Wrap – Week Ended 11/02/07




3-2-1 Crack Line Shows Cracks Improving. You'll note I've added a generic 3-2-1 crack spread line to the table above. I've been harping on a theme of late: that products have not kept pace with ever advancing crude prices over the last few months resulting in depressed crack spreads. This past products decided to start playing catch up. While we will get the official regional data on Monday for the week just ended the generic 3-2-1 crach spread represents a hypothetical margin produced if with NYMEX prices. As you can see from the table the surge in Gasoline and and somewhat smaller surge in crude drove a phenomenal increase in this metric of 35% for the week. Refiners rejoice.

Oil Up Another 4% As Traders Have Their Eyes On The Three Digit Prize. U.S. inventories hit a two year low and the all important for NYMEX pricing Cushing, OK storage point saw a particularly severe decline, also to levels not seen since October 2005.


Natural Gas, Not Oil Had The Best Week Among Energy Commodities. Despite setting an all time high for natural gas storage the December NG contract rallied 8% , doubling crude's move into new nominal record territory.  Winter appears to be on its way.

Interesting To See Both CFTC Net Interest Turning Decidedly Less Positive... I'd say shorter but the shorts held their ground while the longs cashed in early in the week, prior to the larger gains seen by Thursday.

...And A Sharp Increase In The Number Of Gas Directed Rigs Turning To The Right. Last Fall Chesapeake and other producers annunced gas production curtailments when prices got to low for them to produce economically in certain Western plays. As you can see from the chart, the impact on the gas rig count was short live and we went on to 20+ year highs in gas rig activity this past year. It looks to me like the recent peak and subsequent announcements are setting us up for another small dip and then potential higher highs in rig activity. However, I don't think the move to higher levels necessarily means one to much higher highs like we saw last year because the use of horizontal drilling continues to advance. Also the length and number of laterals continues to grow meaning one rig, on site longer than the in the past getting more gas out of the ground. So the move back to higher rig levels is not going to be as big in the past and therefore it is my sense that a recovery among the land drillers is not in the near term cards (at least not until Canada decides to wake up and start drilling which will take a really cold winter there and in the U.S.).

Holdings Watch: (click on the image below to open in its own window).







14 Responses to “Wrap – Week Ended 11/02/07”

  1. 1

    Hey Z.,

    Happy seems to like

    Is it time to consider this again?

    I know you like HAL.

  2. 2
    zman Says:

    I assume he just likes the technicals for a bounce back to its old highs if oil can stay at 90+ or does he have something else?

    I like HAL not just for the discounted valuation but also what they said on their CC (good stuff) vs SLB (fearful stuff) relative to N. America.

    But from a pure TA standpoint I’d say SLB likely makes run on 110 – 112. HAL would likely hit all time highs in the mid 40s if that were to happen.

  3. 3
    jazzkool Says:

    Z, late Friday, there was an email from a guy that liked CAM. It was featured in IBD today, so I sure would wait before I looked at CAM, at least at the open.

    WNR/FTO earnings before the market opens on Wednesday. What do you think of their chances to crush like last time?


  4. 4
    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive Says:

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  5. 5
    texana Says:

    z thx on dnr like clr going into erngs apa the crown jewel on any pull back

  6. 6
    rseidman Says:

    I received your EXM call through email, but no updates on this site for an hour.
    Something wrong?

  7. 7
    zman Says:

    RS – you’re posting on the weekend wrap post. We’ve been very active on Monday’s post.

  8. 8
    doc Says:

    Bought nov 40 chk calls 4.100

  9. 9
    zman Says:

    Doc, I agree with call…you know you posted on the weekend post. If you ever want to go to today’s post just click on the blog title at top! You saw I bought some December’s yesterday.


  10. 10
    doc Says:

    Who is “doc”, I changed my name to avoid getting arrested. If anyone remembers my former posts,it was Drdavis.


  11. 11
    zman Says:

    Phil – can you please post on today’s post. thanks. Z

  12. 12
    doc Says:

    CHK The report tomorrow is going to blow the door off.

    Z we need to look at SandRidge SD
    Mclenden & Ward founded CHK. SD may be discused by McLenden. I think they still are buddies.

    ”NEW YORK, Nov 5 (Reuters) – SandRidge Energy Inc , an oil and natural gas exploration company based in Oklahoma City, raised $746.2 million on Monday with an initial public offering that priced above a forecast range.

    The 28.7 million share offering, increased in size from 26 million shares, priced at $26, compared with a forecast range of $22 to $24, according to a company statement.

    Based on its offering price, SandRidge has an initial market capitalization of about $3.5 billion.

    The company plans to use proceeds from its offering, which floated about 39 percent of the company, to pay down debt.

    Chief Executive Tom Ward, who already held about 34 percent of the company before the offering through various entities including family trusts, said he will buy a further 4.2 million shares at the offering price, according to the company’s statement.

    SandRidge is active in exploration in the West Texas Overthrust, where it has tripled its acreage since last year, according to its registration statement with the U.S. Securities and Exchange Commission.

    Its foothold in the area likely helped it win investor interest, according to one analyst.

    “It is a very hot area, and they (SandRidge) have very large acreage,” said Scott Sweet, managing director of research firm IPOboutique.com.

    The company, through a subsidiary PetroSource Energy Companyy, also collects carbon dioxide in the West Texas Overthrust Area, which can be used to extract more oil after traditional methods have been used, according to its filing.

    “They are very diversified,” said Sweet.

    The company also likely earned investor points for its strong management team, with its CEO being an industry heavyweight — Ward founded industry giant Chesapeake Energy (CHK) — who has carefully recruited other executives, including a new chief financial officer hailing from a career at Goldman Sachs (GS) and Bear Stearns (BSC) .

    “He (Ward) has about as good a background as you can have,” said Francis Gaskins, president of research firm IPOdesktop.com. “And he must have extreme confidence in the future of the company,” Gaskins added. “He could have had options issued, but instead he is buying more shares (at the offering price).

    “CEOs don’t usually put hard money down on the table. That is a big plus.”

  13. 13
    zman Says:

    doc/Phil – please post on today’s post…nobody is seeing this but you.

    I looked at Sandridge back in July and reposted it in today’s post second comment of the day. You are posting on the weekend.

  14. 14
    doc Says:

    I got on by accident. Been away for a few days.

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