Wednesday Morning – Oil Preview + A Little Stock Commentary


Commodity Watch:

Crude Oil: plunged on a weaker dollar but then rallied in a successful defense of the $100 mark. It dipped briefly into double digit territory but if you blinked you missed it and finally closed off just $0.60 at $100.98. This morning oil is up slightly.

  • Nigeria Watch: The Shell operated Trans-Niger export pipeline continues to burn for a fourth day. Shell planned to put it out yesterday but were again denied access to the blaze by locals and Shell said that exports so far remain unaffected. The fire is in an area that was sabotaged last year. A second fire on a pipeline feeding the refinery in the Port Harcourt area has also been burning since Sunday. 

Oil Inventory Expectations (from the Dow Jones survey)


ZComment: Platts has a higher consensus estimate calling for a 2.8 million barrel build in crude stocks and it could easily top that if imports simply return to seasonal norms for this week in history.

  • Refiner Watch Note: In yesterday's post I upheld my decision to continue to avoid the group. RBOB (reformulated gasoline) advanced on a day which saw crude go from negative to positive to negative. This move was based on the expectation of another good-sized draw on gasoline stocks and if we don't get that I'd expect gasoline, and the refining group to sell down

Natural Gas fell $0.38 to close at $9.72 yesterday. The drop was sudden on no real new weather news and accelerated into the close of NYMEX. This morning gas is trading off $0.05 to $0.10. In the comments section I was asked how far I thought natural gas and (UNG), the natural gas ETF on which I hold puts, would fall. Since many of you don't lurk in the comments section and I continue to agree with my answer on this I'll repeat it here.  How far will gas fall?

Don’t know. I think traders are looking ahead past this week’s draw to next week and saying, “ok, we’re trading in line with the 5 year average so storage is not really low unless you are looking at 2007 levels.”

They also must be saying “so net net, supply is 7 to 14 Bcf per week higher than it was last year and much higher than the five year average for supply. [see charts below on this].

Finally they should be saying, “with slack demand and the extra supply we know exists, we’re going to see a rapid rebuild in stocks until cooling demand sets in.”

Technically, (and I rarely talk technicals unless it’s the commodities) the failure to break the previous high at 10.37 is anti-bullish in most commodities trader’s books. They’re saying it about oil now, about how the Basra troubles last week didn’t get us back to new highs and they will say the same thing after today’s action in gas. I think the first support is the bottom of the pre gap day on 3/20 at 9.30 but better support is $9 and ultimately gas may take its Spring break in the mid $8s.

Holdings Watch: No trades yesterday.


Stocks We Care About Today Watch:

Booyah Watch: Jim Cramer is recommending land driller (NBR) as a way to play a potential re-acceleration of the U.S. onshore gas-directed rig count. I went long and then doubled down on Monday for the same reason so thanks Jim! Normally I agree with about 75% of what Cramer says about stocks in the energy patch and would not give this much more thought but it affords me the opportunity to expand upon a couple of points. These are my points, not Cramer's:

U.S. Onshore Gas-Directed Rig Count Resurgence Likely In Next Few Months ... After peaking last summer, gas rig counts stabilized during the first quarter and anecdotal evidence (in the form of rising capital budgets) is suggesting a resurgence may be in the near term cards. It may be slow to be seen at first drilling efficiencies in the hot, resource play basins (shales, tight gas sands and coal bed methane) have been dramatic for the big players even over the last 12 to 24 months. This means that E&P's like (CKH) who drill 1 Barnett shale well ever 15 hours can drill more wells in less time with less rigs than ever before. However, as they and others like them crank up their Capex due to high natural gas prices, the total rig count will rise.

...Horizontal Rig Activity May Slow The Resurgence A Bit. As operators increasingly rely on horizontal drilling the tie between rig counts and gas field activity has become more murky. Horizontal rigs drilling multilateral wells may be on station longer than a vertical well but cover two to four times as much ground, so to speak, with a single surface penetration. The third chart below, though not broken out by oil or gas is overwhelming a gas-directed indicator meaning that its continual increase ties to the the next set of production charts.


U.S. Onshore Lower 48 Gas Production: Note how production rockets when horizontal drilling came into its own. The second chart shows a bit longer view of onshore U.S. gas production as it drifted slightly higher if at all, year after year, until the recent spate of resource play driven growth. This is one of the key factors in my argument against double digit natural gas prices ... more on that in the Thursday night wrap.



Land Drillers: I've Been Avoiding Them Like The Plague For Quite Some Time; Multiples Are Sector Depression Level. I'll stick to the big names (NBR) were 300 of their 535 are located in the U.S. and many of them, as Cramer noted, are currently idle.  Some of the smaller names may outperform on a percentage basis early (they are all in the process of being upgraded by analysts) but the larger names should be provide more consistent stock gains over time as fund managers can more easily move back into the more liquid names, especially since we may be a bit early on the turn of the group's fate.


(NFX): I've been out for a few weeks and plan to go back in soon with May NTM (near the money) calls. Earnings are due out April 24th and I doubt we'll see an @NFX publication prior to that. However, the quarter will likely afford them:

  • the opportunity to inch production guidance higher or at least tighten the range for 2008,
  • give them an opportunity to talk about several Woodford items including:
    • 1) improved costs in the Woodford Shale,
    • 2) possibly increasing EURs (expected ultimate recoveries) here given another 2 months of drilling extended laterals, and
    • 3) more results from the downspacing effort.
  • and also let them talk a bit more about Monument Butte, where the wells have been coming in 3x plan and which could provide an upside surprise on volumes.
  • Finally, I expect them to provide a little more detail on their deepwater prospect calendar for 2008

(BZP) Update: Still don't own this one but am interested as a long term play. See my original write up on them in this post. Yesterday they announced a successful production test in their Z1 Block offshore Peru. Initial combined test results of three DSTs (drill stem tests) of the CX11-18XD well produced 5,350 bopd. There is some formation damage present but management termed it "manageable". The original thinking was that this well could add another 2,000 bopd so this is good news, and I might add on schedule to the day originally projected however, the results are not yet final and that, combined with the formation damage caused the stock to suffer a 9% drop from "buy the rumor, sell the newsitus". I'll watch it more closely for a little while and will consider going long on further weakness.   

Odds & Ends

Analyst Watch: (FST) from hold to buy at Jefco after their analyst meeting, Citi also raised its (FST) target to $67 from $62.

Calendar Watch: Look for the first iteration of the 1Q08 earnings calendar next Monday.


87 Responses to “Wednesday Morning – Oil Preview + A Little Stock Commentary”

  1. 1
    Sambone Says:

    7:48 am EST

    Crude Higher On Dollar Ahead Of Stock Data

    By Nick Heath

    LONDON — Crude oil futures climbed more than a dollar in London Wednesday ahead of weekly U.S. inventory and as the U.S. dollar weakened against the euro and other major currencies.

    After two days of volatile price activity, traders are looking for indications of whether crude will continue it’s recent path lower or recover towards it’s record highs. Some suggested that Wednesday’s U.S. Department of Energy data could provide more concrete direction.

    “Although prices have fallen back on profit taking, we still appear to be in a scenario where the dips are seen as good buying opportunities,” says Glen Ward at ODL Securities in London. “With the weekly DOE stats.. today we may just get a signal for traders to commit to a direction.”

    At 1059 GMT, the front-month May Brent contract on London’s ICE futures exchange was up 79 cents at $100.96 a barrel.

    The front-month May light, sweet, crude contract on the New York Mercantile Exchange was trading 92 cents higher at $101.90 a barrel.

    The ICE’s gasoil contract for April delivery was up $8.75 at $935.75 a metric ton, while Nymex gasoline for May delivery was up 213 points at 266.05 cents a gallon.

    U.S. crude oil inventories are expected to have grown by 2.3 million barrels in the week to March 28, according to the average forecast of 14 analysts surveyed by Dow Jones.

    Gasoline inventories are seen to have dropped by 2 million barrels, while stocks of distillate, which includes heating oil and diesel fuel, are expected to have fallen by 1.7 million barrels.

    Refinery use is seen increasing by 0.5 percentage points to 82.7% of capacity.

    As gloomy economic sentiment in the U.S. continues to foster unease over crude oil consumption there, close scrutiny is also expected to be reserved for latest demand indications from the Department of Energy data.

    “I think the market is in the habit of focusing on the inventory numbers when the US weeklies come out — but I think more and more people are paying attention to demand numbers,” said Mike Wittner, global head of oil market research for Societe Generale in London. “In the economic environment we’re in there is an understanding that that is the key fundamental driver. People don’t tend to cite it, but people are starting to focus on it.”

    The oil markets also mulled reports Wednesday that the International Monetary Fund has cut its forecast for U.S. economic growth in 2008 from 1.5% to 0.5%. Forecasts for world economic growth were revised to 3.7% from 4.1%.

    “On the face of it you should be thinking this should weaken demand and should help to bring prices down,” said Simon Wardell, analyst at Global Insight in London, although implications for a weaker U.S. dollar associated with a slowing U.S. economy could counter price weakness, he said.

    Any further signs of U.S. economic slowdown are expected to add to expectations of more Federal Reserve interest rate cuts, and with them a fresh weakening of the dollar, a development seen as stimulating investor interest in oil futures.

    Fed Chairman Ben Bernanke is due to give testimony before the Joint Economic Committee of the U.S. Congress at 1330 GMT Wednesday, while currency watchers are also looking ahead to latest U.S. non-farm payrolls data due out Friday.

    “The (U.S. inventory data) demand number will be a number closely watched but we must stress that recently, trading the DOE statistics has taken second stage to trading the dollar,” said Olivier Jakob of Swiss consultancy Petromatrix. “We are of the opinion that the main statistic for the week will be the Friday employment number.”

    Crude oil exports from Iraq’s key southern Basra oil terminal have returned to near-normal levels it was reported Wednesday, although technical problems continue to prevent flows at normal levels, a shipping agent told Dow Jones Newswires.

    Crude oil is flowing at around 60,000 barrels an hour, compared to a normal export rate of between 65,000-75,000 barrels an hour, the agent said.

    —By Nick Heath; Dow Jones Newswires

  2. 2
    zman Says:

    Once oil tipped red that was all she wrote for natural gas, now down $0.20 at $9.52 on pretty good volume for this time of day.

  3. 3
    zman Says:

    Shaw group agreed to build to NEW NUCLEAR POWER plants in South Carolina. S. Carolina Electric and Gas submitted a plan to the NRC on 3/31 so not much chance we could possibly see these in operation inside of five years, more likely 10.

  4. 4
    uop Says:

    my UNG puts which I had rolled up to 86 are now DITM, hope the NG price drops more, BUT this was a big event.

  5. 5
    zman Says:

    uop – is that USO at 86? does the D stand for double?

  6. 6
    uop Says:

    DITM means deep in the money, UNG puts.

  7. 7
    uop Says:

    UNG 48, sorry

  8. 8
    zman Says:

    uop – ok, thanks. UNG not tracking NG well today.

    Wet blanket watch: Bernanke speaking today

    Energy patch up slightly but no moves mean anything until after 10:30est.

    NBR flat: cramer used to have more swing than that.

  9. 9
    kaman Says:

    Z- LOL, thanks for the hockey stick graphic…in my mind I had most of the stick pointing up….but parabolic is parabolic. Good luck to all today, some follow-thru would be sweet.

  10. 10
    reefguy Says:

    ioc- down 20% in 5 days

  11. 11
    zman Says:

    Reef – watching that IOC…think we both said they needed a definitive DST to support the stock. They are chunneling through cash so they need news soon to get Merrill to stay kind to them. Have you looked at BPZ (ticker BZP) on the report page? Kind of interesting Peru oil play.

  12. 12
    zman Says:

    NG off $0.22 (2%), UNG off 1%; it may true up after the oil report. Not saying we will see a shock on oil but we could see a big crude build this week.

  13. 13
    Sambone Says:

    9:31 EST

    Nymex Crude Sheds Gains As Dollar Firms

    By Gregory Meyer

    NEW YORK — Crude oil futures shed earlier gains to trade lower Wednesday as the dollar firmed and the market eyed potential growth in U.S. crude stockpiles.

    Light, sweet crude for May delivery was recently down 32 cents, or 0.3%, at $100.66 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange was 35 cents lower at $99.82 a barrel.

    Oil had earlier risen more than $1 as traders reconsidered three straight days of price declines. The dollar, whose monthslong slide has drawn buyers to oil, rallied Wednesday after payrolls company Automatic Data Processing Inc. (ADP) reported a better than expected estimate of job growth in private-sector employment last month.

    “The dollar got stronger, offsetting some of the strength in crude,” said Tom Bentz, a broker and analyst at BNP Paribas Commodity Futures in New York. Oil products, such as heating oil and gasoline, “are holding on a little bit.”

    At 10:30 a.m. EDT, the Energy Information Administration reports U.S. oil inventory data for the week ended March 28. Analysts surveyed by Dow Jones Newswires on average say crude stockpiles rose by 2.3 million barrels, gasoline stockpiles fell by 2 million barrels and stockpiles of distillates, which include heating oil and diesel fuel, fell by 1.7 million barrels.

    The rate of refinery use climbed by 0.5 percentage point to 82.7% of capacity, the analysts predict.

    “A bearish surprise in the numbers could prompt participants to retest the $100 support level” for Nymex crude, said Edward Meir, a Connecticut-based analyst with brokerage MF Global in Connecticut, in a note. “A close below this level would constitute a significant technical deterioration in the charts.”

    The U.S. data will also offer a fresh picture of oil demand in the world’s top energy consuming nation. In the four weeks through March 21, U.S. oil product demand was down 2.2% from the same period the year before. A recession in the U.S. is expected to slow its oil consumption.

    The International Monetary Fund has cut its forecast for U.S. economic growth in 2008 to 0.5% from 1.5%, according to reports. The IMF now expects the world economy to grow by 3.7% this year, lower than the 4.1% rate previously forecast.

    Federal Reserve Chairman Ben Bernanke’s testimony before Congress Wednesday “could have a significant impact on the dollar and ultimately oil prices,” wrote Jim Ritterbusch, president of energy trading advisory firm Ritterbusch and Associates, in a note to clients.

    Front-month May reformulated gasoline blendstock, or RBOB, was down 45 points, or 0.2%, to $2.6347 a gallon. May heating oil was lower by 19 points, or 0.1%, at $2.8778 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  14. 14
    zman Says:

    Bernanke – 1H08 GDP may contract slightly, sees return to slight growth in 2H but says confidence in their forecast is not high. He finally gets it that he hasn’t gotten it.

    K – yeah, U.S. gas generally grew 1 or 2% or not at all at times throughout my professional life. 8% growth is nutty. To be fair, I excluded the offshore to show just how much the onshore is contributing but the overall picture is one of strong growth over the last 3 years. I’ll have more on Thursday’s post.

    Market looks like its just waiting for Ben to quit talking.

    NG continues to weaken, down 2.7% or 26 cents now to 9.46

  15. 15
    zman Says:

    gassy stocks almost completely ignoring the slide in nat gas which is a good sign since holders are focused on fundamentals of growth, hedges, etc and not just underlying commodity prices. Often stocks run with the commodity and sell with the commodity.

    Nicky sent an email saying Addison Armstrong is looking for a draw on crude…that would be pretty shocking and send crude higher.

  16. 16
    zman Says:

    crude increased 7.4 mm barrels

    imports rebounded

    utilization remained about the same at 82 cent.

    gasoline down 4.5 mm barrels

    distillate down 1.6 mm

    this will prop up refiners a bit

    oil just tripping below $100

  17. 17
    zman Says:

    Sane – any API numbers? I got the big build I’ve been looking for since last week and oil is up.

    ZTRADE: Entered DVN May $105 Calls (DVNEA) for $5.

  18. 18
    zman Says:

    I’ve been meaning to enter DVN on a down day for now and this is as good a time as any. Wanted to be in before well news at their Chuck prospect in the lower tertiary trend of the deepwater GOmex and in front of earnings (the two likely to coincide). Earnings out May 7 and I may trade in and out of it a few times between now and then.

  19. 19
    zman Says:

    HAL chart looks poised by the way. Still holding the second half of my April $37.50 position here but may roll to Mays soon.

    ZTRADE: COP $80 April calls (COPDP) for $1.30. This doubles my position here.

  20. 20
    Dman Says:

    Have to take back what I said yesterday about Jim Cramer’s pride stopping him from getting behind NBR. Either that or I was right but he swallowed it anyway. Come to think of it, what pride? No one with any pride would expose himself the way he does, lol.

    But anyway, looks like there was a queue formed today to sell into the Cramer NBR call. Two days in a row NBR has bounced back from nasty early selloffs & the stock is now sitiing right at the top of a slight declining trend over the last 5 days. Looks ready to blow.

  21. 21
    zman Says:

    Agreed D – oddly quiet around here today. Not seeing server slowness….must be Spring break.

    Can’t believe the Street didn’t see the big crude build coming. Oh well, looks like the draw on gasoline is propping the oil complex and the group has gone almost uniformly green.

    NG rebounded with oil, now NG only down 11 cents…probably an entry opportunity for more puts as the 2 are unrelated other than a fleeting pull. May double my UNG put position here.

  22. 22
    Nicky Says:

    Morning all. Just a brief ‘fly by’ as we are on Spring Break here…

    Great call Z from last week re the crude build. What was Addison Armstrong smoking?

    TA –

    Crude looks to be playing out a small abc correction for wave ii up before we embark on iii down which will be a big down move. If it is then 102.55 is the minimum and there is further resistance at 102.86, 103.14, 104.00 and 104.90.
    A move below 99.13 should signal the next wave down underway.

  23. 23
    zman Says:

    Thanks Nicky, can’t believe the Street wasn’t watching imports better. Addison was smoking some Nigerian blend, lol.

    Thanks for the flyby, was beginning to think my mike was broken. Thanks also for the TA. Have a great break!

  24. 24
    sane Says:


    Crude Up 1.9M
    Gasoline Down 1.5M
    Distillate Down 96K

  25. 25
    ram Says:

    Any idea why APC has been dragging behind its peers?

  26. 26
    zman Says:

    Thanks Sane, for once the EIA numbers make more sense to me, at least on the crude front. Note that gasoline demand of 9.2 mm bpd was FLAT with year ago levels.

    APC – noted it has been a little weaker but think its just market noise. Will punt the April $70s soon and hold the $65s a bit longer here.

  27. 27
    sane Says:

    Demand was flat per this report, but I have noticed the EIA has been consistantly overstating their demand numbers and then revise down a couple of months later. Demand looked to jump a bit, probably d/t spring break / easter stuffs.

  28. 28
    Dman Says:

    Hi Nicky, nice of you to fly by 🙂

    Z – how do you see the HAL vs SLB valuation thing at the moment? Naively looking on Yahoo shows SLB still twice the PE, but I’m guessing it’s a bit more complicated than that.

  29. 29
    sane Says:

    Off topic question, but does anybody know how much asphalt is going for lately?

  30. 30
    zman Says:

    Sane – very true re the monthlies but the variance is not that big on the reductions. Guess I’d just expect more of a dip with prices up 35% YoY. Demand continues to be relative inelastic to price … only negative job growth/protracted recession going to bring it down.

    Sane – contractor friend told me last week it was more than double year ago price, and as it lags crude up I’d bet it goes higher. Sorry don’t have a number for you.

  31. 31
    sane Says:

    I hear you re gasoline demand. I think the pot is still heating up and not boiling yet.

  32. 32
    zman Says:

    HAL 11x ’09 est
    SLB 15x ’09 est

    That’s a smaller premium than usual for SLB . The discount has shrunk as SLB disappointed re last quarter guidance and HAL has seen this strength from the U.S. onshore. Their growth rates are very similar but I would not expect HAL to go premium to SLB so beyond the low $40s on HAL we’ll need a further rise in SLB or the valuation spread here could act like a ceiling on HAL.

  33. 33
    zman Says:

    Sane – I think much of America does what one of my younger friends does: don’t fill the tank up or just spend $10 per fill up. They drive the same amount and fill up more often but psychologically they don’t feel so beaten up, lol.

  34. 34
    sane Says:

    Thanks Z. I figured the cost was way up. I am trying to choose between concrete and asphalt, and both are nutz.

    Ugh, If I had to go to the gas station more than one a week that would beat me up psychologically, then again I only going to the gas station once every 2 to 3 weeks.

  35. 35
    zman Says:

    Sane – I bet Quarryman knows re Asphalt. I’ll shoot him an email.

    The trick at the gas station, I’m told by my young friend, is to just go when you’re below E, pay $10 each time and don’t look at the gallons readout. Ahhh, youth.

  36. 36
    zman Says:

    SWN completely breaking out. This is a good example of a pure gas E&P running despite gas prices, valuation is always a bit stretched here to what you normally think of on a P/CF basis but people want to be in prior to the quarter.

  37. 37
    Sambone Says:

    11:11 am EST

    Nymex Crude Gains After Gasoline Inventory Dips

    By Gregory Meyer

    NEW YORK — Crude oil futures edged up in choppy trade Wednesday after government data showed U.S. gasoline stockpiles dropping for the third straight week.

    Light, sweet crude for May delivery was recently up 85 cents, or 0.8%, at $101.83 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange was 53 cents higher at $100.70 a barrel.

    The Energy Information Administration reported U.S. crude stockpiles rose by 7.3 million barrels last week, far more than the 2.3 million barrels analysts anticipated. The data was tempered by a 4.5 million-barrel drawdown in gasoline stocks, more than twice the drop expected. Stockpiles of distillate fell by 1.6 million barrels, close to expectations.

    “The report featured both a larger-than-expected 7.3 million barrels build in crude stocks and a larger-than-expected 4.5 million barrels draw in gasoline inventories, so it is directly bullish for the gasoline crack spread,” Citigroup energy analyst Tim Evans said in a note. The gasoline crack spread is the price premium gasoline fetches over a barrel of crude.

    Gasoline demand was also 214,000 barrels a day stronger last week, at 9.33 million barrels a day, the agency reported. The figure seemed to counter concerns a U.S. recession will cut demand.

    The International Monetary Fund cut its forecast for U.S. economic growth in 2008 to 0.5% from 1.5%, and its forecast for world economic growth to 3.7% from 4.1%, citing the “largest financial crisis in the U.S. since the Great Depression,” according to a document viewed by Dow Jones Newswires.

    In Congressional testimony Wednesday, Federal Reserve Chairman Ben Bernanke raised the prospect of a U.S. recession in the first half of the year. In prepared remarks, he said futures markets indicate a “leveling out of prices for oil and other commodities,” which will moderate inflation.

    The dollar pared earlier gains on Bernanke’s testimony. The dollar’s weakness has contributed to oil’s recent price gains as investors seek a hedge in hard assets and exporters adjust prices for the dollar-denominated commodity.

    Front-month May reformulated gasoline blendstock, or RBOB, was up 4.43 cents, or 1.7%, to $2.6835 a gallon. May heating oil was up by 88 points, or 0.3%, at $2.8885 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  38. 38
    zman Says:

    HAL cresting $40
    HK cresting $20
    COP eying $79

    Bernanke just said that one small silver lining (chuckle) is that many alternative energy sources become economic. They’ll probably lambaste him for that but he’s correct.

  39. 39
    ram Says:

    As much as Cramer spoke about CHK prior to NBR, you would think CHK would be close to green. Does it seem to be a low volume day for CHK with the buyers absent?

  40. 40
    Dman Says:

    OK, a new alternative energy Czar: Ben Benanke, come on down!

    Economics 101:

    Step 1: assume all the capital that just got vaporized in the financial sector was still available for productive investment.

    Step 2: Invest it all in alt. energy.

    Step 3: Presto! Problem solved.

    (OK, OK, maybe I’m being a little harsh on the guy.)

  41. 41
    zman Says:

    Ram – I think Cramer has ridden that horse pretty hard of late and that he does not have a lot of swing left there. His NBR push was with the caveat that they have one more quarter of bad news in front of them which explains the muted response to his buy on it today as well.

  42. 42
    zman Says:

    Dman – its ok if you are harsh, the ivory tower the fed lives in is sound proof.

    NG definitely presenting an opportunity to get more UNG puts although ……. the weather this week is going to be colder again than the CPC predicted, I can feel it.

  43. 43
    ram Says:

    Why the doubling of the April COP’s?

  44. 44
    ram Says:

    Is DEEP dead?

  45. 45
    zman Says:

    COP – just too cheap and it gives me a way to small boost in refining sector profits as well. Also, it’s the gassiest of the Majors and we could see an upside surprise due to both oil and natural gas prices here from their upstream unit. Don’t need to hold through earnings, just though others upgrading here.

    DEEP – Deep financial troubles, I would not fish that one.

  46. 46
    zman Says:

    ZTRADE: Out second half of my HAL April $37.50 Calls (HALDT) for $2.81, up 181%. Will liking take May calls soon.

  47. 47
    ram Says:

    Thank you and thank you!

  48. 48
    Sambone Says:

    DEEP is dead. Can’t and won’t get enough funding to keep the doors open. Maybe B52 Ben will lend them the cash he’s printing. Oops, forgot DEEP isn’t a bank. LOL

  49. 49
    zman Says:

    Thanks Sam – funny how the banks who created the housing bubble and the sub prime disaster aren’t evil but oil companies are.

    Oil up $0.55 (I’m sure that’s XOM’s evil doing) and natural gas is slightly green on the day as well.

  50. 50
    Sambone Says:

    Banks are allowed to make profits, but Oil companies aren’t allow profit. Come on Z, get with the program. LOL

  51. 51
    zman Says:

    Sam – what they should do is “take those oil company profits” and give them to the likes of Bear Stearns where everything was rosy one day and the next the company was going to file bankruptcy.

  52. 52
    ram Says:

    Since we are in oil company bashing time, has anyone done a study that if there were no restrictions for oil drilling, the U.S. could be independent?

  53. 53
    sane Says:

    That kangaroo court yesterday was just a show by the government.

  54. 54
    sane Says:

    I personally doubt that the US could be independent even without the drilling restrictions. Maybe with a dramatic demand reduction and a removing of drilling restrictions, maybe it is possible but otherwise no.

  55. 55
    zman Says:

    Just so no one is confused by RAM’s sarcasm, I NEVER bash oil companies.

    Ram – I don’t think we would be independent but we would be better off than at present. 3/4 of the coast line is off limits. Big swaths of the Rockies too. Then you’ve got ANWR etc… The issue has to be addressed on three fronts: access to reserves, increased efficiency of autos, and alternative energy.

  56. 56
    Sambone Says:

    NIMBY baby, NIMBY

  57. 57
    zman Says:

    Sam, yeah NIBMY will probably kill that S. Carolina nuke too.

  58. 58
    zman Says:

    Anybody got a favorite of the Alt Energy ETF’s … I listed 5 in yesterday’s post but I have not done the DD to differentiate them. still think they are going to be hot for the summer. There are probably several more not on my list.

  59. 59
    Jay Reynolds Says:


    Paying upwards of $20K/ac for leases in Tarrant County, TX.


    Talk about a redneck renassiance… if those kind of numbers hold true up here it will look like False River after the Tuscaloosa Trend hit. Consumption (bass boats, 4X4’s and new double wides) was so over the top that National Geographic ran a feature. At the time they were paying up to $40K for a lease on a lot with a shotgun house.

    CHK is trying to buy minerals up here, offered $250K for 100 acres but landowner balked after doing the math and seeing that he could be passing up >$20K/day in royalty income.


  60. 60
    zman Says:

    Oil up $2 as gasoline prices storm 3% higher.

    Jay – had heard anywhere from 10 to $18K of late in the fairway…guess the offer is allowing them to write bigger checks. Still very economic for them to at $9 NG to spend that much in the core. Forget about a refund check from the govt. this is a serious boost to the local economy, lol. Bernanke should be encouraging oil companies to increase capex, not banks to do more secondaries.

  61. 61
    Jay Reynolds Says:

    RE 58.

    Longtime follower of ENER, but somewhat challenging company to unravel.

    They are tripling capacity for their flexible, thin film, amorphous solar panels mfg in rolls 1.5 miles long in a fashion similar to printing a newspaper. Quite complex process but uses NO crystalline silicon.

    Company pioneered field of amorphous (non-crystalline) materials science, invented NiMH battery, rewritable DVD’s, and looks to be large beneficiary of PCM (phase change memory), non-voliatile, rad-hard, etc..

    New mgt after 40 years of losses as R&D powerhouse, excellent IP base in whole field, look to be close on roll to roll mfg process for OLEDs (Organic Light Emitting Diodes) – feed them electricity they make light, feed them light they make electricity..

    Anyhow, google Jay Reynolds and “Energy Conversion Devices” or “Fuel Cells” and you may find some copies of previously published works I did a few years back.

    Overall, I see them shortly settling their business re Cobasys (the Michigan company you see featured on CNBC) with Chevron, hopefully then spinning off their solar unit.

    Dark horse to be sure.


  62. 62
    zman Says:

    Jay – Thanks Jay, will do. Been a little worried about a coming over-supply of thin-film capacity

    Oil up nearly $3 now. Gasoline up 4.2%. Fill up your tanks today as $4 gas is on the way.

    My SU Calls waking up.

  63. 63
    Jay Reynolds Says:

    RE 60

    The acreage I have is up for grabs, tied in with a large block closer to CHK’s hz in DeSoto Parish.

    I am working to get a handle on their completion costs. Best info I have is that conventional vertical with large frac in the Cotton Valley at about 8.5K’ is around $2.25 mil. Don’t know what the horizontal is costing them but will see what I can find out and let you know.

    I’m guessing it’s well below the 10-15 mil number mentioned here.


  64. 64
    Popeye Says:

    SII is on fire today.

  65. 65
    zman Says:

    JY re 63. I was trying to be conservative with the thought that they might be in lower end of the Haynesville – down at 13,000 feet and with an extended later, the early wells could cost well over $10 mm and their F&D would still be very good if you’re punching 20 mm/d IP wells.

    NFX is drilling Hz extended reach wells to a much shallower depth in the Woodford for ~ $7mm so maybe you are right about the $15 but I bet we’re looking at at least $10mm.

    Popeye – yeah, going to need lots of bits and mud…I never took any unfortunately.

  66. 66
    zman Says:

    DVN – that was quick.

    HK – waking back up, will drop my April 20s if they don’t keep moving higher soon. Still plenty exposure here but I am wondering if they will PR the 2 horizontal wells prior to the 1Q call or wait (by then they should have 3 more Hz wells to talk about). They have not yet said when 1Q will be released but you got to think it’s early May.

  67. 67
    Dman Says:

    Z – OII is the only service stock on my screen showing red. Can’t help but wonder if there’s something out there… any ideas?

  68. 68
    zman Says:

    OII – no, have not seen anything, could be a slight in some analyst’s morning comments. Their trading peers are up, especially FTI, as are the DW rig co’s. Could be the old start the day down and not recover with the group so everyone thinking something wrong…sometimes those are great day trades (not that I would know about that kind of thing) if they manage to go green before the close.

    CHK at new highs post its deal, over $47 now.

    HK back well over $20.

    HAL – I’m out early it seems and the break out is on. Won’t chase.

    NBR working nicely now, a little earlier than I thought.

    SU – topping $100…woohoo!

    DVN – from down $2 to up $2…nice

    COP has taken $79

    APC waking up.

    UNG down of course and will wait for the moment of the gas report tomorrow to decide to take more puts or not. Anyone seen the consensus number???

  69. 69
    zman Says:

    CLB = dooohhhh!

  70. 70
    Dman Says:

    Re 68, UNG green on my screen …

  71. 71
    zman Says:

    wow oil up 3.76, rbob up 5.3% …silly drivers.

    Dman – sorry re UNG, meant my puts are down today. Gas up 15 cent due to oil.

  72. 72
    zman Says:

    new all time high for May contract RBOB at $2.77 … pretty muted response from the group.

  73. 73
    Sambone Says:

    2:23 pm EST

    Nymex Crude Jumps, Following Gasoline


    NEW YORK — Crude oil futures shot more than $3 higher Wednesday after government data showed U.S. gasoline stockpiles dropping for the third straight week.

    Light, sweet crude for May delivery was recently up $3.23, or 3.2%, at $104.21 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange was $3.02 higher at $103.19 a barrel.

    The Energy Information Administration reported U.S. crude stockpiles rose by 7.3 million barrels last week, far more than the 2.3 million barrels analysts anticipated. The data was tempered by a 4.5 million-barrel drawdown in gasoline stocks, more than twice the drop expected. Stockpiles of distillate fell by 1.6 million barrels, close to expectations.

    “We’re following gasoline,” said Tim Evans, an energy analyst at Citigroup in New York. “There was a little bit of a tug of war over what’s more important, the draw in gasoline or the build in crude. It looks like gasoline has won the battle.”

    Gasoline demand was also 214,000 barrels a day stronger last week, at 9.33 million barrels a day, the EIA reported. The figure ran counter to concerns a U.S. recession will cut demand.

    Front-month May reformulated gasoline blendstock, or RBOB, was recently up 11.87 cents, or 4.5%, to $2.7579 a gallon. May heating oil was up by 5.75 cents, or 2%, at $2.9372 a gallon.

    The International Monetary Fund cut its forecast for U.S. economic growth in 2008 to 0.5% from 1.5%, and its forecast for world economic growth to 3.7% from 4.1%, citing the “largest financial crisis in the U.S. since the Great Depression,” according to a document viewed by Dow Jones Newswires.

    In Congressional testimony Wednesday, Federal Reserve Chairman Ben Bernanke raised the prospect of a U.S. recession in the first half of the year.

    In prepared remarks, he said futures markets indicate a “leveling out of prices for oil and other commodities,” which will moderate inflation.

    —By Gregory Meyer, Dow Jones Newswires

  74. 74
    scoop006 Says:

    Z-Re#18 Time to sell for a 30%+ nice day trade and buy back on a – day?

  75. 75
    zman Says:

    Scoop – not a bad idea but I don’t really want to get too day-trady around here. Still, $ is $ …probably need a rule like “25% or 50% same day unexpected gain is always a sell”

  76. 76
    Sambone Says:

    I’ve been doing some research and since the refiners are not running at 100% (They are not making any money), the gasoline stocks are dropping. Now if the summer driving surge happens then we may see shortages. But I read a recent survey and only 16% of the responses said they were going to drive on vacation this summer compared to 48% last year. So we not see a surge in gasoline. Any thoughts?

  77. 77
    zman Says:

    Sam – agreed, I think the move is way over done, as do refining stock investors who are barely nudging the group green today. We’re still at multi year highs on storage so a record here now is a bit whack. Still working through some of the numbers but the refiners won’t stay at 82% (another record low for this week in history forever).

  78. 78
    Popeye Says:

    “largest financial crisis in the U.S. since the Great Depression,” ???? Where are the bread/gas lines?

  79. 79
    zman Says:

    Re 78 – It’s a plastic veiled depression. Plenty of supply high priced goods bought by American’s carrying increasing credit card debt.

  80. 80
    uop Says:

    was away had trailing stop on UNG and, of course got stopped out,
    but I believe its ok to go for May 47??

  81. 81
    zman Says:

    Re May UNG, probably so, I’m waiting to see tomorrow’s storage number at this point but yes, this is an oil drag rally (which itself is probably overdone).

    Anybody see the gas storage consensus?

  82. 82
    scoop006 Says:

    Z YGE +$3.

  83. 83
    zman Says:

    scoop, yeah, group en fuego … I await the first big pull back but it seems to be doing what we thought it would with high oil as summer approaches.

  84. 84
    regale Says:

    Re #33

    Glad you think 48 is young, lol.

    That full-sized 4X4 bought in 2000 to tow the horses is murder on the gas credit card. Soon to be replaced by a hybrid, and the nags will just have to hitch-hike.

  85. 85
    Jay Reynolds Says:


    Assuming that refiners are not long able or willing to accept diminishing crack spreads, who do you think is most likely to break ranks first ratcheting up refined products costs and most benefit thereby?

    Assuming that the Haynesville Shale play in North Louisiana is for real and that there is a “fuse” running against leasehold development timelines, which onshore driller is most apt to profit? I understand that the HAL office in Bossier City is deep in strategic planning for accelerated deployment of services.


  86. 86
    zman Says:

    Jay – probably VLO. Most efficient ops would allow them to profit a little more earlier…think it would be hard to see in the financials and the others would follow quickly since its mostly public knowledge on any big ups or downs. Todays rally in RBOB, if it is the start of a bigger move, could yield (and I think it will) a move higher in utilization next week. The group really needs a concerted effort to find ways to stay off line fixing and upgrading. Storage is still very full. Production remains very high despite the low utilization … still looking for a reason other than increased blending but have not found a satisfactory answer here.

    Re Haynesville: I like NBR for that. Also, CLB is going to benefit from having up to 10 “touches” per shale well in a new play and CRR for all the propant for fracs. As you say, HAL won’t be left out, nor BJS, nor SLB.

  87. 87
    jiveyjr Says:

    ok, I’ll guess that Forest Oil buys HK…

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