07
Aug

Thursday – Gas Preview and Oil Review

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Z Sentiment Watch: Cautiously optimistic. Yesterday was one of the few days in the last month where:

  1. A  rally in the group did not coincided with a big rally in oil,
  2. Said rally did not sell off substantially by the end of the day but rather closed near the HOD, and
  3. Good news on earnings calls made a difference in the returns of individual names.
  4. The first bit of red following this day will prove a crticial test of conviction in the group’s need for a recovery rally

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Earnings Watch/Stocks We Care About Today
  4. Holdings Watch

Holdings Watch:

  • HK - August $30 Calls (HKIG) added for $2.40.
  • HK - September $35 Calls added for $2.10.

Commodity Watch:

Natural gas managed to close up 5 cents despite oil's tumble to close the day at $8.77 yesterday. Gas appears to be ready to put in a near term bottom. The technicians think so for technical reasons and I think so because we are at the beginning of strong period for generation demand, fears of a gas glut are being debunked on conference call after conference call (see bullet below) and the hurricane season is likely to send more storms into the Gulf which will likely cause some short covering.  This morning gas is trading up 10 to 15 cents ahead of inventory numbers.

  • Haynesville takeaway comment: several new projects underway will add 2 to 3 Bcfgpd in between 2009 to 2011 ~ Floyd Wilson. I don't think takeaway capacity will exceed 1.5 Bcfgpd next year.

The Gas Inventory Preview

  • My Number: 60 Bcf injection
    • Last year: 52 Bcf with cooling degree days of 85.
    • 5 year average: 57 Bcf...normal CDDs for this week in history run closer to 73
    • Last week: saw an injection of 65 Bcf with a degree day reading of 78.
    • Imports: Down 2.5 Bcfgpd  vs last year; up 0.3 Bcfgpd vs last week
    • Weather:
      • Cooling degree days were 84, the hottest of the season so far.
      • The Edison Electric Institute pegged generation up 1% from last week and up 5% YoY
  • Street Consensus: 61 Bcf injection (from the Bloomberg survey)

Crude Oil fell $0.59 to close at $118.58 yesterday following EIA inventory numbers that were somewhat of a mixed bag on crude and products. Crude also failed to act on news that a separatist group (the PKK) had claimed responsibility for the attack on a pipeline in Turkey, which transports 1.2 mm bopd or 1% of global supply. This morning crude is trading up over $2 on a retreat in the dollar, word that the Turkish pipeline from the Caspian is still burning, and tough talk on Iran from Condi Rice.

  • Turkey Watch: Pipeline still burning and now thought to be sabotage as claimed; may take 1 to 2 weeks to reopen. Stock piles at the Cehyan depot, used yesterday to load tankers, have run dry. (BP) and its partners have curtailed some production from their Caspian oil fields.
  • Cellulosic Ethanol Watch: While I'm on the subject of BP, got to note they put $90 million into a cellulosic ethanol company called Verenium Corp (VRNM) yesterday- shares doubled but I would not ignore an investment like that in BP having seen what they have done with solar. The two had a conference call yesterday that I plan to read through today.

 

The EIA Oil Inventory Review

ZComments:

  • Much bigger than expected draw down on gasoline inventories. Demand at highest level of year, but still off 1% from last year's levels.
  • Crude numbers stocks rose more than expected due to higher week to week imports
  • Distillate: Big build, not bump in demand seen yet.

CRUDE OIL:

Refinery Utilization and Inputs: The demand destruction at the top of the oil consuming food chain in the U.S. is as follows:

  • On A YoY basis, refineries in the U.S. have seen crude runs quarter to date down 3%
  • When compared to the five year average, 3Q inputs are running down 2%.

 

In Summary on Demand From Refiners

 

From the EIA's Weekly Piece:

Since 1998, the United States has diversified its supply by increasing the number of countries from which it receives crude oil imports. We received crude oil imports from 45 countries in 2007, up from 39 countries in 1998. Still, six countries continue to supply about 75 percent of total U.S. imported crude oil: Canada, Iraq, Mexico, Nigeria, Saudi Arabia, and Venezuela. Total imports from the six have remained fairly constant over the past ten years, though their individual shares of U.S. imports have changed.

The EIA piece, which is worth a read, goes on to describe the shift in imports to the U.S. but does not really address the changing nature of the crude arriving on U.S. shores ... In short the world's barrels are getting heavier and more sour as time goes by.

Crude Stocks - Rally but still low to normal for this time of year.

GASOLINE - This is the one that mattered to my mind this week. Production flat, imports down slightly, demand flat (but at the highest level of the year).

 

Demand At Highs For 2008 As Prices Fall. Part of this is service stations or downstream refilling but part of this is consumers continuing to fill their tanks with "cheap gasoline". The U.S. consumer is beat up. Not only is gasoline high relative to what people consider normal but so to is beer, chips, and queso. When was the last time the average Joe got a break on one of those? I can't recall either. So when gasoline cracks its natural for people to fill up. As prices cross back through the $4 threshold in different parts of the country at different times, we get a week to week rolling fill up. The Midwest and Gulf Coast retreated from $4 first, the northeast followed two weeks ago and the Rockies and California have yet to crack that psychological deal point but they are well off their highs and headed toward that level (although the West Coast is the only region where gasoline stocks are low to year ago levels). My sense is that consumers will become accustomed to $4ish per gallon gas prices over the next year or two.

Gasoline Stocks Remain Somewhat Bloated. Up 3% YoY, Up 2% to the 5 Year Average. 2004 levels were higher so stocks are no longer at a five year high.


DISTILLATE- Another Bigger Than Expected Build. This will come increasingly into focus next month.

 

Earnings Watch / Stocks We Care About Today

GDP Announces Big Beat Based On Production Outperformance

  • The 2Q Numbers:
    • Revenues of $65 vs $55 mm expected
    • CFPS of $1.29 vs $1.02 expected
    • Production of 67,100 Mcfepd, up 16% sequentially, up 64% YoY with growth coming primarily from the Cotton Valley. This was above the high end of the recently upgraded guidance range of 62.5 to 64,000 Mcfepd.
    • Cash Costs fell to $3 per Mcfe, down 11% from the year ago quarter. LOE was $1.26 and I would expect it to continue to fall in coming quarters as low op cost CV  wells become a greater percentage of the company's production profile.
    • Cash Margins: With the high price realizations in the quarter, cash margins ballooned to $7.62/Mcfe up a whopping 84%.
  • Guidance:
    • 3Q08 initiated at 72 to 74,000 Mcfepd; mid point equates to 9% sequential growth.
    • With their recent equity deal and asset sale to CHK, and undrawn credit line it appears no equity deal is waiting around the corner.

 

  • Operational Update:
    • Cotton Valley trend wells, seeing better results with average IPs moving up 2,700 Mcfepd vs a more typical 1,800. These wells are difficult to mess up and represent the bread and butter cash flow generating backbone of the company so the higher rate is meaningful when you consider that 37 of the 46 wells the company drilled during the quarter targeted the CV.
    • Haynesville Shale was targeted in multiple East Texas and NW Louisiana fields in  vertical wells, IP's ranged from 1,600 to 2,400 Mcfepd, with sections of 165 to 276 feet encountered.  They plan to spud their first horizontal Haynesville test in  Caddo which  is near the center of the Haynesville universe later this month followed by E. Tx and NW. La. horizontals before year end. Haynesville will start contributing meaningfully in the fourth quarter but look for a well test on the 3Q  conference call.
  • Conference Call: 11 EST

Haynesville Player Thoughts

  • HK commented on calculating gas in place of 170 Bcf per section, not saying its ubiquitous but that is over three times what people have been talking about. Recovery factor  of 30% still seen.
  • DVN commented it has 483K arces with 73 Tcf of reserves. That comes to gas in place of 96 Bcf per section.

PVA  - Results out, no opinion on that yet and little color in the PR on ops but want to listen to their call at 3pm EST when they will be talking Haynesville, lower Huron, Bakken and other topics of interest.

SFY - Conference call at 10 EST. Old favorite worth listening to. 

Drybulk Watch: Two bulkers reporting today

(EGLE) - Reported EPS of $0.32, in line with expectations; EBITDA was a little better than expected . This is a rapidly growing bulk who has managed to keep its utilization at 100% and I just want to listen to the conference call to start gaging the mood in the group.

(TBSI) also reported and I'll listen to a replay of the call if I get time. I plan on adding some exposure to this group (maybe long, maybe short) in the next few weeks.

Odds & Ends

Analyst Watch: Lehman maintains overweight rating on (HK) but trims price target $2 to $57. Stifel upped (RIG) to Buy.

 

186 Responses to “Thursday – Gas Preview and Oil Review”

  1. 1
    zman Says:

    FTO just reported, not sure if the apparent beat is clean, showed improved gasoline and diesel cracks over 1Q.

  2. 2
    BirdsofpreyRcool Says:

    FTO – beat included positive affects of inventory, offset a bit by negative affects of hedging. “clean” EPS = 27ยข

  3. 3
    zman Says:

    EGLE – 7% yield, sees increasing dividend, good call here, large fleet of open (non-charted) vessels for 2008 to 2009 providing leverage to rates.

    They see 20+% EBITDA growth through 2012.

    They have revenue visibility going out ten years for a significant wedge of revenue as they move to 55 ships(these are mostly supramax). Good sensitivity chart vs rates on slide 11 (does not include the last 15 ships coming into inventory in 2010/11).

    There low rate growth case gives them revenues growing from $200 mm this year to $300 next year and as much as $600 in 2010. So either the yield explodes here as they payout or the share price advance.

    The big picture:

    China plans to build 104 new cities with 1+ inhabitants by 2025.
    Coal deliveries 400 mm/ton growth per year
    Iron ore rising 100+ mm tons per year

    China generation: up 80 to 90 Gigawatts (thats like 80 or 90 of our nukes ) per year for next several years.

  4. 4
    zman Says:

    Thanks BOP – stuck on the EGLE call.

  5. 5
    zman Says:

    EGLE Call:

    57% of their cargoes were what are traditionally considered Pana and Cape loads.

    See new builds at other shipyards slipping by 25% and several cancellations. Korea confirmed last week $800 mm in cancellations. Which goes to alleviate some concerns about coming over capacity.

  6. 6
    tomdavis12 Says:

    Z: PQ execution risk? Do you consider the quarter a miss? If so, isn’t this a poor quarter to have missed (solid pricing). I try not to be too patient with poor management. Was there any solid mitigating circumstances? This was originally a very cheap CFPS company. Are there any others that are just as cheap but seem to be executing much better? HK – GMXR – GDP? Just looking for your conviction level. Trading PQ’s options are masocistic even for just a covered call guy.

  7. 7
    BirdsofpreyRcool Says:

    KOG raised their capital. Looks like they got the underwriters to buy the deal at $2.75. Downsized to 6mm shares. But good that it got done. They have their conf call today at 11 EDT. Expect stock to trade up.

    But also expect them to raise more capital at some point in the near future. Preferably, after the results of their 1st Bakken well.

  8. 8
    Sambone Says:

    5:08 am EST

    Crude Gains On Rebel Claims, Capped By Demand

    Dow Jones Newswires
    From Market Talk:
    0905 GMT [Dow Jones] Crude markets trade higher after news the BTC pipeline in Turkey will be shut for 15 days, longer than anticipated, pushing prices to intrady highs. Meanwhile, claims by the Kurdish rebel group PKK, that it was responsible for the pipeline explosion and reports that no crude stocks were left at the Ceyhan terminal, are expected to provided further support for prices. However despite the bullish news, crude gains were capped as demand concerns and bearish sentiment prevail in the oil markets. “Real supply interruptions are there but there is no reactions.. showing the shift of focus from supply to demand issues,” Eugen Weinberg notes. ICE September Brent +68c at $117.68/bbl. Nymex Sep crude +67c at $119.18/bbl. (RAM)

  9. 9
    Sambone Says:

    7:57 am EST

    $30 Drop In 18 Days Amid Weak US Oil Demand

    By DAVID BIRD
    A DOW JONES NEWSWIRES COLUMN

    NEW YORK — Bearish U.S. oil data fueled a continued selloff in crude oil futures Wednesday. All told, oil is down 20%, or more than $30 a barrel, from its intraday record high, hit just 18 days earlier.

    Government figures showed crude oil stocks rose by 1.6 million barrels in the latest week, compared with an expected rise of 100,000 barrels, as refinery runs dropped to the lowest level since May 2. Ironically, front-month Nymex September crude, for the second straight day, settled at the lowest levels since May 2, ending Wednesday at $118.58 a barrel, well below the intraday peak of $147.27 on July 11.

    Market bulls found encouraging signs on the day, but even all the bearish data may not be plainly evident.

    The Energy Information Administration reported cumulative data to Aug. 1, shows demand in the world’s biggest oil consumer is down 3.6%, or 750,000 barrels a day, from a year ago at 19.962 million barrels a day.

    A review of EIA data shows that if final figures for June and July bear out early indications, U.S. demand in the first seven months of the year will be the lowest for the period since January-July 1982 — a year before crude oil futures began trading on the New York Mercantile Exchange.

    U.S. demand in the latest four weeks lags a year ago by 2.6%, at 20.13 million barrels a day. That’s the lowest four-week level for this time of year since 2003 and the weakest four-week level since Jan. 19, 2007.

    Gasoline futures failed to hold above $3 a gallon, even with a surprise 4.3-million-barrel decline in inventories four times the expected size. September gasoline settled at its lowest level since May 1, down 71 points, at $2.9493 a gallon.

    The drop came as imports fell 10.5% in the week to the lowest since March 7. Gasoline demand inched up to what was the strongest level since Aug. 31, 2007, but, at 9.484 million barrels a day, still was 1% below the year-ago level.

    Shedding Summer Gasoline
    Gasoline stocks are 2% above year-ago levels and slightly above their five-year average, relative to demand.

    With just a few weeks left in the gasoline season, analysts warn that refiners — already facing tight profit margins on the fuel — may have to sell off sizable volumes of summer-grade material.

    EIA analyst John Duff said the gasoline outlook is “extremely bearish,” given that refiners are likely to want to sell what is believed to be high volumes of summer-grade fuel before mid-September.

    Refiners who sell higher-cost and higher-quality summer grade fuel in the early autumn may be giving away steak at hamburger prices, said Joanne Shore, EIA analyst. Given “slim to negative” margins, refiners, importers and suppliers, in general, will have a strong incentive to not give away value,” she said.

    EIA data suggest a bright spot for demand for distillates (heating oil/diesel) over the past four weeks, with apparent consumption up 3.5% from a year ago, at 4.139 million barrels a day, the only gainer among major products in the period. But analysts said the figure likely reflects continued hefty volumes of distillate fuel exports, which have hit record levels in recent months, not actual strong demand in the sluggish U.S. economy.

    Heating oil fell for the fifth straight day, with September-delivery fuel down 4.41 cents, or 1%, at $3.2379 a gallon, the lowest settlement since May 2.

    The steep crude oil price drop since mid-July is raising concerns in Venezuela, where Oil Minister Rafael Ramirez has adapted his position in recent days. On July 29, Ramirez said he doesn’t see the need for the Organization of Petroleum Exporting Countries to increase its oil output at its Sept. 9 ministerial meeting in Vienna.

    Venezuela Antsy Over Price Fall
    On Wednesday, Ramirez said Venezuela would support a cut in OPEC output at the policy talks next month, but wouldn’t say whether he would make such a proposal at the talks. In any case, price-hawk Venezuela is pumping all that it can now and can only gain from higher prices, analysts said, and Caracas wouldn’t like to cut volumes, even if OPEC agreed to do so.

    Just as OPEC grapples with the shifting market, traders are looking for clear signs of a fresh footing under the $120-a-barrel level. Some trading houses warn of further selloffs, likely down to $110 a barrel, but the market has consistently settled above market lows in recent days, even while posting losses.

    In what may provide just a one-off curiosity as traders grope through the market fog, front-month crude oil futures, for September delivery, regained their premium to the second month on Wednesday, albeit by a slim 14 cents a barrel.

    Front-month futures last settled higher than the second-month on May 28 for a single day and on a more consistent basis in mid-May, the end of streak that ran largely intact since mid-July 2007.

    When front-month prices trade above forward contracts, that usually signals strong demand for crude, but weak refinery demand and relatively strong stocks don’t suggest that’s the case now. Crude stocks, though nearly 40 million barrels below last year, are relatively plentiful compared with last month, when the year-to-year gap was nearly 60 million barrels.

    Crude stocks are sufficient to cover 19.7 days of refiner demand, near the five-year average of 19.9 days, even though they are below the year-ago level of 21.6 days.

    Tim Evans, an analyst for Citi Futures Perspective, said the new footing in crude futures may speak more of future weakness than current strength. October crude fell 78 cents on Wednesday, while September ended down 59 cents.

    “We may be seeing heavier selling pressure on October, as opposed to September demand,” he said. “September doesn’t have that much time left to go (expiring on Aug. 20), and traders could be putting fresh shorts into October,” he said.

    —By David Bird, Dow Jones Newswires

  10. 10
    zman Says:

    Re PQ – It was miss. Analysts got ahead of themselves and you can see that in some other company numbers coming out. I didn’t like the lack of color on the LOE rise. On the operations side everything appears to be clicking pretty well. I’m not adding right now unless in common for a long term hold. I’ve complained in the past about the cruddy trading habits of the options here and I’ll only play there again when the smaller caps clean up and I see clear near term catalysts for the stock. So they are doing fine but in this environment I see no reason to go coo-coo for coco puffs about the stock. I like it, but I like it long term.

  11. 11
    zman Says:

    BOP – Re KOG. I don’t think that amount of $ will get them half way through their 6 well Bakken program although I don’t know the state of their revolver.

    EGLE sees post Olympics coal pickup.

  12. 12
    BirdsofpreyRcool Says:

    KOG – nope. You’re right. The original raise (8.01mm shares at $3.00) was enough to fund 5 wells. They raised less than that with this underwritten offering. But, they have no debt drawn. I would expect that to change after they get a well or two on line. Might stave off another 2ndary, but not for long.

  13. 13
    tomdavis12 Says:

    Z: Are there other dance partners that look a little sweeter than PQ these days?

  14. 14
    ddaley Says:

    Z and Nicky,
    Your end of the day comment about XLE. Interesting point at @70, for long term interest. Next point down is 62.5, and Nicky, I would love to know how those two points play into an EW frame. The run down from 90 to 70, is that, from the basics page: we are in an incomplete c wave of correction, that is approaching 4 up, then 5 (c) 2 (with a circle around it) ? If that is correct, presumably 62.5 is the target. If that is the case, the downtrend line for 4 up is 73.8, (ah, pre open, we are already there) just a hair above current levels.

    So there is that, now what does one do if in fact the CL and NG chart is “fairly” bullish?? Perhaps wait and see, cautiously.
    Thanks

  15. 15
    jy Says:

    I have been listening to a number of 2Q conf calls the last few days and am starting to wonder where all of the rigs are going to come from that operators are talking about adding in the next 18 months. From the call info I estimate 24! additional rigs for HK, 5 for XCO (new builds they said), etc. Seems like this could be a bottleneck on the upstream end of the resource plays as pipeline capacity is on the downstream end. Thoughts?

  16. 16
    zman Says:

    Tom – Let me answer that by saying that I think the group is exceedingly cheap right now. The biggest three worries I have at the moment for E&P are:

    1) commodity price directionality
    2) rising costs that in some cases exceed growth leading to per unit op costs rising and if prices due fall lead to contracting cash flow.
    3) over spending or capital indiscipline.

    So its not just a who’s cheap call but who seems to be managing the above.

    With that said, I go back to my stalwarts, CHK and HK and somewhat more expensive SD in gassy E&P, and CLR for oil exposure and then several names that I watch and track and some of which are coming up in my opinion but upon which I have not yet acted like a PXP. I’ll try to work up a current list of better dance partners for the Friday post.

  17. 17
    kyleandy Says:

    tomd – looks like its time to switch PQ into something else. awaiting z’s reply as to what.

  18. 18
    zman Says:

    jy – I agree and you are seeing that reflected in rig rates. I think the bigger, more active playes will get the rigs and the little guys will have a tougher time like in last cycles only worse, as these rigs are higher spec and therefore more rare. Aubrey is safe on that count as he runs either the #1 or #2 rig out operation in the country (his words on the last call) . But the mids and especially small caps may be dreaming. Good for NOV, HP, NBR.

  19. 19
    zman Says:

    Kyle – all I have in PQ right now is some worthless Agusut 22.50 calls and an opening wedge of stock. I will hold the stock for quite some time. I may add options as per conditions in 10.

  20. 20
    Bleemus Says:

    Natural Gas Data is due at 10:35AM ET. Bloomberg reports that analysts are expecting a build of 62 bcf in Natural Gas Inventories during the week ending Aug 1 (last year natural gas saw a build of 42 bcf); analyst estimates range from a build of 51 bcf to a build of 65 bcf (18 out of 18 analysts are expecting a build); 4 week average is a build of 86 bcf; last week inventories rose 65 bcf to 2461 bcf.

  21. 21
    Nicky Says:

    Morning all. DD re # 14. Let me take a look and I will come back to you.

    Broader market – 11500 is pretty key in the Dow. I would say that if the market has higher highs left in it this area would have to hold. We may see another move up to below yesterdays highs.

  22. 22
    crysball Says:

    Z,
    Is BEXP on the Bakken Dance Card?

  23. 23
    tomdavis12 Says:

    Z: Very good numbers from PDC today. Good for NBR. Thanks for your PQ updates. Will look forward to your updated dance partners.

  24. 24
    zman Says:

    Crys – I took my first tasted there and got bashed but only due to my slowness and bad timing of the trade. Think things look bright there.

    Suddenly HK not going bankrupt.

    GDP halted with trade imbalance. See comments in post, very strong quarter.

    Wow , that VRNM from the post. Moonshot.

  25. 25
    Nicky Says:

    Reiterating from yesterday though we did make it to the lower end of resistance area which was 1291 – 1302 SPX so a top can be in.

  26. 26
    zman Says:

    Thanks Nicky – time to start watching the XLE vs XLF trade.

    Energy groups shrugging off the first retreat of the day as the DJI drops 155.

  27. 27
    zman Says:

    The shrug off of the market going pretty well so far although we have gas inventories to get through in about 40 minutes.

    SFY call in 5 which will be of little interest to many here but is one I follow for sport and the fact that they have finally dumped that Kiwi boondoggle and continue to do well at Lake Washington makes it a good, cheap one to keep an eye on.

  28. 28
    Sambone Says:

    Off subject – From our previous conversation on “Dark Pools”.

    Dark Pool Trading System Liquidnet Plans IPO

    By LYNN COWAN
    Of DOW JONES NEWSWIRES

    At a time when major Wall Street firms are grappling with the effects of the U.S. stock market’s volatility, alternative trading system Liquidnet Holdings Inc. has filed plans to launch an initial public offering.

    Liquidnet, which allows institutional investors to buy and sell large blocks of stock anonymously, registered with the Securities and Exchange Commission last month to raise up to $500 million. Because Liquidnet has set neither its share price nor size, the actual amount it raises through an IPO will likely be different than the registration amount. The company, which declined to comment, also does not have a date pegged for its IPO, nor has it settled as to what exchange it will trade on.

    What is certain is that the New York firm, which began operations in 2001, occupies a niche of Wall Street that doesn’t carry all the baggage associated with major brokerage firms. Liquidnet has no complicated asset-backed securities on its books to write down and has a simple business that charges commissions for institutional trades.

    Its services remain in demand during a volatile market — Liquidnet’s average daily U.S. trading volume increased 32% to 63 million shares in 2007, while they rose 41% to 81 million shares in the first quarter of 2008, compared to the same period a year ago.

    Alternative trading systems “don’t have the same exposure to risk” as the rest of Wall Street, says Ed Ditmire, a market structure analyst at Fox-Pitt Kelton. “They’re solely transaction-based and aren’t acting as a trading counterparty. Among financial stocks, these seem like the most resilient business model for the current business environment.”

    Liquidnet offers a so-called “dark pool” of trading that allows major investors like mutual funds to negotiate to buy and sell large chunks of stocks from one another with anonymity. Such institutional investors often find that once the size of their order and their identity are known to the broader market, prices can move against them.

    Using an alternative system like Liquidnet that cloaks their identity can help shield their trades from this market impact. In a 2008 survey by Greenwich Associates, the company was ranked No. 1 for lowest-market-impact trading costs among U.S. electronic trading systems in the U.S.; in 2007, it was the eighth- and ninth-largest institutional broker-dealer for dollar value traded in Nasdaq and New York Stock Exchange securities, respectively, according to the publication BrokerEDGE Monitor.

    “Commissions are already so low that other considerations like market impact and execution quality have become relatively more important to institutions, and that’s where dark pools come in — as a value-added product. When commissions are measured in pennies, but you can move a stock by several bucks due to market impact, market impact really matters more,” says Jane Gladstone Wheeler, an investment banker who heads Evercore Partners Inc.’s (EVR) financial services corporate advisory business.

    In 2007, Liquidnet’s revenue rose 37% to $346 million and its net income increased 19% to $115 million, compared to 2006. In the first quarter of 2008, its revenue rose 38% to $107 million and net income rose 11% to $30 million, compared to the same period of 2007. The company hasn’t released second-quarter results yet.

    Liquidnet is not without its risks. Analysts and bankers say off-exchange marketplaces like Liquidnet could attract unwanted regulatory attention, which could affect or change the business. The company warns in its prospectus that declining trading volumes, whether in its own pool or the broader market, could reduce its transaction fees.

    That’s an investor concern that is already clearly reflected in the share prices of large stock markets in the U.S., adding uncertainty to when Liquidnet might be able to debut. Both Nasdaq OMX Group Inc. (NDAQ) and NYSE Euronext (NYX) saw their average daily share volumes increase in the first and second quarters, compared to the same periods in 2007. But their stocks, which have declined about 37.3% and 50.2%, respectively, since the start of 2008, are faring about the same as Merrill Lynch & Co. (MER), down about 47.7% year-to-date.

    Dark pools such as Liquidnet succeed only when enough investors converge on them, and conversely, investors are only attracted to dark pools that are “deep” with plenty of participants. The dark pool industry itself has become a victim of its own success; the number of companies in it has multiplied in the past five years, spreading traders more thinly and lowering the average trade size, a source of frustration for investors who want to get large blocks done quickly.

    But Liquidnet, as one of the leading pools, had a bigger average block size of 51,200 shares in its negotiation system last year, compared to average trade sizes hovering around the 300-share mark for the major U.S. exchanges.

    “One of the challenges for a new entrant is gathering enough participants to make it successful — and liquidity begets more liquidity,” says Kenneth Schiciano, a managing director who specializes in the financial technology industry at private equity firm TA Associates Inc. “Anyone can set up a crossing system, but if the liquidity is not there, it’s meaningless.”

    —By Lynn Cowan, Dow Jones Newswires

  29. 29
    zman Says:

    HK at HOD, may lose those Aug $30 calls from yesterday since it has been awhile since I’ve had a 60% gainer in 24 hours.

  30. 30
    BirdsofpreyRcool Says:

    z – great call on the Hawk!

  31. 31
    antrimshale74 Says:

    TXCO exploding higher today.

  32. 32
    zman Says:

    I’m forgetting about SFY for now unless I take a put there. Whole new set of troubles.

    Oil well off highs now as traders continue to look for reasons to sell any bumps.

    Stocks following oil around by the nose more today which is not what I’d like to see as per opening comments in the post.

  33. 33
    zman Says:

    Guess people liked the TXCO earnings and rate on that headline well, don’t know them well enough to comment.

    GDP – people loving the quarter and the Haynesville well comments – there is a summary in the post on this one. Conf call at 10 central.

  34. 34
    BirdsofpreyRcool Says:

    SFY… they just never seem to get it all together. kinda “The Gang Who Couldn’t Shoot Straight.” Sorry to hear it’s still true. that Lake Wash stuff is pretty good.

  35. 35
    zman Says:

    BOP – I used to remind myself not to put that exact phrase in First Call notes when describing their ops at Kauri and other places that make nice vacation spots but don’t seem to be easy to extract hydrocarbons from. Lake Washington is coning water bad. Lot of line problems. Will check in next quarter. In this environment, I may take puts here. I like Terry but this won’t fly.

  36. 36
    Garyinhou Says:

    56 should help?

  37. 37
    BirdsofpreyRcool Says:

    z – sorry to hear SFY’s last jewel is watering out. hadn’t heard that recently. well… puts look like the only way to play that name.

    agreed. nice guys. but New Zealand was just so weird, never took ’em seriously after that.

  38. 38
    Dman Says:

    Oil following NG here ?

  39. 39
    zman Says:

    56 Bcf injection, light to the Street, gas rallying nicely, breaching $9 from below.

  40. 40
    zman Says:

    NG up 30 cents. Hello green day.

  41. 41
    zman Says:

    Tempted to take a picture of the screen and hit the beach. I think we weathered our first red intraday test well.

    Oil following NG??? yep, that’s a little weird.

  42. 42
    kyleandy Says:

    nicky = z thinking of beach he coming to visit us???

  43. 43
    zman Says:

    BOP, you going to listen to the KOG call, what time is it again?

    I have GDP at 11 EST and PVA after that.

  44. 44
    antrimshale74 Says:

    Did anybody see that clip of Dennis Gartman on CNBC yesterday saying that oil was heading below $80?

  45. 45
    Bleemus Says:

    KOG call is at 11 am EST. Here is link to sign up…

    http://www.videonewswire.com/event.asp?id=49714

  46. 46
    zman Says:

    Beach visits:

    going to the Redneck Riviera in Sept.

    and San Diego in October for IPAA – broadcasting live from there but they don’t know it yet. If you are going to attend let me know, I’ll be buying drinks at the Palace bar.

  47. 47
    zman Says:

    Antrim – did not, was it a fundamentals are crashing call?

  48. 48
    Bleemus Says:

    And here is link to Power Point presentation KOG will use….

    http://www.kodiakog.com/pdf/KOG%20April%202008.pdf

  49. 49
    zman Says:

    Nicky – any thoughts on a near term bounce in the broad now that you’ve gotten your near term top. Oil service is lagging the other energy names due to the broad.

  50. 50
    zman Says:

    Thanks very much Bleemus, it’s that kind of help that keeps me from having to hire an apprentice.

    Producing region saw a 7 Bcf draw. It’s been hot down here. I would not expect next week to show same as we have cooled down significantly.

  51. 51
    zman Says:

    Dman – nice intuition on PQ.

  52. 52
    zman Says:

    GDP up 15%

  53. 53
    Bleemus Says:

    Still hotter than Africa here in the Southeast. Has been for days. Heat advisory in place.

  54. 54
    breakhound Says:

    Z ATLS is working in the marcellus and also owsn stakes in atn,apl,ahd. looks pretty cheap. Any take on this one. It has eps after the bell today

  55. 55
    Sambone Says:

    9:49 am EST

    Nymex Crude Rises On BTC Pipeline Closure

    By Carolyn Cui
    Of THE WALL STREET JOURNAL

    NEW YORK — Crude oil futures bounced back on supply woes, as a key European pipeline could be shut down for five weeks.

    Light, sweet crude for September delivery traded $2.40, or 2%, higher at $120.98 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $2.11 higher at $119.11 a barrel.

    Thursday morning’s uptick came after BP PLC (BP) said it would shut down its Baku-Tbilisi-Ceyhan pipeline, or BTC, which has a capacity of 1 million barrels a day. The pipeline was damaged by a fire in Turkey on Wednesday, and could be down for up to five weeks, a spokesman for operators of the Turkish portion said Thursday. BTC averages 850,000 barrels a day, or 1% of total world oil demand.

    BP, which operates and owns 30.1% of the pipeline, said BTC had declared force majeure, which means it can’t guarantee carrying the oil for contracted shippers. BTC transports crude more than 1,750 kilometers from the Caspian Sea in Azerbaijan to the Mediterranean Sea in Turkey.

    “Short-term supply issues are edging out demand concerns for now,” Barclays Capital wrote in research note this morning.

    Whether the rally will hold remains “a tough call,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA.

    Barakat noted that U.S. futures are trading at a premium to Brent, the European benchmark blend, even though the pipeline closure’s impact is mainly on European markets. The fact that Brent didn’t rise faster than the U.S. contract indicates that the supply threat posed by the pipeline is less significant than it first appeared, Barakat said.

    Oil prices have fallen for three straight days, pressured by concerns over eroding demand. Wednesday’s drop came after a mixed U.S. inventory report featuring larger-than-expected builds in crude and distillates stocks counterbalanced by a large draw on gasoline stocks. Crude settled at $118.58 on Wednesday, the lowest level since May 2.

    Front-month September reformulated gasoline blendstock, or RBOB, recently traded up 5.08 cents, or 1.72%, at $3.0001 a gallon. September heating oil traded 2.02 cents higher, or 0.62%, at $3.2581 a gallon.

    —By Carolyn Cui

  56. 56
    Bleemus Says:

    EOG EOG Resources moves to session highs in recent trade; hearing stock was upgraded to Perform at Oppenheimer (99.48 +1.49) -Update-

  57. 57
    Dman Says:

    Z – #51 well, would be happier with it if I’d acted on it ๐Ÿ™‚

  58. 58
    zman Says:

    Break – will look at ATLS before close, not close to them though so don’t know I’ll anything intel to say.

    GDP call started.

  59. 59
    BirdsofpreyRcool Says:

    z – rats! i was going to ask you the same. i have a “special sit” call i have to be on.

  60. 60
    zman Says:

    If you look over the Haynesville players list, the love is coming back.

    HK, GDP, GMXR, PVA all up strong. CHK getting little swing however.

    EOG – saw that note and think he’s missing the boat on his NAV number. Very timid as are many E&P analysts right now.

  61. 61
    zman Says:

    GDP – Conf Call

    8 vertical wells so far

    “extremely well positioned” financially to go after the horizontal H.S.

  62. 62
    BirdsofpreyRcool Says:

    Sam – nice call on buying SKF yesterday.

  63. 63
    zman Says:

    NG failed 9 and is up only a dime now. I think we rally from these levels however this feels like ongoing fund liquidation as we continue to see better than expected (bullish) injection levels and they continue to get a muted response on the day of or worse and then follow on selling. The glut thesis is a red herring.

  64. 64
    VTZ Says:

    The glut in gas is the equivalent of demand destruction in oil.

  65. 65
    apbd Says:

    Getting my feet wet with a little UNG Sept 42’s. Starting to get a little confidence back.
    apbd

  66. 66
    zman Says:

    ZTRADE: Out HK $30 calls (HKHF) for $4.10, up 71%. Will roll longer here or in another Haynesville name as the 2Q progresses. Still holding higher strikes in August (not for long if possible) and the September $35s taken yesterday.

  67. 67
    kyleandy Says:

    TXCO – very excited about pearshall play. think it could be very big. have added substantial acreage. very positive call.
    z – who else in pearshall??

  68. 68
    zman Says:

    Kyle – I think ECA and SM. TXCO may have the most leverage to it.

  69. 69
    zman Says:

    ZTRADE: SD $50 September calls (SDIJ) for earnings tonight, added for $2.95.

  70. 70
    BossmanG Says:

    Z, how do you feel about the HK Sep 40 calls?
    Also about NFX, SLB, NBR ones that are underwater?

  71. 71
    Sambone Says:

    Love that Chavez

    By Raul Gallegos
    Of DOW JONES NEWSWIRES

    CARACAS (Dow Jones)–Venezuela would vote in favor of an output reduction by
    members of the Organization of Petroleum Exporting Countries as a measure to
    stop prices from sliding further, the country’s oil minister said Wednesday.
    Venezuelan officials also will ask their OPEC colleagues to do everything
    necessary so oil prices stay at levels they consider fair, Oil Minister Rafael
    Ramirez told Dow Jones Newswires in a brief interview Wednesday.
    “If in the upcoming meeting in September we have to review output levels of
    the members for an output cut, we would have to do that,” Ramirez said. “We
    will support the measures necessary to prevent an oil price collapse.”
    Ramirez declined to say whether Venezuela will propose a cut, but insisted
    that if it becomes necessary he will vote for it.
    The ongoing decline in oil prices, he said, is a concern for Venezuela. The
    recent oil price decline has been “important,” said Ramirez. Yet the minister
    pointed to the price decline as proof that speculation plays a key role in oil
    prices right now.
    OPEC member countries are getting ready for the 149th ordinary meeting slated
    for Sept. 9 in Vienna.
    After falling from a record high of $147.27 a barrel on July 11 to $118.58 a
    barrel Wednesday for September delivery of Nymex light sweet crude, prices are
    still about 60% higher than they were at the beginning of August 2007.
    Venezuela’s basket of crude and products stood at $116.36 a barrel as of
    Friday.
    There have been signs of late that oil consumption in the U.S., Venezuela’s
    largest oil customer, is beginning to slow. Ramirez acknowledged that this is a
    concern but insisted that caution must be taken and the figures must be
    analyzed closely.
    “We will see about that…Our position will always be, ‘let’s be careful,
    careful with the price for our natural resource,'” he said. “We cannot let
    consumer countries pressure us into increasing output, so they can build
    inventories and then nothing can be done when oil prices drop.”
    In Ramirez’s view, a key issue that OPEC members will have to discuss is the
    problem of oil price speculation. Ramirez blamed speculative market activity
    for hurting the market and with it OPEC member countries; so, he said, “the
    September meeting will likely revolve around this issue.”

    -By Raul Gallegos, Dow Jones Newswires

  72. 72
    ddaley Says:

    The briefing trader on UNG:
    UNG – would suggest trimming a bit more on this run as price explodes above yesterday’s high on bullish Nat Gas data – you’ve got some natural resistance points upcoming, including the 42.50 area and 43.75 – will keep half the shares for a run at taking out the recent pivot highs and possibly attack the 200 MA.
    We recommend a long position in the UNG after the build in natural gas came in much smaller than expected likely influenced by GOM shut-ins. After holding a bearish view on gas since the end of June, we have become much more constructive over recent days based on price action. Today’s data supports the view of a near-term bottom in gas with the caveat being weather.

  73. 73
    zman Says:

    Boss – the HK $40s depend almost entirely on oil holding and gas recovering (but more the oil) as it will dictate sentiment in the group. The stock is cheap again but we know that may not matter. The 40s are on the edge of comfortability meaning I’m holding them but not adding. Managers in the group are still very snakebit so rallies like this may get sold…I think we have put in the near term lows but I could be early.

    On the others, I feel good about the companies, lousy about all but the lowest strikes I’m in, especially the NBR and WFT high strikes which simply have no chance to come back, look to minimize losses in those. In a month I suspect the stocks will be on the road to recovery but August exp is 6.5 days from now.

  74. 74
    Bleemus Says:

    Ddaley-
    Where do you find that content on Briefing? I must be blind!

  75. 75
    zman Says:

    Thanks for that briefing piece DD. Sounds good.

  76. 76
    Nicky Says:

    Z – re #49. At the moment we only have 3 waves down in the broader market so we can’t confirm a top in place.

    Commodities look like they are trying to form a bottom…I am watching the metals closely as v down may have completed earlier and we now need to see a move above today’s highs. Normally with a big down week in metals we see a reversal on or before Friday.

  77. 77
    Dman Says:

    Broad market thoughts: decoding Cramer.

    I’m not dwelling on Cramer for the sport of it (got better things to do, believe me).

    Aside to Nicky: I was amused to find myself defending Cramer the other day. I’m not a huge fan of his, but I don’t despise him. However, I’m sure I *would* despise him if I had tried to follow his trades: I would be despising him from the (relative) safety of a pysch ward.

    We have been used to seeing Cramer contradicting himself from one day to the next. Then, in the last few weeks, he was contradicting himself intraday on energy, with sequential articles seemingly taking opposite positions. I’ve been reading him for a long time, so I don’t think I’m misreading the articles.

    But yesterday was the piece-de-resistance: in multiple cases he seemed to be contradicting himself *intra-article* and he managed to do it more than once per article. A caveat is that frankly, these pieces didn’t really seem to make any sense and I was wondering if he was finally cracking up.

    The subject was the relationship between the broad market and energy. He is trying to craft a thesis where a sweet spot can exist for both energy and the broad market.

    My comment: maybe that sweet spot exists but is there any reason for these crazy volatile markets to find it?

    Z – someone sure is trying to sink NG. If it is fund liquidation it raises the question of who will be left to buy it on the way up? But I suspect there will be volunteers.

    My impression is that the reason the E&Ps didn’t hedge out their production when NG front month was at $13 is that frankly they are very bullish on the stuff. Is that your take on the E&P view of it?

  78. 78
    zman Says:

    Nicky – thanks for the broader commodity thoughts. Keep me posted as I tend to get focused on the trees (oil, natural gas, coal) while the forest is getting chopped down as well. Think coal could be due a run before the end of the Olympics, may be obvious but they are in short supply of met and generating coal.

  79. 79
    antrimshale74 Says:

    SWSI almost at 52 week high today.

  80. 80
    zman Says:

    Dman – requires to much thought to answer 77 until after I get GDP off the speaker. Will get back to you and if I don’t within 30 minutes kick me.

  81. 81
    zman Says:

    wow, look at that cellulosic name VRNM crash back to earth now, down 14%. Gotta get to know that one.

  82. 82
    ddaley Says:

    Bleemus,
    Briefing offers a “Trader” service for $300 a month, which among other things comes with observations and suggestions by a group of 5 -8 traders who trade and declare their trades, and opinions. By and large they are real ‘daytraders’, in and out for a one dollar move, not swing.

  83. 83
    Bleemus Says:

    KOG call was pretty much a snoozer. Very optimistic regarding Bakken acreage as nearby privately held well rumored to be doing great on the Indian reservation where they have their acreage. Wells to north of reservation are all doing well. Looks like another quarter or two before we see some solid results.

  84. 84
    BossmanG Says:

    ddaley, how are the stats on that “trader” service?

  85. 85
    zman Says:

    DD – I would caution you to be careful not to violate copyright on a product like that. Thanks for understanding.

  86. 86
    Bleemus Says:

    thanks DD, I found it after your description

  87. 87
    zman Says:

    WILDZ: SD August $50 calls for $0.90. Very risky with the stock at $45.35, earnings tonight and expiration tomorrow. This one may be a day trade for a rally into the close.

  88. 88
    Bleemus Says:

    As for copyright I only post Briefing blurbs that are also available on the free wire services. No content that they supply color on gets pasted unless I have a brain cramp.

  89. 89
    BirdsofpreyRcool Says:

    Bleemus – thanks for the KOG summary. If the rumors about the private well to the north come true, the stock should bask a bit in that glow, i would think. But, long wait to hear results from their first Bakken well, i’m afraid.

  90. 90
    Bleemus Says:

    Expiration is Friday the 15th isn’t it?

  91. 91
    zman Says:

    Thanks Bleemus, just trying to avoid getting sued which I find distracting.

    Also thanks for the KOG summary. Would agree with BOP on the basking in the glow and my two cents on well results is that once spud the well can run up into the results much like GMXR and GDP who have not yet harvested a molecule from a horizontal well in the Haynesville but act like they are a certainty.

  92. 92
    ddaley Says:

    NOT from briefing trader, but from briefing. Something we basicaly know:
    Energy/Commodity sector near Weekly Support zones:

    It’s no surprise that money has been flowing out of the Energy/Commodity space the last 2-3 months, but a number of these stocks have begun to show up on my Weekly “oversold” lists, suggesting that some sort of recovery/stabilization may be in order the next few weeks. A look at the Weekly charts in many names will reveal long-term uptrends and key support zones coming into play which could make for a low-risk position trade. Note however, these should be treated as “counter-trend” trades as the Daily momentum is clearly down (10-ema < 20-ema < 50-sma), so you’ll want to either consider scaling in Long on weakness, trading smaller size, or hedging the position, etc.

    With the XLE and OIH both dropping more than -20% off their early July highs and slipping below their 200-day simple ma’s the last few weeks, the group is looking very near-term oversold and due for a recovery/stabilization here during August. Note on the Weekly charts, the longer-term uptrend lines are coming into play along with some key retracement levels.

  93. 93
    zman Says:

    Expiration- yes, last day is next Friday.

  94. 94
    zman Says:

    Paris Hilton Energy Plan:

  95. 95
    ddaley Says:

    Z,
    Apologies, this issue has not come up, or I have not asked. I shall keep careful track in the future. I would not want you to get sued, as bad as a bris.

  96. 96
    Bleemus Says:

    Z- Thanks. You had me scared there for a second with the WildZ trade saying it was tomorrow. I was scratching my head thinking I overslept by a week. ๐Ÿ˜‰

  97. 97
    bill Says:

    BULKERS GETTING SLAMMED AS SPOT RATES ARE FALLING.

    ONLY FREE IS UP (SORRY FOR THE CAPS)

  98. 98
    zman Says:

    6 days is pretty Wild for a $6 needed move in my book, lol.

  99. 99
    teomax Says:

    is anyone of you pros following ATPG? I just bought some shares and options today, they trade around 1x CF in 08 (stated by CEO in CC) as they had some bad Q report. actually not so bad, but market dont trust them.

  100. 100
    ram Says:

    A select number of service stocks are running as if there is a suitor brewing.

  101. 101
    zman Says:

    ATP has traditionally been a bottom feeder. Never liked their game plan but have not visited in a long time. There’s cheap and there’s cheap for a reason.

    CFPS estimates all over the map on those guys (spread for 2009 is $15 to $29) with 17 analysts covering…that’s a management problem in my book.

  102. 102
    Bleemus Says:

    I am playing SD earnings a bit different. Selling a AUG put vertical.

    Sell the 45s.

    Buy the 40s.

    Credit of $1.65

    Safe down to $43.34 in case of mild miss and keep all the money with anything over $45.

  103. 103
    zman Says:

    Ram – you mean WFT. Saw that, it’s like a little SLB. Maybe that (and the broad market) is what is holding SLB down. Still scratching head over the relative poor perf there.

  104. 104
    zman Says:

    NG goes red. Just hard to believe given the drop we have had, pulling oil down with it.

  105. 105
    antrimshale74 Says:

    Didn’t you get the memo to buy AIG? It is so much more compelling!

  106. 106
    zman Says:

    Just looked through ATLS. Good looking well results Marcellus last quarter, would not venture a guess on current quarter as they have a different structure than your usual E&P with at least two classes of stock and a transmission segment. Sorry just not much help on these kind of deals.

  107. 107
    elduque Says:

    I think the main reason for the poor performance today, is the strength in the dollar. Why it is stronger is beyond me.

    I am curious why CHK’s poor relative performance.

    Maybe the answer is that it was owned by the bigger funds, who have been unwinding their energy/financial positions.

  108. 108
    VTZ Says:

    How is the dollar stronger?… Every time one of these banks reports an 11 billion dollar loss the FDIC is a step closer to printing more cash to bail them out… how much longer do people need to realize that there is probably a total of a trillion in writedowns and we are only 400 billion in and the us government has already had to bail out X number of institutions.

  109. 109
    zman Says:

    Eld- agreed $ reversal from earlier playing a part, must be ECB comments which now sound much like the Fed. Growth slowing, inflation rising. But natural gas almost must be a hedge fund problem.

  110. 110
    1520sbroad Says:

    ATLS – i follow APL – their processing and pipeline MLP. ATLS pros in my mind – good marcellus exposure, they are the “locals” in PA and have been there a while (may help down the road with environmental, water issues), improving well results based on last quarter, all the subcompanies in some sense work for ATLS – for example APL has a deal where they automatically hook up ATLS wells, may be a good way to work the takeaway issues in the marcellus. Cons – exotic structure with GP status, MLP’s, LLC’s – it can be hard to know who is who, mgmt has been selling the shares recently – the cohen family still has a big stake though.

  111. 111
    Dman Says:

    The whole equity market is keying off every 10cent move in crude. Amazing. We don’t really need 10000 stocks. Just USO and its inverse.

  112. 112
    zman Says:

    Epperson completely avoided talking about nat gas. No wonder I don’t watch those guys.

  113. 113
    1520sbroad Says:

    another pro to ATLS – they have exposure to other plays via their ownership stakes in the subcompanies. Most of this exposure is more on the infrastructure end – i.e. pipelines that takeaway from fayetteville shale, processing assets they bought from Anadarko about a year ago, hard to estimate the final benefit to ATLS as it goes thru another company before ATLS gets it. I know they have some Michigan acreage too – i think that may have been a deal they bought from somebody.

  114. 114
    1520sbroad Says:

    ATLS – final thought – another con – they may fall into the serial filer category.

  115. 115
    breakhound Says:

    Thanks 1520’sbroad. Atls seems so cheapand has great land holdings but the market it gives it no love. they have an enermous amount of debt outstanding and keep issuing more though long term they should be able to pay it all off. In the group AHD looked good as a yield play. they hold the general partner in apl and million common units but the market tanks all of it almost everyday.

  116. 116
    1520sbroad Says:

    i own APL and have had it for a number of years. Great yield play and if you like MLP’s the tax benefit is helpful too. APL has been terribly beaten down over the last year in my opinion. There has been a lot written and discussed about how MLP’s took it on the chin over the last year because many of their big holders (wall street banks, hedge funds etc.) had to sell out their MLP stakes to raise cash. All that said APL (AHD and ATLS) have some great assets.

  117. 117
    elduque Says:

    I haven’t posted much, but I do read all your comments during the day. Many thanks to all of you.

    Especially want to say much appreciation for the GMXR post. Paid for many years of subscriptions.

  118. 118
    PackMan Says:

    PQ … fyi I have a few stock positions (regretting it a bit).

    21.90
    19.90
    18.95

    However, all are covered by sales of calls. Aug 22.50s for the first 2 and Aug 20’s for the last (plus some uncovered to trade around).
    Just added some Sept 25’s for 45 cents.

    Great way to reduce cost basis and play for upside.

    Mitigates somewhat the disappointing stock performance. My highest cost basis shares above are now reduced to about $21 by these sales.

  119. 119
    breakhound Says:

    Hopefully you bought apl in march 2000. I think AHD has better cap appreciation being it has the incentive distribution rights on apl. the chart looks a little healthier.

  120. 120
    PackMan Says:

    Also long UNG (stock, not option) just above $40.

  121. 121
    1520sbroad Says:

    not quite that long with APL – my first buy was in 05 – i have bought more recently though.

  122. 122
    PackMan Says:

    well that UNG purchase looking real solid now, under $40 already …LOL.

  123. 123
    Sambone Says:

    By Brian Baskin and Carolyn Cui
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–A switch in accounting for energy derivatives exposure
    isn’t the main reason that crude oil futures have plummeted 18% from their
    record high.
    A large, unnamed oil trader recently classified as a speculator by government
    commodities regulators hasn’t been forced to trim positions, Tom LaSala, the
    head of compliance at the New York Mercantile Exchange, said Thursday.
    While the move by the Commodity Futures Trading Commission relabeled some
    positions, the Nymex has sole authority to force any market participant to
    reduce bets outstanding.
    The Nymex’s response undermines a widespread theory in the market that the
    reclassification forced the entity in question to liquidate some positions. The
    new designation came during a period of extreme oil price volatility, with
    crude futures hitting a record $147.27 a barrel on July 11, only to plunge by
    11% the following week. A commercial trader, SemGroup LP (SGRP.XX), had also
    been forced out of the oil market around that time, with lenders accusing it of
    engaging in speculative bets.
    The CFTC in mid-July reclassified a single entity, holding a massive set of
    crude futures positions, into the “non-commercial” from the “commercial”
    category in its weekly snapshot that tallies different kinds of bets in the
    commodities futures markets. “Commercial” entities are companies that use
    futures to hedge real business operations, such as oil companies, while
    “non-commercial” refers to those that seek to profit strictly from a rise or
    fall in prices.
    The line between these two categories is often blurry, as investment banks
    push into physical energy markets and some energy companies engage in
    speculative trading, rendering it difficult to gain a true picture of activity
    in the oil market.
    The trader reclassified by the CFTC in its report for July 15 held positions
    obligating it to buy and sell about 330 million barrels of oil, about 11% of
    outstanding contracts in the futures market for light, sweet crude.
    In fact, the CFTC’s designation changed nothing about the trader’s activity in
    the market, said Tom LaSala, the Nymex’s chief regulatory officer. The Nymex
    was already aware that the trader was primarily a speculator, and was
    “comfortable” with the size of the entity’s positions, LaSala said.
    LaSala declined to identify the trader in question, citing the exchange’s
    policies on confidentiality.
    “I don’t see that their reclassification does anything, as far as mandating me
    to do something,” he said. “It’s (the CFTC’s) system, and not mine.”
    LaSala confirmed that the company reclassified by the CFTC is financially
    sound and still in the market.
    However, the week that crude oil plunged, there was some major reshuffling of
    positions. Crude oil open interest, or the number of outstanding contracts, saw
    a big drop of 8.1% in the week ended July 22, an indication that traders were
    closing out bets. Non-commercial traders also started to show a net short
    position that week. Analysts say the expiration of options that week also may
    have played a role in the tumult.
    The reclassification has also raised questions about the role played by
    speculators in the commodity boom. After the revision, non-commercial traders
    accounted for 49% of the crude oil market, rising from about 38% under the old
    calculation.
    The Nymex sets a position limit of 20,000 crude futures contracts per entity.
    Once a company goes over that amount, it must disclose additional information
    about its operations to the exchange. Compliance officers can then limit the
    opening of new positions or force a reduction.
    In reality, that occurs only if a trader’s actions threaten the exchange or
    its clearing members, LaSala said. The exchange also enforces the limit to
    prevent a single trader from accumulating a position big enough to threaten the
    orderliness of trading.
    Once a single trader accumulates one-third of all contracts in a specific
    market, exchange officials begin to consider enforcing limits, LaSala added.

    -By Brian Baskin, Dow Jones Newswires;

    -By Carolyn Cui, The Wall Street Journal;

    Dow Jones Newswires
    08-07-08 1327ET

  124. 124
    zman Says:

    El D – please ask question when you have time…makes the community a richer place. Know that sounds cheesy but I mean it.

  125. 125
    breakhound Says:

    Z, MMR’s play on blackbeard u think it will work. this stock has held up much better than most

  126. 126
    tomdavis12 Says:

    Z: What is your guess about nat gas 6 months from now? I know there are always many moving parts with weather being the biggest. The market today seems to have embraced this “Windfall of domestic production” that I have not ever felt before. Is this because of the Prop 10 in Calif? Is there a guesstimate as to weather Prop 10 will pass this Nov? What does your math say? Minus from LNG, Canada, exports plus from new discoveries. Aubrey on the CC seemed to say this extra will take some time and he still was talking $9 – $10. Could there be an extra 5% growth in supply over the next year? If so, are you thinking nat gas play should only be trades and not investments?

  127. 127
    Sambone Says:

    Off subject – Love the headline!

    http://www.waynetimes.com/police.asp

  128. 128
    zman Says:

    $9 to $11 in 6 months.

    MMR – I don’t think it works, I think it fell early as they passed 32,500′ with no results. The stock got down to pretty cheap levels and there is a lot more to them than this ultra deep, ultra expensive well. Maybe interested once the dust settles in the commodities and group.

  129. 129
    Nicky Says:

    Oil having turned count hanging by an absolute thread now! So far only 3 waves down off the high so ‘could’ be a 2, will know soon….

  130. 130
    Nicky Says:

    Broader market equally challenging. Could be in wave iv with one more high to come or we need to get moving through 11500 to the downside in short order! All the wretched markets are a nightmare today!

  131. 131
    zman Says:

    Tom – I don’t think its Prop 10. I think its a hedge fund blow up and the glut of gas story is the excuse we see now. We should be seeing bigger builds than we are.

    My math based on May supply and more current imports and a guess on exports would yield numbers that are 10 to 15 Bcf higher than what we saw in today’s injection. We lack several of the incremental adds we had this year in next years growth so I think not 5% but 3% growth. Demand on the electrical side will offset that most likely.

  132. 132
    zman Says:

    Nicky – good use of the word wretched. This still looks like bottoming action, especially in the equities. NG I think goes higher near term but the non-sensical reaction to new data points may cause more to throw in the towel. Definitely not causing a wave of short covering here.

  133. 133
    breakhound Says:

    Thanks Z. hopefully MMR and the other e and p’s build nice cup and handles to buy after this correction.

    On the market in genereal FRE and FNM need to get wiped out and restructured. big market participants might be waiting things out till that plunge is complete.

  134. 134
    zman Says:

    Bill – EGLE had a very positive pr and call this am, getting clocked with the group. They are looking for an uptick in supra rates later this summer post games, any thoughts there, they just could not have had a better Q?

  135. 135
    Bleemus Says:

    EPA rejects Texas request to ease US biofuels requirements – Bloomberg

    Texas Gov. Perry asked the U.S. govt to partially exempt Texas from the nationwide ethanol mandates.

  136. 136
    PackMan Says:

    Doubled down on UNG at 39.72.

    All out at 40.36.

    Nice day trades.

  137. 137
    Fred Says:

    Uncle Phil says:

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

  138. 138
    zman Says:

    watching the re-rally in oil while listening to the KOG replay

  139. 139
    mahout Says:

    Z:
    Re. Dman #164 yesterday on XCO call:
    Does a 1500 HP rig really have 50 people running it? Watch “Black Gold” and only a few on those rigs. I assume these biggies are used for horizontal drilling.

    Sam:
    Very good overnite read, thanks.
    But where are the August hurricanes? You are in charge, aren’t you?

    Vtz #108 :
    So right, but think writedowns will total more like 2 trillion. What an unnecessary disaster!

  140. 140
    Nicky Says:

    This close is quite encouraging for the energy complex – even distillates trying to go positive…

  141. 141
    Dman Says:

    Crude up 1.2% and NG down 2.8% on bullish NG news. Makes perfect sense!

    Gassy E&Ps mostly up (I think) on down NG. So the news has bypassed NG, hit the E&Ps and bounced off crude on the way out. Makes perfect sense!

    Oil service …um…oh I think I’ll skip figuring that out but I’m sure in “makes perfect sense” (TM)

  142. 142
    VTZ Says:

    mahout – we can argue about the number but I think we can agree it will be over a trillion and the FDIC won’t be able to continue funding everybody.

    Also, can anybody say trade deficit to the moon?

  143. 143
    Sambone Says:

    1:32 pm EST

    Oil Loses Steam; Buyers Dillydallying

    Dow Jones Newswires
    From MARKET TALK:
    [Dow Jones] Crude oil futures have given up most of their gains from the morning session. Support from a shut-down in a key European pipeline faded around mid-day. September crude is 42 cents, or 0.35%, up to $119/bbl, dropping from a 2% decent gain earlier in the day. Institutional investors are still waiting on the sidelines. “The market is in liquidation mode,” says Jim Ritterbusch at Ritterbusch & Associates. “We haven’t seen much accumulation of long positions.” The fact that the market can’t respond positively to significant news like that is just another indication that we are in a bear market, he says.

  144. 144
    Dman Says:

    Nicky, you have this market on a string. Your #140 appears & our stocks turn up.

  145. 145
    zman Says:

    KOG call notes

    Dunn County
    1) permits in hand,
    2) tubulars purchased
    3) capital raised for first few wells
    4) rig arrives in Sept

    The play: 53,700 gross, 38,000 net acres
    operates all but 7,000 net with Hunt (now XTO)
    60 drill sites based on 1 per section, could double with downspace
    2nd rig arrives in 1Q09

    Other properties – Vermillion properties.

    Drilling in Vermillion driven by DVN
    Baxter shale – 43,200 gross, 16,200 net under lease and can get more through farmins.

    Agust spud on west side of Horshoe Basin. DVN plans to drill 3 wells, 2 vert, 1 hz. The verts can be re-entered hz later.

    2 exploratory wells on the Coyote Flats unit.

    Williston – drillsite prep for Tallbear 16-15H completed permitted – middle Bakken target. 68.75% WI and operate.

    Newbuild drilling rig for September.

    Tubes for 7 wells, 4 pumping units purchased.

    30 to 45 days spud to test, so each well drilling 8-9 wells/year

    Q&A in a second.

  146. 146
    zman Says:

    BOP forgive the redundancy of the above to my note from yesterday, I’m still coming up to speed on this little guy, going to model it this weekend if I get time and like the Q&A.

  147. 147
    Sambone Says:

    M – #139, LOL
    Man, if I was in charge we would have had two in the GOM already, LOL

    I’m watching blob at 95W, 20 N currently in GOM. Not sure if it will amount to anything at this time, but shear is down, so who knows.

    Also a blob over the Bahama’s caught my eye.

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

  148. 148
    BirdsofpreyRcool Says:

    z – KOG Q&A not v. enlightening… let me know if you pick something out. btw, i thought they said “75% WI” in the Tall Bear #16… ?

  149. 149
    zman Says:

    listened to it twice: 68 point 75 but we are splitting hairs. What’s the royalty there?

    Here ya on not very enlightening so far on Q&A

  150. 150
    md Says:

    Re: #131 I attached a link yesterday to EIA electrical EPM report that adjusted upwards NG power plant consumption for March by 25 BCF or .8 BCFPD. Likelihood that April forward will be adjusted too which may partially explain weaker injections.
    Re: HK posting
    Due to my ignorance in technical jargon would it be possible for you to take a posting template and provide explanatory notes. Hopefully it will assist the technically challenged. Eg. I’m trying to understand how you arrive at 5 to 7 BCF per well on the books and what will that translate to in total reserves.

  151. 151
    mahout Says:

    Z:
    Phoenix news: Gas has been below 4 bucks for 2 weeks now. People are breathing easier. It’s incredible how much psychology is associated with that number. Also, bankruptcies are double what they were a year ago. So much for Ben’s projected growth.

  152. 152
    zman Says:

    MD – I saw the link but didn’t know what to make of it. Do you mean they revised the number up the month after it was initially issued?

    On HK, they had 1.1 Tcfe (Trillion cubic feet of gas equivalent) in booked reserves as of year end 2007. That’s the same as 1,100 Bcfe (Billion cubic ….). The equivalent term comes from smashing oil and gas together to get one number in a ratio of 6 Mcf of gas = 1 barrel of oil (the approximate BTU ratio of the two).

    Anyway looking at the Haynesville wells, if we assume that each successful well yields 5 to 7 Bcfe of proved reserves, then drilling 100 of them (to keep the math simple for the sake of argument) would add 500 to 700 Bcfe to proved reserves less the royalty burden less production from those wells prior to reserve report being calculated. Which is what I call significant, again relative to what they have on the books. Not all the wells drilled during the year will get booked as the later in the year ones may fall into the next year as they may not get completed by 12/31 but you get the idea. For more on units and reserve metrics you can also check out Z’s Dictionary at upper left and let me know if any of that needs expounding upon.

  153. 153
    BirdsofpreyRcool Says:

    z – the leases were all 5 yr w/ 18% royalty. so, i’m a tad confused (not the first time).

  154. 154
    zman Says:

    Bird, so their NRI is 56%, so a 1,000 bopd well gets them a shade under 600 bopd or revenue of $1.8 mm/ month per well which jumpstarts a company with barely a million a month in revenues now.

  155. 155
    zman Says:

    should have said at $100 oil in 154.

  156. 156
    VTZ Says:

    I’m confused as to how money is still flowing out of commodities. Is it so that they can flow it right back in in a few months?

  157. 157
    Sambone Says:

    For Nicky – This aint good

    By Meena Thiruvengadam
    Of DOW JONES NEWSWIRES

    WASHINGTON (Dow Jones)–U.S. consumer credit jumped more than twice as much as
    expected in June as American households boosted their use of credit cards in
    the wake of a faltering economy, the Federal Reserve said Thursday.
    Consumer credit outstanding rose $14.3 billion in June to $2.586 trillion, its
    highest level since June 2001, the earliest time period for which data are
    available, according to the latest report from the Fed. That follows a revised
    $8 billion consumer credit increase in May. The Fed had initially estimated
    consumer credit rose $7.8 billion in May.
    The June credit growth topped Wall Street’s predictions, which suggested a $6
    billion increase for the month.
    The consumer credit data exclude home mortgages and other real estate-secured
    loans. These tend to be highly volatile from month to month and are frequently
    revised.
    The latest report shows that in June households increased their use of
    non-revolving credit, such as car and boat loans. Non-revolving credit grew
    $8.9 billion to $1.618 trillion. That follows a $1.9 billion rise in May,
    revised downward from a previously estimated $2.1 billion.
    Revolving debt, which mainly reflects credit-card financing, grew $5.5 billion
    to $968.4 billion. That follows a revised $6.1 billion increase in May,
    originally estimated at $5.7 billion.
    Overall consumer credit grew in June at a seasonally adjusted annual rate of
    6.7%, higher than May’s revised 3.8% rise. Consumer credit was originally
    estimated to have grown at a seasonally adjusted annual pace 3.6% in May.
    Non-revolving credit expanded at a 6.6% annual rate in June after rising at a
    revised 1.5% rate, 0.1% lower than the original estimate, the previous month.
    Revolving credit grew at a 6.8% annual rate after rising a revised 7.6% in
    May, up 0.5% from the initial estimate.

    -By Meena Thiruvengadam, Dow Jones Newswires
    Dow Jones Newswires
    08-07-08 1500ET

  158. 158
    Pete Says:

    Z,
    Gassy E&Ps mostly up any reason for CHK to lag them?

  159. 159
    zman Says:

    So Wall Street was more clueless on credit than the Fed? Great.

    Listening to PVA call. Nothing interesting so far, other than another voice saying Marcellus will be slow to develop, both infrastructure and politically. Heard yesterday that permitting in PA was at a complete standstill.

  160. 160
    zman Says:

    Pete – It’s been weaker than most all day but the day is a very mixed bag with wide ranges in lots of names. Volumes are light to recent levels. Group has no convicetion today and the recent highs did sell back for all names with the break in natural gas.

  161. 161
    Pete Says:

    thanks

  162. 162
    md Says:

    RE: EPM (Electrical Power Monthly)
    You may recall we had this discussion 2 months ago after EPM for Jan was released. The electrical power consumer numbers in NG monthly seem to be estimates and will probably be revised for March in a few weeks, now that the March numbers in EPM are showing as 462 BCF as opposed to 437 BCF as shown in NG Monthly. Variance is 25 BCF or .80 BCFPD.
    Re: Units and metrics. I’m ok on that.
    How does say 13.7 MMCfepd equate to 5 -7 BCF reserves. or does it.

  163. 163
    zman Says:

    I show the XNG of 1.5% now by the way, not that it helps other than to say CHK is not alone. EOG, COG, SWN, APC, APC all red now. DVN only big cap up of note and that a lot less than earlier.

    Re EPM – got ya, I remember, they can revise those numbers up and down for 2 or more years following the initial release, sometimes wildly so. Are you seeing an upping pattern each month?

    In general, the higher the IP, the higher EUR in these plays. It’s not necessarily linear and it the relationship is going to vary from play to play and from region to region within the plays but, in short, bigger is bigger which is better.

  164. 164
    texana Says:

    long tom ward

  165. 165
    zman Says:

    SD trading up into the close but muted so far to what I would have thought due to this gas “reaction”. Ug. Thinking about punting the Augusts if we get a end of day draw up of another buck as this market is a jerk (that’s a technical term I picked up somewhere) but will hold the Septembers through the numbers.

  166. 166
    zman Says:

    Hey Tex – agree your sentiments of caution the other night.

  167. 167
    zman Says:

    DJI getting crushed.

  168. 168
    Bleemus Says:

    ATW is set to report Q3 results today after the close. Analysts are expecting EPS of $0.93 on revs of $138.93 mln.

  169. 169
    md Says:

    HK
    Haynesville – 29 wells @ 5-7 Bcfe would mean additional YE reserves of 160 added to 1.33 Tcfe totaling 1.5 Tcfe..
    How do you value HK based on earnings, proven reserves and potential reserves.
    Would a TCF go for $5.5-6 Bln *1.5 TCF =$8-9 Bln.
    At today’s share price HK is at $7BLn.

  170. 170
    md Says:

    EPM variance
    January 84 BCF WOW
    Feb. -5 BCF
    Mar 25 BCF

    I just started tracking it so don’t have a history.

  171. 171
    VTZ Says:

    Nicky – Does today confirm more bearish action?

  172. 172
    Nicky Says:

    Ah this is more like it!
    Dman – re #144 – I wish!

    Okay broader market – volume confirms this move down. Next minor cycle is a low due on 13th August plus or minus a day.

    Its likely that tomorrow we see at least a bit of a retracement of today’s move down but I would be surprised if we retest the highs.

    First target area for spx is 1253.

    I am still holding out for the bullish count in crude against yesterday’s lows -if they were to break it would be very bearish. But as long as they hold I am looking for a wave 2 rally which corrects some of the move down we have seen. I think most likely target area is between 128 – 132.

    Metals are trying my patience!! But again odds are good the low is in or close. Once again expecting to see a retracement of the move down and target areas for the bounce are 920 – 940.

  173. 173
    Bleemus Says:

    SD SandRidge Energy beats by $0.05, beats on revs

    Reports Q2 (Jun) earnings of $0.21 per share, excluding non-recurring items, $0.05 better than the First Call consensus of $0.16; total revenues rose 137.6% year/year to $378.1 mln, may not be comparable to the $267 mln consensus.

  174. 174
    Fred Says:

    Z – PBR note. It won the Gold Medal at the 2006 Great American Beer Fest in the American Lager category. As far as American Style Pilsners/Lagers goes, I don’t think you can beat it for price and flavor.

  175. 175
    Bleemus Says:

    SD Earnings release…

    http://media.corporate-ir.net/media_files/irol/19/196066/8708Q208EarningsReleaseFinal.pdf

  176. 176
    zman Says:

    Beer thirty delayed was on a call, back to address last items in a couple of hours including md question.

  177. 177
    Bleemus Says:

    “At some point, the last hedge fund will unwind their losing Energy/Financial spread.”

    Adam Warner

  178. 178
    Nicky Says:

    Sam – re 157 – this is far from over I think….
    currently 3.9 million homes for sale in the US. They reckon inventory has to come down by half before any bottom is in for the housing market….

  179. 179
    md Says:

    LNG spike in 2009
    Did you see this one. It was on WSJ Aug.4

    http://www.reuters.com/article/pressRelease/idUS115227+17-Jul-2008+BW20080717

  180. 180
    ram Says:

    Was this potential supply coming on line soon mentioned in any of the CC’s?

  181. 181
    Wyoming Says:

    Z,

    Did the completion questions get answered from yesterday? Skipped to the end before it gets too late, been busy the last couple of days and nights.

    Cemented liners, packer systems etc..

  182. 182
    crysball Says:

    Z,
    Re: LNG Spike to USA, can’t see this LG coming to USA if prices in Europe are much higher, unless there will be a big glut in Europe, driving prices down below $9mcf?

    Re: KOG the hand-to-mouth financing and the stop/start impact this has indicates they have not reached critical mass, and will remain a wannabe, couldbe, shouldbe, with low valuation.

  183. 183
    hermanmar1e Says:

    Wyoming,

    What questions were there about completions?

  184. 184
    zman Says:

    Herman – HK was talking about switching to cemented liners in the Fayetteville, seen better results with those.

  185. 185
    zman Says:

    Md – no, had not seen that story. I would like to see what they thought of this year as everyone including the EIA and every house on the Street saw US LNG imports up 30% to 50%. It is true there are a lot of projects that have been delayed. Whether they are enough to bring international prices down enough to send those volumes to the U.S. is another matter. The story says nothing about demand factors in Europe and Asia. Nigeria I would not count on being on time, Sak either. The argument that U.S. gas imports came up short due to delays in new projects makes 0 sense. We are running down 66% on average year to date and no international LNG liquefaction projects cratered. The gas simply went elsewhere. Their argument does not address the demand side which in Asia and Europe has acted like a black hole sucking up spare gas volumes.

  186. 186
    texana Says:

    SD, Looks like they had tremendous growth thru the drillbit, especially in the WTO. Their exploratory wells to outside of the Pinon Field are the buzz around West Texas. Its looks as though they have the same type of thrusting & faulted formation all along their WTO leasehold now at 610,000 acres.These wells also have a much lower co2 content and higher menthane count. They also own the surface and the vast majority of the minerals under this acreage. The last time I saw infor they were the 7TH largest driller in the US. They are basically going to get out of their none core areas and continue to ramp up WTO. Looking forward to cc and any color that might be added on new exploratory wells. Tom Ward added $100 million in stock this quarter so he thinks they got going in the right direction. Negatives: still below it’s 10, 20, & 50 dma; they will continue to issue more equity & debt to fund growth and the energy market continues to be driven by the price of the dollar. A cursory look at the $usd chart seems to show a definite break out above resistance with underlying support of 10,20 & 50 dma and 4 month base with a W formation. Most would say that this bodes for lower oil and gas prices ahead. xle rebuffed at it’s 10dma today, so I would look for the xle to regain 10 and 20 dma before going long energy option trades. Still looking to acquire select companies here for long term portfolio, i.e. sd, eog, wll, hk , clr, gmxr. late nite musing, t

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