05
Dec

TGIF

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Sentiment Watch: Armegeddon. Jobs down 533,000 for the month of November, 370,000 of that from the service industry. Unemployment held at 6.7% but only because 420,000 people fell off the map as far as the count goes. Very ugly numbers and all market pundits, economists, and fund managers expect it to get worse in coming months. As financial market panic increases the biggest hedge funds out there are imposing limits on withdrawals. The question now becomes how much of this is already factored into the equity markets. How the dollar can rally on this news I don't know. 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Odds & Ends

Holdings Watch:

  • SWN - $10KP - Added (10) SWN December $35 calls for $1.10.

Commodity Watch:

Crude oil fell $3.12 to close at $43.67, a four year low on no news and more fear. I even saw one headline claiming it was the build in crude stocks yesterday (sorry buddy but they actually fell) but no matter, traders wanted to sell and sell they did. A test of $40 is now imminent as the next big fat round number in the way before we get that much talked about three handle. All kinds of production is falling below or is about to fall below break even from new production in the Bakken play to stripper wells (see discussion last night). This morning oil is trading off with the jobs number.

  • IEA Watch:The IEA is on the tape saying oil prices are too low. These are the guys who said production was too low well into the recession and begged OPEC to produce more to get prices down. Now they are worried about long term investment in oil developments on a global basis. Way to go guys.

 

  • Contango Watch: Jan 2009 Crude: $43.60, Jan 2010 Crude: $58.25, Jan 2011 Crude: $67.26. Getting steeper.

 

  • MEND Up To Old Tricks Watch: Two oil service boats were attacked over night. Market unlikely to give a fig however the string of news from the Delta of late has point to an increase in MEND and other rebel related violence against oil infrastructure.

Natural gas fell $0.33 to close at $6.02, a 15 month low after the EIA reported a slightly smaller withdrawal from storage than the Street wanted. More on that in the next section. This morning gas is trading nearly 30 cents and was trading lower before the jobs number as traders are fearful of a collapse in industrial demand.

Natural Gas Storage Review

EIA reported gas in storage fell 64 Bcf last week, below the prior week's 66 and in middle of my range but below the Street's number of 69 Bcf. Given the weather, which was warmer than the previous week, the Street should not have been looking for the bigger number and the subsequent sell off was an over-reaction which was exacerbated by yet another bad day in oil. The fact of the matter is, 64 Bcf was a good number given the excess YoY supply we know to be in place. Relative to year ago results, it was an excellent result given the weather as it shows industrial demand is not currently falling off a cliff.  Looking ahead, gas faces and immediate string of difficult comps however, December weather is so far not disappointing as degree days are increasing again this week. 

 

 

Odds & Ends

Analyst Watch: Calyon cuts (APA) from Buy to Outperform, Morgan Keegan cuts (GSX), (BRY), (BBG), (TXCO) to market perform.

 

140 Responses to “TGIF”

  1. 1
    BossmanG Says:

    Goodmorning everyone….Z, I’m having trouble seeing the second image right below “Gas in Storage”, it’s not loading…?

  2. 2
    Sambone Says:

    Oil Slightly Weaker Again After Four Days Of Losses

    BY REZA AMANAT
    Of DOW JONES NEWSWIRES

    LONDON — Crude prices edged lower Friday, after oil markets posted four consecutive days of new lows.

    Market psychology remains beset by worries over demand amid a global economic downturn which has contributed to prices falling around 70% since July. The International Energy Agency Friday lowered its projections for global oil demand in 2008-2013, revising annual growth expectation to 1.2% from 1.6%. Glen Ward, a broker at ODL Securities in London, said the “overriding factor” for the market remains fear of recession. “The market shows no reaction to bullish news but finds it more comfortable to react to bearish news,” Ward said.

    The front-month January contract on the New York Mercantile Exchange was down 10 cents at $43.57.

    “There simply is very little buying coming into the markets, as we saw yesterday…despite (OPEC) attempts to jawbone prices higher,” Edward Meir, oil analyst at MF Global said.

    Key U.S. nonfarm payroll data, due at 8:30 a.m. EST, will be closely watched by crude traders for further evidence of economic weakening. Meanwhile, analysts point to the growing connection between oil and equity markets, with developments on the latter expected to remain a bellwether for crude prices.

    “Oil remains in thrall to global equity markets, with correlations at all-time highs,” analysts at Morgan Stanley lead by Hussein Allidina said.

    According to Marius Paun, analyst at ODL Securities in London, technical charts show little sign of reversal in the recent bearish trend.

    “The fact that we made new lows for the fourth day in a row only comes as an emphasis of the seriousness of this downward trend,” Paun said.

    —By Reza Amanat, Dow Jones Newswires

  3. 3
    Sambone Says:

    Oil’s Slide Set To Leave Dark Trail

    By Ann Davis, Ben Casselman and Carolyn Cui
    OF THE WALL STREET JOURNAL

    Already in free fall, the price of oil could soon push much lower as the effects of a global recession take hold.

    Crude fell $3.12, or 6.7%, to settle at $43.67 a barrel on the New York Mercantile Exchange on Thursday. Many oil-industry insiders and traders now say prices could slump much lower, into the $30s, before supply cuts push prices back up, perhaps much later into next year. The changes come from a combustible mix of factors — a rise in inventories, shifts in the quality of oil used by refiners, and severely deteriorating demand.

    “I don’t think we’re through with the drop. I don’t know where it stops, but I don’t think we’re through,” said Steve Chazen, president and chief financial officer of Los Angeles-based Occidental Petroleum Corp.

    Lower oil prices are a short-term gain for consumers and businesses, from carpooling parents to households using heating oil to airlines. But a sustained decline in the price of oil also has painful downsides. Energy-driven economies — in areas from Texas and Alaska to Venezuela and Russia — can face huge busts, with job losses affecting employment for engineers and roughnecks on rigs as well as the accountants, hotels and restaurants that support them.

    Sinking oil prices also reduce the political will to push ahead with costly renewable-energy projects, and reduce the urgency to prioritize energy-policy debates on topics ranging from auto efficiency to offshore drilling. The danger is that when demand does bounce back, prices will boomerang far higher because the supply cushion has shrunk.

    The swift decline in prices — crude hit an intraday high this summer of $147 a barrel — is hurting industry players, who have less cash to spend on projects as lower prices hurt their revenues.

    They also have less incentive to invest as their margins get crushed. Wednesday, Schlumberger Ltd., the world’s largest oil-field-services firm by market capitalization, said its 2008 earnings will miss analysts’ estimates as oil and gas production slows world-wide. Industry drilling-rig counts have begun falling sharply.

    Research firm Sanford C. Bernstein & Co. puts the oil industry’s average break-even cost zone at $35 to $40 a barrel, though the figure can vary by project and based on other factors. Thursday’s closing price is well below the $70 to $75 marginal cost at which producers this year could earn an expected return of roughly 9% on new drilling projects.

    North America is likely to see the sharpest retrenchment, but Schlumberger’s announcement suggests international projects could follow. Projects that revived long-dormant wells in Oklahoma, used new technologies to salvage old West Texas oil fields or extracted oil from tar sands in Canada require prices above current levels, in some cases far above, unless costs also fall. Some deepwater projects in the Gulf of Mexico or the North Sea would be imperiled if prices fell below $40 for an extended period.

    Occidental’s Mr. Chazen says even announced production cuts may be months from taking place, adding to the glut. “Slowing it down is hard. You sign contracts, you make plans,” he says. “It may take you two or three quarters. It can’t be done instantly.”

    A further collapse in prices could be forestalled by unexpected supply disruptions. Producers are still struggling long-term to keep pace with global consumption trends. The price drop could stiffen the resolve of the Organization of Petroleum Exporting Countries to slash production when members meet in Angola Dec. 17. King Abdullah of Saudi Arabia, the world’s largest oil exporter, recently was quoted as saying $75 a barrel is the “fair price” of oil. If anything, unpredictability is the only certainty in today’s volatile oil markets.

    But a growing number of industry insiders say conditions are now ripe to test the market’s lows. It has historically taken OPEC many attempts to stem price declines. A sea of excess inventory is building from Cushing, Okla., to Singapore. Even in China, one of the few growing markets around the globe, stockpiles are rising.

    One of the most striking short-term pulls on oil prices is a futures-market condition called contango. Simply put, oil is vastly cheaper to lay hands on now than it is for delivery months or years in advance. Thursday’s settlement for January delivery, $43.67, is roughly $14 cheaper than delivery a year from now, $23 cheaper than two years from now, and a whopping $39 cheaper than delivery in 2016.

    Not only does the opposite condition often occur, where spot oil is more expensive, but the contango conditions present today also feature spreads at their widest in years, Barclays Capital says. Contango incentivizes those who can afford to hold oil to hold on to it. Storage fills up, and that causes the spot price to fall because people need to unload oil.

    The debt crisis is one reason for the imbalance, since inventories tie up scarce working capital. “Even people who require physical barrels are trying to take it on Jan. 2, so it won’t show up on their balance sheet at the end of the year,” says Mike Loya, an executive with large international oil trader Vitol Group.

    Industrialized countries in the Organization for Economic Cooperation and Development saw stocks rise to 56 days of forward consumption as of the end of October, well above historic levels, according to the Energy Information Administration.

    In the U.S., crude-oil stocks are above five-year averages. Traders have also found it profitable to lease tankers for floating storage, which helps inventories to build.

    It isn’t just financial maneuvers threatening the price of oil. The premium that the market gave light, sweet crude oil, which is well-suited for making diesel, has dwindled as diesel demand has shrunk.

    Deutsche Bank AG analyst Adam Sieminski expects further weakness in the widely quoted Nymex and London light, sweet oil benchmarks “that generate pricing headlines’ because substantial new refining capacity is starting up in India and China designed to make products from lower-quality crude.

    For example, Reliance Industries Ltd.’s Jamnagar refinery complex in India, set to become the world’s largest single-location refinery with a major new expansion, is expected to start full operations in the first quarter of 2009.

    On top of this are stark demand statistics. Despite a drop by more than half in the price of gasoline, consumption until last week remained listless, and only jumped slightly. In China, inventories have risen in recent months after the government increased retail prices for gasoline, diesel and jet fuel by nearly 20% in June. In India, car sales recently saw their first decline in three years, says Sanford C. Bernstein.

    A popular research note brimmed with pessimism from energy executives at the end of Thanksgiving week, when Houston research firm Tudor, Pickering, Holt & Co. Securities Inc. invited clients to help write its morning missive. One unnamed exploration and production executive wrote in: “Is E&P where the banking sector was six months ago — recognizing the fundamentals have deteriorated but not yet seeing the cliff we’re headed for?”

  4. 4
    Sambone Says:

    Low Oil Price, High Stocks=Bad Days For OPEC

    By DAVID BIRD
    A DOW JONES NEWSWIRES COLUMN

    NEW YORK — There’s no question these are strange days for the oil market. The steady climb from below $44 a barrel to the July record intra-day high above $147 took nearly 900 trading days from early 2005.

    The breath-taking reversal was nine times faster.

    Crude-oil futures took the express elevator down Thursday to a low of $43.51 a barrel, and likely still haven’t hit the basement yet.

    Light, sweet crude for January delivery settled down $3.12 a barrel, or 6.67%, at $43.67 a barrel on Thursday on the New York Mercantile Exchange, the lowest level since Jan. 5, 2005. Prices have dropped 20% in the past four days on doubts over OPEC’s ability to rescue prices amid slumping demand.

    Just days before the official start of winter in the Northern Hemisphere, Ministers of the Organization of Petroleum Exporting Countries will meet Dec. 17 in Algeria to try again to halt the precipitous slide in prices.

    Winter brings shorter days with fewer hours of sunshine, and typically strong oil demand. But in the topsy-turvy market churned by the global economic crisis that many believe rivals the Great Depression, even winter demand growth isn’t certain this year, and that means more pressure on OPEC to slash output.

    Unless OPEC gets a handle on reducing bloated global oil inventories, the days of lower prices are far from over.

    “They need to come up with a credible way to show they’re taking another 2 million to 3 million barrels a day out of the market” in the first and second quarters of 2009, said Jan Stuart, economist at UBS Investment Research in New York.

    So far, OPEC is off to a slow start in trimming output, despite forecasts that global demand will show its first full-year decline since 1983.

    A Dow Jones Newswires survey found that total OPEC output fell by 815,000 barrels a day in November from October. The 11 OPEC members who agreed to cut output by 1.5 million barrels a day from Nov. 1 only cut by less than 60%, and pumped 619,00 barrels a day above their target.

    Stock Levels Don’t Measure Up
    That slow start and the continued weakness in price and demand leaves OPEC with a monumental task in shoring up the market.

    At talks in Cairo last weekend, Ali Naimi, oil minister of Saudi Arabia, called $75 a barrel a fair price for oil, but some traders believe $35 is more likely in the near term. Naimi’s target refers to the cost of marginal production of future supplies and serves as a warning that necessary long-term investments would be at risk if prices stay low.

    Near term, though, Naimi said OPEC wants to tighten inventories to levels that appear nearly as far-fetched as a quick return to $75 a barrel would be.

    “Winter is coming and hopefully inventories will fall to 52 to 53 days” of forward demand cover in the major industrialized nations, such as the U.S., that comprise the Organization for Economic Cooperation and Development, he said.

    But in these days of falling oil consumption, holding 52 days of demand cover in inventories means far less oil than it used to. And that means bigger problems for OPEC.

    At the end of October, OECD stock stood at 56 days of cover, with inventories at 2.7 billion barrels, according to estimates from the International Energy Agency, the OECD’s oil-policy watchdog. That’s based on OECD oil demand of around 48.2 million barrels a day in the current quarter.

    But IEA sees demand from the industrialized nations dropping to 47.9 million barrels a day in the first quarter of 2009, a fall of 900,000 barrels a day, or 1.8% from a year earlier.

    For stocks to hit Naimi’s target of 52 to 53 days cover, they would need to shed 200 million barrels by the end of the first quarter from the end-October stocks level, to near 2.5 billion barrels. By comparison, first-quarter 2006 OECD stocks of 2.59 billion barrels amounted to 53 days of demand cover.

    US Inventories Rise In November
    OPEC’s November output cut would reduce stocks by only around 25 million barrels. Meantime, early U.S data show that inventories grew by more than 13 million barrels in the month, blunting the impact of the OPEC cut.

    The rise in U.S. November stocks, at a rate of 440,000 barrels a day, was the biggest for the month since 2004 and followed a stock drawdown of 645,000 barrels a day in November 2007, data from the Energy Information Administration show.

    Assessing demand levels is a meld of art and science and data are constantly revised. Stock levels for the OECD nations are the most transparent, but data from elsewhere is less reliable. OPEC’s own projections of demand from the major industrialized countries through the first half of 2009 exceed IEA estimates by 200,000 to 820,000 barrels a day.

    What’s more, OECD countries are expected to make up only 55% of global oil demand in the first quarter of 2009, down from 56% a year ago, as emerging nations, such as China, play a greater role in the market.

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

  5. 5
    zman Says:

    Morning Boss – its the gas in storage set of 5 graphs. Loading ok here, what browser are you using?

  6. 6
    zman Says:

    Heard Merrill cut 2009 oil price forecast to $25, can anyone confirm?

  7. 7
    BossmanG Says:

    hmmm, IE…odd

  8. 8
    zman Says:

    Hmmm, showing ok here in firefox and ie. Hate to suggest a reboot but…

  9. 9
    BossmanG Says:

    Agreed, will do. Odd that one loads and the other doesnt lol.

  10. 10
    zman Says:

    Boss – all I can think is it is a very tall graph, maybe more memory intensive than the first one. I’ll repost it as five separate graphs if the trouble persists.

  11. 11
    tater Says:

    Posted the weekly and daily charts for EOG SWN HK GDP

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

  12. 12
    zman Says:

    Thanks much Tater, will have a look.

  13. 13
    VTZ Says:

    Looks like a blood red open again

  14. 14
    VTZ Says:

    no blood, just red

  15. 15
    zman Says:

    Pretty ugly but not as bad as I thought. CHK at $11.

  16. 16
    BirdsofpreyRcool Says:

    Busy morning. Saw some short covering in credit early this morning. Now, not a lot going on. Investment Grade bonds have swung out to another new wide. The IG was quoted as wide as 292 bps this morning, right after the Jobs Report. Tightened back a little. But still an eye-popping number.

    IG 286 bps

  17. 17
    zman Says:

    Treasury out this morning pointing to mortgage rates saying the TARP is working, that financial markets have stabilized.

  18. 18
    BirdsofpreyRcool Says:

    With respect to the energy sell off… I think a whole lot of black-box “sell” programs kicked in, when nat gas hit the $6.00 level. From then on, it’s been all sellers and no buyers.

    Today’s Jobs number was just plain unmitigated awful. No credit, no banks, no funding for companies, no jobs needed, no driving to work, less industrial production. We are still in that downward spiral. Maybe close to a bottom… seeing mountains of articles about how “cheap” corporate bonds are. With govvies paying close to nothing, at some point, investors are going to notice 8% yields on investment-grade bonds. Once they do, the mrkt healing process can really begin.

    Spot-on article on corporate bonds vs equities from Pimco:
    <http://www.pimco.com/LeftNav/Global+Markets/Global+Credit+Perspectives/2008/US+Credit+Now+Equities+Later+Kiesel+Dec+2008.htm

  19. 19
    BirdsofpreyRcool Says:

    let’s try that again. hopefully, the link will paste correctly this time.

    http://www.pimco.com/LeftNav/Global+Markets/Global+Credit+Perspectives/2008/US+Credit+Now+Equities+Later+Kiesel+Dec+2008.htm

  20. 20
    zman Says:

    Think you are right re black box sell as it didn’t matter what it was, just energy. CHK almost touched $9

  21. 21
    BirdsofpreyRcool Says:

    IG +289 bps… fundamentally meaningless, it is just a measure of how frozen the credit markets for non-TARP and FDIC-backed companies remains.

  22. 22
    1520sbroad Says:

    #11 – tater – thanks for charts. I haven’t looked at a long term chart of SWN in a while – i’d like to see it stay in that channel.

  23. 23
    1520sbroad Says:

    As an interesting bit of hopeful news – one of the commercial reits that i have followed for years is actually beginning to turn positive. These guys were in the thick of the CDO management/assembly market a few years ago and got into a little trouble. (Not as bad as many others.) I think they realized early what was going to happen and went into the bunker – paid down short term debt, unwound some bad stuff they were in the middle, started to conserve cash, got downgraded/sold by everyone and thier brother (yes even the king of Cramerica.) They have continued to make some money and pay a dividend. Now their actions to go into the bunker appear to have been the right thing to do. they were the tip of the spear in terms of the financial meltdown – i take some solace in the fact that they have shown some relative strength recently.

  24. 24
    BirdsofpreyRcool Says:

    1520 – it does seem like the “sell/short financials!” trade is done. Glad to hear we will still have some of them around… especially the non-US Govt backed ones. The newest whipping boy seems to be energy/materials. SMN is the new SKF, it seems.

  25. 25
    douglas51 Says:

    to late to buy DUG?

  26. 26
    BirdsofpreyRcool Says:

    z – it sure seems like oil wants to head to a 3-handle. Guess it could do it too, ahead of the Dec 17 OPEC meeting. Sure find it hard to believe it sticks there, tho. But, who’s going to blink? Even at $35, some cash flow is better than no cash flow for the OPEC guys. Can’t see how Hugo C stays popular in this environment.

  27. 27
    1520sbroad Says:

    Bird – agreed there. The meltdown at Citi a few weeks ago i think marked the end of the short blitz on financials. Lots of people that were ultra-super-triple-mega short got burned on that one. As much as i hate to say it i think energy/materials/miners are now in the crosshairs of the short camp. It’s an irresistable short for folks in that game – no buyers for any equities at all, recession, even folks that want to go long can’t because they have no cash/can’t get leverage/have huuge redemptions to payout.

  28. 28
    tater Says:

    1520,
    No problem. Sure looks like somebody needs their cash back. Wow.

  29. 29
    zman Says:

    Pretty late on DUG at this point. Better short is probably OIH but not today.

  30. 30
    BirdsofpreyRcool Says:

    1520 – I think that sums it all up, rather succinctly.

  31. 31
    VTZ Says:

    Removal of the uptick rule marked the death of the markets as we knew it.

  32. 32
    ram Says:

    Wow CHK single digits. I wonder what Aubrey can say now.

  33. 33
    tater Says:

    Douglas51,
    Not to give advice, but technically the DJUSEN is so close to the bottom of the trading range that it might be prudent to see whether it can hold the 360 level (we are at about 370 now). DUG would be huge if that would happen. Should the index bounce at 360 or before, your purchase of DUG now would likely be a case of buying at a top.
    Again, I know the question was for Z, just giving the TA side

  34. 34
    BirdsofpreyRcool Says:

    my trading desk thinking we go lower, but then see a surge higher into the close. just passing that along…

  35. 35
    1520sbroad Says:

    I think the short proliferation is what will lead to the most violent, unfathomable, hard to grasp snap back rally ever. I can now as joe investor get single, double or triple short with an ETF via my etrade account. Scary.

    If i was shorting anything right now it would be the 30 yr.

  36. 36
    VTZ Says:

    Short the 30 yr under the assumption that this next cycle will be deflationary? Is nobody scared of violent inflation as a result of the amount of money being created to free up the credit markets?

  37. 37
    VTZ Says:

    Sorry, I guess if you thought inflation wasn’t a problem then you would buy the 30yr… I got it backwards.

  38. 38
    zman Says:

    apologies for short and/or delayed response. My cold seems to be morphing into the plague.

  39. 39
    Sambone Says:

    BOP, #34 is wrong. “W” is speaking at 11:30 about the economy. Look out below!

  40. 40
    Sambone Says:

    This dosn’t sound good!

    http://finance.yahoo.com/news/Bank-Julius-Baer-CEO-dies-rb-13755979.html

  41. 41
    1520sbroad Says:

    just looking at the price of the entire treasury market it has gone thru the roof. Yields thru the floor. At some point people may realize that 3% for 30 years does not keep you ahead of inflation but a yield of over 3% on the S&P 500 gives you a better shot at keeping up with inflation and maybe even some upside.

  42. 42
    Sambone Says:

    1520 – The problem is that the “Market” is not thinking rationally. Logic is not part of this, it’s all emotion.

  43. 43
    1520sbroad Says:

    42 – Sam – couldn’t agree more. Just wish i had more cash to throw at the lack of rational thinking.

  44. 44
    zman Says:

    When the turn comes it is going to be massive. I’m hitting the showers, back after lunch.

  45. 45
    BirdsofpreyRcool Says:

    sam – #39… well, that would be the “down from here” part of the trading desk comments. They were thinking there would be a “surge up into the close.” I have no opinion on this, but it’s always good to know what other people are think. Especially those who are sitting on trading desks.

    Hard to see what might push the mrkt higher here… but, short-covering (a la 1520’s comment) could make it interesing.

  46. 46
    BirdsofpreyRcool Says:

    W speaking now….

  47. 47
    Jay Reynolds Says:

    Follow on stripper well conversation from last evening.

    Many stripper operators can probably shut in production for a while – as lease terms allow – and get their production back when they resume pumping pretty easily.

    For us, we handle so much water, it can sometimes take a month or more to begin to see any slight amount of production return so shutting everything off is not something I can do. Others will have the option of shutting down for a while, not those of us in the Nacatoch in NW LA though.

  48. 48
    Nicky Says:

    Morning all. Feels a bit like capitulation in many commodities. oil, corn, soybeans etc.

  49. 49
    Sambone Says:

    You can’t make this stuff up!

    12:12 (Dow Jones) Among the hedge funds with the biggest losses through
    November, according to a partial report from investors, is the 788 China Fund,
    whose returns were down about 95% year-to-date. It was up 115% ytd at the end
    of 2007, making it one of the best. “Only the one who sells loses money,” the
    fund’s managers, Jacques Mechelany and Benjamin Grenier, said in a report back
    in June of this year, when the fund was down a mere 31%. He who sells, they
    said, “prevents his own self to ride the unavoidable extremes and volatility of
    markets that are temporarily disconnected from the reality of fundamentals and
    benefit from the very strong rebound once the fundamentals come back to the
    fore.” (DKM JC)

  50. 50
    Nicky Says:

    CNBC reporting that Chrysler have hired a bankrupty firm.

  51. 51
    BirdsofpreyRcool Says:

    Chrysler is an asset sale, waiting to happen. No reason to inject capital to sustain the current equity base (owned by Cerberus, a private equity firm). This sort of this can be handled in a BK court… would hate to see good money (taxpayers) thrown after bad.

  52. 52
    BirdsofpreyRcool Says:

    that said, don’t cry for Cerberus… Daimler basically paid Cerberus to take Chrysler off their hands and retained some of the liabilities. So, the only real losers here would be Daimler and the bondholders (who are the banks, who couldn’t stuff their clients with Chrysler paper before the collapse of the junk bond mrkt). Sad if it pulls down some of the supplier base, tho. That needs to be addressed, in my opinion.

  53. 53
    Sambone Says:

    By Jeffrey McCracken and Mike Spector
    Of THE WALL STREET JOURNAL

    Chrysler LLC has hired the prominent law firm of Jones Day as bankruptcy
    counsel, according to several people familiar with the matter. The firm was
    hired several weeks ago to help the ailing automaker prepare for a possibility
    Chapter 11 bankruptcy filing.
    A Jones Day spokesperson declined to comment. A Chrysler spokeswoman couldn’t
    be immediately reached.
    Chrysler’s move suggests the auto maker is preparing for imminent financial
    failure should its efforts to persuade Congress for federal rescue funds fall
    short. Chrysler, which is majority-owned by private-equity firm Cerberus
    Capital Management LP, says it needs a $7 billion capital infusion before
    year-end.
    (This story and related background material will be available on The Wall
    Street Journal Web site, WSJ.com.)
    Detroit’s three auto makers have all lobbied Congress for some $34 billion in
    immediate financing amid the deepest recession since the Great Depression.
    General Motors Corp. (GM) says it needs $4 billion by the end of the month.
    Ford Motor Co. (F), which has a slightly better cash position after mortgaging
    nearly all its assets in 2006, is seeking a $9 billion line of credit it hopes
    it won’t have to tap.
    Jones Day co-head of restructuring Corinne Ball is handling the case, said
    these people. She has worked on other automotive bankruptcies such as that of
    auto supplier Dana Corp. and many cases involving the UAW. She represented
    General Motors on its acquisition of Korean automaker Daewoo.
    Reached by phone Friday afternoon, Ball declined to comment.
    Chrysler has actively been seeking mergers or other alliances in an attempt to
    rationalize its cost structure. Chrysler engaged in preliminary merger
    discussion with GM but the talks were put on hold as the recession worsened and
    GM’s cash position became dire. In testimony before a Senate panel Thursday,
    Chrysler Chief Executive Robert Nardelli said he would accept a forced merger
    with GM as a condition for a federal bailout.
    Lawmakers skeptical of providing rescue funds have asked Nardelli why Cerberus
    won’t inject more of its own cash into the struggling firm.
    Mark Zandi, chief economist at Moody’s Economy.com, told senators Thursday the
    total payout could rise to $125 billion to keep Detroit’s car companies out of
    bankruptcy for two years.
    The auto makers have encountered skepticism on Capitol Hill after a big
    infusion from a recently passed $700 billion financial rescue package into
    banks and other financial firms has failed to unfreeze credit markets and
    angered lawmakers’ constituents. Auto makers have been forced to submit
    detailed restructuring plans and cut executive pay in an attempt to win aid.
    Congressional Democrats have urged the White House to use money from the $700
    billion Troubled Asset Relief Program, or TARP, but the administration has
    resisted, saying the funds are only intended for financial firms. Others have
    suggested using money from an Energy Department program intended to help auto
    makers retool to make more fuel-efficient vehicles, but Democrats have largely
    balked at that idea.

    -By Jeffrey McCracken and Mike Spector, The Wall Street Journal

    Dow Jones Newswires
    12-05-08 1255ET

  54. 54
    Sambone Says:

    Brother, can you spare $100,000 for the Sambone?

  55. 55
    Sambone Says:

    By Isabel Ordonez
    Of DOW JONES NEWSWIRES

    HOUSTON (Dow Jones)–Rapidly falling oil prices are prompting large oil
    companies to review 2009 capital programs, shifting analysts’ expectations of
    companies’ future spending.
    This week, Chevron Corp. (CVX) said it will postpone the announcement of its
    2009 capital spending plans to the end of January from December, an indication
    that oil prices have dropped so fast that the oil giant needs extra time to
    reevaluate its budget.
    “Our budgets have worked throughout the year when oil prices were much higher,
    so it’s prudent to do some additional planning,” said Mickey Driver, a Chevron
    spokesman.
    Some analysts suspect that companies need extra time to trim their capital
    budgets, a move that could translate into a slowdown of investment in both
    current and new oil capacity. This could potentially further restrain global
    oil supply and halt or at least slow the slide in prices, though the effect
    often happens with a lag.
    Oil giants such as ExxonMobil Corp. (XOM), Chevron and ConocoPhillips (COP)
    have consistently said that they will spend in 2009 at similar levels to 2008,
    despite crashing oil prices and the darkening economic outlook. But as crude
    futures continue to drop – trading Friday below $42 a barrel, the lowest level
    in nearly four years – some analysts now expect Big Oil to announce in the
    coming weeks budgets that will be 10% to 15% lower than this year.
    “Things are changing so fast that it’s possible that major oil companies will
    come up with numbers that are less than previously indicated,” said Phil Weiss,
    an analyst at Argus Research in New York.
    Smaller capital programs would reflect savings oil companies expect to reap
    from lower costs of materials such as cooper, concrete and steel that
    skyrocketed when oil prices were soaring. The flipside of the cuts is a
    possible slowdown of investment in both current and new oil capacity.

    Budget Cut Effects

    Oil companies don’t want to make substantial cuts in exploration and
    production outlays, as that could worsen their ability to access new reserves,
    a task that has become a major challenge for large producers as oil-rich
    countries have increased their control over resources.
    Investors welcome smaller spending budgets that reflect savings but express
    concern if lower spending translates into a slowdown of companies’ production,
    which has been decreasing even when oil majors were ramping up spending as old
    assets are draining.
    “If they cut expenditures now, they could pay for it a couple of years out,”
    Weiss said. “One of my biggest concerns is that they have natural depleting
    assets so they need to make investment to help to maintain and grow
    production.”
    For this reason, large producers – which have large cash reserves and mostly
    take on projects that would be profitable with oil at $60 a barrel – are
    carefully reviewing their plans.
    Oil companies are trying to have budgets that take advantage of the benefits
    of lower oil prices, but also are trying to avoid the mistakes made in the
    early 1980s and late 1990s, the last two price downturns. Many companies
    slashed budgets during periods of low oil prices, but when prices rebounded,
    producers found it difficult to ramp back up to capitalize on improved market
    conditions.
    A senior ExxonMobil executive seemed to acknowledge as much, affirming
    Thursday that the global oil major has no intention of delaying or abandoning
    any of its oil and gas investment plans. “We don’t see any change in our
    near-term investment plans,” said Mark W. Albers, Exxon’s senior
    vice-president, on the sidelines of a conference in Kuala Lumpur. “Crude prices
    are in a cycle” and will recover, he added.
    Shares of major oil companies fell Friday, as crude oil was trading below $42
    a barrel on the New York Mercantile Exchange.

    Possible Project Delays

    Jason Gammel, energy analyst at Macquarie Securities in New York, said the
    maximum level that major oil companies could reduce spending by next year is
    limited to 10% to 15%, the discretionary level major oil companies generally
    have on their budgets. Major oil companies, unlike smaller firms, have very
    long-term investment commitments that are shielded under contracts that form
    the bulk of their spending.
    Large producers are expected to honor these contracts, but at the same time
    try to push for lower costs by delaying projects. Over the past few weeks,
    several major oil producers have announced delays of important projects, or
    have scaled back their expansion plans in the hope that market conditions will
    help them secure better deals from contractors.
    On Nov. 6 ConocoPhillips, the third largest U.S. company by market value, and
    Saudi Arabian Oil Co., or Saudi Aramco, officially halted bidding on their
    400,000-barrel-a-day refinery at the Yanbu Industrial City, in Saudi Arabia.
    Both companies cited the uncertainty of the financial markets as the driver of
    the decision, but analysts saw the delay as a move by both firms to wait and
    take advantage of lower operating costs.
    Besides possible cuts in capital spending, analysts also expect reductions in
    oil companies’ share buyback programs as they have less cash to spend, but no
    changes to their dividends programs.
    ConocoPhillips will be the firstU.S. oil major to report its 2009 capital
    program in mid-December. Chief Executive Jim Mulva said recently the Houston
    company will hold next year’s capital spending flat at the $15 billion planned
    for 2008 as it navigates a sharp drop in crude oil prices. ExxonMobil is
    expected to post its capital program during its annual meeting with analysts in
    New York that typically occurs in March.
    Exxon reaffirmed in October it will continue to spend as planned, investing
    about $125 billion over the next five years. But executives have also said the
    company is actively chasing the lag from lower costs of materials.
    “We’ll be working very hard to ensure that the lower costs we’re seeing in
    some of these goods and services translate directly into lower costs of those
    projects to the extent possible,” said David Rosenthal, ExxonMobil’s vice
    president of investor relations, in a recent conference call with analysts.
    Chevron said that despite the delay in its 2009 capital spending announcement,
    it plans to have a capital program similar to this year’s $22.9 billion budget.
    But Chevron’s executive vice president of strategy told a conference in New
    York this week that it doesn’t rule out possible small changes to its budget
    due to lower costs.

    -By Isabel Ordonez, Dow Jones Newswires (Yee Kai Pin in Kuala Lumpur contributed to this report)

    Dow Jones Newswires
    12-05-08 1329ET

  56. 56
    zman Says:

    broad market going green

  57. 57
    elduque Says:

    Does anybody have a clue what is going on with CHK?

  58. 58
    BirdsofpreyRcool Says:

    If we can close green today, should set up for a stock mrkt rally through the end of this year, don’t you think? Credit mrkt is in tatters… but, no one’s really expecting much there, so don’t think credit will hold back stocks.

    IG 284… still wider than yesterday

    Credit mrkt performance the first two weeks in January will be key. But, until then, stocks could be free to roam about the cabin.

  59. 59
    zman Says:

    El – D, yes, its fear of dilution and a broken stock chart feeding on itself.

  60. 60
    zman Says:

    Bird – I was thinking that we are due a sharp snap back in commodities, that the Fed will cut again and not that it matters to lending but it could finally tip the dollar over which would again help oil, and that OPEC will act and will act big mid month.

  61. 61
    BirdsofpreyRcool Says:

    CHK just scheduled a conf call to update operations and cash position for Dec 8th at 9am EST. Guess they noticed their stock price.

  62. 62
    zman Says:

    Looking st CHK and the stock activity today it appears there is quite a lot of bottom fishing going on around $10

  63. 63
    Sambone Says:

    Hmmm, I wonder how old Chavez is handling the oil drop?

    CARACAS (Dow Jones)–The average price for Venezuela’s basket of crude oil and
    refined products fell $5.10 to $34.49 a barrel in the week ending Dec. 5, down
    from $39.59 on Nov. 28, the Oil Ministry said Friday.
    The new price level is the lowest recorded in 2008, in a dramatic drop that is
    putting fiscal pressure on the government of President Hugo Chavez.
    The average price for the year running now stands at $91.62 per barrel, still
    higher than last year’s average of$64.74 a barrel, figures show.
    Falling oil prices are becoming a problem for Venezuela’s government as it
    plans a $78 billion budget for 2009 based on a $60-a-barrel average price for
    next year. Venezuela’s finance ministry is pondering possible scenarios for a
    spending cut early next year.
    Moreover, Petroleos de Venezuela SA is reviewing all energy projects to
    determine which ones will need to be shelved until oil prices improve.
    Oil Minister Rafael Ramirez has vowed to push another output cut of at least 1
    million barrels a day at the coming meeting of the Organization of Petroleum
    Exporting Countries scheduled for Dec. 17.

    -By Raul Gallegos, Dow Jones Newswires

    Dow Jones Newswires
    12-05-08 1404ET

  64. 64
    BirdsofpreyRcool Says:

    z – oil prices hinge on what OPEC does… then on what kind of follow-through discipline results. On the other hand, the longer OPEC delays tightening, the more projects around the world get delayed. That will make the next energy price spike even spikier. Any chance you think that is part of their evil plan?

  65. 65
    zman Says:

    My best guess would be they are further cutting capex, announcing some more gas price based basin specific production curtailments and that lease acquisition is on hold along with an operations up date from the Haynesville.

  66. 66
    elduque Says:

    Thanks Z

  67. 67
    Pete Says:

    Options 101 question Z,

    Like on a Zblast when you are playing an inter day or short term trade do you place it in the money or just out of the money?

  68. 68
    zman Says:

    Bird – Absolutely not part of their plan. Saudi has oil, like the U.S. coal, enough they see producing it for at least the next 100 if not 300 years and they have a long range plan in mind to get them in position for the end of that plan. They don’t want spiked oil prices as that provides impetus for the green energy movement to really get a foothold.

  69. 69
    elduque Says:

    Your server is faster than mine. I just got the notice a minute ago.

  70. 70
    zman Says:

    Pete, depends on the volatility of the underlying stock. If its a perceived short term move in the group and in that stock in particular than out of the money provides the best leverage as long as its not too far out of the money and you are not wrong like I was yesterday on the SWNs.

  71. 71
    ram Says:

    Since the market cap for CHK is now $6B, could you do or have you done a back of an envelope asset analysis? Where did you find time in your busy schedule to get sick?

  72. 72
    BirdsofpreyRcool Says:

    z – it just seems like a repeat of what happened in the 1980s. On the other hand, there was a lot of non-OPEC oil that ramped up during that time period… like the North Sea and Mexico. But, always wondered if the Saudis weren’t secretly pleased that they killed energy exploration in the US in 1984.

  73. 73
    Pete Says:

    thanks bet we see some of those soon

  74. 74
    zman Says:

    Ram – good question

    BOP – which is why this time it will necessary to get Russia and maybe one other big non-opec player to agree to curtail and for Saudi to take a bigger than normal percentage of the cuts themselves.

  75. 75
    zman Says:

    Pete, not until next week.

  76. 76
    zman Says:

    Ram – if you just took the 12 tcfe of proved reserves on the books now, put $2 an Mcfe on it that $24 billion. So with $12 in debt that leaves $12 for the mkt cap which leaves out all the acreage and upside story. That would be $20, no? And leaving out all the rest and only using $2 on the reserves is completely bogus.

  77. 77
    zman Says:

    Unbelievably tempted to buy more CHK and CHK calls now that I see a ray of light.

  78. 78
    BirdsofpreyRcool Says:

    z – I just don’t see Mother Russia agreeing to any outside oversight of their most precious asset, energy. Doesn’t’ mean it wouldn’t happen, and/or doesn’t mean Russia won’t curtail. But, Russia is one of the most paranoid places on earth. I just don’t see them trusting any group policy.

  79. 79
    zman Says:

    ZTRADE: $10KP

    XOM April 95 Calls sold (3) for $2.40, down 23%

    CHK December 10 Calls bought (3) for $2.10 with next week’s new conference in mind.

  80. 80
    zman Says:

    BOP – they have refused in the immediate recent past although they may cut some to certain European clients this time of year as a lesson to those guys anyway. Wouldn’t be a formal quota by any means but an agreement to prod prices temporarily. Their production, like Mexico’s, appears to be rolling over (not as fast as Mex but its happening)

  81. 81
    BirdsofpreyRcool Says:

    z – if you have seen pictures of the equipment they use, it’s no surprise that Russia can’t keep up with declining production. That said, they have a lot of hydrocarbons…

  82. 82
    zman Says:

    Pete – CHK moves less (at least to the upside) and, it has an event in place which changes things. So I took the in the money calls.

    Why does an event change things? The implied volatility of the options changes as we cross the event horizon (haven’t gotten to type that in awhile) and as such, IV can drop as new news is digested. So even if the news is good and the stock jumps $2, for instance, the $15s may see their IV fall and suddenly you are in a lower volatility out of the money option than you were before. In this case, the $10s captual all that gain.

    BOP -yep, but not the cheddar with which to develop them. If you think about the areas around the world that use outside capital to get where they are like Russia, Norway, L America and then you see that choked off, its a problem.

  83. 83
    zman Says:

    Ok kids, time for that rally cap. Two weeks, 1 hour and 15 minutes until expiration and I’ve gotten the $10KP into a pickle. No rally and I’ll be recapitalizing it shortly.

  84. 84
    zman Says:

    By the way, my family is buying CHK stock today in the $10s.

  85. 85
    BirdsofpreyRcool Says:

    z – good point re: cheddar. Back to the concept of a global credit crunch again.

  86. 86
    kyleandy Says:

    bop kudos to your trading desk called it pretty good. if only i had listened to them

  87. 87
    BirdsofpreyRcool Says:

    kyleandy – the desk is usually pretty good. that’s why i pass along their comments sometimes, even if i’m not sure or don’t beleive them. That said, we still have 70 minutes to prove them wrong!

  88. 88
    zman Says:

    BOP- have any of your sellside friends done a study yet on where the big impairments will be?

  89. 89
    ram Says:

    So, you have a $10 stock with a conservative NAV of around $25 to $30. Why isn’t Buffet or his equivalents chasing after this or other E&P bargains? Instead of the U.S. giving $34B to the autos, they could buy CHK, PQ, SD, for starters and have money left over. GM is a $2.5B company and they are asking for how much? Ignorant Congress.

  90. 90
    zman Says:

    So the market is effectively saying “jobs? we don’t need no stinking jobs”

    Sambone, time for some movie quotes.

  91. 91
    BirdsofpreyRcool Says:

    The reason this rally may be sustainable is that the financial stocks are trading strong. These days, when UYG goes green, it’s not uncommon to see the mrkt pulled up with them.

  92. 92
    Pete Says:

    thanks for the lesson

  93. 93
    1520sbroad Says:

    Bird – is it possible that i see a long financials short energy trade developing?

  94. 94
    zman Says:

    I vote Ram for president. And its not the delirium. Why don;t the deep value types like cyclicals or see them in a different light in the case of natural? Where is Soros for that matter. These are chump change to him and could alter the way the US looks at gasoline were he to get seats on the boards of the big 3 as part of an aid package at the same time he took over the 3 or 4 of the top 20 gas producers in the states. Its a great question. Buffett is busy losing his shirt at Goldman I think.

  95. 95
    BirdsofpreyRcool Says:

    update from the trading desk… for day-traders only: if you bought for a rally today, sell 1/2 now and put tight stop on 2nd 1/2. Then, if mrkt surges more, sell the other 1/2.

    Again, just passing along comments.

  96. 96
    zman Says:

    Pete – ask more questions as it makes me think about it too.

    BOP – thanks for the headsup on the CHK conf call.

  97. 97
    BirdsofpreyRcool Says:

    1520 – i have been thinking/saying that for a while. it’s the reverse of the Spring 2008 trade that made a lot of hedge funds a lot of money. Then: long energy/short fins. NOW: long fins/short materials & energy.

    Makes sense. Govt backing financials while rest of economy spirals down.

  98. 98
    BirdsofpreyRcool Says:

    z – yeah. CHK’s conf call announcement seems to have made it a relative outperformer on the bounce here. I’ve been watching CHK vs HK as both have highly-leveraged balance sheets (HK much more so than CHK, of course).

  99. 99
    zman Says:

    BOP expect that Energy stocks peaked in June/July, are down heavily since then and are incredibly cheap on a real asset basis and are underleveradged as a group. You could not say that about the banks as they fell.

  100. 100
    Sambone Says:

    “Take care Steve, take chances and drive fast.”

  101. 101
    BirdsofpreyRcool Says:

    IG 282bps

  102. 102
    Sambone Says:

    “Listen to me very carefully. There are three ways of doing things around here: the right way, the wrong way, and the way that *I* do it. You understand?”

  103. 103
    1520sbroad Says:

    #99 – very true. I think the short energy play has worked until now but it would take guts to go short energy now. Long financials i think is a far more appealing play for whoever is left in the fast money crowd.

  104. 104
    BirdsofpreyRcool Says:

    z – banks are scary. their assets continue to head south. that said, they are now hooked up to the taxpayer IV drip. Can’t say the same about energy. That’s all.

  105. 105
    BirdsofpreyRcool Says:

    1520 – i do think the energy short train left the station a while back. that said, sentiment (and oil prices) continue to fall. Just keep nimble and take profits when you get them. But, would prefer to play energy from the long side. Just can’t sit in ’em… yet.

  106. 106
    zman Says:

    That’s true but not sure why that puts energy on the other side of the paired trade.

  107. 107
    BirdsofpreyRcool Says:

    energy and financials have historically had a -ve correlation. and it’s the reverse side of the trade that made so much $$ in the Spring.

  108. 108
    zman Says:

    Am thinking Street reacts positively to a chopping of Capex as CHK but ya never know, they may gripe over the slower growth.

  109. 109
    1520sbroad Says:

    Bird – no energy shorts for me. I’m long energy, have been long energy, getting longer energy. No sitting in them for me – I sell calls against all of my energy stuff and collect the premium from Z and the rest of the call option buyers in the world.

    The financials – not so much banks – but some other spots in the financials have been gaining some of my interest of late. Mainly REITS that are still standing and trading at fractions of book value.

  110. 110
    zman Says:

    STO killed off a $16 B oil sands upgrader yesterday. Non-opec incremental supply dropping like flys. I guess we have Congress to thank for saving us from the speculators.

  111. 111
    BirdsofpreyRcool Says:

    that said, i hate pairs trading. it just means you have to get two things right instead of one. doubles your odds of losing money. “risk neutral” funds that claimed to return more than the risk-free treasury rate always made me laugh.

  112. 112
    zman Says:

    Agree re pairs trading. I used to have clients ask for one long and one short E&P name for a quick trade and I always said look pal, they are all pretty correlated so maybe if you give the trade 6 months to a year to work but over a week, forget about it.

    Ricky bobby on the first one Sam

  113. 113
    zman Says:

    SU is going to be a great long when oil does bottom. Competition is all delaying cancelling new stuff and will be slow to add it back as prices move up. Any thoughts VTZ?

  114. 114
    1520sbroad Says:

    first time i heard of pair trading i thought they were talking about the fruit.

    I have never seen one really work well until this year with the short financials long energy.

  115. 115
    zman Says:

    gas rigs down another 15

  116. 116
    BirdsofpreyRcool Says:

    1520 – LOL. They now WISH they had been trading fruit!

  117. 117
    elduque Says:

    Is there any reason why SD won’t survive?

  118. 118
    BirdsofpreyRcool Says:

    z – you are soooo right. I don’t think there is a sector that is more correlated than e&p. as you have pointed out, hedged vs non, oil vs gas, production vs acreage… the paddy wagon locks up the piano player along with the girls. 😉

  119. 119
    zman Says:

    Re SD. Bigger leverage and lower gas prices hurt but I don’t see them going under unless things get a lot worse, long term on gas prices. There are rumors out there about their accounting but I don’t give them much credence. Once a newer stock breaks 10 in this environment it seems to spiral lower.

  120. 120
    VTZ Says:

    SU is the monster of the oil sands and is the epitomy of guaranteed oil production in the future. The sales pitch for Suncor is the fact that you have a guaranteed 30+ year steady 280,000 bpd and then an expansion to hopefully bring you to 500-550 kbpd at a cost of ~30 B. Debt = ~6.5 B. That incremental 220+ kbpd (from Voyageur) also has a 30+ year mine life.

    How much money do you think they will print at 500,000 bpd leveraged completely to oil? Assuming worldwide E&P production starts rolling over like it has in Mexico the only secure and guaranteed supply is from the oil sands due to political climate and the fact you are digging oil that you know is there out of the ground.

    If oil recovers it will have no problem recovering to previous levels. As a long term play it is a complete no-brainer assuming you think oil will recover. They have no need to expand quickly, they can wait for price to catch up or costs to come down because in exhcange for waiting they are printing cash each day.

    Even if oil recovers to say 60 for FY 2009. With a cost of ~40$/bbl you’re looking at 15-20$/bbl profit. The great part is that there is so much leverage to highger prices because your costs/bbl are so high. At 80$/bbl you make double the profit that you do at 60 and so on.

  121. 121
    zman Says:

    Liking your rally BOP but energy not playing well, especially after the last few days.

  122. 122
    BirdsofpreyRcool Says:

    SD – their CFO is about as squeaky-clean as you can get.

  123. 123
    BirdsofpreyRcool Says:

    z – sadly, it’s going to be tough to get energy to rally much, until nat gas sees the better side of $6, i think. Just not a “go-to” sector today. GE doing pretty well, tho.

  124. 124
    VTZ Says:

    Keep in mind that in the invesment climate in Alberta has been superheated that capital obligation could come down.

  125. 125
    zman Says:

    VTZ – sounds like they are the guys with the oil in the Road Warrior in the future.

    Fear of sub $40 oil is weighing them down given their debt. What do they do if oil goes to $30 for 2 years? I assume they are hedged but this is still out of my space.

  126. 126
    zman Says:

    Agree, re $6 NG. You know what I think about the cause of that decline. Almost like it was rigged, would like to see who was looking for a really big gas draw that pulled consensus up so high. Bet it was a bear.

  127. 127
    zman Says:

    CHK may just announce some serious curtailments Monday to put a fire under gas. Here’s hoping for that and continued cold. It was 26 here last night which is below normal for this time of year.

  128. 128
    VTZ Says:

    If oil went to 30 for two years they would be hurting as I don’t think they hedge a lot of production forward, only nominal amounts.

    If it did happen they could have to raise equity.

  129. 129
    BirdsofpreyRcool Says:

    z – haven’t looked at CHK’s hedges… any in-the-money hedges they could monetize at the sub-$6 level?

  130. 130
    1520sbroad Says:

    #127 – CHK falling on the sword would be an interesting twist. I am sure Aubrey would like to spend his Christmas bonus on shares under $10.

  131. 131
    VTZ Says:

    They could probably bring down their costs substantially by spending less sustaining capital but this would place a burden on later years.

  132. 132
    BirdsofpreyRcool Says:

    CRK nicely in the green today. No debt helps.

  133. 133
    zman Says:

    BOP – yes, most of them would be.

    1520 – I thought about that. He does control 2.3 Bcfgpd of U.S. gas production.

    BOP – some days it does.

  134. 134
    VTZ Says:

    RE SU hedging: “As of September 30, 2008, costless collar crude oil hedges totaling 10,000 bpd of production were outstanding for the remainder of 2008. Prices for these barrels are fixed within a range from an average of US$59.85/bbl up to an average of US$101.06/bbl. In addition to these hedges, we have crude oil puts for 55,000 bpd of production for 2009 and 2010 that provide us with a floor price of US$60.00/bbl.”

  135. 135
    BirdsofpreyRcool Says:

    IG 274 bps… after starting the day at it’s widest ever, 292, it’s strangely calming to see “only” +274. The rules of capital markets, they are a’changin’… debt is the new equity. equity is the new warrants. banks are the new bondholders.

  136. 136
    zman Says:

    Those are some pretty substantial puts V. I guess I need to model these guys up.

    Bird – well said

  137. 137
    VTZ Says:

    Yeah I was surprised they were that high. I didn’t think they had that much hedged.

  138. 138
    zman Says:

    Me too, given the size I’d bet they designed it to ensure they have adequate $ for maintenance if not expansionary capex.

  139. 139
    BirdsofpreyRcool Says:

    one last piece to the New Rules of Capital Markets: the new banks are the U.S. taxpayers.

    With Congress as the Lending Committee.

    If you don’t like what the Lending Committee is doing with your money, speak up. The US taxpayer is our last line of credit. We should be careful who we chose to loan money to. We can’t afford to make many more mistakes.

    The Chinese, with their massive savings rate, are waiting in the wings, to take our place if we fail.

  140. 140
    BirdsofpreyRcool Says:

    … not to sound paranoid (or “Russian”) about it.

    Have a great weekend. And keep the thermostat on 84 degrees!

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