Merger Monday


With Suncor set to buy Petro-Canada for $15 billion creating the largest Canadian oil company (see details below), the nearly week long Howard Weil Energy Conference, and oil and gas prices hinting that a near term bottom may just be in the making, all eyes will be on energy this week. Investors will be watching that and the trillion dollar, public-private toxic asset program announced yesterday (see Geithners's op ed in the Journal here) and  further detailed this morning which has got the Street feeling green again. 

The Week Ahead:

  • Monday 3/23: Howard Weil, Existing home sales (4.45 million forecast)
  • Tuesday 3/24: home prices
  • Wednesday 3/25: EIA oil inventory report, durable goods (forecast down 1.2%), new home sales (323,000 forecast)
  • Thursday 3/26: EIA natural gas inventory report, initial jobless claims (last report was 646,000), GDP for 4Q (forecast down 6.7%)
  • Friday 3/27: consumer spending for February (forecast up 0.3%), consumer sentiment for March (forecast 57.2 vs 56.6 last read). I'm takingFriday off for Spring Break.

In Today's Post :

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


Holdings Watch: The Wiki Tab have been updated.

Commodity Watch

Crude oil rose 10% last week for the April contract which expired on Friday. The May contract continues to look like a rounded bottom. April wasn't alone in the rally however as the 12 month strip put on a show as well rising 14% to close at $57.14 and looks like this now. This morning May crude oil is trading up slightly with the equity markets.

  • Strike Watch: Brazilian union workers set to start a 5 day strike today. Brazilian officials think the impact on production will be minimal.

Natural gas rallied as well and oddly so on the heals of an every so slightly above forecast withdrawal from storage. April gas closed the week up 7.5% and importantly, above the $4 mark at $4.23 last week. This morning gas is trading up five cents.

  • Weather Watch:
    • Last week: Much warmer than normal. HDDs came in at 116 vs 105 originally forecast and 156 in the prior week which generated that small, 30 Bcf withdrawal we saw last Thursday.
    • This week's forecast: 108 HDDs.

Stuff We Care About Today

Howard Weil Energy Conference - March 23 - 26. As far as I can tell presentations are not being webcast but there will likely be a stream of press releases and new presentations/slide shows made available as the week progresses.

SU In Talks To Snap Up PCZ For $15 Billion

  • Share swap yielding a 28% premium to PCZ shareholders based on Friday's prices
  • Creates largest oil company in Canada
  • Sees annual operating savings of $300 mm and annual capital efficiencies of $1 billion.
  • This gives SU access to PCA's incompletely developed Fort Hills oil sands project where leases were extended by Alberta to 2019 this morning. 
  • Puts spotlight on: (CNQ), (ECA), (NXY), and probably (TLM).

GMXR Announces 2010 Budget / Hedges

  • 2010 budget of $75 million to drill 8 Haynesville wells. This puts them pretty close to living within EBITDA in 2010.
  • 2009's budget goes from $150mm to a range of $125 to $150 mm (14 to 16 Haynesville wells)
  • 2010 production guidance of 15 Bcfe; up slightly from 2009 guidance of 14.6 Bcfe which makes sense since much of the 2009 budget is weighted towards the back half of the year.
  • 2010 reserve growth seen outstripping production with guidance of 25 Bcfe of additions which points to continued strong reserve replacement.
  • Hedges:
    • 2009: 67% hedged at $7.77.
    • 2010: 75% hedged at $6.50.
  • Redetermination comment: "Bank group and 2nd lien lender have recently indicated a strong desire to grow our relationship further."  Both have expressed a willingness to be flexible with regard to loan covenants in the future.
  • They present at Howard Weil: Tuesday at 3:30 pm EST.
  • Nutshell: We might see a little further reduction in the 2009 and definitely will in the 2010 cash flow estimates. The company is now being valued (all in, mkt cap + debt) at under $1 per Mcfe in the ground on the proved reserves. That's nutty.

The "I Will Survive List" will be out tomorrow.

Weekend EMail Bag Watch: From El D over the weekend.

1. Why are the utilities so reluctant to switch from coal to nat. gas? Is it because up until the last few years (finding of the big shale plays) there didn't appear to be enough? Or is it too expensive?

The truth is utilities moved to add gas-fired capacity in the late 1990s and early 2000s and natural gas now accounts for 20 to 21% of all power generation. Coal is about half, nukes are 20%, oil is 2 to 3%, and hydro, wind, solar, and other renewables comprise the balance. The cost of gas has been the principal retardant of further growth although new gas-fired capacity is added each year. 

2. Why has the current administration not promoted NG in the same way as other green projects? Is natural gas not thought to be a green project and wouldn't get any votes.

Drilling. Drilling is not viewed as eco-friendly. Water consumption, pollution of various kinds, and ignorance of the facts regarding just how clean drilling is. There is some acceptance within the administration of natural gas but it been fleeting with natural gas often left out of key energy speeches by the President and attacks on drilling by the Department of the Interior. Very much a mixed message in the first place but the actions have not been gas friendly.

3. Will the new SEC rules for year end 2009, with expanded reserves, give the utilities and others a better idea of just how large the reserves are for natural gas.

It will make it more obvious but they know the supply is there. That's really not the hold up. They want to have balanced power portfolios and when you look at power, nukes and coal are cheaper than gas.

4. How much LNG can really come into this country.

Capacity is going to be over 10 Bcfgpd by year end. Intake averaged 0.75 Bcfgpd last year and 2.0 Bcfgpd in 2007. I view the recent capacity additions as expensive boondoggle, especially when you consider the Haynesville and Marcellus shales have not yet been exploited. It will be a long time if ever for that capacity to be utilized and my suspicion is that while LNG shipments will be up this year and next, they will largely be offset (at least in 2009) by further declines from the U.S.' biggest source of imported gas, Canada.

One observation: It seems that the NG market is suffering from the short term viewpoint that too much gas is a bad thing. However, in the long term, isn't it conceivable that with a much larger supply assured, more conversions would take place.

Yes. The one area where natural gas could be of major potential benefit is transportation but it's penetration into that market has been limited by concern over adequate supply.


Odds & Ends

Analyst Watch: nada.

82 Responses to “Merger Monday”

  1. 1
    BirdsofpreyRcool Says:


    Levels at 7amET:

    · SP futures at highs +23pts; rallies back to 787 level

    · Euro Stoxx also near highs +2.2%

    · Asia stocks very strong as well; Japan/HK/India +3-5%

    · CDX IG11 opens 7bps tighter (230/232)

    · HYCDX11 opens +1/2pt to 68.875/69.5

    · USD dn 0.6% as safety bid cont to deflate; EUR/JPY also strong

    · US tsys down small on shorter end but 30yr is higher; 10yr yield sits at 2.64%

    · Crude up 60c to $52.50/bbl (Algerian oil minister Khelil sees oil rising to $60 by year end, per Bloomberg)

    · Spot Gold dn 4pts to $953/oz (has held $950 since Weds’ post-Fed run-up)

    · Base Metals Complex is higher – copper +2.5% on strong volume, FT article on China buying.. aluminum up 1%, nickel up small.

    · Baltic Dry Index was off 0.7% on Fri; several shipping tycoons (Louis Dreyfus, CC Tung) are sounding warning signals for the industry..

    Today’s Top Stories

    · Big M&A (Suncor to buy Petro-Canada in $15B deal to create Canada’s largest oil company) and anticipation of Geithner’s bad bank dominate morning news. The squeeze continues around the world this morning, with European stocks and US futures both at overnight highs (+22pts); Japan/HK/India all surged 3-5%. USD down vs EUR and the EUR/JPY is quite strong as safety bid fades in FX mkt again. Financial stocks rally around the world.

    · Treasury/Geithner is due to rollout specific details on a plan to remove toxic assets from bank balance sheet (there will be a three-pronged approach, involving the FDIC, an expansion of the TALF, and public/private investment partnerships). Geithner, who wrote an oped in the WSJ this morning discussing his plan, will meet with reporters shortly before the 9:30 a.m. opening bell for trading on the New York Stock Exchange (he is giving an interview on CNBC @ 2pmET).

    · TALF caution: There remains hesitation on the part of private investors to get involved in any government-led effort following the uproar over AIG’s bonus payments, as the relatively tepid response to the inaugural TALF funding last week can attest to, although the Treasury is expected to make clear that TALF and PPIP participants won’t be subject to compensation limits.

    · On the AIG bonus front, rhetoric isn’t quieting down w/several prominent Congressman still pushing for legislation to impose severe taxes on the money although Obama this Sun night on 60 Minutes expressed doubt regarding the constitutionality of the bill passed by the House and other White House officials have dialed back support for the measure.

    · China will continue to invest in Treasuries as they are an essential part of the country’s “investment strategy of its foreign currency reserves,” Hu Xiaolian, director of the State Administration of Foreign Exchange, told a briefing in Beijing today before President Hu Jintao visits London next month (Bloomberg).

    · Should the USA be AAA? Some think the U.S. may not be able to hold on to its perfect credit rating indefinitely considering how much money the Fed, Congress, the Fed and the Treasury Department have thrown at the economy in their attempt to lift it from this recession. Fortune.

    · White House/Treasury will rollout a sweeping regulatory blueprint in the coming week that will give new powers to the Fed, create regulators w/the power to oversea systemically important companies, and align compensation policies w/the long-term health of a company (the NYT had a big pg. 1 article talking about the regulatory overhaul, inc. implying that the White House is seeking to cap compensation – sources tell Politico that administration officials think the NYT article is mischaracterizing their true intent and that the White House has no desire to touch overall levels of pay but rather the formulas behind determining remuneration).

    · The deficit: A CBO report out Friday (during trading) projected much larger budget deficits out over the next decade than are included in the Obama budget, providing ammunition to both Republicans and Democrats in their criticism of the president’s spending priorities.

    · On the labor legislation front, a bunch of retailers this morning have offered up a compromise to controversial “card check” and other union bills making their through Congress now although the plan doesn’t seem to have much support in either the business or labor communities.

    · Federal regulators seized 5 institutions this weekend, inc. three banks and two huge corporate credit unions – the organizations had aggregate assets of approx. ~$59B.

    · Bank equities have surged but bond spreads are near record wides; bonds of the companies yield 8.55 percentage points more than Treasuries, about the widest in 13 years; spreads widened even as equities surged over the last few weeks – Bloomberg

    · California housing: the WSJ profiles the town of Mountain House in California, a planned community outside of San Francisco; the town was decimated in the wake of the housing crash but is starting to show signs of life now. Some economists think there are tentative sings of a bottom in the CA housing market. WSJ.

    · Protectionism is on the march according to the NYT – “barriers are going up around the world. As the recession’s grip tightens, these pressures are likely to intensify, several experts said”. NYT

    · Russia debt fears: a tiny aircraft leasing firm, Finance Leasing Co, defaulted on ~$250MM worth of debt, the first by a Russian state-owned company on foreign debt since the country’s 1998 financial meltdown. The move is sending shockwaves through the Russian debt markets. WSJ

    · Barclays, according to press reports, signals it is racing to complete a sale of its iShares franchise before a Mar 31 deadline to apply to the UK government’s APS – if a sale can’t be completed by that date, it would mean Barclays could have to hand over equity to the British Treasury as compensation for guaranteeing pools of assets; some fear the UK gov’t could end up w/a stake as large as 40% in Barclays.

    · To watch for the week coming up: the most important announcement of the week will be Geithner’s plan for removing toxic legacy assets from bank balance sheets, as well as any additional actions taken by Washington on the AIG bonus front. Existing home sales are due on Monday (investors will be looking to see if trends confirm the strong starts figure out this past Tues). We will also get the third revision to Q4 GDP. Short interest figures will come out Tues after the close. Obama will be on 60 Minutes this Sunday and is hosting a primetime news conf on Tues (the focus in both will be the economy). The House Financial Services Committee will be very busy and is hosting a slew of hearings (inc. an AIG hearing Tues and one focused on Wall St bonuses on Wed). The Senate will start to discuss a bill that would impose a 70% tax on Wall St bonus payments. Outside of bonuses, the Washington budget process will kick into high gear in the coming weeks, so expect a lot more headlines on taxes, health care, and cap-and-trade (there is an increased amount of talk that the White House and Congressional leaders will look to get health care through via the budget reconciliation process, which requires only 51 votes). The White House Auto Task force has said it could make an announcement on the future of the industry in the coming week. The British government will host a meeting on March 24 for CEOs of the world’s largest banks. A bunch of retailers will report earnings (inc. BBY and TIF). The G20 meeting is Apr 2 and Obama will leave for an expansive trip through Europe on Mar 31 (he will also be attending the 60th Anniversary Summit of NATO). NCUA (National Credit Union Administration) is hosting a webcast Monday, March 23 at 2 p.m. to provide the credit union community with an update on the corporate credit union stabilization program. The IMF on Tues is expected to officially introduce a credit facility w/”sweetened” terms in the hopes more struggling countries will make use of it.

    · Economics to watch coming up: One very important number to hit the tape next week will be the Q4 Finals GDP estimate on Thursday. Bloomberg consensus is for another revision lower to dn 6.6% for the quarter. Recall the Advanced reading in Jan had been -3.8% and then the Preliminary reading in Feb. was taken down to -6.2%. With the Fed’s move this week to increase asset purchases, inflation expectations have been on the rise (see recent surge in gold and drop in USD) and data points surrounding inflation will likely be in focus. Next week PCE will be reported in the US, CPI in the UK and CPI in Germany. There are no schedule Central Bank meeting next week, but the ECB will hold a meeting the following week (Apr. 2nd) and both the BoE (Apr. 8-9th) & BoJ (Apr. 6) the week after that.

  2. 2
    elduque Says:

    BDI -9 1773

    TED: 101.53

  3. 3
    Dman Says:

    Z – in the short to medium term, how will the SU deal affect your view of SU as a crude-tracking vehicle?

  4. 4
    zman Says:

    Re 3. It dilutes the relationship somewhat. Adds in refining and distribution plus injects deal noise.

  5. 5
    zman Says:

    Andrew Gould at Howard Weil:


  6. 6
    zman Says:

    Initial reaction to perusal of SLB presentation: not terrible, not great for 2009. Stock would likely be flat were it not for this Treasury inspired market. Still doing a little reading but may add to puts as strength in the broad market wanes.

    GMXR – initial reaction to reduced capex and lowish production target for 2010 is positive which is a change from the last 2 times they cut numbers and saw their stock get whacked. I credit the bit in the press release relating to their bankers’ willingness to work with them.

    I’m fairly light on options positions at present with 3 E&P sets of calls (SD, GMXR, SWN) and 2 service sets of puts (NBR, HAL).

  7. 7
    zman Says:

    SU reaction up 5% is probably attributable to the low price being paid for PCZ.

  8. 8
    zman Says:

    SLB sees difficult 2009 for offshore seismic, Russia, and N. American natural gas drilling and service pricing.

    They don’t see a meaningful decline in gas production in 2009.

    They still think deepwater will remain healthy through the cycle.

  9. 9
    BirdsofpreyRcool Says:

    No Tech Trader Colour for today…

    Head Trader thinks “wishy-washy all day and lower close from here.”

    Geithner gives an interview on CNBC at 2pm… could see some volatiilty around this.

    Lastly, from Doug Kass…..”What is the incentive for a bank to participate in a ring-fencing of their bad assets through a fire sale/auction of assets if mark-to-market is going to be modified shortly?”

    While I do agree with Kass, I have to say that the Geithner proposal + any modification to the rigidity of MTM give the banks more options. Anything that gives more options, increases the value of the asset.

  10. 10
    BirdsofpreyRcool Says:

    Existing Home Sales up 5.1% vs exp’d -0.9% to 4.72mm annual pace. So, better number than expected.

  11. 11
    zman Says:

    Re 9. If understand it correctly, its 6 to 1 leverage so the capital employed by private firms will rather limited, rest is borrowed money backed by FDIC. Its months away from happening, sounds like June at earliest. Seems like people will need some guarantees that the government won’t change the deal on you once you sign on as well.

  12. 12
    zman Says:

    Thanks BOP. Little surprised this rally has the legs it so far has. Am getting close to adding SLB puts here.

  13. 13
    BirdsofpreyRcool Says:

    re: change the deal… reading that Congress wants to weigh in on executive comp in general… not just TARP recipients, not just financials. Personally, I think exec comp has gotten way out of hand over the last 10 years… but, not sure I want that camel completely in the tent.

    Actually, I am sure… camels have bad breath. They should stay outdoors.

  14. 14
    zman Says:

    ZTRADE: Added 10 more HAL April $15 Puts for $0.35 with the stock at $17.90, rallying with the broad market over Treasury’s new toxic asset plan.

  15. 15
    zman Says:

    BOP – re 13. Agreed re out of hand and agreed re that’s a question for boards and shareholders to look at.

  16. 16
    BirdsofpreyRcool Says:

    Head Trader using JPM today as a mrkt indicator. JPM just traded at HOD.

  17. 17
    zman Says:

    XLF up 10%. Once again, this is no way to run a market.

  18. 18
    zman Says:

    ZTRADE: Out SWN $30 April Calls for $3.90, up 59% with the stock just under $33.

  19. 19
    zman Says:

    Lot of single digit E&Ps trading up big %’s today. SD and GMXR look to bottoming.

  20. 20
    zman Says:

    Sudden surge in crude, don’t see a reason, should not be the Brazilian strike, dollar is up so that’s not it either, best guess is it decided to join the market rally with this last leg up to Dow up 260.

  21. 21
    Nicky Says:

    Morning all.

    Broader market – 860 spx would have to be taken out on the upside for me to be convinced the lows are in. Its certainly possible and would mean that any retrace we see after this cycle is done to the upside (end of first week in April at the latest) would not take out the 666 low before we head higher again.

  22. 22
    zman Says:

    Thanks Nicky.

  23. 23
    zman Says:

    EOG had a presentation up over the weekend for today’s presentation at Howard Weil. Pretty standard stuff but shows their dominance in terms of return on capital employed, debt adjusted per share growth, strong, strong, strong balance sheet, and low finding costs with a huge stack of drilling locations ready to go when things pick up. They are still not hedged on oil and today CEO Papa said they expect slowly rising oil prices now through year end which I concur with and which probably means they are not going to hedge any of the Bakken oil any time soon.

    Recall also they are in the Haynesville as well with a couple of big wells IP’d to date at 17+ mm/d and they 110,000 acres ready to drill when prices rise. They are well hedged for 2009 but have little on the books for 2010 yet, so a recovery in gas prices will be a big boost to their cash flow next year.

  24. 24
    BirdsofpreyRcool Says:

    z — thanks for the summary (and reminder) on EOG. You thinking of doing anything new there?

  25. 25
    zman Says:

    BOP re EOG, Good question. Thinking of waiting for a red day there and getting back long. Feels a bit like chasing here. Many of the charts are starting to look like base breakouts; that one looks a little different. They are at cycle cheap lows but this quick move looks extended.

    Do you know if any of the HW presentations are being broadcast? I may uprisk into higher strike SWN calls.

  26. 26
    BirdsofpreyRcool Says:

    has HW ever been broadcast? I always thought that was a pretty closed meeting.

  27. 27
    BirdsofpreyRcool Says:

    agree with you “chasing” comment….

  28. 28
    Nicky Says:



  29. 29
    zman Says:

    …as they speak after lunch.

    BOP – I can’t recall, thought some people asked that their presentations be broadcast. SLB provides an immediate transcript which is where I got my comments this morning. Others just post a new presentation.

  30. 30
    elduque Says:

    Nicky: What are your thoughts on crude?

    Thank you

  31. 31
    zman Says:

    Unless I’m blind or they were a late addition, not seeing when/if HAL presents at H.W.

  32. 32
    zman Says:

    Eld- did you want me to expand on any of those questions in the post?

  33. 33
    zman Says:

    Dman – I favor CLR or EOG or APA over SU for now as an oil play.

  34. 34
    Nicky Says:

    Hi Elduque

    I guess I am rather stubbornly refusing to believe we have seen the lows in crude. I really have to push it to see a completed pattern to the downside ie I just don’t see 5 clear waves down. This leads me to conclude that we are in a sideways wave iv correction still. That said there is nothing to say we can’t get back to $60 or above in this correction.

    If I am wrong and 5 waves down did complete to the downside then we are I think in a wave b correction which essentially has us heading in the same direction in the short term – up.

    Likely we rally with the broader market into early April.

  35. 35
    elduque Says:

    Not really. I appreciate your answers. If we really do want to cut down on carbon emissions, we do need to cut down on our use of coal. I don’t know what the technology or the cost of cleaning coal up is, but I would assume it is more expensive than gas.

    If I had to answer my own question. I really think that the utilities are afraid that NG is going to be significantly higher in the future.

  36. 36
    elduque Says:

    Z did you look at the Barclays article and their these that DVN was the cheapest stock. Agree or disagree?

  37. 37
    zman Says:

    Market appears to be stuck at current elevated levels waiting on Geithner.

    Eld- ok, just wanted to make sure. 350 year supply of coal would argue for adding the baghouses and other equipment to clean it up. Mercury is the tough one to get at without chemically messing with the coal itself, the carbon can be captured and sent underground.

    Re DVN – did see it, didn’t give it much thought, as they were talking a recent gap opening compared to the group. Will look.

  38. 38
    Nicky Says:

    Apparently Obama about to speak – this guy sure loves the camera.

  39. 39
    zman Says:


    $10KP – Added (3) SWN $35 April Calls (SWNDG) for $1.30 with the stock at $33.25. The company speaks at Howard Weil after lunch and I used part of the proceeds from my sale of the $30s earlier to gain a little more leverage on the possibility that they have news out of the Haynesville shale.

  40. 40
    zman Says:

    Nicky – SP500 looks to be having trouble getting through this 803 level from last week, there is a gap around 818 which I’d bet we make tomorrow if we can get above this level today. We get home prices tomorrow so not a big market moving data point. Wondering if this week is spring break for most market participants, I know quite a few people who took the week off.

  41. 41
    zman Says:

    Brazilian strike shuts down PBR’s P34 platform halting 60,000 bopd, union says to disrupt more production soon.

  42. 42
    jat Says:

    SLB presentation notes (from broker):

    Largest CAPEX reductions from the industry are in Canada heavy oils and Russia

    Expect worldwide rig count to decline by 18% in 2009, lef by North America (-58%) and Russia (-22%)

    WesternGeco will is cash flow positive; backlog of $1.1B at YE 2008 and expect to be profitable in 2009

    Do not expect recovery in 2H09 in North America, and do not expect to see a change in decline rate in 2010 as a result of reduced drilling

    Further headcount reduction is likely as company focuss on cost cutting

    Acquisition values are beginning to fall in-line with company’s expectations; looking for attractive opportunities

    BREAKOUT Notes (from me):

    “2010 international revenue will be flat to down over 2009.”

    “Any service company with double digit margins in 2H09 will be a hero.”

    “Continued cost and price adjustments in oil service will probably take 18 months– currently 5-6 months into the downcycle.”

    Although I’m biased, I agree with Z that were it not for the Gov’t printing press things would be flat to down.

  43. 43
    zman Says:

    Thanks Jat. I kept looking at the share price and then back to the presentation, no linkage between the two. I would say that your breakout notes are a bit more dire than Gould’s official comments but that is not at all surprising. Everything is ubiquitously green so not a lot of thought going into the rally in service, saw another brokerage pointing to the deceleration in the rig count as bullish…that’s a stretch in my book.

  44. 44
    VTZ Says:

    I’m busy today and I’ll comment on the SU/PCA teamup later but I can say that I’m extremely excited at the combination because it diversifies SU and brings their expertise to Fort Hills.

    TLM, NXY and UTS (higher offer by SU) are next to go I think.

  45. 45
    VTZ Says:

    There is also still risk that the deal will not go through due to the old federal government restrictions from when they owned majority of petro-can

  46. 46
    BirdsofpreyRcool Says:

    Heeeeere’s TIMMY.

    The interview on CNBC.

  47. 47
    zman Says:

    Thanks V. Busy doing tax stuff. Fun, fun.

  48. 48
    elduque Says:

    vtz Do you have any thoughts on AAV. Looks to me OK and should be an easy double from here.

  49. 49
    jat Says:

    Yeah, the directions of margins don’t really matter when people are looking to buy the OIH as a reflation trade.

    By the way, need to correct my “2H09” to “2Q09” which makes more sense.

  50. 50
    zman Says:

    Not sure which is more boring, a solid green market that hasn’t changed since the first half hour of the day except for the dollar which has weakened and crude which has strengthened or running through my tax checklist. Ugh.

  51. 51
    occam Says:


    You wrote “…do not expect to see a change in decline rate in 2010 as a result of reduced drilling”. I am not sure I understand what you are saying here. What decline rate does this refer to?

  52. 52
    BirdsofpreyRcool Says:

    hey, z — I owe you an apology… our discussion about including “preferred stock” in the debt basket…

    There seems to be some new flavors of preferred that were issued over the last couple of years. They have covenants that make them debt-equivalents, to my way of thinking (and in support of your argument). For example, someone just pointed me to the TXCO perpetual convertible preferreds. It appears those preferred have put rights, in the event of a cross default.

    That just blows my mind. Why any CFO would issue preferred that has debt-like rights and features is beyond me. From a tax and corporate finance perspective, it just plain does not make economic sense. But, there you have it. Once again, one has to look at the details and footnotes to properly classify a company’s capital structure.

    Thanks for pointing that out the other day.

  53. 53
    BirdsofpreyRcool Says:

    Market pushing to new highs… what happened?

    Did Congress just resign en masse?

  54. 54
    Nicky Says:

    La La Land I think!

  55. 55
    zman Says:

    BOP – oh please, no apologies. That’s just the way I look at things, you’re the debt side guru / credit analyst, not me. I’m all too happy to be wrong on that and locked away in my little energy world.

    Occam – if I may, I think he meant natural gas decline rates in North America, the quote from SLB was that they do not expect any significant change (lower production) before 2010.

  56. 56
    ram Says:

    ZMAN – Did you post a Howard Weil schedule? I notice on HK’s website that no date is given.

  57. 57
    zman Says:

    No, I didn’t get a bootleg copy of the schedule until a little while ago. HK speaks Wednesday afternoon along with CLR

    SWN spoke already but there’s no mike in the room and they did not put up the presentation on their site. Stock got happy after the meeting end though, in line with the move on up in the market.

  58. 58
    BirdsofpreyRcool Says:

    z — ha! these days, we are ALL credit analysts… have to be.

  59. 59
    zman Says:

    CNBC drooling over toxic asset plan. Geithner went from Goat to God in a day.

  60. 60
    zman Says:

    58 – Right, which is why I’m glad you are here.

  61. 61
    ram Says:

    Why the relative shroud over this conference compared to last year?

  62. 62
    occam Says:

    re 55 – that seems to me to spell trouble for NG E&Ps. Looking at the Dec through mid March residential and consumer NG use, it appears to be way up (several bcf/d) from the pasts few years. As this comes off, together with very high production numbers, we may fill storage very soon this injection season. The good horizontal wells seem to be overwhelming the decline in other drilling.

    As an example, I know of a mom-and-pop gas producer in the northeast (east of Illinois) that cannot get the company who usually takes his production to agree to accept any NG this summer.

    What am I missing?

  63. 63
    zman Says:

    Ram – probably the best way to make people travel in this environment is to not broadcast. I’m pretty sure this one is always quiet relative to the others with a few names webcasting for FD purposes but this year it looks to be all quiet.

    Tomorrow’s names of interest speaking at the conference:

  64. 64
    ram Says:

    Thank you.

  65. 65
    zman Says:

    Occam – I think its going to be squishy in the shoulder season with a faster refill. Prices will look at that (already have) and weigh it against the perceived direction of aggregate production. Key dates are the next several month ends when we get the producer data. I think Gould is conservative on that or I misunderstood his comment. Barnett will roll over this year along with the rest of Texas, may take a little longer than you think due to the “drilled but not yet completed” well factor but it will happen. The severity of the drop (rigs over 50% from peak in less than 6 months) can’t be offset for a full year by a relatively small number of high initial rate wells coming on line. The recent pop is a bit perplexing as it seems more like short covering than anything else, it is certainly not attributable to demand. But it does provide the E&Ps with opportunity to further hedge their 2009 production now.

  66. 66
    zman Says:

    I’m going to double my GMXR position. I have trouble believing they are going to be beaten up too badly in their redetermination after releasing the press release today…

  67. 67
    zman Says:

    … the stock is fighting through an across the board lowering of expectations for 2010 and I’ll wait for the open tomorrow to buy to make sure we don’t get a downgrade.

  68. 68
    elduque Says:

    Z I have a new CHK presentation, haven’t looked at it yet.

  69. 69
    zman Says:

    Thanks Eld – they’re popping up all over the place, SWN en fuego, still have not seen their new one.

    A bit pleased that HAL seems to be having trouble following the rally on up, still don’t know when they speak at Weil.

  70. 70
    BirdsofpreyRcool Says:

    FWIW… Tech Trader says odds of a rally tomorrow are 50/50.

    So, basically no opinion.

  71. 71
    BirdsofpreyRcool Says:

    Head Trader pointing out that there are only 6 trading days left in the quarter… so he thinkgs this rally might “get some chasers for sure.”

  72. 72
    Nicky Says:

    chart looks like we may see some lower consolidation tomorrow to me bop.

  73. 73
    jat Says:

    HAL not going to speak at Weil. They’re taking meetings but not presenting as CEO isn’t present. Nothing actionable… they just don’t like playing second fiddle to SLB and so don’t send their CEO.

  74. 74
    elduque Says:

    BOP It seems to me that the April quarter has a lot of 401K money. Am I right?

  75. 75
    zman Says:

    Nicky – just sent you some Elliot comments

  76. 76
    zman Says:

    Thanks Jat, beerthirty.

  77. 77
    BirdsofpreyRcool Says:

    elduque — re74, that makes some sense… but, i’ve noticed there is always some cash-raising by stock-selling too.

    I posted (what i thought was) the Big News a coupla days ago… from people who watch hedge fund flows. Some managers went net long for the first time since October. If that is true (and I believe it is), you will have other managers piling on, to keep their returns up with the mrkt.

    That said, tough to get too bulled up here. Govt action/intervention is still THE Wild Card, IMHO. Until we see signs that our govt is going to stop waging war on the private sector and the non-union workforce, all bets for a rally are off.

    Just WAIT until they roll out healthcare, carbon and CO2 taxes!!

  78. 78
    Dman Says:

    #33 thanks Z. I was out for most of the day… looks like fund managers are all now in performance anxiety mode & chasing furiously.

  79. 79
    BirdsofpreyRcool Says:

    elduque — re74… didn’t finish the thought… there is always some cash-raising by stock selling to pay taxes, it seems.

  80. 80
    BirdsofpreyRcool Says:

    About 20 people at AIG Financial Products unit just resigned. Will be interesting to hear the details. Maybe Frank, Grassley, Rangel, Pelosi, and the Attorney Generals of 19 states can step in and unwind those derivative contracts.

    When the govt threatens business. Business quits. Govt doesn’t generate tax income, business does. This is Atlas Shrugged. Not good.

  81. 81
    BirdsofpreyRcool Says:

    That said, AIG lost 100s of millions of dollars for the US taxpayer. So, it’s not like I want to defend them. But, you can’t have govt bashing individuals. That’s the point.

  82. 82
    Dman Says:

    Finally found a clip of the recent Simmons appearance on Bloomberg.


    BOP: #81 I think it is 100s of $billions by now, isn’t it?

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