30
Apr

Thursday – Natural Gas Preview + Oil Review + Lots of Earnings

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I find this kind of thing typical, a clean car story touting touting a handful of technologies that will someday be used instead of gasoline. In this case 8 of them including batteries, hydrogen, ethanol and even salad oil. Who's left out? Natural gas.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Earnings Watch: FSLR, OII
  6. Odds & Ends

 

Holdings Watch: No changes yesterday. I took some FSLR calls in comments but did not ZBLAST it as that stock has been more than a little tricky of late and it could have gone either way as far as the reaction of to their call comments.

 

Commodity Watch

Crude oil rose $1.05 to close at $50.97 on the back of an exuberant equity market and a falling U.S. dollar. This morning crude is trading up $0.75 on the back of stronger equity futures.

  • OPEC Watch: Having 1) looked over the Fed's statement yesterday which signals an inflection point has been reached in the economy (you may insert your favorite expletive here if you don't agree but that's their story and they are sticking to it) and 2) watched imports to the U.S. remain high at a time when demand has failed to markedly snap back and 3) seen the dollar start to waffle lower I can conclude that the Cartel is going to increasingly lean in the direction of output cuts at its May 28th meeting. Members are below their operating budget break even thresh holds and at this point, I would have to assume that they see themselves as having done their part to help the globe in its recession and that it is now their turn to boost prices. I would be highly suspicious however of any move to reduce volumes that does not place a disproportionate share of the curtailment on Saudi and furthermore, of one that does not include some kind of agreement with the F.S.U. states.   

 

Natural gas fell $0.04 to close at $3.40 yesterday. This morning gas is falling further (down 2 cents to $3.38) after the release of EIA supply data yesterday afternoon.

  • Demand: Not great on the latest data but a good piece of that was weather, then economy.  Taking a look at this past February vs February 2008 illustrates a couple of interesting items. It was a little warmer this year than last during the period which impacts all areas, especially the Residential and Commercial segments of demand. In February Industrial demand was off 3.3 Bcfgpd while total gas demand fell 9 Bcfgpd, and electrical consumption of gas fell 1 Bcfgpd. You can chalk up perhaps 3 to 3.5 Bcfgpd (nearly half of the total YoY deficit) to warmer February weather. 

 

Natural Gas Preview

  • My number:85 to 95 Bcf injection
    • History:
      • Last Week: 45
      • Last Year: 77
      • 5 Year Average: 58
    • Weather: Mild. 62 HDDs which is 11 more than last year.
    • Imports: Down 0.6 Bcfpgd from the prior week as Canadian imports to the U.S. hit a new low at 6.6 Bcfgpd.
    • Electricity: Edison pegged U.S. generation down 4.4% from the year ago last week, gas demand for generation is likely to be off less but still off.
  • Street Consensus: 81 Bcf

EIA Oil Inventory Review: In a nutshell, not a bullish report with another bigger than anticipated build in crude. The one bright spot was an unexpected and large gasoline withdrawal, but this was caused by an unforeseen (and temporary) slump in production and imports ... demand was just flat week to week. Going forward, I see utilization at refineries rebounding modestly allowing crude inventories to level off and then ease as summer approaches.

CRUDE OIL: Another big add as imports stay high and refiners see a hiccup. Expect demand from refiners to firm up soon.


 

 


 

That's should read "Needs" to stay low, otherwise, without a pick up in demand to more seasonal normal or close to normal levels we could see a bloat along the same proportions as distillates.

 

 

 

DISTILLATES -- Valero  commented yesterday on their 1Q09 call that domestic demand remained weak (no kidding) but that export demand remained strong and that it was likely to pick up soon and more than just seasonally as some sources of Latin American diesel are not available this year. We shall see. So far, demand looks weak period.

 

 

 

 

Earnings Watch:

 

FSLR Beats Street Easily On Lower Costs; Reaffirms Guidance, Hints At Better Times Ahead

  • The 1Q09 Numbers:
    • Production: 219.5 Megawatts (MW)
    • Revenues of $418 mm vs $399 mm expected
      • project financing deal in Germany resulted in deferral of $26.6 mm
    • Gross Profit of 56% vs last quarter's 54% and the year ago quarter of 51% (part of this reflects foreign exchange hedges which are phasing out later this year)
    • Operating Margins of 40%
    • EPS of $1.99 vs $1.51 expected.

A look at their metrics reveals continuous/consistent improvements:

 

  • Operations and Thought Process Update:
    • 1Q09: added 479 MW of new backlog during the quarter.
    • Cost per Watt: $0.93, another record low.
      • expect to continue to decline in near term with ramp of lower cost lines in Malaysia
      • You need this lower price point to enter a non-subsidized market like you have in the U.S.  (unlike in Europe) because you are competing with other renewable type energy.
    • Risks: Management walked through how they see risk at this time:
      • Oversupply of modules -
        • Not impacting them in the near term,
        • longer term they compare their cost reduction roadmap (getting from the current $0.93 per watt down to the $0.65 level by 2012). When they compare to what silicon could go at various price points they still have a cost advance even in the worst case scenario. This was a new level of detail for them and is pretty impressive as their roadmap consistently keeps them competitive to regular photovoltaic solar provides.
      • 10 - 15% customer contract default risk - They continue to see it at this level, situation has not changed from last quarter.
      • Project Financing - good flow on the little roof top projects in Germany, "reasonably robust"
      • Limited visibility outside of Germany - they are seeing larger banks in Germany beginning to lend for larger projects.
  • Guidance: Revenue maintained at $1.9 to $2.0 B, costs up very slightly.
  • CEO Succession Process
    •  Michael Ahearn is moving over to their government policy team, helping to promote solar and get things changed with DC
    • brings in new talent.
    • will take as long as needed to find right person
  • Conference Call was last night, went well, notes are incorporated in the stuff above.

 

OII Reports Better Than Expected 1Q09 Results (ROVs, subsea projects (inspection and repairs), subsea products(trees, umbilicals etc) - deepwater focused))

  • The 1Q09 Numbers:
    • Revenues of $435.1 mm vs $462 mm expected
    • EPS of $0.80 vs $0.68 expected - ahead of guidance
  • Operations Highlights:
    • Better than expected 1Q volumes in their subsea projects division due to higher than expected amounts of hurricane damage repair work.
  • Guidance:
    • 2Q09: 0.75 to $0.85 vs Street at $0.82
    • 2009: range moves from $3 to $3.60 to $3.10 to $3.60 (which essentially absorbs the 1Q beat and the 2Q weakness)
  • Conference: Today, 11 EST; will listen to call and decide if there is still room to play here for now.

CRR Reported OK Quarter Consider Environment. (Proppant company)

  • 1Q09 Numbers:
    • Revenue of $90.6 mm vs $98 mm expected; this is flat YoY and down 14% from 4Q
    • Sales volumes: down 11%YoY and 14% from 4Q
      • N. America volumes fell 8% YOY and 16% sequentially.
      • International volumes fell 46% and 30% respectively.
      • Given rig declines in NAM being strong this situations looks somewhat inverted with international taking the bigger hit.
    • EPS of $0.70 vs $0.66 expected.
  • Nutshell: Reducing pricing to stave off volume losses - ouch. They don't see a significant recovery (in gas prices) before 2010. Lower prices and volume questions will intense on the conference call. Estimates are already knocked back in the out quarter and margins were strong so analysts may not take numbers down now given the beat this quarter. 
  • Conference Call: today 11 am EST.

 

 

Odds & Ends

Analyst Watch: Jefferies takes up targets on (COG) from $30 to $36 and (FSLR) from $170 to $215. FBR, who has (FSLR) rated market perform grudgingly takes their target from $100 to $110.

108 Responses to “Thursday – Natural Gas Preview + Oil Review + Lots of Earnings”

  1. 1
    zman Says:

    XOM on the tape with 92 cents, expecting $0.95, stock coming off.

  2. 2
    bill Says:

    wll reported a loss
    bry big profit beat

  3. 3
    zman Says:

    Thanks Bill, saw that, not in either at present:

    BRY call at 1:30 EST
    WLL call at 11 EST

  4. 4
    BirdsofpreyRcool Says:

    Say what you will, but the fact of the matter is that the markets have decided to move past the banks and focus on the consumer. The Fed/Treasury/President has shown their hand and there will be no systematic bank nationalization. “Nothing to see here, folks, just move along.”

    The Consumer has taken the stage, front and center, now. That means that events like P&G’s earnings report and conference calls will be carefully inspected, parsed, and will move the markets.

    Who knows? Perhaps the banks can still blow themselves up and retake Center Stage in this vast Comedy of Errors. But for now, the market prefers to think we have made it to the right side of the economic V.

    Massive massive rally in credit continues. Haven’t seen moves like this to the upside in over 5 yrs.

    IG 161 … a full 8 bps tighter than last night’s close

    HY 79.25… a full 1.25 points higher. On top of yesterday’s almost 2 full point rally. This is called moving-at-light-speed in the high yield market.

  5. 5
    zman Says:

    Cannacord picks up GXMR with Buy and $13 target.

  6. 6
    BirdsofpreyRcool Says:

    Some timely insights into how the CDS/credit markets work, against the backdrop of the GM/C/Govt/UAW/bondholder spectacle.

    http://www.capmarkets.com/ViewFile.asp?ID1=116230&ID2=317797205&ssid=1&directory=6571&bm=0&filename=04.30.09_CDS_Saving_Capitalism.pdf

  7. 7
    bill Says:

    7 days ago , gxmr was below 6.25. Ng has fallen in those 7 days, so what factors are changing that drove a 75 % up move

  8. 8
    zman Says:

    GMXR was overly discounted, credit markets are firming and the fear there was what would happen to the revolver. They’ve got coming well results so there’s speculation building on those as well.

  9. 9
    BirdsofpreyRcool Says:

    KOG — if it wasn’t for bad luck, this management team would have no luck at all. Just like their Vermillion play disaster, KOG can’t complete a well successfully to save their life. Seems HAL was supposed to complete a 10-stage frac on the first well, but literally “dropped the ball” after 2-3 fracs. I don’t think they can re-enter and complete the remaining fracs (Wyoming… can they?). But hearing this partially-completed well IP’d at 600 bopd. Based on this, they are extrapolating the 2nd well from the first pad to come in at 1,200 bopd.

    This, combined with the expectations that drilling from their 2nd pad to the NE will result in 2,000 bopd wells + the successful results from Peak Energy in the TFS in the middle of KOG’s properties, is what is moving the stock.

    z — if these rumors and reports are correct, how should we value KOG’s 37,000 net acres in the Bakken now? (as everything else the company owns has been written to zero).

  10. 10
    Sambone Says:

    7:47 am EST

    Nymex Crude Nears $52/Bbl On Economic Optimism

    By NICK HEATH
    Of DOW JONES NEWSWIRES

    LONDON — Nymex crude oil futures traded at two-week highs Thursday, spurred by higher equity markets and a focus on positive elements of recent economic readings.

    Crude prices skirted $52 a barrel, despite latest U.S. inventory data Wednesday showing U.S. crude stockpiles rose further last week due to slower refinery use and wider oil demand weakness.

    Federal Reserve comments out Wednesday and industrial production data from Japan Thursday — revealing a 1.6% increase in production in March, the first rise in six months — instead nurtured optimism that the worse of the contraction in the global economy and commensurate oil demand may be over.

    “There are no indications at the moment that the bullish financial guidance can be denied by the bearish fundamentals,” said Marius Paun, energy broker at ODL Securities in London.

    At 1109 GMT, the front-month June Brent contract on London’s ICE futures exchange was up 47 cents at $51.25 a barrel.

    The front-month June light, sweet, crude contract on the New York Mercantile Exchange was trading 82 cents higher at $51.79 a barrel.

    The ICE’s gasoil contract for May delivery was up $3.00 at $430.50 a metric ton. Ahead of its expiry Thursday, the Nymex gasoline contract for May delivery was up 152 points at 146.36 cents a gallon.

    Financial markets continued to focus on the Federal Reserve’s comments about a modest improvement in the U.S. economic outlook Wednesday, in preference to a worse-than-expected, 6.1% drop in first quarter U.S. gross domestic product out the same day.

    Those comments — “the economic outlook has improved modestly since the March meeting,” though it should remain weak “for a time,” the Fed said — also appeared to take precedence over further indications that oil demand in the world’s largest oil consuming nation remains stunted.

    “The Fed hinted at a vague sense of hope. Everything else is grim, but prices rallied. And, there you have it. The market should be lower but is not,” said Peter Beutel, president of trading advisory Cameron Hanover.

    U.S. commercial crude stockpiles rose another 4.1 million barrels in the week ended April 24, the Energy Information Administration reported Wednesday, adding to inventories that were already near 19-year highs. A 4.7 million-barrel drop in gasoline inventories provided some support, but demand remains low, with average four-week demand at the lowest level in a decade.

    “Were it not for the (Fed) meeting, sellers would likely have been out in full force on Wednesday,” said Edward Meir, analyst at MF Global in New York. “With the uncertainty surrounding the (Fed) meeting fading going into the Thursday session, we could see a slight retrenchment in energy prices over the balance of the week, as the bearish impact of the EIA numbers have a chance to sink in.”

    —By Nick Heath; Dow Jones Newswires

  11. 11
    elduque Says:

    BDI +14 1786

    TED 90.67

  12. 12
    zman Says:

    Re KOG – we’d start looking at it on a wells per section basis. Say one well per section for now so 37.5K / 640 at 300,000 barrels EUR on those rates. Slap $10 in the ground cost on it to be conservative and back of the envelop discounted. That puts you at 175 mm in value, with 90 mm shares that’s just under $2. Then cut that in half or at least by 25% to mark down the acreage.

  13. 13
    BirdsofpreyRcool Says:

    z – KOG – thanks. I think that is conservative, but reasonable, at this point. Your wells/section and EUR/well are at the lowest end of estimates. But KOG is also going to have to raise money/JV/sellout to continue to fund their operations. So, some sort of dilution/debt will come into the picture, soon.

  14. 14
    Jason Says:

    Z – Any plan for the FSLR calls? Big win there….thanks!

  15. 15
    zman Says:

    Apologies for the delayed response, drew short end of stick on carpool.

    BOP – probably being too conservative, maybe range of $1 to $3 ish on that kind of news. If they say, and by the way we have big TFS potential we’re seeing in well #3 well…

    Jason – It was a good call, seeing some sour grapes notes out of analysts who have fallen way low on targets (same guys who were pushing $300 targets this time last year). Will punt and re-examine.

  16. 16
    zman Says:

    re 15 – good call as in good conference call, I just got lucky with my call.

  17. 17
    zman Says:

    Funny thing about smart guys or guys who think they are smart. Often very hard for them to change their world view. The guys who have been short and wrong stay that way (maybe like me on HAL although I know I’m right, lol!) even when presented with new, impressive, undeniable data. But you can read things as you want to, colored by your earlier preconceptions. I really try not to do that. I try to take in new data and adapt.

    So I look at Jefco and Carris now, both taking their targets up over $200 on FSLR and know that they are predisposed to be positive. Then you have FBR who is sitting down there with a target of $100. They obviously want a miss, don’t get it, they listen to the same call that the rest of hear and they come up with an extra $10 of value to $110. The company is making its numbers and growing double digits on bottom line so they really think it should trade at about 11x this year’s numbers? No, they are just stuffed with sour grapes.

    Reason I bring this up is that I am as prone as anyone to suffer from this malady. So ask me questions.

  18. 18
    zman Says:

    SWN waking back up

    OII on fire, missed that one. Call in an hour, will be on, maybe I go short as it has had a thumping good run but I hate shorting stocks of good companies and managements and that one qualifies in both categories.

  19. 19
    zman Says:

    PQ above BOP’s cost now, I no long have to feel guilty there.

  20. 20
    zman Says:

    Jason – just so you know, I’m still doing so other analyst research on it this morning and have not yet punted. Probably should have at the open …sense is that if the market runs to a high at end of day FSLR will likely be up there with it.

  21. 21
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures were flat Thursday, holding above $50
    a barrel after the Federal Reserve injected new optimism about the economy into
    the market.
    Oil prices had earlier reached an intraday high not seen since April 13,
    though futures remain within a narrow trading range that has now held for six
    weeks.
    Light, sweet crude for June delivery traded 10 cents, or 0.2%, lower at $50.87
    a barrel on the New York Mercantile Exchange, down from $51.94 a barrel earlier
    in the session. Brent crude on the ICE futures exchange traded 24 cents lower
    at $50.54 a barrel.
    Futures moved above $51 a barrel as commodities and equities markets took the
    Federal Reserve’s statement Wednesday that its economic outlook had “improved
    modestly” as a sign that the worst of the recession might be over.
    It was another Fed meeting in mid-March that locked oil prices into their
    current range around $50 a barrel, after the body surprised markets by
    announcing a plan to spend more than $1 trillion buying bonds and
    mortgage-backed securities.
    The Fed’s words helped soften the blow of Wednesday’s report from the Commerce
    Department that U.S. gross domestic product had contracted by 6.1% in the first
    quarter, putting the economy in its worst recession in 50 years.
    Oil demand has fallen sharply as both consumers and industrial users cut back,
    forcing crude inventories up to their highest level since 1990. Stockpiles were
    up for the eighth-straight week in U.S. Energy Information Administration data
    released Wednesday.
    While traders have come to see large oil inventory build-ups as routine, the
    EIA data did make waves in the products markets, showing an unexpectedly large
    draw on gasoline stocks. Gasoline supplies are relatively close to seasonal
    levels as the peak summer demand period approaches. Inventories of oil and
    other fuels soared to historic levels weeks ago.
    “Gasoline … is the only market that has any kind of fundamental worth,” said
    Tom Bentz, a broker and analyst with BNP Paribas (BNPQY) in New York. “Not that
    we have any tightness in gasoline stocks, but at least the market is looking at
    the inventories and saying they’re not as high as we have in distillate or
    crude oil.”
    Front-month May reformulated gasoline blendstock, or RBOB, recently traded up
    21 points, or 0.1%, at $1.4505 a gallon. May heating oil traded 1.57 cents, or
    1.2%, lower at $1.3134 a gallon.

    -By Brian Baskin, Dow Jones Newswires

    Dow Jones Newswires
    04-30-09 0920ET

  22. 22
    Jason Says:

    Re 20 – Thanks for the heads up. I was thinking the exact same thing.

  23. 23
    zman Says:

    Saw at least one broker comment on the NG supply numbers from yesterday. Comment was: Bearish. Gulf of Mexico still growing. That’s naive or at least a giant oversimplification on a busy day. I’d point out that the GOMEX may be recovering but that it is still producing less than it was pre storm and likely will not exceeded those levels as some production will never come back due to lost structures and replacement economics. There is some incremental deepwater gas production that may offset that loss but in the end, the trajectory on GOMEX, especially shallow water production is negative. Texas on the other hand, has been a source of growth. Until November. Texas is now down 0.8 Bcfgpd from that high. It’s not a matter of if we rollover but when. The longer gas stays this low, the more production will decline. Reason to dislike NAM focused service names right there.

  24. 24
    zman Says:

    Jason – roger that. The non-suckers move of course is to take the double and walk away.

  25. 25
    zman Says:

    CRR getting whipped. Call is at the same time as OII. Since I don’t plan to chase OII I will probably listen to the Carbo call. Wyoming was spot on here regarding the lack need and the coming volume drop. Stock ran up into earnings with all things service.

  26. 26
    zman Says:

    RJ ups FSLR target from $190 to $215. Shiny happy people in the solar realm.

    Nice call on KOG BOP!

  27. 27
    zman Says:

    82 Bcf injection, in line, could have been a lot worse, gas off a dime.

  28. 28
    zman Says:

    FLSR at 185, delta on those 160 calls is approaching 0.8 so every dollar starting to really count.

  29. 29
    Wyoming Says:

    http://www.epmag.com/WebOnly2009/item37397.php

    Russian LNG. Looks like most will be heading to Japan . Odd that COP’s LNG out of Alaska ’s Cook Inlet has a contract expiring this year to Tokyo Power and Light. COP exported about 50 BCF per year, not much in the grand scheme of things.

    Yup, another Shale article:

    http://www.epmag.com/WebOnly2009/item37015.php

    Venice, LA is the arm pit of the Gulf … trust me

    http://www.epmag.com/WebOnly2009/item37398.php

  30. 30
    zman Says:

    FSLR FYI Jason, punted the June $160 call for $33.50

  31. 31
    Jason Says:

    RE 30 – Saw that singlet fire off, wondered if it was you. I’ll join you soon and thanks again!

  32. 32
    zman Says:

    OII call starting, stock at 47.14.

    This is about 7.3x this year’s EPS estimate of 6.42 and 5.8x 2010.

  33. 33
    zman Says:

    OII Call

    Hearing deepwater projects in 2011 and beyond being canceled due to low oil prices.

    On interesting angle, some of these are being redesigned as subsea tie backs instead of standalone projects. Good news for them actually and for FTI.

  34. 34
    Wyoming Says:

    Bop:

    Sorry, missed #9. Yes, completions can be recovered. Mistakes happen all the time, especially when you are 2-3 miles in the ground. A lot of the wells you hear about did not go perfect and delays in results are usually from trying to keep the crowd entertained until the curtain opens.

    That said, I can’t tell you how many times I am at a function and I hear things like” frac’d into the fault, drilled across the Karst … and would you believe it is our best well…” seriously.

    In your KOG example, I take literally to be they are using a frac sleeve type of completions HAL calls their’s DeltaStim Sleeves. If there is horizontal above, they should be able to recover. If it is in the stages already frac’d, they should be able to drill out the ball seats and continue on. Nice thing about the Delta’s is they can be shifted, take s alittle more time and $$ but it can be done. Please note, I say what I say without any of the facts and reality is probably 180 degrees from my pre-conceived picture.

  35. 35
    BirdsofpreyRcool Says:

    Wyoming — #34. Thank you for your detailed answer. I do not understand the following: “If there is horizontal above, they should be able to recover.”

    I have heard two different versions of what is going on in well #1. The first is that the well is on line and currently producing cash flow, but that mngmt is going to “correct the completion mistake,” at some point. The second version is that they can’t “fix” the mistake. And, since a “ball” was mentioned as part of the completion process, and KOG said it would be a sleeve-type completion, it sounds like your assumptions are correct. Apparently there was some problem with “the ball.” As in, it was literally “dropped.”

    As an ex-geologist/geophysicist, I am pretty much mystified, when it comes to engineering/completions. Anything you can add would be very helpful.

    Thanks again!

  36. 36
    ram Says:

    HK – There seems to be a lot more sellers than buyers at 24.

  37. 37
    zman Says:

    ZTRADE:

    Added 10 CLR May $25 Calls (CLREE) for $1.25 and with the stock trading flat on the day. Oily CLR reports 1Q09 results next week. Looking for more positive results out of the Three Forks Sanish in the Bakken play of the Williston Basin, its the unhedged oil name with oil firming and it should be interesting to see how much stretching of their capex will be possible as completion costs come down in the region.

  38. 38
    zman Says:

    Re HK – If they will knock it down a buck I’ll add more back prior to earnings next week.

  39. 39
    Wyoming Says:

    Above. If they messed up Stage 1, then they still have horizontal left above the stage available to complete. I thought this would be confusing, I did not mean vertically above in the literal sense. Ie, their Stage 2,3,4,5 can still be done.

    With the Delta Stims (Packers Plus, BHI has FracPoint) you literally drop a ball in between stages to isolate the lower / prior stage and open the sleeve to frac the next stage. Now if they drop the larger ball first, you basically make the further stages from the toe more difficult to get to.

    I have seen completions where every ball is dropped in proper sequence, looking at the surface data, one would think that every stage went according to plan. Look at the micro – seis, 3 out of the 5 stages frac’d the exact same interval essentially giving 3 stages when 5 were pumped. Still was a good well. I really don’t like the mechanical / sleeve systems, I prefer the tried and true plug/perf technique with a cemented horizontal, but that is a choice deal and I am sure there are people who swear by the Sleeves.

  40. 40
    BirdsofpreyRcool Says:

    The investment grade CDS index has a new handle…

    IG 159

    This has been a very very large (positive) move tighter for corporate bonds, over the last few days. For the first time in a while, credit is leading stocks higher, not the other way around. And since the credit freeze is what put us into this sorry state, any thaw in credit puts a stablizing strut under stock market gains.

  41. 41
    zman Says:

    OII Q&A

    Margins going forward will be lower, not getting very granular on that, I’ll buy into this one later and maybe lower but not after this run.

    Wyo – did you see those CRR volume declines? Ouch.

  42. 42
    BirdsofpreyRcool Says:

    Wyoming — thanks for the further explanation. Last question, do they frac toe-to-heel (as I would guess)? Or, heel-to-toe? Trying to piece together the mental pic here. thx.

  43. 43
    BirdsofpreyRcool Says:

    Nothing moves up (or down) in a straight line…

    IG 160

  44. 44
    zman Says:

    OII Q&A over – easy money made here for now, not going to chase.

    Probably should have listened to CRR instead, tanking during the call.

  45. 45
    zman Says:

    43 – too true.

  46. 46
    zman Says:

    E&Ps reporting next week that I care about:

    EOG – will own
    PQ – do own
    CHK – just always care, and I own the common
    CRK – will likely take calls
    WRES – ” ” calls or stock
    PXD – will take calls
    HK – own it now, both calls and stock
    KWK – just watching
    XCO – ” ”
    GDP – ”
    PXP – ”
    CLR – just bought calls, may add one more set before the call
    SD – mulling
    KOG – mulling

  47. 47
    zman Says:

    Profit taking started about an hour ago in the gassy names, meanwhile, NG is off a dime from its lows, down 2 pennies now on that in line storage number.

    If this turns into an afternoon woodshood, I’ll shop from the list in 46.

  48. 48
    Dman Says:

    Z – any insight into the WLL quarter & outlook?

  49. 49
    BirdsofpreyRcool Says:

    wow. The President is going to be on TV in a few minutes. It’s been, like, what? 16 hours since his last appearance?

  50. 50
    ram Says:

    ZMAN – you are almost there regarding HK losing a buck. E&P’s turned negative quick.

  51. 51
    zman Says:

    Not yet, saw they reduced guidance and didn’t wow on production, threw the print out aside for a revisit this afternoon. I wonder if their results were behind the Nataxis downgrade of CLR.

  52. 52
    zman Says:

    re 49

    Buy stock in camera and microphone suppliers.

    Ram – yep, but good run there, can’t blame people for taking a little of the table.

    I see Nataxis axed their rating on RRC, that may be my next buy. Good quarter there, see review in yesterday’s post.

  53. 53
    Popeye Says:

    Z, 51 refers to 48 not 50 correct?

  54. 54
    zman Says:

    ZTRADE: $10KP – a little riskier trade here.

    Added (10) RRC May $42.50 calls for $0.70 with the stock off 6+% at $40 on a broker downgrade the day after they reported a solid quarter. This one is gassy and highly hedged for 2009. See the Wednesday post for more thoughts here.

  55. 55
    zman Says:

    Popeye – yes, was referring to WLL.

  56. 56
    nifkin Says:

    914 data out Z

  57. 57
    Wyoming Says:

    We call Stage 1 the toe and the higher numbers work back to the heel.

    Have a meeting and then off.

  58. 58
    zman Says:

    Thanks nifkin. Just looked it over, don’t see any major deltas to what you saw in last night’s natural gas monthly. Surprised by the resilience in Ok but then I remember hearing some operators were going slow on completions early on so it drags out the time to see the decline … or they are just improving woodford results and stepping up in the wash play.

    Texas remains the story (at least to me).

    HK just not willing to fall that much for me, there’s always tomorrow.

    EOG – Give me another $1.50 drop on them and I’ll be in there too.

  59. 59
    zman Says:

    Thanks for the schooling Wyo. Good call again on CRR.

  60. 60
    zman Says:

    By the way, don’t know where CNBC is getting it’s feed for natural gas today but they have been wrong since the wee hours. Front month gas is not down 1 to 2 pennies at $3.39.

  61. 61
    bill Says:

    wll call was positive
    declining well costs
    optimistic going forward
    cap ex at 420 m for 2009
    will have better takeaway capacity in future now cost 4 per bbl in future 2 years 50 cents

    I wish they had more ng hedges

    book value, fwiw, is 40 stock at 32, swn book is 7 stock at 36

  62. 62
    Wyoming Says:

    CRR – don’t know if I mentioned but they are Marketing (Dave Gallagher – Ex-SLB Sales Prez or whatever, makes sense when CEO Kolstad is Ex-SLB) a ceramic to compete with the Resin coated props. Adds about $50k to proppant cost on a 2.5 mm # proppant well.

    So, how does TPH feel about their call now? Also, TPH was pushing their position on some conference call forums about proppants. Talking the book.

    KEG, I think they are the best positioned for these non-drilling times ahead. Frac crews will be an issue with them but shale re-fracs will be the next generation of non-drilling activity. Spend some capex but not the full fledged costs of a drill. Also, when production drops, operators will be looking at HBP issues for some leases.

    NOV and the drillers, if the street wants to pump them up so be it.

    I am out; Desk and Derrick Golf tournament. Gonna enjoy a day while I still have a job …. kind if an oximoron, ah, maybe just a moron.

  63. 63
    bill Says:

    ng at 3.40 down 4 cents per nymex

    http://www.nymex.com/ng_fut_condet.aspx?product=NG&month=June&cmonth=M&year=9&currPrev=C

  64. 64
    zman Says:

    Thanks much Wyoming. Beer and golf on a Thursday make for a long weekend.

  65. 65
    ram Says:

    I’m just too greedy today. I want HK and SWN to fly.

    Thanks Wyoming for the KEG info.

  66. 66
    bill Says:

    ep companies rolling over

    is it profit taking or something in the 914 report

  67. 67
    rseidman Says:

    Z: Not the best timing on CLR, eh?

  68. 68
    zman Says:

    Nope. I buy in pieces, not all at once as that’s always a possibility.

  69. 69
    zman Says:

    Bill – really nothing new in that report so I’d say profit taking in energy. Service is off 3%, about double E&P’s fall. Also, XOM is setting a bad tone for energy with their miss.

    Volumes look pretty light on the selling in most names I’ve checked.

  70. 70
    RMD Says:

    EROC said in their ofconf.call producers have started laying down rigs in Austin Chalk, Angelina River and Travis peak areas, needing $4.50-$5.00 gas to justify drilling. Granite Wash needs $5.00. (You may want to consider the source here, as co. said service costs only down 20% and stock is down 40%.)

  71. 71
    zman Says:

    ZTRADE:

    Added another 10 CLR $25 calls on this market retrenchment for $0.75. Brings average cost to about a buck.

  72. 72
    jy Says:

    Wyoming Re #29–
    Venice LA would have to improve immensely to be an “armpit”.

  73. 73
    bill Says:

    Z, if you have time on your hands read up on PXP
    ————————————–

    Listening to bry call, calif differentials improved 7 dollars, pxp has major operations there

    Pxp pre announce no q1 write downs and i think that was achieved with reserve recapture from higher oil prices and narrowing differentials.

    They will give more color to recently announced vietnam discovery

    They have been raising money hand over fist, worse case to give more liquidity, maybe to buy some assets.

    As you know they have 20 % of chk haynesville and last qtr said>”The last seven horizontal wells had gross initial production or test
    rates averaging approximately 16 MMCFED and the two most recent wells,
    which are currently waiting pipeline connection, tested in excess of
    22 MMCFED. In addition, another 15 wells are waiting on completion.
    Also, a firm transportation agreement on the new Tiger Pipeline for
    approximately 1.0 BCF per day with a mid-2011 start up was recently
    announced by the operator.

    The joint venture expects to run an average of 26 rigs during 2009.
    PXP plans on spending approximately 43% of its 2009 capital budget on
    the Haynesville Shale.”<

    Anyways, i like them, and need another set of eyeballs.

  74. 74
    zman Says:

    Bill – I’ll take a look again before they report next week.

  75. 75
    Nicky Says:

    Good afternoon all. Z – support for SPX is 873 – 875. Then 863, then 850.

    I will be very surprised if we don’t see some profit taking ahead of Monday.

    The Elliott Wave count is tricky in that we really should have seen a bigger pullback than we have seen to date. Its possible that the very small one we saw last week was ‘it’ and we just continue to chop higher. If its still out there which is my hunch then this morning may have marked the top and we now see a deeper retracement.

  76. 76
    zman Says:

    KOG gave all of that move back. Sham-Wow volatile.

  77. 77
    zman Says:

    Thanks Nicky.

    Some catalyst or worry about Monday or just passage of time for the charts?

  78. 78
    Nicky Says:

    CNBC were walking out analysts talking Dow 10,000 this morning. That in itself was enough to warrant a pullback!

  79. 79
    zman Says:

    Bill

    If you like that much oil exposure and more hedged you probably like DNR, which will also give you longer reserve life and some growth this year without such a high debt load.

  80. 80
    Nicky Says:

    We are overbought, seeing some divergences plus just from a fundamental point of view if you had ridden this rally up from the lows why not take some off the table ahead of Monday. Financials have been underperforming too.
    UK has a holiday Monday – so they may cover tomorrow. Asia I think also has holidays starting today.

  81. 81
    md Says:

    EIA Feb numbers out. Variance on stocks and product supplied DN

  82. 82
    zman Says:

    Hear ya Nicky, since I didn’t buy into the rally in some things like banks and service, I’m not sure when to say overbought is overbought or just part of the way up, so thanks.

    Saw them pullout a guy who examines leading indicators and he said we are out of the bear, back to the bull. up, up, up. Agree, when they go there, its time to run.

    Did anyone catch Bob Pisani’s statistics on “sell in May and go away” a little while ago?

    MD – you talking petroleum #s?

  83. 83
    md Says:

    Yes

  84. 84
    md Says:

    CHRY CH 11

  85. 85
    zman Says:

    re 84 – yep, put the brakes on the market. SPX is really trying to hold Nicky’s levels. Often see a positive close to the last day of a strong month.

  86. 86
    bill Says:

    z- thanks. Yes , I like the oily names better with current prices

    i own dnr too. Took a small dose of clr and wll as well.

  87. 87
    Denise Says:

    Good afternoon,
    If anyone is interested Pappa Kass
    has been getting short the past few days
    (not energy-no worries there)
    retail financials and some other assorted areas

    Also my voodoo man getting cautious
    Jim Cramer bullish-worshiping at the alter of momentum(Kass comment)
    Always a contrary sign

    Kass is usually early-also says he hears a rumor about sell program into close

  88. 88
    Denise Says:

    Another chart to make you cautious on Barry Ritholtz’s site yesterday-
    we are at or over 90% of S&P’s 50 day mov avg

  89. 89
    zman Says:

    Thanks for the flyby Denise, appreciate the comments.

  90. 90
    Denise Says:

    Also a lot of chatter-(sorry if this was mentioned pressed for time today and speeding reading board) about Obama’s swipe at Wall street hedge funds and money managers

  91. 91
    Denise Says:

    BoP- Thank you for all the insight on KOG
    working out well (thx Z also)

  92. 92
    zman Says:

    Thanks JAT and BOP for the re-check on the consensus number.

    It was 81 Bcf, we got 82 which is not out of line with expectations although CNBC said it was much bigger than expectations and very bearish. Its also not out of line with the norms for this time of year and we actually shrank the deficits to the 5 year avg storage level and year ago storage. These guys are clueless, I want part of my cable bill back. They are incapable of doing anything but being a mouthpiece for traders in the pits who are still short. These guys won’t see the turn coming until it hits them in the face. I’m pretty tired of seeing talking heads make mention of something in the most dramatic fashion possible without any real understanding behind the numbers. I’m also tired of the network passing oil and gas around to whichever second string pretty face is available that hour. Ugh.

  93. 93
    tater Says:

    So what I’m hearing you say is that you wouldn’t say no to a little private party with Bertha and Sharon?

  94. 94
    zman Says:

    I’m saying do it right or don’t talk about it. Bring Mellisa Francis back onto the energy lead.

  95. 95
    tater Says:

    She got chewed out with Ratigan for being too cynical.

  96. 96
    tater Says:

    The idea of a sell program is very much on the table. Give us this little pop here now, then maybe pull the rug out. Day is playing out like the classic turn around day.

  97. 97
    zman Says:

    If everybody is looking for a pullback …

  98. 98
    tater Says:

    Right. 6 v .5 dozen.

    Makers appear to be using the after market to lead their positions.

  99. 99
    zman Says:

    JPM TA guy saying SP chart implies a test down to 760.

  100. 100
    zman Says:

    I would also point out for CNBC that gas in the aftermarket is trading down a whopping 2 cents. No one will be adding rigs at these prices. Production declines rather rapidly when you don’t, um, drill.

  101. 101
    zman Says:

    Not much of sell program, maybe tomorrow.

    Oil flat on the day, with slightly off mkt and an small uptick in the dollar.

    Beerthirty

  102. 102
    zman Says:

    Flu Update: Just an FYI, this came from a friend of friend.

    After I returned from a public health meeting yesterday with community
    > leaders and school officials in Comal County and Hays County, Heather
    > suggested I send an update to my patients in the area, because what we are
    > hearing privately from the CDC and Health Department is different from what
    > you are hearing in the media. Some of you know some of this, but I will just
    > list what facts I know.
    >
    >
    > – The virus is infectious for about 2 days prior to symptom onset
    >
    > – Virus spreads more than 7 days after symptom onset (possibly as long as 9
    > days) (this is more unusual than ordinary flu)
    >
    > – Since it is such a novel (new) virus, there is no “herd immunity,” so the
    > “attack rate” is very high. This is the percentage of people who come down
    > with a virus if exposed. Almost everyone who is exposed to this virus will
    > become infected, though not all will be symptomatic. That is much higher
    > than seasonal flu, which averages 10-15%. The “clinical attack rate”
    > estimation from CDC and WHO may be around 40-50%. This is the number of
    > people who show symptoms. This is a huge number. It is hard to convey the
    > seriousness of this to those outside of the medical fields.
    >
    > – The virulence (deadliness) of this virus is as bad here as in Mexico, and
    > there are folks on ventilators here in the US, right now. This has not been
    > in the media, but a 23 month old in Houston is fighting for his life, and a
    > pregnant woman just south of San Antonio is fighting for her life. In
    > Mexico, these folks might have died already, but here in the US, folks are
    > getting Tamiflu or Relenza quickly, and we have ready access to ventilators.
    > What this means is that within a couple of weeks, regional hospitals will
    > likely become overwhelmed.
    >
    > – Some of the kids with positive cases in Comal County have had more than 70
    > contacts before diagnosis as a minimum figure.
    >
    > – There are 10-25 times more actual cases (not “possible” cases — actual),
    > than what is being reported in the media. The way they fudge on reporting
    > this is that it takes 3 days to get the confirmatory nod from the CDC on a
    > given viral culture, but based on epidemiological grounds, we know that
    > there are more than 10 cases for each “confirmed” case right now.
    >
    > – During the night, we crossed the threshold for the definition of a WHO,
    > Phase 6 global pandemic. This has not happened in any of our lifetimes so
    > far. We are in uncharted territory.
    >
    > – They are advising President Obama to declare an emergency sometime in the
    > next 72-96 hours. This may not happen, but if it doesn’t, I will be
    > surprised. When this happens, all public gathering will be cancelled for 10
    > days minimum.
    >
    > – I suggest all of us avoid public gatherings. Outdoor activities are not as
    > likely to lead to infection. It is contained areas and close contact that
    > are the biggest risk.
    >
    > – Tamiflu is running out. There is a national stockpile, but it will have to
    > be carefully managed for law enforcement and first responders as it is not
    > enough to treat the likely number of infections when this is full-blown. I
    > don’t think there is a big supply of Relenza, but I do not know those
    > numbers. If I had to choose, I would take Relenza, as I think it gets more
    > drug to the affected tissue than Tamiflu.
    >
    > – You should avoid going to the ER if you think you have been exposed or are
    > symptomatic. ER’s south of here are becoming overwhelmed today– and I mean
    > that — already. It is coming in waves, but the waves are getting bigger.
    >
    > – It appears that this flu produces a distinctive “hoarseness” in many
    > victims. The symptoms, in general, match other flu’s; namely, sore throat,
    > body aches, headache, cough, and fever. What is not too common in regular
    > flu cycles is vomiting and diarrhea which seems to be associated with this,
    > further dehydrating victims. Some have all these symptoms, while others may
    > have only one or two.
    >
    > – N-Acetyl-Cysteine — a nutritional supplement available at the health food
    > store or Wimberley Pharmacy, has been shown to prevent or lessen the
    > severity of influenza. I suggest 1200mg, twice a day for adults, and 600mg
    > twice a day in kids over 12. It would be hard to get kids under 12 to take
    > it, but you could try opening the capsules and putting it on yogurt. For 40
    > pounds and up, 300-600 mg twice a day, for less than 40 pounds, half that.
    >
    > – Oscillococinum, a homeopathic remedy, has been vindicated as quite
    > effective in a large clinical trial in Europe, with an H1N1 variant. You can
    > buy this at Hill Country Natural Foods, or the Wimberley Pharmacy.
    >
    >
    > I will try to keep everyone posted if I have any new information. Meanwhile,
    > don’t be afraid, stay informed and try to avoid infection. The fewer people
    > infected the easier it will be for our public officials to manage it.
    >
    > If any of my patients become ill, or suspect infection, call the office, do
    > not come without calling and DO NOT go to the ER. If one member in a family
    > is identified all would be given the Tamiflu or Relenza (that is normal
    > course of action) if there is enough distributed to fill prescriptions.
    > Public health stated that one family member identified or suspected to have
    > contracted the flu it will require the whole family to be ‘quarantined’ in
    > their own home until enough time has passed for the remaining household to
    > have contracted it or be considered infection free ( 7 to 10 days per
    > person). As another suggestion, if any member of the family is on routine
    > medication- fill those prescriptions now. Have plenty fluids, Motrin, soups,
    > etc available and make contingency plans in case your family is affected.

  103. 103
    BossmanG Says:

    Thanks Z, keep us posted if you receive any more news.

  104. 104
    Wyoming Says:

    Done at the Desk and Derrick, thankfully our team had a huge handicap, so we took 2nd place. Charity so it goes to a good cause.

    Only thing I heard this afternoon was Encana, Encana, Encana. Luck favors the hedged. Oh, also about a Range Tarrant County well doing a 9.6 MM Practical IP.

    I did some more reflecting, once again KEG and the frac crew, with hundreds of wells needing to be completed, the drillers and my whipping boy NOV will be still on the back burner, pressure pumpers (KEG) will be fracing for months while the drilling rigs watch. It will take a long time especially with all the frac crews getting absolutely creamed right now. I don’t mean it insensitively, these are the first people that SLB, WFT, HAL release. Not to mention the perforating, rigs,Coiled Tubing Units, tools etc that Key will be providing for the completion. They really should buy a snubbing outfit. I digress.

  105. 105
    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Wrap – Week Ended 5/3/09 Says:

    […] Thursday – Natural Gas Preview + Oil Review + Lots of Earnings […]

  106. 106
    Marmura si granit Says:

    Marmura si granit…

    […]Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Thursday – Natural Gas Preview + Oil Review + Lots of Earnings[…]…

  107. 107
    brazilian hardwood Says:

    brazilian hardwood…

    […]Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Thursday – Natural Gas Preview + Oil Review + Lots of Earnings[…]…

  108. 108
    medicine Says:

    medicine…

    […]Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Thursday – Natural Gas Preview + Oil Review + Lots of Earnings[…]…

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