16
Jul

Wednesday – Oil Inventory Preview

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The number 17. That is the number of years since we have seen a drop of yesterday's magnitude in oil. To that I say oil was at a record high last Friday and we are less than a week away for August contract expiry. So extreme in price meets extreme time for volatility and profit taking. 17 is also the percentage amount the S&P500 closed down YTD yesterday. Today, at least the early part of it, will not be pretty (CPI came in hot) and I will go into capital preservation mode if we don't see some sense of sorting the baby from the bath water by the end of the week or at the latest early next. Pretty quiet on the news front today (calm before the earnings storm beginning this Friday) in the E&P (couple of previously announced deal closings) and service names. In the coal space Cleveland Cliffs is acquiring Alpha Natural for hefty premium and that may prompt me to reenter one extremely cheap name there I just keep missing on dips (see below).

 

In Today's Post:

  1. Holdings Watch
  2. Commodities Watch
  3. Stocks We Care About Today
  4. Odds & Ends

Holdings Watch: The wiki tab is updated.

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

Commodities Watch:

Crude Oil was thrown for a loop by reawakened concerns about the U.S. economic picture and a reiteration of President Bush's call on Congress to lift the ban on offshore drilling. Oil settled off $6.44 to close at $138.74 (click the link for a chart). This morning oil is trading off another $1.50 to $2.

  • Brazil Watch: (PBR) says all production returned to full capacity by emergency replacement crews as the oil workers strike enters its 3rd of 5 planned days and more workers joined in a "work slowdown" (not expected to impact production) for a 48 hour period. The Oil Worker Federation, the union representing PBR's operations employees is planning to vote on a whether or not to conduct a walk out which have a greater impact on PBR's production levels this week. 
  • Nigeria Watch: (CVX)'s 120,000 bopd Escravos pipeline in Nigeria is back on line following a MEND related outage a couple of weeks back. This should put current outages in the terrorist plagued country at a about 780,000 bopd. 

EIA Inventory Preview (from the Bloomberg survey)

exp-071108.jpg

ZComment: Looking for a couple of things this week and neither of them bode necessarily well for the numbers staying in line with estimates. Last week I was thinking imports were due for a small dip and we got which produced an over large draw on crude stocks despite continued anemic demand from the refining sector. Those don't always last long and any sort of catch up from a logistical standpoint, even if imports were to simply rise from 9.5 to a more seasonally normal 10.0 mm bopd would likely yield a build in crude stocks which in the current environment would be unwelcome. The second item is again gasoline demand which continues to show a divergence, due to high prices at the pump, relative to year levels. Earlier this year we saw periods of belt tightening in which drivers were clearly driving less. No it looks as if drivers are saying enough is enough. If demand does not continue to rise seasonally, albeit at a rate 3 to 4% less than last year I think we see further pressure on wholesale gasoline prices and therefore crude.  

Natural Gas followed crude lower ending down $0.48 at $11.48 on the day yesterday. This morning gas is trading off another $0.10 to $0.20.

  • Tropics Watch: Western Atlantic tropical wave could strengthen to a tropical depression despite shear in the area as it became better organized overnight. It is being steered towards an area of warmer water and lower winds, continues to show signs of rotation and some tracks put it on course for the gulf. Click here to see the latest.

Stocks We Care About Today 

(EAC) Announce Haynesville Acquistion & Provides Bakken Update. I don't actively follow (EAC) but I like to stay on top of the numbers in these two plays.

  • Haynesville Acquisition:
    • $54 million for 3,200 net acres in the "heart of the play", comes to $16,500 per acre
    • Will add a rig for operations beginning early 2009
  • Bakken Update:
    • 2 decent wells with average 1 week production of 394 BOEpd and 436 BOEpd
    • Have drilled and will complete their first Sanish well soon,
    • planning to add a 3rd rig to accelerate Bakken and Sanish drilling 

 

(GDP) Bulking Up In The Haynesville Shale.

  • Acreage now totals 60,500 in E. Tx and NW. La., this is up from 22,000 acres at last count, with coming from additions coming from Panola and Rusk counties in Texas,
  • In the Minden field (Panola), (GDP) has drilled and logged but not yet completed two wells with encouraging results.
  • The acquired acreage in E. Tx pushes Goodrich up the scale in our Haynesville list of players from #7 to #2 in terms of reserve exposure leverage in the Haynesville Shale vs end of 2007 booked reserves. 

(CLF) Acquiring (ANR).

  • ANR being taken out for the equivalent of $128.12, or a 35% premium to yesterday's close by iron and coal producer Cleveland Cliffs.
  • This price implies some fairly lofty forward multiples (for a coal company) as you can see from the chart below.
  • Positive implications for the other small coal producers,
    • I am highly likely to add July and August calls on metallurgical coal producer (WLT) soon after the open despite the fact that it will likely open up 10% or so. This is not one that you can easily say is cheap for a reason as they are punting the undesirable aspects of the company (home building and lending) later this year and the stock has been on a rapid rise until the last couple of weeks.

coal-multiple-071508aaa.jpg

Odds & Ends

Analyst Watch: (BBG) -rockies gas, (CXO) nice Bakken play, (SWN) -nearly all gas and dominant in the Fayetteville Shale all raised from Neutral to Buy at SunTrust. SunTrust also cut (BEXP) and (PVA) from Buy to Neutral based on valuation.  A bit late to the party, JP Morgan takes (BEXP) from underweight to overweight. 

 

207 Responses to “Wednesday – Oil Inventory Preview”

  1. 1
    zman Says:

    Union workers to hear PBR proposal at 1 EST.

  2. 2
    Bleemus Says:

    XCO Exco Resources Explores Possible Joint Venture Opportunities in Its East Texas/North Louisiana and Appalachia Operating Areas

  3. 3
    Sambone Says:

    7:16 am EST

    Crude Slips $2 As Traders Sell Before DOE Data

    By Angela Henshall
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures fell over $2 in London Wednesday, after lacking direction for much of the session, with traders uncertain where to allocate positions ahead of this week’s U.S. oil inventories data.

    “The problem with this market is it’s looking tired,” said Glen Ward broker at ODL Securities, “we break above resistance levels but never follow through, just fall back again. The market needs to flush out a lot of longs and get fresh short positions in before it will have the energy for a major rally again.”

    At 1104 GMT, the front-month August Brent contract on London’s ICE futures exchange was down $1.78 at $136.97 a barrel, after dropping to $136.28 a barrel earlier.

    The front-month August contract on the New York Mercantile Exchange was trading $1.49 lower at $137.25 a barrel, after falling to $136.40 a barrel earlier.

    The ICE’s gasoil contract for August delivery was up $7.50 at $126.100 a metric ton, while Nymex gasoline for August delivery was down 327 points at 335.21 cents a gallon.

    —By Angela Henshall, Dow Jones Newswires

  4. 4
    arodeen Says:

    I’m curious how/if anyone of the more informed readers interprets the other major world indexes in terms of energy and/or the DOW/S&P. For instance, I see this morning that most are slightly down. Does that mean anything to us?

  5. 5
    kaman Says:

    Z-
    Thanks for the quick read on coal plays…holding ICO Jul 15 calls…hoping for any kind of sympathetic pop today. Mostly bot them as a play on their met coal (steel prices)

  6. 6
    zman Says:

    See it Bleemus, 2 prs in 2 days. Bumps XCO’s H.S. acreage to 115 from 107,000.

    Kaman – looks like that group will have a nice day today. One thing that is always hard with a deal like this where you have a hefty premium is judging how long the others will bask in the glow of it. Sometimes its only a day, sometimes several. Here I would think more than one as it was from a non-pure play (coal and steel company) and as such vertical integration which boosts the number of potential acquiring entities.

    Need to add ICO to my list, cheap on 2010 eps of $1.65. Bid up about $0.90 at present, not a bad option trader in terms of volumes either, good luck there.

  7. 7
    zman Says:

    Kaman – Table in post updated to include ICO. Thanks.

    Arodeen. It does matter to the energy names as the broader markets influence the action in the group. How much depends on what the commodities are doing that day and the news out in the group. In yesterday’s comments, Tater had an interesting article on the VIX as it relates to the energy stocks and their relationship to the broad market and the commodities. I have not done on a study on it but we alternate back and forth between being more or less influenced on a daily or weekly basis and the read on the VIX may help explain which is more influencing at a given point in time.

  8. 8
    zman Says:

    Oil inventories update: Since late last night estimates for EIA inventories have changed pretty dramatically.

    Platts is now looking for a drawdown on crude of 3 mm barrels

    and a drawdown, not a build in gasoline stocks of 1.1 mm barrels

    still expecting a build in distillate of 1.8 mm barrels.

    If imports rally which I’d give even odds you are likely to see a build, not a pull from stocks and I would guess this would cause more selling. Hope I’m wrong as the group is keying off oil prices at present.

  9. 9
    rv9 Says:

    What is your take on CRK? They seem to be concentrated on HS shale and are only 12% hedged. Of course, if NG drops, will hurt its bottomline

  10. 10
    Sambone Says:

    By Rebecca Bundhun
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Fresh dollar weakness has renewed speculation over the
    potential revaluation of Gulf currencies, which in turn is adding to the risks
    surrounding the dollar Wednesday.
    The euro’s rise to a record high of $1.6040 Tuesday sparked the debate over
    whether Gulf countries might revalue or even depeg their currencies from the
    enfeebled dollar.
    “Changes to the pegs might be seen as a vote of no confidence in the U.S.
    currency,” said Julian Jessop, chief international economist at Capital
    Economics.
    Stoking the speculation, a member of Saudi Arabia’s Shura legislative council
    announced Tuesday that he had requested a revaluation of the Saudi riyal, which
    could be discussed as early as next week.
    Walid Arab Hashem proposed a 20% appreciation of the riyal, arguing that its
    peg to the weakening dollar is exacerbating already soaring inflation by
    driving up the cost of imports.
    Because soaring inflation in Gulf states, such as Saudi Arabia and the United
    Arab Emirates, is coupled with vigorous oil-fueled economic growth, the
    dollar’s slide has triggered much debate over the benefits of the currency
    pegs.
    Inflation in Saudi Arabia reached 10.6% in May, while annual inflation data
    for 2007 show U.A.E. inflation at 11.7%.
    “The dollar remains under depreciation pressure and if it were to lose further
    ground from current levels, the probability of a currency move would increase
    significantly,” said Ahmet Akarli, a currency strategist at Goldman Sachs Group
    Inc. in London.
    Jessop said he is “skeptical that any changes are imminent,” but warned that
    “the markets would initially interpret any such moves as negative for the U.S.
    currency.”
    Markets assume that if Gulf states abandon their dollar pegs, this would lead
    to reduced dollar flows and diversification of foreign-exchange reserves, which
    would hurt the U.S. currency.
    Saudi Arabia, the U.A.E, Oman, Bahrain and Qatar are tied to tracking U.S.
    monetary policy as a result of their dollar pegs. Given the divergence of the
    economies of these countries from the United States, mimicking U.S. rate moves
    hasn’t really made sense.
    So far Kuwait is the only Gulf Corporation Council member state to have
    abandoned the dollar peg.
    With fresh concerns over the U.S. financial sector and dovish rhetoric from
    the Federal Reserve, near-term U.S. interest rate hikes seem to be off the
    cards
    Such a rate-setting outlook isn’t in the interest of Gulf states and could put
    further pressure on the dollar – factors which add to the case for GCC
    countries to revalue or depeg.
    If the Saudi authorities did allow the riyal to appreciate, this could trigger
    similar moves from other Gulf states.
    “It is very likely that the other GCC economies, which had to cope with
    serious inflation problems over the past few years, namely the U.A.E and Qatar,
    would follow suit to realign their currencies,” Akarli said, adding that he
    wouldn’t be surprised to see GCC foreign-exchange forwards starting to price in
    a higher probability of revaluation over the coming days.
    At 1320 GMT, the euro was trading at $1.5890 from $1.5899 late in New York
    Tuesday.

    -By Rebecca Bundhun, Dow Jones Newswires Dow Jones Newswires
    07-16-08 0936ET- – 09 36 AM EDT 07-16-08

  11. 11
    zman Says:

    I like CRK as they transition to more of a resource play. I owned them much lower many months back and missed the big move higher and am now on the fence. In this environment I don’t see a real need to rush in but they are the radar as their exposure relative to the Haynesville relative to their booked reserves is high.

    Sam – Thanks. You won’t see Saudi trying to rein in oil prices with talk much longer if we get another leg down in the dollar.

    Sudden greening of the group in an early day bottom fish. I’m longer than I like in July and well on my way to good earnings season positions and will not act pre EIA #s today.

  12. 12
    zman Says:

    Wow, unreal three minute reversal on the group. Across the board, on lowish volume but very fast. Looks like a sell program.

  13. 13
    reefguy Says:

    xco JV- Goldman hired to bring big boy on 50/50 basis. Devon and marathon charging… number floated as high as 2B for a 50% wi.

  14. 14
    zman Says:

    Reef – are you saying for XCO’s 122,000 acres in the H.S.

    Notice DVN has been awfully quiet about what they are doing there.

  15. 15
    Sambone Says:

    Tired of sending all your US dollars overseas? Well, just invest in “GULF” and get it back.

    http://www.wisdomtree.com/etfs/fund-details.asp?etfid=69

  16. 16
    SkyKing Says:

    Yes, big sudden drop. but seems to have slowed now.
    Broad market declining now.
    When are EIS#s expected?

  17. 17
    zman Says:

    meant 115,000 acres on XCO

    10:35 EST.

  18. 18
    reefguy Says:

    14- yes, in the hy only

  19. 19
    Sambone Says:

    9:29 am EST

    Nymex Crude Down Ahead Of Inventory Data

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures traded slightly lower Wednesday, with the market taking a breather before the release of U.S. oil and product inventory data.

    Light, sweet crude for August delivery traded 66 cents lower, or 0.5%, at $138.08 a barrel on the New York Mercantile Exchange. August Brent crude, which expires Wednesday on the ICE futures exchange, traded 95 cents lower at $137.80 a barrel.

    Futures plunged $6.44 on Tuesday, the biggest single-day loss in dollar terms since 1991. The market has calmed since then, awaiting inventory data for the week ending July 11. Analysts polled by Dow Jones Newswires gave an average forecast of a 1.6 million-barrel draw on oil inventories, a 200,000 barrel decline in gasoline stocks and a 1.5 million-barrel increase in distillate inventories. The data will be eyed for clues to the health of U.S. demand, which has been down slightly from a year earlier.

    “Crude is trying to make its way back higher, but the sentiment is still lower, and I think we’re going to see considerable draws to get this market back to $140,” said Tony Rosado, a broker with GA Global Markets in New York.

    The market is heading lower over worries about the U.S. economy, which Federal Reserve Chairman Ben Bernanke told Congress is likely to see slow growth through the end of the year.

    A U.S. economic slowdown is nothing new, but the market is on the lookout for signs that a slump in oil demand is quickening. For now, strong growth in Asia is seen countering declines in the U.S. and Europe, but the balance could tip if economic problems worsen. Bernanke will testify before Congress again Wednesday.

    “We suspect that as the pace of demand destruction accelerates, it will be harder to ignore,” wrote Edward Meir, with MF Global. “We could see more frequent bouts of selling, and perhaps the start of a long-overdue trading range.”

    Consumer prices rose by 1.1% in June, the biggest monthly increase since 1982, according to Labor Department statistics released Wednesday. Energy was a major factor in the rise, with prices for that category growing by 6.6% in June. High inflation is seen increasing the likelihood that the Fed will hike interest rates, which would strengthen the dollar. Some investors use oil as a hedge against the dollar, so a rising dollar could cause oil prices to drop. A rate hike is far from guaranteed, however, as the Fed may prove reluctant to cause more difficulties for the troubled financial sector.

    Oil prices showed little reaction to the inflation data.

    Front-month August reformulated gasoline blendstock, or RBOB, recently traded down 1.48 cents, or 0.4%, at $3.3700 a gallon. August heating oil traded 1 cent lower, or 0.3%, at $3.9090 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  20. 20
    zman Says:

    Reef – $17K+ for a deal of that size would be pretty impressive.

    Broad market getting a boost here which I don’t get right now. Why is inflation being so readily forgiven Sam or anyone watching the explanations on CNBC?

    Refiners getting a second day of green. Not trusting that move w/o seeing the data.

  21. 21
    ram Says:

    CHK has had quite the haircut in the last couple of weeks. This seems more than profit taking.

  22. 22
    Sambone Says:

    Z – This market is in “Lala land”. The only thing I can come up with is “Mr. market”. Once again it reminds me of Animal house. “All is well” as he gets run over. Banks are up because now the big bad bear can’t naked short their pals at JPM, GS, MS, etc. WFC reported better numbers than the street expected, SO, All is well! No more problems. I’m short, staying short and moving $ off shore into other currencies.

  23. 23
    zman Says:

    Ram – there is the fear that Aubrey has been too aggressive with the balance sheet. There also concerns that they won’t be able to drill up and keep all their H.S. acreage and that doing so will lead to extreme service cost inflation. Reuters ran an article after the close summing all this up citing analysts from Fitch and from GimmeCredit worrying about the debt load. These cats and Moody’s and S&P have in the past done a poor job of reserve accounting and therefore have repeatedly taken an overly cautious tone on the debt carrying capacity. I have concerns about men and materials availability but CHK will be one of the ones able to get the rigs and most likely the pipe they need. Still, it is a concern. But at present, its move appears in line with the pull back in the group to me and while it stinks for my July’s I am not as concerned for the medium term and especially for the stock.

  24. 24
    zman Says:

    Hear ya la-la land Sam

  25. 25
    BirdsofpreyRcool Says:

    zman – great summary of the CHK pullback and reservations. thank you.

  26. 26
    breakhound Says:

    Z new to the site, learning a great deal. thanks. u think CHK is finding technical support from the june 13th low and could bounce here?

  27. 27
    zman Says:

    breakhound – welcome to the show. I will defer anything but the most simpleton support and resistance TA work to the more knowledgeable subscribers here as they are much better at that than I. I would say we look to be in a support range now at 58 and add that stocks fill gaps and there is one all the way down to 56. We are nearly the secondary price and a lot of times you will see deal participants come back into the open market to fill up allocations or add to positions they just acquired if the price retreats to that of the deal.

  28. 28
    zman Says:

    For those new to the site this is where get the EIA release, usually a few seconds before CNBC runs through the main numbers.

    http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/txt/wpsr.txt

  29. 29
    Sambone Says:

    Welcome Break!

  30. 30
    ellwodo Says:

    XCO, # 13 and 20: Is the $2 billion rumor for the 50% being peddled or the implied total value? If the former, it would be around $34k per acre. a little over what CHK got.

  31. 31
    reefguy Says:

    xco-true 34k net and this is being peddled

  32. 32
    zman Says:

    Hey bird, long time no chat. Anything to add to yesterday’s Bakken/TFS thoughts?

    Elwo – thanks for the correction, overlooked it was for a 50% WI. Insert whistle here.

  33. 33
    SkyKing Says:

    Energy stocks sure are jittery before this EIA release.

  34. 34
    kaman Says:

    re #20: Was listening to FastMoney yesterday driving home and struck by the same thought…any bounce in refiners right here is probably an opportunity to short or take puts.

  35. 35
    ellwodo Says:

    XCO followup, the press release talks about Marcellus nd Haynesville. Is the $2 billion rumor for half of everything? If so, that’s not much of a markup on the current total $4 billion market cap.

  36. 36
    zman Says:

    Crude increased by 3 mm barrels
    Gasoline up 2.4
    Distillate up 3.2

    unfortunately I was right about today’s call

  37. 37
    reefguy Says:

    oil down 5$

  38. 38
    zman Says:

    Oil down $5

    the big build in oil was predicated by a surge in imports.

  39. 39
    zman Says:

    Gasoline demand continues to hover between 9.3 and 9.4 mm bpd.

  40. 40
    kiaora Says:

    Sam–re. #22-would you consider adding to puts on COF & C on a day like this?

  41. 41
    reefguy Says:

    oil headed further down

  42. 42
    sane Says:

    Peak shaving going on in gasoline demand.

  43. 43
    zman Says:

    135 was obvious support for crude, once it fell through that it only had a chance to make a stand at round number support, next hitch could be $132.

    Last week they beat oil over the head on a bigger a large draw down in stocks saying it was an import problem and a west coast problem and today we get the opposite, an import increase, which is not sustainable at a whopping 10.8 mm barrels so they may say “oh hey, its the imports stupid, and try to rally it some” at least that’s my wishful way of looking at it. We are definitely still suffer from baby and bathwater action on the group as everything is getting punted without regard to hedges or oil/gas mix. Service getting hit worst of makes the least since, at least in the onshore arena as those names are only getting busier.

  44. 44
    tater Says:

    Hey Breakhound –

    Z indulges me by allowing me to present some chart analysis every once in a while. Added CHK at the bottom of the list. No predictions, just my version of what I see happening. Good luck

    USO CLR RIG SLB NBR CHK

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

  45. 45
    zman Says:

    Sane – any API confirmation yet?

  46. 46
    reefguy Says:

    z-so oil off some 10% in days…when do big bull hedge funds get a cash call?

  47. 47
    kyleandy Says:

    z – good call maybe platts should consult you. prob is i was too stupid to act on it.

  48. 48
    uop Says:

    zman:

    energy stocks are tanking with the drop in oil, I thought HK, CHK etc are not that correlated with oil.
    Am I wrong ?

  49. 49
    zman Says:

    Kyle – me too.

    Reef- no idea, usually takes awhile (months of slow grinding the wrong way). In this case you gotta think a few will get nipped.

    Uop – they are correlated with oil when it moves like this.

  50. 50
    antrimshale74 Says:

    XLE at 3 month low. It seems to me that we should be due for some earnings beats over the next few weeks. Perhaps that will be a catalyst for the group?

  51. 51
    Dman Says:

    CHK early June gap now filled

  52. 52
    Sambone Says:

    K – My question back to you is, “Is the worst over”? Have the banks, IB’s, card companies, Mortgage companies taken all their writeoffs? If not (Which I say), yes to add. Don’t bet the house, but be there.

  53. 53
    zman Says:

    Antrim – beats, upward volume guidance, and play specific news is my game plan.

    SLB kicks off with bmo results on Friday, widely expected to have nothing but good things to say about the near and long term outlook, better than last quarter when the stock actually missed, said good things and we rocketed and the stock is below where it was then despite an upward move in estimates.

  54. 54
    antrimshale74 Says:

    Airlines up 20-30% across the board. UAUA and NWA each up over 25%. At least somebody’s excited and profiting from today’s oil action.

  55. 55
    zman Says:

    Thanks D – I see it. Awful lot of group dumping going on. Seeing some try to head back up but those rallies have so been pretty quick sold.

    HK trying one now.

  56. 56
    Sambone Says:

    Analysts surveyed by Platts expect that U.S. crude stockpiles decreased by 3 million barrels last week. They also expect a decline of 1.1 million barrels in gasoline inventories and a buildup of 1.7 million barrels in distillates.

  57. 57
    breakhound Says:

    Tater great chart work. much appreciated. Looks like PBR is ready to plung here. This sell off is good sets the stage for rallies in Aug/sep.

  58. 58
    Sambone Says:

    10:40 am EST

    Nymex Crude Down Ahead Of Inventory Data

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures traded slightly lower Wednesday, with the market taking a breather before the release of U.S. oil and product inventory data.

    Light, sweet crude for August delivery traded 66 cents lower, or 0.5%, at $138.08 a barrel on the New York Mercantile Exchange. August Brent crude, which expires Wednesday on the ICE futures exchange, traded 95 cents lower at $137.80 a barrel.

    Futures plunged $6.44 on Tuesday, the biggest single-day loss in dollar terms since 1991. The market has calmed since then, awaiting inventory data for the week ending July 11. Analysts polled by Dow Jones Newswires gave an average forecast of a 1.6 million-barrel draw on oil inventories, a 200,000 barrel decline in gasoline stocks and a 1.5 million-barrel increase in distillate inventories. The data will be eyed for clues to the health of U.S. demand, which has been down slightly from a year earlier.

    “Crude is trying to make its way back higher, but the sentiment is still lower, and I think we’re going to see considerable draws to get this market back to $140,” said Tony Rosado, a broker with GA Global Markets in New York.

    The market is heading lower over worries about the U.S. economy, which Federal Reserve Chairman Ben Bernanke told Congress is likely to see slow growth through the end of the year.

    A U.S. economic slowdown is nothing new, but the market is on the lookout for signs that a slump in oil demand is quickening. For now, strong growth in Asia is seen countering declines in the U.S. and Europe, but the balance could tip if economic problems worsen. Bernanke will testify before Congress again Wednesday.

    “We suspect that as the pace of demand destruction accelerates, it will be harder to ignore,” wrote Edward Meir, with MF Global. “We could see more frequent bouts of selling, and perhaps the start of a long-overdue trading range.”

    Consumer prices rose by 1.1% in June, the biggest monthly increase since 1982, according to Labor Department statistics released Wednesday. Energy was a major factor in the rise, with prices for that category growing by 6.6% in June. High inflation is seen increasing the likelihood that the Fed will hike interest rates, which would strengthen the dollar. Some investors use oil as a hedge against the dollar, so a rising dollar could cause oil prices to drop. A rate hike is far from guaranteed, however, as the Fed may prove reluctant to cause more difficulties for the troubled financial sector.

    Oil prices showed little reaction to the inflation data.

    Front-month August reformulated gasoline blendstock, or RBOB, recently traded down 1.48 cents, or 0.4%, at $3.3700 a gallon. August heating oil traded 1 cent lower, or 0.3%, at $3.9090 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  59. 59
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures hit a three-week low on a surprise
    increase in U.S. oil and product inventories.
    Light, sweet crude for August delivery traded $5.09, or 3.7%, lower at $133.65
    a barrel on the New York Mercantile Exchange, after falling as low as $132 a
    barrel after the data release. Brent crude on the ICE futures exchange traded
    $4.63 lower at $134.12 a barrel.
    Oil stocks rose by 3 million barrels in the week ending July 11, according to
    the U.S. Energy Information Administration. The analysts consensus forecast was
    for a 1.6 million-barrel drop. Gasoline inventories also surprised, rising by
    2.4 million barrels, where analysts had expected a 200,000 barrel drop.
    Distillate inventories rose by 3.2 million barrels, about double expectations.
    “The numbers look bearish across the board,” said Jim Ritterbusch, president
    of Ritterbusch & Associates in Galena, Ill.
    The inventory data gave the market a reason to extend Tuesday’s losses, which
    were the biggest in dollar terms since 1991. Rising oil and product inventories
    are an indicator of falling demand in the U.S., the world’s largest oil
    consumer. Gasoline demand is off about 2% from last year, the EIA said.
    “It’s a clear indication that the demand is just not there, typically what
    happens is that the number reflecting the July 4 weekend typically shows an
    increase in demand by around a million barrels,” said Nauman Barakat, senior
    vice president at Macquarie Futures USA in New York. “It doesn’t look like
    that’s showing up in these numbers at all.”
    Federal Reserve Chairman Ben Bernanke said Tuesday that a recovery isn’t
    imminent, with slow economic growth likely to persist through the end of the
    year. Inflation data out Wednesday also showed energy prices weighing on the
    economy, with June’s 1.1% increase in consumer prices the largest since 2005.
    Bernanke’s comments and the EIA data appeared to finally break a wall the
    market had built around negative U.S. economic indicators. Futures have risen
    over the last year in spite of increasingly grim signals, as investors assumed
    that strong growth in Asia would compensate for declining oil consumption in
    the U.S.
    With futures having fallen by $12 in two days, market participants now wonder
    how low oil can go.
    “It’s the whole gravity effect, things seem to fall faster than they rise,”
    said Mike Zarembski, senior commodity analyst at brokerage optionsXpress Inc.
    in Chicago.
    Price support is now forming around $131.75 a barrel, he said, with a move
    below that level likely to prompt another round of rapid selling.
    Front-month August reformulated gasoline blendstock, or RBOB, recently traded
    down 13.60 cents, or 4%, at $3.2488 a gallon. August heating oil traded 11.80
    cents, or 3%, lower at $3.8010 a gallon.

    -By Brian Baskin, Dow Jones Newswires (Tatyana Shumsky in New York contributed to this article)

  60. 60
    bill Says:

    def con 3

  61. 61
    zman Says:

    Scud count for July looks like 5 with another 2 with steep losses. Ug.

    Oil, NG and the Group seeing no sign of recovery yet.

    Refiners losing their shine already.

    At least I was distracted long enough to not go in on the WLT yet, colas mostly down hard with energy.

  62. 62
    bill Says:

    HOUSTON, Jul 16, 2008 (BUSINESS WIRE) — Rowan Companies, Inc. (RDC, Trade ) announced today that its wholly owned manufacturing subsidiary, LeTourneau Technologies, Inc. (LTI), has entered into a contract to provide major components for nine new 1500 horsepower land drilling rigs. The contract is with Nomac Drilling, Inc., a wholly owned subsidiary of Chesapeake Energy Corporation, and is valued at approximately $90 million.

    Each of the rigs will feature AC drive technology and incorporate key LTI drilling equipment, including the mud pumps and drawworks. Delivery of the components is expected to begin in the fourth quarter of 2008 and be completed by mid 2009.

    Rowan Companies, Inc. is a major provider of international and domestic offshore contract drilling services. The Company’s manufacturing division, LTI, produces equipment for the drilling, mining and timber industries. The Company’s stock is traded on the New York Stock Exchange. Common Stock trading symbol: RDC.

  63. 63
    zman Says:

    Thanks Bill saw that earlier and that and other orders are why I say CHK will get the rigs they need to go to a 60 rig program.

  64. 64
    VTZ Says:

    bill – The sky is falling, nobody cares about that! Demand for oil is going to zero! If you do a straight line from last year’s july long demand to this years demand and extend forward it means nobody will be driving on july long weekend in 10 years! sell sell sell. It doesn’t matter that CHK is a gas company. sell sell sell.

  65. 65
    zman Says:

    V – you type like I feel.

  66. 66
    BirdsofpreyRcool Says:

    #32… z – missed the Bakken/TFS comments. what/where are you referring to? i recently met with KOG CEO… finally understand the geology there.

  67. 67
    Bob Says:

    ATW: Last analyst upgrade to buy in June had split adjusted target of $92.25 (90% above current) Stock has fallen 25% in 2 weeks. Maybe finding support near April low here? Time for technical bounce?

  68. 68
    bill Says:

    these are the days you buy calls

    i uncovered my hk calls and now long just the stock

  69. 69
    Sambone Says:

    V – Bwhahahaha, you sound like me. LOL

  70. 70
    zman Says:

    Bird – wondering if you had any comment about the ubiquity of the Three Forks Sanish in the core area and outside the Neeson. Did KOG have any thoughts there?

    Bob – unreal thrashing there, problem is unreal thrashing everywhere. RIG coming out with good data point after good data point to no avail.

    Bill – agreed re calls but was a bit early and would average down a little higher than here as I’ve been buying weakness for a week now.

  71. 71
    Sambone Says:

    Tell me it not so; Benny B52 Bernanke “Repeats that manipulation not cause in oil rise”! LOL

  72. 72
    SkyKing Says:

    Slightly off subject:
    My in-laws in Portland, Maine, just filled their heating oil tank for over $1000. at $4.30/gal. They said many people couldn’t afford oil last year and this year is much worse.
    They got a cord of wood, but now all the wood dealers are sold out and not taking any more orders.
    And this is still July, isn’t it???

  73. 73
    zman Says:

    Skyking, – when you factor in the utility hike requests I’ve been seeing the end of summer cooling and the winter heating bills are going to crush the consumer into buying more blankets and mukaluks. What’s the ticker for LL Bean?

  74. 74
    cadillac Says:

    While the July’s Don’t look good. The Augs and out will be just fine. This is to be expected given the significant drop in oil in just a short amount of time. Most all of these names will bounce back shortly. I am looking at this as a quick buying opportunity. Hopefully, I am right.

  75. 75
    BirdsofpreyRcool Says:

    z – no. sorry. nothing to add, yet. we covered just some pretty basic stuff about the play. he made some comments about the canadian side of the bakken that caught my interest, tho. sounds like the producing zone is bordered by a facies change to the east. would like to figure out what happens to the north. anyone familiar with the geology there? is it an old sabkha sequence??

  76. 76
    zman Says:

    Bird – if interested in the north Bakken you might go snooping around HTE (Sask player with Bakken mention)

  77. 77
    antrimshale74 Says:

    Say what you want about Bernanke, but it must take a lot for him to not want to jump across the table and pop some of these congressmen with their silly questions and grandstanding.

  78. 78
    BirdsofpreyRcool Says:

    the comment was made that the canadian stuff wasn’t anywhere near as good… but, as i said, i’m pretty new to undertanding the g&g here. thanks!

  79. 79
    Bob Says:

    z: 67,70. Agree RIG better company, but RIG off only 8% from high versus 25% for ATW. Coul not resist buying some common today at $48.00 while contemplating August options

  80. 80
    sane Says:

    API

    Crude UP 5.1M
    Distillates UP 5.4M
    Gasoline UP 1.6M

  81. 81
    VTZ Says:

    Bird, Z – be careful with Harvest as they have significant refining as well. They do have a nice yield though.

  82. 82
    VTZ Says:

    To ammend my response, I would not touch Harvest. The yield could be cut as well.

  83. 83
    zman Says:

    Bob – agreed on the slamming of ATW. I was out of the country when it when ballistic from $100 to $120 + when I got back. I guess easy come easy go. Kind of like the H.S. players are seeing now too. ATW seems to be doing well, the longer term metrics are strong and I thought I saw them add another rig the other day (on order for 2012?), before that they were not as leveraged as RIG, don’t know about now. RIG is now rumored to be about to put forth a good sized dividend which will then make investing in them available to a wider list of funds (growth and income ones)

    I may own either of them by their call, added a little SLB in the personal account for Friday.

  84. 84
    zman Says:

    Wow Sane, wonder what is happening to export diesel demand, must not be as good now as earlier this spring with those big builds. Not good stuff for guys like VLO who were touting diesel as the last great hope for the refiners.

  85. 85
    BirdsofpreyRcool Says:

    VTZ – thanks for your comments. i’m wary of trusts, anyway… but, might be able to cruise their reports to see if i can pick up some info on the northern limits of the bakken. i know i’m late to the party here, but it really is a cool play from a geologic perspective.

  86. 86
    zman Says:

    V – thanks, I’m not there and won’t be. Just thought Bird might want to sift a presentation there for the Bakken angle.

  87. 87
    zman Says:

    Bird – since I’m basically lazy by nature please let me know if you find another way to play the north Bakken.

  88. 88
    zman Says:

    Oil down a little under $4 now, group staging a decent rally (still down 2 to 4% on most names).

  89. 89
    BirdsofpreyRcool Says:

    z – will do. but, not sure the northern bakken is in the same league as the south-of-the-border stuff. will let you know! (you’re hardly “lazy”… LOL)

  90. 90
    VTZ Says:

    Z, Bird – I ran into a company the other day with what looked to be canadian Bakken assets, but they didn’t refer to it as a Bakken play. It was the same area though. I’ll see if I can pull it up.

  91. 91
    sane Says:

    re 84

    I wonder if China is winding up their stock building for the olympics comming up.

  92. 92
    zman Says:

    Sane – wasn’t their game plan to shut down imports prior to but then where are they going to get electricity if they can’t burn diesel or coal during the events?

    V & B – thanks.

    HAL trying to go green. SLB losses cut by more than half, still want to see a day where we turn in the middle and close green, that seems to be how people make their investment decisions this summer.

  93. 93
    rv9 Says:

    Z, Bird, V: Petrobank has leases in Bakken area

    http://finance.yahoo.com/q?s=PBG.TO

    Trades on pink slip. Let us know what you feel

  94. 94
    Dman Says:

    In case this is of interest: Canadian trust Enerplus (ERF) has a Bakken oil play, but it’s in Montana:

    http://www.enerplus.com/operations/bakken.shtml

  95. 95
    jazzkool Says:

    The few DUGS that I have have tripled in value. Do you all continue to see oil going down. Be nice to unload them, see oil go up, and then buy them back at a much lower level. To me, everthing portends a descent into the 120s.

    If there is anything positive, Bush’s portfolio is probably hurting, although knowing him and Chaney they probably shorted the oils before his jawboning yesterday.

    Jazz

  96. 96
    sane Says:

    Z,

    They are going to put half a billion Chinee on stationary bikes connected to generators for electricity.

  97. 97
    ram Says:

    Took a shot at AUG CHK 60’s. Tater or Z, at the bottom of the charts, the CHK chart is saying that the majority of the time it opens strong and closes weak. Does that have any technical meaning?

  98. 98
    bill Says:

    i mention FREE yesterday

    its up .22 cents to 6.00

    worth a look

  99. 99
    BirdsofpreyRcool Says:

    rv9 – i know a HF guy who has a pretty large (long) position in petrobank. he’s keen on the in situ stuff, but looks at the bakken as upside to the core bitumen sand stuff. fwiw.

  100. 100
    Sambone Says:

    Weather – Wow, Bertha won’t die. Die Bertha, Die Bertha! LOL
    Still watching 94L. Cane Hunters on the way. Should be a TD this afternoon. Wave off Africa will amount to nothing. Nothing else at this time of interest.

    http://www.ssd.noaa.gov/goes/east/tatl/loop-rb.html

  101. 101
    zman Says:

    Thanks Bill – has the threat of China slowing shipments of coal been fully discounted in the BDI and in the shares in your way of thinking. Looking at the charts of the BDI’s I would guess so.

    Jazz – I think it would be healthy for oil to pull back into the mid $120s as it would alleviate some economic concerns or at least give it a little bit of a break. I think DUG is 25% Exxon and down oil there is not necessarily a bad thing for them as the refining and chemicals sides will benefit while their E&P side sees lower revenue. I still think USO or the double ETF there on oil is a better play if you like oil down.

  102. 102
    VTZ Says:

    rv9 – petrobank is a great company and I would certainly take a look at them.

  103. 103
    zman Says:

    Thanks for the weather report Sam. Have you seen the tracks for 94L. I saw them mentioned but have not seen a site that maps tracks on lows, just TD’s, TS’s, and Cains.

  104. 104
    zman Says:

    WILDZTRADE (risky): Added WFT July $40 calls for $0.60 as another play on SLB’s Friday earnings.

  105. 105
    srp Says:

    Arb is closed from far east for diesel and jet, Europe diesel still at 2003 inventory stock levels and market is in contango for next few months. I would expect diesel to remain strong in the near term and not crater after Olympics. Also, middle distillate demand driving much of front month crude, so if diesel comes off, crude likely to follow.

  106. 106
    rv9 Says:

    Z, looking at E&P Hedged in the link:

    http://zmansenergybrain.com/subscriber-data/e-p/

    The data for CRK is slightly off from company’s recent presentation. Where do you compile this data from

    Thanks

  107. 107
    zman Says:

    rv9 – it is dated from April, those are done by hand when I get time or from Street research when I get it.

  108. 108
    Sambone Says:

    #103 – I still use “Stormtrackr”

    http://www.thestormtrack.com/tropical/aal942008/2008AL94_0716_00z_op_full.png

  109. 109
    zman Says:

    Thanks Sam, it is added to the Weather tab.

  110. 110
    zman Says:

    rv9 – I generally update the hedges if I see a big change or after the quarter which is when most companies release their hedge numbers. That last is from the closing time of the last quarter.

  111. 111
    rv9 Says:

    Is 10Q your source or you get it from bloomberg etc? Thanks

  112. 112
    zman Says:

    rv9 – usually from press release at the time of quarter, sometimes from ops update pieces, and sometimes someone is kind enough to send me a bit of Street research (data dump) with the hedges in a table.

  113. 113
    Sambone Says:

    Z – I guess the oil patch will continue to go down sinec Uncle Phil is bullish!

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

  114. 114
    zman Says:

    Thanks for 113 Sam, there’s 1 minute of my life I will never get back, lol. Now his trades are “just a guide”. I’d be more chipper like him but I have money on the table the trades aren’t just a guide.

    I do agree completely with Cadillac’s sentiments in 74.

  115. 115
    uop Says:

    zman:
    what would be a hedge against crude ?

    and NG ?

    and oil exploration ?

    and coal ?

    and solar ?

  116. 116
    ram Says:

    Z – You still thinking about WLT?

  117. 117
    zman Says:

    Uop – Probably puts on USO for Oil,

    for natural gas I have not been satisfied with puts on the XNG but gas has been doing what oil has been doing 3 out of 5 days a week so again, the USO there.

    XLE for the E&P companies

    KOL for Coal but I don’t like puts there, maybe you can borrow it if the SEC will let you. Can you short an ETF? I honestly don’t know.

    For Solar that probably ties well with coal but you could look at something like the MOO ETF.

    Ram – I probably should be but no, going to let it sit until next week. Lack of follow through with the rest of the group makes me think down energy is over riding and that the deal hype will be short lived. I like it but have decided not to chase.

  118. 118
    uop Says:

    zman:
    what does HK and CHK have in terms of NG and oil ?

  119. 119
    zman Says:

    CHK is 92% natural gas and hedged north of 70% for this year’s expected production,
    HK is 91% natural gas and less hedged.

  120. 120
    Dman Says:

    Added some OII exposure here

  121. 121
    tater Says:

    ram re #97

    Please don’t take this like a smart ass comment because I’m taking your question on it’s face. It seems like you are actually making a statement, kind of “forest for the trees” kind of thing. Your eyes are telling you something (there has been obvious selling in CHK) and you don’t want to believe what your eyes see.
    TA is just a pictorial description of the day’s action.

    Z – wondering if you could take a sec and force yourself to make an argument for SLB to somehow report bad news. I can’t come up with anything, but you know one heck of a lot more than I do. Would be of a great help in preparing for downside risk.

  122. 122
    zman Says:

    NG coming close to green.

    Dman – I’m contemplating some too.

  123. 123
    ram Says:

    Thanks tater for the response. Just wondering when the sticks are red, meaning they close down for the day even though they were up, even higher than the previous day, does that mean something.

  124. 124
    uop Says:

    zman: hk and chk high in NG, the rest is condensate ??

  125. 125
    cargocult Says:

    What is your take on adding August SLB’s now?

  126. 126
    zman Says:

    Tater Re SLB – If they brick it will likely be offshore. Remember they missed last quarter and that was largely a function of Western Geco (offshore seismic) and other timing and weather related issues that lead to lumpy revenues. The stock was more than forgiven during the call for the feeling imparted by management that things in the onhsore N. American environment were looking like they would improve in 2H08 and especially 2009. People expect them to elaborate on this now that we are three more months closer to promised land. Also, a second sequential decline in the middle east would be unwelcome, not saying it happens but impossible to know for sure. On the quarter they could miss but that would not be the end of the world unless it were a large one. The stock is relative cheap for it at 16x next year’s numbers with strong growth expected this year through 2010.

  127. 127
    zman Says:

    Uop – a mix of oil and NGL’s

    Cargo – I’m not very concerned about them right now. See 126 for things that might change that but I’m holding them through the call on Friday.

  128. 128
    tater Says:

    ram –
    Sticks are actually clear or filled.
    Clear stick (red outline or black outline) means the day’s close was above the day’s opening price.
    Filled stick (red or black) means the day’s close was below the day’s opening price.
    Clear red stick means days closing price was above day’s opening price but still below yesterday’s closing.
    Black filled in stick means down day but close still above yesterday’s close.
    The tails on the sticks (shadows) are the day’s trading range. The think body (real body) borders the day’s open and close.

    Sorry, I misread your question.

    Thanks Z, appreciate it.

  129. 129
    zman Says:

    At $95, SLB is right back where it was before the last conf call. Unlike in the E&P and refining realms where analysts periodically mark their estimates to the market prices of commodities, oil service estimates remain relatively unchanged after a quarter is released once the adjustment s to the models are made. There are minor tweaks but generally only a big contract announcement can move the needle. SLB’s have not moved since early May. So unless they were too high after the 1Q call and have not yet cut the company should be about ok on the numbers. One other thing to add is that they get their business largely from the Majors, state oil companies and E&Ps. Those almost monthly increases in Capital budges on the part of E&Ps and companies like PBR should be finding their way into SLB’s pockets.

  130. 130
    BirdsofpreyRcool Says:

    #117 z – you can short an ETF… but the borrow can be a bit tough. there hasn’t been borrow (or at least I can’t get it) on USO for about 2 months now, fwiw.

  131. 131
    Bob Says:

    Broader market: Reminder 2PM ET Fed minutes from last meeting. Could move market lower or higher. Over the past year it has cut the daily gains more often than added to them.

  132. 132
    ellwodo Says:

    XCO – It seems hard to believe that XCO won’t be able to pull off a deal that implies a value to it a lot higher than its current market cap. I’ve increased my position today in the Sept 40s. I want plenty of time for earnings cc an/or JV announcement. Of course, it also seems hard to believe that oil reaching a one month (or so ) low could send natural gas stocks down 5%, so what do I know.

  133. 133
    zman Says:

    Brazil: union willing to talk with PBR but they want all workers removed from offshore platforms first.

    Thanks Bird and Bob.

  134. 134
    tater Says:

    Sorry if I missed you saying it earlier or not, you mentioned WFT as a play on SLB positive call. Do you like NBR (other than for it’s own reasons) with SLB as the trade catalyst?

  135. 135
    zman Says:

    Tater – I think HAL is the most obvious runner up on good news at SLB. WFT is sometimes called a “little SLB” and it generally moves if SLB has a good day, liked the low premium there and am already long the name further out. NBR should move too but it may be a bit slower for the July’s so I took the WFT.

  136. 136
    tater Says:

    That’s probably bad phrasing. Could you see SLB’s call influencing other service names, specifically land drillers?

  137. 137
    tater Says:

    Sorry. It’s hard not to forget to phrase those questions properly.

  138. 138
    zman Says:

    Tater – yes, they could mention the higher Canadian rig counts, the higher U.S. counts, the higher Mexico count and all of these could help NBR. The US count could help the other names in U.S. land as well including UNT which I hold and the smaller names like GW which I don’t and won’t.

  139. 139
    zman Says:

    Tater – no worries and I did not notice anything about phrasing that was a problem for me. I’d let ya know it if you said something like “should I buy SLB $100 June calls or not Z, come on tell me what you think!” but you didn’t do that.

  140. 140
    Sambone Says:

    Just added some more COSWF at $47.60 US.

  141. 141
    zman Says:

    some fed officials wanted rate hikes “very soon”

  142. 142
    ddaley Says:

    Z-
    Near term catalysts for EOG, earnings on the 29th? And am I correct that EOG is more sensitive to crude, as it is a Bakken oil play in the Williston Basin?
    Thanks

  143. 143
    zman Says:

    DD – EOG is a strange trader as it is a gassy but becoming more oily large cap E&P. It has always traded closer to oil than NG and should be one of the better CFPS numbers as it stopped hedging during the 1Q and has more exposure to both oil and gas than many of its peers. Been drilling the biggest Bakken wells in its Austin/Parshal area and they should have more results out on the call. Also, they should have more news out on their Canadian shale play and their other oil shale plays announced with a little more detail than CHK did earlier this Spring. Very curious to see progress in the Barnett oil play.

    Planning to do a WIOWIO for EOG and SLB for tomorrow’s post.

  144. 144
    Sambone Says:

    Some at Fed June meeting saw rate hikes coming ‘very soon’
    Marketwatch – July 16, 2008 2:00 PM ET
    WASHINGTON (MarketWatch) — Some top Federal Reserve officials argued at the closed door meeting last month that the central bank should hike interest rates “very soon,” according to a summary of the meeting released Wednesday. Some members said the Fed had aggressively cut rates to 2% to guard against downside risks to growth and now that these risks had “diminished” that “some firming in policy would be appropriate very soon.” But other FOMC members said financial conditions were still too fragile and borrowing costs were higher for consumers than before the Fed starting cutting rates last fall. The minutes show a clear divide between one camp that favored a rate hike and others who believed the outlook was still uncertain at best. One FOMC member, Dallas Fed Bank President Richard Fisher, voted for a rate hike. In general, the minutes were a bit more hawkish that Fed chief Ben Bernanke was in his two days of testimony before Congress.

  145. 145
    zman Says:

    5 killed in Nigerian gunman attack on naval boat.

  146. 146
    zman Says:

    3 of them were rebels, sounds like a 2 hour gun battle after a failed attempt to take over an offshore platform.

  147. 147
    uop Says:

    zman;
    your designation:

    E&P is essentially in NG, yes ?
    HK, CHK,

    Majors: mix of things, crude, refining, NG, yes ?
    CVX, but not VLO as they have no oil.

    Oil Service is exploration and drilling: NFX, PBR

  148. 148
    apbd Says:

    Is it time to buy ” energy?” I just got a tip from a shoeshine boy. lol
    apbd

  149. 149
    zman Says:

    E&P = exploration and production can be either all gas like a BBG or a mix of oil and gas like most E&Ps or all oil like BRY used to be and WRES is almost now.

    Majors do both upstream (E&P) work, as in they go find it, then process it into products at the refinery (downstream) and then market it at the pump. They also have chemicals divisions.

    Independent refiners generally don’t have the upstream side, last one I remember was TSO and I’m pretty sure they sold Bob Oliver and his crew to someone a long time ago. So they buy crude and turn it into gas and diesel.

    Oil service help the E&P side find the oil and gas.

    There is a list representing what I watch in each sector here:

    http://zmansenergybrain.com/subscriber-data/zeb-screens/

    It’s not comprehensive but it gives a good representation of each sector and some of the players in hot plays right now.

  150. 150
    zman Says:

    A – “I’ve been burned on tips before”

  151. 151
    ram Says:

    How could someone find out what refiners are paying for oil, especially the gas at market now?

  152. 152
    ddaley Says:

    Z-
    On the EOG, thanks. Are you inspired to buy it, or anyting else at thse “depressed” prices? I guess looking at the flatlining, that is a question for everyone.

  153. 153
    zman Says:

    I own it but I’m not buying much of anything until some reason comes back into the group right now. No knock against them but it was 120 two days ago and at 107, although it seems completely beaten and bashed I don’t feel particular compelled to add given the sour sector environment.

  154. 154
    uop Says:

    zman:

    txs for clarification,
    what I conclude is thaT it is almost impossible to find an index or ETF which can be used clearly to hedge,

    UNG is ok for NG,
    USO for crude,
    OIH for exploration,
    XLE for mixed situations,

  155. 155
    zman Says:

    Ram – I don’t have a good answer for that. Depends on the mix of crude they buy, where they are located, hedging, etc. Maybe someone has a better idea or source.

    OIH for oil service.

  156. 156
    reefguy Says:

    MMR, EXXI trying to be green. MMR earnings call tomorrow with BB update?

  157. 157
    zman Says:

    Thanks for the headsup Reef, bmo tomorrow call at 10 est., still holding some near worthless August calls here, would take a lot to resurrect.

  158. 158
    reefguy Says:

    xco on wire…Goldman to market 50% wi in JV. These guys did the Leor deal to ECA six months ago for 2B on a 50%interest

  159. 159
    reefguy Says:

    158-in Dallas Business Journal

  160. 160
    Bleemus Says:

    MMR – Next earnings release: Jul 17 before market, confirmed. First Call estimate: 1.03

  161. 161
    zman Says:

    Reef – any last minute color to add on MMR?

  162. 162
    ellwodo Says:

    XCO, #158 – Is it a sign of weakness for XCO to go to GS instead of having to beat off interested parties or just good marketing? The press release talks about almost all their plays, any word as to whether they are in effect trying to sell half of the whole company? Any rumors on price? Sorry for all the questions, but their Sept 40s are currently a very large chunk of my portfolio. Any news, guesses appreciated.

  163. 163
    reefguy Says:

    Sands and shows below liner at 31,942. I estimate drill depth of 33,200′, going for 35k and depth record. look at mmr into close

  164. 164
    reefguy Says:

    162- Marathon made an unsolicited, bringing capital and no skills. Devon will win at 2B

  165. 165
    ellwodo Says:

    164 – thanks, but is the $2 billion for half of everything (current market cap is $4 billion, so that wouldn’t be good news) or just half of Haynesville?

  166. 166
    reefguy Says:

    Half of East Tx assets, other than mid stream.

  167. 167
    ellwodo Says:

    Reef, thanks. Sounds as if that should be very good for the stock. They also have over 100,000 net acres in Marcellus among other things.

  168. 168
    zman Says:

    Elwo – no way the $2 B extends to include the Marcellus. That’s would be on top of their Haynesville.

    Now that everything is perfectly fine with the broad market we are starting to see a rally in select service names.

  169. 169
    ellwodo Says:

    Thanks everyone.

  170. 170
    zman Says:

    Elwo, if I remember correctly, Aubrey placed a 15 Billion price tag on the worth of his 1.6 mm acres in the Marcellus. So XCO’s 100,000, if they sell them, cold expect the same ratio…pretty penny, over $1 B for a 100% interest.

  171. 171
    reefguy Says:

    i think xco has 400k leases in marcallus

  172. 172
    reefguy Says:

    no run in mmr or exxi at close

  173. 173
    Sambone Says:

    “Senator, I can tell you what you can believe. You can believe I believe everything I say.”

    ~ Secretary Paulson, Senate Testimony, Tuesday, July 15th, 2008.

  174. 174
    zman Says:

    right Reef:

    393K net Marcellus
    another 117K net Huron

  175. 175
    reefguy Says:

    mmr two minutes late

  176. 176
    zman Says:

    I was trying to think what movie that was from before I saw the dateline.

  177. 177
    reefguy Says:

    exxi not following

  178. 178
    VTZ Says:

    Sambone that’s priceless.

  179. 179
    Pete Says:

    Z,
    A wee bit of traction for the group into the close.

  180. 180
    ellwodo Says:

    XCO – bring on the buyers!

  181. 181
    zman Says:

    Wee bit is right, I do like the reversal on the OIH though, well off lows late.

  182. 182
    reefguy Says:

    210044 shares of exxi trade at $5.50 at close.

  183. 183
    Dman Says:

    CAM has gotten all jiggy. Not clear to me why it has chosen today for it … earnings July 30th.

    #173 sounds right out of Get Smart : “would you believe …”

  184. 184
    Sambone Says:

    For you evening viewing! Tini Time

    http://www.cnbc.com/id/15840232?video=794008504&play=1

  185. 185
    zman Says:

    Wow, just saw WH, 12% rally and I have no news on it.

  186. 186
    Eagle Says:

    WSP Holdings Limited (NYSE: WH) (“WSP Holdings” or the “Company”), a leading Chinese manufacturer of API (American Petroleum Institute) and non-API seamless casing, tubing and drill pipes used in oil and natural gas exploration, drilling and extraction (“Oil Country Tubular Goods” or “OCTG”), and other pipes and connectors, today announced that its wholly-owned subsidiary, Wuxi Seamless Oil Pipes Company, Limited (“WSP China”), received purchase orders for 8,217 tonnes of API products from Ch

  187. 187
    zman Says:

    nowdrinkingdomesticbeerthirty

  188. 188
    zman Says:

    Thanks Eagle, I don’t have that story, thought they released that a couple of days back.

  189. 189
    Eagle Says:

    Sorry, Chopped off the end.

    WSP Holdings Limited (NYSE: WH) (“WSP Holdings” or the “Company”), a leading Chinese manufacturer of API (American Petroleum Institute) and non-API seamless casing, tubing and drill pipes used in oil and natural gas exploration, drilling and extraction (“Oil Country Tubular Goods” or “OCTG”), and other pipes and connectors, today announced that its wholly-owned subsidiary, Wuxi Seamless Oil Pipes Company, Limited (“WSP China”), received purchase orders for 8,217 tonnes of API products from Chickasaw Distributors, Inc. (“Chickasaw”) in the United States, and 2,246 tonnes of non-API products from PTTEP Siam Limited (“PTTEPS”) in Thailand.

    In May and June 2008, WSP China received four purchase orders from Chickasaw for a total of 8,217 tonnes of API casing pipe. WSP China expects to complete delivery for these orders by December 2008.

    Chickasaw has extensive experience as an OCTG product distributor and is an OCTG provider to Shell Oil Company, one of America’s leading oil and natural gas companies.

    In July 2008, WSP China received a purchase order from PTTEPS for total of 2,246 tonnes of non-API casing, drill pipe and related accessories. WSP China expects to complete delivery for these orders by December 2008.

  190. 190
    Bleemus Says:

    VLO Valero Energy to Receive Canadian Crude Oil for Its Gulf Coast Refining System (32.42 +0.20)

  191. 191
    zman Says:

    Don’t get too excited, they have been talking about getting Canadian crude to the Gulf Coast for several quarters now. Problem is no pipe. Looks like Keystone is a 2012 event. It’ll help them but that’s a ways off.

  192. 192
    VTZ Says:

    At some point in the future there will also be a pipe from the oil sands to the west coast to either Asia, West coast or Gulf coast. The problem is the Rockies.

    Enbridge has also proposed “Gateway”, but that won’t be until 2012+ either.

    Bottom line, don’t count on it any time soon. It’s good positioning for the future though.

  193. 193
    Bleemus Says:

    NRG NRG Energy cancels plans for IGCC plant in western New York; decision follows NYPA ending support for clean coal project (37.25 -0.96)

    Co issues statement regarding its planned clean coal project at its Huntley Station in western New York. The New York Power Authority informed NRG of its intent to allow their strategic alliance, formed in January 2007 to pursue development of NRG’s clean coal project, to expire on July 22. This effectively ends co’s effort to develop a clean coal project at Huntley in its present form. “We are disappointed in the State’s action today, but we recognize that the necessary funding was not there. The Huntley IGCC project was, in many ways, ahead of its time.”

  194. 194
    john11 Says:

    XCO trading off after hours, 8k filed.

  195. 195
    cadillac Says:

    SLB up fairly significantly after hours.

  196. 196
    antrimshale74 Says:

    SLB got many a favorable comment on Fast Money tonight re: trading for Friday’s earning. Hence the move after hours.

  197. 197
    bill Says:

    chk with new guidance

    http://media.corporate-ir.net/media_files/irol/10/104617/716Outlook.pdf

    z have u seen this yet?

  198. 198
    rv9 Says:

    Per my observations, the Proved reserves of all gas shale plays will increase substantially compared to 2007, principally due to Haynesville shale. Does this observation make sense? Also, all the HK, Encana, etc seems to rush to drill the shale vigorously. If this is so, I feel there is a good chance that gas prices will come down probably in few months. Can you comment on the validity of this observation.

    Which other play is as rich as Haynesville shale. I see bakken play is pretty hot as well, and is more skewed towards oil.

    Thank you

  199. 199
    VTZ Says:

    Does that guidance show CHK trading between 3.8-4.2 2010 CFPS? for a company with 18% production growth per year… hrmmmm.

  200. 200
    ddaley Says:

    I just caught 60 seconds of Cramer mid way through the program. Recommended Western Gas, and then, “I think oil reverses tomorrow, I am buying it and selling the financials”. Fast Money was all over the XLF move today, like all the problems are solved. Actually Macke was skeptical, said it is going back down.

  201. 201
    Nicky Says:

    Evening all.

    FWIW despite today’s huge rally in the broader market the market is firmly entrenched in its downtrend. We would have to get through 11450 for that to change. I have to say I had begun to wonder if this rally was ever coming as I have a cycle high due 17th plus or minus a day – lost count of the times I have said that. Anyway yes we could go a touch higher. In fact it is possible we touch 1275 on spx and 11450 on dow but I feel unlikely. Somewhere between where we are now and there is likely to cap this rally which I have as a wave iv and take us to new lows in wave v which should be done sometime the end of July/beginning of August.

  202. 202
    Nicky Says:

    Oil – despite the plunge the bull is not dead count wise! We need to take out the 131.90 area and preferably 130 area and until then this is possibly just an ABC correction. That said I still favor the bearish count right now but even under it I expect to see the market stage a decent bounce for wave 2. Possible we go a bit lower and then bounce or it has already started. But I can see us retesting 140 anyway.

  203. 203
    ram Says:

    ZMAN – Is the recent filing for CHK an improvement over what analysts are currently gaging the company?

  204. 204
    bill Says:

    looks like they up’d 2009 and 2010

    2008 is the same

    also shows they have enough cash to meet need of 2008

    the only negative is all the damn hedges.

    they will lose over 1 billion in q 2 as they hedged at 8 and gas ran up to 13

  205. 205
    ellwodo Says:

    XCO: I may be “looking for the pony”, but XCO’s filing after the bell about the forced conversion of its preferred stock into 105 million additional common (doubling the common, but getting rid of $2 billion of mezzanine debt)may have a silver lining. XCO’s F/S (note 4) disclose that if there had been a “change in control” the preferred could have forced a cash buyback at $2 billion. When you advertise for a 50% partner, sometimes 100% acquirors come calling. If such an acquiror wanted to use stock, it would be nice to not have to also come up with $2 billion cash. (Granted, a deal would now cost them more stock.)A short term call holder can only hope.

  206. 206
    crysball Says:

    China Q2 growth 10.1%, inflation cools

    What is not apparent in these figures is the addition of more and more diesel & gas burning engines to support this kind of double digit growth……………and they still got 10.1% growth with a major earthquake.

    The National Bureau of Statistics said the economy grew at an annual rate of 10.1% in the three months to June, down from 10.6% over the previous quarter.

    If it keeps growing at a double-digit pace, then China may overtake Germany as the world’s third-largest economy.

    Beijing has been trying to curb rising food costs amid fears of social unrest.

    Consumer price inflation also cooled to an annual rate of 7.1% in June – a decline from 7.7% in May.

    But with producer prices rising to an annual rate of 8.8% in June – the fastest pace of growth since the mid-1990s – the expectation is that the government will go further to make sure that these costs are not passed on to consumers.

    “While inflation has been easing, it is still at a fairly high level,” said Li Xiaochao, the statistics bureau’s spokesman.

    “If prices stay high for a long period, it’s not good for the stable development of the economy and will affect people’s lives, especially those with low incomes.

    “So we have to continue with price controls to control inflation,” he added.

    Analysts considered that the growth figures were in line with expectations and despite signs that the economy has peaked, double-digit growth is still expected for the full year.

  207. 207
    zman Says:

    Crys – unreal isn’t it. This is what happens when you cap fuel prices and subsidize your refiners. People increase their per capita consumption of oil which given the scale of China can only lead to higher prices for everyone.

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