25
Mar

Wednesday – Oil Inventory Preview

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Rig Count Comment Watch: WFT's CEO said he expects U.S. rigs to bottom at 900, 185 rigs or 17% below current levels. That would be a 6 year low and I'm not sure what besides freed up capital markets and significantly higher natural gas prices arrests the decline there.  Speaking to wire service reporters, an EIA official who requested anonymity said he thought rigs would bottom at 850.

 

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today - Key takeaways from yesterday's E&P Slides
  5. Odds & Ends

Holdings Watch: the wiki tab is updated.

     ZTRADE: $10KP - Added PQ April $5 calls for $0.20 with the stock at $3.10. A bit of a stretch but it doesn’t have to get all the way there to be profitable. See Tuesday's post for reasoning following their bank line redetermination announced Monday night.

    ZTRADE: $10KP - Adding (5) HK $22.50 April calls (HKDX) for $0.60.

Commodity Watch:

Crude oil ended yesterday up $0.18 at $53.98 after a morning swoon and near test of $52. The API numbers which came out after the close (see next bullet) were not bullish and this morning crude is trading lower by $1.50.

  • Shenzi Online: 100,000 bopd capacity deepwater Gulf of Mexico development run by BHP started production yesterday. We should see the uptick in the weekly oil production numbers in the next several weeks. 
  • API Inventory Watch: Another big crude build.
    • Crude: Up 4.6 mm barrels
    • Gasoline Down: 0.805 mm barrels
    • Distillates Down: 1.6 mm barrels

Natural gas traded closed up $0.05 to close at $4.35 yesterday. At four consecutive days this ties the record winning streak for 2009 and far exceeds the prior one in terms of percentage performance. My sense is gas is drifting higher with the dawning realization that production shuts down hard in coming months, not if, just when. I would not fall in love with this rally as I still think it is highly likely (call it 80% that we see a sub $4 number before tax day if not by month end. Furthermore, I'd say we have a good chance of testing the $3.60 to $3.70 level again, especially if we see an earlier than expected build or a couple of quick big builds in gas storage. This morning gas is trading down slightly with crude.

  • LNG Watch: Things to keep in mind for the perceived coming ramp in LNG shipments:
    • TOT says the first LNG shipment from Nigeria to Sabine Pass (LNG the company’s new regas facility in Louisiana) set for April. They also are saying that Indian demand for their Nigerian LNG will be robust.

Oil Inventory Preview: regularly scheduled time of 10:30 EST today; estimates in the table from the Bloomberg survey.

ZComments:  So we got a big crude build number (up 4.6 mm barrels) from the American Petroleum Institute last night. API now puts crude inventories at 354.5 million barrels. If you take a look at the table above you note that the the expectation on crude inventories for EIA today and API's number are now incredibly close. Last week you'll recall we also got a whopper of a crude build from API (4.9-- mm barrels) and while EIA came in hot to estimates it tallied just under 2 mm barrles. In short, refineries are remaining off line a little longer than is seasonally normal due to weak margins.  

Stuff We Care About Today

Key takeaways from yesterday's E&P Slides (which now reside on E&P tab):

Big Caps:

  • Commodity price, commodity price, commodity price
  • Valuations cheap (low to trough cycle multiples) on 2009 and 2010 metrics
  • No worries on interest coverage for the whole group,
  • Big Cap thought, they've run too far too fast, much more than the market. Continued near term runs ill likely increasingly require increases in commodity prices, group feels like it could use a break, perhaps a 10% retrenchment before carrying on higher.
  • Most Interesting Underperformer. APA oiliest of the big caps, 3rd cheapest on TEV/EBITDA, cheapests on reserves, second strongest growth profile among big caps, balance sheet not a concern , strong recation to the recdent jump in oil but still underperfroming year to date.

Mids and smalls:

  • Liquidity liquidity liquidity
  • much more diversity in these names than the big caps, its not clear whether all of these names will survive the current downturn.
  • reserve life is not curretly correlating to P/CF multiples ; normally the longer the reserve life the more of a premium multiple is warrnet
  • BOP expressed this better the other day but worth repeating/reiterating: on the way down, during a credit crunch and period of falling commodity prices the safer names will be the low leverage, highly hedged ones. When credit frees up more debt and fewer hedges becomes the bigger return.
  • Stocks that may "not make it": SD, GMXR, BEXP. I have concerns about these names in terms of too much debt juxtaposed with low commodity prices. May "not make it" is probably too strong as I think they will likely survive as a public entity but we need to get through redetermination to see if they will have to sell assets or other wise change the structure of the company.
  • Interesting to see CLR taking on a bigger rally than most names in the group, high % oil profile, no hedges, leverage
  • The charts from yesterday have been added to the E&P tab.

Odds & Ends

Analyst Watch:  None.

 

129 Responses to “Wednesday – Oil Inventory Preview”

  1. 1
    zman Says:

    Durable goods up 3.4% in February vs expected down 1.2%

  2. 2
    BirdsofpreyRcool Says:

    Comments from the Trading Desk —

    Nothing from Tech Trader today.

    Head Trader thinks we close higher today (doesn’t say much about what goes on in-between). But, he cautions to watch the SPX level. If we test 818-823 and can’t push above it, then sell. Market will head lower.

  3. 3
    PackMan Says:

    Can you elaborate on your SD comment Z ?

  4. 4
    BirdsofpreyRcool Says:

    Credit Market, pre-stock-open —

    IG12 185 bps
    IG11 +40 bps to IG12

    HY 70.375 +0.25 nice to see a 70-handle again.

    Colour comments from CDS bond desk suggest that credit markets want to go tighter (positive), but that Europe is holding them back a bit. Seems our counterparts east of New York are more cautious that we seem to be. First hour after stock market open will be interesting.

  5. 5
    zman Says:

    Pack – thanks, that was a fragment of a thought. I just changed it.

  6. 6
    Sambone Says:

    By Sherry Su
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude futures lost some ground Wednesday due to caution
    ahead of weekly U.S. oil stock data by the Department of Energy.
    Bearish sentiment heightened further after the American Petroleum Institute
    reported a sharp increase of 4.6 million barrels in crude oil inventories
    Tuesday.
    “Considering the rebound of the dollar, if the DOE are to confirm the overall
    stockbuild suggested by the API, then we would expect WTI to take a breather to
    a consolidation around the $50/bbl mark,” said Olivier Jakob, managing director
    of Swiss Consultancy Petromatrix.
    The DOE data, due 1430 GMT, are likely to show crude oil inventories in the
    U.S. rose 1.3 million barrels in the week ended March 20, according to a Dow
    Jones’ survey of 16 analysts. Gasoline inventories are seen falling 500,000
    barrels, while stocks of distillates, which include heating oil and diesel
    fuel, are expected to rise 200,000 barrels, the survey showed.
    At 1130 GMT, the front-month May Brent contract on London’s ICE futures
    exchange was down $1.11 at $52.39 a barrel.
    The front-month May light, sweet, crude contract on the New York Mercantile
    Exchange was trading $1.22 lower at $52.76 a barrel.
    The ICE’s gasoil contract for April delivery was down $1.25 at $467.00 a
    metric ton, while Nymex gasoline for April delivery was down 252 points at
    147.74 cents a gallon.
    Despite gains over past few weeks, crude futures are flipping to a deeper
    contango.
    “This is a sign of weakness,” as in a real bull market the front of the curve
    typically flattens and eventually moves to backwardation, said energy analyst
    Stephen Schork. This suggests some force other than near-term fundamentals are
    driving the current “strength” in crude futures, he said.
    Simon Wardell, an analyst at Global Insight in London, said current
    fundamentals don’t justify the recent gains in crude prices. The recent rally
    “came a bit prematurely in my view.
    “Demand is still exceptionally weak. We still see inventory build in the U.S.
    We still have floating storage to get rid of,” Wardell said.
    The output cuts by the Organization Of Petroleum Exporting Countries may help
    tighten the market, “but this is going to take some time, and we are probably
    not there yet…I won’t be surprised to see that prices come off quite a bit in
    the near term,” he said.
    China Tuesday raised benchmark retail prices of gasoline and diesel by 3%-5%,
    an increase seen as rather modest compared with a rise of more than 40% in
    crude oil since China last cut its fuel prices Jan. 14.
    But “one should not interpret this price increase as a reflection of
    significantly improved demand in China,” said Paul Ting, president of
    consultancy Paul Ting Energy Vision LLC.
    China’s oil demand “may have bottomed in January with a 10.9% of demand
    decline, but February demand showed only signs of modest recovery but still a
    decline versus last year,” Ting said.

    -By Sherry Su, Dow Jones Newswires
    Dow Jones Newswires
    03-25-09 0755ET

  7. 7
    zman Says:

    Stocks of interest speaking at Howard Weil today:

    The unloved: BPZ, KOG, TXCO, CPE, MMR

    The interesting: CLR, HK, CRR

    BP is speaking at the lunch which should be good for some headlines.

  8. 8
    zman Says:

    Dman – thanks for sending all the thinkorswim stuff re IV last week.

  9. 9
    choices Says:

    Z-excellent summary of e & p for yesterday andtoday-do you know if CRK is presenting at conference today?

  10. 10
    choices Says:

    Dman-how is thinkorswim working for you?

  11. 11
    zman Says:

    CRK spoke yesterday, I have not yet seen their presentation.

  12. 12
    elduque Says:

    BDI -18 1740

    TED 102.97

  13. 13
    zman Says:

    Oil through yesterday’s lows and $52 on profit taking before the numbers. Regarding 6, agree with comments rally has been too strong but would add that oil and commodities in general turn up before inventory peaks. On a seasonal basis, oil inventories should peak in the not too distant future.

  14. 14
    elduque Says:

    RE SD-They have in fact admitted that they are going to sell off their midstream assets and anything else that would improve liquidity. YES or NO?

  15. 15
    BirdsofpreyRcool Says:

    Credit trying to validate the stock market rally

    IG12 183

    HY11 70.75

  16. 16
    Dman Says:

    thinkorswim: I’m currently using it for streaming data & charting. Very happy with those features, but have really only scratched the surface of what it can do. A bonus I wasn’t expecting is that it has a lot of live futures data. Will soon be trading with it & will probably do most (if not all) of my option trades there.

  17. 17
    zman Says:

    Re 14 – yes they have, long time plan to sell. I was thinking more of producing or prospective property asset sales, like BEXP’s probable need to sell 100 to 200,000 acres in the Bakken. In the past, the pitch there has been the strength of that prospective leasehold, giving them a large number of future locations to choose from. If they have to sell that, the story becomes less attractive.

  18. 18
    zman Says:

    CLR trading in lockstep with front month crude.

    SU flat as people contemplate the Petro-Canada acquisition. I’ve seen others comment on this and I must agree, that deal failed to inspire any M&A mania. Perhaps its the fact that you have most of the super independents at H.W. this week saying they don’t see M&A picking up this week (except for APA and their shale gas comment).

  19. 19
    BirdsofpreyRcool Says:

    New Homes Sales strong !! here we go

  20. 20
    BirdsofpreyRcool Says:

    New Homes Sales came in UP 4.7% MoM… vs -2.9% expected. Even last month’s report was revised to show higher sales.

  21. 21
    Dman Says:

    Broad market dragging energy green. Dang those solars, getting away from me after I forgot to load up on SPWRA.

  22. 22
    VTZ Says:

    I’ve contemplated SU/PCA for a while now and I’ve decided that it reduces the trade-ability of SU but increases the long-term investibility.

  23. 23
    VTZ Says:

    I also think its very accretive in terms of their oil sands and trading/refining because they should be able to optimize petro-can refinery feedstocks with Suncor crudes.

  24. 24
    VTZ Says:

    The land positions are also adjacent so it could mean moderately reduced capital costs depending on how they re-jig the development plans going forward. Ultimately the cost of developing all the land will be reduced.

  25. 25
    BirdsofpreyRcool Says:

    IG12 181… the rally in credit (as measured by the CDS investment grade index) continues

  26. 26
    zman Says:

    Curious to see HAL, SLB not participating, then note OIH is down. Got a note showing one small oil service named warned re 1Q this am. Doubt its that, could just be profit taking. Numbers for the group continue to fall and will be too high as things stand for 1Q now (variety of sources on that so its well known and thus discounted).

  27. 27
    Dman Says:

    VTZ – Any views on AAV?

  28. 28
    zman Says:

    VTZ – In 3 years when oil is back into the $140 range we will be wondering why we bothered to worry about paying $23 for SU.

  29. 29
    VTZ Says:

    Suncor Energy Tgt Raised To C$40 From C$35 By BMO >SU
    Suncor Energy Tgt Raised To C$39 From C$38 By Scotia >SU
    Suncor Energy Tgt Raised To C$38 From C$36 By Natl Bk >SU
    Suncor Tgt Raised To C$35 From C$30 By Canaccord >SU
    Suncor Energy Tgt Raised To C$42 From C$39 By UBS >SU
    Suncor Energy Tgt Raised To C$36 From C$26 By Tristone >SU
    Suncor Raised To Outperform From Neutral By Macquarie >SU
    Suncor Tgt Raised To C$39 From C$30 By Macquarie >SU

  30. 30
    BirdsofpreyRcool Says:

    Just a reminder as to why we care about this stuff — Any increase in the availability of credit will swell the ranks of the “I Will Survive” list. Interest rates are low, so borrowing costs are low, so it’s the the “cost of funds” per se that is the problem… it’s just ACCESS to those funds that is the missing link to recovery.

    So, ANYTHING that breaks the credit logjam will help every private company in the world. (Not to put it too mildly.)

  31. 31
    elduque Says:

    VTZ -I was interested in your thoughts with regards to AAV. No longer going to be a trust, selling property to get rid of conv. and development of large NG shale play.

    Thank you

  32. 32
    choices Says:

    re:CRK=found this on their site 5 Mar. Did see anything on hedges but debt situation looks ok-prob not present they gave yesterday.

    http://library.corporate-ir.net/library/10/101/101568/items/327443/1F72F1BF-982A-4E99-8D87-314E28B299BC_CRK_March_2009.pdf

  33. 33
    VTZ Says:

    When oil is 140 the mergeco will be worth in excess of 100 for sure.

    Re: AAV I forgot to comment the other day but I think they could be in trouble with their debt position unless gas prices recover in a hurry. I see no reason to hold them now that they removed their dividend.

  34. 34
    BirdsofpreyRcool Says:

    eratum: “it’s NOT the cost of funds per se”

  35. 35
    BirdsofpreyRcool Says:

    Credit market in general moving higher, not just the indices… +1/2 point, on average. That is a strong, positive move.

  36. 36
    VTZ Says:

    I have to leave for the day, if you leave comments or questions I can answer in late afternoon or this evening.

  37. 37
    choices Says:

    re 32-did NOT see anything on hedges-trying to type too fast.

  38. 38
    zman Says:

    EIA in 20 minutes, the rally for energy could still evaporate.

    HK speaking later today at H.W. getting a nice move now.

    GMXR spoke yesterday, getting a 10% pop this morning. May have had interesting post market breakout session. New presentation on their site has a better break out of their Haynesville position than in the past, good points made on low recovery factors vs Barnett in the 6.5 Bcfe assumption, also best 3 wells in company history were 1st 3 wells they drilled in the play, more data month end April.

    Choices: CRK has only about 10% hedged as of last notice which was 4Q release.

  39. 39
    BirdsofpreyRcool Says:

    Head Trader pointing out the obvious… that the market will not go up in a straight line today, but that we did get through the resistance on the SPX cash index and futures. Thinks we will fall back a bit, but if we can hold 816 on SPX, should close higher.

  40. 40
    zman Says:

    Knew what you meant choices, I do the same all the time.

  41. 41
    choices Says:

    Z-In the category of what have you done for me lately vis-a-vis market, this rally in gen mkt and in energy sector, OIH, XLE, etc, seems a little tired-maybe just consolidating but a lot of people are predicting a big rollover in April-however, uptick rule and mark to mkt to be reviewed in early Apr-was wondering about what you have heard or your opinion.

  42. 42
    elduque Says:

    It seems to me that the real question re all the small players is not how much debt they have but is their any market for “some” of the assets that they own. I guess I haven’t heard of any asset sales, just talk that some of the larger players want to be buyers. Do you know if any sales have taken place.

  43. 43
    zman Says:

    Latest GMXR presentation:

    http://files.shareholder.com/downloads/GMXR/579047875x0x281860/4fe007bc-b32e-4607-bbca-ac61a98d90d3/2009.03.24_Howard_Weil_Mktg_Presentation.pdf

    Wyoming – their “frac recipe” is on slides 16 through 18. Laterals have not been that long yet relative to other operators. Had to cut some completions short in first 3 wells.

    Slide 19 – old slide from last presentation but worth a look when you want to compare the early history for them in the play to others.

  44. 44
    zman Says:

    There are transactions going on for acreage, pricing is as you would expect way down. Williston (Bakken) trasactions of late in lease sale showed promised which is helping BEXP, there saw acreage going for 1,000 to $4,000 per acre.

    Choices – agreed tired, hence comment on the big cap E&Ps. I think service should be more tired as they have had a decent year so far amidst plummeting earnings estimates. I think we are due a pullback although a lot of the charts look like base breakouts so your downside could/should be close at hand. Of course, someone can always hold the wrong press conference and spike us in either direction. Real fundamentals have show 5 or 6 good datapoints of late and demand for oil for gasoline at least is not dead, more after the inventory numbers…

  45. 45
    BirdsofpreyRcool Says:

    elduque — REXX announced a property sale this morning… west TX and New Mexico stuff. Don’t know details on the properties, but the sale netted $17.3mm.

    Availability of credit helps the funding for potential buyers. The more buyers, the more an asset will bring in a sale.

  46. 46
    zman Says:

    EIA Oil Inventory Report: Part I

    Crude: up 3.3 mm bbs
    Gasoline: down 1.1
    Distillates: down 1.6

    Crude at time of report: down $1.20

    Utilization: 82% (flattish)
    Imports up some to 9.4 mm bopd

  47. 47
    zman Says:

    EIA Part II

    Gasoline demand: up 145,000 bopd to 9.1 mm bopd. Not terrible.

    Cushing barrels in storage fell sharply:

    down 2.2 mm barrels to 31.7 mm barrels, this is taking away from the headline number on total crude. Gulf Coast saw the biggest rise due to higher imports.

  48. 48
    zman Says:

    EIA PArt III

    7 minutes after report and oil $0.80

    Distillate production sharply lower with this report and demand picked up.

    Total product supplied moved up nicely. Demand is not dead.

  49. 49
    md Says:

    SPR not having problem getting supply

    What’s CL trading now

  50. 50
    zman Says:

    Here’s one for TEX and Wyoming to comment and maybe scoff at re GMXR slide 26. First Haynesville well cost $9.5 mm (spud to sales of 100 days), current cost $7.5 (75 days), future $5.5 mm (50 days).

    Elsewhere in the presentation they talk about saving $25 mm by laying down a rig. If you get to 50 days that means half the rigs to drill the same number of wells.

    Note that 2010’s Capex only budgets 8 Haynesville completions That contemplates a small rig count for them next year than this …survival mode but with good reserve growth.

  51. 51
    zman Says:

    Down 70 cents $53.25. Re SPR, good time to refill it.

  52. 52
    zman Says:

    Crude shorts: Schork, Fox’s Flynn must be grating teeth over crude not collapsing here, have sponge bob, not CNBC on in the office today, anyone hear the talking head comments re inventories?

  53. 53
    BirdsofpreyRcool Says:

    z — you will learn more from sponge bob than CNBC.

  54. 54
    Dman Says:

    I think Sponge Bob beats the bobble-heads any day.

  55. 55
    reefguy Says:

    BOP- Franklin beats Spongebob or Caillou

  56. 56
    Sambone Says:

    Uncle Phil is long crude

    http://www.321energy.com/reports/flynn/current.html

  57. 57
    zman Says:

    Thanks Sam, wonder when that happened.

  58. 58
    BirdsofpreyRcool Says:

    reefguy — clearly, you have far more knowledge of popular culture than do I. I defer to your expertise.

    Franklin is a SB character? I usually think of the mutual fund company or the Father of France, when I hear that name… 😉

  59. 59
    zman Says:

    BOP, when you get a chance, slides 29-32 of the new GMXR presentaion probably behind the rally in the shares today, they have a net worth waiver on their bank line now but otherwise look pretty clean, it looks like they think the bank line will be redetermined UP by $10 mm.

  60. 60
    zman Says:

    Franklin is a troublesome little turtle, seems fine on the surface which is the lure for parents to let the kiddos watch him. Then your 5 year old is suddenly playing with matches or washing the dog with bleach. Sponge Bob is much less harmful because he’s obviously crazy.

  61. 61
    reefguy Says:

    BOP- I have 6 birds from the nest ages 4-20. The Franklin (a talking turtle) has been part of my nightime reading program for about 15 years. Calliou is a cartoon
    tv character who is 4, bald and whiney.

  62. 62
    BirdsofpreyRcool Says:

    Is KOG on deck at HW now? Popping its head up. That conference is a good forum for little companies to present their side of the story.

    At 20 cents and no debt, you can throw away all of KOG’s other assets (seems like they wrote them down to zero themselves), and the $20.4mm mrkt cap would value their FBIR Bakken acreage at $551/acre.

  63. 63
    zman Says:

    KOG had a breakfast this morning.

  64. 64
    reefguy Says:

    kog- that is a pretty fair value with the management you would have to get out of the way

  65. 65
    Sambone Says:

    By Anna Driver
    NEW ORLEANS, March 25 (Reuters) – Investment bankers may
    dream of tie-ups between large independent oil and gas
    companies, but executives who could possibly do such a deal say
    they are not in the market.
    On Monday, Canadian companies Suncor Energy Inc SU.TO
    and Petro-Canada PCA.TO announced a $15 billion stock deal,
    but U.S. oil and gas executives point to low share prices,
    still-frozen credit markets and the nation’s vast gas reserves
    locked in shale plays as reasons to go it alone for now.
    “I don’t see that anybody needs to do anything right now,
    so I’d be surprised if any of the large-cap independents bought
    other independents or if a major bought a large independent,”
    Aubrey McClendon, the chief executive of Chesapeake Energy Corp
    CHK, told Reuters.
    There may be some consolidation among small- to mid-sized
    companies looking to lower costs, McClendon said, adding that
    he would be surprised to see another deal the size of
    Suncor/Petro-Canada or the ConocoPhillips/Burlington Resources
    deal struck in 2006.
    Chesapeake, with its 2.4 million acres in prime shale gas
    areas like the Haynesville play in Louisiana, is often chatted
    about as a juicy target for an oil major looking for exposure
    to big gas reserves in the porous rock.
    “I don’t really see a lot of M&A in the sector right now,”
    Larry Benedetto, oil and gas analyst with Howard Weil, said at
    the company’s annual energy conference.
    Share prices are still too low for energy companies to
    consider a takeover, he said.
    And with the advent of the shale plays, independent oil and
    gas companies now have huge inventories of natural gas that
    will “take them 8 or 10 years” to drill so they have no need to
    buy assets, Benedetto said.

    STILL SOME POSSIBILITIES
    Still, there could be some small deals that involve
    distressed companies, he added.
    John Richels, president of Devon Energy Corp DVN, said
    his company holds the view that there will be more
    consolidation in the industry over time, partly as a result of
    economic woes. He sees deals more likely among middle-sized
    companies.
    “It makes good sense that you would see more
    share-for-share transactions being done,” Richels said, citing
    the scarcity of cash in the market.
    Other larger oil and gas companies like Devon, which said
    big deal activity for them is unlikely this year, include EOG
    Resources Inc EOG and Anadarko Petroleum Corp APC.
    Houston energy research firm Tudor, Pickering, Holt & Co
    Securities Inc told clients in a note on Wednesday that if the
    natural gas market stays weak, deals will are not likely
    “imminent in any way,” but it thought the best large-cap
    takeout plays are Apache Corp APA and Chesapeake.
    Still, some say the steep decline of crude oil and natural
    gas prices from their summer peaks has created great bargains
    for assets.
    Steven Farris, Apache’s chief executive, told investors
    that the company is actively looking at assets, primarily in
    areas where it already has operations.
    And Murphy Oil Corp MUR Chief Executive David Wood told
    the Howard Weil Energy Conference in New Orleans that his
    company would be looking to add acreage in the downturn.
    “I do see the opportunity to add things into our business,”
    he said. “This is a good time for us to do that.”
    (Additional reporting by Braden Reddall in New Orleans;
    Editing by Steve Orlofsky)

    Wed Mar 25 15:18:24 2009

  66. 66
    BirdsofpreyRcool Says:

    reef — good point. I still look at them as a going concern, as I think mngmt will ultimately “do the right thing” there (they have a lot of stock) and merge/sell after the FBIR acreage proves up. But in a burn-down analysis, you have to look at those mngmt costs and severance agreements. Also, while there is no debt, they do have to deal with that pesky “take-or-pay” agreement with Unit on that 2nd rig.

  67. 67
    elduque Says:

    HK-any news that I missed?

  68. 68
    zman Says:

    Eld – No, they speak this afternoon at H.W.

  69. 69
    zman Says:

    No new HK presentation on the site yet. Stock broke through its high from last week. A lot of analysts have price targets in the mid 30s on this one, a few in the low to mid $20s. They have pulled back on spending like everyone else but will still post best in class production growth this year.

    HAL and SLB easing off highs. I’m still close to flat on my HAL trade, never took the SLB puts. Thinking I’m early on it. If anyone sees a comment from that Citi analyst who predicted the coming wave of warnings from the service industry I’d like to know about it.

  70. 70
    choices Says:

    FWIW-Thinkorswim platform IS slick-will take me roughly 3 light years to understand all of the features.

  71. 71
    zman Says:

    Wow = Oil.

  72. 72
    rseidman Says:

    Z: What do think of TSO here for swing trade?

  73. 73
    zman Says:

    RS – Not a bad idea probably, cracks need to stabilize soon on gasoline, saw west coast gas production was up big but that’s one week, but I expect them too. If distillates pop back up could be a nice rally in the group.

  74. 74
    zman Says:

    10 Bcf withdrawal expected by the Street, gas seems tired…smart move probably to give it a chance to rest/test $4. This time of year its not uncommon to see big surprise misses on the part of the Street relative to the EIA number. We’re at trough storage or very close to it now unless the weather chills back out, forecast looks a bit doubtful for that although I have not seen what Bastardi at Accuweather thinks about March now that its been much milder than he originally thought. Anyway, gas will focus on the velocity of the rebound now. So if we get a 10 bcf build instead of a 10 bcf withdrawal tomorrow its a tragedy for price if not for absolute storage levels.

  75. 75
    zman Says:

    RS – I should have a better answer for you on that by morning, doing a little reading/mulling, not wild about the refiners by any stretch nor down on them either but you said swing trade and I’m thinking about it.

  76. 76
    kyleandy Says:

    PQ i see they finally joined the party

  77. 77
    zman Says:

    Wyoming – it is painful how little differentiation there is in the sub sectors of the energy market to me as well.

    Kyle – yep, I’m looking for what will be the next catalyst there, right now its just trickling up with growing acceptance that they are not tot.

  78. 78
    Nicky Says:

    Good afternoon all.

    SPX move off the this mornings high looks corrective so I think we still head higher. Support on SPX at 804. Resistance at 835 and 840. Dow has resistance at 8300.

  79. 79
    reefguy Says:

    BTW- IOC near $27

  80. 80
    zman Says:

    Wow Reef – completely fell off my radar. Nice move.

    Any thoughts MMR/EXXI re Blackbeard, they’ve got 4 sands, right? Any word on a do or die date here?

  81. 81
    zman Says:

    Anyone care to take a shot at what turned the market around/lower?

  82. 82
    Nicky Says:

    It needs to hold the above support levels I should have added!

    Oil despite the fundamentals also does not look complete to the upside.

  83. 83
    Nicky Says:

    Z – CNBC reporting that there seems to be a concern over the treasury auction. Equivalent failed in the UK earlier.

  84. 84
    kyleandy Says:

    nicky what time auction?

  85. 85
    zman Says:

    Thanks Nicky, I see foreign buyers bid poorly, but the Fed is buying now.

    http://www.marketwatch.com/news/story/Treasurys-fall-after-record-5/story.aspx?guid={3BE5AF49-E318-418A-AF23-BF325F579943}&dist=hplatest

  86. 86
    zman Says:

    I am as always surprised by the muted action in the dollar following a poor auction. Hmmm. There’s another auction tomorrow.

  87. 87
    BirdsofpreyRcool Says:

    just got back… little foreign kick to the stomach, eh? well, guess we can’t be debt-gluttons forever. Nice to get that reminder every once in a while.

    IG12 188 now (add 40 to that, to get 228, to calibrate to the old index). Credit market not liking what ever it is that stock market not liking.

  88. 88
    zman Says:

    BOP – see link 85

  89. 89
    occam Says:

    VTZ re 33. If the merged company will be worth $100, won’t SU even without the merger be worth almost that much? Is PCA that undervalued?

  90. 90
    zman Says:

    Geithner propping the buck. Very touchy markets:

    http://www.marketwatch.com/news/story/Geithner-sends-dollar-roller-coaster/story.aspx?guid={B2E7B567-C937-465F-A666-896AFBA9D90D}&dist=hplatest

  91. 91
    zman Says:

    HAL looking to crack back below $17, lot of recent resilience, up 15% on my combined put position and my add a third tranche. Not falling in love with the idea of shorting service but I still think estimates have to fall more and valuations are getting pretty high for 0% (or less) growth.

  92. 92
    Nicky Says:

    Wow was I ever the kiss of death for the market. 792 next support on SPX

  93. 93
    zman Says:

    Oil managed to close down $1.20, right where it was before the inventory numbers hit. More on that in tomorrow’s post.

  94. 94
    zman Says:

    Nicky – I think Geithner and that poor auction was the kiss of death and you are the messenger. Any thoughts on natural gas from an EW perspective?

  95. 95
    zman Says:

    Fed’s Yellen warns about deflation. Is that really news to the market? Or just an excuse to take profits?

    http://www.marketwatch.com/news/story/Yellen-pledges-no-retreat-policy/story.aspx?guid={B601CC14-9AB6-45B9-AC25-3931B3BC7713}

  96. 96
    VTZ Says:

    Occam – re 89, probably at least 85 yeah.

  97. 97
    zman Says:

    Ya know, I’d pay real money for all government officials to take a Spring Break from making speeches about anything right now. Take a week off, let the markets be markets and digest data. Heck, take a month off.

  98. 98
    zman Says:

    HAL out with $100 mm contract extension for drilling in Russia. This is the kind of press release you put out when you are trying to inspire confidence in your book of business in a region. They don’t PR every $100 mm contract, not with revenues of $14.5 B per year.

  99. 99
    Nicky Says:

    That move lower is either wave c of 2 in which case we now launch significantly higher or we are in wave 1 down. I favor the former until proven otherwise. Would like to see 792 hold on the SPX.

  100. 100
    Nicky Says:

    Will just take a look at nat gas Z – give me 5 mins.

  101. 101
    zman Says:

    BJS sounds like more job cuts in progress

  102. 102
    Nicky Says:

    Nat gas – okay its difficult to make much out of the wave up of the low last week so far. That said we have resistance around here at 4.34. We could see a small correction from this area before moving higher again. I believe this will be the start of a decent move to the upside but its too early to say whether it is going to be just a 3 wave correction or something more bullish.

  103. 103
    BirdsofpreyRcool Says:

    Credit Trading Desk noting that bears are having a tough time getting up a head of steam with the downdraft. Whereas we used to be in “sell the rallies,” we now seem to be back to a little bit of good ol’ “buy the dips.”

  104. 104
    zman Says:

    Thanks Nicky and BOP.

  105. 105
    BirdsofpreyRcool Says:

    yep… stocks trying to go green again

  106. 106
    Nicky Says:

    It doesnt feel like it but we are actually down 3 of the last 4 days on the indices.

  107. 107
    BirdsofpreyRcool Says:

    Head Trader commented that he thinks the large funds might be buying into this market… he says hedge funds are pretty quiet and he’s not seeing “spiky” buying (or selling). Since the large mutual funds usually use a VWAP algo to buy, he thinks that is where the bid is coming from.

    This would also support elduque’s theory of 401-k contributions being put into the market.

  108. 108
    zman Says:

    Indexes trying for green close, about flat on my HAL which is fine, although if I get another shot at up 50% on those like last Friday I will take it and reload. For now I just want to stay sort of close to this level, under $18.25, while I wait a little long for negative industry comments.

  109. 109
    zman Says:

    HK – gain on day doubled with the start of their H.W. speech. No new presentation on their site as they are slackers. If anyone went to the presentation I’d like to hear highlights.

  110. 110
    zman Says:

    Wow, whiplash market today. All major indexes up over 1% now. Beerthirty.

  111. 111
    BirdsofpreyRcool Says:

    I honestly think I got whiplash, watching the mrkt today. Can anyone seriously “trade” this? If I was a day-trader, my brain would be fried by now.

  112. 112
    BirdsofpreyRcool Says:

    uh-oh…. i’m beginning to sound like z…

  113. 113
    Nicky Says:

    Oh my God again the kiss of death this time to the 3 of the last 4 days down!

    Okay imo this looks good for 2C finishing this afternoon at the 7550 level. We should now be in a 3 of 3 which should move significantly higher. Famous last words of course!

  114. 114
    zman Says:

    Take heart BOP, I recall a period last summer with daily large swings from positive to negative and back again. It was the top.

  115. 115
    zman Says:

    Nicky – feel free to act as the kiss of death more often, lol.

  116. 116
    PackMan Says:

    CRAZY day, just like Head Trader called it right ? LOL.

    Home Sales – Analyst Note:

    Homebuilding: Feb. New Home Sales Show Modest Bounce Off 20% Drop Since Oct.; Spring Selling Season Still Weak

    While February New Home Sales rose 4.7% sequentially to 337K, above the Street’s 300K estimate, or a 2.9% seq. drop, we make two key points that we believe should temper any optimism regarding a potential inflection point in the housing market. First, we note Feb.’s rise is only a modest partial reversal of the 20% drop since Oct., punctuated by a strong 13% drop last month. Second, based on anecdotal evidence and conversations with private builders, we believe traffic has fallen in March, which we note is supported by the depressed NAHB survey at 9 in March, featuring a 2 point drop in the buyer traffic component. Moreover, on a YOY basis, sales are still down 41% vs. Jan.’s 46%. Accordingly, we believe the spring selling season should remain weak, and that a trough in the housing market remains elusive. In addition, while absolute new home inventory continued to decline, months supply remained elevated. More importantly, however, we believe the core problem facing the housing market is still the highly elevated level of existing homes available for sale, which rose 5% in Feb. to 3.798 mil., and is 11.5x the size of new home inventory. As a result, given our outlook for continued weak demand amid rising unemployment and low consumer confidence, tight credit conditions, and rising delinquency trends, we believe inventory should remain highly elevated over at least the next 6-12 months, which we believe should result in further home price declines and large impairments well into 2009. Thus, we reiterate our negative sector stance.

    While absolute new home inventory continues to decline, months supply remains elevated; more importantly, however, existing home inventory remains the core problem. Absolute new home inventory fell 10K units to 330K, representing. a 2.9% decline and a 42% fall from its July ’06 peak, while specs fell 4.7% seq. to 284K, down 40% from its Sept. ’06 peak. Mos. supply fell 5.4% from last month’s record high, but remains elevated at 12.2 months. Importantly, we believe these declines in absolute inventory remain relatively immaterial relative to existing home inventory, which rose 5.2% in Feb. to a highly elevated 3.798 mil., or roughly 11.5x the size of new home supply.

    Prices fall, but we believe more declines are necessary. Median prices fell 2.9% seq. to $201K following Jan.’s 9.0% decline. On a 3-month moving average basis (to reduce volatility), prices fell 3.2% seq. and 10.0% YOY. We continue to believe further material declines in new home prices are necessary, given continued weak demand and our outlook for further deflation in existing home prices, which should drive continued large impairment charges for the builders.

    Regionally, rise in new home sales led by the South and West. Specifically, the South rose 10% sequentially following January’s 6% sequential decline, while the West rose 7% following Jan.’s 35% fall. The Midwest fell 9% sequentially following Jan.’s 7% decline, while the Northeast fell 3% following Jan.’s 3% decline. On a YOY basis, all regions fell between a 26% to 54% range.

    Maintain negative sector stance. We note that while the large-cap builders are currently trading at 0.56x P/B (ex-FAS 109), modestly below the 1990 trough of 0.7x, we also point to a markedly more challenging housing and macro environment today. Moreover, we believe our outlook for impairment charges to represent another 30% hit to builders’ book values could easily prove conservative. As a result, we believe a sustained positive move in the homebuilders at this point will require a fundamental driver, rather than simply a more compelling valuation multiple, given the current lack of confidence in asset values.

  117. 117
    BirdsofpreyRcool Says:

    PackMan — LOL… Head Trader has a real feel for this stuff !!

  118. 118
    md Says:

    FWIW
    Electrical Dec Power Monthly and jan Flash report
    show 10%+ decline in industrial YOY for ea. month. NG Dec. relatively unchanged at 4% and DN 10% in Jan flash report.
    Although higher HDD’s will mean higher res and comm. so likely will be a wash for Jan YOY

    LNG – Qatar innaugurates their next train for UK of up to 1 bcfpd early April. Europe storage is very very low YOY. Do you follow it at all. Is there not enough LNG avail storage at this time of year to be refilling in Europe instead of here.

    I’ve been out of the loop last bit. Wish I had more time.

  119. 119
    md Says:

    to clarify- relatively unchaged from the NG monthly figures for electric

  120. 120
    zman Says:

    Hey MD, adding some monthly petro data in tomorrow’s normal Thursday review. Re Europe storage, only when I see a data point, usually someone mentions it here and there, there was talking of published numbers last fall for the EU on gas storage and if that has been done, on a weekly basis, I’ll start tracking it.

  121. 121
    mimster90 Says:

    zman what about kwk will it make it or is it in the same class as gmxr, sd and bexp?

  122. 122
    zman Says:

    Mim – they are on my list to look at, not yet done looking at them.

  123. 123
    Wyoming Says:

    Did a cursory pass on the comments. Tell me if I miss one. Will do GMXR in a bit.

    #50 Actually $5.5mm is what I believe is a true development cost of a HS well. This does not have a bunch of science (sorry GnG boys), resin coat proppant.

    Quick observations today. WFT released many sales people in DFW, will have to see how it effects their performance. IMO, it was too deep. They also closed their Farmington frac operation. It has only been open for a couple of years. Another major service friend in Houston feels like Q1 will be really bad for them, at least in US.

    Maybe the HAL puts are not too early, will have to see.

    Will be back in an hour with GMXR.

  124. 124
    gaamblor Says:

    Z, is the weekly CTFC position update available for NG? can you put that in tomorrows post, curious to see how many shorts went away in the mad rush last thursday

  125. 125
    Wyoming Says:

    16 – volumes almost look like standard Barnett stage. Hybrid fluid system. Would not be my preference at that temp, but they have more experience than me. They have cut short little less than 30% of their stages. Fluid could be the reason, hard to tell without all the data.

    17 – Yea, right. Effective frac dimensions are never that good.

    18 – Liars
    Calli = 250′ per stage
    Bosh = 310′ per stage
    Bald = 367′ per stage. Should have 18 stages to = Calli.

    19 – Not a Barnett decline. Looks to be cleaning up. Not surprising, gel loading in frac fluids may have some impact.

    26 – I think it is possible, some of the reasons are OK sort of. Tangibles probably come down because thay do not have a large pipe inventory at the high prices. Facilities, minimal impact and deflation reduced. Cycle time comes from the learning curve and is reasonable @ 50 days. Intan drilling probably reduction in logging costs and tools run, deflation effects.

    Really curious to know how many stages are factored for #26 cost reductions.

  126. 126
    zman Says:

    The Journal’s take on O&G industry taxes under the new admin:

    http://online.wsj.com/article/SB123802514107642447.html#mod=todays_us_page_one

  127. 127
    zman Says:

    If we get a draw at all on NG, could get a nice sigh of relief rally. Concern is the reaction to a possible build in storage…really a coin toss today.

  128. 128
    lexus automobile Says:

    lexus automobile

  129. 129
    Eagan home mortgage company Says:

    Eagan home mortgage company

    Wednesday – Oil Inventory Preview | Zman's Energy Brain ~ oil, gas, stocks, etc…

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