14
Nov

T.G.I.F.

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Nice bounce yesterday, with retail sales (awful) and consumer sentiment (probably  awful) and the G20 meeting (looming) acting to put a lid on further bounces today. Can we go higher? Yes, sure, into a weekend feel-good supported by the thought that world governements will act in  a coordinated effort. Can we give back all of yesterday and more into the close today? Yes, why did we rally yesterday? Because of a speech? It felt like a bear market, dead cat bounce.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Preview
  4. EIA Oil Inventory Review
  5. Stuff We (But No One Else) Care About Today
  6. Odds & Ends

Holdings Watch: The wiki tab is updated. The $10KP sits at $12,700.

  • BEXP - $10KP TRADE - Bought (10) BEXP December $5 calls (QBJLA) for $0.60 with the stock down about $0.75 at $4.25.
  • EOG - $10KP TRADE - Out last (3) EOG November $85 Calls for $3.80, up 77%. Just taking advantage of the run in the group to exit a November out of the money position. Will reposition soon.

Commodity Watch

Crude oil yawned at the release of a mixed set of EIA numbers (see below) yesterday but traded higher with the broad market rally closing up $2.08 at $58.24. This morning crude is trading flat.

  • OPEC Watch. November 29th emergency meeting has been called. According to Reuters most analysts expect another 1 mm bopd cut in quotas which they say is already factored into prices.
  • After a $90 point drop in oil in the last 5 months you sort of have to wonder if these guys do much in making statements like that beside looking at the obvious current direction of the chart. Despite 4 weeks of flat inventory levels in the U.S. (see oil inventory review section below) the analysts and traders interviewed still think crude will go lower because it has gone lower. So they call for $55, then $50, then $45, then $40. No one is willing to make a call on the bottom, but you can't lay that off on demand as much as the pendulum effect of the market.

Natural gas closed down another 9 cents to $6.32, its third day of losses (15% in total). This morning gas is trading up slightly in meaninglessly light trading prior to the release of EIA inventories. I think the sell off of the last few days has been largely related to oil and the fear of one last big injection due to last week's very mild weather.

Natural Gas Storage Preview. We could see an ugly dip inspriing number today and if so I'll probably add some UNG calls after the fall as a bad number has already been discounted. 

  • My Number: 35 to 55 Bcf Injection. I know you can drive a truck through the range on my numbers this week but I gotta call it like I see it. The Street is using the number from two weeks ago as its estimate this week (46) and I'm basicallly plus or minus 10 off that number given that it was just unseasonably warm last week. 
    • Last year: 4 Bcf Injection
    • 5 year average: 23 Bcf injection
    • Weather: 77  Heating Degree Days vs 113 HDDs last year and 99 in the prior week when we saw an injection of just 12 Bcf.
    • Imports: up 0.2 Bcfgpd from the prior week so really not much of a factor.
  • Street Consensus: 46 Bcf. This is the same number as the withdrawal from 2 weeks ago when degree days were at 92.

ZComment: Natural gas simply can't catch a bid until oil stabilizes. Gas tried and failed to rally over the past week as cool weather, which helps out demand and therefore prices was offset by falling crude which is not a competing fuel for heating or generation and therefore should have little effect but nevertheless does. Traders know or at least think they know the gas directed rig count will fall significantly (anywhere from 200 to 800 rigs) over the next 6 months but until they see it actually come down the rallies in gas will be timid...unless oil can reassert some level of confidence in the market. Given the weather in the U.S. this week I think we are very likely to see the first withdrawal of the season in next week's report which coupled with a little more cold shold bolster prices somewhat. Still, without oil at least holding the current mid $50s trading range it will be difficult for gas bulls to get out of bed. 

EIA Oil Inventory Review

CRUDE OIL - No change in inventories vs an expected build. Again.

 

Crude Imports - Beginning to peel off. This could be a function of lower deliveries from OPEC but  its not possible to tell given the weekly data.

Stocks - Flat for the last 4 weeks, now down 1% from year ago levels. We're simply not seeing the expected big build in fourth quarter inventories that are supposed to depress oil prices. At least not yet.

 

GASOLINE - A bigger than expected build in inventories, even as imports fall and demand remains stable. Odd numbers.

 

 

 

 

 

 

DISTILLATE - Bigger Than Expected Build, Stocks Remain At Adequate Levels For Winter.

 

Stuff We (But No One Else) Care About Today

B of A Energy Conference: Today I plan to listen to: (all times EST)

  • (HERO) at 9:20 am
  • (CHK) at 10 am
  • (ATW) or (HP) at 11:25 am
  • (NBR) or (NOV) at 12:05 pm
  • (GDP) at 1:25 pm

 

 Odds & Ends

 Analyst Watch: FBR cuts rating to market perform and price target to $30 on (WLT), CK Coopre initiates (GDP) at Buy with a $41 target.

180 Responses to “T.G.I.F.”

  1. 1
    bill Says:

    boa schedule

    https://gems.bankofamerica.com/public/DisplayCollateral?id=544902785

  2. 2
    bill Says:

    on gas storage

    did you complete the sentence

    ” Street Consensus: 46 Bcf. This is the same number as the withdrawal from 2 weeks ago when degree days…….” were what?

  3. 3
    zman Says:

    RE 2. that should say when degree days were at 92.

  4. 4
    bill Says:

    thanks

    did you listen to lng boa presentation?

  5. 5
    zman Says:

    I listened to the LNG call as well. Will listen again. Kind of an odd argument that LNG will flood into the US because it has nowhere else to go if the US is paying 1/3 of prices in Europe and Japan and the U.S. has no need for the gas. He basically said the U.S. doesn’t need the gas and that they built a great, world class, facility for gas that isn’t needed but that gas must come to the U.S. I’m going to do a little more thinking about it.

  6. 6
    zman Says:

    Listening to HERO now for a little current perspective on the shallow water rig market.

  7. 7
    bill Says:

    lol he rambled a bit..he indicated 6.25 was an attractive home

  8. 8
    Dman Says:

    Crude now down 5% ? Any news?

  9. 9
    zman Says:

    Dman – look at the Dow down 149 points, look at oil, down $1.49. Notice anything?

  10. 10
    zman Says:

    HERO mentioning there is a tale to the hurricane repair business (they run lift boats as well as jack ups) into the 1Q. I don’t recall OII talking about an impact due to that on the repair revenue side, could be a little upside for OII there.

  11. 11
    zman Says:

    Dman, I’ve got live crude quotes so maybe its a little easier for me to see but some days, when there is no news, the DJIA and oil trade tick for tick.

    Someone just pulled a fire alarm at the B of A conference, kind of appropriate.

  12. 12
    BirdsofpreyRcool Says:

    Even before the “biggest drop in retail sales on record” and predictions of the “worst Holiday Shopping Season in 20 years,” the credit bears were back out of their den. The Investment Grade index (IG) tried (briefly) to rally from yesterdays (mainly short-covering) close and opened at 197. But that was as good as it got. It didn’t take very many trades to push spreads a lot wider. We are back to the over-200 (“oh-sh*t”) spread area. But where it goes today, ahead of the G-20 meeting this weekend, is anyone’s guess at this point.

    IG 206 at stock market open.

  13. 13
    zman Says:

    Bird – retails numbers are definitely bad. How are they compared to expectations?

  14. 14
    zman Says:

    Dman – its uncanny.

    Dow now down 71 points, crude off $0.69.

  15. 15
    zman Says:

    Bird – one thing I have noticed is that the sales out there are not very good. Could be a function of a strong dollar. Is that what others are seeing, not a lot of bargains or is the consumer just really being stingy or both. Just trying to gauge the consumers’ stinginess right now. Gasoline demand is running flat despite those falling prices, I still expect it to tick up and if imports continue to plummet it could be an unexpected positive event for domestic refiners.

  16. 16
    zman Says:

    CHK talks at B of A in 10 minutes. First time for them to openly talk about the Marcellus deal, not Aubrey but the CFO.

  17. 17
    bill Says:

    bry got a downgrade today from tudor pickering and its the only energy stock up today

  18. 18
    antrimshale74 Says:

    Bill, BRY was barely up yesterday. There’s probably just a bit of catching up today.

  19. 19
    BirdsofpreyRcool Says:

    z – here’s the thing… we all know the market is pricing in “bad” economonic reports, problem is, expectations are still not “bad enough.”

    The good news is that the Import Price Index came in LOWER than expected. “What inflation?”

    Import Price Index (MoM) exp -4.4%, act -4.7%
    Advance Retail Sales (Oct) exp -2.1%, act -2.8%
    Retail Sales, ex-auto (Oct) exp -1.2%, act -2.2%

  20. 20
    zman Says:

    GDP and RRC up as well. BRY is too beaten down in my book but I’m not going to touch them here.

  21. 21
    BirdsofpreyRcool Says:

    The Univ. of Michigan Confidence numbers (in 5 mins) is expected to be 56.7

  22. 22
    BirdsofpreyRcool Says:

    hey!! U of M just reported early… it’s actually BETTER THAN EXPECTED at 57.9… even UP a bit from last month’s 57.6.

    Exactly what those numbers measure, is beyond me, however….

  23. 23
    zman Says:

    Group trying to green. At some people have to save, where else are you going to find earnings.

    Notice SEA trying to creep up. Panamax and Supramax rates have been inching up. Capesize really can’t go much lower without going negative. They are already below daily operating costs. I may take some DSX next week.

  24. 24
    BirdsofpreyRcool Says:

    I’ll bet we are going to close “green” today… in spite of the credit market. It seems stocks just WANT to go up.

    Makes sense, 3 down days followed by 2 up days. It’s from the Old Trader’s Handbook.

  25. 25
    zman Says:

    Thanks Bird, agreed there is a desire to close green for Friday.

    CHK presentation starting now.

  26. 26
    Dman Says:

    Z – I was looking at USO & I now realize that since it rallied hard after the nymex close yesterday, it is now down more than crude is down relative to yesterday’s close. That’s where I got the 5% from in #7.

  27. 27
    zman Says:

    CHK – that $650 mm of converts bought back in last few weeks bought back for 25 to 50% discount. These guys are pretty quick to take advantage of developing financial situations.

    Gotcha Dman. Now news makes crude a market tracking boy.

  28. 28
    zman Says:

    Jay – CHK talking about laying over rigs in conventional plays which is not news but I was just thinking that the CWG – conventional well gas and casing head gas (gas from oil wells) components of the U.S. gas supply picture will be coming off pretty good in 2009. I don’t have any recent stats on Conventional vs Nonconventional (resource plays) vs Casinghead gas.

    CHK thinks the “private, checkbook drillers” are going to 0 rigs. They see 600 plus drop in rigs in 2009.

  29. 29
    BirdsofpreyRcool Says:

    z – CHK is a hedge fund, disguised as an E&P. “Quick-Advantage” is their middle name.

  30. 30
    zman Says:

    CHK – expects VPP #4 in December and S. Texas deal to slip into January. That’s probably a net neutral to a small negative. They don’t need to get south Texas done for the balance sheet but it would probably make people happier.

    2009 knockouts mostly replaced.

  31. 31
    BirdsofpreyRcool Says:

    IG 208 1/2… moving wider with stocks.

  32. 32
    BirdsofpreyRcool Says:

    z – thx for the running commentary on CHK. good to hear the knockouts are largely history.

  33. 33
    zman Says:

    CHK

    S. Tx deal slipped into 2009 because they did receive some bids which were no better than VPP $. They then took it to the banks who do VPPs with them and those banks expressed interest, but, not surprisingly, don’t want to commit capital until Jan 1.

    Deal looking to be $650 to $800 mm which is in line with past comments.

    Talking about a Master Secured Hedging Facility. $8 billion deal which would still be a consortium for hedging but would spread the counterparty risk evenly.

  34. 34
    zman Says:

    CHK regarding Aubrey’s Margin call.

    Board has asked if other management members have margin holdings of CHK and the answer is no.

  35. 35
    zman Says:

    Natural Gas Inventory Report:

    62 Bcf Change

  36. 36
    BirdsofpreyRcool Says:

    whoa — ugly nat gas injection #… +62 Bcf

  37. 37
    zman Says:

    That’s very ugly

  38. 38
    BirdsofpreyRcool Says:

    IG 209 +10 from the official close last night.

  39. 39
    zman Says:

    Yep, Bird, just watching it for now. Gas hit $6.05 after the number and bounced. I think the trade may be to go long into the bad number but I’d rather have them confirm. The weather was tropical last week and so we get a big build, plus, last week’s number was small which may mean you have some gas squirreled into one week from the other as the EIA isn’t that accurate. If I do go long, it is just for a trade.

    Regarding a flood of LNG coming to the U.S…. not at these prices pal. Not with storage already full, not unless we get a colder than normal winter.

  40. 40
    zman Says:

    Also, the gas market is largely short right now. This is the last shoe, so to speak, of the season to drop as next week they start getting withdrawals.

  41. 41
    BirdsofpreyRcool Says:

    I read a strategy piece this morning, talking about the affect of hedge fund redemption requests today. I guess a lot of the large HFs have a “max 25%” rule now. Anyway, the strategist opined that since HFs have (on average, he says) 30% cash right now, they would be able to honor the 25% redemptions without further selling. He went on to say that he thought the stock market would (could) rally nicely next week.

    Here’s my question tho… If HFs do get the max 25% for redemtptions, won’t they fear another 25% request at the next open window? Not sure how most funds are structured these days. Some only give liquidity events once a year, others are quarterly or monthly. But, for a rally to occur starting Monday, I think HF mngrs would have to be fairly certain that January would be a good (and liquid) month. Otherwise, I think they might continue to take liquidity (and market rallies) where they can get it. That said, there are also an awful lot of HFs that are net short too. Unwinding those shorts will put upward pressure on the mrkt, of course.

    Lots of moving parts.

    noodling….

  42. 42
    bill Says:

    with 3,4 trillion in storage, its amazing to me how the market reacts to an additional 20 bcf

    with all the gas still being produced i dont expect the inventories to drop as fast as they have in the past

    chk on convertible buys actually a stock swap and the hedge funds sell these shares into the market..so 600 m in debt converted at 30 = 20 m more shares and those 20 m shares are being sold into the market

  43. 43
    rlogan1301 Says:

    could today a possible mirror of yesterday? thoughts?

  44. 44
    rlogan1301 Says:

    sorry..could today be a possible mirror of yesterday? its friday

  45. 45
    zman Says:

    Bill – me either, but nobody expects the draws to be as large given the supply. Estimates of supply growth are exaggerated for next year however. Listen to the last presentation by EOG for a breakdown on that.

    On the convertible conversion. Yes more shares but doing it now at a discount means less overall dilution than doing it later and they get the debt off the balance sheet. Think its better than a wash for a little selling pressure now.

  46. 46
    BirdsofpreyRcool Says:

    IG 210… inching wider.

    RL – I think it could look like yesterday. It’s kind of a coin toss (like z’s comment last friday)… I’m going with green. But, I was a contra-indicator last Friday.

    That said, there is nothing right now particularly positive in the market. The Retail Sale numbers this morning will be tough to bounce back from. But yesterday’s Jobless Claims were no less dismal.

  47. 47
    zman Says:

    Bidding some January UNG. Prices are probably low enough to entice buyers back to the market with a big cold front and withdrawals coming soon.

  48. 48
    bill Says:

    ng started the week at 7.20 ish ..6 seems to be the floor and i hope we dont see 5’s in the winter

  49. 49
    rlogan1301 Says:

    are the dec UNG calls done for?

  50. 50
    zman Says:

    RL – they are in sad shape but they have 5 weeks and we could see a pretty good short rally. Not thinking to get back to even as that is a losing game but I am hopeful for a partial recovery allowing for a more graceful exit between now and expiry.

  51. 51
    rlogan1301 Says:

    agree..is it really tied hard to the price of natural gas or more with the gassy companies?

  52. 52
    zman Says:

    ZTRADE: $10KP EOG for a quick trade.

    Going back into the November $85 calls for $2.15. (5) added for $2.15 with the stock at $80.50, down $4.50 on a weak market day.

  53. 53
    zman Says:

    UNG tied to the price of natural gas.

  54. 54
    BirdsofpreyRcool Says:

    CHK… bond mrkt didn’t like this morning’s presentation. CHK bonds are off about 1 – 1 1/2 points. That is a large (negative) move in bond land. (as CHK is a junk bond issuer, their bonds are quoted like stock prices, not in yields.)

  55. 55
    bill Says:

    free down 16 % as they cut the divy..dry sector still sux’s with no end in sight

  56. 56
    zman Says:

    One of the problems with UNG is they traffic in the front month and then the next month futures which don’t always move the same percentage so when watching gas and UNG moves they don’t always align well.

    One problem with the options on UNG is that there are not a lot plays so higher premiums and a bit wider spreads than I care for that are almost impossible to split. Trades in SWN are a good proxy for gas as well and more reactive to moves in gas prices but the spreads there are wider. In these tough times of limited audience for energy, I find the EOG trade to be a good vehicle as it will move with gas on gas up days but more with crude on even if gas is being punished. Its a solid 82% gas producer but big enough to have enough traffic in the options to offer decent pricing. Although the premiums are always high, they remain so after you buy in too.

  57. 57
    bill Says:

    chk bonds what are the convertibles trading at

  58. 58
    Sambone Says:

    9:58 am EST

    Crude Falls As Equities, OPEC Watched

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK   Crude oil headed lower Friday, dropping more than $1 a barrel in a market hit by concerns about withering demand.

    Light, sweet crude for December delivery was recently down $1.24, or 2.1%, to $57.00 a barrel on the New York Mercantile Exchange. January Brent crude, the new front-month contract on the ICE Futures exchange, fell $1.49 to $54.75 a barrel.

    Without major new developments affecting oil supply, traders said they’ll continue to watch stock markets for guidance on the direction of the world economy. Oil reversed losses late Thursday as U.S. equities took off on a breathtaking rally.

    On Friday, the blue-chip Dow Jones Industrial Average was off more than 100 points as stock markets opened.

    “The equity market is so much more powerful than the crude oil market,” said Peter Donovan, a vice president at Vantage Trading in New York. “If that market rebounds like it did yesterday afternoon, it would probably drag us higher as well.”

    Oil consumption has been pressured as worldwide economies slow. In the U.S. last month, retail sales fell 2.8%, the fourth monthly drop in a row and the steepest since records began in 1992, the Commerce Department reported.

    The euro-zone economy is in recession, with output having contracted in two consecutive quarters for the first time since the currency area was formed in 1999, the European Union statistics agency Eurostat said Friday.

    Demand in major industrialized countries is evaporating. Analysts at Deutsche Bank said in a note Friday they expect world oil demand to shrink by 500,000 barrels a day next year, which would make the first annual decline since 1983. The bank’s chief energy economist, Adam Sieminski, said the “downside” target for oil prices is between $30 and $35 a barrel.

    The Organization of Petroleum Exporting Countries has scheduled a special meeting in Cairo Nov. 29 to discuss falling crude prices, a spokesman said Friday. The cartel last month agreed to cut output by 1.5 million barrels a day, to 27.3 million barrels a day among its 11 members subject to quotas.

    OPEC statisticians are uneasy about a buildup of oil inventories in major oil consuming nations and the group will target further production cuts to reduce that overhang, a source familiar with the group’s policy said Friday.

    Deutsche Bank said oil prices tend to stay lower throughout an economic downturn, but can rally as much as 80% in the six months following OPEC’s final production cut. As OPEC’s cuts are expected to remain through the end of next year, the bank doesn’t see a sustained turnaround in oil prices until 2010.

    “We believe that OPEC will eventually be able to put a floor under the oil price but not until the end of 2009,” the bank’s Sieminski said.

    Front-month December reformulated gasoline blendstock, or RBOB, fell 5.86 cents, or 4.5% to $1.2438 a gallon. December heating oil fell 2.56 cents, or 1.4%, to $1.8494 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  59. 59
    Sambone Says:

    Low Oil-Use Forecasts May Still Be Too High

    By DAVID BIRD
    A DOW JONES NEWSWIRES COLUMN

    NEW YORK — Withering in the heat of the global economic meltdown, oil demand will grow next year by only the amount needed to meet 40 seconds of the world’s daily consumption.

    The bad news for OPEC nations and other oil producers seeing revenues fall away is that even the latest dire forecasts may be optimistic.

    In the last two days, forecasters at the U.S. Energy Information Administration and the Paris-based International Energy Agency have taken an ax to global oil-demand forecasts, tipping prices closer to $50 a barrel, a level last seen for benchmark U.S. crude prices in May 2005.

    Those new lower forecasts, though, only bring their numbers closer in line with the already-bearish forecasts of financial analysts who expect 2009 to show the first decline in global oil-demand growth since 1983. The outlook points potentially to further weakness in oil prices, already down 60% since peaking above $145 a barrel in July. The EIA and IEA crude price forecasts of $63.50 to $80 a barrel could prove too optimistic.

    The wild ride for oil prices could experience a further jolt Monday when OPEC issues its monthly oil market assessment and Nymex crude oil options contracts expire.

    Nymex December-delivery crude hit a low of $54.67 on Thursday and traded in a volatile $4.44-a-barrel price range before settling up $2.08 at $58.24 a barrel. Wednesday’s settlement price of $56.16 a barrel was the lowest since Jan. 29, 2007.

    Battle For Market Share
    If OPEC members find themselves competing with each other for a share of shrinking global oil demand, and show lax adherence to production cuts, price gains could be fleeting and the declines could accelerate.

    Likewise, if Saudi Arabia, the world’s largest oil exporter and de facto OPEC leader, makes steep cuts, the growing level of spare capacity would still temper the scope of a price rally, as the global economy struggles to recover.

    The EIA and IEA numbers resemble a hippy after a buzzcut: There’s far more on the floor then left in place, in terms of oil demand. But some analysts would see the now-shorn hippy shaved bald, and losing a mustache and beard, too.

    On Tuesday, the EIA hacked 990,000 barrels a day from its 2009 global oil demand forecast. At 85.93 million barrels, world oil demand would inch up by 40,000 barrels a day — or about 40 seconds worth of daily global oil consumption.

    The IEA, the energy watchdog for the major industrialized countries, slashed its 2009 demand projection by 670,000 barrels a day, to leave growth of 350,000 barrels a day, at 86.5 million barrels a day.

    The stunted 2009 outlook follows steep cutbacks for 2008, leaving the EIA forecasting demand growth of 80,000 barrels a day and the IEA projecting growth of 120,000 barrels a day.

    Analysts Kevin Book and Patrick Hughes at FBR Capital Markets expect a sharper 500,000-barrels-a-day fall in 2009 global demand to 85.7 million barrels a day. FBR said it is keeping “for now” its price range of $80-$95 a barrel for 2009 but said this is based on OPEC showing production discipline and an economic recovery beginning in the latter half of next year.

    So far, OPEC is seeing lower prices in response to its pledge to cut output by 1.5 million barrels a day from Nov. 1. The group’s reference basket price fell Wednesday to $49.94 a barrel, the first time below $50 since January 2007 and a 13.3% drop from when it announced output cuts on Oct. 24.

    OPEC is scrambling to put a halt to the price slide, with plans forming for discussions on the sidelines of an Arab oil producers meeting in Cairo on Nov. 29 ahead of the group’s next scheduled meeting on Dec. 17 in Algeria. Many analysts expect OPEC to announce a further 1-million-barrels-a-day cut at the Algeria talks. Ecuador, OPEC’s smallest producer, already has said it can’t take the economic strain of making further output cuts.

    Crude Runs Lowest Since 1996
    Meantime, evidence of lower demand for crude in the U.S., the world’s largest oil consumer, is growing.

    U.S. refiners cut crude oil inputs to refineries by 1% in the week ended Nov. 7, to 14.463 million barrels a day. That’s 3.3% below the five-year average for this time of year. The EIA predicted crude oil runs in November will average 14.63 million barrels a day, more than 500,000 barrels a day, or 3.4%, below a year ago and the lowest level for the month since 1996.

    U.S. crude oil inventories rose by a fraction 22,000 barrels a day in the latest week, as refiners cut imports to a six-week low. At 311.95 million barrels, stocks are 2% above a year ago and in the middle of their average range for the past five years.

    But while stock levels held steady in the week, the volatile market punished refiners. Marked to Nymex front-month futures prices, the value of that crude oil inventory fell 10%, or $2.1 billion, from a week earlier.

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

  60. 60
    zman Says:

    Bill, what do you make of panamax rates well over capesize now. Nobody moving big lots of coal? Those rates look to be turning higher which would be good news for DSX as they roll over some contracts mid 2009. Agreed, the business stinks right now but at some point things have got to start shipping again…can’t just beam the stuff over.

  61. 61
    zman Says:

    That headline should read “Crude falls with stock market”

  62. 62
    Sambone Says:

    Mexico Hedges All Oil Exports In 2009 At $70

    By DAVID LUHNOW AND ANN DAVIS
    Of THE WALL STREET JOURNAL

    Mexico said it has hedged all of its oil exports for next year against a price of oil below $70 a barrel, in a sign of how some resource-rich nations are trying to protect themselves against slumping commodity prices amid a global economic slowdown.

    Mexico’s Finance Ministry said Thursday that it bought $1.5 billion of put options that guarantee Mexico will get at least $70 a barrel for some 330 million barrels.

    If the price is above $70, then Mexico can choose not to exercise the option and sell for the market price.

    Mexico has been hedging against the price of oil for years, but normally the country covers only a fraction of total exports. But the steep fall in the price of oil from last year’s highs alarmed Mexican officials. The price corresponds to Mexico’s expectations of oil income for next year’s budget.

    “We started this back in July, doing it very slowly to avoid affecting the market,” said Rodrigo Brand, a Finance Ministry spokesman.

  63. 63
    rlogan1301 Says:

    thanks z

  64. 64
    tomdavis12 Says:

    Z: Have you ever looked to hedge your positions with SDS the short S&P 500 ETF? I assume that since you are so sector specific you might not consider it at all helpful.

  65. 65
    zman Says:

    Wonder who the counter-party is (are) to Mexico’s hedge. That is a lot of oil. Mexico may be disappointed if oil does go to $50 and hangs out there the counter would be on the hook for $20 per barrel less premium or $6.6 billion. Probably a hefty premium but still, a lot of risk. It would probably be cheap for Mexico to just join OPEC.

  66. 66
    zman Says:

    Tom – I have shorted them with DIG puts, DUG calls, XLE puts, OIH puts. With little positive effect. Generally I use cash position as an accelerator or brake on my sentiment.

  67. 67
    BirdsofpreyRcool Says:

    bill – the CHK 2.25%s due 12/38 were offered at 57 this morning. That’s a YTM of 8.88%

  68. 68
    bill Says:

    >Mexico’s Finance Ministry said Thursday that it bought $1.5 billion of put options that guarantee Mexico will get at least $70 a barrel for some 330 million barrels.

    someone has to take the other side and i wonder if this is contributing to the selling pressure

    Pnanamax rates need to get to 30 k or better–so if they doubled from current rates are still not high enough

  69. 69
    bill Says:

    chk news on texas hitting the wires

  70. 70
    zman Says:

    Given how far shipping rates have fallen that $30K could easily happen and the stocks will move up as the rates do.

    CHK – I don’t really care if its a VPP or a deal. A sale would have been nicer but you have to be realistic about the current market. Contrary to how some analysts feel about VPP’s they are not debt and are a proven way to get cash now for your long lived assets that would take 15 or more years to get. Given CHK’s opportunity set I see no reason not to do as many of them as they can.

  71. 71
    BirdsofpreyRcool Says:

    IG 211…. 217 was the wide yesterday. So, anything short of that is just par for the mrkt fugliness today. so far, anyway.

  72. 72
    Jay Reynolds Says:

    Via Rigzone:

    “Oil fields world-wide will experience faster production declines in coming years as the industry moves offshore and into smaller fields, in a further sign that future supplies could be tighter than previously thought, the International Energy Agency said Wednesday.

    (snip)

    The study, part of the IEA’s annual World Energy Outlook, shows that the investment needed to increase overall oil production as well as offset falls at the world’s aging fields may be much higher than initially estimated.

    The world will have to invest $26.3 trillion by 2030, or more than $1 trillion a year, to ensure adequate energy supplies, the IEA said. That is $4 trillion more than its year-earlier estimate.

    http://www.rigzone.com/news/article.asp?a_id=69413

    Not in this enviornment!

  73. 73
    bill Says:

    how does the vpp work

    is it like factoring a/r

  74. 74
    zman Says:

    Jay – yep, hit that in yesterday’s post. Just love that the IEA argues prices are too low and then says the world won’t invest more (but needs to) without higher prices.

  75. 75
    zman Says:

    Natural gas strip holding in very well.

    December to May off 14 to 16 cents is not bad reaction on that number.

  76. 76
    zman Says:

    SUN just keeps rising. CEO buying shares.

  77. 77
    BirdsofpreyRcool Says:

    z – how do banks see VPPs? does it add “debt” as per convenants? I know analysts who view VPPs both ways (as debt / not as debt). It kinda of falls into a gray-ish area… like underfunded pension obligations. Unfortunately, if you’re a below-investment-grade company (like chk), analysts tend to be more conservative in what they throw into the debt bucket. Not sure it makes sense… but when you see CHK bonds down 1 1/2 points on the news, you know at least the debt analysts look at VPPs as (at least partial) debt obligations.

  78. 78
    douglas51 Says:

    Zman…what can be the reason for ATN and APL dropping so much…APL now yields over 32%.

    thanks

  79. 79
    rseidman Says:

    Pardon my ignorance, but what does “VPP” mean?

  80. 80
    BirdsofpreyRcool Says:

    z – as a bond person, i tend to see VPPs as a type of “debt.” Of course, I also net cash out against any debt position… but, the cash can burn away, and you are still left with the obligation to deliver the molecules. Any “asset” that has been encumbered is one less asset that bondholders/banks can get their hands on. So, i do think you have to view VPPs as debt.

    Along a similar vein, I go back and forth (as do other debt analysts) on whether to throw in a/r facilities as “debt” too…. as bill points out. But, a/r facilities don’t pre-fund account receivables that haven’t been generated yet. VPPs do.

    Again, it makes less difference if you’re an investment-grade company. Which CHK is not.

    thoughts?

  81. 81
    zman Says:

    VPP – Volumetric Production Payment

    Basically the E&P company with the asset delivers the production to the buyer for a specified period via a pricing mechanism (either flat or escalated). At the end of the period the E&P gets the asset back and whatever reserves are left. This is a way of locking in your return on a what are generally non-core assets, monetizing them up front so yep, its like factoring.

    Agreed re your comments on debt vs non-debt. Since the company is going to be producing the reserves either way I don’t see it as debt. Its not a big component of their biz, nor is the S. Tx sale so it really should not be impacting the bonds like that.

  82. 82
    bill Says:

    79 vpp

    he VPP is a particularly effective monetization strategy for longer-lived asset base as it allows a Company to keep the oil and gas reserves and production stream beyond the limited term of the overriding royalty. A company is able to lock in commodity prices and accelerate the revenue stream and retain the upside of future development drilling.

    For reporting purposes, production and reserves will be reduced by the oil and gas volumes sold via the VPPs, and the proceeds will be reported as Deferred Revenue on the balance sheet. Over the term of the VPPs, the Deferred Revenue balance will be amortized and reported as noncash oil and gas revenues causing oil and gas revenues per barrel oil equivalent to rise considering that the VPP volumes are not reflected in production. Because a company retains all operating expenses and the depreciation, depletion and amortization costs related to the oil and gas production sold, these costs, when calculated on a per barrel oil equivalent basis, will also increase considering that the VPP volumes are not included in production or proved reserves. Interest expense will decrease by the savings related to the proceeds being applied to outstanding debt.

    The VPP proceeds are not immediately taxable and will be included in taxable income over the five- and seven-year terms of the VPPs.

  83. 83
    zman Says:

    RS – never apologize for asking questions.

    Bird – guess I’m in the non debt camp.

    Douglas – probably fears the distributions won’t hold up with gas teetering near having a $5 handle.

  84. 84
    isleworth Says:

    Z- do you ever trade the UGA ETF – run by same people who run the UNG ETF? Any thoughts on it…..not looking for directional comments. The volume is seemingly very low, especially compared to the UNG ETF.

  85. 85
    BirdsofpreyRcool Says:

    z – agreed. not a large component of their biz. so, mainly a philosophical discussion. But, in times of stress, e&ps do resort to VPPs. I recall having to wait a coupla years before KCS’s obnoxiously-low-priced VPPs ran out. Held the stock back for a long time… but, the VPPs there were a MAJOR component of KCS’s production.

  86. 86
    zman Says:

    Bird – I was about to add more on why I don’t put it in the debt camp but the second paragraph in 82 is pretty much my answer.

  87. 87
    bill Says:

    the accounting treatment is to

    debit cash

    and credit def revenue (which is not debt) but is a liability

    Thru their partnerships they are crediting the carry (provided by the buyers) to the cost pool so they would have a lower depletion cost

    CHK needs to generate CASH CASH CASH and cut costs costs cost

    The debt is still too high in light of current prices and the coming glut in ng and lower demand, imho

  88. 88
    zman Says:

    Isle – No. I toyed with the idea of hedging my family’s personal gasoline consumption with it this past summer though and thankfully did not. Now or soon might be a good time to rethink doing so though. Thanks for the reminder.

  89. 89
    zman Says:

    Don’t knock KCS’s Jim Christmas now, he’s the guy who taught me how VPPs worked. Hmmm, maybe that’s why I don’t count them as debt.

  90. 90
    bill Says:

    I dont look at as debt either

    One way of looking at it is an advance payment for product

    So it isnt a sale either. Its a deposit given in promise of future delivery of product

    Isnt that the same as selling a future contract without the mark to mark obligation

  91. 91
    zman Says:

    RE 87. Bill, they have good EBITDA/Interest coverage and their operating costs are low for the industry. Their debt is not due until 2012 at earliest so I don’t see a problem, especially with the large hedge position which defuses the low gas price problem.

  92. 92
    BirdsofpreyRcool Says:

    z – i understand the argument as to why (from an accounting standpoint) VPPs are not counted as debt. Just sharing the argument and mixed conclusions about VPPs in the bondholder community. Since bondholders look to cash flow (and don’t always net cash against debt), I’m just saying that a conservative credit analyst will tend to throw VPPs into the debt basket for a below-investment-grade company, as it reduces cash flow.

    enjoyed the back-and-forth discussion, tho. thx.

  93. 93
    zman Says:

    BOP – of course, you know what happened eventually happened to KCS. They got bought by a company called Petrohawk.

  94. 94
    bill Says:

    z true… i just dont like ng prices or oil at the moment

  95. 95
    zman Says:

    me too, thanks. stepping out for 20 min.

  96. 96
    BirdsofpreyRcool Says:

    HEY!!! i DON’T knock KCS’s VPPs… saved them from BK during the dark times. Jim did a great job. I just couldn’t wait until they rolled off (as nat gas prices had moved higher than the VPP pricing).

  97. 97
    zman Says:

    Bird – you might post that city stuff, gives good insight I think on the day’s trading.

  98. 98
    zman Says:

    Bird – yeh, in that sense, they are like a long term underwater hedge that everyone hates.

  99. 99
    BirdsofpreyRcool Says:

    z – yeah. HK acquired KCS ib 7/13/06…. AFTER the VPPs had rolled off. 😉

  100. 100
    bill Says:

    Vpp it was a good discusion and helped me get focused on what they are

    The vpp payment would obviously be higher with higher ng prices as its a npv calculation

    Also, with the focus on debt now and cash its a way to get cash up.

    They will miss their q 4 year end objective as it had the sale of texas in it

  101. 101
    1520sbroad Says:

    #78 – APL and whole Atlas related group under pressure. Citi analyst reiterated his sell rating an provided more detail on why he thinks APL in particular will have trouble maintaining proper ratios of Debt to EBITDA and EBITDA to interest coverage. Basically as crude and nat gas fall APL can’t generate enough cash. APL discussed this on their cc last week – they are looking to sell some pieces of their portfolio to generate some cash to keep ratios in line. Likely they will have to cut payout as well down the line. Should be interesting end of year for APL – i wouldn’t be surprised to see APL, AHD and ATLS get rolled up into entity before January.

  102. 102
    1520sbroad Says:

    #101 –
    last line – should read rolled up into one entity before january.

  103. 103
    BirdsofpreyRcool Says:

    This is not helping the market today… first Calif, then Detroit, now Philadelphia, Atlanta, and Phoenix… (oh, and the D-3). None of these cities/states had any problems ratching up spending during the housing boom. Now they want the working class (taxpayers) to foot the bill for their excesses. This has got to end. NOW.

    Mayors of Philadelphia, Phoenix seek bailout share

    [aside: Maybe the word “table” should be “TROUGH”]

    WASHINGTON (AP) – Three big city mayors asked the federal government Friday to use a portion of the $700 billion financial bailout to assist struggling cities.

    The mayors sought help with their pension costs, infrastructure investment and cash-flow problems stemming from the global financial crisis.

    The mayors—Michael Nutter of Philadelphia, Shirley Franklin of Atlanta and Phil Gordon of Phoenix—made their request in a letter to Treasury Secretary Henry Paulson.

    Nutter said cities are facing an economic crisis not seen since the Depression and need help just like financial institutions.

    “I want to make sure that cities and metro areas are at the table, that their voices are being heard, that our challenges and problems are well understood, so that we can get relief,” Nutter said.

    President-elect Barack Obama has also called for some sort of aid to state and local governments so they don’t have to raise taxes or lay off workers while the federal government is trying to revive the economy, but he hasn’t proposed or endorsed a specific aid plan.

    The three mayors proposed providing loans to help cities pay pension costs. They also want $50 billion in loans for investment in infrastructure, and additional one-year loans to cities unable to borrow cash because of the tight credit markets.

    Nutter said he met with Phillip Swagel, Treasury’s assistant secretary for economic policy. He said Swagel “completely understood that we have major problems, in big and small and medium-size cities all across America and they want to be helpful. It’s just a matter of figuring out what’s the best way to do it and what works best.”

    The Philadelphia pension system lost more than $650 million in the first nine months of the year. Last week, Nutter announced Philadelphia would be laying off city employees, cutting salaries, closing most of its swimming pools and shutting nearly a dozen library branches to cope with a $108 million shortfall this year caused by lower business and real estate tax revenue. The deficit could grow to a total of $1 billion over five years.

    Phoenix’s budget deficit is at least $200 million and could reach $250 million by June if tax revenues keep sliding. The figure represents up to 22 percent of the city’s $1.2 billion general fund, which pays for most city services.

    Franklin said this week that city employees in Atlanta will have their hours and pay cut by 10 percent each week. The cuts are being made to help the city weather an expected budget shortfall of $50 million to $60 million.

  104. 104
    bill Says:

    one final thing on vpps

    The banks said come back next year

    These business cycles are wonderful for well capitalized and debt free companies

  105. 105
    cargocult Says:

    The pension funds are a looming crisis that hasn’t been addressed at all. For years it was easier for local politicians to give public employees fat pensions and worry about the consequences later. I guess this is later. Maybe Mugabe can give us some ideas as to how to handle the cash shortfalls.

  106. 106
    BirdsofpreyRcool Says:

    cargo – i’ve seen that up close… it ain’t pretty at all. they all knew that someday the piper would have to be paid… but knew it wouldn’t be on THEIR watch.

    So, tell me again exactly HOW politicians are different from “greed bankers”??

  107. 107
    BirdsofpreyRcool Says:

    make that “greedy bankers”

  108. 108
    zman Says:

    I’ll be at the Haynesville Expo and will be happy to talk about all things energy aside from VPPs next Friday.

  109. 109
    zman Says:

    CHK “news” not affecting the common.

    SUN now the only bit of green on my screen today.

    NG down 8 cents now, my UNG call bid did not get hit.

  110. 110
    Sambone Says:

    CARACAS (Dow Jones)–Venezuela’s basket of crude oil and products fell to
    $46.35 a barrel, the lowest level this year, putting additional fiscal pressure
    on the government of President Hugo Chavez.
    The average price for Venezuela’s basket of crude oil and refined products
    fell $6.61 to $46.35 a barrel in the week ended Friday, down from $52.96 the
    previous week, the Oil Ministry said.
    The new price level, the lowest recorded in 2008, means more headaches for the
    Chavez government, which is grappling with next year’s budget plans. The
    government has proposed a $78 billion budget for 2009, assuming an average oil
    price of $60 a barrel.
    The average price for the year running now stands at $95.07 per barrel, still
    higher than last year’s average of $64.74 a barrel, figures show.
    Most analysts estimate that, assuming state spending remains unchanged,
    Venezuela’s government will begin to run deficits in the future if the oil
    price remains below $85 a barrel.
    The government has warned Venezuelans that a series of oil ventures may be
    placed on hold and other projects may also suffer in the coming year in the
    face of less state spending.

    -By Raul Gallegos, Dow Jones Newswires

  111. 111
    zman Says:

    LOL Hugo, bet he wants XOM’s investment dollars now.

  112. 112
    zman Says:

    NG trying to go green.

  113. 113
    BirdsofpreyRcool Says:

    hmmm…. if oil prices continue to decline, you think ExxonMobil can get in line with the automakers?

  114. 114
    zman Says:

    Nah, the U.S. doesn’t hand out money to evil people, only investment bankers. woops.

  115. 115
    BirdsofpreyRcool Says:

    guess that eliminates Big Pharma too.

    I thought the Detroit 3 were also evil because they sold SUVs and wouldn’t voluntarily raise mileage requirements. NO ONE in Calif drives a US car… Hollywood hates ’em… so, why the bailout again?

  116. 116
    md Says:

    I will bring up ( regurge) comments that I have made in the past.
    No mention in your summary of weekly distillate product supply which shows chg. %- 4.6% on preliminary 08 vs. adjusted 09. When final monthly numbers come in it will likely show a steeper decline as in earlier monthly adjustments.
    Compare Latest EIA monthly product supply 8/ 08 8/07 chg.%
    3657 4146 -13.4%

    to weekly 4 wk avg. ending August.

    Distillate FuelOil
    8/29/08 8/29/07 chg.%
    4,257 4,146 2.7
    and the variance is very apparent.

    This weeks report based on preliminary figures indicates that price reduction is not going to entice FEDEX to the pump. Same for Delta Air although these numbers are even less reliable.

  117. 117
    zman Says:

    Ok, maybe its a function of unionized evil vs non-unionized evil. I don’t know about the Majors but I know either none or a very small percent of CHK’s workers are union types.

  118. 118
    zman Says:

    md – This time of year FEDEX will go to the pump based on demand for deliveries. Didn’t see much to talk about in the distillate numbers this past week.

    XOM trying to go green now.

    refinies moving into green a bit tracking SUN’s rally.

    Natural gas briefly green.

  119. 119
    ram Says:

    Up and down CA I see the UPS guys running CNG on their local delivery trucks. I know this because they proudly diplay graphics saying how green they are on the side of their vehicles. I wonder if this is the case in other states as well.

  120. 120
    zman Says:

    Ram – I noted the CNG station at the airport in California. Its a lot less prevalent elsewhere. The numbers on gas demand for CNG or just transportation using natural gas as the government lists it are inconsequential…but growing. Running about 2.5 Bcf per month now. The U.S. has the gas and that should change but its going to take time.

  121. 121
    zman Says:

    Here’s to a green close today.

  122. 122
    Sambone Says:

    By Isabel Ordonez
    Of DOW JONES NEWSWIRES

    HOUSTON (Dow Jones)–While the recent plunge in oil prices is reminiscent of
    what happened in the 1980s, energy companies are shunning the idea of massive
    layoffs this time around.
    Crude oil futures fell 64% between November 1985 and April 1986, resulting in
    an exodus of rig workers, petroleum engineers and infrastructure experts. These
    layoffs ended up costing crude oil and natural gas companies later, as the
    shallow labor pool pushed up salaries when commodities prices took off earlier
    this decade.
    Oil and gas executives say they won’t repeat this mistake and intend to
    continue paying employees enviably high salaries and expand their hiring in the
    U.S. and around the world. This is happening even as many other industries are
    shedding workers in anticipation of a global recession.
    “Chevron is still actively recruiting new employees and expects to hire 6,000
    new employees this year,” said Kurt Glaubitz, a spokesman for the
    second-largest integrated U.S. energy company by market value. “There are no
    plans to lay off employees.”
    Chevron Corp. (CVX) this week said it hasn’t put a hiring freeze in place and
    isn’t planning on doing so.
    This trend underscores the energy industry’s long-term optimism on oil prices.
    It’s also a sign of maturity. Oil and gas executives are often lifetime
    employees and seldom come from other industries. They themselves survived the
    layoffs to experience the labor crunch that came later, and realized that
    reducing costs by firing people in time of crisis can be a bad decision in the
    long run.
    To be sure, companies more exposed to the natural gas market may be taking a
    more cautious approach, as gas prices have been depressed for longer and tend
    to be more volatile than oil prices over time. But oil and gas are often
    produced in tandem, so firms looking to take advantage of oil reserves also
    hire to handle the gas side.
    U.S. benchmark oil futures were about 2% lower on Friday at $57 a barrel.
    Futures have plummeted 61% from their all-time record highs set in July.

    Companies Still Catching Up

    Years after letting go of hundreds of thousands of workers, oil companies
    across all energy sectors are still short-handed and forced to pay skyrocketing
    salaries to hang on to the talent they have. To make things worse, a large
    number of baby boomer energy workers are set to retire soon, and there isn’t a
    big enough pipeline of experienced people behind them.
    Despite concerns about the economy, Houston ConocoPhillips (COP) continues
    with its plans to grow and recruit aggressively.
    “We need our employees,” said Bill Tanner, ConocoPhillps’ spokesman.
    The decision to retain and hire talent in the face of declining oil prices
    isn’t just a luxury of major oil companies that have a strong financial
    position and billions in cash.
    Even smaller independent oil and natural producers, some of which have
    flourished in recent years by exploiting hard-to-get oil and gas reserves, said
    they aren’t planning to cut into their workforce.
    “We have to believe that oil prices are going to be $50 a barrel or less and
    stay there for years before we consider anything like layoffs,” said Mark Papa,
    chief executive of EOG Resources, one of the largest independent oil and gas
    producers in the U.S. “We just don’t believe those kind of lower oil prices are
    sustainable in the long-term.”
    EnCana Corp. (ECA), Canada’s biggest oil and gas company, has already told its
    employees that there won’t be any layoffs, said Jeff Wojahn, head of EnCana’s
    U.S. arm this week. However the firm has temporarily stopped hiring people.
    “We have a temporary hiring freeze but we don’t anticipate any layoffs,”
    Wojahn said.

    Shares Fall, Headcount Swells

    The dramatic turnaround in commodity markets has pushed several energy firms
    to cut capital spending for next year. This has sparked concerns about staffing
    in companies that are struggling financially. But even those companies say
    layoffs aren’t in their plans.
    “We are not laying off anybody,” said Chesapeake Energy Corp.’s (CHK)
    spokesman Jim Gipson. “We are hiring people.”
    Chesapeake, the largest natural gas producer in the U.S., has seen its share
    price collapse amid a sharp decline in natural gas prices and a tightening of
    the credit markets.
    Transocean Inc. (RIG), which owns the world’s largest fleet of offshore
    drilling rigs, said it has such a large backlog of work that getting rid of
    people would be like “shooting ourselves in the foot,” said Guy Cantwell,
    Transocean’s spokesman.
    “We are going to be hiring a lot of people not just for offshore drilling, but
    for other positions as well,” he added.
    This optimism is still present even at the student level, said Tadeusz Patzek,
    chairman of the Petroleum and Geosystems Engineering Department at the
    University of Texas at Austin. After the energy industry cut its work force in
    the 1980s, few students were attracted to the sector. But as oil rebounded and
    salaries soared, more students are choosing petroleum careers.
    Patzek said it is too early to tell if lower prices are affecting the
    students’ interest, but “currently we are seeing a strong increase in petroleum
    engineering,” Patzek said. “I’m not seriously concerned they are not going to
    get a job. The need for people in the energy industry is humongous.”
    The reason why oil companies aren’t in a firing mood is because the current
    commodity price environment is better compared to what the energy industry has
    gone through, said Eric Nielsen, managing director of recruiting firm
    Korn/Ferry’s (KFY) Houston office.
    “I’m sure everybody is saying things like, ‘Let’s be more conscious about
    where we travel, why we travel,’ and things like that,” Nielsen said. “But I
    don’t think anybody is panicking right now.”
    Things could change if the industry faces years of depressed global oil
    demand.
    “Then you have a very serious situation in the sector, but we are a very long
    way away from that,” Nielsen said.
    -By Isabel Ordonez, Dow Jones Newswires

    Dow Jones Newswires
    11-14-08 1353ET

  123. 123
    Sambone Says:

    Uncle Phil

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

  124. 124
    BirdsofpreyRcool Says:

    IG 204… this mrkt has a shot at closing in the green today.

  125. 125
    zman Says:

    Oh, now you’re drinking the same coolaid as me. That’s dangerous. But it is Friday and the G20 will do something.

    Wonder if Citi is still around on Monday or merged into someone else.

    XOM has been a pretty good leading indicator of the group lately, now up 1%

  126. 126
    zman Says:

    NG up 5 cents now. Short covering.

  127. 127
    VTZ Says:

    Precious metals put on a good show today as well.

  128. 128
    BirdsofpreyRcool Says:

    z – see #24… i placed my bet early. never changed it.

  129. 129
    BirdsofpreyRcool Says:

    (z – it was your pre-mrkt comments that had me convinced! )

  130. 130
    zman Says:

    As per 129, my coolaid.

    Its obviously a coin toss for the close and the open on Monday will very likely be big down of big up. So for the quick trade profits, I’ll try to lock in some November losses and profits this afternoon.

    Will be at a parent teacher conference from 2 CST but should be back just prior to close.

  131. 131
    zman Says:

    Crude back to trading purely with the DJIA

  132. 132
    antrimshale74 Says:

    Did somebody post something today about BRY? It has really been weak lately.

  133. 133
    zman Says:

    Antrim – only that it caught another downgrade. Those guys are pretty beat up and I think overly so. But I’m not willing to go into the name now.

  134. 134
    md Says:

    India is looking for more LNG

    http://www.ptinews.com/pti%5Cptisite.nsf/0/82A9CC97CCCD494E652574FD002E9856?OpenDocument

    http://www.business-standard.com/india/storypage.php?autono=339549

  135. 135
    antrimshale74 Says:

    I hear you, zman. Too many other safer choices. Are you planning to hold your EOG calls through the weekend?

  136. 136
    zman Says:

    I think so. Gotta run, be back 15 before close.

  137. 137
    VTZ Says:

    I think I’m punting a bit if we rally into close… what’s everyone thinking?

  138. 138
    Sambone Says:

    Punt

  139. 139
    zman Says:

    Nice moves into the close, gotta be tempted to punt stuff that can get really damaged including anything November.

  140. 140
    ram Says:

    What nice moves?

  141. 141
    zman Says:

    Wow, talk about sell programs hitting with 30 minutes to the close, that was very fast. Fair warning I tried and missed selling the EOG calls from earlier today. That was just a quick trade and I still plan to reposition there but in a longer dated set of calls. Will try again if we run back up into close.

  142. 142
    zman Says:

    Ram – if you blinked you missed it. The Majors are moving up and the gas names are well off their lows still, which after yesterday’s moves is impressive.

  143. 143
    Sambone Says:

    Crude Ends Lower As Equities, OPEC Watched

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK   Crude oil headed lower Friday, dropping more than $1 a barrel in a market hit by concerns about withering demand.

    Light, sweet crude for December delivery was recently down $1.24, or 2.1%, to $57.00 a barrel on the New York Mercantile Exchange. January Brent crude, the new front-month contract on the ICE Futures exchange, fell $1.49 to $54.75 a barrel.

    Without major new developments affecting oil supply, traders said they’ll continue to watch stock markets for guidance on the direction of the world economy. Oil reversed losses late Thursday as U.S. equities took off on a breathtaking rally.

    On Friday, the blue-chip Dow Jones Industrial Average was off more than 100 points as stock markets opened.

    “The equity market is so much more powerful than the crude oil market,” said Peter Donovan, a vice president at Vantage Trading in New York. “If that market rebounds like it did yesterday afternoon, it would probably drag us higher as well.”

    Oil consumption has been pressured as worldwide economies slow. In the U.S. last month, retail sales fell 2.8%, the fourth monthly drop in a row and the steepest since records began in 1992, the Commerce Department reported.

    The euro-zone economy is in recession, with output having contracted in two consecutive quarters for the first time since the currency area was formed in 1999, the European Union statistics agency Eurostat said Friday.

    Demand in major industrialized countries is evaporating. Analysts at Deutsche Bank said in a note Friday they expect world oil demand to shrink by 500,000 barrels a day next year, which would make the first annual decline since 1983. The bank’s chief energy economist, Adam Sieminski, said the “downside” target for oil prices is between $30 and $35 a barrel.

    The Organization of Petroleum Exporting Countries has scheduled a special meeting in Cairo Nov. 29 to discuss falling crude prices, a spokesman said Friday. The cartel last month agreed to cut output by 1.5 million barrels a day, to 27.3 million barrels a day among its 11 members subject to quotas.

    OPEC statisticians are uneasy about a buildup of oil inventories in major oil consuming nations and the group will target further production cuts to reduce that overhang, a source familiar with the group’s policy said Friday.

    Deutsche Bank said oil prices tend to stay lower throughout an economic downturn, but can rally as much as 80% in the six months following OPEC’s final production cut. As OPEC’s cuts are expected to remain through the end of next year, the bank doesn’t see a sustained turnaround in oil prices until 2010.

    “We believe that OPEC will eventually be able to put a floor under the oil price but not until the end of 2009,” the bank’s Sieminski said.

    Front-month December reformulated gasoline blendstock, or RBOB, fell 5.86 cents, or 4.5% to $1.2438 a gallon. December heating oil fell 2.56 cents, or 1.4%, to $1.8494 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  144. 144
    ram Says:

    Yes indeed. Maybe we finally have a floor in most of the E&P’s

  145. 145
    zman Says:

    If you take a look at:

    CHK
    APC
    EOG
    DVN
    APA
    XTO

    which are the leadership in the E&P realm you could easily draw that conclusion from the daily charts.

    I’ll put up the latest valuation charts for the sector over the weekend as 2009 CFPS estimates have collapsed back as analysts model in $6 and $60 for next year.

  146. 146
    VTZ Says:

    I was too slow and got caught up so nothing got the boot which is regretable 🙁

  147. 147
    ram Says:

    What a punishing close!

  148. 148
    Sambone Says:

    451 point swing today on the Dow.

  149. 149
    Sambone Says:

    Tini time! Everybody have a good weekend!

  150. 150
    antrimshale74 Says:

    Nothing like a 200 point drop in the last six minutes. Massive selling pressure at the close, giving us the pleasure of closing at the day’s lows. Wonderful.

  151. 151
    zman Says:

    Yep, looks like everyone decided to punt into the close.

  152. 152
    antrimshale74 Says:

    Volume at the close was monstrous. Sure looks like liquidation to me.

  153. 153
    zman Says:

    Though the energy group paced the move, volumes were not monstrous.

  154. 154
    antrimshale74 Says:

    Was looking at the SPY. Volume at close monstrous relative to rest of day’s very light volume. Heavy heavy selling pressure.

  155. 155
    zman Says:

    I see what you mean Antrim. Looks like some hedgies waited until the last possible moment before dumping and then nervous hands piled on.

  156. 156
    Wyoming Says:

    Here is about my exciting evening. Wanted to check out a couple of things before I made a comment. Shallow horizontals. Not a problem Unocal did some in Cali. You basically utilize a slant rig. The issue is building a curve in a horizontal. Here is a link to a website

    http://www.kmtechnology.com/, open the ERD industry data, has a zip file. Remember it is in meters, don’t blow out a brain cell.

    You can probably get out 4,000 feet in the Chatnga Shale. You will probably have to use rotary steerable tools and won’t be able to slide.

  157. 157
    zman Says:

    Far be it from me to argue with guys who do it for a live. Hooray horizontals in the Chatanooga. What are these other plays griping about regarding shallow and long laterals then I wonder.

  158. 158
    Wyoming Says:

    Only limits are in the pocketbook and minds.

  159. 159
    Wyoming Says:

    Speaking of pocketbooks, about one week from now me and my free beer will be traveling back to DFW. Don’t forget.

  160. 160
    zman Says:

    Comments came from SWN with regard to the southern Fayetteville and there was another but it escapes me after a large enchilada dinner and one or two cervezas.

  161. 161
    zman Says:

    Oh I’m there. I’ll be the guy wearing the Oil Speculator t-shirt under his jacket.

  162. 162
    Wyoming Says:

    Jacket, are you actually thinking it will be cold? It is going to be tropical, NG futures say so.

  163. 163
    zman Says:

    Apologies for the confusion, sport coat. Don’t do ties any more though.

  164. 164
    Wyoming Says:

    Have you actually hung out with oil types? Red Wings and Carharts.

  165. 165
    zman Says:

    Yep but mostly the office types.

  166. 166
    Wyoming Says:

    Well, they do have a small purpose when they are not getting in the way of progress …

  167. 167
    zman Says:

    Yes, I do hang out with a better class of folks now at my home on the web.

    By the way, here’s a photo so you won’t walk right past me. I’m the one in the foreground.

    http://www.upstreamonline.com/multimedia/archive/00021/nig1_21441f.jpg

  168. 168
    Wyoming Says:

    I think you might have been one of my trainee’s when I was an instructor in England. Your name would not be Marine Okubama? Real name BTW.

  169. 169
    zman Says:

    Nope but that’s a good strong name for a kid. I was going to name my new one Aubrey but the margin sale tarnished it for me, lol.

  170. 170
    Wyoming Says:

    Sorry, have no back up site and Verizon Fios actually wanted me to connect an ethernet cable to my router, it went down while we were going back and forth. Don’t ask me how, but I found one. I think I found the last dinosaur, there is a little more source rock that can be created.

  171. 171
    zman Says:

    No problem, just catching up on paper work and about to sign out for the night.

    Weekly wrap in the morning with actual comments this time.

    Rig count saw some good hits.

    NG rigs down 41
    Oil rigs down 13
    and horizontals off 20

    Also interesting, a big chunk of the CFTC short position for oil got covered and speculators are now net long again. Hmmm.

  172. 172
    Wyoming Says:

    One thing to consider. Been thinking about CHK/STO. Majors are getting with domestic indies, chk/STO, TLM/Hallwood. There is a guy who quit us. Swabbed me down about shale drilling and completions, production etc. Basically he is looking at some shales in Europe. TLM is using some of the local knowledge in Hallwood to start developing their engineers and fields. It is one of the reasons for partnering, except Shell (Ha). Working on another, don’t leave yet.

  173. 173
    Wyoming Says:

    Every vendor telling me about a lot of rigs coming off, Friday is a decent bunch for information. Very few appear to be drilling thru the curve. ECA will be announcing their budget 1st week of December. Just be patient about the rig count, it will drop BIG in Q1.

    PTEN was one mentioned to be getting hit hard, we don’t use them much.

    BHI, I bet is a solid performer. I know Chad somewhat. I think he may have called the top early but they have not been chasing this expansion. I always wondered why they sold SLB all the Western Geco seismic. They have not expanded huge with production capacity nor hire a bunch like their competitors …. hmmm. How do they compare fundamentally?

  174. 174
    zman Says:

    BHI is a lot cheaper on fwd earnings although that’s not really new. SLB still showing higher 2009 and higher 2010 earnings due to offshore/international.

    BHI more flattish looking EPS go forward with a slight dip in 2009 now. Analysts are having a tough time weighing less activity vs bigger pump jumps as rigs transition even more from conventional to resource plays.

    CHK CFO did a good job on the rig count drop story today at B of A. Told a story of real woe for the drill by check crowd. Lot of his friends were using 2 to 3 rigs up to last month, now going to 0.

  175. 175
    Wyoming Says:

    Rig drop, way more common than not. Denbury shut the door on their activity too, as I understand.

    SLB, good source of funds to rotate. I think that cash will be king, sure SLB has a lot but they run even if they think they may get hit in the nose. Will slash and burn their operations to save the top. I have learned not to fight the street…

    From my perspective, at these commodity levels, well costs need to drop bu ~ 60% before anyone should raise a derrick. Critical lease expiries excluded. Cash is king, if everyone is capable of decent growth while reducing capex, what the hell were we doing (HK, CHK, us…)Screw Wall St. and Congressional oversight committees.

  176. 176
    zman Says:

    roger that

  177. 177
    Wyoming Says:

    Later, flag me if I can be any help like above. Workovers suck but it sure beats the alternative as in #122, been thru a couple of those.

    BTW, head hunters are still calling, not as frequent, but still calling.

    Thanks, talk to you later.

  178. 178
    ram Says:

    What are headhunters looking for?

  179. 179
    Wyoming Says:

    People, engineers in particular; Reservoir, drilling, completion, production.

    Good Primer/Update on NGLs
    http://www.capmarkets.com/ViewFile.asp?ID1=107708&ID2=273040261&ssid=1&directory=12080&bm=0&filename=TPH_Midstream_Update___Primer_11-14-08.pdf

  180. 180
    zman Says:

    Thanks for 179.

    Wrap is posted.

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