Friday Random Thoughts

Natural Gas Holds Mid $7 As YoY Storage Deficit Increases. On the one hand, storage is at the third highest level for this time of year. I'd say score one for the bears but it had been running second to last year's bloated levels. On the other hand, the YoY storage deficit, increased again as this past week's paltry 18 Bcf injection met tougher comps last year. My thoughts on gas storage and prices going forward can be seen here.

Odds & Ends

Analyst Watch: BMO Capital Markets picked up drillers (GW), (BRNC), and (PDC) with outperform ratings.

Canada Leaves Oil Sands Producers Out Of Plan To Cut Emissions. Great news for (SU), (ECA), (BQI) - well someday, and everyone else in the market.
Pemex sees Cantarell field production off 15% in 2007. According to Upstrea, the field, Mexico's largest and the worlds largest offshore, saw a slight bump in production in March to 1.585 mmbopd from 1.567 in February. Bears shouldn't get excited as full year production is still seen aveaging only 1.526 mm bopd or ~ 50% of Mexico's supply.

Carbo (CRR) says Pemex trials of their proppant resulted in 2x production vs fracs with sand. Pemex is now a customer. Carbo is one of my favorite service companies and although they see a bit of weakness in North American drilling activity this quarter it's one I'll be warming up to more as the year progresses and they bring production costs down.

Newfield gave us exactly what we wanted and gained 1% on a down 0.9% SNG day.

Cheveron Reports 1Q: Reported $1.88 (after backing out a gain on the sale of a refinery) vs expectations of $1.67. Refining revenues leapt; chemicals and upstream segments lagged. Like the other majors, revenues were down but margins were greatly improved.

OPEC Says To The West, "So You Don't Want To Buy Our Oil? We'll Cut Investment" For once Al Gore and George Bush are on the same page. The're both giving fodder to OPEC to spew price supporting rhetoric. In this OPEC's monthly newsletter published last night, the cartel sited global warming and increasing talk of reduced dependence on foreign oil as the foundation for a decision to review and perhaps curtail future investments in developing their oil reserves. Here's a great story on it.

Comment: To those of you who say, "yeah right, what are they going to sell, sand?" I'd say that you're right in some cases but wrong in the case where it matters the most. Saudi Arabia has talked about diverisification for a quite some time now as it looks to it's wealth of mineral deposits and eyes areas like fertilizer.

29 Responses to “Friday Random Thoughts”

  1. 1
    zman Says:

    Quiet day in energy. No BIDU’s around.

    Mulling a trades in BQI, HK, NFX but don’t see a need to rush.

  2. 2
    Stephen Says:

    END traded 5% of their 25% stake in Emu for a 5% stake in Acer. Means their eggs are not all in one basket. Should be positive, shouldn’t it?

  3. 3
    Stephen Says:

    Oh and I saw BQI are going to issue a private placement of 14 million shares at $2.75, so I’d be wary of buying for much more than $2.85.

  4. 4
    zman Says:

    Stephen saw that on END – they must like it since it’s already drilling. Plus I suspect they’re looking to kickstart the season (and the stock) should be good (if it’s good that is. lol.)

    BQI – hear ya on that. Thanks!

  5. 5
    zman Says:

    I’m buying SWN calls specifically for the earnings on Monday. Stock is acting ok and they should have nothing but good news.

  6. 6
    zman Says:

    USO popping. I’m on a CC, anything going on on CNBC or news?

  7. 7
    sane Says:

    Probably on the foiled Saudi terrorist plot



  8. 8
    zman Says:

    Canaccord ? cuts NFX price target from $56 to $49. Probably based on the higher operating costs. It’s a concern but the resource play here outweighs the modest bump in costs. Also, I think NFX is playing it conservative with cost estimates not wanting to rise above estimates again. The big story will be post 2Q when GOM related costs are gone and they have a clean look at LOE.

  9. 9
    zman Says:

    Thanks Sane. Funny the delayed reaction to it though. Nothing else?

  10. 10
    sane Says:

    The only other news out there is the usual pumpers touting $75 oil and $4 gasoline.

    Supposedly consumer sentiment is up a smidgen == pump oil and gasoline. I just became real suspicious of the consumer sentiment report. I am wondering who they are surveying. They said people are worried about energy / food prices and housing declines, but income increases and stock values increasing more that offset those worries. Stock values? Minus the average persons 401K, how many people in the populace actively trade in the market, and or rely on it for income?

    Yeah bring it on and see what happens to the economy.


  11. 11
    zman Says:

    Sane – check out the growth in money supply. Through the roof. People alway focus on fed funds but there’s more than one way to goose (and quietly) an economy, especially with the longest run from first debate to election. Republicans can’t afford a recession. Inflation? What inflation…once you wipe out food and energy which no one buys anyway, right 😉

  12. 12
    zman Says:

    Corn – I don’t think I was saying it was bearish. It’s been bearish and it (and I) have been getting more bullish (or at least less bearish) about gas prices, save an expected period of slight weakness, for the past 2 months now.

    I’m adding to calls on gassy stocks I like, NFX, SWN, probably CHK on a pullback, HK, little SCU … not that bearish around these parts.

    By the way, some producers aren’t economic at sub sub $6 HH. It just depends on where you are. Plus service cost keep going up, LOE keeps rising on a per unit etc.

  13. 13
    Stephen Says:

    On NFX, forgive my ignorance, or if I’m barking up the wrong tree, I mean the market definitely doesn’t agree with me.

    You’re absolutely right, it’s an unrealised loss, and it’s only mark-to-market accounting, a paper loss, they haven’t lost the actual money yet.

    But, here’s what I don’t understand. They’re an oil and gas company, so by nature they’re long oil and gas, so if they’re buying commodity derivative instruments they should really be building a net short position. Oil and gas are down recently, $60 and $6, so my question really is what kind of commodity derivatives are they buying (or selling, but rather unlikely)?

    Maybe they are just very complex derivative instruments and they will increase in value over time.

    I listened in on the second half of the conference call, but no one seemed to be concerned.

    Just my opinion.

  14. 14
    sane Says:

    I agree z.

    They keep printing money to dilute the economic situations. Yeah weaking the currency can be a tool in paying off debt, but it is already starting to backfire. Exports are down, imports are up. Now we are buying at a higher price. Way to go with that debt.


  15. 15
    zman Says:

    Stephen – They do mostly costless collars like many of their peers. It’s a silly accounting thing and the money is not lost nor will it be. I’ll try to get back to this later today or over the weekend. Maybe I should post a piece on weekend piece on it?

    The rising costs seem to be concerning analysts here more and the stock is getting whacked around by that PT reduction at Cannacord.

    I’m working up a fun with numbers piece that basically tells me to buy and hold NFX stock as they make the transition to a long reserve life company and to buy calls on SWN

  16. 16
    zman Says:

    Stephen – don’t ever say forgive my ignorance around here. It’s just not necessary. I gotta hit an errand but I’ll be back in 30.

  17. 17
    Stephen Says:

    Costless collars, I’ve never heard of them, I’ll have to look into them.

    It’s always good to bounce ideas off one another, and it’s a great website you got here.

  18. 18
    zman Says:

    Thanks Stephen! I’ll try to do something on hedging this weekend.

    CRZO is running up w/o me again. 🙁

  19. 19
    zman Says:

    RR check your email. I’m doing the opposite of what you’re suggesting, not that that means much. lol.

  20. 20
    umagumm Says:

    I need a few of those costless dollars. Come to think of it, the Fed is way ahead of us- printing like there’s no tomorrow.

  21. 21
    zman Says:

    them and North Korea both!!!

    Well, it looks like my SWN / NFX piece will be a weekend edition. My PC is just too tired to make it happen today. Maybe tonight if I don’t go fishin’

    CRZO Blast off (and giving the bird to Wachovia I might add)!!!

  22. 22
    zman Says:

    got some more may 45 NFX calls at $1.35.

  23. 23
    zman Says:

    June gasoline $2.35. And now the refiners can’t go up anymore? They must know I bot VLO for a trade yesterday. lol.

  24. 24
    T-Tupp Says:

    Z- Cannacord is the biggest joke in the league. non-event lol.

    not listened to much up here in the north.

  25. 25
    T-Tupp Says:

    they’re like one of those firms like from the movie Boiler Room.

  26. 26
    zman Says:

    Bubble Time!


  27. 27
    zman Says:

    I know it’s a bucket shop with no vision. I don’t know why they even follow a boring stock like NFX. No sex appeal on the surface, relatively slow grower. Do they even have a banking side?

  28. 28
    zman Says:

    Actually, I take that back, it looks like they bought AHH which used to be a great biotech research shop. Don’t know the E&P guy though. Still say he lacks vision on this call though.

  29. 29
    benbobby Says:

    Zman,at what point does the government investigate the continuing decrease in refinery utilization {81%}.?

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