Monday Morning And All Is Forgiven

Welcome to the land of government intervention and bailouts.  Free markets are becoming an endangered species but capital markets are applauding the decision to open the discount window to FRE and FNM. And there's more, Treasury Secretary Paulson will seek congressional approval for the Treasury to buy shares in each. The idea is of course to stabilize the 5.2 trillion dollars in mortgage securities the two own. And to insure that foreign holders, who have over $1 trillion invested here don't make a run on the agencies, so to speak. In my book, when you play with matches (subprime loans in this case) two things happen. You eventually get burned AND you learn that you can get burned. Unless you uncle stands at the ready with a set of new fingers for you each time you get careless. Paulson says congress will have increased oversight of the standards these two will set in the future as a tradeoff for this deal but over time we know this won't work and once the economy improves, the kids will just burn themselves again.  

If you missed the weekend wrap click here

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stocks We Care About Today
  4. Earnings Watch - Earnings Week 0.1
  5. Odds & Ends

Holdings Watch: The Wiki Holdings and ZEB Performance Tabs are updated. One thing is certain, I am more long front month than I generally like to be this close to expiration. I will work to rectify that between today and Wednesday's EIA report.


Commodity Watch:

  • Crude Oil - August crude, despite a wide trading range, ended essentially unchanged last week at $145.08. This morning crude is trading slightly lower on dollar related strength.
  • Saudi Production Growth Pinch? BusinessWeek says Saudi will have sustainable production of only 10.4 mm bopd, a far cry from the 12.5 mm bopd the Kingdom claims it will be capable of sustainably producing by 2010. Current production is 9.7, a multi decade high. The BW claim comes from a field by field study release to the magazine by an un named oil executive who has access to SaudiAramco officials.
  • Brazil Watch: 5 day strike by Brazilian oil workers halted production from 13 offshore (PBR) platforms shutting in some 400,000 bopd of Campos Basin production early Monday morning. This is a little over 1/4 of Campos production (all run by PBR) and 33 of 42 platforms are expected to eventually go down this week. Strikes are nothing new here and they generally don't last long and I would expect Petrobras to come to the table with slightly improved terms to get everyone back to work quickly (especially now given the current oil price environment).  
  • Government Ensures Freddie/Fannie Debt, Boosting Dollar. The White House and the Fed moved jointly Sunday night to ensure the two have access to capital and stocks and the dollar are set to rally this morning. As this article suggests, the bump for the dollar could be a temporary lift. 
  • Natural Gas - August natural gas, and the rest of the strip, got slammed last week falling nearly 10% to close the week at $11.90. Blame a not so near miss by the first Hurricane of the season with nothing behind for a bout of profit taking that did some damage to the chart. This morning natural gas is also trading off a few cents in sympathy with crude.
  • Weather Watch: Last week was the hottest week of the summer so far. Cooling Degree Days came in at 80, in line with year ago levels when we saw an injection of 76 Bcf into storage. This week's early CDD read calls for more heat with a forecast of 83. 


  • Tropics Watch: From Accuweather ~ a strong tropical wave about 1,400 miles east of the southern Windward Islands is being monitored for possible tropical development. Click here for the latest on this one.

Stocks We Care About Today:

(RRC) Updates Marcellus Play. I like Range but I don't follow it closely. The Marcellus, due to limited infrastructure and difficult terrain has said by several to be a slower to develop shale than some of its peers like the Barnett or Haynesville. The following has positive implications for ATN- (CHK), and (XCO). From Range's press release:

  • Current Acreage: Range now largest in the play with 1.4 mm acres; 850,000 are what they term as high graded
  • Recent initial production averages 4.1 MMcfepd, not shabby at all, especially this early in the play's development
  • Now thinking well EUR's of 3 to 4 Bcfe with drilled and completed costs of $3 to $4 million apiece. That's a low finding cost range.
  • Now sees 15 to 22 Tcfe of unrisked reserve potential here,

Others We Track With Significant Marcellus Acreage/Potential:

  • (ATN) - 516,000 acres (242,000 of those considered core), best wells have been > 2 MMcfepd, average IPs just over 1 MMcfepd, almost all verticals to date.
  • (CHK) - Plans to move slowly in developing their 1.2 million acres, currently evaluating on 2 Bcfe EUR per well (estimated unrisked reserves here at 12.9 Tcfe as of 1Q CC). Planned to added another 200,000 acres here over time. If the RRC news translates to CHK leasehold this could bump up Aubrey's NAV run through from the current $150 per share towards $160. 
  • (XCO) - 393,000 net acres (260 in the core), in process of drilling 4 horizontal wells here now, probably no results on HZ on the 2Q call.


Earnings Watch: I'll listen to the solar calls on Thursday but won't own the names into the calls. I will be adding to my August (SLB) position prior to their Friday call. I plan to revise the tall table of earnings on the Calendar tab later this week. 



Odds & Ends

Analyst Watch: BofA takes (NOV) to Buy, Lehman trims (XOM) price target by 3 to $99 (probably just a call on the domestic refining side), otherwise pretty quiet on the analyst front. 





121 Responses to “Monday Morning And All Is Forgiven”

  1. 1
    Sambone Says:

    7:33 am EST

    Crude Weaker On Profit Taking; Dollar Eyed

    By Angela Henshall

    LONDON — Crude oil futures traded lower in London Monday as the U.S. dollar gained, but retained support from ongoing concerns over financial market stability and security of supply from Nigeria.

    Robert Laughlin, analyst at MF Global, expects financial markets to be a crucial driver for oil prices in the coming week and that the U.S. government “saw the error of its ways’ by moving to bail out mortgage lenders Fanny Mae and Freddie Mac.

    “(But) whilst dollar values have recovered overnight it may well be short-lived and any continued weakness in financial markets will lead to additional fresh funds entering as buyers in oil and commodity sectors.”

    At 1114 GMT, the front-month August Brent contract on London’s ICE futures exchange was down $1.18 at $143.31 a barrel after falling to $142.25 a barrel in earlier trading.

    The front-month August contract on the New York Mercantile Exchange was trading $1.32 lower at $143.76 a barrel after falling to $142.49 a barrel.

    The ICE’s gasoil contract for August delivery was down $22.00 at $130.325 a metric ton, while Nymex gasoline for August delivery was down 332 points at 353.00 cents a gallon.

    The stress in financial markets will be a dominant market-making influence on the energy complex, said Olivier Jakob analyst at Petromatrix. The analyst said that at the begining of last week speculators moved en masse to liquidate length, leaving only moderate liquidity for crude oil futures, which magnifies the influence of outside drivers such as the dollar. “Relative values are still under pressure both on inter and intra-product basis and the overall fundamentals remain unchanged,” Jakob said.

    Political tension in major producing countries remains high on oil traders’ radar. Any headlines detailing further cuts to supply of the light, sweet crude produced by Nigeria are seen instantaneously driving prices even higher.

    The leading rebel group, The Movement for the Emancipation of the Niger Delta, called off its ceasefire Saturday, promising further attacks on oil infrastructure. The country’s output has already been trimmed after a series of pipeline attacks which in recent weeks led to approximately 900,000 barrels a day of production being suspended, so any further attacks will pose a major problem for the Organization of Petroleum Exporting Countries.

    “What concerns me here is the inability for anyone in government to conduct dialogue with the militant groups, as always this is about money and where the revenue from oil gleaned from the Niger Delta is redistributed,” said a market participant.

    Meanwhile, the war of words between Iran and the U.S continues, following missile tests by Iran and renewed talk of a military strike by Israel. “A potential conflict in the area could obstruct shipments through the Straight of Hormuz, the most vital shipping channel for crude imports from the Middle East,” warned Nimit Khamar analyst at Sucden.

    —By Angela Henshall, Dow Jones Newswires

  2. 2
    tater Says:

    HK in a trading range that is likely to break very soon

    CLR might give a pullback signal that could give us a 2nd chance at the rocket ship

    HK CLR charts


  3. 3
    Brian08 Says:

    Friggin’ ridiculous analysis tater, so many lines!! Thanks for the lesson…

  4. 4
    zman Says:

    Thanks T – lost barrels from Brazil offsetting dollar strength at the open.

    Looking for a strong mkt related day in service names. May add to the SLB position post initial pop as I would suspect more managers want to own this one for Friday.

  5. 5
    tomdavis12 Says:

    Z: I read and forwarded the UBS comments re PQ dated 7/10. I was very surprised that he had a NAV of $30/sh with ZERO value given to their HS holdings. The analyst Andrew Coleman talked about 8 vertical wells to 10,000 ft. being permitted. Is it difficult to drill deeper or horizontal if PQ wants to do so? Is their holdings in the Panola county attractive? What is the time frame when we might know more about how significant this will be for PQ. It always smells like opportunity when Wall St gives NO value to something.

  6. 6
    zman Says:

    Tom – Thanks. Have not looked it over yet. PQ not talking about HS, they’re not hard to drill deeper but you do have the added cost of the lateral and your rig has to be able to do the duty. Do not know how much of their acreage is prospective for HS but the play appears to be fairly ubiquitous so it has some potential at worst. Agreed your last and would say 2Q may give us more datapoints.

  7. 7
    reefguy Says:

    Panola county, if they have the HY rights is worth 10,000 to 20,000/acre

  8. 8
    zman Says:

    Speaking of that, PQ off to the races.

  9. 9
    VAL Says:

    Hello folks. Is anyone buying refiners at these levels?

  10. 10
    reefguy Says:

    and BRY and GMXR into higher orbits

  11. 11
    tater Says:

    Brian, sorry about the jumble. I just don’t want anybody to think I’m making this stuff up. Summary is that for CLR, I’m trying to see if it might pullback before it goes much higher.
    As for HK, I don’t believe anybody can say which way it is going to trade in the future until it crosses the red or purple lines. Then we can make a better guess.

  12. 12
    Brian08 Says:

    Tater, it’s all good…The more lines the better for somebody like me who only knows 0.000000001% of what TA is…

  13. 13
    zman Says:

    VAL – no, I’ll have more comments there in tomorrow’s post but in short I’m waiting for fundamentals to at least stop worsening.

    Service happy with market, E&P reversed with lower crude.

  14. 14
    VAL Says:


  15. 15
    Nicky Says:

    Morning all. Looking for the broader market to bounce back to the 1277 – 92 spx area before another leg down.

  16. 16
    zman Says:

    ZTRADE: Added CHK $67.50 August Calls (CHKHU) for $3.10 with the stock down about 0.60 at just under $63.

  17. 17
    Sambone Says:

    Weather front – Bertha – DOA. Watching 94L, probably will be TD3 by tommorow. Current models have it basically going anywhere (GOMEX, etc.) and at any strength.

    45W, 12 N

  18. 18
    tater Says:

    So OptionsXpress decides to add some pretty little bells and whistles over the weekend. Now the site doesn’t work and the phone is busy. Great.

  19. 19
    BossmanG Says:

    Sambone, when you mention that “current models”, do you model this yourself or through some research site? don’t have a clue about reading weather charts, maybe you have some good starter sources?

  20. 20
    Sambone Says:

    Z – I’m getting that feeling again bout this market.

  21. 21
    Dman Says:

    Sam …er.. what feeling was that?

  22. 22
    zman Says:

    Bossman – take a look at the weather tab on the left hand side bar. Lots of useful links there.

    Its that sinking feeling Dman. Market loves instant gratification, it loves to sell into it.

  23. 23
    kiaora Says:

    Tater–see that. Also couldn’t make a trade

  24. 24
    Dman Says:

    Service looking good. It might have occurred to managers that waiting till after SLB reports could be too late to buy their favourite service names. So they are doing it now.

  25. 25
    Sambone Says:

    Boss, I do some, but here is a good site for you during “Cane” season.

  26. 26
    kiaora Says:

    Options Xpress working now

  27. 27
    Sambone Says:

    D – yep, see #22. Look at the action on SKF today.

  28. 28
    Dman Says:

    Bounce in the dollar fading fast. Not surprising considering dollars are being dispensed by helicopters over NYC.

  29. 29
    Sambone Says:

    9:39 am EST

    Nymex Crude Torn Between Dollar And Supply Worry

    By Gregory Meyer

    NEW YORK — Crude oil futures shed early losses to trade evenly Monday, tugged between the forces of a stronger dollar and uncertainty about supply.

    Light, sweet crude for August delivery was recently off 3 cents, or 0.02%, at $145.05 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange was 7 cents lower at $144.42 a barrel. Nymex crude touched a record intraday high of $147.27 on Friday.

    Oil came under pressure overnight, falling as low as $142.49 a barrel, as the dollar rebounded on the U.S. government’s moves to backstop troubled mortgage companies Fannie Mae (FNM) and Freddie Mac (FRE). The dollar’s decline in the last year has coincided with crude’s record-breaking run this year as investors seek a haven in hard commodity assets. The euro was recently at $1.5858, compared with $1.5931 late Friday.

    Supply concerns supplied support for oil prices, however. Foremost was a strike declared Monday by the union representing oil workers at Brazil’s Petroleo Brasileiro (PBR). The union said production at several platforms had been halted as part of a five-day strike, interrupting about 400,000 barrels of oil a day in output.

    Questions about potential Israeli military action against Iran over the major oil producer’s nuclear program also underpinned the market. Iranian President Mahmoud Ahmadinejad warned Sunday that his country will “cut off the hands” of any enemy that attacks the country over the controversial nuclear program, according to the state-run IRNA news agency. Iran produces about 4 million barrels of oil a day, nearly 5% of world supply.

    “Between the Brazil issue and the Iran-Israel saber-rattling right now, prices are going to stay up at these levels for the time being,” said Matt Zeman, chief of market strategy at brokerage LaSalle Futures Group in Chicago.

    With world oil inventories below their five-year average, the oil market is vulnerable to price spikes brought on by supply developments. Venezuelan President Hugo Chavez threatened Sunday to stop oil shipments to the U.S. if Exxon Mobil Corp. (XOM) succeeds again in freezing the overseas financial accounts of state oil company Petroleos de Venezuela SA in a dispute over a nationalized oil venture.

    “If they freeze us, there’s no more oil for the United States, and the price of crude will go to $300 a barrel,” Chavez said at the V PetroCaribe summit.

    In April, the U.S. imported about 1 million barrels a day of crude from Venezuela, according to the Energy Information Administration.

    But Chavez also suggested oil prices will eventually cool. “We’re waiting for the (oil price) speculation bubble to explode,” he said.

    Front-month August reformulated gasoline blendstock, or RBOB, rose 21 points, or 0.1% to $3.5653 a gallon. August heating oil rose 1.24 cents, or 0.3%, to $4.0890 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  30. 30
    zman Says:

    May lose power as we are doing a little rewiring in the building, should not be long if I go down.

  31. 31
    scoop006 Says:

    Z, Where is the back up generator?

  32. 32
    zman Says:

    Scoop – I run an APC for the PC’s but not on the modem and router. Gotta fix that.

    Nice re rally in E&P

    Service continuing to extend gains, still waiting on a dip to add to SLB.

    Starting to take a hard look at remaining July positions into this strength.

  33. 33
    Nicky Says:

    President Bush opens up offshore drilling and will talk on this issue at 1pm today. Oil up over a dollar since this was announced!

  34. 34
    Dman Says:

    According to Patrick Shultz at TSCM, economists at major banks believe the Eurozone contracted in Q2. Evidence includes a YoY decline in industrial production of 0.6% for the most recent monthly data point.

    Along with that comes a lot of talk about the Euro topping out:

    These are not unrelated: the current high Euro has been a disaster for the powerhouse industrial exporters in Germany, France (Airbus) etc.

  35. 35
    Dman Says:

    Oil has been mostly driven by supply issues recently, with robust demand slinking about in the background. With US domestic demand in trouble and the Eurozone possibly contracting, when does demand get weak enough to slam oil back to $90? Not immediately, I would suggest, unless China wakes up in a recession sometime soon.

    Crucial questoin: does the oil market anticipate economic turns (as per the stock market) or does it just follow them?

  36. 36
    Nicky Says:

    Dman – that makes sense to me with the charts. Euro appears to be in its final leg up. It should top out between 160 and 162. This should coincide with a top in oil and probably a low in equities.

  37. 37
    zman Says:

    D – it anticipates them. OECD inventories are low at present, suggesting Europe has been destocking oil due to lack of demand. One thing about GDP reads and oil demand is that you pretty rarely see an actual contraction in consumption but more often a deceleration in growth…so I don’t think $90 is in the cards soon.

  38. 38
    zman Says:

    Market losing that lovin’ feelin’ as per Sam’s earlier comment.

  39. 39
    zman Says:

    EOG trade starting to work, getting some Bakken based respect now and breaching $120. Thinking they will have a lot to say on the conf call, re Bakken, potentially H.S., and also Barnett oil play. Could be a mention in their for some Tx panhandle development work with HK too.

  40. 40
    zman Says:

    Oil came back from up a buck to flat post the White House announcement on the OCS but probably more due to PBR announcing it has sent emergency workers tokeep production flowing at about 2/3 of the affected platforms.

  41. 41
    kiaora Says:

    Z- do you know when GMXR reports?

  42. 42
    Fred Says:

    Z – HERO moving on the lift of the offshore drilling ban.

  43. 43
    ddaley Says:

    RRC from briefing:

    Range Resources: Wouldn’t be surprising if RRC is setting up “beat and raise” scenario on production front – Friedman Billings (66.07 +2.90)

    Friedman Billings notes that this morning, RRC updated its assessment of the Marcellus shale operations. Firm says all the relevant variables used in their analysis are positive, and firm is increasing their Marcellus NAV estimate to $56/share, brining their total 3P NAV for RRC up to $125/share. The co remains in acreage acquisition mode. Water acquisition and disposition has been officially mentioned as an issue, but firm’s recent conversations with mgmt indicate that it is addressable. Production ramp is slower than what firm had modeled but is in line with their understanding of Street expectations. Based on recent conversations with mgmt, however, firm would not be surprised if RRC is trying to set up a “beat and raise” scenario on the production front.

  44. 44
    zman Says:

    Fred – right, should be good for the offshore drilling group, RIG, DO, ATW, NE, ESV, RDC, and names like FTI, NOV, OII.

    Problem is will Congress comply. All Bush can do is lift the executive ban (should have done that day 1). There is still a legislative ban and I although prices make arm twisting potential high I don’t think he has the votes to get them to topple it now.

  45. 45
    zman Says:

    Thanks DD.

    They did mention in the PR taking up 2Q due to areas outside the Barnett Shale where they’ve had some shut ins. I like FBR reads on things in general and would agree that is likely case here.

  46. 46
    Nicky Says:

    Actually Z oil was down when they announced the lift on offshore drilling. It then went up over a dollar before coming off again.

  47. 47
    zman Says:

    Nicky, right, so it has fallen since they announced the deal. The pop made no sense and was probably more related to Brazil.

  48. 48
    zman Says:

    …and oil falling on the Bush news makes little sense either. No congress on board, no change.

  49. 49
    Nicky Says:

    That I think is my point Z – oil went up on the news which to me was traders saying so what.

  50. 50
    VTZ Says:

    Z – Don’t know if you follow this sort of thing but Shell offered to buyout Duvernay Oil today… tight gas play.


  51. 51
    zman Says:

    Dollar gave it all back. Broad market gave it all back.

    V – saw it, have not thought about much though.

  52. 52
    zman Says:

    ZTRADE: Entered PQ August $22.50 Calls (PQHX) for $5.20 with the stock trading at $26.70.

  53. 53
    Sambone Says:

    Thare she goes!

  54. 54
    Sambone Says:

    Off subject – Looks like WM is next in line for the FDIC.

  55. 55
    Nicky Says:

    Volume today is well down from Friday. If the SPX was to make a lower low (1225) on this contracting volume it would actually technically be bullish.

  56. 56
    Nicky Says:

    I do show it that the spx made a slightly lower low on that spike down.

  57. 57
    Nicky Says:

    We would need to take out today’s highs for any confirmation that a low is in place.

  58. 58
    zman Says:

    Dollar index off now, approaching a 2 month low.

    PBR now saying the emergency crews have staved about 100,000 bopd of cut production so PBR production will be down about 300,000 bopd this week or about 16%.

    E&P looking to start a rally despite the broad market, service kept its rally going for the most part. Where else do they have to go?

  59. 59
    texana Says:

    on eog, they have 8 wells in comp in bakken & will report these most likely with conf call. they r going to do a co2 huff and puff on a northern parshall well that was just completed in 2007 & has cum about 180k boe. they extended the parshall to the south with at least 3 wells but infor still tight. the barnett oil wells r looking positive and i will be looking for something on eur per well as this will become a manufacturing process. This is definitely a needle mover. they should have some add’l results on there northpark dicovery in co., which avg 320 bopd . They should alsohave add’l infor on their canada shale play, which is real deal but infastructure constrained. i’m especially interested in their wildcat bakken on the western edge of the wlliston basin in mt.this looks like a mirror image of the placement of the parshall field on the other side of the basin. skf offset trade

  60. 60
    ellwodo Says:

    Z, I know you have HK Aug 55s. Any thoughts on the Aug 50s at this point?

  61. 61
    zman Says:

    GDP off 5%, filed 8K showing the underwriters took only a third of their overallotment shares. Little odd with the offer at $64 and the stock at $74.

    Thanks Tex. Good stuff. Am thinking the stock will top old highs after the earnings and call. There is huge appetite for big caps with heavy exposure to resource plays in this environment. They are cheap than I recall them being on a fwd basis in many years and growing faster, from higher margin regions than before. Love the idea that the gassy big cap has not gotten more and will continue to get more oily. I take it your Barnett oil comment is grapevine as I have not read a thing yet there.

  62. 62
    zman Says:

    Elwo – I’ve got $45 and $55s Augusts there and may cycle the $45s to $50s on pre CC strength.

  63. 63
    ellwodo Says:


  64. 64
    texana Says:


  65. 65
    zman Says:

    July calls coming back into cross hairs, especially the out of the money, could go to zero at the whim of the market stuff. Won’t be missing an opportunity to punt between now and Wednesday morning on any surge.

  66. 66
    BossmanG Says:

    Z, just wondering why Wednesday morning? thursday too late?

  67. 67
    zman Says:

    Wednesday moring = EIA Oil Inventory time, one bad number and short dated calls could go kaput. Generally I like to be gone from the front month 7 to 14 days prior to expiry except for the occasional last minute trade. This month, the rapid melt down a little over a week ago left me unwilling to punt and adding and now I am a bit longer in July than I’d like. I’d rather punt them at a medium to small loss than risk the EIA posting a market moving number and being on the wrong side of the trade…for those remaining calls it could do a lot of damage (or a lot more damage as the case may be).

  68. 68
    texana Says:

    the dutch co bo something in canada & want to increase their footprint in north america, stability. somebody is fixin to make a move on 1 of these cos before w headsout to pasture. My picks r clr,eog and dvn. no matter i want to own them anyway, although i think everything could go down with the mkt & can add at lower price.

  69. 69
    ddaley Says:

    Are you thinking it likely enough that EOG would head to previous highs to buy OTM calls?
    AUG 140’s are $1.60

  70. 70
    zman Says:

    DD – Usually I only go about 10% out of the money across a news event. Been thinking about the $130 and $135 strikes. Say it has a 10% day at earnings moving from here to 130 on 7/29. Both options move up and with 18 days of life left at that point and holding everything else equal the $130 call will just outperform the cheaper, higher strike $140. But they will collapse the IV on the news event which would mean that the $140s would participate far less on a % basis than holding all things = would imply. I’ve gone too far out of the money too many times , gotten the news I wanted and then said “well great” when the high strikes proved a bridge too far. I’d rather stake the same amount of money (fewer contracts in the lower strike) and get a better return.

    That’s an alternative way of saying that while I think they could exceed the old highs and hit $145 or so I’m not that confident in it. And if they do, the $130s would be a 5 bagger which is nothing to sneeze at.

  71. 71
    texana Says:

    long eog aug 130 @ 3.75

  72. 72
    ddaley Says:

    Thanks, good options analysis. And always good to keep in mind the IV collpase with earnings.

  73. 73
    ddaley Says:

    Some early pinning action, CHK for one, and perhaps HK.
    A way to play ex week is to look for an expiration pullback for a position that you want and wait.

  74. 74
    Sambone Says:

    Lunch is over, now we’ll see.

  75. 75
    italyinvestor Says:

    Z – What’s the strategy behind taking PQ in the money?

  76. 76
    zman Says:

    Italy – at the time I took it it had less of a spread . I’ve noticed with that one that it is an extremely poor options trader. So not only do you have to be right but you have to be very right just to lift the bid over your ask. Thought I’d let the intrinsic value help me out as the stock had just roundtripped a nearly $2 opening gain.

  77. 77
    zman Says:

    ZTRADE: Added SLB August $110 Calls (SDBHB) for $2.55 with the stock up about $2.50 on the day at $101.70. Continuing to hold the Aug $100 calls here.

  78. 78
    Dman Says:

    Z – last Friday, after PQ popped by 17% in 2 days, I sold some higher calls against my ITM calls. The IV was 68%, so I thought maybe best not to be too long that kind of IV. And then it popped 7.5% today! Now back close to where I sold the calls. I’m thinking that the IV has to calm down at some stage. So taking ITM calls on it sure makes sense to me.

  79. 79
    Brian08 Says:

    How in the heck does Kildork get on CNBC…This guy has the personality of a Saltine, without the salt…

  80. 80
    zman Says:

    Brian – I get a lot more out of watching Bloomberg or even Nickelodeon.

  81. 81
    cadillac Says:

    Spongebob is very insightful

  82. 82
    zman Says:

    Cadillac – too true, he puts out more new material daily than the fed does in a month.

    Looks like an afternoon rally in energy groups in the works.

  83. 83
    scoop006 Says:

    Crameroo promoting DVN & NOV

  84. 84
    zman Says:

    Re 83. Oh that’s gutsy, he has analyst support on the NOV call from BofA and DVN has just been ripped (I like it pre earnings too). It’s a wonder he didn’t notice the intra-day sell off in the group and declare the end to be here, lol.

  85. 85
    Dman Says:

    Could the broad market be trying to rally here?

    Random fact: if the Dow continues its rate of fall since early June, it would hit zero by about February.

  86. 86
    zman Says:

    Wood McKensie analyst out with a tid bit on HK and the Haynesville. Basically says the H.S. will pass the Barnett in production w/i 5 years and should take a lot fewer wells to do it. Nothing new there. He is saying that the H.S. takeaway is limited to 1 Bcfgpd at present and that this may make it tough on producer to get their gas to market. My thought is that the big boys like CHK will get their gas to market and that the little guys will have periods of shut in productivity as the capacity from the region is stair stepped higher.

  87. 87
    Sambone Says:

    Off subject – run on WM, they are lining up.

  88. 88
    Fred Says:

    Sam – I was just thinking about opening a CD there. Just kidding!

  89. 89
    Sambone Says:

    Fred, yea, buy one. LOL

  90. 90
    kyleandy Says:

    sam — WM since this is my last bank short keep up the good news. u have candidate to relace it??

  91. 91
    Dman Says:

    I guess we’ll know when the market bottoms: banks will be imploding and the market will rally on it.

  92. 92
    ram Says:

    Where are those people going to put their money with some sort of safety? Which bank will have the next run on it’s deposits? This seems more difficult to predict when this is going to stop unlike other times of serious bank defaults.

  93. 93
    scoop006 Says:

    KY # 90 been short COF since $52. I think it has a long way to fall.

  94. 94
    Dman Says:

    Ram, they can always set up a brokerage acount and buy some USO. But no doubt their financial advisor would tell them it’s too risky and they should hand over their cash to a bank instead.

  95. 95
    Sambone Says:

    K – NCC on the way out.

  96. 96
    Dman Says:

    Z – #86 when would you think those shut ins would be starting. In a year or so, or further out?

  97. 97
    zman Says:

    D – good question, can’t answer, will have better idea after the XTO call next week (7/22) and CHK at the end of the month. My sense is that some guys are constrained now, some of the little ones. CHK is moving to secure takeaway capacity and to build new pipe as we speak and they have the $ to do it (as well all just found out).

  98. 98
    scoop006 Says:

    Sambone, Any thoughts on COF?

  99. 99
    Sambone Says:

    COF – Well it aint a bank, a investment bank or a mortgage company, so that means currently it can’t go to the fed discount window, YET. It is the largest Credit card issuer. Non performing loans continue to increase. At this point, I don’t think it’s going belly up, BUT it is going down as Americans max out their cards, and COF cannot replace them with new borrowers. Their loan portfolio will continue to melt. Americans will slow their spending etc. I think it’s a good short at this time, IMO.

  100. 100
    Nicky Says:

    SPX has support in a wide region between 1210 and 1230 with the strongest support between 1220 and 1230. Volume has been lower today and as lower lows were made this is technically bullish. So… a rally into the next cycle high can start anytime.

  101. 101
    kyleandy Says:

    sam- #95– already short COF for long time NCC i like but not much left altho i am trying a put option spread. what abt WB?

  102. 102
    scoop006 Says:

    Crameroo taking profits in NOV

  103. 103
    Sambone Says:

    By Gregory Meyer

    NEW YORK (Dow Jones)–Crude oil futures inched higher Monday as a labor strike
    bottled up 7% of Brazil’s petroleum output.
    Light, sweet crude for August delivery settled 10 cents, or 0.1%, higher at
    $145.18 a barrel on the New York Mercantile Exchange. Nymex crude is 11 cents
    below its all-time record close of $145.29 a barrel reached July 3.
    Brent crude on the ICE futures exchange settled down 57 cents at $143.92 a
    After a week of vexing headlines from producer nations, market talk of
    tensions over Iran’s nuclear program and unrest in Nigeria’s oil-rich south was
    less prominent Monday. In Brazil, employees of Petroleo Brasileiro (PBR) began
    a five-day strike that the company said has reduced production by 136,000
    barrels a day by midday.
    Crude’s modestly higher close stood in contrast to some other commodities,
    with Comex gold rising 1.4% to $972.70 per ounce, the highest close since March
    18. Crude touched a record intraday high of $147.27 a barrel Friday.
    “The market is trying to find its footing here before it has another leg
    higher,” said Mike Fitzpatrick, a broker at MF Global in New York.
    Other traders shared a sense the calm won’t last.
    “To me it seems like the market is getting ready for some sort of move,
    especially to the upside,” said Ray Carbone, a trader with Paramount Options in
    New York.
    Seeking to increase domestic supply, President George W. Bush on Monday lifted
    an executive order barring energy exploration in the Outer Continental Shelf, a
    move the White House hopes will pressure Congress to reverse its own ban on
    offshore drilling.
    “Until Congress gives us some indication of what they are going to do, I don’t
    think prices will respond,” said Brad Samples, an energy analyst at Summit
    Energy in Louisville, Ky.
    The office of Senate Majority Leader Harry Reid, D-Nev., said in a statement
    that “we cannot drill our way out of this problem.”
    Oil’s steady day followed the U.S. government’s intervention to backstop
    mortgage companies Fannie Mae (FNM) and Freddie Mac (FRE). U.S. stocks sold
    “It seems the market is taking a breath and focusing more on the financial
    side of the trade,” said Zach Oxman, senior trader at brokerage Wisdom
    Financial Inc. in Newport Beach, Calif. “The short-stock, long-bond trade seems
    to be driving more of the hedge fund money right now.”
    Front-month August reformulated gasoline blendstock, or RBOB, fell 55 points,
    or 0.2%, to $3.5577 a gallon. August heating oil fell 1.17 cents, or 0.3%, to
    $4.0649 a gallon.

    Dow Jones Newswires
    07-14-08 1527ET

  104. 104
    zman Says:

    Tempted to punt HK $45 Julys here, not going to jump just yet. Lots of volume in the 50s which may turn out to be the pin for July.

    Bidding some NFX August calls, otherwise being patient in here.

  105. 105
    zman Says:

    ZTRADE: Doubled the August NBR $50 Call position for $1.25. Brings average cost to $2.03.

  106. 106
    doc Says:

    Anyone know when cof reports earnings?

  107. 107
    kyleandy Says:

    z hope u excuse the off energy talk but not much happening!!!

    sam just bot the NCC july 5 puts and sold the july 3 puts @ 1.10.

  108. 108
    scoop006 Says:

    DOC # 106 July 17

  109. 109
    zman Says:

    Kyle – don’t mind me, just doing my thing getting ready for the next couple of weeks. Next week should be pretty busy and after that it just get’s nutty.

  110. 110
    Sambone Says:

    Tini time!

  111. 111
    zman Says:

    beer thirty

  112. 112
    ellwodo Says:

    “104 800 of the HKHJ contracts was me. so don’t assume it’s informd buying

  113. 113
    ellwodo Says:

    meant #104

  114. 114
    isleworth Says:

    SandRidge Energy Announces Intent to Sell Its East Texas and North Louisiana Assets

  115. 115
    zman Says:

    Elwo – how can you say I can’t assume its informed buying when its a reader of this site. You really know how to hurt a guy, lol. 😉

    SD selling those E. Tx/N. La assets we talked about a few months ago, guess they will get a pretty penny now.

  116. 116
    zman Says:

    They had 30,000 acres in the area as of the 1Q call. Let’s see, 30,000 acres at $30,000 acre = $900 mm. They’ll have progress on this sale front as well as some of their deeper exploration in the West Texas Overthrust on the 2Q call on Aug 8.

  117. 117
    ellwodo Says:

    HK 50s: sorry Z, I misread your post. I was buying the Aug 50s, not the Julys.

  118. 118
    Wyoming Says:


    Thanks for the presentation link, got it from their site. Slide 12 is what I needed and it fits with my comments last night. I will add that I like the brittle comments about the Bakken. That is really similar to the Barnett, more importantly is the way it will frac, real nice. The ductile shales tend to be less desirable. Nice TOCs too. Still can not tell you how it will frac without more info but 120 feet is doable for height growth. Would tend to say it would not go too far downwards, but more info would be needed.

  119. 119
    texana Says:

    sd & oxy teaming up to build c02 extraction plant in pecos co.,tx.oxy will spend 1.6billion to build & operate the facility.SD will retain all methane & oxy will get all co2 in this 30 year agreement.According to the article in the Midland Reporter Telegram oil report, oxy will build the plant in 3 phases over 3 years. Rick Callahan, Oxy Permian ops mgr said “the new supplies of co2 will increase the co’s pb production by at least 50,000 boepd within the next 5 yrs.” Even when the plant is fully operational there will still be a 500 milcfpd of co2 deficeit in the pb. SD’s Ward said that there r multiple tcf s of hi co2 gas to be produced in the west tx overthrust. I’m sure that this cannot happen fast enough for SD even with 30+ rigs runnin in wto. They have at least 3 lookalike prospects east of the pinon field , with at least 1 prospect with mutiple wells drilled with encouraging results. No wonder Ward just purchased an additional 100mil$ worth of SD stock.Looks like everything is on GO with SD. The stock looks like it needs to consolidate before moving higher.

  120. 120
    zman Says:

    Thanks Tex. They signed that a couple of weeks back and I agree, they are constrained around the Pinon due to CO2 content and this will help them get that monkey laid to rest, meanwhile, the move east is hitting bigger wells with a lot less CO2 content. I think we see upward revisions to guidance here with 2Q results, don’t think it will be much of a surprise that it happens but the magnitude of the increase may be along with the continued low guidance on operating costs. Ward timed the potential sale of his e tx / nw La assets perfectly as well so in this season of secondaries he may be looking at an acceleration of capex with no capital markets transaction …nice.

  121. 121
    Wyoming Says:

    CO2 floods are the future. Nice miscible action that you can not get with water flood, huff n puff, steam flood. We were talking today with how much oil will be left behind in some of the deep water projects due to abandonment thresholds.

    Wish I would have bought SD sooner, bought on these dips for long term in the IRA.

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