Monday Morning And All Is Pensive

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The Week That Was Can Be Seen Here.

The Week Ahead: Tons of economic data and a Fed meeting.

  • Monday - existing home sales, leading indicators,
  • Tuesday - consumer confidence (38),
  • Wednesday - EIA Oil Inventory Report- 10:30 EST; EIA November natural gas supply report, FOMC meeting (rates 0 to 0.25%),
  • Thursday - EIA Natural Gas Inventory Report - 10:30 EST, jobless claims, durable goods (-2.4%), new home sales,
  • Friday - 4Q GDP (-5.5%), consumer sentiment (61.5%)

In Today's Post

  1. Holdings Watch
  2. Commodity Watch
  3. Earnings Calendar
  4. Stuff We Care About Today - HAL and WFT earnings
  5. Odds & Ends

Holdings Watch - The wiki and $10KP tabs are updated.

Commodity Watch

Crude rose 8% last week to close at $45.98 with the 12 month strip ending at $52.73. This morning crude is trading flat to down $0.50.

  • Dollar Watch: Back in the saddle again as international community economy spirals lower, dollar once again seen as the only place to be. The dollar index is at 85.56 and has resistance at 88 having run 9% in the last month.


Natural gas can't seem to catch a bid, ending the week off 5% at $4.51 (12 month strip at $5.13) despite an inline injection and a severe hacking of the gas rig count. Many shales are uneconomic at these prices; many more conventional plays have been for several weeks. This morning gas is trading down a dime.

Weather Watch: A little colder than expected but not cold enough.

  • HDD's Last Week Fell Off To 225 vs 215 from the forecast and the big 258 number in the prior week. The 205 to 215 range so far this winter has not produced big withdrawals and we're up against a very tough comp from the year weather when HDDs soared to 268 and we saw a gas withdrawal of 240 Bcf
  • The HDD forecast for today: 237 (which would be the second coldest of the season so far).
  • For The Kids: From Accuweather.

Gas Rig Count Tumbles Another 50 ....

...But Many Are Watching The Horizontal Rig Count (a source of bigger wells) And It Has Had A More Difficult Time Falling Off.

Earnings Calendar. SLB kicked off earnings last week with "not so bad" results but a dire forecast. A lot of the move was thought to be priced in and the stock bounced nicely on Friday. I'll be taking puts there soon. This week, we get a little bit of everything including all the majors, an independent refiner, a couple of coals, one solar, many oil service names but none of the E&P (they start next week).This table is on the calendar tab and the bigger, all encompassing earnings season table will be added a little later this week.

Stuff We Care About Today:

Norway to Spend 2.9B on "Green Energy" projects. Oslo says it will secure jobs during a global downturn while fighting climate change. Sound familiar? One of the knocks on the solar companies over the past 6 months has been that they would see less government subsidies this year and for the foreseeable future as governments tighten their belts due to the slipping global economy. In fact, I think we will see the opposite.

HAL Reports Decent Quarter; Not Much Telling In Press Release

  • The 4Q Numbers:
    • Revenue of $4.9 B vs $4.8 B expected.
      • Latin America was the big grower for the quarter,
      • North America was flat sequentially despite the falling rig count. They did see pricing pressure towards the end of the 4Q.
    • EPS of $0.87 (net of a DOJ charge; see below) vs $0.73 expected. .
  • They have a "prospective" settlement with the DOJ and the SEC in their Foreign Corrupt Practices Act charges for $303 mm. This has not been much of a weight on the stock but its good to get behind them. 
  • Outlook: Not much in the press release beyond basically stating we've seen down cycles before, just had our best year ever, 2009 will be challenging. Operating margins retreated slightly on pricing pressures and volumes late in the 4Q in North America but it could have been worse and their efforts to diversify internationally over the last 2 years clearly benefitted the company during this turn.
  • Balance Sheet: $1.1 billion in cash, net debt to cap of 16% (easily manageable); they did note substantial room left in their share repurchase authorization but that they did not buy shares in the 4Q...that's the conservative move now, hoard cash and see how bad things get. 
  • Street: 2009E EPS of $1.97 (vs $2.82 for 2008),  or 9.3x which is probably close to fairly valued given the market unless they say something to change my thinking on the call I don't think analysts will be slashing numbers further just yet. 
  • Conference Call: 9 am EST.

WFT Reports Good Quarter

  • The 4Q Numbers
    • Revenue of $2.6 B vs $2.6 B expected.
      • Sequentially flat North American revenues
      • Latin America: booming. Recurring theme so far this quarter. Up 23% sequentially, 52% YoY
      • Middle East / N. Africa / Asia up 6% sequentially,
    • EPS of $0.53 (net of items) vs $0.52 exp. Results include 4 cent loss due to foreign exchange; 3 cent loss to asset writeoffs.
  • Outlook: No guidance in the pr.
  • Conference Call: 10:30 am EST.

Odds & Ends

Analyst Watch: Jefferies reiterates Buys on (UPL) and (SLB).


132 Responses to “Monday Morning And All Is Pensive”

  1. 1
    Dman Says:

    Hi Z – any color on the UPL & SLB from Jeffco?

  2. 2
    Sambone Says:

    By Reza Amanat

    LONDON (Dow Jones)–Crude prices were under downward pressure in London
    Monday, as participants focused on the deteriorating economic conditions, which
    have sapped any confidence away from buyers, market participants said.
    The losses came despite the market ending the week strongly on Friday, as data
    on shipments of oil indicated the Organization of Petroleum Exporting Countries
    are ardently adhering to supply cuts.
    “(The market) won’t be satisfied really until we see $35 a barrel on Brent,”
    said a crude broker in London. “Demand and the economic situation should
    gradually erode any fresh buying out there,” he added.
    At 1241 GMT, the front-month March Brent contract on London’s ICE futures
    exchange was down 38 cents at $47.99 a barrel.
    The front-month March contract on the New York Mercantile Exchange was trading
    40 cents lower at $46.07 a barrel.
    The ICE’s gasoil contract for February delivery was $31.00 higher at $447.75
    a metric ton, while Nymex gasoline for February delivery was down 44 points at
    115.00 cents a gallon.
    OPEC’s seemingly strict compliance with output cuts continues to interest the
    market, as participants look for concerted signs that a fall in supply will
    help curb the recent declines in oil prices.
    The tanker tracker Petrologistics estimated Friday that OPEC’s January crude
    output is down 1.5 million barrels a day from December.
    Despite signs that OPEC members are showing “sufficient supply side
    restraint,” the oil market remains unconvinced that output cuts are enough to
    reverse the recent downward trend in oil prices, especially amid falling
    estimates on demand, said Gordon Gray and James Evans, analysts at Collins
    Stewart in London.
    They noted that conditions for a “moderate” price recovery could be on the
    cards in March, if OPEC cuts hit U.S. inventories at the time when U.S.
    refiners ramp up seasonal demand for oil.
    Despite the short term falls however, crude traders took note of the strong
    performance on technical charts, with Olivier Jakob at Petromatrix, a
    consultancy based in Switzerland, seeing Nymex March light sweet crude’s close
    above the 50-day moving average Friday, as the first step necessary for a
    positive trend to develop in the oil markets.
    However, he noted a break above $50 a barrel would be necessary in order to
    substantiate a lasting upward trend.
    Further ahead, market participants are expected to focus on a plethora of U.S.
    economic data set for release this week, as they look for indications of
    economic turmoil and demand deterioration for crude and oil products.
    The data will include existing home sales, due for release at 1500 GMT Monday,
    and an interest rate decision by the Federal Reserve on Wednesday.

    -By Reza Amanat, Dow Jones Newswires
    Dow Jones Newswires
    01-26-09 0817ET

  3. 3
    Sambone Says:

    Friday, 3:06 pm

    Crude Eyes $40/Bbl Floor In Nervous Rally


    NEW YORK — Crude oil prices are hovering above $40 a barrel, but there’s considerable doubt that the foundation for a near-term rally is in place yet.

    Declining worldwide oil demand and high inventories amid the ongoing economic crisis are behind the shaky outlook. That means no let-up in volatility for oil prices, which dropped to a near-five-year low in December of $32.40 a barrel from a record high of $147.27 in July, as the global economy went into a tailspin.

    In the 15 days of trading so far this year, front-month crude oil futures prices on the New York Mercantile Exchange have whipsawed in a near-$18-a-barrel trading range from an intraday high of $50.57 a barrel to a low of $32.70.

    March-delivery crude futures have held above $40 a barrel since becoming the front-month and the focus of trading on Wednesday, fueling hope for a rally base among bulls. Still, the huge supply overhang argues against sustained gains.

    In the U.S., the world’s largest oil consumer, the year-to-year surplus in crude oil inventories has grown to more than 14%, the highest level since late August 2005.

    But market conditions are the mirror opposite of what they were the last time stocks were as swollen. In August 2005, the U.S. was burning oil at a near-record level of 21.6 million barrels a day as the economy hummed along at an annual growth rate of 3.7% in real gross domestic product. Refiners were running at a break-neck pace, processing 16.25 million barrels a day of crude.

    Refiners Cutting Runs
    Now, oil demand is languishing at near 19.1 million barrels a day, off 8%, or 1.65 million barrels a day from a year ago. U.S. real GDP, after growth of just 1.2% in 2008, is expected to fall by 2% this year, according to the Energy Information Administration’s forecast.

    Refiners, facing both weak profit margins and seasonal maintenance, have cut the rate at which they process crude to 14.1 million barrels a day, a 5.2% drop from a year ago and a nine-year low for this time of year. Crude runs are 2.1 million barrels a day, or 13%, lower than in August 2005, when the overhang in crude stocks was this big.

    Crude inventories of 332.7 million barrels are nearly 42 million barrels above a year ago. To bears, that’s 42 million reasons prices will stay weak.

    Refineries have enough crude on hand now to run for 23.5 days at current rates, or 3.5 days more than the five-year average. But the EIA said refiners are expected to cut back operations further, to below 14 million barrels a day in both February and March, for the first time since 1996, meaning the glut in inventories won’t be pared soon.

    What’s more, stocks of key petroleum products such as gasoline and distillate fuel (diesel and heating oil), are at or above their five-year average levels. Combined crude and petroleum products inventories are sufficient to cover 54.3 days of current demand, the highest level at this time of year since 1999, and nearly six days more than the five-year average, EIA data show.

    Retesting Five-Year Low
    Some traders think the oversupply may again push crude down to near $32 a barrel, a five-year low last seen Dec. 19.

    U.S. oil supply and demand data look “bearish when viewed from just about any angle,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill. He said he sees crude prices falling back to the $32-$33 area over the next three weeks or so.

    Still, the market is mustering some support from signs of further output cuts by the Organization of Petroleum Exporting Countries. Saudi Arabia, the world’s biggest oil exporter, has said it will pump below its agreed level of near 8 million barrels a day in February. Petrologistics, a tanker tracking group, estimated OPEC output is down 1.5 million barrels a day in January from December levels.

    OPEC on Dec. 17 agreed on its biggest-ever output cut, of 2.2 million barrels a day, in response to sliding demand and rising stocks. OPEC is anxious to limit further gains in stocks ahead of the second quarter, which is expected to show the weakest demand of the year, with global demand dropping by 450,000 barrels a day to 1.6 million barrels a day from the first quarter, analysts estimate.

    Lawrence Eagles, head of commodity research at JPMorgan Chase said the current rally could continue, but is unsustainable, given the stock overhang and the pressures from rising spare production capacity as OPEC implements cuts. He sees U.S. crude prices averaging $38 a barrel in the first quarter, but climbing to $50 in the fourth quarter.

    “The market is moving into balance, but supply is probably not quite tight enough to create a deficit that will work off surplus stocks until the second half of the year,” he said.

    –(David Bird, senior energy correspondent for Dow Jones Newswires, has covered global oil markets for more than 20 years.

  4. 4
    BirdsofpreyRcool Says:

    Marc Faber – Summary from Barron’s interview this weekend (stuff we care about)… Marc is bullish on resource stocks – AA, FCX, CVRD, Rio Tinto, and BHP. Calls US Treasuries the short of the century. Says he recently bought some US stocks for the first time in years (inc. MSFT, YHOO, ORCL, etc) – thinks these equities will do great over the next few years.

  5. 5
    zman Says:

    VLO – cutting rest of Texas City refinery production due to maintenance and economic reasons.

  6. 6
    zman Says:

    Baron’s was hot for XOM over the weekend.

    Dman – sorry, all I saw was a headline.

  7. 7
    BirdsofpreyRcool Says:

    Good Morning. The CDS market and credit indices (IG and HY) are very quiet so far. No trading yet. There is still a desire by non-traditional investors to buy credit (the hedge funds) as demonstrated by the huge difference between the Credit Default Swap cash market and the indices. (CDS is trading much richer than the cash NAV). This spread has reached a point where historically, something’s gotta give. Either there will be more aggressive buyers of individual bonds (from traditional players like mutual funds and insurance companies), or the hedge fund Macro Bears will start to push on the CDS indices (the IG and HY). Stay tuned… which way it falls (and when) will tell us a lot about whether we can rally stocks from here… for a while.

    IG 207 bps vs. NAV = 261 bps

    HY $74 5/8 vs. NAV = $71 3/8

    [note: IG index quoted in spread to treasuries – so want this number to go down. HY index quoted in dollar amounts – so want this number to go up.]

  8. 8
    zman Says:

    HAL saying Russia was strong 4Q but sees 25% reduction in spending in 2009, lower spending in North Sea as well. This lower spending will directly contribute to lower oil production from these two regions in 2009.

  9. 9
    BirdsofpreyRcool Says:

    z – you thinking about doing anything with XOM today? Or, just waiting in the weeds on that one for now…

  10. 10
    zman Says:

    XOM – waiting on a good Dow red day between now and earnings on Friday. Technician last week saying it was a sell, but firm crude could and not so bad earnings in the sector so far could give it another pop so I want in for Friday. Re Baron’s I don’t give them any more sway than Cramer these days.

  11. 11
    BirdsofpreyRcool Says:

    No conviction from the Trading Desk this morning. It’s a 50/50 day, so could do anything.

    That said, Desk points out that the mrt seems to have shaken off the CAT news after reversing for 10 points… so we shall see.

  12. 12
    zman Says:

    Re HAL – nothing much different on the call than in the press release. Declined to discuss specifics for handling this environment due to competitive reasons. Did say they would be careful in cutting the head count too much to keep re-hire and re-train costs in check during the next upcycle.

  13. 13
    BirdsofpreyRcool Says:

    z – ha! re: Barrons… I officially let my subscription lapse this weekend. They have been no help for the last 2 yrs and I got tired of watching Alan Ableson pat himself on the back. so, hear ya there.

  14. 14
    BirdsofpreyRcool Says:

    PBR on the tape saying they are going to review all labor contracts and look to cut costs. Doesn’t bode well for the services guys.

  15. 15
    elduque Says:

    BDI +15 995
    TED +.011 1.08

  16. 16
    BirdsofpreyRcool Says:

    z – HK…. missed it by ONE day. Which is why I rarely buy options, by the way.

    HK hit $20. My work here is done.

  17. 17
    zman Says:

    LOL, BOP, Thanks for the assist! How about if you stay out until it fills the gap at $21.94.

  18. 18
    zman Says:

    Goldman raises DO, ATW, RIG, NE, PDE price targets, adds RIG to Conviction Buy list.

    I was looking at adding ATW before next week’s earnings.

  19. 19
    BirdsofpreyRcool Says:

    z ouch!

    confession: since I missed getting Z Hat on Friday, i bought HK back before the close. I feel better about the whole thing now, thanks for asking.

  20. 20
    zman Says:

    Rats, I can’t give these hats away!

  21. 21
    BirdsofpreyRcool Says:

    exisitng home sales for Dec = good number.

  22. 22
    zman Says:

    Wyoming – HAL will wait until the end of the 2Q and size up the market at that time to see if further head count reduction is necessary.

  23. 23
    BirdsofpreyRcool Says:

    wow. Dec Index of Leading Eco Indicators didn’t suck either… expecting -0.2%… just printed +0.3%

  24. 24
    BirdsofpreyRcool Says:

    Financials lovin’ it. Good for entire mrkt.

  25. 25
    zman Says:

    Thanks BOP – I started adding the week ahead on numbers at the top of the Monday posts because the eco data has become much more important than it was in 2007/2008 for the direction of the market.

  26. 26
    zman Says:

    FSLR should run hard in here, comments on their symbol re a new renewables association (IRENA) they hope to get Obama to back.

  27. 27
    BirdsofpreyRcool Says:

    z – I saw that eco-addition. Great idea. Thanks.

  28. 28
    BirdsofpreyRcool Says:

    z – don’t take it personally about the board being quiet… there is practically noting going on on the credit desk either. That said, credit is quoted higher (better). Just very very quiet today.

  29. 29
    zman Says:

    Even natural gas up…it’s a miracle.

    Oil holding over $47, starting to get a re-rally in SU but I think I will hold off for a bit.

    BOP – thanks, I don’t…I find myself to be excellent company…but I’m you’re here 😉

    GMXR and GDP in the overly beaten down for absolutely no reason category…should see a nice bounce if this energy bid has a day or two of staying power.

  30. 30
    BirdsofpreyRcool Says:

    I think the eco-data really caught people by surprise. If we can follow it up tomorrow with a pleasant surprise on the various consumer confidence surveys coming out, might get a little bit of a run here.

  31. 31
    BirdsofpreyRcool Says:

    rumor – BP for CHK rumor making the rounds.

  32. 32
    zman Says:

    Thanks BOP. BP went out of their way not 3 months ago to debunk that. The rumor makes since since they have done deals in the Anadarko basin and in Appalachia with CHK but I don’t see it. Still, it could easily take CHK back into the high teens if not 20. I may play a little.

  33. 33
    zman Says:

    BOP – we’ve also got GDP on Friday which is expected to be dire, so if its just a little less sucky than expected hello higher levels.

    By the way, S&P500 hovering just over that crucial 850 level. I think Nicky has been spot on with this last move.

  34. 34
    BirdsofpreyRcool Says:

    z – i don’t believe it… but it’s making the rounds, so just passing along. When the mrkt is this quiet, I guess traders need to make stuff up to amuse themselves. You know how traders are…

  35. 35
    BirdsofpreyRcool Says:

    we get back through 850 on SPX… and hold… mrkt will rally on the technicals. So says the Trading Desk.

  36. 36
    zman Says:

    ZTRADE: $10KP

    RIG Sold half (1) RIG Feb $50 call for $7.90, up 139% with the stock up $4.20 after Goldman Sachs added the name to their Conviction Buy list.

  37. 37
    zman Says:

    I may fold up my tent on my refiner short. Don’t feel like fighting the trend there.

  38. 38
    tater Says:

    Nice RIG trade (among others). HK ran up into the 52 week EMA. Very hard to say how strong that resistance is. It hasn’t faced it in this type of situation (so far down looking up). Always something lurking in the background. Like I said on the chart, I’ve been paying too much attention to daily views and not enough to the weekly views.

  39. 39
    BirdsofpreyRcool Says:

    Just guessing… but the combo of SPX getting back over 850 + FCX’s comments on their positive long-term oulook for the commodities market this morning… + Thain’s mea culpa might be making people feel a bit better about the world.

    That… and the positive eco-data this morning.

    What else??

  40. 40
    Dman Says:

    About a week ago I mentioned the bullish turn in various commodities (crude, grains, base metals) as indicated by a crossover in the weekly MACD.

    In the case of crude there was another indicator that seemed to validate the MACD: the Jim Wyckoff contra-indicator. Tater has noted that Jim, whilst well meaning, has a gift for abysmal timing. In a recent article Jim asserted that “There are no early technical clues to suggest the downtrend in crude oil prices is about to end anytime soon. ” Hmmm.

    Note: UNG also has this weekly MACD signal, but (not surprisingly) it is weaker-looking than in other commodities (you will see what I mean if you look at the MACD).

    I tried to look at the NG futures but quote.com refused to do the weekly MACD.

  41. 41
    tater Says:

    HK – 200 day EMA same area. Never know whether these things respect SMA’s or EMA’s. Have to put all that on the screen, but then things get so cluttered you can’t read it.

  42. 42
    zman Says:

    Thanks T, I may take the HK $20s off the table soon.

    Looking at SU (again) and BTU (been awhile) long here.

    Note the % variance on XOM and COP and the fact that Barron’s loved the former and dissed the later in their weekend piece. Tell us something we don’t know already Barron’s.

    Thanks D, good points, keep pointing those out.

  43. 43
    BirdsofpreyRcool Says:

    JPM trading at HOD… good sign.

  44. 44
    zman Says:

    Obama speaking about energy policy now

  45. 45
    BirdsofpreyRcool Says:

    z – listening to FCX… so pls post any Obama comments worth passing on. thx

  46. 46
    Dman Says:

    Has anyone been trading the ERX & if so, any comments?

    Also, does anyone know much about the underling index (the Russell 1000 energy index) or even some good links to info on it? My googling must be deficient but I’m not getting far on this one.

  47. 47
    kyleandy Says:

    bop- have decided to use my home equity line of 100k before BOA takes it away from me. want to park it in relatively short term bonds or notes that are liquid. u have any suggestions? u can email me at am5153@msn.com. some risk is ok. thks




  48. 48
    BirdsofpreyRcool Says:

    kyleandy – I can’t give investment advice… but I will check around and see if I can come up with a couple of bonds we can talk about. Pls define “short-term” for me. thanks.

  49. 49
    zman Says:

    Will do BOP, so far a lot of yada, yada, crisis inherited, we will stand firm, talk. CAFE standard to go to 35 MPG by 2020 (yawn).

  50. 50
    BirdsofpreyRcool Says:

    kyleandy – is your home equity loan fixed? or, does it float with LIBOR (or something). You are thinking about interest-rate arb, as you know. Just what the banks try to do.

  51. 51
    BirdsofpreyRcool Says:

    z – thanks.

    2020? wow.

  52. 52
    zman Says:

    Yep, so we stand firm in conserving energy but its Biden’s (or someone else’s) problem in the end.

  53. 53
    kyleandy Says:

    bop- short term = 2-5 yrs maybe closed end fund ok, but don;t think theres any short term ones. maybe those HK notes u mentioned last wk

  54. 54
    zman Says:

    ZTRADE: $10KP

    BTU – Added (2) BTU Feb $25 Calls (BTUBY) for $2.10. A bit risky in front of earnings tomorrow but coal prices have held up quite a bit better than other commodities while the producers have been punished with falling natural gas prices.

  55. 55
    kyleandy Says:

    bop prime + 3/4

  56. 56
    BirdsofpreyRcool Says:

    kyleandy – 2-5 yrs gives us some room to play with. Thanks. I was afraid you meant 2-5 months.

    If that is your timeline, I think there are some great fixed income opportunities out there. If you pick the sectors you are comfortable with (like energy), I’ll chase down some bond suggestions for you.

  57. 57
    BirdsofpreyRcool Says:

    kyleandy – i see the Prime Index is currently at 3.25%… down from 8.25% in Sept 2007. So, makes sense to try to find bonds that yield 8.5% or better, to give you a bit of a cushion. You don’t have to reach down too far on the risk spectrum these days to get that sort of yield on an individual bond. So, can look for stuff that is low investment-grade and high junk rated. That’s a good place to start.

  58. 58
    zman Says:

    ZTRADE: $10KP

    Added (3) SU Feb $22.50 Calls (SXHBX) for $1 with the stock up $1 and oil nosing over $48.25. Earnings are behind us and this is essentially a manufacturing story. We have their outlook on volumes and costs and there is room for upside do to cost improvement. The stock would seem to be discounting lower prices than the 12 month strip ($52+) would suggest so until it comes into more of a parity with current forward prices I plan to more actively trade the name.

  59. 59
    BirdsofpreyRcool Says:

    Trading Desk reiterates that there is no preferred direction today…. As we go into the lunchtime-selloff.

  60. 60
    zman Says:

    BOP – how broken are the CPE bonds?

  61. 61
    BirdsofpreyRcool Says:

    z – the CPE 9 3/4s due 12/10 are pretty busted. I don’t have a current mrkt quote on them (I don’t think they trade institutional very often), but TRACE is showing a $52 trade on 1/22. That’s a 51.21% yield. At that point, I’d rather just buy the stock, if you think the company’s current cap structure survives.

  62. 62
    BirdsofpreyRcool Says:

    running out for a bit…

  63. 63
    zman Says:

    Thanks BOP, am thinking they LBO.

  64. 64
    zman Says:

    Obama and the EPA:


  65. 65
    reefguy Says:

    CPE- bulk of bonds owned by single entitiy, so they do not trade well. I think CPE does a stock merger, eith the Bonds being traded for equity.

  66. 66
    zman Says:

    Thanks Reef.

    Stocks look stalled waiting for lunch to end.

  67. 67
    zman Says:

    Oil just gave up all the day’s gains. Very fickle market.

  68. 68
    elduque Says:

    Why doesn’t one of the majors go after something like CHK or SU for that matter. They all have declining reserves and it would be cheap for them to replace. I know it is somewhat an obvious question, but why not.

  69. 69
    zman Says:

    El-d. It’s less risky to buy back your stock and wait for them to fall more. I think it will happen but the last deal was COP for BR (of that size) and while I think it was a good deal for COP it took some risky thinking. The Majors all like going international more (bigger exploration targets, cheaper licenses/acreage. I think SU is a great idea for XOM and CHK would be a great add for someone smaller, like an APC but they are too leveraged to pull that off. Perhaps APA or DVN does it. Right now though, with the financial markets in disarray, nobody wants to go out on a limb despite the low valuation placed on the booked and especially on the potential reserves of these shale names.

  70. 70
    Popeye Says:

    Tax dollars at work:

    “Beleaguered Citigroup is upgrading its mile-high club with a brand-new $50 million corporate jet – only this time, it’s the taxpayers who are getting screwed.”

  71. 71
    zman Says:

    Popeye – that’s worse than Thains new and now empty $1.2 mm office. Sheesh.

    another big storm for New England, January turned out to be a lot colder than originally forecast. Most of the big forecasters were look for a cold December, mild January, bitterly cold February. I have not seen whether the February weather forecast is still intact.

  72. 72
    zman Says:

    Farmers Almanac still sees colder than normal February:


  73. 73
    BirdsofpreyRcool Says:

    reef – good catch on those CPE bonds. Over 60% owned by Franklin. I’ve been in bond negotiations with Franklin… if CPE wants to do a debt-for-equity swap, they have a tiger by the tail with that firm.

    Tough to see how CPE could LBO, with debt trading in the 50s. But, with an exploration company, anything can happen.

  74. 74
    zman Says:

    BOP – I was thinking they sell Entrada to do it. They’ve been private, public, private, public … just stands to reason.

  75. 75
    BirdsofpreyRcool Says:

    I wonder how much McKinsey thinks it would cost to keep earthquakes from happening too. The earth has been in a warming cycle since the early 1800s… long before Arnold drove a Hummer. I’m all for “pollution control”… but….

    Global Warming Can Be Contained for $263 Billion, McKinsey Says
    2009-01-26 18:20:50.756 GMT

    By Alex Morales
    Jan. 26 (Bloomberg) — The world can keep global warming in check if nations ramp up spending on energy efficiency, clean power and forestry projects to at least 200 billion euros ($263 billion) a year by 2030, McKinsey and Co. said.
    The investment is needed to ensure that global temperatures don’t rise by more than 2 degrees Celsius (3.6 degrees Fahrenheit) since industrialization, McKinsey said today in “Pathways to a Low-Carbon Economy.” Beyond that threshold, nations including European Union members say global warming will become dangerous.
    Delegates from 190 nations aim to craft a treaty to fight climate change in December in Copenhagen. Global action covering all sectors of the economy will be needed to contain rising temperatures, New York-based McKinsey said in the 192-page report.
    “Without focused and coordinated action, it is unlikely that even the most economically beneficial options will reach their full potential,” Tomas Naucler, leader of the consultant group’s Climate Change Special Initiative, said in an e-mailed statement.
    Forty-seven billion tons of the 70 billion tons of greenhouse gases projected to be emitted in 2030 could be cut if governments take immediate action, McKinsey said. The annual cost by 2030 may be less than 1 percent of the global economy — or from 200 billion euros to 350 billion euros, it said.
    Fourteen billion tons of greenhouse gases could be cut by making buildings, vehicles and factory equipment more energy efficient, the study said. Twelve billion tons could be slashed by investing in wind, nuclear and hydropower as well as technology to pump carbon emissions for storage underground and biofuels.
    McKinsey also said a further 12 billion tons of emissions could be removed by stopping tropical deforestation and improving agricultural practices.

  76. 76
    BirdsofpreyRcool Says:

    z – that’s kinda what i mean by “anything can happen with an E&P.” If they could sell an asset Entrada for more than $275mm, then I guess they could take the company private. What do you think that asset is worth?

  77. 77
    BirdsofpreyRcool Says:

    (sorry, bad syntax… one eye on the mrkt, the other on my typing)

  78. 78
    zman Says:

    Re 75. I believe there is a lot of ego out there that says we can change it if we pay enough. Huge cycles with some pretty hard to control carbon emitters like volcanoes and oceans.

    BOP – not that much in this environment.

  79. 79
    BirdsofpreyRcool Says:

    z – good point. Just think how annoying it would be to have spent $263 billion… only to have Montserrat or Krakatoa erupt. Would undo all that work, in a single day.

  80. 80
    zman Says:

    …right and that’s $263 per year.

  81. 81
    BirdsofpreyRcool Says:

    … guess McKinsey is setting up a new practise: the Global Warming Group. Lots of consultants needed to “ensure that global temperatures don’t rise by more than 2 degrees Celsius (3.6 degrees Fahrenheit).”

    “ensure”??? Back in the last 60s, we were worried about a new Ice Age coming on. Sorry. But, what a CROCK.

  82. 82
    Sambone Says:

    1:43 (Dow Jones) Nymex crude slips into negative territory as the commodity
    and stock markets pare earlier gains, traders say. Crude surged to an intraday
    high of $48.59/bbl but the rally started to settle back down along with grains
    and gold prices, likely triggering some further selling once it fell below
    $47/bbl, says Tom Bentz at BNP Paribas. But momentum remains with the upside,
    with support holding at $45.50/bbl, says GA Global’s Tony Rosado. Nymex March
    crude recently down 35c at $46.12/bbl. (HYL)

  83. 83
    zman Says:

    XLF in the red, most energy still green, oil off a dime to 30 cents, pretty quiet trading, equity markets trying to decide what to do post lunch.

  84. 84
    BirdsofpreyRcool Says:

    watch GS for a mrkt indicator. that’s what a lot of traders watch these days.

  85. 85
    Sambone Says:

    Off subject

    Ya know if I lost my trust fund to Madoff, I think I would do a bit more than these Palm Beach wimps!


  86. 86
    zman Says:

    Apparently not a lot of people by the BP for CHK rumor. CHK up 1.8% now.

  87. 87
    apbd Says:

    One bright spot from the current economic situation: WSJ reports that several large law firms are closing their doors and many others are laying off. There’s always a bright spot if you look for it.

  88. 88
    BirdsofpreyRcool Says:

    seems the sell-off is due to comments about TARP money being used to bail out the consumer… not sure what the actualy details are… but the fear seems to be that TARP money will not be going to the banks and to the consumer instead caused stocks to sell off.

  89. 89
    BirdsofpreyRcool Says:

    that’s why the financials dropped out of bed suddenly… and dragged oil and the mrkt with it.

  90. 90
    zman Says:

    Oh to live in a world where government doesn’t feel the need to stand up in front of cameras every 15 minutes. Think how much we’d save on cosmetics for congress.

  91. 91
    Sambone Says:

    By Steve Gelsi

    U.S. energy stocks held on to some of the gains from earlier in the session
    Monday, with shares of oil service giant Halliburton providing a lift after its
    profit update.
    The sector fell back from highs during the session as a broad rally cooled
    The Amex Oil Index (XOI) rose 3.1% to 964, led by a gain of 7% for Total SA
    (TOT), Sunoco (SUN) rose about 5% and Hess Corp. (HES) rose about 4%.
    The Amex Natural Gas Index (XNG) rose 1.7% to 379. Chesapeake Energy Corp.
    (CHK) rose about 3% and Noble Energy (NBL) gained about 5%.
    The Philadelphia Oil Service Index (OSXX) rose 3% to 129, led by a rise of 9%
    from Noble Corp. (NE).
    Halliburton (HAL) rose 3% to $18.78 as it put a years-long bribery
    investigation into its former Kellogg Brown & Root unit behind it with a $383
    million settlement. Halliburton also beat Wall Street’s earnings targets.
    Weatherford (WFT) dipped 1% to $10.73 after it managed to post a 5% increase
    in fourth-quarter net income despite losses throughout the sector.
    Crude prices fell 82 cents to $47.55.
    Investors waded into petroleum shares after a positive Barron’s article about
    integrated oil giants presenting a buying opportunity.
    Barron’s singled out Exxon Mobil (XOM) as the most likely for a dividend
    increase because of its rich cash position. Shares of Exxon Mobil rose 1% to
    -Steve Gelsi
    Dow Jones Newswires
    01-26-09 1351ET

  92. 92
    zman Says:

    rally time.

  93. 93
    tater Says:

    Couple names seem to be concerned with filling their opening gaps. RIG being one of them and DBA is another (we put our food in our gas tank now, so it’s an energy name).

  94. 94
    elduque Says:

    CHK moving now.

  95. 95
    BigJim Says:


    Rig hit resistance today at 57 and could not bust. OIH hit 81 and could not break. Wondering about March 55 puts on Rig. Any thoughts.

  96. 96
    zman Says:

    Big Jim – I’d pick something else, RIG is too secure their earnings for 2009 and 2010 for me to short them. Maybe BHI or BJS or one of the land drillers, beaten down as they are. But I’d not do RIG with puts unless you are just talking a short term technical trade. If that’s the case then sure, it has better spreads than the OIH usually.

    Re CHK – yep, funny delayed reaction. I still don’t believe a deal happens there but if it did it would send other names, especially names like HK, GDP, GMXR, higher briefly.

  97. 97
    zman Says:

    El – D – that’s not to say I don’t think CHK is a huge bargain down here. I do indeed and I own the common now. Just don’t trust rumors like this that have proved false in the past and still seem unlikely and only convenient.

  98. 98
    BigJim Says:

    Thanks Zman

  99. 99
    elduque Says:

    No I don’t think that Aubrey would want to sell now. He doesn’t own enough the company. Besides I agree that it is cheap. That is why I wondered how the majors can be so stupid in not accumulating at least some of the smaller players.

  100. 100
    ram Says:

    ZMAN – TSO’s strength is due to shutting down refinery’s only?

  101. 101
    BirdsofpreyRcool Says:

    ram – Z-berry says he’s on a call… will get back to you shortly.

  102. 102
    Dman Says:

    tater – regarding DBA & DBB, i.e. food energy and energy-congealed-as-metal, for energy blog purposes 🙂

    I just saw today that they have options. Last time I looked I didn’t see any.

    #79 If Krakatoa erupts, the particles spewed up into the atmosphere will cause global dimming & hence cooling as happened last time it erupted. So it would actually delay global warming by several years. The more practical engineering solutions to global warming involve emulating that, by blasting particulate matter (hopefully non-toxic) aloft to create an artificial dimming & hence cooling. The practicality of this was inadvertently demonstrated in the 3 days after 9/11, when the absence of contrails over the US led to a warming of about 1 degree (from memory).

    These engineering solutions are discussed on the quiet in the scientific community, because it is hoped instead to get a solution by CO2 reduction and obviously that is politically difficult at a national, let alone global level. If the engineering solutions were seen as a real alternative, getting agreement on the far more costly CO2 reduction approach would be impossible.

    So if it is cheaper & easier & more likely to actually be carried out, why don’t scientists come out & put the engineering approach front and center? Because it would mess with the climate at a regional level in ways that are probably impossible to predict (eg the Indian monsoon might vanish, leaving a billion people to starve). So whilst it would get the cooling job done, the risks are huge & so it is seen as a last resort to be discussed only if CO2 reduction fails.

    Personally, I cannot envisage the CO2 reduction ever being done quickly enough, so I think that the engineering approach should be given more weight. There have been proposals to do limited trials in the polar regions, to gain experience and data that could inform a broader approach.

    As for the science of global warming itself, I have seen enough of it to be convinced that the atmospheric physicists know what they are doing. The simplistic portrayal of the issue in the media bears no resemblance to the depth and quality of the scientific work. The evidence has been accumulating for decades and it only ever goes in one direction: more warming & greater certainty that human CO2 is responsible. In the scientific community, this issue is, frankly, settled. There is no serious dispute about this in scientific circles, contrary to what the media portrays.

    As I have mentioned previously here, the real dispute is about what to do about it. I personally think the engineering approach should be pursued because I don’t believe the CO2 reduction approach will work: it is technically feasible but politically implausible if one looks at human history. Maybe I’m a pessimist but I would prefer to say a realist.

  103. 103
    zman Says:

    Ram – apologies for delay.

    I think it is rallying on small float,

    short covering:

    and the fact that some West Coast refining (not their’s is offline longer than expected). All regions saw cracks fall last week except for the West Coast which was flat. I picked them last week as one that had run too far too fast off the lows but it still wants to run.

    VLO reports Friday and if they don’t rally on that I’ll punt the TSO and try again higher.

  104. 104
    zman Says:

    Thanks BOP for relaying.

  105. 105
    BirdsofpreyRcool Says:

    Dman – I appreciate reading your thoughts and engineering perspective. Wonderful, intellectual stuff. However, I do beg to differ with you on one statement; while the presence of man (and especially heat sinks, like concrete cities) do contribute to local temperature differences (warming), it is far from settled in the scientific community as to whether man-mad actions are driving global temperatures systematically higher. Or, is it just part of the geologic cycle. The cycle that — at times — has been so warm as to make practically the entire planet one warm, shallow sea. (which is why we find hydrocarbons in the Bakken in the middle of North Dakota, by the way.)

    At one point, scientists all agreed that the earth traveled around the sun too. Scientific conclusion by “consensus agreement” is not a convincing argument. At least to someone who spent a large part of their life at a scientific research institute. One person’s opinion only, of course.

  106. 106
    BirdsofpreyRcool Says:

    ha! “hoist with my own petard”… at one point scientists agreed that the Sun traveled around the Earth. oops, my bad.

  107. 107
    zman Says:

    Dman. Wow. I thought global dimming was a function of those falling SAT scores. Anyway, I thought I heard that volcanoes, not the exploding kind but just the boiling and bubbling kind, gave off significant carbon emissions or green house gases. That and cows.

  108. 108
    BirdsofpreyRcool Says:

    The volatility in the mrkt today is just too distracting. From green to red to green to red… like being stuck on the 405 on a Friday afternoon in front of a traffic signal!

  109. 109
    BirdsofpreyRcool Says:

    z – re: BTU. Is that one of those chart shapes that you used to have to look for in your prior life as a grunt?

  110. 110
    zman Says:

    Despite my doubts, feels like a sucker move not to own a little CHK call action into the close, just in case. I’m usually in anyway and I do think it about as cheap as its going to be for awhile, especially since they will have fewer write downs than their peers and will likely be to reduce their F&D costs and will again talk up the 20 Tcfe reserve report coming at the end of 2009.

    Dman – Did you see Norway is going to sink quite a bit of cash into carbon sequestration in spent gas fields under the North Sea? I would imagine there is going to be a lot of money spent in the next 4 years on this kind of thing.

  111. 111
    zman Says:

    Aye BOP, tis a scoop chart.

  112. 112
    BirdsofpreyRcool Says:

    BTU chart looks like the HK chart about 6 days ago.

  113. 113
    Dman Says:

    Z – yes, no doubt volcanic eruptions (or just bubbling) cause long-term warming by releasing greenhouse gasses. The dimming effect due to particulate matter is temporary (lasts years to decades) in the case of an eruption. But humans could decide to keep sending stuff up there, without the nasty greenhouse gasses that you get with an eruption. I’m not saying it’s a wonderful idea, just that it may become necessary.

  114. 114
    zman Says:

    WLL offering 8 mm shares. They should highlight Bakken stuff on the road show that may have favorable impacts on EOG, CLR, HES, BEXP, maybe even KOG. I don’t recall the last time some did a secondary so it will be pretty interesting to see how it gets priced. Especially a deal this large as they only have 42 mm shares out now.

  115. 115
    Bob Says:

    Z, Re 103. FYI: Valero website confirms earnings release BMO tomorrow with cc at 10 CT

  116. 116
    zman Says:

    Bob thanks. Damn, I botched that date on my spread sheet. Guess I won’t have to wait as long to see how TSO is going to react.

  117. 117
    cargocult Says:

    Not to be a nit picker but scientists never concluded that the sun revolved around the earth. It was religious leaders, paying strict attention to the bible, who believed this, and it was early scientists (Copernicus) who disproved it.

  118. 118
    zman Says:

    Dman – who do you think has the best sequestration technology? I know SLB has a group that’s on it, and I was thinking maybe someone like FLR could be involved as well.

  119. 119
    tater Says:

    Speaking of volcanos, doesn’t Denburry own one? Seriously, I thought they own an old volcano that they pump CO2 into.

  120. 120
    Dman Says:

    BOP – as you know, science does not operate by consensus. It operates by some ideas turning out to be right (or at least approximately right) and others turning out to be, well, wrong. The tricky part is that there has to be an accepted mode of everyone agreeing when something has been found to be wrong. In most areas of physics, this is straightforward enough. Atmospheric physics is no different … or at least it wasn’t until it began to have political implications and suddenly certain companies (XOM) started to funnel money to anyone willing to stand up and dispute things that really had no business being disputed. In other words, to muddy waters that would otherwise have been perfectly clear. So the usual scientific process has been messed with & this makes sensible discussion of the issue rather difficult.

    For example, politicians simply won’t believe extremely dire forecasts. So the UN panels have been forced to quote moderate forecasts that they can give with extremely high certainly that the forecast does not overstate the problem. But in reality, the forecasts the scientists think are more realistic (but are slightly less certain of) are far more dire.

    This is why, as soon as each UN report released, the observed climate shifts (ice break-up in polar regions etc) are immediately found to be worse than predicted. It is because the predictions had to be watered down for political reasons. In turn, this is why climate scientists are becoming desperate about the problem.

  121. 121
    cargocult Says:

    Not on subject but I need your option take. RWT is trading at 12.96, up 8% for the day. A Feb 12.50 Call can be sold for 1.60. A buy/Write at 13/1.60 gives you a net buy at 11.40. If the shares are called away at 12.50 in Feb this gives an 8.5% for the month. Is the market saying the shares are overpriced or underpriced?

  122. 122
    zman Says:

    Anybody have the latest breakdown on the stimulus plan? I’m seeing some strange multi-hundred million dollar projects in there. Is it assumed that everybody that gets a job from the stimulus project will like using a shovel or power tools?

    Tater – they source CO2 from the remnants of a Mississippi volcano yes. They use the CO2 to increase recovery from oil fields (CO2 or tertiary flood). SD sells their CO2 for the same purpose.

  123. 123
    BirdsofpreyRcool Says:

    cargo – much of science, as it has evolved, came through the research, observation, and experimentation by men associated with the church. Frankly, those men were the only ones who were educated, well-fed enough, with spare time and access to books to think, observe, and function in the role of “scientists” for a long period of time (basically, the Dark Ages).

    Doesn’t mean their work was right. But doesn’t mean that all scientific work by religious leaders was wrong, either. Think: Gregor Mendel, as a more modern day example.

  124. 124
    zman Says:

    back in 30 minutes

  125. 125
    Dman Says:

    Z – #118 No idea off the top of my head. But I wonder if the key technology is not so much in getting the stuff down a hole but in being able to say that it will stay there … i.e. geological analysis, which would be where SLB has a lot of expertise.

    WLL secondary %^&#* !!!!
    I noticed it was up nicely but did I sell??? Doh!!

  126. 126
    BirdsofpreyRcool Says:

    Dman – I have absolutely no doubt the earth’s climate is changing. It always has, it always will. I am skeptical about two things: 1) how much is “man-made” and 2) whether it’s man-influenced or not, how much can we really change the cycle we are on.

    With billions and billions and billions of dollars at stake (that could be spent elsewhere), what are we really doing? And what can we really do?

    Purely personal, but i trust nothing that comes out of a U.N. deliberation. It is to the benefit of the poor countries (who are in the majority) to precipitate massive spending by rich countries to fight “global warming.”

  127. 127
    cargocult Says:

    Good point.

  128. 128
    zman Says:

    Cargo – I don’t really look at the market saying the stock is under or over valued based on options prices. This one has high volatility and a large yield, I assume paid monthly or quarterly as it’s a REIT. I’m don’t write a lot of calls to reduce principal cost on high yielding vehicles but would want to know when the distribution date is the stock in theory will fall by the amount of the distribution on the date it is paid. If you forced me to look at it from an over or under priced way, I’d have to say that the market thinks it is under-priced and that the IV (and I don’t know what the IV was historically) is jacked up now to reflect some sort of recent change in the expectation that this will continue. Again, without know what’s going on here but having eyeballed the chart and the volume spike from a secondary (suddenly people are able to raise money via the equity markets? hmmm. That’s all probably clear as mud, again, not my area, seems the options are saying its underpriced for what that’s worth.

  129. 129
    Dman Says:

    BOP – the leading role in climate research has been played overwhelmingly by Western scientists and US scientists in particular. Not that there aren’t good scientists in the third world, but realistically most of the technological and scientific firepower comes from the West and a lot of it (perhaps most of it) from the US. This science is published in scientific journals that the UN plays no role in.

    The UN panel is really just supposed to collate the most up-to-date findings and summarize them, but of course various political agendas come into play. So I don’t put much store in the UN panels either. I’d rather just listen to NASA or the leading science journals.

    Z – yep the cows are a big problem too. One day HK will have a pipe running to each individual cow 🙂

  130. 130
    jy Says:

    Tater RE#119
    Denbury is getting CO2 from the Jackson Dome in Mississippi which was the site of a volcano in the Cretaceous. Radiometric dating of the volcanic rocks yield an age of 69-79 million years. The heat cooked most of the hydrocarbons and left a large volume of CO2 behind. Denbury is using same to enhance oil recovery in old fields.

  131. 131
    BirdsofpreyRcool Says:

    Dman – yeah…NASA… James Hansen. He was assisting the leading cheerleader for The Ice Age Cometh in the 1970s, too. Funny how much grant money comes your way when you can get people really riled up.

  132. 132
    Dman Says:

    BOP – according to Wikipedia, Hansen coauthored reports warning of global warming in 1981. Those reports wouldn’t have been written overnight. So it seems to me that at the latest he must have been investigating the CO2 issue in the late ‘1970s, at which time he was in his late thirties.

    You say that he was “assisting” someone who was a proponent of a “new ice age” theory. Some points:

    1. If every junior scientist was held accountable for the crimes and misdemeanors of their supervisors, we would never get anywhere. The whole point is that the younger folk are supposed to develop new theories. The fact that those theories differ from those of their elders is a good thing.

    2. I don’t know much about the ice-age theories, but I do know that the 1970s were very much the dark ages in terms of satellite data, assorted automated terrestrial data systems, computing power for climate models and ….on and on and on.

    3. I have seen evidence that the early stages of global warming were masked in the data by increasing airborn particulate pollution (the global dimming thing again). As western countries cleaned up their air (circa the 1970s), the masking of the CO2 effect was reduced. Nowadays, the vast pollution in Asia causes measurable dimming and so is again masking CO2 effects.

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