Less Jobless Friday

"Only" 539,000 lost jobs in April, below consensus but above the whisper numbers. Equity and commodity futures markets were strong before and immediately following the number.

Housekeeping Watch: I will be out of the office from 10 to 11:30 am EST to see Intern #1's year end program at school.

Tax Man Taketh Away Watch: . The Obama Administration proposed scrapping "loopholes" for oil and gas producers yesterday saying doing so will raise $26 billion in tax revenues over the next 10 years. The White House rejected as "unfounded" industry claims that ending the tax breaks would take a significant toll on US oil and gas production. It said oil and, to a large extent, gas are internationally traded commodities whose prices are determined on the world market.


1) Hmmmm.

2) This is an attack on Big Oil and everyone who tries valiantly to "get the U.S. off foreign oil". Forget about natural gas and focus on oil. This is all about taking money from the haves (Big Oil because even though they are price takers its their fault (it being everything)) and giving it to the have nots (banks, insurance companies, some non-public solar companies (because the publics ones are on record as saying the Administration is doing a terrible job of thinking about how to develop solar in the U.S. but the poor little non-public companies will take cash from anyone, even the government .. but I digress)

3) U.S. Production Looks Like This:

The reason U.S. production looks like this is that the Majors long ago left off trying to grow in the U.S. not just because the easy stuff was drilled up but because it was easier to deal with buggering pirates in Kraplakistan than it was to deal with the U.S. government.

4) The Claim That Production Won't Be Impacted Is Bogus. It's true that oil is a globally traded commodity. Dollars spent drilling for oil will go where they can earn the highest return. An overwhelming majority of big and medium cap E&P names already have international operations. That number will increase as will the percentage of business that is conducted internationally.

5) What does that mean? API puts the loss of oil production if these "loopholes are closed" at 20%. That's 1 mm bopd, which the administration should know could easily have the following impacts.

A) Lower Royalty Revenue By $1.2 Billion Per Year ... The U.S. collected federal royalties last year of $6.17 B. A 20% haircut means annual reduction in royalty revenues of $1.2 B. Now, I suppose you could raise the royalty rates to compensate and they are in fact planning to do that by punting royalty relief for smaller projects in the deepwater and for enhanced oil recovery. So, in effect, the U.S. government is discouraging squeezing every last drop of domestic oil out of the ground.

B) ...Lowered Tax Revenues By Another $1.3 Billion Per Year. $30 per barrel of costs and the rest gets taxed at about 35%. If we take our million barrels of lost production from above and keep oil at $50 per barrel that comes to tax revenues of $2.6 billion per year lost. Call the deferred tax rate 50% and that yields a cash loss to the U.S. government of another $1.3 Billion.

Sidebar: So there's $2.5 billion lost while we are raising $2.6 billion per year. I know I'm being fairly simplistic here but these really could be the unintended consequences of such a policy and I find it hard to believe the administration is naive enough to just brush aside the potential for lost production volumes by saying that oil and gas are global commodities. It is precisely because you can find oil and gas in other places, outside the U.S., that the administration should be concerned about sapping the ability of U.S. players to find hydrocarbons domestically.

C) And Last But Not Least, Send More Dollars Overseas To Buy "Replacement" Oil. The loss of 1 mm bopd comes to 365 million barrels per year. Were oil to stay at $50 per barrel (pretty unlikely if the world's largest consumer suddenly starts producing 20% less) that comes to $18.25 billion dollars per year sent overseas. Again, that's the per year figure.

6) "A sector as important as oil cannot be subject to the whims of private companies, it must be subject to the control of the state," ~ Rafael Ramirez, Venezuela's Minister of Industry, commenting yesterday on the Venezuelan's passage of a law that will allow Hugo Chavez to seize oil service companies for the State. Sounds familiar.




In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Inventory Review
  4. Earnings Watch - SD
  5. Other Stuff We Care About Today - KOG
  6. Odds & Ends - Analyst Watch has Barclays cutting its rating on Oil Service companies.

Holdings Watch: Very busy day yesterday. The 10KP is updated.

  • CLR - Sold the last 5 CLR $25 May Calls CLREE for $6, up 683% with the stock close to $31 and up with oil, just before the conference call. This turned out to be pretty good timing with oil as I stated in the post I was less than impressed with the quarterly results. The stock closed the day at $28.42 and I won't revisit the idea of a re-entry until some time in the next week or two if then.
  • HK - Sold the remaining May $25 HK Calls with the stock at 26.25 for $1.70, up 130%. I continue hold 5 of the June $25 calls here.
  • HAL - Added (10) June $22 puts (HALRV) for $1.21 with the stock down 20 cents at $22.95. Will add more in a bit if it recovers to the days highs, closer to $24.
  • CRR - Added (3) CRR June $35 PUTs (CRRRG) for $3 just under the mid with the stock at $35.65. GMXR just commented they are switching their Haynesville wells from ceramic to resin coated sand and we are hearing this same kind of comment from a number of E&Ps in the shales saying that ceramic is an unnecessary expense.
  • EOG - Doubled up on the EOG June $80 calls (EOGFP) for $2.85 with the stock off 4+% on a Citi downgrade and a little profit taking. Natural gas is bounding through 44 this morning at $4.07 after an in line storage report while oil is toying with the $58 level in preparation for a move on $60.
  • HK - Added back (10) May $25 Calls for $0.85 (yep the ones I sold above for $1.70). Will be a quick trade.
  • HK - Added another 20 HK $25 May Calls (HKEE) for $0.55 with the stock at $24 on equity deal rumors and a down market. Natural gas closed back over $4 and sentiment there may be turning.
  • Added 5 more of the June HK $25 Calls for $2.00.


  • Sold the remaining WRES June $2.50 calls for $0.30, up 88%. I continue to hold the common and the November $2.50 calls.

Commodity Watch

Crude ended the day up $0.37 at $56.71, having breached the $58 level early in the day. A sell off in the equity market later tamed crude. This morning oil is trading up $1.50, back over that $58 level.


Natural gas rallied in the morning before the EIA storage report (see below), sold off on the number and then rallied sharply, breaking $4 to close up $0.19 at $4.08. This morning gas is trading up another dime.

Natural Gas Inventory Review

ZComment:  I write this with a good deal of caution and the nagging feeling that I've been here before but sentiment in the gas markets appears to be, if not turning, then at least bottoming. Much like the stock market eight weeks ago, recent gas commentary has focused on comments like "it's going to 0". That one was Shork just last week but there have been several analysts and camera friendly traders and hedge fund managers who claimed that the U.S. is awash in domestic and import gas and prices are going to $3, then $2, then I assume free. Baaaahhhh. The facts are and remain, storage is high for this time of year and we are going to get full. The fact also remains that a decline in production is inevitable. Gas traders, like everyone else these days, are beginning to look through the trough to a time when gas markets are balance from a decline in supply and an improved demand from economic recovery.



Earnings Watch:


SD Reports A Beat; Announces Monetizations ; Reaffirms Guidance

The 1Q09 Numbers:

  • Production of 319 MMcfepd
    •  up 27% from 1Q08
  • Revenue of $159 mm vs $238 mm expected
  • EPS of $0.25 (clean) vs $0.08 expected
  • CFPS of $0.73 vs $0.60 expected

Deals: Announced $260 mm in asset monetizations

  • Gathering system: Signed a letter to sell their Pinon Field gather system for $200 mm cash.
  • Deep E. Texas drilling rights: 23,000 acres, everything below the Cotton Valley for $60 mm ($2,600 per acre). Not bad.
  • These two deals along with the $350 mm in equity issuance in recent days are designed to tide the company over through this period of low natural gas prices. They should alleviate some near term liquidity concerns that have been burdening the shares.


  • 2009: Reaffirmed at 110 to 120 Bcfe; 301 to 329 MMcfepd. Mid point equates to 14% growth
  • Cost guidance is essentially unchanged except for the DD&A rate which has been lowered due to a reserve impairment which will have the effect of boosting EPS in coming quarters but which is non-cash and therefore cash flow neutral.


  • 2009: 79 Bcf hedged at $8.42 (that’s 69% of expected production)
  • 2010: 80 Bcf at $7.70

Operational Highlights:

  • 5 rigs now (4 in Pinon and 1 in East Texas) vs 47 rigs running 1 year ago.
  • 1Q09 averaged 10 rigs so they have been on a continual slide.
  • I find it somewhat encouraging that with the rig count as low as it is they are reiterating guidance however, the low end of guidance would imply a sharp reduction in volumes by the fourth quarter. On the call, analysts should try to pin them down on what represents a maintenance program vs the one they have now.

Conference Call: Today, 9 AM EST.



Other Stuff We Care About Today

KOG Reports Big Well Results:

Nutshell: BOP's Take:

KOG — No particularly negative surprises… sorry to see they are still working on a resolution for the 2nd rig (which they don’t need), but I don’t think that will trip them up (like it did, post 4th quarter conf call).

IP rates on wells #1 and 2 are slightly better than we were hearing, so pretty happy about that. I hope they can say something more about the potential for wells 3 and 4, but until you complete and IP ‘em, it’s only anecdotal evidence. That said, the anecdotal evidence there is said to be very strong.

One negative… average realized oil and nat gas prices in 1Q was $30.04 and $2.83. [cue up sound of someone gagging here] They don’t have any hedges, of course, b/c they don’t have dependable production yet. But, who can make any $$ at $30/bbl realized? POTUS… are you listening???

I think what they say and the tone in which they say it on the conf call will fill in some blanks. That said, overall about as positive as it could be, at this point. Would like to hear a little more about the TFS potential, tested by other operators in the area. That is quietly a huge positive potential for their reserve base.

Overall, as happy as one can be… with a micro-mini who screws up their first well in the only play that counts for them. But, if wells 3 and 4 IP at anywhere near the “whisper number” of 2,000 bopd, then that forgives a lot of prior screw ups.

Kudos to management for raising $7.5mm. Wonder how much was their own $$ (whisper number said 50%, but not confirmed).

Conference Call: 11 EST.

Odds & Ends

Analyst Watch:

  • (PXD) price target raised by Raymond James from $28 to $40 (this was yesterday afternoon)
  • (PXD), (RRC), and (APC) cut to Market Perform by FBR
  • (GMXR) raised to Outperform by Thomas Weisel
  • Barclays downgrades oil services sector. They said the expect North American drilling activity to be weaker for longer and that rig activity will not pick up on a sustained basis until mid 2010. "Over the coming five quarters we expecte rig activity to remain weak and pricing to come under additional pressure
    • (BJS), (CRR), (HERO), (PTEN) (SII) and (BAS) cut to Underweight
    • (NBR) and (SLB) to Equalweight

Housekeeping Watch: 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.

173 Responses to “Less Jobless Friday”

  1. 1
    BirdsofpreyRcool Says:

    Good morning. Rant coming… So, cover your ears.

    What We Learned from the Bank Stress Test —

    What we learned is that you never want to ask the US Govt for help. There was a right way to do this, and a wrong way. The Govt chose the wrong way, and then made it worse. The “tests” were focused on many of the wrong metrics and following the Gov’t friendly advice will NOT result in increased lending. At least, lending according to global standards based on BIS rules.

    So, bottom line (and something GM should have thought about a long time ago), stay the hell away from a Strategic Plan that includes the following slide — “If We Get In Trouble, We Will Ask the Govt for Help as We are… [fill in the blank, “too big, too important, Union-Controled,” etc,] to Fail.”

    The “govt” does not speak with one voice…. and too many cooks CAN spoil the soup.

    ‘Nuff said. Asinine test is now 95% behind us. Best thing I can say about the Stress Test.

  2. 2
    elduque Says:

    BDI +20 2214

  3. 3
    bill Says:

    tudor upgrades sd to a buy and mentions pxp as a buy if you want oily exposure

  4. 4
    BirdsofpreyRcool Says:

    Employment number was on the neutral side. Less than the published expected number, more than the whisper number. So, not a lot of new info there.

    IG rallied this morning, then fell back a bit after the # and is stuck right around the +140 bps number. Corporate bond issuance is strong in Europe and getting more sea legs here too. Junk bonds outperformed investment grade yesterday, but are quiet this morning. That said, we are almost to the level (85) in high yield where stock investors don’t have to pay as much attention.

    IG 141

    HY 82.5

    30-yr Treasury auction yesterday did not go that well. Pushed 30 yr yields up. This doesn’t affect banks as much (as they borrow at the front end of the curve, but lend longer… so they actually benefit from this), but hurts the homebuyer, all else equal (although 30-yr motgages are priced off the 10-yr treasury). Might be prudent to put some TBT into your portfolio. Tough to see 10-30 yr treasury rates falling from here… unless the FEAR TRADE reemerges this summer. Something we can’t count out.

  5. 5
    1520sbroad Says:

    BOP – does your trading desk have any treasury commentary following the 30 year auction yesterday?

    Agree with your #1 – importantly the stress tests took long enough that the market was able to sort some things out on it’s own before we got the overhyped, overleaked, over- press-ified results.

  6. 6
    BirdsofpreyRcool Says:

    From bloomberg top shipping stories this morning —

    Anchored Shipping Fleet Signaling No Rebound in World Trade

    World trade may be no better than it was at the end of last year, judging by the number of inactive oil tankers, commodity vessels and car carriers at anchor. Ships carry about 90 percent of world trade, according to The Round Table of International Shipping Associations. “There’s more lingering and idling and waiting to find business,” said Andreas Vergottis, London-based research director at Tufton Oceanic Ltd., the world’s largest shipping hedge-fund firm. Anchoring “is a manifestation of slack” as trade dwindles and the global fleet expands, he said. To cope with the glut of ships, owners are also accepting smaller cargoes and ordering captains to slow down to conserve fuel, Vergottis said. There’s a 30 percent oversupply of container ships, 20 percent in oil tankers, and as much as 15 percent in coal and iron-ore carriers, he said.

  7. 7
    BirdsofpreyRcool Says:

    1520 — my trading desk is equity-centric. But, the best cross-asset-class hedge fund manager I know (and have known for almost 20 yrs) put on a short US Govt swap trade on Tues and levered it. He is that confident that govt bond yields are headed up.

    I know we all pretty much think that… but there were too many other places to make $$ over the last coupla months. However, now might be a good time to take some defensive moves against treasury yield inflation.

    Any thoughts here?

  8. 8
    Nicky Says:

    Good morning all.

    SPX got to 929 area yesterday so in between my two target areas and then pulled back. I did have some initial thoughts that the top may be in (and it still may be) but the pullback yesterday looks corrective and whilst it would have looked better if it had pulled back a touch more it was most likely close enough. With the futures higher this morning this looks like a good setup for the final thrust up in a wave v before we can look for a more meaningful correction of the rally. So target areas for wave v – 934,940 – 950.

    Oil following the same wave pattern as the indices. Looking for a top in the 62.50 – 65 region.

  9. 9
    BirdsofpreyRcool Says:

    Color from Tech Trader = “50/50 day. Unless you work for NITE and have to trade, take the day off.”

    This is aimed at Day-Traders, as it always is, of course.

  10. 10
    1520sbroad Says:

    #7 – i’ve been using tbt and selling out of the money calls against it with the same theory. Feels like a crowded trade all of a sudden.

  11. 11
    Nicky Says:

    200 dma for spx is at 956 and coming down 2 -3 points each day.

  12. 12
    Nicky Says:

    Correction 200 dma is at 950 for the spx.

  13. 13
    rseidman Says:

    Z: In light of PXD target changes has your view changed regarding expectations?

  14. 14
    zman Says:

    RS – not really, just expect it to drift higher into the next bit of news (1 to 2 weeks).

  15. 15
    jat Says:

    I was reading Venezuela’s repeated comments this morning and could help thinking of HP’s comments during their call, that they’d been drilling in Venezuela “for decades” and had always been paid. Well Anglo-Persian was in Iran for decades, and they did get paid, but their payment was for cents on the dollar after they’d been kicked out and overrun.

  16. 16
    zman Says:

    Hear ya there Jat. Ever read Whirlwind by Clavell?

  17. 17
    john11 Says:

    ROSE starting to bloom.

  18. 18
    zman Says:


    Sold those 30 HK May calls taken yesterday for $1.05, up 57% with the stock at $25.30. I continue to hold my June position.

  19. 19
    zman Says:

    I’m out for the next 2 hours. Keep the screen green. Except for service. Service can go red and I’d be just as happy.

  20. 20
    BirdsofpreyRcool Says:

    z — that May HK trade was gutsy. Glad to see it work out. I think more of that type of swing-trading is in order. Thanks.

  21. 21
    BirdsofpreyRcool Says:

    KOG conf call at 11 am EDT today. john11, kyleandy, occam… any of you guys going to be on the call with me?

    KOG, Kodiak Oil & Gas, 11:00EST, 877-257-3168, Code: 97397558, (also available via webcast)

  22. 22
    AAA Says:

    BOP, you’ve been right on the stress test all along. Seems to be a metaphor for the government’s handling of the serial bailouts. Ignore the law, funny business behind closed doors running rampant, but cross them and the full weight of the government and media will crush you.

    Re T-bonds, I suppose the bull case is (1) Fed can suck up a lot of supply under QE and (2) the equity rally is bogus. What about the chinese? Are they the marginal buyer now?

  23. 23
    BirdsofpreyRcool Says:

    AAA — I saw a chart recently that showed the breakdown of who buys US Govt bonds. Since 1994, “foreign buyers” have been the only growth category of treasury buyers (vs individuals, mutual funds, insurance companies, pension funds, corporations). It wasn’t broken out by country, tho.

    That should send a shiver up someone’s leg…. if they are paying attention.

  24. 24
    1520sbroad Says:

    #23 – absolutely right – counting on the foreign buyer worries me. If the chinese are smart (i think they are when it comes to conservative investment policy) they will start to find assets that protect their dollars from inflation. I’m not sure the long end of the curve does that at the moment.

  25. 25
    Nicky Says:

    A take on the bond market:


  26. 26
    cargocult Says:

    Anyone have an idea as to the impact of Chavez’s moves for the price of oil? Short term or long term?

  27. 27
    john11 Says:

    BOP..I’ll be on the KOG call, looking forward to it.

  28. 28
    BirdsofpreyRcool Says:

    1520s — I like the way you are playing the TBT, writing calls against it. There is definitely a big Question Mark as to when the FEAR Trade will re-emerge. I don’t think anyone thinks it’s all-clear-and-straight-up-from-here. So, TBT could drop off, in a rush to “safety.” But, in the bigger picture, I think that is a shorter-term phemom.

  29. 29
    tater Says:

    I can’t think of a scenario where it is bearish, but then again, I’m not a guy that thinks that governments are the most efficient mechanisms. Take a look at Mexico’s oil company. The picture of health.
    Actually leads me to the question; How can anybody feel that a US jobs report that makes it clear that a market that has government as the leading growth industry is a sound market? (“Sound” in the sense that it is “on the right track”).

    Rant over.

    Hugo’s move in and of itself would appear to be bullish long term for the price of oil, but it is not in a vacuum. It would seem that the state of the world economy (the determiner of the demand side of the equation) is going to set the pace on pricing for the next year at least.

    Or, in the alternative, supply/demand of oil doesn’t mean squat and we all need only consult with Goldman Sachs to figure out the supply/demand for oil futures contracts. But that would be the cynical view.

  30. 30
    cargocult Says:

    tater, How about oil service companies who have assets in Venezuela? I can’t imagine Chavez will be paying what the assets are worth. It will be interesting when Chavez discovers he has to go it alone when no one will work for him.

  31. 31
    kyleandy Says:

    BOP – are u expecting to hear anything that wasn’t announced last nite on the call?

  32. 32
    BirdsofpreyRcool Says:

    z is going through market withdrawals… can people periodically post market updates for him? We’d hate to see him get the DTs in front of #1 Intern’s entire school… 😉

    DOW +67
    SPX +8.44

    don’t have live quotes on oil/nat gas…

  33. 33
    BirdsofpreyRcool Says:

    kyleandy — I sure hope so. I hope they can talk about some of the wells drilled by competitors near their acreage, for one. Not something they can put in a PR, but they can talk about it on a conf call.

  34. 34
    BirdsofpreyRcool Says:

    HK 25.39

  35. 35
    kyleandy Says:

    bop – is peak oil a private co??

  36. 36
    tater Says:

    What I’m hoping for is that he hooks up with the Chinese. That would play out like an episode of the Sopranos.

  37. 37
    choices Says:

    Jun Cl +0.74
    Jun NG +0.038

    both seem to be coming of a tad

  38. 38
    BirdsofpreyRcool Says:

    #35, yes. Peak is private.

  39. 39
    BirdsofpreyRcool Says:

    Sad, sad day, for the rule of law in America. Notes from a strategist…

    Chrysler Lenders Give Up the Fight, Which Spooks Stock Investors, 5.8.09

    It was reported shortly after the stock market opened today that two more Chrysler lenders have given up on fighting the government, in the wake of adverse rulings from the judge and from outside pressure. This contributed to a drop in stock prices after the strong opening, and we received a flood of worried inquiries about this from people concerned that this will reverse the gains in sentiment that the credit market has made.

  40. 40
    BirdsofpreyRcool Says:

    PQ 4.16

  41. 41
    BirdsofpreyRcool Says:

    IG 144.5

    Bond mrkt spooked by the Chrysler situation.

  42. 42
    BirdsofpreyRcool Says:

    KOG = enough capital now to complete 2009 capex program. Private placement was priced at mrkt (v. unusual).

  43. 43
    VTZ Says:

    BOP, what do you think about the 10 year bond yield increasing? Helicopter Ben going to fire up the printing presses to full capacity to keep em down?

  44. 44
    BirdsofpreyRcool Says:

    KOG 1st well = 41 days to TD w/ 4200ft lateral

    4th well = 28 days to TD w/9000ft lateral

    nice learning curve.

  45. 45
    BirdsofpreyRcool Says:

    HK 25.50
    CRZO 18.20
    PQ 4.19

  46. 46
    jat Says:

    Cargo, re: 30, that was exactly the reason that HP tanked 15% on the day of their call, with their miss due to non-payments from PDVSA.

    Z, haven’t read Whirlwind. Just finished the Prize, which read like a novel at times, will give it a shot.

  47. 47
    BirdsofpreyRcool Says:

    VTZ — on KOG cc… will circle back to your question later, k?

  48. 48
    1520sbroad Says:

    i’m spooked by the chrysler situation

    spx +9.44

  49. 49
    john11 Says:

    KOG future well completed costs to be in 4-6 mil range as opposed to original 6-7 mil ests, have to like that.

  50. 50
    BirdsofpreyRcool Says:

    1520s — we should ALL be spooked by it! I have no doubt that behind-the-scenes-Chicago-style-politics came into play.

    This takes a page from Hugo Chavez’s Play Book. It doesn’t matter if you are a Dem or a Rep, it is true. Govt whims overriding the established rule of contract law and private ownership. The cost of debt will go up for account for this new “risk.”

  51. 51
    VTZ Says:

    No rush BoP.

  52. 52
    zman Says:

    Graduation accomplished. Thanks for the updates.

    KOG reaction seems muted relative to the news.

    Jat – Its a good time about the times leading up to the fall of the Shah, told from the perspective of one group of radicals and a group of British petroleum workers working the offshore platforms.

  53. 53
    zman Says:

    FYI – CLNE beat and the fundamentals continue to approve, call was last night, interesting story, interesting chart now.

  54. 54
    john11 Says:

    KOG, talking around Three Forks, bobbing and weaving, nothing imminent, but get the sense they know value is there.

  55. 55
    zman Says:

    Wow ROSE. Missed my entry point there.

  56. 56
    zman Says:

    Analyst watch addendum: HK target raised at RJ from 28 to 32.

  57. 57
    zman Says:

    POTUS talking about jobs.

  58. 58
    kyleandy Says:

    KOG cc “pretty pleased” that sounds good.

  59. 59
    BirdsofpreyRcool Says:

    KOG — *1 didn’t seem to work on my phone… first time ever. Or, I’ve been dissed (not the first time ever). Have a few follow-up Qs for mngmt… will report back when I get some answers.

    Call went OK. Not enough additional info than what is in the PR to get stock going, tho. Think next bump will come with production test results fronm well #3.

  60. 60
    Nicky Says:

    Metals, DXY, Euro – all in triangles. need to see which way they break, but favoring a bit more upside for metals before a reversal.

  61. 61
    zman Says:

    By they way, if anyone can poke a hole in my rant this morning or my previous ones on the potential impact of ending tax loopholes I’d like to hear it. I’m sending my congressman and our senators a copy of it later this weekend.

  62. 62
    BirdsofpreyRcool Says:

    KOG — I will go out on a limb, however, and say that the stock will move to $1.25 when well #3 results are published. Unless scout reports on the amount of oil in the shakers is wrong (or oil tanks again), those should be much better wells than #1 and 2.

  63. 63
    zman Says:

    Regarding HK

    Look Ma, No Deal

    Stock nearly offsetting yesterday’s deal fear losses.

  64. 64
    AAA Says:

    BOP, re # 50, yes and the problem is it will only get worse. When would-be tyrants get a taste of success, they tend to go back for more. Corporate America is not exactly filled with profiles in courage either. More like filled with Ken Lewis clones who will sell their shareholders out to stay in the good graces of the White House and keep their jobs.

  65. 65
    BirdsofpreyRcool Says:

    If you didn’t read it before, here is it again, with an intro by Michelle Malkin. Cliff Asness’ open letter on what is happening between “our” govt and private ownership.


  66. 66
    BirdsofpreyRcool Says:

    AAA — #64. Great points…. and well-said.

  67. 67
    zman Says:

    HK back up to 26.

    Lots of big ups again today. Taking profits is never a bad thing.

  68. 68
    BirdsofpreyRcool Says:

    VTZ — #43. If Ben fires up the printing press, it only makes the 10-yr yield go higher. But, it does depress hard asset prices in the US… and increases hard asset prices that we IMPORT into the US. Like oil….

    That is why, as 1520s mentioned, the TBT is a crowded trade. There is almost no way you can lose there, in the long run.

  69. 69
    zman Says:

    joe3rd – check your email.

  70. 70
    choices Says:

    BOP-you have some very good points on this fiasco but please spare us the idiocy of Michelle Malkin-she is one of the extremes of the wingnuttery and practically foams at the mouth when she is interviewed on TV-same camp as Hannity, Beck, O’Reilly-

    Sorry, I guess I could just not view it but I am very surprise to see some such as Malkin offered up here-I prob will not pick up any friends here with this comment.

  71. 71
    zman Says:

    Street thumbs nose at Barclays OIH downgrade.

  72. 72
    Garyinhou Says:

    Politics and related subjects can be fun to discuss as long as we don’t label everyone we disagree with as an idiot or their ideas and opinions as idiocy. Political thoughts of every stripe have appeared here and should continue, as long as we’re respectful.

  73. 73
    zman Says:

    Choices – I don’t know who Michelle is but I am in principle against wingnuttery.

  74. 74
    BirdsofpreyRcool Says:

    choices — you are right. I should not post purely political commentaries. I posted Cliff’s letter a day or so ago, just saw this article on Cliff’s bloomberg and picked up the link. Didn’t have a link to his letter and didn’t want to post the whole thing again.

    You are right, to call me out on posting Michelle. But, I thought the benefit of accessing Cliff’s letter outweighed the board rule of “political neutrality.”

  75. 75
    ram Says:

    There is an inherent bias on this board. It appears that one side of the political isle is for taxing and discouraging investments and employment in energy land.

  76. 76
    Garyinhou Says:

    Plus… we like Friday Movie Quotes…

  77. 77
    tater Says:

    I’m for anything that will keep Wyoming in the strip clubs!

  78. 78
    ram Says:

    I’m for more people getting employed in the US, while relying less on foreign oil.

  79. 79
    zman Says:

    Tater for president.

    Ram – agree completely. I’ll go a step further and say I’m even for less oil consumption in the U.S. period. Clean burning natural gas gas baby.

  80. 80
    tater Says:

    Remember the time he came on here and told that story about connecting the doohicky to the thingamabob and then they did fractional calculations until dawn? Man, that was a good one. I re-tell that one all the time. Those engineers sure know how to party!

  81. 81
    zman Says:

    Movie Quote Friday Watch

    This one’s for Hugo although I think he’s already got it.

    “control, control, you must learn control”

  82. 82
    tater Says:

    Yoda or wax on, wax off?

  83. 83
    zman Says:

    Gotta say, only modest demand for the TEXT ME function so far.

  84. 84
    zman Says:

    Yoda – tater win’s a prize.

  85. 85
    zman Says:

    One 4oz jar of organic carrot mush = $0.90

    128 oz per gallon

    Gallon of organic carrot mush = $28.80

    Carrot depth = max 1 foot.

    Gallon of gasoline = $2.08

    Average depth of oil > 1 foot

  86. 86
    ram Says:

    Yeah, but it’s still 32 little glass jars.

  87. 87
    zman Says:

    Ram – good point. Still, I bet 75% of the carrot’s didn’t travel up 5000 feet of hole, then half way around the world in a tanker, get cracked using additional fuel, then get taxed by the government for a greater percentage of the total cost per unit than the company making it gets in income.

  88. 88
    ram Says:

    ZMAN – Do you feel the need to lighten up on any Junes with this strength?

  89. 89
    VTZ Says:

    Anyone thinking of playing SKF calls anytime soon or am I the only one?

  90. 90
    zman Says:

    Ram – its a great question. I do want to. I was mulling taking off the double ups on EOG and HK … especially the HK, so they don’t have a deal and it rallies 9%, back to the post call highs. If it falls back I will just buy it again.

    NG up 16 cents to $4.25.

    And LNG (the company) falling 9% to below $4. How appropriate.

  91. 91
    ram Says:

    VTZ, the last time I did I got burned. I find it difficult buying puts on a weak industry, while ZMAN’s gov’t keeps proping them up.

  92. 92
    zman Says:

    Yes, that is one of my other evil little plans.

  93. 93
    zman Says:

    CRR just rocketing, so much for the sell rating at Barclays, I may add more next week, say double from 3 to 6 puts.

  94. 94
    VTZ Says:

    ram – I don’t buy the perception now that everything is rainbows, butterflies, clear skies ahead for the banks. It seems like consensus that the worst case scenario is out and the banks can meet the capital requirements.

  95. 95
    BirdsofpreyRcool Says:

    “Don’t Fight the Fed” is the Number One rule of investing. Number Two is “The market can stay irrational, longer than you can stay solvent.”

    Keep nimble.

  96. 96
    zman Says:

    I own a little CLNE call position that went off yesterday without my knowledge. Earnings and conference call was good, just did not see them trigger. I won’t add more at the present time and I won’t ZTRADE it as the stock moved up. Interesting story and chart, could be gaining some traction in the House with the NAT GAS Act.

  97. 97
    zman Says:

    Tater – when you get a chance, what’s your best thought on resistance on HK?

  98. 98
    zman Says:

    What the NAT GAS ACT covers:


  99. 99
    zman Says:

    ROSE up 25%. Wow.

  100. 100
    john11 Says:

    ROSE releases before open monday.

  101. 101
    Dman Says:

    My problem with Michelle Malkin isn’t that she’s a screeching idiot. After all, that test would disqualify most of cable TV (and we can’t have that, of course!).

    It’s not that she’s a purveyor of hatred and ad-hominem attacks or a complete ignoramus who finds the fascist mindset oddly compelling. Again, it would be unfair (though correct) to single her out for such mere trifles.

    No, my problem with Michelle is that she is an agent of Voldemort.

    That’s right: she works for You-Know-Who.

    If you doubt this, consider the following quote from The Order of The Phoenix (Page 201):


    Hermione: ‘Don’t you remember what Dumbledore said at the last end-of-term feast?’

    Harry and Ron both looked at her blankly and Hermione sighed again: ‘About You-Know-Who. He said his “gift for spreading discord and enmity is very great. We can only fight it by showing an equally strong bond of friendship and trust-” ‘

    How do you remember stuff like that?’ asked Ron, looking at her with admiration.

    ‘I listen, Ron,’ said Hermione …


    So there you are, an open and shut case: Michelle is an agent of Voldemort, spreading discord and enmity.

    And in case anyone forgets how bad Voldemort is, I would just remind you that this is one guy that President Obama *hasn’t* yet had a photo-op with, as the Red-State-Update folks were keen to point out:

  102. 102
    ram Says:

    VTZ – I agree with you. No one can predict the increase in foreclosures, comercial and residential, along with credit card defaults. The numbers tell you that unemployment insurance cannot feed and house you and cover other expensenses. There have been over two million people unemployed this year and counting. It will take a couple of months before loans go bad after being unemployed. You are right, it will only get worse.

  103. 103
    VTZ Says:

    Whatever happened to toxic assets now too? It seems like the focus on TCE for the stress tests has completely eliminated the need to remove toxic assets from their balance sheets.

  104. 104
    Denise Says:

    BOP -Thank you for the Cliff Assness
    link. I am only on the board occasionaly and had missed it.

    He ran some funds (when I was at GS)-do not know him well but he called his own shots there also.

    The guy has guts

  105. 105
    bill Says:

    did i hear right

    New tax- Those with health insurance to pay a tax. Money to go for people without insurance

    So– i guess i should drop my plan to save on taxes and get a fed hand out

    Amazing the market is going up with govt spending out of control

  106. 106
    Denise Says:

    Z-did I miss something new on line?
    running with the bulls today?

  107. 107
    choices Says:

    V-I agree that everything is not rainbows in the banking sector-have picked up a very small number of SKF, SRS, and SDS but it appears that it is waaay too early-bkx continues to rocket higher, BOP’s points in #95 are certainly valid. I’m not sure when I will every learn not to try to find bottoms or tops.

  108. 108
    BirdsofpreyRcool Says:

    Denise — thank you for the colour on Mr. Asness. I am looking for Heros in a world full of spineless whimps (ref: TARP Bank Bondholders, who succumbed to political pressure over their own fiduciary duty to protect the investments of their clients). Cliff Asness is on my short list.

  109. 109
    BirdsofpreyRcool Says:

    Credit Market continues to weaken. Although we have held below the important (to me, anyway) +150bps level on the Investment Grade index. If we start to widen much above +157 or so, I may take my toys and step out of the sandbox for a while.

    IG 147

  110. 110
    zman Says:

    Bill. I must need government insurance to fix my hearing because I thought I heard that too. Sigh.

  111. 111
    zman Says:

    LINE – raised by RJ to Strong Buy.

  112. 112
    Nicky Says:

    This market is getting soooo ripe for a pullback. Its way ahead of itself and I just don’t see where they are going to get any more good news from to keep this going. Stress tests out, stimulus done. More likely to see disappoint going forward and sluggish growth at best. Bullish levels are at extremes that always mark a market top and that have not been seen since the last bull market! 9 up weeks???? I wouldn’t bet on 10.

  113. 113
    BirdsofpreyRcool Says:

    For the rest of today — Head Trader pointing out that it’s “924.50 on the spoo… but see stops at 925.5 and 928.5, so may try to run them…”

  114. 114
    Nicky Says:

    Cramer on saying the housing market has bottomed. My own take on the housing market is that with the housing data showing a glimmer of hope this week the market is going to be flooded with people rushing to put their homes on the market believing the bottom is in. Result – even more inventory. Also Cramer obviously is not aware that house prices usually bottom a year after housing actually turns. The guy is such a great contrarian call – remember when he told us all to buy Lehman and Bear Stearns!

  115. 115
    zman Says:

    SP500 up 36% from early March. Hmmm. Things, even things that missed numbers, and had little good to say on the 1Q calls, a little too ubiquitously green for my tastes.

  116. 116
    Dman Says:

    Z – #111 There ya go. My sale was right for a day, now wrong.

    Mind you, today they’ll buy anything with energy somewhere in it. In contrast with last year’s “Sea of Energy Love”, this year’s Sea looks to be motivated by

    -flight from the $
    -admission that energy had sold off too hard
    -perception of economic recovery, however tepid or illusory it may seem

    So it’s quite different from last year’s Sea, which had actual supply tightness & rampant speculation to boot.

    By looking at these differences, I’m trying to get an idea of “how long” and/or “how far”.

    If the dollar collapses, the overbought market (per Nicky) might not matter.

  117. 117
    Dman Says:

    Nicky, #114: what does it mean to say “house prices usually bottom a year after housing actually turns” ?

  118. 118
    BirdsofpreyRcool Says:

    Head Trader pointing out that they took out the buy stops at 925.50… onto 928.50

  119. 119
    zman Says:

    Rig Count Watch:

    Gas rigs down 11 to 730 vs 1,475 a year ago.

    Horizontals down 5 to 380 vs 513 last year.

    Texas saw a 20 rig drop to 355 from 889 at this time last year.

  120. 120
    Denise Says:

    Forgive me Z -off energy but worth posting

    In honor of today being David Rosenberg’s last day as Merrill Lynch North American Economist, here are Rosie’s rules to remember (an economist’s dozen):

    1. In order for an economic forecast to be relevant, it must be combined with a market call.

    2. Never be a slave to the data – they are no substitute for astute observation of the big picture.

    3. The consensus rarely gets it right and almost always errs on the side of optimism – except at the bottom.

    4. Fall in love with your partner, not your forecast.

    5. No two cycles are ever the same.

    6. Never hide behind your model.

    7. Always seek out corroborating evidence.

    8. Have respect for what the markets are telling you.

    9. Be constantly aware with your forecast horizon – many clients live in the short run.

    10. Of all the market forecasters, Mr. Bond gets it right most often.

    11. Highlight the risks to your forecasts.

    12. Get the US consumer right and everything else will take care of itself.

    13. Expansions are more fun than recessions
    (straight from Bob Farrell’s quiver!).

    Good luck up north Rosie, your insights will be missed south of the border . . .

  121. 121
    zman Says:

    Denise – no apologies necessary whatsoever, outside energy commentary helps build my world view.

  122. 122
    BirdsofpreyRcool Says:

    Denise — loved it. TY.

  123. 123
    Nicky Says:

    Dman re 117. Sorry I didn’t think I was being clear when I said it as I was in rant mode listening to Cramer.
    Basically whilst housing data may turn ie starts, sales etc. prices normally continue to fall for another year after that.

  124. 124
    Nicky Says:

    Whilst I am happy to follow the charts on currencies and the $ can someone explain to me why the $ would be weak if all is well in the land of the USA again?

  125. 125
    zman Says:


    Added (3) more CRR June $35 Puts for $1.80 on the mid with the stock up $4 and cresting $40. Downgraded to Underweight by Barclays has been ignored by the market which seems to be in buying frenzy mode.

  126. 126
    Nicky Says:

    Answering my own question in 124 I am guessing its away from the safety trade but an economic recovery in the USA (if you believe it) is going to lead to higher interest rates in which case the $ would go up.

  127. 127
    Dman Says:

    Z – rig declines still impressive.

    Aubrey is now forgiven, it seems.

  128. 128
    zman Says:

    Nicky – Re 124. I think you answered your own question.

  129. 129
    Paul in Kansas City Says:

    Wyoming (I believe) great call on KEG!

  130. 130
    Nicky Says:

    Z – I hate it when things don’t make sense (most the time!) which is I guess why I prefer to follow the charts.

  131. 131
    zman Says:

    PXD up 11%…I think I said drift higher, these rapid moves are nutty. Volumes in E&P look light.

    I’m going to lighten some stuff, not PXD but other stuff. One moment please.

  132. 132
    Denise Says:

    Z question-wondering if crr is included
    in any of the etf baskets?

  133. 133
    zman Says:


    Sold (5) of the June HK $25 for 3.00, bought yesterday for $2.00

    Sold (5) of the June EOG $80 Calls for 3.70, added yesterday for $2.85

    That leaves me with 5 of each of those in the 10KP for next week. Market just looks a little too heady. I will buy them back on dips.

  134. 134
    Dman Says:


    #123 thanks.

    #124 If you’re interested, I’d like your technical take on the $ versus the commodity currencies (AUD & CAD).

    To answer your question: the point may have been passed where the USD is no longer viewed as “safety”.

    Slight curiosity: gold not doing much today with the USD down about 2% against AUD & CAD.

  135. 135
    zman Says:

    Denise – I don’t know of one that contains it, will look about.

    BOP – what’s time line on KOG #3,4?

  136. 136
    Denise Says:

    -off energy again but

    Decided that while I was being run over by the bulls today (short financials!)

    I would buy some bull (etf cow)
    after I read a Maudlin/Stratfor Geopolitics of Pandemics piece (you can google-free post) on the swine flu not becoming one.

    Had read about the Cow idea a few days ago-Saut RJ weekly piece

  137. 137
    zman Says:

    PQ at $4.50 is a new high for this side of the trough.

    Oil at $58.50
    NG at $4.32

  138. 138
    Denise Says:

    Z-thinking might account for run up
    in name

  139. 139
    kyleandy Says:

    bop he got his 928.50 now going for 924. i am watching in amazement

  140. 140
    zman Says:

    Denise – sorry, which name?

  141. 141
    Denise Says:

    Z-Crr-the basket could be a reason the stock is flying
    Good idea if so on the puts

  142. 142
    Nicky Says:

    Denise – will take a look at $/AUD and $/CAD and give you a view Monday. $ has been very tricky as far as Elliott wave goes of late as it has not broken out in either direction. When looking at $/euro it appears it is in a triangle and we are currently in E up and then I think Euro will break down – but I may be totally wrong!
    Gold I am watching too. It has been underperforming silver all week. This maybe setting up some divergence however with gold unable to make new highs. It looks like it will struggle to get past 950 to me and we are coming into the time of year when we normally see weakness in metals. So maybe a touch more upside and then down.

  143. 143
    Dman Says:

    Denise – I bought some COW yesterday. I’m thinking of it as leverage to energy. Livestock is levered to grains & grains are levered to fertilizer & fertilizer is levered to energy. Now all we need is calls on the COW and the leverage chain would be complete!

  144. 144
    BirdsofpreyRcool Says:

    KOG — wells 3 and 4. They were kinda vague about the exact date. But they have completed wells 1 and 2, so will move the completion rig to pad 2 to complete wells 3 and 4. How long does it take to set up, complete, and run a 24 hr test? Dunno, exactly. A week, maybe? Anyway, PR says that well #3 “completion operations are canticipated to commence in late May 2009.” And well #4 operations “are anticipated to commence in June.”

  145. 145
    Dman Says:

    Thanks Nicky (142) even if you’ve changed my name to Denise. But I promise you I’m not pretty enough to justify it 🙂

  146. 146
    zman Says:

    Tater – when you get a chance would you look over CLNE? tia

  147. 147
    Dman Says:

    Market is torturing the shorts here.

  148. 148
    kyleandy Says:

    z – maybe u cud glance at BBEP over the week-end 1/2 listened to their cc this morn and they kept emphasizing how fully hedged they were at very high prices. need to listen to it again. with EVEP and LINN doing well, maybe worth a look.

  149. 149
    Denise Says:

    Dman-any economic recovery and more meat less pasta consumption (or at least perceived) should help Cow.

  150. 150
    zman Says:

    Thanks BOP

  151. 151
    tater Says:

    Just got back from lunch and grocery. Watermelon down to $5.99. I’ll post a chart.

    Working on CLNE and HK

  152. 152
    zman Says:

    Kyle – I don’t like the structure there, very convoluted. They suspended their dividend. Your probably not going ever see me own that one.

  153. 153
    BirdsofpreyRcool Says:

    Strategy for KOG — buy at 75¢. That is where the institutionals (who had to sign a 90 day lock-up) and management put money in. Works for me.

  154. 154
    zman Says:

    Not that I give advice but if I did I would say that that seems like good advice.

  155. 155
    Nicky Says:

    Dman – I am so sorry!! I was reading too many posts with Denise’s name in them!

  156. 156
    kyleandy Says:

    KOG hope that strategy not doable. been a slow steady march up last hour. does that 90 days start when deal closes?? might be a good date to remember.

  157. 157
    Paul in Kansas City Says:

    I can’t believe the amount of upside moves being made here. It’s making me paranoid!!! Great discussions today everybody.

  158. 158
    tater Says:

    HK – Daily resistance is 26.07

    CLNE – Daily resistance was 9.50


    More detail in a bit on those, kind of rushed them.

  159. 159
    BirdsofpreyRcool Says:

    kyleandy — good question. I can try to answer, but it’s only an assumption, on my part. Have a call into mngmt. Will add it to the list.

  160. 160
    ram Says:

    The Plaza Steakhouse in Kansas City, one of my favorites. Hopefully, I’ll convince the crew that’s where we need to be tonight.

  161. 161
    zman Says:

    Thanks Tater, HK coming right down to that point.

    I second Paul’s comments.


    BOP – Any sense from the new offering how much was new blood, was it oversubscribed.

  162. 162
    BirdsofpreyRcool Says:

    z — KOG mngmt said on the call that it was to existing institutional investors… also, that it was priced at mrkt. So, have to think mngmt got what they wanted, no more, no less. “Priced at market” was much better than the whispered “25% discount.” But, they did walk the stock down from the high, before pricing.

  163. 163
    tater Says:

    CLNE is kind of goofy. I think the chart needs a Fib overlap treatment (get me an engineer!). Kind of time consuming so I’ll give more detail this weekend, but in a word it’s touchy. That HOD of today is July ’08 low.

  164. 164
    Paul in Kansas City Says:

    ram; beer at The Foundary sitting outside would be PERFECT!

  165. 165
    zman Says:

    And it begins …

    Venezuela seized control of WMB oil project.


  166. 166
    zman Says:

    Thanks T on CLNE, don’t sweat it.

  167. 167
    bill Says:

    bulker stocks were down

    hard hit was drys with another offering after their crooked ceo said he was done

    this drew 2 downgrades


  168. 168
    BirdsofpreyRcool Says:

    SGU — a heating oil distributor MLP just reported blow-out (positive) earnings. I’ve mentioned the company’s 10.25% notes as a good buy… apparently the company thinks so too. Been buying back their own debt in the open mrkt.

    8.6% yield on the MLP units themselves, but that should either 1) go up, or 2) company will use cash to go accretive acqtns and “stock” price will go up.

  169. 169
    john11 Says:

    ROSE is out with op. update, some info of note re Eagle Ford and Bakken..
    Eagle Ford Shale Update

    Rosetta has successfully drilled, cored, and logged two vertical Eagle Ford Shale wells in South Texas that has helped quantify the resource potential of the play. The Eagle Ford Shale interval was present in both of these wells and contained a highly resistive shale interval. Based upon both well logs and core analysis, these wells have been mechanically configured to drill horizontal at a later date. Both of these wells are operated by the Company with a 100% working interest. Additionally, Rosetta has increased its net acreage position in this play from the previously announced 25,000 acres to more than 28,000 acres.

    Bakken Shale Update

    Rosetta has captured more than 230,000 net acres in the Alberta Basin and plans to drill a minimum of two exploratory wells this year to help quantify the resource potential of the play. Well permitting is currently underway and the expected spud date for this program is in the third quarter of 2009. The Bakken Shale is anticipated to be at a vertical depth of roughly 5,000 – 6,000 ft and normally pressured.

    Here is link to http://finance.yahoo.com/news/Rosetta-Resources-Inc-pz-15189134.htmlthe whole release;

  170. 170
    john11 Says:

    Sorry link got messed up;


  171. 171
    zman Says:

    Thanks John

  172. 172
    zman Says:

    The wrap is posted, the 10KP is updated as is the wiki.

    Have a great weekend!

  173. 173
    isleworth Says:

    Dman – COW is smart move. I was on National Cattleman’s Beef Board representing the restaurant industry, and just recently locked in a major beef contract for 2010 for a large national restaurant chain. Herd liquidation cycle is playing out. We will see higher beef prices in 2010.

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