Wednesday – Oil Preview And More Earnings

182 thoughts on “Wednesday – Oil Preview And More Earnings”

1. ADP at 491. People had been looking for losses of 650K jobs there.

2. PXD 1Q slide show:

   http://phx.corporate-ir.net/phoenix.zhtml?c=90959&p=irol-presentations

   Eagle Ford Shale – Slides 9 to 11

3. Good morning. Green shoots continue to push up in the credit markets. The ADP employment number kicked the Investment Grade Index from around 158 bps prior to the number, tighter… to around 152 bps now, off a bit from the tight of 151. The good news is that at 150 on IG and 185 on HY, no one will have to listen to me anywmore. So, a little something to look forward to!

   IG 152

   HY 80.5

4. Meanwhile… some levels on bonds of companies we follow. Quoted on the offer side —

   CHK 9.5% 100
   PXP 10.0% 99
   HK 10.5% 101.25
   SD 8.0% 87.5

   CHK is seeing “better buyers” at that level, PXP and SD seeing “better sellers.”

5. Bill – have looked over PXP – finding that story more compelling now than before. I haven’t got it worked up yet and I won’t be buying pre call but that’s more interesting than I had thought.

   WRES due to report this morning (they have a conference call) but still no pr. Note to management teams … bad idea to last minute your pr.

6. BDI +168 2085

   TED 78.81

   Lots of good numbers!!!!!

7. Eld – did you get my email on full cost stuff? Let me know if you want more detail.

8. A credit market strategist I like to follow is claiming the credit rally is due the non-TARP bondholders standing up to the “smash-and-grab” robbery our President proposed on the Chrysler restructuring (my description of the situation, not his). Not sure if I agree with him… but the rally really did get its sea legs about the time capital providers showed some backbone.

   “Shared Sacrifice” makes sense… but the ONLY ones “sharing” were the senior lenders in the Chrysler deal. Everyone else (UAW, US Treasury) was getting way more than their fair share under the LAW. It’s the lack of respect for rule of law, that has really rattled the bond market (this affects bank lending and mortgage origination). This is what makes watching the Chrysler situation so important. It affects the cost of borrowing for ALL of us.

9. I did. Do all oil exploration cos. use full cost accounting?

10. Head Trader thinks you buy the morning pullbacks as he thinks we “trend higher with bumps in the road” today.

11. NG has recovered yesterday’s 11 cent downer

    Oil is at $55.37

    No, some use “successful efforts”. This is one of the reasons I look at cash flow vs eps for oil and gas companies, I will find some links and send later today. Note DVN had a $4.2 B writedown and the stock could care less today.

12. Tech Trade also says to buy the morning and look for a few points… but gives it low odds.

    HT thinks there is a squeeeeze coming. Reiterates his “buy the morning dip.”

13. IG 151 bps

14. 5 thanks z

    dsx call on now, ceo made interesting comments on industry, orderbook too big to be financed (in good times) means trouble for shipbuilders in future

    anyways, if anyone is interested in drybulk i suggest you listen to replay or read the transcript

15. Morning all.

    Pullbacks continue to be almost non existent in the broader market. I had said last week that I thought we could go much higher than most of us thought possible in short order. I also said 904 SPX would be a brick wall which is was not! The 200dma is the attractor to price here and it is currently around the 961 SPX level. Its quite possible we just go straight there as we are currently in a iii wave. I have yet to determine whether this is only iii of i. If so we should still see a pullback but it should not go below 866 spx before the higher targets are achieved.

16. Z agree with your comments on oil. We are in break out territory here and if we can break out then we are headed to $60 plus.

17. from Tech Trader — “10:05 EDT is the most common time for LOD but there may be some selling shortly after that drops it a little more.”

18. Why Dylan Rattigan left CNBC:
    http://www.businessinsider.com/henry-blodget-dylan-ratigan-speaks-and-hes-angry-2009-4

19. HK getting smacked

20. 2- Follow that trend northeast, turns east in La. Encore’s Lwr Tusc Marine Shale.

21. A couple of possible fib targets for the SPX in this iii – 923.56 and 933.38. Once we see iii top then a pullback in iv and a final spike higher for v which I believe will be to the 200 dma. By then it may have come down into the 950’s.

22. Gary – It just about has to be an analyst commenting on the bump in Capex, glad to have taken most Mays off the table, may add to the June’s I started yesterday on the call.

    Reef – thanks.

    Nicky – good to know, thanks. We get inventories in about 40 minutes, if they confirm API #s last night, pretty good chance we head on higher.

23. WRES reported just before the open (very rooky that). Mixed bag

    12 cent loss expecting 9,
    production looked strong so it was mostly price
    redetermination not yet complete but they don’t see a reduction in their borrowing base.

24. HK with a $23 handle will prove to be just-too-cheap, I think. Only reason to walk it down was capex > estimated CF.

25. PXD up 8%, call starts in 5 minutes. I expect them to talk more about why they are adding dollars to the Eagle Ford Shale (E.F.S. for short) program.

26. BOP – I absolutely think that’s all it is. That and the fear that they will roll off more shares from their printing press given where the stock is and the need for additional funds. I suspect they will make some pretty strong claims about both the H.S. and the E.F.S. on the call.

    EOG working well now … that really was a good quarter, just released on a bad day.

27. hk already off low in a hurry.

    Z.. thoughts on clr’s action with earnings tomorrow…

28. Gary – back to you post the next 3 calls on that.

29. Gary – ok, PXD is still adding callers.

    CLR – it’s had a good run, need some good well results in the Bakken to keep the momentum up. I sold half my position I think it was Monday for a good gain and so I’m playing with House Money and not going to add to my 10 May Call $25 position in terms of total dollars. I may sell it and add Junes for the same dollar value if it runs following the oil numbers in 30 minutes.

    PXD 1Q09 Call starting.

30. z — good point. The threat of deal-doing is high at HK. Frankly, i think they might do a HY deal next…

31. Watch TXCO – stock doing anything but going down. PXD is going to have a special talk on the call on the Eagle Ford.

    PXD 1Q09 C.C. Notes #1

    70% of 2010 gas hedged above $6

32. Thanks Z..

33. BOP

    Was wondering about that, HK is 46% debt to cap, not sure if that enters in for the bankers now but a deal of size would take them over 50%. Why not do another equity deal in 2 or 3 months and get that paid in capital on the balance sheet, then do the HY deal?

34. PXD CC #2

    1 rig running now, capex held at previous guidance at $250 to $300, ultra low for a firm of this size.

    They can do this because their R/P is high so they are not fighting big decline curves. Also they have some low cost assets and they are reducing costs…pretty much the stuff analysts like, other than their balance sheet which has been that way for awhile.

35. Wow GMXR. Own a little common, no options. Wow. Not going to touch that in front of those 3 wells they are going to announce on the CC.

36. Canaccord Adams takes EOG to Buy

37. z — HK… yeah. Having an argument with a seasoned PetroHawk watcher… he thinks equity too. Frankly, the stock is in Floyd’s target zone for doing another 2ndary. So, is probably the outcome. Historically, they announce within 24 hrs of the conf call, right? So, should know soon.

    That capex > cash flow was a bit disappointing. That said, NO ONE has the Best-in-Class position in the HVS and EFS that HK does. In the end, the quality of their assets (plus good mngmt) is what counts.

38. PXD CC #3

    Sprayberry Trend – West Texas (below the Eagle Ford)

    * No rigs running now

    * 900,000 acres either held by production or by lease payments. They are finding that using cash to hold the leases has been cheaper than drilling while they wait for drilling costs coming down.

    * Restart to drilling next year

    * Drilled 17 wells in the quarter but fraced 41 so should boost in 2Q. Could make them beat next quarter.

39. Tech Trader says the odds of a long trade working here is now 100%. (with the caveat that, in theory, nothing is 100%).

40. btw, also hearing that DPTR is the ultimate short… headed for zero. Don’t follow that one, but they are apparently able to generate negative EBITDA. Not the preferred method of operating in this environment.

41. PXD CC #4

    Eagle Ford Shale

    As they were drilling their Edwards wells, they regularly flared gas from both the Austin Chalk and the Eagle Ford shale. They have > 150

    They cored 180 feet of shale in well #1

    3000 foot lateral with 8 stage frac, completed in the next 2 weeks.

    Second well in 3Q is well away from the first, …big area to play in kids.

    Eagle Ford Shale

    overlies entire 310,000 acres in the

    14000 feet in the north

    120 to 250 feet thick, average thickness is 200

    slightly overpressured, good porosity (avg. 10%)

    they have 3D over all the acreage, can see natural fracturing.

    They said what I said last night:

    natural fracturing will keep costs down and rate should be better than otherwise would be expected.

    Comparison to HK – they have completed 4 wells to date and are drilling 2 more.

    Slide 11 compares logs from HK and PXD.

    they think 200 Bcf per section.

    “very promising”

42. Ok – stopping here on the PXD call and jumping to the HK cal. My sense is that PXD moves higher between now and 1st E.F.S. completion in a week or two.

    EIA in 3 minutes

43. EIA Inventory Release:

    Crude: up 0.6 mm bbs (much less than the 2.5 in the survey
    Gasoline: down 0.2
    Distillate: up 2.4 (much bigger, not surprising

    Utilization: 85.3% big up
    Crude imports: higher by 100K bopd
    Gasoline demand: weak at 8.9 mm bpd

    Not a wildly bullish report underneath the main numbers.

    Oil at $55.40

44. HK Conf Call still queuing listeners.

    WRES call obviously not inspiring longs. Will read the transcript.

45. bp

    http://online.wsj.com/article_email/SB124155530486688737-lMyQjAxMDI5NDAxNjUwNTY1Wj.html

46. HK 1Q09 CC #1

    CEO Floyd comments – says the increase in the budget is the natural progression of the equity deal already done.

47. HK CC #2

    Latest H.S. well: put on yesterday at 22 MMcfgpd.

    They have put every operated well drilling in the H.S. into production without delay.

48. WRES shelled now.

49. HK CC #3

    Eagle Ford Shale

    Henderson well: Best well to date, and cheapest to date, did not say rate.

    20 days, spud to TD

50. Trying to add a little more HK

51. V – looks overdone but still on HK call.

52. ZTRADE: Riskier trade.

    Added 20 HK $26 calls (HKEP) with the stock at $24.40 for $0.40. The stock was weak early on an increased spending budget but the call is going well. I won’t hesitate to punt these into strength along with the other Mays but for now I plan to continue to hold my Junes taken yesterday. Conference call ongoing.

53. WRES call was unispiring. only 2 questions – 1 about bank redetermination taking long time and what gave them confidence it wouldn’t be reduced, answer new bank (lloyds) in consortorium and needed more time and mgt talking to banks made them feel no decrease in redetermination. not spoken with a lot of conviction in my opinion. mkt must have agreed w/ me!!

54. Thanks Kyle. I plan to get to it after the HK call, will listen to the replay as soon as it is available, not going to bottom fish just yet.

55. HK — sounds like no equity offering today… stock likes that.

56. BOP – agreed. But as much as I am a natural born optimist (you have to be to be an options trader) I am a skeptic (you have to be to be an analyst). He hedged the comment with a shoulder shrug in his voice. I think no deal today, but take the stock to $30 and I bet he can’t resist.

57. z — HK offering. precisely! we will see another equity deal at some point this yr… that’s why i said not “today.”

58. Oil at $55.95.

    HK coming back nicely, need green to prevent post call roll to today’s lows.

    EOG and CLR Go!

59. BOP – meant to add that CEOs are natural born liars.

    WRES only half shelled now.

60. HK Q&A note:

    they continue to be pleasantly surprised by rate as they move around in the play. Recall that their wells are not simply clustered in a sweet spot but spread far afield.

61. HK thoughts on IP relative to EUR

    They can’t speak for other companies on IP rate. Internally they use a consistent methodology to report IPs. A 20 MMcfepd well would be in the higher end of their EURs and a 10 MMcfedp IP would be at the lower end. Given where their wells are coming in it sounds like they are adding more than the current 7.5 Bcfe per well that is their current benchmark for the play.

62. HK Q&A

    Comment on completion techniques:

    Have been gathering a lot of data from other operators and their own.

    They are constantly tweaking to get a better job at a lower or the same cost.

    Some of the new things, longer stages, pumping ottawa sand as opposed to resin coated or ceramic, increasing injection rate up to 100 barrels per minute (Wyoming might want to chime in here)

    They think there is a real chance they can improve EUR further, improve rate, and lower costs.

    Decline curve – all tracking at the same 7.5 Bcfe EUR.

63. HK Q&A

    Eagle Ford:
    Henderson well (#5) – LaSalle county – put on 2 weeks ago. They said it was in the list but I don’t recall this well any more than the analyst asking the question about it. They still gave no rate on it.

64. HK Q&A

    10 or 12 rigs could hold all the H.S. acreage but the increase to 16 makes that an easier, quicker to accomplish goal.

    Eagle Ford
    $12+ mm on first well (lots of science in that)
    Most recent AFE was for under $5 mm.

    Exhibiting shallower decline that the H.S. wells.

65. HK Q&A

    H.S. Completions:

    They are pumping 75% ottowa sand, 25% resin coated sand. Ceramic sounds like its not in there. Poor news for CRR.

66. HK call coming to a close. Analysts seemed fairly pleased. Given the green day elsewhere its probably going to trend with the broad market again, if oil holds. Analysts should be getting on the squawk boxes about now. Stock is at $25, down $0.16 at end of CC.

67. HK — given the increase in production outlook, lower drilling costs, higher EURs, continued increase in non-op production, good hedge position, low discount to NYMEX, decreasing time from spud to hook-up… think the sell-side guys will take the NAV up here?

    I do.

    Potential equity offering the only fly-in-the-ointment I can find.

68. BOP – Maybe a couple of $1’s. The extra debt balancing some of the reserve gain out.

69. Listening to WRES replay

70. You mean the $600mm already done? Or, the potential draw on the revolver.

71. The draw on the revolver. Unless gas prices bounce in 2H09 (which I expect them to) it will happen. I have not run the numbers to see how much.

72. dvn talking about lower decline rates in haynesville

    everybody is showing growth in production

    question: how will supply glut be resolved

73. #71 — just making sure. Thx. Personally, don’t think the revolver draw will have that much affect on the NAV, giving that EURs are creeping up. But, as the revolver draw creeps up, so does the potential for a equity deal.

74. dvn call very bullish stock up almost 10 %

75. exxi had its call today..they are in same gom plays as mmr,pxp

    Amazzo news should be out in 2 or 3 weeks as they are at 21.500 td 23,000

76. z — what % of nat gas production comes from shale plays these days? someone said that on their conf call recently… still a pretty low percentage, if i recall correctly.

77. z — good heat-of-the-moment buy on the HK May $26s… HK with a $23-handle was too cheap.

78. Bill – 85% of U.S. gas production comes from conventional sources. Rig counts there are squashed.

    The U.S. aggregate decline rate is about 30% which means that production declines by over 15 Bcfgpd each year if we don’t drill.

    The Barnett is sub 6 Bcfgpd, and Texas, which is about 20 Bcfgpd looks to have rolled over already.

    On the conventional production, much of it comes from small and medium players. They are not drilling right now.

79. Bill – if you have EXXI questions Reef is probably your guy on the name. Did they say anything about their ultra deep play.

80. NG up 20 cents.

    Thanks BOP. I’ll be letting go of the May calls for the end of the day I think.

    Oil has hit $56.07 so far today.

81. Aubrey chk may look like a genius

    cash in 2010 hedges only to reload later with higher prices

82. ZTRADE:

    Sold the EOG June $70 calls for $8.40, up 169% withe stock up $4.65 on the day at $75.66. I continue to hold the June EOG $80 calls.

83. Bill – yep, I think that’s his evil plan.

84. 41- PXD has maybe 100 PDBP zones in the Eagleford in those 150 Edwards wellbores.
    As the Edwards depletes, they can kick out of the existing vertical drill a horizontal for maybe $3MM with completion and frac. Lets see: 100 times 6BCF/well times .75 NRI= 450 net BCFE for $300MM is 67 cents/mcf for F+D.

85. dvn has a piece of Kaskida in gom

    Stat oil bot 75 % LAST YEAR

    I see stat oil name come up often

86. IG 150.5bps…. almost there….

87. RE STO, yep, they like the U.S., they are with CHK in the Marcellus.

    RE PXD – yep, that’s how I look at it. At 200 Bcf per section in the Eagle Ford alone that is a pile of gas. All they need is a budget to get it done … but unlike other operators, there’s not the time rush to hold acreage.

88. Gary – RE CLR. Recall my plans from #29. I’m thinking hard about doing that soon. I may or may not roll to Junes until after the call if the call and results warrant re entry. If I leave some on the table so be it. But my second set of Mays is up 356% right now, just seems imprudent to hold those into a call with 7 days until expiry on them.

89. I hear ya, Thanks Z

90. There went half of them.

    ZTRADE: Sold half (5) of my remaining May CLR calls for $3.70, up 383% since entry last week. I may take the other five off before the call tomorrow and may add some longer dated calls. I’ll let ya know.

91. Got to step out for 20 minutes.

92. The Investment Grade CDS Index has tightened back to a level that indicates credit is thawing, investors are willing to buy risk assets, banks should be willing to make more loans, and the world has finally gotten over the collapse of Lehman. If we did not have the threat of Stupid-Govt-Moves hanging over us, I would say that our economy is pulling itself back together. Unless we start to move appreciably in one direction, or the other, I will not pester this board with a flurry of credit comments.

    Recall, when this all started, in more “normal” times, the stock market could care less, what the bond market is doing. (A bit of hyperbole, but you get the point.)

    IG +150 bps offered.

    To TRULY get back to “normal,” we should see that spread cut in half again, to about 75 bps. But, 80% of the hard work is now done.

93. I think pxp is drilling in this area

    http://www.rigzone.com/news/article.asp?a_id=75827

94. page 19 & 20 here

    http://library.corporate-ir.net/library/13/132/132091/items/329685/22089491-34A2-4DDF-9CBC-356280DEA226_PXPHowardWeil309.pdf

95. reef- Re #20 –One of the differences in the Tusc. Marine shale is that it is an oil source/reservoir. Not much gas in it so may be harder to liberate(produce)than the gassy, age equivalent (upper Cretaceous), Eagleford in STX.

    Encore has spent a fair amount of money drilling and completing 4 wells in the SW MS-Florida parishes of LA area with minimal production rates to date. 2 wells in Louisiana averaged 40 and 10 BOPD respectively in Feb 2009. They IP’d at 323 BOPD & 74 BOPD.

    How do you make money?

96. PXP is drilling an offset in the friesin

    The Friesian #2 well, as previously announced, encountered
    approximately 389 net feet of oil saturated Miocene aged sands with
    three main sand lobes encountering more than 210 net feet of high
    quality oil pay plus a fourth sand lobe encountering 179 additional
    feet of oil pay that was not fully evaluated.

    These four pay sands, all full to base with oil, are the uppermost
    field pays at the prolific Tahiti field approximately eight miles to
    the west across the basin syncline. Existing data show strong
    correlation, both geologic and pressure, from the initial Miocene
    field pay sands at Tahiti to the drilled portion of our Friesian #2
    well. Early stage commercialization initiatives for Friesian
    production are under study with multiple parties to target initial
    production by 2012.

97. Chrysler’s Greedy Hedge Fund Holdouts Get It Right: Ann Woolner
    2009-05-06 04:01:00.10 GMT

    Commentary by Ann Woolner
    May 6 (Bloomberg) — You can call the plan to merge Chrysler and Fiat good for the economy. You can think it creative.
    You can say it’s the start of “a vibrant new company,” as Chrysler LLC Chairman Robert Nardelli did last week.
    But there’s one word that you can’t call the Chrysler bankruptcy package: legal.
    The plan would overturn basic rules of bankruptcy by setting up a sort-of sale to sidestep pesky legal requirements.
    It would bulldoze well-established rights of secured creditors, property rights the U.S. Constitution guarantees.
    So if U.S. Bankruptcy Judge Arthur Gonzalez follows the law, the Chrysler rescue plan dies. If he blinks and approves it, secured creditors everywhere should feel a shiver of unease, and quick sales of insolvent companies to avoid court scrutiny would multiply.
    The other option is a settlement, and that might well be where this is headed.
    I hate to say it, but the dissident Chrysler lenders are right, the ones President Barack Obama described as greedy hedge funds selfishly blocking Chrysler’s survival.
    The president’s fist-waving looks a lot like the posturing lawyers use to scare an adversary into surrender, never mind the law. In fact, several are giving up the cause.
    At the heart of the plan, and at the heart of the plan’s problem, is the idea that Chrysler would sell itself quickly rather than go through months or years of court-supervised reorganization.

    Within 60 Days

    Called a 363 sale for the relevant section of the bankruptcy code, it can close within 60 days and unload all or part of the company. The sale to Barclays of a piece of Lehman Brothers Holdings Inc. took about a day.
    A 363 sale is perfectly legal when a sound business reason demands it and when it isn’t reorganization in disguise.
    But if it’s aimed at resolving creditors’ claims, that is what reorganization is for. Bankruptcy reorganization promises secured creditors at least the same payout they would get if the company liquidated, and Chrysler’s proposed sale looks like a way around that.
    Figuring what creditors have coming to them requires lots of paperwork and hearings. That’s why it takes so long.

    Drawn-Out Bankruptcy

    And that is what Chrysler is trying to avoid. In fact, it must avoid a long, drawn-out bankruptcy if it is to survive.
    But with a 363 sale, there is no chance to figure the value of Chrysler’s assets if sold piecemeal, much less what each creditor should get.
    The secured creditors who are complaining about this helped save Chrysler the last time it almost went under, in 2007 after the marriage to Daimler AG soured. How much of a haircut should they be forced to take?
    The dissidents say the sale is nothing more than what bankruptcy law calls a sub rosa reorganization, a secret reordering dressed up to look like a sale, which the law forbids.
    Plus, would it even be a true sale?
    In public statements Chrysler says a United Auto Workers health benefits trust would get 55 percent of the shares of New Chrysler and a $4.6 billion note to satisfy some of the group’s unsecured claims against the company.
    Paying nothing but offering its fuel-efficiency expertise, Fiat SpA would own 20 percent initially and could increase its stake by another 15 percent. The U.S. and Canadian governments, which are providing billions in interim financing, would own the rest.

    Phony Sale

    Chrysler is essentially selling itself to itself, says Lynn LoPucki, a law professor at the University of California, Los Angeles. He teaches secured transactions and maintains a database of major bankruptcies.
    So, if the “sale” isn’t a true sale, and if it dictates payout to secured creditors, isn’t that a sub rosa reorganization?
    If it favors junior creditors over senior creditors, doesn’t it violate the very basics of bankruptcy law? Senior creditors can volunteer to give up some of what’s due them but they can’t be forced to by a bankruptcy court.
    “Those are property rights, and they are protected by the Constitution,” says Daniel Glosband, a partner in Boston’s Goodwin Procter. “You can’t just take them away.”
    And yet, it could happen.

    ‘Enormous Momentum’

    “There’s an enormous momentum in favor of the government plan,” says Jay Westbrook, who teaches bankruptcy law at the University of Texas.
    It’s naïve to assume bankruptcy judges feel compelled to follow the law, says LoPucki.
    He argues that bankruptcy courts across the country compete for the big cases by giving lawyers for major companies what they want.
    “According to the law, this plan should not be approved,”
    LoPucki says.
    Yet he predicts Gonzalez will do it anyway to persuade other companies (General Motors Corp. comes to mind) to pick Manhattan’s bankruptcy court over, say Detroit’s.
    Already the Chrysler case is one for the books. You have the federal government sending a company into bankruptcy court, financing its reorganization, deciding who will get what, setting a strict timetable and urging a judge to blink at the law.
    If the argument that Chrysler’s welfare is so critical to the national interest that longstanding laws can be ignored, what’s next?
    Some future president will find a way to justify blatantly illegal conduct. Such as torture.

98. Z – I only got one thing to say: those new headphones seem to be working pretty well.

99. Dman – Thanks, that some Q-tips. Two weeks in and I really like them headphones.

    I have listened to the WRES call. Hooo-humm. Not the end of the world, the cut in capex was half of what they previously mentioned. I will listen to it again but for now I am holding.

    PXD up 16% now. That’s more than I was looking for out of the call.

100. Crude clearly in break out territory now at $56.25.

101. Is anyone thinking that this rally is getting to be a little overdone or are we just straighlining to the moon?

102. Stocks like BRY are not moving as well now that its up here, having clearly already discounted much of the move. I would bet that it moves again if we make a run on $60 oil.

103. It seems like you can appeal a BK decision.

104. V – I think it was overdone on the downside as well, but yes, it feels a little too homogenous to me. I don’t think in energy the E&P rally is done but it needs to take a breather, if for no other reason than to let me reload at lower prices with recent highs still close at hand.

105. I’m talking more about the broad S&P. I agree that, for energy, all it needs is a breather.

106. Anyone listen to the CWEI conf. call or have any management or acreage quality thoughts?

107. ROSE a laggard not getting any help from Eagle Ford yet.

108. XTO comment on cc.: industry needs gas at $7-8/m to generate sufficient cash flow to keep industry production flat.

109. TXCO pretty amazing considering they are in a huge financial pinch.

     RMD – not on call, opinion of them so-so.

     ROSE – thanks for pointing that out. Still mulling.

     HK up 2.3%. The $26 calls from this morning and the remaining $25s will likely be sold by me today or tomorrow.

110. 105 amen and ditto

111. Re that XTO comment. EOG and CHK made a similar comment yesterday.

112. FSLR bumping up against $200. Oh what a difference 5 days make. Is it really worth 33% more than it was before the call. With reiterated, not raised guidance. This smells like a sentiment rally, not saying the stock is over priced here but its good to recognize it for what it is.

113. ram #103…. no. no appeals process in a BK. there is a legal term (that escapes me right now)… but, it’s equivalent to saying “you can’t reconstituted a broken egg.”

114. VTZ – the broad market rally is overdone in both time & price if you go by historical norms. But are we really in a “normal” period? Doesn’t look like it to me.

     Still, get the feeling that upside is getting a bit exhausted here.

     XRT (retail ETF) has reversed down strongly from a pop at the open.

115. ZTRADE:

     Out all (10) PXD $25 May Calls (PXDEE) for $4.00, up 220% since purchase yesterday. Good earnings report, good conference call, will reposition on a pull back into longer dated calls here.

116. Z – do you think SU has run ahead of crude here?

117. Dman – I was looking at that a little while ago. I’m not sure it has run far enough, obviously up well with crude but that name is a little special and was overly beat down. I was glad to hold CLR into this crude rally.

     On the remaining CLR, I think I will hold through earnings tomorrow. They will have some well results and will talk about squashed differentials. I am hopeful that Hamm does not talk about his efforts to stall more Canadian crude from reaching the market. I think of that as a distraction, much like Aubrey talking about his campaign to get gas into car tanks except it smacks of protectionism. Anyway, if it runs to $30 before the close I will probably punt the remain half of my May calls and sleep in.

118. ZTRADE:

     Sold the 20 HK $26 May calls purchased during the conference call for $0.90, up 118%. I don’t do a lot of trades with the intention of them being “day trades”. But that one did what I wanted. I will likely pull the trigger on the remaining 10 May $25s soon and look to reposition on the next big red day in the group. If you haven’t noticed, I’m raising a little cash.

119. z — great intra-day trade on overdone HK weakness. Think 1-3 day duration trades might be the safe thing to do here.

120. Profits are meant to be taken in markets like this. If I leave cash on the table, and I’ve left plenty it is of little concern to me compared to round-tripping winners into scuds.

     As of now, the $10KP has only 2 May call positions left:

     (5) CLRs and 10 HKs

     and then a scud of a position in HAL puts.

     Everything else is longer dated calls.

     Cash is now: 76% of the portfolio.

     Thanks BOP, just didn’t seem right to sell the stock off like that on the capex boost.

121. Re HAL scuds, would HAL be considered a 2X neg on energy if we get a pull back in energy?

122. BOP, re 113, I believe the term you are looking for is “moot”, a legal term meaning the train has left the station. However, i must disagree with your contention that there are no appeals in bankruptcy. It is certainly possible that events take place before the bankruptcy court that render an appeal moot, but I don’t see that happening in the Chrysler case.

123. Ram – that’s a good question. It certainly has run too far too fast. Mowed me down a couple of times. I’m not ready to go back there yet. Many of the names like NBR are up almost 100% in the last 4 weeks. Unreal.

     I may target CRR soon, but the spreads are bad. Just seems to be a buying panic on in service and then, I guess, in the rest of the market.

124. There is more than a little fast money re-entering energy, volumes are large last few days, today especially.

125. Reporting after the close today:

     AMC
     GDP
     APC

     No positions in those.

     Reporting before the open tomorrow:

     CLR – 5 MAY $25 CALLS
     GMXR – a smallish stock position, no options
     PXP – no position

126. FYI – if you want ZBLASTS texted to your phone send your username, phone number, and carrier to zmanadmin@gmail.com with text me in the subject line. We should have this up and running next week.

127. AAA – #122. Sorry. My shorthand was confusing. You are correct, the BK process is all about working out issues and objections. I was refering to when a BK is settled. When a company emerges from BK, there is no appeals process as to how the settlement turned out.

     And it’s not moot. It’s some clever saying, like “you can’t put spilled milk back in the bottle.” Once a company emerges from BK, involved parties can’t appeal the outcome.

128. PXD unwilling to pull back. I may take a little June position before the close. My sense is that analysts will say nice things in their morning first call notes. My second thought is that its a bit extended, though still a cheap name and that it and the group are due for a breather. And my third thought is that it will likely drift higher from currently levels as they approach the well results on the Eagle Ford well. The results themselves could lead to selling, not that they will be bad, just that it should have moved up by then, crude, gas, and market willing.

129. Re PXD, there seems to be a piling on in the JUN 30’s.

130. ZTRADE: Taking an opening position in June PXD calls. We sold the Mays earlier but it seems unwilling to give much of a pull back.

     Added (10) PXDFF June $30 calls for $2.05 with the stock at $29. If it opens weaker tomorrow I’m likely to add more either then, Friday, or next week.

     My sense is that analysts will say nice things in their morning first call notes. My second thought is that its a bit extended, though still a cheap name and that it and the group are due for a breather. And my third thought is that it will likely drift higher from currently levels as they approach the well results on the Eagle Ford well. The results themselves could lead to selling, not that they will be bad, just that it should have moved up by then, crude, gas, and market willing.

131. Ram – thanks, I noticed that too, lol.

132. Z – I know gapfill-ology isn’t a law of physics or anything. But the gap in LINE at $12 (late December) is bugging me.

     All I want to know is: am I being retarded to worry about it?

     🙂

133. Retarded seems a bit harsh unless you’ve run for congress, won, and not told us.

     Tater or others are probably better qualified than me to answer that but in my experience, sooner or later, stocks fill gaps.

134. CLR closing on $30.

135. ZMAN – What was the issue that you didn’t buy LINE in your IRA?

136. Denise or someone referenced a limit in the amount of MLP distributions allowed in an IRA so I moved it to a taxable account.

137. Last year at this time is when CLR gapped up big on earnings.

138. Where does one find the limits for MLP distr in IRA’s?

139. Bank Stress Test — Dick Bove is no junior analyst in banking. When he speaks, markets listen. Pretty brave of him to go this far out on a limb… but, I’ll bet he’s someone who has always paid all the taxes he owes… so he can sleep at night.

     http://www.cumber.com/special/bove.pdf

140. BOP – What do you think about this issue?

     Canadian Oil Sands Trust has agreed to issue US$500 million principal amount of 7.75% senior unsecured notes. The notes mature on May 15, 2019 and were priced at $99.792 to yield 7.78%.

141. OK, well I have to raise some cash into this rally, so I sold the LINE. My thinking is that there was a prior attempt to fill the gap (March) & will probably be another attempt, even if it doesn’t actually get there. Having just paid out a quarterly dividend I guess it might be dead money for a while. It was a safe zone during commodity annihilation & now they are looking for the sexy fast movers instead.

     OTOH, of course, the easy bull case is “hey it’s hardly moved & the commodities are on fire”. Wouldn’t be surprised to see it higher, especially since I just sold.

     But then, after the last 2 years, who would be surprised by anything?

142. Z…

     Hearing XTO saying frac costs were down 30% in April. No more detail than that, so could be anecdotal on some jobs, but seems huge relative to the 50% discounting you supposedly had in 1st quarter. Any thoughts?

143. Nevermind, their comments must be referring to the average drop from peak prices, otherwise it doesn’t seem to make any sense.

144. Jat – I think it will hard for service to offset this with cost cutting so that margins stay flat 2Q to 4Q. I’ve heard about that same number from a number of companies and from several sources listening to calls that I listened to.

     Ram – see the part about who should and who should not hold MLPs:
     http://www.investopedia.com/articles/basics/07/ml_partnerships.asp

145. Jat – that’s what I thought you meant. PXD said something like that this morning.

146. XTO comment on frac costs was ~ costs didn’t decline until the large backlog of business had been worked off; when backlogs got tiny, ie. now, prices caught up on the downside. Or at least that’s how I heard it.

147. VTZ — it’s all about “relative value”… where do similar bonds of companies with similar risk profiles trade? I don’t follow the company, but I’ll take a look for you.

148. Recurring themes this quarter:

     E&P guys say rates are falling at various %s

     Service guys say “no they are not, not yet”

     Both probably right as service looks at previously contracted stuff and E&Ps talking now. You have not seen the cost reductions filter to the E&Ps as much yet but that will change or has changed for new business now. Again, Wyoming can tell you first hand.

149. I just noticed that some of the Direxion 3x ETFs are optionable: eg ERX and FAZ. How’s that for leverage?

150. Bob Simpson on CNBC now.

151. VTZ — the Canadian Oil Sands US$500mmm 7.75% senior unsecured notes due 2019, priced at a discount to yield 7.78%.

     It’s a $500mm issue (upsized from $400mm), so that makes it a “Benchmark Bond” that will have to be included in a lot of indices (which are therefore natural buyers of the bond). Bonds are currently 144a, tho. So individuals can’t buy them. If you are interested, I can check on the reg rights, to see when individuals might be able to buy.

     It appears the company’s bonds are rated Baa2/BBB. That is 4 full ratings steps (by Moody’s) higher than CHK’s senior unsecured notes, which trade at a 9.4% yield. COS is investment-grade, but Canadian (that shouldn’t make a difference, but it does). CHK is junk-bond rated and has Aubrey.

     So, seems like COS is issuing an attractive bond. Trouble is, only institutions can buy it until the bond is registered.

152. Simpson saying double NG price by 1 year from now.

     Sees production off 5% YoY by 4Q09, falling at 10% rate after that (at least I think that’s what he said on that last part)

153. CLR at HOD. I’ll hold my remaining calls (5 of the May $25s) overnight with earnings in the morning.

154. z-is ROSE ok at these levels. Do they have any financials issues that I need to be aware of.

     Just searching for something to replace.

155. El d – I don’t own it yet, not ready to commit.

156. BOP – “COS is investment-grade, but Canadian (that shouldn’t make a difference, but it does)”

     Can I beg to differ? It *should* make a difference, but in the other direction: stable currency, non-socialist government … etc. (!!)

157. I guess I am re-learning a lesson here to not fight the tape but I certainly hate chasing-cannot understand at all bkx, banks, screaming higher, buying panic in energy.

158. LINE
     Resistance is generated from the prices of Jan ’08 and also $16.50 is a 50% Fib retracement of the drop from June ’08. I am not so sure that the gap from the beginning of Jan ’09 is as much of a target as would be a pullback to 15.50 area before looking to move higher if oil continues up. If oil drops, it’s anybody’s call.

159. LINE what % oil to gas?

160. Dman — LOL… re: Canadian… no argument from me!! On the other hand, Alberta has shown itself to be every bit as able to justify a higher energy asset grab as her neighbor to the south.

     Also, Canada, being a smaller mrkt, trades with a discount … fair or not. Canadian company bonds are just not as liquid as US company bonds… all else equal.

161. 51% gas / 49% mix of NGL’s and crude

162. Dman: FAZ traded 460 mil shares today, off 20%, some people are getting crushed, down from around 115 in March, $5 and change.

163. tater – Can you comment on the gold chart. Lots of people are saying a break above 920-925 range is extremely bullish and it broke the downsloping trendline starting in Mid-Feb at the highs.

164. Kyle, that was reserves:

     as % of production it should be about 60% gas this year.

165. Coronalightthirty

166. KOG — deal priced and done. Should know details soon. Nice to get that behind us, tho.

167. SPX closed pretty nead the HOD… gotta buy a round for HT and TT. Tan, rested, and ready. They were spot on today.

168. “nead”???? try “near,” instead.

169. thanks tater on LINE.

     kyl, LINE = “51% gas / 49% oil and NGLs”

     BOP – #160 Honestly, there’s always gotta be *someone* who’s going to be objective and rational, even when it’s totally uncalled for. There I was, with a perfectly good opinion, based on, well, nothing. And then you have to bring along some actual facts and understanding, not to mention expertise. I mean really, how’s my opinion supposed to withstand that?

     🙂

170. Dman — uh-oh… did i ruin a perfectly good joke? I can be SUCH a kill-joy sometimes!

     Bond-people… guess that is why we aren’t the popular ones at cocktail parties either.

171. BOP – what is your appraisal of the Bove argument? I gather he is saying the govt is going to crater the economy with the stress tests, because they are looking backwards & assuming that no improvement is possible.

     I heard a much simpler (but sort of opposite) version, which was that banks have reduced their lending *ahead* of the stress tests so as to look more solid and will then expand lending after they pass the test. But this assumed they would actually pass. Oops.

172. BOP #170 – no, not at all. The only attempted joke was #169, but obviously it failed 🙂

     As for parties, try being a physicist. Oh wait, you *are* a physicist (if I recall).

     A scientist *and* a bond person. Yikes. Four cocktails in the 1st half hour usually smooth things along 🙂

173. VTZ,
     Gold is becoming such a farce. If you aren’t sleeping with somebody in the IMF I strongly suggest you find another playground, or buy the stuff that you can put in your pocket. Every time these guys print more cash, they sell gold so the printing doesn’t debase the currency.
     Whah???
     Wake me up when that one begins to make sense to anybody in the room.

     Off the soap box and on with the charts. I think that any trade between 860 and 925 is a crap shoot. A break above 925 should be bullish and a drop below 860 is the opposite. On the daily chart for GOLD you can see what looks like a horse’s head on the end of the long green channel neck that describes the action from Nov ’08 to the present. As soon as the horse’s head looks like it’s either drooling something fierce or grows a unicorn’s spike, you’ll have your answer.
     http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

174. Dman — geologist, geophysicist, US govt bond trader, corporate finance analyst, junk bond mutual fund, bankruptcy workout specialist, hedge fund… yeah. It takes about 4 stiff drinks before people laugh at my jokes! 😉

175. Dman — my uncle was a PhD physicist from CalTech. Funniest guy I knew. Problem is, I didn’t figure out his humor until he was long gone. Took a while to get his jokes, I guess.

     Physicists are lively people, tho. Grew up just up the street from Richard Feynman. It was always interesting to go “trick-or-treating” at his house.

     Physicists are funny people.

176. A gold theory FWIW: the monster dollar creation does not hurt (inflation, the dollar, etc.) as long as rates are declining. Now that treasury rates have bottomed, $ creation does matter; this helps all commodities as assets (dollar hedges)while a better economy will help them as commodities as demand increases again. This is a big thoery crunched into a small space.

177. BOP – #175 You dropped in at Feynman’s place? Wow. That would have been interesting. Never a dull moment there, I would think.

178. Kodiak Oil & Gas announces $7.5M offering (0.72) The company announced that it has entered into purchase agreements with certain institutional investors and insiders, including management, for the sale of 10M shares of its common stock at $0.75 per share through a non-brokered registered direct offering. Subject to Kodiak obtaining NYSE Amex approval for the listing of the common shares issuable pursuant to the transaction, the closing of the transaction is expected to occur on or about 11-May. The shares of common stock offered by Kodiak in this transaction will be registered upon issuance under Kodiak’s existing shelf registration statement on Form S-3, which was declared effective by the SEC on 24-Jul, 2008. There was no placement agent or underwriter in this transaction.

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