26
Jan

Tuesday Morning Pause

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Market Sentiment Watch: Market still in cautious mode before Bernanke confirmation, State of the Union speech and fourth-quarter GDP revision. President Obama will reportedly call for a 3 year partial budget freeze which may also move the market depending on which things are frozen but if you read the story in this link you'll see we are talking peanuts in terms of savings. 

Side Bar Watch: Just taking a time out to say take a look at that link above. Note that the story is talking about a three year  program but they quote a 10 year number for savings of $250B. Laughable in my book since the deficit is set to be $1.5 Trillion with a "T" this year alone. This plan saves a whopping $10 to $15 Billion with a "B" starting in 2011. Also note which departments are likely to get hit: agriculture and energy and transportation. But wait, the administration just raised royalty rates to give the EIA a budget boost. Hmmm, I guess that money is going elsewhere. 

Meanwhile, back in the opening paragraph... Apple beat after the close last night along with Texas Instruments setting a positive tone for earnings at least in tech land today. But the market should remain cautious until the S are out. Energy saw its first rise in four days along with the broad market but gains were muted late today as the S&P sank. Still cold weather is returning and we have four weeks left in this expiration cycle so all is not as glum as it appears.

Ecodata Watch:

  • Cash-Shiller home prices,
  • consumer confidence (F 53.5),
  • FHFA home prices

Medium Term Things To Look Out For:

A guy on CNBC (sorry, didn't catch the name but he was scruffy if that helps, calling for a 20 to 25% correction in the markets by March/April time frame.

We feel that the overall the oil market is headed down to the$40 a barrel handle over the next few months but at the same time you have to be careful and respect the wide daily trading ranges. ~ I think this one comes from Phil Flynn.

  • My sense is that after a few days pull back in either equity or commodity markets, guys come out of the woodwork, claiming the fall is at hand, that the end is near. Mind you, these same blokes have likely been calling for the same fall from a much lower level so even if they are they are unlikely to get back to even. But at least we can take two of them at their word, and if right, listen more closely in the future, and if wrong, discount whatever it is they might mutter to a very high degree.
  • As to Flynn, I remember when he called a top on crude the last time. At $90. On its way to $148. Eventually he was right. I see his arguments as one sided depending on his stance. When he's bullish, he presents stories about China, domestic demand, or rebel acts that impact supply. When he is bearish he presents stories about spare capacity, domestic demand, and the impacts of fuel switching on gasoline or whatever is the pc comment of the week. I try to present both sides. I see weakness, I tell you about weakness, I see see strength or cause for it, I try to tell you about that too.
  • Could oil go to $40 in "the next few months"? Sure, but not without the markets melting down, and China's rapidly growth contracting. These are things I just don't see happening. Gasoline demand is actually rolling along fairly well given unemployment and with no alternative fuel sources for transportation on the 3 month time horizon I just don't see oil taking a near 50% hair cut.
  • Why should oil be $75 and not $100, and not $40? Good question. The easy answer is that OPEC wills it. Like it or not, the guys with the swing capacity can rule the price, learned that in Freshman economics and it stuck. Budgets for the OPEC states for the most part work north of $60 per barrel world price with Saudi probably workable at half that and UAE, Qatar, and Algeria coming at the $60 price point, and loud mouth countries Venezuela and Iran probably higher (although Iran said yesterday it could live with $60 oil). With between 4 and 6 mm bopd of spare capacity, these guys largely determine price and at the present time, they've opted to go ahead and say they (OPEC) won't be upping production in 2010. 
  • Will They Lower Production If Prices Start Really Falling, Even In The Weak Economic Environment?  You betcha.  Last time oil fell from on high, from that $148 level back into the $30s, they acted hesitantly, harvesting as many high priced barrels as they could for too long. Many thought the Cartel was on the endangered species list. Since then, their ability to boost prices however while cheating enough to keep them from spiking up too soon and kill a fragile global recovery has been a masterpiece.


In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today - VNR, RRC, BHI, RRC
  5. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $19,700
    • 49% Cash
  • Yesterday's Trades:

    • MMR – Sold 1/2 (10) of the MMR $15 Feb calls for $1.60, up 161%. I continue to own the other half of these plus the $17.50s.
    • The quick view on the holdings tab has been updated.


Commodity Watch

Crude oil rose $0.72 to close at $75.26 yesterday; blame coming cold and continued refinery outages and somewhat stronger equity market. Note below that once again the bar is set pretty low for this week's inventory report and a bullish report would be likely to catapult crude back into the upper $70s. Tonight's API report should get more than the usual amount of shoulder shrugging as the survey has at least directionally been a pretty accurate forecast of what EIA will ultimately report mid week. This morning crude is trading off 60 cents on a weak looking equity futures picture.

  • Early Read On Oil Inventories:
    • Crude: UP 2.0 mm barrels
    • Gasoline: UP 1.5 mm barrels
    • Distillates: DOWN 2.0 mm barrels

 

Natural gas fell a dime to close at $5.72 yesterday. The front month contract expires Wednesday so expect some more volatility before it is done. Note also that we should get supply data from the EIA on Friday.  This morning gas is trading lower by 15 cents.

  • Imports Watch: Unavailable this week from my usual source, working on it. 
  • Industrial Demand Watch: Chemical production as measured by rail car rebounded in the middle of 2009 but has since evened out, waiting on this another sign of industrial demand recovery. 

Crack Spread Update


Key Takeaways: Actually starting to pay a little more attention as product inventories get back into line with historic levels. This plays into one of my themes for 2010 which was that refiners are likely to outperform in the early part of the year as demand is expected to rise above last year's late Spring levels. VLO reports later this week to kick off the refining reporting season and it would be hard not to be more upbeat on a conference call than the last two. Always a good listen, this time I may actually play.



Stuff We Care About Today

VNR To Increase Distribution

  • Quarterly distribution increased 5%, or 2.5 cents per unit to $0.525 per unit per quarter.
  • Bumps the yield up to 9.4% from the current 8.4%.
  • Leaves room for further increases later this year.

RRC Comments on Production /  Hedges

  • Pre announcing 4Q09 production, as is typical for them before company results at 457 MMcfepd, up 13% YoY.
  • Hedges: 2010: they 69% of expected production, hedged with floors at $5.53 and ceilings of $7.33, so no change here since their last update.
  • RRC still has not given official guidance on 2010 volumes yet, but looking at their Marcellus projections, one easily gets to higher total company growth than 2009's 13%.

 

 

BHI Reports Better Revenue; Weaker Than Expected Bottom Line

The 4Q09 Numbers:

  • Revenue of $2.43B vs $2.33B expected
    • down 24% YoY; up 9% seq.
  • EPS of $0.27 vs $0.35 expected

Highlights:

  • "The sequential improvement in our fourth quarter earnings was the result of increased revenue in every region, as well as the aggressive cost cutting measures we took throughout the year.
  • Incremental margins were particularly strong in North America driven by increased horizontal drilling in the US Land geomarket and improved rig mix in the Gulf of Mexico geomarket.  
  • They see improvement in international activity in 2010 ...
  • ...but also see continued margin pressure.
  • They see the increase in U.S. rig count continuing.

Conference Call: Today, 10 am EST

 

HAL Wrap Thoughts:

  • Quarterly numbers were ok, not a problem for the stock, international margins were weaker than expected
  • Q1 EPS probably going to drift a few pennies lower on one time costs
  • 1H10 stronger for NAM implying pricing power in the shales.
  • 2H10 stronger for International as big projects start to move.

Odds & Ends

Analyst Watch:

  • HAL - Jefferies raises target from $42 to $49, rating Buy.
  • HAL - Citi raises target from $34 to $40, rating Buy.
  • HAL - Barclays raises target by $2 to $31, rating Equal-weight.
  • CXPO - started at Barclays with Overweight rating, target of of $8.
  • CXPO - started at Morgan Keegan with an Outperform.
  • CLR - UBS raised it to Buy with a $46 target
  • STP - Upped to Hold at Jefferies with a $12 target
  • SPWRA - Upped to Buy with a $29 target
  • Macquarie Raises Targets on the coals:

    • MEE from $40 to $55
    • BTU from $53 to $60
    • ACI from $16 to $23
    • CNX from $50 to $55
    • PCX from $11 to $16
    • ANR from $47 to $65

Housekeeping Watch: Help Z Get Organized. Want to see some new feature on the site? More of the WIOWIO or maybe a big picture area where the latest longer range thoughts on oil or natural gas or some other topic can be easily reached? Let us know what to do to improve the site. Thanks. Send an email with your thoughts to zmanadmin@gmail.com and we'll get to work on it.

 

140 Responses to “Tuesday Morning Pause”

  1. 1
    zman Says:

    PXP on the tape with decent looking reserve metrics but not finding costs, not sure that’s a positive on them today but probably not a big deal longer term.

  2. 2
    Wyoming Says:

    http://screencast.com/t/ZDYxMDhjYzY

    Tried to get this in first, I’m too slow. As always, click to expand, you will need to.

  3. 3
    BirdsofpreyRcool Says:

    This was out last night, from BedTime Market Strategist. But the history lesson on “Fed Independence” made it worth posting this morning. Note the Volker comment to Reagan in the 1980s. That is what “independence” looks like.
    —————————————–

    Wishy-Washyington.

    Ignorant men don’t know what good they hold in their hands until they have flung it away.

    -Sophocles

    That was the Bloomberg Terminal quote of the day and it is a very apt description of the environment in Washington. Over the weekend and throughout today, the big push was made to assure the markets that the Fed Chairman has the votes. The markets partially bought it but there is no question that doubts still linger. If not, the vote would have been scheduled. The equity market staged an unimpressive bounce and it remains clear that investors are tentative about buying stocks ahead of the State of the Union on Wednesday. That statement really says something in and of itself. Investors are afraid to buy in front of the President speaking for fear of repercussions. Don’t forget, this is a business where you can always turn around and hit a bid. No wonder employers are hesitant to increase their ranks.

    If Scott Brown had not won and if this were not a mid-term election year, Senators would not be weighing this decision so heavily. One has to wonder what finance ministers in Beijing and Tokyo think when they witness the Bernanke imbroglio. In making the U.S. the destination of choice for safekeeping reserve funds, these bankers rely on the U.S. system. The system works because of the rule of law, free flowing capital, essentially Free markets, our military strength, and the list goes on. Among the more important elements in our system are “checks and balances” and an apolitical Central Bank. By way of illustration of the historic independence of the Fed, shortly after becoming President, Ronald Reagan wanted to meet Fed Chairman Volcker at the Federal Reserve, Volcker’s response to the Whitehouse was that it would be “inappropriate.” How times have changed.

    It is widely believed that Global Central Bankers have a high opinion of Chairman Bernanke. It must be disconcerting for foreign observers that a well-respected man who is the primary architect of monetary policy may be ousted because less than a handful of legislators at the two most extreme wings of both parties threaten to filibuster him. The U.S. may find itself guilty of the ineptness of which we often accuse other nations of. Let’s hope the reaction is not the same as the one displayed by foreign governments when Fannie and Freddie went into conservatorship.

    Central Banker Revolution.

    Although the Chairman of the Federal Reserve’s Board of Governors is traditionally the Chairman of the FOMC, it does not have to be that way. “The FOMC, under law, determines its own internal organization and by tradition elects the Chairman of the Board of Governors as its chairman and the president of the Federal Reserve Bank of New York as its vice chairman.” Every year, the FOMC select its Chairman, and it selects the Chairman of the Board of Governors out of tradition, not obligation. Ben Bernanke’s term as a Governor does not expire until January 31, 2020. So if this were to truly get ugly and the Fed did want to assert its independence and the members of the FOMC stand behind Bernanke, he can theoretically guide monetary policy for the next decade and not be Chairman of the Board of Governors. Obviously, it seems silly and unrealistic, but more ridiculous things have happened in Washington.

  4. 4
    zman Says:

    VNR – should have been on the catalyst watch for a distribution upgrade. Mission accomplished.

  5. 5
    zman Says:

    Re 2: LOL.

  6. 6
    Wyoming Says:

    Somewhere in North Texas, a corporate HQ is missing their class clown … we are here to serve.

  7. 7
    zman Says:

    CXPO – good to see the banking firm come out with an $8 target having brought the deal at $5 and with the stock at $4. If anyone has access to Barclays or the Mokeg report please forward it, I’d like to see how they justify the multiple, or maybe they just get a lot more EBITDA than I do on my cocktail napkin.

  8. 8
    zman Says:

    Hearing clean EPS at BHI is 42 cents, explains the action in the stock this morning, will be on the call at 10 am EST.

  9. 9
    bill Says:

    We are initiating coverage of Crimson Exploration with a 1-Overweight rating and a 12-month price target of $8.
    We believe results from delineation drilling in the Haynesville Shale expected early this summer will be the
    primary drivers of share price performance.
    􀂃 Our $8 price target is based on a combined value of $5 for the company’s producing assets and $3 for its
    Haynesville and Eagle Ford shale acreage. Consequently, we believe share valuation could be a binary
    outcome based on drilling success in the Haynesville Shale.
    􀂃 CXPO’s producing properties are primarily located in SE and S. Tx. The company owns 12,000 net acres in E.
    Tx and 2,800 net acres in S. Tx that is prospective for the Haynesville and Eagle Ford shales, respectively.
    Management estimates 800 – 1,050 Bcfe of net unrisked reserve potential on its asset base, ~8x current proved
    reserves.
    􀂃 $100 mln equity offering in 4Q09 should provide CXPO with liquidity to pursue a more active capital program in
    ’10.
    􀂃 Shares currently trade at 5.6x our 2010 PICF estimate and $3.24/Mcfe of proved reserves vs. peer averages of
    6.6x and $3.07/Mcfe.

  10. 10
    zman Says:

    Thanks Bill, those are the basic metrics I was looking for, will back into EBITDA from there but that sounds like a stretch on CFPS.

  11. 11
    zman Says:

    Crude breaking $74 on a strong dollar, weak futures.

    NG down 20 cents, forecast might be a touch warmer now this weak but suspect its related to end of contract tomorrow more than weather.

  12. 12
    bill Says:

    looks like pxp will open a dollar lower on the positive update, lol

  13. 13
    bill Says:

    pxd is down 5 bucks from the day they released positive well results

  14. 14
    zman Says:

    Re PXD – I know, waiting for the broad market to sort itself before adding more.

  15. 15
    elijahwc Says:

    On the wire: Chesapeake Energy Corporation (CHK) announces the closing of its $2.25 bln Barnett Shale joint venture transaction with Total E&P USA, Inc., a wholly-owned subsidiary of Total S.A. (TOT), whereby Total acquired a 25% interest in Chesapeake’s upstream Barnett Shale assets. Total paid Chesapeake ~$800 mln in cash at closing and will pay a further $1.45 bln over time by funding 60% of Chesapeake’s share of drilling and completion expenditures until the $1.45 billion obligation has been funded, which Chesapeake expects to occur by year-end 2012…

  16. 16
    zman Says:

    Eli, thanks, saw that didn’t mention as I didn’t see any change in the deal terms. Don’t think any of it changed.

    CNBC about to discuss the partial budget freeze…should be good for a laugh or a small sigh. News flash: Rosetta Stone reports surge in North American sales of Cantonese and Mandarin language sets. Ugh.

  17. 17
    zman Says:

    Feb = Dec

    http://www.accuweather.com/news-weather-features.asp?#extremes

  18. 18
    zman Says:

    BOP – how’s the HT and TT read on the day?

  19. 19
    zman Says:

    Watch WLL, BEXP, PXD for adds.

  20. 20
    elijahwc Says:

    USEG doing a financing/participation deal with PQ in La.

  21. 21
    zman Says:

    VNR – missed my entry.

  22. 22
    zman Says:

    Consumer confidence or lack thereof in 5 minutes. 53.5 expected. Makret at LOD at 1090 S&P.

  23. 23
    zman Says:

    TPH “defending” HAL as their favorite service name. Not doing the name any good today but if you look at the analyst watch, others are defending it as well today, raising price targets on what sounded something like optimism on the call.

  24. 24
    zman Says:

    Confidence 55.9, pretty good.

  25. 25
    zman Says:

    ZTRADE:

    MMR – Added back those 10 MMR $15 Feb Calls for $1.10 with the stock at $15.05. Fall looked a little sharp and market based and I’ll swing trade them again if I get the chance.

  26. 26
    zman Says:

    Markets coming back fairly well now. Group starting to slowly green up. I expect a better demand figure for distillates tonight from API and given the fall we have had in crude, it’s setting up for up a shot at a little oil rally here.

  27. 27
    bloodystupidjohnson Says:

    RE: your CNBC guy — these guys come out and make wild predictions. If they are right everyone will remember him, and it could make a name for himself. If he is wrong, most people will not remember the call.

  28. 28
    zman Says:

    testing, testing, this thing on?

  29. 29
    zman Says:

    BSJ – Absolutely, very well put. I will remember his scruffy face so if in 3 months I am wrong I can just switch over to something more enlightening if he is the guest, like comedy central or nicktoons. I’m tired of CNBC not keeping a spreadsheet of guest comments and holding people accountable, especially on the “wild but with high conviction” type comments.

  30. 30
    zman Says:

    ZTRADE:

    BEXP – Added (20) Feb $15 calls for $0.30 with the stock at $13.45. Expecting more well news any day now on 1 or 2 more Bakken wells.

  31. 31
    bloodystupidjohnson Says:

    Z: Look at all the “predictors” in the media, from Cramer, to Kass, to Stork, etc. People always remember the correct calls, but forget the wrong ones.

    Remeber Elaine Gararelli? She made a career out of “predicting” the 1987 stock market crash. For the people involved, it is a very high reward, low risk activity.

  32. 32
    zman Says:

    Tom – You ought to post your NE comments to the site.

    BHI – guess I should have gone with my gut on that one yesterday.

  33. 33
    zman Says:

    BHI CC comments:

    They are telling people BJS acquisition will integrate quickly…which is exactly what people want to hear.

    Analysts very happy with the numbers, overjoyed.

  34. 34
    zman Says:

    BHI just failed to take out it’s recent highs on this 7% move. Sounds like a lot of upgrades of price target coming up.

  35. 35
    bloodystupidjohnson Says:

    Tom Brown over at http://www.bankstocks.com presents his always interesting take on Obama and the banks.

  36. 36
    tomdavis12 Says:

    Z: I am posting some NE comments only because I hope to be a proud owner of a Z-hat by the end of the week. Earnings will be out after the close Wed. Consensus is $1.57, I am looking for $1.62 and there are whisper #’s @ 1.69. My revenue number is $914M above consensus and year earnings I am at $6.36 which will be peak earnings. I do NOT consider this a tradeable event because the current tape. Below 1085 and 1074 would push me more to the sidelines. I am long the stock short Mar 50 calls and short Mar 36 & 40 puts. As always talking my book.

  37. 37
    zman Says:

    BSJ – did you see VNR? Sooner than I was thinking, maybe a bit smaller too, leaving room for more should they make another acquisition this year.

  38. 38
    zman Says:

    Tom – thanks Tom, and I hope you get the hat since it’s free advertising for me.

  39. 39
    tomdavis12 Says:

    Z: I have alot more data about NE that I can share but I will spare this site. Z has liked RIG, DO and ATW over my NE. That is the reason for the hat bet. If anyone would like to hear more I can offer but my homework may not be up to BOP, Bill, West standards and many others.

  40. 40
    bloodystupidjohnson Says:

    Z: Did you ever follow CXG? Even though I don’t currently own it, I always liked it nice clean story. It is a sub of CNX (CNX owns 83%+) and is mostly a coalbed met driller though they are getting into the marcellus shale, which is in their backyard. I know many gas guys don’t like coal bed E&P’s, so I was just wondering if you ever followed it.

  41. 41
    zman Says:

    Tom – I read your stuff via email and liked it. I think its a value add. As you say, my first love is E&P. I am closer to the ATW story because it is small and easy for someone who is not a full time rig operator watcher, like me, to understand.

  42. 42
    zman Says:

    BSJ – I didn’t cover them but I’m very versed in CBM having covered the original Evergreen Resources in the Raton.

  43. 43
    zman Says:

    Market just waffling about pre SOTU.

  44. 44
    zman Says:

    BHI call wrapping up.

    They were surprised to have beaten by as much as they did. Analysts uniformly pleased with the results, definitely most positive call I’ve been on this season. Stock up 8% at the close of the call. I think it is a technical trader from here at 48.17 which is just below the prior high of the recent run. I could see a number of upward EPS revisions to account for improved outlook in the coming days, could give the stock a further leg. I’m not normally a big fan of BHI and am undecided what I will do but am considering taking a little, would like Jerome’s view on the TA.

  45. 45
    zman Says:

    BTU call was earlier, missed that they reporting today. My bad calendar on that. Coal stocks moving on another sector upgrade and positive BTU 4Q comments. I will have more comments later. Stocks may run a bit but how far is largely dependent on the broad market. These are big met and thermal coal trends BTU is talking about and any moves the stocks make in the near term are not going to satisfy/discount this trend any time soon.

  46. 46
    kaman Says:

    Anyone else watching ICO action today?

  47. 47
    zman Says:

    Kaman – that goes with comment 45.

  48. 48
    bloodystupidjohnson Says:

    RE: 45 don’t forget the favorable comments made yesterday by AKS.

  49. 49
    Nicky Says:

    Morning all. Not sure I am in the 20 – 25% correction camp but I do think see a correction the first wave of which likely finished overnight. I say likely as I would have liked to have seen the cash trade a bit lower on the open and of course it did not. That opens up the possibility that we are currently in wave iv up to around 1105 – 1114 SPX before we head down to finish v of wave 1. If wave 1 is done then we are now in either a wave ii retracement or an ABC retracement (of course there is the possibility that we just go up from here to new highs but its not rating highly on my radar right now due to the cycles). For either a ii or an ABC we should see a good percentage of this move down retraced. The most common retracement for a wave ii is 61.8% so it could take us back towards 10500 on the Dow and 1130 on the SPX. Then under either count I am looking at we should see another leg down. My preferred count is that this is an ABC correction off the top and we will correct to about the 200dma by mid February/early March. At that time the 200 dma average will be around 1030 on the SPX although I expect to see decent support at 1050 too. Then we launch higher to make a final high for big wave A from the March 2009 lows. That high should come in May/June. From there a big B wave correction into the Fall. It is at this point that I have recently changed my preferred count. I had thought that we would see the top of this rally by late Spring/early summer of this year but I am now seriously considering that in fact it will only be the top of A or a larger ABC rally from the March 2009 lows. This is because in a mid term presidential cycle year history shows that a low is made and the market then stages a very good rally into the end of the first quarter of the following year (2011). So if this is the case what we should roughly see is the high of A in the Spring/Summer of this year, the B correction into the fall, and the final C rally into the Spring of next year.
    Okay so what if this is wrong. Two possibilities. One that the high is now in (the preferred count by the bears) and we are now on our way to new lows. Alternatively we will see one more high into the Spring and that will be THE high. Line in the sand for the more bullish count is 956 on the SPX. If that goes you can stick a fork in it!

    OMG I have waffled!

  50. 50
    zman Says:

    BTU coal comments:

    Pacific markets growing rapidly

    China and India rapidly increasing imports

    Current spot met coal moved from $129 in April 2009 to $200 today.

    See global steel production up 9% in 2010

    Thermal coal demand from Asia rising as well.

    55 GW of new coal fired construction underway in India. That’s your average nuke size here. Good luck making sure all of that is “clean”

    In the U.S. , they saw inventories declining at a record pace at the end of 2009 for thermal coal. Inventories in the U.S. are high and the decline is a function of shuttered mines as we’ve talked about before.

    They see a sharp return of U.S. thermal coal demand due to the economy and a strong growth due to new build generation.

    BSJ – thanks for the reminder.

    The last coal update I did was on Jan 6th and my comments then were:

    * Generation can’t get a lot worse than it was in 2009. Ok, it can but it is unlikely. Generation in 2009 was off just under 4% due to the economy and a mild summer. Moreover, with low gas prices last summer, gas was able to steal market share from more expensive coal. That price relationship is reversing out for all but the most inefficient coal plants.
    * U.S. coal inventories are likely to remain high through year end
    * U.S. coal production has been steeply curtailed due to the economy driving lower demand
    * Prices for thermal coal are not much off their lows but they appear to have stopped falling and higher natural gas prices will likely be supportive of higher coal prices.
    * Eastern coal prices hit $135 per ton in July of 2008 and are now at $48, near their 2009 lows, trading in what I often refer to as a scoop chart.
    * Similarly, the low BTU, but lower polluting Powder River Basin coals of Wyoming are trading in a range between $8 and $9 per ton, having peaked in Summer 2008 close to $22 per ton.
    * Coal export markets remain strong, especially China.
    * Met coal demand continues unabated with domestic producers repeatedly commenting they are selling every ton they can get out of the ground.
    * I’m only long a small (ANR) position at present via January calls but I plan to be more involved in this space in 2010.

    So in a nutshell, pretty in line with what I was saying at the beginning of the year. If you look at the piece on the 6th here:

    http://zmansenergybrain.com/2010/01/06/wednesday-oil-preview-bexp-pq-coal-thoughts/

    You can see that the stocks are for the most part lower than they were in the table yet their EPS is drifting higher. I will update that table for the morning post.

  51. 51
    Jerome Blank Says:

    #44 BHI charts and comments…

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

  52. 52
    zman Says:

    49 – wow, thanks for the waffle, lol. Good stuff, which we could put a chart to it.

  53. 53
    zman Says:

    Thanks Jerome, thinking to do just what you were saying, looks like we might get the $49 today, market willing.

    SP back to 1100 and flat lining.

    Oil down a whopping 19 cents now.

    Group less red.

    Notably, HAL easing higher, now 50 cents or so above the Monday close with SLB and BHI leading the group. HAL results probably fall in between the two on sentiment and better on outlook than either of them.

    Also notable ROSE green, ok only a penny but after yesterday’s rally and with news around the corner people not willing to give in here.

    In the we could get news any day now category: NFX, HK, BEXP, NOG, ROSE.

  54. 54
    bloodystupidjohnson Says:

    Z: yesterday price action in APC seems to have slipped under the radar screen — have any comments on it?

  55. 55
    zman Says:

    Regarding oil inventories this week, for those of you with an extremely short term mind set, data should / might be leaning to positive given the low bar the Street has set for inventories tonight. Given the fall we have had, I could see oil putting on a rally into the mid 70s on positive data from API tonight or EIA tomorrow, especially if positive on the distillate demand front, which cropped up last week, and should see another week of mild weather oil tank restocking. We also may see a draw on Crude, not a build, as imports flag due to fog disruptions along the Gulf Coast last week.

  56. 56
    zman Says:

    BSJ – I didn’t see much to comment on, did you have something in mind? Looks like similar action to many of the large caps yesterday. Scotia came with a market neutral rating on them but I don’t think many people care about that. Stock looks to be trending sideways to me.

  57. 57
    bloodystupidjohnson Says:

    I don’t follow APC. However I did notice yesterday it was up quite alot and I didn’t really see any comments on it. Just curious.

  58. 58
    zman Says:

    BSJ – I guess I sort of remember it being up at one point during the day more than the rest, same went for EOG at one point, I’d call it hopeful noise, no news. I like them as a buy and hold type idea but I have not been very good there with options. Top notch management, good assets, good bit of debt but easily managed. They do have an appetite though so I put it at better than a coin toss that they buy something else before they eventually get gobbled up.

  59. 59
    zman Says:

    MMR – Nice rally off the day’s low as the group greens. Could completely evaporate of course if the S&P waffles lower into the close in fear of what the government will propose next before SOTU.

    I do think I could be onto something in 55.

  60. 60
    Alhambra Says:

    http://www.weather.gov/forecasts/graphical/sectors/northplains.php#tabs
    Cold in Bakken, but weather finally breaking. http://www.bismarcktribune.com/news/state-and-regional/article_ea5b9b10-0a91-11df-bfef-001cc4c002e0.html Wanting to hear some reports.

  61. 61
    zman Says:

    Thanks A – did a check with a Bakken player regarding completions vs weather about two weeks ago, so far they were not having much trouble this winter but you’ve got to figure it has an impact given the amount of cold we have.

    I added your weather link to the weather tab which has a lot of links for a variety of weather types on days in which you have nothing better to do.

  62. 62
    zman Says:

    Jat – care to share on the WFT call? I missed that one. Stock off 6%.

  63. 63
    zman Says:

    NG down 25 cents. Expiration of the front month is tomorrow. The strip is by nearly 20 cents though. Big cold will return from the South to New England by the weekend along with a major snow storm so I doubt train platform sentiment among traders will remain bearish for very long. Another storm is taking the same line in long range models for next week as well.

  64. 64
    1520sbroad Says:

    Z – in 63 – strip is up 20 cents?

  65. 65
    zman Says:

    1520 = that would be down nearly 20 cents.

  66. 66
    1520sbroad Says:

    got it – thanks.

  67. 67
    zman Says:

    Honestly the equities are just squishing around here which is good (as opposed to tanking with that falling gas price) in front of oil inventories and the market. No one expects much out of this or next week’s withdrawal (consensus is 111 Bcf for Thursday) but after that the forecast looks pretty good for a return to surplus reduction and a low ending trough.

  68. 68
    zman Says:

    … and man, volumes are light today.

  69. 69
    1520sbroad Says:

    Z – one note i took away from the RRC pr today was the impact of weather on drilling/completions in Q4 of 2009. Are we likely to see other companies production suffer slightly due to the big storms/snow/cold weather? Or does RRC have a little more impact because they are drilling further north? I doubt it moves the needle for anybody all that much but i don’t remember seeing a company highlight the fact that weather impact production (unless they are out in the GOM somewhere.)

  70. 70
    zman Says:

    re 69. I agree that it won’t move the needle much. You’ll see some freeze offs in some of the colder weeks, I’ve seen some estimates from people like Simmons that it could be as much as 1 Bcfgpd in aggregate, so not a big deal as you get it back when it warms, maybe you have to do some repairs, not a noticeable lasting impact. I heard of freeze offs in the Barnett, Woodford, Fayetteville, Marcellus over the last few weeks and you always hear abot them in the Rockies, but again we might be talking about 7 Bcf per week out of supply, not a huge chunk, at least according to guys in a better position than me to make an estimate (lots of interns to call the big producers and ask how much they have frozen up right now).

  71. 71
    skimo Says:

    Z, I’m new to this segment. HERO seems to have been beaten down for all the right reasons over the last year and a half. In their recent presentation they indicate they’ve cleaned up somewhat. With demand/product prices ratcheting up for other providers, is it still to early to be interested in this name, or is it anethema given past history? TIA for your thoughts.

  72. 72
    zman Says:

    Skimo – thanks for the question, especially on such a slow day that finds me nearly dozing but I’m not up on that one nearly as much as BOP. Will have a look but will defer to her judgment there.

  73. 73
    jiveyjr Says:

    TA piece on Bloomberg showing oil in a rising channel projecting $90 by end of June…that’d be nice eh?

  74. 74
    jiveyjr Says:

    LINE green now…big volume shake out yesterday was worrisome but I added at 25.53 a couple of days ago and 24.53 yesterday…

  75. 75
    zman Says:

    Jivey – 73 would be ok by then, yes, I’d prefer a range of $75 to $85 until at least then though. Don’t want to see a superspike anytime soon. Ends badly.

    Hear ya on LINE. I’m going to add VNR on big bad red day in the group or maybe after a week of them. But I don’t plan to sell the LINE anytime soon unless I find a better MLP to replace it with.

  76. 76
    choices Says:

    Z: Not very optimistic article from Barclays on NG (FWIW)

    http://money.ninemsn.com.au/article.aspx?id=1003751

  77. 77
    zman Says:

    Choices – Driscoll, the Barclay’s E&P analyst (or one of their top ones assuming they have more than one) has been bearish on gas for awhile. Probably served him well in the back half of 2008 and early 2009. I think he’s a bit stopped clock on it. I did see on CNBC early this morning that Barclays (his firm mind you) had a survey of its investors asking what they thought would be the top performing commodities of 2010 and natural gas was on the list. Not that an analyst should care what his clients thinks but there you have it. I have also noticed that they have consistently marked their targets to market as the stocks have marched up. Not very helpful. And how he gets to an $8 target with a bad gas year on CXPO is beyond me (oh wait, his firm was the banker).

  78. 78
    zman Says:

    … and I’m happy to put his comment about natural gas only falling by as much as LNG rises and a $5.25 average 2010 price on my wall of things that need to be monitored. If I recall correctly, Driscoll/Barclays was one of the ones touting the much anticipated no show of a LNG tsunami of gas last year. Which seems to have pretty much all gone to China, Korea, Japan.

  79. 79
    jat Says:

    Re 62, WFT has everything to do with execution and mgmt-overhyped guidance as opposed to underlying service trends. I had them at $0.08 but it sure wasn’t a clean $0.08! Now expectations to be recalibrated. WFT is basically a threepeat- Q2/Q3/Q4 disappointment. Now, it’s down to the level at which Nick Macaulay bought another $1.5mln worth in November 09. If you look at his timing he’s been excellent as his previous purchase was $2mln worth at $9.00 in February 09.

  80. 80
    jat Says:

    Sry, meant Bill Macaulay. He’s a longstanding board member and CEO of First Reserve.

  81. 81
    choices Says:

    (on a slow day)
    SSEC: I do not profess to know triangles on TA but this is an example-others on this board are far more knowledgeable about TA.

    http://stockcharts.com/h-sc/ui?s=$SSEC&p=D&yr=1&mn=0&dy=0&id=p34896083269&a=169079550&listNum=16

    BDI:
    http://stockcharts.com/h-sc/ui?s=$BDI&p=D&yr=1&mn=0&dy=0&id=p45331191449&a=154681854&listNum=39

  82. 82
    zman Says:

    Jat – any idea where 2010 EPS shakes out after model changes? Think the changes and tone inspires downgrades tomorrow?

  83. 83
    zman Says:

    Story on Reuters covering a who’s who list of Marcellus players who are being targeted by a green fund for possible aquifer contamination due to fracking.

    http://www.reuters.com/article/idUSN269772720100126

  84. 84
    zman Says:

    Market just sloshing around now, very directionless, volumes still light in the energy space. S&P back below 1,100.

  85. 85
    milepost_43 Says:

    Morgan Stanley updated its price forecast for the energy complex over the weekend. It calls for crude oil to trade to $95 by the end of the year. The forecast cited improving global demand as the world’s economy turns the corner. Higher crude oil prices point to higher input costs, but also support corn and soybean values as well.

  86. 86
    zman Says:

    Thanks MP, not hard to imagine how they get there from here. Full year of high China/India demand + per capita demand growth in the Middle East, flat YoY U.S. / Europe and no move by OPEC would probably do that.

  87. 87
    zman Says:

    Coal group sinking back rather sharply from earlier highs. Just not a lot of confidence in the broad market at all today.

    All giving back bigger moves:
    MEE, ACI, BTU, WLT (especially), ANR, ICO

  88. 88
    choices Says:

    (again, on a slow day)-apologize in advance if these quasi-OT posts are not encouraged.

    Embry very respected gold analyst-his take on gold (and the US$).

    http://www.sprott.com/Docs/InvestorsDigest/2010/01_29_2010%20Expect%20gold%20to%20gain%20more%20than%2030%20this%20year.pdf

  89. 89
    jat Says:

    It was already downgraded at RBC this morning. As for estimates, mgmt guided to $.10-$.12 vs current Q1 consensus of $.16, so that should give you a flavor of the state of things to come. I can’t see MS, DB, or Barclays downgrading it. We’ll see about the others.

    We last sold in very early January, thankfully, now taking another look given the damage. Given that they’ve now reinstituted forward quarterly guidance, my hope is that they’re very, very confident on being able to deliver this next one. We’ll see.

  90. 90
    zman Says:

    Choices – hey encourage them, as there is a lot looming right now that’s not energy spec. Thanks, lets me learn something new.

    Thanks Jat. Just watching it ebb here. Thinking maybe later in the week i might take a shot. Will try to get to the transcript tonight.

  91. 91
    zman Says:

    Latest oil inventory survey from Bloom:

    Crude: up 1.58 mm barrels
    Gasoline: up 0.95 mm barrels
    Distillates: down 1.9 mm barrels

  92. 92
    VTZ Says:

    Embry is the best, he gets so mad when he gets interviewed by the hacks on financial TV. Kind of like Santelli.

  93. 93
    VTZ Says:

    Embry runs the Sprott gold and precious metals fund which is up >110% YoY and I have a large stake in.

  94. 94
    BirdsofpreyRcool Says:

    Hey… checking in later than usual. It’s been a somewhat strange day.

    Hearing MMR currently attempting to core at Davy Jones, to give something to the Reservoir Engineers to try to prove up the porosity of the Wilcox. Sounds like MMR is trying hard to get someone to independently confirm the discovery and allow MMR to book reserves. Will be interesting to watch how/if they can pull this off.

    Has anyone heard about timing for the EXXI reverse split? Should be any day now, I would think. That might make for a weird trading day or two in the stock. Like we need more “weird trading days.”

  95. 95
    zman Says:

    Interesting BOP, thanks.

    S&P gave it all up and then some, coals pulling back to even. Energy/everything looking skittish. Unless the oil numbers are very bullish I’d guess we have at least another day of this stop/start wishy/washy trading.

  96. 96
    BirdsofpreyRcool Says:

    OK… take that back… EXXI reverse split may wait until around their next earnings report… guesstimated sometime in the 2nd week of February. 5 => 1

  97. 97
    BirdsofpreyRcool Says:

    Yep. Got to hear what the POTUS says in the SOTU before knowing which way the winds blow, i guesses.

  98. 98
    zman Says:

    I see CNBC trotted out Prechter, the elliot waver. I think he jabbed the market calling for a fall. As I recall, he said the same stuff a couple of months back.

  99. 99
    bill Says:

    sd back to an 8 handle

    the ng stocks are taking it on the chin

  100. 100
    BirdsofpreyRcool Says:

    HERO back to (what looks like, to my untrained mind) a key support level. I think of that stock as a “when” and not “if” it moves up. Frankly, the longer rig rates stay limp in the GoM, the more iron gets moved out into International waters the better the rebound will be. I like looking for hockey-stick opportunities… sometimes I get in too early… but, it’s important to be in when they take off.

  101. 101
    BirdsofpreyRcool Says:

    Speaking of opportunities and hockey sticks… everyone should pick their preferred flavor, but everyone should have a piece of the Davy Jones pie — MMR, EXXI, PXP. Good reasons to own each one. PXP has some other drivers too (Lucius)… but, it’s offset by the “On-No,-Not-Flores” effect.

    JMHO, of course.

  102. 102
    bill Says:

    76 the stocks started to rollover around 2

    barclays has been negative for at least a year now

  103. 103
    BirdsofpreyRcool Says:

    Yep… this is a Kleenex Day, for sure.

    Just ball it up and toss it away.

  104. 104
    skimo Says:

    BOP, thanks, I looked at 2012 $7.50 leaps and decided b4 writing to get in at $1.05-$1.15, based on low risk and significant time. Was looking for confirmation. May take more in if LEAPS stay there.

  105. 105
    zman Says:

    And I’m not attacking Prechter by any means. The guys is smart. But CNBC needs to do a better job of talking about when he was on last and what he said then. If you pull up the S&P you can see he was on during that dip in October. Calling for a fall back to at least the March 2008 levels. I think he was on in the mid 1,000s and the market went ahead and added another 100 points after that. At the time he had a book about to hit the shelves in November. Now the market has fallen for almost a week, they trot him back out and mention the book again and again. Guess I need to write a book.

  106. 106
    Jerome Blank Says:

    RE: 100…HERO charts and comments…will add more later…

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

  107. 107
    bill Says:

    from NGI

    The sharp contraction in the Texas oil and gas economy began to ease as 2009 came to an end, but uncertainty persists about the future of the state’s energy industry with the oversupply of domestic natural gas, a petroleum economist said Tuesday.

  108. 108
    BirdsofpreyRcool Says:

    Jerome — thanks! But where do “interesting triangle patterns” usually lead??

  109. 109
    Jerome Blank Says:

    RE: #108…Hi BOP…HERO 3 box reverses at $4.50, but HERO remains on a P&F buy signal within the tightening range triangle until a print of $4.25, we watch the 30 min for an intraday reversal at or below $4.50 but above $4.25…we then go long with stops a few ticks below the sell signal, easy to manage low risk trade, target $7.50..

  110. 110
    BirdsofpreyRcool Says:

    #105 — keep people scared/concerned/worried… and they watch more TV. Pretty much a vicious Do-Loop, if you ask me.

  111. 111
    jiveyjr Says:

    re: 105…damn right…let’s all right books…I’ll recommend yours, you recommend mine…we can start newsletters and all that….I”ll vouch for your expertise and you vouch for mine…what absolute horses***

  112. 112
    zman Says:

    Re 110 – True enough. If he came on and said 10% ago I said we’d fall and then went on with his thesis that would be different. If he didn’t say don’t get in stocks for “at least” a year or two that would also be different.

  113. 113
    jiveyjr Says:

    write books…not right books…guess I’d need one hell of an editor to keep down the bad words in more ways than one…LOL

  114. 114
    zman Says:

    re 111. yep

  115. 115
    zman Says:

    Oil up a bit on API, anyone have those #s yet?

  116. 116
    Nicky Says:

    re 105 – you are dead right. His timing has been awful. He has been telling people to short the market for months. They failed to mention that on CNBC this afernoon! Instead they implied he had caused the market to drop this afternoon – no way!

  117. 117
    zman Says:

    Nicky – Thanks for that and I know I’m ranting. I know you are a EWaver and in the past, on the odd occasion you’ve been wrong, you’ve admitted it freely, like we all have to. But what I really appreciate is the openness to both the bull and bear, like in your possible wave counts today. This guy just threw out a one sided, hell and hand basket comment. That’s his choice but I find it a bit absolutist. I have more of a problem with CNBC though for not calling him on the last time he was there but instead mentioning Sue’s 20 year relationship with him. I also think he’s discounting the impact of more global than local recovery in his fundie thinking but that’s beside my point.

  118. 118
    zman Says:

    Expected for EIA tomorrow:

    Crude: up 1.58 mm barrels
    Gasoline: up 0.95 mm barrels
    Distillates: down 1.9 mm barrels

    API this afternoon:

    Crude: up 0.916 mm barrels
    Gasoline: DOWN 1.978 mm barrels
    Distillates: down 2.225 mm barrels

    May not be at all what EIA portrays but like I wrote earlier, they have been directionally in line for weeks now.

  119. 119
    nifkin Says:

    z bloomberg calling API’s Crude Oil: Drew 2.2 MMBbls on the week vs expectation for a 1.6 MMBbl build
    – Gasoline: Built 0.9 MMBbls on the week vs expectation for a 1.0 MMBbl build
    – Distillates: Drew 2.0 MMBbls on the week vs expectation for a 1.9 MMBbl draw

  120. 120
    PackMan Says:

    Z – just had to laugh about your write up this morning and the so-called spending freeze Obama is proposing. Such a joke this guy is.

    Its like my “freezing” my household budget by telling my kids they can only buy the same amount of candy and video games as last year; and my wife and I can only buy the same # of stamps.

    Voila, we froze our spending !

  121. 121
    PackMan Says:

    BEXP; hope you are right about news soon; loaded up a bunch of shares today at the close.

  122. 122
    zman Says:

    Woops, I had my numbers in 118 out of order will resort here:

    Crude DOWN 2.225 mm barrels
    Gasoline UP 0.9 mm barrels
    Distillate DOWN 1.978 mm barrles

    Makes more sense on the gasoline number and on the crude which I’m sure is a function of weak imports due to fog.

  123. 123
    jat Says:

    API saying utilization up 1% and inputs to refiners up 146 from 13361 to 13507

    Crude Imports down 1.487mn b/d

  124. 124
    zman Says:

    Pack – re 120. And you saw the Senate said no to his Saturday bipartisan deficit reduction committee proposal?

    Re 121. At this point they could have 3 wells down. Two in R. Rider (where the bigger IPs have been occurring and 1 over in Ross area). Maybe they save it for the call, dunno, but they should have some new well data in hand as the first of those should have been completed around the beginning of the month.

  125. 125
    zman Says:

    Thanks Jat. Not sure why the Street would miss out on the fog thing. It probably just reverses out in next week’s numbers anyway but if you’re going to take a shot at the weekly estimates …

  126. 126
    zman Says:

    Here ya go Pack:

    http://news.yahoo.com/s/ap/20100126/ap_on_bi_ge/us_obama_budget

  127. 127
    zman Says:

    VTZ – Prechtor also called for a big rally in the dollar and a sharp drop in gold, apologies but I did not catch what levels he saw gold down to.

  128. 128
    PackMan Says:

    124 — Yeah saw that also.

    Two comments – Bipartisan deficit reduction commission is just Obama punting the issue to a “commission” to claim he is doing “something” while avoiding hard but necessary choices.

    Second, the Senate (Dems mostly) objecting to even that and to his “freeze” shows how patheticly irresponsible, partisan and out of touch they really are.

    Throw them all out !

  129. 129
    PackMan Says:

    126 – yeah, well its all Bush’s fault. Peter Orszag said so on TV this afternoon before getting back to his important business of chasing young girls all over DC (“dont you know who I am ?”)

    Enjoy this one: http://hopeychange.blogspot.com/2010/01/live-from-6th-grade-its-teleprompter.html

  130. 130
    BirdsofpreyRcool Says:

    HERO out with a 4th quarter update… and they are moving their 4th quarter conf call from Feb 9th to March 2nd. Mrkt never likes stuff like that… guess year end accounting got more difficult, with a pesky international customer that has decided not to pay their bill. Ugh.

    That said, 4Q revs look to be higher than expected… just need to shuffle through the affect of the $29.8mm deadbeat customer has on “adjusted” operating income. If you treat the one time charges as, well, one time, then it looks like HERO’s operating loss will be about -$20mm. Which, frankly, is a lot better than the -$28.3mm analysts estimate on bloomberg. Could use some more details… but, other than that pesky deadbeat customer, quarter looks “not too bad.” However, reporting delay could weigh on the stock. Will see tomorrow.

  131. 131
    PackMan Says:

    49 & 51 good stuff

  132. 132
    BirdsofpreyRcool Says:

    #96… i take back what i took back. EXXI reverse split coming sooner than later.

  133. 133
    skimo Says:

    RE 130 Well, if you ever want cold water thrown on a stock, just ask me to get interested in it, then wait 2-24 hours.

  134. 134
    BirdsofpreyRcool Says:

    skimo — ugh. I hear you. But if it wasn’t for that deadbeat customer, the 4th quarter update would be positive.

    Really, it’s about what might happen in the near future. I’m more disappointed that their conf call was delayed for almost a month. Would like to hear how they see trends developing.

    That’s the thing about hockey-stick investments… you try not to spend too much time on the long, flat part (the shaft?) before taking off. But getting the timing right can be problematic.

  135. 135
    VTZ Says:

    RE 127: Prechter has been calling for a fall in gold since the 800s. FAIL!

  136. 136
    Jerome Blank Says:

    EXXI and MMR updates to intraday charts…

    UNG traders worked hard to hold that 50 day SMA channel today…

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

  137. 137
    Nicky Says:

    re 127 and 135. Prechter and EWI are saying gold is going to go to $650.

  138. 138
    VTZ Says:

    Since 860 theyve said that though.

  139. 139
    Wyoming Says:

    Neighborly disagreement

    http://screencast.com/t/ZmUyZDM3ZG

  140. 140
    nifkin Says:

    VLO looks better

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