Monday Morning

If you missed the weekly wrap click here. In it you'll find a few more comments on gas supply which is a mountain compared to the mole-hill of LNG, quite the opposite of what many of the talking heads on CNBC and in other mainstream media are saying as they yell buy, Buy, BUY Natural Gas!

Commodity Watch:

  • Crude Oil: closed up nearly 4% last week at $105.62 as the dollar continued to slump, Basra heated up, and crude inventories barely budged instead of rising as the Street expected. This week we should see a rebound in imports which could combine with continued soft refinery utilization to yield a sizable build in crude stocks which should soften crude prices. This morning oil is trading off slightly.
  • Coin Toss Watch: From Bloomberg ~ This [the upcoming week] is the 12th straight week that analysts have forecast a decline in prices. They were correct in three of the past 11 weeks. The oil survey has correctly predicted the direction of prices 51 percent of the time since its introduction.
  • Iraq Watch: Muqtada al-Sadr has told his Mahdi Army not to lay down their weapons until the current government is ousted along with all foreign military units but he has declared a cease fire ... they'll be back.
  • OPEC Watch: Iran Production
  • Nigeria Strike Watch: The oil workers are again looking at a strike here with a decision to be made on Tuesday.
  • Natural Gas: rallied 7% last week with the May contract closing at $9.80 despite a smaller than expected withdrawal (much smaller given the weather - click here to see last Thursday's gas wrap if you missed it) and it's possible that an increase in the NYMEX margin requirements caused a bit of a short covering rally later in the week. This morning natural gas is trading up about a dime.
  • Weather Watch: Lingering coolness. 
  • Last Week: Heating degree days edged down to 137 last week from 142 in the prior week. This is nearly double levels seen a year ago (when we saw an injection of 35 Bcf) and should yield a small draw (around 15 Bcf) on storage this Thursday, potentially the last withdrawal of the year.
  • This reporting week is usually contains the shift from withdrawals to injections. The 5 year average change in storage for this week in history is a 15 Bcf injection. 
  • Next Week: CPC forecast is 107, slightly warmer than normal and which should  yield the season's first injection to gas storage.
  • CPC Routinely Underestimating HDDs: The 137 HDD figure noted above was cooler than CPC's early forecast and I'd note that they need to hone their models as 13 of the last 15 weeks have come in colder than originally expected.


Stocks We Care About Today:

(IOC) Announces Year End 2007 Results & To Review Elk 4. Let me start by saying I punted my position here with a small gain last month after waiting an eternity for results on the Elk 4 well. Earnings and cashflow matter little at this juncture in the stock's life relative to the importance of Elk 4 and the company is going to need to come up with the goods here (a good test rate and not just indications of lots of gas in place) to avoid seeing the stock fall towards $10. I'll play it on information only and will of course keep you posted. 

Conference Call: ongoing as I post this and I'll have notes in comments.

Mexico Revisits The Idea of Foreign Investment. Probably a slight positive for international oil service co's as well as GOMEX E&P players. The good news is the parties are still talking about it but the bad news is that they've decided to go back to square in the talks and the Mexican Congress adjourns at the end of April so it's unlikely a decision allowing foreign capital to enter the country, which is likely the only way to begin staving off Pemex's declines, will be reached before the late Summer at earliest.

(NE) - 5 Deepwater Rigs Signed with (PBR). Worth $4 billion to (NE) over the next 6 years for five of Noble's deep and ultra deepwater capable rigs. This brings (NE) backlog to over $10 billion. Not what I'd call world beater day rates but not too shabby either:


Again, this kind of long term lock up of deepwater rigs speaks to tightness and long term surety of demand in this space. It's also welcome news for deepwater competitors (RIG), (DO), (ATW) (who won't be bidding againts these rigs for quite some time) and for recent South American offshore contract winner (ESV).  

Odds & Ends

Analyst Watch: Quiet day, just (MRO) cut to average by Carris. 

We'll have the monthly natural gas supply review on Thursday night's post.

(ASTI) - achieves 1Q capacity goal and posts some pretty good average efficiency. This is not one I follow actively but sometimes things jump out at you in the wee hours of the morning and a solar module efficiency of 9.5% is on the high side for the thin film solars. The stock has had a strong run of late in part due to the market's recent re-acceptance of the group (not uncommon for the season and with oil in triple digit territory) and in part due to Norway based aluminum giant Norsk Hydro. At 180x sales I'm not even remotely interested in chasing a minnow of such rich valuation but the improved efficiency level is encouraging for the group as is taking notice of the market's willingness to once again ignore reasonable valuation metrics in the solar space. 


96 Responses to “Monday Morning”

  1. 1
    kaman Says:

    Morning Z

    I’ll go with OXY for the HK takedown contest. – Kaman

  2. 2
    zman Says:

    ELK 4 drilling report out – still drilling, having some hole stability issues which explains the slowness, have seen quite a bit of gas, planning to drill ahead, this could be early summer in my book before they reach total depth.

  3. 3
    zman Says:

    Morning K, gotcha OXY.

    NG on fire again, reminds me of last month before it plummeted…not a lot of reason to buy it here other than its up and Cramer says so, lol.

  4. 4
    Sambone Says:

    5:26 am EST

    Crude Mixed In Quiet Trade

    Dow Jones Newswires
    From Market Talk
    0924 GMT [Dow Jones] Crude oil futures mixed with ICE May Brent holding slightly above unchanged, Nymex May light, sweet crude trading lower. Repair of Iraqi pipeline alongside possible easing in violence there lends some downwards pressure, but falls met with dip buying interest to limit moves lower. Currency market fails to provide direction, meanwhile, with US dollar largely static Monday. “It’s been a very quiet start… maybe to do with it being last day of the financial year for a lot of companies. We do seem to be in a stalemate at the moment,” a trader says. Nymex May crude -38c at $105.24/bbl, ICE May Brent +3c at $103.80/bbl. (NHE)

  5. 5
    zman Says:

    CNBC reporting potential for a strike in Gabon as well as the one that may begin tomorrow in Nigeria. Gabon produces about 250,000 bopd while Nigeria is close to 2.4 mm bopd.

    Also reporting Goldman is saying oil demand weakest since 2004 and this may drive prices into the low 90’s which would be fine with me.

    Oil is paying more attention to the strike news however, rising from a buck loss overnight to slightly green at the moment.

    Cramer saying he can only recommend oils, grains and natural gas going into Q2.

    NG topping $10 now. Will take a few more puts if we see the spike sustained on low volume.

  6. 6
    Sambone Says:

    Cramer – So that means short them?

  7. 7
    reefguy Says:

    ioc-Conf. call has not happened. I am starting to feel bad on this play. Drilling report is confusing and need questions answered.

  8. 8
    zman Says:

    Sam – normally I’d say he may have already changed his mind but here he has the hots for the commodity and is ignoring a majority of the supply picture which is hugely up on production.

    Reef – I listed to the first part of the call via phone (web not working) but got cut off. The Elk 4 report 4 is out.

  9. 9
    zman Says:

    IOC call number:

    612 332 0107

  10. 10
    reefguy Says:

    ioc-Drilling report. Sounds like they ran low to prognosis with limestone at 7116′ By their design, Antelope top should have been at about 6800′. They did not see the Marl and set their intermediate too high, now they have to set a 5/12″ liner into the antelope and drill out to test.

  11. 11
    zman Says:

    Reef- guessing we’re at least a month from TD and more from some definitive results…not a lot of detail re the gas they are seeing … call started off talking about how ELK/Antelope is only 1% of their acreage in PNG and how they are looking for oil too … not really what I wanted to hear from a company with a do or die well drilling for gas to support a proposed LNG facility.

  12. 12
    zman Says:

    CHK news this morning, bought Pier 1’s hq building in Tx for $100 mm and then leased it back to the. As much as I like the story I don’t think now is the time for real estate speculation…just did a deal to support boosted capex and oh, by the way, we like that building over there too. Hmmm. Aubrey is a big real estate investor in Ok and he’s using deal proceeds to support the hobby, lucrative as it may be, for his company as well? Odd. Street could care less by this morning’s reaction (it’s only $100 mm) but we are long quite a few calls here and don’t distractions acting as a brake on CHK as natural gas inspires a rally in the gassy stocks.

  13. 13
    scoop006 Says:

    Z DO you know Pier 1’s credit rating? If they go out of business can the bldg be rented at a higher price.?

  14. 14
    zman Says:

    Scoop – lol, no I don’t and I’m sure its prime real estate, just didn’t want the distraction in the shares at this time … so far the green energy day is taking care of that and the stock is cresting 46 which is pretty solid the day after a 10% secondary priced at $45.75

  15. 15
    zman Says:

    RIG / DO outperforming

    NBR stock not wild about their news.

  16. 16
    reefguy Says:

    z-ioc, thanks for phone number. Wayne Andrews is more optimistic than I can be at this point.

  17. 17
    isleworth Says:

    Z – Any comments on NBL backlog, up another $4B today?

  18. 18
    zman Says:

    Reef – What choice does he have?

    NG on fire, at $10.08, needs to break through old high at 10.365 or we’ll be looking double toppy.

    Isle – look at the bottom of the post.

  19. 19
    isleworth Says:

    ok tks Z…somehow had missed that πŸ™‚

  20. 20
    zman Says:

    Dow Jones reporting CHK increased its production guidance. Not true, they did this last Monday and mentioned it in a filing which today… Silly DJ, pay attention.

    Isle – main takeaway is that producers think the market will be tight. From NBR’s perspective, those are good but not great prices but it does allow them to upgrade those rigs and PBR is paying for some of the upgrade time.

  21. 21
    Dman Says:

    Z – #15 I guess you meant NBL ?

  22. 22
    zman Says:

    Bidding some May HK calls.

    Dman, yes, Noble (NBL), apologies, need more coffee.

  23. 23
    Sambone Says:

    9:38 am EST

    Nymex Crude Led Higher As Heating Oil Jumps

    By Gregory Meyer

    NEW YORK — Crude oil futures were led higher Monday by heavy buying in heating oil ahead of the expiration of the fuel’s April contract.

    Light, sweet crude for May delivery was recently up 42 cents, or 0.4%, at $106.04 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange rose 72 cents to $104.49 a barrel.

    “We’ve broken through some technical levels largely on the back of strength in heating oil, which is being pressured higher by expiration and covering of shorts there,” said Addison Armstrong, an analyst at TFS Energy Futures in Stamford, Conn.

    Crude had earlier dropped more than $1 a barrel, but pushed into positive territory once simultaneous pit and electronic trading opened.

    The front-month April contracts for heating oil and reformulated gasoline blendstock, or RBOB, expire Monday. Heating oil prices have continued to show surprising strength after winter’s official end in the U.S. Northeast, the largest market for the fuel. Prices partly reflect global demand for distillate fuels, which include heating oil and diesel fuel.

    “Within the product markets, today’s expiration of the April contracts will provide some clues to price direction,” said Jim Ritterbusch, president of Galena, Ill.-based energy trading advisory firm Ritterbusch and Associates, in a note. “We look for bullish focus to shift away from the distillates and toward the gasoline with the debut of the May contracts’ as the front-month contracts.

    April heating oil was up 4.50 cents, or 1.5%, to $3.1500 a gallon. April RBOB was 57 points, or 0.2% higher at $2.7227 a gallon.

    Crude had fallen Friday after workers repaired a key Iraqi export pipeline damaged in a bomb blast. On Monday, technical problems had halved oil exports from the southern Basra terminal to about 768,000 barrels a day from normal levels of about 1.6 million barrels a day because of technical problems, shipping agents told Dow Jones Newswires.

    Turkey’s military said its warplanes hit Kurdish rebel targets inside northern Iraq late last week. Turkey also said it had killed 15 rebels in an earlier shelling, according to the Associated Press.

    “This story, as we have reiterated over the past few days, reaffirms that the geopolitical risks in Iraq are far from resolved and will continue to provide upside risks to prices, at least in the short term,” Barclays Capital analysts said in a note.

    In the U.S., oil demand appears to be softening as the country’s economy flags. Over the last four weeks, domestic oil demand was down by 2.2% from the same period in 2007, the Energy Information Administration reported. Analysts at Goldman Sachs see Nymex benchmark oil prices averaging $91.50 a barrel three months from now.

    “We believe that demand will continue to remain under pressure in the next few months before the impact of the expansionary monetary and fiscal policy and of declining price inflation will help support a recovery,” Goldman’s commodity analysts said in a note Monday.

    —By Gregory Meyer, Dow Jones Newswires

  24. 24
    uop Says:


    HK dropping and timing for lower price,
    what strike: 20 or 17.5 ?

  25. 25
    Dman Says:

    Oops.. I think it’s NE, not NBL. Gotta go fire up the coffee machine myself.

    Judging by reaction to the NE news in the service space, you’d think the prior conventional wisdom was “Deepwater? Nah, don’t waste my time with that stuff”

  26. 26
    zman Says:

    HK off 3 pennies. I’m bidding the may 20s but no long for 45 minutes now. I have the 22.50 Mays and half of my positions in the April 17.50s and 20s. The April 20s likely to be punted soon.

  27. 27
    Dman Says:

    Market likes Aubrey’s dabbling in real estate πŸ™‚
    Maybe they think he’s the next all round Warren Buffet type.
    Just hope the man himself doesn’t start thinking like that… at least not while I’m long the calls.

  28. 28
    zman Says:

    Dman – wow’s that’s embarrassing. Just fixed the post to correct.

    Aubrey is the largest individual owner of real estate in OK…maybe they think he’s got the touch.

    CHK up a buck now. With action like this (better than the group) the analysts/brokers in and outside of the syndicate have down a good job selling the deal. That means the long term story is being bought by the fund managers and they are taking the dilution in stride. Good early sign as the stock remains very cheap.

  29. 29
    zman Says:

    Market turning lower as Paulson drones on.

  30. 30
    Dman Says:

    Z – I recall you’re anticipating a drilling report from HK… are you expecting it this week?

  31. 31
    zman Says:

    D – this week or next. It’s two Taylor Sand horizontal wells they mentioned would be completed “in the next few weeks” at their Analyst Meeting on 3/12.

    Speaking of that …

    ZTRADE: Entered HK May $20 Calls (HKED) for $1.45. Continuing to hold positions in the May $22.50 calls and will be exiting the remaining April $17.50 and $20 call positions in the near future

  32. 32
    BossmanG Says:


    Do you mean holding postions in June $22.50 calls?

  33. 33
    zman Says:

    Yes, taken on the 27th, HKED. Definitely Monday. The holdings Wiki tab is updated.

  34. 34
    Dman Says:

    To be fair to Cramer on NG, when he says “I like natural gas” he would normally be referring to his favourite stocks in the group, not to the commodity. That’s not to say that someone’s granny somewhere doesn’t pick up the phone & scream “Buy natural gas!” 5 seconds after Cramer appears on TV πŸ™‚

  35. 35
    zman Says:

    ZTRADE: NBR – this is the land driller and not to be confused with NE from this morning’s post. This references the land drillers from the post on the 26th and the increased chance that the gas-directed rig count will rally this year.

    Entered NBR April $35 calls (NBRDG) for $0.65.

  36. 36
    zman Says:

    Re Cramer & Natural Gas. Dman, point taken, but he is talking about gas going up based on fundamentals and he is purposefully ignoring the 95% of the supply side of the equation which is growing at higher rates than ever before. When Hackett was on the show last week he said prices didn’t need to be up here, were probably not sustainable. Even if no LNG came into the country this year, supplies would be up as long as Canada doesn’t just fall apart which it is not showing signs of doing.

  37. 37
    Dman Says:

    Wow, an NBR call trade. Just trying to process that concept. Stock sure looks jiggy.

  38. 38
    scoop006 Says:

    Z- Good luck with NBR. I got burnt the last 3x I played them albeit takeover rumors.

  39. 39
    Dman Says:

    Z – re 36. Yep, I forgot he was using the “gas goes to 16” argument for his longs.

  40. 40
    zman Says:

    NBR – think it gets more attention in the near future as the cheapest, big domestic onshore driller.

    Thanks Scoop – Cramer going to talk land drillers tonight. Maybe he goes small (GW or BRNC) but I don’t see how he can get around (ignore) the cheap valuation here with his “best of breed” mantra.

  41. 41
    scoop006 Says:

    Z Did Cramer mention NBR today?Back in the day(2005) NBR was one of his favorite stocks calling Gene Eisenberg the best CEO in the business.

  42. 42
    Dman Says:

    “Turn! Turn! Turn! (To Everything There Is a Season)”

    Even NBR πŸ™‚

  43. 43
    zman Says:

    Scoop – No, said he couldn’t talk about which land drillers (plural) he’d be talking about but he’d be on it all week. Your thought same as mine re NBR.

    Dman – never let it be said that I’m in the “if you can’t beat Cramer join him camp” lol. Plus I did mention this in last Wednesday’s post and since we’ve had some broker upgrades but the stock has barely moved so my face saving bases are covered.

  44. 44
    zman Says:

    ESV – mentioned in post this morning and of late as a cheap JU that has been beat up enough. Recall last Fall I took a beating on puts here as its 7x fwd PE defended it against a right call on a missed quarter.

    Now Merrill piece a friend of the site just sent over is suggesting ESV as a short as the prior impetus of increased drilling offshore Mexico has faded and may be turning lower. They see this leading international jack-up rates to a decline and they site the recent hot stacking of 3 int’l JU’s as an indicator of topping demand.

    Interest but short piece, doesn’t really reflect ESV’s still cheap nature but the stock has had a run and if consensus thinking turns to lower JU rates in the future than it and RDC and a few others will be in for a bit of a fall.

  45. 45
    zman Says:

    Oil just swung $2.50, now down $1.50 at $104ish … dragging gas and weighing on group a bit.

  46. 46
    Dman Says:

    One thing I’ve noticed about Cramer is that he has the ability to call things correctly (eg. go long gassy E&Ps) even while all his reasoning is wrong on facts or just a bunch of non-sequiturs. So he is wrong about *many* things but doesn’t always suffer the consequences in his stockpicking. I think basically he reacts to what the market is doing, gets into the heads of the buyers/sellers, temporarily adopts their arguments (very loudly) & tries to get out before the arguments fall apart.

    Leaving psychoanalysis to one side…

    Z – Since we are following CHK & company closely we can hardly avoid noticing that NG supply is rising & in the NG markets that tends to predict pretty drastic downswings. But since it is CHK etc that are selling more gas, we expect them to be insulated from that. Would it be an appropriate shorthand for this story to think of them as “taking market share”?

  47. 47
    reefguy Says:

    oil down $3.40

  48. 48
    Dman Says:

    Briefing.com reports that for Q108, Ghana’s stock market leads the world with +15%, while Vietnam is at the back with -44% (ouch!). Information so usefuI felt compelleld to pass it on…

  49. 49
    zman Says:

    D – Agreed and getting into the heads of the “crowd” is very important. Notice I’m long a lot of gassy names yet short some NG. I just think he should be arguing that the gassy stocks are not discounting gas at $8 let along $10…if you think they are cheap now, try adding to $2 to the gas price and re running the models. Bucko EBITDA.

    Re CHK, that is a fair statement. Not only are they the third largest producers of N. American natural gas going to #1 by year end with all the economies of scale that affords you visa vis service costs but if you look at the bottom 50 producers in a list of the top 100 out there, my sense is that little guys are not keeping up with the big boys in terms of growth but are working hard in this price environment to offset declines.

    Reef – peace in Iraq and technical breaches of $104 and $103.

  50. 50
    zman Says:

    Reef – also you’ve got Goldman out today saying near term oil going to low $90s…lot of hedgies don’t know CL from OJ so there ya go.

  51. 51
    scoop006 Says:

    Cramer just purchased 1000 shares of El Paso =EP total holding now 4500 shares. Says it’s undervalued.

    If he talks about land drillers how about equipment and service providers?

  52. 52
    zman Says:

    Scoop – SII is a bits and mud maker that would definitely benefit and I’m holding some HAL.

  53. 53
    Dman Says:

    What’s the broader market so happy about? An up day but not up 400 points. Could the bear be back in hibernation?

    HAL looking jilted now that NBR is the belle

  54. 54
    scoop006 Says:

    Re #52 I know he loves HAL & WFT

  55. 55
    Sambone Says:

    12:29 pm EST

    Nymex Crude Drops Amid Commodity Selloff


    NEW YORK — Crude oil futures U-turned into a steep drop Monday, joining other several commodities in an aggressive selloff.

    Analysts struggled to pinpoint an immediate explanation behind the dive, but said the modestly stronger dollar may have helped drive oil prices down.

    Light, sweet crude for May delivery was recently down $3.04, or 2.9%, at $102.58 a barrel on the New York Mercantile Exchange. Nymex crude earlier fell as low as $101.59 a barrel.

    Brent crude on the ICE futures exchange had fallen $2.57 to $101.20 a barrel.

    “You’ve the got the whole commodity sector to the downside,” said Scott Meyers, senior trading analyst at Pioneer Futures in New York. “Wheat came down, soybeans came down, the softs have been weak, little by little the metals started to give way and then crude oil, which was hovering around unchanged, just broke.”

    The euro was recently at $1.5801, off from an earlier intraday high of $1.5897. Meyers said the dollar’s strengthening may have contributed to oil’s fall.

    Commodity markets may also be reacting to concerns about an economic slowdown, which could undercut demand, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

    “People are starting to realize that oil isn’t the best hedge against a slowing economy,” Flynn said. “It seems like more air is being let out of the commodity bubble.”

    Crude had fallen Friday after workers repaired a key Iraqi export pipeline damaged in a bomb blast. On Monday, technical problems had halved oil exports from the southern Basra terminal to about 768,000 barrels a day from normal levels of about 1.6 million barrels a day, shipping agents told Dow Jones Newswires.

    April heating oil was down 4.01 cents, or 1.3%, to $3.0649 a gallon. April reformulated gasoline blendstock, or RBOB, was 9.05 cents, or 3.3% lower at $2.6265 a gallon. Both contracts expire Monday.

    —By Gregory Meyer, Dow Jones Newswires

  56. 56
    zman Says:

    Sam , I think more air is being let of Flynn, lol. It’s like clockwork how the new found bear crowd comes out of the woodwork on any significant down oil day.

    By the way, welcome new subscribers! We’ve had a bit of a subscriber surge in the last week and I just wanted to say thanks, speak up when you wish, and don’t be shy asking questions as there are no stupid questions here.

  57. 57
    ram Says:

    Since there are no stupid questions, is CHK one of the most leveraged debt wise of its peers and that’s why the additional 20 million shares?

  58. 58
    ram Says:

    Since this is the last day of the quarter, does anyone have a feel that institutions or other money managers want certain energy stocks recorded in their portfolio before the quarter ends?

  59. 59
    uop Says:

    just sold my USO 87 puts for 35 % gain, will roll to May 82,

    expect/hope/dare to believe that UNG will drop if oil drops.

  60. 60
    Sambone Says:

    Ram – It’s called “Quarter end window dressing”

  61. 61
    zman Says:

    Ram – it is more leveraged than many but not all of its peers. The debt service is very manageable.

    re window dressing, you’d think so but its not apparent yet.

    Uop – another nice trade. Re UNG, I will take a second put position if it gets another spike up here. LNG volumes were flat again this morning (last week’s number) at 0.6 Bcfgpd which is very light to last year and to which everyone points and say, “Ah- Hah!” I alway leave room to take seconds, thirds, and fourths on positions.

  62. 62
    scoop006 Says:

    Anyone have an opinion on MRK&SGP selloff today? Seems overdone to me

  63. 63
    zman Says:

    Scoop – no opinion other than their is a conference (American Conf of Cardiology) today with some bad drug news that’s hitting several of them. What’s funny is the drug co’s are down 13%ish on the 1Q08, with banks down less than 10% and homebuilders just about flat. And I can remember a half dozen times in the past 3 months that guests on CNBC said flee energy for Health care, the traditional safe haven during times of market insecurity, lol.

  64. 64
    zman Says:

    oil down $4.50 going for a test of $101.

  65. 65
    zman Says:

    Nigeria unions indefinitely postpone strike.

  66. 66
    zman Says:

    Cattleman, FYI, CNBC running a piece on source verification.

  67. 67
    Dman Says:

    Z – automated reminder: RIG down impressively. Buy now for same price as last …November. You don’t believe me? Would you believe “buy now for same price as last week” ?

  68. 68
    zman Says:

    crude down $5, eyes set on $100…given the fall, the stocks are barely noticing the move except SU which I almost sold this am as per my last several days of jabbering that crude prices were due a fall … shoulda, woulda, coulda.

  69. 69
    reefguy Says:

    oil down $5.30

  70. 70
    zman Says:

    oil – attempt at rally in the in the last 20 minutes of Nymex.

  71. 71
    Alhambra Says:


  72. 72
    zman Says:

    been bidding more NBR DG at $0.40 for a couple of hours now, no joy. May take the 32.50s for less risk.

  73. 73
    zman Says:

    ZTRADE: Added to NBR April calls for $0.50.

  74. 74
    ram Says:

    Would NOV supply parts to NBR or compete or both?

  75. 75
    zman Says:

    Ram – NOV would be selling to them and to the operator/producer.

    Stepping out for 20 min.

  76. 76
    ram Says:

    Thank you.

  77. 77
    zman Says:

    Wow CLR – the story that just keeps on giving. Breaking out to all time highin a down $4 oil market.

  78. 78
    cattleman Says:

    Z- Thanks for the kind words on Friday’s post, grilling season is upon us and the joy factor will increase. Puting some calves on spring grass to finish the right way. Re the CNBC story – did they address the multi- step, multi-owner situation?

  79. 79
    zman Says:

    Cattle – they said it was all the rage but then I had to run. They’ve been talking cows off and on over the last week.

    When will you harvest? Also, do you butcher for the prices discussed or does it come as a quarter or half cow on ice?

  80. 80
    Sambone Says:

    3:25 pm EST

    Nymex Crude Slips On Quarter-End Selloff, Economic Woes


    NEW YORK — Crude oil futures were dragged down $4 Monday as traders ditched commodity positions before their books closed on the first quarter.

    Observers were divided over the significance of the selloff, with some saying it reflected nothing more than quarter-end profit-taking and others seeing a reaction to a slowing U.S. economy.

    Light, sweet crude for May delivery settled down $4.04, or 3.8%, at $101.58 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled $3.47 lower at $100.30 a barrel.

    With Monday the end of the first quarter, analyst Stephen Schork discounted the meaning of the price drop, regardless of its severity.

    “Don’t put any stock in this: it’s the end of the quarter,” said Schork, editor of the Schork Report energy markets newsletter in Villanova, Pa. He said traders seeking to create attractive quarter-end “window dressing” for their investor reports were behind much of the move.

    With the economy faltering and oil demand slowing in the U.S., the world’s largest energy consumer, other analysts said Monday’s drop signals a longer-term pullback from all-time highs. Nymex crude peaked at an intraday record of $111.80 a barrel March 17.

    “Energy prices are going to get very badly beat up as the economy contracts,” said Walter Zimmermann at brokerage ICAP/United Energy in Jersey City, N.J. “We don’t see commodity prices holding steady in the face of the magnitude of economic problems that continue to present themselves.”

    Nymex crude futures’ drop was the steepest in dollar terms since March 19, when they dropped $4.94 a barrel in one day. After tumbling as low as $98.65 a barrel, last week they rallied to $108.22 a barrel before a two-day retreat that began Friday.

    With big one-day moves becoming more common, many market veterans are hesitant to draw conclusions from them.

    “This is the new market: you get sharp moves out of nowhere for seemingly no reason,” said Scott Meyers, a senior trading analyst at Pioneer Futures in New York.

    The dollar, which after sinking near an all-time record low against the euro, mustered some strength and was trading close to its levels late last week. The dollar’s months-long weakness has helped draw buyers into dollar-denominated, internationally consumed crude. The euro was $1.5790 on Monday from $1.5796 Friday.

    In a note, Goldman Sachs reiterated its forecast that benchmark West Texas Intermediate crude will average $91.50 a barrel three months from now.

    “We believe that demand will continue to remain under pressure in the next few months before the impact of the expansionary monetary and fiscal policy and of declining price inflation will help support a recovery,” the investment bank’s commodity analysts said.

    U.S. crude oil stockpiles are also building, analysts surveyed by Dow Jones Newswires predict. In the week ended March 28, crude inventory levels grew by 2.1 million barrels, the analyst predict. Weekly data revealing the government’s reckoning of inventory levels are due Wednesday morning.

    The analysts surveyed on average forecast U.S. gasoline stockpiles fell by 2.2 million barrels, while distillate fuels stocks fell by 1.5 million barrels. The rate of refinery use is seen growing by 0.4 percentage point to 82.6% of capacity.

    On the Nymex, front-month April reformulated gasoline blendstock, or RBOB, settled down 10.07 cents, or 3.7%, to $2.6163 a gallon. More actively traded May RBOB settled down 8.64 cents, or 3.2%, at $2.6271 a gallon.

    April heating oil fell 5.58 cents, or 1.8%, to settle at $3.0492 a gallon. The April contracts expired Monday. May heating oil dropped 8.15 cents, or 2.7%, to settle at $2.9061 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  81. 81
    cattleman Says:

    The prices quoted are vacuum sealed in plastic from a USDA plant according to a cutting order. A few left for this year’s grass finish ready in late June, early July. Grain finished later in the year. Omega 3 rich grass finished is a guilt free pleasure.

  82. 82
    zman Says:

    Lovely greening of the group into day’s end.

    What’s a quarter cow run this year and do you have a website yet?

  83. 83
    Dman Says:

    CLB seems to be breaking out from a short term down trend.

  84. 84
    zman Says:

    Dman – yea, CLB, CRR among those who definitely benefit from a N.American gas-directed rig uptick.

  85. 85
    zman Says:

    HK – nice to see the profit taking was contained here and we are going to close back over $20. Also, Friess sold 4mm shares before the end of the 4Q…nice move there, lol.

  86. 86
    cattleman Says:

    No web site yet. Depending on final weight of the animal the quarter would run from 175 – 200 lbs. X $3.15. Get a couple of buds together and split a whole carcass and my young partner and my young partner may just run it over to you.

  87. 87
    zman Says:

    How much freezer volume do we need? My lawyer, who likes to spend my money, is talking about buying a good size open top reach in freezer …

  88. 88
    ram Says:

    What are the different types of cuts (estimate of course) in 175-200lbs?

  89. 89
    Wyoming Says:

    Looks like BJS is getting into the subsurface equipment business.


    We use Innicor eq in N. Africa, cheap knock off stuff.

  90. 90
    Jay Reynolds Says:

    Local oil producer in NW LA. Long 1200 CHK this am after hearing fro sources I have known for years:

    1)Offering more than $800 ac for deep rights just south of here.

    2) “Unpermitted” (ie, “outlaw”) CHK well flowed at 20 MMCFD, guards on site, CHK happily paying State fines to limit access. This is about 10X the norm for CV wells in the area.

    3) Brokers canvassing heavily for open deep rights, log showed 1000′ of net pay (about 10X normal) for Haynesville Shale.

    Otherwise, all is quiet.


  91. 91
    zman Says:

    JR – Welcome aboard. Otherwise, all is quiet, lol.

    That is a monster rate well, sounds like a taylor or davis sand but too thick.

    Was your source saying it was deep enough to be the shale? If so, it has to be one of the 4 Hz’s they’ve spud so far … If IP is commensurate with EUR your are talking sub $1.50, maybe sub $1 / Mcf F&D. No wonder they were in a massive hurry up to get the deal done once the news was sprung.

  92. 92
    scoop006 Says:

    Z Re#91 paragraph 3. can you explain what you are saying in plain english. ty

  93. 93
    Jay Reynolds Says:

    My first source for the depth was a business partner who owns about 6,000 acres in the play. They have cultivated a long time relationship with the three primary producers who operate on their property just south of Shreveport. As soon as word of CHK’s well leaked (sorry, no such thing as a “tight hole” around here)- they were calling offering to match any offer. (Their acreage was available at deeper depths than that being currently produced due to the producing leases being outside of their Primary Term and having Vertical Pugh Clauses).

    The relationship was such that to have any hope of securing this acreage they had to be completely candid about the prospect, the economics, etc..

    The INITIAL offer, which was declined, was for $600/ac w/ 1/4 royalty. The telling part, until further word got out, was that the offer was for rights below the Cotton Valley, which if memory serves is usually about 8,400’+ subsurface in the area.

    Another producer, a good friend, very savy with about 8K acres subject to farm in on Caddo Lake likewise confirmed the zone as the Hanynesville Shale, the log as 1,000′ of net pay and the flow rate.

    The good news is that title work isn’t as complex in LA as in TX due to the fact that our minerals prescribe (ie, pass to the surface owner if not produced for ten years) but some of the old leasehold areas are pretty hairy and the lessors can be fairly sophisticated.

    Yes, if the info and flow rates hold up then it would be a MONSTER and I would expect rates and recovery to improve with experience – in parallel with the experience JW Operating had in figuring out the Cotton Valley in the area.

    OT, on other fronts, my CO has developed a totally new method of producing shallow stripper wells that eliminates rods, tubing, pump jacks, etc.. Can be used as mobile or stationary installation. We should shortly finish simulating 200 years of mechanical wear and be ready to go to market, maufactured by Parker-Hannifin Corp (PH).




  94. 94
    zman Says:

    Scoop – I was saying that the well JR is referring to would almost certainly be one of the 4 CHK horizontals drilled into the Hayneville as of last week.

    The IP (initial production) of 20 MMcfgpd is massive for any onshore well, let alone a shale well. EUR is estimated or expected ultimate recovery (amount of reserves you ultimately produce over the life of this well (probably 20+ years)) and I was just saying that often times initial rate of a shale or any other well tells you something about the size of the reserves you’ve encountered. In other words, bigger is better.

    So if the thinking by HK was that a well with an initial flow rate of 2.5 to 3.0 Mmcfgpd gets you reserves of 3.0 Bcf (that was HK’s assumption on 3/12 and that sounded reasonable to me) then a well with an IP of 20 MMcfgpd might get you 10 or even 15 Bcf of reserves. At that depth, you probably start drilling single lateral horizontals for $9 to 12 million a pop (they’ll get cheaper with practice) depending on the length of lateral, number of frac stages etc… That sets you up for very low finding and development costs. With rates like that, they are going to have to lay a lot of pipe out of the area but it’s criss crossed with infrastructure and close to labor (unlike that wilderness Canadian play EOG is onto) as is so that won’t be a problem.

    JR – wow. I’d tell most people to get their head examine on both the pay (I take it it’s contiguous or nearly so) and the rate but after Aubrey’s “most significant press release of all time” and “these are the best 4 shale wells anyone has ever drilled at the start of a shale play” statements last week I’m open to some new thoughts on this play.

    JR, you and reefguy probably know each other and will get along great on the site. Congrats on the stripper well technology … definitely needed at these prices as long as the front end is low enough for the moms and pops and the opex is not too bad you should be sitting pretty. Will have a look at that link.

  95. 95
    scoop006 Says:

    JR&Z Thanks for the explanations.If you ever need answers to real estate questions,hit me up.

  96. 96
    Jay Reynolds Says:


    If I understand you correctly, I am using 1,000′ of net pay to mean 1,000 feet of homogenous vertical interval.

    I can tell you that I’ve never seen this level of interest up here – ever in the deep gas play. There are a lot of attempts to buy minerals under the area but no takers that I know of thus far. Personally, I’m expecting the play to prove out as being roughly similar to the Tuscaloosa Trend, just reflecting a more northly depositional trend. But I’m no geologist, just a hunch.

    Otherwise, the flexible production system is pretty cool. I hope to have a “Race Video” up soon showing time to equip a well in the traditional manner vs the new system. About the time they’re rigged up we’re through. The front end cost is the same as traditional equipment, but only one moving part, no workover rig required, one guy with a pickup can equip a well by himself and drive away with it pumping in about 30 minutes. Hope to take it up to RMOTC before too long – just to show ’em what can be done WITHOUT any help : )

    The funny part of the process is shown at http://strippersolutions.com/New__Pics.html and some novel thinking in the way of Chemically Enhanced Vertical Waterflood is shown at http://strippersolutions.com/T___A.html

    I am completely transparent in my thinking and field work, anybody is welcome if in the area.



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