Thursday – Dualing Inventory Reports



In Today's Post:

  1. Holdings Watch: initial trades in the $10,000 portfolio
  2. Commodity Watch
  3. EIA Inventory Previews
  4. Stuff We Care About Today
  5. Odds & Ends

Holdings Watch: I added a couple of positions in CHK calls (one set near, one set further out) as detailed below in the $10,000 portfolio ($10KP).

The holdings and the portfolio's cash position can be seen on the 10KP tab as well.

Commodity Watch

Crude oil fell another $4.09 to close at $74.54 yesterday as the markets headed south as recession concerns mounted. OPEC again lowered its global oil demand forecast for the rest of 2008 and for 2009. Combine that with recent pronouncements by the Cartel that inventories are in danger of exploding in the developed countries and it seems that OPEC is lining up its ducks for a hefty sized production cut. It simply does not make sense for OPEC to continue to produce at current elevated levels with the global economic backdrop in mind. This morning crude is trading off $1 to $2.50.


Natural gas fell $0.14 to close at $6.59. Gas has done a pretty good job in recent weeks of shrugging of plummeting crude prices but it can only take so much. This morning gas is trading flat.

  • Hemoraging Cash Watch: In CHK's presentation yesterday after, Aubrey indicated that the E&P industry, especially those companies that aren't hedged, are "hemoraging cash" right now, pointing to field prices in Oklahoma of $2.50 and $3 in the Barnett and Fayetteville shales.
  • Rig Count About To Drop. CHK indicated they have released 20 rigs, most of which are drilling their last well, and which are therefore not yet reflected in the rig count. This represents about 1% of the current U.S. gas rig count and 13% of CHK's count. If the most activitive driller in the U.S. with the largest acreage position and largest number of potential drillsites is falling off this much it begs the question of what the rest of the less transparent names plan to do about activity. The 200 to 400 rig count reduction thrown out by Aubrey for the industry over the next couple of months is looking potentially conservative.

EIA Inventory Preview: (To be released at 11:00 am EST)


ZComment: Hard to see a lot that can be construed as bullish in the inventory numbers today and even you were to get an unexpected draw, upside will likely be limited / short-lived as crude is sold by down by a wider array of investor classes. It will be interesting to see if gasoline shows any demand response to lower prices.

Natural Gas Inventories

My number: 70 Bcf

  • Last Year: 49 Bcf ; 5 Year average 62 Bcf
  • Weather: 43 gas-weighted heating degree days, nearly normal and almost double year ago levels. 
  • Imports: 8.8 Bcfgpd which is flat with last week and down nearly 2 Bcfgpd from year ago levels.

The Street: 83-87 Bcf Injection (according to the Platts survey)

ZComment: Still too big for this time of year. If the Street is correct, that would be the largest injection on record for this week of the year and the second largest this late in the season.


Stuff We Care About Today

Wall Street Journal Reports BP After CHK Assets. That would make a lot of sense and mark the third transaction with BP for Chesapeake. Getting a monetization done in the next two weeks is going to be key to restoring stability in the shares.

(CHK) Conference Day 2. Speaking of CHK, the second day of their 2 day analyst meeting kicks off today at 8:30 EST.  They get more play specific today and I'm working through the second, 141 page presentation this morning for any nuggets.

Common Stock Thoughts: I'll include some thoughts on longer term holdings in the next few days.

Odds & Ends

Analyst Watch: Bernstein trimmed oil expectations and cut price targets slightly on E&Ps and integrated companies across the board.  Jefferies cuts a number of smaller names from Buy to Hold including (DNE), (BPZ), (ATPG) and raises (APC) from to Buy.

169 Responses to “Thursday – Dualing Inventory Reports”

  1. 1
    zman Says:

    CHK starting day 2 now. Haynesville shale up first.

  2. 2
    zman Says:

    First time I’ve seen them show this map


    page 7

  3. 3
    Sambone Says:

    7:47 am EST

    Oil Drops Further As Recession Fears Grip

    By Nick Heath

    LONDON — Crude futures fell more than $3 to new multi-month lows in European trade Thursday, as recession fears battered stock markets and fueled fears that oil consumption will slow alongside weakening economies.

    ICE Brent crude futures slid below $68 a barrel to their lowest levels since the end of May 2007, while Nymex light, sweet crude dropped more than $3 to trade below $72 a barrel for the first time since the end of August 2007.

    The slides came as European equity indexes shed approximately 5%, and Japan’s Nikkei Index recorded its largest one-day percentage drop since October 1987, down 11.4%.

    While continuing to monitor equity markets, oil traders also braced themselves for an update on U.S. oil and products inventory data Thursday, which are expected to reveal builds in oil, gasoline and distillate stocks, as well as the latest demand readings from the world’s largest consumer of oil.

    But with expectations for global demand already looking weaker, crude market investors continued to head for the exits ahead of the numbers Thursday.

    “The oil market can be characterized by two Rs — recession and redemptions,” said Ole Hansen, manager of futures and fixed income trading at Saxo Bank in Copenhagen.

    At 1103GMT, the front-month November Brent contract on London’s ICE futures exchange was down $2.71 at $68.09 a barrel, having earlier fallen to $67.17 a barrel. The November contract expires later Thursday.

    The front-month November light, sweet, crude contract on the New York Mercantile Exchange was trading $1.72 lower at $72.82 a barrel, up from its intraday low of $71.21 a barrel.

    The ICE’s gasoil contract for November delivery was down $11.25 at $693.50 a metric ton, while Nymex gasoline for November delivery was down 573 points at 172.49 cents a gallon.

    Given the strength of crude’s recent downturn and the broader pessimistic economic outlook, only U.S. inventory data confirming the market’s bearish outlook are likely to generate a response, market participants said. The U.S. Department of Energy data are delayed by a day due to Monday’s Columbus Day holiday in the U.S. and will be published at 1500 GMT.

    “In the current environment, we would not bet too much on trading the statistics unless they go in the (same) direction (as) global markets,” said Olivier Jakob, managing director of Swiss consultancy Petromatrix.

    Of the 14 analysts surveyed by Dow Jones Newswires, 10 expect an increase in crude stocks, with predictions ranging from a build of 5.7 million barrels to a draw of 1.25 million barrels. All 14 expect gasoline stocks to have climbed — build predictions ranging from 1.5 million barrels to 4.1 million barrels — while a mixed picture on distillates sees analysts, on average, expecting a 400,000 barrel increase. Refinery use is seen rising 2.7 percentage points to 83.6% of capacity.

    Crude’s latest dive lower, meanwhile, served to harden expectations that the Organization of Petroleum Exporting Countries will trim its output levels when it meets for an extraordinary meeting Nov. 18 in an attempt to staunch the slide in crude that has now seen prices more than halve since reaching record highs above $147 a barrel in July.

    “They have to cut at this sort of price level,” said Simon Wardell, analyst at Global Insight in London. “This is getting into territory where it does cause budgetary concerns for some of those countries.”

    —By Nick Heath; Dow Jones Newswires

  4. 4
    zman Says:

    Oil down 25 cents now.

  5. 5
    Sambone Says:

    This Is Not A Drill

    Of The Wall Street Journal

    “Drill, baby, drill.” U.S. gas exploration and production companies were way ahead of Republicans on that score. Now many are paying the price.

    America’s natural-gas-drilling renaissance this decade has focused on unconventional reserves, such as “tight” gas. This coincided with two other trends: easy financing and a continuing shift by the majors towards non-U.S. projects.

    Paradoxically, smaller independent companies took on the challenge of developing these large, complex fields. Tight gas requires lots of drilling, making it very capital intensive. Consider, for example, a holding of one million acres. Assume a well every 80 acres or so, costing $3 million each, and you’re looking at a bill of $37.5 billion — a multiple of most E&P companies’ market capitalization.

    The great enabler was abundant financing. At the start of September, Credit Suisse analyst Jonathan Wolff was estimating U.S. natural-gas-focused E&P companies would reinvest 161% of hedged cash flow this year. Now, almost half the companies Mr. Wolff tracks carry debt loads of more than two times 2009 cash flow, assuming current spot energy prices hold.

    As the credit crunch has intensified, the likes of Chesapeake Energy have slashed capital expenditures to conserve cash. They must also realign ambitions with reduced earnings power, since their very success in expanding U.S. natural-gas supply has undermined prices.

    Given steep decline rates on tight gas fields, lower capex should quickly translate into less production, underpinning a recovery in prices next year. Until then, the more leveraged companies must try to survive.

    For a growth sector, however, mere survival is not enough. As a whole, the group’s stock has dropped 65% since June 30.

    Consolidation must happen. The majors have the strongest balance sheets and need growth assets.

    The tricky part will be pulling off a deal. Imagine you are a Chesapeake shareholder, where the stock has collapsed from almost $70 in early July to $16 and change today. In that context, a cash offer of, say, $24 from a major would offer a way out, but not necessarily the most compelling one.

    Dan Pickering, head of research at Tudor, Pickering, Holt & Co, an energy-focused boutique bank, puts it thus: “Investors want the validation of value from the majors, but they probably want it with a stock they don’t own.”

    The likelihood is that if and when one of the majors makes its move — and BP PLC is said to be eyeing parts of Chesapeake — bosses at many E&P companies will rethink their stance on independence. Shareholders would probably prefer all-paper, low-premium deals among E&P companies themselves that cut costs, strengthen balance sheets — and leave them positioned to profit from natural gas’s attractive prospects after the credit crunch eases.

  6. 6
    Sambone Says:

    At Half Its All-Time Highs, Oil Caught In Downdraft


    NEW YORK — With oil trading at half of its record highs, price forecasts once seen as a remote possibility are gaining mainstream acceptance.

    Crude closed below $75 a barrel for the first time in more than 13 months Wednesday, as the story of inexorable world demand growth starts to unravel.

    Absent aggressive action from the Organization of Petroleum Exporting Countries, oil now looks on track to fall below $70 — possibly to $50 — a low last reached in January 2007, analysts say.

    It’s been a punishing few months for anyone who bought crude when it traded above $147 a barrel in July. After a decade-long climb from $10 a barrel, oil has fallen 50% in three months. Light, sweet crude settled at $74.54 a barrel Wednesday, down $4.09, or 5.2%, on the New York Mercantile Exchange. In late electronic trading, it sank as low as $73.55.

    The decline reflects fears that the credit crisis upending global financial markets will snowball into a full-blown recession around the world. Energy demand growth has also slammed into reverse in large consuming nations, and some forecasters now see global oil use shrinking next year, potentially the first contraction since 1983.

    Frozen credit has also altered the trading landscape. Investors have grown leery of doing business with Wall Street firms that fashion complex products pegged to commodities. Hedge funds with big positions in commodities are facing redemptions from investors and demands for new collateral on bets made with borrowed money. The number of open Nymex crude futures contracts is at its lowest since July 2006.

    Equities markets have also been discouraging. In an industry short of good supply-and-demand data, stocks indexes have become a “moment-by-moment indication of future demand prospects,” noted Tim Evans, a New York-based energy analyst at Citi Futures Perspective. Crude extended declines after a late-afternoon plunge in the Dow Jones Industrial Average, which closed down 7.9% at 8578.

    Having been overwhelmingly bullish amid oil’s gains earlier this year, a host of Wall Street energy analysts have chopped forecasts to account for the price drop and the future demand scenarios. JPMorgan Chase & Co. on Wednesday said it now sees oil averaging $74.75 a barrel next year; this is $25 lower than its prior prediction. Prices could dip as low as $60, the bank said.

    Unlike most others, JPMorgan sees world demand shrinking next year, albeit by a modest 320,000 barrels a day, to about 85.5 million barrels a day as drivers and businesses in heavily industrialized countries use less oil.

    “The world economy is currently in recession,” said Lawrence Eagles, JPMorgan’s head of commodities research and a former official at the International Energy Agency. “This global recession, which has occurred very, very suddenly, has reduced global demand.”

    Eye On OPEC
    Government analysts continue to see world demand growing next year, albeit hesitantly. OPEC on Wednesday trimmed 100,000 barrels a day from its 2009 demand forecast, and now sees consumption growing by 800,000 to 87.2 million barrels a day.

    Oil’s slide suggests the cartel may agree to cut output at an emergency meeting Nov. 18, or perhaps even earlier, if prices fall below $60. Iraq’s oil minister said Wednesday that OPEC should trim production at the meeting. Saudi Arabia, OPEC’s de facto leader and the only member with spare capacity, has yet to tip its hand.

    “Unless OPEC — by that I mean the Saudis — are willing to cut output, this market will remain in free fall,” said Nauman Barakat, senior vice president at Macquarie Futures USA in New York.

    With recession looming and oil tracking stock market losses, even a heavy-handed move from the cartel may not arrest the trend, however. The dollar’s steady gains against the euro in recent months also point to further declines, said Walter Zimmermann, a technical analyst with ICAP/United Energy in Jersey City, N.J.

    While OPEC can tighten supply, Zimmermann said, “it’s the collective sentiment that controls the market, and right now that sentiment is focusing on the economy.”

    Some commodity veterans argue for a rebound. Michael Korn, president of Skokie Energy Corp., a Princeton, N.J., brokerage, notes it took oil prices nearly a decade to rise from $10 a barrel in 1998 to $147 this year. More than half those gains have vanished in three months.

    “Even if you’re bearish, you’ve got to be careful right here,” Korn said. “Potentially the market could fly, just because in commodities we have bounces. This could be a dangerous point to sell.”

    –By Gregory Meyer, Dow Jones Newswires

  7. 7
    zman Says:

    CHK plan for HS. Use superpads to drill 8 wells from 1 pad per section. 80 acre spacing (so 8 per section or per sq mile) each with a single, 4,500′ lateral. Costs will drop substantially this way as you don’t have to move rigs around until after you’ve drilled your 8th well.

  8. 8
    Sambone Says:

    Shippers Washed Up, For Now


    NEW YORK — Anyone wincing after the recent stock market gyrations might want to try taking a look at shipping stocks.

    While the Dow Jones Industrial Average pulled back around 20% since mid August, the shippers like DryShips Inc. (DRYS), Eagle Bulk Shipping (EGLE), Navios Maritime Holdings (NM), Excel Maritime Carriers Ltd. (EXM) and Genco Shipping & Trading Ltd. (GNK) are all down between 50% and 70%. The shipping companies make their money hauling bulk freight such as iron ore, coal and grains across the ocean.

    The dramatic selloff for the group came as a shock even to the experts. Many shipping analysts were eagerly anticipating a rapid bump in maritime freight hauling activity following the end of the Beijing Olympic Games in late August. (See SIMON SAYS: The Smog That Created An Olympic Investment Play, Aug. 22, 2008.)

    Instead of picking up, the shippers saw business deteriorate at breakneck speed. The Baltic Dry Index, which tracks the cost to move bulk freight across the ocean, collapsed from around 7,190 the third week in August to 1,976 recently — an eye-popping 73% decline.

    That’s pretty much the opposite of what most analysts foresaw. The idea was that industrial production in the Beijing area, which had been shut down in an effort to curtail lung-busting smog, would start back up when the athletes had left. That would then quickly lead to increased demand for imported ship-borne raw materials.

    Unfortunately, the hoped-for pickup ran headlong into the credit crunch.

    “It looks like the financial crisis in the U.S. and Europe is having spillover effects in emerging markets,” says Min Ye, a steel stock analyst at Morningstar in Chicago. “Asian economies are export-led and also global trade was at historically high levels.”

    Or, in other words, when the western demand for Asian exports fell back, industrial output in China also took a dive.

    As a result, demand for steel slackened and with it use of iron ore, a key input in the manufacture of steel.

    Stockpiles of iron ore currently stand at around 37 days of consumption compared with a more normal 25 days, according to recent estimates by Banc of America Securities analyst Michael Pak.

    The higher-than-usual inventories meant Chinese steel makers felt little need to import more.

    Exacerbating the situation, for the shipping companies at least, has been an attempt by Brazilian iron ore miner Companhia Vale Do Rio Doce (RIO) to raise the prices it charges Chinese steel mills for iron ore.

    China balked at the price demand and as a result, less of the stuff was shipped.

    That meant the largest, cape-size vessels that are typically used to move such material from Brazil to China were left empty and unused, explains Natasha Boyden, shipping analyst at Cantor Fitzgerald in New York.

    “That was a very long haul route and it weighed down on (freight) prices,” she says. The price of renting cape-size ships weighs relatively heavily on the Baltic Index.

    Despite the recent slowdown, analysts in general believe in the secular China growth story.

    “China is building the equivalent of an electrical grid the size of the U.K.’s every year,” says Urs Dur, shipping analyst at Lazard Capital Markets in New York. “That isn’t going to stop, because if it did there would be major social implications.”

    So at some point it will be all-systems-go again. The real question for stock pickers is when.

    Not quite yet, says Dur, at least until the immediate situation improves.

    “But that can turn up very quickly, just like it turned sour very quickly,” he notes.

    Others see things differently.

    Cantor’s Boyden says at current prices the stocks represent a “phenomenal buying opportunity,” adding, “Right now I think they have been ridiculously oversold.”

    (Simon Constable, commodities columnist at Dow Jones Newswires, muses regularly on the commodities sector)

  9. 9
    zman Says:

    Further to #7, they plan to put the superpads on the edge of the section line and route the gathering systems along the lines to tap 2 sections from one spot. Very capital efficient.

  10. 10
    Sambone Says:

    BTU did well

  11. 11
    zman Says:

    Thanks Sam, any outlook comments from BTU. I’m listening to the CHK call now. Haynesville stuff very strong…good but also “victim of your own success” situation.

  12. 12
    isleworth Says:

    PQ upgraded to BUY from Hold at Jefferies

  13. 13
    zman Says:

    CHK – we’ve drilled 16 wells so far and have not seen 1 fault. That’s good, the laterals just go on to their designed end.

  14. 14
    Sambone Says:

    BTU raises earnings expectation for 2008 to $3.00 to $3.25. Street has them earning $2.82 for 08. So stock is currently trading at $27.70 premarket from yesterdays $24.24. That is a 9 p/e.

  15. 15
    zman Says:

    Thanks Sam. Thinking ACI, PCX. PCX I think is 3x next year #s.

  16. 16
    zman Says:

    Over the last year, CHK HS wells were taking 50 to 60 days to 40 to 50 days. Still the occasional snag but getting more efficient with each well (slide 15).

    Taking into account the deal with PXP, CHK’s acreage position average cost in the Haynesville is $1,400 per acre. I’ve seen analysts call it as high as $8,000 per. Just wrong. And this plays into their estimates.

  17. 17
    Sambone Says:

    Off subject – Just don’t click the red phone


  18. 18
    zman Says:

    Sam – All the coals showing 5 to 10% up opens on the BTU. I was going to put a valuation table for the coals in the post today but ran out of time. Will do tomorrow. Absolute pounding, far and away worse than that of the commodity.

  19. 19
    BirdsofpreyRcool Says:

    Interesting disconnect: stock futures are up… but fixed income market (after trying to rally this morning, a little) is now dropping.

    IG (CDX11) closed yesterday at 198 (after going 20 bps wider on the day… huge negative move)… tried to rally this morning, now at 201.

    CIT is part of the CDX11 index and the fixed income market doesn’t like what they are hearing from the earnings report and outlook there.

    So, tale of Two Markets. Stocks up, fixed income down. My guess (and it’s just a guess), fixed income “wins.” Any stock rally may be short-lived. Will keep you informed.

    IG 201

  20. 20
    BirdsofpreyRcool Says:

    IG 202

  21. 21
    zman Says:

    CHK has 7 pilots outside of the center core.

    Wells are right at $7mm now. $4.5 mm to drill, $2.5 mm to complete.

  22. 22
    BirdsofpreyRcool Says:

    IG 203

  23. 23
    zman Says:

    SLB reports tomorrow. At last comment from them about a month ago they were not talking about weakness but were still saying things are looking up. The stock is down by half from the last quarterly call.

  24. 24
    BirdsofpreyRcool Says:

    IG 207… this is not good

  25. 25
    BirdsofpreyRcool Says:

    IG 205 1/2… backing away from the edge

  26. 26
    BirdsofpreyRcool Says:

    IG 204

  27. 27
    zman Says:

    Much better than market bounce for energy. About time… not saying it lasts but we have been overly beaten down.

    Industrial production down most since 1974. Not great news for natural gas…probably less of an impact for crude but it will hit the chemicals demand numbers.

    CHK moving on to Barnett discussion now.

  28. 28
    zman Says:

    CHK says leasing program in the Barnett really slowing down. Plan to add only 5,000 acres per quarter through 2010 and then thats about it. They have 280,000 acres in the core, 315,000 total. Note that this is less than half the size of their position in the Haynesville.

  29. 29
    zman Says:

    CHK has been 43 rigs in the Barnett, going to 33 next year.

  30. 30
    zman Says:

    CHK up 10%. Nothing to write home about yet but at least the right direction, approaching $18 now.

  31. 31
    Jay Reynolds Says:

    My post yesterday got truncated.

    Stripper operators in my area, where lifting costs run > $35/bbl are going to keep hanging on because 1) they have no other way to make a living – “Mom and Pops” and 2) to preserve their leases which typically have deep right (though they are just producing shallow, generally < 1 BOPD) in anticipation of the HS eventually active in the area again. We have two HS wells within a few miles S of here (Vivian, LA) but all leasing is on hold.

    The flexible production system is letting me produce oil at < $5/BBL which is the only thing saving my bacon right now… see http://www.strippersolutions.com/History.html

    for some humorous history on how we developed it. We’ve come a long way from laying 1,000 feet of hose out through the woods and then driving forward with it tied to a truck to drop it into a well. Getting into the field at about 5 am everyday now to get a few more hours of production in…

  32. 32
    zman Says:

    Jay – McCain should have interviewed you instead of the John the Plumber.

  33. 33
    BirdsofpreyRcool Says:

    IG 206… going wider again. tough to see a sustained stock mrkt rally if bonds don’t want to go along.

  34. 34
    teomax Says:

    bird, I am watching TED spreads for a signal to buy in, but from your post I concluded, that I should be watching IG too, is that right?

  35. 35
    zman Says:

    Isle – re the PQ updgrade. I understand what Jefco is trying to do with an upgrade. I’m waiting on getting “re-interested” in the smaller names just yet. Nothing personal on the stocks themselves but the appetite for energy is lower among the investor crowd than it was 3 months ago by several magnitudes. As money comes back (when it comes back), I think the bigger names come up first. So while PQ may be much more highly discounted to NAV than we or Jefco thinks is reasonable, it can go a lot lower. I’ll likely add their but don’t see a rush. If you’re interested in the stock vs options, I think its long term higher.

  36. 36
    BirdsofpreyRcool Says:

    teomax – yes.

    TED reflects what is happening. But, it’s not what drives the fixed income market. real buying (or selling) of bonds drives levels. the Investement Grade index is the easiest way to follow broader (high quality) corporate bonds. Unless we can pull some money (and buyers) into the corporate bond market (and out of the US govt bond mrkt), then this economy will stay stalled. Job losses follow.

    TED is a good way to gauge overall “fear” in bank lending. But, corporate bonds are the best indicator of what actual investors are doing. Banks can stay scared longer than corporate bond buyers. The problem is right now, is that both are scared. We can’t have a stock market rally unless we get money flowing in to support the fixed income market.

    Am i making any sense here?

  37. 37
    BirdsofpreyRcool Says:

    IG 211… we are wider by 13 bps from yesterday’s close… which was 20 bps wider from monday. this is not good.

  38. 38
    BirdsofpreyRcool Says:

    VIX over 73 and bond mrkt buyers nowhere to be seen. The stock market has some heavy lifting to do, if it wants to turn this around. We seem to be at a point where institutional investors are holding their breath… waiting to see which way it breaks from here. Frankly, on a short-term basis, could be either way. But the bond mrkt is not trading a lot of volume…

  39. 39
    zman Says:

    CHK sees leasing done by 2010 in the Fayetteville shale. Taking in about 9,000 acres per quarter at present.

  40. 40
    BirdsofpreyRcool Says:

    by the way, the TED Spread is a little better today. the “cash” TED is at 425 bps, down from the wide of 463.

    IG backing away from the edge again…

    IG 209

  41. 41
    elduque Says:

    bird, where do you get the IG index?

  42. 42
    BirdsofpreyRcool Says:

    elduque – it’s an actively-quoted index that trades in the private bond market… like 95% of all bonds, which don’t trade on exchanges. So, you can’t look up prices. It’s like having to call your realtor to find out where your neighbor’s house sold. It’s not published on a real-time exchange.

    that is why i (so annoyingly) post the updates, on days where i think it will help.

  43. 43
    teomax Says:

    I fully understand that…following some guys, who exactly predicted whole financial crises.. here is great article from a guy, who was 90% right, but with a bit radical approach to your taste probably.


    I was thinking about getting out of oil stocks in the Feb and March and going 100% short on finacials, momo tech, etc., but the oil price raises and love for the sector conviced me to stay in the game.

  44. 44
    BirdsofpreyRcool Says:

    IG 210

  45. 45
    zman Says:

    Dow down 210, oil down 2.10

  46. 46
    zman Says:

    79 Bcf injection, helping gas a little early as it is slightly light to expectations.

  47. 47
    BirdsofpreyRcool Says:

    IG 211 1/2

    teomax – i actually agree with almost all of that. this is a very complex problem… but the underlying root is Too Much Debt. and not just the banks, companies, government. it’s ALL OF US. we spent more than we made. We borrowed against our homes. We took out 0%-down mortgages and expected our houses to double in 2-3 yrs. The enemy is US. Banks, governments, wall street were facillitators… but, we did it to ourselves.

    here is a column from today backatcha:


  48. 48
    antrimshale74 Says:

    Crack spreads have got to be a complete disaster by now.

  49. 49
    zman Says:

    Still listening to CHK, good to study up during days (weeks, months) like this.

    Bird, I saw your question re LINE. Have not done yet, will do when I grab a spare moment.

  50. 50
    BirdsofpreyRcool Says:

    IG 212

  51. 51
    BirdsofpreyRcool Says:

    z – no hurry. i can get down off my soapbox and do the work myself. better than watching all the red today.

  52. 52
    antrimshale74 Says:

    Just saw a CHK ad on CNBC. I imagine that they will eliminate their ad campaign now that their cash situation is a bit stretched.

  53. 53
    zman Says:

    Antrim – yes. Gotta think they shut down early for Fall maintenance, switchover, and reduce capacity to kill production off. Why make product for $0 or negative dollars? There is a lot of negative sentiment in the wholesale gasoline price and if you look at prices at the pump over the last week they have plummeted. A lot of people are paying homage to the thesis that Americans have permanently reduced their consumption of gasoline via new habits. I don’t buy it. Numbers in 20 minutes.

  54. 54
    isleworth Says:

    Tks Z for the comments on the small E&P players….. 🙂

  55. 55
    Sambone Says:

    LONDON (Dow Jones)–The Organization of Petroleum Exporting Countries on
    Thursday moved forward an emergency meeting to review its production policy by
    nearly one month, underscoring the cartel’s concern about falling crude prices.
    “OPEC nations are reliant on oil revenues and to the extent that prices have
    fallen this far, we are very concerned,” Nigerian Oil Minister Odein Ajumogobia
    told Dow Jones Newswires by telephone from Nigeria.
    OPEC, in a short statement, said the meeting will be held Oct. 24 at the
    group’s headquarters in Vienna rather than Nov. 18, as previously scheduled.
    -By Spencer Swartz, Dow Jones Newswires

    Dow Jones Newswires
    10-16-08 1044ET

  56. 56
    zman Says:

    CHK – revolving credit facility for CHK midstream partners just closed. A little good news on a dreary market day. Goes to confidence more than anything else.

  57. 57
    zman Says:

    OPEC has to be freaking out. Last five years have seen a bling bubble over there that must be supported.

  58. 58
    sane Says:

    “OPEC nations are reliant on oil revenues and to the extent that prices have
    fallen this far, we are very concerned,” Nigerian Oil Minister Odein Ajumogobia

    Um maybe Nigeria should try producing some oil.

  59. 59
    BirdsofpreyRcool Says:

    IG 210… backing down a bit again.

  60. 60
    tomdavis12 Says:

    Z: Does it bother you that NBR president Petrello sold more then 1/2 of his position. Based on CHK comments the land drillers will be facing heavy headwinds. Is there any sense in looking to upgrade positions. I can make a case that maybe the offshore drillers might have the best growth potential over the next year. Since everything is pummelled, which of your dance partners or sectors are the best to weather what will be more storms.

  61. 61
    Sambone Says:

    In regards to OPEC, my question is how long Chavez can hold out with these prices?

  62. 62
    Sambone Says:

    By Peter A. McKay

    NEW YORK (Dow Jones)–An early stock rally fizzled Thursday as recession fears
    again took over.
    Investors welcomed a few promising signs, including favorable readings of
    jobless claims and bank-to-bank lending rates. But there was also a round of
    horrid bank earnings and the general sense that once an economy is experiencing
    a steep slowdown, it doesn’t right itself in a few days or weeks.
    That sentiment on Wednesday produced the worst market drop in percentage terms
    since the 1987 crash, and it has prevented stocks from sustaining any rally
    even when major indexes do flash signs of life.
    “The question of whether or not there is going to be a recession is moot at
    this point,” said strategist Bob Hoye of the research firm Institutional
    Advisors in Vancouver. “It’s just a matter of saving yourself some pain in your
    portfolio of stocks, bonds and everything else.”
    Based on chart patterns from previous market downturns, Hoye believes the
    market could bottom later this month. But he added: “There is certainly room to
    the downside for now.”
    The Dow Jones Industrial Average was up more than 140 points at its morning
    high but recently traded down 164 points, or 2%, at 8402. The S&P 500 was off
    2%, leaving the broad measure at 889. The Nasdaq Composite Index was down 1.7%
    at 1601.
    New claims for U.S. jobless benefits dropped by 16,000 last week – more than
    expected – to a seasonally adjusted level of 461,000, the Labor Department
    reported early Thursday. The Labor Department also reported a flat reading on
    the Consumer Price Index, the government’s most closely watched inflation
    barometer. The latest data came after prices actually dipped by 0.1% in August.
    Three-month U.S. dollar Libor dropped to 4.5025% from Wednesday’s fixing of
    4.55%. The one-month rate fell to 4.2775% from 4.35875%. The overnight rate
    tumbled to 1.9375% from Wednesday’s 2.14375%, edging closer to the Federal
    Reserve’s fed-funds target rate of 1.5%.
    Citigroup shares fell 7% to $15.10 after the bank reported a $2.8 billion net
    loss for the third quarter, reflecting $4.9 billion in credit losses and a $3.9
    billion boost to its loan-loss reserves. Merrill Lynch reported a third-quarter
    loss of $5.2 billion versus a loss of $2.24 billion for the same period a year
    ago. Its shares were down 3.6% to $17.62.
    Switzerland’s government and central bank early Thursday offered emergency
    help to the country’s two largest banks, UBS and Credit Suisse, although the
    latter declined a government capital injection. UBS shares rose 2% to $17 and
    Credit Suisse was up 1.7% to $38.
    For continuously updated news from The Wall Street Journal, see WSJ.com at

    Dow Jones Newswires
    10-16-08 1049ET

  63. 63
    zman Says:

    Tom – remember the original premise of the dance partner list was for names that would work once commodity price stability kicked in. So far, no joy there.

    NBR will differentially outperform other rig operators (aside from UNT who will do well too) due to rig type. Rigs are not just declining in #s but also moving into higher return plays that require higher horsepower top drives and that’s those too. But right now, if you have falling oil and a decline in the rig count coming, the direction is south. Normally you have seen stronger or bigger players gobble up smaller names for replacement value but with the financial markets the way they are there is little hope on that front. So low can get lower in my book. Offshore is a different ball of wax and I think the deepwater capable names are discounting a depression in offshore drilling. I think based on financing you could see some hiccups in drilling schedules. However you are even more likely to see delays in the shipyards causing the big increase in rigs expected over the next 3 years to shrink somewhat which should help prevent a bigger pullback on dayrates. In other words, I think many of the deeper, bigger targets are not going to be affected by oil prices where they are right now, let alone the $80 to $100 where I think we average over the next year (you heard that range here first!).

  64. 64
    BirdsofpreyRcool Says:

    IG 211

  65. 65
    zman Says:

    Sam – its a good question. And he doesn’t get these prices…his heavy will get a discount.

    crude up 5.6 mm bls
    gaso up 7 mm bls
    dist down 0.5

  66. 66
    zman Says:

    Nat gas diverging a bit from oil. Oil is looking to test $70. Given that imports stayed above 10 mm bopd and that demand for gasoline is not responding yet to lower prices you’ve gotta say we’re over supplied.

    Interestingly, gassy stocks are paying attention to natural gas and not entirely to the big down day in oil or the market. Hmmm.

    RIG down $20, 24%, in 2 days.

  67. 67
    sane Says:


    Crude Up 2M
    Gasoline Down 518K
    Distillates UP 862K

  68. 68
    zman Says:

    Oil at 69.50

    Vix at record > 80

    Dow down 370, at 8,210

  69. 69
    zman Says:

    Thanks Sane, not very confirming. OPEC unlikely to be worried about putting the economies into recession by cutting production and raising oil prices at this point.

  70. 70
    Sambone Says:

    NEW YORK (Dow Jones)–U.S. crude-oil inventories in the week ended Oct. 10
    rose more than analysts’ expectations, according to data released Thursday by
    the U.S. Department of Energy.
    Crude stockpiles rose 5.6 million barrels to 308.2 million barrels, the
    department’s Energy Information Administration said in its weekly report. That
    compared with an average forecast of a 2.2 million-barrel build in a Dow Jones
    Newswires survey of analysts.
    Gasoline stockpiles rose 7.0 million barrels to 193.8 million barrels,
    compared with an average survey estimate of a 2.8 million-barrel gain.
    Distillate stockpiles fell about 500,000 barrels to 122.1 million barrels,
    contrasting with analysts’ forecasts of a 400,000-barrel gain.
    Refinery use rose 1.3 percentage points to 82.2% of capacity. Analysts had
    expected a 2.7 percentage point increase.
    U.S. Oil Inventories:
    For week ended Oct. 10.
    Crude Gasoline Distillates Refinery Use
    EIA data: +5.6 +7.0 -0.5 +1.3
    Forecast: +2.2 +2.8 +0.4 +2.7

    Figures in millions of barrels, except for refining capacity, which is
    reported in percentage points. Forecasts are the average of expectations in a
    Dow Jones Newswires survey of analysts earlier in the week.

    -By Gregory Meyer, Dow Jones Newswires

    Dow Jones Newswires
    10-16-08 1111ET

  71. 71
    Garyinhou Says:

    There should be a congressional hearing called to investigate the role of speculators in driving down the price of oil over 50% in less than 4 months. Waxman can haul in Goldman Sachs to explain how they could be so totally wrong on oil prices, maybe get Exxons CEO to explain supply and demand one more time. And why isn’t anyone talking about Demand Construction? I see people pumping gas who look like they just hit the progressive Double Diamond at 4 Queens.

  72. 72
    Sambone Says:

    Just in case we do have a bloodbath, you’ll need to know this.


  73. 73
    antrimshale74 Says:

    Any thoughts on DUG at this point?

  74. 74
    BirdsofpreyRcool Says:

    IG 209… wow. a little ray of sunshine. SOMEone is buying SOMEthing. maybe it’s the PPT.

  75. 75
    1520sbroad Says:

    option premiums are currently absurd. I have never seen anything like this. At the money SPY options that expire friday pay 2.5-3% just in premium. Unprecedented.

  76. 76
    Sambone Says:

    By Christine Buurma

    NEW YORK (Dow Jones)–Natural gas futures rose Thursday after the U.S. Energy
    Information Administration reported a build in storage that was slightly below
    analysts’ and traders’ expectations.
    Natural gas for November delivery on the New York Mercantile Exchange was
    trading 7.8 cents higher, or 1.18%, at $6.67 a million British thermal units
    Thursday after the EIA reported an injection into storage of 79 billion cubic
    Analysts and traders in a Dow Jones Newswires survey had predicted an 83 bcf
    build. The five-year average injection for this time of year is 63 bcf, while
    last year’s build was 49 bcf.
    The latest injection brings the total amount of gas in storage as of Oct. 10
    to 3.277 trillion cubic feet, 2.7% above the five-year average and 2.6% below
    last year’s level.
    Although the storage build wasn’t far below expectations, the approach of
    cooler weather in the major gas-consuming regions is providing support for
    prices in anticipation of a boost in demand for natural gas for heating, said
    Allen Rather, a private energy analyst in Victoria, Tex.
    The National Weather Service was predicting below-normal temperatures for the
    U.S. Northeast, much of the Southeast and part of the Great Lakes region from
    Oct. 21 to Oct. 25. From Oct. 23 to Oct. 29, NWS was predicting below-normal
    temperatures in the Northeast, Southeast and South Central Regions, including
    most of Texas.
    “I do think the market has been pretty oversold,” Rather said. “We’re
    progressing to a cooler weather pattern, but it takes time.”
    Gas storage levels should be ample going into the winter heating season,
    analysts and traders said. Large weekly builds between now and the unofficial
    start of heating season Nov. 1 could boost already swelling U.S. gas
    inventories to a level near last year’s surplus.
    Gas in U.S. storage is expected to total about 3.45 trillion cubic feet as of
    Nov. 1, according to a Dow Jones Newswires survey of 10 analysts and traders.
    The predicted total surpasses the five-year average storage level on Nov. 1 of
    3.327 tcf, but falls short of last year’s record 3.535 tcf.

    -By Christine Buurma, Dow Jones Newswires

    Dow Jones Newswires
    10-16-08 1129ET

  77. 77
    zman Says:

    Antrim – I think I’d rather wait. If the market corrects it’ll work. But it has had monster moves. If you look at Monday, DUG fell 36%, yesterday, it rose 31%. We are terribly oversold. Next shoe to drop might just be positive. The amount of doom and gloom is choking but nothing moves in a straight line in the market. Just to date myself, I’ve been actively in the equity markets as a professional since 1992 (happily went non professional in 2004). So when I say I’ve never seen this before it may not mean that much. But being an avid student of markets and trivia I can say this is truly an exceptional time…but nothing moves in a straight line.

  78. 78
    antrimshale74 Says:

    Option spreads are probably the way to go if you are trading Octobers.

  79. 79
    zman Says:

    CHK wants to run if the market environment will let it.

  80. 80
    antrimshale74 Says:

    OK. Here’s another thought/question. Buy the stock and write a deep in the money call for November. There seem to be some tempting choices for buy/write strategies today, specifically because things have fallen so much and the volatility is so high.

  81. 81
    BirdsofpreyRcool Says:

    IG 206

  82. 82
    zman Says:

    Antrim – I like that Buy and Write strategy better. I’ve noticed the blown out spreads and fat premiums as well. To me the options players are signaling less liquidity and the volatility which they don’t want to get run over by.

  83. 83
    zman Says:

    oil sub $69

  84. 84
    BirdsofpreyRcool Says:

    NYMEX gasoline futures down over 10%

  85. 85
    BirdsofpreyRcool Says:

    IG 205… we get back under 200, we could see the stock market close the day in the green. just taking a guess here.

  86. 86
    zman Says:

    Favorite names for a comeback in large cap E&P: EOG

    Majors: take your pick but CVX and XOM are interesting and though a fraction more expensive than COP will likely see money come back sooner. COP also has a lot of Rockies gas which will hold them back right now.

  87. 87
    BirdsofpreyRcool Says:

    Anybody buy HK below $10 again?

  88. 88
    zman Says:

    Not me bird, thought about it but for options at least the more liquid names are not seeing as much those killer spreads and premiums. Still big to normal but not like the little names.

  89. 89
    BirdsofpreyRcool Says:

    IG 203…

  90. 90
    Sambone Says:

    Z – Do you think CHK will survive as it is?

  91. 91
    zman Says:

    Sam, what do you mean by “as it is”?

  92. 92
    Sambone Says:

    As a company that pays it bills, etc.

  93. 93
    zman Says:

    Yes, absolutely. I don’t know even know where the question comes from.

  94. 94
    elduque Says:

    #90 Take an hour and listen to the first days conference call and go through the attached slides.

    If you do that, you will be wondering why the stock isn’t trading in the 40’s.

  95. 95
    elduque Says:

    #94 follow up.

    In this market value doesn’t mean anything. If one can have a point of view longer than a day. This is the best opportunity to buy value in the last 20 years.

    The only reason that the market is down here is absolute panic, which I believe is caused by everybody wanting all the fixes that are in place to work immediately.

  96. 96
    zman Says:

    Re CHK: the stock, the Aubrey sale, and the company have nothing to do with each other right now.

    EL – D agreed. Still listening to day 2. They’ve move on the deep Anadarko Basin in Oklahoma…stuff they only generally talk about in passing but this conventional stuff is more than have the company on a proved reserves basis. Talk about stacked pays.

  97. 97
    Sambone Says:

    Ok, here ya go for the answer. Put in limit orders for CHK pr E at $150.00. This puppy doesn’t trade much (Only 100 have traded so far today). That will give you a yield of 10.41% ($3.90625 x 4 = $15.625) It convertable into 7.172 shares of common. It looks to convert on 06/15/09. It is non callable. Chk is currently selling at $17.15, so 7.172 x $17.15 = $123. I’ll get two more payments of $3.90625. $3.90625 x 2 = $7.8125 + $123.00 = $130.81. Risk is CHK stays the same between now and next June or it goes down and stays down, or goes out. I think this puppy has been oversold and we should see some sort of rebound into $35 range by next June. Your thoughts?

  98. 98
    zman Says:

    My EOG is flipping higher as this market goes green. Probably take a shot there soon.

    Natural gas up 24 cents.

  99. 99
    BirdsofpreyRcool Says:

    IG 201…

  100. 100
    elduque Says:

    #97 – I don’t know enough about what the normal premium should be. Other than that it seems like a great idea.

    That is why I like PRGN so much. $2 dividend and the stock trading at 5.45.

  101. 101
    zman Says:

    Sam – Still listening to call so am not going to get into that. Suffice to say, they are not going out of business. They are selling assets as planned. Their hedges seem to be safe. Their debt is not due for 4 years on the revolver and 5 years on the first tranche of senior. They have good interest coverage. They are not in violation of loan covenants. They are reducing the debt to cap ratio by year end as those mark to market hedge losses are reversed to gains and roll through the income statement to the balance sheet boosting stockholder equity. They are improving efficiencies in drilling and transitioning rigs to higher IRR plays from lower ones in the current environment. The land rush capex run is over. Spending will no longer outstrip cash flow by billions per year and may actually match it. I’ll put these in the post tomorrow along with additional CHK wrap thoughts.

    Thinking to pick up some HAL pre SLB call.

  102. 102
    1520sbroad Says:

    chk pr E – wow – some traded at 110? I assume that was earlier this month? That is a winner for someone

  103. 103
    zman Says:

    ZTRADE: $10KP Trade

    CVX – November $70 Calls (5), CVXKN for $2.10 with the stock off about $1.75 on the day. Cheap Major that’s fallen from $85 to $58 since the beginning of the month, trading at about 5x 2009 earnings. Earnings may come off from current estimates the recent fall is discounting a bigger drop than I see as likely.

  104. 104
    zman Says:

    ELd – how is prgn affected by the recent drop in rates? Seems like that dividend has to get whacked.

  105. 105
    zman Says:

    Wyoming – any thoughts on costs for completing vertical and horizontal in the Delaware Basin, is this something CHK can systematize as easily as they seem to plain horizontal plays. Looks like a vertical completion in the Penn and then horizontal completions in the Woodford and Barnett. Nice completion I think in Reeves country, w. Tx.

  106. 106
    zman Says:

    SLB getting popped with their call tomorrow. Anyone have any news/analyst comments. Everything I’ve seen so far is looking for a good quarter, but it looks like the stock is falling because the stock has been falling.

    I’ve got an order in sub market for some Novembers.

    CHK still talking. Lots going on. Now talking about non-conventional nonshale plays. Very oily those.

  107. 107
    elduque Says:

    Z – take 20 minutes and listen to conference call at either Jeffries or Dahlman. Can be found by going to Paragon’s website. http://www.paragonship.com/assets/webcasts/JEFFERIES%20PRESENTATION.pdf

    Quite simply, they have no short term charters and have the dividend covered for the next 2 years. Alas, it is sort of like CHK with all their hedges, which really don’t mean anything as far as the analyst community is concerned.

    Hedges penalize you when the market is going up and don’t really seem to help you when the market is going down and they are working.

    All dry shippers are not alike.

  108. 108
    zman Says:

    Eld – thanks. agreed. Sounds like opposite of DRYS.

    On the hedges, they may not help the stock but they insure the company. Street never gets that, too true.

  109. 109
    zman Says:

    Bird – you have to check out slide 132 in CHK’s presentation today. Beautiful seismic on a deep trap they drilling 2002, since produced 50 Bcfe from a single well bore, going to set record for largest revenue from a single well in Oklahoma to date over $300 mm. Now targeting similar over thrust structures in the area with better 3D and re-processing.

  110. 110
    antrimshale74 Says:

    HK November calls written on underlying stock is an interesting idea if you think the company will not get destroyed between now and then.

  111. 111
    BirdsofpreyRcool Says:

    z – ooooo…. seismic! you know, it looks pretty easy, once you slap all that color on it. but, nothin’ more fun that a room full of seismic sections. endless fascination for the nerd herd.

  112. 112
    zman Says:

    Ok, last page of CHK presenation. 2 mile across impact crater (400 million year old meteor), 6,000 feet sub surface with 1,000 feet of depth at the time of impact. They’ve got it leased up and will spud a well here this quarter. Ordovician impact crater…news to me. These can produce a lot of gas.

    Conference over.

  113. 113
    zman Says:

    Slide 141


  114. 114
    BirdsofpreyRcool Says:

    IG … 205… but, it’s a random walk right now

  115. 115
    bill Says:

    drybulk hedges are not like chk gas hedges as the counterparties are small .

    I see major risk of drybulk charterors defaulting on long term charters either thru bankrupcy or simply giving back the keys.

    this is already happening so id be careful with prgn and any other dry bulk shipper

    cash is king

  116. 116
    zman Says:

    Thanks Bill. Watching the SEA ETF fall daily. Stuff is going to need to be shipped during and after the crisis. Strong players going to get a big bounce at some point, maybe from a lot lower levels than current.

  117. 117
    elduque Says:

    Hi Bill

    It appears to me that the charters are with reputable (?) cos. Bunge and a new contract with COSCO. Maybe you could take a look at the slide show and tell me if any of them aren’t particularly good.


  118. 118
    bill Says:

    this might be of interest


  119. 119
    bill Says:

    bunge and cosco as big as it gets

    I will look at slides

  120. 120
    BirdsofpreyRcool Says:

    can someone explain to me why the VIX is up over 11% to 77 and stocks are basically flat on the day…. does this make sense?

  121. 121
    zman Says:

    Bill – do you have a table of which bulker names are more weighted to charter than spot. My list is very dated. Thanks.

  122. 122
    elduque Says:

    EGLE is another midterm charter

  123. 123
    BirdsofpreyRcool Says:

    ok… got an answer on the VIX. people think it’s due to the expiry/roll… investors/traders are simply rolling volatility into the next month. something we saw with crude a few weeks ago. that’s the explanation, anyway.

    still, weird.

  124. 124
    Sambone Says:

    VANCOUVER, British Columbia, Oct 16 (Reuters) – There has
    been a second attempt in less than a week to bomb a natural gas
    pipeline in northeastern British Columbia, police said on
    The pipeline, near the town of Dawson Creek, was damaged in
    the incident but did not rupture, the Royal Canadian Mounted
    Police said. The pipeline is owned by EnCana Corp ECA.TO.
    Details remained sketchy, but police said the incident
    happened late on Wednesday or early Thursday, and appeared to
    be similar to an attempt to bomb a pipeline in the Dawson Creek
    area on Saturday.
    Police did not identify the pipeline, but said it was in
    the same area as the first incident and involved a 12-inch
    EnCana pipeline carrying sour gas to its Steep Rock gas plant.
    The second attempt was discovered on Thursday by pipeline
    workers who found a crater under the line.
    Police were already investigating if the weekend explosion
    was linked to a letter sent to media in the Dawson Creek area
    last week that warned the energy industry to leave northern
    British Columbia. The letter did not make specific threats.
    The RCMP’s anti-terrorism unit has joined the
    investigation, but police believe the incident is local in
    (Reporting Allan Dowd, Editing by Peter Galloway)

    Thu Oct 16 18:03:18 2008

  125. 125
    Sambone Says:

    By David Pearson
    PARIS (Dow Jones)–Oil producers aren’t investing enough to be able to cater
    to future demand from consuming countries and this – together with the likely
    imposition of a carbon levy of some kind – is likely to push up the price of
    oil over the medium to longer-term, the head of the International Energy Agency
    said Thursday.
    Although the prospect of an economic slowdown is pushing down the price of oil
    at present, Nobuo Tanaka told Dow Jones Newswires in an interview, that is
    likely to be a temporary phase. “The age of low energy prices is over,” he
    That is the conclusion of a new IEA study of 800 oil fields and their expected
    decline rates, as well as the likely demand outlook over the medium to
    long-term, that will be published next month.
    “On the basis of the current structure of the supply side, there’s not enough
    investment to catch up with the demand side, so the price of oilis likely to
    riseover the medium to long-term,” Tanaka said, especially if governments
    decided to impose a cost on fossil fuel consumption to reduce carbon emissions.
    That’s likely to prompt calls for more energy conservation, more efficient
    energy use and more investment in alternative energy sources, he said.
    “Even if oil demand were to fall to 60 million barrels daily, 60 million is
    still a very big number. We definitely need more investment by OPEC and other
    producing countries to satisfy this demand,” he said.
    The ongoing credit crunch is a source of concern to the IEA because it’s
    causing necessary investment to dry up, he went on.
    “It’s certainly impacting the demand side and reducing demand, but it also
    impacts the supply side, especially relatively small independent producers that
    are borrowing on the financial markets,” and don’t have the same financial
    clout as bigger companies.
    “We’re concerned that there has already been a lot of slowdown or delays in
    projects. It’s having an effect on exploration, refining and transportation,”
    he said.
    Last week, the IEA revised downward its oil demand projections to reflect
    sagging global economic activity.
    The agency has come in for criticism that its demand projections are
    unreliable because they are based on lagging economic indicators.
    “It’s true that sometimes our adjustments look too slow, and there’s some bias
    for optimism” when the IEA tries to gauge oil consumption in a slowing economic
    environment, he said.
    “But we have to build on facts. We can’t depend on feelings. We have to be as
    objective as possible. In a downturn, yes, we may seem optimistic, but in
    upturns we tend to appear pessimistic.” Tanaka said it’s too early to say
    whether or not global oil demand could actually contract, something it hasn’t
    done for decades.
    “It’s an interesting question and we’re watching it carefully. But we’re still
    saying that global demand is growing by about 1% or a bit more even though it’s
    declining in the main OECD countries,” he said.
    “We are revising this decline further downward,” he went on, but at the same
    time there’s no evidence to suggest that demand is starting to flag in China,
    India or the Middle East.
    “Obviously, if high oil prices and the economic slowdown impact non-OECD
    countries, we will change our projections. But so far we haven’t seen any
    evidence of this,” he said.
    Faced with falling oil prices as the financial crisis brakes the economies of
    consuming nations, the Vienna-based secretariat of the Organization of
    Petroleum Exporting Countries said Thursday it is bringing forward its special
    ministerial meeting to Oct. 24 from Nov. 18.
    “The Organization is concerned about the deteriorating economic conditions,”
    it said in a statement.
    Oil prices slumped on Thursday to their lowest level for more than 15 months.
    Tanaka urged OPEC not to cut its production levels, however.
    “An oil price of between $70-$80 a barrel is still historically high; the
    market is still tight and that’s making it volatile,” he said.
    “If OPEC continues its current level of production, that certainly will help
    the market situation through the end of the year,” he said. “It’s true that
    inventory levels in consuming countries are building up, and that’s another
    good phenomenon that we’re observing,” he noted.

    -By David Pearson, Dow Jones Newswires

    Dow Jones Newswires
    10-16-08 1328ET

  126. 126
    isleworth Says:

    Z- VLO now at $16.50 – about 3x Enterprise value.

    Any hope?

  127. 127
    BirdsofpreyRcool Says:

    IG 202 1/2

  128. 128
    elduque Says:

    According to Sedacca on Minyanville, corp and muni deals are starting to get done.

  129. 129
    BirdsofpreyRcool Says:

    IG 201

  130. 130
    zman Says:

    Isle – nobody believes the estimates for the refining group. Look at SUN today and yesterday as CFO leaves and they announce asset review. Wow. No buyers for their assets…demand still not picking up with lower prices. Ugh.

  131. 131
    BirdsofpreyRcool Says:

    IG 203….

  132. 132
    zman Says:

    Re SLB – I guess I’m not going to play. Stock glued to $50. I see GS cut them this last week and issued a target price of $44 while FBR has a $108 target. As I’m more of an E&P guy and this market looks completely craptastic I feel adding it now before the numbers tomorrow for these premiums is a bit too gunslinger. One thing is for certain, it will move sharply on the numbers, maybe a straddle but I’d rather pick a direction due to some thought of how the fundamental view (I think positive but maybe they’ve changed their tune in the last 2 weeks) will be accepted by the market. If they go with pulling in the horns now, it could take the stock to 40 in this market. Again, that’s not been their mood as recently as 2 weeks ago.

  133. 133
    zman Says:

    Other than BTU, the coals have pretty much given back the BTU results inspired morning gains and BTU itself has given back most of its gains as well. Very tough. Anybody else notice the Dow is jumping around in big point swings?

  134. 134
    zman Says:

    Jefco’s upgrade of PQ, market could care less….this is the problem with this market…you can have good reasons for an upgrade but if a fund or two needs an out, that’s all you get, a morning pop and then lower. Especially hard on the little names.

  135. 135
    zman Says:

    Gold down $36.

  136. 136
    1520sbroad Says:

    SWN – i wrote some Oct 25 calls against my position a while back. Here is how they have done in the last 7 trading days at the close: (I want them to get called)

    10/7 – in the money
    10/8 – slightly in the money
    10/9 – slightly out of the money
    10/10 – way out of the money
    10/13 – way in the money
    10/14 – even further in the money
    10/15 – way out of the money
    10/16 – ?

    With the VIX at 81.13 earlier today i can’t imagine what more volatility would look like.

  137. 137
    BirdsofpreyRcool Says:

    IG 201….

  138. 138
    elduque Says:

    Z – Did you find any negatives in CHK presentation?

  139. 139
    BirdsofpreyRcool Says:

    IG 199. the stock market rally will hold onto the green, i think.

  140. 140
    ram Says:

    Chk oct?

  141. 141
    zman Says:

    Eld – nope

    Thanks Bird

    Ram – going to hold it, it was 1% of the portfolio and a kicker if things worked…still could.

  142. 142
    BirdsofpreyRcool Says:

    IG 198… back to where we closed last night. after Japan was down over 11%, this is quite an accomplishment.

  143. 143
    Sambone Says:

    Wow, 670 point swing on the Dow today

  144. 144
    zman Says:

    #143 …amazing how we get used to such big numbers.

  145. 145
    elduque Says:

    Bill- Re PRGN Please let me know if you find anything negative. The Jeffrey’s analyst thought there was nothing wrong.

  146. 146
    BirdsofpreyRcool Says:

    IG… back to the fear threshold again… 200

  147. 147
    zman Says:

    Well the CVX is working…dumb market luck that.

  148. 148
    rlogan1301 Says:

    Z – great call on CVX…i was looking at it and was too “cheap” and didn’t get the ask price when it was a 1.90…stupid move

  149. 149
    zman Says:

    RL – nah, not stupid, smart. I’ve been letting them come to me for the most part…if they don’t hit I don’t care. This market is no where in the vicinity of rational. I missed SLB down $4 earlier and now its down $1.60 and I could simply care less as it could have been down $6 without the Dow rally and it could still get hammered for earnings or guidance.

  150. 150
    Dman Says:

    I saw an article somewhere yesterday that Chines crude imports for Sept were up 10% YoY, contrary to a lot of chatter. It said the Chinese were taking advantage of the price drop to rebuild inventories… which kinda makes sense.

  151. 151
    zman Says:

    Dman – let me know if you find it …I will look around. There have been some tanker trackers talking about something similar a couple of months ago…essentially that the Chinese would hold out on oil and coal orders to drop commodity and shipping prices and then buy back big

  152. 152
    BirdsofpreyRcool Says:

    looks like we dodged another bullet today… amazing swings in the debt mrkt too. for the most part, bonds are almost back to where they closed last night.

    IG goes out at 197 1/2

  153. 153
    kyleandy Says:

    i noticed gas price at my 7-11 down to 2.85 this aft. had long line so thot i would catch it on way back. on way back home, line was worse. usually nearby hess is lowest price and it was 2.94. i like your theory z that the public will start buying again w/ lower prices!!!

  154. 154
    BirdsofpreyRcool Says:

    fiveandimer – i see that California sold $5B of muni bonds today… $1B more than they wanted. So, your comments are spot on correct. If Cali can do it, that should flash the green light for others to give it a go. Key will be, how long will the investors stay in the room? Muni yields have gotten so stupid-cheap that i think that party can go on for a while. Plus, people just might think about pulling money out from under their mattress and putting it to work in something Obama can’t tax. It may be a while before people want to even THINK about stocks… but, you can’t sit in 3 month T-bills yielding 0.46% forever.

    Also, MLPs are somewhat tax efficient… maybe we see some moves (up) there next.

  155. 155
    hermanmar1e Says:

    re #105

    That’s my backyard. This is a VERY tricky play if you are talking about the deep Barnett/Woodford and the Penn stuff isn’t developmental type sands/carbonates. Some of the vertical wells alone are going for +25MM$. Email me for more info…

  156. 156
    zman Says:

    Herm – they were talking about a 5 mmcfepd completion and it was unclear if that was dually completed vert in the Basal Penn and then horizontally in the Barnett/Woodford or just the horizontal. What depth are you talking about for $25mm?! Ton of frac stages or just the depth causing that price tag?

  157. 157
    zman Says:

    CHK said these are costing them $8 mm and falling.

  158. 158
    hermanmar1e Says:

    re #156:

    Same depths/reservoir for a 25MM$ well. This is one of the most EXTREME drilling environments in the lower 48. The reservoirs can be severely depleted or overpressured so you don’t know what to do on mud weights, then you have a HUGE well control issue!

  159. 159
    zman Says:

    H – page 118-119. This is what I was referring to. They have 1.2 mm acres and are just getting started. You don’t like their CWC number I take it?


  160. 160
    Dman Says:

    Z – #151

    Here are some Bloomberg articles:



    The first one mentions a “10% increase” which I assumed was YoY. But the second article seems to indicate a much higher YoY change. Both articles throw around a lot of numbers without mentioning timeframe. Good luck if you can piece it together …

  161. 161
    PackMan Says:

    Z 160 .. do you have a link for session 1 presentation as well ?


  162. 162
    PackMan Says:

    meant 159

  163. 163
    zman Says:

    Packman here ya go:


  164. 164
    hermanmar1e Says:

    re #159:

    I never like their CWC’s, just like I called BS on their initial HS well costs. I know, I work these plays, heck, we are their partner in this w. texas play. Where do you think their HS rigs are coming from?

  165. 165
    zman Says:

    Herm – re 164. This is why I like you. But $25 and $8 are a long way apart.

  166. 166
    hermanmar1e Says:

    re #165:

    Without a doubt, the 25MM$ is an extreme case, but it happens more than you would think. Red Adair, Boot n Coots, Wild Well have been out to this part of the country more than any other for well control issues. I was on APC’s first well back in 2002 and we TD’d an 18,000′ well with 19.6lb mud in the hole, this equates to a 18,500 pressure gradient. Subsequently, the well IP’d over 40MMcfd, but was P&A’d due to casing collapse. Fun, but risky area to work! The W. Tx Barnett/Woodford is pie in the sky gas field. Yes, there is gas, and it is only found in the “sweet” spots. This will never be a Ft. Worth or Haynesville development program IMO.

  167. 167
    PackMan Says:

    thanks Z

  168. 168
    jsaun14 Says:

    Z- EGY released a drilling program update this am.

  169. 169
    mimster90 Says:

    Does anyone follow the shipper SSW?

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