Flying Oil Friday

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Housekeeping Note: Thanks! Subscriber growth continues to advance. That's good for both of us in one way as it brings resources to bear to the site that we didn't have access to several months ago.  I will say that I could not be more please with the constructive spirit and knowledge base of the site. Thanks again for making me a better trader. In another way growth has its downside as I only have so much time and though my wife has tried to clone me the results are dubious at best. Some of the busyness on the site may result in me dropping a response or two from time to time. This is the last thing I want to do. If I don't get back to you ask again or drop me a note at zmanalpha@gmail.com. Also, feedback on the site is welcome and needed. We are working on a long overdue site review but as in many things in life, it falls subject to the demands of time ... in this case, 1Q08 results have taken precedence. Anyway, thanks and keep keeping me on my toes. ~ Z


In Today's Post:

  1. Holdings Watch - added June X and some July PQ calls, and sold the HK May calls
  2. Commodity Watch
  3. Stocks We Care About Today - SWN, SD
  4. Odds & Ends

Holdings Watch: Starting to think more and more about losing May options. The Wiki and perf tabs are updated.

  • (X) - Entered the June $180 U.S. Steel calls (BXWFP)for $8. This is a play on steel demand in general and the OCTG market in particular. I went in small as I'm new to the space and will firm up my thesis in the space in coming days/weeks. 
  • (PQ) - Added the July $25 for $1.10. I'll be shedding the May calls here very soon.
  • (HK) - Sold the May $22.50 calls (HKEX) for $4, up 105% since April 29 entry. I still hold the June strikes here and may add to those positions in the next few days.

A Note On May Holdings:  I have a handful of May option positions still open. For the most part they are up but there are some scuds in the list. I will be liquidating them in the very near future. They are all on the bubble as I despise watching a position tick by tick during the later half of expiry week. Will all the Mays exit the building today? No but they will be dispensed according to perceived risk and volatility on my part. That means everything but (NBR) and (HAL) could go as you read this Friday morning. 

Commodity Watch:

  • Crude Oil: Crude traded lower early but as expected the June contract closed at a new high, up $0.16  at $123.69. OPEC commented that there is plenty of oil on the market and the OPEC Secretary General rejected calls from Cartel members for bumping production. This morning crude is trading up well over a $1 and is above $125 per barrel.
  • Brazil Watch: President Lula plans to see first production from the rumored to be 33 billion barrel Carioca discovery in 2010. "We want to begin test drilling in March and start pumping oil from 2010. Brazil will then become a large oil exporter. We want to join Opec and try to make oil cheaper. The start date is hugely ambitious. The OPEC statement could drive crude significantly higher.


  • Natural Gas traded off slightly following an in line gas storage injection. Click here to see last night's Gas Storage Review which includes a new  chart graphically depicting the conservatism of E&P analysts relative to the current gas futures strip. Natural gas is trading up a dime this am.

Stocks We Care About Today Watch:

SWN Ups CapEx and Volume Guidance.

  • '08 Capital budget increases 16% to $1.7 billion.
  • '08 production goes up 14% to a range of 460 to 468 MMcfepd, roughly 50% over 2007 levels.
  • SWN will be putting up "best in class" production growth and this move has positive implications for other Fayetteville Shales names including (CHK), (HK) and (PQ).


SD Reports Beats Street; Raises Guidance. This one caught me off guard as I thought they were gong to report next week.

The 1Q08 Numbers:

  • Reported EPS of $0.19 (ex items) vs $0.14 expected,
  • CFPs of $1.02 vs $0.86 expected,
  • production of 250 MMcfepd up 78% YoY

Reserves Update: In truly CHK protege like fashion SD provided a quarterly update showing reserves climbed 12% from YE07 to 1.516 Tcfe, with low finding costs ($1.73 per Mcfe all-in and a very low $1.50 / Mcfe strictly with the drillbit)


  • 2008 : increased by 5% to 273 MMcfepd.
  • cost guidance remains unchanged on a $/Mcfe basis

Conference Call:  9 Est.

Odds & Ends

Analyst Watch: (RAIL) upped to buy at Lehman (was just thinking about this one yesterday regarding their labor troubles), (HES) upped to hold at Lehman with a $110 pt, (GDP) cut to reduce at Robinson Humphrey,

The Best Seismic I've Seen In Quite Some Time. Spud a couple of months ago this one will reach TD in mid December.



185 Responses to “Flying Oil Friday”

  1. 1
    Sambone Says:

    7:18 am EST

    Nymex Crude Hits New Record High

    By Lananh Nguyen

    LONDON — Nymex crude oil surged past the $125 a barrel milestone in London trade Friday, as crude futures extended their record-breaking run.

    Prices were lifted to fresh highs for the fifth day in a row by bullish technical charts and investment flows.

    “The uptrend feeds the uptrend — the more increases you see, the higher the investment demand will be,” said Eugen Weinberg, an analyst at Commerzbank.

    At 1101 GMT, the front-month June Brent contract on London’s ICE futures exchange was up $1.93 at $124.77 a barrel after earlier hitting a record-high $124.91 a barrel.

    The front-month June contract on the New York Mercantile Exchange was trading $1.64 higher at $125.33 a barrel, after earlier posting a record high $125.48 a barrel.

    The ICE’s gasoil contract for May delivery was up $37 at $1,190.75 a metric ton, while Nymex gasoline for June delivery was up 308 points at 316.86 cents a gallon.

    Technical momentum was enough attract a flood of investors into the oil market Friday, pushing prices back above their highs in the absence of fundamental news.

    “(Funds) are currently being attracted by oil’s rapid price appreciation this year,” said Michael Davies, head of research at Sucden commodities. “This probably explains the move higher over the last few days on what many have regarded as bearish news.”

    Friday’s rally was a “follow through” on Thursday gains and an extension of the last $10 a barrel move higher, said a crude oil trader based in London.

    “$125 (a barrel Nymex) is probably a psychological level. If that closes above $125, then off we ago again,” the trader said.

    Options activity was also focused on the $125 a barrel strike price for Nymex crude, which an energy broker cited as contributing to the price rise.

    Separately, China recorded a rare on-year fall in crude oil imports in April, a person familiar with the preliminary data said Friday, likely due to high prices and record volumes arriving in Chinese ports the previous month.

    The country imported 14.24 million metric tons of crude oil in April, equivalent to 3.48 million barrels a day — down 3.8% from the 14.82 million tons were shipped in during the same month of 2007.

    —By Lananh Nguyen, Dow Jones Newswires

  2. 2
    zman Says:

    Texana re BEXP pump and dump. There has been a notorious pump and dump shop touting the stock on its Haynesville acreage and saying things like “get in now because our membership alone can drive stocks higher, don’t delay!!!” I’m not saying its a bad company but the type of investor who jumped at $7 due to these guys will probably flood back out when they declare the move over. Can’t remember the name of shop but they are truly notorious.

  3. 3
    zman Says:

    crude up $2 at 125.60

  4. 4
    BossmanG Says:

    Zman, congrats! boy/girl?

    Also, should oil heavily reverse, do you think its ok to sell off the positions at their highs and buy them back lower as oil price seems to affect these plays?

  5. 5
    BossmanG Says:

    (or might be too early to tell?)

  6. 6
    zman Says:

    Bossman G – Thanks, will get new seismic in a couple of months to determine that.

    Yep, this high oil is not necessarily good news for the stocks as it may kill the broad market.

  7. 7
    zman Says:

    HK volumes showing trades from the secondary going through.

  8. 8
    reefguy Says:

    z- congrats on confirmation by seismic!

  9. 9
    reefguy Says:

    EXXI- Third Point Files 13G

  10. 10
    zman Says:

    On SD Conf Call

  11. 11
    tater Says:

    I love the wee little smiling face!

  12. 12
    Nicky Says:

    Morning all. Z – CNBC are reporting that overnight OPEC have said they will consider increasing production (of course if the fundamentals call for it!) and may meet before September. This move is backed up Nigeria.
    But who cares about that eh? GS call for $200 so its onwards and upwards….

  13. 13
    sane Says:

    congrats z.

  14. 14
    Nicky Says:

    PS – just seen the above and congratulations – you will be able to trade through the night in December!

  15. 15
    texana Says:

    thx z, do we know pricing on hk 2ndry

  16. 16
    tater Says:

    Do you have a link for a good $USD chart that updates? I’m on StockCharts and it is late to the dance. Wondering about where it stands. Thanks

  17. 17
    Nicky Says:

    Minimum upside target for nat gas is 11.465. Possible targets are between 11.000 and 12.030. We should then see a very good pullback….

  18. 18
    zman Says:

    I’m just excited to be able to staff up from internal resources!

    SD – no exploration results yet on their West Texas Overthrust deeper program

    30000 acres cotton valley going well, not thinking about Haynesville for now.

    Texana – no but it appears only slightly in the hole given the price right now.

    Nicky – I think it turns when oil does.

  19. 19
    Sambone Says:

    8:33 am EST

    Nymex Crude, Led By Heating Oil, Above $125/Bbl

    By Lananh Nguyen


    [Dow Jones] Nymex crude remains firmly above $125/bbl after rising to a new record $125.98/bbl overnight. Heating oil futures continue to lead the way, outpacing gains in crude. “All in all, this bull move remains much intact and a further crude price advance to the $129.50 area as early as next week appears likely,” says Jim Ritterbusch, president of Ritterbusch and Associates energy advisory firm. Nymex Jun crude +$1.56 at $125.25/bbl. (greg.meyer@dowjones.com)

  20. 20
    Nicky Says:

    Tater – you could try this one…


    However I think it has a small delay and you will have to refresh it.

  21. 21
    Nicky Says:

    Crude hit 126.20

  22. 22
    Garyinhou Says:

    Way to go Z! Growing through the drill bit!

  23. 23
    Nicky Says:

    A move below 121.58 will provide confirmation that this wave is done. It is possible however, that this is ONLY wave i! If so we see a pullback towards 115 before onwards and upwards. If the whole move is done then 110.29 will be taken out.

  24. 24
    tater Says:

    Thank you Nicky! Perfect. Purposely have only looked at dollar on an end of day basis, needed an update for this morning for a trade. Appreciate it

  25. 25
    scoop006 Says:

    Z Congtatulations, Since you already have a little Zette, I rooting for big blue

  26. 26
    irished Says:

    any thoughts on OII?

  27. 27
    Nicky Says:

    Miss Eppperson currently has oil running through her veins I think!! Anyway she is reporting huge buying in call options for $150 oil before it expires next week!

  28. 28
    ellwodo Says:

    What was the HK secondary priced at?

  29. 29
    zman Says:

    Elwo – I have not yet seen a price

  30. 30
    kiaora Says:

    Z..When do you expect info on the May ATW ?

  31. 31
    zman Says:

    ATW announced, numbers were strong, have not got a pos there and have not reviewed in depth.

    pretty red open here with the broad market, CLR jumping

  32. 32
    Dman Says:

    irished – My thoughts on OII: I wish I bought it when it flirted with the low $60s !! Thought about it, put an order in but it skipped away & I didn’t chase. That’ll learn me.

  33. 33
    uop Says:


    my anticipated drop in the steel happened now, too much excitement.

  34. 34
    irished Says:

    thks dman.

  35. 35
    apbd Says:

    Congratulations to Mr. & Mrs Z. Time to look ahead to options on diaper stocks.

  36. 36
    zman Says:

    Uop – you think more short term than me. Metals are off with the market, I’d be pretty careful shorting “tops” in cheap stocks with improving fundamentals.

  37. 37
    texana Says:

    congrats z s , buying more wll on dip & hk

  38. 38
    Dman Says:

    Z – congrats on the seismic results. As for the cloning thing, well as someone who has an actual clone (=identical twin) I can agree that the results are dubious at best 🙂

  39. 39
    ram Says:

    Congrats Mr. and Mrs. Z.

  40. 40
    tater Says:

    Does anybody have an opinion about Hiland HLND?


  41. 41
    rseidman Says:

    09-May-08 10:04 ET

    Petrohawk Energy announces it has priced its public offering of 25 mln shares
    of common stock. All shares were offered at $26.39. (26.34 -0.30)

  42. 42
    Sambone Says:

    9:49 am EST

    Oil Surges Past $126 A Barrel


    NEW YORK — Crude oil futures blasted above $126 a barrel Friday, led up by strong demand for heating oil and other distillates.

    Light, sweet crude for June delivery was recently up $2.17, or 1.8%, at $125.86 a barrel on the New York Mercantile Exchange. The contract earlier made a record intraday high of $126.20.

    Brent crude on the ICE futures exchange was $2.72 higher at to $125.56 a barrel, after reaching an intraday record of $125.90.

    Heating oil futures continued to surge, leading crude higher. The U.S. government reported U.S. distillates stockpiles fell unexpectedly fell last week. Internationally, stockpiles of the distillates gasoil and diesel remain in great demand.

    “Heating oil’s being helped by diesel prices. They move in pretty close tandem,” said Rick Mueller, director of the oil practice for consultancy Energy Security Analysis Inc. “Demand for diesel has been growing quite strongly in Europe, and it’s also been growing pretty well in the U.S. That’s helping to pull up heating oil.”

    Front-month June heating oil futures were recently trading up 8.74 cents, or 2.5%, at $3.5972 a gallon after reaching a record $3.6125.

    “Traders are looking for anything they can hang a bullish call on, and right now this is the most convenient victim,” Mueller said.

    Oil’s has soared amid global demand in emerging economies, static output from the Organization of Petroleum Exporting Countries and sluggish supply growth outside of it.

    On Friday, the oil minister of OPEC member Nigeria said he’d support a meeting of the group this summer, ahead of its next scheduled meeting in September, if it appears more crude is needed. But he said said the market was well supplied at the moment.

    “I would support a meeting (before September) if the fundamentals indicate that intervention to increase or reduce supply is warranted,” minister Odein Ajumogobia told Dow Jones Newswires. “We are all watching the market closely and stand ready to intervene as appropriate.”

    Crude futures have closed higher for the last five sessions, and made records in the last four. They have doubled over the last year.

    Fast-growing demand in China has helped stir buying. But counter to trends, the world’s most populous nation’s crude oil imports fell in April, a person familiar with the preliminary data said Friday, likely due to high oil prices, record volumes arriving in Chinese ports the previous month and maintenance at several refineries.

    China imported 14.24 million metric tons of crude oil in April, equivalent to 3.48 million barrels a day, the person said on condition of anonymity. This is down 3.8% from the 14.82 million tons that were shipped in during the same month of 2007. It is the first time that China’s imports of crude have declined on year since October 2006.

    Front-month June reformulated gasoline blendstock, or RBOB, rose 5.42 cents, or 1.7% to $3.1920 a gallon, after reaching a record $3.2011.

    —By Gregory Meyer, Dow Jones Newswires

  43. 43
    Sambone Says:


    IntercontinentalExchange Inc. (ICE) slammed congressional proposals aimed at
    the futures market’s potential impact on surging crude oil prices, calling
    current market oversight “sound.”
    Senate Democrats have proposed higher cash collaterals for energy futures
    trading, but some say such a move in the U.S. could cause a migration to
    foreign exchanges and rob the market of the liquidity that some participants in
    the market say they need to hedge their risk.
    ICE, a commodities futures exchange, said in a statement Friday that “the
    hastily submitted legislative proposals to place arbitrary controls on
    regulated energy futures markets do not offer short-term relief or long-term
    solutions to the drivers of crude oil prices. … The various trading proposals
    by Senate Democrats would result in adverse consequences for consumers, market
    prices and on the competitiveness of the U.S. markets.”
    Sen. Byron Dorgan, D-N.D., said he hopes that by increasing margins for crude
    contract trades from around 5% to 7% now to 25% of the contract’s value,
    speculators will be less likely to risk their cash in a volatile market. By
    comparison, to trade stocks, the Securities and Exchange Commission requires a
    50% margin.
    ICE said, “Proposals designed to place restrictions on qualified participants
    would inevitably impact liquidity, leading to the degradation of price
    discovery, and importantly, increasing the potential for even greater price
    volatility. The presence of hedgers, and those that are willing to take on the
    risk that hedgers wish to lay off, are vital to properly functioning markets.”
    The Senate bill is part of an energy package that Majority Leader Harry Reid,
    D-Nev., announced Wednesday. It has the support of Sen. Jeff Bingaman, D-N.M.,
    chairman of the energy committee, and other high-ranking Democrats as a tool to
    fight speculation.
    But ICE contended that “global demand, supply constraints and evident
    geopolitical risks, if coupled with proposed market limitations, would do
    nothing to lower, and may actually increase, oil prices.” Instead, the company
    called for curbing U.S. dependence on foreign oil.
    ICE shares were recently down $3.62, or 2.3%, at $156.10.
    -By Kevin Kingsbury, Dow Jones Newswires; 201-938-2136;
    (Ian Talley contributed to this story.)

    (END) Dow Jones Newswires
    05-09-08 1008ET

  44. 44
    bill Says:

    should we buy sd?

    Whats gas company has hedged their output the least

  45. 45
    Dman Says:

    Some big reversal days recently in E&P cohort: DVN, CHK, HK, PQ, XCO. Don’t know what it means… maybe just earnings driven volatility, maybe they need a rest.

    Z – I’m trying to get a handle on your comments recently regarding E&Ps and the price/availability of pipe. I can see that actual shortage could cause a real problem with valuable properties sitting idle. But as for price, how bad would it have to get to make a meaningful dent in CFPS?

  46. 46
    aaatest Says:

    Re sd , im not chasing it here, just yet

  47. 47
    aaatest Says:

    Dman its on on good question back to u later but it willnot impact greatly for on on time cfps, more likely to cause drilling delays

  48. 48
    Dman Says:

    For those wondering, aaatest = the Zmobile

  49. 49
    aaatest Says:

    Can i get on on percent move update on crude, ng dow points , xng oih, cop etc, thanks

  50. 50
    Dman Says:

    Dow: -107
    OIH: -1.1%
    CHK: waffling around flat
    HAL: -1.8%
    SD: $48.76 down from $50.64
    COP: -1.4%

    USO: +0.22%
    UNG: +0.81%

  51. 51
    texana Says:

    clr simo fraced 4 wells in woodford hughes co,ok with laterals up to 4200 ‘ good ol boy hamm said,”we got some mighty fine flow rates to show for it.”

  52. 52
    Denise Says:

    Good morning,
    Z-wonderful news! what a blessing!

    Mr K update-has gone from 2-2 rating to a 5-2 this am. (nueral short term)

    Interesting colulmn I read this am about India (which coincides with Sam’s margin piece) about the govt intervening in commodity markets for the “good” of the nation-

    The Forward Markets Commission in India, an organization similar to our CFTC, yesterday halted all trading in soybean oil and rubber futures for four months. These are key markets for India, as half of its 1.1 billion inhabitants live on less than $2 a day and have been facing shortages and hoarding of core commodities because of rampant inflation. This move is similar to a ban on trading of wheat and rice imposed by the Indian government in 2006, an experiment that seemed to have little impact on the rising prices of those commodities.

    Speaking of India-there was a article last weekend in the FT about a farmer finding his camel was now more economical to use than his tractor. (you can’t make this up)


  53. 53
    Popeye Says:

    How is a frac done? I read that it gets the attention of neighbors to the well.

  54. 54
    Denise Says:

    Also a good artcle in Ft about cap ex spending in the commodity and energy space-(slow to ramp up and what incentive do CEO’s have to do it when it takes decades(in the case of mining) for it to pay off. They will not be around to reap the benefits

    If the GS spike of $200 a barrel were to materialize-the avg driver would be spending $3500 a year -10% of per capita disposable income!

    Certainly bodes ill I remain short retail

  55. 55
    Sambone Says:

    I have a question for everyone. Down here in the south gas is $3.60 a gallon for regular. I have not seen a slowdown in cars or traffic. 1) What is everybody else seeing in that regard and 2) At what price for a gallon will people slow down their driving? It reminds me of the frog and a pot of water on the stove.

  56. 56
    Denise Says:

    Great question Sam-

    I am of the belief it takes time-habbits are hard to break-but when the country gets those electricity bills this summer?
    I would imagine vacation plans are being curtailed.

    And we do not have much public transit in the south

  57. 57
    Sambone Says:

    I drive around and the traffic is terrible. I ask friends about vacation they are still going to the beach. I really don’t see any change. If oil goes to $150, that would be about $4.50 at the pump. I just scratch my head and wonder why.

  58. 58
    VTZ Says:

    They pay almost 10$ a gallon some places in europe and there most people still drive although demand is less than the states.

  59. 59
    irished Says:

    spent the winter in Fl (snowbird)and no slowdown in speed. I have a diesel motorhome and was doing 60 and was passed by everything on wheels. Am in Bowling Green KY. and no change whatsoever in driving habits from Fl to here. Cannot understand. At 4 dollars a gallon for diesel, I have to slow down.

  60. 60
    Garyinhou Says:

    In Houston, my friends in their F 250’s complain about $120 fill ups, but they cannot change driving habits as its work related. Just wonder about their ability to pass along prices, and when they do, who will feel that??

    Freeways still jammed with folks but a few more taking the “park and ride” buses.

  61. 61
    kiaora Says:

    Not in Chicago..Tollways are packed with single driver cars & SUVs.

  62. 62
    zman Says:

    RIG getting drop kicked,

    Red day otherwise but it looks pretty well contained to a little profit taking.

  63. 63
    zman Says:

    Tex – you didn’t see new data did you on the simul frac, I have previously seen 3.8 mm/d avg IP of the 4 wells

  64. 64
    zman Says:

    Re Frac: One of the oil guys who does this for a living feel free to expound on this at length but in the simplest terms it means pump sand or proppant into the well in an effort to fracture the formation making it easier for oil and gas to flow up the wellbore.

  65. 65
    uop Says:


    please give me an update on your latest NG conclusion and UNG future ?

  66. 66
    Sambone Says:

    RIG – Word on the street is that somebody (A bank?) is dumping.

  67. 67
    zman Says:

    Thanks for the input Eli: he reminds me that the tout on BEXP is Tobin Smith from Changewave.

  68. 68
    zman Says:

    natural gas will likely reverse when oil does. I see no reason to try to pick a top in the name with people exploring the out limits on crude prices. Near term neg catalyst would be the restart of Independence hub which will bump domestic production about 2% but NG is going for $16 in Europe and higher in Japan which is keeping LNG away from US shores. Also, you’ve got a continuous cover and reshort going on in gas and we are headed into hurricane season which will provide supportive sentiment.

  69. 69
    zman Says:

    Refiners just getting shelled.

  70. 70
    zman Says:

    Tristone cuts TSO target from $22 to $18

  71. 71
    VTZ Says:

    Z – Would you frown upon someone ditching their may nfx right now? Or is it a wait and hope?

  72. 72
    ram Says:

    SAMB – I wish our Reg gas would be $3.60. West coast is $3.95 to $4.25.

  73. 73
    zman Says:

    I think we get positive revision in Merrill estimates and price target on Monday for HK. Market likely to grain of salt it with them having just done the deal but numbers going to be rising.

    PQ – numbers are rising. Were $4.76 on 2009 CFPS a month ago, now $5.15, more to come.

    VTZ – no, not at all, I was planning to drop them on pop but the pop seems to be delayed.

  74. 74
    ram Says:

    ZMAN – Any thoughts on SD SEPT 55’s?

  75. 75
    zman Says:

    Interesting to see the separation of wheat from chaff. Cheap working well. NBR flat. Rest of group greening as oil comes off its highs which is taking a little pressure of the broad market. Kind of counter-intuitive but that’s my read on the current action.

    That little WH keeps going up, X off all of yesterday’s gains with market.

  76. 76
    sane Says:

    Our reg gas is $3.90 here outside of Chicago. I have heard a lot of people round starting to talk about getting a new car that gets better gas mileage, but it remains to be seen if they actually do. I just tell the people who bitch constantly to quit being a part of the problem and be a part of the solution.

  77. 77
    zman Says:

    Ram – probably ok but I’m not nibbling today (holding the common from way back) but I need to listen to the call again, do a little math and get back to the name next week. Same goes for SWN where their pr has been trumped by the market.

  78. 78
    zman Says:

    Aubrey gives $15 mm to OU with part of that targeted towards climate change. Let’s see how much the politicians have given to stop global warming.

    Stocks just trading with the broad market.

  79. 79
    scoop006 Says:

    Z If you liked your X trade on Thur. do you love it today

  80. 80
    zman Says:

    HK: Tristone Capital raises price target from $26 to $34.

  81. 81
    zman Says:

    Scoop – that’s a fair statement and I will likely take a second piece down here today or maybe Monday. I see no hurry as today just looks like mounting profit taking so it could go lower. I think CNBC summed it up pretty well as energy and commodity traders have some fat recent profits in hand, they are selling and leaving the pits early for the weekend. This applies to the equities as well.

  82. 82
    texana Says:

    z, from the oklahoman article: —initial prod rates 40% higher for each of the wells in the grouping of 4 than they were for the 2 outlying wells drilled earlier. 4 wells had ip of 17.8 & ea well avg 3.84 during 1st week

  83. 83
    zman Says:

    17.8 in aggregate. So a little better than 4.5 MMcfepd apiece and then 3.8 on a 7 day test?

    Ya know, NFX has tapped over a dozen extended laterals in the Woodford with IPs over 10 MMcfepd…the more recent, the better.

  84. 84
    texana Says:

    how long r nfx lat

  85. 85
    zman Says:

    X – CIBC took their estimate for 2008 EPS to $16.30 vs consensus of $14.24. They did this based on news that X had added a substantial per ton charge to steel orders (an extra $250 which is pretty significant).

    Tex – I think average on those is about 4,400 feet and rising. 3D helping to avoid the faulted out areas

  86. 86
    zman Says:

    ZTRADE: COP May $90s for $0.60 – still getting filled there.

  87. 87
    Garyinhou Says:

    ZMan.. HK, DVN, EOG and some others getting smacked, would you nibble or just wait til next week?

  88. 88
    zman Says:

    Gary – pretty tempted to nibble on June or longer in those names and to punt any remaining Mays (I only have PQ in Mays). This is not bad selling, group looking pretty resilient to me and the smacking is really just a 2%ish give back after one heck of a run. Also tempted to add a little CLR while it is off its high, could be some news here soon out of them or another Bakken operator.

  89. 89
    Dman Says:

    DJ wire sez HK secondary was upped from 21m shares to 25m (as Z predicted if I recall) and that they priced at $26.39

  90. 90
    zman Says:

    Dman – re HK, its not hard to figure that at these prices management would exercise the show which I think was 3.2 mm shares. That tells you the deal was over-subscribed and the book managers needed the extra share inventory to meet orders. I’m very impressed with the syndicates management of this deal, very little softness for a no roadshow secondary. Gives me confidence to add…

  91. 91
    Garyinhou Says:

    Re: CLR – guessing someone has re-iterated and upped est’s and tp.. can’t see any news of it anywhere..

  92. 92
    seymoujs Says:

    z, buying more or selling .coper?

  93. 93
    zman Says:

    Gary – that’s my guess as well. The three forks sanish test will be a separate press release at some point in the near future, rate could be comparable to the biggest rates seen in the Bakken to date so it’s probably an analyst trying to get in front of that.

  94. 94
    zman Says:

    Man did I miss FTI, the subsea tree guys. yikes.

    Sey – I bought more at $0.60, sorry it was not clear, the email said risky which would imply a buy but I got in a hurry.

  95. 95
    zman Says:

    CNBC talking about distillate…they should have seen my distillate export charts in yesterday’s post. Refiners may be approaching a near term bottom but I’m not willing to play yet. Products are certainly outpacing crude today.

  96. 96
    ram Says:

    Longer dated HK calls are not contracting much.

  97. 97
    tater Says:

    Just a bit of a heads up for anybody who felt a pit in their stomach last week when oil dropped to 112ish. CLR common has moved 37% in six days. Puts are an easy form of insurance for that kind of gain. Sorry if that’s preachy, just remember reading a lot of “poor me” on this board only a week ago.

  98. 98
    zman Says:

    Somebody said “poor me” over CLR? Wow, don’t remember that. Must be getting old. I do remember that after it rallied double digit percentage it took two days of rest and I said I thought it would keep moving up and I did not sell.

    Ram – RE HK I see that, thanks for pointing out. Very seriously considering taking on more exposure to replace the exited Mays from yesterday.

  99. 99
    zman Says:

    NBR turning green as the market sells off. Good volume, think people are still coming around on the future here.

  100. 100
    zman Says:

    NBR going to lose the May calls and buy more June $40s.

  101. 101
    Garyinhou Says:

    Roger that Tater, insurance often a good idea, especially when you think you don’t need it. Own 20 CLR June 30 puts worth zero, hope they stay that way. My poor me story with CLR is selling the June 40’s for 5.00 2 weeks ago.

  102. 102
    zman Says:

    ZTRADE: Out May NBR Calls for $4.50, up 120%.

    Trying to buy some June $40s now.

  103. 103
    tater Says:

    Sorry, I thought that might be misunderstood. Not slamming the company or anybody’s picks. Just trying to point out a simple way to lock-in gains without being a seller as the stock has seen a very nice move.

  104. 104
    zman Says:

    ZTRADE: Added More June $40 Calls for $1.60.

  105. 105
    zman Says:

    Tater – never apologize. I was half kidding with the poor me thing. And I am getting old.

  106. 106
    regale Says:

    Here in San Diego traffic is down–I’d say about 5 to 10% based upon the fact my 20-mile commute has become a breeze. Last spring/summer, with oil in the $60-70 range, freeways here were jam packed. Also seeing a lot more people on light rail and buses. Lots of new Priuses and a few Smart cars, majority of new cars with dealer placards (pre- permanent license plates)are compacts and sub-compacts. Will have a Chevy 4X4 1/2 ton for sale soon — am readying to buy a Ford Escape Hybrid. Spouse already bought a Mercedes M320CDI (diesel) that averages 25mpg. Horses are now getting around by commercial equine transportation, and, incidentally, hay has gone through the roof. The good Timothy and Orchard Grass hays from Washington and Oregon have gone to $26/bale due to diesel cost–was paying $18/bale last year.

  107. 107
    zman Says:

    Regale – thanks for the color. Apparently horse care fees are going up here as well as we know a few kids who’ve quit riding, also noted the local Petsmart closed their tack shop due to lack of demand. We’ve had 3 prius on our block for 2 years now but I do think that the amount of smug produced by their owners may be contributing to global warming.

    It’s been awhile since the broad market has gotten whacked into the close on a Friday. Once oil closes I would expect a pretty sharp move in one direction or the other…I know, I know… how sage of me.

  108. 108
    Garyinhou Says:

    Tater – I’m a big believer in put insurance, especially after significant gains and wanting to stay long the underlying.. no misunderstanding here… I know exactly what you meant and appreciate it

  109. 109
    zman Says:

    Tater – yep, what Gary said.

  110. 110
    tater Says:

    Just trying to be helpful. I know this isn’t really a tech analysis site but having made a nice profit myself, CLR is now forming a doji candlestick, just like it did on April 28th and (sort of) on April 16th, which preceded pullbacks. It is also $8 above its 20 day EMA which is at about 45. Nothing goes straight up, and having made a very nice profit in the last 5 days (THANK YOU Z!) , i have entered a trade to also make a profit on a pullback, as I have read somewhere that stocks go down as well as up. I have a thick skin (and am also old as dirt) so no probs.

  111. 111
    BossmanG Says:

    regale, how do you like the ml320cdi? just wondering how it compares to the audi q7 tdi or bmw x5 diesel coming out

  112. 112
    zman Says:

    Tater – feel free to pass along all the TA you want to. I’m not a big TA guy as you know but am a fair hand at reading a chart. Your input is appreciated.

    Wow – look at LNG, the company, down 36%. I hear Taps being played.

    VW has a 75 mpg diesel coming out soon.

  113. 113
    BossmanG Says:

    Z, which vw are you talking about?

  114. 114
    zman Says:

    VW Pollo

  115. 115
    zman Says:

    VW Polo


  116. 116
    Garyinhou Says:

    Crazy German Chicken?

  117. 117
    Dman Says:

    Agree that smug emissions from Prius owners are an underestimated contributor to global warming. I know one such owner whose house contains so many light globes (zillions of small halogens recessed in the ceiling) that just turning on the lights causes immediate glacial collapse in Antarctica.

  118. 118
    guru1 Says:


    I am a recent subscriber and for the past few weeks have been trying to soak in all the intense energy related research posted here. Being a retired a chem engr, I find the insight excellent and look forward to a lot of learning.

    Zmann: I have been following along on your HK play (and profited handsomely). How does a secondary (priced at $26.39 this am) with a 12% dilution affect the HK price short term, since we are playing short term (June) options? Thanks.

  119. 119
    uop Says:


    when you go to a POLO game they serve POLLO.

  120. 120
    uop Says:


    you mentioned I am short term, now you did the same, buying mayCOP.


  121. 121
    apbd Says:

    I thought I was the oldest on the blog.

  122. 122
    BossmanG Says:

    Z, wow, crazy polo..and that seems to be the sedan that gets 75mpg, i wonder how much better the hatchbacks are
    seems more efficient than a prius or any hybrid

  123. 123
    zman Says:

    Guru – glad you like the site and will be picking your brain on some topics in the future. For instance, gotta be thinking the ethylene margins are getting hit with the rapid rise in nat gas prices, not good for the likes of DD although they may be simply passing it along like everyone else.

    RE HK – the impact of the dilution was taken into account and filed away by the market yesterday and today. Normally in a stock without further near term catalysts you can expect a week to a month of resting. In this case I would expect it to chart and upward course, of course barring an discombobulations in the broad and or energy markets.

    Uop – I’m pretty opportunistic and will do long and short term plays including the occasional day trade as we approach expiry. You are shorting a stock based on a chart with the underlying trading at about 10x fwd earnings. I am long it and long a little COP which is the cheapest of the majors and the gassiest in a rising commodity price environment. I guess that’s what makes markets.

  124. 124
    zman Says:

    BossG – I think the car pictured, which does get 75 MPG (diesel) is their green energy Passat, not available in the U.S. yet

  125. 125
    zman Says:

    Looks like a greening of the group is yet again underway. Let’s get crude closed and a nice bounce and I will toss so more Mays out of the portfolio.

  126. 126
    tater Says:

    Well, for all of that type space, I will be the first to say ignore my tech analysis of CLR as today’s candle is not done forming and it would appear now that it is not going to be in the shape that would warrant a bearish view. Oh well. At least I hope it was entertaining.

  127. 127
    BossmanG Says:

    ah my bad, your right
    (also, probably not available in canada either where i’m at)

  128. 128
    uop Says:


    few days ago sold some, still have

    now its 2$ lower,might want to restock a little, what is EOG’s future ?
    Do they need more time, say july+++.

    in your portfolio: are the positions live, meaning any change in the market is immediately reflected ?

  129. 129
    Dman Says:

    UOP – Expanding on #123, I guess if I was going to short something that was at a 52-week high, I would want it to be conspicuously overvalued and would want the underlying fundamental trend to be turning down. That way, market “surprises” are likely to work in favour of a short. Whereas shorting steel stocks at their 52 week highs, but still cheap and with underlying trend moving in favour of the stocks, means you have high odds of “surprises” working against you. If I had just made 3-4% shorting NUE I’d be getting the hell outa there. But I wouldn’t bother in the 1st place. I’d rather just use the 3-4% decline as an entry point for much larger gains as the fundamentals play out.

  130. 130
    zman Says:

    EOG – I’m not adding right now. Their future is bright. See what I said after the quarter on May 2 here:


    Live portfolio on my screen but not on the site.

  131. 131
    regale Says:

    Re #111, we LOVE the 320CDI. Have had it for over a year. Purchased in Las Vegas in 2/07 and we could sell it for same price we paid for it, even though it’s now got 20K miles. When we go on vacation, we put a Yakima luggage carrier on top so we can get all the pets (sans horses) in the back. Great daily driver, plus will tow 7000 lbs., per Mercedes–will be purchasing a European composite horse trailer for those short, one-horse, 15-minute to half-hour trips (much to husband’s dismay) and continue to use commercial haulers for anything longer. Also quite easy to get a bale of hay in back (now the husband is groaning in agony), so plenty of room.

  132. 132
    Dman Says:

    Z – a while back you mentioned you’d read some trading psychology & I’m interested in applying it. I’ve spent a lotta time investigating OII, NOV & FTI & have traded them over the last year with nice results. But now they’ve shot up & I only have token positions in each (a few call spreads & some stock) & ITS DRIVING ME NUTSOID!! What does the trading shrink say ?

  133. 133
    zman Says:

    Pick a copy of Trader Vic


    and The Super Traders (a bit more history but good)

  134. 134
    zman Says:

    pretty sure it’s the trade vic book that has a hole section on mastering emotions and also a bit on reading people and market behavior vs the numbers.

  135. 135
    zman Says:

    DOW down 1.03%
    S&P down 0.76%

    XOI: down 0.87%
    XNG down 0.93%
    OIH down 0.45% – interesting, look for an OIH multiple update on Monday.

  136. 136
    zman Says:

    OII, FTI, and NOV leading the oil service stocks higher now. Interesting to see the run leaving RIG off. There was an offshore tech conference this week but I turned my back and these things just launched. OII could probably go a lot higher but these things are not that cheap and I won’t chase in size into the weekend. Anybody see a note on these names? Argh, got busy on other stuff and let that OII get clean away from me.

    Oil just on fire going into the end of the Friday session.

  137. 137
    scoop006 Says:

    Z would you be comfortable holding OII May $70 past today?

  138. 138
    zman Says:

    Scoop – the very question presupposes that I had been smart enough to buy it, lol. Hard for me, if I had it, not to roll it here. But Scoop, usually when you ask me a question like that, whatever the underlying is, it pops $5 the next day. Its the strangest phenom I’ve seen this year.

  139. 139
    scoop006 Says:

    TY I’ll hold

  140. 140
    ram Says:

    ZMAN – You’ve answered my question with regards to NOV in 136. Do you have any thoughts towards ATW now that it has released earnings?

  141. 141
    zman Says:

    can’t say I blame you. Now ask me about the COP. Please, ask me.

  142. 142
    ram Says:

    ZMAN – Do you have any thoughts on COP in the very short term?

  143. 143
    Dman Says:

    Nice one, scoop. Nice one ram.

    Thanks Z, I’m looking at Trader Vic on Amazon.

    Did load the boat up with NBR, so that takes the edge off 🙂

  144. 144
    texana Says:

    z do u have sec t&r location for the clr well sanish test

  145. 145
    zman Says:

    ATW – I have not looked at their numbers enough yet. Will look over the weekend

    COP should recover with the broad market. This is my one real quick trade as we approach expiry and it’s gut / valuation based. The refining side is taken care of in terms of expectations … there are basically no expectations of improvement in the near term. The E&P will offer price deck based outperformance and to a greater degree than its peers due to its gas leverage, especially its Rockies gas where differentials have improved with greater access to markets (Rockies express pipeline)

  146. 146
    zman Says:

    Texana – let me look through my notes and get back to you, I don’t have the lat and long but can probably get there with my notes and the ND map site.

  147. 147
    scoop006 Says:

    If #141 was directed to me I was in @.88 and out@$1.15. Never had much success holding COP

  148. 148
    Dman Says:

    Z – not sure it’ll work if you *ask* to be asked 🙂

  149. 149
    zman Says:

    Scoop – I was just going to tell you not to buy it so it would then advance. I tell, it’s uncanny. See, Dman has found the error in my plan.

    Wow, you can tell it’s Friday around here. If only Sam would drop in a movie quote trivia question I could quite for the week.

    NBR and HAL working. I may drop the May HAL calls before the close.

  150. 150
    zman Says:

    Question earlier about hedge positions. I’ll have an update on the E&P space in general with some new thoughts on Monday.

  151. 151
    Sambone Says:

    3:18 pm EST

    Oil Surges Past $126 A Barrel On Distillate Demand

    By Gregory Meyer

    NEW YORK — Crude oil futures capped a week of records above $125 a barrel Friday, electrified by world demand for distillate fuels.

    Light, sweet crude for June delivery rose $2.27, or 1.8%, to settle at $125.96 a barrel on the New York Mercantile Exchange, later rising as high as $126.25.

    Brent crude on the ICE futures exchange climbed $2.41 to $125.25 a barrel. Brent settlement prices weren’t immediately available.

    Benchmark Nymex crude has climbed six sessions straight and broken records in the last five. Powering the rally has been heating oil, a form of distillate fuel.

    While the season for burning the oil is all but finished, U.S. stockpiles of distillates are below average. Heating oil futures also reflect a sturdy global market for distillates, which also include include diesel and gasoil.

    “Heating oil is the tightest sector of the U.S. market,” said Tim Evans, energy analyst at Citi Futures Perspective in New York. “Distillate inventories are 11% lower than a year ago. There is some real physical tightness in that sector of the petroleum complex, so it continues to lead the way higher.”

    June heating oil futures rose 12.62 cents, or 3.6%, to settle at a record $3.6360 a gallon.

    Crude has more than doubled in the past year as consumption mounts in China, India and the Middle East, new supply has been slow in appearing and the Organization of Petroleum Exporting Countries keeps a lid on output.

    Still, with crude’s price up 11% in May alone, some believe the market has overshot reasonable levels.

    “Oil’s recent meteoric rise has been fueled, in our view, by non supply-demand factors and by potential inventory misperceptions,” energy analysts at Lehman Brothers said in a note. “We judge the two most important factors unrelated to supply and demand are dollar weakening and investors’ desire to be exposed to real assets, leading to increased inflows from passive long-biased index investors.”

    The dollar’s slow decline — down about 5% against the euro in the last six months — has softened the blow of more expensive crude oil on consumers using other currencies, helping keep buying interest strong for oil. But oil has risen all week despite uneven trading for the greenback against the euro.

    Harry Tchilinguirian, senior oil market analyst at BNP Paribas Commodity Derivatives in London, said that while they’ve moved closer in recent months, the relationship between the two currencies is “episodic and unstable,” and there’s no guarantee it will last.

    Since April 22, the euro has declined from a record high of $1.6020 to as low as $1.5285 on Thursday.

    Since last fall, OPEC has stood pat on output levels and now supplies 42% of the world’s crude. OPEC Secretary General Abdalla Salem El-Badri this week said there’s no shortage in the oil market, reiterating the cartel’s position that that market speculation causes high prices.

    The oil minister of OPEC member Nigeria on Friday said he’d support an OPEC meeting ahead of the next scheduled gathering in September “if the fundamentals indicate that intervention to increase or reduce supply is warranted.”

    “We are all watching the market closely and stand ready to intervene as appropriate,” the oil minister, Odein Ajumogobia, told Dow Jones Newswires.

    Meanwhile, Brazilian President Luiz Inacio Lula da Silva told a German magazine that his country, flush with newfound oil reserves, wants to join OPEC.

    Front-month June reformulated gasoline blendstock, or RBOB, rose 6.34 cents, or 2%, to settle at a record $3.2012 a gallon.

    More information on settlements and highs and lows for futures on Nymex and ICE platforms can be found by searching for the following headlines:

    —By Gregory Meyer, Dow Jones Newswires

  152. 152
    Wyoming Says:


    Anyone answer the frac question before I get blabbly? Still interested?

  153. 153
    zman Says:

    Wyo – I gave him the 2 second def. Feel free to expound.

  154. 154
    apbd Says:

    of all the gin joints…

  155. 155
    zman Says:

    X – don’t call it a comeback!

    A – I thought you didn’t drink!

  156. 156
    Sambone Says:

    Z – Guess the quote and then it’s beer thirty

    “Window or aisle, boys? Yeah, we’re in deep shit!”

  157. 157
    zman Says:

    I will not google it. sounds like nickleson

  158. 158
    zman Says:

    becoming more interested in that high yield name EVEP for the kid’s account. Buy, hold, get paid (a lot) to wait.

  159. 159
    Sambone Says:

    2nd quote

    “It will be nice working with proper villains again!”

  160. 160
    Sambone Says:

    Z – Take a look at COSWF for the kid. With WTI at these prices the yield will be 5 bones before it’s over. I think it’s still a buy here.

  161. 161
    Sambone Says:

    Third quote

    “You gotta walk before you crawl.
    Reverse that.”

  162. 162
    zman Says:

    thanks, will add to the list of yield names.

    Oceans 11

  163. 163
    Sambone Says:


  164. 164
    zman Says:

    Distillate just blew out the top today, up 4% vs crude up 2%. Big beneficiaries there would be:


  165. 165
    Sambone Says:

    Tini time for me! Have a good weekend!

  166. 166
    apbd Says:

    Ocean’s 11. Easy

  167. 167
    zman Says:

    CNBC story on now about fixed option payout product. I ‘ve looked into it before, kinda scary and limits upside.

  168. 168
    Wyoming Says:

    Fracs vary in size, usually a function of depth to the horsepower required. A tractor trailer pump is avg 2200 HHP. There will be about 8 on a Barnett job. The pumps take fluid in low pressure and pump it down the well 60 bbl/min (42 gal/bbl). In the Barnett, this would be @ 3000 psi (about 5500 feet depth from surface). The fluid under pressure will open the rock up and gain length from the well. Proppant is placed in the fracture so that the rock does not close and provides a permeable path of the fluids to return to the wellbore. Think of the frac as the autobahn with a lot of feeder roads.

    A simo frac is 2 wells side by side (500-1000 feet) fraced together. Somtimes you hear of a zipper frac, 2 wells and you go back and forth, like a zipper. Sometimes it is more than 2, heard EOG did one with 4 wellbores.

    I can go on, been doing this for over 20 years.

  169. 169
    Jay Reynolds Says:


    A stimulation treatment routinely performed on oil and gas wells in low-permeability reservoirs. Specially engineered fluids are pumped at high pressure and rate into the reservoir interval to be treated, causing a vertical fracture to open. The wings of the fracture extend away from the wellbore in opposing directions according to the natural stresses within the formation. Proppant, such as grains of sand of a particular size, is mixed with the treatment fluid to keep the fracture open when the treatment is complete. Hydraulic fracturing creates high-conductivity communication with a large area of formation and bypasses any damage that may exist in the near-wellbore area.

    SLB good, open source oilfield dictionary.


  170. 170
    ram Says:

    HAL, PQ, NFX, PBR, PQ?

  171. 171
    Wyoming Says:

    Fluids: In the Barnett, fresh water, pretty cheap; might pump 15k bbl per stage 5 or 6 stages per well. Big issues with this much.

    Crosslinked fluids, take a polymer and add a metal ion (borate most common)to creat a super viscous fluid to keep the frac open while carrying the proppant out the frac.

  172. 172
    john11 Says:

    CLR should be close to the top of the IBD 100 list this wk-end its IBD #’s are 99 and 99.

  173. 173
    Popeye Says:

    Thanks Wyoming and all. I would love to hear more of the sort on some slow days. I hope everyone did as least as well as I this week.

  174. 174
    zman Says:

    Ram – what’s question on 170?

    Wyoming – thanks very much.

    Popeye – yeah, very close to my 2008 high. Lots of fun but I am raising cash as a % of total assets a bit.

  175. 175
    ram Says:

    The MAY’s of those and their possible termination. Mute point now – for Monday. Now you get to drink the whole bottle of wine!

  176. 176
    Wyoming Says:

    Oh, congrats on the new seismo. You’ll have to do 4D (time)now that you ran the baseline….

  177. 177
    Dman Says:

    Z – Trader Vic looks good & it does have the section you mentioned. Ordering it now …

  178. 178
    md Says:

    Just opened the blog.
    Congrats on the seismic results. Are you polling the subscribers on the name.
    Have a great weekend

  179. 179
    scoop006 Says:

    Z- May I suggest the name Zachary

  180. 180
    zman Says:

    wife already rejected all Z names: zach, zeke, zane

  181. 181
    scoop006 Says:

    Thought double Zachary=ZZ had a nice ring to it except on further reflection his nickname would be SLEEPY

  182. 182
    scoop006 Says:

    Cramer says he struck out by not recommending CLR. Did not like the price @$21.50 loves it now@$50.”Wait for a pullback & buy”.

  183. 183
    T-Tupp Says:

    congrats Z on the second??? mini Z!!!!

    your little girl is darling an sure this new addition will bring you and mrs. Z great happiness!!

    sold my hk calls at 330, and am holding my DVN’s & BTU’s a little longer…. VLO took our ultra strong support today…. i say it has room to fall from here no matter what its multiple is..

  184. 184
    zman Says:

    Thanks T, yep Z2

    Nice trades, wish I had just bit on the BTU back when I said enough was enough when it was high $40s. ug.

    Re the refiners, numbers still coming down in the space so yeah, they are not as cheap as they look.

  185. 185
    real roulette making Says:

    real roulette making

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