Tuesday – Still More Earnings

Fantastic Monday. What I should have called yesterday's post in light of the move the energy sector and especially our holdings in (CLR, up 16% yesterday) enjoyed. See last night's wrap on CLR here. Today its back to more earnings from the E&P sector with a big beat at perennial favorite (though not currently held) Anadarko (APC) and at PQ where we have significant call exposure. 

In Today's Post:

  1. Holdings Watch: added more DVN, punted some CHK.
  2. Commodity Watch
  3. Stocks We Care About Today: APC, PQ
  4. Crack Spread Update - staying away.
  5. Odds & Ends

Holdings Watch


  • DVN - added June $125 Calls for $2.45 in advance of earnings on Wednesday.
  • CHK - took some May exposure off the table as the group continued its rally. Sold the May $50 position for $4.70, up 262% since entry in late March.

Commodity Watch:

  • Crude Oil: closed up $3.65 to $119.97. A retreat in the dollar helped along with the markets' sudden thought that an improving economy = more oil demand. Lightish trading volumes due to some major market holidays no doubt exacerbated the move. This morning oil is trading flat to down slightly.
  • Natural Gas: closed up a whopping, stunning, mind blowing $0.40 to $11.18. The move higher keyed off weather, which came in cooler than expected for last week, a further dip in imports, and then the rally in oil.  This morning natural gas is trading around even. 
  • Imports: total imports fell to 8.2 Bcfgpd last week, down 3.4 Bcfgpd from year ago levels.
    • LNG remains stuck in other ports with U.S. send out volumes mired at 0.7 Bcfgpd, down 2.6 Bcfgpd from year ago levels.
    • Canadian volumes dipped to their lowest levels of the year at 7.5 Bcfgpd, down 0.8 Bcfgpd from year ago and last week's levels.
  • Independence Hub: scheduled to come back on line Mid May according to Anadarko's 1Q operations update. This has kept 0.9 to 1.0 Bcfgpd offline for 3 weeks now.

Stocks We Care About Today:

PQ Reported Solid 1Q08 Results

The 1Q08 Numbers:

  • EPS of  $0.28 vs $0.26 Street Consensus,
  • CFPS of $1.03 vs $1.03 expected,
  • Revenue of $77 vs $71 million,
  • Production of 86.7 MMcfepd, vs guidance of 86 to 92 MMcfepd
  • Lease operating expense came in well high of expectations at $1.29 / Mcfe, I suspect due to increased workover expense at two Gulf of Mexico shelf properties. Note to management, it would be nice to have at least a footnote on this kind of thing in the press release.


  • 2Q08: issued at 91 to 97 MMcfepd,
  • FY2008:  reaffirmed 94 to 100 MMcfepd.
  • Boosting Capital Budget: from 230 to 260 million...they did not break out where the additional money goes other than to say it would be directed to long-lived basins.
  • Cost guidance: higher ranges set for LOE and production taxes. Both are very low but I'm not wild about a 10% boost in the $/Mcfe guidance without explanation.

Operations Update: Not a lot of meat in the press release. Hopefully the call will flesh some things out.

Arkoma Basin : > 20,000 Mmcfepd net from the Woodford and Fayetteville Shales Combined

Woodford Shale: 

  • still seeing good rates, 14 wells completed so far, #12 and #14 IP'd 4.6 and 6.3 MMcfgpd,
  • #13 has been on for 7 weeks having IP'd at 6, the well is averaging 4.6 MMcfgpd after 7 weeks... that's maybe a slightly decline rate than they would expect.
  • wells are coming in at much better rates relative to plan from last Fall (which is the same modeled EUR in their April presentation so maybe it's time to revise those numbers up). IP's then were thought to be 2.5 to 4.0 which EUR's 2.5 to 3.5 Bcfe per well. Costs remain in line at around $4.5 mm a well so development costs here are coming down.
  • 3 rigs running in the play,
  • "in excess" of 31,000 net acres, a majority of which is in the core of the play, so on 80 acre spacing that gives you nearly 400 locations left to drill.  If (NFX) results continue to be encouraging in their 40 acre spacing pilot.

Fayetteville Shale:

  • rate increased 10% from 1Q08 exit to 3.3 MMcfgpd
  • 6 non-operated rigs running here
  • no well count given, still saying they will participate in 80 to 100 wells this year

East Texas Basin:

No update on activity in the SE Carthage Field, these are cheap to drill, nearly impossible to mess up Lower Cotton Valley targets, very predictable, and very low cost to operate.  This field has been the core of their East Texas Basin operations and should be close to 15% of current production...hopefully we'll get a production number on the call.  

Outside of the SE Carthage Field: 

  • Palmer Prospect (Robertson County): another Lower Cotton Valley lime well completed for 2.5 MMcfepd makes three
  • Weekly Prospect (Houston County): second well drilling target Buda formation oil...no mention of what happened with the first well...don't see where I missed it, just no mention. They've got quite a bit of acreage here so oily results from that first horizontal test are pretty important...look for more details on the call.  

Gulf Coast: 

  • Pelican Point Development: On line as expected at previously announced rate of 20 MMcfepd gross (they have a 22 net revenue interest (NRI) here). They have several exploratory Gulf Coast test planned for the remainder for the year, at least one of which should have already spud.

Hedging Update: ~ 40% of expected 2008 production is hedged at just over $8/Mcf.

In A Nutshell: Waiting for a little more meat in the Conference Call: Today, 9:30 EST. 



APC Reported Blow Out 1Q08; Reaffirms Guidance Despite Independence Hub Shortfall

The 1Q08 Numbers: 

    • EPS of  $1.44 (ex items) vs $1.22 Street Consensus;
    • CFPS of $4.27 vs $3.44 expected. Blowout.
    • Production: 585,000 BOEpd, up 8% YoY increase from retained properties; this blew out the top end of the range of 550,000 to 570,000 BOEpd issued in February. 


  • 2Q08: issued at 550 to 570 BOEpd (flat with that of 1Q guidance),
  • FY2008:  reaffirmed prior volume guidance of 565 to 585,000 BOEpd
  • Cost guidance is in line as well, save a small increase in expected transportation costs.

Operations Update: There's a long list (15 pages long) on the APC website. Many of these have to due wit the timing of development activity in the Gulf of Mexico, Algeria, the Rockies etc. They did have a large discovery off Ghana and a large dryhole (the Green Bay prospect) in the lower Tertiary region of the deepwater Gulf of Mexico (in which DVN was a participant). 

In A Nutshell, '08 CFPS Numbers Will Be Coming Up Probably $2 to $3. The stock has been trading at just under 5.0x 2008 and 2009 CPFS (they're practically the same for both years). Similar volume guidance and markedly better prices in the second quarter should add at least $1 to second quarter estimates. 3Q should see a bigger gain in volumes so add another buck there as well. So if we hold the multiple flat and raise the estimates by $3 the stock should at least advance to $80 before consideration is given to the deepwater extensions and discoveries.  I'm not in at present and will listen to the call before deciding whether or not to bite at present or wait for the inevitable energy "red" day. Conference Call: 10 EST.

HK reports after the close / before the open Wednesday.

Crack Spread Update: Still Moving In The Wrong Direction. Not even tempted to add refining longs here.


Odds & Ends

Analyst Watch: (AGU) raised to outperform at RBC, SUN cut to underweight and (VLO) cut to neutral at JP Morgan - (he must be thinking the same thing about cracks that I am ... Yawn), 


221 Responses to “Tuesday – Still More Earnings”

  1. 1
    zman Says:

    PQ bid up a buck, conference call at 8:30 central time.

    Oil waffling around $120

  2. 2
    el_vogel Says:

    morning Z –

    Bloomberg going on this AM about GS analyst’s $200 oil prediction plus lots of bad news in the financial sector so many rotated into last week; so far this week is already looking pretty good I’d say – maybe we’ll get some extra positive momentum as money rotates back…

    my armchair analysis for the day, while I have time to prepare it 🙂

  3. 3
    zman Says:

    EL -V yeah, I called it the super-duper spike in the post. Amazing how having the biggest hedge fund on the planet (Goldman) say something can virtually insure that it occurs.

  4. 4
    zman Says:

    IOC shareholders getting some nice dilution this morning. $60 mm of debt just became shares.

  5. 5
    reefguy Says:

    Pemex takeaway from Dallas Wildcatters- Cantarell current production 1.2MMBOPD(out of 2.9MMBOPD)declines next year by 200k/day. Decline cure shown looks like an 18%/yr ramp, no indication of hyperbolic curve. Planning says will hold national rate to 3.1(it is already down to 2.9)till 2012. Importing 40% of gasoline and increasing at 8%yr. No new refining capcity since 1979, none planned. Natural gas production increasing at 14%/yr. Since 04- Total hydrocarbon production flat at 4.4 MMBOE/day-oil down from 3.4 to 2.95MMBOPD.

  6. 6
    Sambone Says:

    7:48 am EST

    Crude Steady, Numex Close Above $120/Bbl Eyed

    By Angela Henshall

    LONDON — Benchmark crude oil futures are little changed in London Tuesday, pausing after a rally to fresh highs earlier in the session on growing concern over tighter global crude supplies.

    The move higher was a continuation of Monday’s rally that saw the Nymex light sweet crude front-month contract finally breach the crucial $120 a barrel barrier.

    “It looks like follow-through technical buying,” said Glen Ward, a broker at ODL Securities, after significant resistance levels had been surpassed.

    Nymex crude surged to within a whisker of $121 a barrel earlier Tuesday, hitting $120.93 a barrel, while the ICE Brent June contract moved higher in tandem to $119.07 a barrel in a market spooked by fears of supply shortages.

    Prices climbed on a number of supporting factors including worries over security of oil exports from Nigeria, a key supplier to the U.S., in addition to concern over ongoing strikes at key oil shipping hub Marseille in France.

    Market bulls are still looking for an excuse to go higher and remain extremely sensitive to any news of further outages in Nigeria, where more than 600,000 barrels a day is already thought to be shut-in.

    Another attack on a facility over the weekend triggered buying, although some progress has been made with Exxon Mobil (XOM) saying earlier Monday it had fully restored output following a strike by workers.

    At 1131 GMT, the front-month June Brent contract on London’s ICE futures exchange was up $0.29 at $118.28 a barrel.

    The front-month June contract on the New York Mercantile Exchange was trading $0.04 higher at $120.01 a barrel.

    The ICE’s gasoil contract for May delivery was down $1.00 at $109.850 a metric ton, while Nymex gasoline for June delivery was down four points at 305.25 cents a gallon.

    Crude’s latest extraordinary run to record highs has seen Nymex crude gain $10 a barrel since late Thursday, taking just two days to accomplish a move that previously took ten.

    Although Nymex crude has smashed the $120 a barrel barrier, it still needs to confirm it by closing above that level, although traders now see no clear resistance level before $125 a barrel.

    Four months ago, when prices broke $100 a barrel, concerns were raised over whether demand would start to erode as the U.S. economy slowed. This so far has proved unfounded and the widespread expectation is that prices will remain above $100 for the medium term.

    Goldman Sachs forecasts an oil price “super spike” within the next six to 12 months to $150-$200 a barrel.

    “We believe the current energy crisis may be coming to a head, as a lack of adequate supply growth is becoming apparent and resulting in needed demand rationing in the Organization for Economic Co-operation and Development areas in particular the U.S.,” it said in a research note Monday.

    It is tricky to determine exactly which corner of the market is driving the recent wave of buying. Part of Monday’s move higher could be attributed to “black box buyers,” using algorithmic trading programs, according to traders based in London.

    A trader said a bullish fundamental picture combined with weaker U.S dollar lifted crude through significant resistance levels Monday.

    “That triggered a lot of buying from trading advisor programs which, in thin volume due to a U.K. holiday, met very little resistance,” the trader said. “Each one (trading system) could have a different level, but a buy signal would be given if we break above a level that has been a high for a while — so they all tend to go with the trend.”

    Geopolitical tension in the Middle East also continues to lend additional support.

    Samuel Ciszuk, analyst at Global Insight expects the risk premium for oil prices to increase if Iran forges ahead with its nuclear program, dismissing a package of incentives offered by countries in the West.

    “All sides are digging into trenches…leading to more tension,” Ciszuk said, adding the West looks set to move towards a new round of sanctions while Iran’s resolve seems unshaken.

    —By Angela Henshall, Dow Jones Newswires

  7. 7
    sane Says:

    Re 3

    Self fulfilling prophecy.

  8. 8
    zman Says:

    Reef – thanks much, good data. If only they’d open Mexico up to U.S. investment…

    Sane – yep, talk about a market crusher, $200 oil possible in 6 months. Yikes. That might just kill Nicky.

  9. 9
    sane Says:

    I think it will kill a lot of things.

    Re Mexico: afraid that the foreigners are going to steal their money from them, but at the rate they are going, they are not going to have any oil to sell soon. DUmb.

  10. 10
    reefguy Says:

    $200 oil- The entire Midland Basin becomes a wolfberry location on 40/20 acre spacing. thousands(Maybe 20k) of 50-80k barrel wells for less than 2MM each a 75 NRI yields decent returns!

  11. 11
    zman Says:

    what about the Sprayberry?!

    PQ call starting. Stock bid 22.15 for reference at the beginning of it.

  12. 12
    zman Says:

    refiners getting pummeled

    PQ call finally starting

  13. 13
    reefguy Says:

    PEMEX=socialized petroleum.
    1. Taxed 66% of gross
    2. Subsidized refining(losed $500MM/yr
    3. Employees maybe 5 to 6 times more folks than it needs.
    4. Only spends $1.5 B/yr on capital projects.

  14. 14
    zman Says:

    reef – right, and people complain about XOM not reinvesting enough, lol.

  15. 15
    zman Says:

    PQ conf call

    Weekly Prospect in E. Texas Basin – 1,300 bopd IP horizontal Buda oil well, I did not know it was this big. IP’d and paid out in 1Q. Nice. Second well should be completed in 2 weeks.

    This is huge rate for them in you think about the well being almost 8,000 Mcfepd gross, will find out their net.

    Stock now up 6%

  16. 16
    zman Says:

    Ram – CHK sliced through $55 like a shot today.

    HK – at all time high over $25. Woo hoo.

    EOG and DVN very pleasing to the eye.

    Service companies moving nicely in our little group as well.

    PQ going into Q&A now.

  17. 17
    BigJim Says:

    Hey Zman:

    Looks to me CHK is in full breakout mode. Very good call. I still hold the June and July calls. With DVN earnings around the corner, I expect great action in Nat. Gas stocks. Thoughts.

  18. 18
    uop Says:


    please make a short comment on the following and your projection;



  19. 19
    zman Says:

    on PQ call back to you guys in a bit

  20. 20
    Sambone Says:

    9:38 am EST

    Nymex Crude Up As Supply Threats Loom

    By Gregory Meyer

    NEW YORK — Crude-oil futures were a half-dollar higher after touching a new record high near $121 a barrel Tuesday in a market underpinned by supply concerns.

    Light, sweet crude for June delivery was recently up 50 cents, or 0.4%, at $120.47 a barrel on the New York Mercantile Exchange, after earlier hitting an all-time intraday record $120.93. Brent crude on the ICE futures exchange rose 77 cents to $118.76 a barrel, after also making a new trading record of $119.07.

    Oil’s speedy ascent has blindsided many analysts, with some of the most aggressive forecasts projecting prices near $100 for the second quarter. Prices breached $120 a barrel for the first time Monday.

    “Nothing’s quelled the upward momentum,” said Peter Donovan, vice president of Vantage Trading on the Nymex floor.

    As they have for months, supply threats in major oil exporting countries have stoked buying.

    Exxon Mobil Corp. (XOM) said its crude oil production in Nigeria has returned to normal levels following the end of last week’s worker walkout that shut around one-third of the West African country’s output. But traders said the market is still rattled by reports a Nigerian militant group had over the weekend damaged oil delivery lines belonging to Royal Dutch Shell PLC (RDSB).

    Amid sabotage and strikes in Nigeria, the Organization of Petroleum Exporting Countries pumped less crude oil in April, a survey by Dow Jones Newswires showed. The survey estimates daily production in April by all 13 of the group’s members dropped 0.49%, or 160,000 barrels, from the previous month to 31.97 million barrels. Production by the group’s 12 members with output quotas decreased 110,000 barrels a day, or 0.37%, last month to 29.74 million barrels a day, the survey shows.

    International tensions over the controversial nuclear program in Iran, a major oil exporter, and unrest in Iraq have also served as reminders of threats to global supply. Both are OPEC members, but Iraq is the one OPEC member outside OPEC’s quota system.

    The euro also gained against the dollar, whose declining exchange value in recent months has helped draw buyers into dollar-denominated crude. The euro was recently $1.5552, from $1.5493 late Monday.

    Prices have managed to remain strong in spite of sputtering demand in the U.S., the world’s top energy consumer. The Energy Information Administration is expected to update its outlook for U.S. demand and prices later Tuesday. Its previous forecast sees U.S. demand falling to 20.6 million barrels a day in 2008, from 20.7 million last year.

    Front-month June reformulated gasoline blendstock, or RBOB, rose 2.91 cents, or 1%, to $3.0820 a gallon. June heating oil rose 63 points, or 0.2%, to $3.3128 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  21. 21
    BigJim Says:


    CHK in full breakout. Good to see and I will keep riding to 60.00. Thoughts.

  22. 22
    reefguy Says:

    15- their net is 85%, second well lost due to swelling shale above objective. First well averaged 800 BOPD in Feb( FROM RRC)

  23. 23
    zman Says:

    Reef- Re Weekly Prospect (Buda Horizontal Oil) they are about to TD that second well. They have 13 more of these to drill. Thanks for the working interest, 85% is massive.

    Call going very well, analysts are asking about upside to EUR in Woodford, Fayetteville and the East Texas Basin.

  24. 24
    zman Says:

    More on PQ:

    Woodford: Two-thirds of their acreage is bracketed by wells that have flowed 6+ mm/d. That’s big given the potential locations here and jives with the lower end of recent NFX longer lateral wells. Recall that NFX has seen many recent Woodford wells IP > 10 mm/d.

  25. 25
    reefguy Says:

    Weekly- two nearby wells have cumed about 350k barrels each

  26. 26
    zman Says:

    PQ – sounds like the rig count in the woodford goes to 4 or even 5 by next conference call.

  27. 27
    reefguy Says:

    ioc- up 6% on dilution?

  28. 28
    zman Says:

    PQ Call –

    Sounds like they expect Pelican Point discovery is going to expand in terms of reserves and possibly production rate.

    Reef – re IOC – the banker converting to common is seen as a positive. still that ” drilling to determine if commercial aspect to this” These guys are shady. I’m staying away. Good luck with it and all but I don’t trust them.

  29. 29
    reefguy Says:

    28-IOC- Management need new jobs. If Elk 4 is big(I am betting so) they are looking for new jobs(ala TMR)

  30. 30
    zman Says:

    If it is big, and I agree it very well could be as its a stone’s throw from Elk 1 I vote that you develop it. These guys would take 10 years.

  31. 31
    Sambone Says:

    By Cassandra Sweet

    NEW YORK (Dow Jones)–Natural gas futures rose Tuesday on the back of higher
    physical gas prices, rising crude oil prices and concerns about supplies this
    summer and fall.
    Natural gas for June delivery on the New York Mercantile Exchange was trading
    Tuesday 17 cents higher at $11.348 a million British thermal units.
    A rally in the crude oil market that has brought a nearly continuous stream of
    record-high prices has supported natural gas prices, traders and analysts said.
    In addition, high spot prices for next-day gas deliveries and concerns about
    the overall U.S. gas supply outlook are spurring prices upward.
    “Energy in general and commodities in general are experiencing some
    speculative buying,” said Tom Saal, a gas broker with Commercial Brokerage
    Corp. in Miami. “I think you sprinkle that in with some moderately bullish
    fundamentals and you’ve got your price rise.”
    Nymex June crude-oil futures were up $1.75, or 1%, at $121.72 a barrel, after
    hitting an all-time intraday record of $121.92, as the market grappled with
    supply concerns.
    Exxon Mobil Corp. (XOM) said its crude oil production in Nigeria returned to
    normal levels following the end of last week’s worker walkout that shut around
    one-third of the West African country’s output. But traders said the market was
    still rattled by reports a Nigerian militant group had over the weekend damaged
    oil delivery lines belonging to Royal Dutch Shell PLC (RDSB).
    Prices for physical natural gas for next-day delivery rose Tuesday, with gas
    at the benchmark Henry Hub in Louisiana trading 35 cents higher at
    $11.08/MMBtu, compared to early Monday, and gas at Transcontinental Zone 6 in
    New York 32 cents higher at $11.92/MMBtu, according to the
    Forecasters were calling for chillier-than-normal weather this week in the
    U.S. Midwest, with highs in Chicago dipping into the 50s Thursday, according to
    Accuweather.com. Temperatures in New York are seen reaching into the 70s during
    the day, dropping to the high 50s overnight.
    The gas market has been keeping a close eye on a continuing outage since April
    8 at the giant U.S. Gulf Coast natural gas platform Independence Hub.
    Enterprise Product Partners (EPD), which operates the pipeline that connects
    the platform to shore, has said operations were likely to restart by May 15.
    Market participants said the outage is supporting gas prices, which could
    strengthen further if Independence doesn’t return to service by mid-month.
    With U.S. natural gas inventories at their lowest levels in four years, a
    decline in liquefied natural gas imports and the ongoing outage at the
    Independence Hub, gas prices are likely to remain strong, said analysts at TFS
    Energy in a note to clients.
    Large withdrawals of gas from storage over the winter have left inventories
    below the five-year average for this time of year. Total gas in U.S. storage as
    of April 25 was 1.371 trillion cubic feet, 0.2% below the five-year average and
    15.7% below last year’s levels at this time.
    “Supply concerns continue to propel natural gas prices higher,” said the
    analysts, Addison Armstrong, Gene McGillian and Amanda Strong. They added that
    reduced Canadian gas production in April has added to the concerns.

  32. 32
    zman Says:

    Pelican Point – 147 feet of pay with no water level. Just give me one of those and I go to the beach.

  33. 33
    zman Says:

    Scoop – this is one of those up days you were wishing for the other day. Bigger than the red day. Time to take profits. I’ll be looking hard at some May E&P calls – ie, the rest of the CHK (May only) when I get off this call.

    PQ up 8.4% – I’m going to let the May’s there run for a bit but will lock in profits on any dip after the call. I think analysts are about as pleased as they can be.

  34. 34
    zman Says:

    HK hitting 26. yippee-skippee

  35. 35
    zman Says:

    PQ Call note:

    Woodford – think they can easily be at 5 rigs next year (3 now) and each well can drill 8 to 10 wells per year. Core asset, biggest growth engine, not building it to sell.

  36. 36
    texana Says:

    wolfberry; wolfcamp, dean & sprayberry several years ago the rrc allowed the cos to co mingle production from these formations. in areial extent this might rival the bakken . it is made up of many small productive lenses & produces mainly oil with assoc gas. pxd has major position & has been one of the leaders for yrs. they also have big plays in 4 corners region with recent production from deeper shale. the countryside kinda looks like what most people think texans look like, a well in every yard. the only problem is jed doesn’t own the minerals. actively downspacing from 160 to 80 to 40.

  37. 37
    isleworth Says:

    Z – PQ looks to have very good room for multiple expansion, in light of today’s news

  38. 38
    zman Says:

    PQ – not releasing their net acreage in the Haynesville at this time. Saying its due to not knowing where the play is exactly at this point. They said they will talk about on the next conference call. Heh, heh, heh.

    Texana – hear ya re Sprayberry. I got my start working for a couple of ex Parker and Parsley guys and they lived and breathed Midland lore.

  39. 39
    zman Says:

    Isle – I’d say so, no changes really to 08 expectations, 09 could see very nice growth. Stock is still cheap to peers on a ’09 CFPS of 5.17 which is very likely to come up. At $23 it is trading at just 4.5x ’09 cash flow. Peers are at $6. Add a multiple and you’re still at a discount with the stock at $28.

    going from 3 to 5 rigs in the Woodford probably means you double the woodford well count next year and the eastern part of the play is higher interest so you get more of the 6 mm/d IP, these could improve as lateral lengths extend as they get more 3D seismic in house on the play.

    Also, the Buda Oil is big.

  40. 40
    scoop006 Says:

    Z #33 Thanks for remembering. Yesterday & Today exceed last weeks slaughter. I’m in a selling mode and not looking back.

  41. 41
    zman Says:

    Call ended for PQ – very positive.

    Quick thoughts for Uop
    HK holding for earnings tomorrow
    CHK – about to punt remaining May calls

    DO – sold my May, will see what RIG does before deciding on my long dated options here

    EOG – holding, think it goes higher in the near term

    TSO – Ug

    PBR – rallying with oil and development comments at Tupi, Sugar Loaf, also entering US Gomex and partnering with APC in more wells off Brazil

    COP – I like it long term but I’m not in right now – should be in there instead of thinking about the indie refiners.

    Thoughts for Big Jim – see CHK above. Like it very much, had a good run on the Mays, will retire them soon and hold the longer dated options.

  42. 42
    zman Says:

    FBR just took its PQ target from $20 to $27.50.

    UBS recent initiation at hold with a $20 target. The rating and pt should improve after this call.

  43. 43
    Sambone Says:

    Uncle Phil – I guess he got back from vacation, eh?


  44. 44
    zman Says:

    Anybody get to listen to the APC call, up 11%. I picked a fine time to take a pass on the holding them through a report.

  45. 45
    Sambone Says:

    Indonesia is considering withdrawing from OPEC


  46. 46
    zman Says:

    Saw that, they produce less than a 1 mm bopd, and are a net importer, it really does not make sense for them to be part of group that wants higher prices.

  47. 47
    zman Says:

    ZTRADE: Out CHK May $55 Calls for 2.23 average, up 78%.

  48. 48
    Dman Says:

    Re # 45/46: Besides, aren’t they a future mud-refinery superpower?

  49. 49
    Nicky Says:

    Morning all. Sane is quite right – its gonna kill a lot of things. Technically I have been saying it is bullish so its no surprise to me. Makes me mad as hell especially as this morning seems to be yet another Goldman induced spike. Shameless. Oil at $200 and the US will be in a depression – I hope GS is ready for that.

  50. 50
    Nicky Says:

    John Najarean trade of the day today was to short the refiners.

  51. 51
    Nicky Says:

    MEND offering a ceasefire – anyone got any details?

  52. 52
    zman Says:

    Barack Obama asked them for one yesterday, don’t have anything more.

  53. 53
    Nicky Says:

    Well just saw the headline so this is new news so to speak.

  54. 54
    zman Says:

    CRK exploding – I’m not following

    PQ looks like its going to make a play for HOD/all time high soon.

    risky but potentially rewarding way to play RIG tonight…ATW June calls. Mulling.

  55. 55
    scoop006 Says:

    Why ATW & not RIG-June

  56. 56
    zman Says:

    Scoop – I’ve just noticed that it often gets a bigger quick pop if the one of the big guys (RIG or DO) have good news, plus it will have the “buy it before it reports on Friday going for it too”. I’m going to take a small piece soon.

  57. 57
    Nicky Says:

    Z – any thoughts on inventories tomorrow?

  58. 58
    pwdrhound Says:


    First post here….been following along and like all of the info.

    What do you think on the NBREG – may 35’s – ? Time to take profits, or wait a little longer?

  59. 59
    kyleandy Says:

    just listened to TXCO’s conf call. interesting cause it was the first time i’ve heard hostile questions about the stock’s performance and about their comments, such as why are u talking about EBITA and throwing out numbers nobody cares about instead of what u are going to do about stock’s lagging performance

  60. 60
    zman Says:

    P – welcome to the conversation. They’re on the chopping block along with all May calls, could go any day now. Longer term, I’m more comfortable with NBR than most of my holdings.

    Nicky – inventories seen rising 1.7 mm barrels. Imports would have to stay high for a third week in a row. That’s more possible this time of year so the number is more of a coin toss to make. Usually refiners would be ramping utilization this time of year in prep for gasoline but we have plenty of that on hand and their margins are less than stellar at present so ramping is not constructive for them beyond a certain point.

    Ky – surely that was an individual investor and not an analyst or fund manager?

  61. 61
    Jay Reynolds Says:

    Z – If you owned UNG 50 July puts, what would you be doing with them now?

    Kind regards

  62. 62
    zman Says:

    UNG – not buying any more puts, dumping. I have 48 and 49 which are next to worthless.

  63. 63
    reefguy Says:

    kyl-Any color on Fort Trinidad?

  64. 64
    ram Says:

    ATW – MAY or JUN?

  65. 65
    isleworth Says:

    Z- saw your great piece on CLR….tks…very well done!!!!

    It is backing up here today, which looks to be an opportunity. Any thoughts on an entry into this one?

  66. 66
    Dman Says:

    NOV seems to be bouncing above its 100 & 200 day averages after about a 15% retracement from recent highs. According to analyst estimates it is growing revs and EPS at about 18% (08 to 09) and is currently at around 12 times 09 EPS, which seems reasonably priced.

  67. 67
    Garyinhou Says:

    ZMan, copied from CRK’s call supp. materials…

    *$322 million onshore drilling program to drive continued strong production growth onshore

    *Targeting 20% to 25% onshore production growth in 2008.

    *Position in emerging Haynesville shale play exposes Comstock to 1.7 to 2.5 Tcfe of reserve potential

    *Substantial unhedged production provides
    Comstock exposure to higher cash flow and
    earnings in the current strong oil and gas price environment.

    *Divestitures of stake in Bois d’Arc Energy and the NPI properties strengthens balance sheet and
    enhancing focus to support continued growth of onshore operations.

  68. 68
    zman Says:

    Isle – thanks. I was just thinking about that. We were up 16% there yesterday, down 2% today. I have no qualms about adding to the Junes here or buying the common. Shorter term we may get a further dip if oil decides this little rally is unfounded giving you an op to get in cheaper.

    If you ever think about buying a HP laptop get your head examined. What a POS mine has been. Complete boat anchor (anchor with 2 gigs of memory).

  69. 69
    VTZ Says:

    We have HP laptops at work and I’ve seen 3 people get blue screens of death in the past week and a senior guy’s hard drive crash last month so I can testify to no HP. They are all 6 month old laptops or so.

  70. 70
    scoop006 Says:

    Z – Don’t the refiners eventually have to turn around . If so, does it make sense to buy some September calls which seem fairly priced?

  71. 71
    apbd Says:

    Hooray! Been selling all morning. More winners than losers for a change. My inventory is low. What’s next?

  72. 72
    BossmanG Says:

    Z, I’d recommend looking into the thinkpad T61 series…recently upgraded to a T61p and have been a lifer with the T series

  73. 73
    el_vogel Says:

    The new rule for laptop/computer purchases: always upgrade to 4Gb of RAM. You’ll never regret it, especially as cheap as it is these days. I do software development for my day job so 4Gb is a must – but I recommend it to anyone and everyone who’ll listen…

  74. 74
    zman Says:

    GDP may run like a cat on all this renewed Haynesville chatter, should be more of this tomorrow on HK’s call.

    V – its just unreal and about to become an expensive frisbee.

    Ram – maybe a small slice of each

    A – for a change? Ouch. I’m at my 2008 high right now. What’s next, how about I take a nap.

    Thanks Bossman, will do, that was IBM, who make its now and do you like their service?

    El-V – I thought 2 was enough with XP, no?

  75. 75
    zman Says:

    PBR in danger of breaking out.

    Scoop – they do. But I’ve been hearing valuation upgrade calls and comments in the space for 2 months and have had two toes completely shorn off when testing the water. September may get you through it but it will go down if the group does just the same. Estimates still falling so are they really cheap or just not yet fully discounting reality? Hmmm. In a less hot money go-go energy sector I’d be all over the valuation play. But right now I just like keeping my toes and the cheaper they get, the bigger the bounce when it comes. I don’t think it will be V-shaped, that’ll be the headfake. I think we need good solid bottoming action to get people re-up on the names.

  76. 76
    reefguy Says:

    z-may calls HK, XCO, IOC- deep green when to sell?

  77. 77
    Dman Says:

    Z – my quality of life improved drastically when I bought a Mac about a year ago. No more wrestling with insane PC problems. Not sure how they go with your fancy multi-monitor arrangement though.

    If you upgrade your computers every 2 years or so, Macs work out cheaper because you can actually resell them for decent $.

  78. 78
    scoop006 Says:

    Z- Thanks for #75 reply. Enjoy the siesta

  79. 79
    zman Says:

    Reef – I’m thinking out with the May’s very soon. Congrats on the IOC.

    Dman – the wife has a new power book which we like very much. The monitors are plug and play USB which is extremely cool as you don’t have to worry about vid cards and can daisy chain 6 of them. The one worry is will my trading platform work on Tiger? Can the new pc based macs run everything a pc can? My Vista cannot run my one of my trading platforms…just does not work.

  80. 80
    reefguy Says:

    z- Before or after HK, XCO cc’s?

  81. 81
    Dman Says:

    Z – re #74 last point. I still have a PC for various offline purposes but I absolutely won’t let it connect online, so no unstable updates & no viruses etc. I also absolutely refuse to have anything to do with Vista. XP is stable if you can keep if offline and 2GB is fine with it.

  82. 82
    kyleandy Says:

    reef not much abt ft trinidad mostly pearshall. is ft trinidad near where PQ has its BUDA well. commented about PQ hitting big buda well and they have a lot of acreage in next county, which they think might tie in.

    z- it was hedge fund or similar that i believe owns about 9% of comp and was already hostile to mgt.

  83. 83
    zman Says:

    Reef – good point. I’m waiting on the call on HK. I think I’m holding my Mays through the call. If its a miss I will take a man-sized hit.

    XCO I was not bright enough to purchase.

    Ky – thanks for the color there. That’s PQ’s “Weekly” Prospect. If they have 15 high interest wells (85% WI) come in there this year at 1,000 bopd (the first one was 1,300 bopd) that’s like adding net 77,000 Mcfepd to a company that is set to produce 94 to 100,000 Mcfepd this year and just turned in 87,000 Mcfepd in the 1Q. I wouldn’t kick that out of bed for eating crackers.

  84. 84
    kyleandy Says:

    bot the atw 100’s and sold the 110’s may like your theory.

  85. 85
    kyleandy Says:

    re 84 meant to put may in front of options

  86. 86
    zman Says:

    Chevron subsea general manager Randall Kubota, today confirmed at the Offshore Technology Conference that a full front-end engineering and design study will be launched this summer for the Jack and St Malo ultra-deep discoveries in the Gulf of Mexico.

    DVN has 25% of Jack and 22.5% of St Malo

  87. 87
    scoop006 Says:

    Z #83 if HK does NOT miss where would you expect it to land.

  88. 88
    el_vogel Says:

    4Gb for anything newer than Windows 3.1.

  89. 89
    elijahwc Says:

    Not to bring up a dead fish, but will you be commenting on the END call Thursday… (L)

  90. 90
    ellwodo Says:

    HK – sold my May 25s for a very healthy return, used a small piece of the profits to buy a load of the May 30s just in case it’s a real blowout.

    CHK – took profits on Mays and about half of Julys, reinvested profits in Jan 10 60 leaps that I’ll hold as part of my CHK core.

    Thank you very much for your continuing commentary on HK and CHK. It has been very helpful.

  91. 91
    zman Says:

    Scoop – hard to say without seeing what they say. Higher, I’m on record as saying $30 with the right comments is doable by June.

    ElV – thanks will look into but I’m about set on a new box at this point.

    Eli – END – I will take a look, thanks for the headsup as I had not seen them announce the date. Wonder how many dry holes they will drill this year.

  92. 92
    zman Says:

    Elwo – glad to help on the commentary. It’s getting that “too easy feeling” and I feel like more cash and longer dates are in order.

  93. 93
    zman Says:

    Elwo – I like that sale of the May HK pre call so much I may do it before the close and roll part of the profits in some higher strike Junes. Fair waring, I may pop out of the May 22.50 HK calls as that has become a bloated position for me.

  94. 94
    zman Says:

    re 93, I will wait until pretty late to decide as the action of late has been run the shale mania names into the close before earnings.

  95. 95
    zman Says:

    bidding some May 110 ATW calls for $1.20

  96. 96
    Dman Says:

    Z – re. #79. If you have a PC trading platform then I guess there’s not much point in running it on a Mac in Windows mode since you’ll have all the underlying OS problems that accompany Windows wherever it goes.

    I’m not a security expert, but if I had to run Windows due to a specific trading platform, I would keep a PC dedicated for that purpose & let it connect only to the relevant IP addresses.

  97. 97
    zman Says:

    Here it is Nicky. Funny the reaction to oil since the story has been higher. I guess traders remember the whole Iran hostage thing, lol.

    Nigerian militant group the Movement for the Emancipation of the Niger Delta (Mend) said former US President Jimmy Carter had agreed to act as a mediator if invited by the Nigerian government, promising it would declare a ceasefire if the initiative went ahead.

    “Former president of the US Jimmy Carter has graciously accepted to mediate in the Niger Delta crisis on the condition that the Nigerian government and any other relevant stake holder invites him,” mend said in a statement emailed to Reuters.

  98. 98
    Jay Reynolds Says:

    HK can, at the very least, talk up their “closeology” to the larger Haynesville wells, emphasizing their sizable leasehold positions.

  99. 99
    zman Says:

    Dman – tif Mac is out then Dell or Thinkpad?

  100. 100
    reefguy Says:

    ky- Ft trinidad in Buda fairway, damn near adjacent to Weekly. TXCO off a buck, I am nibbling here.

  101. 101
    BossmanG Says:

    Re#73: 4GB is definately good to have, but you’ll most likely need to run a 64-bit OS, and with that there might be some compability issues with software

    Z, on a mac, you can run software called “bootcamp” which can virtualize windows, but you’d have to test it out how the performance is with the trading software you use

  102. 102
    zman Says:

    Boos – thanks, sounds like a headache. Will look into thinkpad and dell laps

  103. 103
    BossmanG Says:

    Definately thinkpad, if you can get your hands on a thinkpad (T series…) and compare it with a dell, can’t beat the quality of the build

    But if you buy any laptop, i’d make sure it has a 7200rpm harddrive as that seems to be a bottleneck these days

    Mac’s are great, haven’t had too much experience with them, but something I’d seriously consider next

  104. 104
    ram Says:

    ZMAN – HAL could ride the RIG wave?

  105. 105
    zman Says:

    Ram – normally I would not think of that. If the wave is big enough I guess so.

    We all ought to be thinking about buying X. Tubular price comments from every company point one direction: up.

  106. 106
    el_vogel Says:

    you don’t need 64 bits to run 4Gb of RAM. 4Gb is the most the desktop OSes will recognize, however.

    Even if you’re buying a new box, spend the extra $100-200 and fill it up with RAM. You’ll never regret it.

  107. 107
    zman Says:

    HK looks like its getting that after noon rally ($1.80 or 8% $26.35). Milking the Mays for all they are worth.

  108. 108
    ram Says:

    RAM is good. Regarding the HAL’s, I noticed there is still half of the MAY 45’s.

  109. 109
    Dman Says:

    Regarding the energy mania: whilst it really does seem too easy of late, many of the charts still don’t have any gaps, so there is room for more frenzy. Doesn’t mean it will happen now, but just saying it hasn’t happened yet.

    Z- maybe the trading platform people have experience as to which PCs seem to work best with their software.

  110. 110
    Nicky Says:

    Thanks Z for finding the statement. As you say makes absolutely no difference.

    The Goldman Sachs report apparently ‘applauds’ the role of the speculator in the current energy market saying that basically that the sooner the prices are hiked the sooner alternatives will be looked into.

    I am staggered that they would say such a thing – simply disgraceful for an analyst to applaud what will be turn out enormous misfortune to many. And anyway I thought they were denying there was speculation in this market???

  111. 111
    zman Says:

    Ram – out next couple of days, most likely this week. Same goes for the rest of the May positions.

    NFX May $65 may be a stretch to break even and may get punted soon, break even on not. As I remind myself constantly about breakeven vs losing all my money trying to get back to a number that only I, and no one else in the universe cares about, it makes no sense for me to either.

    Dman – on with them now. No mac support, get lots of memory, get a faster router.

  112. 112
    zman Says:

    Nicky – I hear ya. Sounds like they have given up on their near term weakness call from 3 or 4 weeks ago.

  113. 113
    sane Says:

    They want to be on the forefront of the next big cough.. bubble… cough… I mean next big thing alt energy.

  114. 114
    reefguy Says:

    ioc- maybe feeling the squeeze…

  115. 115
    zman Says:

    EOG and DVN charging ahead with the rest of big cap E&P.

  116. 116
    reefguy Says:

    HY buddies making may options look spectacular

  117. 117
    Dman Says:

    Nicky, it seems GS have been stealing my intellectual property!

    Didn’t I say yesterday that:

    ” …the sooner oil gets to where it is going, the quicker action will be taken on alternatives & conservation” ??

    Well yes I did, in post #59 on Monday.

    Actually, since it is posted on Z’s site, the IP probably belongs to Z. So Z needs to have words with GS about knocking off the site content 🙂

    Z – the trouble with PCs is that whilst they are all *supposed* to be the same, there are zillions of combinations of components and settings & so in practice, any given PC may or may not work well with a given application. The techies at the trading platform vendor will probably know what machines work best (hint: they’ll be using them) but they may not ‘fess up to this because their product is *supposed* to work with any brand of PC.

  118. 118
    Nicky Says:

    Yes Dman – I was thinking exactly that when I heard their statement – its one thing for you to say it but for an analyst I think it is quite different – unless you work for GS that is???

  119. 119
    Nicky Says:

    And also you weren’t saying lets run it up to $200 asap!

  120. 120
    zman Says:

    You’d be surprised who’s in here. Lot’s of industry folks but also quite a few sell side and buy side firms (I can’t say which ones). You never know who is reading.

  121. 121
    reefguy Says:

    gas went red

  122. 122
    zman Says:

    I was watching that but didn’t want to jynx it, lol.

  123. 123
    Dman Says:

    My outrage at GS cribbing my post is tempered slightly by the fact that the point I was making is, well… obvious. I’ll even go as far as to concede that GS could have independently tripped over it.

    Nicky, as discussed months ago, I wouldn’t last long at GS because their downside targets for WTI are measured to within 10 cents, whereas I could probably only venture a guess to within, say, $3. So I just wouldn’t cut it, you see 🙂

  124. 124
    Dman Says:

    HK doing the business. CHK impressive.

    Poor NBR seems a bit hung-over after its recent partying. Not crashing the car but not getting very far either. WAKE UP!!!

  125. 125
    Nicky Says:

    Well the rest of the complex hanging around at the highs – just tells you that the numbers tomorrow probably don’t matter at all….

    I am not sure about that Dman – $150 – $200 – they have given themselves a pretty big target area!

    Z – I hope they are reading!!! Their comments were totally immoral imo.

  126. 126
    Jason Says:

    Z – Tempted to take any longer dated DUG here as a little hedge?

  127. 127
    zman Says:

    RE HK:

    I was going over my notes and its possible Merrill Lynch will have to up their opinion on the company’s Fayetteville shale play. They had discounted the northern acreage but HK may have results, there, as alluded to in their IPAA presentation in early April that could force an upgrade in thinking there.

    I still think they go 2 for 3 in the Taylor sand so we could see some double digit IPs here.

    Jason – no, I’d rather just raise cash and buy lower. The DUG trade has not worked well of late.

  128. 128
    zman Says:

    Jason – not to put to fine a point on it but my shorts have gotten whacked of late. I’d rather step aside then try to make money shorting undervalued (despite) the run companies.

  129. 129
    ram Says:


  130. 130
    Jay Reynolds Says:


    The cluster near Giliam (scroll map to the E) may serve to firm up the HS further to the N. Word in the field is that the Sampson well (working on more particulars) is 26 MMCFD.

  131. 131
    zman Says:

    Ram – they never hit my bid. Just going to play via my ailing June 150 DO position.

    Thanks Jay – CLR saying they’ve heard of 7+ and you know that would not be enough to keep Aubrey so consistently mum about rates while saying it will be the most influential field in CHK history.

    After looking back over my notes and with things like that rate in mind, I’m holding all of my HK through the conf call.

  132. 132
    reefguy Says:

    z-holding HK and XCO through calls

  133. 133
    ram Says:

    Any other trades?

  134. 134
    Dman Says:

    NOV up 3.5%

    Running up ahead of RIG earnings ??

  135. 135
    zman Says:

    Ram – I’ll let ya know.

  136. 136
    Jay Reynolds Says:

    Re 130, forgot to add that the well is just off the W side of Hwy 71. Guard shack, enough lights to start an airport, a tight hole like we’ve never seen around here.

  137. 137
    zman Says:

    Feeling pretty patient right now. Happy to be long 2 of the big 5 E&Ps (DVN and EOG) – DVN has the potential to really pop if they get the right news in the deepwater. In the past on big lower tertiary news it has moved in excess of 10% the day of the news but often quickly retrenches, something to be mindful of if Chuck is good tomorrow. If its bad the stock may take a little hit which is why I have no May exposure. Stock is poised for a break out to record highs now.

  138. 138
    zman Says:

    stepping out for 20 minutes

  139. 139
    kyleandy Says:

    jay – whose well is the samson well?

  140. 140
    Popeye Says:

    I wish I had bought more DRYS.

  141. 141
    zman Says:

    I assume he’s talking about Sampson, the operator.

  142. 142
    uop Says:


    all its near 52 high,

    on which ones do you pull the plug:



    I have no may,

  143. 143
    Sambone Says:

    3:22 pm EST

    Nymex Crude Closes Higher As Demand Sturdy


    NEW YORK — Crude oil futures closed above $120 a barrel for the first time Tuesday as the market showed conviction that record prices won’t necessarily trip up global demand.

    Light, sweet crude for June delivery settled up $1.87, or 1.6%, at $121.84 a barrel on the New York Mercantile Exchange, after rising as high as $122.73. Brent crude on the ICE futures exchange closed up $2.31 at $120.30 a barrel after also setting records. Brent settlement prices weren’t immediately available.

    Heating oil and gasoline futures also settled at all-time highs.

    The Energy Information Administration on Tuesday projected triple-digit prices for months to come, issuing a new monthly outlook that forecast crude prices averaging more than $114 a barrel in the second half of the year. While the agency anticipates U.S. demand will slip by 190,000 barrels a day this year to its lowest annual level since 2003, it expects emerging economies to keep world demand expanding 1.4%, to 86.6 million barrels a day.

    “We’ve had a doubling in crude prices in the past 14 months and they’re still looking a 1.4% increase in global demand across the year,” said Jim Ritterbusch, president of energy trading advisory service Ritterbusch and Associates in Galena, Ill.

    “That’s the ghost factor in the background” fueling record prices, he said.

    Further agitating buyers, equity analysts at Goldman Sachs issued a report saying prices of $150 to $200 a barrel seem “increasingly likely” six months to two years from now. The same group of analysts made waves three years ago when they identified a “super-spike” lifting prices as high as $105 a barrel, then an outlandish notion.

    Crude oil has risen 27% year to date and 97% from a year ago on a combination of irrepressible global demand growth and supply troubles. A Dow Jones Newswires survey showed Tuesday that the Organization of Petroleum Exporting Countries oil production slumped 0.5% in April amid supply troubles in member states Nigeria and Iraq. Over the weekend, a Nigerian militant group damaged oil delivery lines in the country’s oil-rich Niger Delta.

    Flows from investment funds into commodities have also ignited crude prices as people seek protection from inflation and a weaker dollar. This helps explain why crude oil prices can remain strong in spite of faltering demand in the U.S., said Sarah Emerson, managing director at Energy Security Analysis Inc. in Wakefield, Mass.

    “Oil prices are driven by two different markets,” she said. “I don’t think the physical market warrants a price collapse, though it probably warrants a weaker market. But you have this other market, which is a desire to hold crude oil, and that’s really in the drivers’ seat at the moment.”

    Crude, which is priced in dollars, has drawn investors seeking a hedge against the greenback’s decline. The dollar’s weakness has also softened the impact of higher prices for buyers using other currencies. The euro was recently $1.5525, from $1.5493 late Monday.

    Weekly U.S. oil inventory data due Wednesday could provide guidance for the market later in the week. Analysts surveyed by Dow Jones Newswires expect crude stockpiles rose by 1.4 million barrels last week, the third increase in a row. Gasoline stockpiles fell by 400,000 barrels, the analysts estimate, while distillates rose by 800,000 barrels. The rate of refinery use is expected to climb by 0.4 percentage point to 85.8% of capacity.

    While an increase in crude stockpiles could send the market a signal to slow down, “probably not,” Ritterbusch said. “with all the bullish euphoria, I’ve noticed we kind of pick and choose in that report and look for the bullish items.”

    Front-month June reformulated gasoline, or RBOB, settled 5.26 cents, or 1.7%, higher at a record $3.1055 a gallon. June heating oil settled 4.70 cents, or 1.4%, higher at a record $3.3535 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  144. 144
    zman Says:

    Wow. I should step out of the office more often. PQ and HK both up about 9%. FVN up $6. Where do I pull the plug, I don’t own COP but that would be the last to go out. PBR is the most tied to oil so if you see a pull back that would be down.

    PQ has had news and will have more favorable comments from analysts.

    HK has news tomorrow/tonight so that is risky in that they could mess up but it could also get sent a lot higher.

    EOG looks like a classic break out there, lots and lots of good, repeatable success going on.

  145. 145
    uop Says:


    I am not selling, but I am covered 1/2, just in case.

    What a green day.

    Txs z

  146. 146
    zman Says:

    beer thirty, best day $ wise of the year and closing at my high for 2008 which is not too bad considering last week’s sector rotation fears. Not to sound trite but it all goes to having a thesis and sticking to it. out for awhile, buzz me if DVN, HK, XCO etc release results.

  147. 147
    isleworth Says:

    Petrohawk Energy announces $500 million offering of senior notes

  148. 148
    john11 Says:

    HK earnings out, 150k hayneseville acres.

  149. 149
    ram Says:

    HK off in AH, about $1.50. They don’t like the offering.

  150. 150
    T-Tupp Says:

    how were the earnings?

  151. 151
    isleworth Says:

    Petrohawk Energy announces public offering of 21,000,000 shares of common stock

  152. 152
    scoop006 Says:


  153. 153
    Jay Reynolds Says:

    Given that the HS development, within the timelines of the 3-5 year leases taken to date in NW LA, is going to be VERY capital intensive, I think it is a GREAT idea for HK to have put the word re the 500MM in notes. Perfect chance to explain why they need the $ on the call.

  154. 154
    T-Tupp Says:

    z do you ever follow the oil voice website? is it worth reading every day? i stumbled upon it and it looks pretty tuned in.

  155. 155
    VTZ Says:

    I think they are getting hit for the shares worse than they are for the notes…

  156. 156
    T-Tupp Says:

    where did you get all this info on hk’s q1? i cant find anything anywhere

  157. 157
    isleworth Says:

    HK – Reports Q1 earnings of $0.15 per share, $0.01 worse than the First Call consensus of $0.16; revenues rose 2.7% year/year to $214.9 mln vs the $202.2 mln consensus.

  158. 158
    T-Tupp Says:

    isleworth- do you see cfps for hk

  159. 159
    zman Says:

    T – I don’t read.

    The report has been out since 2 minutes after the bell.

    V – agreed, its the share offering, not the notes.

    EPS don’t matter, its CFPS that matters, forget the headlines. They did $0.72 vs $0.70 and beat the top end of 1Q guidance on production. Stock will move on the deal and then the comments re beefing up Haynesville as well as some nice rate out of Terryville Sand

  160. 160
    T-Tupp Says:

    z your hilarious lol. you always cut the beef.

    honestly these AH’s traders are always trading the stocks the wrong way after squed sounding headlines come out

  161. 161
    T-Tupp Says:


    what do you make of this z?

  162. 162
    isleworth Says:

    Cash flow from operations before changes in working capital was $133.7 million, or $0.72 per fully diluted common share, for the quarter.

  163. 163
    VTZ Says:

    I don’t get why wouldn’t they didn’t just offer more notes?

    Selling shares is like saying your stock is overvalued and good currency compared to dollars, which is the exact reason people have moved to commodities and their respective equities.

  164. 164
    zman Says:

    VTZ: just keeping the capital structure the same. 21 mm shares @ $25 = $525. They’re doing $500 of debt so there you go.

    T – that looks like the expected withdrawal of their midstream MLP

  165. 165
    T-Tupp Says:

    re: Hk – in the companies press release on the website they have a net loss of $0.30/ share on the income statement. but it aloso had a loss of $0.12/ share for the same quarter in 07– what gives?

  166. 166
    T-Tupp Says:

    also, it looks as though their production of both CL and NG is lower fron the same period last year, is this a function of them ramping up the new play in LA?

  167. 167
    zman Says:

    Tupp – its a non cash derivatives loss, it does not matter. That is one of the many reasons to look at cfps, not earnings for E&Ps.

    They sold their gulf coast division. The comparison is not apples to apples

  168. 168
    T-Tupp Says:

    z- is there a reliable source where CFPS estimates can be obtained so i know what an actual beat is?

  169. 169
    VTZ Says:

    Z – Makes sense, thanks. That’s why we keep ya around, heh.

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    zman Says:

    yeah, me.

    Thomson if you want to pay high $ for it.

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    T-Tupp Says:

    re apples to apples- you mean production difference?

  172. 172
    zman Says:

    yes, this year’s volumes don’t contain gulf coast production.

  173. 173
    john11 Says:

    My guess is this secondary gets done very quickly ala RRC or XTO, once out of the way positives from huge capital expenditures should benefit price.

  174. 174
    zman Says:

    good point John.

    I’m just going through the pr now, lots of interest here. They will need to come up with some “why we are accelerating the Haynesville in CHK fashion” statement on the conf call tomorrow. Something better than the wink and nod that Aubrey can afford to give the Street.

  175. 175
    T-Tupp Says:
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    Popeye Says:

    I HATE getting blindsided by share dilution but the last PP turned out to be beneficial. Raising cash to grow the company vs need to meet obligations.

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    zman Says:

    Hey Tupp, please provide a link and don’t copy and past stuff from Blogs. Its a copy violation.

  178. 178
    zman Says:

    Popeye – like CHK doing a deal a few weeks back at $45.

  179. 179
    ram Says:

    ZMAN – Does it appear on the surface, prior to CC, that it is an excellent earnings report for HK?

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    zman Says:

    Ram – not finished reading yet. The results are better than expected but that gets trumped by the story and the offerings which is what I’m working on.

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    T-Tupp Says:

    np z

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    zman Says:

    My sense is that the stock dips in the early morning hours. Even some analysts may attempt to decry the wanton levels of spending. This will pass. I will buy more if it is still low during the conference call. At the end of the day, their growth to 150,000 shares will propel them to the forefront of the Haynesville mania. There are a number of very solid developments in the PR which I’m chewing on now.

  183. 183
    zman Says:

    T – not to crab but I don’t want a copy and paste or even a link to that firm you mentioned above. thanks for understanding.

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    scoop006 Says:

    Z Yahoo says IPO cancelled.

  185. 185
    zman Says:

    Scoop – that was a limited partnership IPO they canceled. It was expected to be pulled.

  186. 186
    scoop006 Says:

    will the new 21 million shares being offered have any affect on their potential acquisition

  187. 187
    zman Says:

    Scoop – that’s a good question. I think the answer is no. Your adding about $1 billion to total enterprise value but at the same time, you’re bulking up the potential reserves substantially. This last 80,000 acres in the Haynesville, risked pretty harshly could yield reserve adds of 3 Tcfe. The company only has 1 Tcfe book in ALL ITS PLAYS at YE07. It takes $ to develop it but if anything I think it makes them a little more attractive. Again, I don’t think its CHK, my bet would be EOG. Not to be a rumor monger but I’ve seen deals done quickly to preempt secondaries. Just thinking out loud.

  188. 188
    Jay Reynolds Says:

    Z –

    If you don’t think it’s a waste of time…

    Announcement of a capital raising endeavor (CHK, HK more recently??) typically leads to a sell off.

    I would very much appreciate a simple formula that I could use to evaluate the NAV appreciation as the result of the application of a given amount of additional working capital.

    With a set of assumptions that I seem to recall are applicable in the Haynesville Shale (adjust as needed) plus what I believe to be true on the ground…

    Assume: Well cost at $6.0 MM (high I think)
    Avg Leasehold Acq cost at $1K/ac (high I think)
    IP rate: (picked a round number) 10 MMCFD (low for sure)
    Well spacing: 80 ac

    My back of the envelope is showing me a conservative 8-10/1 ROI a 3 year or less term (initial units are larger and hence hold the acreage).

    With some idea of a valuation model I could extrapolate from the IP rates, acreage. All thoughts from all quarters most welcome.


  189. 189
    zman Says:

    JR – I just take the acres, risk it 35% so that 65% are prospective for development, assume a 4 Bcfe / well and an 80% NRI. That gives me 5.2 Tcfe net unproved reserve potential on the 150,000 acres.

    The stock is trading at $6 billion of TEV to 1 Tcfe of booked proved reserves. The math on the NAV gets a little nutty from their and I think that EUR of 4 Bcfe per well is way low.

    This is 11% dilution and a little bit of debt, I stand by what I wrote in 182.

    Anybody have an idea of their WI% in the Hunton Lime? Can’t see to find it but that’s another “resource-style” play that looks like it has room to run.

  190. 190
    zman Says:

    JR – did that answer your question, not sure I answered it looking back.

    Notice the capital budget is going up by $500 million while they are raising a billion. The excess will be used for corporate liquidity which means they are swapping their debt for a lower rate. So that’s not really that much additional leverage.

  191. 191
    Jay Reynolds Says:

    New from Matt Simmmons in case you need more bad news. Good argument for some US Steel.


    Oil And Gas “Rust”:
    An Evil Worse Than Depletion

  192. 192
    zman Says:

    JR – I am hearing tubulars mentioned on every conf call. No shortages yet but prices on the move. Had to be. Maverick tube used to be the play but they got bought by Tenaris (TS) which does have some option activity. Also, it depends on how they are set for steel although given these commodity prices I think they can pass it along, lol. If we move back into service cost acceleration mode then I want to be in more oil service names like HAL, BJS, TS, NBR and less of the E&Ps – not that they will be hurt in the near term but momentum may favor the service names soon. Hmmmm.

  193. 193
    scoop006 Says:

    Cramer devoted the first segment of his show to the gas stocks we trade around here and he could not have been more bullish. Try to catch the replay at 11 PM EST

  194. 194
    zman Says:

    Thanks Scoop – will do

    Life’s little ironies watch: I wrote this earlier above:

    I was going over my notes and its possible Merrill Lynch will have to up their opinion on the company’s Fayetteville shale play. They had discounted the northern acreage but HK may have results, there, as alluded to in their IPAA presentation in early April that could force an upgrade in thinking there.

    Merrill is running the deal book with Lehman on the 21 million shares.

  195. 195
    scoop006 Says:

    sometimes it pays to be good and lucky

  196. 196
    Jay Reynolds Says:

    HS Note: Interesting twist. In years prior, depth limitations in a lease or farm-in typically read to the “base of the Pettit, Paluxy, Cotton Valley, etc.”

    What’s happened now is that many of the old leases, some back to the 50’s but most later, that have been producing from the CV sand are being reinterpreted to mean (by the operators that hold them) that the base of the CV extends all the way down to the Smackover, electing to interpret the language to include all of the CV series, which also contains the HS.

    How it will all shake out I’m not sure but will let you know after the first ruling which will probably happen in a couple of weeks. It could mean that smaller operators holding onto a marginal CV well may find themselves holding HS rights – but I doubt it.

    I think the ruling will come down based upon the language of the time, and the geological intrepretations at the time the instrument was drawn.

    I’ll check around and see if I can get a sense of any large acreage swing according to how the interpretation goes. If it is inclusive of the HS, it could at lease save a lot of leasing horsepower.

    Z – thanks a million for the insights. The CHK call trade made it possible for me to add another 1,200 common, something that would have otherwise been impossible. Damn there’s a lot of steel going up and down the road these days! Really good to see everybody busting arse these days after so many years of just being plain, flat out broke in this 105 year old field for so many years where perfectly round “lakes” are the only reminders of the blowout craters that dot the landscape from the days before casing cementing was discovered…

  197. 197
    T-Tupp Says:

    what firm? PSW?

  198. 198
    zman Says:

    Tupp, no not PSW, OV asked about above.

    JR – cool on the 1,200. That is an interesting wrinkle on the depth limitations. Please let me know what you hear. Here’s to HK saying they are seeing double digit IPs in the HS.

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