11
Sep

Thursday – Gas Preview and Oil Review + Some Simple E&P Math

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Sentiment Watch: Street is scared, apathetic and scared but not complacent. Better to take names out and shoot them in the head now then to watch them fall for no apparent reason for the rest of the quarter. Makes for a very tough investing environment. Better to study up then spin the wheel.

Tropics Watch: Ike is turning into a bruiser and is headed for Houston. This is not a compact storm and it is likely to produce more flooding and power outages than Gustav so the impacts to the Gulf Coast refining industry are likely to be longer last than the week to two week impact of Gustav. But there is very little in the way of Tropical action behind it so beware the hangover potential after the stock price party.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Inventory Comments
  4. Stuff We Care About Today - Back of the envelope E&P math plus a hedge update
  5. Odds & Ends

Holdings Watch - No changes yesterday.


Commodity Watch:

Crude Oil: fell $0.68 to $102.58 in confused, volatile trading, at least initially shrugging off the reduction in OPEC output and lower than expect crude and gasoline inventories. The inventory reductions were seen as the temporary impacts from Hurricane Gustav that they were and discounted and people are not ready to buy a sudden return to discipline on the part of OPEC. I think OPEC will be able to enforce greater discipline (it has had better luck in the last 2 years when it wanted to in doing so) as a noticeable build will, in the words of one OPEC official, "destroy oil prices". And they don't want that. This morning crude is just holding its own as the dollar pierces 80 for the first time in twelve months.

  • Gulf Refineries Closing Down. Gasoline is up 5% this morning as a number of refineries close down operations in advance of Ike.
  • Dems & Drilling. Congress is going to be able to vote on an offshore drilling billing. The plan would allow states to decide on whether to drill in the region 50 to 100 miles off their coasts and open access to drilling beyond the 100 mile mark. The eastern Gulf of Mexico remains off limits until 2022. The bill will also require oil companies to speed up drilling on Federal leases they already hold. Pretty lukewarm bill but it beats the so-called gang of 16 bill.  

 

Natural Gas: fell $0.14 to $7.39 yesterday. This morning it is getting all of that back in the early session but it will retreat again if the oil falls further and if the storage injection is not in line with or smaller than consensus.

Inventory Comments: Natural gas preview and oil inventory review.

Natural Gas Inventory Preview: Weird week for numbers due to Gustav.

My Number: 45 to 50 Bcf Injection. Last year saw an injection of 56 Bcf and the 5 year average is 78 Bcf.

How I Get There:

  • Weather: 59 cooling degree days (for the third week in a row), about normal for this time of year but tepid vs last year's number.
  • Imports: In line with the prior week and down 2.1 Bcfgpd from year ago levels
  • Production: Has been running about 5 Bcfgpd high to year ago levels. This week you can subtract the following:
    • Gulf of Mexico: off 5 to 6 Bcfgpd for the week on average (about 38 Bcf) due to Gustav.
    •  Rockies: 0.8 Bcfgpd that can't get to market due to repair work on the Rockies Express pipeline (about 6 Bcf).

The Street's Estimate: 54 Bcf consensus injection with a range of 45 to 69 Bcf (from the Reuters Survey).

ZComment: Beyond the price action today, I don't think the number matters much. Ike will determine pricing for the rest of the week and then its back to the gas glut grind. I don't buy the gas glut thesis but the Street is all too willing to accept $6 gas ad infinitum at this point. So I won't be thinking this is the big rally we've been waiting for to save the day. If anything it is either a reason to add UNG puts or just continue to wait for a real bottom to establish itself.

The Oil Inventory Report Slide Show:

In A Nutshell: We knew the numbers would be fast and loose and for the most part they were. Oil and gasoline inventories fell by bigger than expected amounts while distillates fared better which is a head scratcher until you consider that Gulf Coast directed exports probably took a back seat to product imports in advance of Gustav. In next week's EIA report we should see an increase in the amount of crude demanded by refineries but not a lot more oil production coming out of the Gulf of Mexico since Ike has halted and reversed the production restart process. So it stands to reason that we could see another big drop in crude stocks for the next two weeks.

CRUDE OIL

Utilization Plummeted With Gustav. Refiner utilization fell to 78.3% last week and demand for crude by refiners fell in line reaching a season low 13.5 mm bopd.  Look for a small bounce in demand here in next week's report.

Production Hits The Skids. Production fell by 20% or 1 mm bopd from the previous week as the Gulf was pretty much shut in for the period. Look for small increase here each of the next two weeks and then a slow increase towards the 5 mm bopd mark which has been the norm over the past summer. There has been some damage and it will probably be 30 to 90 days before everything prior to Gustav is back up, assuming Ike has no lasting impact. 

Crude Imports: As expected, imports to the U.S. tumbled as Gustav shut down access to the Louisiana Offshore Oil Platform (the LOOP) for much of the last reporting period.

Crude Stocks Continue To Fall. This is what "that guy" I was talking about in yesterday's post was talking about. High production from OPEC, "demand destruction" everywhere the eye can see, and yet inventories of crude fail to rally.

GASOLINE - Production dropped, imports rose, demand dipped and in the end, we saw another larger than expected drop in inventories.

Production: Down as the Gulf Coast takes a holiday.

Imports Rallied. Not a lot to say there. Europe has plenty of gas on hand and is shipping the excess to the U.S. Not sure how long that carries on but it could spell trouble or at least weakness for cracks. Its worth checking into and I plan to do a little more digging here near term.

 

Gasoline Demand Falls With The End Of Driving Season. Demand is running 1 to 4% below year ago levels depending on the week (see second chart below) so while the recent lower prices appear to have propped demand somewhat refiners should take care to manage inventories. I'd like to see a protracted Fall maintenance season this year before they kick distillate production into higher gear. 

 

Gasoline Days of Supply. I have not shown this chart in some time because frankly it wasn't telling me much. But given the repeated threats to refining infrastructure this hurricane season has brought with it  I thought now would be a good time to dust it off the concept. This is a measure, in terms of time, as to how much gasoline the U.S. has on hand to meet demand.

Gasoline Stocks Have Now Fallen 13% In The Last Seven Weeks. Expect a slight rally in production next week and then further declines due to hurricane forced closures.

DISTILLATES - Production and Demand pulled back last week due to Gustav. Not much to see here, the U.S. remains adequately stored in terms of overall distillate stocks however the dirty stuff, the non ultra low sulfur diesel, may be in short supply if the winter turns out to be a cold one.

Distillate Stocks Tick Lower But Not As Much As Expected. After looking at the the data production and demand data it is clear that exports were impacted by Gustav.

Stuff We Care About Today.

Marcellus Development May Be Further Delayed. The Delaware River Basin Commission plans to make drillers disclose chemicals used before drilling in the Marcellus Shale. (CHK) hinted at this last week when he said he wasn't poisoning New York's water. It won't stop development in this part of the Marcellus (parts of PA and NY) but it will likely slow things down even more in a region where getting a drilling permit is already a fairly slow process.

PBR Announces Another Big Discovery. This time 3 to 4 billion barrels in the Santos Basin. At some point, someone will care.

Back of the Envelope  E&P Fun... or Why K.I.S.S. Makes Sense When No One Is Bothering To Think Too Hard. This is way oversimplified and should be tweaked further. BasicallThe blanks don't mean "0" but that the table is a work in progress which will be expanded in terms of names and data and sent over to the E&P tab. Essentially this table takes a look at proven reserves and asks the question, "what is the market valuing them for right now on a $/Mcfe basis relative to the company's Total Enterprise Value." As you can imagine, there are some general rules of thumb that give will compress or expand valuations:

  • Some of these rules, like homogeneity of reserves which leads to repeatable success are not fully captured here unless you associate high growth rate, manufacturing style plays with higher multiples, which the market does.
  • High reserve life plays or high R/P (reserves to production) also will assigned a greater value.
  • Bigger companies get smaller valuations which is true of all areas of the market.
  • I've also thrown in some metrics on acreage and "reserve potential" which can can make some of the seemingly expensive names on the page much less so when taken into account. 

Bottom line: the names we traffic in to a greater degree on the site are not trading at unrealistically high prices when looking just at their proved reserves. So we are in buy cow and get the pasture for free territory. The first 6 names on the table are the larger cap E&Ps and I was a little surprised to see CHK not trade at the highest $/Mcfe valuation  in the group given that it is both faster growing, replete with upside potential, and somewhat smaller than the other big caps. I guess that is another sign of the market not keeping everything in its relative place during this tumble. Again, the table will be on the E&P tab in a few days when it is a little more formalized and with a few more names. If the table is too wide for your monitor you can click on it to open in a separate window.

 

 

Hedges: Partial list of the stocks we care about around here and their current hedges. I'll keep expanding the table and will try to keep it up to date on the E&P tab. If you happen to be looking for the oil unhedged and beaten down name on the list it is (CLR).

 

 

Odds & Ends

Analyst Watch: Zip, nada, nothing.

 

 

108 Responses to “Thursday – Gas Preview and Oil Review + Some Simple E&P Math”

  1. 1
    Sambone Says:

    Worked overtime today, eh Z?

  2. 2
    Sambone Says:

    NEW YORK, Sept 11 (Reuters) – Wholesale gasoline prices on the U.S.
    Gulf Coast soared to $1.50 over their futures benchmark as refineries began
    shutting operations before Hurricane Ike hits this weekend, traders said
    Thursday.
    Prompt cycle 53 conventional M3 gasoline, which has been reaching new
    highs on successive storms, traded successively higher at $1.00, $1.25,
    $1.40 and $1.50 over the October RBOB futures screen, which was likewise
    rising on the refinery outages.
    (Reporting by Janet McGurty; Editing by John Picinich)

    Thu Sep 11 12:53:31 2008 -GMT

  3. 3
    Sambone Says:

    By Nick Heath
    Of DOW JONES NEWSWIRES
    LONDON (Dow Jones)–Crude oil futures fell more than a dollar Thursday, as
    concerns over slowing demand and increasingly weak investor sentiment
    overshadowed potential threats to Gulf of Mexico oil production.
    A stronger dollar added to pressure on prices, helping ICE Brent crude to
    six-month lows Thursday. But the market shrugged off OPEC’s production
    announcement and latest U.S. oil and products stock falls out Wednesday,
    despite concerns that Hurricane Ike will punch fresh holes in U.S. inventory
    levels, and possibly damage infrastructure.
    “Considering Hurricane Ike is in full swing and facilities remain shut, there
    should be further significant stock falls, but the market seems to be ignoring
    the prospect at the moment,” said Michael Davies, head of research at Sucden
    Research in London.
    At 1140 GMT, the front-month October Brent contract on London’s ICE futures
    exchange was down 51 cents at $98.46 a barrel, up from an earlier six-month low
    of $97.85 a barrel.
    The front-month October light, sweet, crude contract on the New York
    Mercantile Exchange was trading 74 cents lower at $101.84 a barrel.
    The ICE’s gasoil contract for October delivery was up $6.75 at $929 a metric
    ton, while Nymex gasoline for October delivery was up 484 points at 271 cents a
    gallon.
    Hurricane Ike, currently a category two hurricane, could intensify into a
    category three hurricane over the next day or two, the U.S. National Hurricane
    Center said in its 0400CDT advisory Thursday.
    Ike is expected to take a general west-northwestward motion over the central
    and western Gulf of Mexico Thursday and Friday, a track which suggests its
    center will be approaching the northwestern Gulf of Mexico coast late Friday,
    the NHC said.
    “Ike is deviating on a more northerly route and will thus cross more oilfields
    than the path suggested yesterday,” said Olivier Jakob, managing director of
    Swiss consultancy Petromatrix. “We will only know early next week if Ike has
    been destructive.”
    According to the latest update from the U.S. Minerals Management Service,
    95.9% of oil production in the U.S. Gulf has been shut-in ahead of Ike’s
    approach.
    Analysts continued to mull OPEC’s Wednesday announcement on production,
    although many questioned whether the declared output reduction will arrest
    crude’s price decline with demand readings an increasing cause of market
    concern.
    While the U.S. Energy Information Administration Wednesday reveled sharp drops
    in crude and products inventories as a result of Hurricane Gustav, demand
    readings again came in lower, with U.S. gasoline demand down 2% in the month
    ended Sept. 5.
    “Traders are in effect saying ‘It doesn’t matter if there is less oil
    available because there will not be the demand for it anyway’,” said Glen Ward,
    energy broker at ODL Securities in London. “OPEC may be saying that they have
    done their bit to bring down the price of oil but in reality it’s the effect of
    the high price on economies which has curtailed demand and led to the current
    downtrend.”
    Strength in the dollar against most major currencies helped pile further
    pressure on crude prices Thursday. The euro dropped to $1.3893 Thursday
    morning, its lowest level against the greenback since in almost a year.
    The same pressures helping foment concerns over weaker oil demand have
    contributed to further weakening in the single currency this week, particularly
    the European Commission’s downgrade of its 2008 growth forecasts Wednesday.
    While not all agree on whether the dollar is driving oil prices – some argue
    it is in fact the opposite – moves in the greenback continue to generate a
    response in the crude market.
    “It’s difficult to say with the dollar and oil whether it’s chicken or egg.
    But if the dollar does start to weaken at all, it does tend to have a
    supportive effect on commodity prices,” said Tony Machacek, energy broker at
    Bache Commodities in London.
    While wilting demand remains a key pressure on crude prices, oil’s resistance
    to any seemingly supportive developments – specifically the potential threat
    from Hurricane Ike – reflects the state of current oil market sentiment, said
    Jim Rintoul, analyst at London-based trade advisory TheOilTrader.com. That
    sentiment offered some explanation as to why crude was trading lower but
    products climbed Thursday, amid the approach of Ike.
    “It’s sentiment – there’s an unwillingness to invest in long side oil
    positions,” he said. “It goes down a lot easier than it goes up these days. The
    drop (from record highs) has scared a lot of people out – the speed of the move
    is unpalatable for a lot of people.”
    -By Nick Heath, Dow Jones Newswires

    Dow Jones Newswires
    09-11-08 0759ET

  4. 4
    zman Says:

    Nah, taught my 5 year old to 10 key.

  5. 5
    zman Says:

    Oil reversed since that last story came out, up as much as $0.90 in the last 15 minutes. Look for another volatile session today with moves dependent on the track of Ike.

    Also, the CFTC should have a report out on speculation in the oil markets which will give some podium types a reason to call for increased restrictions on trading. Nevermind those same speculators are busy buying the dollar right now and weakening oil. I guess we should only like them when they buy the right things.

  6. 6
    Nicky Says:

    Morning all. Wow what a spike in the products. RBOB moved 1000 points in minutes. I think the oil market is way too complacent about Ike and obviously figuring that the market will respond in the same way as it did to Gustav but this storm is much bigger and the oil region is on the ‘wrong’ side of it.
    Crude continues to bounce of the Gann line I have been talking about. I think oil has now been down 8 days in a row (it may be 9) – same with gold. Dollar very overbought…

    Broader market support at 1211 and then 1207.

  7. 7
    zman Says:

    Agreed re Ike, no reaction in the stocks except for the refining group and that’s pretty anemic. Oil could care less and is red again at the moment. If no storm, which will be the case next week, oil would be below $100.

  8. 8
    zman Says:

    Wow LEH.

    This is on market watch:

    Oil futures traded lower Thursday morning, as The New York Times reported that Saudi Arabia has given private signals that it won’t honor the production quota drop agreed in Vienna. Crude fell 75 cents to $101.83 a barrel. That sounds like a short rumor to me.

  9. 9
    Sambone Says:

    WM is going out also. My question is, who will Paulson use the shotgun on this weekend to buy these puppie’s out (LEH, WM)?

  10. 10
    tater Says:

    Anything that you get out of hurricane news that is different this morning than from what you knew 24 hours ago? Want to figure out whether to trade the refiners on technical info or on fundamental info (or if I should just go to the zoo today?)

  11. 11
    zman Says:

    Sam – is Goldman untouchable in that selection process?

    Tater – Ike got stronger and continued veering to the east of the tracks from 2 days ago. As Nicky said, this puts a big chunk of U.S. refining capacity on the wrong (bad) side of the storm. The storm has seen a little increase in forward speed (which is would generally mean a little less damage as it squats over the target for a shorter period of time) but it really is only a slight increase. Yesterday afternoon forecasters were thinking it would be a Cat 4 at landfall, this morning it is thought to be a Cat 3….from a wind and flooding standpoint its probably not that much of a delta but traders will take those numbers literally and if the forecast backs to a Cat 2, gasoline will fall back as will the stocks. This is a much bigger storm than Gustav and it is about to cross some warmer water and is expected to move up the scale to a 3 before the close so from a day trading perspective you may have a catalyst there but if you look around the energy complex, there is a lot more concern about global depression than this storm so gains will probably be muted and short lived as the Atlantic looks pretty blank aside from the remnants of Josephine at present.

  12. 12
    zman Says:

    Nicky, is the support level on crude at $101 or 101.50. They are pushing it now.

  13. 13
    zman Says:

    Oil hit 100.85.

    So, are banks and investment banks failing in Europe?

  14. 14
    tater Says:

    Thanks. Some days old news gets trotted out and everybody pretends it’s new. Just trying to get a feel for if it is actually new info vs. things a good weather watcher already knew yesterday.

  15. 15
    QUARRYMAN Says:

    Hey Z.

    Just CHKing in. Loving my LEH and MER puts from Happy’s site, where I’ve been hanging out. Turned my brother on to your site (don’t know his handle yet).

    SO, I’m liking CHK below 40. But, I’m afraid of getting stung by a further drop.

    This seems to be the scenario for a calendar spread. Here’s my question:

    Which month should I sell?

    Oct 40s against Jan 40s? or go out longer?

    Basically, you’ve convinced me of the cos. merits and Aubrey McClendon.

    Q.

  16. 16
    redjack Says:

    interesting link: http://www.theoildrum.com/node/4517

  17. 17
    Nicky Says:

    Z – there was a Gann support line which came in at the 101.50 region today. Next support is 100.58.

  18. 18
    zman Says:

    zoo, zoo, zoo.

    What I think is really being underestimated is the amount of shallow water infrastructure that this storm is headed over. There is likely to be more damage. Gassy players would stand to benefit, those without offshore presence a little less than the onshore guys. This is also good stuff for TDW though you can’t tell it by their stock action.

    One last thing on the refiners. If we have damage occur to one or more of the really big sites along the coast, that generally is what will turn the group. You can go back in time and see fires and other major outages as “the event that turned the group”. If that happens they all more or less will benefit. I prefer the ones away from the hurricane action like TSO, and FTO but I hold VLO which has some sites in the path but which is a go to name when fund managers want independent refiner exposure.

    NG number in 20 minutes.

  19. 19
    Sambone Says:

    #10 – Z, GS has it’s own Kingdom. It doesn’t want to muddy it’s own waters. Paulson was CEO of GS before he became Bazooka Hank. I call GS “The Matrix” because not all is what it seems. Who is CEO of WB? MER? Bottom line, don’t count GS.

  20. 20
    tomdavis12 Says:

    Z: Warming up to some more TSO?

  21. 21
    zman Says:

    Q – the group has not put in a bottom yet and it likely won’t until the commodities find a comfortable trading range. I’ve shortened my hold times and am just acting opportunistically (or not so in some cases).

    Tom – I have enough for now, if I do it’ll be close to the money Octobers or some Septembers for a WildZ. FTO popping up again nicely and they will have a better 3Q than their 2Q but I almost prefer taking the shares and selling calls against them as a longer term hold.

    Retail sector acting like the consumer is back with oil down here. If that is supported by actual sales it seems people will need to drive to get there.

    Thanks Redjack, good Gomex graphic on that link.

  22. 22
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures fell below $101 a barrel for the first
    time in more than five months as the dollar reached a one-year high against the
    euro.
    Light, sweet crude for October delivery traded $1.16, or 1.1%, lower at
    $101.42 a barrel on the New York Mercantile Exchange, after falling as low as
    $100.85 a barrel. Brent crude on the ICE futures exchange traded 84 cents lower
    at $98.13 a barrel.
    Futures have tumbled 31% from the record intraday high of $147.27 a barrel hit
    on July 11, as the market considers weakening demand in the U.S. and Europe.
    Several large European economies appear to have entered into recession, hurting
    oil demand and helping to send the euro sharply weaker against the dollar.
    Some investors sell oil when the dollar strengthens, as crude priced in the
    dollar becomes more expensive for those who book profits in other currencies.
    Oil would likely be trading even lower if it weren’t for Hurricane Ike, which
    is expected to make landfall along the Texas coast Saturday. The storm has
    forced several Texas refineries to shut down, further pressuring gasoline
    supplies that were already depleted by Hurricane Gustav last week.
    “If it wasn’t for Ike swirling out there, we’d probably be testing $100 right
    now,” said Gene McGillian, an analyst with Tradition Energy.
    Front-month October reformulated gasoline blendstock, or RBOB, recently traded
    up 8.14 cents, or 3.1%, at $2.7430 a gallon. October heating oil recently
    traded at $2.9310 a gallon, up 2.86 cents, or 1%.
    Some have begun to see double-digit oil prices as inevitable, though
    predicting precisely when oil will drop below $100 a barrel is difficult.
    “The market’s been anticipating $100, and with Brent trading (below $98), I
    don’t see any reason why we shouldn’t follow,” said Tony Rosado, a broker with
    GA Global Markets. “But we may end up net positive on the day on the back of
    the strength in products.”

    -By Brian Baskin, Dow Jones Newswires

    Dow Jones Newswires
    09-11-08 1027ET

  23. 23
    zman Says:

    58 Bcf injection. That’s a little high.

  24. 24
    zman Says:

    new low on crude $100.18.

  25. 25
    redjack Says:

    Wholesale gasoline prices shoot past $4

    Some Houston-area gas stations running low or out of certain grades, but that’s not the only problem at the pump (via AP):

    The wholesale price for gasoline produced on the Gulf Coast has jumped about 30 percent as Hurricane Ike churns toward Texas and its massive petroleum refining infrastructure.

    The wholesale price for a gallon of gasoline rose about $1 to $4.25 today, topping the high price five years ago when hurricanes Katrina and Rita raked the Gulf Coast, said Tom Kloza, publisher of the Oil Price Information Service in Wall, N.J.

    “It’s pure panic,” Kloza said. “It’s related to the fact that there are worries about whether there’s going to be enough (gasoline) in the distribution system to satisfy some of the September pumping needs on the Gulf Coast.”

  26. 26
    zman Says:

    oil fighting back over $101, group coming up a little. Almost did another DUG trade, got cup of coffee instead, gains cut in half on the day in that three minute span.

    Interesting link for all your oil demand by region curiosity. This is the IEA’s read on regional demand and while they have been pulling in their horns note how much china has come up and that it is not expected to fall apart. The driver behind Other Asia is India. Works best if you pull up the excel table showing supply and demand.

    http://omrpublic.iea.org/balances.asp

  27. 27
    md Says:

    Do you have a list or chart of BCFPD production by producer for 2008.

  28. 28
    zman Says:

    Interesting lack of reaction in NG to the storage numbers(second week in a row). Feels like bottoming action in the 7 to 7.50 range.

    md – I have a top 20 producers list for the U.S. for 2Q08. There are over 100 publicly traded gas producers in the U.S. alone but the top 20 produce about 40% of the gas.

  29. 29
    Fred Says:

    Z – The point missing, WTI is only down cause the SPR is open with the 700 mbr. Close the SPR and let’s see what happens?

  30. 30
    zman Says:

    Fred – not sure I follow your last thought there. Can you elaborate?

  31. 31
    md Says:

    Is it possible to send me link. Does it show volumes for 2008 and projected for 2009

  32. 32
    BirdsofpreyRcool Says:

    z – VERY impressive amount of work last night. thank you!

    plagued by internet probs today… trying to follow credit spreads (opened at the wide, but have come in a bit, so that is good), but connectivity is making it tough.

  33. 33
    zman Says:

    CNBC talking head saying look at when oil was moving up through $100 back in February vs now and gasoline prices. Makes the statement I guess gasoline just falls slower than it rises since gasoline was $3.09 retail then and is now $3.67. It couldn’t be summer grade vs winter grade gas requirements could it? naahhh.

    MD – it does not have projected 08/2009 volumes since many of the companies (especially the majors) don’t provide that guidance or have not yet. For those guys you can generally assume down as the Majors don’t really try to grow domestic gas production. The problem with trying to add those kind of lists up and come up with a growth rate is that you have divestitures and acquisitions which cloud the picture. If they are from names on the list that’s ok but if you pull assets from outside the list it distorts the true growth picture. I planned on publishing it on the E&P page.

  34. 34
    zman Says:

    md – if you just wanted to see a who’s who in U.S. gas check page 27 of the September CHK investor presentation.

  35. 35
    zman Says:

    Bird – Those tables aren’t pretty but they are a start. Been meaning to get organized and I find its better to study on days like the recent ones than stare blankly at my screens like Malcolm McDowell in a Clockwork Orange.

  36. 36
    BirdsofpreyRcool Says:

    z – powerful visual. know the feeling.

  37. 37
    BirdsofpreyRcool Says:

    (“pretty” is for banker presentations. really appreciate your turnaround time.)

  38. 38
    Fred Says:

    Z – Seems like adding more suppy from the SPR has the price of WTI crude falling to me and most of the dow news wire folks haven’t mentioned that much about it. Those folks are unaware of what we know here, meaning the big API draw down from the SPR last week.

  39. 39
    zman Says:

    Bird – if you have additions for both lists or metrics the suggestion box is open. I have a few Haynesville and Bakken names I plan to add. On metrics cash costs is being worked.

  40. 40
    BirdsofpreyRcool Says:

    z – thanks for asking. as you know, the thing about e&p stats is that there is no one or two that you can rely on 100%. you have to look across a lot of different metrics. on the other hand, e&p has more ways of slicing and dicing metrics than any other industry… bar none. so, it’s a constant balance between KISS and detail.

    In this mrkt, KISS counts. So, thx again.

  41. 41
    zman Says:

    Fred – Ok, I see. I’m not sure you can rely on that API number. I like them, have a relative who works there (and still don’t get a free subscription mind you) and think they are generally accurate. But that number implied a bigger than believable drawdown. I don’t know if the deliverability is even there for that kind of draw. The numbers I show are non ex-SPR on the stocks. I know one small release request from the SPR was granted last week but the EIA shows no release so I’m going to trust them. Also, refinery inputs got whacked so again, don’t see that SPR crude coming into play.

    If congress were smart they would authorize a Strategic “Products” Reserve that would contain non-EPA friendly gasoline. There is a New England heating oil reserve so people don’t freeze. It would seem to me to be a calming force to have a gasoline supply ready to go. I mean, we have hurricanes each year and we have not figured out the whole weather control thing yet so why not. Huge jobs program there to boot.

  42. 42
    zman Says:

    BOP – absolutely agree and now I can sleep in. And if I ever go into data dump mode like the weekly brokerage pieces please yell at me to wake up. I used to produce a natural gas weekly and at times I must admit, it was pretty rote.

  43. 43
    zman Says:

    Screen is actually mixed. Big caps appearing to lead the way both in E&P (APA, XTO) and in Service (SLB).

    Refiners continue to expand on gains from earlier.

  44. 44
    BirdsofpreyRcool Says:

    FTO… wow. in addition to being a “hurricane play,” the fact that they are marketing their $200mm HY deal means that more people are looking at them than usual. It’s such a well-managed company. I hope they can buy some good assets off TSO on the cheap.

  45. 45
    zman Says:

    Bird – their 1Q and 2Q calls sounded nothing like their peers. 3Q going to see a nice improvement there but analysts are on that and am not sure we get a beat. May not need one.

    Market figuring out, again, that E&Ps have no CDO exposure.

  46. 46
    doc Says:

    Just a few words about new york state politics-Thousands of acres of land were condemned along route 309 along the deleware river 30 years ago to build a huge lake for boating. rt 309 is called the ho chi min trail by truckers. It runs up.o. to the deleware water gap. The land is still condemned with no development. I could see the marcellus shale project die like the lake

  47. 47
    BirdsofpreyRcool Says:

    z – yeah. was on the calls. people forget that FTO’s end mrkts are not new york and L.A., but good ‘ol midwest. also, they sell a lot of diesel to the farmers… and we all know how well that demographic is doing. on the other hand, only having two refining assets makes them more exposed to “event risk.”

    all that said, FTO is the only refiner i have been willing to own for the last 3 months.

  48. 48
    zman Says:

    Doc – wow, NIMBY will always rule no matter how well you hide the wellhead.

    What’s gotten into oil, almost flat. Dollar selling back to even…thought everything was fine now.

  49. 49
    Sambone Says:

    Sept 11 (Reuters) – Oil companies, still reeling from the impacts of
    Hurricane Gustav more than a week ago, shut more than 95 percent of their
    offshore oil production in the Gulf of Mexico and 14 percent of their U.S.
    refining capacity as a precaution ahead of Hurricane Ike.
    Ike was gathering strength as it churned through the Gulf of Mexico’s warm
    waters on a track that would skirt the heart of the U.S. offshore oil patch
    before slamming into the Texas coast late on Friday or early on Saturday.
    The Gulf is home to a quarter of U.S. crude oil production and 15 percent
    of U.S. natural gas production, and a big share of the nation’s oil refineries
    dot the Gulf Coast from Mississippi to Texas.
    The following outlines the impact of last week’s Hurricane Gustav and the
    approach of Ike on the energy sector:
    ***************************HIGHLIGHTS*************************
    CUMULATIVE IMPACT OF GUSTAV AND IKE
    *14.1 million barrels of crude oil
    *67.9 billion cubic feet of natural gas
    *15.5 million barrels of refining (counting only plants completely shut)
    CURRENTLY SHUT/SLOWED
    *95.9 pct Gulf of Mexico oil output
    *73.1 pct Gulf of Mexico gas output
    *10 refineries shut, 14.6 pct of US capacity
    *4 refineries representing 6.8 pct of US capacity at reduced rates
    OTHER HIGHLIGHTS
    *Henry Hub extends force majeure due Ike
    *Exxon Mobil XOM Baytown refinery, U.S. biggest, shut
    *NYMEX Crude drops $2 Thurs, RBOB up 7 cents
    *Cash products spike due Ike
    *LOOP stops unloading ships, still delivers from storage
    *Houston Ship Channel halts inbound traffic due to Ike
    *Inbound ships halted Beaumont-Port Arthur, Corpus Christi, Freeport
    *74,000 Louisianans still no power, nuke ramping up n
    *South Texas nuclear plant prepares for Ike
    ******************CRUDE OIL, NATURAL GAS********************
    HEADLINES:
    *95.9 percent of U.S. Gulf’s 1.3 million barrels per day crude output shut
    Wednesday, from 77.5 Tuesday, MMS says.
    *73.1 pct of the Gulf’s 7.4 billion cubic feet per day natural gas output
    shut Wednesday, from 64.8 pct Tuesday
    *****************************REFINING****************************
    REFINERIES SHUT: (Texas, Ike-caused unless otherwise noted):
    *Exxon Mobil Baytown 567,000
    *Shell RDSA.L -Pemex Deer Park 340,000
    *Marathon Texas City MRO 76,000
    *ConocoPhillips COP 195,000 Alliance, Louisiana, due Gustav
    *BP 467,700 Texas City nN11383378
    *ConocoPhillips 247,000 Sweeny
    *Flint Hills 300,000 bpd Corpus Christi
    *Valero 83,000 bpd Houston
    *Valero 200,000 bpd Texas City
    *Pasadena Refining 100,000 bpd
    REFINERIES AT REDUCED RATES:
    *Valero 289,000 bpd Port Arthur refinery
    *Valero 195,000 bpd Memphis, Tennessee
    *Citgo 430,000 bpd Lake Charles, Louisiana
    *Motiva 285,000 bpd Port Arthur
    BACKGROUND:
    *At peak of Gustav’s impact, more than a third of U.S. refining capacity
    was either slowed or shut down.
    ********************ELECTRIC POWER IMPACT*************************
    *Entergy: Power by Monday to ConocoPhillips Alliance
    *Entergy La. Waterford 3 reactor up to 64 pct power n
    *South Texas nuclear plant readies for Ike n
    *Some 74,000 Entergy customers still lack power
    **********************PORTS, WATERWAYS****************************
    HEADLINES:
    *LOOP stops unloading ships, keeps delivering from storage ahead of Ike
    *Houston Ship Channel halted inbound due to Ike n
    *Beaumont-Port Arthur, Freeport, Corpus Christi halt inbound ships
    *********************PIPELINES, GAS PLANTS************************
    HEADLINES:
    *Seaway crude pipeline shut Wed, 6 p.m. CDT (1800 GMT) n
    *SPR Bryan Mound, Texas, to shut due Ike n
    OTHER PIPELINE, GAS PLANT NEWS:
    *Enbridge EEP to end force maj. on UTOS, Stingray
    *Part of BP Destin gas line to remain shut due Ike
    *Henry Hub extends force majeure due Ike n
    *NYMEX keeps force maj. in place for August, September contracts
    *Capline at reduced rates
    *Colonial, Plantation pipelines at reduced rates
    *Houma-to-Houston crude line to restart Saturday
    *Centennial pipeline restarts
    (Reporting by Bruce Nichols, Erwin Seba; Editing by Richard Valdmanis)

    Thu Sep 11 15:58:15 2008 -GMT

  50. 50
    antrimshale74 Says:

    Anybody here follow CVI?

  51. 51
    Sambone Says:

    WASHINGTON, Sept 11 (Reuters) – The U.S. futures market
    regulator on Thursday said it could not determine whether
    speculators were to blame for the run-up in crude oil prices
    this year.
    In a much-anticipated report to Congress on the impact of
    speculators in the energy markets, the Commodity Futures Trading
    Commission said it was not able to “quantify the amount of
    speculative trading occurring in the futures markets.”
    (Reporting by Tom Doggett)

    Thu Sep 11 16:06:58 2008 -GMT

  52. 52
    AAA Says:

    New to site. Noticed NFX is lagging other names. Any significance to that?

  53. 53
    zman Says:

    Antrim – sorry no.

    AAA – Welcome! Re NFX, analysts were disappointed with the initial guidance for 2009 (8 to 13%) growth coming on the heals of 26% growth (raised 3x so far this year). They expected more on the unit volume side and have been trimming numbers to match the guidance. I’m waiting for the group to establish a little better tone before heading back to that one on calls. NFX generally lags group moves. On the relatively near term horizon you should see further completions in the Bakken and more improvements out of the Woodford, not just the dual lateral they just spud and have been talking about for some time but also via super extended reach laterals (9 to 10,000 feet of horizontal). For now, analysts on the group are not willing to go out on a limb and understand that the initial guidance range is attributable to production growth that is already in hand via Gulf of Mexico and Malaysia planned starts/ramps. Meanwhile, fund managers are more in the mode of “Nice call, talk to me in the Fall”.

  54. 54
    zman Says:

    Sam – CNBC confirming GS does not want LEH.

  55. 55
    Sambone Says:

    Told ya

  56. 56
    Sambone Says:

    NEW YORK, Sept 11 (Reuters) – U.S. Gulf gasoline price
    differentials spiked in early frenetic trade on Thursday as the
    region’s refineries began closing down ahead of Hurricane Ike,
    traders said.
    Wholesale gasoline prices traded as high as $2.50 over the
    rising futures benchmark as refineries began shuttering
    operations as a precaution, before the fuel slipped to
    $1.00/$1.50 over the October RBOB screen in quiet trade.
    “It’s dead here,” said one dealer who said gasoline trade
    began to taper off after early active short-covering.
    Midwestern gasoline prices tracked the Gulf higher.
    As of midday, nine refineries with capacity of about 2
    million barrels per day — or 11.4 percent of capacity — were
    closing down ahead of Ike, which was expected to hit land on
    Saturday somewhere on the mid-Texas coast.
    “What we’re seeing is a combination of a Category 3, maybe
    a Category 4 storm moving … near the refineries. We’ve also
    got the lowest stocks in RBOB gasoline since 2000 combined with
    possible damage to refineries,” said Jim Brunn, Forecast
    Trading, in Suffern, New York.
    In the New York Harbor, jet fuel jumped 20 cents per gallon
    and other distillates firmed in the hub as buyers chased
    sellers amid news of the refinery shutdowns, traders said.
    Crude futures fell as weak economics combined with
    Ike-related refinery shutdowns are seen cutting back on demand
    while RBOB futures were up 12.24 cents to $2.7840 at midday.
    For a list of refinery outages, click REF/US

    U.S. GULF COAST
    Newly-prompt cycle 53 M3 gasoline spiked as high as $2.50
    over the October RBOB screen before slipping back as refineries
    began shuttering ahead of Hurricane Ike, well over Gustav’s 50
    cents over and Wednesday’s 40 cents over.
    Cycle 54 traded at $1.10 and $1.00 over October.
    Distillate trade was virtually nonexistent, with gasoline
    taking center stage.
    “Distillate trade is thin and obviously volatile, but it’s
    been all gas,” said one trader.
    Traders said 61 grade ultra-low sulfur diesel traded at
    27.50 cents over futures before slipping back to 22/24 cents
    over. On Wednesday, ultra-low sulfur 61 grade rose about 3
    cents to trade at 11.50 cents over the screen.

    NEW YORK HARBOR
    Big mover jet fuel was offered at 55 cents over the October
    NYMEX heating oil futures, before trading there, up from 35
    cents over Wednesday afternoon for Buckeye Pipeline barrels.
    The fuel was later offered at 60 cents over, putting it as
    high as 34 cents above early Wednesday levels.
    “It’s a better bid market … Jet traded at +55, it’s now
    offered +60,” one distillates trader said.
    “Nobody knows what’s going to happen with 9 refineries
    shutting down,” he added.
    Kerosene also jumped, last valued at 55 cents over the
    print, from about 29 cents over early Wednesday, and heating
    oil firmed a half penny to 2.50 cents under the print.
    ULSD diesel firmed to 20 cents over the October print, up
    13 cents per gallon from Wednesday, according to traders.
    M4 regular gasoline was heard early on at 16 cents over the
    print, holding a 5-cent gain from Wednesday.

    MIDWEST
    Gasoline and diesel price differentials jumped in lock-step
    with the Gulf and amid the growing fears of supply disruptions
    that may be caused by the storm.
    N-grade gasoline in the Group Three jumped to trade at 32
    cents over the October RBOB futures, then 35 cents over the
    print. This was up from 19.00/20.00 cents over on Wednesday.
    In Chicago, thinly talked gasoline offers were said to be
    as high as $1.50 over October futures, up from 55 cents over.
    “It is probably $1.00 wide bid and ask … only solid
    number I have seen is a $1.50 offer,” a Chicago trader said.
    “It’s all Ike,” he said of the factors behind the spike.
    Group ULSD rose to 22.25/22.50 cents over the print, then
    backed off to +19.00 cents over. These levels topped
    Wednesday’s 12.50 over. In Chicago, ULSD was heard in a broad
    range of 21.50 to 25.0 cents over, up from 20 cents over.
    (Reporting by Janet McGurty and Haitham Haddadin)

    Thu Sep 11 17:05:30 2008 -GMT

  57. 57
    md Says:

    KISS definitions
    Proved Reserves inc.P1 Proved Undeveloped Reserves . In CHK Aug. presentation Pg.12 they list 12.2 TCFE and PUD of 4.1 TCFE. Is that inc. in the 12.2TCFE. valued at $2.81 on Pg 24 @9.00 NYMEX
    They also list
    48 tcfe of risked unproved reserves valued at .90 @ 9.00 What is meant by “risked” Would this be inc. in P2 or P3.
    Lastly, 147 tcfe unrisked unproved resources. No Value seems to be attached

    The bigger and more credible the operator the higher the values for the P’s ? Assuming KISS

  58. 58
    Sambone Says:

    DOW JONES NEWSWIRES
    The price gasoline wholesalers charge retailers for gasoline was up to as much
    as $5 a gallon along the Gulf Coast, the Houston Chronicle reported Thursday on
    its Web site, citing the Oil Price Information Service. Prices range from $4.25
    to $5 for spot, or wholesale, gasoline, said Tom Kloza, publisher and chief oil
    analyst at the service, up from about $3.30 a gallon Wednesday.
    -Dow Jones Newswires

    Dow Jones Newswires
    09-11-08 1315ET

  59. 59
    md Says:

    What conservative values would you put on the various P’s @8.00 say for a CHK or HK or PQ

  60. 60
    zman Says:

    md – yes. I’ve got a basic run through of reserves here:

    http://zmansenergybrain.com/subscriber-data/zs-dictionary/

    risked means they put a probability on their acreage as to whether or not is prospective for those reserves. Some companies will risk something 50% meaning that they see a good chance of finding hydrocarbons on half their acreage or in terms of a play, that it is a coin toss. The unrisked unproved is pretty much what you’d think. No percentage dropped on it. In this case they are risking the what they see as their potential by two-thirds which is a pretty good haircut.

    On the last statement, yes in general, if you mean the bigger the company, the bigger the underlying reserves, yes.

  61. 61
    Sambone Says:

    Oil’s Health Risks

    By LIAM DENNING
    A DOW JONES COLUMN

    War in Georgia wasn’t enough to prop up oil prices. Might one man’s health problems in Nigeria do more?

    The man is President Umaru Yar’Adua, whose grip on power in Nigeria has never been rock solid following 2007’s flawed election. Long-standing concern over his health — he has a chronic kidney complaint — has flared in recent weeks.

    Sebastian Spio-Garbrah, an analyst with the Eurasia Group, foresees the potential for a serious power struggle if Yar’Adua were to be incapacitated. Even barring this, Yar’Adua has so far proved unable to deliver much progress on a critical issue: Bringing stability to the fractious Delta region, home to most of Nigeria’s oil and natural-gas reserves.

    Nigeria produces only 2% of the world’s crude oil, but that belies its true significance. Nigerian crude is predominantly light and “sweet” (low in sulfur), making it easy to refine. Some 16.6 million barrels a day of the world’s 2007 crude-oil output fell into that category, according to Julius Walker, an analyst with the International Energy Agency. So Nigeria accounts for 12% of the world’s light, sweet crude capacity.

    OPEC, of which, Nigeria is a member, is scaling back excess production now. However, most of that is heavy, sour Saudi crude, which is less in demand by refiners. Refiners’ struggle to produce, in particular, enough low-sulfur middle distillates such as diesel, has been a bottleneck supporting oil prices in general.

    A cutback in Nigerian output due to disruption, a recurring theme in recent years, would have a more significant upward effect on oil prices, especially as the country also is expected to account for 11% of OPEC’s new capacity over the next five years. As North America and Europe head toward winter, Nigeria’s own brand of Delta force could spell trouble.

  62. 62
    Sambone Says:

    Notice No. 475
    09/11/2008
    CME Group Announces Early Open on Sunday for Energy Products on CME Globex and ClearPort Related to Hurricane Ike

    CME Group, the world’s largest and most diverse derivatives exchange, has announced that it will extend trading hours for energy futures and options contracts on the CME Globex® and ClearPort® electronic trading and clearing platforms due to the potential impact of Hurricane Ike on the US Gulf Coast this weekend.

    CME Globex and ClearPort trading sessions for energy products only will begin on Sunday, September 14 at 10:00 a.m. (all times in Eastern time) with a 9:30 a.m. pre-open on CME Globex. All trades will be for the Monday, September 15 trade date.

    All other products listed on CME Globex will follow their regular trading hours on Sunday.

    “After extensive discussions with the energy trading community, including clearing member firms and independent software vendors, CME Group is modifying its Sunday trading hours to allow customers access to the markets that may be impacted by Hurricane Ike,” said CME Group Chief Operating Officer Bryan Durkin. “Collectively, we recognize the need for the global energy markets to manage their risk during this potentially volatile time and felt this was in the best interest to serve their needs.”

    If you have any questions, please call the CME Globex Control Center at 312.456.2391 or in Europe at 44.207.623.4708.

    Should you have any questions or require any further information, please contact exchangeinfo@nymex.com/quote

  63. 63
    md Says:

    How did CHK arrive at .90 estimate for 47.7Tcfe unproved resources vs. 2.80 for proved resources @9.00.
    Is it simply 33% probability of $2.80. and combining P2-P1 and P3-P2.
    Basically trying to see if there is any common denominator between operators.

  64. 64
    zman Says:

    Sam – re 58. Watch the attorney general of Tx get involved over that wholesale price.

    59 – that’s a PV10 calculation. I don’t run those as its more complex than just ratioing the values from year end and in the end, I have not found them to be of much use. I think in this environment it is better to slap a $/Mcfe value on the proved reserves and then decide if the excess potential is worth the price. When gas was trading $13, deals were being done at $3+/Mcfe. Now they are closer to $2.50. So you would take proved reserves by $2.50 and then decide if the delta between that number and the company’s total enterprise value is worthy of the upside (non-booked) potential and any other assets like processing sites and pipelines etc.

  65. 65
    zman Says:

    MD – to answer 63 first, no there is not. There are several variations as to how they throw a value on the reserves. Everybody has to do PV10 at year end as per SEC rules but other than that, the stuff you see in the presentations is generally what feels best to them and takes into account a number of factors. CHK may have used that method but it could also be coincidence. The value of the unproved and then the probable and possible reserves will be less since they are 1) less sure they are really there, and 2) will require more capital to develop. Same goes for the proven reserves where you have PDP (proved developed producing) and PUD (proved undeveloped) categories. The higher degree of PUD’s the less the proved reserves are worth since they will take more additional capital to develop and bring to market.

  66. 66
    BirdsofpreyRcool Says:

    #65 – really good explanation.

  67. 67
    zman Says:

    PBR responding to their well news this morning. I’m not ready to jump back in there in front of lack of Ike next week however it is good to see evidence that data is sort of maybe starting to matter.

  68. 68
    zman Says:

    DUG is off now and I may take a piece for an Ike is a dud play over the weekend.

  69. 69
    zman Says:

    re 68 will likely wait on tomorrow. I think good chance Ike is a problem for the refiners and maybe less of an issue for the platforms…looks to be delaying the expected strengthening on the present tracks.

  70. 70
    occam Says:

    “Ike’s huge wind field has put an extraordinarily large volume of ocean water in motion.”

    From this link, arguing that Ike is going to be extremely damaging even though it is only Category 2.

    http://www.wunderground.com/blog/JeffMasters/show.html

  71. 71
    BirdsofpreyRcool Says:

    sounds like there could be some cheap real estate for sale on the West End of Galveston next week. those kind of hurricanes are barrier island eaters.

  72. 72
    occam Says:

    Given the large waves needed to create the record shore surge being predicted, the energy in them could be a serious problem for Gulf platforms, even though the winds will not be as high as other hurricanes.

  73. 73
    zman Says:

    Occam – agreed, a real problem for the Gomex shelf players and the refiners, probably not so much for the deepwater guys. You could be looking at a couple of Bcfgpd down for several weeks if the Shelf takes a damaging blow.

  74. 74
    zman Says:

    Putting 73 into perspective, of the roughly 7.4 Bcfgpd of gas produced in the Gulf of Mexico, 4.8 Bcfgpd comes from the shelf (<1,000 feet of water). Ike is tracking though some of the more densely populated parts of the shelf. This represents about 8% of U.S. gas deliverability. Obviously not all of it would be affected but right now, the market is giving this storm no credit.

    For oil, the shelf produces about 30% of the oil produced in the Gulf or just under 400,000 bopd, so its about the same threat to U.S. production, about 8% of total.

  75. 75
    zman Says:

    Hear ya Bird, everyone who lives along the Gulf Coast should be required to read this:

    http://www.hurricaneville.com/book_review_jun_2006.htm#ISAACSTORM

  76. 76
    Sambone Says:

    IKE

    Gota feeling this guy is gonna beat somebody up. Might be bigger than Big K!

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

    http://moe.met.fsu.edu/cgi-bin/cmctc2.cgi?time=2008091112&field=Sea+Level+Pressure&hour=Animation

    Pressure is dropping big time!

    http://www.ndbc.noaa.gov/station_page.php?station=42001

  77. 77
    Fred Says:

    Z – just picked up copy of IS. Thanks

    “10% chance that the storm tide from Ike will reach 24-27 feet on the south and east sides of Houston.” Wow!

  78. 78
    Sambone Says:

    By Christine Buurma
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Natural gas futures finished lower Thursday, pressured
    by falling crude oil prices and a storage build that was smaller than some
    analysts had predicted.
    Natural gas for October delivery on the New York Mercantile Exchange settled
    floor trade 14.5 cents, or 1.96%, lower at $7.248 a million British thermal
    units after reaching a low of $7.21/MMBtu in combined electronic floor trade
    earlier in the day.
    Nymex gas prices slipped Thursday after the EIA reported an injection into
    storage of 58 billion cubic feet for the week ended Sept. 5. Although the
    storage build met the market’s predictions, some analysts had expected a
    smaller injection as a result of Hurricane Gustav-related production
    disruptions in the U.S. Gulf of Mexico.
    “Given all the production that’s supposedly offline, it’s not a very bullish
    number,” said Kyle Cooper, an analyst with IAF Advisors, a Houston-based energy
    advisory firm.
    Analysts and traders in a Dow Jones Newswires survey had predicted a 58 bcf
    build. The five-year average injection for this time of year is 78 bcf,
    according to the EIA. In the same week last year, 56 bcf of gas were added to
    storage.
    The latest injection brings the total amount of gas in storage to 2.905
    trillion cubic feet, 2.9% above the five- year average and 4.8% below last
    year’s levels.
    The crude oil market was also driving natural gas prices lower Thursday.
    Natural gas can sometimes be used as a substitute for oil products in power
    plants and heating systems.
    Nymex light, sweet crude oil for October delivery settled down $1.71 at
    $100.87 a barrel Friday. The contract reached $100.01 in intraday trading, its
    lowest price since March 5, on a strengthening dollar and signs of weak demand.
    “Natural gas prices are also still reacting to changes in oil prices, and
    right now, that means watching the U.S. dollar, perhaps more than any other
    single indicator,” analysts with Cameron Hanover, a New Canaan, Conn.-based
    energy advisory firm, said in a note to clients Thursday.
    Meanwhile, gas traders continued to monitor Hurricane Ike’s progress as it
    neared the Texas coast, although the storm appeared unlikely to create
    prolonged disruptions to gas infrastructure. About 93.3% of Gulf gas output, or
    6.9 billion cubic feet a day, was offline Thursday as operators shut in
    production ahead of the hurricane, according to the U.S. Minerals Management
    Service.
    Ike is projected to make landfall in Texas as a Category 3 hurricane, with
    maximum sustained winds between 111 miles per hour and 130 mph, early Saturday
    morning.

    -By Christine Buurma, Dow Jones Newswires

    Dow Jones Newswires
    09-11-08 1524ET

  79. 79
    Nicky Says:

    They are currently reporting 38ft wave heights on the north east side of Ike which is only due to get worse. That is huge is it not?
    Still believe the oil market is way offside with this storm….

  80. 80
    Sambone Says:

    Looks like MER is in trouble also in the Fin patch

  81. 81
    Sambone Says:

    If Ike hits Metro Houston headon, kiss $4.00 a gallon away. With all of those refiners in that area, wow!

  82. 82
    zman Says:

    ZTRADE: Doubled the Oct $20 TSO position for $1.15.

  83. 83
    zman Says:

    Sam – maybe people think Paulson will be calling on them.

  84. 84
    Sambone Says:

    Z – I think old Bazooka Hank is going to have his plate full this weekend. LEH, WM, and now maybe MER. Wow.

  85. 85
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures fell to a fresh five-month low as weak
    demand continued to drive the market lower, with only the arrival of Hurricane
    Ike in the Gulf of Mexico preventing steeper losses.
    Light, sweet crude for October delivery settled $1.71, or 1.7% lower at
    $100.87 a barrel on the New York Mercantile Exchange, one cent above a
    six-month settlement low. Crude futures last settled below $100 a barrel on
    March 4.
    October Brent crude on the ICE futures exchange settled $1.33 lower at $97.64
    a barrel.
    Oil prices fell to $100.10 a barrel in intraday trading, the closest futures
    have come to double digits since early April and a 32% drop from the record
    high set in mid-July. The decline has come as demand sags in the U.S. and
    Europe, and the dollar surges against the euro.
    Traders engaged in a “tug of war” over the psychologically important $100 a
    barrel on Wednesday, and the contingent who believe that price should mark a
    floor for the market won out, at least temporarily, said Matt Zeman, head of
    trading at LaSalle Futures Group in Chicago.
    “(Futures) are putting up a decent fight here so far, but we have not seen the
    big money come back into oil yet,” indicating that oil has further to fall said
    Zeman, who believes oil is on its way to $90 a barrel.
    Hurricane Ike has provided a lone leg of support for oil prices, as Gulf of
    Mexico producers have shut down about 1.3 million barrels a day, or 25% of
    domestic production. The storm is expected to make landfall near Freeport,
    Texas, on Saturday, potentially as a major hurricane.
    “Had we not seen Ike, we probably would have traded below $100,” said Nauman
    Barakat, senior vice president at Macquarie Futures USA.
    Without the lost production in the Gulf, oil prices would likely have plunged,
    as the dollar hit a one-year high against the euro Thursday, Barakat said. Some
    investors balance currency and commodity markets in their portfolio, selling
    oil when the dollar strengthens, and buying when it weakens.
    But the hurricane did little to entice investors to take bets that oil prices
    will rise, either.
    Some of the most active trading this week has come in the “gasoline crack,”
    the futures market’s approximation of the margin refiners see from converting
    oil to fuel. Investors are buying gasoline futures and selling oil to take
    advantage of dwindling gasoline supplies, as refineries shut down along the
    Texas coast, Barakat said. Gasoline stocks had already fallen sharply last
    week, after Louisiana refiners halted operations ahead of Hurricane Gustav,
    which swept through the state over Labor Day weekend.
    Front-month October reformulated gasoline blendstock, or RBOB, settled 8.72
    cents, or 3.3%, higher at $2.7488 a gallon. October heating oil settled 1.31
    cents, or 0.5%, higher at $2.9155 a gallon.

    -By Brian Baskin, Dow Jones Newswires

    Dow Jones Newswires
    09-11-08 1548ET

  86. 86
    zman Says:

    re 77. Very good book. Not that they have supercomputers calculating storm tracks but you get a very good feel hurricane basics and its true story.

  87. 87
    Sambone Says:

    Now I know why the market is up this afternoon.

    By Stephanie Kang and Suzanne Vranica
    Of THE WALL STREET JOURNAL

    Despite a troubled economy, advertisers have snapped up about 75% of the
    commercial time in the 2009 Super Bowl, say media buyers and advertisers.
    Broadcaster NBC, a unit of General Electric Co. (GE), is selling ads at a
    faster pace than in previous years, they say, a bright spot in an industry hit
    by a flagging economy and shrinking advertising budgets.
    (This story and related background material will be available on The Wall
    Street Journal Web site, WSJ.com.)
    The healthy pace of sales comes despite an estimated 10% price hike from the
    most recent Super Bowl — some advertisers are paying as much as $3 million for
    30 seconds of ad time. Typically, about 50% to 60% of Super Bowl ad time is
    sold by this time of year, buyers say.
    Those jumping back into the action this year include Anheuser-Busch (BUD),
    PepsiCo (PEP) and Careerbuilder.com.
    Advertisers have long been eager to jump into the big game thanks in part to
    its large audience. This year’s nail biter between the New York Giants and the
    New England Patriots drew the biggest television audience in the sporting
    event’s history, with more than 97 million viewers tuning in to the Fox
    network, which is owned by News Corp. Many networks are benefiting from bigger
    sports ratings.
    Advertisers are more eager than ever to be a part of the Super Bowl because of
    the growing penetration of ad-skipping devices. Big-event TV has been one area
    where ad skipping hasn’t been an issue.

    Dow Jones Newswires
    09-11-08 1401ET

  88. 88
    Sambone Says:

    BAC to buy LEH?

  89. 89
    zman Says:

    Awful lot of people looking for oil to fall to $90. Afraid it will be a quick trip if oil pierces $100 so I have to agree with Zeman in #85.

  90. 90
    zman Says:

    Funny Sam, beerthirty!

    Sis if you are at home reading today please consider leaving H-town for this one.

  91. 91
    Nicky Says:

    I suspect as so often happens in the energy market we will see the opposite happen to what everyone is expecting. As the market fell after Gustav everyone is thinking the same is going to happen again – I am thinking the opposite. Yes we could still go lower but downside is now limited I think.
    I could even argue that the low we are about to put in is significant although its not my preferred count. But… we could be completing IV with V up about to start. As I say its not my preference which is that we are tracing out a 3 wave correction to the downside and essentially we are finishing the first leg down with a leg up now to come.

  92. 92
    md Says:

    73 sorry to be redundant
    P10 is in Zdictionary. PV10 is not.
    I’m dgging around ad trying to understand this.
    Reference Sandridge Pg.23 of I’m assuming latest presentation
    PV-10 YE 2008E
    Proven $7831
    Probable/Possible $10272
    which it seems SD defines on bottom of sheet as 3P
    BBG defintion PV-10 is present value of future net revenues- the present value of estimated future revenues to be generated from the production of PROVED reserves. If this is the right defintion why has SD inc. probable P2/possible P3 reserves into this category.
    What P is under category of risked unproven and what if any P is unrisked unproved reserves.
    NFX Aug invstor conf. Pg. 13
    uses comparables to CHK/BP at that time. Are they apples to apples and if not did they make adj.
    Pg.14 unproved risk resouces 16000
    unrisked resources 35000
    Would the 16000 be classified under P3-P1
    and part of reserve potential in todays chart.
    I realize homogeneity from play to play so have to take with a barrel of salt.

    I appreciate the KISS B O Env that you did and trying to catch up behind the curve.
    PS LEH Option Scud
    TSO and HK makes up for it.
    Note to self. The Gassy’s money in the bank. The Banks are gassy money.

  93. 93
    zman Says:

    MD – just saw that last. Heading to dinner. Will address before dawn.

  94. 94
    md Says:

    My goal is to create spreadsheet based on $7-8-9-10-11-12 NG
    P1 (reserves)
    P2&P3 -P1 (probable&possible)
    x Discount/Premium% for operator, field and say his LOE F&DD
    Unrisked unreserved =free milk or subprime mortgage quality
    less: debt and pref.

  95. 95
    BirdsofpreyRcool Says:

    hey, md… i hope i didn’t influence you tto much to buy the LEH options. For a while there, you were looking good. But, you can’t park in that stuff. LEH is no Bear; and personally, i think someone will buy them (probably not BAC, as there are accounting issues that make it difficult… maybe a foreign bank… we’ll see). Anyway, it just comes down to who, when, and for what price. And that price could be quite, quite low. Dick Fuld shoulda hit the bid weeks ago. If he thought he was dealing from a position of strength, he was dreaming.

    Glad you made $$ on TSO and HK!

  96. 96
    md Says:

    Friend of mine bought in Mar 2008 kick in product reccomended by his investment bank with a 10% return provided that the any one of three underlying bank stocks fell no greater than 30%. LEH, JPM and MS. Come March 09 he will be the owner of the worst performing stock that kicked in. Wall St. should merge with Times Square or do reverse takewhorver.

  97. 97
    BirdsofpreyRcool Says:

    ouch! it’s nice to know there are worse things than being an energy investor the last 2 months.

  98. 98
    Wyoming Says:

    md,

    I’ll take a stab at this. Obviously we use software to deliver the data to our management when putting together acquisitions, exploration etc …

    P10 or PX is a Probability number. From Wikipedia;

    Probability is the likelihood or chance that something is the case or will happen. Probability theory is used extensively in areas such as statistics, mathematics, science and philosophy to draw conclusions about the likelihood of potential events and the underlying mechanics of complex systems.

    If we put together a project, we will put out a P10 number for a 10% probability of cost or reserves whatever the reviewer wished to see. A P90 number is a 90%. Sometimes you will hear a P avg or a P mid. It is associated with some risking factors.

    PV is present value, the number is interest rate. From Wikipedia:

    Present value is the value on a given date of a future payment or series of future payments, discounted to reflect the time value of money and other factors such as investment risk. Present value calculations are widely used in business and economics to provide a means to compare cash flows at different times on a meaningful “like to like” basis.

  99. 99
    Wyoming Says:

    Also try typing in “oil reserves” in Wikipedia to get the P relationship to reserves.

  100. 100
    md Says:

    NFX DN today.is it due to GOM exposure?
    CHK flat… weather related? Why HK UP
    I saw note from you on TSO and FTO. Can’t find it now.

  101. 101
    md Says:

    Does P2 probable and P3 possible fit into PV10 as per Sandridge investor report. Is that risked unproved resources.
    Is unrisked unproved resources meaningless. Which would be undeveloped acreage Core and/or non core

  102. 102
    md Says:

    When I think a bit into this. Whatever NG price I plug in it would be valuing assets at say todays value of $8 for assets that will be sold over the long term at what is more likely to be $10 min.
    Staying power becomes an issue of course which is why PQ should be discounted TEV than CHK among other reasons such as track record.

  103. 103
    Bleemus Says:

    I have a friend who works in Houston at a refinery. Here is what he said about Gustav while we watch Ike….

    exxon made the decision to keep running their refineries in baton rouge(a very large refinery,bigger than where I work) and chalmette…which is close to new orleans….

    they both had power failures….baton rouge will be downs for at least another month…units are plugged up because of the sudden and immediate loss of electricity

  104. 104
    Wyoming Says:

    md,

    I think you are getting a little nomenclature salad. If you go to the Wikipedia site it will help.

    1P = Proved (pr P90)
    2P = Proved + Probable (or P50)
    3P = Proved + Probable + Possible (or P10)

    As per Wikipedia:

    Proved reserves

    Proved reserves are claimed with reasonable certainty (80% to 90% confidence) to be recoverable in future years by specified techniques. To meet this definition, the development scenario must have been defined and use known technology, and the scenario must be commercial under current economic conditions (prices and costs prevailing at the time of the evaluation).[7] Industry specialists refer to this as P90 (i.e. having a 90% certainty of being produced). Proved reserves are also known in the industry as 1P.[8]

    Proved reserves are further subdivided into Proved Developed (PD) and Proved Undeveloped (PUD). PD reserves are reserves that can be produced with existing wells and perforations, or from additional reservoirs where minimal additional investment (operating expense) is required. PUD reserves require additional capital investment (drilling new wells, installing gas compression, etc.) to bring the oil and gas to the surface.

    Proved reserves are the only type the U.S. Securities and Exchange Commission allows oil companies to report to investors. Companies listed on U.S. stock exchanges must substantiate their claims, but many governments and national oil companies do not disclose verifying data to support their claims.

    [edit] Unproved reserves
    An oil well in Canada, which has the world’s second largest oil reserves.
    An oil well in Canada, which has the world’s second largest oil reserves.

    Probable reserves are based on median estimates of the accumulation that are more likely to be recovered than not (50% confidence). This can result from either better reservoir behaviour than expected under the proved category or additional investments to be decided over the medium to long term (three to ten years) using conventional techniques.[7] Industry specialists refer to this as P50 (i.e. having a 50% certainty of being produced). Proved plus probable reserves are known in the industry as 2P.[8]

    Possible reserves ideally have a chance of being developed under favourable circumstances.[7] Industry specialists refer to this as P10 (i.e. having a 10% certainty of being produced). Proved plus probable plus possible reserves are known in the industry as 3P.[8]

    Unproved reserves are used internally by oil companies and government agencies for future planning purposes.

  105. 105
    Wyoming Says:

    Longterm effects of SLB and somewhat HAL competing with their clients (IOC’s)

    “http://seekingalpha.com/article/95058-big-oil-companies-could-lose-out-on-exploration-deals?source=yahoo”

    Without the quotes

  106. 106
    md Says:

    W
    Is PV10 strictly proved resources AKA 1P

  107. 107
    Wyoming Says:

    The 10% PV will vary from company to company. It is part of the evaluation of Asset teams for capital monies.

    For instance, in the Barnett, we compare wells and fields by the following criteria:

    15 ROI
    2.8MM total gross cost
    1.8 BCF EUR (Ultimate recovery)

    The reserves will get classified as Proven (1P).

    If we have more property for offsets, we could book Proven Developed and Proven Undeveloped. Property further away may get a lower classification.

  108. 108
    zman Says:

    Thanks Wyoming. That seems to have covered it all!

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