28
Apr

Oedipus Wrecks The Market

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Market Sentiment Watch:  Actually, S&P wrecked the market with their downgrades of Greece and Portugal's sovereign debt. And wrecked maybe too strong a word but surely they dinged sentiment in the emerging markets with their "surprise" downgrade. The only thing surprising about that move was that the two countries' debt was not already classified as junk. This too shall pass with either Germany coming around to save the day or we will see the unraveling of the euro zone. On this side of the pond, the Fed is expected to keep rates unchanged but may  take another step towards the inevitable tightening via language changes. I still don't see them lifting rates until 1H11.  In energy land we have a number of our most trafficked names reporting 1Q earnings this morning and the list grows longer as the week progresses (see the Calendar tab at left for the full roster).

Ecodata Watch: No data release schedule aside from the Fed meeting.


In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today - Earnings Watch: NFX, STR, RRC.
  5. Odds & Ends

Holdings Watch:

ZCAT (Zman Catalyst portfolio):

  • $9,400
  • 57% Cash
  • Positions for the quick view are updated on the ZCAT, ZIM, ZLT page.
  • Yesterday’s Trades:
    • None

 

ZIM (Zman Inefficient Markets portfolio)

  • $22,900
  • 70% Cash
  • Yesterday’s Trades:
    • VLO – Added (40) May $21 calls for $0.36 with the stock at $20.02. See site for comments on earnings. Conference call at 11 am EST. I may buy another set if it weakens after consumer data.
    • VLO - Added (40) more VLO May $21 Calls for $0.39 with the stock at $19.92 as the stock pulls back following what I thought to be a fairly positive 1Q conference call during a very weak tape.
    • VLO - Added a final (20) calls of the VLO May $21's for $0.41 with the stock at $19.96 and the market at its lows of the day.

Commodity Watch:

Crude oil fell $1.76 to close at $82.44 yesterday, on a flight to safety rally in the dollar following S&P's downgrades.  After the close, the API released  a mixed bag of a report (see below). This morning crude is trading fairly flat but will likely trade against the dollar and with equity markets today unless the EIA report isn't fairly mundane.

 

Natural gas eased 4 cents to close the day at $4.22 yesterday, largely ignoring the flap in the markets over Greece but instead holding steady with EIA supply revisions due out tomorrow. The June contract takes over as the front month takes over tomorrow as well so expect a little  more end of contract volatility today. This morning gas is trading flat.


Early Read On Natural Gas Storage: Street is looking for a 71 BCF injection for tomorrow’s report.

  • Last Week: 73 Bcf Injection
  • Last Year: 77 Bcf Injection
  • 5 Year Average: 63 Bcf Injection
  • 10 year Hi: 103 Bcf Injection
  • 10 year Low: 5 Bcf Injection

 

Oil Inventory Preview


API Watch: 

  • Crude: Up 5.3 mm barrels - API showed imports backing off so the rise in stocks, given current refinery utilization remains something of a mystery, as usual with the internal workings of API reporting.
  • Gasoline: DOWN 658K barrels
  • Distillates: DOWN 1.369 mm barrels

ZComment:

  • Crude - imports jumped last week took a relative large bounce last week that could easily reverse out due to logistics along the Gulf Coast this week, leading to a higher potential for a smaller than expected build in crude. That may be somewhat supportive today but unless it's large I think all eyes remain focused on gasoline demand (still running strong given unemployment and elevated prices).

Stuff We Care About Today

NFX Reports OK 1Q10 Results

The 1Q10 Numbers:

  • Production of 67 Bcfe (28% liquids) vs guidance of 62.6 to 69.2 Bcfe
  • Revenue of $458 mm vs $545 mm expected
  • LOE of $0.91 per Mcfe vs guidance of $1.11 to $1.13 per Mcfe.
  • EPS of $1.19 (ex items) vs $1.11 expected
  • CFPS of $2.95 vs $3.01 expected

Highlights:

  • NFX released an operational update on Monday night, refer to the Tuesday post for details. Here is some extra stuff:
    • 2Q Guidance is 70 to 73 Bcfe
    • 2010 Guidance is 283 to 288 Bcfe (or 11% growth on the mid; 30% liquids and revised/tightened higher yesterday from a prior range of 278 to 288 Bcfe) and the company is guiding towards the upper end of that band. The profile is getting oilier faster than expected.
    • Costs: not rising as quickly as as I would expect:
      • recurring LOE seen retreating to a range of $0.67 to $0.72 / Mcfe

    • Hedges: Upped

Nutshell: Taken in combination with the Tuesday press release the company shows that it continues to hit on all operational cylinders. Guidance continues to reflect their shift to an oilier production profile and operating cost guidance remains surprisingly tame from this famously conservative management team. Given the small miss on CFPS this morning and the market environment it's unlikely the stock is gong to wow anyone today but I'll be looking for a pull back into the bottom half of the recent trading range to consider adding calls. I continue to hold the common in the ZLT.

Conference Call: today, 8:30 am EST

 

RRC Reports Strong 1Q10 Results; Guidance Reaffirmed

The 1Q10 Numbers:

  • Production of 465 MMcfepd (81% natural gas)
  • Revenue of $237 mm vs $246 mm expected
  • EPS of $0.16 (ex items) vs $0.14 expected
  • CFPS of $0.92 vs $0.90 expected

Highlights:

  • Marcellus Shale:
    • Increasing Marcellus reserve recovery estimates: EURs rise to 4.0 to 5.0 Bcfe (from a prior range of 3 to 4 Bcfe)
    • Reaffirmed exit target of 180 to 200 MMcfepd
    • Rig count now 13, going to 16 by year end and 24 by the end of 2011
  • Barnett Shale:
    • Catching up on completions, production still rising despite lowered rig count. On the call management should give a tally of the drilled but not yet completed backlog here.
  • Unit costs expected to continue to decline in 2010 and 2011.
  • Balance sheet: net debt to cap at 36%, improved after asset sales

Nutshell:

  • Kind of a broken record here, another quarter (this makes 29 consecutive) of record growth
  • Valuation remains the reason I don't fall for the name for other than the occassional quarterly fling:

    • 2010 P/CF of 12.0x
    • 2011 P/CF of 8.6x
    • $3.17 / Mcfe on an EV / Proved Reserves basis
  • Look for comments on the call regarding capex sensitivity to gas prices in the second half of the year.

Conference Call: today, 1 pm EST.

 

STR Reports Slight Beat; Raising Operating Guidance

The 1Q10 Numbers:

  • Production of 51.5 Bcfe

    • up 10% YoY
  • EPS of $0.73 (ex items) vs $0.74 expected
  • EBITDA of $433 mm vs $428 mm expected

Highlights:

  • The company released it's ops update on Tuesday and raised production guidance in that release
  • Guidance Going Up:
    • 2010 EBITDA guidance tweaked higher from a range of $1.45 to $1.55 B to a range of $1.48 to $1.58 B

Nutshell:  Not a lot new here after Tuesday's spilling of the operational beans. The company continues to hit on all cyclinders and is not excessively valued to its peers (2010 P/CF of 6.3x and 2011 P/CF of 5.8x).

Conference Call: today, 9:30 am EST.

 

Other Stuff:

  • FSLR reports and has their conference call after the close today.
  • Tomorrow gets very busy with CLB, WLT, OII, WLL, LINE, APA reporting.

Odds & Ends

Analyst Watch:

  • Barclays shift targets about:

    • CXPO cut a buck to $7 (still can't find the reason for the high multiple they put on this one unless you count the banking relationship angle)
    • XCO cut $2 to $27
    • HK cut $3 to $29
    • SD cut $1 to $11
    • CHK cut $5 to $32
    • CRK cut $9 to $48
    • WLL up $10 to $110
    • XEC raised to Overweight, target upped $23 to $93
    • FST cut to Equal-weight, target trimmed $1 to $32
  • FRO - target upped $5 to $44 at FBR, remains Outperform


 

161 Responses to “Oedipus Wrecks The Market”

  1. 1
    zman Says:

    NFX call in 5 minutes.

    SSN out with it’s quarterly update, little new there from an operational update although there is a fairly detailed property and plans over view for those new to the name.

  2. 2
    zman Says:

    NFX Call Notes

    40% of budget goes to oil projects
    continuation of shift started months ago

    Domestic oil volumes to grow 20% this year (Malaysia, Monument Butte (Utah), Bakken)

    Comments on oil projects providing 2010 oil volume growth.

    Monument Butte:
    nearly tripled production since acquisition in 2004 (7,000 => 19,900 bopd now, up 3,000 bopd since year end 2009)

    growing 20% this year.

    5 rig program is the equivalent of running 8 rigs back in 2006 due to efficiencies.

    very large drilling inventory (4,700 locations)

    Williston Basin (Bakken)

    2 biggest IPs to date for them were in the Tuesday release. IP of > 3,300 boepd for the last 2 wells and > 1,100 boepd for a 30 day average.

    Malaysia:
    accelerating development well program in the shallow water.

    Plays of the Future:
    Maverick Basin (Eagle Ford Shale)
    2H10 evaluation plan, multirig program to drill 25 wells starting in June.

    Southern Alberta Basin:
    224,000 net acres
    Bakken look alike potential
    spud first well this week

    On the natural gas side they have very limited drilling obligations to hold acreage. Only need 1 rig in the Woodford to get acreage HBP, same Granite Wash.

  3. 3
    zman Says:

    NFX Q&A

    What are your commitments for getting acreage held by production?

    In short, not much:

    Woodford – nearly all HBP

    Granite Wash – all HBP

    Monument Butte – all HBP

    Williston Basin – 3 to 5 years leases

    Maverick Basin – $100 mm this year should take care of any lease maintenance issues there.

  4. 4
    zman Says:

    NFX Q&A 2

    Ute Tribal acreage (north part of Monument Butte), continuing to see better results there than at Monument Butte proper, a little thinner zone but better natural fracturing. This is the reason behind the higher guidance for this area for the year and why 3 of 5 rigs in the play are on the Ute acreage.

  5. 5
    zman Says:

    Analyst Watch:

    AEZ – Rodman picks it up with an $8.50 target.

  6. 6
    BirdsofpreyRcool Says:

    TechTrader is 60/40 SHORT today. And he is pointing to a nice gap up at open, in order to lay on his day trade. Can’t argue with that, with all the testimony (GS) and reports (FOMC) this afternoon.

    HeadTrader pointing out that advertising and consumer goods (like Carnival Cruise Lines) reporting way bettern expected earnings. He thinks you buy stuff (other than financials) on dips. Then you buy financials on a really big dip. He would also buy today, after TT is done, covering his short.

  7. 7
    BirdsofpreyRcool Says:

    HT’s caveat… watch the headlines.

  8. 8
    zman Says:

    Thanks for the color BOP.

  9. 9
    zman Says:

    NFX call ongoing, analysts sounding pretty pleased, especially with some of the probables discussion which portray significant reserve potential.

  10. 10
    zman Says:

    Nicky – where do you have resistance now?

  11. 11
    zman Says:

    NFX will keep capex within cash flow, despite opportunities in oil plays to accelerate to take advantage of higher liquids pricing. Good.

  12. 12
    Nicky Says:

    Good morning. Resistance is at 1195. We need to get above there and stay above there for this correction to be done.

    Support is at 1176 and then 1168.

  13. 13
    zman Says:

    Thanks much Nicky.

  14. 14
    zman Says:

    Marginal utility of the NFX call is declining. Nutshell, positive. No thoughts to changing my position in the ZLT. I won’t be adding in the other 2 portfolios today due to the market and lack of new news here.

  15. 15
    Garyinhou Says:

    Z.. holding eog may 110’s I guess i shoulda sold… thoughts on next week or two… mucho variables I know

  16. 16
    zman Says:

    Coast Guard about to light Macondo fire.

    Congress to investigate the accident in early May.

    Gary – I hold the $115s, still in still 25 days from expiry and still thinking I will come out OK on them as the slide yesterday had nothing to do with the stock other than it has been outperforming and some people who fear a Greek end to the world decide to panic and sell.

    EOG doesn’t miss guidance on the top line as it is a conservative guider.

    They should have news from the Niobrara on the call.

    They may talk about the east Montana Caret well which is a big deal but it could be early for them.

    They may also have more Eagle Ford wells to talk about but probably not a lot, given the recent analyst meeting data dump there.

  17. 17
    zman Says:

    Crude backing off a quarter, oil inventories in 25 minutes.

    NFX backing off post call to up 50 cents from an up $2 open. To be fair, the XOI is backing and filling with the S&P.

  18. 18
    Garyinhou Says:

    rog.. thanks

  19. 19
    zman Says:

    RRC call at 1 pm EST, so far no joy in the stock from another strong quarter. Valuation is pricey there which is normal but which may be catching up to them as other names look increasing less so.

  20. 20
    zman Says:

    EIA Oil Inventories:

    Crude just before report: 82.20, down $0.25

    Inventories:
    Crude: UP 1.9 mm
    Gasoline: DOWN 1.2 mm
    Distillates: UP 2.9 mm

    Crude imports: 9.4 mm bpd , up nearly 200,000 from last week, probably reverses next week.

    Demand:
    Gasoline: 9.29 mm bpd, turning back north again seasonally, good to see and the reason for the unexpected dip in gas stocks.

    Distillates: up slightly,

  21. 21
    dij Says:

    EOG earnings next Tuesday, May 4. During the day?

  22. 22
    zman Says:

    More EIA

    Cushing stocks moved to 34.6 mm barrels, that’s near the high end of the all time range and will likely restrain another move on the part of crude significantly higher.

  23. 23
    zman Says:

    More EIA …

    Domestic production continues to creep higher, which is helping to bloat Cushing.

    Refinery capacity jumped to 89% and I have to say they are getting ahead of themselves. Throughput to refineries jumped a commensurate amount but you saw no increase in finished gasoline production this week (it actually retreated, also helping to explain the draw on gas stocks) but it should rally next week.

    Gasoline and heating oil are coming under a little pressure following the report.

  24. 24
    zman Says:

    EOG CC at 9 am EST on May 4. They generally report before the open, not after the close.

  25. 25
    zman Says:

    Market just treading water in front of FOMC now, expect crude to trend with the SPX.

  26. 26
    BirdsofpreyRcool Says:

    Cross-Asset Class Strategist #1, noodling on Greece and implications for global financial market impact…

    http://www.capmarkets.com/ViewFile.asp?ID1=135737&ID2=411218873&ssid=1&directory=6571&bm=0&filename=04.28.10_Incredibly_Stupid_Decisions.pdf

  27. 27
    baylor3217 Says:

    Do we think yesterday’s sell off in BEXP provided yet another opportunity on the 17.50s?

  28. 28
    zman Says:

    Thanks BOP, good stuff, especially the summary.

  29. 29
    baylor3217 Says:

    On a side note, I’ve also got a big INTC short that I’m getting squeamish about.

  30. 30
    zman Says:

    Crude turning green. Products have yet to get there but are off their lows. Distillate build is not a shocker and should not color crude trading this time of year. Gasoline may have a bit of a run in store, that is through next week’s report and then it probably sages unless demand really legs up here.

  31. 31
    baylor3217 Says:

    We’ve been in buy the dips mode so long it seems hard to believe this greece / portugal thing will be anything more than a blip on the radar as yet another govt gets bailed out and brings the market roaring back over the next 2 to 3 weeks.

  32. 32
    zman Says:

    Baylor – I expect good things from them on the call on Friday and am playing with the $20s. The $17.50s would be the more conservative route. I continue to own the common in the ZLT.

  33. 33
    baylor3217 Says:

    VLO moving up nicely

  34. 34
    zman Says:

    Baylor – I have to agree with 31 because it sounds complacent but I think that’s what is likely to happen. Technicals are in the driver’s seat nearly 100% once earnings season peters out though so if there is a break down there, it can do a lot of damage. Getting ready to think more defensively as the late Spring doldrums approach.

  35. 35
    zman Says:

    re 33. Better pre numbers but yes, it’s coming back now. Gasoline is continuing to inch off the lows. As with everything in the ZIM, I won’t be there for long. If the FOMC comments are well received by the market I would expect VLO to give me a significantly better exit point.

  36. 36
    zman Says:

    Crude marking the S&P move up.

  37. 37
    baylor3217 Says:

    Do most on this board work in the energy industry or used to work there?

    I’d love to be able to do this for a living, but unfortunately, I’m nowhere near confident in my investing skills to quit my day job.

    Although having a day job does make doing this that much tougher.

    If you’ve made the transition, how have you gone about doing it? I’m 34 so I’m looking at longer term career options.

  38. 38
    zman Says:

    NG up a dime, traders must be thinking covering a bit is smart in front of possibly damning revisions tomorrow.

  39. 39
    zman Says:

    Baylor – I can tell you there is quite a mix from former traders, to hedge fund managers, to sell side guys, to moms, to E&P presidents and management team members to completion engineers like Wyoming.

    I can also tell you that it is a hard row to hoe in terms of quitting your day job and trading for a living. I know because I did it. Of course, if you are independently wealthy that helps. I am not but I do have a background in E&P research, banking and portfolio management so I have a fair grounding in how to get by in the investment world.

  40. 40
    baylor3217 Says:

    Re 39 thanks for the info Z. I look at this board as a great way to get an excellent education in investing.

    One can’t learn to dance from a book and unfortunately few are independently wealthy but that just makes the challenge all that more exciting.

  41. 41
    baylor3217 Says:

    What are we expecting out of WLL this evening?

  42. 42
    andy Says:

    bop – getting to about KOG time for an update. hearing anything??

  43. 43
    baylor3217 Says:

    EXXI not really participating here

  44. 44
    zman Says:

    Re WLL – probably in line on the numbers, maybe another 4 mboepd Bakken well in their Sanish area, then hoping to see a well completed to the south in the 200,000 acre Lewis and Clark TFS area. Aside from that good growth in Postle field (one of their enhanced oil recovery projects) and perhaps a reduction of capex announcement for their mid-continent division for gas directed drilling.

  45. 45
    zman Says:

    BEXP might be the most interesting name for the rest of the next two weeks as you have potential catalysts from the firm (at least 3 wells due on Friday) + news from EOG’s call next week that could impact the e. Montana (Ghost Rider) program.

  46. 46
    Popeye Says:

    Do we still have the stripper well operator/equip manuf. in here? I hope he is doing ok with these prices.

  47. 47
    jiveyjr Says:

    more crappola outta SP re: Spain…seemed to weaken the market again

  48. 48
    zman Says:

    Popeye – have not heard from him in awhile, should be pretty happy up here.

    Jivey – thanks, saw the drop, they downgraded Spain. Guessing Ireland is next.

  49. 49
    zman Says:

    Gold happy with the downgrade however.

  50. 50
    baylor3217 Says:

    yes if you have a gold position, that is looking pretty decent

  51. 51
    baylor3217 Says:

    I was hoping to get to the FOMC announcement before selling anything. may or may not get there.

  52. 52
    jiveyjr Says:

    I’m hoping Stoneburner has a happy analyst day at the end of the mo…

  53. 53
    BirdsofpreyRcool Says:

    KOG reports earning on May 6th, a week and a day from now. They have been pretty quiet. Which is OK for them. They need to continue to drill wells and keep the cash flow growing. I am looking forward to hearing an update on any pipeline timetable. Hooking up to a line will instantly add revenues from the nat gas stream they are currently flaring. I don’t worry much about KOG anymore. Maybe I should, but they haven’t given me a good reason to worry for about a yr now.

  54. 54
    zman Says:

    ZTRADE – ZIM – VLO

    Sold (100) VLO $21 Calls, up 38%, with the stock at 20.40. Would have held longer but S&P downgraded Spain and the market looks a bit dodgy.

  55. 55
    Nicky Says:

    Yuk here we go again. They could really tank this market if they choose. 1168 is a must hold or we are looking at the 1125 area imo.

  56. 56
    VTZ Says:

    Nicky – Today is another example of my gold reaction comment to news. Gold up and dollar up on a concrete new downgrade/worry.

    Also this puts us above resistance and I’m now looking for a new all time high.

    Then when the dollar breaks down, GAME ON when all the momo money starts chasing and bullion counters start covering.

  57. 57
    Nicky Says:

    VTZ – I said yesterday that for me the gold chart looked very bullish and it should surge and its looking that way.
    Not sure the dollar strength can last if the Fed does nothing and doesn’t change the language.

  58. 58
    VTZ Says:

    Today/yesterday could actually be the blow off top in the dollar, expecially if the FED does nothing, which is my expectation.

    Good call on the chart.

  59. 59
    Nicky Says:

    Just noticed that silver is moving up with gold now which it did not do yesterday. I think equities may reverse too…..not feeling confident one way or another however.

  60. 60
    tomdavis12 Says:

    BOP: Saw in the HK Annual Report that Stoneburner is NOT on the BOD and does not have a top three salary. Does not feel like a way to groom a successor.

  61. 61
    zman Says:

    V – re 58. I only expect tonal changes. Maybe they up the discount rate but the fed funds rate won’t budge.

  62. 62
    VTZ Says:

    I don’t expect any wording changes to exceptionally low for an extended period which will be what everyone is looking at. The Discount rate is basically meaningless anyways in terms of liquidity.

  63. 63
    Nicky Says:

    re # 58 – could be very supportive of oil.

  64. 64
    BirdsofpreyRcool Says:

    tomdavis — talking to someone who stays very close to the company, says Stoneburner is “firmly in charge.” But, I have to question that too, given the corporate structure (and Wilson’s recent bid for Common Resources, which he denies. ha)

  65. 65
    zman Says:

    CNBC trader saying EIA numbers don’t matter anymore, that all trading is based on Euro / Dollar and the market. I’d disagree, at least in part. Weekly numbers add volatility to the report but the general trend of higher oil prices given supply and where supply is headed (not to the U.S.) and demand (rising in the U.S.) and stocks of crude, (now down vs year ago levels by 5% and still only up 6% to the five year average for this time of year), along with falling production in a number of countries normally supplying the U.S. would argue for higher prices over time. Saudi has spare capacity but there has been a meaningful Mid East shift to gassier long term projects. When per capita oil demand rises in Asia and Latin America this year and next, the 4 mm bopd spare cushion is likely to be quickly eroded, with little that can be added quickly thereafter. Russia, currently the largest crude producer is likely to have a flat year and unless it really steps up service contracts in the second half of 2010, a slightly down 2011.

  66. 66
    zman Says:

    V – you may get your blow off top upon S&P’s downgrade of Italy and Ireland.

  67. 67
    jiveyjr Says:

    BOP, I heard a rumor you were in the running as wife # 4…can you confirm or deny?

  68. 68
    BirdsofpreyRcool Says:

    jivey — not bloody likely. And for so MANY reasons! LOL. 😉

  69. 69
    jiveyjr Says:

    glad you took the joke in the good fun intended…

  70. 70
    BirdsofpreyRcool Says:

    There were just so many answers that leapt to mind… had to clean it up a bit, before I posted. It was a truly funny comment.

  71. 71
    zman Says:

    On the other hand BOP it should increase our data flow out of the name so you have my blessing. 😎

  72. 72
    zman Says:

    Market doing a good job of shrugging off Spain now. FOMC in 1.5 hours, RRC in 30 minutes, stock off a buck, pretty much worst in group.

  73. 73
    BirdsofpreyRcool Says:

    OMG, z. I would have to freshen up my dancing skills at Rick’s first! Not gonna go there….

  74. 74
    BirdsofpreyRcool Says:

    HeadTrader pointing out that the mrkt usually rallys into the FOMC decision.

  75. 75
    zman Says:

    Last time I was at Ricks there was a hurricane with sandbags around the front door. Charming place.

    re 74 – good point.

  76. 76
    zman Says:

    Busier day tomorrow:

    http://zmansenergybrain.com/subscriber-data/calendar/

  77. 77
    zman Says:

    Heckuva rally in WLL off the bottom.

  78. 78
    elduque Says:

    what time does the monthly report come out tomorrow?

  79. 79
    zman Says:

    Eld – there is no set time. Generally it comes out when they get it done.

  80. 80
    elduque Says:

    more important question. In 25 words or less, how much of an impact do you think it will have? or maybe a better question is how much of the supposed decline in production is already discounted?

  81. 81
    BirdsofpreyRcool Says:

    MIDDAY OVERVIEW

    Market Update – risk assets tried to rally pre-market and for most of the morning, spurred higher by some reports out of Europe (specifically that the Greece rescue package would be upped to EU90B+ and would last for three years). However, the strength earlier today wasn’t on back of larger long-only vanillas – it was mostly shorts covering after a nice victory on Tues = there wasn’t a lot of follow-through on the buy side. European sovereign issues remain a big overhang for US equities (whether it’s a genuine concern or just an excuse to take some profits remains to be seen – if we can hold >1170 on cash prob. the latter). The mid-day downgrade of Spain caused a quick steep sell-off in stocks, although equities finding their footing a bit as we head into the afternoon. The looming Fed decision keeping the shorts from getting too aggressive in laying out new exposure (expectation is will be more pos. on the economy but will maintain “extended period”). The desk, like yesterday, remains pretty quiet and we aren’t seeing panicked activity in either direction (long onlys still not doing much – not selling out of long exposure but also not aggressively stepping in on the weakness). Technically, 1170-1175 (on cash) being watched as important level; below there 1150 is next major level.

  82. 82
    zman Says:

    Eld- don’t know. Depends on what they say. If it is a 1 Bcfgpd reduction it’s probably in the gas strip now (12 month is near $5). If it’s 2.5 Bcfgpd then I think we have some more rallying to do. The revision should be between those two points I would guesstimate.

  83. 83
    zman Says:

    Financial reform stalls in the Senate for a 3rd time.

  84. 84
    Jerome Blank Says:

    Re: #72 RRC…what’s interesting about RRC is that it is right at both P&F trendline buy signal and that huge daily lower triangle trendline support zone…very little downside risk required to see if you’re right on a long try…the $52.50 May options seem to be trading better today…

  85. 85
    zman Says:

    Thanks JB, RRC call about to start.

  86. 86
    zman Says:

    RRC delineating continued quick per unit cost reductions, stock start to wake up. Mulling $50s and $52.50s.

  87. 87
    Dman Says:

    Z – WLL bounced off a trendline that it broke above on April 1.

    Just bought some May 24s in HK. OK, so call me crazy. The hourly chart looks promising & surely they didn’t set up the analyst day to stink up the joint. Well it’s a theory anyway.

  88. 88
    zman Says:

    RRC Notes
    2010: > 70% of expected gas hedged at >$5.40
    2011:51% at 5.73

  89. 89
    bondbuddha Says:

    Memos from Houston: No more Rick’s ladies and gents, shows how old your memories are! Recent comments should include ” Treasures “, or so I hear. Dick Stoneburner is on the board, but Floyd is firmly in charge of vision, business development, whatever phrase you want to use!!

  90. 90
    baylor3217 Says:

    What time do the FOMC notes come out?

  91. 91
    zman Says:

    2 to 2:15 pm EST

  92. 92
    BirdsofpreyRcool Says:

    http://www.ricks.com/club/default.aspx?id=11001

  93. 93
    zman Says:

    re 92. Thanks for making it difficult to focus on the RRC call. Something about shale or shelly or sheila …

  94. 94
    BirdsofpreyRcool Says:

    (you crack me up)

  95. 95
    baylor3217 Says:

    re 92, great, now i have to sanitize my girlfriend’s computer or I’m a dead man

  96. 96
    BirdsofpreyRcool Says:

    just tell her it’s a “high class” place… lol

  97. 97
    BirdsofpreyRcool Says:

    ya know… the Oil Patch is a colorful place. Still pretty much 99% dominated by the male ego (and everything that goes along with that). Is what it is. Never a dull moment, however!

  98. 98
    zman Says:

    RRC Notes

    Drilling some Granite Wash wells in the Tx. Panhandle part of the play.

    BOP or Jat or anyone, have you seen any other research today on RRC saying what they think isn’t wowing the crowd? Sounds like it might be realized prices were slightly low and their 2Q production will be off slightly due to 25 mm/d of asset sales at the end of 1Q (the Ohio sale).

    Things I consider to be more important:

    1) higher cost properties have left the portfolio.
    2) production guidance for the year remains unchanged despite the asset sale.
    3) higher EUR assumptions should set up bigger reserve growth at year end, taking away some of my complaint on valuation of the reserves.

    Stock continues to bleed lower.

  99. 99
    zman Says:

    re 97. Alas I am but a watcher of the energy patch, not a member.

  100. 100
    zman Says:

    RRC Notes:

    We have the best position in the play. We will consider monetizing a % of our Marcellus acreage for the right price (higher than here) and will consider JVs for a carry.

  101. 101
    BirdsofpreyRcool Says:

    RRC — only a handfull of “neutrals” in a sea of “overweights” following results today.

  102. 102
    zman Says:

    RRC Q&A

    What’s the strategy behind the comment about doing sales or JVs?

    Having seen Atlas and some of the other deals in the Marcellus of late, they started to consider the potential of doing a deal (selling) on acreage. Still need higher $/acre to do something but will consider offers. They don’t need the money but they have had “lots of discussions with lots of people”

    Utica play – drilled, logged, shows, tested. Found gas but not going to say how much, keeping tight lipped for now, best part is in W. PA. Will drill 2 more wells by year end, will stay tight hole on it. They have holes in their acreage to fill in.

  103. 103
    zman Says:

    Still listening to A&A at RRC but I’m likely to take a little here. Not reading or seeing anything other the valuation issue to hurt the story. Analysts sound pleased, especially with costs coming down. Besides, taking a little piece today on weakness could provide a fairly quick return tomorrow from a combo of Buy reiterations and the gas revision (assuming it puts a spring in gas’ step).

  104. 104
    zman Says:

    ZTRADE – ZIM – RCC

    RRC – Added (30) $52.50 calls for $0.39 with the stock near the LOD at $47.60.

    RRC – Added (10) May $50 calls for $0.90.

  105. 105
    zman Says:

    Thanks BOP.

  106. 106
    tomdavis12 Says:

    Z: From UPS: Total daily package vol +2.7% yr/yr. Int’l growth +18%

  107. 107
    zman Says:

    Tom – thanks much. Wish all the truckers would do the same.

  108. 108
    bill Says:

    newsflash on cnbc

    bill cllinton “not sure if goldman broke law , but no economic merit to transactions”

    He declined to explain the economic merit to his wifes cattle future trades.

    Oh , wait a second, those trades did have economic merit as she only was allocated winning trades.

  109. 109
    tomdavis12 Says:

    Z: In the 20 largest increases in short positions for the month: FE +57.91%, MUR +57.51%, FTI +54.35 and SWN +49.36.

  110. 110
    zman Says:

    FED unched. Statement looks pretty happy, happy, joy, joy.

  111. 111
    BirdsofpreyRcool Says:

    FOMC … rates to stay “exceptionally low” for “extended period…” Labor market “beginning to improve”

  112. 112
    zman Says:

    Tom – re SWN, still a small interest though.

  113. 113
    zman Says:

    discount rate unched as well.

  114. 114
    tomdavis12 Says:

    Z: PDE upgraded @ CSFB. Will forward.

  115. 115
    zman Says:

    RRC – call over concluded with hopefully we deliver similar if not better results in the second quarter. Flat volumes Q to Q would make sense given the late timing of the asset sale mentioned above.

  116. 116
    dij Says:

    Z, BTW Oedipus Wrecks, the Most Clever Headline of the Month Award.

  117. 117
    VTZ Says:

    Re 111 and 113 – The economy must be just booming.

  118. 118
    zman Says:

    Dij – thanks, just part of my ongoing effort to make BOP laugh.

    V – I hear ya but I’m more concerned with stock market drivers than the actual economy. Rally proceeds a recovery. The financial system got unstuck (rally event 1) and then the data proceeded to get less worse (continuation of rally 1). We’re probably due a pause but stocks are still not yet expensive as cost cutting has sent more to the bottom line. Leverage those cost savings with increased widget sales and you have the S&P trading at a 2011 multiple of what? 12x?

  119. 119
    VTZ Says:

    I agree. Was a broad comment, not directed at you. The S&P does seem cheapish based on the estimates.

  120. 120
    zman Says:

    Crude going off the board today up 75 cents.

    NG up 3 cents. Biding its time before tomorrow. June takes over as the front month tomorrow, currently trading 4.35.

  121. 121
    jiveyjr Says:

    with all this liquidity being tossed about and no sign of any stoppage, I think there is upside risk in the market that I’m not well positioned for…

  122. 122
    zman Says:

    V – and I agree, U.S. is far from booming.

  123. 123
    tomdavis12 Says:

    Z: On PDE report. Mostly likely takeout candidates in this space. PDE, ATW & RDC. PDE is 9.4% owned by Seadrill and has a very strong currency.

  124. 124
    BirdsofpreyRcool Says:

    z — 118… ha! and LAUGH i did!!

    hearing there is a large seller of TAT out there right now… like 500k shares at least. No fundamental reason we can figure out. But there you have it. It’s a TAT Sale on today!

  125. 125
    zman Says:

    Jivey – RRC made the comment that the financial window is so wide open (and for a long time now) for the E&P industry that there is the danger that companies will continue to jack up the rig count (what I call financial indiscipline) for longer than you’d think. But at the same time he said he thought most people were largely hedged for 1H10 with little on the books for the second half, which could lead to a sharp pull back on the gas directed rig side.

  126. 126
    zman Says:

    Thanks for the headsup on TAT.

  127. 127
    zman Says:

    SLB bled yesterday, doing nothing today. There was a fundamental upgrade in thinking there on Friday regarding the market for services in the international arena going forward which I don’t believe is being reflected in the name via that one day long pop, half of which the name has given back. I took a small position there Friday and may add a bit more as I think it is still due a higher multiple following a couple of days of digestion, much like HAL before it.

  128. 128
    jiveyjr Says:

    re: #127…think they have huge opportunity…I keep building a position in it; SLB

  129. 129
    baylor3217 Says:

    WLL with quite a turnaround today

  130. 130
    elduque Says:

    Re earnings. financials are a large part of the equation. Banks have reduced their reserves and that plus zero interest rates means huge profits. Also low interest rates mean cash gets nothing but helps all cos. earnings with low borrowing costs.

    Sometime (????) rates will rise probably because of our sovereign credit problems. It won’t be because Bernake/Greenspan wants them to. I still think we are in a huge mess and delaying solving the problem doesn’t help.

  131. 131
    baylor3217 Says:

    Z can we start a contest to see who the finger is pointed at next to pummel the market for a day by the S&P or the government?

  132. 132
    baylor3217 Says:

    V i noticed gold “sold off” after the FOMC notes and is slowing working its way back up to pre-announcement levels.

  133. 133
    VTZ Says:

    I would like to call it digestion rather than sell off. It just shows what the expectations are.

  134. 134
    jiveyjr Says:

    re: gold…GDX really strong + 4% today….a miners ETF

  135. 135
    VTZ Says:

    The shares have been lagging the metal and will play catch up at some point here.

  136. 136
    zman Says:

    Unlike last earnings season at least we can say that Service and E&P earnings reports that contain good news are being met with open arms by the market.

  137. 137
    zman Says:

    If we get a large revision, one big enough to move the gas strip tomorrow, I’ll very likely take a position in SWN as they are relatively naked and essentially 100% natural gas leveraged. If prices rise they benefit the most, especially given strong growth based on a planned outspending of cash flow this year.

  138. 138
    baylor3217 Says:

    out of curiosity, where are the FOMC notes officially released? (in other words, where do people usually look to get the info first)

    I usually find it on finance.yahoo.com but i’m guessing they dont do a PR Newswire type release as their official announcement.

  139. 139
    zman Says:

    Baylor – I always get it here:

    http://www.marketwatch.com/story/text-of-fomc-statement-2010-04-28?dist=countdown

  140. 140
    baylor3217 Says:

    VLO trying to close at the highs of the day

  141. 141
    baylor3217 Says:

    In today’s odds & ends:

    # Barclays shift targets about:

    * CHK cut $5 to $32

    They had a $37 price target on CHK?

    interesting…

  142. 142
    zman Says:

    re 141. Yes.

  143. 143
    zman Says:

    XOM boosting dividend. That name is just above the level at which is announced the XTO acquisition. Funny thing is that for once XOM is doing the right thing, buying gas assets in the U.S. while they are cheap. I think you could have gone with a better reserve base but that’s really splitting hairs. In 5 years they may be viewed as brilliant with the move.

    RRC made a very good point on their conference call, differentiating between those who have oily acreage they can allocate dollars to during times when oil is high (they complimented NFX on this) vs those who are out paying up for oily acreage now that oil has run (the unspoken name in that case would be Chesapeake). They said this is the time to be buying into gas plays, not oil, which makes a lot of sense.

  144. 144
    zman Says:

    beerthirty

  145. 145
    bill Says:

    beerthirty..not so fast, lol

    wll numbers out

    they look good to me

  146. 146
    BirdsofpreyRcool Says:

    HP buying Palm

    Visa out with bettern exp’d

    Allstate worse than exp’d

  147. 147
    BirdsofpreyRcool Says:

    (why would anyone want to buy PALM??)

  148. 148
    cargocult Says:

    Bill, you keep up with EXM? They look undervalued compared to their peers.

  149. 149
    bill Says:

    Cargo

    im familar with the name and was in it a few year ago. They acquired QMAR pre crash at the top of the market

    let me take a fresh look at them.

    I like nm and dsx in the sector

  150. 150
    baylor3217 Says:

    That HPQ deal sounds like a ME TOO type acquisition.

    PALM has been a rumored takeout target for quite a while now. Not particularly surprised it was HPQ but not sure if my fellow Baylor grad of a CEO should have picked this one up.

  151. 151
    zman Says:

    Re WLL – looking it over.

  152. 152
    cargocult Says:

    Bill, thank you

  153. 153
    elijahwc Says:

    WLL – the short version from briefing:

    WLL Whiting Petroleum beats by $0.05, beats on revs (84.16 +1.00)

    Reports Q1 (Mar) earnings of $1.15 per share, $0.05 better than the Thomson Reuters consensus of $1.10; revenues rose 114.5% year/year to $351.3 mln vs the $319.7 mln consensus. Co says “We expect to fund our capital expenditures through discretionary cash flow during the remainder of 2010. We have a 210-well drilling program planned for 2010, which includes at least 13 gross wells at our Lewis & Clark prospect area. One of our primary objectives in 2010 is to establish another resource play. We believe our Lewis & Clark prospect area, where we have amassed a 211,000 net acre position, has the potential to be such a play. By focusing on our Bakken drilling program, our two EOR projects and adding a new resource play, we expect our organic growth to continue in 2010 and beyond.” Co sees Q2 Production (MMBOE) of 5.60 – 5.80 and for 2010, 22.60 – 22.90.

  154. 154
    zman Says:

    WLL

    Beat the top end of guidance for the quarter by 2%, driving the bottom line beat, costs came in at the low end of the range.

    Guidance for the year goes up with the old high end of the range becoming the new low. Now looking for 11.5 to 13% growth.

    Not a lot new in the ops update, one nice well in Sanish.

    Nothing new at Lewis and Clark although the acreage position may be up a tad.

  155. 155
    BirdsofpreyRcool Says:

    BedTime Market Strategist

    Déjà Vu.

    Despite the recent round of rampant dovishness out of the Fed, we believed the FOMC should have taken “baby steps” towards tightening language and restored the 100 basis point spread between the Discount Rate and the Fed Funds rate. Needless to say, the FOMC did not see the situation as we do. The Fed decided to remain with the status quo. We have always asserted that the earliest potential timing for a real tightening move is the end of 2010, but it would be more likely that rates do not rise until 2011. Nonetheless, when it comes to the use of words and jawboning, the FOMC cannot be permitted to fall into the same pattern as 2002-2005. During that time period, for 29 consecutive FOMC meetings, the statement used the word “accommodative” to reference monetary policy. It is widely believed among the investment community (ourselves included) that such predictability of interest rate policy over the course of years fueled the housing bubble, credit bubble, SIV’s and reckless carry trades. The Fed Chairman does not share this view, he still blames the “global savings glut,” but we remain convinced it was the leverage. The “exceptionally and extended” language in its current form has been in the statement for just over a year, or 9 meetings. But remember, the current level of monetary policy is “accommodative” on steroids. Anyone who reads this Note regularly knows that we have been (and remain) bullish for some time. The reasons for our optimism have varied. At the depth of the crisis, we believed the policy response was the correct one. Then, after the economy bottomed, we believed in the power of the earnings recovery which is now being joined by the progress of the economic recovery. Just as the members of the FOMC fear the latent deflationary threat and slack in the economy, so do we. With 9.7% unemployment, we do not support Kansas City Fed President Hoenig’s push for a 1% Fed Funds rate right now, but we do find ourselves in precise alignment with Hoenig’s dissent as described today.

    Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly.

    A change in language may or may not signal a change in policy. It is a pretty safe bet that at this point in time, it would not signal a substantive change in policy, but allows for flexibility if necessary. The bottom line is that with an extra $1.5 Trillion of liquidity added to the system and a 25 basis point Fed Funds rate, any investor or business person who needs to read “exceptionally and extended” in an FOMC statement before making an investment or capital expenditure decision is a weak hand, adds no value and should not be given the free ride.

  156. 156
    zman Says:

    Part of tomorrow’s Stuff Section:

    * CLB Reports Better Than Expect and Record Quarter; Numbers Should Be Headed Higher
    o Revenue of $188.3 mm vs $183 mm expected.
    o Operating margins were 27%, near record
    o EPS of $1.38 vs $1.31 expected. Guidance was $1.35 to $1.38 and had been revised higher once.
    o Brief Nutshell:
    + Outperformance was again driven by strength in all three divisions (Production Enhancement, Reservoir Management and Reservoir Description)
    + Margins remain strong for all segments
    + Reservoir Description continues to run hot internationally, including in Iraq
    + Reservoir Management continues to enjoy expanding joint-industry projects in the Eagle Ford, Haynesville, Marcellus shales and in the Granite Wash play. A joint-industry project has been started in the Niobrara.
    + 2Q10 Guidance remains equal to number put out at mid month.
    # Revenue of $185 to $190 mm vs current Street estimate of $190 mm,
    # Operating margins forecast to be 28%, a company record.
    # EPS of $1.39 to $1.44 vs current Street estimate of $1.40.
    + Balance Sheet: Net debt to cap of 25%.
    + Valuation: Interesting comment in the pr about them being the number one performer of 30 Service names in terms of ROIC.
    # 2010 P/E of 26x (the denominator here will be rising after this report)
    # 2011 P/E of 22x
    + I don’t see how these guys continue to remain independent of SLB or HAL for very much longer.
    o Conference Call: today, 8:30 am EST

  157. 157
    mimster90 Says:

    I found the following EXXO info. I don’t know if this is new news

    Firstly, Ensminger is at 9,700′ where they were testing thier blow out preventer.

    Secondly: And this is a MAJOR deal. The Second lein notes are being withdrawn and replaced with notes that have the same conditions with the excpeition that the notes will be tradeable on the open market. Meaning EXXI could use cashflow to purhcase them back at lower prices if the bond prices get depressed.

    An exerpt of the filing below.

    Prospectus

    Energy XXI Gulf Coast, Inc.
    Offer to Exchange up to
    $338,622,000 of 16% Second Lien Junior Secured Notes due 2014
    (and up to $32,190,136 of 16% Second Lien Junior Secured Notes due 2014
    as payment of interest thereon)
    for
    $338,622,000 of 16% Second Lien Junior Secured Notes due 2014
    (and up to $32,190,136 of 16% Second Lien Junior Secured Notes due 2014
    as payment of interest thereon)
    that have been Registered under the Securities Act of 1933

    Terms of the Exchange Offer
    • We are offering to exchange up to $338,622,000 of our outstanding 16% Second Lien Junior Secured Notes due 2014 and up to $32,190,136 of our 16% Second Lien Junior Secured Notes due 2014, if any, that may be issued as payment of interest thereon (the “outstanding Notes”) for $338,622,000 of our 16% Second Lien Junior Secured Notes due 2014 and up to $32,190,136 of our 16% Second Lien Junior Secured Notes due 2014, if any, that may be issued as payment of interest thereon (the “new Notes” and, together with the outstanding Notes, the “Notes”) with substantially identical terms that have been registered under the Securities Act and are freely transferable.
    • We will exchange for an equal principal amount of new Notes all outstanding Notes that you validly tender and do not validly withdraw before the exchange offer expires.
    • The exchange offer expires at 5:00 p.m., New York City time, on May 3, 2010, unless extended. We do not currently intend to extend the exchange offer.
    • Tenders of outstanding Notes may be withdrawn at any time prior to the expiration of the exchange offer.
    • The exchange of outstanding Notes for new Notes will not be

  158. 158
    BirdsofpreyRcool Says:

    Nice catch, mimster. Means that EXXI is finally getting around to registering the 16% 2nd liens they issued under the 144a exemption last Sept with the SEC. Once the private placement notes are exchanged for registered notes, the bonds won’t necessarily trade on an exchange, but non-institutional investors (like us) can buy them and trades should show up on TRACE (so we can see pricing).

  159. 159
    skimo Says:

    Is there anything not to like about how LINE manages their business?

  160. 160
    zman Says:

    Ski – not that I can see. Post out in 10 minutes, CLB cc starts at the half hour.

  161. 161
    bill Says:

    wll slides

    http://www.corporate-ir.net/Media_Files/IROL/14/147759/Web4-29-10A.pdf

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