02
Feb

Monday Morning and All Is Gloomy

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Congrats Watch: Congrats to the Steelers! One of the better Super Bowls I've watched even though I was betting on the other team. Total game points:50. No hats to hand out unless I missed someone but I have 2 extra point winners on 6 extra points: Kyleandy and Eagle (send me your snail mail addresses at zmanadmin@gmail.com and we'll get those mugs shipped out). 

The stimulus bill gets taken up by the Senate this week and we have high profile economic data every day of the week (income and spending out this morning were essentially in line with forecasts with consumers once again inspired by fear to save more) so it should be a pretty volatile one....what else is new? We also have 3 of the big 5 E&Ps reporting and a number of smaller service and driller names.

Last Week's Wrap Can Be Seen Here.

The Week Ahead:

  • Monday - Personal Income (forecast -0.4%), Consumer Spending (-0.9%) and ISM (32.8%)
  • Tuesday - Jan. Car Sales (10.3 million previous)
  • Wednesday - EIA Oil Inventory Report (10:30 EST), ADP Employment (down 693K last)
  • Thursday - EIA Natural Gas Inventory Report (10:30 EST), Initial Jobless Claims (down 588K last), Factory Orders (forecast down 3.3%)
  • Friday - Non-farm payrolls (-525,000 forecast), Unemployment rate (7.5%),

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Earnings Watch - Calendar Week 3
  4. Stuff We Care About Today
  5. Odds & Ends

 

Holdings Watch - The Wiki tab is updated.

Commodity Watch:

Crude oil fell 9% last week to close at $41.75. Price action felt like profit taking and was actually quite resilient in the face of another fat crude inventory build. This morning crude is trading off a buck as fear over this week's slew of economic data invades trader's thinking.

  • Refinery Strike Watch: Strike averted for now as 30,000 unionized oil workers agreed to go to work today as negotiations continued through their Sunday deadline without work stoppage.
  • OPEC Watch: OPEC secretary general said $46 oil (Brent price) is causing some Cartel members to cut social welfare programs and may soon trigger social unrest.
  • Hugo Watch: PDVSA said to be considering cutting 3,000 jobs (4% of total) due to low oil prices.

Natural gas fell 2% last week to $4.41 with a better than expected withdrawal having little impact on sentiment. This morning gas is trading a little over a dime with oil.

  • Rumor Control Watch: I've gotten multiple reports now from what I'd call above average credibility sources of mega monster wells in the Haynesvile Shalle. A monster shale well, pre Haynesville era, was 10 MMcfepd. The Haynesville changed that to 20 to 25 MMcfepd. These rumors are for wells in the 60 to 80 MMcfepd, which is normally the purview of high rate offshore gas finds. If these rumors pan out, good for the operator, bad for everyone else producing gas.
  • Weather Watch:
    • Last Week's Weather: 249 HDDs vs the 237 originally forecast, so much colder than forecast at the beginning of the week, a trend the weather has been showing almost all winter and making last week the second coldest of the year. With last week's 186 Bcf withdrawal in hand on a 226 HDD week, this data augurs for the first 200 Bcf withdrawal of the season.
    • This Week's Forecast: 201 HDDs. But this number is a problem for gas as the last few in the 200 HDD range have scored with drawals in the double, not triple digit region.

 

Earnings Watch - Calendar Week 3

Stuff We Care About Today

(APC) Makes Deepwater Gulf Of Mexico Discovery

  • Heidelberg prospect, Green Canyon block 859, close to its Constitution spar.
  • 28,500 foot target, Miocene sub salt, over 200 feet of pay encountered in multiple high quality sands
  • APC operates with a 44.25% working interest
  • In a nutshell, a nice discovery, potentially good sized, in close proximity to existing infrastructures which insures development at current prices, a good lead in to earnings after the close today and tomorrow's conference call.

Odds & Ends

Analyst Watch: Jefferies cuts (PQ) to Hold, halves price target to $6.

(MMM) Forms Renewable Energy Subsidiary. See story here.

123 Responses to “Monday Morning and All Is Gloomy”

  1. 1
    zman Says:

    FWIW Watch: Phil sees shadow.

    http://news.yahoo.com/s/ap/20090202/ap_on_re_us/groundhog_day

  2. 2
    BirdsofpreyRcool Says:

    Credit Market Indices following Europe and US Futures, down. The High Yield Index is especially weak and trading at new lows. Not much active selling to drive prices down this morning… just lack of buying.

    U.S. Govt = 800 lb Gorilla in the room with a gatling gun… no idea where he is going to point it… no idea when he is going to shoot it. Everyone holding their breath and “hoping.”

    IG 207 +6bps from Friday’s official close

    HY 73 1/4 -1point from official close.

  3. 3
    zman Says:

    Blood red open. Service taking a bigger hit early than the majors and E&P.

    Oil still down a buck but off the lows after consumer spending came out. We get ISM in a little bit.

    EIA revised oil demand numbers down for November. Sambone, you around or still on vacation? That’s the kind of story you normally catch.

    Thankfully refiners rolling. Products are off a lot more than oil this morning, especially gasoline and the rally there has made little sense to me so maybe the pullback will be harsh. Still think TSO is the way to play to the downside after a huge bounce it has had.

  4. 4
    BirdsofpreyRcool Says:

    Citigroup on the tape saying they “expect US recession to end by middle of year…”

    Citi is also very positive on LatAm markets… think they see a 40% dollar-adjusted gain in 2009.

    Citi analysts must be Steeler’s fans.

  5. 5
    zman Says:

    Anyone have a schedule on when the stimulus vote in the Senate is likely (I guess what day this week?) and what the current status of the bad bank is? Not seeing stories this morning talking about it but it seems necessary to get it out of the way so the market can pick a direction and run with it.

  6. 6
    zman Says:

    BOP – I will say that the selling is uniform in E&P and without regard to valuation, hedges, etc and also very low volume, even for this early in the day.

  7. 7
    BirdsofpreyRcool Says:

    z – I don’t think there is a schedule for either of those, yet, from what I can see.

    Obama wants to talk through executive compensation at banks before pressing for a banking solution. I guess the thought is, for any banking solution to be accepted by the US people, they have to get over the anger aimed at compensation. At least, that’s the only logical explanation I can think of, for his focus on arranging the deck chairs on the Titanic.

  8. 8
    BirdsofpreyRcool Says:

    z – frankly, I don’t think it’s unusual to see pretty low, lackadaisical volume in the US markets, following an exciting Super Bowl Game. I think people are busy collecting their earnings from various football pools… and drinking a lot of coffee.

  9. 9
    elduque Says:

    Good news?

    BDI +29 1099

    TED +4.367 100.18

  10. 10
    BirdsofpreyRcool Says:

    Trading Desk Technician didn’t show up to work this morning. Widely believed to have “won big” in the football pool yesterday.

    Traders who showed up to work think we see the lows this morning, then bounce as hope prevails about the bailout and stimulus.

  11. 11
    BirdsofpreyRcool Says:

    ISM manufacturing just reported… stronger than expected!

  12. 12
    BirdsofpreyRcool Says:

    Construction spending was down a bit more than expected, MoM… but, how can that possibly be a surprise?

  13. 13
    BirdsofpreyRcool Says:

    IG 207 didn’t move, post-ISM

  14. 14
    zman Says:

    Steve Leeseman – Regarding today’s data things still contracting, just not as bad as they were.

    Oil back to tracking the move in the Dow divided by 100.

  15. 15
    zman Says:

    NG opened down with crude, setting up to go green now on last week’s more than expected cold. Could see a 200 Bcf number this week. Need to see gas stabilize before you can really get excited about cheap E&P names.

  16. 16
    BirdsofpreyRcool Says:

    seeing some green on my screen… IVZ and TRA going positive

  17. 17
    zman Says:

    And natural gas goes green.

    XLF not far from it now BOP, could be a reversal day. What’s the read from the trading desk?

  18. 18
    Popeye Says:

    HK presenting this am @ the JP Morgan Global High Yield & Leveraged Finance Conference.

  19. 19
    zman Says:

    Thanks Popeye, saw that on a Google alert, no new presentation I see, let me know if you find a way to listen in, can’t seem to track one down.

  20. 20
    BirdsofpreyRcool Says:

    z – see #10. I wasn’t joking with that trading desk colour. That’s what they said, before open this morning.

  21. 21
    zman Says:

    BTU positive, the canary in today’s coal mine?

    XOM green as well and FSLR jumping up. Appetite coming back for energy across the board.

  22. 22
    BirdsofpreyRcool Says:

    Credit finally responding to perkier stocks…

    IG 205

  23. 23
    zman Says:

    ZTRADE:

    $10KP

    (1) FSLR Feb $150 Call (HJQBJ) for $5.50 with the stock at $140. Just repositioning a little closer to the current price and thinking it will run again when we get the next bear market rally this week.

  24. 24
    BirdsofpreyRcool Says:

    GS green.

  25. 25
    zman Says:

    Thanks for the trading desk color or lack thereof. I simply missed #10.

  26. 26
    zman Says:

    ACI joining BTU in plus column. Feels like the market wants to rally a little.

    Interesting to see OIH go from down big early, bigger than the markets and energy to down less by a long shot with HAL up now. There is definitely appetite for these stocks in this market. I just read a broker note talking about thinking on rig count getting to a lower number of operated rigs before but that they are keeping buys on some of the bigger names as the market has already pounded the stocks.

  27. 27
    BirdsofpreyRcool Says:

    High Yield Index finally responding positively too…

    HY 74 +1/2 off the low

  28. 28
    BirdsofpreyRcool Says:

    CHK bonds are well-bid for this morning… seeing more “buy” interest in the name from the bond trading desk.

  29. 29
    benbobby Says:

    Zman,the theta on HJQBJ is .46… the underlying stock better go up or you will get drilled

  30. 30
    BirdsofpreyRcool Says:

    wow. An almost 10% swing in BAC during the first hour.

    IG 206 trying to move tighter (positive)

  31. 31
    zman Says:

    Ben – Thanks. That’s the general plan. Its a volatile name and can move 10% in a day with no news and only a green market at its back.

  32. 32
    kiaora Says:

    Off the subject but; Our hard earned money working for us???

    Earlier this week, Obama instructed the EPA to reconsider the case of California’s existing proposal to raise fuel-efficiency standards. The automakers have been fighting California and other states in court for several years. Last week, they pledged to continue that fight – despite the president’s instructions and, to a larger extent, his consistent and unequivocal insistence on a “green” auto industry. Except, as it stands now, the automakers are basically using their bailout money — from taxpayers — to turn around and sue…the taxpayers themselves.

  33. 33
    VTZ Says:

    Rumours today that COS.un is a takeout target by Imperial Oil (who is majority owned by Exxon). I would say that if that’s true it’s by Exxon rather than Imperial Oil (IMO).

    They already own a majority and are the operators in Syncrude through Imperial and the Exxon stake, so it would make sense to take larger ownership in the asset.

  34. 34
    zman Says:

    Kiaora – irony to the point of tears.

    Thanks V. Listened to the Exxon call and there was not much in there regarding their thoughts on M&A. They are down to $31 B in cash from $40 at mid year, bought a lot of stock back and did not generate as much cash in the 4Q now matter what ABC News thinks (see weekend post for my rant on journalistic deception).

  35. 35
    VTZ Says:

    Imperial Oil is cash strapped too because of the Kearl Lake project so I don’t think that they could afford it either.

  36. 36
    zman Says:

    Question for the chart types. Last week everyone was talking about getting to and closing above S&P 850. Mission accomplished. Several things I read said get there, close above there and we’ll see a rally. Three down days (so far) from the that level, which I’m sure they call a lower high now and we are talking about 800 and the November lows. I guess my question is, was 850 of any significance since it only lasted for a day? And what are the important important levels now other than obviously 800?

  37. 37
    Dman Says:

    #10 hilarious

    #32 Ironic, yes. Would be darkly hilarious in a movie, but in the real world there is that groaning sound emanating from taxpayers & the possibility they will pick up pitchforks and torches at some point.

    Z – these 60 to 80 MMcfepd rumors – trying to map out consequences. Lemme know if these make sense (assuming rumors true)

    – another leg down in NG, similar to when the last round of monster HS wells hit the tape.

    – HS bumps up against initial pipeline constraints earlier than expected

    – more effort directed away from conventional drilling to horizontals.

    -overall rig count continues to collapse, which (along with shut-ins) eventually stabilizes NG.

    – Recovery in NG depends on extent of monster-well territory. Since it is still (relatively) early days for horizontal drilling, it seems reasonable to expect some further “surprises” in terms of what it can achieve… i.e. these may not be one-off freak results.

  38. 38
    zman Says:

    DNR on the tape with excellent reserve metrics.

    29% growth
    525% reserve replacement (almost all organic)
    F&D costs of about $7/BOE (that’s just over $1 per Mcfe) which is going to be on the very low end of F&D costs this year. No one cares now but those are very good numbers and the name will move with oil.

  39. 39
    zman Says:

    D – that sums it up pretty well but I think the drop in NG will be limited to $3.50 to $4.00 range as you already have widespread uneconomic wells (for drilling, but you still produce). If that happens you should/could see more curtailments for low price (not a lot so far). I think the gas companies are walking a very careful line this year with a new admin. Even Aubrey on CNBC the other day said the variable cost of producing gas is so low you produce even at these prices…not what he said back in September 2007 (then it was, we don’t have to sell gas at a loss) and the September before that too. I think the gas companies want to be included in the solution to America’s dependence on foreign oil and actions that would be construed as “cartellish” won’t help them in that plan and so they continue to produce this year when normally they would have shut more in.

    That being said, even if we do see some 60 or 80 MM/d type wells I suspect they will be limited to sweet spots as we have seen a number of wells in different parishes of LA and counties of TX in the 10 to 25 mm/d. It is a big area, so impossible to say but these rumors if true, sound like the sweetest of sweet spots. Good for the guy who drilled and maybe the guys nearby, bad for those not involved.

  40. 40
    zman Says:

    NG up 17 cents. Brrrr of the past. It probably won’t make much headway other maybe a small short covering rally this week that carries us close to $5 given the widespread warming expected for the U.S. through the weekend.

  41. 41
    BirdsofpreyRcool Says:

    It is really difficult to make a decision — any decision — whether you are an investor, consumer, company CFO, strategic planner, bank, or CEO… until we know what the 800-lb Gorilla with the Gatling Gun is gonna do.

    Just sitting… waiting… hoping.

  42. 42
    zman Says:

    Hear ya BOP. Market has that “girl from Ipanema” muzak on the answering machine quality to it. Just catching up on some weekend reading I skipped to instead watch the Boss, which I should have.

  43. 43
    tater Says:

    Re #36. I don’t really have anything much to add to your statements in #36. It looks like the downside points to 800 then tests of the Nov lows, then take a look at long-term SPY chart that I wrote up a couple of months ago. Trend is accelerating to the downside, not slowing.

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

    Upside appears to be a game played by the banks/brokerages as to how much they can play the present administration and Congress.

    I vote that we just make California secede from the Union. Seriously, how much better off would this country be if that den of monetary irresponsibility just fell off into the Pacific?

  44. 44
    BirdsofpreyRcool Says:

    frankly, it might not be a bad idea to just skip this week entirely. There are going to be numerous “leaks” and “trial balloons” floating up from Washington. Potential for the market to veer widly in pretty much any direction. Would love to get at least one peg in the ground… need to get a sense of where this is going. Feels like a ship without a rudder, waiting for a wind.

  45. 45
    BirdsofpreyRcool Says:

    tater – i’m a 3rd generation Californian (who left the state for the last time in the mid-90s)… and i agree with your comment 100% !!!

  46. 46
    BirdsofpreyRcool Says:

    Californians want to set their own rules and regulations (e.g. what cars can be sold there). But, when they get into trouble (with all their own rules and regulations) they come to Washington… to get the rest of the country to bail them out. Worse than having a teenager in your home… it’s like having to finance someone ELSE’s teenager.

  47. 47
    zman Says:

    HAL gets $600 mm from BP for 4 deepwater projects off Angola.

  48. 48
    BirdsofpreyRcool Says:

    IG 205 bps

  49. 49
    zman Says:

    HK poised for another run on $20, liking the Feb $20 calls there this week for potential news with a sell on a rally to that gap around $22. After this week probably shift to holding the March $22.50s or $20s.

  50. 50
    tater Says:

    BOP, I can’t even add to your statements without just ranting. It’s reached the point where the analysis wouldn’t even be political its such a joke. They spend, spend, spend, and then when the money runs out they stand around contemplating their bellybuttons.
    My favorite is the mansions that they build on unstable muddy hills. They just HAVE to have the view. Then when the damn thing slides off the hill, it’s a public disaster that the rest of us have to pay for. Maybe, just maybe, you shouldn’t build houses on unstable ground? Maybe that’s just stupid?

  51. 51
    BirdsofpreyRcool Says:

    tater – wow. you hit on one of my favorite rants. people who build houses on cliffs and then are surprised/angry/sue when erosion occurs.

    Like living below sea level between a lake, a river, and the Gulf of Mexico… Mother Nature just doesn’t respond to lawuits.

  52. 52
    Dman Says:

    BOP – I thought Z had a lock on the monkey metaphors. But now you’ve given us the Gorilla with a Gatling Gun (GGG).

    Just tell me if the GGG went to basic training. If not, well, er …. oops.

  53. 53
    BirdsofpreyRcool Says:

    Dman – with respect to the GGG’s basic training… what do you think, hmmmmm?

    Gorilla’s like to eat bananas, have a bit of fun, knock down a tree or two every once in a while, beat their chests, and hang around with the good-looking females.

    They have no idea what to do with a Gatling Gun.

  54. 54
    Dman Says:

    BOP, OK I must have been thinking of Planet of the Apes.

  55. 55
    BirdsofpreyRcool Says:

    Dman – lol. Good point.

  56. 56
    zman Says:

    Regarding APC earnings tonight, I may play. Mulling it over now. Like management a lot here, nice oily follow on Gomex discovery at Heidelberg will add to the useful life of their Constitution spar via tieback, expect them to attempt to quantify reserves here but 200 feet of pay in high quality (and high pressure at that depth) will mean low multi-hundred million barrels of oil of which they get a little under half (on top of the 2007 reserves of 2.4 billion BOE).

  57. 57
    BirdsofpreyRcool Says:

    WSJ said Geithner to lay out plans on financial crisis in speech next week.

    Guess that’s why the uptick?

  58. 58
    zman Says:

    NG up 21 cents. Biggest beneficiary: BTU, up 3.4%.

  59. 59
    Dman Says:

    Monster wells or not, UNG continues to look scoopy.

    Retarded question: looking at the “continuous contract” in NG or crude, eg $NATGAS & $WTIC in stockcharts.com, does that just represent the front month contracts stitched together? So it should jump on expiry days?

  60. 60
    zman Says:

    I suggest he not lead of with the line, “the only thing we have to fear is the bad bank itself”

    Still mulling APC, lot of debt, prices went against them more than thought looking at their hedges. They speak Wednesday at the Credit Suisse Energy Summit.

    Tomorrow they pretty much have the conference schedule to themselves as earnings calls don’t get heavy until later in the week.

  61. 61
    BirdsofpreyRcool Says:

    z – Tristone out with a morning note covering APC and their Heidelberg discovery. Think adds 75 to 90 cents/share to their current $85.25 NAV/share. Has a $70 PT on the stock.

  62. 62
    Dman Says:

    … although it is a scoop with a weird bulge in it …maybe not a “classic” scoop.

  63. 63
    zman Says:

    Is Tristone using $45 and $4.50 deck for that NAV? Seems like a small add. Would have thought $2 to $3 back of the envelope but maybe I’m overestimating reserves.

  64. 64
    BirdsofpreyRcool Says:

    a “pregnant scoop” maybe??

  65. 65
    BirdsofpreyRcool Says:

    z – re: Tristone, don’t know. Maybe just an overly-conservative outlook on reserves?

  66. 66
    zman Says:

    Dman, I don’t use that particular service but you could compare it to this which is the front month contract all strung together over time.

    http://tonto.eia.doe.gov/dnav/ng/ng_pri_fut_s1_d.htm

  67. 67
    zman Says:

    Thanks for sending that. The press release said in excess of 200 feet of pay, the last one I think was West Tonga, also oil, nearby, Miocene, 350 feet of pay. I see from the report they say confident at least 100 mm barrels. That’s the difference as they are running with the first number. Also, a little further out than I was thinking (I was thinking 2 years), they are thing 3 or 4 years. For a tieback, even in 5,000 feet of water, that seems a bit slow but their plate is full and high pressure manifolds are in shorter supply. Interesting, they have chalked up quite a few deepwater strikes of late.

  68. 68
    zman Says:

    S&P green. Nasdaq green. Dow thinking green but it looks pretty shaky.

  69. 69
    BirdsofpreyRcool Says:

    IG 202 1/2 getting it’s rally-hat on

  70. 70
    Dman Says:

    Z – #66 interesting long term chart there. Certainly shows the current decline is not out of character, but after 8 months or so it is getting long in the tooth.

    – The bulge in the NG chart over the last week or so could be viewed as a reverse-wedge formation, often indicating reversal of earlier trends.

    – Both crude & NG have MACD swinging positive on a weekly chart (more convincingly for crude). However NG also has MACD swinging positive on a daily chart.

    I think this conjunction of technical signals combined with the new low earlier today persuaded a lot of money to jump in & thus the +6% so far today

  71. 71
    Dman Says:

    BEXP getting hit today along with little guys PQ & XCO.

  72. 72
    occam Says:

    The word around here is that there will soon be a major earthquake that separates California from the rest of the country, and the East Coast will fall into the Atlantic.

  73. 73
    zman Says:

    PQ caught a vote of no confidence from the boys at Jefco this morning, cut pt in half. Don’t know BEXP but I’d assume oil price meets burn rate yields lower stock price. Thanks for the reminder on XCO, going to buy the stock there soon for the IRA.

    Going to get some lunch, rally the market while I’m out.

  74. 74
    BirdsofpreyRcool Says:

    IG 204 … just bouncing around with stocks now.

  75. 75
    ram Says:

    Why would people use this forum to trash talk about any state?

  76. 76
    zman Says:

    Ram – hear ya.

    Still taking a look at APC for a pre-call play but leaning towards sitting it out. Its possible they could have some other interesting news (including a Haynesville shale horizontal) but since we have anything but a friendly market I don’t see good risk/reward vs just waiting.

  77. 77
    BirdsofpreyRcool Says:

    ram – do I owe someone an apology? If so, my bad. Tough to keep politics out of it… as politics are creeping more and more into our private economy. But, I will try.

    My bad.

  78. 78
    zman Says:

    Refining strike update: still on 24 hour rolling strike status as negotiations continue. Latest word is that there likely will not be a strike at midnight tonight.

    RBOB off 8 to 10 cents, its really run up way too much in the last few weeks.

    Tater – when you get a chance can you look at that TSO chart?

  79. 79
    zman Says:

    BOP – any further conviction from the trading desk or are they just calling this a loser?

    Stocks look pretty stuck where they have been all day. Very little news in the energy space to move anything.

  80. 80
    Nicky Says:

    After all – more hideous action for oil today. We are in a v down off the high of about ten minutes ago at 42! Whether it is v of 3 of v or the final wave v remains to be seen – most likely the former.

    Indices – should stage a bounce shortly.

  81. 81
    zman Says:

    Thanks Nicky. If it is the former what’s your low target on crude?

  82. 82
    BirdsofpreyRcool Says:

    z – you hit the nail on the head.

    Trading Desk says they think we drift lower… because there is no new news to take it higher.

    Market got perky a while back on WSJ comments that Geithner would have something concrete early next week. Mrkt waited to hear more. No more news, so sell off.

    Everyone is waiting for the “magic” to happen. When it doesn’t, it just sells off.

  83. 83
    zman Says:

    Crude dropping sharply into the Nymex close, going for a test of $40.

  84. 84
    zman Says:

    There went $40 briefly, nice to see it not run hard for the next dollar figure lower, still think it trades with the market tomorrow.

    Thanks BOP, kinda what I thought.

  85. 85
    Nicky Says:

    Natural gas has some major support at the 4.0 – 4.1 level – where is that hat Z?!?!? My God who thought we would be talking about the hat again!

  86. 86
    Nicky Says:

    If its the former I would expect it to find support between here and about 38, bounce and then make a lower low which could trade anywhere between 31 and 39. So not exactly helpful!

  87. 87
    zman Says:

    Nicky – very funny. That hat bet was I think for 2007. No hat bet in place right now. Haynesville mania/phobia changed everything sending the pendulum not just too far but through the side of the case. Would not be shocked to see NG go to lower $3s this spring if weather turns mild early.

  88. 88
    Nicky Says:

    Broader market – 804 area absolutely has to hold for the SPX for the bullish count to remain in play. If it does then we are likely looking at a move to 940 spx or above before turning lower again. If it doesn’t then we are likely looking at wave v down and a target area of 640 – 690 spx.

  89. 89
    Dman Says:

    I am pretty amazed at the unpaid tax thing that has now emerged with two major appointees even before they start their jobs. The idea that arises is “OK, so I guess the elite just see taxes as a kind of optional thing”. Any prospect of economic recovery is going to depend on confidence & I don’t see that helped when many could draw the conclusion that the whole system is rigged. As for the markets, their reaction to Obama’s plans is not going to be helped if they think the government is going to have to spend years playing public defender for tax cheats.

    Finally, it goes to judgment & that also is critical for public confidence: how much unpaid tax, hypothetically, would an appointee need to have before Obama decided they were actually not indispensable? I can’t see why either of these guys couldn’t have been ditched and replaced with someone just as capable who paid their taxes. Is that really such a rare quality?

    BTW: I’m not in the least bit interested in political point scoring & indeed my view of the outgoing administration would probably cause the server to start emitting steam. I am just amazed, frankly, that these problems emerged this quickly (so much for all that much vaunted vetting) and even more amazed that Obama is giving them a pass.

  90. 90
    tater Says:

    ram,
    If you feel my statements are in error, please let me know exactly where you see that error. As for choice of forum, I am under the certain impression that the energy sector does not perform in a vacuum and the spending policies as outlined by the Speaker of the House from California will have a very large impact on the sector.
    I consider it to be a valid attempt to ascertain what exactly would be the logic behind the Speaker’s spending ideology. If the objects that would evidence such an ideology include a state intent upon transferring the costs of its wealth to other parts of the US, would that not be a good starting point upon which to place focus for such an interrogatory?

    Or is playing nicey nice always paramount, and any statement that presents a contrary viewpoint always to be regarded as “trash talk?” Thanks for the censorship, much appreciated.

    TSO daily chart – Short term trend is still up. Price above the 20 EMA since mid Dec.
    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

  91. 91
    zman Says:

    I honestly don’t care but on the other hand, not sure how it makes me money either. If someone wants to explain that to me I’m all ears.

    Thanks Nicky for the market weigh points.

  92. 92
    Dman Says:

    tater, leaving aside the public spending issue, I would imagine that the Californian private sector has been pretty good for the US over the years. Silicon Valley & all that. There’s a lot of export income there. By which I mean a huge amount. Don’t know the numbers but I’m guessing it makes the state budget problems look like small change.

  93. 93
    Nicky Says:

    Re: #87. Aha! Only kidding.

    But the count always did need to undercut the 4 level! Forgot to mention we would head into orbit before that!

    And yes 3 and even 2’s is possible.

  94. 94
    zman Says:

    Anywaaaayyyyy…. thanks for the chart work T.

  95. 95
    zman Says:

    From a fundamental standpoint, I think you see RIG fall off much further than currently expected if we break into the $3. We’ll know more about sentiment from the guys who run a big chunk of the onshore rig count (APC, EOG, DVN) this week but recall that EOG’s low spend case for 2009 was based on $7 gas. Bet they’d like to see $6 at this point. Really going to stink for those left out of the Haynesville as everything else is going sub economic at these prices.

  96. 96
    benbobby Says:

    zman,any info on BP’s earnings ?tks

  97. 97
    Nicky Says:

    Dman re #89 – coming in on the end of this conversation so I hope I am not upsetting anyone but I agree totally with every comment you have made. To me it looks simply terrible that this is the best they can do and its like they are condoning their behavior. You have to lead by example and the shenanigans that have gone on in the banking sector that have led to this economic debacle should be dealt with and the offenders made accountable. How can anyone expect the american public to have any confidence, respect, trust when they now appoint guys that are trying to deceive the very system the rest of us are expected to abide by?

  98. 98
    zman Says:

    BB – no, apologies. I don’t follow them close to have any good shot at an intelligent comment there. RDS.A took bigger than expected reserve writedowns this year (they always take some and catch hell for the quality of their reserve auditing) but this year with oil prices thrown to the wind I don’t know how BP avoids some sizable writeoffs as well. But again, too many moving pieces and not enough visibility for me to pay much attention.

  99. 99
    Dman Says:

    Nicky, yeah you said it better actually. The cure for shenanigans is … drumroll … *more* shenanigans!

    BOP – Bob Marcin at TSCM sees your 800-lb gorilla and raises you an 8 million-lb gorilla:

    “By my calculation, we need to extract $10-15 trillion of debt from the system. This will overwhelm all the rate cuts, interventions, bailouts, pleas, and rants. That sucks, but it’s the truth. This is the 8 million pound gorilla in the room and its diet has just begun.”

  100. 100
    zman Says:

    Nicky – no one will get upset as we all trade options, equities, futures, and or bonds and therefore by definition have very thick skins, are more knowledgeable than the average joe, and better looking too, but I digress. I agree completely. I say launch an investigation into congressional tax paying habits. We’ve dug up 2 already out of how many high level nominations? Hmmm, sounds like an epidemic. If I owe $120,000 I doubt they just say, “oh just pay it and here’s a new high level job for you”.

    Wow Dman, that’s a lot of $0s.

  101. 101
    BirdsofpreyRcool Says:

    Dman – at least his gorilla doesn’t have a gatling gun.

    But, reading some other pieces that say much the same thing. like Jeremy Grantham today. He is pointing to the same $10-15 trillion to get the US balance sheet (as defined by what he is calling the National Private Asset Base) in balance, assuming a 2:1 equity:debt ratio.

    In other words, $30 trillion of net national worth (down from the high of $50-60 trillion), only supports $15 trillion of debt. We currently have about $25 trillion of debt… so, $10-15 needs to go away, somehow.

  102. 102
    Dman Says:

    BOP – I think Marcin got his numbers from Grantham.

  103. 103
    BirdsofpreyRcool Says:

    Dman – the coincidence is a bit compelling, yes.

  104. 104
    BirdsofpreyRcool Says:

    The Trading Desk is commenting that “this mrkt has a mind of its own”… and “this is miserable.”

    So not much luck, trying to see through the fog today.

  105. 105
    BirdsofpreyRcool Says:

    Moody’s lowers Parallel notes rating, outlook negative

    Approximately $150 million of rated debt affected

    New York, February 02, 2009 — Moody’s Investors Service downgraded Parallel Petroleum Corporation’s (Parallel) $150 million senior unsecured notes to Caa2, LGD5 (80%) from Caa1, LGD5 (77%). Moody’s affirmed Parallel’s B3 Corporate Family Rating (CFR) and Probability of Default Rating, but changed the outlook to negative from stable. The speculative grade liquidity rating remains SGL-3.

    “The downgrade of the notes rating is due to the increased size of the senior secured bank facility relative to the amount of the unsecured bonds and the low likelihood of that changing in the near term,”
    commented Pete Speer, Moody’s Vice-President. “Moody’s changed the outlook to negative due to Parallel’s weakening credit metrics and tight liquidity.”

    When the initial ratings were assigned to the senior unsecured notes in July 2007, the senior secured revolving credit facility borrowing base was $150 million which resulted in the notes being notched one rating beneath the CFR under Moody’s Loss Given Default (LGD) Methodology. The current size of the borrowing base significantly exceeds the amount that results in a double notching of the bonds under LGD, and there is little likelihood of Parallel replacing senior secured borrowings with unsecured borrowings or paying down secured debt with an equity offering given current capital market conditions. Therefore Moody’s has downgraded the senior unsecured notes to Caa2, or two notches beneath the B3 CFR.

    The negative outlook reflects Parallel’s tight liquidity, which is currently adequate for operations assuming a significant reduction in capital spending levels. The company previously announced a 2009 capital budget of $118.8 million which Moody’s believes will be further reduced given the continued decline in commodity prices. Lower natural gas and crude oil prices will reduce operating cash flows but that will be partially mitigated by Parallel having hedged oil and gas production volumes approximating 48% of its total 3rd Quarter 2008 production levels with floors of approximately $70 for oil and $7 for gas. This should help the company to meet its stated objective of living within cash flow for 2009.

    However, Parallel’s senior secured borrowing base will go through the usual re-determination in April and could be reduced depending on the bank’s price deck and the company’s final 2008 year-end proved reserve volumes. In addition to the liquidity risks, the negative outlook also incorporates the deterioration in Parallel’s credit metrics in 2008 and the potential for continued deterioration in 2009. Increasing debt levels throughout 2008 and substantial capital investments combined with meaningful negative price revisions to proved reserve volumes are expected to result in higher leverage metrics on proved reserves and high finding and development costs. The reduced level of capital expenditures in 2009 is necessary to preserve liquidity but could result in another year of weak reserve replacement results, while there is limited opportunity for meaningful debt reduction absent a strengthening of commodity prices.

    Parallel’s ratings could be downgraded if the company’s liquidity were to tighten further or if the company has to reduce capital expenditures to levels resulting in significant sequential production declines that indicate a continued erosion of the proved reserve base. The outlook could be returned to stable if the company is able to improve its liquidity and demonstrate a track record of replacing reserves at competitive costs while reducing leverage relative to its reserve base and production levels.

    The last rating action was on July 19, 2007 when Moody’s assigned Parallel’s B3 CFR and the Caa1 rating to its senior unsecured notes.

  106. 106
    Dman Says:

    Z – #100 second point:

    as far as my credit-challenged understanding goes, that is actually the essence of it: somehow $15 trillion ($15 with a whole lotta of “0s” after it) has to get converted into a whole lotta $0.00.

    Apparently this is accomplished by a very large gorilla who may or may not carry automatic weapons.

    Although I would argue it’s just a matter of moving a decimal point… probably that’s why I’m not running a credit desk 🙂

  107. 107
    zman Says:

    Re 105 – a long time ago, in an office far, far, away, I came very close to picking up coverage of PLLL. One trick pony at the time and back burnered it. Anything of interest there now?

    Dman – thanks, lol. That delevering of the consumer was mentioned on the site about 6 months ago as the next big thing that would have to occur. Wonder how long that will take. Consumer not spending and starting to save and now the government wants people to spend and not save.

  108. 108
    zman Says:

    Beer Thirty. Market, at the end of the day, not all that bad, energy didn’t really track the recovery.

  109. 109
    Jay Reynolds Says:

    Now that would be Major Hooverage (teenage son translation: “That Sucks”) that FINALLY the HS gets up our way and the wells are getting larger and larger and we really are, as rumor would have it, in the 340′ pay neighborhood, and THEN prices crater due to the high volumes.

    Jeez, what next? We get force pooled too and operated to death?

    Surely it is a test of my sterling Sense of Humor!

  110. 110
    PackMan Says:

    BOP – which specific IG index do you look at ?

  111. 111
    PackMan Says:

    Don’t Harsh My Mellow, fellas.

  112. 112
    zman Says:

    Pack = can I use that in the future? LOLOLOL.

  113. 113
    PackMan Says:

    z- Absolutely. I borrowed it as well !

  114. 114
    zman Says:

    Question for the members. How about a link on the site for the non energy topic or topics of the day? That’s too long a name so I’ll simply call it The Rant. It would just be a place to express comments (in a constructive and respectful way as is always the case around these parts) about non-energy topics that may or may not have an impact on stocks). Little non-energy bits are fine here, but bigger non-energy writings, and I have a big one in my email now that is hugely important and should not be lost on one day’s comments could go there. It would be a tall list over time that just flows, not changing with a new post for the date. How about a thumbs up or down on that?

  115. 115
    Nicky Says:

    Thumbs up but you know me I could rant on forever!

    Re # 72 – Occam do you work in something that is showing this?
    Can you imagine what that would do to the markets!!

  116. 116
    BirdsofpreyRcool Says:

    PackMan – re#110

    cdx11

  117. 117
    occam Says:

    re #72: that is a Texas style joke that always gets a laugh here in California.

  118. 118
    zman Says:

    Going to gym, ate body weight in pizza this weekend. Seriously, I want to know if people want The Rant page or not. Dumb idea? Maybe, let me know.

    APC on the tape, stock called up a little over a buck, will have review in the morning.

  119. 119
    BirdsofpreyRcool Says:

    z – ok… i’ll weigh in on the question of “to rant, or not to rant.”

    Personally, (and i guess this comes as no surprise) i like the peppering of commentary and occassional non-energy opinions — as it relates to markets — thrown in with your (and others) most excellent commentary on energy markets. If the non-energy topic is something i’m not interested in (rarely… try, never), i can just skip it. You (and others) are pretty good at keeping the site balanced, so i don’t think anyone has really gone full snookers overboard in ranting on a position. It’s usually short, clever, and fun to read (and diverting on some of these blood-red days).

    You raise another issue tho: does it make sense to have a site where one can refer to information and not have to remember what day it was posted under. Answer: i don’t know. You have an example of that in your in-box… i, for one, would like to see what you are talking about. Perhaps then, i will have a better idea what you have in mind for “The Rant Site.”

    Hope this helps!

  120. 120
    mahout Says:

    Z,

    I vote for no rant site.
    It is too much fun the way it is. Sometimes we need a release from the frustration and tedium. One person’s rant may be another person’s legitimate and logical offering, anyway. Let’s give each other some leeway on personal opinions without getting too up-tight. Many times they are just meant to be funny anyway, not to be taken literally. No structural inhibition on rants but you just spank us when we get too far out of line is my recommendation.

  121. 121
    mimster90 Says:

    my $0.02 I vote No rant.

    The web is full of places for those who like to rant and read rants.

  122. 122
    zman Says:

    Ok thanks. I got to thinking I didn’t want to do it anyway, monitoring one page is enough and the rants or whatever you want to call them contain good info in most cases so we’d have to be notified and to go check that area and it would be nutty. I’m pasting mahout’s method in 120 on my screen so that I don’t get all Tiananmen square on you guys. Censorship stinks, even if I’m the censor. I’d just say play nice kids and leave it at that.

    Reef – thanks, glad to hear about NAPE.

  123. 123
    BirdsofpreyRcool Says:

    hey, z… you might like the quote-of-the-day on bloomber today:

    “Good teaching is one-fourth preparation and three-fourths theater.”
    – Gail Godwin

    Glad to see the rants stick around. It’s the “three-fourth theater” part, i think.

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