Thursday – Gas Preview & Oil Review + Earnings Galore

The Fed gave us a quarter point rate cut but did not add the "pausing language" traders were looking for to "kill the commodity trade" by propping up the dollar. At least that's what I thought when I heard and again when I later read the Fed's statement. The WSJ characterized it as "signaling a pause in rate cuts" and Marketwatch said the Fed was just being coy about its future plans.  I've included the full text of the Fed statement at the end of the post and won't go into the endless grammar dissections the mainstream media will engage in on the matter. To me, the Fed sounds it continues to be worried about the state of the economy and somewhat less worried than it has been about inflation. The statement was certainly not immediately the "dollar pumping commodity pounder" many were looking for. Overnight, the dollar began to creep higher and this morning Exxon missed their quarter (only $11B of net income!) so we're looking at a weaker open for energy.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stocks We Care About Today
  4. Odds & Ends

Holdings Watch:

  • (NFX) - Added June $60 calls for $4.10.

Commodity Watch:

  • Natural gas closed even at $10.84 retracing a portion of Tuesday's sell off after the Fed failed to boost the dollar and kill crude.  This morning natural gas is trading slightly higher before the inventory report.

Natural Gas Storage Preview:

  • My Number: 80 to 85 Bcf Injection. Finally we got some weather that wasn't cooler than normal and was in line with the year ago week so abnormal weather should not have masked higher YoY production ... so if there was ever a time for an upside surprise on a storage build it is this week. I don't think even the upper end of my band triggers a sell off in natural gas as its upward move still have momentum and the large short position provides for continual covering on the dips.
  • Imports - Continue to run about 2 Bcfgpd light to year ago levels, entirely due to low LNG shipments.
  • Weather - HDD's were in line with year ago levels.  
  • Domestic Production Update: The Volumes Keep Piling Up. I'll have more on this in tonight's gas storage review piece but here are a couple of charts that the market cannot continue to ignore.



5.7 Bcfgpd to be exact but that is still a whopper of a number. The second chart directly above gives you an idea of the acceleration natural gas supplies are enjoying at this time. As Aubrey of (CHK) joked on his last conference call, maybe we need to think about sending LNG FROM the U.S.

  • Comps:
    • Last year: 67 Bcf
    • 5 Year average: 62 Bcf
  • Street Consensus: 70 Bcf.


Crude Oil dipped after a much larger than expected build in crude inventories was announced
and remained off about $2 until the Fed failed to pump up the dollar. This morning crude is trading off $0.30 to $0.80 as the dollar shows some signs of life.

  • Nigeria Watch: It was reported yesterday that the strike had ended. It has not and (XOM) production of nearly 800,000 bopd remained offline for an 8th day today. 

The Crude Inventory Review: In a nutshell sustain high imports drove a bigger than expected build in crude, while gasoline fell short of estimates as refineries failed to continue scaling up production and consumers remained relatively inelastic to record prices.  


CRUDE INVENTORIES:  Up more than 2x expectations. Trend is as it should be this time of year. 

Imports Remain At A Lofty 10.2 Million BOPD. With anemic and non-volatile utilization levels, imports have become the big swing factor for crude stocks of late. I expected a small pullback in imports last week and didn't get it and this is the time of year that although still lumpy, imports will start rising to meet increased demand from refineries.


Imports from Nigeria and Mexico are pinched. Data is from February, most recent available but you can tell natural declines in Mexico and unrest and now strikes in Nigeria are hurting volumes. Consider that in February, Nigeria was producing about 1.9 mm bopd and export about half of that to the U.S.. As of yesterday, they were producing just over 1 mm bopd.  




Crude Stocks Remain 5% Below Year Ago Levels and In Line With The Five Year Average.  


GASOLINE: The only bullish part of yesterday's inventory report with the draw-down coming in at 1.5 million barrels, or double expectations. 

Production remains at record levels despite utilization. Blending components draw down this week is likely to lead to further increases in gasoline production in next week's numbers


Demand Off Less Than 1% YoY. As you can see in the graph below, demand should continue to rise seasonally as the summer driving season approaches. I'm waiting to see if it does before taking any further positions in the refining group.


Gasoline Inventories continue to track seasonal patterns. Although the slope of the descent is a little steep than normal due to the reduced refining utilization the U.S. remains very well stocked for the approaching summer driving season.


Stocks We Care About Today: We don't own these and there's a laundry list so I'll just hit the highlights.


Cabot Oil & Gas (COG) Provides Updates for Marcellus and Haynesville Activities: 

  • Marcellus - stepping up drilling in the Pennsylvania part of the play from 20 to 30 wells in 2008.  Now see drilling 70 to 100 here in 2009.
  • Haynesville (E. Texas side of the play) - they've now drilled 15 vertical tests into the shale as tails on lower cotton valley wells. Initial production ranging from 0.65 to 2.3 MMcfepd on 11 of the wells and they think they're adding 1.5 Bcf for an incremental cost of $400 to $600,000 over a normal LCV well (not as deep). Those are fantastic economics, with the midpoint of the range putting their incremental development costs at $0.33/Mcfe. They plan on drilling 8 more Haynesville wells this year with one of those a horizontal. 

E&P Players Sensitivity To The Haynesville - Just reposting this because we are about to get some critical updates and its nice to know who else may get some play if certain players say good things. 


(XOM) Reports a miss, EPS of $2.03 vs $2.13 expected

(OII) reports in line results, guidance for 2Q is down to the Street estimates. Conference call at 11 Est.

(DNR) reported CFPS of $0.74 vs $0.75 expected, reaffirmed 2008 production guidance. Conference call at 11 Est.

(APA) reported a miss with CFPS of $5.39 vs $5.75 expected (EPS came in at $2.99 vs $3.06 expected), says it sees accelerating production in the second half. Some nice wells announced at their Canadian Ootla shale play but no guidance given in the PR. Conference call at 2 Est. 

(CHK) and (EOG) report after the close and before the open respectively.


Odds & Ends

Analyst Watch: (BP) cut to hold at HSBC, (FSLR) cut to perform at Opco.

Yesterday's Federal Reserve Statement:

Release Date: April 30, 2008

The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 2 percent.

Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.

Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully.

The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Gary H. Stern; and Kevin M. Warsh. Voting against were Richard W. Fisher and Charles I. Plosser, who preferred no change in the target for the federal funds rate at this meeting.

In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 2-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Atlanta, and San Francisco.

191 Responses to “Thursday – Gas Preview & Oil Review + Earnings Galore”

  1. 1
    uop Says:


    good morning,

    before the market opens, I am trying to restructure my UNG strategy:

    do i believe in a drop in the price, yes eventually,
    the only question is when ?
    demand and supply: do not justify further increases, but the question is when is the decrease?
    May UNG puts are soon worthless with 15 days to expiration.

    I will get out of the May puts, whether I get june puts, I am hesitant.

    What do you think ?

  2. 2
    isleworth Says:

    Co announces a gas and gas liquids discovery in the Antelope structure, which was intersected at 7,402 feet, in its Elk-4 well. The Elk-4 well has successfully penetrated the Antelope structure, a new discovery which will significantly augment the gas found at the Elk-1 discovery well. Drilling operations experienced a gas kick and a flow of gas and gas liquids to surface which was circulated and flared. The well is now being prepared to drill deeper under pressure followed by comprehensive evaluation.

  3. 3
    zman Says:

    I won’t add to the position until I see the momentum break. I think that comes on a day with data, like but not necessarily today. UNG is at $51.25 and I’m in UNG $50s, they could profitable in a week or dead in two. A lot depends on this newfound tighter linkage between crude and NG. If oil falls to $100, those UNGs will do will. If gas storage starts to build rapidly, they should but may not do well. June or longer is safer although I’m sure the hurricane hype machine will keep gas above $8.

  4. 4
    zman Says:

    People hating the APA and XOM quarters early. It’s more a question of the analysts getting ahead of themselves in both cases. This is pretty knee jerk with down oil and on low volume, taking the group down, does not change my thoughts at all on my names.

  5. 5
    bill Says:

    mur has blow out earnings, beats estimates and falls 3 %

    i guess everyone buys pre earnings and sell on the news regardless.

    In that case chk should fall tomorrow

  6. 6
    isleworth Says:

    That was IOC

  7. 7
    zman Says:

    Thanks Isle, see the press release and few details there. They had a lot of difficulty getting this down despite the fact that its near the discovery well and the crest of the structure. I might play if it will pull back from currnet levels a bit.

    People not liking the DNR numbers either, LOE was up pretty sharply there

  8. 8
    zman Says:

    Bill – not necessarily, bad energy day doesn’t help with XOM and oil down hard. Stocks well off their lows already. CHK opened off a buck (knee jerk), now down a dime.

    PBR looking like it wants to run.

  9. 9
    Denise Says:

    Good morning,
    So in laywoman’s terms on IOC how much does this increase the probability of Elk 4 being a success(hit?)
    and the company having enough gas to build a terminal?
    Thank you for any insight

  10. 10
    zman Says:

    OII getting clocked, down 7% on their 2Q guidance, that call is an hour away. They have had trouble keeping analysts in line. I’ll listen to their call in an hour but am unlikely to bottom fish just yet. I would like to own them the first time we see a tropical storm spinning up in the Atlantic.

    Note CNBC, storage and supply are not synonyms.

  11. 11
    zman Says:

    Denise – not enough data to know. The phrase “drilling ahead to establish the commerciality of this discovery” gives me pause, that and the fact that management here would press release a dog fart if they thought it would buy them some time with their lenders.

  12. 12
    kyleandy Says:

    denise – laywoman” a new word to my vocab. i like it

  13. 13
    kyleandy Says:

    z- do u talk to the oil analyst at jeffries?? wondering why the big hit on DNE.

  14. 14
    uop Says:

    TSO, DO and NBR charts are going down or at best sideways:

    what is your update?

  15. 15
    zman Says:

    86 Bcf , I was at 80 to 85, Street was at 70.

    I’ll add some UNG.

  16. 16
    texana Says:

    bakken prod for feb 2008; 797,129bo& 674,941mcfg according to rmoj april issue. eog has 14 0f the top 15 oil producers in the state. eog had 26 wells producing in the parshall field in feb & reported production totaling 338,320bo. they should have 6 additional wells completing since last report with a lot of exploratory wells drilling the bakken. wll has 20% of the parshall field & 80% of sanish field to the west of parshall. the cum est @ 600 to 1mil per well with 2 long laterals drilled over 2 sections. closer to the heart of clr fans the south red river unit is avg 1 mil bo per month. expect eog to have good report probably more than expected

  17. 17
    zman Says:

    ZTRADE: May UNG $49 Puts for $1.05.

  18. 18
    zman Says:

    Tex – thanks and agreed re EOG. I wonder if they will experiment with dual laterals like WLL has at Sanish?

    UOP – I said I had $50 UNG puts earlier but was incorrect. I had 48s and now I have 49s too.

  19. 19
    zman Says:

    Gotta ask what the hell APA was thinking with the late release on of the earnings date, sticking it on the business day of the quarter and then putting the call in the afternoon. Stock of almost $9 now.

  20. 20
    Denise Says:

    Thx Z-love the analogy
    think I will stay sidelined on IOC

    Looks like the street may have a sale starting in energy names
    I am starting to shop

  21. 21
    zman Says:

    Re the natural gas numbers: Say imports are down 2 Bcfgpd, but domestic production is up 6 Bcfgpd. That’s net up 4 or 28 Bcf per week relative to year ago levels. Last year the weather was the pretty much the same vs last week so it made for a pretty good comp. Last year saw 67 Bcf injection, this week say 86 Bcf injection or 19 Bcf variance. Production is showing up in the injections now that weather is out of the way. We’ll see if it matters to gas prices or not.

  22. 22
    zman Says:

    Denise – this look (as is) pretty painful. But looking at the volumes I’m seeing big moves down 4 to 6% today on little volume. I’m not shopping for more yet and sitting on some hefty recent losses but I think we turn soon, next few days.

  23. 23
    el_vogel Says:

    HK dropping like it’s (not) hot

  24. 24
    Nicky Says:

    Morning all. The fall in the dollar and bounce in commodities turned out to be even more short lived than I expected last night. Silver has made a huge reversal today.

  25. 25
    Garyinhou Says:

    The commodity smackdown certainly in gear, the last time was Jan I guess and picked some winners in energy and ag, I guess Aug was the one before that?

    Don’t the nat gas names usually take a seasonal dip May thru July or so?

  26. 26
    Nicky Says:

    CNBC trader saying after the nat gas data to expect short covering at the end of the day ahead of non farm payrolls tomorrow. Heaven forbid they turn bearish!

  27. 27
    uop Says:


    has EOG missed ?/
    way down.

  28. 28
    Garyinhou Says:

    seems over done already… but my gut instincts are always 100% wrong, my brother trades on that

  29. 29
    zman Says:

    Gary – sometimes but not always.

    UOP – the group is off hard with XOM and APA misses. EOG reports in the morning.

  30. 30
    Nicky Says:

    Agreement reached to end strike in Nigeria.

  31. 31
    zman Says:

    Hey Nicky – nice call, everybody is talking $110 now.

    Exxon and OII calls starting now. XOM down $4.20 at the start of the call and the stock is providing direction for the group.

    APA off $10 …seems overdone.

  32. 32
    zman Says:

    Thanks Nicky, never know if its true or not until XOM confirms it.

  33. 33
    uop Says:


    I have baskets of stocks for monitoring:

    oil, energy,canada energy, agri, metals and coal gold an silver, solar, even casinos all red,
    technology , bio/med green, that tells you where the money flows at this time.

    I have never seen such a strong rotation.

  34. 34
    Sambone Says:

    9:28 am EST

    Nymex Crude Near Two-Week Low On Stronger Dollar

    By Brian Baskin

    HOUSTON — Crude oil futures are trading near a two-week low on the strengthening dollar.

    Light, sweet crude for June delivery traded 58 cents, or 0.5%, lower at $112.88 a barrel on the New York Mercantile Exchange. June Brent crude on the ICE futures exchange traded 49 cents lower at $110.87 a barrel. Nymex crude traded as low as $112.53 Thursday, a level not seen since April 16.

    Futures traded lower as the dollar strengthened against the euro, convincing some investors to sell oil and buy U.S. currency. This play, a driving factor behind energy markets for months, has received special attention this week, after the Federal Reserve cut its benchmark interest rate by a quarter basis point Wednesday. The Fed left the door open for more cuts, which tend to cause the dollar to weaken, but appeared ready to depart from its recent history of regular, aggressive reductions. Further cuts are expected to hinge on the extent of deterioration in the U.S. economy, as the Fed assesses the effect of its latest adjustments to interest rates.

    Trading has been light so far Thursday, with May 1 a holiday in Asia and Europe, and the U.S. trading day only just beginning.

    Given the Fed’s statement Wednesday, some see the market reacting more strongly to economic and financial indicators going forward.

    “We look for (oil) to begin refocusing on financial-type guidance for several sessions rather than fundamental inputs beyond the Nigerian labor situation,” wrote Jim Ritterbusch, president of Ritterbusch & Assoc., a trading advisory firm in Galena, Ill.

    On Thursday, the dollar firmed against the euro on data showing consumer spending increasing in March by more than expected. Nonfarm payroll data, to be released Friday, is expected to be the next major signal to currency markets. The euro was valued at $1.5489 Thursday morning.

    Ed Meir, an analyst with MF Global, saw a chance for the Fed’s ambiguity to cause oil to rebound, however.

    “With the Fed having missed its chance to talk up the struggling dollar, commodities could work higher for the balance of the week,” he wrote.

    Nigerian workers affiliated with Exxon Mobil Corp. (XOM) continue to strike, in a stoppage that has forced the company to halt all energy operations in Nigeria, shutting in 800,000 barrels a day of oil production. Talks are ongoing, as the strike enters its second week.

    Front-month June reformulated gasoline blendstock, or RBOB, recently traded down 1.13 cents, or 0.4%, at $2.8950 a gallon. June heating oil traded 99 cents, or 0.3%, lower at $3.1481 a gallon. Both contracts are in their first day as the front month.

    —By Brian Baskin, Dow Jones Newswires

  35. 35
    tomdavis12 Says:

    Z PBR up yesterday and early today because upgrade in Brazil paper to investment grade. Next 10 points likely lower because of difficulty getting at most recent discovery. T

  36. 36
    Sambone Says:

    If RIG goes below 135 on this rotation, then I’ll load tha boats.

  37. 37
    zman Says:

    XOM YoY oil production down 3% after netting out Venezuelan expropriation and divestitures. Keeping previously stated growth profile intact. Saying production was lower but as expected, saying year production is back end loaded. Yawner of a call so far.

    Interesting to have one of the biggest oil producing entities in the world to be unable to grow production and have oil dropping on the same day.

  38. 38
    zman Says:

    Sam – by the way you were right, just delayed reaction.

  39. 39
    Sambone Says:

    Day late and a dollar short! LOL

  40. 40
    zman Says:

    Tom – I think PBR direction to be determined by oil price. I don’t think anyone thought subsalt would be easy to develop. Stock was also up as Brazil considers bumping up fuel prices which would improve their margins and on the FPSO approval by the MMS yesterday.

    Independent refiners turning up slightly: SUN, TSO, FTO, WNR so far.

  41. 41
    zman Says:

    From the Exxon conf call re Nigeria.

    Union has directed workers back to the facilities. Negotiations continue. They have not to XOM’s knowledge started turning things back on yet.

  42. 42
    zman Says:

    Average E&P down 5%, smaller caps down worse. APA worst down 8.5%. Very ugly and no selectivity. Looks like panic selling as volumes picking up in some names.

  43. 43
    zman Says:

    XOM call over, stock down $4.50. Very lackluster call, they don’t sound overly concerned, analysts sounded pretty unsurprised by the results.

  44. 44
    zman Says:

    XNG and OIH at near term support. OIH is at the low end of headlines are out saying miss at RDC is tanking the group. That’s absurd. The group is down on the dollar trade a rotation. I think the moves in the groups are overdone and I’m taking a beating.

    I’m not bottom fishing and won’t until crude stabilizes and some order comes back to the group – now hugging $111, down $2.50.

  45. 45
    uop Says:


    darn it:
    my anticipated rotation out of commodities – which many of the bloggers did not believe in – well its happening on a big scale.

    The money leaves and goes omewhere else.

    oil and ng is also a commodity and all ene4rgy related stocks are nosediving.

    You might say its overdone, but that is what is happening.

  46. 46
    VTZ Says:

    One thing that I find odd is that when all the commodities were trading up massively, not all the equities followed. But today they are selling off as a group which suggests shorting the indices (I think) in exchange for the dollar trade. I think that suggests some nams should come back a bit, although right now I am certainly getting punished.

  47. 47
    scoop006 Says:

    Z You think it makes any sense to buy CHK May $47.50 or $50 P’s for protection from further declines?

  48. 48
    el_vogel Says:

    volume doesn’t seem to be all that strong for a sector rotation…would anyone agree?

  49. 49
    Bob Says:

    APA creeping back, $2 over last 45 mins. Conf call in 20 mins

  50. 50
    VTZ Says:

    Could just be the start of reweighting elvogel

  51. 51
    zman Says:

    Scoop – I think it pops. I of course could be wrong. I had noted a steep increase in APA CFPS when updating tables recently, CHK did not get as big an increase as its gassy and hedged. They have in the past been pretty good at keeping the analyst estimates in check.

    Bob & El V – seeing signs of tepid life in several names, volume seems to be higher on the move up but I only looked at a few names so far.

    Uop – rotation out implies weeks or even months of selling. Is that what your thinking? I just don’t see that.

  52. 52
    Sambone Says:

    Not good for the US$


  53. 53
    zman Says:

    Definitely seeing some signs of bottom fishing. I reached my point of “what in the world, why did I not sell everything yesterday?” about an hour ago which is usually when things decide to go up.

    Even XOM above pre call levels.

  54. 54
    zman Says:

    Re 52: yesterday I heard Iran is now selling oil in non-dollar currencies. Probably not all but they plan to do more. OPEC states have massive inventories of dollars.

    Crude and products trading in lockstep, down 2.3 to 2.4% apiece. Refiners starting to green.

  55. 55
    uop Says:


    its a great move out of commodities and straight into NASDAQ stocks,

    the commodities bubble, most agreed that there was one, has clearly burst today,

    but, every time there is an overreaction, there is ususally a counterreaction.

    Certainly today cost me a ton of money, I will have to be more cautious,

    rotations can occur quickly and yoy have to turn of the PC if you cannot stand it.
    I should have gone golfing.

  56. 56
    Garyinhou Says:

    Money may leave commodities near term but money will come back to them just as well. All of a sudden fertilizer is in great supply against demand. And oil is plentiful, corn and wheat fall from the sky. Bull.

    Halliburton hit $37+ last July with oil at $65 -70, dropped the next month to $31 plus when oil “plunged”.

    They said the same things in Mar, and Jan, and Nov, and Aug. The commodity trade is dead. Ok.

  57. 57
    uop Says:


    big money moving into the market,

    man did I miss it by 1 day, this Bernanke really screwed me up yesterday, I dislike this man,

    got out yesterday of my may USO puts, now look at the drop in oil price,

    at least my UNG and DUG give back some money.

  58. 58
    ellwodo Says:

    CHK – It may not be the bottom, but I’ve loaded up on May 50s and 52.5s.

  59. 59
    zman Says:

    Gotta CNBC, Bob P saying look at APA as evidence of rotation, saying it has fallen from 143 in March to 125 now. He fails to point out it started March at 105 but that’s ok. As numbers have risen there, apparently a little too much, the stock, like many of its peers has not simply gotten more expensive and the 125 level it is at now is in fact cheaper on a forward multiple than when the stock was at 105 in early March.

  60. 60
    uop Says:

    of course, its only a matter of time, the world is not really gaining on resources, it is using resources up fast,
    what time frame do you have in mind for money to come back ?>

  61. 61
    zman Says:

    elwo – I too am loaded with CHK. Stock looks like it wants to go higher but that’s moot in front of numbers. Should see another nice build in quarterly reserves, crossing fingers that they reveal one of the oil shale plays with economics. They’re big in the Barnett so it could be on HBP acreage. Recall that announcing Barnett oil is what spiked EOG a couple of months back.

  62. 62
    Denise Says:

    Here is some food for thought I filed away for a sea of red day
    from R Krueger
    “The CRB has doubled since 2001 in what he counts as the 7th bull market since 1760.
    Looking over 248yrs of hard data-none of those prior bulls stopped at a double
    Not one stopped at a triple either

    If you add all six prior CRB bulls together you get 2008% an avg of more than 334% per bull each one lasting an avg of 21yrs”

    Interesting way of looking at it-wouldn’t you agree?
    I have been putting some $ to work legging in

  63. 63
    Jay Reynolds Says:

    OK, several new deep gas wells N of Shreveport.. Getting particulars now.

    Here’s the brain twister. Several are in the 6MMCFGD category, one at 25MMCFGD and all, none, as far as I know are Haynesville Shale. BUT one just E of Hyw 1 around Blanchard showed 420′ of HS, with is about 200 more than the best pay for the HS in the Caspiana Field S of Shreveport.

  64. 64
    zman Says:

    APA call in 45 minutes with the stock improving. I’ll listen but am unlikely to buy.

    Quiet recovery underway … Cramer out with a video saying dump XOM so it rallies immediately.

  65. 65
    zman Says:

    JR – are you getting that off Sonris? I looked last night and saw no new completions of that size in Caddo or Bossier in the Shreveport scout detail. Where you finding this?

  66. 66
    uop Says:


    withy oil down so much,
    now watch for

    attacks on pipeline,
    refinery and pipeline problems,

    early hurricanes,

    you believe in such actions ?

  67. 67
    zman Says:

    Do I believe they exist? Yes.
    Do I condone them? No.
    Do I think they will occur. Of course, MEND has promised a campaign and the four day lull since the last one is surprising but I guess everyone deserves a vacation.

  68. 68
    uop Says:


    the financials is where a lot of money is going, you did expect this, did you not /

    Western Refining up , what is going on here ?

  69. 69
    zman Says:

    I think the financials, from my layman’s view, some 10,000 feet overhead are still not out of the woods yet. Mortgage exposure pretty well known now but foreclosures still rising, repos of cars at record levels, credit card debt ballooning. I think its folly to put money to work there, into names with so many unknowns. But that’s what makes markets.

    WNR I would not touch, its up with FTO, VLO, SUN, TSO.

  70. 70
    Garyinhou Says:

    Over the past year the shorter commodity dips seem to last approx 10 days and the longer ones 20 days. Thats just me eyeballing it.. don’t have any bigtime software or anything.

    Short downturns in July, Aug, Oct, Dec, Feb

    Long downturns in Nov and Jan.

    DO for instance, look at the opportunity for entry we had in Aug, Nov and late Jan/Feb.

  71. 71
    Nicky Says:

    Do you not think that having now had a 15 month run in commodities that it is not surprising to see a pullback? Looking at the charts gold can go back to $600, silver $12 and oil to $85 and the bull run is intact and far from over.
    IMO the funds have not even started to bail yet and it is very unlikely this pullback is only going to last a day or so.
    I am not saying we will get to the levels above but I do think we are going lower.
    The commodity trade was becoming so overdone that it has to take a breather.

  72. 72
    Jay Reynolds Says:

    Z re 65.

    Just local knowledge. Local crews doing completion, word gets around. Same ol’ same ol’.

  73. 73
    ellwodo Says:

    61 – I also hope (and am certainly betting) that CHK has some good news on one of its shale plays, but I’d prefer news on Haynesville. That should make for a triple play – CHK, XCO and HK.

  74. 74
    Garyinhou Says:


    I agree.. every pullback I looked at was min 7-10 days. Looking back, when I bought those dips, patience would have rewarded me, as I bought back in early every time. Matter of fact, I always seem to sell early too. Operator error.

  75. 75
    zman Says:

    Thanks JR, I was going blind scouring the reports again. There are several CHK wells listed as “waiting on potential”.

    Nicky – when I speak of rotation, I’m talking about the energy equities, near term oil could certainly pull back more, don’t think you see those levels ($85) either as Saudi is already trimming production levels and they seem happy with triple digit oil. If Exxon proves anything it is that the future of oil prices is increasingly in the hands of the NOCs.

  76. 76
    zman Says:

    Ellwo – I didn’t mention the Haynesville b/c I don’t want to beat that horse too much but I expect some big rate there. If JR’s 25 MM/d is CHK’s and not Questar’s I’ll be a very happy camper.

  77. 77
    zman Says:

    At the risk of beating that horse, Aubrey said they had drilled three of the best wells ever drilled, to his knowledge, at the beginning of a new shale play in the Haynesville. He said the he thinks the Haynesville will be bigger for CHK than the Barnett Shale is for them.

  78. 78
    Sambone Says:

    Uop – #68. The “Crowd” is also buying Tech.
    Z – #69. I equate the IB’s and banks like a bedroom. They have a closet full of Bogymen. They can’t let them all out, because then they would be bankrupt because of leverage. They just let a few bogymen out each quarter, raise cash by issuing preferred stock or dilute the shareholder by issueing more stock. Financials are dead money for now. We’re 25% of the way done. “That dog won’t hunt”.

  79. 79
    zman Says:

    So Mr. Clean and those other guys on Fast Money are like the shepards of “the crowd” ushering it towards the next big cliff.

  80. 80
    Sambone Says:

    You know it’s bad when the Bud and chicken bone group win’t go racin!


  81. 81
    Sambone Says:

    #79 – Those were the same guys last fall saying get out of oil and buy the banks.

  82. 82
    zman Says:

    Sam – the reality that people actually buy RVs to go watch people turn to the left at high speed is why we will never get off foreign oil. Not until RV’s burn something else entirely.

  83. 83
    Garyinhou Says:

    Maybe they should start racing without helmets…

  84. 84
    Sambone Says:

    Z – Hey, it’s God giving right for Americans to have cheap gas, don’t ya know.

  85. 85
    zman Says:

    Not to insult all race fans as I know Nicky is one but of IRL which is whole different animal.

  86. 86
    Denise Says:

    Loved the article
    Think Humpy is a family name?

  87. 87
    zman Says:

    Yes re 84. SOUTH Americans. They’re called Venezuelans and that dog doesn’t hunt either.

    Seeing a continuation of that quiet rally in the groups. Just thinking ahead. If CHK says something like the Haynesville is the greatest shale play ever, we love it and we now have doubled our acreage there and are seeing double digit IPs and 5 + Bcf type curves what else benefits.

    GDP – biggest swing on reserves there – down 8% today.

    PQ – currently holding a full boat there

    CWEI – one of reef’s favorite names

    PVA – already reported and down 9% today after RBC cut it from favorite name to outperform.

    Just trying to be useful as the APA call kicks off and we wait on CHK results

  88. 88
    zman Says:

    Oil down $2 at 111.50.

    APA call started.

  89. 89
    uop Says:


    agree, I am outraged what lousy job the banks and financials institutions have, of course, I am not surprised as we have in the USA an EXCESSIVELY loose way of letting industry do whateverv they want to do, and pay themselves millions despite doing a lousy job,

    John Adams said: we are a nation of law, not a nation of people, man he is right but if we do not make the right laws, that is what you get,

    now: the fact still remains that there is massive outflow and massive inflow. moneyflow into financials has been going on for a while now but not like today,

    I was shorting V and MA, 2 companies which give no loans, I lost my shirt the last 3 days.

    I have to stop.

  90. 90
    Sambone Says:

    D – Only in the south, baby!

    Wheeler explained the origin of his nickname. He said that when his father had played football at the University of Illinois, he was caught once smoking Camel cigarettes, earning the name “Humpy” for the camel’s hump. His father’s friends then began calling him Humpy Jr. Growing up through high school, college football, and then racing, the name “Humpy” has stuck with him.

  91. 91
    Sambone Says:

    U – You need OA (Options anonymous) LOL

  92. 92
    uop Says:

    please don’t bring a GOD into this discussion,

    there are too many who rely on a GOD when things go wrong.

    It was interesting when the pope was here a few weeks ago:

    usually Bush and the politicians COMMAND God to bless America (not the USA, so it includes also other American countries??), the pope said it better; he said may God bless America,

  93. 93
    zman Says:

    Interesting move in crude, down $1.50 and approaching $112 from the bottom.

    APA uninspiring so far, me and the stock. Started by saying 6% growth still attainable but 4-6% range is probably safer.

  94. 94
    Denise Says:

    My voodoo /elliotician says we may tag or go over S&P 1420-he says he suspects it might be a false breakout
    (had said we could have big correction in May and he has been very right lately)

    Others I read are also not believing in this move
    My ace T/A lady agrees among others

    Rev Shark points out the rotation is going to the sectors with no earnings visability and out of the one (energy)
    with visibility

    I am buying a little protection in case it is a sell in May kind of month

  95. 95
    Sambone Says:

    Interesting that W’s buddies might not follow B52 Ben, we’ll see. If they go to the euro, oil is going to soar!

    Saudi Delays Rate Decision As Gulf Neighbors Follow US Cut


    DUBAI (Zawya Dow Jones)–Saudi Arabia, the Mideast’s largest economy, kept currency traders guessing Thursday as it held firm after the United Arab Emirates, Qatar and Bahrain quickly followed the U.S. Federal Reserve’s rate cut.

    The kingdom, which pegs its riyal to the U.S. dollar along with Persian Gulf neighbors U.A.E., Qatar, Oman and Bahrain, surprised analysts by not immediately cutting its key lending rates in line with the U.S.

    “If Saudi doesn’t decide today they are sending a message that they will continue to observe the Fed rate cuts and they may have to apply a different monetary policy than what we’ve seen in the past,” said SABB chief economist John Sfakianakis.

    The Fed lowered Wednesday its target rate for the federal funds rate to 2%, from 2.25%, adding pressure on oil-rich Gulf sheikdoms that are struggling to match U.S. policy at a time when their booming economies are crying out for monetary tightening.

    The U.A.E. was the first to cut announcing it would cut its repurchase rate by 25 basis points to 2% but leave its discount rate unchanged.

    Qatar was next to announce a 25 basis points cut in deposit rateto 2% but kept it lending rate unchanged.

    The weak U.S. dollar and a string of lending rate cuts has helped spurr rampant inflation across the Gulf states.

    In March, Saudi Arabia’s inflation touched a 30-year high of 9.6%, while Oman recorded inflation at 11.1% for February — an 18-year high.

    Qatar and the U.A.E., who are both heavily investing their surplus oil revenues in building key infrastructure as quickly as possible, are perhaps worst hit, with inflation at 13.7% and 11% respectively.

    “We are in trouble,” said Eckart Woertz, chief economist at Gulf Research Center. “It’s very worrying but they will just continue to fight inflation in a piecemeal fashion through subsidies and price caps,” said Woertz.

    The Fed’s signal that Wednesday’s cut may be the last in its current cycle as it battles to head off a looming economic recession may encourage Gulf central bankers, analysts said.

    “There are no policymakers in the Gulf at present who are keen to cut rates,” said Simon Williams, HSBC’s Middle East economist. “They are hopeful that this is the end of the Fed cutting cycle which would stop things becoming more difficult but won’t make them any easier.”

    Since September the Fed has slashed its benchmark rate by 300 basis points, from 5.25% to 2.25%, just as Gulf states needed to put the brakes on economic growth to stem inflation.

  96. 96
    Nicky Says:

    I hardly call an 82 cent fall in crude a cliff fall as CNBC are saying – nor does it look anyone is bailing out of energy to me just yet.

  97. 97
    zman Says:

    Nicky – dunno, tempting to sell everything and mortgage the house buying ABK.

    Nice recovery continues. CHK more than halved its losses, ditto HAL, NBR.

    COP has gone green and the indie refiners are up a couple of %+.

    APA call on in the background. Lots of moving pieces, growth is a little disappointing but they have their fingers into a lot of pies that could be interesting down the road. I’m not playing for now.

  98. 98
    uop Says:

    crude is down today 2.28$, Brent is down 1.66$,

    NGH is down .28.

  99. 99
    Nicky Says:

    No I don’t think so uop, crude closed at 112.50 level so off less than a buck.

  100. 100
    ram Says:

    ZMAN – I don’t agree with the first statement in #97. I hope you are joking.

  101. 101
    zman Says:

    I have live commodities: crude is down 0.98 at 112.46 at 2.47 EST.

  102. 102
    Garyinhou Says:

    Ag starting to go positive now…

  103. 103
    zman Says:

    MOO is green.

  104. 104
    uop Says:


    all sources I checked now again: crude (not Brent) is down to 111 and a bit, that makes it down 1.71 nto 2.11.
    what is your reference ?

  105. 105
    uop Says:

    agri will, as I expect to rever as food for the world is tight.

  106. 106
    Garyinhou Says:

    Could be a sell the rally moment.

  107. 107
    PackMan Says:

    I am not sold yet on a big rotation, other than a 2-day event.

    More like a 1-day post Fed rally right up to key resistance levels (which likely will fail IMO). Jobs number tomorrow will tell the tale, I guess.

    Nice sector turnaround. CHK … counting on you Z !

  108. 108
    Nicky Says:

    Uop – I have no idea what you are looking at but wti is at 112.48 as I write, still off less than a dollar. There was a good rally into the close..
    Can somebody else please confirm.

  109. 109
    uop Says:


    I thought we were talking crude oil price, what is wti ?

  110. 110
    sane Says:

    I am seeing the close as 112.52

  111. 111
    zman Says:

    112.48 now, right now, lol.

  112. 112
    Nicky Says:

    uop – wti is crude oil…

  113. 113
    sane Says:

    I feel kinda guilty because I have a couple of friends that work for Ford, but I had to kinda smile at the fact GM and Ford got their teeth kicked in in sales.

  114. 114
    ram Says:

    West Texas Intermediate or something like that.

  115. 115
    uop Says:


    now I see what your reference is, West Texas Inter.

  116. 116
    Nicky Says:

    Broader market – volume is up on yesterdays numbers – implying higher highs ahead – look for resistance in the 1413- 1416 spx region.

  117. 117
    Garyinhou Says:

    I think the experts rotated too far and are actually buying back the stocks they sold this a.m. Classic over-rotation of fundage.

    Just kidding. Enjoyed everyones insight and comments today.



  118. 118
    zman Says:

    Sane – I watched a show on GM’s new designs last night and it looks like they will have a fuel efficient car that Americans will want to buy … by 2030.

  119. 119
    zman Says:

    Best comeback/worst sell off I saw today was HK which fell as much as 8%, now down 2.3%. Personally I like to think that the smarter money has been playing in the names this afternoon.

  120. 120
    zman Says:

    Re 107…no pressure eh? Well, if I’m right then the bigger moves will probably be in names like I mentioned above and in today’s graph of which I have PQ and HK. Also, if I’m right I’ll be counting on you to tell your friends!

  121. 121
    uop Says:

    WTI is very sweet crude, very high quality and excellent for gasoline making,

    oil from most other areas is not as good,

    I look at barchart.com and Bloomberg, they use the term crude oil, June futures:
    it actually has now recovered and is dowm only 89 cents.

    that is all I will say

  122. 122
    zman Says:

    Uop – too right and that is largely what Nigeria sends us – Bonny Light.

  123. 123
    zman Says:

    At this rate HAL and NBR will close positive. One thing about CHK’s call will be more talk about an accelerated drilling program. Good news for the onshore service names.

  124. 124
    Nicky Says:

    Uop – I didn’t think we were having a discussion on the quality of crude!! You asked me for a price and that is what I and two others on here gave you. You just need to refresh your screen as the price you are now giving is the one I told you an hour ago.

  125. 125
    zman Says:

    All right kids, play nice.

    Crude actually fared a little better than products today but the refining group decided its time to rally, all indie refiners up now and COP. CVX probably would be but they still have earnings to get through.

  126. 126
    ram Says:

    Hi Nicky. Thanks for the call on the S&P. You are the woman!

  127. 127
    zman Says:

    Nicky – can I trouble you for market, crude, and NG levels?

    Agree with Ram – ignore her charting prowess at your own risk. I did last few days.

  128. 128
    Nicky Says:

    Z you are kidding me re crude and ng levels right??
    If not crude (WTI!) is at 112.21 and nat gas is at 10.53

  129. 129
    zman Says:

    Nicky – No I meant your technical read! I don’t poke the bear like that, lol.

  130. 130
    Nicky Says:

    Volume has come down considerably in broader market in last half hour so higher highs are slightly more debatable now.

  131. 131
    PackMan Says:

    No pressure Z.

    Had a good time buying dips today in PQ HK and CHK. Holding CHK calls and some stock for tonite.

  132. 132
    el_vogel Says:

    HK recovering nicely. My T/A for the day: Yay! 🙂

  133. 133
    Jay Reynolds Says:

    OT: Popcorn before the show.

    One of the greatest dripping with sarcasm arse chewings I’ve ever read.

    CHK’s Aubrey to M. Jodi Rell, Gov of Connecticut.


  134. 134
    zman Says:

    Rell makes me laugh

  135. 135

    Where can I listen to the CHK earnings conference?

  136. 136
    zman Says:

    It’s Friday at 10 am CST, I’ll provide a link.

  137. 137
    zman Says:

    CEO of CHK speaks on Fast Money (4-5 CST)

  138. 138

    Are the earnings announced tonight or tomorrow?

  139. 139
    zman Says:

    should be tonight

  140. 140
    PackMan Says:

    chk earnings out

  141. 141
    zman Says:

    CHK is on the tape with 1.09 EPS vs 0.93, will be back in a bit with the quick deets.

  142. 142
    Bob Says:

    EOG earnings out 0.96 vs 0.88 headline

  143. 143
    ram Says:

    CHK: It’s definitely not good news to some traders.

  144. 144
    Bob Says:

    EOG “adjusted earnings” 1.89

  145. 145
    zman Says:

    CHK crushed CFPS estimates: reporting $3.07 vs 2.43.

    Production was a touch high, nothing to right home about.

    LOE was on high side but within guide

    Reserves, reserve replacement, F&D costs all very good

    Haynesville now 300,000 acres and they are going to 12, not 10 rigs by year end . No well results in the piece.

    They did a VPP for $600 mm

    Plan to sell rest of Woodford

    2008 guidance going up slightly and that’s with the volumes from the VPP coming out. Not sure if it excludes the Woodford too.

    Production expenses inching up in guidance, still low cost, just not as low.

  146. 146
    ellwodo Says:

    CHK – I’m reading it, but I need someone to tell me what I’m reading. Is it good news?

  147. 147
    zman Says:

    Ellwodo – I’d characterize as good from an operations standpoint, excellent from a reserves standpoint, and thin on info from a play details standpoint which is the meat everyone wants. They will have more on the call and and maybe Aubrey will give up some info on Fast Money in the next hour or so. Nothing to go running screaming either way in the PR.

  148. 148
    VTZ Says:

    Are you worried about the net loss headlines?

  149. 149
    zman Says:

    VTZ – no, non-cash non-realized mark to market item does not count.

  150. 150
    VTZ Says:

    Didn’t think so but that’s what the headlines are reading already.

    Cash flow and production/guidance should dominate?

  151. 151
    VTZ Says:

    Also, would they release haynesville info in the conference call even though they have it listed as non disclosed?

  152. 152
    zman Says:

    Yes, they bumped 2008 prod guide slightly, kept 2009 flat in aggregate, and initiated 2010 with 15% YoY growth target.

    CFPS was bigger than expected although its price given where expenses came in. They’ll get some questions tomorrow about cost pressures.

  153. 153
    zman Says:

    VTZ – you mean non-disclosed on the Louisiana site? Yes, they could do that.

  154. 154
    VTZ Says:

    “Based on recent industry transactions and peer company valuations, we believe the undeveloped acreage of these three plays, together with our 300,000 net acres in the Haynesville Shale play, is worth more than $25 billion”

  155. 155
    VTZ Says:

    I meant the NDs on their table of all their plays they don’t say anything about drill density, reserves etc

  156. 156
    zman Says:

    They could list a few and talk about their thoughts.

  157. 157
    zman Says:

    I think they left off the other b/c its simply too early.

  158. 158
    uop Says:


    Crude for June delivery dropped 94 cents, or 0.8%, to close at $112.52 a barrel on the New York Mercantile Exchange. It fell to an intraday low of $110 a barrel earlier(which is 2.42$).
    The 2.4$ was the drop when this comment started, Nymex pumped it up again by about 1pm and it ended at the 94 cents.

  159. 159
    zman Says:


  160. 160
    PackMan Says:

    i missed the fast money segment; just caught the end…. what was said about CEO buying ?

  161. 161
    zman Says:

    Oh I see, nobody believes me when I say the quarter was a good one , but the CEO billionaire comes on and says its a double and people can’t buy enough. Hmmpphh, guess I’ll just shut up.

  162. 162
    zman Says:

    He buys all the time in slugs of half a million to million shares. He owns 31 mm shares which makes him I think the second richest guy in Oklahoma behind the (CLR) CEO. Aubrey used to have a deal where he had a working interest in every single well they drilled so you can imagine he’s quite well funded.

  163. 163
    Jay Reynolds Says:

    He justed, as a neat little crown on what I thought was a very coherent piece in a sound bite world that he owned 130 million shares and would continue to be a buyer, that the stock was a double, undervalued among its peers, 30% YOY growth, etc., if I’m remembering correctly.

    It will be on again at 7 pm CST

  164. 164
    PackMan Says:


  165. 165
    tater Says:

    If you are still around, you think the “doubler” comment is a market mover with respect to your experience with these shoot from the hip CEOs?

  166. 166
    zman Says:

    Tater – no

  167. 167
    zman Says:

    I happen to agree with it but for a near term move or cutting any ice with analysts, no.

  168. 168
    tater Says:

    Thanks, screen loaded slowly so I just now saw you guys discussing the segment.

  169. 169
    tater Says:

    Just an aside, not asskissing, just wanted to say that I really appreciate the way you run your board. Compared to other sites that I’ve tried where it just devolves into people bemoaning their stocks picks on a day like today, or cheerleading when they hit a big one, you remain constructive and direct the discussion back to what’s important going forward.

  170. 170
    scoop006 Says:

    I second tater’s comments

  171. 171
    tater Says:

    That’s asskissing 🙂

  172. 172
    Popeye Says:

    CHK AH volume 240k shares.

  173. 173
    Nicky Says:

    uop – why would every person on here be giving you a quote for crude oil at 112.50 if it was at 110.00? I think if you in fact you check the time this discussion started we were giving the correct price at the time. You started giving a price AFTER the close and the price actually started going up from about 1pm EST onwards. By 2.30 EST the price was over 112.50. Your first comment on the subject was at 1.41 CENTRAL time ie 2.41 EST. Yes crude oil was at just over 110.00 but that was before 1pm EST. Respectfully we can’t all be wrong.

  174. 174
    zman Says:

    EOG beat on earnings, $1.89 vs $1.65

    Announces new shale play (Atoka) in Tx Panhandle, nice rate on wells drilled so far.

    Reiterating 15% organic growth target and notably not upping their capital budget.

    I’ll have more out in the morning.

  175. 175
    Jason Says:

    I would like to join in on the activity in #171 and say ‘exactly’ to #169!

  176. 176
    zman Says:

    Thanks – if it ever devolves into something like that I will shut it down.

  177. 177
    zman Says:

    I would like to brain the Dow Jones flunky who puts out headlines like

    Chesapeake Swings To Loss

  178. 178
    Jay Reynolds Says:

    Z – Keep the fee structure, exercise a good swift boot if needed, you’re 99.99% spot on with the board organization and execution.

    Maybe a disclaimer on the front page prior to sign up that distinguishes this forum from a message board… I’ve seen a lot of them grow gross with strife when a benelovent dictator (you’re elected) could have quashed the problem at the outset.

  179. 179
    zman Says:

    Thanks Jay, we have a great crew.

    I’ll have the Thursday Night Gas Review out a little later and a pre-call note on CHK. EOG notes will be in the Friday post. Let’s have a greener day tomorrow.

  180. 180
    ram Says:

    ZMAN – I’ll keep the sarcasm to a minimum.

  181. 181
    Jay Reynolds Says:

    I’m going to try to get out this weekend and do a ground check on the Caddo Parish gas wells I spoke of. I don’t think either operator is CHK.. but will check. Won’t matter much anyhow, as the play, as earlier articulated, is estimated at 3,000 sq miles, and CHK is all over like a wet blanket. Well, like a warm, fuzzy, wet, woolen, very friendly blanket.

    Oddly, the “read” in the local community after the Fast Money phone call was much more positive than I would have guessed.

    Got a lot of nods with the “put my money where my mouth is remark” (remember the demographic in the local operator community hereabouts), and then the realization really set in when they started doing the SP X # of shares owned by Aubrey math. Actually, I’d expect that to have some lingering beneficial effect to CHK’s advantage. Got a lot of tough, boot-strapping farmers, fierce nearly-been-starved-out independents and that sort. Aubrey came off as “smart” and not “slick”. Hard to quantify but my gut feel is that the guy is seen as a smart guy, a survivor and maybe better to lease to than the next guy.

    There is a HUGE amount of acreage available in the north part of the Parish and I’d guess that a meeting between well-heeled, long-established local producers and CHK or their peers would be highly productive. The grapevine has been on fire around here lately and I think they’d find their overall leasehold acquisition cost would drop a bit(lease ahead of the confirmed play) would go a whole lot faster for a lot less money if they were willing to accept some acreage for WI APO.

    I’d wager I could fill a BBQ catered room with 150+ on a day’s notice.

  182. 182
    Jay Reynolds Says:

    In fact, for .5% and some collaboration on pulling off a “closer” presentation from the presenter, I’ll order the BBQ and rent the Oil City Museum of Oil and Gas immediately.

    That’s where I host my “stripper technology” feeds. : )

    Just got through with a big DOE Grant App and find out that grants.gov can’t deal with Word 2007 documents! Just due tomorrow.

  183. 183
    apbd Says:

    Been out most of the day. Ditto # 169.
    And, some humor too.

  184. 184
    Nicky Says:

    A thought re non farm payrolls tomorrow -last year in April the ‘fake’ birth/death model added 260,000 jobs, so I would not be surprised to see a better number tomorrow than expected tomorrow. I think the consensus is for a loss of 75,000 jobs.

  185. 185
    zman Says:

    180 – I doubt it, lol

    181 – I do think he’s better to lease to than others in the sense that you have a higher chance of getting drilled on your acreage.

    No bet re: the BBQ and 150+, I’m sure you could.

    JR – put your link on the site, somebody might like to look at the tech.

    A – it was a long red day.

    Nicky – fake birth/death model?

  186. 186
    Jay Reynolds Says:

    Z – I think now, after five generations of having Parker Hannifin (PH) purpose build our production system for stripper wells that I’ll give it a week or so of testing (during which each day we’ll simulate 4-6 years of mechanical wear) I’ll be closer to saying it’s “done”.

    Should have new photos shortly, but the premise is to eliminate rods, tubing and pumpjack, cut cost of lifting fluid by > 50%, eliminate workover rigs. Will update when I can, until then http://www.strippersolutions.com then “Parker Production System”. I will release this product to market when we have accurately simulated 200 years of mechanical/corrosive wear. No sweat, the system has nothing than can corrode and 1/27th the moving parts.

    PH’s engineers are flying in during the next few weeks and I should have some local media links to post as well.


  187. 187
    Nicky Says:

    Z – fake is maybe the wrong word but he nfp data is skewed – John Mauldin explains it far better than I can in an article written in June 2007:

    ‘The Birth/Death Ratio’s Impact on the Jobs Data

    To start with, let’s dissect the employment numbers. The official headline number for June was 132,000 new jobs. Since we need about 150,000 new jobs just to stay even with population growth, that is hardly a robust number, but not too far off from what would be a good number. Except that there are some problems with the headline number.

    The employment numbers come from a survey of established businesses. But obviously the Bureau of Labor Statistics (BLS) cannot call every business in the US, so they simply survey the larger businesses. But that means they miss the growth in the small-business sector of the economy, which is where the largest amount of new jobs are created.

    The BLS surveys about 160,000 businesses in its sample model. There is an unavoidable lag between an establishment opening for business and its appearing on the sample frame and being available for sampling. Because new firm “births” generate a significant portion of employment growth each month, non-sampling methods must be used to estimate this growth. To make up for this, they add or subtract a certain number of jobs, called the birth/death (of new businesses) ratio.

    They use the actual births and deaths of real businesses for the last five years to make their estimates of new jobs created from new business. This is quite a legitimate methodology, but it does have one problem. It is backward-looking data. BLS knows that and states the following on its web site:

    “The most significant potential drawback to this or any model-based approach is that time series modeling assumes a predictable continuation of historical patterns and relationships and therefore is likely to have some difficulty producing reliable estimates at economic turning points or during periods when there are sudden changes in trend. BLS will continue researching alternative model-based techniques for the net birth/death component; it is likely to remain as the most problematic part of the estimation process.”

    Remember the jobless recovery of the first Bush term and the constant criticism about the poor economy? Why was the economy doing so well and yet job creation was so poor? It turns out that a great deal of the explanation is that the BLS underestimated the number of new jobs being created by small business. In the early years of the recovery, rather badly.

    Likewise, the BLS data will overestimate jobs when the economy is slowing down. Is there some evidence that may be the case today? I think there is.

    To the credit of the BLS, they are very transparent about their data. There are massive amounts of data available at http://www.bls.gov and the data on the birth/death ratio is at http://www.bls.gov/web/cesbd.htm. Now, let’s examine the contribution of the birth/death ratio to the employment numbers.

    Last month, the BLS estimated that there were 156,000 new jobs in the birth/death ratio category, which was 24,000 more jobs than they estimated were created for the month. OK, maybe no problem. Looking back over five years, the economy has created about that many new jobs during the month.

    Except that they estimated 26,000 new small-business construction jobs. With home construction dropping, do we really think that the same number of new jobs was created in construction as in June of 2006 and 2005? Or that 153,000 new jobs in small-business construction have been created this year? Really?

    In fact, since January, the BLS estimates for the birth/death ratio have added 747,000 new jobs of a total projected growth of 871,000 jobs, or 86% of the total of the jobs estimated supposedly created for the first half of the year.

    Is there any other reason to believe that the birth/death ratio may be overstating employment as the economy slows? The always astute Paul Kasriel of Northern Trust thinks there is. He notes that in 2005 the contribution of the birth/death ratio (12-month average) to the overall employment numbers was well under 35%. Today it is over 56%. Given the recent numbers, that ratio is likely to rise.

    “What has been happening to the relative contribution of birth/death estimates as the economy has slowed in the past year? The chart below shows that it has been rising. In the 12 months ended March 2006, the birth/death adjustment was contributing only 30.9% of the jobs to the change in nonfarm payrolls. The birth/death relative contribution has been trending higher since then. Notice that as the birth/death contribution to nonfarm payrolls has been trending higher, the percentage of small businesses saying that now is a good time to expand their operations has been trending lower. If existing small business managers do not think now is a good time to expand their operations, does it make sense that there are a lot of new small businesses starting up and hiring?

    “Perhaps because the birth/death adjustment is not, itself, adjusted for the phase of the business cycle the economy is in, it is biasing upward the growth in nonfarm payrolls now. Perhaps the birth/death adjustment is the answer to the Fed’s latest conundrum with regard to stronger-than-expected payroll growth given the sharp slowing in real GDP growth.”

    The number of unemployed rose by 114,000 in June, as both the labor force and population rose. That does not sound robust to me. That seems to call into doubt the recent numbers.

    Another take on it here:


  188. 188
    Wyoming Says:


    Nice tech, they have been doing something similar with composite Coiled Tubing embedded with hepta cable for logging etc… of course it is not commercial after 5 years. Good luck with the system.

  189. 189
    Wyoming Says:

    Sorry over 15 years

  190. 190
    john11 Says:

    Peruvian smallcap energy play BZP initiated with strong buy at Raymond James, target $40

  191. 191
    zman Says:

    john – thanks I see it. I put a link to my last thoughts there on today’s post

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