Tuesday Morning

131 thoughts on “Tuesday Morning”

1. Petrohawk Energy initiated with a Buy at Merrill

2. Isle – where did you see that?

3. z- Another great overnight summary and analysis! Do you have help or are you gonna do a blogger burnout?

4. Thanks Reef – one armed paper hanger on the writing + a little admin help. I love this stuff too much to burnout.

   Anybody have access to Merrill?

5. Bloomberg wire had Merrill rating HK a buy

6. HK target $27

7. Any deets?

8. Waiting for details…

9. Z- Did you see today’s The New York Times article re Marcellus Shale?

10. 30% upside for PT, didn’t leave themselves a lot of room. Love to see the EBITDA or CFPS estimates.

    Scoop – yes thanks, its in my night reading bin for tonight, do I need to look at this am?

11. No

12. Will try to get you ML report Z

13. Isle – zmanalpha@gmail.com if you please. Thanks.

    Scoop – will read this am anyway

14. NYT- Estimated $700MM spent to date. That is low by 1/2. Chief has spent over $200. Just land grab by CHK, RRC, COG, XCO exceeds 2,000,000 acres at $300/ac exceeds $600MM.

15. Haynesville: JPM said acreage was going for $10,000 an acre….that sounds really high compared to what I thought a week ago.

16. Hz- Between $3000 and $10,000. closer to lower number…

17. HK- 70,000 acres@$10,000/acre = a number
    that means they need to be bought out

18. JP Morgan’s quote:

    we have talked to several operators and they have confirmed that CHK is leasing just the deeper rights for 7 to 12,000 and … outright buying mineral rights for 7 to 10,000 per acre.

19. agreed, if the 10K was correct. JPM trips overthemselves to say what a great play this is, that the acreage is worth 40 or $50K per but then slams CHK for buying it at $10K. Sour grapes.

20. Buy minerals for 3x of lease prices makes sense and is a general historical multiple throughout the patch

21. 8:36 am EST

    Nymex Crude Eases Below $109/Bbl; Dlr Impact

    By Nick Heath
    Of DOW JONES NEWSWIRES

    From MARKET TALK:

    [Dow Jones] Nymex crude eases below $109/bbl as the dollar strengthens overnight, while heating oil drops less amid a strong gasoil market in Europe. Nymex May crude -$1.08 at $108.01/bbl. (greg.meyer@dowjones.com)

    LONDON — Crude oil prices strayed little from their previous closes in London Tuesday, supported by continued strength in distillate markets and geopolitical developments.

    Having scrambled back to near-record highs Monday, crude prices could now be on course to test uncharted territory, analysts suggested.

    “The highs are like a magnet, and we are not very far away. Naturally it attracts the money,” said Eugen Weinberg, analyst at Commerzbank in Frankfurt.

    At 1134 GMT, the front-month May Brent contract on London’s ICE futures exchange was down 42 cents at $106.72 a barrel.

    The front-month May light, sweet, crude contract on the New York Mercantile Exchange was trading 33 cents lower at $108.76 a barrel.

    The ICE’s gasoil contract for April delivery was up $5 at $1,009 a metric ton, while Nymex gasoline for May delivery was down 230 points at 276.05 cents a gallon.

    Oil prices jumped briefly higher after Iran’s President Ahmadinejad announced Tuesday that Tehran is starting work to install 6,000 new uranium-enriching centrifuges at one of its nuclear plants, feeding oil market concerns that already-strained tensions between Iran and the West, particularly the U.S., could deteriorate further.

    While doubts over any imminent confrontation allowed oil prices to subsequently relax, the oil market’s sensitivity to developments in the region remains heightened.

    “There is always a risk, but given the current market conditions, the state of the U.S. election and everything else, anything happening this year is unlikely,” said Simon Wardell, analyst at Global Insight in London. “But, obviously, it will still have some sort of impact on the oil market.”

    Higher distillate prices continued to channel support into crude oil prices. Monday’s news of a fire keeping Neste’s 200,000 barrel a day Porvoo, Finland refinery off-line into May propelled ICE gasoil futures to more record highs, the April contract peaking at $1,017 a ton Tuesday. The strength spilt over into crude, even though the refinery’s outage also spells less demand for oil.

    “Most of the support to the oil complex is still coming from the middle distillate part,” said Olivier Jakob of Swiss consultancy Petromatrix, noting strength across gasoil, diesel and jet prices Tuesday.

    While Monday’s sharp climb leaves crude prices within striking distance of their record heights, analysts warned that signals of weakening demand amid soaring prices may pose an obstacle to further advances.

    “It is still very important to watch out for any further signs of declining demand for energy from the U.S. and slower global growth rates, which could still undermine crude futures,” said Andrey Kryuchenkov of Sucden Research in London.

    U.S. Energy Information Administration chief Guy Caruso said Monday that he expects upcoming summer U.S. gasoline demand will fall by 85,000 barrels a day compared with last year the first decline since 1991. He said the EIA expects national average retail gasoline prices to climb above $3.60 a gallon during the peak of the summer driving season.

    While a declining U.S. dollar has been a catalyst for higher crude prices in recent months, fresh weakening of the greenback appeared to assume secondary importance Tuesday, much as it had Monday. But currency moves would remain a focus for the oil markets as crude prices advance on record level, some said.

    “Although ignored yesterday, dollar weakness may still play a strong part as there are potential longs looking for reasons to buy,” said Andy Riddell, energy broker at ODL Securities in London.

    -By Nick Heath; Dow Jones Newswires

22. Hk- doing the right thing, May calls looking smart(zman yesterday)

23. I put the IPAA schedule at the bottom of the post again as today is really the big day for me at least in terms of names I want to hear from.

    HK trying to run on the Merrill upgrade. Those reports take a bit of time to write / model and you know the analyst has been working on it since the mid teens and kicking himself for missing the move into the $20s. My point is, he’s going right in front of earnings and despite the run so I’d like to see why he didn’t wait on a pullback. I suspect its a combination of horizontal outlook and the new Shale.

24. reef- lucky to have that many brokers making phone calls and sending emails and IM’s re the new coverage.

    CHK should be done with their Weil presentation now, stock up a smidgeon.

    NG looking to test $10, up $0.13 at $9.92 as crude comes flat on the day.

25. Reef – can you expand on #17 ?

26. I’m a little surprised that oil isn’t testing $110 on the Iran centrifuge news.

27. Natanz = place of next generation U.S. cruise missile test. I’d bet Bush hits the site (or the Israelis do) before he leaves office.

28. 17- That seems to be near $700,000,000 add to Market Value, about $3.5/sh

29. Re 17: The nice thing is they got the first 30,000 acres on the cheap (as no one was onto the play but CHK and those acres underly HK’s Elm Grove field), and the next 20,000 quietly also pretty cheap (withing a week of their analyst meeting)… so if they don’t get bought it was well worth purchase price…but they’ll get bought.

30. Sitting here with my landman now.

    Relatively ill-informed small prospective lessors in the Haynesville turning up there noses at opening $800/ac lease bonus, “you’re bottom fishing”.

    Highest I can confirm to date is $3,000/ac.

31. XCO- how many acres in the Haynesville?

32. JR- That is what we hear, $3000/ac for leases and $10,000 for mineral rights

33. NFX stretching towards an all time high today…current 56.93 would be a closing high. $57.75 would put us in record territory.

    Re XCO Haynesville: I show 154,000 acres

34. Guys if you acreage there I think JPM would give you 40 or 50,000 for it so you might want to give them a call, lol. What are they smoking?

35. Tristone raises Newfield Tgt to $78 and raises it to Top Pick

36. Nice greening of the group taken place, especially nice relative to the market.

    CHK through $48
    HK resting 22
    PQ still not moving much and I’d point out that they had 24,000 acres in the area we’ve been chatting about as well.

37. JPM- smoking HK/XCO/PQ/GDP buyout work

38. xco up .38 all time high at $21.71

39. 9:43 am EST

    Nymex Crude Steadies As Distillate Rally Eases

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures steadied Tuesday amid easing prices for distillate fuels, among the main products refined from crude.

    Light, sweet crude for May delivery was recently down 22 cents, or 0.2%, at $108.87 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange was off 22 cents at $106.92 a barrel.

    Nymex crude rose nearly $3 a barrel Monday, aided in part from an announcement that a major Finnish producer of gasoil had delayed its restart after a fire. After climbing 4.2% to settle at $1,004 a metric ton Monday, gasoil had recently dropped 75 cents to $1,033.25 a metric ton.

    “It seems to be losing speed,” Tradition Energy analyst Gene McGillian said of the distillate rally.

    Over the last several months, dollar-denominated crude oil has closely tracked moves of the greenback, as a weaker dollar softens the impact of higher prices for oil buyers using other currencies. The euro was recently $1.5701 Tuesday, from $1.5707 late Monday.

    “Although a detachment from the U.S. dollar has developed this week, we still view the dollar as a key pricing ingredient to the oil and we would expect a reconnection as this week proceeds,” said Jim Ritterbusch, president of Galena, Ill., energy trading advisory firm Ritterbusch and Associates, in a note.

    Meantime, traders are facing the prospect of weaker demand in the U.S. The U.S. Energy Information Administration now sees domestic gasoline demand averaging 9.405 million barrels a day this summer, a drop of around 35,000 barrels a day from a year ago, according to its latest short-term energy outlook issued Tuesday. It would be the first drop in U.S. summer gasoline demand since 1991.

    The outlook also said the agency expects crude oil output from the Organization of Petroleum Exporting Countries will rise by about 1%, or 310,000 barrels a day in the second quarter from the first quarter, to 32.59 million barrels a day.

    Separately, OPEC’s president told reporters the producer group has no plans to formally raise its output quotas amid prices now daily trading above $100 a barrel.

    “The supply is there. We are (now) entering a period of lower demand…demand this year is going to be lower than expected,” Chakib Khelil told reporters in London.

    Khelil, who is also Algeria’s oil minister, placed the blame for the current $100 a barrel oil prices on a weak U.S. economy that was undermining the dollar, giving financial speculators room to bid oil prices higher.

    Early in the session, Nymex crude jumped to $109.64 a barrel after Iran, OPEC’s second-largest exporter, announced plans to install thousands of new centrifuges to enrich uranium at its main nuclear plant, in defiance of U.N. Security Council calls to freeze the sensitive process.

    Front-month May reformulated gasoline blendstock, or RBOB, fell 2.38 cents, or 0.9% to $2.7597 a gallon after settling at a record on Monday. May heating oil was up 1.40 cents, or 0.5%, to $3.0983 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

40. Thanks Isle …. I like it when people upgrade stocks after I buy them. That’s the way it is supposed to work. That scrub at JPM needs to get with the program.

    XCO – yeah, I missed that one. Glad you were on top of it. That’s by far the best performer since CHK highlighted the play. I should have been on GDP too as I used to cover/know those guys but I was asleep at the wheel. Will not chase GDP, may have to take a look at XCO as you know T Boone will be on CNBC running it more soon. And it’s still cheap.

41. About 20 public companies have exposure to the Haynesville.

    Biggest holder is CHK but in terms of exposure vs total company valuation the biggest exposure goes to

    1) QBIK (which I highlighted way back but did not and will not touch), then
    2) GDP,
    3) XCO,
    4) GMXR,
    5) CRK (one of my favorite names but I don’t often traffic the options)
    6) PVA,
    7) HK,
    8 SM,
    9) PQ,
    10) CWEI

42. DRYS tapping on $70 … been awhile. Rates continuing to tighten their trading range:

    http://www.dryships.com/index.cfm?get=report

43. Re #26-27

    As I understand it, the Irananian centrifuges are well within Iran’s rights under the NPT (remember that? Quaint old thing: the “T” in NPT stands for “Treaty” ).

    But I don’t suppose it’s the NPT that is restraining Mr Market here: what it cares about is “is Bush going to hit them and double the price of oil overnight”. So it is curious that the market doesn’t respond at all to the 6000 centrifuges. You would think that even a 5% chance of doubling the oil price would be worth something….like maybe a 5% jump.

    Instead there was a 0.5% jump, so in very crude terms (pun intended) the market seems to rate the chances of Bush doubling down in the Middle East at 0.5%.

    That seems a bit paltry. I’d give it better odds than that. What does Mr Market know that we don’t about W’s plans?

    Maybe a decent chance of the Iran-hit is already factored in and Iranian actions are mostly irrelevant.

    BTW, I don’t think any generation of cruise missile will make much of a dent in Natanz unless it’s a decent sized nuke & then, depending on the prevailing winds, there could be fallout issues in the Green Zone & Tel Aviv (just to give some examples).

    What happens to WTI if Western oil-service workers evacuate the Gulf to escape the nuclear fallout?

    Given how crazy the scenarios very quickly become, maybe the market just shrugs and says “who cares, its too hard, we can’t figure it out”.

44. Ok, maybe 100 of them. Or a B2 full of next-gen JDAM. I think what is likely is that Rice goes back to the UN for more sanctions and “what next” talk and that that inspires Ahmed to rattle his Straits of Hormuz Saber.

45. Z:
    is APA still attractive now ?

46. Contango (MCF) this morning issued PR that says they are buying more interest in their “Dutch” and “Mary Rose” projects immediately offshore Louisiana AND they have asked Merrill to solicit buy offers for these 2 projects. Stock reacting in positive fashion, up ~$5.00 today.

47. uop – APA …I think so. Its had a pretty good run but the news there is very strong.

    Jy- I wrote about these guys quite awhile back but never bought the shares and at the time no options. So feel like I missed it but I will revisit.

    Just added a E&P tab at upper left as a repository for valuation metrics, hedges etc on the group.

48. Late winter/early spring last year, the US had three carrier battle groups in the “Pond”. They were preparing a strike, but the military level heads finally went and told the Hawks that the US couldn’t handle a three front war.

    I don’t believe the US will do anything, but I would not count out a strike by Israel.

49. Group caught a little selling pressure, hard to fathom HK stays this low with Merrill and IPAA on tap. Interesting release of the acreage news on the same day as IPAA and Merrill. It could makes one a little nervous about the rate on the upcoming Hz wells. Gotta go with your gut on that and mine is saying hold but I will be exiting my remaining April calls soon.

50. Gas running out of steam?

51. Is it just me or is the action lately in the gassy & service stocks becoming whippy, trippy, zany & zippy? How can a stock go in so many directions at once? Maybe I’ll forget about learning how to day-trade.

    But seriously, is anyone else seeing this or do I need to back off on the caffeine?

52. Dman – you are not alone. I’ve adjusted my hold times (shorter) accordingly. This seems to happen, some would say, near a top, but I think in this case it is more along the lines of a group that is torn between obviously improving fundamentals and disbelief in the economy and continued improvement in said fundamentals. Also there is the constant thought that you need to sell your winners to cover your losers.

    My point has been that prices don’t need to keep going up (oil and gas prices) for the stock prices to continue to rise (at least in the names I’m in). It helps if they don’t tank but I don’t really see them doing that.

53. HK IPAA presentation about to begin.

    They’ve bumped their reserve potential from 4.7 as of 3/12 to 6.4 Tcfe as of today.

    That would be the additional acreage.

54. Z:

    with the high oil prices, should one not invest in some of the best drillers, equipment for drilling etc??

55. It gets a little more complex as capacity in the different service components determines pricing and some have become bloated. We are in NBR which is a cheap driller.

    HK call started…available on their website.

56. More HK: Estimated EUR now up from 3 to 4 Bcfe in their presentation. That’s probably still conservative.

57. HK presentation over: biggest takeaways I saw were:

    1) the increase to reserves per well estimate.
    2) The map of the Taylor sand shows two of the Hz wells completing and one listed as flowing back. Hard to tell if they will have more to say before 1Q report.
    3) guidance was unchanged at 25% YoY growth

58. Tristone took up their price target on NBR from $32 to $40.

    They also took HAL from $46 to $55.

59. Critical Iranian nuclear infrastructure is probably dispersed. Israel wouldn’t attack without U.S. approval, probably would require U.S. assistance and would be preceived as a U.S. proxy. Iran has been at war with us since the embassy takeover and we have yet to respond. We don’t have the ground forces needed to ensure the job gets done or to influence events post attack.

60. z check out NBR June P&C

61. Scoop – long straddle…betting it moves big but don’t know/care which way.

62. C – Your probably right.

63. Sam – Are you still holding on to the SKF trade? Do you think the financials have been save from themselves?

64. From the Department of Random Observations:

    The tone in NBR seems to be a tell for the gassy & service complex… it’s as though NBR is an indicator of the level of conviction in the move. Since it disappointed repeatedly in the last few years, it’ll be a while before everyone gets on board that particular train.

65. CNBC was all in a panic over “negative” ACI comments yesterday …and look at them and the rest of the coals now.

66. C – Yep, looking to buy more SKF. Waiting on a rally in the banks short term and then buy more under 100. In regards to Financials, you havn’t seen nothin yet. IMF expecting 1 Trillion write off around the world and we’ve only seen about 232 billion so far. What I don’t get is that S&P and Moody’s can downgrade Sigma Finance’s paper(Father of the SIV investing), but they don’t downgrade MBI or ABK. Did you see the downgades of paper at BAC yesterday? Owners of WB better watch out. They bought Golden West at the height and most of their lending was in California. Folks in CA who have home equity loans aren’t paying them because they know that if the bank forecloses on them, the first lender will get the house and the bank gets nothing. I could go on for hours.

67. Sam – Understand. I hold some SKF also. I’m guessing that the preception is that the Feds are guaranteeing the system, have set the floor so traders feel the bottom is in. Yor’re saying that the problem is too big for Treasury and the Fed right?

68. DVN selling $2.2B in assets – http://www.reuters.com/article/marketsNews/idINN0836442320080408?rpc=44

69. A – I guess things change: Here’s what DVN said yesterday:

    Devon is actively looking for more shale resources but is not looking to increase this year’s capital budget, nor is it selling any assets as some peers have recently done, company boss Larry Nichols told Reuters.

70. So you put #68 and $69 together and you get an acquisition of a “shaley” company in the U.S. They could pick up PQ with the proceeds from this deal as a tax free swap. Enterprise value is $1 billion and they are in the Fayetteville, Woodford, Haynesville (via Carthage field) and Hartshorn.

71. RE #68&69. Can management be that disingenuous and get away with it?

72. John Kildfuff has turned bearish energy – says he expects to see a 20% drop.

    Anyone know what the CFTC have said this morning? Its been aimed at the energy sector…

73. Z why don’t you broker the sale of PQ to DVN .Would be nice commission

74. Scoop – I think I took DVN wrong on the quote, they said they weren’t selling assets right after they mentioned shale. I’ll bet they meant they were not highgrading or selling shale they didn’t want to buy acreage they do want. Probably had nothing to do with international ops which, as they story says, they have been trimming. The others they are referring to would be CHK in the Woodford, if I had to guess.

75. Sam or anyone: what is Merrill’s market maker symbol and do they have more than one?

76. Re 73: Cut my energy teeth doing that. No thankyou.

77. z- what was the idea behind al the NBR trades last week and this week?

78. C – Hmmm, let’s see, B52 Ben can print all the money he wants. Hank can bend the rules (BSC bailout). So yes the US government can take all the bad toxic paper off the US banks. But then what happens? The US$ goes down by 1/2, nobody buys our bonds (Credit worthiness), inflation goes to 20%, etc. etc and so on. This reminds me of the 30’s and of Japan. Who loses? The banks and the US taxpayer. The line goes; “Man goes to see his banker and saids that we’re in a depression. Banker replies when the man loses his job, it’s a recession, but when the banker loses his job, it’s a depression”. We all are at a historic time. It’s called “Deleveraging”. This is a lifetime event, and it will not be painless.

79. NBR is a trade on increased N. American natural gas drilling activity.

80. #75, no clue

81. C – one more thing, we’re increasing our debt by 1 Trillion $’s every 15 months.

82. Ok, thanks, was just looking for them on Level II and didn’t see an obvious choice.

83. Sam – Roger that and therefore an historic opportunity. By the way, cost inflation for ag production inputs are without precident. Real inflation seems baked into the current cake (not to mention loaf of bread). Phosphorus is double this year over last as an example.

84. Uncle Phil

    http://www.321energy.com/reports/flynn/current.html

85. Would like to sell some covered calls against UNG, near term expy? Any suggestions?

    TX, JR

86. C – Beer = Hops up 300% in one year.

87. Z-MLCO Merrill Lynch

88. EOG April $140s are a little fat, .45 x .65

89. Thanks Bob!

90. CHK wins sealed bid in Haynesville shale at approx 1,000 acs, 4,000-4,500/ac lease bonus.

91. Z – what are you seeing across the board for inventories tomorrow? I presume we are not going to see the massive build we saw in crude inventories last week. So as they have run the market up $10 since that I shudder to think what they will do with a lesser number…

92. BP, ConocoPhillips team on Alaska natural gas pipeline

93. Nicky – last weekly was easy to see coming from the build standpoint. This week I would expect it to be smaller as you and the market say. I think the danger lies in a second big gasoline draw that may materialize and send gasoline and then oil higher. But like I said, it’s pretty hard to say except that imports will very likely back away from last week’s bloated levels yielding a smaller crude build. Refiners appear to holding the line on utilization so that could send gas up two and from what I can tell about Spring break demand it generally spikes for 2 weeks and last week was the first. So again, I’d think higher gasoline prices but I’m not exposed to refiners so I have not given it a whole lot of thought today.

94. Thanks Sane … I’ll believe it when I see it and then only maybe.

95. I agree Z.

96. C. re #59

    I think you are right in all points except 2nd last sentence. Here is a timeline of the US-Iran relationship/conflict:

    1953: US backs overthrow of democratic Iranian government because it nationalized the oil industry.

    U.S. installs the Shah (remember that guy?) and sells F14 Tomcats to Iran, amongst other things. Iranians under brutal dictator for decades.

    1978: Iranians kicked out Shah but replaced with theocratic regime that did a fair imitation of crazy for quite some time, including all the students piecing together shredded CIA documents (who could forget that?) in the 1979 embassy crisis.

    1983: Donald Rumsfeld “was the most senior conduit for crucial American military intelligence, hardware and strategic advice to Saddam Hussein” in his war against Iran.
    http://en.wikipedia.org/wiki/Rumsfeld

    Infamous footage of Rumsfeld meeting Saddam in 1983.

    1984-1986: Reagan administration sells anti-tank & anti-air missiles to Iran (no that isn’t a spelling error).

    1988: USS Vincennes shoots down Iran Air Flight 655

    2000: US apologizes (sorta) for the 1953 coup.

    http://transcripts.cnn.com/TRANSCRIPTS/0004/19/i_ins.00.html

    2003: US invades Iraq & … etc etc.

    2008: Iran still tries to operate the F14s & the US tries to keep their mitts off the spare parts.

    So its’ a bit of a tangled web, it seems to me.

    The Iran thing is the elephant in the room when it comes to oil prices. Few other factors could double the price overnight.

    Sam sez nothing will happen & my gut feeling agrees.

    And yet… I find it hard to see W leaving office without taking a shot. The history above suggests *anything* is possible. Just another reason I won’t be short energy anytime soon.

97. Hmmm, just read this. I’m trying to fiqure out how to make $ off it. Any ideas?

    http://www.latimes.com/business/la-fi-railcars7apr07,0,1052030.story

98. DMAN- Great review. A point often made is that U.S. presidents have looked at action against Iran with distaste since the aborted Tehran embassy rescue.
    Don’t forget the bombing of the U.S. Embassy in Beirut in ’83 followed closely by the bombing of the Marine Expeditionary Unit compound at the airport, with the loss of 241 Marines. Those bombings were the work of Hesbolla. In response we pulled out. Hezbollah and Hamas are Iranian proxies and active effective opponents of our policies and goals. My boots were on the ground – USMC Intelligence Officer,Retired.

99. NG giving back a little now, down 12 cents (1%)…UNG flat.

100. xco- cannot log on Presentation site for H W

101. The FED minutes are out: I am sort of embarrased for them. They should get out more; especially buy gas and groceries.

102. No need in an ivory tower

103. NFX call at IPAA starting now:

     http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=63798&eventID=1819118

104. xco slides-Hy. page 11 and 18 Looks like an east texas play

105. ZMAN – Did you ever check on the SEC’s decission on changing how E&P stocks list proven reserve’s?

106. yes, I found nada new about it. no time line for implementation even though everybody seeems to think its a good idea

107. Z thanks for #93. Its probably stating the obvious to say right now that the whole complex looks bullish! We look like we need a thrust higher…..

108. Zman:

     is UNG finally getting cold feet ?
     all my HK options are in the green except May 25.

109. NFX showing off its extended lateral program in the woodford. Showing them to bit to a 4.5 Bcfe per well type curve which means that for $6.7 or $6.8mm they are costing you’re under the $2 / Mcf threshold. This presentation looks like they are moving closer and closer to making a decision to go with 40 acre spacing…I hear these are yielding IPs of 6 mm/d + which is very nice.

110. listening to NFX, back shortly

111. Just sent you Merrill report on HK 🙂

112. NFX sees costs continuing to fall in the woodford.

     if they go to 40 acre spacing, it equals 7 Tcfe vs ye of 2.5 Tcfe. Amazing they don’t get more credit for this play.

113. isle – saw it, thank you very much!!!

114. NFX – 250 wells in monument butte. This is the one I was saying the other day that could provide upside to their oil volumes. They just added another rig here and 250 sounds high to old forecast but will check.

     They think they have 200 mm barrels of oil here which is 1.2 Tcfe on an equivalents basis, again that up again 2.5 in the whole company at ye 2007.

     Plus …

     Mancos shale: 2 to 3 wells will be tested by HAL using logs NFX says they have never even heard of in these tests. They hold 110,000 acres here already by production. This could be very big…no date on a test but I’d bet they talk about it more in the breakout session…next year we will be there broadcasting from the conference…and they will be talking about on the 1Q conference call.

115. UNG / NG – I don’t think today’s action meant much, it tried for $10 and failed which is good volume appeared light and it could try again on any cooling of a weather forecast. Next week’s report goes up again a draw and everybody will be thinking about that as they decide weather or not to hold gas through the transition from withdrawals to injections. I’ll have something on tomorrow’s posts about this in the morning.

116. thx for that history on Iran…

117. Re Iran history: for those of you who like historical fiction James Clavell wrote a hefty tome called Whirlwind about the time up to and during the overthrow of the Shah written from the perspective of a bunch of Brits flying helicopters for oil companies there before everything got nationalized.

118. Cattle, re #98. I think it is indisputable that Hezbollah and Hamas are clients/proxies of Iran. I wouldn’t claim to know how much freedom of action they have (i.e. how long the leash is) but I would assume that Iran approved or at least permitted Hezbollah to proceed with the Beirut bombings.

     Let me run another one past you, in view of your background: the Pan Am Flight 103 bombing over Lockerbie. It always seemed much more credible to me that it was Iranian revenge for the Iran Air Flight 655 shootdown than some Libyan operation. Relatives of the victims have long maintained a lack of belief in the investigation.

119. only rbc has upped nbr to outperform eh? may have room to attack old highs on more outperforms. i see your reasoning here z. you think it’s too late for the pos. you initiated yesterday? i took some may 35’s today anyway. the co has an est. CAGR of 40%- best of any bigger oil service co, and too boot it trades at like 6 times FWD earnings!

     also i was reading the Forbes’ annual 2000 best and biggest companies issue on my 3 hr layover in the beautiful city of Newark last night. they had NBR as one of their top 5 energy plays– not that it holds tons of stock- but it does looks prety nice to moi…

120. also z- if you had to add to any of your open positions right now what ones would they be? i was away last week as you know and would like to hit the ground running as they say

121. T:

     Re NBR – If I didn’t hold it I would add after anytime and I may add more.

     On the oil and gas companies I like most of what I’m in. Easier to say what I would not specifically add to:

     Anything April especially the TLM and the APC 70s.

     We have oil numbers tomorrow and its a hard one for me to judge so I’m a bit quiet today and thinking more about taking profits than about buying right this second.

     NFX is top of my list for adds but when I say that realize I mean over the next week and for longer dated calls. Doing some more work on the Mancos shale and they keep mentioning it and no one is listening. They just said a couple of tests but that may be months out.

     Mostly I’m waiting on a pull back for adds or at least some consolidation.

     Oh yes, and PQ, that being down puzzles me. They are evenly more likely to get taken out than HK.

122. Z – re #52

     I have to admit the weird volatility does “feel” toppy but like you I concluded that it wasn’t – how convenient, given my positions 🙂

     It just does bother me that good news is receiving tepid responses. Polite applause rather than the roar of the crowd. Still, just now HK seems to be making another run at $22 …

123. IOC up %5.5 on nada

124. Tini time!

125. Beer thirty … that was a very good day.

126. HK daily chart looking good at the close.

127. re 117 great read!!

128. Yemen Rocket Attack On U.S. Oil Workers Launched By Al-Quaida

     http://www.rigzone.com/news/article.asp?a_id=59682

129. Z – I just looked up “Whirlwind” at Amazon.

     It comes up with “631 Used & new from $.01 “. Wow, someone is selling books for one cent?! It’s gotta be better than that 🙂

     OK, I think I get it: they figure that if you’re paying $4 postage and 1cent for a book you might order something else along with it. I guess that’s the deal…

130. z how does cop look to you here could be a good entry eh? i know your pretty loaded down with positions now though…

131. T – I just bought more but am waiting for EIA report tomorrow. Stock remains cheap to peers, could see some upside based on price, little risk in the 1Q report as they’ve already announced the interim results.

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