03
Apr

Friday – Gas Supply Slide Show + Gas Storage Review + Some Other Stuff …

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The post that got too long. This one will be book marked for future reference on the natural gas link at left.

Jobs Watch: Job losses of 663,000 being billed as not too terrible, no changes to February, but sharp downward revisions to January levels. See story here.

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Supply Slide Show
  4. Natural Gas Storage Review
  5. Brief Thoughts on Natural Gas Demand
  6. Odds & Ends


In Today's Post:

Holdings Watch: All $10KP trades. The wiki has been updated.

  • Out (15) CRK $35 April calls for $1.05, up 172%. Will hold the $30 calls for awhile, and may rebuy these as the expected and potentially catalytic operations update has not yet been released.
  • (10) HAL April $15 Puts (HALPC) for $0.38.
  • (5) BHI April $30 Puts (BHIPV) for $1.40.
  • Note: Estimates still coming down, potential for further pressure on numbers for the rest of the year remains high. They may or may not issue warning releases.

 

Commodity Watch

Crude oil jumped $4.25 to close at $52.64 yesterday on the strength in the broader equity markets and weakness in the dollar brought about by a smaller than expected interest rate cut in Europe. This morning crude is trading off slightly.


Natural crawled up $0.09 to close at $3.78 yesterday. We remain within a hair of near term support. The "rally" was not the gas storage numbers nor the release of the supply data for January but was instead the green markets. This morning gas is trading down a touch with oil.

 

Natural Gas Supply Slide Show

ZComments: The January natural gas supply data was released by the EIA yesterday, no big surprises but we are starting to see the roll in most of the big, growthy pieces of U.S. gas production. The following slides kind of say it all but here are my big picture thoughts:

  1. January 2009 Lower 48 gas production was 58.6 Bcfgpd, down from 58.8 Bcfgpd in December. Onshore production was 52.3 Bcfpgd, down from a December level of 53.06 Bcfpgd.
  2. The January data reflect rig activity levels from late last year. Rig counts were only off by 20% from peak levels last Fall. In other words, the January production did not reflect a majority of the reduced activity that has occurred in North American drilling. 
  3. All regions that had been growing look "toppy"
  4. The Gulf of Mexico is the one exception. In January, the Gulf was still recovering from the effects of Hurricanes Gustave and Ike and was also seeing some incremental associated gas volumes from new deepwater oil developments.
  5. We are probably not going to see sharply lower production volumes from one month to the next but a continuous and accelerating slide over the next several months is on tap. A high number of drilled but uncompleted wells will make the decline more gradual than the rapidly fallling rig count would suggest. 
  6. Louisiana was still not seeing a bump in production from all of those 4Q08 Haynesville completions.
  7. "Others States" production has been a stealth ship of growth...until now. The EIA breaks out the major producing states on a monthly basis as I have them below. However, it the the smaller, non-traditionally gas producing states that have been one of the primary growth engines contributing to recent growth. States like Colorado, Utah and Arkansas are among a dozen or so states that have seen unprecendented growth in recent years.  


Natural Gas Storage Review

ZComments: Not much to add, the number was technically a build as there was a 9 Bcf reclassification of working gas to base gas (without which we would have been talking about a 9 Bcf build). Demand is squishy, its the should season. The velocity of the rebuild is the important thing to watch right now as we are going to get to very full storage this Fall. Getting to full storage has not historical been the nail in the coffin for natural gas prices although doing it too rapidly will mean prices will struggle to mount much of a recovery before  the EIA 914 data  make the declines all too obvious in another 3 to 4 months.  Click here for a good primer on natural gas storage in the U.S.

And Now For A Few Very Brief Thoughts On Natural Gas Demand.

Demand in from the Residential and Commercial sectors is primarily space heating related and is fairly unaffected by the economy. Looking at the following charts you should notice the season peaks in demand are generally seen in February. Taking note that our data runs through January 2009 you can see that recession or not, people don't like to be cold. The weather was colder in January 2009 and demand ticked up in near lockstep.

Electrical Demand: Generation has been low for the last several months but gas is more than holding its own.  Winter is the slow season for generation but note that over the last few years, gas has seen increasing demand as it generation increases AND it steals share from coal and nuclear remains maxed out. In the summer this trend is even more apparent and has been exaggerated by the impact of summer droughts which reduce output from hydroelectric sources.

Industrial Gas Demand ... The Weak Link.  Demand here is seasonal and we ran 2.5 to 3.0 Bcfgpd low to what you'd expect in January. We had everything from crushed steel production to a fertilizer market held at a standstill has farmers couldn't get loans and ammonia production was halted. Chemical production, the biggest piece of industrial gas consumption was off severely in 4Q as per comments from the Majors and January would have seen no help from that sector. And you don't heat empty factory floors. As the economy unfreezed, this sector may recover faster than people think as current low natural gas prices offer a return to margins not seen in nearly a decade.

Total Demand Was Up in 2008. Yep, thought that might be surprising ...

... or looked at by quarter, its not apparent the economy has had that much of an impact on demand... Part of that is better weather but it helps to have the charts at hand for reference when the gas bears cry out that industrial demand is "destroyed". It's impaired, not destroyed and other parts of the demand pie made up for it (and not just before everything ground to a halt in the global economy in the second half of 2008.

... In Fact, Despite The Weak Economy, Demand Remained Strong Through January.

  • January 2008 Demand: 87.5 Bcfgpd
  • January 2009 Demand:  87.2 Bcfgpd
  • Apparently its not the end of the world as we know it after all. Yes, storage is high as seen in the previous section but its primarily a function of excess supply. Take that away (as the falling rig count will do over the next several months) and the demand is still there to balance the market. I'll have some more data for you on LNG (the current fear mania) next week.

 

 

Odds & Ends

Analyst Watch: (DVN) raised to Outperform at FBR, (FTI) upped to Buy at Jefferies, (WNR) cut to Hold at Soleil, (SPWRA) initiated at Hold and (ESLR) initiated at Sell at Canaccord.


140 Responses to “Friday – Gas Supply Slide Show + Gas Storage Review + Some Other Stuff …”

  1. 1
    BirdsofpreyRcool Says:

    Credit bouncing around in a fairly small range this morning. So, not really giving any directional indicators.

    IG 195.5

    HY 72.75

    Backstory — The high yield sector is seeing some pretty amazing INflows of funds. Those positive effects are not really reflected in the CDS Indices as mutual funds buy individual bonds (and are not large players in CDS). So, while our indicators (the CDS indices) have widened considerably in the last week, a lot of individual bond spreads have narrowed. Bottom line — good for credit. High Yield is a very technically-driven market. When issuers (like CHK) see major changes in in-flows, they know they will be able to raise money. For the smaller, less-well-known-issuers, it’s still tough slogging. But, improvement always starts at the top.

  2. 2
    BirdsofpreyRcool Says:

    Head Trader + Tech Trader comments rolled into one — going to be a rough day to gage….there was virtually no move off the nonfarm #….program trader says best trade is to short the morning rally but odds are only 55/45…since there was no gap down, I wouldnt be surprised for it to be choppy today with a trend to downside

    Bottom line — active traders should knock off early and enjoy the weekend.

  3. 3
    BirdsofpreyRcool Says:

    z — incredible data-dump above… gonna need a 3rd cup of coffee to plow through all that useful stuff. Since today may not be a good day to watch the mrkt, could be a convenient time to catch up on some fundamentals. thanks!

  4. 4
    BirdsofpreyRcool Says:

    OK… one more comment and I’ll give it a rest.

    From The Best Strategist in the World — After revisions, the payroll number was 89k lower than consensus, so it was a moderately negative number. But, we are right at the SPX 850-area battleground. We would need to see stocks fail to hold 850 for a week or so for the Credit Bears to really begin pushing.

    So, leveraged credit short-sellers appear to be sticking to the sidelines for now.

  5. 5
    Sambone Says:

    By David Bird
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures prices were lower, hovering near $52 a
    barrel on Friday, after the U.S. Labor Department reported the March
    unemployment rate was the highest in 25 years.
    The jobless rate hit 8.5%, up from 8.1% in February, but in line with
    expectations. New unemployment claims rose by 663,000, less than the consensus
    forecast of 673,000.
    Still, the report was another sign of continued economic weakness and followed
    comments Thursday by the International Energy Agency that it will likely lower
    its oil demand forecast for 2009.
    Oil prices are pressured by the highest crude oil stocks in 16 years and data
    showing U.S. oil demand in the latest four weeks was the weakest since
    mid-October.
    Competing with weak supply/demand issues, strong performances from global
    equities and news of a $1 trillion aid package agreed to by the leaders of the
    world’s 20 major economies lifted crude oil prices Thursday by a sharp 8.8%, or
    $4.25, to $52.64 a barrel. But traders said the market may see profit-taking
    after that strong gain.
    Industry surveys show OPEC tightened output again in March, which may help put
    a floor under the market, analysts said.
    “We believe that OPEC production cuts are improving the potential for an
    inventory reduction by the end of the year,” Deutsche Bank said in a report
    Friday. “We are…more confident that oil prices have established a floor.”
    Still, “the weak economic growth and slumping oil demand over the next few
    months will mean any rallies in the crude oil price will be unsustainable,” the
    bank said.
    At 9 a.m., EDT, May crude oil futures were down 62 cents at $52.02 a barrel.
    May RBOB gasoline futures were 1.71 cents lower at $1.4526 a gallon, while May
    heating oil was down 2.12c, at $1.4179.
    – By David Bird, Dow Jones Newswires
    Dow Jones Newswires
    04-03-09 0908ET

  6. 6
    elduque Says:

    BDI -32 1506

    TED 95.50

  7. 7
    Garyinhou Says:

    Must be broker comment or something out for clr

  8. 8
    zman Says:

    Gary – I don’t see one but it could be something I don’t get. Agree, bit of an odd up move on down oil but you are seeing the oily names find more footing than you’d guess with oil waffling about the $50 mark.

    Don’t see the need to chase much this morning, may add a little more to the OIH puts if those names continue to move up.

    May also reposition the SWN and HK positions as they have had a good run the last few days and may pull back sharply if the market does. I won’t go into the weekend without owning HK, CRK, GMXR, or SD calls though.

  9. 9
    choices Says:

    Thanks, Z, for the very thorough gas summary.

  10. 10
    Garyinhou Says:

    Could clr action be short covering? Thought that would have happened yesterday…

  11. 11
    zman Says:

    Choices – my pleasure, I can add more but who would read it? Just trying to hit the high points. When I first started working on natural gas I was a demand guy. The supply team would show me graphs similar to the State graphs I make and point to those most recent months and say “see it?” I’d say, “um, no, not really, something wrong with your scale?”. They’d say, “NO, you don’t see it? How can you not see that decline?” For reference on this look at the Oklahoma chart. That’s a pretty good reduction in volumes in January but it gets hard to see so ask if anything doesn’t make sense.

    U.S. gas production peaked last summer and has traded flattish since. We are now starting to see the slow and I think long slide. The E&P’s who are low cost will benefit as will the ones in the high return basins which have big reserve targets and good gas market prices (Haynesville, Marcellus). The E&Ps also benefit from falling service costs. A lot. Service costs are going to continue to fall at these oil and gas prices.

  12. 12
    zman Says:

    Gary – could be a continuation …

    http://shortsqueeze.com/?symbol=clr&submit=Short+Quote%99

  13. 13
    Dman Says:

    Anyone got any deets on the Jeffries FTI upgrade?

  14. 14
    zman Says:

    Dman – only have a headline.

  15. 15
    Garyinhou Says:

    FTI – upgraded at Jefferies to Buy from Hold and price target increased to $45 from $27 based on the strong multi-year outlook for subsea activity, expectations for solid order flow in 2010 and valuation. $45 price target based on 19x 2009 EPS and 9-10x 2009 EBITDA, a premium to peers which is supported by history. Risks include execution of backlog, rising labor costs, macro economic/worldwide slowdown in GDP that impacts oil demand, and a potential drop in commodity prices which could curtail deepwater drilling and subsea development.

  16. 16
    Garyinhou Says:

    Z – Thanks for short squeeze link.. also showed insider ownership at 81.5% … seems way high

  17. 17
    zman Says:

    Will wait for rig data before adding to oil service puts. NBR getting tempting again as it punches up through recent highs. Stock is cheap on current estimates but those keep falling, especially next year’s numbers.

  18. 18
    zman Says:

    Gary – Harold Hamm owns a ton.

  19. 19
    Dman Says:

    thanks Gary

  20. 20
    zman Says:

    From a Department of the Interior report on the Outer Continental Shelf (OCS) released yesterday:

    The concluded there are 115 billion barrels of recoverable oil on the OCS. The report also included data on economically recoverable oil and gas. At a price of $60 per barrel, 52 billion barrels could be available, the report says. At $160 per barrel, there are 71 billion barrels of economically recoverable oil.

    ZComment: So does it make sense, given where prices are, that the U.S. should be looking to raise royalties, thereby lifting the effective oil price needed to make all that oil economic? Or to remove the small pools royalty forgiveness until break even has been reached? I just don’t understand these guys.

  21. 21
    BirdsofpreyRcool Says:

    News from the Pits — MLCO bought some SPX futures and GSCO selling… a lot.

    Just fyi.

  22. 22
    zman Says:

    Thanks BOP

  23. 23
    BirdsofpreyRcool Says:

    MLCO can’t be wrong, every time… just passing along info.

  24. 24
    gaamblor Says:

    what were HDDs Jan 09 vs Jan 08?

  25. 25
    Dman Says:

    BOP – keep those FYIs comin’ 🙂 We certainly need to know what GSCO is up to, since they know what the Govt is up to.

    Z – lets assume that the reasons given on the OCS policy might not be the real reasons in play. Just want to point out that any undeveloped reserves will be worth a huge amount more in 10 years and they *will* be tapped because the alternative will be … well there won’t be one really.

  26. 26
    zman Says:

    Gas-Population-Weighted HDDs
    jan 08: 955
    jan 09: 1,034 (up 8% YoY)

    Residential Demand
    jan 08: 28.5 Bcfgpd
    jan 09: 30.3 Bcfgpd

  27. 27
    BirdsofpreyRcool Says:

    OK… Head Trader going against his common sense and saying he thinks we rally here, sell off, then trend up into the close. Things it will be a green close. However, he thinks if the sell-off doesn’t happen in the next hour, it won’t happen at all.

    Also, MLCO just sold the position they just bought a few minutes ago… for a loss.

  28. 28
    BirdsofpreyRcool Says:

    Bottom line — today is a very sloppy trading day. But, HFs still not shorting, ahead of 4/8 mtg on uptick rule.

  29. 29
    zman Says:

    Agreed sloppy trading. Would add boring trading to that. Very slow. Watching OIH for a higher put entry position but don’t feel particularly rushed on it.

  30. 30
    BirdsofpreyRcool Says:

    PackMan — HT is going out on a limb… just for you… This will be a test to see how good his animal instincts are.

  31. 31
    BirdsofpreyRcool Says:

    z — echo the “boring” part. Credit desk can hear a pin drop.

  32. 32
    zman Says:

    ZTRADE: $10KP

    Uprisking the HAL put trade.

    Added (20) HAL April $14 Puts (HALPH) for $0.20 with the at 16.55, up 1% on the day. Looks like it hit and bounced off its 20 day average, estimates continue to fall, NAM rig activity not likely to be up soon.

  33. 33
    Dman Says:

    Z – as this econo-disaster rolls on, I would think there will be substantial risk to commercial NG use. People don’t like to be cold but if a commercial property (such as a shopping mall) is vacant, they won’t be paying to heat it. There is talk of another leg down in the commercial property market, part of which is that retailers are doing terribly. There has just got to be less of them in the future, which means vacant buildings.

    Come to think of it, a lot of all sorts of companies aren’t going to make it & that will surely mean empty office space also.

    What I’m getting at is that rules-of-thumb for recessions are just not going to hold here. This ain’t no recession.

  34. 34
    Dman Says:

    Is SD trying to tell us something? Chart starting to shape up.

  35. 35
    zman Says:

    Dman – will get back to you in a few minutes on 33.

    Re 34, yep, watching it very closely too.

  36. 36
    Hoss Says:

    Z

    April 6-8, 2009
    4th Annual Developing Unconventional Gas Conference (DUG) … some irony in that acronym.
    Fort Worth, TX

    http://www.dug2009.com/Agenda/Conference/

    BP,SLB,HAL,CRR,CRZO,RRC,COG,GMXR,GDP,HK,CXG,GSX are presenting

    Worth a note and a chuckle.
    Screamers in East Texas: What Deep Bossier, Travis Peak, Cotton Valley Can Do
    Russell Porter, Chairman, President & CEO, Gastar Exploration Ltd.

  37. 37
    zman Says:

    ZTRADE:

    Sold the CRK $30 calls for $3.30, up 89%. Will reposition prior to the close as I don’t care to miss operations update which could be a Monday event, most likely in the $35s.

  38. 38
    zman Says:

    Hoss – I saw that and thought same, they keep pestering me with emails but their other recent conferences have been less than enlightening.

  39. 39
    zman Says:

    Dman – on commercial demand. Good point. Vacancies did not really show up in commercial demand data this winter (at least not through January). Next winter that may be a concern although they generally won’t let properties freeze up. In the summer it won’t matter as much but will show up instead over in the electricity demand component for cooling. That one will be off across the board this year for coal, nukes, gas most likely. Have not yet looked at Pac northwest snowpack levels but that can prove to ding gas as well in the Spring as high melt increases hydro which offsets West Coast gas demand (there’s a reason why most of the pipe projects coming out of the Rockies head east, not West). Anyway, its a valid concern but I think by the time it becomes an issue (say November 2009 to Feb of 2010) we will have gas production off 3 to 5 Bcfgpd.

  40. 40
    zman Says:

    Dman – I think you can put the action in GMXR in that same camp of trying to tell you something, probably about their redetermination as it’s too early for well news.

    CRK and HK are in anyday now mode for an operations update. I’d bet on CRK first but its just a somewhat educated guess.

  41. 41
    reefguy Says:

    DUG- Have been every year since inception. No go this year as unconventional gas is non-commercial. They should do a special section on the bk’s caused by unconventional gas

  42. 42
    BirdsofpreyRcool Says:

    reef — even our much-loved Haynesville boys?

  43. 43
    zman Says:

    Haynesville is economic at current prices.

  44. 44
    reefguy Says:

    Not pure hy. But they learned to use the dope in the Barnett/Woodford/Fayetteville. Those drugs have taken a toll on the balance sheet….

  45. 45
    zman Says:

    Don’t try this at home:

    Shell had to shut in one of its Nigerian gas processing plants after someone illegally “installed” a valve on this pipeline.

    http://www.allposters.com/-sp/A-Woman-Walks-Along-an-Oil-Pipeline-Near-Shell-s-Utorogu-Flow-Station-Nigeria-January-15-2006-Posters_i3708016_.htm

  46. 46
    Jay Reynolds Says:

    Re: >ZTRADE: $10KP

    Uprisking the HAL put trade.

    Did you mean HALPN?

  47. 47
    BirdsofpreyRcool Says:

    Head Trader pointed out that we got his quick sell-off. He thinks we trend higher from here. Just updating.

  48. 48
    zman Says:

    Wyoming’s late night reading list from yesterday:

    http://zmansenergybrain.com/2009/04/02/thursday-gas-preview-and-oil-review-3/#comment-62593

  49. 49
    zman Says:

    JR – yes, apologies, need new glasses.

  50. 50
    Sambone Says:

    I swear, these bankers need to all be put on a large decommissioned freighter with a whole bunch of large sexually deprived violent criminal offenders from all over the world, sail to way southern Pacific, and fire couple of Tomahawks at it.

    (Reuters) – U.S. banks that have received government aid, including Citigroup Inc, Goldman Sachs, Morgan Stanley and JPMorgan Chase & Co, are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000 billion plan to revive the financial system, the Financial Times said.
    Citigroup was considering whether to take part in the plan as a seller, buyer or manager of the assets, but no decision had yet been taken, the paper said, citing people close to the company.

    Goldman and Morgan Stanley have pledged to increase investments in distressed assets, the paper said.

    This week, John Mack, Morgan Stanley’s chief executive, told staff the bank was considering how to become “one of the firms that can buy these assets and package them where your clients will have access to them,” according to the paper.

    Spencer Bachus, the top Republican on the House financial services committee, told the paper that he would introduce legislation to stop financial institutions “gaming the system to reap taxpayer-subsidized windfalls.”

    Bachus added it would mark “a new level of absurdity” if financial institutions were “colluding to swap assets at inflated prices using taxpayers’ dollars,” according to the paper.

    Citigroup, JPMorgan and Goldman declined to comment to the paper.

    The U.S. government’s plan, known as the Public-Private Investment Program, gives government help to private investors looking to buy loans and securities from banks.

    “It’s an open program designed to get markets going,” a Treasury official told the paper, adding that “it is between a bank and their supervisor whether they are healthy enough to acquire assets.”

    A Citigroup spokesman in Hong Kong was not immediately available for comment, while JPMorgan’s Asia-Pacific spokesman did not immediately return an email seeking comment.

    A Goldman Sachs spokesman in Hong Kong declined to comment.

    A Morgan Stanley spokesman from the company’s office in Hong Kong was not immediately available for comment.

    (Reporting by Ajay Kamalakaran in Bangalore, Editing by Ian Geoghegan

  51. 51
    VTZ Says:

    Sam – Watch this if you have time. He said that exact thing here:

    http://www.youtube.com/watch?v=n-arbfLTCtI

  52. 52
    BirdsofpreyRcool Says:

    If you just assume that a banker is a person who would knock his own grandmother over to get to the dollar first, you will never be disappointed. The profit (money) motivation runs deep. But, that is why they are bankers. They are SUPPOSED to want to make money… not lend it to homeless people at high rates who can’t repay.

    So, frankly, no surprise they are trying to game/profit from the PPIP. They lay awake in bed, pondering this stuff all night.

  53. 53
    BirdsofpreyRcool Says:

    Not defending… but, not surprised either.

  54. 54
    zman Says:

    VTZ – watching that now. Good explanation of risk reward there. Come to think of it. That’s what I do all day long.

  55. 55
    zman Says:

    VTZ – just finished that…very troubling as he says.

  56. 56
    ram Says:

    Any news out on CRK?

  57. 57
    Sambone Says:

    Teldar Paper, Mr. Cromwell, Teldar Paper has 33 different vice presidents each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can’t figure it out. One thing I do know is that our paper company lost 110 million dollars last year, and I’ll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents. The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated. In the last seven deals that I’ve been involved with, there were 2.5 million stockholders who have made a pretax profit of 12 billion dollars. Thank you. I am not a destroyer of companies. I am a liberator of them! The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.

    Gordan Gekko – Wallstreet 1987

  58. 58
    zman Says:

    Tater – when you get a chance would like a TA on HK. Its at the level we had thought they would get to before doing a secondary, which they instead did back at $17.50. Not a criticism, necessity of the times. But they are going to have an ops update out soon. Haynesville and Eagle Ford shale comments therein.

    CRK – just widespread anticipation of a ops update in the near future (would guess next week).

  59. 59
    benbobby Says:

    Sam,you didn’t think that the retail investor would be able to partake in this process in any meaningful way….great deal.. use taxpayer funds{tarp/talp} trade assets- whose value is now modified/inflated by mark to model valuations-and trade them among the owners of the toxic assets and limit your losses to 3%… what could possibly go wrong with this scenario?

  60. 60
    zman Says:

    ZTRADE: Doubled that HAL $14 April Put trade from earlier at $0.135. Symbol there is HALPN. Done with the stock near $17.

  61. 61
    VTZ Says:

    Yeah, I thought that video was well thought out and explained. I can’t imagine that scenario panning out well for taxpayers.

  62. 62
    BirdsofpreyRcool Says:

    Very nice rally in credit.

    IG 189 -10bps

  63. 63
    Dman Says:

    Yikes. Copper up 6%

  64. 64
    zman Says:

    Nice moves SD and GMXR, redetermination thinking most likely.

    CRK discounting some of the coming ops update…buy the rumor … I won’t chase but will take some higher strike if it will pull back with the market.

  65. 65
    elduque Says:

    Random Thoughts:

    I find it hard to be anything but positive about markets. I realize that there are certainly problems, but I am impressed by the results of the G20 meeting. I have seen a lot of changes in my life, but I do believe that yesterdays meeting had to be one of the highlights of my life. To think that we really have become a global community is extraordinary. I am sorry that it took almost destroying the financial system to do it. However, as I have found in my life, the worst moments have turned out to be the most productive in defining my life.

    Now all we have to do is get CHK back up to $45 and life will be perfect.

  66. 66
    BirdsofpreyRcool Says:

    MIDDAY OVERVIEW

    · Equities ramp off morning lows…the safety bid continues to unwind: SPX ticks into pos territory as noon passes, USD/JPY back above 100, credit acts very well, VIX drops 4% (back below 200dayMA), and US 30yr treasuries drop over a full pt. It has been a pretty quiet trading day thus far, but the firm bid remains; tech, energy are the best performing groups (still long interest in those early cycle plays), while health care very weak (dwn 1.6% today). Equities did see a pullback at the open on some poor eco news, profit-taking after strong week, and absence of catalysts (next week is only 4 days w/Fri a holiday and there really isn’t a whole lot scheduled), but this is a very resilient tape and stocks having a hard time making much headway on the downside. The jobs report for the month of Mar was pretty much inline (still a very ugly number), although there were large revisions to the month of Jan. The ISM non-manufacturing came in a bit under forecasts. With most of the market’s major catalysts out of the way until earnings season (which officially starts next Tues w/AA but doesn’t really kick off until the week of Apr 13), shorts have become a bit more comfortable pressing positions today (some of those catalysts: all 4 points of the Geithner plan have been announced, the FASB made its changes, the G20 is over, etc). That said, there remains a bid underneath the market on any weakness; on SP500 cash watch ~815 as support on the downside, while that ~840-845 range on the upside remains very tough (highs today so far have been ~836)

    · Credit outperforming stocks for a change…CDXIG12 is ~10bps tighter midday, and had been 3-4bps tighter this morning (even when stocks were down on the day)…our credit desk says it’s very quiet but would consider IG strong given how stocks were trading. HY12 also stronger on the day.

    · Those early cycle groups are still seeing interest (industrials/transports, tech, discretionary) while financials are laggards (this group peaked on 3/23 and has struggled since); “safe” sectors like HC and staples seeing people use as source of funds to get long other groups. Tech is flattish-to-up on the day and remains a very strong outperformer (RIMM is up ~20% after earnings last night; tech as a group is up ~10% YTD, the best performing major group by far). Transports, which had a huge run Thurs, are seeing some pullback today, but vols are lighter than they were on the ramp yesterday and there is long interest in this group (similar story in the industrials).

    · Jobs report takeaways: Since the beginning of the year the job market has shed just over 2,000,000 positions. While today’s report largely came in close to market expectations, that should not obscure the message that the labor market remains in terrible condition. The decline in the participation rate is making the rise in the unemployment rate look less intense than it would be otherwise (over the past year the participation rate is down 0.5% point to 65.5%).

    · ISM takeaways: The ISM nonmanufacturing index edged down to 40.8 in March from 41.6 in February and 42.9 in January. This was a bit of disappointing release, as the small gain in the ISM manufacturing index had raised hopes that we would see something similar with the nonmanufacturing index. Still, the 1Q average of 41.8 was slightly better than the 4Q average of 40.7, suggesting that the percent change in 1Q GDP was at least no worse than the 6.3% annualized fall in 4Q. In coming months we will probably need to see a more substantial improvement in the nonmanufacturing index if our 2Q GDP forecast of -2.0% is to be realized.

  67. 67
    zman Says:

    Rig Counts out: Not big numbers

    oil up 7
    ng down 2
    horizontals down 7

  68. 68
    BirdsofpreyRcool Says:

    Seeing headlines — “Cuba ‘open’ for US energy comanies if embargo ends.”

  69. 69
    zman Says:

    Not drilling off Cuba and letting the Chinese and Iranians and Petrobras do it instead made little sense.

  70. 70
    BirdsofpreyRcool Says:

    z — don’t forget the Russians… they are bidding for Cuban acreage too.

    Yeah. Not too bright, on our part.

  71. 71
    Wyoming Says:

    Is anyone seeing rumors on XOM for HAL. Yes, I know Monkey flying, saw an options dude comments on Twitter.

    http://screencast.com/t/Rrn55ZB0

  72. 72
    elduque Says:

    For all you technicians out there. If we break over $20 on CHK,I am thinking that we could run up to $26.

    Any thoughts?

    Thank you

  73. 73
    BirdsofpreyRcool Says:

    Wyoming — can you imagine XOM buying an outside energy services company? I can’t.

  74. 74
    reefguy Says:

    SD- Their Permian overthrust gas has CO2 which must be processed at considerable expense before sales. My guess is a .50 to $1.00/MCF expense!

  75. 75
    Wyoming Says:

    Thus the monkey comment. Some smaller EnP have their own services, usually inherited from an earlier acquisition or being in an area where Service is next to non-existent.

    I can never imagine XOM for HAL. IMHO …. Nuts.

  76. 76
    BirdsofpreyRcool Says:

    Wyoming — figured the monkey had something to do with it. Thanks!

  77. 77
    zman Says:

    Reef – yep, I got that in the model. Hit their guidance pretty hard but with 82% of 2009 volumes hedged over $8 I’m getting over $2 per share of cash flow. The CO2 gets solved next year debottlenecking their production. Waha about $3 now, figure it moves to a $4 average realized price for the year, anyway, just over $2 cash flow and a borrowing based that is very likely to hold flat (if you believe the company) and the chart is attracting attention.

    XOM for HAL. Hmmmm. Hard to see that getting through Hart Scott, especially now.

  78. 78
    zman Says:

    Not to mention CHK and HAL who have their own rig fleets.

  79. 79
    reefguy Says:

    77- just looking after my friends.

  80. 80
    zman Says:

    I hear ya and thanks. Not much on the line there other own the stock long term and 50 worthless little April $10 call contracts. They really do think they have another Pinon field next door.

  81. 81
    ram Says:

    Why would XOM buying HAL be an antitrust issue? I would see XOM buying CVX being an antitrust issue. It seems that the service side of XOM is so small and they are trying to expand without hiring thousands of workers.

  82. 82
    Wyoming Says:

    HAL does not have rigs.

  83. 83
    BirdsofpreyRcool Says:

    My experience with XOM is that they are pretty tough on their contractors… can’t do that, if you own ’em.

    Only if you’re the US Congress can you own something and then try to beat it to death.

  84. 84
    zman Says:

    Right but I can see Congressman decrying the unfair advantage it would give the most evil of oil companies. Could be wrong, maybe they love it…but I doubt it.

  85. 85
    zman Says:

    19 out of 20 (my guesstimate but I’ve been doing this for quite awhile) of these rumors don’t pan out.

  86. 86
    BirdsofpreyRcool Says:

    Wyo — you let the rally monkey outta the cage again?

  87. 87
    BirdsofpreyRcool Says:

    Wyo — you let the rally monkey outta the cage again?

  88. 88
    Wyoming Says:

    I hope not, pretty much in puts all around and ….. I digress from this point.

    Saw somewhere that Fannie and Freddie are to give out $210 MM in bonuses. Must be for the spectacular job they are doing.

  89. 89
    zman Says:

    Reef or Wyo or anyone – do you have a good source for CO2 prices per Mcf?

    Saw that too Wyoming. Replace the words “$210 MM in bonuses” with the word “canings” and that makes a lot of sense.

  90. 90
    RMD Says:

    re #72 CHK: just noticed 20 is a double top at the point & figure downtrend line from the top at 74. I dk P&F counts so can’t calculate a target, but breaking downtrend lines is good news.

  91. 91
    zman Says:

    Thinking further on that, would XOM really want the public image of HAL, the bribes, the non KBR stuff. Maybe they don’t care about testifying more and more in front of Senate panels … but I’d think they could do something else with their cash stay out of the spotlight. I really sense a witch hunt were they to try it. Not saying its fair or the HAL guys are bad guys or anything of the sort. But you know what “they’ll” say.

  92. 92
    Wyoming Says:

    Not good for the CO2 in flooding. My use is in fracs, which is a totally different market. We use it in a liquefied version.

  93. 93
    zman Says:

    I can vouch that RMD at least used to do those PF charts by hand.

  94. 94
    Dman Says:

    Z – LINE down 2% and all I see are some CEO compensation headlines. Do they raise any red flags?

  95. 95
    reefguy Says:

    SD- Field next door has no CO2

  96. 96
    zman Says:

    Wyoming – I hear ya, just thought you might know a guy who knows a guy.

  97. 97
    zman Says:

    Dman – had not seen will check.

  98. 98
    Wyoming Says:

    BOP, My experience on the other side dealing with XOM is that they were not hard to pull one over, their rules and regulations make them do some really stupid business decisions. Shell, now they are another story ….

    I can’t see it happening, I thought someone with live news access might have a source story, not a rumor. If someone would have said GE, I might have bought off on it.

  99. 99
    zman Says:

    Dman – oh, they filed their proxy. Pretty standard stuff but the headline writers like to yank news about anyone who makes more money than them which is everyone. Go to page 13 of the proxy and you will see clear, objective calculations for the officer’s bonuses. I like those and more companies should do that. They don’t get paid more without a combi of higher unit price, higher distribution, and /or high coverage of distributable cash flow to distribution. They are tied to getting the price up and the distribution up in a non-reckless manner (hence not just get the distribution up but get it up with increasing coverage via cash flow). You can see how they panned out last year as well.

  100. 100
    jat Says:

    I feel like we hear the XOM for Service Company X, usually HAL, every 6-8 months. Total BS.

  101. 101
    zman Says:

    My experience with XOM is that they drill very expensive, kitchen sink wells, and like to squish little partners with costs. Or maybe its just they are so big they don’t think about the fact that they squish their little partners.

  102. 102
    jat Says:

    BTW, regarding the CO2 prices, I was just at a mtg with OXY IR and I think they were saying around 50 cents a m? Last year they said they were paying about a dollar.

  103. 103
    zman Says:

    Reef – which is a good thing. They were also finding less gas as they moved east in their current play as I recall, finding some big EURs. I can also tell you that nobody wants to give me cheap options there. Been trying on the mid in a couple of as of yet nameless strikes here in a couple of months and no joy. I will tell you a bit of option trickery as well. If you find no one hitting your new bid on the mid from time to time but players joining you, its a good bet you can yank it and sell to the joiner. After all, he wanted it, right?

  104. 104
    zman Says:

    Jat – thanks much re 102. With the drop in oil prices that would only seem fair. And OXY would know.

  105. 105
    BirdsofpreyRcool Says:

    wyo — #98 LOL. Give ’em hell, guy! But, you’re right… I have DEFINITELY seen them do some stupid stuff. Also, the MOCs always belt-and-suspenders what the independents try to shoestring.

  106. 106
    BirdsofpreyRcool Says:

    z — #101. Have been on the receiving end of that too. Sadly. Personally, I don’t think they are malicious… they just science-project to death what a little guy could do in 1/4 of the time and expense.

  107. 107
    Wyoming Says:

    101, they literally drill by their book. No deviation of the tried and true practices…. the Kitchen sink. Why do you think XOM pretty much has smaller operators drill, complete, operate? XOM in the US is basically a landlord.

    You can look on the service side too. The big Pressure Pump companies require their units to have 15M psi treating iron, even in the US. Something like 95% of the wells in the US are on artificial lift, strippers.

  108. 108
    elduque Says:

    What did I miss on SD?

    Thanks RMD on CHK – wasn’t even looking at P&F charts.

  109. 109
    Dman Says:

    #103 thanks Z

  110. 110
    zman Says:

    Kudos to HT. I’m pretty hedged at the moment, eating it a bit on the service names and having my way with the E&Ps. Let the CRK go a bit early and still won’t chase. I never kick myself over selling a winner early, takes way too much fun out of a Friday to say “damn, only made 89%, curse, arghhhh”

  111. 111
    BirdsofpreyRcool Says:

    z — no body ever gets mad at you for making a profit. That CRK trade was a winner!

  112. 112
    zman Says:

    For 109 / 103 we have the movie quote Friday watch:

    “Sniper approached the instructor by being a sneaky bastard, Sergeant Major!”

  113. 113
    zman Says:

    NG closed up 4 cents. Noise, green market, little more…but at least it’s not plummeting. The first step in the road to recovery is the cessation of falling.

  114. 114
    zman Says:

    VTZ – check your email.

  115. 115
    zman Says:

    Wonder what happened to that Citi analyst (think it was Citi anyway) who was expected all the oil service warnings. I have seen 1 so far from a midget of a company. Wondering if he still expects them to warn or if Jat’s thoughts are more likely to play out (walk everyone’s estimates lower until you don’t miss).

  116. 116
    Dman Says:

    oops, I meant #99, not #103.

    Not that I have anything against #103.

  117. 117
    Jason Says:

    Re 112 – “Looks like he had lunch here, sir. Quarter Pounder, sir, with cheese.”

  118. 118
    Sambone Says:

    Ok, I’m done, GO HEELS!

  119. 119
    zman Says:

    ZTRADE: $10KP

    Added 10 SD May $10 calls (SDEB) for $0.40. Still have the Aprils as well.

  120. 120
    Dman Says:

    #50 I thought Sam was being a bit harsh … until I checked out the video in #51.

    Now, about that freighter in #51. Any reason it couldn’t be an LNG tanker?

    Seriously, this is looting on a cosmic scale. BOP points out (#52) that it is to be expected that bankers will take advantage of whatever is offered. But the point is the whole thing is a scam, cooked up by Geithner to allow massive $$ transfer to a few crony firms while pretending it involves “private” investment.

    Interesting article comparing the current crony capitalism in the US with earlier episodes in Russia and Argentina:

    http://www.washingtonpost.com/wp-dyn/content/article/2009/03/25/AR2009032502226.html

  121. 121
    zman Says:

    Does anyone recall Nicky’s resistance points on the SP500?

  122. 122
    ram Says:

    840 to 850?

  123. 123
    zman Says:

    Thanks Ram, that’s sounds right. Looks like yesterday filled a gap and today, no move off 834 with the 50 day sitting at 800.

  124. 124
    ram Says:

    “Good morning all. SPX has resistance at 835, then 850, 860.

    We may have seen a very small wave 2 complete yesterday at the lows – I don’t like it but its possible and now we are in 3 up.”

  125. 125
    zman Says:

    Thanks again.

  126. 126
    BirdsofpreyRcool Says:

    Dman — #120… personally, i think Bill Gross cooked it up with Timmy… banks are just looking at ways to get their hands in the cookie jar too.

  127. 127
    tater Says:

    HK

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

  128. 128
    zman Says:

    Thanks Tater!

    Beerthirty – have a great weekend!

  129. 129
    tater Says:

    News from out in the real world; small businesses are going belly-up from being over-leveraged, real estate barrons are starting to blink on lease rates, people are getting scared of the idea that they are in competition for lower level (second) part-time employment. I really think the guys on that island in New York need to go interview a couple “real folk” down at the WalMart.

    Sorry, I tried to get the HK out before the bell but the chart site was moving really slowly for me. Hope everybody had a good week.

  130. 130
    PackMan Says:

    BOP – 27 – Head Trader looks like he nailed that one.

    Real estate …. SRS is the play; don’t know what the heck was going on w/ IYR and REITs this week; MTM bump I guess.

    Real Estate … not in a good way; ater is right.

  131. 131
    Dman Says:

    Monster tracking error on the SRS. Really a very short term vehicle.

  132. 132
    zman Says:

    Oil continues to take all cues from the equity markets with NG taking its cues from oil.

    CRK did not fall enough for me to take a shot at it just yet.

  133. 133
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  134. 134
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  135. 135
    furniture makers Says:

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  140. 140
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