Thursday Morning – More Earnings And A Natural Gas Preview

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Earnings Watch:

  • (TK): Earnings of $1.12 vs expectation of $1.13. Revenues were higher than expected and the company commented that rates have been above historic averages and are expected to remain firm through the 2H07.
  • (HK): GOOD QUARTER. Beat of $0.17 vs $0.12.
    • CFPS rose 123% YoY
    • revenues were in line up 103%
    • strong production growth,
    • the bottom line beat with a top line meet was attributable to a drop in LOE. LOE fell to $0.55/mcfe (remember that these guys have been divesting higher LOE properties as a matter of course).
    • In fact total operating costs declined 26% YoY on a unit basis.
    • Hedges cover 73% of expected production with average floor prices $7.32 per mmbtu and $63.05 per barrel.
    • Guidance appears to be in line. I'll have more after the conference call.
  • (SCU)
    •  Production from the PRB is at 9.6 MMcfepd, up from 8.0 MMcfepd at year end
      •  4 Rigs running in the Powder now, drilled and completed 20 wells in 1Q07, still on track to drill 150 wells there this year.
      • 75 days out from drilling in the Fayetteville shale. Drilling locations are staked and the company continues to add acreage. Plans to drill 4 to 6 company wells now. Last plan I saw said 14.
      • Elk Valley, Alberta, dewatering of 10 wells continues. Associated gas is increasing.

Natural Gas: Thursday’s gas inventory INJECTION could top 100 Bcf.

  • HDD - fell to 39 from 49 in the prior week when an injection of 87 Bcf of was reported.
  • CDD - registered a slightly warmer than normal 17 but it really shouldn’t have much of an effect just yet. In general I’ve found that owners of the newer more well insulated homes with more energy efficient heating and cooling units are the early adopters of AC in the Spring. The rest of the U.S. will sweat a little and hold out as long as possible before flipping that switch.
  • In the year ago period 85 Bcf was injected so we might eat into the YoY storage deficit but not meaningfully so.
  • The over/under for gas prices is likely to be 100 Bcf.

Oil retreated yesterday on a much bigger than expected build in crude stocks. Both gasoline and distillates climbed more than expected as well.

  • Crude: A 5.6 million barrel build in crude stocks was well above the highest estimate yesterday. Funny that it comes on a day that the LOOP files for permission to increase it's storage facilities by nearly 5 mm barrels.
  • Gasoline: as I wrote yesterday, the over / under on gasoline stocks would be a build of 400,000 barrels and what do you know we got exactly that, odd coincidence, and gasoline drops (as it was the first build in gasoline stocks in 13 weeks) but then rallies throughout the afternoon to close up $0.0264 on the day. This morning pre market trading has June RBOB up another $0.03 to $2.26. What gives? Blame MEND for abducting four US workers.

Gasoline Imports - Finally Starting To Show Up On U.S. Shores. After stiff competition from the Carribean and Europe gasoline imports appear to be slowly increasing.  Given that several non U.S. refineries in the western hemisphere have now returned to service and the duration of high U.S. wholesale prices I'd expect imports to continue to climb.


Odds & EndsAnalyst Watch: (ATW) to hold at Jefferies, (ECA) and (CRZO) price targets increased at RBC.

Holdings Watch: Changes


  • (TK) - added June $65 for $1.40. What greater evidence of high traffic can there be than sharply rising imports.


  • TSO 115 puts for $2.10 because: 1) I'm a glutton for punishment and 2) I honestly think we've saw the peak in RBOB prices at $2.35 at the end of April.

42 Responses to “Thursday Morning – More Earnings And A Natural Gas Preview”

  1. 1
    lawdymama Says:

    Z – expensing the 3-d seismic studies sure hurt the EGY earnings.

    Had closed most of my long positions before the Wed energy numbers. But as it seems that gas is determined to keep going up, am back in long – picked up some VLO Jun75 and TSO Jun120 at the open.

  2. 2
    lawdymama Says:

    Z – btw, me going long in TSO should help drive the price down. Think of me when u close out those puts…

  3. 3
    zman Says:

    Lawdy – wow, had not had a chance to look at EGY. Seems like an over-reaction but I’ll listen to the call later.

    TSO. LOL. You know you’ll do well with the calls as I got more short again yesterday. When will I learn my lesson?

    What’s the latest reason for gaso rise?

  4. 4
    zman Says:

    HK – after a brief dip it looks like it wants to rally pre conf call. That really was a good quarter, production guidance for 2Q was essentially flat sequentially. May dissappoint some but their operating metrics are kicking butt.

  5. 5
    zman Says:

    Not even the refining stocks are buying this Nigeria/Hurricane hype induced $0.06 rally in gasoline prices.

    Hurricane forecasters in Colorado say there is an above average chance of a huricane striking the gulf this summer.

  6. 6
    zman Says:

    TK continues it’s rally. New all time high.

  7. 7
    zman Says:

    96 Bcf

  8. 8
    zman Says:

    Not that the two CNBC weathergirls understood it but their guest, Chris Jarvis, just made a bearish case for gas prices.

    On the one hand, he said LNG is running 3 Bcfgpd (that’s large) b/c of the high US price relative to Europe/UK prices. Also nukes are less likely to be down this late summer period since they did extensive turns this spring.

    On the other hand he bowed to the forecast for a hot summer pointing out that we only injected 650 Bcf last summer versus th etypical 950 bcf as temperatures rose. I point out on that while it was hot, production was also still recovering from Kat/Rit. We’re back up to where we were in the GOM and TX and WY are hitting all time production highs.

    He closed by saying we’re in pretty good shape on storage heading into summer.

  9. 9
    zman Says:

    Gas storage page is updated.

  10. 10
    slm Says:

    LOL CNBC Weathergirls!

  11. 11
    slm Says:

    Hey Zman, how do you like PTR here?

  12. 12
    zman Says:

    SLM – I like them long term as a stock you buy and hold. As an option play, it’s pretty volatile issue. As well as the commodities are doing I’m a little disconcerted to see how weak the group is with the broader market. Profit taking continues, especially amongst service.

  13. 13
    zman Says:

    Nicky – I agree techincals say up. I still think that if we get any slowing in Nigeria n hostilities or another big build in crude stocks next Wednesday you’re look at a $60 test.

    I second the confounced feeling on the products rally.

  14. 14
    zman Says:

    It’s funny but when the 96 Bcf number was announced there was a boo in the pits. Can you say short pain?

  15. 15
    zman Says:

    Nicky – you’ve got your certified market technician hat on today, what do you think of the natural gas chart(s) (front month but also the 12 month strip)?

  16. 16
    zman Says:

    Thanks Nicky! I think it’ll take a triple digit inject to even get gas as low as $7.50 and then you’ll get massive short covering taking it right back up towards the $7.70 to $8.00 levels.

    I need to do some work on pipeline volumes from Canada. Used to track it all daily but I no longer have an intern. lol. That’s going to be the swing this summer offsetting the expected rise in LNG.

  17. 17
    zman Says:

    If anyone as the May PQ calls, now would be a good time to roll em to June. They’re days away from a pretty significant well which if dry, could see the stock back to the mid $12s. If good you’re looking at $14+, maybe as high as $15.

  18. 18
    zman Says:

    Technically speaking I agree on the linkage but the mitigating fundamental factors I think keep gas pretty still. As soon as you crack $7 you’ll have talk of chopped budgets and shutins in the Rockies (where gas will closer to $5)

  19. 19
    zman Says:

    MCF up another 3%. Wonder if they’re gone. Anybody hearing anything?

  20. 20
    zman Says:

    My luck it’ll be NFX taking out MCF! The assets are right up their alley.

  21. 21
    lawdymama Says:

    I’m confused (nothing new there)…can’t believe TSO’s down $3 and VLO down $2 with RBOB up almost $0.07. Granted they were a bit stronger yesterday than I expected with the gas inventory build and I could understand some inherent weakness today, but to be down that much on such strong gas increase…what am I missing?

  22. 22
    T-Tupp Says:

    z did everything go well with the link i sent you?

  23. 23
    lawdymama Says:

    I could be a lot happier with RBOB up $0.08 if TSO wasn’t down $2.

  24. 24
    zman Says:

    Tupp – I got it. Thanks!

    Plan on going in tonight.

  25. 25
    zman Says:

    Lawdy – it’s just a general market shallacking. Besides, how much is TSO up since they missed numbers, $4? LOL

    MCF up 4%. Crickey something’s afoot.

    The LNG number taht CNBC guest gave of 3.0 Bcfgpd is off by about 100%. Running 1.6 per day in Feb.

  26. 26
    zman Says:

    Anybody else see that one CNBC this morning? Did he say we are running 3.0 Bcfgpd now or that we will be this summer. I wasn’t clear on it?

  27. 27
    zman Says:

    Imports: From Apache’s Weekly Newletter

    Last week’s send-out volumes from liquefied natural gas (LNG) terminals totaled about 2.9 billion cubic feet per day (Bcfd) or 0.9 Bcfd more than last year. Waterborne LNG Report estimates that LNG imports to the U.S. might set a record of 3.6 Bcfd in May. Canadian imports last week were 7.9 Bcfd or about 1.2 Bcfd less than last year.

    So the guy on CNBC was right! There’s the big ramp in LNG which doesn’t quite offset a rapid decline imports from Canada. That decline from Canada is pretty supportive of gas prices.

  28. 28
    tom Says:

    thanks for the anwswer Z. How stupid of me posting on the wrong post!

    What’s your take on oil stocks? I’m thinking of going back in WNR puts as it getting close to fail a trend line at 38 and going below 20MA on still a bearish chart on the daily. Thx

  29. 29
    zman Says:

    Tom – Oil stocks, gassy, low cost ones I like. Refiners I still think have gone up too far too fast but they barely got scathed today while everything else has gotten whipped.

  30. 30
    tom Says:

    So you’re leaning bullish lukewarm?

  31. 31
    T-Tupp Says:

    tom- good call on the wnr puts… chart looks like a double top, and it has been downgraded by bmo.

    i am waiting to initiate a position myself. might got squashed to 30 ish

  32. 32
    tom Says:

    I will get back into that POS stock again tomorrow for more if it fails 38.

    I hope that take on the market last Thursday was of any help to you and Phil. I turned neutral on the market last Thursday when I sent you a note and I turned bearish premarket this morning on the blog. For the first time since early March I bought market puts in IWM on the bogus rally up after the gap down. That 200MA chart just couldn’t go on forever. Heck, as the market was making new records, less and less stocks were staying above 200MA! We had a lot less stocks above 200MA yesterday than what we had pre the mini crash on 2/27. Just didn’t make any sense to me and was showing that the broad rally was getting less and less broad. Now we have to look at the pullback to see if it is an healthy one or the start of a downtrend. Lots of fun time ahead!

    Thanks for your help!

  33. 33
    zman Says:

    Tom & Tupp – yeah I’m still in WNR puts. The ting that might queer the put is the possibility that WNR makes changes to the GI ancqusition (divest a few items) and the Feds allow the deal to happen. In that case , WNR runs a few $.

    Tom, oh no, thankyou for taht market read!

  34. 34
    tom Says:

    Hmm… interesting Z. I’d rather look for another one then. I hate to be in a stock in such a context. Too risky. Will look for some charts and see what you say on them. Back in 10 min. Tx

  35. 35
    tom Says:

    Ok, I must have reviewed 250 charts and I was surprised to see so many with a bullish bias on the daily. Confirms your lukewarm bullish bias earlier on. Here are some that are bearish on the daily or about to become bearish. Others charts are not all bullish, some are in the wait and see neutral bias.

    TLM APA SUN TSO ATN (fresh IPO) ATW TOT BBG UNT and COP which might turn bearish if fails 67. I don’t like those rising channels on the long side.

    Any good looking ones FA wise on the short side?


  36. 36
    zman Says:

    Tom – It could be weeks before a decision is reached.

  37. 37
    tom Says:

    Ok, but why take the risk if there is no such things in TSO and the other gang posted above?

  38. 38
    zman Says:

    Good point.

  39. 39
    zman Says:

    Thanks Tupp – I’m in. Playing about now!

  40. 40
    T-Tupp Says:

    its impressive eh? read the downgrade report for wnr…

  41. 41
    bigh Says:

    hi test

  42. 42
    bigh Says:

    been having trouble posting, sorry about my test-looks fixed…took and sold some tso puts did ok…

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