Tuesday Morning



In Today's Post

  1. Holdings Watch
  2. Commodity Watch
  3. WIOWIO - Part 1 for the week
  4. Crack Spread Update
  5. Odds & Ends

Holdings Watch: The wiki tab is updated

  • Added 5 CRK $35 April Calls (CRKDG) for $0.65 with the stock off about 4% with the market and with an initiation of coverage at neutral from a brokerage. These are the ones we sold last week for $1.05.

Commodity Watch:

Crude oil fells $1.56 to close at $51.05, after successfully falling below and then recovering above $50. The IEA is thought to be mulling another reduction to their demand forecast to be published next week (they currently see a 1.5% contraction (or 1.2 mm bopd) in global demand for 2009). This morning oil is trading close to $50 in sympathy with equity market futures.

  • Early Read on Crude Inventories:
    • Crude: up 1.25 mm barrels
    • Gasoline: down 1.5 mm barrels
    • Distillates: down 0.3 mm barrels
    • Utilization was expected to have remained unchanged near 82% last week. Looking at this week's restarts it appears that this week or last week may prove to be the nadir on utilization this season.

Natural gas fell $0.07 yesterday to close at $3.73, in crude and equity market related action. Cooler than normal weather continues to blanket much of the U.S. east of the Rockies this week. This morning gas is trading off another 5 to 10 cents with oil.

  • Early Read on Natural Gas Storage: Survey Says: Unchanged.


  • Imports Watch: Combined natural gas imports are running 1.6 Bcfgpd (11 Bcf per week) light to last year.
    • Canadian piped gas fell to the lowest weekly level in my database at 6.7 Bcfgpd, down 2 Bcfgpd from last year. I hear/read everyone worrying over a ton of gas coming in via LNG but no one really mentioning Canada.
    • LNG remained flat with the prior week at 1.1 Bcfgpd, up 0.4 Bcfgpd from year ago levels.

Why I Own, What I Own Now Watch:

Long side (Calls)

SWN - Southwestern Energy - April $30 and $35 calls.

  • Held for a bounce in gas and:
  • Seasoned management, have successfully systematized operations in the Fayetteville Shale, sending out feelers in the Marcellus, Haynesville.
  • Low debt (23% debt to cap), undrawn $1 B revolver
  • one of the few names spending (read that as able and needing to spend) more in 2009, more bang for the buck with service costs falling.
  • also one of the few names still planning on growing much at all this year, currently forecasting 45% growth in volumes over 2008 (96% gas)
  • Just under half hedged for 09 above $8
  • Continual improvement in Fayetteville Shale well results
  • Increase capacity out of the area will result in better gas price realizations after 1Q09,
  • In East Texas they've been drilling some good James Lime wells and will drill 2 Haynesville wells. First H.S. well completed but test results not yet released, 2nd well is drilling now.
  • Valuation:
    • P/ 2009 CF: 8.4x (elevated for the group but not for it and it deserves some premium for the above)
    • Implied Value of Reserves: $5.31 per Mcfe. Given their low finding costs and 2P and 3P potentials this rich multiple is probably fair. 

Short Side (Puts):

HAL - Halliburton with April $14 and April $15 puts.

  • Estimates continue to fall rapidly and the stock has not kept pace. 
    • Last Summer 2009 EPS estimates of $3.69
      • the '09 multiple was 11.6x
    • Beginning of this year '09 had fallen to $2.17 with 2010 at $2.31.
      • the 09 multiple at the time was 9.6x
    • Now 09 of $1.44 (11.7x) and 2010 has come down to $1.46
    • So we've lost the prospect of growth in the out year and the multiple has expanded by 22% just this year. Hmmmm.
  • There has been a lot of talk from the company about international operations being the bright spot on the horizon while North American business lags.
  • Highly liquid options with 1 to 2 penny spreads is nice as well.

More names for the WIOWIO file tomorrow...


Crack Spread Update: Margins continue to tread water and I still see little reason for enthusiasm.


Odds & Ends

Analyst Watch: JPM takes (SUN) up to Overweight, FBR cuts (SPWRA) target from $33 to $28. Barclays cut price targets on the independent refining sector. 

81 Responses to “Tuesday Morning”

  1. 1
    zman Says:

    Article on water consumption for fraccing H.S. wells:


  2. 2
    BirdsofpreyRcool Says:

    Market Preview from Bloomberg —

    U.S. Stock Futures Fall; Bank of America, Citigroup, Alcoa Drop
    2009-04-07 12:44:41.908 GMT

    By Adria Cimino and Rita Nazareth
    April 7 (Bloomberg) — U.S. stock futures dropped as George Soros, the billionaire hedge-fund manager, said the monthlong rally in equities won’t last and investors speculated Alcoa Inc.
    will kick off the first-quarter earnings season with a loss. The dollar weakened against the yen, oil fell and Treasuries gained.
    Bank of America Corp. and Citigroup Inc. slid at least 3.6 percent, while Alcoa slumped 2.3 percent. Applied Materials Inc.
    retreated 4.8 percent after a contract for solar equipment was slashed by $1.65 billion. Archer Daniels Midland Co. fell 5.8 percent after Citigroup advised selling the shares, while Exxon Mobil Corp. and ConocoPhillips lost at least 1 percent as Barclays Plc cut its earnings estimates for the energy industry.
    Standard & Poor’s 500 Index futures expiring in June fell
    1.5 percent to 818.2 at 8:42 a.m. in New York. Dow Jones Industrial Average futures lost 96 points, or 1.2 percent, to 7,820. Both measures have surged more than 21 percent since sinking to the lowest levels in a dozen years on March 9.
    “It’s a bear-market rally because we have not yet turned the economy around,” Soros said in an interview with Bloomberg Television, referring to the rebound in stocks since March 9.
    “This isn’t a financial crisis like all the other financial crises that we have experienced in our lifetime.”
    European and Asian shares also declined today. Alcoa, scheduled to release its quarterly report after U.S. markets close, will be the first Dow average company to post results for the January-to-March period.

    Earnings Watch

    For S&P 500 companies, profits probably fell 37 percent in the first quarter, according to estimates from more than 1,700 securities analysts compiled by Bloomberg. The stretch of seven straight declines in earnings is the longest since at least the Great Depression, data compiled by S&P and Bloomberg show.
    Bank of America lost 3.6 percent to $7.21. Citigroup sank
    4.8 percent to $2.59. Both stocks more than doubled in the four weeks ended April 3.
    Alcoa dropped 2.3 percent to $7.73. The largest U.S.
    aluminum company will probably report an adjusted loss of $398 million, after making $341 million in the year-earlier period, according to analysts’ estimates.
    “The first quarter will be a reality check for investors, and they will be focusing on guidance,” said Charles Dautresme, a strategist at Axa Investment Managers, which oversees $651 billion in Paris. “We’ll decline from this bear-market rally, but have established a floor on March 9 and that’s positive.”
    Faber, the investor who recommended buying U.S. stocks before the steepest rally in more than 70 years, said the S&P 500 Index may decline to about 750 and rebound after July.

    Selling Banks

    U.S. stocks fell yesterday for the first time in five days as Mike Mayo, analyst at Calyon Securities, advised selling bank shares and International Business Machines Corp.’s purchase of Sun Microsystems Inc. collapsed.
    The International Monetary Fund will raise its estimates for U.S. bad debt to $3.1 trillion from a January prediction of
    $2.2 trillion, with estimates of another $900 billion of toxic assets from Europe and Asia, the Times newspaper reported today in London, without saying where it got the information.
    U.S. earnings may drop 31 percent in the second quarter and
    18 percent in the next before gaining 76 percent in the last three months of the year, analysts predict. Banks will be responsible for all of the rebound in the final three months of the year. Without financial companies, the gain turns into a 4.5 percent decline, the data show.
    Applied Materials slipped 4.8 percent to $11. The maker of semiconductor wafer-fabrication equipment said a $1.9 billion solar-power contract was cut to $250 million.

    ADM Downgrade

    Archer Daniels Midland fell 5.8 percent to $27.05. The world’s largest grain processor was cut to “sell” from “hold” at Citigroup, which said slowing agricultural demand and overcapacity are negatively impacting sales and margins.
    Exxon Mobil Corp., the world’s largest oil company, and ConocoPhillips, the second-largest U.S. oil refiner, fell at least 1 percent after Barclays cut its 2009 and 2010 earnings estimates for the industry, citing lower natural gas prices and refining margins. The bank’s analysts said that first-quarter results are likely to be disappointing.
    Investors should “underweight” U.S. shares as a rally is likely to end and other markets are cheaper, Citigroup said in a quarterly report.
    “While absolute valuations still look cheap, relative valuations are not attractive” for the U.S., strategists led by London-based Robert Buckland wrote in a report titled “Welcome to the Twilight Zone” dated yesterday. “The year may be marked by powerful rallies and meaningful pullbacks as was evident in the 1930s and 1970s.”

    Japan Upgrade

    Buckland raised Japanese shares to “neutral” from “underweight,” saying the weakening yen, a forthcoming stimulus package that may total 10 trillion yen ($99 billion) and improving fundamentals should aid market performance.
    The MSCI World Index has rallied 23 percent since March 9, when it dropped to the lowest since 1995. The U.S. Treasury department unveiled a plan last month to rid banks of toxic assets and central banks from the U.S. to Switzerland and Japan have stepped up purchases of government and corporate debt to unfreeze credit markets, helping to lift sentiment.
    The U.S. is expensive based on both estimated earnings and price to book in comparison with global equities while dividend yields are also lower, Citigroup said. The market was previously rated “neutral.” Shares in the S&P 500 trade at 1.85 times book value, according to Bloomberg data, versus 1.38 for stocks in the MSCI World.

  3. 3
    Sambone Says:

    GO HEELS!!!!!!!

    By Nick Heath

    LONDON (Dow Jones)–Crude oil futures fell for a second consecutive day
    Tuesday, as prices reacted to drops across European equity bourses and a
    stronger U.S. dollar, and as investors braced for further possible builds in
    U.S. oil inventories.
    Absent of any fresh oil market news, traders primarily took their cue from
    movements in wider financial markets, choosing to follow equity markets and the
    fate of the U.S. dollar.
    However, anticipation that still-weak oil demand will be reflected in another
    build in already-brimming U.S. crude oil stocks in government data Wednesday
    left some participants cautious at holding crude Tuesday.
    “The best reasons for traders to buy in this complex have come from equities
    and from a weaker dollar. When equities are weak and the dollar firm, this
    market has nowhere to hide,” said Peter Beutel, president at trading advisory
    firm Cameron Hanover. “The fundamentals are essentially dismal, and they have
    been going from bad to worse recently.”
    At 1108 GMT, the front-month May Brent contract on London’s ICE futures
    exchange was down 49 cents at $51.75 a barrel.
    The front-month May light, sweet, crude contract on the New York Mercantile
    Exchange was trading 92 cents lower at $50.13 a barrel.
    The ICE’s gasoil contract for April delivery was up $4.25 at $444.50 a metric
    ton, while Nymex gasoline for May delivery was down 152 points at 146.03 cents
    a gallon.
    Nymex crude prices flirted with – but failed to break below – the
    psychologically important $50 a barrel mark Tuesday, around which they have
    swung in the last week. Most of that has come as investors tracked equities –
    seen as a barometer of global economic health – as well as the greenback,
    movements in which impact investors using crude as insulation against any
    weakening in the currency.
    Choppy price moves are expected to persist through the shortened trading week,
    with an absence of macroeconomic data to offer direction to the financial
    markets in general, and liquidity thinning ahead of the Good Friday holiday.
    The New York Mercantile Exchange and ICE Futures exchanges will be closed
    However, traders will have the opportunity to focus on oil market fundamentals
    Wednesday, with the weekly release of U.S. Energy Information Administration
    oil inventory data. U.S. crude inventories are already at their highest levels
    since 1993, and analysts expect that they likely built for a fifth straight
    week last week. According to the mean forecast of eight analysts surveyed by
    Dow Jones Newswires, crude oil inventories are expected to have risen by 2.3
    million barrels.
    “Maybe there’ll be something interesting from the data. We’re locked into this
    general trend of keeping a watchful eye on the dollar and stock markets, but
    there seems to be plenty of crude around,” said Tony Machacek, energy broker at
    Bache Commodities in London.
    Analysts also eyed the monthly roll process of large oil and commodity funds,
    notably the U.S. Oil Fund LLP, which Tuesday begins selling the current
    front-month contract and buying into the following month. The procedure has in
    previous months contributed to sharp moves in crude as some investors looks to
    take advantage of the sale and sell crude futures short.
    “The pre-holiday low volume might (also) make the roll of the commodity
    indices more of a pressure point,” said Olivier Jakob, managing director of
    Swiss consultancy Petromatrix.
    -By Nick Heath; Dow Jones Newswires
    Dow Jones Newswires
    04-07-09 0741ET

  4. 4
    BirdsofpreyRcool Says:

    Very quiet in credit markets this morning. Following futures down, but not in a panicky way.

    IG 193 (remember when this was 180, just about a week and a half ago?)

    HY 73.5

  5. 5
    BirdsofpreyRcool Says:

    Head Trader thinks we open low, but don’t close as low as futures are right now. The market will firm near the end in anticipation of the uptick rule mtg tomorrow. Not necessarily go green… just not as bad as now.

    The in-between part is hard to gauge as we are technically in “no-man’s land.”

    So, open low… then who knows… close higher than open.

  6. 6
    zman Says:

    Mexico closes crude export points due to rough weather, something to monitor for next week’s import levels.

    Tudor Pickering out with a good piece on Q1 oil service earnings. Basically says they will be weak and everyone expects that. They expect bigger miss potential at HAL and BHI, calls important tone setting events for the year. They think OII has upside beat potential so pretty much in line with my view of the world.

  7. 7
    elduque Says:

    BDI -20 1466

    TED 95.87

  8. 8
    zman Says:

    Thanks for the color there BOP.

    Eld- guess its going to take more signs of life out of Asia to reverse BDI this time.

  9. 9
    zman Says:

    NG getting whacked pretty hard with oil and the markets, off to 3.59, new low which won’t inspire any kind of a bounce in the rig count or any help for service as the E&Ps look at their budgets.

  10. 10
    zman Says:

    Did anyone ever see any news or commentary on TXCO?

  11. 11
    Sambone Says:

    By Hyun Young Lee

    OTTAWA (Dow Jones)–Crude oil futures slipped below $50 a barrel Tuesday, as
    the market eyed the stronger dollar and further gains to brimming U.S.
    Light, sweet crude for May delivery was down $1.56, or 3.1%, at $49.49 a
    barrel on the New York Mercantile Exchange. May Brent crude on the ICE futures
    exchange was $1.10 lower at $51.14 a barrel.
    Tuesday’s market saw a continuation of the previous day’s negative mood,
    taking its lead from the strengthening dollar, which tends to push down crude
    prices as investors become less concerned about using commodities to hedge
    against inflation. Crude was also tracking sliding equity prices, which traders
    watch as a barometer for the broader economy and oil demand.
    “The oil market is still acting more like a currency than a commodity,” said
    Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. “It responds more to
    the stock-market and global currency moves than it does to stories of weakening
    demand and rising supply.”
    The massive oversupply of crude, however, continues to weigh on prices,
    remaining a concern even as the market has surged on equity and dollar-driven
    rallies. U.S. crude oil inventories are already hovering around 16-year highs
    and analysts expect yet another increase when the Energy Information
    Administration releases its weekly report Wednesday morning. The forecast 2.3
    million barrel gain would mark the fifth consecutive increase.
    Meanwhile, gasoline stockpiles are seen falling by 700,000 barrels and
    distillates, which include heating oil and diesel, by 200,000 barrels.
    Preliminary indications of inventory levels will come Tuesday at 4:30 p.m.
    EDT, when the American Petroleum Institute releases its weekly report.
    But traders have become somewhat inured to the constant beat of brimming
    stockpiles and dismal demand, so they will likely continue to take their cue
    from the financial and currency markets, reckoned Gene McGillian, an analyst at
    Tradition Energy in Stamford, Conn.
    “That sort of trading seems to take place when the fundamental picture isn’t
    given the credence it deserves,” McGillian said. “But at the moment, people are
    fishing for reasons for the market to go higher.”
    Front-month May reformulated gasoline blendstock, or RBOB, was down 2.4 cents,
    or 1.6%, at $1.4515 a gallon. May heating oil was 2.56 cents lower at $1.3935 a

    -By Hyun Young Lee, Dow Jones Newswires

    Dow Jones Newswires
    04-07-09 0950ET

  12. 12
    zman Says:

    Flynn has #6 right, crude trading with markets. Of course, it does that about 90% of the time if you look at the daily moves.

  13. 13
    zman Says:

    Nicky – when you get in, would love to have some fresh levels on the SP500. My layman’s TA eye says support is close to 780.

  14. 14
    zman Says:

    Interesting article watch:

    Deepwater knowhow may find new revenues with offshore wind projects:


  15. 15
    zman Says:

    Interesting outperformance in CRK vs the other gassy players today, quick to recover off lows. I have heard some say that the company is not planning a pre-1Q press release operations update. No way to confirm since companies don’t generally say when a pr is coming out. There last communication (Feb 10) to the Street pointed to 6 weeks out with the caveat that they were drilling several wells and that they would not press release them in 1s or 2s but in batches.

  16. 16
    Sambone Says:

    5th Week Of Crude Gains Seen


    NEW YORK — U.S. crude oil stocks are expected to rise a fifth straight week in data due Wednesday from the Department of Energy, according to a preliminary Dow Jones Newswires survey of analysts.

    The data, put out by the department’s Energy Information Administration unit and covering the week ended April 3, are due at 10:30 a.m. EDT Wednesday. Separate weekly oil U.S. data from the American Petroleum Institute are due at 4:30 p.m. EDT Tuesday.

    Crude oil inventories are expected to rise 2.3 million barrels, according to the mean of eight analysts’ forecasts. The analysts are unanimous in predicting an increase, with estimates ranging between gains of 500,000 and 5 million barrels.

    Gasoline inventories are seen declining by 700,000 barrels, according to the analysts’ average. All but two analysts predict a drawdown, with estimates ranging from a decline of 2 million barrels to a gain of 2 million barrels.

    Stocks of distillates, which include heating oil and diesel fuel, are expected to fall by 200,000 barrels. Four of the eight foresee a decline, three see gains and one expects no change. Estimates range from a fall of 1.6 million barrels to an increase of 1 million barrels.

    Refinery use is seen rising by 0.2 percentage point to 81.9% of capacity.

    U.S. commercial crude stockpiles, already at their highest since 1993, would push above 360 million barrels if analysts’ expectations come to pass. Jim Ritterbusch, head of energy trading advisory firm Ritterbusch and Associates, said U.S. crude stockpiles last week likely to got a boost from added imports.

    “Overall, we don’t look for decidedly bearish balances in either the crude or product markets to be altered by this week’s numbers,” he said in a note.

    Analysts’ Estimates
    Analyst Crude Gasoline Distillates Refining
    Alaron Trading +1 +1 +1 +0.5
    Cameron Hanover +5 -1.5 -1.25 +0.75
    Citi Futures Persp. +1.5 -1.5 -1 -0.2
    IAF Advisors +3 -2 unch +0.3
    MF Global-Fitzpatrick +3.7 -1.3 -1.6 +0.6
    Ritterbusch & Assoc +1.5 -1.9 -0.2 unch
    Societe Generale +0.5 -0.5 +0.4 unch
    TrendMax Futures +2 +2 +1 -0.2

    Average Estimate
    +2.3 -0.7 -0.2 +0.2
    Figures in millions of barrels, except for refining use, which is reported in percentage points. Figures are rounded to two decimal places in table, one decimal place in averages and story. For analysts providing forecasts in a range, the average of the upper and lower ends of the range is used.

    –By Gregory Meyer, Dow Jones Newswires

  17. 17
    Nicky Says:

    Morning all. Support in the SPX between 810 and 816, the latter of which has just held. I think we need to see that area hold or we likely retest 750 area.
    I agree with post above that near term we will likely see some support due to uptick rule and also Alcoa which whilst likely to be horrendous is already priced in all of which may produce a bounce tomorrow.
    That said we are likely to see a more major correction take place over the next few weeks. Cycles point to any upside being done no later than 18th April, then down into late April early May, followed by further upside into June (maybe as late as early July). Then that will be it! We turn lower into next year.
    Near term I was hoping we would test 850 – 860 on SPX during market hours and we only did that overnight which is not ideal. So for me the jury is out on whether we get there on one more push or whether we have already completed a rather short v up. The pullback I think will take us to the 750 area – could go as low as 735 or fall short and only make 775 area.

    Got my eye on natural gas here. We have a major support area in the 3.5 – 3.7 area and we have made a new low and the chart pattern to the downside is showing signs of completion.

  18. 18
    BirdsofpreyRcool Says:

    CRK — had some beautifully-scripted and wonderfully witting comments about CRK… then the internet burped. Will try to rewrite… but can’t possibly be as good the 2nd time around. Hate that!

  19. 19
    zman Says:

    Odd, countergroup action in ATW, now thinking want to be on next big group dip for Q1.

  20. 20
    zman Says:

    Thanks for the read Nicky. Hope you are correct re natural gas, knew the shoulder season would be weak and it has been.

    I have picked out a rice paper hat for consumption should it fall into the $2s.

  21. 21
    BirdsofpreyRcool Says:

    CRK — some caveats around the “no 1Q09 operational update.”

    CRK was widely expected to report their 1Q operations at the Howard Weil conference. — No update.

    CRK said on their 4Q conf call that they would give an operational update in 6 weeks. — It’s been eight weeks.

    CRK may STILL give an operational update before the next earnings call. They might choose the IPAA forum, on or around April 20th. If they miss that window, then their next earnings release is around May 4th.

    On the last conf call, CRK talked about their first 2 HS wells. Those wells IP’d at 8 and 14mmcf/d. They said they are running 4 (or was it 5) rigs and would give an update in 6 weeks. Since that call, we know that well #3 had massive operational problems. But we are also hearing that well #4 is their “best ever Haynesville well.” We think they are drilling wells 5, 6, 7 and possibly 8. But, here’s the thing, who wants to come on a conf call and talk about a well with “massive operational issues,” unless you have more than one bit of good news to offset it? So, think CRK was distracted by well #3 and doesn’t have enough info on wells 5, 6, etc to talk about yet. Since they don’t want to do onesy-twosy press releases, guess they are waiting on a few more wells before announcing operational update.

    Will that be tomorrow? At IPAA (most likely, if before earnings call)? Or wait until 1Q09 conf call on May 4th.

    Don’t know. But, that’s the backstory.

  22. 22
    zman Says:

    JPM positive nod to SUN this morning having modest uptick effect on the stock. They point to VLO being their favorite play on summer strength in gasoline prices as volumes pick back up. I have to agree with that although we can’t do it without demand nor can we see a substantial improvement in margins if gasoline imports continue at high levels. Still, expectations for the group remain low.

  23. 23
    zman Says:

    Thanks BOP – sounds about right, knew about well 3, stock seems past that on rumors about IP of well #4. Let me go back into emails from last week, think I have a tidbit to add.

  24. 24
    Dman Says:

    How long ago did the news on CRK well 3 come out?

  25. 25
    zman Says:

    Not sure, been out a little while, heard it was fracc’d and flowing back as of last week and the 4th well was being completed. Also read the 1st and 2nd wells were gel fracs with large proppant vs the #3 and #4 which were slickwater and smaller proppant. I’ll let Wyoming comment on that as I’m not an engineer. General thinking would be the slickwater frac could/should see improved IP over the gel with big grains o sand.

  26. 26
    Nicky Says:

    Z – nat gas – this is the third 9 month decline this decade which argues for a low in April 2009. During the 1990’s (1996,1997, 1998 and 1999) nat gas found resistance in the 3.5 – 3.7 area. This resistance is now support.

  27. 27
    Dman Says:

    Z – reason I asked #24 was just to look for the dip in the stock on that news to get a sort of a calibration.

    On another matter: Cramer has been recently making broad brush statements that the NG companies won’t be able to make their estimates due to new lows in NG. When I say broad brush, he included CHK in some of these comments, so he evidently has no clue about the hedging situation.

    But it did get me thinking about EOG… i.e. is the current dip an opportunity or otherwise. I would say obviously an opportunity if NG doesn’t stay down for long. But my question is: how are they situated if NG stays down for a while?

  28. 28
    zman Says:

    Thanks much Nicky, makes a lot of sense from the TA side. Good to have that in mind when looking at the current over supply and over stored state of gas (which is a near term negative) but which is creating a mid term (Fall) positive in the form of lower investment = fewer wells = falling production meets recovering demand = higher prices. LNG may be a bugaboo here but Canada is working hard to offset a jump in volumes there.

  29. 29
    zman Says:

    Funny re Cramer – he was touting natural gas again not all that long ago. I guess the prozac wore off.

    EOG – 43% hedge 2009 at $9.73, very little gas hedged in 2010 (less than 10% hedged). No oil hedges. I think the dip is an opportunity and that it may go a little lower, more of a TA question. They moved very well with crude in the last little rally. That rally being tied to the market more than supply and demand as we keep ending the weeks with oil up to flat as inventories rise (everywhere but at Cushing). Anyway, going to be long (most likely) for earnings but just can’t fall in love (with much of anything, for long, in this current market environment).

    XOM hitting the tape saying Sable Island offline due to operational issue. This is off Nova Scotia and most of that gas finds its way to New England (so call it just under 0.4 Bcfgpd shut down). Will look for reason and timeline on restart, could be a goose to gas as we have cold hitting New England tomorrow.

  30. 30
    Nicky Says:

    Cramer – he is a great contrarian call.

  31. 31
    zman Says:

    More on Sable: Problem began March 27, which contributed to the fall in Canadian production we saw in the post today. The production loss at Sable Island got worse today, still no detailed explanation:


    Map of that system:

  32. 32
    zman Says:

    Nicky – I think he’s a smart guy. I just think he has a problem with sticktuitiveness and with timelines. No offense but he talks fundamentals but seems to swing more with the charts. Also has a habit of using the long held view to support his stance on a stock but then abandons ship on small moves. And he totally wilted in the face of Jon Stewart.

  33. 33
    zman Says:

    BHI want to break down for me, HAL not so much. Content to hold puts a little longer there.

  34. 34
    zman Says:

    Sable Island wrap: XOM says they are working in the field to resolve an operational issue that has shut in 400 MMcfgpd as soon as possible but can’t offer a timeline.

  35. 35
    reefguy Says:

    Sable Island- How does a whole field get shut in? 1,Pipeline to shore. 2,Processing(seperation) Unit goes down. 3,Surface connection or wellhead leaking…leaking bad

  36. 36
    zman Says:

    Reef – we can hope it’s coning

  37. 37
    elduque Says:

    The paint is drying here. How about at your place?

  38. 38
    zman Says:

    Eld – yep, felt like May all day.

  39. 39
    zman Says:

    Trading has a holiday week feel to it and we are off Friday.

  40. 40
    Nicky Says:

    Respectfully (of course!) I differ re Cramer – I don’t think he is a technical trader at all. He is very much based on fundamentals and he is very knowledgeable. However, because he works on fundamentals he is not successful. I know I have said this before but he continually underperforms the market and heaven knows how he must have done in the last year. He is a showman as far as I can see – he rants and raves and it makes good television viewing for many – not me I am afraid as he never seems to get to the point.

  41. 41
    zman Says:

    BOP – re CRK from earlier. H.S. #5 is completing and wells 6 through 10 are drilling. I’d highly doubt they would be in a position to say anything about 6-10 yet. With that thought, it make sense that they’d wait until IPAA to talk, probably want to have at least 3 as they don’t want to get into the trap of announcing single well results. They may also want to talk about something besides the Haynesville.

    Saw a synopsis of yesterday’s RBC Hold recommendation, analyst thought there are better ways to play the Haynesville (I’d guess he’s thinking HK but not sure). He did point out that they will easily drill their budget via cash flow which is a plus but that they are too lightly hedged for 2009. Stock still not down as much as peers which suggests someone is quietly touting it today.

  42. 42
    zman Says:

    IMF thinks toxic assets could be $4 Trillion


  43. 43
    BirdsofpreyRcool Says:

    AA kicks off the start of earnings season (as we all know) with their 1Q09 announcement after close today. As all eyes will be on this, just thought I’d point out that one of the better metal analysts is calling for a loss of 85 cents for the quarter vs a loss of 56 cents expected.

  44. 44
    BirdsofpreyRcool Says:

    Have to admit, CRK holding in there, as HK is down 8.2% and CHK is down 5.0%. Maybe the Rodney Dangerfield of e&p’s is finally getting some respect.

  45. 45
    Dman Says:

    BOP – love to hear the background on your “Dangerfield” comment. CRK is a new name for me & I’m trying to get a feel for it.

  46. 46
    zman Says:

    Dman – best thing to do is page through the presentation. They’ve done a good job recently with asset sales although some of the currency involved there was devalued (SGY stock) in the recent fall. Debt levels are low, capex within cashflow for 2009, and as such they are low on hedges. They have a plan to drill the Haynesville in what I’d call a measured approach, no need to really rush out in different directions to get acreage into HBP like some (CHK, HK to an extent).


  47. 47
    BirdsofpreyRcool Says:

    Dman — I have followed CRK for years… back when most equity people didn’t know them, but they were big borrowers in the high yield market. Even back then, with all that debt, mngmt’s philosophy was to stay largely unhedged. As such, it made CRK a much more volatile e&p in down times. It always seemed like equity investors overlooked CRK as their valuation was almost always cheap to their comps.

    Well, even old dogs can learn new tricks. CRK mnmgt team has now been together for about 15 years, through good times, and bad. And they have the scars to prove it. They have paid down debt, can live within cash flow, and have gotten themselves a nice chunk of one of the best plays in No America (the Haynesville). But, old stereo-types seem to die hard. CRK has just not been one of the go-to names, when buysiders want exposure to a small- to mid-cap e&p. The stock just seemed to lag it’s peer group. But, perhaps that has changed. It should. CRK is in a great position, both operationally and financially.

    Just a few random thoughts and opinions.

  48. 48
    Dman Says:

    Nicky – you & Z are both right (although I have no idea what “sticktuitiveness” is, so I’m going out on a bit of a limb here). Maybe Z means “sticktoitiveness”?

    Yes, Cramer is a fundamental trader but since he sold his soul to CNBC, he simply doesn’t have time to do the research that he used to be able to do. Consequently he has no edge … but will never recognize/admit it. Since he is now edgeless, he is always being caught the wrong way by market moves & ends up top-ticking every little trend that emerges. This is what I think Z means: Cramer is now a (very bad) closet technical trader, who ends up being captured by sentiment … hence your “contrarian” comment. Indeed lately he has been approaching foolproof as a contrary indicator.

  49. 49
    zman Says:

    Yeah, I never said I could spell.

  50. 50
    Dman Says:

    Thanks Z & BOP on the CRK.

    There will be plenty of scars to go around on the E&P survivors…

  51. 51
    Jay Reynolds Says:

    Just passed the SLB yard on Hamilton Road in Bossier City. I think that if you wanted to get another piece of equipment parked there you’d have to airlift it in. Place is packed.

  52. 52
    zman Says:

    Thanks Jay, OIH lower but only due to market. Can’t count the number of analyst notes saying estimates are too high, that HAL and others will miss and the analysts don’t care. Valuations have become stretched vs their normal “good times” levels, let alone their “down year over year” levels.

  53. 53
    Popeye Says:

    Always interesting to hear the opinions, rumors and scuttlebutt from the guys doing it for real.

  54. 54
    BirdsofpreyRcool Says:

    KOG — just heard that they think they will have completed the first two wells (from Pad #1) by April 24th. Don’t know what that means, with respect to an exact date on releasing IP data. But, getting closer to finding out.

  55. 55
    BirdsofpreyRcool Says:

    The investment grade credit index has hit its head on 195 bps and can’t seem to widen further. Currently +193.5… so, maybe we start to see that bounce into close soon, that Head Trader talked about this morning.

  56. 56
    zman Says:

    Thanks BOP – as you know those little ones often run a week or more prior to the pr as you won’t the only one in the room on that date.

  57. 57
    BirdsofpreyRcool Says:

    KOG — nope. Had to get it from another buy-sider with better connections. Company is still tight-hole. Funny thing is, tho, info does have a way of leaking out, sometimes. Tells me there is a lot more than just buysiders, looking at this stock (and watching the comany’s moves). I don’t think KOG will be a stand-alone company by this summer.

  58. 58
    jat Says:

    So, Z, how does the growing chorus of analyst notes concerning Q1 change your thoughts on the service puts? Think it’s baked? I’m thinking more in line with the Tudor note this am regarding the OSX trading ranges…

  59. 59
    Dman Says:

    Oligarchs, emerging markets & the great bailout cluster%#&* :


  60. 60
    zman Says:

    Jat – it’s hard to poke a lot of holes in that argument really, stocks will fall with OSX near upper band of trading range and not if they are at the bottom when earnings hit. They point to my names and say they will miss bigger than most which gives me reason to smile but not reason to hang on through the numbers as that too will be if it isn’t already baked in. Feel like the stocks don’t really want to fall, having trouble filling gaps despite the 200 pt down DJ day is telling. I do think the analyst crowd has estimates for the NAM exposed too high and part of that is an expected reflex rally in rigs that usually happens and this time is less than likely. So not only are we down and fast but we stay low for awhile. Full gas, full oil, no reason to get all spendy at the E&P level.

  61. 61
    BirdsofpreyRcool Says:

    IG 194.5 getting jiggy again…

  62. 62
    Dman Says:

    BTW, speaking of John Stewart, I can’t help but notice that his dust-up with Cramer happened over the week that turned out to be the market low.

    Palpable, abject disgust with the stock market: a classic sentiment read.

  63. 63
    BirdsofpreyRcool Says:

    IG 193

  64. 64
    zman Says:

    Market holdings its breath for AA at the bell.

    Sam – have you seen a new hurricane forecast out today?

  65. 65
    zman Says:

    Disregard 64, here it is:

    The boys in Colorado cuts hurricane named storm forecast from 14 to 12.


  66. 66
    BirdsofpreyRcool Says:

    IG 189

  67. 67
    BirdsofpreyRcool Says:

    well… THAT didn’t last long…

    IG 190.5

  68. 68
    choices Says:

    Dman, #59-excellent article. I worked in Moscow in the mid-90’s up until the ruble collapse in 1998-watched to the extent possible from business news and reports, etc how the oligarchs there stole all of the state assets to include state airlines under Yeltzen-he was drunk all of the time but I do not know what our excuse is here in the US-total incompetence maybe-the Russian oligarchs were petty change compared to our boys here-they are holding the entire US economy hostage.

  69. 69
    zman Says:

    AA – 59 cent loss, stock bouncing.

  70. 70
    BirdsofpreyRcool Says:

    AA reported 59 cent loss… not as bad as some feared.

  71. 71
    zman Says:

    woops, falling back now, must not like something in the press release.

  72. 72
    BirdsofpreyRcool Says:

    BBBY reports after the close too… worth noting that one also.

  73. 73
    Nicky Says:

    I have the loss as worse than expected. The forecast was for a 51 – 56 cent loss. Revenues however are better than expected.

  74. 74
    BirdsofpreyRcool Says:

    BBBY kicking some after-hour butt. Will see if it holds up.

  75. 75
    zman Says:

    Re BBBY, ya know, I really only go there if I need linens and things.

  76. 76
    BirdsofpreyRcool Says:

    seriously, i can not tell the difference between BBBY and Linen’s ‘n’ Things… ‘cept one is BK and liquidating.

  77. 77
    sane Says:


    Crude Up 6.9MMbls
    Gasoline Up 2.1MMbls
    Distillates Down 2.3MMbls

  78. 78
    zman Says:

    Another wow-bad oil number. OPEC better get their cheaters under control soon.

  79. 79
    sane Says:

    Numbers look hokey in relation to imports and utilization

    Imports Down 877Mbpd
    Refinery runs Up 76Mbpd

  80. 80
    zman Says:

    yeah, that math looks bad.

  81. 81
    Dman Says:

    Interview with Marc Faber:

    Part 1:

    Part 2:

    He makes the point that some US financials might be good for a trade to the long side because Mr Geithner is allowing them to dump their liabilities on the taxpayer, leaving them with businesses that will be worth at least something. Then notes that taxpayers, as well as getting all the toxic assets, will also have the privilege of paying increasing bank charges as the banks try to get profitable. His comment “it’s a wonderful world” seems lost on the host.

    In the second video, he advises buying some gold every month & not worrying too much about the price “because the weight stays the same”. Again, his dry humor seems lost on the host.

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