05
May

Tuesday Morning – Lots of Earnings

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Another busy day to day with four of our frequented names with earnings out and another handful from the perimeter, like FST and BBG, reporting as well.

Overlapping Conference Call Watch: (all times EST)

  • EOG - 9:00 am
  • PQ - 9:30 am - probably listen to the replay
  • CRK - 10:30 am  - may listen to this or
  • CHK - 10:30 am  - listen to hedge fund managers chew on Aubrey. Hmmmm.

also on tap today:

  • FST - 10 am - Will look over transcript for more color on 3 more modest Haynesville completions during the quarter and any other highlights.
  • BBG - 12:00 - I'm not a close follower of this Rockies gas story but I knew the predecessor company well. Might listen.

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Earnings Watch
  4. Other Stuff We Care About
  5. Odds & Ends

Holdings Watch: The 10KP and Wiki Tabs are updated ($10KP is back over $25K and is currently 54% cash). All trades below are $10KP trades. 

  • (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.
  • (CLR) - 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.
  • (WRES) - 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.
  • (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%.
  • (EOG) - Added June $80 Calls (5) for $1.95 with the stock up about $5.25 on the day.  I continue to hold (5) of the June $70s here.

Commodity Watch

Crude oil rallied $1.27 to close at $54.47 yesterday. on the back of yet another surge in the equity markets and a dollar which tried but ultimately failed to rally. Crude seems to be bumping up against resistance at $55, but looks to be on its way to $60 in the next couple of months if not sooner.  This morning crude is trading back towards $54 as it lacks data and a surging broad market to take it higher.


Natural gas rallied with oil and a bullish Canadian imports number (see below) ending the day up $0.18 at $3.72. I continue to think gas is in the process of bottoming but that does not mean it will be anything close to straight back up from here. Instead, think lots of volatility with large percentage moves and retests of recent lows but with gas adopting a stair step pattern of higher lows and modestly higher highs associated with each new data point (monthly supply numbers more than the weekly storage numbers). An occasionally warmer than normal bit of summer weather and tropical activity will lend to the volatility as long as gas prices remain in the $3 to $5 range. This morning gas is trading lower with crude futures.

  • Imports Watch:
    • 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.
    • 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. LNG will have to rise quite a bit to offset this decline. 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. 

Earnings Watch:

EOG Resources (EOG) Reports 1Q09; Keeps Spending Plans Flat, Ups Production Guidance; Announces Another New Oil Shale Play.

The 1Q09 Numbers:

  • Production of 2.145 Bcfepd,
    • flat with last quarter (they've been curtailing Bakken oil production) and U.S. volumes fell off a touch,
    • up 13% from 1Q08 levels.
    • Still quite a gassy company but oil production was 14% of volumes up from 12% in 1Q08. Oil production will continue to become an increasing portion of their production profile.
  • Cost Control: Good.
    • LOE of $0.75 per Mcfe, in line with year ago cost of $0.73 per Mcfe. Last quarter
    • Total cash costs of $1.75 / Mcfe, down from $1.96 / Mcfe; primarily the result of lower production taxes which are themselves the result of lower natural gas and oil prices. 
  • CFPS of $2.75 vs $2.51 Street Consensus

Guidance:

  • 2009: Volume guidance goes from 3.0% to 5.5% YoY; 2009 to average 2.009 Bcfepd
    • Function of 2H09 increased oil sales from the Bakken and the north Barnett oil play
    • They see oil rising to 19% of production this month
  • 2010: they commented that they see a return to double digit growth here, commodity prices making that a workable idea of course.

Operations Update: For play relevance recall EOG had booked reserves of 8.7 Tcfe (1,450 MM BOE).

Haynesville:

  • No change to past comments,
    • still 14 well program for 2009,
    • still just the 2 wells tested to date (both IP'd in the 17 MMcfepd range)
  • 116,000 net acres
  • They continue to peg recoverable reserves at 3 to 4 Tcfe on their acreage
  • Look for questions on the call about recent drilling results and costs

Bakken Oil Shale:

  • 73 wells drilled to date ; 40% > 1,000 bopd
  • Avg IP in 2008 was 1,700 bopd
  • 500,000 net acres
  • They continue to point to the play as being over 80 MM BOE (over 480 Bcfe)
  • Extension area "Bakken Lite" drilling needs an update on the call.
  • Look for some questions about the Three Forks Sanish tests on the call

British Columbia - Horn River Basin Shale

  • 7 wells flowing to sales,up from 5 at last mention
  • Best one is still a 16 MMcfgpd IP,
  • 7 wells in 2009 program - No rush as this play is really set to begin meaningfully contribute around 2012 when takeaway infrastructure is in place.
  • 157,500 net acres (maybe up slightly)
  • Still saying they think they're acreage has recoverable gas potential of 6 Tcf

Marcellus Shale:

  • No update in the press release
  • They had planned to take it slow here with a 1 rig program for 2009
  • We've been seeing some impressive rates out of recent Marcellus wells so they should get a question or two about how its coming.
  • 240,000 net acres
  • They put reserve potential at 2 to 3 Tcfe

Barnett Shale and Barnett Combo: Little new in the press release or presentation.

  • Combo (oil): > 200 MMBoe (1.2 Tcfe) potential
  • Shale Gas: > 5 Tcfe potential (they've booked 1.8 Tcfe)
  • these numbers remain unchanged from the last update

New Canadian Oil Shale Play - Waskada Field, Manitoba

  • 25 mm barrels recoverable (conservatively, they still call their Bakken play a > 80 MM barrel play) so this is a good start and likely to be upgraded in future quarters. 
  • Booked on 2.2 mm barrels as of YE 08
  • Current production of 1,900 Bopd, targeting 9,500 Bopd by YE12
    • They peg after tax rate of return at 65% at current oil prices (that's better than the Bakken)
  • This is one of the plays they hinted at but didn't name last April-- at their analyst meeting.

Balance Sheet: Debt to total cap of 19%; one of the lowest in the group, big, medium or small.

Hedges:

  • 45% of '09 North American gas production hedged at $9.40
  • Oil: un-hedged.

Valuation:

  • Street is at $10.40 CFPS for 2009, that number should come up a little better than commensurate with the increase in volume guidance. This puts them at 6.9x '09 which is fairly cheap for this name; moreover, the out year is trading at 6.0x Consensus CFPS and there is little in this quarter's numbers to suggest those numbers would be coming down. 

Nutshell: Good quarter, CFPS beat on good operating cost control, but analysts and investors should really like the concept of more growth and therefore more cash flow from the same budget.This translates into better than expected debt reduction by year end and further increases to their dividend which though small is still better than most of the peers. During the time when the financial markets were more frozen, EOG lacked the sense of panic in the face of low prices due to its strong balance sheet, conservative management and strong set of assets set up to provide repeatable success.They have no shortage of drilling locations (12,000 ready to go with at least as many that should probably work) so it boils down to a matter of spending.  

Holdings Watch: The $10KP holds 5 June $70 calls and 5 June $80 calls.

Conference Call: Tuesday, 9 am EST. This note has been archived on the reports tab

 

Chesapeake (CHK) Reports Strong 1Q09 CFPS;  Cutting Capex; Easing Guidance Lower. Lots of moving pieces, I'll be staying away from the name unless it gets absolutely wood-shedded after the call.

The 1Q09 Numbers:

  • Production of 2.367 Bcfepd:  (pretty strong results when you consider their rig count declined from year end and you recall that they had between 200 and 400 MMcfepd shut in voluntarily during the quarter.) If they held production flat from the first quarter levels they would come in just below their previous guidance range. This compares to:
    • 2.316 Bcfepd in 4Q
    • 2.244 Bcfgpd in 1Q08
  • Revenue of $1.995 vs $2.2 B expected (looks like wider than expected natural gas differentials to blame)
  • Costs were better than expected
    • LOE: up slightly despite the higher volumes to $1.12 per Mcfe but still at the low end of the range
    • Production taxes were well below guidance due to low gas price realizations
  • CFPS of $1.67 vs $1.48 expectations.

Reserves: Fell due to prices

  • March 31 reserves of 11. 851 Tcfe, down from 12.051 at YE08
  • $6.019 B price related impairment.

Guidance: Inching It Lower Again

  • Volumes
    • 2009: Falls from a range of 875 to 885 Bcfe (2.4 to 2.42 Bcfepd) to a range of 865 to 875 Bcfe (2.37 to 2.4 Bcfepd)
    • 2010: Bigger haircut. Falls from a range of 976 to 1016 Bcfe to a range of 915 to 955 Bcfe. This one definitely brings the 2010 numbers down, all other things being equal. 
  • Other Guidance:
    • noticeably widening differential to NYMEX gas. This may be part of an effort to bag the Street in future quarters
    • keeping production tax guidance high
  • Reducing Capex by $500 mm over 2 years. (which is why you see the 2010 unit volume guidance tank harder than 2009.
  • Hedges:
    • 2009: 42% of expected production swapped @ $7.67 and another 42% collared with floors at $7.08.
    • They previously released that a majority of their "knockout swaps" had been closed out.

Operations Update: Pretty standard update, I'll have highlights from the conference call.

 

Nutshell: Ho-hum quarter operationally, lots of noise financially and operationally. Aubrey's compensation issues will be a nuisance on the call. They are saying they will garner the investment grade label by 2010. I'm not sure I'd believe my eyes if I saw such a headline by next year. It's a nice goal to have but I'm sure something (like a new hot shale play) will come between CHK and that dream. I own some common stock here but no options at present.

Conference  Call: Today, 10:30 am EST

Comstock (CRK) Reports Ok Numbers, Announces Bigger Haynesville Wells

The 1Q09 Numbers:

  • Production of 157 MMcfepd
    • down 6.6% from 4Q08
    • up 3% from 1Q08
  • Revenue of $68.4 vs $74 mm expected
  • LOE: inched up to $0.97 per Mcfe due to lower volumes
  • EPS of ($0.12) vs ($0.10) expectations
  • CFPS of $1.00 vs $0.91 expectations

Guidance: None given for volumes; reiterated a $360 mm program of which they are slightly more than a quarter of the way through with the 1Q09 spending. They did not make good progress in reducing drilling times in the Haynesville having run into a number of mechanical issues and I suspect that the current drilling program will remain unchanged unless gas prices deteriorate further in which case I'd expect them to have a slower second half.

Borrowing Base Redetermination: Redetermined at $550 million with $90 mm outstanding; debt to cap of 20% is very manageable.

Hedges: Not mentioned in the press release. At last quarter they were a low 10% of expected gas production for 2009.

Operations Update:

The company announced it has hones its completion methods moving from heavier gel fracs to slick water fracs which along with longer laterals allowed them to report their best IPs in the Haynesville to date (16,15,and 12 MMcfepd). Note these wells were all in DeSoto Parish which begs the question what about your Texas acreage? And also, what were the choke sizes, pressures, time of test. These will be questions for the call.

Nutshell: Just didn't blow my skirt up.  I don't own it currently, will listen and decide, good company, not the best quarter, and its had a good run. Would like a little more visibility on the current production base's decline rate as 1Q09 came off a little faster than I would have thought in aggregate, when you take into account the new wells coming on during the quarter.

Conference  Call: Today, 10:30 am EST

PQ Reports Good P; Quietly De-leveraging

The 1Q09 Numbers:

  • Production of 112.2 MMcfepd (record production) vs upwardly revised guidance of 110 to 112 MMcfepd.
  • Revenue of $59.2 vs $59 expected
  • Cost Control: Good
    • Lease Operating Expense fell to $1.10 per Mcfe from 1.36 in the fourth quarter and was much better than guidance.
  • CFPS of $0.78 vs $0.66 expectated

Operations Update: Not much going on. The company remains in survival mode, participating in low working interest non-operated wells in the Fayetteville and Woodford Shales. They spent $10 mm during the quarter will generating discretionary cash flow of $38 mm.

Guidance:

  • 2Q09: 90 to 96 MMcfepd (includes impact of 1.3 MMcfepd of producing assets sales closed during the quarter but also reflects the lack of real drilling activity)
  • 2009: 90 to 100 MMcfepd, reiteration of previous guidance. They inched their guidance for expenses slightly lower.

Nutshell: Good quarter from a cash flow perspective, remains quiet operationally so little to talk about from a wells drilled perspective. Debt to equity will look jacked up due to a non-cash ceiling test writedown but that's not a bank line covenant and the $17 to 18 mm of interest expense they will incur this year on their debt is more than easily manageable.

Conference  Call: Today, 9:30 am EST

 

Other Stuff We Care About

Reporting after the close tonight or before the open tomorrow: DSX, HK, WRES, DVN, RIG

Odds & Ends

Analyst Watch: 

  • Barclays takes (OXY) to Overweight
  • and cuts (DVN), (CNQ), and (APC) to Equalweight
  • Barclays trimmed its EOG price target from $87 to $80 and kept the stock at Overweight. Looks like Barclays is taking down their natural gas price deck today.
  • Argus cuts (SLB) to Hold

Interesting Article: Crude Protectionism

150 Responses to “Tuesday Morning – Lots of Earnings”

  1. 1
    zman Says:

    EOG call in 20 minutes.

    Oil going green, NG still red but trending up.

    Dollar index at 83.69, 1 more point lower and we have a technical breakdown.

  2. 2
    bill Says:

    Any commnets on chk monetizing 2010 hedges which are way down from prior

  3. 3
    zman Says:

    Not really, they see higher prices down the road so if they take some off I’m not surprised by it. They said they would do this on past calls. They also said most of the knockouts are gone now.

  4. 4
    zman Says:

    EOG conference call starting now.

  5. 5
    zman Says:

    EOG CC #1

    They realized that 2008 they outperformed all of their peers in these categories.

    Best stock performance
    Highest ROCE
    Lowest finding costs
    Lowest unit cost
    Least writedowns

    The new 5.5% growth target assumes they will not curtail gas production.

    Barnett: 11 rigs vs 24 last year. Seeing $2.8 mm completed well cost for 2 Bcfe wells in Johnson.

    Hill County – only company making good wells 1.5 Bcfe there

    Barnett Combo
    Completed 12 wells, 30% ROR, based on current prices, now pattern drilling, seeing improved results, will be a major 2010 to 2015 production growth driver. See doubling liquids volumes nearly double by 2010.

    more in a second… this will likely be the strong E&P of the day, as countered by CHK’s weakness.

  6. 6
    elduque Says:

    BDI +91 1897

  7. 7
    zman Says:

    EOG CC #2

    Waskada oil – tight siltstone, old vertical field.

    29 successful horizontals here, 65% ROR at current prices.

    Bakken
    8 rig program from last years 10 rig
    deferred completion until summer, no well results to report,
    they will be bringing production back on line from earlier curtailment in June and be back at full production in July.
    They will be taking oil out by railcar.

  8. 8
    zman Says:

    EOG CC #3

    won’t say what railcar hauling is going to cost but says its better than what they are seeing as transportation costs

    Haynesville – no well results to report. 4 rigs now.
    Horn River – no well results, deferring completion until summer to take advantage of falling frac prices.

    Marcellus – 1.6 to 3.0 Bcfe EUR, improving results.

    International
    China – nothing to say until year end.

  9. 9
    BirdsofpreyRcool Says:

    Headline — “MEE Executives Take 10% Pay Cut to Control Costs”

    Which brings me to Aubrey… Abrey’s saying that CHK is going to be investment grade by 2010 is like a skid row drunk’s saying “I’m going off the bottle… next week.” Nice goal. Ain’t gonna happen.

  10. 10
    zman Says:

    EOG CC #4

    Oil – tight range next few months, slowly strengthen into the $60s. Need to watch non-OPEC levels.

    NG – expect YE09 production down by 4.5 Bcfepd assuming gas rigs of 650.
    See 2010 – see declines in 2010 in both U.S. and Canada. They think Texas is declining now which is what the EIA data shows, they think we have 1 or 2 more EIA supply reports to endure before the more noticeable declines.

    They closed out their 2010 second half prices. Confident that they will do better than the $10 prices they had on those hedges.

    Summary of the quarter:
    1) Getting oilier
    2) See steady results from the now manufacturing style Barnett oil combo play.
    3) First mover in Manitoba

    Papa saying don’t treat the non-cash charges as one time events as it was cash at the time of investment. I think that’s easy for him to say and a bit of a cheap shot. The rules are silly and are being changed. They force writedowns during low prices but do not allow for “write ups”

  11. 11
    bill Says:

    I loved eog comment on one time write offs
    slamed other ep and warned analysts not to dismiss such charges

  12. 12
    zman Says:

    BOP – couldn’t agree more re investment grade comment. Whatever dude.

  13. 13
    bill Says:

    # 9, roflmao

    good one

  14. 14
    zman Says:

    Bill – I guess that’s what makes markets.

  15. 15
    BirdsofpreyRcool Says:

    Credit Indices about flat to yesterday’s close… would not be surprised to see them widen out a bit from here. We’ve seen a lot of spread tightening in just two weeks. Also, like the fact that US Treasury yields go up when investors sell safe investments to buy risk assets (like corporate bonds), I would expect we will see investors sell the more liquid CDS indices to move into individual credits. So, probably a bit of back-and-forth around the +160 bps level on the IG index.

    IG 159

    HY 79.875

    both indices just a tad wider/lower than yesterday’s close.

  16. 16
    bill Says:

    I think the arguments are good for both views– it doesnt have to be one or the other–

    Companies keep saying one time, well they did it last qtr so its at leas a two time chagre

    futhermore it took cash to buy the assets in the first place

    Chk spent money like a druken sailor on shore leave. He said at the time, you snooze you lose..he was wrong and now he has a 10 b write down

    A better strategy is to hoard cash, wait for the bubble to burst, and buy assets on the cheap

  17. 17
    zman Says:

    E&P = profit taking, ho hum, somewhat boring results, and slight pull back in commodities.

  18. 18
    zman Says:

    and the weakness is on very light pre open and opening volumes.

  19. 19
    zman Says:

    Re 16. I hear ya Bill. I just think you have to consider the source, he’s a successful efforts accounting type taking a shot at the full cost types. They do they same on their calls pointing to their conservatism. At the end of the day, its about the reserves in the ground and the all in finding costs needed to get them out of the ground. Also, Aubrey’s not just buying and then writing down the assets. He hedged. But the way full cost accounting works, you can’t factor the hedges into the ceiling test calculation. Which is why I don’t consider it to be very useful as a measure in the real world.

  20. 20
    zman Says:

    CRK – Investors focusing on those 3 well results in the post. I’m not going to chase that rally down.

  21. 21
    BirdsofpreyRcool Says:

    PQ — strong “green energy” comments from CEO.

  22. 22
    BirdsofpreyRcool Says:

    PQ — good conf call, so far. But not enough “zing” to interest day traders yet.

  23. 23
    zman Says:

    Thanks BOP, stock not liking the 2Q guidance I’d guess. Still on EOG, let me know if PQ says anything interesting.

  24. 24
    BirdsofpreyRcool Says:

    PQ — doesn’t make sense to drill hi-IP wells in a low nat gas price environment… focusing on long-lived drilling program. Makes sense.

  25. 25
    zman Says:

    BOP – re 22, right, people want you to stay within cash flow but then they want to hear about the next monster well. Hard trick to pull off for the little guys.

    EOG went through a laundry list of plays where they had little to saw. Traders yawned and walked the stock lower.

  26. 26
    BirdsofpreyRcool Says:

    should be “hi IP/steep decline rate”

  27. 27
    BirdsofpreyRcool Says:

    PQ — analysts already talking about the NEXT bank redetermination. Company giving an appropriately conservative answer… stock not liking this.

  28. 28
    zman Says:

    EOG Q&A – to slightly outspend cash flow if the strip today were to be realized.

    Bakken Lite – they think this will be big source of growth/reserve upside for them.

    Bakken Core – 60 to 70 more to drill and 30 to 40 drilled that will be completed later this year. IPs in the core in 2008 were 1,800 bopd.

  29. 29
    BirdsofpreyRcool Says:

    PQ — “just don’t see the value of completing high production wells in $2-3 nat gas environment”… they have said this about 10 different ways so far.

  30. 30
    zman Says:

    EOG Q&A

    Barnett Combo – EURs of 210 mboe, may improve over time, think its playing out as they thought in feb 2008 analyst meeting.

  31. 31
    zman Says:

    Fair warning, and this one will probably cost me a few bucks, but if we get a good rally in the group in a bit, which I suspect we may, I will punt some or all of my WRES June calls. Earnings are tomorrow and they will not have impressive things to say…just keeping on keeping on and building cash. Like PQ. But it has already had a good run and the June calls would take a big hit (they are up 150% now) were the stock to see a similar reaction to the PQ one seen today. I’ll hold those November calls and the common.

  32. 32
    BirdsofpreyRcool Says:

    Tech Trader is BACK —

    Mrkt open — The gap down increases the odds of a long trade working well to 60/40. The lows are from 9:45 into 10:55. the best highs are from mid morning into lunch always. BUT the HOD is in the last hour always, and the last 25 minutes over 50% of the time. whether the spoos and INDU close positive though is 50/50.

    Just now — the 15 prem at 9:46 is red. overall the odds for a long trade working are 65/35, but on this green tuesday the odds are 100/0 and the spoos close positive 100/0. The best highs are at 11:35 and 12:35 (from the hourly bloombergers. the actual HOD is at 3:50 and 4:15.

    [futures close at 4:15… so, saying HOD expected at close]

  33. 33
    BirdsofpreyRcool Says:

    ISM Non-Manuf = slightly more positive than expected … 43.7 vs 42.2 exp’d

  34. 34
    BirdsofpreyRcool Says:

    Bernanke says sees signs that housing is bottoming… but any recovery dependent on credit not collapsing again.

    Sounds like a lead-in to the Gov’s report on the Bank Stress Test.

  35. 35
    BirdsofpreyRcool Says:

    Credit indices holding in here, just fine.

    IG 157

    HY 79.875

  36. 36
    Garyinhou Says:

    Barclays color…

    Anadarko Petroleum (APC Quote) downgraded at Barclays from Overweight to Equal-weight. $44 price target. Stock has performed well, despite a pullback in natural gas prices.

    Devon Energy (DVN Quote) downgraded at Barclays. Rating lowered to Equal weight from Overweight. Price target lowered to $57 from $72. 2009 EPS estimates lowered to $1.05 from $2.10.

  37. 37
    BirdsofpreyRcool Says:

    PQ = “build cash and work with bank group”… as banks may want some of their $$ back, next redetermination.

    Pretty conservative stuff. No desire to monetize their hedges… they like the security blanket right now.

  38. 38
    zman Says:

    ZTRADE:

    WRES – Sold 25 (half) my June $2.50 Call position for $0.60, up 277% with the stock at $2.85. I didn’t expect this kind of rally in the name and I don’t see a reason to hold onto the closer month calls with earnings tomorrow.

  39. 39
    BirdsofpreyRcool Says:

    PQ = thinks the gas market improves in 2010, tho… so not locking in more 2010 hedges. After all… not in hurricane season yet. Fun stuff can happen with the curve when it gets windy in the Gulf.

  40. 40
    zman Says:

    BOP – thanks for listening to PQ for me, hate it when the calls overlap, good updates.

    EOG thinks the same on natural gas price recovery in 2010. Note they killed most of their 2H10 gas hedges which were above $10/MMBtu.

  41. 41
    zman Says:

    WRES all over the place, up 10 to 20% between blinks. Not really my style of stock trading but at least the color is right.

  42. 42
    BirdsofpreyRcool Says:

    PQ — pretty solid operating comments. Taking a conservative stance, but thinking it will get better from here… Nat gas price-wise, operating costs-wise, increase in technological advances.

  43. 43
    BirdsofpreyRcool Says:

    PQ — no lack of deals in the Haynesville… lots of them around. Not aggressively pursuing one area over the other.

    Wide differentiation between good and bad acreage in all these trends. Will pick carefully.

  44. 44
    Popeye Says:

    Atlantic Hydrogen is developing a way to make natural gas more environmentally friendly. The process involves using a plasma reactor to separate hydrogen and methane in the gas. The procedure also turns carbon emissions into high-purity carbon black, a substance that is used to make inks, plastics and reinforced rubber products. Utility companies could potentially sell the carbon black, making the process more financially attractive.”
    http://www.technologyreview.com/energy/22580/

  45. 45
    zman Says:

    CRK and CHK calls in 10 minutes. CRK may go higher post call but its had a very strong run. CHK quarter had plenty of noise. Torn which to listen to as CHK could be great entertainment value.

  46. 46
    BirdsofpreyRcool Says:

    z — go for the CHK !! Could be a classic.

  47. 47
    zman Says:

    BOP – I’m with you on that will do.

    Is Ben B talking the market down?

  48. 48
    BirdsofpreyRcool Says:

    Bernanke saying that “banks have significant earnings power.”

    DUH. So would I… if I could borrow from the Fed at 0.25%. lend to E&Ps (for example) at 4.0%, and lever that 6x.

  49. 49
    BirdsofpreyRcool Says:

    Ben seems to be pushing the mrkt around. Some positive, some negative, more uncertainty in general.

  50. 50
    tater Says:

    Yep, as well as having you pay for the bad credit card, car, housing, and commercial real estate notes. Nice biz plan.

  51. 51
    BirdsofpreyRcool Says:

    on CHK… couldn’t resist the potential entertainment value. Shallow reason, I know.

  52. 52
    BirdsofpreyRcool Says:

    tater — ain’t Socialism a wonderful thing? I can take risks… and let you pay when it doesn’t work out for me. Who wouldn’t vote for that system??

  53. 53
    tater Says:

    I’ll stop bitching. Pointless for the next 3 years. SWN and HK, wild.

  54. 54
    BirdsofpreyRcool Says:

    tater — pls don’t stop. Complacency is the worst place we can sit in, for the next X yrs.

  55. 55
    tater Says:

    Reminds me of that commercial where the guy bids on the painting at the auction and then he immediately says that he now wants to sell it.

  56. 56
    BirdsofpreyRcool Says:

    Aubrey — weak “defense” of pay package. “Y’all knew about this in January… and no one called me to complain.”

  57. 57
    BirdsofpreyRcool Says:

    Aubrey — [thinking] “I’d rather be sitting in the dentist’s chair right now… than hosting this conf call…”

  58. 58
    BirdsofpreyRcool Says:

    z — question… it it “fair” to include partner contributions to drilling costs in your F&D costs? As an analyst, i’d sure yank that out of the model.

  59. 59
    zman Says:

    I think you have to consider it in terms of the carry but not let it skew your thoughts on the long term trend. It helps them get this acreage into HBP.

  60. 60
    zman Says:

    CHK Call

    Knockouts: restructured almost all of 2009 hedges to get rid of them.

    Carries – largely unused in each basin.

  61. 61
    zman Says:

    CHK Call

    Joint Venture Carries:

    $4.575 B total announced, only used $0.5 B so far. Dollars will go about 30% further due to lower service costs. (so that original 4.6 could be worth more like $6 B)

    Q&A about to start

  62. 62
    kyleandy Says:

    z – bop – u not missing much on CRK pretty much read the presentation questions starting now

  63. 63
    BirdsofpreyRcool Says:

    kyleandy — thanks!

  64. 64
    zman Says:

    CHJK Q&A

    CHK has 300 uncompleted wells. 200 waiting on pipeline, another 100 were voluntarily curtailed.

    2010 – sees gas production down 10%.

  65. 65
    zman Says:

    EOG doing the least poorly in this profit taking session.

    CHK still down 10%, hearing nothing to change that on the call, at least today.

    CHK 2010 hedges: monetized when prices fell in back half of 2010.

  66. 66
    zman Says:

    Kyle – thanks, glad to have not chased the initial CRK surge. It’s had a good run.

  67. 67
    BirdsofpreyRcool Says:

    z — conf calls not giving a lot of reasons to add to and/or initiate positions in the gassy e&p kids… am I missing the boat here?

  68. 68
    zman Says:

    CHK Q&A

    Haynesville: Saying first year decline rate is 86%, probably not enough of a sample size (only 2 wells have been on for 12 months).

  69. 69
    BirdsofpreyRcool Says:

    FWIW — Tech Trader thinks we have seen the LOD.

  70. 70
    BirdsofpreyRcool Says:

    (he said that about 10 mins ago, btw)

  71. 71
    zman Says:

    RE 67. No, you are not missing a thing. I’ve been watching this rally with an increasing sense of a coming “ok, so now what” following this week. Typically, there is a news vacuum for the E&Ps in the second half of May as earnings wraps up and there are few conference appearances. This leaves directionality on the stocks to be dictated by 1) the broad market and 2) commodity prices, once the period of post quarter valuation readjustment/repositioning is taken care of which should be done by the end of next week.

  72. 72
    bill Says:

    govt oversight ….

    Sens. Carl Levin (D-MI) and Susan Collins (R-ME) Monday introduced bipartisan legislation to give federal financial regulators immediate authority to regulate trillions of dollars in swap transactions that continue to be marketed and traded in the United States under the radar of government oversight

  73. 73
    BirdsofpreyRcool Says:

    Susan Collins… tough to use her as a bi-partisan example. But, need some sort of transparency in the CDS mrkt.

  74. 74
    zman Says:

    ZTRADE:

    Adding (5) HK June $25 Calls HKFE for $2.25 with the stock at $25.20, weak with the group today and with earnings tomorrow. I still have 10 of the May $25s.

  75. 75
    zman Says:

    CHK call about to end. Not one buy sider asked a question. How odd.

  76. 76
    elduque Says:

    Aubrey pretty much echoed your sentiments on NG. One thing that I did find interesting is the limit on the amount LNG that can be imported by storage space. If I remember it correctly, he was estimating that by the end of the summer it would be filled up.

  77. 77
    BirdsofpreyRcool Says:

    Credit rally holding up.

    IG 157 bps

  78. 78
    zman Says:

    And then, boredom set in ….

    Market looks like it wants to tilt higher.

    Noon time laugh:
    http://d.yimg.com/kq/groups/16118715/1552239791/name/TheFrontFellOff.wmv

  79. 79
    zman Says:

    Eldugue

    That’s correct. The unanimous expectation is that we get “full” on storage. That includes me. Full is somewhere slightly above 3.5 Tcf, maybe 3.6 Tcf, there is some variance in the estimates of what we can actually store but it is close to that level and we go a little higher than we ever have before due to the shallow trough this year.

    But the comments from EOG and CHK employ the word “inevitable” production declines and both look to 2010 as a much higher price environment.

  80. 80
    zman Says:

    UBS raised EOG price target to 81 from 73.

  81. 81
    ram Says:

    It’s been too long since I had such a laugh. Now I know why I am here.

  82. 82
    zman Says:

    Ram, glad to be of service. Everyone comes for different reasons but like a public high school the experience is as much a part of what you put in as what it is what is offered.

  83. 83
    Garyinhou Says:

    I’d like to see Susan Collins and Barney Frank sing a duet…

  84. 84
    mnt Says:

    Z, can you expand on your thoughts on lack of buy side questions ? I am a bit lost, thanks

  85. 85
    kyleandy Says:

    CRK questions were mostly about drilling in the haynesville-future locations,takeaway capacity. he said (don’t know who he was, but excellent speaker – better than CEO -adding takeaway in july, holding up some completions till then , going to drill 4 corners of their acreage , happy w/ all their recent wells. last one done in 29 days for 8mm. all pretty positive.

  86. 86
    zman Says:

    MNT – Usually there are 2 or 3 questions from hedge funds and not just from the sellside brokerage firm analysts. Could be they want to gripe about Aubrey in a more private format or could be that Aubrey didn’t let them in the call queue.

  87. 87
    zman Says:

    Kyle – thanks. That last well was 29 but their time to drill all there wells is all over the map, as shown in a slide in their presentation last night.

  88. 88
    zman Says:

    If I didn’t know better I’d say pinning action had set in 8 days early. Sham-boring!

  89. 89
    BirdsofpreyRcool Says:

    KOG — they want to get their ducks in a row, ahead of their conf call on Friday morning. If they can do this successfully, we will know about 2 wells, the outlook for completing 2 more (one with partner XTO, the other with partner Peak), a 3rd site, and near-term resolution of funding needs.

    Could be interesting.

  90. 90
    zman Says:

    BOP – I am torn between waiting on the well results and waiting on the deal announcement. I’d guess wells first, then deal after the close or the next day?

  91. 91
    zman Says:

    BOP – are #3 and #4 at TD but not yet completed? Is #2 completed?

  92. 92
    BirdsofpreyRcool Says:

    KOG — they hope to announce it all, in the Thursday night PR and/or on the Friday morning conf call.

    We know there were problems completing the 1st well, they are rushing to complete and IP the 2nd (to give results on call), and trying to close funding deal. If those ducks line up, think stock will be higher than here.

    Hearing great things about well site #2… even though it hasn’t been completed yet.

  93. 93
    BirdsofpreyRcool Says:

    (well site #2 = wells 3 and 4)

  94. 94
    zman Says:

    Scout ticket or scuttle butt? Just kidding. Just looking around at a number of Bakken player EURs … I was probably overly conservative on their middle Bakken stand alone being 300,000 Boe per hole. Who was the operator amidst their acreage (thought it was private) and did you get an IP on that well or any data on the completion?

  95. 95
    zman Says:

    Ok, let me see if I have this then. They’ve fracced wells #1 and #2 and may have data on wells #3 and #4 by the time of the call? How far apart are the two sites?

  96. 96
    BirdsofpreyRcool Says:

    Peak (their partner in well #4) drilled the TFS test in the middle of KOG’s acreage. It was completed and is producing. Can’t get much info out of that (tight hole status), but hearing the economics are similar to Bakken wells in the area. So, could potentially double the economics of any Bakken discovery with TFS present in any of KOG’s wells.

  97. 97
    elduque Says:

    Re CHK -Now I assume that Aubrey is calling the shots at the co. I guess given all that he has accomplished, he probably is one ceo that deserves above average compensation.

    Damn smart to have all your drilling costs paid for. Sell off the property and still retain ownership.

    What’s not to like, other than the current price of NG.

  98. 98
    BirdsofpreyRcool Says:

    fraccing well #2, drilled on pad #1. After that, completion rig will move to pad #2, where wells #3 and 4 have already been drilled (with XTO and Peak), but awaiting completion.

    Won’t have anything definitive on 3 and 4 by the call… but, hearing there was a heck of a lot of oil “in the pit” on those 2 wells. Apparently, much much more than wells 1 and 2.

    Well pad #2 is about 6.5 miles NE of pad #1, if i recall correctly. Will go search my notes now.

  99. 99
    zman Says:

    Eld – I think the furor blows over when gas prices rise as well. I’m not going to defend his board on buying the art and such but long term, I don’t think it hurts the stock.

  100. 100
    BirdsofpreyRcool Says:

    KOG — from my 4Q08 conf call notes on 3/12/09

    o acreage in Dunn County N. Dakota = only acreage that counts

    o 10 wells have been drilled in the vicinity around KOG’s acreage, average IP ~1k bopd/well.

    o estimated ultimate recovery for those wells 350-500k bbls

    o wells 3/4 being drilled 12 miles north of first pad [darn my memory there… which is why i take a lot of notes]

    o costs ~$1.5mm/well to complete

    o well #1 planned to have 6 stages, #2 to have 5 stages, using “slightly different approaches”

    o well #3 (w/XTO) will have 4,500 ft lateral; well #4 (w/Peak) will be a 10,000 ft lateral [these wells have already TD’d, waiting on completion rig from pad #1]

    o well 6 miles south from pad #2 has both Bakken and TFS production [don’t think this is the recently-drilled Peak well]

  101. 101
    zman Says:

    WILDZTRADE:

    Took 10 PXD May $25 Calls for $1.25 with the stock at $25.20, off almost 6%. They report after the close, and this is a pure spec play on an Eagle Ford shale well they are drilling to the east of the currently announced wells. Good company, cheap, not very active right now with prices where they are. Not looking for a beat, just an end to the beating. They may not even have the well in completed by tomorrow or it could be bad. Obviously a higher risk trade.

  102. 102
    zman Says:

    BOP – thanks much for #100. Mulling.

  103. 103
    BirdsofpreyRcool Says:

    z — KOG was a buy at 25 cents, 18 cents, 30 cents (in that order). Gut tells me it’s about 50/50 here. 50% odds of moving to $1.25 in near-term, 50% back to lows. But, I do think they get financing done, and wells 3 and 4 are better than 1 and 2. Also, will try to drill and prove up their own acreage, using JVs on a well-by-well basis… didn’t get the bids they wanted to join up with a stronger parent. You were right, no one is paying up for acreage these days… even Bakken or Haynesville.

  104. 104
    kyleandy Says:

    z – eld – how greedy do the rich get?? i am sorry audrey lost multi-million by being over leveraged, but that still left him with major millions. so even tho he helped tank CHK stock by his forced selling, he gets rewarded to the tune of 75 million bonus dollars, and buying his collection for 12mm seems ludicrous. then the comp is quoted that it was a good buy, it’s worth 20 million. why in the hell didn’t they sell for 20 million then?? i have a big position for me in CHK, and am torn between selling it on principle , or holding because its undervalued. is this a lot different than the shenanigans w/ the DRYS ceo??
    that’s my first and hopefully last rant on here!!!

  105. 105
    kyleandy Says:

    bop if u get too 60/40 on KOG going to 1.25 let me know. thks

  106. 106
    tater Says:

    BOP
    Is tech trader sticking to the comments from this morning? Seems like we might be in for a turn down. I know what I’m seeing, just looking to compare if it’s convenient for you.

  107. 107
    AAA Says:

    Kyleandy, totally agree re 104. The justification for this is insulting. If Aubrey wants to do this kind of stuff, take the company private. It’s not gonna fly with stockholders these days.

    Aubrey and the collection of conflicted cronies they call the Board of Directors appear confused on the role of a public company. Hint: it’s not to bail out the CEO when he steps on his crank. I don’t have any confidence in his judgment or his ethics.

  108. 108
    BirdsofpreyRcool Says:

    tater — Tech Trader usually weighs in just once, in the morning… i can check with Head Trader’s gut, tho. Always an interesting exercise. Also, will double-check key levels. Give me a sec….

  109. 109
    choices Says:

    re #104, 107: just another example of the greed culture and the boards of directors not doing their jobs-they are usually hand picked by the ceo-corporate governance is very very weak but what the hell is the answer-shareholders revolt but that is not likely.

  110. 110
    choices Says:

    I understand Michael Douglas is going to do a sequel to the “Greed is Good”-that should be a laugher.

  111. 111
    tater Says:

    Appreciate that. Seems to be hanging on the edge, what I’m looking at could go one way or the other, just wondering.

  112. 112
    BirdsofpreyRcool Says:

    kyleandy — i am secretly there, at 60/40… but, too embarrassed to admit it. the ONE thing KOG did right is to NOT take on debt. They have a bank line, but are not using it… except for a few little letter-of-credit-type stuff. No bank debt means they preserve the optionality in the stock. So, I’m still holding here… think we see $1.25 before we see 25 cents again.

    But, my fortune telling is worth what you pay for it!

  113. 113
    BirdsofpreyRcool Says:

    tater — HT thinks as long as we stay above 900 on SPX, then we go higher into the close. But, if still around 900 near close, then go lower.

    He still thinks “higher into the close,” at this point.

  114. 114
    kyleandy Says:

    AAA = choices – thks, glad i’m not alone w/ my thoughts.
    z – am considering trading my CHK for UNG. what are some pros and cons of this?? i know u dont particularly like UNG, but it seems to mirror the price pretty well, and we’ve had several ceo’s say that they think ng is going to $10 in 2010.

  115. 115
    zman Says:

    Kyle – the only power you have as a small investor is to vote with your feet. If management does something I don’t like I think about the impact short and long term it will have on the stock. If I simply can’t live with it I leave. There are over 100 U.S. E&P names and then you have all the players to the north and then everyone else. But I think answering the impact question is the most important part of the decision. Will his pay package impact his ability to get future financial deals done? Does it overtax the corporation’s ability to meet its other goals? Will he become a poster child of greed and therefore cap his ability to get the job done etc, etc, etc.

    Now, if its more of a visceral, “I hate that kind of CEO” response then you should dislike the stock here and at any price under his tenure.

  116. 116
    kyleandy Says:

    choices – michael douglas was on either leno or letterman the other night and he did say a sequel was coming!!!

  117. 117
    zman Says:

    Re 114.

    UNG – I don’t care for how those ETFs are structured, have traded in the past and lost money as gas market went higher due to the way they roll the contracts. It may have advantages in a market in backwardation but not in contango. I prefer a gassy E&P that is modestly hedged with low, low operating costs to UNG.

  118. 118
    elduque Says:

    I agree with all the comments about being greedy.

    Just think it is one hell of a company and he is the one who built it. And yes, it still doesn’t justify the greed.

  119. 119
    zman Says:

    …like an EOG. Conservative management, low debt, lots of assets, probably 25,000 drilling locations to choose from, still gassy but getting oilier which provides balance.

  120. 120
    BirdsofpreyRcool Says:

    this just out… kicked the mrkt in the head…

    Reuters.com reports financial professionals, academic experts and the U.S. broker-dealer watchdog agree the SEC should not reinstate its old uptick rule to regulate short selling but disagreed on what other measures would be effective. At a day-long meeting on Tuesday, the SEC examined a handful of proposals to restrict short selling after a year in which U.S. markets lost trillions of dollars amid the economic crisis. The SEC is considering five proposals, including reinstating an updated version of the Depression-era uptick rule, which would only allow short sales when the last price was higher than the previous price. None of the SEC proposals received overwhelming support at the public meeting on Tuesday. The only thing on which experts achieved some sort of consensus was their opposition to proposed legislation that would force the SEC to reinstate its old uptick rule.

  121. 121
    zman Says:

    …well at least he didn’t have them buy his basketball team from them….they just donated a few million to it.

  122. 122
    zman Says:

    Thanks BOP – I would not expect that to have a lasting impact (not several days of trepidation at least). The SEC mentioned those 5 new ways of handling the issue a couple of weeks back. I thought it worked but we seem to need to reinvent everything these days.

  123. 123
    kyleandy Says:

    z i’m sure that if the shareholders had voted, they would have been unanimously in favor of giving the OKLA CITY THUNDER a few million…

  124. 124
    zman Says:

    Kyle – Don’t know if it was sign rental fees courtside or just a gift. Just doesn’t look good.

  125. 125
    choices Says:

    Interesting-CHK trading down almost 12%-maybe that is the answer but of course that penalizes the people who still own shares.

  126. 126
    zman Says:

    Choices – It was a noisy quarter with reduced forward guidance and the Aubrey cloud. Lots of things to give the shares a pause today.

  127. 127
    BirdsofpreyRcool Says:

    IG credit index sold off a bit, but now back to near the tights of the day.

    IG 158

  128. 128
    BirdsofpreyRcool Says:

    On the other hand… little old boring CRK is holding in there… and PQ is bouncing off its lows.

    No stadiums, no wine or old map collections, no glitz and glamor… sometimes, that’s a good thing. 😉

  129. 129
    zman Says:

    BOP – EOG well off lows too.

  130. 130
    BirdsofpreyRcool Says:

    Speaking of Drama Queens…. hot off the bloomberg news service —

    Victoria Principal Sues Former Housekeeper
    2009-05-05 18:55:01.583 GMT

    LOS ANGELES (AP) — Victoria Principal is embroiled in a legal fight with a former housekeeper that’s worthy of a prime- time soap opera. It involves allegations of a gun, a sick dog and extortion.
    Maribel Banegas claims she was fired by the former “Dallas”
    star on Dec. 26, but instead of paying her, the actress threatened to shoot her.
    Principal, in a lawsuit filed Tuesday, states she pulled the gun only after Banegas injured her dog and was acting aggressively toward the actress and another worker. She claims Banegas repeatedly demanded money during an argument and refused to leave her home.
    The dueling lawsuits will play out in Santa Monica, Calif.
    Neither woman’s lawsuit lists an amount she is seeking.
    The incident that sparked them happened at Principal’s Malibu home. According to Principal’s lawsuit, she hired Banegas from a temp agency and the woman was only employed with her for three days.
    Banegas, in a lawsuit filed Friday, claims Principal fired her and refused to pay her after she took Principal’s dog for a walk. The lawsuit claims Principal berated her for taking so long.
    She claims that she locked herself in a room and called 911 after Principal pointed the gun at her. She is suing for false imprisonment, intentional infliction of emotional distress and assault.
    A phone message left for Banegas’ attorney, Chris Allgreen, wasn’t immediately returned Tuesday morning.
    Principal’s lawsuit claims Banegas took her dog on Dec. 26, and that when she returned with it an hour later, the dog was “visibly choking and shaking.” The suit states she and Banegas got into a shouting match, and that it was the worker’s aggressive behavior that compelled her to grab her gun.
    Principal, 59, is suing for several claims including trespass, civil extortion and animal cruelty. Her lawsuit states that Banegas’ treatment caused her weight loss and “significant injuries,” including vertebrae damage.
    Principal played Pamela Barnes Ewing in the hit series “Dallas” and has her own line of skin care products.

  131. 131
    Jay Reynolds Says:

    Raising Cash Dept.

    If anyone needs about 600-700 ac of HS acreage in N. Caddo Parish, LA via sublease (ie, maintained via current production) at a good NRI, let me know.

  132. 132
    zman Says:

    Jay – Aubrey is still buying, said so on call. If you want to deal with those guys.

  133. 133
    BirdsofpreyRcool Says:

    #130 — sorry for polluting the board. For some reason, that struck me as hilarious…. in light of the discussion of Rich and Famous people doing stupid things.

  134. 134
    zman Says:

    Heck, EOG may go positive. Good quarter, raised guidance and all the other yada, yada above. And management is the exact opposite of CHK. Even though the E in OG used to stand for Enron, lol.

  135. 135
    BirdsofpreyRcool Says:

    headlines that count — “Goldman Sachs says US Banks are ‘Attractive’ and boosts ratings”

    BAC and Capital One = outperform

  136. 136
    zman Says:

    RBC cuts LINN target from $23 to $21, maintains outperform rating.

  137. 137
    tater Says:

    Thanks BOP

  138. 138
    BirdsofpreyRcool Says:

    almost to 900 on futures… if get there soon, HT thinks higher close

  139. 139
    BirdsofpreyRcool Says:

    yep… 900.50 on the futures.

    let’s see if his gut is any good, after 4 days on a Florida golf course.

  140. 140
    BirdsofpreyRcool Says:

    IG playing along… 1/2 bps tighter

    IG 157.5

  141. 141
    isleworth Says:

    Aubrey on CNBC at 5PM

  142. 142
    zman Says:

    Thanks Isle

  143. 143
    BirdsofpreyRcool Says:

    IG 157

  144. 144
    zman Says:

    Beerthirty!

  145. 145
    zman Says:

    Jay – re 131, check your email.

  146. 146
    zman Says:

    API showing:

    Crude down 1 mm barrels
    Gasoline down 2.9 mm bbs
    Dist up 1.1 mm bbs

    Survey for tomorrow’s numbers showed:
    Crude up 2.5 bbs
    Gasoline up 0.65 mm bbs
    dist up 1.0 mm bbs

    Oil still down on day but back over $54 in after hours.

  147. 147
    zman Says:

    anyone see API util and imports?

  148. 148
    john11 Says:

    Aubrey on cnbc right now

  149. 149
    jat Says:

    Util up 2.2% to 83
    Imports down 14 at 9708 vs. 9722 prior

  150. 150
    zman Says:

    Thanks Jat

    PXD on the tape, strong top line out the top end of the production guidance range, good cost controls, have to wait a little longer on the Eagle Ford well as they are still fracing it but they did mention adding more $ to the play to drill another well so it stands to reason they are “encouraged”.

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