11
Mar

Wednesday – Thank You Sir May I Have Another?!

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 Nice day yesterday although the energy sectors were pretty much tapped out after the first hour as investors sought the perceived easy gains to be had in the banker sector. The willingness to chase the black box, unknown risk and potentially valueless financial names never ceases to amaze.

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crude Oil Inventory Preview
  4. Stuff We Care About Today - PQ
  5. Odds & Ends

Holdings Watch:

  •  PQ - Bought the common just under $1.04. At the time of the earnings report I saw I thought they had gone into survival mode running a limited capital program to make it through this period of low prices. I’m taking a small slice, not a big swing here. But its a good company, with an excellent track record that has more debt than is currently thought wise by the markets. I think they will make it but of course there is no guarantee of that. Rumors abound that they are having a tough time with their bank line redetermination (see yesterday’s post for comments on that process) and those rumors may or may not be true. But buying it for a buck is likely a perpetual option on again what are a good set of assets and a capable management team.  See the Stuff We Care About Today section for a brief model and more thoughts here.

Commodity Watch:

Crude oil eased $1.36 to close at $45.71 yesterday. This morning oil is trading lower by about $0.50 before the oil numbers but all eyes are firmly squared on the comments coming out of OPEC ministers as they prepare to travel to Vienna this weekend for OPEC's 152nd meeting. I did read where the recent rise in oil prices has taken the pressure off the Cartel to further cut production but since all of the OPEC nations are well below their budget levels at current prices I'd say the easing of pressure is pretty minimal.

  • API Watch:
    • Crude: Down 419 M barrels
    • Gasoline: Up 1.7 MM barrels
    • Distillate: Down 279 M barrels

 

  • OPEC Watch: An unnamed OPEC minister said the Cartel may not cut due to the rise in prices and said that if they see more bearish news in the next few days they might cut a modest 500,000 bopd. This is the level of cut I have been thinking we will see. This, and more talk of higher than historicaly normal compliance.

 

  • North Sea Watch: The Oil and Gas Independents Association say investment in new projects has dried up in the U.K. North Sea. OGIA says only Lloyds is lending at this time and new wells drilled in the North Sea are expected to fall from 110 in 2008, to 30 this year and only 10 in 2010. OGIA went on to say that breakeven is $40 oil for many North Sea fields. We're going to see more of this talk of curtailed Non-OPEC production in the coming months. 

STEO Watch: The EIA is out with its latest Short Term Energy Outlook:

  • Global oil consumption: seen falling 1.4 million bopd in 2009 (was seen falling 1.2 mm bopd a month ago).

  • S. fuels consumption is now seen down 2.2% for 2009 vs 2.4% from the month ago report.

  • Non-OPEC supply: seen as flat for next 2 years. Last month, EIA saw this as up 150,000 bopd for 2009 and up another 130,000 bopd for 2010. Hello Mexico, Russia, etc.

  • Global inventories at the end of the year were revised up from 2.58 to 2.7 billion barrels.

  • This is what is causing the little bit of pressure we are seeing on crude now (off over $0.75 from up a buck earlier). This will also give OPEC more reason to cut production.

  • The 2010 outlook calls for a rally in consumption of 0.9 mm bopd (vs 1.2 mm bopd last month)

 

Natural gas inched up $0.02 to close at $3.84 yesterday. This morning gas is trading up two to three pennies.

  • Early Read on Thursday's Gas Storage Withdrawal: The Street is looking for a draw down of stocks of 110 Bcf, which looks a little high to me (again) and would leave storage at 1,683, about 18% above the five year average for this time of year.

Crude Oil Inventory Preview (from the Bloomberg survey)

ZComment:

  • Crude Oil: API calls the same size change in inventories but in the opposite direction. If we get that look for a $1 to $2 rally that will quickly fade back towards watching the pre-OPEC-meeting headlines. Imports have average just over 9 mm bopd for the last 4 weeks vs an average closer to 10 mm bopd for the preceding 4 months. While utilization remains its clear that the range on imports is the swing factor that will determine if we do indeed see high levels on crude inventories.
  • Gasoline: API reported a 1.7 mm barrel build here which intuitively would mean an increase in production which helped them report a draw down of crude stocks. While I'd prefer another draw on gasoline stocks due to higher demand as gasoline becomes increasingly important for crude support one week of builds is not going to hurt the deficit to year ago levels.
  • Distillate: bloated. Advice to the refiners. Make less.

Stuff We Care About Today

PQ Fast Look: I took some PQ common shares yesterday at just over a buck as described in the Holdings Watch section above. The following is my quick model with assumptions which I find to be pretty conservative:

The main things I think about when looking at the model vs their plans:

  • they have set capex at $80 to $100 million
  • my model spills out $120 mm of cash flow on the low end of guidance, the high end of costs and some pretty bearish prices for the year with fat differentials to boot.
  • at year end they had borrowed $130 million on a $150 million line and the fear hear is that the coming redetermination (see the breakout from the 10K below the model) will take the ceiling from $150 to some number below $130 million.
  • They had $24 mm in cash at year which would help absorb a lower redetermination if need be and they could monetize some of their 20.9 Bcfe of hedges with an average floor of $8.02 per Mcfe.

 

From the 10K Regarding the Borrowing Base and the Redetermination:

  • stuff that scared people in yellow
  • stuff that takes the edge off in orange
On October 2, 2008, the Company and PetroQuest Energy, L.L.C. (the “Borrower”) entered into the Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., Calyon New York Branch, Bank of America, N.A., Wells Fargo Bank, N.A., and Whitney National Bank. The Credit Agreement provides the Company with a $300 million revolving credit facility that permits borrowings based on the available borrowing base as determined in accordance with the Credit Agreement. The Credit Agreement also allows the Company to use up to $25 million of the borrowing base for letters of credit. The Credit Agreement matures on February 10, 2012; provided, however, if on or prior to such date the Company prepays or refinances, subject to certain conditions, the Notes, the maturity date will be extended to October 2, 2013. As of December 31, 2008, the Company had $130 million of borrowings outstanding under (and no letters of credit issued pursuant to) the Credit Agreement.
The borrowing base under the Credit Agreement is based upon the valuation as of January 1 and July 1 of each year of the reserves attributable to the Company’s oil and gas properties. The initial borrowing base is fixed at $150 million until the first borrowing base redetermination, which is scheduled to occur by March 31, 2009. The Company or the lenders may request two additional borrowing base redeterminations each year. Each time the borrowing base is to be redetermined, the administrative agent under the Credit Agreement will propose a new borrowing base as it deems appropriate in its sole discretion, which must be approved by all lenders if the borrowing base is to be increased, or by lenders holding two-thirds of the amounts outstanding under the Credit Agreement if the borrowing base remains the same or is reduced.
At December 31, 2008, the borrowing base under the Credit Agreement exceeded the Company’s outstanding borrowings by $20 million; however, as a result of the declines in commodity prices since the establishment of the borrowing base, the Company anticipates that its next regularly scheduled borrowing base redetermination, which is scheduled to occur by March 31, 2009, will result in a borrowing base of less than $150 million. As a result of the redetermination, the Company may be unable to borrow any additional funds under the Credit Agreement, and if the revised borrowing base is less than $130 million, the Company will be obligated to repay the amount by which its aggregate credit exposure under the Credit Agreement exceeds the revised borrowing base within forty-five days after the revised borrowing base is determined. At December 31, 2008, the Company had cash and cash equivalents of approximately $24 million that the Company believes would be sufficient to repay amounts that may be required as the result of the redetermined borrowing base. 

PQ Thoughts Nutshell: Their borrowing base is probably headed lower. That's not the end of the world for them. There capital budget of $80 to $100 mm is below cash flow (my estimate and the Street's) in any event which along with the previously referenced $24 mil should allow them to work through any hit to the borrowing base in a timely fashion and still come close to maintaining production levels.

 

GMXR Responds To Shareholder Letter. Basically said they will consider the request from their largest shareholder, Centennial Energy Partners, to explore strategic alternatives (sell the company) and get back to them in due course.

Odds & Ends

Analyst Watch: (SLB) and (CAM) cut to Hold at Citi, (STO) cut to Sell at Citi, Jessup raises target for (RIG) from $99 to $120.

125 Responses to “Wednesday – Thank You Sir May I Have Another?!”

  1. 1
    Sambone Says:

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude oil futures edged lower but were pinned into a
    narrow range Wednesday, with many market participants sitting tight ahead of
    weekly U.S. inventory data.
    The cautious tone added to hesitancy already growing ahead of Sunday’s meeting
    of Organization of Petroleum Exporting Countries ministers in Vienna, with the
    market uncertain of whether the group will seek to keep output on hold – and
    possibly stress increased compliance with previous cuts instead – or reduce
    production again in a bid to hoist prices.
    “It will be the OPEC meeting that will cast the longest shadow on the markets
    for much of the week,” said Edward Meir, analyst at MF Global in New York.
    “Given the varied opinions, market players will move to the sidelines over the
    next few days and likely rob the markets of a big move in either direction,” he
    said.
    At 1138 GMT, the front-month April Brent contract on London’s ICE futures
    exchange was down 37 cents at $43.59 a barrel.
    The front-month April light, sweet, crude contract on the New York Mercantile
    Exchange was trading 66 cents lower at $45.05 a barrel.
    The ICE’s gasoil contract for March delivery was down $16.25 at $368.00 a
    metric ton, while Nymex gasoline for April delivery was down 221 points at
    127.51 cents a gallon.
    Eight out of 15 analysts surveyed by Dow Jones Newswires expect U.S Department
    of Energy weekly data will reveal U.S. crude oil inventories rose in the week
    ended March 6, with estimates ranging from a draw of 2 million barrels to a
    build of 3 million barrels. The DoE’s report is due at 1430 GMT Wednesday.
    Market participants, including OPEC ministers, will be closely watching crude
    stockpile readings for any further indications that a build in U.S. inventories
    has started to peak and potentially reverse. U.S. crude import levels will also
    be monitored for signs that previous OPEC cuts may be starting to show up in
    data. And gasoline demand figures, which have recently hinted that a slide in
    U.S. consumption has started to bottom, will also attract scrutiny.
    Meanwhile, news from China Wednesday offered little incentive for any move
    higher. Preliminary data from China’s General Administration of Customs showed
    that oil imports fell on the year for the second consecutive month.
    China – the world’s second largest consumer of crude – imported 11.73 million
    metric tons of crude in February, 17.9% lower than the 14.29 million tons
    imported during February 2008.
    “They are certainly not the type of data needed for a break of $50 a barrel,
    but one needs to keep in mind that the high levels of crude oil imports into
    China went into stock building rather than real consumption,” said Olivier
    Jakob, managing director of Swiss consultancy Petromatrix. “China is importing
    less crude than a year ago but is also building less stocks than a year ago as
    storage capacity has been filled,” he said.
    -By Nick Heath; Dow Jones Newswires
    Dow Jones Newswires
    03-11-09 0800ET

  2. 2
    zman Says:

    Thanks Sam.

    Crude fell through $45 and never looked back, pretty meaningless prior to the numbers. It will interesting to see if a draw down on crude stocks, if it happens as API indicates, will begin the process of analysts changing their numbers following the Tuesday night release.

    Interesting to see opening bids on PQ and GMXR this morning.

  3. 3
    elduque Says:

    BDI -27 2271

    TED 109.26

  4. 4
    BirdsofpreyRcool Says:

    Tech Trade Comments (just got ’em) — Switch game plans. Go short the morning rally for a sell of through lunch. Odds 60/40.

  5. 5
    BirdsofpreyRcool Says:

    Credit Market — spreads across the board tighter… especially in the financials. Still far, far from safety… but taking a breather from the panic of last week that accerated and almost blew up on Monday.

    IG 238.5

    HY 69.25

  6. 6
    BirdsofpreyRcool Says:

    Credit Desk (CDS) starting to see some “mini-fades” of this rally.

  7. 7
    BirdsofpreyRcool Says:

    z — that PQ Bold Trade is working well. Kudos to clear headed thinking, in a panic-stricken market.

  8. 8
    reefguy Says:

    z- Nice 44% pop! You are so good…

  9. 9
    zman Says:

    I had a push from the SMH analyst, can’t take credit but its nice to have a little gain in a stock these days.

    Wow GMXR – going to opt not to trust that rally just yet, very difficult sell in this market. I know its their biggest shareholder but I’d tell them to shove it, get some spine and perspective and talk to me in 12 months.

  10. 10
    zman Says:

    Within 50 cents of gap fill on the FSLR … mulling taking my lumps there.

  11. 11
    zman Says:

    Reef – also, keep those rumors coming. Need that info flow. Part of the biggest trouble in the sector these days is knowing what is depressing the names. I often think I know but you guys in the business may be hearing different things. Many thanks for pointing out the redetermination rumor 2 days ago.

  12. 12
    BirdsofpreyRcool Says:

    Credit (CDS Indices) validating this morning’s rally now…

    IG 237

  13. 13
    reefguy Says:

    z- look at CPE 4Q earnings(($21.19) loss/sh)

  14. 14
    BirdsofpreyRcool Says:

    reef — CPE is toast, don’t you think? They have a 9.75% bond outstanding ($193mm) that is trading sub-50-cents. That is usually an indication that equity is worthless.

  15. 15
    zman Says:

    BOP – is that CPE a convert?

  16. 16
    zman Says:

    Reef – will do. You think TXCO dead? Story looked promising.

  17. 17
    reefguy Says:

    BOP- bond is held 75% by one fund, so trading is skewed…it is similar in some respects to PQ in that they have $25MM in cash and some room in revolver.

  18. 18
    reefguy Says:

    TXCO- DOA on oil below 45. They will be acquired, but how much for equity?

  19. 19
    zman Says:

    Santa Barbara dedicates new STP solar project today, private financed, puts a positive spin on all the doubt out there as these deals trickle through the system. This is a small project (powers 100 homes) but we are likely to see more of them this year. Everything is not frozen.

  20. 20
    zman Says:

    FSLR hit 124.88 so far today. Gap was at 124.89. Silly market, gaps are to be filled.

  21. 21
    BirdsofpreyRcool Says:

    reef — re: CPE… true. Franklin… they are not afraid to take over assets in a BK, either. So, unlikely they will “negotiate” with equity… they typically play hard ball. But, good point about trading price distortion.

    It is a straight note, due 12/2010.

  22. 22
    reefguy Says:

    BOP- and they will not sell that note at a discount…

  23. 23
    Dman Says:

    Any tips on good data streaming services?
    My broker’s platform – not so good.

    I used to have Qcharts, is there anything else worth a look?

  24. 24
    BirdsofpreyRcool Says:

    reef — re: Franklin, did they buy it at offering? or, are they distressed investors.

    I have been in situations with them as distressed investors… it’s something they do better than most mutual fund companies.

  25. 25
    zman Says:

    Dman – you just looking for live charts/quotes for equities and options, level ii, news? If so, Street Smart Pro from Schwab is hard to beat.

  26. 26
    reefguy Says:

    Franklin purchased at offering

  27. 27
    zman Says:

    EIA Inventories: kind of a mixed up report but good for refiners

    oil up 0.7 mm barrels
    gasoline down 3 mm barrels
    distillate up 2.1 mm barrels

    imports stayed low at 9.1 mm bopd

    gasoline demand eased a touch to 9 mm bpd

  28. 28
    Dman Says:

    Z – yep, quotes & charts for stocks & options. Futures would be nice too.

    BTW, do you ever have any use for trading the futures or option on them?

  29. 29
    zman Says:

    COP on the tape disclosing acreage buys in the Eagle Ford shale in S. Tx. (Maverick and La Salle counties). Could give a boost to HK.

  30. 30
    elduque Says:

    Dman-you might take a look at Think or Swim

  31. 31
    zman Says:

    Dman – Schwab does a pretty good job, tell them you are an active trader and they’ll give you pretty good software. They don’t do futures which is why I’ve got a Thomson terminal on my desk too. Re futures, I can do it but have only done it rarely, not in a couple of years now.

  32. 32
    zman Says:

    Other player in Eagle Ford is TXCO, big acreage owner there.

  33. 33
    benbobby Says:

    Zman, re: gasoline inventory…. given the continued historically low utilization numbers… aren’t these numbers in fact being manipulated?

  34. 34
    BirdsofpreyRcool Says:

    reef — thanks. interesting…

  35. 35
    reefguy Says:

    29- That is in TXCO home plate

  36. 36
    zman Says:

    Re PQ Redetermination: I’d bet the $150 mm line falls by 25 to 35% which would not kill them. Was thinking long term hold but I hear ya, in this market, what’s that? Getting a nice move over $1.50 now which is more than I expected in a day so may just kill it and revisit on a fall, will definitely take half off the table soon.

  37. 37
    zman Says:

    ben – I’m shocked. Bad data from the government? No way. Ok in all seriousness, the numbers have been surprisingly strong on the production side for both distillate and gasoline production. The demand number is not an actual nor are the weekly imports numbers…they are estimated. Will give it some more thought in a bit.

  38. 38
    zman Says:

    Another birdie sent me a note on PQ this morning. I had not noticed that the same bankers on the revolver are the couterparties to the hedges. So that makes flipping the switch on $60 mm in hedge value as easy as flipping a switch. This broker points to favoring the 10.375% Senior notes of 2012 over the common. Get paid to wait for the story to improve (30% yield now).

    They also point to insider buys of 490K shares since Monday.

  39. 39
    gaamblor Says:

    the import numbers are estimates? seems like they could at least figure that out to some degree….do they have actual data finalized and published at some point?

  40. 40
    zman Says:

    gaamblor – sort of. They publish a monthly that’s a couple of months delayed that aggregates the numbers. Then those numbers are revised each month as the new monthly comes out for between 1 and 2 years. Your tax dollars at work forecasting the past.

  41. 41
    zman Says:

    Gasoline down but outperforming HO and Crude. NG holding flat despite the big, unexpected build in distillates.

    I honestly trust the big numbers from the API a lot more but the market looks to EIA as there is more, albeit estimated, data there. API was way off of EIA today.

  42. 42
    md Says:

    Are you planning to unload FSLR today

  43. 43
    sane Says:

    polar opposites between EIA and API

  44. 44
    zman Says:

    md – good question. Just asking myself that. If the market and it don’t push on through the gap area then I think I have to and revisit on the next massive, we hate the sun market failure day.

    Sane – amazingly opposite. They had been tracking pretty closely.

  45. 45
    reefguy Says:

    z- you may get a 24 hour double

  46. 46
    zman Says:

    Gasoline positive now. Just took a look at production, it was off 5% from last week which is a big number and the reason for the drop even as demand skidded slightly. This goes back to the comment from earlier this week that refiners are unwilling to revisit negative mogas margin land. A little faster than I thought and there’s definitely some unplanned outage time in the number but that’s a big production drop even though we normally see some slide in production this time of year.

  47. 47
    PackMan Says:

    PQ; rather than try to time a sale and possible pullback; I just sold Mar 2.50 calls for 15 cents.

    So come next Friday, I either have a sale for a total of 2.65 on shares bought for 0.94; or my cost basis to hold will be 0.79.

    I think a reasonable shot this will be 2.50-3.00 by next Friday; depending on what does or does not happen.

  48. 48
    Garyinhou Says:

    So maybe COP acquired acreage from TXCO?

  49. 49
    zman Says:

    Packman – that’s a sound concept.

  50. 50
    zman Says:

    Gary – could be but TXCO would have to announce it. Sounds like its been going on quietly for some time and the area is large so I’d guess they just picked up unattached acreage. GS is advising TXCO on their strategic alternatives.

  51. 51
    zman Says:

    Nicky – was your level on the SP500 738?

  52. 52
    zman Says:

    Cushing stocks declined for a third week to 33.6 mm barrels… less Bakken crude production.

  53. 53
    Dman Says:

    thanks EdD, looking at ThinkorSwim now.

    PQ – up 60% in a few hours. Not bad for a stock trade.

  54. 54
    AAA Says:

    Anyone know what just torpedoed the financials?

  55. 55
    zman Says:

    Wonder if Dow 7,000 is now a ceiling.

  56. 56
    BirdsofpreyRcool Says:

    AAA — just asked the trading desk… they don’t see anything.

  57. 57
    BirdsofpreyRcool Says:

    POTUS was speaking, about 15 mins ago… but, i didn’t watch. So DK what it was about.

  58. 58
    zman Says:

    Saw President Obama was in front of a camera but had the sound off, could be that. Saw a headline saying earmark reform and another about the global economy potentially being a drag on the U.S. for longer than previously thought.

  59. 59
    zman Says:

    BEXP announces after the close. I’m probably going to sit that one out.

  60. 60
    VTZ Says:

    Probably fundamentals torpedoed them… jokes.

  61. 61
    zman Says:

    Wash sale rules for executives. Refresh my memory but are they longer than for the rest of us? 6 months vs 1 month?

  62. 62
    zman Says:

    TXCO – is drilling better wells in the Eagle Ford in partnership with APC. APC announced they IP’d a 6 MMcfepd well yesterday in their analyst meeting.

  63. 63
    Sambone Says:

    —— API —— —— EIA ——
    Stocks Change Change Stocks Change Change
    03/06/09 from from 03/06/09 from from
    pvs wk yr-ago pvs wk yr-ago
    Crude 345.3 -0.4 40.1 351.3 0.7 47.9
    Distillate 144.0 -0.3 29.7 145.4 2.1 30.0
    Gasoline 216.5 1.7 -2.8 212.5 -3.0 -19.2
    Heating oil 38.2 -0.1 7.8 37.8 1.3 7.7
    RFG gasoline 1.5 0.2 0.5 0.9 0.0 -0.1
    Kerosene 41.0 -0.4 2.6 41.6 -0.1 1.9
    Crude runs (bpd) 14.6 0.2 0.0 14.1 -0.2 -0.5
    Refinery runs
    (percent) 83.7 0.2 -3.3 82.7 -0.4 -2.3
    Products supplied
    (4 week moving average)—————-19.3 -0.2 -1.2
    https://customers.reuters.com/community/commodities/graphics/DOE_Actual.htm

    By Haitham Haddadin
    NEW YORK, March 11 (Reuters) – U.S. crude oil stocks rose last week as
    imports increased and demand from refiners fell, while gasoline posted a big
    decline, Energy Information Administration weekly data showed on Wednesday.
    Total commercial crude oil inventories gained 700,000 barrels to 351.3
    million barrels for the week ended March 6, EIA reported, above forecasts for a
    small build of 400,000 barrels.
    Crude stocks rose on an increase of 93,000 bpd in crude imports and as
    refinery runs, or demand from refiners, fell by 229,000 bpd. U.S. refinery
    utilization fell 0.4 percentage point to 82.7 percent of capacity versus a
    forecast 0.1 percentage point decrease.
    Gasoline supplies amounted to 212.5 million barrels, down by 3 million
    barrels and dwarfing a forecast 400,000-barrel draw, as refiners cut their
    output
    of motor fuel for the week.
    “Gasoline is coming up from the lows here and I expect gasoline will be on
    the positive side soon and lead the market higher,” said Mark Waggoner,
    President
    of Excel Futures in Huntington Beach, California.
    Though motor fuel demand was off on the week, demand over the past four
    weeks
    was 9.02 million barrels per day, up 1.6 percent from a year ago.
    Weekly gasoline demand above the “magical” 9 million barrel mark will add to

    the psychologically bullish backdrop, noted Chris Jarvis, senior analyst at
    Caprock Risk Management in Hampton Falls, New Hampshire.
    “In short, the energy complex leader, gasoline, continues to strengthen,
    which should support the market over the near term and help crude oil push to
    the
    $50.00 mark,” Jarvis noted.
    Distillate fuels, which include heating oil and diesel, were up by 2.1
    million barrels at 145.4 million versus forecasts for an unchanged reading.
    Production of middle distillates was up by 155,000 bpd last week, EIA noted.
    Heating oil stocks rose by 1.3 million barrels to 37.8 million amid some
    milder weather for part of the week in the U.S. Northeast, the world’s largest
    market for the home heating fuel.
    Total U.S. distillate demand over the past four weeks was down 6.1 percent
    from a year ago, EIA added.
    “Distillate is an important indicator of economic activity and I think this
    points to continuing problems in the economy …” said Addison Armstrong,
    analyst
    at Stamford, Connecticut-based Tradition Energy.
    The American Petroleum Institute, a trade group, said in its weekly data on
    Tuesday that crude stocks in the world’s top consumer fell 419,000 barrels last
    week while gasoline rose 1.7 million barrels as product imports rose 190,000
    bpd.
    Distillates fell 279,000 barrels, API said. nAPI000032
    (Reporting by Haitham Haddadin with additional reporting by Janet McGurty and
    Gene Ramos; editing by Jim Marshall)

    Wed Mar 11 15:35:36 2009

  64. 64
    AAA Says:

    z, Re 61, wash sales are a tax rule. There is an SEC rule that prohibits short swing trading by execs, defined as 6 months. They have to give up any profits.

  65. 65
    Nicky Says:

    Hi Z – there was a gap to fill at 735.

  66. 66
    choices Says:

    Dman-you might also look at TD Ameritrade for streaming stk/option, Interactive Brokers for futures, Canadian stks-I believe TD is acquiring Think or Swim but not positive. Commissions low on IB and relatively low on TD if active-lot of tools on TD, charts on IB are lousy but you can hook up to NinjaTrader.

  67. 67
    Nicky Says:

    Support at 690, 697 and 700. Wave iv correction and it could take a number of different shapes, ie single zig zag, double zig zag and I think likely to last a week or so. That said I can’t dismiss the possibility of a smaller wave iv correction that completed an c move this morning.

  68. 68
    zman Says:

    Thanks AAA, just wanted to confirm its 6 months for the executives. More in a bit.

    Thanks for the levels Nicky.

  69. 69
    RMD Says:

    re:61 wash sale rules for execs.
    I think Aubrey said he can not buy stock until April (or June?). April would be 6 mo.s from Oct. ’08 margin sale.

  70. 70
    zman Says:

    RMD – yeah, I think April on Aubrey. I was looking at Wilson over at HK who dumped shares in December and then a small lot in February. I’d like to have more insider buying here than the free shares management gives itself but I’m not going to get it for at least another 3 months if then. I see some of the other guys buying but its small bits.

  71. 71
    zman Says:

    A lot more buying from insiders hitting the tape now. Some of it quite large, all under a buck.

  72. 72
    zman Says:

    add to 71. The biggest PQ insider buys coming from the directors who have, I am sure gotten pretty good assurances from the CFO. The CFO is buying too but pretty small $. Would like to see him and other officers step to the plate more than this.

  73. 73
    zman Says:

    Stepping out for 20 minutes.

  74. 74
    Dman Says:

    Best thing about ThinkOrSwim so far: they actually have their platform application for Mac! It runs easily on my somewhat underpowered 2 year old Mac Mini. And it rocks … gonna take a while to learn how to fly it, but it’s looking good.

  75. 75
    BirdsofpreyRcool Says:

    PQ — hearing the selloff Friday was a true Bear Raid. Looking at the volume on Monday and today, don’t think all those shorts can have covered yet.

    Anyone out there familiar with analysing a bear raid? would like to hear what you think re: have they covered yet.

  76. 76
    zman Says:

    Wow. Market turned lower since I left, not a lot of bullishness in the numbers to support crude. Flipside on lower crude , now off almost $2 is that it takes away the argument that OPEC won’t act because oil is up. Personally, I think that’s a pretty weak argument as they look out a lot longer into the future and past when planning.

  77. 77
    zman Says:

    PQ – don’t know about the bear raid but surely some of the shorts will just look to add to positions on this bump. I know that you have people in now that don’t know the difference between petroquest and petrohawk. That makes me want to get back out and buy it back after they take their one day profits.

  78. 78
    BirdsofpreyRcool Says:

    z — taking profits in a squirrely mrkt is never a bad thing. Protect the nuts! 😉

  79. 79
    Dman Says:

    “Protect the nuts”

    I’ll try to remember that rule 🙂

  80. 80
    zman Says:

    Big cap E&P up, everything else mostly red. Cash flowing to perceived safety. Surprised to not see EOG up more but then there is all that unhedged oil on a down $2.35 oil day. Seeing story after story saying OPEC won’t act due to the rally in oil. Time to change the headline fellas.

  81. 81
    zman Says:

    It’s Wednesday afternoon and the market looks spent.

  82. 82
    Dman Says:

    Z – continuing the nut theme, can you ‘splain (in a nutshell) why SWN has held more-or-less steady as NG has swan dived (as it were).

    Also, what names (if any) are related to NG as SU is to crude? With NG at $3.80 something, I’m looking for a commodity type vehicle, i.e. a stock that will track the commodity without the systematic tracking problems of UNG. I don’t mind if the stock wobbles around in the tracking (like SU with crude) but just want to avoid the systematic problems of the USO, UNG type vehicles.

  83. 83
    zman Says:

    SWN probably better due to strong management, resource, balance sheet position. People like the fact that they weren’t paying $25,000 an acre for anything last year. SWN is a good choice to track NG.

  84. 84
    zman Says:

    Listening to the CPE call replay now, taking a look at them from the same perspective as PQ. Jury still out. Buzz if you have a question/comment.

  85. 85
    VTZ Says:

    Most people do not expect the royalty breaks in Alberta to have a huge impact on drilling. Just saw this article and I believe it reflects everything I’ve heard.

    The royalty break impacts small explorers, but large E&P like Encana, Petro-Can, Imperial, CNRL, Talisman, Nexen, etc are not looking to increase spending on Alberta nat gas anytime soon.

    Excerpts from DOW JONES NEWSWIRES:

    “The one-year incentives start in April, capping royalty rates on new oil and gas wells at 5% and offering drilling credits to smaller producers.”

    “While energy companies say the incentives are a step in the right direction, the industry is skeptical of their ability to reverse a forecast 27% slump in drilling activity this year.”

    “Heavyweight producers, meanwhile, may need more encouragement before directing spending back into Alberta. EnCana Corp. (ECA), North America’s biggest gas producer, hasn’t yet decided if it will ramp up drilling schedules based on the new incentives, while Canadian Natural Resources Ltd. (CNQ) has already ruled out making any changes.”

    “The new incentives help, “but you’re going to need longer-term measures,” said Canadian Natural’s president Steve Laut, noting that Alberta’s royalty system and low gas prices were equally to blame for the company’s cutbacks in the province.”

    “The temporary “band aid” solutions suggest more changes and complications lie ahead for Alberta’s royalty structure, analysts say.”

  86. 86
    Dman Says:

    #83 so they didn’t get caught up in the great gas grab of 08?

  87. 87
    zman Says:

    SWN – no big land grab cost.

  88. 88
    BirdsofpreyRcool Says:

    Natural Gas Falls to 6-Year Low as Recession Reduces Demand
    2009-03-11 18:48:24.569 GMT

    By Mario Parker
    March 11 (Bloomberg) — Natural gas fell to the lowest in more than six years on concern the sour economy is sapping demand for the fuel from factories and manufacturers.
    Industrial gas use will fall about 6 percent to 17.1 billion cubic feet a day this year, the U.S. Energy Department said yesterday in its monthly Short-Term Energy Outlook. The estimate was down from 17.3 billion forecast in February. Industrial users account for about 29 percent of gas consumption.
    “The fundamentals for natural gas are still very poor,”
    said Tom Orr, research director at Weeden & Co. in Greenwich, Connecticut. “Industrial consumption is still down and that’s really cutting into demand.”
    Natural gas for April delivery fell 4.2 cents, or 1.1 percent, to $3.798 per million British thermal units at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange.
    Prices touched $3.791, the lowest intraday price since Nov. 14, 2002. Gas has been at or near six-year lows for the past week.
    Industrial gas consumption in November was 4.3 percent less than the same month in 2007, and in December demand was down 10 percent from a year earlier, the department said on Feb. 26.
    The U.S. unemployment rate jumped to 8.1 percent, the highest since 1984, according to a Labor Department report on March 6. Manufactures such as General Motors Corp. and Dow Chemical Co. have shuttered plants as demand dropped.
    Gas inventories last week probably fell 104 billion cubic feet, according to the median of 16 analyst estimates compiled by Bloomberg. The average decline for the week is 91 billion, according to the Energy Department. Stocks in last week’s report were 14 percent above the five-year average.
    “Supplies are quite a bit above the five-year average and you’re kind of in a lull period,” at the end of the heating season and before air conditioning starts to boost demand from gas-fired power plants, Orr said.
    Gas production is expected to average 58.6 billion cubic feet a day this year, matching output in 2008, the U.S. Energy Department said yesterday in its monthly Short-Term Energy Outlook.

  89. 89
    Dman Says:

    From the latest SWN transcript it looks like they have 48% of ’09 hedged at $8.48, so that would help explain their relative strength.

  90. 90
    zman Says:

    That’s part of it but I can think of more highly hedged, more leveraged names that shall remain nameless with headquarters in OKC that have faired less well. Now is when you want to be something other than a gunslinger.

  91. 91
    BirdsofpreyRcool Says:

    The lovely rally we had in credit is faaaaaaaaaaaaading… sadly.

    IG 246

  92. 92
    choices Says:

    VTZ-have you had any experience with the operations of PDS or any opinion on the company-they took on huge debt to acquire Grey Wolf and the price has been absolutely hammered.

    Thanks.

  93. 93
    zman Says:

    GOOG – Must be feeling the pinch. Just got notice my monthly service cost fees for subscribers will be going up 50%.

  94. 94
    reefguy Says:

    93-z, didn’t you that the cost to harvest proprietary info from our data has skyrocketed?

  95. 95
    Dman Says:

    Z – how do you rank the fundamentals of RIG, DO, ATW here?

  96. 96
    Popeye Says:

    Cramer will be the featured guest on the “Daily Show” tonite.

  97. 97
    zman Says:

    Reef – that’s funny.

    Dman – with broad strokes, I’d put them in that order. RIG and DO pretty close to a tie in my mind. ATW has more shallow water exposure on a percent of revenues basis. If we do start to see a number of rig contract cancellations (I’ve heard of several deferrals/renegotiations now and at least one outright cancellation) then it will hit the big guys less than if one were tossed at a player with only a handful of rigs like ATW.

  98. 98
    zman Says:

    Big split between LC and SC E&P today, like night and day. CHK had another class action filed against it last night and its up 6%.

  99. 99
    zman Says:

    Thanks Popeye, setting the DVR.

  100. 100
    elduque Says:

    Rant 1 for the day.

    I think it would be extremely beneficial if the would take CDS and S__T can them.

  101. 101
    zman Says:

    BOP – just listening to the replay of today’s CPE conference call, they are going to be talking to the 2010 noteholder (Franklin?) about renegotiating sooner rather than later. I take it you think that won’t fly?

  102. 102
    choices Says:

    I think Cramer is on on Thurs nite-he did not look happy on video clip on one of the blogs. I did see it but apparently Stewart did another rant last eve-anything to drive up ratings.

  103. 103
    BirdsofpreyRcool Says:

    z – no

  104. 104
    zman Says:

    Thanks BOP…sounds to me like they are dreaming on a couple of fronts. Their 2009 production profile and their ability to restructure that senior note.

  105. 105
    zman Says:

    CHK off to the races…people should sue them more often.

  106. 106
    elduque Says:

    Z- Rant 1. should be if they would take —

    Also, any reason for CHK’s performance today.

    Thank you

  107. 107
    zman Says:

    Eld – I knew what you meant! On CHK, there is nothing that I see, the big cap E&Ps are all strongly green however except for XTO.

  108. 108
    BirdsofpreyRcool Says:

    z — let’s think this through… what can CPE equity (or management) offer Franklin in return for renegotiating their debt position? More security? More assets? I’d have to look at what the collateral potential is, as the bonds are not currently secured. That might be a bargaining chip CPE can play… but, CPE equity would have to come up with something Franklin could get outside of a Ch11 that Franklin couldn’t get in a Ch11.

    This sort of bondholder negotiation can sometimes work, in a service-based business… or one where the assets disappear in a Ch11 (like if the operations are scattered across a number of JVs that automatically disolve in a BK). But, in a hard-asset based business, what can CPE mngmt offer that Franklin wouldn’t get in a BK? Of course, Ch11 is a value destruction process, as it becomes a food fight for legal and advisory fees… so, that is a minor bargaining chip… just thinking out loud here.

  109. 109
    zman Says:

    CPE – I’ll wait until morning to think about taking a small slice. Gotta work some stuff out in my model. Redetermination is ongoing on their borrowing base but they have nothing borrowed now and some cash on hand. Very survival mode capex spend.

  110. 110
    zman Says:

    BOP – I hear ya on 108 and I can’t figure out why they would take less on the dollar. I don’t see world class assets here. What I see are a few scattered mostly shelf leases, 4 shelf producing properties, 2 deepwater properties (all minority non operated interests). Not to put too fine a point on it but the best thing to do is take them into BK, roll them up with some other shelf assets as a package and then IPO them in 2 years. And the cycle repeats. This is why I don’t have much to do with Gomex Shelf players. Nasty decline rates that don’t tail out over 20 years but go dead in 4 to 5. Prices go low, you can’t afford to drill and so you dwindle and if you have big interest payments like these guys, you polish your resume.

  111. 111
    zman Says:

    Re 110 – doesn’t mean I won’t buy the stock for a trade at all. They’ve been around the block and can make it if they are patient AND prices recover. Like I said, nothing on the revolver, they’ve got a little cash and a little hedge value they could trade in. They are talking about hunting for new producing properties in a never say die kind of fashion.

  112. 112
    zman Says:

    Wow, fast day. Beerthirty.

  113. 113
    BirdsofpreyRcool Says:

    CPE — and if CPE mngmt starts offering up collateral to Franklin, that further reduces the bank borrowing base. Also, one thing banks will NOT stand for is if a company will have to draw on its revolver to make interest payments to subordinated debt. So, keep that in mind while you are doing your model.

  114. 114
    Dman Says:

    Bizarre feature of ThinkOrSwim platform: it rings a bell at the close, which sure woke me up.

    A slightly green day after a monster green day. Seems good to me… when was the last time we had that?

  115. 115
    Dman Says:

    #114 referring to the broad markets, not to energy. But even so …

  116. 116
    zman Says:

    This is from my Tech Support guy, an all around good egg, who makes sure things don’t break around here on at his real job in Austin.

    Hello, folks. I know, I know. Some of you are going to bitch and
    scream, “you never write anymore!” Just remember, it goes both ways!

    Recently I took on the project of trying to get my brother-in-law some
    Internet access. Most of us wouldn’t be dealing with quite the problem
    in obtaining this as he is. You see he’s out in
    Jalalalalallalalaalalaalabaaddd (there are probably too many a’s and
    l’s in there) in Afghanistan as part of 20+ person unit on the front,
    doing things like defending our way of life.

    In order to chat with his fiance’, he’s got to stand in line to use a
    shared computer with pretty crappy access. Or to email his mother or
    father or sister. He’s got a few guys in his unit that are going to be
    there while their babies are being born this summer, and boy would
    they like to see the little buggers as live as possible.

    How is this possible, you ask? Enter the magic of broadband Internet
    connections. Without getting into the gory details, suffice it to say
    that I’ve got them, and I’m looking at raising $4500 to enable them to
    get this shipped, installed and activated for them. That provides them
    the first few months of service, after which the guys in the unit will
    be taking it over.

    Yep. $4500. Well, ok. Not $4500. $4479.35, precisely.

    I know all about the economy and lack of money, yes, but I’d like you
    to take a moment to think about this, and I would like you decide
    whether you would like to contribute to this cause, or not. And,
    really, with my stellar, internationally-renowned nagging ability, and
    mind-like-a-steel-trap and award-winning grudge-holding, can you
    really afford NOT to participate? 🙂

    I’ve looked at having this sponsored by some companies, but there have
    been political considerations (quite literally) in some cases,
    cashflow issues in some other cases, and lack of interest in some
    cases. I’m waiting to hear back from a couple, still, but I’m losing
    hope on that front.

    Therefore, I’m starting a grassroots campaign to raise this money.

    This message went out to about 45 people, and I’ll be sending out some
    more. I’d appreciate it if:

    a) You could forward this to anyone who might be interested in contributing
    b) You could find it in your heart to do so

    This is going to happen, one way or the other. The question is just
    how large of a dent it ends up making in my pocket.

    I hope this note finds you all well, and my brother-in-law, the
    Airborne 101 and me all thank you for your time in reading and
    considering this.

    In a perfect world, I can get
    100 or so people interested at $45 each. I doubt it.

    Sincerely,
    Scott Whitney

    We’ll have this along with a mailing address and a PayPal donate button for those of you who wish to contribute.

  117. 117
    choices Says:

    Dman-this site may be of interest.

    http://www.elitetrader.com/br/?action=view&R_FirmID=146

  118. 118
    tomdavis12 Says:

    Z: AT&T is planning on having 8000 CNG vehicles built. Seems pretty mainstream and good for CHK.

  119. 119
    zman Says:

    Re 118, may be good for CLNE too.

  120. 120
    zman Says:

    TBP on CNBC shortly

  121. 121
    ram Says:

    ZMAN – Could the reason for HK not doing relatively well is it is not in the major energy flight to quality group?

  122. 122
    zman Says:

    Ram – probably the case although there were exceptions and I was a little surprised it wasn’t among them. Just noise I think.

  123. 123
    choices Says:

    Z-Re: #116, I’m in-please provide the necessary details.

  124. 124
    BirdsofpreyRcool Says:

    OVERVIEW

    · Equities opened strong but ended the day only slightly in the green; SPX +2pts after failing near the ~730 level; USD sold off hard in the afternoon and Treasuries stage strong rally. Overall, a very boring (although choppy/volatile) afternoon for the most part…though the fact that we at least held on to Tues’ massive gains is encouraging to the bulls. Most still think we need to break through the ~740ish level to get some more fear/conviction behind the squeeze.

    · Sectors today: Financials remain relative outperformers (banks still leaders to the upside), although even there some profit taking is setting in following two very strong days (Mon + Tues) but still not seeing new shorts being put on. Tech has a nice bid to it and actually has held onto most of its morning move higher. Health care is very weak today and underperforming broader tape (the “distributor” stocks, led by MCK, are getting crushed – MCK off 16%+ on the day; med-tech, led by ABT, also sluggish).

    · In credit, very wide range in CDX (as tight as 235 and as wide as 248…..CDX looks like going out the day ~242-244bp, towards the wides of the day).

    · Treasuries rallied intraday to end the day higher across the board as the 30yr gained a full point to yield 3.6%. Helping treasuries today was 1) a technical failure of the 10yr to hold the 3% yield level which sent yields down to the 2.9% context and pushed prices higher, and 2) decent demand for today’s $18B 10yr auction. Auction results are being closely followed as the large amounts of oncoming supply is a constant overhang for the asset class. Tomorrow, the Tresasury will wrap up this week’s auctions with a $11B in 30yrs.

    Catalysts to Watch:

    · House hearing on mark-to-market accounting starts 10amET Thurs (http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr031209.shtml).

    · Geithner speaks Thurs @ 10amET to the Senate budget committee on the ’10 budget.

    · The White House’s Summers speaks Fri @ 10:30amET (will speak to the Brookings Institute on US economy & financial crisis).

    · The G20 finance ministers meeting is this Fri/Sat (the G20 heads of state meeting is Apr 2).

    · Tomorrow, the Tresasury will wrap up this week’s auctions with a $11B in 30yrs. OPEC is meeting on Mar 15.

  125. 125
    zman Says:

    Thanks choices, will do as soon as I get them.

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