15
Jul

Trying Tuesday

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Yesterday's opening broad market glee was shorter lived than even I thought it would be. And the dollar's solace due a the bailout of Freddie and Fannie was short lived as well with the dollar index closing lower on the session...and tumbling this morning.  Although a broad market melt down would ding the energy shares I continue to think that during this time energy is one of the few "safe" hiding spots for capital as we approach earnings season. 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Refiner Update
  4. Stocks We Care About Today
  5. WIOWIO - CHK, I plan to re cap reasoning for my ownership in 1 to 2 names per day as we approach earnings season. 
  6. Odds & Ends

Holdings Watch: The Wiki and ZEB Performance tabs are updated through 7/14. I plan to make progress on the "get out of the remaining July calls" effort today. Yesterday's trades:

  • (CHK) - Added CHK $67.50 August Calls (CHKHU) for $3.10 with the stock just under $63.
  • (PQ) - Entered PQ August $22.50 Calls (PQHX) for $5.20 with the stock trading at $26.70.
  • (SLB) - Added SLB August $110 Calls (SDBHB) for $2.55 with the stock at about $101.70. Continuing to hold the Aug $100 calls here as well for earnings this Friday.
  • (NBR) - Doubled the August NBR $50 Call (NBRHJ) position for $1.25. Brings average cost to $2.03.

Commodity Watch:

  • Crude Oil settled up a dime at $145.18 yesterday as mixed reports about the impact of a strike in Brazil took precedence over fast fading memories of tensions between the U.S. and Iran. Not that those tensions eased but nothing new happened over the weekend leaving traders with little to sink their bullish teeth into after the recent plethora of hype driven news items and the occasional fundamentally supportive data point. This morning crude is trading up $0.50 to $1.00 on dollar weakness. 
  • Saudi Counters Productivity Claims. Saudi Arabia said it will stand ready to pump 12.5 mm bopd for as long as necessary beginning next year, in direct contrast to one of the bullets I ran yesterday citing a BusinessWeek article citing an only limited ability to reach levels that high.
  • Dollar Falls To Record Low Against The Euro. Yesterday I gazed in wonderment at the dollar's strength as the U.S. became further entrenched in the financial institution bailout business. Today it is finally hitting home and the Euro hit an all time high of $1.60 while the dollar index is testing 4 month lows in a bid to fall into the abyss (off the monthly chart).
  • Natural Gas closed up almost 6 cents to $11.96. We'll be looking for a smaller than seasonally normal injection this week, something on the order of 70 Bcf which could spark a modest rally in prices which, yesterday not withstanding, have fall almost 10% in 5 trading sessions. This morning gas is up slightly with oil.
  • Imports Update: 8.5 Bcfgpd, flat with the prior week and off 3.7 Bcfgpd versus year ago levels
    • Canada: Piped gas volumes headed south of the Can/U.S. border registered 7.8 Bcfgpd last week, down half a B from year go levels.
    • LNG: still stuck at 0.7 Bcfgpd.
  • Tropics Watch: Low #94 now thought likely to eventually develop into a hurricane over the next several days. It (to be named Cristobel) is becoming better organized and taking a more southerly tack than Bertha and could make its way into the Gulf of Mexico. 

Refining Update: Still not excited; not quite ready to bottom fish the group

crack-spread-071108.jpg

Refiner Multiple: Cheap for a reason. And the reason is that no one has much faith in the denominator at present.

refiner-multiple-071408.jpg

refiner-per-071408.jpg

Key Points:

  • I'm away from the group and been for months now but am always looking to re-enter.
  • As crude rises and margins retreat, analysts continue to hack back EPS estimates, price targets and ratings; several have come out with "enough is enough" type pieces which have provided good exit points for trapped investors.
  • At these levels, buying puts seems like a dangerous game in front of an earnings season in which no one expects these names to do anything but report losses and guide towards a dismal second half.
  • I'm going to wait and listen carefully to comments made on the 2Q calls by the following names here: (VLO) on 7/29-, (TSO) on 7/31, (FTO) on 8/6 and (SUN) on 8/7. I don't need to catch a falling knife without some new data and fresh perspective on the current environment and I don't care if I miss the bottom 10% if the group is truly going to begin some form of recovery.
  • One last thing, not knowing as much as I'd like about asset valuations in the space I checked with sources much more knowledgeable than myself. Other than in the event of a take out, the stocks simply do not trade on asset value. I suspected this was the case (as it is with E&P's where the only time they really trade at or above their NAV is on the day they get acquired) but thought asset values might provide a floor for the stocks. I was dissuaded from this argument. 

 

Stocks We Care About Today:

(SD) Announces Intent To Sell Non-core Assets.

  • 30,000 acres in East Texas / Northwest Louisiana (Haynesville potential)
  • could receive between $20 and $30 K per acre
  • don't expect CHK to go after it, at least not the whole package as much of it lies pretty far from what they have so far defined as the core of the play.

GMXR Announces Secondary. Another Haynesville player offering shares. CHK and GDP sold shares in the last 2 weeks. 

  • 2 mm  shares (14% of outstanding with the shoe), quite a bit more dilutive than the earlier deals we have seen but the book is being run by Jefco who knows a thing or two about placing energy deals.
  • Proceeds for "temporary repay of indebtedness"
  • If your Haynesville player has not yet announced a secondary, get ready for it.

BEXP Provides Operations Update.

  • Bakken Area:
    • 2 nice completions,
      • one west of the Neeson Anticline in McKensie Countyat 727 BOEpd gross (this lies just to the west of where the bigger wells in the play have been located); net production in recent days would be about 160 BOEpd. This was a re entry
      • the other in the North Stanley area (North End of the Neeson Anticline) with an IP of 618 BOEpd; net of the last of 3 day average would be about 170 Bopd.
    • 2 more wells completing in Mountrail County N.D. 
    • 2 more wells are drilling in the Parshall/Austin area where EOG has hit its monster wells (3,000 to 3,600 bopd)
    • and one or two Three Forks Sanish wells are now planned as third quarter spuds
    • and they are adding a second rig beginning in August
  • Putting that in perspective:
    • BEXP Average Production: 6,900 BOE per day so each one of these wells is meaning full (net rates are worth 2%ish of total production each) to the company.
    • Same goes for reserves. Good economics and 250,000 to 1 mm barrels in reserves per well vs 2007 booked reserves of 23.3 mm boe.

 

WIOWIO - Why I Own What I Own

CHK - Common Stock, July calls (soon to be gone) and August Calls.

The Big Picture Stuff:

  • Management - top notch and highly aligned with shareholders,
  • High unit volume growth guidance: 22% for 2008, 21% for 2009 and 16% for 2010.
  • gassy - 92% of production is U.S. natural gas,
  • long reserve life (15+ years)
  • Massive drilling inventory (>10 years worth at current drilling rates and they are the most active driller in the U.S. bar none).
  • Leading position acreage positions in Haynesville and Marcellus shales, #2 in Barnett and Fayetteville Shales
  • For as long as I can remember, the stock has been the cheapest of the big cap E&P. I have argued that their prospect inventory, production growth rate, and all of the stuff in prior bullet points augured for a more equivalent forward multiple of cash flow relative to its peers. That has now occurred but the name is still cheap and when was the last time Wall Street, upon taking notice of thing didn't swing the pendulum too far in the other direction? Given that production is likely to be revised higher over the course of time I think the stock will continue to soldier higher, perhaps adding 50% to 100% in the next 12 months.
  • Valuation: (CHK) trades at 5.3x 2009 numbers vs the large cap peer group's 4.8x multiple. The group is slower growing and in many cases does not provide the stability of production growth CHK is able to guide for. These multiples were nearly inverted (CHK vs the group) as recently as March.


Near term stuff (reasons I own it right now, especially the August calls and the stock):

  • 2Q results due out after the close on 7/31. In the press release and on the conference call I expect to see:
    • Quarterly Beat On The Numbers. A quarterly beat of both production guidance of 2.275 Bcfepd and Street Consensus CFPS of $2.37; would like to see LOE to come in at about $1/Mcfe.
    • Production Guidance To Go Up. I have little doubt we'll see numbers rise for production growth guidance for 2008 through 2010,
    • Better than 12 Tcfe for 2Q reserves.  (CHK) is one of a handful companies that calculate and report reserves on a more than annual basis...we could see them up their 13 Tcfe by YE08 and 15 Tcfe by YE09 targets as well,
    • Potentially another $1 B + in asset monetizations via either an MLP (master limited partnership) for midstream assets or a VPP (volumetric production payment) for non-core, non-growthy reserves,
    • Continued strong growth from the Fayetteville shale which has positive implications for (SWN) and (HK). Look for them to show off more efficiency metrics this quarter here and in the Barnett,
    • And more news about Non-Haynesville, non-gas shale plays. Yes they do other things besides drill in the Barnett, Fayetteville, Haynesville, Marcellus and other gas shale plays. Back in March when they made the Haynesville a household name (HK just gets no credit for beating them to the punch) they also announced 5 OIL SHALE plays.
      • They were cagey about location to the point of not giving any names or even the states the plays reside in,
      • We know the plays ranged in size from 100,000 to 1,000,000 acres and were spread over 4 states way back in March 24. With Aubrey's "get established, then talk" methodology, the leaseholds are no doubt bigger now.
      • Aubrey previously said the plays could amount to 1 billion barrels of oil or 6 Tcfe. The company only has 11.5 Tcfe booked now. With potential for 8 Tcfe in the Barnett, 10 in the Fayetteville (and that will rise) and over 20 Tcfe in the Haynesville they are setting up an undeniable extreme discount to reserve valuation.
      • My sense is that this is the next big shoe to drop from management. When you absolutely, positively have to convert every last analyst in the room, hit them with a successful oil shale play (or 5 of them them).

 

 

Odds & Ends

Analyst Watch: Broadpoint cuts (CLR) to neutral on valuation. Jesup initiates coverage on (RIG) with a Buy.

 

163 Responses to “Trying Tuesday”

  1. 1
    Sambone Says:

    Z – “Black Tuesday”? I somewhat disagree with you on the energy patch. On a “meltdown”, the crowd will exit all including the patch. May not get spanked as bad, but you know the saying ‘baby and the bathwater”.

  2. 2
    Sambone Says:

    8:09 am EST

    Crude Higher; Gleans Support From Weak Dollar

    By Angela Henshall
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures traded higher in London Tuesday, supported by the U.S. dollar weakening sharply on growing fears over the outlook for the U.S. economy.

    Andrey Kryuchenkov, analyst at Sucden Research, said oil prices gained ground as the dollar declined against major currencies on “downbeat sentiment over U.S. financial markets,” because the U.S. government’s move to rescue mortgage lenders Freddie Mac and Fannie Mae had failed to boost investor confidence.

    Market participants are looking ahead to Federal Reserve Chief Ben Bernanke’s monetary update to the Senate Banking Committee later Tuesday, and consequent dollar movements are expected to lead direction for crude.

    At 1115 GMT, the front-month August Brent contract on London’s ICE futures exchange was up $1.20 at $145.12 a barrel. The front-month August contract on the New York Mercantile Exchange was trading $1.04 higher at $146.22 a barrel.

    The ICE’s gasoil contract for August delivery was up $11.50 at $132.100 a metric ton, while Nymex gasoline for August delivery was down 240 points at 358.17 cents a gallon.

    A group of bullish factors continue to keep oil supported within striking range of $150 a barrel, including a weaker dollar, anxiety over the U.S. economy and fears over tight physical crude supply.

    Oil market participants have a lot to contend with and process in coming days with a raft of economic data due alongside earnings reports from a number of banks and major financials.

    Olivier Jakob, analyst at Petromatrix, warns distress in the financial sector will continue to influence oil price. Jakob points out that as investment banks have been steadily increasing their value-at-risk exposure to commodities, “their current distress can have significant impact on oil prices if they are forced to liquidate commodity positions in a run for cash.”

    Crude oil futures also still look vulnerable to bouts of profit-taking this week, and murmurs of demand erosion persist among market participants, with some banks moving to call a top to the market, pointing to a faltering demand outlook.

    Lehman Brothers bank analyst Ian Scott thinks the negative impact of sustained high oil prices is starting to bite.

    “We believe today’s high prices are now materially affecting demand,” says Scott.

    The volume of oil imports to the U.S. has fallen 19% in the three months to May, and prices have risen by a further 33% since then. Scott said while Chinese demand remains strong, U.S. imports represent three times the quantity China imports.

    In addition, a gloomy supply outlook came from the Organization of Petroleum Exporting Countries’ monthly report. The group revised down its forecast for 2008 growth of world oil demand down to 1.2%.

    On the supply front, Chevron (CVX) has restarted its operations at the Escravos facility in Nigeria after a forced shut-down, although any returned supply there could be canceled out by prolonged loading delays for ExxonMobil (XOM) Qua Iboe crude in July and August.

    Supply to the Mediterranean physical crude market will also be trimmed in coming weeks after shippers confirm less Kirkuk crude is flowing from the fields in Northern Iraq following a technical problem.

  3. 3
    zman Says:

    Re #1 – I said they would get dinged but I’m not really expecting a crash at this time, are you?

  4. 4
    Sambone Says:

    Z – She’s getting ready. My local paper had 2 front page ‘Oh my God” headlines yesterday, and three this morning. WSJ had three yesterday. Joe sixpack is starting to worry. Maybe not a Crash today, but capitulation soon. I think we’re getting close.

  5. 5
    zman Says:

    Maybe they will let GM go to the discount window, lol.

    300 points off the S&P since October, you think we are going to 1200 then to 1100? The monthly chart there looks like a big ugly decade long double top. Just curious as usually when people start talking crash you get a bounce. And vice-versa, when there is so much complacency, especially in summer, you get a drop. I would not call the mood complacent at present.

  6. 6
    zman Says:

    RIG out with $3 B in contracts from PBR, details to follow.

  7. 7
    zman Says:

    Brazil oil worker union says may extend strike to remaining terminals, and to refineries and shipping. Says no talks scheduled with PBR. PBR says offer is final.

  8. 8
    Sambone Says:

    Off subject – Saw this today and it might help everybody with their long term investing.

    Short Interest Tutorial

    There are a host of short-term sentiment and trading activity indicators – things like the VIX, put/call ratios, the TRIN, Market Vane numbers and short interest data.

    Today we want to focus on the short interest which is the number of shares borrowed from brokerage firms and sold, with the sellers anticipating they will buy back the shares at lower prices. The Short Interest is the total number of shares sold short and not yet covered (bought back). A typical or conventional short interest ratio is the total short interest divided by average daily trading volume for the preceding month. This ratio gives you the number of days needed to cover the shorts. When the short interest ratio is high and rising it indicates that there is increasing pessimism that stock prices will fall. Different analysts will come up with different levels to watch but for many years a high short interest ratio (above 1.8) has been considered bullish and a low one (below 1.15) has been considered bearish.

    Short interest can also be used for individual stock analysis, but most people apply it incorrectly, in our opinion. What is too often seen is the short interest compared to the stock’s float or the number of outstanding shares. Technical analyst Phil Erlanger was studied the short interest data for many years and has a different approach.
    http://www.erlangersqueezeplay.com/page/esp/aboutus/

    Erlanger compares the current short interest in individual stocks to their 5-year history and not to the company’s float. Is the short interest high to its own 5-year history or at the low end of its history? Then one should look at the stock’s relative strength to the S&P 500. Has the stock been outperforming the market? Taking the short interest history and the relative strength Erlanger then looks to identify two winning combinations —
    Type 1: Short Squeezes.  We like to buy these. These are stocks whose relative strength is so strong that their Erlanger Technical Rank is above 70. This is not all, however. In addition to relative strength, in order to qualify as a short squeeze, there must be a lot of short selling. So a Type 1 short squeeze must have an Erlanger Short Rank above 50.
    Type 4: Long Squeezes.  We like to sell short these. These are stocks whose relative strength is so weak that their Erlanger Technical Rank is below 30. This is not all, however. In addition to a lack of relative strength, in order to qualify as a long squeeze, there must be very little short selling. We interpret this as a sign of extremely bullish expectations. So a Type 4 long squeeze must have an Erlanger Short Rank below 30.
    So if there is a large short position and the stock has a weak relative strength picture, the shorts have it right!

  9. 9
    Dman Says:

    Dow still on track to reach zero by February. Just sayin’ is all. Make of it what you will …

  10. 10
    zman Says:

    HK out with news.

    Developing a small slice of the Haynesville with MNLU (never heard of them)

    2700 acres in De Soto parish

    MNLU will transfer 60% of its interest in the acreage to HK in exchange for a carried interest on the first well drilled and a 80% carry on a second.

  11. 11
    reefguy Says:

    mnlu- we missed this one z

  12. 12
    ram Says:

    This person is getting nervous about this country’s financial stability. I’m all in at WF, and if she goes, there is no where else to go.

  13. 13
    zman Says:

    Its a BB, pretty hard to dig those out.

  14. 14
    tater Says:

    Nat gas charts support your conclusions Z.

    Simple and clean charts for today.

    UNG $NATGAS

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

  15. 15
    zman Says:

    HK deal, that is pretty cheap access for those acres. Maybe spending $10 mm dollars on the first two wells and then a 60/40 split there after. If they had leased them at current prices it would have cost more. Probably something closer to $50 million ($20K/acre x 2700 acres) to get 100%. Smart move in my book.

  16. 16
    crysball Says:

    BEXP announces Baaken results and expands Capex to $189 million this AM

  17. 17
    zman Says:

    Crys – I have a short review of the BEXP Bakken part of their PR in the post.

  18. 18
    reefguy Says:

    do not like BB stocks

  19. 19
    zman Says:

    In general neither do I. Information is often scarce and unreliable.

    Right now this market does not like any stocks, BB or otherwise.

  20. 20
    Bleemus Says:

    SD SandRidge Energy: RBC believes that selling prospective Haynesville Acreage unlocks value (60.53 )

    RBC notes that SD announced its intent to sell its interest in ~41,000 net acres in East Texas and North Louisiana. Firm thinks this sale will unlock significant value for SD as they believe the gross proceeds could yield between $1.2-$2.0 bln by firm’s initial ests. In firm’s NAV, they currently attribute ~$1 bln to these assets. Given the high level of interest in the Haynesville and size of this package, they expect there to be a large list of interested buyers. SD’s intentions are not likely an indication of prospectivity but more of an opportunistic time to sell a non-core asset and will help fund SD’s FCF deficit over the coming year.

  21. 21
    kiaora Says:

    Tater…what entry point did you say CLR had to pull back to to be attractive?

  22. 22
    zman Says:

    Thanks Bleemus, had not seen RBC’s take, that’s quite a bit more acreage than I had last heard they had here (thought it was 30K)

  23. 23
    zman Says:

    Stocks getting exaggerated moves on low volume. Broadpoint rating cut yilds a 5 point dip in CLR? K’s question is a good one as this is trading technically. I think on a valuation basis they are being pretty short sited and the stock may runn on the 2Q.

  24. 24
    Sambone Says:

    9:32 am EST

    Nymex Crude Rises On Record Dollar Weakness

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures traded higher Tuesday, after the dollar hit a record low against the euro.

    Light, sweet crude for August delivery traded 54 cents, or 0.4%, higher at $145.72 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange 79 cents higher at $144.71 a barrel.

    The euro traded at $1.6040, an all-time low for the dollar. Oil prices often rise on days when the dollar falls, as investors use commodities as a hedge against the greenback. The dollar has weakened on signs of instability in the U.S. economy, most recently with the government move to support mortgage giants Fannie Mae and Freddie Mac.

    Futures failed to set a new record alongside the dollar, however. Several potential supply threats failed to materialize, putting a cap on gains in early Tuesday trading. A strike by oil workers in Brazil resulted in little shut-in production, while a storm off South America appeared unlikely to develop into a hurricane. Trading volumes were low as the U.S. session began.

    “Everybody’s waiting to see what will be the next factor to drive pricing,” said Gene McGillian, a broker and analyst with Tradition Energy in Stamford, Conn.

    While U.S. economic troubles could signal a decline in demand from the world’s largest oil consumer, traders remain focused on strong growth in the developing world. Consumption in Asia and the Middle East continues to grow rapidly, more than making up for any drop seen in the U.S.

    “The only thing that can take us down are reallydemand destruction numbers from the emerging markets,” said Ray Carbone, a trader with Paramount Options in New York.

    The market may also be waiting on the release of weekly U.S. oil and product inventory data, scheduled for Wednesday morning. Oil stocks for the week ending July 11 are expected to fall by 1.3 million barrels, with gasoline inventories down 100,000 barrels and distillates up 1.8 million barrels, according to the average analyst forecast.

    Front-month August reformulated gasoline blendstock, or RBOB, recently traded 81 points, or 0.2%, at $3.5658 a gallon. August heating oil traded 2.97 cents, or 0.7%, higher at $4.0946 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  25. 25
    zman Says:

    From MarketWatch ~

    The potential for runaway price hikes is the top concern of Federal Reserve policymakers, according to testimony by Fed chairman Ben Bernanke and the accompanying report on the economic outlook of his colleagues on the central bank released Tuesday. FOMC members were more uncomfortable about the inflation outlook in June than they had been at any point in the year, according to the Fed’s monetary report to Congress. The Fed is worried that high oil prices, combined with the weak dollar, will increase business costs and prices. At the same time, it could make workers demand higher compensation because of the more expensive cost of living. As a result, most Fed members viewed the possibility that inflation could come in higher than expected in coming months.

  26. 26
    Bleemus Says:

    10:01 Bernanke says surge in oil prices driven predominantly by strong demand, tight supply

  27. 27
    zman Says:

    Oil coming off, looks to be back to worrying about a global recession. Stocks getting woodshedded (dinged) as investors sell everything.

    Bleemus – watching Ben’s comments coming across as well. It’s like a fireman watching a house burn down and giving a detailed report but not saying how to put it out.

  28. 28
    tater Says:

    Kiora
    $75 or $72 for CLR. Personally I am doing 1/3 now, 1/3 at $72 if it happens, and 1/3 or 2/3 on a break above yesterday’s high. Good luck

  29. 29
    zman Says:

    Tater – I’m waiting for the day to show some sign of not completing falling apart but otherwise agree with the average in and average up, not down strategy.

  30. 30
    Bleemus Says:

    10:05 ABP Abraxas Petroleum announces approval of Wyoming drilling permits (4.78 +0.16)

    Co announces that it has received approval on two of its drilling permits in Brooks Draw, Wyoming. Co anticipates receiving approval on three additional permits during the third quarter of 2008. A rig has been scheduled for mid-August and initial plans are to drill one well at a time with evaluation periods in-between. The wells will be drilled horizontally into the Mowry Shale and/or the Turner Sandstone. Abraxas owns a 100% working interest in each of these wells.

  31. 31
    bill Says:

    re # 10

    I got a mailer on MNLU..

    talked about haynesville..i threw it away as a scam stock

  32. 32
    Sambone Says:

    Weather – 94L still continues to chug west. Watching wave off of africa, disturbance at 70W, 15N and disturbance in GOM coming off of TX and just off FL coast.
    It’s heating up boys and girls!

  33. 33
    zman Says:

    Oil off a $1.30 with no recovery in the $ and a worsening of the strike in Brazil. They are definitely more concerned about recession.

  34. 34
    bill Says:

    mnlu yearly low .01

    currently at 6.20 at a 52 week high

  35. 35
    ellwodo Says:

    Bought some more HK Aug 50s. I may need a 12 step program.

  36. 36
    zman Says:

    It looks like they are starting to fish the group.

    Elwo – time will tell

  37. 37
    tater Says:

    K – I added the CLR charts to my nat gas posting if you want another look

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

  38. 38
    kiaora Says:

    Thanks

  39. 39
    Jay Reynolds Says:

    Question:

    How much is a 17 MMCFD Haynesville well worth?

    Why:

    I’m being asked to farm out my acreage in Caddo Parish under a novel arrangement.

    I would forgo 1/2 the usual bonus, keep the usual override and get 1/2 of the reserve value upon resale of the acreage once a HS well is drilled and completed.

    Their plan is to bring geologist, completion team, rig, capital, etc., (now active in Bakken), drill, hopefully make a good well and sell out to one of the “big boys”.

    What might I guesstimate the value of the 50% to be?

    TIA

    JR

  40. 40
    zman Says:

    Tater – thanks for the charts. Natural gas continuing its break below trend. Seems unusually willing to sell off now without a change in fundamentals of supply and with increasing cooling load and a storage refill that is going rather slowly and going to lead to below normal peak storage next October.

    This happened last year too when hurricane season got off to slow start.

  41. 41
    zman Says:

    JR – So they want to pay you $15,000 an acre and give you 25% royalty? Reserve ranges are being guesstimated at 4.5 to 8.5 Bcfe per well. And you get half the reserves value when they sell it? Is that about right?

  42. 42
    zman Says:

    What a bunch of mixed messages out of Ben. Inflation is chief concern but then, from marketwatch~

    Interest-rate futures traders slashed bets that the Federal Reserve will increase benchmark interest rates as soon as September after the central bank’s Chairman Ben Bernanke told Congress he sees “significant downside risks” to economic growth. Fed funds futures show a 17% chance of a quarter-percentage point rate increase as soon as September, down from a 52% likelihood Monday. It briefly showed no chance of a hike. Futures still indicate a 32% probability of a rate hike to 2.25% by November, after recently pricing in a 50-basis-point increase by then.

    Ben basically admitting he has no control.

  43. 43
    zman Says:

    Crude down 2.50 now, I guess on the economy, no other news out aside from Saudi’s statement about being able to meet future production goals.

    Dollar remains in the gutter.
    Broad market starting a recovery.

  44. 44
    Jay Reynolds Says:

    Z – I’ll email you the pro-forma when I get it. It’s a novel arrangement but don’t know the value they’d give to the bonus.

    JR

  45. 45
    zman Says:

    Cool JR. On the reserves alone we are talking good sized numbers 🙂

    Crude down $3.50.

    Nicky if you are around could use some fresh support levels on the broad market.

  46. 46
    zman Says:

    Oil just tumbling now, down $4.75, off another $1.25 in 1 minute.

  47. 47
    zman Says:

    Oil off $9 as Bush calls on Congress to allow for offshore drilling saying it will change market psych if passed.

  48. 48
    antrimshale74 Says:

    Oil is moving on Bush comments? I feel like I woke up in silly land today. Have you been listening to this? It’s enough to make one mad.

  49. 49
    zman Says:

    Antrim – yep, these are sillyland comments designed to boost the broad market by nuking oil. I see no action and nothing of substance here. Just spin. Unreal.

  50. 50
    Sambone Says:

    W – Wise man? LOL

  51. 51
    bill Says:

    ng down as well down 50 cents to 11.45

    oil down 6.63 to 138.34

    looks like bush plan helps pscycologically

  52. 52
    Dman Says:

    Had some bids in on Dec NFX and Jan HAL calls. The whole complex dropped on the Bush brain-spasm and now I’m the proud owner of aforesaid calls. And the funny thing is, I can’t decide if I’m happy about it or not. I do kinda like it when the market is this deep into crazy-town though. A word from the Bush Brain and crude drops like a rock and the broad market recovers (shorts scrambling?). Well, at least something is moving out there 🙂

  53. 53
    zman Says:

    Quote of the day:

    Bush says “no question it is a time of uncertainty for the US economy”

    second one

    “fundamentals are driving oil price — low supply, high demand”

    So he plans to change price determinant from fundamentals to psychology. Wow.

    Volumes in the group in most cases appear to be pretty light.

  54. 54
    antrimshale74 Says:

    Well the airlines are moving up.

  55. 55
    bill Says:

    clr down 9

    ouch

  56. 56
    bill Says:

    gmxr down 6

  57. 57
    bill Says:

    chk in the 50 ‘s

  58. 58
    zman Says:

    Refiners going slightly green on down oil.

    This is Sam’s baby and bathwater action. Still above the lows from the other day but not by a lot for The OIH and XLE.

    CHK fell all the way back to its 50 day SMA

  59. 59
    uop Says:

    zman;
    yes Bush makes these really deep statements: it sucks.

    There has always been a question on my mind: will energy stocks move in line with oil prices?? Certainly the last 30 minutes.

  60. 60
    el_vogel Says:

    chk nosediving

  61. 61
    Dman Says:

    Z – I see you are as deeply impressed with Bush plan as I am. Our problem may be that we are part of the reality-based community. Whereas Bush believes he can make his own version of reality and go live in that. And who can argue, with oil down 6% on his whimsical say-so?

  62. 62
    zman Says:

    El – V – yep and it’s still in line with the group for the day. Unreal the drop here.

    Refiners up on down 6% crude…but gasoline is down 6.5% and heating oil is off 5%, celebration makes little sense here.

  63. 63
    antrimshale74 Says:

    Coal stocks getting hammered as well.

  64. 64
    antrimshale74 Says:

    Perhaps some short covering on the refiners at this point stoked by the oil drop?

  65. 65
    davidjeso Says:

    Z – what do you think of the NFX Aug 60 calls at around $3.50? or the 65s at $2.05? I’m looking for some good news on the call and really like buying into what I think is temporary weakness for the group.

  66. 66
    zman Says:

    Yes, we don’t need coal anymore either.

    Re refiners, probably a good thought re covering.

    Anyone see a congressional response yet on drilling on the OCS?

    david – I hold the August $60s and the September $65s as well as some worthless July’s. They should have catalytic news from the Bakken and the Woodford on the call. No results on their dual lateral in the Woodford as it probably just spud, hopefully some Mancos shale news also.

  67. 67
    doc Says:

    Do you like ECA? They have low pe, low price to sales and low debt

  68. 68
    zman Says:

    Doc – I do like them but don’t follow them closely enough to trade. Maybe someday I’ll get around to wrapping my arms around them and NXY and I used to follow TLM for a living so them too. But for now, at least going into the 2Q period, I have no intelligent thoughts on them.

  69. 69
    arodeen Says:

    NFX has just spudded their first on a 4 well pad in the Woodford. The dual lateral isn’t very near completion at this time. I’ll work on some dates, but I wouldn’t expect results in time for earnings.

  70. 70
    Popeye Says:

    I SEE GREEN! DRYS. Ooops, gone.

  71. 71
    zman Says:

    Thanks Arodeen, that’s what I thought on the lateral in the Woodford, maybe they highlight the savings from pad drilling on the call with that 4 spot well. I know they have things to talk about in the Bakken, at least 3 wells down, no concept of rates though.

  72. 72
    bill Says:

    Bulkers are bouncing off there lows

    A new name I like is FREE on a turn around

    33 % more operating days in q2 will beat analyst numbers.

    A bargain at 5.85 imho

  73. 73
    ram Says:

    WIKI just shows JULY and SEPT for NFX. When did the ZTRADE for AUG get sent?

  74. 74
    Dman Says:

    Energy price by Presidential decree looking a bit shaky. Is the market defying the Leader?

  75. 75
    zman Says:

    Ram – apologies for the confusion. It is one that fired yesterday and I did not see it execute. Didn’t know I had it until I looked at the NFX’s when david asked. Pretty sloppy on my part but one of the but I am comfortable owning it…will not put in the records until I add more of it.

  76. 76
    zman Says:

    Ram – that trade was yesterday with NFX trading about flat so about $2.25 higher than here at a cost of $4.70. It’s a lot cheaper today.

  77. 77
    apbd Says:

    Back from vacation. Economy hasn’t affected the RE prices in Telluride. Out of sight. Over 1mm on 1 BR condos.
    I second bill’s comments on free. Great dividend, too.
    apbd

  78. 78
    ram Says:

    Thank you.

  79. 79
    zman Says:

    Wildz thought would be to pick the low today and take July $100 calls on SLB for Friday. We actually pulled this off nicely last quarter as they were reporting on expiration then too as I recall. If I do one that will be it but at present I am not feeling very wild.

  80. 80
    zman Says:

    CHK closing on 61 from below.

    Group seeing some weak volume buying.

  81. 81
    Dman Says:

    apbd – could you translate that for me? RE= ?? , condos = ??

  82. 82
    kiaora Says:

    Tater—-the CLR first and second 1/3s worked perfectly…..so far.

  83. 83
    zman Says:

    WILDZTRADE: July $100 SLB Calls (SDBGT) for $2.85. Maybe a daytrade, maybe held through earnings. High risk and on the small side.

  84. 84
    apbd Says:

    Real Estate
    Over $ one million asking prices
    apbd

  85. 85
    SkyKing Says:

    Are SLB earnings announced on Friday morning?

  86. 86
    tater Says:

    K-
    I am doing that one in an IRA with the common. Figure when we are all in soup lines it might come in handy. I also sold some aug 65 puts.
    The Bull Flag still measures to a price around $110 to $120.

    I just updated the CLR 60 min chart so it might make more sense for people. I also left the nat gas charts up. Lost a bit on a daytrade there, but the chart did help me to know when to get out without too much blood. Hope they are of some help.

  87. 87
    Bleemus Says:

    PBR Petrobras Brasileiro says well in POT-T-661 block commercially viable – Bloomberg (60.50 -1.86) -Update-

  88. 88
    zman Says:

    SLB earnings Friday bmo, conf call at 9 EST.

  89. 89
    zman Says:

    XCO picking up E.Tx acreage with Bossier / H.S. exposure.

  90. 90
    reefguy Says:

    XCo- Rusk, Gregg and Upshur 23,000/acre

  91. 91
    Jay Reynolds Says:

    OK, local news stuff re the Haynesville Shale in NW LA.

    Completion guy told me today, “This is Star Trek. We’re going where ain’t nobody been.” Said they have had wells flowing from 10.5K ft w/ 5,000 ft lateral (yes, that’s right) w/ 7.5K psi on the surface with hole full of fluid.
    Kicker was that they hadn’t perf’ed yet so have no idea where pressure was coming from – bad cement job maybe?

    Shut in on at least two others, hole full of fluid was 7 K @ stop circ, then 8 K and 9 K psi one and two hours later respectively.

    Minority players in area opting to sell (ArkLaTex Exploration?) just the window to the HS for as much as 19K$/ac, jobs are just mind-blowers. Counted 242 frac tanks on job, pumped three days, trucks hauling more water the whole time.

    His closing comment: “Just when you think it can’t get any better it just goes completely insane.”

  92. 92
    Dman Says:

    apdp – OK, I get it. I thought you were talking about telluride, as in compounds of the element tellurium used in solar cells. Thought you were saying the ore prices were going thru the roof and I couldn’t quite see a connection with condos, but what do I know about units of tellurium ore? OK so I had a brain spasm…

    Speaking of brain spasms, Crameroo is describing the market as “irrational”. When it’s too irrational for him, it’s getting pretty crazy out there.

  93. 93
    Dman Says:

    Wow, PQ green

  94. 94
    zman Says:

    Reef – yep, not a high price on a proved reserves basis and not bad at all on what they think is 3P excluding the Bos/H.S.

    Thanks JR. Drive a hard bargain there. I guess there is still plenty of water around?

    PQ positive.

  95. 95
    ram Says:

    JR – So in layman terms, is this good or bad?

  96. 96
    zman Says:

    It is very good Ram. I’m still worried about men and materials and a bit about takeaway capacity but those wells, even on a restricted choke will be “monster”.

  97. 97
    zman Says:

    So market is trying to go green on down oil as Fed Chair says inflation is out of control but we can do nothing about it as the economy continued to weaken. Hmmmm.

  98. 98
    tater Says:

    Just wanted to share something I read from Alan Farley, a TA writer whom I find to be fairly brilliant;

    “There’s a tendency for small-market players like you and me to believe that oil and gas equities should
    track the underlying commodity markets step by step, but that’s never been true. In fact, here’s a tidy
    little formula you can use to make armchair predictions about convergence-divergence relationships
    between these markets:
    Look for energy stocks to track the oil and natural gas futures contracts when the Market Volatility
    Index (VIX) drops under 20. Alternatively, expect these stocks to turn and follow the equity indices
    when VIX spikes above 20, especially when the indicator’s 10-day moving average is pointed higher.
    The basic premise of this filtering process is simple. It predicts that energy stocks will follow the S&P
    500 and Nasdaq indices when the markets are grinding lower in active selloff mode, like they are right
    now. But it also recognizes that long-term trends and fundamentals are unlikely to be dismantled by
    short-term volatility spikes.”

  99. 99
    zman Says:

    Thanks Tater. We see switching between the 2 (market vs commodities) from week to week. Will have to take a look at that, may be a help with entries and exits.

  100. 100
    BossmanG Says:

    thanks tater! very interesting…

  101. 101
    Sambone Says:

    11:59 am EST

    Nymex Crude Sinks On Troubled US Econ Outlook

    By BRIAN BASKIN
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures plunged more than $9 Tuesday after the Fed chairman delivered a bleak outlook on the U.S. economy.

    Light, sweet crude for August delivery recently traded $7.45, or 5.1%, lower at $137.73 a barrel on the New York Mercantile Exchange, after sinking as low as $135.92 a barrel. Brent crude on the ICE futures exchange traded $6.35 lower at $137.57 a barrel.

    Futures approached a three-week low following comments by U.S. Federal Reserve Chairman Ben Bernanke that the U.S. would see slow growth in the second half of the year. Bernanke also called the outlook for inflation “unusually uncertain.” President George W. Bush, speaking at the same time, said the U.S. is facing “financial uncertainty.”

    Mounting losses in the oil market snowballed as more and more trading interests hit sell stops, or price levels that trigger an automatic sale.

    “When this thing unravels, it will be ugly…it will be “shoot first and figure it out later,'” said Dean Hazelcorn, a trader with Coquest Inc. in Dallas.

    Oil prices stopped just short of triggering a halt to trading, mandated by the Nymex when oil drops by $10. Heating oil and gasoline futures also came close to the cutoff point.

    “A lot of people have been waiting for a $10 down day,” said Chris Mennis, president of brokerage New Wave Energy in Aptos, Calif. “This may finally be the day.”

    Futures avoided falling below $135 a barrel, a support level tested many times over the last few weeks, indicating that a recovery could be in the works, Hazelcorn said.

    Front-month August reformulated gasoline blendstock, or RBOB, recently traded down 20.26 cents, or 5.7%, at $3.3551. August heating oil traded 17.14 cents, or 4.2%, at $3.8935 a gallon.

    —By Brian Baskin, Dow Jones Ne

  102. 102
    Dman Says:

    Tater, I saw that article too & the theory makes sense… but currently the VIX is 27 and energy stocks are tracking commodities and contra the broad market.

  103. 103
    zman Says:

    Dman – I would suspect the rule doesn’t apply when you have an extreme move in either the market or the commodities. Then they just track whichever one is moving the most on that particular day.

  104. 104
    bill Says:

    refineries up nicely

  105. 105
    zman Says:

    Bill – re refiners. Looks like a reflex action (short covering as volume is large) to down oil. Products are down as much or more so fundamentally not a lot if any improvement in cracks but sentiment would benefit if oil were to fall lower and lower and it gives people a place to hide. We’ve seen this same kind of action on past big oil down days and it has been a headfake as they resume making lower lows a few days later when oil recovered. There’s probably a trade here but I’m sticking to my plan in today’s post and will listen to conf calls and make a decision then unless I see something in the data between now and those calls which seems particularly inspiring.

  106. 106
    tater Says:

    D,
    I think that the article is a generalization, and therefore somewhat flawed when applied to particulars. Overlay the VIX and the XLE. seems to apply. Today’s action shows a spike in the VIX and a commodity sell-off. I think it is certainly worthy of contemplation though, and probably more correlation research.
    Sure would be nice to have an indicator like that to have in your back pocket.

  107. 107
    bill Says:

    105

    sounds like a good plan

    i dont own any either

  108. 108
    zman Says:

    Bill – not saying it is the right plan, but it is mine and I have followed moves like this in the past when everyone goes “ah hah, today is the last day they will ever go down”. I do think they are close to a bottom, but they could still lose 25% from here.

  109. 109
    Dman Says:

    Z – #103 … yes that makes sense.

    Just noticed there are some headlines for PQ about Bluff’s Prospect

  110. 110
    Fiveanddimer Says:

    If you can take 15 minutes away from the short-term market ups and downs, here’s an entertaining Bloomberg interview with Jim Rogers. It seems to cover most of the front-burner economic issues. Although Rogers can be a bit abrasive at times, I find his opinions good for the soul.

    http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vIQvD7yNni2I.asf

  111. 111
    zman Says:

    Dman – yes, drilling 3 wells in La with USEG (which I think of as a uranium play). Just spudding the first which is no reason to pr something but its USEG and not PQ with the release.

  112. 112
    Dman Says:

    RIG & CLB green

  113. 113
    davidjeso Says:

    apbd – Just returned from Telluride as well. One of the prettiest places on the planet. Agree on sky high real estate prices. But, I think you might find some deals there if you wait 12 months or so. A decent piece of Telluride real estate is owned by non-energy types and there are some folks who will find themselves very overleveraged in the coming months….just my 2 cents.

  114. 114
    zman Says:

    BEXP and CWEI too

  115. 115
    Brian08 Says:

    I’m guessing this is just baby with bathwater type stuff today…But shouldn’t drilling on the OCS be good for drillers? I’m guessing OII, DO, and RIG would be the beneficiaries since it is offshore and yet with the exception of RIG they are red…

  116. 116
    zman Says:

    Five – thanks for the jimmy rogers piece. He can be a bit of a crank, true, but he is a wise old salt on the economy and not to be ignored.

    Brian – you are correct on both accounts and I’d throw in FTI for subsea trees and NOV and HAL and SLB as they do a lot of offshore work already.

  117. 117
    tater Says:

    Kiora,

    Just wanted to let you know that I’m taking my ball and going home on CLR. Too quick of a bounce for me. I really suspect that we will get some more selling soon and another chance to buy in. If I am wrong, I’ll just buy up agriculture with Jim Rogers (thanks Five, that was classic!), or get back in when/if it clears yesterday’s high. Good luck

  118. 118
    kyleandy Says:

    z could u translate #91 about pressurre, fluid etc. i assume it is all good!!! thks

  119. 119
    ddaley Says:

    PQ
    U.S. Energy announces the spudding of its first well with PetroQuest Energy (2.83 +0.01)

    Co announces PetroQuest Energy (PQ) has spudded the Bluffs Prospect in Louisiana. U.S. Energy Corp. is participating in this well as a 20% working interest partner with PetroQuest. This initial well will be drilled to a depth of about 13,500 feet, and PetroQuest believes it is targeting a resource of 8 BCFE. This well is the first of a three well program anticipated to be drilled this year with PetroQuest. The other two wells, the St. Andrews and Highlands prospects, are expected to spud by late 3rd quarter or early in the 4th quarter depending on drill rig availability.

  120. 120
    kiaora Says:

    Tater–out @ 80….THANKS!!!

  121. 121
    Fiveanddimer Says:

    “to spud a well” . . . what does that mean?
    Buehler?
    Anybody?

  122. 122
    arodeen Says:

    Five – spud = begin drilling

  123. 123
    zman Says:

    Kyle – it just means there is a lot of pressure to flow hydro carbons to the surface, the fluid in the well is the mud used to keep the well in balance prior to completion (otherwise you have gas rushing up the well before you are ready for it). Wyoming and Reef can elaborate.

  124. 124
    Sambone Says:

    Uncle Phil/Mr. Right

    http://www.321energy.com/reports/flynn/current.html

  125. 125
    zman Says:

    Oil closing down $6.50. Saw that Brazil govt official thinks the strike will end in days. Yeah, like three more as it was planned.

    HK daring to be down only a buck, wow. Otherwise group not catching much of a fish trade just yet.

  126. 126
    Dman Says:

    Monster volume in USO today

  127. 127
    SkyKing Says:

    Zman
    Do you think it is worthwhile to hold our July Calls another day or two?
    I know you might be on the verge of closing some at the loss.

  128. 128
    reefguy Says:

    91- Shut in pressures post pumping frac load are usually quite close to the final pumpin pressure. Simple ex. 12,000 foot well at .75 pressure gradiant equals a breakdown(pump-in pressure) of 8000#. A 1.0 gradiant equals 12,000# pump in to break down. At 12,000′ a column of seawater would weigh about 5900#(about .48 times 12,000). If a well has a full colmun of water and has 7500# on surface one can then infer a bottom hole pressure of 13,400#.. In the real world it is not this simple, the fluid in the borehole probably has some gas column, so the bottom hole pressure is less.

  129. 129
    zman Says:

    Skyking, Re the July’s I’m thinking closer to the money ones will get punted after the open tomorrow. Obviously was looking for a better day today. The further out of the money ones or the ones that are just simply toast will stay on through oil inventories tomorrow. With 3 days left, they can all go to 0 pretty easily; I expect 3 of them out of 8 positions to be scuds at this point with large but not total losses on about half of the remainder.

  130. 130
    zman Says:

    Thanks Reef. Seems the completion engineers are not having a problem with those pressures.

  131. 131
    SkyKing Says:

    Are oil inventories scheduled for the morning tomorrow? If so, there might be a pop up?

  132. 132
    zman Says:

    Yes they are and if we get another big draw (we’ve had a series of them) you could see a pretty good rebound. Last week the draw down was discounted as a W. Coast phenom. But the absolute whithering of inventories is getting hard to ignore. What would be better than would be an uptick in gasoline demand…not thinking we will get that. Looking over the expectations in a few minutes.

  133. 133
    BossmanG Says:

    Z, where do you source the expectations? bloomberg ?

  134. 134
    zman Says:

    Boss – generally Bloomberg, sometimes DJ, they both grab quite a few analysts. Don’t like to use Platt’s as they seem to be skewed with only a few guys in there one week and then a lot the next. Honestly the survey rarely gets it right, not like in the gas storage survey but use it to gauge expectations.

    Bloom is looking for 1.5 mm barrel crude draw this week so it won’t be hard to exceed as long as imports don’t see a sudden surge.

  135. 135
    zman Says:

    Stocks are just treading water down 3 to 6%, rallies are largely being sold but I suspect the group will green into the close now that NYMEX is closed IF the broad market can hold its upward bias.

  136. 136
    Wyoming Says:

    Re 91

    Said they had not perfed yet. We are looking at the pore pressure. That is a function of the overburden usually unless there is depletion or tectonics that would make it over-pressured. If the reservoir has a water drive it would be reffered to as normal pressured. Ie. the pore pressure is @ .44 psi/ft of TVD depth. Water also has the same gradient. A well @ 10,000 True Vertical depth would have a bottom hole pressure of 4400 psi. If we filled the well with fresh water, then the surface pressure would be 0 psi.

    This is the case in the example. The well has a split somewhere (not good) and a full column of water (assumed); gas has entered the well bore and travels up to below the wellhead causing the pressure to increase to 7500 psi. If they want to work on the well and repair the casing, they will need to inject a brine weighing more than water (8.34 Lbs/gallon). In this case it would calculate to 22 #/gallon if the well is full of water, doubtful and unreasonable. If the well is full of gas ~ 2 #/gal, then it would take about 16.4 ppg brine to kill the well. That is reasonable and probably the case. Sweet well to own, bad luck to have with the split.

  137. 137
    redjack Says:

    tropical disturbance 94L..THIS SYSTEM HAS GENERALLY BECOME
    LESS ORGANIZED AND THE POSSIBILITY OF A TROPICAL DEPRESSION TO
    FORM IS DECREASING. (2:00pm)

  138. 138
    Sambone Says:

    Off subject – Here is a case of “The street” protecting it’s own. It let’s “Naked short selling” go on for the longest time, but today, the SEC is going to stop it on it’s own. Wow!

    SEC May Extend New Short-Selling Limits To Entire Market

    By Kara Scannell
    Of THE WALL STREET JOURNAL

    WASHINGTON — The Securities and Exchange Commission announced an emergency action aimed at reducing short selling aimed at Wall Street brokerage firms, Fannie Mae (FNM) and Freddie Mac (FRE), and will immediately begin considering new rules to extend new requirements to the rest of the market.

    SEC Chairman Christopher Cox said the SEC would institute an emergency order requiring any traders to pre-borrow stock before shorting Fannie Mae and Freddie Mac, the embattled government-sponsored entities that own more than half the nation’s mortgages. It would also apply to the stocks of Lehman Brothers Holdings Inc. (LEH), Goldman Sachs Group Inc. (GS), Merrill Lynch & Co. (MER) and Morgan Stanley (MS). The order is a near-term fix and will expire in 30 days.

    Cox said the SEC “will undertake a rule making to address the same issues” across the market.

    The move will likely limit short selling for the two mortgage entities, which have seen their stock prices fall sharply in recent weeks. Wall Street has been calling for the SEC to address short selling, which some believe is contributing to market volatility and could be used to manipulate shares of financial stocks.

    It comes as short interest, or the amount of outstanding short positions, is at an all-time high for NYSE Euronext (NYX)-listed stocks.

    Short selling, a legitimate trading strategy geared to profit from falling stock prices, has long been a lightening rod issue, and so changes that cover the entire market will likely be hotly debated. Companies have complained that short sellers target their stocks with the purpose of driving them down, while short sellers have been credited with identifying a company’s true market value.

    Under current rules, a short seller must locate shares to borrow, which are later replaced with stock bought at a lower price. Some market watchers have been concerned that traders were borrowing the same shares from the same lender over and over, and driving down stock prices.

    Under the emergency order, traders will be required to borrow the stock and the lender would then take it out of the market and not allow other traders to use it to satisfy requirements that they’ve located stock.

    Recently, Freddie’s stock was down 21% to $5.63, while Fannie’s shares slid 19% to $7.87.

    —By Kara Scannell, The Wall Street Journal

  139. 139
    Nicky Says:

    Good afternoon all. No sign of capitulation in the broader market yet. I still think a lower low out there fwiw. I think we are getting close. Time wise cycles are calling for a low next week – 22nd July is a key date. But this morning we got into the upper end of the price levels I was looking for but it really needed to fall apart further and we just didn’t see it. I think it more likely we see a low somewhere around the 10500 to 10600, level in the Dow, 1150 possibly on the spx before a really tradeable bounce. Today’s bounce may well have been the bounce for this small cycle I was looking at and if not then resistance is at the 1235 – 41 area on the spx.

  140. 140
    kyleandy Says:

    reef
    wyoming
    z thks

  141. 141
    antrimshale74 Says:

    Looks like we’re tanking into the close.

  142. 142
    Nicky Says:

    Energy – once again the ending diagonal pattern looks to have played out. That really was one heck of a move midday and whilst I absolutely hate to try and call the top in this market it really does look like it may be an interim top. A daily close below 135.14 would be a good start to confirm it. I am looking for a move up now which falls short of the high and then a sharp turn lower….

  143. 143
    zman Says:

    Thanks Wyo and Reef. I know enough to be dangerous but did not want to talk out of my depth, lol.

    The only thing positive about today is that the move down in the names is fairly uniform. Yea right, now I feel better.

    Agreed your last Nicky, that would be trouble for crude.

  144. 144
    Fiveanddimer Says:

    Re #138 If anyone want’s to get into how big a problem naked short selling is, I recommend going to deepcapture.com and looking around. The SEC is saying that they are going to now selectively enforce the rules for only a select few investment banks, and they will consider enforcing the rules for everybody else later. This stinks. Sometimes I feel like I’m investing in the Wild West. Maybe we’d be better off selling all our securites and buying gold and shotgun shells.

  145. 145
    Nicky Says:

    The one really good argument I heard today about the fall in energy was the need to raise money and I always thought that in the end commodities would be sold along with everything else for that reason. That also goes for gold which to me is an argument for gold in the end not being a hedge when the market falls apart. When oil fell today the rest of the commodity complex including gold suddenly looked very vulnerable.

  146. 146
    zman Says:

    Agreed Nicky, same goes for the energy equities, being used right now as a source of funds into the close. Very ugly. I was writing about this late last week, earlier this week. Guess I should have stuck with that thought a little longer.

  147. 147
    zman Says:

    Nicky – re 139, looks like we close below 11,000, the rally this morning looked contrived and we are approaching 2 year lows. Looks like good support in your 10,500 range. Think they do it this week or do we get a bounce first after this close, just trying to time some exits.

  148. 148
    Nicky Says:

    Z – Intel after the close…so far we have retraced about 50% of today’s rally so obviously the lows are now key but we could see another leg up before the next sell off. I had this minor cycle high as up into the 17th but as you can tell from my calls the downtrending cycle is just so strong that the minor cycles are really not being effective except to see some very small bounces.

  149. 149
    ram Says:

    Hopefully tomorrow is a better day.

  150. 150
    zman Says:

    Hear ya Ram, wouldn’t be hard. ug.

  151. 151
    Nicky Says:

    Intel beats both on EPS and Revenue…

  152. 152
    Nicky Says:

    Fib retracements for oil:

    140.09 is 38.2%
    141.35 is 50%
    142.62 is 61.8%

    Gold:

    976.18 is 38.2%
    979.3 is 50$
    981.8 is 61.8%

  153. 153
    arodeen Says:

    Feels like hard whiskey thirty to me.

  154. 154
    crysball Says:

    CLR & the TWO (2) RECENTLY ANNOUNCED Three Forks Sanish [TFS] Wells.

    Spoke with Warren Henry @ CLR & he advises:
    1) Each of the 3 Forks Sanish vertical wells had a single bore 9,000+’ lateral with multistagee frac [10 frac’s at 900′ intervals] with swell packers.

    2) Current technology does not permit them to make muitiple laterals at different depths from the vertical wellbore.

    3) In order to declare TFS as a separate reserve they plan come back in 6 months and do a new stepout vertical for each well into the mid-Baaken and defintiively determine if there is any communication between the TFS and Mid-Baaken.

    Note also submitted some followup questions about other Mid-Baaken wells in the area, and extent of congruence of the the TFS to the mid-Baaken in the CLR leasehold. Will advise CLR answers .

  155. 155
    zman Says:

    Thanks Crys

    1) they said all wells would be completed this way going forward.

    2) From their last CC, they indicated that they planned to position one lateral between the middle Bakken and the TFS and to frac into both. They thought they could pull this off so that would obviate the need for laterals at different depths.

    3) makes sense.

    on your last, let us know, they sounded at last check like they really were not sure. Starting to see increased incidence in press releases of TFS by other operators.

  156. 156
    Fred Says:

    XTO buys Bakken site:

    http://biz.yahoo.com/prnews/080715/latu119.html?.v=101

  157. 157
    zman Says:

    Thanks Fred, see that it adds about 100,000 acres to the original deal. Will have some comments in the morning.

  158. 158
    texana Says:

    Out of 30 energy stocks; e&p, service, 2 coal cos & the xle that represent most of the stocks we follow, 26 are below their 10,20 &50 sma, the other 4 are below their 10 &20 & sitting on their 50 sma. From a chart perspective some sideways consolidation is needed before we can hope for further new highs. It doesn’t seem like there is a hurry to secure add’l long positions at this time. xle,apa,apc,bhi,bjs,btu,chk,cnx,cop,cvx,dvn,eog,ep,esv,hal,hes,mro,mur,nbr,ne,nov,oxy,rdc,rig,se,sii,slb,sun,vlo,wft,wmb,xom,xto.

  159. 159
    zman Says:

    T – that seems like a reasonable assessment, no hurry to add more than I’m already long. Earnings season will provide further catalysts for the stocks, whether they listen more to the news or to the market is tough to say.

  160. 160
    Wyoming Says:

    Crysball,

    Mr. Henry is incorrect. There is a system out by BHI that allows multi laterals at different depths from the same vertical. It is called the Hook system:

    http://www.bakerhughesdirect.com/cgi/bot/myHomePage/welcome.jsp?func=cert&goto=%2fresources%2fExternalFileHandler.jsp&linkNames=multilateral&path=%2fprivate%2fBOT%2fpublic%2fwellbore%2fmultilaterals%2findex.html&channelId=-4200297

    We ran 2 and I was involved with one design that had a Fusselman and Devonian completion out in West Texas. It is a little quirky but manageable and both horizons can be fractured @ 10,000 psi with the right casing configuration. It can also be configured as a dual completion to test each zone or comingled.

    Swell packers was probably with HAL delta stim sleeves, about 10 stages is the max with that configuration due to ball sizes that are dropped. Also a quirky system but can be effective also. There are some other me too products out there with WFT and BHI.

  161. 161
    Wyoming Says:

    Z,

    This reminds me of May 2006, good news, bright future did not matter, energy was just sold off. Double bottom in July and Sept.

    I was zigging when I should have zagged and got pasted. I’m much smarter now ….

  162. 162
    zman Says:

    Wyo- From time to time we go through this with the good news does not matter. Not sure we are there as this is a whole week into the turn and it may just be noise. Painful but noise. Not saying you aren’t right but growth rates are higher and fwd multiples are lower than they were then, and service inflation is not running rampant (although it is moving up in some areas). Anyway, just think it is a little early to call a top and run but we’ll know if coming guidance increases illicit no positive response.

  163. 163
    Wyoming Says:

    Thanks, Not saying it is a top. Just a correction, too painful when not positioned correctly. I think it is a sign of bottom action, look at SLB back then, bounce…bounce…take off….

    Actually looking forward to tomorrow and Thursday and hopefully some people start piling on the shorts, then sprinkle in a couple of TD’s to spook ’em. I kept some dry powder….

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