Monday Morning – Guardedly Optimistic


OPEC Watch: No Change In Quotas.

  • Cartel member compliance seen at 79% now (cited secondary sources on that and I've seen as high as 81% but it's good to seem them giving confirmation that the outside sources are  in the right ballpark because this is far greater compliance than is typical from the Cartel); they are seeking improvement from "some members."
  • Opec retains a target price around $70 a barrel, needed for investment to prevent a future oil shortage.
  • OPEC Sees:
    • Global oil demand, estimated to decline by 1.0 million bopd in 2009 to 84.6 mm bopd. As a result of this, high stock levels, which are currently at 59 days of forward cover, will persist.
    • Non-OPEC supply is forecast to grow by 0.4 mm bopd in 2009, to 50.7 mm bopd,
    • resulting in a total call on OPEC production during 2009 of 29.1 mm bopd, a reduction of 1.8 mm bopd over 2008.
    • "some initial signs reported of a reversal in crude oil-stock trends, and a narrowing of the contango in the front price structure, indicating that the adjustment process instigated through OPEC measures vis-à-vis excess supply in the market is gradually helping to redress balance"
  • Russia did not announce a cut but called for long term contracts in oil prices between producing and consuming nations to remove some of the speculative element from prices. Russia went on to say their production has fallen 2% (or about 190,000 bopd ) in the last two months.
  • Next Meeting: May 28th, 2009.

Meanwhile, Ben and Barack Get Optimistic. Comments from the President became noticeably less toilet bowl swirly last Thursday and Ben Bernanke,-- in a taped interview on 60 Minutes--- went as far as to say the economy may begin a recovery in 2009 and that actions taken to date have likely prevented a depression. You can watch Ben's interview here.


The Week Ahead:

  • Monday 3/16: March Empire State Index (last month this was at its worst level ever / yet);  Industrial production
  • Tuesday 3/17: Housing starts; PPI (forecast: up 0.3%, core up 0.1%)
  • Wednesday 3/18: CPI (forecast: also up 0.3%, core up 0.1%); FOMC (forecast 0 to 0.25% range, same as last time); EIA oil inventory data (10:30 am EST)
  • Thursday 3/19:  Initial jobless claims, Leading Indicators (last month they were strangely up), Philly Fed, EIA natural gas inventory report (10:30 am EST)
  • Friday 3/20: No U.S. eco data; rig counts (expected to be down again)

In Today's Post:

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

Holdings Watch: The Wiki tab is updated.

Commodity Watch:

Crude oil for the front month inched up 1.3% last week as rumors of OPEC cuts tossed it to a 6 week high before rumors to the contrary left it essentially unchanged on the week. The 12 month strip eased to $50.19 and looks suspiciously like a rounded bottom. This morning crude is weaker by just over a buck after a sharper initial reaction and while I would expect it to be soft early this week I take some heart from OPEC's decision as this will take some heat off the economy and therefore the equity markets and in fact it shows that their past cuts are having an impact on inventories.

  • Rebel Yell Watch: Nigerian rebels abducted four oil service workers from a supply boat off Cameroon near the Nigerian border. Cameroon produces less than 100,000 bopd and as such is far from being a major player in the crude markets but I bring this up because the Nigerian rebels (MEND and at least two other rebel groups) have become noticeably more active with more widespread exploits.

Natural gas was unchanged last week at $3.93 but, as you can see from the wrap table, is down 31% year to date. At current spot prices only the low cost producers are profitable and then in only the highest return basins. This is not enough to keep rig rates flat and they will continue to fall until we see stronger evidence of production declines and of a pickup in the industrial side of the economy.

  • Weather Watch: Rapid Warming
    • Last week HDDs fell to 156, vs the early forecast of 144.
    • Next week's forecast calls for the gas and population weighted degree day count to plummet to 105, vs a normal reading of 143 and last year's 139.


Rig Count Review:

Gas Directed Drilling Continues to Fall ... Each week I show charts of falling rig counts for natural gas, more lately as the falls have been quite dramatic. In fact, we've never seen rigs fall off this fast and thousands of oil hands are now joining the ranks of the unemployed. The longer we stay at these and lower levels, the more time it will take to reassemble those rig crews and get them running efficiently again.


... Meanwhile, Domestic Oil Drilling Activity Is Falling Off Even More Rapidly  ... Rigs drilling for oil in the U.S. have been falling quickly as well as many of the better plays in the U.S. still require $40 to $50 per barrel to yield a decent return and that will likely be the case until the second half of 2009, by which time, service cost declines will have helped that picture out substantially. Oil production by its very nature is often more costly to produce as well so many operators of older, marginal wells are feeling the pinch right now and some are already shutting in production, perhaps permanently. Until oil prices recover rigs drilling for crude are likely to continue to dwindle.

... And Oil Drilling Is Also Important To Domestic Gas Supplies.  When you drill an oil well, quite often there is associated natural gas or "casing head gas". In fact nearly 13% of U.S. Lower 48 gross withdrawals of natural gas come from oil wells. Put another, taking away this associated gas production would be like removing Canadian gas from the U.S. picture.  So when oil activity falls off, an important source of conventional (non coal bed, non shale, non tight gas sand) gas production disrupted as well. This is probably something people in Washington should be aware of before they decide to remove the marginal well tax credit and the enhanced recovery credit.

Stuff We Care About Today

TOP 10 Energy Ideas List For The Long Term Coming Tomorrow.

Odds & Ends

Analyst Watch: (APA) upped to Outperform at Credit Suisse, who also cut (DNR), (OXY), and (PXP) to Neutral. Citi initiates coverage of (XOM) with a Buy rating and $77 target. 


97 Responses to “Monday Morning – Guardedly Optimistic”

  1. 1
    zman Says:

    Good morning and thanks much BOP; there’s a link in the post to watch Ben if you care to.

  2. 2
    elduque Says:

    BDI -64 2058

    TED 110.28

  3. 3
    Fiveanddimer Says:

    This morning Suntrust Robinson raised GDP from neutral to buy.

  4. 4
    zman Says:

    BOP put this on the wrap:

    Sounds like Ben is the one to calm markets. Didn’t see it, but heard he said some positive things on 60 Minutes last night. And the POTUS is on Jay Leno tonight.

    Tech Trader says simply to buy the morning pullback for a rally into lunch. Doesn’t have any colour for the 2nd half of the day.

    Credit Markets better this morning. Bank bonds especially outperforming. On the other hand, the Empire Manufacturing Index came in at a whopping down 38.23… vs the down 30.8 expected and down 34.65 in Feb. Apparently, no one is making anything in upstate New York.

    Also, Net long-term capital flows from Foreign Investors in January was negative… by a lot. Net outflows from the US of $43.0B vs expected net inflows of $45B and and net inflows in December of $34.8B. I would think that would (should) spook the US Treasury market a bit.

    IG 233 -3bps from Friday’s close

    HY 70.5 +.625 from Friday’s close… nice to see a 70-handle again.

  5. 5
    zman Says:

    Thanks Five – I’m guessing it’s a valuation call.

    Market move up looks a little tentative. Energy looks likely to green up if oil does not tank. Back to down nearly $2 after the open. Everything energy up small or down small. Not a lot of news out this morning, CHK forcing conversion of preferred stock is pretty much a non-event, otherwise pretty quiet.

  6. 6
    choices Says:

    SLB placing 1 bil 5-yr Euro bond at 1.75 basos points over mid-swap rate. Not sure what that means other than they evidently had no problem placing the deal.

    BOP-do you have any comments? Thanks.


  7. 7
    zman Says:

    Non-MEND based attack on a Chevron pipeline in the southern Niger Delta shuts in 10,000 bopd. Its not yet summer and the region is heating up.

  8. 8
    choices Says:

    Ben-I did not see it either but he apparently said that he was seeing “little green shoots” of optimism, may be able to avoid a depression.

  9. 9
    zman Says:

    BOP is doing tax stuff today, not sure if you’ll get a response. I think your takeaway on SLB, that they had little trouble getting it done, is the main one.

    On Ben, I saw it, not a lot new there, really just confidence building, toured the halls of the Fed, nice art by the way, wonder who pays for that. Mostly it was spin control coordinated with the President’s effort initiated late last week to say smilier things about the economy. Personally I think there has been enough talk about how bad things are having the President repeat it over is probably not the best thing. Besides, there are signs like leading indicators and a couple of months of positive retail sales that you can point to as rays of confidence.

  10. 10
    zman Says:

    Here’s my own ray of sunshine on the OPEC non-event, aside from my opening comment. Oil is not tanking, in fact it has not yet fallen below the initial reaction level last night which was off $2.25. The stocks are a little reddish but are not tanking either. Volume is very, very light in most E&Ps. It feels like the energy groups are going to bounce.

    That casing head gas (CHG) argument for natural gas from the post is pretty serious. Going back several years the U.S. saw more CHG as a percent of total production. Six years ago the number was 15% of gas vs the 12% now. That matters because it help stabilize gas production. Since it is now a smaller component that means more gas is coming from gas well gas (GWG) and the nature of the growth there has been high IP, high decline wells. This relationship will make the fall only that much harsher.

  11. 11
    rseidman Says:

    Sorry for being ignorant, but what does
    POTUS mean, #4?

  12. 12
    zman Says:

    POTUS = President of the United States.

  13. 13
    zman Says:

    That weather forecast for this week is just too tepid. Natural gas falling to fresh cycle lows. Payback is going to be hell from these rig declines. Don’t think the E&Ps will just call the rigs back and ramp drilling at the first signs of falling production and rising prices.

  14. 14
    rseidman Says:

    I should have known #12

  15. 15
    zman Says:

    It’s just short hand, I’m sure it is not meant to be disrespectful.

    If you want a disrespectful title, I give that to Hugo Chavez who is, with all due respect, a nutbag. Saw he and / or Castrol is considering becoming home to a Russian bomber base/s

  16. 16
    zman Says:

    Greening of the energy screen underway.

    TOP 10 For the Long Term asked about last week, just narrowing my list now, might end up with top 15 due to some internationals. I’m giving near term thoughts and valuations, and then long term outlook for each.

  17. 17
    zman Says:

    PQ up another 11%.

    CPE did not take and has not yet moved. That’s a tough one but could have jumped in the same manner.

    Same BEXP – did not take, did not jump yet

    GMXR inching up, still not sure of the impact their redetermination could have on their budget. They won’t have to sell anything but they may not end up growing this year which could put much of their acreage into lease expiry trouble in about 2.5 years.

  18. 18
    zman Says:

    Wow EOG, from $50 to over $60 in about 10 days. Good to see some E&P leadership. Expecting a goodly move from SWN this week.

  19. 19
    zman Says:

    Oil off less than a buck now.

  20. 20
    choices Says:

    EOG-showing a lot of leadership, unfortunately I have some covered Mar 60 calls-waiting until the last minute to decide what the hell to do. EOG certainly came alive, which I think is a good indicator because of its lack of crude hedges-bodes well for crude price expectations.

  21. 21
    zman Says:

    PQ at $2.50, up another 20%. Again, up a lot faster than I thought. Am thinking about taking my second 50% off the table.

  22. 22
    zman Says:

    Oil is green now.

  23. 23
    zman Says:

    … which is a very good reaction to the OPEC meeting. Also welcome news for the group, especially SU, CLR, RIG/DO, EOG and all the big cap E&Ps. PXD in the mid caps will benefit greatly as Sprayberry/Wolf economics will get a boost from $50 oil if we get there.

    It’s also halted the slide for NG this morning, good for SWN.

    HK still underperforming, my thought is that once it goes green it should run having rested for 2 weeks now.

    PQ up 26% is a little nutty but so was the run lower.

  24. 24
    zman Says:

    From a newswire story I just read, quoting Larry Nichols, CEO of DVN:

    “When the recession ends and the economy starts booming, we’re going to have less natural gas than we do today and prices
    are going to spike back up,”

    “The drop in supply will be so steep, it could easily catch up to where demand has dropped to before the recession ends,”

  25. 25
    Nicky Says:

    Good morning all.

    SPX has strong resistance at 780 and Dow at 7400. We are in a 5th wave higher and I expect these areas to halt the rally and then we need to watch the pullback for signs of whether it is impulsive or corrective.

    My hunch is that we will pullback to the 7000 area on the Dow before another move higher to say the 7700 area on the Dow before rolling over again. I doubt any top we put in here will be the end of the corrective move to the upside as there are likely just too many people thinking they want in on this rally.

    The whole rally is likely to top out early April.

  26. 26
    zman Says:

    Morning Nicky, I just sent you a question:

    Got any oil technical thoughts? We seem to be shrugging off the OPEC “hold still” announcement nicely. My sense is we hold a range of low to high $40s for a little while before moving into the $50s on a combination of better economic data and continued low imports.

  27. 27
    Nicky Says:

    Hi Z – still part of a sideways correction for oil imo. I still reckon it resolves lower eventually although yes we could chop about between $40 and $50.

    I suspect when the broader market rolls over in wave v down so will oil.

  28. 28
    Dman Says:

    Z – OPEC sez it sees some non-OPEC production growth in ’09. Meanwhile Russia announces its production is falling, projects are being cancelled all over, Mexico production is in free-fall. North Sea in decline. Something not adding up here?

    Oil now up on no OPEC cut. Anything to do with the above?

  29. 29
    Nicky Says:

    John Kilduff and Schork on CNBC now saying they think oil will go to $25 – for once I agree with the former!

  30. 30
    zman Says:

    Dman – I think its mostly up with the equity market. Then maybe a little boost from the Russian lack of investment comments. I think OPEC comment about non-OPEC is going to turn later in the year to flat and then lower for 2009.

  31. 31
    zman Says:

    Nicky – and then he said it will go to $200 due to the current administration’s hostile attitude towards the oil industry. Schork said he’s been focused on $25 oil for four months now but I recall an interview last month in which he was looking for a recovery. I would tell you that absolute inventory levels, as he pointed out incorrectly as being at record highs, are not the ultimate determinant of prices. The trajectories of supply and demand are much more important for pricing. Same thing applies to natural gas. How much in storage is noteworthy but the if you have a lot of inventory and production is set to fall off a cliff, the latter will over ride the former in short order.

  32. 32
    Nicky Says:

    Z – I hear ya. All I can tell you is that the charts are pointing to a move below $32.75 and I think if the momentum builds on the downside again it could well overshoot.

  33. 33
    zman Says:

    Thanks Nicky, that’s exactly what I wanted to know.

  34. 34
    zman Says:

    SWN trade starting to work, one more day like to today and I’ll roll out of the Marches, already holding the $30 strike Aprils.

  35. 35
    zman Says:

    Gasoline outperforming crude easily today as it should based upon ok demand and lowish inventories with the prospect of lower unleaded production if cracks fall around the corner.

    NG tried to pull positive on the day…tough weather scenario there. Also, no new consumption data for another 2 weeks.

  36. 36
    Denise Says:

    Good morning,

    Z or anyone please refresh my memory on what is the tranport cost as a % of LNG
    Your thoughts on this article?


  37. 37
    zman Says:

    Hey Denise, the cost of shipping is not a big component, when gas is priced above $7, but it starts eating in and becomes significant at $4 / MMbtu gas.

    I think the longer term market is going to be one of increased supply to the U.S., I don’t see incremental LNG this year doing much more than offsetting declines from Canada except in the heat of the summer and then it probably only goes a Bcfgpd higher. It depends very much on who you ask though. If you take the word of those who have built new capacity in the states they will tell you Asia is doomed and all that gas will go to Europe and the U.S. These are the same guys who say LNG volumes tripling in the U.S. last year … when they actually declined substantially.

    There is a good chart in relation to that article in a GLNG presentation, one that shows new capacity under construction over time, will grab the page number and link for you, wait one minute.

  38. 38
    zman Says:


    Page 6 in this presentation:


    I would also point to page 9 and say “just because you build it, doesn’t mean it will come”

    Thanks for asking about it, I had not noticed how pounded down GLNG is. This is a pretty interesting story, traditional LNG carriers, lot of long term contracts so spot exposure is not terrible. Also interesting floating storage refrigeration units, essentially LNG regassification on the water. Elminates the need for onshore regas where the environmentalists/movie stars might see the facility.

  39. 39
    Denise Says:

    This is interesting off energy but important-was reading rumor that the govt. might prohibit shares of financials that they own from being borrowed (prohibit shorting)

    Makes sense from there pt of view-

  40. 40
    Denise Says:

    What happens to a floating refrigerator if someone targets it?
    Do these things blow up?

  41. 41
    zman Says:

    Denise – that’s pretty tricky of them. Forcing a short covering rally in the financials. Some of those guys who’ve been balking at talking federal money might start buying their own shares and then ask for a piece of the TARP/TALF.

  42. 42
    Nicky Says:

    Obama speaking about AIG – he doesn’t seem to have the sincerity he had before he was elected – all a bit casual and he doesn’t sound all that serious.

  43. 43
    zman Says:

    Re 40. Don’t know. I suspect so. They would have LNG tankers coming and going all the time as well. Saw a write up long ago about a theoretical 2 Bcf capacity (pretty standard size) LNG tanker in Boston harbor, Calculations were done by a guy good with math, pretty much would destroy bean town. Sounded like a small nuke.

    Note there is a map of the proposed locations for the GLNG mobile units on page 20 of that presentation above. Further note none are planned for anywhere near Nigeria or Somalia. Nigeria has been flaring more gas each day than the Haynesville will be producing 2 years from now. Nowhere to put all the gas that comes out with the oil. They are building LNG there now. My big concern is the LNG tankers coming in and out of MEND riddled waters.

  44. 44
    zman Says:

    Oil up $1.15+, over $47 now. NG flat on the day.

    Stocks moving up more than the broad market now.

    SPX up 2.2%
    XOI up 2.2%, XNG up 4.6%, OIH 4.7%

  45. 45
    zman Says:

    HK taking that run at $17.50 I’ve been looking for.

    SWN getting tempting to sell the March 30 calls here.

  46. 46
    Denise Says:

    Thoughts about the business longer term
    Wonder who would insure these floating targets if one gets blown up and at what cost? Could the risk be high enough to kill the business?

    An example of a long term cost of being a target the Sears Tower(or should I say Willis Whatever) is 85% occupancy-

  47. 47
    BirdsofpreyRcool Says:

    just to weigh in with a few LNG comments… surprisingly, LNG is not combustable. You can hold a match to it and it won’t light. The fear of an LNG plant blowing up (just like like the Hindenberg, for example) is just not true. However, if you hit an LNG tanker with a nuke, i do think sparks would fly… just like if you hit an oil tanker with a nuke. You “vaporize” the stuff and it will ignite.

  48. 48
    zman Says:

    BOP – I think the guy doing that study assume terrorists strapped bombs around it.

  49. 49
    zman Says:

    This guy from Lloyds was probably referring to the same thing I was:


    Industry has long said its not a problem and to be fair, there have been no LNG explosions…ever.

  50. 50
    BirdsofpreyRcool Says:

    No argument you would probably get a heck of a fireworks show… but, strap bombs to an oil tanker and it would blow too. The point is, there is nothing combustible about LNG… it just kinda lies there. But if you warm it up and revaporize it… then hit it with a match, watch out!

    Frankly, an oil refinery is much more likely to blow than anything to do with an LNG plant, tanker, or pipeline.

    Not saying this stuff is all “safe.” But it’s not the “bomb” that you would think it would be. (Got all this from an LNG engineer several years ago… I was surprised myself to hear the stuff won’t light.)

  51. 51
    zman Says:

    BOP – thanks for the correction. I’ll look for that theoretical bomb piece. He may have just been taking the btus from 2 Bcf of gas going off in a small space.

  52. 52
    BirdsofpreyRcool Says:

    z — not correcting ya… just adding to the general knowledge, i hope.

  53. 53
    BirdsofpreyRcool Says:

    Pretty nice rally in credit today…

    IG 228… feels like an incredible relief to back away from 230+

  54. 54
    zman Says:

    BOP, I welcome corrections. I’m sure the author just did the math on btus.

    GMXR walking up on us, did not get comfortable there with the redet vs capex, may plan some Aprils.

  55. 55
    jat Says:


    What’s your guess on inventories this week?

  56. 56
    Denise Says:

    Thank you Z and BOP-so LNG is an issue for the foreseeable future to our supply
    of NG/coal

  57. 57
    BirdsofpreyRcool Says:

    z — that makes sense… by the way, wonder how many BTUs are in a VLCC.

  58. 58
    zman Says:

    Jat – have not worked it up yet, will get back to you after I’ve taken a look at imports for last week and then broken out the weather more by region. First blush I’d guess 70-80 Bcf.

  59. 59
    jat Says:

    Sorry, wasn’t being more specific. I was thinking more along the lines of what you think for the DOE report this Wednesday. Current estimates are for a build of 600k on crude, -1500k draw on gasoline, and 500k on distillates…

  60. 60
    choices Says:

    FXI, which tracks the Chinese 25 index, has been doing well the last few days or so-composition is approx 50% financial Chinese financial stks-somewhat strange. Also, about 20% energy stks, which is not so strange, as some strength seems to be coming into energy stks.

  61. 61
    BirdsofpreyRcool Says:


    · Day 5 of the squeeze; some say the rally feels ‘fatigued’, though equities remain near session highs as noon passes: SPX +12pts, DXY falls another 1%, CDX IG11 is ~3bps tighter, and US tsys work lower across the board (especially the 30yr, which is down >2pts). Financials, industrials, and utilities are leading the way higher; tech, which is only dwn 3%+ on a YTD basis, is definitely seeing some profit taking as investors rotate into groups that have lagged more…the REITS are also laggards. Financials are certainly seeing a massive squeeze this morning, though our desk is pretty quiet (some signs of profit taking, but not a ton, and no new shorts being put on). From our index derivs desk: futures are at/near a number of key technical resistance points (760 to 782.50 are late February reaction highs); 3-day RSI at 90 also suggests overbought levels (nearing recent extreme at 93.5). Bottom line: the rally does certainly feel a little fatigued up here, but shorts remain very wary of upside risks.

    · In terms of “catalysts” for the upside, a lot of the same issues from last week still stand: the market has become much more comfortable around the financials heading into earnings, and more hopeful re actions from Washington (the tone from senior officials in DC has been more sanguine on the outlook for the economy over the last few weeks and we are due to receive information around the public/private bad bank this week; meanwhile, Treasury officials continue to make tweaks to the TALF to insure strong demand when it launches this Thurs). The G20 meeting this weekend is being received well despite the lack of specificity around fiscal spending b/c: 1) the heavy emphasis on clearing bad assets off bank balance sheets (the G20 put out an entire separate communiqué on this issue); 2) the IMF could see its resources tripled to $750B to help alleviate strains in emerging market economies.

    · FX markets cont to see safety bid unwind: The DXY fell another 1% at one point this morning, and the EUR/JPY (a major gauge of risk tolerance) is being watched for a big potential breakout (through Nov/Dec/Jan highs).

    · Financials action: despite the huge rally last week, these stocks continue to climb higher; the newsflow remains encouraging (Barclays this morning said its YTD results have been strong so far; credit card mastertrust #s have been coming in OK and a bit better than feared in certain instances). GE trades above $10 and C trades north of $2; GE Cap CDS spreads, which had traded at very distressed levels over the past couple weeks, are no longer “up front” (for the last two weeks they had been up front). GS and MS, which have been big outperformers within financials YTD, are laggards today (some rotation back into banks/cards from these two relative “safe havens”). Financial credit spreads are tighter across the board – BAC/C/GS/MS are all in 20bp on the day; in life insurance, HIG/MET/PRU are all 2 points tighter (still up front); LNC is flattish on the day and remains 25-30 points up front. GE is tighter and no longer trading up front.

    · Eco numbers today: The first of the Mar regional Fed surveys hit today (Empire) and it came in very soft; we will get the Philly Fed later this week. Industrial Production was weaker than expected on the headline, but this was mostly due to utilities (warmer weather); manufacturing was actually a bit better. The big eco headline of the day was Bernanke’s relatively optimsitic interview on 60 Minutes last night

    · Accounting update: the FASB takes quick action following last Thurs’ hearing…..they had said would have updated rules within 3 weeks, but put out this morning guidance for companies in adopting mark-to-market accounting. proposed on Monday to allow companies to exercise more judgment in determining if a market for an asset is active and if a transaction is “distressed.” (Reuters). http://www.fasb.org/draft/ed_technical_corrections.pdf

    SP500 Performance Breakdown (from Bloomberg…as of 11:45pmET)

    · Biggest % gainers today: AIG, C, MET, HBAN, DYN, NWL, MTW, FITB, BAC, GNW

    · Biggest % decliners today: S, SNDK, APOL, PLD, GM, FLR, FAST, VTR, NSM, DELL, PCL

  62. 62
    zman Says:

    I hear ya BOP – VLCC = a lot more btus, just assumed that would burn except for any vapors in tanks.

    Jat. Ohhh. Had not given that a thought. I generally take a look at the reasonableness of the estimates vs history and what’s going on. Will have a look at those.

  63. 63
    zman Says:

    EOG = wow.

    HK approaching secondary price.

  64. 64
    BirdsofpreyRcool Says:

    HK — off the bench and back in the game.

  65. 65
    BirdsofpreyRcool Says:

    or, better yet, outta the penalty box and back on the ice!

  66. 66
    zman Says:

    CS took their SU target from 38 to 43, stock at 26 now.

  67. 67
    zman Says:

    Nicky – check email for forwarded piece.

  68. 68
    BirdsofpreyRcool Says:

    Borrowing bases can have pretty dramatic reductions. Case in point…

    EPL – Energy Partners’ borrowing base was decreased to $45mm from $150mm. The Company has $83mm drawn, leaving a $38mm deficiency. The Company is in discussion with its bank regarding options to remedy the deficiency, as well as waivers for potential violations of certain financial covenants that are likely to occur in 2009. EPL reported that its restructuring committee has begun discussions with holders of its $450mm of senior notes regarding a debt-for-equity swap. EPL also announced the resignation of Chairman and CEO Keith Bachman and the hiring of a restructuring executive, Alan Bell. Bell was a director for Ernst & Young’s energy practice in the Southwest US area prior to retiring in 2006.

  69. 69
    zman Says:

    BOP – looking at XCO from that angle now.

  70. 70
    BirdsofpreyRcool Says:

    Looks like BEXP is next… not good to have a fully-drawn revolver, going into your redetermination these days.

    BEXP – Moody’s downgraded Brigham Exploration’s senior notes rating to Ca from Caa2. The outlook is negative. Moody’s noted that BEXP’s low planned 2009 capex budget of $37mm could result in “significant production decline.” Moody’s also noted that the Company has the potential to violate its bank covenants. Moody’s believes there is a “material risk of a borrowing base reduction,” which would require the immediate repayment of a portion of BEXP’s fully-drawn revolver.

  71. 71
    zman Says:

    BOP – yep, I just couldn’t get onboard with the BEXP deal last week when I was looking at them, PVA, GMXR, CPE, and PQ. They look like a buy under candidate or a much smaller company soon as they will be forced to punt 100 to 200,000 acres of prime Bakken real estate after the redetermination.

  72. 72
    reefguy Says:

    68-low prices suck

  73. 73
    zman Says:

    Question for anyone. What capital gains do most small businesses pay? Just curious as this seems to be the focus today for the administration to help small businesses out. Are income taxes for small businesses going down too?

  74. 74
    zman Says:

    Reef – well said.

  75. 75
    zman Says:

    Strong upward bias to oil prices into the close of NYMEX, trending towards an HOD close.

  76. 76
    Garyinhou Says:

    Look at the call option activity on FTO today.. something is up or somebody thinks so at least

  77. 77
    BirdsofpreyRcool Says:

    bondholders are going to own the equity of a lot of those little guys…

  78. 78
    zman Says:

    Gary – interesting, had been watching it drift a little higher, insiders have been punting some. Looks like a calendar spread on the April and March calls.

  79. 79
    Garyinhou Says:

    Z.. maybe rumored takeover/buyout of fto going to actually happen?

  80. 80
    zman Says:

    Gary – I wouldn’t think so but maybe. Last thing I heard from the bigger refiners was a sense of wanting to punt select assets and finding no buyers.

  81. 81
    zman Says:

    …but if one were to look for strategically positioned assets, I could see a SU for FTO deal making some sense.

  82. 82
    BirdsofpreyRcool Says:

    z — biggest headache for a lot of small businesses is the govt mandates… like payroll tax, healthcare, unemployment insurance, minimum wages, liability insurance, compliance functions, and various state taxes that don’t care if you have positive net income, or not. Take it off the top line, not the bottom.

    So, gotta view more govt interference with a somewhat jaundiced eye. Any one else have different thoughts?

  83. 83
    Garyinhou Says:

    roger .. Thanks

  84. 84
    zman Says:

    Because the market generally tunes out every year at this time and because I try to be helpful with all things …


  85. 85
    zman Says:

    ZTRADE: Out SWN March $30 calls for $0.50, up 100% since entry last Friday with the stock at $29.12. I continue to hold the April $30 calls.

  86. 86
    zman Says:

    Does anyone see a broker comment on the solars/FSLR today? All day slight underperformance is a bit odd in this market.

  87. 87
    zman Says:

    Thanks BOP for the FSLR news. Story out saying some of the patents begin expiring in 2010. I had heard this mentioned by the company before. Patents are one thing. Economies of scale built upon those patents are another. Other solar makers have already built their models based on higher cost per watt models, not sure a lot of the generic photo voltaic makers will be able to quickly shift to thin film manufacturing based on FSLR’s process.

  88. 88
    BirdsofpreyRcool Says:

    AmEx killed the rally… came out with credit card data that indicates rising default rates.

  89. 89
    zman Says:

    Re 88. Yep, but was that really a surprise to anyone?

  90. 90
    zman Says:

    ZTRADE: $10KP Added 3 more HK $17.50 March Calls for $0.60. Obviously a little risky as they have 4 days of life left but the stock has been resting since the secondary and is just getting back to the $17.50 level despite a much stronger rally in the group. I plan this to be another quick trade, like the SWN. Normally I’d shy away from the short hold times but in this market we are left with few chances with options to buy and ride for long.

  91. 91
    BirdsofpreyRcool Says:

    Re 89 — ha!! Head Trader said the exact same thing.

    Can’t imagine anyone was surprised. But, used it as an excuse to sell, I guess.

  92. 92
    zman Says:

    BOP – right, five days would have been something like 8 month record!

  93. 93
    zman Says:

    Beer Thirty – not nearly as bad a day as you would expect from no OPEC move, especially for oil ending up 2%.

  94. 94
    PackMan Says:

    Jim Rogers on Bloomberg tonite talking about a long recession, maybe a depression, civil unrest in the US and around the world & “I hope I’m wrong”.

    Claims he not very short.

    Bullish on Agriculture.

    Not a particular of his, just posting FWIW.

  95. 95
    PackMan Says:

    sorry, not a fan of Rogers is what I meant to say …

  96. 96
    zman Says:

    Thanks Pack, interesting hedge on Rogers’ part, things stink but I’m not real short. Makes little sense. So he’s extremely bearish for the fun of it?

  97. 97
    PackMan Says:

    Hard to say Z – he said he covered most shorts in Nov, wished he hadn’t. Then said he still had some. Didn’t say what.

    Kept pushing Ags and not other commodities.

    I was only half listening …

    As for Uncle Ben … I watched 60 minutes last night and did not take away anything new. Nothing different than his testimony last week to Congress. Reaching out to the folks, which is smart; but didn’t really offer anything to hand one’s hat on. For instance, in not wanting banks to fail; nothing new there; the bank may not fail; but they would wipe out the equity. Talked about orderly unwinding of failed institutions.

    I wouldn’t go buying the market based on his 60 minutes piece.

    Clearly he and O are trying to put out the fire before it gets out of control and they destroy all confidence. My question is, do they see anything else out there that is real scary that is prompting this change in tone other than Obama’s poll numbers ?

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