15
Feb

Wrap – Week Ended 2/13/09 (In progress)

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In The Wrap

  1. Wrap Table With Comments
  2. Holdings Watch
  3. Odds & Ends


1) All Congress And No Plan Make The Market A Dull Boy. Wow. Talk about a week we could have fast forwarded through.  Hopefully passage of the stimulus package, good or bad, will let the market get back to business and make CNBC look a little less like CSPAN. Energy earnings pick back up in the next two weeks which should also help to refocus investors. While it was a pretty random week, the OIH underperformance does stick out. I've been negative on much of the oil service sector for awhile now (aside from the deepwater focused drillers) and it appears that despite their "apparent cheapness" they in fact cheap for a reason as the E in PE continues to deteriorate with the continual shrinking budgets of the producers. While the OIH remains the best performing energy sector year to date its pretty difficult to fathom how that continues for long.

2) Another Week, Another Pile of Rigs Get Stacked.

  • Oil and natural gas directed rig counts are now off 36% and 34% respectively since their Fall peaks with the majority of the decline occuring since the beginning of the year. 
  • Day rates are dropping dramatically now with many rigs that ran in the $20 to $22,000 per day range at New Year's looking for work now in the $8 to $10,000 range.
  • Producer conference calls are littered with arm twisting refereces as E&Ps commonly refer to costs being down 15 to 20% now with similiar reductions targeted in the near term. Again, not a good omen for the OIH. 
  • More important for natural gas prices, the horizontal count continues to fall as well and after a little early year resilience is now off 24% from its Fall peak. Texas rigs dropped early and continue to fall but now Louisiana (Haynesville Shale) and North Dakota (Bakken (oil)) are contributing to the horizontal rig decline. I'll have all the charts for this in the Tuesday post (Monday's closed for President's Day)

Holdings Watch: TBA

Odds & Ends:

Jobs Watch: Just doing our part to aid the jobs scene ... without raising your taxes later.

 Contact: Gary Gibson, Recruiter, Selective Resources : gary.gibson1@gmail.com 713-398-7903 Cell for the following:

  • Pipeline Engineer, Dallas Area - New Const/existing maint. experience, multiple positions $80K and up depending on experience.
  • Cost Accountant - West Houston - Oil/Gas related manufacturing experience, 2 positions $60K - $100K
  • Purchasing Manager - DT Houston - Fuel purchasing for large fleet preferred, $60-80K

Contact: Anne Kumaga, Futurestep/Weatherford anne.kumaga@weatherford.com 713-285-2502  for the following:

  • Business Development Manager - Houston, TX $115-120K Base + Comm, +car or car allowance.

3 positions requiring:

  • 1) 10 Yrs/ Business development and 5 yrs Wireline Services
  • 2) 10 Yrs/ Business development and 5 yrs Hydraulic and Fracturing Experience
  • 3) 10 Yrs/ Business development and 5 yrs Well Testing Experience

12 Responses to “Wrap – Week Ended 2/13/09 (In progress)”

  1. 1
    kiaora Says:

    Z-Can you explain? Why isn’t our government throwing some money at the E&P guys in the form of buying more oil from them and less from the middle east? Wouldn’t this be a great time to cut back on some of the foreign oil buying and giving the work and profits to US companies?
    I think I’m missing something somewhere.

  2. 2
    zman Says:

    K – It’s a mystery. The U.S. government has at the best of times a contentious relationship with the oil and gas industry. I have always advocated more access for drilling AND enhanced efficiency and conservation.

    At present, the Department of the Interior seems to be moving towards reduced access to Federal lands in favor of forcing oil companies to “drill the leases they already have or lose them”. We have seen leases pulled from auction and leases revoked since the start of the new year. Increased access to the Outer Continental Shelf is under review.

    Leases however are very much like a portfolio of stocks. Some work well at $50 oil and $5 natural gas and others don’t at all. The spectrum is quite broad. The leases do have an expiration date as they are in fact a legal contract between the Federal Government and the E&P or Major that bought them. I get antsy when I see any government hint that it wants to “amend an oil contract”. This is how Chavez and his ilk behave.

    Much of this fear and loathing stems from high profile incidents like the Valdez and Three Mile Island (not hydrocarbons but you get my point). The oil and gas industry in the meantime has literally cleaned up its act and small to medium spills are rare. The industry has at the same time greatly enhanced recoveries of oil and gas through new technologies. But overall production in the U.S. has fallen as all the low hanging fruit, that work at lower $/Barrel, have been drilled up. Recall, that the U.S. produced 8.9 million bopd in 1985 and now squeaks out around 5 mm bopd. We import roughly twice that amount.

    In the meantime, the U.S. consumer’s appetite for hydrocarbons continues to grow (up 30% between 1985 and its peak last August). And the car companies, the domestic ones, have failed to significantly increase efficiency. In fact, Suburbans produced in 1985 got 1 MPG better mileage than one produced in 2008. And so they get the government money.

    So, in a nutshell, my sense is that you must have more drilling (access to certain oil bearing leases like the OCS) and greater efficiency out of the things (cars) which consume that oil. Since the U.S. government seems to measure success by revenues (wow, Exxon’s revenues are huge) and not net income (wow, Exxon’s net margins are 10% vs 28% for the likes of Microsoft) it is unlikely to throw money at the energy companies anytime soon. In fact, even during the industry’s darkest times (like when oil was near $10 per barrel in the late 90’s) government had little sympathy the domestic producers. That would just make too much sense.

  3. 3
    kiaora Says:

    All we heard for the last year from both parties was “we are going to reduce our dependance on foreign oil” So…If they are considering useing US produced steel on the roads and bridges, why not buy US produced oil before considering a foreign oil purchase. Some of the money we’d spend by putting those guys back to work would come back in the form of income and social security taxes…..The money going to the middle east is just gone!

  4. 4
    Wyoming Says:

    Kiaora,

    An excellent question and observation. All 3 previous comments have valid sentiment and facts. Oil and Gas is the most hated necessary industry we have. The foundation of industry and livelihood (jobs). Perception, belief, conspiracy all rolled into making policy and gaining power.

    IMHO, I believe this current administration believes that the way out of dependence of foreign oil is to eliminate the need for hydrocarbons. I truely believe they have not seen the mistakes of the recent past where all energy sources are required. World oil consumption was around a high of 87 mmboepd. We could not keep up as an industry. Currently we are down around 84 mm. Forecast for the year 2030 is around 125 mm (after downward revision). The math does not add up and we are having supply destruction from VTZ’s world to TEX, REEF, et al and mine.

    My numbers are not exact, we use closeology in the shales these days. I have more to say but this is enough, have to go wake the monkey up after last night and prep him for tonight. Running out of Shiner, may switch to Tequila.

  5. 5
    Wyoming Says:

    K,

    Also, your thought process would literally save thousands of jobs. A majority in the current administrations income band level. Add that bullet point.

  6. 6
    BirdsofpreyRcool Says:

    Kiaora,

    The lack of understanding about a practical energy policy runs so deep in Washington, it is simply breathtaking. Contrast this with China… the Chinese know that controlling sources of energy is their number 2 most important public policy (behind finding enough work for their citizenry).

    The US is called the “Saudi Arabia” of coal and we derive over 50% of our power from coal-fired plants. Figuring out how to use clean coal should be a priority, but people don’t even want to think about the possibility… they are too busy dreaming of the day when the US can run entirely on wind, sunshine, and geothermal. But that is just not possible. For so many reasons… even if we wished it so.

    Also, the US has a massive amount of natural gas. But there doesn’t seem to be anything in the stimulus-spending bill to capitalize on that resource.

    Including clean-coal and natural gas in a stimulus/infrastructure investment package would make a lot of sense. And create and keep a lot of jobs.

    Until we can have an honest, national debate about where our energy comes from and how to best use and conserve it, politicians seem more content to rile people up against “Big Oil” and mislead them about the practical expectations for wind, solar, and other alt-energy.

    Just my Sunday nite 2 cents.

  7. 7
    Wyoming Says:

    My apologies to everyone. Drunk monkey ran away last night. Said something about a Japanese buddy of his at the G7 summit …

  8. 8
    mahout Says:

    Z and all,

    Big government has always desperately needed scapegoats to divert attention away from itself(which causes the problems in the first place). Currently and for a long time it is BIG OIL. You can probably add BIG FINANCE to that now. If you go back in time you will find BIG STEEL as the aweful enemy of the people. Before that the Pharmaceutical companies were IT! And if you go further back it was actually MEAT PACKING! because it was the largest industry out there in the early 1900’s.
    They made them sign a consent decree in 1922 that prevented them from ever selling peanut butter and a few other items. That really saved the nation from peanut butter disaster!
    Big government is what it is: one step away from tyrany at all times.

  9. 9
    zman Says:

    FYI, this wrap post has been updated to include a jobs section.

  10. 10
    ram Says:

    That is very kind of you ZMAN!

  11. 11
    calvo Says:

    Z, did you have a look at the new USL oil fund? …could be a better option than USO with the current contango?

  12. 12
    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Wrap – Week Ended 02/20/09 Says:

    […] Wrap – Week Ended 2/13/09 (In progress) […]

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