Thursday – Raft of Earnings Plus Oil Review and Gas Preview

117 thoughts on “Thursday – Raft of Earnings Plus Oil Review and Gas Preview”

1. NOV beats, adds $1 billion to backlog, CC at 10 EST.

2. VIENNA (Dow Jones)–Saudi Arabia’s oil minister Ali Naimi said Thursday that
   oil prices are determined by the market, declining to give a clear view on the
   state of global oil markets ahead of a closely-watched emergency OPEC meeting.
   The de facto leader of the Organization of Petroleum Exporting Countries
   hinted however, that supply and demand for oil may be unbalanced. When asked if
   the market was out of kilter, he said: “What do you think? Look at what the EIA
   data has been showing,” he said, but didn’t elaborate.
   Naimi was referring to crude oil stocks data from the U.S. Department of
   Energy’s Energy Information Administration. Crude oil inventories in the U.S.
   have climbed above year-ago levels for the first time since August 2007, adding
   further fuel to the slide in crude oil futures prices that’s sparked alarm
   among oil producing nations.
   Naimi was speaking as he arrived for the OPEC meeting Friday where the group
   is expected to slice oil production as it seeks to rein in sliding oil prices.
   Just how much Saudi Arabia supports a deep cut is unclear.
   -By Spencer Swartz, Dow Jones Newswires

   Dow Jones Newswires
   10-23-08 0822ET

3. By Angela Henshall
   Of DOW JONES NEWSWIRES

   LONDON (Dow Jones)–Crude oil futures trade higher in London in anticipation
   the Organization of Petroleum Exporting Countries will announce it’s cutting
   production at its meeting in Vienna Friday.
   Oil traders, however, are skeptical it will make deep enough cuts to support
   the crude price, and warn disappointment with the measures could send it
   tumbling.
   “It’s a tricky one to call,” said Glen Ward broker at ODL Securities said, “as
   I think people already thinking along those lines anyway (anticipating a
   negative reaction,) so it may be priced in”
   At 1106 GMT, the front-month December Brent contract on London’s ICE futures
   exchange was up $1.12 at $65.62 a barrel.
   The front-month December contract on the New York Mercantile Exchange was
   trading $1.13 higher at $67.87 a barrel.
   The ICE’s gasoil contract for November delivery was down $2.75 at $660.25 a
   metric ton, while Nymex gasoline for November delivery was up 181 points at
   158.90 cents a gallon.
   OPEC President Chakib Khelil made a series of “measured, positive,” comments
   Thursday morning, said Julian Keites analyst at Newedge which have supported
   the crude price, lifting it from its recent lows. Over the last few days the
   Nymex contract has traded below $70 a barrel, hitting its lowest level for 13
   months.
   Oil consultancy PFC Energy says several OPEC members need oil prices above the
   current level to balance their 2009 budgets. Prices have more than halved in
   value since striking record highs above $147 a barrel in July, slashing the
   revenues of oil producing countries.
   While a period of lower oil prices is not a major worry for Saudi Arabia, “key
   partners Venezuela and Iran – which need $90 a barrel and $88 a barrel,
   respectively – will face greater pressures,” even if prices stabilize around
   levels slightly higher current screen price, it said.
   Iranian Oil Minister Gholamhossein Nozari said Thursday the group would need
   to cut its oil output by 2 million barrels a day to stabilize the market. But
   Nigeria’s oil minister, Odein Ajumogobia, who is not attending the meeting, is
   not thought to support a cut.
   The group is expected to announce quota cuts totaling around 1 million barrels
   of oil a day or more, probably in effect from Dec. 1. It could however, opt to
   implement cuts in two stages; first a 1-million-barrel-a-day cut in December
   following by another 500,000 or 1-million-barrel-a-day quota cut in January,
   which would give it a bit of breathing space to assess.
   Looking at technical charts crude oil remains locked in the downtrend, with no
   signs emerging yet of a reversal pattern. A close above key level $75 a barrel
   for ICE Brent, which would indicate a break-out, some traders say, is still
   unlikely.
   Looking ahead, once the meeting has concluded, traders of physical oil in
   Europe will be watching out for adjustments to official selling prices from the
   Middle East producer nations.
   “The signal to watch for with respect to compliance to a quota cut will be the
   discount in Saudi OSPs on Arab Heavy versus Brent for the coming months,” said
   Torbjorn Kjus oil market analyst at DnB Nor bank. “Lower rebates versus Brent,
   the more expensive Arab Heavy crude, would imply that Saudi is delivering on
   the quota cuts.”
   -By Angela Henshall, Dow Jones Newswires

   Dow Jones Newswires
   10-23-08 0747ET
   Inc.- – 07 47 AM EDT 10-23-08

4. CLB call pretty uneventful beyond the press release, probably moves with the market.

   NOV, which reported too late for the post, looks to be the flavor of the day in oil service given the opening indications.

   CLB – saying they are better positioned with their 3 lines of perforation charges now than they were last time the rig count turned down. Their perf charges bring frac costs down so they see them staying in strong demand.

5. DO probably also does well and I may take some calls before their call starts at 10 EST.

6. CLB saying they don’t think the deepwater is going to be affected much at all by the downturn in oil. They also think the big 5 shale plays won’t be affected by gas prices.

7. ZTRADE: $10KP Trade

   Added (5) DO December $80 calls (DOLP) for $2.75 at the open with the stock up $3 on earnings and a hike to their special dividend and on the heals of a big drop in the last few days.

8. test

9. I see you Pete.

   On the DO call.

10. (DO) Conf Call

    Seeing commitments at increasing day rates. The majors showing strength and willingness to commit to both deepwater and jackup.

    One contract they did lose was due to a cash flow crunch due to ike/gustav at the customer. It was not APC , won’t say who. So the cancel was not over oil prices but a company specific issue.

11. Z: On a scale of 1 – 10, what kind of grade would you give to NFX’s quarter?

12. DO call going well, Q&A soon.

    Re NFX: Maybe a 7. Nothing wrong at all, just no one cares right now and nothing in that says wow, I gotta own it despite the fact that they have bumped production guidance for this year up 4 times now and have said all the right things regarding capital discipline.

13. I hope we don’t make sine waves all day, give me some direction.

14. Popeye – hear ya man, no kidding. This action is exhausting everyone.

    Does anyone see news on FSLR? Getting pounded.

15. DO – general sense from the call. No sense of collapse in utilization or day rates whatsoever. Contracts between rig companies and their E&P clients: no outs for market issues. Contracts in general are very strong.

    Stock up $6, probably takes, if market stays green (big if I know) this probably takes RIG, NE, and maybe ATW higher.

16. DO Q&A:

    Gomex only has 21 independent leg cantelever JU’s left, demand remains strong, no E&P pulling back from the shallow water as of yet.

17. >imports: off about 1.4 Bcfgpd (10 Bcf for the week) from the year ago week

    why is the us importing gas? We should be exporting NG

18. Bill – we may some day but we produce about 56 Bcfgpd and import another 8 to 12 depending on the season. The recent rally in production is just that, recent, so either demand has to grow into the new supply or net imports have to come down via rising exports (we do ship some to Japan (tiny) and to Mexico) or prices have to fall to balance the market.

19. through the 1990s, companies built large gas pipelines from Canada to the U.S. to meet rising demand as the U.S. was increasingly gassified for home heating and also for power generation.

20. thanks

    this is what i advocate

    net imports have to come down via rising exports

21. 70 Bcf injection.

    gas off 22 cents before number.

22. ng getting slammed before the numbers down about .23

    i wonder what they know that i dont know

23. i actually saw a 75 forecast so im ok with 70

24. Bill, I put a preview in the post ya know…I was at 70, the Street was at 75.

25. DO up $7, call going very well, analysts not poking any holes.

26. lol you hit it right on the nose

    i knew i saw 75 somewhere, … lol right here!!

    Im losing my mind

27. hear ya, very hard to find one’s mind if you lose it…don’t recommend that course of action.

28. What’s with sudden happy happy joe joe in the market? Note oil trading in lockstep. Ugh. No thought for fundamentals here.

29. Z – The overall market is trading only on emotion. Fundies don’t matter.

30. DO – call over, very positive.

    Sam, right, right, silly me.

31. When Ben Graham was writing Security Analysis with David Dodd in the 1934, he was fighting the consensus opinion that the Depression was a permanent condition.

    Value Investing is the marriage of a contrarian bent and a calculator.

    You must invest in a bear market with the understanding that the worst may still be ahead.

    Stay focused on bottoms-up analysis. Don’t be tempted with market meteorology.

32. Funny how we get used to big numbers. DO up $8 now that they have boosted the dividend more than anyone would have thought and have alleviated (or at least tried to alleviate) concerns regarding rig contract forfeitures. Yet the stock was off more yesterday.

33. In investing, certainty is impossible. You will never extinguish doubt in investing. The best investors always understand they could be wrong. We’re simply better wired at being unsure than sure.

    You must be willing to own anything at the right price, and own nothing at the wrong price.

    This speaks to what is important: You can control your investment process. You cannot control the market. Maximize your outcomes by concentrating on your process. Time horizons that are too short always lead to broken processes.

    You will never know when a bear market is over. But keep in mind, the vast majority of people will still make their mortgage and car payments.

34. Sam – exactly why I do what I do. Calls less populated by analysts, much less populated by the buy side. That’s a big mistake in my book. Now is the time to hunker down and read, listen to these stories at these valuations. Not cry. Jack Welch by the way said Cramer is off base in his 5 year time frame on the market this morning. I’ll take Jack over Jim any day.

35. We have witnessed the unwinding of 25 years of excess in the past several weeks. Mr. Market is in a straight jacket.

    Market inefficiency, the best friend of the astute investor, is not widely seen as an opportunity. I guess that’s just the way it works.

    The great mass of people always seem to be over-invested at the top and under-invested at the bottom.

    Too many people tried to duplicate the Yale investment model. It was its own mania.

    Market today is rife with forced selling. It is, in fact, value heaven.

36. I’ll take Warren over Jack over Jim anytime!

37. Sam – could not agree more your last.

38. Until we get some fundamental direction to our market, our economy, our politics… it seems like stocks will move in the direction of Maximum Pain.

    Suck the longs in with a rally. Slam the shorts with a squeeze. The winner is volatility, in the short run.

39. DO up $9 now, but of course the Dow up 260 does not hurt.

    Sam regarding your RIG, still like it and NE and would say that DO and CLB comments today on calls regarding the stability and continued upward deepwater will filter into the rest of the space. PBR remains an unknown (can they fund all the rigs they have previous asked after? don’t know) but the offshore market in general and the deepwater market in particular remains very strong.

40. RIG is a steal IMO

41. where is ng now?

42. what was the NG number ?

43. down 28 cents

    number was 70 Bcf.

44. UNG time anyone?

45. thanks Z

46. V – looking to see if there is a fresh warm forecast out.

47. Cold snap coming this weekend for New England.

    http://www.accuweather.com/news-story.asp?partner=accuweather&traveler=0&article=4

    Gas price could just be someone forced to sell and others piling on.

48. Majors trying to fight higher. They’ll go higher as they are financially solid and dirt cheap if the market will just trend sideways.

49. #47 – thought i saw cold snap for upper midwest next week on WSJ weather page this morning.

50. By Benoit Faucon
    Of DOW JONES NEWSWIRES

    VIENNA (Dow Jones)–The global banking crisis will hurt new oil development
    projects and is already forcing many companies to drop oil projects, OPEC
    President Chakib Khelil said Thursday.
    The banking crisis is crimping project financing for foreign oil companies
    operating in OPEC and non-OPEC nations, Khelil said. Even if oil prices return
    to $90 a barrel, that wouldn’t be enough in some cases to secure adequate
    financing for projects, he said, speaking at a Vienna press conference.
    By contrast, Algerian state-owned oil projects haven’t been hit hard by the
    crisis so far because they rely on local banks, which are still able to finance
    oil projects, said Khelil, who is also Algeria’s oil minister.
    The Organization of Petroleum Exporting Countries is concerned about the sharp
    fall in oil prices from an all-time high in July of around $147 a barrel. OPEC
    ministers will hold an emergency meeting Friday to review the group’s output
    policy.
    Around 1030 GMT Thursday, New York Mercantile Exchange oil futures were
    trading around $67.70 a barrel – less than half the level reached in July.
    OPEC’s president said he doesn’t think a return of oil prices to $90 a barrel
    would curb economic growth. On the other hand, he said, international oil
    companies need high oil prices to continue to finance their projects.
    Projects such as Canada’s Athabasca oil-sands development need oil prices to
    be at least $90 a barrel to proceed, Khelil said.
    OPEC member Angola’s deepwater oil projects “need around $70”-a-barrel oil
    prices, Khelil said.
    “OPEC countries that have resilient banking systems haven’t been affected by
    the financial crisis because most of those projects have been locally
    financed,” Khelil said. “Those OPEC countries whose projects are being financed
    by foreign banks definitely will be affected.”
    Referring to fellow OPEC member Nigeria, Khelil said, “I think most projects
    in Nigeria are financed by foreign banks. Whenever you have a foreign company
    operating in a country, they will be affected.”
    OPEC isn’t the only group of countries trying to stabilize world markets,
    Khelil said. “An OPEC of finance is being created,” he said, referring to the
    coordinated response by industrialized countries to the financial crisis.
    U.K. Prime Minister Gordon Brown and U.S. President George Bush “had to inject
    (public) capital in private banks” to stop the panic in financial markets,
    Khelil said. “That’s unheard of – the antithesis of capitalism, of the market
    economy.”
    The OPEC president estimated it would take “maybe two or three years” for the
    world economy to leave behind its current turmoil.
    Meanwhile, oil prices will keep falling if the oil market isn’t balanced,
    Khelil said.
    Attempting to strike that balance in the oil market, OPEC is likely to
    announce a production cut when it meets Friday, Khelil said. The group also is
    asking non-OPEC oil producers Russia, Mexico and Norway to join it in trimming
    oil output, he said.
    Khelil said OPEC will “most probably” decide to cut its oil production.
    However, the size of any cut is difficult to determine ahead of the group’s
    meeting Friday, he said.
    Earlier, Khelil said OPEC may consider cutting back its oil production in
    stages.
    When asked whether OPEC may cut its oil output over several months, taking oil
    out of the market in several steps, Khelil said, “It’s a solution that can’t be
    excluded.”
    OPEC could even cut its output through a telephone conference call of its
    members if necessary, Khelil said.
    If needed, however, OPEC could raise its output in the future to meet demand,
    the group’s president said.
    OPEC also is talking to the largest non-OPEC oil exporters, Khelil said,
    adding that he hopes Russia – the world’s largest non-OPEC oil producer – will
    join OPEC in reducing oil output to balance the oil market.
    -By Benoit Faucon, Dow Jones Newswires

    Dow Jones Newswires
    10-23-08 1147ET

51. Greenspan in “shocked state of disbelief” over financial institutions’ failure to regulate each other. Like he has no blame in this mess. Why does congress want to hear from him now anyway, he’s just selling his book.

52. Letter from Aubrey to his troops, sent out week before last I think.

    From: Aubrey McClendon
    Sent: Friday, October 10, 2008 4:14 PM
    To: All Employees
    Subject: AKM 10/10/08 email to CHK employees

    Dear CHKers: As you no doubt have observed, the world around us is changing daily, and not for the better – that is especially true in financial markets, where the current meltdown is having profound implications on our industry, on our country and around the world. The challenges our industry, country and world faces are daunting – however, among the three, I would prefer to have to deal with those of our industry, whose primary challenge is a combination of lower oil and natural gas prices, tougher credit markets, and, as a result, substantially lower stock market valuations – the country’s and world’s problems seem more intractable by comparison. Our company has not been immune to these challenges as several members of our bank group have been bought under duress recently, one of them went under (Lehman), and others are just plain struggling to stay in business.

    The biggest challenges facing the big financial institutions are twofold: first, the biggest ones hold lots of illiquid financial derivative “assets” that few people know how to value and these assets currently have very little resale value or liquidity. Second, these large financial institutions’ ability to conduct business relies on the confidence that their peers must have in doing business with them – this is called “counterparty risk”. In normal times, most companies and big financial institutions don’t think twice about doing business with another big financial institution, now most people worry if they can get their money out of a transaction with one of these big financial institutions because they have no idea about the financial status of the counterparty.

    On the other hand, our company has “real” assets: natural gas and oil properties that produce products that are vital to modern human existence and that are easily valued and readily saleable for cash, both on a monthly basis and in the A&D market in bulk. In fact, we believe we have the nation’s best natural gas assets and they form the foundation of our position as the nation’s #1 natural gas producer. Our 36,000 wells produce every day and every month and we are paid cash for that production by reputable end users – companies such as utilities, industrials, pipelines, etc. The price of natural gas is set by many factors, but primarily by seasonal demand patterns that are driven mostly by unpredictable weather patterns – it’s pretty simple actually, cold winters and hot summers bring higher nat gas prices and warmer winters and cooler summers bring lower nat gas prices. To reduce our exposure to those pricing swings, we hedge (or “lock in”) a large percentage of our natural gas and oil production, often with the same financial institutions I described above, which these days is a bit disconcerting. Even though we are exceptionally well-hedged, it’s hard to ignore that natural gas prices have declined by 50% in the past 90 days and oil prices are down almost as much.

    So, where does this all leave us as a company? Actually, despite a ridiculously low stock price, in excellent shape. We have over $1 bln of cash on hand and we are well hedged at prices significantly above current prices with counterparties that are generally among the strongest still standing. We will generate almost $6 billion in cash flow in 2009 (or about $10 per share) and about $6.7 bln in 2010 (or about $11 per share), plus we have asset sales planned in each of 2009 and 2010 of several billion more. In addition, we have several property sales and joint venture initiatives under way that should allow us to end the year with even greater liquidity than we now enjoy.

    Although we are in a strong position financially, in tough times such as these, we all need to be more careful with expenses. It is imperative that we negotiate lease prices reflective of today’s economic conditions. So make sure you negotiate everything extra long and hard. What was a fair price 90 days ago for a lease is now overpriced by a factor of at least 2x given the dramatic worsening of the natural gas and financial markets. The same is true on drilling, completing, operating and overhead costs – in fact, everything that we do everyday to run this business should have a sharper focus on cost control and all of us can help in that regard. Together, we will emerge from these trying times as a stronger and even more efficient and successful company. For those who are relatively new to the company, look at our stock price chart from the late 1990’s – we’ve been through tough times before, in fact, much tougher than today, and prospered and became the industry leader we are today.

    Finally, let’s talk about the stock price, and what can I say? It’s ridiculous at a multiple of 1.5x 2009 cash flow, but it’s real and my advice to all of you is just to ignore it. There is nothing that either you or your management team has done to reduce the value of the company by 80% in the past 90 days and 65% in the past two weeks – it’s just investors in full scale panic across the globe right now, selling whatever they can. Over time, the stock price will take care of itself, but in the meantime, just ignore it – it does not reflect how well we are doing as a company.

    So, while all is not well in the world at this moment, Chesapeake financially and operationally is actually doing very well. So let’s keep our heads down, sharpen our pencils, tighten our belts, lower leasing and drilling costs, ignore the stock price and instead stay focused on how much net asset value the company is creating for our shareholders, how much natural gas and oil we are producing, reducing our finding costs, growing our reserves, identifying top notch JV partners, etc – in short, attending to those things that we can control, and ignore the stock price, something we can not control.

    I hope you have a great weekend, and I appreciate your hard work and that of your colleagues on behalf of our shareholders. I am proud to be your CEO and promise to continue to direct this company with all the energy and enthusiasm that I’ve had since we began Chesapeake in 1989.

    Warm regards,

    Aubrey

53. MMR -huge #4 well at their shallow water Flatrock development. 109 MMcfgpd from the #4 wellbore alone. Plus another 2500 bpd of condensate or 15 MMcfepd. And that’s better than expected on the rate. #5 is half way to TD and #6 will spud in 4Q. They also said they plan to complete and test Blackbeard soon. Stock flat.

54. Z: Is the Cimarex deal what you expected coming out of the investor days? Should CHK be announcing more assets sales? That would clearly help at this point.

55. By James Herron
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Major international oil companies may emerge from the
    current financial turmoil and the sharp drop in oil prices strengthened as they
    cherry-pick reserves from smaller companies that run into trouble.
    As access to financing dries up and share prices get hammered, some of the
    smaller oil and gas companies will become extremely vulnerable to forced asset
    sales or takeovers. And the cash-rich majors will be waiting to snap up vital
    new reserves at bargain prices.
    “The majors are in a fantastic position,” said Mike Wachtel, head of the oil
    and gas practice at Watson, Farley and Williams LLP, a law firm that advises on
    corporate mergers and acquisitions. “There are a lot of (small oil and gas)
    companies now that are having financing problems. They’re going to have to
    either sell their assets, put themselves up for sale, or go to the wall. And of
    course that produces a lot of opportunities for both the hedge funds and a lot
    of the large, predatory companies.”
    The valuations of oil companies of all shapes and sizes have taken a pounding
    as the price of oil has more than halved since its mid-July peak. Shares in the
    world’s largest oil companies including BP PLC (BP), Royal Dutch Shell PLC
    (RDSB.LN), ExxonMobil Corp. (XOM), Total SA (TOT) and Chevron Corp. (CVX) are
    down by more than a third from their peak in May.
    Smaller companies have been hit even harder. The value of consultancy Ernst
    and Young’s index of 20 oil and gas companies listed on London’s Alternative
    Investment Market, or AIM, has halved since the beginning of 2008.
    But the major companies have low levels of debt and the production and cash
    flow to get them through tough times. Many of the smaller companies don’t.
    “Against the backdrop of high and volatile commodity prices and a nervous
    market environment, many of AIM’s junior oil and gas companies are finding it
    increasingly challenging to secure funding from investors,” said a report from
    Ernst and Young. “Without cash, a company cannot progress from exploration
    activities to the development and production phase.”
    The smaller exploration and production companies “have no access to equity
    markets and no access to debt markets,” said a London-based banker who advises
    on corporate transactions in the energy sector. “Anyone with a hint of
    financing problems has been whacked,” and many of them will either go bankrupt,
    be forced to find a buyer or cut expenditures to the bone and drift along as
    “zombie” companies, the banker said.
    There is plenty of evidence of AIM-listed companies facing funding
    difficulties and cutting expenditures.
    Canadian company Oilexco Inc. (OIL.LN), which is active in the U.K. North Sea,
    lowered its 2008 production estimates and said it was having difficulty raising
    its credit lines to $1 billion from $700 million because of “unprecedented
    liquidity and volatility issues.” In September, London-based Sterling Energy
    PLC (SEY.LN) was forced to issue new equity at a one-third discount to its
    share price and sell a portion of an oil field in Iraqi Kurdistan to raise
    funds.
    Such problems create opportunities for larger companies with secure credit
    lines and stronger cash flow.
    “Everyone is expecting a big pickup in (merger and acquisition) activity,”
    said Andrew Bartlett, global head of oil and gas corporate advisory at the
    Harrison Lovegrove subsidiary of Standard Chartered Bank. “I look at ’98 and
    ’99 and see a lot of similarities.”
    The end of the ’90s, when the oil price dipped to around $10 a barrel, saw the
    last great wave of consolidation in the sector. BP bought U.S. companies Amoco
    and Arco, Exxon merged with Mobil and Chevron began merger talks with Texaco.

    ‘Everyone Is In Play’

    “There is fantastic value across all the sector. It’s fair to say that
    everyone is in play, from the very big to the very small,” said Bartlett. The
    best opportunities are for the major companies to pick off smaller players and
    boost their reserves. “The companies that have gone – Imperial Energy (IEC.LN),
    First Calgary (FCGCF) – have all had a very large undeveloped resource base,”
    he said.
    India’s Oil & Natural Gas Corp. (500312.BY) has made a $2.59 billion bid for
    Imperial, which has large reserves in Russia that haven’t yet been developed.
    Italy’s Eni SpA (E) agreed last month to buy First Calgary Petroleum Ltd. for
    $868 million.
    “Companies with more than 100 million barrels of oil equivalent of commercial
    or near-commercial resources…are in our view the most likely takeout
    targets,” said a report from the research arm of corporate advisers Fox Davies
    Capital. It listed JKX Oil and Gas PLC (JKX.LN), Regal Petroleum PLC (RPT.LN)
    and Cadogan Petroleum PLC (CAD.LN), all of which are developing resources in
    Ukraine, among likely targets.
    The steep drop in share prices recently means that even larger companies whose
    funding is secure may also be vulnerable. “I’d be very surprised if one of (the
    major oil companies) doesn’t snap Tullow (TQW.DB) up just for the Jubilee field
    in Ghana,” said Wachtel of Watson, Farley & Williams. At Tullow Oil PLC’s
    current share price, “you could buy the jewel in the crown for 30% less than
    it’s worth and get everything else for nothing.”
    “Cairn is exactly the same story. So there’s a lot of opportunity out there
    for people with money and the appetite to go and do some of these deals,”
    Wachtel said.
    The London banker said North American gas is likely to be a big focus for the
    majors. Oklahoma-based gas-producer Chesapeake Energy Corp. (CHK) looks
    particularly vulnerable, he said.
    Chesapeake has been selling assets and cutting back on drilling as U.S.
    natural gas prices have fallen. The company also drained its credit facility to
    boost its cash on hand. Chesapeake has already sold large stakes in two shale
    gas resources to BP, which has expressed an interest in further deals.
    The banker said Oklahoma-based Devon Energy Corp. (DVN) and Texas-based
    Anadarko Petroleum Corp. (APC) are also potential targets.
    “I think the majors are gearing up for more substantial transactions,” the
    banker said. ExxonMobil and BP are the most likely acquirers because both are
    cash-rich, but don’t have enough projects in the pipeline, so will need to buy
    more reserves, he said.
    “The trigger point is Jan. 1,” by which point banks should have less doubt
    over their own balance sheets and be willing to back deals again, the banker
    said. Even then they will remain cautious and $20 billion to $30 billion may be
    the maximum size of any cash deal, he said. Given the febrile state of equity
    markets, Bartlett of Standard Chartered said all-share takeover deals, such as
    Salamander Energy PLC’s (SMDR.LN) recently withdrawn offer for Serica Energy
    PLC (SQZ.V), are unlikely to succeed.
    “For companies with a hole in their production profiles in the longer term,
    this will be the time to seize the day and replenish the portfolio with quality
    reserves at low prices,” said a report from analysts at broker Sanford
    Bernstein.
    However, the Western oil companies won’t be the only bargain hunters out
    there.
    Jiang Zemin, the chairman of PetroChina Co. Ltd. (PTR), told a shareholders
    meeting in Beijing this week that he was also looking at buying foreign oil
    companies caught short in the financial crisis, according to the China Daily
    newspaper.
    “The Chinese are definitely back in M&A markets,” said Bartlett. They weren’t
    active this year, at the top of the cycle, but they have the cash and are
    definitely value buyers, he said.

    -By James Herron, Dow Jones Newswires

    Dow Jones Newswires
    10-23-08 1219ET

56. That deal is one of the little pieces they didn’t really talk about, just there are several portfolio optimizations they can make. The big kahuna will be getting a 25% stake in their Marcellus position sold.

57. Anyone see anything on FSLR?

58. APA mentioned Eagleford shale in their call

59. Thanks reef, anything noteworthy? Hard to believe action in MMR and EXXI.

60. Bird, any credit market comments?

    About to get on RRC call, hard to stay awake at this point.

61. Sambone,

    Enjoyed your #31,#33 and #35. Wisdom without a doubt.

    As to: “You will never know when a bear market is over” (#33), this is true, but in this particular bear market that we find ourselves mired in there are three things I would like to see happen before I commit precious cash(which is now “emperor of the world”). I think all these will happen before we reach the bottom of the bear market. They are:

    1. Fear in the general population subside substantially(VIX and other confidence indicators). Redemptions, and other liquidations are coming out of left field and killing the market. And with widespead fear consumers and small businesses cut way back on spending. ‘Two thirds of the economy, I am told. Bad for business and profits and cause further job losses.

    2. Financial paralysis subside substantially(TED, IG, HY and positive news stories on that front).

    3. Jobless numbers stop growing. I think we’ll have to wait awhile on this one. After all, we are only in the beginning stages of the recession in the U.S. and also in most of the world.

    Sam, I realize the stock market begins climbing before the economy turns around.

    I’m asking your opinion, and anyone else’s that cares to comment. Is this not a reasonable position? Am I asking too much before pulling the trigger?
    What do you think? I want to get this right. I’ve got a lid on my cash drawer and will have to decide when to take it off.

    Thanks for all your info and comments.

62. Man – Reasonable. This “Bear Market” will be a Stock picker/trader market. During the last bear (74-82), basically that was the only way you could make money. The days of throwing a dart and watching them go up are over for awhile.

63. Anybody have any thoughts on the Roubini comments about hedge funds forcing another massive down wave of selling that will force the markets to close for a week?

64. #61 – mahout, those are all the right questions.

    i’ve stayed quiet about the debt markets lately, because i’ve been head-faked by the stock market too.

    bottom line on credit: the symptoms are better (TED Spread and LIBOR are lower), but until we see some actual NEW ISSUANCE take place in the fixed income market, the stock market has no back bone. There have been a couple debt issues that have gotten done, but overall, money continues to flow OUT of fixed income.

    Banks won’t lend to banks won’t lend to companies can’t fund their operations will have to lay off people.

    We are seeing continued, massive deleveraging on a global scale. The HFs are currently getting slaughtered. It’s not over yet. Next up, the consumer. All those foreclosures don’t count (as many? most? were on people who were not really “homeowners” in the sense that they put money down and let equity build up). The next wave will be real, live people with jobs. When those jobs start falling by the wayside, consumer debt will be the next deleveraging to hit the door.

    Credit market inflows, debt deals getting done, job losses minimized… this is what we need to see. The caveat is that most major credit crises have been ended by stocks going up. That pulls money back into fixed income. But a stock market rally, absent money moving into bond funds is meaningless.

    IG back in FEAR territory: 220.

65. Thought for a rally if OPEC cut fails to impress: XAL

    RRC call a snoozer, just killing time until NE call. Like to get more confirmation that deepwater mkt holding up.

66. 63: Had not seen, sounds a bit extreme but I could use a week off.

    64: thanks Bird.

67. IG 221

68. posted this on wrong day–sorry

    I just took a stake in HNR

    Risk: Chavez country risk, & oil price

    Opportunitues:

    -Trades at 7.25
    -No debt cash 4 bucks per share
    -expanding drilling from 1 to 3 rigs
    -More dividends from subsidiary(petrodata) to corp for 2008 results will add to cash
    -company buying shares, i expect them to keep buying
    -insider buying
    -drilling new well in louisianna– worth 7 bucks per share if they hit oil, results any day now
    – 2 intl opportunities
    -company thinks stock is worth 50++

    earnings out 11/4 and some of this (good news) will be discussed methinks

69. nat gas sucks. apa says east of hk and is oiler

70. thanks for the chk letter

71. #57, Z – Something on “First Call” but I don’t get that.

72. By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–The Organization of Petroleum Exporting Countries could
    do the world a big favor by cutting output this week.
    That statement would have been heretical just three months ago. But with oil
    down by half from July all-time highs, the argument that OPEC could help ward
    off future price spikes by being stingier now is gaining favor – inside and
    outside its Vienna headquarters.
    The cartel meets in an emergency meeting Friday to address oil prices that
    last week sank below $70 a barrel. With most forecasters seeing world economic
    growth slowing to a crawl next year, demand for oil is expected to falter. That
    could lead to a buildup in oil inventories if OPEC pumps crude apace, not to
    mention an even harder fall in prices. Most observers expect the group will
    trim production by at least a million barrels a day.
    But there’s another justification for an OPEC cut. It’s that sustained low
    prices today will squelch investment in new supplies for tomorrow, leading to a
    serious crunch when demand gets back on its feet.
    OPEC President Chakib Khelil said Thursday that international oil companies
    need high oil prices to continue to finance their projects. Projects in
    Canada’s Athabasca oil-sands need $90 a barrel oil to proceed, Khelil said,
    while OPEC member Angola’s deep-water oil projects need prices at about $70.
    Iraq’s oil ministry may have to consider reductions in planned energy spending
    due to the fall in oil prices, its leader said in Vienna. Benchmark oil futures
    were recently at $68.22 a barrel in New York.
    The idea of cutting production to bolster prices worries some world leaders.
    U.K. Prime Minister Gordon Brown, whose country daily uses about 1.7 million
    barrels of oil, called the potential output cut “absolutely scandalous.” Nobuo
    Tanaka, executive director of the International Energy Agency, an energy
    watchdog for large industrialized countries, said, “our concern is that this
    would have an impact on the world economy.”

    Fresh Demand On Horizon

    But the IEA’s most recent projections see world oil demand rising to 89.2
    million barrels a day in 2010 and 90.8 million in 2011, from 86.5 million this
    year. New projects meant to feed that added demand could be shelved if current
    oil prices erase investment returns.
    “This is one of the messages that OPEC may be trying to convey now: these low
    prices, if they keep sliding, may give short-term relief or a little boost to
    the global economy, but in the long term they will starve the industry of
    future supplies,” said Sadad Al-Husseini, a consultant to bank Morgan Stanley
    and former Saudi Arabian Oil Co. executive.
    Besides dampening upstream investment, lower prices could also stimulate
    consumption, said analysts at JBC Energy in Vienna. “These factors would
    ultimately result in even higher oil prices in the medium term,” the
    consultancy said in a note. “OPEC knows this and needs to bring the market back
    to a balance of around $80 to $100 per barrel.”
    The CEO of oilfield services company Schlumberger Ltd. (SLB) last week said
    OPEC members would cut back on oil field development spending if weak prices
    persist for more than a year. But oil majors Exxon Mobil Corp. (XOM) and
    Chevron Corp. (CVX), for example, have so far indicated their existing capital
    spending plans will stay on track.
    An output cut would increase the OPEC supply cushion available for
    emergencies, potentially loosening oil balances in the short term. But that
    spare capacity is likely to fall back to critically low levels if the economy
    picks up in two to three years from now, say Goldman Sachs’s Michele della
    Vigna and Henry Morris, prompting a return of higher prices.
    “We don’t think that OPEC can do much to support prices in this environment,”
    the analysts said in a note after OPEC scheduled its meeting. But the bank is
    bullish, “as supply problems are likely to continue over the coming five years
    and will not be enough to keep up with demand growth once global economic
    growth goes back to trend.”
    The expected rebound in oil demand and pressure on supply may be one reason
    why prices for crude oil delivered years from now isn’t down as much as futures
    for imminent arrival. Front-month December 2008 crude closed Wednesday at
    $66.75 a barrel on the New York Mercantile Exchange, down 34% this month. Crude
    for December 2016 delivery closed at $86.78 a barrel, down 19% in the month.

    -By Gregory Meyer, Dow Jones Newswires (Brian Baskin in New York, Benoit Faucon in Vienna, William Horobin in Paris
    and Isabel Ordonez in Houston contributed to this report)

    Dow Jones Newswires
    10-23-08 1336ET

73. Thanks Sam, somebody cut them.

    On that last OPEC news item, it makes a lot of sense.

74. I saw the Roubini piece on Bloomberg. The guy is fairly sharp.

75. NE conference quote. Nothing has changed in the last 90 days except our stock price. Not had a single phone call inquiring about cancellations.

76. Sambone #62,

    Thanks much. Stock picker/trader market it is. Guess I’ll have to try to adapt.

    BOP #64,

    Thanks much and agree.
    Question: Since overleveraging across the board in this country took many years to build up, how long will sufficient deleveraging take to get things back to “normal functioning”. (Please don’t ask me to define that term precisely, you may use your own definition). Have you got a guess, or opinion or estimate? Because of the sheer size of the overleveraging I keep coming up with 3 to 5 years, which scares me.

77. Antrim #63,

    I haven’t seen Roubini’s latest comments. Where did you find them?
    We all should have paid more attention to what he was saying a few months ago.

78. mahout- I saw them on the main Bloomberg website. The article should still be there or you can do a Google news search and find it. It is quite scary, yet logical.

79. The VIX is very pesky and near 80 right now.

80. Sam – after listening the NE call, and DO before that, its apparent strong balance sheet is most important, that contracts are holding up well.

    DO favorite deepwater, then NE, then RIG only last because of high leverage.

    NE says only Pemex could cancel and get away with it. All other region contracts are take or pay, no out clauses.

81. Analysts beating the canceled contract subject to death.

    NE CEO doing a great job of saying it just won’t happen. Cancel your contract and get sued. It’s happened once in his career and they went to court and the other side lost big. Same happened to Rowan once and same result.

82. Z, I recently read some article in the paper that said courts are more lenient in these types of matters when companies void contracts…in times of despair

83. xco having a going out of public business sale at $6.44/sh

84. Boss – they even mentioned the contracts will likely hold up through bankruptcy. We’ve seen down times much worse than this for oil and the operators could not wriggle out of them.

85. Reef – take a look at VLO and the other indie operators. Hope people don’t like driving…products not keeping up with oil, cracks just awful.

86. Z: Was on NE call. It looks like their balance sheet will be able to take advantage of any special opportunities much like the large oils with the E&P space.

87. Tom – yep, in this market it would be smart for both types to be patient…heck, you can wait another month and get 4 companies for the price of one. Then the smaller names will race higher.

88. here’s to a last hour rally. OPEC either does 2 mm bopd+ cut or they won’t arrest this slide.

89. DO CEO on CNBC right now.

90. Thansk for the headsup Antrim, always fun to watch Maria B talk about that which she has no clue. Thought he did a good job of explaining balance sheet, dividend, resilience of business.

91. Nicky, if we are in wave V down, because we might close below 8500, how low should it go?

92. Any update on the XCO debt-coming-due story of a few weeks ago?

    Thinking of grabbing some stock here. At this price there’s only $6 of risk !

93. Dman – not a word on that.

94. Dman- XCO going to go private…take my word on that

95. Never mind Nicky, it’s running back up again, and how!

96. liking the move in DO today, three conf calls confirming the continued strength of deepwater

    liking strength in the Majors, esp CVX

    Ram, careful you don’t speak too soon, this market has no idea where to price itself

97. ram – #94 dumb question: is that good or not ??

98. What time tomorrow could we expect to hear from OPEC?

99. Eld – Don’t know, I’ll tune in late tonight and see if they have the webcast set up, so far not sure it will be cast.

100. My question on XCO going private is just because I’m not familiar with the mechanics of that, so I’m not sure how it works out for shareholders.

     I.e. would it be just like a takeover bid but it happens to be a private entity doing the bidding?

101. Dman – Are you taking to me ….. I’m the only one here … are you talking to me?

102. CVX is trying real hard to break out from under the declining trend line, but it’s keeping us in suspense… closed right on the line.

103. ram – yeah well I don’t know anything about these “going private” things, so any enlightenment would be great.

104. Re going private, think leveraged buyout. If you can borrow enough against the reserves to buy out the common you go private. Premiums are often not as good as what happens in a takeout or competitive bid situation. Bit of a conflict of interest in that management is the one taking it private in many cases and they are going to be the ones who have to service the debt after it is out of the public arena and are also the guys who are recommending to the board and therefore the shareholders that their offer is a good deal. Some companies have been public, private and then go public again in better times, Callon has gone back and forth and there are others.

105. Thanks Z, I was wondering how they would swing the “leverage” part at this particular time & also the premium/conflict issue that you mention. I could imagine buying stock in this environment, watching it drop substantially & then get bought out at a premium that may not even get back to even. Whereas with a takeout you know management is going to hang tough for a decent price. Hmmm.

106. hnr well status

     http://sonlite.dnr.state.la.us/sundown/cart_prod/cart_con_wellinfo2?p_wsn=237809

107. Antrim #63,

     I listened to Roubini’s whole speech of today. He paints a very dark picture. I can’t find anything wrong with his arguments and simple statements. When he says we are close to a panic, there will be massive dumping of assets, hundreds of HF’s are going to go bust, The amount of money the FED and Treasury are sending the bank’s way is not nearly enough, we haven’t yet seen the effects of the financial crisis in other countries (which is now beginning and which will hurt us), some companies are too big to fail and some are too big to SAVE in smaller countries, systemic risk is growing not receeding, etc., etc.- I for one am going to listen. He has been right in the past, hasn’t he?

108. Z,

     It kinda looks to me that OPEC is priming the world for a cut of substantial proportions for OUR benefit. So the world will be able to have enough in the future to meet escalating demand B/C they were able to fund their expansion projects with higher prices than today’s.
     It also looks like they will try for a level between $70 and $90 for Cl.

     Perhaps it might be 2 mmb. It better be that much at least to cover the inevitable cheating. Hopefully an announced increase will give us a pop in the market.

109. Z,

     My #108: Should be “an announced sizeable cut will give us a pop in the market”

110. here is interesting detail on ng

     http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp

     ng in new york is almost a dollar higher than henry hub

     its cold here in new england brrrrr

111. Responding to the lackluster market in the United States for liquefied natural gas (LNG) imports, Sabine Pass LNG LP Thursday filed an application at FERC seeking authorization to operate its terminal for the additional purpose of exporting foreign-sourced LNG volumes.

     Sabine Pass, a subsidiary of Cheniere LNG Inc. and operator of an LNG terminal in Cameron Parish, LA, has asked the Federal Energy Regulatory Commission (FERC) to act on its request by December.

     “Increasing worldwide demand for LNG in European and Asian markets and relatively high prices [have] resulted in a decrease in deliveries of LNG in the U.S. Sabine Pass’ proposal would provide customers of the Sabine Pass terminal the opportunity to purchase cargoes of LNG at current LNG world market prices that may be higher than prices in U.S. markets, with the intent that such LNG subsequently could be exported for redelivery to a foreign market at a later date,” Sabine Pass LNG told the Commission [CP04-47, CP05-396].

     “In the event that U.S. market prices were to rise to a point where domestic sale of the LNG held in storage were to become economically feasible, the LNG would then be readily available for U.S. consumption.”

     Granting Sabine Pass authorization to allow exports would provide two benefits, according to the company. “First, it would ensure that a continuous supply of LNG would arrive at the Sabine Pass facility, which in turn would help ensure that the Sabine Pass facility remains in operation even when U.S. market conditions may not otherwise support the sale of imported LNG.” Sabine Pass currently has 2.6 Bcf/d of sendout capacity and currently is in the process of adding 1.4 Bcf/d more of capacity. The latter project is expected to be in service during the second quarter of 2009.

     “Second, to the extent imported LNG may be needed to meet U.S. gas demand, grant of the authorization requested…would help ensure that such supply is present in the U.S. and available for delivery to U.S. market,” the LNG company said.

     Sabine Pass LNG’s request comes about two weeks after FERC ruled that the company did not have to go through the mandatory pre-filing process for LNG facility modifications that are related to its request to export foreign-sourced LNG from its terminal in southwest Louisiana (see Daily GPI

112. Bill,

     Thanks for #110.

     I’ve noticed an interesting phenomenon. When it’s colder than normal here in the Valley of the Sun, Phoenix, AZ, it is the opposite in New England. It always seems to be the opposite. It’s like the country is on a teeter totter as to weather. I can usually tell what it’s like in New England by what it is here. Probably due to the jet stream. Today it is quite warm for October. I hope that holds so we will need lots of NG in New England.

113. on ng storage

     “Storage is a big nonevent, I don’t know why we pay attention to it,” said Ed Kennedy, senior vice president at Hencorp Becstone Futures, Miami. “It gets filled every year. Whatever the utilities decide they want in storage is what the [final] number will be. You can shut in production like you did in 2005 [post-Katrina] and you will fill storage. Why pay attention from week to week?”

114. on cold weather

     Temps will be falling to below average across the eastern half of the U.S. in the coming days and will stay there for the weekend,” said private meteorologist John Dee in a morning report. He added that a “reinforcing shot of cool air” is likely to send temperatures even more below average in the eastern United States for early next week. In his forecast he says temperatures in the West will warm to above average in the coming days and stay there into much of next week. “The cooler than average temps in the East will lead to higher than average demands for heating energy across all of the Northeast U.S. and most of the Midwest, although it is too early in the season to be generating demand levels that are too substantial

115. so why did ng get slammed today? lol

116. Bill – appalachia gas is typically premium to a henry hub.

     on LNG, thanks had not seen but am not surprised, others have talked about reversing and I expect all them to apply for it. Regas capacity is way overbuilt

     re 113. That guy is both right and wrong. Today storage had little to do with price (that was more of the forced liquidations that have become so fun of late). But gas storage does not get full, to the same extent, each year. Not paying attention is akin to throwing up ones hands. In that sense he’s just wrong.

117. al-Hayat (Saudi paper) citing Saudi source says OPEC to cut 1 mm bopd. If true that would be a disappointment for crude. Source says they do not want prices below $70 but also don’t want to hurt the world economy.

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