Follow Through Friday – OPEC Unchanged

Only too happy to close the books on January 2008. Notice the following table contains no homebuilders, sub-prime lenders nor mortgage-backed security insurers yet the numbers are ugly. The energy sectors were shot in the head without even a headline like "oil falls 20% as demand craters" . The R-word got bandied about quite a bit but the commodity strips stayed fairly healthy (see yesterday's post) and extreme cold has finally put a severe dent in the natural gas storage overhang. No rant today, just happy to see the month end.


This morning both (XOM) and (CVX) beat and are called high, OPEC left production quotas unchanged and the market is expected to open modestly higher after yesterday's massive rally and word that (MSFT) is bidding for (YHOO).  

Commodity Watch:

  • Crude Oil traded wildly yesterday falling to a low of $89.58 before recovering to only close down $0.58 at 91.75, saved by a broad market rally. The sell-off came early and was tide to rumors that OPEC was not contemplating a cut in production at the Feb or March meetings. Crude is trading in a range of up to down $0.30 this morning.
  • OPEC Watch: No production quota increase.  "The condition of the market is sound currently, supply and demand are equal and global reserves are fine," Saudi Oil Minister Ali al-Naimi said. The group meets again March 5th when it is thought they will discuss a production cut.
  • Natural gas traded up $0.029 to close at $8.074 on a bigger than expected (and in fact all time record) withdrawal of 274 Bcf. The Street was at 250 Bcf; I was at 225 to 275 Bcf. All three regions are below year ago storage levels and the West region is 3.7% below its five year average for this time of year. Trading was more focused on the early pain in the broad markets, oil, and on the fact that the weather forecasts "currently" call for a warming trend. See the natural gas  storage tab for last night's update on inventory levels.

Holdings Watch: No action. Held my breath during another good day in the dry bulks where the stars are lining up for a recovery in both rates and the stocks.

Earnings Watch & Other Interesting Tidbits

XOM Reports A Beat

  • EPS of $2.13 vs expectations of $1.95.
  • Revenues ahead as well $116.6 B vs expectations of $114.89
  • Higher prices and asset sales account for the variance on EPS. I have not yet seen a clean earnings number but the stock is called higher.
  • Conference call at 11 am est.

(CVX) Also Beats

  • EPS of $2.32 vs exp of $2.26
  • Conference call at 11 am est. 

Next week is big-cap E&P reporting week kicking off with APC. Barring market forces, I'm looking for APC, APA, DVN, and EOG to report very solid numbers. 

Odds & Ends

Analyst Watch: (FTO) and (VLO) upped from hold to buy at Soleil, (SM) cut from buy to hold at Key.

72 Responses to “Follow Through Friday – OPEC Unchanged”

  1. 1
    Sambone Says:

    8:48 am EST

    Nymex Crude Slips On Weak US Jobs Data

    By Nick Heath


    [Dow Jones] Nymex crude slides lower after US jobs data comes in weaker than expected. Mar crude -58c at $91.17 after earlier rising as high as $92.12 after OPEC, as epxected, leaves output unchanged. (matt.chambers@dowjones.com)

    LONDON — Crude oil futures edged higher in London Friday morning as the Organization of Petroleum Exporting Countries agreed to leave crude oil production levels unchanged, but traders kept their focus on a possible U.S. economic slowdown.

    At 1315 GMT, the front-month March Brent contract on London’s ICE futures exchange was up 6 cents at $92.27 a barrel. The front-month March light, sweet, crude contract on the New York Mercantile Exchange was trading 13 cents higher at $91.88 a barrel.

    The ICE’s gasoil contract for February delivery was up $16.00 at $813.00 a metric ton, while Nymex gasoline for March delivery was unchanged at 235.72 cents a gallon.

    In its communique following its meeting’s conclusion, OPEC said the first half of 2008 was likely to witness a crude inventory build, and supply/demand forecasts indicated that commercial oil stocks are in line with the seasonal trend. Stocks are expected to remain within their five-year average during the traditionally lower-demand season in 2008, it said.

    “In view of the current situation, coupled with the projected economic slow-down, the (ministers) agreed that current OPEC production is sufficient to meet expected demand for the first quarter of the year,” it read.

    OPEC is now set to review its production in Vienna on March 5, when there may be greater pressure from some member countries to cut output in the face of seasonally weaker demand and a clearer picture of the effects of the slowdown in the U.S. on the global economy.

    “They will be keeping an eye on the impending “slowdown” ahead of their March meeting as a world recession will hurt them more if demand begins to evaporate,” said Andy Riddell, joint head of commodities at ODL Securities.

    Confirmation of the widely expected OPEC decision Friday allowed analysts and traders to return their immediate attention to macroeconomic issues.

    U.S. January non-farm payroll and unemployment data out later Friday is likely to be closely watched as markets look for an update on the U.S. economy’s health. The possible implications of a U.S. economic slowdown on crude oil demand remains a source of concern for crude oil traders.

    Analysts’ consensus expectations are for a rise of 75,000 in non-farm payrolls and a jobless rate of 4.9%.

    “With sentiment currently highly sensitive to macroeconomic news, today’s U.S. January employment report might spark some volatility in the market,” said analysts at Barclays Capital.

    Ahead of the data, crude oil prices were also likely to continue monitoring movements in equity markets Friday, much as they have done in recent days.

    “Everybody is keeping a careful eye on what the stock markets and other financial markets are doing,” said Tony Machacek, a broker at Bache commodities in London. “Flat price movements are mirroring the financial markets — a lot of the recovery in oil prices Thursday appeared to be due to the stock market recovery.”

    —By Nick Heath; Dow Jones Newswires

  2. 2
    zman Says:

    Despite the two majors reporting, fairly slow news day as OPEC was the non-event we thought it would be. Going to the dentist at 10 est.

  3. 3
    apbd Says:

    Don’t let em hurt ya Z.

  4. 4
    Sambone Says:

    Part I

    After Record, Crude Moves Shakily Into Feb


    NEW YORK — January 2008 will stand in oil-market history as the month in which crude oil futures traded above $100 a barrel for the first time.

    But the stay in triple-digit territory was temporary, a two-day stint without a settlement above the century mark, a level that was inconceivable just a few years ago.

    At $92.93 a barrel, January’s average Nymex crude oil futures price was closer to $86 than $100 and was $2 below the monthly record average set in November 2007.

    The January average was up a hefty $38.58 a barrel from a year ago, when prices set a 19-month low of $54.35. Though penny-for-penny, January’s gain was a record rise on a year-to-year basis, the 71% price jump fell short of the near 75% gain of October 2004.

    Front-month crude oil for March delivery settled at $91.75 a barrel Thursday, down 7.9% from the record settlement of $99.62 a barrel on Jan. 2.

    Now the oil market moves nervously into February, typically a robust month for Nymex crude oil futures prices. In four of the past five years, average prices have risen in February from January, with twin 9.3% month-to-month rises in 2003 and 2007. February’s average price in 2003 was the highest for the year, the only time that’s happened in 24 years of trading.

    February has never boasted the lowest average price in any year, but the biggest-ever month-to-month price plunge occurred in the shortest month of the year in 1986, a 32.7% flameout in a glutted market pressured by rising non-OPEC production.

    Members of the Organization of Petroleum Exporting Countries, gathering in Vienna on Friday to review oil output policy, may not be entertaining the prospect of a repeat of the market meltdown of 22 years ago.

    But they are expected to agree to keep official output levels unchanged amid deep concerns over the health of the U.S. economy and expected warm end-winter weather.

    OPEC Rebuffs Bush
    OPEC appears likely to rebuff unusually public lobbying by President George W. Bush’s administration for an output increase to cool down prices.

    U.S. officials pressed the case with Saudi Arabia, the world’s largest oil exporter and de facto OPEC leader, and its Gulf OPEC neighbors, saying oil inventories are at worrisomely low levels in the industrialized countries.

    Data from the U.S. Energy Information Administration show that commercial inventories held by the countries in the Organization for Economic Cooperation and Development dropped by around 140 million barrels in 2007. That’s far more than the 100 million barrels that Saudi Oil Minister Ali Naimi said in late 2006 needed to be removed from the market.

    But Naimi said Wednesday that current market fundamentals are “sound.”

    OPEC, with meetings at the start of the month and in early March, looks likely to be at the forefront of the market throughout February.

    Already some in the group are looking to the scheduled March 5 meeting with an eye toward cutting production ahead of the seasonal slowdown in oil demand between winter and summer in the Northern Hemisphere.

    The latest U.S. weather projections may pressure the market, too. The National Oceanic and Atmospheric Administration on Thursday forecast warm temperatures across the U.S. Mid-Atlantic region, the area which consumes the most heating oil. In the first-half of the month, above-normal temperatures are seen for the entire New England region, which is the world’s largest heating oil market.

    U.S. crude oil prices were $87.49 a barrel when OPEC last met on Dec. 5 and decided to keep output steady.

    But since then, prices have ebbed and flowed over the weak dollar and the fears of a potential U.S. recession and its resounding impact in global markets.

  5. 5
    Sambone Says:

    Part II

    Fed Moves Tweak Prices
    In an ironic twist, moves by the Federal Reserve Board to cut U.S. interest rates and stimulate the economy have been one of the lone and fleeting props to oil prices during the month. Big speculators have moved strongly out of long crude positions, which they had held expecting price gains.

    While January’s crude oil price was not far from the EIA’s expectation of $94 a barrel, retail gasoline prices nationwide have averaged only $3.04 a gallon so far this month, eight cents below the forecast. Poor refining margins have inspired outright cuts in production and early maintenance turnarounds, which have allowed crude oil stocks to build. Gasoline demand has flattened compared with a year earlier in recent months, suggesting the cumulative impact of price rises is finally showing.

    U.S. crude oil inventories are now sufficient to cover 20 days of refinery runs at current levels, the most since Nov. 23, latest EIA data show. Refiners ran facilities around 85% of capacity in the week ended Jan. 25, the lowest rate since March 3, 2006.

    U.S. crude oil stockpiles have gained 3.6%, or 10.1 million barrels in last three weeks, after dropping 31.8 million barrels, or 10.1%, in the prior eight weeks.

    Just after OPEC decided to keep output unchanged in December, U.S. crude stocks swung from being in the upper end of the average range for this time of year, to the lower end, EIA data show.

    U.S. gasoline stocks now cover 25 days of demand, the most in any week in January since 2003. Inventories of the most widely used petroleum product have gained 15.2%, or 29.6 million barrels in the past 12 weeks gains while gasoline demand has eased. Gasoline use fell to a two-year low of 8.94 million barrels a day in the latest week, EIA data show.

    End-Season Heating Oil Fall?
    Nymex heating oil futures for February delivery expired Thursday at $2.5345 a gallon, down 1.48c. For the month, the price averaged $2.5618 a gallon, 0.7% below a month earlier and the lowest since October. Compared with weak year-ago prices, the average price in January was up 65.6%, the biggest percentage rise since March 2005.

    The long-term historical trading pattern suggests Nymex heating oil futures are likely to fall on average in February, when the end-winter March contract trades the front month. In 21 of the 28 years of heating oil futures trading, prices have fallen from a month earlier. But prices have gained in February in three of the past five years.

    Gasoline futures for February delivery expired at $2.3091 a gallon, down 2.49 cents. The average price of $2.362 was down 7.8% from a month earlier and the lowest since October, but was 63.5% higher than a year ago.

    Average gasoline futures prices show a tendency to rise in February, posting gains in four of the past five years.

    —By David Bird, Dow Jones Newswires

  6. 6
    zman Says:

    Somebody is taking a sizable bet on YGE’s 4Q numbers (Feb 15) with big buys early today in the Feb 20, 22.50 and 25 calls. That stock has been slaughtered. The Street sees them making $24.37 in 2010, the stock is at 20.44. Supposed to make 13.84 in 2009 and $6.36 this year.

  7. 7
    zman Says:

    No chance APBD, I’m a believer in all kinds of gases, lol.

    BTU back to where it started the game before the earnings miss. Should have listened to Scoop there. The analysts are saying the long term trend matters more than the numbers…sounds like a copout by guys who can’t model a company but I agree that the fundies are impressive for coal. ACI moving higher this morning on their numbers.

  8. 8
    zman Says:

    RIG with a positive open…could be the turn…big deep in the money action on the Feb calls early.

  9. 9
    zman Says:

    Found the reason for the dip in crude this morning (off $1.05 now)

    Oil Movements analyst says OPEC exports will jump 570,000 bopd to the highest level since November 2006.

    Ok, I’m outta here for an hour or so. GLTYA, keep DRYS up while I’m out.

  10. 10
    Sambone Says:

    9:48 am EST

    Nymex Crude Slips On Weak US Jobs Data

    By Matt Chambers

    NEW YORK — Crude oil futures fell Friday after weak U.S. jobs data pointed to further slowing in crude oil demand from the world’s biggest energy user.

    Light, sweet crude for March delivery on the New York Mercantile Exchange was recently down $1.21, or 1.3%, at $90.54 a barrel. Brent crude on the ICE futures exchange fell $1.10 to $91.11 a barrel.

    The jobs data outweighed an OPEC decision to leave output unchanged after the cartel met in Vienna Friday.

    “If the job numbers are bad, it’s clear that demand for gasoline will falter and pressure oil,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. Weak employment is seen as having a direct effect on gasoline demand because it means less people are driving to work.

    Non-farm payrolls fell 17,000 in January, the Labor Department said Friday, the first drop since August 2003. Wall Street was expecting an increase of 75,000.

    Crude oil had earlier risen slightly after the Organization of the Petroleum Exporting Countries, as expected, agreed to leave oil output unchanged. OPEC is now set to review production in Vienna on March 5 and will be focused on the extent of the slowdown in the U.S. economy.

    Front-month March reformulated gasoline blendstock, or RBOB, fell 3.62 cents, or 1.6%, to $2.3210 a gallon. March heating oil fell 3.27 cents, or 1.3%, to $2.4964 a gallon.

    –By Matt Chambers, Dow Jones Newswires

  11. 11
    Nicky Says:

    Morning all – talk about whipsaw!

    Wave 4 still playing out in the broader market – I favor a short term top here or hereabouts.

  12. 12
    Sambone Says:

    N – I’m shorting more.

  13. 13
    freeflow Says:

    I agreee Nicky – do you think we’ll go back down to 11k?

  14. 14
    Nicky Says:

    Free – wave 4 is proving a difficult wave to count! That said this next move down ‘could’ retest the previous lows or fall short. However, once done we should still see another move higher probably towards the 1420 spx level before we turn lower in wave 5 which should take out the previous low. So I expect wave 4 to mess about for a while longer ie another week or so before we turn down again.
    On a shorter time frame there is a Bradley turn due this hour…

  15. 15
    zman Says:

    I’m back. Talk about small world, my dentist assistant’s husband is a crane operator on Thunderhorse, lol.

    Large cap E&P looking forward to next week. Still happy holding APC, would have thought APA might get hit on oil but that train is leaving the station.

    Service is turning up with the new month. Looking to take on some ATW and add to RIG and HAL.

  16. 16
    scoop006 Says:

    Hi Nicky, Bradley turn?

  17. 17
    Nicky Says:

    Scoop – should be a change in direction…

  18. 18
    scoop006 Says:

    Nicky ,Hello Mr. Bradley

  19. 19
    freeflow Says:

    That made me laugh out loud at my work desk scoop – thanks.

  20. 20
    Popeye Says:

    I googed bradley turn and found this:

    “Amanita Forecasting uses the Bradley Siderograph and Astrology to predict major market turns.”

    I’m consulting my astrologer now.

  21. 21
    TTupp Says:

    i see the market’s trading like a sine wave again today.

    i love how every day the anchors on cnbc have a new buzz word that the producers of the network tell them to us b4 air time every morning lol. todays buzz word is “whipsaw” hahaah ive heard 3 or 4 of them use it. such douches.

  22. 22
    zman Says:

    XOM and CVX failing to wow post their conf calls and earnings beats.

    Nat gas getting whacked on “ok, big deal, what next” action. Three weeks of tough comps on the way.

  23. 23
    scoop006 Says:

    Z With YGE – today any thoughts on Feb $20&$22.50 calls considering the large volume

  24. 24
    zman Says:

    Scoop – I’m going to buy some. They announce on expiration day so its an all or none deal. But unless those estimates are in yuan or made completely morons I mean, wow, cheap, cheap, cheap. Going to take the Feb 20s for a small bottom fish bet. This thing is getting cooked for no reason other than its down.

  25. 25
    TTupp Says:

    is that milton bradley’s brother?

  26. 26
    zman Says:

    Scoop also looking at taking some XOM in here, that was a good quarter, oil will likely not sell off much more in coming weeks.

    ZTRADE: XOM Feb $85 Calls for $2.05

  27. 27
    TTupp Says:

    does anyone know how many times the gdp numbers are pre-released then when the final numbers are stated? also, with respect to the job numbers, someone on cnbc was talking about them being revised upward . i thought these were the finals, and the adp numbers were the precursor.

  28. 28
    Sambone Says:

    Oil getting spanked today. Down to 88.96

  29. 29
    zman Says:

    Sam – yep, the early reaction to OPEC inaction over the how weak the economy is.

  30. 30
    Sambone Says:

    Uncle Phil


  31. 31
    zman Says:

    Next week APC kicks off the serious E&P earnings reporting season with its report after the close on Monday. Should be a good call highlighting their ahead of schedule debt pay down, and their acceleration of deepwater drilling activities both in the GOMex and abroad including China.

  32. 32
    Sambone Says:

    1:05 pm EST

    Nymex Crude Dn On Economy Signs, Book Squaring

    By Matt Chambers and Gregory Meyer

    NEW YORK — Crude oil futures dropped more than $3 a barrel Friday to their lowest price in more than a week after weak U.S. jobs data sparked more concerns that the world’s biggest economy is in recession and pointed to a further slowing of crude oil demand.

    Light, sweet crude for March delivery on the New York Mercantile Exchange was recently down $2.57, or 2.8%, at $89.18 a barrel after falling as low as $88.54. Brent crude on the ICE futures exchange fell $2.57 to $89.64 a barrel.

    Traders said the gloom over the jobs data was reinforced by comments from U.S. President George W. Bush, who said he saw “troubling” signs the economy is weakening.

    “You heard the president’s remarks that the economy seems to be in trouble,” which along with the jobs report convinced buyers who had entered the market earlier in the week jump out, said Gene McGillian, an analyst at TFS Energy Futures in Stamford, Conn.

    “They didn’t want to be exposed to trouble that might occur” over the weekend, he said.

    Traders may also have been rattled by a reported propane leak and fire at the Wynnewood refinery in Oklahoma. Oil markets tend to be sensitive to disruptions at Oklahoma facilities, as they process some of the crude that flows from Cushing, Okla., the delivery point for Nymex crude.

    However, the leak did not shut in production at the 52,000 barrel-a-day facility, a spokesman said.

    Friday’s jobs data outweighed an OPEC decision to leave output unchanged after the cartel met in Vienna Friday.

    “If the job numbers are bad, it’s clear that demand for gasoline will falter and pressure oil,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. Weak employment is seen as having a direct effect on gasoline demand because it means less people are driving to work.

    Non-farm payrolls fell 17,000 in January, the Labor Department said Friday, the first drop since August 2003. Wall Street was expecting an increase of 75,000.

    “It will be extraordinarily difficult to dispel ideas the economy is not headed into a recession,” Mike Fitzpatrick, senior vice president of energy at MF Global in New York, said in a research note. “General economic slowing appears to be taking place just as crude oil stocks have begun seasonal rebuilding.”

    U.S. crude oil stocks rose by 3.6 million barrels last week, according to the latest Department of Energy data.

    Crude oil had earlier risen slightly after the Organization of the Petroleum Exporting Countries, as expected, agreed to leave oil output unchanged. OPEC is now set to review production in Vienna on March 5 and will be focused on the extent of the slowdown in the U.S. economy.

    Also weighing on crude oil, the Dow Jones Industrial Average turned negative and was recently down 0.2%, erasing earlier gains. Traders have focused on equities markets in recent weeks for signs on the health of the broader economy.

    Front-month March reformulated gasoline blendstock, or RBOB, fell 6.88 cents, or 2.9%, to $2.2884 a gallon. March heating oil fell 7.41 cents, or 2.9%, to $2.4550 a gallon.

    —By Matt Chambers and Gregory Meyer, Dow Jones Newswires

  33. 33
    zman Says:

    well I’m the kiss of death for XOM.

  34. 34
    scoop006 Says:

    Z when you are RIGHT you are Right

  35. 35
    zman Says:


  36. 36
    scoop006 Says:

    Glad you can take it

  37. 37
    Denise Says:

    Good afternoon-Z
    Cramer might be helping your kiss of death-did one of his web videos saying there is a high probability of big money being spooked by the job numbers (recession worse than thought)and will not buy oil right now-wait and see

    Also did you see the Simmons person on fast money last night? Wondering if you agree with thesis-infrastructure better play?

  38. 38
    Denise Says:

    Any thoughts on FTI or CLB?
    Was looking at the charts?

  39. 39
    zman Says:

    Denise – going through EVEP right now. That was your request, right?

    Cramer whacking my DSX from last night too, the schlub

    Did not see it but it was Matt Simmons right?

  40. 40
    Denise Says:

    Yes-you can probably pull the web cast
    My request was MVO
    Wasn’t EVEP the Jeff Saut?Raymond James recomendation this week?
    He is usually pretty good

  41. 41
    zman Says:

    I like CLB both long and short term. They “touch” a well so many times now you don’t need to see rig counts going up and to the right for them to have very smart earnings growth. Their quarter is out next week and should be very upbeat. I like FTI long term but have no real feel for the stock or the quarter right now.

  42. 42
    zman Says:

    Denise – so you were asking about EVEP and MVO, correct?

  43. 43
    Denise Says:

    Cramer is kind of following Simmons thesis it seems-sold some more RIG today-thinks margins are beginning to be squeezed by increasing costs
    Simmons was pushing infrastucture because of margins also-people shortage ect…

  44. 44
    Denise Says:

    Just MVO-I was overlaying USO over the chart and it seems out of wack even with the production shortfalls-it always seems to have a delayed reaction to oil prices-think because of the nature of a energy trust holders and it is small
    I trade it sometimes-

  45. 45
    Nicky Says:

    Addison Armstrong on CNBC turning bearish on crude – never thought I would see the day!

  46. 46
    zman Says:

    I see on the infrastructure argument – nothing new about, or new enough for Cramer’s 15 minute attention span anyway. There’s been a people shortage for years now…no news flash there…maybe some mortgage bankers can turn roughneck. I think with the drubbing the OIH just took (down 17% this last month) combined with the fact that it is historically cheap and activity won’t decelerate in the deepwater, its a safe bet those plays are fine near and medium and long term. Re margins at RIG coming down I’ll check into it…rates have been going up and demand is increasing from various deepwater reserve basins new (brazil, russsia, asia) and old, (gomex, west africa)

    Onshore N. America is seeing some slowing of price pressure (appears to be bottoming)

  47. 47
    zman Says:

    I love how these guys go bear on down days and radio silent on up days

    drybulks rounding higher, cramer is out of touch by months there if you go by his statement last night…he actually said the industry was over-valued…he basically hated the CEO of DSX in the interview because the guy, an english as a second language type, sounded conservative. To me if a CEO sounds like he just did a line of coke when talking about his stock alarm bells go off. Cramer on the other hand sees that enthusiasm as a badge of value. sheeesh.

  48. 48
    zman Says:

    Ok, whoever wanted EVEP I like what I see so far and a little more than that will be in the wrap.

  49. 49
    kyleandy Says:

    i am the EVEP guy. doubt if denise has a wife’s IRA also, my friend who is very successful just bot orleans energy i think its OEXFF ever heard of it?

  50. 50
    Sambone Says:

    Z – RIG, I reviewed again the “Fleet update”, and this company is going to rock on earnings. The day rates continue to go up, up, up. I’m buying more for the long run.

  51. 51
    Alhambra Says:

    some heavy HAL options trading today… any thoughts?

  52. 52
    Dman Says:

    Z, Sam, Denise:

    re. Sam’s comment on RIG.

    I thought Z’s Wednesday post implied most of RIG’s fleet (and others) are already contracted out for 2008/9 . If so, then how can RIG increase near term earnings?

  53. 53
    zman Says:

    OEXFF – I don’t trade the pinks.

    That being said they seem to be fairly sophisticated for some little guys having drilled some nice wells for low $ last year.

    They’re little but growing fast, they set a production target earlier in the year for an exit rate which they made…like to see people keep their targets…sets up nice growth for 2008 as well. They are in fact looking for 30% YoY growth.

    The parts of Alberta they are in are good hunting grounds. As in the old adage “drill where there’s oil” so they’re not big game hunter wildcat types.

    I don’t know management but the style of the PR for the year end wrap up is what you want to see, professional, not hypey.

    They’ve put on some nice, albeit small to their production levels hedges.

    Its 3/4s gas, 1/4 oil which right now in Canada is probably a bit gassy for what you’d want given prices but your looking long term, right?, so that’s ok

    Their Cash flow target for this year is $0.85 and looking at their income statement and plans that looks doable so with the stock at 2.85 your looking at a 3.4x forward CFPS trader with a 30% 1 year growth rate on the top line.

    The one thing I see holding them back is reserves which they running through pretty quickly (reserve life of 4 years) but it looks like they are doing what’s needed to get that to creep up by drilling in repeatable plays.

    Also, their debt is a touch high.
    From an operations standpoint, LOE is high in the last quarter but their may be an explanation for that.

    If you’ve got some research there I’d be happy to take a look, all in all not bad…probably won’t see it zoom but they’re easily growing EBITDA and making their debt payments … probably not a bad long term hold. Be happy to answer any questions.

  54. 54
    zman Says:

    Alhambra – only that I almost doubled on the open and didn’t like a schmuck 🙁 Service is too beat up, the quarter was very good as was the outlook on the call.

  55. 55
    zman Says:

    Dman – they are mostly contracted, that is true with less to roll over near term. The stock, along with the other deepwater drillers ATW, DO, NE and Seadrill are being valued off 2009 and 2010 numbers and those can still go up. The one with the most leverage to rising near term contract prices would be NE which has 3 of the 5 existing floaters on the planet still with available time in 2009 (2008 is a done deal) – that comes from Credit Suisse and I don’t know who has the other 2 rigs but they are undoubtedly split between 2 firms.

  56. 56
    zman Says:

    Nice recovery underway

    EVEP: MLP That looks like a winner to me.

    Solid, experienced management,

    Low cost acquisition of producing assets that themselves are low cost to exploit and operate.

    Their all-in F&D is about $1.80/Mcfe which is very low.

    Reserve life is very long at 17 years so you have stability and they seem to be able to keep acquiring similar assets so the distribution should continue to grow unless gas prices (its about 77% ng) just fall out of bed which I don’t expect.

    Its got an interesting JV with APA in east Texas which could give you a little upside kick that you don’t normal see in an MLP.

    So far nice history of distribution growth here…look likely to continue.

  57. 57
    zman Says:

    ZTRADE: APA Feb $100 calls for $2.45 for earnings next week and a potential rebound in oil.

  58. 58
    Denise Says:

    On the coal/railroad front-
    GBX and ARII are both heavily shorted-
    would tend to think with the rails doing well there earnings might improve
    both coming to life a bit-think gbx is 15 days to cover and arii 12 days

  59. 59
    zman Says:

    Thanks Denise!

    Can’t believe the turns today…ATW for earnings next week and I can’t split the the bid ask to save my life.

    FTO – should be owned by me already as well.

    HAL – they’re stripping the premium out of the options…bad for me since I own but it will cost less to double down on the flip side.

  60. 60
    zman Says:

    the ARII chart looks poised for a pop.

    GBX – breaking out now.

    Not sure if either one of them make coal cars however. Know RAIL does.

  61. 61
    zman Says:

    BNI completely broken out of its bolly bands

  62. 62
    freeflow Says:

    RAIL was looked at by my wife’s PE company as a possible buyout. They are definately for sale – and they have been for at least a year.

  63. 63
    zman Says:

    IOC through $22!

  64. 64
    zman Says:

    APC starting to wake up, again, earnings Monday night.

  65. 65
    zman Says:

    Nice rally action going on into the close…I’m heading to a meeting (going to pick the brain of a money manager much smarter than myself) and will of course be around on the weekend. Have a great weekend!

  66. 66
    Sambone Says:

    3:03 pm EST

    Nymex Crude Falls On Concern About US Economy


    NEW YORK — Crude oil futures on Friday closed below $90 a barrel for the first time in a week after a fall in U.S. jobs data sparked more concerns that the world’s biggest economy is in recession and pointed to a further slowing of crude oil demand.

    Light, sweet crude for March delivery on the New York Mercantile Exchange fell $2.79, or 3%, to $88.96 a barrel, the lowest settlement for a front-month contract since Jan. 23. Brent crude on the ICE futures exchange fell $2.70 to $89.51 a barrel. Final settlement prices for Brent weren’t yet available.

    Traders said the gloom over the jobs data, which posted its first fall in four years, was reinforced by comments from U.S. President George W. Bush, who said he saw “troubling” signs the economy is weakening.

    “It appears some of the bearish factors in this market are just too powerful to be remedied by interest rate cuts, fiscal stimulation, or lack of cooperation from OPEC,” said Peter Beutel, president of trading advisory firm Cameron Hanover in New Canaan, Conn.

    Crude oil has been supported over the past week by two Federal Reserve rate cuts totaling 1.25 percentage points, and a government fiscal stimulus proposal designed to spark economic growth.

    Friday’s jobs data outweighed an OPEC decision to leave output unchanged after the cartel met in Vienna, despite calls from big oil consumers for extra production to take the stress of slowing economies.

    Non-farm payrolls fell 17,000 in January, the Labor Department said Friday, the first drop since August 2003. Wall Street was expecting an increase of 75,000.

    “If the job numbers are bad, it’s clear that demand for gasoline will falter and pressure oil,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

    Crude oil earlier rose slightly after the Organization of the Petroleum Exporting Countries, as expected, agreed to leave oil output unchanged. OPEC is now set to review production in Vienna on March 5 and will be focused on the extent of the slowdown in the U.S. economy. Iran is already lobbying for an output cut next month in the face of uncertainty about demand.

    Front-month March reformulated gasoline blendstock, or RBOB, fell 7.38 cents, or 3.1%, to $2.2834 a gallon. March heating oil fell 8.02 cents, or 3.2%, to $2.4489 a gallon.

    —By Matt Chambers and Gregory Meyer, Dow Jones Newswires

  67. 67
    Dman Says:

    Z, Denise, Sam:

    I’ve looked over a bunch of presentations by Matt Simmons over the past year.

    If Cramer thinks he is following the Simmons thesis by selling RIG and buying infrastructure, then he is only getting half the message.

    Yes, Simmons is positive on infrastructure, rig construction etc. But he is also positive on nimble E&Ps and service companies (so long as their equipment doesn’t fall apart).

    In particular, he is skeptical that the current rig build can be delivered on schedule & so expects (according to one interview I saw) that deepwater rates will keep rising.

    A good report from Simmons & Co is:


    It’s worth reading in full, but some bullet-points extracted from it include:


    “Deepwater Rigs Will Stay Scarce”
    Delivery dates stretch out to 2011.

    Delays will probably increase over time.

    The easing in 2009/2010 assumes delivery of 57 new rigs.

    70 deepwater rigs estimated to cost $35-$38 billion.
    – This averages $500 –$550 per rig
    – Few have started to lay keel

    1996 –2002 deepwater expansion:
    – Average rig cost was 1.5 X 2.0 original estimate–
    Delivery times were twice what was planned


    These comments from Simmons (as of 31 Oct 07) raise the question:

    Who is building all these rigs & how realistic are the timelines? How many have even commenced construction?

    Overall, my impression is that the Street will periodically panic about a looming rig deluge (that may never quite eventuate, relative to demand) and that will be a good time to buy RIG & friends.


  68. 68
    TTupp Says:

    z – re #47, rotfl

  69. 69
    Denise Says:

    Thanks Z

  70. 70
    Sambone Says:

    Tini time

  71. 71
    zman Says:

    T: re 47, he’s a smart guy who says stupid things I think or maybe …

    Denise – No problem

    Dman – thanks for thoughts on 67, will read that simmons piece.

    My smarter than me money manager just gave me a phone book thickness research file on the solars so I can be particularly entertaining at a superbowl party this weekend.

    Look for the wrap in the morning, have a great weekend, and as always tell your friends about the site!

  72. 72
    zman Says:

    Dman – re 67. Lots of builders, will get you a list. Over 70 rigs at present in development for delivery between now and 2011 as I understand things now. Several have started to build, many more not yet although I think they get built, costs definitely going up and time taking longer.

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