Monday – Energy Earnings Begin To Flow

If you missed the weekend wrap click here

Commodity Watch

  • Crude Oil. When all was said and done about the economy last week, oil actually closed up almost 1% having rallied late in the week when news hit that the U.S government would be sending out checks for lunch money. Or gas money or Ipod money...just don't save the money or pay down debt or the plan won't work. Oh don't look for that check until June so so much for a quick fix. Still, it stabilized the commodity markets if not the equity markets. Oil is trading off a buck to the mid $89s in early trading today.
  • OPEC Watch: They meet Thursday. I'm looking for no change to production quotas here. Maybe if Energy Secretary Bodman was a little more like Charlie Wilson and a little less like J. Wellington he could get OPEC to bump production up...but I doubt it.  OPEC is holding the line that speculators and not production levels are dictating prices and with prices having just last week touched a 3 month low I doubt there is much sentiment among cartel members to do anything that would cause them to slide further.
  • Oil Put Buying Surge: According to the CFTC speculators halved their long position last week and put buying, especially for the second half of 2008, is on the rise.
  • Natural Gas was essentially flat last week closing just under $8. This morning gas is down $0.05 to $0.10 in early trading.
  • Last Week Was Much Colder Than Originally Thought. The CPC indicates ga-weighted HDDs came in at 272, much higher than the already lofty reading of 251 it had expected making last week by far the coldest of the year. This will certainly lead to a near record gas storage withdrawal this week.
  • The CPC shows the U.S. warming up to 191 HDDs in its early forecast for this week which is slightly below the comparable weather from one year ago. With that said, I would expect gas to remain close to the $8 mark this week with the potential for a swing towards $8.25 to $8.50 on a big number on Thursday. 

Earnings We Care About This Week Watch:


The full list of 4Q earnings we care about along with this week's earnings can be seen here

Earnings We Care About Today:

HAL Reported A Nice Solid Beat

  • 4Q07 EPS of $0.74 (continuing operations) vs 0.69 expected.
  • Revenue of $4.2 B vs expectations of $4.06 B. Up 19% YoY and largely attributable to growth in its Eastern Hemisphere operations. 55% of revenue now comes from outside the U.S.
    • Eastern Hemisphere revenues up 12% sequentially
    • Western Hemisphere revs up 2% driven by increased activity in Canada, the Gomex, and Latin America
      • fracturing business in N. America saw expected seasonal slowdown, pricing pressure was contained to low to mid single digit declines in the 4Q and are picking up market share.
      • which was largely offset by growth in directional drilling and bits.
  • Buyback: repurchased 2 million shares during the quarter, $2.3B remains available under the current approval.
  • Conference Call at 9 am EST, today


Odds & Ends

Analyst Watch: (WNR) and (HOC) raised from underperf to neutral and (TSO) raised from neutral to outperf at Credit Suisse




37 Responses to “Monday – Energy Earnings Begin To Flow”

  1. 1
    zman Says:

    interesting name to watch for a future bacteria based IPO ethanol company sent in by a member.


    Listening to the HAL call now.

  2. 2
    doc Says:

    Bought late fri HAL CALLS 02 $32 2 $37.50 CHK 0.80


    CHK-from previous postings you are away and then I have call position position

  3. 3
    zman Says:

    HAL Call Notes:

    Don’t see a recovery in Canada in 2008.

    Saw some big customers delay fraccing large numbers of wells in the Rockies from 4Q into late 1Q.

    U.S. land fracturing contract rollover. Now a little > 70% under contract for 2008. Believe they grew market share, see prices down here mid to upper single digits in 1Q. Seeing technology driving increased volume…see pricing stabilize in 2H08.

  4. 4
    zman Says:

    more HAL

    expect to increase pace of buybacks in 1Q08

  5. 5
    doc Says:

    PUPLAVA he has gotten reports THAT Americans working in Saudi Arabia SAY the reserves are overstated- the only thing they have left to ship its heavy oil and there will be no increase in production because they just don’t have it.

  6. 6
    zman Says:

    even more HAL

    increasing use of multi zone completions leading to more and bigger frac jobs

    intelligent well completion systems growing by leaps and bounds

    deepwater – Tupi – enabled PBR to drill through the salt, directional drilling, seismic, fluid sampling etc.

    short term N. America still hard to tell but may improve 2H08

    international visibility is very good/strong. see up 20% in 2008

    2009 outlook very strong.

  7. 7
    zman Says:

    HAL Q&A

    2009 has the potential to be strong than 2008 due to the strong offshore drive behind the numbers.

  8. 8
    zman Says:

    nothing bad on the HAL, stock tried to open higher, market is dragging it lower. May double it once the morning noise has settled down.

  9. 9
    scoop006 Says:

    CNBC just interviewed Doug Mavrinac analyst with Jeffries Maritime. Sees a 3x stock increase within 12 months. Bullish on DRYS to $160;EXM to $92; ANW to $55; EGLE to $39;and GNK.
    Z Do you know Doug or the firm’s past calls?

  10. 10
    zman Says:

    Not familiar with Doug, Jefco is one of two or three top brokers on the sector.

  11. 11
    zman Says:

    broad market thoughts welcome. On any other day, HAL’s quarter would have it up a buck at the open.

  12. 12
    Dman Says:

    Market seems to be waffling. Strange that deepwater cohort (RIG, DO, OII) are being sold off. Profit taking from the big dip last week?

    WFT is seeing some follow through from earnings last week. Maybe a good sign for HAL.

  13. 13
    Dman Says:

    Market hit by Fed paralysis? Seems a bit sleepy, just when we’d gotten used to the roller-coaster.

  14. 14
    zman Says:

    Dman – agreed and the market is dictating the direction on energy and not oil or nat gas this am.

  15. 15
    Dman Says:

    Q: Who is Doug Mavrinac? A: The leader of Jeffries’ Maritime Shipping research, according to this:


    Here’s a quote from 26 October 07:
    “…we can still expect to see shipping rates escalate all the way through 2008, Jeffries maritime analyst Douglas Mavrinac tells Investor’s Business Daily.”

    ( http://www.moneyweek.com/file/37016/shipping-the-worlds-greatest-bull-market.html )

    Well, its still early in 2008, so he may yet be right, sort of… (lol)

  16. 16
    zman Says:

    home hum day put everyone to sleep. D – yeah, he said that right in front of the big rate downturn.

  17. 17
    Brian08 Says:

    OK, I’ll just throw this out there to wake people up…

    Kekorian offered what like $64/share for TSO and now the thing is trading at $39/share…I know cracks are weak as hell, but was he that far off on his offer? I don’t see a really big investor paying $64/share for something that the market thinks is only $40/share…

    And also wasn’t he paying a premium for TSO compared to what refiners usually trade at?

  18. 18
    freeflow Says:

    I’m curious as to Nicky’s projections. So far they’ve been pretty good. Dow hit 12150 today and it is rising.

    Are we on track to 12600 then back down?

  19. 19
    zman Says:

    B – I’d bet KK fired an analyst after seeing that quarter after they had made that high priced offer. From there, negotiations became deliberately contentious from the Tracinda folks and overly nice from the TSO clan (although they did adopt a poison pill) and I think both of them are happy to forget it now.

    FF – I’ll see if I can rouse Nicky…Monday’s are usually slow and this is the very calm time before the storm of earnings. I’m around but reading and still suffering from whatever plague it is that is going around. Quite disgusting.

    VLO has earnings out tonight and I am happy to stay away this time but may come back to the long side after the call.

  20. 20
    Brian08 Says:

    Agreed Z…Probably some dumb MBA ran the numbers…Damn Excel monkeys from Ivys…

  21. 21
    zman Says:

    B – what’s really sad is you know he had the help of bankers from 3 or 4 bulge bracket firms to verify the model and assumptions. KK must have been near to a stroke when those 3Q numbers hit.

  22. 22
    zman Says:

    Oil back to hold 90
    NG clinging to 8

  23. 23
    zman Says:

    economy must be fine now, lol, oil is bordering on green.

  24. 24
    kyleandy Says:

    z== know anything about EVEP?
    raymond james likes. has pretty strong dividend.

  25. 25
    zman Says:

    Ky – sorry don’t know em, will have a look.

  26. 26
    Alhambra Says:

    Golar (GLNG) going off; anybody see any news?

  27. 27
    jy Says:

    kyleandy–EVEP operates >11,000 wells and produces ~260MMcf/d(gross). Average well makes 23 Mcf/day. There will be fairly high operating costs for these volumes because of the large # of wells. Their Monroe Fld in North LA is an 80+ year old field with a large # of wells producing at very low rates. Predictable but little upside. Monroe is ~25% of their reserves.

  28. 28
    freeflow Says:

    Any thoughts on entering APA for earnings Z?

  29. 29
    TTupp Says:

    it’s not that impressive that teroro is down decently on a day it gets a downgrade and the energy sector is outperforming the broad market…

  30. 30
    kyleandy Says:

    jy thks

  31. 31
    scoop006 Says:

    Alhambra ;re post #26 on Friday night’s Fast Money show on CNBC Karen Finerman said she was going to buy GLNG on Monday
    Maybe she has a large following.

  32. 32
    Alhambra Says:

    haha, nice scoop; hey I’ll take it, as long as money pours in, I’m happy!

  33. 33
    TTupp Says:

    z vlo reports in the am not after the bell like you said above, unless you have some inside info 😉

  34. 34
    zman Says:

    the rating change I saw for TSO was an upgrade…really not impressive.

  35. 35
    TTupp Says:

    i meant upgrade, man sometimes i really think im dyslexic.

  36. 36
    freeflow Says:

    Anybody here this AM?

  37. 37
    zman Says:

    FF – yeah, I’m here, just posting the Tuesday post. What’s up?

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