Thursday – Natural Gas Preview and Oil Review Plus More Earnings

161 thoughts on “Thursday – Natural Gas Preview and Oil Review Plus More Earnings”

1. EOG Natural gas: sees U.S. production rolling over by mid year.

   Sees December 2009 production down 2.8 Bcfgpd from Dec 2008 levels.

   Sees Canada down 0.8 Bcfgpd in 2009

   EOG sees 3% production growth for themselves this year.

2. Credit Market Update: Nothing is trading. But spreads are wider. Market back to “breath holding mode.”

   IG 202 hate to see it back up over the 200 threshhold again. But, again, no trades… so, could go either direction, once someone decides what to do.

   HY 73 1/2 not much changed from yesterday. Still trading near it’s all-time low… but “trading” is merely a descriptive term, not an action term. As here, like the IG CDS Index, nothing is trading.

   Combo of the massive new unemployment claims and continued fear of govt nationalization of the banks.

   Personally, there are so many reasons for the govt NOT to nationalize our banking system that I honestly believe it will not happen. But, until the issue is settled, somehow, that is the fear de jour.

   GGG pointed at the banking sector, he pulled off a single shot at CEO compensation, but I do not believe he will let loose on the sector as a whole.

   Banking will get worked out. But, until it does, nothing else really matters. Just trading noise.

3. BDI +182 1498

   TED +.765 95.41

4. Thanks much BOP

   EOG saying at current prices the Bakken core play remains economic. That implies non-core is not.

   Bakken lite – 250 to 300,000 bopd EUR, requires $50 WTI to be economic. Those are very good reserve numbers outside of the Parshall.

5. Re 4 – that also implies most Bakken players are not economic at this time (probably sub $55)

6. ATW – good pre market bid / ask of 17.79 x 17.98 vs 16.95 close. Would have liked to see Southern Cross get a contract and to have a better market day to announce on but the results were good.

7. EOG – Barnett Oil (Now called Barnett Combo)

   50 mm barrel recoverable, think it goes to 200 mm barrels as they step out from the core. They’re going to take it slow given current prices.

8. BPZ on tape, looks to be gapping down, will have a look post EOG.

9. z – so what’s the IP, EUR of the bakken core wells, on avg?

10. Hail Mary Bond Pricing: Landry’s priced the CCC rated bond last night…

    $295mm 14% coupon due 2011 @88. The price of desperation.

    Still, it got done! Good stuff. Someone’s willing to take risk, at the proper price.

11. BAC – feels like everyone is trying to get thru the door and out of the room… all at once.

    Worth watching as a bellweather stock today.

12. GS and IVZ go green. Just need assurance that govt help in the banking sector will NOT include eliminating divds on preferred stock. Would like to hear this, sooner than later.

13. Well, if you were quick you could have made a nice turn on the ATW as it spiked to $18 plus. I’m holding for the conference call. Up 2% now due to market.

    Oil holding up well despite the equity markets.

14. IG picked a direction… wider.

    IG 203 1/2

15. Re 9 – I don’t have an average for you as it varies a lot by operator and county/field. The best wells are coming in with IPs just over 3,000 bopd in Parshall and those have EUR’s north of 300,000 barrels. Outside of Parshall but in North Dakota along the Neeson Anticline I’ve seen a lot of wells in the 600 to 1,200 bopd range and EUR estimates of 100 to 300,000 barrels. Over in eastern North Dakota and in Montana the numbers have been lower. In northern North Dakota (north of the Neeson) there are some better results showing up.

16. thanks, z.

17. EOG Call still ongoing:

    “clearly seen the peak of the Barnett”

    Gulf of Mexico, both Shelf and Deepwater on secular decline due to economics inability to compete with resource plays. Hard to argue with that given the production chart for Gomex. Even if you take at the hurricane losses the trend is clearly lower.

18. By the way – there was no reliable “trading desk colour” this morning. Desk says odds of any trade are 50/50. So, didn’t post. Sorry for the delay.

19. This would be the 5th down day for the market out of the last 6 trading days.

    EOG Call Over

    Last comment on the Haynesville – will have firm transport of 80 mm/d by April, so they won’t be constrained for capacity this year but they are not going to go after it hard for now given prices.

20. The Fear Trade is gaining traction, sadly.

    IG 207 +9bps for the day.

21. Factory Orders down more than expected — -3.9% vs -3.1% expd

22. Factory Orders is a december number… the november reading was revised too. Down, by a lot — was -4.6%, revised to -6.5%

    This is consistant with destocking the inventory build up in the 4th quarter. So, not all bad… just happening faster than expected.

23. PBR considering $20 billion equity offering

24. For those debating the question of whether GE would support their AAA rating at the expense of the dividend. Jeffrey Immelt gave us the answer today. GE is prepared to run as a AA company and has the cash flow to pay the divd.

    Smart decision. AA is still a major huge high-grade rating. And in the land of the Blind, the one-eyed man is king.

25. Credit Market calming itself a bit.

    IG 205 1/2

26. NAPE is today and tomorrow. http://www.napeonline.com/home1.asp

    May get some reserve deal metrics out of the attendees which could help establish new levels for $/mcfe of reserves…probably takes a few days to compile but we have a contact on the floor there.

27. Z- Do you think BPZ is down 35% because of the operational update, or the comment about trying to refinance with their French Bank or both?

28. Fortunoff Holdings just filed for BK. Even the rich aren’t acting rich these days.

29. CHK rising ???? Any thoughts??

30. occam — is it just too forward to ask where you snagged those KOGs yesterday? I put my hand out at 25c, but didn’t get filled.

31. El -d. A number of gas names are up now, HK is marking that CHK move. I think the comments of 3% growth for EOG and 0% growth DVN translate – who left is big cap and still going to grow this year: Hello CHK.

    Bob – back with you in one minute.

32. BOP – can you check and see if Art Hogan is still at Jefco. Some new kid on CNBC now listed as chief investment strategist. Thanks.

33. Gas number: 195 Bcf in line, gas rising a bit

34. z – Art still shows up at Jefferies in the Boston office. So, should still be there.

35. sums up the situation nicely —

    BAC: Bank of America: Valuation suggests investors believe bank
    2009-02-05 15:27:39.529 GMT

    [ Live In Play]

    BAC: Bank of America: Valuation suggests investors believe bank is about to fail and be nationalized – Ladenburg Thalmann (4.09 -0.61) [Update] Ladenburg Thalmann says BAC’s stock is now selling at 0.28x expected 2009 revs; 6.9x expected 2009 earnings; 0.19x stated book value; 0.50x tangible book value. Its market capitalization is 3.4% of its total deposits and 1.7% of its assets. Firm says these numbers are clear, investors believe that this bank is about to fail and be nationalized by the United States government. If they believed that it would continue as an operating entity it is unlikely that the bank would be selling at such a low value. One reason for this conviction, on the part of investors, is BAC’s acquisition of Merrill Lynch.
    It is felt that either the co did not do the appropriate due diligence before making this acquisition, or that the co lacked the ability to understand how bad Merrill’s problems were.

36. Thanks BOP

    Bob – if the French Bank in question is Parisbas, that would be bad, they tanked a lot of energy names in the late 90s along with some other spineless bankers. Will read the ops update in a minute.

37. 36: Bank is Natixis. Only $90 Million, with half syndicated. Doesn’t sound like a big problem. Stock must be off on the operational update

38. “It is felt that either the co did not do the appropriate due diligence before making this acquisition, or that the co lacked the ability to understand how bad Merrill’s problems were.”

    OR that they were screwed anyways (along with the rest of the lot) and they are all going to go down one by one?

39. Bob – couple of items:

    Reserves. They had told people reserves at Corvina field were 25 mm barrels, then report 17 mm bbs. Delta is methodology, first is SPE (society of petro engineers) which allows you to book more PUDs than the second which is SEC.

    One well was drilled too far down dip (think of a underground mountain with the reserves piling up near the top and their well was lower down the mountain) hitting below the oil / water contact and so you get a water producer. Uphole from that the sands were poor quality. They plan to sidetrack it to get to the right spot, about a month to do. It’s probably a screaming buy down here but want to cross some t’s. Planning to do full update, hopefully over the weekend for Monday piece.

40. VTZ – yep. That would be the overarching fear here. The mrkt does not want to see it’s banks nationalized… but we need to see the bleeding staunched.

    I’m no Soros fan, but his side-pocket the illiquid assets recommendation (in the WSJ yesterday) is something that could be done quickly… and so have an immediate effect.

41. HK easily through the $21 previous high.

    FSLR continues to track for $150.

42. 39: Almost sounds like the 25 mm was changed to 17 mm based on using a different formula for SEC purposes

43. Z, you mentioned something about doing a summary on dry bulk carriers when you get time-any plan at this time?

    BDI up 14% yesterday.

    Thanks.

44. Bob – if this was the end of 2009 (when the new SEC reserve rules go into effect) instead of the end of 2008 (when the old ones still apply), the reserves would have been higher, impossible for me to say at the high end of the range but definitely higher. The reserves in the ground don’t actually change, its just an accounting rule of what you can claim as proved. Note that the SEC reserves did increase by the same % that the SPE calculated reserves did.

45. I apologize in advance for repeating myself…. but…

    Gotta LOVE the HAWK !!

46. Choices – tabled it for tomorrow’s post. SEA down 1% today but trending with the broad market. Wanted to take a look at some of the contractings going on and not just throw together one of my blue and gray tables and say, oh boy, its cheap. Will do for Friday.

    ATW call in 5

47. BOP … until Floyd decides to do a secondary.

    By the way, the other day Aubrey said he cannot start re-acquiring his shares in CHK until mid year due to wash sale rules.

48. z – at $22, figure it’s in the bag… a 2ndary, that is. But, JMHO.

49. IG 200 back to the neutral position

50. I guess the Tech Sector hit the market with a Happy Stick. Can’t see any other reason. you?

51. Re HK secondary, would certainly like to be out before that happens-secondaries seem to follow my choices and are the bane of my track record, whatever that is these days.

    Re: #47, not sure I understand Aubrey’s explanation, wash sales are only for 30 days, either side of the transaction-maybe he has special rules as an insider or offficer of the company. I believe he got his margin calls last fall.

52. ATW – 1Q09 Conference Call

    2 extraordinary items for costs in the quarter:
    $1 mm currency exchange loss
    $1 mm of maintenance spares expensed

    Utilization:
    3 planned 0 rate days for the Beacon
    unplanned days
    Vicksburg – 4 days
    Eagle 1 day
    Richmond 1 day
    Nutshell: not bad at all.

    75% booked for 2009 (same as last quarter)

    Uncertainty on Southern Cross booking, This means markets for their Richmond and Vicksburg rigs are sketchy and they come off contract in 2009.

53. Choices – I thought the time was long as well but that’s what he said. Maybe longer for a CEO?

54. ATW could go either way. Depends on how big a deal analysts want to make of the one still unbooked rig and the two that come off contract in 2009 and the “weak market for those rigs” comment.

55. yes. Form 4 filers are subject to much different “wash rules” than private investors.

56. ATW –

    Richmond rig, which comes off contract in Gomex in March is being marketed at lower rate than current.

    Cost guidance needs to improve (they will share that in a minute) or I’m going to punt essentially flat.

57. NG up 4 cents…yawn.

58. ATW 2009

    Southern Cross – 0 rate days for current quarter. May be unemployed all year.

    Falcon – may incur 0 rate day, up to $2mm day.

    $61 mm drilling cost for 2Q ($5 mm in extraordinary costs). This is a little high.

    G&A – $8mm for the quarter.

    CapEX for 2009

    $300 mm outstanding

    $350 to $400 spending this year.

    See debt to total cap at 30% by year end, debt range inched up from 400 to 500 to a range of 450 to $500 mm.

59. ATW – Q&A

    That 450 to 500 mm pretty much taps out their revolvers. But they don’t see adding to the facilities. Think they start paying them down in 2010 from cash flow.

    Activity is down, rates will be down.

    They are talking to one potential client now on the Richmond.

60. ATW Q&A 2

    Southern Cross – 3 opportunities. Pretty cagey about where they might be. 2 of them could start in 3Q (June-ish), the other later. They are looking for a contract that could take them into next year and in a better market, not just looking to book single well biz.

61. ATW – stock holding up pretty well in face of the previously mentioned cost and operating headwinds.

    Analysts sound cautiously optimistic.

62. Z, coal has been strong the last few days-with all of the talk coming from Obama admin against coal and the ad campaign disputing the clean coal concept, it seems unusual.

    Any thoughts because the volitility has killed me in the past in the coal sector.

63. Choices – let me get back to you post ATW call.

64. And there’s the end of the ATW Call. Pretty good considering the environment, not great on level of uncertainty for three of their 8 (soon to be 9) rigs for the back half of FY2009. Holding a little longer.

65. Coal prices have held up much better than oil and gas prices when you look at the downturn in commodity prices over the last year.

    High BTU eastern coals have almost been cut in half but that beats natural gas, its main competitor as a generation choice by a long shot. In the last couple of weeks that price trend has been bottoming. Lots of coal production capacity has come off line in the U.S. and abroad as the economy slowed. The cleaner Powder River Basin coal prices have held up much better. Again, curtailments of capacity.

    In China they have a stimulus package too and it has prompted steel mills to start rising again which lifts met coal prices and in turn supports exports of coal for generation (some of this coal overlaps).

    As to Obama…I think his hands are full and I notice that Feinstein or Pelosi or Boxer (I get them confused but so far that has not hurt me) said yesterday the Climate Change legislation is DOA for 2009 due to the economy.

    I continue to hold BTU and will likely swap for a later dated set of calls soon and ACI which I will not as their quarter was wrought with higher cost guidance and problems.

66. By the way, Jon Stewart had a pretty fun piece yesterday on putting people back to work winterizing homes. I can just see all the “Wall Street Fat Cats” crawling under homes to install vapor barriers.

67. FSLR topping $150.

68. Thanks, Z. I take your point about the three spokeswomen for the Dems.

69. Is the point that coal will not be demonized this year?

70. Still holding my ATW, getting a nice post call rally but that may just be market.

    I missed the CRR call, huge beat, saw that coming with all the proppant talk of late, failed to act, my bad.

71. Credit playing along with stocks now.

    IG 199 back below the 200 threshhold. good.

72. BAC back over $5 would be a huge, positive psycho-kick to the mrkt.

73. Ram – I think they make noises but do little to damage it. I was on the Pickens Plan conference call the other day and T Boone made the point of saying that at the end of the day, and speaking of a normal market where you see growth in electricity generation of 1 to 2% per year in the U.S. you simply can’t abandon 50% of the nation’s generation capacity because you want to. You actually have to do something and wind, which T boone is big into, is not the answer to the problem. You have a wind corridor from Texas to California where the wind projects will really work and then you have solar which is much smaller than wind in terms of installed capacity at this time and is still lower efficiency than it needs to be. By the way, I asked him what kind of efficiency gain you get from a new generation power grid and he said 20%…that’s going to be costly but it is something that we have to do if wind is even going to be considered. You lose electricity in every mile of wire from generation source to end user. Wind and solar are generally installed where the people aren’t (I’m speaking of the utility projects and not the panels on your house), in places that are remote, so the electricity has further to go than it does now from already installed coal, gas-fired, and nuclear facilities. The efficiency falls further in the summer with heat (just when we need even more power). Anyway, I figure stimulus package 4 or 5 or 6 will announce government spending on a new grid. I don’t think its in the current one but I could be wrong.

74. Aubrey out until April as per interview with the Flying Baboon (no offense to baboons the world over).

    Cramer: What happened when you were forced to sell your CHK stock?
    McClendon: I bought some stock on margin because I was bullish on our company and natural gas, and got over-leveraged when the financial markets fell apart. I can’t buy any stock until April, but I look forward to increasing my ownership stake in the company.

75. Thanks Mark…you going to NAPE?

76. More along the lines of what Soros was talking about in yesterday’s OpEd piece. Would be HUGE positive for our banking system… and irritate the CDS Global Macro Bears to the point of returning to their caves. Could potentially see a pretty fun short-squeeze if this is done soon.

    Reuters reports that it might be possible to modify mark-to-market accounting rules for U.S. banks facing steep writedowns of troubled assets without abandoning the underlying accounting standard, a senior Senate Democrat said. Sen. Christopher Dodd, chairman of the Senate Banking Committee, told reporters on Wednesday evening after a panel hearing that at least one former bank regulator was discussing how to approach the difficult issue without “walking away from” mark-to-market standards. The issue of how to value distressed assets held by U.S. banks has been one of the most difficult challenges in constructing a bank rescue plan, according to industry lobbyists and lawmakers

77. Thank you ZMAN.

78. Embarrassed to ask but I’ve been on calls all day, what prompted this broad market rally?

79. ram – anytime. Got any wallet friendly wine picks, its almost the weekend and the economy is prompting me to keep the niebaum coppolas and plumpjacks in the cooler. Looking for a new California Cab staple wine.

80. mid-day update:

    Equities stage a V-shaped rally after SP500 cash holds the ~820 level, shorts get squeezed, and Europe closes ~unch’d on the day; SPX +17pts, gold surging another $16, treasuries hold a bid, and euro recovering after dovish Trichet comments, though CDX IG11 remains ~3bps wider (199 bid). The melt-up seemed to stem from: 1) Sen Reid saying a stimulus vote could happen as soon as TODAY in the Senate (see below) and 2) optimism the TARP II announcement next week may include a suspension of mark-to-market accounting (on Reuters, CNBC). The impressive rally aside, there were more jaw-dropping declines among many of the usual suspects at the open this morning (BAC drops >15% and breaks $4, GE breaks $11)…though the financials complex has rallied sharply off lows. As has been the case of late, the equity desk is seeing little conviction behind the rally so far, and actually saw a good number of shorts into the bounce this morning (remains biased ~2:1 to the sell-side). Technically, SP500 cash held the 820 level this morning and is right at a major resistance level (850)…if it breaks out, we could see covering/buy-stops kick in.

81. THANKS BOP!

82. SUN 4Q results dragging refiners lower.

83. Stimulus: Sen Majority leader Reid says a vote could happen as early as TODAY in the Senate although its not clear if there is enough to get 60+; Obama has said he has enough votes. If the Senate does pass tomorrow, then the House and Senate will have to reconcile their two versions and a bill could hit Obama’s desk by next week.

84. Not making it to NAPE this year; doing my part on the cost cutting front 🙂

    Good luck with the wine selection. At $4 gas, might suggest Boones Farm!! Had a Chard blind tasting event last weekend. All 6 choices were voted “no” and the cheap “by the gallon” table wine won!

85. z – has Trader Joe’s made it’s way to Little Rock yet? It’s a mainstay for my wine rack during times like these.

86. Hear ya re NAPE. Not sure a lot of buyers going to be there right now.

87. Although… not a fan of “Two Buck Chuck”… there’s some $6-11 selections that are highly drinkable!

88. Actually, it’s kinda fun to hold a “Recession Wine Tasting Party.” Buy a bunch of wines below some certain price… have a bunch of friends over and select the most drinkable. Then, rush back to the store and stock up.

    Rinse glasses and repeat.

    Helps get through times like these!

89. Nope, backwards southern laws have prevented out of state wine sale in groceries until this year when that was deemed in violation of inter state commerce and therefore unconstitutional. Just looking for a new, solid, meaty $20 cab to keep around.

90. ATW – setting a mental stop to take small profit and go to sideline with any dip to $17.70 in the stock. I’d call the conference call, good, not great. Stock gain won’t hold up if the broad market does not.

91. HK – You can almost smell the secondary. My best guess is $24. Feels like they are out talking about stuff that was not in the operations update. Not falling in love with those Feb options.

92. z – how long does it take to drive to Nashville? There’s a TJ’s there. Bet that had something to do with Art Laffer’s decision to move from So Calif to Tennessee.

93. BAC – Senator Dodd doesn’t see nationalization of Bank of America.

94. BOP – you greatly overestimate my need for vino, lol. Good wine store down the Street, just trolling for non-magazine written thoughts…

    Amazed at the lack of responsivity in GMXR stock. Trying to find a reason not to swap my HK for those guys.

95. Berringer and Kendall Jackson’s “low end stuff” are good. CA has had a string of very good to outstanding vintages from 2001 through 2007. I would even suggest to experiment with the “Wine in the box” concept with a CA cabernet. I think you will be surprised with the quality and you’ll appreciate the convenience.

96. z – I should open a TJ store. Too bad they are all company-owned. And they have a pretty loyal following.

97. A short-squeeze can be a beautiful thing. It can actually get the long buyers off the benches, sometimes.

98. Thanks Ram – Black Box is always around here. Have been keeping Rhone valley wines on hand for years (Parallel 45) along with Penfolds and others every since the straight Mondavi cab crossed $30. I’m a big Caine Five and Clos Pegase fan as well.

    Nothing like multitasking during a slow lunch.

    HK crossing 22, stock acting like something is up with a good bit of fast and furious trading, will check the rumor mill.

99. BAC is clawing it’s way back to $5. Would be major, positive accomplishment, and boost the entire mrkt.

100. Here in Raleigh, they have better selections than most stores in SoCA.

101. Z – #94 – i saw that GMXR is presenting at a conference next week – perhaps some catalyst there?

102. z – you going to sell those ATWs? Or just let ’em ride.

103. 1520 – is that Enercom. Maybe it gives them a bump. Volume has been absent as it just sits. Clean balance sheet, very large 3P potential (I think they had a 400 NAV for themselves over the summer which people will discount but I see how they get there at higher prices). Rumor has it they are in for a % of one of the rumored big kahuna Haynesville wells which may act as a catalyst. Production growth is going to be big here and I think that if HK can move up here with their $1 billion write down and a deal around the corner (I don’t know it is for sure but I’d bet on it) that GMXR may get up as well.

104. BOP – I’m inclined to sell them, just watching for now. I’ve got time on them but if I were an analyst looking to get more cautious I could find reasons to lower that one tomorrow based on the call, just to a Hold with the contract uncertainty for 3 rigs and the rising cost guidance.

105. Is ARK a felony state with regards to receiving wines from out of state?

106. gmxr – 10:55am on 2/18 at Enercom – i just looked at the schedule and it looks like a good group of presenters.

     http://www.theoilandservicesconference.com/schedule.html

     I agree on your points with gmxr. i have a set of hk calls written that i hope get called in feb – i plan to roll that capital into gmxr

107. No its not any longer. But we have good selection, not quite like Austin, but we can get just about anything except some of the very small wineries. Distribution monopoly however means prices are 40 to 50% over what you pay in Ca.

108. 1520 – when you go through their presentations you kind of wonder what gives with the stock given < 4x 2009 CFPS and still set to grow like a weed. One thought would be they've been mum on reserves so far and low gas prices will ding them but I suspect low op and fing costs will help them to dodge much of the bullet and next year they will see rapid reserve growth and better rules to report under.

109. White House briefing coming up on the stimulus bill, apparently headed for a senate vote today.

110. ATW didn’t sound that impressive to me and I dumped my stock during the presentation for a small profit.

111. El -d . Agreed, I’m just milking the chart.

112. XTO – strong as any of the big cap E&Ps of late. Have to admit not as close to the story here as with other names but if you look at the big cap E&P table in yesterday’s post its the one posting YoY gains in CFPS next year. Lot of acquisitions at much higher oil and gas prices than current market last year with big acquisitions in the Bakken and Haynesville. If that thing can rally we may be seeing a more favorable time for E&P as we wade through 4Q earnings releases.

113. Emailed in question regarding today’s weakness in CLR which runs counter to their peers.

     I suspect EOG comments regarding the Bakken in general outside of Parshall field which is essentially a large sweet spot in the formation needing $50 oil to be economic are weighing on CLR who is a big Bakken player … outside of Parshall. EOG also cited cutting back production due to the low prices but also high operating costs and people may suspect CLR will do the same. I’ll probably get long there again when I think oil will rise and after they’ve announced 4Q reserves. Surprised WLL not feeling the same pain.

114. #108 – totally agree. I think they are just smaller than others in the HS and haven’t gotten as much attention. I would like to think they have been flying under the CHK-HK smoke screen and drilling away.

115. Good afternoon all.

     Broader market got to the edge of the absyss this morning and stepped back. That reversal looks very positive to me and hard to see even with a bad payroll number that if they pass the stimulus package as they say they will today that we aren’t going to see at the least a short lived bounce.

116. Oil I think is poised to follow….but I am getting so bored waiting!

117. re 116, I was just about to type the same thing when I refreshed my screen. New line in the sand is $40, feels like time for a bounce.

118. ZTRADE: $10KP

     Out ATW Calls, Sold ATWCS Feb $17.50s for $1.90, up 36%. Solid quarterly report but a little more uncertainty with regard to unbooked days in remainder 2009 with lower re contracting rates seen and higher than expected operating costs. Will revisit if it drops post analyst comments tomorrow but I’ll probably just gravitate back RIG on next weakness.

119. z – any more earnings reports that you are thinking of stepping in front of? or, we done for this quarter…

120. BOP – oh no, not done. May step on them instead of in front of them but some mids and smalls in E&P land report in the next 2 weeks and I’ll be there.

     I’ll probably step out of the way unless with a long dated call on HK as I own that stock and they may have another call where the analysts have few questions because the ops updated already hit.

     Looking at NFX, SD, SWN, GMXR, GDP to get in front of. No guarantee I will but that’s what I’m thinking right now. Maybe CHK, have not yet decided. Can’t believe I forgot about CRR.

121. ZTRADE:

     Sold HK Feb $20s out of the regular account for $2.40 up 65%. Pretty active stock and very active options. Will likely come half out of the $10KP position soon.

122. RE: California Cab
     suggest you visit the Ultimate Wine Shop:
     http://www.ultimatewineshop.com/?pVar=68
     go to the ‘Freee Shipping ‘section

     They have several excellent cabs and you get free shipping and pay no sales tax.

     While I live in Indiana,k have found their prices and selection without parallel.

123. Thanks Chrys – isn’t BPZ one of the names you track? Any comments today’s action? I took a shot at it above.

124. ZTRADE: $10KP

     Out half HK February $20 Calls (HKBD) for $2.50 up 108% (lower entry point than the regular account). Time to play with house money.

125. Totally ignorant question, but I was talking to another buy-sider about 2 weeks ago. Chatting about the Haynesville, of course. He started to explain some stuff about the proppant they are using in the play. It was kind of a sidebar conversation, so I didn’t key into the details. But, it was something like: irregular surfaced proppant (which is cheaper) works better than the round ceramic proppant that CCR makes. More drillers moving away from the ceramic stuff… and toward the jagged stuff (I can’t recall exactly, maybe it was quartz, or walnut shells, or something). Anyway, he said it was going to suprize people and hit CRR pretty hard.

     Given CRR’s good earnings report, his comments are either 1) wrong, or 2) early.

     Is this just too weird a question? But, what is the preferred proppant in the Haynesville Shale?

126. [suprize = surprise, in the world of no spell-check]

127. BOP – I’ll add my thoughts on that and then ask Wyoming to step in when he sees this.

     I’d say the guy is wrong. Every call I hear from a Haynesville player says they want either ceramic proppant (which is what CRR makes) or RCS (resin coated sand). I’ve not heard anyone want jagged proppant. The ceramic proppant can withstand the high pressure of 11,000 foot wells better than the RCS but does cost a bit more. The comments I hear also is that people don’t have as much higher end proppant as they would like to. I think HK was the last team I heard talk about it but their thought was stronger/smoother better than regular sand for these deep, complex completions. Wyo?

128. See one analyst citing SUN’s good quarter as already priced into the stock and now subject to profit taking. I think that applies to TSO as well.

129. BAC — pretty active insider buying.

130. (normally, I wouldn’t comment on banks on an energy site… but, getting the banks back to some sort of “normal” means the rest of the mrkt is free to roam about the cabin. Until then, most of the mrkt remains buckled in their seat, braced for a bumpy ride.)

131. Is HK getting tired? Can’t get out at a good price.

132. BOP – Just checking in. My price was .27

133. occam – hope it’s not too uncool to ask… thanks for your reply. You made a good buy, I think. It will be interesting to find out who the seller was.

134. BOP- I agree we need the banks to stabilize. Can’t imagine that the BAC exec’s would be buying if they weren’t assured of being nationalized.

135. Z: When are you thinking of punting your SU pick?

     Do you think that there is a
     decent shot at profit?

136. Ram – It seems to have just softened and then bounced with the whim of the market, strong compared to its peers.

     RS – re SU, If oil doesn’t rally tomorrow showing a clear bounce off the 40 level I will punt tomorrow for a 70% hit.

137. Closer to the money TSO puts?

138. Ram – I toyed with it earlier, thinking to wait for Wednesday to see if we get a second week of strong demand or another bounce in utilization. Your idea is the smart/gutsy move, I just feel a little like the crowd likes it and will run me over again. I think I took puts at $14 and it pretty much marched to $18. Mulling it over, won’t do it today but again, that’s probably the smart move.

139. Wow ATW near HOD.

140. Yep, left a little on the table and it may go higher. Still have some higher strike 20s for March I referred to yesterday but didn’t Ztrade as it just felt like a dice roll for them. Even after this gain today, I can only sell those flat which is a good lesson in overstretching on the strike before a news event, after which, IV drops and premiums shrink.

141. RS – just realized didn’t answer your question on SU completely regarding chance to get profitable. If we get a rally in crude of any size ($2 to $3) between now and Tuesday, which largely depends on the broad markets then I’d say we have a good shot at 25 to 50% loss on the $22.50s. As you know, I don’t really think about getting back to even on any one issue, in other words, the break even point is an arbitrary point in space that only the buyer really cares about. If its time to sell its time to sell. Really need to publish my trading rules.

142. Not a bad day. Beer thirty.

143. Opted to wait on NFX to see the writedown and results in the morning.

144. I totaly missed the ATW. Tried to get out, but ran out of time.

145. RS – a few items auger for a short term upswing in crude:

     We seem to be bouncing technically
     There’s a good chance oil workers in Nigeria go on strike on Monday.
     Market seems to like the stimulus bill and may rally into Obama press conference scheduled for Monday night.

146. Ram – so you are still long?

147. Can someone clarify something for me – CNBC had a ticker going earlier saying the Senate would vote tonight on the stimulus. Dylan Rattigan said as the market closed that the stimulus would be voted on by next Thursday.
     Which is it?

148. Nicky – as I understand it, the Senate may vote tonight, then it goes to committee and the House and Senate bills are merged and then Obama’s pen by next week.

     http://www.marketwatch.com/news/story/Senate-leader-Reid-sees-enough/story.aspx?guid={FDC229B3-249F-4024-AA6B-5CCD88ABDAD5}

149. Z: Thanks for your further comments

150. Z: An outline of your trading rules would be appreciated

151. Alberta govt says a stimulus package will be in the form of helping juniors and mid-sized companies drill new wells. Will be in place within a couple weeks.

152. VTZ, Re 151; thanks, I always thought running a road grader would be pretty cool.

     Uhps, those jobs aren’t meant for me, thanks anyway.

153. Wyo – Did you see BOP’s proppant question in #125?

154. RE 125, the mystery engineer is correct. There is one camp saying something similar to that. Not pumping something angular on purpose, just frac sand (silica/quartz) is not as spherous and round as ceramics.

     I mentioned some time ago that the HS folks were shifting to resin coated proppants. During the time I said they can get their costs down to $6.5MM, that number should be a lot less these days.

     Walnut hulls have been around for some time, we usually use them while drilling for lost circulation. BJ actually coats them with resign and has a technique to place them. We don’t do a good job pumping them with about 10.5 ppg fluid for the technology to work.

     My vote is for 2.

     I don’t work HS so I could not tell you the preferred proppant, only relay the things I hear from the vendors I prefer to use who work in the areas.

155. Yes, thinking about it while mulling the wit for #152.

     One add comment; there is another camp that runs along with the sand practioners, place the proppant that makes the most money and not necessarily writes SPE papers.

156. So I’m wrong in 127? A jagged prop would be better than a round, strong one? That runs counter to comments I’ve heard out of CHK and HK in the last few months, that they prefer either ceramic or RCS but not beach sand. Or walnut shells.

157. Don’t think of it as the jagged prop, view it is the not as round prop. We have been using these frac sands for decades.

     One of the tech lines of thinking is that the shales when fractured do not have as much closure stress as previously.

     Like I said, everyone thinks they are a completion expert. Engineers are not salmon.

158. I gotcha on used for years, all kinds of things have been but as I recall from maybe two conference calls back CEOs drilling in the Haynesville were saying the heat and stress at 11,000′ was working better with ceramic than with coated or uncoated sand. Not trying to get a degree, just trying to be clear and get an understanding, lol, thanks.

     I just found this which would seem to argue my point that RCS or lesser is not kicking Ceramic to the curb, at least not yet.

     From the CRR call today

     “Revenue for the quarter increased 30% compared to last year’s fourth quarter. The total proppant sales volume for the fourth quarter was a record 293 million pounds, a 19% increase from last year’s fourth quarter. The revenues for the quarter also reached record levels.

     Sales volume in North America increased 30% compared to the fourth quarter of 2007 due to sustained demand in areas that have traditionally used ceramic proppant, continued acceptance of ceramic proppant reservoirs that have previously used sand-based proppant and the development of new reservoirs such as Haynesville in which the high stress, high temperature operating environment is conducive to the use of ceramic proppant. And in fact every region in the U.S. saw increased demand except for one.”

     They continue to see strong markets but granted they are selling the product and are expanding capacity. I’m no engineer and the ceramic does cost more but the buy side guy was saying it was going to hurt them. I guess I could have said maybe he’s not right yet.

159. Marketing. Do you think they will say our product sucks?

     OK, argue your point, I am not buying your ceramics and putting them in my well.

     Just making a point, everyone is an expert.

     It is known that yes, sometimes a ceramic may have an higher IP, bring out the Wall Street suckers. But little is publicly known that a lot of thin fluid, sand proppant wells have better EUR’s. Takes years to prove this and by then the next buzz play comes along, looking for that IP number.

     Refer to my comment about the new belief in the stress profile. If true, then ceramics are like bringing a gun to a knife fight.

     And my final point is that the ceramics are expensive, I pump what makes the most money.

     Just giving you the side of the argument for sand, invest your money where you feel fit.

160. I’m not an expert and don’t pretend to be, that’s why I asked. Again, not trying to argue, just to understand.

     Obviously several someones out there like it if their plants are maxed out and volumes are at a record.

     As to the Wall Street suckers, I certainly want to understand what they are thinking so I can get in front of them and benefit from the lemmingism that ensues.

     I agree they are expensive, obviously they are expensive and operators are looking to cut well costs.

     As to your last, thanks I appreciate the sand thoughts. In this low price environment I would have thought more people would be making due with lower prices proppant. Maybe they are and the Haynesville and other plays where people do like ceramic are higher IRR and therefore as rigs shift from lower to higher IRR plays that has kept the ceramic volumes rising. And as to your very last…always.

161. Z- blaming crude weakness on a USO roll. Oil ETF Gains ‘Critical Mass,’ May Boost Contango: Chart of Day
     2009-02-06 00:01:01.0 GMT

     By Alexander Kwiatkowski and Grant Smith
     Feb. 6 (Bloomberg) — The United States Oil Fund, an exchange-traded fund betting the price of crude will rise, holds more than 20 percent of outstanding March futures contracts, setting up a potential surge in oil’s contango.
     The fund, which tracks the price of West Texas Intermediate crude, owned about 79,000 March futures as of Feb. 4, according to the fund’s Web site. That’s more than four times the size of its holdings at the beginning of December. The fund will sell those futures today, and buy April contracts, in order to “roll” its position.
     The CHART OF THE DAY shows how the fund’s “rolls” since its holdings have multiplied coincided with a widening in the first month’s discount to second month futures, the so-called contango. Tomorrow’s roll may cause the value of March futures to fall relative to April, according to Olivier Jakob, managing director of Zug, Switzerland-based Petromatrix GmbH.
     “It has reached a critical mass,” Jakob said in a telephone interview. The S&P Goldman Sachs Commodity Index will also start rolling its crude positions from tomorrow, he said.
     “We could see some widening back into the roll,” he added.
     John Hyland, Chief Investment Officer of Alameda-based United States Commodity Fund, which manages the exchange traded fund, or ETF, said the size of the holdings doesn’t necessarily mean it will influence the crude price when it rolls. There may be investors looking to make the opposite trade at the same time, making them the “perfect counterparties,” he said.

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