Tuesday Morning – Price Deck Check, HK Operations Update Plus A Few Other Items

Posted on by zman

 


In Today's Post

  1. Holdings Watch
  2. Commodity Watch
  3. Commodity Price Estimate Update - Analysts inching numbers lower.
  4. Earnings Watch
  5. Crack Spread Update
  6. Stuff We Care About Today - BEXP, HK
  7. Odds & Ends

Holdings Watch - The Wiki tab is updated.

  • FSLR - (1) FSLR Feb $150 Call (HJQBJ) for $5.50 with the stock at $140. Just repositioning a little closer to the current price and thinking it will run again when we get the next bear market rally this week.

Commodity Watch

Crude oil fell $1.60 to close the day at $40.08 yesterday as gloom and doom for the economy along with a growing sense of what will the government do for me to me next combined to hold the equity and commodity markets in check. This morning oil is falling through the $40 mark.

  • Refining Strike Watch: The U.S. refinery workers strike continues to be delayed pending the outcome of talks. BP said it was encouraged this morning.
  • North Korea Watch: North Korea appears to preparing a new test of its 9,300 mile range Taepodong II missile which can reach Japan, China and even Alaska. Kim Jong Il is rumored to have had a stroke last year but remains a dangerous little nutbag and likely sees the current economic distress of the globe as a good time to get something he wants. Last time he shot missiles into the sea of Japan oil prices spiked on fear of a regional conflict. Intelligence experts think he may be a month or two from another such launch.

Natural gas rallied on the back of last week's cold weather climbing $0.14 to close at $4.56. Before you get excited notice how much nicer it is outside this week. This morning gas is trading up a couple of pennies.

  • Imports: 9 Bcfgpd, down 1.2 Bcfgpd from last year and down 0.7 Bcfgpd from last week.
    • LNG backed off to 0.9 Bcfgpd last week from 1.3 Bcfgpd in the prior week. I said this bears watching and I continue to think we should watch LNG to make sure there isn't a big resurgence in supplies but given pricing, gas would truely have to be homeless to make its way to the U.S.
    • Canadian volumes continue to hold well below year ago levels at 8.1 Bcfgpd. Probably a function of higher domestic consumption due to the cold and a second year of lower rig counts coming into play via lower domestic production from the Western Canadian Sedimentary Basin. I think Canadian imports will continue to lag in 2009.
  • Rig Count Watch: Patterson (PTEN) Rig Count Does Cliff Diver Impression. January rigs running in the U.S. fell to 147 from 201 in December.  No breakout is given for oil vs gas but these are mostly gas rigs.

Commodity Price Estimate Update: Analysts are getting closer to reality on oil, slipping a little further away on natural gas versus their positioning relative to the 12 month strip from one month ago.

  • On oil analysts have brought down their 2009 median price estimate to $58.44 from $62.50 a month ago. Note that the forecast is back end loaded, much like the Strip. This will lead to fewer price related earnings misses in the first half of the year but also assumes an economic recovery takes hold sometime in the second half of 2009 which is discounted in advance by the oil markets.
  • For gas, the estimate has fallen to $6.21 per Mcf verus $7.38 a month ago (this level feels much more "doable"). Same close matching of Consensus to Strip pricing. Note the dip in 2Q ... everyone is scared of the 2009 Spring shoulder season. Could get very ugly for gas prices for a month or so.

 

Earnings Watch:

  • APC Reports Solid 4Q08 Results. I don't own it but I plan to listen to the call today at 10 am EST.
  • Tomorrow: PXD reports after the close today, ATW, NOV, DVN and SUN report sometime tomorrow.

Crack Spread Update

ZComment: Refining margins fell last week despite the at the time looming refining strike which inflated gasoline and heating oil prices with threat that some 60% of U.S. refining capacity might be shuttered indefinitely. That looks less likely now and given bloated inventories I expect margins to erode further this Spring unless the U.S. consumer goes into spending/driving mode, something that the economy and the weather have had a hand in inhibiting over the last couple of months. I remain a put holder, to my shagrin, in TSO and may add closer to the current price strike puts there tomorrow if the demand data does not improve.

 

Stuff We Care About Today

Credit Suisse Energy Summit: BTU there today, who else? Will try  to get a schedule.

BEXP Announces Their Best Bakken Well To Date

  • Nice well, Olson 10-15 #1H; IP of 1,200 bopd and 1.4 MMcfgpd (8,600 Mcfepd gross or 6,900 Mcfepd net)
  • west of Neeson Anticline but still in North Dakota (Williams county) 
  • long lateral with 20 frac stages, set between two previously drilled lower producers (200 bopd), they're thinking better completion here is the trick.
  • they have 105,000 acres in the vicinity (sets up 164 locations assuming two wells per two sections (two square miles)
  • they have 3 more wells to complete here but are awaiting further service price decline (pressure pumping for the fracs)

HK Provides 4Q08 Operations Update & 2008 Reserve Metrics

  • Production Comments: Mostly unchanged from last press release
    • 361 MMcfepd up 15% from 3Q and 52% YoY, this was in the middle of the guidance range for the quarter. The only thing new to note is that they noted they achieved this despite "some" shut ins due to low prices in the Fayetteville Shale as basis differentials there widened due to constrained takeaway capacity (since resolved by the completion fo the Boardwalk pipeline)
    • 2008: exited at approximately 400 MMcfepd. Nothing new here. Note that held flat, they achieve their 25 to 35% growth target for the year.
  • Reserves:
    • 1.42 Tcfe, up 34% (Netherland Sewell reserve engineers so you've got a good, conservative handle on reserves here). Recent guidance here was 1.35 to 1.40 Tcfe.
    • Only 11% of proved reserves are from the Haynesville meaning they have a long way to go here
    • Reserve Replacement of 419% - that will be above average this quarter and above their last thought of 300%
    • F&D: 4Q spending not given so its a bit early to get a drill bit only F&D rate. The "all in" number will be high this year given the land grab in the Haynesville in the first half of 2008.
  • Operations Update:

    • Haynesville Shale:
      • 4 New wells completed: Average IP of 17.7 MMcfepd
      • 2 others completed with mechanical issues (this is deep, hot, high pressure stuff): IP of 5.4 and 11.1 MMcfepd.
      • Current Production: 160 MMcfepd gross with 16 wells on:
        • 11 wells averaged 15.2 MMcfepd over their first 30 days of production
        • 8 wells averaged 13.2 MMcfepd over 60 days
        • and the 4 wells they had on over 90 days so far have seen average production during that 3 months of 8.8 MMcfepd. 
        • So you can see the impact of an 80% harmonic decline in the first quarter of a well's life comes out to something like cutting the initial production rate in half over the period. 
        • The will be conducting a pilot program using a smaller choke size to see if that impacts recoverable reserves so we may see less of the big wells for a time going forward.
      • Current Well Methodology
        • Laterals of 4,300 to 4,600'
        • up to 15 frac stages (at about $350,000 a pop)
        • These are probably $8.5 to $9.0 mm wells
        • 75 days spud to spud
        • 12 rig program (unchanged from prior guidance)  which allows for 75 to 80 wells here this year (about 6 per month.
  • Fayetteville Shale
    • Gross operated production: 145 MMcfepd at YE08 (yes, it got passed up by the H.S.)
    • lateral lengths and frac stages per well inched up all year long ...
    • ... as did initial production from 1.919 MMcfepd in 1Q08 to 2.456 by 4Q08.
    • No mention of rig count for 2009, I'd guess it may be under review for a reduction
  • Eagle Ford Shale
    • 2nd well completed with an IP of 8.3 MMcfepd on a 4,300 foot lateral with 12 frac stages
    • the first well saw a higher IP (9.1 mm/d) with a shorter lateral (3,200 foot) so this may be a bit of a disappointment.
    • a third well is expected to be completed by mid February so we may see a rate there on the Feb 25 conference call.
    • 1 rig program and 50 days from spud to completion means we will likely see 6 wells here this year in this 100,000+ acre developing play.
  • In a nutshell: Good operations update, good reserve growth, nothing of world-beater status in here beyond what we already know, no further guidance given, if it pops on this I'll likely punt my February calls and take a wait and see approach with a small trade here and there based on market whimsy. Not sure what new they will have to talk about on their call on the 25th as this kind of steals the show and I have a suspicion that they may be thinking its time to get the stock up a little to do a secondary. I'll add this to the HK notes page on the Reports tab.

 

Odds & Ends

  • Analyst Watch: Argus cuts its target on (XOM) from $95 to $90. Argus also cuts its target on (FSLR) from $229 to $209.

140 thoughts on “Tuesday Morning – Price Deck Check, HK Operations Update Plus A Few Other Items”

  1. By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude oil futures inched higher in Europe Tuesday, but
    failed to gather momentum as the market retained its focus on shrinking demand
    amid widespread economic slowdown.
    Crude prices traded near the bottom of their recent trading ranges as the
    prospect of shriveling demand continued to damp buying interest. But Nymex
    crude futures managed to hold above the psychologically important $40 a barrel
    level, with a backdrop of Organization of Petroleum Exporting Countries output
    cuts sufficient to deter protracted selling, and keep prices rangebound.
    “The story’s not changed – we get to $40 it’s a bit too cheap, speculators are
    going to buy it. If it gets to $50, people stop buying it, there’s not enough
    demand for $50 oil,” a London-based crude broker said. “The fundamental issue
    remains the economy, that’s stopping the price going up.”
    At 1148 GMT, the front-month March Brent contract on London’s ICE futures
    exchange was up 31 cents at $44.13 a barrel.
    The front-month March light, sweet, crude contract on the New York Mercantile
    Exchange was trading 2 cents higher at $40.10 a barrel.
    The ICE’s gasoil contract for February delivery was down $4.75 at $424.25 a
    metric ton, while Nymex gasoline for March delivery was unchanged at 114.92
    cents a gallon.
    Crude’s resistance to moves higher comes despite OPEC’s combined 4.2 million
    barrels a day of output cuts unveiled since last September. However, the
    group’s attempt to help prices higher has been largely thwarted by brimming oil
    stockpiles, particularly in the U.S.
    Iran’s OPEC governor said late Monday that a continued rise in global oil
    inventories amid declining crude demand could warrant further production cuts
    by producers.
    “When you see the (oil) stocks building rapidly it means there is a surplus in
    the market that needs to be balanced,” Mohammad Ali Khatibi told Dow Jones
    Newswires by telephone.
    Latest U.S. oil inventory data is due first from the American Petroleum
    Institute at 2130 GMT Tuesday, followed by weekly data from the U.S. Department
    of Energy Wednesday. Initial analysts’ estimates suggest crude oil stocks rose
    again last week, a development that could pile more pressure on Nymex crude
    prices in particular.
    Aside from inventory data, economic news is likely to help set the agenda for
    oil prices with U.S. non-farm payrolls and unemployment data due Friday
    expected to be particularly closely watched.
    “If we see another big increase (in unemployment), it won’t be possible for
    oil prices to increase. The focus is still on oil demand and especially fears
    that oil demand will decrease further,” said Sintje Diek, analyst at HSH
    Nordbank in Hamburg.
    Revealing earnings Tuesday, BP PLC (BP) Chief Executive Tony Hayward said oil
    demand will continue to fall in 2009 as the global economy continues to slow.
    The company Tuesday posted a 42.5% fall in adjusted net profit for the fourth
    quarter after shrinking demand in the slowing global economy caused oil prices
    to slump. It said full-year profit was $21.2 billion compared to $20.8 billion
    a year earlier.

    -By Nick Heath, Dow Jones Newswires (James Herron in London contributed to this item.)

    Dow Jones Newswires
    02-03-09 0712ET

  2. NEW YORK (Dow Jones)–The national average retail price of regular gasoline
    rose 5.4 cents to $1.892 a gallon in the week ended Monday, the Energy
    Information Administration said.
    The price is the highest since Nov. 24, when gasoline prices were at the same
    level.
    Prices have gained in four of five weeks this year, by a total of 17.3%, or
    27.9 cents a gallon. Gasoline is now $1.086 a gallon, or 36.5%, below a year
    ago.
    Gasoline prices had begun rising as refiners cut output on poor profit margins
    as gasoline prices haven’t kept pace with crude oil prices, which have swung
    broadly amid weak demand.
    Prices rose in all regions and posted the biggest gains on the Gulf Coast.
    AAA Daily Fuel Gauge Report said Monday that gasoline prices averaged $1.880 a
    gallon nationwide, up 1.3 cents from Sunday and $1.099 below a year earlier.
    EIA’s gasoline price survey is collected through a telephone sampling of
    approximately 900 retail gasoline outlets.

    Region Change Vs Price
    Week Ago Per Gallon

    East Coast +6.0c $1.876
    Midwest +5.0c $1.870
    Gulf Coast +7.3c $1.802
    Rocky Mountains +6.8c $1.712
    West Coast +2.5c $2.082
    California +1.8c $2.113

    -By David Bird, Dow Jones Newswires
    Dow Jones Newswires
    02-02-09 1634ET

  4. Marathon Oil (MRO) just reported 4Q. I don’t follow them, but it looks like a huge beat on EPS on the surface.

  5. Trading Desk Colour — I kid you not… this is the advice from the Technical Trader today (back from his SuperBowl Hangover)…

    With the Super Bowl out of the way, and the Full Moon coming next Monday, the most predictable patterns matching best for today are bearish for some kind of a sell off. Almost always into lunch and sometimes on into the last hour late. A very typical Red day pattern.

    For Today: Go Short on the morning rally for a sell off through lunch and into 2:00. Look for a few points with average odds of 60/40. Be sure to tighten stops after any sell off in the morning and especially after 11:50 and 12:25. And tighten again at lunch at 1:15. Trading after 2:00 is 50/50.

    So — Basically go short the morning rally at some point, then cover around lunch and take the rest of the day off. By the way, he is serious about the “Full Moon Effect”… has a whole report on the influence of full moons. A level of detail, I will leave to him.

  6. MRO – looks like strong production growth, I don’t follow, should help a bit with the tone there and at the bigger Majors.

    APC numbers were strong as well, conference call at the top of the hour.

    The moon? Wow. I thought chicken bones, sure, but the moon? Wow.

  7. Credit Market Update — Both Investment Grade and High Yield better this morning. IG quite a lot, HY not so much. Trade continues to be, go long IG and short HY. The thesis is that defaults will tick up and send HY spreads even wider. We’re pricing in a lot of defaults already… but, is it enough? Not if the market decides to switch back into FEAR mode. The GGG is making long-term business strategic planning in the private sector very difficult.

    IG 201 bps

    HY 73 5/8

  8. z — yeah… The Moon. I questioned it myself. That’s when he offered to let me read the research. I passed.

    On the other hand, the police will tell you that crime ticks up on Full Moons… and not just the kind that requires more light at night. Go figure.

  10. Full moon? Sun spots? Tea leaves? Palm reading? Tarot cards? Ok, I’ll just continue to use my bones and rocks thrown on the dirt floor to call the market.

  12. BOP — your approach to astrology reminds me of Paul Krugman’s approach to Austrian economics. He says he doesn’t have to read it, he just knows it’s wrong. Actually, there is quite a good correlation between full moons and changes in market direction. I know it sounds crazy, but it seems to have worked over a long period of time. Not trying to defend it, just trying to keep an open mind.

  13. RE improvement in the BDI, methinks that the glass might be half full (well maybe a quarter full) rather than empty as all the media would like us to think.

  15. Re #13. Agreed. Some ships are still moving, rates went below cost of operation for a time there. The SEA ETF has been stuck in neutral while rates have been improving.

  16. Fiveanddimer – thanks. A lot of things that sound crazy work. Eventually, somebody can come up with an explanation in time. Sometimes, you just throw up your hands and say, whatever, it works. I don’t know why. But the Scientific Method starts with “observation.”

    I admit, i felt kinda silly, passing the data along. But, i don’t like to edit the message. cheers!

  17. RIO DE JANEIRO (Dow Jones)–Brazilian state-run energy giant Petroleo
    Brasileiro (PBR) notified regulators late Tuesday that it found traces of oil
    in test wells drilled at two exploration blocks in the Potiguar Basin.
    The finds were made in the onshore BT-POT-8 and POT-T-520 blocks, Brazil’s
    National Petroleum Agency said on its Web site. Petrobras holds a 100% stake in
    each block.
    Petrobras and other oil companies have enjoyed a string of successful test
    wells in the Potiguar Basin in recent months. The mature basin lies on the
    border of Rio Grande do Norte and Ceara states.
    Last week, independent explorer Partex Brasil Ltda. found traces of oil in the
    POT-T-559 block. Partex is lead operator in the block with a 50% stake, while
    Petrobras holds the remaining 50%.
    The Potiguar Basin also attracted interest from exploration companies in
    December, when the ANP held its 10th round auction of exploration and
    production concessions. The ANP received bids on 14 of the 35 Potiguar Basin
    E&P blocks up for bid at the auction.
    Petrobras partnered with Portugal’s Galp Energia SGPS (GALP.LB) to buy stakes
    in five blocks in the Potiguar Basin, while Partex and Petrobras also teamed to
    buy two blocks.
    Oil companies operating in Brazil must inform the ANP of indications of oil,
    gas or hydrocarbons in any exploratory well within 72 hours. The disclosures
    are routine, and do not indicate commercial viability.

    -By Jeff Fick, Dow Jones Newswires
    Dow Jones Newswires
    02-03-09 0928ET

  18. If we do get a rally, FSLR is back into the rally more than the rest on market strength mode. 142ish and holding. Seems to trade in big increments each way 3 or 4 days in a row.

    Thanks Sam on PBR – incredible asset value, but no one is paying attention. Say they are now planning to cut their budget this year.

  19. BOP et al. Re:#5 I worked in partnership for 3 years w/a petroleum engineer who claimed that the majority of well drilling mishaps occurred on full moon days + or – a day. Don’t know about the sample size he worked with but he thought there was a close correlation. Correlation does not = “cause”. Sounds like a great topic for a research grant. I can see the title now; “Full Moon Pertubations in Earth Tides and Their Effects on Drilling Assembly Friction and Shock Measurements”

  23. jy – good thesis topic.

    I am a big fan of “correlation does not equal cause.” Isn’t there some sort of SuperBowl rule that correlates to stock market performance? Or, the length of women’s skirts?

  24. The NFC has won the last 12 coin tosses. I’m sure you can find something else that has happened in those past 12 years… it doesn’t mean they are remotely related… complete nonsense.

  26. Back to hard, undisputable data:

    Credit Market very quiet…

    HY 73 5/8 unch’d from open, following stocks.

  27. APC doing well in the middle Miocene in Gulf of Mexico, sanctioned Caesar /Tonga, this is another tie back to Constitution spar, Heidelberg goes there too, probably sanction late 2009 (my guess)

    Gomex – Lower Tertiary – Shenandoah still drilling.

    Ghana – active, doing well.

    Marcellus – 4.5 mm/d first IP on first horizontal

    Haynesville – nothing big, a Carthage field horizontal IP of 6 mm/d

    Good opening to the call, balance sheet firmed up

    at current service costs, $5 gas held flat into the future = IRR of 10% onshore U.S. from a majority of their natural gas assets.

    $30 oil is good enough for similar return from their deepwater gomex oil projects.

  29. APC Q&A:

    — seeing frac spread recovery, ethane and propane margins now positive…

    Impact would be more stripping of liquids from the natural gas stream so maybe a little less total gas supply out there (less ethane rejection).

    probably good news for the likes of KWK as they have a high liquids cut.

    Service costs are normally slow to respond, they are working to get the service comp’s to reduce rates at a much faster pace.

  30. APC was running 60 rigs onshore US in the 4Q, now running about 40. If the big boys are cutting rigs that fast the middle guy cuts will be even deeper. The little guys, the small caps and the mom and pop operations are on the sidelines.

    Re the APC call, going very well, analysts happy. Stocks will likely trend up given a flat or up market post call.

  31. APC fielded a question on the Eagle Ford shale. They are in partnership their with TXCO. TXCO is run by Jon Schiller who was head of exploration at Ocean (under Hackett who now runs ACP). They said they have not seen what they’d call a completion quality frac there yet. Encouraged by the gas and oil shows here. Probably worth working up TXCO further as I liked what I heard back in October at IPAA as well. Talk about a scoop chart. Reef, any color you want to provide on or off site would be appreciated re TXCO.

  32. Shenandoah test in the lower Tertiary currently drilling, will swing the stock either way. Tight hole now, look for news here soon. Probably also worth a re-look as they have had better than average success in these deepwater water Gomex L. Tert wells and they are sticking with prior numbers for an economic threshhold that sound lower than I would have thought at these low oil prices.

  37. To further my comment earlier, I think the fact that people trade based on meaningless correlations rather than cause and effect can explain a lot of the random market action. The same people who trade based on the moon will draw a line between 2 points and call it a trend… yet somehow these people run the markets and we wonder why they don’t make sense.

  40. Trading Desk Thoughts — no update to the Technical Trading recommendation this morning (full moons and all). But traders personal thoughts are that unless we see the banks rally here, they are inclined to think that the rest of the mrkt will sell off to catch up with the banks. Watch GS and BAC for clues.

  41. That’s good V, get it out of your system.

    NG off 12 cents. Easy gain come, easy gain go. The main thing we’d like to see here is a flat chart for a time that moves on the Thursday storage numbers, and to a lessor extent the Friday rig counts.

  42. Obama nominates Republican for Commerce Secretary. Market seems to be reacting positively to the nod towards bipartisan thinking.

  43. z – any thoughts who has the monster well in hs?? HK had been outperforming everybody and i thot that was a good hint–but not today. maybe no monster well??/

  44. VTZ — I hear you. I am a Fundamental Investor to the core. You have to be, when you invest in high yield bonds. But I have come to appreciate that when markets don’t have a firm, fundamental direction, then traders/short-term investors look at technicals. So, I have learned to listen to them with one ear and try to hear the fundamental data with the other. In this market, I just want to make $$. If everyone is going to watch “technicals,” I’ll watch too. Ultimately, fundies trump technicals. But, that requires sanity and a sense of direction. We aren’t there yet.

  45. Kyle – Best educated guess (and I hate to throw these out because then I’ll see it in a yahoo msg board that Zman said it) but I’m hearing ECA and that maybe GMXR is one for a smaller interest. I’d say the possibility that the rumor is true went up over the last time I mentioned it but it may not be comparable to well results at say HK, due to shorter test (could be an open flow rate) as opposed to the 20/64 chokes they are using. I don’t know what Parish either to pin down who’s got acreage close by. Probably won’t know until we know. It would be good for whoever is in it though and probably a near term downer for natural gas.

  48. z – seeing a materials rally today… especially the coal kids. Any reason you can see? Other than oil is up too.

  49. CNBC commenting OPEC at 2/3 of compliance is better than expected, don’t know who told them that, probably one of the tanker trackers but that could put a fire under oil. Still holding my SU for that.

  50. Eco Data — the other side of the coin from the perky Pending Home Sales Data this morning.

    Record 19 Million U.S. Homes Stood Vacant at End of 2008
    2009-02-03 15:18:30.810 GMT

    By Kathleen M. Howley
    Feb. 3 (Bloomberg) — A record 19 million U.S. houses stood empty at the end of 2008 as banks seized homes faster than they could sell them and prices continued to fall.
    The fourth quarter’s all-time high was 6.7 percent above a year ago when 17.8 million properties were vacant, the U.S. Census Bureau said in a report today. The vacancy rate, the share of empty homes for sale, rose to 2.9 percent in the last quarter, the most in data that goes back to 1956.
    The worst U.S. housing slump since the Great Depression is deepening as foreclosures drain value from neighboring homes and make it more likely owners will walk away from properties worth less than their mortgages. About a third of owners whose home values drop 20 percent or more below their loan principal will “hand the keys back to the bank,” said Norm Miller, director of real estate programs for the School of Business Administration at the University of San Diego.
    “When you’re underwater and prices continue to fall, you tend to walk,” Miller said in an interview. “It’s a downward spiral that’s tough to stop because it feeds on itself.
    Foreclosures encourage other foreclosures and falling prices discourage buying.”
    There were 2.22 million new foreclosures in 2008, an average of 6,090 a day, according to Washington-based Hope Now Alliance. Those resulted in 917,000 property sales, according to the group that represents 27 mortgage lenders and servicers.
    U.S. banks owned $11.5 billion of homes they seized from delinquent borrowers at the end of the third quarter, according to the Federal Deposit Insurance Corp. in Washington. That’s up from $5.4 billion a year ago.

  51. BTU working again, bringing ACI up with it. After listening to the two calls and outlooks I much prefer the former over the latter.

    HK tripping up into green territory. It wasn’t a bad press release by any means. I think the disclosure of a couple of wells with mechanical issues is a non-event although I saw it mentioned in a not in a not so favorable way this morning. I’d tell him to drill down 2 miles and over nearly 1 mile and not have a problem. For the most part they are completing stellar wells and will continue to and have set the bar pretty low for 2009 production growth, only needing to hold flat with year end 2008 exit levels to achieve the mid point of their 25 to 35% ’09 target. Without the big land grab this year that they had in 2008, their finding costs should drop like a stone.

  52. Ya know, I hope the new commerce secretary paid his taxes. Much more of this and the American people are going to refuse to pay what isn’t deducted from their salaries.

  57. Love the full moon stuff. Lot of market action is sentiment driven & all we need is a link between social mood and the moon & bingo. Not very hard to think of some links, but maybe hard to prove them. Like BOP sez, science begins with observation.

    tater, I imagine you use stockcharts.com because you tried a lot of others & it is the best… any others worthy of mention?

  58. Gregg is a rather interesting choice by Obama for Commerce Sec’y. Watching him during the banking committee meeting last Fall, I found him to be calm, intelligent, wise, careful, and fiscally responsible. I can’t imagine he supports the Stimulus Bill as it stands… but, he’s a great choice and the markets like it.

    Obama Says Gregg Will Help Steer Economy at Commerce (Update1)
    2009-02-03 16:33:43.329 GMT

    By Julianna Goldman and Hans Nichols
    Feb. 3 (Bloomberg) — President Barack Obama said Republican Judd Gregg will help guide the U.S. recovery and ensure the nation remains competitive as commerce secretary.
    The only way to confront the country’s economic challenges is “to put aside stale ideology and petty partisanship and embrace what works,” Obama said at the White House, where he announced the New Hampshire senator as his choice to lead the Commerce Department.
    Gregg, 61, called his nomination by the Democratic president “a rather extraordinary step.”
    “This is not a time for partisanship,” Gregg said. “This is not a time when we should stand on our ideological corners and shout at each other.”
    If confirmed by the Senate, Gregg would join Defense Secretary Robert Gates and Transportation Secretary Ray LaHood as the third Republican member of Obama’s Cabinet.
    Gregg’s acceptance of the post suggests he has reached a deal with the administration and New Hampshire’s Democratic Governor John Lynch to keep the Senate seat in Republican hands.
    Gregg said yesterday he wouldn’t accept the post at the risk of handing Democrats a 60-vote majority that potentially could force legislation through the Senate.

    Stimulus Legislation

    From the commerce post, Gregg could become a critical voice in the administration to vouch for the president’s economic policies at a time when Obama’s two-year plan to spend more than $800 billion to pull the nation out of a recession has run into resistance from congressional Republicans.
    Regarded as a deficit hawk and an independent-minded fiscal conservative, Gregg has voiced concerns about the size and makeup of Obama’s economic recovery plan.
    Gregg, who was chairman of the Senate Budget Committee from
    2005 to 2007, has called for reining in government spending on Social Security and other federal entitlement programs, which Obama has promised to address.
    As commerce secretary, Gregg would lead a Cabinet department of about 40,000 people, whose role is to boost the U.S. economy, compile economic data, monitor the weather, adjudicate trade complaints and oversee the Census Bureau.
    Obama’s first pick to lead the department, New Mexico Governor Bill Richardson, withdrew last month amid a federal investigation.

    Balance of Power

    Democrats currently have 56 seats in the Senate and two independents caucus with them. If Lynch were to appoint a Democrat to replace Gregg and if Democrat Al Franken prevails in the disputed Minnesota race, the party would have a margin big enough to overcome Republican attempts to stall legislation.
    New Hampshire Republicans say Gregg’s most likely replacement would be Bonnie Newman, a Gregg family friend who also served as his chief of staff when he was in the House of Representatives. She was executive dean at Harvard University’s Kennedy School of Government in Cambridge, Massachusetts, from 2000-2005, and served in the administrations of former presidents Ronald Reagan and George H.W. Bush.

  59. z -re mug u said other day everybody drinks coffee – wrong!! send my mug to bop for helping me buy bonds

  61. kyleandy — you are too kind. It was my pleasure to help you in your bond-buying endeavor. You did a great job. It’s no where near as easy as buying stocks, so your persistance paid off. Nicely.

    Put the mug behind your bar and put swizzle sticks in it. You earned it!

  62. #56 The media always amaze me with the soft linguistic treatment of malfeasance by Beltway types. They never once used the word “lie” during the previous 8 years. It was always “may have misled”. And now we have:

    “She offered no further details of her tax difficulties”

    DIFFICULTIES!! See? It’s not her fault, she wasn’t greedy or anything. No it was all too “difficult”.

    #62 Z – these guys were ahead of the curve:

    http://www.sitemason.com/newspub/fQKJvW?archive_month=01&archive_year=2009&archives=Go&id=61602

  64. #56 The media always amaze me with the soft linguistic treatment of malfeasance by Beltway types. They never once used the word “lie” during the previous 8 years. It was always “may have misled”. And now we have:

    “She offered no further details of her tax difficulties”

    DIFFICULTIES!! See? It’s not her fault, she wasn’t greedy or anything. No it was all too “difficult”.

  65. bop – but if u use mug, traders may ask about it and subscribe making a deadly combo “z and the moon”. win win situation!!!

  72. API expected to show 2.9 mm barrel rise this afternoon. Someone post it when they see it, should be about 30 minutes post close.

  73. Maybe it’s just the system doesn’t like a link I’m trying to post. OK so I’ll try the youtube version…

    Z – re #62 these guys were ahead of the curve:

  74. For those who did not notice, that is the Tennessee flag in the background. Our state prevented Al Gore from becoming president on 2000..glory be to God!

  75. I have figured out a way to balance the budget. We just need to expand the cabinet to include everybody in Washington politics.

  76. oops – next time something doesn’t get thru I’ll ask z before repeating it. Didn’t mean to spam the site.

  78. Dman – enjoyed the video. Thanks for sharing!

    douglas – When Art Laffer (of the Laffer Curve fame) decided to leave California, he went looking for “the best state to live.” Being a trained economist (he was an economics professor at USC), he turned the search into an academic study: quality of life, taxes, attitude toward business, education, healthcare, demographic trends, etc. He was especially focused on taxes (as tax policy is — after all — his life’s work). Anyway, to make a long story short, Art and his investment/economic consulting group moved to Tennesse about 3 years ago. I can’t think of a higher recommendation than that!

  82. From Market Watch:

    Analysts expect a build of 2.9 million barrels in U.S. commercial crude-oil stocks in the week ended Jan. 30, a survey by energy information provider Platts showed.

    The same analysts also project a build of 1.3 million barrels in gasoline stocks, and a decline of 1.2 million barrels in distillate stocks because of strong demand for winter fuels amid uncommonly low temperatures across the U.S.

  83. BOP…thanks for the info on Art. Would be curious to see where he moved to in TN. The plains of west TN or the mountains of east TN.

  85. Green jobs don’t necessarily mean good paying jobs

    http://uk.reuters.com/article/behindTheScenes/idUKTRE5124A920090203

    Favorite quote: “Our survey results suggest that wind and solar manufacturing workers earn more than the typical employee at a Wal-Mart store, but it would be a stretch to say that all of them have good jobs,” the report said.

    Wage rates at many wind and solar manufacturing facilities are below the national average for workers employed in the manufacture of durable goods of $18.88 an hour, and average pay rates at some locations fall short of income levels needed to support a single adult with one child.

  86. knew it wasn’t Memphis, not to throw a rock, but I lived there for a time … and knew he must be talking about some other part of the state.

  87. douglas — if I could find someone who needed a credit/high yield/bond analyst in Nashville, I would think about moving there too. I have tons of respect for Dr. Laffer. Nice man, quite the optimist. He’s worried about the structural direction of Washington’s involvement in private business and pending “huge” increases in taxes… but, aren’t we all.

  89. * BP Q4 net profit misses forecasts
    * CEO sees output up, investments steady in 2009
    * Marathon, Anadarko, XTO all cutting capex budgets
    * BP shares end 0.5 pct higher, Anadarko up 4 pct

    LONDON/HOUSTON, Feb 3 (Reuters) – BP Plc BP.L missed
    analysts’ forecasts on Tuesday with a 24 percent drop in profit
    due to the oil price collapse and a Russian loss, while smaller
    U.S. players cut spending plans to fit a tougher energy
    market.
    BP Chief Executive Tony Hayward said the company was
    intensifying efforts to cut costs and jobs, echoing similar
    comments that rival Royal Dutch Shell Plc RDSA.L made to
    staff last week.
    “The mantra in BP today is: Every dollar counts, every
    seat counts,'” he said in a statement, adding BP would exceed
    its target of cutting 5,000 jobs by the middle of the year.
    BP’s oil and gas production rose 1 percent in the quarter
    from a year before to 3.945 million barrels of oil equivalent
    per day. Hayward expected output to grow in 2009 and for BP to
    have replaced all the oil it pumped in 2008 with new finds.
    Oil prices have tumbled from a record near $150 a barrel
    last July, and the industry is starting to get to grips with
    the new pricing environment. Sanford C. Bernstein on Tuesday
    cut its 2009 crude-price outlook by $20 to $50 a barrel, which
    is only about $10 above current prices. nBNG414599
    BP expects to hold investments in drilling and project
    development steady in 2009, Hayward said, following the trend
    among the very largest oil companies, which contrasts with big
    spending cuts across the rest of the sector. nLU85109
    BP expects 2009 capital expenditure of $20 billion to $22
    billion, versus $21.7 billion in 2008.
    Marathon Oil Corp MRO, the fifth-largest U.S.
    integrated oil company by value, reported a quarterly loss and
    said it would cut 2009 spending by 24 percent. nN03502066
    Exploration and production company Anadarko Petroleum Corp
    APC said its 2009 capital spending would be below last
    year, with its final budget due next week, while rival XTO
    Energy Corp XTO trimmed its capital budget to $2.75
    billion, down a sixth from its original budget.
    Excluding non-operating items, BP’s fourth-quarter net
    profit was $2.605 billion, below an average estimate of $2.98
    billion in a Reuters poll of six analysts.
    That compared with a 29 percent drop in fourth-quarter
    profits at Shell and a 33 percent drop at Exxon Mobil Corp
    XOM, the world’s most valuable listed oil company.
    The last time oil prices crashed, in the late 1990s, it
    sparked a round of mergers among big oil companies, with Exxon
    buying Mobil and BP buying Amoco. But BP’s Hayward does not
    expect a repeat of that, saying consolidation this time round
    may be between state and private oil companies. nL3658588
    Marathon’s quarterly profit, excluding items like the $1.4
    billion charge it took to write down the value of its oil sands
    business, topped Wall Street expectations, helped by refining.
    U.S. oilfield services company Cameron International Corp
    CAM posted an 18 percent rise in quarterly earnings but
    said its backlog of work had slipped as oil companies cut
    spending, and its shares fell 5 percent. nN03538966
    Shares of BP recovered from early losses and ended 0.5
    percent higher in London. Anadarko shares were up 3.7 percent
    to $37.42, while shares of Marathon and XTO were little changed
    in afternoon trade on the New York Stock Exchange.
    (Reporting by Tom Bergin in London and Anna Driver in Houston;
    Writing by Braden Reddall; Editing by Tim Dobbyn)

    Tue Feb 3 18:23:12 2009

  90. It occurs to me that since Daschle has most humbly apologized (really all that was necessary for Obama and many) and has now withdrawn from consideration for health care TSAR or whatever it’s called, now he probably no longer actually has to PAY the taxes. YUK,YUK
    Why bother? And he no longer has to answer questions about haven’t you been making a lot of money as a consultant for some of the same companies you would be regulating if the appointment went through? Washington world – makes me long for good old Cook County politics where everthing has a price and you know exactly where you stand. LOL
    It is all too funny and a monsterous joke on guess who?

  91. “the structural direction of Washington’s involvement in private business.” Words that should never be in the same sentence.

    Just watching the paint dry. Talking with a lawyer friend who is more than a little concerned about all the bond covenant restructuring talk on CNBC today.

  92. GM Jan U.S. vehicle sales down 49% YoY.

    Might be a good time to negotiate for that new Suburban…

  93. Market catching a sudden rally, surely not the car sales numbers. Anyone?

    Energy so far not really buying into though we’ve been green(ish) most of the day.

  94. I ended up buying a Honda Pilot. It is assembled in Alabama and 70+% of parts are fabricated in the U.S. Sort of a compromise of buying a U.S. made vehicle.

  97. BOP – give it a bit more time, you’ll be able to buy the whole company, never mind the car. Oh wait, what would you do with the company. Good question. Hmmm.

    Daschle fiasco: wow, I think I’ll offer my services to Obama as a political advisor. Job description: point out the #&@*ing obvious.

    They could have taken my advice yesterday & saved themselves a day of presidential pain & conserved political capital for when they might, you know, need it for actually doing stuff.

    Why Obama would want to spend even one day of his credibility on the likes of Daschle is beyond belief. Actually it raises disturbing questions that I’d rather not think about. For hints in this direction, see

    http://www.salon.com/opinion/greenwald/2009/02/01/daschle/index.html

    (fair warning: it isn’t pretty & it’s from a guy usually seen as “liberal” but it’s a tough critique, to put it mildly).

  98. BOP #92,

    The do or die crisis is surely on the way for GM. It’s just uncertain when it will hit. Did you see the auto show? There were some very attractive vehicles on display. I got the feeling the industry is desperate and bringing out very advanced designs maybe a couple of years ahead of time to try to stay alive.
    The two Chinese electric cars were interesting to me. That’s all Detroit needs is competition from China.
    I was disappointed those cars selling for a million.two a piece were already sold out. They were beauties!

    As to the Suburban: I had mine washed yesterday. It looks Soooooooo Good. And drives Soooooooo Good i’ll keep it awhile. Anyway i’m expecting a mandated 50 miles per gallon on future Suburbans. That will be a big improvement and i might buy one of those. (Hope it can get up a hill).

  99. ZMAN – I love it. I bought the EX 2wd version. Very versatile with interior adjusting for 8 passengers or 2. A six cylinder with plenty of power and uses less cylinders when driving economically in the city and highway. Drives like a car with little road noise. I got XM sat radio for 90 days free…. I can’t say enough about the pilot.

  101. Thanks Ram – will add it to the list of candidates

    BOP sent a message saying Republicans are proposing a bill to reduce the corporate tax rate for one year from 35 to 25%. Maybe this is the reason for the rally.

  102. Z – looks like crude caught up to the market at the close. Everything is looking over its shoulder at everything else.

  103. Hmmm, somehow I don’t think corporate tax is the number one issue on CEO minds just now. I think they’ll be delighted if they are entitled to pay tax ‘cos that would mean they are still in business. OK so call me naive that way.

    It would at least benefit the winners & do squat for the losers, which makes a change from bailouts.

  104. boy… is my computer sloooooow. Got hung up there for a while.

    Anyway, here’s another rumor making the Wall Steet rounds: BAC and UBS to merge.

    Personally, i think it’s just a made-up rumor (as most are). But, just passing along what I’m seeing/hearing.

  105. Part of the theory on corporate tax rates is that the US is — like — 2nd highest in the recognized world for corporate taxes. So, lower the taxes and attract more international business presence. But, if that’s the theory, a 1-yr tax break ain’t gonna accomplish that.

    I’m with Dman on that one… i’m not sure it does much of anything.

  107. Re 106 Roger that Ram, press release steals thunder, leaves many wondering “so now what for the conference call at the end of the day”. Also, the unanswered question of just how busy they will be in the Fayetteville suggests economics are marginal at best despite the improved regional differentials to hub. That puts everything on the Haynesville and to a much lessor extent the Eagle Ford. I think it goes higher after getting today under its belt and assuming the broad market doesn’t take (nice big if there). I would also add no reaffirmation of production target is probably being read the wrong way and its more likely they don’t want to up it (slightly at this time) before the 1Q call (3.5 months from now).

    Re-listening to the ATW call from 3Q now, just thinking I might play earnings on the morning as they should be able to talk about progress in becoming more of a deepwater player. Earnings really shouldn’t miss unless its a currency translation issue.

  108. Z – you mentioned RIG yesterday as potentially suffering if NG has another leg down. What about DO or ATW ?

  109. Dman – not what I meant, you just caught me being an idiot. Typed RIG, meant rigs, as in rig count will fall a lot more than people now expect if natural gas falls to $3 or so. Had to go back and search for that. Certainly not what I meant but I see it in the comments. Basically I was saying the natural gas directed rig count won’t stop at 1000 to 800 rigs from a high over 1600 last summer but will keep falling if gas gets down there. RIG would in fact be one of the more isolated of the service names in that event.

  110. WILDZ – 10KP – Swappig remaining RIG Calls for ATW calls.

    Sold the RIG Feb $50 calls for $5.20, up 55% (did better with the first half of that trade).

    Buying (3) ATW March $17.50 calls for $1.40 with the stock at $16.50 and the 1Q09 earnings call tomorrow morning.

  111. mrkt trying to take out stops on the SPX futures at 838… so, could blast off from here, for a bit. Just technical, tho.

  112. Z – OK, I thought it was odd in that you would have mentioned it way earlier if that’s what you thought.

  113. Dman – and to answer 108, DO and ATW less insulated but still should hold up well.

    I’m still not clear on what started the rally, maybe technicals being breached and now we’re are drawn to 850 on the spx but it saved oil from a sub $40 close.

    In other news that’s bad for my TSO puts:

    HOUSTON, Feb 3 (Reuters) – Gasoline prices in the Los Angeles wholesale market spiked up 14 cents on renewed fears of a nationwide strike by refinery workers against oil companies as talks for new contract continued on Tuesday, traders said.

    Gasoline formulated to meet California’s strict environmental standards sold as high as 56 cents per gallon over the benchmark NYMEX March RBOB contract, traders said. California gasoline finished at 42 cents over on Monday. (Reporting by Erwin Seba; Editing by John Picinich)

  114. Dman – yep, bad neuron in the brain.

    Nicky – does the dip today in crude (early) satisfy the dip you were looking for from and Elliot perspective?

  118. That would be a good time to buy puts on the refining group. SUN may beat in the morning but the others are fair game, TSO has had the most dramatic rally over this. See Tater’s chart on it from yesterday.

  120. Looks like the G-man gets to be the only tax avoider (so far) who keeps his job.

    Er … because out of the three (so far), only his position involves collecting taxes? Guess that makes sense then.

  121. Steelworkers, Refiners Reach Tentative Agreement, Avert Strike
    2009-02-03 20:50:55.126 GMT

    By Aaron Clark and Barbara Powell
    Feb. 3 (Bloomberg) — Refiners reached a tentative agreement on a new contract for about 30,000 unionized employees, averting a strike that would have affected almost two-thirds of U.S.
    capacity to make gasoline, diesel and other fuels.
    Negotiators for the United Steelworkers and Royal Dutch Shell Plc, which represented employers in the talks, agreed to terms after 12 days of meetings in Austin, Texas, said United Steelworkers International Vice President Leo W. Gerard. The union said that it didn’t win the safety improvements it sought.
    The union was seeking higher wages, a cost-of-living adjustment, and full medical, dental and vision-care benefits for employees and retirees. Workers also want improvements in plant safety practices after a March 2005 explosion at BP Plc’s refinery in Texas City, Texas, killed 15 people and injured 170.

  133. Dman,
    In and out all day today. Not really sure why I started with Stockcharts instead of another vender, but I’ve been happy with their service. Don’t really know if they have a free trial, but I think it’s something like $20/month to sign up.

  135. I’m having problems looking at the charts with an open mind right now as I’m catching up on news. That always creates a predisposition to seeing one side over the other which is really a bad methodology for charting. I am in the camp that believes that any rally without the banks is just Wall St playing around. They’re afraid to short themselves any further, but the moving money from Tech to Medical to ?? is not going to give a lasting bull market.
    Now I’m reading that the energy sector is a safe haven. Then why not assign a multiple that’s indicative of being such? I think we’ve got some cowboys looking to manufacture returns before they get downsized.

  136. 90 … Daschle actually paid the taxes AND got the boot ! Gotta love the double whammy, but remember this is a typical DC Pol who got rich off the lobbying and influence peddling trough …Daschle w/ Leo Hindery and the cushy post senate job; and his wife as a 7-figure lobbyist.

    He can afford the taxes.

    Bout time one of these sleazeballs got the boot.

    Big O’s nominees are quite the spectacle so far; not impressed, even Gregg, big Whoop – commerce; frees up a Republican Senate seat for the Dems to try to poach; replacement is considered a moderate and no gravitas.

  137. 115 – ya, Washington is moving “real quick” on the economy. And the moving they are doing is freaky scary.

    Kudlow called on Geithner to resign in the wake of Daschle and the other woman (chief performance officer) who also had a tax problem.

    Rangel Rule rules !

  140. It’s got a $7.1 b ceiling test writedown in it. Strip that out and earnings are a beat. I don’t own it, will listen to the call for Barnett production and service cost and other guidance.

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