30
Dec

Wednesday – Oil Inventories Preview

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Market Sentiment Watch: Even more sluggish than yesterday with only the oil inventories and Chicago PMI for datapoints. I'm putting out a short post today as I think most people are out and the stocks are truly directionless. I'll have my 2010 thoughts post out tomorrow.


In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Supply Slide Show - Data For October 2009
  4. Oil Inventory Preview
  5. Stuff We Care About Today - MMR
  6. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $22,400
    • 60% Cash
       
  • Yesterday's Trades:
    • None.

Commodity Watch:

Crude oil closed up a dime at $78.87 yesterday in listless trading. After the close, the API released a really mixed bag of data (build in crude, decline in gasoline, really big decline in distillates). I don't doubt the drop in distillate stocks but the build in crude? Doubtful. This morning crude is trading flat.


Natural gas gave back half of Monday's gains after the EIA reported less than bullish looking production numbers to close the day at $5.84. I would expect the persistent cool weather to forestall a giant sell off in the numbers. More on the supply numbers below. This morning gas is trading flat.

  • Early Read On Natural Gas Storage: The Street is looking for a 145 Bcf withdrawal with the expectation that Christmas during the week will curtail demand enough to more than offset cooler temps. I'm looking for a number between 150 and 155 Bcf tomorrow. 

    • Last Week: 166 Bcf withdrawal
    • Last Year: 144 Bcf withdrawal
    • 5 Year Average: 95 Bcf withdrawal
    • 10 year Hi: 1 Bcf injection
    • 10 year Low: 208 Bcf withdrawal

 

Natural Gas Supply Slide Show - Data For October 2009

This month's data does nothing for the bullish gas case. Most analysts are calling it bearish, or at least most of the comments that I saw in the hours after the numbers came out did. They want production to decline at a faster rate than it has been. Two reports ago they were upset that production was falling two slowly. A month ago they were excited about production falling off despite the fact that a big chunk of the drop from the "other states" production segment was simply attributable to Boardwalk Pipeline related production curtailments. I would point out some key facts about the report and then I will be quiet. 

  • Production was 59.2 Bcfgpd, up 1.1 Bcfgpd from last month and 2.1 Bcfgpd from year ago levels. Year ago is a bit of an apples to oranges comparison as outages due to the 2008 Hurricane season reduced volumes form the Gulf, Texas, and Louisiana as well as part of the "other states".
  • Excluding the offshore component, YOY volumes for the onshore lower 48 states were down 2.1 Bcfgpd.
  • Texas volumes are down 2.05 Bcfpgd, or 10% from their peak levels in November 2008. Texas accounts 31% of U.S. gas production and was the major source of growth in the last cycle. Given the recent uptick in rigs working in the state I would expect the decline in Texas production to fall at the same shallow rate of 0.1 to 0.2 Bcfgpd well into 2010.
  • Louisiana production continues to grow rapidly, up 0.3 Bcfgpd from month to month in the last report as Haynesville production ramps.  Louisiana production has been flattish for years and will probably grow by another 20% in the next 2 years and currently accounts for only 8% of U.S. volumes.
  • Other states rebounded in the month after a Boardwalk pipeline fix was completed in early October. I would expect Other States production to inch up for the next several reports.


Oil Inventory Preview


API Watch: Weird

  • Crude: UP 1.73 mm barrels. This comes despite API showing a large drop in imports. One has to wonder if they have a data mismatch on their calendar.
  • Gasoline: DOWN 1.4 mm barrels.
  • Distillates: DOWN 3.46 mm barrels.

ZComment: Same as last week, demand for gasoline and especially distillates is critical in support oil. The oil inventory number is less important.

Stuff We Care About Today

MMR Press Release Yesterday / Conference Call Today

  • Key points:
    • None, there just wasn't much here to bite off on except that the company continues to drill ahead on three high profile Gulf of Mexico wells.
    • The extra pay found at Blue Berry Hill is positive but that and the  rest of results don't seem to warrant the nearly 7% rally the stock had yesterday, after a slow, headscratching start.
  • Conference Call: Today, 10 am EST.

 

Odds & Ends

Analyst Watch:

  • Nada

88 Responses to “Wednesday – Oil Inventories Preview”

  1. 1
    bill Says:

    interesting article

    http://online.wsj.com/article_email/SB10001424052748704134104574624491513755228-lMyQjAxMDA5MDMwMDEzNDAyWj.html

    producers trying to get long term contracts, users are relunctant

    they will feel differently if ng went to 10 again

    aubrey quoted as saying days of double digit ng prices are over

  2. 2
    bill Says:

    tph out with gems and dogs of 2009

    my mcf was the 8th worst stock to own in 2009 after being on best list for the prior 2 years

    # 1 gem is KOG up >600 %

  3. 3
    reefguy Says:

    bill- ioc is up 456% YTD, is it on list???

  4. 4
    bill Says:

    no

    they must not follow the name

  5. 5
    zman Says:

    That list should be broken down by market cap. No sense putting the pennies in with the rest of the companies.

  6. 6
    bill Says:

    yeah , they have xom on the list at # 10 dog with dptr and gxmr the worse at # 1 and # 2

  7. 7
    bill Says:

    chk down 3 % look like it will be down another 1 % on the opening

    yuck

  8. 8
    zman Says:

    Opens are so thin and trading throughout the day this week so light that the price action is pretty meaningless.

    Good to see NG holding it’s own, up 2 pennies now. Aubrey has been talking about long term contracts for awhile now, have not heard him mention the “end of the double digits” but it makes him less of a bad guy in the eyes of congress when trying to get NG used as a transportation fuel so that makes sense.

  9. 9
    zman Says:

    NG up 7 cents. Wow-volatility there.

  10. 10
    zman Says:

    DVN leading Big Cap group today again, 3 days now, thinking people are thinking there is something to the takeout rumor.

  11. 11
    zman Says:

    Chicago PMI jumps to 60 vs 54.9 expected

  12. 12
    zman Says:

    MMR call in 10 minutes:

    http://www.mcmoran.com/invrel/pres_new.htm

  13. 13
    zman Says:

    May do some small quick trades around MMR and around the oil inventories.

  14. 14
    reefguy Says:

    pissed off, call shows closed on audio link…

  15. 15
    zman Says:

    Reef, I’m on the call now

  16. 16
    reefguy Says:

    good, let me know

  17. 17
    zman Says:

    MMR Notes

    Davy Jones:
    Confirmed integrity of their interpretation of the seismic at Davy Jones. Good for here, good for other targets. Seeing things match up paleo-wise with the deepwater.

    Starting to get sands, several hundred feet in the Yegua, well developed, laminated, big porosity, up to 24%, that’s high.

    Appears to be hydrocarbon intervals…

    Below, in the Wilcox, pressure and temp whacked the circuit in the resistivity curve. But the gamma ray and neutron was good quality. Definite response is sand. Looks like a clean sand.

    more in a second …

  18. 18
    reefguy Says:

    z-sounding a bit spinning…

  19. 19
    zman Says:

    MMR Notes 2

    Still need to get the resistivity log to work to confirm presence of hydrocarbons in the sand.

    Think they will see more sands as they drill deeper, since they know where they are in the section due to the paleo

  20. 20
    zman Says:

    Reef – sounds like they wanted to do a year end press release to stop a bunch of phone calls.

  21. 21
    reefguy Says:

    yegua sands are still unknown then with out R curve. I question the validity of that porosity at 24%…

  22. 22
    zman Says:

    MMR Notes 3

    Bottom of the hole will be maybe 28,500, so 500 feet more. Talking a lot about the difficulties of drilling at this depth, heat, pressure, working in the rate hole below TD ….

  23. 23
    zman Says:

    Reef – I think he said most was 18 to 22%, still awfully high, the 24% was peak.

  24. 24
    reefguy Says:

    Sounds like they will ultimetly decided to run production casing since the chance of a R tool worling is slim to none.

  25. 25
    zman Says:

    MMR Notes 4

    Davy TD at 28,300 to 28,500, expecting those extra Wilcox sands. Bet this takes awhile.

    Now he’s talking about things below 29,000 feet. Thinks he may get to see the Cretacious. Think the Tuscaloosa onshore play will be here. The science project that never ends…

  26. 26
    zman Says:

    MMR Notes 5

    Hinting that someone just recently announced Cretacious sands in a deepwater well. Wonder if that is an APC well mentioned a week or two back. This would be a cheaper way to get at those sands vs deepwater by a long shot.

  27. 27
    reefguy Says:

    Tuscaloosa is Tex Moncrief’s idea, likely they keep digging until they reach it or run our of options. Money is not a problem for Tex, so it may be him and MMR at the last

  28. 28
    zman Says:

    EXXI still liking the comments, MMR undecided.

  29. 29
    zman Says:

    MMR Notes 6

    Blueberry Hill – Thinks this well comes in updip to the last 3… didn’t hear much more than that.

    Hurricane Deep – sidetracking to the south to see same sands downdip to another well plus some additional sands.

    Says the pr was to quell rumors. Q&A about to start.

  30. 30
    bill Says:

    MMR- What did he say about another rig confirming wilcox structure

  31. 31
    bill Says:

    Like i said yesterday, pxp has a larger interest than mmr does and its being totally ignored there

  32. 32
    zman Says:

    SWN – looking like it wants to fill a lower gap just under $48.

  33. 33
    bill Says:

    forget about 30 i see 26 now

  34. 34
    reefguy Says:

    DJ timeline..IMHO: TD at 29,500′; thats 1300′ in about 26 days(50’/day). A myriad of logging attempts, 21 days. Thats about 60 days away at 300k/day
    A cool $18MM from here, before running production casing to TEST.

  35. 35
    zman Says:

    Said the R-Curve was out of whack but was painting shale vs sand.

  36. 36
    zman Says:

    Reef – yep, great if it works, ouch if it doesn’t.

  37. 37
    zman Says:

    Oil #s in a minute.

  38. 38
    zman Says:

    EIA Oil Inventory Report Summary

    Crude DOWN 1.5 mm barrels
    Gasoline Down 0.3 mm barrels
    Distillates Down 2 mm barrels

    Utilization at 80.3% – stuck there.

    Demand

    Gasoline still strongish at 9.074 mm bpd
    Distillates dipped to 3.656 – not great

  39. 39
    zman Says:

    Oil not doing a whole lot following the numbers, hanging out around $79, up 10 to 30 cents.

    That distillate pullback looks a bit odd, could be diesel demand falling due to holiday and due to storms.

  40. 40
    bill Says:

    finding oil /gas is not an easy task and jim bob isnt getting any younger

    who going to fill their shoes?

  41. 41
    zman Says:

    Oil slumping as heating oil rolls over. I think the distillate demand number is suspect is very likely to reverse out next week with a spike in demand.

  42. 42
    zman Says:

    ZTRADE:

    Added another (10) of the January $50 SWN Calls (TKQAJ) for $0.90, bringing my average cost to $1.54 as the stock sees a little profit taking.

  43. 43
    zman Says:

    That SWN trade was done with the stock at $48.45.

  44. 44
    bill Says:

    10 new millionaires in texas

    http://finance.yahoo.com/news/1003-Million-Judgment-Sought-prnews-1135544284.html?x=0&.v=1

  45. 45
    zman Says:

    Boone Pickens is on the MMR call

  46. 46
    bill Says:

    lmao boone pickens on call

    boone singing jimbob praises

    lol he says he almost understands

  47. 47
    zman Says:

    Boone making a statement.

    You are the best gulf geologist I’ve ever seen. Believe it or not I actually understand most of it.

    Does your heat and pressure destroy your hyrdrocarbons.

    Answer: Based on everything we know we should be fine up to 600 degrees. The oil will get cooked and will have acidic gas with it.

  48. 48
    zman Says:

    It’s a good question on the temps.

    Going further in explaining the porosity here, saying it reacts with feldspars. That’s over my head.

    Boone: “If you have 20% porosity with those pressures, you can move a lot of hydrocarbons”

    Talk about talking your book.

  49. 49
    zman Says:

    Q&A MMR – Yegua sands are not more localized than what they are looking for with the Wilcox targets (20,000 acres of closure). So big as well. Just to sum up: Yegua sands (several hundred feet of sands) starting at about 25,000 feet, they are at 28,100 feet now, in Wilcox, thinking they see Cretacious at around 29K. It sounds to me like he’s going to keep drilling until there is more risk of getting stuck in the hole.

  50. 50
    zman Says:

    Q&A – Blueberry Hill – will we see reserve bookings for 2009? Talking to Ryder Scott about logged sands in first well. Ryder will likely want the #2 well down before they can size it.

  51. 51
    zman Says:

    Still listening to this call. My read on the analyst crowd is that they will not jump to downgrade or tell people to sell on this press release and conf. call. So no trade from me on puts. On the flipside, I think a bet in anything other than the common will be tough on options. I simply don’t see anyone running out and pounding the table on this either.

  52. 52
    zman Says:

    TEXW – What kind of temps and bottom hole pressures are you seeing E.Tx or NW La. ?

  53. 53
    md Says:

    RE: Natural Gas Monthly
    Balancing number -202 indicate 6.5 BCFPD discrepancy somewhere. I was sure we were going to see a big drop in production. I did not count on such a large number.

  54. 54
    JD Says:

    BEXP just bouncing off 13.75, the 200day on 30min chart. If it does not hold, next support appears to be just above 13, which is the 21day on a daily chart. I sure hope it holds.

  55. 55
    zman Says:

    MD – have you looked at demand yet? Total demand up 1.6% vs the year ago October, industrial and electrical both off but residential and commercial offsetting.

  56. 56
    zman Says:

    JD – should see 1 or maybe 2 wells announced out of them next week.

  57. 57
    kyleandy Says:

    z = still no e-mail from u am5153@msn.com

  58. 58
    zman Says:

    Thanks Kyle. Cans and a string work better some times. Just sent you a test one.

  59. 59
    zman Says:

    HAL green. Take picture of screen, rare event of late.

    SWN coming up off the lows.

    JD – do I need to actually talk to you on the phone?

  60. 60
    zman Says:

    Kyle – Do you get the Blasts ok? Did you check your spam filter?

  61. 61
    baylor3217 Says:

    Lol on the HAL comments. I’ve generally made money on most of my Hal trades but it has almost always been an exercise in patience.

  62. 62
    kyleandy Says:

    z – no receive, checked junk mail – nothing am travelling today -will check tonite. dont think i signed up for blasts

  63. 63
    zman Says:

    Baylor – hear ya on that. Mildly annoyed but not troubled by this week’s price action in most names. The group needed a breather and I pushed my re entries in a couple of names too soon. Watching the pullbacks in WLL and NOG for add back of calls and add of common respectively. Probably just wait for next week at this point.

  64. 64
    md Says:

    Very true
    To my understanding NG is largely recession proof. It’s 65% driven by HDD and CDD’s and 27% driven by Industrial.

  65. 65
    zman Says:

    Kyle – gotcha, no worries. I got your test email yesterday.

  66. 66
    zman Says:

    MD- Yep. Also saw TPH this morning musing about the balancing number leading EIA to overstate supply or understate demand by nearly 3 Bcfgpd.

  67. 67
    md Says:

    If EIA ran the Congressional Budget office we could painlessly wipe out the federal deficit

  68. 68
    TEXWS6 Says:

    Up to 400F and 13,000psi near salt pinch out’s in the Red River area. These are also where we are making monster wells that make everyone else’s look bad!

  69. 69
    md Says:

    what are the NG imports for the week

  70. 70
    zman Says:

    Re 68. Thanks. Call on the MMR asking where they see hydrocarbons that aren’t overcooked and Jim Bob said your area. Of course, there was talk of temps moving in the 400 to 600 range. 600 is obviously quite a bit hotter and I’ve never heard of something that hot producing other than steam, maybe some of those hot mud wells over seas. His pressure is a bit higher too. Must be some fancy works at the bottom of this hole.

    MD – I don’t know, my source is out again. Anyway with Gas Daily feel free to throw the numbers out. Thx.

  71. 71
    zman Says:

    Crude up 70 cents now at 79.60 as the dollar comes off its highs. Stocks could care less.

  72. 72
    zman Says:

    CNBC reporting Nasdaq building being evac’d over suspicious van

  73. 73
    zman Says:

    Good treasury auction.

  74. 74
    zman Says:

    EXXI at $2.40

  75. 75
    occam Says:

    Are the wells BEXP is expected to report in the next week or so ones that USEG is participating in?

  76. 76
    zman Says:

    Yes, at least one of them is.

  77. 77
    zman Says:

    Should see results from the State 36-1 well, NE Rough Rider area, lot of frac stages, could be another big one for them with 30 stages, a bit further to the East than they have been going.

    That reminds me, West, got any info on a NFX well, the Chanel 1-33H?

  78. 78
    elijahwc Says:

    Cliff Notes – ATLS

    Atlas America, Inc. Capital One Southcoast Management Discussions
    We touched base with ATLS yesterday. They mentioned that their initial horizontal well in Fayette County, which was announced with their 3Q ops update, is still producing above 3 MMcf/d after being on production for more than 80 days. Remember, this well had a peak rate of 3.6 MMcf/d. If the well were following a typical well decline, it would be producing less than 2 MMcf/d after being on production for 80 days. We estimate this initial well could be a 4 – 5 Bcf well, which is above the 3.75 Bcf/well we assume for ATLS’s acreage. ATLS has ~110K net acres in Fayette County, which is ~40% of its acreage in the Marcellus fairway. If ATLS is able to consistently drill 4.5 Bcf wells in this area, it would boost our NAV from $31 to $43. With only one well, we think it is too early to assume 4.5 Bcf wells, but we wanted to show the upside potential. Our take: This is another positive data point for ATLS and the SW portion of the Marcellus play. We continue to think that RRC offers more upside potential with less risk than ATLS, but we see this data point as an incremental positive for ATLS.

    Contact: Sales – 1-800-666-9174

  79. 79
    zman Says:

    Oil closing out the day up 50 cents

    NG closing off 13 cents, follow through on yesterday’s numbers.

    The Street is now looking for a 150 Bcf withdrawal, up from yesterday’s consensus of 145 Bcf. I am at 150 to 155 Bcf.

  80. 80
    elijahwc Says:

    More Cliff Notes – PVA

    Penn Virginia Corporation Pritchard Capital Partners, LLC Buy – Price Target: $28
    Penn Virginia Corp (PVA-$22.00) – Announced an agreement to sell its Gulf Coast assets, which have been on the block for several months, to Hilcorp Energy I, L.P. for $38.0 MM in cash. Production and reserves on these assets are ~10 MMMcfe/d and 25 Bcfe, respectively. In return PVA will purchase from Hilcorp producing Selma Chalk assets located in the Gwinville Field in Jefferson Davis County, Mississippi for $6.0 MM in cash. This looks to be a nice little purchase for PVA which already has the Selma Chalk as one of its core operations. The closing of the transactions are contingent upon each other and are expected to occur on January 29, 2010. Significant value underlies PVA shares in our view. Adjusted for its reduced stake in Penn Virginia GP Holdings, L.P. (PVG-$16.87), PVA trades at an EV/Proved Reserves of $1.28/Mcfe, one of the lowest in the small/mid-cap E&P group and well below the $3.23/Mcfe group median. Adjusted EV/current daily production is $8,700/Mcfe vs. the group median of $13,800/Mcfe. We believe the sale by PVA earlier this year of a piece of PVG is the first step in unlocking the value of PVOG, PVA’s wholly-owned oil & gas subsidiary. Separating PVOG from PVA would in our opinion greatly reduce the valuation discrepancy cited above. Buy rating, $28 price target.

    Contact: Gail Nickelson – 703-891-6080

  81. 81
    zman Says:

    It looks like the few market players still around are trying to organize another end of day pump.

    All we have left on the year in terms of data is jobless claims and the last storage withdrawal.

  82. 82
    Jerome Blank Says:

    EXXI looking great and doing what it should be doing… trying to test resistance for a third time at $2.50 on fairly good vol…given the swings within the ascending triangle, I’d like to see EXXI hold $2.15 on any pullback away from resistance…consider buying stock again at $2.15..if it breaks out convincingly on good vol, resistance would then becomes support at $2.50…

  83. 83
    zman Says:

    IOC turned around and could easily nab the annual high tomorrow.

    HAL – nice reversal.

    BEXP – hugging JD’s 13.75 after a brief dip below.

    SWN – off the lows, ok but not great volumes, better to buy than to sell it seems in the afternoon.

    EXXI at 2.41, up 6%. People are getting that positive for MMR would be more than positive for EXXI. Thanks Jerome for the TA here.

  84. 84
    zman Says:

    Beerthirty

  85. 85
    Wyoming Says:

    Intersting:

    http://www.zerohedge.com/article/clusterfuck-nation-thinktanks-2010-forecast-definitely-not-rosy

    More Interesting:

    http://seekingalpha.com/article/180304-2010-time-to-arrest-the-oil-extortionists?source=kizur

    He is a man in dire need of a … guess the movie.

  86. 86
    bill Says:

    BHo moves will help ng prices

    http://www.nytimes.com/2009/12/31/science/earth/31drill.html?_r=1&scp=2&sq=gas&st=cse

  87. 87
    bill Says:

    Might have to watch this movie over the week end

    http://www.nytimes.com/2009/12/30/books/30lebowski.html?em

    There is a tie in to an energy company I (we) follow but decorum prevents me from saying its name, lol

  88. 88
    bill Says:

    im worried about the ng number this week

    NG stocks have not followed the rally in ng prices

    henry hub daily cash price has climbed from 2.51 on 11/13 to almost 6 yesterday and check out the names , id say they are mostly down from that time frame

    henry hub daily cash price

    2009-11-13 2009-11-16 2.51
    2009-11-16 2009-11-17 2.65
    2009-11-17 2009-11-18 3.47
    2009-11-18 2009-11-19 3.74
    2009-11-19 2009-11-20 3.57
    2009-11-20 2009-11-23 3.09
    2009-11-23 2009-11-24 3.79
    2009-11-24 2009-11-25 3.62
    2009-11-25 2009-11-30 3.32
    2009-11-30 2009-12-01 4.41
    2009-12-01 2009-12-02 4.30
    2009-12-02 2009-12-03 4.67
    2009-12-03 2009-12-04 4.57
    2009-12-04 2009-12-07 4.53
    2009-12-07 2009-12-08 4.78
    2009-12-08 2009-12-09 5.10
    2009-12-09 2009-12-10 5.27
    2009-12-10 2009-12-11 5.02
    2009-12-11 2009-12-14 5.21
    2009-12-14 2009-12-15 5.41
    2009-12-15 2009-12-16 5.53
    2009-12-16 2009-12-17 5.57
    2009-12-17 2009-12-18 5.65
    2009-12-18 2009-12-21 5.87
    2009-12-21 2009-12-22 5.79
    2009-12-22 2009-12-23 5.56
    2009-12-23 2009-12-24 5.55
    2009-12-24 2009-12-28 5.70
    2009-12-28 2009-12-29 5.84
    2009-12-29 2009-12-30 5.96
    2009-12-30 2009-12-31 5.72

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