29
Oct

T.G.I.G.D.P.

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Market Sentiment Watch: Advance 3Q GDP of 2% vs 2.1% expected.  Hello QE2. Energy earnings continue to roll out. The group feels a little bit tired and continues to, with few exceptions, trade in step or a little weaker than the broad market. We get another monthly reading on natural gas supply later this morning which could serve to buoy gas prices should we get a second month of flattish figures out of Louisiana. For those of you playing the home game, you can click on this screen for the 914 data and /or this one for the Natural Gas Monthly.  HAL rebutted the Presidential Panel's comments - See stuff section below. 

Ecodata Watch:

  • We get Chicago PMI at 9:45 am EST, forecast 57%, last read was 60.4%
  • We get Consumer Sentiment at 10 am EST, forecast 68.5, last read was 67.9. 

In today's post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Inventory Preview
  4. Stuff  We Care About Today – SWN, HAL, EXXI
  5. Odds & Ends

Holdings WatchZCAT (Zman Catalyst portfolio):

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

ZIM (Zman Inefficient Markets portfolio)

  • $3,200
  • 1% Cash
  • Yesterday’s Trades:

    • NBL – Added an $80 November call for $1.25 with the stock at 78.60. Call ongoing after strong quarterly results. See site for further details. 

Commodity Watch

Crude oil edged up $0.24 to close at $82.18 yesterday in boring trading. Kind of like the dollar and the equity market. Crude is hanging out over $80 longer than I thought. I don't think this means much other than when it falls a lot of folks will say, "finally" and it will be more likely to move back into and above this range again when things do improve in the economy or at least on the products demand front. This morning crude is trading off slightly.

Natural gas rallied $0.13 (3%) to close at $3.89 yesterday as the EIA reported another massive (for this week of the year) injection into storage but the fact that it fell 2 Bcf short of expectations and a change in the weather patterns towards cooler temps helped sentiment. This morning gas is trading up 3 cents. 

  • Tropics Watch: Nothing threatening. Tropical storm Shary formed in the Atlantic but is headed away from NAM and the Gulf. The season is definitely on the wane. 

Natural Gas Review


ZComment: We remain range bound and with a peak probably between 3,800 and 3,850 Bcf we will need protracted cold and a falling rig count to prompt a meaningful / sustainable rebound above $4.00. 

Stuff  We Care About Today

--- 

SWN Reported Strong Results ... But Gives No Guidance Reiteration


Highlights: Not a lot really.

  • Production was 104.7 Bcfe, near the high end of the range set out in the 1Q call of 102 to 105 Bcfe.
  • Fayetteville Shale Update:
    • SWN noted that average drilling times fell to 11 days spud to spud during the quarter and they drilled a handful of wells in five or less days. 
    • This should lead to strong savings on the well cost front, which, given SWN's lack of hedges and 100% gas natural is a good thing since their capital budget will likely need to be reduced to keep from ballooning debt on the balance until gas prices rally. 
    • Downspacing: SWN reduced their thinking on well spacing on their 600,000 acres:

      • 20% of acreage should be good to go for 30 to 40 acre spacing
      • 40% at 65 acre spacing
      • and 40% needs further testing to determine spacing. 

    • However, for the third straight quarter IPs and presumably EURs were flat vs the preceding 2 years of up and to the right style quarterly improvement, begging the question, have we seen just about all of the improvement (aside from drilling time and completed well cost) that we are going to see out of the Fayetteville.
  • Guidance: The normal comment on guidance for the rest of the year was omitted. Again, getting back to their capital budget, I think they must consider reducing spending and as their production will ratchet up or down with spending, it makes since to mull gas prices and keep their mouth shut on guidance for now. 
  • Other Areas:

    • Appalachia - Still talking about the Greenzweig well, not a lot else new.
    • Nova Scotia - too early, didn't even get a mention in the press release.
  • Nutshell: Good quarter on the numbers, not a lot to bite into on the operations update all the downspacing news helps. The lack of guidance reiteration may prove a concern for the market. I continue to hold a half sized position in the ZLT. 

Conference Call: Today, 10 am ESt. 

Other Stuff:

HAL Rebuttal Watch:

  • Yesterday, the Presidential panel established in May to investigate the Macondo tragedy, released a statement casting dispersions on HAL's cement job on the well. HAL's stock was sandbagged for 8%, falling twice that much at one point in the day. The president's Panel made a number of claims

    • 1) That 3 of 4 tests on the cement slurry used at Macondo failed tests to determine their stability/suitability in cementing the well.
    • 2) That the slurries that failed testing were similar to the cement used in the well 
    • 3) That HAL did not communicated the failed tests to BP.
    • 4) That Chevron was unable to take cement segments and achieve a satisfactory stability result in lab tests 

  • Last night, HAL responded

    • 1) On the question of 3 of 4 tests failing, HAL notes that 2 of these were pilot tests of cement mixes done in February .... they were not the same blend as was eventually used in the well.  
    • ZComment: I find this mention of "failed tests" to be a deliberately misleading statement on the part of the Panel. Without trial, and sometimes error, how does the scientific process unfold? Oh, wait ... now I remember ... the Panel is headed by a former head of EPA and a senator who has been anti-offshore drilling (he's from Florida) his whole career.   That former EPA head's bio is here and you can see he's a lawyer and also a former head of several conservation outfits ... but not a scientist who might come to something close an objective decision in this matter.  
    • 2) HAL notes that, contrary to the Panel's assertion that the February slurry was very similar to the April slurry used in the well, the slurries between the two dates were not similar. 
    • 3) HAL goes on to noted that the 3rd test was botched in the lab. 
    • 4) HAL also says that BP was made aware of the test results (so that's ones a he said/she said kind of thing)
    • 5) Notably, HAL says that BP told them to increase the amount of retarder in the cement after a successful test was conducted with a lower of retarder.  Most retardedly, a stability test was not run on this higher retarder mix.
    • 6) HAL notes, as have we all, that BP elected not to run a cement bond log test. This is what SLB had a crew there for and they were not allowed to run it and they hit the helicopters and left the scene immediately.  
    • 7) Finally, HAL says that CVX tested off the shelf cement vs the custom blend used at Macondo.
    • ZComment: I stand by my previous comments on HAL on this one; they were a contractor under the direction of BP working under imperfect direction at that. My sense is that massive BP spill debt fear gripped shareholders yesterday and some holders, who are already worried about a deceleration in NAM next year decided to throw in the towel. 

 

EXXI Pricing

  • Common priced at $21.75, deal upsized to 12 mm shares from prior expectations of 9.5 mm. Hey, at least there is demand.
  • The $250 mm of convertible perpetual preferreds were priced at $250 with a 5.625% yield.
  • Total proceeds are close to $500mm, above the $400 mm discussed at deal onset Wednesday night, before any overlotment.   


Odds & Ends

 Analyst Watch:

  • OII - Global Hunter initiates with Accumulate rating, target $72.
  • SWN - UBS cuts target by whopping $10 to $46, rating Buy
  •  

117 Responses to “T.G.I.G.D.P.”

  1. 1
    BirdsofpreyRcool Says:

    EXXI common priced at $20.75… you gots a typo
     
    It's already trading up, in pre-mrkt… but will watch for a coupla days… until underwriters stop supporting it.  Then see what the convert hedgers do to it… then add.  That's the PLAN, anyway.

  2. 2
    BirdsofpreyRcool Says:

    File under:  Things That Make Me Nauceous
     
    The HAL comments put forth from the "Govt Panel" were from a CHICAGO LAW FIRM "tasked with investigating the cement."  From TPH this morning…
     
    —- The Oil Spill Commission received a letter from a Chicago law firm, apparently tasked with investigating the cementing issues surrounding the Macondo well. —-
     
    Does this not REEK of politics?  A Chicago Law Firm???  C'mon, people… do they really think we are THAT STUPUID?  Apparently, they do.  And HAL lost a bunch o' market cap value y'day.  And Hugo Chavez just smiled and waved…. smiled and waved.
     
    rant over

  3. 3
    BirdsofpreyRcool Says:

    We haven't heard from BedTime Market Strategist in a while…. here's what he said about the AAII Index, which has moved up into dangerous territory…
    =====================================
    Mixed Bag.
    Despite the flat performance of the Equity market, it was truly a mixed day. One key negative was the 70.34% Bullish reading on the AAII sentiment survey. After the very pessimistic reading in early July, we <http://www.elabs10.com/c.html?rtr=on&s=x8paoo,5m51,352,1e5i,7lt9,1l20,e2o> noted that we expected the July 1st low to be the equity market low for 2010. We frequently mention that we think very highly of this indicator and that a reading above 70% Bullish is a "sell signal." This is the first such sell signal since February 23, 2007. This reading is not enough to shift us out of the Bullish camp, but it makes us cautious. As we have noted in the past, 2003 serves is the caveat for adhering to the sell signal when economic data begins to show signs of improvement (chart below). If economic data begins to exhibit signs of recovery as it did throughout 2003, the market can continue to rally despite AAII being in sell territory most of the year. That leads into the positive news of the day, which was the Initial Jobless Claims report. Today's reading of 434,000 claims was the second lowest of 2010, and you have to go back to the summer of 2008 to see consistently lower readings. As we have advised since August, if we continue to follow similar patterns to last year, there is a high likelihood that Initial Claims will break below 400,000 before year-end.
     
    For more on AAII and the forward Median and Average returns for different levels of sentiment please click this link- AAII Revisited <http://www.elabs10.com/c.html?rtr=on&s=x8paoo,5m51,352,jc9p,j2sf,1l20,e2o> .
     
    Dollar Drop.
    The Dollar was beat up pretty good against most currencies, but lost 1.2% versus the Euro and 1.1% versus the Pound. The movement is interesting because European Sovereigns have begun to see yields rise over the past week. Dollar weakness is likely related to a story by Bloomberg last night about the Fed polling primary dealers on the size of the potential Quantitative Easing program and the influence they expect it to have on rates. The part of the Bloomberg story that caught our attention were the multiple choices offered to dealers regarding the expected effects over a 6 month period of the following purchase sizes: zero, $250 Billion, $500 Billion and $1 Trillion. Any time a $1 Trillion number is mentioned in the context of Quantitative Easing, it is likely to cause Dollar fears. The question is what are the odds of a $1 Trillion number actually being announced? Since the odds of a "zero" number being announced are slim to none, it is fair to guess the odds of a $1 Trillion number are only modestly higher.
     
    Market expectations appear to have settled at $100 Billion per month in Treasury purchases. The $250 Billion and $500 Billion over 6 months break down to $42 billion and $83 Billion in monthly purchases respectively. The $1 Trillion over 6 months breaks down to $167 Billion per month. For context, the "Shock & Awe" announcement of March of last year increased the size of QE1 from $600 Billion to $1.75 Trillion. The $1.15 Trillion in securities added in March were originally intended to be purchased in 6 months, which would have been a rate of $192 Billion per month. As the economy improved, the FOMC slowed the rate of QE1 purchases and extended the program by 6 months. Overall, the final average monthly rate of purchases during QE1 was approximately $120 Billion per month.
     
    That leaves the question of what is the FOMC's time frame? Will it be meeting to meeting, which is 1.5 months, or 3 months, representing a quarter, or 6 months as in the survey? To us, 6 months seems too long and risks boxing the Fed in, but one cannot rule it out. The other two options offer more latitude and allow the FOMC to remain data dependent.

  4. 4
    BirdsofpreyRcool Says:

    (musing… one always feels a tinge of chagrin… when one misspells "stupid" or "intelligence" when one is insulting someone else for lack thereof…  but sometimes — in the middle of a rant — little things get ignored.  oops.)

  5. 5
    zman Says:

    re 1, thanks, wishful thinking πŸ˜‰

  6. 6
    zman Says:

    Analyst Watch

    HAL – Goldman Sachs – Buy HAL On The Headline Risk 

  7. 7
    AAA Says:

    Hey BOP,  I hope you caught my last comment last night.  Briefly, I hope you know I wasn't implying you had led anyone astray on EXXI.  To the contrary, you warned repeatedly that a financing was in the works and it would impact the stock.  I was just annoyed at the way they did it, which seemed calculated to clock the common.  I was also aware that the chart had been screaming sell signals for a couple of weeks. 
    Anyway, if it hits $30 by year end, I will come on here and apologize to management for ever doubting their acumen.

  8. 8
    milepost_43 Says:

    HAL….holding right @ 200dmav…..time to buy some Nov calls??

  9. 9
    BirdsofpreyRcool Says:

    AAA — i did read your comments.  And thank you!  However, I did you a favor by not answering, as I was about 3/4s of the way thru a Calif Pinot (from TJs).  But your answer made me smile.  Didn't mean to get all emotional (ha!  me?  emotional??)… but the thing i HATE the most, is for ANYbody to lose money on something I said. 
     
    We all knew EXXI would do this… just thought it would be presented as the entire picture.  As in "Debt + Equity = Assets."  Instead of seeing (and evaluating) the entire equation, EXXI just slapped us with the "Equity" part, leaving us with one equation and two unknowns.  As any mathematician knows, that is an UNsolvable equation.  And unknowns create uncertainty…. and uncertainty creates selloffs.
     
    IMHO, EXXI didn't have to do it that way.  THAT is why I was jumping up and down like a Mexican Jumping Bean, shooting steam outta my ears the last day and a half.  But, what's done is done.  And I am holding onto every single share of my EXXI (except for the trading shares… they get booted at $28-fiddy).  πŸ™‚

  10. 10
    zman Says:

    MP – Already owned them post quarter, mulling an add of a lower strike.   Media continues bashing HAL, I guess they find it fun, this morning and we have early selling today on the fear factor. 

  11. 11
    john11 Says:

    Anybody have conversion details on the EXXI preferred?

  12. 12
    zman Says:

    BOP – I've made plenty off what you've written. Swing away!

  13. 13
    bill Says:

    ambulance chasers alert
     
    http://finance.yahoo.com/news/Pa-woman-sues-gas-driller-apf-459128995.html?x=0&amp;.v=1

  14. 14
    zman Says:

    By the way, listened to the LINE call late last night.

    Couple of things that should have made the post but didn't due to laziness:

    Catalytic granite wash well results should come out before 4Q, probably in next 30 to 45 days. 

    Wolfberry will garner more attention next year, 20% of production now and growing, liquids rich of course

    (no apparent overlap with any AREX acreage as the Wolf goes)

    Sounds like they have an appetite for more Permian acres

    Granite Wash and Permian will allow them to grow the distribution and coverage as we knew, tone on growth is like to be not quite every other quarter for a distribution increase, so another one is likely either in 1Q11 or 2Q11 but not in the 4Q. 

    Balance sheet rock solid. 

  15. 15
    DrLink Says:

    SSN another Christmas gift?

  16. 16
    zman Says:

    Demand for thought watch:

    http://www.businessinsider.com/the-six-commodities-that-have-been-hijacked-by-chinese-demand-2010-10

    Give it five years and oil will creep onto the list.

  17. 17
    zman Says:

    DRL – I saw the pre-market weakness, no explanation for it. Cash now accounts for over 70% of the stock price. Like I've been saying, they lack an immediate catalyst and people get bored and sell and the selling begets more of the same. I may add a little more soon. 

  18. 18
    AAA Says:

    GS is apparently rec'ing HAL this morning and buying HAL's rebuttal.

  19. 19
    zman Says:

    AAA – For what it's worth, I too am drinking the HAL coolaid slurry.

  20. 20
    bill Says:

    Press calling for prison for coal executive
    http://www.minyanville.com/businessmarkets/articles/coal-coal-mining-massey-energy-west/10/29/2010/id/30837?camp=syndication&medium=portals&from=yahoo

  21. 21
    mimster90 Says:

    rants need misspellings to be genuine
    EXXI CEO better be getting a fantastic deal with all this expensive money he is raising. It does hurt his creditability with me the way he ran roughshod over the common share holder.

  22. 22
    BirdsofpreyRcool Says:

    mimster — that is a cool, profound statement about rants.  Thanks for saying.  It's so true!
     
    And no argument from me… the Asset side of the equation better be Awesome Possum.

  23. 23
    tomdavis12 Says:

    EXXI Pfrd cusip #29274u309. I do not have symbol yet. Did trade over the $250 issue price yesterday.

  24. 24
    BirdsofpreyRcool Says:

    EXXI new preferred = 5 5/8 coupon with a 22.5% conversion premium

  25. 25
    BirdsofpreyRcool Says:

    so, converts at $25.42.

  26. 26
    zman Says:

    West – thanks for the tip on the Bakken discussion group, trying to get a guy to drive over and check out the flare on a WLL after he spoke about a big fat flare at a recent L&C TFS producer. 

  27. 27
    zman Says:

    Consumer sentiment: bummer at 67.7.

  28. 28
    zman Says:

    MMR shareholders realizing that having your partner have more cash is generally a good thing. 

  29. 29
    tomdavis12 Says:

    Z: Did you hear anything on WLL CC that gives you pause?

  30. 30
    zman Says:

    SWN Call starting:

    http://www.swn.com/Pages/default.aspx

  31. 31
    zman Says:

    Tom – Not to put to fine a point on it but no.  The Street worried over the EPS miss yesterday. There were some rare items in LOE that helped that happen while pulling guidance down to the mid point of their guidance. Catalysts upcoming are pretty important and are likely to be positive for the name. I don't do targets but I'd expect with oil hovering around $80, the news over the next 30 days should take the name through the recent highs as the L&C area is de-risked.  

  32. 32
    zman Says:

    SWN flat as call gets into downspacing comments. 

  33. 33
    zman Says:

    SWN Notes

    Capex to be at or below $1.2 B target for 2010.

    Debt to book capital expected to DECLINE from 31 to 28% by year end. Hmmm.

    Q&A about to start. 

  34. 34
    zman Says:

    SWN Q&A notes

    No 2011 budget yet … but they are going to stay close to cash flow, minor debt increase is possible. They said 2011, given where prices are now, will be a lower number than this years $1.2 B. I think that's smart of them. It's also the reason for not really talking about 2011 production growth yet. They also commented that they are not looking to do asset sales to make the capex vs cash flow balance work out. They may sell some stuff (my bet is they punt some more E. TX) but the budget is primarily based on cash flow from operations expectations.

  35. 35
    zman Says:

    SWN on Nova Scotia

    Have gather gravity and magnetic studies, just in house

    Prepping for a small 2D survey of a deeper part of the basin. They know they can get good reflections down to 15,000 feet which is positive. 

  36. 36
    milepost_43 Says:

    Z….ck email….HAL brokerages comments

  37. 37
    zman Says:

    HAL working through the govt. smearjob. 

    NBL working higher. 

  38. 38
    BirdsofpreyRcool Says:

    milepost — can you post any of the HAL comments?

  39. 39
    zman Says:

    Thanks MP. JPM cautious, others not at all. 

  40. 40
    BirdsofpreyRcool Says:

    well… not verbatim. but just who is saying "buy" or "sell" or "i'm so confused, I can't find my coffee cup this morning."

  41. 41
    zman Says:

    Jefco says Buy, same Stern Agee. JPM saying liability increased, worried, which I don't agree with. JPM, as usual, see the glass 3/4 empty. 

  42. 42
    1520sbroad Says:

    Z – thks for SWN notes – I didn't get on at the beginning of the call so I will read the transcript later.
    There is a well in new brunswick that should get reported with Corridor's Q3 report in early november.  This is a horizontal that they drilled with Apache Canada.  Apapche just finished fracking it and should have data in the next couple of weeks. 

  43. 43
    zman Says:

    JB – can you comment on NBL, looks like a breakout with room to roam. 

  44. 44
    BirdsofpreyRcool Says:

    #41 — thanks, z.

  45. 45
    1520sbroad Says:

    corridor reports on 11/11/10.  The well is the Green Road 41.  I am sure SWN will be watching closely.

  46. 46
    milepost_43 Says:

    Have them saved as PDFs….can I link to them somehow?
    Jefferies…..Halliburton (NYSE: HAL)
    Lack of Bond Log Cements our Positive View on HAL
    Investment Summary
    Yesterday's news from the presidential oil spill commission suggested
    HAL's cement job contributed to the BP Macondo well disaster and
    sent shares tumbling. We believe HAL is fully indemnified against
    liability and that BP is ultimately liable for the well blowout and
    resulting damages. Expect volatility; Reiterate Buy.
    JPM….North America Equity Research
    28 October 2010
    Halliburton Overweight
    HAL, HAL US
    Commission Letter Signals a New Direction, Liability
    Risk Has Suddenly Increased – ALERT
    Price: $34.42
    27 October 2010
    Stern Agee We are buyers of the stock, although respecting the market’s
    need to do more in-depth analysis of the change in risks. A big
    difference now versus before, before meaning we already knew
    HAL was accused of providing unstable cement, is the well is
    plugged, i.e., the liability is not running astray with the flowing
    oil anymore. We will be back with more analysis as the data
    presents itself, and HAL is said to be in the process of
    formulating a response to the letter in short order.

  47. 47
    BirdsofpreyRcool Says:

    milepost — thank you very much!

  48. 48
    jat Says:

    It's an interesting mindset that says risk is increased after a large share price decline and incredibly clear information on both ultimate liability and actual responsibility is even further disclosed.  

  49. 49
    zman Says:

    1520 – Tapadh leat for the color there. 

  50. 50
    zman Says:

    MP – sorry no, can't link a pdf here unless you have the doc on a server. 

    Jat – I know, as BOP says, you gotta love inefficient markets 

  51. 51
    1520sbroad Says:

    #49 – say what?

  52. 52
    zman Says:

    ZTRADE – ZLT – SSN

    Added  more SSN for $1.14. My sense is the stock has been bleeding lower on a lack of real news out of the Niobrara play from other, larger players this earnings season to date and a lack of near term company news from SSN on their own acreage (have to wait until 1Q11 for that). As the name pulls back, the stock becomes more and more a cash on the balance sheet story with acreage upside in the Niobrara and reserves in the Bakken and elsewhere being overly discounted.  

  53. 53
    BirdsofpreyRcool Says:

    are you kidding?  I LIVE for "inefficient markets."  I get up every morning and say a little prayer to the market gods… PLEASE let me have an Inefficient Market Day!  πŸ˜‰

  54. 54
    zman Says:

    They speak Gaelic in some parts of that area, means thank you. 

  55. 55
    zman Says:

    SSN volume at 547K, seems more than 1 bottom fisher out there today. 

  56. 56
    zman Says:

    How to prove you don't care if management likes you.

    Analyst – "why didn't you hedge more?"

    SWN "Ummmm, because we wanted $5 gas and couldn't get it"

    Analyst – "But your program works below $5"

    SWN "Yeah, it does"

    It's a fair question to ask but not very constructive, should have been directed to the future instead of being a flip jab.  

  57. 57
    zman Says:

    HAL trying to go green

  58. 58
    BirdsofpreyRcool Says:

    #56 — love your color commentary.  thanks!

  59. 59
    zman Says:

    re 58 = mutual. 

  60. 60
    1520sbroad Says:

    #54 – ah ha!  Merci, I could understand but I don't speak Gaelic. 
    Was just reading thru the analysts reports/comments on SWN – they seemed bored to death.  Lots of vanilla flavored thoughts on Southwestern. 

  61. 61
    zman Says:

    re 60. Hear ya. Like with WLL, the downspacing commentary is not sexy enough to keep them awake on a Friday. Plus, analyst like to be spoon fed guidance and SWN is not ready to do that. 

  62. 62
    zman Says:

    WLL up $2, recovering yesterday's dip. Some analyst somewhere must have liked the CC. 

  63. 63
    choices Says:

    #16-the list goes on and the Chinese do not seem shy about using their leverage-the thought of anyone from the West going to Beijing to argue about currency or trade measures seems ludicrous-the West better get used to talking about issues as a supplicant rather than as an equal partner-
    http://www.nytimes.com/2010/10/20/business/global/20rare.html

  64. 64
    zman Says:

    Unfortunately, have to step out to the revenue office to renew a license. If you don't hear from me within an hour send out the hounds. 

  65. 65
    zman Says:

    Bomb on UPS flight Yemen. What a shocker. 

  66. 66
    zman Says:

    Nat Gas Monthly out, gotta run out but it was essentially flat. Gomex actually caught a small bounce, LA was up a bit more than I'd like, other states trickled higher, TX,WY NM, OK essentially flat. 

  67. 67
    zman Says:

    MMR zipping higher now, HAL green, NBL moving a bit better now too. 

  68. 68
    elijahwc Says:

    EXXI – Wohahh…….net pref outta there hot, trading 264 to266.  Conversion price 25.42 so conversion ratio 9.8353.  My hands are flat.

  69. 69
    AAA Says:

    I'm having second thoughts on the attractiveness of the EXXI pref's versus the common.  There is plenty of paper out there paying in the 5-7% range, so the attraction has to come from the possibility of converting.  If that is so, why not just go with the common?

  70. 70
    BirdsofpreyRcool Says:

    MMR with a 15-handle was Christmas in October.  I think a few people here grabbed some of those presents.  Nicely done. 

  71. 71
    AAA Says:

    elijahwc,  what is the ticker for that pref?

  72. 72
    BirdsofpreyRcool Says:

    AAA — i'll let elijah answer that question technically.
     
    But it's not typical to have a convert with that high of a coupon.  It provides a nice income stream that dampens the volatility of the underlying stock for you.  Kind of like selling covered calls… but you don't risk the stock being taken away from you.  In return, you get fewer "shares" than if you just used the same money and bought shares outright.  But less risk. 

  73. 73
    BirdsofpreyRcool Says:

    To add to 72… the stuff that is out there paying that sort of coupon is (usually) not a convert, but a straight bond.  So, your upside is capped.  Not so with a convert.

  74. 74
    BirdsofpreyRcool Says:

    That said, using the same proceeds to buy the stock — if the stock goes up more than some % per year — will always outperform the convert. 

  75. 75
    milepost_43 Says:

    #46 HAL one more FBR….picked up a few Nov calls earlier….so far so good…….
    In a research note Friday, FBR Capital Markets analyst Robert MacKenzie reiterated a market-perform rating on Halliburton and said the market overreacted to the National Oil Spill Commission study.

    "It is possible that the foamed cement pumped by Halliburton on Macondo could have been unstable, however this by itself does not affect whether or not Halliburton bears any liability for the spill," MacKenzie said.

    Rather, the company's liability hinges on whether BP chooses to challenge Halliburton's contractual indemnity clauses, he said.

    "Halliburton's decision to run a fourth test with a modified design shortly after the third test showed instability, shows some measure of diligence, not gross negligence, in our opinion," MacKenzie said.

    He said the tone of BP's internal report on the incident didn't mention gross negligence but cited a combination of errors instead.

    "Based on this reading of BP's report, we believe that BP will seek contribution from their partners, and not attempt to pierce the contractual protections of their service providers," he said.

  76. 76
    elijahwc Says:

    None yet that I know of:  Its not going to be listed so a symbol will be assigned and appear on "other markets OTC" and will show up sometime before settlement 11/04.  Could be as early as tomorrow. 

  77. 77
    skimo Says:

    Z, your nbl 80's from Wed are lookin pretty good. Have you got a target?

  78. 78
    bill Says:

    mmr..star of the day

  79. 79
    occam Says:

    BOP – do you expect some EXXI short selling from here as people get their hands on the converts?

  80. 80
    bondbuddha Says:

    Sold my MMR calls for 47% profit, thanks Z

  81. 81
    BirdsofpreyRcool Says:

    occam — that is what happened last time.  If history repeats, then yes… i expect the institutional convert holders will lock in the yield by shorting the common.
     
    The dynamic tension is that EXXI will have a couple of announcements to make… and soon, I would think.  1) DJ#2 and BBE well logs, and 2) answer the question "whatcha gonna do with the CASH, boys??"

  82. 82
    RobBanks Says:

    z and others, just wanted to run this by you quickly.
    I looked at LINE's hedge book. for 2011. I added up the swaps, the floor of the collars, and the puts, and came up with $84.09.
    Line says the average is $84.09. So I know I did something right with the math to come up with the same number, but it seems to me that 84.09 is the floor, not the average. In other words, the puts allow unlimited upside on the 25% of prod that they protect, and the collars allow some limited upside.
    Am I seeing this correctly, that 84.09 is the floor with some potential upside?

  83. 83
    BirdsofpreyRcool Says:

    So, with EXXI… one has to ask oneself, "is this a good price to get in?"  The other day, i was chomping at the bit to buy at 22.50.  I could have bought all I wanted at 21.50 today.  Like MMR, the biggest "risk" to EXXI (IMHO) is NOT being in the stock…
     
    Wow.  MMR is a Rock Star today!

  84. 84
    BirdsofpreyRcool Says:

    MMR — someone(s) musta finally figured out that it's not the wells that are "all wet"… it's Joe Allman!
     
    On the other hand, Joe dressed up in a bright red suit with white trimming and a hat and handed us all an early Christmas Present.  So — all together now — "THANK YOU, Uncle Joe!!"  πŸ™‚

  85. 85
    zman Says:

    NBL – I was thinking near term probably 82-84, question is probably better directed to JB as this one breaks on out. 

    re 84, lol

    re 80 – happy it worked for ya

    Rob – just got back,  haven't run the math but the top is more open to upside that the floors so that sounds right, don't recall the $ on oil so will go run it.

  86. 86
    zman Says:

    Listened to a WSJ analyst on NPR in the car a minute ago, simply trashing the truth in an effort to put the blame on HAL. It's like HAL didn't even respond to the Pres Panels "report"

  87. 87
    zman Says:

    Re LINE

    http://files.shareholder.com/downloads/LINE/1036785616x0x412980/E53C12E3-49DF-4CE5-BA34-8F313F03F013/Q3_Earnings_Release_Supple_Info_FINAL.pdf

    Slide 11, busy, not my favorite but I get what they are at with it. Yes, $84.09 is the average protection level of the swaps and collars they have in place. As you can see, a majority of their volumes have been swapped at 88.25, a little has been collared with a floor at $90 and then about a third has puts on it at $75 but no ceiling.  

  88. 88
    zman Says:

    Glad to see SSN come off that crescendo move down on the open on good volume, now 924 K on the day. 

  89. 89
    BirdsofpreyRcool Says:

    #86 — it might be my imagination… but ever since Rupert Murdoch took over the WSJ, the ink has gotten more colorful, but the quality of the reporting has declined.

  90. 90
    skimo Says:

    http://news.yahoo.com/s/ap/20101029/ap_on_bi_ge/us_gulf_oil_spill_cement;_ylt=AvIYbvgBJ4mkOR79kfXsjDADW7oF;_ylu=X3oDMTJ0dGQ2MGJ0BGFzc2V0A2FwLzIwMTAxMDI5L3VzX2d1bGZfb2lsX3NwaWxsX2NlbWVudARwb3MDOARzZWMDeW5fYXJ0aWNsZV9zdW1tYXJ5X2xpc3QEc2xrA2p1ZGdlb3JkZXJzdA–
    judge in charge of lawsuits now jumping on cement issue.

  91. 91
    zman Says:

    Re 84… Ya know, JOE should work for the government, they both like throwing grenades at my positions and both seem to not care if they are rightfully doing so. 

  92. 92
    AAA Says:

    I am sure the fact the elections are next week had nothing to do with this highly charged report on HAL, which most democrats seem to consider to be an arm of the republican party. 

  93. 93
    skimo Says:

    re 14 LINE call-was i hearing with my "wishful thinking" ear when they were discussing distribution increases and coverage of distribution it seemed like I heard 25% as a number thrown by mgt as to an annual increase. That is inconsistent with their management style, but perhaps somebody can clarify. Perhaps they were discussing a 125% coverage ratio and I misheard.

  94. 94
    zman Says:

    Ski – I heard the 25% number near the end of the call and I think he was talking about 2011 EBITDA growth but have not circled back to it to check yet. 

    AAA = Right, couldn't be that ….

  95. 95
    zman Says:

    CNBC Watch, 2 noteworthy items

    1) Dollar /yen falling to record low.

    2) The candy striper on right now. 

  96. 96
    BirdsofpreyRcool Says:

    AAA #92 — agree with you 100% on that!

  97. 97
    Pati Says:

    #92, 96 — thought that as soon as it came out.  Trying to shift focus to a "real villan"

  98. 98
    Pati Says:

    "villain."

  99. 99
    jat Says:

    Re 94 refers to cash flow growth.  The distribution growth will be less than that, more in line with the recent increase, ya.  All good and sustainable.  Additional cash flow probably goes into the program I'd imagine, or maybe they really step up the distribution at some point, who knows.  Pretty much a high quality problem.
     

  100. 100
    skimo Says:

    94 99 thanks guys

  101. 101
    jat Says:

    Does anyone have an idea why natural gas as well as the gas stocks are doing well?  EIA 914 looked dreadful.

  102. 102
    zman Says:

    Jat – demand side showed some improvement, will have full slideshow this weekend. 

  103. 103
    VTZ Says:

    For anyone who cares, the weekly close in gold and the HUI arequite bullish and are likely to set up a run at an all time high in gold and a break out in the HUI.
     
    Of course, the Fed could put an end to that but if they do it's going to put an end to the S&P rally too and I just don't think that they have the stomach for letting deflation poke around.

  104. 104
    BirdsofpreyRcool Says:

    Is it time for the nat gas ETF to roll their contracts?  Mrkt makes 'em "Buy high and sell low"…

  105. 105
    zman Says:

    VTZ-  thanks much.

    BOP – not sure, good thinking though. 

  106. 106
    zman Says:

    This will go down as one of the best October's in the books. 

    Booothirty

  107. 107
    jiveyjr Says:

    I got me some of them SSN shares at $1.10…this morning before I really got my eyes opened good….thought I'd get more but I suppose I wuz just too cheap…maybe they come again…I'd like that

  108. 108
    zman Says:

    We'll be sending out ZLT performance on Monday. Read the email and you might just be surprised. Have a great one. 

  109. 109
    zman Says:

    Good job Jivey. 

  110. 110
    BirdsofpreyRcool Says:

    Thank you for the comments on HAL this morning.  Something I almost never do… I day-traded the name.  Bought at open, then scaled out after noon.  I would have said something, but that has a tendency to jinx that sort of trade for me…. and it's too close to Halloween to ignore supersticious twinges.
     
    But thank you all for the early comments.  Really really helped!

  111. 111
    jat Says:

    oh, now look who's going for the filet

  112. 112
    BirdsofpreyRcool Says:

    jat — you emboldened me, my dear.  Thank you.

  113. 113
    PackMan Says:

    FWIW, I am still here …
     
    Noticed plenty of excitement this week, notably HAL and EXXI.  I have positions in both, as I am sure many others here do.
     
    Have a good weekend all, I hope to find some time to join in the conversations next week.

  114. 114
    AAA Says:

    Interesting article that basically calls shale gas uneconomic and E&P's that are shale-focused to be frauds.  http://www.businessinsider.com/marcellus-shale-disappointment-2010-10

  115. 115
    snuhart Says:

    December Natural gas futures showed powerful upside reversals on both the weekly and daily charts.  Google "free commodity charts "-.  . they'll direct you to a link TFC Charts  The site is pretty all-inclusive.

  116. 116
    Jerome Blank Says:

    #43 NBL…on a P&F buy signal in X's, the P&F longer term price objective on the current buy signal is $104, I added a weekly chart which, based on the developing technical pattern appears to support this longer term target. near term support on a pullback to topside channel line at $80…looks good…updated charts and weekly added…
    I changed Nat gas futures to new listing under Natural gas futures and have UNG listed under UNG only…Nat gas futures weekly added, tough resistance  thru about $4.50, the "shaved head bullish engulfing candle"  reversal referenced by snuhart in #115 can be seen on the weekly….
    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

  117. 117
    paper crush Says:

    web site

    Zman

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