12
May

Tuesday Morning – Already Time For A Rebound

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In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Earnings Watch
  4. Crack Spread Update
  5. Other Stuff We Care About Today - E&P hedges, multiple debt and equity deals come down the pike.
  6. Odds & Ends

Holdings Watch: The Wiki Holdings Tab is updated.

  • HK - Riskier trade - Added (20) HK May $26 calls with the stock at $25.40 for $0.60 on the mid. Also bidding some Junes.
  • HK Added (10) more HK May $26 Calls for $0.45, HKEP, higher risk trade, averaging down from the earlier trade into makret weakness with the stock trading $25.

Commodity Watch

Crude oil fell $0.13 to close at $58.50 yesterday, recovering from a dip below $57, despite a weak equity market and a slightly stronger dollar. The dollar appears poised, to this layman's technical eye, for a trade lower which would be supportive of crude. From OPEC's dollar denominated reserves, this further pushes the need for crude to rally. I have my doubts that they are gearing up for anything other than either a very small production cut or no further cut but instead a report that shows improved compliance with their current quotas (tanker trackers put current compliance at about 80% which is high). This morning crude is trading at a 2009 high, close to $60, as the dollar sinks to fresh lows not seen since early January.

  • IEA Watch: The Paris based energy watchdog said it will probably not reduce its global oil demand forecast later this week when its monthly report comes out. This breaks a long string of reductions. The group also said that Non-OPEC supply is now seen falling 500,000 bopd this year, that's a reduction from the IEA's and EIA's recent forecasts. EIA should have its Short Term Energy Outlook (STEO) out later today. EIA has been calling Non-OPEC supply flat with '08 levels.
  • China Watch: April crude imports were up 14% from year ago levels to 3.9 mm bopd, the highest level in 6 months.
  • Nigeria Watch: Nigeria admitted today that it is having trouble meeting its current OPEC quota of 1.67 mm bopd due to persistent rebel activity. The EIA had Nigerian production pegged at 2.2 mm bopd as recently as January 2009.
  • Early Read On Tomorrow's Oil Inventory Report:
    • Crude: up 1 mm barrels
    • Gasoline: up 250,000 barrels
    • Distillates: up 1 mm barrels

Natural gas eased less than a penny to close at $4.30 yesterday, an impressive feat given the lack of supporting weather and the 21+% rally last week.  This morning gas is trading up nearly 20 cents approaching $4.50.

  • Grasping At Straws Watch: (LNG), the company, is begging FERC to allow it to "re-export" LNG sourced abroad. They say they have opportunities to resell the gas brought to the U.S. to higher priced markets elsewhere. Um, but all along their story has been that new liquefaction capaicty being added around the globe would bring a "tsunami of gas" to U.S. shores. So, um, let me see if I get this straight. You want the ships to call at your sparkling new facilities at Sabine Pass, facilities that you built because you said there was a dire need to import more gas to the U.S., despite the fact that existing facilities were wildly underutilized, so that you can then ship it somewhere else that really needs it. Do the ship guys get a free meal or something? Freeport LNG, 30% owned by (LNG) just received FERC approval to export LNG the other day.
  • Looking at (LNG), the company.  Hmmm ...
    • $3.1 billion in debt,
    • negative shareholder's equity,
    • an operating loss of $63 million on revenues of $600,000 in the fourth quarter with your biggest expense being G&A of $43 million,
    • interest expense of $52.6 mm per quarter (again, that was $600 thousand in revenues)
    • and its hard to believe you have $200 mm in market cap left
    • For what it's worth, Cramer said their story is going to come in big later this year. I guess that's like their "ship coming in" ... I wonder if he knew it would just be doing a drive by.
  • Natural gas imports watch: Down 2.0 Bcfgpd from year ago levels; down 0.5 Bcfgpd from last week.
    • LNG at 1.5 Bcfgpd, basically flat with imports.
    • Canadian imports at 5.7 Bcfgpd, down a whopping 2.4 Bcfgpd from last year. This is the lowest level of imports from Canada in many, many years.
    • Although I hear only 1 analyst out of 10 who mention a wave of LNG entering the U.S. later this year also mention the demise of Canadian volumes I expect this sub 6 Bcfgpd number to get some more notice.

Crack Spread Update: Flattish

ZComment - Key Takeaways

  1. Crack spreads are trending to a flat average with 1Q levels.
  2. Normally, cracks rise from 1Q to 2Q. Yes, they rise early enough in the quarter that the increase quarter over quarter is apparent.
  3. Diesel crack spreads are poor, gasoline is a little stronger. This makes sense given the large distillate surplus in U.S. inventories.
  4. Diesel cracks are unlikely to recover until a real economic recovery, both in the U.S. and abroad, is underway.
  5. There is no evidence that I can find to support an increase in volumes of goods being shipped around the U.S. (and therefore consuming more diesel for truckloads).
  6. I can also find no evidence that exports of diesel, which became increasingly important to the independent refiner group last year, have turned the corner.
  7. Gasoline demand is not as poor as distillate demand. If utilization at refiners remains lowish into late May and early June, these cracks, which determine more of the overall crackspread will improve.
  8. Gasoline demand may rally at the expense of kerosene (jet fuel which is a distillate) as summer vacations in the U.S. revolve around driving the family car to Yellowstone rather than jetting off to Mexico or Hawaii. 
  9. This will likely result in a small upturn in cracks 2Q to 1Q. This will likely result in a small rally in the refining names which continue to languish not as far from their annual lows as the rest of the market.
  10. No, I'm not buying any right now as 7, 8, and 9 need to evidence themselves in the data over the next several weeks.

Refining Multiple: Still Cheap, Still Cheap For The Reasons Above

 

Other Stuff We Care About Today

E&P Hedge Thoughts

The Most Hedged Gassy Stocks for 2009 & 2010:

  1. XCO (81% in 2009; 72% in 2010)
  2. SD (71% in 2009; 65% in 2010)
  3. CHK (76% in 2009; 56% in 2010)
  4. NFX (70% in 2009; 49% in 2010)
  5. BBG (71% in 2009; 48% in 2010)
  6. KWK (60% in 2009; 50% in 2010)

Hedged Today But Not So Much Tomorrow:

  1. RRC (75% in 2009; 0% in 2010)
  2. SWN (46% in 2009; 14% in 2010)
  3. ECA (50% in 2009; 1% in 2010)
  4. UPL (52% in 2009; 9% in 2010)
  5. EOG (30% in 2009; 1% in 2010) - unhedged on the oil side (about 14% of 2009 production, more in 2010)

The Oilier Names In What Has Become An Increasingly Gassy U.S. E&P Realm:

  1. CLR (80% oil) - Unedged
  2. WLL (75% oil) - 40% oil hedged 2009; 33% of oil hedged 2010
  3. BRY  (66% oil) - 90% of oil hedged 2009; 75% of oil hedged 2010
  4. PXD (49% oil) - 45% of oil hedged 2009; < 10% for 2010

Most Unhedged Large Cap E&P: (DVN), then (APA), then (APC)

Note: This section has been added to the bottom of the E&P tab.

Deal Watch: The Deal Window Is Wide Open

APC Announces Big Secondary

  • 30 mm shares (before the shoe), about 6.4% of the outstanding or 7.4% if the shoe is exercised. 
  • proceeds of roughly $1.5 billion would be used for general corporate purposes including future capex.

LINE Announces Debt & Equity Offerings:

  • on the tape with 4.5 mm units, about 4% of outstanding plus $200 mm senior secured.
  • proceeds to go to debt repayment and some to general corporate purposes.

SD - Senior Debt Deal

  • $365 mm, 9.875% coupon (priced to yield 10.75%), 7 year notes
  • Used to pay down portion of credit facility.

RRC - Senior Debt Deal

  • $300 mm, 8% coupon (priced to yield 8.75%), 10 year notes
  • Used to pay down portion of credit facility.

GMXR - Announces Large Secondary Offering

  • 5 mm shares; with 750 K more for overallotment and an additional 150K reserved for sale to officers and employees which is a little more rare these days
  • 31% dilution
  • Used to pay down portion of credit facility.

Conference Calls Today (all times EST):

  • EVEP - 9 am
  • GST - 10 am
  • EGY - 12 pm

GST - Another Potentially Big Deep Bossier Well

  • 60 feet of pay
  • drilled fast and on the cheap; 84 days for $7.2 mm
  • Tough kind of stock to play right now but it is beaten down severely and many of these little names have been making moves, be they dead-cat bounces or otherwise remains to be seen. Will listen to the call.

Odds & Ends

Analyst Watch:

  • Shipper (GNK) cut from Buy to Hold at Argus
  • (ENER) cut to Neutral and Hold at Credit Suisse and Citi

Housekeeping Watch: We will begin blasting to text on Wednesday.

103 Responses to “Tuesday Morning – Already Time For A Rebound”

  1. 1
    zman Says:

    CHK upped to Overweight at Morgan Stanley

  2. 2
    BirdsofpreyRcool Says:

    Good morning. Fairly random credit thoughts —

    Credit had an awesome day, yesterday. You couldn’t see it from the indices, but 13 deals got done, the most in 11 months. Even Icahn is switching from equities to focus on “distressed debt,” which he calls a “once in a generation opportunity” right now. (With Carl, you can’t say “once in a lifetime” as that seems to span 100s of years). Anyway, this credit thaw is good for big and mid-cap companies. The little guys are still getting dissed by their bankers… and who wants to be beholden to a banker these days? Those guys are in pissy moods… having discovered that “TARP” really stood for “Roach Motel.”

    Anyway, the stock market is getting very very nervous again. As it should. So fast, so far. With so much bad stuff still abounding. Andy Kessler makes some intellegent observations (as Andy Kessler often does) in the WSJ this morning

    http://online.wsj.com/article/SB124208415028908497.html#mod=todays_us_opinion

    There is a $34B Treasury Bill sale today… but it’s for 4-wk bills, so shouldn’t cause the mrkt any gas pains. Other than that, banks are making tons of money off each other, as many of them are engaging in capital raising activities.

    So, what’s next? My crystal ball is murky. Looking for an old guy with a lantern to tell me truthfully what to do.

    Meanwhile, the new SD 9.875s due 2016 are trading right around issue price of 95.77. So, looks like they scooped up all the marginal dollars they could there, when the $300mm deal was upsized to $365mm. Stock likes it tho… keeps the pissy bankers off your back for a while.

    IG 149 after trading as wide as 152 this morning

    HY 81.5 after trading as low as 81.25

  3. 3
    Sambone Says:

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Nymex crude oil futures Tuesday traded above $59 a barrel
    for the first time since November driven by a weaker dollar and technical
    buying.
    While news of strong Chinese April crude imports provided some support for the
    gains, much of crude’s fundamental backdrop remained bleak, analysts said.
    Weekly U.S. Energy Information Administration data due Wednesday will likely
    show U.S. crude stocks built for the tenth straight week.
    However, crude’s recent ability to advance in spite of questionable near-term
    fundamentals continued to encourage a steady flow of investment, much of which
    has been based on equity market gains and hopes the worst of the economic
    slowdown may have passed.
    “The break of $59 a barrel has little to do with internal fundamentals,” said
    Hamza Hamza, fund manager at Sucden Financial in London. “Rather, direction
    continues to be steered by developments in the equity markets. This results –
    albeit by a lack of its own initiative – in an improving technical landscape
    that whets the bulls’ appetite.”
    At 1155 GMT, the front-month June Brent contract on London’s ICE futures
    exchange was up $1.17 at $58.65 a barrel.
    The front-month June light, sweet, crude contract on the New York Mercantile
    Exchange was trading $1.21 higher at $59.71 a barrel.
    The ICE’s gasoil contract for June delivery was up $10.75 at $492.25 a metric
    ton, while Nymex gasoline for June delivery was up 128 points at 169.30 cents a
    gallon.
    While the overflow from other financial markets has helped crude’s sharp
    climbs, projections for oil demand remain distinctly bearish. Several agencies
    publish their latest demand outlooks this week, with reports from the EIA,
    Organization of Petroleum Exporting Countries and the International Energy
    Agency due Tuesday, Wednesday and Thursday respectively. Crude’s resilience
    could be tested if those point to a continuing straitened demand outlook.
    U.S. demand has thinned as a result of the wider economic slowdown, leading to
    nine consecutive weekly builds in U.S. oil inventories. Already standing at
    375.3 million barrels, the highest since September 1990, analysts expect
    Wednesday’s EIA data to show inventories built again last week.
    “Oil stocks are at record levels and there is a mountain of oil floating
    offshore to be disposed of,” said London-based brokerage PVM Oil Associates in
    a note. “Oil prices are where they are because of economic expectations, not
    because of supply/demand realities. Nothing wrong with that, but if these
    expectations are dashed there is no second line of defense.”
    While demand from the world’s largest consumer remains depleted, some
    fundamental support came from the world’s number two importer Tuesday. China’s
    April crude imports rose 13.6% year-on-year to 16.17 million metric tons, the
    second-highest monthly crude oil import volume ever on a daily basis, data from
    the General Administration of Customs showed.
    Higher refinery operation rates and buying to fill commercial crude reserve
    tanks helped drive China’s demand for foreign oil, although analysts were wary
    how much price support China’s imports could have given the extent of slower
    global crude.
    “I think an improvement in China alone will not suffice to offset the
    contraction in the rest of the world,” said Harry Tchilinguirian, senior oil
    market analyst at BNP Paribas in London, adding a trend of similar figures
    might be needed to harden fundamental support.

    -By Nick Heath, Dow Jones Newswires Dow Jones Newswires
    05-12-09 0811ET

  4. 4
    Sambone Says:

    $60/Bbl
    By Dan Molinski
    OF DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–The dollar is down sharply Tuesday after crude oil
    prices popped above $60 a barrel, signaling a global rise in risk appetite that
    is causing investors to shop for foreign currencies that could offer meatier
    returns than that of the buck.
    The dollar fell to a seven-week low against the euro Tuesday morning in New
    York, a four-month trough against the U.K. pound and a two-week low against the
    yen.
    Data out Tuesday showing the U.S. trade deficit for March was smaller than
    economists were expecting did little to boost confidence in the greenback.
    Investors also seemed to ignore a strongly worded defense of the U.S. currency
    by Federal Reserve Chairman Ben Bernanke late Monday.
    Analysts say that if the euro can move above $1.3739, an important high
    reached in March, then that may signal more rapid U.S. dollar weakness. It has
    reached as high as $1.3708 so far Tuesday.
    “I would not expect it to bomb straight through (that key level) without good
    reason, like a sharp push higher in risk appetite,” said Alan Ruskin, an
    analyst at the Royal Bank of Scotland.
    Tuesday morning in New York, the euro had pared some of its gains and was at
    $1.3659 from $1.3582 late Monday. The dollar was at Y97.15 from Y97.41,
    according to EBS. The euro was at Y132.72 from Y132.31. The U.K. pound was at
    $1.5296 from $1.5120. The dollar was at CHF1.1049 from CHF1.1099 late Monday.
    Following a prepared speech in Georgia Monday night, the Fed’s Bernanke told
    the audience that the dollar will stay strong “because the U.S. economy is
    strong,” and because “the Federal Reserve is committed to making sure we have
    price stability in this country.”
    But if the comments were meant to bolster the buck, they failed. Investors
    watched European stock markets rise overnight, saw oil prices moving up, and
    decided that the reasons to hold on to the greenback as a safe-haven were
    dissipating.
    “Markets have appropriately shrugged (Bernanke’s) comments off,” said currency
    analysts at Scotia Capital.
    The concern over the dollar is that the U.S. government’s hyper-spending
    habits in recent months to save the banking industry will lead to higher
    inflation, reducing the dollar’s value.
    Meantime, the Canadian dollar is higher in the wake of twin Canadian and U.S.
    March merchandise trade reports released earlier. Canada’s trade surplus
    unexpectedly widened to C$1.1 billion during the month, adding to a recent
    string of positive data surprises.
    Combined with negative global momentum for the U.S. dollar after Monday’s bout
    of correction, optimism about economic recovery flowing from the data is
    expected to restore the recent strengthening trend for the Canadian unit as
    well as other commodity-linked currencies.
    Currency strategists at Scotia Capital in Toronto said that recent price
    action confirms that U.S. dollar “bears are still in control.”
    They suggest there is still a downside bias for the dollar against its
    Canadian counterpart, and look for the U.S. currency to retest downside support
    at C$1.1478.
    Early Tuesday, the dollar was at C$1.1562 from C$1.1633 late Monday.
    -By Dan Molinski, Dow Jones Newswires (Paul Evans in Toronto contributed to this report.)

    Dow Jones Newswires
    05-12-09 0906ET

  5. 5
    BirdsofpreyRcool Says:

    It might be time to consider adding some more bonds to one’s holdings. No reason to sit in cash, paying 20 bps.

    Just a thought. From a cross-asset class strategist, who isn’t buying into the Bearish Mood here… at least, not in corporate bonds.

    http://www.capmarkets.com/ViewFile.asp?ID1=117020&ID2=321532753&ssid=1&directory=6571&bm=0&filename=05.12.09_Push_Bearish_Populism_Aside.pdf

  6. 6
    bill Says:

    Good stuff on hedges z…

    i think chk took off most 2010 hedges and now only 22 % hedged for 2010.

    This may be aubreys greatest move

    each $1 in ng will bring chk another 700 m in 2010 on unhedged volumes

    I dont see pxp on list, they have 70 % hedged for oil (puts) so they have 100 % on upside and 80% ng hedged at 10.00

  7. 7
    zman Says:

    Stifel initiates PQ at Buy, target $7.50.

    Thanks Bill, I forgot to put PXP on there.

  8. 8
    zman Says:

    Mixed bag opening for E&P, sort of up market combined with at least 5 debt and equity deals which are pulling group leadership lower on the day.

  9. 9
    BirdsofpreyRcool Says:

    PQ… seems like only yesterday that it hit 61¢. As I recall, you bought around $1, z. Those are the kinds of trades that make your site invaluable.

  10. 10
    zman Says:

    Thanks, but you’re not too shabby yourself with that KOG call. Also know that I own some PQ from the previous cycle in the $8s.

  11. 11
    Nicky Says:

    Good morning to all.
    Z – sorry not to get back to you yesterday – however I just checked yesterday’s posts and see Tater’s question.
    Not much has changed from last week for me. Indices – We are oh so close to a turn but I think the count shows we need one more up. I think we could test the 900 level on the spx and then bounce and touch that pesky 200 dma before the meaningful correction. Its possible the top is in and we are going to need to bust through 900 for that. Options expiry Friday is likely to lead to volatile swings which would fit nicely with the wave pattern for a higher high!
    Oil is trading in step with the Dow. A high is likely this week and will likely coincide with the top in the Dow – I am still targetting the $62 – 65 area.
    The $ – I said a couple of weeks ago that we look likely to test the December lows of 78. We did go through trendline support in the 83 region. I am not entirely convinced that we go too much lower here. The euro has resistance at 1.3740.

  12. 12
    Nicky Says:

    From The Business Insider, May 11, 2009:
    Merrill’s economist David Rosenberg left the firm Friday, May 8 (planned for several months). And he went out swinging. David has maintained from the beginning that the recent rocket rally off the lows is just a suckers’ rally, and he reiterated that view as he walked through the doors.
    Some excerpts from his swan song, which was published Thursday:

    Market likely to peak the end of the week [Friday]. Just as the clock is winding down on my tenure at Merrill Lynch, the equity market is winding up with an impressive near-40% rally in just nine weeks. For those that were still long the equity market back at the March 9 lows, a good ‘devil’s advocate’ exercise would be to ask yourself the question whether you would have taken the opportunity, if the offer had been presented, to have sold out your position with a 40% premium at the time. What do you think you would have said back then, as fears of financial Armageddon were setting in? We haven’t conducted a poll, but we are sure at least 90% of the longs at that point would have screamed “hit the bid!”

    Are we at risk of missing the turn? Fast forward to today, and within two months optimism seems to have yet again replaced fear. Are we at risk of missing the turn? What if this is the real deal – a
    new bull market? This is the question that economists, strategists and market analysts must answer.

    Risk is much higher now than it was 18 weeks ago. The nine-week S&P 500 surge from 666 at the March lows to 920 as of yesterday has all but retraced the prior nine-week decline from the 2009 peak of 945 on January 6 to the lows on March 9. We believe it is appropriate to put the last nine weeks in the perspective of the previous nine weeks. To the casual observer, it really looks like nothing at all has happened this year, with the market relatively unchanged. But something very big has happened because the risk in the market, in our view, is much higher than it was the last time we were close to current market prices back in early January, for the simple reason that we believe professional investors have covered their shorts, lifted their hedges and lowered their cash positions in favor of being long the market.

    Employment, output, income, sales still in a downtrend. Considering what transpired from an economic standpoint, the decline in the first nine weeks of the year was rather appropriate in the midst of the worst three-quarter performance the economy has turned in roughly 70 years. The rally of the past nine weeks appears to be rooted in green shoots. While it may be the case that the pace of economic decline is no longer as negative as it was at the peak of the post-Lehman credit contraction, the reality is that employment, output, organic personal income and retail sales are still in a fundamental downtrend.

    Need to see an improvement in the first derivative. We have evidence that the consumer, after a first-quarter up-tick that was front- loaded into January, is relapsing in the current quarter despite the tax relief (didn’t we see this movie last year?). Not until improvement in the second derivative morphs into improvement in the first derivative with respect to the important economic data will it really be safe to declare what we are seeing as something more than a bear market rally, as impressive as it has been.

    This is a bear market rally that may have run its course. The investing public is still holding tightly to their long-term resolve, but much of the buying power at the institutional level seems to have largely run its course, in our view. That leaves us with the opinion, as tenuous as it seems in the face of this market melt-up, that this is indeed a bear market rally and one that may well have run its course. We have “round-tripped” from the beginning of the year and there is real excitement in the air about how these last nine weeks represent evidence that the economy will begin expanding sometime in the second half of the year.

    Growth pickup will likely prove transitory While it is likely that headline GDP will improve as inventory withdrawal subsides and fiscal policy stimulus kicks in, our view is that whatever growth pickup we will see will prove to be as transitory as it was in 2002, when under similar conditions the market ultimately succumbed to a very disappointing limping post-recession recovery. So yes, there may well be some improvement in the GDP data, but it is based largely on transitory factors. We strongly believe it is premature to totally rule out the end of the vicious cycle of real estate deflation – residential and now commercial – that we have been experiencing since 2007. Balance sheet compression in the household sector will continue to pressure the personal savings rate higher at the expense of discretionary consumer spending. This is a secular development, meaning that we expect it will last several more years.

    Chances of a re-test of the March lows are non-trivial. To reiterate, it seems to us likely that the risk in the market is actually higher today than it was back at the same price points in early January, and we say that with all deference to the stress tests (which given the less-than-dire economic scenarios, along with the changes to mark-to-market accounting, were destined to reveal healthy results). While the consensus seems gripped with the burden of trying to decide if there is too much risk to be out of the market, we actually still believe that the chances of a re-test of the March lows are non-trivial, especially if the widely touted second-half economic rebound fails to materialize…

    The data flow is less relevant this cycle than in the past. This was not a manufacturing inventory cycle, which makes the data flow less relevant than in the past. Real estate values are still deflating and the unemployment rate is still climbing; these are critical variables in determining the willingness of lenders to extend credit. And as we just saw in the Fed’s Senior Loan Officer Survey, while there may be a ‘thaw’ in the financial markets, banks are still maintaining tight guidelines. In fact, the weekly Fed data are now flagging the most intense declines in bank lending to households and businesses ever recorded.

    The best case is that this is a bear market rally. All of this has not precluded an elastic band bounce from an egregiously oversold low in the S&P 500, and perhaps we will even test the 200-day moving average of 960 (as the 10-year note yield and NASDAQ just did). But we still do not believe what we are seeing fits the hallmark of a new bull market. In our view, the best case is that this is a bear market rally, but one that clearly has more legs than its predecessors this cycle.

  13. 13
    zman Says:

    Thanks much Nicky

  14. 14
    zman Says:

    GST call in 5 minutes, could be an interesting one if they can hang on for higher prices.

  15. 15
    BirdsofpreyRcool Says:

    KOG — in all sincerity, hoping it drops back to 85¢. Might shift a few more funds in at that price. Thinking about it, don’t think they will make an announcement after they test well #3 (end of May). Think they will wait to report 3 and 4 (mid June) as 3 is a 4,500 ft lateral, but 4 is a 9,000 ft lateral. 4 could be one of those “game changing” wells for them. But, maybe everyone is already thinking the same thing. We shall see…

  16. 16
    zman Says:

    BOP – on the extended lateral, did they say something along the lines of targeting twice the reserves for 2/3rds of the price of 2 wells or something similar. WLL has drilled some really long laterals and some dual and tri-laterals up there to good effect. I too think it is a good thing if they don’t get into the habit of press releasing each well.

  17. 17
    zman Says:

    Story out saying OPEC’s president does not see calling for further cuts in production quotas at the May 28 meeting.

  18. 18
    zman Says:

    The resilience in the service names continues. Just can’t get excited about more puts in the space when the stocks pop on the slightest bit of green in the broad market but only shallowly participate on the down days despite their recent stout gains. The Street continues for the most part to pump these names up … they must see a round of deals around the corner in the space if they can get them up high enough.

  19. 19
    BirdsofpreyRcool Says:

    #16 KOG — they were totally tight-hole on wells 3 and 4 on the conf call. Not giving the public any data or setting any expectations. However, the institutional buyers in this last equity round had to sign a 90-day confidentiality agreement. So, there is clearly stuff swimming below the surface here.

  20. 20
    john11 Says:

    BOP..Any words of wisdom from TT or HT this morning?…TIA

  21. 21
    BirdsofpreyRcool Says:

    TT gave it another 50/50 day… so, nothing useful there. Will check with HT now (he had nothing to say pre-mkt).

  22. 22
    choices Says:

    http://321energy.com/editorials/west/west050609.html

    Lot of discussion lately pertaining to the strengthening uranium market-above article cites a couple of reports.

  23. 23
    zman Says:

    GST – going through the yada, yada now on the call, will let ya know if they say anything interesting.

  24. 24
    BirdsofpreyRcool Says:

    HT thinks we bounce here to, maybe, slightly positive on the indices. But not enough to trade it.

  25. 25
    zman Says:

    GST – not getting excited here.

    Last six wells at $10 mm a pop, down from early last year at $14mm , not a big surprise there.

    Do see some bump up in production later in the year due to workover but they are not really drilling so it will be lumpy with 2Q down from 1Q and then back up later in the year.

    They have $30 mm of debt coming due this year so the story really hinges on their ability to either pay that off (can’t with cash flow) or do a deal to refinance it. They really need higher gas prices.

    Analysts sound bored, but there appear to be more of them on the call than in past recent quarters.

  26. 26
    choices Says:

    bkx weakening considerably, vix edging up.

  27. 27
    zman Says:

    Oil and NG just gave up the day’s gains.

  28. 28
    zman Says:

    GST call = uneventful.

  29. 29
    VTZ Says:

    Nicky/tater – Should I be reading anything into the fact that many are looking for turning points in S&P, Oil, Gold and the USD at the same time?

    I’m hearing lots of calls for S&P to turn down, USD to turn down, Gold up and Oil caught in the middle between the USD bears and the S&P bears.

    It seems like a critical inflection point for all markets.

  30. 30
    zman Says:

    ZTRADE: HK – Added another (20), the last piece, to my so far ill-fated HK May $26 call trade for $0.20. Brings average cost down to 42 cents. High risk trade label still applies as expiration is Saturday.

  31. 31
    1520sbroad Says:

    z – any thoughts on GMXR and how this offering changes the redetermination math? I figure they can raise $80m net on their 5.75m shs @ $14ish. This goes against $150m outstanding on their revolver. What does all this + gas recovering slightly do to their redetermination?

  32. 32
    zman Says:

    1520 – it helps, maybe they get a small bump. According to management they were in little danger of seeing their borrowing base reduced. It gives them more breathing room and the ability to quickly add a rig in the latter part of the year should gas prices improve in the fall. I guess no one really cares about the dilution which is thumping large. Just focus on the 4P reserve potential as they call it and small the ugly pill. BOP is right, you don’t want your banks holding an anvil over your head these days.

  33. 33
    zman Says:

    CNBC Watch:

    Addison Armstrong calling the recent move in oil a momentum move. Can’t argue with that.

    Says oil can trade up into the lower $70s … that sounds like a bit of a stretch, guess it depends on the time frame.

  34. 34
    1520sbroad Says:

    Agreed on the anvil avoidance.

  35. 35
    zman Says:

    “The previous administration’s failure to apply the law has resulted in widespread uncertainty in the oil and gas industry and put reliable conventional energy production from offshore areas at risk,” Interior Secretary Ken Salazar said in a statement released late last night.

    “We must fix the problems the court identified and put oil and gas leasing decisions back on firm scientific footing.”

    Who is he kidding?

  36. 36
    1520sbroad Says:

    gmxr said in their release that they have only about 65m left to spend in 2009 (net of a sale of pipe). Seems like that after the offering and a redetermination that stays the same roughly that they can live within their means and fund the remaining capex via the drill bit (more or less). Also gives them some ramp up capital if things improve.

  37. 37
    zman Says:

    VTZ – 29. Agreed. Which is why I’m playing pretty conservative on cash after the run we’ve had. Seems like we could round trip 100 points on the SPX and no one would be able to say much about it other than “oh, well, it had had a good run”.

  38. 38
    BirdsofpreyRcool Says:

    #35 = “double-speak”… something that is being perfected these days.

  39. 39
    zman Says:

    BOP – I just find it more than hugely ironic that Salazar, with his designs to pillage the hydrocarbon based energy industry in the U.S. has the gall to make that kind of statement.

    Looks like market is waiting on retail sales tomorrow to make a decision on what to do next. Volumes in most things I’m looking at are very light.

  40. 40
    BirdsofpreyRcool Says:

    Maybe we need a “Gall Meter” along with our “Irony Meter” these days.

  41. 41
    tater Says:

    VTZ = I’m hearing exactly the same things. Yes, I believe that we are at one of those points, but I think that Nicky has some very valid ideas as to how difficult it is say what/when there may be a turning point. I believe the market has been pushed by traders who had a craptastic 2008. They absolutely NEED to hit every rally or they are out of work. Same may be true of a possible reversal. There may be a pile into that direction if we head back down. I figure that there is no need to be early. Let it turn around and jump in for the ride.

  42. 42
    zman Says:

    We used to have a “give a crap” meter. When that one felt low, it was time to get out of the market, which had become too complacent. I’m really surprised to not see more profit taking here in the broad market.

  43. 43
    BirdsofpreyRcool Says:

    We are in a pretty famous “news vacuum” time of year. Where the mrkt can be pushed to the FEAR side of the ledger with relative ease.

    IG 152.5 moving wider

    HY 80.625 moving lower

  44. 44
    zman Says:

    I’m pushing Websters hard to add craptistic to their list. No other word conveys quite the sentiment.

    CRR edging lower but its tough going, feels a bit like a slow, continuous cover.

  45. 45
    VTZ Says:

    Thanks tater, just wanted to see if you had the same perspective as me. Great charts as per usual. I vote whenever I visit.

  46. 46
    zman Says:

    Oil hit $60.08 at the open and backed quickly away which is pretty typical of a momentum trade. Products are down today on continued perceived weak demand and that should tug oil lower if we don’t see a pickup in at least gasoline demand tomorrow.

    Did see a couple of stories on summer trips (expected to be down this year but was not broken out by flying vs driving) and another story saying travel for Memorial Day would be up.

  47. 47
    BirdsofpreyRcool Says:

    Moody’s rates Linn’s proposed notes offering B3; outlook is stable

    Approximately $450 million of debt securities affected

    New York, May 12, 2009 — Moody’s Investors Service assigned a B3 (LGD 6;
    91%) rating to Linn Energy, LLC’s (Linn) proposed $200 million eight-year senior unsecured notes and affirmed its existing B1 Corporate Family Rating (CFR), B1 Probability of Default Rating (PDR), and existing B3 (LGD 6; though the point estimate is changing from 92% to 91%) senior unsecured note ratings. The note ratings are assigned under Moody’s Loss Given Default notching methodology. The SGL-3 Speculative Grade Liquidity Rating was also affirmed. The outlook is stable.

    Note proceeds from the pending offering along with the pending $75 million equity offering will repay a like amount of outstandings under Linn’s first secured borrowing base revolver. Under Moody’s Loss Given Default methodology, the rating for the proposed senior notes offering is two notches lower than the B1 CFR. This is the result of the company’s estimated $1.2 billion outstanding balance under the revised $1.7 billion borrowing base revolver, constituting nearly 72% of the capital structure as determined by the LGD methodology pro-forma for the $200 million notes offering and $75 million equity offering.

    The affirmation of the B1 CFR reflects the company’s overall sizeable and durable asset base comparable to similarly rated E&P companies. Although Linn’s property base has undergone significant change over the past two years, it consists of long-lived durable assets needing relatively low levels of capital spending to sustain production and contains prospects for near-term growth.

    The ratings are further supported by seasoned management; sound liquidity due to effectively 100% of production being hedged through 2011 with significant proportion extending further into 2014; and sound production and productivity trends.

    The B1 CFR is tempered by the company’s LLC corporate structure which contains the burden of not only sustaining, but also growing its regular cash distributions to unit holders, and the need to supplement organic growth with acquisitions. This distribution obligation amplifies the relatively high reinvestment risk for the company but is compounded by having a depleting capital base underpinning a depleting asset base.

    The B1 CFR also incorporates the company’s relatively high leverage on the proven developed (PD) reserve base approximately $8.86/boe pro-forma for the equity offering which is on the higher end of the B1 rated exploration and production (E&P) peers group. Moody’s expects that leverage will likely remain on the higher end for the rating as the LLC model does not lend itself to much debt reduction given that cash flow after maintenance capex will be paid to unitholders instead of debt reduction. In addition potential acquisitions may also result in sustained higher levels of debt within the company. However, given the company’s scale and diversification, the B1 rating can handle some incremental leverage.

    The stable outlook assumes that the company will be able to continue to demonstrate stable production trends, while maintaining a manageable cost structure. The stable outlook also reflects the expectation that leverage on the PD reserves remains within the $9.00/boe range and future major acquisitions will be adequately funded with equity,

    The speculative grade liquidity rating of SGL-3 primarily reflects Moody’s expectation that Linn will have adequate liquidity to cover its planned capital spending needs, interest expense, and working capital requirements over the next twelve months. Given its LLC structure, Moody’s does not expect Linn to have much free cash flow after unit distributions, but will have adequate availability under its senior secured revolving credit facility to cover any funding needs.

    Moody’s last rating action for Linn Energy, LLC dates from June 17, 2008, at which time Moody’s assigned a first time B1 corporate family rating (CFR), a B3 (LGD 6; 92%) rating to its senior unsecured notes, a B1 probability of default rating, and an SGL-3 speculative grade liquidity rating.

    The principal methodology used in rating Linn was the Global Exploration and Production (E&P) rating methodology which can be found at http://www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating Range can also be found in the Credit Policy & Methodologies directory.

    Linn Energy is a Houston, TX based independent energy company engaged in the development, production, acquisition, and exploitation of long life crude oil and natural gas properties in the United States. The company’s reserves and production are located in California and Mid- Continent regions.

  48. 48
    tater Says:

    Just to add to that idea, the line in the sand is likely to be somewhere between 904 and 899 for people to really get that tight feeling in their gut again. Sentiment-wise, I tend to believe that so many people got scorched, just absolutely burnt up in the last year that they will be very quick to pocket a positive return for their fund and sit on it until they have reason to re-invest.
    Imagine a trader who could sell now and sit out until November and then claim to have gotten a 38% return for his fund this year. I’m sure that it would be a big marketing point for a fund. For an industry that makes its living off of commissions, I think that will play a part.
    Just my ramblings, but charts really are just a physical manifestation of crowd behavior, nothing more or less.
    Thanks for the kind words (and though I appreciate the vote, that was just for a little bet that I had going with a friend. No need to bother anymore, but thank you for the effort).

  49. 49
    zman Says:

    EIA STEO:

    revised global crude demand from a drop of 1.35 mm bopd to a drop of 1.8 mm bopd for 2009.

    revised non-OPEC supply up to growth of 100,000 bopd from flat for 2009.

    Just came out, pushed crude a touch lower.

  50. 50
    zman Says:

    HK looks to targeting $24. No news, sinking with the market, group, resurgent rumor that they are going to do a deal.

  51. 51
    BirdsofpreyRcool Says:

    Credit indices weakening, with stocks…

    IG 154.5

    HY 80.5 down a full point

  52. 52
    tater Says:

    I really don’t listen to the news during the day. Did this just come out, or is it old?
    http://www.bloomberg.com/apps/news?pid=20601068&sid=aKkPN8keugMw&refer=home

  53. 53
    choices Says:

    Z-maybe you should send an e-mail to XOM and COP that things may not be so rosy on the LNG deliveries (sorry about the long link):

    http://www.thepeninsulaqatar.com/Display_news.asp?section=Business_News&subsection=Local+Business&month=May2009&file=Business_News2009051215446.xml

  54. 54
    zman Says:

    Tater – I think it came out about an hour ago, recall seeing it scroll by.

    Choices – I hear ya but don’t think they’d listen, lol. They bet a big chunk of their future growth on a scattering of LNG projects as they gave up on trying to grow volumes in the U.S. quite some time back. XOM from time to time has commented on what a poor market the U.S. market is for natural gas…they’d rather deal with the Russians on multi-billion dollar projects than have to contend with the boom-bust winter centric cycle in N. America. That decision is also part of why I have trouble listening closely to buyout rumors on names like CHK with XOM as the cash rich buyer, since XOM has shown such a predilection for international ops and as recently as late last year punted either some or all of its Barnett position.

  55. 55
    Sambone Says:

    NEW YORK (Dow Jones)–A highly uncertain economic outlook could keep a lid on
    oil prices this year and next, the Energy Information Administration said
    Tuesday.
    Even while actual markets have risen, the U.S. agency lowered forecasts for
    benchmark U.S. crude prices in 2009 and 2010, citing cloudy prospects for an
    economic turnaround.
    In its monthly short-term energy outlook, the EIA said U.S. light, sweet crude
    will average $51.70 a barrel this year, slicing 94 cents from its prior
    forecast. In 2010, the agency sees crude averaging $57.75 a barrel, a
    projection $5.17 below its April view.
    “EIA’s forecast is based on a macroeconomic outlook that assumes the U.S. and
    global economies begin to stabilize in the coming months and show signs of
    recovery late in 2009 and into 2010,” the outlook said.
    The agency is the statistics and analytical wing of the U.S. Department of
    Energy. Its forecast is the first of three highly anticipated oil market
    reports due this week. The Organization of Petroleum Exporting Countries is
    scheduled to release its report Wednesday, to be followed Thursday by the
    International Energy Agency.
    The EIA’s downward revisions come as oil markets have seemingly hit bottom.
    U.S. crude futures have climbed more than $9 a barrel, or 18%, since the EIA’s
    last outlook was issued April 14.
    This report’s price revisions were relatively modest in comparison with past
    months, when the EIA was forced to catch up with crude’s plunge from highs
    above $145 a barrel last year.
    The EIA warned, “Both recent experience and the sizable participation in
    near-term crude oil futures options contracts at strike prices that are
    significantly different from current futures market prices clearly demonstrate
    that crude oil prices can move within a wide range in a relatively short
    period.”
    A stronger-than-expected recovery from recession or lower production from
    countries outside OPEC could precipitate a “faster and stronger rise” in
    prices, the EIA said.
    The EIA said retail gasoline should average $2.21 a gallon this summer, down
    about $1.60 from last summer. For all of 2009, gasoline will likely average
    $2.12 a gallon, rising to $2.30 in 2010.
    For refiners whose profits on turning crude into gasoline have been pummeled,
    margins should stabilize at low levels as demand slowly recovers and supplies
    of ethanol grow more slowly, the EIA said.
    In the second quarter of this year, crude will likely average $53.22 a barrel,
    rising to $55 in the third quarter, the EIA said. Together the two quarters
    comprise the summer driving season.

    -By Gregory Meyer, Dow Jones Newswires
    Dow Jones Newswires
    05-12-09 1248ET

  56. 56
    Sambone Says:

    NEW YORK, May 12 (Reuters) – The U.S. Energy Information
    Administration said Tuesday it lowered its estimates for
    domestic natural gas production and consumption in 2009, as
    weak economic conditions continue to pressure drilling and
    usage.
    In its May Short-Term Energy Outlook, EIA forecast U.S.
    marketed natural gas output this year would average about 57.98
    billion cubic feet per day, down 1.0 percent from last year’s
    daily rate of 58.59 bcf.
    In recent months, EIA has steadily pared back its estimates
    for U.S. gas production as low gas prices this year prompted
    production curtailments and a record slide in the number of
    rigs drilling for gas.
    EIA also said the sharp drop in drilling activity and the
    declining productivity of wells already in place will cause
    production to drop again in 2010.
    In 2010, EIA expects total U.S. marketed natural gas
    production to decline another 2.8 percent to 56.36 bcf per day,
    despite expectations for higher gas prices.
    EIA also projected domestic gas consumption this year would
    fall 1.2 bcf per day, or 1.9 percent, to 62.32 bcf per day,
    slightly more than the 1.8 percent decline forecast last
    month.
    The outlook for continued economic weakness in 2009 was
    expected to take its greatest toll on industrial demand, which
    is expected to fall 7.9 percent this year, up from EIA’s
    previous estimate for a 7.3 percent drop.
    EIA also expects slight demand declines this year from
    commercial and residential consumers, where consumption is
    influenced more by weather than economics.
    But it expects a 2.1 percent increase from the electric
    power sector as low gas prices, particularly in the Southeast,
    cause some power generators to switch from coal to cheaper gas.
    EIA expects consumption next year to increase 0.3 percent,
    but said the forecast gain is highly contingent on the timing
    and pace of economic recovery.
    In its price outlook, EIA said the Henry Hub spot price was
    expected to average $4.06 per thousand cubic feet this year,
    down from its previous estimate of $4.24 and nearly 56 percent
    below 2008’s $9.13 average.
    For 2010, EIA sees prices at Henry Hub, the benchmark
    supply point in Louisiana, rising 28 percent to $5.21 as the
    expected improvement in the economy lifts demand.
    (Reporting by Joe Silha; Editing by Walter Bagley)

    Tue May 12 16:44:33 2009

  57. 57
    zman Says:

    EIA STEO

    On natural gas they now see consumption growth of 2.1% in the electrical segment, up from 0.7% in last month’s forecast, as natural gas takes more share from coal.

    Gas Production Forecast:
    2009 was expected down 0.3%; now down 1.0%
    2010 was expected down 1.0%; now down 2.8%

    LNG – They inched up their import forecast from 1.32 Bcfgpd to 1.37 Bcfgpd

    Canada – they raised their forecast for imports from an expected decline of 11% to a decline of 7%. That makes little sense since the data continue to worsen out of Canada.

  58. 58
    zman Says:

    Thanks for posting Sam, I was just looking over the EIA’s latest bone toss.

  59. 59
    john11 Says:

    Z, are you still of the mind that it is very unlikely HK does an offering here?

  60. 60
    zman Says:

    John – yes, I am. But the last time I said that (and I mean after the 4Q call and not in the last couple of days) they proved me very wrong. They have $0 drawn last data available, but they also stepped up the capital program last week which will absorb the cash from their high yield deal. I just think Floyd would be pushing his installed base of shareholders over the brink were he to do one in the next 3 to 6 months unless the stock is at least $30.

  61. 61
    john11 Says:

    Thanks Z.

  62. 62
    zman Says:

    John – most of the May call trade is going to hinge on the direction of the market, more than fear of deal, unless of course they do one, over the next 3 days. NG continuing to march up helps but its not enough without the SP500.

  63. 63
    zman Says:

    NG up another dime now. Interesting to see SWN apparently responding.

  64. 64
    zman Says:

    Blackbery question. Somehow got shunted to the bottom of 30 days of emails. Anybody know how to get back to the top or do I have to wear out my thumb?

  65. 65
    BossmanG Says:

    Z, press “T” for top, “B” to get to bottom.

  66. 66
    zman Says:

    Thanks much Boss, will do when it stops deleting a couple of weeks of emails.

  67. 67
    BirdsofpreyRcool Says:

    US April budget deficit at $20.9B

    First April deficit since 1983.

    This is TAX COLLECTION month… and our Govt is ALEADY in the red?? Somebody, pls stop this. Now.

  68. 68
    VTZ Says:

    Can’t stop bailout nation… pensions funds… medicare… 401Ks all need propping up. Don’t count on surpluses for the foreseeable future.

  69. 69
    VTZ Says:

    Gold closing above 920 is bullish for a move to 960.

  70. 70
    BirdsofpreyRcool Says:

    Time for a little Bank Stress Test Humor break… if you didn’t see this, it’s a hoot.

    http://www.nakedcapitalism.com/2009/05/saturday-night-live-grades-stress-tests.html

  71. 71
    ram Says:

    Thanks BossmanG.

  72. 72
    zman Says:

    BOP – RE 70, that’s a must see, thanks for the laugh!

  73. 73
    zman Says:

    Greenspan sees signs of bottom in market; says Fed policy did not cause boom

  74. 74
    BirdsofpreyRcool Says:

    Greenspan is not dealing from a full deck.

  75. 75
    zman Says:

    Impressive end of day run in natural gas to close up 17 cents near the $4.50 mark. Feels like short covering as it is very streaky.

  76. 76
    Denise Says:

    Good afternoon
    For any interested has been covering his shorts today Mr K
    -seems he is in a market nuetral mode

  77. 77
    Denise Says:

    Also everyone I read buying gold

  78. 78
    zman Says:

    Thanks for the color D

  79. 79
    BirdsofpreyRcool Says:

    Denise — what do you think about buying gold? I never get that one right. And i’m still more worried about deflation + high govt interest rates, than inflation + high govt interest rates… don’t know how gold behaves in that scenario.

  80. 80
    Denise Says:

    BOP-I am never comfortable buying gld always late but occasionally join the crowd. I went small aem long for possible 55 pin on options expiration.

    agree with you

  81. 81
    BirdsofpreyRcool Says:

    Denise — thanks for sharing. I just can never get gold (or airline stocks) right. One has to know one’s limitations, I guess.

  82. 82
    Denise Says:

    There is a newletter by Lance Lewis
    (not sure think Daily Market Summary is the name) He posts columns on Minanville and seems to get it pretty right.

    I believe he was with David Tice-I do not subscribe (only because of my lack of fondness for gold)

  83. 83
    VTZ Says:

    For what it’s worth I essentially have a tinfoil hat.

    Deflation is a short term concern and there’s no way rates are going up unless they want to crush the economy. Most serious cases of inflation are caused by actions taken in depressions.

    QE can only lead in one direction. The monetary base is huge and there’s no practical way to reduce it without further decimation of the economy. The deficits (that are ongoing for a decade?) will be monetized and this has been predicted correctly by many. You can’t monetize a large part of 3 trillion dollars of your deficit over 2 years without impacting purchasing power of your currency.

    Asset deflation and monetary deflation are two different things. Cheap money does not solve a problem caused by cheap money.

    You know those banks that everyone is saying are so great right about now because of the steep yield curve… well not so much… treasuries? Not so much…

    The flight to gold as a currency rather than commodity will be fierce. Call it a bubble if you want, but I’ll take gold because it has always and will always act as the ultimate reserve backing.

    In order to back all the EU and American currency, gold has to reach a number between 5000 and 10000 depending on who you ask.

    Why does anyone hold gold as a reserve if it’s not a currency? Also, what’s backing the USD is the USD if the world’s currency? You can’t debase the whole system because other countries (read China) won’t have their reserves, crushed.

  84. 84
    RMD Says:

    A bit off subject, but since there are lots of engineers here:

    Wisdom Of A Retiree!

    I’ve often been asked, “What do you old folks do now that you’re retired?”

    Well … I’m fortunate to have a chemical engineering background, and one of the things I enjoy most is turning beer, wine, Scotch, and margaritas into urine..

  85. 85
    BirdsofpreyRcool Says:

    VTZ — we might be talking about the same things. When i say i worry about deflation, it’s wages, home prices, commercial realestate (not oil, gold, or other imports). When I say I worry about high interest rates, it’s not at the front end of the curve, which is the only place the Fed can really control.

    So, I worry about a continued decline in wages in the US, to more of a world-scale… with Govt providing a lot of services that Govt didn’t used to provide (and taxing a lot that they didn’t used to tax) + higher interest rates in the 2 – 30 year range. Guess gold goes a lot higher, in that scenerio… but I don’t know.

  86. 86
    VTZ Says:

    BOP – We are on the same page… There’s no way the Fed can raise short term rates, but everyone knows that the longer the rates on the short end stay low combined with QE, the higher the long end should go.

    At some point, oil will punish the US consumer (and the economy) as a function of bailout nation dollar destruction.

    If they don’t continue monetizing debt, they will not be able to finance their deficits. Bernanke and Obama have indicated by their actions that this isn’t an option.

    Gold can only go up.

  87. 87
    Denise Says:

    BOP-I worry about China not buying our debt!

    It seems to me we will be in an exquisite trading environment for the next decade. But not make much headway.

    RMD-read depressing tibit yesterday that China and India graduated 975,000 engineers last year and we had 70,000.

  88. 88
    BirdsofpreyRcool Says:

    VTZ — thank you. I guess I am personally more comfortable with oil, than gold… but both will go up for similar reasons, all else equal. When it comes to the Armageddon currency of choice, I’ll take shot gun shells. They serve a dual purpose… I can’t eat gold! But, glad to be on the same page.

  89. 89
    BirdsofpreyRcool Says:

    Denise — exactly. China fueled our housing boom by reinvesting our exported dollars and keeping interest rates low (why that was a conumdrum to Greenspan, I’ll never know). They can take away the punchbowl at any time. If US consumers pull back (and not buy Chinese imports) at the same time our Govt needs the Chinese to fund ever higher deficit spending, the Chinese are going to require a lot higher rates to buy our debt. We are basically enslaving ourselves to making the Chinese happy, with all this deficit nonesensical spending.

  90. 90
    VTZ Says:

    BOP – You can’t eat gold, but you can’t eat oil either and gold is easier to store.

    Denise- China has already indicated that they are not going to fund US debt forever… as demonstrated by their talk and their well-documented and publicized accumulation of gold.

    RMD- The older guy beside me has that cartoon on his door.

  91. 91
    Denise Says:

    I guess we all are in agreement commodities and energy are the preferred asset class.

    I notice the ag/fert names are doing well today

  92. 92
    BirdsofpreyRcool Says:

    CF loves TRA. AGU loves CF. SAC loves TRA…

  93. 93
    zman Says:

    Beerthirty. Someone let me know when they see API.

  94. 94
    BirdsofpreyRcool Says:

    What a day. Head Trader points out that longs are just not all headed to the door, like you think they would be. Also, there is a lot of money still sitting on the sidelines, wanting part of the game.

    Credit closed back about where it opened. Maybe we just scoot sideways from here… nah. Too much headline risk, govt involvement, and frazzled nerves. Summer should be volatile.

  95. 95
    BirdsofpreyRcool Says:

    INTC — CEO on the tape saying “2Q better than expected so far.”

  96. 96
    zman Says:

    TXCO – COO and CFO terminated.

  97. 97
    BirdsofpreyRcool Says:

    One of my rules of investing — Never buy stock in a company who’s CFO has a name that rhymes.

    TXCO = Mark Stark, ex-CFO.

  98. 98
    zman Says:

    BOP – I gotta, well, bop. Can you post those API numbers?

    Jat can you post imports and utilization.

    Looks like we got across the board draws, oil up post close.

  99. 99
    BirdsofpreyRcool Says:

    According to Bloomberg — API Report

    Crude Oil Inventories -3130k
    Gasoline Inventories -2006k
    Distillate Inventory -1757k

  100. 100
    BirdsofpreyRcool Says:

    END OF DAY WRAP

    Levels

    – SPX dn 1pt to 908

    – Credit flattish; IG12 147 / 149 (tighter 1bps)

    – Commodities mixed: Crude briefly hit $60/bbl this morning, breaking thru January levels, but ends back under $59.. Spot gold acts well, trading up ten bucks to $923/oz.. Copper reversed course to the downside after initially trading higher on the back of China import data..

    – Baltic Dry Index rises 1.7% (highest level since early Mar)

    Overview

    Markets stage strong rally off their worst levels as the financials cut their losses into the bell. While the move higher was nice, the defensives are the strongest sectors today (health care, staples, telco carriers), not the types of stocks you would like to see lead a rally, and a lot of the late day buying in financials was mostly just a burst of short covering (and fins couldn’t hold their gains into the bell). That said, the tape remains resilient and the financial sector is hanging in well despite a huge rally and a huge uptick in fresh supply.

    Some of the headlines that hit during trading today that helped equities:

    · Greenspan comments helping (they hit just after 2pmET) – says seeing “seeds of bottoming” in housing….says US eco running “very well” in recent weeks

    · Financials started to rally – a lot of short covering help – the early sell pressure when deals brook price completely abated in the early afternoon and flow became pretty even

    · HUD sec makes pos comments on housing initiative – HUD says that FHA going to permit its lenders to allow homeowners to use the $8K tax credit as a downpayment….”the Obama administration plans to further stabilize the housing market”

    · Russian Central Bank (on Bloomberg) also said today they have no plans to reduce US treasury holdings; “Of course there are lots of problems in America, but the American economy is fundamentally big and flexible,” they said

    · GE’s Immelt said improved credit markets have brought stabilization to the economy but it is still not clear when growth will resume

  101. 101
    jat Says:

    Utilization:
    DOWN 1.7% from 83 to 82

    Imports:
    DOWN 985 from 9,708 TO 8,723

  102. 102
    jat Says:

    Huge drop in imports there…

  103. 103
    zman Says:

    Thanks BOP and Jat. Yeah, that is a monster drop in imports, kind of what we’d call a “low quality” beat on the numbers. Not nearly as bullish as imports can be flighty and you’d rather have a crank up in demand. However, on the other hand, the gasoline dip is like a bit of increased demand AND softer production. The increase in demand is important and the softer production means less crude demand but also keeps gasoline inventories out of the spot distillate inventories have found them in. This time of year, we start to see gasoline prices start to wag the crude price dog so even though crude demand is weak, any possibility of a reduction in gasoline inventories will be supportive of crude prices. More on the morrow …

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