25
Jul

TGIF

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In Today's Post:

  1. Holdings Watch
  2. Commodities Watch - with natural gas storage review
  3. Stocks We Care About Today
  4. Odds & Ends

Holdings Watch: (repositioned some CHK and HK August calls for a perceived soon to come rebound) 

  • CHK - Out CHK $75 calls for $0.05, down 99%.
  • CHK - Added August $50 CHK calls (CHKHJ) for $2.70.
  • HK - Out HK $45 Calls for $0.20, down 95%
  • HK - Added HK $30 August calls (HKHF) for $3.50.

Commodity Watch:

Crude traded higher on the day. Wow. Frankly I don't put a lot of stock in a $1 move up to close at $125.49 on the heals of a seven day, twenty-one dollar (15%), worst in the history of NYMEX crude trading, slide. In my book yesterday's trading was just noise. What I would like to see is crude trading in a range with smaller daily changes. This morning crude is began to fall back off shortly before the open reversing earlier small gain.

  • SPR To Remain Untapped. Democrats wanted to release 10% of the 700 million barrels in the U.S.' Strategic Petroleum Reserve to help reduced prices at the pump. They did not however, want to vote on and be seen as opposing by said vote drilling offshore and thus, since they couldn't get one without the other, the idea is scuttled. Bad idea in my book but I don't political here as that's not my bag. I'll just say that you don't "get off foreign oil" by making the products made from that oil cheaper; instead you encourage more consumption but I guess you get votes. Impact on oil prices: pretty minimal as I don't think many people thought this would really happen but it does remove one cloud from crude's sudden gray outlook.
  • Nigeria Watch: MEND abducted a couple of oil workers. 

Natural Gas got drilled for another $0.46 to close at $9.32. The EIA announced an injection into storage of 84 Bcf yesterday, in line with Consensus at 83 and my number at 85. The August contract traded as low as $8.88 before the smallish rally in crude and the potential for a smaller injection with next Thursday's report restored some sense of value. This morning gas is taking its cue from oil.

I think gas turns back up soon. And I'm not alone. I read a piece by Goldman last entitled "natural gas selloff: too much, too soon". Instead of boring you with my usual prattle here are their high points with my comments where I disagree or want to augment. Goldman's thoughts are abbreviated and in italics.

  • Warmer than normal forecasts for the coming weeks. Pretty self explanatory.
  • Sings of a stronger than normal hurricane season. ditto
  • Inventories below 5 year normal and unlikely to reach full status by end of October. Much like I've been writing (see my expectations for end of season storage in the second table below).
  • They maintain a Aug-Oct 2008 forecast of $12.90. So about a whopping 38% pop over current levels!
  • They go on to reiterate their 13.40 for '08/09 winter average price.
  • They say the prior week's 104 Bcf injection remains largely unexplained. At least I'm in the dark on that one in good company. They say that the possibility that is was just "noise in the numbers" became more plausible with yesterday's return to a more normalish 84 Bcf injection...I could not agree more.
  • They see somewhat softer prices in 2009 ($9) as production increases balance out the supply / demand situation allowing for fuller storage in Oct 2009...I have no problem with that one either although there is a lot of time between now and then and cool winter or more probably a further erosion of Canadian piped volumes into the U.S. would cause me to think prices would remain in the double digits after this coming winter. 

Natural Gas Storage Review 

gas-table-071808.jpg


gas-graphs-071808.jpg

Earnings We Care About Next Week:

earningswk3q2.jpg

Stocks We Care About Today:

HK Short Interest Evaporates. From June 30 to July 15, short interest in Petrohawk was in the top 5 biggest decliners for the period falling 62%from 19.4 mm shares (10% of outstanding) to 7.3 mm shares (4%).  

Odds & Ends

Analyst Watch: (RRC) raised to buy at RBC, (SWN) upped to buy at FBR, (NE) and (ESV) upped to buy at Jefco,

116 Responses to “TGIF”

  1. 1
    Bleemus Says:

    CHK Chesapeake Energy: ICAP sees tremendous value in CHK and believe risk is being excessively priced into the stock (49.06 ) -Update-

    ICAP says at present, the amount of risk being priced into CHK is the most extreme it’s been at any point in the last 3 years. Though timing is uncertain with flow and flow momentum both negative, they see tremendous value in CHK. They view best/worst case 12-month scenario on the stock at $80/$52, both above current levels. Firm also notes that yesterday’s 53 mln share reversal in a down market also encourages them that the bottom may be very near.

  2. 2
    zman Says:

    Oil just fell out of bed again. Anyone see a news item?

  3. 3
    zman Says:

    MD – still mulling last night’s question.

    PBR and their union failed to meet negotiation deadline yesterday, looks lily we’ll see another strike in BRazil in a week or two and this one should shut in more production as it would be spread across all of PBR’s domestic operations. Maybe a boost to oil but more importantly, a buying op for PBR once that name stops falling.

  4. 4
    Sambone Says:

    Nothing on my scope at this time.

  5. 5
    zman Says:

    BRY on the tape with an earnings miss, beat on revenues, talking up their Haynesville plans, conf call 10:30 EST. I’ll listen to the call but am unlikely to add in this market as the smaller players with any kind of bad news, even the perception of bad news will get tossed aside. I may near the money calls there as they appear to be executing well but I’ll wait for calmer waters.

  6. 6
    Sambone Says:

    8:02 am EST

    Crude Steady, Supply-Demand Outlook Uncertain

    Dow Jones Newswires

    By Reza Amanat

    Of DOW JONES NEWSWIRES

    LONDON — Crude prices stabilized in London Friday, as the market remained wedged between signs of falling demand and ongoing concerns over future supply levels.

    “The outlook for oil prices is uncertain. Oil market sentiment has turned more bearish for the moment,” said David Moore, Commodity Strategist at Commonwealth Bank of Australia. “But the oil market remains tight, meaning there is the potential for the oil price to bounce temporarily higher.”

    At 1240 GMT, the front-month September Brent contract on London’s ICE futures exchange was higher 60 cents at $127.04 a barrel.

    The front-month September contract on the New York Mercantile Exchange was trading 77 cents up at $126.26 a barrel.

    The ICE’s gasoil contract for August delivery was higher $6.25 at $1169.75 a metric ton, while Nymex gasoline for August delivery was up 201 points at 307.95 cents a gallon.

    Participants continued to eye other markets for clues over crude’s direction. Further weakening in the U.S. dollar against most major currencies helped provide some upside support, while analysts pondered whether the failure of a nascent recovery in equity markets this week could lure money back into oil.

    “It remains to be seen whether the current bounce in energy will hold up as we head into the weekend,” said Edward Meir, analyst at MF Global in New York. “Yesterday’s sharp decline in the equity markets — should it continue into a second day on Friday — may lead to some firming in the commodity space, but given the grim macro background, we are not sure how much the two markets could effectively decouple from each other.”

    Concerns over consumption amid high prices have focused predominantly on the U.S. where demand for gasoline continues to weaken — the latest illustration stemming from another build in stockpiles revealed in this week’s U.S. Department of Inventory data — amid soaring prices and a slowing economy.

    However, signs economic malaise and faltering demand may be spreading was borne out by European economic data this week.

    U.K. second quarter GDP grew at its weakest since the first quarter 2005 as the economy struggles with higher oil prices, a housing market downturn, and the impact of the credit crunch, the Office of National Statistics revealed Friday. The data followed German readings Thursday showing business confidence at its lowest level since September 2005 in July.

    Adding to concerns about slowing oil demand, preliminary figures from France Thursday indicated gasoline and diesel demand were down a little over 10% from a year ago.

    Participants will also look out for U.S. data on consumer confidence and new home sales due for release later Friday for signs of further economic strain.

    Despite the strengthening in bearish sentiment that has accompanied oil’s recent decline, uncertainty over future supply remains an obstacle to a more comprehensive pullback, analysts suggested.

    Geopolitical unease in the Middle East — particularly the uncertainty over reaction to Iran’s nuclear enrichment program — and anxiety over the impact of militant activity on Nigerian output remain a threat to oil supply, at a time when demand continues to retain support from emerging economy demand, particularly in China and India.

    “With both (China and India) nations still reporting very high growth and ongoing concerns about supply growth, particularly non-OPEC supply growth not being able to keep up with insatiable emerging market growth, we would argue that the long term bullish case for oil still remains intact,” said Michael Davies, research analyst at London based brokerage firm Sucden.

    —By Reza Amanat, Dow Jones Newswires;

  7. 7
    zman Says:

    XLE ignoring today’s downdraft in crude, something it has not been able to do in three weeks…may be telling that the tide is turning for these stocks, down “too far, too fast. Also note the XLF is down.

  8. 8
    Sambone Says:

    Oil Prices And Other Weirdness

    By DAVID COTTLE
    A DOW JONES NEWSWIRES COLUMN

    LONDON — The idea that commodity prices, and especially oil prices, have soared this year as a reflection of increased demand is quite well entrenched.

    Indeed, no less a commentator then Ben Bernanke echoed it in his recent testimony to Congress.

    “Our best judgment is that this surge in prices has been driven predominantly by strong growth in underlying demand and tight supply conditions in global oil markets,” he said. Well, that’s that then. How much clearer do you want it folks?

    And, over the long term, this is no doubt so. Of course, it must be. But take a look at recent events. The price of a barrel of crude has fallen some 15% in a matter of days.

    Now call me suspicious but can the supply/demand balance for crude really have changed that much that quickly? I think not my friends.

    Some in the markets have been quick to blame weaker equities; indeed, one trader told Dow Jones that the oil price may be much more closely tied to stock moves from now on. Well, maybe it will, but stock weakness is hardly novel this year.

    At the end of 2007 we were all wondering which sucker would be the first to pay $100 for a barrel of the black stuff. And by June 2008 we were wondering if anyone was going to have to stump up $200 by Christmas. Stocks have generally tanked in the interim so, once again, the question could be asked what, fundamentally, has changed so much to account for the rise?

    The answer is not much.

    As one economist put it: “Oil prices had doubled during the first 12 months of the financial crisis, in the face of a darkening growth outlook for the largest oil consumers.”

    When it comes to commodity prices, the part played by financial speculation seems to have been played down, as has the role of a weakening dollar. As UniCredit said: “Most econometric analyses (including our own) indicate that the causality seems to run from higher oil prices to a weaker dollar, rather than the other way around.”

    However, the most recent price action, in oil and across a diverse range of commodities, shows that the picture is significantly more complex. It suggests that financial factors might be playing a stronger role than generally acknowledged, according to UniCredit.

    Which means it ain’t all about fundamental demand.

    The house goes on to suggest that this may have implications for monetary policy, as central banks may need to act to soak up excess liquidity if a commodity bubble bursts.

    But for equity investors it may also have a stark resonance. The miners, oil majors and those firms that service their needs have often served a safe-haven role this year, or as close to one as any equity sector has come.

    If what we thought, and were assured, was demand was really no more than speculative buying then it looks as though one more refuge could develop a very leaky roof.

    —By David Cottle, Dow Jones Newswires

  9. 9
    Bleemus Says:

    Senate democrats fail to get votes for oil speculation bill – Bloomberg

  10. 10
    zman Says:

    Thanks Sam

    Oil down $2, looks like technical selling, looks like weak support is available at 123.30 and then better support in the high teens.

    NG back to green. I think the Goldman arguments I included in the post for natural gas are pretty compelling and they apply to the stocks as well, down too far, too fast. Stocks starting to realize / reflect that a bounce is coming.

  11. 11
    zman Says:

    Bleemus – thanks, first the SPR and now the anti-speculation bill.

  12. 12
    zman Says:

    ACI blew out numbers,

    0.78 vs 0.64 expected, stock is off $10 in the last 5 days and trading at 9x 2009 numbers. Conf call at 11 EST – plan to listen, may add some WLT for Monday earnings.

  13. 13
    bill Says:

    >HK Short Interest Evaporates

    so we had a fall from 50 to 29 and that with shorts covering?? Wow!

  14. 14
    Sambone Says:

    Weather – Still watching invest at 40W, 20N (Old 97L). Nothing much else to report.

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

  15. 15
    zman Says:

    Bill – looks pretty odd doesn’t it. Maybe the naked side grew.

    XLF takes off and XLE starts to weaken. That’s pretty uncanny.

  16. 16
    antrimshale74 Says:

    Place those orders for WM.

  17. 17
    kyleandy Says:

    antrim i’d like to buy some WM but are u sure it will be here monday?/ just joking am short.

  18. 18
    Bleemus Says:

    Models suggest the atlantic disturbance will pass harmlessly well east of Bermuda….

    http://www.skeetobiteweather.com/archive/model/AL972008mlts.gif?250744928

  19. 19
    zman Says:

    Oil down $3 at $122.50., the stocks are doing a good job of not falling with it so far. Definitely no sense of panic after the drop we’ve already had.

    Throughout this drop the refiners have not done well either. There were a few days were they outperformed but are now lower than where they started. I may take some small positions in VLO and TSO for earnings next week. No one expects them to beat or even make numbers but if oil decides to move on down into the mid teens and prices fall uniformly through $4 across the U.S. I think we see a pickup in demand from people rushing to fill their tanks feeling all the richer for paying $3.80 instead of $4.10. I think you would then see an increasing chorus of bottom fish the refining group calls from analysts.

  20. 20
    1520sbroad Says:

    did anyone see the fbr note on swn this morning? any content or just an upgrade on valuation?

  21. 21
    zman Says:

    Re – SWN, I’d bet its an upgrade on valuation, stock is a lot cheap than it has been in quite some time, they are likely to guide higher either this quarter or next and I bet they outstrip guidance this quarter. I almost bought a little back at $41 (last week). The FBR guys put a $43 target on it which is well south of NAV and while I normally think they do good work I think this market gave them an opportunity to get long the stock but that they wimped out on the target.

    I was just looking at adding some common to a stock only account for earnings next week and just talked myself into it.

  22. 22
    kaman Says:

    Z- This may be a stretch connection to your area, but re: VLO, I read WSJ online article about cost of oil and asphalt vs other refined products, long term outlook for global mkt, U.S. infrastructure needs, etc…discovered the company NS. Do you know them? Unclear to me whether there’s some residual affiliation with VLO.

  23. 23
    T. J. Says:

    Zman..When I logged in this a.m. I was getting yesterday’s post…just logged on a few minutes ago and now of course I am on Friday’s post. Can you tell me what happened?

  24. 24
    1520sbroad Says:

    Z-
    agree on swn. i have followed them closely for years and continue to hold their stock. i agree that they may surprise on the guidance side. i think their use of 3d seismic and a lot of experimentation on the frac/completition side will continue to yield them really good wells. i am curious to hear more about thier james lime wells and activity in the marcellus. they have a good team at work in AR, hope some of those folks are working in PA now. i know they did a little bit of mgmt shift recently and would be curious if that has had any affect on their style.

  25. 25
    zman Says:

    K – yep out of my area, I don’t do transmission stocks, they are more akin to utilities than growth stocks. Sorry.

  26. 26
    Sambone Says:

    New Orleans

    Now over 200 ships stacked up. Two refiners affected. Disruptions to the supply chain are now being discussed. “Economically unacceptable” was one term used. It will take at least a week to straighten out.

    http://www.reuters.com/article/environmentNews/idUSN2420080724

  27. 27
    zman Says:

    TJ – I didn’t post today’s post until about 20 minutes bm, you were probably just in before I was ready today.

    1520 – they are definitely getting the science down. The Marcellus will likely be good to them but as you know they and others are downplaying the timing of that play – takes longer due to terrain and infrastructure. Although the margins will be high due to higher regional gas prices. I am hearing more noise about Haynesville on the north side of the Arkansas border. It’s less than 150 miles from their normal hunting ground and I’m sure they aren’t asleep at the wheel on this although they may not discuss it soon. Just thinking out loud. If anyone with lease experience in the SW part of AR is reading today, feel free to chime in or send me an email.

  28. 28
    tater Says:

    I am having a bit of difficulty finding an update to CLR’s quarterly report release date. I have it as 7/29. Does anybody have anything more accurate?

  29. 29
    zman Says:

    Tater:

    http://www.briefing.com/GeneralContent/Active/Investor/TickerSearch/QuickSearch.aspx

  30. 30
    Bleemus Says:

    CLR Next earnings release: Jul 29 before market, confirmed. First Call estimate: 0.70

  31. 31
    Bleemus Says:

    NFX Newfield Expl upgraded to Buy at Suntrust – tgt $72 (52.77 +0.50)

    Suntrust upgrades NFX to Buy from Neutrla with a $72 tgt based on improving Woodford shale economics and share price depreciation. The firm says principal production catalysts include the Arkoma Basin Woodford shale, the Uinta Basin Monument Butte field, offshore Malaysia (Puteri/East Belumut/Chermingat fields) and the deepwater Gulf of Mexico PowerPlay field.

  32. 32
    1520sbroad Says:

    re:22,25 – NS is related to VLO. NS is the pipline/terminal/transport arm of VLO. The bought up some asphlat assets from Citgo earlier this year. NS yields 8+% and is set up as an MLP. VLO spun them out a few years ago. Several execs and former VLO execs are major holders of NS. i don’t know a whole lot about NS in particular and i would recommend due diligence on all of these type of investments – hedging is typically a big part of their business. What type of contract they use for delivery is also important. MLP’s also have their own quirks and are not for everyone.

  33. 33
    tater Says:

    Wow, thanks. Maybe I should spend a day surfing. Internet is an amazing thing. Al Gore, gotta love him!

  34. 34
    Sambone Says:

    10:28 am EST

    Crude Falls Below $123/Bbl, Approaches 2-Month Low

    By Tatyana Shumsky
    Of DOW JONES NEWSWIRES

    NEW YORK — Nymex crude futures fell below $123 a barrel for the first time since June, as falling U.S. demand continued to weigh on the market.

    Light, sweet crude for September delivery recently traded $2.59, or 2.1%, lower at $122.90 on the New York Mercantile Exchange. Futures fell as low as $122.50 a barrel, less than $1 above the bottom hit on June 5. A drop below $121.61 would mark a two-month low. Brent crude on the ICE futures exchange traded $2.62 lower at $123.82.

    Futures had rebounded Thursday, but the market resumed a downward course begun on July 15. The $23 plunge over the last 10 days is based in concerns that high oil prices and the U.S. economic downturn will reduce oil demand more than previously expected. U.S. gasoline builds over the last month have amplified these fears.

    “It seems like we have adequate supplies domestically and demand is still eroding, even though we’ve seen some considerable price declines,” said Tony Rosado, a broker at GA Global Markets.

    The declines are also coming in the absence of new supply threats in oil producing countries.

    The Iran-Israeli tension appears to have subsided as the Islamic Republic is due to return to the negotiating table in a week’s time. The talks are aimed at resolving the West’s concerns over Tehran’s nuclear program.

    Similarly, no actual damage to Nigerian oil production facilities and pipelines has been incurred, though threats persist.

    “Right now, the hot spots have gone from a boil down to a simmer and the market is sensitive to those things,” said Gene McGillian, analyst at Tradition Energy, a brokerage in Stamford, Conn.

    Crude options markets have recently seen heavy volumes at and below the $100 a barrel level, Rosado said, adding that this indicates “there is opinion that the market is going to head back towards $100.”

    Front-month August reformulated gasoline blendstock, or RBOB, recently traded 4.99 cents, or 1.6%, lower at $3.0095 a gallon. August heating oil fell 4.08 cents, or 1.1%, lower to $3.5263 a gallon.

    —By Tatyana Shumsky, Dow Jones Newswires

  35. 35
    zman Says:

    Tater – lots of useful links in the upper right hand part of this page and for weather junkies on the weather tab. Yes, I thank Al every morning for all he has done to make the site a reality, lol.

    Coal stocks looking really ready to run, with ACI and BTU earnings strong and out of the way and what I see as a near term rally in NG and coal prices.

  36. 36
    zman Says:

    “talks are aimed at resolving the West’s concerns over Tehran’s nuclear program.”

    thanks for making coffee shoot out of nose.

    Off topic: anybody got anything bad to say about Toshiba laptops. Looking at their latest 17″ desktop replacement with an Intel core duo 2 and 4 gigs of ram. This box runs my Thomson trading software and Office, a browser and that’s it. Any help from the techies around here much appreciated.

  37. 37
    1520sbroad Says:

    Z- re 27 – agree on marcellus. my in laws own a farm in PA and i can assure you that the terrain there is extremely challenging. Takeaway is a challenge too. Who has put out the most recent comments on the marcellus? RRC? ATLS?

    For whatever reason SWN seems to like to stay low profile which i think is a good thing. It served them well in the early days of the FS.

  38. 38
    tater Says:

    I thought the links were just for a quick peek at the babes on Trading Goddess!

  39. 39
    1520sbroad Says:

    one more SWN comment- i have heard their mgmt say that they will continue to remain low profile for fear of attracting the “Chesapeake fleet of jets.”

  40. 40
    zman Says:

    TRADE: Added to CHK $50 August Calls (CHKHJ) for $2.85.

  41. 41
    Fred Says:

    K – That NS is Bill Greehey’s, the ex-CEO of VLO, new company. NS has been very successful with Greehey at the helm. IMO he was responsible for VLO’s rise and likewise with NS. Greehey used to say “he could not forsee any event in which VLO wouldn’t make a strong profit”.
    I wish he was still there so we could see if he’s changed his tune with this bloody market.

  42. 42
    zman Says:

    Tater – she’s pretty savvy. As Maxwell Smart woulds say, I came this close to doing a radio show with her every Wednesday with Phil Davis as the numbers came out but it was just too hard to comment to the site, to the radio and trade at the same time.

    Greehey should not say things like that…sounds like the Toll Brothers and the only bubbles they saw were the ones in their champagne, that’s a quote from 2005.

    1520 – I’m sure RRC commented, I missed the call and will listen to it soon. I’m not sure laying low really works for someone like Aubrey, he has 4,000+ landmen working in the Haynesville alone, whether he talks about it on a call or not, people are going to notice. In the Fayetteville CHK is number 2 in terms of land and production and the only reason acreage prices didn’t soar as much as in other basins is the quality/ubiquity of the reserves and CHK’s level of interest. They weren’t first mover there and were too distracted to try and take a dominant position, much like in the Woodford, luckily for SWN and NFX as they continue to grow their positions. I’ll check on the range comments. Note XCO has been beaten down severely as well.

  43. 43
    el_vogel Says:

    Z – re: 36, I’d wait for HP’s EliteBook to come out. They are going to support 8GB of RAM in their laptops, as well as a longer-lasting battery to boot.

  44. 44
    bill Says:

    good timing chk starting to move… up!!

  45. 45
    zman Says:

    EL-V – thanks, will have a look, when does that one reach TD?

  46. 46
    VTZ Says:

    Z – I used to have a toshiba and it was the worst… that being said I didn’t purchase the top end model… was more mid to high end and. That was also 5 years ago but I still wouldn’t trust them.

  47. 47
    1520sbroad Says:

    i don’t think laying low is an option for Aubrey or CHK. I think the industry needs spokesmen and folks that are willing to stand in the spotlight.

    i looked at XCO some time ago and got distracted by HK. I will try and review marcellus stuff over the weekend.

  48. 48
    bill Says:

    can we, will we, have a recovery rally in chk.

    looks like it starting

  49. 49
    zman Says:

    Bill – please don’t judge me on a tick chart basis, lol. You’ll be disappointed every trade!

    Bill – can we get an update on your macro thoughts on dry bulks when you get a chance?

  50. 50
    zman Says:

    Three good things about today I see (excluding the obvious one that the stocks are not down 5 to 10%)

    1) the group is up with the broad market up.
    2) the group is up with oil down.
    3) Volumes are very high for this time of day and for a Friday and again with the group up.
    4) natural gas, like the group not taking as much of a cue on what to do from oil…I really think the move down is overdone and due a reversal with a test of $10 and, with a little help from the weather, a further test of Nicky’s $10.79.

    VTZ – thanks, am also looking at a Dell Studio 17. Better PCmarks, etc.

  51. 51
    ddaley Says:

    WLL moving

  52. 52
    el_vogel Says:

    not sure what you mean by TD, all I know is it’s coming out any day now.

    http://h10010.www1.hp.com/wwpc/us/en/sm/WF05a/321957-321957-64295-321838-89315-3688868.html

    I’ve got an Lenovo from a sale at Office Depot and despite the RAM upgrade it’s way too slow for what I need it for (software dev, virtual machines, etc). That said, I can live with it due to the RAM upgrade, otherwise I’d really be miserable.

    Anyone looking to buy a new laptop and want performance should always:

    – buy the fastest processor upgrade you can afford (those can get pricey). Try also to get a dual-core or better.

    – make sure the disk speed is 7200rpm minimum

    – the new minimum for RAM is 4Gb

    – 64 bits whenever you can. It’s compatible with 32 bits and the data throughput is orders of magnitude more powerful than what you’re accustomed to.

    Keep these things in mind and you’ll be pretty happy with your purchase.

  53. 53
    zman Says:

    From the Range conf call yesterday: some pretty high Marcellus IP’s noted, good for RRC, but also CHK who has just as large a position, SWN is in there, XCO, Atlas .

    And other high impact opportunity for Range is on Marcellus shale plane in the northern part of the Appalachian basin. Last week we announced that we have now 1.4 million acres of Marcellus Shale acreage. We believe our high graded acreage now stands at 850,000 acres which equates at 15 to 22 Tcfe of net un-risked reserve potential. Of that 10 to 15 Tcfe are located in the Southwest of the play with the remainder in the northeast. To date we have drilled and completed 22 horizontal Marcellus Shale wells and have an additional three horizontal wells waiting on completion.

    In yesterday’s release we announced our last seven horizontal completions which had an initial production rates that averaged 4.9 million per day. This compares to 4.1 million per day for the 10 wells prior to that. Range also recently announced these well should costs $3 million to $4 million in the development mode and we expect reserves to be 3 to 4 Bcfe per well. That generates finding and development cost of $0.90 to a $1.60 per Mcfe. We have also announced an agreement with MarkWest to develop the midstream infrastructure and we’ve also announced that to date we have secured firm capacity on the pipelines with $150 million per day and are currently negotiating for additional capacity.

    The whole transcript can be found here:

    http://seekingalpha.com/article/86942-range-resources-corporation-q2-2008-earnings-call-transcript?source=yahoo&page=-1

    Set it to single page at the top and the use a find for Marcellus…beats listening to the audio by a mile.

  54. 54
    bill Says:

    Im so underwater in chk every tick helps.

    I really like 2 stocks in the bulker area right now.

    My favorite is FREE. They report next week and they will have 30 % more operating days due to expansion and clearing up of operational problems. More operating days means higher profits and the analyst estimates are too low. The stock has been has high of 10.50 and trades at 6.00

    OCNF pays a 77c dividend and at 20 is cheap.

    I think the sector reports good earnings for q2. Looking out, world slow down and more ships means lower rates so I would be more cautious longer term

    Tankers are looking good again with fro and tnp good buys

  55. 55
    zman Says:

    EL-V – TD refers to total depth (when you finish drilling a well). Sorry, I refer to spud date as the start of something and TD as the end date or due date. My wife especially dislikes me saying the next baby reaches TD in mid December. Old habits.

    Thanks for your opinion, much obliged. Here’s a link to the Toshiba I’m looking at if you wouldn’t mind looking at the specs. Really want fast and 17″ screen.

    http://www.circuitcity.com/ssm/Toshiba-Satellite-P305-S8842-17-1-Widescreen-Laptop-P305S8842/sem/rpsm/oid/215101/catOid/-12963/rpem/ccd/productDetail.do#prodspecs

  56. 56
    zman Says:

    Bill – re CHK, that is why I reset the strikes. In other words took the hit on the high stuff (held some I couldn’t sell) but added the more near the money strikes. If you think it is going to bounce or move higher through earnings the NTM options will pay, the way out of the money ones won’t or at least not as well unless their is some kind of real confidence boost in the group. The higher strikes, if the stock does not achieve something near them, will lose all value post earnings as the implied volatility deflates. I know you know this but I thought I’d add it to better explain my rationale and for some of the new guys who joined in the last month or so.

  57. 57
    zman Says:

    Bill – thanks for FREE, will have a look.

    Saw some upgrades of the tanker sector the other day but was wondering if OPEC won’t trim volumes now as they can easily say, see, we told you the market was well supplied as they try to keep oil from really falling out of bed. The reduced traffic would seem to be bad for tanker rates.

  58. 58
    BossmanG Says:

    Z, for that laptop, harddrive is definately a big bottleneck, I wouldn’t recommend anything slower than 7200rpm…

    Personally, I used to be a fan of the old toshiba tecra line (5 years ago), but the recent models they have been coming out with are not of the same quality…I recently picked up a ibm thinkpad T61P (performance) and haven’t been happier since

  59. 59
    BossmanG Says:

    Also, quick note about that toshiba
    it has this processor: Intel Core 2 Duo T5750

    big flaw, is the 667MHz and 2MB L2 cache…any of the T7xxx or higher have 800MHZ and 4MB L2 cache…sounds like a small difference, but definately not

  60. 60
    arodeen Says:

    Z – Mind posting your current cash/option/stock percentage distribution? Also, if you’re expecting an industry bounce, how are you going to adjust the portfolio? Maybe novice questions, but I’m still resisting the urge to swing for the fence after all the recent strikeouts.

  61. 61
    zman Says:

    DD – I see it, the whole Bakken list is up 2 to 5% today, despite down $2 oil. That’s another positive sign.

  62. 62
    1520sbroad Says:

    Z- thanks for RRC link #53. i don’t know rrc very well but will ramp up the research.

  63. 63
    zman Says:

    Cash about 25%, stocks about 45%, rest options.

    Boss – thanks, sound like you are talking me out of the instant gratification of buying a new toy after the close.

  64. 64
    el_vogel Says:

    I took a quick look – 2 hard drives @ 200Gb is nice, but they both spin @ 5400 rpm. Not the biggest factor here, but keep in mind the more data you put on 400Gb the slower they’ll both go. The upshot is you can ‘straddle’ applications on both drives.

    At 17″ your laptop becomes less “lappy” and more “portable workstation” – if you’re not doing a lot of traveling and you can live with the wait, you should be fine. The first time you try opening this laptop on an airplane, unless you’re first class you’re going to be miserable. I had a classmate in business school a couple years back that had one of these – looked like a freakin’ tank.

    One last thing I’d double-check — it looks like it’s a 64-bit computer but they install 32-bit Vista on it? It’s not very clear in that regard, but that’s how it looks when I read it.

    I like this one in 32 bits, despite the price tag:
    http://www.jr.com/lenovo/pe/LEN_Y710_hy_1/
    This one is much closer to your price range:
    http://www.jr.com/hp/pe/HP_DV9922US/

    One last thought – SATA drives are easier to replace when you want to take the jump from 5400 to 7200 rpm. The ability to change things out in a laptop is key, especially since nobody selling laptops gets any of it right for under $2k. I’m sure that’s no accident.

    back to work…

  65. 65
    el_vogel Says:

    in other words Z, the toshiba you picked is okay but it’s going to be heavy. The HP up above is likely lighter – i didn’t check the specs. Caveat emptor!

  66. 66
    BossmanG Says:

    el, that HP is in a totally different class then that toshiba..just look at the processors:
    Intel® Core™ 2 Duo Processor T9600 (2.80 GHz, 6 MB L2 cache, 1066 MHz FSB)
    Intel® Core™ 2 Duo Processor T9400 (2.53 GHz, 6 MB L2 cache, 1066 MHz FSB)
    Intel® Core™ 2 Duo Processor P8600 (2.40 GHz, 3 MB L2 cache, 1066 MHz FSB)
    Intel® Core™ 2 Duo Processor P8400 (2.26 GHz, 3 MB L2 cache, 1066 MHz FSB)

    Anything above the T7xxx series is good, minimum you should go with is the 800mhz, 4mb cache…obviously 1066 and 6mb cache is much better…

  67. 67
    zman Says:

    Thanks for the huge lesson!

    One last question for you guys, I run on a gigabit lan, but with wireless G, some of these have G and not N, am I going to notice the drop if I unplug and go out on the deck? Or should I get one with N and upgrade the wireless capability of the router.

  68. 68
    zman Says:

    ZTRADE: Added EOG $115 August calls (EOGHC) for $2.85 into strength and as per comments in recent days that they will have good 2Q performance and potential catalytic news from their oil shale plays on their 2Q call next Tuesday. Continuing to hold the August $120 calls here as well.

  69. 69
    el_vogel Says:

    Boss, I was taking into consideration the 64 bit processing vs. a higher speed 32-bit machine. the toshiba compares much more favorably against the more expensive lenovo i posted, but I personally would rather have a slightly slower dual core 64-bit processor with slightly less cache.

    You are right about the cache though – more is better. 6MB is pretty good, and I’m not sure why they’d give 64 bits such a small cache. I still favor the 64 though.

    Re: routing and Lan, you’re always going to get some kind of drop when you unplug. I haven’t found a wireless N router I like yet, but that’s mainly from a lack of trying 🙂 I do everything wireless in my house (workstations, servers) and I’m still pretty satisfied with G.

  70. 70
    zman Says:

    Thanks EL V

    XLE / XLF look like a double helix. There’s your hedge for oil stocks going down. Looks to beat correlation to DUG.

  71. 71
    Sambone Says:

    Uncle Phil/Mr. Right

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

  72. 72
    ddaley Says:

    HK
    3,500,000 block volume at noon

  73. 73
    zman Says:

    QBIK falling through $4 now.

  74. 74
    BossmanG Says:

    Z,

    wireless G has max speed of 54MBps, range around 75′
    wireness N has max speed of 200Mbps, and range around 150′
    all depends on surroundings, line of site..

    gigabit is definately superior, I run gigabit at home, and just bought a N , but haven’t used wireless that much so I can’t comment on the speeds

    but i would keep your current router, wait until they finally “finalize” the specs on N, since it seems to be in “draft” still, and then theres other tech coming out with dual attenas, etc.

    el, I picked up a dlink DGL-4500, fastest processor, good for heavy loaded home networks (i.e. multiple computers, consoles, etc.)

  75. 75
    isleworth Says:

    Z – that Goldman Sachs report today on E&P has their CHK “bear case” at $64, and their base case at $91 – the stock is at $48.80. Pretty crazy, especially when they have it as a “Neutral”……makes no sense at all. Now I know why you’re no longer a Wall St analyst….haha.

    SEC is closely monitoring firms buys, sells, neutrals etc. Goldman take that stuff seriously….not much sense of humor there. CHK sure looks ripe for an upgrade there. BTW, their study is based on discounted cash flow analysis

    Wouldn’t be surprised to see sector upgrade of E&P and/or CHK by Goldman next week, in light of their own compelling research.

    Also this GS report is based on a $7 nat gas price 2009 to 2011.

  76. 76
    zman Says:

    Thanks much Isle. Yes, I feel pretty “neutral” about a $49 to $64 run in any stock worst case, don’t you LOL. And in the base case a near double? Who would want one of those?

    Here ya re big brother and ratings but come on man, act like ya gotta pair. Agreed re potential for an upgrade next week but maybe he’ll have to wait for his banker to give him the wink.

  77. 77
    Garyinhou Says:

    Hey Z.. just curious if you ever look at https://www.dmr.nd.gov/oilgas/dailyindex.asp for Bakken well stuff and if its worth anything.

    Thanks,

    Gary

  78. 78
    isleworth Says:

    Wink Wink 🙂

  79. 79
    zman Says:

    Gary – I do look at that site, awesome mapping ability so you can see where everyone is drilling but the well data is of course, months behind reality. Still, if someone hits to the north of the Neeson in a TFS well you can see who is drilling near offsets for impact.

  80. 80
    zman Says:

    Isle – at least you know no one tells me when to like a stock. The great wall of China is full of gaps you run a VLCC through 😉

  81. 81
    Garyinhou Says:

    cool, thanks

  82. 82
    Dman Says:

    Could it be that someone who is massively short the gassy names is trying to pound down the NG futures to spook the group? That would have worked 2 days ago.

  83. 83
    isleworth Says:

    Aubrey needs to include GS in his next debt/equity offering. Then the “winks” really work…..and give the analyst some real testicular fortitude……..that he obviously sorely needs.

  84. 84
    zman Says:

    A good friend of the blog just sent me an email entitled “this is absurd” and a TA snapshot of UNG. I could not agree more and will tell you that I’m strongly considering taking some near and longer term exposure to the gassy ETF. Probably wait for next week or at least for the close of NYMEX today to start dipping a toe in calls. I’ll go slow and add if it falls to its Thursday low. The weather has been very hot, and degree days were set to hit 90 for this week. That number comes out officially on Monday and we’ll be looking at a big surplus in degree days vs the year ago and normal weather. So look for a much smaller injection next week. Next week is expected to be hotter across a broad swath of the U.S. but not in the great lakes or new england . After that, the whole country heats up (10-15 day forecast) and short covering may set in as the heat combines with the threat of the next tropical system. Just thinking out loud.

  85. 85
    zman Says:

    Dman – I think we are in the changeover period from a falling stocks to rising stocks environment and your seeing the quick buck artists take their last day of profits out of the names. Looking at performance by names, much of what was up yesterday is down today and vice versa. This is the sideways waffling before, in my thinking, a recovery leg up. Not to the old highs but to an interim level that says “hey, ya know, HK isn’t going out of business after all”

  86. 86
    zman Says:

    Isle = LOL

  87. 87
    Sambone Says:

    SemGroup’s Stunning Collapse Continues To Ripple

    THE EVENT: Semgroup LP (SGRP.XX), the Tulsa, Okla., oil marketing company filed for Chapter 11 bankruptcy protection on July 22, in a stunning fall from grace for the 12th largest private company in the U.S.

    The company had taken out short positions, or bets that crude prices would fall, as a hedging strategy for oil it intended to move through a subsidiary’s pipelines and sell to refiners. When oil prices rose, SemGroup moved to “cover” its short positions by taking out equivalent long positions, or bets that oil prices would rise. Eventually, SemGroup was unable to put up collateral for its swelling bets and transferred its futures account to Barclays Capital on July 16, amassing total losses of $3.2 billion.

    TAINTED UNIT: Shares in one of SemGroup’s affiliates, publicly traded SemGroup Energy Partners LP (SGLP), lost two-thirds of their value over concerns that its parent was in trouble. They’ve since stabilized but questions linger over whether the unit can survive amid the bankruptcy spotlight. On Thursday, SemGroup Energy Partners received a letter from the Securities and Exchange Commission, which is conducting an inquiry into the company and its recent disclosures about parent SemGroup’s liquidity issues. SemGroup Energy also received grand jury subpoenas from the U.S. attorney’s office in Oklahoma City that require it to produce financial and other records.

    THE CEO: Until last week, former SemGroup chief executive Tom Kivisto was an outspoken community and business leader who over an eight-year period grew SemGroup L.P. into one of the largest privately held companies in the country. The one-time college basketball star backed charities and sporting events in Tulsa. He supported the arts and advocated economic development. Tulsans haven’t seen or heard from the executive since Terry Ronan took over the posts of president and chief executive officer of SemGroup L.P. Spurned creditors are now questioning the activities of a trading company owned by Kivisto.

    MARKET FALLOUT: One theory making the rounds in the crude oil market is that as SemGroup’s long positions snowballed, so did the oil rally. SemGroup’s rapid exit from the market removed a force for upward momentum when the market, under siege from negative U.S. economic indicators, needed it most. Oil prices are trading at $124.08 a barrel in New York Friday, compared with a closing level of $136.68 a week ago. There’s reason to believe that there’s still considerable market fallout to come also, particularly in the physical crude oil market where SemGroup was a substantial player. The company was a major gatherer and transporter of oil in Kansas, Oklahoma and Texas, and owns 7 million barrels of storage capacity at the key oil storage hub at Cushing, Okla.

    THE EXCHANGE: The New York Mercantile Exchange took the first step to facilitate the transfer of SemGroup LP’s oil futures trading portfolio to Barclays Capital in order to protect other members of the exchange, according to people familiar with the matter. The move suggests Nymex may have been concerned about potential ripple effects from SemGroup’s collapse on the broader futures market and key Nymex members. Account transfers are normally routine transactions conducted between two willing parties. But under Nymex bylaws, the exchange can also facilitate a transfer “for reasons including, but not limited to, the permanent disability of an account owner, the preservation of an orderly marketplace, or where such transfer is in the best interest of the Exchange.”

    WHAT THEY SAID:

    “The SemGroup Companies are in a severe liquidity crisis attributable to a host of factors, including, among others, recent margin calls of massive proportions related to large NYMEX and OTC futures and options positions and overall exposure to the recent extreme volatility in commodity prices. This has been compounded by the ever-tightening and volatile credit and financing markets.” — Terrence Ronan, SemGroup senior vice president for finance, in court papers.

    “When I heard about (SemGroup’s problems)

    I said this is an atomic bomb exploding, and the fallout from this deal will occur for weeks and weeks to come. It’s not going to be pretty. — Rick Navarro, director of crude oil supply at Central Kansas Crude LLC, an oil gathering company that worked exclusively with SemGroup.

    “In the three days surrounding that transfer (to Barclays), (crude futures) plunged $15.89…thus, with SemGroup removed from the market, crude oil has been free to fall. — Stephen Schork, editor of the Schork Report.

    “We have a strong future as an independent energy transportation company, and we’re ready to take on the challenge of expanding our third party throughput agreements.” — Kevin Foxx, CEO of SemGroup Energy Partners.

    —By Grainne McCarthy, Dow Jones Newswires;

  88. 88
    mahout Says:

    Z:
    Loved yesterday’s posts. Maybe cause confirmed and clarified my thinking. You Guys are so much smarter and know so much more than me, I’m enjoying it. Example of your smarts: keeping a good % in cash. I find myself almost fully invested and wish I wasn’t. But I do have some fine names with good fundamentals: XTO,CHK,APA,ECA,CEO,CLR,NFX,WLL,HK,RIG.

    Not smart enough to do options!
    Should change my name to “Simpleton”.
    Here’s how this “Simpleton” sees it:

    1.It’s over! The Bears are entering into exhaustion. I thot it would be at 120. It looks like it was anything below 125.

    2.Sanity will return with a trading range of 115 to 125, or some fairly narrow range with small daily movements revolving around 120 or so.

    3.We have a good chance at this cause S. Arabia will not stand for much below 120. And why should they? It’s about as high as they can expect without doing real damage to key economies. Also with Gas below 4 bucks Pol. pressure is greatly relieved. People will adjust slowly over time.

    4.Fundamentals will return to energy common stock valuations if we have such a range.

    5.But it could still all hit the fan if Israel attacks Iran and Iran is successful in closing the Straits of Hormuz for any significant period of time. I think this only 60 mile wide country of Israel will feel like they have no choice, they must attack Iran.
    And If they do who can tell what all the implcations for the energy patch in the U.S.will be?

    Is the Simpleton wrong?
    Critique it please.

  89. 89
    zman Says:

    Thanks Sam…Schork’s a smart guy, been bearish for awhile, including into the peak as I recall.

    mahout – thanks for rescuing me from tech support hell. Changing Thomson from an XP box to a Vista box going to be fun over the weekend but I needed to get back to work.

    The gang here is smart. No two ways about it. I learn many new things everyday and the site, aside from being my trading journal, is my way of surrounding myself smarter than myself which my dad and others have told me is a good idea.

    Don’t change your screen name, those are not bad thoughts. We’re in a spot in the market where details don’t matter much…but they will again. Here are my thoughts on your thoughts.

    1) its over. I’d say it is close to over for the equities but that the volatility needs to die down and the focus needs to return to results.

    a) For the exploration and production stocks this really has not yet occurred. Witness NFX with stellar results after a beating and still no respect. The moves up are ticked off traders saying enough is enough. Technicals still playing a bigger roll than they deserve (no offense Nicky and Tater). The Street is still hiding from the fall but starting to open the gun ports and more results from larger cap E&P names next week should start to provide some footing.

    b) for service names, the focus on the outlook has been there but the impact is muted and in many of the non big 3 names (SLB,HAL, BHI) the results and moreover the predictions for 2H08 and 2009 which are very strong have been met with yawns and “would you look at oil falling again, better dump em Cramer calls” . Service will track the broad market to an extent which is true according to history but pretty silly when you look at the 20% per annum growth expect 2008 – 2010 for many of the leaders and the mid to low teens forward PE multiples.

    In a nutshell, while I think we have gone way too far down I’d rather see a U shaped than V shaped bottom as the V will inspire quick profit taking and if you get that into a bad day for oil it could cause program selling in the energy complex and another down 5% day in the groups. And that would stink.

    2) – 5) in the next comment

  90. 90
    Sambone Says:

    2:44 pm EST

    Crude Falls Below $123/Bbl, Approaches 2-Month Low

    By TATYANA SHUMSKY
    Of DOW JONES NEWSWIRES

    NEW YORK — Nymex crude futures fell below $123 a barrel for the first time since June, as falling U.S. demand continued to weigh on the market.

    Light, sweet crude for September delivery recently traded $2.59, or 2.1%, lower at $122.90 on the New York Mercantile Exchange. Futures fell as low as $122.50 a barrel, less than $1 above the bottom hit on June 5. A drop below $121.61 would mark a two-month low. Brent crude on the ICE futures exchange traded $2.62 lower at $123.82.

    Futures had rebounded Thursday, but the market resumed a downward course begun on July 15. The $23 plunge over the last 10 days is based in concerns that high oil prices and the U.S. economic downturn will reduce oil demand more than previously expected. U.S. gasoline builds over the last month have amplified these fears.

    “It seems like we have adequate supplies domestically and demand is still eroding, even though we’ve seen some considerable price declines,” said Tony Rosado, a broker at GA Global Markets.

    The declines are also coming in the absence of new supply threats in oil producing countries.

    The Iran-Israeli tension appears to have subsided as the Islamic Republic is due to return to the negotiating table in a week’s time. The talks are aimed at resolving the West’s concerns over Tehran’s nuclear program.

    Similarly, no actual damage to Nigerian oil production facilities and pipelines has been incurred, though threats persist.

    “Right now, the hot spots have gone from a boil down to a simmer and the market is sensitive to those things,” said Gene McGillian, analyst at Tradition Energy, a brokerage in Stamford, Conn.

    Crude options markets have recently seen heavy volumes at and below the $100 a barrel level, Rosado said, adding that this indicates “there is opinion that the market is going to head back towards $100.”

    Front-month August reformulated gasoline blendstock, or RBOB, recently traded 4.99 cents, or 1.6%, lower at $3.0095 a gallon. August heating oil fell 4.08 cents, or 1.1%, lower to $3.5263 a gallon.

    —By Tatyana Shumsky, Dow Jones Newswires;

  91. 91
    zman Says:

    2) Agreed. I’ve been thinking that level is more healthy for the economy and the stocks for some time now and that the stocks, which did not trade in perfect tandem with oil on the upside would get hurt more than they should on the down side if it fell back. This happened but I played it all wrong. So I’m not that smart after all. But these market moves like this one has been are thankfully very infrequent.

    3) That’s a tough call. OPEC meets in September and you’ve got mixed signals on what they will do. If they cut production it could spur lower prices as that is yet another acknowledgement from them that demand is weak. It really will depend on on how much they cut it. Of course, the U.S. will argue that we are about to head into winter but with where distillate stock above average I don’t think they have much of an argument. I have to think more about this one but there odd noises coming out of the two loud mouths in the group, Iran and Venezuela of late…Iran saying no need to cut production and Venezuela saying oil should be about $100. This is only a few months after both said they saw oil going much higher. Maybe they are financially short.

    4) Absolutely agree. What you need for investors to get back on board is not higher oil but just not continually falling oil. Forward estimates don’t reflect the current strip, they are lower although the 3Q is probably in line, 2009 is lower than here so you could lose some ground in the commodity and still see E&P estimates go up. As long as they don’t go down and substantially down, capital budgets will remain as they currently are which is plenty high to keep the service guys in growing profit land.

    5) that ones impossible to call and not really investable from an options standpoint. I think that if the Iranians continue to stall and lie and backtrack that eventually the Israelis target some key facilities. It would be impossible to get em all but maybe they set them back a few years. I think the retaliatory position of Iran has been demonstrated as dangerous if not particularly accurate. Depends on how bad they want to see missile come back on Tel Aviv…but I don’t live in Israel and my contacts there tell me its definitely a possibility. That’s a hard life.

  92. 92
    Hoss Says:

    Z, Sam

    Schork on Bloomberg May 21, 2008

    Click on the “Related Video and Graphics” link to your right to watch the video.

    I saw this when it aired and never offered his opinion up for comment. At the 3 minute mark he just about calls the SemGroup event in everything but name – uncanny if your looking at it from the outside, but “no surprise” to the insiders.

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a3E0IXQuHJu4

  93. 93
    Dman Says:

    Iran watch:

    You would *never* see me suggesting that the media waits for the government to tell them what to do. So it must be a coincidence that shortly after the Bush administration starts making diplomatic moves in the general direction of Tehran, NBC decides that it is OK for them to fly to that city and interview Ahmadinejad:

    http://thepage.time.com/2008/07/25/nbc-news-sits-down-with-ahmadinejad-monday/

    My prediction: The A-man mistakes his audience for religious fundamentalists and couches his dialogue in such terms, thus scaring the *&#$ out of everybody (again). Reminder: this is not actually the guy who has his finger on the button of …you know … whatever it is that they got over there.

  94. 94
    Sambone Says:

    H – Just ask GS. GS reminds me of the “Matrix”. Not all is what it seems.

  95. 95
    1520sbroad Says:

    Just saw this come across – may explain the late day re-swoon of CHK and RRC.

    Shale-Gas Producers Face Regulatory Obstacles In Appalachia

    Jul 25, 2008 15:22:11 (ET)

    NEW YORK (Dow Jones)–Energy companies are flocking to Appalachia in droves, snapping up acreage and drilling test wells in search of natural-gas deposits buried deep in ancient rock formations.

    But as concerns about the environmental impact of such drilling activity grow, gas producers could face mounting costs as they attempt to navigate tightening regulations.

    “It’s a big concern as to how quickly we can ramp up production,” said Randy Waller, chief compliance officer for Texas Range Resources Corp. (RRC), Fort Worth, Texas. “The process is hindered by the weakest link, whether that’s a water-source permit or another type of permit.”

    New York Gov. David Paterson signed a bill Wednesday that fast-tracks horizontal natural-gas drilling in the state’s Marcellus Shale, a gas reservoir that also extends into Ohio, West Virginia and Pennsylvania. But in a concession to environmentalists, the governor directed the state’s Department of Environmental Conservation to prepare a document examining potential environmental impacts associated with the drilling activity. The DEC will also review staff resources and regulatory issues that could be affected by shale-gas drilling.

    Over the past few years, natural-gas companies including Range Resources, Chesapeake Energy (CHK), and EOG Resources Inc. (EOG) have bought up substantial acreage in the Marcellus Shale. Gas plays like Marcellus require more expensive drilling techniques than conventional gas deposits do, but rising hydrocarbon prices have made such ventures economically feasible.

    Gas drillers in the Marcellus Shale are already facing higher regulatory hurdles in Pennsylvania, which now has stricter requirements dealing with water use and other drilling-related environmental concerns. Such mandates are creating headaches for gas producers and could ultimately eat into profits if more stringent permitting requirements result in significant production delays.

    Although shale drilling has been conducted for years in producer-friendly states like Texas, growing interest in the Marcellus Shale has brought such activity to Appalachia for the first time, forcing policy makers to re-evaluate laws and regulations that were designed to address conventional drilling methods.

    Geologists have said the Marcellus Shale could contain enough natural gas to meet U.S. demand for two years. Most of the Marcellus leasing activity has focused on Pennsylvania, which is thought to have the greatest output potential.

    But environmentalists say that shale drilling can contaminate drinking water and create other environmental hazards. A 2004 report by Argonne National Laboratory said studies indicate that water discharged as a byproduct of gas drilling is 10 times more toxic than water discharged from oil platforms.

    Shale formations like Marcellus require a drilling technique known as hydraulic fracturing, or “hydrofracking,” which involves fracturing rock by injecting a mixture of water, sand and chemicals at high pressure into deep wells. Environmentalists have argued that the chemicals used in hydrofracking are toxic and could leach into groundwater supplies.

    A report released Tuesday by nonprofit news service ProPublica and public radio station WNYC cited instances of drinking-water contamination in states where hydraulic fracturing was conducted. Environmental permitting issues are likely to slow the pace of Marcellus Shale development, making it more costly for gas producers to drill there, said Manuj Nikhanj, an analyst with Ross Smith Energy Group, a Calgary-based research firm. Producers looking to tap into the Marcellus Shale in Pennsylvania have to obtain permits related to water use and disposal, endangered-species protection and earth disturbances.

    Regulatory requirements “are definitely going to slow [development] down,” Nikhanj said.

    Groundwater contamination from horizontal wells is unlikely because such wells are 4,000 to 8,000 feet deep, well below where most groundwater reservoirs are found, Nikhanj said. The more pressing issue is how natural-gas producers discharge the water after it is used for hydrofracking, he said.

    “The big concern is…where is the water being taken from to [fracture] Marcellus wells and how is the recovered frac fluid and brine being treated if the water is being discharged back into the river systems?” he said.

    Over the past year, Pennsylvania has updated the state’s drilling regulations to address such issues. Producers must disclose where waste water will be disposed, and specific facilities must be used to treat recovered frac fluid from the Marcellus.

    Producers also have to disclose how much water they will use for drilling and where they will obtain it. Separate permits are needed to withdraw water from certain sources.

    Such requirements could create significant delays for producers looking to develop the Marcellus Shale. Pennsylvania’s approved waste-water treatment facilities have limited capacity, which could create bottlenecks for producers. Some regulatory agencies, such as the Susquehanna River Basin Authority in central Pennsylvania, meet only a few times a year.

    In some cases, Range Resources has begun drilling wells in the Marcellus Shale, only to halt drilling activity to evaluate changing regulations, Waller said.

    “The biggest struggle we’re having right now is dealing with regulations that are developing in real time,” he said.

    But because natural-gas production could stem the tide of rising fuel prices and generate significant revenues for Marcellus Shale states, policy makers are walking the fence between allowing drilling and addressing environmental concerns.

    “We’ll see a balance between acknowledging environmental concerns and feeding what is an energy-hungry country,” said Dan McSpirit, an analyst with BMO Capital Markets in Toronto.

    That’s what New York policy makers are aiming for as they examine existing drilling regulations in the state.

    The law signed Wednesday “appropriately addresses the issue of how oil and gas wells will be spaced without compromising the environmental oversight,” said Pete Grannis, the DEC commissioner, in a statement. “Let it be clear: DEC will be vigilant in ensuring environmental safeguards.”

    -By Christine Buurma, Dow Jones Newswires; 201-938-2061; christine.buurma@dowjones.com

  96. 96
    zman Says:

    1520, saw that and it may be the reason but I think more likely we are in a weak gets weaker, strong gets weaker dull Friday afternoon market. But it could be.

  97. 97
    zman Says:

    MEND getting busier.

    http://www.upstreamonline.com/live/article159900.ece

  98. 98
    BirdsofpreyRcool Says:

    z – i was wrong about the origin of XTO’s recent Barnett purchase. I now have no idea who they bought it from or why they would pay so much. Have you heard any follow up there? i was surprised that analysts on the conf call didn’t press for more details. For $62,000/acre, maybe XTO thinks they will hit gold, as well as gas…

  99. 99
    1520sbroad Says:

    #96 – true – it is 3:30 on friday in late July.

  100. 100
    zman Says:

    Bird – nope and agree there was a stunning lack of metric examination regarding the purchase. They seem to have waved away the questions by saying they see 3P at 4x the undisclosed 1P reserves. Very odd.

    RIG count up 29

    NG up 21 to a new 20+ year high
    Oil directed rigs up 8 to a 10+ yr high

    all good for NBR and the related service names: slb, hal, wft.

  101. 101
    zman Says:

    1520 – yes, and many energy folks long ago cried themselves to sleep. Maybe the last few minutes of trading will catch their eye as we seem to be putting a last minute rally on in the XLE.

  102. 102
    antrimshale74 Says:

    Nice strong close to end this awful week.

  103. 103
    Hoss Says:

    Sam,

    There is no spoon – only Paulson.

    This must be what the CFTC meant by Bang’n the Close?

  104. 104
    Dman Says:

    Z – #97 looks like they switched back to easier targets

    I wonder if I would get any support if I suggested cutting the trading day to, say, a 1 hour morning session and a 1 hour afternoon session. Would solve the “nothing happens in the middle” problem.

    Gassy names and NG going opposite ways in the final sprint…

  105. 105
    zman Says:

    maddogtwentytwentythirty! Let’s have a better one next week.

  106. 106
    arodeen Says:

    Nicky/Tater – what are your thoughts on the CHK weekly and monthly charts?

    Option Activity Alert: Bulls Bet on Chesapeake Energy Corporation Ahead of Earnings Thanks!

  107. 107
    zman Says:

    Aro –

    did you see the sub headline in the story?

    Optimism is flooding the Street ahead of this energy firm’s second-quarter report

    are they insane? Maybe from a call option new open interest perspective but I would have phrased it differently.

  108. 108
    arodeen Says:

    No joke. We’ve been drowning, but not in optimism.

  109. 109
    arodeen Says:

    From a novice perspective it looks like they’re (CHK) hitting some very long term support levels.

  110. 110
    tater Says:

    arodeen,

    I updated the charts and opinions that I have for a couple of stocks. (They are my opinions, not arguments, nothing more). CHK weekly and daily are on first page.

    Just remember that when you look at charts, try not to see only what you want to see. Take the other side of the trade as well (because somebody surely is).

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

  111. 111
    zman Says:

    Thanks Tater, good comments in your link, agree needs time to base but still want to be in for news next week.

  112. 112
    купить Says:

    купить

  113. 113
    eastbourne Says:

    eastbourne

    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » TGIF

  114. 114
    lotto junkie Says:

    lotto junkie

  115. 115
    such a good point Says:

    such a good point

    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » TGIF

  116. 116
    nulled plugins Says:

    nulled plugins

    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » TGIF

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