21
Oct

Tuesday Trials

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In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Earnings Watch
  4. Stuff We Care About Today - MLP's Plus HK Ops Update
  5. Odds & Ends

Holdings Watch - the 10KP, Performance, and Wiki Holdings tabs are updated.

  •  UNG - Bought (3) December $33 UNG Calls (UNELG) for $2.25 and UNG at 31.25 (Natural gas at $7.04). (10KP TRADE)
  • CLR - Added CLR December $35 calls for $3.20 (CLRLG) with the stock at $28.50.
  • HK - November $15 HK Calls (HKKC) for $1.90.

 

Commodity Watch

Crude oil rose $2.40 to close the day at $74.25 as traders bet OPEC will cut at least 1 mm bopd at this Friday's "emergency meeting". This morning crude is trading off $1.50 to $2.50 plus as the broad markets point down.

 

Natural gas lost ground yesterday following an early morning spike. I blame a combination of profit taking brought about by a failure of gas to hold $7 level and a failure of a disturbance in the northwestern Caribbean to develop into something more threatening. Gas is trading flat in early trading today.

  • Imports remain low. LNG came in at 0.7 Bcfgpd, up a hair from last week and in line with year ago levels (LNG typically tails off during the cooler months). Canadian imports were off 1.4 Bcfgpd from year ago levels at 8.1 Bcfgpd. So the rush to get gas to the States is far from on as Winter approaches
  • Tropics Watch:  That disturbance in the Caribbean still hanging out.

Earnings For The Rest of the Week:

 

Stuff We Care About Today - MLP's.

Ok, I put together some thoughts on a group of MLP’s (Master Limited Partnerships) at the request of a number of subscribers. There are 50 or so U.S. MLP’s out there in various parts of the energy business but I limited myself to the upstream (E&P) variety as pipelines and midstream (processing) operations are not my normal ballywick. I’m very comfortable dissecting E&Ps and I took a list of 10 and weeded that down to six I might see investing in for the long term.

Where we are in the cycle. The MLP’s have been to hedge funds what money markets are to you and me, a place to deposit cash, only with a much better yield and a fairly predictable and safe one as long as commodity prices are flat or rising. Recently, hedge fund redemptions have pounded the shares. There is actually a MLP index, the Alerian MLP Index, ticker AMZ, which peaked at about 342 in mid July 2008 and hit a low of 151 on October 10 before closing at 220 yesterday. So its volatile. Look at how the index performed during and following the last few market implosions relative to the S&P500: (the index is blue and the S&P is yellow if you can’t make it out in the chart’s legend)

Source: LGCY

 

Still the names are beaten down and yields appear high. One thing I think many investors do when the sector is beaten down is pick the names with the highest yields. I like to say sometimes things are "cheap for a reason." Take QELP, which is not in following tables despite having the highest current yield at 30%. They’ve got lawsuits, they got financial irregularities, a complex structure to begin with and a CEO who quit when people started asking questions. But that’s the highest yield I could find.

Other metrics are helpful. The industry employs a few metrics in addtion to the ones normally looked at by E&P investors.

  • Total Debt / Adjusted EBITDA. You want this one to be low as its essentially a measure of debt in relation to your annual cash flow.
  • Adjusted EBITDA /  Cash Interest Expense. This one you want to be high as its basically a coverage ratio for your ability to make your interest payments. Everyone in the group below can easily make their interest payments but there are some MLP’s in the non-upstream names which come closer to having interest coverage problems.
  • Yield…This Is Not Your Father’s Rate of Return. With the stocks pounded down by 1/3 to 1/2 from their peak cycle highs yields are still high. But the next ratio is most important in determining whether or not that distribution (like a dividend but different for tax purposes), and therefore their yield remains in place.
  • Distribution Coverage Ratio. This is the ratio of distributable cash flow vs the company’s actual distribution. The higher the ratio the more room the company has if things turn temporarily lower to keep the distribution up. 
  • LOE. Ok, lease operating expense is standard for E&Ps and I think of high importance when looking at upstream MLP’s. The lower the better.
  • Reserve Life: Also standard for the E&P, this is a measure of reserves to production (measured in years). The higher this is, the lower your decline rate. Most upstream MLP’s focus on cash cow type properties so a reserve life of 20 is not uncommon. Shorter reserve life properties would mean the firm would need not only maintenance capital but acquisition capital shortly just to remain in business. All of the firms in the tables below have long reserve lives.

If I had to pick favorites, I’d go with size. Probably (LINE) first, which operates a majority of its properties and has a strong management team which impressed at IPAA despite the downtrodden environment, then (ATN) who is largely Marcellus focused and then (EVEP). Even after  the modest recovery of the last few days these names are yielding 17%, 13%, 17% respectively with some of the better distribution coverage ratios in the business ahd better than average operating expesenes, especially (ATN).

 HK Provides 3Q08 Operations Update

Somewhat better than expected decline rates in the Haynesville. Probably suggests a) better than expected production to targets and b) high recoverable reserves (probably above 6.5 Bcfe)

  • Another high rate Haynesville well announced at 17 MMcfepd IP; more important was the 30 rate of 15.4 MMcfepd
  • The EGP #63H (their first Haynesville well) now has been online for 100 days with average production of 8.8MMcfed; this IP'd at 16.8.
  • Another well with 67 days of history as averaged a whopping 14.6 MMcfepd over the period.
  • 16 wells drilled to date - very consistent, thick, high quality shale
  • Using 10 horizontal rigs and 5 spudders.

Fayetteville Shale: Seeing better rates.

  • They are seeing rates fo 4 to 5 MMcfepd which would put them among the best wells seen in the play (as good as play drivers SWN and CHK's best wells) due to improvements in completions.
  • Lateral length and number of frac stages growing.
  • Boardwalk pipeline should be on line mid-November...this has been a headache for operators in terms of delay as the play is currently constricted.

Eagle Ford Shale Discovery: La Salle County (south Texas).

  • over 100,000 acres leased
  • discovery well IP'd at 9.1 MMcfepd with a high liquids cut (7.6 MMcfgpd and 250 barrels of condensate per day)
  • second well drilled 15 miles away (I guess you can call that an extremely long range step out) appears to be of higher quality on logs and cores and the lateral section of the well is drilling now.
  • First well drilled pretty deep at 11,300 feet with a 3,200 lateral. HK is putting well costs at $5 to $7mm and will hold a 90% interest in this play and operate
  • 3rd well to spud in November and 1 rig will run continuously here for now
  • This play is in no analyst's numbers but notably the capex for early development of the field is within the numbers already published for the remainder of 2008 and full year 2009.

New shale play to be discussed on a conference call along with all of the above at 10:30 EST

 

Odds & Ends

Analyst Watch: (WFT) to Buy at Citi, (X) to Buy at Soleil, B of A cutting a number of the shippers from Buy to Hold

 

129 Responses to “Tuesday Trials”

  1. 1
    Sambone Says:

    8:45 am EST

    Crude Futures Down As Market Awaits OPEC Meeting

    Dow Jones Newswires
    From MARKET TALK:
    Nymex crude is trading lower in the November contract’s final day before expiring. Uncertainty about the extent that OPEC will cut production, and the worsening economy, weigh on the market. November crude trades at $72.50/bbl, down $1.75.

    Reported Earlier:
    LONDON — Crude oil futures traded lower Tuesday in London as participants remained on the sidelines ahead of an emergency meeting by the Organization of the Petroleum Exporting Countries Friday.

    Market participants were weighing the possibility of tighter supplies — through a potential OPEC production cut — against weak oil demand and slowing economic growth in many industrialized economies.

    “A lot of traders are flat and don’t have a firm view,” about where prices will go next, a trader in London said.

    At 1048 GMT, the front-month December Brent contract on London’s ICE futures exchange was down $0.58 at $71.45 a barrel.

    The front-month November contract on the New York Mercantile Exchange was trading $0.27 lower at $73.98 a barrel.

    The ICE’s gasoil contract for November delivery was up $18 at $709.25 a metric ton, while Nymex gasoline for November delivery was down 223 points at 169.78 cents a gallon.

    “The general trend is still of uncertainty,” said Olivier Jakob, managing director of Petromatrix consultancy in Switzerland.

    OPEC’s president and Algerian Energy Minister Chakib Khelil called on non-OPEC oil producers to share in production cuts announced by the group, according to a report Tuesday in Algerian state newspaper El-Moudjahid.

    “If those countries, especially Russia, Norway and Mexico, don’t contribute to the reduction in production, the decision by OPEC (to cut) will be more difficult and more painful,” Khelil said.

    But Norway, the world’s fifth biggest oil exporter, hasn’t considered reducing its oil output to stem falling crude prices, a spokesman for the Oil Ministry told Dow Jones Newswires.

    Opinions varied about the extent to which OPEC may rein in output. Cuts deeper than 1 million barrels a day are unlikely, and would spell “political suicide” for OPEC, a trader said.

    “Japan, Europe and U.S. are in a bad place, China is slowing faster than expected,” and OPEC producers could be blamed for exacerbating an economic slowdown, he said. “Its going to be very interesting.”

    Another trader in London said any losses would be limited ahead of the OPEC summit.

    “I think it’s certain that they will cut something, but it’s tough to predict volume and timing,” he said.

    But even an OPEC rollback may not have a restorative effect on prices in the face of persistent economic gloom and battered financial markets.

    “Concerns about weakening crude and product demand continue to mount, and steadily eroding global refining margins provide evidence to back up these concerns,” said Mike Wittner, global head of oil research at Societe Generale.

    He said crude prices would continue to be weighed down by risk aversion and a broad-based deleveraging in markets, which is expected to continue for at least one or two quarters.

    “Despite a potential significant production cut, it is widely agreed that ongoing lower demand will keep on making headlines, remaining the primary price driver,” said Marius Paun, a broker at ODL Securities in London.

    Technical charts continued to signal prices heading on a downward trajectory, said Julian Keites of Newedge group.

    “The overall downtrend is still strong and no sign of extreme trend reversals,” Keites said. “This will make technical traders look to sell rallies.”

    –By Lananh Nguyen, Dow Jones Newswires

  2. 2
    zman Says:

    Iran’s Oil Minister Gholamhossein Nozari said a drop in demand could push Opec to cut output by between 2 million and 2.5 million barrels per day, adding that falling prices would hurt consumers in the long term by damaging investment in capacity.

  3. 3
    zman Says:

    Bird – to be fair I was “talking the LINE” before Cramer, last week in fact…he just follows my moves, lol.

  4. 4
    BirdsofpreyRcool Says:

    z – i know. (figured that statement would get a rise outta you) 😉

  5. 5
    zman Says:

    HK – good news for the stock, and an “oh great, another big gas shale, for the gas markets to worry about.” Probably some leakage of this new last few days, still a bargain down here, no wonder they adopted that shareholder plan.

  6. 6
    zman Says:

    Thanks Bird. Of course I, liked HK at about these levels before the big run up and then he came in screaming BUYBUYBUY at $46. I should have seen that as their near term eulogy.

  7. 7
    zman Says:

    WTI – W&T Offshore – Welcome to the short zone. Just received a piece on CEO’s new bumped up salary and use of personal jet anytime for any reason. Come on guys…recession…down oil and gas, think man, think! Anyway, probably takes a beating for moves like that right now.

  8. 8
    BirdsofpreyRcool Says:

    cash TED at 261 bps (below 300!!)

    IG 195 (a bit wider than yesterday’s close)

    High Yield index (i don’t usually quote this one) 81 1/4

    Strangely, the high yield bond index outperformed the investemtment grade index. Guess people are starting to notice that high yield bonds have priced in way too much “default risk.”

  9. 9
    zman Says:

    Bidding some December HK near the money with the stock flat on the open in a sea of market induced redness.

  10. 10
    zman Says:

    ZTRADE: Added HK December $20 calls (HKLD) for average $1.88 with the stock up $0.80 at $15.80. See the Tuesday post for comments.

  11. 11
    zman Says:

    If the market manages to recapture green HK likely to see quite a bit higher later today and this week.

  12. 12
    zman Says:

    Thanks for the debt market color Bird, keep it up.

  13. 13
    zman Says:

    So, I guess two market up days in a row would be too much to ask.

    Tater has updated charts on page 8 of his link:

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882&cmd=show%5Bs153564507%5D&disp=O

    Charts for VIX, banking index and QQQQ

  14. 14
    BirdsofpreyRcool Says:

    Something fundamentally KEY to keep in mind regarding LIBOR and TED Spread and money market rates… these are totally and completely separate markets from the credit market. They get thrown in by the media with “credit.” But they are actually all just part of the money market and short-term funding markets.

    For the stock market to hold onto it’s gains (not just today, for for the next few months), we need to see the market for corporate bonds improve.

    So, with the FEAR FACTOR (TED Spread) decreasing, it’s no longer an important indicator. We’ve drained the fear, for now, but we still haven’t seen the bond market open up.

    I am going to move to quoting both the Investment Grade and the High Yield Indices. IG is quoted in spread (so lower is “better”). HY is quoted in bond price (so higher is “better’). HY is much more sensitive to the outlook for default rates. But, IG is more important as a measure of the fundamental health of the debt market.

  15. 15
    zman Says:

    Just roughing out some quick numbers on the Eagle Ford Shale for HK:

    they say they have leased over 100,000 acres, lets call it 100K to keep the math straightforward.

    With the following assumptions they may be able to say could have potential reserves of around 3 Tcfe.

    80 acre spacing…just a guess for now but is being done in other shale plays (8 laterals per section (1 sq mile)

    5 Bcfe per well…based on the IP of the first well sounds doable to light but its too early to say definitively

    20% royalty…just a guess, could be 15 to 25%

    90% working interest

    risk the acreage by 1/3 to be conservative meaning 66K acres can be developed for the Eagle Ford and you have:

    66,000 acres / 80 acres = 825 drilling locations.

    5 Bcfe/well X 90% WI X royalty = 3.6 net BCFE per well.

    3.6 Bcfe X 825 locs = 2.97 TCFE.

    take the middle of their well cost range and you have 825 wells @ $6 mm apiece = $4.95 billion of CWC completed well cost which puts F&D around $2 when you add in acreage and gathering system costs. Not too shabby.

    Put that 2.97 Tcfe up against the year end 2007 reserves of 1.1 Tcfe and then think about what the Haynesville is adding and you have a lot of reserves.

  16. 16
    zman Says:

    Conference call for HK in 20 minutes

  17. 17
    BirdsofpreyRcool Says:

    watching the headlines scroll by: on FCX’s conf call, they are saying “markets aren’t open for financing.” They are also saying that FCX doesn’t need to finance right now… but, it’s remarks like that that will keep a lid on this market.

  18. 18
    BirdsofpreyRcool Says:

    IG 189
    HY 81 7/8

  19. 19
    1520sbroad Says:

    z – hk eagle ford question – any infrastructure there? takeaway? i don’t know much about this geography.

    nice mlp piece. The Atlas family of companies are pretty well positioned i think. They have picked up some assets along the way the last few years – NOARK, some APC assets.

    i suppose royalty trusts are next…

  20. 20
    zman Says:

    1520 – there’s lots of infrastructure around those parts but am not certain of takeaway, that will be a topic on the call for sure.

    thanks on the MLP piece, pretty basic but stuff I need to know for my kid’s college fund. On the royalty trusts…not if I can help it.

  21. 21
    zman Says:

    Italy – today’s lower than anticipated decline rates in the Haynesville may provide a slight boost to the valuation of Cubic in a takeout. Higher PV10 if those production tails are higher and longer than previously thought.

  22. 22
    1520sbroad Says:

    had you said yes for the royalty trusts i would have raised the white flag to signal some sort of massive glacial shift in the thought pattern i have seen from you.

  23. 23
    zman Says:

    Petrohawk has scheduled a conference call for Tuesday, October 21, 2008 at 9:30 a.m. CDT (10:30 a.m. EDT) to discuss the Eagle Ford Shale discovery and today’s operational update. To access, dial 800-644-8607 five to ten minutes before the call begins. Please reference Petrohawk Energy Conference ID 70181528.

  24. 24
    BirdsofpreyRcool Says:

    HY 82 1/8

  25. 25
    zman Says:

    Re 22. LOLOLOLOLOLOL. Never. That kind of strategy of the day, week, month never works.

  26. 26
    zman Says:

    can’t believe the HK call is not webcast…who use’s phones these days? dorks.

  27. 27
    BirdsofpreyRcool Says:

    HK – there must be lines out the door, to get on this conf call…

  28. 28
    antrimshale74 Says:

    QELP shooting the moon this morning.

  29. 29
    BirdsofpreyRcool Says:

    HK – Ealge Ford geology sounds very very attractive… wonder how much they paid per acre?

  30. 30
    zman Says:

    HK Conf Call:

    Eagle Ford Shale Introduction:
    * low cost development at a pace of their choosing

    * high btu, should meet or beat Nymex prices

    * very thick, consistently porous from top to bottom

    * cretaceous (younger than a lot of the popular shale plays)

    * porosity, permeability, thermal maturity there to be viable

    * 11,000 to 12,000′

    * 200 feet thick

    * only slightly over-pressured

    * very similar to Haynesville completion

    * entry costs were low as they had no competition for acreage

  31. 31
    zman Says:

    HK Conf Call:

    Haynesville updates:

    * very little water produced from all wells to date

    * will have 12 rigs by year end (10 now) not including 5 spudders.

    Fayetteville shale:

    * improved well results, gave hats off to SWN for the completion improvements

    * fraccing a 5,600′ lateral, 13 stage frac well.

    Q&A about to start.

  32. 32
    BirdsofpreyRcool Says:

    HK – 250 bpd of condensate… how does that comp to the Hayneville?

  33. 33
    BirdsofpreyRcool Says:

    HK – never mind… doesn’t sound like an oily condensate…

  34. 34
    zman Says:

    HK Conf Call Q&A

    2009 Eagle Ford: might drill 9 wells with the 1 rig program.

    Reserves. Too early to comment other than saying its “highly economic”.

  35. 35
    zman Says:

    XEC buying west Ok acreage from CHK for $180 million. Another positive stroke for CHK.

    HK call still ongoing. Talking about monetizing some lower return assets.

  36. 36
    BirdsofpreyRcool Says:

    HK – good to know they see 2009 as being supported by internal cash flow.

  37. 37
    zman Says:

    Bird – yep, gotta beat that into analysts heads. “we can scale up OR down” is the new mantra. Aubrey is sporting it too.

  38. 38
    BirdsofpreyRcool Says:

    yeah, well, i don’t trust Aubrey as much as Floyd. but JMHO

  39. 39
    zman Says:

    Bird – Can’t say I blame you on that!

    Bidding some HK for the 10KP now.

  40. 40
    reefguy Says:

    Ef shale- first mover is TXCO

  41. 41
    BirdsofpreyRcool Says:

    reef – thanks for that!

  42. 42
    zman Says:

    Reef – in Texas or along the trend?

  43. 43
    zman Says:

    ZTRADE: 10KP Trade

    HK December $17.50 calls (HKLW) for $3.10.

  44. 44
    reefguy Says:

    in Maverick Basin two counties west.

  45. 45
    BirdsofpreyRcool Says:

    HK – good, high yield analyst question… how much you HAVE to spend…

  46. 46
    zman Says:

    Thanks Reef. They have not seen results like this, correct, are they seeing the thickness there.

  47. 47
    krishna Says:

    Z,
    How many HK December $17.50 calls in 10KP

  48. 48
    zman Says:

    Sorry Krishna, 3 calls

  49. 49
    zman Says:

    …which is about a 10% position.

  50. 50
    BirdsofpreyRcool Says:

    for people who think all high yield companies are “junk”… HK is rated B3/B-

    this is the lowest rating of the “investible” junk bond universe. so, it’s very good to hear that HK can live w/in cash flow if the debt mrkt stays frozen.

  51. 51
    reefguy Says:

    TXCO fracs not nearly as massive. Verticals about 1mmcfpd

  52. 52
    zman Says:

    Thanks Reef. Vertical only so far, do they have cash to drill horizontal program and how much acreage are we looking at?

    HK reporting another well they just got an email on in the Haynesville just before the meeting, 12 mm/d IP pre clean up meaning it should match up with the other mid to high teen IP wells, really sounds like they are getting systematized well already in the Haynesville.

  53. 53
    TEXWS6 Says:

    re #32:

    VERY little to no condensate out of the Haynesville.

  54. 54
    zman Says:

    Thank for that TEX, what I thought but some players have announced a little while others have said dry gas so could not remember exactly.

  55. 55
    zman Says:

    Bird – did they give current capacity out of the Eagle Ford?

  56. 56
    reefguy Says:

    TXCO in JV with SM, ECA, APC across 950,000 gross acres TXCO has about 50% net.

  57. 57
    BirdsofpreyRcool Says:

    #55… not that i caught. didn’t seem to think it was a problem. but…

  58. 58
    BirdsofpreyRcool Says:

    HK – 25% royalty payments… those are some Happy Ranchers down there!

  59. 59
    zman Says:

    Reef – they are mentioning Pearshal Shale now as interesting…

    Other data points
    Royalty – 25% for ES

    Call about to wrap up, probably goes higher though maybe not too much today, depends on mister market. A green dow could see this at $17.50+

  60. 60
    bill Says:

    25 % royalties for hk

  61. 61
    bill Says:

    xec cc call on the web now

  62. 62
    reefguy Says:

    Pearsall is four laterals along in TXCO JV’s about 4 MMPD with five stages.

  63. 63
    zman Says:

    FBR cut HK target from $45 to $18 this morning. I expect more out of those guys.

  64. 64
    bill Says:

    18 what the heck are they thinking

  65. 65
    zman Says:

    Re 64. Probably that gas goes to $4 and sits there forever.

  66. 66
    zman Says:

    Did anyone catch Fast Money last night? Were they on fire bullish or did I dream that?

  67. 67
    reefguy Says:

    OT: EXXI and MMR doing the dance?

  68. 68
    zman Says:

    Reef – Hmmmm. I really need to put them on my primary watch list. Check out the Treasure Island warrants – TISDZ…moving.

  69. 69
    zman Says:

    CHK reacting favorably to asset sale progress, $180mm may be small but it goes down to determination to hone the portfolio.

    Bill, I’m not on the XEC call, are you? If so, did they say reserves associated or was it just moose pasture they bought?

  70. 70
    zman Says:

    NG up 0.6%, UNG dead flat.

  71. 71
    reefguy Says:

    68- no trades today, look at bid/ask

  72. 72
    isleworth Says:

    FYI – On NBR call, NBR management notes there have been rumors around that someone will buy CHK and that the rumored buyers both have good balance sheets….

  73. 73
    zman Says:

    Re TISDZ – I show 108,500 volume, see no bid and ask though.

  74. 74
    zman Says:

    Thanks Isle, probably explains the small market defying pop more than the asset sale.

    Market starting to ease more into lunch.

  75. 75
    reefguy Says:

    z- my bad, bid .48 ask .55

  76. 76
    zman Says:

    Reef – It’s such a wing and a prayer way to play Black Beard I hesitate to bring it up. I don’t know what the warrants are entitled to should it prove successful.

  77. 77
    BirdsofpreyRcool Says:

    IG 190

  78. 78
    reefguy Says:

    schiller at $1.84(ThirD Point owns 10%)
    TISDZ at .48- easy to figure which one to own…

  79. 79
    BirdsofpreyRcool Says:

    HY 82… losing steam, along with stocks

  80. 80
    zman Says:

    Reef – so EXXI re 78

  81. 81
    reefguy Says:

    78-Gave my banker their annual report this morning. He only buys winners

  82. 82
    zman Says:

    Sam – any thoughts from the storm chaser crowd? 2 of the tracks point to the Gomex.

    http://tropics.hamweather.com/2008/atlantic/invest91/modelsmap_zoom1.html

  83. 83
    zman Says:

    Reef – thanks for the chuckle. Colbert last night asked the question, “is your money safe, or is it in a bank?”

  84. 84
    reefguy Says:

    Action at EXXI means that bastard took my lead

  85. 85
    zman Says:

    Reef – yep.

  86. 86
    zman Says:

    On the brighter side, I’d bet, for the day trader in you, that a recovery in the broad market yields at least of a dollar of climb in HK today. If the broad can get off the deck that is.

  87. 87
    tomdavis12 Says:

    Z: Do you think HK has more upside than NBR right now since they are approx same price? Thks.

  88. 88
    elduque Says:

    It appears to me that the panic/hedge fund liquidation selling is over. It is for sure that the ag names are down today, but they don’t appear to have that screaming sell to them.

    That has been transferred to Citibank and the Dollar.

  89. 89
    zman Says:

    Tom – kind of apples to organges or giraffes there but yes, I think near and medium term HK has more running power.

  90. 90
    cargocult Says:

    what do you think about filling in Dec UNELG at this time? Likewise EOGKO?

  91. 91
    bill Says:

    xec call

    i was only on the end of it as i was listening to hk as well

    Someone asked about reserves and i think the answer was a small amount ie 5 m of the purchase price

    the other thing they said is they know the area well and they dont like accumulating stuff to sit on it

  92. 92
    zman Says:

    Cargo. On the EOG, I like the higher recent high it ran to but its a little early for me to double just yet given the market. On UNG, I want to see the storage numbers. If we get a bad one, I’ll add on further weakness. If a good number I want to see how gas reacts.

  93. 93
    bill Says:

    no one seems to be buying nfx pre earnings

  94. 94
    zman Says:

    Thanks Bill, so it was primarily most pasture which prices it out at $4,700 per acre and it does not give me a data point to use on $/Mcfe.

  95. 95
    zman Says:

    Re NFX – trading in line with group, maybe a little worse. That kind of name gets lost on red days like this. They must be planning a post close release given their late afternoon conference call time.

  96. 96
    bill Says:

    either that or someone inside saw the earnings

    hey xec said in their operation update they are taking a q3 charge for :

    Because of the $3.00-$4.00 per Mcf quarter-end spot gas price in the Mid-Continent and Permian Basin, the Company’s preliminary analysis has determined that the proved properties book-value exceeds the full cost ceiling limit (1) by $600 – $700 million before tax ($378 – $441 million after tax). If gas prices do not increase, Cimarex will take this non-cash charge to earnings in its third-quarter 2008 results.

    Does any other gas company have this problem

  97. 97
    zman Says:

    They already tightened production range higher, despite storm disruptions so I doubt its the quarterly number. More likely the prospect of bringing down capex is weighing….or its just noise which is most likely.

    It’s a ceiling test write down and its non-cash and they all have it as a possibility and its not a big deal. The SEC requires reserves to be marked to market for above/below breakeven. Stupid rule as it is based on the price at a single point in time. And, they never let you mark it back up when prices improve. The reserves go away from an accounting stand point but they are obviously not gone in reality.

  98. 98
    Sambone Says:

    Z – Not expecting anything from these. Wind shear way to high. Most likely you’ll see alot of rain in Tampa.

  99. 99
    zman Says:

    Thanks Sam, had to ask.

  100. 100
    zman Says:

    Interesting flat day on BEXP.

    Volumes in energy land look pretty light today.

  101. 101
    zman Says:

    CHK at HOD.

    I’m a big fan of listening to anything but CNBS during the day. Got turned onto pandora.com recently. Nice.

  102. 102
    Jay Reynolds Says:

    Weatherford Reports Company’s Highest Level of Quarterly Revenue
    [United States] — Weatherford’s third quarter revenues were $2,541 million, or 29% higher than the same period last year, against a backdrop of an 11% increase in rig count activity.

    http://www.rigzone.com/news/article.asp?a_id=68034

  103. 103
    Sambone Says:

    NEW YORK, Oct 21 (Reuters) – U.S. crude output in the Gulf
    of Mexico rose slightly on Tuesday, with 38.6 percent of output
    shut compared with 39.4 percent on Thursday, as companies
    continued to restore operations after Hurricane Ike, the
    Minerals Management Service said.
    The volume of natural gas output shut rose to 36.7 percent
    on Tuesday, compared with 36.6 percent last Thursday.
    Last week, problems with some oil wells that had restarted
    following Hurricane Ike caused a drop in the region’s
    production, which was hit hard by the storm.
    U.S. facilities in the Gulf have output of an estimated 1.3
    million barrels per day of oil and 7.4 billion cubic feet per
    day of natural gas.
    (Editing by David Gregorio)

    Tue Oct 21 17:48:58 2008

  104. 104
    Sambone Says:

    MOSCOW (Dow Jones)–The Organization of Petroleum Exporting Countries hasn’t
    made any decision to cut oil production yet, Secretary-General Abdullah
    al-Badri said Tuesday.
    “There has been no decision to cut production so far,” he said during a visit
    to Moscow.
    OPEC members are scheduled to meet in Vienna on Friday to discuss the market
    situation.
    The price of oil has fallen during the last two months from a record high of
    almost $150 a barrel to around $70.
    “We don’t prefer a very high price and we don’t prefer a low price,” al-Badri
    said.
    While denying a decision had been made on cutting supply, al-Badri, however,
    said that according to OPEC numbers there will be an excess of supply in the
    near future.
    “There will be an excess of supply in the end of this year and in the first
    and second quarter of next year,” he said.

    -By Jacob Gronholt-Pedersen, Dow Jones Newswires

    Dow Jones Newswires
    10-21-08 1319ET

  105. 105
    rlogan1301 Says:

    i heard CNBC XM radio something about a qatar, iran and another country creating a OPEC-like thing for natural gas…is that true?

  106. 106
    Sambone Says:

    MOSCOW (Dow Jones)–The Organization of Petroleum Exporting Countries, or
    OPEC, won’t ask Russia to cut production of oil, the Secretary General of the
    organization, Abdullah al-Badri, said Tuesday during a visit in Moscow.
    “Russia is an very important oil producer. We are interested in what Russia is
    doing, and Russia is interested in what we’re doing now and in the future,”
    al-Badri said.
    “But talking to them has nothing to do with production cuts,” he added. “We’ll
    just exchange information.”
    Al-Badri’s arrival in Moscow comes after an OPEC meeting in Vienna last month,
    at which Russia sent its most senior delegation in a decade.
    At the meeting, Russian Deputy Premier Igor Sechin proposed extensive
    cooperation between Russia and OPEC to meet global energy needs.
    Sechin said then a draft memorandum of understanding had been submitted to
    OPEC’s leaders. Sechin didn’t suggest, however, that Russia would consider
    becoming a full member of OPEC.
    With a daily crude production of around 9.8 million barrels, Russia is the
    largest oil producer outside the organization.
    Company Web site: http://www.opec.org
    -By Jacob Gronholt-Pedersen; Dow Jones Newswires

    Dow Jones Newswires
    10-21-08 1410ET

  107. 107
    zman Says:

    RL – they are discussing a gas-opec but this comes up every once in awhile and to date the cooperation from many of the major players including Russia has not been there.

  108. 108
    Sambone Says:

    Dow Tracing Out Bearish Triangle Pattern

    By TOMI KILGORE
    A DOW JONES NEWSWIRES COLUMN

    Just because the knife has stopped falling doesn’t mean it’s time to catch it.

    The stock market appears to be stabilizing, which seems to suggest the turmoil seen earlier in the month was the final capitulation investors have been waiting for. Warren Buffett, known for his shrewd, conservative approach to investing, said in the New York Times last week that stock prices are attractive enough for him to buy.

    But Buffett also said he has no idea if stocks will be higher or lower in a month. Unless you have his tolerance for risk, there are technical signs that suggest attractive, or even cheap, may not be enough for everyone over the short term.

    Despite the recent sharp drop in equity prices, UBS economist Larry Hatheway said valuations are probably just closer to “fair,” rather than “cheap,” if corporate earnings performances are in line with recession norms. “And investors may not want to pay even “fair” prices in these uncertain times,” Hatheway said.

    Basically, there are two sides to every view of the market.

    The good thing about charts is that they are supposed to provide an objective view of how the market behaved over a specific period of time. However, bias is in the eye of the beholder, and just because the chart is being objective doesn’t mean the chart watcher sees it the same way.

    After the Dow Jones Industrial Average bullied its way to a 413-point gain Monday, Tuesday’s early bounce off the lows, and with Buffett apparently on the buy side, it’s difficult not to look at the stock market without an upside bias.

    But then I saw it. As much as I try to see the activity since the washout earlier in the month as a bullish buildup of momentum, I can’t keep fooling myself. Since bouncing off the Oct. 10 multiyear low, the Dow has been tracing out the shape of a triangle, which is difficult to mistake as anything other than a bearish continuation pattern.

    Rather than point out that the market has stopped falling, short consolidation patterns following a previous sharp move indicate that the market isn’t rising, despite the apparent change in sentiment.

    The ascending bottom of the triangle is the line connecting the lows of Oct. 10 and Oct. 16, while the descending top of the triangle is the line connecting the highs of Oct. 14 and Friday. Although Monday’s high of 9266.63 peaked slightly above the top of the triangle, it still fell short of Friday’s high of 9281.12.

    Unless the Dow can break above the top of the triangle soon and start making higher highs rather than just higher lows, the bearish scenario will become more likely.

    The Dow was down 56 points at 9209 in late-morning trading Tuesday and had been down as much as 147 points at the intraday low of 9118. The line defining the bottom of the triangle currently comes in around 8500.

    One of the defining features of the continuation triangle pattern is declining volume as the triangle lines converge. And on Monday, despite the large Dow rally, volume on the New York Stock Exchange was about 1.2 billion shares, which was lower than any day last week.

    One aspect of the bearish triangle is that it helps provide a downside target. A measured-move approach — subtracting the widest part of the triangle from the potential breakdown point — would put the Dow just below 7000, assuming the breakdown occurs later this week. Of course, that’s assuming the so-called continuation scenario actually plays out.

    Unless you have the risk tolerance that Buffett has, “not falling” and “attractive” may not be enough. It may be prudent to wait for signs the market has the strength to make higher highs before buying.

    “Until more convincing signs emerge that credit markets are recovering, we feel it is premature to re-engage more fully in global equity markets,” UBS’ Hatheway said.

    Bottom line: Stabilization after a sharp drop is encouraging, but it doesn’t necessarily mean a bottom has been seen. It’s better to wait for signs that a bull market has started, rather than just signs that a bear market may be ending, before following in Buffett’s footsteps.

    –Tomi Kilgore writes Taking Stock, a global column that gives insightful analysis about equity-related topics around the world

  109. 109
    rlogan1301 Says:

    thanks Z – what is your take on what impacts this would be if it happens?

  110. 110
    zman Says:

    RL – I really doubt they pull it off but if so the immediate impact would be higher prices, at least that’s the idea behind a cartel, best price for them, not for you. In the U.S. they would have quite a difficult time as we were once known as the Saudi Arabia of coal and the new shale make us the Saudia Arabia of gas too…guess that makes Aubrey Lawrence.

  111. 111
    zman Says:

    BEXP really starting to work if you count yesterday and today…need to dig through notes but am out of office right now due to power outage. Anyone see a broker comment.

  112. 112
    zman Says:

    nevermind, see BEXP was upped by suntrust this am.

  113. 113
    isleworth Says:

    Z- you’re a good daytrader too….re HK 😉

  114. 114
    BirdsofpreyRcool Says:

    IG 188… rally monkey is back

  115. 115
    zman Says:

    Isle – half blind squirrel finds nut from time to time.

  116. 116
    zman Says:

    Listening to the BEXP IPAA presentation, something makes me think Robbie Hump (SunTRust) picked now to upgrade beyond price. Just a guess but will try to firm that up.

  117. 117
    rlogan1301 Says:

    Re: 115…z has hit pretty well on chk and cvx calls…and now hk…pretty good lately.

  118. 118
    zman Says:

    Safest holdings right now are probably CVX and EOG for near term appreciation. CHK and HK have great stories, more leverage…if we see a re-freeze in the credit markets you can see those gains evaporate.

  119. 119
    zman Says:

    BEXP just talking about their acreage value given current transactions at 1 to $5,000 per acre puts them at $18 to $40 per share.

  120. 120
    BirdsofpreyRcool Says:

    Investment Grade index rally just confirmed by a positive move in the High Yield index. Should be a good last hour.

  121. 121
    zman Says:

    BEXP – ok, just re-listening to their last pres, that’s what I thought, several wells will have news on any week now. May take until next week for EOG (operator of some of them) to announce.

  122. 122
    BirdsofpreyRcool Says:

    IG at 186 now.

    Historic wide: 230 (just 2 weeks ago)
    Historic narrow: 37 (18 months ago, or so; just to put it in perspective)

  123. 123
    PackMan Says:

    I will give you a four letter word:

    A A P L

    will make or kill a rally; right now killing it pre earnings tonight.

  124. 124
    BirdsofpreyRcool Says:

    PackMan – appears you are correct, sir! thanks for pointing that out.

    Bond market is better today, but stocks have decided to get their panties in a twist. Nice to see the bond market not playing along (for now).

  125. 125
    PackMan Says:

    Perhaps we get a scenario where there is a good report out of AAPL … and that plus a slightly improved bond market provide the juice for tomorrow.

  126. 126
    zman Says:

    AAPL always sand bags numbers so the initial reaction may not portend much for the market.

  127. 127
    zman Says:

    Laptop out of juice, see ya in a few hours

  128. 128
    Popeye Says:

    I need some juice as well.

  129. 129
    arodeen Says:

    Z – Wondering if you had an opinion (or know of) McDep Associates (Kurt Wulff)? Just issued a buy on XEC yesterday due to low debt and market cap to PV ratios.

    I heard around the office that Cimarex has talked of moveing up to 12 rigs into Canadian County, OK. It’s geologically separated from the Woodford stuff in SE OK where NFX has been.

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