30
Dec

Tuesday Morning

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In Today's Post

  1. Holdings Watch
  2. Commodity Watch
  3. Viewer Mailbag - New SEC Rules & Implications
  4. Crack Spread Update
  5. Odds & Ends

Holdings Watch:

  • SUE - entered SU Jan $22.50 calls for $0.40 with the stock at $19 as a play on bouncing oil and a cheap, overly beat down name.

Commodity Watch

Crude Oil rose $2.31 to close at $40.02 yesterday on the back a weaker dollar, Israel/Hamas tensions, and evidence that OPEC is making good on recent cuts. The front month contract looks like this (oversold to any layman). This morning crude is trading off about 80 cents.

 

Natural gas rose a more impressive 27 cents to $6.08 yesterday (we switch to the February contract today) apparently on colder than expected weather last week, falling rig counts in most parts of the U.S., and the supply data outlined in yesterday's post and archived on the natural gas tab. Note that in this holiday light volume influenced week the gassy stocks did not sit up and take notice of this move. Perhaps people don't buy it because the weather has turned somewhat milder this week (casting doubt on next week's storage withdrawal  remaining in triple digit territory) or perhaps because we have seen so many headfakes of late or because no one is minding the equity store this week. I suspect it's a little bit of all three. This morning gas is trading off 8 cents with oil. 

Viewer Mailbag: Questions from after the close. Feel free to drop questions on me at night for an attempt at a coherant answer the next day.

Ram pointed out that the SEC has handed down their new reserve reporting rules for oil and gas companies. The press release announcing the revisions to current rules can be found here. This is the SEC's first change to the reporting rules in 25 years and while the details have not been released yet I think these are the key takeaways. Note that its not clear whether companies can use the new rules for 2008 or that they will have time to do so between now and mid February (when the 4Q reports are due).

  • a) Price Treatment For Reserve Calculations
    • The old way. Price used to calculate whether or not reserves are economic was the closing price on 12/31 for oil and natural gas. Too low a price and the reserve had to be written down, taking them off the reserve report and sending an impairment charge through the income statement.
    • The new way. Twelve month average price to be used instead of the point in time method. This should smooth some of the volatility out of reserve reports brought about by volatile commodity markets allowing for better comparisons of companies over time.
    • If today were the close of the year, the $6.14 gas price would likely trigger many ceiling test writedowns. But instead of $6.14, the annual average of close to $9 will be used.
    • This will help the higher cost names like (KWK) who are likely to need a higher gas price to avoid impairments
  • b) provisions that permit the use of new technologies to determine proved reserves if those technologies have been demonstrated empirically to lead to reliable conclusions about reserves volumes.
    • Translation: horizontal drilling and new completion methods have led to repeatable and predictable success in homogeneous plays (shales).
    • Good for the resource players (shaley names) like CHK, SWN, XTO, HK, RRC, XCO, KWK, GMXR, PVA to name the probably most influenced ones. 
  • c) allow companies to disclose their probable and possible reserves to investors. Currently, the Commission’s rules limit disclosure to only proved reserves.
    • again good news for the shale players but also for players with high impact exploration programs.
    • CHK, for instance, has 12.1 Tcfe in the proved category but can show 55 Tcfe of risked 3P reserves (that swell to 168 Tcfe on an unrisked basis).

Crack Spread Update. Margins are showing some signs of life and if this continues into the first quarter and rallies the group I'm likely to short the weaker independent refiner names against longs like in the likes of XOM. Gasoline and distillate are adequately stored and though the group is fairly cheap on forward earnings there are likely to be more bankruptcies before sentiment turns. I'm thinking negatively of overly indebted (WNR) and (ALJ).

Stuff We Care About Today

M&A News. Last week we had a deal by service co (FMC), this week (ALY) is acquiring a Canadian oil service firm doing business in Brazil. We are far from a return to normalcy in the financial markets but it is noteworthy that deals are getting done at all. 

Odds & Ends

Analyst Watch: None.

 

62 Responses to “Tuesday Morning”

  1. 1
    Sambone Says:

    Crude Edge Lower; Demand Concerns Still Weigh

    By Sherry Su
    Of DOW JONES NEWSWIRES

    LONDON — Crude futures traded slightly lower in a narrow range Tuesday as a lack of fresh fundamental news and absence of many traders amid the holiday season continued to prevent prices moving significantly in either direction.

    Despite a fourth day of Israeli air strikes on the Gaza trip, concerns over a potential disruption in oil supply in the oil-rich region were still outweighed by a gloomy outlook for global economic demand.

    “With most global economies struggling and credit markets still in an impaired state, it is hard to get too excited about the upside potential in energy markets attributable solely to geopolitical factors unless, of course, these are directed at the heart of the oil supply system,” said Edward Meir, analyst of MF Global in New York.

    At 1115 GMT, the front-month February Brent contract on London’s ICE futures exchange was down 30 cents at $40.25 a barrel.

    The front-month February light, sweet crude contract on the New York Mercantile Exchange was trading 47 cents lower at $39.55 a barrel.

    The ICE’s gasoil contract for January delivery was up $13.75 at $420.75 a metric ton, while Nymex gasoline for January delivery, which expires Wednesday, was down 80 points at 86.65 cents a gallon.

    The Israeli air strikes in the Gaza strip that began Saturday have so far killed more than 300 Palestinians, and stoked a mounting call from international community for an immediate ceasefire.

    Despite this, Israeli Prime Minister Ehud Olmert Tuesday said the blitz was “the first of several stages approved by the security cabinet.”

    Traders are closely watching whether the tensions could spill over into other Middle East countries, especially members of the Organization of Petroleum Exporting Countries.

    Separately, Nigerian militant movement, the Movement for the Emancipation of the Niger Delta, or MEND, said Monday it was closer to an “all-out oil war” following the arrest of a member of the movement and due to the alleged treatment of its detained leader, Henry Okah, who is standing trial on charges including treason, gun running, kidnapping and oil bunkering in connection with the insurgency in the Niger Delta.

    MEND and other militant groups in the Niger Delta have kidnapped more than 250 local and foreign oil workers, and destroyed several oil and gas facilities in the region.

    But for the oil market most attention is being saved for upcoming U.S. weekly oil inventory data, due 1535 GMT Wednesday.

    Crude oil stocks are expected to have fallen by 500,000 barrels in the week ended Dec. 26, while distillates stocks are likely up 1 million barrels, according to a Dow Jones Newswires’ survey of seven analysts.

    The focus is expected to remain trained on demand indications, with supply issues playing a subordinate role to consumption signals amid a continued global economic slowdown. However, some analysts warned the risk of relying too much on weekly reports by the U.S. Department of Energy for demand details.

    “By overestimating demand since 2007 the DOE has contributed to the move of WTI above $140 (a barrel) and by now underreporting demand it is contributing to the move of WTI below $40 (a barrel),” said Olivier Jakob, managing director of Swiss consultancy Petromatrix.

    “The margin of error in the DOE weekly report demand estimate is so great that one needs to carefully weigh the risk of trading solely on the demand numbers,” he said.

    —By Sherry Su, Dow Jones Newswires

  2. 2
    Sambone Says:

    Sunoco Sees Grim 2009, But Bright Future

    By JESSICA RESNICK-AULT
    Of DOW JONES NEWSWIRES

    NEW YORK — With a new chief executive in the driver’s seat, Sunoco Inc. (SUN) is poised to pull ahead of much of its competition, if not in 2009, then over the course of the next five years.

    Despite shrinking gasoline demand, a potential decline in diesel consumption, and a dearth of buyers for refining assets, Chief Executive Lynn Elsenhans plans to build Sunoco into a leaner, more efficient refiner. She plans to sell or shutter one refinery and to divest the company’s chemical plants, focusing instead on processing cheaper crude oil and meeting future diesel demand anticipated when the economic crisis passes.

    Sunoco, the second-largest independent U.S. refiner by volume, lacks the capacity to run large volumes of the cheapest grades of crude oil and has lagged some peers in investing in its plants.

    Elsenhans took the reins at the Philadelphia company in August, moving from Royal Dutch Shell (RDSA), where she managed the oil major’s global network of refineries. At Shell, Elsenhans created a joint refining venture with Mexican state oil company Petroleos Mexicanos, and sold smaller less-efficient refineries. Elsenhans’ strategic accomplishments at Shell have set high expectations for her performance at Sunoco, and the company’s shares have outperformed its peers since her appointment.

    “Clearly, there has been a hope that Ms. Elsenhans can pull a rabbit from the hat, given the out-performance of Sunoco since her appointment,” Deutsche Bank analyst Paul Sankey wrote in a recent report.Because Sunoco trades at a premium to other independent refiners, Sankey has a “sell” rating on the company with a $30 price target on the company. Sunoco was trading at $42.39a share on Monday afternoon.

    During the past two months, Sunoco has outperformed the S&P 500 index, which includes the refiner. Sunoco is trading at about 12 times the estimate of its 2009 earnings, while the refiners are trading at 10% of 2009 earnings estimates on average.

    At a meeting with analysts earlier this month, Elsenhans forecast a gloomy environment for the refining sector in 2009, indicating she wouldn’t be able to reinvent the conservative refiner right away. However, she laid out aggressive plans for change at a historically conservative refiner. “Hunkering Down” In anticipation of a difficult 2009, Sunoco has cut planned capital spending for the year. Elsenhans says she plans to reduce routine operating costs by more than 10%. The McKinsey & Co. consultancy has been retained to assist in a review of refinery operations and of business and operations support.

    The most dramatic cutback could come if the company cannot find a buyer for its 85,000 barrel-a-day Tulsa, Okla. refinery. Elsenhans has announced Sunoco will convert that refinery to a refined products terminal if the plant is not sold in 2009. The plant is the 68th largest of the 145 operating oil refineries in the U.S. and would be the first plant of its size to be closed in about a decade.

    To keep the plant operating, Sunoco would need to spend about $400 million to comply with environmental regulations. Elsenhans’ willingness to close the plant reflects Sunoco’s projection that refineries using high-cost crude oil to make a lower-cost slate of products like lubricant oils, won’t be profitable.

    “Given that a lot of these refiners aren’t going to receive the top dollar, or what they would have received a year and a half ago [in a sale], they’re considering other options,” said Alexandra Kirk of Washington, D.C.-based consultancy PFC Energy.

    While Sunoco is the first refiner to announce plans to close a plant, the problems the company faces have been seen across the sector. “They’re not alone,” said Chi Chow, an analyst with Tristone Capital in Denver. “It seems like most companies are hunkering down.”

    High crude oil prices were the root of refiners’ woes early in the year. But as prices declined, demand for gasoline didn’t recover. As a result companies like Sunoco have seen weak profit margins for their principal product.

    To cope with these problems, refiners have tried to buy lower-cost grades of crude oil and produce higher quantities of diesel fuel, which has provided better returns this year.

    Sunoco has reduced the volumes of costly Nigerian crude it has used in the past year, favoring higher-sulfur crudes that are less expensive. “I think there’s room for diversification away from light, sweet crude,” Elsenhans told Dow Jones Newswires after the analysts meeting.

    Sunoco has also ramped up the amount of diesel it produces, but may need to scale back in 2009, if diesel demand declines due to the global economic crisis, Elsenhans continued. As the financial crisis shakes Europe, a key market for U.S. diesel exports, refiners’ profits from producing diesel may fall.

    Forging Ahead
    Sunoco’s historically tight purse strings are unlikely to loosen immediately under Elsenhans. “They’re approaching their investment cautiously,” said Kirk of PFC.

    Elsenhans expects to increase the amount of heavy crude oil that Sunoco can process and ramp up diesel production. In making these major investments, though, she said she’ll seek a partner to share the cost.

    She hopes to first form a joint venture to run heavy crude produced in Canada at Sunoco’s Toledo, Ohio refinery, and says she’s already in talks with Canadian crude producers. While some integrated oil companies like ConocoPhillips (COP) and BP PLC (BP) have already entered into such agreements, Sunoco would be the first independent refiner to do so.

    A second joint venture with a crude producer would allow Sunoco to build at least one major unit to produce greater volumes of diesel at its refineries in the Northeast.

    But given the current tightness in credit markets, Elsenhans acknowledged these proposals still remain fairly distant. It will likely be at least five years before any major changes take place at Toledo, and the Northeast project would lag that investment.

    –(Jessica Resnick-Ault covers conventional oil refining and alternative fuels for Dow Jones Newswires

  3. 3
    reefguy Says:

    SEC rules: New ceiling test at average price should keep single midgets on life support and make mergers possible(going concern risk somewhat mitigated) If they can get thru till prices rise…

  4. 4
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures traded lower as the market refocused
    on rising inventories and weak demand.
    Light, sweet crude for February delivery traded $1.05, or 2.6%, lower at
    $38.97 a barrel on the New York Mercantile Exchange. Brent crude on the ICE
    futures exchange traded 68 cents lower at $39.87 a barrel.
    The oil market remains fixated on rising inventories in the U.S. and
    elsewhere, including a record-high inventory level at Cushing, Okla., the
    delivery point for the Nymex crude contract. This has caused near-term futures
    to trade at a steep discount to outer months, a phenomenon known as contango,
    and put pressure on the February contract, where traders anticipate the
    greatest oversupply.
    Oil prices rose Monday over concerns that Israeli airstrikes in Gaza would
    lead to a regional conflict that disrupted production, but the supply glut is
    seen as more pressing, market participants said.
    “The market shows its true colors as the deep contango continues,” said Tony
    Rosado, a broker with GA Global Markets in New York. The spread between
    February and March crude futures grew about 25 cents to $3.29 on Tuesday.
    U.S. oil inventories are expected to fall by 500,000 barrels in U.S. Energy
    Information Administration data for the week ended Dec. 26, according to a Dow
    Jones survey of analysts. Gasoline stocks are expected to grow by 1 million
    barrels, and distillate inventories, including heating oil and diesel, are seen
    rising by 400,000 barrels.
    A correction could be in the making, however, as the Organization of Petroleum
    Exporting Countries appears to be stepping up its compliance with a production
    cut agreed to in December. OPEC members reduced production by 400,000 barrels a
    day in December, “much better than expected,” according to Petrologistics, a
    tanker tracker.
    The group had reduced output by only 60% of a reduction of 1.5 million barrels
    a day in October, but early indicators show a higher degree of cooperation with
    the cut of 2.2 million barrels a day announced on Dec. 17.
    Analysts see a steep OPEC cut and a bottoming out of world oil demand as
    required conditions for prices to rebound.
    “With most global economies struggling and credit markets still in an impaired
    state, it is hard to get too excited about the upside potential in energy
    markets,” wrote Ed Meir with MF Global.
    Front-month January reformulated gasoline blendstock, or RBOB, recently traded
    down 1.18 cents, or 1.4%, at 86.27 cents a gallon. February heating oil 16
    points, or 0.1%, lower at $1.2837 a gallon.

    -By Brian Baskin, Dow Jones Newswires (Oliver Klaus in Dubai contributed to this article)

  5. 5
    zman Says:

    Reef- yep. Still can’t tell if the rules apply for 2008, looks like they go into effect Jan 15, 2009 so not sure if that means a big round of writedowns this year but not next or what. Leave it to the government to finally get it right but get the execution all wrong.

  6. 6
    Dman Says:

    CVX chart looks weird, even by recent standards.

    Todd Harrison pointed out yesterday that XLE chart looks bearish: churning below long term support ($60) with a flag that would most often break in the direction of previous trend (down).

  7. 7
    Dman Says:

    Flying on squished seeds:

    http://biz.yahoo.com/ap/081230/as_new_zealand_airplane_biofuel.html

  8. 8
    zman Says:

    XLE looks like a base to me but I’m no TA expert. Looks to be tightening range on decline volume. That CVX chart looks a lot like fellow major XOM’s chart. I think none of these charts get excited until crude closes above $40 again and appears to trade sideways itself.

    Dman – A one stop shop for all your jatropha needs: http://en.wikipedia.org/wiki/Jatropha

  9. 9
    zman Says:

    Worst case scenarios by Saxo Bank:

    http://finance.yahoo.com/banking-budgeting/article/106331/No-Growth-in-China-and-Other-Outrageous-Prophecies

  10. 10
    zman Says:

    Consumer confidence hits all time low in December.

    http://news.yahoo.com/s/ap/20081230/ap_on_bi_ge/economy

  11. 11
    pearl1301 Says:

    who was it that got LINE a couple of days ago? good trade..up nicely today.

  12. 12
    zman Says:

    Pearl I know APBD bought some yesterday morning. I ran a piece on the MLP’s back back in October:

    http://zmansenergybrain.com/2008/10/21/tuesday-trials/

  13. 13
    zman Says:

    Market action worse than watching paint dry. Wake me up next week.

  14. 14
    tater Says:

    I’m no expert, and I don’t want to dispute Mr. Harrison. Just want to add that on the weekly view of XLE, the bear flag is concentrated at exactly the .62 Fib retracement area which is where you would want to find a congestion zone. That would signal to me that we need to wait on the breakout of the triangle. The idea that it “should” fail to the downside, or break to the upside, is not really a function of that formation (which shows a battle, or market indecision). The volume can be a good indicator, but since it is such a broad based tracking ETF, it needs to be seen in light of the volume of the overall S&P, which is also holiday skewed.
    Lots of words to say I agree with Zman’s assessment that it is a wait and see situation.

    The treatment of reserves. I remember reading something last year (I think it was in a UTS Energy analysis) that the biggest beneficiaries of the change in accounting was going to be oil sands producers as they have had to treat their heavy oil as speculative. Any thoughts on this?

  15. 15
    Jay Reynolds Says:

    OPEC Cuts Oil Supply Below December Target, PetroLogistics Says

    By Alexander Kwiatkowski

    Dec. 30 (Bloomberg) — OPEC cut oil production this month as the group complies with efforts to reduce supply and boost prices, according to Geneva-based consultant PetroLogistics Ltd.

    Oil supply from the 11 members of the Organization of Petroleum Exporting Countries subject to quotas averaged 27.1 million barrels a day this month, down from 27.5 million barrels a day in November, PetroLogistics said.

    For November and December, the target ceiling for 11 OPEC members was 27.308 million barrels a day. A lower collective target of 24.845 million barrels a day will come into force on Jan. 1 when OPEC begins output cuts agreed on Dec. 17 at a meeting in Oran, Algeria.

    http://www.bloomberg.com/apps/news?pid=20602099&sid=amrGyP3AIIAc&refer=energy

  16. 16
    Dman Says:

    tater, I was hoping you’d offer a view. Harrison was not dogmatic on it BTW, he just mentioned it in passing and has been getting long USO in recent days.

  17. 17
    tater Says:

    Dman, yep, I’m long and wrong on USO as well. Have been attempting to do some reading lately on the USO, and now that I am involved, I am seriously considering jumping ship to what may be a better way to play a bump in crude pricing. (In other words, I am beginning to see the light Mr. Zman!).
    Cost of rollover, blah blah = listen to Zman.

  18. 18
    zman Says:

    Tater – you really are too kind. I have been long and wrong much in the back half of 2008.

    Need a contest idea. Feeling generous as in cash prizes or free membership time. I’ve never offered discounts to new subs like the cable companies do. Seems kind of counterintuitive to reward new people and not your existing base. Anyway, if you few guys hanging out on this holiday light week can come up with a contest of some energy worthiness (unfortunately judged by me) then I will come up with some sort of prize. Maybe one of those Zman hats or T-shirts or a free month or fifty bucks, I dunno, just bored and musing. I had thought of picking the closing price of oil for 2008 but that’s just silly. M&A contests are a bit out of fashion at the moment and I’m thinking of something with more of an immediate payout possibility, say next week or two.

  19. 19
    crysball Says:

    Anyone subscribe to Drilloggix database on the up to the minute location of Jackup Rigs……am trying to locate Pride Cabinda and GSF Adriatic VI to determine if either has moved recently [within the last week]?

  20. 20
    elduque Says:

    Interesting read is Paul McCulley of Pimco’s latest epistle.

    I also sent Z the latest write up from Credit Suisse on SD.

  21. 21
    zman Says:

    Crys – I sent that message to a couple of guys who I think have access but have received no response as of yet. Holidays …

  22. 22
    zman Says:

    El – can you sent the Pimco piece to BOP, it would be good to get here opinion. She’ll be back from vacation next week.

  23. 23
    Sambone Says:

    HOUSTON, Dec 30 (Reuters) – Coal supplies at U.S. power
    plants fell 2.3 percent this week from last week but are 7.4
    percent greater than the same week of 2007, Genscape said
    Tuesday.
    Electric companies had 158.6 million short tons of coal
    stockpiled, compared with 162.3 million tons reported last
    Tuesday and 147.7 million tons the same week of last year.
    U.S. generators had an average of 57 days’ worth of typical
    coal burn on hand, one less than last week, but four more days’
    supply than the same week last year, Genscape said.
    Eastern coal mine output dropped because of the Christmas
    holiday, and Western coal shipments were disrupted by heavy
    snowfall, Genscape said.
    But slackening power demand in a stalled economy and a
    slowdown in U.S. exports have made more coal available to
    domestic utilities, improving the supply outlook, Genscape
    said.
    Coal stockpiles usually grow in the spring and fall, when
    mild weather eases cooling or heating demand.
    Stockpiles shrink as winter or summer sets in across the
    country, boosting demand for electricity for heating or
    cooling.
    Earlier this year, U.S. coal exports had cut Atlantic Coast
    utilities’ ability to build stockpiles during the fall, but the
    economic slump is cutting world demand for U.S. coal.
    Mathematical rounding sometimes affects the results,
    overstating some changes and understating others, Genscape has
    said.
    (Reporting by Bruce Nichols; Editing by Christian Wiessner)
    Tue Dec 30 17:00:03 2008

  24. 24
    elduque Says:

    Check your mail

  25. 25
    Dman Says:

    Just noticed that item 10 in the Saxo article (post #9) refers to the “Chinese yen”.

    Hmmm…

  26. 26
    VTZ Says:

    tater – As far as I know, this SEC announcement does not change the way that reserves are calculated in oil sands mining operations because they are not classified as proved or probable until mining is started at which point the mine becomes proved reserves once their extraction operation starts.

    I’ll look into it. It may affect the insitu producers.

  27. 27
    zman Says:

    Will send to her, Mahalo nui loa.

  28. 28
    zman Says:

    V – I will look as well. Canadian reserve reporting is more liberal than U.S. rules so this actually brings SEC more in line with what you see on SEDAR for our friends north of the border. The wording is vague on what the “technology recognition” will mean but I know they were angling to up the PUDs (proven undeveloped reserves) that go along with each successful wellbore. CHK has long complained that when they drill one well they could honestly book a lot more in terms of adjacent reserves since they know those reserves to be there in such a homogeneous play. It seems that this would benefit the reserves of the insitu guys on the same principal.

  29. 29
    ram Says:

    Just give us all T-shirts and you’re done – no more thinking about it!

  30. 30
    zman Says:

    Wup, there ya go starting trouble. That’s a lot of T-shirts.

    Oil at its best levels of the day with 20 minutes to go.

  31. 31
    1520sbroad Says:

    anyone seen anything written on SJT – up almost 12%. It’s a royalty trust, ex day was yesterday, big volume today, most other royalty trusts are flatish today. Could just be end of year quirkiness? is there a potential impact to reserves for these vehicles with the SEC changes discussed?

  32. 32
    Sambone Says:

    NEW YORK (Dow Jones)-U.S. gasoline demand, measured by purchases at the pump,
    fell 2.9% to 9.134 million barrels a day in the week ended Dec. 26, according
    to a report by MasterCard Advisors LLC, a division of MasterCard Inc. (MA).
    Gasoline consumption in the latest week was depressed by bad weather and the
    Christmas holiday, which normally causes a slight dip in demand. However, the
    year-on-year demand decline of 3.8% seen in the week was consistent with a
    pattern of falling consumption that’s been reported throughout 2008.
    Year to date, gasoline consumption is down 3.2% compared with the same period
    in 2007, according to the report, which is compiled by SpendingPulse, a retail
    data service of MasterCard Advisors.
    The average for the past four weeks showed a drop in demand for the 46th
    consecutive week with a decline of 3.0%. The four-week consumption average was
    last above year-ago levels in February, according to the report.
    Demand has fallen even as gasoline prices have declined. The national average
    price of retail gasoline fell 4 cents a gallon to $1.613 a gallon for the week
    ended Monday, according to the Department of Energy’s statistics arm, the
    Energy Information Administration. The decline was the 13th consecutive price
    drop, bringing the price down more than 44% from year-ago levels.
    Michael McNamara, the SpendingPulse report’s lead author, said falling
    week-on-week demand is typical during the Christmas Holiday. “Gasoline
    consumption typically spikes a couple of days before, and is suppressed on
    Christmas day,” McNamara said. Bad weather may have also provided an additional
    impetus for drivers to stay off the roads, particularly in the Northeast and
    Pacific Northwest, where storms limited driving on Dec. 20 and Dec. 21, he said
    SpendingPulse is a macroeconomic indicator that reports on national retail
    sales and is based on aggregate sales activity in the MasterCard payments
    network, combined with estimates for all other payment forms, including cash
    and check. SpendingPulse from MasterCard doesn’t represent MasterCard
    financial performance.
    The Department of Energy will issue its weekly petroleum data, including
    gasoline demand, on Wednesday at 10:35 EST.
    The data, put out by the EIA, don’t count the number of gallons sold. Instead,
    it offers a “Product Supplied,” or implied demand, figure in its weekly report.
    Product supplied represents the total volume of gasoline that has moved on from
    refineries, pipelines, blending plants and terminals on its way to supplying
    retail stations.

    -By Jessica Resnick-Ault, Dow Jones Newswires
    Dow Jones Newswires
    12-30-08 1400ET

  33. 33
    zman Says:

    1520 – probably end of year stuff or a broker comment. On reserves they would be impacted on the CBM stuff in the San Juan but most companies are not reacting to the SEC news much if at all.

  34. 34
    1520sbroad Says:

    gotcha – i haven’t seen any comments. Maybe folks looking for unleveraged (key word these days as we grind to year end) access to reserves.

  35. 35
    apbd Says:

    Dipping my feet back in the ocean.
    USO Jan 31 Call (UBOAE) at 1.95
    Very small purchase. Go Oil.
    apbd

  36. 36
    ram Says:

    Fine, too many people. How about a treasure hunt of some sort?

  37. 37
    tater Says:

    Thanks V for the info. I do remember that the issue was one of the background ideas behind investing in one of the smaller guys (like UTS). Something about once the SEC changed reporting rules their total reserves number would skyrocket. I don’t know why an SEC rule would affect a Canadian company unless it has to do with lending or exchange listing requirements or even GAP, certainly not my area.
    I appreciate you guys working on it.

  38. 38
    md Says:

    what’s the difference between DBO and DXO.

    Contests – If you wouldve asked us a few weeks ago when Intern the 2nd was born, I had some ideas.

  39. 39
    zman Says:

    hear ya md, did the post answer your question?

  40. 40
    md Says:

    Yes thanks. I might ask for more details

  41. 41
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures fell Tuesday as concerns about
    weakening demand overshadowed escalating hostilities in Gaza.
    Light, sweet crude for February delivery settled 99 cents, or 2.5%, lower at
    $39.03 a barrel on the New York Mercantile Exchange. February Brent crude on
    the ICE futures exchange settled down 40 cents, or 1%, at $40.15 a barrel.
    Oil prices partially retreated from gains made Monday, when Israeli air
    strikes on Hamas positions in Gaza raised fears of a regional conflagration
    that could disrupt oil production. With that prospect priced into the market,
    traders returned their focus to weakening demand, and the bulging inventories
    seen worldwide as a result.
    Despite falling prices at the pump, U.S. gasoline demand dropped 3% in the
    four weeks ended Dec. 26 from a year earlier, the steepest decline since the
    period ending Nov. 21, according to MasterCard Advisors LLC, a division of
    MasterCard Inc. (MA). U.S. consumer confidence also hit an all-time low in
    December, the Conference Board said Tuesday.
    “Everybody is saying the economy is dismal, and … the bottom line is that
    everybody is just thinking demand is going to go down,” said Mark Waggoner,
    president of Excel Futures in Newport Beach, Calif.
    Some, including Waggoner, believe demand may be on the cusp of turning around,
    however, as gasoline prices continue to fall.
    The Organization of Petroleum Exporting Countries is also stepping up its
    efforts to reduce supply. Members reduced oil production by 400,000 barrels a
    day in December, according to tanker tracker Petrologistics. Saudi Arabia, the
    world’s largest oil exporter, is due to inform customers about February crude
    shipments at some point in the next two weeks.
    OPEC has its work cut out for it to bring oil supplies in line with falling
    demand. Inventories at Cushing, Okla., the delivery point for the Nymex
    contract, hit a record 28.5 million barrels in the week ended Dec. 19. Some
    still expect a build at Cushing, though storage space is growing scarce.
    The U.S. Energy Information Administration is due to release updated data on
    Wednesday, and analysts see oil inventories nationwide falling 1 million
    barrels, according to a Dow Jones survey. While some companies have an
    incentive to store oil due to the large spread between front-month and
    outer-month futures contracts, others will need to reduce stocks to avoid tax
    charges.
    “Companies don’t like holding inventory at the end of the year, so very likely
    we draw again,” said Tom Bentz, a broker and analyst with BNP Paribas in New
    York.
    Analysts also gave an average forecast of a 1.4-million-barrel build in
    gasoline stocks, and an 800,000-barrel increase in distillate inventories,
    including gasoline and heating oil.
    Front-month January reformulated gasoline blendstock, or RBOB, settled at 1.08
    cents, or 1.2%, higher at 88.53 cents a gallon. January heating oil settled 27
    points, or 0.2%, higher at $1.2880 a gallon.

    -By Brian Baskin, Dow Jones Newswires (Oliver Klaus in Dubai contributed to this article)

    Dow Jones Newswires
    12-30-08 1518ET

  42. 42
    VTZ Says:

    tater – It was probably BQI. BQI is only listed on the AMEX… they are the company with a large amount of land in Saskatchewan. Their resources still lie within the Athabasca Basin although the majority is not in Alberta.

    This would most certainly affect them if they prove that they can economically recover the resources with insitu production.

  43. 43
    VTZ Says:

    tater- Although nobody asked for my advice I’ll give it anyways and I’ll say that BQI is highly speculative and until Saskatchewan has a concrete Oil Sands or Heavy Oil Royalty scheme I don’t think there is any rush to go buy the stock.

    To me, all I see is more dilution coming.

  44. 44
    zman Says:

    re 40 – me too, the press release so far just basically said “coming soon”.

    Thanks for that thought on BQI. To me its like buying in acreage in the Haynesville but having no production on it. Maybe a little better than that as they do have a plan and I think have even moved a little dirt around. But nothing like a SU.

  45. 45
    VTZ Says:

    You’re right that it’s like buying Haynesville land, except with the knowledge that you will either need to contiually give pieces of land away (dilution) or go beg the banks for incredible sums of cash.

    That being said, the resource IS there and the land holdings are large. You also get about 40 cents a share in cash, although that could get burned through in a Q if they weren’t just milking it.

  46. 46
    Wyoming Says:

    An interesting slide show presentation on the current economy and energy. Not stirring up Peak Oil or any other debatable / political dialogue.

    http://www.chrismartenson.com/crashcourse

  47. 47
    VTZ Says:

    The only reason they have that cash is they issued 89 million in stock this Q. If they do that again next Q then thats over 50% dilution. No thanks?

  48. 48
    zman Says:

    Hear ya V, thanks.

    Hey Wyoming, do you have access or friends who have access to drillogix? See Crys question above. By the way, the politics are fair game for the holidays, lol.

  49. 49
    Wyoming Says:

    No, I saw that. We sold off all our deepwater domestic and international. All our related subscriptions have expired. Everything we now have gives you a place to run, not jump when the pooh hits the fan.

  50. 50
    zman Says:

    Pritchard Capital on the tape saying CHK, HK, GMXR, PQ stand to benefit from new SEC rules. Pritchard also said that some companies that may see a benefit from no ceiling test write down due to the use of average price include PXD, XCO, and BRY.

    Tudor Pikcering says investors should “warm to the prospect”

  51. 51
    zman Says:

    Thanks W. Rant politically away.

  52. 52
    Wyoming Says:

    2 things bugging me. $1.27/gal gas and that the world now decides that a military conflict is bad (higher prices) for oil. It is assumed that nobody condones the loss of life in these types of topics. Seriously, Russia goes clean into Georgia, messes with pipelines and bupkis. Also, don’t get me wrong, the Hk/Jan $15 calls are working nice, but with 70 degree weather at the zoo today and rigs dripping not dropping off, I don’t see how gas is going up.

    I just don’t see a bottom to any of this until there are more bankruptcies or a start of mergers/takovers.

  53. 53
    Wyoming Says:

    Oh and add that Cramer is bullish on CVX, BP and COP. Tell me that is not something to fade.

  54. 54
    zman Says:

    Dude, don’t hold back. You were the one who cautioned me to be patient until the new year on the rig drop, though. I think that gas will discount that move early, may already be doing so. Warmth doesn’t help and the forecast for January that I saw last was a warm one so it may be tough times for NG as in limited upside. Still, the stocks are discounting something closer to $4.50 I think just based on peak to trough math of the fall in gas vs the fall in the gassy stocks.

    Re the lack of geopolitical impact, I hear ya. I think that that will gain traction early this year. MEND is about to get busy and Obama is about to get tested.

  55. 55
    Wyoming Says:

    That’s my point, rig count is still high-ish, temps will get/are warm-ish and nat gas is going up?

    Has to be a bear flag, only thing I can see. Covering shorts by EOY.

    I want some good entry points and I want infrastructure to drop so that we don’t have to go through the pain of Senate hearings and CEO’s reading from scripts.

  56. 56
    zman Says:

    Well, NG was off 25 cents today if it makes you feel better.

  57. 57
    italyinvestor Says:

    Z – Since you’re taking requests since things are slow….I’m looking a building some long positions for IRAs/family accounts. You had a chart posted in the past that showed some of your favs with respect to debt and i think their estimated cost to produce a mcfe. I believe the low debt E&Ps will be more stable short term and will lead during the recovery. Am I off base here? If not, could you repost or do up a chart for the gassy names and the oils that shows debt levels and estimated production cost?

  58. 58
    Wyoming Says:

    Thanks, back to work tomorrow, vaca drawn to 0 balance. Have to start doing the DD for rigless and optimization projects. Rather go to a dentist.

    Have one call to try and find the P Cabinda and GSF Adriatic VI. Maybe get a free lunch and learn if service co’s feeling any pain yet.

  59. 59
    zman Says:

    Italy – I agree with you there. Will repost for the morning with any updates.

    Thanks Wyoming.

  60. 60
    calvo Says:

    Z, do you reckon there’s a serious chance of getting more (credit-related) bad news on SD which have not yet been priced into its shares? Did the Credit Suisse piece on SD from elduque uncover anything new?

    I’m thinking about getting in for the long term.. any additional insights would be much appreciated – thanks!

  61. 61
    mimster90 Says:

    zman any thoughts on when is a good time to go long on kwk, chk, sd, hk etc… As well as which ones are best to focus on.

    I am glad I listened to you on line, evep and atn.
    I am thinking they will retest lows 1 more time before going up. I see no good economic news in the first or second quarter of next year (revenue guidance down across the board, more retail bankruptcies, higher unemployment, etc…) unclear to me what could turn all that around even with lots of cash supposedly on the sidelines.

  62. 62
    zman Says:

    Calvo and Mim, will answer in tomorrow’s post along with Italy’s question. Thanks for asking.

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