Monday – Credit Markets Grudingly Unfreeze


Sentiment: Bounce time. Banks appear more willing to lend this morning and equity and commodity futures are pointing to a sharply higher open. As one talking head put it this morning, "what would happen to the images of the banks that receive Federal funds but then refuse to make loans? They'd be tarnished, that would be unpatriotic". Maybe so. But encouraging more lending is how this whole problem started, right. It makes one wonder what happens if the consumer is given additional rope on their credit cards while the economy is still faltering, say, right before Christmas. But I digress...

3Q08 earnings season kicks off in earnest this week. See the names we care about below and on the Calendar tab. SLB was something of a dud on expectations last week but they are always cautious when the rig count is not spiraling higher. HAL reported this morning and their conference call should be more illuminating for the Service names as the easy logic has led to the group being absolutely pummeled. Later in the week we get the first of the Majors and E&Ps and I'd note that a number of analyst teams have upgraded energy names this morning in front of the quarter. Interesting.  I've gotten a number of emails requesting my thoughts on the MLP's and longer term common stock holdings and will be accomodating these enquiries over the week.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Earnings Watch
  4. Stuff We Care About Today
  5. Odds & Ends


Holdings Watch: The Wiki, Perf, and 10 KP Tabs are updated.

Commodity Watch

Crude oil fell 7.5% last week to close at $71.85 as fears of a longer and stronger recession punished 9 out of 10 commodities (natural gas being the rare exception). This morning crude is trading up $1.50 to $2.00.

  • OPEC Watch #1: Friday meeting was pushed up from November which itself was originally scheduled for December. The group has got to know that a 1 mm bopd cut won't arrest the slide in prices as the U.S. alone is consuming over 1 mm bopd less oil at its refineries compared to year ago levels and the rest of the world are burning less as well.
  • OPEC Watch #2: The head of OPEC is flying to Moscow today as the Cartel and Russia seek closer ties. Everyone else in the world collectively say "Grreeeeaaatttt"
  • Sudan Watch: 9 Chinese oil workers kidnapped in Sudan by rebels. China is the driving force behind Sudan's emergence as an oil exporting country. This is the third kidnapping this year but so far production has not be impacted.
  • China Oil Production Reaches Plateau. From Upstream ~ "China’s gas sector has boosted production amid hefty development of fields in the west of the country and investment in pipelines and other infrastructures. However, crude output is reaching its plateau, after peaking at major fields in the east. The oil development in the frontier fields in the west will still need time to catch up."


Natural gas rose nearly 4% last week to close at $6.79. Gas prices were supported by a number of capital budget cuts, cooler weather, slack imports and the fact that gas has already been crushed. Getting ready to pull the trigger on UNG calls this week, probably prior to the Thursday numbers. On item of interest which was circled in the weekend wrap table was the fact that the 12 month natural gas strip barely budged last week.  This is interesting because the strip is no down to $7.33, well below the $8 level seen by many to be the tipping point for more capital budget reductions on the part of the E&Ps and Majors (XOM abandoned the Barnett Shale two weeks ago due to weak prices). Strategy here will be to take both near and further out calls. This morning gas is trading higher (approaching $7) with crude and peraphs with the cooler forecast for this week.

  • Weather Watch: Gas-weighted heating degree days rose to 52 last week which was in line with the year ago week but still warm for this time of year. However, this week is forecast to be much, much cooler with HDD's jumping to 79 which is close to normal and much colder than year ago levels of 47. This could bring next week's injection close to flat...not saying it will be an early end to the injection season or an early beginnning to withdrawals but it certainly doesn't hurt.
  • Tropics Watch: Something may be getting organized in the northwest Caribbean.

Earnings Watch: 3Q Earnings Week 1:


Stuff We Care About Today

HAL 3Q Beats Ex Acquisition Charge

  • Revenues of $4.9 B vs $4.6 expected ...revenues were strong in US and international
  • EPS of $0.76 (ex items) vs $0.74 expected
  • Nutshell: very strong quarter, outlook guardedly optimistic
  • Conference call: Today, 9 EST, can be accessed here.

WFT (The mini SLB) reports small beat

  • Revenues of $2.54 B vs $2.48B expected
  • EPS of $0.55 (ex 2 cent item) vs $0.53 expected
  • Nutshell: The Street has been focusing concerns on margins, especially in Latin America, however so far this has not been a problem with revenues growing 19% YoY while operating income grew at 27%.
  • Conference call: today at 10:30 EST


Other notable:

NBR reports after the close today. The stock has probably been overly beat up but I will wait for the call to buy back in as a negative tone (if that's what they set) will lead to further decline in this market environment.

MMR Conference Call. I don't own it and have not looked at the numbers yet but I want to listen to this call for a little color on their ultra deep Blackbeard well and its potential for (EXXI). Conference call today, 10 EST.


Odds & Ends

Analyst Watch: Oppenheimer raising 13 Majors and E&Ps from Perform to Outperform this morning, and (VLO), (TSO), (SUN) from Under to Outperform. FBR ups APC and NBL to Outperform. Deutshe Bank cut a number of E&P names to Hold including (PXD), (FST), (UPL) and (KWK) which seems a little late.



114 Responses to “Monday – Credit Markets Grudingly Unfreeze”

  1. 1
    Sambone Says:

    By Lananh Nguyen

    LONDON (Dow Jones)–Crude oil futures traded up over $2 Monday in London,
    boosted by signs that the Organization of Petroleum Exporting Countries would
    decide to trim production at its meeting Friday.
    “We believe that the combination of OPEC starting to move more aggressively
    into production cuts and of demand starting to stabilize through lower prices
    will move towards a bottom in oil prices,” said Olivier Jakob, managing
    director of Switzerland-based consultancy Petromatrix.
    At 1137 GMT, the front-month December Brent contract on London’s ICE futures
    exchange was up $1.90 at $71.50 a barrel.
    The front-month November contract on the New York Mercantile Exchange was
    trading $1.92 higher at $73.77 a barrel.
    The ICE’s gasoil contract for November delivery was up $23 at $701 a metric
    ton, while Nymex gasoline for November delivery was up 439 points at 171 cents
    a gallon.
    Crude oil prices – which have fallen over 50% from their mid-July peaks – got
    a reprieve last week from OPEC’s decision to move forward its emergency meeting
    to Friday from Nov. 18 in Vienna.
    Many OPEC officials have expressed their discomfort at weakening fundamentals
    and the rapid price selloff, while others have advocated openly for production
    Market participants said the meeting, and broad expectations for an output
    cut, would draw a line under prices throughout the week.
    A proposed rollback of 1 million barrels a day would “definitely” set a floor
    for prices at $60 a barrel, said an oil trader based in London. However,
    analysts at Goldman Sachs suggested the group may need to make multiple, and
    deeper, production cuts in order to stem falling prices.
    “We don’t think that OPEC can do much to support prices in this environment,”
    Goldman Sachs analysts said in a report dated Friday that emerged Monday.
    “There is little visibility in the oil price short-term due to a weakening
    global economic environment and credit crunch-led destocking.”
    Monday’s price rebound didn’t convince some participants, who warned oil
    prices could yet stall on poor oil demand, sluggish equity markets and the
    movement by the U.S. dollar.
    “With demand easing, the market will still remain under pressure,” a broker in
    London said.
    Unremitting negative sentiment in financial markets could drag oil prices down
    further, said Citigroup analysts.
    “If the demand side does indeed weaken sufficiently we see a floor in the
    range of $40 to $50 a barrel,” the analysts said.
    Meanwhile, technical charts continued to point south for crude futures. ICE
    Brent crude oil has “decisively swept aside” its seven-year technical support
    trend line, and now targets the $63.80 to $64.60 a barrel range, said technical
    analysts at Barclays Capital.
    “All of the moving averages remain pointing downwards, however there is room
    to rally up to the $75 area in this current [bearish] pattern,” said Andy
    Riddell, a broker at ODL Securities in London.
    Overall, prices are largely expected to stay in a holding pattern before
    Friday’s OPEC powwow.
    “When it meets later this week, OPEC will have to decide how far it can ignore
    the global economic crisis and pressure from consuming countries not to try to
    reverse the recent price falls,” said the Centre for Global Energy Studies in
    London. “The real danger is that a big cut will send prices soaring again,
    putting the global economy at even greater risk.”

    -By Lananh Nguyen, Dow Jones Newswires
    Dow Jones Newswires
    10-20-08 0748ET

  2. 2
    Sambone Says:

    NEW YORK, Oct 20 (Reuters) – A low pressure system over the northwest
    Caribbean Sea had a 20 to 50 percent chance of developing as it slowly
    moved northeast toward the Florida Peninsula, the U.S. National Hurricane
    Center and most weather models said Monday.
    The system will produce heavy rains over portions of Honduras,
    Guatemala, Belize and the Yucatan Peninsula over the next couple of days,
    the NHC said.
    The weather models were mixed on the forecast system track, with a
    couple expecting the system to move west over Belize and southern Mexico
    while most models expect the system to move north over the Yucatan before
    entering the Gulf of Mexico and then turn northeast toward Florida.
    None of the models expected the system to hit the U.S. oil and gas
    production in the northern and northwest Gulf of Mexico.
    Energy traders watch for storms that could enter the Gulf of Mexico and
    threaten U.S. oil and natural gas platforms as well refineries along the
    Commodities traders likewise watch storms that could hit agriculture
    crops like citrus and cotton in Florida and other states along the coast to
    If the system develops into a tropical storm, with winds of 39-73 miles
    per hour, it will be named Paloma.
    (Reporting by Scott DiSavino; Editing by John Picinich)

    Mon Oct 20 12:01:31 2008 -GMT

  3. 3
    zman Says:

    Thanks Sam, on the HAL call now.

    HAL has had not troubles with the credit market, continue to believe in the long term fundamentals of the oil and gas markets. Kind of looking through the trough with their opening comments.

  4. 4
    zman Says:

    Nothing earth shattering or company making on the HAL call so far. Lot of it is rearward looking…blah, blah, blah, great quarter future less certain but they are pretty positive.

    Opco upgraded 2 of 10KP positions (EOG and CVX) so kudos to them!

    Natural gas is tipping north of $7.

  5. 5
    Fiveanddimer Says:

    Z, I agree with your thoughts in the first paragraph of today’s post. It was easy credit and excess liquidity (and the abuses that followed) that got us into our current predicament. And how are we trying to fix the problem? — with easy credit and liquidity. It reminds me of Einstein’s now famous definition of insanity: continuing to do the same thing, but expecting different results.

    Also of note is the fact that the people that led us into this mess are the same people that we expect to get us out. In 2004 it was Hank Paulson and the other investment bank CEO’s who personally petitioned the SEC to remove the limits on leverage for the investment banks. At the time, they could only leverage their assets by a factor of 15. They argued that to be competitive, the limitation should be removed. The SEC capitulated. The rest is history. Now who is trying to lead us out of the mess? If this wasn’t so serious, I’d be laughing myself caput.

  6. 6
    zman Says:

    HAL big pix comments:

    horizontal rigs at 30% of total U.S. active rigs. these rigs are 2 to 5x greater in terms of oil service intensity relative to a vertical well. Note that horizontal rig activity has done nothing but go up (down 2 last week but right at the all time high).

    international – see slower growth but still growing for 4Q and 2009. May see some delay of or curtialing in NEW projects, notably in heavy oil.

  7. 7
    zman Says:

    HAL Q&A starting.

    I’m looking to add EOG and UNG calls after the open, may add to CVX and a little NFX a little later in the day.

  8. 8
    zman Says:

    CHK called up 9% on the bid. At some point soon I take more short term there and at other gassy players including SWN which has done better the last several sessions and at SD which has not.

  9. 9
    zman Says:

    Forgot to add CLR #7 which reports this week too. These are going to be 1/3 to 1/2 of total desired position entries.

  10. 10
    zman Says:

    Bidding some UNG calls.

  11. 11
    zman Says:

    ZTRADE – 10KP

    Bought (3) December $33 UNG Calls (UNELG) for $2.25 and UNG at 31.25 (Natural gas at $7.04).

  12. 12
    BirdsofpreyRcool Says:

    One comment on the “push to lend”… I don’t think we are talking about consumers here.

    Banks are not lending to banks are not lending to businesses. HAL might not be having a problem with the debt market, but it’s also a $19B company. Also, I doubt HAL is planning on placing any debt issues any time soon. They have $150mm of debt due in 2008, but that is manageable (without going to the public debt market). After that, they have $750B due in 2010. By that time, the credit crunch will be over (if it’s not, we will all be living in caves and who cares about oil services companies at that point).

    So, credit needs to be available to businesses. Not just expansion debt, but everyday working capital debt. Companies employ people. If banks/investors don’t get back to lending/investing in the debt markets, job losses across the board will follow.

  13. 13
    zman Says:

    ZTRADE: Added CLR December $35 calls for $3.20 (CLRLG) with the stock at $28.50 and in front of Wednesday earnings.

  14. 14
    zman Says:

    Bird – hear ya push to lend but isn’t that ultimately where the $ end up, in the hands of the consumers. I’m hearing there is a ton of packaged credit car and car loan debt that is toast.

  15. 15
    BirdsofpreyRcool Says:

    Morning report on the Investment Grade Bond indes (IG, for short).

    After a wild, options expiry-driven day in the equity mrkts, IG closed around 195-ish. There were some late trades that pushed it down (which is good, narrower spreads = improvement), but the feeling was that the risk was to the downside over the weekend.

    In spite of talk of stronger credit markets in Europe, the US bond market opened (an hour and a half before the stock market) weaker. IG was 201 offered.

    Now, bonds are watching stocks. They are skeptical about the stock market rally. But, if stocks can get bonds moving, that will verify the rally and put some support under these levels.

    As I type, Leading Indicators came in stronger than expected and stocks love it. Bonds are trying to feel the love too.

    IG at 199. (want to see this get to the low 190s to validate stock’s Happy Dance.)

  16. 16
    BirdsofpreyRcool Says:

    z #14. Yes, and no.

    The credit card and auto loan stuff is indeed toast. But, those are old issues (like home mortgages written in Jan 2007). Consumers will HAVE to pay down debt. That is clearly going to be a drag on GDP for some time to come (years?). But, consumers also have access to cash through their jobs. The point here is to keep the engines of the US commercial market running, to keep jobs losses as low as possible.

    Although it won’t make up for consumer spending, the US has woefully underspent on infrastucture and manufacturing companies who benefit from exports. These are the areas where credit needs to be used to invest.

    So, rather bleak outlook for the consumer. But, hey… didn’t EVERYONE buy a new car within the last 2 years?? Seems like it.

  17. 17
    BirdsofpreyRcool Says:

    IG at 195.

  18. 18
    rseidman Says:

    Z: Regarding #11, how many shares of UNG did you buy for 10KP? Or did you mean you just bought the options?

  19. 19
    zman Says:

    Thanks Bird, much appreciated. Here’s to a Happy Dance rally lasting longer than 1 day.

    I’m going to take some NFX pre call Wednesday. Should have more Bakken results and will be able to talk about the dual lateral Woodford project.

    MMR conference call going well, about to talk about S. Tim well (Blackbeard).

    Hear ya Bird, I bought a new kitchen instead of cars but to each his own.

  20. 20
    zman Says:

    RS – 3 call options of UNG $33. I know it sounds like a ridiculously small amount but hey, its only $10K. I only got a partial fill in my regular account so far. Notice I did not take the CLR calls in the 10KP as 1) they announce this week and that’s somewhat more risky for a new portfolio and 2) I have to work within limits there of portfolio until I hopefully build it up. The spreads on those are tough on a little portfolio and I don’t want to bang into my cash position too much too quickly either.

  21. 21
    Garyinhou Says:

    Z – How might #6 relate to NBR with needed extra HP rigs etc?

  22. 22
    zman Says:

    Gary – you would think the market would sort that out, so far not. Stock pretty much tracks the N.American rig count or the perception of where it is going. Hence, the lack of response in NBR to HAL’s move today. Earnings tonight, I’m not going to play pre call. If they have something convincing we have a long way to rally that won’t be taken care of in a day.

  23. 23
    zman Says:

    MMR – not reacting great to lack of real new news on Blackbeard. Sounds like they are still pretty sure they have a discovery but nothing definitive. Stay tuned, work in progress, yada yada yada

  24. 24
    zman Says:

    Reef – if you are around and listening to MMR did you hear anything re Blackbeard that was more encouraging than what they have already stated?

  25. 25
    zman Says:

    Filled on the rest of my UNG calls in the general account at $2.20. These are also the December $33 UNGs with natural gas at $6.99.

  26. 26
    Sambone Says:

    10:57 (Dow Jones) Now’s the time to buy oil, gas and refining stocks,
    Oppenheimer says, because upside potential in next 12 months could
    significantly exceed downside risk from a further decline in oil and gas
    prices. Firm says high energy prices in the last few months were due to
    excessive speculation, but there’s value in the stocks at a crude benchmark of
    $60/bbl. Crude currently trading about $73/bbl. Firm sees an average upside
    potential of 20% for the major oil companies, 25% for secondary oil outfits and
    explorers and 40% for refining stocks. (EBW)

  27. 27
    zman Says:

    Thanks Sam. So OPCo is using a $60 price deck. That means unlikely further cut to CFPS estimates unless its due to capital cuts. To me, Oppenheimer is trying to front run a potential bigger than expected cut from OPEC and cold weather boosting prices.

  28. 28
    bill Says:


    Do you know anything about HNR Harvest Natural Resources?

    No debt, about 4 bucks in cash with the stock below 8, market cap at 225 m and 3 or 4 interesting prospects along with oil production in Venzulua

    Company insiders and company buying stock like crazy


  29. 29
    bill Says:

    BHO a small time bulker company with a book of about 20 starts a dutch tender offer between 4 and 5..stock is 3.80

  30. 30
    zman Says:

    Bill – I used to follow them, not for awhile now. Too much country risk for me.

  31. 31
    zman Says:

    SWN move unreal compared to the rest of the gassy stocks, waiting on a pullback as it often will run one day on no news and then get clipped for 10%, again on no news.

    Stocks just trending with broad market albeit at much better percentage moves.

  32. 32
    elduque Says:

    More thoughts about PRGN

    I just got off the phone with Christopher Thomas – Treasure of PRGN.

    He says that the freeze on letters of credit needs to be unwound, before the market will improve. The demand for the cargo has not subsided.

    In the meantime he is sitting on $70M in cash and $100M in undrawn lines of credit.

    He says that he knows that a number of their charters have laid off the charter with the FFA.

    Further positive is most of their charters were done not at the top of the market, so the charterers don’t feel quite so compelled to get out of contracts.

    They have authorization for stock buybacks, Thought about it when the stock was at $10, but they viewed keeping the cash was more important.

    Re dividend. As long as he feels that the majority of the shareholders own the stock higher he is not inclined to cut the dividend.

  33. 33
    bill Says:

    I had the same thought, but… they seem to managing it well and have other prospects

    drilling a well in lousiana


    they have leases off off texas


    and they have teamed up with

    Our private company partners have a track record that is second to none in the Texas Gulf Coast and East Texas area. Their geological team includes John Amoruso, Denny Bartell and Larry Bartell. This team’s most recent discovery is the giant Amoruso field (Deep Bossier, East Texas), discovered in 2005, which is viewed by many in the industry as one of the most significant onshore natural gas discoveries in the continental United States in the past decade or more. We at Harvest are extremely pleased to be working alongside such an accomplished and seasoned team of explorers.”

    anyways, i found enough there to take a position

    Check out the latest presentation when you get a chance

  34. 34
    zman Says:

    Will do Bill thanks.

    That’s good due diligence El-D, thanks.

    Market looks pretty nervous, Nicky, got any levels. Bird, got an IG reading?

  35. 35
    ram Says:

    ZMAN- Looks like they took out some premium out of the NFX DEC 25’s. No movement with the common up $2.

  36. 36
    BirdsofpreyRcool Says:

    IG weaker… back to 198 1/2

    Investors are not piling back into the credit market. Mainly, it’s the street, trading with the street. Need to get actual investors off the bench and onto the field. Without investors, the Credit Market Ain’t Got No Game.

  37. 37
    zman Says:

    Thanks Ram…treading very cautiously in here, the group is not trading on its own merits still, gosh, what a duh type statement. I was hoping the common would not move up today. BEXP starting to work well by the way, their Three Forks Sanish discovery early this month is actually a pretty big deal but no recognition from the Street as of yet. I may add some shorter and longer dated calls there pre call.

  38. 38
    Dman Says:

    Z – with the SD calls, are you thinking Novembers or further out?

  39. 39
    zman Says:

    Re – SD, closer to the money Novembers and higher Januaries…really think this is one that comes back to much higher levels with the perception shift of the gas markets getting balanced by mid 2009. Recall that their are more than the usual amount of dire rumors with this story.

  40. 40
    elduque Says:

    Hi Bird

    TED spread falling with 3 month t’bill rate rising

  41. 41
    zman Says:

    ZTRADE: November $15 HK Calls (HKKC) for $1.90.

  42. 42
    BirdsofpreyRcool Says:

    elduque – yes, you’re right. cash TED at 305 bps now. mainly on a sell-off in t-bills, but still, teasing investors out of govvies and into spread product is a positive credit move.

    What the TED Spread is telling us is that some of the FEAR has drained out of the credit market. But, the next step is to see buyers return. So far, the buyers strike is in full swing.

  43. 43
    zman Says:

    Bird – equity market seems to want to believe the end of the strike is near.

  44. 44
    zman Says:

    CNBC reporting OPEC asking non-OPEC members to cut production to boost prices. OPEC basket at $64, which you can see at http://www.opec.org/home/

  45. 45
    italyinvestor Says:

    Zman – What do you think about QBC considering that they have had unsolicited 3d party interest in their acreage and have hired RBC to explore alternatives? I’m working on the take out value – would you figure on land position or some variation of reserves?

  46. 46
    bill Says:


    im sure you know this but i didnt and thought id share with your viewers

    UNG is an etf that invest in ng futures

    You can find current holdings here


    nov gas is up 2 % today but the etf is trading even.

    2 factors…only half the etf is invested, the other half is in cash, and 2 the etf is trading at a premium to nav but its probably a “poor mans way” of buying NG

  47. 47
    zman Says:

    Italy – long time no write. On QBC, 1) I was glad to be gone at $4. 2) acreage in the area going for between $5,000 and $7,500 now, far cry from the $25K and up land of 3 months ago. They had little booked so you gotta go with acreage and they are in the heart of CHK/GDP Haynesville country. If you do go with acreage and give them even $10,000 per acre that only comes to half their market cap at present (roughly $124 mm) and then you have debt of around $20 mm. If you go with reserves, 3P reserves won’t do it but those 4P thoughts (proved, probable, possible and the new potential) could get to a value of $400 mm in value using $2 per Mcfe for gas.

  48. 48
    zman Says:

    Bill – thanks, they fluctuate on the cash balance from what I’ve seen with more invested near the beginning of the nymex contract month and less at the end or so it seems. Some days it under performs, other days it outperforms but it generally tracks.

  49. 49
    italyinvestor Says:

    Been on leave and away from the net. Lost a ton of $ in the past few weeks come to find out but no one was shooting at me so it’s all good. Nothing like perspective to keep things even keeled. I think I might nibble on QBC if it continues to head lower and things stay crazy in the bigger names. I was thinking $4 max on the take out but that was a optomistic calc. Thanks for your thoughts.

  50. 50
    BirdsofpreyRcool Says:

    z – #43… so do I !!

    But, as long as people are parked in govt’-only money market funds and under-the-mattress, it’s not happening. Yet.

    Watch bond fund flows and — more importantly — any uptick in new bond deals announced, then placed. Until we see that (which we haven’t yet), we are all still trading on hope.

    I’ll let you know what I am seeing. But, there is a sense that the worst of the FEAR TRADE is behind us. Next step, real live bond investors show up at the party.

  51. 51
    zman Says:

    Italy – I was thinking $2.50 to $3…depends a lot on gas prices. Also, they may have more debt now on a revolved. The micro cap single digit midget crowd is hugely out of favor now. If I were to pick up a sub $2 E&P right now it would be EXXI.

  52. 52
    john11 Says:

    Any particular reason for drop in natgas here.

  53. 53
    zman Says:

    John – probably because I decided to buy UNG. Nope, nothing I see. Imports numbers for last week are out, they remain pretty darn low. So weather is a positive, imports a positive, I’d say this is profit taking that accelerated once the near month contract failed to hold $7.

  54. 54
    bill Says:

    >probably because I decided to buy UNg lol

    i gave it the kiss of death too

  55. 55
    john11 Says:

    Thx Z, do like the the forecast for next 15 days.

  56. 56
    1520sbroad Says:

    #52 – had the heat on for the first time in NJ last night. New gas fired furnace is so much better than our old heating oil one.

  57. 57
    zman Says:

    1520 – hear ya, put the heat on for the first time over the weekend, have been able to go without utilities for I think the last 40 days due to mild weather. I know, I know, should have cranked the AC and the heat for the cause.

    Bill – It’s not my last buy in the UNGs and I don’t really care if it closes down today, like Tater says, matching the chart I watch to the time horizon I’m investing in.

    Oil perky with the Dow, now up $3.50. Could be that Russia matches move by OPEC and that’s what they are talking about when they say non-OPECs should cut with them.

  58. 58
    elduque Says:

    Yes, it is getting cold here on Maui, too. Had to close the two of the doors last night.

  59. 59
    zman Says:

    NG backoff could be attributable to a weakening of this thing:


  60. 60
    zman Says:

    EL-D. How’re gas prices, that’s a TSO stronghold.

  61. 61
    1520sbroad Says:

    #57 – we should be good for at least a BCF or two of demand just from my household alone following our full nat gas conversion. Furnace, fireplace, range, water heater (we went with the 75 gallon monster instead of the instant on variety we discussed before – so far so good)

  62. 62
    zman Says:

    If anybody sees MMR post call comments by the sellside please shoot them to me. Ty

  63. 63
    ram Says:

    ZMAN – Were you thinking NOV or DEC calls on NFX to play the earnings this week?

  64. 64
    zman Says:

    Doug Kass’ piece this morning was pretty optimistic ala Warren Buffet.

    Warren has been buying things over the last two weeks or so and sounding more optimistic. That we all know. I wonder how the market would react to him being nominated Treasury Secretary. My guess is uber positive and it would allow a graceful start to the Berkshire Hathaway managerial transition plan. Just thinking out loud on a boring, albeit green, green, green Monday.

  65. 65
    zman Says:

    Ram – re NFX, November NTM calls and January well OTTM calls but so far I have not grown much of a spine into this rally.

  66. 66
    elduque Says:

    re #60 Gas prices are too much. 3.67gal unleaded

  67. 67
    ram Says:

    At least we have 5 weeks until NOV expiry.

  68. 68
    zman Says:

    33 days

  69. 69
    zman Says:

    FLSR took a hit after I bought last week, may add same calls to regular portfolio for just over half what I paid for them.

  70. 70
    Chendor Says:

    Just to jump in on UNG #46,48 UNG is a pure play on spot natural gas. They are by definition always 100% invested in NG futures. Apparent discrepancies on day % change usually reflect nothing but the fact that UNG closes at 4EDT and NG futures close at 2:30EDT. Differences between UNG price and NAV rarely exceed a few cents per share. Larger differences reported by AmEx are usually a result of errors in the AmEx calculation of NAV during the 4 days per month when UNG is rolling futures positions.

  71. 71
    BirdsofpreyRcool Says:

    IG … down to 192. but, it’s barely trading today…. yaaaaawn.

  72. 72
    zman Says:

    Chendor – last I looked I thought they had a stack of cash, just looked at holdings and yahoo no longer shows. My point was that it moves “in general” with natural gas but not perfectly. Awhile back I looked at USO which I think is structured the same way as UNG and it underperformed WTI oil by quite a bit. Still, if you don’t have a futures account and want to avoid company specific risk and metrics of a gassy E&P names UNG is probably your best bet to match up to moves in natural gas.

    Bird – hear ya on the yawn. Wonder if the market stays green through the close, this lazy trading reminds me of Friday before the last hour.

  73. 73
    Sambone Says:

    By Gregory Meyer

    NEW YORK (Dow Jones)–Crude oil futures rose to touch $76 a barrel Monday as
    the market anticipated the Organization of Petroleum Exporting Countries will
    decide to rein in production at a meeting this week.
    Crude has fallen by about half from its July record above $147 as slowing
    national economies depress demand growth. OPEC member governments reliant on
    oil revenues watched in alarm as crude last week tumbled below $70 a barrel.
    The cartel has scheduled an emergency meeting for Friday to address the
    situation. Analysts believe they will decide to cut production by at least a
    million barrels a day. In September, the group produced 32.3 million barrels of
    crude daily, according to the International Energy Agency.
    The prospect of a cut has helped support prices. Light, sweet crude for
    November delivery was recently up $3.57, or 5%, to $75.42 a barrel on the New
    York Mercantile Exchange, after earlier rising $4.15. The contract expires
    December Brent crude on the ICE Futures exchange rose $3.24 to trade recently
    at $72.84 a barrel.
    “All we’re seeing is technical buying based upon OPEC cutting,” said Daniel
    Pavilonis, senior market strategist at brokerage Lind-Waldock in Chicago.
    Several officials representing OPEC members said they expect a reduction,
    though they differed on the amount.
    “A cut in production by 1 million barrels a day is not enough to re-establish
    equilibrium on the market,” Libya’s oil minister, Shokri Ghanem, told Agence
    Ecuador’s mining and oil minister said Monday the group needs to cut crude oil
    output by about 500,000 barrels a day to help prices recover.
    Many observers are skeptical about OPEC’s ability to arrest the price decline,
    at least in the short term, as the credit crisis dampens oil companies’ desire
    to build up supplies and pushes some participants out of the market. The
    world’s oil use is also growing more slowly than earlier anticipated, with some
    analysts predicting a decline in demand next year.
    In a note released Monday, Goldman Sachs commodity analysts said OPEC needs a
    cut of 1 million barrels a day to keep markets balanced and prevent an
    inventory buildup of more than 300,000 barrels a day next year.
    Prices may still fall further.
    “Historical evidence shows that initial OPEC cuts in a recessionary
    environment do not provide strong support to the oil price, and it is only
    after further material cuts that the oil price starts to react,” Goldman said.
    The bank believes OPEC will defend a price of $60 a barrel.
    In a note over the weekend, Deutsche Bank cut its oil forecast and now expects
    prices will average $60 a barrel next year and “could bottom out” at $50.
    “We believe OPEC production cuts are inevitable in this environment, but the
    experience of 1998 and 2001” – times of previous economic slowdowns – “suggests
    the cartel will struggle to cut production as fast as world growth is slowing,”
    the bank said.
    Front-month November reformulated gasoline blendstock, or RBOB, rose 7.51
    cents, or 4.5% to $1.7412 a gallon. November heating oil rose 11.44 cents, or
    5.4%, to $2.2473 a gallon.

    -By Gregory Meyer, Dow Jones Newswires
    Dow Jones Newswires
    10-20-08 1409ET

  74. 74
    Chendor Says:

    UNG and USO only underperform by their transactions and management costs. What appears to be underperformance is really the impact of the cost of rolling positions. With futures in contango, USO/UNG appear to underperform; with futures rolls in backwardation, they appear to outperform.

  75. 75
    tater Says:

    Wondering if you might take a peek at the PBR article below and give your two cents?


    I’ll be honest in that I am looking for companies that might not have all their ducks in order coming into a period of questionable economies. Or to be more clear, I’m looking for companies to short in case we get a run-up and then the chocolate pudding hits the fan again.

  76. 76
    bill Says:

    chendor 70

    ng is flat and ung is down 1.9 % as of this writing.

    there are no time differences

    it’s not moving with the price of ng today

  77. 77
    Sambone Says:

    Off subject

    By Nicole Maestri
    NEW YORK, Oct 20 (Reuters) – Anxious shoppers wanting an
    early glimpse of the types of deals U.S. retailers will offer
    for the Thanksgiving holiday weekend can get a sneak peek
    Numerous websites have cropped up in recent years that
    publish in advance what they claim are copies of the newspaper
    ads retailers will run for Black Friday — the day after
    Thanksgiving that marks the ultra-competitive launch of the
    holiday shopping season.
    Thanksgiving falls on Nov. 27 this year, and the sites are
    already beginning to post early copies of Black Friday
    newspaper ads. The sites are also expanding their reach to list
    other types of promotions that retailers are planning for the
    Thanksgiving weekend.
    On Monday, BFAds (http://www.bfads.net) sent an email to
    subscribers saying it had posted the Black Friday newspaper ad
    for tool retailer Harbor Freight. It also said it had received
    word of a “midnight madness” event that will be hosted by Polo
    Ralph Lauren RL.
    A link on the BFAds site connects to Ralph Lauren’s site,
    where shoppers are invited to “join us after your Thanksgiving
    dinner” to get 20 percent off purchases of $150 or more at its
    outlet stores, most of which will open at the stroke of
    A visit to BlackFriday.info lists Black Friday deals from
    Ace Hardware and Harbor Freight. It also lists what it says are
    deals from Toys “R” Us’s toy book catalog, like a $10 store
    gift card with any $99 iPod purchase.
    While shoppers flock to the Black Friday sites to plan
    their Thanksgiving weekend shopping strategy, the sites can
    raise the ire of retailers.
    BlackFriday.info said the general counsel of close-out
    retailer Big Lots Inc BIG sent it a letter saying its
    advertisements are protected by trade secret, copyright and
    other laws, and it would take action if its ad was posted.
    “While we disagree with their claim, we have been forced to
    remove their ad,” the site states.
    BFAds said in its email that Wal-Mart Stores Inc WMT is
    not allowing it to post Wal-Mart ads until the week of Black
    Shoppers also have to take the information on the sites
    with a grain of salt. The sites tend not to verify the ads with
    retailers, and right now BlackFriday.info still has many of
    last year’s deals posted on its site.
    “There is some confusion,” said Jon Vincent, founder of
    BlackFriday.info, of the old ads. But he said the site will be
    redesigned this week.
    Given the state of cash-strapped shoppers, Vincent expects
    retailers to roll out great deals for the Thanksgiving
    But the deals could come sooner than Black Friday.
    According to BFAds, several retailers “have mentioned that
    they will be having competitively priced sales in the weeks
    before Black Friday. It looks like, once again, some of the
    best deals this year may be had before the doors even open on
    November 28th.”
    (Reporting by Nicole Maestri; editing by John Wallace)

    Mon Oct 20 18:25:31 2008

  78. 78
    zman Says:

    Tator – I’ve seen much higher capex if that makes you feel better (worse about going long). Great resource potential here and the stock has been pounded. It will likely trade with oil. I had not heard about the debt deal but had heard there may be trouble getting the rigs to drill and FPSO’s to produce everything they want to over the next 3 to 5 years. They need to carve out bits of it to the Majors but so far they’ve done very little of that. When oil is not going up, names like this are hard to get excited about…wide range on potential reserves, high development costs in an uncertain market. How’s the chart look, I assume short-like?

  79. 79
    Chendor Says:

    UNG today is 75% Dec NGZ*, 25% Nov NGX8. At futures settle (1430 edt) on Friday UNG was trading at 30.2. If UNG and USO don’t move with the price of NG and CL then there is free money–they are completely arbitragable. Futures and cash can be turned into UNG/USO at will, and v v.

  80. 80
    VTZ Says:

    Today almost seems like normal trading a little…

  81. 81
    Sambone Says:

    Cramer just recommended buying RIG. Should I sell?

  82. 82
    zman Says:

    Sam – what was the reasoning, because its finally up today?

  83. 83
    Sambone Says:

    Not sure, my buddy said he saw it on CNBS

  84. 84
    tater Says:

    Thanks. Actually, they all look about the same. Double bottom potential, but can’t know until they get north of the middle part of the W look. Have to baby everything you trade until we get better info. Just goofing around with CLR now and swearing that I will never daytrade it again due to the murderous spreads. Can’t seem to dump my position before the stock turns again.

  85. 85
    zman Says:

    Well, I can’t disagree with him on RIG, lot of damage done there, estimates have come off a bit too which assumes their remaining small piece of uncontracted business for 2009 comes in at below market prices OR they see some cancellations. So far no sign of either occurring.

  86. 86
    zman Says:

    V – I’d just like them to hold green through the close for 3 or 4 days in a row. Can’t tell on names like HAL whether this is market acceptance of the call or just market. SLB was not liked Friday on their call, that was obvious, today all forgiven.

  87. 87
    zman Says:

    V – probably a good day to buy some DUG calls, the way this market has been unable to do what I’m talking about in #86.

  88. 88
    VTZ Says:

    Yeah probably… I’m not playing with anything yet, got too burned and my hand still hurts. Offtopic, but re: the oil sands piece, you can post that if you’d still like although I would use the caveat that it is a month old now, but I should be available to answer questions during the evenings now.

  89. 89
    zman Says:

    Am liking how the majors are trading today, especially CVX where we’ve added about 1x of multiple since buy in last week. Those are November calls so I don’t be surprised to see me come out soon waiting for a bad day in the Dow/SPX to re-enter.

  90. 90
    zman Says:

    V – I was waiting for a good time to put it up…ie, when things were not falling 10 to 15% every day. Will post this week. I was actually thinking SU might make a nice trade if OPEC pulls something more interesting than a 1 mm bopd cut out of their hat. They have to know that won’t be enough to stem the slide.

  91. 91
    VTZ Says:

    Yeah I was hoping you’d wait. I like how Suncor and Canadian Oil Sands look here too.

  92. 92
    ram Says:

    Sorry to beat the NFX drum again, but were you thinking the analyst expectations were too low for the earnings release?

  93. 93
    kyleandy Says:

    z – want to buy NBR pre-earnings. i know u said u were going to wait but stk is so beat down think it might get a pop. heard any rumors as to what they might say??

  94. 94
    zman Says:

    Ram – no trouble at all, was not really saying. Thoughts on the quarter are they are unlikely to beat based on production, maybe on price. They could/may very likely announce a reduction to capital spending plans like everyone else, should be greeted positively.

    Kyle – nope, I did see Merrill say they thought the chance of a beat there was small but this quarter is not that important compared to what they say about go forward (always true but now more than ever). If I like what I hear and miss the bottom 10% I don’t care that much.

  95. 95
    zman Says:

    Out for 20 minutes.

  96. 96
    tater Says:

    Have to say that I don’t like the way that oil seems to be trading in lock step with the S&P since Sept. Gives me the continued hedge fund willies. Today it’s lets all play nice. Tomorrow they all have to liquidate to fund the redemptions. I guess the idea is good economy=oil usage, but this seems to be getting away from fundamentals and looks to be continued technical movement.

  97. 97
    jy Says:

    Z- re # 24 above, Moffett at McMoran (MMR) said today in 3Q conference call regarding Blackbeard test well in South Timbalier Block 168 that they have collected velocity data in the well in an attempt to answer the question of whether to drill deeper than the current TD of 32,997’. The velocity data would be used to see if the well has reached the objectives seen on the seismic data. The seismic data are recorded in time so the velocity survey in the well would attempt to show how deep (in time) that the well had drilled. Moffett said several times that the logs in the well “indicate hydrocarbons”, and that they have figured out how to run wireline logs to TD. He said that the partners are ready to complete “if they don’t drill deeper”. Moffett said they’d make a decision “in the next few days”. “12 months + to get equipment to test Blackbeard well w/a test cost of ~ $50MM. Moffett says subsequent wells at Blackbeard Prospect could be drilled for ~$125-135MM”

    Analysts treating Moffett w/kid gloves in Q&A. Guess they don’t want him to get mad at them. Moffett treating Analysts like 3rd graders.

  98. 98
    zman Says:

    Tater – I agree, hate to see them so tied. Also, the red light, green light action in the group (all or none) is lousy. Yes, I like the all green but tomorrow we could be all red due to events in Seoul or London. Silly after the beat down we’ve taken.

    JY – yesp, that what I heard. Analysts sounded a little exasperated with it, some investors sound a little more optimistic now. They have a lot going on besides this and the stock should probably be higher but I’m really listening to them as a play over at EXXI I’m considering. CEO Schiller is a smart, oil and gas finding kind of guy, head of exploration at Ocean under Hackett…very impressive, still doing a little dd there.

    Nice moves in the group with the close approaching, would very much like to see a close at HOD.

  99. 99
    zman Says:

    CVX and Majors racing higher into close. EOG finally coming along for the ride as well, HK too.

  100. 100
    BirdsofpreyRcool Says:

    the U.S. credit market is dead, dead, dead today. You could hear a pin drop on a trading desk. But, if people want to believe that “credit is getting better,” bless ’em. Maybe “hope” is what will pull investors in.

    Something has to break the ice.

  101. 101
    rlogan1301 Says:

    ung not following the run up.

  102. 102
    tater Says:

    BOP – Just wondering if you had the chance to read the article on page A11 from Saturday’s Wall St Journal titled Bernanke Is Fighting the Last War? Interview of the 92 year old lady who co-authored with Milton Friedman “A Monetary History of the United States.”

  103. 103
    ram Says:

    neither did clr

  104. 104
    zman Says:

    Ram – its up 9%, that’s not too bad.

  105. 105
    BirdsofpreyRcool Says:

    tater – thanks. with all my weekend reading, missed that one. Love Milton Friedman (can you believe the University of Chicago staff is lobbying against naming a building after him??). I’ll go find the article now.

    That said, Ben has been too little/too late for so long, that he finally had to do way more than he ever should, just to catch up. If more had been done sooner, the global run on the banks would have been confined to a very few bad ones. So, I am no Ben Bernanke cheerleader.

  106. 106
    zman Says:

    10KP tab updated…trying to get better about updating them daily.

  107. 107
    ram Says:

    No, but I was hoping to see CLR run into the close as well. I agree with you in that the HOD at the close is better than in the A.M. Of all the talking about NFX, I never did make a trade and it also ran into the close.

  108. 108
    Bleemus Says:

    NBR Nabors Ind reports EPS in-line, beats on revs (16.43 +0.92)

    Reports Q3 (Sep) earnings of $0.73 per share, in-line with the First Call consensus of $0.73; revenues rose 17.5% year/year to $1.44 bln vs the $1.41 bln consensus. Co says, “Our 2009 earnings per diluted share will also be impacted by newly promulgated accounting rules effective January 1, 2009 that will apply to our 0.94% coupon convertible debt issue. We estimate the impact to be ~$0.25 per diluted share in 2009, solely attributable to non-cash charges.” Co continues to believe the long-term challenges associated with production decline rates in North American gas and the world’s more significant oilfields augur for a strong outlook for their business in spite of short-term volatility. Whatever the extent of the current demand diminution, it is simply a matter of time until these decline rates rebalance the supply.

  109. 109
    BirdsofpreyRcool Says:

    speaking of weekend reading, the quarterly by Jeremy Grantham was pretty good. here’s the link


    my comments (to another colleague on Saturday) follow:

    A very good read. Can’t find anywhere to disagree with him. Although he is cautiously optimistic on making value investments here, his outlook for the commodity-based stocks is pessimistic for the next 18 months. That also makes some sense to me. But, low prices have a way of curing low prices (just as the reverse is also true). While always a difficult exercise to predict oil prices (you tell me what OPEC is going to do, I’ll tell you where oil prices are likely to head), natural gas is much more of a local market. At anything close to $5-6/mcf, much of the new, shale-based production in the US is non-commercial. And, as shale-based production falls off very quickly (about 70% after the first year alone), continuous drilling is required to maintain even flat production levels.

    If growth in China falls off, watch out below for oil prices. But even $50 oil can support $6.25 – 8.25/mcf nat gas prices (using a 6-8x mmBTU conversion). Also, an Obama presidency will be tough on the coal, oil, and nuclear producers. Nat gas is considered “clean.” So, nat gas producers and nat gas biased utilities (like Calpine) may be the winners here (along with TRA and WG). I am less optimistic about the oil sands or the US coal producers. I don’t think China will go along with any of the silliness about coal, but hesitancy about OECD country use of coal will result in depressed prices for a while (much to China’s delight, I would think).

  110. 110
    ram Says:

    Nice article on McClendon/CHK in the Fort Worth Business Press. He looks like my high school chemistry teacher but Aubrey’s hair is more organized.

  111. 111
    tater Says:

    BOP – It’s an interesting article. I really kind of felt for the old lady. She co-authored the darn thing and nobody’s ever heard of her. I guess you had to have a penis before 1970 for anybody to give you any credit.

  112. 112
    zman Says:

    ZEB perf and Wiki holdings pages updated.

  113. 113
    BirdsofpreyRcool Says:


    Mrs. Schwartz is spot on.

    This is why I thought the original 2.5 page Paulson Plan was something that could work. It would shore up the balance sheet of the banking INDUSTRY but was not targetted at saving bad banks. That is also why I came out against direct investment by the U.S. govt in individual banks. Bad banks, be gone. Good banks, stick around.

    But, Ben and Hank so muddled around and mis-sold their mission that the whole thing just got mucked up by Congress and the media. I probably did a hideous job trying to explain and defend it myself. And then the Lehman/AIG inconsistancy just put fuel on the fire of PANIC.

    So, we are at the point where the U.S. govt will DO ANYTHING to prevent a further run on the bank.

    Yes, Ben misunderstood the cause of this from the beginning. That is why I couldn’t understand why he was fighting a “inflation” battle while illiquid securities on bank balance sheets were being attacked by the CDS macro-bear funds. This is a complicated issue… but the Fed governors seemed wildly out of touch, for people who are supposed to be paid the big bucks to understand what is going on.

  114. 114
    bill Says:


    Rates still stink down 80% in one month

    Ocnf fell from 20 to 7 after hours they voted to mainyain qrtly dividend of 77 cents and the stock is up today 22 % to 8.60

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