24
Sep

T.G.I.F.

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Market Sentiment Watch: Malaiseville. Germany looks strong but everything else in the economy on the US side of the points to coming QE2. Meanwhile, the dollar, despite rumors of intervention, continues to slip. In energy land, look for news to begin to pick up next week again as we have a number of catalysts on the very near term horizon and the quarter will be done which means companies will be taking a last look at guidance as will analysts. See the Stuff section for the latest out of Samson.  

 

Ecodata Watch:

  • Durable goods came in at -1.3% vs -1.4% expected.
  • We get new home sales at 10 am EST, forecast 300,000.
  • Also, the NY Fed's Christine Cummng will speak at a bank conference in Chicago this morning.  

In Today's Post:

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

Holdings Watch ZCAT (Zman Catalyst portfolio)

  • $5,200
  • 100% Cash
  • Yesterday’s Trades: None

ZIM (Zman Inefficient Markets portfolio)

  • $2,800
  • 28% Cash
  • Positions for the quick view are updated on the ZCAT, ZIM, ZLT page.
  • Yesterday’s Trades:
    • None

Commodity Watch

Crude oil closed up $0.47 at $75.18 yesterday rebounding in a directionless feeling market. Maybe fist shaking words from Iran's president had some impact. Or maybe it was the tropics. We continue to be range bound, which in my opinion is healthier for the oil and gas stocks than would be an unwarranted (by inventories and demand) and therefore unsustainable move into higher territory. I would suspect that as we approach the fourth quarter prices will firm as traders look towards year end.  This morning crude is trading up 50 cents.

Natural gas popped up $0.05 to close at $4.02 yesterday on storm concerns south of the Gulf and after the EIA reported a slightly better than expected storage number (see below). This morning gas is trading off slightly.

  • Tropics Watch: TS Mathew formed south of Cuba. Current tracks range all over the map but most have a Mexico impact to them. 

Natural Gas Storage Review


ZComments: With 6 or 7 weeks left in the storage season, storage appears to be on track to peak somewhere between 3,650 to 3,750 Bcf. That should keep gas close to the $4 mark this winter, save spikes and slumps related to out of normal range weather. Next week we get another look at supply and while some are calling for a big ramp in supply during the period I am thinking we see another slightly lower number as Rockies gas retreats, Texas and Louisiana edge up and the Gulf slumps while the Mid-continent eases slightly.


Stuff We Care About Today

SSN Updates Goshen Sale - Acreage Being Sold To Chesapeake

  • The 2nd Niobrara acreage sale closing results in another $6.3 mm in the bank ($0.08 per share) ... as guided by the company. 
  • That brings the total cash from the Goshen County Niobrara acreage sales to date to $70mm ($0.85 /share) vs the original range of $63 to $72 mm. At this point, management has lived up to their promises for this deal. 
  • Cash in the bank now totals $76 mm, net cash totals about $65 mm (or $0.78 / share)
  • Final Closing Monday. The 3rd and final closing is now expected on Monday, September 27th for $2.2 to $4.1 mm ($0.03 to $0.05 / share).
  • For the first time, they disclose the buyer of the acreage to be Chesapeake and I care because CHK is in a push for oil and will likely be drilling the acreage sooner rather than later. Samson maintained a 3.8% over riding royalty interest in the acreage sold so the news that one of the deeper pocket large cap E&Ps is the buyer is more than a little welcome. The present value of this ORRI is probably north of $30 mm (Enercom came up with a $53 mm figure based on CHK using 1 rig to develop it and a slightly higher ORRI).
  • Regarding the Intrepid Well. Management confirmed to me that they permitted the well but that CHK spud it as it occurred during the transitioning of the property from SSN to CHK. This also goes to the credibility of my comment above regarding CHK hitting the ground running in the play. 
  • SSN Is Sticking To Its Game Plan For The Retained Niobrara Acreage. The plan was to shoot seismic in the remainder of the year over the 17,300 remaining acres.  Total cost to shoot and process is $2.3 mm and they still plan to drill two test wells in 1Q11. The 3D will also help identify other targets here aside from helping to pick the faults out in the Niobrara (think Codell, J-sand)
  • Nutshell: Chalk up a little more credibility for these guys. Refreshing in the sea of exaggeration and "over-promise and under-deliver" so common to the single digit midget E&P crowd. New near term back of the envelope target climbs just above $2.20 as I decided to add in some value for the ORRI. I don't expect it to get there in the near term but to graduate above that level should CHK wells on their newly acquired acreage prove successful and further should SSN's test wells next year begin to prove up the retained acreage early next year. In the near term we should get the 3rd closing next week and more Bakken play news in the form of another set of well results. A little further down the road, look for them to expand their smallish Williston position. I continue to own the common here in the ZLT.

Other Stuff: 

  •  
  • PBR raises $70 Billion (with a B). Happy day for the Oil Service names, especially HAL, SLB. and the deepwater rigs names from RIG to DO.
  • Look for an odd little micro cap report next week.

Odds & Ends

Analyst Watch:

  •  SBLK - Started at Outperform at Rodman, target $3.25

79 Responses to “T.G.I.F.”

  1. 1
    ram Says:

    If PBR raised $70B, isn't it a happy day for E&P as well.  There is alot of potential in a difficult offshore enviornment for PBR.  It seems that more money is moving to energy land in general.

  2. 2
    zman Says:

    I was thinking of direct beneficiaries but yet, that makes sense.

    Futures called up strongly, S&P up 12, DJIA up 100

  3. 3
    BirdsofpreyRcool Says:

    Not feeling the malaise in Credit Land… taking back everything we gave up y'day. 
     
    IG -2.5 bps tighter to +112 bps
     
    HY +7/16 pts higher to 98.5 pts

  4. 4
    zman Says:

    Anyone see the bite on PXD this morning?

  5. 5
    zman Says:

    Yeah, just thinking equity malaise. Even with big moves, I'm not seeing enough volume to say people aren't either gapping up in a vacuum or gapping down in one.

  6. 6
    zman Says:

    SSN trading resumed.

  7. 7
    zman Says:

    Opening volumes are pathetic in E&P land, 10 minutes in and less than 100K EOG traded?

    SSN – early profit taking, not concerned. I checked in on the yahoo message board, something I do not often do, and see that many over there are disappointed the company wasn't bought or all the acreage wasn't sold, since they expected something big from the HALT. The big news was CHK is drilling the acreage that was sold and that the deal is getting done as promised. CHK spud the Intrepid well on the sold acreage and plans to spud a second well (Enterprise) over the weekend.

  8. 8
    BirdsofpreyRcool Says:

    Anybody who was “disappointed” in SSN’s announcement is stupid and we should buy their shares.

  9. 9
    BirdsofpreyRcool Says:

    JB — most EXCELLENT (and timely!) call on MMR y’day.

  10. 10
    zman Says:

    WLT looking like it is gearing up to extend Wednesday’s breakout. Go ahead may come as early as 15 minutes with the housing numbers. Feels like the futures are up strongly but stocks are lagging.

    WLL – rebounding after yesterday’s profit taking.

  11. 11
    crysball Says:

    Z,
    Single Digit Midget writeup……..is the SSN writeup today the Single Digit Midget writeup you alleded to yesterday……..or do you have some other new magic up your sleeve?

  12. 12
    elijahwc Says:

    CRZO – On briefing comments from Southcoast on Niobara

    Carrizo Oil & Gas: Upgrade details (22.59 +0.59)

    As mentioned earlier CapitalOne Southcoast upgraded CRZO to Add from Neutral based on the well rates for the initial wells drilled by Noble, EOG, and St. Mary’s, the economics of the Niobrara could rival the Bakken with wells up to 500 Mboe. They current model only 250 Mboe per well for CRZO’s 58K acres in the Niobrara, which accounts for $3 of their $24 NAV. Firm says with well results coming from REXX (mid October ops update) and CHK (Oct 13 analyst day) and with CRZO’s first well spudding soon, they think investor interest in CRZO will pick up.

  13. 13
    zman Says:

    Crys – It is not. Don’t know if the other is magic or not but it will be out on Monday if I can talk to the company today.

    Eli – thanks for that.

  14. 14
    elijahwc Says:

    #9 on JB MMR

    Double ditto!!

  15. 15
    zman Says:

    ZTRADE – ZLT – SSN

    SSN – Added another piece at $1.41. See today’s post for details.

  16. 16
    bill Says:

    mmr up 11 % for the week
    pxp down 5 % for the week

    http://finance.yahoo.com/q/bc?t=5d&s=MMR&l=on&z=l&q=l&c=pxp

    pxp will own 23 % of mmr

  17. 17
    zman Says:

    Bill – at some point the Street will be forced to notice that. Maybe if MMR doubles.

    My MMR Oct $16s are up 63%, will come out of those next week.

  18. 18
    choices Says:

    Z,you are and were on top of this deal with SSN-thanks!

    JB-excellent call on MMR-thanks and voted.

  19. 19
    jim bob is my jesus Says:

    PXD: DBK did a 4mln secondary last night priced at 64.75. dont know if that was communicated or not.

  20. 20
    zman Says:

    Choices – thanks, pretty much my stock game plan.

    End of the alphabet crowd in rally mode, WLL, WLT, and WHX flat but near its recent high.

    PXD = ?

  21. 21
    reefguy Says:

    GST- blowback: Korean deal working since April. G&A for new Appalacian office is paid in half by them. Manager has 25 years expierence in area and in horizontal, building team. Gst looking at two follow on Marcellus deals, one in the AMI one outside.
    Blocks they will be drilling are connected via third party midstream company, no need for comapny capital. Transport and Processing agreement at about .67/mcf.
    GR wells will be completed with a pack plus system, first well was treated in only one of five fracture swarms.
    EF designed as 5000′ lateral, 16 stage frac; $6MM. Testing likely at year end.
    Steaker Bossier well being fraced today, testing shortly(good looking porosity zone, expect 10 MMCFPD.
    Current value at $6/share IMHO, with execution, this could go north of $10

  22. 22
    zman Says:

    Thanks for the GST private chat breakdown

    Have they communicated the capex for 2011 in the Marcellus, how many net wells, etc.

    Do they have a large partner in the EFS well? Still getting to reknow this name.

    Thanks too for the Streater comment.

    Good call here Reef. On valuation, if you start putting normal acre values on it you get a higher price than the total co is worth now.

  23. 23
    zman Says:

    SSN at new cycle highs at 1.48

  24. 24
    zman Says:

    JB – how’s the long term SSN chart look to you now?

  25. 25
    jat Says:

    hey, BOP, what’s the next catalyst for ATPG in your mind?

  26. 26
    bill Says:

    Gawd..pxp down today when market is soaring +180 and oil up a buck

    I give up!

    The market is treating them like they gave it away for nothing

  27. 27
    zman Says:

    Jat – she has left the building for Marcellus country. I would tell you it is the Telemark well (adds 7 to 10K bopd) to current prod of about 23K bopd. Then monetization of the Triton (who knows when) and the end of the moratorium.

  28. 28
    zman Says:

    PXP – I hear your pain. I think it is that and a combo of overpaying for gas assets with CHK and I’d guess being involved in Ca. I think the market has them all wrong and the lower it goes, the closer I get to my first trading buy there.

  29. 29
    zman Says:

    NOG – breaking out.

  30. 30
    BirdsofpreyRcool Says:

    z and jat — just about to leave… but I’m looking for the results from the Telemark well (as z said)… and if I was GE (waiting in the wings to do a sale/leaseback on the Titan) I’d be waiting too. So, expect well news first… then (if good) Titan news 2nd.

    Like to think we will hit the Shorts with a One-Two Punch. heh heh heh

  31. 31
    BirdsofpreyRcool Says:

    ALSO — if/when the idjits in Wash DC lift the Moratorium, ATPG will sprout wings and fly.

  32. 32
    BirdsofpreyRcool Says:

    z — re your SSN buy at 1.41… you’re a Meanie. That was like taking candy from babies. đŸ™‚

  33. 33
    zman Says:

    MCF – almost back to its highs. That has just quietly drifted from $42 to $49. So on the edge of my radar and I missed it down low. Will add in the ZLT if you remind me on the next big bad red day.

  34. 34
    BirdsofpreyRcool Says:

    EEP — back to $55… my work there is done. (so no more eep eep-ing polluting this board)

  35. 35
    reefguy Says:

    GST- 12 horizontals in Marcellus in 2011. Capex covered by JV.
    EF has no partners in first three wells as Navasota(33.33%) went non-consent under in or out provision.

  36. 36
    zman Says:

    re 32. Yeah, I feel bad about that.

    re 34. Good job!

    Reef – thanks much.

  37. 37
    zman Says:

    EOG above $91 which was I believe one of JB’s PF signals.

  38. 38
    BirdsofpreyRcool Says:

    ok… outta here. Gonna go see the western PA Marcellus up close and personal. Have a great weekend all!

  39. 39
    zman Says:

    Gold to $3000 story

    http://www.businessinsider.com/david-rosenberg-forget-gold-1300-its-going-to-3000-2010-9

  40. 40
    choices Says:

    #37-91 was the P% F print needed for reversal-JB’s PF chart shows reversal on EOG.

  41. 41
    West Says:

    Reef, Have you heard anything about MHR having a problem with their frac on the EF Gonzo well?

  42. 42
    zman Says:

    KOG – continuing to get the love back.

  43. 43
    DrLink Says:

    Sen. Mary Landrieu (D-La.) delivered a blow to the White House Thursday, announcing she will block the nomination of Office of Management and Budget director Jack Lew until the Obama administration lifts its deepwater drilling moratorium.

    Read more: http://www.politico.com/news/stories/0910/42637.html#ixzz10SgZ2woX

  44. 44
    tomdavis12 Says:

    Z: I no longer have a position in either HK or CHK, but I feel Bill’s pain re PXP. I thought your response was right on. Over the last 18 months CHK has outperformed HK. I am still surprised by that. What would be your down and dirty as to why? Thanks.

  45. 45
    zman Says:

    Nice move in BEXP today as well, it has been lagging and TPH is out championing the name today.

  46. 46
    1520sbroad Says:

    #44 – Z – I will be curious to hear your response to HK vs CHK over 18 months too. My initial thoughts – CHK has better hedges (or at least has been able to construct some hedges that look better), CHK has JV’d/shared risk/monetized a lot of their acreage positions where HK hasn’t done as much of that.

  47. 47
    zman Says:

    Re 44. How much time do you have?

    My thought is that it stems from the dogged claim that “we are a gas company, we are still a gas company, we may be the only gas company left” and similar statements made by HK over the last 6 months. They have done $1.5B in divestments when the target was $1.0B. They have new oily finds in Texas. Production is still set to grow over 30% this year and next and likely again in 2012. They are highly hedged for 2010 but also 2011. But they continue to outspend CF and this is the one knock that I think really bugs people. When you look at names that will see a leap in reserves at the end of this year they will be in the top five and yet here where are at continuous 52 week lows. I still own it and I may add more, watching the base form.

  48. 48
    zman Says:

    HK – is more nimble than CHK and less indebted on an absolute basis and on a interest coverage basis. The HK hedges are strong, better than CHK in 2011. I think CHK started yelling about oil and that supported the stock but they are pretty different companies. Maybe some of the Marcellus magic rubbed off on CHK. Maybe it’s that HK did one too many deals and though they need none now through at least the end of 2011, no one believes them. When I see divergent performance like HK I look for reasons and while I may understand, or think I do, why it is underperforming I also think that the reasons are invalid, that the next big deal out there we see will be them punting the FS and thereby taking their LOE/MCFE even lower. Not sure people will care about that either but they should.

  49. 49
    crysball Says:

    COULDN’T HAPPEN TO A NICER GUY DEPARTMENT:

    ‘Stuxnet, rated as the most advanced and dangerous virus ever devised, is said to have crippled 3,000 Iranian enrichment centrifuges.’

    The Israeli’s are very clever, and with just 1 upload from from a USB memory stick managed to cripple the the entire Iranian network of Iranian enrichement centrifuges….incidentally, the differnece between enriched Uranium for for reactor fuel and and for weapons grade material is a function of centrifuge speed. The Stuxnet malware in the Microsoft Controlled PC network provided an an oversppeed instruction to the Siemens PLC controllers and overrode the speed limiter on the gas centrifuges and the centrifuges literally destroyed themselves [burned up their very special ball bearings which can only be obtained in the West]………..so not only did they stop weapons grade Uranium production……..they destroyed the means of making weapons grade material, as the Iranians have no means of manufacturing thses highly specialized high angle contact radial ball bearings.

    My hat is off to the Israeli’s who will never claim credit for detecting and exploiting this weakness in the Microsoft operating system.

    Could not happen to a ‘NICER GUY’…i.e. Amehnijad !

  50. 50
    zman Says:

    Agreed.

    Tropical Storm Matthew gearing up to dunk my friends in Honduras, then on to Mexico and then who knows. One model show it regaining strength in the central Gulf and going to NOLA.

    Bastardi saying next storm to threaten Florida. OJ, get your OJ!
    http://www.barchart.com/charts/futures/OJX10

  51. 51
    1520sbroad Says:

    Z – thx for 47,48. I bought some more HK recently based on a contrarian set of metrics. My hope is that HK will continue to execute and that they have learned something.

  52. 52
    zman Says:

    WLL roaring back, if TPH thinks BEXP is cheap/ has lagged (and it is cheaper than it has been and it has lagged) then they would really like WLL (not for lagging but for the cheapness of it).

  53. 53
    choices Says:

    Z, do you place any significance on the trends/pricing in Brent as an indicator for the same in Light Sweet Crude or vice versa?
    -Brent is weakening a tad and appears to be rolling over short term.

  54. 54
    zman Says:

    Choices – haven’t given it a lot of thought of late but they generally move in the same direction. I think WTI is range bound and if Brent moves out of bounds with it that it will be short lived. By all reports, Asian demand remains robust as does Middle Eastern demand. US is seeing a bit higher production of late (Bakken mostly) but demand declines have been arrested so that’s OK as a pricing indicator and I expect to see the Gulf start to noticeably slip early next year.

  55. 55
    crysball Says:

    Z,
    Did you neglect to add the GOM production slippng thanks to POTUS and his ‘lackies’?

    Love the action by LA Democratic Senator Landreau to block nominnations of POTUS lackie.

    Loooking forward to November elections TO SEND A MESSAGE to the ‘CLUELESS’ ‘ANIT-BUSINESS, ANTI-OIL/GAS’ TAX & SPEND Administration who’s NEO-KENYNIAN ECOONOMIC POLICIES HAVE FAILED……while we allow the Chinese to continue to ‘call the shots’ in the currency market with a cheap Remimbi [Yuan].

    End of Rant.

  56. 56
    zman Says:

    Crys – my last sentence in 54. Estimates call for small loss this year, probably 120,000 bopd (out of a total current US of 5.5 mm bopd).

  57. 57
    zman Says:

    Market boring itself higher. Not complaining but hard to stay awake. Volumes most names pretty light. Grabbing some lunch.

  58. 58
    elijahwc Says:

    SSN: What do you think? Do you believe SSN will come with another rights offering? Seems to be in their DNA. Stock always does 50% or more to the upside every time they have issued this way in the past. Great source of financing without killing existing shareholders. Z, any odds?

  59. 59
    ram Says:

    I can’t imagine how SSN could top the last scenario. Talk about found money.

  60. 60
    bill Says:

    bexp soaring

    did you folks see this

    DENVER, Sept. 23 /PRNewswire/ — EARTHSTONE ENERGY, INC. (BSIC

    Loading… Loading…

    ) reported Panther Energy Company, LLC, its majority partner in the Banks Field, has sold its interest in the field, comprising nearly thirteen thousand gross mineral acres, to Brigham Exploration Company (BEXP

    BEXP BRIGHAM EXPLORATION COMPANY 17.93
    Change +1.37 (+8.27%) AS OF 1:56 PM ET 09/24/10.
    Chart for BEXP Research

    ). This sale does not affect Earthstone’s leasehold rights in the area and Earthstone expects to retain its oil and gas interests. As in the past Earthstone intends to participate in new wells proposed by Brigham, or others, that “pool or space” our leasehold rights within spacing units they operate.

    “We are not just excited by this development, we are ecstatic,” commented Ray Singleton, president of Earthstone. “Brigham is on the forefront of the application of new stimulation technology in Bakken wells and has been instrumental in demonstrating the economic viability of this area of the Williston basin. With Brigham now involved, we expect the pace of development to heat up. Based on conversations with Brigham, we anticipate drilling one well, possibly two, on this acreage before the end of the calendar year.”

    Singleton continued, “In related news, the Pederson 10-3H, our newest well in the Banks Field, has been completed and placed on production. However, because of high gas sales line pressure, the well has been unable to produce at full capacity without flaring natural gas. As a result, production from the well has been ‘throttled back’ to conserve this resource. Production from the well, which is expected to come off confidential status next week, is estimated to report an initial production rate of approximately 500 barrels of oil and 200 MCF of gas per day. In addition, Zenergy is planning a new well in the Banks Field, the Ceynar 29-32H. Earthstone has a small interest in the well which is expected to commence within the next 30 days.”

  61. 61
    bill Says:

    49 wow what a story

  62. 62
    zman Says:

    Eli – they could but they don’t exactly need the money at the moment.

    Ram – if they prove up the 400,000 boe per well case on their retained acreage then the NAV moves close to $10.

    Bill – yes and I spent the entire day yesterday reading about them. Tiny, interesting, but tiny. Fairly valued on reserves. Trades by appointment. A few acres here and there. Not for the feint of heart but a clean balance sheet with a smallish net cash positive position and they are profitable.

  63. 63
    ram Says:

    $10?? Again, I am glad I’m here. Of course, the previous statement does not state or infer that ZEB or any of it’s afiliates or interns told me what to do – blah, blah, blah…………..

  64. 64
    zman Says:

    Ram – fully developed would be a long ways off and it will discount the price by quite a bit, but I could see anywhere from $3 to $6 within 2 years depending on how well things go with the Niobrara drilling and their reinvestment of capital into more Bakken land. All things like prices being equal of course.

  65. 65
    ram Says:

    #49 Taken down without firing a weapon. Makes you wonder about other cyber attacks looming……

  66. 66
    zman Says:

    Colbert testified before congress. Well, at least they were busy laughing and not writing more regulations.

  67. 67
    bill Says:

    file under you either with us or against us

    http://liveshots.blogs.foxnews.com/2010/09/23/applause-for-ahmadinejad/

    We should cut all foreign aid to countries that applauded.. for openers

  68. 68
    zman Says:

    Volumes still very light, looking at the daily charts, the volume bars on many of our names are hard to see today vs the last several weeks.

  69. 69
    zman Says:

    Rig counts watch:

    Oil up 3 to 673 vs 297 a year ago
    NG down 15 to 967 vs 710 a year ago

  70. 70
    zman Says:

    TGA breakout continues – I missed that one.

  71. 71
    bill Says:

    lol a poster commenting on iran says

    Ahmadinejad hates America and everyone knows it.
    Obama hates America but only some know it.
    Both want to destroy capitalism and America.

    Im done for the day..good bye

  72. 72
    zman Says:

    See ya bill, have a good one.

    Hogs to play #1 Alabama, should be interesting.

  73. 73
    jiveyjr Says:

    thx to Z , BOP and everyone for digging up all these winners

    …thx to Jerome for his great charts and pointing out a “potential area to consider purchasing”….WLL yesterday I think….timing was exquisite….didn’t buy enuff of course, but bot some…

    ended the week voting…bye all..have nice weekend

  74. 74
    zman Says:

    MMR moved on up, changed mind about next week.

    ZTRADE – ZIM – MMR

    MMR – Sold (25) MMR $16 October Calls for $1.16, up 83%, with the stock at $16.34. Will look at repositioning next week.

  75. 75
    zman Says:

    SSN should have more news Monday:
    1) final closing, likely $4mm or $0.05/sh more in cash received.
    2) Bakken results from their latest well.

  76. 76
    zman Says:

    I’m out of here as well, ZLT at a new high but I have leaves to rake and football to watch. Have a great one.

  77. 77
    tomdavis12 Says:

    Z: Go Hogs!

  78. 78
    occam Says:

    For NASDAQ stocks, this link gets the latest short interest sooner than shortsqueeze.com does:

    http://www.nasdaqtrader.com/Trader.aspx?id=ShortInterest

    EXXI and ATPG bot down.

  79. 79
    choices Says:

    Old news but some additional detail
    http://www.economist.com/blogs/babbage/2010/09/stuxnet_worm

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