In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Earnings Watch - SLB, SPWRA
  5. Stuff We Care About  Today - SD
  6. Odds & Ends

Holdings Watch:

  • (HK) - Added to the May $24 (HK) Calls (HKEO) for $0.60 with the stock at $21.80.

Commodity Watch

Crude oil ralliled $0.77 to close at $49.62 yesterday on the back of a strong equity markets and a slipping dollar. This morning crude is trading up $0.80 to a buck (back over $50).

  • Dollar Watch: Dollar keeps running into resistance.

Natural gas fell $0.12 to close at $3.41, a new cycle low, after the EIA reported another slightly larger than expected natural gas storage injection. This morning gas is trading off slightly this morning.

Natural Gas Storage Review


The trajectory of injections will be important this year, not from a "will we get full" standpoint but more from a "how fast will we get full" perspective. Storage will "get full", probably the fullest ever. This leaves little room for a boom in LNG as this growth will come from domestic production and weakish demand.


Earnings Watch:

(SLB) Beats Reduced Estimates; Yawn.

  • The 1Q09 Numbers
    • Revenue of $6.0 B vs $6.0 B expected
      • oilfield service revenue of $5.44 B was off 13% sequentially and 3% YoY
      • seismic division revenue of $551 mm, down 8% seq, 18% YoY
    • Operating Margins: down sharply from year ago levels 20% this quarter vs 25.6% in 1Q08.
    • EPS of $0.78 vs $0.73 expected
    • Management comments:
      • said the rate of decline in revenue "accelerated considerably compared to the fourth quarter" citing NAM rig count, weak Russia, currency issues. 
      • cost base has declined by > $450mm
      • sees activity declines overseas as more limited but sees weaker pricing. When you look through their region by region comments, this resilience is less apparent.
      • see exploration being deferred in  lieu of projects that offer cash flow more immediately. This will be important in 2 years when Non-OPEC supply growth is absent when its needed.
      • deepwater activity holding up to capital budget cuts  
  • Guidance / Outlook: visibility remains unchanged on 2009 - "do not see any significant recovery in North American gas drilling before 2010"
  • Conference Call: 9 am EST


(SPWRA) Tosses Up A Solar Panel Shaped Brick

  • The 1Q09 Numbers
    • Revenue of $214 B vs $269 mm expected
    • EPS of ($0.06) or $0.05 ex items vs $0.24 expected
    • Most challenging quarter ever, "moving to a demand driven model"
  • Guidance / Outlook:
    • 2009 Revenue guidance of $1.3 to $1.7 B vs current Street of $1.564 B. The previous forecast was $1.6 B to $2.0 B.
    • 2009 EPS guidance of $0.25 to $0.75  (including FASB related non cash charges of $0.20) vs current Street of $1.90. The previous forecast was $2.20 to $2.80.
    • Numbers will be flying lower.
  • Highlights:
    • added a new contract with FPL for 300 to 600 MW - not an insignificant deal.
  • Nutshell: surprise miss on weak earnings blaming seasonality, the credit crunch, and the economy. Their IR or CFO could take a lesson from the oil service industry in how to guide analysts. The analysts probably need to go back to school. How this does not slam the stock and the group I don't know. FSLR, if it takes a big hit will jump onto my radar as they enjoy significant advantages over this #2 name in the space. 
  • Conference Call: was last night.

Stuff We Care About  Today

Wyoming Watch (or take it from a guy who knows watch(see Bio on the Bio Tab): I asked yesterday about a bottoming in some completions costs as proposed by service calls I've been listening to:

Talked to one of our vendors about a play after I saw your first message.  Prices have come off ~ 40% +, felt that there is no stopping the direction, not a bottom.  I have seen these reductions when I have done a check up of pricing.  Saw a typical pump schedule, resin coat is a common proppant now.  Carbo has marketed a ceramic for a couple pennies more, $50k on a 2.5 mm pound well additional cost.

SD Spot Secondary 

  • 12.2 mm shares from the company
  • 3 mm shares from the CEO Tom Ward
  • Priced at $7.60 last night
  • Had recently filed a shelf with the CEO registering over 16 mm shares which would have left him with about 12 mm shares...so it could have looked worse. Ward still owns 26 mm shares.

SD Operations Update

  • 319 MMcfepd average production for 1Q09. This compares to 325 MMcfepd at YE08. Probably not going to wow anyone but if you just held it flat from here you would make the mid point of previously released guidance for 2008 and they have steer people towards the low end of the range of 110 to 120 Bcfe (301 to 329 MMcfepd).
  • No progress in non-financial markets transactions, hence last night's secondary:
    • Still trying to sell East Texas position but retain some deep (Haynesville) acreage (drilled 2 vertical tests earlier)
    • Pursuing farm out in the Pinon on new drill wells
    • Pursuing sale or JV of midstream assets for Pinon

Odds & Ends

Analyst Watch: Goldman cuts (XCO) to Neutral, raises (EOG) to Conviction Buy (no seriously, we mean buy it, lol), Jefco ups (NFX) target from $30 to $35 and maintains Buy. Jefferies cuts SPWRA target to $34 from $40 but maintains Buy with Egg On Face rating. Merriman cuts (SPWRA) to Sell from Neutral.

141 Responses to “T.G.I.F”

  1. 1
    bill Says:


  2. 2
    BirdsofpreyRcool Says:


    Levels at 7amET:

    · SP futures +3pts, moving back to overnight highs after Ford earnings

    · Euro Stoxx near highs +1.2%

    · Japan underperformed dn 1.6% (index sees biggest weekly drop in 2mos) and China/Australia also dropped on falling metal/copper prices.

    · USD (DXY) dropping 0.8% as stocks move off lows; EUR back to 1.325

    · US tsys mixed across the curve; 10yr yields 2.925%

    · Commodities attracted a record $22B in the 1Q, according to Barclays report..

    · Crude is up 40c to ~$50/bbl

    · Metals – base metals are lower on light volumes.. Gold continues to recover, breaking back above $900 y’day and now trading at $911/oz..

    · Baltic Dry Index rose 1.5% y’day, although note FFA rates fell >10% from intraday highs during Thurs session..

    Today’s Top Stories & Catalysts

    · All eyes will be watching for today’s bank stress test criteria and this afternoon’s G7 statement (due out after the close).

    · F (Ford) earnings come in better than expected (#s just hit at 7amET); SP futures rallying a bit after the nums. EPS came in (.75)/shr vs. St (1.23); op cash flow has improved substantially (ends w/$21.3B; op cash flow dwn $3.7B) – CNBC

    · Mixed eco data overnight: While there were some positive datapoints (German biz confidence improved at the start of 2Q, French consumer spending beats expectations in Mar, South Korea’s economy unexpectedly expanded in the first quarter), there were a few worse than expected eco numbers out of Europe: Spain’s unemployment has surged to 17.4% and UK’s GDP drops 1.9% (“Most Since Thatcher Came to Power in 1979”).

    · Bank stress tests: the FT says the bank stress tests may be broader than generally understood; regulators are also looking at an institution’s counterparty risks, in addition to their loan/asset portfolios. FT

    · Economist cover story this week cautious: “A glimmer of hope?…The worst thing for the world economy would be to assume the worst is over”….the cover warns that investors shouldn’t become too excited by recent signs of improvement as there remain several challenges….also the article cautions politicians around the world not to be lulled into a false sense of hope that their jobs are done – massive stimulus measures are still needed.

    · BNP cautious on equities: “despite a close to 50 per cent drop in equity valuations, equities look not only rich but are significantly mispriced and are a bubble waiting to be pricked.” FT Alphaville

    · Mizuho Financial Group rose the most in two weeks after filing to sell up to 500 billion yen ($5.1 billion) of bonds, easing concerns that the bank will have to dilute shareholders by issuing stock. Bloomberg

    · Chrysler bankruptcy is near according to the NYT (late in trading on Thurs) and the WSJ (overnight Friday); the co could file as early as next week whether or not it reaches a deal w/its lenders, the UAW, or Fiat.

    · Citi: Pandit’s job security is increasingly in jeopardy as momentum grows in Washington to oust him. NY Post

    · MS is considering making large changes to its largest prop trading desk (dubbed Process Driven Trading) according to the WSJ, inc. spinning it out into a hedge fund or opening it up to outside investors.

    · Insiders at US companies are unloading shares at the fastest pace since ’07 according to a Bloomberg report today; directors and senior officers at U.S. companies sold $353 million of equities this month, or 8.3 times more than they bought – Bloomberg

    · Credit issuance continues: $9.5bn has been issued so far this week, $1.35bn of which is government guaranteed. Month-to-date issuance has been $36.4bn, of which $11bn is government guaranteed.

  3. 3
    BirdsofpreyRcool Says:

    ram — just saw your banking question from last night. I am no banking expert/analyst. I have been using the UYG, FAS, and SKF to play the various moods swings on bank “nationalization.” And I bought BAC a while back b/c — while not anywhere near as well run as JPM — BAC is a better franchise than Citi and it just got too cheap. Commercial realestate is not a huge part of BAC’s banking portfolio. Consumer credit is trickier. And I actually think they made a good buy with Countrywide. Merrill is the Black Box of Horror… but we knew the Govt had a hand in that. Anyway, don’t want to go on about banking on an energy site. There are some great analysts out there who specialize in the sector. I am not one of them. Thanks for asking, tho.

  4. 4
    reefguy Says:

    BOP-RCH owns subordinated debt in Hallwood…

  5. 5
    BirdsofpreyRcool Says:

    reef — RCH = Raymond Crowe Holdings, I think….

  6. 6
    Sambone Says:

    By Lananh Nguyen

    LONDON (Dow Jones)–Crude oil futures rose above $50 a barrel Friday in
    London, lifted by positive equities and a weaker dollar against the euro.
    Despite the gains, crude remained stuck in its recent range and will likely
    tread water in the coming sessions, analysts said.
    “Oil prices are likely to trade around current levels…until hard evidence
    emerges that the various (economic) stimulus packages are improving oil demand
    and that OPEC production restraint is contributing to a fall in oil
    inventories,” said Eugen Weinberg, an analyst at Commerzbank in Frankfurt.
    At 1136 GMT, the front-month June Brent contract on London’s ICE futures
    exchange was up $0.55 at $50.66 a barrel.
    The front-month June contract on the New York Mercantile Exchange was trading
    $0.69 higher at $50.31 a barrel.
    The ICE’s gasoil contract for May delivery was up $5 at $426 a metric ton,
    while Nymex gasoline for May delivery was up 11 points at 139.55 cents a
    Nymex crude prices are comfortable in a range between $47 and $53 a barrel,
    said Ole Hansen, manager of the futures and fixed income trading desk at Saxo
    Bank in Copenhagen. He expected the bleak economic outlook to dominate market
    sentiment in the coming days.
    “We really find it difficult to see any major upside, but at the same time you
    can’t be blind to the fact that we are trading sideways, which indicates some
    underlying strength amid the constant flow of price negative news,” Hansen
    Oil prices have been strongly influenced by equities and the dollar in recent
    weeks, and prices have remained stable despite a growing crude inventory glut
    and lackluster global demand.
    Friday, oil market participants were content to remain on the sidelines,
    mulling their next move as broader financial markets stabilized.
    The market was also digesting a signal from the Organization of Petroleum
    Exporting Countries that it isn’t likely to further rein in production at its
    May 28 meeting.
    OPEC Secretary General Abdalla Salem El-Badri said he doesn’t expect the oil
    group to cut production. The organization needs to fully implement agreements
    late last year to remove 4.2 million barrels a day from world markets, El-Badri
    said. “We need to take all that off the market before we can talk about new
    cuts,” El-Badri told Dow Jones Newswires in an interview in Vienna Thursday.
    -By Lananh Nguyen, Dow Jones Newswires (Spencer Swartz in London contributed to this report.)

    Dow Jones Newswires
    04-24-09 0747ET

  7. 7
    reefguy Says:

    Bop- thanks will look into that!

  8. 8
    zman Says:

    SLB call about to start.

    Saw SLB comments described by one broker as “more realistic” than the peer commentary quarter to date…have to agree with that. Stock called up $2+

  9. 9
    BirdsofpreyRcool Says:

    reef — make that “Crow,” w/o the “e”

  10. 10
    reefguy Says:

    There is an Anne Raymond at Crow. Is this coincidence? nothing under the name you give

  11. 11
    elduque Says:

    BDI -24 1873

  12. 12
    zman Says:

    Oil up nearly $2

  13. 13
    BirdsofpreyRcool Says:

    reef — I don’t think so. Let me get you the website.

  14. 14
    reefguy Says:

    Lee had three sons, no daughter

  15. 15
    zman Says:

    SLB – nothing on the first half of the SLB call that was not in the press release. They just don’t see signs of recovery, growth, still see market decelerating. Meanwhile, stock now bid over $50.

  16. 16
    zman Says:

    SD bid at $7.80, up 20 cents from the deal price last night.

  17. 17
    BirdsofpreyRcool Says:

    reef — i know. Triplets! Anyway, think it has to do with Trammel Crow $$. But, checking the link.

  18. 18
    tater Says:

    “Far better than expected” is now the new “pushing on a string”. My ear keeps hearing it, and my stomach keeps wanting to throw it back up.
    I guess if you’re expecting to get a 2×4 shoved in an orifice, dry, and it turns out to have a little grease, well yes that sure is better than expected.

  19. 19
    zman Says:

    Tater – thanks for the mental image, great point.

    SLB CEO Gould just keeps refusing to show sunny side for analysts who are very glass quarter full types right now. Repeat after him, no visibility (about 5x now).

  20. 20
    BirdsofpreyRcool Says:

    Credit Indices market very quiet this morning. HY is trying to rally and Investment Grade is trying to go wider now, after an early morning rally (so, opposite directions). No real “conviction” right now. Think credit will take its clues from the stock market today. As it did yesterday.

    IG 178

    HY 75.75

  21. 21
    Dman Says:

    I’ve had a week of paperwork horrors, so no time for the market. I did glance at the site & noticed that bill brought this article to my attention:


    It’s in interesting case study in the way the greenhouse issue is handled by journalists. Usually, journalists struggle to get even basic facts right in everyday reporting (eg plane crashes) so it’s a bit much to expect them to get complicated science right. But in this case, to my eyes the basic reporting seems OK. Which means that we can progress from elementary fact checking to something a little closer to the bone. The article states:

    “ICE is expanding in much of Antarctica, contrary to the widespread public belief that global warming is melting the continental ice cap.

    The results of ice-core drilling and sea ice monitoring indicate there is no large-scale melting of ice over most of Antarctica, although experts are concerned at ice losses on the continent’s western coast. ”

    As far as I can tell, the following statements are correct:

    1. The public has seen accelerating reports of dramatic ice collapses in Antarctica for about 10 years now.

    2. The public therefore believes that Antarctica is melting.

    3. Climate scientists have been monitoring the collapsing ice shelves in West Antarctica, the ice measurements in East Antarctica, satellite infrared imagery and a whole lot more.

    4. Climate scientists therefore know that currently Antarctica (as a whole) is not melting.

    Whilst I don’t follow this closely, I know that a year ago, experts assessed that the Antarctic did not show a significant declining trend (in overall ice mass). As I recall, it didn’t show a strong trend in either direction.

    So whilst the reporter describes these non-newsworthy non-revelations as being “contrary to the widespread public belief”, here is what he *doesn’t* say:

    He doesn’t say:

    “contrary to global circulation models”

    “contrary to current scientific thought”

    “contrary to warnings by climate scientists”

    Giving credit to a journalist is dangerous, but here goes: perhaps he didn’t write those things because he knew they are false. After all, he’d been talking to scientists to get this information. So he knew it didn’t shock *them*. But the article wasn’t for scientists, it was for the public to read over coffee, and the journalist thought (probably rightly) that it would surprise them.

    Why would it surprise people to learn that some things can actually get colder even while the global average temperature rises? Who told them that something as complicated as the climate should be expected to behave trivially? Who has been dumbing it all down?

    The media? The very same media that now wants to say “surprise, it’s not really that simple after all! After we just finished telling you it was simple!”

    Did climate scientists ever think it was that simple? No.

    When the climate system is tweaked, currents and jet streams shift and/ or change intensity. It is obvious that these shifts can lead to some places getting a lot colder & others getting a lot warmer, even though the shift itself is powered by an overall warming. This seems obvious, but not obvious enough for the media, who want a simpler story. Or maybe just want to try to manufacture a story with conflict (“they said warmer & now they say cooler!”) when no such conflict exists.

    So then, why does anyone care about collapsing ice shelves in West Antarctica? The article says: “…. although experts are concerned at ice losses on the continent’s western coast”.

    Why are these dumbasses worried about that when there’s plenty of ice in the East?

    Because: more than 30 years ago, when global warming was beginning to attract scientific attention, a very specific prediction was made to test the warming hypothesis. It was asserted (in 1977, I think) that the first major signal of a persistent warming trend would be collapses in the ice shelves of West Antarctica. The last decade has seen that signal arrive and accelerate.

    That is: whilst Antarctic’s vast ice reserves *are* the main element in the “doomsday” scenario of rising sea levels, their current role in the drama is different: they are currently acting as a climate detector. The ice shelves perform that role because they are (obviously) sensitive to sea temperatures.

    Remember that the dire warnings are not about what is happening now, they are about several decades in the future. Currently, the overall ice-mass in Antarctica is more-or-less stable even with a warming globe. But the models show that this negative feedback loop gets overwhelmed if the temperature forcing continues.

    My own back-of-the-envelope physicist’s viewpoint is this: when you overwhelm a negative feedback loop with external forcing, failure tends to be catastrophic (= sudden). Climate history is full of such dramatic reversals. That’s just my interpretation, so don’t blame climate scientists for it. But my back-of-the-envelope analysis convinced me years ago that the official (= diluted by bureaucrats) climate reports to government were far too optimistic. So it hasn’t surprised me at all to see that every year they have to scramble to try to catch up with the latest data, which only ever goes in one direction: “worse than expected”.

    Whether or not that is “contrary to the widespread public belief” is another matter. Oddly enough, global circulation models are not fed with data from opinion polls. Not even Al Gore’s opinion gets into the models. Shocking, but there it is.

  22. 22
    zman Says:

    EOG and NFX racing, I’m not chasing.

  23. 23
    bill Says:

    oil looking good

    who is the most oiliest

    Im in pxp 65 % oil all hedged with puts and upside exposure

    who else can we play for oily exposure?


  24. 24
    zman Says:

    CLR is very oily, and has 0% hedged.

  25. 25
    sane Says:

    tater lol 😛

  26. 26
    BirdsofpreyRcool Says:

    Head Trader says it’s a “low conviction day” and to “stay nimble.” But, he thinks you sell the morning open… take a few points out of it and call it a day, early. Thinks we bounce around all day, then close higher… right around where we opened.

    He was so spot-on yesterday, that it’s a tough act to follow. Key today is that it’s a “low conviction” prediction. So, there you have it.

  27. 27
    tater Says:

    Hey Dman, I love your words on that issue, I am looking forward to more!

    SLB, that sure looks to me like a gap that has to get filled eventually. Doesn’t appear to be a “breakaway” to me. Trying to figure out an entry level.

    No gap imagery, sorry.

  28. 28
    zman Says:

    SLB Call:

    Now becoming a recognized fact that Russian oil production is rolling over. Kind of a “Well Duh” statement but good to hear him reiterate that thinking. At some point, he thinks late 2009, Western Siberia activity rebounds, would be a boon for SLB.

    Tater – just listening to the SLB call, all of the analysts are trying to put positive spin in their questions to the CEO.

  29. 29
    Dman Says:

    tater, I’m trying to focus on the market & how I missed EOG but instead I just keep seeing a lump of 2×4 🙂

  30. 30
    tater Says:

    Appreciate the SLB updates, I’m herding cats this morning. I’m going to have to read it later. Looking for your lead as well, SLB (among others) is usually right in your sweet spot.

  31. 31
    Sambone Says:

    By David Bird

    NEW YORK (Dow Jones)–Crude oil futures rose above $51 a barrel early Friday
    and hit the highest levels since April 13, led by strong equities and the weak
    Nymex light, sweet crude for June delivery hit a session high of $51.60 a
    barrel after the Commerce Department said March U.S. durable goods orders fell
    less than expected.
    But the followthrough was initially muted with the market stalling before
    breaking above resistance at $51. The durable goods data wasn’t entirely
    bullish, traders said, as February data, which had hinted at a pick-up in
    economic activity, was revised down sharply. March orders were down 0.8%,
    compared with a consensus of a 1.5% decline, while February orders were revised
    down to show a rise of 2.1%, not 3.5% as reported initially.
    Traders said the market is showing surprising strength amid weak demand and
    brimming inventories, especially in the U.S., where they are at the highest
    level since September 1990. Many analysts believe it is a matter of time before
    crude prices return to the low $40 level under the weight of the high stocks.
    “Underlying fundamentals will become too onerous to ignore and the market
    could adjust down by as much as 15%-20% toward the $40=-$45 area,” said Jim
    Ritterbusch, analyst at Ritterbusch and Associates in Galena, Ill.
    OPEC’s Secretary General Abdalla Salem El-Badri said he doesn’t expect the
    group to cut production at its May 28 meeting despite weaker crude demand
    swelling inventories in major oil consuming countries. “I think we have to live
    with this environment for 2009,” he said.
    At around 9:12 AM ET, June crude was up $1.70 at $51.32 a barrel. May RBOB
    gasoline futures were up 4.46 cents at $1.4390 a gallon, while May heating oil
    was up 3.94c at $135.73 a gallon.
    – By David Bird, Dow Jones Newswires
    Dow Jones Newswires
    04-24-09 0917ET

  32. 32
    BirdsofpreyRcool Says:

    Watch New Homes Sales # out at 10am… lately the mrkt has been trading on anything housing-related…

    expecting March 337k sold and 0% MoM change.

  33. 33
    BirdsofpreyRcool Says:

    New Home Sales weaker than expected…. but, prior month revised up a lot. So, kinda neutral, overall

  34. 34
    zman Says:

    SLB wrapped up, sees rough margins, rough time in the second quarter for everyone, has said the big cost reductions have come.

    Last analyst trying to get CEO to say margins will bottom in 2Q or 3Q and then rise in 4Q. CEO refused, said I don’t now.

  35. 35
    BirdsofpreyRcool Says:

    Head Trader thinks the New Homes report was very positive. The prior month revision was HUGE.

  36. 36
    zman Says:

    Thanks BOP – had noted market caring about housing.

    ACI results not making people smile, been away from the name since last quarter when they had mechanical difficulties. Pricing power on U.S. coal demand is weak, and gas is looking to take more share this summer than normal due to the BTU charts I showed earlier in the week. I continue to stay away from ACI and would only really look at BTU which has some more global dynamics and better costs.

  37. 37
    zman Says:

    Wow EOG – just missed that last rally, here’s to a pull back prior to early May earnings.

  38. 38
    BirdsofpreyRcool Says:

    Pit traders who went short this morning were just stopped out.

  39. 39
    Dman Says:

    #33 is that why my screen is so green?

  40. 40
    BirdsofpreyRcool Says:

    FWIW, professional pit traders shorting again.

  41. 41
    ram Says:

    BirdsofpreyRcool – Thanks. I asked because it was after the close and it seemed you were more versed than others on financials. No more banking questions from me.

  42. 42
    ram Says:

    ZMAN – As you mentioned EOG and NFX are running – besides charts – what would be HK’s resistance fundamentaly from moving higher?

  43. 43
    BirdsofpreyRcool Says:

    ram — no problem! i should have answered you yesterday… just didn’t check in. thx for asking.

  44. 44
    zman Says:

    Re – HK. Good question. Perceived lack of catalyst. Big news is out so now what attitude. Has happened in past quarters between the ops update and the release of the actual quarterly results. Valuation is not overtly cheap (you get what you pay for) and people are thinking these guys won’t be upping production guidance for the year until at least the second quarter release which they probably won’t.

  45. 45
    Dman Says:

    I find it very weird that things like DBA are trading with the market. Did they think things were so bad that people were going to forget to buy grain?

    BOP – any idea what the shorts’ thinking is here?

  46. 46
    BirdsofpreyRcool Says:

    last comment from HT for the day — “pit is very very slow and almost impossible to make a handle or two… why? it’s 75 and clear in chicago and they think it is summer. very very slow and not worth the risks if the spoos are not moving…. best to save your $$ and wait till monday.”

    So, it’s Beer-Thirty early for HT.

  47. 47
    zman Says:

    And from 44 you might be wondering, so why am I in again and pretty heavily? See reports tab, read quarter update and then think that with strong hedges, debt and equity deals behind us and one of the rare examples of growth, we will see Capex curtailment announcement with the 1Q results or a statement that they are leaving it the same but will end up drilling x more wells for the same dollars. Also expect to see the same out of SWN.

  48. 48
    BirdsofpreyRcool Says:

    Dman — I think the shorts thought we were headed for a down day, just based on technicals… until 2:45 pm, after which, no one seems to be able to call in advance these days. But with the lack of volume and volatility, I get the sense that the active traders are calling it a day early.

  49. 49
    Dman Says:

    Z – any thoughts on CRK here?

  50. 50
    zman Says:

    Dman – yep, will own it before the call, but smallish. They’re evidently waiting for 1Q results to update everyone on a plethora of E.Tx Haynesville/Bossier drilling 7 to 8 wells as I recall. BOP sent me a note like 2 weeks ago which indicated they might be holding off despite their earlier comments to the contrary and that turned out to be correct. Good story, experienced management, absolutely no chance of an equity secondary unless they see something they just have to buy, gotta like management’s commitment to cherish the shares, unlike some people we know. Anyway, not a huge fan of May’s on this, likely Junes.

  51. 51
    choices Says:

    Z-coal-CNX reported good results yesterday, up yesterday and strong today-have not yet read the report-very volatile stk.

  52. 52
    zman Says:

    UBS raises target on HK from $21 to $25 (really going out on a limb), maintains Buy rating.

  53. 53
    VTZ Says:

    BOP – Can you really see this general market rally continuing with all the economic data that’s out?

    It seems to me like people lowered their estimates so much coming into earnings just so that they can say that it’s a positive that instead of having -40% profits it’s only -30%.

    What do you see as a multiple on S&P earnings if they come in at 50$? Considering we are at ~850, 17 times earnings seems like a heavy multiple to me considering we are in the middle of a huge recession?

  54. 54
    BossmanG Says:

    BOP, appreciate your comments from HT. Does he only trade ES futures? lol and does he really call it a day that fast and leave?

  55. 55
    choices Says:

    Z-what is your thinking on HAL, considering the SLB conf call-are all of the analysts singing in chorus?


  56. 56
    bill Says:

    pxp moving towards 19 trying to recoup the 2 dollar hit it took due to secondary

  57. 57
    zman Says:

    Thanks Choices.

    BOP – no kidding activity level, market barely has a pulse.

    Re HAL relative to the call. I think results will be worse than I’d thought for 2Q and 3Q, the Street will likely hold numbers flat for some time. At some point soon we see profit taking. There is no light at the end of the tunnel according to Gould. He is normally the most conservative guy in the room. And SLB is up $4 here. I’m not going to beat my head against that wall until it spikes it a buying panic. Then I add close to the money options on either SLB or HAL.

  58. 58
    zman Says:

    NG off 5 cents to another new low today. Rig counts out in a couple of hours, some thinking we see a rally in rigs here. If so, I say it is just noise on the way down. There is little reason to spud new wells here unless you have a profitable play and those are rare at current prices.

    Reef – I saw a tally on drilled but uncompleted gas wells last night: 600. Largely in the Barnett where gas prices have been trading below $3. Mention was made of the Fayetteville backlog as well but that was a function of Boardwalk being slow to get finished and those are being worked through by the end of summer.

  59. 59
    zman Says:

    Another area of difference I’m seeing between analysts and the service calls:

    Deepwater vs shallow. Shallow has been weak and is set to get weaker. Analysts are going for a contrarian call here too, adding recs to names like ESV and RDC and cutting DO, RIG, NE. SLB stated a couple of times that deepwater is still holding up well.

  60. 60
    bill Says:

    Im tempted to buy puts on ng sompanies

    Who are best short ideas? Swn? Chk?

  61. 61
    bill Says:

    I added to pxp today–

    bot shares, bot may 17.5 and may 20 calls

    No one notice vietnam discovery and no q 1 write off

    Also oil differentials are narrowing in calif and they are unhedge on upside and have downside protection

    Oh yeah , 1 other thing 10 dollar collars on ng and own 20 % of chk haynesville although i like them for their oil not gas positions

  62. 62
    zman Says:

    Bill – Borders on advice which I don’t give. Also runs counter to my current thinking. I don’t get the argument for shorting them with NG at its lows with the company expectations low and liquidity issues at least temporarily behind us and their operating and drilling costs are falling.

    With all that said, the best shorts are going to be higher multiple (high beta) stocks like a SWN although they are substantially hedged for this year but not next but are set to post improved well results and will see their basis differentials contract in 2Q.

    CHK is extremely well hedged, has shown that the market wants to lend them $ and has no liquidity concerns for 3+ years.

    Best bet on short would be the unhedged and leveraged and then have credit stay cold-ish and gas low. Maybe RRC (no hedges next year).

  63. 63
    bill Says:

    i also took a little in dnr and clr

  64. 64
    BirdsofpreyRcool Says:

    VTZ — all the right questions… but the crystal ball is very fuzzy, this time around.

    Coming out of the last downturn, we went long in summer of 2003 and super-long that september. We thought was pretty clear that the Iraq war would prove to be an economic boon to the US manufacturing/defense sector. Also, we had seen the bottom (wide) in high yield spreads about 6 months earlier. Anyway, point being, it was easier to see a bottoming out and pin a start to an economic expansion last time around.

    This time, we have a new player in the room. The Govt. This adds a level of complexity, inconsistancy, regulation, costs, and overall uncertainty to the “recovery” process. Without active govt involvement in the private sector, we would go long and stay that course, as we beleive 2010 will be a good time for the economy. With the Govt involvement, we are not certain what the US economy is going to look like on the other side of this recession. So, no crystal ball, this time around.

    I will say one thing about p/e’s tho… at the depth of a recession, p/e’s expand, at the height of the market, they contract. So, what is the “right” p/e changes with time and sentiment. Once we can get borrowing costs down for corporate America and liquidity back, low absolute rates means a higher p/e ratio can be supported.

    Frankly, the US stock market may not be the best place to be, once a global recovery takes place. As we move to a more “centrally-managed economy,” other countries are moving away from that model and toward freer markets. The best returns will probably be made in places like Brazil and Asia, as those economies are expanding and interest rates continue to drop there.

    Just my two cents… you asked. Don’t think it’s much help, tho.

  65. 65
    bill Says:

    Chk- has good hedges but wont come close to making cash flow numbers shown in feb.

    They still have 20 % unhedged and i think they might have knock out issues

    I think they will be tempted to float some stock if stock stays above 20

    I think swn is way over priced even though its an institutional favorite and showing great volume growths will probably pop higher on earnings .

    I might buy that pre earanings and go short after earnings if stock is at 35

    anyways, ty for your thoughts

  66. 66
    elduque Says:

    Bill – I shorted SLB this morning and am considering WFT.

    Z- Do you have any special love for WFT?

  67. 67
    BirdsofpreyRcool Says:

    BossmanG — HT is not allowed to actively trade for his own account… but he has a close circle of ES traders who do. He gets his colour from them… and a lot of other places. Frankly, that’s what head traders are supposed to do, right? I think he is jealous b/c, yes, his friends really DO get to kick off early on days like this. “Take your 2 points and go home.” Unfortunately, not for HT. We chain him to his desk.

  68. 68
    RMD Says:

    Jefferies conf. call on Science of the HS starting now.

  69. 69
    zman Says:

    Bill – happy to work through any of it with you. Re CHK – and it will still be ultra cheap and have no liquidity issue. This is another one where I think they have 2 important issues for the call that are will be interesting – gotta take a call, back in 5 to 10 minutes to continue …

  70. 70
    tater Says:

    I did a search on Z’s dictionary (above left) for the term “special love” and I couldn’t find it. Would that be the eHarmony kind of love elduque? ):

  71. 71
    tater Says:

    or 🙂 might work better

  72. 72
    zman Says:

    still on call but rmd do you have a link ort dial in?

  73. 73
    Dman Says:

    BOP – #67 “ES =?”

  74. 74
    elduque Says:

    I am too old for eharmony.

    I had to google it too figure out what it was.

  75. 75
    zman Says:

    ok, more on CHK.

    the two things are:
    1) they get a get of jail pass on production growth given their recent announcements
    2) they cut capex and keep drilling focused on the Haynesville, with delayed completions in the Barnett and Fayetteville.

    and I don’t think shorts are a bad idea for some names in here and will look about. Problem is, at this stage, things I’d like to short, like SGY have been hammered and you run the risk of the rumor mill on M&A cranking back up.

  76. 76
    BirdsofpreyRcool Says:

    ES = “e-minis.” SPX futures that cost $50 a 1/4 point, instead of $250. (I had to ask too.)

  77. 77
    zman Says:

    “special love” not in my dictionary; you’re probably thinking “sea of green love” which describes my market watch right now.

    WFT – no, I see them as a little SLB and I think they will have worse margin compression that SLB and others as they have been taking some really low bid work to stay as busy as possible. As Wyoming his opinion on them now.

    Re Eharmony, my good friend Phil Davis over at Phil’s Stock World was a co founder of the predecessor company to Eharmony.

  78. 78
    VTZ Says:

    BOP – One more…

    If the market can support these P/Es at these interest rates, it leads me to believe that there’s no way these valuations are sustainable considering the amount of liquidity being introduced into the system and the realization that interest rates can only go up from here and will likely suppress any rally and potentially knock us back into recession phase 2 when the government stop giving free money to everyone that asks (or doesn’t ask) for it.

    To me the S&P valuations are ludicrous and the people who are talking about the rate of decline decreasing, ie shrinking at a pace of xx% instead of xx+xx% previously are grasping at straws. The crux of the problem hasn’t been fixed and the answer isn’t more liquidity.

    Didn’t we already estabilish that you can’t fix a problem caused by liquidity with more liquidity? Nobody can honestly say they know anything about the bank balance sheets and until that’s resolved this monster rally is based on nothing.

  79. 79
    zman Says:

    “Didn’t we already estabilish that you can’t fix a problem caused by liquidity with more liquidity? Nobody can honestly say they know anything about the bank balance sheets and until that’s resolved this monster rally is based on nothing.”

    Exactly. Which is why I follow E&P and not banking stocks. Tell me how much they produce, what price they sell it for, what it cost to get out of the ground, and I can put value on that. Very little blackbox there as opposed to all blackbox at places like AIG and Citi.

  80. 80
    Dman Says:

    Z – lucky NG and SD are red, otherwise I’d have to start talking about a sea of energy love. And we don’t want that.

  81. 81
    zman Says:

    Dman – see, you know the term better than me, SD is trying to recover from the deal which says either things are not that bad or people are suckers. I’m going with a bit of both.

  82. 82
    BirdsofpreyRcool Says:

    VTZ — no disagreement from me.

    But, a couple of things. 1) Is there going to be a recovery? If so, it’s just a matter of when and not if. Doesn’t mean there aren’t a lot of false starts… i am very wary of this one. As is everyone else, i think.

    2) US govt bond interest rates could go up a lot from here and still corporate borrowing costs could come down. Corporate bonds trade at a spread to treasuries… historically, investment grade bonds trade about +50bps to treasuries. They are currently over +200bps.

    3) There is a lot of debt being wiped out in BKs. So, some of that “liquidity” is being sort of naturally sopped up. Also, the way the Fed is adding liquidity (through open market operations) is not a permanent thing. And most (if not close to all) TARP money is going to get paid back. The auto loans are a black-hole… but that is a different topic.

    4) It’s the Washington-induced budget deficits that have me on the edge of my chair… not anything the Fed has done. As i said, Govt spending/taxation/control is the total wild card in this recovery.

    5) Bank balance sheets have always been a mixture of art and science. When assets don’t trade, but you continue to receive the coupon payment, there is a lot of judgement that goes into pricing that asset. Like all else in this world, some people cheat, most don’t.

    6) The US economy will start to recover when housing prices have bottomed. There is a whole lot of stuff tied to getting to that point. It includes jobs, banks, consumer loans, same store sales… so that is what we need to watch now. Banks are not going to be nationalized. It’s time to stop focusing on that train wreck and start watching the housing train wreck. That is the next barometer, imho.

  83. 83
    VTZ Says:

    Z – Agreed, I’m not challenging energy at all, just the broad-based rally. Just curious to hear what BOP had to say in advance of the “stress tests”.

  84. 84
    tater Says:

    I can’t help but feel that being short right now is like standing in the way of a train. But the energy that is behind this does not seem “healthy” for lack of a better word. Seems contrived, forced. That’s why I pay so much attention to the RSI indicator, it gives a sense of the “urgency” of the market moves.
    I’m seeing things like SBUX (AAPL is good because of stimulus/theft checks, so retail coffee is great now? What happens if the theft stops?) HOG (a Harley in every pot?) going crazy.
    I know I keep coming on here and making bearish arguments. That’s not really my intention. The market is the market, I’m not really saying what it should be, I’m just trying to take some money home and I’m thinking that at some point it has to get back to a less urgent profile (revert to a mean). Wondering aloud when that might be.

  85. 85
    zman Says:

    VTZ – agreed, me too. Did you have any interesting / unexpected thoughts out of the SU quarter?

  86. 86
    zman Says:

    Tater – agree. Very agreeable with you guys today. Oil service train ran over me this last go round. So far, the stories are not countering my thoughts and estimates will still be falling, albeit at a slow rate. Just does not in my world view warrant this kind of a rally.

  87. 87
    VTZ Says:

    I haven’t had a chance to review it yet sorry. Too busy lately, after I have a look I’ll post something.

  88. 88
    zman Says:

    V – thanks in advance, just curious no rush. Thanks for pointing out the ECA Haynesville double down the other day.

  89. 89
    zman Says:

    dollar down over 1% now, crude up nearly 4%.

  90. 90
    zman Says:

    … and with that SU, CLR, WLL, EOG all up 4 to 6%.

  91. 91
    zman Says:

    Ram – HK got through yesterday’s high for you but can’t seem to get up through $22.50 to take a shot at Tater’s resistance level at 22.65 or the 22.87 2009 high.

    Probably has something to do with NG being off another dime now, although HK is up in line with the XNG at +2.5%. My sense is that sentiment on gas is too bearish. The drilled but not completed wells will act like an overhang in the next 6 months or so keeping gas from rebounding as much or as quickly as it normally would but it will also mean that production will start to fall off much faster than the current low well count would suggest.

  92. 92
    BirdsofpreyRcool Says:

    Here’s the good news… I have to run out for most of the rest (if not all) of today. Historically, there has been a 100% correlation between my being away and the market rallying (ask z, if this is not true). Let’s see if it holds this time.

  93. 93
    zman Says:

    Thanks for the comments today BOP, thanks for playing!

  94. 94
    zman Says:

    Movie quote Friday watch:

    “A fellow as ugly as you are probably couldn’t get to first base without a fire”

  95. 95
    ram Says:

    ZMAN – I would believe that HK would go through yesterdays high and beyond for everyone. The positive that I see is that the upticks are on larger volumes than downticks. Daily volume on up days are moving up. It seems like HK wants to break higher soon.

  96. 96
    zman Says:

    Ram – True. They just put up their 1Q date, May 6th which is just after EOG on the 5th and before GDP on the 7th.

    Here’s another thought to consider. There may be an interesting play on GDP. EOG should have results from a Haynesville well in Nacogdoches county

    see map east and a little south of the traditional Haynesville/Bossier play

    GDP has Nacodoches acreage.

  97. 97
    zman Says:

    Rig Count Watch:

    Gas down 18 to 742 vs 1,473 a year ago
    Horizontals down 14 to 385 vs 511 a year ago

  98. 98
    zman Says:

    More anger over Aubrey’s pay:

    from newswires:

    Benjamin Dell, analyst at Sanford Bernstein, on Thursday advised shareholders to vote against allowing the company to increase the number of authorised common shares, warning that its board structure, corporate governance and dilution of ownership stakes created a material overhang for the stock.

    In the SEC filings, it emerged that Chesapeake spent $12.1 million on antique maps, watercolours and books owned by McClendon, and, in 2008 and 2009, gave donations totalling $4.6 million to the Oklahoma City Thunder basketball team. McClendon has a stake of just under 20% in the team.

    The company is also a major donor to Oklahoma State University of which Burns Hargis, one of its independent directors, is president, the FT report said.

  99. 99
    zman Says:

    Times up, no prize. Hellfighters.

  100. 100
    Garyinhou Says:

    Morgan Stanley released a tactical research note saying shares of National Oilwell Varco (NYSE:NOV) will rise in absolute terms over the next 60 days, citing recent declines in the company’s stock, making its “short term valuation much more compelling.” The analyst note said that the company had $700 million in cash flow during Q1 and expects similar cash flow likely for the remainder of 2009, making the company’s free cash flow yield in excess of 20%. The analyst also said that with such excess capital, National Oilwell Varco will be able to capitalize on the current economic downturn through acquisitions, improving its market share. Morgan Stanley estimates that there is an 80%+ or “almost certain” probability for this scenario. Shares remain rated “Overweight.”

  101. 101
    zman Says:

    Thanks Gary.

    Natural gas could care less about the rig count. Probably the 6th week in a row with 0 reaction (except maybe a negative one) to lower rig counts.

  102. 102
    zman Says:

    Goldman keeps putting gaps in chart, bet the EOG one gets filled in the next week. They might want to change that rating too, “conviction buy”, sounds bad.

  103. 103
    zman Says:

    Stress test results stressing the market out.

  104. 104
    zman Says:


  105. 105
    zman Says:

    ACI getting thrashed now, off 10%.

  106. 106
    zman Says:

    Tater or anyone: Do you look at OBV, old indicator, don’t hear many people talk about any more?

  107. 107
    Garyinhou Says:

    maybe Goldman Sachs can use.. “….conviction….. bye”

  108. 108
    tater Says:

    I used to use it quite a bit. I still think it has usefulness in a general sort of way, I just can’t get it to give me trading signals so I concentrate on other things.

    I was trying to give a movie quote from the Boondock Saints (worth renting if you haven’t seen it) but I can’t seem to be able to find two lines in a row without the F bomb.

  109. 109
    zman Says:

    Monday Earnings: SII, VLO also BWP as things pertain to SWN, HK Fayetteville takeaway capacity.

    Tuesday: COG, HERO

    Wednesday: BHI, FSLR, OII, TLM, WLL


  110. 110
    zman Says:

    Tater –

    A) thanks, will ask more later.

    B) don’t let that stop you

  111. 111
    zman Says:

    Intern #2 just had first rice cereal so look for enhanced research next week.

  112. 112
    zman Says:

    HK at 22.85, Tater, what’s next resistance to your eye?

  113. 113
    zman Says:

    HK topped 23 briefly, seeing a little pullback here, holding 24s, 25s, and a few 22.50 May calls in here, don’t like the way the 24s are trading, may reposition them on the next spike above 23 into the 22.50s.

  114. 114
    Coug1984 Says:

    Tater – re #84, check out these graphs for a historical perspective supporting your sense of this rally. They were linked in Ritholz’s blog this morning.


  115. 115
    tater Says:

    HK – Next is the $26 level (very strong). I’ve got the daily and 60 min views here

    Not trying to poop on anything, but the 22.65 level holds until a close above that price.

  116. 116
    zman Says:

    Thanks much T.

  117. 117
    tater Says:

    Thanks Coug,
    Skimmed it for now, will go back and give it due attention after the close. I’m no market forecaster, I just don’t see the real world swallowing the whole “the market leads the recovery” pile of junk that comes from people who don’t shop at Walmart. I’ll be the first to say that I’m wrong, but for now I’m looking to enter short.

  118. 118
    zman Says:

    Tater – take a look at OBV in a name like HK and then in HAL.

    I think with HK we have some price target risk approaching just above your level (analysts either have to raise the PT or cut ratings from there to about $38 or face the wrath of the research director).

  119. 119
    ram Says:

    ZMAN – Speaking of going short, I recall Nicky’s levels, but there was timing involved as well. Where’s Nicky?

  120. 120
    zman Says:

    re 117. Batteries and handguns seem to be flying off the shelves for people living in caves.

  121. 121
    zman Says:

    Will send her a note now

  122. 122
    zman Says:

    Denise, any word from Kass? He made a fantastic call for the market bottom about 5 or 6 weeks ago, maybe 7, anyway right near the bottom, wondering if he had gone short yet.

  123. 123
    zman Says:

    Missed my reposition on of those $24 HK calls, will ride through the weekend.


  124. 124
    zman Says:

    Sea power video:


  125. 125
    tater Says:

    Handguns? Amateurs.

    Went back and checked on the low of Sept 26, 2008 for HK. It was 22.81, so I offer my largest possible apology to anyone who trades on anything I have to say. The correct level of resistance for the current upswing is that low, which is the correct level of the top of the gap that denotes the resistance. Is it that precise? I doubt it, but I just want to be clear. I still see 22.65 as a legitimate level, so I am going to just say that I see it as a resistance “area” and we appear to have closed at the 22.81 level.

  126. 126
    zman Says:

    Thanks for the followup T.

    Re handguns, but they are selling like hot cakes, something about the new administration going after them shortly I suppose. I say they’re no good in the darkness of a cave. For proper cave defense I offer up the final movie quote for Friday:

    “Alright you Primitive Screwheads, listen up! You see this? This… is my boomstick! The twelve-gauge double-barreled Remington. S-Mart’s top of the line. You can find this in the sporting goods department. That’s right, this sweet baby was made in Grand Rapids, Michigan. Retails for about a hundred and nine, ninety five. It’s got a walnut stock, cobalt blue steel, and a hair trigger. That’s right. Shop smart. Shop S-Mart. You got that? “

  127. 127
    tater Says:

    Added OBV to HAL and HK, don’t really see what you’re seeing, both are up (though HK is down over the last 2 weeks on the 60 min view).

    Also rethought my HK apology and upon further review the 22.65 is the proper Fib level, so I appeal to your greater sense of purpose and ask you to simply ignore my attempts at self-flagellation.

  128. 128
    VTZ Says:

    Z – I heard Kass on CNBC the other day and he sounded like he was bearish again.

  129. 129
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