30
Nov

Tuesday Morning – Natural Gas Supply Slide Show Plus Other Stuff

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Market Sentiment Watch:  As expected, news flow from energy land increased with onset of a fresh investor conference season. I expect to be on a number of calls today and will update the Catalyst List for the beginning of the week as items get marked off. Equity futures are trading off this morning again on European debt fears but I expect the oilier E&Ps to continue to outperform both the group and the market in the near term. The gas supply figures released yesterday were abysmal and are covered in detail below in the Natural Gas Slide Show. 

Ecodata Watch:

  • Case-Shiller home prices,
  • Chicago PMI (F = 59.8%),
  • Consumer Confidence (F = 52),


In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Supply Review - Bearish
  4. Stuff We Care About Today – OAS, CRZO
  5. Odds & Ends

Holdings Watch:

  • ZCAT (Zman Catalyst portfolio):
    • $5,200
    • 99% Cash
    • Yesterday’s Trades:
      • None
  • ZIM (Zman Inefficient Markets portfolio)
    • $7,900
    • 4% Cash
    • Yesterday’s Trades:
      • None
      • Positions page will be updated later this morning

Commodity Watch 

Crude oil rallied $1.97 to close at $85.73 yesterday despite weaker equity markets on expectations that demand from Asia will remain strong. This morning crude is trading off $0.65.

  • Early Read on Oil Inventories:
    • Crude: DOWN 0.9 mm barrels
    • Gasoline: UP 0.750 mm barrels
    • Distillates: DOWN 1.1 mm barrels

Natural gas tumbled $0.19 to close at $4.21 yesterday after the EIA reported another rise in production (see next section for details and graphs). This morning gas is trading off 2 pennies. 

  • Tropics Watch: End of the official Hurricane season is today ... went out with a whimper. ---

Natural Gas Supply Slide Show - Updated for the Month of September 2010

It's a no brainer to call this report bearish:

  • Lower 48 Gas production was up 0.4 Bcfgpd from August to 62.2 Bcfgpd, not great.
  • Flat TX, OK, NM, WY, down Gulf but up in the "other states" category (Marcellus, Fayetteville most likely culprits but EIA still not breaking out the new rising star production states – probably takes them a couple more years to break out PA and WV and maybe AR and CO).  
  • Some recent Street comments were yet again looking to call the top. For my own part I was expecting flattish numbers.
  • I think near term thoughts of a  rollover are premature given the drilling we've seen, the public company results year to date, and the giant backlog of wells that have been drilled but not yet completed in the rush to hold acreage pre lease expiry. 


Stuff We Care About Today

OAS Adds Montana Williston Acreage

  • 10,000 acres with 200 BOEpd of production on it located in Richland County, MT

    • This builds upon the Montana acreage position added earlier this month. In early November the acquired the Hebron area acreage, in southern Roosevelt County - 16,700 acres, for about $2,875 per acre before considering production.
    • This new acreage is contiguous to the south in Richland with Hebron
    • And their total Williston Basin position to 318,000 net acres
  • Purchase price of $30 mm, or $3,000 per acre ... this would be pretty heady pricing for what until recently has been frontier territory however if you put $50,000 per flow barrel on the production you arrive at a more reasonable $2,000
  • The company still has no debt and cash on the balance sheet should still be nearly $250 mm.
  • Nutshell: OAS is moving west in the Bakken play along with the others and it makes sense for them to continue to push the into cheaper areas that may ultimately results in Bakken Core like results. It also may tell you something about how they feel about their Beula Irene well, their 3rd well in the area, last listed as awaiting completion in central Roosevelt County as well as the first two wells here which were impressive. Also note the interesting comment about this area being prospective for the same kinds of EURs seen in their West Williston drilling (450 to 787 MBOE range). The name still trades at a steep discount to its peers on a TEV / Acre basis as seen in the graph below (please note that this is not a fair comparison to CLR and WLL who have other non Williston core areas that skew their TEV/Acre higher in the graph). 
  • I continue to own a half sized position in the name having taken profits twice now since my soon after IPO entry here. 


 

CRZO Operations Update:

  • Eagle Ford Shale - strong results
    • 1st well, the Mumme Ranch 10 Hin La Salle County, TX - IP of 1,011 Bopd
    • 2nd well, the Mumme Ranch 12 H - IP 1,220 Bopd
    • They are saying production from the two wells has stabilized at a combined 1,125
    • 2 MMcfgpd is being flared from this two well pad
    • Very impressive result 
    • La Salle is on the west side of the play, in APC/SFY/HK territory
    • 75% NRI to CRZO
    • A third well has been fracced and we should get results before year end; two other wells have been drilled but not completed
    • CRZO holds 20,000 net acres in the Eagle Ford
  • Niobrara Shale Update - results just around the corner

    • First well schedule to frac tomorrow in Weld County, CO
    • A second well is drilling in the horizontal section and a third well will spud immediately following TD of the 2nd one. 
    • CRZO holds 59,000 net acres in the Niobrara
  • Nutshell: This is a name I have not played in but am generally on for the conference calls. Until recently it was a Barnett-centric gas player but that has changed over the course of the last several quarters with the addition of positions in the Eagle Ford, Niobrara, and Marcellus. Management has commented about potentially adding 5,000 Bopd by the end of 2011 from the EFS and Niobrara ... this is a good start.  The stock is trading at 8x this year (on the high end for the growthy E&Ps but only 5.0x next years CFPS Street estimates. Given these results, more of the crowd following them should gain confidence in that 5,000 bopd potential wedge. I'll be watching it today for a quick trade higher on the news and in anticipation of further news in both plays and from the Marcellus by year end. 


Other Stuff

 Canaccord Energy Conference (all times EST)

  • NOG - 8:20 am
  • AXAS - 8:40 am 

EXXI Announces $700 mm senior notes deal to fund recent acquisition. 

  •  

EGY  - Catalyst List event: EGY – I have note calling for South Tchibala well expected to come on this quarter at about 2,000 boepd, on the tape at 3,800 bopd. 

Comments for GDP have been deferred until tomorrow's post. 

Odds & Ends 

Analyst Watch:

  • CHK - Argus cuts to Sell from Hold

191 Responses to “Tuesday Morning – Natural Gas Supply Slide Show Plus Other Stuff”

  1. 1
    john11 Says:

    ATPG out with a new presentation posted;
    http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDA1OTEzfENoaWxkSUQ9NDE0ODY1fFR5cGU9MQ==&t=1

  2. 2
    john11 Says:

    test

  3. 3
    zman Says:

    CRZO barely budging out of the gate due to the market. 

  4. 4
    zman Says:

    See you john, had to step out for a few there. 

  5. 5
    zman Says:

    Analyst Watch:

    CRZO – Howard Weil ups their target from $29 to $35

  6. 6
    Dman Says:

    Freaky opening in WLL, down to $105 and back.

  7. 7
    john11 Says:

    Global Hunter took CRZO target to $45

  8. 8
    milepost_43 Says:

    TGA….Jarislowsky, Fraser Limited ups target price to $C19 from $C15..no link….Canaccord also @ $C19…..Canaccord conf presentation today @ 1:20 MST

  9. 9
    elduque Says:

    re chk and argus, do you know why they went to sell?

  10. 10
    zman Says:

    Thanks MP – plan to be on that one.

    Just watching CRZO trade barely positive on what TPH is calling "some of the best results we've seen in the EFS". Their estimates and PT's are rapidly going to go up. Stock flat due to the nature of the day. I've been watching there for awhile now, wanting to see a pullback and not getting it…had hoped it would fill a gap from earlier this month but no joy on that so far. 

  11. 11
    zman Says:

    re 9 – No. I would bet it was a combination of yesterday's EIA data and the buy of more acreage they announced. 

  12. 12
    TEXWS6 Says:

    RE Natural Gas Slides:
    Z, my thoughts on New Mexico: We'll see an upward growth in gas production as you see people chase the Leonard/Avalon/Bone Springs Shale.  Majority of the activity for these shales are in New Mexico.
    As for Louisiana production, expect another huge year of growth.  People are skeptical since rig counts have dropped from their highs, but there are hundreds of wells that are still waiting to be fracced.
    Just my $.02

  13. 13
    elijahwc Says:

    #9 from breifing:
     
    Chesapeake Energy downgraded to Sell at Argus (22.05)

    Argus downgrades CHK to Sell from Hold saying while they believe Chesapeake
    has one of the industry's best collections of natural gas assets, they are
    concerned about the company's profligate spending and its impact on the
    balance sheet, as well as worries about its earnings quality.

  14. 14
    zman Says:

    Thanks Tex, my thought is that the LA growth is slowing with a combination of less drilling and restricted choke production. But I absolutely hear ya on the uncompleted well list. I just don't think 2011 looks like 2009 and 2010 in continuing the hockey stick.

    Hear ya on NM, same could be said of OK and the Washes

  15. 15
    zman Says:

    Chicago PMI up more than expected at 62.5

  16. 16
    Zorgnak Says:

    CRZO  Volume Profile…Little resistance until $34- $35
    http://www.charthub.com/images/2010/11/30/AREX

  17. 17
    zman Says:

    Missed a shot at a low ball offer on the CRZO $30s. Being patient.

  18. 18
    Zorgnak Says:

    Long CRZO

  19. 19
    zman Says:

    Thanks ZORG

  20. 20
    bill Says:

    does anyone have access to argus sell on chk
    "company's profligate spending"
    Aubrey went thru great detail showing how the jv partners end up paying for the acreage
    Take, efs..they bot yesterday at 9,000 acre and sold 20 % to cnoc at 10.800

    I can see if they said surplus of ng and low prices lasting forever but that would affect all ng producers not just chk and i thought chk was getting oilier

  21. 21
    bill Says:

    exxi out with a note offering to pay for the xom assets
    The stock is down hard. Do note buyers short the common?

  22. 22
    elduque Says:

    Where is CRZO in EFS relative to CHK?

  23. 23
    BirdsofpreyRcool Says:

    Note buyers do no such thing (that I know of).  They want the equity to go UP (as it provides more cushion for bondholders).  On the other hand, if you push equity down before a note placement, maybe you get better pricing?  That is not a game traditional investors play… but maybe there is a Level in Hedge Fund Hell that plays that way. 
     
    EXXI continues to be a PosterChild in two Oscar-Winning Categories… Good Operational Management… and Bad Balance Sheet Management. 

  24. 24
    elduque Says:

    re 22- I just read your write up closer, you have already answered my question. CHK all around the area. You might take a look at slide 9 or GDP's write up. It looks to me like they are in LaSalle and Frio Co.; right above CRZO.

  25. 25
    Dman Says:

    BOP – can I trouble you for a brief recap on your views on MMR – i.e. how risky is it at this point?

    BTW, I read the "Dogs Decoded"  transcript – really fascinating stuff. 

  26. 26
    zman Says:

    re 22 – west. Planning to look at GDP shortly. 

  27. 27
    zman Says:

    KOG and WLL pushing the envelope higher. WLL just short of all time highs now as it crosses $111. 

    SWN – I find it shocking that they are up given yesterday's data. 

    Does anyone have the full Canaccord schedule?

  28. 28
    john11 Says:

    Added EXXI here, reaction seems wrong to me

  29. 29
    zman Says:

    BSIC side note … I'm guessing no one here still owns this one.  I continue to but am not adding given how thin it is. I do think we hear something in terms of an operations update soon, probably along the lines of BEXP having spud a couple of wells that they are a very junior Bakken partner in. 

    WLL = moving well.  Continuing to hold the common in the ZLT and the $110 and $115 strikes in the ZIM

  30. 30
    bill Says:

    come back in progress..hk is now up on the day

  31. 31
    bill Says:

    28- i think exxi is trading lower than pre xom deal which will spin of ebitda at 300 m per year

  32. 32
    zman Says:

    Thanks for comment 23. Any yield thoughts on these new ones?

  33. 33
    reefguy Says:

    Did anyone get their Passport- PPI.V?

  34. 34
    RMD Says:

    Argus on CHK quickie summary  reexamines what CHK says vs. what it does, stirs in CHK's various accounting moves over time, hints at low ROI and higher risk, and votes:No.  I agree.  (I read what feels like a thorough summary.)

  35. 35
    choices Says:

    http://seekingalpha.com/article/239231-estimating-the-breakeven-costs-of-shale-gas?source=email_watchlist
     
    Fairly long article with summary of NG situation, prob not much new, but decent summary w/weather map.

  36. 36
    BirdsofpreyRcool Says:

    Dman — MMR = well-watching at it's finest. 
     
    MMR = much riskier (operationally) than EXXI… so, I am just playing it for the news event.  Unfortunately, there seems to be a delay on releasing news from the Blackbeard East logging run.  Heard they did get the pipe-protected logging tool all the way to the bottom of the hole (in spite of a slight dog-leg in the well) last week.  Then all they have to do it to pull it up slowly and log.  So, MMR should have the results in hand by now.  In the world of well-watching, "no news is not good news."  Fact of the matter could be that BBE is a dry hole.  That doesn't change much per se… but that sort of info historically does not move stocks up and to the right.
     
    A prudent strategy on MMR right now (in line with current thinking, adjusted for the logging news delay) is to wait for the news.  If it's "bad," that would be an oppy to buy, methinks.  On the other hand, if EXXI sells off too on the news, I would be more inclined to add there, than at MMR.  I just use MMR as a trading vehicle.  And — frankly — it doesn't always have a happy ending.

  37. 37
    RMD Says:

    I still have BSIC on my list of things-I-should-do-but-haven't.

  38. 38
    1520sbroad Says:

    general announcement —- for all you long bias individuals — today is last day for +31 day tax swaps, must unwind on 12/31to avoid wash sale rule

  39. 39
    bill Says:

    >various accounting moves over time,
    can you give me an example of a chk accounting move
    I agree they got cute with hedges

  40. 40
    tomdavis12 Says:

    Z: SDRL earnings out today. Disappointing considering their significant outperformance to the group. Notes from CC: 1. raising div from .61 to .65  2. Have 1B in assets in their investments in other drillers. PDE, Seawell, Seahawk. Can use to pay for newbuilds ordered. 3. High priority is to highgrade their fleet. Only rigs built after 2000. 4. Best use of money is to order new rigs. Cost prices back to '05 levels. 5. Newbuilds coming out are finding homes without lowering prices. 6. PBR's in house builds will take a minimum of 4 years with much higher pricing. I get the sense that they may do joint venture with someone in house to be used more in that sector.      I own for yield and sell 35 calls. Have switched my NE to SDRL because of my concern with NE's relationship with Pemex.     

  41. 41
    zman Says:

    Thanks RMD. Analysts are tired of the FCF outlook falling on lower gas prices and the continued outspend. Asking how much is enough, how many acres can Aubrey ski behind?! I still say he is the best landman out there and the deals work but I don't care to defend him today so I won't. 

  42. 42
    choices Says:

    Reef, #33-did not buy but watching, been on a tear lately, last 13 weeks, up from .05 to .36, up 19% today.
    Definitely interesting-w/your track record, I'm tempted but penny stks do not work very well for me.
    Will look a little further.

  43. 43
    choices Says:

    #42-fairly unique web site:
    http://www.passportpotash.com/index.php

  44. 44
    BirdsofpreyRcool Says:

    #41 — Zebras don't change their stripes.  Aubrey may have learned a bit from the School of Hard Knocks over the years… but the analyst's complaints have remained the same (more or less) for the last 15 yrs (more or less).

  45. 45
    BirdsofpreyRcool Says:

    #43 — yeah.  Let me know if you find an actual company presentation on that site.  It alluded me. 

  46. 46
    zman Says:

    Thanks Tom

    re 44. Yep, agreed on both counts. I only fault the analysts for the "risk" comment

  47. 47
    jiveyjr Says:

    re: 29 and 33….I own BSIC and will until you don't….I got a little of the Passport but it was moving so fast I didn't get much….

  48. 48
    Dman Says:

    Thanks BOP.

  49. 49
    zman Says:

    Re 37. I'm less impressed than I was the day I bought it, not due to the stock performance but further due diligence. I may just be selling the news. 

  50. 50
    elijahwc Says:

    Reef # 33:  With you on PPRTF
    Bill – Z will have ARGUS on CHK shortly

  51. 51
    BirdsofpreyRcool Says:

    MMR — there is lots of other "good news" that could hit the airwaves… especially going into the Capital On Southcaost Energy Conf presentation on Dec 8th.  Am told that JimBob is hosting dinner in his offices the night before.  So, would expect to see him pour a stong one and do the happy dance.  However, we just might have to brace ourselves that (in spite of JB's denials that the absence of the salt weld at BBE was not terminal) BBE might be declared non-economic. 
     
    Hope I am wrong about BBE, of course.  As I have money on a more positive oucome for that well.

  52. 52
    zman Says:

    KOG bumping $5. Can't tell if they speak this week or next at any of the 4 conferences that will be focused on energy.

  53. 53
    kiaora Says:

    Reefguy.#33….Picked up a bunch @ $.18 Thanks.

  54. 54
    BirdsofpreyRcool Says:

    KOG shows up as presenting at CapOne Southcoast on Dec 8th too.

  55. 55
    john11 Says:

    Z, I've got KOG listed to speak at Southcoast on the 7th at 9 est

  56. 56
    elduque Says:

    Bill- Do you have a price where you start buying NM?

  57. 57
    zman Says:

    I show WLL speaking Thursday at the close at Jefco. 

  58. 58
    crysball Says:

    Reef ,
      Bought  Pssport  at .28  Canadian. ….[many thanks]…….and of course   wishing   had  bought more.
    Also been  in LEI  for  5  months  [trading  along  the roller coaster ride].  What is your  exit  strategy on  LEI?

  59. 59
    mimster90 Says:

    EROC, not a widely followed name here, is increasing their quarterly distribution to .15  and is currently trading at ~$7.80.

  60. 60
    zman Says:

    59, nice yield Mim, unfortunately not my area, but glad it's working for ya. 

    Re 54,55 – KOG – well I guess we have a week to figure out when they speak. I am planning to take my not one but two trading position off very soon. Will leave the core ZLT holdings in place, but they have had a very good run.  

  61. 61
    john11 Says:

    Correction that KOG time for the 7th is 2:00pm central
    here is schedule
    http://www.meetmax.com/upload/event_6427/COS%202010%20%20Energy%20Conference%20Schedule.pdf

  62. 62
    bill Says:

    > but I don't care to defend him today so I won't
    lol
    Does he spend alot, he does. But the JV deals have saved his butt and given him more confidence to re-invest the proceeds in the efs and Niobrara. Should he pass on those opportunities? I think not.
    I'm more concerned with them and swn and HK cranking up production 25% or more a year. Get the leases Hbp and then holdback production until price goes up

  63. 63
    BirdsofpreyRcool Says:

    Thinking was KOG to $5 and EXXI to $30 by Christmas.  But early presents are gladly accepted also.

  64. 64
    zman Says:

    re 62, last sentence = TOO RIGHT!

  65. 65
    BirdsofpreyRcool Says:

    john — my KOG presentation time came off the Bloomberg EVTS function… which is usually — but not always — correct.  Thank you for tracking that down.

  66. 66
    zman Says:

    WLL – my guess is people are supposing the mid fairway Lewis and Clark wells are good and that the company will give an update prior to their presentation on Thursday at Jefferies. With the northwest and southeast corners of the play working well, punching good wells in the middle will help to prove up much more of the position as prospective for the Three Forks. Recall that WLL's L&C acreage is bigger than its core areas at Sanish and Parshal. They probably will also talk about their new Starbuck play in Montana.  

  67. 67
    bill Says:

    Nm is cheap here at 5.20. Not low enough to tempt me .. issue here is current rates and i dont see a catalyst to turn that around. Maybe 4.75 might get me off the sidelines
    There is a glut of supply in the market and more coming in 2012 and rates are falling and haven't improved
    DSx got a buy from goldman today

  68. 68
    RMD Says:

    do we actually pay the folks at the EPA for this?
    they cut cullulosic ethanol blending target to 6.6 mm gal in '11(from 6.5mm gal. in '10).  The Renewal Fuels Std, passed in '07, mandated 250mm gal in '11 but there are no commercial scale facilities operating.
    How do you spell Bureaucracy?

  69. 69
    zman Says:

    RMD – there's never enough fermented switchgrass around when you need it. 

  70. 70
    elduque Says:

    re 67- thanks. Mid 4.s is where I was thinking.

  71. 71
    reefguy Says:

    Lei exit- lets get the two laterals tested by Hillcorp and find the door

  72. 72
    zman Says:

    Guru check your email.

  73. 73
    zman Says:

    Odd reaction to EGY news. 

  74. 74
    bill Says:

    bop/others
    Do you view pref stock as debt or equity?
    Chk critiqued  for replacing higher cost debt with lower cost pref stock which helped debt equity ratio's.
    Well even if you consider it debt, its lower cost.
    Im suprised the analyst didnt bring up Aubrey wine collection or margin calls

  75. 75
    BirdsofpreyRcool Says:

    reef — we should hear on those two laterals within about 2 weeks (guesstimation).  Does that sound about right for a Nov 1st spud date… ??

  76. 76
    BirdsofpreyRcool Says:

    Preferred stock can only command a board seat, when the wheels are falling off the bus.  Bondholders get to grab the keys.  So, I consider "preferred" as "equity" only.

  77. 77
    BirdsofpreyRcool Says:

    KOG just printed 5.000000000.  Mini-Happy-Dance going on.

  78. 78
    zman Says:

     

    re 74. I consider it debt. And you left out the $75 mm map collection. But I hear ya, lower cost is lower cost. They easily service their debt load as it is and they pay 8% to participate in much higher return deals. 

    re 75 – timing is all over the map at the moment depending on who you are and the deal you have for completion crews so Reef would know best here for sure.   As you know, all of the little guys are getting pushed back on timing. And some of the big guys too, EOG, although CHK hinted that was a joke of an excuse for cutting their production targets/ 

  79. 79
    BirdsofpreyRcool Says:

    little guys are getting pushed back… but the wells are operated by Hilcorp… altho private, I would not consider them small. 

  80. 80
    zman Says:

    Re 76. I don't look at stuff from the board/shareholder side as much as you do, I consider it something they have to pay and lump it in with debt for TEV and with interest for expense reads. But I get what you are saying and good point. 

  81. 81
    zman Says:

    KOG at $5.04, 5 strikes alive and kicking. 

  82. 82
    BirdsofpreyRcool Says:

    #80 — the view is always different, if you are looking from the top down (like bondholders) or the bottom up (like common equity).  But preferred is NOT debt-like.   At all.  It is "fixed-payment-like," agreed.  But, so is abandenment costs when you drill a well too.  I do lump the divident payments into fixed costs… but not interest expense (as they are not included in calculations for interest expense in bank covenant ratios).  I'll give you that preferred is equity with bad breath.

  83. 83
    ram Says:

    zman – Is the EXXI performance based on the bad pricing of taking back the bonds or is this a longer term flame out of EXXI/MMR?  Thanks.

  84. 84
    zman Says:

    My opinion would be the former

    Re 82. LOL

  85. 85
    zman Says:

    Reef – how far are LEI's wells from EOG's big kahuna 2,000 bopd ish wells in Gonzales? 

  86. 86
    mimster90 Says:

    re 59, I don't own eroc but I watch for good MLP yields. I think with US bond rate's being low that a lot of money has been pumped into high yield MLPs. At some point that money will want to go elsewhere and there might be opportunities to get MLPs at better prices. 

  87. 87
    elduque Says:

    straight preferred is just one more way to screw joe public. ranks right along with 30 year bonds at par and a 5 year call. Yields go down and you have a 5 year bond, go up and a 30 year bond. Yuck!!!

  88. 88
    jat Says:

    when does Lynn do equity again?  I'm looking at a stock that's doubled since late August with a big funding gap for 2011 and current rabid interest, ie NOG, for Baaken equity.  Not saying I disagree with the big picture view, I've been a Kogger myself in the past, just looking at it and thinking that now or soon is definitely the time.

  89. 89
    irongate Says:

    Fed purchases 6.8bln ……….. let the POMO rally begin
    http://www.newyorkfed.org/markets/pomo/display/index.cfm

  90. 90
    bill Says:

    views vpp as debt, and i dont dispute that but again, if your cost is 2 and you sell at 4 that = profit
    so he has an issue with the purchase of assets and the way they pay for them
    critiques the full cost pool since it has the carries in it(ie the money they get from jv partners) which lowers their overall cost> He is speaking boths side of his mouth. the jv deals support/pay for the lease acquisition. Its one of the best things aubrey has done. Its the one thing SD hasnt done. they have a ton of assets and no partners and their balance sheet makes chk BS look pristine
    Also mentions the cute hedges which i mentioned the day the q came out. he is about 9 months late on that one.
    He obviously follows CHK very closely, maybe his steak was overcooked at last analyst day. I havent seen too many outright sell recommendation on any stocks.
    The last 200 m efs purchase was the straw that broke the camels back in his view. Wants more focus.
    I remember aubrey  re  land acquisition said, "you snooze , you lose"

  91. 91
    zman Says:

    Mim – right, thinking same. But thinking when that happens the only way to get the yield premium over bonds will be for them to either increase the distribution or fall. Either way, a headwind for the MLP group. 

  92. 92
    bill Says:

    bop ty for 76
    and z/others helluva call on kog at 5,00

  93. 93
    zman Says:

    Bill – I view VPPs that are long lived and tapped out from an exploratory and exploitation since (at least in the zones put into it) as a mostly harmless form of debt.  KCS used to do these all the time.  

  94. 94
    elduque Says:

    Bill you got to love somebody that gives you the opportunity to pick up cheaper stock.

  95. 95
    DrLink Says:

    Re: 33 Reef  big thanks! ..in PPI.V at  .2063

  96. 96
    ram Says:

    Zman – Is there an event, whether it would be a restructure or more regulation, that would change your outlook on EXXI/MMR?  It seems there is more positive reaction to the current level of oil on the part of onshore energy than offshore.

  97. 97
    zman Says:

    Elduque – I wanted to circle back on your earlier question re wells and the EFS

    First link is from EOG presentation:

    http://www.eogresources.com/media/slides/InvPres_1110.pdf

    Look at slide 9 – shows the oil, wet gas, dry gas windows over a big swath of the play (about 120 miles and 12 counties)

    Look at slid 11 – shows their IPs – note Reef's LEI being in Gonzales county which has had EOG's biggest initial rates in the play

    For a map of the counts with more legible names see this link:

    http://geology.com/county-map/texas.shtml

    Orient between the two off Bexar County (San Antonio)

  98. 98
    ram Says:

    Re 33 Thanks reef.  I'm aboard.  Was thinking of adding more.  Thoughts?

  99. 99
    ram Says:

    Reef – In at 0.23.  Looking to add again on a pullback.

  100. 100
    zman Says:

    re 96. Not sure I follow you. I am positive on both. Do you mean a negative macro event that would make me think about getting out? Or do you mean something that would make me like them more, again, from a macro stance. Long term I believe they are sitting on a sizable resource pool in the ultra-deep. Near term I think we will get further evidence of this. 

  101. 101
    zman Says:

    BSIC up 8% on size volume for the name. I have enough and am not planning to add to them. 

  102. 102
    ram Says:

    Sorry zman for not being clear. Third sentence in 96.

  103. 103
    ram Says:

    O.K., third sentence in 100, negative macro etc.

  104. 104
    jiveyjr Says:

    I sold my BSIC @ 1.13…looks like I put a floor under it…hopefully so for those still aboard

  105. 105
    elduque Says:

    Slide 8-10 outline where GDP is in the play. .http://www.goodrichpetroleum.com/presentations/2010_11_10_Stephens_Pres.pdf

  106. 106
    choices Says:

    #88-jat may have a point on possible secondary-Z, BOP any thoughts?
    Thanks.

  107. 107
    zman Says:

    re 103 – If gas prices get really hit I'd be more concerned about MMR than EXXI. Other things would be the government. So far they have not held up EXXI's plans nor hurt MMRs that I am aware of. In EXXI's case this is because of the type of permits the company needs not being the same as the kind that are being slowly processed by BOEMER. Obviously another big spill in the Gulf would send the shares scuttling lower and the fear of further regulations would probably keep them down for an extended period.  I think another big spill in the near future is unlikely. I don't see the P&A comment yesterday as being a big deal for either of them, especially EXXI. 

  108. 108
    BirdsofpreyRcool Says:

    KOG  2ndary … I think Lynn will issue stock when he finds more acreage to buy.  I don't think he will issue stock just b/c it hit $5.  That said, I would love it, if he adds to his core acreage positions.

  109. 109
    zman Says:

    NOG trying to break out from a short penant, moving into new all time highs. We know there is no equity deal to be done there and with a rising rig count in the Basin on the whole, their production growth target for 2011 looks to be the low end of the potential outcomes. 

  110. 110
    bill Says:

    Back to argus and chk..
    He concludes his analysis with this thought

    "The best time to buy cyclical stocks is when they are trading at the top of its valuation range"
    As a value investor, I think exactly the opposite.

  111. 111
    zman Says:

    Re KOG deal … isn't it about time he actually used the revolver for more than just appearances. I recall the last time he did a deal he had just gotten the revolver in place and was talking about using it and then issued shares a day or so later.   Besides, according to the Catalyst list it is up for redetermination Nov/Dec. Would like to see him think in terms of WACC. 

  112. 112
    BirdsofpreyRcool Says:

    VYOG CEO said that he uses "equity for land acqtns and debt to drill."  That seems about right to me.  Lynn issued equity and did a land deal.  I think he uses cash flow and debt to develop it.  He owns a significant stock position (even if other officers don't).

  113. 113
    zman Says:

    Re 110. I get what he means. When stocks are trading at the high end of the valuation range it usually means things are going well for them and they are going up. So his thought is "buy high and sell higher". At least that's what I bet he's thinking, without having talked with him. Personally like putting a framework around such statements regarding commodity prices. If stocks are at the high end because gas prices are falling then his statement is just useless. 

  114. 114
    BirdsofpreyRcool Says:

    "debt to drill" only works in a resource play, btw.

  115. 115
    zman Says:

    Re 112. Thanks for the color. 

  116. 116
    elijahwc Says:

    While we are on the subject of issuing equity when does LEI do so, and how much below their self arrived at NAV of $6.00??? 
     
     
     

  117. 117
    bill Says:

    One point argus made was that marathon did a deal in efs at a cheaper price than chk
    Is all efs the same?
    here are the details on marathons purchase
    Marathon Oil Co. said it signed a deal to enter the Eagle Ford shale field with the $10 million purchase
    of land from Denali Oil & Gas in one of the hottest areas in the U.S. oil and gas industry. Eagle Ford,
    located in south Texas, has drawn interest from several energy producers seeking to expand their
    operations into the total dense rock formations that could hold years’ worth of natural gas and liquids.
    Under the terms of the deal, Marathon will pay Denali $10 million and drill and complete four wells to
    receive about 17,000 acres. Marathon will have an option to buy another 58,000 acres from Denali in
    Wilson and Atacosa counties, which would bring the total deal price to $209 million, or $2,800 per
    acre. If Marathon fails to exercise that option by the October 31, 2011 deadline, Denali can opt to sell
    those 58,000 acres for $92 million or $1,225 per acre.

  118. 118
    zman Says:

    Re 117 – As you hint, absolutely not all the same. That Antares press release gives a good look at the progression of deal prices done in the play. There are several above what CHK paid as well. 

  119. 119
    tomdavis12 Says:

    Z: Which of your names are growing their CFPS most rapidly. No other restrictions. Thanks. 

  120. 120
    skimo Says:

    Interesting blog supporting nat gas vs coal/wind/solar from Matt Ridley author of "The Rational Optimist"
    http://www.rationaloptimist.com/blog/coming-dash-gas

  121. 121
    zman Says:

    Tom – well it gets kind of wonky if you mean year over year because you have several names on the production hockey stick in the Bakken. Names of size that I own that will growth big digits are WLL and HK. But the NOGs KOGs and OASs of the world are going to blow the doors off a YOY % comparison. 

  122. 122
    zman Says:

    Names I'll be listening to at Jefco tomorrow:

    CLR, NFX, GDP OR HK, UPL, SFY, OII OR CHK, HAL OR SM, EXXI, BEXP, CLB

  123. 123
    zman Says:

    Obama on CNBC now regarding meeting with Republicans today. 

  124. 124
    1520sbroad Says:

    Story yesterday on eastern canada/new brunswick players and regulation…
    http://telegraphjournal.canadaeast.com/front/article/1328428

  125. 125
    zman Says:

    Thanks for 124, he's right about the "clarity" issue, that's key.

  126. 126
    zman Says:

    Obama's comments make it sound like the two sides are still far apart on tax cuts. 

  127. 127
    elduque Says:

    How do I access the GDP presentation, please and thank you

  128. 128
    zman Says:

    Eld – I would assume there will be a link in the morning on their website. 

  129. 129
    elduque Says:

    Nothing on the website.

  130. 130
    zman Says:

    OAS and NOG at all time new highs, pushing higher in what is a mixed bag of a day for the S&P.

    ElD – I'm going through GDP's most recent stuff right now. 

  131. 131
    zman Says:

    re 129 – the presentation isn't until tomorrow so I'd guess they will get the link up by then. 

  132. 132
    Wyoming Says:

    Was it over when the Germans bombed Pearl Harbor?
    http://tinyurl.com/29gmcf7

  133. 133
    zman Says:

    Hey, long time no see.  Anything new and interesting in your world?

  134. 134
    zman Says:

    Wyoming, TexW, Gino, anyone want to give a quick lesson on reading fracture logs. 

  135. 135
    zman Says:

    VYOG up 13% … I was just saying yesterday it will probably go higher without me … well no kidding. 

  136. 136
    tomdavis12 Says:

    Z: Are you surprised by the lack of response by APC to the recent W Africa discoveries? Do you think stock still has the legal issues weighing it down?

  137. 137
    zman Says:

    re 136, yes and apparently. I'm not in, just watching. They are uncovering big value over there. Not so surprised that a gas discovery didn't move it but the oily ones have been ignored too. 

  138. 138
    bill Says:

    tidz down– they get an orri on mmr leases
     
    i wonder if bad news is being circulated
     
    http://finance.yahoo.com/q?s=TISDZ.PK

  139. 139
    RMD Says:

    GHS starts on EPL, notes they hold leases on-trend with MMR though that's not their focus.  Sells for ~$16/boe of proved, ~$40m/boe/d of 4Q production.

  140. 140
    RMD Says:

    138 my add of TISDZ was unbrilliant.

  141. 141
    zman Says:

    … or fear of bad news. 

    re 140 … time will tell, know you won't give up yet. 

  142. 142
    zman Says:

    Those EPL guys are speaking at a conference this week as well. 

  143. 143
    BirdsofpreyRcool Says:

    RMD — by my calculations, you get about 3 right for every 1 wrong.  You can't get much better than that… and still play by the rules.

  144. 144
    ram Says:

    Thanks ZMAN for your thoughts on EXXI/MMR.  I was just thinking of unloading common because of their relative weakness.

  145. 145
    zman Says:

    Talk about wondering if news is being circulated, BSIC up 13% on big volume (for it), with no news, is rather odd. 

  146. 146
    ram Says:

    Any news on WLL?  Nice price and volume for WLL.

  147. 147
    zman Says:

    re 146, news expected any day. 

  148. 148
    blackgold39 Says:

    re 134, you mean image logs? or horizontally logged pay in naturally fractured reservoirs

  149. 149
    blackgold39 Says:

    I guess neither matters, all you can see is induced secondary porosity.  And a hot gamma

  150. 150
    zman Says:

    BG – Thanks, it is in the latest GDP presentation 

    http://www.goodrichpetroleum.com/presentations/2010_11_10_Stephens_Pres.pdf

    slide 15, actually the Schmidt Dip plot was not something I recall seeing that way before, not in my books. After looking at again I guess they are just trying to show me fracture orientation. 
     

  151. 151
    blackgold39 Says:

    Ahh, the dip meter reads differential gamma rays to determine bed dip at the wellbore I do believe

  152. 152
    blackgold39 Says:

    and yeah, that plot they are showing is downward facing, showing azimuth of what THEY THINK are the principal stress directions for the fractures

  153. 153
    blackgold39 Says:

    Of course, being in a lime, you can be a bit more certain

  154. 154
    zman Says:

    Thanks, got ya, I think. 

  155. 155
    elijahwc Says:

    MHR: Overhead Supply

    Back during 9/09 MHR acquired the US assets of Sharon in exchange for  $2.35 Million 100% of which was paid through the issuance of 2,294,474 new restricted common shares of MHR.  These shares have come off restriction and hense supply.  From their release:

    “During the quarter, Sharon realized approximately $900,000 from the sale of its Magnum Hunter investment.  The fair value of the remaining investment of 1,832,152 shares was approximately $7.8 million at September 30, 2010.  Subsequent to the end of the quarter, Sharon sold an additional 936,000 shares for $4.77 million.  To date, Sharon has sold approximately 1,398,000 Magnum Hunter shares to realize $7.0 million.

     
     

    Sharon continues to be in an enviable position, for a growth oriented junior exploration company, with a:

    Significant cash position.
    Substantial and highly liquid holding in Magnum Hunter Resource”



    I’d say this was a pretty high ROI deal for Sharon.  Much better than drillng.

  156. 156
    zman Says:

    Stepping out for 30

  157. 157
    crysball Says:

    LEI  ………reef  thanks  for the info  on the   exit  strategy…….
    PPI-V  correction  was in at   .18  Canadian  not .28  my typo.
    EGY
    #1 ……..finally  replayed the Q3  CC,   in it  Russ  raised  the estimated  flow    on  S. Tchibala  Dev. Well [2nd Horizontal OHGP]  to 3,000 BOPD,…still 3,800 BOPD  is  a pleasant  surprise.
    #2 …..gas  lift  line  from  FPSO   to  the new  Etame  7-H  well is laid and connected……….line being flushed……….Etame  7-H will   start  on production   withn a few  days  ……….at  least  3,200 BOPD  [NET INCREASE]. 
    #3 …….Omangou  prospeect vertical exploration  well is currently drilling. It will test  both  Dentale  and  and Gamba sands………. NOTE:    3-D seismic  indicateds the sands  are  much  thichker  in  the Omangou Prospect………..well & logging will be finished  B4 the end of Dec.  so  they claim  reserves  in 2010  if  successful.
    #4……Vaalco  now  has  multiple   offers  on  an Angola   Blcok 5  [shallow offshore] partner [at the time of Q3 CC they only had one firm offer].  Today  is the  last  day  the Blcok 5 data room will be open.  However, the final decision on a  new  partner  will  be  up to Sonongal  as  the  default by  Interoil Norway  reverted  the ownership  back  to Sonongal
    #5   3-D   Seismic   currently  being  shot  in new  area  near the coast  of  Gabon,  wont be processed until   2011.
    #6 Etame  study  project  is  making good progress [all partners  contribuitng  team members]……….looks  like they will recommend :
         6A  a new production platform   in Etame   from  which  they will  drill  several more development  wells……..exact  location  will depend  on outcome  of Omangou exploration well.
        6B  increasing  the  oil processing  capability of the  FPSO  to 35,000 BOPD (currently 25,000  BOPD………..primairy topside   fluid processing  trains
         6C   to date  Etame  has  produced    53 million  barrels of oil……..all the partners  beilieve  they have  at  least  this much more  to produce from Etame  with  the  new   'LEAVE NO  OIL  BEHIND'  mindset……..this implies the Etame RESERVES  ARE   SERIOUSLY  UNDERSTATED  by N&S  Reserve Engineers.   
     
    No announcements  yet on items 2,3 4. 5 .     #6  was  hinted at   in the Q3 CC, but  was  extensively elaborated    upon  by    somenone  'in the know at Vaalco".  

  158. 158
    cargocult Says:

    What's the exit strategy for LEI?

  159. 159
    zman Says:

    Cargo – see 71

  160. 160
    cargocult Says:

    Thanks

  161. 161
    zman Says:

    All of them off the highs but the Bakkens also all showing higher than normal volume on these rises. 

  162. 162
    zman Says:

    CNBC looks more like CSPAN than usual today, never a good sign. Lots of lame ducks and others in DC taking center stage. Yuck. 

  163. 163
    Zorgnak Says:

    Buyers showing up on CRZO pullbacks today, so far. Daily volume double daily average. Will show up on all the end of day momentum screens tonight.

  164. 164
    zman Says:

    Zorg – thanks and agreed, been watching all day. Waiting now to see if budget committee comments tomorrow spook the market. 

  165. 165
    zman Says:

    Beerthirty, back in awhile. Hopefully the news flow expands for the group the rest of the week. 

  166. 166
    john11 Says:

    KOG mkt on close buy imbalance 1,207,700 that's pretty darn high for KOG, wonder why.

  167. 167
    VTZ Says:

    MMR getting trashed at the end of the day.

  168. 168
    bill Says:

    aubrey on vpp last conf call
     
    >Aubrey McClendon – Chesapeake Energy Corporation – CEO
    I'll let Nick answer. They see VPPs largely as debt, which is kind of nutty because I'm sure Nick will give you a good example of
    why that is beyond nutty, but go ahead.
    Nick Dell'Osso – Chesapeake Energy Corporation – CFO
    They do see VPPs as debt. JVss they see as having a partner, they have a lot of question about what those JVs mean, but they
    do not necessarily view that any differently than the rest of you guys would.
    VPPs, we've had lengthy discussions with the agencies on this point and they continue to view them as debt. Again, we sell the
    reserves, transfer title to them, we take the reserves off our books. The only obligation we have ongoing is to be a prudent
    operator of the property, and they are a partner in the property like anyone else is. So we do have the obligation, as they are
    now a royalty owner in the property, to pay their operating costs. So that's no different really than any other royalty owner.
    And if you think about the way that those guys are going to look at it as debt, one of the things that we always scratched our
    head about is if we do a VPP in a gas price environment of 2011, where the strip is going to average something in the, let's call
    it mid-5s to low-5s versus having done a VPP in first half of 2008 where the strip was much higher than that, it's actually going
    to result in more debt in 2008 than in 2011 for the same property just because the price was higher. And it's really just an
    obligation in volumes and it can't be measured as debt.
    Aubrey McClendon – Chesapeake Energy Corporation – CEO
    So call it 400 Bcf that we sold for $1.15 billion. If we had sold it for $1, they would consider that a better deal than if we had sold
    it for $4 billion. They would consider $4 billion a bad deal because it's more money and therefore more debt. Of course, they
    ignore the cash that you get from selling it. So it's one of the insanities of dealing with rating agencies and there is probably no
    better definition of it than that one.

  169. 169
    BirdsofpreyRcool Says:

    MMR — two thoughts… 1) hope JimBob steps out from behind the curtain tomorrow and lets us know what's going on… good or bad… it's time for an update.  And 2) the short interest in the stock is at the highest levels since last January and this is the last day of the month.  I have often seen hedge fund-centric positions take a dive (or bounce) on the last day of the month. 
     
    Seems to me, we should know something soon.  You can bet that JimBob did not miss the fact that his stock is down over 7% today.

  170. 170
    elduque Says:

    Jim Bob is not the only one who noticed the stock was down 7%. You all have a good evening. I am going to the beach and cool off. That's not fair is it?

    Aloha
     

  171. 171
    RMD Says:

    bill 168: how about debt  repaid in gas? 
    CHK gets needed cash upfront but must pay  all op costs. Didn't they sell  the last one for under $3.00/m;  connotes needing the money to me.

  172. 172
    zman Says:

    Guessing JB will talk when they have the log done and not half way through it, always takes longer than people would like. Guessing that EXXI speaks to soon-ness of more data tomorrow at Jefco if there is no release by then. 

  173. 173
    Geno Says:

    Re 171 I guess op costs are kind of like the interest on the debt.  There is still an obligation to provide the gas.

  174. 174
    RMD Says:

    MMR  I get this bad feeling The Friends know and I don't.
    While OT, STX cancelled LBO discussions 'cause valuations weren't high enough.  Meanwhile it occurs to me that a high % of E&P stocks have raised equity.  Just musing before I get to winethirty.

  175. 175
    Jerome Blank Says:

    MMR tripped the P&F sell signal with the $14.50 print….although the intraday and even the daily don't look so hot, there is some interesting support symmetry on the weekly and P&F charts, major P&F trendline support at $12 which corresponds with lower ascending weekly trendline support, so for those with a longer term outlook this could be a nice developing buy opportunity…. 

  176. 176
    john11 Says:

    KOG news.
    http://finance.yahoo.com/news/Kodiak-Oil-Gas-Corp-Completes-prnews-3847891947.html?x=0

  177. 177
    zman Says:

    Re 176 – that looks pretty much as expected.

    Ex the acquisition the exit rate range straddles the prior 2,500 bopd target; I'm not going to sweat timing of the 4 well pad coming on just after as opposed to by year end.

    4Q volumes are higher than I was looking for at 2,100 boepd vs my 2,000 boepd.

    Saying they will provide 2011 capex and production guidance in the next few weeks, won't be surprised to see triple digit YoY growth for 2011. 

     

     

  178. 178
    choices Says:

    GFS: Canadian frac co I mentioned several weeks ago, planning expansion into US:
    http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aGFS-1785871&symbol=GFS&region=C

  179. 179
    jy Says:

    Re #151.
    A dipmeter normally uses closely spaced  (in a horizontal sense, as many as 64 or more) micro resistivity curves that are computer matched for semblance (correlation) so that the vector components (orientation and dip magnitude) of a planar surface cut by the wellbore can be calculated.
     
    Imagine a cylinder covered w/64 resistivity sensors around the outside of the cylinder spanning only a few vertical inches. Thats what the dipmeter tool looks like.

  180. 180
    zman Says:

    JY – thanks, I was thinking of how to read their output on that slide. 

  181. 181
    jy Says:

    GDP slide #15 is a composite of a "microimager log" wellbore image (from densely spaced resistivity sensors) on the far left, fracture strike (direction) and dip in the yellow area showing most of the fractures run NE-SW and dip nearly 90° (mostly vertical) and the "Schmidt Plot"  which is an equal area projection of the "poles to the fracture planes".  The short version of the "Schmidt Plot" in this instance is that you would orient your horizontal well direction in a NW or SE direction to intersect the maximum # of natural fractures.  Note on slide #10 the GDP wells (little red sticks) are oriented in that direction.

  182. 182
    zman Says:

    re 181, OK, gotcha, thanks on the plot. 

  183. 183
    choices Says:

    http://www.nytimes.com/2010/11/30/business/energy-environment/30utilities.html?_r=1&ref=business
    Conversion to NG "may" finally be picking up the pace.

  184. 184
    zman Says:

    Just going over some late night notes, old name FPP, another SDM I don't talk about but used to know well, drilling Bone Springs wells with XEC and soaring. 

  185. 185
    West Says:

    http://www.asx.com.au/asxpdf/20100624/pdf/31qzml4n2r201n.pdf     …………page 46, Twister prospect sold 75% wi to NBL and retained 60% of 25% wi with 500k $ carried. T9N-R61W section 36 is CRZO drlg location for two Niobrara wells with one now in turn. Section 16 same township is their first well. Section 9 same township is CLR's Pump House Prospect and their first Niobrara well.

  186. 186
    elijahwc Says:

    West you do some of your best work in the wee hours of the morning.  Thanks for SDCJF piece above.  Quite a tour.

  187. 187
    elijahwc Says:

    OPCO likes HES:
     
    "
    HES Hess tgt raised to $84 at Oppenheimer on higher oil prices & exploration potential (70.05 )

     
    Oppenheimer is raising their tgt to $84 from $70 on expected higher oil prices, increased production, and high impact exploration. HES recently announced two acquisitions in the Bakken that will boost its current leases of 510K net acres in this oil shale play in North Dakota by 260K net acres, or 51%, to more than 760K net acres. Both acquisitions are expected to close by the end of the year and are likely to lift the co's guidance for spending and production in the play by more than 30%. Net 2015 production from the Bakken could significantly exceed the current 80 mboed guidance, making HES the largest producer in the play."

  188. 188
    elijahwc Says:

    CQP:  From yesterdays Heard on the Street.  Nice yield too.
     

    Why should Russian behemoth Gazprom worry about Cheniere Energy, a minnow struggling under a debt nine times the size of its $317 million market capitalization?

    http://online.wsj.com/article/SB10001424052748704679204575647143626625572.html?mod=djemheard_t

  189. 189
    john11 Says:

    Here is link to Cannacord presentations today, including ATPG MHR REXX TAT among others
    http://www.wsw.com/webcast/canaccord3/

  190. 190
    รายได้เสริมทางเน็ต Says:

    รายได้เสริมทางเน็ต…

    […]Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Tuesday Morning – Natural Gas Supply Slide Show Plus Other Stuff[…]…

  191. 191
    check over here Says:

    check over here

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