28
May

T.G.I.F.

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Market Sentiment Watch: Hooray 3 day weekend! Watch the volume and volatility die off live, on your screen after lunch.   

TopKill Watch: MMS director officially top killed yesterday. Stay tuned ... The real topkill is still a work in progress with BP reporting some problems with the initial work (too much mud escaping) and some progress last night as they add bridging material (junk) to the BOP. BP sold off overnight over fear the topkill junkshot operation was not working. This morning the Coast Guard said the operation had killed the flow of oil and gas from the well but that it was critical they maintain this for the next 12 to 18 hours. BP said that the operation is going to plan.

Ecodata Watch:

  • Consumer spending of 0.0% vs expectations of 0.1%
  • Chicago PMI comes out at 9:45 am EST, expecting 61%
  • Consumer sentiment comes out at 10 am EST, forecast of 73.4

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Stuff We Care About Today - BEXP, Shell
  5. Odds & Ends

Holdings Watch

ZCAT (Zman Catalyst portfolio)

  • $7,500
  • 99% Cash
  • Positions for the quick view are updated on the ZCAT, ZIM, ZLT page.
  • Yesterday’s Trades: None

ZIM (Zman Inefficient Markets portfolio)

  • $9,950
  • 2% Cash
  • Yesterday’s Trades:
    • BP – Sold the (5) June $42.50 calls for $3.80, up 51%,  with the stock just over $45. I continue to hold HAL calls as a play on the BP spill and still strong fundamentals in that name.
    • BP – Added (20) June $50 calls for $0.51 on the mid with the stock at just under $45. I assume they leg up once more if the top kill is successful today or tomorrow.

 

Commodity Watch

Crude oil jumped $3.04 to close at $74.55 yesterday (strong equities, weak dollar again). This morning crude is trading up slightly on a weaker dollar.


Natural gas increased $0.12 to close at $4.29 yesterday. The EIA reported a slightly larger than expected injection into storage (see below) but the word that NOAA would be upwardly revising it's Hurricane forecast for this season more than offset the injection news. We should get fresh supply numbers from EIA sometime this today. This morning gas is trading up 4 cents.

  • Tropics Watch: NOAA calling for the most active hurricane season since 2005, maybe one of the most active ever. Colorado State will update their forecast (higher) on June 2.

Natural Gas Storage Review


ZComments: Surpluses to the year ago and 5 average figures were slightly eroded but there really isn't much to say at this point except that we remain oversupplied for the time of year and only significant and sustained heat are going to keep storage from rapidly rebuilding towards last Fall's record peak.

 


 

Stuff We Care About Today

BEXP Comments From Pritchard Presentation:

  • Volume Guidance:

    • 2010 Unchanged at 5,189 BOEpd
    • 2011 Established at 10,400 BOEpd

Shell Buys Marcellus and Eagle Ford Assets

  • $4.7 B for 1.05 mm net acres in the Marcellus
  • Shell also added a 250,000 acre position in the Eagle Ford
  • Good to see continued interest in gas shale plays in the U.S. by foreign players that began in earnest last year.
  • Should be good for players in both plays:

    • Especially RRC and PVA (which also made a Marcellus buy today) in the Marcellus.
    • Also detracts from recent comments by CHK about the valuation of Marcellus acreage as this was about $4,500 per acre and not the $14,000 per acre we have seen in some recent deals. Won't hurt the stock, just the argument about big slots of contiguous acreage getting a premium.
    • and it also looks good for HK, EOG, PXD, SFY in the Eagle Ford.

Odds & Ends

Analyst Watch:

  • BP - Credit Suisse cuts target from $64.36 to $57.80, maintains outperform
  • SU - Cut to Equal weight at Barclays

138 Responses to “T.G.I.F.”

  1. 1
    zman Says:

    Looks like SD has ARD bagged. Forms filed showing shareholder suits settled.

  2. 2
    BirdsofpreyRcool Says:

    Well slap my face! RIGHT after i said that Shell doesn’t do acqtns… they DO an acqtn. Pretty much within seconds of the statement. Ha. Note to self… one more dogma sent to the Dogma Pound. Hit “reset” button.

    Another weird day in credit… but generally pointing to the positive. TED is still stubbornly wide; no movement from his perch at 37+ basis points. Meanwhile, the investment grade and high yield indices go wild. Even seeing some debt deals delayed over the last two weeks getting done now. So, things feel somewhat less like The End of the World As We Know It today. Reminder… 2010 is no where NEAR the complete disaster waiting to happen that we call Fall of 2008. If anyone tells you it is, they are either short, lying, or just plain ignorant of anything other than watching stocks bounce around.

    IG -1 1/4 bps tigther

    HY +3/8 point higher

    It’s the end of the Month and Hedge Funds are gonna wanna see stocks close green, methinks.

  3. 3
    zman Says:

    “they are either short, lying, or just plain ignorant of anything other than watching stocks bounce around.”

    I’ve found that most times those first two are the same thing.

  4. 4
    BirdsofpreyRcool Says:

    Pre-mrkt observation… it’s good to be a KOG-ger today. Oily, totally onshore, new credit facility with a great bank in place, no need to raise equity on the horizon, and did i menion totally onshore? Yep. Not many totally onshore, publicly-traded E&Ps are pretty much 98% oil production. Good thing.

  5. 5
    milepost_43 Says:

    TGA and 1st horizon frac in Egypt
    from IR….
    We are moving tanks into the field now to do the frac on the horizontal
    well Arta 12. The Packers Plus equipment is en route (currently in JFK
    waiting for cargo space on Egypt Air) and is expected in Cairo on June
    2nd. We expect to complete the frac during the second week of June. We
    will also be fracing Arta #6 and #13 and are in the process of
    evaluating Arta #1 for a frac in this program. Update press mid-June

    ckd news archives and last 3 years updates, June 16, 19, & 12….likely results in time for mid June update PR by Fri 18th…..added some Jul calls on pullback……..

  6. 6
    zman Says:

    KOG shareholders meeting June 3

    Thanks for the reminder on TGA MP, Occam mentioned earlier this week, have not looked at yet.

  7. 7
    zman Says:

    I’d add to BOP’s list WLL, BEXP, NOG, AEZ, and tiny SSN.

  8. 8
    zman Says:

    BP spill stuff:

    CS saying they have definitively established HAL did not provide the float collar or perform the float test. So that’s on BP’s head.

    Float collar:
    http://www.glossary.oilfield.slb.com/DisplayImage.cfm?ID=501

  9. 9
    Nicky Says:

    Morning all.

    Support at 1097,1091. Resistance at 1103,1107,1115.

    We maybe due a small pullback. 1090 needs to hold.

  10. 10
    zman Says:

    Energy yield names just keep rebounding. It was a weird drop and when WHX crosses back above the downgrade prices and at a lower prevailing oil price I promise to gloat and laugh out loud.

  11. 11
    zman Says:

    Thanks Nicky.

  12. 12
    zman Says:

    JB – how much credence do you give moving averages on penny names? SSN at $0.62 appears to be 2 cents below its 50 day.

    You can see all of JB’s chart work here:
    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

    and vote at the bottom.

  13. 13
    elijahwc Says:

    Capital One Southcoast: E&P Moratorium Thoughts

    ATPG & CIE: Among covered E&Ps, ATPG and CIE have the most leverage to a ban on deepwater drilling

    We estimate that a six-month delay to ATPG’s Telemark #2, #3, and #4 wells would reduce our $7.66 2010 CFPS estimate by $1 and our 2011 CFPS estimate of $14.06 by a little over $1 to $12.91. With no financial covenants associated with its $1.5B bond debt and zero drawn on its revolver, ATPG has no covenant issues to worry about on the drilling delays. A six-month delay would reduce our NAV by $1 from $24 to $23 for ATPG.

    Deepwater focused CIE has no wells currently drilling in the deepwater but it had plans to spud Ligurian and North Platte in deepwater GOM in the next 6 months. Our $18 NAV includes $1 per share for the Heidelberg and Shenandoah developments in the GOM and $3 of risked GOM exploration value. Even excluding the GOM completely, we would get a $13 NAV for CIE, with $10 for its West African exploration program and $3 per share in cash as of the end of 1Q. The company has no debt. After backing out the ~$3 cash, at the current stock price of $7.15 per share for CIE, investors get the GOM for free and the West African exploration program (worth $10 risked at a ~30% chance of success) for only $4 per share.

    Our take: Seems to us like risk tolerant investors could do well buying ATPG and CIE down here. These two stocks are down over 40% each in the last month versus 21% for the average GOM E&P in our coverage universe.

  14. 14
    john11 Says:

    Given that SD/ARD happens, any valuation thoughts going forward?

  15. 15
    zman Says:

    John – will work something up over the weekend. The combined is a lot better than SD standalone. Surprisied the stock is not caring at all at the moment. Back to weird market as big drops, especially in the service names are occurring on very light volume.

  16. 16
    Nicky Says:

    May Chicago PMI 59.7% vs 63.8 in April

  17. 17
    zman Says:

    Consumer sentiment of 73.6, in line.

  18. 18
    Jerome Blank Says:

    Re:#12, good morning, thank you for the vote…the moving avg’s we reference (20,50,100,200) are largly followed and I find them helpful to pin down support and resistance, especially with a stock like SSN, which has good vol…with SSN I’d really like to see SSN get back above .75, breaking this downward channel which found support at the 100 day SMA, a break above .75 would change the tone and print a local higher high…

  19. 19
    zman Says:

    Thanks JB…it’s getting help from the other Bakkens like BEXP, WLL, CLR.

    SM got away from me again, 3 days, $2 each day. Wow.

    BEXP and HK moving pretty well again by the way and my pile of calls in each (50 of the BEXP and 100 of the HK) are waking up in the ZIM now.

  20. 20
    zman Says:

    Got this from Stephens and am only posting verbatim because they owe me:

    We received a recap of a call the Department of Interior held
    yesterday (5/27) with members of the industry. It is our understanding
    that no new drilling or completion related activity will be permitted
    in the deepwater GOM for the next 6 months. The government is asking
    that existing drilling operations cease as soon as they can be stopped
    safely. Additionally, the administration has canceled two lease sales.

    Prior to yesterday’s 11:45 a.m. CT press conference by the President,
    most believed that new drilling activity would be held up for some
    period of time, but now it appears completion and workover activity
    will be impacted as well. Official regulations have yet to be released
    but a total shutdown of deepwater drilling rig activity appears to be
    underway. The particulars are expected in a document to be posted on
    the Department of Interior website in the near future. In the
    meantime, there remains a great deal of uncertainty as the
    Administration figures out all the specifics; for example, how
    vessel-based intervention work might be affected.

    The situation is fluid and it’s still too early to assess the ultimate
    impact, but clearly a shutdown of all deepwater operations will
    negatively affect those with exposure, at least through the end of the
    year. We would expect the stocks with the most leverage to the
    deepwater US GOM to remain volatile as the industry sorts out the
    implications of the new regulatory and operating environment.

  21. 21
    zman Says:

    Bastardi debunked claims that oil in the Gulf will lead to stronger hurricanes, a story that’s making the rounds the last couple of days.

  22. 22
    zman Says:

    Jat – have you seen any comments on NFX yet on #s coming down due to delays?

  23. 23
    skimo Says:

    Anybody ever look at this forecasting service? When I was really looking hard this stuff for someone back in 07/08, they seemed to have been closer to the mark than the guys out of Colorado, anyway,always nice to have several weather vaticinators if possible.
    http://www.tropicalstormrisk.com/

  24. 24
    zman Says:

    Ski – I’ve seen them but don’t know how good they are. Maybe I should add them to the links on the weather tab and see how they do this year.

  25. 25
    tomdavis12 Says:

    Z: re NE I know I said 27.5 to 28 was the drop dead area, I just didn’t expect it in one day. It looks like NE now has the flying turd award. Mea Culpa to anyone listening to my rantings. I am glad everyone on here is wise enough not to listen to me.

  26. 26
    zman Says:

    Tom – Buck up camper, hard to predict that what happened would have happened. Its the black (oily) swan event for offshore.

  27. 27
    zman Says:

    Eli – MHR private placement on the tape.

  28. 28
    elduque Says:

    re 20- How much expected production will this effect. NG and CL? Which cos. are most effected. Sort of negative Z catalyst watch.

  29. 29
    zman Says:

    Gulf of Mexico production:

    About 30% of U.S. oil production, out of that deepwater accounts for about one third. We produce about 5.4 mm bopd so neither figure is insignificant. Understand that its new drilling and not production that is cut so the production will just be declining off in the interim.

    On the gas side, deepwater accounts for about 3% of U.S. natural gas production. I’ve seen different figures floating around but those are the best ones I’ve come up with in filtering the data.

    Who is affected. ATPG I would agree is the most leveraged to deepwater drilling (or not in this case). APC has a big stake in the deepwater and most other big caps are there to one extent or another except for EOG and CHK. DVN just punted so good timing for them. Numbers will coming down for many names who will simply see delays in getting development projects on line, including NFX but that one should not be a big hit.

    Probably a worse thing for all the deepwater rig names.

  30. 30
    zman Says:

    Nicky – any more thoughts on levels, we’ve traded down to the 1094 level twice. Market looks sleepy.

  31. 31
    zman Says:

    The Street is shooting oil service in the head today without regard for what companies do, and I guess will let the market gods sort them out later. OIH down 5%.

  32. 32
    elduque Says:

    re 29 – that should make SU relatively more attractive.

  33. 33
    zman Says:

    One would think so, yes. Market sort of fell out of bed into the European close.

  34. 34
    zman Says:

    If you got to the live feed now you can see a pile of junk that they appear to be choosing from to stick into the BOP.

    http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/homepage/STAGING/local_assets/bp_homepage/html/rov_stream.html

  35. 35
    1520sbroad Says:

    Crisp, sparkling sunny day so far in NY/NJ. I think the B-team effect this afternoon will be more noticeable than usual as the A-team is likely already on the golf course, at the shore, hamptons etc.

  36. 36
    jat Says:

    Sorry, regarding the NFX question, broker sent me a comment that they continue to drill pyrenees and haven’t received any official cease notice. when that happens they have the option to declare force majeure and can get out of the diamond contract by paying a 10 day rate fee, which I think would be like $3mln or something. small potatoes in my view, NFX still benefits from shift to more onshore oil names, plus the operational flexibility is great.

  37. 37
    zman Says:

    Or if you need a laugh:

  38. 38
    jat Says:

    Morgan Stanley fanning OIH flames today.

  39. 39
    BirdsofpreyRcool Says:

    Stupid comment from a North Korean General has caused the credit mrkt to weaken. XACS believes the credit move points to a down 15 to 20 point loss on SPX. Doesn’t mean it goes there… but that is what parity suggests right now.

  40. 40
    zman Says:

    Reef, Geno, Wyo, TexW or whoever, how do you get the junk in the BOP, just curious as I watch a BOP with a knotted up bunch of rope drive around. I am thinking there is some kind of port with two doors on it?

  41. 41
    zman Says:

    Thanks Jat and BOP.

    Guest on CNBC saying because the public is freaked out we should stop drilling on the Shelf too. Nope, sorry, wrong answer. If you think they are freaked out now, wait until they pay $5 at the pump and $8 / Mcf again for natural gas.

  42. 42
    elijahwc Says:

    MHR – Z my people say it hasn’t. At least not yet. Last drive by was in Nov ’09.

  43. 43
    zman Says:

    Chinese saying they are undecided on what sank the S. Korean ship.

    Leaked U.N. report says N. Korea exporting nuclear tech:

    http://www.guardian.co.uk/world/2010/may/28/north-korea-exporting-nuclear-technology

  44. 44
    zman Says:

    Eli – it was on the Reuters tape at 9:30. $1.5 mm private placement.

  45. 45
    Nicky Says:

    re # 30 – still playing out pretty much as I laid out Z. Corrective pullback towards 1190 (when i looked again it could go as low as 1187 without causing too much damage) and then another move up to challenge the 1110 – 1120 area (there is a gap at 1110).

  46. 46
    zman Says:

    re 45. Um, you mean exactly like you laid out! 😎

  47. 47
    Nicky Says:

    re # 46 – lol! I am actually starting to feel a little more bullish! The move down to 1060 and rocket ride off it set up an inverse h and s which targets the 1140 area.
    My thoughts are that we top out early next week at the area suggested in #45 but possibly as high as the 1140 area. From there we should see another pullback.
    FWIW the voodoo looks very positive from 7th June onwards for 2 weeks.

  48. 48
    TEXWS6 Says:

    Junk in BOP? Very easy when you are just drilling ahead normally. Think about all the mud, rock, crap you are circulating past that BOP during NORMAL operations, not to mention 5000′ of water (hydrates).

  49. 49
    zman Says:

    TEX – thanks, should have said, how do you get it in there intentionally, through a port in the side, was just wondering if that was tough, but apparently they just open a choke or kill port and stick it in. Sounds like we’ll know better by Sunday.

  50. 50
    zman Says:

    SD – has settled 6 of 9 lawsuits and issued a white paper on the potential benefits of the merger with ARD.

  51. 51
    zman Says:

    Option Monster saying option activity tells them that yesterday was going to be as good as the stock price gets for BP. I’m betting they are wrong.

  52. 52
    elduque Says:

    I see the senate is considering a tax break for electric cars. Where does the electricity come from? The sky.

    Why is the country so reluctant to embrace natural gas? It seems like the ultimate no brainer.

  53. 53
    zman Says:

    ZTRADE – ZIM – BP

    BP – Added another (30) calls for $0.24 with the stock just over $43. We should know more about the top kill efforts by Sunday.

  54. 54
    zman Says:

    Those were the June $50s.

  55. 55
    zman Says:

    Eld – yes, they think the sky (wind and solar). Unfortunately for them 50% will come from coal, at least initially.

  56. 56
    BirdsofpreyRcool Says:

    Fitch on the tape, downgrading Spain from AAA to AA+

    SELLLLLLLLLLLLLLLLL

    ha.

  57. 57
    BirdsofpreyRcool Says:

    Thing is, the A-Team has already left their desks for the Hamptons. The B-Team is in charge… and worried that they might actually have to DO something.

    So, fragile mrkt means volatility… could cut both ways, tho. Right now, cutting the bulls…

  58. 58
    zman Says:

    I wouldn’t think the downgrade is much of a surprise at this point.

  59. 59
    BirdsofpreyRcool Says:

    One would think that, yes…

    hence, the “ha”

  60. 60
    zman Says:

    What’s Fitch’s highest rating?

  61. 61
    BirdsofpreyRcool Says:

    AAA

  62. 62
    Nicky Says:

    Support at 1079

  63. 63
    VTZ Says:

    That says something right there if they were rated AAA until now. Why do the ratings companies even exist.

  64. 64
    zman Says:

    … and their second highest rating is?

  65. 65
    john11 Says:

    This should be buyable,..imo.. adding AEZ and BEXP

  66. 66
    zman Says:

    My point exactly V.

  67. 67
    Nicky Says:

    Interesting CNBC Fast Money traders reporting this as a buying opportunity….

  68. 68
    BirdsofpreyRcool Says:

    AAA- i suppose

  69. 69
    BirdsofpreyRcool Says:

    nope… wrong… no AAA-…. you go straight to AA+ from AAA

  70. 70
    BirdsofpreyRcool Says:

    S&P has Spain one notch lower, at AA

  71. 71
    BirdsofpreyRcool Says:

    S&P cut spain’s rating on April 28th… so Fitch just paying catch-up

  72. 72
    zman Says:

    Gotta say, they are anything but forward looking.

  73. 73
    Geno Says:

    just got off the phone with one of my deep water bud’s. Just got the word to shut down and plug anything drilling. This going to be a huge deal. Think about the lawsuits over long term contracts, lease expirations, etc.. I know they will play the FM card, but you just don’t turn things off like a light switch. If there’s any good news in gonna be for the onshore guys.

  74. 74
    BirdsofpreyRcool Says:

    Geno — thanks for confirming. Heard rumors about that on Tues. ugh.

  75. 75
    zman Says:

    Right. But bad also for service, HAL, SLB, and the rig and equipment guys all pretty busy out there.

  76. 76
    Geno Says:

    The service industry in south La may just be a memory soon.

  77. 77
    tomdavis12 Says:

    Z: I guess if there is a plane crash, you should cancel all flights. POTUS is becoming the king of overreaction.

  78. 78
    Geno Says:

    further on my last comment I had shown them a large deal to them last week they called yesterday and loved the deal but turned it down. Called today and said forget that we may need to spend some money onshore since we can’t offshore. Could be big turn for onshore guys

  79. 79
    Geno Says:

    All of us here in la are resting peacefully now that Obama’s here and IN CHARGE.

  80. 80
    zman Says:

    Geno – It’s only deepwater as per your comment though, right, Shelf continues on. Wondering about TDW and DVR and who was that bought Petroleum Helicopter?

  81. 81
    zman Says:

    I also wonder if paying “all legitimate claims” will mean paying out of work oil service firms.

  82. 82
    BirdsofpreyRcool Says:

    PetroHel just changed their name… wasn’t bought… PHI now (PHII ticker)

  83. 83
    BirdsofpreyRcool Says:

    Pelosi on the tape, talking about ending the Oil-Driller liabity cap… this would kill the under-$1B mrkt cap kids who play in the GoM. Don’t think it will go thru… but, doesn’t mean it doesn’t scare some people.

    Nancy… I wonder if a business can take out insurance against her… bet it would be expensive, tho!

  84. 84
    Nicky Says:

    Guy from Fitch was just grilled on CNBC. He said they have no further plans to cut Spain again in the next year. Seemed to lift the market a bit.
    The print low was 1086.25. Market needs to hold 1086 or I would turn more bearish short term.

  85. 85
    zman Says:

    Called our lawyer to ask about 81. He said no way, no how BP is responsible for a shift in government policy.

  86. 86
    jat Says:

    fyi, large cap service gom revenue is low to mid single digits. obviously estimates are coming down and the stocks are getting nailed, but it’s not as bad as it is for offshore drillers in terms of their immediate effects and the longer-term effects on their dayrates.

  87. 87
    zman Says:

    Jat – agreed. HAL down too much here on this.

  88. 88
    Gtinvest Says:

    Rigcounts Us +17, oil +17, Gas -2, misc. +2, N.D. +6, go Bakken Boys !

  89. 89
    zman Says:

    GT – thanks.

  90. 90
    zman Says:

    EIA data out for gas, new high shown for the March data. Surprised gas holding green and here on this, probably not going to hold up by Monday on this but we also get upwardly revised hurricane numbers and lower gas production thoughts from the Gulf to offset. I’ll have the slide show out of over the weekend.

  91. 91
    zman Says:

    March data for Lower 48 gas production goes to 60.94 Bcfgpd. This is a new recent high and is up from:

    60.18 Bcfgpd in Feb
    59.22 Bcfgpd in Jan

    Texas is turning back up

    Other states hit a new high

    Louisiana ditto

    N.M., OK, Wyoming and Gulf were flat and have been for awhile now.

  92. 92
    elduque Says:

    futures market is a forward looking vehicle- Sometimes???

  93. 93
    zman Says:

    re 92. Yeah, juniors in charge today and conflicting items in the data path. Means do nothing today and sort it out on Tuesday for those guys.

  94. 94
    Hoss Says:

    Z,

    Just for grins – I think shareholder vote for SD/ARD is 6/8

    SD/ARD Deal – 4.7771 SD shares + $2.5 cash for every ARD share

    SD – Down 17.3% since 4/1 close – day before announcement
    ARD – Down 4.5%

    SPY – Down 7%
    XLE – Down 9.25%
    XOP -Down 5%
    USO- Down 18%
    UNG – Up 0.5%

    ARD Discount to merger value using closing prices since day of announcement Widest – (7.53%) Narrowest (0.47%) Current (1.41%) Avg (3.2%)

    APA/ ME Deal – .17043 APA shares +$7.8 cash for every ME share

    APA – Down 16.8% since 4/14 close – day before announcement
    ME – Up 17.5%

    SPY – Down 10.5%
    XLE – Down 13.5%
    XOP -Down 8.5%
    USO- Down 23%
    UNG – Up 2.7%

    ME Discount to merger value using closing prices since day of announcement – Widest (9.76%) Narrowest (0.40%) Current (7.68%) Avg(4.12%)

    What do you think of using the wide discount in ME to catch the bounce in APA in the event the well is plugged?

  95. 95
    zman Says:

    Hoss – I think that’s pretty smart. I was just contemplating the validity of the calorie count in Red Stripe Light, but I respect the fact that you have your thinking cap on this late in the week, especially given the diver down action of the S&P at the moment.

  96. 96
    Hoss Says:

    Just messing around. The ME options are a little tricky – but aren’t they all.

  97. 97
    1520sbroad Says:

    #95 – that’s the spirit. Everyone have a good weekend

  98. 98
    zman Says:

    Hoss – I’ve been playing BP straight up on this because a) the spreads are tight b) because they trade like water c) the volatility keeps kicking up after I buy and so the bids are better than my buy in with the stock lower (acting like I bought a put). I think there is a 10% pop on the stock at minimum if they say over the weekend they have it plugged. Probably less downside left if they say time for BOP stacking.

  99. 99
    zman Says:

    re 97. I mean seriously, 35 calories. Tastes the same (to me) as the original. That’s about 1/3 of an amstel light.

    Natural gas up 9 cents now. Go figure.

  100. 100
    choices Says:

    link to SD/ARD White Paper-Z, I’m interested in your thoughts (when you get a chance) on the points made in the paper and the attractiveness of SD after the merger-thanks.

    http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Mzg0NDg2fENoaWxkSUQ9Mzg1OTk2fFR5cGU9MQ==&t=1

  101. 101
    zman Says:

    Choices – I will peruse but am covered in suddenly out of school interns at the moment who really need to be thrown in the pool.

  102. 102
    1520sbroad Says:

    Z – be on the lookout – I sent you some snail mail – to the P.O. box/ZEB HQ

  103. 103
    choices Says:

    as a follow-on to #100, does the debt picture for SD get any brighter-not sure what ARD brings in the way of cash or more debt.

  104. 104
    choices Says:

    Thanks, Z-no hurry-whenever you get a chance.

  105. 105
    zman Says:

    SD/ ARD white paper thougts

    page 2/3 – OK amount of other interest entertained pre deal announcement, suggests there wasn’t any after the deal. Sort of hard to believe given the low premium and doesn’t address why they are selling out at this point for this low valuation.

    Good job of showing pro forma – this is no longer a gassy company but is 57% liquids after taking into account the deal with FST and the merger with ARD.

    page 6 – didn’t really answer the synergy question.

    Nutshell: decent, not going to satisfy everyone.

    Debt to cap will fall, haven’t run the numbers in awhile, planning to do over weekend.

  106. 106
    RMD Says:

    VNR” small inside buys bu CEO and CFO . Will announce distribution increase after all hedges in place; sounds like it will be more than 1 cent per quarter increase.

  107. 107
    AAA Says:

    I heard something on the radio yesterday to the effect that BP had received a waiver from the MMS regarding something to do with the original plugging of the well. I assume it had to do with pressure tests or removing the mud prior to installing the second plug. Anyone know what this was? I wonder if they could use it to claim they were not negligent, since the government had approved whatever they did.

  108. 108
    zman Says:

    Was planning to have some more SD/ARD thoughts in the Tuesday post.

    RMD – yeah, I would think it would be a noticeable bump maybe in the 3 to 5% range over current.

  109. 109
    zman Says:

    AAA – I heard they had a waiver for a plan for a plan that was tailored to this well for an emergency plan, instead using an off the shelf plan. Had not heard about any waivers on plugging. Hmmm.

  110. 110
    RMD Says:

    VNR confirmed 16% decline rate mentioned on conf. call as the decline rate on their PDP production only, influenced by the steep decline of new wells. 15-17 yr. reserve life includes the PUDs. Now I wonder if LINE and the other upstream MLPs have the same PDP decline?

  111. 111
    AAA Says:

    Z, that may have been it. I just caught a fragment of the discussion. So it would not be relevant to liability for the blowout in that case.

  112. 112
    andy Says:

    red stripe – finally a subject i have some knowledge of!!! red stripe light at 35 cal and 3.8 alcohol content, select 55 is 55 cal and 2.4 a/c whereas mgd 64 is 64 cal and 2.8 a/c. RSL looks pretty good if u can safely assume the calorie content is accurate.

  113. 113
    AAA Says:

    HAL off 7%+, OII off 11%.

  114. 114
    zman Says:

    AAA – It could be something else but that’s the only waiver I recall hearing about. I think CAM is not going to be in trouble over this. HAL shouldn’t be but the President actually mentioned holding them accountable so who knows.

    RMD – I thought I saw the base decline in one of LINE’s presentations. 16% sounds high to me, will dig about.

  115. 115
    zman Says:

    re 112. I have to question it as well. Makes me wonder what those guys were smoking.

    Yeah, they are clubbing the OIH like baby seals. On the OII, there are generally 1 or 2 ROVs on every deepwater project. Most of them are OII’s. That about $9,000/day each, not working for 6 months plus collapsed day rates around the globe for those.

  116. 116
    zman Says:

    S&P jumping higher.

  117. 117
    AAA Says:

    Z re 114, sorting out the liability issues here could make a good law school exam question. BP blames HAL for a defective cement job, HAL blames BP for pulling mud, RIG blames both of them. It will take decades to sort out, given the efficiency of our legal system. Lawyers will put their infants through Harvard off this. I may be dead wrong, but I see these companies as nothing but short term trading vehicles. The history of companies that get mired in the litigation swamp is not a happy one, eg asbestos, tobacco.

  118. 118
    Nicky Says:

    Starting to look a little more constructive. We have broken out of todays down channel – backtesting it now – hopefully will get going to the upside shortly. Did go a little lower than my target of 1087 this morning – you can thank Spain for that!

  119. 119
    Gtinvest Says:

    Z More on the cement controversy:
    http://www.nola.com/news/gulf-oil-spill/index.ssf/2010/05/hearings_bp_cementing_engineer.html

  120. 120
    TEXWS6 Says:

    SLB CEO sent out letter to entire company stating that recent political decision is a HUGE detriment to company. Told employees to be ready for a transfer (Africa, Brazil, etc).

  121. 121
    BirdsofpreyRcool Says:

    It will be interesting to find out, at some point in the way-future, how history treats Ms. Pelosi’s reign…

    Pelosi Says Ending Driller Liability Cap Is ‘Worthy’ (Update2)
    2010-05-28 19:31:31.794 GMT

    By James Rowley
    May 28 (Bloomberg) — U.S. House Speaker Nancy Pelosi said Congress should consider eliminating any cap on the damages a company such as BP Plc might have to pay for harm caused by oil spills.
    “There is a movement afoot in Congress for that. Why have a cap?” Pelosi said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” to air this weekend.
    Pelosi had previously voiced support for a proposal under consideration to raise the existing $75 million cap to $10 billion for economic damages caused by each environmental disaster. After being thwarted March 13 in the Senate, backers of that legislation have vowed to renew efforts to win passage.
    “You would hope that there would not be more than $10 billion of damage, but understand it is for each episode,” she said. Asked about eliminating the cap altogether, Pelosi said:
    “I think it’s worthy of looking at.”
    The legislation under consideration in Congress would apply to BP and Transocean Ltd., owner of the Deepwater Horizon oil rig that exploded April 20 in the Gulf of Mexico, 40 miles
    (64 kilometers) off the coast of Louisiana.
    The well has been spewing an estimated 12,000 to 19,000 barrels of oil into the Gulf, a U.S. government panel said yesterday. BP said in a statement it has already spent $930 million responding to the spill.

    ‘Cozy Relationship’

    Pelosi said the head of the Minerals Management Service, Elizabeth Birnbaum, was fired because she hadn’t cleaned up problems at the agency that were “the result of the cozy relationship between the Bush administration and the oil industry.”
    Holdovers from the previous administration “have burrowed in there” and President Barack Obama “removed the head” of the agency “because she hadn’t cleaned up the Bush administration people fast enough.”
    The president told reporters yesterday he didn’t “know the circumstances” of Birnbaum’s departure, though he took responsibility for the slow effort to change the agency’s culture.
    “This oil spill has made clear that more reforms are needed,” he said.

    ‘Harshest Scrutiny’

    Asked if she was satisfied with Obama’s response to the oil spill, Pelosi praised his “impatience and his persistence in pursuing every channel” and subject “the role of the oil companies and the role of the regulators” to the “harshest scrutiny.”
    On Afghanistan, Pelosi said she traveled there May 9 “with some serious questions” about the prospects for U.S.
    success “and I came home with some.”
    Pelosi said she still questions whether Afghan President Hamid Karzai, whom she met during her visit, is doing enough to fight “systemic corruption” in his country.
    Because of widespread skepticism about the war effort among House Democrats, the speaker predicted a “difficult vote” next month when the House debates the $60 billion war- funding legislation to finance U.S. military operations in both Afghanistan and Iraq.
    “Until we see the bill and then until we see what the path that the president is providing as we go forward, it’s really hard to say what the votes are,” she said. “On vote counting, I never assume anything.”

    Jobs Bill

    Pelosi declined to predict whether Congress would pass additional jobs legislation after today’s approval of a $112 billion measure that extends unemployment insurance and restores some tax breaks for small businesses.
    “This is a major jobs bill,” the speaker said of the legislation approved 215-204, mostly on party lines.
    The measure must still pass the Senate, where Republicans have vowed to block any legislation that increases the deficit.
    The Congressional Budget Office estimated the legislation would add $54.2 billion to the deficit, which is projected to reach
    $1.5 trillion this year.
    “It is making sure every bill we pass, every appropriation that we pass, is job creating” and cuts the government spending deficit, she said.

    November Elections

    Turning to the November elections, Pelosi dismissed the conventional wisdom that Republicans can retake control of the House, where Democrats currently hold a 255-177 advantage, with three vacancies.
    She said she can state “with absolute certainty that we will retain the House of Representatives” because “our members are dedicated, they know how to communicate individually with districts.”
    As an example, she cited the 8.5-percentage-point victory by Democrat Mark Critz to fill a vacant House seat in an economically depressed part of Pennsylvania that Republicans “didn’t even have any thought that they would lose.”
    “I am not yielding one grain of sand on that.”

  122. 122
    RMD Says:

    121 is Nancy with Gatling Gun, or maybe the BFG in DOOM.

  123. 123
    zman Says:

    RMD – It’s getting nigh on mint julep thirty.

  124. 124
    BirdsofpreyRcool Says:

    RMD — no doubt.

  125. 125
    RMD Says:

    Z and BOP, you can both come for mintjulepthirty as we are the only ones here.

  126. 126
    zman Says:

    Beerthirty. Have a safe and great long weekend. Fly the flag. Pray they get that well plugged.

  127. 127
    BirdsofpreyRcool Says:

    RMD — thanks! You have NO IDEA how much I would like to take you up on the invitation. Thanks again… and have a great weekend.

  128. 128
    baylor3217 Says:

    WOW. HAL got hammered today. in line with the usual cast of characters (BP, CAM, RIG)

    Interesting volatility there in the group. I hate bottom picking, but HAL seems to be down $2 one day and up $2 the next

  129. 129
    mimster90 Says:

    #110 PDP and PUDS, are they things little puppies leave behind?

    WHX is out of oil in 4 to 6 years at current rate. Oil accounts for ~80% of their income.

  130. 130
    zman Says:

    1520 and APBD – thanks for the fan mail!

    The Wrap will be out on Sunday. May was the worst May for the markets since 1940.

    I’ll have the gas supply slide show out on Monday. Have a great weekend.

  131. 131
    zman Says:

    Operators and rigs affected by the deepwater moratorium:

    http://www.gomr.mms.gov/homepg/offshore/deepwatr/Current_Deepwater_Activity.pdf

  132. 132
    BirdsofpreyRcool Says:

    Ugh. Just checked out the live cam on the oil spill… looks like only crude gushing out again. No sign of slowing. Double-UGH.

  133. 133
    zman Says:

    Hard to tell but rate looks slower to me. Lighting from this ROV is different from the last one as well so hard to make comparisons. They were going to stop pumping mud occasionally to check pressure, etc so it could be this is one of those times.

  134. 134
    BirdsofpreyRcool Says:

    This just posted from the NYTimes …

    BP’s Latest Attempt to Plug Oil Leak in Gulf Fails
    2010-05-29 16:59:38.590 GMT

    By CLIFFORD KRAUSS and LESLIE KAUFMAN
    (New York Times) — HOUSTON — BP engineers failed again to plug the gushing oil well on Saturday, a technician working on the project said, representing yet another setback in a series of unsuccessful procedures the company has tried a mile under the sea to stem the flow spreading into the Gulf of Mexico.
    BP made a third attempt at what is termed the “junk shot”
    Friday night, a procedure that involves pumping odds and ends like plastic cubes, knotted rope, and golf balls into the blowout preventer, the five-story safety device atop the well. The maneuver is complementary to the heavily scrutinized effort known as a “top kill,”which began four days ago and involves pumping heavy mud into the well to counteract the push of the escaping oil. If the well is sealed, the company plans to then fill it with cement.
    The technician working on the project said Saturday pumping has again been halted and a review of the data so far is underway after engineers failed again to restrict or plug the well.
    “Right now, I would not be optimistic,” the technician, who spoke on condition of anonymity because he is not authorized to speak publicly about the effort. But he added, that if another attempt at the junk shot were to succeed, “that would turn things around.”
    BP said Saturday it would not comment on the technician’s assertions. Officials have said they will continue the process into Sunday before they declare it a success or failure.
    In previous days, BP officials have been more optimistic than not about the effort working. Tony Hayward, BP’s chief executive, told CNN on Friday morning that he believes there is a 60 to 70 percent chance this effort to plug the well will succeed And Doug Suttles, BP’s chief operating officer, said Friday that the attempt to plug the gushing oil well is going basically according to plan even though there have been stops and starts to the actual pumping. “We’re going to stay with this as long as we need to,” he said. “We’re not going to rush.”
    The top kill remains the company’s best option for stopping the massive leak that is polluting gulf water’s at an estimated 12,000 to 19,000 gallons a day. If it fails, the company has said it will try and build a containment dome again. A first attempt with a containment dome failed earlier this month. Otherwise, it may take until August to drill a relief well, the option experts say is most reliably going to stop the current catastrophe.
    President Obama, who visited the Gulf Coast on Friday, spoke broadly about the government’s response to the environmental disaster, saying that “not every judgment we make will be right the first time out.”
    He also added, seemingly capturing the mood of engineers working to plug the well: “There are going to be a lot of judgment calls here. There are not going to be silver bullets or perfect answers.”
    The technician said that engineers had come up with a variety of theories about why efforts have failed so far, and they were trying different sizes of objects. He said the process required trial and error — and sifting through various theories among engineers in the operation’s control room — about the best way to clog the “internal geometry” of the damaged equipment.
    BP said pumping operations resumed around 3:45 p.m. Friday.
    The technician said Friday that despite all the injections, at various pressure levels, engineers had been able to keep less than 10 percent of the injection fluids inside the stack of pipes above the well. He said that was barely an improvement on the results Wednesday, when the operation began and was suspended after about 10 hours.
    “I won’t say progress was zero, but I don’t know if we can round up enough mud to make it work,” said another technician on the project. “Everyone is disappointed at this time.”
    The technician also said that there were disagreements among engineers about why efforts had been unsuccessful so far, but that those disagreements were based on a lack of a clear understanding of what was happening inside the pipes on the sea floor.
    Meanwhile, anticipating that the top kill may not succeed, BP began preparations to try to place a second containment vessel over the leak. Mr. Suttles said BP was also preparing to replace the damaged blowout preventer.
    In Grand Isle, La., President Obama promised to triple the federal personnel along the most threatened stretches of the coast.
    “We’re in this together,” he said, gesturing to the three governors, two Louisiana senators, a congressman and other officials he had just met with for more than two hours.
    Even if the leak is stopped, “we face a long-term recovery and restoration effort,” Mr. Obama added. “America has never experienced an event like this before,” he said.
    Such sentiment plainly was aimed at answering “the anger and frustration” that Mr. Obama acknowledged many residents and political leaders here are feeling, and at blunting charges that his administration had abandoned them as the Bush administration was accused of doing after Hurricane Katrina in 2005.
    “I ultimately take responsibility for solving this crisis.
    I’m the president, and the buck stops with me,” Mr. Obama said.
    For the president, who has been on the defensive about his and his administration’s role in trying to stop the spill and prevent oil from reaching the coasts, Friday’s trip was his second since the explosion of BP’s Deepwater Horizon rig on April 20.

  135. 135
    zman Says:

    Thanks BOP, that doesn’t sound good. They stopped drilling the relief well the other day and are stealing the BOP off that rig to put on top of the current BOP.

  136. 136
    BirdsofpreyRcool Says:

    #135 — that sounds like a good idea… wonder why they haven’t tried that already. Makes more sense than some weird “containment vessel.” That said, my HEARTFELT PRAYERS and WISHES go out to the people involved that they are successful… and soon!!

  137. 137
    zman Says:

    Soccer Watch: Turkey at U.S. on ESPN2 starting now.

  138. 138
    zman Says:

    BP officially killed top kill. Next step small containment vessel to be placed upon top of BOP. Time line on that unknown.

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