Monday Bloody Monday


Hurricane Ike was a big, bad storm. However, it did not bring with it the catastrophic storm surge, at least for the oil industry, that many had predicted. Initial reports showing a lack of extensive damage surfaced late Saturday and early Sunday and trading on Sunday saw crude fall as low at $98.46. It will take a few more days to fully assess the damage to energy assets but a lack of photographic evidence of submerged refineries was enough to send gasoline tumbling over a dime. Platform and pipeline damage in the Gulf is a different story however and appears at first flyover to be worse than that suffered during Gustav. A number of platforms (unnamed as of yet) have been described as "destroyed" while onshore a high percentage of Gulf Coast natural gas processing facilities remain offline. The were a number of salient comments on the weekwrap post so click here if you missed it--- or use the calendar at lower left. At present, sentiment in the crude market remains poor and chart oriented and I continue to tread lightly.

Outside of Energy Land Watch: Lehman plans to file bankruptcy, B of A is buying Merrril, and AIG is hitting the Fed up for a $40 billion bridge loan to avoid rating agency downgrade or they will likely be toast in 48 to 72 hours. Here's an article worth reading on what went wrong with Lehman and the Street. And here is the Fed's response.

In Today's Post:

  1. Commodity Watch
  2. Ike Impacts
  3. Stocks We Care About Today
  4. Odds & Ends

Commodity Watch:

Crude oil traded down 5% last week to close at $101.18. In yesterday's expanded storm session, crude traded off about $2 and this morning the collapse of Lehman and the threat of a global meltdown and fund liquidation has oil off another $4. Traders "want" crude lower and not OPEC cuts (which by the way have gone from a rumor that Saudi won't abide by them to a fact in the press although there is apparently no new data) and not renewed hostilities in Nigeria can keep crude up. Nicky noted over the weekend that  major support lies in a range of $93 to $96 and I would point out that crude is down $21 since Gustave "disappointed" on September 2.

  • Nigeria Watch: MEND Declares War. Over the weekend the Nigerian Military attacked a MEND camp and in response, MEND launched "Hurricane Barbarossa" (not to be confused with the last operation of the same name which was a complete loser), a campaign of press releases and attacks on production platforms and pipelines. MEND told foreign oil companies to withdraw their workers or else. The group claims to have attacked platforms run by Chevron (confirmed) and Shell (unconfirmed) and to have blown up major trunk lines in several locations. This morning Shell has begun withdrawing some workers after one of their flow stations was attacked abandoning the station. No word yet on 


  • Dollar Watch: Still retreating from the 80 level and looking like it has faith in all the rumors that the Fed may be about to cut, not hike, interest rates. No action is expected at tomorrow's meeting but fed fund rates now point to a cut before year end. China, by the way, cut interest rates overnight for the firm time in 6 years.

Tropics Watch: All quiet on the Atlantic front.

Natural Gas closed down just 1% last week to end at $7.37. Unlike crude, the concept that platforms were damaged and that a large percentage of Gulf Coast natural gas processing will remain offline for perhaps weeks was not lost on the weekend trading crowd. Natural gas continues to attempt to put in a bottom in the $7 to $7.50 level. This morning gas is trading off only 2% which is not bad considering the doomsday sentiment on everything today.

Ike Impacts -  gathered from a variety of sources including our own.


  • Oil: 1.3 mm bopd (100% of Gulf production) offline - expect this to ramp back over the next two weeks less a small amount that will be off longer due to damage.
  • Natural Gas: 6.8 Bcfgpd (90%) offline. Ditto comment above. There is another 2/3rds of a Bcfgpd in the state waters that is largely shut down as well.
  • Shell reported some amount of moderate platform damage
  • Chevron reports several platforms damaged


Natural Gas Processing:

  • 30 processing plants with an aggregate processing throughput of 14 Bcfgpd are offline and awaiting power and inspections.

Imports: The LOOP is undamaged and resumed operations Saturday morning.

Refineries: In aggregate 3.9 mm bpd (21% of U.S. capacity) was affected. This represents 1.4 mm bpd of gasoline and 1.0 mm bpd of distillate production. Some highlights:

  • Shell's 325,000 bopd Deer Park refinery "needs repairs". No eta on restart.
  • Shell's 235,000 bopd Convent, LA plant is still unable to produce finished product two weeks after Gustav.

Stocks We Care About Today: Not that it will matter today...

Dan Rice of Blackrock Global Tells Barron's (XCO) or (HK) to be bought. Dan is a smart guy and of the two he said HK is the more likely to get picked off. 

Odds & Ends

Analyst Watch: Morgan Stanley cuts price targets for 22 oil service firms and says service companies are currently discounting a $70 to $80 per barrel environment. On average the cuts were from 5 to 10% in magnitude and most names remain rated outperform. UBS took just about all the airlines except hedged (LUV) to Buy.


174 Responses to “Monday Bloody Monday”

  1. 1
    Sambone Says:

    Z – I was right, Bazooka Paulson was busy this weekend.

  2. 2
    Sambone Says:

    8:37 am EST

    Crude Slumps On Ike, Financials Fallout

    By Nick Heath

    LONDON — Crude oil futures plunged more than $7 from Friday’s closing levels in European trade Monday on anticipation that Hurricane Ike caused only minimal damage to Gulf of Mexico oil and refining installations, and as turmoil in the financial markets weighed on crude trading.

    Crude prices traded at their lowest levels since February this year Monday, after news that Lehman Brothers Holdings Inc. (LEH) has filed for bankruptcy protection and Merrill Lynch (MER) sold itself to Bank of America (BAC) walloped sentiment, and reinforced concerns that oil demand is set to suffer amid deteriorating economic conditions.

    Reports of weekend militant attacks on oil Nigerian oil installations failed to make inroads into prices Monday, overwhelmed by the surge of bearish developments.

    “With yet further turmoil in the U.S. likely to hurt U.S. demand for oil and also other economies and their demand for oil, it seems likely that we will see further impact on industrial commodities for a while,” said Michael Davies, head of research at Sucden Research in London.

    At 1155 GMT, the front-month October Brent contract on London’s ICE futures exchange was down $5.38 at $92.20 a barrel, up from a $91.17-a-barrel intraday low. The October contract expires later Monday.

    The front-month October light, sweet, crude contract on the New York Mercantile Exchange was trading $5.75 lower at $95.43 a barrel. It had earlier dropped as far as $94.13 a barrel.

    The ICE’s gasoil contract for October delivery was down $55.75 at $884 a metric ton, while Nymex gasoline for October delivery was down 2243 points at 254.53 cents a gallon.

    Lehman’s bankruptcy filing hammered market sentiment, analysts said Monday and rushed participants into scaling back risk, exiting crude.

    “I think this is more to do with Lehman than to do with Ike — Ike has been consumed by all the Wall Street news,” said Jim Rintoul, analyst at London-based trade advisory TheOilTrader.com.

    “There hasn’t been significant damage offshore but there has been damage to refining capacity. That’s bearish crude anyway because demand for crude will be down because refineries are down. But I think the bigger picture is just fear from Lehmans — there’s a fear of contagion. I can’t see why anyone would buy this in size right now.”

    A London-based oil trader agreed. “Financials outweigh the fundamentals here,” he said.

    Prior to Lehman’s declaration, crude prices were already under pressure from initial reports that Gulf of Mexico oil production facilities hadn’t suffered significant widespread damage in the wake of Hurricane Ike. However, problems with power outages looked set to hinder the return of some refineries and hinted at possible refined product supply problems.

    “Participants sensed that the weekend would be “make or break” time for the oil markets. From the looks of things, it is more “break” than “make’, in that Ike generated far less damage than was expected,” said Edward Meir, analyst at MF Global in New York.

    Oil producers and refiners began the process of assessing platforms and refineries Sunday, with personnel being redeployed to some offshore facilities.

    Ike appeared to have destroyed about 10 production platforms and damaged some pipelines in the Gulf of Mexico, the Associated Press reported the U.S. Minerals Management Service as saying. A total of 591 production platforms, equivalent to 82.4%, of the 717 manned platforms in the Gulf of Mexico had been evacuated prior to Hurricane Ike’s arrival, the MMS said. Approximately 99.6% of the oil production in the Gulf remained shut-in, it said in its latest update Sunday.

    Meanwhile, the U.S. Department of Energy reported nearly 3.9 million barrels a day of refining capacity in the path of Hurricanes Ike and Gustav was offline Sunday.

    Chevron Corp.(CVX) and Royal Dutch Shell PLC (RDSB.LN) Sunday said they were looking into reports of attacks at or near their Nigerian facilities following claims by militants that they had attacked facilities operated by the two majors.

    Nigeria’s main militant group, the Movement for the Emancipation of the Niger Delta, Sunday declared an “oil war” in the region after saying the Nigerian military had attacked its members in recent days.

    Despite militants’ proven record in damaging oil production infrastructure, the market shrugged off the reports, focusing more on Ike’s passing and the roiled financial markets.

    “Some disruptions (in Nigeria) are likely but a disruption premium needs to be taken off in the U.S….after the lack of structural damage from Ike,” said Olivier Jakob, managing director of Swiss oil consultancy Petromatrix.

    —By Nick Heath; Dow Jones Newswires

  3. 3
    zman Says:

    You were right on Paulson, Bernake got no sleep either. Still no fix though. Thoughts on tomorrow’s fed decision.

  4. 4
    Wyoming Says:

    Our Barnett gas shut in due to Liquid processing station (Mt. Belview?) being down due to electricity. You might understand better than I, could effect gas from West Pan and Rockies too if it is where they are sending the NGL’s.

  5. 5
    zman Says:

    Wyo – Don’t know about that. With so much processing capacity offline there is definitely going to be a weird number next week on storage. Some production will get shut in as you can’t just put untreated or unstripped gas (if the btu content is too high) into the system.

  6. 6
    zman Says:

    Big moves on next to no volume so far in the stocks. Trades look delayed, out of order.

  7. 7
    Sambone Says:

    Z – Fed probably will do nothing. If anything they will lower because they are scared to death. Everybody should realize that this is a lifetime event. The Fed has never taken low quality assets to lend against. IMO, GS and MS are gone.

  8. 8
    zman Says:

    When you say gone?

    Also, it seems to me a sign of the apocalypse that they would consider loaning money to AIG.

  9. 9
    Sambone Says:

    Z – See MER/LEH. This stuff is not over. 10% of all loans in the US are non performing. The OTC Derivative market is 600 Billion. If any counter parties don’t pay their side, game over. So LEH has Swaps, who steps up for their side. Does BAC have any FRE or FNH preferreds on the book? Who knows what is the question. This is not over.

  10. 10
    zman Says:

    Saw Corzine on CNBC this morning saying GS was a different animal, better controls. Of course he used to run it.

    The dollar doesn’t believe in a cut tomorrow.

  11. 11
    Dman Says:

    Getting a bit of a downside test here. Random sample of energy stocks (HK, NBR, EOG, CHK, TSO) holding lows from a few days ago, more or less. Not too bad, considering oil has very much broken down to a new low.

  12. 12
    zman Says:

    Hear Dman , seems to be some appetite for bottom fishing the refiners above their lows from the mid last week. Pretty hard to get excited about it at this point.

  13. 13
    Dman Says:

    Z – possibility of a coordinated cut with the ECB, so maybe the dollar wouldn’t behave as per normal with a cut. Having said that, they all seem clueless, so it’s not safe to expect anything constructive. At least China got a clue with their rate cut.

  14. 14
    Dman Says:

    Z – today’s action aside, would you say the refinery-turn thesis is still intact?

  15. 15
    zman Says:

    Dman – good question. Yes. It wasn’t really a Gustav or Ike play although that was part of it. Lower oil should lead to a demand response … plus all those unemployed Streeter’s will be driving to interview for awhile (sorry for the low blow there). So the question becomes which goes down more over time, products or crude. My money is on crude as we are not pinched for supply (the LOOP is fine) but the refining segment has taken at least a small hit and inventories should be hitting significant lows over the next 2 weeks.

  16. 16
    Wyoming Says:


    Should have been a little more specific, as I understand, it is not just our gas getting shut in, it is everyone. Thought you might know more about the upstream side / marketing.

  17. 17
    md Says:

    With todays CAT 6 out of Wall St. this is small news.


    something to keep in mind for a later day.

  18. 18
    zman Says:

    Wyo – You mean all Barnett? Ok, will ask about about that. No PR’s as to Tx shut ins onshore yet.

    Thanks MD.

    Anybody have that Baron’s blurb on HK, I only saw the first 2 lines.

  19. 19
    Wyoming Says:

    Yes, and then some. As I understand if anyone say in West Pan sends gas this way, it too will be shut. Same for Rockies etc.. As I understand, this facility will process all of the liquids off gas. There are seperation plants here and there in the field but end of day, they have to be sent to Bellview. Like I said, this is not my exact area of experience but the Barnett Op’s mgr relayed this in a meeting.

  20. 20
    zman Says:

    Another sign of how $96 oil will not be a problem for the deepwater drillers. PBR announces 10 FPSO’s (floating production storage and offloading ) vessels to be added to its fleet to go after subsalt discoveries. Now, subsalt (they call it pre salt) is an expensive venture and yet they are moving ahead here. This will take a lot of wells (read as 100+) to develop. And they are leasing the deepwater rigs out to 2014/15 now. So why names like RIG continue to fall is a bit of a mystery in a vacuum.

    Note clean ETFs down too. PBW, PUW, PZD, GEX, QCLN all red.

    Solar getting absolutely drilled too.

  21. 21
    zman Says:

    Wyoming – not that it matters but it sounds like peak storage may have a shot at coming in below 3.4 Tcf.

  22. 22
    zman Says:

    Thanks, got the Baron’s piece.

  23. 23
    kyleandy Says:

    last nite on way back from BUCS game stopped at gas station and they were raising price from 3.74 to 4.04 there was a tanker truck there pumping gas in so i assumed they were reacting to a new price. yet gas is down shaply this morn. don’t understand!!!

  24. 24
    zman Says:

    Kyle – we went $4 on Friday morning around here. They should pull it back down in a couple of days, depends on where they get their gas. There is an awful lot of refining capacity offline including some in the mid-continent undergoing maintenance. This looks to be a pre-all-the-facts over-reaction with LEH having more bearing than Ike.

    Nicky support levels held so far and a bounce has ensued. We are now down on $19 from the day after Gustav (sept2). Woo-hoo.

  25. 25
    zman Says:

    CVX saying oil production not impacted by MEND attacks after 3 days of renewed fighting. Press release like that is the equivalent of painting a target on all their as of yet unscathed facilities.

  26. 26
    Sambone Says:

    HOUSTON (Dow Jones)–Citgo Petroleum Corp. requested one million barrels of
    crude from the Strategic Petroleum Reserve in an “effort to alleviate potential
    fuel shortages” caused by Hurricane Ike, the company said in a statement.
    The company needs the crude to feed its Lake Charles, La., refinery, which is
    one of the two refineries still operating along the heavily concentrated region
    of energy infrastructure stretching from Lake Charles to the Houston/Galveston
    Ike, which made landfall Saturday in Galveston, resulted in a number of
    refinery closures. There have been no reports of serious damage at the
    refineries, but many lack basic utilities like power and water and have no
    timetable restart.
    Even though Citgo’s refinery is running, it isn’t receiving enough crude via
    the Sabine Pass and Calcasieu Ship Channel waterways, which have been closed
    because of the storm. Ike caused historic flooding in the Lake Charles area,
    according to a parish official there.
    The request from Citgo, which is a subsidiary of Venezuela’s state-owned oil
    company, Petroleos de Venezuela SA, comes at a time of increased tensions
    between the U.S. and the Latin American country.
    The two key waterways were also closed in the wake of Hurricane Gustav, which
    struck central Louisiana on Sept. 1. Citgo had requested a crude from the SPR
    after Gustav but later withdrew the request.
    After Gustav, Marathon also requested crude from the SPR to run Midwest
    refineries, which were lacking feedstocks because of a key pipeline closure.
    The U.S. Department of Energy sent about 250,000 barrels to the Catlettsburg,
    Ky., and Robinson, Ill., plants.

    -By Susan Daker, Dow Jones Newswires
    Dow Jones Newswires
    09-15-08 1031ET

  27. 27
    zman Says:

    Abraxas on the tape saying there is a proppant shortage (CRR) in Texas. Also sees tightening in supply for rigs and rig rates rising onshore Texas.

  28. 28
    Garyinhou Says:

    Howdy.. drove 45 mi. for ice yesterday.. Gov Perry should have suspended Sunday beer blue law..

  29. 29
    zman Says:

    Believe it or not, volume on the day has been weighted to buying. After the opening gap down was complete, DUG was up 10%, and that gain has gradually eased to under 6% now.

  30. 30
    Wyoming Says:

    RE 27, you heard it here first …

  31. 31
    zman Says:

    Gary – here ya on that. I did drink one for you though, even after they canceled the UT game (and they got no rain in Austin, lol). Hope things improve rapidly for you guys. Pictures of the JPM building are pretty incredible.

  32. 32
    zman Says:

    List of insiders selling CRR isn’t doing the stock any good, had been holding up well and they are cranking production to try and meet demand here and to a bit lessor of an extent in Russia. Look for big earnings 3Q. Not buying, just watching but so far that’s a good indicator there is no slowdown in non-conventional shale drilling. Regarding the rig comment, NBR just keeps getting pummeled. Hmmm.

    Wyoming – hear ya there, thanks. Natural gas still not getting shellacked like oil.

  33. 33
    Garyinhou Says:

    maybe get electric back today.. but cool front helps regardless..

  34. 34
    tomdavis12 Says:

    Z: If the fed cuts rates a small amount, what’s your guess as to CL and NG reaction?

  35. 35
    Wyoming Says:

    If Russia or anywhere else in the world show a spike in proppant’s, look out because that means that there is some serious production restrictions. Not revenue increases, price escalation abounds. We are talking throughput volumes.

  36. 36
    zman Says:

    Tom – up as I would expect the dollar to retreat. Probably not a lot and it depends on the how the Street reacts to the Fed decision. Its like when OPEC cuts. Sometimes people say great, less production means higher price. Other times, they say, whoa, things really are bad, price then falls on demand concerns.

  37. 37
    md Says:

    what will margin calls do to the stocks.

  38. 38
    Sambone Says:

    LONDON (Dow Jones)–Royal Dutch Shell PLC (RDSB.LN) on Monday said a station
    guard at one of its energy facilities in Nigeria was killed early Monday
    following a militant attack.
    The company, in a statement, said four workers were being treated for injuries
    at the Shell hospital in Port Harcourt, Nigeria’s main oil city and not far
    from where the attack took place.
    As a precaution, Shell said it was evacuating an unspecified number of
    employees from “some field locations”. The company didn’t say how much oil or
    natural gas production might have been affected in the attack on the
    Shell-operated Alakiri oil gathering station, natural gas plant and field
    logistics base.

    -By Spencer Swartz, Dow Jones Newswires

    Dow Jones Newswires
    09-15-08 1100ET

  39. 39
    Sambone Says:

    WASHINGTON, Sept 15 (Reuters) – Fourteen oil refineries in
    Texas and Louisiana with a total capacity of 3.573 million
    barrels per day remained shut due to Hurricane Ike, the U.S.
    Department of Energy said on Monday.
    The department said oil refineries suffered minimal damage
    from Ike, however, and are preparing to restart operations.
    In addition, 27 major natural gas processing plants with a
    total capacity of 13.85 billion cubic feet per day are closed in
    the Gulf of Mexico, including plants still affected by Hurricane
    (Reporting by Ayesha Rascoe)

    Mon Sep 15 14:48:20 2008 -GMT

  40. 40
    zman Says:

    MD – since there is a continuing cycle of sell this to cover that I’d say more of the same until the broad market finds a bottom too. Oil seems to be trading in lock step with the Dow today.

  41. 41
    zman Says:

    Goldman forecast for WTI still calls for $125 3Q (may be a stretch), 4Q of $130 (um, hmmm, um), 2009 of $140, 2010 of $150. That would indicate that they either see a sharp snapback very soon or are asleep at the wheel or are about to lower their forecast for the back half of the year.

  42. 42
    md Says:

    Is AIG next

  43. 43
    tomdavis12 Says:

    Z: People I talk to think the AIG situation is now what the market will focus on. The Govenor of NYS will talk in 10 minutes.

  44. 44
    reefguy Says:

    ESV- cannot find jackup working for ME

  45. 45
    zman Says:

    Reef – given that they have GPS transponders I’d say its a new artificial reef.

  46. 46
    md Says:

    AIG below 4

  47. 47
    zman Says:

    Natural gas up 13 cents now.

  48. 48
    reefguy Says:

    Does Shell have HI damage?

  49. 49
    zman Says:

    Reef – I assume that’s one of them, went right over High Island but so far PR’s have not gone beyond moderate damage. Lot of high rate gas there. Used to follow Remington’s activities there. Old infrastructure, easy to mess up.

  50. 50

    HEY Z,

    When can you get excited about CHK?

    I’m wondering if I just set a low limit on the Jan 35s?

    A calendar spread Oct/Feb 35s is attractive to me as well, if you think the bottom is yet to be sounded.

  51. 51
    zman Says:

    Q – list of thoughts on that one shortly, on a call.

  52. 52
    zman Says:

    NG up 30 cents. Hmmm. Gas plants.

  53. 53
    reefguy Says:

    RIG- Found its Marianas semi floating around

  54. 54
    reefguy Says:

    z- 27 gas plants down…

  55. 55
    Wyoming Says:


    Hopefully it was not a Latourneau Class 116, there were only about 5 to choose from on the US side for my platform, not to mention if some are already on long term contract. ESV already talking about sending more to Mexico in 2009. Would definitely suck to be me.

  56. 56
    reefguy Says:

    MMS- sya one other rig rig is drifting

  57. 57
    reefguy Says:

    Update on ESV- it is Ensco 74 had been at Marsh Island 149 in 230′ of water 92 miles from shore.

  58. 58
    zman Says:

    COP reporting a couple refineries still without power, Sweeny is a big one. Their Alliance refinery still down from Gus. These things don’t just come back overnight, now matter was the mogas traders think.

    APC saying some damage (minor) at deepwater Constitution and Marco Polo. Ihub restarted.

    Re CHK – to get really excited about them I’d need to see oil and gas prices find a floor and trade sideways for awhile, say a month. Doesn’t mean I won’t trade in and out of them in the meantime but I don’t feel the need to go this is it and jump back in with both feet. Also, I’d like to see some other gassy name announce capital budget reductions due to low gas prices. Finally, I’d like to see the Sellside do a better job of communicating to the Street that the gas glut concept is not as big of a danger as people on the Buyside think it is.

  59. 59
    zman Says:

    XOM playing with going green with the Dow down 250 points. Interesting for the group with oil well off its lows and natural gas still up 31 cents.

  60. 60
    Sambone Says:

    A rumor a day keeps Bankruptcy Away

  61. 61
    bill Says:

    2 things

    1. I was invited to the chk investors conf 10/15-10/16

    2. why is ng up today

  62. 62
    zman Says:

    Best guess on why NG is up is that their are onshore as well as offshore curtailments being announced due to those 27 down processing sites.

    I’m mulling going to the CHK investor day too.

  63. 63
    Sambone Says:

    HOUSTON, Sept 15 (Reuters) – Hurricane Ike damaged or
    destroyed 11 offshore production platforms or drilling rigs,
    but so far there have been no big spills, the U.S. Coast Guard
    said Monday.
    “The latest I have, there’s 11 missing or damaged platforms
    or rigs,” a spokesman said.
    It will take awhile to fully determine the post-Ike oil
    spill risk in the U.S. Gulf of Mexico due to the storm, the
    spokesman said.
    “All of the valves were shut before, so we won’t know
    anything until we get back out to the rigs and turn things back
    on, whether anything’s damaged below waterline,” he said.
    The U.S. Minerals Management Service said assessments
    continued Monday and reports were still rolling in. “The
    numbers are changing,” a spokeswoman said.
    (Reporting by Bruce Nichols; Editing by David Gregorio)

    Mon Sep 15 16:32:04 2008 -GMT

  64. 64
    Sambone Says:

    HOUSTON (Dow Jones)–The Houston Ship Channel has reopened but with
    restrictions, the U.S. Coast Guard said Monday morning.
    The channel is open to outbound commercial vessels with a draft of 12 feet or
    less, the Coast Guard said.
    The Gulf Intracoastal Waterway is open from the Houston/Galveston area west to
    Corpus Christ, Texas, the Coast Guard said.
    The ship channel carries vessels to the largest petrochemical port in the
    -By Susan Daker, Dow Jones Newswires
    Dow Jones Newswires
    09-15-08 1212ET

  65. 65
    Sambone Says:

    NEW YORK, Sept 15 (Reuters) – The operator of the Henry
    Hub, the benchmark trading point for New York Mercantile
    Exchange gas futures, said Monday it was assessing the status
    of the Hub and facilities on its mainline natural gas system,
    but force majeure declared over the weekend remained in effect
    until further notice.
    In addition, Sabine Pipe Line LLC said in a website posting
    initial reports indicated flooding from Hurricane Ike had
    impacted the current operability of its system.
    Sabine, a unit of oil major Chevron Corp CVX, operates
    a 131-mile pipeline that transports natural gas between Erath,
    Louisiana, and Port Arthur, Texas.
    Due to interconnects with more than a dozen interstate and
    intrastate pipelines, the Hub was selected as the official
    NYMEX natural gas delivery point.
    (Reporting by Eileen Moustakis)

    Mon Sep 15 16:40:04 2008 -GMT

  66. 66
    bill Says:

    If i was chk– id buy a 10 % interest in hk then announce a takeover/merger

    Can you imagine 1.0 m acres in the haynesville

  67. 67
    VTZ Says:

    If I was Exxon Mobil I would announce that I’m using my treasury shares to buy CHK.

  68. 68
    VTZ Says:

    Z – Regarding the oil sands piece, I’m getting hammered at work and won’t likely be able to finish it off for a bit, just fyi so you know I didn’t forget about ya.

  69. 69
    tbone Says:

    Press Release Source: Ensco International Incorporated
    Ensco International Reports Preliminary Status of Rigs Following Hurricane Ike
    Monday September 15, 10:28 am ET
    DALLAS–(BUSINESS WIRE)–Ensco International Incorporated (NYSE: ESV – News) announced that it has completed a preliminary visual inspection of its Gulf of Mexico rig fleet in the path of Hurricane Ike. All but one of the Company’s jackup rigs in the hurricane’s path have been located and no damage is reported on those rigs. Eight of Ensco’s 13 Gulf of Mexico jackup rigs have been re-manned. The Company’s deepwater semisubmersible rig, ENSCO 7500, has returned to its drilling location and is preparing to resume operations.

    The rig that is not accounted for is ENSCO 74, a MLT Super 116-C that had been located in approximately 230 feet of water 92 miles from shore in South Marsh Island Block 149. Aerial reconnaissance and a boat dispatched to the location failed to locate the rig. All personnel had been safely evacuated from the rig ahead of the storm. The rig is insured for $100 million and the Company has a $50 million per occurrence retention for Gulf of Mexico windstorm damage losses with an aggregate annual limit of $155 million. Updates on the status of ENSCO 74 will be provided as and when new information is available.

  70. 70
    jy Says:

    Ouch! See #69 & #55. The loss of a 116 class rig will tighten the market considerably for that rig class in the GOM which was already tight as chicken lips.

  71. 71
    zman Says:

    Thanks Reef, Tbone, Jy – otherwise, most rigs look to have suffered little. Not bad considering the size of the storm. DO caught a little damage but again not bad. Still have not seen much in the way of reports from the small cap offshore (shelf) guys.

  72. 72
    zman Says:

    Nigerian officials saying last 3 days fighting could result in new shut ins of up to 115,000 bopd.

  73. 73
    sane Says:

    Speaking of being submerged in water, up here in northwest Indiana we got the most rain I have ever seen and they are saying the most ever recorded in a 48 hour period. 10in to 11in. Houses underwater, roads and highways flooded. My neighborhood looked like a snapshot of the gulf coast flooding. Spent all weekend sandbagging and pumping out peoples homes.

  74. 74
    Wyoming Says:

    From a presentation I did for budget a couple last month:
    US GOM Jack Up rig inventory:

    Pride – 12 rigs, 2 cold stacked, 0 116’s

    Ensco – 15 rigs, 5 MLT 116C (2 are Supers)

    Rowan – 9 rigs, 1×116 old style, 1 x 116C

    DO – 7 rigs, 0x116’s

    Noble – 0 rigs

    Hercules – 24 rigs, 1x116C

    RIG – 0 rigs

    The C is cantelever
    This does not account for any rigs under long term contracts or are beig promoted for Pemex in 2009, as ESV informed us while researching.

  75. 75
    zman Says:

    Sane – definite damper on gas demand, rain and cool temps chopped off a late season heat wave in the heart country. Hope you and yours are dry.

    Wyoming – any noticeable beneficiaries? I was think RDC. Probably not a good thing for the little E&Ps out there who have drilling schedules to keep and will have to wait and pay the higher tab now. Wonder if it gets noticed.

  76. 76
    zman Says:

    MMS Updated for Monday:

    99.9% of oil and 93.8% of natural gas from the gulf shut in. So about 1.3 mm bopd and 7 Bcfgpd not being produced.

  77. 77
    Wyoming Says:

    Doubt it, fundies are irrelevant ..

    You can catch a falling knife with your hand or your foot ..

    Oil goes down, crack spreads improve, refiners go down .. Sears goes up ..

  78. 78
    zman Says:

    Wyoming – hear ya on that. I was thinking in a sane world. Just for my own thought process, if fundies did matter, that RDC might see a slight bump to business out of that and that the Stones and Callons of the world might say ouch. But for now I agree, the Street is not bothering to think anything but panic.

  79. 79
    sane Says:

    My house fared well being on top of the hill, but my neighbor down the street is in kind of a bowl on the top of the hill. So we ended up getting out this old diesel powered pump and about 500ft of tubing to pump the water. I never thought I would be using my john boat to get around my neighborhood.

  80. 80
    VTZ Says:

    Nicky or tater, care to chime in about levels relating to the financial disaster?

  81. 81
    zman Says:

    Fast money guy on CNBC says seeing how Goldman has done will have something to do with the future direction of oil prices. The most inane comedy of a report yet from that network. Supply and demand never mentioned, some talk how funds are positioned but all he said was that if they are still long a bounce will be met by selling and if they have gotten out oil my recover a bit. Wow. Incredible insight. Oil is essentially flat on the year now and we closed down $21.50 since the end of Gustav. Maybe the guy is entirely right to focus on the hedge funds but as I read the speculative holds of WTI counted by the CFTC, they are well into net short territory and low and behold, all you hear from guest on CNBC and in the press is the negative, bearish view. Shocking.

  82. 82
    Sambone Says:

    Gonna get interesting after 3:30 today.

  83. 83
    zman Says:

    Hear ya on that Sam. I’d bet we go hard one way or the other. Damage in the energy group is averaging 6%. Last time I checked no one there went begging to the government for cash or filed for bankruptcy over the weekend after trying to sell themselves for cents on the dollar unsuccessfully. Little annoyed here since I remember October of last year hearing dump energy and buy financials and now people are having to dump energy to answer those margin calls on their financials.

  84. 84
    Sambone Says:

    Z – 32 points before we break 11,000

  85. 85
    Sambone Says:

    Z – We’re down on our energy patch. Now the contracts are mostly short. Talking heads say it’s going down. I’m buying (RIG, PBR, ACI, DVN, CHK, COP, etc). On a long term (Today long term is 1 year) they are screaming buys on fundies alone. Our patch may suffer a while longer, but the party aint over yet.

  86. 86
    jiveyjr Says:

    I wrote some puts on EOG with a strike at $80, I will still be happy to take that stock if they put it to me

  87. 87

    Forgive the long post that follows this one.

    BUT, if we have a down day tomorrow at the opening and VMC is at or below 70:

    I’m in on a LOT VMC calls. Pick your month (OCT or longer) but this will bounce back strongly.

    Look at the chart. 70-75 and back repeatedly.


  88. 88

    RealMoney by TheStreet.com
    Two Rock-Solid Values in the Aggregates
    Monday September 15, 9:45 am ET

    VMC and MLM

    A perfect storm is brewing in the markets such as we have not seen for decades. Housing prices are falling, inflation is creeping, and energy and commodity prices are coming down. This widespread disregard for equities should excite long-term investors. While some market valuations have yet to reach 1970s-type bargains, one boring industry currently offers competitive advantages amid the market selloff.

    Aggregate businesses, companies that supply rocks used in just about all types of construction, have fallen along with the housing industry. But the wide-moat competitive advantage of aggregate businesses, coupled with the fact that aggregates are needed not only for houses but for highways, bridges and stadiums, makes them worth considering for value-seeking investors.
    Concrete Economics

    One often overlooked aspect of a business is its competitive position. Investors are often trained to drill down so hard on the valuation that they give inadequate analysis to a business’ long-term competitive advantages. Staying in power means a lot in business. Coca-Cola has such a strong economic moat around its business that the company has been able to increase prices over years and increase market share. Very few businesses can offer such a strong business franchise. This is why in the 1980s Warren Buffett plunked nearly 20% of Berkshire Hathaway’s capital into Coke.

    The aggregates industry has similar economic moats of its own. Before I get into the businesses themselves, here’s why the economics of the aggregates industry are so solid:

    1. No risk of technological obsolescence: Aggregates have always been and will remain the same product mined from the same locations. You can’t make synthetic concrete or cement to use to build bridges. Even if you could, it would be hard to find substitutes at $9 a ton, which is the going rate for rock these days.

    2. Pricing power: As a value investor, this is what excites me. Any time you have a business that has pricing power, you should look at it very closely. The weight of rock is very high relative to its cost to transport. This leads to very localized markets. If you operate a rock quarry that’s within 10 miles of a work site, you can count on being the supplier to that site. Even if the quarry 40 miles away is charging less per ton of rock, transporting the rock 40 miles will wipe out any pricing differential. Most aggregate is transported by truck and can cost as much as 25 to 30 cents per ton per mile to move. A 30-mile trip can nearly double the cost of rock. So if you own the local quarry and the next competitor is that far away, you can raise prices without any fear of losing business.

    3. NIMBY – ‘not in my backyard’: This signifies the extreme difficulty involved in getting a permit today for a new quarry near a growing city. Quarries are loud and messy, and no one wants one near where they live.

    The Two Titans

    Given the competitive advantages noted above, it would stand to reason that the aggregates suppliers that have assets already in place are in an extremely dominant position. Here, the two players are Martin Marietta and Vulcan Materials. Martin and Vulcan have spent years acquiring quarries in hundreds of local markets in the country’s top growth markets. In terms of reserves, Martin has 50 years’ worth, on the basis of current production, and Vulcan has about 40 years’ worth.

    The locations of these quarries are a key driver of the long-term attractiveness of Martin and Vulcan. As the population grows, the key beneficiaries will be metropolitan cities. Anyone trying to drill a new quarry hole in a populated city will face very tough resistance from citizens and governments. For Martin and Vulcan, which already have quarries in place, this is a strong economic advantage.
    Rocks Get Crushed

    My obvious attraction to this industry, namely Martin and Vulcan, is due to share prices having been crushed by the rapid decline in residential construction. There’s no denying that the dropoff in residential construction has hurt the aggregates industry and these two companies in particular.

    But while the residential side of the business continues to decline, the companies’ municipal and federal business side remains stable. It’s common knowledge that our bridges, roads and highways are always in need of repair somewhere in the country. California, a major market for Vulcan, has allocated some $6.6 billion of its fiscal 2009 budget for highway and new transportation projects, up from $4.6 billion in 2007.

    More importantly, however, is what’s going inside the businesses. In a similar fashion to oil, aggregate supply is finite. But unlike oil, which can be transported from cheaper locations economically, aggregates cannot, because of their weight. So even though the environment is extremely difficult for aggregates and volumes continue to decline, Martin and Vulcan have shown their ability to raise prices. So far in 2008, both Martin and Vulcan expect to increase prices by about 8% per ton.

    This pricing power is valuable. Consider that in 2007 Martin Marietta sold about 180 million tons of rock, the lowest since 2000. Yet in 2000 it earned $2.39 a share vs. $6.06 in 2007. If that is not a clear sign of the impenetrable dominance of a business, I don’t know what is.

    Vulcan and Martin have staying power. They will take a few bumps in this environment but will ride out of this economic mess with their armor intact. You should look at any opportunity to acquire stakes in them at current prices.

  89. 89
    zman Says:

    I agree Sam, but I am not yet willing to “call a bottom” or risk more capital until some semblance of sanity comes back in. I can highlight some very good fundamental stories right now with world beater growth rates, high IRRs despite current prices etc and no one cares. SD for instance. Wow. Below IPO price, much better story now than then. I think the group bounces soon but soon can be 10% away from current levels in only another day’s trading time. I’d rather see them trade sideways for a bit.

  90. 90
    Sambone Says:

    Off subject

    By Peter Eavis

    Shotgun marriages are rarely a success. And Bank of America Corp.’s (BAC)
    planned tie-up with Merrill Lynch & Co. (MER) could soon come under strain.
    BofA Chief Executive Kenneth Lewis has long wanted Merrill, which agreed to a
    deal after it found itself staring into the abyss this weekend. But it is odd
    that Lewis didn’t take advantage of Merrill’s distress to push for a lower
    The all-stock deal originally valued Merrill at $50 billion, a 70% premium to
    Friday’s closing price and a generous 1.8 times tangible book value, a measure
    of net worth that excludes goodwill and other intangible assets.
    True, the dollar price has come down with the sharp drop in BofA’s shares
    Monday. Paying up could help win over Merrill’s work force, while warding off
    potential shareholder pressure, like that which pushed JPMorgan Chase & Co.
    (JPM) to raise its price for Bear Stearns.
    But Lewis is still giving roughly one-quarter of his bank to bet big on
    Merrill’s recovery. BofA gave out precious little detail about expectations for
    Merrill’s performance Monday, making the rushed deal feel even riskier. And
    executives declined to quantify likely write-downs on Merrill’s $60 billion of
    residential and commercial mortgage assets.
    BofA’s expected $7 billion of annual cost savings look optimistic. While there
    will be opportunities to slash holding-company costs and overlaps in the
    combined investment-banking operations, it could be expensive to retain
    Merrill’s notoriously independent brokers.
    But the biggest fear is that BofA might have to raise more capital. The
    Countrywide acquisition has already weighed on key capital ratios. Even before
    Sunday’s deal, Morgan Stanley was forecasting that BofA would raise another $12
    billion of capital this year.
    To support the Merrill acquisition, as well as any future hits from
    Countrywide, BofA investors might want a bigger cushion against losses.
    Lewis has got the business he wanted: Merrill’s private client operation,
    which Sanford Bernstein estimates is valued at $26.7 billion. But assume
    Merrill’s BlackRock Inc. (BLK) stake is valued at $14 billion, and BofA’s
    original price implied almost $10 billion for the risky investment bank.
    Given the precarious environment, with Lehman going to zero, Lewis has paid
    too generous a price.

    Dow Jones Newswires

  91. 91
    Sambone Says:

    WASHINGTON (Dow Jones)–American Petroleum Institute President Red Cavaney
    said Monday that much of the 3.6 million barrels a day of off-line refinery
    production could likely come back on line within weeks if power is restored
    Following Hurricane Ike, which struck the Gulf Coast this past weekend,
    Cavaney said the industry was reporting far less energy infrastructure damage
    than the 2005 hurricane season that knocked out supplies and caused price
    spikes and major energy shortages.
    Cavaney told reporters that there had been no reports of long-term refinery
    damage that would sustain high gasoline prices.

    -By Ian Talley, Dow Jones Newswires
    Dow Jones Newswires
    09-15-08 1505ET

  92. 92
    Nicky Says:

    Afternoon all. Computer problems all day long – completely doing my head in!
    Broader market – ugly ugly ugly. Read your comments on GS Z – unfortunately I think their results will effect the broader market tomorrow – and you have to wonder when they have continually called for $150 oil? Surely they have sustained massive losses? Anyway if they miss I expect more ugliness and looking at chart I still expect more ugliness. 1180 SPX will offer support and 10,800 Dow.
    Oil now seems to be trading hand in hand with Dow. We are into support but the chart really is a mess. Do we get a rate cut tomorrow which may be the catalyst for oil to turn – it doesn’t seem likely now although if the market turns into a bloodbath in the morning I would say it becomes far more likely.
    What does everyone else on here think re rate cut?

  93. 93
    Sambone Says:

    By Gregory Meyer

    NEW YORK (Dow Jones)–Benchmark oil futures Monday settled below $100 a barrel
    for the first time since March as tumult on Wall Street reinforced concerns
    about flagging petroleum demand.
    Light, sweet crude for October delivery fell $5.47, or 5.4%, to settle at
    $95.71 a barrel on the New York Mercantile Exchange, the lowest close since
    Feb. 15.
    October Brent crude on the ICE Futures Europe exchange, which expired Monday,
    closed down $5.59 at $91.99 a barrel. Brent settlement prices weren’t
    immediately available.
    Nymex crude sank as low as $94.13 in early trading after Lehman Brothers’
    bankruptcy filing and Merrill Lynch’s agreement to sell itself to Bank of
    America sent fears of an economic slowdown into the oil market. Crude has
    fallen just shy of $50 a barrel from its July settlement record of $145.29.
    “The financial developments over the weekend clearly have spooked the market,
    and people worry that the global economy continues to be under a lot of
    stress,” pressuring petroleum demand, said Adam Sieminski, chief energy
    economist at Deutsche Bank.
    Prices declined even as oil companies surveyed damage from Hurricane Ike’s
    weekend landfall in Texas. The Minerals Management Service said virtually all
    offshore Gulf Coast oil production remains off line and reported damage to at
    least 10 platforms. On shore, refineries accounting for a fifth of U.S.
    capacity were shut down and others were operating at reduced rates.
    “Ike hit the U.S. refining system right where it hurt the most – the Texas
    Coast,” JPMorgan Chase analysts said in a note.
    While wholesale regular gasoline prices spiked more than $2 a gallon over the
    Nymex futures price before the storm, the premium fell back Monday to $1.40 a
    Front-month October RBOB gasoline futures on Nymex settled down 20.82 cents,
    or 7.5%, at $2.5614. October heating oil fell 14.79 cents, or 5%, to $2.7912 a
    Market watchers said Ike’s energy-sector aftermath didn’t live up to fears.
    With widespread power outages in Texas, “there’s going to be a lot less demand
    coming out of the Gulf, too,” said Tom Bentz, a broker and analyst at BNP
    Paribas Commodity Derivatives in New York.
    Analysts said rival banks were scrambling to take on commodity clients of
    Lehman. Lehman was suspended from trading on ICE Futures Europe after the
    exchange’s clearing house declared the company a defaulter, a press release on
    the ICE Web site said Monday.
    Lehman’s own “value at risk” from commodities, or potential one-day losses
    from trading positions, averaged $15 million dollars in the three months ended
    Aug. 31 – less than half the most recently reported exposures at commodity
    powerhouses Morgan Stanley and Goldman Sachs.
    Buyers of crude failed to find traction Monday even as tensions simmered in
    key oil-producing regions. Iran’s ambassador to the International Atomic Energy
    Agency said the country will continue enriching uranium in defiance of U.N.
    Security Council demands, the ISNA news agency reported.
    In Nigeria, Africa’s top crude exporter, a militant group said it launched
    attacks on a Royal Dutch Shell PLC crude-gathering station near Nigeria’s main
    oil city, Port Harcourt. On Sunday, the group said it attacked a Chevron Corp.
    oil facility.
    After months of bidding up oil in the face of gathering economic clouds,
    investors appeared to flee for other perceived safe havens Monday. December
    gold rose $22.50, or nearly 3%, to $787 an ounce Nymex’s Comex division, while
    demand for Treasurys surged.
    “The short-term trend looks down,” Bentz said. “The financial crisis is having
    an impact.”

    -By Gregory Meyer, Dow Jones Newswires

    Dow Jones Newswires
    09-15-08 1516ET

  94. 94
    Sambone Says:

    N – Watching this market, I think B52 Ben will cut 25 to 50 bhps

  95. 95
    Sambone Says:

    It’s going to be interesting tommorow when the Asian markets open.

  96. 96

    I bought some SEP FXI puts, some LM and XLF puts.

    I think the Chinese markets are sitting on their hands watching this sell off and it will ignite in some pent up selling when their market opens in 5 hours.

  97. 97
    ram Says:

    Can the FED chairman make an emergency cut on his own?

  98. 98
    zman Says:

    Ram – they can do it, but I think they get on the phone and vote, not alone by Ben.

    If they do cut I’ll be buying some DIG calls.

  99. 99
    md Says:

    Int rate cut will have Short term 2 days gain. med. -Long term will have no effect.

    How will that give banks access to funds.

  100. 100
    zman Says:

    Hard to believe the XLE is still holding its lows from last week. This is the single largest drop for the XOI, XNG and OIH in quite some time (since the day after Gustav actually) but all three are holding last week’s lows.

  101. 101
    Nicky Says:

    I am hearing so many conflicting opinions on whether a cut would be good or bad for the market. Most seem to think it would not be good but I think his hands may be tied and he may have no choice but to do something tomorrow. Art Cashin has often commented that Tuesday’s are great days for a reversal -so we need to see capitulation at the open.
    Oil is taking no notice of anything bullish fundamentally right now so would a cut make any difference to oil? I would hate to say I am despairing in the charts but an oil bounce really is long overdue!!!

  102. 102
    zman Says:

    COP says Sweeny Tx 300,000 bopd refinery restarting. Says its 195,000 bopd Alliance refinery has had some flooding.

  103. 103
    zman Says:

    Nicky – notice natural gas ended slightly green?

    Very tempted to by some DIG here with it down 12+% and oil getting further crushed in the after market. Cut could be overnight which should shoot the dollar and cause a spike. Just a short term trade thought.

  104. 104
    Nicky Says:

    Z – nat gas is so volatile and the whipsaw looks like classic signs of trying to form a bottom imo.
    If the Fed are due to meet tomorrow surely they won’t cut tonight? To be honest I am kind of surprised they didn’t do it earlier today if they were going to do it.

  105. 105
    zman Says:

    WILDZTRADE: Bought DIG $66 Calls (DHBIN) for $1.90.

  106. 106
    zman Says:

    Nicky – bottoming my thought as well.

  107. 107
    Nicky Says:

    I will also add that cycle lows are not due in the broader market until 19th September which is plus or minus a day – happens to be quadruple witching and spx could be at 1120 by then. There is still a very bearish wave count on the table which says we are currently in wave 3 down – still not my preferred count but can’t discount it. Preferred count for me says this is B down – with a very good bounce due in C into end of October/early November.

  108. 108
    Wyoming Says:

    In ref to the Belvue (right in Ike’s path) comment I made earlier. Just got out of a meeting with some Market staff present. Their report basically said that Belvue is where most of the Barnett gas gets sent and anything with NGL’s. They have fractionators down there and break things down further. It will be 2 days to 3 weeks before they get power, in addition, three of the larger fractionators have experienced major damage, no idea how long to repair. To make matters worse, even if everything was alright, their staff can not inhabit that area just yet. Bad water and other mojo.

    Barnett spot is down to around 5.60/mcf. It has already dropped today by about $1. Reason as they explained was LEH getting liquidated, had like 50% commodities and it is in a fire sale.

    This is as I hear it. Anyone can shoot holes and I could not defend an argument.

  109. 109
    Bleemus Says:

    Wow. What a day! It’s double martini time!

    Hasta manana’

  110. 110
    apbd Says:

    You really think I should wait another day before I get into the bathtub with the razor blades?

  111. 111
    zman Says:

    Thanks for the update Wyoming. So that sounds like the Barnett is shut in to the tune of 2+ Bcfgpd, eh? Makes sense to me that the differential expanded like that. See that every time Rockies Express goes down out west.

    APBD – depends on which you think is more painful, that or another 500 pt dow drop.

  112. 112
    Wyoming Says:

    It is not only the Barnett, anyone going to Belvue. We are flaring West Panhandle wells, Kansas has issues because they pipeline their ethane for treatment. Bigger number. Go home time, comment tonight if anymore questions.

  113. 113
    md Says:

    Is tomorrow another down day as the houses and funds estimate or pubisize their intraparty exposure to LEH and/or unwind their positions .

  114. 114
    hermanmar1e Says:


    There is a substantial amount of gas coming out of W. Texas that has been shut in due to the same reason you mentioned earlier Zman, no place to send NGL’s. This week’s injection numbers will be VERY interesting.

  115. 115
    zman Says:

    Herman – thanks. Any word on how long that’s been going? Since Gustav or just since Ike?

  116. 116
    zman Says:

    No rest for the wicked. Oil off another $1.60 early in the evening session.

  117. 117
    elduque Says:

    Maybe this too simple. But, if the refiners are shut down, then does that mean that the demand for crude is reduced, until they come back up again. If so, does that have an effect on the current free fall.

  118. 118
    Nicky Says:

    Wow anyone see crude after hours. Unreal.

  119. 119
    Wyoming Says:


  120. 120
    Nicky Says:

    There is huge support at 92 fwiw and then 86…

  121. 121
    Nicky Says:

    Yes 92.75 – relentless

  122. 122
    zman Says:

    Yeah, I’m watching it. Down $3. Gasoline and heat off another 2%. Dollar off a little too. Showing S&P down 1.4 % after hours.

  123. 123
    Nicky Says:

    Metals now moving down as well.

  124. 124
    zman Says:

    Just stepping through a sensitivity analysis on the group. Looks cheap on the current Street deck for 2009, not much more expensive on the current 2009 strip prices. Bottom line, estimates coming down but not that much yet.

  125. 125
    Nicky Says:

    86 looks the biggest support but are we really going to fall another 7 bucks in a straight line I wonder? the markets are totally insane so anything could happen.

  126. 126
    zman Says:

    El D – in response to your 117. Cross currents there. Yes, you have reduced demand from refineries but at the same time you have some imports that won’t make it to port plus 1.3 mm bopd of Gomex production that will be off probably about the same amount of time and not all of it is apparently coming back (10 platforms destroyed they think so far).

  127. 127
    zman Says:

    OPEC members going to scream for an emergency production cut in the 80s.

  128. 128
    Wyoming Says:

    These days, would not be suprised. Looking at USO, we are already way through the 38 fib and 0 of Feb would put it down another 8 or so. Not a good tech analysis as you but I did sleep in a Holiday Inn last night.

  129. 129
    zman Says:

    AIG downgraded by Fitch after the close. Then you have the headline, “Can Goldman and Morgan survive?” along side “Fed asks Goldman and Morgan to support AIG”. Unreal.

  130. 130
    Nicky Says:

    $ still looks pretty weak so should be supportive of commodities – but not right now.

    Huge fall for the Hang Seng on the open. Will tomorrow reverse this or is it going to take all week I wonder.

  131. 131
    zman Says:

    Largely depends on Ben and the ratings agencies. And Goldman earnings. Ben still piddling with his magic 8 ball on what to do tomorrow. Pretty clear that he and Paulson just don’t get the depth of the crisis as a month ago they were painting a picture that included rate hikes by year end.

  132. 132
    Nicky Says:

    A question? if the money is coming out of stocks and commodities then where is it going right now?

  133. 133
    Nicky Says:

    Well the stops at 92 have now been run.
    Z – there must be zero confidence left which now is the real worry – everyone bailing on everything.
    If they cut rates tomorrow may just smack of desperation…

  134. 134
    BirdsofpreyRcool Says:

    desperation? maybe… but, they never cut rates when things are looking good.

    there is record cash in money market accounts. more than at the end of the 2000-2003 bear market. lower rates mean less attractive yields on cash and lower cost of floating rate debt (usually), which is good for borrowers.

    a rate cut is entirely appropriate, don’t you think?

  135. 135
    Nicky Says:

    Yes I don’t disagree except its almost expected (although a few are still saying no way) which makes me wonder whether it will lessen the impact.

  136. 136
    zman Says:

    Nicky – that was my though in 36 above. Also, CNBC said no way all day. Puts in the probably happens camp in my book. Cut enough and it will send that money market $ seeking better returns. Could prompt V-shaped short term recovery, then who knows.

  137. 137
    Nicky Says:

    Z do you mean a recovery for energy or the broader market or both?

  138. 138
    Nicky Says:

    If they do .50 rather than .25 it may have some power behind it…

  139. 139
    BirdsofpreyRcool Says:

    I’m not sure anything the Fed does at this point will have much of an impact. Over time, it will. But it’s tough to see what is going to stop the mounting pressure over the next few days. Maybe Goldman reports decent results and AIG pulls a rabbit out of a hat.

    But credit spreads went out at the widest since March 15th. the stock market actually held up pretty well, given what was happening in the bond market.

    I don’t know how you “fix credit” right now. But, unless qualified borrowers have access to capital and can roll over their existing debt, you can not have a functioning economy. no debt market, no economy, no stock market.

    On the other hand, something will turn this around. It always does.

  140. 140
    BirdsofpreyRcool Says:

    Nicky… agreed.

  141. 141
    Nicky Says:

    BOP – re 139 – very true. And yes something will turn it around – cycle turns due the end of this week – of course we could be a lot lower by then or does the 1170 – 80 level hold – I doubt it to be honest in which case we could see 1120 very quickly.
    I am slightly surprised that the commodity market is not holding up better in light of the chance of a rate cut unless it really is that unexpected.

  142. 142
    BirdsofpreyRcool Says:

    In addition to Fitch, Moody’s and S&P just thwacked AIG’s long-term debt ratings… three levels. More importantly, they took the short-term ratings down from A-1+ to A-2. That effectively removes their ability to issue commercial paper. Time is running out.

  143. 143
    BirdsofpreyRcool Says:

    fwiw, i think commodities are less about the strength of the US $ now, and more about supply/demand… or the anticipated lack of it. with China cutting rates to stimulate their economy, one of the huge engines of commodity-demand is slowing down.

  144. 144
    Nicky Says:

    What the heck happens if the Fed doesn’t cut???
    Plus is the AIG problem going to be solved. They are too big to fail but nobody seems to want to bail them out.

  145. 145
    BirdsofpreyRcool Says:

    I think Paulson’s comments about Lehman make it clear that there is no longer anyone who is “too big to fail.” Also, just because AIG’s equity gets wiped out at the holding company, doesn’t mean their business just goes poof. Actually, AIG’s subsidiaries still have pretty decent bond ratings… it’s just that there is too much debt (?) at the parent level. In some ways, AIG just got too big… and that got it in trouble.

  146. 146
    Nicky Says:

    yes which is why they are falling step in step with the indices. the perceived weakness in supply/demand is outweighing any of the other more bullish fundamentals which begs the question when the indices turn will energy too?

  147. 147
    BirdsofpreyRcool Says:

    After the market’s tumble, the poor economic numbers out today, and commodity “inflation” headed the other way, I can’t believe the Fed would stand pat on rates. What is the point of that?

  148. 148
    BirdsofpreyRcool Says:

    I’m not sure energy will turn with the market bottoming. The market typically looks 6 months or so ahead. Commodity prices are much more current supply/demand balanced. So, I think commodity prices can continue to fall, even if the stock market stops the slide and even starts to move up.

  149. 149
    Nicky Says:

    I am not thinking a major low for commodities – but we haven’t seen any sort of bounce at all and I believe we should be looking at at least a $10 bounce soon.

  150. 150
    BirdsofpreyRcool Says:

    I hope so. I think that would help the psychology of the market.

  151. 151
    BirdsofpreyRcool Says:

    The Hong Kong market isn’t looking very chirpy right now.

  152. 152
    Wyoming Says:


    I think you are right in 148. As EnP’s got pummeled immediately after good news, they will rise with bad. Only difference between energy and homebuilders is real cash flow.

  153. 153
    zman Says:

    By the logic of 152, I guess the coal play WLT which is punting a homebuiding and finance subsidiary is just doomed.

  154. 154
    Wyoming Says:

    Do not follow them.

    My point is like my first VLO lesson. Record earnings and they tank. Enforced later by the May 2006 SLB correction. It does not look big relative but the losses were real in options.

    Look at the recent SHLD bump up. You know their real estate is crap, who wants to own one of the ex-Kmart strip malls, BIG? And like they are really going to have a green Xmas? Tell me their 6 month future looks good.

  155. 155
    zman Says:

    WLT – very interesting. Was a conglomerate, now a pure met coal play. Chinese are playing games with imports post olympics to drop shipping and coal prices. Growth still expected to be 10%.

  156. 156
    Wyoming Says:

    Your right, DRYS looks like it broke the 52 week low.

  157. 157
    Wyoming Says:

    155, in this George Costanza market, you think it goes down, it will go up. For EnP’s you said it today; inventories are later to fill.

    Look at the news since the doldrums:

    2 Hurricanes in GOM
    Russian Invasion
    MEND shananigans continue
    Every Major not replacing reserves
    Russian Bombers in Venezuela
    Pipelines blown up in Turkey.
    Iran nukes

    Ah, guess I am wrong, lets go short.

  158. 158
    zman Says:

    That’s so funny I’m crying. At least I think its funny. Dollar starting to strengthen again…wow.

  159. 159
    Wyoming Says:

    Good cry; not Eagle cry?

  160. 160
    Nicky Says:

    How can the $ possibly strengthen with all this crap going on?

  161. 161
    zman Says:

    $ down a quarter % now, off by a half earlier. That’s nothing in my book, and it rallied well off its lows earlier today.

  162. 162
    Wyoming Says:

    Flight to quality? Asia subscribes to ZEB?

  163. 163
    Nicky Says:

    Well if we see a rate cut its going to fall. The fact that its rallying makes me think we aren’t going to see one.

  164. 164
    zman Says:

    Lol, we have not really broken into that market. Lots of readers of the weekend post in China and Saudi though.

    …or the market has got it wrong. I think the plunge protection team is in late night session now and that the currency traders are just messing around waiting. Ya know, oil went up too far as usual but we are now down $55 in 8 weeks. Looks like 87 on a weekly chart is the next best defense. I say, go ahead and get it out of the way.

  165. 165
    Wyoming Says:

    Yea, might as well, but where are the refineries in the down draft? It was my hedge …

  166. 166
    Wyoming Says:

    Should not have told me #164. Movie quote … ” What the F@%k the Chinese downhill”

  167. 167
    zman Says:

    I think they work first when things start working. So far they have only worked as a quick trade and not a hold long enough to grab a sandwich.

    What movie is that. Only China movies I know have subtitles or star Kurt Russel.

  168. 168
    zman Says:

    Wyo – any more thoughts on voluntary capital reductions or shifts in the U.S. E&P patch? As you know I am thinking we see a shift at least partially away from conventional drilling to more unconventional and that the moms and pops start to get less busy at these gas prices. I was thinking that if people in the public arena start to shift rigs to more shale, less other that we see a flat or slight decline in the rig counts, permits should already be dropping in Tx but have not checked. Then maybe we see more ceramic proppant, not less consumed to frac all those Haynesville wells. Poke a hole in that please?

  169. 169
    Wyoming Says:

    Hot Dog, The Movie

    I had Sunny side up, Sunny side down, Sunny side all around.

    Have to say it with a German accent to appreciate.

    About the same era as 1941, Animal House. A ski bum movie.

  170. 170
    Wyoming Says:

    A lot of EnP’s are like us, I think our budget will be on the lower allocation, matter of fact I think that is already certain. We already slashed our expanded program in some areas already. When things spring up after the election, management will start with the “how many rigs can we get for Play X?”

    Mean time, mom and pop gets squeezed. What I say earlier $5.6 today in Barnett plus it dropped another $1. Mom and pop will capitulate and sell. Then you will see another Anadarko buy Western Gas and KM in one swoop. CHK, HK have all made sure that MnP’s don’t hit the HS like the Barnett, only scraps for them. Want in the new plays, have to bring cash (PXP/CHK, Shell/ECA etc…)

    Ceramic, yes. It will be US driven as I mentioned before. Back up the truck if ceramics sell in volume over seas. Don’t forget that St Gobain and a select others provide too. Our industry makes sure that no one vendor gets out of control and monopolizes. Prices get out of whack and we will just pump sand and accept the crush. Economics dictate.

  171. 171
    zman Says:

    Thanks Wyo, much appreciate the reality check. My queries to IR folks last few days have had a gruff, “screw the stupid Street, just keeping head down, keeping doing what we do which is to make money and not file for bankruptcy due to stupid amounts of leverage”. Nobody will talk about budgets except to say “low end of range” like you said and like EOG said 2 weeks ago or to say they have not yet formalized 2009 yet. Names like CRR have good margins and are getting tossed now with everything else, down from 60 to 48 in the last few sessions and if there is any understanding there I think it is probably wrong, in expecting a decline in tonnage that may not happen.

  172. 172
    Wyoming Says:

    Your right, not to harp, but my personal experience was SLB May 06. Did not make sense 74 to 56 but there you had it. Glad it happened in one way but my own stupid stubbornness cost me some tortillas. I learned.

  173. 173
    zman Says:

    Here’s one last one for the night to give you a chuckle or a fright. This type of thinking is why some people, companies, governments will never learn…because they believe there will always be a safety net.


  174. 174
    Wyoming Says:

    Nice and thanks. Leave you with Accuweather:

    The front extending into the Gulf of Mexico over the western Gulf and extending into and off the Carolina coast by Friday will be watched for possible development in the Gulf of Mexico and off the Carolina coast as a large surface high becomes established over New England by Saturday. Any wave of low pressure developing along this front could evolve into an organized tropical system over time due to the pressure difference between the strong high to the north and the lower pressure along the front. This often becomes a favored area for development during the latter part of September and October. However, development of this kind usually takes several days. So, any development along this front would probably not be a concern until Friday or Saturday at the earliest.

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