24
Nov

Monday Morning – 2 Up Days In A Row?

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Thank you sir, may I have another?! Friday's post entitled Dead Cat Bounce Friday was about as apt as I get. Today Citi gets a bailout and the markets are set to run again. This is going to be a low volume, vacation fraught week so my first, second, and third temptations are not to put much faith in the rally but that the week will likely end higher than where it started even as a raft of negative economic data are released.

Obama Watch: This is from the weekend radio address: Creating jobs via infrastructure programs including bridges and roads but also "building wind farms and solar panels; fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead." The (TAN) solar ETF peaked at $13.55  on November 4 and as of last Friday was trading at $5.95.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today
  4. Odds & Ends

Holdings Watch:

  • $10KP is now at $7,000. The Wiki tab is updated.

Commodity Watch:

Crude oil fell just over 13% last week with the January contract ending at $49.93, a level not seen since April of 2005. The move down was again dictated by the slide in the broad markets.   This morning crude is trading up $1+ with the rally in the equity markets as Europe and U.S. futures react to the Citi deal.

  • Exploding Pipeline Watch: The main export pipeline connecting Northern Iraq with Turkey, the Kirkuk-Ceyhan 400,000 bopd line, was blown up by Kurdish rebels on Friday. Repairs are expected to take less than a week and loadings from Ceyhan are likely to unaffected due to storage on hand. The PKK claimed responsibility so this may be a sign that tensions there are re-igniting.
  • OPEC Watch: Emergency meeting set for Saturday, November 29th. Leadership has been trying to lower expectations saying that further curtailment may not occur until the December 28th meeting. ZComment: Underpromise and over-deliver. Most observers are not confident that member countries are complying with the last cut.
  • MEND Watch: MEND promises it will bring chaos to the western delta (because it's been so orderly of late) unless hardliner General Rimtip is removed. "(Rimtip) has woken the peaceful sleeping dogs of the Niger Delta,".

Natural gas rose 2.7% last week to close at $6.48 despite another larger than expected injection. The rally was likely due to the colder forecast and the expectation that this week will see the first withdrawal of the season. This morning gas is trading up with crude and weather data showing last week was exceptionally cold (see below) but we are likely to be range bound until the rig count slide really gets rolling.

  • HDDs jumped to 176 last week. That's much colder than forecast (153), much colder than normal (146) and much colder than the comparable week last year (126). If we don't see a withdrawal this week gas is simply sunk. Looking ahead to this week, the Climate Prediction Center is  look for a slight warming with gas-weighted HDD's coming in at 160, a number which is in line with normal and year ago levels.

Stuff We Care About Today

This short week is usually a slow week news in general and especially from the energy patch. We get both the oil and gas numbers on Wednesday at 10:35 and 12 pm EST respectively.

(CLNE) - I spent a little time with the CLNE representative at the Haynesville Shale Expo. He countered my safety and economic concerns pretty confidently and reiterated the company's bias for supporting fleet operations for CNG and LNG at this time. I came away thinking...2010. Truck fleets rapidly replace their trailers and the real play may be in Cummins Engine but I will continue to monitor.

Odds & Ends

Analyst Watch: (FTO) upped to Buy at Argus, $18. (STP) cut to Hold at Jefco, price cut from $25 to $6,

 

117 Responses to “Monday Morning – 2 Up Days In A Row?”

  1. 1
    Sambone Says:

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)- Crude oil futures swung higher to back above $50 a barrel
    in European trade Monday, tracking gains across regional equity markets and
    amid anticipation surrounding the coming weekend’s meeting of the Organization
    of Petroleum Exporting Countries.
    The weekend U.S. government rescue of bank Citigroup injected some optimism
    into equity markets, and swelled expectations of further climbs on U.S. equity
    bourses, the likes of which gave crude a boost late Friday.
    While the drop in crude prices to below $50 a barrel and weekend calls for
    production cuts from some members of the group have helped shape expectations
    of another OPEC production cut, the meeting’s outcome remains shrouded in
    doubt. That uncertainty contributed to a wide trading range of more than $3 in
    European trade Monday.
    “The direction of the oil market is split between those who have doubts that
    OPEC will deliver this weekend versus those that feel that equity markets are
    showing relief that Citigroup has been saved for now,” said Rob Laughlin, an
    analyst at MF Global in London.
    At 1227 GMT, the front-month January Brent contract on London’s ICE futures
    exchange was up $1.68 at $50.87 a barrel. The front-month January light,
    sweet, crude contract on the New York Mercantile Exchange was trading $1.84
    higher at $51.77 a barrel.
    The ICE’s gasoil contract for December delivery was up $17.75 at $538.50 a
    metric ton, while Nymex gasoline for December delivery was up 193 points at
    108.36 cents a gallon.
    While equity markets, are expected to remain a strong influence on crude
    prices in the short-term, anticipation surrounding OPEC’s Nov. 29 meeting in
    Cairo is due to occupy the market’s fundamental focus. Market skepticism has
    surrounded members’ willingness to forego income to comply with previous cuts,
    although those doubts have tempered slightly following data from tanker tracker
    Petrologistics Friday which appeared to show stronger signs of adherence.
    “The drop in front month prices below $50 a barrel has again elevated market
    expectations for a cut,” said Greg Priddy, global oil analyst at Eurasia Group.
    “So far, it appears that the Saudis would prefer to wait until the 17 December
    meeting before announcing cuts. However, a high level of compliance with the
    October cuts and the continued price collapse likely increases Saudi
    willingness to take on further cuts, whether in November or December.”
    Despite the moves higher Monday – which saw crude clear the psychologically
    important $50 a barrel level – market participants remain wary of the longevity
    of any rebounds, with demand side pessimism linked to increasingly weak
    economic data readings still the main sentiment driver.
    Latest data flow came from a German Ifo Institute survey Monday, revealing
    business confidence waned sharply in November, dropping to its lowest level in
    almost 16 years, as firms reported depressed prospects across the board.
    “Up to this point, the external market context, demand-focused sentiment, data
    flow and pure momentum have all meant that the direction of prompt oil prices
    has been by and large a one-way street heading downwards,” said analysts led by
    Paul Horsnell at Barclays Capital. “Anything that might have looked like a
    fragile green shoot of potential price recovery has immediately been
    steamrollered and covered by a thick layer of smoking asphalt by the road gang
    of negative sentiment.”
    -By Nick Heath; Dow Jones Newswires
    Dow Jones Newswires
    11-24-08 0745ET

  2. 2
    zman Says:

    fyi, I woke up to XOM common in my regular account this morning due to the run up on Friday and my out of townness. I’ll be punting those at the open.

  3. 3
    BirdsofpreyRcool Says:

    Good morning. Could use a quiet week.

    IG 263 -7bps from Friday’s small rally.

    Stock market behaved better than the bond market on Friday, as IG at 263 is still the sort of thing that nightmares are made of. As said on Thurs/Friday, at these levels the Investment Grade CDS Index doesn’t really mean anything. The spreads are so wide, there is no tie to reality. IG CDS at +280 (as it was last week) corresponds to a S&P level of 650 or so. Clearly, there are some very very bearish bets being placed in CDS land.

    So what does this mean today? Watching the direction of the IG index is about all we can do. If it goes higher (wider), then the bears continue to press their negative positions. If they let up a bit, perhaps bulls step in, or (more likely) we will see some of the bearish bets covered. Certainly “saving” Citi is going to help the mood on the trading desks today.

    A MUST-READ article on the front page of the WSJ today: “Anatomy of the Morgan Stanley Panic.” If any one is unclear exactly why we follow the IG CDS index, this should help explain it… in gorey detail. It’s not that CDS can be “manipulated,” per se… but, the fact that they have enormous leverage (vs the underlying cash position) and that only the largest instutional players participate in that market and — finally — that all trades are done via phone calls or emails (and not on an exchage), means that the CDS market can be used to paint a picture and cause panic in the target’s stock price. Any student of the market should take the time to read this article. There are no conclusions drawn, no real accusations that can be proved, but this is the Play Book the bears used to bring down the House of Lehman.

  4. 4
    zman Says:

    Thanks Bird, will looking into it.

  5. 5
    mahout Says:

    BOP,

    Delighted you have such a positive assessment of HK. Actually, i tried for 4 stocks Friday morning: CHK, NFX, SD and HK. First buying in a long time. I got the HK at 13.10 and thot i had missed the other 3 when the whole group moved up sharply but was surprised to learn later i got the SD at 5.75 (closed at 7.71). Hope you think positively on SD also.

  6. 6
    BirdsofpreyRcool Says:

    mahout – i do view SD positively. But, i need to so some more work there. I really don’t understand why someone would sell that stock at $4.85. I think it’s hedge fund selling, but still need to snoop around a bit more.

    z – any comments on SD??? thx!

  7. 7
    zman Says:

    Nice to see the moves in the names but I’d like to see something newsworthy driving it. Safety seems to be taking a back seat to risk today as CHK and HK are easily outperforming strong balance sheet names.

    Sold the XOM common at 76.50. Still holding December calls there.

  8. 8
    zman Says:

    BOP – re SD – no news, just hedge fund selling in my book. Pretty tough to turn the names once they break $10, especially before year end. Despite reserves in the ground, despite hedges, despite strong management. They will be subject to an inordinate amount of tax loss selling too being new and far below their IPO price, story be damned.

  9. 9
    tater Says:

    Good morning all,

    I don’t watch much financial TV, but here’s a quote that caught my ear this morning:

    Mark: “So why would any sane person put money into the market?”
    Robert (guest): “Listen Mark, we’re not strategists, we’re financial advisors…”

    Hard to argue with that Robert!

  10. 10
    zman Says:

    Group will have a tough time staying green in XOM and COP can’t.

  11. 11
    BirdsofpreyRcool Says:

    z – #8, thanks. You reminded me of some good technical reasons why SD is so low. Appreciate it.

  12. 12
    zman Says:

    Tater – here’s a fun one for Monday, got any thoughts on FSLR’s chart? Obama keeps reiterating he’s going to create jobs in the sector, the Street keeps cutting numbers on all their peers and reducing ratings and price targets, ostensibly due to the strong dollar and due to govt money drying up. The dollar I see reversing and the govt money is not going to dry up, at least not yet.

  13. 13
    zman Says:

    Bird – thinks it sells into X-mas and then rallies pre new year. Not a lot of news between now and February for the group will have the beaten down names beaten further.

  14. 14
    BirdsofpreyRcool Says:

    XOM and COP will have a tough time staying green with crude moving into the red camp.

  15. 15
    Sambone Says:

    Off subject – “Don’t you just Love Jim Cramer?” His 2008 call;

    http://nymag.com/news/businessfinance/bottomline/42392/

  16. 16
    zman Says:

    XTO had the nicest booth at the Expo, complete with leather chairs, hardwoods, and a fireplace. So for those of you who like to judge stocks during tough times on the basis of “not getting the environment”, there ya go. Seriously though, I did pick up some small names, Canadian in some cases, and will be doing a little digging before I talk about them.

  17. 17
    tater Says:

    The method I used to make that drastic target of 53 has no time frame, so that’s not the most useful thing in the world. Kind of a warning more than anything. The open today created an island reversal out of the action of Thurs and Fri which is supposed to be very bullish. Price rallied to close the most recent of about 5 opening down gaps from the recent top at 180.
    Cliff Notes version?
    Still in a downtrend, currently in a counter-trend bounce. How far can it run? Probably only back up to the downtrend line, then it reverses again. Will it get that high? I don’t know.
    Is all that counter to good fundamental reasoning? Yes.

    Good observation by the manic one from afternoon TV; stocks are being sold because they can be sold (they are still liquid, unlike other things).

  18. 18
    zman Says:

    Thanks Tater, kind of what I thought.

  19. 19
    nomad4x Says:

    BOP,

    Where can a guy get IG quotes? The only site I’m aware of is markit.com Nice article re ##

  20. 20
    BirdsofpreyRcool Says:

    nomad – only place to get current quotes (that i am aware of) is via emails and phone calls directly to CDS Trading Desks. That’s why i update, whenever i see a fresh quote.

    IG 261

  21. 21
    nomad4x Says:

    Thanks for the info and the quotes.

  22. 22
    BirdsofpreyRcool Says:

    nomad – if you (or anyone) ever comes across a reliable source for quotes, i would love to know! but, historically, bond prices and CDS levels are notoriously tough to get at… except for the most liquid bonds (and even then, a retail broker will rip your face off, ’cause they know you can’t look up a fair price).

  23. 23
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures traded higher as U.S. equities were
    poised for a strong opening on the government bailout of Citigroup Inc. (C)
    Light, sweet crude for January delivery traded $1.55, or 3.1%, higher at
    $51.48 a barrel on the New York Mercantile Exchange. Brent crude on the ICE
    futures exchange traded $1.50 higher at $50.69 a barrel.
    Crude futures were firmly hitched to rising equities on Monday. U.S. stocks
    are expected to open strong on the proposed government rescue of Citigroup (C),
    with the plan helping to boost confidence in the financial sector.
    The financial crisis that began in September quickened a decline in oil prices
    that began in July, as a looming global economic downturn was seen weakening
    demand. The oil market has looked to equities for a sign that the worst of the
    downturn is over, though the small size of Monday’s rally indicates that few
    traders believe the global economy to be out of the woods yet.
    “We are still following equities, there seems to be a ray of hope for some,”
    said Dean Hazelcorn, a trader with Coquest Inc. in Dallas, adding “it seems a
    little unreasonable to say we saw the bottom Friday.”
    The Citigroup bailout has reversed the flow of investment into the dollar, a
    popular safe haven during periods of market uncertainty, and back into riskier
    markets, including crude and equities. The euro recently traded at $1.2769,
    about 1.4% stronger.
    Crude futures are also seeing support in advance of the Nov. 29 meeting of the
    Organization of Petroleum Exporting Countries in Cairo. The group has not
    indicated what course of action it will take, leading many market participants
    to dismiss the prospect of a production cut.
    A reduction is seen as more likely at OPEC’s regular meeting on Dec. 17,
    though up to 2 million barrels a day must be taken off the market to counter
    weakening demand, JPMorgan Chase & Co. (JPM) and other commodities analysts
    believe. OPEC already agreed to cut output by 1.5 million barrels a day in
    October, though compliance is currently seen around 1 million barrels a day.
    “This week’s emergency meeting…will be of only passing interest to a market
    that remains largely fixated on a deepening global recession and a related
    substantial deterioration in oil demand,” predicted Jim Ritterbusch, president
    of the trading advisory firm Ritterbusch & Assoc. in Galena, Ill.
    Front-month December reformulated gasoline blendstock, or RBOB, recently
    traded up 1.82 cents, or 1.7%, at $1.0825 a gallon. December heating oil traded
    2.88 cents, or 1.7%, higher at $1.7284 a gallon.

    -By Brian Baskin, Dow Jones Newswires

    Dow Jones Newswires
    11-24-08 0929ET

  24. 24
    zman Says:

    Sign of a strong stock in a bear market. One that bounces back immediately from a non-sensical fall as soon as the market gives its group support. Its chart does not get broken in the process. Two such names, both low debt, one large, one small with good, catalytic news on the horizon although more so in the case of the small than the large. EOG and GDP. If oil finally catches a bid these two should move well.

    Note more analysts are throwing in the towel on oil with Goldman throwing out all their oil trading calls on Friday and JPM calling for 35 oil without 3 mm bopd cut from OPEC. I’d prefer all analysts do this as it will get them being wrong out of the way allowing the group to move higher instead of having them dole out a succession of reduced estimates that were too high because they, the analysts, were wrong on oil and natural gas prices.

  25. 25
    nomad4x Says:

    BOP,
    The only site I’m currently aware of for CDS quotes would be http://www.markit.com/information/products/cds.html that said I’m not sure how much or how “real time” they are. Especially if they charge 2 arms and 2 legs for the service.

  26. 26
    zman Says:

    re 24 – should have put XOM in that list too.

  27. 27
    Dman Says:

    Z – Vancouver based Westport Innovations (NASDAQ: WPRT) is a specialist in CNG engines that partners with Cummins to produce the CumminsWestport line of engines

    http://www.westport.com/
    http://www.cumminswestport.com/

  28. 28
    BirdsofpreyRcool Says:

    nomad – yes. you are correct. Markit would be able to provide accurate pricing and quotes. it’s what they do. they are also behind setting up several CDS indices (including the cdx11, which we refer to as the IG). So, thank you for pointing this out. The fact that they can charge you enormous sums of body parts, just shows how tough the data is to get for all us little people.

  29. 29
    BirdsofpreyRcool Says:

    IG 255 -15. following stocks now. good.

  30. 30
    zman Says:

    FSLR must have filed to be a financial institution to get TARP funds.

    I’ll probably yank those XOM calls from Friday close to $80 and hold on to the $80 calls I already had.

  31. 31
    zman Says:

    Thanks Dman, will include them too.

    SWN should have been in my thoughts on 24 as well.

  32. 32
    BirdsofpreyRcool Says:

    Looking out the window, it’s snowing today. Lovely, fluffy, big-flake stuff. The kind of stuff that makes nat gas prices go higher. Nice to see.

  33. 33
    rlogan1301 Says:

    R 32 – good to hear as my ung dec calls are doing nothing…just want to lose 50% instead of the 80% that i would book now..ugh

  34. 34
    Popeye Says:

    Z, any colour on the HS expo?

  35. 35
    zman Says:

    RL – check you email.

    Pop – Still putting my thoughts together. Really a lot of anecdotal stuff that doesn’t scream buy anything. Reinforced a lot of my thinking especially on rig count directionality.

  36. 36
    elijahwc Says:

    From Briefing.com:

    ATN Atlas Energy Resources announces higher results with new technique in its Marcellus Shale Drilling Program (13.56 +0.85)

    Co announces over the past several weeks, Atlas Energy has successfully pioneered the use of a two-stage frac design for five of its vertical wells as part of its Marcellus Shale drilling program in southwestern Pennsylvania. Using this frac design, the co says it has averaged initial rates of production for 24 hours into a pipeline of 2.1 mln cubic feet per day, more than double the co’s historical average of approx 1 Mmcf/d over 90 previous vertical completions in its Marcellus program. Further, early results indicate that a well having a two-stage frac exhibits a shallower decline rate than a well with a single stage frac. Assuming these results continue, which are not assured, the co expects to realize sizable increased reserves and production per vertical well drilled. The incremental cost of the two stage design over a single stage design is approximately $125,000. The co also reports it has successfully drilled and cased its second horizontal well to the Marcellus Shale having a lateral length of approx 3,000 feet.

    Comes with a 17.6% yield. Something is upside down here. Toughts?

  37. 37
    zman Says:

    Eli – it falls in line with the MLPs all used as cash machines for the hedge fund industry, which pounded them down the last several months. See post on MLPs on Oct 23 or 24 on that. Also in part, people don’t believe the distributions are sustainable. I favor LINE in that regard. As far as ATN’s well results sounds good, would have liked to see them double the EUR as well as the IP. Can’t always make the jump that doubling that rate doubles the reserves but its a step in the right direction.

  38. 38
    BirdsofpreyRcool Says:

    elihahwc – not knowing ATN, but taking a quick look, here are a few thoughts.

    ATN is an MLP. MLP’s have been used as “cash equivalents” by hedge funds. Hedge funds are redeeming, liquidating, panicking, selling… especially e&p lately. Also, ATN is not that liquid… so, doesn’t take a lot of selling to crush the stock price.

    That’s a technical reason. Here’s a fundamental reason: ATN outspends their cash flow and therefore has to access the debt market to fund deficit operations. EBITDA has been growing too, but not as fast as total debt. Also, cash flow per share has been trending down, a key measure in ATN’s ability to fund their payout. Accounts payable ticking up too, while accounts receivable has stayed about the same. Revenues declined in the 3Q from 2Q as did cash flow from operations. Just taking last quarter and annualizing it, I would expect the divd payout to drop in the future.

    It doesn’t look like ATN is in any sort of near-term trouble as they can probably scale back on the capex and keep cash flow positive. However — this is the key metric, I think — ATN’s debt carries a 10.75% coupon and is rated B3/B-. It’s bonds are currently quoted around 67, giving a yield to worse of 18.3%. So, why buy the units (when the divd will most probably go down), when you can buy the debt and get a guaranteed 18.3% yield?

    Just a few thoughts…

  39. 39
    zman Says:

    Going to hold onto my XOM now that it has broken out to nearly a 2 month high. EOG about to do the same.

  40. 40
    BirdsofpreyRcool Says:

    eli – so, you are correct. Something IS upside down at ATN. The subordinated units (equity) should yield more, not less, than the senior debt.

  41. 41
    zman Says:

    TAN up 20%; coal up 10%.

    Energy outperforming the broad markets despite the fact that this is supposed to be a “financials” rally, led by the Majors up 7+%

  42. 42
    BossmanG Says:

    Z, any comments on NE or its sector?

  43. 43
    Sambone Says:

    VIENNA (Dow Jones)–The Organization of Petroleum Exporting Countries will
    most likely wait until its December meeting to move to cut its oil production
    further, OPEC President Chakib Khelil said Monday.
    “The Cairo meeting will see consultations only…but there’s no set agenda,”
    Khelil, who is also Algeria’s oil minister, said at a press conference here.
    OPEC is scheduled to meet formally Dec. 17 meeting in Oran, Algeria.
    But OPEC ministers will meet in Cairo Saturday on the sidelines of a
    previously scheduled gathering of all Arab oil producing nations.
    Some OPEC nations, like Venezuela and Iran, are calling on OPEC to take speedy
    action again and reduce production by at least 1 million barrels a day.
    Asked whether he would support such a move, Khelil said “not enough
    information is available to make a decision but if there were a meeting today
    a 1 million barrel a day cut wouldn’t be enough.”
    The group announced a production cut of 1.5 million barrels a day at an
    emergency meeting last month in Vienna. Most analysts, at this point, say they
    believe the bulk of those cuts are being implemented.
    Data shows that “compliance with the cut has been excellent so far,” Khelil
    said.
    -By Flemming E. Hansen and Edith Balazs, Dow Jones Newswires

    Dow Jones Newswires
    11-24-08 1125ET

  44. 44
    BirdsofpreyRcool Says:

    IG 253 -17. The bond mrkt LUVS Tim Geithner.

  45. 45
    1520sbroad Says:

    #40 – within the atlas suite of companies there are 2 pieces that have got a little more of a problem that ATN. This may be leaking over into all of the ATLS related companies. APL and AHD have got a problem. They are in danger of getting out of whack with their ratios to debt and running into some debt covenants. This was addressed by APL in their Q3 earnings and cc. They may wind up selling off some assets, cutting the payout, or rolling up into the parent?? ATLS. I am not as familiar with ATN.

  46. 46
    zman Says:

    Boss – no news, nothing really to add to recent comments. I like them best of the oil service sector. If credit frees up or oil rallies they will likely outperform oil service. The group has gotten very cheap as the P has contracted without the E doing so. The E, at least in 2009, is pretty safe, rates are not falling, and contracts are unlikely to get broken although that is the fear. After the PBR news on cutting back on new build rigs, they made another big discovery in the subsalt. So demand is there and its the financial markets that are the governor. Since those were newbuild rigs, that just means that demand vs smaller than expected supply of deep water capable drillers will be the near term (2 – 4 year) case. That’s good news in my book as the enemy of the drillers is always the potential for over capacity. Ok, so I had a thought or two after all.

  47. 47
    zman Says:

    1520 – the structure of Atlas is convoluted. In this environment that is not a plus. I like LINE since they will continue to boost distributions slightly even in a falling price environment into 2009.

  48. 48
    1520sbroad Says:

    I would also add that there is still a lot of value in the APL and AHD models. They have an issue as long as crude (and therefore their related hedges) stays low. If crude was to bounce up to $70 APL would be ok – in my opinion.

  49. 49
    1520sbroad Says:

    #47 – absolutely agree – ATLS, ATN, APL, AHD are a maze and wildly confusing at best.

  50. 50
    BirdsofpreyRcool Says:

    mahout, ma’ man! Your Friday Greedy Buy has served you well. Nicely done.

  51. 51
    elijahwc Says:

    Thanks Z

    On the issue sustainablty, I understand that LINE has two years hedged and that is also the case with PSE. I borrowed the following:

    http://web.servicebureau.net/conf/meta?i=1113067047&c=2343&m=was&u=/w_ccbn.xsl&date_ticker=PSE

    To summarize, CEO says he is “very surprised” by the amount of gas shut-in in the Rockies, Mid-continent and Permian Basin because all storage is full in the region and they can’t move it because of pipeline limitations. Says producers in region are only netting about $2.80/mcf in Sept, Oct. and Nov… and that only thing that can end the glut is a lot of cold wx soon and drilling rigs being shutdown. Doesn’t bode well for the likes of SJT, PBT, etc. from the sound of it.

    This not effecting PSE much because of their hedges ($100/oil and $9/gas through 2010). Made a point of saying that they can maintain their $2 annual divvy “for the next several years.”

    PSE’s 2.00 = 16.5%. IMO sustainable yield will essential in a deflationary enviroment that has quantative easing going on.

  52. 52
    elijahwc Says:

    BOP, Z & 1520

    Thanks for your input on ATN. Knew I could a quick and insightfull snapshot here.

  53. 53
    zman Says:

    Eli – no problem but you are too kind to me at least. When does the hedgie crowd stop hitting these names up for cash? When do the redemptions slow/stop? I personally think these will look like brilliant buys but I don’t know if we are at the “buy now” point yet…if I had to answer that question for the broader market I’d have to say we are closer to the low now but may still see the recent lows taken out.

  54. 54
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures shot up Monday along with investor
    confidence in the financial sector.
    Light, sweet crude for January delivery traded $4.31, or 8.6%, higher at
    $54.24 a barrel on the New York Mercantile Exchange. Brent crude on the ICE
    futures exchange traded $4.32 higher at $53.51 a barrel.
    The oil market is one of several to hit multi-day highs Monday. Crude futures
    are at their highest point since Nov. 19, as is the Dow Jones Industrial
    Average, while the euro hit a two-week high against the dollar. All three
    markets started moving on a proposed government bailout of Citigroup Inc. (C),
    which was seen boosting confidence in the financial sector.
    Oil has posted similar gains before, however, only to sink to fresh lows.
    Analysts saw little in Monday’s rally to indicate that it would be the start of
    anything permanent. Global oil demand is still widely expected to be weak next
    year, as large economies endure a recession.
    “There’s still a long way to go before market sentiment really changes,” said
    Tom Bentz, a broker and analyst with BNP Paribas in New York.
    Others noted that trading is likely to be low-volume and volatile during the
    week surrounding the Thanksgiving holiday Thursday.
    The Organization of Petroleum Exporting Countries provided some additional
    support to oil prices, with the group scheduled to meet in Cairo on Saturday. A
    production cut is not likely at that meeting, OPEC President Chakib Khelil said
    Monday, adding that a cut of 1 million barrels a day would not be enough to
    match weakening demand.
    But OPEC is not playing a leading role in the oil market currently, as
    economic indicators continue to dominate, said Addison Armstrong, an analyst
    with Tradition Energy in Stamford, Conn.
    “This has less to do with OPEC than it has to do with equities,” Armstrong
    said. The group needs to demonstrate that it will comply with any cut made next
    month, as well as the 1.5 million barrel a day reduction in October, Armstrong
    said.
    Front-month December reformulated gasoline blendstock, or RBOB, recently
    traded up 8.77 cents, or 8.2%, at $1.1520 a gallon. December heating oil traded
    10.37 cents, or 6.1%, higher at $1.8033 a gallon.

    -By Brian Baskin, Dow Jones Newswires
    Dow Jones Newswires
    11-24-08 1207ET

  55. 55
    zman Says:

    Mere mention by Obama that this is going to be a costly stimulus package and that the economy will get worse before it gets better took 140 points off the Dow. Silly traders, like you don’t know that already.

  56. 56
    BirdsofpreyRcool Says:

    z – I’ve got my mantra, and I’m sticking to it: Take profits when you can get ’em.

    I think we haven’t seen the lows either. There is NO WAY earnings reports for the next two quarters (4th and 1st) can be cheery. Still thinking we will see the lows, sometime in Feb-March (if we are lucky… if the economy and unemployment keep getting uglier, all bets come off the table).

  57. 57
    zman Says:

    Question is how much will the names miss by. I think 4Q is a problem for E&P land right now because the analysts are simply too high to the reality of commodity prices quarter to date. 1Q remains high but that could see a recovery. Analysts need to hurry and get down on their numbers so that strong production can be highlighted and not covered up by priced based misses on the top line. I’ve seen many a quarter screwed up by analysts, not companies. The next question is, once the numbers are down, is it in the stock price already. In all cases I would yell yes. But if big names “miss” estimates, then they will lead the group into a painful February.

  58. 58
    Sambone Says:

    #55 – “Silly rabbit, tricks are for kids!”

  59. 59
    rlogan1301 Says:

    Z – just responded…let me know your thoughts.

  60. 60
    zman Says:

    RL – thanks, I just responded.

  61. 61
    zman Says:

    Tater – EOG approaching the top of the recent range. You know I like them muchos, but this is a chart driven market. Any thoughts on how important it will be to break above the recent high of $85.88 on volume? The “on volume” part of that may be difficult this week given the holiday so was wondering if volume is as important here as I think it probably is.

  62. 62
    nomad4x Says:

    Hey Z,

    I sent you a mail, when you get time have a look at it. The mail can wait until the day winds down and has to do with a google checkout invoice that was generated.

  63. 63
    zman Says:

    Nomad – my bad, see email.

    Tater – no worries on the EOG but I think it may take out that level either today or definitely tomorrow if we get a third friendly open (kind of hard to fathom that but it’s possible).

    Oil up $4.70 … see I said Obama would be good for commodity prices, lol.

    NG up 32 cents as well.

  64. 64
    Pete Says:

    Z,

    Taking #57 into consideration is this rally today in e&p more likely just short term ?

  65. 65
    zman Says:

    Fair warning, the XOM $75 Dec calls are on the table offered at $7. Will continue to hold the $80s which are just under breakeven but by far the most widely traded strike around right now.

  66. 66
    zman Says:

    Pete – I think it has legs for another 10 to 20% up from here. 4Q earnings are after all not out until February. Marking to market of commodity prices in the analysts models will start the second week of December in earnest (there has already been some but these will be the big tweaks downward to numbers). It is at that time you will see some analysts hit the unhedged names particularly hard, and then again in the first week of January (when they have the actual prices for the entire quarter to put in the model).

  67. 67
    zman Says:

    Just pushed my offer up to $7.25 on the XOM because of the momentum in the other names, think it still gets sold today.

  68. 68
    Pete Says:

    Z, Thanks
    So in the second week in Dec CLR will be revised have I got that right?

  69. 69
    Sambone Says:

    VIENNA (Dow Jones)–The Organization of Petroleum Exporting Countries won’t
    take a decision on output before its December meeting in Algeria, OPEC
    President Chakib Khelil said Monday.
    OPEC is scheduled to meet in Cairo on Saturday, but while this meeting will be
    used for consultations, the information needed to make an output decision will
    only be available ahead of the December meeting, Khelil said.
    “First we need to find out whether what we have cut has been acted upon. By
    mid-November, OPEC was complying to 85%, or maybe a little more. That’s
    actually an excellent compliance, considering OPEC only started implementing
    the cut on Nov. 1,” Khelil, who is also Algeria’s oil minister, told a press
    conference here.
    He added he had no doubt that OPEC would reach full compliance with the 1.5
    million barrels a day cut announced in October during the first few days of
    December.
    “The other issue, how far down the demand has fallen, I don’t think anyone has
    numbers on that. So we will wait until early December to find out,” Khelil
    said.
    OPEC is scheduled to meet formally Dec. 17 in Oran, Algeria.
    OPEC ministers are also meeting this Saturday in Cairo, Egypt on the sidelines
    of a conference there.
    “The Cairo meeting will see consultations only…but there’s no set agenda,”
    Khelil said.
    Some OPEC nations, like Venezuela and Iran, are calling on OPEC to take speedy
    action again and reduce production by at least 1 million barrels a day.
    Asked whether he would support such a move, Khelil said “not enough
    information is available to make a decision but if there were a meeting today
    a 1 million barrel a day cut wouldn’t be enough.”
    The group announced a production cut of 1.5 million barrels a day at an
    emergency meeting last month in Vienna. Most analysts, at this point, say they
    believe the bulk of those cuts are being implemented.
    -By Flemming E. Hansen and Edith Balazs, Dow Jones Newswires

    Dow Jones Newswires
    11-24-08 1254ET

  70. 70
    zman Says:

    Other thoughts for this kind of market. I was saying last week that in a bear market we will occasionally get brief but very sharp rallies. Hello Friday and Monday. If there is one thing I have learned about options during this kind of market it is to take losses. Reset the strike and try again. Trying to get even on the positions is a losing game and a temptation that I simply fight off every day. I don’t give advice, as you know, but if I did, that one would be near the top of my list of things to keep in mind, especially during a bear market. Take profits, sure, but also take losses and hit the reset button.

  71. 71
    zman Says:

    Pete – yea, more or less around then they will get clock on their oil price, then worse in the first week of January. The December thing will be stretched out, the January thing should be all the rest of the analysts. Mind you, this doesn’t mean the stock goes down, it may already be down enough, but its good to keep in mind when these MTM events occur. They, the analysts also generally use Jaunary6 as a month to reset their 2009 oil and gas price decks. Some will get that done in December but many will wait on complete 2008 prices to release their revised (lower) estimates for 2009.

  72. 72
    zman Says:

    85% compliance would indeed be excellent for the Cartel.

  73. 73
    nomad4x Says:

    Z,

    I never received a mail, I’m 99% sure it is something with my mail setup, (Don’t ask.. LOL) If I don’t get your mail by tomorrow I’ll re-send from another mail address.. Sorry something is weird today with my gmail also, no zblasts either.

  74. 74
    Sambone Says:

    Off subject

    By Rob Curran
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Traders were burned so many times buying into a “bottom”
    for the banks and the market that few believe the latest 12% rally in the
    Standard & Poor’s 500 and 25% surge for banks is anything more than another
    “two-day wonder.”
    The government’s decision to buy another $20 billion stake in Citigroup (C),
    and guarantee troubled securities and loans worth $306 billion is supposed to
    stabilize confidence in the banking sector. But so was the bailout of Bear
    Stearns in March, the government takeovers of Fannie Mae (FNM) and Freddie Mac
    (FRE) in early September and the launch of the Troubled Asset Relief Program
    last month. Each of these events precipitated a bounce in the stock market, but
    all the rallies soon evaporated. When the government says it has stabilized the
    banking system and pundits say this could mark a turnaround for stocks, the
    market hears the “Boy Who Cried Bottom.”
    “We’ve not seen anything that would lead to a major change in our opinion that
    this is anything more than a two-day bounce, and the overall trend is still
    lower,” said Ryan Detrick, senior technical strategist Schaeffer’s Investment
    Research. The government “has given Citi money before…why is this time
    different? They keep throwing money at the crisis in various ways. Nothing has
    bailed us out yet.”
    The Financial Select Sector SPDR, a basket of banks and lenders that’s a
    popular proxy for the sector, recently traded at $10.88, up 12% on the session
    and up 25% from the lowest trade in a roughly 10-year history last week. The
    XLF remains down 63% for 2008 so far. To Detrick, the financials will not have
    marked a significant turning point until the XLF closes above $13 for more than
    a couple of sessions. That level drew buyers on Oct. 10 and again on Oct. 27.
    Generally, important support levels on the way down become resistance levels
    once they break. That’s because people who bought in at $13 may be waiting for
    that trade to break even, and sitting with their fingers on the sell button.
    As for support, the lowest point for the XLF on Friday was $8.67 and that’s
    the last line of support on the chart. If the exchange-traded fund dipped below
    that level, “it’s kind of a bottomless abyss,” Detrick said.
    The S&P 500 bounced around 850 a couple of times in October, and it’s close to
    testing resistance at that level.
    On a fundamental basis, there are ample reasons to doubt the sustainability of
    the recent recovery. The already weakened labor market and the fragile balance
    sheets of financial institutions stand to suffer further if one or more auto
    makers fail. Plus, other banks may suffer a similar crisis of confidence to
    Citi, and not find a champion as easily.
    “I think there might be another leg down at one point since 1) this shows that
    Citigroup was gone, and nobody would buy it at any price 2) this might create
    problems for foreign banks where authorities either don’t want, or can’t bail
    out large banks,” said Lorenzo Di Mattia, manager of hedge fund Sibilla Global
    Fund.
    – Rob Curran, Dow Jones Newswires
    Dow Jones Newswires
    11-24-08 1300ET

  75. 75
    zman Says:

    Nomad – Just forget about the first communication…our bad. On ZBLASTs you have gotten any cause I haven’t sent any today. I am trying to punt a little XOM but otherwise don’t feel like chasing this rally. I’m more likely to sell into it, taking some losses, and reset.

  76. 76
    nomad4x Says:

    Okay, good to know. Thanks

  77. 77
    zman Says:

    By the way, if you send me an article and I don’t reply immediately its only because I’m lazy. In reality I get 5 to 10 articles or research pieces a day so don’t feel bad if I don’t acknowledge each one.

  78. 78
    zman Says:

    Nomad – please post to let me know you got back in.

  79. 79
    nomad4x Says:

    I made it back in, and I received the mail after i went through the whole password rest 🙂

  80. 80
    zman Says:

    Little bit of profit taking going on. Housing numbers tomorrow may be scaring people into sales.

  81. 81
    BirdsofpreyRcool Says:

    IG 256…

  82. 82
    zman Says:

    Just taking a look at crack spreads on both the all in (gasoline and diesel) and the gas cracks, pretty obvious why SUN held up better than the group…on gasoline the NY Harbor has stayed positive on gas cracks, all other regions losing money on every gallon sold.

  83. 83
    BirdsofpreyRcool Says:

    nat gas up 6.2% to $6.88. All this snow we’re getting must be helping.

  84. 84
    nomad4x Says:

    I’m just happy looking at my portfolio tab and seeing a color other than red for a change.

  85. 85
    zman Says:

    Bird – that HDD number was huge this morning, plus you’ve got crude up 9%

  86. 86
    BirdsofpreyRcool Says:

    IG 258… widening back out a little.

  87. 87
    BirdsofpreyRcool Says:

    actually seeing some REAL BUYERS of bonds today. word must be out… CREDIT IS OVERSOLD.

  88. 88
    ram Says:

    ZMAN – I see where you bought CLR the common 18 months ago at $14.25 and with CL trading lower than today. It would appear that at $19.50 and CLR’s well results, this could be a good investment.

  89. 89
    zman Says:

    Thanks BOP, good color on the bonds.

    Ram – thanks.

  90. 90
    zman Says:

    moved that XOM offer back down to 7 on the 75 calls. I can always reposition but it is have a bit of trouble moving today.

  91. 91
    1520sbroad Says:

    Z – i don’t know much about this company but their results from the HS seem to further justify everyone’s activity. Any thoughts?

    Questar Corporation (NYSE: STR – News) subsidiary Questar Exploration and Production Company (Questar E&P) today announced completion of the company’s first operated Haynesville Shale horizontal wells in Northwest Louisiana.

    The Waerstad #3, located in Red River Parish, La. (Sec 1, T14N, R12W) was placed on production on November 13, 2008, at an initial rate of 16 million cubic feet of natural gas per day (MMcfd) on a 23/64 inch choke with 6,400 pounds per square inch flowing casing pressure. Eight fracture stimulation stages were pumped in the 3,234 foot horizontal lateral. Questar E&P has a 100% working interest in the Waerstad #3 well.

    The Wiggins 36H- #1, located in Bienville Parish, La. (Sec 36, T15N, R10W) was placed on production on November 16, 2008, at an initial rate of 7.4 MMcfd on a 22/64 inch choke with 5,450 pounds per square inch flowing casing pressure. Nine fracture stimulation stages were pumped in the 3,455 foot horizontal lateral. Questar E&P has a 62% working interest in the Wiggins 36H- #1 well.

    Questar E&P is currently drilling two additional company-operated Haynesville horizontal wells and is participating in four outside-operated Haynesville horizontal wells that are in various stages of progress. Questar E&P has approximately 31,000 net acres of Haynesville Shale leasehold in the Elm Grove, Woodardville and Thorn Lake areas of Northwest Louisiana.

  92. 92
    zman Says:

    1520 – its a well run company. For Haynesville plays I like a the uniformity of results and greater leverage to the play offered by HK. Also would put GDP ahead of them based on where their acreage is. Nothing wrong with STR but I too do not know them that well.

    Nice rally as the last hour begins.

  93. 93
    zman Says:

    GDP and consumer confidence in the morning.

    Solar stocks on fire according to CNBC. Being attributed to Obama weekend comments included in the post. Another 5 days like this on FSLR and I’m whole on my January calls’ lol.

    Pulled my sell order on XOM, will be greedy for one more day.

  94. 94
    zman Says:

    dollar down 2.5%

  95. 95
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures shot up as commodities markets
    benefited from a surge in investor confidence.
    Light, sweet crude for January delivery settled $4.57, or 9.2%, higher at
    $54.50 a barrel on the New York Mercantile Exchange. January Brent crude on the
    ICE futures exchange settled $4.74, or 9.6%, higher at $53.93 a barrel.
    Markets rallied early to a proposed government rescue of Citigroup Inc. (C),
    interpreting the bailout as easing the uncertainty that had plagued the
    financial sector in recent days. Oil prices fell 12% last week and the Dow
    Jones Industrial Average closed below 8,000 for the first time since 2003, over
    fears that the economic downturn was deepening.
    Those concerns had not disappeared Monday, but investors who had stashed funds
    in the dollar as a safe-haven investment appeared to be moving back into
    commodities and equities. The euro reached a two-week high against the dollar,
    gaining more than 2% to trade recently at $1.2865. The Dow spent most of the
    day up around 300 points, and most commodities posted gains.
    Analysts and traders differed as to whether the rally marked the start of a
    new chapter for an oil market that has traded consistently lower for over four
    months.
    “It’s too early to say yet, but this certainly looks positive,” said Mark
    Waggoner, president of Excel Futures in Newport Beach, Calif. “This has to
    become a habit. If (tomorrow) is another day like today, that may change the
    mood of these markets substantially.”
    Others were quick to dismiss any gains made in the days before the
    Thanksgiving holiday, when activity is often light and volatile.
    “Whatever happens this week will be a lot of book squaring…and getting money
    out before the holiday,” said Stephen Schork, editor of the Schork Report, an
    energy newsletter based in Villanova, Pa. “I can’t tell you which way, but what
    we can expect is a lot of volatility.”
    Over the course of the week, the oil market’s focus is likely to turn to the
    two upcoming meetings of the Organization of Petroleum Exporting Countries, the
    first of which is Saturday in Cairo. OPEC President Chakib Khelil said there
    would likely be no cut at the Nov. 29 meeting, but a reduction is widely
    expected at the second gathering on Dec. 17 in Oran, Algeria.
    Both the size and timing of an OPEC cut are still up in the air, though Khelil
    and analysts agree that it must total more than 1 million barrels a day to come
    close to matching demand lost to the weak economy.
    Front-month December reformulated gasoline blendstock, or RBOB, settled 7.82
    cents, or 7.4%, higher at $1.1425 a gallon. December heating oil settled 8.48
    cents, or 5%, higher at $1.7844 a gallon.

    -By Brian Baskin, Dow Jones Newswires
    Dow Jones Newswires
    11-24-08 1508ET

  96. 96
    ram Says:

    ZMAN – I was trying to form a question without asking anything (I’m practicing my Yogi Bearisms). I am thinking of adding more CLR at this juncture in a 401K.

  97. 97
    zman Says:

    ZTRADE: $10KP TRADE

    Out XOM $75 December Calls for $7.25, up 119% since entry on Friday.

  98. 98
    zman Says:

    Ram – I know, and I was trying to answer without answering. Tricky business that. I would say that it will move with oil, first and foremost. Since they are 100% unhedged and the Street’s price for oil is too high compared to what oil has averaged for the quarter, their numbers for the 4Q and likely for 1H09 will be falling. For the long term, I like them as they have the leading position in the Bakken and are otherwise good operators.

  99. 99
    BirdsofpreyRcool Says:

    Goldman Sachs is up 30%. Pretty amazing move for a large cap company.

  100. 100
    zman Says:

    BOP – yep, perfect for a bear market rally. Today is second day of ups in a row. Almost mind boggling. If GDP comes in down worse than the expected 0.6% tomorrow for 3Q wouldn’t you expect the market to give back half this move in a snap? Consumer confidence is going to stink after the market opens, think the last number was 38. Don’t know what expectations are.

  101. 101
    BirdsofpreyRcool Says:

    Lots of Eco numbers and expectations for tomorrow:

    8:30 am Exp’d
    GDP (QoQ) -0.5%
    Personal Consumption -3.2%
    GDP Price Index 4.2%
    Core PCE (QoQ) 2.9%

    9:00 am
    CaseShiller Home Price 163.0
    CS Composite-20 YoY -16.9%
    CS US HPI YoY -17.1%

    10:00 am
    Consumer Confidence 38
    Richmond Fed Manuf -26
    House Price Index MoM -0.7%

    5:00 pm
    ABC Consumer Conf -53

  102. 102
    zman Says:

    ZTRADE: $10KP Trade:

    Sold (3) EOG December $80 Calls (EOGKP) for $10, up 58%. Nothing against the name, just strong run and need to reposition.

  103. 103
    Sambone Says:

    Hmmmm, this market is reminding me again of Alfred E. Newman, “What, me worry?”

  104. 104
    zman Says:

    ZTRADE: $10KP

    EOG – Bought (3) December $95 Calls (EOGLS) for 3.10 with the stock up about $10 today and within $2 of a 2 month high.

  105. 105
    Sambone Says:

    Hmmmm, I guess the banks don’t have anymore problems, that the light at the end of the tunnel is “Blue sky” not a train, housing has bottomed, and that Hank “Bazooka” Paulson has all the answers.

  106. 106
    BirdsofpreyRcool Says:

    IG 255… bonds not following stocks higher here. For what it’s worth, this feels like a short-covering rally…

  107. 107
    zman Says:

    ZTRADE: $10KP

    OIH Puts: Bought (2) OIH $70 December puts (OIDXN) for $3.35 with the OIH up 10% at $81.

  108. 108
    zman Says:

    Bird – Agreed. The rally on the service side feels like go along with oil and very short sited. Talk about negative news flow on the come.

  109. 109
    BirdsofpreyRcool Says:

    z – talking to an old-timer today… says the service rates are still way too high, for the lowered capex budgets. so, buying puts on a crazy day seems like a sane idea.

  110. 110
    tater Says:

    Re: EOG
    Been out all day. I’ll take a look at that in a little bit.

  111. 111
    zman Says:

    Bird – at the Expo, I spent some time buying beers for Wyoming. His point that the service rates are still operating on 2008 capex levels cannot be over emphasized. When 2009 rolls around there is going to be a downdraft in service pricing.

  112. 112
    zman Says:

    Thanks T

  113. 113
    BirdsofpreyRcool Says:

    z – yep. that’s consistant with the old-timer buzz out there. rig rates have to head south… it’s simple economics when capacity exceeds demand.

    IG going out at 258… big move on a low volume day. That means tomorrow could go either direction. Look to Asia tonight and a slew of eco-numbers tomorrow morning.

  114. 114
    ram Says:

    ZMAN – Thanks.

  115. 115
    zman Says:

    Any time Ram

  116. 116
    tater Says:

    Finally got the EOG charts done. Got stuck on a couple of things but your analysis of the 85 price is the same thing that I got. If you want to see all the cute little squiggly lines, I’ve got it up on the post at the link (the only two charts there).

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

  117. 117
    zman Says:

    Muchas gracias Tater. I thought 85 was “fairly obvious” too but I’m glad to have you in that camp as well. Now, if you want a challenge, there’s always FSLR, lol.

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