11
Feb

Washington Weary Wednesday

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ReTARPed - \ri-ˈtär-pəd\ (adj.) - what they call you when you hype a plan and then turn out not to have one. See T. Geithner.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crude Inventories Preview
  4. Stuff We Care About Today - CRK, FST, APC
  5. Earnings Watch
  6. Odds & Ends

Holdings Watch: The Wiki tab is updated.

  • ZTRADE: $10KP - Added (1) RIG February $60 Call (RKJBL) for $2 with the stock down $1.85 on the day or 3% at $59 vs a 5% dip in the OIH and against the backdrop of 4.8% of the S&P500. This is a bottom fish in a volatile, depressed market and I plan to add more if it dips further tomorrow.

Commodity Watch

Crude oil fell $2.01 to close at $37.55 reacting to a pronounced lack of specifics surrounding TARP II. This was the first substantial break below the $40 mark since late December and puts the charts in further jeopardy of another slide as there is no obvious support level from a technical standpoint until we hit substantially lower levels. This morning crude is trading up slightly.

  • IEA Watch: Cutting demand again. IEA says 2009 global oil demand will fall 980,000 bopd to 84.7 mm bopd. Their prior forecast had called for a half million barrel of oil per day drop. IEA did go on to say that if OPEC is succesful in holding members to previously announced cuts, supply will be off 1.5 mm bopd meaning we should see a sharp reversal on inventory levels later in the year.
  • Shell Comments On Oil Sands: No way at current prices and current costs to restart Greenfield oil projects.
  • API Numbers:
    • Crude:  Down 1.996 million barrels
    • Gasoline: Down 2.9 million barrels
    • Distillate: Up 0.853 million barrels

Natural gas tumbled $0.26 to close at $4.54. Blame a weak market and a lack of support from crude and warm weather. This morning gas is trading up ever so slightly.

  • U.S. Government Showing Less Than Friendly Drilling Hand. Not a big deal so far but the direction seems to conflict with the "get us off foreign oil" mantra unless your answer is handing out bicycles. Since the administration has come to D.C. we've had the Minerals Management Service revoke parcels for lease in Wyoming and Utah, the forest service pull the plug on 67,000 acres up this week for leasing in Colorado, and now Interior Secretary Salazar (who runs the MMS) pull the plug on leases potentially opened up for drilling in the outer continental shelf in the last hours of the Bush Administration. The new OCS proposal will involve a four step process:
    • an extended public comment period,
    • a comprehensive assessment of the resources offshore,
    • a series of four public meetings and
    • a development of an offshore plan for renewable resources.
  • ZComment: Welcome to Footdragging 101.  The Bush plan would have accelrated a development plan that would affect some 300 million offshore acres on the outer continental shelf (OCS), from the US eastern seaboard to the Pacific Ocean off California, the eastern Gulf of Mexico and Alaska. Two decades ago (latest estimate) these regions of the OCS were thought to contain 18 billion barrels of oil and 70 Tcf of gas. But who would want that?

Short Term Energy Outlook Watch: Link to the STEO here. Some takeaways on natural gas, the EIA sees:

  • industrial gas demand down 5.1% in 2009 (really depends on the economy and any recovery plus weather, I would not expect it to be that bad for the whole year though,
  • total gas demand down 1.3%,
  • sees total supply up 1.1% (a lot lower than the previous forecast)
  • Sees LNG imports up only slightly in 2009.

Crude Inventories Preview

ZComment:  Imports, imports, imports. The key number today will be crude imports. We need to start seeing numbers well under 10 mm bopd.

  • Crude oil - the survey is directionally correct with the API listed above and if we get a number of 2.5 to 3.0 mm barrels it will be the first in recent memory (four weeks) where the crude wasn't super-sized compared to expectations. That we are adding to inventories at this time of year isn't unusual, but we are 15% over normal already and the refinery turnaround season is fast approaching. Over the next eight weeks we need to see a marked reduction in imports (running hot at 10 mm bopd of late) or we will get to read headlines that include the words "record crude storage" and not just in reference to inventories at Cushing, Oklahoma which are already there. 
  • Gasoline - another week of rising demand in a poor economy with rising prices? Hmmm. Gasoline futures jumped 2% after hours.
  • Distillates - this wold be normal for this time of year but runs contrary to the API data. If we see further builds here now heating oil prices should tumble which would be a problem for refiners.

Stuff We Care About Today

CHK $300 Million Senior Debt Deal.

  • 9.5%, due 2015.
  • Use of proceeds: to repay indebtedness on the revolver.
  • These are in addition to the $1 billion of notes CHK floated on Feb 2.
  • Again, would not be surprised to see the deal double up in size
  • In A Nutshell, I think BOP said it best last night:

It’s all about subordination and covenants and first liens. Sub debt puts the least claims on a company to perform. For the most part, if you just pay your interest when it’s due, sub debt doesn’t bother you. But, if you’re going into a downturn, your banks can (and will) bother you a lot. Banks have performance covenants that sub debt does not. Banks can pull the plug (or make you pay for waiver relief) if you violate sometimes stupid covenants.

  • You've got to be a little concerned that CHK, who seems hard pressed to pass up new leases, won't just charge up the credit again in short order.

FST Pops A Haynesville Well

  • 14 MMcfepd IP, 100% owned Haynesville completion.
  • 2 other wells completing and 2 drilling.
  • 2 rig program for 10 to 12 wells this year, 106K net acres.

APC Announces 2009 Budget & Guidance

  • Capital Budget of $4 to $4.5 billion, down from $4.88 billion in 2008
  • Production Guidance: 208 to 212 mm BOE, up from 206 mm BOE produced in 2008
  • Costs for the first two quarters are included and look in line for lifting costs and little better than expected for other cash costs (G&A)
  • Conference Call: today, 10 EST

 

Earnings Watch

CRK Followup Thoughts. I went back and listened to the conference call, the original pre call notes and the post mortem can be found here.

Earnings for Tomorrow: CLB, PVA

Odds & Ends

Analyst Watch: FBR cuts (HK) to Market Perform (looks like a downgrade based on the stock getting too close to their price target of $23).

132 Responses to “Washington Weary Wednesday”

  1. 1
    elduque Says:

    BDI +81 2055

    TED +2.05 92.69

  2. 2
    zman Says:

    Thanks El-D, I like it that you post this in the morning as I often forget to go check it.

  3. 3
    zman Says:

    From BOP

    From Yesterday’s Credit Market Strategist… who was spot-on with his comments… follow-up –

    Reports indicating that the credit markets are distraught over the government’s re-directed TARP plan are exaggerated….

    The government’s existing programs, the outright dismissal of nationalization, and the government’s desire to attract private capital will protect bondholders and preferred shareholders in the largest US banks

    The huge increase in the TALF program should provide private investors with a reason to re-engage the ABS market. The re-energizing of the ABS market primary market will likely increase overall market liquidity and drive secondary market ABS spreads tighter.

    The private-public bank and increasing the strength of the government’s SBA loans guarantees will take time to implement and their benefits to the economy will be difficult to measure – the lack of an aggressive implementation schedule should not cause banks to fail but would continue to constrain non-financial sector growth

    A credit positive that may have escaped general notice – UBS announced that they were going to retain a portfolio of credit exposures that were wrapped by bond-insurers rather than selling the risk to the government. This could indicate that UBS may be calling the bottom of the ABS meltdown.

  4. 4
    BirdsofpreyRcool Says:

    z – excellent conversation between you and Wyoming after hours last night. For anyone who actually tries to get a normal nights’ sleep, you might want to go back and peruse (and I use that word in its literal meaning) comments 150 on. Excellent technical stuff and parsing of the service guys.

    Thanks z and Wyoming!

  5. 5
    zman Says:

    Thanks BOP

  6. 6
    BirdsofpreyRcool Says:

    Early Credit Comment — strangely, have not yet seen a quote for the Investment Grade Index. Usually, this index trades/is quoted about 4x to every trade in High Yield. This morning, it’s all about the High Yield Trade… can’t recall last time I saw this. High Yield is the canary in the coal mine for credit. While the positive moves are not huge and volume seems light (ie no trades), they are in fact, positive.

    HY 74 3/4 +1/2

  7. 7
    zman Says:

    Wow. What a difference a day makes. Ubiquitous sea of green.

  8. 8
    zman Says:

    Except for CRK – anyone see the broker note that didn’t like the quarter? Thanks in advance.

  9. 9
    BirdsofpreyRcool Says:

    Helps when Timmy doesn’t talk.

  10. 10
    BirdsofpreyRcool Says:

    z – SMH came out neutral on CRK. I’ll send over the note. Basically, their PT is $45, based on 5Bcfe EUR HVS wells. Which is what the company said on their conf call. If the HVS wells come in better than that, PT goes up.

  11. 11
    zman Says:

    Thanks BOP, that’s probably fair, if you look at reserves in the ground vs mkt price they are not all that cheap, its the 2009 action that gets them there…and the upgrade of that type curve on their Haynesville stuff. Liked management sticking to 5 Bcfe, think they could go to 6, most likely will, but not before mid year as they need to get wells down.

    Still don’t understand the thinking on keeping Helicopter Ben around. The guy was a deer in the headlights for much of 2008 on the economy.

  12. 12
    BirdsofpreyRcool Says:

    Credit markets in general opening tighter this morning. Nice to see the IG index hanging below the 200 mark.

    IG 192

  13. 13
    zman Says:

    If you have time, the APC call is in 10 minutes. CEO Jim Hackett is a good example of what you want in an Oil and Gas CEO.

  14. 14
    zman Says:

    One nice thing about CRK is their lack of hedges and 90% gas profile. Eventually, natural gas will rise, and this one will benefit directly.

  15. 15
    zman Says:

    Thanks for that piece BOP…not real meaty. I would not expect that to have put any lasting pressure on the stock. I would also think management’s ruling out of equity and debt deals to carry more weight than what is an NAV based target based on what will probably be low Haynesville additions.

  16. 16
    BirdsofpreyRcool Says:

    z — Ben is the wrong man… but, you and I differ on the reasons he should go. In my opinion, he did not start the engines on the helicopter soon enough. We were raging about how bad things were over a year ago… worrying about DEflation. Saying that Ben & Co. needed to be much more proactive with interest rate cuts and look through energy prices (as that wasn’t “true” inflation). If the Fed had moved earlier, Lehman wouldn’t have gone belly-up.

    So, in the end, Ben & Co has had to move MORE than he would have if he had recognized the wildfire that was burning out of control. Much MORE $$ has to be pumped into the system than would have been necessary. For that, I think he deserves to be fired.

    That said, I wish I had done things differently with my portfolio too… but, at least I could see the Train Wreck that was the credit market. Meanwhile, all the Dallas and St Loius Fed govs could see was “inflation.” I guess I thought they would “get it” at some point.

    Yesterday, Ben said he had underestimated the need for accomodative moves. DUH.

    But, water under the bridge now.

  17. 17
    zman Says:

    I too think he was too slow to see things coming. Not water under the bridge if he’s still there, driving with his rearview mirror.

    Getting on APC call.

    Oil numbers in 30 minutes. Starting to see the typical pre number retrenchment in several energy names.

  18. 18
    BirdsofpreyRcool Says:

    z – you summed up the reasons to watch and wait-in-the-weeds for CRK. Low debt, financial flexibility, committed drilling program, no debt/equity dilution, and mostly-unhedged production book. Good stuff, to be added at the right time.

    The CRK mngmt team almost lost their company in the late 90s with too much high yield debt + unhedged philosophy. That said, what doesn’t kill you, makes you stronger. They proved they could learn from that experience. For that, I give them credit.

  19. 19
    BirdsofpreyRcool Says:

    z – good point. Not water under the bridge when he’s still driving the boat. Guess I’ve just written him off as largely irrelevant at this point. He’s not completely irrelevant, of course. As he has the power to use the Federal Banks’ Balance Sheet for good (which I think he will do).

  20. 20
    zman Says:

    Will read APC transcript later, web link not working for me. Don’t own it, no hurry.

  21. 21
    BirdsofpreyRcool Says:

    BGC popped on earnings this morning. That company is a TRUE “infrastructure” play. Is probably worth reading the transcript there too, as they have a good global read on project spending.

  22. 22
    zman Says:

    Thanks BOP, will do.

    Energy continuing to ebb pre inventories.

  23. 23
    zman Says:

    FST floating a debt deal too upon their well news.

  24. 24
    BirdsofpreyRcool Says:

    z – as far as gasoline demand goes… I’m seeing something around here (Detroit area) that I saw in Houston in the mid-80s. For those who have to drive 20+ minutes to work everyday, the commute is getting easier. Frankly, there are less commuter vehicles on the road. Purely annecdotal and probably a big “DUH,” but I don’t think jobs lost will come back anytime soon. In spite of what people in Elkhart, IN are “hoping” for.

    Just my 2-cent, on-the-ground observation.

  25. 25
    BirdsofpreyRcool Says:

    Would be curious if anyone in California (where driving to-and-from work is a full-time job) is seeing the same effect.

  26. 26
    BirdsofpreyRcool Says:

    The REAL reason it’s tough for individuals to figure out what bonds to buy. Good summary of CHK’s various bond flavors:

    Covenant Review: Chesapeake Energy: Widely Varied Covenants
    2009-02-11 15:22:13.386 GMT

    As Chesapeake Energy markets its 9.5% Notes due 2015, investors should note the very wide variances in covenant protection among Chesapeake’s bonds. This is particularly important in light of the company’s continuing asset sales and periodic speculation about Chesapeake as an acquisition target.

    Some of the Chesapeake bonds have no Change of Control covenant, and some but not all of their bonds would also require a ratings downgrade for the put to be effective. Some of the bonds have investment grade covenants, while others have high yield covenants (and some of those high yield covenant packages would fall away upon an investment grade rating). Some of the bonds have Asset Sales covenants, while others would not have any say on how sale proceeds are used.
    Overall, investors can observe a range of desirability of the covenant packages and align that view with their expectations for continued asset sales or a sale of Chesapeake.

    Understanding the Chesapeake bonds requires analyzing 16 separate indentures and 91 supplemental indentures.

  27. 27
    zman Says:

    crude: up 4.7 mm barrels on weak refining demand

    gasoline: down 2.6 mm barrels (out of line with thinking for the EIA number
    but in line with last night’s API numbers

    distillates: down 1 mm barrels (not quite as strong as expected)

    imports: 9.7 mm bopd, still too high
    gasoline demand: held flat at 9 mm bpd

  28. 28
    zman Says:

    Stocks at Cushing hit another record high. Crude trying to shake the numbers off, not getting clubbed so far.

    This was the fourth consecutive, “way too big” crude build. It should add fuel to the fire for OPEC to cut production as imports are obviously too high for demand. That thought will help support crude, that and the fact that projects are being shelved around the globe at these prices, let alone lower ones.

  29. 29
    zman Says:

    BOP – any trading desk feel for the rest of the day?

  30. 30
    Popeye Says:

    Yes BOP, traffic better in OC CA. Resturants here in Newport Beach are like a morgue these days.

  31. 31
    Nicky Says:

    Morning all. Gold has huge resistance at 950.

  32. 32
    Nicky Says:

    Broader market – until/unless 804 fails on the spx there is still the possibility that the wave iv correction is still playing out.

    Alternative is that v down has already started.

    Under either count I would expect the 7800 area to provide support for at least a short term bounce.

  33. 33
    zman Says:

    Thanks for the color Popeye. I have not heard much about conservation in terms of driving from the new or past administrations but I am as much a fan of conservation as I am of drilling. The government could encourage, via tax incentives, a more “work from home” populace. For service workers and their employers there are numerous cost benefits to such a scheme.

  34. 34
    zman Says:

    Interesting to see oil shaking off those numbers…nothing in their on demand to be supportive. Fear of an OPEC and non-OPEC response I suppose, plus, we’ve had a good downturn.

    Nicky – got levels on oil?

  35. 35
    BirdsofpreyRcool Says:

    Popeye — Newport Beach… a little piece of Heaven. Sorry to hear that. Thanks for the info, tho.

  36. 36
    Nicky Says:

    Z – looks like some sort of v wave may have completed at the earlier low. Need to see it get back above 38.50 region.

  37. 37
    BirdsofpreyRcool Says:

    Trading Desk has been very quiet this morning. Watching reruns of “South Park” and exclaiming “TIMMEH” over and over again.

    Will check in to see if they have anything (other than sick jokes) to pass along.

  38. 38
    zman Says:

    Thanks Nicky.

    Thanks BOP, can’t say I blame them. Anytime CNBC looks more like CSPAN2 all bets are off.

  39. 39
    BirdsofpreyRcool Says:

    No technical color, but Head Trader has gut feel we go higher from here.

    He pointed out that tech had been leading the mrkt, now lagging today… focus back on the financials (like it ever left). Watch the usual financial suspects (GS, BAC, JPM), if they start to move up, everything will move up with them.

    Meanwhile, Head Trader on CDS desk is wondering if his bloomberg works… could hear a pin drop on the Bond Desks. Market holding its breath, it seems. That will magnify any movement we see in the financials (up or down). People/traders are waiting for a sign.

  40. 40
    cargocult Says:

    BOP- traffic seems better in the SF Bay Area as well but the restaurants are still doing lots of business. I don’t commute anymore so my sample is small. One thing never stops amazing me. Every time I go by an Apple Store there is a crowd.

  41. 41
    BirdsofpreyRcool Says:

    Timmy gave them a sign yesterday… and it involved the middle finger.

    Need to see some damage control. Suspension of marked-to-market would be a huge step in the right direction. It doesn’t solve anything, but it would indicate that the Govt “gets it.”

  42. 42
    BirdsofpreyRcool Says:

    thanks, cargocult — what are housing prices doing in the Bay Area?

  43. 43
    BirdsofpreyRcool Says:

    GS trading at HOD. Making Head Trader look good.

  44. 44
    BirdsofpreyRcool Says:

    Does this make sense for VLO???

    VeraSun Energy Obtains ‘Stalking Horse’ Bid from Valero
    Michigan Ag Connection – 02/11/2009

    VeraSun Energy Corporation Tuesday announced that the company filed a bid procedures and sale motion in the United States Bankruptcy Court for the District of Delaware seeking authority to sell substantially all of the assets of VeraSun Energy Corporation and 24 of its affiliates through a court-approved sale process.

    As part of the sales process, the company has signed an agreement with Valero Energy Corporation to sell substantially all of its assets relating to the VeraSun production facilities in Aurora, S.D.; Charles City, Fort Dodge, and Hartley, Iowa; and Welcome, Minn.; and a development site in Reynolds, Ind.. The Valero purchase agreement provides for a purchase price of $280 million, plus the value of inventory and certain pre-paid expenses, subject to certain customary adjustments. Having entered into the Valero agreement, the company is now required to hold an auction to determine if other bidders will offer more favorable terms than Valero’s bid, referred to as a “stalking horse” bid.

    Under the proposed Bid Procedures, the Company is seeking to sell all of its production facilities and operations in separate or combined transactions. While the Company has received expressions of interest with respect to assets other than those that are the subject of the proposed Valero transaction, the Company has not yet negotiated a definitive agreement to sell any other facilities.

    “Given current difficult industry conditions and continued constrained credit markets, we believe that commencing a sale process is in the best interest of Company stakeholders,” said Don Endres, VeraSun’s chief executive officer.

    VeraSun believes it has sufficient liquidity to maintain its production facilities and workforce through the anticipated conclusion of the sale process.

    “We continue to be optimistic about the long-term viability of the renewable fuels industry,” added Endres. “Ethanol is a valuable, clean, high-octane, low-carbon fuel that is reducing America’s reliance on foreign oil, creating jobs and stimulating the economy.”

    Pursuant to the proposed Bid Procedures, interested bidders must submit qualifying bids by March 13, 2009. If qualifying bids are received, the Company would conduct an auction on March 16, 2009 and, following Bankruptcy Court approval at a sale hearing, expect to complete the asset sales by March 31, 2009, or early in the second quarter, subject to regulatory and other customary closing conditions. The initial hearing for approval of the proposed Bid Procedures is scheduled for February 19, 2009 at 9 a.m. in Wilmington, Delaware.

    Rothschild, Inc. is serving as VeraSun’s financial advisor on the transaction and will be managing the sale process. Credit Suisse is acting as exclusive financial advisor to Valero Energy Corporation.

    VeraSun and 24 of its subsidiaries filed petitions for relief under chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court in Wilmington, Delaware on October 31, 2008. The chapter 11 cases are being jointly administered under Case No. 08-12606 (BLS). For more information, please visit http://www.verasun.com.

    VeraSun Energy Corporation is a leading producer and marketer of ethanol and distillers grains. Founded in 2001, the Company has a fleet of 16 production facilities in eight states. VeraSun Energy currently has an annual potential production capacity of approximately 1.64 billion gallons of ethanol and 5 million tons of distillers grains. VeraSun also markets E85, a blend of 85 percent ethanol and 15 percent gasoline for use in Flexible Fuel Vehicles (FFVs), directly to fuel retailers under the brand VE85(R). For more information, please visit VeraSun Energy’s websites at http://www.verasun.com or http://www.VE85.com.

  45. 45
    elduque Says:

    any reason for HK’s underperformance today?

  46. 46
    cargocult Says:

    BOP- housing prices are a multifaceted question in an area the size of San Francisco Bay Area. They are down here of course but in Marin County where I live property is selling close to ask if priced properly. California RE prices are absurd(compared to most of US) and have been for 25 years.

  47. 47
    zman Says:

    RE HK – price target achieved based downgrade by FBR.

  48. 48
    BirdsofpreyRcool Says:

    Thanks, cargocult. I grew up in SoCalif… so I hear you on housing prices.

  49. 49
    zman Says:

    CRK off $1.50 today…a bit surprising.

  50. 50
    zman Says:

    Crude continuing to shrug off dire numbers, now up $0.65 and above $38.

    Keep in mind next week we are highly likely to see the headline:

    “Crude inventories break decade high levels”

    NG has reversed and is higher as well.

    Energy stocks remain a mixed bag as the equity market waffles about.

    CRK making a new LOD, down 4+%

  51. 51
    zman Says:

    Senate bill caps employee pay at $400K for all employees at firms receiving TARP funds. Congress is focusing on being populist, not fixing problems. Ugh.

  52. 52
    isleworth Says:

    Z- Oil doesn’t seem to be able to go down much despite the huge inventory build. Soft demand is certainly evident now, but OPEC cutbacks and lack of incentive to drill at these prices seem to be balancing each other at this level. Volume in USO has been huge over past two months. What do you make of this situation at this point?

  53. 53
    zman Says:

    Isle – see 28. Other than that crude back to tracking U.S. equity market. One thing that most people are not talking about of late is Non-OPEC supply declines. At these prices, investment from the richer OPEC nations is being severely curtailed. The richer non-OPECs are curtailing too. Much supply comes from the poorer non-OPECs and they are will not be able to provide maintenance capital, let alone growth capital. Russia, which is the biggest producer, will roll over faster at these prices than before. I think that thinking is filtering into trader’s thoughts at this time. Still, price can fall further until we see those import numbers move lower.

  54. 54
    1520sbroad Says:

    BOP – traffic here in NY/NJ has not changed at all as far as i can see. Restaurant traffic has come down a bit as i see it.

    #44 – i think that VLO for Verasun deal is a good one for VLO. I will be curious to see if anyone else jumps int he ring in the proceedings. I think VLO will always need ethanol and they have the know how to manage a commodity price sensitive business like corn/ethanol. At one point Verasun was a $4billion EV company.

  55. 55
    isleworth Says:

    Thanks Z. Lack of investment and production cutbacks will no doubt lead to a big problem down the road, and perhaps eventually even higher price spikes than we saw last year. I guess the real issue is timing. If I was a producer who has a finite number of barrels in the ground to sell, I certainly would be trying to limit my sales at these prices. Demand isn’t going to hell worldwide, especially with the continued growth and transportation needs of the developing BRIC countries

    Lower prices may happen, but will only provide better opportunity for a long term investor for the entire sector. It’s really not all that complicated I guess 🙂

  56. 56
    zman Says:

    Re 54. Agreed, good deal for them, next stop, pick up a cellulosic company to add to the mix.

    Isle – yep, demand is down everywhere but not off a cliff and it will recover with the global economy, no reason to think we are seeing structural alterations to the demand landscape.

  57. 57
    zman Says:

    I’m on the wrong side of the refining trade, albeit in a small way. They are exercising more discipline on production than I thought so despite weak demand, cracks are still inching up.

  58. 58
    zman Says:

    Someone just sent me a nice point and figure chart of NFX breaking its down trend.

  59. 59
    PackMan Says:

    EOG … any thoughts ?

  60. 60
    BirdsofpreyRcool Says:

    1520s — thank you for the info.

    And thanks for your thoughts on VLO/Verasun. The corn/ethanol thing always seemed like flawed policy to me… but, I guess we have to be willing to try things in order to reduce dependence on People Who Hate Us.

  61. 61
    PackMan Says:

    Down $8 from yesterday.

  62. 62
    zman Says:

    EOG just moving with its peers. APA, DVN down as bad and worse respectively. APC only up due to a neutral looking outlook pr today.

    Looking at CLB for puts.

  63. 63
    BirdsofpreyRcool Says:

    z — the salary cap business is truly nauseating. It’s the ultimate slippery slope and will have consequences that the short-sighted, economically-challenged Senators can not even begin to wrap their pea-brains around.

  64. 64
    zman Says:

    Pack – that move coincides with the one in crude, no hedges at EOG, and Bakken not profitable at these prices.

  65. 65
    PackMan Says:

    bought some shares of EOG here for a trade; this area has been bottom-y for the stock.

  66. 66
    PackMan Says:

    thanks for the input Z

  67. 67
    zman Says:

    63 – it is when you consider that all companies are taking stimulus of one sort or another from the government. Why not go limit AAPL pay because they benefited from the last round of tax rebate checks?!

  68. 68
    BirdsofpreyRcool Says:

    Hey! I feel kinda bad about bringing up CRK yesterday. I have NO IDEA why they are getting differentially pummelled today. No “big shops” cover them… they are even ignored by Pickering (who is great, as you know). Guess they are just the Rodney Dangerfield of the Haynesville.

    I still think the way to play that name is through the 6 7/8 Notes, by the way. Kyleandy, any luck with your BofA broker on those??

  69. 69
    1520sbroad Says:

    BOP – See this link http://biz.yahoo.com/ap/090210/refiners_ethanol.html?.v=2

    I saw this yesterday and it solidified my thoughts on VLO for Verasun. I have also been trying to work out the geography between VLO’s refineries and the Verasun plants they are buying. I would expect VLO to only buy the ones closest to their refineries. Memphis, Ardmore, OK and McKee, TX are all close enough that VLO can use the ethanol readily. I would be curious about the transportation issues surrounding this deal for VLO.

  70. 70
    BirdsofpreyRcool Says:

    z – or the homebuilders… with the $15,000 tax credit.

    Barf-material, to be sure. There will be consequences… only it will hurt us, the American People… and not the pea-brains in Congress. THEY will just pat themselves on the back and give themselves another pay raise!

  71. 71
    cargocult Says:

    I think Steve Jobs only gets $1.

  72. 72
    BirdsofpreyRcool Says:

    1520s – Corn ethanol only worked b/c of govt subsidies. On the other hand, if VLO can buy the assets cheap enough, it makes a lot of economic sense.

    This is a case where the “first-mover” was DISadvantaged. I have no doubt VLO will get a good deal. Very few companies either have the excess cash and/or can borrow in the credit markets. Good time to buy cheap assets.

  73. 73
    zman Says:

    Hey BOP re CRK, if it makes you feel better, I mentioned it first. They are getting clubbed pretty badly now, down $3. I have a feeling some analyst got a question answered post call in a way he didn’t like, not sure who though. Am looking to add some down here.

  74. 74
    BirdsofpreyRcool Says:

    And Jamie Dimon, the very smart CEO of JPMo, only took $1 million last year. That’s the problem with painting “all bankers” with the same brush.

  75. 75
    zman Says:

    Cargo – right, but I bet a lot of employees there get over $400K….how dare they make those kind of windfall profits, lol.

    Congress votes to give itself a raise every year. I wonder if they will again this year.

  76. 76
    BirdsofpreyRcool Says:

    CRK is now the best way to play a rebound in nat gas prices, imho. And you don’t even have to call prices exactly… ’cause they will make it through this downturn. So, not a matter of “if”… just “when.”

    Bet someone didn’t like the 90% un-hedged 2009 production info…

  77. 77
    1520sbroad Says:

    #72 – bingo. Cash is king at 30% of book.

  78. 78
    zman Says:

    BOP – that should not have really been new info to the analysts though.

  79. 79
    BirdsofpreyRcool Says:

    z – LOL. Yeah… And how many times have you and I seen a stock tank on something that “everyone knew already”??

  80. 80
    cargocult Says:

    Call me a populist but I think top exec’s should get paid for performance. Make money for your shareholders and I have no problem with highly rewarding you. But when the company flounders you suffer right along with everyone else. That’s capitalism.

  81. 81
    zman Says:

    Cargo – it’s that kind of thinking that will keep you from getting in public office.

    CLB – got scooped on my CLB puts (someone wanted them more than me), will wait for an entry closer to the close to see if they rally into post close earnings. This is a coring and perforations company, reservoir management too. Stock always trades at a premium to the service group but it has usually grown the bottom line faster and surprised on earnings. They also generally have a rosy outlook quoting the high number of miles of cores they have in backlog and their ability to get premium prices for their perfs. Hard to imagine they can maintain pricing momentum here.

  82. 82
    rseidman Says:

    Solars! Moving in sync with XLE

  83. 83
    zman Says:

    ZTRADE: High risk $10KP trade.

    Added CLB $60 Feb PUTS (CBPNL) for $1.30 with earnings out tonight.

  84. 84
    zman Says:

    Oil broke $37, group trading off fairly hard on very little volume.

  85. 85
    Nicky Says:

    April contract is trading $6 above yet again. Each month we see this and it just continues to put pressure on the front month contract. I don’t see how we are ever going to put in a low?

  86. 86
    choices Says:

    BOP-re#68-do not give it a passing thought, we are all adults and can take the results of our own decisions in this casino.

  87. 87
    zman Says:

    Nicky – I hear ya, need to see imports to the U.S. actually decline, so far, despite all the cut backs at OPEC, roughly the same amount of oil is showing up on U.S. shores (or coming down from Canada via pipes) as last year and the five year average. Makes it hard to do anything but grow inventories which will keep those front months tumbling while the light at the end of the tunnel, that imports will fall as production falls and demand at some point picks up keeps the contango intact.

  88. 88
    BirdsofpreyRcool Says:

    choices — thanks. My goal is for all of us to make money!!

  89. 89
    Nicky Says:

    Z – the worry is from a chart point of view is that unless we can make a low below the $32 low whilst the March month is the front month then that means even greater falls ahead as we have to do it in a subsequent month which is obviously much higher now.

  90. 90
    Nicky Says:

    The good news is the falls now look like 3 of v down so likely the March contract does it.

  91. 91
    zman Says:

    I hear ya Nicky, thanks, not far off that now really.

  92. 92
    zman Says:

    Feels like rally time. Oil closing just over $36 on the day.

    We have jobless claims tomorrow and consumer sentiment on Friday, otherwise not a lot of data this week.

  93. 93
    zman Says:

    CRK seems to be catching a bid at the $37 level, bottom end of its recent range.

  94. 94
    PackMan Says:

    Nice rebound on EOG

  95. 95
    scottjasonm Says:

    Anyone thinking of adding some HK here after the downgrade?

  96. 96
    zman Says:

    Benbobby. I heard it mentioned as recently as Monday albeit by a anchor on CNBC. I’d guess this summer if oil inventories remain high and prices for gasoline shoot up. I don’t agree with such an investigation but I see your point.

  97. 97
    zman Says:

    Scott – I have a full plate right now in both accounts, may add more if it goes lower, I do think the downgrade is a one or two day event, have not seen the note, but it looked like it reached their price target after a nice little run and they opted to make some commissions instead up change an NAV discount or CF multiple to up the target. If oil and natural gas prices were acting a little more friendly or sideways they could have found a reason to bump the target into the upper $20s and avoided the downgrade.

  98. 98
    zman Says:

    Another 3% off day for XOM. Hmmmm. Getting awfully cheap there.

  99. 99
    zman Says:

    Nice bottom fish on the EOG, group moving off lows fairly uniformly. One thing there has not been is panic, volumes are very light. CRK $1.50 off that low now too.

  100. 100
    BirdsofpreyRcool Says:

    Supposedly, deal reached on Stimulus Bill. Oh boy… We all get to eat pork for dinner!

    Market rallying on it…

  101. 101
    md Says:

    Does CXPortal also have an NG chart similar to
    The CL realtime chart link as below
    http://www.cx-portal.com/wti/oil_en.html

  102. 102
    scottjasonm Says:

    thanks Z

  103. 103
    zman Says:

    Wow, really feels like rally time now.

    CLB not following it up.

  104. 104
    md Says:

    http://www.mms.gov/ooc/press/2009/press0211.htm

  105. 105
    zman Says:

    Stimulus vote expected Friday or Saturday.

    md – not sure, I tried a few combos of the url to no avail but it seems like something along the lines hhub or henry hub and gas or natural gas in that link would work.

  106. 106
    zman Says:

    Thanks md. Some of the remainder is permanent as the facilities were knocked out and it would not be economic to rebuild them for what little reserves are left.

  107. 107
    elduque Says:

    CHK notes now up to $425 to yield 10.%

  108. 108
    tater Says:

    XOM

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

  109. 109
    BirdsofpreyRcool Says:

    CHK going green… shareholders shrugging off note issuance.

  110. 110
    zman Says:

    BOP – that debt CHK did, when is the call date?

  111. 111
    zman Says:

    Thanks Tater. Nice call on the top there a couple of weeks back in the 81 to 82 range.

  112. 112
    BirdsofpreyRcool Says:

    z – those CHK 9.5s due 2/15 are non-call. pretty interesting!

  113. 113
    BirdsofpreyRcool Says:

    z – those CHK 9.5s are currently offered at 98.5. And they are registered bonds… so regular people can buy them.

  114. 114
    tater Says:

    Honestly, I don’t remember that one, but if you say so, thanks.
    Running around again, so quick note on the HK gap resistance. It is not necessarily strong resistance. Second try could easily break through.

  115. 115
    zman Says:

    BOP – that’s what I thought but thought I’d check since I didn’t see it. So they are willing to live with 9.5% for the next 6 years. Hmmm.

  116. 116
    zman Says:

    Tater – I remember it and thanks. On the gap on HK you are talking about the $22 ish level?

  117. 117
    elduque Says:

    Z why are you concerned that CHK will increase the leverage of the company. I don’t really see what the problem is:

    1. production is mostly hedged.
    2. strong cash flow to cover debt
    3. management so far has used debt effectively
    4. paying off the revolver does not increase debt, but I grant you does make room for more purchases, which probably will look very good 1-2 years from now.

    I really think that the key is to be fully hedged and take advantage of the spread. Management seems to be cognizant of that. Only Mr. Market seems to be concerned.

    Fear won’t always as dominant a force as it is right now.

  118. 118
    TEXWS6 Says:

    Re CLB Puts:

    All of E&P companies have entered consortiums for the various plays that have popped up in the last 5 years or so. Everyone immediately went out and cored a well and set core and money to CLB. CLB is SEVERELY understaffed, and as a result, slow to get things turned around. I was their 2nd largest customer at one point, I have a very good grasp on the processes/people that are in place. Great company, I just don’t know how they will do since they have already been paid for all the core work they still have to conduct.

    Their perforating company is called Owens. Owens is currently involved in a lawsuit due to some misfire that happened on two different occasions that led to fatalities. We currently don’t use Owens to avoid any run-ins with lawyers.

  119. 119
    BirdsofpreyRcool Says:

    z – no problem. I had to double-check myself. Guess if they had added a call feature, bonds would have priced a half point or so lower. Surprising to see non-call paper with a fat coupon like that. But, like i said, the high yield mrkt is technically-driven as well as credit-driven. It very sensitive to fund flows… so, if a borrower really really needs $$ at a point where the high yield mrkt is illiquid, in addition to paying up, the borrower has to give up other terms too.

    The Pendulum swings. 2 yrs ago, “pick-toggle” bonds were all the rage… if you were an issuer. As i bond investor, those things scared the sh*t out of me… and signalled the end of that particular credit cycle, i might add.

  120. 120
    tater Says:

    Yes, 22.74ish from late Sept. That’s where price got rejected Monday. Now appears to be getting support from 20 MA.

    I’m gone for a couple hours. I’ll try to post it for tomorrow.

  121. 121
    BirdsofpreyRcool Says:

    to be technically correct, make that “pik-toggle” bonds (pik = payment in kind).

  122. 122
    zman Says:

    El – D. I agree with your last statement on fear. And my comments are more for the right now. I would have thought they would have issued debt 1.5% higher with a call option so they could easily swap it out at 7% in about 1.5 years when things normalize. I’m not hugely concerned and I see the history chain of value where they buy for 1x and sell for 10x…just wishing they’d cool it for a time. You don’t have to do a deal every day to prove you can.

  123. 123
    zman Says:

    Thanks much TEX, appreciate the CLB color much. If you’d care to weigh in on the ceramic vs RCS merits in the Haynesville that would be welcome too.

  124. 124
    BirdsofpreyRcool Says:

    z – i assume you caught CRK’s comment on RCS in the HVS…

  125. 125
    BirdsofpreyRcool Says:

    Financials going out at HOD… positive for mrkt as a whole.

  126. 126
    zman Says:

    BOP – yes, didn’t quantify the bang for the buck enough for me to tell, seemed like they said they were interested in it but few details, or did I miss something more.

  127. 127
    BirdsofpreyRcool Says:

    z – i’m sure you didn’t miss anything. But, it did sound like it was the preferred fraccing medium for them. Wish they had quantified the cost differential, tho.

  128. 128
    BirdsofpreyRcool Says:

    HY index went out weak… rather odd.

    HY 73 3/8 -7/8 pts for the day… that’s a lot.

  129. 129
    zman Says:

    Thanks BOP,

    beerthirty

  130. 130
    BirdsofpreyRcool Says:

    PAA just reported a nice, in-line quarter. One of the larger MLPs, I think. 9.5% payout yield.

    Does anyone follow this one?

  131. 131
    zman Says:

    Sorry, no, I don’t touch the midstream and pipe co’s.

  132. 132
    TEXWS6 Says:

    I think in the NW part of the field (HK, CHPK) you will see more RCS utilized, as opposed to the southern part (Coushatta, La) will be using ceramics and/or bauxites due to increased depths and temperatures. Good for Carbo/Hexion/Atlas/Saint Gobain, except the fact that there is alot of proppant coming in from overseas that had not previously been on the market. This foreign proppant is also 30-40% cheaper than conventional ceramics that has been on the market for years.

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