Tuesday Morning



In Today's Post

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

Holdings Watch: The wiki tab is updated

  • SU - Sold remaining January $22.50 Calls for $0.85, up 113%. Still holding the Feb calls and may add more tomorrow or later Wednesday. HK Conference appearances: BMO today at 9:30 EST and at  Pritchard Capital tomorrow at 8:20 EST.


  • HK - Riskier - Added January HK $17.50 calls (HKAW) for $0.50 with the stock off $1 at 16.55 today and in front of two conferences this week where they may provide additional well news from the Haynesville and Eagle Ford.


Commodity Watch:

Crude oil fell $3.24 to close at $37.59 yesterday, an extension of last week's move on the jobs number and from the bounce off the $50 level. This morning crude is off another $0.70 with the soft equity market.

  • Rig Watch: Still thinking about the RIG, DO, or NE trade. In relation to how much the names have been smashed with the rest of the OIH, its important to consider that these rigs are not seeing the same kind of trend as the North American onshore rig count. In fact utilization has remained flat vs year ago figures as the global rig fleet has grown by 38 rigs (or 6%).

Natural gas rose three cents to close at $5.54 yesterday. This morning gas is trading off a dime.

  • Russia Watch: Russia apparently turning the gas back on to Europe.
  • Imports: down 1.8 Bcfgpd from year ago levels.
    • LNG remains in line with by +/- 0.2 Bcfgpd from year ago levels pretty much hugging the barely there level of 0.7 Bcfgpd.
    • Canadian imports were 7.7 Bcfgpd last week, down 1.6 Bcfgpd from year ago levels.




Crack Spread Update. Just briefly noting that cracks are hanging in there and improving slightly as utilization curtailments by several independent refiners (most notably VLO) have taken effect to stabilize margins. We'll probably continue to see stable to improving cracks but I have no plans to re-enter the refiners until I hear their 2009 capital plans on their 4Q calls in the next couple of weeks. The money that has entered the names will no doubt be nimble and will flee after the recent quick profits if it does not see signs of improvement in the economic outlook for the U.S. in short order. So for now, I'm just keeping tabs on them. 


Stuff We Care About Today

BMO Conference Schedule Jan13, all times EST. Names I care about now at the conference:

  • GDP 9
  • HK 9:30
  • CRZO 10
  • CRK 10:45
  • SWN 11:15
  • BRY 1pm

GDP Offers New Presentation - little new meat here but a few morsels

  • Haynesville shale program will 65% of 2009 budget; probably can add 30% to 40% to company-wide proven reserves with the 2009 H.S. alone.
  • That will bode for another triple if not quadruple reserve replacement year which will be best in class or next to it.
  • Using the mid-point of their potential reserve guidance they see Haynesville Shale reserve potential of 3.6 Tcfe vs the 0.422 Tcfe they had booked at mid-2008 which contained no H.S. impact.
  • Everyone is sticking with 6.5 Bcfe per well at present for a middling H.S. well but given the high initial rates its seems likely that 4Q will see HK and CHK both up their thoughts close to 8 to 10 Bcfe per well meaning the finding costs are going to be better than most people seem to be writing about. 
  • At $6 gas, the worst H.S. well (4.5 Bcfe type curve) is still a 20% IRR well even if it costs $8 mm which now looks high. At $7 and $7 mm with the mid sized 6.5  Bcfe well that IRR improves dramatically to 60%. So in a nutshell, the wells are some of the most profitable ones in the U.S. during times of low gas prices. 
  • GDP has 2 wells completing in the Bethany Longstreet field (H.S. nw La) where they completed at 14.5 mm/d well last week.This is 8.5 Bcfe recoverable country.
  • They have another 2 wells completing in the Longwood area (H.S. nw La due north of Bethany) in the area where HK has been completing 20+ mm/d IP (initial production) wells.These are bigger, although its not linear to IP, they are probably over 10 Bcfe.
  • 60% of 2009 production hedged at $8.61. Beats the 12 month strip pretty handily which now sits at $6.09.
  • 2009 Production growth of 30 to 40% - unchanged from last update.


SWN - January presentation available as of Friday. Key takeaways were only cash flow sensitivities:

  • At $5 gas and $50 oil they see 2009 CFPS of $4.05 (mid point of guidance based on 48% 2009 production growth)
  • At $6 gas and $60 oil they see 2009 CFPS of $4.48
  • At $7 gas and $70 oil they see 2009 CFPS of $4.85
  • The Street is at $4.35.
  • When I did the update on 12/18, the Street was at $4.08 so they have been raising numbers here for the last 3 weeks.
  • The BMO presentation will be carried on the company website here.

CRZO, CRK, and BRY I just find interesting.


Odds & Ends

Analyst Watch: Citi cut FSLR from Buy to Hold.

117 Responses to “Tuesday Morning”

  1. 1
    nifkin Says:

    u see aramco shutting down riyadh refinery for 30 days.

  2. 2
    jy Says:

    GDP using $7.8mm/Haynesville well cost

  3. 3
    jy Says:

    GDP says Haynesville porosity 9-15%. This is much higher than the tight sands at places like Pinedale WY which are typically 6-12%. May explain higher recoveries expected in H’ville.

  4. 4
    BirdsofpreyRcool Says:

    Trading Desk color for today:

    Same game plan as yesterday. Same odds. Better color. Go short on the morning rally, usually early, and on any rally near 11:00 and 11:10, for a sell off into lunch. At lunch, go long as most patterns bounce. And a lot. Odds of a V-pattern repeating today are way above average at 70/30. Look for a few points with way above average and good odds. Be sure to tighten stops after any sell off in the morning and especially after 10:55 and 12:05. [all times EST]

    Disclaimer: these day-trading recommendations are based on a historical-data algorithm (as so do not incorporate today’s fundamental data), but the recommendations have proved to be more right than wrong, in my experience. So, they are worth passing along.

  5. 5
    elduque Says:

    BDI +22 911
    TED -.118 .98

    At some point in time Mr. Market is going to wake up and find out that the goods are starting to ship again and that liquidity is improving.

  6. 6
    BirdsofpreyRcool Says:

    Good morning. Credit indices wider, but still outperforming stocks. Stocks need to hold the SPX 850 level to keep the credit bears from roaring back. As a benchmark, our KSU 13% due 12/13 bonds have continued to rally from their issue price of 88.4 to 104.25 on the offer this morning.

    IG 219 bps

    HY 77 1/8

  7. 7
    kyleandy Says:

    can we access thr HK presentation?

  8. 8
    zman Says:

    Unable to find link for HK presentation.

  9. 9
    zman Says:

    NG getting nuked for a quarter, very odd. Stocks a very mixed bag this morning, strange to see companies giving presentations without webcast access. E&P group looks like its wants to bounce.

  10. 10
    zman Says:

    Nifkin, yes, goes along with their decision to reduce oil production below their quota. RBOB and HO moving up, not so bad news for the refining crowd.

  11. 11
    BirdsofpreyRcool Says:

    Update from Trading Desk: the gap down does NOT help the odds for the short trade working. Most lows are right here, or between 10:20 and 11:00, and the spoos bounce into the last hour over half the time.

    Just passing the comments along.

  12. 12
    Sambone Says:

    By Nick Heath

    LONDON (Dow Jones)–Crude oil futures pared earlier losses Tuesday after Saudi
    Arabia’s oil minister said that the kingdom’s oil production will be lower in
    February than its recently agreed Organization of Petroleum Exporting Countries
    Crude prices were lifted off their intraday lows following comments from Saudi
    oil minister Ali Naimi that the kingdom – OPEC’s largest producer – is now
    pumping 8 million barrels a day of crude, slightly less than its latest OPEC
    quota level of 8.05 million barrels a day, and is working hard to bring the oil
    markets into balance.
    However, Nymex crude prices remained in negative territory, having neared $36
    a barrel earlier in the day, as the specter of weak economic activity and its
    implications for crude demand continued to hang over prices.
    A slight rebound on news that Russian natural gas flows to Europe had not
    restarted – despite earlier reports that they had resumed Tuesday – also proved
    “At this moment in time it’s hard to see any bullish news that will spark a
    rally in the face of the falling demand which is the main focus of traders’
    attention,” said Glen Ward, energy broker at ODL Securities in London.
    At 1235 GMT, the front-month February Brent contract on London’s ICE futures
    exchange was up 20 cents at $43.11 a barrel.
    The front-month February light, sweet, crude contract on the New York
    Mercantile Exchange was trading 99 cents lower at $36.60 a barrel.
    The ICE’s gasoil contract for February delivery was up $11.00 at $464.00 a
    metric ton, while Nymex gasoline for February delivery was up 82 points at
    109.23 cents a gallon.
    The Saudi oil minister’s comments Tuesday followed similar ones from other
    OPEC members that they intend to implement production cuts. However, prices
    have failed to rebound on them, and a sustained upwards reaction is likely to
    be reserved for discernible evidence that supply flows have indeed been
    “As always, the market won’t reach its final verdict on the OPEC cuts until
    its sees verifiable and observable evidence, which means declines in OECD
    (Organization for Economic Co-operation and Development) crude imports and
    crude stocks,” said analysts Michael Wittner and Remy Penin at Societe
    Generale. “Only the latest (i.e., current) round of OPEC cuts was enough to
    outpace contracting demand, and those cuts will take a couple more months to be
    fully implemented.”
    Meanwhile, anticipation that U.S. government data will reveal another build in
    already swelling U.S. crude stockpiles Wednesday piled downward pressure on the
    Nymex January contract, sending it to a $36.10 a barrel intraday low Tuesday.
    U.S. crude stockpiles jumped in the week ended Jan. 2, helping stocks at
    Cushing, Okla., the delivery point for Nymex crude futures, surge by 4.1
    million barrels to a record 32.2 million barrels. Fears that another build
    could top up stocks weighed on the front-month contract Tuesday.
    “(Cushing) inventories are very high, a record level, and this is one of the
    reasons why people are afraid of getting exposure to the market right row,”
    said Eugen Weinberg, analyst at Commerzbank in Frankfurt.
    -By Nick Heath; Dow Jones Newswires

    Dow Jones Newswires
    01-13-09 0738ET

  13. 13
    reefguy Says:

    HK- Floyd did a good job. XOM should buy them out now

  14. 14
    zman Says:

    Reef – Were you able to listen to it and do you have a link to it?

  15. 15
    Bob Says:

    Listening to conference on http://www.bmocm.com/conferences

  16. 16
    tomdavis12 Says:

    BOP, Any thoughts on the spls bond deal, 9.75, due 2014. Looks interesting.

  17. 17
    reefguy Says:

    Yes you log onto BMO and hit track 1. SWN at 11:15

  18. 18
    zman Says:

    Thanks Bob, will see if I can get a replay there.

  19. 19
    zman Says:

    Thanks Reef.

  20. 20
    zman Says:

    Oil rebounding smartly now. So by CNBC logic demand must be up and the recession must be over. Unfortunately I have to step out for a bit, will be back by the SWN call, keep the stocks green for me.

  21. 21
    reefguy Says:

    IOC- Antelope 1 logged with 1500′ of net pay….

  22. 22
    BirdsofpreyRcool Says:

    tomdavis – on those Staples bonds… i’m no “consumer” analyst, so I don’t have an opinion on the office supply retail sector (other than my gloomy outlook for the consumer in general)… but, taking a quick look at the offering, I’ll tell you what I think.

    Staples raised a lot of money, $1.5B of 9.75% 5 yr notes, priced at par to yield 9.75%. That is almost 930 bps over the treasury curve. Wow. That’s a lot. But, what else is new. The notes will be used to pay down a bunch of senior, bank-backed debt, including their commercial paper facilty, bank line, and their revolver. If I had to guess, I would say that is debt that cost them around 5% or less. So, doubling their interest expense at a time when sales are weak.

    It’s never good, when your banks make you pay them down. On the other hand, banks aren’t in such great shape themselves. Banks are taking every opportunity to get old loans (revolvers, commercial paper obligation) off their own balance sheets, as those loans are way below what they can make in the mrkt these days. SPLS must have triggered a covenant (or two) with their last (dismal) earnings report, or are afraid they are about to.

    The notes are rated Baa2, the 2nd lowest investment grade, so it’s an attractive place in the credit universe. However, these notes have a provision I personally detest: investors can put the notes back to the company in the case the company’s rating fall below investment grade. I would have to look further to see if this only applies with a change of control. The interest rate on the notes also goes up, by 25 bps for every cut below investment grade, to a maximum of 200 bps.

    You never like to see provisions that hurt a company’s financial condition at a time when the company’s financial condition is deteriorating.

    The last time SPLS sold bonds was in Sept 2002 (bond mrkt conditions were bad then too, and bottomed in Nov 2002), issuing $325mm 10-yrs at 7.375%. So, SPLS does have a history of issuing debt at the bottom of the credit cycle. Perhaps they are a good contra-indicator. Personally, I would not buy these bonds… doesn’t mean they don’t do well, tho.

  23. 23
    Sambone Says:

    NEW YORK, Jan 13 (Reuters) – The U.S. Energy Information
    Administration on Tuesday again cut its estimate of domestic
    natural gas production growth in 2009 and further trimmed the
    expected decline in demand as economic activity continues to
    In its January Short-Term Energy Outlook, EIA forecast U.S.
    marketed natural gas output this year would rise 0.41 billion
    cubic feet per day to 58.88 bcf daily, up 0.7 percent from last
    year but down slightly from a 0.9 percent gain forecast in its
    previous monthly report.
    (Reporting by Joe Silha)

    Tue Jan 13 15:57:55 2009

  24. 24
    zman Says:

    BOP – the CRK presentation is probably worth your time

  25. 25
    BirdsofpreyRcool Says:

    z – thanks for the head’s up.

  26. 26
    zman Says:

    CRK – sounded like they announced a pretty good success in S. Tx, probably 20 to 30 Bcfe well. Thought you had an interest in these guys.

  27. 27
    BirdsofpreyRcool Says:

    z – CRK, yes. I like their acreage position in the HVS and the fact that they have paid down all their debt. It’s a management team that has been together for a long time. Not the best, but pretty good guys. Don’t expect to see the sort of headline risk here we see with others.

  28. 28
    zman Says:

    those are Wilcox sands, CRK said they expect the other 2 they are drilling to be similar and to be completed soon. Those are big wells, a little odd to assume you hit before they are down as these are exploration targets. They must really like their new seismic there.

  29. 29
    choices Says:

    BEXP up over 8% today, I believe they are to present at the Pritchard Conference, not sure when that is.

  30. 30
    zman Says:

    Re CRK, thanks for the push on them the other day, they had kind of fallen off my plate, not a great name from an options standpoint but I am revisiting the story

    SWN presentation starting now

  31. 31
    Sambone Says:

    So it continues

    KIEV (AFP)–Ukrainian President Viktor Yushchenko Tuesday accused Russia of
    “blackmail” over a cut in gas supplies across Ukrainian territory that has
    caused widespread shortages in Europe.
    “Each person living in Ukraine should understand that what has happened
    between January 1 and now is not the blackmail of our state, it is the
    blackmail of each of you,” Yushchenko said in a televised press conference.
    While Russia accused Ukraine of blocking the transit of gas to Europe despite
    a European Union deal to resolve the crisis, Yushchenko said Russia was aiming
    to undermine Ukraine’s independence.
    “This attack against Ukraine has the goal of provoking a revolt in the eastern
    regions,” where heavy industry relies on Russian gas supplies, he said.
    “This is one of the methods used in the fight against our independence and
    sovereignty,” he said.
    Ukraine’s Naftogaz energy company said it wasn’t technically capable of
    receiving the Russian gas as the Ukrainian network was now occupied with
    supplying domestic clients.
    The head of Naftogaz, Oleg Dubina, said Ukraine would have had to cut off
    internal gas supplies to four regions in eastern Ukraine in order to allow the
    export of Russian gas.
    Yushchenko suggested Russia’s long-term goal was to seize control of transit
    pipelines to Europe through Ukraine.
    “All of these events show (Russia’s) intention to change the ownership of the
    Ukrainian pipeline system,” Yushchenko said.
    Russia and Ukraine have traded accusations over the crisis, which has left
    hundreds of thousands of people across Europe without gas for heating.
    Tuesday, Russia announced it was restarting supplies through Ukraine to the
    E.U. on a test basis but the resumption immediately hit problems with Russia
    accusing Ukraine of blocking supplies again.

    Dow Jones Newswires
    01-13-09 1114ET

  32. 32
    Sambone Says:

    NEW YORK (Dow Jones)–Oil prices will average near a five-year low in 2009,
    and mount only a slight recovery as the global economy begins to rebound in
    2010, U.S. government forecasters said Tuesday.
    Benchmark West Texas Intermediate crude will average $43.25 a barrel in 2009,
    down 57% from last year and the lowest since 2004, according to the U.S. Energy
    Information Administration. In its initial forecast for 2010, the EIA said
    prices would average $54.50, slightly below the price in 2005.
    The EIA’s updated forecast was included in its monthly Short-Term Energy
    Outlook, released Tuesday. The agency is the independent statistics and
    analytical wing of the U.S. Department of Energy.
    “The outlook for supply and demand fundamentals indicates a fairly loose oil
    market balance over the next two years,” the EIA said, adding “commercial
    inventories are well above average historic levels, and EIA projects that they
    will remain there through the end of 2010.”
    Global oil demand was “largely unchanged” in 2008, but will fall 800,000
    barrels a day in 2009, as growth in global real GDP slows to 0.6%. Growth will
    speed up to 3% in 2010, with oil demand increasing by 880,000 barrels a day,
    the EIA said.
    The 2009 oil price forecast is $7.92 a barrel, or 15%, lower than last month’s
    forecast of $51.17 a barrel. That prediction was itself a 19% decline from the
    October forecast, as the EIA struggled to adjust to the 75% decline in oil
    prices seen between July and December.
    The agency sees U.S. retail gasoline averaging $1.87 a gallon in 2009, down
    from an average price of $3.25 a gallon in 2008. Gasoline prices should average
    $2.18 a gallon in 2010, the EIA said.
    The EIA said diesel fuel should average $2.27 a gallon in 2009 and $2.54 a
    gallon in 2010, down from $3.79 a gallon in 2008. U.S. heating oil prices are
    seen averaging $2.22 a gallon in 2009 and $2.40 a gallon in 2010, down from
    $3.30 a gallon last year.

    -By Brian Baskin, Dow Jones Newswires

    Dow Jones Newswires
    01-13-09 1122ET

  33. 33
    zman Says:

    BEXP at 5pm EST

  34. 34
    BirdsofpreyRcool Says:

    GE taking it on the chin with a downgrade by Barclay’s. I stepped out of that stock a while back, but still hate to see them slapped around like that. I consider GE kind of a market indicator. Will be a struggle for them to retain that triple-A rating, tho.

    FedEx announced a $1b note offering this morning. Like STPL, they are rated Baa2 and have that pesky change of control/below investment grade put. However, unlike STPL, the 5-yr tranche is being offered at a 7.375% yield (and the 10-yr tranche at 8.0%). Unlike STPL, the proceeds are being used to roll over existing public debt (and not to pay down their banks). Like STPL, the interest rate on this this new debt is about double the maturing debt.

    I would be a buyer of these notes… after taking a closer look at their bank credit agreements (and that pesky put option on a downgrade).

  35. 35
    kyleandy Says:

    BEXP today or tomorrow?

  36. 36
    BirdsofpreyRcool Says:

    z – CRK. thanks. Knew the S. Tx properties were Wilcox. So, just mixing a few apples and oranges together.

    I do like the conventional (Wilcox) and unconvential (HVS) mix. I look forward to hearding what you might do with that name.

  37. 37
    zman Says:

    Kyle its today.

  38. 38
    BirdsofpreyRcool Says:

    Now McDonals is stepping up to the plate to issue $750mm of 10- and 30yr debt. The bonds will be rated A3/A, but no price talk yet. I would expect them to pay something like 6 – 6.5% at the most.

    Great to see non-FDIC backed issuers lining up to access the public debt markets.

  39. 39
    zman Says:

    SWN – good presentation, nothing new

  40. 40
    BirdsofpreyRcool Says:

    pete – as long as non-US govt companies are able to place their debt, your TBT ETF should do well.

  41. 41
    elduque Says:

    Would anybody care to answer a simple question?

    What is the reason for the steep Contango.

  42. 42
    BirdsofpreyRcool Says:

    elduque: from a Simmons & Co. commentary yesterday, on the steep contango

    We believe the prompt month WTI contract will trade at a discount to the second, third and fourth month contracts as the market anticipates the impact of OPEC production cuts and its future impact on prices. In addition, we expect recent capital spending cuts to contribute to further non-OPEC supply disappointments and that eventual economic recovery will strengthen global demand.

  43. 43
    zman Says:

    The steep contango is due to a combination of the abandonment of commodities in the near months due to too much supply and the futures market looking through to a more balanced market a little further down the road. In the past, when the contango has gotten this steep, it was the early sign of a bottom in crude prices.

  44. 44
    BirdsofpreyRcool Says:

    more from the Simmons note:

    Weak regional demand and near full storage at Cushing have negatively impacted WTI vs. other crude grades. Essentially, the prompt month WTI price is being pushed lower than supply and demand fundamentals are currently suggesting for other similar grades of crude, creating a disjointed market. For example, the European benchmark light sweet crude, Brent usually trades at a small discount to WTI due to regional and quality differences. However currently, because of the unique factors impacting WTI (namely storage concerns at Cushing) prompt WTI is trading at a steep discount to Brent. The WTI discount to Brent hit an all time high of $7.83/bbl on December 19, 2008 and currently trades at a $3.28/bbl discount.

  45. 45
    BirdsofpreyRcool Says:

    last item from the Simmons commentary:

    The contango will close when market fundamentals recover. Global oil demand has been falling more rapidly than production during the second half of 2008, contributing to a steady increase in OECD, US and Cushing inventories. The contango in the forward curve will remain until the market shifts to better balance. Many factors are beginning to shift toward a better crude supply and demand balance. Most importantly, there is evidence that OPEC made meaningful steps toward implementing its Dec 17th supply quota reductions (1. announcements from officials in Saudi Arabia, Iran, Kuwait, Abu Dhabi and Qatar directed to specific customers related to specific production cuts, 2. an increase in the price of Arab Medium and Arab Heavy crudes, and 3. declining VLCC rates and rapidly declining oil in transit numbers out of the Middle East). We expect OPEC cuts to eventually bring supply & demand back into balance and reverse the trend of inventory builds. Secondly, non-OPEC supply, which we believe peaked in 2007, is likely to continue to disappoint relative to expectations especially when considering the reduction in capital spending that is in the process of occurring due to lower oil prices. Finally, an eventual recovery in the global economy and a return of oil demand growth in the non-OECD countries will serve to re-tighten the oil markets. Contango almost always compresses due to the front of the curve rising faster than the back of the curve, which was the case in all 4 of the recent oil price troughs (1993, 1998, 2001, 2007).

  46. 46
    elduque Says:

    Thank you.

    I presume if we get a drop in storage at Cushing then the market rallies.

  47. 47
    zman Says:

    ElD yes, saw that response with the data from two weeks ago. Crude is piling up there as refiners cut production runs.

  48. 48
    zman Says:

    Listening to the replay of HK


    H.S. production “well over” 100 mm/d now up from 84 as of 1/4/09

    Two new wells on, one at 17mm/d, one at 24 mm/d

    Well costs going up to $8.5 to 9 mm per well as they go to 4500 foot lateral and 15 fracs. Idea is to drain with less wells per section so overall cost drops.

  49. 49
    zman Says:

    HK has drilled 30 wells now in the Haynesville Shale but only released well results on 10 and will release more wells (sounds like 3 to 5) in the operations update, don’t kno when that is. Floyd said the others are remarkably consistent with the ones announced. He thinks that Elm Grove is probably the core of the play, which is their backyard in terms of acreage.

    He mentioned the second Eagle Ford well is completing and that it and a third well drilling now look great.

  50. 50
    crysball Says:

    HK presentation

    What does a 1.1 N factor mean with an 80% 1st year decline rate?

  51. 51
    Dman Says:

    I wonder if these well results are putting the hurt on NG

  52. 52
    zman Says:

    80% decline means the 1 year drop in production from IP. This is pretty standard for a tight gas sand well or an over pressured shale.

    I assume the N factor Floyd is referring to of 1.1 is describing the level of formation damage due to the way it was drilled vs the model so this would be very little decline due to completion method. Negative would be better.

    Dman – I’d guess not, I’d guess its the Russians.

  53. 53
    nifkin Says:

    any reason for EOG outperformance today?

  54. 54
    zman Says:

    Nothing that I see on EOG, could be a broker call following up on last week’s 8K but I don’t see all of those. Stock is cheap.

  55. 55
    zman Says:

    Hey wyoming, if you are not too busy optimizing an old well somewhere, let me know if I got 52 right?

  56. 56
    elduque Says:

    I understand that we get the API data this afternoon after the close.

    Will you be posting it or how do I get the results?


  57. 57
    zman Says:

    I don’t get the API data but I think Sane still does. Are you referring to the weekly oil numbers? Those normally don’t come out until Wednesday. Is this a different set of numbers.

  58. 58
    sane Says:

    I haven’t heard anything about api data this afternoon.

  59. 59
    zman Says:

    EIA head nominee Chu on the tape talking about chief concern is global warming. I’d like to see him talk about chief concern being affordable and clean energy. Let the EPA guy talk about climate change.

  60. 60
    sane Says:

    Chu is a nightmare.

  61. 61
    zman Says:

    Seems odd to have your energy guy’s first priority to be establishing a cap and trade system for co2. How about drilling more for natural gas, fueling cars with it and therefore lowering the amount of refining that needs to get done and thereby lowering the footprint?

  62. 62
    sane Says:

    Upstream also posts the weekly API data later in the day on Wednesday. They also show the total stocks and production.

  63. 63
    BirdsofpreyRcool Says:

    “Global Warming”…. “C02 cap and trade”… those are “black hole” investments…. no matter how much money you pour in, the hole doesn’t fill up and doesn’t produce anything. What a misplaced sense of purpose. What a collossal loss of valuable capital that could be used for investment. yikes.

  64. 64
    sane Says:

    Cap and Trade will be a great economic stimulus. Unemployment will only rise by about 3 to 4 percent.

  65. 65
    Jay Reynolds Says:

    Re 61: “How about drilling more for natural gas, fueling cars with it and therefore lowering the amount of refining that needs to get done and thereby lowering the footprint?”

    OBJECTION YOUR HONOR! Assumes facts not in evidence. “Thinking” is not mentioned in the job description!

  66. 66
    zman Says:

    BOP – someone saw that writing on the wall a while back, the friendly guys in the blue trucks, lol.


  67. 67
    Dman Says:

    Item on Minyanville sez API data now come out after the close Tuesdays (possibly at 4.30pm)

  68. 68
    zman Says:

    Sane – next I’ll have to buy a credit to burn wood in the fireplace.

    JR – doooohhhh!!!

  69. 69
    zman Says:

    Thanks Dman. If true it will increase volatility in Wednesday mornings, will check into it.

  70. 70
    sane Says:

    I think I am going to go burn a tire now…. oh wait I would have to file for bankruptcy to pay for those credits.

    There are better ways of reducing emissions without head-butting the economy.

  71. 71
    zman Says:

    Sane – head butt the U.S. economy AND jump start the Chinese one and anyone else who doesn’t sign a Kyoto style accord.

  72. 72
    sane Says:

    Your tax dollars at work

    Chase to spend $300 mln to refurbish, rebrand WaMu branches

  73. 73
    benbobby Says:

    Zman,is their a method to ascertain the correlation between the movement in price of WTI and RBOB…yesterday crude goes down 3.24- RBOB moves slightly over .02 down..today crude is currently down .27 yet RBOB is up .0239 ? tks

  74. 74
    zman Says:

    Ben – not really. Over the long term, they move together. Over shorter periods and especially from day to day you can get wide variations and divergences between the two due to news items in each respective realm. Is there something you are trying to get at? Today’s move is likely caused by the Saudi refiner news, a snag in a restart of an FCC at a BP refinery along the Gulf Coast etc while crude is likely watching the sell down in the Dow.

  75. 75
    choices Says:

    BOP-concerning your comments relating to buying hi-yield bond funds, I noticed a comment elsewhere that HYG is considered favorably by I have no idea as to the qualifications of the person making the comment-it does yield approx 12% but with yield goes risk.

    Would be interested in your view.



  76. 76
    zman Says:

    Ben, also, only the front crude month is down today. The rest of the strip is up 30 cents to as much as $1.44 right now.

  77. 77
    Sambone Says:

    HOUSTON (Dow Jones)–The sharp drop in oil prices at the end of 2008 may lead
    oil and gas companies to report lower proven reserves and could contract the
    borrowing ability of some firms, according to a report.
    The Securities and Exchange Commission requires oil and gas companies to
    disclose net quantities of proven oil and gas reserves based on year-end oil
    prices. Over the past several years the SEC reporting rules didn’t cause a
    significant problem because year-end prices were fairly similar to average
    annual prices. But as the price of oil fell by $100 a barrel from its record
    high in July to less than $45 a barrel in December, reserve booking is likely
    to come under pressure, analysts at Fitch Ratings said in a report released
    “The outsized volatility seen recently in commodity markets led prices to
    diverge sharply, and for 2008 is expected to result in sizable negative
    price-based reserve revisions in pending year-end reports,” Fitch analyst Mark
    Sadeghian wrote.
    The expected negative reserve revisions shouldn’t have a significant effect on
    the liquidity and capital-expenditure plans of large integrated oil companies
    and large independent oil and gas firms, according to the report.
    However, independent oil companies with more aggressive growth profiles may be
    affected, in particular exploration-and-production firms with reserve-base
    lending. In this type of lending, the size of the borrowing base is
    redetermined on a semiannual or other basis, which due to lower oil prices may
    cause a contraction in a company’s borrowing ability and hence its ability to
    fund expansion plans, according to the report.
    Some of the companies with reserve-base lending listed in the report are:
    Berry Petroleum Co. (BRY), Chesapeake Energy Corp. (CHK), Clayton William
    Energy Inc. (CWEI), Comstock Resources Inc. (CRK), Forest Oil Corp. (FST), Linn
    Energy LLC (LINE) and Newfield Exploration Co. (NFX). Petrohawk Energy Corp.
    (HK), Plains Exploration & Production Co. (PXP) and Sandridge Energy Inc. (SD)
    are also part of the list.
    Larger oil companies, such us Exxon Mobil Corp. (XOM), Chevron Corp. (CVX),
    ConocoPhilips (COP) and Marathon Oil (MRO), which have significant reserves
    booked under production-sharing contracts, may see a partial offset to the
    negative effects of lower oil prices in reserve booking, according to the
    report. This is because these contracts, which are generally agreements between
    private oil companies and oil-producing nations or a national oil company, are
    designed to give more oil to companies and increase reserve booking when oil
    prices go down. They have the reverse effect when oil prices go up.
    “With 2008 year-end crude below $45/barrel, at least some of those barrels are
    expected to come back onto the books and could offset the effect of low prices
    on the rest of a company’s reserve holdings,” Sadeghian wrote.
    The negative effects of last year’s oil-price volatility on reserve booking
    are expected to vanish in 2010. The SEC recently approved major changes of the
    existing reporting rules that require oil and gas companies to report net
    quantities of proven oil and gas reserves based on 12-month average pricing
    versus year-end prices.

    -By Isabel Ordonez, Dow Jones Newswires

    Dow Jones Newswires
    01-13-09 1353ET

  78. 78
    zman Says:

    Just doing a little reading on the N factor as I wasn’t sure I had that right. Still not sure and awaiting Wyoming’s lesson. Did come across the fact that the Eagle Ford Shale was the source rock for the Austin chalk when reading a little about fractures.

    If you don’t have a copy of Nontechnical Guide to Petroleum Geology, Exploration, Drilling, and Production I highly recommend it.

  79. 79
    Sambone Says:

    NEW YORK, Jan 13 (Reuters) – U.S. retail gasoline demand
    fell about 4 percent below year-ago levels last week as
    gasoline prices increased, according to a MasterCard
    SpendingPulse report released on Tuesday.
    Gasoline demand averaged 8.96 million barrels per day
    during the week ending Jan. 9, down 4.1 percent from the same
    period a year ago, according to the weekly report.
    Demand for gasoline last week was relatively unchanged from
    the previous week, down 0.1 percent, the report said.
    Retail prices for gasoline jumped about 8 percent from the
    previous week, gaining 13 cents to $1.74 per gallon.
    Last week marked the first week since mid-September that
    average weekly gasoline prices increased.
    Gasoline prices have dropped steadily for the past few
    months from a high of over $4 per gallon due to sharply lower
    crude prices.
    The four-week moving average for gasoline demand, which is
    usually more indicative of long-term trends, was down 3.6
    percent compared to the same period last year.
    During the past year, U.S. gasoline consumption has shrunk,
    first due to high retail gasoline prices and then as the
    downturn in the economy slashed consumer spending.
    MasterCard Advisors estimates retail gasoline demand based
    on aggregate sales activity in the MasterCard payments system
    coupled with estimates for all other payment forms including
    cash and checks. MasterCard Advisors is a unit of MasterCard
    Inc MA.
    (Reporting by Rebekah Kebede; Editing by Christian Wiessner)

    Tue Jan 13 19:00:00 2009

  80. 80
    zman Says:

    Thanks Sam. I noticed SWN highlighted the fact that their $1 billion line of credit is unsecured, not reserve based, and still untapped.

  81. 81
    Sambone Says:

    NEW YORK (Dow Jones)–World oil demand in 2009 is expected to decline by 0.9%,
    or 810,000 barrels a day, to 85.1 million barrels a day, as the global economic
    turmoil trims global consumption for the first time since 1983, U.S. government
    forecasters said Tuesday.
    The Energy Information Administration’s projection for the current year is a
    downward revision of 200,000 barrels a day in global oil demand from its
    December monthly forecast.
    The EIA revised its 2008 global oil demand projection upward to show a modest
    rise of 0.1%, or 110,000 barrels a day, to 85.91 million barrels a day in the
    year, from the earlier forecast of a slim 50,000 barrels a day decline.
    Forecasters warned that the outlook for supply/demand fundamentals “indicates
    a fairly loose oil market balance over the next two years.”
    The EIA said the global economic downturn points to declining 2009 demand
    along with rising oil production capacity from members of the Organization of
    Petroleum Exporting Countries and non-OPEC countries. The high level of output
    capacity will reduce “the likelihood of a renewed strong upward pressure on
    prices,” EIA said.
    Real global gross domestic product growth is expected to be 0.6% in 2009 and
    3% in 2010, compared with growth of 3.2% in 2008 and 4.6% in 2007.
    The EIA said commercial oil inventories held in the major industrialized
    nations, such as the U.S., that comprise the Organization for Economic
    Cooperation and Development are well above historical norms and are expected to
    remain there through 2010.
    OECD stocks were sufficient to cover 57 days of forward consumption at the end
    of the 2008 third quarter, “well above average historic levels.”
    “The combination of substantial surplus capacity and above-average inventories
    should dampen price pressure over the period,” the report said. “A sustained
    rebound in prices is not likely until the economic recovery causes a sustained
    rebound in demand for OPEC crude oil.”
    The EIA projected U.S. benchmark crude oil prices will average $43.25 a barrel
    this year, less than half of the $99.55 a barrel average in 2008.
    In 2010, global demand is expected to recover to show growth of 1%, or 880,000
    barrels a day, at 85.98 million barrels a day, the EIA said.
    In 2008, the EIA figures show, OECD oil demand slumped 3%, or 1.42 million
    barrels a day, to 47.71 million barrels a day. But non-OECD demand rose by 1.53
    million barrels a day, or 4.2%, to more than offset the decline.
    Oil demand in China, the second-biggest oil consumer behind the U.S., averaged
    7.98 million barrels a day in 2008, a rise of 400,000 barrels a day, or 5.3%,
    EIA data show.
    U.S. oil demand fell 5.66%, or 1.17 million barrels a day, to 19.51 million
    barrels a day. That’s the biggest fall since 1980 and put demand at the lowest
    level since 1998.
    In the expected 2009 global demand drop, OECD oil use will drop 1.3 million
    barrels a day, or 2.7%, to 46.61 million barrels a day, the EIA projects.
    Non-OECD output will rise by 490,000 barrels a day, or 1.3%. China’s demand is
    expected to rise by 280,000 barrels a day, or 3.5%, to 8.26 million barrels a
    day, accounting for more than half of the non-OECD rise.
    In the current quarter, global oil demand is expected to drop 1.02 million
    barrels a day, or 1.2%, to 85.39 million barrels a day, the EIA said. OECD
    demand will drop 1.43 million barrels a day, or 2.9%, to 47.24 million barrels
    a day. Non-OECD demand will gain by 420,000 barrels a day, or 1.1%, with China
    again accounting for more than half of that rise, showing a gain of 270,000
    barrels a day, or 3.4%, to 8.26 million barrels a day.
    – By David Bird, Dow Jones Newswires
    Dow Jones Newswires
    01-13-09 1226ET

  82. 82
    elduque Says:

    One other simple question.

    Why is UNG off so much today? This week?


  83. 83
    zman Says:

    Note crude trading with Dow still, Dow down 66 points, crude down 66 cents. Happens a lot on slow days. All other months still up from March on out.

  84. 84
    zman Says:

    UNG is off 6% with the front month for natural gas down 35 cents or about 6%. Why it is off today that much is a bit of a mystery, I’m guess its due to Russia opening taps to Europe which in theory frees up some LNG to come to the States.

  85. 85
    zman Says:

    We’re approaching $5 on natural gas. Rig count going to do nothing but drop. Seems like a good time to buy more SWN if NG will hold $5. HK too as they are gassy and 70% hedged at $8 for 2009. GDP as well with 60% hedged at $8.60.

  86. 86
    zman Says:

    crude jumped a buck into the close. Lots of games being played. Feels like time to turn back up but numbers tomorrow say play it safe and wait. Crude’s only hope of bouncing will be a size decline at Cushing or a big pull on distillates.

  87. 87
    Popeye Says:

    Z, at what price oil does the Bakken make money. Just a general #.

  88. 88
    BirdsofpreyRcool Says:

    choices (Tom) – i think it was pearl who originally pointed out the high yield ETFs, HYG and JNK. Since then, I’ve noticed a few articles mentioning HYG (but none mentioning JNK). Was it Barron’s who mentioned HYG this weekend? Anyway, both HYG and JNK are trading well above their NAV. While not really a fan of buying closed end funds above their NAV, I can see why they traded there.

    FWIW, I prefer the composition of JNK. I like the asset mix of their bond portfolio (more O&G holdings, for example), the fact that they hold about 8% cash right now (to reinvest at the current attractive rates), and have a lower management and expense cost structure.

    The only advice I would give here, is do not try to buy a high yield ETF during the first and last hour of the trading day. That is when the NAV to market price gets most out of whack.

    JNK NAV = $31.16
    HYG NAV = $74.22

    Does this answer the question you asked?

  89. 89
    zman Says:

    $40 to $50 with low end for the better wells from what I understand.

  90. 90
    choices Says:

    BOP-it was Keith Fitz-Gerald of Money Map, a somewhat innocuous service which has found my e-mail. I’ve seen Fitz cited a few times but again many gurus out there.

    Yes, you certainly answered my question-thanks very much.



  91. 91
    Sambone Says:

    SAN FRANCISCO, Jan 13 (Reuters) – National Oilwell Varco
    Inc NOV, after spending $12 billion on acquisitions in just
    over three years, is looking to buy more companies, a director
    at the U.S. oilfield service and equipment company said on
    A collapse in energy prices has left many companies that
    profited from the boom short of cash and steady revenue,
    triggering talk of potential for mergers in the industry.
    “We’re going to use this opportunity to look around for
    strategic acquisitions,” the director, Loren Singletary, who is
    also vice president of global corporate accounts at NOV, told
    investors at an industry conference. “We’ve got $1 billion in
    cash, and we don’t at this point believe in buying our stock.”
    He was not more specific, but said the integration of Grant
    Prideco Inc, which NOV talked to for four years before buying
    it last year for $7.27 billion, had gone smoothly and clients
    welcomed the resulting increase in product offerings.
    Separately, Singletary said that while a decline in steel
    prices had helped reduce some of NOV’s costs, the company still
    faced strong upward pressure on wages for skilled staff.
    NOV was looking to hire 800 well services workers and open
    a training center in Brazil this year to complement centers in
    Houston, Singapore and Norway, as Brazil’s state-run oil
    company, Petrobras PETR4.SA PBR, gets heavily involved in
    deepwater exploration.
    “The liquidity situation that we have in the world is
    slowing them down some,” Singletary said at the Pritchard
    Capital Partners Energize conference in San Francisco.
    He also said customers he talked to were not worried by oil
    priced at about $35 a barrel.
    “This commodity price is not bothering them whatsoever,” he
    said, noting deepwater projects require planning over such long
    periods of time that companies behind them cannot dwell on
    price fluctuations.
    (Reporting by Braden Reddall; editing by John Wallace)

    Tue Jan 13 19:36:38 2009

  92. 92
    kyleandy Says:

    z the thing that bothers me as while we are definitely seeing a big drop in rig count, most of the players have stated they are dropping their lower yielding rigs and either maintaining or adding in the HS. wouldn’t this add up to about the same amt of natural gas using less rigs???

  93. 93
    reefguy Says:

    z- did you see IOC found an acorn?

  94. 94
    zman Says:

    Kyle – at least for 2009, the takeaway capacity is not there out of the Haynesville so you probably can’t get the gas to market to replace declines in what have been the leadership basins. Several pipes need to be built and will likely get built but not before 2010/2011 and by then the Barnett will have rolled over.

  95. 95
    zman Says:

    Yes, congrats! That is a monster well. Surprised the stock is not up a lot more.

  96. 96
    Sambone Says:

    By Brian Baskin

    NEW YORK (Dow Jones)–Crude oil futures inched higher Tuesday as OPEC members
    floated the idea of a new series of production cuts to counter weakening
    Light, sweet crude for February delivery settled 19 cents, or 0.5%, higher at
    $37.78 a barrel on the New York Mercantile Exchange. February Brent crude on
    the ICE futures exchange settled up $1.92, or 4.5%, at $44.83 a barrel.
    Oil prices snapped a four-session losing streak, though futures still ended
    below $40 a barrel for only the fourth time since July 2004. The market was
    buoyed by statements from several members of the Organization of Petroleum
    Exporting Countries, as well as the body’s secretary general, hinting at a
    third round of production cuts. The group is next scheduled to meet on March
    OPEC most recently agreed to cut production by 2.2 million barrels a day on
    Dec. 17. Refiners worldwide have reported strong compliance from some of the
    group’s largest exporters, including Saudi Arabia and the United Arab Emirates.
    Yet oil prices have fallen 13% since the meeting, as the global economic
    situation has continued to darken.
    OPEC Secretary General Abdalla Salem El-Badri said Tuesday that the next
    meeting could be used to “take further measures to balance the market” if it is
    still oversupplied.
    The market’s focus will now turn to the latest U.S. oil inventory data, due
    out Wednesday morning from the Energy Information Administration. Stocks at
    Cushing, Okla., the Nymex delivery point, are at a record 32.2 million barrels.
    Oil prices fell sharply in mid-December as storage became tight at Cushing in
    the final trading days of the January contract. The February contract appears
    to be headed for a repeat, with its discount to March futures widening out to
    more than $7 in intraday trading.
    “No matter which way the market goes, that spread weakens,” said Andy Lebow,
    senior vice president for energy at brokerage MF Global in New York.
    Analysts expect oil inventories to rise by 1.8 million barrels nationwide in
    the week ended Jan. 9, according to a Dow Jones Newswires survey. Gasoline
    stocks are expected to rise by 1.4 million barrels, and distillate inventories,
    including heating oil and diesel, are seen growing by 800,000 barrels.
    Refinery utilization is seen falling to 83.9%, and the anticipated low fuel
    production during the approach to peak summer demand may be helping to
    strengthen refined product futures.
    Demand continues to decline, however, falling 3.6% from a year ago in the four
    weeks ended Jan. 9, according to MasterCard Advisors LLC, a division of
    MasterCard Inc (MA).
    Front-month February reformulated gasoline blendstock, or RBOB, settled 2.67
    cents, or 2.5%, higher at $1.1108 a gallon. February heating oil settled 4.17
    cents, or 2.8%, higher at $1.5141 a gallon.

    -By Brian Baskin, Dow Jones Newswires

    Dow Jones Newswires
    01-13-09 1509ET

  97. 97
    Wyoming Says:


    Just got in front of a computer and saw some comments about N factors. Not exactly sure the reference, may have to get with a res type engineer. For damage, we use Skin (symbol is S in equations). The number would be about right for your description. A reservoir with a skin of 0 is the original rock, BTW an acid job would take a well from + to 0 only. A +1 and more would describe anything that may be drilling damaged. Anything that is frac’d would be negative. The thing about negative skin a deviated or horizontal well will be less than 0.

  98. 98
    BirdsofpreyRcool Says:

    z, wyoming – guess a wild hair guess… would the “N” factor of 1.1 be something that described the shape of the logarithmic production decline of 80% for the first year?

  99. 99
    BirdsofpreyRcool Says:

    IG 219… but the real story is that new issuance continues to get placed and done. So far, in the BB+ and better rated categories. Would love to see a B2/B $250mm issue get done. That would be a nice test of the credit mrkt.

  100. 100
    zman Says:

    Wyoming, thanks, I know just enough to be dangerous, seems he likely meant something else. The critical things is that people need to recall these are 30 year wells with 80% off the highest production in the first year. So they simply can’t take a bunch of 20 mm/d and 15 mm/d wells and add them and freak out about this year’s production growth.

  101. 101
    zman Says:

    Could be. He was talking about the well going from hyperbolic to harmonic decline near that time. I’ll just ask them, hate not knowing stuff.

  102. 102
    jy Says:

    Yikes!! “The “right way” is my way”-only!

    The Laramie-based Biodiversity Conservation Alliance filed a lawsuit against the Bureau of Land Management in federal court in Casper, WY Tuesday to stop the construction of new well pads and roads Jonah field, saying expanded drilling approved by federal regulators would leave the area “moonscaped.”

    The Biodiversity Conservation Alliance singled out Canadian oil and gas company EnCana Corp., for causing the most habitat damage by declining to drill directional wells, which are more costly and complicated to drill than conventional straight-hole wells.

    “And the only reason that we can see that they’re not doing it today is that they like to do it the cheap way instead of doing it the right way,” Molvar of The Biodiversity Conservation Alliance said.

  103. 103
    PackMan Says:

    haven’t been able to check in until now. What gives w/ NG / UNG ? Wow.

  104. 104
    zman Says:

    I think its the Russians deciding to play nice.

    Its certainly not the weather:


  105. 105
    zman Says:

    back in five minute for more on 104

  106. 106
    Wyoming Says:

    BOP, it could, that is why I wanted to get with a res type engineer (Hyperbolic, Harmonic … thanks, now I need a beer). I discussed skin as it was the 2nd part of comment, also why I mentioned horizontals are negative so drilling damage is not an overall issue. It is also part of the ideal gas law: PV=zNRT, but I don’t think he was referencing that.

    Here is a link, you can see the missing equation under the “Decline Curve Analysis” found under the Production Engineering;


    Decline Curve Analysis

    Production decline is assumed to obey the general rate-versus-time expression:


    q = production rate
    t = time
    K = decline constant
    n = decline exponent

    K and n are the 2 unknown non-negative parameters.

    Tater, I know, the first step is admitting you have a problem.

  107. 107
    Wyoming Says:

    Ex res friend says that a 1.1 is a bad (steep,hard)Hyperbolic decline.

  108. 108
    BirdsofpreyRcool Says:

    wyoming – thanks. I don’t know this stuff ’cause the PE’s wouldn’t let me go on their field trips!

    I can find my way around a physics or geochem book, but i’m a total babe-in-the-woods, when it comes to production engineering. Thanks for answering my questions.

  109. 109
    BirdsofpreyRcool Says:

    wyo – cool. for once, i guessed right. thanks!!

  110. 110
    zman Says:

    Thanks Wyo and BOP. I’ve got a program that plots these wells out for cash flow by month but it does not denote them that way and none of my books do either.

    Will add to 104 later as I’m being called home to teach the intern a new trick.

  111. 111
    jy Says:

    Re #30, #78, #98 et al “N” factor:

    Slides 1-9 should explain “n” THE DECLINE EXPONENT sufficently:

    http://ocw.kfupm.edu.sa/user062\PETE30101\Lectures/Lecture 10_decline curve analysis.ppt

  112. 112
    jy Says:

    Re 111
    you’ll have to cut and paste the entire link into your browser to see the .ppt file. hyperlink doesn’t like that backslash!!

  113. 113
    reefguy Says:

    11 jy, Thanks. skin is Sd, correct?

  114. 114
    Wyoming Says:

    Welcome to the misery of Pet Eng. It gets real confusing on the symbols and their representation, I reference some manuals all the time. Thus the SPE and API.

    Np – is the cumulative amount of production.

    n – is what I believe the 1.1 was referencing.


    S is the symbol for skin. I am not sure about Sd. The d could be several things, dimensionless is what comes to mind. Depends on the equations being used

    Thanks, always like to see new material.

  115. 115
    Jay Reynolds Says:

    If there are any readers here from NOV, the fexible Production System is for sale, all rights, all IP, all parts of the world, etc..


    An afterhours thanks,


  116. 116
    mimster90 Says:

    Zman what is your order of best buys for NG producers? You have recently mentioned EOG, SWN, HK, GMXR, CHK, GDP and probably a few I missed.

    I would buy more MLP’s (ATN, EVEP, LINE, BBEP and LGCY) if they would come down a bit more. BUt maybe I got spoiled when they were all so low a few weeks ago.

  117. 117
    zman Says:

    Mimster – in order of preference

    HK – big and bigger wells, 3 shale play focus,

    SWN – well hedged, not overly leveraged financially, solid grower, and one of the few E&Ps you will see this year with a higher capital budget than last year. The only knock on them is that they are not a Haynesville player (although they could stealthily enter now)

    GDP and GMXR – toss up. Haynesville galore. Clean balance sheets, well hedged, even higher production growth rates, a bit smaller so they may get occasionally lost in the market shuffle.

    EOG – gassy, almost assured to grow at the 10% of their 10 to 14% range this year as they will down shift again with their February number release due to low gas prices. Under-leveraged but will not reduce debt levels further this year due to low prices. They needed to hedge more earlier, not terrible and fully in their numbers at this point but a bit of a knock on the normally conservative management team.

    CHK – last but only because you forced me. They are in the right places and have recently even said the right thing. Realize that the margin between #1 and #6 on this list is pretty thin.

    If you are meaning for longer term (2+ years) then EOG and CHK should move closer to the top of the list and GMXR should easily top it.

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