Merry Monday Eve

The week ahead:

  • Monday: Markets close at 1pm EST.
  • Tuesday: Markets closed for Christmas.
  • Thursday: The EIA's Oil Inventory Report will be released at 1:00 pm EST.
  • Friday: The EIA's Gas Inventory Report will be released at 10:30 am EST.


Energy Outperforms Broad Markets...Again. So much for every single one of the talking heads who over the last month have said buy the financials and short energy. You were wrong and should get a lump of coal for your error on Tuesday, not from Santa but from me to remind you that Energy does not necessarily need a rising commodity price environment to make gains.

The broad market is doing nothing.... 

comps-122407.jpgclick to enlarge S&P vs XOI vs XNG

Valuations remain cheaper than the broad market and in many cases below the mid point of historic ranges. As to the financials, well...who can say? People have said that many of the players in the sub-prime debacle have more convoluted off balance sheet machinations than did the so well understood "smartest guys in the room". This action tells me we don't need rising prices to get more multiple respect for the E&P stocks in particular. 

New Expanded Table. We've added a few things in recent weeks including:

  • some benchmark rates for tankers and bulkers
  • weekly change in natural gas in storage

Commodity Watch:

  • Crude Oil rose 2% last week to the close at $93.31. This morning crude is trading flat to up $0.30.
  • You Scratch My Back Comrade And I'll Line Your Pocket Watch: He may be Time's "Man of the Year" but he's still just a KGB thug to me. Now Vlad is apparently set to take the reins as chairman of Gazprom. No doubt his nomination of current Gazprom chairman Dmitry Metyedev to his own job as ex-Soviet king of bling helped his resume to the top of the stack. As it related to Dmitry, to my readers in Europe who depend on Russian gas to heat their homes I say get ready for more of the same and worse arm twisting you've grown accustomed to. As for me, after writing so many flattering things about Vlad the Capitalist Impaler over the last couple of years, don't worry I started sweeping a geiger counter over all my food shortly after they did this. This is a natural gas monopoly but their oil arm (Gazpromneft) just reported a $5 billion quarter (I haven't seen numbers for the bigger gas side) so this is like Putin being handed the top slot at the equivalent of Anadarko or Apache. Of course, those guys weapon of choice is a HP12C and they don't cut off gas flows to the midwest after first doubling prices in the heart of winter. Man of the Year...bah humbug.
  • How You Know The Mainstream Media Is Desperate For Quotes In A Pre Holiday Thin Environment: They quote a guy from a firm with a name like this:

``The past few winters have been mild but there's a worry that things could always change,'' said Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney. ~Bloomberg. Zcomment: I swear I saw this same comment under the "things could always change" section of the Encyclopedia of Duh.

  • Natural Gas also rose 2% closing at $7.19. This morning gas is trading off a dime to $7.08.
  • Gas-Weighted Heating Degree Days Hit 200. This is the high of the season and up from the Climate Prediction Center's forecast of 190. Recall that we go up a very easy comp this week of a pull of 49 Bcf from storage in the comparable week last year so look for use to quickly plow into YoY storage deficit land by about 100 Bcf this week (that assumes a withdrawal of 140 to 150 Bcf this Friday).

Holdings Watch: click here for an updated holdings list.



Odds & Ends

Analyst Watch: nada ... nobody is working today and you shouldn't be either! Have a great and safe Holiday!


Merry Christmas Everybody! May Your Cup Overflow With All The Joys of the Season!





44 Responses to “Merry Monday Eve”

  1. 1
    Sambone Says:

    6:32 am EST

    Crude Lower On Light Volumes

    Dow Jones Newswires
    From Market Talk:
    1001 GMT [Dow Jones] Crude oil futures trading lower in very thin pre-holiday trade. No fresh headlines seen to drive prices, and movements seen to be final position adjustments ahead of the Christmas break. But with volumes low, risk of large price moves remain. “It certainly should be a quiet day today, I can’t see what’s going to push it one way or another,” says Tony Machacek, broker at Bache Commodities. “The risk is someone doing a physical deal and having to hedge it — 500 lots is a big deal at the moment,” Machacek adds. Nymex February crude -26c at $93.05/bbl, ICE February Brent -52c at $91.94/bbl. (NHE)

  2. 2
    freeflow Says:

    Morning Z

    I haven’t been here in a few days but I’ve noticed APC is doing very well.

    Do you think it is too late to jump on this one?

  3. 3
    zman Says:

    FF- I don’t think its too late although I have been lamenting having been out for the last $4 or so. I’m going to go back in around $65 which is just slightly below here if I can, probably 65 strike Jans and this is one of the 10 or so I plan to be in Feb for earnings. Recent run has not put it above the mid point between cheap and expensive.

  4. 4
    freeflow Says:

    Thanks Z – have a good holiday!

  5. 5
    zman Says:

    FF- same back to you! That list for the 4Q and/or YE reserve reports is:

    CHK (don’t throw rocks at me, its cheap and they will top 11 Tcfe, with 300%+ reserve replacement and respectable F&D costs)

  6. 6
    Sambone Says:

    9:25 am EST

    Nymex Crude Steady In Light Holiday Trade

    By Matt Chambers

    NEW YORK — Crude oil futures were steady in quiet pre-Christmas trade Monday, holding on to gains made Friday on an upbeat U.S. consumer spending report.

    Light, sweet crude for February delivery on the New York Mercantile Exchange was recently unchanged at $93.31 a barrel. The futures jumped 2.5% Friday after the U.S. Commerce Department said personal spending in November rose the most since May 2004. Brent crude on the ICE futures exchange was down 34 cents at $92.12 a barrel.

    Trading on Nymex will close at 1:30 p.m. EST and will reopen at 6 p.m. Tuesday for trade date Dec. 26.

    “The strong finish to last week’s trade tended to underscore the focus that traders are now placing on U.S. economic prospects and the associated implications for petroleum demand,” Jim Ritterbusch, president of trading advisory firm Ritterbusch & Associates, said in a note to clients. “In spite of a soft start to this new week, we believe that odds favor price strength.”

    Front-month January reformulated gasoline blendstock, or RBOB, fell 63 points, or 0.3%, to $2.3732 a gallon. January heating oil fell 1.41 cents, or 0.5%, to $2.595 a gallon.

    —By Matt Chambers, Dow Jones Newswires

  7. 7
    zman Says:

    Solars are the must have stocks for year end window dressing. Pretty much everything hitting 52 week highs. YGE March calls now a double, will hold for the week but I think there is a bit of an unlock on these names sometime in January.

  8. 8
    ram Says:

    I’m throwing CHK stones at you!!

  9. 9
    scoop006 Says:

    Z- “unlock” + or – ?

  10. 10
    zman Says:

    Scoop re Solars I was thinking negative…maybe not first or second week but soon after the year starts. Parabolic charts in this market don’t last long (Chinese oils, drybulks…). After year end you have two sources of supply (selling)
    1) people who have made a boat load and didn’t want to pay taxes in 2007 and

    2) fund managers who got in late to show it on their roster but who have as such little conviction and will flip the position for a small gain after their year end list is printed and sent to fund holders (next week)

    longer term I think some of the group play catch up …this group and the other alt energy plays used to run with oil. As oil stalled, they pulled ahead on the energy bill. For many of them, the only way to grow the top line is to raise prices as their facilities aren’t readily scalable in capacity (lumpy assets).

  11. 11
    scoop006 Says:

    Z Since its a slow day can you please look at COF Jan $65P and explain the 30K contracts. ie their straergy. TY

  12. 12
    zman Says:

    Scoop – my system says its a straight hedge, not a spread. Somebody owns some stock and is scared. Went in three lots of 10,000 contracts. Why so deep in the money? I suspect it was the lowest premium at the time of execution.

  13. 13
    zman Says:

    suggestion box is open: too much of what / too little of what, other things I should be paying more attention to.

  14. 14
    scoop006 Says:

    Thank you for your prompt response. Read on Yahoo that delinquencies on credit card accounts are increasing and COF has exposure.I think I’ll add some P’s to go with my WFC P’s
    Very happy Holiday to you, Mrs.Z and little Z.

  15. 15
    zman Says:

    Thanks Scoop you too! Sambone is the resident financial shorter around these parts, Sammy any thoughts?

  16. 16
    Sambone Says:

    Z – Credit cards are starting to come to the surface.

    What I’m watching is MBI and ABK. If they are downgraded by S&P, then get out of the way. How many billions of $’s are insured by MBI, especially in the Muni market? Your Grandmother has AAA rated muni’s in her portfolio, and now they are AA, A, Baa, or lower after these insurers are downgraded? It will rock the muni market as well as the bond/stock market. How about that ACA Capital. Looked at that chart lately? ACAH. The banks are scared.

    I still smell smoke on the Bank balance sheets. GS just bght 7 billion of Cheyne Finance’s SIV. Problem is no price of the assets were quoted. Hmmmm.

    Bottom line, I’m staying clear of the finance stocks.

  17. 17
    Sambone Says:

    Scoop – In regards to Credit cards, Americans used their homes as ATM’s. Now they are using unsecured debt. US consumers would rather spend than save. We have negative savings rates here in the US. Also auto loans are starting to see late payments.

  18. 18
    ram Says:

    Cute little Z! I hope you have stocked up on the shotgun shells to keep the boys away.

    Sugg: You like DNE as a little guy that could be big. How about a little guy site and their possible potential?

  19. 19
    zman Says:


    I own a gun and shovel. I’m sure they won’t be missed.

  20. 20
    Sambone Says:

    Insured Muni bonds = 500 billion

  21. 21
    Sambone Says:

    Ok, I’m outta here. Happy Holidays to all! Talk at ya Wednesday.

  22. 22
    zman Says:

    See ya Sam! Be safe, have fun, and God Bless.

  23. 23
    zman Says:

    go PBR, its your birthday!

  24. 24
    Dman Says:

    Z: any thoughts yet on NOV? I am looking at it as a (somwhat) beaten down service play (medium term, not front month calls). But what about BHI in that same category?

  25. 25
    apbd Says:

    Z: The blog lettering is in green today.
    Very festive. Could you do that for all of the quotes in my portfolio?
    Merry and Happy.

  26. 26
    ram Says:

    100 on ATW came true.

  27. 27
    ram Says:

    Z Even though ATW has a small fleet, do you know if they are modern and sophisticated/ultra deep guys?

  28. 28
    zman Says:

    Dman – I totally forgot to include in the weekend piece which morphed into the Monday post by the time I got it out. Gotta say I’m liking them a little bit better post deal than at the rich valuation they had standalone. I’ve not seen yet if its accretive in 2008 (but I bet it is) and together they are a strong match. Before, they (NOV) and (GRP) were threatened by everyone from BHI to SII to SLB. That’s still the case but now they touch more parts of the process which is the name of the game now.

    I’m not a fan of BHI but it may make sense for them to snap up someone else now (their CEO hinted about consolidation 2 weeks ago just before the NOV deal) and I’m sure he’s planning acquiring and not being acquired. I’d think he may go for a SII but that’s purely a guess of what I think would make sense.

    APBD – your wish…is my wish…Merry Christmas, did you get the email I sent?

    Ram – As far as know they are modern. The types of rigs are typically overhauled for the job in question. They are updated over the years but not all of their rigs are ultra-deep capable (they have at least 1 JU which is shallow only) but I’m really not at all familiar with their fleet….could be in about five minutes if its important to you. I would say that at this rate of climb they won’t be cheap long. If only half of their rigs are deep or ultra-deep capable than that necessarily puts a damper on further earnings acceleration (unless the shallower stuff sees a big rate boost of the deeps go from 500-600 to $700 to $800 kpd over the next 2 years. Keep oil around $90 and that could very well happen.

  29. 29
    ram Says:

    Z – I was fishing to see if they would be a takeover based on their size and if they had decent equipment to add to a larger company (ESV?).

  30. 30
    zman Says:

    Ram – I’m sure that’s part of the rally here. Could be ESV or RDC or DO or RIG acquires them.

  31. 31
    apbd Says:

    Yes. Thank you.
    Best to all,

  32. 32
    zman Says:

    COP rallying towards old highs, about a month late for me but this is what I thought it would do back around the time they pre-announced the 3Q brick.

  33. 33
    zman Says:

    Bet we get another $3 out of PBR on Wednesday…if it gets to 119 but fails to close above there I flee.

  34. 34
    zman Says:


    ATW’s fleet by water depth capability:
    3 at 5,000
    1 at 2,000
    (those four can drill pretty deep 20,000 to 25,000 total vertical depth) but were built in the 70s and 80s and I don’t know how updated they are but they aren’t liking to get the highest of bids for their class.

    the other four range in water depth capability of 600 feet down to 70 feet

    they also have one rig under construction (350 feet).

  35. 35
    zman Says:

    oil off a dime in meaningless trading.

    NG off $0.175 to $7.01 which is odd that the weather turned out to be colder than expected. Maybe the imports numbers rallied again but I have not yet seen them.

  36. 36
    doc Says:

    Bought CHK Jan @$0.70

  37. 37
    zman Says:

    Good luck Doc, those are the Jan $40s right, I own those too. One of these days that one is going to surprise a lot of people.

  38. 38
    ram Says:

    Time to watch little RAM as Mrs. RAM and her gaggle of girlfriends challenge the retailers one more time.

    Merry Christmas Z and family, and to the ZEB family as well.

  39. 39
    zman Says:

    Be safe Ram and Fam. Remember at the stores, cash is king and plastic is for the drastic.

    PBR shooting for 117

  40. 40
    kaman Says:

    Merry Christmas Z, thanks for the sweet picture. Here’s to a prosperous 2008 everybody! cheers-K

  41. 41
    zman Says:

    Back at ya K! More winners, less scuds in 2008!

  42. 42
    scoop006 Says:

    Z Now 80K P’s for COF Jan 65

  43. 43
    zman Says:

    Scoop – looks institutional, big blocks.

    Ok, gotta, run. Everybody have a great and safe Christmas! Hug the family lots, smile no matter what, and call a cab when needed.


  44. 44
    sane Says:

    Have a merry Christmas everyone!

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