28
Jul

Merger Wednesday

Print Friendly, PDF & Email

Merger Watch: AEZ bought by HES for a smallish premium. May light a brief, small flicker under the smaller Bakkens today.  We own AEZ in the ZLT (see details in the Stuff section) but not for long.  We also hold BEXP, KOG, OAS, and WLL that could get a little play on the announcement.  

Market Sentiment Watch: Lessons from the E&P sector quarter to date: 1) Do not raise spending levels  2) If you do, make sure the bump is far outweighed by evidence of bigger production growth AND much higher margins going forward, but 3) Do not raise spending levels. RRC did #1 without gaining that much in #2 and go sent to the penalty box for it (see price target cuts on RRC in the Odds and Ends section today). If we see much more this quarter we will have to conclude that the E&P realm is not paying attention to what investors are saying at present. Which is 1) wait for higher prices before you add that next set of 10 rigs, 2) hedge, 3) pay down debt, 4) get spending within your cash flow. All of that applies more to gassy names than oily ones but given the precarious nature of the economy, and therefore oil prices, I have to say that the oil-centric E&Ps need not get irrational exuberant with their budgets at this time either.

EcoData Watch:

  • Durable goods for June came in at -0.6% vs 1.0% expected  (I wouldn't prop up a corner of my desk these days with the flotsam being produced by the economist community of late for fear it would collapse)
  • Beige Book due out at 2 pm EST

BP Spill Watch:

  • U.S. to launch criminal probe into the relationship between the MMS and BP, HAL, and RIG. Not sure why the last two are on there other than when you conduct a witch hunt you cast a wide net.
  • Also, DOJ and SEC are probing trading in BP shares surrounding the spill.
  • Last piece of casing will be cemented in place between today and Sunday, with BP targeting Monday for the Static Kill operation.
  • NOAA says oil from Macondo rapidly degrading, "loop current threat" to east coast diminishing.
  • Diagram of the relief well
  • Oil spill tax credit

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today – Bye, Bye AEZ, NBR, BRY,
  5. Odds & Ends

Holdings Watch: ZCAT (Zman Catalyst portfolio):

  • $7,300
  • 75% Cash
  • Yesterday’s Trades:  None

ZIM (Zman Inefficient Markets portfolio)

  • $1,400
  • 12% Cash
  • Yesterday’s Trades:  None

ZLT (Zman Long Term portfolio)

  • Added the met coal leveraged producer WLT for $68.92. The stock has been to $100 and as low as $60, all this year. Recent comments from BTU and other producers and my own work on EIA data and anecdotal evidence all continue to point to firm coal markets and still higher met coal pricing. I’ve had no exposure in the ZLT to coal stocks in quite some time and am seizing on today’s weakness (profit taking after a recent bounce and reduced guidance by PCX) to rectify that. WLT reports on after the close tomorrow and remains discounted to a majority of it’s peers.


The ZLT as it now stands:


Commodity Watch:

Crude oil tumbled $1.48 to close at $77.50 yesterday. After the close, the API released a bearish across the board report (see below).  This morning crude is trading off another 50 cents.

Natural gas edged up another $0.06  to close the day at $4.68 yesterday. This morning gas is trading up a penny. Gas remains range bound.

  • Imports: Up 0.5 Bcfgpd week to week.

Early Read On Natural Gas Storage: Street is at 32 BCF for tomorrow’s report. I'm at 35 Bcf

  • Last Week: 51 Bcf Injection
  • Last Year: 70 Bcf Injection
  • 5 Year Average: 54 Bcf Injection
  • 10 year Hi:  81 Bcf Injection
  • 10 year Low: 19 Bcf Injection

Oil Inventory Preview

API Watch: Bearish report.

  • Crude: UP 3.08 mm barrels
  • Gasoline: UP 877,000 barrels
  • Distillates: UP 407,000 barrels

Stuff We Care About Today

Bye, Bye AEZ ... You Went Too Young

  • For a full run through on AEZ, a nascent, west of Nessen, Bakken player, see my initial write up here.
  • Deal valuation is relatively simple given AEZ's clean balance sheet and focus.


  • Some more thoughts:
    • The premium is low. If this thing had the normal deal discount there would not be much if any run in the shares today. But given that management is onboard with the deal it may run to almost full price. In that event, I may punt immediately and reallocate the funds to the next perceived Bakken target.
    • I do want to be thoughtful about the potential for the stock to be tied to HES now and HES has a call at 10 am EST to discuss their 2Q results (they reported a 2 cents beat this morning). 
    • The press release mentions the possibility of a cash dividend based on where working capital stands at the time of the deal:
      • As of their 1Q report working capital stood at $73.7mm, with $73.9 mm of that in cash.
      • They've been busy boys in the interim so not all of that will be available for a dividend.
      • Also, the language in the PR is rather vague and they did say "possible"
      • But if we go with the shares outstanding at present, and we assume that they went land acquisition crazy since the end of the last quarter, spending $50 mm all in (including drilling) then you could be looking at a dividend on the order of $0.40+.
      • Finally on this matter, note that the deal doesn't close until 4Q. Meaning the working capital could be gone or at least severely eroded by then. Again, this leads me back to my earlier comment about punting the initial pop (this is my play) and reallocating.
    • Price per acre works out to $5,400 which seems low to me but that could be attributable to AEZ's acreage being still relatively unproven.  
      • The WeeBaks are likely to be most affected by the deal including KOG and NOG and to a lessor extent OAS, BEXP, WLL, and CLR. 

 

 

NBR Chalks Up A Small Beat

The 2Q10 Numbers:

  • Revenue of $918 mm vs $876 mm expected
  • Contract drilling margins still declining but flattening with some light at the end of the tunnel.
  • EPS of $0.19 (ex items) vs $0.18 expected

Highlights:

  • “I believe the second quarter marks the start of a steady upward progression in our business." ~ NBR CEO Isenberg. Last quarter's CEO comment was more subdued.
  • North American rigs were up 14 to 172.3 for the 2Q average and are at 179 (175 of them active and 4 being terminated) at present.
  • Expecting modest rig count and dayrate improvements as the year progresses
  • "With rig hours continuing to increase, we anticipate further rate progression, which should serve to more than offset the recent cost variances and return this unit to robust sequential growth. " ~ comment on US land.
  • Seeing adds in the hot shale plays, they are still market share leader in the shales
  • On the international front, operating income continues to grow and they see quarterly rig adds through 2011 but the pace of growth will be lower in the second half of 2010 due to continuing delays in Mexico and greater competition in Saudi Arabia.

Conference Call: Today, 11 am EST

Other Stuff: 

Earnings Wrap For The Season To Date:

  • RRC - as previously mentioned, a boost in the budget and hints of dilution down the road spooked investors, who barely noticed a boost in volume guidance, and who sent the shares down 7%
  • VLO beat estimates, espoused cautious optimism and ended the day down slightly as investors yawned at the outlook.
  • PCX (the coal company) narrowed its loss to expectations but cut planned volumes, something no one likes, which prompted a 10% slide in the shares.

Nutshell: Don't spend more, don't deliver less and don't be too cautious sounding. This goes back to the beginning of this quarter as well if you look at the difference in the HAL and SLB post earnings release trading.

LINE Distribution Unchanged, as expected

BRY Conference Call: Today, 10 am EST 

  • Bottom line scores a beat but it was, financially, a messy quarter
  • 2010 Guidance maintained
  • Planning to listen, but no interest in the name at this time.

 

QEP earnings call, 11 am EST.

Tomorrow we have a boatload of names reporting: WLT, OII, PXD, WLL, CRR, LINE, FSLR. As I will be traveling tomorrow  I will look over any that manage to report before about 4 am Thursday.

The rest of the week's earnings calendar can be viewed here

Odds & Ends

Analyst Watch:

  • CRZO - raised to Outperform at BMO
  • RRC - target cut $4 to $63 at Rodman, maintains Outperform
  • RRC - target cut $11 to $45 at Barclays, maintains Equal Weight

Housekeeping Watch: I will be away from the office Thursday and most of Friday and again mid next week. BOP and Nicky will be in charge. 

196 Responses to “Merger Wednesday”

  1. 1
    zman Says:

    AEZ to trade off HES today and going forward. I’ll be in AEZ though the HES call but don’t plan on holding much longer. It would take a $5 rally in HES to double the premium of the deal to yesterday’s AEZ close. Interested to hear more details about the potential dividend as well. My sense is that the deal was probably penned when AEZ dipped to $6 last week, so if they kept the same multiple you would have been looking at a much more attractive looking premium. Still think AEZ is selling itself too cheaply here.

  2. 2
    1520sbroad Says:

    Long time MLP sector penalty box dweller APL out with a big asset sale this morning. Selling their Elk City system to Enbridge for $682 million. Will pay down debt and reinstate the distribution in Q4 2010. And there was much rejoicing.

    APL is going to concentrate on their opportunities in the Marcellus with thier parent company ATLS.

  3. 3
    zman Says:

    Analyst Watch:

    OAS – Raymond James initiates with a Strong Buy

  4. 4
    john11 Says:

    Site loading very slowly here.

  5. 5
    bill Says:

    ng up 15 cent

  6. 6
    scoop006 Says:

    refresh slow here too

  7. 7
    zman Says:

    Site slow, I know, should be temporary. We have not yet upgraded to the new server.

  8. 8
    zman Says:

    Don’t know reason for move on natural gas, don’t see anything brewing in the Gulf or Atlantic. Our forecast just got revised hotter, again, so it may be that.

  9. 9
    zman Says:

    AEZ up 8% on the open, HES flat. Call in 20 minutes.

  10. 10
    BirdsofpreyRcool Says:

    XACS#1 wieghs in with some thoughts on the market (George Soros must be sooo proud…)

    http://www.capmarkets.com/ViewFile.asp?ID1=141308&ID2=429966521&ssid=1&directory=6571&bm=0&filename=07.28.10_Attack_And_CBO_says_Short_the_USA.pdf

  11. 11
    BirdsofpreyRcool Says:

    AEZ — way to pick ’em, z!

    You know… there is little that is more EXCITING than to wake in the morning and see that little your company has just been eaten by a larger fish. Kinda gets the blood flowing… makes you wanna go find the NEXT one.

  12. 12
    zman Says:

    BOP – glad someone noticed, thanks. Glad I’m going on vacation.

  13. 13
    RMD Says:

    AEZ: it worries me that the small premium connotes these Bakken-minis have most of the upside priced in already. I will try to get insight into why mgt sold now vs. in a year or two (realizing they need cash for capx right now).
    SD seems to be outperforming CHK since the deal.

  14. 14
    BirdsofpreyRcool Says:

    So… what is more “contrarian” these days… conventional nat gas? Or GoM nat gas? Or uranium??

  15. 15
    zman Says:

    Thanks RMD, HES call may shed some light on that in a minute as well.

    I do think the small premium relates to the recent dip (so it would have been bigger if not for the run of the last couple of days) and to the fact that much of AEZ’s land is not yet proven up. 3 wells so far is not much to stake a claim in 85,000 acres of would be moose pasture. I’m betting that management gets enough out of the deal to build another one from the ground up. Who knows, maybe they are the SSN Niobrara buyer.

  16. 16
    BirdsofpreyRcool Says:

    (few problems with the placement of “little company”… but, you get my meaning)

    Seriously… by FAR the COOLEST thing EVER in the high yield mrkt was to wake up to find your B3/B- company was being bought by a AAA company. Happened to me only once. But you just LIVE for that stuff.

    Kinda surprised that AEZ didn’t go for a tad more. I think wcoaster had a great back-of-envelope model on AEZ that put “value” closer to $9. Wonder if we will see other sharks start to circle…

  17. 17
    bill Says:

    tom ward of sd to be on cnbc at noon today

  18. 18
    BirdsofpreyRcool Says:

    HeadTrader musing that if we can hold and consolidate in here… might see some money looking to be put to work in August (which is just next week). People still looking to SHORT stuff. So, if money starts to flow in on the long side, the shorts would just be fuel on the fire….

  19. 19
    BirdsofpreyRcool Says:

    Also, nice swap from EXXI into OAS. Looks like you’re outperforming there too.

    Hearing more contrarian and deep deep value folks whispering the words “SD,” fwiw….

  20. 20
    zman Says:

    Site should no longer be slow. Disabled one of my tools whose site was down. Who needs tools like that?

    Agreed BOP, may see some sharks.

    HES trading up because the quarter was good and this is such a small bite for them.

    HES call starting now.

  21. 21
    1520sbroad Says:

    reload is fast now

  22. 22
    zman Says:

    HES on AEZ

    Well, they just mentioned it.

    In the Paris Basin they have > 1mm acres and will drill 6 wells in 4Q.

    … expect more in the Q&A…

  23. 23
    BirdsofpreyRcool Says:

    Oh “Par,” we knew you far too shortly…

    IG back to 104 1/2 bps, out 1 3/4 bps this morning

    HY 97 11/16 ptx, down 9/32 pts

    would love to see both HY and IG cross at 100. Just something to look forward to.

    TED still drifting slowly, slowly back toward 25… hovering around 32.5 bps this morning.

  24. 24
    Nicky Says:

    Morning all. Support at 1106 – 1108. So far move down looks corrective which indicates another move up before we go down. That said we are running out of time on the upside cyclically.

  25. 25
    zman Says:

    BOP – thanks for the credit, always helpful.

    Probably should have put CRED in the list of names that could scoot on the AEZ takeout.

    Nicky – how much time have we got?

  26. 26
    zman Says:

    Analyst Watch

    BEXP – don’t have any details but Global Hunter picked up coverage on BEXP with a Buy this morning.

  27. 27
    Nicky Says:

    Well we are in the timeframe between now and Friday for a top. The astro pointed to late Thursday.

  28. 28
    BirdsofpreyRcool Says:

    CIGX — honestly was hoping it would drift back down. Monday’s run up was that crazy “someone’s-gonna-buy-them” rumor that pops its head up periodically. Seriously, the drama between the shorts and longs is getting to a fever pitch here. Will break in one direction or the other. Wonder if inVentive launches before the CIGX 10Q is put out. Company burns through about $5mm of cash/quarter with no discernible revenues (hence, the short-thesis). So stock price is a random walk (or, a Manipulated Walk) until we get some of the fundamental news we are all waiting for.

    Personally, happy to see it on sale this morning. Still have some shares to buy…

  29. 29
    zman Says:

    Oil numbers in 15 minutes. Again, not a real good feel for the numbers this week. Expecting imports to come off a bit and thinking API was reflecting the prior week’s surge in imports (a week late and several thousand barrels short)

  30. 30
    bill Says:

    which ng stock is down 25 % in the last 3 months and in that time period is more unloved than sd

    http://finance.yahoo.com/q/bc?t=3m&s=SD&l=on&z=m&q=l&c=hk

  31. 31
    zman Says:

    HES on AEZ comments

    85,000 net acres, west of the Nessen. Lot more drilling left to do before we talk, not going to update guidance yet but we are clearly excited about it.

    ZComment: That’s pretty lame, nothing new. But they are excited about the land which is in the northeast corner of what we call BEXP’s Rough Rider.

    More questions on the acquisition:
    Risked Resource?
    They plan use AEZ 3 current rigs but to mow down the acreage with dual laterals

  32. 32
    zman Says:

    HES – declined to comment on risked resource on AEZ’s land.

    Analyst Watch

    WLL – Global Hunter also picked up WLL, who reports tonight, with a Buy.

  33. 33
    zman Says:

    Yeah but Bill, that doesn’t mean it makes sense.

  34. 34
    BirdsofpreyRcool Says:

    Here’s the link to Global Hunter’s morning piece. Hope they don’t mind my posting. But, think their senior guys (Michael, Ravi, Bo) are pretty good. So, always worth reading.

    http://www.capmarkets.com/viewfile.asp?ID1=0&ID2=0&directory=13887&filename=GHS_Dirty_Energy_Daily_2010-07-28.pdf

  35. 35
    zman Says:

    HES on the Liability Cap

    Saying they support one of the proposals that is $1B cap, then a fund to take over about that.

  36. 36
    zman Says:

    Thanks BOP

    Oil numbers in 1 minute, oil off 80 cents at 76.71.

  37. 37
    zman Says:

    JB – can you look at HES?

  38. 38
    zman Says:

    EIA Inventories

    Crude up 7.3 mm barrels due to a huge build in imports at 11.2 mm bopd.
    Gasoline: UP 0.1 mm barrels
    Distillate: UP 0.9 mm barrels

    ….

  39. 39
    zman Says:

    more EIA

    Big jump in demand to a new high for this year.

    Gasoline at 9.632 mm bpd, well above the range.

    Distillate: at 3.6 mm bpd, still weak.

  40. 40
    BirdsofpreyRcool Says:

    Global Hunter’s initiation piece on the Bakken is titled “Bakken Bits.” That’s FUNNY.

  41. 41
    jat Says:

    What’s with those imports

  42. 42
    zman Says:

    Oil testing $76 at the moment, but given that the surge is imports and given that gasoline demand is much better than expected, the dip is probably the wrong move for oil at the moment.

  43. 43
    BirdsofpreyRcool Says:

    Analysts expected oil inventories to DROP by 1.73mm barrels. Guess no one is paying close attention to the ports…

  44. 44
    VTZ Says:

    Z – Good job on AEZ, but I think HES cut you short. Did they comment on the special dividend to AEZ holders at all?

  45. 45
    zman Says:

    re 40 … and I thought my WeeBaks was clever.

    Jat – don’t know, that’s not a sustainable rate. With imports being lumpy it could be more of a “govt. estimate” than usual.

  46. 46
    jat Says:

    Re 42, I also can’t see the gasoline demand on bloom yet. See it in the PDF.

  47. 47
    zman Says:

    re 44 – Thanks, agreed, and no they did not.

    Oil coming off those lows. No one is going believe that imports number isn’t reversed out of the data next week.

    Looking at the stock build it was largely on the Gulf Coast (Cushing actually fell) so maybe it was a “better get to port before Bonnie smacks up” surge.

  48. 48
    zman Says:

    Crude back up to 76.50 from the original knee jerk below 76.

  49. 49
    zman Says:

    Petra tells me the charts section tomorrow is going to be brief because I still haven’t packed. I take 10 minutes to pack no matter where I go but alas the interns do not.

  50. 50
    tomdavis12 Says:

    Z: Summary of comments made by Ole Slorer @ MS today. With the combination of rigs leaving the gulf and uncontracted newbuilds coming from shipyards, day rates likely to be soft into 2012. ( I agree but much of this is priced in ). Still has a buy on SDRL, RDC, and RIG. Expects utilization to trough mid-2011. Over the next 12 months the sweet spot is the service space SLB, HAL, BHI and WFT. In equipment he likes CAM and TS. Good call on AEZ Z. BOP you always make good calls.

  51. 51
    zman Says:

    That RayJay target on OAS is $23.

  52. 52
    zman Says:

    BP off a nickel now, whose afraid of multiple criminal probes, lol.

  53. 53
    zman Says:

    HES Q&A.

    AEZ didn’t want cash, they wanted HES stock.

  54. 54
    blackgold39 Says:

    They are running for sure

  55. 55
    blackgold39 Says:

    My HES counterpart tells me he thought ~$5200/ac was pricey, but I disagreed.

  56. 56
    zman Says:

    Thanks BG39

    ESV not apparently in play today and Morgan Stanly cut the group today. Ouch on my unofficial trade yesterday.

  57. 57
    blackgold39 Says:

    BP Aug 40s looking like a complete steal right now

  58. 58
    zman Says:

    Jat – anything strike you as interesting from NBR?

  59. 59
    zman Says:

    Does anyone see any broker comments on AEZ this morning? Would be good to get some details from them on calculation of the “possible” dividend. Timing shouldn’t matter (it’s probably at the time of the deal) as the shares should discount it.

  60. 60
    VTZ Says:

    RE 59 – Doesn’t seem like there’s any discount in there at all yet.

  61. 61
    tomdavis12 Says:

    Z: Does anyone win anything with AEZ or do you have to pay yourself? No comments on AEZ from my places.

  62. 62
    zman Says:

    AEZ – Law firm already lined up to sue them for fiduciary breach.

  63. 63
    zman Says:

    Whoa, make that 3 law firms.

  64. 64
    BirdsofpreyRcool Says:

    Off topic…

    Bloomberg has a new quote, every morning when you log on. Particularly like the one this morning…

    “Be pleasant until ten o’clock in the morning and the rest of the day will take care of itself.” — Elbert Hubbard

    HeadTrader just hates that quote… 😉

  65. 65
    zman Says:

    BOP – Tell HeadTrader that Elbert got his in the end, he went down with the Lusitania.

  66. 66
    blackgold39 Says:

    Z — whats your source for BP news on relief well?

  67. 67
    choices Says:

    so far, three law firms announce investigation of AEZ Board-breach of fidiciary duty to shop the company.

  68. 68
    zman Says:

    ZTRADE – ZLT – AEZ

    AEZ – Sold all for an average $7.135, up 33% since entry in late May. See site for further details.

  69. 69
    zman Says:

    BG39 – re BP – just the morning updates and my scrolling energy news.

  70. 70
    blackgold39 Says:

    Off beat: http://www.examiner.com/examiner/x-10317-San-Diego-County-Political-Buzz-Examiner~y2010m7d24-Los-Zetas-drug-cartel-takes-control-2-US-ranches-in-Texas

  71. 71
    zman Says:

    NG up 18 cents but the gassy stocks are not paying attention.

  72. 72
    tomdavis12 Says:

    Z: Do you have a dance card for any other Bakken boys that might follow in AEZ’s footsteps?

  73. 73
    zman Says:

    Tom – I am long now WLL, BEXP, OAS, and KOG that are directly linked to the traditional Bakken play.

    NFX and ROSE as well but those are more diversified stories.

    Also SSN but that’s trading off Niobrara news more than it is Bakken.

    So that’s the list for now and honestly, they aren’t getting any help from this deal at the moment.

    Essentially pure plays will be KOG, NOG, BEXP (getting there) and OAS.

    If you pull out the midcon from CLR, they start to look cheap on their nearly 900,000 acres in the Bakken but then again, they have not been drilling the big wells that others have.

  74. 74
    Jerome Blank Says:

    RE: #37 HES, is on a P&F buy signal but is currently trading below trendline resistance, the P&F and traditional chart are both in a consolidation…at this point nothing that exciting, first resistance at $53-$54…HES is pressing topside daily traditional resistance now… charts added, nothing makes me want to jump in at the moment…

  75. 75
    Jerome Blank Says:

    BP intraday…tracking the 50 period as support and the lower 30 min trendline from yesterday as resistance….

  76. 76
    BirdsofpreyRcool Says:

    #70 — holy sh*t!! What an inconvenient truth (for some people), if it is true. Wow.

  77. 77
    zman Says:

    JB – thanks, my thoughts too. Done with AEZ, moving on.

  78. 78
    Jerome Blank Says:

    CIGX 30 min intraday support at $1.83-$1.93…chart updated

  79. 79
    nifkin Says:

    DOE’s hitting again

  80. 80
    nifkin Says:

    Heard there was a file that was corrupt coming from the DOE, but never got confirmation

  81. 81
    zman Says:

    Crude still bouncing off the low, now 76.85.

    Nifkin – it wouldn’t be the first time a file or something else was corrupt there.

  82. 82
    BirdsofpreyRcool Says:

    Met with a company last week who has Bakken interests. They are not adding to their position there. Say it’s gotten way too competitive… all the acreage is tied up and M&A is the only way to get anything good.

    This same company considers themselves to be very contrarian. They are currently thinking about buying/merging/partnering with a nat gas producer. They have spoken to HK about some properties… and they think the world of HK’s assets. When I told them i owed HK (at higher prices), they just smiled and said “you’ll be happy in the long run.”

    In the long run, we are all dead. I hope to find happiness well before that.

    Just musing….

  83. 83
    zman Says:

    COP headlines coming across.

    CEO says he wants to do more in the Gomex but won’t move until he knows what the rules are. Wow, a surprisingly simple statement that DC doesn’t understand on so many levels.

  84. 84
    zman Says:

    Crude at 77.20, off 30 cents on the day.

    BOP – sounds like Jim Christmas won them over. Wonder if the KCS guys are still at HK.

  85. 85
    BirdsofpreyRcool Says:

    JB — thank you! Voted.

  86. 86
    Jerome Blank Says:

    KOG..looks like it’s winding up, currently a mini bull flag at the daily 100 day which intersects right at the topside daily trendline resistance zone, KOG looks like it wants to make another break higher….

  87. 87
    Jerome Blank Says:

    RE: #85 BOP, thank you…

  88. 88
    BirdsofpreyRcool Says:

    He was singing the praises of Stoneburner.

    Who wouldn’t like an energy CEO who goes by the name of “Dick Stoneburner.” That is just so darn appropriate.

    (Takes me back to my old geology student days… the head of our dept was named “Dick Stone.” It was just so RIGHT.)

  89. 89
    zman Says:

    OAS – based on current market price is trading at $4,100 per Bakken acre.

  90. 90
    BirdsofpreyRcool Says:

    Note to self… EXXI at $16.55 was just too cheap. Keep that in mind next time.

  91. 91
    BirdsofpreyRcool Says:

    z — that same company (who thinks the world of Stoneburner) thinks that OAS’s acreage is concentrated in more of the marginal Bakken stuff. Any comments there, vs the AEZ acreage?

  92. 92
    zman Says:

    Whereas NOG is at $8,800 / ac and
    KOG is at about $6,500

  93. 93
    Geno Says:

    Stoneburner was a fraterity brother of mine at UT good name back then

  94. 94
    BirdsofpreyRcool Says:

    Thing is… there are still lots of private companies with Bakken acreage positions. Kinda surprised HES didn’t nosedive at some of those.

  95. 95
    zman Says:

    BOP – see page 2 here:
    http://www.sec.gov/Archives/edgar/data/1486159/000095012310055381/h69816a5sv1za.htm

    Sanish should be good as should be Nesson

    On the west of Neeson segment, the blob to the east and middle is the south east corner of Rough Rider where BEXP has a couple of 3,000 BOEpd IPs. The stuff to the north in that area is north Rough Rider but I don’t think OAS has drilled it or at least not much.

    So sort of hard to say as it’s early, but I would say they are shopping in the right neighborhoods.

  96. 96
    BirdsofpreyRcool Says:

    Geno — it’s just such a “John Wayne” type of name. You can believe in a guy who goes by the name of Stoneburner. Hope he lives up to the moniker.

    Were you in the geology dept at UT? Or engineering….

  97. 97
    Geno Says:

    Land Management got out did not like being a landman got a geology degree

  98. 98
    zman Says:

    SSN refund update: Still nothing via Schwab.

  99. 99
    BirdsofpreyRcool Says:

    Geno — good decision. 😉

  100. 100
    skimo Says:

    re 98 sent a note to my Schwab contact, she sent on to an “analysis” group. Will see what they find. I think SSN sent checks on a slow boat floating along from Aussie land.

  101. 101
    zman Says:

    Thanks Ski. I figure it will arrive when it arrives, but I like stay on top of that kind of thing.

  102. 102
    blackgold39 Says:

    APC is nosediving

  103. 103
    zman Says:

    Bill – where is Robry at for tomorrow? I’m sticking with 35 Bcf.

  104. 104
    BirdsofpreyRcool Says:

    GoM kids not reacting well to the Congressional moves to restrict drilling. Land-based guys are up, for the most part.

    Except for SD. It’s down because… well… it’s what SD does.

  105. 105
    zman Says:

    Re APC – yeah, sloppy market, not huge volume on the day by any means. No news out that I see. I had thought BP would press hard for them and Mitsui to pay. Comments on the BP call yesterday were along the lines of “we’ll see you in arbitration”

  106. 106
    choices Says:

    XEC getting whacked.

  107. 107
    Nicky Says:

    If crude can hold here and start to move higher we maybe looking at a potential inverse h and s. Same with gold.

  108. 108
    blackgold39 Says:

    re 105: I am wondering when that arbitration may take place

  109. 109
    zman Says:

    SSN failing to get whacked today.

    No idea re timing of arbitration. I would bet APC wants to put it off as long as the criminal probes are incomplete.

  110. 110
    skimo Says:

    It just gets better and better with this legislative body!
    http://blogs.barrons.com/stockstowatchtoday/2010/07/28/sec-no-longer-obliged-to-respond-to-press-says-fox/?mod=yahoobarrons

  111. 111
    skimo Says:

    For clarification-congress is the body I’m speaking of as they apparently passed the law.

  112. 112
    choices Says:

    News note:VLO may restart Aruba refinery in Sep

  113. 113
    cargocult Says:

    Anyone have insight on WTI?

  114. 114
    zman Says:

    Thanks Choices.

    re 110. Nice.

  115. 115
    bill Says:

    >110

    SEC no longer has to respond to public requests for information under new rules brought on by financial reform legislation.

    wow

    that and birth certificates

  116. 116
    bill Says:

    103 robry at 30 now

  117. 117
    ng8990 Says:

    Z, Robry is 30, Bentek is 26, and Sempra is 32 for tomorrow

  118. 118
    elijahwc Says:

    TRGL getting a nice lift. Perhaps off of Paris Basin partner HES. In any case this dog of chart has just resolved itself positively.

  119. 119
    bill Says:

    seems like everyone is getting whacked post earning.

    given that, how does one play wll.

    What are the odds of a beat?

  120. 120
    bill Says:

    Ward of sd on cnbc in a moment, stock is at 5.97 down on the day at 12:43

  121. 121
    Nicky Says:

    Cargo – re WTI – I am watching the earlier high at 77.20. If we can move above there fairly swifly then the inverse h and s is in play.

  122. 122
    scoop006 Says:

    1,000+ WLL AUG $80 puts today

  123. 123
    elijahwc Says:

    SSN: the missing message about having to book time for title search means that prices aren’t going any lower and that with the additional of the earnest money to hold the deal, you may expect the high end of the range.

  124. 124
    zman Says:

    Cargo – nothing more than my previous comments. It sold off on the headline number which was inflated by an outlier of an imports number but demand by refineries remained strong and gasoline demand hit a new high for the year. So I thought crude would bounce of the lows and so far so good.

    On phone back in a minute.

    Eli – good longshot thought there.

  125. 125
    zman Says:

    WLL – I took deep in the money calls there the other day but that one is really a stock play for me and long term. I think they have a decent chance (call it 75%) of a CFPS beat tonight. I also think work at the Lewis and Clark area is more important than the numbers this quarter.

  126. 126
    zman Says:

    Eli – true enough.

    Going back and forth with president at SSN at the moment on some items.

    So far I have:
    1) Re post tax proceeds on the deal: Too difficult to compute given other sales they plan which could impact their rate. Checking to see if they will at least bless $50 mm plus post deal dollars,

    2) the deal is breakable only with a significant level of title problems (which they have not encountered any yet) and not for other reasons. The president reiterated his belief the deal will close.

  127. 127
    nifkin Says:

    Anyone have a clue on why STR is down 4%? thought the quarter was ok and CC was good.

  128. 128
    bill Says:

    -ward- next yr 70 % oil
    -still no 2010 ng hedges
    -ward expect gom to decline 20 % to 30 %
    1.7 to 2 bcf day

  129. 129
    bill Says:

    Commentary likes sd and oas

    sd at 6.00 so 3 cent impact YEAHHHH

  130. 130
    elijahwc Says:

    MHRprC: For those looking for a little yield, shareholders of this issue just approved going to 4mil shrs vs 750m. This is a 10.25% cum perp pfd trading right around par($25).

    BUT YOU MAY NOT BUY IT TODAY. Recall that in June MHR and partner Hunt Oil spudded the first of two Eagle Fords so you are just in front of “an event”. If everything goes well with “the event”, issuance will find its way into the market, and perhaps price will go to a discount while the credit betters itself. Right now the issue is rated one notch below junk with a garbage rating. But one persons trash is……

  131. 131
    zman Says:

    OAS probably has about 6 brokers who all have initiated on the name with Buys in the last 48 hours pointing to the per acre price at AEZ and saying that OAS is too low.

  132. 132
    bill Says:

    –and OAS was just pumped on cnbc seems to be the winner from the tom ward interview

  133. 133
    zman Says:

    Bill – re OAS . People should like the easy math there. It’s new, it has 290,000 net acres scattered across the Bakken and it trades for less than $5K per acre all the while sporting 100+% growth in 2010 and again in 2011 with $0 debt and a pile of cash.

  134. 134
    bill Says:

    lol yahoo sd board assesment of interview

    http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_S/threadview?m=tm&bn=63136&tid=22826&mid=22826&tof=2&frt=2

    133 i like the 0 debt

    after thought

    sd needs a token bahken position, lol

  135. 135
    zman Says:

    Bill – re yahoo board = LOL.

    OAS about to tap new high.

  136. 136
    zman Says:

    Bob Dudley telling NPR he is hopeful they will kill the well Monday or Tuesday.

  137. 137
    blackgold39 Says:

    Anyone know OAS’s current net Bakken production?

  138. 138
    zman Says:

    Anyone have a good recent range on Woodford acreage?

  139. 139
    blackgold39 Says:

    re 138: which player?

  140. 140
    zman Says:

    BG39 – at the time of the IPO I had it pegged at 3,200 BOEpd

    Reserves were 93% oil.

  141. 141
    zman Says:

    re 139 – Oh, nobody in particular, just wonder what land is changing hands for in the core of the play.

  142. 142
    blackgold39 Says:

    re 138:

    ahh nvm, you meant $/ac

    $350-$2000, largely dependent on where it’s located.

    Shallower, less resource (western side) is $250-$700.

    Deeper, more resource, higher pressure (700-10,000′ TVD, center & eastern edge) about $1,000-$2,500 tops.

  143. 143
    zman Says:

    BG – thanks much, that’s what I needed.

  144. 144
    blackgold39 Says:

    Ranking players by $/ac worth in their WDFD portfolio without regard to size of position, top to bottom:

    BP, XTO/XOM, NFX, PQ, DVN, Pablo, SM, CLR, Sedna, Cornerstone

  145. 145
    blackgold39 Says:

    NFX, DVN only down the list due to their larger positions across the play, watering down the $/ac value

  146. 146
    zman Says:

    BG – Did you ever get an understanding of what Aubrey didn’t like about the Woodford, or do you think he just needed the cash and one less gas play. It could be the midcon pricing structure but that would get better over time I would think, especially if we get transportation as a source of demand.

  147. 147
    blackgold39 Says:

    Those sitting on the hottest WDFD acreage currently would be XTO, BP, PQ, NFX, and to some extend DVN. Most of this is in the Northeastern quadrant of the play.

  148. 148
    zman Says:

    Beige Book out – says economic activity still increasing but 4 districts see softness.

  149. 149
    blackgold39 Says:

    re 146: Aubrey got a great deal for his acreage at good gas prices (near the peak) as BP paid 1.75 B as I recall. Might have just seen a good deal and taken it.

    It was some of the most productive acreage in the play, however, and BP stepped into a decent shoe on that one. We will see if they know how to wear it.

  150. 150
    cargocult Says:

    Any thoughts if VNR can break above this $25 top?

  151. 151
    zman Says:

    BG – thanks, I think he saw a deal and took it. At the time, he said something along the lines of its’ not as good as some people think it is.

  152. 152
    zman Says:

    ZTRADE – ZLT – OAS

    Added a third bit of stock at an average $17.22 (brings my overall average to $15.92). This is essentially a swap with the AEZ sold earlier today.

  153. 153
    blackgold39 Says:

    re 151: I think some people will end up being surprised by the finding costs reported in that eastern area by all the players. Guess it doesn’t matter if you’re trying to drop all gas for oil plays.

  154. 154
    zman Says:

    BG – right, like well under $1/Mcfe F&D

  155. 155
    blackgold39 Says:

    Anyone know how many rigs OAS is running in Bakken? not a lot on their page

  156. 156
    blackgold39 Says:

    FYI OAS has options out

  157. 157
    zman Says:

    Cargo – I don’t have a lot on VNR at the moment, probably more a question for JB.

    re 155

    4 rigs, plan to drill 30 wells this year, no doubt more next:

    http://seekingalpha.com/article/210760-oasis-in-the-bakken

  158. 158
    zman Says:

    re 156. Well that was fast. Thanks.

  159. 159
    blackgold39 Says:

    spreads are big, low volume, but promising

  160. 160
    blackgold39 Says:

    Feb 2011 OAS 17.5’s for $2.50, is that a mistake??

  161. 161
    zman Says:

    re 160. He looks real for 23 contracts.

  162. 162
    zman Says:

    LINE back to $30 after yesterday’s puntfest.

  163. 163
    zman Says:

    Got an email asking if my chat with SSN is going to prompt me to buy more. Answer to that is not yet but it eases my finger off the trigger on the remaining. I have another set of ?s in with the company now.

  164. 164
    Nicky Says:

    I am hoping we see a late day rally or a rally tomorrow otherwise the bullish count is on thin ice. We cannot break 1089 and as the down cycle is in effect until 2/3rd August that does not give us much room.

  165. 165
    zman Says:

    Thanks Nicky, stepping out for a bit.

  166. 166
    BirdsofpreyRcool Says:

    Nicky — interesting that your Aug 2/3rd corresponds to HeadTrader’s thoughts that we may see money put to work in equities at the beginning of the month. Assuming we don’t fall off a cliff into the close of July.

  167. 167
    Nicky Says:

    BOP thinking if we could see a move up to 1126 into late tomorrow that gives us room to move back into the 1090’s into early next week without violating any key levels. But if we end today at 1100 that is unlikely.

  168. 168
    BirdsofpreyRcool Says:

    So today’s close will be crucial. Stay abovt 1100 and on track. Close below and watch out below……

  169. 169
    RMD Says:

    I got the feeling talking to VNR they would be emphasizing on upcoming conf. call that 1. most of restatements were non-cash and 2. the increase in cash flow as the acq. tilts production toward oil. My guess is it will play well but be boring vs. LINE’s G. Wash discussion and resulting cash flow.
    One question I ponder: as LINE becomes more E&P-like and less MLP-like, and E&P’s valuation is a discount to MLPs, does LINE’s decline as their production and reserves spike up with the big IPs?

  170. 170
    BirdsofpreyRcool Says:

    RMD — it’s a yield thing, i would think. As long as LINE can maintain a yield above 7% (just to pick a baseline number), it will be valued as an MLP, not an E&P, i would think.

  171. 171
    BirdsofpreyRcool Says:

    On the other hand, the more “risk” LINE reaches for, to keep the payout up, the higher the payout % will need to be. Sort of a balancing act.

  172. 172
    zman Says:

    Interesting:

    http://www.examiner.com/x-17371-Raleigh-Climate-Examiner~y2010m7d27-African-wave-train-could-be-trouble-in-23-weeks

  173. 173
    zman Says:

    After the close we have “a bunch” of earnings reports:

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

  174. 174
    zman Says:

    BP testing relief well BOP, circulating fluids to clean the well.

  175. 175
    RMD Says:

    170: I was alluding to the valuation of MLPs being 2X E&Ps on an EV/mmcfe or EV/mcf/day of production. Also sell at premiums to cash flow.

  176. 176
    jy Says:

    Re #35 HES may be OK w/$1B liability cap in GOM but there are a lot of independent operators smaller than they who WILL NOT be so sanguine. Most can not afford $1B in liability coverage. We pay nearly $1 million/yr for $30 million insurance coverage today.

    Rep. Rahall’s amendment to HR 3543 is filled w/all sorts of nasty surprises including, but not limited to(i hate that phrase), a $2/bbl and $0.20/mcf “Conservation Fee” from production from ALL federal leases on and offshore(sounds like a disincentive to produce to me), royalty redetermination on existing federal leases that currently have reduced royalty as incentives to drill in deep wtr or >15,000′, called the “Royalty Relief for American Consumers Act of 2010”

    We GOM independent operators are quaking in our boots!!

  177. 177
    zman Says:

    I don’t see them passing that conservation fee. I wonder if those guys realize just how much 20 cents an M is to many, many plays. That’s a huge %. Gee, I wonder if that would be passed along to the consumer. And the redetermination is completely bogus unless you are willing to buy the leases back plus interest which I am sure the U.S. is not.

    Same goes for any proposed non-use rental fee. The royalty relief concept was put in place on the first XXX barrels depending on the play to get people to risk capital on ventures that simply would not otherwise be economic, especially in non-satellite situations. These guys must like foreign oil. All I can say is pal, you better pass that before November because after that you have no chance.

  178. 178
    zman Says:

    And I hear ya on the Liability Cap, was just passing it along. Of course they support a higher one as a lot of competition for leases comes from small E&Ps who have a piece of seismic they like and going all in on their bids. Those cats won’t be able to pay the insurance premiums and still make the big bids.

  179. 179
    zman Says:

    Beerthirty

    Nicky and BOP, large and in charge tomorrow. I will post a Thursday post late, late tonight.

  180. 180
    bill Says:

    i capitulated and sold gmxr and put the money into wll calls

    Fingers crossed….

    HK and Sd next which means we are close to a bottom

    I think wll will do 65.0 mboe and prices should be ok.Cash flow neutral after cap ex

  181. 181
    Nicky Says:

    Z – enjoy your break. Try not to worry too much with the girls in charge!

  182. 182
    zman Says:

    What, me worry?

    More replies from SSN:

    If I understand Australian it seems that they will keep 100% of the sale proceeds (I had asked about the ability to shield from gains taxes).

    They’ll also be looking to add more Bakken acres (could be some news on this in the next couple of weeks), and will be drilling their first Niobrara wells in 1Q11, probably carried for the first two. The wells will 5,000′ horizontals, not the post holes I had feared.

    I think I will hold on to what I’ve got left for awhile now.

  183. 183
    zman Says:

    WLT on the tape, $2.16 vs $1.93 est

  184. 184
    BirdsofpreyRcool Says:

    RMD — #175 do those multiples hold over time?

    No argument from me… but I think MLP’s are valued almost purely on relative-value payout (and expectation of future payouts). Like a dividend discount valuation model. The yield is related to corporate bond yields. And the payout is a function of the company’s leverage and earnings (of course).

    Anyway, that is the way we used to look at MLPs in the past. It’s a yield vs cost of capital vs earnings expectations thing. JMO, of course!

  185. 185
    1520sbroad Says:

    Z – have a good trip. much deserved.

  186. 186
    zman Says:

    WLL – production just over the high end of the range, EPS of 1.31 vs 1.23 est…. still reading.

    Thanks 1520, can’t manage to get out the door just yet.

  187. 187
    zman Says:

    WLL guidance hiked from 11 to 13% over 2009 to 15 to 17% over 2009.

    Budget remained flat at $830 mm.

  188. 188
    zman Says:

    WLL – three wells awaiting completion in L&C so no real news there.

    But they have leased 39,000 net acres in the Niobrara which should be news to everyone.

  189. 189
    zman Says:

    Ram Energy trimming production guidance.

  190. 190
    Jerome Blank Says:

    $NYMO back to 45.90, burning off quite a bit of the over sold condition. move higher is next….
     
    Zman have a relaxing break….

  191. 191
    Jerome Blank Says:

    #190, that is I meant to say "overbought"…ie the McClellan is not nearly as overbought now…

  192. 192
    zman Says:

    Should have said 39,000 more net acres.

     

    Thanks JB, good to hear. 

  193. 193
    mimster90 Says:

    Z great buy on AEZ.
    BOP #82 is so funny it hurts. Must be time to buy more HK when Nickys pullback happens. 
    "Thank you sir may I have another" comes to mind with HK.
     

  194. 194
    zman Says:

    Thanks Mim- had planned to be in that one a lot longer.

  195. 195
    zman Says:

    AAA – thanks, got that

  196. 196
    zman Says:

    Pati – CHK midstream IPO went at the top of the range.

    Also noted that APA's secondary to help pay for the BP assets was up-sized,

Leave a Reply

You must be logged in to post a comment.

Zman’s Energy Brain ~ oil, gas, stocks, etc… is is proudly powered by Wordpress
Navigation Theme by GPS Gazette

s2Member®
%d bloggers like this: