Thursday Gas Preview & Oil Review

177 thoughts on “Thursday Gas Preview & Oil Review”

1. XOM on the tape disappointing. EPS $2.27 vs $2.53 expected. How do you disappoint with earnings of $12 billion. wow. The thing trades at 8x 2009 numbers and its call down a couple here.

2. XOM’s Capex of $7 billion in the quarter is nothing but good news for oil service companies. For years these guys have been accused of spending to little on the E&P and too much on buying back their stock. Can’t say that about this quarter.

3. TSO call in 15 minutes.

   MRO talking about breaking itself up along its business lines. Probably a huge value unlock there, no decision until 4Q.

4. Z- nice post this morning. As a relatively new subscriber i offer my kudos to the group for great discussion, commentary, news and education.

   SWN – great quarter. Will be curious to hear what (if anything) they have to say about the marcellus. Seems like they may lay back on that to see if others can tackle some of the hurdles. May be smart for SWN to stay local instead of moving north.

5. 1520 – agreed. SWN said they have 105,000 acres in Marcellus at the end of the pr and that may be all you hear about.

   MRO popping, had not noticed how cheap it had gotten. Trading at under 7x earnings for 2009.

6. Z – do you still follow SCU at all?

7. TSO 2Q08 Conf Call:

   Plan to continue to reduce inventories to unlock working capital. (cut inventories 3 mm barrels in 2Q and have 27.6 mm barrels on hand…that’s gotta be worth something.)

   Refining segment profits were up, almost exactly reversing the 1Q losses.

8. 1520 – I still hold a small piece but am not active there. Need to do an update.

9. Friend has grandparents that own a 100 acre parcel on the Marcellus in upstate PA. According to him (numbers may be fudged as he isn’t an energy junkie like us) Chesapeake Appalachia did a deal that looks something like this…

   $300k for 5 year lease (he wasn’t sure about number of years but thinks his grandparents mentioned 5)

   15% Royalty

   “Will be one rig that will take up approximately 3 acres”

   They will improve the road.

   Sounded interesting to me.

10. This industry almost is reminding me of the casino industry…They can afford to pay all this money for leasholds, give royalties to land holders and STILL make money hand over fist…Good business to be investing in…

11. Thanks for the color Bleemus.

    Brian – agreed with a caveat. The bane of this business has been repeated cycles of capital in-discipline. Not sure that’s a word but you know what I mean. Spending from time to time has advanced too quick and nothing solves high prices like high prices so people have, from time to time, found themselves quickly outspending cash flow and debting up. Not saying we are there but the fear of that with the current land grab is out there.

12. Z – Just curious but do those numbers sound normal? Seemed like high dollars for one well but inline per acre.

13. Z I know exactly what you are talking about…I worked at Merck before I went back to B-school…Talk about capital in-discipline…Spent on research like a bunch of drunken sailors and then when stuff went wrong in 2000 they still kept spending and spending and getting squat outta it…Spending + No Pipeline + VIOXX = TROUBLE…

    It’s like these CEOs think if they have money they HAVE to spend it because well it’s there…It would be great if these guys didn’t have credit revolvers, like a credit card for a shopoholic…

14. APA beats numbers. Says they still see up production despite blast in Australia.

    Good highlights from Egypt and from the Ootla Shale in Canada plus a deepwater GOMex smallish gas discovery.

    CC at 2 EST.

15. International Paper Agrees to Sell Mineral Rights to Chesapeake Energy Corporation for Approximately $263 Million
    Thursday July 31, 8:50 am ET

    MEMPHIS, Tenn., July 31 /PRNewswire-FirstCall/ — International Paper (NYSE: IP – News) has agreed to sell approximately 13,000 net acres of subsurface mineral rights located in the Haynesville Shale natural gas formation in northwest Louisiana to Chesapeake Energy Corporation (NYSE: CHK – News) for approximately $263 million, subject to various adjustments at closing. The transaction is expected to close in late August.

    my quick math shows that at $20k/acre

16. Bleemus, I’m not up on Marcellus acreage metrics. The dollar per acre looks fine but the royalty seems light to me but that may be the norm for current PA leases. Anybody got any Marcellus lease comments?

    Brian – I thiiiinnnkkk the E&P CEOs, the really experienced ones, have learned this lesson. Aubrey went through it with the Austin Chalk years ago and while he’s always a spender he has always backed it up. Note he’s one of the most hedged guys in the group … long memory on that chap.

    Thanks Broad – I’ll see if I can get a mineral rights broker who has a subscription here but rarely comments to in fact comment. Mineral rights make great Christmas gifts by the way. Get a Haynesville well drilled on those and get paid for 30 + years. Woo hoo.

    Oil up nicely now.

17. rs – see my post #183 from last night re CHK

18. US dollar weakens against other major currencies following worse than expected economic data… Dollar sensitive commodities such as oil & gold gain.

19. for the record i would be happy to sell the mineral rights to my property to anyone interested. any idea on what 1.3 acres in coastal new jersey is worth? i have no problem with rigs on the property, trucks, seismic equipment, pipelines, you name it. i have an extra bedroom if any of the rig hands want to stay here.

20. bill – were u happy w/ FREE’x earnings? bot some yesterday. raised div from 70 cents to 80 cents. pretty strong at 13 %

21. Bleemus – it’s funny, one minute the economy is too cold and so demand must be dying and therefore oil falls. The next, the economy is too, too cold and the dollar tanks because they dare not raise rates yet and oil goes up, even though demand can’t be better.

    Isle – don’t worry, soon or later they’ll figure out the Trenton/Blackriver is underneath your lot, lol.

22. Kyle: Thanks! I assume Fidelity erred. I just wanted the members to know what I saw.

23. SWN SW Energy tgt increased to $55 at RBC; new Frac Method looks to add more value (35.73 )

    RBC raises their tgt on SWN to $55 from $51 reflecting continued strong performance in the Fayetteville shale. There are two encouraging developments. First, well costs have improved to $2.8 mln, despite an increase in the lateral length by 8%. The second development is a new completion technique. The ‘s test of closer perforation clusters has shown good results. This could boost firm’s Fayetteville well model to as much as 2.5-3.0 Bcf, with a minimal additional capital investment. Firm increases their 2008 production target to 185 Bcfe, which is 63% growth. Their 2009 production target increases to 242 Bcfe or 31% growth.

24. Re 20

    Free earnings met expectations. I was expecting a pop but they had 2 ships in “dry dock for 70 days” (means not working) which i missed and another 10 days were lost for a new ship being positioned. so the “pop” will be in q3.. Analysts agree and are expecting 35 cents for q3

    On the ccall they mentioned ebitda growth is very strong and the dividend is only 26 % of cash flow which means the rate of 20 cents will increase in time

    I really think in time this climbs to 10, you get 13 % yield while you wait

    GNK and dsx (same business) also reported good numbers today.

    Free is indicating 6.25 to 6.50 premarket and i had expected a pop to 6.50 today on the earnings news.

    Im very satisfied with the results.

25. TSO call over. Outlook not bleak but no improvement in demand or margins really quantifiable from what I heard. They continue to cut costs and hone margins and are underleveraged with no revolved and cash on hand. Inventory sales seem like a good way to better monetize the balance sheet. I’ll sit back and think about this, probably through the weekend.

    Oil all over the place this morning, now barely up. NG down slight with an hour to go before inventories.

    Stocks looking to open a touch weaker except for APA which is going to run. SWN call at 10 EST. You can see when most of the important calls are scheduled for the week on the calendar tab.

26. CNX getting totally whacked this AM.

27. ng sector getting creamed– one day dead cat bounce..very frustrating

28. Wow. APA now down hard.

29. Bill – agreed. The size of the giveback from yesterday’s bounce makes no sense. XOM’s miss has no impact whatsoever on the rest of the group. I saw an analyst on CNBC saying it was their E&P segment that made them miss as volumes were lower than expected. This shouldn’t be a shock as XOM doesn’t grow volumes.

    The spending of $7 billion went completely ignored as to impact on the service sector. This is a major step up for them but instead people would rather listen to some fast money guys say sell the rally. Energy sectors off twice as much as broad market and five times as much as oil. I think it turns, oil service first then E&P but agree, frustrating.

30. Watching one analyst describe yesterday as a dead cat bounce. I thought it had to do with Ohmert’s departure and the gasoline inventory miss, but he was right. Those same facts are with us today and oil is tanking.

    Jazz

31. If you were an oil service analyst, that capex number from XOM would be music to your ears…they lover numbers like that and especially a change in the numbers (up 38%) like that.

32. A freak-out ahead of the NG number was always likely given what happened 2 weeks ago. This number matters for the group

33. At least the freak out seems to be low volume.

34. V – right, only the sellers are playing today.

    SWN call about to start, I have them, MRO and WLL up, everything else red including the dollar, oil and natural gas.

    People could apparently care less what Goldman thought about EOG’s Bakken potential.

35. SWN call still not started, lots of interest one of the two E&Ps up today.

    SLB trying to go positive here

36. wow, nevermind SLB, down a buck in 1 minute.

37. Looks like we’ve given up about 1/2 of yesterday’s gains thus far.

38. antrim – half on the oil, 3/4s on the stocks.

39. XOM refining sector margins down 83% in US, Production off by 8%, with expropriation by Mr. Chavez and problems in Nigeria contributing.

40. Crysball – right, so the biggest energy company in the world can’t grow production.

    SWN guy just reading the press release.

41. XLE and OIH down 45% and 40% of yesterday’s up moves.

42. buying bexp on pullback prior wll erngs. excellent cc yesterday

43. Antrim, sorry, was looking at my portfolio.

44. Tex – agreed, I’ve been a little concerned about their underlying declines and over promise nature but I may add a little more. Nice CC yesterday and they seem to be in front of the wave of ND production now. Did you note the negativity on the EOG call regarding the TFS. Sounds like its not under or economic in Parshall field.

45. yes pappy didn’t make me happy

46. Are people just looking for the greenlight to sell after the gas #s?

47. Morning all. As of this moment the pullback in oil this morning just looks like a healthy correction. We have made it just beyond the 50 percent mark and the 61.8 comes in at 123.60. I am expecting oil to move higher in a lengthier correction of the move down and this is likely the B wave of an ABC move up.

48. V – looks to me like they are selling before the gas number.

    SWN having a good call which will matter today only in this kind of market. I’d buy puts there but its just too good a story and I think there will be some upgraded price targets soon.

49. 65 Bcf – should be a boost to gas

50. 65

51. Stocks that will rally if gas does now would be CHK in front of earnings and SWN along with their just released quarter.

52. BEXP says the Baaken consortium is sharing information on TFS well data and completion techniques and this will significantly facilitate TFS progress in coming quarters. They also hint the Sanish portion of the TFS is a separate formation in their 3-D studies.

    Am also buying BEXP on this morning’s pullback.

    Would expect BEXP Q4 numbers to be be HUGE based on all the hints dropped in the CC, although they did not offer specific guidance.

53. Its also very hard to see how the trade won’t want some insurance ahead of Iran on Saturday and for that reason I see very little chance of the energy market selling off hard ahead of that, most likely quite the opposite.

54. Coal stocks rebounding well. CNX conference calls going well. They have no intention of divesting their CXG stake.

55. Nat gas chart also looks short term bullish to me.

56. Crys – BEXP gave a pretty good ramp indication on 4Q volumes in the pr. My concern is their gulf coast declines. They will serve to mute the Bakken wedge’s total co growth effect.

57. SD moving back up in here as well, I have a strong suspicion those guys beat based on volumes from the east side, Pinon look alike area in the West Texas Overthrust. This is the less CO2 intense area where they have been upping the rig count. They may be able to talk about reserves in this newer area as they are of a like mind with CHK on quarterly reserve reports/comments.

    Speaking of CHK, I don’t doubt they beat on CFPS tonight, I think they will not be upping guidance on volumes. I think they talk oil shale, I think they talk more about the HS and possibly west Texas Woodford and Barnett, and I expect very strong improved well econ in the Fayetteville Shale. Whether that will be enough to get the stock off its butt I cannot say but I’m leveraged that direction.

58. Housekeeping Watch: the Print This Post function is now back on line. Thanks to Scotty and his serious skills!

    Natural gas falling back off now after a brief bit of green. Really don’t know what they want if below consensus injections don’t do it for them.

59. 65 should be bullish

60. bexp 10 stage comp seems to be key to better prod. mro still drlg long horiz laterals with single comp. 26 rigs running in mckenzie co so about 26 wells a month.with their acreage spread they will be participating in alot of wells. seems like a good way to play especially since they just completed an 1000+bopd well this week. not sure their wi%

61. Nicky, during the NBC interview with Iran’s A-man earlier in the week, Brian Williams repeatedly referred to the deadline you mention. But the Iranian response was that they were unaware of any such deadline. Of course, we know perfectly well that they are aware of many statements from the West insisting on the deadline, but they don’t appear to recognize it. They certainly didn’t agree to make any response in that timeframe. So I don’t think we can depend on any fireworks from them: they seem inclined to simply ignore it.

    This then puts the ball back in the Bush court. How will they play it? I don’t know, but the oil market isn’t taking conflict seriously at this point.

62. still listening to the SWN call, nothing earth shattering beyond what was in the pr.

    looking at the gas numbers, the Producing Region saw no injection. This is pretty odd given that’s where the growth is:

    Alabama, Arkansas, Kansas, Louisiana, Mississippi, New Mexico, Oklahoma, and Texas

63. Tex – BEXP’s NRI was 55% in that well so at IP 1,110 bpd it would give them a little over 6 mmcfepd net or about 20% of 2Q avg production. Not too shabby.

64. just sold CHK aug 45 puts as my pre-call play

65. Z:
    What a welcome change yesterday! It’s like someone set a back-fire and saved us from being burned up by a wind propelled forest fire.

    But, I don’t think we should expect crude to continue right on up to where it came from. It’s not that we don’t have allies and factors that help to advance the price of crude. Dman pegged it nicely yesterday in #127 with his list (to which I would add a big one: A zillion Chinese switching from bicycles to cars) No, it’s not that. Crude will eventually go on up. What it is is that the “PERCEPTION” of a crude “bubble” within a commodities “bubble” has not yet been discredited, or abandoned, or set aside (or punctured,if you will. lol)
    That will take some time before the media and market talkers and market movers figure out that with a sharp drop of only 20/40 points, or so, from 147, it couldn’t have been a “bubble”! “Bubbles” have enormous long term declines like the Tech bubble fiasco. This will be nothing like that.

    As I see it, what this living market will try to do now is find a band of equilibrium. Hard to do these days, but it will try. So it probably won’t continue up, but seesaw. Tough to deal with, scary and unpredictable, but I think it’s probably what we can expect.

    We are fighting ERRONEOUS PERCEPTION, not reality. Which makes the market even more irrational than it usually is.

    In any case, for now, we are a whole lot better off (In the long view) with crude below 130 and gas below 4 bucks.

66. Interesting Seeking Alpha article which posits that the SEM group collapse contributed significantly to the recent fall in oil….seems a little far fetched.

    http://seekingalpha.com/article/88228-semgroup-s-fall-and-the-impact-on-oil?source=d_email

67. How the hell is gas not rallying?

68. WLL call on if anyone cares.

    Mahout – well said! I was saying yesterday that perception and technicals are in charge right now with the fundamental drivers just a sliver of what influences price right now.

69. Hearing rumor that T Boone has completely liquidated his long oil position as of this week.

70. crysball – I’ve read a bunch about it lately and I think there’s truth to that idea. Think copper market in 05′ or 06′ or the gas trader who exploded his hedge fund.

    I think once the market can identify a small enough player with any given position they can throw enough money at it to knock them out of the game. Goldman is fully capable and would have no qualms about doing this.

71. V – it tried but then fell back as crude did. I think it is settling into a range before a rally. Agree re Goldman and killing the competition for sport.

72. I think GS has been spearing BP Cap

73. EOG upped to Buy at Canaccord

74. Maybe Congress should pass a law banning GS, lol.

75. Dman – are you listening to the OII call and if so, are they saying anything of redeeming value. Stock getting nuked.

76. I really find it amazing the amount of influence they have. It’s unbelievable to me how they come up with price targets on something without a lot of justification then they force the market up there by building technicals and whatnot with the capital. Then after the fact they point and say “look… see, we were right” then it tanks when they move their money out… were they right or would the value have just been where it was before they staged a GS-driven rally.

77. mahout – speaking of a “zillion” Chinese: I notice no one is panicking about the possibility of China attacking South Korea after the latter leaked their opening ceremony (which seemed to involve a substantial fraction of a zillion people). I’m only half-serious, of course, but “face” matters in China and there must be some serious fury over there. They are going to get revenge somehow. The South Korean athletes better look out …

78. Z – sorry, not on the OII call but yeah, I should be, now you mention it…

79. Conspiracy Theory: Oil rise from 120 to 147 was a sucker punch by GS. Suck em in two fisted, then lay waste back to 120. Oh yes, the affiliated downdraft in NG was just a side benefit!

80. #69: Yikes!

81. Dman re #61. That doesn’t surprise me but I would still take that as more bullish for oil as Iran will just be seen to playing more games, stalling out etc etc. Whilst I don’t expect war, the sabre rattling will be jumped on by the energy bulls as the Iran problem being right back on the table. Just imo!

    Z – re #69. wow is all I can say! This from a die hard $150 man! He must have sustained some huge losses in oil and just think of his losses in natural gas!! Almost to the minute he announces the Pickens Plan the price of nat gas starts to fall and some.

    Still think natural gas chart looks constructive and ready for a decent short term bounce. A move above today’s highs should confirm…..

82. Hopefully PF won’t mind me printing an excerpt from his daily email as it seems everyone is talking GS talking their book:

    ‘Leave it to Goldman Sachs to talk up their position at a key technical moment in the world oil market. they jumped on the report from the Master Card advisors that showed that gasoline demand hit the highest level of the year. You see according to Goldman what we have seen lately is not demand destruction but demand restraint and oil will go back up to the highs before the end of the year. So don’t worry about all those airlines that went out of business. They did not go bankrupt they were just restrained. And Detroit, just go back to making those SUV’s because demand is just restrained! That’s great news! The death of demand has been greatly exaggerated! This could be the biggest comeback since Lazarus.’

83. Now on the OII call but they are already in the Q&A …

84. Nicky – re T Boone, yeah, I thought I had a bad month.

    Re – natural gas, I think it turns too but I get concerned when prices don’t react to better than expected numbers. Traction on the numbers get lost and you fall further into the realm of perception. In the case of gas, the perception is that 2009 will see a gas glut as guys like CHK become their own worst enemy. I thought EOG’s comments regarding the Barnett peaking next year would be viewed as more bullish than they were.

    Crude cracking lower now.

85. OII saying drilling in GOM has been pretty flat this year so far & they had overestimated it …

    General reduction in diving & project activity in GOM this year

86. ROV introduction back end loaded for this year (not news, just reiterating)

87. Dman – yuck but thanks. Will read that transcript later, staying away for now.

    There seems to be a bit of a bottom fish going on in the equities now.

88. OII says there is overcapcity in the umbilicals market, but states there has been no recent capacity additions

89. OII notes there is more visibility on ROV side

    Products business less predictable

90. When you think Hank Paulson was the head of GS it makes you wonder how deep this manipulation goes. Absolutely zero chance of GS ever being taken to task over anything – they are running the country!

91. OII:

    Inspection business: outlook excellent, but reminds about seasonality in the UK market for Q4.

    Surprised by strength of rig building worldwide & expects continued growth for construction-related work

92. Yeah, I agree Nicky.

    At the risk of sounding like a conspiracy theorist, I think that GS has the power and influence to do whatever they want. Goldman Sachs is the Golden Child of Wall Street, especially since they avoided the CDO market and I keep hearing about how they “manage their risk”, even though they sure as hell sold a lot of CDOs.

93. OII: doesn’t see margin expansion in subsea products but likes their position in this market.

    Have plenty of capacity to respond to hurricane damage (would have more vessels and staff available than in Katrina case)

94. V re #76 – you are right on there. Its an interesting thought as to whether the price would trade there anyway. My gut instinct is to say no but as I like TA and in particular Elliott Wave then I could argue the opposite! Right now we know they are long and they need out like T Boone. So stand by for a strong rally. Not back to the highs or their 149 target on this run but high enough to get them out I suspect.

95. Z is there a tab on MMR on the site? The increases in production looks like it has alot of growth ahead of it and is very cheap

96. Dman:
    #77- Agree. What the Chinese really want (and need) is RESPECT from the rest of the world. And particularly from us. If we give them decent respect we CAN deal with them. I like what Jim Rogers said: “There are more Communists in Massachusetts than there are in China”.

    Contrast respect to them and respect to Iran. If we treat Iran (meaning the crowd currently in power) with decent respect they would still kill us all, if they could. Any footsie between Bush and Amahdinajad is only on the suface, in my opinion. Underneath, we know who our enemies are. Iran has been at war with us for over 2 decades. Which we have officially ignored. But underneath we are at dagger points with them.
    It’s just tough that they have so much oil and so large a population.

97. OII:

    Expects better profits on subsequent BOP systems after engineering cost blowouts for initial units.

    Products backlog is lumpy and hard to predict.

    Expects ’09 to be another growth year. Notes that most problems mentioned on the call refer to ’08, not ’09

    State that they are trying to grow all business segments; have made aquisitions in the subsea products areas. Don’t seem interested in divesting any units.

98. Re MMR – no, I followed them initially for their work at Flatrock and then later as a play on Blackbeard which looks to me to be a complete boondoggle.

99. OII call over. Tone was cautious but not pessimistic. Happy with the 19% growth achieved (that may have referred to a particular segment, not sure) but unhappy that they hadn’t hit the ball out of the park for ’08 as they had thought they would.

    Will listen to the earlier part when it is available.

100. Z – This is 100% off topic but would you ever go long Gazprom stock for a longterm hold?

101. V – maybe since they plan to corner the LNG market, only half lol. I haven’t looked at valuations but long term it seems like a good idea. LUK interesting too but its a bit afield from what I do so you’d be better off asking your Goldman guy’s opinion.

102. They are only cornering the European market… relax, lol.

103. WLL call still going on. Long winded guys with lots of good stuff to say. They did just say that they have about 170K acres in the area southwest of their usual hunting grounds, sounds like CLR country and that half of it looks prospective for the TFS.

104. WLL has sized their oil line to handle 115,000 bopd from North Dakota Bakken area. They’re doing about less than 10,000 bopd from the Parshall/Sanish area now. They expect to see big long term boost from the middle Bakken, the Three Forks Sanish and some of that capacity will be carried for third parties.

105. XOM spent $58MM/day in the 2nd quarter on exploration and production…

106. OII recovering a little after call, perhaps not as bad as some thought?

     Z – I gather you thought -9% was excessive given that the numbers were only slightly trimmed?

     I was trying to weigh up what would be a fair price just now: would expect it to test the high $50s in the next few days unless we get a return to the “sea of energy love (TM)” and/or a spinner.

     But maybe I’m being overly pessimistic there when the stock is already back to year-ago levels. Could argue that the news yesterday provides a downside test today.

     Whaddayathink?

107. Brian – I know. I was never a service analyst but rubbed elbows with them. They will use stats just like that in telling people why they should be buying SLB – that kind of spending is off the hook (and still they can’t grow!)

108. What are the prospects of US exporting LNG to Europe or Japan?

109. Cuba & China will drill off of Florida but the US Congress will not allow it.

     Reason number 88 why I will never vote for a Democrat

110. Re – OII, I haven’t read that transcript yet but appreciated your play by play while I listen to the marathon WLL call. I’m going to read and then decide but yeah, I thought it was the kind of over reaction you get in this kind of market but that said, it could get worse. Will let it settle for this week and think about it next week in earnest. No spinners look likely to crop up over the weekend. Plus I did not understand their GOmex rig activity comment. Everything I’m hearing is point to a stabilization…it has been weak but has lately improved. With the rig ads they should be looking at adding more ROVs to the market and at better rates. If they are not thinking that way both Gomex and international then something has changed that I don’t get.

     WLL would be up $10 on this call on a good day. Talk about ugly spreads on options though.

111. Cargo – if it happens I’d say its a 2012+ event. With the Barnett, the key driver in Texas and U.S. gas production expected to peak next year we will be in a fairly balanced market. It will be up to the Haynesville to ramp up and replace those volumes as they begin to decline so maybe we get good growth next year with peak of the Barnett but Haynesville just being to climb. This leaves 2010 in question for similar growth but I’d bet on lower and not upper single digits as the old shale may decline off some and the new shales accelerate. Marcellus will be slow with little meaningful contribution until 2011 so I’d say if it happens it will be after that. There is a lot of other states contribution that is coming up but in terms of size, the HS and later the Marcellus will mean the most.

112. Cargo Part II. I think at that point, new sources of demand crops up so even if we did send some out, it would likely be small.

113. LNG- it takes 1 MCF to compress 6MCF. This is line loss and compression fuel.

114. Nigeria stirring it up with Cameroon.

     http://uk.reuters.com/article/oilRpt/idUKL164501020080731

115. 10:18 am EST

     Nymex Crude Lower On Weak US GDP Data

     By Carolyn Cui
     Of THE WALL STREET JOURNAL

     NEW YORK — Crude oil futures Thursday failed to hang on to the previous day’s gains, as demand concerns resurfaced following the release of weaker-than-expected U.S. economic growth data.

     Light, sweet crude for September delivery traded 45 cents lower, or 0.35%, at $126.32 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $1.19 lower at $125.91.

     Oil futures made a brief attempt to push up higher, but turned negative zone when the Commerce Department reported that U.S. gross domestic product rose 1.9% in the second quarter, lower than the market’s expectations. Sparking renewed fears of a U.S. recession, revised data showed that GDP actually contracted. Previous estimates had the U.S. economy growing slowly at the end of last year.

     Weaker economic growth indicates lower demand for oil products. Adding to the anxiety, analysts point to the disappointing U.S. oil demand figures, with gasoline demand off by 2.4% below the same period last year.

     Energy investors enjoyed a long-awaited rally Wednesday, prompted by a 3.5-million-barrel decline in U.S. gasoline inventories. Crude oil jumped 3.8% to close at $126.77 a barrel, and gasoline was up 4.24% to settle at $3.1351 a gallon.

     Wednesday marked a break in oil’s downward spiral over the past few weeks, with prices shedding 16% from its all-time highs of $145.29 hit on July 3.

     After a closer look, analysts found cold pockets in the inventories report.

     “The EIA data itself was not that bullish, but participants nevertheless latched on to a surprise draw in gasoline,” wrote Edward Meir at MF Global. For example, crude oil dropped by 100,000 barrels, less than the market’s expectation; distillates rose 2.4 million barrels, a bigger-than-expected build.

     However, some traders believe the market has shown some resilience due to the buying back of previously sold positions, as well as new money entering the fray.

     “There’s been a massive liquidation, and there’ll be buyers at this level,” said Victor Sperandeo, president of Alpha Financial Technologies LLC.

     Front-month August reformulated gasoline blendstock, or RBOB, recently traded down 2.51 cents, or 0.8%, at $3.1100 a gallon. August heating oil traded 2.13 cents lower, or 0.61%, at $3.4990 a gallon.

     —By Carolyn Cui,

116. Oil Production at Integrated Majors [XOM, Shell, Respro(Spain)] all declining. ENI says it will trim production in Q4 and miss it’s 2008 production goal………..all leading toward increased dependency on unstable import sources for their various client states [USA, Italy, Spain, etc].

117. Crysball, I know re the Majors. But we are in perception land at the moment. At least oil has not fallen through yesterdays lows on the GDP freakout.

     DUG up 5% after a 12% drop yesterday.

118. Odd little article about MEND’s current leader.

     http://www.vanguardngr.com/index.php?option=com_content&task=view&id=13010&Itemid=42

119. Z – Agree not sure what to make of the GoM comment. I just found it again in the replay. In discussing subsea products, they note a lower utilizationn of their IWOCS (Installation Workover and Control Systems) fleet and then say:

     “Really we’ve seen pretty flat drilling activity in GoM this year and I think we were just too optimistic in our expectations for that business”

     Just listened to the ops update at the start of the call. Very positive on ROVs. Lots of details on why subsea projects are a bit slower than expected, but still positive overall.

     Details of ops update (hopefully not too scambled by me):

     First part of OII call:

     Midpoint of new ’08 EPS range is only 3% lower than previously indicated.

     Subsea products:

     Backlog up but not as much as expected.

     Still achieved 19% growth rate in this segment.

     BOP control systems: expense overruns in engineering, but pleased with their improving capacity to supply this new product line into what they see as a growth market due to all the new floating rigs on order.

     Expanding area of operations into UK & West Africa:
     Initial expenses have been higher than anticipated.

     Project delays partly responsible for reduced subsea products orders.

     ROV’s:

     all sounds positive.

     ROV margins improved.

     Growing ROV fleet about 10% in H2

     Performance: “exemplary”
     Outlook remains “very bright”

     Subsea projects:

     YoY declined as expected due to Katrina winddown
     Large new contract awarded in GoM employing a new ship to commence in Q4

     Inspections: best performance ever. New contracts coming in.

120. Z – I just noticed that there is a bullish comment from Trader Vic at the bottom of Sam’s #115

121. Dman – Nice overview. Thankyou for that.

     The Vic’s not wrong, that’s why he sells all those books.

122. 9.029 is the 61.8 retrace of the rally off yesterdays lows in natural gas. 9.085 the 50% retrace….

123. I’m having a great day. Bought a Winchester Model 1894 Lever action 30-30 at an estate sale. Made my day. I wish I had bought it with energy profits though.
     apbd

124. A little torn in my opinion on natural gas at present.

     1) I think it is oversold and due a rally

     2) I never think it should have gotten as high as it got so that mutes the size of said coming rally.

     3) Traders seem to have finally taken notice of increasing volumes from the shale plays, something I was noting a while back when I bought puts in vain on the UNG.

     4) traders are now missing out on the pace of deliverability increases…overestimating it and forecasting a glut next year (see commments to cargo above)

     5) the pendulum always swings further than we think.

     6) traders are focused on storms that could impede Gomex and Gulf Coast production.

     7) traders are not focused on heat other than to say it won’t last which is not what my weather sources show

     8) sell the rallies seems to be in place here on crude (which I think will also bounce) and that impacts gas prices which trade largely in concert with oil.

     9) so while I think it will bounce, it may bounce from a much lower level, say $8.

     10) Hopefully, it holds $9 or the recent lows just below it. If not, we could vacuum down to $8 in the absence of further data points for a week.

     11) At that point, Aubrey’s hedges look pretty smart.

125. Crude Rally Tied To Gasoline May Be Shaky

     By DAVID BIRD
     A DOW JONES NEWSWIRES COLUMN

     NEW YORK — A surprise drop in U.S. gasoline inventories sparked a near 4% jump in crude oil futures prices Wednesday. But the gain may prove fleeting heading into the expiration Thursday of August-delivery petroleum products contracts.

     Despite the inventory drop, stockpiles are ample and demand remains sluggish as the summer driving season heads into its final month. Still, the winding down of peak gasoline demand comes as the potentially perilous Atlantic hurricane season enters its strongest phase.

     Gasoline futures prices dipped early to $2.9850 a gallon on expectations that inventories would show a rise. A sustained futures price at that level would put retail prices at around $3.60 a gallon, last seen in April, and well shy of values hugging $4 a gallon.

     But instead of a modest 200,000-barrel rise, the Energy Information Administration said gasoline stocks fell 3.5 million barrels on a combination of lower refinery output, reduced imports and the strongest weekly demand since Aug. 31, 2007.

     Gasoline futures quickly recovered, spiking to a high of $3.1449 a gallon, on the way to a settlement of $3.1351 a gallon, up 12.74 cents, or 4.2%. That’s the biggest rise in percentage terms since June 11.

     The price surge was amplified by position adjustment ahead of the August contract’s expiration on Thursday.

     Michael Wittner, global head of oil research at Societe Generale in London, said the gasoline drawdown was “the only bullish item” in the data, but not enough to justify the accompanying surge in crude prices.

     New Price Floor, Or Last Twitch Higher?
     After holding resistance near the critical $120-a-barrel level for the second-straight day, front-month September crude oil futures jumped 3.7%, or $4.58, to settle at $126.77 a barrel.

     Wittner said it’s unclear if the market has put in a new bottom or if its experiencing “a classic dead-cat bounce.” Crude futures have dropped 18% from a record intraday high of $147.27 a barrel on July 11 to Tuesday’s session low of $120.42 a barrel.

     Crude’s rebound Wednesday, from a fall Tuesday to its lowest level since May 6, also was spurred by Goldman Sachs’ reiteration of its $149-a-barrel year-end forecast.

     Ironically, the same Goldman report that stirred buying interest in asserting that global fundamentals support a $132 oil price now and $149 by year-end warned that prices could drop to $110 quickly, if the $120 level was breached.

     Goldman, which has tweaked markets in recent years with long-term bullish predictions, said recent large financial liquidation in crude oil left prices close to levels where a large amount of put options are struck, underscoring the risk of further selling. A put option gives the holder the right to sell at a certain price.

     The current situation was likened to that in early 2007, when a weather-related selloff was accelerated by options moves, pushing prices below $60 a barrel.

     “Now a similar amount of open interest is concentrated around $120/bbl, $110/bbl and $100/bbl, underscoring that if prices fall below $120/bbl, a further correction to $110/bbl cannot be ruled out,” Goldman said. But, this time, the “majority of put contracts are likely held by active financial players, such as hedge funds, as opposed to producers.” Such speculators “are more likely to sell back the option as they get closer to being in the money,” decreasing the need for financial traders who sold the puts to sell oil futures to hedge their positions.

     But Goldman said it expects any such selloff, spurred by fears of demand weakness in the U.S., to be fleeting.

     Still, it would take a selective reading of latest U.S. oil data to make a strong bullish case.

     Weakest July 4-Week Demand In 5 Years
     U.S. gasoline demand rose 1.3%, or 126,000 barrels a day, to an 11-month high of 9.468 million barrels a day in the latest week. But it was still 2%, or nearly 200,000 barrels a day, below the year-ago level for the week.

     Gasoline use in the latest four weeks averaged 9.375 million barrels a day — the most since mid-September — but down 2.4% from a year ago, while year-to-date demand is down 1.5% from a year ago, EIA data show.

     Total oil demand in the last four weeks, at 20.156 million barrels a day, is down 2.4% from a year ago and the weakest level for this time of year since 2003. The year-to-year decline of nearly 500,000 barrels a day is the biggest drop since mid-March.

     Government forecasters early this month projected July gasoline demand would average near 9.6 million barrels a day, with total oil demand for the month at 20.6 million barrels a day.

     Inventories are running ahead of forecasts and near or above five-year average levels for crude oil, gasoline, heating oil and diesel fuel.

     Antoine Halff, an analyst at Newedge USA LLC, said neither weaker refinery output nor lower imports are particularly bullish factors for gasoline “and the price rebound may thus prove a short-lived, knee-jerk reaction” to the data report.

     Long-time bulls at Barclays Capital in London argue that the year-to-year drop-off in U.S. gasoline demand is “more on the scale of a scratch on the fender than any act of demolition.”

     How U.S. drivers react to gasoline prices below $4 for the first time since early June may well be “one of the key drivers of sentiment in the oil market” in coming weeks and months, Barclays Paul Horsnell said in a report. He contends that prices below $4 a gallon could restore “a sizeable chunk” of the demand decline.

     —By David Bird, Dow Jones Newswires

126. apbd that was my grade school grad present in 1957.

127. Unlimited Free Ethane…if you can gather it:

     PASADENA, California (AP) — At least one of many large, lake-like features on Saturn’s moon Titan contains liquid hydrocarbons, making it the only body in the solar system besides Earth known to have liquid on its surface, NASA said Wednesday.

     An image of Titan’s surface shows what scientists believe are bodies of liquid, shown in blue.

     Scientists positively identified the presence of ethane, according to a statement from NASA’s Jet Propulsion Laboratory in Pasadena, which manages the international Cassini spacecraft mission exploring Saturn, its rings and moons.

     Cassini has made more than 40 close flybys of Titan, a giant planet-sized satellite of the ringed world.

     Scientists had theorized that Titan might have oceans of methane, ethane and other hydrocarbons, but Cassini found hundreds of dark, lake-like features instead, and it wasn’t known at first whether they were liquid or dark, solid material, JPL’s statement said. iReport.com: Share your images of Saturn

     “This is the first observation that really pins down that Titan has a surface lake filled with liquid,” Bob Brown, team leader of Cassini’s visual and mapping instrument, said in the statement.

     Perhaps Obama will make this part of his National energy plan to complement corn Biofuels.

128. Z Was on vacation for the last week. Have not had time to read the last weeks comments. Are there any companies that have released their numbers that look undervalued? I know it will hard to be aggressive until the markets stabilize. Just looking to monitor a top few. Did you look at NE? Thks

129. Crys – don’t tell Aubrey, can’t afford another equity deal to get there at the moment. And imagine the pipe shortage.

     Tom – Did not look at NE numbers yet as I don’t own at present and am a bit away from that story. Best calls of the quarter so far goes to NFX so far, not that you can tell by the stock and to SWN today. On the service side, set up for long term growth are HAL and SLB. SLB had a much better call than in several quarters and trades where it did last quarter when the outlook was more tentative. WLL’s call today was very positive and that stock is not expensive.

     From Sam’s comment above ~ “How U.S. drivers react to gasoline prices below $4 for the first time since early June may well be “one of the key drivers of sentiment in the oil market” in coming weeks and months, Barclays Paul Horsnell said in a report. He contends that prices below $4 a gallon could restore “a sizeable chunk” of the demand decline. ” I agree completely and would that add that the same applies to the gas stations who will take on more inventory now that prices are coming off a bit.

130. Uncle Phil

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

131. # 124

     11) At that point, Aubrey’s hedges look pretty smart.

     at one point i wish he didnt hedge as much as he did, but yes it looks very smart

     q2 earning will be impacted ny the mark to market value at 6/30 which was over 13.00. This will cause a massive loss in reported earnings..yes i know analysts will ignore it but it doesnt inspire enthusiasim for the stock price

     the entire liability was unwound in 4 short weeks which will show up in q3

132. apbd – I’ve got an all chromed and black supposed to have been used as a prop on the Paladin series.

     Bill – I am wondering why Bush doesn’t use the Presidential order?

133. Sharp end of day rally to close oil down “only” $2.60 at $124 after brief trading into the $122 just before the NYMEX close.

     SLB once again going positive.

     WLT on CNBC and then Cramer touts it half an hour later. Hmmm.

134. Well Z, Crameroo called a bottom to the market. I thought it took three days to confirm a reversal.

135. I assume he called a bottom on the broad market and not the oil market. I keep holding my breath for him to tell me when to start buying energy, lol

136. All of today’s action just looks like end of the month fund shenanigans. “Can’t have any energy stuff on the books when we send out the statements!”. I am sitting on my hands and waiting for the month to end.

137. Bleemus – tend to agree.

138. QBIK gets contingent approval for Amex listing, stock goes up 14%. That’s just dumb.

139. Z – QBIK being added to the Amex Aug 4th. up 15%.

140. CNBC – have Greenspan on live talking about what the Fed should do etc. Helloooo America this is the guy that got you into this mess in the first place!

     Broader market – higher highs are still favoured in the days ahead. SPX you reach 1291 and higher and a cycle high is due by early to middle of next week.

     Still favoring a move higher in oil ….

141. Another day out behind the woodshed.

142. Z – any last minute pearls of wisdom on CHK? 🙂

143. Will have a gas storage update with supply graphs out sometime shortly after the close.

     Will add a section on demand, just looking at those numbers now. Electricity demand growth continues to be impressive.

144. #136

     I think it goes beyond just end of month stuff. I am seeing very odd patterns that keep repeating themselves, goofy volumes, outright attacks timed to news (and the opposite). Plus we are seeing moves that should take at least a month or a week being done in one day. I had a short on RIG that I put on at yesterday’s close that I obviously closed way too early as I could not believe the speed of the move down.

     Looks to me like the fundies that aren’t allowed to play their game in the financials are throwing their little black boxes around in the energy names. New sheriff in town.

145. Isle – wrote this earlier, not much to add:

     Speaking of CHK, I don’t doubt they beat on CFPS tonight,

     I think they will not be upping guidance on volumes.

     I think they talk oil shale,

     I think they talk more about the HS and possibly west Texas Woodford and Barnett, and I expect very strong improved well econ in the Fayetteville Shale.

     Whether that will be enough to get the stock off its butt I cannot say but I’m leveraged that direction.

     I would add that I expect them to please the crown on Reserve Additions going more than halfway towards their 2008 with this afternoon’s report.

     I hold August $50s, $52.50s (off the books as it was a partial fill and it ran away from me yesterday) and near worthless $57.50s and $67.50s. With 16 days to go to expiry the $57.50s still have a shot at being interesting. The $67.50s will go over the side if we get a pop which I’m not really expecting.

146. Anyone buying CHK on this dip before earnings?

147. XOM sets record profits and shares fall 5%. So is it really XOM that bricked or the analysts that follow them, lol. No doubt, their IR dept could have done a better job of cajoling numbers lower but to see the stock drop $21 billion in mkt cap after announcing the best profits in history the history of the world despite the weak refining side is just silly.

148. Tks Z. I continue to reflect on that GS cash flow analysis and their CHK targets…..we’re comically so far below their “bear” target of $64, nevermind their $91 base case. I have backed up the truck.

149. Orion – I’m there in common and the options above.

150. Z – CHK – thanks for your take – I was thinking of selling the $57.50’s if we get a spike. Decided not to add anything before the close.

151. Isle – not like anyone listens to Goldman anymore but they should be forced to upgrade their rating to Buy tomorrow. Unless their price targets just have no meaning.

152. QBIK – that price values their Haynesville acreage at over $75K per acre…no sale!

153. bloodmarythirty!

     Somebody shout when CHK announces

154. Well that takes care of 70% of yesterday’s move in the XLE and OIH.

155. CHK 89 cents

156. when does hk come out?

     Any good buyout rumors?

     Also, with ng at 9 instead of 13, doesnt that make it harder for chk to spin off partial interests like the pxp deal?

157. chk on hedges:

     Recent extreme volatility in natural gas and oil prices has created wide swings in the MTM value of Chesapeake’s hedges. For example, from June 30, 2008 to July 25, 2008, the MTM value of the company’s hedges moved in the company’s favor by approximately $4.7 billion. Should prices on September 30, 2008 be the same as prices on July 25, 2008, substantially all of the 2008 second quarter unrealized MTM loss would be reversed and reported as a unrealized MTM gain in the 2008 third quarter. Because of such pricing volatility and in order to secure strong and predictable profit margins, Chesapeake prefers to hedge much of its exposure to natural gas and oil price swings on a rolling 24-month basis. Chesapeake’s hedging agreements have been structured so that cash margin requirements are generally not required by the 22 counterparties it uses to hedge its production.

158. does anyone know a web site that shows live up to the minute commodities prices for natural gas and crude and coal?

159. CHK DOWN A BUCK AFTER HOURS FWIW

160. FWIW, they’re selling before they’ve read the release.

     Reserve replacement in the first half north of 400% at a all in finding cost of $1.49 / Mcfe. They pegged mid year reserves at 12.2 Tcfe, well on their to their annual goal.

161. Chk down 2 now

     Probably will be down 5 tomorrow , i havent seen anything negative in the report

162. >FWIW, they’re selling before they’ve read the release

     lol- you are right as I’m still going thru it!!

163. What would really juice this stock to the upside is if they sold off some asset backed commercial paper to a hedge fund for 20 cents on the dollar and financed 2/3 of the purchase price. I figure that should be good of eight or nine points to the upside.

164. HOw did the chk report go? What time does after hours trading end?

165. After hours trading ends at 8PM EDT.

166. Its making a comeback of sorts and is now 49.30 as of this writing

167. here is money coming in

     ompany Agrees to Sell 93 Bcfe of Proved Reserves for Proceeds of Approximately $605 Million, or $6.50 per Mcfe, in its Second 2008 Volumetric Production Payment Transaction

     The company has recently agreed to sell certain interests in Chesapeake-operated long-lived producing assets in the Anadarko Basin in its second volumetric production payment transaction in 2008. Chesapeake will sell assets with estimated proved reserves of approximately 93 bcfe and current net production of approximately 50 mmcfe per day for proceeds of approximately $605 million, or $6.50 per mcfe. Chesapeake will retain drilling rights on the properties below currently producing intervals and retains all remaining production after approximately 11 years. For accounting purposes, the transaction will be treated as a sale and the company’s proved reserves and future production will be reduced accordingly. The transaction is expected to close in early August 2008. The company also plans to pursue other undeveloped leasehold sales to high-grade its inventory and monetizations of mature producing properties as needs and opportunities arise

168. >Chesapeake can continue increasing its net asset value by at least $10 billion per year, assuming NYMEX natural gas prices average above $8.00 per mcf.

     thats worth 20 bucks per share

169. the good stuff..

     We are also excited to provide updated information on our Barnett, Haynesville, Fayetteville and Marcellus shale plays. All of them are working exceptionally well and, in many respects, we have just scratched the surface of the potential of these plays, especially the Haynesville Shale. Our most recent Haynesville Shale well, the Milton Crow 27-1H, is producing approximately 14 mmcfe per day on a 24/64 choke at flowing casing pressure of more than 5,800 psi. We have now completed 11 horizontal wells in the Haynesville Shale and our current combined gross production from these 11 wells is approximately 45 mmcfe per day. We are extremely pleased with the data points we have seen in the play to date and are eager to begin ramping up our drilling activity with our partner, PXP. By the end of this year, we anticipate using 12 rigs to develop our 450,000 net acres of leasehold in the play and, on average, should be able to complete a new Haynesville well every five days.

170. CHK: good production volumes, good reserve growth as stated above,
     reported CFPS of $2.77 vs Street at $2.37 so nothing to squawk about there as they beat the highest end of the Street.

     Guidance stayed the same which should have been expected, was by me, as they just upped it a couple of weeks ago. 3Q guidance and beyond for costs is in line with prior (same on LOE for 2009 and 2010 as previous) so again, no problem.

     I’ll have a piece out on CHK later tonight with a little more color. The five days per well comment is a starting point and will quickly add reserves and volumes here based on the mid teens IPs we are seeing.

     The VPP was in line with their previous statements of $650 mm. Some analysts consider those debt as they are a future obligation to produce the volumes and give them to a third party. I say monetize limited upside properties all you can in exchange for the IRRs provided by Haynesville and other plays.

171. Doc – I don’t have a free site that does live commodity quotes but Nicky or Sam mentioned one awhile back, I’ll ask them to give it to us again tomorrow.

172. Doc re #158 – I think this site is real time http://nymexdatardc.cme.com/index.html

     and this one as well http://www.livecharts.co.uk/MarketCharts/crude.php

173. Lone Star Land Development now in area front running to acquire blocks of acreage to co-op w/ big boys or flip.

     Current offer is 25% royalty, $10,000/acre, 3 year primary term, option to renew for 2 additional years for $10,000/acre.

     Pending agreement on other lease terms I’m going to say “yes”. Buying acreage N to the Arkansas line.

     JR

174. >The VPP was in line with their previous statements of $650 mm. Some analysts consider those debt as they are a future obligation to produce the volumes and give them to a third party. I say monetize limited upside properties all you can in exchange for the IRRs provided by Haynesville and other plays.

     HOW DO THESE WORK

     THEY GET 650 M UP FRONT

     and then they deliver enough gas to pay it back?

     Who incurs expenses?

     What yields is assumed

175. China wins Niger Oil Concession

     A multi-billion dollar oil deal between China and the west African state of Niger has been denounced by unions and transparency campaigners.

     Civil rights groups in Niger are calling for a parliamentary inquiry into the $5bn (£2.5bn) contract and for scrutiny of how funds will be spent.

     China’s state oil company was given oil exploration rights in Niger in June.

     There is widespread concern that the people of Niger will not benefit from the country’s oil wealth.

     For centuries Africa has failed to gain much benefit from its enormous mineral deposits; they were plundered by colonisers and during wars.

     But even when the governments of independent African countries have signed deals with mining companies, the people in those countries have rarely benefited.

     Now as resource hungry China expands its business in Africa there are claims that a lack of transparency will once again prevent the people from gaining.

     Secrecy

     China recently said it would invest $5bn in Niger over the next three years to develop oil production.

     But a coalition of organisations in Niger has called for a parliamentary investigation into the deal and an examination of how the funds resulting from the agreement are spent.

     A mining union in Niger said the deal with China took place in the greatest of secrecy and with contempt for regulation.

     It is not easy changing the way such deals are struck – political and business elites often have a vested interest in avoiding transparency.

     Even when a company or investor wants to disclose the details of a deal, it risks losing its license to a less scrupulous competitor.

     There are plenty of examples where governments have failed to do business in the interests of the people they serve.

     It has been alleged that for several years Angolans were losing out on more than $1bn every year as oil revenues were misappropriated.

     Unless the deals are transparent and accounts published, it is almost impossible to spot any corruption.

     That is why campaigners are now making noise in Niger as they hope China’s vast investment will break the mould and actually benefit the population.

176. Bill – you got it. Usually you do these on low upside, long life reserves. Somebody wants the gas so they give you the money up front. Then you operate is and at the end of the term, 10 or 15 years, you get the asset back as like it never happened (less the production in between). The contracts for these are detailed on costs so there will be protections for CHK in that regard. As to yield, I can’t say as they vary but it is attractive to monetize a low upside asset and plow those funds back into a higher return areas. The in ground price they received was pretty good considering up until this year most asset deals were done in the $2 to $4 per Mcfe range.

177. China is in a massive global land/oil grab. If you look at their participation in the development of Sudan’s oil production, the story is pretty telling. When TLM was in for a quarter the Canadians built schools and hospitals and other public works. Human rights groups forced the Canadians out. The Chinese don’t care about Amnesty International or any other human rights group and so they stayed and now, well, I don’t think CNOOC is building a lot of schools.

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