02
Sep

Non-Tropical Tuesday

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Sentiment Watch: Fear and Loathing Return To The Energy Groups as oil and natural gas get hammer to new lows pre market. Everything from crude to gasoline to heating oil to natural gas is off 6 to 7% this morning as Gustav failed to grow into the hype of "mother of all storms", OPEC watchers also said the group's production rose for a fourth straight month in August, and the dollar is getting a British comment inspired rally. Note we are starting to get increased news flow from the E&P names as CHK sells another chunk of itself to BP (more on that below).

 

In Today's Post:

  1. Tropics Watch
  2. Commodity Watch
  3. Stocks and Stuff We Care About Today -  CHK, SWN, NFX, Lehman conference starts
  4. Odds & Ends

Tropics Watch: Busy season getting underway.

Gustav Impacts:

  • SPR Release Expected: Shell and (XOM) are expected to ask for a crude oil release from the Strategic Petroleum Reserve.
  • Damage To Offshore Platforms and Rigs Appear To Be Minimal: expect the damage tally to come in over the next 2 to 3 days as companies do fly-overs. Anadarko has said all rigs and platforms remained where they were supposed to be and some large platform operators in the deepwater have reported no damage.
  • Production Shut In: 100% of Gulf crude production and 95% of Gulf natural gas production was shut in according to the M.M.S. This comes to 1.35 mm bopd (about a quarter of U.S. production) and 7.4 Ncfgpd (another 0.67 Bcfpgd of state waters production is off line as well) or 15% of U.S. gas production. Computer models from Kinetic Analysis Corporation, a Silver Spring, Md.-based company, predict that 40% of Gulf of Mexico oil will be offline for 30 days and about 30% of natural gas will be offline for 30 days with marginal improvements after that. MMS will update GOMEX production stats at 2 pm EST daily.
  • Refineries: Estimate of 15% of U.S. refining capacity is off line due to the storm. Forecast is for rain, rain, and more rain through the end of the week. (VLO)'s 250,000 bopd St Charles refinery is relatively undamaged and has power. Valero plans further inspection work today before announcing a restart plan. (XOM) has shut its 503,000 bopd Baton Rouge refinery due to power loss. Refineries generally take several days to restart.
  • LOOP: the Louisiana Offshore Oil Port has been shut (the reason for those SPR requests) and a reopen data has not been announced. Computer models developed by Kinetic Analysis Corporation, a Silver Spring, Md.-based company estimate that LOOP will be out of service for two or three weeks. ~ Forbes

Hurricane Hanna: Now a Cat 1 Hurricane and looking to be an East Coast event which won't impact any production but could serve to reduce gas demand in the southeast for a few days.

Tropical Storm Ike - formed in the mid-Atlantic yesterday, looks likely to be a hurricane by tomorrow and, is tracking due east towards Cuba but it is very early for predictions of where it will ultimately land. Still we are in the sweet spot for tropical development.

 

 

Commodity Watch: Commodities slumped in the weekend trading session as Gustav failed to impress traders.

Crude Oil. Oil is down $7 (6%) in pre market trading from Friday's close. I think that down between $6 and $10 early this  morning is an overreaction to a storm that simply did not move oil up that much and that traders should not forget that OPEC has said their is too much supply on hand and the fact that September is the busiest storm month of the year.

  • OPEC Watch: August production was the fourth consecutive month of rising Cartel production. OPEC produced 800,000 bopd over quota (much of it the result of Iran's heavy oil inventory sell down). OPEC meets September 9 and I would look for a test of $100 between now and then if there is no indication that they will ahere to current quotas or cut production at that time. OPEC has previously stated that it sees a strong rebound in global crude stock piles this Fall and I suspect that they will make some move to curb production at the metting.
  • Dollar Strength. Up over 1% this morning as a British official says its economy has not been this bad in 60 years.

Natural Gas is off $0.60 (also 7%) in early trading and I might point out there is no SPR for gas.The EIA's Natural Gas Monthly for the month of June was released yielding few surprises. YoY production continues to run about 4 Bcfgpd (8%) higher than year ago levels.

Stocks and Stuff We Care About Today

CHK Sells 25% Of Its Fayetteville Shale Assets to BP.

The Deal:

  • BP Pays $1.9 B ($1.1 B now and $800 million over 2H08 and in 2009)
  • Gets 135,000 net acres equating to 25% of CHK's Fayetteville Shale position
  • Comes to $14,000 per acre
  • The $800 million is a carry of CHK's costs for drilling
  • BP has a right to participate with CHK in additional acreage buying for 25%
  • This is the second deal this summer with BP, after they bought out CHK's position in the Woodford Shale
  • Values CHK's Fayetteville position at about $8 billion,
  • This is more buy first and low and then sell high from these guys as they did with the aforementioned Woodford and with PXP in the Haynesvile. This should go further towards alleviating analysts gripes about landgrab hungry, debt burdened Aubrey.
  • CHK also reiterated the notion that a similar deal for their more nacent Marcellus play is in the works
  • BP noted they have a significant position in the Haynesville in East Texas (they really should scoop GMXR)
  • Maybe we should have a contest to see who takes out CHK (BP anyone?)
  • Click here for the webcast of CHK speaking at Lehman at 2:25 EST today.
  • Just a reminder on their hedges:
    • 2008 (3Q and 4Q): 77% of gas hedged at $9.16/MMbtu with swaps, another 4% in collars with floors at $8.11
    • 2009: 54% of expected gas hedged at $9.79 + 7% collars wit $8.05 floors
    • 2010: 24% at $10.02

Note: This acreage valuation would put SWN's 781,300 acres in the Fayetteville Shale at $10.9 billion:

  • SWN's total enterprise value is $13.5 B ...
  • ... and the Fayetteville Shale was only 49% of SWN's booked reserves as of YE2007,
  • with the next largest chunk of reserves (24%) in East Texas.

NFX Announces First Bakken Successes.

Not much in the way of formation details, just an update with initial production rates at 2 new wells:

  • In Montana along the Neeson, the Jorgenson1-10H (54% working interest) - 911 BOEpd on a 24 hour test, another well completing and an offset to drill soon.
  • In North Dakota, the Larsen 1-16H - 710 BOEpd (46%), another well about to be completed

Lehman Energy Conference Agenda - September 2-4. These are the ones I plan to listen to. Not sure even a cure for cancer would be headed as good news out of the companies today.

Tuesday: all times EST.

  • 11:00 HAL
  • 11:40 Basic Energy Services
  • 12:20 EOG
  • 1:40 SWN
  • 2:20 CHK
  • 3:00 Exterran
  • 3:40 HK
  • 4:20 Aventine Renewable Energy

Wednesday:

  • 9:05 NBR
  • 11:05 BHI
  • 1:05 TS
  • 1:45 NFX / SD

Thursday:

  • 9:05 NOV / OII
  • 9:45 PQ
  • 10:25 BTU
  • 12:25 CLR
  • 1:05 PGS
  • 11:45 BEXP
  • 1:45 CRR

Odds & Ends

Analyst Watch: Very quiet and who can blame them today. Jessup and Lamont taking their price target up slight on ESV, UBS initiating (SOLR) at Buy.

 

 

 

129 Responses to “Non-Tropical Tuesday”

  1. 1
    reefguy Says:

    Gasoline at $2.63 thats less than $3.25 at Pump. Democrats running on empty $4 fumes into election

  2. 2
    Sambone Says:

    Nymex Crude Below $110/Bbl As Gustav Weakens

    From MARKET TALK
    9:02 (Dow Jones) Nymex crude falls below $110/bbl as Hurricane Gustav weakens to a tropical depression and its damage to Gulf Coast infrastructure appears less than feared. Nymex Oct crude -$8.02 at $107.44/bbl. (greg.meyer@dowjones.com)

    Reported Earlier: Oil Below $110/Bbl As Gustav Fears Subside
    By NICK HEATH

    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures slumped below $110 a barrel to their lowest levels since April Tuesday, driven by anticipation that Hurricane Gustav’s passage through the Gulf of Mexico has had little significant impact on the region’s oil production facilities.

    While firmer reports on the hurricane’s impact on infrastructure are expected to filter into the market throughout Tuesday, initial reaction to Gustav’s passing was that it’s likely to have caused less damage than had been feared possible.

    Gustav’s passing also allowed for prevailing fears over global crude oil demand to regroup, with many now suggesting that $100 a barrel beckons as a potential target.

    “With the fear of Gustav now gone, a downside “speed bump” will have effectively been removed as far as crude oil prices are concerned, and we expect values to start tracking lower once again,” said Edward Meir, analyst at MF Global in New York.

    At 1150 GMT, the front-month October Brent contract on London’s ICE futures exchange was down $1.93 at $107.48 a barrel, having earlier traded down to $104.14 a barrel.

    The front-month October light, sweet, crude contract on the New York Mercantile Exchange was trading $6.87 lower from Friday’s settlement, at $108.59 a barrel, having earlier fallen to $105.46 a barrel.

    The ICE’s gasoil contract for September delivery was down $15.75 at $971.25 a metric ton, while Nymex gasoline for October delivery was down 1,904 points from Friday’s settlement at 266.38 cents a gallon.

    Gustav, which peaked as a Category 3 hurricane, weakened into a tropical depression as it continued to drop heavy rain across Louisiana, the U.S. National Hurricane Center said Tuesday.

    Despite the steep selloff in crude prices Tuesday, some market observers retained a note of caution about discounting any impact on production, given that details of damage to infrastructure could yet emerge as producers and refiners begin their assessment procedures.

    Among them, Royal Dutch Shell (RDSA) and Anadarko Petroleum Corp. (APC) said they would conduct flyover assessments of their Gulf of Mexico offshore assets Tuesday in preparation for returning workers to facilities.

    The International Energy Agency on Tuesday said early indications are that Hurricane Gustav hasn’t caused major damage to oil infrastructure in the U.S. Gulf of Mexico, but emphasized that it was still early days and that more assessments were needed to cement that view.

    “The selloff may have been premature, as hurricanes can be unpredictable and we still have no idea whatsoever about the extent of damage, if any, to the oil production platforms or to the refineries,” said Michael Wittner, head of global oil market research at Societe Generale in London.

    However, crude’s failure to rally strongly on the back of Gustav’s approach — even when a possible Category 4 or 5 event was thought possible — hinted at the factors weighing on the crude market, he said.

    Concerns that crude oil demand is wilting amid a slowdown in developed economies — and potentially beyond — remain a source of downward pressure on oil prices. It’s likely to be a factor for discussion when the Organization of Petroleum Exporting Countries meets Sept. 9 in Vienna, analysts said.

    “With present IEA supply-demand estimates for 2008/09 indicating that the 2009 Call on OPEC could be (around) 600,000 barrels (of oil equivalent a day) lower than in 2008, it seems that OPEC will be required to cut at some point,” said Mark A. Bloomfield, analyst at Citigroup in London. “So, despite a strengthening of the US dollar somewhat compensating for the (approximate) $40 (a barrel) fall in oil prices from the peak (in just two months), we suspect that, with the prospect of a reduced “Call” in 2009 and with uncertainty over demand, OPEC will use this meeting as a rhetorical platform to prepare for a more hawkish stance.”

    However, a group delegate told Dow Jones Newswires Tuesday that OPEC is mulling a rollover of production when it gathers, with prices still relatively high and with demand expected to pick up “approaching the cold season.”

    While Gustav weakened Tuesday, oil market participants continued to keep an eye on additional tropical weather formations. While Hurricane Hanna is unlikely to cross into the Gulf of Mexico, market participants eyed Tropical Storm Ike moving westward across the open tropical Atlantic Ocean, the NHC reported Tuesday. The market also monitored the formation of Tropical Depression Ten in the eastern Atlantic Ocean as it makes its way west.

    “Gustav came in as the little brother, rather than the father, of all storms. However, the tropical season is not over yet,” said Olivier Jakob of Swiss oil consultancy Petromatrix.

    (Majdoline Hatoum in Dubai and Spencer Swartz in London contributed to this item)

    -By Nick Heath; Dow Jones Newswires

  3. 3
    Sambone Says:

    Friday 5:02 pm

    August Oil Prices Erode, But Stormy September Looms

    By DAVID BIRD
    A DOW JONES NEWSWIRES COLUMN

    NEW YORK — Crude oil futures prices showed profound weakness in August, averaging at a four-month low and posting the biggest month-to-month decline since April 2003.

    The market moves nervously into a three-day holiday weekend in the U.S. with the biggest potential hurricane in three years on course to strike the key Gulf Coast refining hub and threaten offshore oil and natural gas output.

    How Gustav behaves will be the main influence on near-term prices. Historically, the Nymex trading pattern shows odds favoring gains in September from August in average crude oil, heating oil and gasoline futures.

    But August’s abrupt and dramatic break from the recent trend could prove to be an overriding factor, amid slumping demand in the world’s largest oil market and worries over rising global inventories.

    U.S. oil demand in the four weeks ended Aug. 22 averaged 20.2 million barrels a day, down 750,000 barrels a day from a year earlier. The 3.6% plunge is the biggest year-on-year decline in any four-week period since Jan. 5, 2007, EIA data show.

    October-delivery Nymex crude oil futures prices settled Friday at $115.46 a barrel, down 13 cents.

    In August, the average front-month price was $116.69 a barrel, a drop of 12.6% from the average in July and the biggest month-to-month percentage decline since April 2003, historical price data show.

    Despite hitting a record settlement high of $145.29 a barrel on July 3, front-month crude prices averaged $133.48 a barrel in July, down 0.4% from the June average.

    Declines in August and July mark the first two consecutive months of declines in average monthly prices since October 2006.

    Despite the $16.79 decline from the average price in July, the front-month price in August was 61.3% above the average in August 2007. Still, that’s the smallest percentage rise from a year earlier since February. In July, the average price rose 80% from a year earlier.

    Echoes Of ’98 Weakness
    Front-month crude topped out at a high settlement of $125.10 a barrel on the first day of the month, and posted a low settlement of $112.87 on Aug. 18, the weakest price since May 1.

    In a further sign of the depth of the price weakness, the average price in August was lower than the heart-of-summer May, June and July averages for the first time since 1998.

    Back then, crude oil prices were coming under growing pressure from rising output from the Organization of Petroleum Exporting Countries and weakening demand from the Asian economic crisis. After OPEC officially boosted output further and an usually warm winter swept the Northern Hemisphere, sapping demand, prices dropped to a record below $11 a barrel, less than half of the price of two years earlier, by December 1998.

    That price signal may raise the eyebrows of OPEC ministers meeting Sept. 9 in Vienna to review output policy amid growing concerns over price weakness.

    A report by the OPEC Secretariat warned in recent weeks that OPEC was pumping more oil than required, leading to a potential large stockbuild that would drag down prices. Lehman Brothers warned in a report Friday that rising stockpiles could push the price of North Sea benchmark Brent crude to a fourth-quarter average of $105 a barrel, from around $122 a barrel in the second and third quarters.

    Still, the Gustav wildcard threatens to make September, always a volatile month, more raucous than usual. Average prices in September have moved from a drop of 13% from August levels to a 16% rise, just in the past five years.

    September prices have averaged higher than August in three of the past five years and in seven of last 10.

    Market watchers are on the lookout for inevitable comparisons of Gustav with Hurricane Katrina, which struck Gulf oil operations in late August 2005, and Hurricane Rita, which added a second blow just weeks later.

    Emergency Reserves Could Cap Spike
    Average prices in September 2005 for crude oil, gasoline and heating oil futures set record highs at the time. But significantly, prices were the highest for the remainder of the year and some months beyond, as additional supplies rushed into a market with brimming inventories ahead of the storms.

    The Bush administration put some 20.8 million barrels of crude oil into the market, either through loans or direct sales of crude oil from the Strategic Petroleum Reserve.

    The moves, coordinated with release of oil from other countries that are members of the International Energy Agency, blunted a quick run-up in prices to a then-record level above $70 a barrel, and Nymex prices didn’t settle above that level until mid-April 2006.

    Both the U.S. Department of Energy and the IEA have said they stand ready to do a repeat performance of releasing oil from emergency stockpiles if Gustav strikes a heavy blow.

    The assurances kept prices from surging in recent days as analysts puzzled out weather maps and storm track forecasts. President George W. Bush on Friday declared a state of emergency in Louisiana ahead of Gustav’s expected arrival as a major hurricane. Already, as a precaution, energy companies have shut in some 6.6% of U.S. Gulf of Mexico oil output and 1.8% of natural gas supplies, government data show.

    Nymex gasoline futures for September delivery expired down 1.15 cents on Friday at $3.0099 a gallon, while the October-delivery contract, the new front-month, ended 1.02 cents lower at $2.8542 a gallon.

    Front-month gasoline futures in August averaged $2.9404 a gallon, down 10.5% from a month earlier, and weakest price in any month since April. That’s the biggest month-to-month drop since January 2007. The August average was up 48.3% from a year ago, the smallest gain since May and compared with a 49.8% gain July.

    Average gasoline futures prices have dropped in September from August in three of the past five years, but have risen in the month in six of the past 10 years.

    September-delivery heating oil expired Friday at $3.1819 a gallon, down fractionally from $3.1826 a day earlier. The new front-month contract, October, settled down 1.02 cents at $3.1919 a gallon.

    Front-month heating oil averaged $3.1909 a gallon in August, down 15.6% from a month earlier, in the biggest month-to-month drop since April 2003. The average price was 59.7% above a year ago, the smallest year-to-year gain since February, and compared with an 81.9% rise in July from a year earlier.

    As winter approaches, heating oil futures tend to rise in September, with average prices up in three of the past five and in seven of the past 10 years.

    Price direction will come from the weather, with U.S. government forecasts calling for warmer-than-normal temperatures in September through November in New England, the core of the Northeast U.S., the world’s largest heating oil market.

    –(David Bird, senior energy correspondent for Dow Jones Newswires, has covered global oil markets for more than 20 years.

  4. 4
    zman Says:

    Hear ya reef, I still think this level of gasoline is inspiring people to fill up. Going to be some really odd looking storage numbers next few weeks.

    Refiners trying to go up on down crude

  5. 5
    zman Says:

    Good piece on the Caspian / Russian pipeline issues.

    http://www.apachecorp.com/Explore/Weekly_Energy_Perspective/Topic_Report/

    in the August 25th piece

  6. 6
    zman Says:

    TD10 forms behind tropical storm Ike.

    Iran saying OPEC must cut

  7. 7
    isleworth Says:

    Good morning Z- How low do you think Nat Gas can go? Lows of last Sept and Dec have now been taken out. Where would you begin to accumulate? Tks for any opinions/thoughts on the subject.

  8. 8
    bill Says:

    z- the chk deal

    are you suprised at the price
    implies a 7.6 b value or 15 k per acre alot lower than their last deal with pxp

  9. 9
    zman Says:

    Isle – traders want to see capex reductions. Still seeing budgets go up, as with KWK this morning. Given how absolutely hated the commodities are right now (oil, gas, coal, gold you name it) I think we see NG test $7. Then I think you have to see some guys who are producing at a loss at that point (as their differentials to Henry Hub are high) announce curtailments. As to timing, don’t know but think a bounce requires a catalyst and that it won’t be inventory numbers, at least not at first, as small injections will be written off as Gustav related.

  10. 10
    zman Says:

    Bill – no, two completely different animals the Haynesville and the Fayetteville. $14 K per acre in Fayetteville is a good price. $30 K in Haynesville was a very good price.

  11. 11
    Nicky Says:

    Morning all. Why on earth would OPEC need to cut – we are still at 108 which is pretty high.

  12. 12
    Nicky Says:

    Support for nat gas below today’s lows is at 7.23, 6.83 and 6.5.

  13. 13
    zman Says:

    Nicky -I’d say it is about fundamentals and the expectation that global inventories are expected to bloom at current production rates but I suspect it also has to do with fear of double digit priced oil and not being able to halt a slide from 99 lower if they don’t nip it now.

  14. 14
    Nicky Says:

    Broader market – spx has support at 1292 area. Important support at 1281. Critical support at 1261.

  15. 15
    bill Says:

    fro’s down big time

    the tanker stocks follow the price of oil

  16. 16
    Nicky Says:

    Reefguy re #1 – I was thinking the price we are paying at the pump is way too high considering how much rbob has come down. We are still over $4 here. US consumer still being robbed it seems.

  17. 17
    VTZ Says:

    Nicky – Is this going to be your significant low?

  18. 18
    zman Says:

    Putin signs gas pipeline deal with Uzbeks. By the way, Russian exports hit their lowest levels since 2004 last month.

  19. 19
    zman Says:

    Gold off its lows, still down $33.

  20. 20
    Nicky Says:

    VTZ – I think oil is completing 5 down for the first part of its correction. Once it bottoms we should see a good 3 wave bounce before another leg lower. If I am wrong then we are already in the next large leg down which should at least equal the first leg from 147 to 111.50 but the bounce we had from 111.50 area to 122 looks too short in both lenth and time to me.

  21. 21
    Sambone Says:

    Weather – OK looks like Hanna will effect East coast. IKE looks to into the GOM. TS 10 (Soon to be Josephine
    ) looks to hit East Coast. Invest 99 probably be a “Fish storm”.

    So “IKE” is the next one to watch.

    http://moe.met.fsu.edu/cgi-bin/cmctc2.cgi?time=2008090200&field=Sea+Level+Pressure&hour=Animation

    Click “FWD” on right

  22. 22
    zman Says:

    IEA says no need for it to release product stock piled in its reserves due to Gustav.

    No structural damage seen at refineries along the gulf coast according to Reuters

    EIA says it has had no SPR requests yet.

    LOOP still shut, unknown status there.

  23. 23
    tomdavis12 Says:

    Z: Z Any back of the envelope improvments to NAV from the CHK deal in Fayetteville? SWN? I assume lower Nat Gas pricing mitigates any improvement.

  24. 24
    zman Says:

    Re 23: CHK speaks at Lehman today, will wait for them to outline it but it should not be lower than their last comment unless you assume prices are at $7 or below for good.

    For SWN, I’ll work one up, but its over $50

  25. 25
    ddaley Says:

    OIH looks good at 175, rallied 17 points in three days, 8.19.

  26. 26
    Sambone Says:

    Faber

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSkw7WJ3TaqQ

  27. 27
    zman Says:

    My best thought on commodities is that the powers that be still want them to go lower. With a strengthening dollar (for whatever reason), the simple trade is oil lower. People are not bothering with math or stories but have been trying to do a little in recent days, all storm hype aside. I see no reason to try and catch a falling knife when so many want oil lower. The refining trade looks like it may get a little more interesting but catalysts in the E&P realm are not there or are not enough or in the case of CHK are too much. For service, business is exceptionally strong but the specter of capital budget cuts hangs over the group like the sword of damocles. This is what I am thinking today and this week and is of course subject to change from new data.

  28. 28
    tater Says:

    Just want to give a bit of a TA heads-up. Many O&G names (all?) gapped down this morning. Some into good support, some headed down toward good support. There is a big cliche out there that says “all gaps must be closed” and that simply is NOT the truth. There are many different kinds of gaps, and all have their own particular trade-type.

    That said, should we see a bounce in these names (for whatever reason, another hurricane?) you can expect that the first attempt back up into the gaps created by this morning’s open will be sold hard.

    As well, if such a bounce and sell-off occurs, it will be creating a larger longer-term pattern in many of these names called a descending triangle (bearish implications) which could become enough in TA speak to overcome the longer-term uptrends that are still in place.

    Basically, I am emphatically saying that I can believe a scenario where O&G names reverse the gains they’ve made over the last year or two. (Yes, that bad.)

    Not a prediction of future prices, just an analysis of how the little black boxes might treat price action should a rally be created.

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882&cmd=show%5Bs149732318%5D&disp=O

    (I will be gone until later this afternoon if anybody wants to tell me how goofy in the head I am).

  29. 29
    Sambone Says:

    NEW YORK, Sept 2 (Reuters) – The operator of the Henry Hub, the
    benchmark trading point for NYMEX natural gas futures, said Tuesday on-site
    assessments were being performed at the Hub and on the Sabine pipeline, but
    force majeure remained in effect following Hurricane Gustav.
    On Sunday, Sabine Pipe Line LLC shut down operations as its workers
    were evacuated from coastal Louisiana ahead of the storm, the company said
    in Website postings.
    Sabine, a unit of oil major Chevron Corp CVX, operates a 131-mile
    pipeline that transports natural gas between Erath, Louisiana and Port
    Arthur, Texas.
    Sabine is a subsidiary of Chevron Corp. CVX
    (Reporting by Eileen Moustakis; Editing by John Picinich)

    Tue Sep 2 15:00:08 2008 -GMT

  30. 30
    Sambone Says:

    Welcome “Josephine”

  31. 31
    zman Says:

    HAL saying little new at Lehman. Zzzzz… Will let you know if they say anything interesting.

  32. 32
    zman Says:

    At $7.22, the October gas contract is back to July 2005 levels. Given the service inflation of the last 2 years and where the gas is coming from and the accelerated decline curve status of today’s wells this will begin to quickly make many plays uneconomic given their differentials to market. Labor is tighter than ever.

  33. 33
    isleworth Says:

    Z – current brief thoughts post-Gustav on VLO, FTO and TSO?

  34. 34
    zman Says:

    Isle – at present I see cracks as slightly improved, the stocks tried to recover with down oil earlier but came in when GC refiners said no damage seen yet and TOT started to reopen one site. I think we see increased product demand that has been pent up which should result in slightly better cracks go forward. Of all the energy segments I’m most comfortable with the refiners which says a lot. Its not as much fundamentals as sentiment on the group. Falling oil, should it continue, should begin to help the group and earnings cuts there seem to be slowing.

  35. 35
    Jay Reynolds Says:

    OFF TOPIC:

    Parker-Hannifin has released for sale the BlackStorm production system that I invented to replace the beam pump.

    Economics look VERY good. Much less mechanically complex, NO steel tubulars to corrode, one man installation.

    PH plans to make the tubing available through its distribution network but really, it’s going to be sold by folks already in the oilpatch, not a hydraulic systems supplier. It is those early adopters, especially in areas with bad corrosion problems, that I should probably be setting up.

    http://www.strippersolutions.com

    Kind regards,

    JR

  36. 36
    apbd Says:

    Good luck JR. Glad to see some success.
    apbd

  37. 37
    Nicky Says:

    Move up off this mornings lows in metals looks corrective – I am looking for lower lows ahead. Silver came very close to breaking its lows this morning…

  38. 38
    zman Says:

    HAL was not interesting.

    BAS- said price increases for service work in the $8 gas range and some planned or already taken price increases for things like pressure pumping probably would start to fall off at $6 gas.

    JR- Congrats!

    Nicky – moves off lows look like a weak attempt at bottom fishing as the dollar comes off the days highs.

  39. 39
    ultyguy Says:

    Anyone have any thoughs on HK. Down over $4 to under $30.00 Good buying opportunity?

  40. 40
    zman Says:

    Ulty – Watching that, like to see it not break $30 but had luck with $30 calls repeatedly of late and the $35s. Would like to hear what CHK has to say and probably won’t play today as HK was one of the better performers in the rebound and is now one of the worst whipping posts. Not going to rush to jump on the back of any E&P until gas decides its not going back to $5. Shork of the same name report was talking about pendulum swings this morning and was saying $95 is fair value for oil (no idea from where he pulled that number or why he bases the swings off of historic levels….guess he thinks those were right and that all oil is the same etc but whatever) and that oil is going to $70 based on the swing always going too far. That would put gas at $5-6. I think its overdone now but it doesn’t matter what I think from a fundamental standpoint if everyone has turned chartist. So for a trade I may be in and out of the more volatile names like HK before OPEC meets and then largely out during the meeting and the reaction to it.

  41. 41
    zman Says:

    EOG saying takeaway capacity from the Barnett for both natural gas and NGL’s both constrained at present due to high volumes.

    Saying their oil play in the Barnett is not reflected in the stock price (agree with that)

  42. 42
    zman Says:

    EOG saying their Barnett oil play will be one of the largest liquids (oil and NGL’s discoveries) in the onshore U.S. in the last 20 to 30 years. (227 mm boe to 463 mm boe net to EOG)

  43. 43
    Pete Says:

    JR
    Would your Blackstorm system work on wells in NE Okla? If so how could I contract you to get additional information.

  44. 44
    VTZ Says:

    he does have a website 🙂

  45. 45
    ram Says:

    At $7.22 for gas, CHK should look like winners with their hedging. After the BP deal, I saw where Tudor Pickering thought they should get more (so they felt CHK was worth more in value?). This whole energy dumping is getting uncomfortable. I hope the value investors step in soon.

  46. 46
    Nicky Says:

    T Boone on the floor of the Nymex promoting his book. Saying the move down is overdone (he would say that wouldn’t he!). Says it won’t go below $100 and OPEC will cut.

  47. 47
    isleworth Says:

    Pickens say NG headed to 6 handle

  48. 48
    Nicky Says:

    On nat gas he says he has no idea on price but that basically we are awash with it which is great for the Pickens Plan.

  49. 49
    zman Says:

    EOG on the gas macro:

    1) take all storage injections, only 2 exceeded consensus. Tells them supply/demand is about balanced
    2) winter will be key (duh)
    cold winter = 9-10 gas
    warm winter = 7 gas
    3) total net gro out of Rockies, 0.3 Bcfgpd vs 1.25 Bcfgd
    4) canada down 0.5 Bcfgpd
    5) Barnett not up much next year,
    6) rest of U.S. up 1 to 1.5 Bcfgpd
    7) this is far less than the up 4 Bcfgpd YoY we are seeing now.
    8) said he does not see eye to eye with the Lehman analyst on gas prices.

    Barnett shale growth – they think it beginning to roll over a bit. Johnson county- EOG drives the bus there and it is rolling over. They see one more year before the whole county is drilled up like a pincussion. That just leaves Tarrant county growing.

  50. 50
    Jay Reynolds Says:

    OT: Pete re #43

    Right now we have used the system extensively in wells to 1,000′ though the system is engineered to 2,300′. Common volumes to the depth we are using is 680 BPD w/ 5 hp pump.

    email me if you like and we can chat. Contact info on the website http://www.strippersolutions.com

    JR

  51. 51
    zman Says:

    Hear ya Ram – think the NAV calc thoughts were straight from Aubrey’s lips and said in a higher gas price environment. The difference is insignificant when you look at the current price vs the whole NAV talked about at that time ($150) even if you ding the whole co. by the same %.

    For those interested in NG macro, EOG’s Papa provided a good run through of it during the Q&A at the end of today’s presentation. Given the high demand prompted by price on the industrial side I have to say this move is over done. Does it see $6’s, yes it does if oil goes much lower at all. Pickens just wants to be energy secretary. Wonder how much he has invested in turbine blade manufacturing.

  52. 52
    ultyguy Says:

    Thanks for your insight Z.

  53. 53
    md Says:

    Are you still on for the big gas production update which you were going to do today or Tuesday. Is there any info expected from LEH to hold off on your update.

  54. 54
    zman Says:

    Ulty – no problem , not sure that is insight or just, um, cowardice but it keeps me afloat. Let me stress I’m light on E&P right now having punted the near the money HK last week. The 40s are back to loser status but one good well announcement may temporarily rally them enough to get out not dead. The SWNs are on the bubble for selling, the small CHK 52.50 position is in trouble obviously but that’s all I have in the space right now.

    Service I expect to bounce but only with stable oil.
    Refining I expect to bounce.

  55. 55
    zman Says:

    Am doing for tomorrow. Didn’t think it would get noticed today and I wanted to add a few more slides to the usual. I will incorporate some for some thoughts Papa had on the EOG call.

  56. 56
    zman Says:

    NOV and OII getting slapped. RIG not so much.

  57. 57
    zman Says:

    CNBC says T Boone said off camera that he thought the best trade for oil right now is to go to cash and wait.

  58. 58
    zman Says:

    Coal getting just slaughtered.

    ACI, BTU, PCX, WLT, you name it, down $8 to $12. Average looks to be down 12% on the day.

  59. 59
    md Says:

    In your CHK PXP JV Jul 01.
    Aubrey comments pursuing similar strategic partnership in Marcellus and Fayetville. Think Fayetville assets are worth $15 Bln.
    Todays deal value of $8Bln is a far cry.
    So why the discrepancy. Hype or the new NG reality. NG on 7/1 closed at 13.50 vs. Aug.29 night at say 7.95. it almost makes sense on NG closing price

  60. 60
    Sambone Says:

    DOW JONES NEWSWIRES

    Energy investor T. Boone Pickens said in an CNBC interview Tuesday he doesn’t
    expect oil prices to drop below $100 a barrel. He also said he thinks the
    Organization of Petroleum Exporting Countries will cut production at its next
    meeting Sept. 9. “I think they’ll start to support (energy prices), is what
    will happen, and they’ll cut production,” he said. “They like it, they – OPEC –
    likes it up here.” Full story at http://www.cnbc.com

    -Dow Jones Newswires
    Dow Jones Newswires
    09-02-08 1300ET

  61. 61
    Sambone Says:

    HOUSTON (Dow Jones)–Devon Energy Corp. (DVN) could resume production of oil
    and gas from the Gulf of Mexico as early as Wednesday.
    “(Production) could begin as early as tomorrow but that will depend on
    third-party pipelines,” Chip Minty, a Devon spokesman, said Tuesday.
    The Oklahoma City-based independent oil and gas company produces about 50,000
    barrels of oil equivalent per day from from the Gulf. It will begin returning
    employees and contractors to 25 production Gulf platforms on Wednesday.
    Devon also will also return workers to a pair of deepwater drilling rigs that
    were evacuated prior to Hurricane Gustav entering the Gulf of Mexico.
    Flyover inspections of those rigs on Tuesday revealed no apparent damage,
    Minty said.
    -By Jason Womack, Dow Jones Newswires Dow Jones Newswires
    09-02-08 1303ET

  62. 62
    zman Says:

    re 59: I think they took what they could get with gas prices.

  63. 63
    md Says:

    what compelled them to do it.

  64. 64
    Sambone Says:

    Gulf Oil, Gas Companies Poised To Quickly Restaff After Gustav

    By ANNA RAFF ,BRIAN BASKIN andNICK HEATH
    Of DOW JONES NEWSWIRES

    NEW YORK — Energy companies sprung into action Tuesday after Hurricane Gustav ripped through Louisiana, preparing to redeploy workers in the U.S. Gulf of Mexico both offshore and on.

    Crude oil futures plunged in electronic trading on Labor Day, extending those declines Tuesday and raising the prospect of prices falling back below $100 a barrel. Crude futures recently traded 5.7% lower at $108.59 a barrel on the New York Mercantile Exchange after falling to a five-month low of $105.46. No major damage to crude oil and natural gas infrastructure in the region has been reported, somewhat lessening fears that the passage of Gustav, now a tropical depression far inland, would result in massive fuel shortages.

    Nymex natural gas futures were trading 8.4% lower at $7.277 a million British thermal units.

    While pipelines transporting gasoline and diesel and some refiners continue to operate, albeit at reduced rates, less is known about how links further back and farther offshore in the oil supply chain weathered the storm. Gustav churned through the Gulf as a Category 4 and 3 hurricane before making landfall in a slightly weakened state near a key oil port in Louisiana.

    Oil product stockpiles are large enough to keep fuel flowing to other parts of the U.S. But any significant delays to getting U.S. Gulf oil and gas output — all of which was shut in ahead of the hurricane — back on line could deplete inventories and send energy prices back on a march upward.

    When hurricanes Katrina and Rita hit in 2005, flooding along the coast was widespread, and company operations and personnel were in such disarray that it took several days just to locate people and start damage assessements. In this respect, the fallout from Gustav was milder. However, the Atlantic basin hurricane season is in its most active period. Josephine on Tuesday developed into the 10th named storm this year, following the trail of Tropical Storm Ike and posing a distant threat to the Gulf.

    Limited Deployment

    Royal Dutch Shell PLC (RDSA) said it will start limited deployments with minimum crew levels Tuesday morning to some locations that were out of Gustav’s final path in their western Gulf operations area. On Tuesday afternoon, the company intends to send workers to the eastern part of the Gulf of Mexico.

    “Once power and communications are restored, marine logistics support is established and the offshore location is deemed safe, then personnel will commence restart and production ramp-up procedures,” Shell said.

    Complete restoration of Gulf of Mexico output may take three to five days, said Shell, one of the largest hydrocarbons producers in the Gulf.

    BP PLC (BP) on Monday said preliminary remote evaluations indicated that its platforms are in good shape. Flyover assessments were scheduled for Tuesday morning, and personnel will return to work once it’s confirmed that the platforms are safe, a BP spokesman said.

    Anadarko Petroleum Corp. (APC) said it would also begin flyovers to evaluate the condition of its facilities. Exxon Mobil Corp. (XOM) was also conducting an assessment.

    While it appears U.S. Gulf output is set to recover, it’s still unclear whether an oil port vital to oil imports to the Gulf Coast was as lucky. Officials from the Louisiana Offshore Oil Port weren’t able to conduct a flyover to inspect facilities on Monday due to high winds.

    “We don’t know anything yet,” said LOOP spokeswoman Barb Hestermann. “Hopefully we’ll get (the inspection) done as early as possible today,” potentially early afternoon, Hestermann added.

    Companies and government officials were discussing whether a release of crude oil from the Strategic Petroleum Reserve, the U.S. Department of Energy’s 700-million-barrel stockpile used to soften the impact of supply shortages, was warranted. Louisiana Gov. Bobby Jindal said Monday that Shell and ExxonMobil were expected to request an SPR release. An ExxonMobil spokeswoman said an SPR request is one of the many options on the table.

    —By Anna Raff, Dow Jones Newswires

  65. 65
    zman Says:

    I think they want to spread the risk in all the plays. Saw a buyer capable of doing it for a decent price and took it.

  66. 66
    md Says:

    SPR drawdown for 11 weeks Sept. 1/05 – Nov.18/ 06 approx. 16 million barrels total.

  67. 67
    md Says:

    CHK deal today changes the price dynamics all around. Is this virgin land or has some of it already been drilled on which would reduce the price.

  68. 68
    zman Says:

    Listening to SWN call, good presentation and Im sure falling on deaf ears today. Talking about having bought own sand pit for fraccing. Cuts costs by $100 per ton which is significant on a 3 mm pound frac per well. Shallow enough they don’t see benefit vs cost of ceramic proppant.

    Service cost inflation:
    people – seeing some pressure but not on a per unit basis. (they are growing fast enough to offset people inflation on a per Mcfe basis)
    pressure pumping – flat on costs yoy
    rigs – up a little
    trucking of water costs them about 10% more yoy.
    steel ordered through next year, up 5% vs current levels.
    These are not too high of costs.

    MD – right, is was not a heck of a lot of oil for Katrina, so unless the LOOP is really messed up I would not expect a long series of price killing releases here.

    Re CHK – it is in the core and has production on it. Reserves attributed to it not provided, thousands of locations mentioned remained but its certainly not virgin. I don’t think this is a sea change event for their valuation. It may be a little disappointing from a $ figure but they are sticking to the monetization plan and it does not scrap their NAV down to anything close to current price. Their call starts in 30 minutes.

  69. 69
    jsaun14 Says:

    Finished “Boone” this weekend…How appropriate to see him on the tube again.

    Wonder if he’d every get back into more of a direct role in the patch or just stick to wind, water and money mngmt??

  70. 70
    zman Says:

    Nicky – does oil back over $110 mean anything to your analysis. CNBC was saying some oil traders thought this a near term sign of bullishness or some such if we got back over 110 which we just did.

  71. 71
    bill Says:

    chk re rams # 45

    > $7.22 for gas, CHK should look like winners with their hedging

    yes but the values for their proven reserves and probable get slammed

    http://library.corporate-ir.net/library/10/104/104617/items/302913/87August2008IRPres(final).pdf

    look at page 24

    net value per share drops 21 bucks for every 1 dollar move in ng

    at 7 ng nav is about 73

  72. 72
    zman Says:

    JS – saw him in an interview last week standing in a wind farm. Not a blade turning behind him. Funny that he allowed that shot. Funny also how when oil is going up you hear from the bulls and when it is going down the bears, who have been saying since 30 it is going to 20 are now saying I told you so.

  73. 73
    1520sbroad Says:

    #68 – Z – i tried to listen to SWN call but can’t get the sound to work. I did look thru the slides. Any commentary on slide 8? East Texas commentary?

  74. 74
    zman Says:

    Link does not work for me in 71

    East Tx – sound like they are very encouraged by their horizontal work in the James Lime, nothing really new there.
    They did comment that they have 100,000 acres in the Marellus now and that they estimate gas in place to be 2 to 2.5x that of the Fayetteville acreage and they are getting gas flowed back from 2 vertical tests in the PA part of the play.

  75. 75
    zman Says:

    wow, what happened to the broad market? thought they liked down oil?!

  76. 76
    1520sbroad Says:

    #74 – thanks.

  77. 77
    zman Says:

    Aubrey on the tape saying their next acreage venture will be with a large, non US oil firm. Um, 2 last deals with BP, I wonder who the Marcellus 25% goes to? Maybe BP should just buy the company. Wonder if Congress would let the Brits buy CHK. Am sure they would not let the Chinese or Russians do so.

  78. 78
    bill Says:

    Tudor had value of fayetville at 10 b or 2.5 b for 25 %

    Aubrey says they get 300 m in tax benefits by structure of deal or 2.2 b yes he said 2.5 but that was in a 13 world

    Very astute deal, i was not aware of tax benefits

  79. 79
    bill Says:

    saw something about china wanting to invest

    im happy that chk is spinning off a portion of their assets

  80. 80
    zman Says:

    MMS reports production unchanged in the Gomex from pre strike levels. 100% of oil and 95% of NG off line.

  81. 81
    zman Says:

    CHK said they are now 100% hedged, this is up from the numbers I used this morning which were from the last August presentation.

  82. 82
    Sambone Says:

    NEW YORK (Dow Jones)–Virtually all of the crude oil and natural gas output in
    the U.S. Gulf of Mexico was shut in for the second day in a row after the
    passage of Hurricane Gustav, the U.S. Minerals Management Service said Tuesday.
    Energy producers have shut in 100% of oil production and 95.4% of natural gas
    output.
    Before production was suspended, about 1.3 million barrels of oil a day, or
    26% of U.S. output, was extracted from the Gulf of Mexico’s federal waters, as
    was 7.4 billion cubic feet a day of natural gas.
    The agency said personnel have been evacuated from 626 production platforms,
    or about 87.3% of the 717 manned platforms in the Gulf. Personnel from 100 rigs
    have also been evacuated, equivalent to about 82.6% of the 121 rigs operating
    in the Gulf.
    After making landfall Monday at Cocodrie, La., about 70 miles southwest of New
    Orleans, Gustav has since weakened to a tropical depression.

    -By Anna Raff, Dow Jones Newswires
    Dow Jones Newswires
    09-02-08 1441ET

  83. 83
    md Says:

    Bill
    $73 is not shabby either in a low NG value scenario either.
    As winter follows summmer NG will not stay at these prices foerver. If CL falls to $80-90 NG could see $6 but I’ve got faith in electricity, weather and maybe Ike and closer BTU parity to move prices up.
    Supply has had a hard time YTD June keeping up with demand and cooler YOY weather in July and August has given us higher YOY injections for those months.

  84. 84
    Sambone Says:

    HOUSTON, Sept 2 (Reuters) – The chief executive officer of
    Chesapeake Energy Corp CHK said on Tuesday the natural gas
    company’s next acreage venture partner in the Marcellus Shale
    is likely to be with a large, non-U.S. company.
    Aubrey McClendon, Chesapeake’s CEO told investors at the
    Lehman Brothers CEO Energy/Power conference that the company’s
    next joint venture partner will be likely be a big company that
    is “not domiciled in the U.S.”
    Earlier, Chesapeake announced that BP Plc BP.L agreed to
    buy a 25 percent interest in its Fayetteville Shale assets in
    Arkansas for $1.9 billion.
    And last month, the South China Morning Post reported that
    China National Petroleum Corp, China’s top state oil firm, was
    thinking of bidding for minority stakes in Chesapeake’s shale
    gas assets.
    (Reporting by Anna Driver, editing by Leslie Gevirtz)

    Tue Sep 2 18:27:43 2008 -GMT-

  85. 85
    md Says:

    CHK hedged at what price and year.

  86. 86
    elduque Says:

    At what point will the market give CHK some value for its hedges?

  87. 87
    zman Says:

    MD – I’d also add that gas supply, while up strongly 4 Bcfgpd (it has been relatively flat since Feb which I find odd, Tx, Rockies, LA just not been growing more.

    Aubrey on CHK NAV – At $7 gas forever, proved assets would be 20b, Haynseville stub of 13b plus 5 b for Fayetteville, 5.9 b for the marcellus. then add value of hedges and they see it as 74 very defendable price.

    Oct 15-16 CHK analyst day.

  88. 88
    zman Says:

    MD – I’ll add but prices not far off what I put in today’s post, just more hedged 2008.

  89. 89
    bill Says:

    86

    Ironically, when prices go up. 🙂

  90. 90
    zman Says:

    Eld- that would be funny if it were not sad. No idea. They were somewhat damned for them as prices rose and then they suddenly did not count when prices fell.

    Aubrey commenting that we get this pullback each year and that its usually not this big. He commented on this last time saying that it seems to come earlier in the calendar each year. He’s saying $5 to $6 gas is unsustainable and the growth mechanism (or anti growth) is already in motion which I take to mean capital slowdown and shift from some plays.

  91. 91
    bill Says:

    did aubrey infer he might cut production.

    Said something about a decision within a month. He said little guys didnt have their flexibility

  92. 92
    zman Says:

    Bill – could not hear it, cut out about then, lost what he thought was about to happen in the group… nice.

  93. 93
    md Says:

    Was LOOP in the loop during katrina and rita.
    I noticed that Andarko has one if not the lrgest rig in GOMEX. That still has yet to be confirmed. Is this correct.

    Your warming on refineries.Considering that hurricane season is not over is TSO still not a flyer. Were any of the refineries affected.

  94. 94
    zman Says:

    MD – slides don’t say anything different on hedges than what I had in the post so I guess they did not update. Planning to listen to the replay and will advise.

  95. 95
    zman Says:

    Broad mkt off, what happened?

    Oil “only” off $5 from down $10 in pre market. Guess they thought it was enough too. Stocks just getting killed though.

  96. 96
    ellwodo Says:

    #87 So does this mean Aubrey’s “line in the sand” may be $75 these days instead of $100?

  97. 97
    zman Says:

    Re

    LOOP was damaged if I recall and if it is this time that would lead to SPR release so not really a positive for oil.

    Anadarko’s independence hub is a 1 bcfgpd gas platform (I think it has 15 wells that spider back to it via subsea connects) and it is the biggest gas platform out there. Almost 2% of U.S. production. No word yet but it is probably fine given other reports.

    On the refiners, all I have seen is power outtages, not word on flooding, no structural damage reported.

    Still like TSO as margins improve (my assumption there)

  98. 98
    Nicky Says:

    Z – re #70 – bounce looks corrective. I think it rolls over again…

  99. 99
    zman Says:

    Elwo – that’s his worst case scenario, I honestly don’t think he would accept $75 right now. This is the low of lows for natural gas since 2005 on this contract and the strip is overbeaten up.

  100. 100
    Dman Says:

    Hi Z,

    #27. I didn’t understand this bit:

    “… or in the case of CHK are too much. “

  101. 101
    zman Says:

    Thanks Nicky, I was just wondering if you agreed with the talking heads that it said something about trader sentiment or that it was just a bounce and nothing more.

    Dman – as in you announce a whole pile of gas and thereby kill the gas market. Too much of a good thing, in beer or natural gas can give you a headache.

  102. 102
    ellwodo Says:

    CHK – By the time he’s brought in 3 or more minority partners is a sale moot in any case, or might smeone still be interested?

  103. 103
    Nicky Says:

    Z – I think we were looking a touch oversold. The market actually closed sub 110 and has bounced since. Nothing to say the corrective bounce doesn’t continue a while longer but I still see another leg down.

  104. 104
    zman Says:

    No, will still be interested as these deals are for the new growth bits of the company. There are still a lot of untouched pieces not the least of which is the Barnett. If you look at their 10K they break out the reserves by region and he’s selling or partnering up the unbooked stuff.

  105. 105
    zman Says:

    Thanks, Nicky, makes sense. What happened to the broad market?

  106. 106
    zman Says:

    stepping out for 20 minutes, back b4 close.

  107. 107
    Nicky Says:

    Broader market – so often the first move out of the gates Monday morning is reversed – I did have my doubts this morning as it was so strong but it appears that the futures had been ‘forced’ up overnight. 1261 and 13300 area remain key…

  108. 108
    Sambone Says:

    DOW JONES NEWSWIRES

    A senior U.S. Army Corps of Engineers official said several vessels are
    grounded on top of a major natural gas pipeline buried in a New Orleans canal
    after Hurricane Gustav struck Louisiana Monday, The Times Picayune reported on
    its Web site Tuesday.
    Col. Al Lee, commander of the corps’ New Orleans District office, said he was
    concerned about the grounding of two ships and two barges above a natural gas
    pipeline buried beneath the canal. “As you probably know, two ships and two of
    those huge barges are now atop a 16-inch natural gas pipeline that services the
    entire United States and cannot be relocated,” Lee said.
    “We could have affected the price of natural gas in the United States,” said
    Brigadier Gen. Robert Van Antwerp, chief of the corps, on Monday after
    inspecting the canal.
    Gov. Bobby Jindal and U.S. Sen. David Vitter grilled U.S. Coast Guard
    officials on Monday about why ships and barges weren’t required to evacuate the
    shipping channel in advance of the hurricane, said Garret Graves, chairman of
    the state Coastal Protection and Restoration Authority.
    The Coast Guard on Tuesday released two videos shot from a helicopter Monday
    that showed the barges and two ships loose in the
    canal.

    Dow Jones Newswires
    09-02-08 1456ET

  109. 109
    Sambone Says:

    DJ Citgo Requests Release Of 250,000 Barrels From SPR -Reuters

    Isn’t Citgo owned by Chavez?

  110. 110
    bill Says:

    lmao 109 i think yes

  111. 111
    Sambone Says:

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures extended declines Tuesday on signs the
    impact of Hurricane Gustav won’t bottle up the Gulf Coast petroleum industry
    for long.
    Light, sweet crude for October delivery settled $5.75, or 5%, lower at $109.71
    a barrel on the New York Mercantile Exchange. It was the lowest settlement
    price since April 8.
    Brent crude on the ICE futures exchange closed at $108.53 a barrel, down 88
    cents. Brent settlement prices weren’t immediately available.
    Oil companies spent Tuesday inspecting refineries, platforms and rigs along
    the Louisiana shoreline after Gustav rolled through the region with heavy wind
    and rain. None has yet reported major damage, though assessments are
    continuing.
    The oil futures responded by sending crude prices reeling. Early Tuesday,
    Nymex crude traded $10 lower at $105.46 a barrel, triggering a price
    fluctuation limit that at 4:16 a.m. EDT that halted trading for six minutes.
    Limits on price swings for crude, gasoline and heating oil futures were then
    doubled, a Nymex spokeswoman said.
    Crude prices mounted a partial comeback as some said the selloff was overdone.
    “We bounced, rightly, off the lows,” said John Kilduff, at MF Global Ltd. in
    New York. “It was a little early in terms of the damage assessments” from the
    storm.
    Short-term U.S. supply was hindered, with the U.S. Minerals Management Service
    reporting virtually all the crude and natural gas output in the U.S. Gulf of
    Mexico shut in for the second day in a row because of the hurricane.
    Crude also felt pressure from the dollar, which overnight rose to a
    seven-month high against the euro, which traded as low as $1.4466. A stronger
    greenback weakens dollar-denominated oil’s attraction as a currency hedge and
    the incentive for exporters to raise prices to maintain steady revenues.
    With crude closing below $110 for the first time in almost five months,
    speculation mounted that prices have further to fall in the days ahead. Several
    said the threat of Gustav served to buoy prices over the last week.
    “The only reason why were were not below $110 (earlier) was because of fear of
    Hurricane Gustav,” said Nauman Barakat, senior vice president at Macquarie
    Futures USA in New York.
    Nymex crude is now $35.58, or 24%, below its all-time settlement peak of
    $145.29 reached July 3, having fallen in concert with the dollar’s rise, fresh
    supply from Saudi Arabia and other exporters and softening demand in developing
    countries.
    Supply from the Organization of Petroleum Exporting Countries will likely grab
    traders’ attention as a Sept. 9 policy meeting approaches in Vienna. OPEC
    Members have sent mixed signals as to the group’s stance ahead of the meeting.
    OPEC member Saudi Arabia, which ramped up production in the summer after calls
    from major consumers to bring down crude prices from record highs, in August
    lowered output by 50,000 barrels a day to 9.55 million barrels a day, a Dow
    Jones Newswires survey showed. This is still well above the kingdom’s assigned
    quota of 8.94 million barrels a day.
    Front-month October reformulated gasoline blendstock, or RBOB, fell 12.05
    cents, or 4.2%, to $2.7337 a gallon. October heating oil fell 11.83 cents, or
    3.7%, to $3.0736 a gallon.

    -By Gregory Meyer, Dow Jones Newswires

    Dow Jones Newswires
    09-02-08 1522ET

  112. 112
    zman Says:

    Citgo – that’s only a couple of days supply, no biggie. I can tell you what kind of terms I’d put on that one.

    HK presentation starts in a minute.

  113. 113
    bill Says:

    got haynesville?

    lol

    http://library.corporate-ir.net/library/10/105/105858/items/306225/Petrohawk%20LEH%20%202008%20Revised.pdf

  114. 114
    zman Says:

    Bill, yeah, it would have been funnier two months ago. Wonder if they’ll ask why the share sale last week.

  115. 115
    zman Says:

    Note to self, add slide 3 (map) to the Haynesville main report page

  116. 116
    zman Says:

    170 Bcf gas in place as per cores from their original well. That is on the high end of the estimates I have heard out there for the play.

  117. 117
    Sambone Says:

    NEW YORK (Dow Jones)–The New York Mercantile Exchange said Tuesday that all
    unfulfilled delivery obligations of natural gas on the August and September
    contracts continue to be subject to force majeure.
    Nymex declared force majeure, which allows companies to depart from
    contractual terms in the event of a natural disaster, on Sunday, after the
    operator of the Henry Hub – the delivery point for Nymex gas contracts – shut
    in the huge interconnector ahead of Hurricane Gustav. Chevron Corp. (CVX) unit
    Sabine Pipe Line LLC Saturday declared force majeure on deliveries from Henry
    Hub, which is located in Erath, La., and interconnects with nine interstate and
    four intrastate pipelines. It has a transportation capacity of 1.8 billion
    cubic feet of gas a day.
    In a notice to members, Nymex, which is owned by CME Group Inc. (CME), said
    its Delivery Committee remains in continuing contact with Sabine regarding the
    recovery of Henry Hub facilities after the storm.
    Sabine declared force majeure at Henry Hub before hurricanes Katrina and Rita
    in 2005, pushing front-month natural gas futures to what was then an all-time
    high.
    Disruptions to natural gas production in the Gulf continued for months after
    the hurricanes dissipated. In December of 2005, cold weather in the U.S. and
    ongoing supply constraints drove Nymex front-month natural gas to the all-time
    high of $15.78/MMBtu.
    Gas futures fell sharply Tuesday, as early reports indicated minimal damage to
    energy infrastructure in the Gulf from Gustav. Natural gas for October delivery
    settled floor trading 68.2 cents, or 8.59%, lower at $7.261a million British
    thermal units.

    -Mark Long, Dow Jones Newswires;
    Dow Jones Newswires
    09-02-08 1553ET

  118. 118
    zman Says:

    HK’s second Haynesville well put on line for 20.1 mm/d, IP’d at 17. IP was announced in the 2Q PR. Strong.

  119. 119
    Sambone Says:

    By Isabel Ordonez
    Of DOW JONES NEWSWIRES

    HOUSTON (Dow Jones)–Exxon Mobil Corp. (XOM) expects a 1%-2% annual growth
    over the next decade, a rate similar to its adjusted growth over the last 10
    years, said analysts at UBS investment research, who had a two-day meeting with
    the oil giant’s management.
    The comment, released in a note to clients Tuesday, came after the largest
    U.S. oil company by market value reported, both in the second half of last year
    and in the first six months of this year, production lower than expected.
    Just in the second quarter of 2008 Exxon Mobil reported a 7.8% decline in its
    production of oil and natural gas.
    Exxon’s production fell mainly because of expropriation of some of the
    company’s assets in Venezuela, a labor strike in Nigeria and lower entitlement
    volumes under production-sharing contracts, the company said. Excluding those
    factors, the company’s output was down about 3%.
    Major oil companies face mounting challenges to increasing their oil and
    natural-gas production, as their existing fields mature and oil-producing
    countries become more restrictive about access to their oil and they have
    started competing with service oil companies for projects.
    BP PLC (BP) also recently reported that its second-quarter production was flat
    with a year earlier, and ConocoPhillips said its quarterly production was down
    8.4%.
    With the major oil company stocks failing to keep pace with the oil price
    increase over the last year, and concerns related to growth and resource
    nationalism growing, investors are questioning the business model of
    international oil companies, said UBS analysts. They said that during the
    meeting with Exxon Mobil’s management, the oil giant cited numerous reasons and
    examples why their model remains relevant, particularly for larger, more
    complex projects.
    “But we suspect oil service companies are winning simpler, lower return
    projects from majors that will continue to hurt the international oil
    companies’ longer term growth profile,” UBS analysts said.

    -By Isabel Ordonez, Dow Jones Newswires

    Dow Jones Newswires
    09-02-08 1555ET

  120. 120
    zman Says:

    HK on offerings:

    Says it is time to get into execution market. Don’t see any large transaction any time soon.

  121. 121
    doc Says:

    hk insider floid wilson sold 200,000 shares 8/28

  122. 122
    zman Says:

    HK – 70% front year decline being modeled for a Haynesville wells.

    Sees lots of bottlenecks, including proppant, steel, people, water. Takeaway capacity mentioned like everyone else.

  123. 123
    zman Says:

    Doc – we have a complete breakdown of that on the weekend wrap. Here were my thoughts:

    HK’s CEO Floyd Wilson Selling Shares. Why I don’t think it is a sell signal but something to watch.

    First, thoughts on insider transactions:

    1. CEO’s and other executives sell their own stock for a variety of reasons: diversification and new or additional house being chief among them. Approaching retirement, illness, mistress, yachts, and approaching bad news for the stock fall further down the reason list.
    2. CEO’s and other executives buy their own stock chiefly for two reasons: either they think it is going to go up or they want you to think it is going to go up.
    3. In looking at insider selling key considerations I look at are as follows:
    1. How much was sold as a percentage of holdings. If they sell out, especially top management this is obviously a red flag. As a general rule, the larger the company, the more I get uncomfortable with large percentage transactions by top management but I don’t have a strict level since it depends on how people are paid (cash vs stock).
    2. What was paid for those shares or what level were they acquired at.
    3. Is the sale part of a planned diversification program or 10b5-1 program?
    4. Percentage of compensation from shares vs cash. If they are paid entirely in shares than you should expect to see more in share sales.
    5. Is there a continual outflow with no purchases or is the sale more one-time in nature.
    6. Is it just one member of management or is everyone jumping ship?
    7. What has the stock been doing and what is the current and long term business outlook?

    Looking at Floyd’s Sale:

    1. Reason for the sale – unknown so no help with #1 above.
    2. How much was sold: 250,000 shares for proceeds of $8.9 mm. This does not appear to be part of a planned program sale.
    3. How much does he still hold: 2.6 mm shares which at Friday’s close of $34.61 equals $90 million.
    4. So he sold 9% of his holdings from the start to the end of last week.
    5. Is there a pattern of selling? No, the last transaction was a purchase made back in March of 2007. He has not sold shares in the last 2 years.
    6. How’s he get paid. $600,000 salary + $1 mm bonus last year plus 142,000 restricted shares and 53,000 stock options. So its a nice living but not world beater. His net worth would appear to be tied up in the shares.
    7. What are the other members of management doing? Almost entirely buying shares.
    8. As to what the stock has been doing, its off its recent highs with the group but by no means tanking and is up strong for the last 52 week period. The business outlook is strong and the stock stands at the forefront of a new large shale play that should help ensure double digit unit volume growth and a large prospect inventory for the next several years. In conclusion I’d bet he’s diversifying his holdings and I’d say he is still quite aligned with shareholders.
    9. From a practical standpoint, the filings for sales from the 27th, 28th, and 29th hit the SEC website on the 29th and the market probably did not notice them so their may be a negative reaction when the market opens on Tuesday but I would think it would be relatively short lived.

  124. 124
    zman Says:

    Haynesville acreage now going for $10 to $20K, down from $25 to $30K two months ago. HK’s average in the play is $5K per acre.

  125. 125
    doc Says:

    thanks for the info on hk insiders. The honda dealer just called. The fit I ordered arrived in wilmington, de by rail from the great lakes. I should be able to get it by the end of the week in lancaster,pa

  126. 126
    zman Says:

    Nice doc, doing your part to lower gas prices.

  127. 127
    md Says:

    Is it feasible that CHK wants the cash to buy more HS at these prices.

  128. 128
    zman Says:

    Quite possible. Especially when you juxtapose their long term view of the play with drop in acreage prices. They are still adding acreage but not at the same pace as they were before.

  129. 129
    teomax Says:

    I posted here some info about WEL last week.
    They had smallest % decline out of oil service companies today – and they did last week moonshot -> so one would expect to give its gains back. Didnt happened much.
    It looks like WEL is being heavily acumulated.

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