02
Mar

Blue Monday

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More Signs of  Gloom...

...And Some Signs Of If Not Hope, Then Less Doom:

  • Warren Buffet's Annual Letter - sobering, worth a read in your spare time, not a lot on energy other than Warren beating himself up for a poor timed entry on (COP).
  • China - purchasing manager's index still contracting but up for 3rd month in a row

 

The Week Ahead:  Data overload.

  • Monday 3/2 - personal income, consumer spending, ISM
  • Tuesday 3/3 - pending home sales for January, car sales for February
  • Wednesday 3/4 - EIA Oil Inventories (10:30 EST), ADP employment
  • Thursday 3/5 -  EIA Natural Gas Inventories (10:30 EST), initial jobless claims, productivity, factory orders
  • Friday 3/6 - payrolls (forecast at -630,000 with some looking for as much as an 800,000 job loss), unemployment rate (forecast 7.9%), average hourly earnings, consumer credit.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today 
  4. Odds & Ends

Holdings Watch: The Wiki tab is updated.

 

Commodity Watch:

Crude oil rose 12% to $44.76 last week, with most of the rally attributable to a second week of low imports and stable gasoline demand. The 12 month strip moved up 10% to $50.07 and the April 2010 contract is trading at $54 while the April 2011 contract is close to $60. The contango is still in place but it is less step providing traders with less incentive to buy crude, sock it away and sell it later for a nice gain. Crude will likely trade with the markets this week directionally but will likely tend to outperform as we approach the March 15 OPEC meeting. This morning crude is off about $2.50 with the lower equity markets.

  • Chu Watch: Recent statements by Energy Secretary Steven Chu:
    • Feb 19 - Regarding the U.S. stance on more production cuts at the March 15 OPEC meeting: "I will be speaking and learning more about this in order to figure out what the US position should be and what the president's position is,". Translation: I don't know if we care if they cut. 
    • Feb 27 - That was then, this is now. "We are very focused on restoring US and global economic growth, and expect Opec members to take appropriate consideration of the current global economic situation in their discussions. Translation: Don't cut.
      • This a more subtle message than the prior Secretary's alternating pleading and commands and it may have tempering impact on the size of  the next cut. My sense is that a cut is in the cards but will be on the smallish side.
      • With this being the first OPEC meeting since President Obama has taken office I think the Cartel will be looking to tread lightly and not invoke more talk biofuels and solar and hybrids, not wanting to ammunition to the U.S. congresss as it weighs energy policy at a time when the U.S. is taking drastic, large scale steps to "fix things".. 
  • Dollar Watch: As Asian and European markets fall, dollar provides safe haven, breaching recent resistance at 88.50 in place since November and rising to its highest levels since April 2006. Next resistance looks to be 90. If the dollar continues to rally it mute any mute the impact on oil prices of any tepid quota adjustments from OPEC.

Natural gas rose 4% to $4.20 last week.  Gas put on a modest rally Friday in advance of another set of dropping rig numbers and comments from the Speaker of the House that indicated that natural gas at least not as evil as coal (see coal bullet in Stuff We Care About Today section) for her letter about converting the Capitol's power plant from coal to natural gas.  This morning gas is trading flat probably due to the CHK shut in news (see Stuff section below).

  • Weather Watch:
    • Last week HDDs 183 vs the original forecast of 179. This is a "normal" reading for this time of year and will likely yield a withdrawal of between 50 and 70 Bcf this Thursday.
    • This week's gas-weighted forecast: 174.
    • The East Coast will see a return to colder temps this week which should keep gas above or at least close to the $4 mark as we could be in for another healthy withdrawal from the Eastern consuming region next week

 

Stuff We Care About Today

CHK Announces Production Curtailment:

  • 240 MMcfepd (almost a quarter of a Bcfpd) due to low Mid-continent prices shut in. This is 7% of CHK's gross company wide production. 
    • 200 MMcfgpd of this is gas and will be shut through at least March 2009
    • this is helpful to NFX in terms of tighter differentials
    • Mid-continent gas is seen selling for $2.70 per Mcf in March
  • Considering further reduction in drilling activity (CHK is the most active driller in the U.S.)
    • CHK rig count has fallen from 158 at peak last year to 110 now
    • Considering cutting another 11%
  • Haynesville Joint Venture With (PXP) Amended
    • This allows PXP to avoid paying $800 mm in drilling carries
    • Only excecisable during a two week period in June 2010
    • If PXP excercises they give up 50% of their investment in the JV...CHK estimates that at that time PXP will have invested $3 to $3.2 billion in the JV.
    • Participation in the form of the 50% carry of CHK's costs by PXP remains mandatory through year end 2010.

DO Rig Hired For XOM in Australia.

  • Kipper subsea gas project
  • Begin work in 2010 for 3 to 6 month
  • DO's Ocean Patriot semi-sub, shallow water rate not disclosed
  • The rig is under contract until 2011 with Apache at a day rate of $380 to $420K per day so I'd assume DO is probably making a little more than that for this work on the side.

 

Odds & Ends

Analyst Watch: Raymond James cuts targets on the Canadian oil and gas and royalty trusts, (HP) cut to Neutral at JPM, (RRC) target upped at Stifel from $45 to $54. (GDP) target cut from $29 to $20 at Jefco,

Link to the weekly wrap here.

107 Responses to “Blue Monday”

  1. 1
    BirdsofpreyRcool Says:

    Good morning. There is no discernable trade for today. Technical Trader says — looks like another day to play the trend as we go along with the headlines. In other words, could go either way, depending on who says what when.

  2. 2
    zman Says:

    Thanks BOP

    CHK did all the gas producers a favor.

  3. 3
    zman Says:

    Barclays ups SWN target from $40 to $42, maintains overweight

  4. 4
    isleworth Says:

    InterOil Corporation (NYSE Alternext US: IOC) (POMSoX: IOC) today announced that its Antelope-1 well flowed at 382 million cubic feet of natural gas per day (MMcfd) with 5,000 barrels of condensate per day (BCPD) for a total 68,700 barrels of oil equivalent per day (BOEPD), setting a new record rate for the country of Papua New Guinea. The flow test recorded a maximum calculated rate at 545 MMcfd for a dry gas reading through a 6 inch capacity choke that was only opened to 3 1/2 inches or about 30% of capacity. Conservatively adjusting the dry gas flow rate of 545 MMcfd to compensate for 13 Bbls of condensate per MMcf results in the 382 MMcf effective gas flow rate reported above.

    As far as we are aware, the world record breaking gas flow rate from a vertical well confirms other records recently established by the well, such as the largest vertical hydrocarbon column height in a single onshore carbonate reef structure and the largest calculated absolute open flow (CAOF) at 17.7 Billion cubic feet of natural gas per day. The well results establish the country of Papua New Guinea as a world class gas resource base in close proximity to the largest and most well developed LNG market in the world.

    InterOil believes the Antelope-1 well clearly confirms the gas resource potential sufficient to proceed with plans to build a liquefied natural gas (LNG) plant on company land next to the InterOil refinery. Antelope-1 and previous wells, have confirmed over 120% of full capacity, estimated at 500 MMcfd, for the first proposed LNG train. Third party resource estimates are underway and will be released when completed in the next few weeks. Recent settlement agreement with Merrill Lynch uniquely positions InterOil to enter direct negotiations with industry partners on an ownership stake in the Elk/Antelope structure, an ownership stake in the proposed LNG plant and long-term LNG offtake contracts.

    Stock up over $2 this AM

  5. 5
    BirdsofpreyRcool Says:

    Credit weaker from Friday’s close. High Yield taking a larger hit than Investment Grade index. No surprises there.

    For anyone interested in buying CHK debt (or any other high yield issuer), watching the levels of the HY index gives you an indication of the direction of the bond price. However, the great thing about bonds is that, unless the company is on the verge of bankrupcy, you get your money back when the bond matures. You also get semi-annual coupon payments. So, pick a yield you are happy with, monitor the company’s free cash flow, and clip coupons. A lot less risky than stocks, these days.

    IG 228 +2 bps from Friday’s close

    HY 71.313 -.625 points from Friday’s close

  6. 6
    zman Says:

    Ah, orderly panic at the open. Everything but natural gas red. SWN will likely trade positive a bit later in the day as the Street is commenting favorably on their Friday call and up natural gas in this market, however small a move it gets off CHK will help a select group of mid cap gassy E&Ps (SWN, HK, and um, um, …hmmmm.) GMXR getting dropped again this morning, tempting but no sale right now.

  7. 7
    BirdsofpreyRcool Says:

    GMXR was downgraded from buy to neutral at SMH Capital. Basically, costs up and increase in reserves lower than expected. More importantly, 2009 capex is $220mm vs $73mm in FCF at $5.50/mcf and $105mm remaining under its borrowing base. All this suggests that GMXR may need to raise additional outside capital and/or further reduce its budget and production growth rate.

  8. 8
    zman Says:

    Saw the U.S. savings rate was the highest since 1995…not exactly what the government wants right now.

  9. 9
    zman Says:

    Thanks BOP – did they saw what they are using for a 2009 expected gas price to come up with that cash flow estimate?

  10. 10
    BirdsofpreyRcool Says:

    $5.50 nat gas

  11. 11
    sportlock Says:

    Z, A quick observation on the 914 numbers. If you back out the GOM production gain of 400 mmcfd it looks like onshore must have dropped a total of 400 mmcfd in December. Hmmmm. Me thinks someone might notice that this is before we dropped another 500 NG rigs. I get the feeling that with record shorts at the end of February in NG and some nasty nasty weather predicted for March we could see storage end around 1.5 T’s and see production come off hard. Not to beat a dead horse but what is going on with GDP and GMXR. I think GMXR is very promotional with their production guidance especially seeing that production fell last quarter. I know they are very aggressive resereve bookers and they are very promotional when it comes to IP rates. After seeing how well their horizontal CV well program turned out I would be very careful with this one. Just my opinion.

  12. 12
    zman Says:

    Bill – you are correct about the offshore. I backed that out in the Friday post and separated production by state so you can see where the growth starts are starting to turn lower. I’d be happy with a 1.5 Tcf trough but that seems like a distant possibility right now. I have not seen the cold March month forecast you are talking about so if you have a link that would be great.

    On GMXR, first, I don’t own it. I’ve traded it a couple of times but was out for earnings and am out now. Their production hiccup in 4Q and 1Q is pretty foregivable. There production growth rate is back end loaded which usually rings an alarm bell but at the same time they are very small and growing small numbers isn’t that hard when your drilling resource wells. They could ratchet it higher with more $ spent or lower with less. Anyway, just watching it fall for now. They have more unhedged than they’d probably like right now so the stock will probably only move higher sporadically with good well results (3 H.S. completions due in April, another in May) and will perform more solidly with a recovery in gas prices.

    GDP, kind of same boat, transitioning from CV to H.S. causes production hiccup. Stronger balance sheet here but the well results have been fraught with mechanical troubles.

  13. 13
    BirdsofpreyRcool Says:

    Feb ISM Manufacturing at 35.8 vs 33.8 expd. Prices paid 29.0 vs 33.5 expd.

  14. 14
    zman Says:

    Add to 12.

    Also, the offshore is in recovery mode from the storms. At this point, it is not yet back to pre storm levels and much like the last big set of storms it will have tough time getting all the way there as several of the older, destroyed platforms will not be rebuilt. They were under utilized to be sure but helped bring ashore gas volumes that otherwise would not warrant a new structure. So, to grow above pre storm levels you have to have new discoveries. At the same time, jackups are leaving the Gulf as the prices for oil and gas don’t warrant much in the way of exploration and development aside from some operators attempting to stem their high decline rates. That leaves deep water where there is some growth in oil volumes scheduled but little in the way of gas that’s incremental. So we are probably close to the high for offshore volumes for the near term.

  15. 15
    zman Says:

    BOP – #13 is a little bit more good news for natural gas. Had a positive effect a couple of months back when the ISM saw a brief uptick.

  16. 16
    BirdsofpreyRcool Says:

    z -#15… it seems that it’s been the industrial component of nat gas demand that has been the larger-than-expected negative throughout this downturn. So, you’ve got a good point.

  17. 17
    zman Says:

    BOP – if only a minor one, yes.

  18. 18
    zman Says:

    Storm pounds Northeast. Gas is trader centric. If they are colder than they expected on that train platform gas has an uncanny ability to rise in the face of a down market like today.

    http://news.yahoo.com/s/ap/20090302/ap_on_re_us/winter_storm

  19. 19
    zman Says:

    Gotta step out to a parent teacher conference. Apparently it is not ok to tell your daughter, when her hair gets pulled, that it’s ok to kick him in the peanuts. Back in 30 minutes.

  20. 20
    PackMan Says:

    HK CHK both getting hit w/ the ugly stick !

  21. 21
    zman Says:

    Thanks BOP for the gas number.

    Wow, uglier since I left, should have stayed gone. Ouch.

  22. 22
    zman Says:

    $4 off on oil, 12 month strip is down about $3.50. Everyone including commodities traders going into abandon ship mode. Surprised gold isn’t jumping back up. Only things green on my screen are the dollar and natural gas.

  23. 23
    zman Says:

    Question from email re GMXR

    They are all getting beaten down very hard this morning with the markets and then beyond it. The little names are just getting shelled in favor of cash. If you have a 1 year time frame I think they are quite a bit higher. I don’t think management has handled things poorly or mis-managed the company, not sure who said that but if it was a sell side analyst I’d like to know which one and why he said. Impairment charges are behind us. I saw Morgans comments on reserves…there’s a link between IPs and reserves and I think they are making it too strict, using comparisons that don’t stack up on the IPs between say GMXR and HK and then assuming reserves must stink. On the growth target, I recall a presentation from 2 months ago in which they assumed sub 4 MMcfepd IPs from the Haynesville wells to get them to their numbers. I don’t think that’s being anything but conservative

  24. 24
    zman Says:

    Fairly large volumes on the E&Ps and some service given the time of morning. Feels like a fund family shot their holdings in the head this morning.

  25. 25
    BirdsofpreyRcool Says:

    z — #24 looking at the action in the energy sector, was thinking the same thing. There seems to be a “get me out, now” trading order on the desk(s) of some one(s) large holdings.

  26. 26
    BirdsofpreyRcool Says:

    IG 231 now. Seeing buyers at this level… that means mrkt thinks investment grade credit is going to widen from here. Reasonable bet, given the Sea of Red on my screen today.

  27. 27
    zman Says:

    BOP – re 25, yep, I should have made it plural as it surely is more than one family. They are creating some very good value in the names but everyone seems to be sitting on their hands now wondering what will be nationalized next and who will be taxed to pay for the fact that the assets don’t stack up to the cash injections and debt forgiveness of deals like AIG.

  28. 28
    Nicky Says:

    Good morning all.

    Hope you put the teacher right Z re # 19!

  29. 29
    zman Says:

    Nicky – you know it!

  30. 30
    zman Says:

    Iran saying OPEC won’t cut output at its March 15th meeting. I would bet this is a trial balloon. Iran is showing the Cartel leadership and others what will happen to oil if the group does not cut production. The claim runs counter to very recent commentary from Iran about cutting.

  31. 31
    Nicky Says:

    Broader market.
    We are getting close to some sort of pattern completion for the indices. I therefore think that whatever cycle low comes in May/June it is likely to be a higher low and that we are going to put in a low between now and the end of March. 18th March is a possible fib date.

    Target areas remain the same – 650 – 690 region on the SPX.

    Thereafter we should a multi month rally – 6 months – possibly more.

    Then we roll over in C down and that is going to be a catastropic wave.

    Oil – still hoping for the sake of the charts (!) that we undercut the 32.75 low.

  32. 32
    Nicky Says:

    I was emailed the following this morning: I presume its common knowledge?

    The U.S. Geological Service issued a report in April (2008) that
    only scientists and oilmen knew was coming, but man, was it big. It was
    a revised report (hadn’t been updated since ’95) on how much oil was in
    this area of the western 2/3 of North Dakota ; western South Dakota; and
    extreme eastern Montana … check THIS out:

    The Bakken is the largest domestic oil discovery since Alaska ‘s
    Prudhoe Bay , and has the potential to eliminate all American dependence
    on foreign oil. The Energy Information Administration (EIA) estimates
    it at 503 billion barrels. Even if just 10% of the oil is recoverable
    .. at $107 a barrel, we’re looking at a resource base worth more than
    $5.3 trillion.

    ‘When I first briefed legislators on this, you could practically
    see their jaws hit the floor. They had no idea.’ says Terry Johnson,
    the Montana Legislature’s financial analyst.

    ‘This sizable find is now the highest-producing onshore oil
    field found in the past 56 years,’ reports The Pittsburgh Post Gazette.
    It’s a formation known as the Williston Basin , but is more commonly
    referred to as the ‘Bakken.’ And it stretches from Northern Montana,
    through North Dakota and into Canada . For years, U.S.oil exploration
    has been considered a dead end. Even the ‘Big Oil’ companies gave up
    searching for major oil wells decades ago. However, a recent
    technological breakthrough has opened up the Bakken’s massive
    reserves… and we now have access to up to 500 billion barrels; And
    because this is light, sweet oil, those billions of barrels will cost
    Americans just $16 PER BARREL!

    That’s enough crude to fully fuel the American economy for 41
    years straight.

    And if THAT didn’t throw you on the floor, then this next
    one should – because it’s from TWO YEARS AGO, people!

    U.S.Oil Discovery- Largest Reserve in the World! Stansberry
    Report Online – 4/20/2006 Hidden 1,000 feet beneath the surface of the
    Rocky Mountains lies the largest untapped oil reserve in the world is
    more than 2 TRILLION barrels. On August 8, 2005 President Bush mandated
    its extraction. As usual, nothing has happened!!!

    They reported this stunning news: We have more oil inside our
    borders, than all the other proven reserves on earth. Here are the
    official estimates:

    8-times as much oil as Saudi Arabia
    18-times as much oil as Iraq
    21-times as much oil as Kuwait
    22-times as much oil as Iran
    500-times as much oil as Yemen- and it’s all right here in the
    Western United States .

    HOW can this BE? HOW can we NOT BE extracting this? Because
    the politicians in Washington have been greasing their pockets from the
    SIG’s & Lobbyists to block all efforts to help America become
    independent of foreign oil.

    James Bartis, lead researcher with the study says we’ve got more
    oil in this very compact area than the entire Middle East -more than 2
    TRILLION barrels. Untapped. That’s more than all the proven oil
    reserves of crude oil in the world today, reports The Denver Post.

    Don’t think ‘OPEC’ will drop its price – even with this find?
    Think again! It’s all about the competitive marketplace, – it has to.

  33. 33
    ram Says:

    Catastrophic?

  34. 34
    zman Says:

    Thanks Nicky, yep that’s the USGS re look at the Bakken, very old news. Play works higher than here, majority of it needs $55 oil to be break even at current costs.

  35. 35
    zman Says:

    Ram – right, as opposed to …

  36. 36
    Nicky Says:

    Ram – C wave will contain a 3 of 3 of 3 – the most powerful Elliott wave.
    Its likely to take the SPX down into the low 500’s and the 200’s is not out of the question.

  37. 37
    BirdsofpreyRcool Says:

    200s ??????????????

  38. 38
    Nicky Says:

    Short term the SPX may find support at 702 area.

  39. 39
    Nicky Says:

    BOP – it wouldn’t be unusual for the wave count. But first things first….we have a good rally coming up to play.

  40. 40
    ram Says:

    I don’t know. Catastropic is not a number. S&P 200?

  41. 41
    BirdsofpreyRcool Says:

    200 would take us back to 1988… and wipe out 2 decades of market value. Not inconceivable, I guess, in the current eco/political climate.

  42. 42
    BirdsofpreyRcool Says:

    Make that sub-300… to get to 200 even, you need to take it back a couple of more years… to 1985.

  43. 43
    ram Says:

    Thanks Nicky.

  44. 44
    Fiveanddimer Says:

    Nicky, based on your projections, I presume you are of the opinion that we are in a depression as opposed to a recession.

  45. 45
    zman Says:

    BOP – circling back to GMXR, just ran them through my quick and dirty model. Based on their production guidance and hedges, and my modeling of costs (fairly conservative) I put their FCF at about $90 mm with $5.50 gas. So they will be hard pressed not to do a smallish deal to complete their 2009 program. I think the SMH guy is being just a little more cautious. I’d guess that if prices are sub $5.50 by mid year you see the program get scaled back so no deal. Note that they are very much back end loaded the drilling calendar which should take advantage of 1) lower rig rates by then and 2) higher gas prices (assumed by me and others as the S/D market gets balanced out).

  46. 46
    Nicky Says:

    Five – I don’t have the answer to that question except this feels like something that nobody has any quick answers to.

    Right now the charts are closely correlated to both 1978 and 1930 with the Dow right now closer to 1978.

    The SPX is at the dividing line. If it were to follow 1930 then likely we are back to 1992/94 levels which are close to 300.

  47. 47
    rkbos Says:

    test

  48. 48
    Nicky Says:

    Was it something I said???

  49. 49
    zman Says:

    We see you rk, just a quiet Monday. Busy modeling up a couple of scenarios on GMXR for a potential buy with the stock off 20%, anything on your mind?

  50. 50
    Popeye Says:

    No whole dollar support for HK today.

  51. 51
    zman Says:

    Nicky – not for me at least. End of the world as we know it may be the title of my next book but I still sleep ok at night. Just doing a little company modeling and thinking about doing my tax prep for my accountant. Ugh. Mondays…

  52. 52
    Nicky Says:

    Agree Z and forewarned is forearmed.
    As the downside is far quicker than the upside there is plenty of money to be made if you can trade the downside.

    I think we will see a 300/400 point bounce on the SPX first too.

  53. 53
    BirdsofpreyRcool Says:

    BTU, HK, CHK, CRK, PXP. CLR, SD, KWK… all down over 10%. No differentiation being made. Not quite sure what is going on… except that faith in the “private sector ownership” model is being put on the line these days.

  54. 54
    rkbos Says:

    Z – no, just thought i lost connection as i hadn’t seen anyone post for almost an hour; not used to the time lapse between posts; to follow popeye, any HK musings from you as i watch snow and cold rule the day where i am?

  55. 55
    Garyinhou Says:

    Looks like I picked the wrong day to quit sniffing glue.

  56. 56
    zman Says:

    Popeye – they seem to be just running away from all energy now, XNG down 9%. OIH down 9+%, should be down a lot more if things made sense right now.

  57. 57
    zman Says:

    Gary – Airplane. And I hear ya.

    HK – no, I own it a little higher and a lot higher (smaller) and then I have a couple of sets of March options. No rhyme reason to why its off 12% today except that most things are off at least 12% in E&P land right now. NG finally succumbed to oil being off almost $5 earlier and $4.30 now and is down but maintaining $4+. Smaller caps getting absolutely woodshedded now, PQ down 20% has nothing to do with the stock and everything to do with the fact that fund managers are pulling the plug on the little know names. GMXR was a $30 two months ago, nothing they have said or done or been subject to since then would warrant the fall to $13 today but you can’t really jump up and down and call it a value as so much else has seen large drops, (not that large but still quite bit) since that time as well. Suddenly missing 2008.

  58. 58
    VTZ Says:

    My question is who on earth is going to buy into the rally?

  59. 59
    Dman Says:

    Hi Nicky, any chance you could send Z a chart with all of you waves-within waves marked on it? While you are there, you could sketch the future wave possibilities you are thinking about!

    I figure I’m not asking you do do any actual work because you must already have your charts marked up. Otherwise I’d feel guilty to ask 🙂

  60. 60
    zman Says:

    I am with Nicky though regarding the a coming bounce. I’m not saying 6 months of bounce yet but a bear market spike is due any day now.

  61. 61
    zman Says:

    V – right, everyone is looking over their shoulder on even the smallest sign of a rally to get out of shares before the music stops and they’ve no place to sit. Relying on government to come up with a solution is no way to run a market, that’s for sure.

  62. 62
    tater Says:

    Woohoo!!!! I’m green .01 on my LINE purchase today. At this rate I’m going to be very, very rich.

  63. 63
    Dman Says:

    Z – do you regard PQ as a survivor?

  64. 64
    zman Says:

    LINE – a safer yield of 18% I cannot find.

  65. 65
    tater Says:

    I’m going to just keep buying as it goes down. I’d rather average down on a yielder and then try to get back in on other names later if we get into a couple weeks of upswing. I’m not short anything at the moment, getting precarious for that side.

  66. 66
    zman Says:

    Dman – yes, they have taken the steps to survive, sacrificing growth for balance sheet. Kind of depends on how low we go and more importantly, how long we stay down here.

    TXCO in violation of loan covenants over the weekend. We will see more of that soon.

    Tater – Agreed. Those short covering rallies in a bear are brutal.

    CNBC says DJIA has not had an up month since August. I guess I had not noticed but wow.

  67. 67
    tater Says:

    Do you have a book value for CLR and SU?

  68. 68
    Dman Says:

    tater, I do think we’ve arrived at the point where you can scale in (slowly).

  69. 69
    zman Says:

    I don’t keep NAVs on them no. They are higher than here based on current oil prices. Normally they would trade at a 20 to 40% discount. Its above the 40% discount to NAV now since there is no M&A to backstop low prices.

    If you price CLR on a barrel in the ground basis, with 159 mm barrels of proved you get to $3.1 billion of value for $20 per barrel (in the ground) vs their current EV of about $2.8 B. That gives them nothing for their biggest in Bakken acreage position or their other non-Bakken acreage.

    SU’s more difficult to come at as they are an upstream and a midstream player and I really thing they are just trading with crude directionally for the foreseeable future. I have not looked at their latest reserves but they have a large resource that is certainly undervalued now unless prices remain here in perpetuity.

  70. 70
    zman Says:

    Dman – this week worries me a bit so I’m taking it slow. Some people are looking for 700 or even 800 K jobs lost on Friday. I don’t know if we get the bigger than expected number if that comes as a shock or a relief. ADP tomorrow will probably move the market quite a bit.

  71. 71
    tater Says:

    Much appreciated. I’ve switched time frames lately, so a small dose of fundamentals seemed appropriate.

  72. 72
    BirdsofpreyRcool Says:

    z — FWIW, ADP on wed… expecting -630k as per bloomberg consesus right now.

  73. 73
    Dman Says:

    Everything on my screen is red except for the US $. I guess that’s textbook deflation.

    OK, I admit PDC is also green, but it hardly seems worth mentioning.

    How about your mega-screens, Z? Just a handful of green ticks?

  74. 74
    zman Says:

    Eyeballing the mega-screens:

    MLPs – down, average 11%. ATN down 18% on their earnings but I don’t really track them.

    Green Energy ETFs- down hard

    Solar – down 8 to 10%. FSLR down 2% but big deal after the thrashing it took on a big earnings beat last week. Still say management overstepped the negative compared to their official guidance…but either way it got thrashed.

    Gassy E&P – clubbed like baby seal, all down.

    Drillers onshore – 7 to 9% down
    Drillers offshore – down 6 to 9%

    Coal – like a smaller baby seal, down 10 to 13%

    Oil E&P and oil sands – crushed

    Tankers – off 10 to 25% …today.

    Dry Bulks – a little worse than the tankers

    Majors – 2 to 8% losses, worse for the foreign majors like PBR, PTR

    Indie Refiners – down 7 to 10%

    Oil service – still get whacked but off the lows.

  75. 75
    reefguy Says:

    TXCO- could be bk…HWG stock suspended beacuse of affiliate Hallwood Energy bk filing

  76. 76
    zman Says:

    Tater – if you adjust your focus to the very short term, and don’t go blind in the process, FSLR feels like a bounce on the next market greening, trading different than the group right now, and the market over the last 2 days, has an exhausted, enough is enough feel to it.

  77. 77
    Nicky Says:

    Another possible fib turn date is 13th March – these can vary by a couple of days so just be aware.

  78. 78
    Dman Says:

    Hey Nicky, can I get you to bite on the idea (#59) of a graph or two?

  79. 79
    tater Says:

    FSLR seems to have support around this $100 area, though the bottom of the late Nov gap at 95ish seems to be calling for a possible test. Hard to gauge the action around Thanksgiving. Other names have Fib studies that work best if you just ignore that little spike down. If you step back and look at the overall picture longer term, it looks awful technically. Really tough name.
    15 minute chart – Any move back into the gap above will likely be sold the first time around. Big gap though, so that’s not very helpful. Below, I still see the 100 level and the 95 level. Very problematic picking an entry price for a long trade. Safest bet seems to be to attempt to grab a piece of $108 to $113. Clean air in there.
    Or just set a stop below at 99.50 and get long now.

  80. 80
    BirdsofpreyRcool Says:

    With the Rules of the Game changing, I think we will see more of this: “Thanks, but no thanks, Timmeh”

    TCF Financial Files Notice to Pay Back $361.2 Million of TARP
    2009-03-02 20:28:00.588 GMT

    TCF Financial Files Notice to Pay Back $361.2 Million of TARP Preferred Stock

    Business Wire

    WAYZATA, Minn. — March 02, 2009

    TCF Financial Corporation (TCF) (NYSE:TCB) announced today that it has filed notice with the U.S. Department of the Treasury to permit redemption
    of all of the 361,172 outstanding shares of its Fixed Rate Cumulative
    Perpetual Preferred Stock, Series A, $.01 Par Value, at a total redemption
    price of $361.2 million plus a final pro rata accrued dividend. According
    to the American Recovery and Reinvestment Act of 2009, the U.S. Department
    of the Treasury must consult with TCF’s primary Federal Regulator before
    approving repayment. After a 30-day notice period required under the U.S.
    Treasury’s Capital Purchase Program (“CPP”), the redemption price will
    become due and payable to the U.S. Treasury on the outstanding preferred
    shares, the related preferred stock dividends will cease to accrue and the
    common sock warrants issued under the CPP will be liquidated. TCF has
    sufficient funds to complete the redemption payment and will not have to
    issue any additional common shares or other securities.

    “The rules have definitely changed,” said TCF Chairman and Chief Executive
    Officer William A. Cooper. “In November when we agreed to accept the funds
    under the Capital Purchase Program, it was with the understanding that
    only healthy banks would be granted the funds. These healthy banks would
    then employ the funds within their markets to expand lending to
    creditworthy individuals and businesses. Recent actions by the U.S.
    Treasury and possible congressional or regulatory restrictions/mandates
    changed the rules. As a result, public perception views those banks that
    took the TARP money as having done so out of weakness and a need to
    survive without distinction among TARP programs or individual bank capital
    adequacy. We believe participation in TARP has created a competitive
    disadvantage for TCF and it is in the best interest of our shareholders to
    redeem these shares.”

    TCF received the TARP funds on November 14, 2008. From November 14, 2008
    to December 31, 2008, TCF originated over $490 million of loans and
    leases, and 762 loan modifications and extensions on over $117 million of
    consumer home equity loans to help customers avoid home foreclosure.

    “TCF has sufficient capital and access to capital to operate without the
    TARP money,” added Cooper. Assuming the redemption of the preferred stock
    occurred at December 31, 2008, the pro forma regulatory capital ratios for
    TCF would have been Tier 1 risked-based capital ratio of 8.88 percent
    (well capitalized requirement of 6 percent) and total risk-based capital
    ratio of 11.74 percent (well capitalized requirement of 10 percent). In
    addition, TCF’s tangible common equity ratio would have been 5.85 percent
    at December 31, 2008.

    TCF is a Wayzata, Minnesota-based national financial holding company with
    $16.7 billion in total assets. The company has 448 banking offices in
    Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana and Arizona,
    providing retail and commercial banking services. TCF also conducts
    commercial leasing and equipment finance business in all 50 states and
    commercial inventory finance business in the U.S. and Canada. For more
    information about TCF, please visit http://www.tcfbank.com.

  81. 81
    zman Says:

    GS has said they will pay back the $10 billion they were asked to take.

    Nicky – I second Dman’s request if it’s not too much trouble.

  82. 82
    BirdsofpreyRcool Says:

    IG 240 bps… kinda feels like a free-fall into the close.

  83. 83
    zman Says:

    Thanks Tater, I understand not your favorite name, I’ve just been watching it trade for awhile now and have noticed that after the big down or up moves it rests and then yo-yo’s in the other direction for a one to three day sharp snap back.

  84. 84
    zman Says:

    Yep BOP, Asia going to get nailed early and if they can’t reverse it I would imagine we fall a little lower.

  85. 85
    Dman Says:

    Z – I agree that FSLR is trading dryish given the background. Could see it leading a snapback.

  86. 86
    BirdsofpreyRcool Says:

    Can’t see Asia turning this around. It’s going to take some sort of “announcement” tomorrow here in the U.S. Something positive. To get the market back to thinking that maybe, just maybe, we aren’t on the path to push our economy over the cliff.

  87. 87
    zman Says:

    maltliquorthirty. ugh.

  88. 88
    ram Says:

    How about TwoBuckChuckThirty.

  89. 89
    zman Says:

    that’s too good for this market, how about Maddog2020?

    Will run some reserve #s for the morning, things are getting into pretty steep asset discount land.

  90. 90
    ram Says:

    I would also be very interested in Nicky’s EWT charts. Thank you Nicky if it’s possible.

  91. 91
    Nicky Says:

    Working on the charts….

  92. 92
    BirdsofpreyRcool Says:

    I have an direct oil well investment question for anyone who has looked at these things lately. This was from a property that was offered at NAPE recently and I have a fund mngr friend who asked what I thought it would sell for. I know there are a lot of people out there who can answer this question better than I. So, please, if you have any input, chime in!!

    Question… what would you pay for this well about to be drilled. Here are some of the details (don’t know royalty or production sharing agreements) —

    Maverick basin
    oil
    about WTI price realizations
    3,000 ft well depth
    closest producing well about 1,000 ft away
    initial flow on nearby well = 450 bpod, choked back to 200 bpd
    estimating 90k proved reserves
    estimated production life = 9-15 yrs
    $875k drilling costs, low costs to hook up to existing infrastructure
    good gas flow and tiny amount of water

    Can anyone tell me what they think the fair value of this well would be?

    Also, what other questions would you want answered, before putting together your bid?

    thank you in advance!

  93. 93
    zman Says:

    BOP – I just sent you an email on your question

    Thanks Nicky

  94. 94
    mimster90 Says:

    I thought the MLP BBEP has good hedges until 2011. There yield listed 33% at yahoo. Of course they also have a lawsuit with heir largest owner KWK.

  95. 95
    Wyoming Says:

    Subject: President Obama’s Budget Slams American Oil and Gas Producers

    IPAA Land & Royalty Committee Member:

    On Thursday, President Obama released his 2011 budget proposal. The budget calls for the elimination of several oil and natural gas industry tax incentives critical to independent producers and also imposes new taxes on Gulf of Mexico producers. The overall budget eliminates $31.5 billion in what the White House calls “oil and gas company preferences.”

    The budget proposal includes:

    o Repeal Expensing of Intangible Drilling Costs – expensing of some of the normal costs of business (i.e., fuel, repairs, hauling supplies). This attracts capital for high risk, cost-intensive businesses.

    o Repeal of Percentage Depletion – as an oil or natural gas well is developed over time, it depletes the natural resource. This tax incentive allows for the “depreciation” of these wells many of which are small, barely economic wells. Without this provision, many could be shut down.

    o Repeal Marginal Well Tax Credit – a credit that serves as a safety net for those wells that only produce small amounts of oil and gas. Most of these wells are barely economic to keep operating, but collectively they supply almost 20 percent of the nation’s oil and 12 percent of its gas.

    o Repeal Enhanced Oil Recovery Credit – a credit that allows industry to get more energy from wells that are “tired” and depleted, instead of drilling new wells.

    o Increases Geological and Geophysical Amortization Costs – allowed for some expensing of the high costs of doing seismic and other high-tech studies/surveys. Such surveys are important to locate reserves and reduce the number of dry holes and unnecessary wells (a.k.a. the industry’s footprint).

    o Excise tax on Gulf of Mexico Production – where the nation produces much of its oil and natural gas resources and where much of our future energy supplies are located.

    o Repeal of Manufacturing Tax Deduction – a provision given to every other American manufacturer. Allows for independent oil and natural gas produces to put more money into new energy projects.

    o A new fee on “nonproducing” Gulf of Mexico leases.

    As a follow-up to his budget announcement on Thursday, President Obama further clarified his administration’s intentions to hit American oil and natural gas producers during his weekly radio address on Saturday. During his address, the President made the following statement;

    “I promised an economy run on clean, renewable energy that will create new American jobs, new American industries, and free us from the dangerous grip of foreign oil. This budget puts us on that path, through a market-based cap on carbon pollution that will make renewable energy the profitable kind of energy; through investments in wind power and solar power; advanced biofuels, clean coal, and more fuel-efficient American cars and American trucks.

    I know that oil and gas companies won’t like us ending nearly $30 billion in tax breaks, but that’s how we’ll help fund a renewable energy economy that will create new jobs and new industries. In other words, I know these steps won’t sit well with the special interests and lobbyists who are invested in the old way of doing business, and I know they’re gearing up for a fight as we speak.

    My message to them is this:

    So am I.

    The system we have now might work for the powerful and well-connected interests that have run Washington for far too long, but I don’t. I work for the American people. I didn’t come here to do the same thing we’ve been doing or to take small steps forward, I came to provide the sweeping change that this country demanded when it went to the polls in November. That is the change this budget starts to make, and that is the change I’ll be fighting for in the weeks ahead – change that will grow our economy, expand our middle-class, and keep the American Dream alive for all those men and women who have believed in this journey from the day it began.”

    The IPAA plans to aggressively fight for the American oil and natural gas industry in Washington . The President and his administration have developed a strategy the will drive us toward unrealistic goals for new energy sources while ignoring the real needs of the fundamental energy sources that make the US economy run. Although President Obama says he wants to make the nation less dependent on foreign oil, in reality he is outlining an energy strategy that will fail and will make the country more dependent on foreign oil by crippling the American oil industry.

    We also need your help. Please make your voice heard at home and in Washington . D.C. and let your elected officials know the vital role America’s oil and gas industry plays in our nations’ economy. Also, please look for IPAA Action Alerts on specific congressional and regulatory actions and let us know how we can help more effectively convey our message to national leaders.

    Please let me know if you have any questions.

    Thanks,

    Dan Naatz

    IPAA

    (202) 857-4722

    Cortney L. Hazen

    Legislative & PAC Manager

    Independent Petroleum Association of America

    202-857-4722

  96. 96
    zman Says:

    Mim – Re BBEP – I looked at them just before they released 4Q earnings. They are well hedged too although their production guidance calls for more slippage than you will see at LINE. They did not guide to a level of distributable cash flow which to me is a step from saying we don’t know, based on our production declines if we will be able to maintain the quarterly $0.52 dividend for the year. With LINE this is not a question for 2009, given their expected production profile. LINE is a lot bigger and will attract more capital than BBEP or its peers in sort of a last man standing scenario in the group. Finally, I didn’t care for the convoluted organizational structure at BBEP.

  97. 97
    zman Says:

    Re 95. It’s just beyond me to respond that. Why the government plans to sabotage a vital industry to create another one that will need subsidies for the foreseeable future is beyond me.

  98. 98
    Wyoming Says:

    A nose, a face, a knife comes to my mind.

    But hey, maybe some crazy MEND people will turn Phil Flynn and the boys back to long …hum?

  99. 99
    zman Says:

    I’ll be back in the office in 1 hour. I need to hunt down some stats on stripper well U.S. aggregate production.

  100. 100
    rseidman Says:

    Z: I know the market hasn’t been good to most of us, but I’d appreciate an update on your 10k and performance tab,
    unless you planned on eliminating them.

    THanks,

    Bob

  101. 101
    Wyoming Says:

    OK, now the other extreme of the story, actually kind of fits with 95. Check out some of the comments. Kind of reminds me of Peter Schiff 2/3 years ago talking about the mortgage/bank crisis.

    http://bit.ly/158Jfa

  102. 102
    zman Says:

    RS – the wiki tab is updated with my current holdings. Haven’t updated the others due to lack of time.

  103. 103
    zman Says:

    The 10KP tab is updated.

  104. 104
    reefguy Says:

    BOP-92 Where in the Maverick can you find that at 3500′? The big holders website TXCO and their investor presentations show two primRY objectives. Glen Rose porosity at 5500′ and Georgetown at lesser depths. So lets assume it is Georgetown; a fracture reservoir. A 3500′ vertical well should cost less than 600k thru completion. Are you buying leasehold? How much per acre?( term and royalty? Does the well have any offsets? What is the NRI (net revenue interest)? Under what operating agreement are you drilling the well? If you do not understand these questions, you best not invest(lose money)in this venture. I could go on here but it is quiet late(or early)

  105. 105
    BirdsofpreyRcool Says:

    reef — good questions, all. My fund-mngr friend is thinking about “investing” in this well, i gave you all the info he gave me… but i went back and asked him most of the same questions you did.

    Agreed. Buying producing properties is not for tenderfoots.

  106. 106
    BirdsofpreyRcool Says:

    reef — PS forgot to mention, Georgetown = objective horizon.

  107. 107
    interstate moving of slaughtered baked Says:

    interstate moving of slaughtered baked

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