Market Sentiment Watch: Futures pointing slightly lower this morning after a volatile set of sessions last week. We are still a week away from many of our most trafficked names 2Q reports but the pace does step up this week as the Majors weigh in (should be largely positive) and we start to see a number of E&P mid caps report. On the economic front, the week starts slowly with only the confidence numbers holding much sway. Later in the week we get jobless claims and the first reading of 2Q GDP, now set at 2.5%, down from recent early forecasts of 3.0% just weeks ago.
HERO CEO Watch. A couple of good points.
- The company has been working hard to keep its work force, focused on shallow water drilling, employed
- In the next 30 days, they will be forced to start layoffs of their 2,200 employees due to tighter regulations that impact activity in the shallow water. Operators have declared force majeure on number of jack up rigs due to uncertainty around these regulations.
- They have a good safety record with no oil spills BUT if they layoff their current workforce there is no guarantee they will be able to hire them back AND this would mean both efficiency and safety will be reduced as they hire back less experienced workers.
BP Spill Watch:
- Work on the first (deepest) relief was was resumed on July 25th.
- Cap remained in place over the weekend and pressure had risen to 6,904 psi by 7/25.
- BP plans to begin the static kill procedure in the first week of August before intersecting with the relief well in the next two weeks.
- CEO Hayward rumored (by the WSJ) to be among the unemployed by week's end. BP's board is meeting today and the company has earnings later this week and you can bet they want to open a new chapter on their corporate life sooner rather than later. Bob Dudley rumored to be next CEO.
The Week Ahead: Backend loaded week.
- Monday 7/26: New home sales (F = 316K),
- Tuesday 7/27: Consumer confidence (F = 52, last read 52.9),
- Wednesday 7/28: EIA Oil Inventory Report, Durable goods orders (F = 0.8%), Beige Book,
- Thursday 7/29: EIA Natural Storage Report, Natural gas supply report due, jobless claims (F = 460K, last week 464 K.
- Friday 7/30: 2Q GDP (F = 2.5%), Chicago PMI (F = 56.3%), Consumer Sentiment (F = 67.3)
In Today's Post:
- Holdings Watch
- Commodity Watch
- Stuff We Care About Today – Energy Earnings Q2-Week 2
- Odds & Ends
Holdings Watch: ZCAT (Zman Catalyst portfolio):
- $7,500 (2 BP call positions and 1 HAL position)
- 70% Cash
ZIM (Zman Inefficient Markets portfolio)
- $1,700 (2 LINE call positions, 1 ECA and 1 WFT call position)
- 10% Cash
Crude oil ended last week up 4% at $78.98. The 12 month crude strip is now trading at $81.22 This morning crude is trading off 50 cents.
Natural gas rose 1% last week to close at $4.58 but remains range bound with spikes and slumps attributable to tropical weather which is having much less of an impact, as of yet, than is a series of Lower 48 heat waves. The 12 month strip is now trading at $4.95. This morning gas is trading off slightly.
- Weather Watch: Hot summer peaks pretty much on schedule.
- Week before last: Cooling Degree Days of 93 which, yielded an injection of 51 Bcf, the lowest of the season to date.
- Last Week: CDDs of 97, versus a prior forecast of 101. This should yield an even smaller injection this Thursday.
- This Week's Forecast: Cooler, still well above normal. CDDs of 89 are forecast, 14 above normal and last year.
- Tropics Watch: All clear on the horizon.
Stuff We Care About Today
- APC scores off Ghana with the Owo Prospect
- 174 net feet of pay in the deep water Tano Block off Ghana
- two high quality oil zones
- Continues a string of discoveries off west Africa for APC and Tullow. APC has an 18% in the well, larger interests in neighboring Twenboa and in Jubilee.
- Good to have alternatives to the Gulf of Mexico deep water realm at this time.
- SSN – no word on the Goshen County deal yet.
- FTI – 2Q call at 9 am EST.
Odds & Ends
- SLB – Jefferies cuts target $4 to $85, maintains Buy
- SLB – FBR reiterates Outperform
- PTEN – Jefferies ups to Buy
- DO – Berstein ups to Market Perform
Interesting Reading Watch:
- Damage To Gulf Overblown? I'm on the record with a hunch that people will be shocked at how quickly the environment recovers.
- Roadside Car Chargers
Housekeeping Watch. I am scheduled to be largely out of pocket Thursday through Tuesday for a battery recharge session with the interns somewhere in South Carolina. I will post Monday through Thursday but will have only intermittent access to the site thereafter.
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