Friday – Natural Gas Preview & Oil Inventory Review


The U.S. is pretty much awash in crude and products now. We need to see imports come off. Demand remains stalled and is inching in the wrong direction. Refiners are taking note of this by cutting utilization but inventories are literally piling up. Some trader/talking heads see this weak's flattening of the contango and retest of recent lows as a potential double bottom that signals higher crude. I see less impetus to tanker-store crude and more to send it directly to the market and bloated land tanks. Crude will rise again, meaningfully, when demand shows signs of stabilizing and while I expect to see much higher prices closer to the third quarter we are only seeing small signs of approaching stability in the supply or demand numbers.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Stuff We Care About Today
  6. Odds & Ends


Holdings Watch: The wiki tab is updated.

  • RIG - $10KP - Bought (2) RIG February $50 Calls (RKJBJ) for $3.30 with the stock off $1.20 on the day and after the better than expected results at NE. See post for details.


  • TSO - $10KP - Entered (5) TSO February $12.50 PUTS (TSONV) for $0.65.


  • HK - Added HK Feb $20 calls (HKBD) with the stock even on the day for $1.

Commodity Watch

Crude oil fell with another set of price depressing numbers from the EIA. The March contract ended UP $0.12 at $43.67 which is quite unexpected considering the bearishness of the oil inventory data (see oil inventory review below). This morning trading close to $43.

  • Ecuador Watch: Correa slashes the budget. Ecuador's budget for the oil sector falls to $3 billion this year from $4.8 billion last year and refining projects will take precedence over exploration and development. The country, which produced 505,000 bopd last year, had been talking about increasing spending as way to boost production which peaked in 2006, oddly, the same year that Correa ascended to the presidency after defeating a local banana tycoon and called for reform of the (read theft from your partners) Ecuadoran industry.


Natural gas fell as well, ending off a dime at $4.68 yesterday. This morning gas is trading off another dime prior to the inventory numbers.

  • LNG Watch: Flex LNG agreed with Samsung Heavy to delay delivery of it four ordered floating liquefaction units by 6 to 7 months. And so it begins.

Natural Gas Preview: The EIA releases the natural gas inventory numbers at 10:30 EST today.

  • My number: 180 Bcf withdrawal
    • History
      • 5 Year Average:
      • Last year: 128 Bcf
    • Weather: Last week was the coldest week of the year with 258 gas-weighted heating degree days, far outpacing the year ago reading of 199 and normal for this time of year of 266 HDDs.
    • Imports:
      • LNG continues to run low at 0.9 Bcfgpd, in line with year ago levels.
      • Canadian piped volumes are down 1.7 Bcfgpd at 7.6 Bcfgpd, the lowest winter level in a decade.
  • Street Consensus: 171 Bcf withdrawal

ZComment: Not a lot of upside potential for gas in the next month or so although we do get a data point at the end of January for November production which should show some more evidence of Rockies and Mid-Continent state production roll over. But today's number will likely either be bad or neutral for gas, especially since this is pretty near as cold as it gets and we are not topping 200 Bcf in a week. And the weather warmed considerably this week making a triple digit withdrawal next week somewhat unlikely. I'm a little above the Street due to a jump in electricity consumption on a week over week and year over year basis last week but I don't think that the number coming in 10 B's high to estimates is going to launch natural gas prices as we are facing some seriously tough gas storage comps in the next 4 weeks (240, 221, 143, 157).

EIA Oil Inventory Review: Big ugly additions for crude and gasoline with distillates adding as well despite the cold weather.

CRUDE OIL - Piling up.


Imports - Let's see: Step 1) load tanker,  Step 2) pilot tanker across ocean,  Step 3) Unload tanker. Total time elapsed, maybe 30 days but should be less. The OPEC cuts should be showing up any week now. Until they do or demand rises, lookout above for crude storage. 






Prices don't seem to be influencing demand.








Stuff We Care About Today

HK High Yield Deal Wrap

  • They ended up raising $548 mm net after originally seeking $300 mm
  • Coupon: 10.5% which is actually run of the mill these days
  • In a nutshell: I'm relieved the deal was oversubscribed on such short notice and that they now have a pile of cash. I'm concerned that we're really not going to be sticking close to cash flow as I am that the company would rather lever up and perhaps run its revolver back up (quietly) over the course of the year. I also smell an equity deal when the market will bear one, say in the mid $20s where HK has repeatedly gone to the well.

 SLB Misses 4Q Numbers; Sees Weakening 2009

  • The 4Q Numbers:
    • Revenues of $6.87 B vs $7.08 B expected
    • EPS of $1.03 (ex items) vs $1.06 expected
  • In Their Own Words:

The sharp drop in oil and gas prices due to lower demand, higher inventories and the belief that demand will erode further in 2009 as a result of reduced economic activity, is leading to rapid and substantial reductions in exploration and production expenditure. At current prices most of the new categories of hydrocarbon resources are not economic to develop. It will take time for inflation to be removed from the system and to bring finding and development costs more in line with lower oil and gas prices.

We expect 2009 activity to weaken across the board with the most significant declines occurring in North American gas drilling, Russian oil production enhancement and in mature offshore basins. Exploration offshore will be somewhat curtailed but commitments already planned are likely to be honored. Seismic expenditures particularly for multiclient data are likely to decrease from last year. Pricing erosion will compound these effects on revenue.

  • Street Estimates: 2009 consensus of $3.50, vs $4.50 for 2008  putting the shares at just over 10x forward earnings, cheap for SLB which is generally given a premium to the other big cap service names but I doubt the $3.50 is safe (hard to tell as there is nothing in the press release you can call firm guidance). HAL and BHI are trading at 8.6x '09 numbers, a much tighter spread on the multiples than is usual and if SLB deteriorates in terms of EPS estimates and prices, so should they (I know they have different models but the estimates are more than likely to move in the same general direction).
  • Conference Call: Today, 9 EST. I have to miss the beginning of this call but should be around for the Q&A.


Odds & Ends

Analyst Watch: (BPZ) initiated at Wunderlich at Buy with $12.50 target.

94 Responses to “Friday – Natural Gas Preview & Oil Inventory Review”

  1. 1
    Sambone Says:

    By Lananh Nguyen

    LONDON (Dow Jones)–Crude oil futures were lower Friday in London as market
    participants worried about the glut of global crude oil supplies.
    However, prices pared their earlier losses as fresh data emerged from tanker
    tracker Petrologistics showing the 11 members of the Organization of Petroleum
    Exporting Countries subject to the group’s production quotas are expected to
    cut production by a total of 1.5 million barrels in January from last month.
    “OPEC output cuts seem to be working slowly, but at the same time there is a
    huge overhang of inventories,” said Ole Hansen, manager of the futures and
    fixed income trading desk at Saxo Bank in Copenhagen.
    At 1302 GMT, the front-month March Brent contract on London’s ICE futures
    exchange was down $0.27 at $45.12 a barrel.
    The front-month March contract on the New York Mercantile Exchange was trading
    $0.42 lower at $43.25 a barrel.
    The ICE’s gasoil contract for February delivery was up $7.25 at $428.00 a
    metric ton, while Nymex gasoline for February delivery was down 74 points at
    108.60 cents a gallon.
    High global crude oil stockpiles and anemic demand continued to put a damper
    on prices, despite OPEC’s production cuts.
    Lower equities markets and a rebounding U.S. dollar also weighed on prices,
    said Andrey Kryuchenkov, vice president of commodities at VTB Capital in
    “The market is already extremely bearish…volatile swings are likely to
    continue, with the market also tracking equities and the U.S. dollar,”
    Kryuchenkov said.
    The worsening global financial crisis and the likelihood of a prolonged
    economic slowdown also made it “difficult to see upside” for oil prices even
    taking into account OPEC’s supply curbs, warned Hansen at Saxo Bank. He
    expected March crude oil futures to trade within a range of $38 to $45 a
    barrel, with price risk mainly skewed lower.
    Petrologistics’ data indicated OPEC compliance with its biggest-ever
    production cut last month stood at 68%. OPEC’s determination to rein in
    production has helped stem losses on the futures market in recent days, some
    analysts said.
    “Since OPEC’s December cut is only gradually being implemented, a further drop
    in OPEC deliveries can be expected in the coming weeks, which should help to
    stabilize prices further,” said Eugen Weinberg, an analyst at Commerzbank in
    While the sharp 6.1-million-barrel surge in U.S. crude oil inventories
    reported Thursday by the Department of Energy, combined with a 6.1 million
    barrel build in gasoline stocks, continued to depress the market, OPEC’s
    actions were beginning to draw a line under prices.
    “$40 (a barrel) is a very strong support level…I think the sentiment is
    slightly improving,” said Torbjorn Kjus, an analyst at DnB NOR in Oslo.
    -By Lananh Nguyen, Dow Jones Newswires (Spencer Swartz in London contributed to this report.)

    Dow Jones Newswires
    01-23-09 0803ET

  2. 2
    Sambone Says:

    08:01 01/23 *DJ Petrobras Cut To Equalweight By Morgan Stanley

    Maybe its time to buy?

  3. 3
    Sambone Says:

    SAO PAULO (Dow Jones)–Morgan Stanley in Sao Paulo downgraded Brazilian oil
    company Petroleo Brasileiro (PBR), or Petrobras, Friday due to volatile oil and
    gasoline prices.
    Morgan Stanley put Petrobras at equal-weight from overweight, saying the
    risk-reward for the once-hot Brazilian oil stock “looks unfavorable until we
    see an uptick in global growth or [oil] supply becomes an issue.”
    Morgan Stanley set a new price target of $25 a share, compared with $46 in
    previous reports, based on 2009 Brent oil prices of $50 a barrel and a 10%
    reduction in gasoline and diesel prices by the third quarter.
    Brent oil prices were trading lower Friday to $44.72.
    Morgan Stanley has since reduced its 2009 price target for oil to $50 from
    The investment bank also warned that Petrobras shares were trading at an
    all-time high in relation to the price of oil. In the last three months, oil
    prices declined 46%, while Petrobras shares in New York declined 7%, analysts
    Morgan Stanley said that the oil company’s massive deep-water oil finds are
    still viable at current oil prices but noted that current stock valuations were
    “not compelling.”
    Petrobras settled 3.4% lower Thursday at $24.29 in New York.
    On the Brazilian stock exchange, or Bovespa, Petrobras shares were trading
    2.8% lower to 22.96 Brazilian reals ($9.77) per share late morning.
    -By Kenneth Rapoza, Dow Jones Newswires

    Dow Jones Newswires
    01-23-09 0838ET

  4. 4
    zman Says:

    SLB – these cycles are getting sharper in their amplitude and shorter in their duration.

    No sign of customers breaking contracts, they are pressuring them to lower prices.

    Not bad enough stuff being said to short it, at least in my book.

    Back in 20 minutes.

  5. 5
    choices Says:

    SLB-buyers stepping in , up over 3%. Maybe the news and outlook has already been discounted in the price (for now).

  6. 6
    elduque Says:

    BDI +35 980
    TED .01 1.08

    Who knows maybe world trade is starting to function again as the credit markets start to function again. It is hard to find anything positive in the media, but short term credit markets have improved dramatically from October.

  7. 7
    Wyoming Says:

    Take SLB comments in two mindsets; International and North America. Sure, no contracts being broken in NAM as everything they offer is a price agreement, 30 day get out clause by either parties. International. you don’t break contracts because there could be huge tax penalties and/or it took a bunch of backshesh to get it in.

    Wait for the next SLB pop, then short it 9 ways to Sunday.

  8. 8
    zman Says:

    Choices – could be that, could be the comment about “absolutely no contracts being broken yet”. Activity down sure, but the backlog for things like the geophysical is solid.

  9. 9
    Sambone Says:

    By David Bird

    NEW YORK (Dow Jones)–Crude oil futures prices were down Friday as the market
    sought to balance bloated U.S. oil inventories and weak demand with signs of
    further OPEC output cuts.
    Prices were hovering well within the bounds of Thursday’s broad trading range
    in which prices moved above $45 after holding above a key support level of $40
    for a second straight day.
    At 9:15 s.m. EST, March delivery light, sweet crude on Nymex was down $1.21 at
    $42.46 a barrel. February heating oil futures were down 61 points at $1.3435 a
    gallon and February RBOB gasoline was down 84 points at $1.0850 a gallon.
    Traders said the market was reassessing the merits of a late rally that gave
    crude a slim gain Thursday, despite U.S. oil inventory data showing sharply
    higher-than-expected rises in stockpiles, amid weak demand.
    “Bottom line, there is no way to construe (Thursday’s) report any way other
    than bearishly,” said Steven Schork, analyst at the Schork Group in Villanova,
    U.S. crude oil inventories rose 6.1 million barrels, well ahead of
    expectations, while gasoline stocks rose 6.5 million barrels, also more than
    expected, and heating oil/diesel stocks showed a surprise rise of 800,000 bbls
    in the week ended Jan. 16, the Energy Information Administration said.
    Inventories of crude and major products are at, or above, five-year average
    Some analysts questioned whether prices will be able to hold the $40 level
    amid the high stocks.
    But prices got some support from news that Petrologistics, a tanker tracker,
    estimates the Organization of Petroleum Exporting Countries’ January crude
    output is down 1.5 million barrels a day from December, signaling the day may
    be nearing when the supply/demand equation tightens. Still others warn that
    deep OPEC cuts create more spare capacity in the market, which may also weigh
    on prices. – By David Bird, Dow Jones Newswires

    Dow Jones Newswires
    01-23-09 0933ET

  10. 10
    zman Says:

    Slow response time on site, may have to switch to backup if this keeps up.

    Backup site is here:


    Not going there yet.

    Wyoming – agree with all of that, think they are trying to talk their way out of a problem that is beyond their control. Stock is beaten down for sure, but we get to look forward to at least 3 more quarters that will be sequentially worse than this one.

  11. 11
    zman Says:

    BOP – what’s the desk say for the day?

  12. 12
    BirdsofpreyRcool Says:

    Junk Bond Sales Jump to Most Since July on Signs of Market Thaw
    2009-01-23 14:51:17.441 GMT

    By Bryan Keogh and Gabrielle Coppola
    Jan. 23 (Bloomberg) — Sales of high-yield bonds surged to
    $1.83 billion, the biggest weekly total since July, as companies took advantage of a six-week market rally to refinance debt.
    Sales almost doubled last week’s $1.05 billion and compare with a weekly average of about $200 million since July, according to data compiled by Bloomberg. Crown Castle International Inc., the operator of U.S. mobile-phone towers, raised $900 million in the biggest high-yield sale in six months. Petrohawk Energy Corp. sold $600 million of notes at a yield of 12.75 percent.
    The high-yield market showed signs of life after the worst year for issuance in at least a decade, Bloomberg data show.
    Crown and Petrohawk, both of Houston, sought funds after speculative-grade debt returned 15.5 percent over the past six weeks, compared with a loss of 5.9 percent for the Standard & Poor’s 500 index. Investors are snapping up the debt in the hopes that coupon payments of more than 10 percent will offset any price declines, said Joseph Wittrock of Aviva Investors.
    “You’ve got much larger room for error,” said Wittrock, a Des Moines, Iowa-based senior vice president of credit research at Aviva Investors. “Not only relative to the past, but also relative to other fixed-income asset classes.” Aviva oversees
    $469 billion of assets globally.

    Electricite de France

    Overall sales including investment-grade offerings tallied
    $16 billion, compared with $27 billion last week, Bloomberg data show. Two Paris-based companies, Electricite de France SA, Europe’s biggest power producer, and government-guaranteed lender Societe Financement de l’Economie Francaise, dominated issuance this week. EDF raised $5 billion in its biggest dollar- denominated offering, and SFEF sold $6 billion of three-year government-backed notes.
    Citigroup Inc. offered the week’s first notes backed by the Federal Deposit Insurance Corp., said a person with knowledge of the transaction. Financial companies have raised $120.6 billion through the program, which the FDIC set up to help banks refinance after they were shut out of the market.
    High-yield sales for the month total $3.72 billion, also the most since July, when issuance reached $3.98 billion, excluding conversions from bridge loans to bonds, Bloomberg data show. Offerings in 2008 came to $40.7 billion, the least since Bloomberg began compiling the data in 1999. Companies sold $2.23 billion of high-yield debt in the week through July 25.

    Defaults to Rise

    Companies are taking advantage of the lowest yields in three months even as S&P estimates that defaults will rise this year, tightening credit for lower-rated borrowers.
    The 12-month trailing default rate will rise to 13.9 percent by December from 4 percent at the end of 2008 as the economic recession and financial crisis deepen, S&P said yesterday in a report. Last month, S&P forecast the default rate would increase to 7.6 percent by November. The rate reached a low of 0.98 percent at the end of 2007.
    Investors demand average yields on junk debt of 18.3 percent, about the lowest since Oct. 15, according to Merrill Lynch & Co.’s U.S. High-Yield Master II index. Yields relative to benchmark rates narrowed 5.1 percentage points to 16.7 percentage points as of yesterday since reaching a record high on Dec. 15. Yields were 10.4 percent a year ago.
    Yields relative to benchmark rates on investment-grade debt widened three basis points this week to 557 basis points as of yesterday, according to Merrill Lynch & Co.’s U.S. Corporate Master index. Overall yields jumped 0.25 percentage point to 7.6 percent.
    Spreads on corporate bonds likely won’t tighten, because the economy will weaken and weigh on investor confidence, said Jim Keegan of Seix Investment Advisors LLC. Keegan hopes to find returns in higher coupons this year, he said.

    Clipping Coupons

    “The way we’ve invested is to assume we’re going to get a coupon-clip year,” said Keegan, chief investment officer at Seix in Upper Saddle River, New Jersey. “If we get anything more than that, that would be nice.”
    Crown Castle, after increasing the size of its offering from the $600 million it planned to sell, issued 9 percent, six- year notes at a discount to yield 11.25 percent, Bloomberg data show. The notes were rated B1, by Moody’s Investors Service, four levels below investment quality, and one level lower at B by S&P. High-yield, or junk, debt is rated below Baa3 by Moody’s and lower than BBB- by S&P.
    Oil and natural gas producer Petrohawk Energy issued 10.5 percent debt due in August 2014 at a spread of 10.83 percentage points, Bloomberg data show. The notes are rated B3 by Moody’s, six steps below investment quality, and one step higher at B by S&P.
    Nielsen Co., whose audience ratings help establish television advertising prices, also tapped the market this week, selling $330 million of five-year notes. The debt was rated Caa1, seven steps below investment grade, by Moody’s, and one level higher at B- by S&P. Nielsen has headquarters in New York and Haarlem, the Netherlands.
    Landry’s Restaurants Inc., the Houston-based owner of the Crab House and Rainforest Café chains, and Intelsat Ltd., a commercial satellite operator, are among borrowers seeking to sell at least $10.9 billion of bonds in the U.S., Bloomberg data show.

  13. 13
    BirdsofpreyRcool Says:

    Desk says “sell the morning rally”… but that they think 8,000 on the Dow holds at the end of the day. So, guess that means “same old, same old.” Sell-off into lunch, rally after 1:00 sometime.

    Not a lot of conviction behind their comments this morning. But, they are NOT seeing people short the mrkt here. Also, not seeing the buy-and-hold guys stepping in. It remains a day-trader’s mrkt. So, will continue to be 1) technically-driven and 2) volatile.

    Hope this helps!

    Nice to see the open better than the futures were indicating, tho. A little ray of sunshine.

  14. 14
    zman Says:

    Same thoughts on HK today as yesterday, a bit stronger than the group, will advance well if we can get the broad market off the ground. BOP, glad to know their are guys out their like the SMH one saying what they are saying when I own it, lol.

    Reef sent me a chart of Hub vs Fayetteville region gas. Its just disgusting, trading at under $3.40. No wonder companies in multiple basins are shifting to high IRR when strong plays like the Fayetteville are not currently close to profitable. Good for SWN, CHK, and HK to be strongly hedged there.

  15. 15
    BirdsofpreyRcool Says:

    Hope someone bought those $17.11 HK shares this morning.

  16. 16
    BirdsofpreyRcool Says:

    In addition to technical levels, something else to watch for daily indicators (b/c it’s what the traders are watching): the banks. When they go green, the mrkt rallies. Like yesterday, for a while.

  17. 17
    BirdsofpreyRcool Says:

    Our new PetroHawk (HAWK 10.5% due 8/14) bonds are trading nicely, considering the deal was upsized to twice the initial amount. Issued at 91.3, they are currently offered around 92.5. Lovely bonds… still 144a, so not registered for sale to the public yet, but one can buy the other HK bonds at nice yields, if you’re looking to clip coupons this year (as I am).

  18. 18
    zman Says:

    Anybody else having slow refresh? Do I need a reboot or to have a yell at my host?

    Good point BOP re the turn in the financials

    Interesting to see energy names rallying…almost like a relief rally that SLB didn’t say “its the end of the world as we know it”

    RIG over $50, HK barely green as well.

    Friday trivial pursuits:

    If you like historical fiction check out David Liss’ books on the London stock markets in the 1700s. Change the names and add several 000s and you’ve got current events.

    If you have a spare minute vote for Tater

    If you have a spare chunk of change and want an investment that will likely payoff in a few years with higher oil prices check out:


  19. 19
    BirdsofpreyRcool Says:

    Sold my HK trading shares… may as well play the game at the hand we are being dealt right now: volatility.

  20. 20
    BirdsofpreyRcool Says:

    (bad syntax in that post… sorry)

    yes, z, refresh is SLOOOOOOOOOOOOOOOW

  21. 21
    1520sbroad Says:

    draw of 176. a tweener.

  22. 22
    Garyinhou Says:

    mucho slow

  23. 23
    zman Says:

    Yep, an ok number. Street had revised to 175 to 180 this morning, I was at 180. Good to see a little gas come out of the producing region storage but I don’t think gas will get much of a lift for in line as per my comments in the post.

    Apologies for the slow site today. Request to fix in with my host.

  24. 24
    jy Says:

    Slow refresh here also

  25. 25
    zman Says:


    Switching to backup site until further notice.

  26. 26
    Sambone Says:

    By Brian Baskin

    NEW YORK (Dow Jones)–Schlumberger Ltd. (SLB) predicted that 2009 will be grim
    for the oilfield services sector as the industry leader reported its first
    year-on-year decline in net income since 2003.
    Oil and gas producers are slashing spending on oilfield services faster and
    deeper than in past downturns, Chief Executive Andrew Gould said Friday in a
    conference call. That could mean a quick recovery as well – but he declined to
    put an end date on the sector’s worst slump in at least a decade. Schlumberger
    is the largest oilfield service company by market capitalization. The company
    and its competitors perform much of the work involved in preparing oil and gas
    wells for production, as well as boosting output from older fields.
    “These cycles … are getting much sharper in their amplitude and shorter in
    their duration,” Gould said. “Of course, that depends on the general economy.”
    Schlumberger’s fourth-quarter net income of $1.15 billion, or 95 cents a
    share, down from $1.38 billion, or $1.12 a share, a year earlier. The quarter
    included an 8-cent charge for job cuts. Revenue increased 9.9% to $6.87
    Analysts gave an average estimate of $1.05 a share on revenue of $6.99
    billion, according to Thomson Reuters. Schlumberger shares were recently up
    5.8% at $39.42, as investors were already anticipating weak earnings from
    oilfield services companies
    “This shouldn’t be a surprise to anyone at this point,” wrote Bill Herbert, an
    analyst with Simmons & Co. in Houston.

    The Downturn Deepens

    Oilfield services companies have anticipated that their fortunes would decline
    along with oil prices, which have dropped from above $145 a barrel in July to
    about $45 a barrel on Friday. Natural gas prices also hit a two-year low this
    week. The biggest declines this year will come from the U.S., Canada and
    Russia, Gould said. Oil and gas fields in those countries are older and less
    profitable for producers, as they require constant work to maintain output.
    Gould said he expects customers to ask Schlumberger to charge lower prices in
    exchange for extra work or longer contracts. National oil companies in
    particular may stretch large projects out over a longer period, but are
    extremely unlikely to cancel deals signed when oil prices were rising, Gould
    “Our customers, they’re not going to break contracts,” he said.
    Schlumberger was among the first oilfield-services companies to respond to the
    slowdown, warning in December that 2008 profit would be below analysts’
    expectations. The company is in the midst of laying off about 1,000 workers in
    North America, or 5% of that region’s work force. It’s also cutting some of its
    65,000 overseas workers, though exact figures aren’t yet available.
    The company may reduce its workforce again in the first half of the year, and
    will decide on a possible third cut in April or May, Gould said.
    Halliburton Co. (HAL) and Weatherford International Ltd. (WFT), two of
    Schlumberger’s biggest competitors, report earnings on Monday.

    -By Brian Baskin, Dow Jones Newswires
    Dow Jones Newswires
    01-23-09 1105ET

  27. 27
    Sambone Says:

    Seems to be working fine now. Must be sunspots?

  28. 28
    Sambone Says:

    By Christine Buurma

    NEW YORK (Dow Jones)–Natural gas futures slid Friday after the U.S. Energy
    Information Administration reported a draw from storage that was in line with
    analysts’ and traders’ expectations.
    Natural gas for February delivery on the New York Mercantile Exchange was
    trading 16.9 cents lower, or 3.61%, at $4.512 a million British thermal units
    Friday after the EIA reported a withdrawal from storage of 176 billion cubic
    feet. Futures were about 3.1% below where they were trading ahead of the data
    Analysts and traders in a Dow Jones Newswires survey had predicted a 175 bcf
    draw. The five-year average withdrawal for this time of year is 126 bcf,
    according to the EIA. In the same week last year, 128 bcf of gas were pulled
    from storage.
    The latest withdrawal brings the total amount of gas in storage to 2.56
    trillion cubic feet, 1.23% above the five-year average and 0.78% below last
    year’s level.
    The draw isn’t enough to outweigh concerns about waning gas demand and ample
    supplies, said Kyle Cooper, an analyst with IAF Advisors, a Houston-based
    energy advisory firm.
    “This is a bad number,” Cooper said. “It really indicates economic activity
    has been poor.”
    Gas demand has dropped as the economic downturn prompts industrial consumers
    to cut back. Meanwhile, production from shale gas reservoirs continues to be

    -By Christine Buurma, Dow Jones Newswires
    Dow Jones Newswires
    01-23-09 1114ET

  29. 29
    zman Says:

    Who knows, could be the new energy secretary trying to take me down, lol. Let’s go back to using this site.

  30. 30
    Sambone Says:

    11:17 (Dow Jones) If investors are concerned about a possible dividend cut at
    some point by Imperial Oil (IMO), don’t be, Credit Suisse says. “With no
    long-term debt and nearly C$2.0 billion of cash on the balance sheet, IMO
    appears well positioned to maintain its dividend even at lower than forecast
    oil and gas prices,” firm says. IMO up 1.7% at $31.22. (BED)

  31. 31
    zman Says:

    HK = 19

  32. 32
    Wyoming Says:

    Ok refresh now.

    RE 10 yes, we agree. 3 Qtr is generous, 25 full tankers say so. Coupe de ta prevention program and socialist program support also say indicate miserable oil prices are in the cards. Does anyone have a way to check and see exactly how much volume is floating for factual data rather than yellow journalists.

    Heard (Herd-joke) from vendors this AM, DVN in Barnett will be going down to 8 rigs, not sure if that is out there. Were at 35 +/- and said dropping to 20 as I understand.

    I think there was a question the other day, no pricing has not slipped more than 10% as of now. I will say that I am getting a lot more contact and vendors appear to be ready to panic, ie comments about asking where their prices need to be. For the curious, projects won’t get approved because of revenue uncertainty, but vendors need to come off about 60% to get their pricing from 120 oil to current levels.

    Time to get going, have a good weekend.

  33. 33
    BirdsofpreyRcool Says:

    z – took one for the team. HK is free to move about the cabin.

    As long as GS and JPM stay in the green, this should hold up. Trading desk is 50/50 now, about where we close today… that is the same as “no opinion.” So, flying on our own right now.

  34. 34
    zman Says:

    Thanks very much for the color WYO – CHK seems to be the only guy in the Barnett trying to grow in 2009. DVN and EOG are coming off on rigs fast. EOG says they will peak there mid year and that is months old so maybe sooner, definitely not the focus right now.

  35. 35
    zman Says:

    BOP – fruitcake for you at $20 (actual gift may vary).

  36. 36
    1520sbroad Says:

    Z – does nat gas withdrawal today make it easier to model the rest of the 09 withdrawal season? The way i see it – we pretty much pegged HDD’s last week and saw roughly 12-15% less of a draw from storage than we would see in a “normal” situation (where industrial demand was “normal”).

  37. 37
    zman Says:

    1520 – Every data point on non-holiday weeks helps. Given that cold extended down to Florida and easily across Texas and pretty much everywhere but where Ram lives that range is probably best case. If we get any warmer than normal weather gas is going to trough very high and the shoulder season will pound gas back to lows not seen since 2000 or the late 90s ($3 ish).

  38. 38
    PackMan Says:

    Refresh is slow and had trouble logging on.

  39. 39
    zman Says:

    Apologies Packman, it has been noted, please use alternate site listed above. V and I are discussing oil sands production and prices.

  40. 40
    gaamblor Says:

    FWIW doug kass says he went long OIH and RIG today

  41. 41
    zman Says:

    Thanks Gaam. I agree with the RIG but not the OIH. On the RIG, its just a trade for 10% or so move in the stock in my book…group is far from out of the woods.

  42. 42
    zman Says:

    Wonder if this little bounce has legs? I really don’t see how it can unless you think China is going to devalue and flood the world with cheap goods to save its economy.


  43. 43
    choices Says:

    BOP-Just noted on another site that Barclays is raised to 80% margin in London-no confirmation found.

  44. 44
    elduque Says:

    BOP Any ideas on how to buy Petrohawk bonds with somewhat of a normal spread bet. the bid and ask?

    Thank you

  45. 45
    zman Says:

    HK – edging back into nearly 3 month highs at 19.30.

    RIG approaching 52.

    Oil flat on day, pretty astounding.

    Cargo – a little, new storage supposed to be added over next couple of years. Yes, now would be a good time to buy. Chinese are adding to theirs and the U.S. has said recently it would start adding again.

  46. 46
    BirdsofpreyRcool Says:

    choices – I don’t think that the status of Barclay’s will directly affect any of the ETF’s they manage in trust accounts. But, there is no accounting for the psychological fear behind another banking disaster. If there truly is a “Barclay’s event,” then I think a lot of things will go down.

    If you are unsure/nervous, sell half your position. There is no shame in sitting on some cash on the sidelines. I’m doing that myself, FWIW.

  47. 47
    BirdsofpreyRcool Says:

    elduque – let me check for you on those HAWK bonds.

  48. 48
    choices Says:

    Thanks, BOP. Unsure/nervous pretty much captures it with the emphasis on the latter-I think I will take the safe course on this one and wait for developments.

  49. 49
    zman Says:

    Tater – so if HK breaks above by a penny, I take it that’s not really enough to say we’ve crossed the line in the sand but its a start. If we go through the October end high at 19.79 then we can look to that gap fill north of $22.

  50. 50
    choices Says:

    Something is going on- Feb Gold up over 900 today, up now almost $40.

  51. 51
    zman Says:

    VTZ – can you refresh this site/see it? Thanks for your update on oil sand expansion capacity, see it in my email receipt but can’t find where you put it on the site.

    HK at 19.50, seems to have disposed of that 19.30 level for now.

  52. 52
    VTZ Says:

    Yeah I can see it now. I was having problems refreshing. I posted all the comments on the backup site.

    choices- if gold breaks 940 soon it’s off to the races.

  53. 53
    BirdsofpreyRcool Says:

    el-d: there are three HK bonds that are registered, so regular investors can buy them. I haven’t bought bonds in my own personal account, but I have advised others. Key is to go in knowing what you want and what you will pay for them. Retail brokers are NOTORIOUS for ripping the face off retail bond buyers… so never buy a bond at their quoted price. Tell them what you will pay, even if they say “it’s too low.” Be willing to walk away and let them come back to you.

    So, I would suggest you try to buy the HAWK (bond ticker is different than stock ticker here) 9.125s due 7/13. There are almost $775mm of bonds in this issue, so it’s more liquid than most. Tell your broker you will pay him 90.50 for a yield to worst of 11.93% (and a yield to next call of 19.73). The CUSIP on this bond is: 716495AB2

    Your broker will probably come back with a 91.5 offer… but, hold your ground.

    Let us know how this goes for you. Just remember, buying bonds is a negotiation, not a transparant transaction (like stocks).

  54. 54
    BirdsofpreyRcool Says:

    choices – there will be plenty of chances to buy into this market at good prices. We are far from out of the woods yet.

  55. 55
    BirdsofpreyRcool Says:

    el-d – one other piece of advice on bond-buying. Do not let your broker charge you some outrageous transaction fee. Brokers make their money on the difference between the bid and the ask on bonds… which is quite large. Your broker should be able to buy those HAWK 9 1/8s around 89.5 or so, then turn around and sell them to you at 90.5. So, don’t get hosed on the fees here either.

  56. 56
    BirdsofpreyRcool Says:

    z – i’m beginning to smell fruitcake…

  57. 57
    zman Says:

    Oil up $2. Now that’s what I call short covering meets a general move into commodities. Seems to be a more than healthy appetite for energy stocks in here.

  58. 58
    zman Says:

    BOP – I’ll send you a ZEB hat.

  59. 59
    BirdsofpreyRcool Says:

    z – WAY cooler than some nutty old cake from Corsicana, TX. Got my fingers crossed…

  60. 60
    Popeye Says:

    HK now has a five buck premium over CHK thanks to Bird.

  61. 61
    BirdsofpreyRcool Says:

    aaaaaaaaaaahhhhhhhhhhhhhh…. so close…

  62. 62
    choices Says:

    Thanks, BOP-completely agree/understand the “not out of the woods.” Apparently, the bank bailout in the UK completely bombed over the last few days, FTSI down, Barclays on NYSE is off 11% today.

  63. 63
    BirdsofpreyRcool Says:

    choices – no reason to try to be a hero in this mrkt. still too much wood to chop.

  64. 64
    1520sbroad Says:

    choices – i think the move in gold is directly related to the UK. Lots of folks willing to jump into the shiny yellow stuff instead of us treasuries.

    everyone listen to BOP when buying bonds thru a broker – those desks are famous for screwing the small buyer.

  65. 65
    choices Says:

    crude up 7%, gold up, need NG to get a bid.

  66. 66
    Fiveanddimer Says:

    Don’t know if this has already been mentioned, but since Tuesday of this week the price of gold has exceeded the S&P500 index for the first time since the early 1990’s. I’m not sure whether this is significant or not. All I can conclude is that gold has been/is in a bull market, at least compared to stocks in general.

  67. 67
    BirdsofpreyRcool Says:

    1520s – thanks for the assist! If anyone is thinking about buying a particular bond, let me know and I’ll try to get a reasonable level for you.

    Bonds are like buying real estate… there is the price the broker will quote you and there is the price that the house actually goes for. Sometimes, there is a huge difference. So, just like buying a house, it pays to go into the negotiation knowing what you think it’s “worth” and not what the broker TELLS you it’s worth.

  68. 68
    1520sbroad Says:

    i always thought retail bond desks operated on the greater fool theory.

    Cheers for the HK sell this morning.

  69. 69
    BirdsofpreyRcool Says:

    I haven’t been keeping y’all up-to-date on the bond mrkt this morning… the high yield index is having a tough time getting any steam up, but the Investment Grade index is en fuego! Opened this morning aroung 222 now …

    IG 207 wow!

  70. 70
    1520sbroad Says:

    BOP – do you have any read on GE? Keeping the AAA? any thoughts from the credit analysts you talk to?

  71. 71
    zman Says:

    BOP – and to think you were just 6 pennies shy of this:


  72. 72
    Wyoming Says:

    There are a couple of suggestions for a Natty Gas symbol that would look sweet on the bumper of my Excursion…

  73. 73
    zman Says:

    I have an oil speculator shirt in the works for that occasional trip to the polls. Works for the ballpark too.

    Wyoming I’m always open to suggestions.

    RIG pacing gains in NE, up 8%.

  74. 74
    BirdsofpreyRcool Says:

    1520s – thanks for asking. AAA rated companies are galaxies away from my universe these days. Personally, i don’t think a drop from AAA to AA would cause GE spreads to widen much from here. I don’t get IG bond quotes… but I heard the 8% bonds they issued a week or so ago were trading at 103 or so. I think any downgrade is already priced into the bonds… so, maybe it’s more important for GE to protect the divd right now.

    All that aside, tho, I don’t have any particular insight for you on GE … other than to say that neither Moody’s nor S&P have GE officially on credit watch.

  75. 75
    Wyoming Says:

    Won’t work if you want to take it to the ball park. Back to the drawing board.

  76. 76
    BirdsofpreyRcool Says:

    z – rats.

    “No cap for YOU”

    story of my life…

  77. 77
    elduque Says:


    Thanks for all the info. It is appreciated. Especially the willingness to provide the proper level.

  78. 78
    BirdsofpreyRcool Says:

    financial indicators (GS, JPM, IVZ) are trading at their HOD… positive indicators for the mrkt as a whole.

  79. 79
    zman Says:

    BOP – I was honestly hoping to send it your way today, still may get to.

    HAL Monday. I’m going to sit it out.

    Question for Tater. Is the descending 50 day sma troubling for much more advancement out of RIG in your way of looking at that chart. It seems that if it can get through that it would be breaking out of this current 2 month base and perhaps recover into the mid 60s.

  80. 80
    zman Says:

    Gas rigs down 50, down 237 YoY. Big drops in Colorado and Texas, Louisiana and OK down 5 apiece.

    Horizontal rigs up 10 which won’t help sentiment on gas, the commodity forgotten in today’s rally.

  81. 81
    Sambone Says:

    BOP – All house bond desks are “Pirates”.

  82. 82
    1520sbroad Says:

    #74 – gotcha on GE. the options market on GE has been acting absolutely crazy so i was just curious if there was any follow on on the debt side. I guess AAA is AAA.

  83. 83
    Sambone Says:

    LAGOS (AFP)–Unidentified gunmen Friday attacked two vessels off the Niger
    Delta, the centre of Nigeria’s oil and gas industry, a security source said.
    Around a dozen men in two speedboats attacked a supply vessel about 12
    nautical miles off the Bonny oil export terminal. There were no casualties and
    no-one was kidnapped but some items were stolen, the source said.
    U.S. oil company ExxonMobil Corp. (XOM)said the vessel attacked was working
    for a company sometimes subcontracted by one of its Nigerian units but said
    that at the time of the attack the vessel was not supporting the operations of
    its subsidiary.
    Later, a second vessel came under attack by gunmen in three speedboats,
    northwest of the Amenam oil field, Nigerian navy spokesman Lieutenant Olabisi
    Way said.
    The Amenam facility, which lies 30 kilometres offshore, is operated by French
    oil company Total SA (12027.FR).

    Dow Jones Newswires
    01-23-09 1348ET

  84. 84
    BirdsofpreyRcool Says:

    sambone – aye, aye and aaaaaaaaaaaargh. I hear you on that, matey!

  85. 85
    VTZ Says:

    Z – You wanted a contest still? Best ZEB t-shirt idea and/or logo.

  86. 86
    zman Says:

    Thanks V. Got a new logo but am open to it on the concept for the front of a shirt.

  87. 87
    Sambone Says:

    Sounds like the “Duck” has been cooked!

    NEW YORK (Standard & Poor’s) Jan. 23, 2009–Standard & Poor’s Ratings Services
    said today that it lowered its ratings on AFLAC and placed them on CreditWatch
    with negative implications.
    “The downgrade resulted from the company’s concentrated exposure to banks
    and financial institution sector credits in its investment portfolio and the
    weakened credit quality this sector has experienced over
    the past three to six
    months,” said Standard & Poor’s credit analyst Shellie Stoddard. The
    concentration includes subordinated, hybrid security investments which are
    highly concentrated in the financial sector. “While AFLAC’s issuer-investment
    concentrations have previously been cited by Standard & Poor’s as an ongoing
    concern, the potential for the weakness within the broader financial sector to
    negatively impact the company’s capitalization and financial flexibility
    prospectively has become significant enough to warrant a one-notch downgrade
    today,” added Ms. Stoddard.
    The CreditWatch listing will be resolved as AFLAC’s potential for
    economic investment losses, and the resulting effect on statutory capital,
    becomes more quantifiable during the first quarter of 2009. If investment
    losses are expected to lead to an erosion of statutory capital of at least
    $400 million (net of earnings and fixed charges), the ratings will likely be
    lowered an additional notch from today’s rating action. If the decline in statutory capital is expected to be at least $800 million, the ratings will
    likely be lowered at least two notches.

  88. 88
    zman Says:

    Don’t see doing anything today including taking profits. I’m going to go watch the kid grow and will be on my blackberry if anyone has anything pressing but I can’t imagine what that would be. Here’s to a green day in energy land, I think we got two of those this week. Wow. Beer thirty called early, have a great weekend!

  89. 89
    tater Says:

    Gone all afternoon. Got tired of the slow graphics on my laptop, so I did my share for keeping Mac sales growth at 9%. I will include a look at RIG and probably XOM on the post for this weekend.
    RIG looks like it will have resistance at the 57.66 area for Fib reasons as well as that looks like a probably collision with the 50 EMA. The more resistance that stacks in one place, the more it looks to be something significant.
    As I might forget: Somebody remind me of a possible Head and Shoulders bottom in RIG if it does rally straight up to the 50. It can have an effect on the way the trade moves around what would be the neckline.

  90. 90
    PackMan Says:

    Z – perhaps you need an actual Brain as part of your logo; with some lightning bolts zapping around plus an oil rig …. jazz it up !

  91. 91
    zman Says:

    I will get to it tonight. All the positions are on the wiki tab.

  92. 92
    Read Webpage Says:

    Read Webpage

  93. 93
    laser capsulotomy Says:

    laser capsulotomy

    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Friday – Natural Gas Preview & Oil Inventory Review

  94. 94
    hosting Says:


    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Friday – Natural Gas Preview & Oil Inventory Review

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