29
Oct

G.D.P. Thursday – Natural Gas Preview and Oil Review

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Market Sentiment Watch: On this 80th anniversary of the '29 crash there is cause for technical concern in the broad markets. While I don't recall the Fall of 1929, I vividly remember the second half of 2008 and I vow to not repeat that action again. 

  • Eco data Watch:

    • GDP of 3.5% vs 3.2% forecast
    • Jobless claims of 530 K vs 524 K forecast
  • Big Cap Earnings:

    • XOM reported $0.98 vs a $1.03 estime

 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Stuff We Care About Today - FSLR, WLL, SWN Pre Call note (to be added after the open)
  6. Odds & Ends

 

Holdings Watch:

  • $10KP II:
    • $17,000
    • 60% Cash

Yesterday's Trades:

  • FSLR – Added (1) FSLR November $165 call for $6 with the stock at 153.33 and earnings after the close. High risk from the standpoint that these guys have repeatedly been able to post strong results and then pull defeat from the jaws of victory by announcing something the Street didn’t care for during the conference call. I’m looking for further production growth and further advances in cost per watt and flat to down margins (expected).

 

Commodity Watch:

Crude oil fell $2.09 to close at $77.46 yesterday. The weakness was more a function of the dollar and the equity index sell off and less a function of the mixed bag of data EIA reported (see comments 2 sections down). This morning crude is trading up 60+ cents.

Natural gas fell with crude, ending the day off $0.22 at $5.07 on the December contract which takes over as the front month contract today. This morning gas is trading off nearly a dime in front of the storage numbers.

Natural Gas Preview

  • My number: 30 to 35 Bcf Injection.  Heating degree days were soft at 66 vs 80 normal and 78 last year 
    • History:
      • Last Week: 18 Bcf on record cold weather
      • Last Year: 49 Bcf
      • 5 Year Average: 32 Bcf

    • Imports weren't much of a factor week to week, only declining
  • Street Consensus: 27 Bcf and has been falling all week as the pipe flow modeling guys contribute falling numbers to the mix.

EIA Oil Inventory Review


ZComment: Crude imports remained low for a third week; not sure of the reason for this as rising prices would generally promote increased imports. Crude is building on a season basis due to low refinery utilization and I expect that to continue for the next several weeks. Distillate demand is picking up seasonally and this is helping to reduce the record inventory levels but we will still need to see a consistantly cold winter to eradicate the surplus before Spring.

CRUDE OIL:

 

 

GASOLINE:

 

 

DISTILLATES:


 

 


 

Stuff We Care About Today

WLL Beats, Guides Higher, Announces Biggest Bakken Well To Date In The Play

 

Pre Call Note Key Points:

  • 3Q09 Production above the upper end of guidance
  • Production guidance raised
  • Biggest IP for a Bakken well in company history (> 4,700 BOEpd)

 

The 3Q Numbers:

  • Production of 5.13 MMBOE (55,761 BOEpd), above guidance 4.8 to 5.0 MMBOE
  • Revenue of $269.3 vs $239 mm expected.
  • EPS of $0.59 vs $0.28 expected
  • CFPS of $2.92 vs $2.52 expected, another big cash flow beat for them

Guidance: Volumes Going Up.

  • 2009 goes from a range of 10 to 12% YoY growth to a range of 14 to 16% YoY growth.
    • range was 19.2 to 19.6 MMBOE
    • now 20 to 20.3 MMBOE ... so you can see they upped number more than enough to account for this past quarter's beat.
    • This implies a 4Q number of 5.0 to 5.2 MMBOE (straddling the 3Q results)
  • 2010 - as is standard for them, we'll have to wait for next year's guidance until a later call.
  • Costs trending lower on a per unit basis

Balance Sheet & Capital Plans

  • WLL paid down $70 mm of bank debt during the quarter out of free cash flow.
  • 25.2 debt to cap vs 27% last of last quarter.
  • They have $150 mm outstanding on their bank line leaving them with $950 mm of liquidity.
  • They upped their budget by $30mm to $470mm for the year, well within cash flow and it sounds like they plan on staying that way.

Operations Update:

  • Sanish Field:  (their big Bakken operated money maker)

    • Net field production of 10,470 BOEpd (19% of total)
    • Maki 11-27H with IP of 4,761 BOEpd from the Bakken (largest well I have seen out of them)
      • 18 stage frac, northeast Sanish Field
    • Tollefson 44-10H with IP of 2,636 BOEpd from the Bakken in the opposite corner of the Sanish Field
    • Kannnianen 11-5H, IP of 1,998 BOEpd from the Bakken, in the center of Sanish Field. Notably, this is roughly in line with the average WLL Bakken IP.
    • Ogden 11-3TFH - third Three Forks Sanish test, 24 stage sliding sleeves, about to frac.

Rig count there just here from 5 to 6 rigs and will go to 9 rigs by early 2010.

Completed well costs sound like they are now coming in at about $5 mm, down from a recent range of $5 to $5.5 mm.

Pipeline Update: The 65,000 bopd pipeline they had previously mentioned as under construction appears be complete with an in service date some time this quarter. Should help with costs and differentials.

  • Parshall Field (their non-operated Bakken interest, where EOG runs the show)

    • Net field production of 6,830 BOEpd (12% of total)
    • No rigs, just non-operated working interests.

Enhanced Oil Recovery - volume upswing continues:

WLL's two EOR projects don't get a lot of attention but they continue to rally volumes at both via low cost workover activity. While big Bakken wells are the sexy part of the story, the water and CO2 flood projects provide a stable base of production and cash flow and WLL's latest efforts in both plays continue to bear fruit:

  • Postle Field (Texas County, OK):
    • 8,670 net BOEpd in 3Q (16% of production)
    • September 2009 saw average production of 9,000 BOEpd, a 33 year high for the field.
  • North Ward Estes (Ward and Winkler Counties, Tx):
    • 6,415 net BOEpd in 3Q (12% of production).

 

Catalyst Watch:

  • Lewis & Clark Prospect: Second well at TD, not yet fraced (first well was completed in the Three Forks for 1,000 BOEpd). Expect to hear more questions on the call on this one.
    • Three Forks Well in Golden Valley County, North Dakota
    • See county map here.
    • WLL has assembled 107K net acres in this area

      • Note that most of the activity we normally focus on is to the north in Montrail, Dunn, McKensie counties.
      • There are numerous existing vertical wellbores in this area that can be re-entered to save costs (casing exit opportunities). This shaves about 20% off the completed well cost.   
    • Results expected mid November (8,550 foot lateral with 16 stage frac)

 

Nutshell: The only things missing were a positive test in the Three Forks from the Lewis & Clark area and 2010 guidance, neither of which were expected. Market willing this probably goes higher as estimates will be coming up again for both 2009 and 2010 and the stock remains one of the cheapest names (4.5x 2010 CFPS) estimate of $12.56) levered to ramping Bakken production. This note along with the notes from the conference call will be archived on the Reports Tab. 

 

FSLR Reports A Small Beat; Boosts Revenue Guidance But Whacks Expected Margins.

The 3Q Numbers

  • Revenues of $480 mm vs $529 mm expected
  • The revenue "miss" was caused by revenue recognition accounting with FSLR unable to recognize $58 mm in revenues due to a contract that was signed after the close of the quarter.
  • Gross Profit of 50.9% vs last quarter’s 57% - mostly due to more competitive environment, mix, and exchange rate.
  • Operating Margins of 33.9% vs 39% last quarter. This had been previously forecast but still seems to have taken the Street by surprise.
  • EPS of $1.79 vs $1.74 expected

Operational Metrics & Thoughts

 

  • Cost per watt of $0.85 vs $0.87 last quarter, another new low.
  • Guidance Revised Higher: 
    • 2009 Sales:
      • Was: $1.9 to $2.0 B 0 everything stays the same.
      • Now: $1.975 to $2.25 B
      • Implies $550 to $600 mm for 4Q, Street at $534 mm
    • Operating Margin:
      • Was: 31 to 33%
      • Now: 33 to 34%
      • 4Q Expectation: 23 to 25% due to largely to a change in product mix and weak pricing there.
    • as does their margin expectation for the quarter of 31 and 33% margin. This implies a steep slide in margins in the back half of the year.

Nutshell: The stock fell on the revenue "miss" but stayed low after that was explained away due to the weak margin guidance. I'll watch it for a few days and sell into any strength next week.

 

Odds & Ends

Analyst Watch:

  • (RRC) initiated at Buy at Thomas Weisel
  • (PQ) upped to Overweight at JP Morgan
  • (HAL) initiated at Outperform at Wells Fargo
  •  

114 Responses to “G.D.P. Thursday – Natural Gas Preview and Oil Review”

  1. 1
    zman Says:

    WLL – RBC takes target from $63 to $68.

    I think BOP is out today.

  2. 2
    zman Says:

    BEXP coat tailing that WLL well as they have not too distant offsets to that acreage.

    WLL up 4%, looking to run higher, conf call at 11 EST

    E&Ps uniformly green.

    FSLR toast.

  3. 3
    isleworth Says:

    any thoughts on PQ upgrade Z?

  4. 4
    zman Says:

    Isle – Don’t know their reasoning other than the stock got whacked yesterday and they missed the initial run up. Stock probably trends with the group, don’t see a bunch of catalysts to drive it up, other than higher gas prices.

  5. 5
    elijahwc Says:

    ATPG – Comment coming out of the Energy-Prospectus Group luncheon yesterday.

    “Based on the presentation today (available at the ATPG website) ATPG is a SCREAMING BUY under $20 with a six month target price of $32. The Telemark Hub will be on-line mid 1st quarter and it will ramp up to 20,000 boepd (mostly oil) very quickly. This will more than double ATPG’s production.”

    FWTIW

  6. 6
    isleworth Says:

    Tks Z. Nice call on WLL……

  7. 7
    baylor3217 Says:

    Things are seeming a bit contrived. For months we’ve been anticipating GDP growth of 3.5% and, VOILA, it comes in at 3.5%.

    I’m trying not to let my abject mistrust of this administration cloud my judgment so as not to affect my long term investing strategy.

  8. 8
    Dman Says:

    This article was at Zero Hedge, but I’m giving the WSM link because there’s a better picture there:

    http://aaronandmoses.blogspot.com/2009/10/busting-out-joint.html

  9. 9
    bill Says:

    crr star of the day up 7

  10. 10
    elijahwc Says:

    MHR – Odds and ends, another step in the Gary evans journey.

    MHR Magnum Hunter announces definitive agreement to acquire assets of Appalachian Basin (1.91 )

    Co announced this morning it has entered into a definitive agreement with an Appalachian Basin energy company to purchase substantially all of Triad’s oil and gas exploration and production operating assets. Additionally, as part of the transaction, 100% of Triad’s ownership interests in certain oilfield service related drilling, pipeline and salt water disposal assets are being acquired. The acquisition of Triad by Magnum Hunter will occur upon the effectiveness of Triad’s reorganization plan under Chapter 11 of the United States Bankruptcy Code. Under Triad’s proposed plan of reorganization, the assets of Triad along with certain affiliates would be acquired by a wholly-owned subsidiary of Magnum Hunter. Magnum Hunter has agreed to pay cash, issue securities and assume or refinance Triad’s outstanding debt obligations in the aggregate of approximately $81 million. The $81 million total purchase price is broken out in components of (i) the assumption and refinancing of approximately $58 million of senior debt owed to secured lenders, (ii) issuance to Triad or its designees $15 million in Redeemable Convertible Preferred Stock with a 2.75% fixed coupon payable quarterly and (iii) up to $8 million in cash.

  11. 11
    bill Says:

    >The Telemark Hub will be on-line mid 1st quarter

    i thought it was starting jan 1

    so we have to wait until july/aug 2010 to see the pl impact

  12. 12
    baylor3217 Says:

    Thoughts on SLB calls?

  13. 13
    zman Says:

    Re SLB – Holding, not adding now, will re evaluate next week. Price action there will be tied to the S&P.

  14. 14
    baylor3217 Says:

    Picked up some ATPG common on this recent pull back almost to the recent lows after the secondary.

    May be a little early here. Time will tell.

  15. 15
    isleworth Says:

    Interested in NFX at a price Z?

  16. 16
    baylor3217 Says:

    Big move in SWN pre-earnings tonight. Any thoughts there?

  17. 17
    zman Says:

    Isle – Re NFX

    I own calls and common there now. I’m not considering adding this week. Do I like this little bounce in the markets today? Yes. Do I have confidence in it? No. I want the market to put together more than a small morning pop on a GDP number before I go further into my cash position.

  18. 18
    zman Says:

    Baylor – I own calls there and common there as well. I have enough as I was adding for earnings as everything was falling about last week and early this week. I’ll be adding a SWN Pre Call piece to the post around noon.

  19. 19
    baylor3217 Says:

    CHK touched it’s 50% retracement from the low to the high over the past 3 months

  20. 20
    bloodystupidjohnson Says:

    Mark Sellers and Bill Miller write about optionality in the E&P names. In other words when you buy a stock, you are getting an free option that is not being priced in the stock. ATPG is a perfect example of that idea. They are bring this field on line. It is not a secret. But you watch. When they finally mention a big production increase, the stock will jump.

    Same idea with WLL. Everyone knows they are drilling in the Bakkans and are getting big wells. Then when they announce more Bakkan succes, it seems to take the market by surprise.

  21. 21
    bloodystupidjohnson Says:

    CHK is also back to it old break out level of 25, for those technically inclined.

  22. 22
    zman Says:

    Gas numbers in 4 minutes

    Bsj – re 20. I see the world somewhat differently. I’ll have a comment on that in a few minutes.

  23. 23
    elijahwc Says:

    11, 14 & 20 – ATPG – A little more color on the timing:

    “Al Reese announced today at our luncheon that that ATP Titan will be heading to location this weekend. It should be on-line mid 1st quarter. Three well will be tied in quickly which should get the Titan to maximum production adding over 20,000 bopd to ATPG daily production.”

  24. 24
    zman Says:

    Natural Gas Inventories

    25 Bcf injection vs Street at 27 Bcf injection.

    Gas just before report: Flat at $5.06.

  25. 25
    zman Says:

    Gas in storage now 3,759
    * up 11% vs year ago
    * up 12.4% from 5 yr avg.

    Gas now down 8 cents and sliding. Stocks not really paying much attention to anything but the S&P.

  26. 26
    zman Says:

    WLL call in 30 minutes.

  27. 27
    bloodystupidjohnson Says:

    Stocks not really paying much attention to anything but the S&P — well Z that is an improvement. Last couple of days the energy names have had a negative disconnect with the S&P.

  28. 28
    isleworth Says:

    NG gone positive; didn’t get the sell-off on better numbers than expected?

  29. 29
    bloodystupidjohnson Says:

    WLL is a key stock to watch. It is rising on good news. Now this is am improvement over the last few days where good news (WLT, NFX, etc) has lead to large declines. Is WLL going to follow PXD and be a one day wonder, only to collapse the next day? Or will get signal maybe the trend is changing and good news will extend over a couple of weeks?

  30. 30
    zman Says:

    BSJ – agreed re that relationship.

    WLL call in 5 minutes.

  31. 31
    isleworth Says:

    ELi – nice action in ATPG………

  32. 32
    zman Says:

    WLL just reading the highpoints of the pr so far

  33. 33
    zman Says:

    WLL – wow, still reading, nothing new.

  34. 34
    elijahwc Says:

    Tivia: Top 288 in energy YTD

    Below is a ranking of Oil and Gas stocks based on year-to-date performance. The ranking shows 244 of 288 stocks in this sector posted positive performance in 2009 year-to-date.

    Ranking | Company (Ticker) | Year-to-Date Performance
    1 Kodiak Oil & Gas Corp. (AMEX:KOG) 732.3%
    2 Geokinetics Inc. (AMEX:GOK) 669.2%
    3 Magnum Hunter Resources Corporation (AMEX:MHR) 527.3%
    4 Venoco, Inc. (NYSE:VQ) 412.9%
    5 Ivanhoe Energy Inc. (USA) (NASDAQ:IVAN) 387.8%

    6 Syntroleum Corporation (NASDAQ:SYNM) 327.8%
    7 Green Plains Renewable Energy Inc. (NASDAQ:GPRE) 289.1%
    8 Northern Oil & Gas, Inc. (AMEX:NOG) 274.2%
    9 Berry Petroleum Company (NYSE:BRY) 270.8%
    10 Hyperdynamics Corporation (AMEX:HDY) 228.9%
    11 MarkWest Energy Partners, L.P. (NYSE:MWE) 228.7%
    12 ATP Oil & Gas Corporation (NASDAQ:ATPG) 222.7%
    13 Vanguard Natural Resources, LLC (NYSE:VNR) 222.2%
    14 Brigham Exploration Company (NASDAQ:BEXP) 216.6%
    15 Rex Energy Corporation (NASDAQ:REXX) 205.4%
    16 American Oil & Gas Inc. (AMEX:AEZ) 205.0%
    17 NATCO Group Inc. (NYSE:NTG) 203.4%
    18 Evolution Petroleum Corporation (AMEX:EPM) 196.7%
    19 PowerSecure International, Inc. (NASDAQ:POWR) 191.2%
    20 CVR Energy, Inc. (NYSE:CVI) 191.0%
    21 China North East Petroleum Hldng Ltd. (AMEX:NEP) 190.5%
    22 Enterra Energy Trust (USA) (NYSE:ENT) 190.4%
    23 DCP Midstream Partners, LP (NYSE:DPM) 182.0%
    24 Pioneer Natural Resources (NYSE:PXD) 181.5%
    25 Energy XXI (Bermuda) Limited (NASDAQ:EXXI) 173.4%
    26 Gastar Exploration Limited (USA) (AMEX:GST) 169.3%
    27 Isramco, Inc. (NASDAQ:ISRL) 168.8%
    28 Targa Resources Partners LP (NASDAQ:NGLS) 160.1%
    29 Abraxas Petroleum Corp. (NASDAQ:AXAS) 156.9%
    30 Cano Petroleum, Inc. (AMEX:CFW) 156.8%
    31 Quicksilver Resources Inc (NYSE:KWK) 153.7%
    32 TGC Industries, Inc. (NASDAQ:TGE) 147.2%
    33 Atwood Oceanics, Inc. (NYSE:ATW) 146.7%
    34 Dril-Quip, Inc. (NYSE:DRQ) 146.3%
    35 TravelCenters of America LLC (AMEX:TA) 142.5%
    36 Magellan Petroleum Corporation (NASDAQ:MPET) 138.5%
    37 MV Oil Trust (NYSE:MVO) 137.8%
    38 FMC Technologies, Inc. (NYSE:FTI) 137.4%
    39 Global Industries, Ltd. (NASDAQ:GLBL) 132.4%
    40 Acergy S.A. (ADR) (NASDAQ:ACGY) 130.5%
    41 Newfield Exploration Co. (NYSE:NFX) 129.4%
    42 Endeavour International Corporation (AMEX:END) 116.0%
    43 Pride International, Inc. (NYSE:PDE) 114.2%
    44 Baytex Energy Trust (USA) (NYSE:BTE) 113.9%
    45 T-3 Energy Services, Inc. (NASDAQ:TTES) 112.0%
    46 Helix Energy Solutions Group Inc. (NYSE:HLX) 110.8%
    47 Enbridge Energy Management, L.L.C. (NYSE:EEQ) 110.4%
    48 TETRA Technologies, Inc. (NYSE:TTI) 108.9%
    49 Gulfport Energy Corporation (NASDAQ:GPOR) 107.3%
    50 Rosetta Resources Inc. (NASDAQ:ROSE) 106.5%

    Rest can be found here:
    http://www.google.com/reader/shared/user/17007329987974805495/label/TopStockRankings

  35. 35
    bloodystupidjohnson Says:

    For my money, WLL gives one of the most boring, mind numbing conf calls. Hey folks, we can read a press release.

  36. 36
    isleworth Says:

    Smith Intl on conf call, says they expect Q4 revs and operating margins to be similar with Q3

    Q3 revs were $1.88 bln, which would put the co below current Q4 consensus of $1.94 bln. Stock down bout 5%

  37. 37
    isleworth Says:

    Bloomberg reports Pemex says it may not renew Weatherford contracts in April

    Pemex says it’s met its equipment needs for next year, Pemex comments in response to two $870 mln drill contracts

  38. 38
    jiveyjr Says:

    maybe he’s bored people so they quit listening and started buying…WLL moving again

  39. 39
    zman Says:

    They’ve moved onto the slides where they do a much better job of presenting.

  40. 40
    zman Says:

    Still listening, not giving much in the way of extra detail with the slides over what they’ve presented before. Good primer on the company if you have not heard it before.

    Dollar rolling over pretty good today. Look ma, GDP up 3.5%!!! Now what? (Pause, um, hmmm). Time to restimulate.

  41. 41
    bill Says:

    oil index down 6 % last 5 days, sd down 16 %

  42. 42
    isleworth Says:

    Z- what are you expecting out of SWN tonight?

  43. 43
    zman Says:

    WLL – on slide 37 of 55. Then Q&A. Nothing new so far other than an updated NAV in the $80s (no one will care about that).

    Q&A – should see Lewis & Clarke prospect area questions.

  44. 44
    zman Says:

    Isle – good things. On WLL call now.

  45. 45
    zman Says:

    Quickly on SWN

    * Probably a CFPS beat along with better than guidance production.

    * Maybe upped guidance for 4Q

    * No 2010 guidance yet

    * Some higher IPs in the Fayetteville, especially after CHK’s comments on the southern side of the play 2 weeks ago.

    * Probably no change to EUR thoughts but another increase in average IP

    * Should have news on a 3rd well in E. Texas. Last two were impressive, especially for 1st shots in the play.

    * Marcellus? Probably not, they have kept pretty quiet there.

  46. 46
    zman Says:

    S&P is waffling

  47. 47
    isleworth Says:

    ok great……..thanks very much Z!

  48. 48
    zman Says:

    WLL 3Q09 Q&A

    Wells Fargo – EOR Question? Have you accelerated those in terms of timing or are you expecting higher recovery now?

    Bit of both. Encouraged by the response. That’s positive.

    Growth rate for 2010…double digit growth?

    Don’t want to give guidance yet … if we were to see the continuation of the level of cash flow they saw in the 3Q then they could have a “very marked increase, perhaps 70 to 80% or so”. The preceding sentence is HUGE.

    Thinking discretionary cash flow could be something in the $800 mm range, vs the $470 they are expending this year … sounds like he’s hinting about a doubling of capex next year.

    They want to pass on that they are more optimistic about the Sanish Field, including the Three Forks. They have 52 producers there now, thinking they could have 300 in total (so only 20% done).

  49. 49
    zman Says:

    WLL Q&A

    That bump in CF would lead to “significant double digit growth”

  50. 50
    zman Says:

    WLL Q&A

    Plug and perf vs sliding sleeves. On the PnP, they need a lot more equipment.

    Said sliding sleeves taking about 12 hours

    PnP taking 3 to 5 days.

    They think they get the 18 stage sliding sleeve off in 18 hours.

    Lewis & Clark – Analyst asked for commentary on economics there.

    CEO came back with a loud “watch the results of the next well (this is the one that should be done mid November), it made a believer out of me”. That’s one of those Wow comments.

  51. 51
    zman Says:

    All other things being equal (market, oil) my sense is that analysts get off this call and goose the name. If the market is benign tomorrow and not back to falling off a cliff this move should extend into the lower $60s. Three nuggets on the Q&A:

    Looking at double digit growth for 2010

    Consistently drilling these wells for $5 mm

    Lewis and Clark comment from CEO – “watch the results of the next well (this is the one that should be done mid November), it made a believer out of me”.

  52. 52
    zman Says:

    WLL Q&A

    4.5 ” liner in this latest L&C well vs 2.875″ liner in the original L&C well that IP’d at 1,000 bopd.

  53. 53
    zman Says:

    WLL – Analysts are pretty pleased with the quarter and the ops update. Call should wind down soon.

  54. 54
    zman Says:

    Oil knocking on $80, dollar continues to weaken, S&P continues to strengthen.

  55. 55
    bloodystupidjohnson Says:

    Z, if WLL follows through on these gains, and that is a big if, do you think this latest news will filter down to the other Bakkan E&P’s?

  56. 56
    zman Says:

    WLL @ 59.75 at end of call.

    BSJ – I think it already has to some extent, as you have BEXP that has some acreage offsetting these Sanish wells and that name is up 9%. If it runs I would expect CLR to move up less but still up into their conference call. The L&C stuff should not impact the other guys as that is pretty specific to WLL.

  57. 57
    bloodystupidjohnson Says:

    CLR was the one I had in mind. It still seems to be stuck in the mud. Plus EOG is not really burning up the track lately either.

  58. 58
    zman Says:

    CLR is kind of pricey and not drilling wells of this caliber. Good stock, big Bakken position, just well priced. EOG has run and then some, likely to buy it back after earnings are released.

  59. 59
    zman Says:

    Wow WLT. Looks like it put in a higher low to me. Still holding my small call position there.

  60. 60
    bill Says:

    z- i sent you 2 emails

    Barclay research on sd

    they have an overweight and target of 17

  61. 61
    zman Says:

    Thanks Bill

  62. 62
    bloodystupidjohnson Says:

    WLT – maybe they got Bakkan acerage too — lol

  63. 63
    bill Says:

    big negative on sd is level of debt

    Positives

    80 % hedged this year and next at 7.50 +
    (no one has this)

    Production growth with crusader acquisition 30mmcf day + the new Oxy plant mid year next year growth production from 200 to 300 per day

    Wondering out loud– Do we get a big pop as we get closer to the turn on date like atpg did.

    Every way I look at it, it appears oversold unless we have 4 dollar ng pricing for the next 5 years

  64. 64
    bill Says:

    actually, sd has 8- % hedge in q3 at 8.46

    http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTA0MDN8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1

    and production plan to grow from 300mmcf to 500 correcting 200 to 300 and we sit on LOD with the dow up 163

    perplexing…..! I dont know what i am missing

  65. 65
    kyleandy Says:

    z – i listened to the WLL call also, and if their production rises 70-80%, w/o market factors, what would u expect stk to rise? that number seemed huge to me also!! also, is the l&c well now being drilled far enough along to justify CEO’s comment “watch the resullts of the next one”. first part of call might have been boring, but q&a’s not.

  66. 66
    bloodystupidjohnson Says:

    Bill, those kinds of stocks can drive you crazy. The “what am I missing” sort of things. All I can say, is that if you think your thinking and facts are right about the stock, then forget Mr Market. This is alot easier said than done.

  67. 67
    zman Says:

    Kyle – that’s 70 to 80% jump in cash flow yielding significant double digits growth in volumes.

    Re L&C – I’m sure he has brightly fluorescencing cores at this point. I’m sure for him to say that they had shows while drilling. It may or may not turn out to be a big Kahuna producer as they can still botch the completion but you don’t make statements like that without a handle on the presence of hydrocarbons.

    Also, they have a little well control there in the form of a bunch of verticals. So in the first two wells you were in inhibited by the mechanics of the well, one was a short lateral on a grass roots horizontal well. The other was a slim casing on the horizontal punched out of a vertical well. This well is also a casing exit but has no such constraints (fat, long straw).

  68. 68
    zman Says:

    Feels like everyone is sitting on their hands today. Market up but only drifting back to opening levels yesterday. Most names, even ones with good news, not offsetting their drops yesterday. Of all things, oil is outperforming it’s loss from yesterday and is leading products. Very odd that it should be leading heating oil, not so that is should be leading gasoline.

  69. 69
    Dman Says:

    bill – SD looks like one of Mr Market’s opportunities here.

  70. 70
    zman Says:

    EIA bumped their gas supply report back a day to tomorrow.

  71. 71
    zman Says:

    Group not tracking S&P higher. Hmmm. Need to hit the reset button on this market in the morning.

    We get consumer spending and consumer sentiment tomorrow. The last read I have on estimates for sentiment is 70.5, vs last month 69.4. I hope the egg heads have brought that number down some or we are setting up for a disappointment.

  72. 72
    zman Says:

    Spin, spin, spin:

    http://www.whitehouse.gov/blog/2009/10/29/reality-check-ap-story-misleads-recovery-act-job-reporting

  73. 73
    ratberto Says:

    Cash for Clunkers Results Finally In: Taxpayers Paid $24,000 per Vehicle Sold, Reports Edmunds.com

    http://www.edmunds.com/help/about/press/159446/article.html

    I feel like smoking a cigarette…

  74. 74
    bill Says:

    sd- 1 week ago it was over 14, today after a rally its 11.20.

    Researching, last 2 earnings calls, the stock pop’d on day of announcement.

    6 months ago in a poor market it was higher than todays price.

    i think you are right, dman.. i added more today.

    Production will be flatish to down for the next 3 qtr’s then it takes off

    Ward, at recent conf says he has 75 % hedged for next year. The hedged amount is 80 bcf so 80/.75 % = 106 bcf f production

    he said it would be lumpy with declines thru 6/10 then it takes off

  75. 75
    jat Says:

    WFT article just highlights the headline risk you have and why the thing is so much cheaper than SLB/HAL/BHI. The truth is these contracts were never set to be renewed in and of themselves, but PEMEX is still going to be tendering for a 500 well contract in 2010 and WFT has the dominant share in the region.

  76. 76
    choices Says:

    z-I think you addressed this previously but I cannot find it-NFX has been weak recently but is rallying today-do you have a view as performance out the next 1-2 quarters?

    Thanks!

  77. 77
    jat Says:

    Addl to 75… I think this is all just a negotiating tactic, but we’ll see. I was speaking with some people at PEMEX a few weeks ago on a call that RBC hosted and the internal guys were pretty adamant that development in the region would continue.

  78. 78
    zman Says:

    Choices re NFX good question.

    Short answer would be whatever the group does plus 10 to 15% 6 months out. Ballpark range obviously but I think it outperforms the group.

    Why?

    1) they will get to put up some some solid growth in 2010, that will have 4 deepwater Gulf of Mexico start ups in it. Analysts like lumpy chunks of production to model.

    2) They have a lot of Bakken acreage but haven’t really gotten their Bakken day in the sun yet so to speak. They participated in one of the biggest TFS wells to date and have offsets all around that well.

    3) Asia – exploration upside

    4) Woodford – moving even more to pad and super extended wells, should get data on these next call.

    5) Granite Wash – another set of 5 to 7 big kahuna producers to announce around year end.

    6) It’s cheap

    7) It’s getting oilier.

  79. 79
    zman Says:

    Hear ya Jat, lots of stops and starts down there. One minute Chicontepec is a go, the next minute maybe not. I wonder at the gamesmanship being played and the impact on WFT corporate margins as I seem to recall they have been low bidder often to stay busy. But I’m just talking off my head and you know that story a lot better than I do.

  80. 80
    zman Says:

    Adding to 78. And now they have the Marcellus angle.

  81. 81
    zman Says:

    Anyone have technical levels on the S&P? Nicky is out of pocket.

  82. 82
    Dman Says:

    BTW – Nicky was right about some trouble in 2nd half of October.

  83. 83
    zman Says:

    Dman – no lie there. Dollar getting hammered. If they can call a 0.2% rally in the dollar a spike, I can call a 0.9% drop “hammered”. Bob Pisani making interesting comment about the dollar carry being back on and managers selling dollars to fund this rally today.

  84. 84
    VTZ Says:

    Of course the dollar carry trade is back on. People are mistaking the carry trade as being a short-term thing. It’s 100% not. It’s meant for long-term yielding positions so you can capture a differential.

  85. 85
    jat Says:

    Utilization down there is a big issue on margins and it’s why Q3 was a disaster. Not because of work cancellations, but because flooding prevented work from being done. WFT has about a million times more assets in the region than HAL/SLB, which is why the latter two were relatively unaffected in Q3.

    To give you a flavor, corporate margins declined from 9.2% to 7.2% Q2 to Q3. Latin American margins declined 800bps from 18% to 10%, but with the weather stuff normalizing should get back to mid teens soon enough.

    There are safer names like SLB if you just want to play a rising OIH but you probably get paid more in WFT if things turn around, i.e. they execute next quarter and PEMEX doesn’t kick them out of the country and do a hat dance over the flaming pile of their WFT rigs.

    In that vein, you had the Sterne Agee analyst turn positive on them this morning, even though he’s been a pretty big bear on the stock for some time in any conversation.

  86. 86
    zman Says:

    V – I only bring it up as interesting because I do believe the talking heads had declared the carry trade dead as recently as, oh, um, yesterday. My dog has better short term memory than these guys.

  87. 87
    zman Says:

    Thanks Jat

  88. 88
    reefguy Says:

    Davy Jones- Have been attempting to log for three days @ 26,300′. Decided to log after tripping for bit. May be in top of Wilcox. Well control issues with mud weight over 18.5 ppg and shoe test of 19#

  89. 89
    zman Says:

    Reef – Are they saying that’s TD or did they give a clue as feasible TD?

    Any update on BB Hill?

  90. 90
    kyleandy Says:

    z – 88 good or bad???

  91. 91
    elijahwc Says:

    Thanks for breaking MMRs radio silence Reef. Much appreciated!

  92. 92
    reefguy Says:

    Not td, just logging on a bit trip. GR not working on MWD, mudlog shows sand. No BB hill info.

  93. 93
    zman Says:

    Reef – Thanks. Any idea height of column?

  94. 94
    zman Says:

    Biden’s economic policy adviser saying 1 mm jobs created or saved. Apparently we get a new read on that “number” tomorrow.

  95. 95
    reefguy Says:

    no e logs, so not known. Maybe 50′ so far. Could not get tools down.

  96. 96
    zman Says:

    So he’s going to drill until he can’t anymore?

  97. 97
    baylor3217 Says:

    Has any other administration tried to tout a number of jobs “saved”?

    How exactly would one calculate that? Lol

  98. 98
    zman Says:

    Baylor – that’s the beauty of it, it’s not official and to my knowledge there has been no purported definition / calculation.

  99. 99
    bill Says:

    someone translate 88 for me,

    ty

    good,bad, or ugly

  100. 100
    zman Says:

    Bill – progress report, tough drilling environment, sand is positive but it basically just tells you they are having trouble figuring out what they’ve got.

  101. 101
    zman Says:

    Beerthirty

  102. 102
    ram Says:

    It’s a scientific method of estimating jobs saved.

  103. 103
    zman Says:

    CHK coming over the tape

  104. 104
    baylor3217 Says:

    What do u mean by that Z?

  105. 105
    Jay Says:

    We have no well control issues..

    Can someone translate for this putative layperson the bottom hole pressure implications of:

    “Well control issues with mud weight over 18.5 ppg and shoe test of 19#”

  106. 106
    Wyoming Says:

    Jay,

    18.5 ppg mud is getting toward the top end of a mud density. You can get the shoe test of 19# by using water nad then applying a hydraulic pressure with a pump at the surface, the water column + the surface pressure then divide that by the depth will give you psi/ft. Multiply that by 0.052 and it will give you a #/gal (19# in this case).

    So, there is only 0.5 ppg if wiggle room of a mud system that is getting close to pumping dirt, if they pick up too much cuttings over 1,000’s of feet means they are toast. The excess pressure could possibly part pipe or frac the rock at the shoe open.

    That said, I don’t have all the information so I could be sticking my keyboard in my mouth.

  107. 107
    baylor3217 Says:

    Any comments on swn’s earnings?

  108. 108
    zman Says:

    Re SWN – I’ll have it out with the morning post.

  109. 109
    Jay Says:

    Wyo,

    Thanks.

    The guy in the next booth to us at the LAGCOE show this week had a really neat invention. A simple adaptation to the mixing vat/nozzle configuration that prevents air entrainment while mixing mud.

    If I understand correctly, the status quo is adding barite to increase mud weight while at the same time the $ spent on barite are partially going to waste on counteracting the effects of entrained air.

    Anyhow, the data he had was showing a 30% savings on barite used. I told him he ought to be shouting “1/2 day payout” from the top of his lungs instead of burying the data. Common problem with inventors being shy about explaining their inventions – getting too granular.

    I didn’t have that problem : ) Told the STORY and got lucky because the presenter ahead of me was B O R I N G !!!

    — this is the nut…. this is the bolt that the nut goes on… this is the pin that holds the nut if it falls… all of this to hold subs in a basket!

  110. 110
    RMD Says:

    WY thanks for the explanation to Jay’s question; lots of us (me) did not know what that meant.

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