06
Nov

Thursday – Gas Preview and Oil Inventory Review Plus Earnings Galore

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In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Inventory Preview
  4. Crude Inventory Review
  5. Earnings Watch - HK, CLR, BEXP, GDP
  6. Odds & Ends

Holdings Watch: The Wiki tab is updated.

  • (SWN) - 10KP trade - Added (5) SWN December $45 calls (SWNLI) for $1.65.
  • (SWN) - Added the $40 calls (SWNKH) to the regular account (a little riskier) for $1.90.
  • (FSLR) - Added FLSR November $200 Calls (HJQKT) for $2.60 to the regular account with the stock off $15 at $162. Obviously a little higher risk here, but I think the “sell the news” event in the form of the election results will not be long lived. Also, there are concerns that solar companies will take a hit over foreign exchange issues and that will be true for some but FSLR is partially hedged and did not act like it was that big a deal to them on the recent conference call.
  • (FSLR) - Doubled the prior trade later in the day for $1.60 bringing the average cost to $2.10.

$10KP: $19,000, 48% cash.

Commodity Watch:

Crude oil lost $5.23 to close at $65.30, giving back most of Tuesday's gains. Oil traded lower with the broad market, pausing only to note the lack of build in inventories (or maybe to note the build in products inventories) before continuing to slide step for step with the broader equity markets. This morning oil is trading nearly another $2.

  • OPEC  Watch: My sense is that OPEC is publicly signaling day after day that each of its members are meeting and in some cases (Nigeria) exceeding the agree upon cuts from the October meeting. If prices do not firm up soon look for more cuts in the immediate future (second half of November).

Natural gas traded flat for most of the day despite the big loss in crude, closing UP $0.03 at $7.25. This morning gas is trading up slightly.

 

  • Favorite Quote Watch:
    • Gas closed above the 50-day moving average for the second consecutive day. Prices yesterday broke above the average for the first time since July 10 and closed above $7 per million Btu for the first time in a month.``Technically, it was a big move yesterday,'' said George Ellis, a director in the energy derivatives group at BMO Capital Markets in New York. The move has built in support around $7.04 per million Btu, he said. ~ Bloomberg

Natural Gas Inventory Preview: This is probably the second to the last injection of the season. Storage probably tops out at 3.45 Tcf which is full but not beyond most expectations. I had been looking for 3.4 Tcf for quite some time and the extra 50 B's is pretty meaningless as all eyes are trained on the winter forecast.

My Number: 30 Bcf Injection.

  • Last Year: 45
  • 5 Year Average: 31
  • Weather:  last week saw the coldest weather of the season to date, with 99 heating degree days (gas-consuming population weighted).
  • Imports: down a little over 1 Bcfgpd from last year, entirely due to lower volumes from Canada.

Street Consensus: 24 Bcf Injection.

EIA Crude Oil Inventory Review

 

CRUDE OIL - Inventories hold flat. 

 

 

 

 

GASOLINE - Inventory build in line with expectations as production inches up. The fact that production is rising now is a bit of a mystery to me. Margins stink. Nature of the production chain I guess but why keep utilization even this high given the lousy economy.

 

 

 

 

DISTILLATE - Inventories right where they should be for this time of year.

Earnings Watch - full house. (GDP) looks best (yep, don't own it), then HK, CLR, and BEXP will largely depend on their conference call as the quarter was a "throw away" due to Hurricane issues.

 

HK Reports Strong 3Q08 Results But Slight Miss On Bottom Line

The 3Q Numbers:

  • Production of 315 MMcfepd vs a guided ranged of 310 to 320 MMcfepd and up from 283 MMcfepd in 2Q08
  • Revenue reported of $305 vs $287mm
  • EPS of $0.19 vs $0.20 expected
  • CFPS of $0.74 vs $0.79 expected
  • LOE of $0.43 vs $0.50 last quarter. Extremely low.

Guidance:

  • 4Q volume guidance was 360 MMcfepd. Current guidance remains 355 to 365 MMcfepd for 4q.
  • 2009 volume guidance was 30% to 40% growth.

Financials: Debt to total cap was 39% at end of 2Q08; fell to 32% at end 3Q.

Operations Highlights:

  • Haynesville Shale: another new well, 15.7 MMcfepd IP
  • Eagle Ford Shale: added another 50,000 acres

Conference Call: Today, 10EST

CLR Reports Good Operational Quarter; Slashes Rig Count

The 3Q Numbers:

  • Production of 33,297 and 31,623 BOEpd in 2Q08 (was 33,000 BOEpd in June)
  • Revenue reported of $286 vs $295 mm
  • EPS of $0.62 vs $0.78 expected
  • CFPS of $1.40 vs $1.40 expected

 Operational Highlights:

  • Bakken - more strong TFS wells, two north of 1,000 boepd IP. I'll have more on the call

Guidance

  • Maintain budget within expected cash flows for 2009 (cutting rig count in half); sees 17 rigs running by year end down from a planned 35 and sees an average of 15.5 rigs running in 2009 with 8 of those in the Bakken.
  • Sees year end exit falling short of 43,000 BOEpd forecast as it curtails rig activity.
  • Sees 2009 volumes at 38,000 to 41,000 BOEpd (again, curtailments)

Financials: 2Q net debt to total cap was just under 20%.

Conference Call: Today, 10EST. I'll be on the HK call at this time and will listen to the replay.

 

BEXP Throws A Storm Brick Of A Quarter, Forward Guidance Solid.

The 3Q Numbers:

  • Production of 27.6 MMcfepd, low to estimates due to hurricane curtailments.
  • Revenue reported of $29.6 vs $37 mm
  • EPS of $0.09 (excluding gains) vs $0.15 expected

Guidance: See 4Q rising to 33 to 37 MMcfepd.

Operations: Not much of an update following

Conference Call: 11 EST.

GDP Reports Strong Quarter

  • Production of 69 MMcfepd, up 48% YoY; all growth organic (from the drill bit, not acquisitions). Production was ---% natural gas.
  • Revenue reported of $60 vs $63 mm
  • LOE of $1.29, in line with expectations.

Financial:

  • $0 drawn on revolver
  • $224 mm in cash
  • 3.9% net debt to capital

2009 Plans:

  • Preliminary capital budget set 15% below 2008 levels at $300 million.
  • 60% funneled toward their growing Haynesville Shale horizontal well program

Guidance:

  • 4Q - slower sequential growth due to delays in hookups but ...
  • ... in 2009 they see 30 to 40% growth

Operations:

  • Haynesville Horizontal Program - 4 wells currently drilling, 3 of those operated by CHK in the JV. I would bet on seeing results from 3 if not 4 of these wells after year end but perhaps before the year end press release (typically in February).
  • Angelina River Trend. Sporting some nice fat James Lime production. 3 wells completed and more drilling.

 Conference Call: 11 EST (I'll probably listen to the BEXP call and the replay here as I'm not currently an owner of GDP)

 

SD Reports After The Close.

Odds & Ends

Analyst Watch: Goldman cuts (EOG) to neutral, FBR cuts (DVN) to neutral.


176 Responses to “Thursday – Gas Preview and Oil Inventory Review Plus Earnings Galore”

  1. 1
    teomax Says:

    I have posted here about WEL, they have posted great 3Q earnings today.
    $0.07 per diluted share.
    “For the nine-month period, approximately 79% of Boots & Coots’ revenues were generated internationally”

    They will probably make it even in this downturn scenario as they are able to add new contracts.

    In the past few months they added:

    “Boots & Coots Announces a New Contract in North Africa Worth $45 Million” and

    •Boots & Coots Signs New Contract in Algeria Worth $28 Million

  2. 2
    zman Says:

    Thanks teomax. They’ve had a big string of contracts in the last year. My contact who kept really close touch with them no longer is interested, kind of the story of the Street right now. My sense is that even the good little performers will suffer if rig count takes a dive, especially for guys like them if the international count falls (which so far it has not really). Maybe they already have done so and the resilience we are seeing in names like SLB stuck at $50 means the market has looked through the trough, hard to say.

  3. 3
    zman Says:

    Weird no press releases out of CHK or BP denying the deal, volume massive at CHK already 21 mm shares.

  4. 4
    tater Says:

    VTZ,
    I did a weekly and a daily chart for AGU (and added a daily for HK). They are all on page 5 at the link.

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882&cmd=show%5Bs154210710%5D&disp=O

  5. 5
    zman Says:

    Thanks tater, will have a look at that HK. Man were you right about 180 resistance on the FSLR!

    Ugly open for the groups but seeing a lot of sings of willingness to bottom fish as the Dow came even a few minutes ago.

    Its probably pretty important for NG to hold $7 as lots of traders are looking at that level.

  6. 6
    zman Says:

    Some must be casting doubt on the BP for CHK rumor as CHK is now off a buck on 40 mm shares 15 minutes into the market day.

  7. 7
    Garyinhou Says:

    Z, isn’t clr volume surprisingly low given “big” eps miss? Seems like no rush to exit..

  8. 8
    BirdsofpreyRcool Says:

    Credit opening weaker this morning. Interesting, as one might expect the combined rate cuts by the ECB and BOE to have an effect. Perhaps it’s Trichet’s comments about “there is no credit crunch.” Denial is never a good way to deal with the problem.

    IG 194 (after last night’s close of 190)

  9. 9
    tater Says:

    Want for FSLR to hold the .38 Fib level ($147) for the 95 up to 180 move. Healthy pullback if it does. Hard to say, I understand there are currency exchange issues for the name and that whole area is flying around today.

  10. 10
    Garyinhou Says:

    spoke too soon

  11. 11
    zman Says:

    Gary – yeah, the opening gap down will put a lot of holders on the sideline to sell later or at least listen to the call. The downward move in capex was expected, the magnitude was not.

  12. 12
    zman Says:

    Gary – also got to add market effect. Dow just gave up 100 points in a flash and that’ll drag the sector and oil too.

    Weighing my choices and exposure, I’ll be listening to the HK call in 5 minutes.

  13. 13
    zman Says:

    If anyone has time to listen to the CLR call while I’m on the HK call that would be great. I’d send you a hat but we’re fresh out.

  14. 14
    zman Says:

    Ram – you must be happy to have chucked your near term CHK calls now.

  15. 15
    ram Says:

    Yes.

  16. 16
    zman Says:

    Is the financial sector short ban still in place?

  17. 17
    BirdsofpreyRcool Says:

    z – no. you can short as many financials as you want.

  18. 18
    ram Says:

    Although I used the monies for FSLR.

  19. 19
    Garyinhou Says:

    clr – projects viable in current price environment..

    intresting note .. clr execs barred from buying co. stock on margin..

  20. 20
    Dman Says:

    XCO earnings out & stock down 12%

    Some impact from Ike

    Sees 10-15 % reduction in Q4 drilling expenses

  21. 21
    VTZ Says:

    Thanks tater!

  22. 22
    Dman Says:

    Would it be too cute to expect UNG to fill the gap to $29.34?

  23. 23
    zman Says:

    HK Conf Call #1

    EUR increased to 6.5 Bcfe from 5 Bcfe over entire Haynesville leasehold. Completing 5th horizontal well now.

    Eagle Ford Shale: completing 2nd well.

    Their reduction in LOE is expected to continue, this puts them at best in class among mid and large cap E&P names. $0.43 per Mcfe. Wow.

    Plenty of liquidity left ($1.4 B)

    Q&A about to start.

  24. 24
    zman Says:

    FSLR just needs a little time and a green market.

  25. 25
    tater Says:

    Dman,
    Just remember that on USO and UNG and other ETFs that monitor commodities, the commodities trade for many hours that the ETFs do not. It might be prudent to ignore traditional gap theory as they really are not gaps. Just my 2 cents, not trying to sound like I know everything, I most certainly don’t.

  26. 26
    Dman Says:

    CLR Q & A

    service costs: diesel fuel surcharge been removed by service companies. Falling steel costs starting to come thru. Expect further service cost decline as utilisation drops over next 4 months or so.

  27. 27
    zman Says:

    HK Q&A #1

    Horizontal CV Lime test drilling now in Shelby County, could be pretty big one given what others have been seeing in CV Lime verticals of late and XTO in the horizontals.

    New Eagle Ford Shale acreage: $350 per acre. Nice price.

    Budget to stay close to cash flow

    Haynesville wells: most of them perform well on a 24/64 choke, nice stable declines on that. Gave them confidence to bump up the EUR projections. No deviations from what they saw over the last couple of months.

    Haynesville LOE: acting like its going to be a nickle!!! 5 cents to produce gas. That’s just insanely low. Their other areas like Terryville and Elm Growth are less than $0.25. This is best in class. That will lead to bottom line numbers coming up.

  28. 28
    zman Says:

    Thanks Dman, much obliged!

    NG below $7, pre storage numbers.

  29. 29
    Dman Says:

    CLR: Bakken very viable at $60. Could operate at $50 and continue to grow, but would then see lower service costs if oil gets to $50.

  30. 30
    zman Says:

    Oil down $3.50, coming up on a test of $60 again. Gotta look for OPEC to align supply with demand soon.

  31. 31
    zman Says:

    Disregard CHK volume comments before, need new glasses.

  32. 32
    bill Says:

    and hk is rewarded down 10 %

    ng is off 35 cents so someone in the govt must have leaked this weeks numbers

    i bet its 50

  33. 33
    Dman Says:

    tater #25: that was indeed the basis of my question, but I’ve seen USO gaps fill very nicely. Seems weird but …

  34. 34
    zman Says:

    HK Q&A #2

    Not drilling proven undeveloped (PUDs) opportunities in the Fayetteville or Haynesville at this time. Anything that is held by production (HBP) is secondary to holding acreage.

  35. 35
    Dman Says:

    CLR: seeing gas rigs getting freed up (due to low NG) & becoming available for Bakken oil plays (leading to downward pressure on costs)

  36. 36
    bill Says:

    coal stocks are down 15 % today on top of yesterday 15 % loss

    30 % in 2 days!

  37. 37
    Garyinhou Says:

    clr -discussing finances etc… low debt load. maintain high transparency…yada yada.. will listen to playback… already in Q&A .. seeing service costs come down.. will start trickling down (same story diff co.)

    ? price threshold for activity in Bakken?s… “very viable at $70… if drop lower.. serv costs will drop, help offset.. can operate at $50 range fine…

    ND Bakken avg 5.8MM per (see 10-20% reduct 1st half of 2009… activity function of cash flow… projects very viable, not issue

    cognizant in bakken that if lay down rigs there may not get back.. so are careful.. actually see more rigs coming in there (as shale plays slow elsewhere)

    up to 14 stage fracs in tfs.. seeing improvement with add’l stages… believe it is helping

  38. 38
    BirdsofpreyRcool Says:

    nat gas only +12 BCF last week

  39. 39
    bill Says:

    ng + 12 bullish

  40. 40
    zman Says:

    12 Bcf – better.

  41. 41
    Dman Says:

    CLR will continue adding to Bakken acreage (71% of land budget targeted to Bakken)

  42. 42
    Dman Says:

    UNG hit $29.36 ! Missed by $0.02

  43. 43
    zman Says:

    It’ll be hard to get a big move out of gas out of the number today as oil is off 3.60 with the dollar up 1% on the European rate cuts. If the broad market closes green or up from the current down 175 on the Dow and oil can come up with it to be down only a couple I would think nat gas could come green on the day.

    That said, the smaller than expected late season build goes to alleviating fears that supply swamps economically depressed demand and trumps weather. That blast of cold led to a big pull for heating. The producing region saw 0 change so the dip in temps in the south really showed up in the numbers despite the flush production.

  44. 44
    rlogan1301 Says:

    Z- is there a map of the US that shows the regions/states and what type of power there use? for example, is the Northeast more of a Natural Gas region or coal or something else..just trying to get a sense of regional impact to those types of commodities based on weather…i know in Indiana the last 2 weeks have been 70s and beautiful, but will get cold this weekend..i believe Indiana is mostly a coal using state, but not sure about the rest of the country. Thanks

  45. 45
    zman Says:

    RL – good question, let me circle back to it after I get off these calls. If I don’t do it by this afternoon remind me.

  46. 46
    tater Says:

    Dman #25 Exactly! Might be retracement theory looking like gap theory. Not the right site to discuss, just saying be careful. Thanks for CLR updates.

  47. 47
    BirdsofpreyRcool Says:

    IG 195 1/2

  48. 48
    zman Says:

    SWN down 15% on no news. Likely add to that one soon.

  49. 49
    BossmanG Says:

    Z, RIG/NE getting dragged down by broad market?

  50. 50
    BirdsofpreyRcool Says:

    IG 196 +6bps for the day. not encouraging.

  51. 51
    zman Says:

    ZTRADE: $10KP TRADE

    SWN – Added (5) DEC SWN $40 Calls (SWNLH) for $1.55 with the stock down 15% on no news and despite a better than expected gas storage number. The possibility exists that listeners on the HK conference call heard that differentials to Henry Hub had recently widened in the Fayetteville Shale and this led to some panic selling. My sense is that this is generally old news and that infrastructure build out will increase takeaway capacity from the region prior to year end and return differentials to something operators are more accustomed to.

  52. 52
    zman Says:

    Boss- in my opinion, yes. It’s a little frustrating that the headlines all read, “RIG down on quarterly miss” when the stock was flat to up during the conference call and nothing they said would lead one to think the sky is falling or business is worsening. They in fact sound like they are walking into situation where they will be more competitive as operators cancel some newbuilds that threatened to lead to over capacity in the deepwater space.

  53. 53
    zman Says:

    Thanks for those updates on the credit market Bird. Conference calls confirm that nothing is happening with credit right now.

  54. 54
    zman Says:

    Just when you thought it was safe to go back into the water:

    Tropical Storm Paloma forms:

    http://news.yahoo.com/s/ap/20081106/ap_on_re_us/tropical_weather

  55. 55
    BirdsofpreyRcool Says:

    KOG – as if mrkts aren’t “interesting” enough already… bought some shares pre-conf call. Call starting now

  56. 56
    zman Says:

    BEXP and GDP calls starting now. Going to listen to BEXP if I can get in, seems to be tech difficulties.

    Good luck with the KOG Bird, loved the comment re their write down last night by the way.

  57. 57
    BirdsofpreyRcool Says:

    KOG – they got a partner for the first 7 Bakken wells… so, that mitigates the cash burn and (hopefully) adds expertise in drilling their first Bakken well.

    If there was any debt on the BS i would say “run away quickly.” As it is, KOG is a pure call option on untested Bakken acreage. The “time value” of that option went up, with the addition of a partner’s capital.

  58. 58
    BirdsofpreyRcool Says:

    z – that said, with KOG, one will need “good luck.” thx

  59. 59
    bill Says:

    drys to sell a ton of shares

    DryShips is targeting a huge share offering to counter the dire dry-bulk market and slump in asset values.

    The George Economou-led bulker owner warned that the current state of the market could challenge its ability to raise capital or even put it at risk of defaulting on its loans.

    George Economou.

    “If the current conditions continue in the dry-bulk market, we may be unable to raise additional equity capital or debt financing upon acceptable terms or at all,” the Nasdaq-listed owner said in a filing to the Securities and Exchange Commission (SEC) on Thursday.

    “The current declines in the market value of our vessels and in the dry-bulk charter market may increase our risk of default under [loan] covenants,” the filing continued.

  60. 60
    zman Says:

    On the GDP call as had trouble with the other.

    GDP had a very good quarter. Essentially no debt, lots of borrowing capacity (completely untapped at this point). Huge pays in the Angelina River play.

    I may add some of this shortly (today or tomorrow). See post for more details. 30 to 40% growth next year and no debt and Haynesville well news around year end.

  61. 61
    zman Says:

    Bill – you were right to say stay away from the drybulk group for some time now.

  62. 62
    zman Says:

    Crude at a new 17 month plus low at this 60.80 level.

  63. 63
    Dman Says:

    Z- what calls would you look at for GDP?

  64. 64
    tomdavis12 Says:

    Z: Any thoughts about int’l trading status. Is the “letter of credit” problem still making things 100% frozen or some other lower %.

  65. 65
    BirdsofpreyRcool Says:

    KOG – expect to spud the 1st Bakken well by end of Nov. But, will drill and complete two wells (from the same pad) before reporting results. Since it will take 45 days (or so) per well, means we could be waiting until next Feb before we hear any official news. Would be surprised if some “scout data” didn’t leak out, but this has the potential to be a long wait.

  66. 66
    zman Says:

    Dman – I’ll let ya know! The spreads stink so I’m looking out in time and in the money, but not yet pinned down. Still watching market and listening to the call.

  67. 67
    Dman Says:

    Z – anything in today’s calls about price differentials that would make you more worried about SD, or is it prettty much what you expected?

  68. 68
    zman Says:

    Tom – I have no color on that.

    Dman – today’s calls are too geographically removed from SD’s hunting ground to benefit. If the analysts don’t know the differentials are lousy out there they should be unemployed.

    Resin coated sand may be fine for Haynesville, early to tell yet, probably not great news for CRR, just an FYI, tough to play that via puts. Also, ceramic proppant coming in from Russia (more now than before).

  69. 69
    bill Says:

    clr gets the loser of the day award

    here is an interesting article which is affectiong shipping at the moment

    http://biz.yahoo.com/ap/081104/meltdown_shipping.html?.v=2

  70. 70
    zman Says:

    Bill – could be the biggest opportunity of the day too, if the market can get off its back.

  71. 71
    BirdsofpreyRcool Says:

    IG 195 – maybe we have seen the lows for today. I don’t expect too much buying, ahead of tomorrows Employment Report, but perhaps the sell-off will stall here.

  72. 72
    zman Says:

    Bird – it “feels” like the selling is drying up. Volumes are very light.

  73. 73
    BirdsofpreyRcool Says:

    IG 194.

    z – agreed. And your FSLR is bouncing back from the LOD. Bank index hitting new low, tho… but who wants to be (own) a bank these days? Congress beating on you to lend, balance sheet (and reserve ratios) still headed south, questions about customer’s ability to pay any loan back, securitization market gone gone gone (so have to live with the loans you make), new regulations coming, Europe going into the tank behind us, deflation looking more and more like a threat. So, what’s “good” about being a bank these days?

  74. 74
    Dman Says:

    If SD is a barometer of hedgie redemptions (I think Bird suggested that the other day), then we could see some nasty selling later today.

  75. 75
    zman Says:

    GDP call over. Very positive. Very much sound in control. Virtually no debt and no need to tap credit line, equity or debt markets to achieve 30 to 40% growth target.

  76. 76
    Dman Says:

    I guess NOV is the other hedgie barometer & it is down 10% here. Of course, at *some* point they have to run out of stuff to sell, right? Hmmm.

  77. 77
    BirdsofpreyRcool Says:

    stock market continues to sell off, but credit is holding in today.

    IG 193 now.

  78. 78
    Dman Says:

    Doug Kass edging into coal & select other energy names

  79. 79
    cargocult Says:

    Bill, where can I reference the info on DRYS?

  80. 80
    BirdsofpreyRcool Says:

    IG 196… so much for calling bottoms.

    Still no reason to buy ahead of tomorrow’s Employment Report.

  81. 81
    zman Says:

    Cargo – what are you looking for re DRYS?

    Bird – hear ya on #80. Have curbed my appetite. Think some of our names have a good run in them when the market just decides to stop selling off. Good results, outlook, not going noticed yet.

  82. 82
    douglas51 Says:

    This comes straight from Charlie Munger:

    1. recession will be painful but short, started November 2007

    2. setting base for 10-15 year bull run,

    3. market will not rally until bond yields come down on long end…really likes municipals,

    4. TARP will make money…historical yields on toilet quality mortage pkgs are well above the prices people are contemplating buying them. really smart vulture guys are buying at the 50-60% levels. He and Buffett are also buying at these levels,

    5. Will see a healthy level of defaltion before we see inflation,

    6. SEES $50 OIL . Demand has been slowing for a year,

    7. Dollar should continue to rally against the Euro,

    8. Governments will drive LIBOR down to force interbank lending. Europe is much worse off than the US in terms of bank health.

    9. cash on balance sheets has never been higher. if they bought back all their stock thier P/es would be trading at a 50% discount to their historical average.

    10. He and BUFFETT are buying lots of U.S. equities for their personal accounts.

    I manage a retail mutual fund and this is good news.

  83. 83
    zman Says:

    Specially thinking of GDP, HK as to #81.

    Douglas – thanks much for passing that along. I agree with all of that…would add that $50 is possible but I don’t think it stays there long at all.

  84. 84
    zman Says:

    By the way Douglas, as you know, I never out people as to what they do but since you let the cat out of the bag in 82, we do have a Bio tab that I don’t think you are on at upper left. Most entries shy away from details but let people know what your perspective is based on. Thanks for thinking about sending one in to zmanadmin@gmail.com. That goes for the rest of you too, especially the recent additions who may not have thought about.

  85. 85
    VTZ Says:

    I would add that the dollar may rally against the euro for a while but I dont think it stays there for long.

  86. 86
    zman Says:

    V – absolutely agree on that. Printing presses already geared up to save the housing, auto, and alt energy industries.

  87. 87
    cargocult Says:

    Bill referred to DRYS issuing stock and risks re loans.

  88. 88
    zman Says:

    Cargo – I don’t see it and the 3Q transcript is not out yet. SEA back to getting crushed today. Many shippers day rates are at or below their operating costs. Do you have a source for amount of traffic…maybe the LA harbor or something different.

  89. 89
    zman Says:

    FSLR mounting a small recovery here, tempted to take a bit more but am not that much of a gunslinger.

  90. 90
    BirdsofpreyRcool Says:

    z – like a moth to the fire… i continue to circle (and noodle) on KOG. Question for you… hearing that Bakken agreage prices are NOT going down, but holding in, and in some areas, going up. So, based on your recent conf calls, what avg price would you place on core acreage, not immediately contiguous to pipeline access?

  91. 91
    zman Says:

    Bird – I don’t recall hearing a fresh number. Did not listen to CLR or BEXP yet, EOG I don’t recall them saying one. Will go back to look at WLL notes.

  92. 92
    zman Says:

    CNBC pointing out RBOB heading to an all time closing low. Refiners need to trim production.

  93. 93
    BirdsofpreyRcool Says:

    was just chatting up another all-energy analyst guy… got his take… wondered what yours was.

    thanks. I think WLL might have mentioned it… and i still need to listen to CLR.

  94. 94
    BirdsofpreyRcool Says:

    IG 197… if we close too low today, then anything short of a complete disaster in the Employment Report tomorrow should give us a relief bounce. Maybe.

    Just a thought.

  95. 95
    zman Says:

    Only thing I saw from WLL was that they were in for very low $, don’t see a current acreage price comment. Will listen to CLR and BEXP replays this afternoon and let ya know.

  96. 96
    zman Says:

    sort of tempted to take a little closer to the money play in SD, hard to believe the slow down and low prices are not factored in to the stock price at this point.

  97. 97
    BirdsofpreyRcool Says:

    z – if you happen to come across any numbers, would like to know. so, thx!

    IG just printed 197 again.

  98. 98
    zman Says:

    Will do, need to listen to CLR for myself anyway but do much appreciate Dman’s notes from earlier.

    NG above $7
    Oil off lows and fighting to hold $61 plus into the close…going to be an interesting last half hour for the NYMEX.

    GDP just keeps drifting towards green, should get off the pot there as that is the kind of story people are going to want.

  99. 99
    zman Says:

    ZTRADE: $10KP TRADE

    FSLR – Added (2) FSLR Nov $170 calls (HJQKN) for $4.10 with the stock down about $10 on the day.

  100. 100
    zman Says:

    California Gov proposes oil and gas severance tax. Not a kind move to Majors, OXY, BRY, Warren etc.

  101. 101
    mahout Says:

    Douglas51,

    Thanks for #82. Very interesting.

    Most of Munger’s points seem well taken and he may be right on all of them, however, his #1 raises a BIG question mark with me. When he says the recession will be short, what basis can there be for that? The underlying cause for all this malaise is massive overleveraging on nearly all balance sheets (including government’s and people’s individual balance sheets which they don’t even bother to make up). True there are many corporations that have excellent balance sheets. Some are outstanding, but the economy as a whole is badly out of kilter because of massive overleveraging and it’s worldwide.
    Like i say, he may be right, but when i consider that the overleveraging we are plagued with now actually started to accumulate in 1982, how long is it reasonable to expect that the current worldwide deleveraging will take to sufficiently offset the 25 year buildup of overleveraging? It seems to me it will take a period measured in at least several years and not a “short” period.

    However i am not a pessimist and i think there will be wonderful opportunities that will present themselves from time to time in this period of painful deleveraging.

  102. 102
    zman Says:

    …and then GDP went green. If we get much of a broad market rally I could see HK there easily as well.

    oil “only” down $3. Lots of people see $50 or less. Usually “lots of people” are wrong.

    NG at 7.07 and climbing into NYMEX close.

  103. 103
    douglas51 Says:

    Mahout;

    Munger’s reasoning was simple he said. Logest recession has been 16 months..entered the recession in November of 2007 or the latest january 2008. Thinks we are well into the later half of the cycle.

  104. 104
    Dman Says:

    SD now a bargain, up a mere 5% from LOD, but still down 14 juicy percentage points!!

    Honestly, this market could drive a guy nuts.

    GDP going green is about the only positive reaction to E&P earnings…. oh wait, EOG reacted well too.

    Trying to figure if SD is so sold-out that it might pop even on not-so-good news. But honestly I’m just guessing.

  105. 105
    reefguy Says:

    SD- WAHA up to $5.28

  106. 106
    zman Says:

    add FSLR to my list of names that want to run if the market just stops going down.

    Listening to CLR call. Very good call so far from an operational standpoint. May add a bit more near the close.

    Re SD – they could have huge results on east side of basin (less CO2 rich side) and still get ignored. They may miss estimates as analysts appear to be rusty on differentials.

    I know what I said earlier in this regard but looking at each of the companies today aside from BEXP where production was on but revenue was light to the Street that really points to the analysts bricking on price assumptions. Usually their models have a regional breakout of production and then a differential to Henry Hub or WTI. If the analysts are slack in updating that differential as they widen it can easily lead to “misses” by the stocks, due to no operational snag. I can tell you that after having had rising prices for years, analysts and especially their new associates laziness can lead to this kind of miss which is what I think is happening as for the most part this quarter, volumes have come in as per plan less previously announced hurricane disruptions.

  107. 107
    zman Says:

    Very encouraged by NG closing over $7 despite the big drop in oil. The chart there looks pretty constructive to me for a roll slowly higher in winter.

  108. 108
    zman Says:

    Thanks Reef – that’s good news. The volatility in basis differentials is unreal.

  109. 109
    zman Says:

    Oil dropped $2 more into the close into the close, back through $61.

    NG failed through $7 with it.

    Drops came with the Dow dropping again.

    Nothing has any conviction to it. Very jittery but again, I’m seeing very light volumes.

  110. 110
    ram Says:

    Unfortunately, the unemployment report will only show the beginning of a massive wave of job losses. Forget subprime mortgage issues, these people have been working for many years in the auto, ag construction, heavy and light industry construction equipment which will put prime mortgages in jeopardy. The adverse effect in GDP will be enormous.

  111. 111
    zman Says:

    Ram – yes, it seems to be the consensus view that unemployment will eventually reach the 7 to 8% range. The market is already discounting further job losses, question remains how much. To be trite, it always looks darkest before dawn.

  112. 112
    mahout Says:

    Douglas51,

    Thank’s for your reply.

    Munger’s reasoning leaves me unconvinced.
    I’ve been around quite a while and i have never seen anything like this one before. When you go back in the past for reference points for today, you should consider what is different now. When you go back in time a few decades you reach times when there were no credit cards to run up permanent balances on, mortgages required heavy down payments, there was no Phoney or Fraudy(sorry, Fannie and Freddie), banks did NOT overleverage themselves, and people actually put aside savings. The Federal government did not run a huge deficit or huge balance of payments deficit. Pror to the 1960’s the financial world was not so interconnected worldwide as it is now. We didn’t have hedge funds or mutual funds to the overflowing extent we have today. We didn’t have CDS’s and securitized mortgage trash up the gazoo.
    The world is quite different now. The financial world is much more vulnerable now. And i would say much more out of kilter than in past economic cycles. Therefore i think it will take more time to pull out of this than in the past and the remedies have to be much more drastic.

  113. 113
    Dman Says:

    Nymex closed, market up?

  114. 114
    antrimshale74 Says:

    I would be shocked if unemployment peaks as low as 7-8%. That’s my two cents. Here in Michigan I know we’ll be in the mid teens in short order.

  115. 115
    zman Says:

    Mahout – CNBC earlier was saying GM has $100 billion in physical inventories (unsold cars) backing GMAC and the CDS situation there is monster.

  116. 116
    zman Says:

    Antrim – I’ve heard 6 to 12% range, but from what I can tell 7 to 8% seems to be consensus trough.

  117. 117
    zman Says:

    Dman – yep, oil got left behind on that one.

  118. 118
    antrimshale74 Says:

    Yes, I’ve heard that same 8% number, too, but I really have no faith in it. I will be pleased if it peaks below 9%.

  119. 119
    Dman Says:

    re #112

    One point I never hear mentioned: this is the 1st recession where any sign of recovery will immediately result in drastically higher energy prices. This will alter the business-as-usual economic cycle. I would imagine it will lead to a more protracted recession. But not necessarily in a bad way for energy prices.

  120. 120
    ram Says:

    ZMAN – I don’t believe you can just look at a high single digit level of unemployment. There are and will be losses of hundreds of thousands of people who made north of $10k per month that are now and will be collecting unemployment from states that are borrowing to pay them. Shorting a retail sector ETF could be a good bet.

  121. 121
    VTZ Says:

    I read in an article the other day that says GMAC has 12.1 billion in CDS.

  122. 122
    VTZ Says:

    Wasn’t retail the first thing to continually get punished? I think the day of shorting retail has come and gone?

  123. 123
    zman Says:

    Ram – I don’t look at just one number for anything. I am saying that a good bit of the bad is already factored in. Don’t know how much. Maybe the unemployed will use more gas driving from interview to interview.

  124. 124
    ram Says:

    Just like in the finance sector where the weak dissappeared, the weak retailers can also go to zero. I don’t think we’ve seen the worst holiday season yet.

  125. 125
    zman Says:

    HK at HOD, content to hold as no one took the call or the quarter poorly, just a cruddy day.

    I think the numbers will be awful for the retailers. Don’t people like AMZN show increased shipments Christmas after Christmas since they started? Maybe not this year. UPS and FedEx do a big business in the 4Q too. So you have down fuel costs but also down deliveries. Sane, any thoughts on the trucking industry here. Should be good for costs.

  126. 126
    mahout Says:

    Dman #112,

    You make a very good point.
    Personally i feel that we will see periods of rising Cl and NG prices (not necessarily at the same time)and corresponding E&P and other energy groups stock prices rising rapidly in response. All the while the rest of the economy is lackluster and spinning its wheels. We might be targeting the best of all the groups and sectors on the board one of these days.

  127. 127
    zman Says:

    Also, re E&P, don’t forget that during the last 5 or so years, the E&P names have had to contend with wage and raw materials inflation of a sort much greater than most business models could accommodate. Now service cost pressures are easing and decline in many regions. So while prices may seem bashed, they are really only returning to levels from the third quarter of 2007 while costs are expected to fall quite a bit further. Which is why I get enthusiastic about the growthier names who can see the double whammy of lower $ costs and therefore even lower $/Mcfe costs. This will make surviving or even flourishing in this lower price environment possible.

  128. 128
    ram Says:

    Unfortunately for truckers doing business in Los Angeles, the city has imposed a “hauling tax” for companies that haul in and out of it’s port. As of Nov. 1, if you haven’t pay dues, you cannot enter the port. Sort of offsets lower fuel prices, city gets more revenue to compensate loses, and consumer does not see any change.

  129. 129
    tater Says:

    How come I can’t find a ticker for Pemex? They seem like such a good growth story. Very low $/Mcfe, great public backing. Seems like a perfect business model, no competition. Maybe Washington should look to them as the perfect example of how our auto industry can lead us out of this mess!

  130. 130
    zman Says:

    And now Arnold is going to impose a severance tax. Any chance of CA muni bond fund failures?

    Pemex = Mexico’s National Oil Company. Surely you jest on all the rest.

  131. 131
    zman Says:

    HK green, lol.

  132. 132
    tater Says:

    I probably need counseling. Sorry.

  133. 133
    zman Says:

    Tater – did you mean PBR?

    Market for now at least looking to close at LOD, basically off 1000 points in 2 days.

  134. 134
    mahout Says:

    Z,

    Excellent info and comment in #127.

    For me, a very key number is cost of production. I consider it MUCH more important at this stage of the game than Debt/Equity ratio in most cases. i don’t worry about the D/E ratio as long as they can throw off sufficient cash to cover it well, such as CHK does. Incidentally, i think CHK is an excellent buy anywhere south of $40. Not ready to buy yet, but i think maybe this month.
    So, for me the comparative cost of production numbers that you provide will weigh heavily. I thank you for them and for all the other important info on each company.

  135. 135
    tater Says:

    No, just being a wise-ass. Back to business, how come XOM is holding on? Seems like such a bad place to be going forward.

  136. 136
    Dman Says:

    Speaking of needing counselling, I just took a flier on SD, on the principle that “if it’s down 20%, how bad can it be?”. No need to remind me of what the answer might be 🙂

  137. 137
    zman Says:

    XOM: Its trading with the market.
    Four reasons:

    1) Nice thing about being the biggest energy company in the US is that its a fallback name for people (funds) who still want to have exposure to energy
    2) its cheap
    3) its integrated so while falling oil prices hurts the E&P arm, the refining and chemicals sides should, over time, benefit.
    4) They have 38 billion in cash and buyback 2% of the stock every quarter

  138. 138
    kyleandy Says:

    dman you’ve got company on SD lost 50 pts in about 10 seconds!!!! maybe we can get group rate on counseling

    tater re pemex i followed u!!!

  139. 139
    zman Says:

    Re PEMEX – my wife tells me I don’t have a sense of humor so that’s why I missed it.

  140. 140
    zman Says:

    GDP up $1.40. Only game in town.

  141. 141
    Dman Says:

    tater, *now* you tell us you’re a wise-ass. But seriously, I was onto you the whole time 🙂

  142. 142
    mahout Says:

    Taterman,

    Both well managed companies over the years, a perfect fit. i think GM should buy Pemex with a little help from our government and offer lifetime gasolene with each vehicle. They could call it G-MEX or Pee-M.

  143. 143
    tater Says:

    I owned bars in another life, so I guess I tend to expect everybody to always be goofing around to offset stress. Just ignore me. Thanks for the XOM. I think that I am just getting used to volatility.

  144. 144
    tater Says:

    Pee-me. Coffee out the nose!

  145. 145
    zman Says:

    I kid you not, just got the mail. $1,500 auto matic pre-approved check from GMAC to buy a car and says it works with most of their other incentives. Did not say U.S. Treasury on the signature line but it should.

  146. 146
    zman Says:

    Beerthirty! Here’s to a low unemployment and a green close to the week.

  147. 147
    zman Says:

    SD – comments out in an hour or so.

  148. 148
    ram Says:

    I still don’t get what you guys are talking about.

  149. 149
    apbd Says:

    Two down days in a row after the election.
    Is this the ” change we can believe in?”
    apbd

  150. 150
    Popeye Says:

    The subscription was good just for the humor today. 🙂

  151. 151
    kyleandy Says:

    Z SD info out what u think???

  152. 152
    zman Says:

    One minute more on the SD

  153. 153
    zman Says:

    SD. First blush, good.

    No change in guidance after recent reduction of capital budget. Not a lot of meat in the PR from an operations standpoint that is new but really don’t need that at the moment. Chopping rigs swiftly in their primary play, the WTO (West Texas Overthrust). The rigs they do keep will focus more on Frog Creek (east side of Pinon Play in the WTO) where the gas found is mostly methane, unlike the original two plays which is CO2 rich, which must be treated, and for which capacity is currently constrained. Well size listed as 7 Bcfe across the play which may be an uptick to their most recent thinking…will check notes on that.

    Production: 3Q was strong despite shut ins due to capacity curtailments attributable to a previously announced facility fire and to Ike and Gustav disruptions. Despite this, they are reiterating their 100 Bcfe total 2008 production target.

    Revenue: $259.1 mm vs $281mm expected (this is the differential issue I’ve been harping on as volumes looked as expected (flat with 2Q due to shut ins) so the analysts were a lazy, sloppy fellows here). Notably, the company is not increasing their differential to Henry Hub guidance ($0.90) so maybe they see a re-tightening from recent drastically crappy levels.

    EPS: $0.17 (clean) vs $0.16 exp. Lease Operating Expense (LOE) per Mcfe came in at the low end of guidance allowing for the bottom line beat. In my book, a high quality beat as I would rather see a company outperform due to cost control than due to higher than expected prices.

    CFPS: $0.83 vs $0.86 exp. Missed on cash flow, but its close and some people may be calculating that differently. With the revenue so far off its a wonder they didn’t miss analyst’s EPS and CFPS estimates by a wide margin.

    Guidance:
    Production guide remains 120 Bcfe for 2009 so 20% growth, same as Oct 2 view.
    Costs look the same as prior with GA inching lower and LOE inching just a touch higher, probably a wash to most analyst models.

  154. 154
    zman Says:

    RLogan, will have an answer to your question above in tomorrow’s post.

  155. 155
    BirdsofpreyRcool Says:

    According to Bloomberg, the market is looking for a change in Nonfarm Payrolls for Oct of -200,000. The unemployment rate is expected to tick up to 6.3% and Manufacturing Payrolls is expected to drop 65,000.

    If we don’t come in worse that these numbers, perhaps we can claw back a bit of of the last 2 days loses.

  156. 156
    Wyoming Says:

    Teomax Re WEL.

    International contracts do not mean much to anyone but rig contracts. They are usually the only ones with a malice clause or stand by rates. Even then I know a certain Caltex (oops) operation that would stand down a rig for “safety” concerns, which coincided with a reduction in capex. The $45 MM is not guaranteed. NOC’s are pretty smart people, I have to give them some credit.

    As for domestic service costs in general, they must drop. Internationally, Saudi already talking about cutting back projects too. We will make sure of that. Why drill wells when you get more return on capital buying back stock on a reserve basis?

    I’ll go back in my cage now.

  157. 157
    zman Says:

    Thanks for play Wyo. Are you going to that Shale Expo later this month? I’ve got a beer or two with your name on ’em.

  158. 158
    zman Says:

    FYI, crude hit $60.01 a few minutes ago.

  159. 159
    zman Says:

    oops, $59.97.

    You can almost here OPEC warming up their minister’s jets for another emergency meeting.

  160. 160
    Wyoming Says:

    Oh yea. Never pass up a beer, especially with my name on it. We are now socialists and ignoring one is not permitted and breach of protocol.

    Some humor for Tater. He needs to realize that sarcasm is usually prevalent north of the Mason Dixon line. Gets lonely for some of us “Damn Yankees”.Diff between Yank and Damn Yank, the Damn Yank won’t leave. Diff tween an Engineer and a bucket of crap … a bucket.

  161. 161
    bill Says:

    # 79 DRYS

    Here is the sec filing http://www.sec.gov/Archives/edgar/data/1308858/000091957408007245/d932469_424b-2.htm

    here is bloomberg story

    http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=DRYS%3AUS&sid=auzn1z0TM1tE

  162. 162
    bill Says:

    I posted an article yesterday on factors affecting shipping..go find it

    Basically, nothing is moving due to liquididty crisis, dropping demand for steel, and inability to get letters of credits.

    The current rates are 5 to 10 k per day which is barely enough to cover crew expenses leeaving nothing for interest expenses or debt repayments.

    Some shipowners, Drys in particular loaded up on debt, and bought ships at record high prices, ( a bunch from the ceo personal stash) the guy is 10 time worse than ken lay and his lack of ethics is what got me out of it to begin with

    But all shippers will eventually suffer.. the best one is dsx which has the lowest debt outstanding

    The tanker stocks are doing better at the moment but with oil at 60 and opec cutting production rates should weaken there as well

    there will be bankrupcy in the dry sector if the current situation continues

    Tops and Rams are both teetering.

    Also, the ship oweners have to take impairment charges like mark to market accounting on their ships and when they do th ebanks will ask for more collateral or call their loans..sound familiar??

    this means big problems come q1 when owners need to true up their balance sheets.

    drys is anticipating that and trying to raise as much equity as they can even though their stock is down 90 % from its highs. One problem is they have no cfo–if the ceo paid someone 200 k a year and listen to him, he woulda saved 3 billion dollars

  163. 163
    PackMan Says:

    Bill re: Drys # 59.

    Seems to me that this is a standard disclosure in a shelf registration filing.

    I know you said to sell Drys recently.

    Are you short on the name ?

  164. 164
    PackMan Says:

    Unemployment.

    Hell, I remember 10.8% in ’82-’83

  165. 165
    bill Says:

    no im not short– i tried to short it no shares were available

    is 5 k per day standard when they used to make 150 k per day

  166. 166
    bill Says:

    z- do you follow the coal stocks

  167. 167
    PackMan Says:

    Bill just saw 162 and others …

  168. 168
    PackMan Says:

    Looking at filing; seems like its been out there and nothing new; w/ BDI at 832 or whatever, these risks are legit.

    I am somewhat suspicious about today’s news story … its not really news. Seems like someone wants to drive Drys and other bulkers down and clearly people dislike CEO for good reasons, but its not like all of a sudden OMG rates are low and there is a sudden risk of covenant defaults and DRYS is selling 25 M shares at 15. I would not bet on that.

    Frankly, I am surprised that some shareholders haven’t sued to void his tanker sale to DRYs from his private stash.

  169. 169
    PackMan Says:

    You should add this to your DRYS postings:

    http://www.irwebpage.com/dryships/files/dryspres110308.pdf

  170. 170
    bill Says:

    packman– i mean no disrespect, but ive been closely following this stock for 2 years

    1. they dont have any tankers
    2. dont believe what you hear from the (crooked) ceo
    3. Those rosey numbers are good if people pay their bills
    4. dwt just filed chap 11 and they had 85 ships chartered in. Owners who expected those long term contracts get their ships back and can only earn todays spot rate
    5 2 days before the ceo was saying everything was fine
    6. 2 days later he mentions potential loan defaults..the reason he didnt own up to it in the earnings release was he was selling 5 m shares at prices north of 20
    7. THE BDI AS YOU POINT OUT IS 832..THATS LIKE THE DOW AT 832, THE BDI WAS ONCE OVER 13000.
    8. Regarding my posting.. i was answering another poster question.. im not hyping or bashing

    I WILL REPEAT AGAIN..STAY AWAY FROM DRYS AND ALL BULKER STOCKS FOR THE TIME BEING

  171. 171
    PackMan Says:

    Thanks for the info Bill (and I didn’t mean “tankers” literally rather the capesize ships). Your points are well taken.

    Another couple of weeks, Dow might be at 832 at this rate !

  172. 172
    zman Says:

    Bill, yes, I do keep an eye and sometimes two on coal. Very tough environment for them stockwise of late, you’d almost think they sold natural gas or oil. Unfortunate comment in the last little bit from Obama too were not helpful. Met coal and coal for generation similarly getting whacked. What did you have in mind?

    yunker, I added you to the bios tab. wealth of industry knowledge around here is simply boggling. please feel to comment and correct when you feel the need.

  173. 173
    zman Says:

    DIA higher at present and oil actually up 50 cents back over 61. Academic in front of the jobs report.

    Bird, I agree with your thoughts in 155.

  174. 174
    bill Says:

    Anr and MEE look cheap to me and i took a small stake. i think down 25 % in 2 days is over done

  175. 175
    zman Says:

    The Wiki holdings tab is updated.

    Bill – I agree, overly harsh sell down last 2 days. The sell down from the top has been incredibly ugly yet the underlying commodities, eastern and western coals have seen no sell off in price similar to that seen by oil.

    Appalachian coal, the high BTU stuff we use to make electricity and with which we blend Western cleaner coals, has fallen from a peak of 140 this summer to 82 at present. Nothing like the 147 to 60 trip oil has had yet the stocks, of which their is a much smaller aggregate public float, have been beaten down much worse. The metallurgical coals names like WLT are off as bad despite the fact that met coal pricing remained at peak levels through the 3Q period. Steel prices coming off have hurt them but met coal remains under supplied in Asia. I’ve been close several times in the last month to dipping a toe or two in the space but fat option spreads and the incredible volatility has left me cold on the idea. There is also the political climate to consider although I think that’s more bark than bit. Anyway, waiting and watching. I thought ANR was subject to a bid. MEE is not may favorite (lots of lawsuits at last check). I think BTU and ACI for regular coal and WLT as a met coal play will be interesting.

  176. 176
    bill Says:

    thanks z

    anr bid is 22 cash and 1 share of cliff thats 40 plus for a 25 stock

    i agree with option pricing comment and volitilty–thats why i just bot shares

    thanks for the input

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