13
Feb

Somber Friday

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 Sign Of The Times Watch: From an internal Shell email, leaked to Reuters yesterday ~

"Do not fill vacancies ... Reconsider how hard to hold on to securing current staff that may be on the fence re. retirement. Ruthlessly review third parties costs ... Review necessity of contract staff as contracts expire, renew by exception only." ~ Chris Haynes, vice president technical, EPT projects. For the record, Shell has said they plan to increase spending from $30 billion in 2008 to $31 to $32 billion this year. Someone forgot to tell that guy and I'd say this augers for further pain for the service names as this attitude is becoming widespread.

This is a 3 day weekend with Monday closed for President's Day. If I don't see you in comments have a safe and relaxing holiday. 

The Friday Movie Quote pertains to the word "stimulus" ~ You keep using that word. I do not think it means what you think it means.

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Earnings Watch
  5. Stuff We Care About
  6. Odds & Ends

Holdings Watch: No changes in yesterday's hate the stocks, hate the stock, no wait, sort of like the stocks market.

Commodity Watch:

Crude fell $1.96 to close at $33.98 yesterday as the equity markets had another bad day prior to the close of NYMEX. It is difficult to point to support on the WTI charts as you have to travel back quite a bit further in time than may be of any use as Tater was pointing out in yesterday's comments section. My sense is that we will be at decade highs on crude storage next week and may make a run on the record high prior to exiting the refinery maintenance season in March/April. This will keep a headwind running against crude and OPEC will take further action. This morning crude is trading up slightly on the following OPEC items which auger for further cuts.

  • OPEC Watch: On The Way To 100% Quota Compliance. No, seriously, as much as that statement would normally make me laugh, it seems that OPEC has gotten the message that the world is watching and that a barrel curtailed is a dollar made. The Cartel says it is at about 80% compliance with the 4.2 mm bopd "aggregated" cuts announced in December and President Al Baradi says look for 100% compliance by the time of the next meeting on March --. Given current prices, another cut is assured and I would be surprised if certain sizable non-OPEC producers don't publicly go along.

 

  • OPEC Watch 2: OPEC Sees Demand Drop. The Cartel sees demand falling by 580,000 bopd to 85.13 mm bopd vs its most recent demand forecast which saw demand down 180,000 bopd this year. IEA said earlier this week it sees '09 demand down 980,000 bopd.

 

  • Zman Botched The Refining Trade. Gotta call it like I see it. Sometimes my timing is off. Sometimes I just miss a reversal in trend or a shift in the fundamentals thinking that it will reverse when it doesn't. This time its the latter. I have a small put position in TSO which will expire worthless and I'm getting ready to do an about face and join the long side here as the spring will is only likely to see further reductions in gasoline stocks and as such, provide ready support for refining margins.

Natural gas eased five cents to close at $4.49 which is a minor miracle given the action in the crude pits, the equity markets, and the fact that we got a slightly smaller than expected gas storage withdrawal yesterday. March natural gas now looks like this. This morning gas is trading up a penny.

Natural Gas Storage Review -  EIA reported a withdrawal from storage of 159 Bcf versus my 155 Bcf estimate and Street Consensus of 165 Bcf. Given the sloppiness of the economy the Street is coming pretty close to the mark. No matter as far as gas prices go as we are still going to trough in with healthy (near five year average trough) storage levels in about 8 weeks and the character of the rebuild (fast or slow) will determine pricing until we see evidence that volumes are indeed falling off. That is not a question of if but when as we know but a little early warmth (like the U.S. is experiencing now) could lead to some shockingly large, early injections putting pressure on gas prices and the gassy E&Ps.

 See notes just below these graphs:

  

 

Just looking at the first graph above you can see storage is actually below the 2007 and 2006 levels and only slightly (2.2%) above the 2008 level during this week of the year. Its been a fairly cold winter and we deferred some production due to storms so despite all the extra supply around, storage hasn't gotten out of hand. Interestingly, for this week in history gas prices were:

  • 2006: $7.32
  • 2007: $7.80
  • 2008: $8.30
  • 2009: $4.50

That's just food for thought. The absolute storage level has had less and less to do with natural gas prices over the last decade. Here's something else to chew on. Production for November (which is the month we had data for at this time in history) was:

  • Feb 2006 (November 2005): 49.1 Bcfgpd
  • Feb 2007 (November 2006): 52.3 Bcfgpd
  • Feb 2008 (November 2007): 55.9 Bcfgpd
  • Feb 2009 (November 2008): 58.7 Bcfgpd

So the U.S. has been piling up some very strong growth, we know that. Just for reference, here's that Lower 48 gas supply graph (those downward kinks are hurricane disruptions).

The previous graph will start rolling over fairly soon, probably in another 3 to 4 reports (months) out of the EIA. That's a guesstimate but I think its in the ballpark. The signs of deceleration in the reports of the large cap E&Ps for the fourth quarter are telling. Anyway, this timeframe would mean flattening production in March or April (those EIA reports run 2 months behind) which is good timing as it coincides with the shoulder season, when there is little demand for heating or cooling. However, I would expect that prices will take one last good slide before traders really start to discount lower production volumes.

 

Earnings Watch

NBR Preannounces 4Q Results

  • Expects $0.80 to $0.82 vs the Street at $0.82
  • They did this because they are taking a ceiling test writedown and goodwil impairment of $1.14 per share which have shown a headline loss for them on their reporting day.
  • The impairments relate to their JV activities with E&P companies in the Bakken, Barnett, Horn River, Haynesville, and Fayetteville shales. This is non-cash and due to low year end prices, like you see for the E&Ps and would have miniscule if the new SEC reserves rules had been in place for this past year's reserves.
  • I'm not high on the stock since its a North American focused driller and that's a tough environment now and for the rest of 2009 at least but this is not much a reason to sell the stock down.
  • They report on 2/24 and I'm still toying with the idea of puts here before that call.

Stuff We Care About Today

COG Operations Update:

  • They reported 4Q08 numbes but I no longer follow these guys closely and I found their ops summary much more interesting in the general knowledge area than as a play on them.
  • Marcellus:
    • they're running five rigs now and see expanding that to 6 or 7 this year
    • small player with 20 MMcfgpd production but only 1 well of 15 was a horizontal
    • this year they will drill 30 and 30 of verticals and horizontals with any wells drilled above the 60 count going horizontal.
    • First completed horizontal IP'd at 5.3 MMcfepd vs verticals in the 2 to 2.5 MM/d
    • Seeing improved drilling times
  • Haynesville Horizontals
    • 1st well was a sub-optimal completion (had to wait due to lack of sand), then problems with the frac (difficulty opening the frac ports). No rate given and they are talking about "drilling another well to test the concept"
    • 2nd horizontal also delayed due to inability to get frac sand. Then they had mechanical problems with this one as well and could not open the frac ports. Plan to either sidetrack or redrill. 
    • My point in pointing this out is that its not a guarantee that all capital spent in the Haynesville will yield surging gas volumes. COG is no slouch. A handful of mid cap players have reported more than the usual amount of difficulties in this deep, high pressure play as they work through the completion science and with limited capital this year this can be something that delays programs and causes people to due more thinking about the next wells while waiting for higher prices.

CHK Farms Into Remainder of PLLL's Barnett Acreage.

  • CHK will pay all of the drilling costs on wells drilled in 25,000 gross acres in the Barnett that are under lease to (PLLL) at this time through 2016.
  • CHK gets all cash flow through 150% of payout
  • and then PLLL reverts to a 50% interest. Its probably not a bad deal for either company.
  • They plan to drill 61 wells in 2009 on the acreage and if you run with $3 mm completed well cost here that's $180 mm in capex.
  • That might tempt you to ask, why not just buy them? The entire TEV of (PLLL) is $400 mm and the Barnett is only about a quarter of their production. Why not just scoop them.
  • My thinking is, this is the smarter move for CHK. If you are going to do a deal at this time, why not spend all the money drilling?  Why not take the first half or so of the reserves of all these wells with $0 down upfront?
  • Its a good deal for PLLL as well as they are cash strapped and slashing budget for 2009 to levels that would have been lowish for one of the 2008 quarters. They get to survive and to keep their leases. They also, no doubt, get their name tossed into the ring as the next takeout candidate in E&P land.
  • Conferencall for PLLL at 11 EST.

Odds & Ends

Analyst Watch: (EGLE) cut to Sell at Cantor.

99 Responses to “Somber Friday”

  1. 1
    Sambone Says:

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude futures pared early gains Friday as the specter of
    reduced global demand amid widespread economic slowdown continued to pressure
    prices.
    Illustrating the bleak economic backdrop Friday, GDP figures out of the
    eurozone revealed the single currency region plunged deeper into recession in
    the fourth quarter of last year.
    Citing a “worsening economic situation,” the Organization of Petroleum
    Exporting Countries Friday revised its previous prediction for 2009 global
    crude demand to 85.1 million barrels a day, down 400,000 barrels a day from its
    previous forecast.
    While most ICE Brent and Nymex crude contracts traded lower, the front-month
    Nymex March product – largely decoupled from the rest of the market as it
    approaches expiry next Friday – remained in positive territory as some
    investors covered short positions ahead of a long U.S. weekend, with some
    rolling into the April product.
    At 1255 GMT, the front-month April Brent contract on London’s ICE futures
    exchange was down 64 cents at $45.39 a barrel.
    The front-month March light, sweet, crude contract on the New York Mercantile
    Exchange was trading 10 cents higher at $34.08 a barrel.
    The ICE’s gasoil contract for March delivery was down 75 cents at $415.00 a
    metric ton, while Nymex gasoline for March delivery was down 148 points at
    124.35 cents a gallon.
    Despite its relative steadiness Friday, analysts expect the Nymex March
    contract to weaken further ahead of its expiry in a week’s time. Record high
    inventories at Cushing, Okl, the delivery point for Nymex crude futures, have
    pressured the physically-delivered contracts ahead of expiry in recent months
    and similar is expected this month.
    “It’s not the first time it’s happened, it’s just one of the inherent
    problems,” said Jim Rintoul, analyst at London-based trade advisory
    TheOilTrader.com. “Until we start to see those Cushing stocks come off, we can
    expect those front months to come off.”
    A combination of high inventory levels and weak demand have so far thwarted
    OPEC’s attempts to push crude prices back higher by introducing more than 4
    million barrels a day of output cuts since September last year. However, with
    the full extent of OPEC’s announced cuts yet to be felt, prices could climb on
    a tighter supply scenario, some analysts suggested.
    “The inventory situation should ease through late Q1-Q2, as OPEC cuts will
    curb import availability,” said analysts at Barclays Capital. “We would be
    buyers of Q3 levels below $50 (a barrel).”
    Crude markets were Friday monitoring developments in Africa’s second largest
    crude producer, Nigeria, after Royal Dutch Shell PLC declared force majeure on
    exports from its Bonny facility Feb 10 due to insufficient security. The
    country has frequently been beset by militant attacks on oil infrastructure
    that have, at times, crippled output.
    “The world needs Nigeria’s high quality, sweet crude, so any threats to
    Nigerian oil production needs be taken seriously,” said analyst Dennis Gartman,
    publisher of the Gartman Letter.
    -By Nick Heath; Dow Jones Newswires
    Dow Jones Newswires
    02-13-09 0819ET

  2. 2
    Sambone Says:

    LONDON (Dow Jones)–The Organization of Petroleum Exporting Countries Friday
    made further downward revisions to its global oil demand estimate in 2009,
    citing the deepening economic crisis for its bearish outlook.
    The group of oil exporters revised 2009 world oil demand down by 400,000
    barrels a day, to 85.1 million barrels a day, 600,000 barrels a day lower than
    in 2008.
    “The revisions reflect the worsening economic situation in OECD countries
    which has spread to the emerging economies,” the organization said in its
    February oil market report.
    OPEC said that the 2008 world oil demand declined at a faster rate than it had
    calculated in January. Demand fell by 200,000 barrels a day, compared with the
    100,000 barrels a day reduction it cited last month.
    OPEC’s forecast change to 2009 global oil demand is lower than the decline
    predicted by the International Energy Agency this week.
    The Paris-based agency said it expected global oil demand to fall by 570,000
    barrels a day in 2009, due to frail global economic activity.
    U.S. oil prices in New York were trading 11 cents higher at $34.09 a barrel
    at 1130 GMT Friday, almost 15% higher since OPEC last announced production cuts
    on Dec. 17.
    Demand for crude oil produced by the exporting body is also expected to fall
    in 2009, OPEC said in the report, calculating a 1.7 million barrel a day
    decline from a year earlier, while the group’s total oil production in January,
    excluding Iraq, was pegged at 26.33 million barrels a day compared with 28.73
    million barrels daily in 2008.
    Hinting at the possibility of further trims to its production as the faltering
    global economy crimps demand, OPEC said: “the current state of the market under
    prevailing supply and demand uncertainties, combined with the deepening
    economic crisis worldwide, highlights the necessity and importance of OPEC’s
    actions to stabilize the market.”
    Weakening oil demand has resulted in a build in crude inventories “across all
    components that make up global oil stocks,” with some areas reaching close to
    maximum capacity, OPEC said.
    Pressured by brimming U.S. crude oil inventories, Nymex light, sweet crude
    futures Thursday settled below $34 a barrel at their lowest price since hitting
    a five-year low on Dec. 19. Stockpiles at Cushing, Okl., the delivery point for
    Nymex futures have risen to record levels in recent weeks.
    As a result, days of forward cover in Organization for Economic Cooperation
    and Development Countries’ have stayed at the historically high level of 57
    days, a situation supported by a declining impact of a seasonal pull on oil
    inventories, OPEC said. OECD inventories have declined from around 180 million
    barrels to 110 million barrels, it said.
    -By Reza Amanat, Dow Jones Newswires
    Dow Jones Newswires
    02-13-09 0851ET

  3. 3
    zman Says:

    Morning Sam, glad to have you around.

  4. 4
    zman Says:

    COG getting marked down for botching their first two horizontal Haynseville completions.

  5. 5
    Bob Says:

    Z-Any thoughts on BPZ’s announcement yesterday? private placement $48mm at $3.05 (below market). Sees 10,000 bbl/day production at end of 2009 and doubling of reserves

  6. 6
    BirdsofpreyRcool Says:

    Credit Market — Tried to rally a bit this morning, but fell back. Can’t tell if market is worried that the “stimulus” package won’t pass… or, if it will.

    It’s a present to the American People alright… a Trojan Horse. I’ll stop there.

    IG opened at 197, 1 bps tighter from yesterday’s close… but drifted wider to 201 now. Gratefully, very little is trading, so it could be turned around fairly quickly. But, the direction so far this morning is “not good.”

    Back above 200 bps. This is the level to watch.

  7. 7
    elduque Says:

    BDI -81 1908

    TED -.195 94.33

  8. 8
    Eagle Says:

    Never imagined that I would hear a Princess Bride movie quote on ZEB. It could be applied to sooooo many quotes out of DC these days.

  9. 9
    zman Says:

    Bob – Not yet for me. Good to get a deal done, saw Jefferies whacked their price target from 5 to 3 the other day on the reserve report I would assume. Good story here, need to do an update and I think I said that a week ago too. Trouble is, the little names won’t work and won’t move up with this oil price. Simply punishing even if they take a price that blends in Brent pricing. Will have a look but my guess is, no rush.

  10. 10
    zman Says:

    Eagle – it just seems to fit.

    I toyed with applying the “odorless, tasteless, colorless” quote to Geitner’s plan.

  11. 11
    Bob Says:

    BPZ also got their refinancing deal done. Agree now is not the time for a long term buy. Possible quick trade potential here and there

  12. 12
    BirdsofpreyRcool Says:

    IG 202 +5 bps from official close yesterday.

  13. 13
    zman Says:

    Bob – If you have a one to two year time frame its probably a great buy. When the international mid-caps start acquiring assets later this year its going to be on the radar.

  14. 14
    BirdsofpreyRcool Says:

    Head Trader reminded me I shouldn’t care about politics… only what they do to markets. Traders really don’t care about the “simulus”… they view it as “neutral.” i.e. doesn’t help the mrkt, doesn’t hurt the market. What traders are looking too is some sort of plan that stabilizes the banks. Without a functioning banking system, we are back to “nothing else matters.”

    Watch the banks. They are at the heart of any turnaround and/or stabilization.

  15. 15
    BirdsofpreyRcool Says:

    Head Trader also thinks there are “bad trading odds for today.” And the Pit will be thin this afternoon. So, sets up unpredictable volatility going into the last 3 hrs.

  16. 16
    zman Says:

    re 15. Right, business as usual.

    Anyone see when they plan to vote on the stimulus bill?

  17. 17
    Nicky Says:

    Good morning all.

    Nice reversal in indices yesterday as they stood on the edge of the abyss. 804spx did hold and now we need to see follow through which I think we will.

    Oil – repeating myself but want to see it undercut the $32 low to complete the pattern. That said I think the bottom is very close. Front month is just way out of line with everything else. We have been down every day now for a week and ahead of a long weekend, stimulus etc etc I think good chances of a decent bounce today.

    Off topic – anyone see House of Cards last night on CNBC? At the end my feeling was that the world/USA is absolutely never going to get out of this mess.

  18. 18
    BirdsofpreyRcool Says:

    Congress due to vote today on stimulus – House Majority Leader Steny Hoyer said the chamber’s members will begin debating the stimulus package this morning and that a vote is likely in the afternoon. Senate Majority Leader Harry Reid said the vote in his chamber likely will occur late afternoon or early evening. Bloomberg A full link to the stimulus can be seen here: http://speaker.gov/blog/

  19. 19
    Nicky Says:

    University of Michigan consumer confidence below expectations.

  20. 20
    BirdsofpreyRcool Says:

    U of Mich Consumer Sentiment just came in lower than exp’d — 56.2 vs 60.2 exp’d and 61.2 last time.

  21. 21
    Nicky Says:

    Z – is the stimulus vote not a done deal?

  22. 22
    zman Says:

    Thanks for the Stim note BOP.

    COG getting clubbed. Rest of energy looks like it wants to run.

    Especially CLB. I am jack’s ongoing shagrin. Will likely add March puts there next week as I’m not buying their resilience to the rig count drops.

  23. 23
    zman Says:

    Nicky – they have to vote on the combined bill and then it goes to the President’s desk next week.

  24. 24
    Nicky Says:

    Sorry I meant is it not guaranteed to pass? Thats what I meant by a done deal.

  25. 25
    zman Says:

    Interesting deal for SPWRA.

    Selling SRECs (Solar Renewable Energy Certificates), these are tradeable shares of green energy goodness. When you generate 1 MW of solar power an SREC is formed which can be bought or sold by people who need SRECs. Revenues will be used to fund additional solar installations in New Jersey but the plan will work anywhere a state decides to start an SREC program.

  26. 26
    zman Says:

    Oh. I suppose so. I don’t know if the commerce secretary nominee quitting last night has an impact on it or not.

  27. 27
    BirdsofpreyRcool Says:

    Buy America – Congressional negotiators have agreed on a final Buy American provision as part of a $789 billion economic stimulus bill that requires public works projects funded by the plan to use only U.S.-made goods, including iron and steel, a lobbyist said on Thursday. The language requiring the United States to honor its trade pacts gives Canada, the European Union, Japan and a short list of other trading partners some comfort they would still be able to share in the expanded U.S. public works market created by the stimulus bill. But many other countries such as China, India, Brazil and Russia, which are not members of an international government procurement agreement, could still be shut out. CNBC http://www.cnbc.com//id/29172257

  28. 28
    BirdsofpreyRcool Says:

    Just reporting the facts… but, you would think that history would have taught us something.

  29. 29
    zman Says:

    BOP – gee, I wonder if China will retaliate? Devalued yuan anyone?

  30. 30
    Sambone Says:

    By David Bird
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures prices were up Friday, mounting a
    modest recovery after falling 17.5% over the previous five days to near
    five-year lows.
    Traders said the market could hold gains into the Presidents Day weekend which
    will have many traders out of their offices on Monday. But they note the
    extreme volatility of the current market and don’t rule out a further test of
    key support at around $32.70 a barrel, the intraday low hit on Jan. 20.
    There won’t be floor trading on Nymex on Monday, but electronic trading will
    resume Sunday evening, with settlement prices issued after the close of floor
    trading on Tuesday.
    At 8:46 a.m. EST, March crude was up 76 cents at $34.74 a barrel, near the
    high of an overnight range of $33.81 to $34.94.
    On Thursday, crude dropped 5.5% to settle at $33.98 a barrel, the lowest level
    since $33.87 on Dec. 19. That level was the lowest settlement since Feb. 9,
    2004.
    Traders said they expect March crude to continue under pressure through
    expiration on Feb. 20, under the weight of a massive overhang in crude oil
    inventories and increasingly weak demand.
    OPEC on Friday cited the “worsening economic situation” in revising down its
    global oil demand forecast for the year by 400,000 barrels a day, to show a
    600,000 barrels a day year-on-year drop.
    Despite that downward revision, OPEC’s demand expectation is much stronger
    than those of other analysts.
    Deutsche Bank economist Alan Sieminski said in a report he sees global oil
    demand dropping by 1.5 million barrels a day this year, more expectations from
    the U.S. Energy Information Administration and the International Energy Agency,
    which see declines of 1.2 million barrels a day and 1 million barrels a day,
    respectively.
    He said OPEC will need to make further output cuts, as global inventories are
    expected to stay high and climb from inflated levels. He said inventories in
    the major industrialized nations could grow to cover 58 days of forward demand
    in the third quarter, from an already high level of 57 days of cover now.
    Sieminski trimmed his U.S. oil price forecast for the current quarter to $40
    from $45 and cut his second-quarter price forecast to $47 from $50.
    March-delivery heating oil was down 1.96 cents at $1.3022 a gallon early
    Friday, while March RBOB gasoline futures were 6.47c lower, at $1.1936 a
    gallon.
    – By David Bird, Dow Jones Newswires

    Dow Jones Newswires
    02-13-09 0915ET

  31. 31
    Sambone Says:

    Hmmmm, does history repeat itself? I wonder.

    “The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance
    of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest
    Rome become bankrupt. People must again learn to work, instead of living on public assistance.” – Cicero, 55
    BC

  32. 32
    tater Says:

    Thank you Sambone for the quote that I am going to use about 30 times tonight in the bar before I get my drunken butt kicked out to the street.

  33. 33
    Nicky Says:

    Interesting Samborne – Greenspan featured a bit on House of Cards and ended with him saying history will repeat itself and we will find ourselves here again basically because human nature dictates – his bottom line and that of David Faber was GREED.

  34. 34
    zman Says:

    I second #32. Exactly.

    Sitting on hands, CNBC now = Comedy Central. Dicker on the economy vs congress is hilarious.

  35. 35
    Nicky Says:

    Okay folks don’t laugh but someone sent me this site a week or so back and I have been monitoring it to see how accurate he is. He is an astrologer! So this is based on the SPX and his chart for price movement today:
    http://www.chartsedge.com/wp/

    It has been very accurate. Watch it for direction rather than strength of move which as you can see from yesterdays’s move was there almost to the minute but the strength was not reflected in the chart.

  36. 36
    tater Says:

    The worst part of it is that I own the bar.

  37. 37
    BirdsofpreyRcool Says:

    “Greed”… always interesting to use that word. Was Chris Dodd “greedy” when he took a below-market loan from Countrywide? Or the homeowner who re-fi’d and spent $10k on a vacation? Or, can only Wall Street be “greedy.”

    We are all capitalists on the way up and socialist on the way down.

    Sadly, you can’t have it both ways.

    I’ll shut up now.

  38. 38
    zman Says:

    Energy stocks trading green, up about 1% across the board, 2% for service (go figure) but the oily names, like SU and CLR not really buying into the $1.50 dead cat bounce for crude. They may be worth a quick trade but I will stick to what I hold for the moment. May do a little profit taking this afternoon as this move looks really shaky.

  39. 39
    zman Says:

    Tater – That explains it. Drunken rally monkey in effect.

  40. 40
    BirdsofpreyRcool Says:

    IG 200

    GS green.

  41. 41
    BirdsofpreyRcool Says:

    Even Rodney Dangerfield feeling the love… CRK up.

  42. 42
    Nicky Says:

    BOP – that is exactly the point – everyone has it in their make up to be greedy. This is not just about Wall Street. And it is exactly why history will forever repeat itself and we will have bubbles caused by people chasing the money in one form or another. The housing bubble showed it clearly from the ground up.

  43. 43
    zman Says:

    BOP – still never saw a good reason for the sell off there on the quarter. Maybe its the overwhelming reliance on Haynesville drilling. It can’t be the hedges.

    POTUS on tap.

  44. 44
    BirdsofpreyRcool Says:

    Nicky — so true. Thanks.

    On the other hand, “greed” is part of evolution. We all want more, if we didn’t, our ancestors would have lost out to the Trilobites a long time ago.

  45. 45
    BirdsofpreyRcool Says:

    z — actually, I was hoping CRK would touch $34. That’s a pretty long-term trend line, and a great entry point.

  46. 46
    BirdsofpreyRcool Says:

    Sirius/XM may file for BK by Tues… stock’s at 9 cents… so, not a huge surprise. A lot of debt there.

  47. 47
    cargocult Says:

    BOP-Greed is relative to each unique situation. We all fall but to greater and lessor extents. Somehow there needs to be harm associated with it for it to be GREED. Either self destruction or otherwise. It may be wisdom to buy at the bottom, but it is greed when we are unable to sell at the top. It is about not wanting to leave something for the next guy. When it is systemic then empires fall.

  48. 48
    VTZ Says:

    BOP – Re 27 and “Buy American”.

    I can tell you that Canada will not stand for a “Buy American” that restricts steel. It’s actually extremely counterproductive considering the trade between the two countries.

    How about Canada puts a “Americans can Buy Middle-Eastern” clause on oil and gas and disregards NAFTA? It’s ok… I guess the US doesn’t want “dirty oil” anyways. I think Obama should be very careful about his talk about re-opening the NAFTA agreement because I wouldn’t be surprised to see some pipelines the Western BC getting built in a hurry.

    NAFTA seems to be a one-way street with the US…

  49. 49
    BirdsofpreyRcool Says:

    That’s the great thing about markets… they do punish the GREEDY. It’s not always a perfect alignment… but, it does happen.

    Where we fell down, as regulators, was applying common sense. Who, with any common sense, would loan money to people with no work history, no income, and no asset verification? The problem was in being able to lay off those “decisions” on others… The Chinese were always there to buy our debt, secured by those liar loans. On the other hand, the Chinese wanted to keep the music playing as $10k home equity loans were being used to consume Chinese exports.

    The problem isn’t greed, per se. It’s when common sense flies out the window and existing regulation (to curb our natural excesses) isn’t enforced.

    I’m not arguing that GREED is good. I am arguing that common sense and an alignment of risk vs. responsibility was absolutely absent from the party over the last 8 yrs.

  50. 50
    zman Says:

    On the $2 oil price move today, it is the front month only. All over months off 50 to 70 cents starting in May. Games being played.

  51. 51
    BirdsofpreyRcool Says:

    VTZ — totally agree!! And the Chinese, who buy all our debt… what are they going to think about “Buy American.”

    That policy is worse than shooting ourselves in the foot. Thing is, it’s been tried before… and found to be a disaster.

    Common sense. Still missing from the party.

  52. 52
    kyleandy Says:

    tater – glad to hear another bar owner on here!!! hope yours is doing better than mine!!

  53. 53
    cargocult Says:

    VTZ-The Chinese have been protecting their markets for years. And their currency. I think they know that if we can’t put Americans back to work then there will be no buyers for their exports. We are all connected but if the buck does really stop here then their party is over as well as ours. I don’t see anything wrong with rebuilding our bridges with locally produced steel even though I own shipping companies that would be transporting Chinese steel. A new dollar in an Americans pocket will multiply many times over and get this engine moving again where a dollar spent in China will stay there or buy more US debt.

  54. 54
    zman Says:

    CLB price target changes:
    RBC ups to 85 from 77
    Barclays cuts to 87 from 90
    Jefco ups to 78 from 70

    The Street is drinking their Coolaid, will not add more puts for now.

  55. 55
    zman Says:

    The House may vote on final passage of the bill between 1 p.m. and 2 p.m. Eastern, an aide to House Majority Leader Steny Hoyer said. A vote in the Senate may come as early as Friday evening.

  56. 56
    zman Says:

    Does anyone get Cantor stuff? Looking for that EGLE piece today? Thanks, email to zmanalpha@gmail.com

  57. 57
    choices Says:

    It is a slow day and we are talking about the stim bill so I thought I would add this-the good news is that the lobbyists are estactic they have a shot at helping their cliets to the trough.

    http://tpmmuckraker.talkingpointsmemo.com/2009/02/lobbying_firm_in_gear_to_help_clients_get_a_piece_of_the_stimulus_action.php

  58. 58
    VTZ Says:

    cargocult- With regards to Chinese trade I can understand the desire to use American steel. Regardless, raising trade barriers with the rest of the world is detrimental and it has been proven many times.

    Additionally as a Canadian, I can say that the more that the US thinks they can exclude us from NAFTA when convenient, the more Canada will try to do the same and a “secure” and “backyard” energy supply may not be so assured.

    If the US wants to set the world back with trade policy, how about a “Buy North American” so that we only set ourselves back 15 years rather than 20?

  59. 59
    zman Says:

    Cargo – can we get a bio for you for the bio tab at top left? That goes for anyone who wants to submit one to us at zmanadmin@gmail.com but you mentioned you are in transport. TEX, I know where you work but a vague bio, which I imagine looks like Wyo’s would be welcome as well. Helps people know who they are listening to and why they should. Thank you, that is all.

  60. 60
    tater Says:

    hey kyle,
    I pretty much buy distressed businesses, do a turnaround and then sell them. I do my best to stay away from food intensive so we’ve done pretty well. (I used to coach football for a living and then moved into the lawyer thing for a very short time).
    It really is a rough market, going to get even rougher for anybody in the swanky categories. Good luck to you!

  61. 61
    zman Says:

    SERCs news driving SPWRA back up today. I’ve done some valuation work on NOx and SOx credits in the past and you talk about a way to make money in a hot summer when the coal fired plants need to buy credits. In this instance, when the original credit is bought from the solar panel maker the funds are used to reduce the cost of the next solar panel out the door. Kind of circular but interesting.

  62. 62
    rseidman Says:

    SPWRA doing good this morning

  63. 63
    cargocult Says:

    Z can you help me out here.KOOMX are Jan 10 5.00 Puts on DRYS with a bid of 2.70. What are the implications of this. Worst case i buy DRYS at 2.30 and it is worth 0. Best case I buy DRYS at an all time low.

    Sorry about my bio confusion. I am not in shipping, just own shipping stocks. I’ll add a bio.

  64. 64
    cargocult Says:

    I’m thinking selling puts here. Big mistake?

  65. 65
    zman Says:

    Cargo – was just about to ask given your last sentence.

    Max gain $2.70;
    Max loss $2.30 (from here with the stock at 4.80)

    If they make it, no bk, I think the stock and the group are a lot higher than here in Jan 2010. If I were doing this and I don’t as a matter of course sell puts, I’d probably move the strike up so that my potential gain is higher relative to my loss, especially since I think it will move up. If you don’t think it will move up some in the 337 then you wouldn’t not move up strike.

    You quickly go from even-ish g/l scenario to one of 2 to 1 at the $10 strike.

  66. 66
    cargocult Says:

    Thank you

  67. 67
    zman Says:

    Cargo – Robert Kolb’s Option book is on my desk for the deeper stuff.

    http://www.amazon.com/Understanding-Options-Robert-W-Kolb/dp/0471085545

  68. 68
    zman Says:

    March up $2.30, looks like a bout of short covering, the out months are still off but April is gravitating to close to even on the day. Stocks are watching the broad market and the 12 month strip on oil …not buying this front month move at all yet. The Majors are down yet again.

  69. 69
    zman Says:

    Hey, TA people, is this S&P level around 830 significant to you? It look like a move below 805 and we would see mid 700s shortly.

  70. 70
    zman Says:

    The Dow looks considerably weaker than that.

  71. 71
    tater Says:

    SPX –
    Last chart at the link. Been working for me.

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

  72. 72
    zman Says:

    Adding data to the end of the article in #1 above, front month oil up $2 on Nigeria Bonny light disruption, flow down to 90,000 bopd from over 200,000 bopd normal and pre MEND level of 500,000 bopd.

  73. 73
    zman Says:

    The green uptrend line looks like its at 825, correct?

  74. 74
    tater Says:

    Currently, yes. Due to the amount of play in the false breaks that have previously occurred, I would not take the lines to mean exact levels. I know that’s wishy washy, sorry.

  75. 75
    Nicky Says:

    820 spx was key yesterday. Pullback this morning looks corrective to me. I think we move higher.

  76. 76
    zman Says:

    Tater – if I apologized for every wishy washy statement I made we’d top 300 comments some days. Thanks for the insight.

    Nicky – I hear what you are saying and I like it.

  77. 77
    Nicky Says:

    Tater – just looked at your gld chart and agree with your gold comments – we may have one more push up – 960 big resistance – but its not necessary – and then yes a move to 800. That should sort all those gold bulls out! Sentiment is way too bullish now on gold.

  78. 78
    zman Says:

    March crude up $3.75. Out months up less or not at all. People think the disruption at the Bonny terminal won’t last.

  79. 79
    tater Says:

    I always appreciate any help you can give, Nicky. Thank you!

    Running out to the chocolate shop. I think it might be thought of as similar to buying a put option. Have a good weekend everybody.

  80. 80
    choices Says:

    Z, do you ever sell covered calls-I am trying to see what the downside is other than maybe missing out on a big run up on the underlying stk-in this market, it seems that one could pocket the premium on stks such as EOG and RIG which have fairly high premiums for 1-2 months out.

    I know you cannot make specific recommendations but just as a general strategy, would appreciate your comments.

    Thanks.

  81. 81
    choices Says:

    Re; #80-Another risk, of course, is if the bottom drops out of the market and the underlying stk gets hammered.

  82. 82
    zman Says:

    Choices yes, I do against core positions in CHK, HK, sometimes SD. I take pretty far out just to harvest a little cash. Especially during these times as we are not likely to miss a big move just yet. I don’t do it naked and since I don’t own the common in those two you mentioned I don’t write calls there. More in a second

  83. 83
    zman Says:

    Enjoying the reversal of fortunes for CLB relative to RIG. People who bought on that stock pump this morning up $4 have got to wonder what’s up with the stock now that the market looks nicer and the other oil service names are rallying. Profit taking in the extreme. Not saying CLB breaks down (and by the way, I like them as a company too, just not as a stock right now) it just seems over priced and the forecast by analysts seems aggressive in this environment. I prefer under promise and over deliver and not the other way around.

  84. 84
    sportlock Says:

    Z,

    What is your take on 50 NG rigs down and 22 HZ down this week? After listening to the UPL and EOG CC’s it sounds like everyone is laying em down now. Do you think if the Bastardi is right about the weather ie cold the next month we could see a real live bounce in NG? Thanks Bill

  85. 85
    zman Says:

    Bill, hang on one minute

  86. 86
    zman Says:

    Thanks Bill had not yet seen.

    50 off on gas rigs, good for gas, good for gassy stocks, bad for service as you probably guessed I would say.

    Horizontal down 22 on top of 30 lost last week is good news for gas, better than the 50 drop. Many traders/analysts see the horizontal rig count as the most key in the rig reports. I do too. Often you see a big swing down followed by a big swing back up and you are just seeing reporting logistics or rigs moving and variances in the report being balanced out. Three decent down reports for the Hz count is significant, surprised no one in the natural gas pits has reacted yet.

    On weather, I have not seen a recent Bastardi forecast. He called the early winter cold right and then I thought he wanted a warm up in January and then a return of cold in Feb. Those last two seem inverted.

  87. 87
    zman Says:

    Bill – as to your last, I think gas will start to inch up and then move rather quickly but the timing is uncertain. If the rigs fall and stay this low and pricing on rigs doesn’t fall into the toilet as fast then I think gas traders will look past the shoulder season to rapidly falling supply.

    The horizontal count is what’s got CLB into the red now as they said that count is much more important to their business than the general rig count.

  88. 88
    zman Says:

    Stimulus passes house, 246 to 183. No GOP on board.

  89. 89
    Bob Says:

    RE:5 BPZ up 33+% today on dilutive private secondary at $3.05 and credit facility at 550 bp over Libor

  90. 90
    zman Says:

    Bob – I know, big move, small dollar stock that was much higher last week. I like them but will let it settle down, definitely not going to chase.

  91. 91
    zman Says:

    With the stimulus bill out of the way in the House they have moved on to more important things…a resolution congratulating the Steelers

  92. 92
    Garyinhou Says:

    CLR can be good for writing calls, good premium due to volatility.

    Z… Saw some recent wells for EOG and WLL big results in Bakken (Mountrail Co.), over 1000 bopd and several approaching 2000 bopd or over.

  93. 93
    zman Says:

    Gary – in Mountrail? Those are good wells that far north. Thanks.

    Crude up $4.10…in March. The rest of the 12 month strip is off about a buck today.

  94. 94
    zman Says:

    Ugly close.

    Beerthirty. Have a safe and relaxing 3 day weekend.

  95. 95
    Wyoming Says:

    If there are no objections, I can watch over the drunk ralley monkey this weekend. Inlaws are still in town and I just bought a case of Shiner on my way home. I’ll let him back out Tuesday AM.

    Tex – thanks for the Mfrac heads up will have to check on our license Monday.

    BTW – thanks to the Detroitites for letting their mayor out, we appreciate it down here.

  96. 96
    zman Says:

    Whoa, I declare beerthirty at 4 est and someone is already in trouble 11 minutes later, lol. Try the Shiner Black.

  97. 97
    Wyoming Says:

    Long week when dealing with Asset teams … thought I could avoid drinking alone with some company.

  98. 98
    zman Says:

    Wyoming – anytime, buddy, anytime. Wild day in the CLB.

    Cargo – bio received and added to the list. Thanks.

  99. 99
    Garyinhou Says:

    Z.. from report at https://www.dmr.nd.gov/oilgas/daily/2009/dr021209.pdf

    (Sampling – last one below over 3K bopd

    WELL FILES RELEASED FROM CONFIDENTIAL STATUS:
    #16972 – EOG Resources, Inc., Austin 7-23H, SW SE 23-154N-90W, Mountrail Co.
    1833 bopd, 1445 bwpd – Bakken

    #17011 – EOG Resources, Inc., Parshall 4-20H, SE SE 20-152N-90W, Mountrail Co.
    1663 bopd, 1850 bwpd – Bakken

    #17032 – Whiting Oil and Gas Corporation, Littlefield 11-29H, NW NW 29-153N-91W, Mountrail Co.
    1934 bopd, 1143 bwpd – Bakken

    #17035 – Whiting Oil and Gas Corporation, Kannianen 11-4H, NW NW 4-153N-91W, Mountrail Co.
    2016 bopd, 2922 bwpd – Bakken

    #17133 – Whiting Oil and Gas Corporation, Smith 11-7H, NW NW 7-153N-91W, Mountrail Co.
    2195 bopd, 2073 bwpd – Bakken

    #17227 – EOG Resources, Inc., Austin 21-28H, NW NW 28-154N-90W, Mountrail Co.
    3292 bopd, 2160 bwpd – Bakken
    #17232 – Summit Resources, Inc., Roosevelt

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