2008, Goodbye and Good Riddance + Oil and Natural Gas Inventory Previews


Sentiment Watch: It was the best of years, it was the worst of years. Personally I could have done without the second half. That being said we are now much closer to a bottom than a top in both commodities and many energy equities and today the feeling on the Street is one of timd acceptance.  In coming days I will have a number of succinct pieces on the energy sectors, the midgets, the MLPs, and so on and so forth as well as my thoughts on energy prices in the New Year. Anyway, It's New Year's Eve, so please, invest responsibly and be careful out there tonight. 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Natural Gas Inventory Preview
  5. Stuff We Care About Today - late day viewer mail
  6. Odds & Ends

Holdings Watch: No changes yesterday.

Commodity Watch:

Crude oil fell $0.99 to close at $39.03 yesterday in quiet trading. This morning crude is trading off about a buck.

Natural gas fell $0.23 to close at $5.86 yesterday as warm weather began to invade more of the U.S. This morning gas is trading off with oil.

Oil Inventory Preview (10:35 EST)

ZComment: This is probably not a very important report as most people that matter in the markets are out buying a last bottle of Dom (or Mad Dog 20/20 if they have been long in the second half of the year). The only potential for any meaningful upside in crude attributable to today's numbers likely lies with distillates which I think have a good shot at coming in low and quite possibly negative as opposed to the 1.5 mm barrel build seen in the table above. Quite simply put, it was very cold again last week and has been for several weeks. This has not been reflected in the inventory numbers of the last several weeks as it appears the distillate export business has largely shriveled up and expired. Cushing stocks however, will be the most watched number (currently at record levels) and a build here again would probably send crude back into the mid $30s to close the year. Either way, this will be oil's worst year on record. 

Natural Gas Inventory Preview (12:00 EST)

My Number: 160 Bcf withdrawal.

  • Last year: 165 Bcf, when heating degree days of 190 were recorded.
  • 5 Year average: 100 Bcf
  • Weather:
    • 222 HDDs, coldest reading of the season to date.
    • Two weeks ago the HDD reading of 215 generated a withdrawal 147 Bcf.
    • Forecast: Not pretty with HDDs for this week (impacting next week's withdrawal number) falling back to 181 (or rather Fallish weather).

Street Consensus: 152 Bcf

ZComment: This week will probably come in close to consensus and I see little upside from the number but significant downside (say 50 cents off gas) if there is a large whiff here. The limited near term upside is the result of warm temps which will result in a much lower withdrawal next week, something below 100 is almost assured so it's hard not to curb your enthusiasm with that around the corner. Still, natural gas appears to be putting in a base between $5-- and $5.-- and I think a focus on the gassier names, especially amongst the lower cost resource players is warranted (more comments in the mailbag sel

Stuff We Care About Today - Viewer Mail

Italyinvestor ~ I’m looking a building some long positions for IRAs/family accounts. You had a chart posted in the past that showed some of your favs with respect to debt and i think their estimated cost to produce a mcfe. I believe the low debt E&Ps will be more stable short term and will lead during the recovery. Am I off base here? If not, could you repost or do up a chart for the gassy names and the oils that shows debt levels and estimated production cost?

ZComment: I agree, low cost is pretty much where you always want to invest and if you can get production growth without blowing capital discipline then more power to you. In the very near term, assuming commodity prices recover a bit faster than the credit markets, I agree that no to low debt E&Ps will outperform their more indebted brethren. As financial markets recover the debt laden will likely, cerebus paribus, play catchup.

  • Names for the quick recovery with higher growth, maintaining a capex with cash flow stance from early in the meltdown, and low debt.  GDP and (SWN - although this one is set to slightly outspend cash flow as things now stand).
  • Name for the longer term: there is good value on an asset basis at a $6 and $60 oil price deck in all the large cap names and in the lower cash cost names.  
    • EOG, GDP, GMXR, HK, CHK 
    • and I'll have a piece out soon on the virtues of some the smaller names that I'm thinking about buying now (common) and forgetting about for a year or two.

The following table is a quick look at debt levels and EBITDA. In the good times Total Enterprise Value/EBITDA can run 6 to 8x the forward number. Note the cluster of multiples around the 4x area (not good times). I've circled the areas where EBITDA is expected to grow next year and where debt loads are pretty small. I think debt vs EBITDA is a better measure of companies' ability to service their interest than is debt to total cap and of chief concern to fund managers at this time. I have not included interest in the calculations due to time constraints in rounding them up but none of the big caps are in jeopardy of coming up short on interest service and none of the favorite names around here are either in the mids and smalls list. 


Calvo ~ Z, do you reckon there’s a serious chance of getting more (credit-related) bad news on SD which have not yet been priced into its shares? Did the piece on SD from elduque uncover anything new? I’m thinking about getting in for the long term.. any additional insights would be much appreciated - thanks!

ZComment: Well, never say never but I don't know of anything on the horizon for them in terms of debt related news that would be a problem. As far as the piece, not really, no. I think the stock is grounded until regional natural gas prices rise. These guys have found a huge amount of gas this year (nearly 1000% reserve replace in the 3Q release) but prices are in the hole out west and they are being pinched. Do they survive? I'm pretty sure they do. However, if the financial markets free up before natural gas prices do they will not be flying solo anymore. I think they missed an opportunity to bring in partners as CHK did in several of its plays and this will hurt as finding costs rise while gas price realizations fall. I own it much higher than here and don't plan to sell any time soon. One thing about a strong first half of year IPO is that it was all the rage and a must own name but lots of hot money here didn't really understand or care to understand the play. They have been selling for tax loss purposes. At least that pressure is about to end.

mimster90 ~ zman any thoughts on when is a good time to go long on kwk, chk, sd, hk etc… As well as which ones are best to focus on. I am glad I listened to you on line, evep and atn. I am thinking they will retest lows 1 more time before going up. I see no good economic news in the first or second quarter of next year (revenue guidance down across the board, more retail bankruptcies, higher unemployment, etc…) unclear to me what could turn all that around even with lots of cash supposedly on the sidelines.

ZComment: I'm long all of those but KWK at present, which really needs higher oil prices for and the higher frac spread for the story to work well with their wet gas play. Is this a good time to go long? If you mean the common and with a long term attitude then its probably a better time than many as the stocks just went from record high prices and fair valuations to five year lows and record low P/CF and TEV/EBITDA multiples in many cases in a six month period.  If demand destruction is to blame then the economy will be your best indicator of when commodity prices rise lifting most of the E&P boats. The stocks will begin discounting this good news (rising) before all the eco-data has turned friendly by as much as 3 to 6 months.  I think BOP's comment that the first two weeks of 2009 being critical for the bond market are also a very good point to consider on the timing issue. As to what to focus on, see thoughts above on the question from Italy.

Odds & Ends

Analyst Watch: nada.

103 Responses to “2008, Goodbye and Good Riddance + Oil and Natural Gas Inventory Previews”

  1. 1
    Sambone Says:

    By Jennifer Waters

    Most Americans who adjusted their driving habits in a big way when gasoline
    prices surged are sticking with their economizing ways, according to a Gallup
    poll released Tuesday.

    Even though prices at the pump are now about 45% lower than they were a year
    ago and significantly below $2 a gallon, 52% of Americans told Gallup that they
    have not gone back to their old gas-guzzling ways.

    At the same time, overall demand for gasoline continued to decline, according
    to MasterCard Inc.’s (MA) SpendingPulse unit. Demand during the usually
    volatile Christmas week dropped 2.9% from the prior week while year-to-date
    consumption was off 3.2%. Winter storms throughout the country also hurt

    For a nation long vilified for consuming mass quantities of oil, this
    downshift in vehicle use would be historic. The change, though, may be as much
    a result of the glum economy that has forced consumer cutbacks in a number of
    areas, including ritual holiday shopping, as it is a long-term behavioral

    “It’s like the, ‘It’s the economy, stupid,’ of what’s going on at this point
    more than anything else,” said Brian Bethune, chief U.S. financial economist
    for IHS Global Insight.

    “If we had a strong economy we would see consumption bounce back,” he added.

    Gallup found that middle- to lower-income consumers – those who earn less than
    $75,000 a year – were most likely to consolidate trips and drive less overall,
    primarily because gas prices at the pump eat up a larger percentage of their

    Of those who made less than $30,000 a year, 69% said they changed their habits
    while 68% of those in the $30,000 to $74,000 annual income range did. Fifty-six
    percent of those whose annual paychecks exceeded $75,000 did.

    There is not much difference in behaviors among age groups when it comes to
    young adults and those who are older. Sixty-one percent of consumers 18 years
    old to 34 years old shifted their driving habits, while 62% of those 55 years
    and older did.

    Of those who are 35 years old to 54 years old, 67% altered how often they got
    behind the wheel. “Of course, this seems logical because at this stage of the
    life cycle, as these Americans are more likely to have to commute and to have
    children involved in many after-school activities,” Gallup Chief Economist
    Dennis Jacobe said.

    Laying Off The Gas

    According to MasterCard SpendingPulse, the four-week moving average of gas
    consumption had a 46th straight decline, down 2.1%. That average has not been
    positive since February.

    By Jacobe’s thinking, lower-income consumers were among those hit hardest by
    the higher gas prices and were forced to make changes in driving habits to make
    ends meet.

    Not surprisingly, those same people were the largest group to pick up where
    they left off. As gas prices plunged, 19% of lower-income consumers said they
    returned to their old driving habits compared with 11% of those in
    middle-income ranges and 8% of upper incomes.

    “One lesson to be learned from the plunge in prices at the pump is that you
    can push money into the hands of consumers, but you can’t make them spend it,”
    Jacobe said.

    Bethune, the IHS Global Insight economist, said the millions of unemployed
    workers and the millions fearful that they will be unemployed are having a big
    impact as well.

    “We’ve seen 2 million jobs disappear this year. That’s 2 million commuters,”
    he said, also pointing to the sharp drop in the Conference Board’s consumer
    confidence index to a record low 38.0 in December from 44.7 in November.

    “It all boils down to those facts plus people have cut back on vacations, are
    taking shorter vacations and not traveling as far,” he said. “That’s all part
    of the severe economic cycle that we’re in.”

    For the time being, however, changes in driving habits that could become
    permanent are good news. “The plunge in gas prices is similar to distributing a
    huge tax rebate by how much individuals drive,” Jacobe said.

    “Like the tax rebate from earlier this year, lower-income Americans tend to be
    most likely to spend the rebate, but all Americans are likely to save a large
    portion of any tax rebate,” he added.
    -By Jennifer Waters

    Dow Jones Newswires
    12-31-08 0811ET

  2. 2
    Sambone Says:

    HOUSTON (Dow Jones)–The Sabine Ship Pilots Association suspended boardings
    Wednesday morning at the Sabine-Neches waterway because of poor visibility
    resulting from fog, the U.S. Coast Guard said.
    The waterway serves refineries in Beaumont and Port Arthur, Texas.
    The Pilots Association guides commercial ships, including oil tankers and bulk
    carriers, through the ship channel.

    -By Jason Womack, Dow Jones Newswires

  3. 3
    zman Says:

    Looks like market and group want a day of green.

  4. 4
    Sambone Says:

    Yep, except our patch

  5. 5
    zman Says:

    If the broad market takes another run, energy will follow … pretty meaningless trading today anyway.

  6. 6
    elduque Says:

    It is worth what you paid for it. CHK just broke up through a minor (been in place since 9/28) trend line.

  7. 7
    zman Says:

    India’s oil co ONGC to go ahead with $2 billion acquisition of Imperial Oil out of the U.K. This deal has been on semi-hold for awhile now…more signs from the M&A market that not everything is frozen but its just a baby step toward normalcy as this is a national oil co doing the buying which normally is pretty run of the mill activity.


  8. 8
    zman Says:

    El – d, barely. At least Aubrey didn’t make the 2008 list of Billionaires Biggest Flubs.

  9. 9
    Sambone Says:

    By Brian Baskin

    NEW YORK (Dow Jones)–Crude oil futures traded lower Wednesday, as weak demand
    looked set to dog the market one last time in the final trading session of the
    Light, sweet crude for February delivery recently traded $1.21, or 3.1%, lower
    at $37.82 a barrel on the New York Mercantile Exchange. Brent crude on the ICE
    futures exchange traded 94 cents lower at $39.21 a barrel.
    No last-minute rebound appeared to be in the offing for oil prices in 2008, as
    the market slid on concerns about weak demand. The global economic downturn’s
    effect on oil supplies already can be seen in the record inventories at
    Cushing, Okla., and the large spread between February futures and the rest of
    the curve. Anyone willing to hold oil from February to March would receive a
    staggering $4.10 premium to do so – and yet the spread continues to widen.
    The U.S. Labor Department reported fewer new jobless claims in the week ended
    Dec. 27, though at a still-high 492,000, the figure hardly provides a reason
    for oil to rally, said Tony Rosado, a broker with GA Global Markets in New
    “It’s gonna be a tough year ahead,” Rosado said.
    Weak demand has led to unseasonably high oil inventories in the U.S. and
    elsewhere. The latest U.S. data is due out at 10:35 a.m. EST from the Energy
    Information Administration. Analysts surveyed by Dow Jones expect a
    1-million-barrel draw on oil inventories, a 1.4-million-barrel build in
    gasoline stocks and an 800,000-barrel increase in distillate inventories,
    including heating oil and diesel.
    While the data has had a muted effect on the market in recent weeks, it could
    grow in impact as the Organization of Petroleum Exporting Countries reduces
    exports, causing inventories to tighten.
    “Prices are nearing the bottom … mainly due to OPEC cuts, which should
    result in large stock draws in the first half of the year,” wrote analysts with
    JBC Energy in Vienna.
    Front-month January reformulated gasoline blendstock, or RBOB, recently traded
    down 2.08 cents, or 2.4%, at 86.45 cents a gallon. January heating oil traded
    90 points, or 0.7%, lower at $1.2790 a gallon.

    -By Brian Baskin, Dow Jones Newswires

    Dow Jones Newswires
    12-31-08 0928ET

  10. 10
    Dman Says:

    #8 He didn’t? Wow. To lose all that and still not make the list. That must hurt.

    Not that I’m bitter about Mr “Look how many shares I own. Oh yeah, they’re on margin. What, you mean I didn’t mention that?”

    Noooo. Not me. I’m not bitter.

  11. 11
    Dman Says:

    Can’t help noticing some strength in service the last few days.

    Z – anything there of interest? Can I tempt you with DO. Or perhaps a little entre-size serving of FTI?

    NOV with a nice curved bottom (did I really say that?) on the 10-day chart.

    Does any of this mean anything?

  12. 12
    zman Says:

    The DO and FTI are interesting down here. CNBC saying this morning rumors of deepwater contract cancellations again. So far I have seen no evidence this happening but we heard the same rumors in the last 2 months and the stocks are off sharply since then. In general, I think service is in for tough sledding in at least the first half of 2009. Estimates really have not fallen very far from where they were in mid 2008 yet the pricing environment will be sharply lower in 2009, even if it has not yet been seen in the field since 2008 budgets are still be spent.

  13. 13
    Jay Reynolds Says:

    HS – Thus far, workover rig rates have only backed off $10/hr for CHK in the Haynesville.

  14. 14
    zman Says:

    Jay – yep, kind of my point. Not sure workover activity will really show it and maybe not as much in that basin where people seem to be concentrating spending now. But regular drilling rig rates should have a big down quarter in Q1.

  15. 15
    zman Says:

    If crude inventories decline as much as expected (now exp down 1.75 for consensus as of this morning) either due to lower imports (possible) or higher refining demand (um, not too likely) then the number to look for will be that Cushing stocks number. Silly as it may be, Cushing is wagging the oil dog right now. If it comes off even slightly crude will take a shot at closing at $40 + on the year. Inventory numbers in 10 minutes with crude treading water down $0.50 to $0.75.

  16. 16
    Dman Says:

    Chart in XCO (from the volume spike Dec 9) looks straight out of a textbook.

  17. 17
    nifkin Says:

    11:03 23Dec08 -COLUMN-NYMEX oil benchmark again in question: John Kemp

    — John Kemp is a Reuters columnist. The views expressed are his own —

    By John Kemp

    LONDON, Dec 23 (Reuters) – The record differential between the front-month and more liquid second-month contracts at expiry last week once again raised pointed questions about whether the NYMEX light sweet contract is serving as a good benchmark for the global oil market, or sending misleading signals about the state of supply and demand.

    The expiring Jan 2009 contract ended down $2.35 on Friday at $33.87, while the more liquid Feb contract actually rose 69 cents to settle at $42.36 – an unprecedented contango from one month to the next of $8.49.

    Criticism of the contract is not new, and past calls for reform have been successfully sidelined. But with policymakers taking a keener interest as a result of wild gyrations in oil prices this year, and a continued focus on regulatory changes to improve market functioning in future, there is at least a chance changes will be adopted as part of a wider package of futures market adjustments.


    During the surge to $147 per barrel earlier this year, OPEC repeatedly criticised the NYMEX reference price for overstating the real degree of tightness in the physical market and causing prices to overshoot on the upside.

    While rallying NYMEX prices seemed to point to an acute physical shortage and need for more oil, Saudi Arabia could not find buyers for the 200,000 barrels per day (bpd) of extra oil promised to U.N. Secretary-General Ban Ki-moon or the 300,000 bpd promised to U.S. President George Bush in June.

    Bizarrely, rather than acknowledge there was something wrong with the reference price, some market participants suggested Saudi Arabia should increase the already large discounts for its physical crude to achieve sales in a market that clearly did not need the oil, and was not paying enough contango to make storing it economic (contango is where the futures price is above the spot market).

    The NYMEX WTI price may have achieved unprecedented media fame as a result of the “super-spike”, but a futures price to which producers and consumers were paying ever larger discounts for actual barrels was clearly not a good indication of where the market as a whole was trading.

    Now the market risks overshooting in the other direction. Intense pressure on the front month in recent weeks has more to do with the contract’s peculiarities (in particular storage restrictions at the delivery point) than a further deterioration in oil demand or a market vote of no-confidence in the 2.2 million barrels per day further cut in oil production announced by OPEC at the end of last week.

    The collapse in NYMEX prices nearby risks exaggerating the real degree of oversupply and demand destruction, sending the wrong signal to producers and consumers about the wider availability of crude in the petroleum economy.


    The NYMEX contract is for a very special type of crude oil (light sweet) delivered at a very special location (Cushing, Oklahoma) in the interior of the United States. It is not representative of the majority of crude oil traded internationally (most of which is heavier and sourer) and delivered by ocean-going tankers.

    These specifications made sense when the contract was introduced as a benchmark for the U.S. domestic market.

    U.S. refiners have a strong preference for light oils, for which they were prepared to pay a premium, because of their much higher yield to gasoline. The inland delivery location, centrally located and near the main Texas oilfields, rather than one on the coast, made sense for a contract that tried to capture the “typical” base price for crude oil paid by refiners across the continental United States.

    But these specifications make much less sense now the NYMEX price is increasingly used a benchmark for the global petroleum economy, in which light sweet crudes are only a small fraction of total output. Just as NYMEX prices sent the wrong signals about physical oil availability on the way up, distorting the market and triggering more demand destruction than was really necessary, they now risk sending the wrong ones on the way down.

    Earlier this year, the problem was a relative shortage of light sweet crude oils at Cushing, while all the extra barrels being offered to the market by Saudi Arabia were heavier, sourer crudes that could not be delivered against the contract. Moreover, extra Saudi crudes would have arrived by ship, and the pipeline and storage configurations around Cushing would have made it difficult to deliver them quickly against the contract.

    Financial speculators were able to push NYMEX higher safe in the knowledge Saudi Arabia could not take the other side and overwhelm them by delivering physical barrels to bring prices down. The resulting spike exhibited all the characteristics of a technical squeeze: tight contract specifications ensured there could be shortage of NYMEX light sweet inland oils even while the global market was oversupplied by heavier, sourer seaborne ones.

    Now the opposite problem is occurring. Crude stocks at Cushing have doubled from 14.3 million barrels to 27.5 million since mid-October. Stocks around the delivery point are at a near-record levels and approaching the maximum capacity of local tank and pipeline facilities (https://customers.reuters.com/d/graphics/CUSHING.pdf).

    As a result, the market has been forced into a huge contango as storage becomes increasingly expensive and difficult to obtain, ensuring the expiring futures trade at a substantial discount.

    But Cushing inventories are not typical of the rest of the U.S. Midwest (https://customers.reuters.com/d/graphics/PADD2_EX_CUSHING.pdf) or along the U.S. Gulf Coast (https://customers.reuters.com/d/graphics/PADD3.pdf), where stock levels are high relative to demand but nowhere near as overfull as in Oklahoma.

    Once again the problem is geography. Coastal refiners have responded to the downturn by cutting imports of seaborne crude, limiting the stock build. But the inland market is the destination for some Canadian crudes that have nowhere else to go, and the pipeline configuration means they cannot be trans-shipped to other locations readily.

    Light sweet crude has been piling up in the region, with refiners choosing to deliver the unwanted excess to the market by delivering it into Cushing.


    The easiest way to make NYMEX more representative would be to widen the number of crude grades that can be delivered, and open a new delivery point along the U.S. Gulf Coast. Both reforms would link the contract more tightly into the global petroleum economy.

    NYMEX already permits some flexibility in delivery grades. Sellers can deliver UK Brent and Norwegian Oseberg at small fixed discounts to the settlement price, and Nigerian Bonny Light and Qua Iboe, as well as Colombia’s Cusiana at small premiums.

    In principle, there is no reason the contract cannot be modified further to allow a wider range of foreign oils to be delivered at larger discounts to the settlement price.

    More importantly, NYMEX could open a second delivery location along the Gulf Coast, increasing the amount of storage capacity available, and linking it more closely into the tanker market.

    If prices spiked again, a coastal delivery location would make it much easier for Saudi Arabia to short the market and deliver its own barrels into the rally. By widening the physical basis, it would also make it easier to support the market by cutting international production and avert a glut trapped around the delivery location.

    So far, the market has continued to resist change. But there are signs policymakers might enforce one.

    Earlier in the year, Saudi Arabia strongly hinted western governments should look at reforming their own futures markets rather than call for production of even more barrels of oil that could not be sold at the prevailing (unrealistic) price.

    Naturally, some of the reform impetus has ebbed along with prices and demand. But policymakers continue to show interest in structural reforms, as was evident at last week’s London Energy Meeting, and there is an increased willingness to challenge unfettered market dynamics.

    It is still possible the incoming Obama administration might force contract changes as part of a wider package of reforms designed to improve the functioning of commodity markets, reduce volatility and send clearer, more consistent price signals to the industry and consumers.

  18. 18
    zman Says:

    Dman – figure its gotta break one way or the other. Reef is pretty adamant about them getting taken out or taking themselves out of play via an LBO. Lots of the charts look like this right now.

  19. 19
    zman Says:

    Nifkin – I saw that piece the other day and I whole heartedly agree with it. A basket approach would be better for looking at crude.

  20. 20
    Dman Says:

    Z – on the contract cancellation thing. Are the customers mainly majors? If so, hard to see how they can get away with breaking a contract .. i.e. they ain’t going bust so they have cash to pay damages.

    Simplistic, but what do you think of these assumptions ?

  21. 21
    zman Says:

    oil up 0.5 mm barrels

    gasoline up 0.8 saw a nice rebound in demand here.
    distillate up 0.7

    cushing stocks backed away from their highs falling from 28.7 to 28.1

    mixed bag on the numbers, somewhat bullish on products, nothing to write home about, good thing for oil that Cushing stocks didn’t shoot the moon again.

  22. 22
    zman Says:

    Dman – contracts with Majors, National Oil Companies (NOC), Big, mid and some small cap E&P names. As DO put it on their last call, we’ve never seen these contracts getting broken … try it and we’ll see you in court.

  23. 23
    zman Says:

    Natural gas inventories due out in 2 1/2 hours.

    Crude closing on green as lack of further Cushing build provide relief valve for Bulls. (my attempt at a intra day Dow Jones headline)

  24. 24
    Dman Says:

    RIG vs DO?

    Z – I gather that lately you’ve preferred DO but not sure I remember why, apart from the dividend.

  25. 25
    crysball Says:

    EGY [Vaalco] hits 2 ofsfshore wells [Gabon]

    VAALCO Energy Provides Update on Drilling Program

    Drilling Results Demonstrate Successful Expansion of Ebouri Field

    HOUSTON, Dec. 31 /PRNewswire-FirstCall/ — VAALCO Energy, Inc. (NYSE: EGY) today provided an update on the new development well being drilled in the Ebouri field and the new appraisal well (North Ebouri) being drilled in the Etame block. VAALCO commenced drilling these wells in November with the jack-up rigs Adriatic 6 and Pride Cabinda, respectively, as previously announced.

    For the development well in the Ebouri field, VAALCO announced that it has drilled one pilot hole to the south of the original Ebouri discovery and a second pilot hole to the northeast of the original discovery. Both of these pilot holes were successful in delineating additional Gamba sandstone reservoir above the oil water contact, thereby increasing the acreage and reserves of the Ebouri field. VAALCO is currently completing the development well horizontally on the same orientation as the second pilot hole. First oil production from this well is expected in January 2009.

    The Company also announced that it drilled the North Ebouri appraisal well in the Etame block approximately 1.5 miles to the northeast of the Ebouri platform and found 21 feet of oil column, further expanding the Ebouri field. VAALCO is now planning a sidetrack to optimize the location for a potential second horizontal development well. In addition, the Company is planning two exploration wells (North Etame and South East Etame) on newly mapped structures. The wells will be drilled back to back using Pride Cabinda.

    VAALCO continues to expect production at a rate sufficient to bring total production from the Etame license area to approximately 25,000 barrels of oil per day (bopd). The Etame license production areas currently produce approximately 20,000 bopd, of which VAALCO has a 28.1% working interest.

    “Results from the Ebouri development drilling have exceeded expectations, and we are pleased with the initial results from our drilling program in the Etame block, with more wells to come,” said Robert L. Gerry, III, Chairman and CEO of VAALCO. “We have substantially enlarged the productive acreage of the Ebouri field, thereby greatly enhancing the recoverable reserves. We look forward to continued success with our exploration program.”

    Additional wells planned over the coming months include:

    Two exploratory wells onshore Gabon in the Mutamba concession: VAALCO is currently mobilizing the Nabors 864 rig to the first of the two planned drilling locations and expects to commence drilling the first exploratory well in early February 2009. Combined potential reserves for these two wells are expected to be in excess of 30 million barrels. VAALCO has a 100% working interest in the onshore Mutamba block.

    One exploratory well in Angola: The Company expects to move forward on the planning for a well on Angola Block 5 during the third quarter of 2009 depending upon rig availability. The Company has recommended to the consortium a prospect with three objective zones, both above and below the salt layer on the block. Total potential from all three objectives is 150 million gross barrels. VAALCO has a 40% working interest in Block 5.

    Interest in North Sea: VAALCO has a 25% interest in a gas prospect on Block 48/25c in the British North Sea. The Company is participating with Century Exploration on the well, which is an offset to a former Shell gas discovery made in 1987. 3-D seismic data indicates the ability to get higher on the structure than the earlier well, increasing the potential reserves to 60 Bcf. Due to a delay in the receipt of the rig from the current operator, VAALCO expects that drilling will begin in January 2009.

    VAALCO’s development and exploration wells planned over the coming months expose VAALCO to over 50 million net barrels, or an 8-fold potential increase to the Company’s current 6.2 million barrels of proved reserves.

  26. 26
    Dman Says:

    SD up 6% and you can barely see it on the 6 month chart.

  27. 27
    tater Says:

    Short day for me today. Just a couple comments before I go read/recite Green Eggs and Ham again.
    Dman, watch the 50 EMA on XCO. It’s playing between the 20 and 50 and 20.
    Political rant: Please everybody read the article on “cram-downs” in the Wall St. today. Law of Unintended Consequences looms very large in the background on that issue. I feel very strongly that it could be the straw that sends us down into oblivion. Won’t argue the point, just want people to pay it some thought.

  28. 28
    zman Says:

    Thanks Crys.

  29. 29
    crysball Says:

    Re: EGY
    Reading between the lines of the news release:
    1) Ebouri Development well is flowing at 5000 barrels/day….better than expected.
    2)The lateral run to North Ebouri is already underway, as the Adriatic VI was already on station @ the Ebouri platform and just moved over to the second slot on the platform to run the lateral.

    3) for those of you who are traders the stock, has not shown much movement yet……….but it will as these 2 wells represent large % increases in Vaalco’s reserves…….with many more well results to come in the next 45 days.

  30. 30
    zman Says:

    DO vs RIG. At these valuations I’m not sure either will perform different than the other in the near term. RIG is a little more locked in long term on contracts, and DO has that rig rate variable dividend which fund managers should like if they were paying attention.

  31. 31
    crysball Says:

    Re: EGY & Vertical North Ebouri Appraisal Well

    Forgot to mention the Vaalco interest on this well is 44% (not the regular 28%) as one of the consurtium partners back,ed away just prior to drilling start.

    Thank,s to careful planning, EGY will have the Horizontal run to Ebouri North and be producing this well in 60 days.

  32. 32
    zman Says:

    Re EGY. Nice one Crys. Anemic response only due to the date, not the news. I’d buy on the news alone going on memory but I have not refreshed my due diligence here in a while and need to do that first.

  33. 33
    Dman Says:

    Thanks Z.

    tater, if you’re still there, got a title for that article?

  34. 34
    rseidman Says:

    Does the market close early today?

  35. 35
    zman Says:

    Nope, full day today and Friday.

  36. 36
    zman Says:

    SWN playing the strong proxy to NG, down vs rest of group that is more concerned with the market being green and oil being ever so slightly green. NG numbers in 2 hours.

  37. 37
    Dman Says:

    Z – RIG much lower P/E than DO. Is that on account of DO has no debt to speak of?

  38. 38
    zman Says:

    Dman – in a nutshell, yes.

  39. 39
    Sambone Says:

    So it begins

    MOSCOW (AFP)–Russian Prime Minister Vladimir Putin on Wednesday warned
    Ukraine of “severe consequences” if Kiev disrupted the transit of Russian gas
    to European customers.
    “If our partners say that they are not intending to fulfil the conditions of a
    contract signed previously then that means that they are intending to annul
    it,” Putin told President Dmitry Medvedev in televised remarks.

  40. 40
    tater Says:

    Bottom of page C1. “The Property Report” by Michael Corkery. Mortgage Cram-Downs Loom as Foreclosures Mount.

    My line of reasoning is that banks will never again write a single mortgage unless the Fed guarantees it. Fed will, but only after the bankruptcy judges begin a value reset (super deflation) in Cal, Florida, Ariz that shows the present working price of housing. This reset tanks the banking industry further, but too big to fail = every other state and their grandchildren are held to subsidize the Cal excesses. This shifting of wealth resources tanks main street in other states as there is only just so much money to go around to service this future debt load.
    This doesn’t sound like a nice program to prop up the value of real estate and keep people in their homes. At least not to me.

  41. 41
    zman Says:

    Yep Sam, that’s good for global LNG price support.

    Israel rejecting truce in Gaza, demolishing supply tunnels from Egypt. Student groups in Iran asking Ahmedinenajad to sponsor suicide bombers in Israel.

  42. 42
    Dman Says:

    #40 this feeds into a question I want to put to BOP: “What are we gonna do if the credit markets as we’ve known them (or at least BOP has, anyway) just don’t come back”.

  43. 43
    zman Says:

    143, not a good number, gas falling back off.

  44. 44
    reefguy Says:

    IOC- up 17% on Antelope 1 news

  45. 45
    isleworth Says:

    Happy New Year Z. Looking forward to a profitable 2009! Thanks for all of your great efforts and research 😉

  46. 46
    zman Says:

    NG trading down as much as off 30 cents after the numbers from down 15 cents at release, so at least no real panic. West and Producing regions were pretty pathetic withdrawals for the amount of cold we had. Natural gas inventories are now 2.3% below year ago levels and 2% above the five year average.

  47. 47
    zman Says:

    Thanks Reef – I stopped watching that one and MMR, you think time to come back to the plays?

    Isle – much appreciate your support as well, Happy New Year.

  48. 48
    Nicky Says:

    Good morning to all.

    New Years Resolution for me – try and spend more time on this site!

    Oil – my ewave count says we are in wave 4 up of 5 down. I have 4 playing out as an abc at the moment (!) and likely to test the highs of earlier in the week before a final leg down.

    Broader market – close to a top imo. Cycles are lower into mid – end of January setting up for what will be a very tradeable rally into the Spring. Its going to be difficult to pin the low in the next couple of weeks cos it could come early.

  49. 49
    zman Says:

    Morning Nicky

    Your low for the “final leg down on oil” is around $30, correct? Understanding that point estimates are a tough call at this time with the “demand” side still looming large with little hard data to back it up.

    There have been calls for another OPEC meeting to cut prices on January 11th. No confirmation on that yet.

    On the market, at least from the energy stocks I think we may see a modest move higher into 4Q earnings and then fear over the week quarter re-asserts itself. I’m likely to play around with small positions until I see the first of the Big Cap E&Ps report (usually its EOG) and see how far off the mark the analyst crowd has gotten things and what the temperature of management is on the gas markets (again, EOG is one of the best to listen for a read on things in NG, not so much oil sorry to say).

    Oil up 88 cents in fairly light trading,
    NG down 37 cents now, stocks off their highs but not reacting much pre / post the number.

    I like your new years resolution.

  50. 50
    Nicky Says:

    Hi Z – I am thinking a low between 30 and 32 area. I know everyone is calling for 25 and sure there is major support there but I am figuring too many are waiting for 25 as they were 200.

    Once the low is in we should see a b leg higher which will last several months.

    I am not sure fundamentals matter really – as the energy market always seems to be able to skew everything to suit – point in fact is six months ago this Middle East news would have sent oil into the stratosphere and now it just shrugs it off. Of course once they turn it they will just make everything sound bullish again.

  51. 51
    zman Says:

    Thanks N. Fundamentals not matter? Alright but I’m going to keeping point them out anyway, good and bad.

  52. 52
    zman Says:

    Oil getting that pop over $40 I was musing about earlier to close the year.

  53. 53
    sportlock Says:


    With last week being a holiday week it does not seem to me that the NG number was that bad and given that the number was fairly strong the last two weeks. With colder weather, weaking production numbers, falling rig count and terrible sentiment do you think we could be setting up for a good bounce?



  54. 54
    tater Says:

    Got called back due to oil action. USO has resistance at 32.06. Don’t see it getting past that number without at least a bit of a rest. ( I am out now).
    Hi Nicky.

  55. 55
    Dman Says:

    Z – was that SU call from Monday the SXHAX?

  56. 56
    tater Says:

    I mean out of my long USO

  57. 57
    zman Says:

    Dman – yes it was.

    Sport – Its a good point you make and one I should have noted. Also, its not that bad a number other than the Street and myself wanted more from the HDD reading. I think we are setting up for a bounce in late January back into maybe the high 6s. I think we will be range bound $5 to $6.25 or so until then. Not too exciting I know but I’d rather see it trend sideway than try to V back up before the either government data or anecdotal evidence really support the move.

  58. 58
    choices Says:

    Z-do you have an opinion on COP and PTR? COP up fairly strong yesterday and PTR is firming up as well-not likely the Chinese are going to stop driving.

    Happy New Year to you and your family.



  59. 59
    zman Says:

    choices – on call, back to you shortly.

  60. 60
    Nicky Says:

    Yes Z – please do keep giving us the fundamentals because of course they do matter. However just call me a cynic – I am still getting my head around all the analysts calling for 200 5 months ago when we were at 147 and now we have almost touched 30 – fundamentally not that much has changed – well at least not enough to move the market in such a huge way in both directions this year. I guess I never did believe it should have been at 147.

  61. 61
    zman Says:

    COP – cheapest of the U.S. Majors, more leverage to natural gas prices and operations in the U.S. in general than the other two. I like them and they have been overly beaten down but so has natural gas. Big piece of their gas comes from the San Juan Basin out west where prices stink at this time so that’s not so great. Refineries are primarily U.S. and Europe so that’s unlikely to provide much upside. Long term, I think they are well positioned for rising natural gas prices in the U.S.

    short PTR comment in a second.

  62. 62
    Popeye Says:

    Wishing everyone a happy and prosperous new year.

  63. 63
    Popeye Says:

    I mean healthy but happy works as well.

  64. 64
    zman Says:

    PTR – I only track it very loosely, and it often trades with oil despite the fact that it does better when oil is not too or too low. Government has allowed prices to drop which should help local demand. They were hit over the summer with high oil prices and set retail prices. Now, I understand they have stepped up exports of diesel. They have also been on a global resource grab for the last several years. That seems to have quietly cooled as oil prices have fallen. From an options standpoint, the name provides more volatility than your average Major as do SNP and CEO but sometimes the moves are nonsensical, at least to me, and that can bite you.

    For now, in this market, I like any of the three U.S. majors, but especially XOM with their $38 billion in cash (no debt), no expectation or desire for U.S. production growth (so no expectations), and large buyback program.

  65. 65
    reefguy Says:

    z- have a great new year!

  66. 66
    choices Says:

    Thanks Z.

  67. 67
    choices Says:

    FWIW, DRYS up strong today-could be an indicator for overall commod shipping.

  68. 68
    zman Says:

    Choices – re drybulk, I’m just watching SEA and the BDI. At some point goods have got to start moving again but for now it seems China and Japan are just not sending stuff to the U.S. and Europe. I suspect some Chinese utilities are getting the deal of the century on coal and coal transportation right now.

  69. 69
    zman Says:

    SU not reacting to oil up $2+ now. Hmmm.

  70. 70
    Sambone Says:

    KIEV (AFP)–A Russian offer to sell gas to Kiev in 2009 at $250 per 1,000
    cubic meters is “unacceptable” unless transit prices are raised, an aide to
    Ukrainian President Viktor Yushchenko said Wednesday.
    “The offer from the Russian side is unacceptable. The price is clearly
    exaggerated if they maintain the current transit prices,” the president’s
    special representative for energy security, Bogdan Sokolovsky, told AFP.
    Russian Prime Minister Vladimir Putin earlier said that Gazprom had showed
    generosity to Ukraine – whose economy is in severe crisis – by offering it a
    price of $250 for 1,000 cubic meters of gas in 2009.

  71. 71
    Sambone Says:

    Crude Drops As Refiners Cut Runs, Build Inventory

    By Brian Baskin

    NEW YORK — Crude oil futures traded lower Wednesday, as the U.S. Energy Information Administration reported a steep drop in refinery utilization but expanding fuel inventories.

    Light, sweet crude for February delivery traded 32 cents, or 0.8%, lower at $38.71 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 2 cents lower at $40.13 a barrel.

    Oil inventories at Cushing, Okla., fell by 600,000 barrels in the week ended Dec. 26, only the second draw since early October. Stocks at the Nymex contract’s delivery point had reached a record 28.7 million barrels last week, highlighting the supply glut forming as global demand weakens.

    Traders saw little else that was supportive in the data, however. Oil inventories nationwide rose by 500,000 barrels, where analysts surveyed by Dow Jones gave an average forecast for a 1-million-barrel draw.

    Stocks grew as refinery utilization unexpectedly fell by 2.2 percentage points to 82.5%, the lowest rate in at least 18 years. Even so, fuel inventories grew, albeit by less than expected. Gasoline inventories rose by 800,000 barrels, while distillates, including heating oil and diesel, increased by 700,000 barrels. Analysts had given Dow Jones an average forecast for builds of 1.4 million barrels and 800,000 barrels, respectively.

    The low utilization rate and growing inventories indicate demand is not recovering as energy prices fall, though it does leave the market vulnerable to price spikes, said Addison Armstrong, an analyst with Tradition Energy in Stamford, Conn.

    “Refinery runs continue to be a worry … the U.S. consumer is dodging a bullet that we just haven’t had the kind of cold weather in the Northeast that can really drive up demand for heating oil,” Armstrong said. “A cold blast with that low of a rate of refinery utilization would cause prices to jump up.”

    Front-month January reformulated gasoline blendstock, or RBOB, recently traded up 32 points, or 0.4%, at 88.85 cents a gallon. January heating oil traded 2.30 cents, or 1.8%, higher at $1.3110 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  72. 72
    zman Says:

    Crude almost feels like its an “I got own it going into 2009 rally”. Volume still about half of normal.

  73. 73
    Sambone Says:

    Maybe they won’t make me pay back the Billion they gave me, ya think?

    Officials: tracking bailout money is difficult
    AP Economics Writer
    WASHINGTON (AP) — Government officials overseeing a $700 billion
    bailout have acknowledged difficulties tracking the money and
    assessing the program’s effectiveness.
    The information was contained in a document, released Wednesday,
    of a Dec. 10 meeting of the Financial Stability Oversight Board.
    The panel, headed by Federal Reserve Chairman Ben Bernanke,
    includes Treasury Secretary Henry Paulson and Securities and
    Exchange Commission chief Christopher Cox.
    The officials discussed “the difficulty of isolating the
    effects” of the bailout program “given the variety of policy
    actions taken by the U.S. government to support financial stability
    and promote economic growth.”
    The document says the officials also noted the “difficulties
    associated with monitoring the use of specific funds” provided to
    individual financial institutions.

  74. 74
    zman Says:

    #73 = Your tax dollars at work for the private benefit of someone who is definitely not you.

  75. 75
    Sambone Says:


  76. 76
    Dman Says:

    Australian dollar recovering to near US71c is a positive indication for global economy and specifically for commodities going into China. By that I don’t mean it’s an infallible indicator, just rather see it up than down.

    Also WLT up 5% doesn’t hurt. The website says it sells to the worldwide market, so I don’t know how much goes to China. Oddly, the website also says they have a homebuilding and finance division. Hmmm… or as they say in the classics ..”oops”.

  77. 77
    zman Says:

    They are almost finished with the process of spinning out the HB and mortgage part of the biz. Then it becomes a pure met-coal play so when steel comes back, lookout.

  78. 78
    zman Says:

    Oil up $2.90 at $41.90. Dead barrel bounce.

  79. 79
    Dman Says:

    USO up 6%

    SU up 0.6%

    Someone drop a decimal place somewhere?

  80. 80
    Pete Says:

    DXO has been making a good move these last few days

  81. 81
    zman Says:

    Oil breaching $42, stocks should start to pay attention soon.

  82. 82
    zman Says:

    Oil up $3.90 at $42.90 with 30 minutes to the NYMEX close of the year.

  83. 83
    zman Says:

    Oil up $4.90 at $43.90, bit of a panic short cover into the close.

  84. 84
    Dman Says:

    That DXO is quite the wild trader.

  85. 85
    Pete Says:

    out DXO @2.98

  86. 86
    Dman Says:

    According to my not-always-accurate platform, there was huge USO volume (79.5 million).

  87. 87
    Sambone Says:

    “The Educators”

    Madoff’s Stolen Statue Recovered By Pest Control Workers
    December 31, 2008
    Ok, we admit it is a slow news day, so here it goes. According to a police report, the lifeguard statue stolen from the Bernard Madoff estate last week has been recovered.

    Bernard Madoff’s Lifeguard Statue
    The statue was found by two pest control workers this morning.

    A note attached to the statue read: “Bernie the Swindler, Lesson: Return stolen property to rightful owners. Signed by–The Educators.”

    Local news station WPTV is on the scene at the Madoff estate in Palm Beach with updates (proof that it is a slow news day).

    In case you haven’t heard, Madoff is accused of running a $50 billion Ponzi scheme, which has claimed dozens of hedge funds and celebrities, including Footloose star Kevin Bacon, as victims.

    The 4-foot-high statue worth more than $10,000 was stolen from Madoff’s estate eight days after he was arrested in New York in connection with operating the $50 billion Ponzi scheme.

    Madoff has been freed on $10 million bail, but is under house-arrest at his Manhattan apartment, a move that has many of Madoff’s alleged victims extremely irate.

    Madoff is scheduled to submit a list of his personal assets to the Securities and Exchange Commission today. He can now add the copper statue to that list.


  88. 88
    zman Says:

    Nice Pete!

    Dman – looks like your system is double counting, I show 40 mm which is still near record high.

  89. 89
    Sambone Says:

    DJ 12/31 14:31 *WSJ: Russia, Ukraine Gas Supply Contract Talks End In Failure

    DJ 12/31 14:30 *WSJ: Russia To Stop Supplying Ukraine With Gas From Jan 1

  90. 90
    Sambone Says:

    By Steve Gelsi

    Petroleum and oil service shares reversed course and moved up with the broad
    market Wednesday, closing the books on a choppy year.
    The Amex Oil Index (XOI) rose 0.7% to 976. The Amex Natural Gas Index (XNG)
    fell 0.4% to 369. The Philadelphia Oil Service Index (OSXX) rose 0.5% to 121.
    Crude futures recently rose 18 cents to $39.21.
    Crude oil inventories rose 500,000 barrels, verses the forecast for a decrease
    of 1.75 million barrels forecast in a Platts survey, according to the US Energy
    Information Administration.
    Crude oil prices are now down about 75% from their peak in July and off more
    than 60% for the year in the face of oversupply and slowing demand.
    Even though prices at the pump are now about 45% lower than they were a year
    ago and significantly below $2 a gallon, 52% of Americans told Gallup that they
    have not gone back to their old gas-guzzling ways.
    Even with all the losses in oil prices, Phil Flynn, vice president at Alaron
    Trading oil prices will face more downward pressure in January. See video: Oil
    investors brace for tough January
    Energy stocks are ending a choppy year with no clear end in sight of a
    historic downdraft in commodity prices.
    With one trading day left in 2008, the Amex Oil Index (XOI) stands down 590
    points, or 38% for 2008. The index of major petroleum producers and refiners
    has lost 694.3 points, or 42% from its record high close of 1,664 during the
    Exxon Mobil (XOM) is down 17% for the year as of Tuesday’s close and Chevron
    (CVX) has given up about 22% for the year. Both stocks are components of the
    30-stock Dow Jones Industrial Average (DJI), down about 35% this year.
    So far in 2008, the Amex Natural Gas Index (XNG) has retreated 203 points, or
    35% as of its close of 370.4 on Tuesday.
    The Philadelphia Oil Service Index (OSXX) fell 120 points, or 60.2% from its
    opening trade of 301.6 in 2008.
    Average retail gasoline prices continued their slide as well in December,
    falling to $1.62 a gallon on Wednesday, down about 20 cents for the month,
    according to the AA Daily Fuel Gauge Report.
    -Steve Gelsi
    Dow Jones Newswires
    12-31-08 1413ET

  91. 91
    Wyoming Says:

    Z / Crys,
    RE – J/U rigs

    We ended up with website info, nothing as detailed above.

  92. 92
    zman Says:

    89 good for shares of LL Bean

    re 91 – thank for trying.

  93. 93
    1520sbroad Says:

    Happy New Year to everyone. Here’s to a great 2009.

    Z – hope you are getting some sleep and everyone in your family is recovering/adjusting.

    Thanks to everyone that contributes here – i have learned a ton.

  94. 94
    zman Says:

    1520 – We’re doing great, thanks for asking. Hope you and yours are well. I’ll raise a bumper to a great 2009!

    Oil up $4.70 to $43.71, volume actually pretty decent. Not that please with my play on SU vs Oil but this is one day and none of the equities are really following along.

  95. 95
    1520sbroad Says:

    Also – i have a big wager with my brother on SWN. Everyone think positive thoughts so SWN will close over $30

  96. 96
    zman Says:

    If you mean today that’s going to be tough given the storage number today and the warm weather. SWN definitely taking on NG proxy status of late. Rest of group up, SWN not, makes little fundamental sense but there ya have it.

  97. 97
    1520sbroad Says:

    i made this bet last january with the stock in the high $20’s. He bet me that CME would finish over $600 – stock was about $575 then. Last trade on CME was around $208. If SWN closes over $30 i win 2 ways = about 6 months worth of subscription to this fine website and he has to answer his phone when i call him with “Yes, my liege…”

  98. 98
    zman Says:

    Nice, man, very nice.

  99. 99
    tater Says:

    Just got home and I’m certainly having a WTF moment. I’ve missed calls before, and I’ll miss them again, but this is not even in the ballpark. They say nobody ever went broke taking a profit, but I sure would like to have that one back.

  100. 100
    zman Says:

    Here ya Tater. XOM trying again.

  101. 101
    Nicky Says:

    Wishing you all a peaceful and prosperous New Year. Take care all and see you on the flip side!

  102. 102
    zman Says:

    Champagne Thirty! Don’t drive and drink. Best to you and yours and very happy, safe, prosperous 2009! I will see you next year.

  103. 103
    crysball Says:

    The Book, to Read for 2009: The Black Swan

    The Black Swan
    Portions of this page Copyright 1995 – 2008 Muze Inc. All rights reserved.

    In this irreverent, yet scholarly work, a financial trader and philosopher contends that a deeper understanding of world events comes from paying close attention to impactful statistical improbabilities he refers to as “black swans,” by studying outliers rather than norms. The essay blends anecdotes and fables with a survey of historical events, social sciences, philosophy, and statistics and illustrates the need for a world view that goes well beyond the often misplaced certainty found in the bell curve. Graphs and other visual aids throughout; includes a brief glossary and an extensive footnote section.

    Length: 366 pages
    Height: 9.3 in.
    Width: 6.3 in.
    Thickness: 1.2 in.
    Weight: 21.6 oz.

    Publisher’s Note
    A black swan is a highly improbable event with three principal characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was. The astonishing success of Google was a black swan; so was 9/11. For Nassim Nicholas Taleb, black swans underlie almost everything about our world, from the rise of religions to events in our own personal lives. Why do we not acknowledge the phenomenon of black swans until after they occur? Part of the answer, according to Taleb, is that humans are hardwired to learn specifics when they should be focused on generalities. We concentrate on things we already know and time and time again fail to take into consideration what we don’t know. We are, therefore, unable to truly estimate opportunities, too vulnerable to the impulse to simplify, narrate, and categorize, and not open enough to rewarding those who can imagine the “impossible.” For years, Taleb has studied how we fool ourselves into thinking we know more than we actually do. We restrict our thinking to the irrelevant and inconsequential, while large events continue to surprise us and shape our world. Now, in this revelatory book, Taleb explains everything we know about what we don’t know. He offers surprisingly simple tricks for dealing with black swans and benefiting from them. Elegant, startling, and universal in its applications The Black Swan will change the way you look at the world. Taleb is a vastly entertaining writer, with wit, irreverence, and unusual stories to tell. He has a polymathic command of subjects ranging from cognitive science to business to probability theory. The Black Swan is a landmark book–itself a black swan.

    Industry reviews
    “Writing in a style that owes as much to Stephen Colbert as it does to Michel de Montaigne….Mr. Taleb presents a range of answers…but it’s clear that he remains slightly vexed by the world he describes so vividly. Then again, beatific serenity may not be the goal here…. As Mr. Taleb warns, certitude is likely to be found only in a fool’s (bell-curve) paradise, where we choose the comfort of the ‘precisely wrong’ over the challenge of the ‘broadly correct.’ Beneath Mr. Taleb’s blustery rhetoric lives a surprisingly humble soul who has chosen to follow a demanding and somewhat lonely path. I wonder how many of us will have the courage to join him.”

    “[A] provocative macro-trend tome….”

    “Taleb’s critique of our current pretensions to knowledge, and of our unwarranted faith in our understanding of things like risk and change, is both rigorous and convincing. And THE BLACK SWAN is a terrifically engaging book, sophisticated without being inaccessible.”

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