Monday Morning – The Calm Before Another Storm of Earnings

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Good morning. Earnings season gets busier this week. I put out a few bullets below in the Earnings Calendar section for your perusal. These are brief thoughts so if you have questions, don't hesitate to ask.
And if you missed the weekend wrap click here.

FYI, Goldman raises the Coal stocks to Attractive this morning, focusing on (MEE) as their conviction Buy. Two things about this:

  • they've been negative on coal for a little while now and related the decline in coal prices to the decline in natural gas prices. There is a very strong correlation, especially over the past decade in the summer months between natural gas and coal prices. If they are warming to the coal stocks they must at least see coal prices stabilizing (for what that's worth)
  • I'd prefer to play and may for a trade (BTU) over (MEE). I think BTU is better positioned not only from a North American standpoint but certainly from a global one to take advantage of an improving global economy including a rebound in Chinese manufacturing (see bullet below on Chinese PMI).


The Week Ahead

  • Monday 5/4: Construction spending (forecast down 1.5%), pending home sales, President to speak on Business tax reform later this morning.
  • Tuesday 5/5: ISM Services
  • Wednesday 5/6: EIA Oil Inventory Report; ADP Employment (last time was - 742K)
  • Thursday 5/7: EIA Natural Gas Report; initial jobless claims, productivity, "Stress Test" results
  • Friday 5/8: Nonfarm payrolls, Unemployment rate, Average hourly earnings, Wholesale inventories

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Earnings Calendar - 1Q09 Week 3 - Busy, busy, busy
  4. Earnings Quick Thoughts For The Week Ahead
  5. Odds & Ends


Holdings Watch: The Wiki and $10KP tabs are updated.


Commodity Watch:

Crude oil rose 3% to $53.20 last week on the back of a stronger equity market, a weaker dollar, increased consumer confidence and the second bullet below. The 12 month strip is now valued at $58.41 and the chart of the front month now looks like this.  This morning crude is trading off about $0.50 on a stronger dollar.

  • Oil Chart Comment Watch: After looking at that chart link in the preceding paragraph, you might be tempted to think that's a setting up for a breakout. My sense is we are still range bound but that we may be set to stretch the top end of the range closer to $60. Pas
  • Survey Says Watch: A Reuters survey showed OPEC reduced shipments from March to April, implementing 84% of its agreed output cut. That makes 8 straight months the Cartel has reduced exports if not output.
  • China Watch: China's PMI rose to 50.1 in April, indicating the first improvement in manufacturing there in 9 months.

Natural gas rose 4% last week to close at $3.55. See the wrap for more thoughts on natural gas current prices. This morning gas is drifting down 3 cents after a stronger performance late last week.

  • Weather Watch:
    • HDDs of 47 vs 39 expected and 62 in the prior week. That's pretty mild for this time of year but demand you lose on the heating side may mean additional demand from cooling load elsewhere. This week the southern tier states will see highs in the 80s and 90s.

      • This week's forecast calls for HDDs to
      • HDDs will be next to unimportant in about a week 
    • CDDs of 20 vs a normal reading of 11.

      • Forecast for this week: 22
      • CDDs will be increasing in importance over the next month

  • Things We Expect To Hear CEO Aubrey Say On Tomorrow's Conference Call Regarding The Gas Macro:

    • In its first year, the average U.S. gas well declines 25%
    • "nearly half of U.S. gas production comes from wells drilled in the last 3 years"
    • "25% of production comes from wells drilled in the last year"

Some Earnings Thoughts This Week: (in order of appearance, just the ones I have anything at all to comment on and if I don't comment on a name and you want more, feel free to hit me up on it in the comment sections).

  • CHK - You got some splainin' to do!
    • Shareholder outrage over Aubrey's pay package at fever pitch, probably overshadows earnings
    • Guidance - probably stays intact in the near quarters and widens on the range for the year in light of the recent curtailment announcements
    • Should have more positive Haynesville news
    • Always good for gas market commentary
    • Stock remains cheap on P/CF, in line on TEV to EBITDA
    • I own some stock, no options at present
  • CRK - News time
    • potentially a miss on the quarter, depends on how well the analysts have accounted for basis, company is largely unhedged for NYMEX prices
    • people would like to hear they have upped their out quarter hedge position
    • well news:5 or more Haynesville completions could be announced
  • EOG - Least leveraged, gassy (but getting oilier) big cap E&P, lots of repeatable success
    • Always good for the North American natural gas macro talk alone
    • Will be interested to hear an update of operations in the Williston, and north Barnett as well as some of their other oil shale plays
    • Getting oilier, still no oil hedges in place
    • Trades at a slight premium to the group but given the lack of real financial leverage employed here, long reserve life, and strong, ratchetable acreage positions that's normal.
    • Holdings: Holding June 70 calls as of last Friday.
  • PQ
    • They pre-released production so a miss, if it occurs should be slight
    • I would imagine their conference call is somewhat uneventful as they remain in survival mode
    • Cheap, cheap, cheap, at 1.4x 2009 P/CF but the stock has recently come back from the ashes.
    • Holdings: I own a stock position here.
  • BGG - Rockies gas checkup
    • Highly hedged,
    • Rapid grower
    • Looking forward to a debottlenecking of gas coming out of the region later this year which improve what has been a really poor differential to Henry HUb.
    • Holdings: No position, just worth a transcript read
  • DSX - Dry bulk
    • Been away from the group for quite some time (looking at the charts that's been a good thing) and just looking to come back up to steam.
    • Holdings: No position at present
  • WRES  - California oil and Wyoming gas
    • I'll have a company snapshot out either today after the close or tomorrow
    • Holdings: Common stock and the June $2.50 calls
  • RIG - Deepwater 
    • Deepwater rates holding up pretty well
    • Fear factor in the group has been with jackups
    • Look for more guidance on newbuild delays and demand
    • Holdings: None at present.
  • HK 
    • Good chance we see a small CFPS beat here but not sure given the run that that will help without further operation pieces of eight.
    • They may have yet again stolen their own 1Q09 thunder with a operations update that confirmed strong production during the quarter and reiterated past guidance for the year.
    • It also updated drilling results in the Eagle Ford and Haynesville shales.
    • I don't think a deal is imminent as they have recently raised debt and equity but when do you with these guys.
    • Holdings Watch: Common stock, May call positions in the $24s (1/5 of original position) and $25s
  • DVN 
    • Don't own it, just want to read the transcript regarding what they have to say about their Gulf of Mexico deep tertiary program and their goings on in the Barnett. Would like to hear their read on how many wells are currently drilled but not completed.
  • APC
    • Good for the gas macro cap and the story
    • Holdings: No position at present, may get more interesting as they are leveraged but quite capable and leverage will play well as the credit markets defrost.
  • CLR - Bakken oil, Woodford Gas
    • time for drilling results
    • should hear about a favorable narrowing of the oil coming out of the Bakken relative to WTI (which gives them an outside shot at a beat.
    • This is one of the more oily names I follow and should benefit from the fact that analysts took oil price decks down faster than they did for their gassy peers.
    • Holdings: May 25 calls
  • GMXR - Haynesvill Player, big 3P future; currently in "go very slow" mode
    • Expecting news on 3 Haynesville wells (#4 - 6) ; need to see improved IPs on these wells (at least that's what the Street wants; double digits would be nice)
    • Looking for them to make their production guidance (anything north of 2.8 Bcfe) as they kind of flubbed the last quarter on the traditional to Haynesville production shift.
    • Looking for a bank line redetermination that stays flat
    • Looking for no increase in the 2009 capital budget, maybe a small decrease given where prices are that knocks the well count in the Haynesville for the year down by 2.
    • Holdings: a small common stock position, no options at present. Given the run the stock has had and where gas prices are I have two words for them: talk bullish. And beyond that, you better have bullish data to back it up. If they come in with non-wow IPs on those wells and a capex reduction I'll be talking a hard look at puts for a trade (but only after I see the data). 
  • PXP
    • One of CHK's partners in the Haynesville
    • I'll have more thoughts out on them prior to their release on Thursday
    • Holdings: No position
  • CLNE - Compressed Natural Gas
    • CNG is not getting political traction but it is winning the occassional fleet converstion
    • I listen every quarter, I think this is a later 2009 or 2010 story that could become quite interesting along with a couple of natural gas engine producers.
    • Holdings - None
  • SD - West Texas Overthrust player, eyes on the long term growth and the next Pinon look-alike
    • Potential for news on asset monetization: coin toss
    • Poor pricing, could see a bottom line miss, stock has discounted ho-hum results already
    • Holdings - small stock position in a family account
  • KOG - Its all about the well news
    • Intriguing micro cap Bakken player
    • Good acreage position
    • 2 wells with pending news
    • 2 more around the corner
    • Secondary stock offering around the corner as well to keep the lights on
    • Based on their acreage and a range of results scene in the vicinity I put their value at anywhere from toast (dry hole - a case we don't anticipate based on the rumor mill) and $3 (best of all worlds Pearshall field monster class wells.
    • Holdings Watch: none now, may take a little before the call then decide how to play with data in hand.




Stock a little later this week: PXP, WRES, and ROSE.

Odds & Ends

Analyst Watch:

  • Barclays cuts (CRR) target from $37 to $30.
  • (MRO) cut to Neutral at Credit Suisse. 
  • Jefferies cuts (RRC) target to $47 from $52, maintains Buy rating, raises (WLL) from $31 to $38, raises (DRYS) from $10 to $12.  
  • Goldman Sachs ups American Coal sector to Attractive. My play there would be (BTU); GS added (MEE) to their "Conviction Buy" list

157 Responses to “Monday Morning – The Calm Before Another Storm of Earnings”

  1. 1
    bill Says:

    PXP doesnt use hedge accounting but has great hedges..for instance 150,000 mbtu’s at 10.00 about 90 % of production.

    In the past, when they reported , they report revenue EXCLUDING IMPACT OF HEDGES and show a gain below the line in Mark to market gain in derivatives which many people exclude in operating earnngs which causes them to say they missed on earnings est of 25 c and reported a loss

    Ive noticed analyst’s include in the price deck REALIZED PRICES in revenue and earnigs estimates. Barclay has ng in the 7’s

    They also cashed out of some hedges near the low in oil in early march

    so i look for an operating loss but offset with hedge gains and if you exclude gains from hedges some might conclude an earnings miss

    Volumes will be 80,000 mboe per day vs q4 93,000 mboe as they sold properties at ye 2008

    SWN included hedge gains when reporting earnings realized prices on a pro forma basis

  2. 2
    BirdsofpreyRcool Says:

    z — thank you for the comments and earnings previews. Very helpful!

    Weird that Goldman would pick MEE as their horse to win the coal derby. There is an awful lot of unique risk to that company that just looking at relative financial metrics does not pick up. BTU seems to be the sane person pick… unless GS has been engaged by someone to do something with/for MEE.

    Credit comments follow…

  3. 3
    bill Says:

    on chk

    they should have a new outlook

    there is no way they can hit the cash flow/ ye cash balances they had which assumed for the full year asset sales

    so i expect them to have good news somewhere, which might be haynesville results

    it will be interesting to see if Aubrey address his pay issue head on

  4. 4
    BirdsofpreyRcool Says:

    Credit is indeed improving. While the highly-leveraged guys (the high yield market) is just beginning to show signs of cracks in the ice, investment grade saw a fairly rapid thaw, just last week. Investment grade bond spreads have tightened back to their pre-Lehman Detonation Level. While that is still far from “healty,” this noted improvement will hoover more money into the sector, causing spreads to tightened still further.

    We at the z-Board are looking for 150bps on investment grade spreads, in order to breath a sigh of relief. We continue to inch in that direction.

    US Treasury bonds continue to fall. But in a “good way.” Investors are selling USTs in order to buy risk product (corporate bonds). We can also tell this b/c the spreads on the TIPS bonds have not changed, so the outlook for inflation has not ratcheted up. This is a normal progression as we begin to leave the cave (selling safety) and try to stand upright (buying investment-grade bonds). When we feel confident enough, we will pick up our spears and go hunting. That is when the high yield bond market will take off.

    I still believe there are more jobs to be lost and the consumer will settle out at a new, lower level of consumption. We have yet to find that equilibrium. But it will result in new winners and more losers to come. So, no one is ringing the “all clear” bell on the stock market… but, careful stock-picking, Washington policy-watching, some swing-trading, and keeping a little cash on the sidelines (as dry powder) seems to be the order of the day.

    Thoughts on that, anyone?

    Meanwhile —

    IG 164 -1.5 bps from Friday’s close

    HY 79.25 about unch’d

  5. 5
    bill Says:

    The pos needs daily tv exposure

    todays mission more taxes for evil corporations. Oracle doesnt like it lol big supporters of DEMS with Gore on their board. I guess they didnt get the payoff they expected on their investment


  6. 6
    bill Says:

    oops meant to say POTUS

  7. 7
    tater Says:

    If you don’t get enough of him on TV, now you can put him on there yourself.

  8. 8
    BirdsofpreyRcool Says:

    bill — thanks for your hedging comments on PXP. You would be surprised how many people (both buy- and sell-siders) don’t understand hedging and the implications. I could use a better education there myself. Keep ’em coming.

  9. 9
    zman Says:

    Gotta miss the open, back in 20 minutes.

  10. 10
    PackMan Says:

    BOP – I am not a bond guy; but generally agree w/ your economic take. Buffet on TV this morning doesn’t see much economic improvement in his businesses and doesn’t see recovery for “a few years”.

    I still think this “rally” in equity markets is bogus; partially short squeeze driven; and on low volume.

    Beyond that, just trying to stay flexible.

    Excellent comments Friday BTW on Chrysler situation.

    Z – HAL, you were way negative on this when 16-17; meanwhile it powers up relentlessly … 21.25 pre market. What is your take now ? Why are these names running if its fundys are so terrible ?

    Then again; I could ask the same question of lots of bank, retail, tech and other names …..

  11. 11
    BirdsofpreyRcool Says:

    Wyoming — saw your additional well completion comments late last night. Thank you so much for trying to fill in my vast void on the engineering side. Extremely helpful. thanks!

  12. 12
    zman Says:

    Back in the office, greener than I’d have thought, nice turn up in oil despite the dollar but I see dollar has dipped from pre market. Nice to see NG go green too.

    WRES – wow.
    PQ – double wow.

    Re HAL – The analyst crowd for the service names are looking through the trough and towards cost reductions to save the day later this year. I think they are early and these pull back this summer unless natural gas really bounces. I think rigs will go lower and stay lower than most of the service analysts now think. Valuations have gotten pretty stretched when you look at 2010 being down from 2009.

  13. 13
    zman Says:

    Also on HAL, I said in the 17, 18 range, about 2 weeks ago, I would not fight the tape there. Still not feeling like I gotta short it although some pretty smart TA types I know thought it was good to go to the downside around $20.50. And now its at $22.

  14. 14
    Nicky Says:

    Morning all. 904 in SPX should be a brick wall.

  15. 15
    BirdsofpreyRcool Says:

    Pending home sales and construction spending came in very positive (vs expectations)

  16. 16
    Nicky Says:

    The market is massively overbought but has been for several weeks now.

  17. 17
    BirdsofpreyRcool Says:

    Pending home sales up 3.2% MoM (for March) and Construction spending up 0.3% MoM (for march also). Vs expected 0.0% and -1.6%, respectively.

  18. 18
    Nicky Says:

    Oil needs to get above $55 to signal a breakout.

  19. 19
    zman Says:

    Nicky – I was thinking we need a trade at $56 to really start something new, could see that this week. We are setting up on the fundamentals for a reduction in crude stocks in the next few weeks, at least in the U.S.

    Fair warning, I’ll be taking some more profits this morning, no sense looking a gift horse in the mouth, time for me to be more cash rich, striking on post earnings opportunity with light positions going in. May calls need to largely go away this week.

  20. 20
    ram Says:

    Nicky – If 904 is the wall, where is 1st support after sell off? Should the next rally have higher highs?

  21. 21
    choices Says:

    Something going on with uranium, CCJ up about 32% since 20 April, wallowed around mid to high teens for months, now at $25.70

  22. 22
    Nicky Says:

    Ram support at 857,850,823,800,780.
    Yes I don’t think the highs will be in and we will only see a correction. Could be sharp and fast though.

  23. 23
    ram Says:

    Thanks Nicky.

  24. 24
    zman Says:


    $10KP – HK – Sold the HK $24 May Calls HKEO for $2.25, up 269%. Offering the $25 calls as well. Will reposition into longer dated calls next day or so.

  25. 25
    PackMan Says:

    12 – thanks Z

  26. 26
    zman Says:


    Sold half (10) of the CLR May $25 Calls for $2.10, up 106% to my average cost. I may add more June calls here before earnings on Thursday.

  27. 27
    BirdsofpreyRcool Says:

    For anyone with access to Bloomberg’s on-line interviews, there is a discussion with bank analyst, Dick Bove, this morning that is just priceless.

    Basically: The Stress Test is the worst idea the US Treasury ever had… going all the way back to Alexander Hamilton.

    The Govt doesn’t know what it is doing.

    The focus on TCE is just the “flavor of the day” and means nothing.

    The BIS (bank capital) standards were ratified by 95 countries (including the US) to govern bank capital… and they do NOT include TCE (which has no definitive meaning, by the way).

    By law, the Treasury has never released the financial strength/weakness of any individual bank… for obvious reasons.

    The Treasury is using the WSJournal to float various trial balloons in the whole topic. No one knows what they will really do.

    The govt is being disingenous with respect to the stress test… if the current govt budget is based on 3.2% growth rates in 2010, then the bashing they are giving banks right now is completely unwarranted.

    Dick is a plain speaker. I agree with his comments.

  28. 28
    ram Says:

    ZMAN – You still have some SWN MAY 40’s?

  29. 29
    zman Says:

    Yep, half position (14) contracts as we speak, you want em?

  30. 30
    zman Says:

    Guess not, they’re offered at $1.75. Plan to roll into later month contracts in a few days. Anyone have gas daily handy, my source is slow this am? Looking for last weeks LNG send out volumes and Canadian gas imports.

  31. 31
    ram Says:

    No, I get the message.

  32. 32
    zman Says:

    Ram – just gapped up, felt like a good time to get out for all I can and then roll longer on next big red day. For you I’d let em go for $1.65.

  33. 33
    bill Says:

    Trivia question for you energy buffs

    when was the dept of energy established and why?

    any guesses

  34. 34
    zman Says:

    Carter, high gasoline prices.

  35. 35
    bill Says:

    I agree the stocks are getting ahead of themselves.. i took some profits too

  36. 36
    zman Says:

    EOG at $70. I would sell half had I bought more.

  37. 37
    zman Says:

    Re 35. To be clear, I think the move they have had is a bit extended. But they were extended to the downside as well.

    Valuations in the E&P realm are not stretched.

    Costs are coming down.

    I see higher lows, and then higher highs for the group.

  38. 38
    rseidman Says:

    Z: Your thoughts on buying UNG, please.
    I’m looking at June calls

  39. 39
    zman Says:

    I don’t like UNG as a trading vehicle for natural gas. I prefer gassy names. If you are looking for a call on natural gas I wrote this over the weekend which I’m sticking with:

    Natural Gas Stops Falling. At least for the week. This looks like bottoming action to me. Is this the turn to higher prices? Probably not yet but the shorts are clearly watching the month supply numbers as well as the weekly imports data and the still declining rig count with increased trepidation. Although I still see talking heads say “its going to 0′ I have to feel they are talking their book.

    * Storage is bloated, well known and we are going to get exceedingly “full” by the end of summer.

    * February supply data provided little on the surface for the bulls to jump up and down about as a recovering Gulf of Mexico masked a third month of declines from what has been a key production driver, Texas.

    * Gas rigs are down 50% from a year ago and down 45% year to date. This means most of the damage done by the drop in rigs has not begun to be seen in the production numbers.

    * People in the know are now talk a low 600 number for the trough

    * One of the things that has supported service is the expectation of a quick bounce; that illusion is starting to fade with the realization that without significantly higher prices, sustained for several months, the E&Ps are not going to come to the party.

  40. 40
    zman Says:

    Hey BOP, any HT or TT comments today?

  41. 41
    bill Says:

    33 and 34

    The ‘Department of Energy’ was instituted on 8- 04-1977
    Hey, pretty efficient, huh?????
    AND NOW IT’S 2008,
    31 YEARS LATER …


    Ah, yes, good ole bureaucracy..

  42. 42
    bill Says:

    John Harwood of CNBC should be Obama press secretary

    He does a great job being his mouthpiece

  43. 43
    zman Says:

    Bill – they are taking the budget up by between 5 and 10% next year.

    From my April 1 post (and this was not a joke)

    Your Tax Dollars Hardly Working At All Watch: The EIA put off the release of its natural gas monthly for the month of January from yesterday until Friday which means I’ll likely have my slide show, with integrated rig counts available for next Monday’s post. I wonder if the issue is lack of funding? The annual budget of the EIA is $95.5 million. 50% of the budget goes to pay 374 federal employees or an average of $128K each. Another 42% goes to pay 250 consultants who make an average of $160K each. Nope it’s not funding.

  44. 44
    choices Says:

    I may be wrong on the possible imminent downturn but the VIX does not show any sign of moving up, today at 35, down a tad. I would expect it to start moving up if traders are getting nervous.

  45. 45
    BirdsofpreyRcool Says:

    z — HT and TT are still on a golf course… somewhere in the wilds of Florida. Back tomorrow.

  46. 46
    kyleandy Says:

    z thk bop said fri ht and tt out today

  47. 47
    BirdsofpreyRcool Says:

    kyleandy — thank for the assist! 🙂

  48. 48
    zman Says:

    Credit Suisse takes RRC up a couple to $46. Chart there looks a bit different than most of E&P. Highly hedged this year, little to nothing next year, low double digits, gassy grower.

  49. 49
    PackMan Says:

    bill 42 .. so true. Funny thing is he thinks he is objective.

  50. 50
    zman Says:

    Nice bid up on the front month WRES calls.

    ZTRADE: $10KP – Added (25) November WRES $2.50 calls (QQWKZ)for $0.60 with bid/ask $0.55 x $0.80. Last little piece before earnings later this week unless it weakens considerably. I hold a little of the common and some June $2.50 calls here as well. Not expecting a big beat with earnings, just forward progress.

  51. 51
    BirdsofpreyRcool Says:

    Carrizo Oil & Gas expands borrowing base (15.18 +1.22)

    The company announced that its bank syndicate approved a $40M borrowing base increase to its secured credit facility, raising it to $290M. The existing bank syndicate also agreed to increase their credit commitments to the new borrowing base from $250M to $259M. Accordingly, several new banks have been invited to join the syndicate to provide commitments for the balance of the borrowing base increase. These banks are currently engaged in a review process that the company anticipates will be completed in the next 20 to 30 days, after which the company expects some of these banks to join the consortium.

  52. 52
    BirdsofpreyRcool Says:

    IG index hugging both sides of 160

    IG 159 bid / 161 offered

    (I always quote the offered side on this board, as it is more conservative)

  53. 53
    zman Says:

    BOP – thanks for 51, that kind of action given where prices are will give heart to many a small and mid cap E&P investor.

  54. 54
    BirdsofpreyRcool Says:

    Why is Timmy Geithner’s talking about hiring more IRS personel to detect “people who don’t pay their taxes” not being laughed off the edge of the world?

  55. 55
    zman Says:

    Dunno. Why don’t I send in my data and they send me a bill. Instead we play this guessing game with the possibility of claw backs with penalties if I miscalculate what they think I owe going years back. Now that’s just stupid. Been that way forever of course but it gets worse each year.

  56. 56
    zman Says:

    But BOP, your point is well taken, he cheated until he wanted a better job. Or was he just confused on what to pay, lol?

  57. 57
    Jay Reynolds Says:

    WYO head-scratching note:

    Out in the field today and pleased to report an interesting discovery. I’ve been playing for a couple of years looking for a cheap way to radically lower the viscosity/raise the API gravity of my 21 API crude. Didn’t have the money or the pressure for using CO2, didn’t have a source of nitrogen or “rich gas” aka flue gas.

    Began a trial using casinghead (condensate) vapor pressurized for injection with no energy input. Appeal of that method was that the vapor is miscible with my crude at STP (standard temperature and pressure) so it stood to reason that it would work at reservior temp and pressures. Voila… production rate w/ portable production system sampling output from a well nearby the well treated was up 5X due to oil being radically thinner. Gravity much improved and I know from prior experience that the thinned oil sells just fine.


  58. 58
    zman Says:

    Watching the group work sideways from the morning highs with the exception of RRC which continues to run. Those are Mays and I am likely to reposition in the next day or two. As it walks up, the chart improves vs a little gassier (in terms of production and reserves) peer like SWN which looks a bit extended on a chart. SWN is through Tater’s $39 strong resistance point but not by a lot.

  59. 59
    zman Says:

    JR – so you are reinjecting the gas and getting 5x production increase in the nearby, well, in communication with this one?

  60. 60
    Gtinvest Says:

    hello to all: you guys are great, by the way Pxp (which I have followed since 2003) Soros fund announced a 5.38% stake. Imo explains above normal volume since completion of secondary.

  61. 61
    zman Says:

    PXP Comments from a friend of friend who has been around the story for quite some time:

    This analyst has followed PXP since it was spun out of Plains Resources and has as good a handle as any on the numbers.
    Cash flow projections show good number but not sufficient in a poor pricing environment to develop aggressively Gulf Discoveries-assuming there are more–and Haynesville.
    Flores has sold Gulf discoveries before-getting PV of discovery and not waiting for value added from production. But in this environment the price may not be there to make that attractive and it may not be a certaintly. I think equity was for additional flexibility knowing that they cannot count on banks for funds as they could have before.
    Personally I don’t think the s tock here reflects the potential and in fact I bt. a bit more yesterday.

    The Raymond James presentation is different enough with more gulf maps from the Howard Weill so that it is worth reviewing both.

    I see “green shoots” of the psychology bottoming out for domestic E&P and some starting to position themselves for the net cycle. Rig declines have been fast and continue and prices for services are coming down. PXP will be reporting mid week and in conference cal will no doubt update its prospects. MMR the operator of most in gulf may issue own release–should be results from Flatrock #5 and maybe more. I would not hesitate to speculate on MMRW here based on news potential or buy PXP as an investment.

    Keep in mind however that PXP will probably have some nat gas reserve writedwons in Q because of price. They are not overly optimistic re there reserves most or all of which are audited by others as well. & Lehman analyst is a professional. The APA comments about gulf production re shale sharp declines is accurate for this sort of environment.

  62. 62
    zman Says:

    Bill – from your earlier comment, I don’t see how Aubrey doesn’t take a timeout on the call to address his pay package. It’s a distraction and its possible the Q&A will be heated. It may put a governor on positive results but not keep the stock out of the green on the day or thereafter.

  63. 63
    Nicky Says:

    Tim Geithner has the nerve to talk about cheating on taxes – only in America!

  64. 64
    zman Says:

    Natural gas import numbers are out:

    LNG rose to 1.6 Bcfgpd last week from 1.4 Bcfgpd in the prior week and 1.1 a year ago. This is the highest level since August of 2007.

    … but …

    Canada fell to 6.1 Bcfgpd, from 6.6 Bcfgpd last week and 8.1 Bcfgpd last year. This is the lowest level I recall for Canadian imports. Will go back into my long term data to see how far back it was last time we saw this. Main point is, LNG will have to rise quite a bit to offset this decline. Second point is that Canada has suffered weak rigs counts for awhile and production is falling. Their storage is high but prices in the states are not enticing shippers to send gas south of the border. They are a bad winter or two away from a real problem without sustained higher gas problems. Makes me want to take better looks at ECA and TLM, maybe NXY as well.

  65. 65
    Nicky Says:

    Regulators advise Wells Fargo to shore up their balance sheet. So much for Buffett’c comments over the weekend.

  66. 66
    zman Says:

    One thing I still note in reading the gas analysts out there is how hung up on the LNG story they are relative to gas prices. I see little mention of the Canadian angle. That will change if gas shipments from the north stay in the 6 Bcfgpd range for long. One possible cause is the Sable Island difficulties XOM was having, but last I they were back up and running.

  67. 67
    zman Says:

    GMXR moving on the CRZO news re bank lines. Got to be. That and probably speculation about those 3 wells they will have out later this week.

  68. 68
    PackMan Says:

    Nicky ! ROTFLMAO on Timmy.

  69. 69
    zman Says:

    CRR – Does anyone see any news on CRR aside from the Barclays target chop from $37 to $30. Stock up $3.50, 12.5%, may be my chance to get puts.

  70. 70
    Dman Says:

    Z – I’ve been thinking about how the redets haven’t been as scary as expected. I wonder if it boils down to this: if you were a banker, who would you lend to in this environment? A retailer or an E&P with guaranteed cash flow? What other businesses look as safe a bet just now?

  71. 71
    bill Says:

    gmxr move over the last month is amazing to me

  72. 72
    zman Says:

    Me too, glad to own the stock, bricked by days with last option expiration. There is a lot of value there. With this run though, the stock will be in put up or shut mode for earnings later this week. Better be some good completions.

  73. 73
    zman Says:

    … as they are essentially a one shale pony.

  74. 74
    zman Says:

    Bill – a lot of these got so overdone on the downside that the moves up seem great. Until you go back and look at one the long term holders have endured. Case in point, PQ.

  75. 75
    zman Says:

    and SD, WRES, the list goes on and on.

  76. 76
    Jay Reynolds Says:

    Yes, will respond to you via email in more detail. But we don’t produce gas so we have no condensate. I have to buy it.

  77. 77
    zman Says:


    I look forward to the email. Gangbuster return. Was wondering a few things.

    Ok, thought you had the gas in the hole, gotcha. Well, at least for now that would be a pretty cheap operation.

  78. 78
    choices Says:

    It would be interesting if someone could construct a “hypocrisy meter” and post it in the corner of the cable “news” shows when the buffoons from both parties and the admin and congress speak-of course, it will never happen but the level of hypocrisy and irony is at nauseating levels in Wash-unfortunately, it seems that the politicians’ assumption that they can fool the press and the public most of the time is true or at least lull them in inaction-no accountability or responsibility.

  79. 79
    RMD Says:

    re 78 hypocrisy meter might be good on CHK conf. call also.

  80. 80
    bill Says:

    >Flores has sold Gulf discoveries before-getting PV of discovery

    yes they sold a discovery to statoil for 800 m in 2006

    MMR and PXP both hinted that they wanted to find a partner or someone to sell the gom discoveries too.

    In PXP case, they are drilling deeper in the freisan to see what they really have

    The cash that they raise covers all of their haynesville carry for this year and still have 0 drawn on 1.3 b bank revolver

    if they can sell something for 500 m they have next year carry covered or they can bail on the last 10 %

  81. 81
    Dman Says:

    Z – maybe VTZ can weigh in on this, but my understanding is that NG is priced way below where it makes any sense for most Canadian outfits to drill. So I guess they just aren’t drilling & the export declines are the obvious result.

    As for LNG: anyone know what current Japanese pricing is?

  82. 82
    jat Says:


    Crr initiated buy at morganstanley

  83. 83
    bill Says:

    crr has been buyng back shares and has no debt , alot of cash and a good product

    their sales and earnimgs will fall as drilling activity declines but they will make money

    sooner or later someone might dwsn also conservatively managed

  84. 84
    zman Says:

    Dman – the economics are poor up there too. They are drilling and the rig count works differently as they have environmental issues (frozen ground ok to drive over, muddy ground not so no drilling during parts of spring and fall) so you have to be careful about looking at their rig count at a point in time. But yes, prices are too low to support big programs and production from the WCSB (Western Canadian Sedimentary Basin) which is their major producing region is falling , has been level or falling depending on the year for some time at last check but I don’t pay Alberta to find out (that’s one good thing about the EIA, data is there for anyone to see free of charge). Anyway, their storage is fairly full as well but production is down and will go lower so that a temporary thing. Also, they have a source of demand the U.S. doesn’t – oil sands which has been taking some volumes away from the pipelines.

    Japan – its more of a contract market than a spot price influenced market. They are taking less volumes this year due to the weak local economy. Kind of hard to tell how much as some old contracts have been canceled while new LNG production is heading their way. Net, net, they will consume less which leaves more for the rest of the world. However, with weak prices in the U.S. and storage heading toward full, LNG will have a hard time crowding into the U.S. at the feared levels as prices would falter further.

    Jat – bless them.

  85. 85
    VTZ Says:

    D – Nobody is drilling in Alberta because the differential to market is too large and the price is too low for conventional wells.

    The only things making sense are the Northern BC Montney shale plays because of the rates.

  86. 86
    zman Says:

    Thanks JAT, so Morgan likes CRR as a long term play and a short term short squeeze. Hmmmm….

  87. 87
    BirdsofpreyRcool Says:

    2009-05-04 17:25:10.914 GMT

    saw this headline on bloomberg… anyone have a link to the letter? should make for good reading.

  88. 88
    zman Says:

    re 85 – BC, Horn River Basin. Which is where EOG is testing the shale with horizontals in a large acreage position. So far so good, they think they are on to 6 Tcfe reserve potential.

  89. 89
    zman Says:

    Things getting a little nutty out there but at least in the right direction.

    WRES up 29%

  90. 90
    bill Says:

    i saw it last week
    here is the link


  91. 91
    VTZ Says:

    Encana and Shell are also a large holder of land there. Encana seems to be in all the sweet spots similar to a CHK.

  92. 92
    BirdsofpreyRcool Says:

    KOG down today… apparently we heard about the pending stock dilution before a lot of other people did. They are making the rounds now, drumming up interest. Want to have it priced and done b/f their earnings conf call Friday morning.

    Frankly, this stuff is supposed to be “confidential”…. but as this stock has moved around so much on leaky news, I think it’s only fair to let people know what is going on.

  93. 93
    bill Says:

    there must be one helluva a shortsqueeze going on

    pxp up almost 20% in 2 days

  94. 94
    BirdsofpreyRcool Says:

    #90 — thanks, bill.

  95. 95
    zman Says:

    Yep, big short names up 20+%, other E&Ps on up 12 to 15% lol.

  96. 96
    zman Says:

    The trick is not to overstay the party.

  97. 97
    VTZ Says:

    I feel like a sucker for mostly sitting this one out… again.

  98. 98
    BirdsofpreyRcool Says:

    High Yield CDS index getting a bit of a lift here…

    HY 79.75 almost back up to that 80-handle… want to see this back at 85, to put some support under the stock rally.

    Nothing goes up in a straight line. Although, sure felt like it went down that way.

  99. 99
    choices Says:

    VTZ-it could be worse-I’m sitting with a ton of covered calls which are waaay under water-“maybe” I break even.

  100. 100
    Dman Says:

    BOP – any comment on my #70?

  101. 101
    choices Says:

    bkx up 8%-this is a total mystery

  102. 102
    choices Says:

    we must be near a top-saw on another site that abbey cohen and elaine garzarelli are prognosticating (again)

  103. 103
    BirdsofpreyRcool Says:

    Dman — by George, I think you’ve got it!

    Energy companies are 1) making their interest payments from free-cash flow; 2) have already written down hard assets on their books; 3) are not as leveraged this time around; 4) are able to issue stock and debt in the public markets (albeit at still wide spreads); 5) for a large part, capex is discretionary (not mandatory); 6) are the one-eyed Kings in the Land of the Blind right now.

    I think there are also reasons 7,8,9,…. 20 for banks to prefer to lend to energy companies… but that’s a start.

    Oh yeah… and if an energy company gets into financial distress there is pretty much a snowball-chance-in-hell chance that Obama steps in and leads the charge for unsecured worker’s over the priority claims of secured lenders.

  104. 104
    BirdsofpreyRcool Says:

    Dman — in addition, banks have been able to increase their fees on bank lines, with the redeterminations. Energy is one of the few areas that can afford to pay higher interest without totally tanking the operations. So, it’s a profitable area for banks to lend… borrow from the Fed at 25bps, lend to E&Ps at LIBOR + 250bps (about 3.5%)… lever that 6 times. Nice business. Offsets some of the stink coming down the road from the consumer and commercial RE.

  105. 105
    zman Says:

    Ram – you should have taken those for $1.65, lol. I’m biding my time, probably punt remaining SWN on open tomorrow.

    NG up 17 cents now at 3.73, strong work, no real driver outside of the equity markets, the move in crude over 54, and the fact that gas is just about the worst performing commodity year to data and especially TTM.

  106. 106
    zman Says:

    From 104:

    “Energy is one of the few areas that can afford to pay higher [blank]”. Survey says … taxes. Interest and fees too.

  107. 107
    zman Says:

    EOG up nearly $5 with earnings in the morning.

  108. 108
    BirdsofpreyRcool Says:

    z – #106… guess “energy” is the new “tobacco,” eh?

    talk about the stink coming down the road…

  109. 109
    zman Says:

    BOP – no doubt. I’m getting that creepy feeling of complacency with some of the gains I’m seeing. That has always a reason to take profits.

  110. 110
    zman Says:


    Reducing MAY Call Exposure

    RRC – Sold the 10 $42.50 calls taken last week for $2.45, up 242%.

    SWN – Sold the remaining 14 $40 calls for $1.90, up 273%.

  111. 111
    BirdsofpreyRcool Says:

    z — #109, I’m with ya. I have found that if one checks one’s PA more than 2x a day… and keeps hitting the “refresh” button… it’s time to take some off the table.

    This time could be different. But that would be a first.

  112. 112
    BirdsofpreyRcool Says:

    What Obama is doing in the Chrysler BK case should scare every private citizen in this country. Instead, you will hear very little about it, from the popular press. People like Warren Buffet and George Soros should speak out on this. This is blatant illegal seizure by the President of private property. By LAW, secured lenders are paid off in FULL before unsecured claims are filled. In practicality, secured lenders usually give somewhat… but lending LAW has been turned on it’s head by our own President. Even worse, this President has vilified lenders (and made them public targets) for merely standing up for their rights!! Everyone should know what is going on here. Ignorance is dangerous.

    Chrysler Non-TARP Lenders Object to Auction Plan (Update3)
    2009-05-04 17:59:50.288 GMT

    By Christopher Scinta and Tiffany Kary
    May 4 (Bloomberg) — A group of Chrysler LLC’s secured lenders is seeking to block the bankrupt company’s plan to sell its business at auction this month, arguing that the U.S.
    government is violating federal law in order to preserve the automaker.
    The group, calling itself Chrysler’s non-TARP lenders, in reference to the Troubled Assets Relief Program, seeks to block the proposed sale to an alliance led by Fiat SpA, as well as a request by the U.S. automaker for approval of a $4.5 billion Treasury loan to finance the reorganization. The group said secured lenders who agreed to the Fiat deal, such as JPMorgan Chase & Co., Citigroup Inc. and Goldman Sachs Group Inc., were conflicted because they had also accepted TARP funds.
    The process is “tainted” because it was dominated by the government, the lenders argued in papers filed today in U.S.
    Bankruptcy Court in Manhattan. The group also said the short period of time given to evaluate the sale was improper and the hearing on bid procedures that began today should be delayed.
    The judge delayed the hearing until 2:30 p.m. tomorrow, ordering the members of the lender group reveal their identities.

    ‘Improperly Attempts’

    The sale “improperly attempts to extinguish their property rights without their comment,” attorneys for the objecting lenders wrote in court papers. “The sale motion should be denied because it seeks approval of a sale that cannot be approved under the bankruptcy code,” they argued, adding “The court should not permit a patently illegal sales process to go forward.”
    Chrysler’s planned alliance with Turin, Italy-based Fiat, would create the world’s sixth-largest carmaker. Chrysler, based in Auburn Hills, Michigan, wasn’t able to pursue the merger outside bankruptcy because of opposition by the objecting lenders.
    Under bankruptcy law, offers for bankrupt companies or their assets are generally subject to the possibility of higher bids at a court-supervised auction.
    The Fiat offer, to be made from an as-yet unnamed entity formed by the Italian automaker, Chrysler employees and other parties, will be the lead bid in an auction, which is typically required for assets sold in bankruptcy. Chrysler is asking U.S.
    Bankruptcy Judge Arthur Gonzalez to approve bidding rules for an auction which would require creditor objections to the sale be submitted by May 11, followed by a May 15 deadline for competing bids. The bankrupt company seeks a May 21 hearing to approve the winning bid, according to the court filing.

    Listed Assets

    Chrysler, in its April 30 filings, listed assets of
    $39.3 billion and liabilities of $55.2 billion, making it the fifth-largest bankruptcy in U.S. history, according to data compiled by Bloomberg News.
    Chrysler’s proposed sale favors junior creditors over senior creditors and would improperly channel the proceeds to specific creditor groups, the objecting lender group said in the court filing.
    In court today, Thomas Lauria, a lawyer for the secured lender group, said some of its members have received death threats. In response to the judge’s demand that the members of his group be revealed, Lauria said the identities of more lenders would be revealed “promptly.”
    Some of the lenders have already been identified, including OppenheimerFunds Inc., Perella Weinberg Capital Management LP’s Xerion hedge fund and Stairway Capital Advisors. Perella withdrew its objection last week.

    DIP Financing

    The group also objected to the request for debtor-in- possession financing, saying the terms of the loan, along with other requests by Chrysler, channeled $25 billion into the hands of other claimholders, including other secured lenders. Some of those lenders have been the recipient of government funds through TARP, the group said in the filing.
    The objectors argued that the payments subvert the usual Chapter 11 bankruptcy process. Under Chrysler’s first-day motions in the bankruptcy case, it sought to pay $5.3 billion to business partners, $4.5 billion in other pre-bankruptcy debt, including employee wages, $9.8 billion in health care and other worker benefits, $5 billion in unfunded pension payments and
    $2 billion to secured lenders.
    The proposed transactions improperly override “the contractual rights of the Chrysler non-TARP lenders and reverses the priority scheme” of the bankruptcy code, they argued.
    “Only if the Treasury Department is prepared to acknowledge and respect the priority of claims contemplated by the Bankruptcy Code” should the DIP loan or any of the other transactions be allowed, the group added.

    62 Percent

    Chrysler has agreement from 62 percent of its secured lenders who hold 90 percent of a $6.9 billion loan, a lawyer for the lenders said. JPMorgan, the largest holder of the Chrysler loan, is the administrative agent for the other lenders and collected votes last week of lenders agreeing to a $2 billion cash payment in exchange for canceling their loan, said Peter Pantaleo, an attorney for the New York-based bank, in bankruptcy court today.
    The lenders in opposition objected to the plan to pay unsecured creditors $8 billion for pre-petition claims, including $4.2 billion to unsecured creditors, $980 million for extended service programs, $375 million for incentive and rebate programs and $3.65 billion for essential suppliers.
    Chrysler witness Robert Manzo, executive director of Capstone Advisory Group, testified in court today that some of the payments Chrysler seeks to authorize will go to union employees at idle plants, and to other unsecured creditors.

    Paid Ahead

    The objections of the group of secured lenders revolve around the argument that the bankruptcy code doesn’t allow unsecured creditors to be paid ahead of them. They alleged that, by paying union employees and business partners early in the case, Chrysler is stripping itself of assets promised as collateral to the secured lenders.
    “The Treasury Department relies on TARP as the purported authority to justify this taking even though TARP was enacted after the senior lenders’ liens on the debtors’ property were already in place,” the group said.
    Manzo said Chrysler tried to get DIP financing from lenders aside from the first-lien lenders, and also failed.
    “We went to other lenders, and they too, after literally a couple minutes of discussion, decided that was not an economic transaction that was worth pursuing,” he said.

    Taxpayer Funded

    He also testified that the U.S. taxpayer funded DIP loan couldn’t be passed on to other investors in the distressed trading market because its terms weren’t attractive.
    Chrysler lost about $17 billion in 2008, according to court filings. The company said it’s averaging a cash burn rate of
    $1.7 billion per month, according to court papers.
    The automaker has said the new company will have assets of
    $28.5 billion and debt of $26.5 billion. Assets are projected to grow to $49 billion by 2016, it said.
    The new company’s net income is expected to turn positive by 2012, according to court papers, reaching $3 billion by 2016.
    The case is In re. Chrysler LLC, 09-50002, U.S. Bankruptcy Court, Southern District of New York (Manhattan)

  113. 113
    zman Says:

    There goes 901 on the SP500.

    Big cap E&Ps all up 5 to 8%

    I’m going to be pretty patient with my June or longer rolls from these recently closed May positions. I don’t mind leaving a little on the table here at all.

  114. 114
    tater Says:

    A toe. Maybe just a toe…

  115. 115
    kyleandy Says:

    LINE is ex div today. does that mean today is the last day to get div or was friday?? thks

  116. 116
    ram Says:

    Sorry ZMAN for not taking you SWN’s. I unloaded mine at 1.60 earlier – had to make a special visit.

  117. 117
    zman Says:

    That’s ok, I was happier to sell them to someone else for $1.90. 😉

  118. 118
    zman Says:



  119. 119
    BirdsofpreyRcool Says:

    The Brazil index is back to where it was in Sept… amazing.

  120. 120
    zman Says:

    Gotta step out for a bit, back before close.

  121. 121
    choices Says:

    bkx up over 12%-as Nicky said, this can only end badly.

    VIX still off a tad for the day.

  122. 122
    BirdsofpreyRcool Says:

    choices — short interest in banks is up, a lot, since the short ban was lifted. I have to think that is part of what is driving the rally.

    But, i also think the Stress Test is one of the worst pieces of public policy ever unleased by our govt. It may whimper to a close and not inflict the potential damage that many feared. That is the hope, anyway.

  123. 123
    Dman Says:

    tater, are you in your cave? I assume it has broadband.

    Something I’ve been meaning to mention for a while but kept forgetting:

    As cave enthusiast, you might have already heard of Dimitri Orlov. But just in case you haven’t …

    He is a part-time Superpower Collapse Predictor and part-time advertising dude.

    His 2006 presentation is a good starting point:

    “Closing the ‘Collapse Gap’: the USSR was better prepared for collapse than the US”


    After that you can luxuriate at Club Orlov:


    Sprinkled amongst his Superpower Collapse Predictions you also get generous helpings of Russian sarcasm and irony, which no doubt helped him live through the first Superpower Collapse.

    If his predictions are even half-way accurate, then

    a) it will demonstrate the power of analogy

    b) You better make sure your cave entrance is well concealed.

  124. 124
    choices Says:

    Thanks, BOP-stress test seems to have become somewhat of a bad joke so maybe everyone just ignores it.

    I have to believe that a lot of this rally is short covering, particularly in energy and banks, but what do I know-I understand that CNBC is giddy with bull fever and people are standing in line picking out the green shoots and Kudlow’s mustard seeds.

  125. 125
    bill Says:

    chk with a new filing


  126. 126
    BirdsofpreyRcool Says:

    choices — I think you are right about the short-covering. Especially banks and energy services. As an aside: a lot of hedge funds went long bank preferreds and shorted the common, thinking there would be sweetened terms to convert or common dilution. That may not play out as they hoped.

    Banks are old news. Onto the consumer, housing prices, commercial realestate, and the Jobs Report on Friday. Oh, and keeping an ear on what Washington has planned for our new Collective Society. That is what is important now.

  127. 127
    gaamblor Says:

    any idea what time the chk numbers are usually released?

  128. 128
    zman Says:

    CHK usually out sometime before evening.

    EOG in morning.

    ZTRADE: Added June $80 Calls (5) for $1.95 with the stock up about $5.25 on the day. Earnings in the morning. I continue to hold 5 of the June $70s here.

  129. 129
    Dman Says:

    BOP – #122

    “one of the worst pieces of public policy”

    And if anyone doubts the achievement that this represents, lets just remember that it’s up against some pretty stiff competition in the much coveted “disastrous public policy” category.

  130. 130
    Popeye Says:

    Strong close today.

  131. 131
    zman Says:

    Popeye – agreed, SP500, oil, gas, you name it.

  132. 132
    zman Says:


  133. 133
    Garyinhou Says:

    what a day

  134. 134
    bill Says:

    chk is out


  135. 135
    bill Says:

    5.7 b loss oh my!!

    but non cash write off dont matter

  136. 136
    BirdsofpreyRcool Says:

    we did it!

    IG 159 offered at the close. Will be an important open tomorrow morning.

  137. 137
    bill Says:

    chk earned )7 were $6.05 realized vs swn 5.9

  138. 138
    bill Says:

    ng realized was 6.05 vs swn 5.97 sorry for typo

  139. 139
    BirdsofpreyRcool Says:

    HY 80 +0.75 at close

  140. 140
    bill Says:

    86 % hedged balance of 09

    rehashed defferal decision

  141. 141
    choices Says:

    USD weak against CAD, broke 1.20 support three trading days ago, shows in the movement up of energy, now trading at 1.173.

  142. 142
    bill Says:

    chk still holds to 1.6 to 2 b in asset sales

    Chesapeake is targeting the monetization of leasehold and producing properties for $1.5 – $2.0 billion in 2009 and $1.0 – $1.5 billion in 2010 and anticipates utilizing the sale proceeds for capital expenditures and to reduce borrowings under its revolving credit facility. The company is currently documenting an agreement to sell certain Chesapeake-operated long-lived producing assets in South Texas in its fifth volumetric production payment transaction (VPP). The assets include proved reserves of approximately 90 bcfe and current net production of approximately 65 mmcfe per day. The company anticipates completing this fifth VPP sale in the 2009 second quarter for proceeds of approximately $475 million, or more than $5.00 per mcfe of proved reserves. The company is planning to sell certain non-Haynesville Shale producing assets in Louisiana in its sixth VPP in the second half of 2009 for approximately $250 million.

    The company is in due diligence with a private equity investor to sell a 50% minority interest in its Barnett Shale and Mid-Continent natural gas gathering and processing assets in the company’s midstream business, Chesapeake Midstream Partners. The company anticipates proceeds of more than $550 million and expects to complete the transaction in the 2009 third quarter.

    Chesapeake also anticipates selling approximately $300 million of mature producing assets late in the 2009 second quarter and another $200 million in the second half of 2009. Finally, Chesapeake is currently in discussions with several companies about a possible Barnett Shale joint venture transaction and anticipates completing a transaction by year-end 2009 for proceeds of approximately $200-300 million.

  143. 143
    AAA Says:

    Re # 90, that article is interesting reading, although it must be a bit sickening for anyone who owns CHK. I realize CHK has been a great company and Aubrey an effective CEO, but this is the kind of stuff that makes my blood boil. Aubrey apparently is suffering from an epic case of entitlement disorder. WTf is the company doing buying his collection of old maps? For 12 mill???? Or giving him a $75 mill bonus in a year where his own reckless overleverage torched the stock through a forced margin call? Most CEOs would have been fired, not given a huge bonus.

  144. 144
    zman Says:

    EOG on the tape is well which is odd since they usually make us wait for the morning. I’ll have pre-call notes out on both later this evening.

  145. 145
    gaamblor Says:

    a lot of 2010 hedges vanished for CHK, swaps went from 324 bcf to 121

    collars 120.3 to 70.6

    price did go up about 30 cents on the remaining, but only 22% is hedged

    I think they are trying to gloss over the fact that they got knocked out of some of valuable hedges

  146. 146
    BirdsofpreyRcool Says:

    gaamblor — you think they got knocked out, or Aubrey decided to monetize them?

  147. 147
    bill Says:

    chk cash went away–maybe they paid off their revolver

    the numbers wont be greeted like swn #’s were, imho

  148. 148
    bill Says:

    fst reported a loss, spending more cash, equity almost wiped out

  149. 149
    zman Says:

    CRK on the tape as well. 3 ok Haynesville wells including 1 well known to have been botched, and 3 double digit IPs using different completion methods. Will have comments on this one in tomorrow’s post.

  150. 150
    PackMan Says:

    This is priceless …

    Unafraid In Greenwich Connecticut
    Clifford S. Asness
    Managing and Founding Principal
    AQR Capital Management, LLC

    The President has just harshly castigated hedge fund managers for being unwilling to take his administration’s bid for their Chrysler bonds. He called them “speculators” who were “refusing to sacrifice like everyone else” and who wanted “to hold out for the prospect of an unjustified taxpayer-funded bailout.”

    The responses of hedge fund managers have been, appropriately, outrage, but generally have been anonymous for fear of going on the record against a powerful President (an exception, though still in the form of a “group letter”, was the superb note from “The Committee of Chrysler Non-TARP Lenders” some of the points of which I echo here, and a relatively few firms, like Oppenheimer, that have publicly defended themselves). Furthermore, one by one the managers and banks are said to be caving to the President’s wishes out of justifiable fear.

    I run an approximately twenty billion dollar money management firm that offers hedge funds as well as public mutual funds and unhedged traditional investments. My company is not involved in the Chrysler situation, but I am still aghast at the President’s comments (of course these are my own views not those of my company). Furthermore, for some reason I was not born with the common sense to keep it to myself, though my title should more accurately be called “Not Afraid Enough” as I am indeed fearful writing this… It’s really a bad idea to speak out. Angering the President is a mistake and, my views will annoy half my clients. I hope my clients will understand that I’m entitled to my voice and to speak it loudly, just as they are in this great country. I hope they will also like that I do not think I have the right to intentionally “sacrifice” their money without their permission.

    Here’s a shock. When hedge funds, pension funds, mutual funds, and individuals, including very sweet grandmothers, lend their money they expect to get it back. However, they know, or should know, they take the risk of not being paid back. But if such a bad event happens it usually does not result in a complete loss. A firm in bankruptcy still has assets. It’s not always a pretty process. Bankruptcy court is about figuring out how to most fairly divvy up the remaining assets based on who is owed what and whose contracts come first. The process already has built-in partial protections for employees and pensions, and can set lenders’ contracts aside in order to help the company survive, all of which are the rules of the game lenders know before they lend. But, without this recovery process nobody would lend to risky borrowers. Essentially, lenders accept less than shareholders (means bonds return less than stocks) in good times only because they get more than shareholders in bad times.

    The above is how it works in America, or how it’s supposed to work. The President and his team sought to avoid having Chrysler go through this process, proposing their own plan for re-organizing the company and partially paying off Chrysler’s creditors. Some bond holders thought this plan unfair. Specifically, they thought it unfairly favored the United Auto Workers, and unfairly paid bondholders less than they would get in bankruptcy court. So, they said no to the plan and decided, as is their right, to take their chances in the bankruptcy process. But, as his quotes above show, the President thought they were being unpatriotic or worse.

    Let’s be clear, it is the job and obligation of all investment managers, including hedge fund managers, to get their clients the most return they can. They are allowed to be charitable with their own money, and many are spectacularly so, but if they give away their clients’ money to share in the “sacrifice”, they are stealing. Clients of hedge funds include, among others, pension funds of all kinds of workers, unionized and not. The managers have a fiduciary obligation to look after their clients’ money as best they can, not to support the President, nor to oppose him, nor otherwise advance their personal political views. That’s how the system works. If you hired an investment professional and he could preserve more of your money in a financial disaster, but instead he decided to spend it on the UAW so you could “share in the sacrifice”, you would not be happy.

    Let’s quickly review a few side issues.

    The President’s attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him. Why is he not calling on his party to “sacrifice” some campaign contributions, and votes, for the greater good? Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power.

    Let’s also mention only in passing the irony of this same President begging hedge funds to borrow more to purchase other troubled securities. That he expects them to do so when he has already shown what happens if they ask for their money to be repaid fairly would be amusing if not so dangerous. That hedge funds might not participate in these programs because of fear of getting sucked into some toxic demagoguery that ends in arbitrary punishment for trying to work with the Treasury is distressing. Some useful programs, like those designed to help finance consumer loans, won’t work because of this irresponsible hectoring.

    Last but not least, the President screaming that the hedge funds are looking for an unjustified taxpayer-funded bailout is the big lie writ large. Find me a hedge fund that has been bailed out. Find me a hedge fund, even a failed one, that has asked for one. In fact, it was only because hedge funds have not taken government funds that they could stand up to this bullying. The TARP recipients had no choice but to go along. The hedge funds were singled out only because
    they are unpopular, not because they behaved any differently from any other ethical manager of other people’s money. The President’s comments here are backwards and libelous. Yet, somehow I don’t think the hedge funds will be following ACORN’s lead and trucking in a bunch of paid professional protestors soon. Hedge funds really need a community organizer.

    This is America. We have a free enterprise system that has worked spectacularly for us for two hundred plus years. When it fails it fixes itself. Most importantly, it is not an owned lackey of the oval office to be scolded for disobedience by the President.

    I am ready for my “personalized” tax rate now.

  151. 151
    bill Says:

    Fast Money just called Economoo out from Drys for his self dealing

    the guy sells to drys from his personal stash 4 ships for 400, which was an obscene price at the time, then cancels the deal with himself and drys pays him 160m to cancel the contract, it only gets worse from there.

    he is the chariman of the bod, he is the ceo, he is the cfo and he says the indepandant board decided…blah b;ah blah

    I calculate he STOLE at least 1 billion in cash from shareholders

    About freking time!!

    Beleive me ,this guy is a crook who should share a cell with Madoff, imho

    stay out of drys forever..buy dsx if you want into this space

  152. 152
    bill Says:

    Is soros a subscriber??


  153. 153
    bill Says:

    on energy independance


  154. 154
    bill Says:

    we dont have enough ng


  155. 155
    bill Says:

    chk on hedges

    looks like aubrey is putting his money where his mouth is

    their outlook for 2010 calls for 7 ng

    looks like they cashed in 2010 hedges and are mostly unfhedged in 2010

    22 % hedged + some way out of money calls at 10.19 for 58 cents for another 35 %

    I guess he can say he is 57 % hedged but i consider it 22 %

  156. 156
    gaamblor Says:

    re 146, knockout swaps went from 226 bcf (february releaes)in 2010 to 70 bcf (today)

    presumably they monetized the other missing 50 bcf for a nice profit, the lifted profit line for 2010 swaps did increase $268mil but 200 bcf should have been more like $700mil without the knockouts

    Just frustrated that they used to have (i believe) over 50% hedged over $10/mcf and now its 22% with 11% of that exposed to knockouts or written puts that are somewhat in the money at the moment

  157. 157
    Wyoming Says:

    Jay Rey,

    RE 57, please pardon me as I am a little confused. Are you using casinghead gas as an Enhanced Oil Recovery? I do apologize s there are too many variables to factor.

    You are correct in the CO2 goes into solution with oil to basically give a big old soda pop, It is a neat thing to see after a CO2 frac. The Casinghead gas should provide the same effect.

    In addition to the PVT (press/vol/temp), I would imagine you would need some form of energy to drive the lightened solution (it would be easier to lift), unless of course that your zones are way depleted that they take everything you put into it.

    Anyway, good on you for the 5x production, glad you are on the oily side rather than the gassy. With a little more detail I may be able to sound like I know what I am talking about but will more than likely run it by the reservoir type engineers.

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