T.G.I.F.

Posted on by zman

Commodity Watch:

  • Crude Oil: May crude closed up $1.68 at $107.58 in Basra pipeline attack inspired move and in follow on action to Wednesday's EIA report. This morning oil is giving back about half of yesterday's gains which is not surprising given the yo-yo trading pattern here since the successful test of the $100 level.
  • False Alarm In Iraq Watch. Yesterday it was reported that one of two main export pipes in Iraq were sabotage. Apparently, that was not the case. Looks like it was a feeder pipeline carrying about 300,000 bopd and officials are now saying Iraq's export pipeline system is running at about 1.2 mm bopd (out of 1.5 mm bopd capacity).
  • More Analysts Taking Oil Forecast Up. I don't publish all of these because that would be tedious but I do note that I'm seeing 1 to 2 analysts up the ante on their oil price decks used to model everything from refining to E&P companies fortunes. This morning Deutsche Bank is taking its 2008 oil estimate up 13% to $95.75 and is boosting its 2009 forecast by a whopping 29% to 102.50 (they also took (MUR) to buy on this).
  • Natural Gas. See last night's gas piece here.  Yesterday May gas closed flat at 9.69. This morning gas is trading up slightly but I expect it to begin move towards $9 and then the mid $8s soon.

Holdings Watch:

CALLS:

  • (HK) Out Half HK April $17.50 (HKDW) Calls for $2.75, up 244% since entry on 3/20.
  • (HK) Entering June HK $22.50 calls (HKFX) for $1.15.

PUTS:

  • (UNG) Entered April $45 Puts (UNGPS) for $1.50. 

Solar Multiple Update: So cliche to say Solar stocks are shining bright again or back in the lime-light but with summer around the corner and with sustained trip digit oil and elevated natural gas prices these stocks and other alternative energy plays are going to get increasing attention and investor dollars this Spring. I'll have more on the sector soon but here are current multiples and the change since the last time I published numbers here, about a month and a half ago. As you can see from the second chart, you haven't missed much in the sector except for (FSLR) which posted better than expected year end results and continues to garner favorable opinions from the analyst crowd (see analyst watch below for the latest).

solar-multiple-032708.jpg 

 

Stocks We Care About Today Watch:

(CHK) Priced It's 20 MM Share Offering. The secondary priced at $45.75, just slightly in the hole from Thursday's $46.10 close. I'll be looking to add to my positions here today.   

Odds & Ends

(RIG) Inks Shell Ultra Deepwater Rig Deal. It's a three year contract with the option for a fourth for RIG's Nautilus, a relatively new (commissioned 2000), 8,000' water depth capable semisub. If Shell exercises the extension the contract has a value of $759 million over four years which works out to about $520,000 per day. That's good but not over the top rate for a rig of this class. At last update, the Deepwater Nautilus was already contracted to Shell for $449,000 per day through January 2009 so this is another pretty good indication of the strength of long term demand in the deepwater rig market.

Free Month Of Zman Watch: Pick the acquiring company of Petrohawlk (HK) and get a free month of Zman. Stipulations are one "guess" per customer, (HK) must be acquired within the calendar year of 2008 (just trying to limit my liability here), you must of course already be a subscriber, and your pick needs to be sent along in the comments section of the site (no emails please as we try to live in the land of transparency around here). Here's the list so far:

zcontest-032708.jpg

Analyst Watch: (MUR) raised from hold to Buy at Deutsche, (LUKOY) upped to buy at UBS, (JASO) initiated at buy at Lazard, (ATW) picked up with a buy rating at Wachovia, (SWSI) started at buy with a $26 target at Jefco, and (FSLR) picked up at Cannacord with a $325 pt (last priced ~ $227). 

 

85 thoughts on “T.G.I.F.”

  2. md – it has been a long time since I felt like oil was going to fall for anything other than a quick trade so you haven’t seen me do a USO put. On the long side I get more bang for the buck by going with the oil-leveraged names like SU and APA which outperformed crude when it rallies.

    USO does track CL pretty well but I don’t care for the spreads there so much.

    Tex – done; EOG now available.

    Oil giving back all of yesterday’s gain.

  5. Saw the move on PQ but to my knowledge no, they’re south of there in LA, maybe they have a spec position but I haven’t heard about it (which means nothing of course).

  7. PQ had some in the 90s, maybe they still do: from an old PQ 10K

    Optima US acquired a 25% working interest in the Chrysler prospect in
    Lea County, New Mexico. The target is the Devonian formation and is supported by
    interpreted 3-D seismic. The first well, Savage #34-1 was spudded in December,
    1996, drilled to 13,000 feet and abandoned on February 17, 1997. A second well
    is scheduled to be drilled in 1998. During 1996 two more wells were drilled to
    the Smackover “C” sands at East Haynesville. Both wells the Garrett #1 and
    Delaney #1 are producing in the Smackover “C”. Further development will occur in
    this field once the Commissioner of Conservation, State of Louisiana assigns 320
    acre production units in both the Smackover Lime and “C” formations. A hearing
    is schedule in mid-April, 1998. The Company holds a 28% working interest at East
    Haynesville.

  11. i have to be a good canadian and spend my vote on ECA Z>>>>>>

    lack of Albertan prospects and burdensome tax system. growth oriented nature of eca and the fact that that are in the same new oil shale area as HK.

    😉

  14. a month off, lol. Just kidding, I’m not participating, XTO is open, that’s just my guess for the record.

  18. Reef – hard to say, the first warm weather doesn’t always do it but I agree with you re “flooding the lower 48”. Looked at EP’s latest presentation yesterday after you mentioned them and the old arrow flow diagram they put out has much bigger flows out of the rockies and from Tx than I remember seeing in the past.

    I think late season coolness is masking this growth although, like you I was a bit surprised by the smallish injection yesterday, that could be just anomalous weekly data but it could also be increased supply showing up in the numbers. When the weather flattens, we could see some SIZE injections.

  21. Tex – best deal (so far) of the last 10 years was DVN for Mitchell. Mitchell’s book is definitely worth a read.

  23. Good Morning,
    looks like I am too late to enter the HK contest-
    My fib/wave man says if we can go over 1333 on the spy we could have a strong reversal upward
    (he still believes big April rally)
    Mr K is putting some money to work for the short term
    new rating 6-4

  24. Question for anyone on IOC-saw they lined up a contractor for there LNG plant.
    Is this commonly done not knowing about Elk4? Just Hype?
    Liquid Niugini Gas, the joint venture made up of InterOil, Merrill Lynch and Clarion Finanz, has selected world-class engineering firm Bechtel to undertake the front-end engineering and design (FEED) work, as well as the engineering procurement and contracting (EPC), for its proposed LNG plant in Papua New Guinea (PNG). In the tight LNG construction market, the securing of services from this experienced contractor is an integral step toward maintaining the fast-track project timeline,
    with the plant’s start-up slated for 2012. Additionally, the group has chosen ConocoPhillips’
    (COP/$84.13) proven Optimized Cascade Process Technology, which has been utilized in a total of 10
    LNG projects across the globe, for the plant design.

  25. ioc- I think we know after conf. call at 7:30 am cdt on monday. Analysts need to ask real oilfield questions concerning logging and testing conducted on Elk 4. Wayne Andrews(sp) with RJ needs to show his geologic unbringing and ask the correct questions–and keep asking until he gets real answers.

  27. Z:
    GM
    please tell me your thinking about CHK as I see you went in for a momentum play with aprcalls

  28. CHK is digesting the deal better than expected. The uncertainty over “would they do a deal” is now removed. And the story is only getting stronger. For what they’ve just announced and how cheap the name is I think it is due a good run.

  29. Denise – definitely not too late on the HK contest. I can think of 10 good names no one has touched yet.

    Oil off $1.50 to $2.00, stocks could care less, NG move up this morning is so far on light volume and looks to be weakening.

    Is basketball on yet?

  32. Is NOV a large supplier to on and offshore drilling companys? NOV MAY 60’s $3.70 appear so so?

  34. dvn said that didn’t comment on areas such as haynesville ,that r heating up, but that they did own shale acreage in that area .

  35. ram – that’s a fair characterization, I don’t know the splits between on and off if that even matters. Weird chart there, no?

    HK came within a hair of another all time high. I bet the first time this thing goes into the red more than a few cents we will see some momentum style profit taking, there. Hopefully well news (and good news at that) next week.

    scoop – no, YGE not favorite, that was a botched understanding of valuation on my part. I’ve seen some analysts touting it of late but I think you are safer in that group with the more expensive, household names (if there is such a thing in this group) in today’s charts

  37. A spastic chart for NOV. It crossed the 10dma 2 days ago and it is trying to push through the 20dma. With all the E&P guys activities of late, shouldn’t analyst be looking downstream to the fab parts guys?

  39. Ram – yes, they seem to be writing those pieces now, upgrading rigs and service.

    oil off 2.60 at just under 105. Group has noticed it but barely…like I keep writing, the stocks are not discounting anywhere near these prices.

  40. CNBC Bob Pisani saying “why are the energy stocks doing so well today and this week given the action in crude”. I wonder how I get my cable company to give me Bloomberg instead of CNBC.

  41. My NOV chart is particularly freakazoidal because the broker doesn’t seem to know about splits 🙂

  42. Z Word on the STREET is you bought some for your account, so the CROWD is piling on.You are moving the MARKET.

  45. z re#31 i’m with u. won 4 out of 4 last nite to improve my record to 9-22.

    denise u subscribe to something to get kass’s opinion?

  47. my solar play stp, just broke near term resistance @39.15 . looking for it fill gap with next resistance @50dma of43 & then 48.60. not for the faint at heart. pretty steady floor @ 20.30 on hk still not much option action. guess there waiting for the z move back in

  48. uop – next data point is Monday morning weather forecast and then Thursday. Still early in the trade here.

    K – hear ya. Re Kass I think she subscribes to about 10 services and he’s one of them.

    Ram – does look pretty heavy, especially given the time of day. Have not heard if the 20 mm was oversubscribed but it looks that way given today’s price so this could be people who got partial fills on their order entering the market to round out positions.

  51. uop – I don’t follow EP.

    Chk is off $0.30, and easing with the market that just went red. I think it may take a few days to work through people’s heads. Like HAL.

    Tex – I am very much still in HK.

  54. cool. I’m about to do the same- Dominican Republic tomorrow! we have ad the longest/ coldest winter up here in canada that i can remember….

    1225 on spx is a pretty big line in the sand from what Nicky was last saying correct?

  55. COP

    mini-tender offer for 1.5 mm shares for $73 by some bucket shop hedge fund … management telling shareholders to reject.

    Tupp – I hear ya re long cold winter. Not what people expected. Al Gore could have won the presidency if it had been WARMER than normal but no joy for him. Those global warming boys hide like oil bears on a $5 up day when the weather actually gets cold. Too funny. Have a great time down there!

  58. No kidding on the 20.30 level on HK, flat lining there. I’ll continue to hold the remaining April 20 calls into next week for potential news.

  59. Kyleandy-yes it is a subscription-they have been putting a lot of his colulmns on the free Street.com site

    Z is correct I subscribe to a lot of sites. Spent 20 yrs on the sales side and really knew very little about equities. It is easier for me to read a lot of smart pepople (like Z and others on the board) and then form my opinions.

  60. Denise – thanks for the “smart” nod. My last research gig was at a institutional only sell-side shop and I gotta say, the few female sales”men” we had were top notch.

  61. If I was able to do it all over again I would start out as a analyst. Much better background for trading-

  63. Z – re #51

    Have I missed something on HAL? What is it that needs to work thru people’s heads?

  64. D – I liked the analyst side except for the part about going from great to goat over one bad trade from time to time. At least the salesman can talk the analyst down behind his back and keep the client. Also, I so love the lack of bankers in my life, just can’t express that enough.

    T – missed her, what was she talking about or was your interest more aesthetic?

  66. Dman – re HAL, I was thinking of how it didn’t immediately trade up after I bought in earlier in the week, just kidding. Its Friday and I have to kid more with Sambone out for the day.

    Speaking of that I’ll be out of pocket from 1:50 EST to just before the close today.

  67. but she did look good. but i actually kept the volume on for her cause she was very smart. Finerman on Fast money is very smart too, although she has ridden TSO all the way down

  69. T-Tup-agree she is sharp and got a lot of pr by going against Bove(sp?) on the banks-although she is assuming the worst
    seems a little late to be short
    Sambone would disagree but I do not like the odds

  71. Z – re 66. I get it now… that’s what I get for skimming posts & not soaking up the vibe 🙂

  74. The potential HK news could be held back by several items. But if the company has all the facts good or bad, what would delay further release – SEC or other?

  75. Possible delays of news at HK would be of a physical nature, as in it just may take longer to complete the wells than they expected. On March 12 they said news in the next few weeks. In my book that means 2 to 4 weeks so we’re probably kind of at the any day now point in time. SEC won’t have anything to do with it.

  76. Cattleman, if you are around CNBC is going over time talking about organic beef today and showing those punks mistreating cows.

    By the way guys, the beef Cattle sent me a couple of months back is some of the best I’ve had and I’m a fair hand with a grill.

    HK trying to hold $20.

  77. Big blocks of IOC changing hands with the stock putting in another recent low. If you want a pure dice roll of a play for Monday, that’s your ticket with them having earnings and, as Reef indicated, a lot of tough questions about the Elk 4. If they hit it big there the stock is $30, a miss and its probably $10 although they could have a result like last time on the ELK 2 (lots of gas but not commercially produceable)

  81. A – Now that’s a bold move that makes a lot of sense. Immediately accretive on earnings though its probably too big for them. Geographically its a no brainer and what’s not to like at HK on the cost side. I’ll put you down fro SWN.

    Incidentally, in this slightly weaker into the weekend market, I think you are seeing some recent hot money that can barely spell HK or Haynesville exit as momentum ebbs.

    No WildZ on this one – thought about a straddle here but the way its trading off I’m just happy to not be on it right now. We can always react to new info Monday.

  82. From the Department of Something To Look Forward To:

    Only about 3 weeks ’til SLB & HAL report earnings!!

    That ought to set the world on fire 🙂

    Of course, in the meantime Citigroup could implode, which would create some opportunities unless the market has gotten so jaded it no longer cares about… well, anything much.

  83. Dman – that’s a very good point, shortest point between two earnings reports is 4Q to 1Q which gives energy additional near term catalyst as estimates are trued up to commodity forecasts (E&P, majors, independent refiners) and expectations are ratcheted up for service as they have experienced the fundamental lows most likely in the last few quarters. Now HAL will be able to say not only are we kicking but in our Mid East expansion but even North America is looking up. SLB can say same on int’l and N. America as well. Look for a more upbeat call from SLB.

  84. Denise – if its lots of gas but not commercial I think they issue the standard “we’ve hired Churnem, Burnem, Cheatem Andhow to explore strategic options”. Seriously, they may have real problems with Merrill and the rate on their debt.

  85. winethirty!

    Root:1 $15 Chilean Cab a guest left with us last night. I’ll let ya know…

    Have a great weekend everybody!

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