Housekeeping Watch: A word on the value of the comments section. I can't say enough about the value of comments from readers in the comments section. Sometimes I'm even one of those valuable contributors. On Friday, after I had posted we received word from Reef that (PVA) was touting (the first) Monster Well results from the Haynesville Shale. JR added his two cents from the field (yeah, he works those parts) and Eli noted shortly later that BMO upgraded GDP and nearly doubled its target price on the back of the strong results encountered by (PVA) in the Haynesville shale. I responded with:
Thanks Eli! Had not seen but that augers for HK price target upgrades at Lehman, Opco, Merrill at the very least. Holding even the June calls through the weekend.
Sometimes it is difficult to tell how much a play the analyst community has factored into a story and their target price. In this case Street had been waiting for proof. And now that have it. This morning Lehman raised its rating on (HK) to overweight and its price target from $23 to $35. I held all my Junes and added September calls on Friday and just wanted to say thanks for the group effort!!!
In Today's Post:
- Holdings Watch
- Commodity Watch
- Natural Gas Supply Update
- Other Stuff We Care About Today
- Odds & Ends
Holdings Watch: The Performance and Wiki tabs are updated.
Commodity Watch:
- Crude Oil fell 3.7% to $127.35 last week prompting a chorus of near term top calls as the CFTC revealed it was 6 months into a wide ranging investigation of speculator activities and more evidenced surfaced that mass transit traffic is up and consumer traffic is down due to high gasoline and diesel prices. This morning crude is trading off $1.70.
- Speculators Run For Cover. From Reuters ~ Crude speculators on the New York Mercantile Exchange cut their net long positions in half last week as prices began to fall, according to CFTC data. Net crude long positions fell to 25,867 in the week to 27 May, from 50,060.
- Natural Gas fell 2.3% to $11.703 last week. Although production continues to ramp (read on) the price trend for natural gas appears to be rooted firmly in the up direction and will likely remain that way until LNG volumes pick up. This morning gas is up $0.11.
Natural Gas Supply Update: A Slide Show.
Key Points:
1) This data was released Friday and is through the month of March, the most recent data available.
2) U.S. Lower 48 gas production was running nearly 5 Bcfgpd high to year ago levels, slightly below levels seen at the end of February but anecdotal evidence suggests that production is currently higher than these levels aside from the 0.9 Bcfgpd shut in as a result of the closure of the Independence Hub in the deepwater Gomex. Independence is set to come back on line in mid June.
3) YoY production growth continues to outstrip the decline in imports and rise in exports witnessed early this year by about 1 Bcfgpd.
4) States not normal associated with gas production are shoulder a greater portion of the nation's productivity, hence the title, Gas, Gas Everywhere.
5) In another two years the Louisiana chart should look more like the Oklahoma chart ... up and to the right.
6) Although I did not include rigs in today's slides the rig count has been fairly flat for the last year ... expect this to rise rapidly in the second half of 2008.
Stuff We Care About Today:
(PTR) - increasing diesel imports and retaining its halt on diesel exports.
(PVA) will hold its Analyst Day June 5th with slides available June 4th. Looking more details about their recent Haynesville efforts.
(CHK) shareholders meeting Friday.
RBC Energy Conference: All times EST. This is the third major conference in two weeks and I plan on listening to only a limited number of items.
- Monday: (GDP) 2:45
- Tuesday: Bakken Shale Panel. 9:40 to 10:45. Click here for access.
- Tuesday: Deepwater Panel. 10:50.
Odds & Ends
Analyst Watch: Jefco takes price target of WLL to $116 from $90, Lehman upgrades (HK) to overweight, Calyon rises price target of (ESV) to $85 from $74 and upgrades (DO) to Add. Deutshe Bank ups ratings on (FTO) to Buy (sold mine on Friday), (TSO) and (HOC) to Hold. FBR took price targets up on all the U.S. coals, most notably taking Patriot (PCX) from $95 to $250. Also in the coal space, Morgan Stanley takes (ANR) to overweight. Citi takes (YGE) to Buy.
Good Morning Z, Any word on HAL bid for EXPRO and what effect on HAL’s stock price if they increase their bid and acquire EXPRO and effect on stock price if they do not make the acquisition.
Nice to see the CHK “day trade” turn into an “investment”
Morning Scoop
Re HAL/EXPRO – no upped bid yet. Saw Umbrella (the competition which includes GS) had received FTC approval late last week. I would expect HAL to elevate their bid at least once more but to keep it mostly cash and therefore accretive and therefore not to receive too harsh a share price reaction (very short lived based on recent past result) and then on and up as people think this is a very good fit and worth more than the current bid.
Hear ya CHK, nonetheless will start making June calls wake the plank anyway first half of this week.
Export – I think Benbobby asked last week about % of exports that are products vs crude. That would be 98% of the 1.43 mm bpd that is exports. Don’t have a breakout of gasoline vs diesel but it is mostly diesel.
WLL spoke at the RBC conf this morning but I missed it. Will listen to replay.
WLL = Positive remarks +$3.75
CNBC about to talk about HK
Z Any technical reasons why RIG has gone down the last 4 trading sessions
Scoop – no reason I see. PBR is being a little nationalistic with contract awards. Most recent 10 out of 12 new drillships going to Brazilian companies. RIG will be involved in the RBC Deepwater panel listed in the post tomorrow.
Scoop – does the site seem a little slow to refresh to you this am?
NG just broke through $12, up $0.33 now.
xco back from the dead!!
the site is refreshing fine for me
#9 Refresh is OK
V – XCO back in the green for me now. Woo-hoo!
Thanks, I’m refreshing ok now too.
Sambone must be off for the week again. I will see if I can rouse Nicky for some oil thoughts.
away from weather any bull story out in Natural Gas that i am missing?
Oil service being pulled down by broad market.
CNBC saying oil demand falling due to alternative energy. That makes no sense as we used next to nothing in terms of oil to generate electricity.
They cited the start of Hurricane Season as the reason for NG surging, now up $0.44 to $12.13.
XCO in complete breakout mode —
SD thinking about doing the same.
Cooling degree days expected to double this week relative to last week. HDDs now pretty much dead for the season.
CHK breaking back to the upside = debt deal digested.
HK = unreal.
RIG defending the 50 day now…I took the bait and added a little
Arrg… and I sold HKGF before close on Fri
ZMAN are u still holding DUG June?
Thanks.
RIG/DO/ATW/NE all kind off interesting here.
PQ playing catchup…they have Haynesville exposure (24,000 acres at last count) that would sharply boost their reserves should it be as prospective as PVA’s well.
By “sharply boost” I mean that since they are a smaller company with a smaller reserve base, Haynesville success will mean a lot more to them than to some of the bigger kids in the play.
PQ had reserves of just over a Tcf at year end 2007. I had original assumed 65% of acreage was prospective, 60 acre spacing, 3 Bcf per well (very conservative), 80% net revenue interest = about 2.5 Tcfe making the play pretty important relative to the 1 Tcf they had. If we say that well results are in the 10 to 15 mm/d IP range and that that would be roughly indicated of EUR, then maybe we can assume the wells are more like 10 Bcfe each. That means this play is worth 3x what I originally estimated for them in terms of potential reserves.
Re DUG – yep and I’m happily down about 20% on it. Will punt on the next big red day.
Oil now up $0.40+ …wild.
I am going to buy PQ stock.
ZTRADE: Bought PQ common at $23.18.
HK will make my head explode
Scoop – me too and I’ve got to cut some free soon. Wow.
My head is asploding right now.
I’ll consider giving Zman my first born if he wants. I’ll at least tell him to call Zman “uncle Z”
relative account up 650% ytd.
VTZ – hahahahaha. You are too kind. Just tell your friends.
NBR – thinking about the all time high.
SLB – don’t call it a comeback…yet.
Fair warning. I will be letting go of some June calls in any of the June names soon.
z = while we are giving away kids wud u like 4 teen-age boys??
Kyle – Can they 10 key data? Nevermind, no sale, I was a teenager once.
HKFF at $2.95 now, this was $0.25 Thursday. Gotta sell this puppy back soon.
Just sold 20 HKFF @$3.10 Bought 4/25/08 @.$55.That’s a TRUE ZMAN TRADE.Many Thanks
ZTRADE: Out HKFF, HK June $30 calls for $2.85, up 418%. Still holding July and September positions.
Wow, my account is up so much, I only just noted the broad market. Reminds me why my idea of a really diverse portfolio these days is one with at least 5 different types of energy stock 🙂
Various deepwater names caught a bid around 40 minutes ago. Haven’t seen why. Just catch-up?
ALY takes out Bronco
Thank you ZMAN.
Oh, OK, the ALY news is that they are paying more. The takeout was actually announced in January, but they have had to up the price.
Z How do you feel about those risky CHK June $60c’s
Ram – those are on the chopping block.
Hey Z…Thanks for the HK…Unfortunately (and stupidly) sold at the end of the day on Friday, but I’ll still take a triple from where it was!
Wow CLR …All Time New High – thinking I will wait for RBC to hold that shale chat tomorrow morning but may just kill my remaining Junes and just keep the July calls.
Z: been off line a bit, see you sold HAL jun 50’s (I missed exit), do you see any upside to ’em now. Also got NBR Jun 40’s, you still holdin?
Z refiners up big today. Any more thoughts reguarding this beaten down sector? Thx
Brian – I never kick myself for taking profits. HK may go to $40. Or people may decide to hate energy and blow it back to $25.
Also thinking of exiting XCO Junes?
X – I since bought those HAL’s back and think they will get a bounce but not sure when they wake back up. Still have the NBR as well but in both cases they will be gone this week.
Fred – I’m watching it, today upgrade related and FTO getting a wind before I went into longer dated, I’m going to give them until a first or second red energy day to get in. If the recovery is real they have a long way to go.
Ram, XCO exit = yes this week, maybe today, liking the breakout and will likely roll that one longer dated.
Ok, next time that CLR pops up like that my Junes go away. Volatile little puppy.
NBR – this would be a closing high.
Stock still discounted to the service stocks and drillers.
ZTRADE: Sold half CHK $52.50 June calls for $4.40, up 110% since entry 5/28.
ZMAN sold my HK last week with nice profit, bought it back today, thanks to you, and sold again for a quick 60%. Love the smell of 4 figure profits in a morning!!
Muchas Gracias.
HK running into support at $31. Just thinking out loud for you day tradey types.
Nice job Irish.
Broad market still not liking the high price of oil here. I guess the fear of the feds has worn off for the oil market. Don’t see anything spinning up in the Atlantic so am not sure why the big reversal in oil prices today, now up $1.45 at 128.80…reverse profit taking?
Broad market problems acting as an anchor, PQ back to where I bought it earlier.
…and any recovery in the broad post the close of oil market will likely yield a stronger energy group.
Z PQ Why stock & not options
Scoop – I have some options there already, don’t like the spreads plus I hold this in lieu of cash. I go to cash/stocks for the end of June each year as I take the last of the week off and got to limited internet access land, AKA Honduras.
Honduras = scuba diving & cigars?
Nope, Catholic mission. As they don’t have much call for options traders I end up doing something akin to Habitat for Humanity in the jungle.
CNBC reporting US may be close to an attack on Iran.
If #61 true which equity do you buy?
USO or SU…or just about anything energy. Alt energy ETFs would likely boom and keep going up after a resumption of oil deliveries in a “we gotta get off this black gooey stuff” protest rally. Solar, wind etc.
oh yes and if 61 true you would not want to be long refiners.
Apparently that has since been denied by the US Z – although by then the damage done and the shorts rushing to cover. Didn’t I just say it would be Iran!
That said the count is still open as far as I am concerned – line in the sand remains 120.75 for the bullish case. That said I would say today’s lows really need to hold too now.
If this is the bullish count then we are now in iii of v up which will take us considerably higher imo. 160 and higher is not out of the question. If bearish then we obviously the previous high needs to hold and most likely we are doing some kind of abc correction from last weeks 125.67 low which would most likely roll over around the 130 area.
For the bullish count to play out I really think we are gonna have to see some sort of threat of military attack on Iran play out and according to the wretched Miss Epperson the EIA are meeting today to discuss a way forward with Iran and ‘she’ thinks they may give the green light for an attack on Iran. As this is likely to send oil soaring my own belief is that this would be total insanity by the Bush government – but what’s new there eh!
sorry last week’s low was 124.67 and not 125.67.
Z re #6o You very nice guy. Send me the name of your charity and I will donate some of the HK profits to your organization.
Nicky – yeah, I was still thinking 124 -125 needs to hold. I don’t see the U.S. attacking but it makes for a good story in the waning days of a two term presidency. Oil up about half of today’s peak, wondering what the broad market levels look like to you. This broad action is taking service lower.
Re # 61 & 65, any links for Iran rumors/statements?
ZMAN – Is Kodiak Energy also a pump and dump stock?
Broad market – nice little downgrade of the financials across the board seems to have done the trick! Cycles were due to top out by 2nd June. We have good support in this region and then 1370 -73, 1365 and 1350. Resistance at 1388. Dow has support at 12385 and then 12298.
May get a short term bounce from this area but then lower I think….
Ram – I don’t know a lot about them but a pretty smart money manager brought them to my attention awhile back, prior to their Bakken angle and I never really followed up.
Scoop – thanks but you already are as this site pays for my trip down there. I didn’t know this but airlines are adding to prices before you leave even after you buy your ticket. I’ve been billed twice since getting my tickets down there.
Nicky – thanks.
ZTRADE: Just saw this went off so this is a bit of a late trade. HAL June $47.50 calls bottom fishing this market for $1.80. These are trading $1.69 by $1.74 and I won’t hold them long, probably tomorrow or Thursday but the stock is trading down with the broad market and a bit unfairly in my book. Could be a results of fear over their next step in the bidding process for EXPRO but like I said, I’m thinking quick trade that works on a broad market recovery.
Zman:
You see any strong upside in refiners like VLO and TSO? The action today is positive despite increasing crude and a very weak market?
G – there was a sector upgrade plus products are outperforming crude. I like VLO but have not yet gone back in. I sold my FTO and plan to reposition longer dated there as well.
zman:
Thanks. Crack spreads are also picking up gradually and these refiners may act as a proxy for put options on crude (gasoline prices don’t fall when crude drops which improves margins for products).
G – right, I’ll have the weekly crack spread update out in tomorrow’s post.
zman:
when you are not in town or on vacation and have no time/opportunity to be online, how do you protect yourself while you are gone /
I will be away for some time and wonder about this ?
close options positions ?
unless they are out in time ??
I close pretty much every option position for this trip as I will gone the entire week. I may leave the Septembers on but have not yet decided. I’ll be largely cash plus the few equity positions. Not really concerned with missing a week’s move but am not will to have a natural degrading instrument in my portfolio with no way to kick it loose.
Z ,Need a little Options 101 help.
How do you determine when to close out of a option for example HAL June $50. considering the time line and the direction of the stock?
Pete there are no hard and fast rules. I generally try to get out of front month calls in the week before the week of expiry. Loss on the position has nothing to do with it although distance to strike will come more and more into play as the days tick off towards expiry. When in doubt sell half. I am down substantially on that particular call but it is a cheap stock, it often moves with the market, as is the case today, and with oil thinking about going red on the day, it is actually likely to start moving back up if the market can get out of its own way (financials raining on the broad market today).
Thanks for the lesson
Z any reason you can see for WNR’s big move; maybe a squeeze going on? Thx
Pete – not sure how much help that was but ok. Those $50s will die on the vine faster than the $47.50s I took earlier this morning and I’m liking to punt mine on any kind of near term strength, today, tomorrow, etc.
WNR – dead cat bounce extending from Friday. I won’t touch it either way.
coal = wow off the upgrades this morning.
Z – I’ve never heard you comment on writing covered calls. I take it that you are not keen on this strategy. If you owned FTO in the high 20’s,for example, would you be tempted to write calls on the position.
Brian – I am keen on it as most calls in the universe expire worthless. I don’t do it on the site as I have not seen much call for it from subscribers but it is a good way to reduce your cost basis in names like CHK, NFX that often surge and rest for a time.
Anybody see a note out on EOG, getting hit in contrast to the group.
SD seems relatively strong vs the others.
Ram – yes, CEO keeps buying which helps.
Thinking about taking some closer to the money OII calls.
RIG looks intersting on valuation (8.8x 09 EPS) but chart looks like it could work lower, now 3rd attempt to get to mid $140s
Here comes CLR again.
Ram – re CLR, volume is much larger on the upward moves than the declines. Feels like fund buying.
Good info. Still looking at OII?
Ram – yes but not for today. I may hold the July calls through my trip as I figure there’s no way to attract a hurricane towards the gulf like me flying down into the strike zone, lol.
Not a good thing to say. You are doing a great thing going there to help others.
zman,after the close could yuo point me in the right direction re:the amount of refined product that the US exports on a weekly basis…EIA states that it doesn’t track those numbers..tks
Benbobby – look at the bottom of this page.
http://tonto.eia.doe.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_w.htm
Ram – and the last thing I would want is to attract hurricanes to them. Mitch practically buried the country and destroyed 3/4 of their GDP a few years back. Great people, crappy government, third world infrastructure but the happiest, smiling kids who love to play soccer at the drop of a hat.
ZMAN
While your in an instructing mode,please explain why you do not “seem” to exercise some options you have. You may do that but I had not noticed it before. I know you said you bought CHK and PQ stock recently when you seemed to have the option as well. It would seem your cost basis would be lower with an ITM option exercise although you would not receive the cash for the amount of money it is ITM, if you understand what I am trying to say. I can await till AH or weekend but when you have a second please. I follow your buddy PHIL and he “seems” to do the same, again like you I do not know for sure.
Thanks for above and option choices. I have done extremely well with your site and made lots of money. I can also now read the WSJ oil report and it almost makes sense!
Irish – For the most part I sell options instead of exercising them. I do on rare occasions in a non-volatile name hold a wide spread option or one that cannot be sold for intrinsic value simply due to lack of market into the weekend, take stock and sell later but this is rare. Usually, if I don’t sell it, its not worth anything. On average 3 to 5 positions expire worthless each month. I’m trying to work that scud number lower but sometimes you just get caught.
The last CHK trade was in a non-option account (my kid’s) and then my wife’s when Ram had asked if I was in buying mood there. The PQ I bought in lieu of holding cash and in lieu of buying more options as I don’t like the spread. I didn’t even think of exercising my current options as they are July and I like the leverage they give me.
You’re likely to see me take a few more stock positions including probably CHK before the end of this month.
zman,tks… so the US exports over 9 million barrels of refined product weekly?
zman, sorry misread it states over 1.4 million barrels per week
Is there any recent news on SD?
RE 103: After the close.
#102, yes that’s their estimate and I understand most of it is diesel. You can see only a dribble is crude and that’s probably some weird type of crude.
Ram – I don’t see anything but some high priced trades. I did see the CEO looks to like buying 230,000 share chunks of the stock.
Tom Ward reported another 230,000 shs of SD purchased on the 29th prices ranged from 55.24 to 56. That’s something like 5 or 6 days in a row of 230k purchases.
sorry Z didn’t mean to duplicate, didn’t read your full post.
zman whats your thoughts on nfx and chk calls?
zman do you do verticle spreads?
CHK I think recovery has started but will be quick to punt remaining FX and FL calls
NFX – they could be any day now for news. I’m in the July and will likely punt in two weeks if no news as I’m leaving town at month’s end.
I don’t do vertical spreads very often. Call me a cro magnon but what I do seems to work for me and is very KISS. I had options courses in college and I understand the strategies but I’m much more of a fundamental oil and gas guy than an options cat.