27
Feb

Friday – Natural Gas Slide Shows Plus More Earnings

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This post is tall but full of good charts. Drink coffee now then proceed. Its going to be an ugly open as the U.S. looks to have taken one step closer to nationalization of the nation's banks overnight (or at least that's the fear this morning) so best to go through the picture shows below and not panic with the open.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Slides
  4. Natural Gas Supply Slides
  5. Earnings Watch
  6. Other Stuff We Care About Today
  7. Odds & Ends

Holdings Watch:

  • LINE -$10KP- Sold half the LINE $15 March calls for $0.75, up 80% with the stock up 10% on the earnings release.
  • LINE - $10KP Out remaining LINE March 15 calls for $0.80, up 88%. Seems to be running into a little resistance with the market. Very good conference call, will buy it back lower if it drops off here.
  • SWN -$10KP - Added SWN $30 March Calls (SWNDF) for $2.40 (on the mid) with the stock up $0.90 on the day.

 

Commodity Watch

Crude oil rose $2.72 to close at $45.22 yesterday. This is the 3rd rise in a row for crude which is the first time that has happened since New Years. This morning oil is trading off $2.

Natural gas inched up $0.05 to close at $4.08 yesterday after the market was nonplussed by an essentially in line withdrawal from storage.  This morning gas is trading close to $4.

Natural Gas Storage Slides

 

ZComment: Not a terrible number for such a weak with decent coolness but wrapped by warm bookend weeks. I didn't expect a lot of positive movement out of the return to triple digit withdrawals as they simply won't last with next Thursday's number likely falling by half.

Natural Gas Supply Slides: The EIA released its monthly numbers through December 2008 yesterday. In a nutshell:

  • Total production: December  U.S. Lower 48 production was flat with November at 58.9 Bcfgpd.
  • Gulf of Mexico volumes continued to creep up as they recovered from late Summer storms Gustav and Ike.
  • Notably Texas, Wyoming, and the "other states" failed to post gains. Texas was flat and WY. and "other" posted small retreats.
  • For those of you who like pictures and I count myself as one of those I present the following:

Earnings Watch:

SWN Reported "In Line" 4Q08 Results;  Provides Further Positive Results In The Fayetteville Shale

  • The 4Q Numbers:
    • Production: 57.6 Bcfe (626 MMcfepd)
      • 44.1 Bcfe (479 MMcfepd) from the Fayetteville Shale
    • Revenues reported of $500 mm vs $540 mm expected
      • Fayetteville shale price realizations averaged $1.80 per Mcf below NYMEX prior to the completion of the Boardwalk pipeline in late December. This was expected.
    • EPS reported of $0.30 vs $0.31 expected
    • CFPS reported of $0.82 vs $0.82 expected
  • 2008 Reserves:
    • F&D of $1.53 per Mcfe (very good)
    • F&D of $1.21 per Mcfe in the Fayetteville alone (even better)
    • Reserve growth of 51% to 2.185 Tcfe.
  • Operations:
    • Fayetteville Shale:
      • YE 08 Production: 720 MMcfepd gross
      • As of Feb 15, 2009:750 MMcfepd gross
  • Hedges: 48% of expected production with an average floor price of $8.48.
  • Balance Sheet:
    •  23% debt to total cap
    • $1B revolver, untapped at present
    • "nearly $200 mm cash on hand
  • Fayetteville Shale Well Update
    • Fayetteville wells now seen at average of 1.9 Bcfe estimated ultimiate recovery, up from prior 1.5 Bcfe previous estimate at YE07. 
    • 2H08 wells cost $3 mm apiece, have gross reserves of 2.2 Bcfe each, for a straight up F&D cost of $1.36
    • Including improved well performance they scored F&D in the Fayetteville of $1.21 per Mcfe last year.
    • IPs are trending up with long lateral lengths.
      • 1Q08: Lateral length of 3,301' with initial production of 2.3 MMcfepd
      • 4Q08: Lateral length of 3,850' with an IP of 3.347 MMcfepd
    • 4Q08 wells cost $3.1 mm a pop with that 3,850' lateral and took 13 days to drill (this was 17 days a year ago)
    • Closer Perforation Cluster Spacing test resulted in 20 to 25% better IPs. Will use on all wells going forward
    • They see completed well costs falling to an average of $2.9 mm in 2009 due to lower service costs and efficiencies (sounds a bit conservative given their past and the speed of the fall).
    • 875,000 net acres so lots and lots and lots of potential locations.
    • 26% HBP, average remaining leases have 5 years remaining and a 15% royalty burden.
    • 22 rigs running (1 more than last I'd heard).
  • East Texas Update
    • Their first Horizontal Haynesville well has been drilled, completed and is currently testing so hopefully we get a little flavor on the call.
    • Second well is drilling and will be completed in 2Q09
    • "the company may invest more capital in the Haynesville/Bossier Shale than previously planned"
    • They also had good results from their horizontal James Lime program,
  • Guidance:
    •  2009 Production: 280 to 284 Bcfe (767 to 778 MMcfepd) or up 45% (on the mid) over 2008 volumes of 194.6 Bcfe. This is the same as the prior guidance from the December operations updated reviewed here.
      • Fayetteville forecast to be
    • 2009 Capital Budget: $1.9 B
      • This is less than the prior budget by $100 mm as they plan to release 4 additional rigs over the course of the year.
      • $1.6 B goes to E&P vs 1.78 B in the old budget
      • $1.3 B goes to the Fayetteville vs $1.5 B in the old budget
  • Conference Call: 10 am EST.

GMXR Reported In Line Result; Promising Haynesville/Bossier Completions

Talk about a story that has gotten simpler. Think 25 Haynesville wells in 2009 consuming 98% of the budget and leading to a back end loaded year with 2009 growing 86% over 2008 levels.

  • The 4Q Numbers:
    • Production: 35.7 MMcfepd (a bit higher than recently reduced guidance)
    • Revenue: reported $24.1 mm vs $21 expected
    • EPS of ($0.63) vs $0.06 expected
    • CFPS of $0.63 vs $0.61 expected
  • Guidance:
    • 1Q09
      • Production: 2.8 Bcfe or 31 MMcfepd.
    • 2009
      • Production: 24 Bcfe or 65.8 MMcfepd, up 86% over 2008 levels. This down slightly from previous press release guidance of 24.7 Bcfe or 67.7 MMcfepd but will still be best in class among the small cap E&P's. They had put the 24 Bcfe number in their most recent presentation a few days ago so its probably not a big shock.
      • EBITDA of $114.1 mm vs Street Consensus EBITDA of $119 mm
  • Hedges: 41% hedged at a $7.77 gas price.
  • Operations Update:
    • Haynesville/Bossier horizontal wells to date:
      • 1st well IP of 7.8 MMcfepd with a 2,000- foot lateral (previously announced as a December completion)
      • 2nd well IP of 7.6 MMcfepd with a 3,100 foot lateral that was positioned in the A&B sub-layers of the Haynesville. These guys did a lot of work with vertical wells to understand the geology here prior to drilling these horizontals.
      • 3rd well IP of 8.7 MMcfepd with a 4,400 foot lateral positioned in the A sub-layer. You get the picture, longer laterals and better positioning = better well.
      • 4th through 7th wells still drilling, all being postioned in the A sub-layer. Results of these wells expected in April (first 3) and May for the last.
      • They plan to complete 6 wells in 1H09 (#2 through #7 outlined above),
      • and then 15 to 19 wells in 2H09 which will result in a bit of a hockey stick profile for the year with an end of year high exit rate.
  • Nutshell: Story getting pretty simple, like GDP they had growing pains as they transitioned from a Cotton Valley program to a horizontal Haynesville/Bossier program which caused them to come in a little light on the 4Q volumes and will cause a little lighter 1Q before the Haynesville wells give them proper footing. Previous guidance was a bit higher for 2009 but not markedly so and it was based on a much lower assumed Haynesville per well IP than what we are seeing in these wells.
  • Conference Call: 11 am EST

 

Other Stuff We Care About Today

HK Secondary Announced Last Night

  • 22 mm shares plus 3 mm more in the green shoe
  • Proceeds would be about $400 mm net of fees if it prices at $17.25.
  • Use of proceeds: Portion of capital budget and general corporate purposes.
  • ZComment: I'm a little surprised they didn't wait for a better stock price, say low $20s but I guess they figured striking while the iron, if not hot, is still available beat missing out on a chance to bolster the balance sheet. I plan to see how the stock reacts to the deal today (I'm assuming they dispense with a road show and get the deal done post haste) and will likely buy a little more when the dust settles.

Mailbag Question Watch:

 
Would you mind elaborating in tomorrows or weekend wrap up
1. Rig count refers to actual drilling or exploratory
2. With companies announced so far will 2009 production based on organic growth be = to ,> or <than 2008.
 

1) The rig count I use is Baker Hughes best count of rigs turning to the right at the time of the count, these are the active rigs. Rigs in the field being moved around from well to well may or may not be in the count but are supposed to be out. Rigs that are being stacked (deactivated) are not in the count.

2) Expected production growth is far less for 2009 than 2008. While you still have some small caps sporting very high growth that pales in comparison to having a DVN go to 0 growth and an EOG go to 4% growth. A lot of analysts track a top 20 or 50 or even 100 producers list and I will make an effort to grab ones of these to get a more precise answer for you.

 

Odds & Ends

Analyst Watch: (WTI) cut to Hold at Wunder, Jefferies whacked price targets on shipping companies.

174 Responses to “Friday – Natural Gas Slide Shows Plus More Earnings”

  1. 1
    Bob Says:

    Z- Any thought on the SD report? Headline number 0.06 vs 0.01 expected. (though the $9.78/sh loss due to NG pricing sounds scary, if irrelevant) SD appears like it will open flat or the least down compared to HK, GMXR, ans SWN

  2. 2
    zman Says:

    The United Arab Emirates, the third-biggest producer in the Organization of Petroleum Exporting Countries, said Thursday that it will cut its April production by 15% to 17%, Dow Jones Newswires reported.

  3. 3
    Sambone Says:

    By Lananh Nguyen
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Nymex crude oil futures dropped over $2 a barrel in London
    Friday, depressed by a sharp selloff in equities and profit-taking from
    Thursday’s session.
    “I feel that oil wants to go up a bit more but will not test new highs until
    the Dow stabilizes a bit in the short term,” a crude oil broker in London said.
    At 1334 GMT, the front-month April Brent contract on London’s ICE futures
    exchange was down $1.82 at $44.69 a barrel.
    The front-month April contract on the New York Mercantile Exchange was trading
    $2.42 lower at $42.80 a barrel.
    The ICE’s gasoil contract for March delivery was down $8.25 at $392 a metric
    ton, while Nymex gasoline for March delivery was down 640 points at 123.64
    cents a gallon.
    Oil prices have closely tracked stock markets in recent days, taking equities
    as a strong indicator of sentiment across broader financial markets. U.S.
    stock futures fell Friday as attention shifted to Citigroup, which received its
    third rescue package from the government.
    The U.S. also reported a 6.2% decline in gross domestic product for the fourth
    quarter, reflecting a deeper recession that first reported. The U.S. is the
    world’s largest oil consumer – its deteriorating economy has a negative effect
    on oil demand.
    -By Lananh Nguyen, Dow Jones Newswires
    (Steve Goldstein in New York contributed to this report.)

    Dow Jones Newswires
    02-27-09 0840ET

  4. 4
    zman Says:

    Bob – pretty much in line from what I can tell, skipped reporting on it due to time constraints and the fact that I’m in there for the very long haul it appears. I would not be concerned with the non-cash elements of that number. Simple fact of the matter is they need higher gas prices but I only skimmed the release, plan to get to it in a bit. Market taking everything down at the open,

    SWN guidance is good,

    GMXR – some I read this morning wanted bigger H.S. well results but their plan assumed much smaller results so the analyst needs to figure out the difference between NW Louisiana and East Texas.

    HK, well, you know the story there. Drop then later pop if market willing, my $20s going to take a hit early but may buy more of them or the $15 to $17.50 strikes.

  5. 5
    Bob Says:

    Thanks, Z

  6. 6
    BirdsofpreyRcool Says:

    Good morning. Credit Markets down, with everything else. High Yield down over a point. Not much good to say, so will just cut it short there and give opening levels. Credit will probably trade with stocks today, not v-v.

    IG 221

    HY 72.375

  7. 7
    Nicky Says:

    Good morning.

    From Bill Fleckenstein:

    “Constant bull-dance chatter in the financial press always seems focused on
    “Is-this-the-bottom?” or “Where-is-the-bottom?” or, in the case of long-side
    vested interests: “What-looks-good-here?” or “What-are-you-buying-here?”
    This sort of “journalism” is dangerous because it fails to examine certain
    realities that might, otherwise, save a lot of neophytes a lot of money (and
    pain)

    Before the leverage explosion (Greenspan years 1987-2007)that kited the
    stock and realestate markets, the MAJOR stock market indices (Dow and S&P
    500) waded through regular, defined cycles between about 3x book value and
    about 1x book value. Dividend yields on these indices varied from about 3%
    to 6% on a fairly consistent basis. For example, ALL MAJOR BOTTOMS (1922,
    1929, 1937, 1942, 1949, 1953, 1957, 1962, 1966, 1970, 1974, 1982) TOOK PLACE
    AT BETWEEN 1x BOOK VALUE AND 1.5x BOOK VALUE! This is an important FACT.

    When asked “How Low… can it go?” One might want to consider the FACT that
    we are in the midst of an historical de-leveraging process that will
    ultimately return the world to a more rational financial structure. The
    current book value of the S&P 500 is about 560, the “Dow” is about 3,100.
    The dividend on the S&P 500 is currently $24.90, and on the “Dow” about
    $319. If they were to decline to a 6% yield, assuming no further reductions,
    those indices would trade below 500 and 6,000, respectively. The only
    significant deviation from the tightly spread historical “norms” was in June
    of 1932 when both indices flirted briefly with only .5x book value and a 10%
    dividend yield. However, within three months, the huge rally that evolved
    from that “MAJOR” (definitive) bottom more than doubled the indices back
    above book value. Without making any predictions, might it be worthwhile to
    consider these historical facts, rather than waste time listening to CNBS or
    other cheerleading entities?”

  8. 8
    BirdsofpreyRcool Says:

    Seeing Briefing headlines that “SWN upgraded to Strong Buy at boutique firm.”

    Not sure who they are referring to … but TPH has SWN as a “best in class core E&P holding” following the earnings report.

  9. 9
    elduque Says:

    BDI +36 1986

  10. 10
    BirdsofpreyRcool Says:

    HK 22mm share deal priced and done.

  11. 11
    zman Says:

    Movie quote Friday:

    “Snakebite leader, Bravo Six, for the record, it’s my call. Dump everything you got left ON MY POS. I say again, I want all you’re holding INSIDE the perimeter. It’s a lovely fucking war. Bravo Six Actual and Out”

  12. 12
    zman Says:

    Thanks BOP, going to take a little common shortly after the open. Eyes on the long term prize there. May take some lower strike calls as well.

  13. 13
    zman Says:

    SWN opening not so bad.

    GMXR not wowing the crowd, down 10%.

    HK looks to be bouncing a bit.

  14. 14
    BirdsofpreyRcool Says:

    HK — i would be surprised to see many of the 22mm new shares flipped. gonna guess they were placed in long-term hands. caveat: what is “long-term” these days?

  15. 15
    zman Says:

    ZTRADE: $10KP Added HK $17.50 March Calls at $1.15 with the stock at about $17.15, off 7.5% on the secondary which has now been completed pretty quickly indicating strong demand.

  16. 16
    zman Says:

    Re 14 – Its someone who lies to you and says they won’t flip it (leaving off the rest of the sentence which is …before they get back from the bathroom).

  17. 17
    choices Says:

    Z, HK-in terms of secondaries, this does appear to be a huge offering so does not appear to be a large dilution effect.

  18. 18
    choices Says:

    Cramer touting PBT

  19. 19
    zman Says:

    If the 3.3 mm green shoe gets filled which I’m sure it will, this represents 10% dilution which is not all that big. When you look at their premium CFPS multiple to the group, they were probably wise to do the deal, as much as I would like to rant about people being covetous of their shares and not dolling them out like they are printed on a roll of toilet paper, that’s not the environment we are in. Best to get them out the door while they can and bolster the balance sheet for what could be a long, warm winter for the group.

  20. 20
    zman Says:

    Wow SWN. Call in 15 minutes

  21. 21
    elduque Says:

    SD LIstened to the call. What’s not to like. Just need to wait for price action on the stock when we get closer to the OXY plant being completed. Oh yes, and higher prices, although they are almost fully hedged for the next two years.

  22. 22
    zman Says:

    Nicky – do you have a 2009 earnings number for the S&P 500. Book value, tangible or not can be a slippery thing. I’m not sure how Fleckenstein is calculating the fair value of the index but I can look at a multiple of earnings and tell if its too high or not. I’d really like to have someone with a Bloomberg figure this one out if possible. I use Thomson and it has no earnings data for the aggregated S&P. Anyone?

  23. 23
    zman Says:

    Thanks El D, will read the transcript. Did they go into a long winded explanation of the upper cabios and how much CO2 they are making in the recent wells versus the older ones? Also, did they give a good picture of when they cut activity further (at what gas price?)

  24. 24
    BirdsofpreyRcool Says:

    U of Mich Conf in as exp’d — 56.3 vs 56.0 expd

  25. 25
    choices Says:

    citi news tanking the mkt-treasury converting pfd to common

  26. 26
    BirdsofpreyRcool Says:

    SPX earnings — off Zacks, via BB

    2008 est $69.19 hi 75.00, low 55.00

    2009 est $63.39 hi 70.00, low 53.00

    consensus still seems somewhat high…

  27. 27
    BirdsofpreyRcool Says:

    IG 220… stocks finally realizing that they already KNEW the Citi news… they just forgot that they “knew it already.”

  28. 28
    choices Says:

    spx earnings-Gary Schilling, who has been relatively accurate est $40, thus p/e of 15 gives 600, maybe lower

  29. 29
    BirdsofpreyRcool Says:

    IG 219.5 positive direction

  30. 30
    zman Says:

    BOP can you get 2005 – 2007?

  31. 31
    zman Says:

    SWN still queuing listeners for the CC. Stock up 4% in a sea of red.

  32. 32
    BirdsofpreyRcool Says:

    z — went round and round with the BB help desk on that the other day. Short answer = yes.

    But, you have to download all the historical data for the SPX members, divide by the applicable weighting, then add them up yourself. Very odd that BB does NOT keep a historical data base of that number. They seemed surprised too.

  33. 33
    zman Says:

    Thanks BOP – anyone else have the recent year S&P 500 EPS data, just curious while listening to the opening yada at SWN.

  34. 34
    Sambone Says:

    Bravo six = Captain Harris
    Platoon – 1986

    Roger your last Bravo Six. We copy it’s your call. Get em in their holes down there. Hang tough, Bravo Six we are coming cocked for treetops. Whiskey to Echo… Snakebite Two, this is lead. Last pass on zero niner. Watch my smoke to target, expend all remaining. Follow my trace…

  35. 35
    1520sbroad Says:

    z – citi went to $52 for 2009 and $55 for 2010 last week. Taht was from Steven Weiting – lead economist. Haven’t seen Tobias Lefkovich’s new outlook (Tobias had a target of 1500 on the S&P for 2008 – needless to say – big grain of salt)

  36. 36
    elduque Says:

    answer re rigs, now at 8 going to 7. Planning to keep cap ex at the low end of the range near $500 mm.

    re CO2 question, Not really, at least to this amateurs ears.

  37. 37
    zman Says:

    Bingo Sam. Seemed appropriate for this market.

    Thanks 1520. I have trouble with the $40 mentioned above but who knows. $52 to $55 seems more reasonable. Does he list by quarter, just trying to see how back end loaded he is.

  38. 38
    zman Says:

    Thanks El D.

  39. 39
    Dman Says:

    Z – where was the HK offering priced at?

  40. 40
    zman Says:

    SWN CC

    SWN just walking through the press release now. I’ll let ya know when they say something interest, stock keeps making new HODs.

  41. 41
    Sambone Says:

    Z, my turn

    Git some! Git some! Git some, yeah, yeah, yeah! Anyone that runs, is a VC. Anyone that stands still, is a well-disciplined VC! You guys oughta do a story about me sometime!

    Why should we do a story about you?

    ‘Cuz I’m so fuckin’ good! I done got me 157 dead gooks killed. Plus 50 water buffalo too! Them’s all confirmed!

    Any women or children?

    Sometimes!

    How can you shoot women or children?

    Easy! Ya just don’t lead ’em so much! Ain’t war hell?

  42. 42
    zman Says:

    Dman – Story I saw did not say and I would think they won’t have the price until this afternoon, BOP?

  43. 43
    zman Says:

    Sambone – FMJ

  44. 44
    kyleandy Says:

    HK = 17.50 offering price

  45. 45
    1520sbroad Says:

    z – i don’t have the report in hand at the moment – i will email to you this weekend. Steven Weiting does break it by quarter as i recall.

  46. 46
    zman Says:

    Thanks 1520, just curious really.

    Lost my connection to the SWN call and can’t get it back, anyone else on the call?

  47. 47
    1520sbroad Says:

    i am – greg kerley doing financial results (pr review)

  48. 48
    choices Says:

    I’m searching for s & p data

  49. 49
    zman Says:

    Thanks Kyle, 1520, choices… still can’t connect…ugh.

  50. 50
    zman Says:

    FSLR green

  51. 51
    1520sbroad Says:

    SWN – moving to Q&A

  52. 52
    Eagle Says:

    I am Looking at the market as a whole, and am trying to remember some comments that were made a while back. Please confirm or deny if you recall. 1) 743 is a key support level for SPX, if that breaks, look out below. 2) Jim Shepard is closing his short positions.

    General question, if deflation is the real threat at this time, bonds with maturities that match your estimate of the deflationary cycle are a good bet. True/False

  53. 53
    Dman Says:

    HK: isn’t it supposed to be a bad thing if it trades below the deal price?

  54. 54
    1520sbroad Says:

    SWN Q&A – question on expenses going forward? G&A?

    No changes from update put out in december, taxes increase slightly due to ARK changes. Severance rate decreasing slightly. Operating expense still around 90 cents.

    Also how many marcellus wells – SWN answer looking at 2010 for more active program looking to blo0ck up acreage will participate in couple of wells

  55. 55
    1520sbroad Says:

    Q3 – looking at strip in operating areas going forward – changes to plans?

    SWN – dropping 4 rigs in east texas – move one to FS. Move one from arkoma to FS.

    Q3.5 – putting more capital into HS? How do JV’s work?

    SWN – looking at one well drilling now and see how economic it might be. Trying to sort out plans there based on results.

  56. 56
    1520sbroad Says:

    Q5 – marcellus results?

    SWN – happy with results so far. Hard to get results from state of PA, won’t say much more.

    Q5.5 – FS – average EUR’s at 3.5BCFes or above?

    They do have wells above 3.5bcfe or above.

  57. 57
    zman Says:

    Thanks 1520, just dialed in old school, listening now.

    That’s all they said on the H.S. so far, nothing about the ongoing test?

  58. 58
    zman Says:

    Anyone got an answer for 52?

    Dman – not necessarily, pretty common to fall below as some older, unhappy hands sell on the dilution.

  59. 59
    1520sbroad Says:

    Q6 – current price environment? Changes to plans?

    SWN – hedged 50% at about $8.40 floor. Looking at wells in FS hit PVI targets below $5 nymex. Have costs in line in FS now that they have completition experience. fundamental decision making – PVI’s in FS could push down to $4 nymex. Leader in most economic shale play around

  60. 60
    1520sbroad Says:

    Z – 57 – nothing else i have heard on HS.

  61. 61
    1520sbroad Says:

    z – i got bumped off the call – i have to go old school now too.

  62. 62
    zman Says:

    SWN CC

    just over 50 wells delayed by takeaway capacity into 2009, takes them into the summer before they work through that backlog. This gives them a little better pop than the drilling schedule alone would.

  63. 63
    tater Says:

    I have purposely turned off CNBC since the new year, and not read Real Money or the Wall St for at least 2 weeks now in order to decrease the noise in my head and concentrate on TA, so I really don’t know what other chartists are saying (and for the time being, I don’t want to care).
    Anyway, the SPX has a way of bouncing up or down on a day that exhibits a candle that has a long stem and a short real body. (This is nothing more than a “turnaround day” so no mystical planet alignment involved in the candlestick analysis).
    So far today, if you look at a daily chart (I have one posted) you can see a candle that takes the exact form that I am talking about.
    All these words to make one simple point:
    If the day were to end right now, all you will hear all weekend is about a “double bottom” and a turnaround day and all sorts of bullish technicals. Please know that guys with billions of dollars to push around are well aware of their ability to generate just such a close, and if it is in their interest to do so (possibly to create a bounce in order to sell more next month into that bounce) they most certainly will attempt it.
    Though a cynical assessment, not a conspiracy theory. Just want it in the back of people’s minds that a bounce may be in the works, but I feel it is something that needs to be sold into.
    If such a candle or day does not materialize, well then you’ve just wasted 90 seconds.
    My two cents.

  64. 64
    zman Says:

    1520, thanks much for your recap. Glad to hear you got bumped too as I was afraid they’d filtered me out based on my email address, lol.

    They aren’t saying much that isn’t common knowledge or in the pr.

  65. 65
    zman Says:

    Tater – will look at your chart when I get off the SWN call. Your back of the mind thoughts are very much appreciated by me.

  66. 66
    zman Says:

    SWN CC

    They see holding all the acreage they want to over the next few years, not seen as a problem.

  67. 67
    zman Says:

    SWN CC

    Seeing some bigger wells, over 3 Bcfe, across their entire acreage.

    They should be going to over 500 MMcfepd around April 1 headed east out of the Fayetteville, at which point the differential to Hub should collapse. This will be helpful on the pricing side for 2Q,3Q,4Q estimates.

    Stock can go quite a bit higher today and next week, nothing bad in that call (the part of it I heard).

  68. 68
    Nicky Says:

    My take for the broader market today. We make a low into the lunchtime time period and then bounce into the end of the day. Under either of the overall counts I am looking at the market should bounce back to the 7400 area or above on the Dow and then we turn back down again.

  69. 69
    zman Says:

    Thanks Nicky. BOP, any thoughts from the desk?

  70. 70
    tater Says:

    you copied 🙂

  71. 71
    Eagle Says:

    Thanks for the input tater. So basically, if 745 holds, then short term technical outlook doesn’t indicate a significant drop.

  72. 72
    choices Says:

    striking out on historical or quarterly earnings 09 estimates for S & P

    did not that S & P research raised GDP from strong sell to hold

  73. 73
    choices Says:

    did note about GDP rating-sorry

  74. 74
    Nicky Says:

    Tater I agree with you and also this continual nagging problem that cycle lows are not due until May/June which is still one heck of a long time away and means we likely have some up and down gyrations to go.
    Bob Prechter closed his shorts this week – whilst not calling the bottom he notes we are now nearer and that when the rally comes it will be violent. He was short from July 2007 and got 800 spx points. Interestingly he doesn’t expect to ever be able to repeat what he considers to be the greatest trade of all time. He says that even if the SPX were to bounce 200 points and we then saw another 800 points of downside likely there would be no one left to pay out!

  75. 75
    BirdsofpreyRcool Says:

    z — there was no useful colour from Technical Trader. Too much mrkt noise.

    CDS desk thought we would see a bounce. They recommended selling into it near the end of the day.

    Waiting to hear Head Trader’s comments… he is busy doing what head traders do right now.

  76. 76
    zman Says:

    Thanks choices, GMXR call about to start, stock still off 11%.

  77. 77
    BirdsofpreyRcool Says:

    SPX — some quarterly data from Zacks…

    QE 12/08 16.23 18.00 hi, 13.42 low

    QE 3/09 16.33 17.00 high, 15.00 low

  78. 78
    tater Says:

    Oh Nicky, just wanted to say that the reference to planets that I made is not a dismissal of that line of thought. I just think that any mention of that makes people cringe. My understanding of the calenders that we use for yearly (the sun) and monthly (the moon) intervals is that we shouldn’t be alarmed if somebody wants to delve a bit deeper into the idea that we base counts on rhythmic constants every day of our lives.

    Eagle,
    Not really what I meant to say. Without hedging too much, I’m really trying to say that if we see a turnaround action today, please be very skeptical about it. Nicky is much more adept than I am at picking exact numbers to shoot for. I personally just think that if we do bounce here, it will turn out to be fake within a couple of weeks. Time enough for the TV to say, once again, that we have put in the bottom.

  79. 79
    1520sbroad Says:

    Z- i sent you an email with a business related question a few minutes ago. Respond whenever.

  80. 80
    Dman Says:

    tater, #63

    The voice from the cave! That’s what we need to hear. Thought you’d like this …

    http://www.cbsnews.com/stories/2009/02/26/earlyshow/main4831380.shtml

  81. 81
    zman Says:

    GMXR CC

    Haynesville/Bossier very homogeneous across their acreage after their extensive vertical looks at the play.

    Note GMXR has only included 3 H.S. wells in their 2008 reserve report (1 proved, 2 PUDs), this is in the pr but its worth noting as they will add 25 wells to that this year, bigger wells than their old CV wells so you are looking at bigger reserve adds from fewer wells for fewer dollars.

  82. 82
    zman Says:

    1520 – will look post GMXR call, thanks.

    SWN up 9%, the place to be today, lol.

  83. 83
    zman Says:

    GMXR presentation – slide 13, pretty good look at Haynesville area rig count drop. Area hit 100 horizontal rigs in January, down to 85 now. The overall rig count in the E.Tx NW. La area is down 100 rigs form year ago levels.

  84. 84
    Dman Says:

    #80 … although I have to say that their cave looks pretty well appointed … not quite the post-apocalypse type of cave.

  85. 85
    tater Says:

    Thanks Dman. My cave is more of a straight down hole kind of entrance (kind of like the market).

  86. 86
    zman Says:

    GMXR – very good chart on page 17 of their 4q presentation. Shows they have drilled better horizontal wells in their first three shots than CHK did by quite a stretch.

  87. 87
    zman Says:

    Here’s that presentation, again page 17

    http://files.shareholder.com/downloads/GMXR/563151513x0x275721/18a00cf9-ce03-4524-ab46-d6e8c442ea9c/2009.02.27%20GMX%20Q4%20&%20YE08%20Earnings%20&%20Operational%20Update.pdf

  88. 88
    zman Says:

    GMXR Q&A about to start, so far a pretty good presentation, stock not reacting to any of it yet.

  89. 89
    zman Says:

    GMXR Q&A #1

    Frac costs: $350K down to low $200s

    Steel costs: down 50%

  90. 90
    Dman Says:

    Z – so the GMXR whacking not making sense so far?

  91. 91
    zman Says:

    Feels pretty overdone, yes.

  92. 92
    zman Says:

    Basically the wells are getting better with longer laterals and with hitting the right spot in the Haynesville. Costs coming way down to drill, and on the operating expense side, same story for others as well.

  93. 93
    zman Says:

    SU – observation from yesterday on the lag to a rise in oil prices. Look at it today. Flat with crude down $2. This is pretty common too. If oil stays flat or rises Monday it would, if it follows history, would move up with it. Lots more fun to play with than the USO.

  94. 94
    zman Says:

    Wow , DJIA headed green suddenly, anyone see the headline.

  95. 95
    zman Says:

    …should start with something along the lines of Congress dismissed or disbanded…

  96. 96
    tomdavis12 Says:

    LOL

  97. 97
    zman Says:

    GMXR Q&A

    On their first H.S. horizontal (that was a 2,000 fot lateral) well the reserve engineers put a 3 Bcfe on it, could have made the argument for 4 Bcfe on that well.

    So a 4,000 foot lateral will be bigger, maybe closer to the industry’s average of about 6 Bcfe per well (5 or 6). Too early for them to really say.

    They like the A sublayer better because that is where other operators with more experience have been more recently completing wells. They are getting a lot of information from offset wells from the Haynesville core info sharing consortium.

  98. 98
    zman Says:

    Sorry Tom, didn’t know anyone was in here, lol. I take it back, congress is doing a great job. The interior secretary is working hard too for the cause of higher commodity prices down the road, bless his tree hugging, money grasping little heart.

  99. 99
    Garyinhou Says:

    We’ve gotta keep our heads until this peace craze blows over.

  100. 100
    zman Says:

    GMXR Q&A

    GMXR – when you look longer term, this little company has 150 MMcfgpd of take away capacity in place, note they are producing about 35 MMcfepd now.

  101. 101
    zman Says:

    GMXR commenting on HK’s 7.5 Bcfe. HK’s higher EUR is the result of higher pressures and lower depths than what GMXR is looking at. He said the rock quality is similar, just not as over pressured. He said they are looking for 6.5 Bcfe later. That’s very positive.

  102. 102
    tomdavis12 Says:

    Z: You mentioned yesterday you thought HK has 12+ TCF as of now. I thought CHK had 12+ TCF at the end of 08 soon to be 20 TCF at the end of ’09 because of the acct change. If these figures are right doesn’t that make HK a tremendous value?

  103. 103
    zman Says:

    GMXR Q&A

    “our banking group wants to lend us more money”

    Could see a borrowing base 2H09

  104. 104
    zman Says:

    Tom – those are potential reserves, think the number was 13 Tcf in the Haynesville. Quite a bit different than proved reserves…would require billions of dollars to prove those reserves up. CHK’s similar measure would be close to 60 Tcfe when you look at its Haynesville and Marcellus acreage.

  105. 105
    gaamblor Says:

    any reason for the spike in nat gas?

  106. 106
    zman Says:

    Add to 104.

    Essentially, given the GIP and the characteristics of the rocks they are in the current completion methods and about 15 other variables, they could get to those numbers. The SEC won’t let you book all that without actually punching holes in the ground though. As you do you get reserves for the PDP (proved developed producing) that you drilled and a number of PUD locations (proved undeveloped) and perhaps PDNP (proved developed not producing) locations. The you have what you feel are probable and possible reserves. You think they are there, you might even be really sure they are there, but you can’t book them in the U.S.

  107. 107
    zman Says:

    G – rig count not out yet so no, dunno. watching for it.

    WFT just low bid for 500 wells at Chicontepec, that just not good for the business as SLB has been doing same in the U.S. and abroad. I know they want to keep busy but it will hammer earnings. Hard to believe the service stocks are up now.

  108. 108
    zman Says:

    GMXR – used ceramic proppants on first three wells.

  109. 109
    elduque Says:

    When do we get the rig count?

  110. 110
    zman Says:

    GMXR making a big point of saying the initial production rates you’ve seen from the Haynesville players are not comparable, I’ve talked a little about this in the past. Note they are better than those CHK wells. And yes, I’m talking myself into buy the stock.

  111. 111
    zman Says:

    Anytime now on the Baker Hughes count.

  112. 112
    zman Says:

    Smithbits rig count report may be out, can’t get it to work today, still don’t see a reason for the rally.

  113. 113
    zman Says:

    HK back above the offer price

  114. 114
    zman Says:

    Maybe the rally in natural gas is this:

    Pelosi urges D.C. power plant to shift from coal to natural gas

    http://www.environmentalleader.com/2009/02/27/pelosi-urges-capitol-power-plant-shift-away-from-coal/

  115. 115
    zman Says:

    Tudor Pickering still likes HK as in their top 3 E&P ideas post the deal.

  116. 116
    Dman Says:

    #93 Yep, SU has its quirks, but at least they aren’t cumulative, like with USO.

    USL looks more promising than USO, but still early days.

  117. 117
    choices Says:

    Anyone have opinions on DXO or UCO-obviously more leverage, more risk.

  118. 118
    zman Says:

    Choices, I do not follow them close enough to offer anything intelligent.

  119. 119
    zman Says:

    U.S.

    Gas rigs down 48
    Oil rigs down 9
    Horizontal down 21

  120. 120
    zman Says:

    Some key state rig declines in the last week:

    Texas: 26 or 5%
    Louisiana: 5 (5%)
    Oklahoma: 10 (8%)
    New Mexico: 7 (15%)
    Wyoming: 2 (4%)

  121. 121
    Dman Says:

    DXO – far from perfect in tracking 2 X oil, so best to buy into sharp selloffs & flip soon after. It’s a trading vehicle, not so much an investment.

    My impression is that it tracks better than USO, but that’s not saying much.

  122. 122
    zman Says:

    NG up 15 + cents, safely back over $4. My guess is it ran up on anticipation of another big cut in rigs. And we got that and here gas sits.

  123. 123
    Dman Says:

    Z – gotta wonder if the persistent green in service-land is signalling a turn in the commodities. OIH has a nice scoop going on.

    Is service usually earlier than E&P in sensing a turn?

  124. 124
    zman Says:

    Dman – good question. E&P generally turns first … this time it may be different but am not sure how to explain that. Service troughs and peaks lower than service in general.

  125. 125
    zman Says:

    By the way, China bought a Canadian E&P with assets in Africa.

    VTZ, what was that ticker of that little Canadian company with the Utica, I lost it?

  126. 126
    Dman Says:

    Platinum (PTM, PGM) took off around about the same time as NG. Weird.

  127. 127
    Dman Says:

    Z – second sentence in #124 ?

  128. 128
    VTZ Says:

    qec was the one I like the most. FST is the operator with the recent wells.

  129. 129
    VTZ Says:

    I mainly just want your input on the potential considering the early stages of that play and the rate they obtained.

    Then I also wanted your opinion regarding the formation potential.

  130. 130
    BirdsofpreyRcool Says:

    z — have been away from the mrkt… just back. See that Buckingham raised SWN to “strong buy.” Who is buckingham?

  131. 131
    elduque Says:

    I must admit for a long term (1 yr. play) SD, looks particularly good. I guess the only question is when Mr. Market start to anticipate the increased revenues with the OXY plant.

  132. 132
    zman Says:

    I dunno who is at Buckingham, see their stuff from time to time and have no opinion of them

  133. 133
    BirdsofpreyRcool Says:

    nice rebound on the Hawk

  134. 134
    zman Says:

    VTZ – QEC, ok. Formation potential. I can run the calcs if you can get me the variables. Otherwise, let me do a little reading and get back to on the weekend.

  135. 135
    zman Says:

    re 133 … saw an author over at the Motley Fool throwing rocks at them for the deal. Be careful where you get your news and opinions. I have a note in with them to see about writing a counter piece.

  136. 136
    VTZ Says:

    Which variables? This presentation shows some info:

    http://www.questerre.com/assets/files/090119_QEC_Presentation.pdf

  137. 137
    zman Says:

    SD – yep, wait and see, assets still in the ground, no rush to produce. Like it long term.

    SWN has more near term catalysts than most I follow now. Haynesville well around the corner.

    GMXR I don’t own but am looking to soon, very overbashed on their release today. Very good call, BOP you’d like slides 17 to 20 in their presentation…lots of geo and they have a good chart showing them to have superior wells to the early CHK H.S. completions. Also, different chokes for different folks if you get me on the IPs

  138. 138
    BirdsofpreyRcool Says:

    z — well… you know what i think of the deal. It was a very smart, proactive move… and if it surprised anyone, then they haven’t followed Floyd for very long. YOU said it after the debt deal… “watch for the 2ndary.”

    Only suprise, i thought they would announce when the stock hit 22.

  139. 139
    zman Says:

    Market going green.

    BOP – me too, maybe they announce another one after they get the ops update out in early April.

  140. 140
    zman Says:

    GMXR said ceramic by the way on the first three wells but the guy didn’t follow up with … and the next 23 wells you drill this year, RCS or ceramic? Bonehead. Anyway, CRR liked it.

  141. 141
    zman Says:

    V – looking now.

  142. 142
    choices Says:

    FWIW, I have always been wary of the opinions of Motley Fool-they seem to cater somewhat to the Cramer crowd. Adverts always on the yahoo financeial web site

  143. 143
    BirdsofpreyRcool Says:

    SWN CEO on CNBC now

  144. 144
    Nicky Says:

    This move up in the broader market is corrective – it should roll over again soon. I expect a test of 7000 before we take another shot at 7400.

  145. 145
    zman Says:

    V – those are thick, high gas content shales (both the utica and loraine). The utica they show at 500 feet is quite a bit thicker than your average Haynesville well although it has less press and/as its at half the depth. Lot cheaper to drill at $3mm for a 2.4 Bcfe recovery (early EUR will be lower than later and didn’t see if they can do longer laterals but that would probably up it some). Also, local market gets premium to Nymex which you rarely see south of the border outside of Appalachia. I have not run their acreage vs the market cap but these are some of the wells that you’d keep drilling in a low gas price environment as they are BE at $3.50, much like the Haynesville. So I wonder what’s not to like. I did not run through their program, they are tiny, no debt but not a lot of size on the asset side of the BS either. If forest decides to run hard in the play could they come up with the cash to play along?

  146. 146
    md Says:

    V
    Any opinion on HNU or HOU for leverage.
    Does it track NYMEX spot or 12 month strip.

  147. 147
    zman Says:

    BOP – missed, can’t roll back, was looking at the weather, did he say anything interesting?

  148. 148
    BirdsofpreyRcool Says:

    sorry… running around… just caught the beginning… so, can’t say.

  149. 149
    VTZ Says:

    Well they have enough cash to finance the drill program for development and from what IR has told me, they can generate enough cash from selling their Bakken or BC Shale assets to fund their own growth once they work out the kinks.

    I think the negative reaction over the past week was due to the sustained rates being low on their first horizontal. It was a 4 stage frac and they got a 4mmcf IP but the sustained rates fell dramatically because of frac fluid.

    I think I’m going to stick it out and add soon to wait and see how the loraine plays out and what their future wells have in store. Thanks for the quick looksy.

  150. 150
    VTZ Says:

    HOU and HNU track the strip but its weighted more heavily towards the front month. You can see that over the past little bit HOU had been getting obliterated because the strip was coming down.

    They are meant to track 2x the % move. I use them from time to time.

  151. 151
    Dman Says:

    Z – I can’t make out the 2nd sentence in your #124…

  152. 152
    zman Says:

    re:

    “Service troughs and peaks lower than service in general”

    I was actually looking at a monthly comp chart of the OIH vs the XNG going back several years. They pretty much track each other but the OIH would fall further during the down cycles and not rise as much during the up cycles.

  153. 153
    zman Says:

    Dman – does that make more sense? Its been a long week, month, year.

  154. 154
    Dman Says:

    # 152 suggests that over time, service loses out. I have seen Matt Simmons say that over time, the service industry has not been rewarded for its contribution, as players tend to go under in the down cycles.

    Any chance they can send the market home early today? It doesn’t seem to be achieving muh…

  155. 155
    Dman Says:

    er … that should have been

    “It doesn’t seem to be achieving much”

    Long day

  156. 156
    BirdsofpreyRcool Says:

    Credit falling out of bed… i’ll refrain from political commentary and just report the facts

    IG 225

  157. 157
    occam Says:

    Why is XOM so sick?

  158. 158
    zman Says:

    Occam – best guess is they are a large, large holder of federal leases many of which are not producing. Current administration has been making less than friendly decrees. Just a guess.

  159. 159
    zman Says:

    BOP – go ahead and rant away, its Friday, its late, and I’m declaring beerthirty. Wyoming will be happy to responds to all political tirades at 1 or 2 am tonight I’m sure.

    Wyoming, if you or Tex want to have a look at that presentation link from VTZ and give your thoughts on those well results please do.

  160. 160
    VTZ Says:

    Yeah, if you could compare those early results (first horizontals) to other shales it would be very helpful to me. I’m not sure how the development of the lateral frac technique works.

    They had verticals of 0.8 and 1 mmcf a day as well if that helps.

  161. 161
    BirdsofpreyRcool Says:

    z – LOL… be careful what you allow… you could post my last email, but i think it’s too inflammatory.

  162. 162
    zman Says:

    “just when you think you are out, they pull you back in”

  163. 163
    sportlock Says:

    Z, Seems that another big HZ drop this week and weather might be helping gas. I have been bouncing this theory around. Since we are in a protracted credit crisis and will see some players like DPTR go under and others not drill since they need time to repair their balance sheets I think we are in unchartered territory. With the huge drop in rigs, the maturity of the North America (I am expecting a 2 bcfd drop in Canada this year), tight credit and an industry scared of its own shadow, that we might be on the verge of big move since storage will end the year not that out of whack and the market is starting to see through the bottom. Your thoughts are appreciated by this eternal optimist. Thanks Bill

  164. 164
    Wyoming Says:

    Occam,

    XOM is just a big ‘ol SPX bank

    http://screencast.com/t/TXCVS76PJvw

    It is the light blue comparator.

    VTZ,

    Will take a look later, unless TEX opines. Which comment # was the link in?

    Drunk Monkey never came back from the G7 summit and his Japanese buddy, he is on his own. Although the Shiner will still flow.

  165. 165
    zman Says:

    Opting for Patron instead of Shiner.

    Sport – will address 163 a bit later, gotta run, may do in the wrap.

  166. 166
    VTZ Says:

    Wyo- 136 and you can look at the website for the recent results from this week.

  167. 167
    Wyoming Says:

    Where is the link to the presentation? Did not see it. Any specific questions on the well results or just general “IMO’s”?

    Shiner = When in Rome, drink as the Romans do. Only optinal substitution is Tequila and I already had my tape worm removed a couple of weeks ago. Next treatment not scheduled until the Spring.

  168. 168
    Wyoming Says:

    Thanks, heading out with Kiddos and will look at it later, sober initially.

  169. 169
    BirdsofpreyRcool Says:

    Gentleman Jack, anyone?

  170. 170
    zman Says:

    CFTC To Investigate USO monthly roll practices:

    http://www.marketwatch.com/news/story/CFTC-probes-big-oil-ETF/story.aspx?guid={545D2A3F-F667-4643-8219-28416F88A9E7}

  171. 171
    Wyoming Says:

    VTZ;

    Looked at the slides on Utica (hope it is the one to look at), generally, I am flat on it.

    Positives: Close to gas market users (minimal diff), shallow, thick, normal to slightly over pressured. Small company could do well $$ and sell.

    Deterrents: TOC / BCF per section looks low (assume US section for comps?)(total BCF is high due to multi layers = complex/expensive drill&complete), unknown water production, fuel gas=compression=painful production operation, indications of karsts/faults in other pay section more than likely bad, reserves = how many years did the stretch out to get? FST had variable results on horizontals. MOre interested in PIP (Pratical IP, not IP). IP in shales = lipstick on the pig for investors.

    Final – these should be easy drill and complete and much cheaper in today’s oilfield economy. Should have no problem finding sand to frac with …

    There may be more to the deal with the Quebec market so close. Be careful, I look at this from a US (we have plenty of gas; please not another shale play/ Obama- go ahead and take the leases back) perspective.

  172. 172
    Wyoming Says:

    Easy to drill and complete as a single.

  173. 173
    Wyoming Says:

    VTZ;

    These are some slides out of a HS presentation. They talk about some of the other shale plays and use comparatives. Shows the ranges of TOC and kerogen type analysis. Just another angle to answer what I think you were looking for.

    Probably the answer to your question
    http://screencast.com/t/xIMHvKK1GR

    Kerogen:
    http://screencast.com/t/gi99S8FG

    Comparative GIP:
    http://screencast.com/t/8D81Mqh9pdl

    Comp Daily Production Rates:
    http://screencast.com/t/UYUeYvAebA

    Conclusion
    http://screencast.com/t/miuubWLP95p

  174. 174
    VTZ Says:

    Thanks a lot.

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