swing in the last hour.

    PXP – I’m not going to rush in but nothing has been said to account for the dip. Will watch.

    Seeing profit taking in several names that opened at new highs.

    Oil numbers in 10 minutes

    CHK/PXP CC still going.

  36. 36
    tater Says:

    sorry off-topic

    Dman, your AUY should have support at the top of last Thursday’s closing price at $15.67.

  37. 37
    kyleandy Says:

    isle PXP i just bot the july 70’s trying to sell the july 80’s

    z couldn’t stand it sold the XBIK AT 4.90

  38. 38
    zman Says:

    Kyl – that QBIK valuation is pretty steep here and this is the news I was looking for out of CHK to drive it higher (IPs on the wells). I am thinking of punting as 66% in a month on a stock is not too shabby and we are definitely into “pendulum swings too far” territory.

  39. 39
    Garyinhou Says:

    PQ flashed but ignored again?

  40. 40
    Brian08 Says:

    Aubrey does it again…Unreal…Thanks for the Haynesville heads up Z!

  41. 41
    italyinvestor Says:

    Zman – UNT common up and dead in the Sep calls (I went a bit longer than you). Everyone must be distracted with the big movers today. It will be interesting to see how log it takes the analysis to filter down to the lesser known names.

  42. 42
    zman Says:

    Gary – Re PQ its suffering a little PT with many names in the group. I like the higher high and will be stepping back into calls here despite my trepidation regarding the spreads soonish.

  43. 43
    kyleandy Says:

    Z CHK is the higher pressure he was talking about good or bad?

  44. 44
    zman Says:

    Italy – dead in the Septembers on UNT? I got 1 of the 80s before I filled in the Augusts, the first is up 20% and the Augusts are up 40%.

    EIA in 5 minutes

    Aubrey saying there is so much gas in place that they would have great recovery factors before the geopressure fell to normal pressure and the fracs potentially closed up. Nice.

  45. 45
    italyinvestor Says:

    Z – Was talking about volume trading. Augs are trading though, just not Sep … or my machine is slow again.

  46. 46
    zman Says:

    oil down 2 mm barrels
    gasoline up 2.1 mm
    distillate up 1.3

    util back up to 89.2

    imports off just a tad to 10.2 mm bopd.

  47. 47
    zman Says:

    CHK just said the new build rigs coming from NOV. Stock moving. I’m not going to play for now.

  48. 48
    ram Says:

    Is this good or bad?

  49. 49
    zman Says:

    Gasoline demand remained in the 9.3 mm bpd area, don’t see any reason to jump up and down for the indie refiners.

  50. 50
    zman Says:

    Ram – its probably slightly positive for oil, negative for products and the refiners although we could see some profit taking in gasoline which may ease crude. Very volatile trading at present as volume is light, crude bouncing all over the place at present. You can compare the numbers in comment #46 to the table in the post.

  51. 51
    zman Says:

    Italy – oh, ok, gotcha

  52. 52
    zman Says:

    HAL breaching $55 without me. Hmmm

  53. 53
    sane Says:

    API

    Crude Down 1.3
    Gasoline UP 100K
    Distillates Flat

  54. 54
    BossmanG Says:

    Z, sane, what is API? 2 different sources of numbers…? which is more correct? or differences in calculations?
    Thanks.

  55. 55
    italyinvestor Says:

    Z – No sooner than I hit send, some volume and up 44%. I’ll not make a habit of asking for volume ;-)!

  56. 56
    uop Says:

    zman:

    i thought chk news was so good, now is dropping.

  57. 57
    zman Says:

    Thanks Sane. Nice to see the numbers are back to not matching at all.

    Boss – API is a parallel set of numbers issued by the American Petroleum Institute. The two match up over time, API says their numbers are more accurate as the EIA’s numbers include a hefty chunk of “modeling”

    CHK/PXP call just ended, went on a little longish in my book, said 400 people were on it which is a lot. I’m thinking the stocks will start to bounce, again oil market willing, in the next little bit here.

    QBIK now over $5

    Uop – It was, this is profit taking.

  58. 58
    tater Says:

    Lots of the wild action turn-arounds this morning are TA trading. SLB, PQ, UNG, etc. It’s just about getting to be that you can set your watch to NFX turning back at $68.

    I puked up the HK yesterday into the close, nice job to those of you still holding!

    Awesome call on the UNT!

  59. 59
    Pete Says:

    Z, What are your thoughts on the July NFX and OII

  60. 60
    srp Says:

    API is voluntary by refiners, EIA is mandatory.

  61. 61
    isleworth Says:

    PXP really tanking – now down almost 3% on the day. Someone doesn’t like something here….capex?

  62. 62
    texana Says:

    where would i go to find ur comments on unt? don’t know what i’m missing

  63. 63
    BARRANT V. MERRILL Says:

    ZMAN,

    AM IN QBIK ON YOUR CALL.
    STOCK IS UP BIG TIME.
    WHAT ARE WE LOOKING FOR HERE?
    BARRY MERRILL
    svp0022@gmail.com

  64. 64
    zman Says:

    Oil headed higher on the numbers, looks like we are going for a record close here, now up $1.80, near 143.

    Even gasoline up now with the move in oil despite the bigger than expected build in gasoline stocks.

    Refiners a mixed bag here but mostly weaker. I see no reason to enter long positions at this time.

  65. 65
    zman Says:

    Raymond James ups PXP target from 90 to 116 with the shares at 72, off $1.25 on the day.

    Re QBIK – Today’s news was what I was looking for. Valuation looks rich to me and I may punt at any time.

  66. 66
    zman Says:

    X taking a bashing again today. Rest of metals suffering is well. Iron ore the issue apparently.

    Have not seen anything on why coal is getting slammed looks, like profit taking in a week market to me.

  67. 67
    zman Says:

    ZTRADE: Out July HK Calls for $4.00 (HKGJ), up 90% since entry on 6/30. Will be looking to add more longer dated calls on bouts of profit taking.

  68. 68
    tomdavis12 Says:

    Z Iron Ore guys RIO, CLF, BHP and RTP also getting pummeled.

  69. 69
    jsaun14 Says:

    Z –

    I know our domestic gassy players are hot, but I’d love to have some new perspective on END and its Ithaca deal. Any thoughts?

    I’m breaking the rules on the single digit stocks and am sitting in END and EGY. The “greenmail” at EGY was fun, but otherwise there is a lot of thumb twiddling here..

  70. 70
    zman Says:

    Thanks Tom

    JS – Will try to update END next week. I have been there as a play on tried and true management. Then the stock fell by 50% as they hit dry hole after dry hole in the North Sea. Stock definitely acting better now.

  71. 71
    Sambone Says:

    11:23 am EST

    Oil Edges Up After Mixed US Oil Stats

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    NEW YORK — Oil futures edged higher Wednesday after a government report surprised the market with a drawdown in U.S. crude stockpiles and gains in gasoline.

    Light, sweet crude for August delivery was recently 46 cents, or 0.3%, higher at $141.43 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange rose $1.11 to $141.78 a barrel.

    The Energy Information Administration’s closely watched weekly petroleum status report showed U.S. crude stockpiles slid by 2 million barrels in the week ended June 27, bucking analyst expectations of a 100,000-barrel increase. Gasoline stocks moved in the other direction, swelling by 2.1 million barrels in contrast with an expected 100,000-barrel drawdown.

    “It’s definitely a mixed bag,” said Tom Bentz, a broker and analyst an BNP Paribas Commodity Derivatives in New York.

    “My first reaction after seeing these stats is it’s a bit negative” for oil prices, Bentz said. “But we had a dip and the market found buyers again and it came back.”

    After the gasoline inventories gained, benchmark August reformulated gasoline blendstock, or RBOB, futures fell 1.84 cents, or 0.5% to $3.4950 a gallon on the Nymex. August heating oil rose 2.90 cents, or 0.7%, to $3.9725 a gallon.

    U.S. oil demand was down 1.9% over the last four weeks compared with same time last year, the EIA report showed. The market continues to assess whether record prices and a shaky economy will choke off enough demand to bring prices down. So far they haven’t, with Nymex crude settling at a fresh record $140.97 a barrel Tuesday.

    “The market is at a crossroads here,” said Peter Donovan, vice president at Vantage Trading in New York. “We’re waiting for some of these softening demand implications to filter into the market.”

    Problems and questions about oil supply have helped propel crude to new highs. Amid talk of a confrontation over Iran’s nuclear program, Iranian Oil Minister Gholam Hossein Nozari said at the World Petroleum Congress in Madrid on Wednesday that Iran would react “fiercely” to any attack against it, which he warned would cause radically higher crude prices. Iran is the second-largest producer in the Organization of Petroleum Exporting Countries.

    Also in Madrid, a top OPEC official reiterated the producer group’s position that oil prices are fueled by speculation, not shortages.

    “The market has no shortage of physical crude” and “supply is higher than demand,” said Abdalla Salem el-Badri, OPEC’s secretary general. Producing countries “must make sure that demand will there” if they increase output, he added.

    Supply has been uncertain amid civil unrest in OPEC producers Iraq and Nigeria, keeping the world market on edge. OPEC managed to raise production last month by less than 1%, or 27,000 barrels a day from the previous month, to 32.24 million barrels a day, according to a survey by Dow Jones Newswires released Wednesday.

    The gains came as Saudi Arabia boosted output to about 9.5 million barrels a day of crude, up 285,000 barrels a day from May.

    Reinforcing supply worries, Russia’s production of crude oil and condensate was down 0.3% to 9.8 million barrels a day in the first half of the year, the Interfax news agency reported Wednesday, citing Ministry of Industry and Energy statistics.

    The market is next expected to take cues from the the European Central Bank, which analysts believe will hike its euro-zone interest rate Thursday. That could further pressure the dollar, whose weakness has drawn investors seeking a hedge against its decline.

    If the ECB takes a firm stand against inflation, “this could reinvigorate the commodity complex, and in crude’s case, provide the decisive push prices needs to move towards $150 resistance,” said Edward Meir, an analyst at brokerage MF Global.

    —By Gregory Meyer, Dow Jones Newswires

  72. 72
    ram Says:

    Z – I like your method of adding longer dated calls and then selling the near term (HK). I know that information is for amusement purposes only and is no way a recommendation on your behalf. Darn esquires!

  73. 73
    zman Says:

    Ram – it seems to work for me.

    Volumes in everything but CHK very light today.

    Welcome back Sambone, stock action starting to resemble paint drying now. People still in the office are about not to be.

  74. 74
    zman Says:

    Anybody see a comment re SBL, getting hit albeit on light volume today.

  75. 75
    scottjasonm Says:

    JS – I have a double on EGY, after holding the common more than a year and a half. Things are moving very slow – hopefully even more progress is coming soon. They still have a fair amount of cash and no debt last I checked…

  76. 76
    zman Says:

    CHK approaching LOD at 71, up 3.60 as NG is moving slightly back into the green.

    Other Haynesville names ghosting CHK’s move with GDP red and near its LOD. They are in the middle of the sweet spot with CHK but I am avoiding it for two reasons 1) it appears to be already in the stock to a large extent- see graph in last nights post and 2) it is an absolutely lousy options trader so not only do you need to be right but you need to be very right just to cover the fat spread.

  77. 77
    jsaun14 Says:

    Scott-

    Yep, just a touch of debt ($5MM on $144M in equity).

    Financing the drill through cash flow and eight wells planned thru 2H and Q1 09.

  78. 78
    Sambone Says:

    My two cents on the Coal companies. They are getting spanked because of the CHK news. One of the largest Ngas finds. Street thinks coal prices will now come down.

  79. 79
    antrimshale74 Says:

    This is quite a stunning move in coal. MEE and ACI down almost 20% for example.

  80. 80
    jsaun14 Says:

    Traveled down 67 from Dallas to Stephenville (south side of the shale)…I saw a lot of NBR rigs on both sides of the road.

    Call this my on-site DD.

  81. 81
    zman Says:

    JS – thanks.

    Antrim – yes, for once I am happy to be out of the coal group.

    Sam – interesting thought re coal. I would bet it has to do with something Chinese, like they are canceling shipments in front of the Olympics to try and look green or at least less smoggy. That’s just a guess though and I have spent little time on the matter today.

  82. 82
    BossmanG Says:

    Z, what do you think about adding to CHK at this point? hitting lower lows of day

  83. 83
    Popeye Says:

    HK volume twice above normal volume compared to CHK and outperforming on a % gain basis today. I had considered moving from HK into CHK at some point but I think I will continue to hold. I have HUGE gains here now and tax considerations have to be taken into account.

  84. 84
    VTZ Says:

    This is starting to be overkill on the profit taking soon for CHK and HK? I’m looking to add CHK AUGs soon.

  85. 85
    ram Says:

    The first half hour – what a pop and drop (relatively for some – others went negative).

  86. 86
    zman Says:

    Boss- looking at adding there right now, have not settled on a strike or month yet.

  87. 87
    cargocult Says:

    I closed my HKGJ for a nice gain. Thanks for paying for my subscription and then some.

    Is this still a time to enter PQ?

  88. 88
    zman Says:

    ZTRADES:

    Added July CHK $70 calls for $3.20 (fairly risky and I will be using soon to be taken profits on the $65s to fund it) (CHKGN)

    Added August CHK $75 Calls for $3.60 (CHKHO)

  89. 89
    zman Says:

    Housekeeping Watch: I have a funeral in two hours and will be out from then until the close.

  90. 90
    zman Says:

    Cargo – re PQ – It’s cheap, I like the story exclusive of the H.S. play. I need to do a little more digging as to how viable their local acreage in the play is, that is, how prospective it is for HS development. They have not made a big deal out of owning it. There other assets should be cranking for them at this time.

  91. 91
    zman Says:

    Please note the CHK July calls are for a trade as I thought the retrenchment was a bit nutty.

  92. 92
    zman Says:

    Anybody see anything re SLB, getting dropped for 3% the day after a Citi upgrade, have been looking for entry for move into the $110s level. 2Q call should be nothing but good news.

  93. 93
    Popeye Says:

    All service on my screen red except HAL.

  94. 94
    ram Says:

    It seems that people are locking in profits today ahead of a 4 day weekend. Hopefully they will chase the same stocks next wek.

  95. 95
    zman Says:

    Group really suffering from profit taking now. By the rumor sell the news in full swing I’d say plus a broader market that continues to melt in the face of higher oil prices.

    Hear ya Popeye, and even what what up is now coming in pretty hard in service and E&P. Big cap E&P taking it on the chin from EOG to APA to APC. Think we bounce once we close oil and people start to say, hey we were just up 10% this morning, what a bargain.

  96. 96
    zman Says:

    Ram – yep, could be that too. Cramer will undoubtedly say nice things about CHK and HK tonight.

  97. 97
    texana Says:

    i don’t know why but i’m buying eog down here. they have been awfully quite lately, do u know erngs date?

  98. 98
    Bleemus Says:

    EOG Next earnings release: Jul 31 after market, unconfirmed. First Call Research estimate: 2.20

  99. 99
    zman Says:

    EOG looks like a coiled spring to me here. Am considering going long but will wait out the weekend now (why pay for an extra day and a half of time value you can’t trade? lol). They should have lots of news regarding their new shale plays including oily ones and more Bakken well results. Should be good and the stock has been resting and is now actually on the cheap side for 2009 CFPS to its normal trading pattern.

  100. 100
    scoop006 Says:

    Z RE SLB There is a strangle on the AUG.$110,3000+ contracts

  101. 101
    Bleemus Says:

    On EOG you could make that theta work for you buy selling the 120/115 put spread for an .80 credit.

  102. 102
    zman Says:

    Afternoon scoop – still can’t see if SLB caught a negative comment or if this is just pt, looks like pt that got a little carried away.

    Bleemus. I know the greeks but I don’t trade by them.

  103. 103
    Popeye Says:

    Rare earth elements exhausted by 2017?

    http://news.slashdot.org/news/08/07/01/2331207.shtml

  104. 104
    uop Says:

    zman:

    I sold EOG on 6/30, now its way down,

    so, you say EOG is ready to bounce ?

  105. 105
    zman Says:

    Popeye – have heard similar comments about the element used by FSLR in their thin film runs. Name escapes memory at present. I thought we had plenty of copper and zinc though.

    Uop – Re EOG just musing about, not saying when it will/if it bounce. I plan to own it prior to the conference call.

  106. 106
    scoop006 Says:

    Z pt=poor trading?

  107. 107
    zman Says:

    pt = profit taking

  108. 108
    texana Says:

    eog to report 7-30-08 @8 am cent. they have a 7 well horiz test program in the niobrara near their reported 320 bopd discovery the north park basin ,co. they also have deep shale test going in the powder river basin that is rumored to also be productive of oil.

  109. 109
    zman Says:

    ZTRADE: Out QBIK for $4.89, up 64% since entry one month ago. I simply can’t come close to defending the price up here. I will revisit if it comes in some but the CHK well rate news was the driver I saw eventually moving it higher and we got that today.

  110. 110
    scoop006 Says:

    PT poor trading or profit taking. Now you know where my heads at.

  111. 111
    zman Says:

    To be fair it could have been price target as well but that did not fit the context.

    Oil easing as it approaches the 30 minutes to close mark. This is having a direct positive effect on the broad market which is going green. We will probably see a little more of a firm move in one direction or the other once oil settles for the day. Gas backing off 16 cents as that tropical wave off Africa failed to get better organized today:
    http://www.crownweather.com/tropical.html

  112. 112
    scoop006 Says:

    Z- Any reason to warm up to AUG. RIG

  113. 113
    zman Says:

    Scoop – I don’t think so before the holiday. They had some news out on another 2 year contract I saw this am but did not have a chance to look at so I’m not sure what the day rate was yet.

  114. 114
    VTZ Says:

    heavy up volume on chk… people remembered we were up 10% earlier

  115. 115
    scoop006 Says:

    Z- How do I program my computer to reject my picks and accept only ZMAN trades?

  116. 116
    ram Says:

    I second #115. Let me know asap. Also refer to #72.

  117. 117
    zman Says:

    Scoop = lol. Have you forgotten the bad months? I had several ya know, back in last fall especially.

    VTZ – yep, and I think I will wait out the morning before killing my sets of July calls in CHK.

  118. 118
    Dman Says:

    Hi Z – trying to get a grip on the overall picture for PQ. Do you have a rough range of valuation for them *excluding* their HS assests?

    Also, is there an easy source for hedging status for various companies or is it just a a matter of ploughing thru their various releases?

  119. 119
    zman Says:

    Dman – take a look at the last thing I wrote on the reports page on PQ. I don’t do NAV’s as E&P stocks trade on a multiple of CF and only losely on NAV since the data is often stale (most companies only do reserves once a year) and as such most companies trade at varying discounts to the NAV. Then you have the whole 1P , 2P, 3P issue on reserves to consider with the NAV and then what price deck do you assume. I find that E&Ps trade on P/CF for their entire life until they are eventually acquired and then NAV plays a role.

    On hedges the only way is to pay someone to do it for you or look it up your self. I have not looked up their percent since the end of the 1Q.

  120. 120
    scoop006 Says:

    Dman, Do you have a $ trading range for “X”. In Hindsight I should have held onto the $165 puts

  121. 121
    zman Says:

    Market didn’t like that final surge in crude, reverse the early afternoon gains.

    I’m off to a funeral and will be back around in a few hours. Have a great day.

  122. 122
    Hoss Says:

    Dman

    PQ – they have a “Research Archive” which includes links to all the analyst research done on the company – latest are from early May.

    Take a look here too:
    Latest Management Presentation
    http://www.petroquest.com/powerpoints/June_2008/sld001.htm

  123. 123
    Dman Says:

    Tater #36 thanks for that. Obviously AUY is levered to gold, so I haven’t worried too much about the last few days in AUY, since gold has been marching up meanwhile. OTOH, stocks like AUY can often be ahead of the commodity, so they could be predicting another swing down, in which case I should be paying closer attention. But I’ll most likely add to it on a decent drop.

    BTW, I tend not to think of commodities like gold as off-topic here, because the there is a strong link over time between oil and gold and predicting oil lately hasn’t been all that easy, so any edge is useful. And also the general dybulks/iron ore is related via the oil shipping business and then there are the oilfield commodity plays like X and … well it’s hard to know where to stop! So that’s my excuse anyway and some of us do a little bit of gold/silver banter. I might use that excuse to quiz you about the AUY technicals, but much more likely to ask for energy technicals!

  124. 124
    Dman Says:

    Hey Scoop. Well, yeah when I said yesterday I was worried about more downside for X from the $175 level, I can’t say I expected it to be this quick. Stock is dropping like a rock.

    Looks from the news like it has something to do with the disastrous state of the US auto industry, which makes sense I guess. I don’t have a $ range for it, no. Volume huge like yesterday, but it is still only back to early May prices, so could still have downside. Tempting to play the extremes here (very short term), but I’d like to have some fundamental thesis behind me.

    BTW, with hindsight, you played the stock successfully going down & then likewise going up. What’s not to like?

  125. 125
    Hoss Says:

    Scoop and Dman

    Last week GS added X to their “Conviction Buy List” raising EPS estimates and setting a new PT @ $228.

    The basis for the upgrade was X’s recent increase in surcharges on OCTG. Higher oil and gas prices stimulating drilling activity, increase in rig counts, demand for OCTG strong and inventory low.

    Risks to their thesis were slower auto production and non-residential activity, a significant global recession, and stronger USD.

  126. 126
    Dman Says:

    #122 & 125. Thanks Hoss. Guess the market thinks autos matter more at this point.

    Oil service getting a flogging, maybe this is the new-quarter selloff Z mentioned yesterday.

  127. 127
    BossmanG Says:

    wow my positions in OII and NFX are getting shelled

  128. 128
    ram Says:

    It looks like the only traders that are left are sellers. All charts look similar where stocks “fell off the cliff”.

  129. 129
    VTZ Says:

    I swear that every time Zman leaves the market knows and we get rocked, haha.

  130. 130
    tomdavis12 Says:

    S&P closes below 1275. Not good technically

  131. 131
    Fiveanddimer Says:

    Same thing happening to oil&gas, precious metals, and agriculture: the underlying commodities are rising in price, but the equities are selling off. Look at gold and silver, both having strong days, as far as the physical metal is concerned, but the stock at down across the board. Looks the the overall equity market is having an anxiety attack. Investors looking at cash as a short-term safe haven.

  132. 132
    Dman Says:

    Just added exposure to EOG CHK SLB HK. Wanted to add OII CLB but outa time …

  133. 133
    scoop006 Says:

    Dman May I ask what month?

  134. 134
    Dman Says:

    Scoop, EOG is Jan, CHK is Oct, HK is Sep, SLB is Jan.

    Think the broad market may have a pretty serious event in its near future, so we might get some more bargains.

  135. 135
    cadillac Says:

    What a day…If Rig drops again tomorrow, I think I’m in with both fists. I can’t see much downside.

  136. 136
    md Says:

    petroleum monthly supply till April shows a 4-4.5% drop comps week and YTD vs. Last year.
    Weekly report is showing only 2%-2.3%
    The difference bettween the weekly which is a preliminary report and monthly which is consdierably more accurate would seem significant but market does not seem to reflect drop in demand. Any explanation.

  137. 137
    Dman Says:

    caddy: Rig looks like it’s found a trading range (as have quite a few other energy stocks) and I’d be tempted on a dip to $143.

    NOV should benefit from the shale mania, so I’ve got it in my sights too. Not as cheap as RIG but hardly expensive.

  138. 138
    zman Says:

    ug?!

    Oil through $144. Broad market getting crushed. XNG and OIH took a thumping for no particular reason other than people have profits. BRY got crushed and the list goes on. Gave up 90% of the opening 10 minutes gains by the close. Yikes!

  139. 139
    cadillac Says:

    z,

    Have you done a Rig/Driller Valuation chart lately?

  140. 140
    zman Says:

    C – nope, will make a note to do one in tomorrow’s post. will also look at rig’s latest contract last night.

  141. 141
    Dman Says:

    Z – having trouble interpreting the last sentence in #138 (the one before “Yikes” ) …

  142. 142
    bill Says:

    we have all done well with ‘our” energy picks

    This is a time not to get too cocky.

    We have a bear market and the possibility of obama and other democrats getting into power.

    Im thinking i want to be high % cash as we get to november. I think other people are thinking that way now

    The prospects look fantastic for chk,hk and pq and in the lobg run should do well regardless of who is in office

  143. 143
    arodeen Says:

    I’m anxiously awaiting Monday. Too bad there’s not a Google Checkout link for “Lifetime Membership”. I might get the ‘Zman 12mo. Subscription’ October 650 calls just in case you decide to go up.

  144. 144
    zman Says:

    Dman – meant to say “gave up” 9/10ths of this mornings gains by the close. The front month sales kept me positive on the day which I was shocked at when I got back to my desk.

    Bill – agree with all of 142

    Aro – thanks. No plan to raise rates. Only did it before to control the pace of growth.

  145. 145
    kyleandy Says:

    z interesting in that PQ presentation there is no mention of haynesville. wonder why ??

  146. 146
    zman Says:

    Kyle – noticed it the other day as well, don’t know the answer yet, looking into it.

    I did notice huge after market down draft in the group, many stock off another 2 to $3 in late trading including CHK, HK, GDP and the all the big cap E&P. Looks almost like a fund decided it was time to trim its energy holdings in very sloppy fashion. Could be done to meet redemptions. Asia is getting shelled on high oil, tomorrow’s open could be ugly.

  147. 147
    scoop006 Says:

    Z re #146 Cramer advised viewers to take profits in their energy stocks tomorrow morning, says further price declines can last 5 days. He should of said this last night or sent out an alert prior to 10:30 AM today.

  148. 148
    zman Says:

    Thanks Scoop – what a fair weather fan that guy is. He pounded the stocks after hours. Hopefully this gives someone like GS who has been lukewarm on many of the mid cap names a chance to upgrade but I would doubt they do it tomorrow. I officially take back all the nice things I normal say about him.

  149. 149
    scoop006 Says:

    Talking of GS they put VLO on their buy conviction list@ $50. down 25% since 4/14

  150. 150
    zman Says:

    Didn’t do the same recently for X?

  151. 151
    Hoss Says:

    Z, Scoop

    I’m neither here nor there on Cramer, but you may get a kick out of this. Some of the editing is probably “out-of-context” but it is what it is.

    http://www.crossingwallstreet.com/archives/2008/06/buy_buy_buy_wai.html

  152. 152
    Wyoming Says:

    Z,

    Not that the After Hours matter much but the DUG’s actually went down and DIG’s went up. Someone will probably straighten out the wood shed tomorrow morning before the carnage begins. I rolled up during the upticks and fortunately out so Scud potential may be minimized. There are also 6 boxes of interest from the GOM to the Africa coast that may keep bear raiders honest on energy.

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