01
Aug

TGIF

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Exxon's Capital Spending for E&P projects during the second quarter: $7 billion dollars

Exxon's Production Growth during the second quarter: Negative Eight Percent

Exxon's Cash on Hand at the end of the second quarter: $39 billion dollars

Enterprise Value of Chesapeake Energy at yesterday's close: $40 billion dollars

Doing a largely cash and therefore accretive deal that allows your company to grow via environmentally friendly natural gas for the foreseeable future and get Congress off your back: PRICELESS.

 

Housekeeping Watch: The print this post at the top of each post is fixed. If you have further problems with it let me know.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Earnings Watch
  4. Stocks We Care About Today
  5. Odds & Ends

Holdings Watch:

No changes yesterday.

Commodity Watch:

Natural gas sank $0.13 to close at $9.12 after the EIA announced injections to gas storage of 65 Bcf. The Street was looking for an injection of 71 Bcf: I was looking for 75. Next week should see a much smaller injection as it has been a lot hotter this week. I’d also point out that the producing region (which is basically Texas and the surrounding states saw no injection this past week…it was hot down here. Early this morning gas is trading off another dime with further weakness in crude.

Click here for last night's gas storage review and supply side slideshow.

Crude Oil resumed its decline yesterday closing off $2.69 at $124.08 as fears of weak economy forced to the surface by a downward revision to GDP. This morning oil is trading off slightly as fear and loathing about the U.S. economy lead traders to the conclusion that oil demand is worsening.

  • Nigeria Watch: Monday's MEND attack on the Nembe Creek pipeline shut in 150,000 bopd, not the 40,000 bopd reported by Reuters yesterday according to NNPC, the state oil company. This makes more sense as Shell declared force majeure through September for volumes from its Bonny Light terminal, which is partially fed by that pipeline.
  • Iran Watch #1: Nuclear Deadline Approaching. Iran must decide to freeze expansion of its nuclear program this weekend or face further sanctions. Iran has denied it knows of any such deadline.
  • Iran Watch #2: Statoil Pulls Out Of New Contract Bids After Pressure From the U.S. & Europe. Norwegian (STO) says it will make no new investments in Iran and is planning to transfer some of its current operations to the Iranian NOC.
  • Dumb Idea Watch: Apparently the windfall profits tax fever is contagious and can travel across the Atlantic. UK Finance Minister Alistair Darling proposes a tax on energy companies to help offset families higher energy and food bills. Darling hails from the same region as Robin Hood who was also a closet socialist too.

Earnings Watch:

In A Nutshell. Chesapeake reported better than expected top and bottom line results with production exceeding the top end of CHK’s guidance and CFPS exceeding the top end of the Street’s forecast range. Costs were in line with guidance and reserve metrics were again better than expected.  They hit the high points in the main basins and released a little more Haynesville data including the first production projections but we should get a lot more color on the call. They did not talk about their oil shale activities but oil production continues to creep up…hopefully more color on the call there as well but it looks like Aubrey will continue to play that one close to the vest until his acreage is place or he’s outed by a competitor.

 

The 2Q08 Numbers: 

  • EPS of $0.89 (ex items) vs $0.88 expected
  • CFPS of $2.77 vs $2.37 expected, beating the top of the range of $1.94 to $2.68
  • 2Q08 Production of 2.328 Bcfepd (still 92% gas), vs guidance of 2.26 to 2.29 Bcfepd. On an apples to apples basis (netting out the impact of volumetric production payments) this is up 5% sequentially and up 29% from 2Q07.

Click here to read last night's pre call note.

Conference Call: Today, 9 EST

Stuff We Care About Today:

  • Land drillers (PTEN) and (UDRL) both report that rising costs are hurting their numbers. They cited rising costs for materials and labor for depressed margins. Last week (NBR)'s comments reflected a more positive tone.

 

Odds & Ends

Analyst Watch: BMO cuts (TSO) price targets from $25 to $18.

 

181 Responses to “TGIF”

  1. 1
    Sambone Says:

    Your early today.

  2. 2
    Sambone Says:

    7:29 am EST

    Crude Slides On Demand Fears; Eyes US Data

    By Lananh Nguyen
    Dow Jones Newswires

    LONDON — Crude oil futures were trading down nearly $1 a barrel in London Friday as slackening demand continued to weigh on prices.

    “I just think people have awoken to the climate we are in (of) less demand,” said an energy broker in London.

    At 1118 GMT, the front-month September Brent contract on London’s ICE futures exchange was down $0.85 at $123.13 a barrel.

    The front-month September contract on the New York Mercantile Exchange was trading $0.87 lower at $123.21 a barrel.

    The ICE’s gasoil contract for August delivery was down $11.50 at $1,116.25 a metric ton, while Nymex gasoline for September delivery was down 253 points at 304.56 cents a gallon.

    Crude prices lost ground Friday as the weak U.S. macroeconomic picture continued to dampen market sentiment. Attention would likely remain fixed on the U.S. ahead of the release of key jobs data at 1230 GMT.

    “Investors will be paying close attention to July non-farm payroll figures for more guidance on the state of the U.S. economy,” said Andrey Kryuchenkov at Sucden research in London. “Market participants remain focused on diminishing demand for energy, even though market fundamentals still look solid in the longer run.”

    Prices resumed their selloff after a short-lived rebound Wednesday, spurring expectations a decline to $120 a barrel would occur soon.

    “(It) looks like we are still in of phase moving lower and trying to find a floor in the short-term,” said Simon Wardell, an analyst at Global Insight in London.

    Declining prices could also prompt investors to take profits before the market falls further, said Olivier Jakob, managing director of Swiss-based consultancy Petromatrix.

    “It is difficult to find the catalyst to justify a move to new highs, and following the dismal commodity performance during July the risk is increasing to have passive retail investors retrieving what is left of their year to date commodity returns,” said Jakob.

    Technical charts also signaled a “turning trend” with a test of the $120 a barrel level in the sessions ahead, said technical analysts at Barclays Capital in London.

    Geopolitical concerns continued to linger in the background, but ongoing tensions over Iran’s nuclear program and threats to Nigerian oil production weren’t enough to stem the drop in prices.

    Iran was given a two-week deadline expiring Saturday to give a final answer to a package of incentives offered by the five permanent U.N. Security Council members plus Germany aimed at persuading it to freeze its sensitive nuclear activities.

    “We’ll await what U.N. hierarchy have to say on Iran, we watch Nigeria continue to deteriorate further into anarchy but also observe a continuing erosion of end user demand,” said Rob Laughlin, a broker at MF Global in London.

    In other news, Organization of Petroleum Exporting Countries production reached its highest level so far this year in July on increased barrels from Saudi Arabia and Iraq and a recovery in Nigerian output, a Dow Jones Newswires survey released Friday said.

    The 13 members of OPEC pumped 32.675 million barrels a day on average last month, up 1.1%, or 366,000 barrels, from 32.309 million barrels a day in June.

    —By Lananh Nguyen, Dow Jones Newswires

  3. 3
    zman Says:

    Oil reacting poorly to the jobs data but the market seems to like it. One minute the market seems to want rate hikes, the next it doesn’t. The Fed’s in a pretty tight spot as now we are seeing more wage inflation and they will need to act soon to curb inflation despite the weak growth outlook.

    http://www.marketwatch.com/news/story/unemployment-rate-rises-57-4-year-high/story.aspx?guid=%7B752CAB21%2DA428%2D4226%2DA503%2DB3EE1D0014A7%7D&dist=hplatest

  4. 4
    jazzkool Says:

    Cramer called HK a buy last night and it is down .82. Even Cramer can’t stop the slide. Israel or Iran needs to do some sabre rattling pretty quick or all my August calls are toast.

    Jazz

  5. 5
    zman Says:

    I saw him say that Jazz. He called them a wildcatter which is a wrongful use of that term given what they do and his recommendation was pretty tepid. Recall that he first said to buy this at $46 when he “discovered” it so he’s not going to have a lot of swing there.

    CHK call starting.

    Oil putting on a rally all of the sudden but I don’t see any smoke.

  6. 6
    Nicky Says:

    Morning all. Energy still looks like another leg up is needed – an ABC correction of the decline is playing out and we are currently in B down. If this count is right I expect to see a good move higher for C.

  7. 7
    zman Says:

    CHK saying their prepared remarks will last a bit longer than useful. Here goes.

  8. 8
    zman Says:

    CHK CC Notes #1

    Heart of the Barnett is only 1.2 mm acres,

    2.45 Bcfe for 100 acres increased to 2.65 Bcfe for 55 acres.

    Think ultimately produce 60 Tcf of gas from mostly Johnson to Tarrent county. That will take 50 years to produce and the 1 yr decline rate is 65%.

  9. 9
    Sambone Says:

    Boo ya!

    http://www.cnbc.com/id/25932873

  10. 10
    zman Says:

    CHK CC Notes #2

    Comment of Recent Negative Comments on the Haynesville by a friend and competitor (that would be XTO):

    CHK saw this coming, others did not. They were lucky to get their hands on a Haynseville.

    300 days on the first well on 9/64ths choke with 5 stage frac.

    1 well has a mechanical well

    3 on 4 months 14 or 16/64 chokes 3 mm/d

    the next wells on 2 months

    last 2 wells are making combined 20 mm/d

    the last well is the best shale well they have drilled in over 2,000 wells . This is the only one with an 8 stage frac.

  11. 11
    zman Says:

    CHK Notes CC #3

    All wells will be now drilled with 8 stage fracs. See all future IP’s likely above 10 MM/d.

    Superior gas price: prices were $1.50 higher for Haynesville than Barnett last month.

    He is now slamming others for doubting his reserves on the play.

    180 Bcf gas in place per section
    220 feet across 3 mm acres

    They think they will recover 52 Bcf/sq mile, or 29% recover with 8 wells per section.

    3 mm acres = 4700 sq miles = 245 Tcfe of recoverable reserves. Says the science reinforced by well data to date makes very confidence.

  12. 12
    zman Says:

    CHK CC Notes #4

    Regarding long term natural gas prices:

    Constraints to growth, will require decades to full develop, many companies will develop slowly.

    Shale is 11,500 feet on average, 1,000 hp with top drive so rig availability is an issue.

    For the next few years, not more than 1.5 Bcfgpd capaicty, much of which is there’s. Don’t see it adding more than 1.5 Bcfgpd within 3 years.

    Then consider declines from Gomex and increased electricity demand think gas prices will settle in a range of $9 to $11.

    40% of current US gas prices comes from wells placed onstream in the last 2 years.

  13. 13
    zman Says:

    CHK Notes #5

    Production growth has been extraordinary at 4 Bcfgpd YoY. Says half is Rockies Express pipeline and Independence Hub. Sees organic growth around 2 Bcfgpd next year.

  14. 14
    zman Says:

    CHK CC Notes #6:

    VPPs – monetizing low decline, mature assets for about double what the market is valuing them at ($3 vs $6 for the VPP)

    Reinvest it for $2 F&D and sell it for $6.

    See VPPs of 1 to 2 billion next year, another half billion this year.

  15. 15
    zman Says:

    CHK CC Notes #7

    Deals coming in the Fayetteville and Marcellus and in the West Tx shale play.

    Says they have drilled some excellent wells in West Texas.

  16. 16
    kaman Says:

    Mornin Z-
    You missed your calling as a political commenatator, keep up the biting wit.

  17. 17
    zman Says:

    CHK CC Notes #8

    Barnett
    775 mm/d gross ; 500 mm/d net
    see 700 wells per year for quite some time

    seeing 3.8 Bcfe per well in their 2008 drilling vs the 2.65 Bcfe they have come to expect.

    Fayetteville
    Drilling best wells ever
    new 3D, longer laterals
    150 mm/d net, 17 rigs
    plan to increase to 25 rigs in 2009

    Marcellus wells in WV, 2 wells producing 7 mm/d combined EUR of 11 Bcfe
    topographic, regulatory, water issues will keep this play down until at least 2011.
    Their leases here are held by production and the rest are 10 year leases

    Ha, ha, thanks K, will do.

  18. 18
    zman Says:

    CHK CC Notes #9

    Hedge impact will completely reverse and benefit the current quarter if gas prices stay down here.

  19. 19
    Bleemus Says:

    EOG EOG Resources upgraded to Neutral at Credit Suisse- tgt $116 (101.77 +1.24)

    Credit Suisse upgrades EOG to Neutral from Underperform saying and cuts their tgt to $116 from $124 to reflect an improved valuation profile (31% discount to $145 NAV and 4.0x 2009 EBITDA) following a 19% decline in the stock since the Feb. 28 analyst meeting vs. a +12% gain for the E&Ps on average and a -7% decline in the S&P 500. The firm says EOG’s optimistic valuation and high spending versus generated cash flow had previously been a concern to us. However, recent underperformance makes the valuation look more reasonable and higher commodity prices have turned the EOG model free cash positive in 2008.

  20. 20
    zman Says:

    The only quote Aubrey left out of his prepared statements.

    “I find your lack of faith disturbing”

  21. 21
    zman Says:

    Added to my common position in CHK.

  22. 22
    apbd Says:

    No good deed goes unpunished.
    apbd

  23. 23
    Nicky Says:

    Wave C looks to be underway for natural gas…

  24. 24
    zman Says:

    CHK Q&A Starting

    Added at $49.84 for the record

  25. 25
    zman Says:

    CHK Q&A Note #1

    They will not be running out of tubulars

    Gas thoughts: sees 2 to 2.5 Bcfgpd production growth

    Sees the shale and other resource plays are profitable at $8 gas. Conventional plays are at an increasing cost disadvantage…they are always inventing themselves going after these smaller targets and therefore can’t get their costs down and he thinks conventional drilling will come down.

    Big basis differential in the mid cont, now 1.50 so those guys are reaping less. I watch this but not as closely as I should and it is a good point.

  26. 26
    zman Says:

    CHK Q&A Note #2

    How does the market unlock your hidden value?

    1) stable gas prices
    2) negative comments on HS need to get past those. “Not very smart to be doggin’ that play”

    We are going to increase our reserves by at least half a Tcfe every quarter and that’s after VPPs and other monetizations which adds 2.5 to 4.0 billion dollars to asset values.

  27. 27
    VTZ Says:

    Nicky,
    Do you think a C rally will last more than a day?

  28. 28
    zman Says:

    CHK Q&A Note #3

    addendum to 26. They are going to see decline F&D costs which will be the opposite of most of their competitors due to their first mover action in these plays.

    West Texas Update:
    completion breakthroughs in vertical wells that are commercial.
    Horizontals are quite good as well
    They have cracked the code there enough to bring a partner in,
    They have > 1 mm acres, lots of play types in the W. Tx Barnett and Woodford.
    They continue to drive costs down, mentioned bringing in a “big boy” to develop it.

  29. 29
    zman Says:

    CHK Q&A #4

    Oil Shale Play Update:

    5 uncoventional oil plays – 4 are shale
    1 of the five was producing in March

    The non-shale – WEHLU – w. Ok. old abandoned oil play with new horizontals, working well.

    They will have the other shales tested by year end.

  30. 30
    jsaun14 Says:

    On the radio this am:

    Here in DFW we’ve had 3 times as many days over 100 degrees as last year and August just got here. Next week have heat indexes of 107 to 110 across the board.

  31. 31
    zman Says:

    CHK Q&A #5

    All of the major pipeline companies have been to see CHK in the last 30 days to see how they can add new takeaway capacity from the Haynesville.

    Says his peak thoughts on the Barnett is a little higher than EOG’s thoughts of 5 Bcfgpd by mid 2009.

    CHK fighting higher now.

  32. 32
    zman Says:

    CHK Q&A #6

    Demand Thoughts From Aubrey:

    Regarding demand destruction in the face of recent high prices:

    He thinks they saw 2 Bcfgpd go away early in the month and come back as prices fell.

    On the supply side: compressors struggle in hot weather…thinks August could show 2 to 3% lower production for the U.S. due to summer heat. Thinks we will see higher demand and the supply struggle give us a series of bullish NG weekly reports.

    CNG – US consumes 10 mm boepd in the form of gas. For every 1% of the car and truck fleet that gets converted to CNG it would use 225 Bcf.

  33. 33
    zman Says:

    CHK Q&A #7

    No interest in international plays, either in Canada or Europe. Thinks of it like he thinks of the Rockies. Great place to look for gas, hard to make money.

    Oil up $1.75 now, NG up 13 cents. Hmmm

  34. 34
    zman Says:

    CHK Q&A #8

    North Gas Supply Scenario. The last 3 years you get a gas price collapse one month prior to the previous year. 2006 was oct, 2007 sept, 2008 Aug.

    Everytime we go through one of these draw downs in price, the floor is higher than the last one since coal and other commodities are higher.

    Joe Alman question:

    see 2 Bcfgpd in Barnett production (gross) by 2012 so they will be taking market share from the Basin.

    Kenworth and Peterbuilt are coming out with CNG powered cabs by year end.

  35. 35
    zman Says:

    CHK Q&A #9

    NG at current prices costs 1/2 of gasoline for moving cars and trucks. He’s working with Congress to make it happen. Sees a real sense of national urgency.

    “made in America, clean, and half the price of gasoline”

  36. 36
    jsaun14 Says:

    Will those NG powered tractors make Boone’s CLNE a possible play too?

  37. 37
    VTZ Says:

    Someone decided HAL was cheap like borscht

  38. 38
    zman Says:

    JS – yes.

    HAL is cheaper than kimche

  39. 39
    BossmanG Says:

    VTZ, hahah great comment
    I like home made borscht but i’m eastern european

  40. 40
    zman Says:

    JS – CLNE probably moves well on this. Good thought!

  41. 41
    zman Says:

    Hey, we make migas with corrizo around these parts but corn prices have made that expensive, lol.

  42. 42
    zman Says:

    CHK Q&A #10

    CHK – these monetizations will get them out of the equity issuance business. Said they had an enormous mismatch this year due to later close of the VPPs vs the leasing ramp in 3 plays. GOING FORWARD, WE ARE MOVING INTO GENERATING CASH FROM THESE CAPITAL REDEPLOYMENTS. So there’s his sort of pledge not to sell more shares.

  43. 43
    zman Says:

    Way to think about gasoline versus natural gas for fuel.

    $4 gasoline at the pump = $32 per MMBTU. With natural gas at $9.3. Makes pretty good sense. I can see a WWII style build out of CNG infrastructure starting with the big transportation companies who are tired of getting killed by diesel.

  44. 44
    Nicky Says:

    Hi V – I am looking at a couple of different possibilities for nat gas – either we are in a wave 4 rally in which case C should end around 9.50 and likely only be of short duration ie a day or so or we are in a wave 2 corrrection which will be much deeper and could last weeks.

  45. 45
    zman Says:

    What got into oil while I’ve been on this call? Up almost $4 now. I thought this was the end of the world as we know it.

  46. 46
    zman Says:

    Headline on the tape says CHK looking at investing in LNG export facilities. I don’t take that comment very seriously. I didn’t hear it this time but may have been distracted. They certainly did not say much about it compared to the idea of getting CNG, compressed natural gas, rolled out. Did anyone here the LNG comment.

  47. 47
    zman Says:

    nevermind, he said he was looking at putting it on a boat. I think that’s more bravado about how much they have found and less about reality, unless of course, prices don’t equalize between the US and international markets.

  48. 48
    Sambone Says:

    Z – Here ya go

    http://www.bloomberg.com/apps/news?pid=20601087&sid=avrBXuuDL_Kw&refer=home

  49. 49
    zman Says:

    CHK Q&A #11

    XCO looking for a JV in the H.S.

    the big deals are all done there.

    Thanks Sam. War, what is it good for?

  50. 50
    Nicky Says:

    C wave rally Z – the charts foretold it!

  51. 51
    zman Says:

    Right Nicky. Apparently the Israelis read charts and know when to nudge them with a press release.

  52. 52
    zman Says:

    Cost to covert a car. $12 to $15K on non assembly line. $5000 tax credit.

    Trick is to get them to come off the line.

    1/3 of cars in Argentina are CNG.

    GM makes 10 car models around the world that are CNG.

  53. 53
    Sambone Says:

    Z – My bet is that Israel will attack by Jan 20, US fleet in the pond will attempt to keep the Strait open, and then the fur will fly. $200 a barrel.

  54. 54
    zman Says:

    Sam – they truly see it as a possible second Holocaust so I don’t doubt what you say.

  55. 55
    zman Says:

    CHK back to even.

  56. 56
    zman Says:

    CHK Q&A #12

    No rig avaiability problems for them, they have the 5th or 6th largest rig up facility in the U.S.

    Call over. Stock Flat. Analysts and fund managers on the Q&A were flattering, great quarter etc, etc, etc.

  57. 57
    kyleandy Says:

    CHK what an upbeat call. are ford and gm going to bankrupt themselves before they see the light??

  58. 58
    sane Says:

    kyleandy,

    I think the US in general will bankrupt itself before it sees the light

  59. 59
    Nicky Says:

    Okay broader market is a difficult call -volume is lower today which is more bullish than bearish. However if we take out 1247 today (and its a big if right now) then it looks likely that the last wave up was a truncated C and we then drop below the lows at 1200. I would say if they take oil on a run ahead of tomorrow then this is could happen. Resistance now at 1261 – 63.

  60. 60
    zman Says:

    Kyle – I find it amazing they haven’t pushed for it here. Must not think the market can bear the extra cost but if it can in Argentina and people are buying hyrids, which cost more, then they must be just slow, as usual.

  61. 61
    Nicky Says:

    Z – TA is telling you which way the market is going to go – not the Israelis!

  62. 62
    zman Says:

    Nicky – nice call by the way on the whole Iran / Isreal will prop the oil market going into the weekend. Glad you were right !

  63. 63
    zman Says:

    Well its not the fundamentals

  64. 64
    T. J. Says:

    Wondering where pipeline are being built and where new ones are planned. Impressive site…http://www.ferc.gov/industries/gas/indus-act/pipelines.asp

  65. 65
    Sambone Says:

    10:47 am EST

    Hard Hit Oil Market Stages Short-Covering Rally

    By David Bird
    Of DOW JONES NEWSWIRES

    NEW YORK — Oil prices, hit hard in July by fears of slowing demand in the world’s biggest oil consumer, staged a sharp short-covering rally at mid-morning Friday.

    Shedding early losses, prices leapt in light trading as the market sought new footing in August after some of the steepest-ever losses in Nymex history last month.

    “Don’t forget, we had a great selloff,” said Steve Bellino, a vice president at brokerage MF Global in New York. “Could we go down to $110 (a barrel in crude)? Sure. But there are too many supportive variables’ to keep prices lower for a long time, he said, citing unresolved issues between the West and Iran, OPEC’s second-biggest oil producer.

    Front-month Nymex crude oil futures in July fell $15.92 a barrel, or 11.4%, ending at $124.08 a barrel in the biggest dollar drop in any month since trading began in 1983.

    Gasoline futures fell 45.38c, or 13% in July, while heating oil lost 46.42c, or 12%, the biggest monthly penny-for-penny decline in Nymex trading history.

    At 10:17 a.m. EDT, September crude was $3.36 a barrel higher, at $127.44, after a low of $122.10 earlier. Goldman Sachs said this week that current fundamentals justify a $132 oil price.

    September gasoline was 9.81c higher at $3.1690 a gallon, while heating oil was up 4.86c at $3.5079 a gallon.

    —By David Bird, Dow Jones Newswires

  66. 66
    Nicky Says:

    Thanks Z – my bullish nat gas call looked on thin ice earlier but to be honest a b wave can retrace very deep and even go lower than the previous low and I was confident that the move down looked corrective. It turned perfectly though. Same is happening with the metals. If we take out today’s highs in energy I think it could go on an absolute tear into the close….

  67. 67
    VTZ Says:

    Nicky – you think today is the end of the C move?

  68. 68
    Sambone Says:

    GS must be long

  69. 69
    ellwodo Says:

    CHK – so after all the good news and UNG up almost $1, CHK is up $0.05. It makes you wonder what the point of fundamental analysis is.

  70. 70
    kyleandy Says:

    does anyone know the cost of the CNG cars for sale in argentina vs normal ones??

  71. 71
    Nicky Says:

    Aye we know that Sam – this is the rally to get them out.

  72. 72
    Nicky Says:

    V – see #44. My gut says it goes on longer yet…

  73. 73
    bill Says:

    ng and oil up 2 %

  74. 74
    Nicky Says:

    Also V – C waves are absolutely vicious as you can see.

  75. 75
    zman Says:

    Kyle – here’s a natural gas powered Honda Civic on sale in NY and Cal. for about $25K

    http://automobiles.honda.com/shop/?modelname=civic+gx&ef_id=1097:3:s_d22889886b8f3e644ca66089e7a8a029_789491580:aUhEl9B6B3YAAFyacYgAAAAW:20080801151159

  76. 76
    kyleandy Says:

    found the answer to my own question volkswagon about 10% higher. http://www.gnc.org.ar/NBC_news.pdf

  77. 77
    zman Says:

    First brokerage post call squawk box comments on CHK starting to impact the stock price? Probably not, more likely its the group getting a little later morning pop as oil retakes up $3. But the analysts should all have very glowing things to say.

    In Europe, the CNG cars are dual fuel so you can switch back and forth. Cities in the US have bus and public vehicle fleets powered by gas. What is to prevent them from opening service stations to fuel private vehicles?

  78. 78
    Fred Says:

    They have a CNG unit that hangs in your garage and refills you CNG tank from your NG line.

    http://jalopnik.com/cars/alternative-energy/more-on-hondas-cng-home-refueling-station-121381.php

  79. 79
    Popeye Says:

    A friend of mine just bought a Honda Fit and he had the option of getting NG with a home NG filling station. Still uncertain how much electricity it takes to run the compressor to fill the tank.

  80. 80
    zman Says:

    Thanks Fred, forgot about that Option.

    Aubrey said there is a $5,000 federal tax credit for buying a CNG car and a $2,500 credit from the state of OK if you live there.

  81. 81
    zman Says:

    On the home fueling side, note that the half price per BTU is against a residential price that is higher than Henry Hub prices. So the home fueling is going to be the most expensive option.

  82. 82
    isleworth Says:

    http://www.cngmotors.com/gal2/images/portfolios/gas2.jpg

  83. 83
    benbobby Says:

    zman,unless they have improved the design or guarantee a system that has no leaks it is very dangerous to garage vehicles that are fueled w/naturalgas.Sparks = explosions in a confined space.

  84. 84
    zman Says:

    Benbobby – got any stats on that. I would think level of danger would be same for a near empty tank of gasoline (full of fumes) in a garage. Have a lot of them blown up or are we in the realm of golfers struck by lightning?

  85. 85
    isleworth Says:

    Article by Popular Science
    The prospect of a flammable gas leaking into your garage when you are filling up, and causing an explosion or flash fire is certainly disconcerting. But according to U.S. Department of Energy studies, the annual probability of an explosion or other deflagration when the filling equipment is used properly is 1 in 7 million. An individual is 10 times more likely to be struck by lightning. Even if the system is intentionally misused, an individual is still more than twice as likely to be struck by lightning than for the Phill home refueling station to cause a deflagration.

  86. 86
    md Says:

    #2
    Iran was given a two-week deadline expiring Saturday to give a final answer to a package of incentives offered by the five permanent U.N. Security Council members plus Germany aimed at persuading it to freeze its sensitive nuclear activities.

    I think their nuclear research Dept. is the marketing arm of the Iranian Oil Ministry

    See below

    An Iranian walks into a bank in New York City and asks for the loan officer.
    He says he’s going to Europe on business for two weeks and needs to borrow $5,000.
    The bank officer says the bank will need some kind of security for the loan, so the Iranian hands over the keys to a new Rolls Royce.
    The car is parked on the street in front of the bank, he has the title and everything checks out.
    The bank agrees to accept the car as collateral for the loan.
    The bank’s president and its officers all enjoy a good laugh at the Iranian for using a $250,000 Rolls as collateral against a $5,000 loan.
    An employee of the bank then proceeds to drive the Rolls into the bank’s underground garage and parks it there.
    Two weeks later, the Iranian returns, repays the $5,000 and the interest, which comes to $15.41.
    The loan officer says, “Sir, we are a little puzzled. While you were away, we checked you out and found that you are a multimillionaire. Why would you bother to borrow $5,000?”
    The Iranian replies. “Where else in New York City can I park my car for two weeks for only $15.41 and expect it to be there when I return?”.

  87. 87
    Popeye Says:

    The NG tank in a van fueling in SoCal exploded a couple of weeks ago taking out a bus at the fueling station.

  88. 88
    zman Says:

    Got a link to that? What was the cause of the explosion?

  89. 89
    zman Says:

    oh here’s one with photos.

    http://www.cleanmpg.com/forums/general/t-cng-honda-civic-car-fireexplosion-dialup-warning-many-photos-7555.html

  90. 90
    Popeye Says:

    http://www.pe.com/localnews/inland/stories/PE_News_Local_W_wfuel18.49fe399.html

  91. 91
    Popeye Says:

    RE: 89 – WOW

  92. 92
    zman Says:

    Found a powerpoint presentation on 88. Wonder what the comparative incidence of this is versus gasoline car explosions. From time to time I see cars burning on the side of the highway and they are gasoline powered I’m pretty sure.

  93. 93
    zman Says:

    Popeye: Firefighter presentation really gets into it. Nice use of arrows and circles in the photos.

    http://www.firetrainingresources.net/items/CNGAutoFire-FIREFIGHTERNEARMISScompressedpics.pdf

  94. 94
    Nicky Says:

    Energy – a move through today’s lows would mean that we have seen a wave 4C complete. The alternative says that we should start a fast move higher soon.

  95. 95
    Wyoming Says:

    Nice photos. Go long Honda, short insurance? Been thinking Chk HS drill costs, I believe their nuber, owning equipment is a huge saving, your partner will pick up over half cost or more. We own rig, frac, ct, cement eq. Ceramic will add 90k per stage. 8 stage = 720k depend on volume, total frac = 1.5mm guess. =oarding plane, good hunting.

  96. 96
    ddaley Says:

    Sorry to distract from the gas explosion exploration. What follows is an observation from a briefing trader on Thursday. (it needs to be said that he is a long term bear and his view needs to be taken with a grain, or more, of salt). For me, the comment is a potential road map that might correctly outline this current “challenging” price action we are seeing. It bodes extreme caution, or skill, if trading options in the gas plays. Better to miss some of the first moves up when the real move comes, than get wiped out.
    Others on the site have talked about September positions not being safe. Sounds good. October calls and selling front month calls. Comments and thoughts welcome.

    “That was simply some ugly economic data and so far the market is not taking it very well. GDP was notably worse than expected and jobless claims showed a big jump. That puts a pretty big dinger in the argument that the worst has been seen and we are on the path to recovery. It reaffirms my very negative view on the U.S. and global economies, I think things are going to get ugly before all is said and done. However, it doesn’t change my views on what is going to happen in the market very much. I still think we are going to see a bear market rally in financials that will last several months before rolling over. I think commodities are going into an extended period of consolidation, which will initially be bearish for the stocks, as we have seen, but will present longer term buying opportunities at some point when the commodities themselves don’t fall as far as people fear and the companies are still making money hand over fist (there is still going to be a lot of demand for oil, coal, steel, and food coming from the developing world). In the short term, I’m looking for a panic move back towards the lows in financials that stabilizes somewhere around that level and then slowly begins to grind higher in a such a way that nobody believes the rally until it has already moved a good ways off the lows. I’m very bearish on tech, overall, the stocks just look ugly. Though I am worried that the market will drag it higher in the short term. At some point I will buy a lot of QID, but I’m not quite there yet. Trying to predict where the S&P as a whole will go is largely academic as the market is so fragmented right now, so I won’t even bother…”

  97. 97
    isleworth Says:

    Great video on Honda CNG vehicle/fueling etc

    http://www.jaylenosgarage.com/video/video_player.shtml?vid=193319

  98. 98
    ddaley Says:

    Nicky,
    More help on the waves!
    Can you point to a diagram on the Elliot wave inter. page ( http://elliottwave.net/educational/basictenets/basics3.htm ) that would illustrate which c wave where? I.E., a corrective wave in a bull market (NG)? Zig zag, flat, triangle, etc.
    Thanks so much.

  99. 99
    BeWater Says:

    RIG added to Jubak picks, target price of $172 by next July

  100. 100
    zman Says:

    DD – re 96. I think hindsight is in full effect in those comments. I think the pullback in gas is overdone as per my comments in last night’s gas post and the fear of a gas glut is being debunked on a daily basis by big cap E&P managements. I think people will start to listen to that. On the oil side, sentiment and technicals are bearish in the near term and that has been influencing equity prices. I continue to think that a little sideways trading would do the energy sectors a world of good and that appears to have started this week but I could be wrong. His long term comments are not out of whack with my thoughts. I would point out that if you think September calls are unsafe, buying October calls is no safeguard as they will erode quickly as well.

    I’m giving positions a chance to build on sentiment in the natural gas market which is due that bounce before taking losses in several positions next week if I don’t see improvement. July was less fun than going to your own Bris as an adult and I suspect that August will be less difficult as stories start to matter again but further downside in oil could set that back into the second half of the month.

  101. 101
    zman Says:

    CHK – down $0.60. No idea why except it started trickling lower after the call when oil came off its HOD and people are selling thinking something must be wrong after the call. Either that or someone from the analyst community has said something negative post call. I heard no discontent in the Q&A.

  102. 102
    zman Says:

    Obama proposes $1,000 “energy rebate” to consumers, paid for by a windfall profits tax on oil companies.

    http://news.yahoo.com/s/ap/obama

  103. 103
    ddaley Says:

    Thanks, Z. Would not want to go to a Bris.
    I do feel relatively comfortable with further out calls, if covered.
    Better than trying to figure the fundamentals of the financials.

  104. 104
    zman Says:

    Re CHK – another possibility for the weakness, besides the lemming effect, was that the minute chart turned right at the time the LNG headline crossed the tape. People are thinking CHK is going to spend a bunch of money build LNG export terminals and I can tell you that is just not the case but nobody is going to listen once the stock went red.

  105. 105
    bill Says:

    I think the export comment was to counter glut comments earlier in the week, ie there will be a market for their production

  106. 106
    zman Says:

    Absolutely agree Bill, now it is just lemming selling.

  107. 107
    bill Says:

    102 unfreaking believeable

    and the lemmings say oh i like it, derr , ill vote for him

  108. 108
    Nicky Says:

    Hi DD – C – yes corrective wave so that can be to the upside in a bear market and to the downside in a bull market.

    You can see on the ‘basics’ page that we can see it play out in a number of ways -ie zig zag, flat.

    At the moment with oil I am looking at such an ABC (zig zag) with A starting on 29th July at just above the 120 area and ending yesterday at the 128 area. We then saw B unfold from 128 down to this mornings 122 area and we are now in C up. It is possible that C finished this morning at 12859 and we should know soon.

    Same thing is going on with natural gas.

    Does that help?

  109. 109
    md Says:

    If CNG took hold is there really enough new supply to satisfy any meaningful share of the 20 miilion barrels. Consider that new power plants are being added as well.
    Likely scenario would be that NG prices would climb to global prices as domestic supply does not meet deamnd and we’d create a market for imported LNG. Chenierre may want to join Aubrey and T Boone to see the Wizards of Congress.

  110. 110
    occam Says:

    This is interesting, a lot of shorting of energy related ETFs:
    http://bespokeinvest.typepad.com/bespoke/2008/07/most-heavily-sh.html

  111. 111
    zman Says:

    How do you have > 100% short interest. Is that not naked shorting?

  112. 112
    ram Says:

    I second the question in #111. I got a headache trying to understand.

  113. 113
    sane Says:

    Re 102

    I’ll take the rebate and buy some energy stocks.

  114. 114
    zman Says:

    Sane – just don’t buy CHK, that is apparently going out of business. Their comments on natural gas spurred NG higher, yet the stock is trading in lock step with the drop in afternoon crude prices.

    92% natural gas production and they just explained that the same forces that drove them to a GAAP loss in the quarter will add back $5 billion (also non cash) in the 3Q. And we’re off 3%.

  115. 115
    ram Says:

    Also, since the sell in May and go away crowd won’t be back until the week after Labor Day, any good news short of a buyout has proven to be a mute point. Yes, it is a very nearsighted frustrating opinion.

  116. 116
    ram Says:

    Re 102 – Someone also promised a “chicken in every pot” once upon a time.

  117. 117
    zman Says:

    Hear ya Ram…stinks when the story could not possibly be better and Aubrey just about promised not to do another deal other than VPPs. People want to know about the oil shales and he didn’t want to say more without drilling results. West Tx rumors are there are some big wells into the Barnett and Woodford formations (so far pretty much untapped in that region and no one thought it would work). He’s going to announce a deal with a Major out there, I would guess before year end and their position is massive so the Major will be paying them to play, much like the PXP deal in the Haynesville. At some point the gutless and don’t use that term lightly, analyst at Goldman must upgrade the stock as it is far below his worst case price target making it a Buy by definition. But he was at this same point last quarter (and the stock was at $51 the night before that quarter was closed) so he can obviously just ignore the positive changes in the fundamentals.

  118. 118
    sane Says:

    Z,

    CHK, yeah on second hand I am going to buy some F and GM…… Not.

  119. 119
    mahout Says:

    Z:
    Much good news out of CHK! Very pleased and don’t care what the stock does today, the future looks bright. Eight stage fracs – hot dog! Go go go Aubrey!
    One question: Isn’t the Barnett’s one year decline rate of 65% very high? I thot the average was more like 30% nationwide. Looks like They’ll have to drill like crazy.
    Happy news out of Kenworth and Peterbuilt. Think Trucking is where CNG will really start to build – big time.
    CNG is where it’s at! What’s a little explosion from time to time (just kidding, we’ll have to be careful for sure). Our engines will last forever, and much less dirty air should lower our health care costs.

  120. 120
    zman Says:

    8 stage fracs = good for CRR.

  121. 121
    ram Says:

    ZMAN- Did you inquire and find an indicator that tracks large/institutional money flow? I believe you were looking for this a few months back to try and determine institutional swings from one sector to another if I recall.

  122. 122
    zman Says:

    Re 65%, that’s the first year expected decline, not out of line for a shale well, then they tail out over 30 years. I looked through a basin by basin economic piece from Simmons early this year and it looked like Henry Hub prices of $6.50 to $8.50 was the economic threshhold as you have varying basis differentials to get the gas to market. The bite is, if gas prices fall enough for the players to cut back capex, you lose the flush production of all those new wells and U.S. production could roll over. Something for the gas glut around the corner bears to chomp on.

  123. 123
    zman Says:

    I inquired but got no response.

  124. 124
    Brian08 Says:

    Just logging on, well played on your comments in the beginning of your post!

  125. 125
    zman Says:

    Brian – thanks, that and $3.50 will get you a venit latte. These blokes don’t know what they are selling (or don’t care).

  126. 126
    Fred Says:

    Z – I have an indicator I use that tracks institutional money flows but it only shows what they report. Turns out they’re slow reporting but better then nothing.

    http://www.mffais.com

  127. 127
    Brian08 Says:

    Maybe a latte and $39BB of cash will get us a double in CHK by year end!

  128. 128
    Nicky Says:

    Interesting close for oil – still finely poised but looks to be in ii down of C up. Clearly no worries about Iran tomorrow and gold market being down indicating the same. Hard to even imagine Iran backing down ….

  129. 129
    zman Says:

    Nicky – how’d you like the close on NG. Consensus forming in the market place seems to be that this is the annual pull back, a little earlier each year and that $9 to $10 will be the trading range for a few months ex Hurricanes and before winter forecasts hit.

  130. 130
    doc Says:

    Does anyone know a website that showsareal time commodities ptices for natural gas,oil and coal?

  131. 131
    zman Says:

    Southcoast upgrading HP and PTEN and raising targets.

    Credit Suisse upped EOG from under to neutral and cut their target from 124 to 116.

  132. 132
    Nicky Says:

    Z – its possible that an ABC wave 4 completed earlier at the 9470 area. In which case we are now seeing a ii up in v down. If that is the case then I would expect it to open down hard on Sunday evening and keeping falling to lower lows. An alternative is that the low is already in and we are now in a larger wave 2 correction which I think could take us considerably higher.

    So I am not being too helpful right now -sorry! But its going to become clear pretty quickly.

  133. 133
    zman Says:

    Lehman takes WLL price target from 105 to 120.

    Doc I don’t but there were a couple of comments with links at the end of yesterday’s comments, did those work?

    Nicky – I tell ya when I’m uncertain, thanks for the same consideration! Too many folks, the ones you see quoted, “know” the answer (until they change their mind five minutes later)

    On gas I would point out that we should get the biggest CDD number of the season Monday morning and that that heat should be supportive.

  134. 134
    BirdsofpreyRcool Says:

    Friday musings: the more energy stocks decline while oil and nat gas prices go up, the more energy stocks will bounce on any whiff of a hurricane/political situation, right? i mean, it seems like it’s all sentiment-driven right now… fundamentals are out the window. it’s the reverse of the last few months, energy stocks are down AND financials are down (as per the SKF).

    me-thinks this is just light-summer-trading-patterns. ie, meaningless. not trading with any real direction or conviction. eco numbers are not good, but i’ve seen worse in prior downturns.

    i don’t think this is a recession, per se. more of a prolonged transition. with winners and losers. winners = nat gas. losers = hummers and cigarette boats.

    oops. SKF went negative, BKX positive. back to long financials/short energy. for now.

  135. 135
    Nicky Says:

    Z – that may lean to the more bullish count then. Either way at some stage in the near future, with or without a lower low, I expect to see nat gas stage a very strong rally correcting the move down. Once we have confirmation the lows are in I will be able to offer some clues as to the upside possibilities. That said I can say that if the lows are already in it is quite likely this market could run back towards 12.00.

  136. 136
    zman Says:

    Interesting article from Abu Dhabi, exemplifies what’s going on in terms of consumption in the middle east. Abu Dhabi has more hummers per capita than any place on planet…blame $1.40 gas and surging inflows of cash from the West.

    http://www.marketwatch.com/news/story/rolling-humvees/story.aspx?guid=%7BD941679A%2D1A79%2D406E%2D91F2%2D64535B9C468F%7D

  137. 137
    Fred Says:

    Maybe GM could unload there Hummer Brand to the Abu Dhabians. lol

  138. 138
    Pete Says:

    Z, What if anything would a perceived coming glut in NG do to the market?

  139. 139
    BirdsofpreyRcool Says:

    JMHO, but as long as global LNG prices stay high and canadian oil sands continue to expand and decline rates on new nat gas wells are in the 50%+ / year and western PA remains hilly (infrastructurally-challenged)… what nat gas glut? i truly hope there is a perceived glut… just wait until CHK decides to slow down the pace of drilling in the face of a “glut.”

    on the other hand, it’s nice to know we have a domestic source of energy that is considered “clean” by the enviro-fanatics. might just give us some time to build nuclear plants.

    more musings… i guess.

  140. 140
    zman Says:

    Pete – well so far I’d say its $2 of the drop or thereabouts from the recent highs to current levels. The other $2 is the drop in oil. My point is that if you get to around $8 for any length of time some of conventional plays become marginal and the shale play economics get a little tighter so you may see conventional in places like the Gulf of Mexico drop off. Just as high prices correct high prices so too do low ones.

  141. 141
    Pete Says:

    Thanks Z

  142. 142
    zman Says:

    Bird – but the enviro nutbags don’t want you to use water to frac it or to use rigs that make noise to drill for it. If you could get it off of that moon Titan, that would be perfect. As long as the pipeline going into the sky does not obstruct anyone’s view in California or Florida.

  143. 143
    BirdsofpreyRcool Says:

    or Martha’s Vineyard

  144. 144
    tater Says:

    As I write this from the fireside, wrapped in my cardigan sweater, Bible, shotgun, and Jimmy Carter autographed photo in hand, I can’t help to think that I’ve seen this before…

    More imp, how to make $. I seem to remember SLB CEO on one previous conf. call saying something about…(might as well copy it here)

    Q1 2008 copied from SeekingAlpha.com

    Kevin Simpson – Miller Tabak & Co.

    Okay, and then you talked about the tight global supplies and one of the issues that I have is that governments around the world seem to be with collective greed conspiring to slow things down. Is that a significant concern of yours, I mean, Russia being one place that’s pretty obvious but other places as well — for instance, Venezuela.

    Andrew F. Gould

    Alaska.

    Kevin Simpson – Miller Tabak & Co.

    The U.S., I suppose.

    Andrew F. Gould

    You are quite correct. It is a concern, Kevin. Our governments think they can tax $100 oil with impunity and that’s not the case. And it’s not so much the amount of the tax; it’s the fact that it produces a degree of uncertainty into our customers’ investment decisions and therefore they have to presume a certain degree of risk, which makes them shy. So you are quite right to point out it is a concern.

    Kevin Simpson – Miller Tabak & Co.

    But to some degree in a way, it’s baked into your thinking that high comfort level, that an ’09 growth is going to be — we’ll say comfortably in excess of —

    Andrew F. Gould

    ’09 growth is more dependent on offshore, which as you know is very long-term and therefore, governments tend to behave more rationally, if you like.

    Kevin Simpson – Miller Tabak & Co.

    Yeah, well, they have less leverage there. All right, thank you. That’s it for me.

    Z-
    My question then is; the analysis of windfall profits is that we will see a slowdown in contracting to services? I need some help here.

  145. 145
    BirdsofpreyRcool Says:

    Z – by the way… loved your XOM / CHK intro this morning. wonder when the MOCs will pull their heads out of their nether-parts and start to buy in No. America.

    XOM sold off their prime barnett acreage because the internal sponsor retired. No one else showed any “enthusiasm” for the play. Not sexy enough, i guess. Sad. Heard CHK back-doored into it. Really prime acreage.

  146. 146
    ddaley Says:

    Nicky,
    Thanks so much for #108. I can see from your subsequent observations, as I was digesting 108, that Elliot requires a good deal of head scratching. I am sure it would be clearer sitting and looking at the same chart together. I would love to see a chart with the lines on it. Briefing occasionally does EW on their technical page. There is a crude discussion on this page, http://www.briefing.com/GeneralContent/Platinum/Active/ArticlePopup/ArticlePopup.aspx?ArticleId=NS20080724090334TheTechnicalTake
    if you get it, suggesting 128.95 as an important recovery point.
    From another perspective, UNG to me me looks like it wants to go up, higher highs, etc. and an upward sloping channel beginning 7.30, and actually lining up with lows on 7.24. But keep up all the comments, it is great work, in spite of the uncertainty!

  147. 147
    Sambone Says:

    Off subject – Hmmmm, looks like WB may be the next takeout. Big call buys today, stock is up 12%. Street saids GS, CNBS saids JPM.

  148. 148
    BirdsofpreyRcool Says:

    http://www.searchanddiscovery.com/documents/2007/07010powley02/images/33.htm

    trying to do some work on the Three Forks / Sanish… anyone know the geology there? found this pressure map… explains why the TFS is so darn attractive. fractured and overpressured and contiguous to black shale. lovely stuff.

    but, what is the sedimentology of these shaly sands?

    help anyone?

  149. 149
    zman Says:

    Tater – lets call windfall profits what it is. A subsidy. Paying for votes as well but that is a political comment and I’m not going there as that’s pretty useless for the point of this site. But back to a subsidy. What does that do for you. One it raises demand and $1000 will boost gasoline demand and gasoline prices and therefore oil prices. As far as capex goes thats hard to say. Its unclear who is going to be slapped with the tax of this issue (were it to pass which I don’t see as a possibility). Is it going on big oil or does it apply to big gas too? Dunno, no details. I can tell you it would not be a dollar for dollar hit to spending. Oil companies will take the hit across their entire capital structure so reduced equity buybacks would be there too. What it will do is cause a backlash from the oil companies, a war of words and a few high profile projects will be shelved and potentially some partners in the Gulf will find better plays to invest. Hard to say without details. But again, I think it is a red herring.

  150. 150
    Sambone Says:

    3:03 pm EST

    Crude Ends +92c At $125 On Iran Tensions

    By DAVID BIRD
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil prices rose Friday on renewed tensions over Iran’s nuclear program and strong refiner buying in gasoline.

    Nymex light, sweet crude oil for September delivery ended 92 cents higher at $125 a barrel — near the middle of a broad $6.50 a barrel trading range.

    Israeli concerns that Iran is on an “unacceptable” path toward a “major breakthrough” in its nuclear program sparked an aggressive early rally.

    September gasoline futures closed 1.28 cents a gallon higher at $3.0837 a gallon in response to strong refiner buying in Midwest and Gulf Coast cash markets, which traders said likely was linked to operational snags at plants. Heating oil closed at $3.4372 a gallon, down 2.21c.

    Settlement prices weren’t available yet.

    Shaul Mofaz, a potential future leader of Israel as he is competing for control of the ruling Kadima party,

    said he considered Iran’s nuclear plans “an existential threat,” adding “we have to make sure we are prepared for every option.”

    The comments brought to surface long held market fear over a potential attack on Iran, OPEC’s second-largest oil producer. Apart from a potential loss of Iran’s output of near 4 million barrels a day, conflict in the region could endanger the vast amounts of oil that move through the Middle East. Iran sits at the mouth of the Strait of Hormuz, through which about 20% of the world’s oil flows — a volume that couldn’t be made up fully through the release of emergency stockpiles in consumer countries.

    Michael Wittner, head of global energy research at Societe Generale, said in a report this week that crude oil would “easily spike over $200” if the Strait of Hormuz was shut.

    The White House said it expects Iran to respond this weekend to an international offer of incentives in exchange for a freeze in its disputed nuclear development. Spokeswoman Dana Perino warned of “negative consequences” which “would possibly come in the form of sanctions,” if Iran rejects the offer.

    Oil prices had begun Friday by adding losses on top of steepest-ever losses in Nymex history last month. Front-month Nymex crude oil futures in July fell $15.92 a barrel, or 11.4%, ending at $124.08 a barrel in the biggest dollar drop in any month since trading began in 1983. Gasoline futures fell 45.38c, or 13% in July, while heating oil lost 46.42c, or 12%, the biggest monthly penny-for-penny decline in Nymex trading history.

    —By David Bird, Dow Jones Newswires

  151. 151
    Fiveanddimer Says:

    GDP is up over $2, while the other Haynesville shale players are down. Anyone know of any fundamental reasons for GDP’s strength today?

  152. 152
    zman Says:

    Bird – have you tried looking at the N.D. website. There are some old pieces that discuss the how they were laid down there. I mean really old, 1950s. I can send a link if you have nothing better to read over the weekend.

  153. 153
    tater Says:

    Thanks. I have become a bit confused this week and have gone back to 100% cash waiting for a more clear picture (as I don’t like my short positions anymore). The tax comment got me to thinking, which is not what I do best.

  154. 154
    BirdsofpreyRcool Says:

    ha! yep…. send away. nothing better to do.

    actually, trying to set up a conf call with some geo-experts. will get back with anything good i find out.

  155. 155
    zman Says:

    Five – not trying to be cute but GDP has been a yo-yo the last few days after the initial crushing it took earlier this month. I have been thinking about getting involved there but wanted to see the big boys stabilize first.

    Bird – here’s a link that describes the Sanish overlain by the Bakken from 1959 starting on page 4.

    https://www.dmr.nd.gov/ndgs/out%20of%20print/Reports%20of%20Investigation/RI_32.pdf

    I imagine the rocks haven’t changed much since then, lol.

  156. 156
    zman Says:

    This may be worth looking at too Bird, Megawest producing light oil from the Heath Shale in Montana.

  157. 157
    BirdsofpreyRcool Says:

    LOL. in 1959 they still believed the Big Flood was responsible for the Grand Canyon. but, worth a look.

    thanks!

  158. 158
    zman Says:

    Well if you are going to insult my 50 year antique library I’m going to declare beerthirty. Have a good weekend everyone.

  159. 159
    Wyoming Says:

    So, every Major has declined production. XOM, CVX, COP, RD. Some have production held hostage, Nigeria.

    Point is, this should have offset the demand destruction/reduction.

    Mahout, all wells decline in production over time. There are many reasons and variables which cause this; pressure depletion, water encroachment, fines migration for a few.

    Shales get their gas from the kerogen content of the reservoir. This usually comes from core data, SLB claims they can get it from a log. Either way real expensive to get. The other factor is the permeability (ability of gas to flow through). The founding fathers used shale for roofs, it is tight. Piecing this all together, drill, frac, produce. The load water from the frac is recovered to the point where gas breaks through. This initial rate (IP) is usually the greatest as there is no depletion. They usually drop real hard, our Barnett go from about 1.8MM to 600 within 1 month.

  160. 160
    BirdsofpreyRcool Says:

    Wyoming… is it REALLY oil from “shales”?? i mean, the Bakken isn’t producing from the shale members, but the sandy dolomitic stuff layered between. Is there really oil shale production?

  161. 161
    Wyoming Says:

    BOPRC,

    I am not sure what the API is for the Bakken oil but it should be actual oil. I have not heard anyone say condensate so that is why I say it. Reservoirs:

    Dry gas – pure gas.
    Wet gas – condensate drops out on the way up the pipe, change pressure, temps.
    Retrograde Condensate – lliquids drop out in reservoir when it drops to a “dew” point of pressure. Bad news, CLB CEO talked about it. Multi phase of fluids in production sucks.
    Oil reservoir – ranges from light to heavy to tar.

    This is general and basic. All reservoir can contain CO2 and H2S making the processing more difficult.

  162. 162
    BirdsofpreyRcool Says:

    Wyoming – let me clarify, i know the oil comes from the shales, but do we actually have any oil fields that are materially producing oil directly from shales? i understand the nat gas plays, it’s the oily ones i’m trying to get at.

    thanks.

  163. 163
    Wyoming Says:

    Might have misunderstood. Shales are generic in name. Some are have more chert, pyrite, other minerals. Barnett looks for a high quartz / silica section. They are just in the shale member.

    Did I get it right this time?

  164. 164
    ddaley Says:

    WLL,
    It sure looks good technically on a 6 month, MACD just crossed over today

  165. 165
    Wyoming Says:

    Also, I know of a well in West Texas that was explored in the Barnett (Delaware Basin). we know the competitor fraced into the Atoka (grew upwards). It was still classified as a Barnett shale.

    Our Barnett wells grow up into the Marble Falls sometimes, are we really producing out of the Barnett or was the Barnett just the source rock for gas coming from the Marble Falls.

  166. 166
    BirdsofpreyRcool Says:

    yes. the Bakken production is truly oil. wonderful, light, sweet stuff too. the kind of oil you would want to take to your Senior Prom. but, it’s a misnomer to say it is a “shale” play. the production is actually from a sandy dolomitic layer between two highly-organic black shale layers. like drilling horizontally into the middle of an oreo cookie. the shale provides the oil, the middle bakken member is the sponge that soaks it up.

  167. 167
    BirdsofpreyRcool Says:

    anyway, sorry to blather on. thanks for your comments, Wyo.

    have a great weekend.

  168. 168
    Wyoming Says:

    Glad to help. Dolomites are great reservoirs, a bunch of Saudi would agree to it. Got to go. Thanks for the discussion.

  169. 169
    tater Says:

    ddaley #164

    I respect your opinion on the TA of WLL and I see the MACD signal, but maybe there are a couple other things that could be brought into consideration. Not trying to quibble, just thinking that maybe we could combine analysis on this one. Your thoughts appreciated. Page 3 on the link

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882&cmd=show%5Bs146444468%5D&disp=O

  170. 170
    Nicky Says:

    DD re #146. What is difficult about Elliott Wave is that there is no doubt that at any one time there is normally more than one possible outcome! That said for the ‘big picture’ I love it. Its true that the minor moves, especially the corrections are head scratching but for the bigger moves the count is often quite clear. More importantly it can I believe give you huge insight to what is ahead.
    As you probably know Robert Prechter is the absolute guru of EW. He wrote a book in 1978 called the Elliott Wave Principle which is well worth a look if you want to get a grasp of the concept.
    At the time he was very bullish and rightly so. It was after the crash of 2000 which he had called (and called way too early!) that people began to sit up and take notice of him. In 2002 he wrote a book called Conquer The Crash. As you can infer from the title its very very bearish and I think many think he is far too bearish. That said I have this in my bookcase and picked it up the other day and glanced through it. It really is quite chilling because bearing in mind it was written 5 years ago much of what he forecast is happening as we speak. I notice with him that his timing is often wrong (its very difficult with Elliott Wave) but his outcomes have so far always come good. It makes for very sobering reading however as if he is right this time then the road ahead is not pretty! Suffice to say that the stock market will likely be at least testing the 2002 lows by 2010.
    One more thought and that is that parabolic advances always retrace the majority of the advance….the Dow was at 2000 in 1990 and the advance since then has been parabolic. On a smaller time frame look at commodities like corn and soybeans -both which gave back huge gains in less than two weeks, nat gas also giving up huge gains, crude I think poised to…..

  171. 171
    BirdsofpreyRcool Says:

    Nicky, the Dow has been parabolic since around 1982. I just plotted it back to 1950. Looks kinda scary when you do that. Does EW contemplate periods of 50+ years? the 2002 lows are nothing, in comparison with where we were in 1990. Or, do markets just shift. For example, we went parabolic in 1982 (or so)… do we pass the market baton to China or Brasil or Russia at this point? do we muddle along then… or, do we fall back to 1995 levels.

  172. 172
    mahout Says:

    Wyoming:
    Many thanks for #159 and the others.
    Exciting stuff, this E&P.

  173. 173
    Wyoming Says:

    Mahout,

    Certain things I know generally, I will make mistakes or not be exact on some things. There are specialists on every subject in this industry; drill, complete, reservoir, facilities, pipeline, refineries.

    You will find that Z is one of the best for piecing this all together with the part that matters…$$

  174. 174
    Wyoming Says:

    Bird,

    Tried to send this a couple times;
    Thought more about your question when I picked up the kiddo’s:
    http://en.wikipedia.org/wiki/Oil_shale_geology

    Reason for your stringer is probably tidelands. Tide comes in lays down dolomite / limestone or shale. Tide rolls out sand sequence repeats etc..

  175. 175
    Nicky Says:

    Hi BoPcool – yes you are right with the start being around 1982 – I was just kind of looking at when it started to make more of a move and I think I am going to be laughed at if I suggest we go back to the level we were at in 1982 which is around 500 on the Dow! 2002 is where the last parabolic move started in the Dow which is likely to be the first target. And yes EW covers huge periods of time ie Supercycles. As much of this will take decades to play out I just concentrate on the next couple of years. I will take a look over the weekend at where Mr Prechter thinks this might bottom and in what time frame and let you know. What I think is now fairly certain is that any rally that unfolds into the election and possibly extends into spring 2009 is going to be a selling opportunity….

  176. 176
    Fred Says:

    Nicky – If you want to see a shocker take a look at the Dow plotted in Euro’s.

    http://seekingalpha.com/article/83758-the-dow-in-euros

  177. 177
    BirdsofpreyRcool Says:

    Nicky – thanks! knew that EW covered huge time periods, actually. But really don’t know anything else about it. Except that there are smart people who swear by it’s predictive powers. So, worth understanding here i think.

    Indices, plotted over long periods of time, are scary. Would love to put some sort of frame of reference around the charts. So, any help you can give is much appreciated.

  178. 178
    reefguy Says:

    159- In the bakken, the lateral is drilled in the more stable dolomite member. Fractures, both natural and created thru frac, drain oil from outer edge of cookie. Eureka moment when it was recognised that the dolomite was the lateral target interval and not the shales themselves.

  179. 179
    crysball Says:

    My attempt at aGrand Summary of the takeaways from the Hottest Shale E&P player conference calls:
    1) The underlying economics of the Oil & Natural Gas E&P business is changing significantly.
    2) They have (or are about to ) ‘CRACK THE CODE’ for realizing very large production #’s [both IP and EUR] from the various new* plays.
    3) As they ‘CRACK THE CODE’ they see a new set of economic variables arising:
    A)continuing significant decrease in F&D costs
    B) Big improvements in economic outcomes [IRR & EUR] coming out of the new Plays
    4) Much of the progress has to do with the accelerating speed of technology transfer & learning curve on methodology of completions, frac’ing, propants
    5) They see a PERMANENT SHIFT in how they DEPLOY CAPITAL…………….given the ‘NEW ECONOMICS’
    A) SIGNIFICANT REDUCTION in new Capex going toward conventional production [including shallow shale’s like Appalachian, New Albany, & Antrim] because the IRR’s do not compare
    B) SIGNIFICANT INCREASE in new Capex to accelerate results in their existing New Shale* plays, even though the per well costs may be far higher [$3 to $6 million depending on completion method & depth]…………..this increase far exceeds the reduction (or reallocation) from other Capex.
    5) Many of the larger E&P players openly CAVEAT their revenue stream will lag the production due to:
    A)Buildout of a gathering / processing system
    B) For Nat Gas, lack of availability of High Pressure pipelines {especially Haynesville]
    C) Tight supply of tubular goods [smaller & medium players]

    Z, would be most interested in your take?

  180. 180
    BirdsofpreyRcool Says:

    reefguy – re#177… meeting with KOG and realizing it was dolomite (and not shale) was MY eureka moment too. That is when i realized that this play is the real thing and very very investible. (i’ve never heard of getting oil flowing from shales… no matter HOW much you frac it.)

    From what i can tell, CLR and KOG are the two best ways to maximize exposure to the play. What do you think?

  181. 181
    crysball Says:

    Hugo does it again:
    CARACAS, Venezuela — The central bank sought on Friday to calm fears of faltering banks a day after President Hugo Chávez unexpectedly announced the nationalization of a large Spanish-owned bank, his latest effort to intensify state control over the economy through takeovers of private companies.

    The nationalization of the bank would extend to the financial sector a series of takeovers, which Mr. Chávez initiated last year, in industries including oil, telecommunications, electricity and steel-making.

    Mr. Chávez further shook the political establishment and financial markets on Friday when he disclosed that he had used his decree powers to issue 26 laws on Thursday. They included a banking reform, although the government did not provide details on any of the laws the president decreed.

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