Swine Flu Monday

Flu Watch: Equity and commodity markets the world over are selling off as a new pandemic is feared. The one holdout is the U.S. dollar, which it turns out, makes a good mask for preventing the spread of the disease (good thing the Treasury keeps those printing presses running 24-7). I'm looking for a weak open across the board before a resumption in last week's buying activity sets in either later today or at the latest by mid-week; market still has that "I want to go up" feel to it despite the lack of an all clear whistle from the actual economic data. 

The Week Ahead:

  • Monday 4/27: No U.S. economic data scheduled today
  • Tuesday 4/28: Consumer confidence (April forecast 30.5)
  • Wednesday 4/29: EIA Oil Inventory Report, GDP (forecast -5.1%); Natural gas 914 data for February released
  • Thursday 4/30: EIA Natural Gas Report, initial jobless claims, Chicago PMI
  • Friday 5/1: Consumer sentiment, ISM, factory orders, vehicle sales
  • We also get the results of the "bank stress tests" this week, a series of test that were designed for the banks to pass so it could be much ado about nothing.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Rig Count Watch
  4. Earnings Calendar - Energy Week 2
  5. Earnings Watch: SII
  6. Odds & Ends

Holdings Watch: The Wiki holdings tab is updated.


Commodity Watch:

Crude oil eased 2% last week to close at $51.55. The 12 month strip is now at $56.88, having witnessed a substantial contraction in the steep contango that has been in place for the last year. This morning crude is trading off $2.50 ish over swine flue panic.

  • OPEC Watch: OPEC says prices are too low to prompt further investment by OPEC states and says 35 of 165 new projects have been put on hold until 2013. The Cartel president went on to add that Russia and other non-OPEC producers should curtail production to help bring the markets into balance.

Natural gas dropped 12% to close last week at $3.30, a near seven year low (see long term chart here). The 12 month strip is trading at $4.49 with the end of that chain trading at  a $2+ premium to the current front month (hedge now or forever hold your drillbit). This morning gas is trading off a dime.

  • EIA 914 Watch: The monthly look at gas supply in the U.S. is scheduled for release on Wednesday with a view of what February production looked like. We are getting into the period when the rig count decline should be have been having a more pronounced impact on volumes. We could/should see a third month of production declines out of Texas.
  • Weather Watch: Heat wave. HDDs fell to 62 last week from 101 in the prior week. The forecast calls for a further decline this week to 39. While it is still a little early to start closely tracking cooling degree days, they are starting to add up and we even turned on the air conditioning a couple of times late last week and over the weekend as temperatures in the souther tier states exceeded 90.

Rig Count Watch:

Earnings We Care About This Week



Earnings Watch:

SII Misses By A Mile; Offers Little Guidance

The 1Q09 Numbers:

  • Revenues of $2.41 B vs $2.56 B expected; down 21% from 4Q08.
  • EPS of $0.52 (excluding an $0.08 charge) vs $0.57 expected
  • Weakness centered in North America but also FSU and North Sea

Nutshell: They point to cost cutting and growth in future quarters while commenting that things will be tough until North American natural gas drilling rebounds.

Conference Call: Today, 11:00 am.


Odds & Ends

Analyst Watch: (CCJ) upped to Buy at Cannacord, (BJS) cut to Market Perf at Wachovia. (ACI) price target cut from $30 to $19. 

Check out the weekend wrap stats here.

111 Responses to “Swine Flu Monday”

  1. 1
    zman Says:

    Oil down $3

    Will have a dry bulk update out for tomorrow, had a crash, lost that version of the post today.

  2. 2
    Sambone Says:

    By Nick Heath

    LONDON (Dow Jones)–Crude oil futures dropped nearly $3 Monday as fears over
    the potential economic fallout from an outbreak of a new strain of swine flu
    gripped financial markets.
    Nymex crude fell more than 5% to below $49 a barrel – reversing all of
    Friday’s sharp gains – with markets riven by worries that the already fragile
    global economy is facing an incident at least on par with other viral outbreaks
    of recent years. European and Asian equity markets dropped Monday, nourishing
    fears that demand for crude will remain stunted.
    “This is important. The 1997 Hong Kong ‘bird flu’ (H5N1) outbreak and the
    2002-03 Chinese SARS outbreak dampened economic activity dramatically,” said
    Stephen Schork, editor of The Schork Report.
    Mexico, the source of the outbreak, said the number of confirmed and suspected
    swine flu deaths had hit 103 Monday. The U.S. has declared a public health
    emergency, while the European Union has begun organizing an emergency meeting
    of health ministers.
    At 1121 GMT, the front-month June Brent contract on London’s ICE futures
    exchange was down $2.41 at $49.26 a barrel.
    The front-month June light, sweet, crude contract on the New York Mercantile
    Exchange was trading $2.64 lower at $48.91 a barrel.
    The ICE’s gasoil contract for May delivery was down $13.75 at $419.25 a metric
    ton, while Nymex gasoline for May delivery was down 498 points at 139.22 cents
    a gallon.
    “The one thing a flu pandemic can do to oil, irrespective of whether it turns
    into one – the fear is the possibility – is hurt the demand side of the
    equation,” said Jim Rintoul, analyst at London-based trade advisory
    TheOilTrader.com. “It puts a chill down the bulls’ backbones.” Airline stocks
    were hardest hit in European equity markets Monday, underscoring anxiety that
    the swine flu outbreak would have a direct impact on consumption of crude and
    refined products.
    “Factor in the air travel aspect of it, and I think it’s fairly reasoned to
    expect some kind of impact on the demand side,” said Simon Wardell, analyst at
    Global Insight in London.
    While markets continued to monitor updates on the spread of swine flu, a
    weekend meeting between oil producers and Asian consumers also provided little
    incentive to build on last week’s late oil price gains.
    Mideast members of the Organization of Petroleum Exporting Countries said
    Sunday that oil markets are oversupplied but that the group is unlikely to
    approve a further cut in output quota when it meets next month.
    The 4.2 million barrels a day of OPEC cuts announced since last September have
    shored up oil prices, but continued demand unease linked to the health of the
    global economy has restricted any advances beyond $55 a barrel. The group is
    next due to meet May 28.
    “Overall demand still remains weak and, arguably, may be outpacing the rate of
    supply cutbacks put through by the cartel,” said Edward Meir, analyst at MF
    Global in New York. “However, doing what seems to be obvious at this stage
    and putting through yet another cut is fraught with risk as well since
    resulting higher oil prices could accelerate the demand destruction that is
    already underway and may also set back the economic recovery,” he said.
    A series of macroeconomic data events this week are due to provide an update
    on economic conditions, particularly in the U.S. Of particular note, the
    Federal Reserve’s Open Market Committee is due to begin a two-day interest rate
    meeting Tuesday, while first quarter U.S. GDP numbers are out Wednesday.
    -By Nick Heath; Dow Jones Newswires (Tahani Karrar in Dubai contributed to this item.)

    Dow Jones Newswires
    04-27-09 0742ET

  3. 3
    bill Says:

    bwp reported a miss cc csll on now

    pipe anomolies problem

    wonder what this means to basis and ep companies

  4. 4
    bill Says:

    from last qtr swn earnings call

    the company’s average price received for its gas production during the fourth quarter of 2008 was approximately $1.80 per Mcf lower than average NYMEX spot prices, compared to approximately $0.76 per Mcf lower during the fourth quarter of 2007. During the year, the majority of the company’s gas from the Arkoma Basin was moved to markets in the Midwest and was priced primarily based on two indices, “NGPL TexOk” and “Centerpoint East.” Late in the third quarter and during the fourth quarter of 2008, differentials to NYMEX spot prices on NGPL TexOk and Centerpoint East began widening above historical averages as a result of the delay in the construction of Phase 1 of the Fayetteville Lateral portion of the Texas Gas Transmission Pipeline

  5. 5
    zman Says:

    Bill – they had been reported to be behind schedule on Boardwalk, CHK has a number of wells drilled and not completed in the Fayetteville because of it. Should be a non-event as it was well known to have increases 1Q basis as area production bumped up against takeaway capacity. Comnpanies most affected would be SWN, CHK, XTO, HK, PQ but again, should be well known and in the 1Q and 2Q estimates already.

  6. 6
    bill Says:

    looking at last 2 weeks of march

    centerpoint east was 2.59 and ngpl texok was 2.90. Henry hub spot was 3.88

    swn has half it ng hedge at price north of 8, the other half is pulling prices between 2.50 and 3.00 which means an avg price of 5.75 to 6.00

    I wonder how the market will react to their earnings. They were well recd last qtr

  7. 7
    zman Says:

    Re SWN – my sense is they are outspending cash flow (one of the few) in 2009 and will reign in their cap ex with their 1Q press release. This is unlikely to mean a reduction in activity, just the savings form lower drilling costs (rigs, pipe, bits, mud, pumping etc).

  8. 8
    BirdsofpreyRcool Says:

    Good morning. We’re off the lows (wides) of the morning, but seems traders needed a reason to sell off… swine flu is as good a reason as any, i guess. Gives the media something to talk about on a slow news day.

    IG 181 +5bps from friday’s close

    HY 75.625 -0.375

    Would love to see HY back up to 85 and IG tighten to 150. Keep those numbers in the back of your head.

  9. 9
    BirdsofpreyRcool Says:

    Swine Flu — something like 36,000 people in the U.S. die from the flu every year… so far, 20 people have come down with the swine flu and none have died. Just to put a little perspective on the whole thing.

    Feels like the “Shark Attack” stories from a few summers ago…

  10. 10
    BirdsofpreyRcool Says:

    Head Trader says the flu headlines have totally messed up any trading for the day. So, he is practising sitting on his hands and perfecting the art of Doing Nothing today.

  11. 11
    elduque Says:

    BDI -34 1839

  12. 12
    tater Says:

    Have to remember the psychology of a disease that kills the young and strong vs. a “reason” for cause of death for the aged is going to be very different. This one can kill everybody, the other one only if you don’t eat your vegetables (in our minds).

  13. 13
    zman Says:

    Had to miss the open, just back in.

    BOP – could not agree more re “perspective” outlined above. The CDC said its not time to panic which begs the question, “is it ever time to panic”

    Also agree with Head Trader, tough day to be right unless you are going long Tamiflu and short Cancun timeshares.

  14. 14
    zman Says:

    Tater – good time to be in the cave, eh? What do you see as support levels on the SP500? Thanks.

  15. 15
    BirdsofpreyRcool Says:

    tater — I see your point. I just think the media has way too much control over our “psychology.” The year of the shark attack focus, there were actually fewer attacks than normal.

    What the heck… bot a few trading shares this morning. May as well put my money where my mouth is.

  16. 16
    zman Says:

    Correction to the post: 3 things up … U.S. dollar, FSLR, and LINE, and NFX trying.

    Also, APA just added themselves to the roster for earnings this week, April 30.

  17. 17
    tater Says:

    Have a couple charts up for the SPX. Look at the 60 min charts and you can see we bounced off of the middle Bollinger Band (20 period moving average).
    Tough to say where we are going, should be a battle though any loss of momentum will be branded as “uh oh” and the opposite will be seen as “Wow, this rally just won’t die”.

    Buying the open seemed the obvious play. Have to see where we go from here, but as I’ve repeatedly said before, I’d be surprised if we don’t start to see some people booking profits here in the next couple days.
    Running to the doggy eye doctor, sticks and eyes don’t mix, good luck today.

  18. 18
    tater Says:

    BOP –
    Exactly. I’ve often wondered why my choice of beer doesn’t get me laid more often.

  19. 19
    BirdsofpreyRcool Says:

    tater — your humor always cracks me up. Even 1st thing monday morning. thank you!

  20. 20
    bill Says:

    swn reports tonight..not on your list


  21. 21
    zman Says:

    Thanks Bill, my bad there. Plan to be long a half sized position in near the money calls by close of the day there.

  22. 22
    bill Says:

    At what price does NG users buy in to lock in current prices

    Seems like a battle between buyers and producers. Buyers and sellers both holding off

  23. 23
    zman Says:

    They’ve been doing it in the steel and fertilizer industries for awhile now, don’t think it is so much of a price point as it is a rolling thing for the biggest industrial user (chemicals).

  24. 24
    zman Says:

    ZTRADE: $10KP Trade.

    SWN: Taking a half position in the May $35 calls (SWNEG) for $0.95 (it fell back as soon as I filled so its $0.80 x $0.90 now with the stock at $33). Will either add on strength tomorrow or not but expecting good results after the close. Strong hedge position, continuously improving results, and a capital budget reduction likely tomorrow with little to no impact on activities (lower cost drilling), and an improved outlook on Fayetteville shale price realizations along with further news from the Haynesville arena.

  25. 25
    zman Says:

    Tater – thanks as always for the charts, best to the pooch.

  26. 26
    zman Says:

    Don’t look now but OIH stocks actually taking a breather today, down 3+% vs down 1.5% ish for the gas stocks and just under a 2% down showing for the XOI.

    We get XOM and CVX later this week and I think their calls will offer less guidance that usual for the sector. Big cap E&P starts later this week and next and that should provide the names with more guidance.

  27. 27
    zman Says:

    Additions to the analyst watch:

    SLB – pt upped to 55 from 42 at RBC
    SLB – Tristone raises to Outperf
    SLB – Barclays raises pt to 55 from 51

    BJS – Wachovia cuts rating to market perf

  28. 28
    zman Says:

    Dow green.

    HK, NFX, LINE green.

    Also little KOG still trying to creep higher.

  29. 29
    choices Says:

    With apologies to Tater and Nicky, let me say that I in no way pretend to be a technician or chartist but I got this idea from another site over the weekend-it is a comparison of the $XNG and $NATGAS ratio-it appears that (with the exception of post-Jul08, when everything collapsed and kept on collapsing) as the ratio gets relatively high, two things could happen: the $XNG will fall or $NATGAS will rise. The $XNG has had a reasonable run and could correct but a quick look indicates that “usually” (and this is stressed), $NATGAS rises at extreme levels of the ratio, as is the case now.



  30. 30
    BirdsofpreyRcool Says:

    KOG — sure wish I knew the results from that Peak Energy well drilled in the middle of KOG’s acreage. Don’t think we will know the results from KOG’s first well for another week and a half or two. At the current 60 cents, KOG is priced more than fairly, for “prospective acreage on trend.” However, if the first well IPs at 1k or better, I think you buy the stock… it will be higher, but the acreage risk will be less. Still think the company sells/partners itself for somewhere between $1.25 – 1.50/share.

    This one is on a fairly short fuse… so, we will know the results soon. I own it, but don’t think I would buy new shares here, fwiw.

  31. 31
    choices Says:

    DO trades ex-div 29 Apr-it has declared a special cash div,as they did in previous qtr, for total of $2 per share-should indicate balance sheet strength.

  32. 32
    zman Says:

    Thanks Choices. The stocks in the XNG are a mixed bag as to their gassyness, some of them are distribution companies, some are E&P. In general, they turn up before the commodity does, time after time. In this case we are seeing several E&P names look to bottom and the XNG is about even on the year. Gas is now at 7 year lows. The gas directed rig count is now at 6 year lows. The stocks are front running the inevitable rebound in gas prices.

  33. 33
    zman Says:

    Oil pushing back up towards $50 as the market gets greener. Stocks still have that “I want to go green feel to them”

  34. 34
    zman Says:

    Choices – yes, that’s the best yield on a deepwater focused driller I’ve found. They have a somewhat unique structure for determining the dividend based on prevailing day rates.

  35. 35
    zman Says:

    Wow, Greg Noval leaves Canadian Superior, wild.

  36. 36
    BirdsofpreyRcool Says:

    SNG — pretty much eliminates any reason to own the stock, don’t you think?

  37. 37
    BirdsofpreyRcool Says:

    Credit rallying… albeit, quietly and with “Monday volumes.”

    IG 177 now

  38. 38
    BirdsofpreyRcool Says:

    SNG — just read a comment that said that with the CEO and COO gone, it “makes it easier to monetize the assets.”

    Well… that’s ONE way of looking at it.

  39. 39
    zman Says:

    BOP – yep, he was their wild card.

    BOP re 37, feels like we are stuck in a holding pattern, no data today so wait for tomorrow. When do they get the stress test results out the door?

  40. 40
    zman Says:

    Re SNG – that might get some interest from EOG and I still doubt it, but the overlap in Trinidad probably makes some sense.

  41. 41
    john11 Says:

    SD upgraded to Buy at Deutsche.

  42. 42
    zman Says:

    Thanks, John, did they give a target that you can see?

    Group looks poised for a run, SWN has cut the day’s loss in half.

    RRC – Wachovia cut rating to Mkt Perf, analysts are being quick to lock in small profits these days.

  43. 43
    zman Says:

    From Apache on CNG:

    Apache Celebrates Earth Day With New Refueling Station in Elk City, Okla. to Power Company Vehicles With Cleaner-Burning, Abundant Natural Gas

    Apache Corporation announced today that it has begun operating its first compressed natural gas (CNG) refueling station at Elk City, Okla., enabling the company to fuel field vehicles with cleaner-burning gas produced from the company’s wells in the Anadarko Basin of western Oklahoma.

    “With many people focused on Earth Day and ways to improve the environment, we are demonstrating that there is an abundant resource in this country – natural gas – that can provide a cost-effective means to reduce America’s dependence on imported oil and its emissions of greenhouse gases and other pollutants,” said G. Steven Farris, Apache’s chairman and chief executive officer.

    “Natural gas can provide an important bridge as other alternative fuels with lower greenhouse gas emissions become more economical to implement,” Farris said. “Using domestic natural gas makes sense because it creates jobs in this country and reduces our dependence on imported oil or liquefied natural gas.”

    A 2007 study of alternative fuels for vehicle use conducted for the California Energy Commission concluded that greenhouse gas emissions from midsize passenger cars fueled by CNG were 20-30 percent below emissions from gasoline-fueled cars on a “well-to-wheels” basis that takes into account emissions that occur as various energy sources are produced, transported, refined and consumed.

    The station has the capacity to refuel 100 vehicles per day. Initially, it will be used to fuel more than 40 Apache field vehicles that are being equipped to run on CNG. Apache is converting the gasoline-fueled trucks because no firms manufacture CNG-fueled trucks in the United States.

    “This is a small step; Apache is exploring ways to share the excess capacity at the Elk City refueling facility with other CNG fleet operators and build additional refueling facilities at other company locations,” Farris said.

    “The biggest obstacle right now is the lack of refueling infrastructure; that’s why we had to build our own station,” Farris said. “The private sector could build adequate infrastructure to fuel many of the nation’s public and private vehicle fleets, but policy makers will need to consider appropriate incentives to accelerate development.”

    Current federal and Oklahoma laws provide incentives for building CNG refueling stations, acquiring CNG vehicles and using CNG, but federal incentives are scheduled to expire at the end of 2009.

    Converting 10 percent of America’s vehicle fleet to run on CNG would have an immediate impact on greenhouse gas emissions and could reduce the nation’s bill for imported oil by $18 billion per year.

    About 120,000 CNG vehicles currently travel U.S. streets and highways, according to Natural Gas Vehicles for America, a trade group. There are about 1,100 refueling stations. For comparison, there are 250 million cars and light trucks and 120,000 gasoline filling stations across the nation.

    Worldwide, there are about 9.5 million natural gas vehicles on the road. In Argentina – one of Apache’s core areas – 1.7 million CNG vehicles comprise about 20 percent of the automotive fleet.

  44. 44
    BirdsofpreyRcool Says:

    Stress Test results made public on Monday, May 4th. Until I see the final reports, I will believe NOTHING I hear. There have been way too many “leaks” on this “Stress Test” that have just proved out to be, frankly, untrue. The only one I want to hear anything from is Geithner.

    From a Broker’s note this morning —

    Stress tests – where we stand and what’s next:

    · The Fed released its bank stress test criteria on Friday Apr 24 although the paper lacked a lot of the numerical specifics craved by investors (i.e., what are the specific charge-off assumptions being applied to loan portfolios, what are minimum capital ratios being sought after those losses are assumed, etc). The test “white paper” can be found here: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090424a1.pdf. The paper does start off with the following: “most US banking organizations currently have capital levels well in excess of the amounts required to be well capitalized”.

    · Some tidbits from the Fri White Paper: 1) regulatory financials will be considered for the tests (not the GAAP numbers that the companies provide to investors); 2) off-balance sheet assets will be considered – FAS140, which is due to come into effect in Jan ’10, is being considered in these tests….the Fed says bring all these off-balance sheet assets back on increases total assets by $900B (the Fed is using $700B); 3) new accounting changes around fair value accounting and mark-to-market will not be included in the more stressed scenarios (they can be included in the baseline forecasts); 4) tangible common equity will be emphasized.

    · Charge-off assumptions & capital – a few days ago, the WSJ has published what it says are the charge-off assumptions being used by the Fed, inc. two-year losses of up to 8.5% on their first-lien mortgage portfolios, 11% on home-equity lines of credit, 8% on commercial and industrial loans, 12% on commercial real-estate loans and 20% on credit-card portfolios; Reuters has reported that regulators are targeting a 3% TCE for banks after those losses are run through asset portfolios.

    · Counter-party risk and underwriting standards – press reports have indicated that Fed officials are also looking at bank’s counterparties as well as specific underwriting standards (so not every mortgage will be treated the same at each institution if one is deemed to have had tougher standards).

    · The next dates to watch: Bank execs met (are meeting) w/Fed officials Friday to discuss the results (the meetings took place in Fed regional offices around the country) to discuss the stress tests; banks will then have until Tues Apr 28 to dispute the test findings (NYT); Federal officials are preparing to disclose the final results to the public on May 4 (to the extent there is a capital deficit, a capitalization plan will also come out May 4).

  45. 45
    elduque Says:

    z- re SD: with the capital raise, I presume you can make the assumption that they will be able to weather almost any adverse scenario. Given that you agree with the former statement. With 6.00 gas and $75 oil – what do you think the stock would trade at.

    Thank you

  46. 46
    elduque Says:

    z-just want to let you know how much I appreciate all your work. The time you must spend and your input is invaluable to me.

  47. 47
    BirdsofpreyRcool Says:

    The latest GM offer to bondholders requires 90% of them to agree. I see just about a zero-chance of that happening. GM has been the poster child for a Chapter 11 since last November. Not saying it’s the best way… not saying it’s a disaster. But, it’s what Ch11 is step up for… taking a capital structure time-out while continuing to operate the assets. The major negative are the legal and advisory costs involved. But, just can’t see how GM can avoid it. Bondholders are too diverse a group (and some have hedged their exposure with CDS, so they possibly stand to make MORE in a BK than in a reorg).

    Anyway, stay tuned. But don’t be surprised if GM goes Ch11. It is NOT the end of the world for GM. It just sets a more controlled process in motion.

  48. 48
    zman Says:

    Eld- I think they will be an event driven stock for some time now. Events that need to happen to get the stock off the floor:

    1) Midstream JV, MLP or outright sale, my vote is on the first or last. See that happening any day to month now, sure to have done by end of 3Q

    2) Sale of E. Tx assets. They botched getting this done in a timely fashion. Now may have to sell on the cheap. Oh well.

    3) Gas prices need to come up to $5+ in 2010, good hedges, may monetize some if they come up faster.

    4) Testing of the less CO2 intensive parts of the WTO needs to continue.

    So it probably stairsteps then rests in between those events. Under your price deck they would be an easy double and probably a triple.

  49. 49
    zman Says:

    Eld – you are making me blush. Do raise a glass for my interns at Duke’s next time you are lucky enough to be down there at sunset. That is one of the few bars I would move into as a residence.

  50. 50
    zman Says:

    Got my head down in some research a little bit ago and completely forgot about the SII call. Will read transcript, was only going to listen there for color on activity and not as a play on the name.

  51. 51
    john11 Says:

    Sorry stepped out..I have no target info on SD

  52. 52
    zman Says:

    Thanks John, just curious.

    HK bumping around the Friday high.

  53. 53
    zman Says:

    Oil at 50.60, down $0.90. Very resilient feel there.

  54. 54
    BirdsofpreyRcool Says:


    · Equities to highs of the session, SPX +1pt to 867, after selling off at the open. Commodities are mixed (Crude -$50 to $50.98, Gold flattish at $911) on back of USD strength (DXY +0.5%), Treasuries are mixed w/front-end and belly slightly higher (10yr yield 2.98%) while the long-end is off 7/32nds of a point and credit is mixed (IG12 1bp wider to 175/177; HY12 dn 5/16ths to 75 9/16ths).

    · Market once again proves very resilient; headlines about swine flu, an unsustainable “junk” rally (in WSJ) and planes flying low over the Hudson all weighed on stocks at the open but as has been the case for weeks now, buyers are present on any meaningful sell-off and stocks rallied back into the green. Pretty quiet day as far as newsflow goes and trading activity also light; there is still a lot left to go in earnings, but investors for the most part have heard enough from the Mar-end companies and are shifting their focus into May/June (the Apr-end company reporting period kicks off next Wed w/CSCO). Best performing sectors in SP500 today are the relative safe-have Utilities (+1.6%), Health Care (+1.4%) and Consumer Staples (+1.2%) while Materials (dn 1.2%), Financials (dn 1.1%) and Energy (dn 1%) lag. Note – off of the swine flu media frenzy this morning our desk saw nothing but sellers of consumer discretionary names; however, it was interesting to note that most all of our sell side flow in those names came from long sellers taking profits after the tremendous run these stocks have had.

    · Program Trading Flows: Quiet start to the week on the program desk. Currently shaping up 1.2:1 better to sell. In sector flow, better to sell Industrials, Utilities, Financials and Info Tech. Better to buy Consumer Staples, Consumer Discretionary and Telecom. 21% of our flow concentrated in Financials, followed by 17% in both Industrials and Info Tech and 14% in Consumer Discretionary.

  55. 55
    elduque Says:

    Unfortunately Duke’s is on the other Island. Maui sunset’s are ok, however.

  56. 56
    elduque Says:

    RE SD- If they were able to do 1. Why did they raise capital?

  57. 57
    zman Says:

    Re 56 – just helping to tide them over until they get it done, not sure what current thinking is on pricing on that or any of their potentials.

    Mkt reversal in progress, does not look like it has panic written on it. Volumes pretty light into the morning in energy.

  58. 58
    zman Says:

    Also going to buy some VLO prior to earnings in the morning.

  59. 59
    Alhambra Says:

    aww… whatta guy!

  60. 60
    zman Says:

    A – wonder what the catch is; better not turn into an EPA Superfund site.

  61. 61
    elduque Says:

    re 58. Did you mean VO or VLO?

    What are your expectations for the latter? I am willing to play the game.

  62. 62
    zman Says:

    VLO, BACK IN 5

  63. 63
    Alhambra Says:

    Sounds to me like the US took a page out of Russia’s handbook for screwing foreign companies with environmental reasons to justify seizing assets and halting business. It’s about time he gave back some skin. why we let him save face is beyond me…

  64. 64
    zman Says:

    Ok on the VLO: 7 points

    1) margins have been weak appear to be stabilizing, even the diesel margins.

    2) VLO is trading at 6.4x 2009 and 5.1x 2010 estimates.

    3) expectations from the Street are very modest, so if they miss, it should not be by a lot. Kind of plays into the same kind of contrarian trading pattern of oil service, starting to discount

    4) they have plenty of cash, more liquidity available and little debt coming due soon. Don’t think they buying back shares now but it could become an option if they think we are on the road to economic recovery.

    5) they should talk about global refining capacity additions being delayed and canceled due to persistent pricing environment. This is especially good for them as the projects being canceled now are ones that handle medium and sour and heavier crudes, which their facilities have been designed to handle, which in turn means a little less demand for those crudes and therefore lower feedstock costs (that’s the theory at least) relative to the lighter sweeter crudes. This is more of a long term thought but they should be able to highlight on the call some big foreign delayed/canceled projects.

    6) they are the low cost producer in the group, so when margins are low, it makes more sense to run with the lowest cost name.

    7) good progress to date in the domestic refiners sticking together to curb utilization and stabilize prices…probably better than they expected.

  65. 65
    zman Says:

    HK flatlined vs the DJIA’s retreat over the last hour. I know I’m babbling about it but I find myself substantially overweight there right now.

    A ~ No doubt. Exactly. I guess they figure there is nothing to be gained by antagonizing him.

  66. 66
    zman Says:

    I will likely be at this mid May in Memphis if anyone wants a beer and some BBQ


  67. 67
    zman Says:

    HK through Firday’s highs, volume starting to pick up.

  68. 68
    nifkin Says:

    ML technicians saying that on the point and figure chart a move thru 23 on volume will create a buy signal with a target into the low 30s

  69. 69
    zman Says:

    LINE – working.

  70. 70
    zman Says:

    Nifkin – thanks much.

  71. 71
    zman Says:

    Natural Gas Imports Watch:

    Last week’s #s:

    LNG: flat at 1.4 Bcfgpd, up 0.3 Bcfgpd from last year.

    Canada: back down to 6.6 Bcfgpd, down 1.5 Bcfgpd from last year.

  72. 72
    zman Says:

    Every once in awhile, you spot one of those names that doing well despite the markets and which does not really retreat as the market suffers further losses. That seems to fit the bill for HK today. If the market makes another effort at green that could be enough to create Merrill’s volume spike and take the stock to at least $24 in short order.

  73. 73
    zman Says:

    Options waking up a bit on the HK, lots of volume today on the calls.

  74. 74
    kyleandy Says:

    trying to buy the HK 25’s at .55 no luck so far

  75. 75
    zman Says:

    Kyle – I’m thinking of lightening up into this rally. Maybe tomorrow just so you know, still down on my $25s, $24s and $22.50s working pretty well. I think at $24 to $25 UBS has a choice to make about taking their target up or downgrading the stock, just something to keep in mind, they are not an axe in the name but could give you another shot at an entry as their downgrade would only impact the shares for a couple of hours on an up day and only for the day on a down E&P day.

  76. 76
    tater Says:

    HK – nice call Z

    Duke’s – Though a tourist bar, probably one of the best I’ve been to. They just get it. (Last time I upchucked from drinking. Hopefully the last …)

    Choices – No problem ever on having differing ideas. As I always try to say, TA’s an art not a science.

    dog – expensive but happy day

  77. 77
    zman Says:

    HK – hopefully we can squeak out a little more there.

    Dukes – yeah, beautiful views, and the stuff outside the bar was cool too ;->

    Dog – hear ya there, vets can be expensive, wife ran over one of our cattle dogs a few years back (dumb dog, not her fault), and for a price, they said they could rebuild him, they had the technology.

  78. 78
    tater Says:

    Just a comment about CNBC vs Bloomberg biz, listening to both on the radio as I was driving. What a contrast, one is a big cheer leader (makes you think that GE has a vested interest in promoting the market….er….) and the other has us all needing to make out wills for the PANDEMIC!!!!!

    Maybe we need yet another biz channel. Or, I could just listen to music when I drive.

  79. 79
    zman Says:

    Tater – You probably already have but check out pandora.com.

  80. 80
    Sambone Says:

    By Gregory Meyer

    NEW YORK (Dow Jones)–Crude oil futures fell Monday on fears the spread of
    swine flu could compound a downtrend in global petroleum demand.
    Light, sweet crude for June delivery settled $1.41, or 2.7%, lower at $50.14 a
    barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures
    exchange closed down $1.36 at $50.31 a barrel. Brent settlement prices weren’t
    immediately available.
    Oil prices slumped as reported human cases of potentially lethal swine flu
    spread from Mexico, where the death toll has reached 149, to the U.S. and other
    countries. The widening exposure suggested travelers will stay home, and
    airline and hotel stocks came under heavy selling pressure.
    Oil traders braced for a further slide in jet fuel consumption. The European
    Union health commissioner, Androulla Vassilou, recommended avoiding
    “non-essential travel to the areas that are reported to be in the center of the
    cluster,” which would include much of North America.
    Cutbacks in international travel would further chisel away at world oil demand
    that the International Energy Agency already expects will fall by 2.4 million
    barrels a day in 2009, to 83.4 million barrels a day. Jet fuel and kerosene
    consumed by member nations of the Organization for Economic Cooperation and
    Development totaled 3.9 million barrels a day in February, down steeply amid
    the global recession.
    The oil-market impact of the viral outbreak is “probably not that
    significant,” said Kyle Cooper, director of research at IAF Advisors in
    Houston. “But in a market that’s already bad, it layers it on.”
    The flu outbreak recalled the Severe Acute Respiratory Syndrome, or SARS,
    epidemic. That health threat severely restrained air travel in Asia, reducing
    global oil demand by about 1% between April and June of 2003, analysts at
    JPMorgan said in a note.
    Incipient rallies have flagged as oil stockpiles sit at their fullest in more
    than a decade. In the U.S., analysts expect data due Wednesday will show crude
    stockpiles grew for an eighth-straight week in the week ended April 24. U.S.
    inventories are at their highest since September 1990.
    Goldman Sachs analysts said in a note Monday they see U.S. benchmark oil
    prices pulling back to the “mid-$40 a barrel range” in the near future to shore
    up demand and bolster the market.
    “The recent weakness in fundamentals has been substantial, with U.S. total
    petroleum inventories building counter-seasonally in the last several weeks to
    record-high levels for this time of year and implied U.S. total oil demand
    collapsing below last autumn’s lows,” Goldman said. The bank recommends selling
    U.S. crude for July delivery.
    Adding to Mexico’s troubles, the country was hit by a 6.0-magnitude earthquake
    Monday. The temblor was centered Guerrero, a coastal Pacific state. Mexican
    state oil company Petroleos Mexicanos is operating normally, a spokesman said,
    adding that the company is still checking for earthquake damage and it is
    premature to rule out any incidents.
    Front-month May reformulated gasoline blendstock, or RBOB, fell 3.88 cents, or
    2.7%, to settle at $1.4032 a gallon. May heating oil fell 4.54 cents, or 3.3%,
    to settle at $1.3229 a gallon.

    -By Gregory Meyer, Dow Jones Newswires

    Dow Jones Newswires
    04-27-09 1515ET

  81. 81
    zman Says:

    Interesting volume buying in HK no, today’s volume itself is nothing special but I’d chalk that up to the tone of the day.

  82. 82
    tater Says:

    Hadn’t seen that. Pretty cool, thanks

  83. 83
    zman Says:

    Tater – really cool thing is how it works using the radio genome to find music you like. Put in an 80s band for a station, then let it wander about.

  84. 84
    zman Says:

    Decided to wait until post results on the VLO calls.

  85. 85
    tater Says:

    No. You put in an 80’s band 🙂
    Admit it, you listen to Winger

  86. 86
    tater Says:

    OK, She’s My Cherry Pie has a ring to it

  87. 87
    zman Says:

    That’s Warrant, not that I would know.

  88. 88
    tater Says:

    I actually saw a guy with a mullet this past weekend. A real one.

    Market hanging on the brink of disaster. Somebody keeps throwing the lifeline.

    HK up into a channel line on the 60 min. You might get a rest soon there, but looks like it should continue higher after that.

  89. 89
    zman Says:

    ZTRADE: out 1/5th of my HK $24 May call position, for $1.00 on the mid, up 60% (basically just taking the profits off the table). I continue to hold HK May calls in the $22.50s, $24s and $25s.

  90. 90
    zman Says:

    Thanks T.

  91. 91
    zman Says:

    HK trying to close at HOD, 2009 breakout, lot of volume last hour, looks interesting on a 12 month daily chart.

  92. 92
    jat Says:

    Anybody see this / have an opinion? QBC seems to be pre-releasing a pretty solid CHK well:


  93. 93
    zman Says:

    SWN topped numbers easily.

    * 63.9 Bcfe on 1Q production vs guide of 60 to 61,

    * clean EPS of 0.36 vs $0.31 expected,

    * CFPS of 1.09 vs 0.85.

    * production guidance for 2Q to 4Q goes up

    * on the mid point, full year 2009 guidance up 3% to 49% over 2008 levels.

  94. 94
    zman Says:

    Thanks Very Much Bill for pointing out SWN as Reporting Today. I would have missed that trade without your noting it!

  95. 95
    john11 Says:

    Re SWN was surprised by small hedging differentials going forward, am i missreading this?

  96. 96
    zman Says:

    John – are you talking about the 25 cent basis differential mentioned beginning with 2Q?

  97. 97
    john11 Says:

    Yes i am, is that net of hedges or is that a positive thing as to smaller price differentials?

  98. 98
    zman Says:

    Its positive, they are making sure the local price to NYMEX price does not widen on them, they had been over $1 and I think almost $2 if memory serves at times during the last few months. So you lock in that price and then you have higher gas price hedges on the NYMEX.

  99. 99
    zman Says:

    Reading on they said that without hedges they would have gotten $1.08 per Mcf than NYMEX during 1Q. So we look at it as that number being $0.25 now, less fuel and transportation charges which are not that much and then the current hedges apply. So the new basis hedges will help them on roughly 2/3 of their gas production in Qs 2-4.

  100. 100
    john11 Says:

    Ok I understand, so they actually have two levels of hedging. One last question, why don’t they mention there overall hedges, or is that just saved for the 10Q or cc tomorrow?

  101. 101
    zman Says:

    John – good question, don’t know, maybe they don’t want to highlight they’re only half hedged on the year. (48% as of last check at prices > $8)

  102. 102
    john11 Says:

    OK, thx Z really appreciate all the info..look forward to the cc tomorrow. Have always liked the way these guys deliver in the production area qtr after qtr, impressive.

  103. 103
    bill Says:

    94 Np thanks Z

    I was blown away with swn production growth. If they could shut down for 1 year, they could solve the glut all by themselves.

    They had a 900 m non cash write down which will help dda by 40 cents going forward. Q4 they didnt have any write down of assets.

    Great execution by swn and i think i saw 12 days to drill a well..wow

    If and when prices go up…..

  104. 104
    Wyoming Says:

    It aint easy:


  105. 105
    Wyoming Says:

    Show me an operator focusing on EOR and I will show you the first one to short:


  106. 106
    zman Says:

    How about DNR

  107. 107
    zman Says:

    By the way, new post out on the SWN quarter, refresh browser.

  108. 108
    Wyoming Says:

    Scuttle butt is XTO to drop 3 to 4 rigs in the Barnett and Williams to go to 1. Barnett rig count already down 64% from peak. Gas prices dropped below $2 at the wellhead. Some amazing deals on some of the services, 50% drop from an already 50% drop in Coiled Tubing for instance. Hearing some stories on the pressure pumping side to drop a jaw too.

  109. 109
    zman Says:

    Just under 50% at last update (earlier this month), should be above $8.30 / mcf

    Next year not so much.

  110. 110
    zman Says:

    Thanks for the color re XTO and the Barnett, still don’t get why the OIH is so quick to look through the trough…think that’s a mistake. I hear many service management teams saying that the E&Ps are exaggerating the cost declines. I think they are going to end up eating those statements.

    Any idea if its 2 or 4 wells to hold a section in the Fayetteville? I can’t see how they’d get away with just one. Just wondering if at this pace (600 wells per year) SWN will get all of their acreage into HBP.

  111. 111
    bill Says:

    105 why?

    lol i just bought dnr

    oily name with hedges added to sp 500 and heavily hedged

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