11
Oct

Wrap – Week Ended 10/10/14

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The wrap table will be out by 1 pm EST Sunday (10/12/14)

All questions under the Wrap will be addressed in the Subscriber Mailbag section of the Monday post

Some food for thought:

The Blotter is updated.  We largely continue to sit on our hands awaiting cooler head re-entry for both the E&P and Service sectors and made our second add to the ZLT G portfolios of October on Friday.  We also did our first ZMT trade in over 4 months on Friday with a high risk bottom fish in HAL.   Look for us to step up additions soon.  

How to ZEB

If you have questions about Zman's Energy Brain please send them to zman@zmansenergybrain.com

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32 Responses to “Wrap – Week Ended 10/10/14”

  1. 1
    brodway Says:

    ECR now below teens. Not sure if its the best investment here and now given all the reduced share prices in other companies.

  2. 2
    PackMan Says:

    Z – What do you make of this article ?

    http://www.bloomberg.com/news/2014-10-09/ceos-tout-reserves-of-oil-gas-revealed-to-be-less-to-sec.html

     

  3. 3
    sea bull Says:

    Hedge link above is 1 day off.  see 10/2 entry for table.  Good information there.  

  4. 4
    zman Says:

    re 2 – got asked last Thursday, my response:

    re 6 – it's a hypey misleading article as to what the companies are doing. It's the difference between 1P and 3P they are talking about. 1P is proven.  3P adds in the probably and possible reserves.   The ambulance chasing lawyer comment is rich.  The numbers are clearly stated as to what they are and I don't see that as any kind of a big deal or anything at all new.   Complete agree with Scott Sheffield's comment that investors understand. 

  5. 5
    zman Says:

    re 3 – thanks for the correction sea bull, correctly link here:

    http://zmansenergybrain.com/2014/10/02/t-g-i-f-90/

  6. 6
    PackMan Says:

    6 – that was my thought as well.  read a bit like a hit piece.

    We are seeing a lot of these (misleading, and in some cases, hysterical articles) right now.

    Almost feels like a coordinated PR blitz … 

    WSJ B1 Friday article also – (… the funadmental problem is that the world is awash with oil…)

  7. 7
    sc4 Says:

    opic breakeven chart, any way to enlarge it. The breakeven numbers all look quie high i.e. over 80 us per barrel. How is breakeven defined here? It would appear that U.S. production is very completive but not sure what this is saying ans costs appear to be more than mere cost of production. tia your clarification. May have been in your post however, running hard in rural china and have not seen everything.

     

  8. 8
    Zorgnak Says:

    OT  kind of…..Tune Out The Noise

    http://zortrades.com/tune-out-the-noise/

  9. 9
    PackMan Says:

    Some oil related news articles this morning:

     

    http://www.gulfinthemedia.com/index.php?id=720482&news_type=Economy&lang=en

    http://en.irna.ir/News.aspx?Nid=81346185

    http://blogs.platts.com/2014/10/06/oil-big-five-october14/

     

    And is Putin starting to blink? … 

    http://www.twitlonger.com/show/n_1scrgv8

  10. 10
    PackMan Says:

    Apologies for the caps; this is cut & paste from someone else pulling headlines from Reuters:  Not what we want to hear …

     

    KUWAIT OIL MINISTER SAYS OPEC CUTTING PRODUCTION WOULD NOT NECESSARILY PROP UP PRICES – STATE NEWS AGENCY

    KUWAIT OIL MINISTER SAYS $76-77 MAY BE LEVEL AT WHICH OIL PRICE SLIDE ENDS, BECAUSE IT'S COST OF PRODUCTION IN U.S., RUSSIA 

     

  11. 11
    zman Says:

    Re 7 – yes, you can temporarily change the zoom settings on your browser.  Their "breakeven" is not just a function of economic production but of their national budgetary levels. 

  12. 12
    sea bull Says:

    Z- looking around the site I can't find where the breakeven point is for each play relative to oil price.  Seems like I have seen that somewhere before.  thanks

  13. 13
    zman Says:

    re 12 – there's a good one here:

    http://ir.bonanzacrk.com/phoenix.zhtml?c=246947&p=irol-presentations

    Click the October presentation, slide 6

  14. 14
    Wayne G Says:

    Algeria Not Worried by Recent Crude Oil-Price Decline: Yousfi

    By Salah Slimani
         Oct. 12 (Bloomberg) — Prices have fallen because of
    several factors including U.S. shale production, geopolitics,
    speculation, Algerian Energy Minister Youcef Yousfi says in news
    conference in Oran city.
    • “We follow with great attention the level of oil prices, but we are very tranquil,” Yousfi says
    • “OPEC doesn’t set the price of oil. Its role is to ensure the balance and stability of the market. I don’t know if there are countries that have requested an urgent meeting” of producer group to address drop in price, he says
    • NOTE: North Sea Brent crude fell as low 

  15. 15
    Wayne G Says:

    Probably spent all weekend trying to figure out where the market shakes out. Oversupply can be gone tomorrow just from Q4 demand and 1 negative headline. Plus, interesting during the june 2012 price drop in prices, everyone was saying the same thing. I googled oil drop articles during the month and it was almost identical. – "this time different" "structural change" "opec not worried" etc.

    Just hope Europe doesn't take us down even further. Spending the weekend looking back, hard to find a week where E&P names dropped 20-30% in 5 trading days.

  16. 16
    zman Says:

    re 15 – yep and yep

    re 14 – Players positioning.  You don't go into a meeting saying "we should cut" and then expect not to cut yourself.  Games.  Kuwait same.  VZ and Iran the oppositive but few will care what they say. "balance and stability" = cut in 1H15. 

  17. 17
    Wayne G Says:

    fwiw when we had the euro debt crisis and debt downgrade in US – XOP dropped about 38% from the high in July to the low in Oct. We are currently off 31% or so from our high in late June. Not sure it matters but a bit interesting. Demand seemed a lot more in question then, then now. 

    Also interesting article – 

    http://oilpro.com/post/7700/usa-shale-production-loosing-momentum

     

  18. 18
    zman Says:

    re 17 – yep …. move overdone. 

  19. 19
    Wayne G Says:

    but interesting XLE holding up a lot better this time around then last. Z, any thoughts about maybe the fears this time are structural rather than macro. I know I kind of asked this question before, but not that I am worried its structural, just trying to figure how the market will read this downturn this time and if the past 2 drops & pops in 11,12 will play out again?

     

  20. 20
    zman Says:

    re 19 – I can answer better tomorrow but I think XLE holding up better is no surprise, it didn't move as well going into downturn and it has components that benefit from lower oil prices. Re structural vs macro, send me an email explaining the difference in your view and I'll address in the Subscriber Mailbag in tomorrow's post. 

  21. 21
    501xx Says:

    gas vs oil stocks. Gas demand is domestic and the US, if not barreling along, is at least plodding ahead, and the gas glut is hardly anything new nor is it asggressively worse than ever.  I'm wondering if the decline in gas equities is more a secondary psychological move without anything near the myriad arguably realistic international posits for the oil equities drop. Consequently, wouldn't it follow that if one was going to put in some new money around these levels the gas equities are the most unjustifiably dinged and might have the quickest and sharpest recovery? Thinking RRC most of all. (If this makes no sense I plead 3 hours of sleep … got up here in California to watch the FOrmula 1 race live.) 

  22. 22
    Wayne G Says:

    *IRAQ SETS NOV. BASRAH LT CRUDE AT $3.15/BBL DISCOUNT FOR ASIA

    *IRAQ SETS NOV. BASRAH LT CRUDE AT 40CTS/BBL PREMIUM TO U.S.

  23. 23
    zman Says:

    Wayne and 501xx – thanks, will address in Monday post. 

  24. 24
    Wayne G Says:

    http://online.wsj.com/articles/saudis-make-aggressive-oil-push-in-europe-1413108958

    This ever happen before?

     

  25. 25
    zman Says:

    re 34 – I think the press is happily over reacting to every ministerial sound bite.  I note there are few details in that piece, just quotes from traders.  Short traders perhaps. 

  26. 26
    zman Says:

    SPX futures falling early evening; WTI and Brent off a buck plus early evening.  

  27. 27
    PackMan Says:

    Media onslaught continues this evening:

    http://www.twitlonger.com/show/n_1scs940

    OPEC members’ rift deepens amid falling oil prices http://on.wsj.com/ZAeKJI 

  28. 28
    Baylor Says:

    Does this recent drop seem contrived / engineered?  Just seems to be a bit like a more prolonged "flash crash" from back a couple of years ago.  It seemed that was someone sending someone a message.

    Maybe a Russia scenario?  Something just doesn't seem to be adding up.

    Then we have the US airlines down 15-20% in the last 30 days due to ebola at the same time that oil is plunging which is completely counterintuitive, but shows the psychological effects of a potential epidemic (real or not and I'm not epidemiologist, but we all know what they say about when certain people's lips are moving), which may also be having some effect on the overall market as each new piece of news gets sensationalized.

    Could create buying opportunities, but I personally got a little long ahead of this drop in anticipation of 3rd quarter earnings and am working to replenish the powder keg to try to strategically add to names that may come back the fastest (assuming this is not a scenarios like 2008 where we go into a 20 month generational downturn).

    If this ends up being the latter, I also wonder what the next move may be as the entire world is up to their years in debt and probably can't play the same clever tactic that was played the last 5 years significantly ramping up the M1 money supply.

  29. 29
    zman Says:

    China shows 15.3% YoY rise in exports

    China oil imports up 9.5% over August. 

  30. 30
    Wayne G Says:

    here is another story – sure this will spook people? Was this around in 11, 12? Notice they mention just people familiar, which literally means anyone in Saudi Arabia. 

    EXCLUSIVE-Privately, Saudis tell oil market: get used to lower prices

    http://www.cnbc.com/id/102081131

     

  31. 31
    zman Says:

    Wayne – saw that one too, comments in tomorrow's post.  Note comment in paragraph 9 or so about the real intent there. 

  32. 32
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