09
Jan

Jobless Friday

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The jobs report came in at 524,000 lost for December, in line with estimates that were revised lower following ADP's back breaker of a number on Wednesday. Unemployment stands at 7.2% and there were downward revisions (more losses) to the October and November numbers. Futures ticking up following the news as many feared it could be a lot worse.

Service Job Cuts Watch:

  • (SLB) Cuts 1,000 North American Jobs.
  • (HAL) has indicated it will also be cutting jobs and I'm sure the same can be said for (BHI), (BJS) ....

Obama Watch:

  • President elect Obama said he wants to double energy generated from alternative sources in the next 3 years. In fact an Obama transition aide in an emailed statement wrote ~
    • "The United States currently produces roughly 24,000 MW [megawatts] of wind, solar, and geothermal power. Before the financial crisis brought the renewable industry to a halt, the wind industry publicly announced the expectation to install at least 7500 MW in 2008. By providing significant loan guarantees and ultimately later down the road a national [renewable portfolio standard], we are confident we will get the wind industry back on track. In addition to the 20,000+ MW of wind, we are confident that with the same combination of support and renewable standards, the geothermal and solar industries can install 4,000 MW of new power."
  • I would note that FSLR's recent 10 MW installation for Sempra was the largest thin-film solar installation to date in the U.S. Thats 10 MW....vs 4,000 the above email calls for. In fact, there were 400 MW of solar utility power installed in the U.S. five years ago and 500 MW installed as of 2007. So in five years the U.S. added 100 MW but in the next 3 it will add 4,000? Hmmmm.
  • I don't mean to be a skeptic and maybe a greater burden of the 4,000 is on the mentioned geothermal side of the equation but progress there has moved at a geological type pace to date and those projects just won't be .
  • You can see all of the renewable generation capacities here. This is likely where the 24,000 MW in the aide's comment comes from with some updates for 2008 additions.
  • Rex Tillerson, CEO of XOM went out of his way to note that this would be "challenging".  He pointed out that the current capacity for turbines and blades is pretty much tapped out. 
  • Not to be left out, the solar and wind trade groups (combined wouldn't that be hot air?) are hosting a joint conference call to today at 12 EST at 866 682 0556 to discuss how they will make the president's goal a reality (see the solar comments below). 

 

In Today's Post:

  1. Holdings Watch: Added some FSLR and SU February exposure
  2. Commodity Watch
  3. Natural Gas Storage Review - bad number but not as bad as it looked.
  4. Stuff We Care About Today - CVX warns, EOG reiterates conservative stance
  5. Multiple Update - Solar Stocks
  6. Odds & Ends

Holdings Watch: The wiki tab is updated.

  • (SU) February $25 Calls (SUBE) added for $1.60 with oil down 50 cents at $42 and the stock flat on the day.

 

  • (FSLR) January $160 Calls (HJQAL) for 4.50 with the stock up $3 at $151.50. This is just a quick trade, call it an Obama play if you like as we approach inauguration, and the stock has been acting right and is cheap for it at present.

Commodity Watch

Crude oil fell $.093 to close at $41.70 yesterday after trading as low as $40.54 on further weak economic data points. This morning crude is trading off slightly but may recover if the equity markets can shake off the jobs report.

  • OPEC Watch: From Reuters ~ Top crude oil exporter Saudi Arabia will deepen its supply cuts in February from January levels to Asian consumers to their lowest in almost five years, industry sources said on Friday, as it strives to support oil prices. ZComment: This is their way of saying, "no really, we mean it".
  • Israel/Gaza Watch: The U.N. has called for a ceasefire; Israeli attacks on Gaza intensified overnight. At some point, probably soon, a tenuous ceasefire will take hold and in the past Israel has stepped up the number of strikes just prior to ceasing hostilities (hitting last minute "targets of opportunity"). When a ceasefire is call I would expect oil to take another shot at a $40 test.

Natural gas fell $0.29 to close at $5.58 yesterday after the EIA released a storage number that was below consensus estimates (more on that in the next section). We are range bound. This morning gas is trading essentially flat.

  • Putin Watch: EU putting monitors in place at compression stations across Ukraine; still no sign of gas headed to Europe.

Natural Gas Storage Review

ZComment: The release was a bit of a confusing release since the EIA made an adjustment to their dates and historical data at the same time.  Key takeaways

  • 47- Bcf withdrawal will appear to be a 67 Bcf withdrawal when we look at it this time next year as the EIA's new data file for 2008 is showing the last weekly withdrawal left storage at 2,897 and not the 2,877 Bcf they show in this week's table or that they had on the books as of last weeks release. Ah to be the government and simply re-write (true up) history without explaining yourself! Ya gotta figure, if they can't account for several $B's from the TARP, what's a few natural gas B's?
  • Either way, the number was light for this time of year.
  • Hurricanes Saved Gas's Near Term Bacon. It may not feel like it from a price perspective but storage could be another 200 Bcf north of its current location were it not for the interruptions to Gulf of Mexico and Gulf Coast production brought about by Gustav and Ike. That production continues to recover.
  • Texas production is apparently still growing (though not for long to be sure) as the producing region actually saw a build in inventories which is a record for this time of year.
  •  Bottom Line: not a lot of impetus for a near term rally in gas. On the flipside, the falling rig count (and number's like this week's storage number will only help encourage rigs to be stacked) will lend support.

Stuff We Care About Today

CVX Warns Regarding 4Q Numbers:

  • Warning attributable to:
    • price weakness in the upstream - that should not be much of a surprise as oil (WTI) and natural gas (Henry Hub) were down 50% and 30% respecively from Q3. That's a big drop for one quarter's time. 
    • lower volumes in the chemicals segment,
    • bigger than expected charges,
  • Says Q4 earnings to be "significantly lower" than Q3; Q3 earnings were $3.25.
  • No mention of what Q4 earnings will be; the Street is at $1.78 (which, in my book, is "significantly lower")
  • JP Morgan raised their rating here to Overweight after the company warned.

EOG Reiterates Cash Flow Neutral Spending, Guides As To When It Will Guide Again

  • Capex to match cash flow in 2009 (no kidding)
  • and that debt will be flat at end of 2009 with end of 2008 levels. I said in yesterday's post that they'd get to $0 debt by 2010 so that sounds fine.
  • They also mentioned they will update production guidance for 2009 when they announce 4Q results (they were at 10 to 14% range and I bet they go ahead and pick the low end of the range for their target now given where gas prices are are).
  • Hedges: unchanged in 2009, nice pricing ($9.87 on swaps) shown for 2010 but light in terms of % of expected volumes at this time.

Multiple Update:  Solars.

Key thoughts:

  1. Solar supply exceeds demand, higher efficiency, lower cost per Kwh will be desired in an industry that is less hot than last year (FSLR is lowest cost and improving efficiency).
  2. Post bubble, the stock have not been cheaper. A lot of times in this type of industry, there is cheap and there is cheap for a reason. I think (FSLR) at these multiples is much more of a bargain than an (ESLR)
  3. Liking linear progression (up and to the right) for earnings of the two highlighted in the table above. Keeping it simple, at least in the beginning of an industry turn is usually a good idea.
  4. These are momentum stocks, can't stress that enough.
  5. Obama likes solar as much as he dislikes coal, maybe more now that pre campaign as the industry is key to his green collar jobs program. My sense is that not only will there be increased funding for research here but plenty of government push programs to get people to put panels on their homes and businesses and that require utilities to up the % of power generated by solar (FSLR and SPWRA have recently implemented state-side and European utility installations).
  6. The stocks could run into the inauguration (but may sell down just before or after in Buy the Hope, Sell the Reality action).

Odds & Ends

Analyst Watch: JPM ups (CVX), cuts ratingd on (MRO) and (PTR) to Neutral. Citi initiates coverage on the coal industry, mostly with Hold ratings, although (PCX) warrants a Sell rating while (FCL) gets the solitary Buy nod. 

92 Responses to “Jobless Friday”

  1. 1
    Sambone Says:

    By Lananh Nguyen
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude oil futures fell in London Friday on a combination
    of bleak expectations for U.S. jobs data and easing geopolitical concerns.
    Prices shed earlier gains as participants turned their attention forward to
    U.S. non-farm payroll data due at 1330 GMT, which are expected to reflect a
    grim picture of the U.S. economy.
    “All markets (are) bracing themselves for a negative report,” said Olivier
    Jakob, managing director of Petromatrix, a consultancy in Switzerland.
    At 1231 GMT, the front-month February Brent contract on London’s ICE futures
    exchange was down $0.56 at $44.11 a barrel.
    The front-month February contract on the New York Mercantile Exchange was
    trading $0.65 lower at $41.05 a barrel.
    The ICE’s gasoil contract for January delivery was down $6.75 at $471.50 a
    metric ton, while Nymex gasoline for February delivery was down 122 points at
    107.60 cents a gallon.
    But prices had largely stabilized as participants awaited crucial data from
    the U.S. A Dow Jones Newswires survey of analysts expects the a 525,000 decline
    in U.S. non-farm payrolls.
    “Job losses in excess of 500,000 would likely cause discomfort amongst market
    participants and could result in further losses in the crude market,” said
    Nimit Khamar, an analyst at Sucden Financial in London.
    Crude futures also fell on geopolitical concerns – which had ratcheted up
    prices earlier in the week – were quelled by some diplomatic moves.
    Russia and Ukraine agreed in overnight talks to deploy an international
    monitoring group to observe gas flows via Ukraine after a dispute over gas
    pricing, statements said Friday. Meanwhile, the U.N. Security Council Thursday
    passed a resolution calling for an immediate ceasefire in the Gaza Strip.
    “We’ll see it comes off,” if further evidence emerges that either of the
    conflicts is easing, a broker in London said.
    Despite modest losses, market participants said further price declines would
    be limited by the Organization of Petroleum Exporting Countries’ resolve to
    constrict supplies in line with its latest production policy.
    “We regard the cuts on the supply front as crucial to stabilize the oil price
    at $40 a barrel,” said Commerzbank analyst Eugen Weinberg, citing news of lower
    deliveries from Saudi Arabia, Venezuela and Angola as confirmation of OPEC’s
    compliance with production cuts.
    “Now that OPEC has implemented the autumn decisions with unexpected unity, it
    also seems determined to enforce the cuts from December.”
    -By Lananh Nguyen, Dow Jones Newswires

    Dow Jones Newswires
    01-09-09 0742ET

  2. 2
    Sambone Says:

    8:01 (Dow Jones) JPMorgan cuts near-term oil price forecast — to a $43/bbl
    average price in 2009 from $69/bbl, and to $65/bbl in 2010 from $85/bbl — on
    expectation of continued weak demand. Firm expects global economic weakness,
    OPEC members dragging their feet in complying with OPEC production cuts and
    inventory building to weigh on prices through 1H09, but believes markets will
    trend upward beginning in 2H09 as they discount tightening supplies next year.
    JPMorgan says 1H09 is good time for disciplined buying of integrated oils, and
    upgrades Chevron (CVX) to overweight; Marathon Oil (MRO) to neutral on
    valuation and relative balance sheet strength. (EBW)

  3. 3
    elduque Says:

    BDI +51 to 872
    TED -.09 to 1.19

    Both continue to improve

  4. 4
    BirdsofpreyRcool Says:

    Nice to know we averted the Armegeddon Scenario this morning. Credit rallying on the news of a Jobs Report that wasn’t outside the boundaries of “expected” and better than the whisper numbers (630 -710K).

    However, wanted to get the Trading Desk’s technical comments out early. Their algorithm is based on historical patterns. But, they tend to be more right than wrong. Take with a grain of salt: high of day will be 9:35 EST, then will sell off and continue to slide the whole day. The program gives this scenario a 5:1 odds of being correct.

  5. 5
    Sambone Says:

    MOSCOW (AFP)–OAO Gazprom (GAZP.RS) Friday said Kiev had agreed to allow
    Russian energy officials into Ukraine, removing a key obstacle to a deal on
    resuming gas supplies to Europe, Russian news agencies reported.
    “Ukraine…has accepted the offer to create an international multilateral
    monitoring commission” including Russian officials to check gas flows through
    Ukraine to Europe, Gazprom chief Alexei Miller was quoted as saying.
    “We hope that things will now move quickly and constructively and that the
    Ukrainian side will abide by the agreement that it has so far accepted only in
    words,” Miller said.
    In a meeting with President Dmitry Medvedev earlier Friday, Miller said
    Gazprom would only resume supplies to Europe through Ukraine once Kiev has
    formally signed a deal on the deployment of gas monitors.
    Russia entirely cut off supplies to Europe that account for around a fifth of
    the European Union’s total consumption earlier this week, saying it had been
    forced to do so because Ukraine was stealing the gas.
    Ukraine denied the accusation and blamed Russia for the crisis.

    Dow Jones Newswires
    01-09-09 0913ET

  6. 6
    BirdsofpreyRcool Says:

    thanks, elduque. bloomberg blurb this morning pointing out that even with the massive improvement in the TED Spread, we are still 3x the “normal” level of pre-credit crisis. So, many rows yet to hoe. But, sure like the direction.

    Key will be: will the single-name buying of credit we have seen for the last 4 days continue?

    Our benchmark Kansas City Southern bonds, issued in mid-Dec at 88.4 with a 13% coupon, are currently bid at 103. That is a mammoth move in three weeks. I am using these bonds as a barometer of the cash bond market (and not just the index).

    Remember the high yield bonds that little IO wanted to issue. Well… looking at recent headlines for the company, i think they can kiss that issuance good-bye.

  7. 7
    Nicky Says:

    Morning all. Looks like your $40 gonna be seen sooner rather than later Z. The fall in the last 3 days now looking as nuts as the rise of the week before that!
    Oil taking no notice of the indices holding up this morning.
    March T Bonds off a cliff since the data which looks like a 5th wave down completing before we see a corrective. Had a very big move this week.

  8. 8
    BirdsofpreyRcool Says:

    Worth pointing out: with the prior month revisions of -153k jobs, the -524k was actually -677k. Also, hours worked are weaker than the headline number indicates. Not to be a wet blanket about it, or anything.

  9. 9
    Wyoming Says:

    http://www.chron.com/disp/story.mpl/front/6200626.html

    Looking at the numbers, this is almost a non-event. 600 to 1,000 people is their annual Jan cut ala GE / Jack Welsh. The 600 number from my friend is probably correct fir direct reductions, a hiring freeze/attrition and drug busts will probably be the remainder. Perhaps there will be a round 2 or 3. I don’t think there is enough pain for the service side yet. Time will tell.

  10. 10
    zman Says:

    Nicky – yep, if it cracks $40 then I’d bet on a pretty rapid failure to the next round number and then the next and so on until it holds one of them. Of course, such a failure increases the likelihood that OPEC accelerates its next meeting and makes more cuts.

  11. 11
    zman Says:

    Wyoming – hear ya re not enough pain on the service side. HK comments to me yesterday that they still aren’t seeing much in the way of service costs falling.

  12. 12
    zman Says:

    Crude broke $40 briefly, surprised it didn’t cascade into a sell off immediately.

    Solar and drybulks only two sectors doing well. Not sure I get the reaction in the dry bulk market but those stocks are going bonkers.

  13. 13
    Wyoming Says:

    BOP,
    Re 4, that is impressive … they were off by 3 minutes on the SPX (joke).

  14. 14
    BirdsofpreyRcool Says:

    Here’s something to chew on: Lennar is being accused of operating a Ponzi Scheme through their multiple JVs by the “Fraud Discovery Institute.” I don’t know who the FDI is, but, knowing how homebuilders operate, there could be some truth in the allegation.

  15. 15
    zman Says:

    Friend in the real estate biz mid last year told me several of the big home builders were selling off acreage for 10 cents on the dollar. Now these cats want to get help from TARP. I’m not sorry but that’s just wrong.

  16. 16
    BirdsofpreyRcool Says:

    Wyoming – I’m no technician (wish I was), but the Trading Desk tends to get it right enough that it is worth posting, if it’s a high-conviction prediction. So, I pay attention to what they say… but can’t defend or explain why they say it.

  17. 17
    Sambone Says:

    By David Bird
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Nymex crude oil futures prices were down early Friday,
    pressured by the December U.S. payroll report that showed that the unemployment
    rate is the highest since 1993.
    February-delivery crude was down $1.22 at $40.48 a barrel at 9:18 a.m. EST
    (1418 GMT), near the bottom of a $40.35-$42.70 trading range. Some traders said
    they expected crude to break under $40 later in the day and challenge support
    at $39.75 a barrel.
    Addison Armstrong at Tradition Energy said he expects crude to head back near
    $35 next week, a level last seen on Dec. 19.
    Added pressure on prices came from news that Russia and the Ukraine have
    resolved the dispute over natural gas shipments that disrupted Russian flows to
    Europe in recent days.
    Elsewhere, Saudi Arabia, the world’s biggest oil exporter, notified Asian
    refiners of cuts in February supplies, in a further confirmation that the
    kingdom is reducing output in line with OPEC efforts to cut the overhang of oil
    in the market amid weak demand.
    Nymex February heating oil was off 419 points at $1.4777 a gallon, while RBOB
    gasoline futures were up 83 points at $1.0965 a gallon.

    -By David Bird, Dow Jones Newswires
    Dow Jones Newswires
    01-09-09 0937ET

  18. 18
    BirdsofpreyRcool Says:

    If the homebuilders get TARP money, tater’s cave is gonna get really crowded. Agree, that is wrong… on so many levels.

  19. 19
    elduque Says:

    Do we get the rig number today and if so when?

  20. 20
    zman Says:

    Yes, usually afternoon, around an hour before the close but sometimes pops out earlier.

  21. 21
    zman Says:

    Today is one of those days where the few things that are up now, in an almost homogeneously red market day, will rally quickly on minor upticks in the broad market. Names like FSLR. Fun for the day traders out there.

  22. 22
    kyleandy Says:

    BOP odds question are they saying its 1 out of 5 or 5 out of 6 of happening like they say??

  23. 23
    zman Says:

    Hey BOP – if you take the revisions and the current number for December, doesn’t that mean ADP nailed it as they were truing up their methodology with Wednesday’s number?

  24. 24
    BirdsofpreyRcool Says:

    5 to 1

  25. 25
    zman Says:

    Toxic coal ash story:

    http://news.yahoo.com/s/ap/20090109/ap_on_go_ot/coal_ash

  26. 26
    BirdsofpreyRcool Says:

    z – sadly, i don’t really pay that much attention to the ADP report, other than having to live through whatever damage it causes. It has been a random number generator since they went public with it. Sound like you’re more on top of the methodology there. So, I’m not qualified to comment.

  27. 27
    zman Says:

    Calling all people with brokers covering solar. Love to see the latest thinking on the industry in terms of global PV capacity, conversion efficiency, and projections on reaching grid parity. I have some old stuff lying around but nothing recent. I have noted that most solar companies have little current on their IR sites. Seems odd they aren’t making more noise right now.

  28. 28
    zman Says:

    Deepwater names pulling back into range.

  29. 29
    BirdsofpreyRcool Says:

    File under the topic: It Takes One To Know One

    Lennar Falls After Minkow Alleges Fraud in Joint Ventures

    By Alan Mirabella
    Jan. 9 (Bloomberg) — Lennar Corp. fell as much as 28 percent in New York trading after Barry Minkow’s Fraud Discovery Institute alleged that the company operates its joint ventures “like a Ponzi scheme.”
    Minkow posted his allegations today on a Web site called lenn-ron.com. The company has failed to disclose material transactions, Minkow said on the site.
    Minkow served more than seven years in prison, from 1988 to 1995, after being convicted of fraud while running a company called ZZZZ Best Co. Minkow’s group investigates what it suspects to be corporate fraud, according to the Web site.
    Lennar spokesman Marshall Ames didn’t immediately respond to a phone call and e-mail for comment. Minkow didn’t immediately return a phone call.
    Lennar fell $2.04, or 18 percent, to $9.38 at 10:07 a.m. in New York Stock Exchange composite trading. Earlier, the shares touched $11.28.

  30. 30
    BirdsofpreyRcool Says:

    Going out to walk the dog again. If the Trading Desk is right, might be back to buy a bit in the last 1/2 hr. Otherwise, just a hand-sitting, research-reading, dog-walking day, IMHO.

  31. 31
    tater Says:

    Low volume on that SU pullback. Might have to join your party. I didn’t get filled last time (yesterday?)

  32. 32
    VTZ Says:

    Z – I sent you a canadian trust report for dman.

  33. 33
    zman Says:

    Thanks V

  34. 34
    zman Says:

    Tater – SU seems to be following your thoughts re the pink line levels in your comments yesterday.

  35. 35
    zman Says:

    Attempt at a rally started. Volumes in energy pretty light on this sell down. Except for oil which is actually pretty busy as crude retakes $40.

  36. 36
    BirdsofpreyRcool Says:

    Deutsche Bank may have a $500mm equity prop-desk trading loss. Who can make $$, trading this mrkt? Clearly, even the pros can’t call it.

  37. 37
    BirdsofpreyRcool Says:

    Actually, swing-trading is one of the only ways to make money in this mrkt…

    Will be interesting to see the details of that $500mm loss.

  38. 38
    Sambone Says:

    KIEV (AFP)–Thousands of homes were left without hot water in southern Ukraine
    Friday because of the gas crisis with Russia, as companies across the country
    were forced to reduce operations and schools were closed.
    The authorities turned off hot water to households in the southern cities of
    Yalta and Sevastopol, while an opposition politician warned gas cutoffs could
    lead to a “social explosion” in this former Soviet republic.
    “The situation is critical – gas pressure has been halved, the heat supply
    system is on the brink,” Yury Kirichenko, deputy mayor of Yalta, a resort on
    the Black Sea coast with a population of 80,000, said in a statement.
    “Therefore a decision has been taken to fully stop supplies of hot water to
    private households and pull the plug on gas for all industrial consumers” and
    “even harsher measures” will be required if there is no change, he said.
    The local government in Sevastopol said in a statement: “Hot water in the city
    will cease from Jan. 9…in order to save” gas to be used in the city’s heating
    system because of lower gas pressure in the pipes.
    Russia cut off gas to Ukraine on New Year’s Day as part of a bitter dispute
    over payments between the two former Soviet republics.
    Russia has since cut off all supplies to Europe via Ukraine, saying it was
    forced to do so because Ukraine was stealing the gas.
    Some here warn that the gas feud might lead to a possible social unrest.
    “The situation with gas this winter creates a real threat of a social
    explosion in society,” said Yaroslav Sukhyi, one of the leaders of Ukraine’s
    pro-Russian Regions Party, which is in opposition.
    OstChem, an Austrian chemical company operating in Ukraine, said Friday that
    “uncertainty with gas supplies” was threatening “stable functioning” of the
    town of Armyansk in southern Ukraine where the firm has operations.
    Two of the town’s five schools are suspending classes, the company said.
    Earlier this week, the government asked regional authorities to switch to fuel
    oil instead of gas and Ukrainian gas company Naftogaz said the chemical
    industry and other firms had reduced gas consumption by 50%.
    The government promised private households wouldn’t suffer from the gas cut
    but many Ukrainians suspect heating has been reduced in homes across the
    country and have complained of lower temperatures at homes and offices.

    Dow Jones Newswires
    01-09-09 1126ET

  39. 39
    zman Says:

    #30 = too true.

  40. 40
    Sambone Says:

    By Steve Gelsi

    Energy stocks came under pressure Friday as investors focused on another drop
    in crude prices, compounded by losses in the broader stock market.

    The Amex Oil Index fell 4.3% to 980. The Amex Natural Gas dropped 3.3% to 387.

    Highlighting the gloom over markets in general, the government reported the
    U.S. economy shed 524,000 non-farm jobs and employment climbed to 7.2% in
    December, mostly in line with projections, to cap off the weakest year for jobs
    data since the 1940s. Crude prices fell $1.05 to $40.65.

    “Demand concerns have generally gained the upper hand over Middle East and
    Russian supply concerns,” in lower oil and energy stock prices, Brian Niemiec
    of Susquehanna Financial Group said Friday. “OPEC, however, is trying its best
    to adhere to production cuts and make the supply side an important factor.”

    While crude prices have been shaping trades in energy stocks, economic
    indicators and broad market moves also fed the downdraft in the sector in
    recent months, as the growing recession puts the brakes on the energy business.

    The tougher times are extending to the largest and mightiest energy companies,
    as Chevron has proven.

    Shares of Chevron (CVX) dropped 1.8% to $72.93 after the integrated oil giant
    late Thursday warned of “significantly lower” fourth-quarter results compared
    to the $100-a-barrel days of the third quarter. The profit warning is not a
    surprise, given that oil prices fell to below $40 a barrel and retail gasoline
    prices dropped below $2 a gallon.

    Meanwhile, another industry giant, oil service mammoth Schlumberger (SLB)
    reportedly plans to lay off 1,000 in the U.S. and some of its overseas workers.
    The company currently employs about 80,000 worldwide. Its shares fell 5.3% to
    $43.40.

    The Wall Street Journal also reported plans by Halliburton (HAL) to trim
    staff. Halliburton stock shed 4.9% to $20.12.

    While the energy sector has resisted the economic slowdown until now in terms
    of workers, Schlumberger is signaling that drilling firms are now preparing for
    difficult times for the foreseeable future.

    “The key question is whether it will scare or encourage investors,” TPH Energy
    Research analysts wrote in a note to clients. “In other industries it has
    scared stocks, Alcoa (AA) being most recent example.”

    Despite the gloom in the sector, JPMorgan upgraded Chevron to overweight from
    neutral while Marathon Oil (MRO) was cut to neutral from overweight. Marathon
    shares fell 2.5% to $28.96.

    Analyst Michael LaMotte said return on invested capital among integrated oil
    firms should drop to 9% this year, based on an expected average crude price of
    $43 a barrel.

    With returns now consistent with energy market troughs in 1999 and 2002,
    LaMotte projects the cycle to return to more normal levels by 2011, when oil
    prices are expected to average about $75 a barrel.

    If the forecasts are correct, Chevron and others could deliver a 40% upside in
    return on invested capital over the next two years. The energy sector will also
    benefit from an expected drop in raw material, commodity and labor costs,
    LaMotte said.

    Chevron is expected to release formal fourth-quarter results on Jan. 30.
    Analysts estimate the San Ramon, Calif.-based company made $1.89 a share, down
    from $3.85 in the previous quarter and $2.32 a year ago, according to a survey
    by FactSet Research.

    Another energy stock in the spotlight, Gazprom, says it will allow
    multilateral group to monitor gas shipments through the Ukraine as the Russian
    natural gas giant moves closer to resuming shipments through Eastern Europe.
    -Steve Gelsi
    Dow Jones Newswires
    01-09-09 1038ET

  41. 41
    Sambone Says:

    By Goran Mijuk
    Of DOW JONES NEWSWIRES
    ZURICH (Dow Jones)–Rosukrenergo AG said Friday that the Switzerland-based gas
    wholesaler, which is owned 50% by Russia’s OAO Gazprom (GAZP.RS), has around 10
    billion cubic meters in gas reserves in Ukraine that it could transport to
    Europe.
    “We have 10 billion cubic meters in gas stored”, said Rosukrenergo board
    member Hans Baumgartner. “We could deliver this gas to Europe immediately but
    our hands are tied.” Baumgartner declined to specify why Rosukrenergo can’t tap
    its reserves, which are stored in Ukraine.
    -By Goran Mijuk, Dow Jones Newswires Dow Jones Newswires
    01-09-09 1122ET

  42. 42
    BirdsofpreyRcool Says:

    Trading Desk update: not from the algo… but, from trader…

    If can hold 96+ on the emini, will give us the boost we need to close positive. If anyone is there to trade it…

  43. 43
    BirdsofpreyRcool Says:

    I don’t trade the futures, so don’t have current quotes on these. any emini experts out there?

  44. 44
    BirdsofpreyRcool Says:

    sorry, that should have been “896+”

  45. 45
    BirdsofpreyRcool Says:

    currently at 894.50 on eminis
    (vs 898.43 cash)

  46. 46
    1520sbroad Says:

    Bird – lots of option action in SPY that would support that thought on the eminis. tons of play between 88 – 90 on the january contract on both sides. i think a lot of the pros here would like to have a month where they had some visibility going into expiration – said another way – they would like to have what they want to happen actually happen – for a change.

    in my feeble opinion i would just like to see the S&P hold the 50 day – also around 890

  47. 47
    tater Says:

    Z, added a small note to that SU 60 min chart. Speculative, but worth noting

  48. 48
    BirdsofpreyRcool Says:

    thanks, 1520… i don’t know a thing about the futures mrkt (or, how it trades, anyway). anyway, my trader saying the mrkt stalled at the key emini level, so he won’t commit to “higher” or “lower” from here.

    crap shoot, basically.

    back to dog-walking…

  49. 49
    BirdsofpreyRcool Says:

    FWIW, I bought some HK a while ago… but only b/c i was pissed at missing 16.75 the other day. Just a renter, not an owner here, though.

  50. 50
    Dman Says:

    Z – when you mentioned “round numbers” for crude, do you mean whole numbers, or multiples of 2 or 5 or ?? I’m guessing you meant whole numbers, so we would look to see if $39 held etc. But just wanted to check.

    Also, yesterday you mentioned “S” shaped charts, with SU as an example. Does this refer to the “S” shape in SU from around December 5?

  51. 51
    zman Says:

    S for scoop is basically a saucer, just a nice rounding bottom progression…moves flat with declining volume.

    yes, round = whole, even, odd, prime notwithstanding. They seem to hover near a mark like $40 and then sell once that’s tripped down to $39 and so on. Today crude is just marking the equity market, albeit at a bigger % hit than equities.

  52. 52
    sportlock Says:

    Z, Any thoughts on the BHI drop of 28 gas rigs including 8 hzs. Puts us close to down close to 400 with TX loosing another 34 but LA gaining 6.

    Thanks

    Bill

  53. 53
    BirdsofpreyRcool Says:

    snow storm headed for NYC…

  54. 54
    Sambone Says:

    13:24 01/09 *DJ Ukraine Pres: OK For Russian Monitors To Check Gas Sites

  55. 55
    zman Says:

    re 52, just saw it. Right direction and the results will be lumpy so I wouldn’t expect to see weeks like last week’s 80 ng rig count drop on a consecutive basis. Re 400, yep, we’re about half way there.

  56. 56
    zman Says:

    Other than weather, I think earnings season for the E&P (starts early Feb with EOG) will be the next potential catalyst for an upward move in gas (to a max of $7 for the next 3 months I’d think other than unsustainable spikes higher). EOG is going to drop the hammer on production growth settling on the low end of the range … if the efficient, low cost drillers pull in their horns further, its got to very hard on the smaller operations who have already shed rigs in earnest. The mantra goes from spending to stay within cashflow to spending to maintain acreage, why grow at these prices.

  57. 57
    zman Says:

    Thanks for the solar snooping, got what I wanted.

  58. 58
    Dman Says:

    For the last 6 months, DO has been outperforming RIG, but for the last 10 days RIG has performed substantially better. I’m wondering if this is reflecting credit thawing & a consequent outperformance by the levered-up RIG.

  59. 59
    zman Says:

    NG trying to rally on the rig drop.

    Dman – that’s pretty likely it. I had heard the outperformance was due to lower exposure to jackups (where rates have come off ) but that’s just not the case looking at the portfolios of the two. Both are cheap, both are seeing up earnings unlike most names in the service and drilling space. I’m just waiting for their charts to pull back a bit more before dipping a toe.

    Market worse than watching paint drying. FSLR stuck up $6, BTU up slightly, SD seeing a little buying today, everything else off lows but not by a lot. Last 30 minutes should prove to be more interesting….not a lot of ground shaking eco news next week that I see.

  60. 60
    benbobby Says:

    Zman, I guess that nuclear powered utiities are a dead issue way too “reactionary”

  61. 61
    zman Says:

    Nuclear issue “reactionary”? He would pun would pick a pocket. There are a couple of guys here who know a world more about uranium markets than I do and until they get sort of interested in the CCJ’s of the world I don’t think I have much to say there. For the longest time I’ve heard and written myself that there won’t be a nuclear reactor commissioned in the U.S. for at least 10 years. Might as well make that 20 as things stand right now. I saw another application the other day but it seems dead on arrival.

  62. 62
    zman Says:

    Key points on solar from JPM analyst

    1) take profits now after end of year run they’ve had
    2) loss of subsidies due to strapped national and local governments will lead to price declines of 25 to 40% (unless you operate in the U.S. where the printing presses run 24/7 for this kind of thing starting in about 2 weeks (that’s my add, not JPM’s))
    3) lack of project financing/increased borrowing costs are a problem. I would say that if the financial markets continue what looks to be the beginnings of unfreezing then the this turns from a problem into a reason to buy the stocks as demand is unlocked (remember green collar jobs!)
    4) they are keeping FSLR and SPWRA at overweight for those people who want solar exposure. Promise I didn’t have this before the post but looking at the EPS table for the group and the low cost nature of FSLR its not hard to see that they applied KISS to their analysis as I was suggesting.

    The analyst made no mention of overcapacity or of some producers getting closer to grid parity, will do a little more digging.

  63. 63
    zman Says:

    FLSR approaching HOD by the way. Never discount the idea that people will want to get in front of a perceived tsunami of federally funded solar jobs.

    Somebody give me that ticker(s) for the geothermal play (aside from CVX).

    The wind list is:
    HXL
    KDN
    MAG
    TRN
    VWSYF
    ZOLT

  64. 64
    zman Says:

    Nice crude rally into the Nymex close, looking to settle just under $41.

    HK actually positive now, APA and DVN as well as SD.

    FSLR tapping on $165.

  65. 65
    Pete Says:

    Z, re: any reason why HK is behaving that well compared to other E&P’s

  66. 66
    Pete Says:

    #64

  67. 67
    zman Says:

    Perhaps some people are expecting an operational update in the next two weeks.

  68. 68
    Sambone Says:

    By Steve Gelsi

    A slide in crude prices, a profit warning from Chevron (CVX) and layoffs at
    the world’s largest oil services firm Schlumberger caused investors to unload
    energy stocks on Friday.
    A weak jobs report and losses in the broad market aggravated the selling of
    energy stocks, which underperformed the Dow Jones Industrial Average and the
    S&P 500.
    The Amex Oil Index fell 2.7% to 985, with component Occidental Petroleum (OXY)
    down 4% to $56.67. Chevron dropped 1.4% to $73.11. Sector leader Exxon Mobil
    (XOM) fell 1.5% to $77.90. Both Chevron and Exxon rank among the 30 stocks in
    the Dow Jones Industrial Average.
    The Amex Natural Gas Index dropped 2.8% to 389. Component Noble Energy (NBL)
    dropped 5% to $50.38.
    The Philadelphia Oil Service Index subtracted 4.4% to 132. Component Nabors
    Industries (NBR) fell 7% to $12.12. Schlumberger (SLB) dropped 4% to $44.02.
    Highlighting the gloom over markets in general, the government reported the
    U.S. economy shed 524,000 non-farm jobs and employment climbed to 7.2% in
    December, mostly in line with projections, to cap off the weakest year for jobs
    data since the 1940s.
    Crude prices fell $1.40 to $40.30.
    “Demand concerns have generally gained the upper hand over Middle East and
    Russian supply concerns,” in lower oil and energy stock prices, Brian Niemiec
    of Susquehanna Financial Group said Friday. “OPEC, however, is trying its best
    to adhere to production cuts and make the supply side an important factor.”
    While crude prices have been shaping trades in energy stocks, economic
    indicators and broad market moves also fed the downdraft in the sector in
    recent months, as the growing recession puts the brakes on the energy business.
    The tougher times are extending to the largest and mightiest energy companies,
    as Chevron has proven.
    Shares of Chevron dropped after the integrated oil giant warned of
    “significantly lower” fourth-quarter results compared to the $100-a-barrel days
    of the third quarter. The profit warning isn’t a surprise, given that oil
    prices fell to below $40 a barrel and retail gasoline prices dropped below
    $2.00 a gallon.
    Meanwhile, another industry giant, oil service mammoth Schlumberger reportedly
    plans to lay off 1,000 in the U.S. and some of its overseas workers. The
    company currently employs about 80,000 worldwide.
    The Wall Street Journal also reported plans by Halliburton (HAL) to trim
    staff. Halliburton shed 8% to $19.52.
    While the energy sector has resisted the economic slowdown until now in terms
    of workers, Schlumberger is signaling that drilling firms are now preparing for
    difficult times for the foreseeable future.
    “The key question is whether it will scare or encourage investors,” TPH Energy
    Research analysts wrote in a note to clients. “In other industries it has
    scared stocks (Alcoa (AA) being most recent example).”
    Despite the gloom in the sector, J.P. Morgan upgraded Chevron to overweight
    from neutral while Marathon Oil (MRO) was cut to neutral from overweight.
    Analyst Michael LaMotte said return on invested capital among integrated oil
    firms should drop to 9% this year, based on an expected average crude price of
    $43 a barrel.
    With returns now consistent with energy market troughs in 1999 and 2002,
    LaMotte projects the cycle to return to more normal levels by 2011, when oil
    prices are expected to average about $75 a barrel.
    If the forecasts are correct, Chevron and others could deliver a 40% upside in
    return on invested capital over the next two years. The energy sector will also
    benefit from an expected drop in raw material, commodity and labor costs,
    LaMotte said.
    Chevron is expected to release formal fourth-quarter results on Jan. 30.
    Analysts estimate the San Ramon, Calif.-based company made $1.89 a share, down
    from $3.85 in the previous quarter and $2.32 a year ago, according to a survey
    by FactSet Research.

    -Steve Gelsi

    Dow Jones Newswires
    01-09-09 1444ET

  69. 69
    zman Says:

    S&P near HOD at 899

  70. 70
    BirdsofpreyRcool Says:

    back. it’s snowy out there. liking the HK swing trade. thanks for keeping us up to date on that name, z. maybe trading in expectation of positive operational update.

  71. 71
    BirdsofpreyRcool Says:

    trading desk pointed out (a half hr ago) that the eminis made it through 896… that was the rally point.

    doesn’t help much, at this point, but thought i’d give a little credit to the Desk.

  72. 72
    zman Says:

    BOP – realize that I know nothing as they were tight lipped with me as they should be (although they could have discussed the well timelines I presented to them without saying whether or not they will release them in a pr separate from the the 4Q). But the timing is such that they could have completed a number of high profile wells and they released an operational update on the 25th of last year with less catalytic news to present.

  73. 73
    BirdsofpreyRcool Says:

    z – totally understand. But, thx for the reminder.

  74. 74
    1520sbroad Says:

    ny, nj TV weather folks in full freakout mode for some decent snow here this weekend and some below freezing daytime highs all next week.

    nymex trader train platform monday morning bounce could be setting up

  75. 75
    BirdsofpreyRcool Says:

    Basically, we got the Jobs Report out of the way. It was bad. It was terrible. The revisions made it worse. But, it’s behind us now. Traders/investors/PMs will come to work on Monday and find that they are still alive and bonds are cheap cheap cheap. I think the January issuance holds up and bond spreads in the cash market continue to tighten.

    The stock market will see this and come out of the foxhole. I think we see a rally from here to 1075 on the SPX or so. After that, all bets are off.

    Just a few random, Friday thoughts. All this assumes they don’t find a Bernie Madoff II and/or Lennar and Hovnanian aren’t playing hanky-panky with their books.

  76. 76
    BirdsofpreyRcool Says:

    (Birds like to say “cheap cheap cheap” just before they buy something. Don’t know why that is…)

  77. 77
    BirdsofpreyRcool Says:

    YAY!! Seeing headline: “Junk Bond Mutual Funds See Biggest Inflow Since September 2003”

    This is the stuff we need to see. Real buyers of cash bonds. Keep it up, people.

  78. 78
    sane Says:

    Re 61 Nuclear stuffs.

    One interesting tidbit about nuclear power is the enrichment front for uranium. Shipments of enriched uranium from Russia into the US (about 40% of current supply) are expected to be cut in half by 2013. Even if there is no new reactors built in the US there is likely going to be a shortfall in enrichment capacity in the US. THe 2 companies doing enricment in the US are General Electric and United States Enrichment Corp.(USEC)

  79. 79
    ram Says:

    ZMAN – I was envisioning that scud would not be in our vocabulary this year.

  80. 80
    BirdsofpreyRcool Says:

    Even with stocks down, credit is having a nice day.

  81. 81
    zman Says:

    Thanks Sane, any reason to play the likes of CCJ or USEC in the near future? Say, 2009?

    Ram – we shall see, certainly less of them

  82. 82
    ram Says:

    Maybe the credit market will set the stage for a positve week starting Monday!

  83. 83
    BirdsofpreyRcool Says:

    Not seeing a lot of quotes and activity in the indices (IG and HY). Most of the trades are taking place in individual names. As there was a huge basis difference between the index and the underlying, this is great to see.

    Last quote in the IG was around noon… 200

  84. 84
    zman Says:

    Ram – I’ll have 2 if not 3 by next Friday almost certainly.

  85. 85
    BirdsofpreyRcool Says:

    ram – this whole kettle of fish started in the credit market… so it will have to end in the credit market. If bonds continue to rally, stocks will have to follow.

    The rally in credit since the beginning of the year has been substantial. If we can get one more week of this, the January new issuance will be declared a “success.” This will draw more $$ into bonds. This is what will unthaw the credit market.

  86. 86
    Wyoming Says:

    Good day. Everyone have a safe weekend.

  87. 87
    zman Says:

    Beer Thirty!

  88. 88
    sane Says:

    USEC is opening a new facility in Ohio which expected to be at full power by 2012 and supply 25% of the US enrichment needs, but they are also closing up there Paducah, KY plant at the same time.

    CCJ – I would watch for them in 2H09 when they restart Port Hope UF6 plant. THey are also ramping up mining production in new Saskatchewan and Kazakhstan mines.

  89. 89
    zman Says:

    Thanks Sane. Do you agree with my thought there is little chance of breaking ground during an Obama administration on a new nuke, even if it is sited at one of the locations where there is foundation etc for another reactor?

  90. 90
    sane Says:

    Yeah I agree. Unfortunately Obama and his energy secretary want energy from rainbows and fairy dust.

  91. 91
    zman Says:

    Hear ya Sane. Hopefully its not that bad. And you forgot the unicorns. Tasty, tasty, unicorns.

  92. 92
    Wyoming Says:

    Unicorns that poop Skittles?

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