20
Jul

Wrap – Week Ended 7/18/08 (In Progress)

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Holdings Watch: July options expired yesterday and I was glad to put that ugly month to bed (at least the second half of it).  In recent months, I've worked to get the scud count (those options that expire worthless each month) down to two or fewer positions. With the sudden decline in the groups of the last two weeks that didn't work out this month. I added into weakness anticipating a shorter duration swoon in the energy sectors than what occurred and some of those adds were front month contracts. Here are the closed and expired positions this week. 

closed-071808.jpg

On To The Wrap....

wrap-071808.jpg

1)  Energy Stocks Take A Break ... The E&P, oil service, and Majors all fell on the week due to lower prices (read on) and the ATM effect. The groups have done incredibly well and in a fit of fear that profits would evaporate if they didn't change them out for bottom fish candidates in the financial sector. The groups were not expensive before the decline with many of the stalwarts in the E&P and Service groups trading below their long term median multiples. I'd also add that (SLB)'s beat and positive sentiments about the rest of 2009 was the kind of start to 2Q earnings we were looking for.

2)  ... As The Commodities Dip.

  • Crude oil fell $16.20, (11.2%) its biggest one week loss in terms of dollars since NYMEX began trading futures contracts in 1983. The rapid sell off was attributable to a combination of renewed concerned about the weak U.S. economy and its impact on oil demand, a rare (at least lately) build in crude stocks prompted by anomalously high imports, and peace-like noises in the middle east. The last two items won't last. The first is a subject open for debate and I'll more there in tomorrow's post.
  • Natural Gas also took a tumble also falling exactly 11.2% (how odd) and looks to be oversold here. Traders on the long side have done well in the past past several and selling mounted as the commodity fell through its trend line. An unexpected large build last Thursday only exacerbated the decline and if that kind of injection build becomes the norm in the next few weeks (doubtful) you have to think that gas will fall further, at least until a storm makes its way into the Gomex. 
  • Coal was not left out in the price decline with the higher BTU east U.S. coals falling 10% on the week. No hard and fast reason for the drop; it just comes on the heal of a substantial rally and is trading with the sentiments of oil and probably even more with that of natural gas.  

More  Comments TBA----

 

3 Responses to “Wrap – Week Ended 7/18/08 (In Progress)”

  1. 1
    zman Says:

    Tropical Storm Dolly has formed in the Caribbean. Track is for the western Gomex once passing over the Yucatan.

  2. 2
    Wyoming Says:

    Z,

    Sorry I missed your query, went to a friends ranch outside Stephenville with zippo technology except a satellite dish and phone. Kiddo’s did not miss a Sponge Bob and I had a cell phone anyway.

    SLB can say what they wish but we ran them off of our last Barnett well before they even rigged up. Their service really sucks. Frac Tech put us in their schedule without missing a beat. N Am. has way too much good competition for them to last very long. I never buy a service companies word that they increased production, way too many variable to take their word at face value probably wells in the middle os a sweet spot or comparing TFS wells to straight Bakken as an example.

    Zipper frac’s; for the less knowledgable:

    Take two wells (usually horizontal but it could be vertical I suppose), Frac each well section simultaneously with eachother toe to heel. 2 frac crews, 2 set ups etc.. really should try to kick in the pumps with in minutes of themselves. Thought is that there will be more compexitiy in the fractures, don’t get caught in the textbook perfect plane drawings. In the brittle reservoirs like the Barnett, this works. I would not try it in a ductile layer. Basically like trying to predict where a crack in your windshield will go and in how many lines after the intial impact. We can predict the general direction of the frac but not the many zip zags that it takes and the 3 or 4 fracs that start out when we pump. In general for the barnett we drill the laterals in a North West to South East plane predicting that the fracs will form in a North East to Southwest plane. Simofracs use the energy off of eachother to just smash up the cracks with the hydrauklic energy. The cracks are filled with proppant and the large water volumes create the reservoir for the nanodarcy kerogen filled matrixs to give off the gas. Rapidly at first production and then tapered probably a function of the fractures closing and choking flow in my opinion. Refracs is becoming the next “thing”.

    Back to the zippers, take the simo theory and now use one frac crew and swing them back and forth between wellheads. Instead of dynamically having the fracs create complexitiy, you are rely on the stress of the one frac that was just finished working in conjunctionyou are now starting.

    A ex-BJ friend of mine was in the founding of the simo craze, he did not really have a preference for one over the other. We did one well with microseismic in realtime (kind of, actually 10 min. delay) with the first stage zippered and the rest of the well simo and did not see a difference.

    Zippers have an advantage of being a little more cost effective, not much but it depends on the pump schedule and details of technique. Anything to lower the F&D costs.

  3. 3
    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Monday Morning – Hello Dolly Says:

    […] Wrap – Week Ended 7/18/08 (In Progress) […]

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