Wrap – Week Ended 4/24/09


Wrap Comments:

1 & 2.  Oil Service Continues Its Massive Run; Gassy Stocks Tread Water.

  • Oil service earnings came in better than lousy which is to say they beat sharply downwardly revised  estimates this past week from HAL to BJS to SLB. To a tee managements commented on their lack of visibility in the out quarters while saying that 2Q was going to be tough and that it may or may not be the trough for pricing and margin compression. International operations, which have been helping to offset NAM weakness are starting to show multiple signs of further softening. And yet, the OIH is up 26% year to date. I have a small (HAL) put position ,which has gotten flogged ,and while the rig count continues to plummet the cheerleading section of analysts who argue that now is the time for multiple expansion continue to urge looking through cycle. I agree that it's not the end of the world as we know it but the rally seems overdone and current earnings estimates for 2009 and 2010 are likely to resume their downward revision path in short oder.
  • Over in gas production land, the coninuous decline in natural gas prices (now at near 7 year lows) has kept the group's rally in check. However on Friday, a number of our more actively traded names hit 2009 highs. Common themes for the quarter are going to be capital budget reductions and how much further drilling dollars can be stretch as costs decline (so you may see total spend drop with a slight bump in acitivity), impairments for the full cost gassy names which are likely to ignored, and a wave of operations updates (people are starting to care again about well and play results (see NFX note here).

Rig Count Watch: Another common theme espoused on a many an oil service and driller conference call last week was a perceived bottoming in the U.S. gas rig count. One management team went as far as saying they thought this past week's count would rise (sorry Charlie, no joy there). Look for a full update of all the charts in Monday's post as well as in the Natural Gas Supply Slide Show on Wednesday or Thursday.

Dry Bulk Comments: The sector is showing a number of signs of life from higher rates to transactions. See update in the Monday post.

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