Wrap – Week Ended 02/20/09

 

 

1) What A Week For Equities. And not in a good way either, especially if your company lends, borrows, services or produces anything. It's not often the major indexes start the day at 6 year lows, hit 12 year lows by lunch time and close somewhere in between. In the week ahead we are to get more details from Treasury on TARP II (no really, an actual plan and not just a plan about a plan) and from the President as he addresses a joint session of Congress Tuesday night on a wide ranging agenda.

2) Refining Margins Suffered; Probably Will Recover Over The Next Two Months. More on this in Tuesday's post and suffice it to say that I am thinking about getting back on board with the refiners now that they've suffered a large one week setback (see TSO's move from $18.53 to $14.13 for the week which wasn't quite enough to save my short there). Anyway, one week definitely doesn't make a trend in the oil inventories reporting world and cracks fell apart as demand for gasoline eased (repeated months of 500 to 600,000 jobs lost will do that) and production of gasoline inched up (rarely positive margins will do that as well). I expect refiner utilization, which is already low, to resume its downward trajectory in the next few weeks before bottoming in late March which should yield a bounce in margins assuming that crude doesn't find more than firm footing from the March OPEC meeting.  

3) Rig Counts Continue To Wane. If you are a gas bull or plan to be one later this year you have to take heart from the continued fall in the horizontal rig count. All of the big cap E&P names have reported now from the financially stretched to the pristine balance sheet imbued. To the very last one they are sharply reducing drilling activity. The story is more dire in the mid caps where several names have sent 9 of 10 rigs packing and a number of smaller cap names have simply stopped drilling at these prices. I have my own thoughts on when we see a turn, see Friday's post for my most recent, and the industry generally sees anywhere from 3 to 5 Bcfgpd of lower production on a year over year basis by the fourth quarter. My sense is that capital discipline will fairly strict through year end.

4) Net Short Natural Gas Position Has Been Been Quietly Falling With Prices. The shorts are slowing giving up the idea that gas has a lot further to fall. I expect an early end to the withdrawal season by a couple of weeks (so between 5 and 6 weeks from now) will result in a test of $3.50 territory. Two schools of thought then take over. Short covering will yield a V-shaped increase in price or the shorts will continue to give up over an extended period with only end of month data out of the EIA showing rolling production. I think we get weaker before mounting a recovery marked by fits and starts.

5) Green Is Good? The GEX and TAN exchange traded funds, which are two of the premier green and solar tracking ETFs have been, well, a disaster.  I just point this out because the stimulus package has about $45 billion ear-marked (bad phrase I know) for wind, solar, other renewable projects and an improved power grid. GEX and TAN were down 67% and 61% in 2008 respectively and from the table above you can see that they have had a less than auspicious beginning to 2009 as well. Opportunity is being created by a market bent on deciding which weekend will see the end of GM or the nationalization of the U.S. banking system.

 

 

Odds & Ends

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Looking For A Job In The Industry? See the jobs listing in last week's wrap here and best of luck to you.

Here are some new Job Listings as of 2/25 (all are in Houston)

• Subsea Wellhead Design Engineer: Mechanical Engineer with 4+ years in the design of subsea wellheads. $70-100K Houston, TX

 

• Subsea Christmas Tree Design Engineer: Mechanical Engineer with 4+ years experience in the design of Subsea Christmas Trees and their associated equipment. $70-100K Houston, TX

 

• Subsea Manifold Design Engineer: Mechanical Engineer with 4+ years experience in the design of Subsea Production System Manifolds. $70-100K Houston, TX

Contact: Gary Gibson, Recruiter, Selective Resources : gary.gibson1@gmail.com 713-398-7903 Cell for the following: