Finally Friday – Sector Bounce Is Due

In Today's Post:

  1. Holdings Watch - added some more UNG puts
  2. Commodity Watch
  3. Stocks We Care About Today - CHK, EOG
  4. Odds & Ends

Holdings Watch:

(UNG) - Added May $49 puts for $1.05 after a bigger than expected gas storage injection was reported.

Commodity Watch:

  • Crude oil closed $0.94 lower yesterday at $112.52 as the end of the strike in Nigeria and the dollar's newfound strength weighed on the commodity market. This morning oil is seeing a small bounce over reports of intense bombings by Turkey of Kurdish rebel positions in norther Iraq. There's probably little potential for impact on oil there unless it comes in the form of retaliatory sabotage.
  • Natural Gas: Closed down $0.28 to $10.56 after the EIA report. Click here to see last night's gas storage review. This morning gas is trading flat.

Stocks We Care About Today Watch:

(CHK) - May 1 Close of $50.93

In A Nutshell. Chesapeake reported much better than expected bottom line results, costs were in line with guidance and reserve metrics were as good as anyone could expect except maybe one or two odd duck analysts. They also announced a new VPP and the expected sale of the Woodford acreage. The operations update was thin and we'll get a lot more color on the conference call.

The 1Q08 Numbers: 

  • EPS of $1.09 (ex item) vs $0.93 expected
  • CFPS of $3.07 vs $2.43 expected
  • 1Q08 Production of 2.244 Bcfepd (still 92% gas), vs guidance of 2.2 Bcfepd; up 1% from 2.219 Bcfepd sequentially,
  • LOE (lease operating expense) of $0.98 / Mcfe vs guidance of $0.90 to $1.00; this was $0.88 in 4Q07. I highlight the LOE in red as it represents a pretty good uptick in operating costs and they are guiding full year to $0.95 to $1.05 per Mcfe now, up from $0.90 to $1.00 just a month ago. I expect some questions on the call about cost creep and I'd bet it's largely fuel prices in the field and/or electricity.

For More on CHK's quarter click here.

To listen to their conference call at 11 EST today Click Here.

EOG Reports Strong 1Q08 Numbers; Reiterates Ability To Achieve 15% 2008 Growth Target

1Q08 Numbers:

  • EPS of $1.89 vs $1.65 expected
  • CFPS of $4.23 vs $3.93 expected
  • as expected, their mix is become more liquids leveraged; gas in the quarter as a percent of total production declined to 83% from 86% one year ago.

They Reaffirmed 15% organic growth guidance for 2008 volumes while maintaining their original capital budget.

Operations Update - just a few quick highlights

Atoka Formation Horizontal Gas Play

  • 60,000 acres acquired to date in the Texas Panhandle,
  • 17 horizontal wells drilled so far (recent initial production in the 6 to 7 MMcfgpd range),
  • 2.0 Bcfe expected per well for $3.4 mm apiece provides for some attractive, sub $2/Mcfe development costs.

Bakken Play Update:

  • No increase in reserves (still think 80 million barrels (0.5 Tcfe) recoverable with a 10% recovery factor)
  • or acreage (320,000 net acres)
  • Hopefully we get a little color on the 2,000 to 3,000 bopd initial production wells they have been drilling in  the Parshall portion of the play .. they did say the average IP from the last 10 completions has run up to 1,700 bopd.
  • They are currently evaluating results from the first downspaced 320 acre well here. Up until now, they have developed the play on 640 acre (1 section or 1 sq mile) spacing. Downspacing could double the number of potential locations here and up the recoverable reserves. They see 9 mm barrels of oil in place per section so if the downspacing results in the recovery factor you can see the high degree of leverage it would have on their reserves here.

British Columbia Shale Play Update:

  • no increase to acreage position (140,000 net acres)
  • or reserve thoughts (still at a whopping 6 Tcfe of potential) ... ,
  • two recent horizontal tests with "half laterals" (think shorter than normal) IP'd at 3.5 and 4.2 MMcfepd, 

Barnett Shale Play

  • No change to their thoughts on oil reserves underlying their acreage on the north side of the traditionally gas Barnett Shale
  • They've added 0.5 Tcfe to their estimate of recoverable gas reserves due to what they described as a technological breakthrough in completion technology.  


Conference Call at 9 EST. 

Odds & Ends 

Analyst Watch: (PXD) upped to buy at Deutsche, Friedman Billings takes hold rated (PQ) target from $20 to $27.50 (35% expected price appreciation probably ought to warrant a better rating there guys), (PTEN) upped to hold at Credit Suisse, (MUR) cut to hold at Bernstein, Lehman takes (MRO) target from $53 to $63. Lehman takes hold rated (XOM) target from $92 to $101.

179 Responses to “Finally Friday – Sector Bounce Is Due”

  1. 1
    zman Says:

    Jobs down 20,000, market set to bounce

  2. 2
    Sambone Says:

    7:49 am EST

    Crude Rises Ahead Of US Jobs Data, Dollar Eyed

    By Lananh Nguyen and Reza Amanat

    LONDON — Crude oil futures traded higher in London Friday as traders covered short positions ahead of key U.S. jobs data.

    The release of U.S. non-farm payrolls at 1230 GMT, and its effect on the dollar, will be the main focus for oil markets in the short term.

    “Today will remain dollar-dominated and we will have some pre-positioning before the employment numbers,” said Olivier Jakob, managing director of Switzerland-based consultancy Petromatrix.

    At 1137 GMT, the front-month June Brent contract on London’s ICE futures exchange was up $0.75 at $111.25 a barrel.

    The front-month June light, sweet crude contract on the New York Mercantile Exchange was trading $0.54 higher at $113.06 a barrel.

    The ICE’s gasoil contract for May delivery was up $11.00 at $1,057.75 a metric ton, while Nymex gasoline for June delivery was up 95 points at 288.77 cents a gallon.

    “Today much attention will be on the U.S. non-farm payrolls,” said Michael Davies, head of research at Sucden commodities brokerage.

    Analysts surveyed by Dow Jones Newswires expect the data to show payrolls down by a further 85,000 in April after declining 80,000 in March. A higher-than-expected decline “would cast further doubt over the health of the U.S. economy,” Davies said.

    Crude futures are also being helped by financial investors squaring their books ahead of the jobs data, which weighed on the dollar and boosted oil.

    Further buying was also coming from oil investors wanting to shed short positions ahead of the weekend, said Julian Keites, analyst at Newedge Group.

    “It’s Friday and temporary shorts will look to exit,” Keites said. U.K. participants will be sidelined by a public holiday Monday.

    News of Turkish air strikes on Northern Iraq are also helping push crude higher, Davies said. Turkish warplanes bombed Kurdish rebel bases deep inside Iraq in a three-hour overnight operation, a rebel spokesman Ahmed Danas said Friday.

    Despite the gains in crude, some participants expected Thursday’s dollar rebound to resume later in the session, which would put pressure on oil prices.

    “The dollar strength is still playing a major role in this move with spec money switching from oil and back into the dollar as credit crunch and recession fears ease a tad,” said Andy Riddell, an energy broker at ODL Securities.

    Fundamentals and technical charts however paint a more bearish picture for crude. Worries over Nigerian and U.K. oil output — which were both disrupted by strikes earlier this week — have largely receded, participants said.

    Meanwhile, technical factors suggest that the recent rally to record highs has run out of steam.

    “The only way is down,” said an energy broker based in London looking at technical patterns.

    If the dollar strengthens further, it could force ICE Brent crude oil down toward its support level at $108 a barrel, Keites said.

    “The overall momentum on the oil commodities is negative,” Jakob said.

    —By Lananh Nguyen, Dow Jones Newswires

  3. 3
    zman Says:

    Ok, so crude was up $0.60 before the jobs number, immediately dipped into the red after jobs came out and the dollar shot up and now oil is up $1.40. That’s a 15 minutes span. Anybody see flames and smoke?

  4. 4
    kaman Says:

    No kidding, how is the retail trader supposed to play in this environment?

  5. 5
    zman Says:

    K – it’s tough. Apparently it is however good for the stock market if the retail trader loses his job.

  6. 6
    zman Says:

    John11 – saying RJ out with a buy on (BZP) which is BPZ energy and $40 price target.

    Here is my last note on that one:

    EOG call starts in 5 minutes.

  7. 7
    Sambone Says:

    I have been waiting and waiting and finally on Thursday two inverse fixed income ETFs were launched. The first one is the UltraShort Lehman 7-10 Year Treasury Proshares (PST) and the second is the UltraShort Lehman 20+ Year Treasury ProShares (TBT).

  8. 8
    Nicky Says:

    Morning all. WTI correctively retracing the move from the 119.93 to yesterdays lows at 110.30. 38.2% retracement is at 113.97 which it looks like we hit perfectly a little earlier. The 20 dma is at 113.81.

  9. 9
    Nicky Says:

    50% retracement comes in at 115.11.

  10. 10
    zman Says:

    EOG Call Notes: saying big wells are becoming routine in the Bakken, saying they completed one horizontal recently at 3,600 bopd…that’s monster and bigger than I had heard so far. Maybe the biggest well drilled in the Bakken to date.

  11. 11
    zman Says:

    EOG other interesting

    Back to China – partnering with Petrochina – acquiring 130,000 acres, say it’s like South Texas Wilcox, will go after the sandstones there with horizontal drilling. They held this asset when they were part of Enron and I know a little about the area via my coverage of them at the time and of Burlington who also piddled around over there. Could be some upside but it will be 2009 before we really know.

  12. 12
    zman Says:

    EOG Comments from Q&A:

    Bakken comments: very consistent results, surprised by the uniformity, those big 3000 + wells are on the north side of the play. Need a little more time to talk about the 320 acre downspace well.

    by the way, their debt to cap has fallen to 14% and they are saying they could be under 5% by year end. Debt is the one thing that keeps the CHK stock from roaring in my opinion. EOG is not so encumbered and is low compared to all their peers. I think this goes higher on today’s data points.

  13. 13
    Nicky Says:

    WTI – should we take out yesterdays lows then 106.59 which is a 38% retracement of this years rally should attract price but there is good support in the 109- 110 area.

  14. 14
    zman Says:

    Denise – re IOC – they got their credit facility extended, which was the goal of yesterday’s press release.

  15. 15
    zman Says:

    CLR likely to run as EOG does

  16. 16
    Sambone Says:

    May 1, 2008
    5:23 pm EST

    Supply Snags May Limit Crude Price Sell-Off


    NEW YORK — Crude oil prices have dropped 8% from their recent record high near $120 a barrel, but the sell-off may be short-lived as the impact of supply outages combines with rising seasonal demand.

    Although the U.S. appetite for oil in the first quarter was the weakest since the fourth quarter of 2003, the latest data show signs of growth in the world’s biggest oil consumer ahead of the key summer driving season.

    In the four weeks covering most of April, U.S. demand for gasoline was up 0.4%, while total oil use was up 0.5%, according to the Energy Information Administration.

    While that’s far from robust, it’s a significant improvement on the steep 2.3%, or 480,000-barrel-a-day fall in first-quarter demand.

    Early indications — subject to revisions which have roiled prices in recent months — suggest April demand was stronger than expected. The EIA estimated in its April 8 Short-Term Energy Outlook that oil demand in the month would average 20.42 million barrels a day, down 0.8% from a year ago, and gasoline demand would trail the year-earlier level by 0.4%.

    The apparent uptick in demand came in the face of the highest-ever monthly average crude oil futures price of $112.46 a barrel, up 75.6% from a year ago. The average price was about 8% above the $104-a-barrel level the EIA had projected for the month.

    What’s more, retail gasoline prices averaged $3.458 a gallon in April, up 21.5% from a year ago, the EIA said. The AAA Daily Fuel Gauge Report said Thursday that regular gasoline already sells for a nationwide average of $3.623 a gallon, a level it expects on a monthly basis in June. Retail diesel fuel, at $4.25 a gallon Thursday, stands far above the EIA’s projected peak for the year of $3.91 a gallon in April. Prices in the month averaged $4.084 a gallon, up 44% from a year ago.

    Nigeria Oil Vital To U.S.
    Now a seasonal uptick in demand, diminished flows of key light, sweet crude from Nigeria, and expected ramping up in U.S. refinery runs, may send prices rising again.

    “Summer driving season is approaching,” said Jan Stuart, economist at UBS Securities in New York. “Even in a recessionary economy, seasonal gasoline demand will pick up, which adds to stress on the global oil supply chain.”

    Civil unrest and workers’ strikes added to the stress in a market already facing slower-than-expected supply growth in oil exporters and surging demand from developing countries, led by China.

    Worries over a workers strike at a 200,000-barrel-a-day refinery in Scotland combined with output losses in Nigeria to propel oil prices up to $119.90 — a record high — on April 22.

    Output of Nigeria’s highly prized light, sweet crude oil was slashed by more than half of its 2.5 million-barrel-a-day capacity late last month due to sabotage attacks on facilities and workers’ strikes. Some output still remains off-line, despite workers settling a dispute with Exxon Mobil Corp. (XOM) at a crucial time for the U.S. oil market.

    Nigeria accounts for more than 10% of U.S. crude oil imports and has ranked as the fourth-biggest supplier of foreign crude in recent months, EIA data show.

    “Nigeria produces extremely high-quality oil, of which supplies were scarce already,” said UBS’ Stuart. “These outages mitigate against the price-depressing impact of softer demand fundamentals in the shoulder season.

    “Unless oil prices come down in a hurry, they won’t come down for a while,” he said.

    Crude oil input to U.S. refineries averaged 14.54 million barrels a day in the four weeks ended April 25, EIA data show. That’s down 3.2% from a year ago, and 2% below the level the EIA expects for all of April.

    But the EIA expects runs in May will jump to average 15.38 million barrels a day, in line with year-ago levels.

    Refinery Runs To Rise
    Stuart said a rising trend of refinery runs after seasonal maintenance turnarounds should be emerging soon, with May kicking off gains in North America, followed by Europe, the Mideast and Asia by July.

    U.S. crude stocks, at near 320 million barrels on April 25, are at their lowest level since Oct. 12, and are in the low end of the five-year average range for this time of year. Stocks are sufficient to cover 21.7 days of current refinery demand, down from 22.2 days a year ago, but above the 21-day average of the past five-years, EIA data show.

    Gasoline stocks, after dropping by 10.5% in the past seven weeks, are 6.8% above a year ago and at the upper-end of their five-year range. Stocks are sufficient to cover 23 days of demand, two days more than a year ago, and slightly above the five-year average of 22.4 days, EIA data show.

    The Federal Reserve on Wednesday cut its key rate by a quarter point to 2%, the seventh cut in months, and it signaled it may be ready for a pause. A sell-off in oil prices, spurred by bearish inventory data, accelerated on the news. But new concerns about the resumption of Nigerian oil flows pulled prices well off the lows.

    On Thursday, crude prices fell to an intraday low of $110.30 a barrel — marking a 8% drop from the peak price — and a 2.8%, or $3.16-a-barrel, fall on the day. But prices recovered late in the session, ending down just 0.8%, or 94 cents lower, at $112.52 a barrel — the lowest level since April 14.

    Tom Bentz, analyst and broker at BNP Paribas in New York, said prices would have to settle decisively below $110 a barrel to fuel further declines.

    The Fed action, which may strengthen the dollar and thereby limit investor interest in oil futures, did “damage to uptrend (in oil in the) short term,” Bentz said.

    Still, he said, he only sees a “15%” chance that the recent high of near $120 a barrel marks the top of the thundering rally which has caused prices to more than double in the past three years.

    Eric Wittenauer, energy analyst at Wachovia Securities in St. Louis, said he, too, is skeptical about further falls in prices.

    “We’ve seen new exuberance on the buy side with every pullback,” he said.

    –By David Bird, Dow Jones Newswires

  17. 17
    Denise Says:

    Good Morning all,
    Mr K update-goes to suspend his 3-3 market rating says he is confused no opinion
    (this was before jobs report)
    He now makes the valid (in my opinion) observation that no one suggests sell the news

    Z-took IOC off my screen-too hard

  18. 18
    Denise Says:

    Forgot too mention- he points out 45,000 jobs added in construction and 8,000 in the financial sector
    (reads like fiction doesn’t it?)

  19. 19
    zman Says:

    those financial adds are temps used to moth ball whole buildings.

    EOG trading a little off from early highs, they said Marcellus would be slow for them and for industry to grow. In my book, that’s a non-event as it’s not even a major focus yet and its not in the numbers.

  20. 20
    zman Says:

    PQ showing nice recovering after yesterday’s smack down. They report next week, are still cheap even at a price of 21 to as much as 25.

  21. 21
    zman Says:

    EOG Macro Comments on Natural Gas – thoughts on the 914 report data.

    they see production growth in the US for the next several years, but not as strong as the EIA data is showing. They also see some pretty sharp declines starting in the 3 or 4Q this year from the Gomex.

    Comments on the USGS study on the Bakken from EOG. — Think the study is well founded, same guy at USGS reviewed the Barnett years ago, they think it may be a bit overzealous economically though technically correct.

  22. 22
    Sambone Says:

    9:35 am EST

    Crude Rises After Days Of Losses On Stronger Dlr

    By Brian Baskin

    HOUSTON — Crude oil futures are trading higher in an upward correction against steep losses taken earlier in the week on the strengthening dollar.

    Light, sweet crude for June delivery traded 82 cents, or 0.7%, higher at $113.34 a barrel on the New York Mercantile Exchange. June Brent crude on the ICE futures exchange traded $1 higher at $111.50 a barrel.

    Futures closed lower in each of the last three sessions, falling by nearly $10 a barrel, but are now trading $3 higher than the bottom hit Thursday. Traders called Friday’s gains a brief pause as oil heads lower on the strengthening dollar. Oil futures are trading nearly 6% off the record high of $119.93 hit Monday.

    “The market has a weak tone…probably no rally today,” said Dean Hazelcorn, a trader with Coquest Inc. in Dallas. Hazelcorn sees oil futures testing support at $107.50.

    The dollar is trading at its highest point against the euro since March 24, after U.S. payroll data showed a smaller decline in employment than expected. Positive economic indicators generally support the dollar, but are having an especially pronounced effect this week. The Federal Reserve indicated with its latest interest rate cut Wednesday that it could take a break from further reductions, barring further deterioration in the U.S. economy. The euro was recently valued at $1.5395.

    Oil prices were boosted by Turkish airstrikes against Kurdish rebels in northern Iraq overnight. The market is quick to react to any signs of instability in the Middle East, though the dollar remains the primary market mover.

    “The dollar should continue to set the tone over the next few days, as commodity markets will no doubt be waiting to see whether this latest rebound has some legs to it, or if it is just another flash in the pan,” wrote Ed Meir with MF Global.

    Front-month June reformulated gasoline blendstock, or RBOB, recently traded up 1.45 cents, or 0.5%, to $2.8927 a gallon. June heating oil traded 3.05 cents, or 1%, higher at $3.1482.

    —By Brian Baskin, Dow Jones Newswires

  23. 23
    MMarkkk Says:

    Sambone- those ultrashort funds look interesting as a play on rising interest rates. Thanks.

    Z- did you hear Cramer’s reaction to XOM’s numbers yesterday? Popped them pretty hard for not being able to at least sustain production levels. Gotta like who he put as his new #1 Big Oil company…COP followed by CVX. COP mainly because of its bet on nat gas. NFX is eating my lunch over the last few days…good story, good growth, bad timing. CHK: Aubrey very bullish as he should be. Wish I could get just a bit of the commission on what he’s been buying of his own company’s shares.

  24. 24
    Garyinhou Says:

    Z.. re: 15 – Hope your right, those are my 10 clrij’s at 2.80.

    Volume started very light, picking up some but no launch yet.

  25. 25
    zman Says:

    Mark – long time no chat, yep saw the video, like anyone expects XOM grow production on an absolute basis, or even a per share basis, that’s really not their goal as you know. Gotta love the COP, I’ve been in and out several times.

    EOG call done, pretty impressive list of plays they are maturing quietly, and I’d bet they release a couple more this year. The China thing could be big but Bakken is going to grow in terms of reserve size, probably officially by next quarterly report. In the interim, they are hitting some big wells consistently,

    I expect NFX to rally shortly but then don’t I always. CHK selling off their Woodford provides an opportunity for NFX to expand what is now their #1 play. Aubrey may not like what he saw their but the NFX guys are bringing down the costs and boosting the reserves per well. Dual laterals has big potential here to further drop the $/Mcfe.

  26. 26
    zman Says:

    Gary – they announce on Monday, right now its just trading around the mean. If EOG will pop then I expect it moves up, if not, Monday should provide catalytic news

  27. 27
    Sambone Says:

    M – Be careful when buying these puppys starting out very low volume when ETF’s first come out. Just bght some TBT at a limit of 70.25. I’m expecting interest rates to go up, so this is the way to play.

  28. 28
    zman Says:

    Bad Analyst Watch: Just had a Credit Suisse report on CHK’s quarter sent over. The poor fellow is using reserves of 9.7 TCFE in his NAV calc. That’s lower than year end and lower than their reserves posted last night of 11.5 Tcfe. You don’t haircut proved reserves arbitrarily. He’s hold rated and just about as clueless as the JPM analyst who downgraded the stock at 45 a few weeks back.

  29. 29
    Nicky Says:

    Non farm payrolls – what you see is not what you get!

    The Birth/Death model added 267,000 pretend jobs to the actual payrolls number so that means the payrolls were -287,000 real paying jobs which is a pretty awful report. Amazing how this is never really reported and the market just takes the numbers at face value.

  30. 30
    MMarkkk Says:

    CHK out at Woodford: I’m not sure CHK doesn’t like it more than they have too many plays on their plate and not enough capital. Gotta sell something. They are selling VPPs. Selling new stock. Why not trim back on a the bottom of the new play portfolio? Better than getting hammered by analysts!

  31. 31
    zman Says:

    EOG selling off after the call which I frankly don’t get. Bringing CHK down prior to their call (ditto).

    EOG may be down over lack of new results from the Canadian Shale play but not likely. More likely it is the lackluster Marcellus comment. Anyway, think it is over done and CLR is down $1 as it eyes EOG for direction. There is no way EOG is off over Bakken comments.

    One other possible reason for the red stock today on EOG is the lack of a production guidance boost. Analysts get used to being spoon fed higher volume guidance and when they don’t get it they yawn at good results and the underlying implications of good results.

  32. 32
    texana Says:

    reef was it u that had comments about booting the tmr mgmt?

  33. 33
    zman Says:

    ZTRADE: Out DO May $135 Calls for a buck, down 71%.

  34. 34
    kiaora Says:

    Z…DO you think today would be a good entry into EOG if I missed the original Blast rec?

  35. 35
    zman Says:

    K – It’s ok, yep, I don’t expect it to suddenly surge so Monday is probably ok too… just think the reaction here is a little muted relative to the data points. I would give myself more time were I to buy it right now…group still acting a little hinky.

  36. 36
    zman Says:

    What’s up with oil up $1.40 and the dollar rallying half a percent?

  37. 37
    PackMan Says:

    Z – CHK calls. What I have left are the May 52.50’s at 1.35.

    your opinion .. buy/sell/ add more ?

  38. 38
    zman Says:

    CHK call in 10 minutes

  39. 39
    zman Says:

    Re 37: I really don’t do that.

    I will say that I’m long May $50s and $55s, in May and July $60s. I’m tempted to add more but am going to be disciplined and listen to the call before deciding and may wait until Monday. If I didn’t have a nearly full load I would add.

  40. 40
    texana Says:

    z didn’t sound like eog was to excited about the haynesville

  41. 41
    zman Says:

    Texana – I didn’t hear them mention it but I got a cuppa joe during the call, what did they say re Haynesville.

    In about 5 minutes I can bet you CHK is going to be pretty excited about it.

  42. 42
    Nicky Says:

    Z – re # 36 – it looks like it could go higher – 61.8% retracement is at 116.25 – and if its a wave ii probably higher than most are expecting!
    Bulls are trying to change sentiment again with anything they can throw at it. Today we have a mixture of short covering with nobody wanting to be short ahead of the weekend. Will probably lead to an exaggerated move. With the $ up it just shows that the $ really has had very little to do with the rise in oil which is what we have been saying for some time.

  43. 43
    zman Says:

    Nicky – I concur. Too many looking for $110 so here we are going back to $115, lol.

  44. 44
    texana Says:

    didn’t have enough data to chase, hold large position in tx & that they would sit back & wait for play to come to them

  45. 45
    jazzkool Says:

    Z, how does DUG work? If it is a short ETF, and you buy calls thinking the underlying is going up in the future because oil prices will fall, why are the higher priced calls (in terms of the stock price) less expensive than the lower priced calls.


  46. 46
    zman Says:

    Low volume sell off in CL…odd reaction to EOG call. EOG bouncing now, we’ll see if CLR follows suit.

  47. 47
    Dman Says:

    I missed the whole shebang yesterday, so I was very dissapointed to see that I missed out on some genuine bargains amongst my favourite stocks. OII has gotten cheaper from where I was looking at it a few days ago, but sliced thru some longer term moving averages yesterday. So it is technically weaker short term but I suspect it will cling reasonably close to those averages. Post-earnings depression + technicals = maybe now isn’t the right time to pounce. What makes it tricky is that I find it hard to believe we’ll be handed another chance to buy it in the $50’s, so low $60’s might be as good as it gets.

    On the broader energy sector, Denise mentioned yesterday that commodity bull markets always go for longer & go higher than this one has gone. I think that is important for eg. gold & for energy in short-term moves where commodities all trade together. But over a longer term, all those previous commodity runs were terminated when supply caught up with demand. I assume that will happen in energy but it is hard to see it happening soon without a severe global downturn. In theory, current high oil prices could slowly choke the globe into recession…but in reality it just ain’t happening. The new economies are inclined to grow drastically with current prices. In the next few years, energy supply is constrained unless nuclear fusion is suddenly made to work and you can fit a reactor in your car. So price will have to rise to constrain demand. In the absence of dramatic new techno-breakthroughs, the only way this energy bull market ends is at much higher prices.

    Z – Speaking of alternative energy… Cramer has recently been mentioning OTTR and TRN as wind infrastructure plays. Thought you might like to take a look.

  48. 48
    PackMan Says:


    your answer there is fine.
    looking forward to your take on the call.

  49. 49
    zman Says:

    thanks Tex, CHK call starting now.

  50. 50
    T-Tupp Says:

    z- you know anything about this new version of wordpress?

  51. 51
    zman Says:

    yea, its a bugger to install.

  52. 52
    zman Says:

    i’ll handle it this weekend, not a worry for you guys.

  53. 53
    Sambone Says:

    Off subject – If one storm hits Florida in the wrong place, Stick a fork in em, because their done. Ouch


  54. 54
    Nicky Says:

    Strange reaction to what was apparently better than expected data – dollar now pulling back,commodities higher,stocks pulling back which is precisely the opposite to what one would expect to be happening.

  55. 55
    zman Says:

    on CHK call now, jazz, dman, pack back to you after it. thanks.

  56. 56
    PackMan Says:

    Nicky; big resistance up here. I don’t see S&P getting past 1430.

  57. 57
    Sambone Says:

    Nicky – #54 I gave up trying to figure this animal out.

  58. 58
    Dman Says:

    Z – glad you mentioned PQ. I’ve been wanting to get some for ages but had completely forgotten until I saw # 20. Scooped up some Oct calls.

  59. 59
    zman Says:

    ZTRADE: Bought CHK Common at 51.74.

  60. 60

    Aubrey’s really pitching the underlying shale asset value you’be been touting on the Barnett, Z.

    .5 pt on thin volume up so far.

    $25billion of proved assets unshown in the stock!?

  61. 61
    ultyguy Says:

    Just wondering if anyone has a spreadsheet that they would like to share for keeping track of options transactions for tax purposes. Just getting frustrated going through all my transactions for last year. Would much appreciate a template if anyone is willing to share one. :-).

    Thinking of getting some UNG puts, but am leery due to getting burned the last couple of months.

  62. 62
    Dman Says:

    Wow – I’m on the CHK call. He’s really givin’ it to ’em.

  63. 63
    Nicky Says:

    Its not out of the question to me (although not my preferred count) that yesterday in fact only ended ii of v up which means new highs are on the cards for crude. I continue to think its totally overdone and these prices are unwarranted from a fundamental perspective but tell that to the guys who think $200 is on the cards!

  64. 64
    Denise Says:

    This should warm the cockles(sp?) of all on this site

    Mr K sold his Dug
    says short position too crowded and the energy correction might be brief

  65. 65
    zman Says:

    Dman – Aubrey sounds like some sort of caped crusader talking about the heroic efforts of a few E&Ps keeping the gas price down via their growth efforts relatve to int’l prices.

    he says go to
    cleanskies.org and cleanskies.tv

  66. 66
    zman Says:

    He’s pointing out that prices were flat year over year on a per MCFE basis (page 2 of the press release) but income grew due to production and cost containment, I saw one analyst call this a price based quarter.

    Talking about the predictable growth allowing them to put out that 2010 forecast in my note.

  67. 67
    Nicky Says:

    Interesting Denise – but is anybody short energy – I thought the trade was buying every dip??? I thought the crowd was long?
    I guess we can all be very happy with a $10 correction!
    Dman – I think you are right about it strangling the global economy. I actually believe its already happening and people are hanging on by their finger nails.

  68. 68
    Nicky Says:

    Chart wise we are at a very interesting point though….if the trade really thinks this move up is done then they will be selling into this rally whilst touting yet again their bullish argument which is why wave 2’s can look so bullish but in fact set up for a much bigger move down.

  69. 69
    zman Says:

    wow, oil at 115.80, up $3.20

    Aubrey talking about selling assets for an implied cost of capital of 7% and reinvesting at the high IRR in their newer plays.

    Haynesville – access to gas market – confident they will be able to get gas out of the area, they have been working on the pipeline for a year. Saying its much easier to get it out of here than it was to get it out of downtown Ft. Worth.

    Call going well…

  70. 70
    zman Says:

    Wonder how Joe Allman at JPM feels about his (CHK) downgrade at $46 a few weeks ago no, lol.

  71. 71
    Jay Reynolds Says:

    >Aubrey talking about selling assets for an implied cost of capital of 7% and reinvesting at the high IRR in their newer plays.

    I think his language was “many multiples of that”

  72. 72
    PackMan Says:

    Z – your buying common comment just came thru at 11:36.

    Did you buy earlier at 51.74 ? would have to be pre-call.

  73. 73
    zman Says:

    CHK –

    Marcellus slower to ramp than many other shales, a lot slower than the Haynesville ramp will be. Rough terrain, they’ve been saying thjis for awhile. He says the short lease times (3to5) will go undrilled in the Marcellus. They are adding a 2nd rig this summer. “Marcellus will not swamp the US in gas” … the Haynesville is another matter…

    Gas supply growth in 2008 and 2009: they are currently producing 4% of nation’s gas, adding 1% to that. He’s saying that gas production will be up 5% through the 2000-teens. That’s higher than EOG’s 3.5% comment.

  74. 74
    Bob Says:

    I bought CHK common at 51.33 at 11:03:27

  75. 75
    zman Says:

    No, I bought 11:17 Est.

  76. 76
    uop Says:

    just arrived,

    see you bought CHK stock , what is basis for this

  77. 77
    zman Says:

    Pack – I said in the email its a long term hold so 8ths and quarters don’t matter to me. It was a market order as I was listening to Aubrey

  78. 78
    zman Says:

    Uop – read last nights post and comments today. Been talking about it all day long.

  79. 79
    zman Says:

    CHK: They are planning an analyst day …first time ever.

  80. 80
    Nicky Says:

    I have to say I am totally sick of the funds manipulation of the oil market. As they said on CNBC the other day they buy it with absolutely no intention of ever taking delivery of a barrel of oil – they don’t even know what they are buying most the time the guy said but they are just told to get a piece of the action! So the price is controlled by the funds and as long as they are making money they couldn’t care less.
    The only news I can find today is a bit of Turkish skirmish – so we are up $6 in under 24 hours – no way.

  81. 81
    Garyinhou Says:

    5 more clrij for 2.20, looking for 5 more before Monday. Order in for 5 at 1.80 since I’m leaving for an hour.

    Hope they don’t pop-out to center. Course, Sept is a ways off.

  82. 82
    zman Says:

    $116 oil

  83. 83
    zman Says:

    CHK Call – Fayetteville Shale – production rates rising….think its the longer laterals, better completions, also seismically defined drilling is keeping them out of the faulted zones, also just experience in being the biggest shale driller and having their in house technology center (not only allows evaluation of shale cores but also they can model the impact of different completion methods)

    1.6 Bcfe when they started these wells, now at 2.2 and think it will get better.

  84. 84
    Jay Reynolds Says:

    Would somebody PLEASE ask them about the Haynesville sections and rates!!

  85. 85
    zman Says:

    CHK Calls

    Guidance: up on the oil side 2009. They are cagey about it but the answer is the oil unconventional plays.

    No kidding Jay !!! It’s almost like its a taboo topic!

  86. 86
    john11 Says:

    CHK..per Aubrey Haynesville may give opportunity to drill as many as 1250 wells. Wow!

  87. 87
    zman Says:

    the higher activity levels everyone is talking about on these calls is just more good news for the likes of NBR, HAL etc.

    John11 – and that’s a highly risked pretty widely spaced number based on the 300,000 acres. Over time I would expect them to find ways to move that number north.

  88. 88
    zman Says:

    PQ rallying more on CHK’s optimistic comments re the Fayetteville shale. Surprising HK isn’t moving on it as well.

  89. 89
    zman Says:

    CHK Conf Call – West Texas shale – best wells they have seen there just drilled, economic, making progress.

    Anybody see any comments on DVN, starting to move back up and I own for earnings next Wednesday and possible SIZE discovery in the deepwater GOMEX.

  90. 90
    kyleandy Says:

    he must have been listening to jay

  91. 91
    zman Says:

    CHK Conf Call: Haynesville Questions:

    CHK just not talking … my suspicion is next quarter they talk. Not now.

  92. 92
    zman Says:

    Closing in on all time high on PQ. As I said at the bottom of today’s note, the upgrade in price target at FBR to $27.50 was a bit curious given their non-buy rating here.

  93. 93
    Nicky Says:

    CNBC now commenting on the birth/death model and questionning the addition of jobs to contruction, finance and the real estate markets in the report – total fiction I think Denise.

  94. 94
    zman Says:

    Sterne Agee takes EOG to buy

  95. 95
    sane Says:


    Quote of the day:

    “We got a pop from the red hot employment numbers,” said John Kilduff

  96. 96
    zman Says:

    Nicky – re 93 – your letter writing campaign continues to work, first the demise of Sharon Efferson, now this mention. I’m in awe. Please tell them that CHK is undervalued.

    CHK Call Note: – rig rates, function of higher gas prices, thinks its becoming a tougher environment for the smaller private operators.

  97. 97
    zman Says:

    Sane – it’s no coincidence his last name contains the favorite beer of homer simpson.

  98. 98
    Denise Says:

    This one’s for you from Mr K-
    “The rise in the U.S. dollar today contradicts the conventional wisdom that it will be accompanied by a drop in the price of crude oil.

    This helps to explain why, at times, bullish investors don’t want to be interrupted by the facts. ”

    Also he is back to 2-2 market call
    All in short

  99. 99
    Jay Reynolds Says:

    96 BINGO. Almost impossible to contract for even a workover rig.

    There was a little window of opportunity about 2 years ago when a consultant would grab a workover rig, then not release it but would make it available to a company if they would become a consulting client

    Conversion of HS vertical wells to horizontals is a good sign.

  100. 100
    sane Says:

    I think I need a Duff after hearing that garbage.

  101. 101
    zman Says:

    CHK conf call:

    is he talking about haynesville when he was speaking of the vertical convert to haynesville? I missed it.

  102. 102
    zman Says:

    I will drink lots of duff and sleep well tonight.

    Those are Haynesville and that is good news. Said a well completing next week and others hooked up, that data has got to hit the SONRIS site in the next couple of weeks.

  103. 103
    zman Says:

    CHK call done, went very well.

  104. 104
    MMarkkk Says:

    Z – #102: not if the report to be filed with the State is “misplaced” for a little while. The Post Office is a rough place, letters get dropped on the floor all the time. Data just sometimes isn’t very timely, not that its planned that way when you are trying to lease up a bunch of acreage!!

  105. 105
    Jay Reynolds Says:

    101 Yes. I think he said they had 4 HZ’s in Haynesville drilled, unclear on how many producing into infrastructure they had built with 4 more to waiting on completion?? next one to be completed next week. Yes, was Haynesville

  106. 106
    Jay Reynolds Says:

    104 Or, if, as local legend has it, they simply elect to pay the fine for untimely filing….

  107. 107
    zman Says:

    Lights blinking here, may lose power

  108. 108
    Sambone Says:

    12:12 pm EST

    Crude Tops $116/Bbl On Brighter Econ Picture

    By Brian Baskin

    HOUSTON — Crude oil futures are surging on promising U.S. economic indicators, regaining much of the ground lost after three days of declines.

    Light, sweet crude for June delivery recently traded $3.27, or 2.9%, higher at $115.79 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $3.60 higher at $114.10. Nymex crude had earlier hit an intraday high of $116.18 a barrel.

    Futures are now up more than $5 from a two-week low of $110.30 hit Thursday, temporarily pushing aside talk of a severe downward correction. The rapid move higher also comes in the face of further strengthening in the dollar, which had been seen as responsible for oil’s losses earlier in the week.

    Instead, oil prices rose Friday as U.S payroll data showed a smaller decline in employment than expected in April. The data came after a report released Thursday found consumer spending growing faster than analysts forecasted. A stronger U.S. economy would indicate growing demand from the world’s largest consumer of oil, though few were willing to bet on a full recovery based solely on the April payroll data.

    “(Oil) has kind of got a mind of its own,” said Matt Zeman, head of trading at LaSalle Futures Group in Chicago. “People are buying today based on the demand outlook…I don’t think the actual supply-demand situation justifies where we’re at.”

    Zeman sees sluggish U.S. demand eventually sending oil prices significantly lower. Others expect further increases in oil prices even with the U.S. economy struggling.

    “This morning’s price action should show that there is no overarching reason to think that oil has turned the corner and a full-blown reversal is underway,” wrote John Kilduff, vice-president for energy risk management at MF Global. “Demand that may be contracting in the U.S. is more than being offset by demand from China, India, and the Middle East.”

    Turkish airstrikes in northern Iraq overnight helped set the upward tone for the day, providing a new potential threat to oil supplies as Nigerian production rose following the conclusion of a strike by oil workers.

    Front-month June reformulated gasoline blendstock, or RBOB, recently traded 7.37 cents, or 2.6%, higher at $2.9519 a gallon. June heating oil traded 8.52 cents, or 2.7%, higher at $3.2029 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  109. 109
    zman Says:

    At last check there were 4 wells that looked like Haynesville with no data updates going back as far as a month on a couple ….said “waiting on completion paperwork from operator” LOLOLOLOLOL

  110. 110
    zman Says:

    Sam – I was just saying that the other day. Wasn’t there fear and trepidation in oil due to a weak economy killing demand? So if we are happy about the economy now shouldn’t demand pick back up? Just following the reasoning, personally I think the economy is in terrible shape but that people need to drive from job interview to job interview.

    EOG getting some respect finally, CLR heading towards green.

    PQ topping $21. What a difference a day makes.

  111. 111
    Alhambra Says:

    Does anyone have info on WEL (Boots & Coots) and the current run they are on? Volume has picked up on this stock going into earnings (May 6) and I hope this is LT money. If there is hype out there that I’m not seeing (ie Turkey threat pumping 911 calls to blowout oil fires), please let me know. Thanks.

  112. 112
    zman Says:

    A – I don’t but I sent an email to a smart guy with good connections who used to track them very closely. We’ll see if he knows anything.

  113. 113
    kyleandy Says:

    z– DNE continues to be minor thorn. not participating in bounce. any ideas?

  114. 114
    Sambone Says:

    Z – #110, These type of swings concern me. Last fall oil was at $75? then ran to almost 120. I agree with Nicky on #80. This is not based upon fundies but momentuem buyers especially in crude. This is a small rabbit hole and too many elephants are trying to get in. If we have a black swan, it will get crazy.

  115. 115
    Nicky Says:

    Z – too funny re #95 – I am thinking there is another letter writing campaign coming up with his name on it!! How come they drag him out every time oil goes up and he disappears completely on the down days – hope it means he is too busy rescueing his longs and therefore does not have time to comment to CNBC.

    Too true Denise re #98.

    May be a good call re broader market – certainly the charts are not looking pretty. It went a bit higher than I was expecting but as someone mentioned on here earlier 1430 was huge resistance. The close is going to be very important today. It is interesting that after the initial euphoria regarding the payroll data it is starting to be looked at a little more closely – I mean a loss of 287,000 jobs is truly a nightmare report.

  116. 116
    zman Says:

    DNE: Conventional resource players getting no respect at all here. I don’t see a reason for the drop other than shale play mania and a single digit midget price on the slide will shake it out of the hands of frustrated investors who see other names rising every day. You got the Jefferies initiation of coverage which barely moved the shares and then this big fall. I think it way overdone and the market clearly does not care what I think. I have a note on them that I never published and will try to dust off at the end of earnings season. Maybe in a week and half I’ll have something intelligent to say.

  117. 117
    Bob Says:

    Z: Any further insight into BPZ (symbol BZP)? Raymond James strong buy with $40 target is up there, but then earnings estimates reflect that price also. Interesting that 3 mos ago both PQ and BZP were at $13, and both are at $21 today.

  118. 118
    zman Says:

    Bob – see comment 6 above

  119. 119
    Bob Says:

    Z: I did earlier, but have not seen any new developments in the last 2 months since your report. Didn’t know if you had insight into why the RJ call at this time. Thanks

  120. 120
    zman Says:

    Bob – I don’t have any new thoughts there. Will have a look for the weekend.

  121. 121
    Bob Says:


  122. 122
    Dman Says:

    Continuing from # 47 on the broad energy outlook: it seems to me that a succession of Bush admin officials, and finally GWB himself, have pulled the rug out from under the conventional wisdom that Saudi has spare capacity. Whilst people like Matt Simmons have been saying for years that Saudi are pumping everything they have, the Saudis have maintained their traditional claims that they do have spare capacity. But they seem to be saying otherwise to GWB and his minions, who then helpfully repeat this to the world, as the Saudis must have known they would do. If Saudi *did* have spare capacity, would they really adopt this curious PR tactic?

    Nicky, re #67, what leads you to think the global economy is teetering?

  123. 123
    ellwodo Says:

    Z – Just wanted to thank you for your pre market analysis of CHK and your comments during the call. It’s currently my biggest investment (between shares and options) and your insights are much appreciated.

  124. 124
    Nicky Says:

    Dman – it started here and it is starting to be felt elsewhere. I really don’t buy the de-coupling theory. I think there is very little doubt the US economy is in a pretty poor state and really is hanging on by the skin of its teeth. The consumer is being killed by housing and is about to drown in credit card debt. There is no respite for them with the inflation we are seeing in food and energy.
    The UK has already rolled over with all the same problems the US has if not worse and whilst I take on board the fact that the UK is not significant to me it is another indicator. Europe, who have been far more concerned about inflation are now showing signs of weakening, yesterday their retails sales figures went negative to give but one example. As far as China and India go – too far too fast imo. I can only put it in laymans terms as I am no economist but everything they manufacture goes abroad and what is going to happen to that demand when the markets they supply weaken even further?

  125. 125
    sane Says:

    Iran Doubles Oil Stored in Tankers, Bolstering Rates

  126. 126
    zman Says:

    el – my pleasure. Can’t tell you the rally won’t peter out if Nicky has her way with oil but I think analysts came away with positive thoughts and that we might, just might see an upgrade on Monday. I sort of doubt it because the guys who get the story already are at buy and those who don’t feel like they’ve missed it and have to eat crow to reverse here.

    Has anyone seen a transcript of that call yet? Got a few things I want to review

  127. 127
    zman Says:

    Sane – thanks for that article, had been noticing the prices climb each week in the wrap for VLCC s of late but I did not know why, especially with the comments about OPEC producing less.

  128. 128
    Jay Reynolds Says:

    Splitting elephants..

    Re: “But they seem to be saying otherwise to GWB and his minions, who then helpfully repeat this to the world, as the Saudis must have known they would do. If Saudi *did* have spare capacity, would they really adopt this curious PR tactic?”

    EVERYBODY’S Right… They do have spare capacity, what 1.5 MMBOPD of heavy, sour for which there is no refining capacity. Right? : )

  129. 129
    sane Says:

    Re 122

    I think most of the Saudis “spare capacity” is heavy and sour. So what may be “spare capacity” to some is not to others if you can’t use it.

  130. 130
    zman Says:

    Eventually the Chinese will build the sour processing capacity to take it off their hands, maybe 2 years out and then it’ll be “spare capacity, what spare capacity?!”

  131. 131
    Nicky Says:

    Dman – one more thing as this did start as a discussion about the effect (or not) of oil prices at this level – oil at these elevated levels is a pretty recent event so imo it is going to take some time for the effects to filter through and be reflected in the economy. As Sam said oil was at $75 in the fall and maybe that was an ‘acceptable’ level. The affects of the massive hike in price since then are probably still being digested.

  132. 132
    zman Says:

    Ultyguy – Have you checked to see if your broker allows you to download transactions to a spreadsheet?

  133. 133
    Sambone Says:

    U – #132 Most major shops do allow downloads to quicken, etc. Smaller shops don’t.

  134. 134
    zman Says:

    hello CLR

  135. 135
    Dman Says:

    Jay & Sane : thanks for splitting those elephants: if there are elephants in the room, it might be the only option.

    Nicky, I certainly agree that current prices haven’t “sunk in” yet. Many decisionmakers are assuming it is a temporary situation & so haven’t yet adjusted their view of what plans are feasible. When they do figure out that they can’t plan on $40 oil, they are going to start cancelling things. Many individuals also assume their new transport expenses are aberrations & so haven’t really adapted their consumption. But will this offset the growth of China etc? A hefty fraction of China’s ecomomy these days is actually domestic: the workers can now afford to buy what their factories produce.

  136. 136
    Sambone Says:

    Nicky #29, here’s a good chart.


  137. 137
    Sambone Says:

    Off subject – I guess you saw where S&P cut CFC to junk today.

  138. 138
    md Says:

    Re: NG weekend report
    Please advise if there’s seasonality to domestic production.

  139. 139
    zman Says:

    big earnings week next week:
    PQ, HK, SD, CLR.

    MD – not to speak of in the U.S., especially not this year. From time to time you see some well freeze ups in the Rockies and western plains that cause short term discombobulations but for the most part drilling and completions are flame on south of the U.S. / Canada border.

  140. 140
    antrimshale74 Says:

    Any idea why DNE got whacked so hard this week?

  141. 141
    Nicky Says:

    Good chart Sam.

    Dman – yes agree re people hoping it is temporary. The talk about a bubble probably has everyone thinking this cannot last – when they realize it is here to stay then we maybe have more of a problem.

    Can China go it alone? I just don’t know. I don’t doubt the long term growth story there but I also think they too will have periods of contraction – it has already slown down somewhat. How much they slow down if the west heads into a protracted recession remains to be seen.

  142. 142
    zman Says:

    Thanks for the transcript of the CHK call Eli! Just doing a little fact checking. Also note that that scrub analyst at JP Morgan did not bother to ask any questions…guess CHK remains a hold there.

  143. 143
    ellwodo Says:

    139 – also XCO May 7

  144. 144
    zman Says:

    Elwo – too true

    Antrim – no, see #116 above.

  145. 145
    Garyinhou Says:

    Clr 43.13, $4 off its low for day

  146. 146
    zman Says:

    Gary, yep, it’s a volatile little puppy.

    So, I’ve had CNBC on mute all day. How many times have they used the word “rotation” regarding a move away from energy today?

  147. 147
    Dman Says:

    Well Z, HK is down 0.3 % !! There’s your rotation out of energy, right there!

  148. 148
    antrimshale74 Says:

    Re: DNE – Didn’t see that note at first. I keep buying as it keeps falling and I’m wondering if I’m missing something.

  149. 149
    zman Says:

    I just think it is being ignored and people are pulling out on no news to focus on names that are jumping.

    Sneaking out for a minute, back before close.

  150. 150
    uop Says:


    which refiners have to buy all their oil, that is they have none of their own ?

    which companies have oil but no refinery ?

  151. 151
    T-Tupp Says:

    z- rotation is better than capitulation. capitulation was the word for all of april….. that sue herrera beat that word to death. i want to start a petition to get her, epperson and mark haines of that network. none of them know a single thing about what they are talking about

  152. 152
    T-Tupp Says:

    uop, q#1- independent refiners like vlo and tso, q#2- pure e&p oil co’s solely look for and produce oil and therefore do not refine into products..

  153. 153
    Popeye Says:

    T-Tupp would you PLEASE add Dennis with the goofy glasses to that petition.

  154. 154
    antrimshale74 Says:

    Dennis is a real piece of work.

  155. 155
    zman Says:

    UOP – independent refiners who have no production of their own: VLO, TSO,SUN, FTO, ALJ, HOC are the main ones.

    Integrateds have both upstream and downstreaM: are the big 3: XOM, CVX, COP and then all the foreign ones: BP, SHELL, TOT, REP, E, PTR, PBR, CEO, SNP.

  156. 156
    zman Says:

    Liking the continued up move in NBR here. All the activity in the gas shales and in the Bakken plays right into their hands

  157. 157
    zman Says:

    add to that list of names I care about reporting next week, APC, DVN

  158. 158
    zman Says:

    what a swing on CLR

  159. 159
    Sambone Says:

    3:25 pm EST

    Nymex Crude Rises On Uplifting US Economic Data


    HOUSTON — Crude-oil futures settled higher Friday as better-than-expected U.S. economic data raised hopes that demand for gasoline and other products will strengthen.

    Light, sweet crude for June delivery settled $3.80, or 3.4%, higher at $116.32 a barrel on the New York Mercantile Exchange. June Brent crude on the ICE futures exchange traded $4.17, or 3.8%, higher at $114.67 a barrel.

    Oil futures closed higher for the first time in four sessions after rising on U.S. data showing a smaller-than-expected decline in nonfarm payrolls in April. The figures bolstered those who believe the economy is recovering, or has at least stopped deteriorating. Gasoline demand is off slightly from a year earlier and refineries have cut back their crude intake, leading some to question oil prices” ability to stay at near-record levels.

    Recently, positive economic indicators have been viewed in the oil market more for their impact on the dollar. Should the U.S. economy strengthen, the Federal Reserve would be less likely to cut interest rates, shoring up the dollar against the euro. Investors have bought oil as a hedge against the weakening dollar, so an end to the Fed’s cuts was seen as likely to send money out of the energy market.

    The Fed cut its benchmark interest rate by a quarter point Wednesday, and implied that further reductions would come only after clear signs of a worsening economy. This partially decoupled oil from the dollar, which is seen as less likely to steadily weaken now that currency traders can no longer count on regular interest rate cuts, analysts said.

    “We may start to see a disconnect,” said Mark Waggoner, president of Excel Futures in Huntington Beach, Calif. “It’s back to (a focus on) demand.”

    A renewed interest in U.S. demand could send oil prices even higher next week, said Peter Beutel, president of trading advisory firm Cameron Hanover.

    “Economic news (now) has the really weird impact of always being bullish,” said Beutel. “If we get recessionary news, there’s still a lingering fear that the Fed could cut (rates). When we get bullish news like we did today…everybody says that’s good for demand.”

    Front-month June reformulated gasoline blendstock, or RBOB, settled 8.82 cents, or 3.1%, higher at $2.9664 a gallon. June heating oil settled 10.1 cents, or 3.2%, higher at $3.2187 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  160. 160
    Garyinhou Says:

    crazy action in clr last few minutes, hope its a good omen for Monday morning not just short covering from earlier or something

  161. 161
    Nicky Says:

    Beutel is saying just what you have been saying Z – basically they can spin it bullishly whatever happens!

  162. 162
    zman Says:

    Nicky – is he talking oil or natural gas?

  163. 163
    Nicky Says:


  164. 164
    Sambone Says:

    By Christine Buurma

    NEW YORK (Dow Jones)–Natural gas futures ended higher Friday, propelled by
    rising crude oil prices and book squaring ahead of the weekend, as traders took
    advantage of a recent decline in prices to buy back previously sold positions
    at a discount.
    Natural gas for June delivery on the New York Mercantile Exchange settled
    floor trade 21.6 cents higher, or 2.05%, at $10.777 a million British thermal
    units Friday after reaching a high of $10.795/MMBtu in combined electronic and
    floor trade earlier in the day.
    “The natural gas market is higher in sympathy with crude oil,” said Tim Evans,
    an analyst with Citigroup in New York, in a note to clients Friday.
    Amid forecasts of mild spring weather in the U.S. Midwest and Northeast,
    natural gas traders have been looking to the crude oil market for price cues.
    Natural gas sometimes trades in sympathy with crude oil and related products,
    which can be used as substitutes for gas in power plants and heating systems.
    Crude oil futures climbed Friday on strong U.S. economic data, which raised
    hopes that demand for gasoline and other products will strengthen.
    Light, sweet crude for June delivery settled $3.80, or 3.4%, higher at $116.32
    a barrel on the New York Mercantile Exchange.
    Natural gas futures also rose as traders repurchased previously sold contracts
    ahead of the weekend, analysts said.
    Meanwhile, moderate temperatures in the major gas-consuming regions were
    expected to spark little demand for natural gas for heating and cooling. The
    National Weather Service predicted normal temperatures for the entire Eastern
    Seaboard, with some below-normal temperatures in the Great Lakes region and
    Midwest, from May 7 to May 11. Below-normal temperatures are expected across
    much of the Northeast and Midwest from May 9 to May 15.
    “Daytime highs in the 60s next week in the Northeast and Midwest will not
    generate much heating or cooling load, obviously,” said John Kilduff, an
    analyst with MF Global, a New York-based brokerage.
    The mild weather was expected to bring sizable injections of natural gas into
    storage over the next few weeks, helping to allay concerns about possible
    supply constraints.
    As of April 25, the total amount of gas in U.S. storage was 1.371 trillion
    cubic feet, 0.2% below the five-year average and 15.7% below last year’s
    levels. Amid dwindling liquefied natural gas imports and an ongoing production
    suspension at Independence Hub, a major U.S. Gulf of Mexico gas platform,
    traders are watching storage levels closely to determine whether inventories
    will be replenished before next winter.

    Nymex June $10.777 +21.6c
    Nymex July $10.792 +21.8c
    Nymex Aug $11.001 +21.8c

    Henry Hub $10.30-$10.66 $10.36-$10.76
    Transco 65 $10.34-$10.69 $10.55-$10.76
    Tex East M3 $10.95-$11.35 $11.27-$11.60
    Transco Z6 $10.98-$11.20 $11.26-$11.60
    SoCal $9.11-$9.39 $9.65-$10.18
    El Paso Perm $8.91-$9.15 $9.56-$9.81
    El Paso SJ $8.55-$8.80 $9.15-$9.36
    Waha $9.20-$9.35 $9.60-$9.91
    Katy $10.07-$10.20 $10.28-$10.55

    -By Christine Buurma, Dow Jones Newswires

    05-02-08 1551ET
    03 51 PM EDT 05-02-08

  165. 165
    uop Says:


    what is your late Friday view how NG will do next week, next 4 weeks ?

    I have rolled to June puts.

  166. 166
    zman Says:

    Aubrey of CHK said they had hedged 192,000 natural gas contracts. He said the risk for natural gas prices was companies like his producing enough to bring it down. Although he thinks global factors like electricity shortages on the far side of the planet indirectly boost NG prices in the U.S. he is still 70% hedged this year and 40% next year. He sees 5+% volume growth for the foreseeable future. Demand has not shown a long term growth trend. Electricity has been growing, other areas like industrial have fallen off, 10 years, very little growth, so it looks to me that unless exports rocket and imports plummet prices are due to fall. Can’t tell when that will be and don’t see it delinking from moves in crude so I’ll be getting out of my UNG short next week, probably after the Thursday number unless the weather data don’t say its a good idea Monday, then I’ll be out Monday. Plan to shelve it for awhile and reaccess…with hurricane hype coming I just don’t see it falling unless the Atlantic stays storm free for too long.

  167. 167
    uop Says:


    txs for response on subscription and comment

  168. 168
    Nicky Says:

    Next fib level for crude is 117.87.

  169. 169
    zman Says:

    Any time Uop!


  170. 170
    Sambone Says:

    Tini time!

  171. 171
    sane Says:


  172. 172
    Jay Reynolds Says:

    new local info:

    $12,000 acre, 5 year lease, 400 acre tract, West Cross Lake area (Shreveport) HK is lessee.

  173. 173
    Garyinhou Says:

    Everybody have a good one.

  174. 174
    T-Tupp Says:

    popeye- i looked on the cnbc website and still dont know of this dennis you talk about…..

  175. 175
    PackMan Says:

    CHK …. good work on that all week Z … thanks.

    I’m out for now, but will be back in.

    On the Economy, very mixed signals. Many companies w/ good earnings reports, particularly in the DOW and Tech like AAPL, RIMM, INTC. CSCO next week.

    Yet on the ground, there are problems. Job losses. Foreclosures. Food inflation. Gas prices. States w/ massive budget deficits only going to get worse (CA, NY) as tax revenues decline.

    Financials have moved this market up, falling VIX helping, who knows if we are seeing short covering or for real. I suspect combination of both. I think it won’t hold. Too many problems still w/ the banks and brokers.

    Its a trader’s market. I don’t buy the “rotation” babble. Nasdaq hit 2500 today. S&P likely won’t break 1430 for a while. May 1 & 2 probably saw lots of 401k mutual fund buying so the crooks are incented to run things up to sell it to them.

    Good weekend all.

  176. 176
    Jay Reynolds Says:

    Something I’m wrestling w/ is the charting methodology which serves many well w/ commodities.

    Chart action, and the inferences that may be drawn from it, are reliant upon supply/demand – if price rises enough supplies will rise, etc..

    What though in the case of unalterable supply constraints as would be the case with peak oil?

  177. 177
    doc Says:

    Last week there was a report that eca lost a lot of money hedgeing. What is your take on this?

  178. 178
    zman Says:

    Doc re ECA – it’s a non-cash hedge charge caused by mark-to-market hedge accounting. Is inconsequential to the cash flow and therefore my take is it does not matter.

  179. 179
    billion dollar bully Says:

    billion dollar bully

    Finally Friday – Sector Bounce Is Due | Zman

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