27
Jan

Wednesday – Oil Inventory Preview + More Coal Thoughts + VLO + More

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Market Sentiment Watch: Nervous trading before the FOMC announcement later today (no hike expected of course but language still important), the State of the Union address tonight, GDP Thursday, and Ben's confirmation (on Friday?). So the same as yesterday and probably the same for tomorrow. Bears continue to right off any small rally as noise or a reflex rally. Bulls look to be sitting on their hands as the volumes were not spectacular yesterday.

Eco Data Watch:

  • We get new home sales for December (forecast 365K), at 10 am EST, should look better than existing home sales did on Monday. 
  • At 2:15 pm EST we get the latest FOMC announcement with the expectation being almost 100% that they stick to 0 to 0.25% range for rates.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today - New and improved coal thoughts, VLO earnings, HES call
  5. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $17,800
    • 44% Cash

 

  • Yesterday's Trades:
    • MMR – Added back those 10 MMR $15 Feb Calls for $1.10 (the ones sold on Monday for $1.60) 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.
    • 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.


Commodity Watch:

Crude oil fell $0.55 to close at $74.71 yesterday due to a restrengthening dollar (go figure) and a directionless market. After the close, the API released a neutral to slightly bullish look at inventories. Imports caused a drawdown of crude stocks, something someone around here mentioned, while products were essentially in line. This morning crude is trading flat.

Natural gas tumbled $0.24 to close the day at $5.48, blame the fear of a small withdrawal this week and potentially only a middling sized one next week but more than end of contract shenanigans. Call it the fall before the storm before the other storm and the broad swath of February cold. At least that's what the best forecasts show at present. This morning gas is trading off a dime.

  • Early Read On Natural Gas Storage: 104 Bcf (according to the Bloomberg Survey)

    • Last Week: 245 Bcf withdrawal
    • Last Year: 186 Bcf withdrawal
    • 5 Year Average: 179 Bcf withdrawal
    • 10 year Hi: 253 Bcf withdrawal
    • 10 year Low: 88 Bcf withdrawal

Oil Inventory Preview


API Watch: Neutral to slightly bullish.

  • Crude DOWN 2.225 mm barrels
  • Gasoline UP 0.9 mm barrels
  • Distillate DOWN 1.978 mm barrles
  • ZComments:  Utilization was up a percent but that's little help on the bull side given the current extremely low levels unless you think it's the start of a trend.  More important to the crude number was a short term interruption in imports which will likely be reversed back out of the system next week.  The rest of the API report was pretty much in line with what the Street was looking for.

ZComments for today's numbers:

  • Crude: Last year saw a big build in stocks of 6.2 mm barrels and I very much doubt we get that despite constrained refining, if for no other reason than I'm expecting a dip in imports due to fog disruptions along the Gulf Coast last week.
  • Gasoline: Demand has been trending sideways which is typical this time of year, no indication that it is taking a dive despite high unemployment and in the meantime, the stock surplus has been whittled down by refinery capacity curtailments beyond the norm of the season.
  • Distillates: I'm expecting a second bigger weak of demand here as mid winter oil tank restocking occurs. Also, there has been some anecdotal evidence out of the trucking sector that a post Christmas season inventory restocking has begun, restocking inventories that were drawn down more sharply than is usual.

Stuff We Care About Today

Coal Thoughts:  From the BTU call:

  • Pacific markets growing rapidly
  • China and India rapidly increasing imports
  • Current spot met coal moved from $129 in April 2009 to $200 today.
  • They see global steel production up 9% in 2010 driving increased met coal importing into Asia
  • 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.
  • These comments echo my thoughts from the coal review on January 6th, perhaps a bit stronger on the U.S. thermal coal market than I had expected.
  • Note that the stocks are cheaper, both in price but more importantly in valuation than they were earlier this year,  WLT for instance is off some 17% as it is high beta to the market.  
  • I'll be getting back into coal in the very near future, probably on the stock side as well as the option side.

Coal Multiple


HES Reports, Conference Call Worth Listening To: Comments: A mini-major and not one of my names, listening for Bakken (where they are 500,000+ acre holder, mostly on the Eastern side of the Nesson) and other tidbits like their deepwater activity in the Gomex as well as their thoughts on domestic refining.

Conference Call: Today, 10 am EST

VLO Reported Decent (all things considered) Results; But Outlook Remains Dismal

The 4Q09 Numbers:

  • EPS of ($0.28)  from continuing ops and ex items vs ($0.47) expected
    • this compares to year ago EPS of $1.53 with the sharply lower results, combination of high priced sour crude and crack spreads on jet and diesel

 

Management Comment Highlights: (sounds a lot like last quarter)

“Weak demand, narrow margins, and low discounts in the fourth quarter exemplified how difficult refining conditions were in 2009,”

“While 2009 may have been the bottom for refining profitability, there’s too much inventory and spare refining capacity in the industry right now for margins to rebound quickly. ZComment: Which is what has largely held me on the sidelines.

Economic growth will help demand recover in 2010, but we also expect new refining capacity to come online in the U.S. and around the world. Therefore, 2010 is expected to be another challenging year for the industry while refiners close marginal capacity and wait for demand growth to work down spare capacity.” ZComment: Anyone want to buy a couple of refineries?

The company went on to say that it should be profitable in 2010 even assuming another weak margin year like 2009 due to the cost cutting they have been working on for several quarters now. They declined to provide guidance however in the press release.

Other Items:

  • Cut quarterly dividend by 5 cents to a dime.
  • 2010 budget reduction: $2 billion in spending vs 2009's $2.7B
  • Working to sell Aruba.

Conference Call: Today, 11 am EST, I'll be listening but I continue to sit on the sidelines. My guess is I will be listening to all of the indie refiner calls this season.

Odds & Ends

Analyst Watch:

  • (EOG) cut to Hold by Macquarie
  • (RDC) upped at MKM Partners
  • (WLL) upped to Buy at TPH
  • (X) cut to Hold at Citi

 

186 Responses to “Wednesday – Oil Inventory Preview + More Coal Thoughts + VLO + More”

  1. 1
    elijahwc Says:

    On the wires:

    Anadarko Petro announces Lucius appraisal well encounters more than 600 net feet of pay (63.89 )

    Co announces that the Lucius sidetrack appraisal well, located in Keathley Canyon block 875 in the deepwater Gulf of Mexico, encountered almost 600 net feet of high-quality oil pay with additional gas-condensate pay in thick subsalt Pliocene and Miocene sands. “The successful Lucius appraisal well confirms this is a major discovery with substantial resource potential,” said Bob Daniels, Anadarko Sr. Vice President, Worldwide Exploration. “We were very encouraged by what we saw in the discovery well, and the results from this appraisal further heighten our enthusiasm. The reservoirs are characterized by excellent porosity and permeability and contain high-quality oil. We anticipate additional appraisal activity in 2010 as we continue to evaluate development options for this very large accumulation.”

  2. 2
    zman Says:

    Yeah, PXP should get a bump (33.3% working interest), ME as well (16.7%)

  3. 3
    zman Says:

    PXD out with reserves, comments in a bit.

  4. 4
    BirdsofpreyRcool Says:

    The whispers were right… Lucius is luscious! ME feeling the luuuuuv too.

  5. 5
    Wyoming Says:

    http://www.csmonitor.com/USA/2010/0125/US-oil-industry-hit-by-cyberattacks-Was-China-involved

  6. 6
    BirdsofpreyRcool Says:

    HERO thoughts from TPH — Net negative. Q4 ops better than expected ($10MM recurring op income loss vs. TPH -$24MM) and 2 new GOM contracts at improving dayrates. Negative offset is $30MM bad debt allowance from ’09 work and $5MM mobe cost write-off, both charges for Rig 156 (customer Angola Drilling Company). Not dire balance sheet impact given HERO has $220MM cash, $250MM revolver capacity, but hurts 2010 cash flow / eps to tune of $12+MM/Q until resolved (costs still incurred). 2010 now roughly cash flow neutral.

    My thoughts — continues to be a call option on pick-up in GoM shelf drilling. The fact that they are cash-flow-neutral now, means it is a call option with no expiration date. Lovely stuff. Just a matter of time. That said, pesky deadbeat customer… messed up what was otherwise a very decent 4Q.

  7. 7
    BirdsofpreyRcool Says:

    HERO set to open a lot lower. Mrkt hates the uncertainty of the bad debt overhang and the 4Q conf call delay. Me too. But this will pass. Just painful to watch.

  8. 8
    Jerome Blank Says:

    HERO breaks the triangle and prints the P&F sell signal if it opens on or below $4.25…

  9. 9
    BirdsofpreyRcool Says:

    Next up, MMR/PXP/EXXI… could be incremental info on DJ as early as this Friday. About the time EXXI announces their reverse split. Sense that a number of shorts have moved into EXXI, in anticipation of the split-action. So, what if you got a Friday or Monday announcement of more results from Davy Jones, combined with the 5:1 reverse split announcement, agitated by a rabid short-position. Could make for an interesting cocktail mix.

    Ugh. HERO pre-mrkt is taking it upside the head.

  10. 10
    milepost_43 Says:

    Ran across this blog/statement about “severe declines” in NG production…never heard of Powers…any validity?? thanks for a great site…

    Editor, Powers Energy Investor
    January 25, 2010
    After receiving many emails after I published my December 1, 2009 issue that discussed the coming natural gas supply crisis of mid-2011, it became very clear to me that there is a great deal of debate regarding the future of natural gas supply. Therefore I decided I would continue to follow-up on my prediction of a supply crisis over the coming months since I believe the cold facts will bear out my prediction. One area that I discussed in my December issue that is likely to be falling faster than I originally predicted is coal bed methane (CBM) production from Wyoming’s Powder River Basin. In fact, after examining recent production data from Wyoming, it has become clear to me that Wyoming natural gas production is in freefall.
    According to the January 19th, 2010 issue of Platts Gas Daily, the Wyoming Oil and Gas Conservation Commission reported that natural gas production fell 9% in 2009 to 2.1 trillion cubic feet (tcf). A drop of 9% for Wyoming represents a decline of 517 million cubic feet per day (mmcf/d) of lost production. Last year was the first year since 1997 that natural gas production declined in Wyoming. To put Wyoming’s 2009 gas production decline in context, just the lost production from the state last year was more than the average daily output in 2009 from the following highly regarded unconventional shale basins: the Marcellus Shale, the Woodford Shale, the Eagleford Shale, Canada’s Montney Shale and Canada’s Horn River Basin.
    While Wyoming averaged 5.7 billion cubic feet (bcf) of production in 2009, the top five producers in the state saw their production fall over 10%. The below table summarizes the decline from the state’s five largest producers in 2008:
    Wyoming Gas Production 2009 – Largest 5 Producers
    Producer % Change Production Change 2009 Production
    EnCana -11% -108.2 mmcf/d 327 BCF
    Exxon -13% -88.2 mmcf/d 211 BCF
    Ultra Petroleum 17% 84.9 mmdf/d 209.5 BCF
    BP -13% -70.4 mmcf/d 167.3 BCF
    Williams -15% -55.3 mmcf/d 117.5 BCF
    Source: Platts Gas Daily, January 19, 2010, Wyoming Oil and Gas Conservation Commission
    More importantly, according to the Baker Hughes drilling data that was released on January 22nd, there were only 37 rigs drilling in Wyoming in mid-January. Even if we assume all of those rigs were drilling for gas, this is nowhere close to enough rigs to keep the state’s production from collapsing over the next two years. The current rate of natural gas drilling in Wyoming does not support even 1 bcf per day of production let alone over 5 bcf per day. While shut-ins during the fall undoubtedly negatively impacted Wyoming’s 2009 production, lack of drilling and the maturity of the state’s largest fields have put its natural gas production on a downward spiral that will not be interrupted any time soon.
    While many market observers have yet to recognize the significant production declines of states like Wyoming, there is little doubt that other states such as Texas, Colorado and New Mexico are on the verge of severe declines in gas production. Savvy investors should use the current general stock market weakness to position their portfolios into gas-weighted companies that are situated to profitably grow production this year.

  11. 11
    bill Says:

    600 net feet of pay is that alot??

  12. 12
    BirdsofpreyRcool Says:

    TechTrader = 70/30 LONG for best day trade today.

    HeadTrader points out that we usually rally on Fed Day. So, he thinks slow cash run-up into Fed Decision (2:15 pm). Then go sit on the sidelines. And wait for the SOTUS tonight.

  13. 13
    zman Says:

    Don’t know Powers, not sure I get his overall thesis. Not surprised by the numbers in Wyoming but they would not be enough to concern or heighten my celebratory mood on gas. Gas crisis in 2011 needs a clarification. Sounds like he’s in the fall off the cliff … more in a bit….

  14. 14
    BirdsofpreyRcool Says:

    bill — it is if it’s OIL. Yes. Lovely lovely stuff. All Happy-Happy-Joy-Joy…

  15. 15
    bill Says:

    me up 20 % pre market with pxp to 36

  16. 16
    zman Says:

    Re 11 – 600 feet of pay is a lot in any well. It depends on the size of the structure what that translates into in terms of reserves.

  17. 17
    BirdsofpreyRcool Says:

    Frankly, 600 ft of pay is huge, even if it’s gas. Davy Jones is very happy with their 200 feet of net pay so far. Imagine what 600 ft would do.

  18. 18
    zman Says:

    BOP – I’m pretty sure Redhawk had less pay and that was gas and worth a fancy bobbing spar, lol.

  19. 19
    zman Says:

    Typing 18 while you were typing 17, lol.

    And on your imagining, 600 feet would take Davy > 10 Tcf. And crunk gas prices most probably in the following months as people said, “holy cow! that’s a lot of gas”

  20. 20
    BirdsofpreyRcool Says:

    Just noodling… but, wouldn’t be surprised to see PXP close with a 37-handle today. LUCIUS is HUGE.

  21. 21
    zman Says:

    PXD – reserves, no great shakes, not that they were expected due to the restricted drilling program. Drillbit only finding and development were pretty low at $6.38 / BOE.

  22. 22
    BirdsofpreyRcool Says:

    HERO — most sorry that Angola Drilling is such a lousy customer… but, 4Q results were about as good as I was hoping for. Don’t know what else to say. Holding for the move to $7.

  23. 23
    zman Says:

    HES call in 15 minutes, probably worth a listen for reasons outlined in the post.

    So no APC conf call for Lucius?

  24. 24
    zman Says:

    BOP – You know the MKM guys? They’re trying to bottom fish that RDC chart with an upgrade today.

  25. 25
    BirdsofpreyRcool Says:

    MKM… Greenwich, CT firm. DK’ em.

  26. 26
    zman Says:

    OII – Stephens out pounding the table on one of my favorite service names for the long haul (ROVs, umbilicals, service/repair in the deep).

    Thanks BOP, surprised no call on Lucius.

    Market going to be wishy/washy all day.

  27. 27
    elijahwc Says:

    Anybody here familar with Global Hunter Securities? Is it a part of Pritchard?

    http://www.thedeal.com/newsweekly/dealmakers/movers-shakers-baz-hiralal-011609.php

    They just started my favorite dog with fleas (MHR) with a buy.

    Also interesting universe ATPG, PXP

    http://ghsecurities.com/pages/research_coverage.aspx

  28. 28
    zman Says:

    Global Hunter has done some good work in the past. Don’t know them now.

  29. 29
    BirdsofpreyRcool Says:

    New Home Sales down -7.6% vs up 3.0% expected.

    My only question is, who expected it to be positive? Number 1 driver of new home sales (sans govt incentives) is Job Security. ’nuff said.

  30. 30
    zman Says:

    BOP – having the up-dip appraisal come in at triple the pay of the discovery well at Lucius should probably mean more to ME and PXP than this move is granting. ME just back to below the level of the October discovery. Will do some quick BOE work there.

    Reef – CPE up 20%, lol.

  31. 31
    zman Says:

    BOP – a bit surprised by the big negative, the credit had been extended by then, a bid odd it’s off that much, was surprised by the existing sale number Monday but this is odder.

  32. 32
    zman Says:

    HES Call comments:

    Bakken – Build from 3 last year up to 10 rigs over the next 18 months. Going from 10,000 bopd now to 80,000 bopd by 2015.

  33. 33
    bloodystupidjohnson Says:

    BOP: RE PXP — gee BOP you are a hot streak. It is a shame that the Morgan Stanley analysis who downgraded the stock yesterday call you first — lol.

    Z: now we know what caused the price action in APC the other day. Someone knew or was gaming the Lucas drilling results.

  34. 34
    BirdsofpreyRcool Says:

    BSJ — Rule #1 = never trust an energy analyst who is based in NYC.

  35. 35
    rseidman Says:

    Z: I’ve seen DPTR mentioned on this site in the past. Could you please tell me your opinion or this stock,if you have one? Another subscription service just recommended it.

  36. 36
    zman Says:

    Pre drill Lucius was over 100 mm BOE, so big but not sure how big. Not a Davy type thing but it is quoted as oil pay. By the way, APC is moving the Redhawk cellspar to Lucius now that the Redhawk reservoir is pretty tapped out.

  37. 37
    zman Says:

    RS – they blew an all important well last Fall and I took puts on that fall from $2 and change to around $1 buck as I recall. Biggest holder is Tracinda so you’d be in with Kerkorian for what that’s worth. Whose the shop recommending it?

  38. 38
    zman Says:

    Oil numbers in 10 minutes, crude down 40 cents with the market slipping and a flat dollar.

    How weak home sales help the dollar I’d have to think about. Nope, says more stimulus, maybe another buyers credit extension.

  39. 39
    rseidman Says:

    Real Wealth Report

  40. 40
    tomdavis12 Says:

    Z: SPX holding 1085 is a very good sign so far.

  41. 41
    zman Says:

    EIA Oil Inventory Review

    oil just before report: 74.37, down 37 cents

    Inventories:
    Crude: Down 3.9 mm barrels
    Gasoline: Up 2 mm barrels
    Distillates: up 0.4 mm barrels

    Imports were lower as expected

    Demand:
    Gasoline: 8.6 mmbpd, flat with recent
    Distillates: 3.725 mmbpd, slightly off

    Neutral report to bearish report, overall non gasoline demand was up with jet and resid but I would have liked to have seen them make the distillate inventory number.

    Crude up ever so slightly from pre report.

  42. 42
    zman Says:

    … more inventories …

    Cushing came in again falling from 33.7 mm barrels to 33.

    This is an underwhelming report.

    While crude improves in terms of storage to both last year and the 5year avg, distillate reversed that trend a bit. Demand for crude dwindled another 200,000 bopd but this is overshadowed by a much larger fog dip in imports. Production of both gas and distillates was up week to week and I’d expect that to roll off a bit next week. We could however see a pretty big snapback in imports next week to so I would not be surprised to see crude track the equity market for now with a predilection to slip if given the chance.

  43. 43
    zman Says:

    Tom – you think so? Kind of looks like we are in for a 200 day test at 1060 to my layman’s TA eye.

  44. 44
    zman Says:

    … which would probably coincide with a test of $70 for crude. All depends on reaction to SOTU, Ben, rates, GDP, technicals of course.

  45. 45
    zman Says:

    Coal stocks – have given back yesterday and more. WLT was weakest, only green on my screen in that group today.

    RS – sorry for the late response. And not saying this is what you should do. But unless that guy is energy specific as analyst, I’d discount it as “bought research” which is generally like a book report with more exclamation points. Maybe not in this case as I’ve never heard of that one, but that would be my guess.

  46. 46
    tomdavis12 Says:

    Z: I have also seen 1074 as a point you do not want to go below, but I too bow to others that are better at TA.

  47. 47
    BirdsofpreyRcool Says:

    CRT on PXP … Lucius, Davy Jones, Haynesville… lots of ways to get to their $45 PT

    http://imageserv.blifax.com/images/logos/MarKes664/filelib_13221/Plains_Exploration_Update_01-27-10.pdf

  48. 48
    zman Says:

    RS – I think the guy failed to mention a few things. Like the debt side of the balance sheet. I see him talking about SEC PV10 (not useless but near there) and outstanding shares. What about the large slug of debt, and the interest on that debt compared to pretty light EBITDA? Maybe it runs, I don’t know, but report doesn’t do much for me.

  49. 49
    isleworth Says:

    Z- HK in full retreat. Anything new there worth noting?

  50. 50
    zman Says:

    VLO call in 10 minutes. Listening for demand comments, size of continued U.S. capacity curtailment, some of it now permanent. Here’s an example of Big Oil taking it on the chin with everyone else, not that certain people care about those jobs.

    HK – nothing to make it fall from their standpoint other than gas prices and the market. I’ve seen a number of Buy rec’s in the last 3 weeks, all ignored. Reserves should be out any day now, expecting a very good report out of them, with reserves growing slightly fast than production did in 2010. Catalyst after that are the 4Q call with a production beat, maybe upward guidance, some more EFS wells, maybe but probably not an EFS oil well just yet, hopefully a non-core asset sale to get the Street off their back on the CF to spending gap this year.

  51. 51
    jiveyjr Says:

    FWIW John Murphy points out that the weekly MACD on the SP is negative for the first time since the rally started last March. A test of the weekly lower bollinger band would occur 1030 which corresponds to the Nov. low…I’m watching 1085 too but if it gives way I’m looking for 1030 FWIW

  52. 52
    VTZ Says:

    RE 43: 1055 to 1060 is due in my opinion.

  53. 53
    zman Says:

    Thanks Jivey & VTZ – good to know. I am currently on the wrong side of the market in my options portfolio. I have 3.5 weeks to right that ship and I think I’ll have a shot at getting out at higher levels on some of my names in that time due to events, market not withstanding. As to the stocks, I’m a pretty patient guy with that regard, not nearly the day trader I probably come off as in the option stuff. I am looking at some things to add to the SEP with the new tax year started. Keeping the options to a small % of one’s portfolio pays benefits at times like these and yet, in the good times, it generally has been impactful.

  54. 54
    zman Says:

    VLO call starting, stock getting no love over better (but still awful) results and negative commentary.

  55. 55
    zman Says:

    Crude positive along with products. Still say not a great report but watching it trend, they are moving with the S&P now. Group doing same from its lows.

  56. 56
    zman Says:

    VLO touting the ethanol buy timing and returns since purchase. Retail was strong as well. Well, if you can’t find something positive to say about your core …

    If you have never tuned into the VLO call I highly recommend it. Especially Bill and Pack and those who like to hear a CEO speak his mind about energy policy in the U.S. I think that will be up in the next few minutes.

  57. 57
    zman Says:

    VLO

    Bought 7 ethanol plants last year at 30% of replacement cost.
    Bought 2 more this year and about to close on a third.

    Market hinging on Timmy’s every word.

  58. 58
    zman Says:

    Not hearing anything on the VLO call to give me any sense of urgency.

  59. 59
    cargocult Says:

    bop-Muchas gracias para la reportan de PXP.

  60. 60
    bloodystupidjohnson Says:

    Z: If you think running this site is a tough way to run a business, try being a refiner — lol Man, refining might be one of the hardest business to run, profitabity, out there.

  61. 61
    DrLink Says:

    Bill, do you mind me asking, you still have your eye on ATPG? It got as low as 15.25 today but I did not pull the trigger, waiting for 14’s

  62. 62
    zman Says:

    BOP – checked with a guy who’d know on Lucius size. The “over 100 mm boe” has morphed into thinking of 500 mm boe with the appraisal loaded with pay. That means ME and PXP could run substantially in coming weeks, especially ME with their 16.7% working interest (or about an 14% nri) vs their reserves of 1081 Bcfe (YE08), that’s a potential add of 438 B’s so a little over 40% vs current reserves forgetting about adjustments to 2008 reserves for production and other for a moment. Quite significant.

  63. 63
    zman Says:

    BSJ – I think this site is the best way to run a business like mine. I think the refining segment in the U.S. continues to dwindle and imports increase in the near term so you couldn’t pay me to do that.

  64. 64
    bloodystupidjohnson Says:

    RE: 63 — I don’t know Z, having people hang over your shoulder and watch all your moves and then make comments about those moves, to me, would be a very hard way to invest or trade. I know from long term personal experience that I could not do what you do. Hats off.

  65. 65
    BirdsofpreyRcool Says:

    #59 — de nada πŸ˜‰

  66. 66
    rseidman Says:

    Z: Re: 48, Many thanks

  67. 67
    BirdsofpreyRcool Says:

    z — #62 NOW you’re talkin’

    People haven’t really figured out how HUGE this is yet…. they will.

  68. 68
    zman Says:

    On the contrary, I have found that having to make a trade in public avoids much of the whimsy that many are subject to in investing. I learn from teaching, not sitting in a classroom. I think better when I’m typing not talking as Wyoming can tell you having met me in person. I also find the site to be a great information and analysis dragnet and sincerely believe that I learn as much if not more from you guys as you do from me. Thanks though for the hats off.

  69. 69
    bloodystupidjohnson Says:

    I guess our different points of views on this is what makes markets. The MOST important thing one must know about the market is HIMSELF.

    I do totally agree that writting about an idea is an excellent way to settle the mind on why or why not to do something in the market.

  70. 70
    zman Says:

    Anyone bothering to watch Timmy? How’s he doing?

    VLO call left me felling like I might have a play this Spring but little else.

  71. 71
    Wyoming Says:

    Ah, Shreveport … I get choked up just thinking about … the beer.

    You think fine; I have had to dig up plenty of research due to you.

  72. 72
    zman Says:

    Wyoming – you Stateside? Got a question.

  73. 73
    Wyoming Says:

    Says he did not do it.

    http://finance.yahoo.com/news/Geithner-defends-Fed-actions-apf-1859243404.html?x=0&sec=topStories&pos=main&asset=&ccode=

    Nope, one more week. You can email.

  74. 74
    elduque Says:

    z- Would you care to comment on nat. gas price action. Seems over done to me.

  75. 75
    BirdsofpreyRcool Says:

    #70 — HeadTrader is watching… he said that Timmeh is doing a good job of “firing back” today…

    HT said that “one of them said [to Timmeh] … ‘u say ur not a politician, but ur answers today say u are’… Timmeh said ‘is that a compliment?’ ”

    LOLOLOL

  76. 76
    bloodystupidjohnson Says:

    Geithner — isn’t this the same guy would said be didn’t “understand” his tax return and under reported his taxes. The same thing was would have sent any of us to jail?

  77. 77
    zman Says:

    Eld. I would agree with that. Front month change out always ends with volatility, this took a dip during warmer weather and the expectation that storage will put in a low number tomorrow, best guess and its kind of that since the weather was squishy is 100 Bcf, like it to be more but not concerned on the trajectories for trough storage as February is going to be cold at least early if not into mid month, giving some good chances at more draws. We also have November supply coming out Friday from EIA and I would guess people are fretting that it will again show muted declines. Tough to say as that’s what it has been doing. Still, part of October was a recovery from logistically constrained volumes in Wyoming, that should continue a downward path, say OK flat, other states I really think up a touch, Texas down again, Gomex down some on deepwater gas (Indepedence Hub and others), LA up of course but it is still small, NM flat to down. Those are my reads at present and I’d like to see 0.3 to 0.5 Bcfgpd come out but the way the EIA has been reporting, I wouldn’t bet on the upper end.

  78. 78
    BirdsofpreyRcool Says:

    BSJ — don’t get me wrong… I think Timmeh is a weasel in a man-suit. But still like to see it, when anyone has the guts to stand up to the pols.

  79. 79
    PackMan Says:

    46, 52. From some other pro traders, they say 1075 is a very impt level.

    I haven’t looked and am not an expert chartist; so I don’t know.

    VLO — Z – did they say why they cut the divvy (other than obvious reasons, losing money; save cash).

    Geithner; such an arrogant, combative, putz. No recusal document ? No document evidencing his recusal on AIG ? That is unbelievable.

  80. 80
    elduque Says:

    That was prompt.I would like to see a lousy number and have gas rally.

    mahalo

  81. 81
    choices Says:

    Odds going up that Geithner is gone before the end of Jun.

    Need to see the odds on Summers/Rahmbo, etc, etc, etc.

  82. 82
    choices Says:

    sorry-did not post the link:

    http://www.intrade.com/#

  83. 83
    zman Says:

    RE VLO – you got it. One analyst asked why they didn’t go to $0 on the div which I thought was obvious and they came back with the statement that they want to appeal to all investor classes. Some yield guys will toss you like a rock if you have no, um, yield, especially when you can tell them when it’s coming back (some big equity income names come to mind) and BOP can tell me if I’m wrong, that they really are that patient but I bet she won’t.

  84. 84
    zman Says:

    Wyoming – sent you an email.

  85. 85
    Wyoming Says:

    Replied, stepping out.

  86. 86
    bloodystupidjohnson Says:

    Z: refiners, because of availability of pipelines bring in imports, don’t some refiners, such as FTO have a better chance of making a buck than others?

  87. 87
    BirdsofpreyRcool Says:

    This just in from HeadTrader… Law of Unintended Consequences at work —

    so GS had to give out stock for bonuses this year…..then Obama talks neg about finls and sends them to lows….and has the unintended consequence of setting the option price at the low…Goldman wins again apparently

  88. 88
    zman Says:

    Thanks, on phone

  89. 89
    bill Says:

    ng down another 25 cents to 5.25

    market thinking glut again

  90. 90
    BirdsofpreyRcool Says:

    Simmons out with a great synopsis of the impact of the Lucius well on APC and PXP. Risked-weighted, the well adds $3/sh for APC and $6/sh for PXP of NAV. This raises Simmons’ NAV calculation to $84 for APC and $51 for PXP.

    They comment that the reservoir quality is very high… lots of porosity (25%!) and permeability (1 Darcy!!)… this means that when this well comes on, the flow rates will be very high (translation: it will produce like gangbusters).

  91. 91
    bill Says:

    ok one more bearish thought for your consideration…

    what happens when market doesnt hold 10,000

  92. 92
    rseidman Says:

    ‘Green’ investors target Marcellus Shale drillers 01/26 02:10 PM

    * Investors want more transparency
    * 12 companies targeted
    By Anna DriverHOUSTON, Jan 26 (Reuters) – A group of shareholders who
    focus on the environment said on Tuesday they are targeting
    companies operating in the Marcellus Shale to ensure
    development of natural gas does not pollute or endanger human
    health.
    The shareholder proposal campaign, aimed at 12 companies
    including Chesapeake Energy Corp (CHK:$25.60,00$-0.93,00-3.51%) , EOG Resources Inc (EOG:$91.585,0$-1.555,0-1.67%)
    and Exxon Mobil Corp (XOM:$65.27,00$-0.65,00-0.99%) , was sparked by mounting
    worry about chemicals used in a process to extract gas from
    rock called hydraulic fracturing, the groups said.
    “There is real business risk here,” said Larisa Ruoff, an
    official with the $100 million Green Century Funds. “Companies
    and regulators must ensure this development is done in a way
    that protects the environment and drinking water.”
    Hydraulic fracturing — where water, sand and chemicals are
    pumped into formations at pressures high enough to crack the
    rock and allow gas to escape — has helped fuel a drilling boom
    in the United States.
    That technology and others have allowed companies to tap
    vast supplies of natural gas locked in big formations like the
    Marcellus Shale, which spans parts of New York, Pennsylvania
    and West Virginia.
    But environmentalists and critics say the drilling
    chemicals have polluted aquifers in Pennsylvania and Colorado
    and can cause cancer and other serious illnesses.
    The shareholder proposals sponsored by Green Century Funds
    and the Investor Environment Health Network ask companies to
    increase transparency about the effect of their drilling on the
    environment and encourage companies to switch to less-toxic
    hydraulic fracturing fluids.
    The oil and gas industry says the process is safe, and
    there has never been a documented case of ground water
    contamination because of hydraulic fracturing.
    “Ultimately the facts are going to bear out,” said Tom
    Price, a spokesman for Chesapeake Energy (CHK:$25.60,00$-0.93,00-3.51%) . “I think that is all
    we can do, is to continue to point to the facts.”
    Chesapeake holds the largest number of drilling leases in
    the Marcellus along with its partner Statoil ASA (STO:$22.85,00$-0.05,00-0.22%) .
    Still, opponents are becoming more vocal. On Monday, New
    York City Mayor Michael Bloomberg said he opposed natural gas
    drilling in the city’s upstate watershed, saying it posed too
    many risks. [ID:nN25192911]
    Ruoff said she has heard back from several of the companies
    about the proposals, but she declined to name them.
    (Reporting by Anna Driver in Houston, editing by Matthew
    Lewis)

  93. 93
    BirdsofpreyRcool Says:

    KOG on the unloved list today. Don’t think it means anything… but we should get results from wells 11&12 in two weeks or so. Don’t like to see this kind of stock price action, prior to results. That said, the wells are drilled in an area they have already proved productive, so don’t think we risk seeing another “well #10” in the next announcement. Should know a little more on Friday.

  94. 94
    BirdsofpreyRcool Says:

    Friday/Monday… those should be interesting days for EXXI. Then on Tues, they release their 2FQ results and host a conf call. Lots of stuff to look forward to.

  95. 95
    bloodystupidjohnson Says:

    Boy, there has been alot of stock moving oil and gas finds lately. Davy Jones moving MMR/EXXI/PXP, Granite Wash moving FST, and now this well moving APC/PXP.

  96. 96
    BirdsofpreyRcool Says:

    This is what makes E&P investing fun. Like finding golden eggs at the Easter Egg Hunt.

  97. 97
    zman Says:

    Re 86 – the ability to refine lower grades of crude is the biggest advantage that guys like VLO and FTO have.

    Re 92 – saw that yesterday, what bunk. Also saw after the close EPA opened up a special hotline for people to report problems with their well water caused by gas drilling. Double bunk.

    re 93 – agreed, don’t think it means anything.

    94 πŸ˜‰

  98. 98
    Jerome Blank Says:

    KOG…bottom trendline support now at $2.12, reverses back in 0’s on a print of $2…holds the buy until $1.75…thinking about adding on a reversal at $2.12

  99. 99
    baylor3217 Says:

    Thought on another traunche of mpg here?

  100. 100
    zman Says:

    I think BSJ was noting that the 5 day after math of most (but not EXXI/MMR) has been a lower stock price. That’s broad market action forcing profit taking. Tough on options, should not be a big deal on the stocks, just short term noise. Unless Prechtor is right.

  101. 101
    tomdavis12 Says:

    BOP: 90 Would you use the Simmons NAV metric to influence your buy decisions? I have followed CHK and they publish NAV numbers monthly at different NG prices. The stock has always traded at a big discount to NAV. Or would you just try to buy when the market shows a green light and you have the confidence that at least their value is growing.

  102. 102
    baylor3217 Says:

    Thought on another traunche of kog here?

  103. 103
    zman Says:

    AEZ announces that it drilled its well. Will complete late Feb with 26 stages. Crowd goes will if that one comes in right.

  104. 104
    BirdsofpreyRcool Says:

    Unless you think oil is headed lower, just don’t see KOG as being a bad investment here. I think “hot hand” may have left the table, as the next Big Catalyst will be well #14, their first TFS test. Won’t hear much about that one until April. That is 2.5 months away. That is Dog Years to some people.

  105. 105
    zman Says:

    MPG must be someone else’, don’t know that name.

    KOG – I’m happy with my recent trade there, not adding for now. Today is one of those weak gets weaker days for everything until it reverses unless it breaks a level, then much lower. IOC case in point.

  106. 106
    BirdsofpreyRcool Says:

    tomdavis — I pick answer B.

    The only NAV model i trust is J.S. Herold’s. But, they only come out with that once a year… and it’s a slow process. Everyone else just basically runs a “back of the envelope” model, compared to JSH. That said, it’s a data point to use. And it gives you the magnitude of the impact of anything new.

    wrt Simmons’ calculation of Lucius’ impact on PXP, they used $12/bbl oil as their back-of-envelope estimate for NAV. But they also used 500 MMboe as the size of the find. If you use different assumptions, you come up with different additions to NAV. But — and you made this point — the main thing is that the NAV goes up. And more than the $1.50/share that PXP is up today.

  107. 107
    bloodystupidjohnson Says:

    I think you got to separate what the market is doing and what the company or stock is doing. If you believe in the longer term prospects of the stock, then use weakness in the market to buy the stock. Of course mo/mo buy on strength guys are throwing eggs at their computer screen on those comments.

  108. 108
    tomdavis12 Says:

    106 BOP Thanks. Its always good to know what wise people think. Do you know how much to subscribe to JS Herold?

  109. 109
    zman Says:

    HAL – looks like a downgrade, not really getting that given activity/outlook/valuation. Could be just technicals breaking in a weak tape, but feels/looks unwarranted given what their peers are doing.

  110. 110
    BirdsofpreyRcool Says:

    tomdavis — i sure can’t speak for the wise people, but i will always tell you what i think.

    JSH was bought about 2-3 yrs ago. Think the same analysts are still in place… but, i don’t know what the pricing is now. (I had free access to JSH at one point in my career… and appreciate the caliber of their analysts… AND the size of their proprietary NAV model.) They should have a website and it’s worth checking out their services. They have some real old-school, hands-on, practically-trained geo-type people there.

  111. 111
    BirdsofpreyRcool Says:

    The JSH data base is really targeted at i-bankers, commercial bankers, M&A guys, consulting firms, E&Ps, and research institutes… it’s not as useful for the day-to-day decisions and updates needed for capital market trading. That might have changed, somewhat, but I doubt it.

  112. 112
    zman Says:

    APC flat on day, PXP up 4.7%, ME up 10%. Market fearful of a cliff dive here.

  113. 113
    italyinvestor Says:

    IOC is under some pressure. Any thoughts out there?

  114. 114
    Nicky Says:

    Afternoon all. Think we are working on v of v here and when done we see a bounce of maybe 20 spx points. By the same token if 1093/96 acts as resistance then this could break down fast.

  115. 115
    zman Says:

    CNBC is now the Ipad show, maybe they think that can save the market, lol. S&P went back down at tapped around 1085 before moving up a touch. Crude was carried lower through $74 and its is whole number support land now, eying $73.

  116. 116
    1520sbroad Says:

    Z – been looking at the catalyst list again – under EOG – letter (A) – the three forks test – is the possible announce date there 4Q10 or 4Q09?

    For the ag folks out there – POT earnings tomorrow. A little volatility in the market could make that an interesting set of options to watch.

  117. 117
    zman Says:

    Italy, I have nothing fresh there. After the last little pr, I find it strange they haven’t had a more verbose follow up.

  118. 118
    zman Says:

    1520 – That would be on the 4Q09 CC.

  119. 119
    elijahwc Says:

    IOC: The debate rages and who really knows? Too difficult.

    http://www.gurufocus.com/news.php?id=82612

  120. 120
    1520sbroad Says:

    #118 – thanks.

  121. 121
    1520sbroad Says:

    I will say it again – catalyst list is very helpful.

  122. 122
    elijahwc Says:

    #115 – I just borrowed this item which I found elsewhere. “Crude oil selling off on the AAPL presentation. I guess the iPad tablet runs on batteries, and not petroleum.” Too funny!

  123. 123
    zman Says:

    EXXI – anyone have a broker comment today, just saw a news bug pop up on them?

  124. 124
    BirdsofpreyRcool Says:

    EXXI — other than their PR about releasing earnings and call next Tues??

  125. 125
    Popeye Says:

    RE:119

    The IOC e-mail exchanges with Minkow are just too funny. I can’t believe they put that in print.

  126. 126
    jat Says:

    The Maquarie analyst said in his note that he’s a buyer of HAL at $28.00, so it seems like a somewhat interesting type of downgrade to me.

  127. 127
    Jerome Blank Says:

    What’s going on with CPE? up 20%

  128. 128
    zman Says:

    Jat – didn’t know they cut it, saw their dg of EOG today. Well aren’t they just stinking up my room today.

    FOMC after the commercial break. They and the President have to be cognizant of the market teetering here. I have to think that enters into the language.

  129. 129
    zman Says:

    Jerome – They had a bit of good news, $44.7mm reimbursement from the MMS last night. It must relate to a development they were working on in 2008 that fell through due to uneconomic prices.

  130. 130
    BirdsofpreyRcool Says:

    Rates will say low for an “extended period.” Will stop purchasing MBS in March, as scheduled.

    I think this is good. Mrkts won’t like the withdrawal of MBS support, tho. But, it needed to happen.

  131. 131
    zman Says:

    Market didn’t like the dissenting vote saying to remove the “extended period” language. I think they have no choice at the point to keep rates low for the simple reason that raising rates will mean increasing the deficit and spending less on other things and as we have seen, Congress won’t cut a paper clip, let along a money clip from the budget.

  132. 132
    zman Says:

    Let the market drift up for a bit now, gotta make a call.

  133. 133
    zman Says:

    Crude ending the NYMEX regular session down a buck, products lower, demand for distillates still soft, gasoline holding its own well.

  134. 134
    baylor3217 Says:

    Anyone have any arguments for POT up or down on earnings tomorrow? It bounced nicely off recent support for the second or third time in the 106.50 area touching 106.90 today.

    It’s been range bound between there and 120ish the past couple of months.

  135. 135
    Jerome Blank Says:

    CPE prints “bearish signal reversed” buy signal with the $2.50 print…wow…

  136. 136
    Jerome Blank Says:

    CPE…wish I had been watching it…had a classic bull flag forming on the daily chart for most of jan…what’s the saying “can’t kiss all the girls”?…

  137. 137
    jiveyjr Says:

    Drawing a channel from the July low ($64)in WTIC, my take is oil is still in uptrend if it holds $72.50 or thereabouts, which it did today….curious how Jerome would look at that…and extension of that slow rising channel is what I look for and what keeps me in various positions

  138. 138
    zman Says:

    Re 132 – I should do that more often.

  139. 139
    zman Says:

    EXXI – churning higher, up 6%.

    Tom – NE is after the close, right?

  140. 140
    zman Says:

    Market greens, then realizes not everyone sells Ipads and that the President is still speaking tonight and then reddens.

  141. 141
    BirdsofpreyRcool Says:

    EXXI — some Bigfoot from the East Coast currently buying…

  142. 142
    zman Says:

    Pulled this off Yahoo Finance:

    “The general consensus is that the Fed could raise rates as early as this summer. But to some, this view appears overly optimistic”

    I really don’t think that statement is correct.

  143. 143
    zman Says:

    More power to them BOP, tell em to buy a little MMR for good measure.

  144. 144
    BirdsofpreyRcool Says:

    #142 Financial writers posing as someone who actually knows what they are writing about… that’s funny!

  145. 145
    BirdsofpreyRcool Says:

    sorry… didn’t mean to be all “hype-y”… just passing along trading desk info.

  146. 146
    zman Says:

    BOP – no, no, keep up the flow.

  147. 147
    Jerome Blank Says:

    Somebody bought 41,500 shares exxi at $3.67…confidence….

  148. 148
    Jerome Blank Says:

    KOG looking a bit more stable now on the 30 min…three higher consecutive 30 min closes…

  149. 149
    Wyoming Says:

    http://i.engadget.com/2010/01/27/live-from-the-apple-tablet-latest-creation-event/

    Start at the bottom

  150. 150
    zman Says:

    Beerthirty.

  151. 151
    reefguy Says:

    Davy Jones- recovered 30′ core headed to core lab…it does contain sand

  152. 152
    BirdsofpreyRcool Says:

    CapitalOne on PXP today —

    Still think there is upside in PXP($46 TP/ 33% upside) off of this huge appraisal well- the stock is up ~$4 on Davy Jones and Lucius – the two biggest drill bit events in some time: we raised our TP by $6 on Lucius discovery and that is based on a 200 MMboe discovery- We talked to ME today (17% wi) and they said they are thinking that APC, the operator , is looking at the discovery as being 200-500MMboe. At 500MMboe that would be $15 in value to PXP. Separately, on the announced additional 65″ft of pay at Davy Jones , we think it could be worth $4.50 to PXP. So PXP is up ~$4 on the two discoveries that could be worth at the upper end ~$20. Other catalyst: I still think PXP can increase its long term 10% production growth forecast with the building blocks in place : Haynesville /granite wash/davy jones/Freisan/Lucius which gives them visibility to make that call.

  153. 153
    BirdsofpreyRcool Says:

    reef — given the VAP action in EXXI today, somebody thinks that core is going to tell us some good stuff, don’t ya think?

  154. 154
    zman Says:

    BOP – yeah, the stars are aligning for me to go long some PXP. Just neglected from the first news 2 weeks back.

    Reef – nice.

  155. 155
    reefguy Says:

    BOP-baby needs the shoes

  156. 156
    zman Says:

    NE – top and bottom line beats. Nice Tom.

  157. 157
    italyinvestor Says:

    Right after the announcement I couldn’t decide what to think about PXP since it didn’t move with EXXI and MMR. But I HAD to do something, so I grabbed my spare change and raided the sofa cushons and bought some 35 JAN 11s (probably paid too much). I have my fingers crossed since i’m not really a LEAP minded person. Z – you ever look at leaps or would you just buy long?

  158. 158
    andy Says:

    italy – what u pay?

  159. 159
    zman Says:

    Italy – I generally go long unless the premium isn’t too whacky. It works best with a fairly non-volatile stock in which you don’t mind waiting on but also feel to be undervalued. So this stock is close to that bill. But most of the time, given the volatility in the group, the premiums strike me as excessive and so the stock is easier.

  160. 160
    Jerome Blank Says:

    NYSE bullish percent goes into “bear alert” status…a fairly big deal…

    …also changes to most of the charts…I removed a few charts only to make things a bit more manageable, let me know if you want one that I replaced…also, a number of add’l comments on UNG coming…

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

  161. 161
    zman Says:

    Jerome – thanks much, don’t know yourself out too much do all this.

    President setting exports goals?

  162. 162
    zman Says:

    $30 billion TARP funds for small business lending.

  163. 163
    zman Says:

    Small business tax credit for those small biz that hire new workers. Man, I’m pretty sure I said that nine months ago.

  164. 164
    zman Says:

    SP Fut were pretty flat pre speech, up 5.2 pts now, as the President gets to Healthcare.

    The energy stuff early was pretty soft by the way.

  165. 165
    zman Says:

    SP Fut at end of speech +7.4

  166. 166
    BirdsofpreyRcool Says:

    The POTUS was as benign as we could have hoped for… the markets should rally tomorrow.

  167. 167
    BirdsofpreyRcool Says:

    P.s. And I won at “Obama Bingo!”

    http://townhall.com/blog/g/ee84bedc-c933-4516-af72-14e6314c082e?comments=true&commentsSortDirection=Descending

  168. 168
    zman Says:

    BOP re 166, agreed, S&P fut up 8, I liked the muted clapping when the energy bill subject was breached and the much louder, bipartisan applause for Obama’s call for nuclear reactors. Gotta say he dropped the ball on natural gas and transportation which would have been an easy one sentence to throw in but I expected that.

  169. 169
    BirdsofpreyRcool Says:

    Just out — EXXI made it on the Nasdaq “Largest Short Interest Percent Increases as of Jan 15” with a 54.4% increase from Dec 15 to Jan 15. It put EXXI as #22 on the list of 200. wow.

    Sensed this was happening, ahead of the reverse split. With the market trading better, oil should be up tomorrow. And the pile-on of the shorts could definitely make EXXI trading more interesting.

  170. 170
    zman Says:

    BOP – do your short numbers agree with these?

    http://shortsqueeze.com/?symbol=exxi&submit=Short+Quote%99

  171. 171
    BirdsofpreyRcool Says:

    The nuclear comment was good to hear. There are a few E&C stocks that should catch a bid on that comment tomorrow.

  172. 172
    BirdsofpreyRcool Says:

    #170 — yes. The key is that there are almost 4mm new shorts who piled on since December. This is after the income funds hedged that (stupid) perpetual convertible preferred that EXXI issued. So these are the sharks who thought they could smell blood in the water, with the pending reverse split.

    Whoever the BigFoot from the East Coast is — who was buying with both hands in the final hour of trading today — is clearly willing to take on a fight with the shorts.

    Interesting stuff, eh?

  173. 173
    zman Says:

    yep, yep, lots of interesting stuff around that story at the moment, same for MMR.

    Davy Jones aside, MMR should be 3 weeks away (or thereabouts on Hurricane Deep and Blueberry Hill).

  174. 174
    BirdsofpreyRcool Says:

    Asian markets up pretty big now… that should boost energy prices tomorrow, unless I miss my guess.

  175. 175
    BirdsofpreyRcool Says:

    Question… does JimBob have any history of being — shall we say — “aggressive” on booking reserves? That topic came up today, with a very savvy buy-sider from one of the largest mutual fund companies.

  176. 176
    zman Says:

    Dollar inching lower since the speech but ran up into it so flattish with close.

    Crude up 21 cents but not enough volume to fill my tub at this point.

  177. 177
    BirdsofpreyRcool Says:

    BedTime Market Strategist —

    Nothing New. Whew!!!
    The question lingering on the minds of Americans was what would the Presidents tone be. For Investors it was how hard would he come after Wall Street and the Financial Industry? The Financial Responsibility Fee (TARP Tax) was mentioned. “As a result, the markets are now stabilized, and we have recovered most of the money we spent on the banks. To recover the rest, I have proposed a fee on the biggest banks. I know Wall Street isn’t keen on this idea, but if these firms can afford to hand out big bonuses again, they can afford a modest fee to pay back the taxpayers who rescued them in their time of need.” The positive in there is the President acknowledged in front of the nation that the banks have paid “most” of the money back. The negative is he still considers the Auto industry losses as the banks.

    The key Financial Industry announcement was reform. There was never a doubt that we would hear about financial reform. The President started with a concession “One place to start is serious financial reform. Look, I am not interested in punishing banks, I’m interested in protecting our economy.” If there ever was signal that he recognizes spooking markets is not going to help the situation or create new jobs, this is it. It was a concession he did not have to give. He then finished with “The House has already passed financial reform with many of these changes. And the lobbyists are already trying to kill it. Well, we cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back.” The rhetoric did not get any more extreme than that.

    We know reform is coming and we know it is necessary. This does not change the announcements that the President has made over the past couple of weeks, but it does take the rhetoric and vilification down several notches. The fear and uncertainty created by the extreme rhetoric has been a large part of the problem.

    To provide brief context to the rhetoric, here are last year’s highlight from his Joint Session of Congress 11 months ago.

    * I understand that on any given day, Wall Street may be more comforted by an approach that gives banks bailouts with no strings attached, and that holds nobody accountable for their reckless decisions
    * I intend to hold these banks fully accountable for the assistance they receive, and this time, they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer. This time, CEOs won’t be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over.
    * I understand that when the last administration asked this Congress to provide assistance for struggling banks, Democrats and Republicans alike were infuriated by the mismanagement and results that followed. So were the American taxpayers. So was I.
    * So I know how unpopular it is to be seen as helping banks right now, especially when everyone is suffering in part from their bad decisions. I promise you – I get it.

    Wind Down.
    The FOMC took a slightly more hawkish tone than we expected. If you measure monetary policy on a scale from 1 to 10, with 1 being very easy and 10 being very tight, today’s transition went from -5 to 1. Accounting for the -5 was the fact we have been in a state of quantitative easing for over a year and the Fed Funds rate is close to zero. Throughout 2009, Jeff Lacker of the Richmond Fed was the FOMC’s resident hawk. He was also the last member to cast a dissent and that vote was made at the first meeting of 2009. His dissent was in favor of purchasing Treasuries over the Fed’s targeted facility programs. This year, Lacker has rotated off the FOMC. Among those rotating on was Kansas City Fed President Thomas Hoenig, who has now staked out the ground as resident hawk with his dissent today. Hoenig dissented from today’s decision because he is in favor of removing the “Exceptionally and Extended” language.

    On January 13th on PBS’s Nightly Business Report, New York Fed President and FOMC Vice Chair Bill Dudley explained that the “Exceptionally and Extended” language indicates that rates will stay low for at least six months beyond statements that include the language. As it stands, policy has not changed much in practice. Rates remain low. The MBS purchase program will be terminated. The FOMC has not made a transition from the Fed Funds rate to Interest On Excess Reserves (IOER). The transition is necessary because the Fed is having difficulty controlling the Fed Funds rate (for the past year, it has averaged 17 basis points). What we did see the Fed do today was officially close out the rescue programs and shift to recovery mode. Most rescue programs have wound themselves down over the past year, as the Fed predicted. As that temporary liquidity drained, the Fed replaced it with the Quantitative Easing. Although we are still concerned about the 10% Unemployment rate, with the expectation of a 5% GDP report for Q4 on Friday, we can understand why the Fed terminated the emergency programs.

  178. 178
    zman Says:

    Jim Bob has a reputation for being aggressive. I don’t think that translates into bookings as he’s got Ryder Scott on the case and they aren’t ones to let you go off the reservation. I don’t know of course but that’s my best impression. If you wanted to stretch it, you would hire someone else, a smaller firm you could bully. Nothing booked to DJ for 2009 they already said and while he’s said numerous times that it would be a big pile of gas I don’t see how anyone can fault the guy.

    Was going through some old MMS stuff early on a fishing expedition and came across what was the deep shelf way long ago, in 2001/2002, check out the prospect mentioned. http://www.gomr.mms.gov/PDFs/2003/2003-026.pdf

  179. 179
    zman Says:

    … and I remember back then that we were worried that the deepshelf would become the norm and there would be too much gas. Of course, our big decision on the year was trying to decide on $2.25 or $2.50 gas, lol. Not that I don’t have a healthy fear of that occurring again with the ultradeep but it is going to take time. It will be interesting to see the bottom of the iceberg, which is convention production, makes its present felt in terms of declines in 2010. Yeah, I’m still a believer in inevitable things like that.

  180. 180
    BirdsofpreyRcool Says:

    thanks for #178. I tend to agree that there are a few checks and balances at work. But interesting that the comment should come up. Just an indication of how some people are thinking about the situation, nothing more (at this point).

  181. 181
    zman Says:

    BOP – Don’t get me wrong, I’ve been there for some bad coolaid here before, but not on reserves … before it got to reserves.

  182. 182
    Wyoming Says:

    Sad days indeed;

    http://screencast.com/t/NWVkNzFmZ

  183. 183
    Wyoming Says:

    http://blogs.ft.com/energy-source/2010/01/26/shells-ceo-peter-voser-interview-transcript-on-canadas-oil-sands-jobs-acquisitions-us-gas-iraq-nigeria-copenhagen-and-more/

  184. 184
    zman Says:

    Still sad over 182

  185. 185
    italyinvestor Says:

    Andy – ref PXP, paid $4.40 each back on 20 Jan, so i’m in the green now.

  186. 186
    Wyoming Says:

    Oh yea, will have to console some of their brothers in about 2 hours. So sad, my eyes are welling up.

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