Thursday – Gas Preview & Oil Review

168 thoughts on “Thursday – Gas Preview & Oil Review”

1. 7:33 am EST

   Crude Up On IEA, Nigeria; Market Lacks Inspiration

   By Lananh Nguyen
   Of DOW JONES NEWSWIRES

   LONDON — Crude oil futures climbed Thursday in London, supported by a bullish oil demand outlook for emerging economies and fresh threats to Nigerian oil installations.

   The gains came after prices whipsawed between positive and negative territory, reflecting indecision over the market’s future direction.

   “We have a mixed picture at the moment,” said Andrey Kryuchenkov, an analyst at Sucden Research in London. “There are signs of softening demand in the near term due to high prices, but prospects for tighter supplies in the future and continued robust growth in emerging market economies should keep the market well supported.”

   At 1123 GMT, the front-month August Brent contract on London’s ICE futures exchange was up $0.54 at $137.12 a barrel.

   The front-month August contract on the New York Mercantile Exchange was trading $0.40 higher at $136.45 a barrel.

   The ICE’s gasoil contract for August delivery was up $12 at $1,252.25 a metric ton, after the July contract expired earlier Thursday. Nymex gasoline for August delivery was up 62 points at 338.70 cents a gallon.

   Oil prices strengthened after the International Energy Agency slightly raised its 2008 world oil demand growth forecast for the first time in several months.

   But the energy watchdog for the world’s industrialized countries also warned that oil demand will remain well below trend into 2009 amid declining economic conditions.

   “In 2008 and 2009 global demand is significantly below trend .. but non-OCED consumption is still expected to remain exceptional,” said Lawrence Eagles, editor of the IEA’s monthly oil market report.

   The crude complex also garnered support from a renewed threat of violence in Nigeria’s oil-producing region.

   Militant group the Movement for the Emancipation of the Niger Delta vowed to end a ceasefire agreed between other militia groups and the Nigerian government. MEND will call off the ceasefire on Saturday at midnight, the group said in an e-mailed statement.

   “All the news we have seen is bullish over the past 48 hours and it has supported the market,” said an energy broker in London.

   The bulls also took heart from data showing an 11% rise in China’s crude oil imports on year between January to June to 90.53 million metric tons, according to the country’s General Administration of Customs.

   Despite the supportive factors, market sentiment was still dogged by fears over waning oil demand.

   “The prospect of spreading slower growth should eventually collar these runaway commodity markets,” said Edward Meir, an analyst at MF Global in New York.

   Looking ahead, participants would be watching the key support level of $136 a barrel Thursday, said a crude oil broker in London.

   “The old story is of much higher-than-expected demand from China .. and of course the new story is demand destruction from the U.S. and Europe,” he said. “I don’t think we’ve reached a top yet .. (but) I think we’re close.”

   Separately, Saudi Arabian Oil Co., or Saudi Aramco, raised its August crude oil allocations for some of its European buyers but held some steady, traders of Mediterranean crude said earlier Thursday.

   Two European lifters said state-owned Aramco has increased their August volumes, while one said its allocation has been kept steady from July’s program.

   —By Lananh Nguyen, Dow Jones Newswires

2. Zman,
   Wondering what your take is on the possibility of the Admin. releasing some of the SPR. I thought it might happen to help sway voters, by lowering Gasoline prices.
   Is this even a possibility?
   Would it affect energy stock prices much?

3. Sky – It could happen, no a little more likely than before, but we don’t need more oil, we need more product. It would likely have a very temporary negative impact on prices but I think OPEC would offset it as they, at least the kingdom, would rather be producing less than they are right now. We have about 700 mm barrels in storage and use 20 mm bopd so it would last awhile at full bore release which I think is about 10 mm bopd. The admin would not release anything close to that level I am sure.

   Caris cutting ratings and / or price targets on the refining group.

4. I think the odds of the gov releasing some of the SPR is quite slim. Wouldn’t bet on it.

5. For those that want to short Crude, here ya go, double short. DTO

   http://www.powersharesetns.com/products/crudeoil/

6. Bleemus – I should have put could have in quotes as I don’t think it will, but that is now a very little bit more likely to happen.

   Thanks Sam…do they have a double long as well?

7. Yep, go to the link, DXO

8. My wife said I had to lose the Ron White “Tater Salad” reference. All the other bulls got turned into bears, I got turned into a steer.

   HK CHK CLR charts

   http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

9. “People never lie so much as after a hunt, during a war, or before an election.”
   –Otto von Bismark

10. Thanks Sam.

    Thanks Tater, will have a look, CLR called up $6, WLL moving but not as hard. Many of those acres are prospective for TFS in the Bakken area and EOG, WLL, NFX have all mentioned TFS prospectivity in the last two months.

11. Looking at taking some EOG August $120 or even higher strike calls on the open. May take a little $120 July action as well for a quick trade. Surely someone in the analyst community will note the recent drop and the Bakken news and say “wait a moment, that’s not right”

12. UBS upgrades PQ to BUY from neutral!

13. Isle – see bottom of post

14. Off subject – Most of you know I don’t watch the bubbleheads on CNBS, BUT last night I did tune in because of the market. My question is; Does somebody hold a gun to their head in regards to banks? They are dead set on buying a falling knife. Don’t they know that they don’t have to buy anything? All I heard was value, value, value, etc. Wow, didn’t the bubble heads last fall say get out of energy and buy the banks? How’d that trade go? Didn’t they do the same this past spring? How’d that trade go? Do people really listen to them?
    I feel better now!

15. Petrobras oil works set 5 day work stoppage in the Campos Basin starting July 14. Unions and terrorist groups alike have Bloombergs.

16. Sam – I agree 100% re 14. Nicky tells me it is a Voodoo call and nothing to do with fundamentals.

17. ZTRADE: Entered EOG August $120 Calls (EOGHD) for $5.20 with the stock just under $114 and up 2.5% on the CLR Bakken news.

18. Hmmmm, Voodoo call? Is that something to do with dolls and pins? Is that how these Dumba*@es do their work?
    Wow, I feel even better now1

19. Sam I have BAC and whenever the sun rises the stock makes a new low…Figure its too big to fail, but I ain’t buying any more…

    These are the same people that say avoid energy because oil/gas prices will be “flat to down” for the rest of the year…Not gonna lie I believe Z more than those guys when he says that “our stocks” are barely discounting $100/$10 oil and gas…

20. Sorry Z – must be still sleeping 🙂

21. Sam, don’t see how that’s off subject: bank implosions will affect our energy stocks, even if only temporarily.

    The only rationale I can think of for a “buy financials” trade is that the gubmint will step in and actually do something to stabilise the sector, at great expense to taxpayers, but possibly averting a depression.

    Crameroo keeps saying they will have to solidify the guarantee behind FNM and FRE. This won’t help shareholders in those firms but may work wonders for those in a slightly stronger position. I have no idea if he is right but it sounds plausible. This would also help our energy stocks in the sense that they would be hurt by a depression, so avoiding one can’t be all bad, lol.

22. Sam,
    Thanks for the ETN’s on crude. Why should anybody in NY actually do research? I hate this charting crap, but that’s how they teach it now. I think it something to do with accountability. This way it’s the black box’s fault and they can all still just hang out at the hottest place for lunch.

    My personal favorite calls are the ones for things like BWLD. Anybody out there know that they slaughtered extra chickens because they don’t want to pay to feed them? What are your costs going to look like next football season when Bud goes up 20% and “Give it away, give it away now” O’bamma says you have pay full health care for all employees?
    I’ll shut up now. (Sir, put your hands up and step away from the coffee pot!)

23. Action in the E&P and Service groups remains pretty cautious right now. Rallies still being sold.

    Isle – no apologies needed, just making sure you saw the pt and comment. I would add that this is mark to market season and the analysts are pretty noticeably absent from the reiteration game as of yet prior to earnings. They are simply not willing to step in front of this tepid action in the group and in the broader market despite the strength of the fundamentals.

    Check out CHK. I’m way way down on my July’s and will hold through at least Monday which is not my normal MO for front month calls but is the position I find myself in there.

24. B – BAC has a current yield of 11%+. Old Ken came out and said the dividend is safe. Yea, right, that’s what Ken Thompson said last fall. WB cut the dividend and Ken aint there no more. The market is telling us something.

25. XTO with Bakken and Haynesville exposure and no respect today. Not nearly as expensive as it once was.

26. Conservation, Biofuels Pose Big Risk To OPEC

    By SPENCER SWARTZ
    Of DOW JONES NEWSWIRES

    LONDON–The Organization of Petroleum Exporting Countries on Thursday warned oil-consuming nations that rising energy conservation and increased use of biofuels pose a big threat to demand for its crude and could force it to spend less on new oil pumping capacity next decade.

    The 13-nation producer group, in its 2008 world oil outlook, said it could be left holding an excess of expensive production capacity if a patchwork of new U.S. and European fuel efficiency standards for new automobiles and buildings and growing investment in alternative fuel sources like ethanol choke oil demand in the coming years.

    OPEC is spending about $160 billion on new projects between now and 2012 that should ease supply concerns to an extent. But after 2012, OPEC says it’s unclear how much its members should invest because the U.S. and other important oil-consuming nations are using less crude today to beat high prices — clouding the prospects of future consumption. Crude in New York traded at around $137 a barrel Thursday.

    The new report underscores a growing concern within OPEC and some of the divergent opinions between OPEC and consuming countries about the current record oil prices that could end up hindering the delivery of future crude supplies and lower energy prices.

    Consumers in Europe, Japan, and the U.S. see conservation and alternative fuel sources, like ethanol, as allies in fighting high energy costs. But OPEC sees such tools as enemies of oil demand that could sour its appetite to invest in new projects in the years ahead.

    “If these (demand) uncertainties lead to a more cautious investment pattern, this might mean that the necessary signals are not in place to develop the appropriate (supply) capacity .. and hamper the drive towards long-term oil market stability,” OPEC said.

    Highlighting OPEC concerns, the International Energy Agency in a separate report Thursday said it expected global oil demand growth this year and in 2009 of just 1%, well below the long-term annual average of about 1.6%, due to declining economic growth and increased fuel efficiency.

    In its report, OPEC cut its world oil consumption forecast to 2030 by 4 million barrels a day versus its 2007 report and said OPEC’s percentage share of meeting the world’s daily oil demand in two decades may be the same level as today at around 40%.

    “There is a real prospect of (OPEC) wasting resources on (oil production) capacity that is not needed,” OPEC said.

    Agreeing on official oil data is also a bone of contention. OPEC thinks groups like the International Energy Agency, a watchdog for oil-consuming nations, are too optimistic about oil demand and may encourage too much supply in the future.

    Yet OPEC is accused by some analysts of taking too rosy a view at times. Unlike OPEC, the IEA and many other analysts think non-OPEC producers will be lucky to add big amounts of new capacity year after year.

    The world’s reliance on OPEC oil may rise from around 40% of daily demand today to possibly as high as 50% over the next two decades because of lagging non-OPEC supply, according to the IEA.

    OPEC concerns about demand for its oil, which include growing investments in non-conventional heavy oil in places like Canada, are understandable, analysts say.

    In the mid-1980s, OPEC invested billions of dollars in new spare production capacity only to see demand and oil prices fall sharply as efficiency gains took hold in consuming nations after the oil price spikes of the late 1970s. Big project investments became uneconomic and many OPEC nations’ economic growth deteriorated in this period.

    Bill Farren-Price, director of energy at Medley Global Advisors, said OPEC countries are also getting more consumed with their social development needs and are growing concerned thatIraq’s oil industry will one day get back on its feet — perhaps in five years — and deliver big crude volumes to the market.

    But OPEC is not very clear about what precise steps oil-consuming countries are supposed to take to ease its fears about where oil demand will be in 10 years time, other than to say that all parties need “pragmatic dialogue.”

    And despite its current concerns, OPEC isn’t totally gloomy about crude’s prospects, especially with most of the growth in oil consumption expected to come from fast-growing Asian and Middle East nations over the next two decades.

    Oil’s share of meeting global demand is expected to ease to 33% of the overall energy mix by 2030 from 37% currently, but crude remains the No. 1 fuel source globally, even in 2030, according to OPEC data.

    Similarly, biomass and other renewable energy sources, while growing quickly from a very low base, remain just a fraction of total energy use based on current trends. They’re expected to meet just 5.7% of the world’s total energy needs in 2030, up from 3.8% in 2006, OPEC said.

    OPEC reiterated that high oil prices are being driven by a weaker U.S. dollar, geopolitics and other factors unrelated to supply and demand.

    Refined Product Deficits Could Sharpen By 2015
    LONDON — The Organization of Petroleum Exporting countries Thursday said global refinery capacity could fall far short of demand by 2015 as rising costs force refiners to postpone or cancel new projects.

    In its annual World Oil Outlook, the group forecast 7.6 million barrels a day of new crude distillation capacity to be added to the global refining system by 2015, but warned that actual capacity growth could be much lower if expansion projects aren’t given the green light.

    “The refining sector has often recorded (project) delays to original time schedules,” and frequent cancellations of announced projects, OPEC said. “This has been even more so under the current conditions of higher construction costs and shortages of skilled labor and professionals.”

    If expansion projects go ahead, supply should exceed requirements between 2010 and 2013, helping to ease tight products markets and soften margins, OPEC said in what it describes as its “reference scenario” for the medium term. The reference scenario is its baseline expectation.

    But the group also outlined another “decisions deferred” scenario, which emphasized downside risk to refinery expansions, largely due to a 70% rise in construction costs since 2000.

    “This could lead either to delays or the termination of projects,” resulting in a 6.4 million barrel a day rise in global distillation capacity by 2015, nearly 16% lower than reference case.

    Oil product demand potentially outpaces supply in the second case, “indicating no capacity excess and an implied continuation of tighter margins,” OPEC said.

    An unclear policy framework was also casting a shadow over refining projects worldwide.

    “Many investors, especially in the U.S. and Europe, are deferring final decisions on major projects as they are being confronted with mixed, even confusing, signals from policymakers concerning the future demand levels for refinery products,” OPEC said.

    The growing supply of biofuels, initiatives to promote greater fuel efficiency and carbon trading could deter investment in the West.

    Meanwhile, in China and India, “uncertainties on the pricing policy for petroleum products and tax-breaks for new investments are also adding some risks to the economics of future investments,” OPEC said.

    In the long term, the non-crude oil supplies — including biofuels, natural gas liquids, coal-to-liquids and gas-to-liquids — would become more widely used and cause a slowdown in refinery expansions between 2015 and 2030, OPEC said.

    The oil producers group was more skeptical about pace and volume of refinery capacity growth than its consumer counterparts at the International Energy Agency, the energy watchdog for the Organization for Economic Cooperation and Development.

    In its medium-term oil market outlook earlier this month, the IEA predicted 8.8 million barrels a day of crude distillation capacity would come online by 2013.

    Agency Web site: http://www.opec.org

    —By Lananh Nguyen, Dow Jones Newswires

27. 9:49 am EST

    Nymex Crude Rises On Supply Tightness, Nigeria

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures traded higher Thursday, buoyed by projections of tight supplies in the year ahead and the threat of renewed violence in Nigeria.

    But prices were up only slightly after a dramatic turn lower early in the week, as weakening demand across the developed world trumped potential supply threats.

    Light, sweet crude for August delivery traded $1.50, or 1.1%, higher at $137.55 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $1.41 higher at $137.99.

    The International Energy Agency in its monthly report forecast strong demand growth in the developing world in 2009 that will more than make up for a slight decline in the U.S and Europe. Inventories should swell in the third quarter of 2008 as a production increase from Saudi Arabia hits the market, the IEA said.

    A persistent belief in short-term tightness should continue to send oil prices higher, however, said Nauman Barakat, senior vice president at Macquarie Futures USA in New York.

    “We are probably heading back towards the $150 number rather than the $130 number going into August,” he said.

    Among the market’s more immediate concerns, the main rebel group in the Niger Delta said in an e-mail that it would end its ceasefire Saturday and potentially launch attacks on British interests in Nigeria.

    Nigeria had recently seen an increase to production and a reduction in militant attacks, as the government and rebels planned a peace summit. A date has yet to be set for a meeting, however, and a resumption of violence now appears more likely.

    Iran test-fired missiles for the second day in a row, further raising tensions around the Strait of Hormuz, a key oil shipping lane.

    Neither event appeared to be having a major impact in the market, however.

    “We suspect that participants are showing reduced appetite for bidding up prices on “what-if” headlines,” wrote Edward Meir with MF Global.

    Front-month August reformulated gasoline blendstock, or RBOB, recently traded 2.53 cents, or 0.8%, higher at $3.4061. August heating oil traded 7.24 cents, or 1.9%, higher at $3.9240.

    —By Brian Baskin, Dow Jones Newswires

28. Z – Thanks for #3 just looked and ALJ upgraded to a buy. Are they kidding?

    http://www.briefing.com/Investor/Public/Calendars/UpgradesDowngrades.htm

29. Fred – no kidding. Would not be my first choice to up in that group.

    Pathetic action in all the groups after the slamming we’ve taken. Service can’t decide what to do from day to day and analyst upgrades are headed for 15 minutes to a day at most (see SLB today with upgrades earlier this week).

30. Sam, another point about your #14: it’s hard to see how the broad market can bottom while the bubbleheads are still exhorting their poorer-by-the-day audience to buy all that “value”. The bubbleheads are paid to spew happy-talk, so I don’t know what it would take for them to actually confront the reality of the finance sector.

31. At the risk of invoking voodoo, CHK has been eying the $56-$58 gap from June 5, but hasn’t yet filled it despite current conditions. Surely it will have to fill that, maybe even today. I’m definitely a buyer at $56 (!)

32. Morning all. Re # 14 and 16. I try and limit what I pay any attention to on CNBC. But I do listen to the Fast Money guys as they are actually trading this market every day and they cover a lot of ground in an hour. Far from saying buy the financials, they are saying ‘not yet’ – do not try and pick the bottom.
    That said the broader market is getting closer to a tradeable low and I stand by my call for a bounce in financials when the low is in sometime end of July/early August. It will I believe be a countertrend bounce but could last a few months.
    Interestingly I spoke to someone yesterday who was saying that charting and technical analysis is far more popular in Europe and Asia and the Americans have scoffed at it for years but it is now starting to become more popular even here now.
    Anyway charts are pointing to a low coming up so let’s see what happens.

33. SPX support is at 1220 – 1230.

34. XNG “support”, early May, 640 -655

35. CLR rocket fuel

36. Lot of head fake rallies in all the energy sectors with lower highs set throughout the day both yesterday and so far today. You won’t see me more than dipping a toe here and there from day to day until they decide to get serious and close the groups green AND near the high of the day. Groups taking their direction from crude which is also all wrong so that’s another thing to watch for.

37. Minor 5th wave down in broader market looks to be in its terminal stages… when it completes we should see a bounce in 3 waves to above yesterdays highs.

38. Tater – yep, must be getting a positive comment from an analyst not spooked by the oil market, what a rare bird he must be these days. Check out the V shape on the EOG chart that corresponds to the CLR move. Wow. Lots of news in the hopper on EOG and it has been savaged of late.

39. tater would be so kind as to chart xle, as this seems to be computer model that e&p cos trade off . support was 79.58 which held & we r moving up from that now. z of course i like the eog call. do u know if nfx wells will test the tfs in nd?

40. Tex – NFX specifically said they have TFS potential. They also said, over a month ago now, they had some discoveries in their first set of Bakken wells.

41. 90 Bcf injection, spot on with my number, 2 Bcf short of the Street. Should have no positive impact on gas prices.

42. Lots of green on my screen now 🙂

43. Dang it. I was trying to bottom-fish NFX but was too fussy on price.

    CHK gap theory: OK, maybe too many people are waiting for the gap to fill and the joke is on them…

44. This is why I love Aubrey, he just offers those secondaries so I can buy me some 2010 LEAPS on the cheap…Thanks man, if I ever find myself down to an OKC Sonics game the beer’s on me!!

45. Tex, what do you mean by “the EOG call” ?

46. Brian – yep but it needs to last the day. Corresponded to the move in oil.

    Brian – could not agree more except for my poor July’s. That investment vs value in the H.S. says it all. Spend $2 B, come up with $16 B. The man does it over and over and over.

47. D – he meant my Ztrade earlier there and in the post as I am playing it, finally on this CLR news, after having talking about it for the last few days.

48. Another energy stock induced rally coming up for the broader market then?

    Even under the bearish count I have the possibility that crude could trade up to between 138 and 140 in a 2C wave.

    Bullish count says we are close to a low in what has been a wave ii with a big move up to come. 131.95 is the line if the sand for this count and I do not favor it.

49. z buying the calls this morning, “the eog call”

50. Nicky – I don’t often comment on your levels but keep ’em coming. Much appreciated.

51. Tex, OK, just checking there wasn’t some analyst call that I’d missed.

52. Natural gas – looking for it to stage a bounce under either the bullish or bearish count.

53. Z I hear ya…Aubrey is pretty brutal on those short term calls sometime…He’s done it a few times…

54. Perfect example of what I don’ really like to see in the group action of the last five minutes (you know I’m not content with the action if you hear me talking about minute charts). The 1/4 off high, 1 minute fire sale in CHK and EOG. Low volume, lower confidence from market participants. If we see intraday higher lows set in the next 2 days then I will begin to get more aggressive with August and 2Q positioning.

55. I do plan to add one last ZTRADE for the month, a set of $60 July CHK calls either later today or tomorrow for a day or 2 day trade.

    Brian – depending on the size of the announcement the market is starting to view good news as deal time in OKC. I feel the need to be long longer term (holding the stock in multiple accounts) and present in the calls for the next big news item, but then to take those calls off the table as he has to pay for it. This last time I thought he had it covered already and I was wrong.

56. VLO and TSO back to Summer 2005 levels.
    SUN back to late 2004 levels.

    ouch.

    NG down 6 cents now on the in line injection. Look for a much smaller number next week, price sentiment should start taking direction from that on Monday.

57. zman:
    your 41,
    with injection on NG as said: what do you mean by ” no positive impact “

58. re #39 – xle and computer driven trading models – no surprise here – xle at the money options are used as a temperature gauge for the level of premium available in the sector for option sellers. There are at least 2 quant computer driven models that i know of that sort and then trade the options of the xle, component individual stocks and the rest of the E&P sector based on the levels of premiums being paid on xle options. Can lead to some small e&p companies options trading big volume and acting squirrely – particularly close to expiration and even more so when xle premiums get big. In a nutshell the sharks get attracted to spots they might not ordinarily find on their own.

59. Uop – I mean it is a non-event. Needed to be much smaller than the 92 Bcf expected by the Street to rally gas. Gas now waiting on final CDD numbers for this week that come out Monday and should show a record ytd meaning it was really hot this week. They’d also like to see that disturbance off Africa continue to develop and take that more southerly tack than Bertha did.

60. No sign of an impulsive move up yet in the broader market. So look for one more low. Support for the SPX at 1220 – 1230.

61. WILDZTRADE: (riskier than normal) Added CHK $60 July Calls CHKGL for average of $2.20.

62. China Oil Demand continues to Rise
    China’s Crude Oil Import Volume Up 11%
    Xinhua News Agency Thursday, July 10, 2008

    China, the world’s second-largest energy consumer, imported 11 percent more crude oil in the first half of 2008 than in the year-earlier period.

    Crude imports stood at 90.53 million tons, the General Administration of Customs said on Thursday. The growth rate was down 0.2 percentage points from last year.

    The imports were valued at 64.98 billion U.S. dollars, up 85.8 percent, as world prices surged. Import prices hit a record high of 849.10 U.S. dollars per ton in June.

    Angola, Saudi Arabia, and Iran were the top three oil suppliers.

    China also imported 21.01 million tons of refined oil products in the first half, up 16.4 percent year-on-year.

    Meanwhile, the country exported 2.37 million tons of crude and 7.88 million tons of refined products, up 30.6 percent and down 0.3 percent, respectively, from a year earlier.

    The administration suggested that the government act to ease the increasingly direct and large impact of oil prices on the economy. It said that further measures were needed to curb oil exports and reform the fuel pricing system gradually to ensure domestic supply.

63. Isn’t there an apparent cap to CHK in the very short term?

64. Crys – thanks, did not see that this morning.

    Why I label some stuff WildZ. I see it as more risky than my usual trade from an out of the money, or time frame perspective. Try telling 200+ people about each one of your trades and see if you don’t become highly cognizant of the fact that some of them never read the post and didn’t read all the stuff about “doing your own research and not just trading the blasts”.

    Ram – how so? Not sure what it would be as the deal is done.

65. Oh. Please explain the timing. I thought this was an ongoing process until all the new shares got consumed.

66. Ram – those shares are sold to the buyers and will be delivered in a few days. At this point analysts can talk up what their firms just placed and people who didn’t get as much as they wanted in the deal can fill out their positions. It’s pretty usual for the stock not to move much after the initial dip on the secondary announcement. Unless it sells off because people continue to dislike the deal or the use of proceeds etc. In this case, the bounce would be a bit unusual were it not for the absolute bludgeoning the group has received since last Wednesday at about 11 EST. People who are medium and long term oriented like the use of proceeds from a dilution vs reward standpoint and the debt agencies like the de-leveraging effect of the cash inflow, however “temporary” it is.

67. O.K. So the additional shares were not really available to Joe or Jane retail unless they have a connection – whatever that could be.

68. They are via their Joe or Jane’s broker who would get an allotment and then dole it out to individual accounts.

69. Z, can you share your thoughts on July HK $45 calls

70. Scoop – I think I will give them another day but they are on the bubble for sale as is anything with June in its name, even the CHK’s which I do plan to hold through Monday.

71. Z is in a timewarp because it’s july not june. He’s wishing he was still on vacation.

72. True enough V! Substitute July for June in 70.

    NG getting that bounce a little earlier than I thought. Nicky called it to the minute.

73. zman:

    look at the delayed response for UNG.

74. FYI: I will be out of pocket from Friday at the open for about 2 hours. Shooting higher res seismic over my future intern.

    Uop – Looks like about a 2 minute slower response to me. The delta between the 2 in terms of % change on the day is normal as it fluxes between +/- as much as a full % from day to day depending on the time of the month.

75. Bernanke sees headline inflation in coming months due to oil. So this is a reason to rally the broad market? Normally you’d think of fighting inflation by cutting rates although that won’t work with energy inflation. So is the idea here that since high inflation is now expected by Ben that it won’t be a surprise when it happens or that the market does in fact want a tightening phase which is almost never good for stocks?

76. Z: Heard that Aubrey bought shares in the secondary for his children. Can not find. Last secondary I thought it took 3 days before it was obvious that he bought with everyone else. Is there some SEC site that this can be checked out?

77. UNT coming back. R 2 at 78.44, running into its 5 day declining ma.

78. I think my idea is that energy inflation is a problem that cant be fixed by American fiscal policy.

    To me the US economy is going to be in recession until energy consumption becomes rationalized. If the US government was serious about reducing consumption they would do things like taxing low fuel efficiency vehicles and putting speed limiters on street legal cars so they can only go 10 mph faster than the speed limit.

    Thats just my 2 cents.

79. Tom – right here:

    http://www.sec.gov/edgar/searchedgar/companysearch.html

    Your looking for Form 4 filings and yes it will take a day or three to show up. I would not be surprised at all to see it but given his special working interest deal with the company I also wouldn’t give it too much weight in an investment decision. Other than he’s already hugely over weight in his stock from a diversification standpoint.

80. Z, any reason why NFX/MRO aren’t responding to CLR’s news?

81. Tater – Have you done any charts on CLR in this run up?

82. V – agreed, and how about not giving businesses tax credits for 6,000 + lb trucks? If they want to get us “off foreign oil” they need to work on efficiency and hit the driver in the pocketbook with an R&D tax per gallon. Unfortunately elected officials see drivers as voters and so that just won’t happen. Easier to attack the guys who get it out of the ground.

83. V – But there is absolutely no cause for concern!:

    “Hank and Ben are on the job!”

    it’s like the scene at the end of Animal House, where the crowd is in full fledged panic and Kevin Bacon stands there screaming for everyone to remain calm. Just remain calm!

84. Boss – Not sure MRO . NFX still not included by most players as a Bakken name. It’ll take well results to get them to wake up and smell the shale.

85. Two things about Sambone’s comment that relate to Bacon.
    1) Kevin gets crushed by the crowd as Ben will be out of a job either way in January
    and
    2) Ben is at least 6 degrees of separation from reality on the economy.

86. Question for the board. Did anyone see a delay from the ZTRADE on the site to receiving the ZBLAST via email today? Just trying to gage a delay if it existed today. If you did not get it at all don’t forget to check your bulk mail or spam filter. Thanks, we are about to switch email systems and I want to be sure that we are still having the problem before I fix it.

87. re #79 – CHK and Aubrey’s participation deal – have you or anyone else ever seen disclosure of Aubrey having participated in a particular well? If i was going to participate in a well i would certainly consider one of the upcoming Haynesville wells. Does he have to disclose this?

88. It is absolutely disclosed. He elects at the beginning of each year to participate in every well or none of them. He took one year off in the 90s I think and otherwise he has 2.5% working interest in all of them, he cannot pick and chose. Cash flow off that deal is unreal. I paper copy around here somewhere, will try to dig up.

    Eli if you are around would you be so kind as to post it.

89. wow – now i understand where all the cash he uses to buy shares comes from.

90. Z: Your email trades have come through perfectly and on time.
    No need for change on my part.

91. Scoop – has Cramer said it’s safe to go back into the energy waters yet. Got the video you sent last night of him on NG but it would not run.

    I’d be delighted with a close here on oil, gas and the groups. The CHK bounce is bigger than I would have guessed by a long shot. But so was the slide.

92. Crameroo has not gived the all clear sign yet, however this past week he has sold EP & XTO and bought COG DVN SWN & NOV.

93. Sorry Tater – I saw that you created a CLR chart and posted in #8 – this brew is for you!

94. CRK jumping second most in the Bakken group as CLR hits new HOD. I continue to think the move spreads and that names like BEXP could play more in the near future.

95. “Sucker born every minute”

    http://www.mygallons.com/index.html

96. How much volume can Crameroo actually drive. I would suspect that energy is > 85% institutional. I sure hope those ppl don’t follow him.

97. Popeye, good question and I think not that much in terms of volumes although a lot of retail brokers follow him. He did however pick a low volume week to pull the plug and the selling cascaded as more people got back in the office early this week.

98. Z- You still feeling good about NBR here?

99. Is the CLR move justified based on a new perspective for valuation?

100. Thanks for the chart vote Tex and anybody else. Didn’t even see that myself, but it’s kind of fun. Went for a walk and wow CLR, and also missed my entry for CHK. Don’t like leaving orders laying around in a market like this.

     Added NBR NFX SM UNT WLL for the Bakken / Sanish Special!

     http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

     Please remember that the notes are for me, and are not intended to be any kind of recommendation to anyone. Not even making an argument, just my opinion of some stupid lines.

     I will try to get to XLE, but that one is very complicated and has many different signals for many different time periods. I really feel that index trading is best left to computers while we just take note of what they do and apply it elsewhere. So I might beg off. We’ll see.

101. CHK – #87, 89 (Aubrey’s participation). You can read about it in the SEC fling CHK posted the other dau about its response to SEC comments on their F/S. SEC wants to add it to his disclosed compensation expense. CHK says it’s different because he also participates in expenses. Says that since the origination of the program Aubrey is in a negative cash position. (Presumably because CHK keeps expanding like crazy, so current expenses exceed prior distributions)

102. Crameroo sees CHK as the key to the group: he traced the decline in the group to the sell-the-news reversal in CHK when it hit $74 but closed below $70. He said in last few days that if the CHK deal price holds, it is all clear for the group.

     It sure looks like CHK will close above the deal price, so he should be sounding the all clear…. if he is consistent from one day to the next… (cue maniacal laughter) …

103. Afternoon Cattle. Re NBR yes from a fundamental standpoint and from a “I want to be long into 2Q CC”. Is now a good entry, search me. It’s been acting a little hinkier than the group in my book. I bought stock there last week in the IRA and I do own longer dated calls here now.

     My next add in service will likely be HAL and then more NBR and possibly UNT.

     CLR – I’d say too early to say, we have 2 data points in the TFS and this is a big move that I missed, except for owning the stock, and will not chase right now. I think it goes higher with time and proving up the second zone but may be getting towards near term fully valued status. Just a lot of unanswered questions still.

     Elwo – I gotta get my head around that negative cash position comment, will go read it.

104. clr up an amazing 11

     http://biz.yahoo.com/ap/080710/continental_resources_well.html?.v=1

     does chk have a similar announcement in the haynesville?

     When do they report drilling results?

105. Roger, thanks.

106. Z Good call this morning re WLL & EOG

107. Tom – I continue to think this filters into the shares of BEXP.

108. Crude up $1.70 with 30 minutes to go in NYMEX.

     NG up $0.17.

     The 1 to 10 change in price effect is in full effect today.

109. Nicky – got any crude thoughts as we approach close of Nymex? CL up $2.60 now on the Brazil strike, MEND willingness to strike, and the apparent desire to strike Iran.

110. Z, Do the buyers of the CHK secondary have the right to sell their shares today at market price

111. Not sure on the delivery vs sale date for the smaller ones. For the bigger ones, the fund managers, the syndicate would ask them not to as that’s pretty uncool to flip but there’s nothing to prevent them from doing it except fear that you don’t get your allocation next time, which in this market is a very empty threat. But it would still be a bit uncool.

112. Wow PQ.

     HK looks forgiven for selling gas too.

113. Z: No rules regarding secondaries only IPO’s. All flippers are long gone.

114. There has to be a bigger piece of news out there to cause a $4 pop in oil?

115. Heating oil up nearly 2000 points.

116. Tom – agreed, I was just saying that when we did PIPES and spot secondaries without a road show we tried to put it in the hands of people who are holders not flippers and that’s how the allocation was done.

     Nicky – makes that a $5 pop in oil. Maybe people are selling the financials to buy oil.

117. No thoughts either way on the charts right now re oil Z. Previous highs and lows are the key and we are right in the middle.
     Off a buck since the close. But what caused such a spike inside a few minutes?

118. Good nite nurse on the refiners…I remember this time last year when we saw the WNRs and HOCs of the world have 10% intraday moves, now they do but it’s almost always just down 10%…Unreal how these guys are all getting woodsheded…Only thing red on my screen is those guys and ANF…

119. Hey Z.. Re: CLR.. near term incl aug 15 expiry… holding clrho with an easy double.. thinking of ringing.. but earnings coming jul 29 perplexed.

120. What a load of BS out of CNBC as to the reason: citing yesterdays close of being up by one penny as the reason for the technical buying. Give me a break!

121. N – Something is up, but can’t find it. I’ve Crude up 4.88 right now.

122. Headlines

     DJ OIL FUTURES:Crude Up On Tight Stocks,Nigeria Violence Threat

123. Z – I saw it as pretty close to a 5 dollar spike. Very funny re the financials. I have said my bit on the financials and will shut up now! Can’t take the abuse! But we will see come August.Lol.

124. Uncle Phil/Mr. Right

     http://www.321energy.com/reports/flynn/current.html

125. Gary – nice one. How do you not ring the register on half and play with half. That’s not advice but how I generally do things. The caveat is that they will explain a lot more about there thoughts about the TFS on that call and may boost 2008 guidance although they may wait for 3Q to do that. I think it trades on TA from here and the 1% of me that can read a chart says it goes to a higher high near term as it is one of the very few, maybe the only E&P at a record high today.

126. Better call it for what it is then as there seems to be a lack of anything fundamental behind the spike – speculation. All the above news was out hours ago and is also speculation.

127. All the news stories are pointing to things that were out early in the day. Broad market not happy with $141 oil.

128. Is CNBC trotting out the oil bulls now? They flip flop more than presidential candidates.

129. Z sounds like you’re watching CNBC, does that mean you owe each of us a buck?

130. Brian – no such luck for you! I really was asking.

131. Nicky – you see anything re HO, it got any even bigger % pop than crude? Could be a products induced spike but I didn’t see anything on the distillate side yesterday that would suddenly cause a spike late today. Maybe goldman said home heating prices are going to be unreal this winter. Could not argue with that.

132. re: #101 – (aubrey’s participation) i will have to read that too. i can’t believe that he is cash flow negative on that deal.

     re: #116 – flipping shares from a secondary on the first day is not well received by the book runners.

133. 184 point swing so far today on the Dow

134. Thanks Z.. appreciate.. I’m on a laptop in Louisville KY.. sorry for the delayed thanks..

     when in doubt.. sell half has worked many times..

135. Gary – no thanks needed. Nice trade on your part as I’m sidelined with only stock in CLR I took in May 2007.

     Very much liking the action in the group today. Like flipping a switch from sell the rallies to buy the dips. Seems that it was flipped before oil really rallied.

     Nicky nice call on a “coming soon” bounce in NG, up $0.39.

136. Just received “an open letter to all airline customers” from United Airlines.

     Dear ,

     Last week, crude oil hit an all-time high of $146, and the skyrocketing cost of fuel is impacting our customers, our employees, the communities we serve, and the economy as a whole. United, and the majority of other major U.S. airlines, are asking our most loyal customers to join us in pushing for legislation to add more transparency and disclosure in the oil markets. Please see the attached open letter from the leaders of the U.S. airline industry.

     An Open letter to All Airline Customers:

     Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.

     For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers. Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

     Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

     Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

     The nation needs to pull together to reform the oil markets and solve this growing problem.

     We need your help. Get more information and contact Congress by visiting http://www.StopOilSpeculationNow.com.

137. Z – short squeeze in PQ? All I can see is the UBS upgrade..

138. Hi Z – distillates chart looks very like the crude oil chart. Its finally poised imo. Sorry to stand on the fence but if I am not sure I would rather say so. What it ‘feels’ like is a wave 2 and its showing wave 2 characteristics which always stretch one’s beliefs in a change of trend! It sucks everyone back into the previous trade and then it likely tanks. As a wave 2 it can run all the way back up to the highs and if it is a wave 2 then it is quite likely to test the upper ends ie go further than we all think. I will work some fibs out for the complex and come back to you.
     If it isn’t a wave 2 then obviously a far more bullish count presents itself and we should explode higher(so far so good I hear everyone say) in a iii of iii which eventually looks like it will conclude between 155 and 170.

139. By Brian Baskin
     Of DOW JONES NEWSWIRES

     NEW YORK (Dow Jones)–Crude oil futures jumped Thursday, as traders rushed
     into a market seen supported by the threat of increased violence in Nigeria and
     a forecast for tight world supplies.
     Light, sweet crude for August delivery settled $5.60, or 4%, higher at $141.65
     a barrel on the New York Mercantile Exchange. The increase was the
     second-largest in dollar terms in Nymex history, and marked the highest
     settlement since July 3. August Brent crude on the ICE futures exchange closed
     up $5.45 at $142.03 a barrel.
     After futures saw heavy losses earlier in the week, missile tests in Iran and
     the threat of renewed violence from the leading Nigerian rebel group at first
     sparked a modest recovery Thursday. Much of the gains came in a dramatic move
     higher just before the close of U.S. trading, likely brought on when a handful
     of large traders took advantage of the day’s low volume and the emerging
     consensus that the market’s declines were over, several traders and analysts
     said.
     “The market sat on support for two days,” said Dean Hazelcorn, a trader with
     Coquest Inc. in Dallas. “When volume dried up, (futures) popped.”
     The leading Nigerian rebel group said Thursday it would end a cease-fire and
     target U.K. interests in the country, after U.K. Prime Minister Gordon Brown
     pledged support to the Nigerian government in its struggle against Niger Delta
     militants. Attacks have cut Nigerian oil production by anywhere from 600,000 to
     1 million barrels a day in the last month.
     Heating oil futures saw even bigger gains than crude, as instability in
     Nigeria most directly affects refiners looking to increase production of diesel
     and heating oil, which are more profitable than gasoline. Nigerian crude is of
     a high quality that is well-suited for producing distillates. August heating
     oil settled 18.58 cents, or 4.8%, higher at $4.0374 a gallon.
     “People are looking for middle distillate grades and if there are problems in
     Nigeria there are not so many alternatives,” said Ehsan Ul-Haq, head of
     research at the consultancy JBC Energy in Vienna.
     Futures also received support after the International Energy Agency projected
     in its monthly oil market report that crude supplies would remain tight through
     2009. Strong demand from the developing world and limited growth in production
     capacity outside of the Organization of Petroleum Exporting Countries would
     keep inventories relatively low, the IEA said.
     The report confirmed for many that the losses seen in the oil market on Monday
     and Tuesday were an anomaly.
     “What happened earlier this week was liquidation pure and simple,” said
     Addison Armstrong, an analyst with Tradition Energy in Stamford, Conn. “The
     underlying fundamentals, tight supply and demand and very insecure global
     political (situation) are still in place.”
     Front-month August reformulated gasoline blendstock, or RBOB, settled 13.01
     cents, or 3.9%, higher at $3.5109 a gallon.

     -By Brian Baskin, Dow Jones Newswires

     Dow Jones Newswires
     07-10-08 1521ET

140. Thanks EL-V

     PQ had news out everyone ignored yesterday.

     There goes BEXP, was on a phone call, ug.

     Thanksk Nicky. You mean the price chart of HO looks like CL and not the inventory charts?

141. Yes I mean the price chart of oil and HO.

142. Hey Nicky,

     even if I was trying to short the financials right here I’d still want your thoughts on them. You are right too often to be disregarded. So please don’t be influenced by “abuse”.

     (BTW, what abuse? But I digress…)

     As I said in #21, I *can* think of a scenario where the financials rally & that would be good for our pet stocks.

     Update: Crameroo seems to be reading the gubmint tealeaves to suggest they will stand behind FNM & FRE. No idea if his reading is correct, just passing it on.

143. We got the lower low in the broader market. Now need to see a move above 1257.65 spx.

144. Dman – I was teasing really about the ‘stick’ I was getting for suggesting a turn in the market. So I was just trying to be lighthearted about it. It is my sarcastic english sense of humor! I will keep commenting on the broader market and how I see it developing.

145. AP blaming Iran tensions for oil jump. But the USO chart sure looks like some event happened at 2.30 and I don’t think AP has the answer on that.

146. D – Gulp, is Cramer actually talking about buying FRE and FNM here or that that Ben and Hank will take over?

     Update: Crameroo seems to be reading the gubmint tealeaves to suggest they will stand behind FNM & FRE. No idea if his reading is correct, just passing it on.

147. Sam,

     No, Cramer is *not* advocating buying FNM or FRE because he thinks that if the gubmint does essentially take over their liabilities the common will be trashed. He thinks the common goes to zero.

148. By Jason Womack
     Of DOW JONES NEWSWIRES

     NEW YORK (Dow Jones)–Natural gas futures rose Thursday, tracking crude and
     getting a bit of a lift after U.S. government data showed a slightly
     smaller-than-expected build of gas inventories last week.
     Natural gas for August delivery on the New York Mercantile Exchange ended up
     20.9 cents, or 1.74%, at $12.215 a million British thermal units. The August
     contract rose as high as $12.359/MMBtu in combined floor and electronic
     trading.
     Data released by the U.S. Energy Information Administration showed a 90-
     billion-cubic-feet injection of gas into storage last week. Analysts and
     traders had expected, on average, a build of 94 billion cubic feet, according
     to a Dow Jones Newswires survey. The estimated build falls short of the 103 bcf
     five-year average injection and last year’s 98 bcf build.
     “This may be a timing issue,” said Tim Evans, energy analyst with Citi Futures
     Perspective, noting the Independence Day holiday. “It may be timing and not any
     unexpected jump in demand or unexpected drop in supply.”
     The lower-than-expected injection still came in within the range of market
     forecasts, and did little to move futures prices. The gas market reverted back
     to tracking the petroleum complex shortly after the inventory data was
     released, and in the absence of significant weather news.
     Crude hovered slightly higher through most of the trading day after a dramatic
     turn lower earlier in the week. Prices were supported early on by projections
     of tight supplies in the year ahead and the threat of renewed violence in
     Nigeria.
     Shortly before the close of floor trading, however, crude oil futures rose
     sharply. Nymex light, sweet crude for August delivery settled $5.60, or 4%,
     higher at $141.65 a barrel. The increase was the second-largest in dollar terms
     in Nymex history, and marked the highest settlement since July 3. August Brent
     crude on the ICE futures exchange closed up $5.45 at $142.03 a barrel.
     Meanwhile, forecasts for moderate temperatures in key demand regions across
     the U.S. did little to move natural gas prices.
     The National Weather Service is forecasting normal to cooler-than-normal
     temperatures along the entire Atlantic Seaboard and in California from July 15
     through July 23.
     While temperatures are seen above normal through the weekend in the Northeast
     and Mid-Atlantic, a strong cold front is expected to move through the Midwest
     and East by early next week and drop temperatures back down to normal and below
     normal, Lehman Brothers meteorologist Daniel Guertin wrote in a note to
     clients. He also forecast a cooling pattern developing over the weekend in
     California.

     -By Jason Womack, Dow Jones Newswires;

149. D – #147, Whew, that’s better.

150. ZTRADE: Entering HAL August $50 Calls (HALHJ) for $1.73 average cost.

151. Z – #140 on PQ : I gather you mean that they ignored the 5 new wells and just focussed on the Gulf production guidance .

152. I think they just forgot it had the news out which was good, the short term stuff was timing related for PQ. Those wells include some monster rates for Woodford wells, not as big as some NFX as punched but bigger than your average Barnett well by far. They are starting to ramp here and production is rising as per plan. Also, the higher % of productin from the mid continent region implies falling LOE / Mcfe which is the big component of cash costs which I watch pretty closely. No good to have production go up and have your costs eat you alive.

153. Tini time

154. ineedabeerthirty!

155. Techies-

     Talk to me about the close…

156. Rice warning Iran could be oil driver.

     http://www.foxnews.com/story/0,2933,379324,00.html

157. someone like chk

     http://www.investorvillage.com/smbd.asp?mb=4146&mn=35275&pt=msg&mid=5159438

158. how will wall street react to a q 2 loss at chk

     re hedges

159. Afternoon Bill. CHK hedge loss should be a complete non-event. The hedges are well known and in the Street’s models and the company disclosed the mark to market dollar figure for all to see exact impact on earnings yesterday. No impact to CFPS which given prices and production are likely to be higher than modeled should yield another beat.

160. BOOYAH, CRAMEROO BACK IN LOVE WITH CHK & THE ENTIRE NAT GAS SECTOR. SAYS CHK’s CEO SHOULD BE ON HIS HALL OF FAME WALL.

161. I was just going to post that. he spent a good 15 mnutes on it..brought up clr

     He likes how the secondary went. Money will be spent for drilling. mentioned insider purchases, very glowing report.

     I kind off expected crameroo to do a flip flop on this

     also mentioned dvn

     MAJOR PUMP JOB

162. RE DEVON WRITE UP

     WHO IS THIS

     http://zmansenergybrain.com/2008/05/07/devon-crushes-1q08-results-pre-call-note/

163. IE THE POKER SPAM POSTS RE 162

164. From Yahoo message board; a trust for the benefit of Mr. Mclendon’s children will purchase 1.000.000 shares of CHK stock at the offering price. If true, this makes one impressive statement as to A.M. confidence for the direction of the stock price.

165. thanks Scoop.

166. Getting word that leasing for the HS has been extended north to the Ark/LA state line. If so, this would, to me, be confirmation of the word leaking out of the Hall #5, originally drilled by Matador, now reputably a CHK well, said to have cut 300 feet of HS in coring. If memory serves, this would be about 80′ more than those in the Caspiana/Elm Grove “sweet spot”.

     Supposedly one of my bounding leaseholders is to receive a bonus tomorrow evening of 16.25K/ac (1.3 mil for 80 acres). If that happens we just saw the play going well to the north side of the Caddo Pine Island Field. If that passes I’ll let you know, but you’ll probably hear the hoots from where ever you are.

     Where the heck these guys are going to get enough rigs to drill what they have already leased and must hold is beyond me.

     SEE ALSO:
     http://www.shreveporttimes.com/apps/pbcs.dll/article?AID=/20080710/NEWS01/807100329&referrer=FRONTPAGECAROUSEL

     Do the math on this… WOW

     “In Caddo, Theophilus Oil, Gas and Land paid $30,212 an acre and promised the commission a 30 percent royalty payment. Leases in DeSoto and Caddo are for three years.

     Another caveat that could add even more millions to the parishes’ coffers is the rental agreement that Theophilus’ company pledged in addition to the cash bonus. It’s a requirement of the state as an incentive for the oil and gas company to get started quickly on drilling and production.

     But if the company instead sits on the property, >>>>>it must fork over $14 million a year to the DeSoto Police Jury and more than $8 million to the Caddo Commission as a rental payment during the term of the lease.<<<<< (The Theophilus bid in DeSoto was for 1,045 acres that includes and surrounds the C.E. “Rusty” Williams Memorial Airport located between Mansfield and Grand Cane.)

     JR

167. Thanks Jr, that is good stuff. Makes me wonder if someone like SWN is sniffing around down by the Ar state line, its so close they can smell it. The lease records are not online and nothing has been permitted yet in the southern Ar counties but I’m keeping my eyes peeled. I’m also looking at other operators in the general vicinity who may have HBP acreage on the north side of the border. I thought I saw a cartoon map the other day showing the HS potential extending north of the La/Ar border.

     On the rigs, CHK has NOV building rigs for them as they expand their built to purpose in house fleet. Don’t know what the other players are going to do once things really take off to get rigs, I’d guess they get into a bidding war and names like NBR, UNT, UDRL all get to start naming significantly higher prices in late 2008. Some E&Ps downplayed the pricing pressures for rigs on the 1Q call, others like XCO said they are seeing dayrates pop in all regions. Bet we hear more of the later starting in two weeks.

     Thanks for the update, keep us posted.

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