18
May

Monday Morning And All Is Greener

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The Week Ahead: Very light week ahead on the economic data front.

  • Monday 5/18  - Home builders index for May, forecast 16
  • Tuesday 5/19 - Housing Starts for April, forecast 518,000
  • Wednesday 5/20 - EIA oil inventory report, no U.S. economic release
  • Thursday 5/21 - EIA natural gas inventory report, initial jobless claims forecast at 630,000, leading indicators for April forecast at 0.8%, Philly Fed forecast down 15
  • Friday 5/22 - rig counts, no U.S. economic release, driving season begins.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today - GDP, KWK, EOG, TXCO, Big Cap E&P Graphs
  4. Odds & Ends

Holdings Watch:

  • $10KP: Value $26,675
  • 88% Cash
  • The Wiki Holdings and $10KP tabs are updated.

 

Commodity Watch

Crude oil eased 4% last week as the equity market rally took its first pause in 10 weeks. Strangely, this was also the first time in 10 weeks we saw a reduction in crude inventories which normally would have been cause for celebration amongst traders but the weak demand numbers and signs that the U.S. driver has again become price conscious relative to prices at the pump. Refiners would do well to constrain production as we enter the driving season  (it officially kicks with Memorial Day in one week) unless they see clear signs that demand is picking up. AAA has said that they expect an uptick in trips taken this week but that they also expect to see travel slump on a YOY basis this summer. This morning oil is trading up a buck plus.

  • OPEC Watch: 10 days until the May meeting and consensus seems to be honing in on NO production cut. 
  • MEND Watch: Straight from MEND HQ ~  "We have ordered the blockade of key waterway channels to oil industry vessels both for the export of crude and gas and importation of refined petroleum products," The group also said it blew up two oil pipelines but there has been no separate confirmation yet. 


Natural gas fell 5% last week as storage topped the 2 Tcf mark a few weeks earlier than normal. Profit taking and the same reasons as in the crude paragraph above can be blamed for the pullback. The $4 level will be pretty to sentiment and you'll note from the wrap that the shorts began reloading their positions last week. This morning gas is trading a couple of pennies with oil.

  • Weather Watch: Cooling degree days of 24; heating degree days of 40, both up slightly from the prior week. At first blush this augurs for another sub triple digit advance in storage this Thursday.
  • Tropics Watch: The official start to Hurricane season for the Atlantic Basin doesn't begin until June. Something forming over Jamaica could but probably won't become tropical storm Ana later this week. Temperatures in the Gulf of Mexico are still coolish and probably too low to aid much in development of storms at present.

Stuff We Care About Today

GDP Announces 3 Haynesville Wells:

  • Two wells in Bethany Longstreet field (NW La):

    • 14.3 MMcfepd IP on a 18/64 inch choke with 6,750 psi
    • 14.1 MMcfepd IP on a 18/64" with 7,150 psi
  • One E. Tx well in Panola County

    • 7 MMcfepd on a 34/64" choke with 2,800 psi
  • Nuthshell: The Louisiana Haynesville wells were still flowing back at the time of the 1Q09 press release and are in line with another Bethany well and should be receive favorably by the Street.

(E) Takes Slice of (KWK)'s Barnett Pie

  • Italian major (E) forming a JV by buying a 27.5% in (KWK)'s Barnett Shale acreage for $280 mm
  • Transfers 131 Bcfe to (E) which yields a strong $213 per Mcfe on proved
  • On a 3P basis they put the deal at $1.23 per Mcfe, still pretty strong given recent prices
  • (E) will help with funding of new drilling going forward, providing $210 mm over the next 4 years to fund its interest in 300 JV wells.
  • Nutshell: Good for KWK, even better for the E&P industry as it is good to see asset transactions coming back to life ... next stop, whole company deals.

(EOG) Files Mixed Securities Shelf

  • $900 mm of debt and equity potentially being offered
  • They file these periodically to maintain flexibility
  • They are one of the least leveraged E&Ps out and the lowest amongst the large caps (see next section) and their plan is to ultimately get to $0 debt. They don't have a need for outside capital so I don't see an equity raise either. They have recently said they are not interested in asset deals although I'd add, given how cheap assets have become, never say never.

(TXCO) Files Chapter 11

  • Attempting to keep operations going via debt in possession financing.
  • You have to wonder if someone doesn't scoop them up quickly out of bankruptcy to obtain their Eagle Ford shale position.

(SUN) Fire "Impacts" Ouputt

  • Explosions at their 178,000 bopd Marcus Hook refinery today
  • Company says it will increase production at other facilities to offset.

Large Cap E&P Multiple: Same notes apply to this set of updated chart as from Friday for the mids and smalls in terms of how I apply them in my thinking. I'll add these and the updated mids and smalls to the E&P tab later today. 

Odds & Ends

Analyst Watch:

  • (DPTR) upped to Hold at Keybanc
  • Jackup operators (ESV) and (RDC) upped to Buy at Jefferies
  • (SPWRA) cut to Sell at Soleil
  • (SLB), (BJS), and (SII) cut to Hold at Jefferies

 

93 Responses to “Monday Morning And All Is Greener”

  1. 1
    Sambone Says:

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude oil futures clawed back some of last week’s losses
    Monday, lifted by equity markets and fears over militant unrest in Nigeria.
    Nymex crude climbed back above $57 a barrel as participants continued to track
    equity markets as potential indicators of future economic activity and
    associated crude demand.
    Claims of weekend attacks on energy infrastructure in Nigeria, and threats of
    more to come, raised concerns over the country’s longer-term oil supply outlook
    after militants declared “all-out war” in the country’s oil producing region.
    “There was quite a big drop on Friday so I think we’re recovering from that.
    The stock market is slightly more positive which is helping, and Nigeria in the
    short term is certainly going to have a supportive development,” a crude oil
    broker based in London said. “But I think the key indicators remain the equity
    markets and general global demand.”
    At 1115 GMT, the front-month July Brent contract on London’s ICE futures
    exchange was up $1.13 at $57.11 a barrel.
    The front-month June light, sweet, crude contract on the New York Mercantile
    Exchange was trading 78 cents higher at $57.12 a barrel.
    The ICE’s gasoil contract for June delivery was down $5.00 at $462.50 a metric
    ton, while Nymex gasoline for June delivery was up 154 points at 169.60 cents a
    gallon.
    The main umbrella group of Niger Delta militants Sunday said it had blown up
    two pipelines over the weekend. It also warned that it planned to target ships
    using oil and gas routes in the region, after the hijacking of a tanker
    Wednesday led to an army attack on one of its camps Friday. The group last week
    warned oil companies to evacuate their staff from the region.
    While supportive to prices, no official confirmation of the claims blunted the
    developments’ impact Monday. Weak global demand and fat layers of onshore and
    offshore global inventories also helped dilute concerns.
    “Nigeria could be triggering some short covering but I think it is mostly not
    priced in yet as it will take some time for the market to evaluate the current
    crisis in the Delta,” said Olivier Jakob, managing director of Swiss
    consultancy Petromatrix. “It will not make a tight market overnight but would
    start to clean up some of the floating overhang.”
    Despite the moves higher Monday, crude prices remain below the 2009 highs
    struck last week that saw Nymex crude peep above $60 a barrel. Optimism that
    global economic contraction is slowing retreated toward the end of last week,
    particularly following bleak first quarter Eurozone GDP readings Friday.
    Equities finished the week lower while crude prices fell 4% on Friday alone.
    Any further pullback in equities could weigh on crude prices, analysts said,
    particularly given current market and wider economic conditions that seem
    unsuitable to support crude prices above $60 a barrel.
    “If some kind of correction is due on the financial front, then oil prices are
    undoubtedly going to follow. Given the very weak current fundamental picture
    they might even do so in their own right,” said London-based brokerage PVM Oil
    Associates in a note.
    Meanwhile uncertainty over the outcome of next week’s Organization of
    Petroleum Exporting Countries meeting could help keep prices supported,
    analysts said Monday. The group is due to meet May 28 in Vienna.
    We “maintain that values will be confined to a relatively narrow $54-$60
    trading range leading up to the OPEC meeting, as the possibility of a surprise
    in the OPEC decision will invariably lend a measure of support,” said Edward
    Meir, analyst at MF Global in New York.
    -By Nick Heath; Dow Jones Newswires

    Dow Jones Newswires
    05-18-09 0746ET

  2. 2
    BirdsofpreyRcool Says:

    Good morning. Quick trading comment. No colour/recommendations from TechTrader this morning, but HeadTrader thinks you buy the pullbacks. Day-trading advice only.

  3. 3
    Sambone Says:

    By Christine Buurma
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Natural gas futures rose Monday as traders weighed
    higher equities and crude oil prices against ample supplies and forecasts of
    mild weather in the major gas-consuming regions.
    Natural gas for June delivery on the New York Mercantile Exchange was trading
    6.9 cents, or 1.68%, at $4.167 a million British thermal units after opening
    floor trade 1.7 cents higher at $4.115/MMBtu,
    “The oil and equity markets turned around, and we kind of followed,” said Gene
    McGillian, an analyst with Tradition Energy in Stamford, Conn. “We’re basically
    waging the same battle we have been for the past four weeks.”
    Higher equity and crude oil prices were providing support for gas Monday. As
    the recession curbs gas demand, traders have looked to the equities market for
    signs of recovery. Natural gas also sometimes trades in tandem with crude oil
    and petroleum products, some of which can be used as substitutes for gas in
    power plants and heating systems.
    U.S. stock futures were higher Monday as traders awaited housing market data
    after Lowe’s Cos. (LOW) reported earnings that topped analysts’ expectations.
    Meanwhile, crude oil prices climbed as traders took advantage of low prices to
    buy contracts after last week’s market decline.
    Nymex light, sweet crude oil for June delivery was trading 18.3 cents higher,
    or 3.25%, at $58.17 Monday morning.
    But an abundance of gas in storage and forecasts of moderate temperatures in
    the U.S. Northeast and Midwest continued to place downward pressure on prices.
    Gas in U.S. storage as of May 8 totaled 2.013 trillion cubic feet, 22.8% above
    the five-year average and 32.8% above last year’s level.
    The National Weather Service was predicting normal temperatures across most of
    the Midwest from May 23 to May 31, with below-normal temperatures in the South
    and some warmer-than-normal temperatures in the Northeast.
    “Mild spring weather hasn’t brought the heat that the market needs to run,”
    wrote Drew Wozniak, an analyst with ICAP Energy in Louisville, Ky., in a note
    to clients Monday.
    -By Christine Buurma, Dow Jones Newswires
    Dow Jones Newswires
    05-18-09 0915ET

  4. 4
    BirdsofpreyRcool Says:

    Market really liking the bottoming comments from Lowe’s. Following on Scott’s Miracle Grow’s earning last week, seems everyone is staying home, putting in veggie gardens and buying patio furniture from Lowe’s to watch the lettuce grow. Anyway, good for housing sector. Ground Zero for this bubble burst.

  5. 5
    BirdsofpreyRcool Says:

    Lots of comments about buying the banks here this morning. GS put BAC on their “Conviction Buy” list, Dick Bove has a report out saying buy banks for the long term, and Berkshire Hathaway (for all those Buffett fans) increased their holdings in Wells Fargo.

  6. 6
    zman Says:

    Thanks for the early morning thoughts BOP.

    Nice broad market rally in progress. Probably going to add some to my trading positions in a bit.

  7. 7
    zman Says:

    ZTRADES:

    Added 10 HK June $25 Calls (HKFE) for $0.95 with the stock at $23.20.

    Added 5 SWN June $40 Calls (SWNFH) for $2.60 with the stock at $40.35.

  8. 8
    zman Says:

    Sam – have you looked at this site for a quick look at canes?

    http://media.myfoxtampabay.com/myfoxhurricane/

  9. 9
    zman Says:

    By the way, am looking at KWK with new eyes. Develeraging is a good idea. Bringing in a partner to share future development costs is a good idea. Getting paid more than PXP did last week in the Barnett for reserves is a good idea. My sense is the stock will make a run on the highs from a week ago in short order and then will have some running room, potential a 20 to 30% move near term. Lots of analysts should be looking at them and their ratings and sharpening their pencils. 11 of 23 covering analysts are at hold with another at sell.

  10. 10
    Denise Says:

    Good Morning,

    Mr K makes an interesting prediction that we might see a meaningful asset reallocation trade (by our country’s largest pension plans) out of fixed income and into equities.

    He points out that over the past year and a half many large pension plans have moved a disproportionate amount of exposure into fixed income, owing to the outperformance vis-à-vis stocks.

    He thinks bonds will likely to remain under continued pressure — with yields on the 10-year above 3% and nearly 100 basis higher than the past five months

    — this could be a catalyst to 1050 on the S&P

  11. 11
    zman Says:

    ZTRADE:

    Added a KWK Call position, a bit higher risk, going with (25) of the KWK June $12.50 calls for $0.25 with the stock up 14% on a JV with Eni in the Barnett. A more conservative posture would be the $10s for $0.90. This is a long expiration with 33 days until expiration. See post comments for more reasoning on the KWK.

  12. 12
    zman Says:

    Would one of you who wanted to receive text blasts let me know if you did in fact receive those trades on your phone? Thanks.

    Thanks D. I take it Kass is coming back from his recent return to shortsville?

  13. 13
    Denise Says:

    He is expecting a correction but seems pretty market neutral for the moment

    He started buying banks last week(exquiste timing as usual)

  14. 14
    zman Says:

    Denise – his timing has been pretty spotty on of late.

  15. 15
    Sambone Says:

    #8, I’ll put it on my watch screen. I won’t start really watching for about a month.

  16. 16
    Denise Says:

    Actually-pretty much on target for the last ten years (he was early on housing short by a year or so)

    For me he is the”when EF Hutton speaks I listen “kind of guy (I’m dating myself)

  17. 17
    zman Says:

    Sam – thanks. Saw a comment that water is cooler than it needs to be. Is it cooler than normal for this time of year (not something I really track)? Just wondering if that is what’s behind the recent downgrades by Colorado State on the season.

  18. 18
    zman Says:

    Denise – I hear ya there. Thanks for the update as to his prognostications. Keep ’em coming.

    KWK through $10 and targeting the opening high. Don’t know if it’s a telephone pole like chart to the lower teens or if we get a pullback due to the strong first day move. Problems with the stock have been low prices and too much debt (this in effect increases their hedge as I see no mention of transference for the volumes) and it cuts the leverage on the balance sheet slightly and increase their ability to make their interest payments substantially. This may not increase their favor in the eyes of their bankers as they are shedding assets but the prices paid for those assets was good, again, for this market.

  19. 19
    bill Says:

    #9

    i think you meant dnr not pxp (my other favorite)

    while on subject of pxp this came out late friday

    http://finance.yahoo.com/news/Budget-woe-led-to-renewed-apf-15270424.html?.v=1

  20. 20
    zman Says:

    Yep, my bad, did mean DNR.

  21. 21
    bill Says:

    pirates in a row boat

    http://www.tradewinds.no/andalso/article537229.ece

  22. 22
    zman Says:

    People decided they not only liked the GDP results but that they really liked them. HK has garnered a premium multiple by drilling consistently bigger wells in that play but also via diversification. I’ve had lunch with Gil Goodrich before and I can say he’s a nice guy, smart, somewhat of an awkward present and doesn’t give you the feel he’s about to do a deal when he is so a bit crafty in that much like the Swift’s you may underestimate his aggressiveness. I’ll not chase the stock here but I’d guess it moves higher.

  23. 23
    choices Says:

    z-sure do not feel like I want to be buying in here but these moves make me feel like I’m standing at the station (strenght is surprising, at least to me)
    strength in crude and NG certainly has something to do with it. No weakness in the service names either.
    what is your view in general terms now that the earnings are in for the immediate future?

  24. 24
    choices Says:

    btw, anyone know if Canadian markets are closed-I cannot get quotes but they had a glitch on Friday as I understand with no data feed for a while.

  25. 25
    zman Says:

    Choices – I grew more cautious towards the end of the season for precisely that “lack of further catalyst” reasoning. Plus we had had a good run. I’m dipping some more toes this morning but not thinking anything like it is time to go all in.

    On oil, my sense is that the expectation of no change for OPEC at the end of the month will keep crude range bound in the $50s, probably the upper $50s. A second week of inventory draws would probably get people thinking $60 test if it was accompanied by an uptick in demand for gasoline.

    Natural gas needs to hold $4. We seem to be topping out near 100 on injections, need to see that again this week, heat is coming and that should help. Psychology on the gassy stocks will turn sour if we break the $4 level even if the strip remains better by a buck.

  26. 26
    zman Says:

    I see Toronto trading.

  27. 27
    Bob Says:

    Toronto is supposed to be closed today for Victoria Day

  28. 28
    zman Says:

    Bob – I think what I saw was a Friday trade:

    http://finance.yahoo.com/q?s=axc.to

  29. 29
    zman Says:

    ZTRADE:

    Added (5) KWK June $10 Calls (KWKFB) to start for $1.10.

  30. 30
    bill Says:

    todays bk

    http://online.wsj.com/article/SB124265936830530735.html?ru=yahoo#mod=yahoo_hs

  31. 31
    choices Says:

    Thanks, Z, Bob

  32. 32
    choices Says:

    Vix very weak-off 6.3%, bkx up 5.5%-banks seem to keep driving this market but I would not touch them with a barge pole-I do not think we see significant weakness until the VIX starts up in a serious and consistent manner-IMHO.

  33. 33
    ram Says:

    There seems to be a strong move for more energy efficient lighting. Apparently lighting accounts for about 33% of power consumption. Do you see analysts looking at power consumption reduction as factors for relatively low growth in 2010 and beyond for E&P’s?

  34. 34
    BirdsofpreyRcool Says:

    Credit Market Comment — strangely enough, the credit markets (as measured by the indices) are just about where they closed on Friday. Investment Grade is a little weaker (wider) and High Yield is a little higher (better). But, not attypical for a Monday with light volumes.

    IG 158 bps

    HY 78 7/16 points

  35. 35
    bill Says:

    shipping report

    http://files.irwebpage.com/reports/shipping/08l26Pvi9u/Imarex%20Daily%20Brief%20-%2015%20May%20%202009.pdf

    interesting comment on mend

    bulker rates modest recovery..most ship types above break even

  36. 36
    zman Says:

    33 – I have not seen much commentary there. Efficiency is difficult to factor into the demand model for something like a light bulb as you generally see growth in overall electricity consumption each year.

    For instance, generation went from 3.8 million thousand megawatthours in 2000

    to 4.16 in 2007 (9.5% growth). In 2008, due to weather and the economy this backed off to 4.11. All this time there was a greening effort going on so this played a part in reducing growth to be sure, but it was the economy that resulted in lower generation.

    Over this same period, gas-fired generation went from 0.6 to 0.897 in 2007 (49.5% growth), retreating to 0.877 in 2008.

    Note that nukes stayed about flat over the last two years having inched higher as they push max capacity this entire decade. When running, nukes run flat out.

    Coal, grew but at a slow pace over the period and the cost of burning more coal is about to go up with cap and trade. I don’t think that means coal “goes away” by any means as it represents half of our current generation but its growth will be further inhibited.

    The rapid growth of gas-fired generation is due to a greater availability of gas in more regions of the country, and the fact that GE was selling gas turbines like hot cakes in the late 1990s. I think the light bulb swap out effect will more than be offset by economic recovery followed by new uses, such as plugging your car in at night, which, um, solar won’t help much with.

  37. 37
    zman Says:

    Having some difficulties with the text messages not getting through. Will send some tests to those of you who are having a problem momentarily.

  38. 38
    elduque Says:

    RE Lowes- Every time I go into the local Lowes, you can drive a truck through it, no make that 10 trucks. A year ago I couldn’t find anybody to wait on me, now I am like the beautiful blonde cheerleader.

  39. 39
    zman Says:

    Hear ya El-d. Same here HD, LOW, sort of slow at TGT too.

    Surprising lack of move in the refiners over the SUN fire. Gasoline is up 3% on it which is giving crude probably half of its $2 move today.

  40. 40
    zman Says:

    Ram – so to add to 36 in answer to your 33, I don’t see it as having much of a measurable impact. I don’t see the U.S. reducing overall consumption in a “return to normal economy setting” over the medium and long term and if we do, I don’t see it hurting natural gas.

  41. 41
    zman Says:

    Still seeing some amazing volatility in the smallest of the small caps. PQ routinely moving 10 to 15% with an upward bias.

  42. 42
    BirdsofpreyRcool Says:

    U.S. Stocks Gain as Bank of America, Lowe’s Shares Advance
    2009-05-18 16:05:45.655 GMT

    By Rita Nazareth
    May 18 (Bloomberg) — U.S. stocks rose, helping the Standard & Poor’s 500 Index rebound from its worst week since March, as analysts recommended Bank of America Corp. and Lowe’s Cos. beat earnings projections. European government bonds and oil gained.
    Bank of America climbed 12 percent after Goldman Sachs Group Inc. put the lender on its “conviction buy” list.
    Goldman Sachs increased 3.9 percent as Citigroup Inc. boosted the company’s share-price and earnings estimates. Financial stocks led the advance after the cost of borrowing in dollars between lenders dropped the most in two months as credit markets thaw. Lowe’s, the home-improvement retailer, added 6.2 percent.
    The S&P 500 jumped 1.7 percent to 898.27 at 12:03 p.m. in New York. The Dow Jones Industrial Average added 148.62 points, or 1.8 percent, to 8,417.26. Europe’s Dow Jones Stoxx 600 Index rallied 2.4 percent, while the MSCI Asia Pacific Index lost 0.4 percent. India’s benchmark index rose a record 17 percent after the prime minister’s party won nationwide elections.
    “It’s a more constructive market” for stocks, said Hank Smith, who helps oversee $5 billion as chief investment officer of Haverford Trust Co. in Radnor, Pennsylvania. “What we saw last week was only a necessary pause, not the beginning of a retracement. The worst of the economy is behind us and it’s hard to see earnings getting any worse from here.”
    The S&P 500 fell 5 percent last week, erasing its 2009 gain, after the index reached the priciest level relative to earnings in seven months, companies from Ford Motor Co. to U.S.
    Bancorp sold shares to raise capital and General Motors Corp.
    said bankruptcy is probable.

    37% Surge

    Between March 9 and May 8, the S&P 500 surged 37 percent in the steepest two-month advance since the 1930s on signs the global recession is easing. Still, U.S. stocks are 55 percent cheaper than shares of European companies just as the price of options to protect against losses in Europe climbs. The gap in valuations is the widest since 2003, Bloomberg data show.
    While profit shrank 37 percent from a year earlier at the
    445 companies in the S&P 500 that reported quarterly results since April 7, Bloomberg data show they beat analysts’ estimates by an average of 9.3 percent.
    Lowe’s rose 6.2 percent to $19.60. The retailer reported a smaller decline in first-quarter earnings than analysts estimated as it reined in costs amid the recession. Profit of 32 cents a share beat the average analyst estimate by 25 percent, according to data compiled by Bloomberg.
    Bigger rival Home Depot gained 5 percent to $25.62.

    ‘Solid’ Quarter

    Bank of America helped lead a gauge of financial shares up
    4.4 percent for the biggest gain in the S&P 500 among 10 industry groups. The largest U.S. lender by assets rose after Goldman Sachs cited its progress on raising capital and another “solid” quarter for the mortgage and capital markets businesses. Bank of America gained 12 percent to $11.96.
    Goldman Sachs added 3.9 percent to $139.65. Citigroup raised the bank’s share-price estimate by 10 percent to $160, citing increased debt and equity underwriting. Citigroup also boosted Goldman Sachs’s profit estimates through 2011.
    Financial shares also rose after the London interbank offered rate, or Libor, for three-month loans in dollars fell four basis points to 79 basis points today, the biggest decline since March 19, according to British Bankers’ Association data.
    “Capital is now available,” said Peter Sorrentino, who helps manage $13.8 billion at Huntington Asset Management in Cincinnati. “Indicators of stress in the financial system are getting back to their historical relationship. That’s bringing investors back into the marketplace.”

    Energy Rally

    Energy shares in the S&P 500 rallied 2.9 percent for the second biggest advance in the S&P 500. Oil climbed 2.9 percent to $57.95 a barrel as a Nigerian military group threatened to block waterways used for energy exports and an explosion at a Sunoco Inc. refinery affected operations in the Northeast U.S.
    Exxon Mobil Corp., the world’s largest company by market value, added 2 percent to $70.52. ConocoPhillips, the second- biggest U.S. oil refiner, rose 4 percent to $45.70.
    Macy’s Inc. advanced 6.8 percent to $12.10. The second- biggest U.S. department store chain was added to the “conviction buy list” at Goldman Sachs, which cited the retailer’s $400 million cost savings plan and prospects for improvement in sales as the economy recovers.
    Lennar Corp. surged 16 percent to $10.23 for the biggest gain in the S&P 500. The fourth-biggest U.S. homebuilder by revenue was raised to “buy” from “hold” at Citigroup.
    Broadcom Corp., the maker of chips for wireless headsets and TVs, advanced 3.6 percent to $21.58. Morgan Stanley upgraded U.S. semiconductor makers, saying the “fundamentals of the group are bottoming.”

    ‘Less Bad’

    The outlook for technology spending in 2009 should be “less bad” than expected, Barclays Plc analyst Benjamin Reitzes wrote in a report. A Barclays survey of 100 chief information officers showed they expect spending to decline 2.4 percent this year, less than the average analyst estimate for a 10 percent drop, he wrote.
    ICICI Bank Ltd., India’s second-largest bank, surged as the country’s benchmark stock index jumped a record 17 percent, bonds rose and the rupee gained the most in two decades after Prime Minister Manmohan Singh’s Congress Party won nationwide elections. Share trading was halted for the first time ever after the Sensitive Index, or Sensex, breached a daily limit set by the market regulator. ICICI American depository receipts gained 30 percent to $30.44 in New York.

    ‘Head and Shoulders Bottom’

    A drop in U.S. stocks would probably be limited to 10 percent because of mutual-fund investments and the bullish “head and shoulders bottom” pattern formed by a graph of the S&P 500, according to a Bank of America Corp. analyst.
    New assets being stashed in U.S. mutual funds have “improved significantly,” Mary Ann Bartels, a Bank of America analyst who studies charts to make forecasts, wrote in a report today. Money managers have seen net investments during eight of the past nine weeks, with almost $5.5 billion added in total.
    “There is more room for flows to support the current rally in equities,” said Bartels, ranked second among analysts who study price charts in Institutional Investor magazine’s most recent survey.
    Allegheny Energy Inc. slumped 10 percent to $23.18. The owner of utilities in four U.S. states was downgraded to “market perform” from “outperform” at Wachovia Capital Markets LLC.
    AutoNation Inc. lost 3 percent to $15.49. The largest U.S.
    new-vehicle retailer was cut to “sell” from “neutral” at Goldman Sachs Group Inc.

  43. 43
    VTZ Says:

    I was just looking into the Sunoco fire, no injuries. Did anyone see any videos?

  44. 44
    zman Says:

    Ocamm and Joe3, sent you test texts, let me know if you received. I received mine as an email to my phone today which is odd since last week it went through as a text.

  45. 45
    zman Says:

    V – No injuries is good. I saw some footage earlier on CNBC, no flames visible, still burning though.

  46. 46
    zman Says:

    Ram – Did 36 and 40 address your question?

  47. 47
    zman Says:

    Oil up $2.75. That does not make any sense from the standpoint of the SUN fire. If it is Nigeria pushing it then I would say this is overdone.

  48. 48
    elduque Says:

    If you are of the bearish bent and want some confirmation on why you should be. Go to http://www.hussmanfunds.com and read his last two weekly comments.

  49. 49
    ram Says:

    Yes, was on the phone with Adura Systems. Clean Tech mass transit vehicles. Exciting crew.

  50. 50
    zman Says:

    Text Blast just sent. Let me know if you are signed up and didn’t get it.

  51. 51
    zman Says:

    Natural gas has given up the gains on the day due to a 1.9 Bcfgpd number for last week’s LNG. This is up 0.9 Bcfgpd from last year.

    Canada remained low however, still down at 5.7 Bcfgpd. This is down 1.3 Bcfgpd from last year and at long term lows.

  52. 52
    reefguy Says:

    Thoughts on KWK trade. This is the package they bought from Chief et al about 14 months ago for $1.25B, so they sold a 27.5% share for 280MM; that is about a 20% discount. In addition they have had 5 rigs running on the block for a year. Call that about 85 wells at about $4/well or $340MM. That 27.5% net is about 93.5 million in that. So in summary, they lost about 300MM net in the last year on this 27.5% share.

  53. 53
    reefguy Says:

    52- check that, they lost about $200MM

  54. 54
    BirdsofpreyRcool Says:

    reef — great back-story and color. thank you for your comments on KWK.

  55. 55
    zman Says:

    Reef – They got cash flow off those wells through the $14 price spike as well though. To me, these are different times, I’d rather they sold down higher but that’s a bit hind site laden thinking.

  56. 56
    reefguy Says:

    Z- yes, they got about 100M from cashflow, that is why they only lost 200MM. It is a good metric for them. ENI paid about $20,000/flowing mcf. That is very rich….

  57. 57
    zman Says:

    EOG went ahead and sold $900 mm of 10 yr debt at a 5.625% coupon.

    http://www.reuters.com/article/marketsNews/idAFN1849968620090518?rpc=44

    Its a strong balance sheet that allows you to pitch sub double digit debt in this market.

  58. 58
    zman Says:

    Re 56. Ok, got ya. I was already typing before I saw 53. Thought you were saying it was a bad metric. It’s your stomping ground but I really think that all things considered it is a good move for them. They just have too much debt.

  59. 59
    reefguy Says:

    z- good move and a decent price

  60. 60
    zman Says:

    Reef – I thought the DNR deal looked a bit light, were those assets tapped out?

  61. 61
    Sambone Says:

    GS must be going short gov debt.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aBII6SLy_WFs&refer=home

  62. 62
    zman Says:

    LINE startimg to recover from last week’s deal.

  63. 63
    zman Says:

    Quick bounce for NG into the nymex close today, was in danger of going red, looks to be ending up 5 cents.

  64. 64
    BirdsofpreyRcool Says:

    Been talking to a few people, both on the buy- and the sell-side today. Pretty much, to a person, no one knows what to think here. It’s like we are in a state of suspended animation… you don’t want to move because you don’t know which direction to commit to. No one I talk to is putting a lot of funds to work…. but no one is shorting, either. Sort of like the Kass “in neutral” comment that Denise passed along this morning. That probably explains why it is so quiet. Waiting to see the color of the next shoe to drop.

    “Green shoots” are NOT going to grow up into the kind of plants we have seen in past recoveries. We don’t know what these genetically-modified shoots will do, this time around. We just know they will be different.

    Just musing out loud…

  65. 65
    BirdsofpreyRcool Says:

    Seeing the first signs of a mini-rally in credit today… fwiw. Maybe we close the day strong in the last hour.

  66. 66
    VTZ Says:

    BOP- it’s because nobody trades fundamentals anymore… they wait for the market to tell them with technicals. Denise probably heard Kass the other day asking Art Cashin whether there was ever a different interpretation of the technicals. Art couldn’t answer the question, he sounded like a sheep.

  67. 67
    zman Says:

    BOP – here ya Very quiet. Friday was about as early and strong as a pin as we’ve had in a year. Some this is just bounce off those manipulated lows. Have TT or HT commented more today?

  68. 68
    BirdsofpreyRcool Says:

    ha! HT is busy with some complicated trades today… so other than this morning, we’ve been chatting margin requirements for sub-$4 stocks on call options where a massive amount of stock was assigned… but, he thinks we rally into the close (i know, b/c that is how we are trading it today).

  69. 69
    zman Says:

    CNBC spot on the Lingerie Football League probably the best piece they’ve run all year.

  70. 70
    zman Says:

    Re – Any thoughts on rest of week from him?

  71. 71
    BirdsofpreyRcool Says:

    VTZ — #66 i think that is true for a lot (most?) people. But others (myself included) are just trying to get ahead of the fundamentals. Once it’s well known that XYZ sector is out of the woods because their earnings have turned up, the stock will have doubled or more. So, have to try to get ahead of the fundies, but extpremely mindful of them. Besides… i S-U-C-K at technical trading. So, fundamental investing is the only thing I’ve ever been taught.

    All fwiw, of course.

  72. 72
    BirdsofpreyRcool Says:

    HT only goes one day at a time. If he went further, he’d be an analyst (and not Head Trader), right?

  73. 73
    reefguy Says:

    z- DNR deal is “tier two” acreage, KWK is clearly “tier one”

  74. 74
    zman Says:

    Reef- thanks. DNR probably had a certain amount of cash they needed to fund their co2 flood effort so they sold enough to get them there.

  75. 75
    jy Says:

    I’m looking for someone to point me to a source for the quote that is rattling around in my head that “the majority of US gas being produced today has been found in the last 3 or 4 or 5 years”

    I tried Energy Info Agency, Simmons, Platts, ECA, APC, Shell, APA, CHK, American Gas Association, all no luck.

    Suggestions??

  76. 76
    VTZ Says:

    http://www.scribd.com/doc/15475184/Understanding-the-Real-Economy-51509

    Martin Armstrong’s waves… artivle from Friday points to today as a key date for those who follow or care.

    He also discusses Elliott waves and other things.

  77. 77
    Denise Says:

    Here is something I never knew-
    complements of J Cooper-
    mutual funds cannot have more than 30% of their income from short term trades(under 90 days)

    So if they need to hold what they bought(assuming they put cash to work starting in March)maybe this rally hold much longer than we think

    I have only read 1 columnist who is bullish (based more on pyschology)
    hmmm…

  78. 78
    zman Says:

    I gotta step out for a few minutes, JY, I will have something for you by end of day.

  79. 79
    bill Says:

    75

    i think aubrey said that– check out chk transcripts

  80. 80
    choices Says:

    BOP, #64-thanks-that helps-someone pointed out that the volume today was very low, no conviction, which explains why no one wants to short this dull market, but surely no one wants to buy either.

  81. 81
    zman Says:

    Bill – yep, CEO’s of CHK, EOG, and APC at the least have mentioned it in the past. Just looking through transcripts for the reference, nothing last couple from EOG and APC. Also, EOG used to have a good natural gas vintage chart that showed the weighted average first year decline rate of wells drilled in the onshore U.S., I’ll send EOG a note to see if they will send me one.

  82. 82
    jy Says:

    Re #78 Great!

  83. 83
    zman Says:

    JY – still looking about, sent a request to EOG for their graph as well.

    Strong HOD close, volume light. Beerthirty.

  84. 84
    BirdsofpreyRcool Says:

    HT — back on track.

  85. 85
    BirdsofpreyRcool Says:

    End of Day Overview:

    · What a difference a weekend makes…after a couple rough sessions last week, stocks surged into the bell. SP500 ended up 25pts, led by the early cyclicals (huge moves in financials +7%, discretionary +4%, and energy/materials +3%). The equity desk started to see real buyers come in late this afternoon; ie, we had a good mix of buying that powered stocks higher (a combo of shorts who pressed last week covering, momentum buyers, and real $ afraid to miss upside). Some incremental positives drove stocks upward throughout the afternoon: Credit finally joined equities after lagging all morning (IG12 tightens 5bps and HY +3/4pt…see below), Crude ripped into the close ahead of expiry (energy names powered higher); Geithner said financial markets have stabilized, but the economic recovery will take time (speaking at the Natl Press Club)…he also said he didn’t want to see exec comp limits; NAHB increase over the last couple months suggests that new single-family home sales hit bottom early in the year and are now slowly increasing (home sales data out Tues morning now in focus). Importantly, SP futures made a convincing break above 896, which ended the trend of lower lows/lower highs from the past few weeks (our futures desk says next stop not until 930)…on the downside, SP Futures held key technical level overnight (~876, which is the 5/4 low).

    · Homebuilder index slowly gains ground, suggesting new home sales have bottomed; The NAHB housing market index rose to 16 in May from 14 in April and 9 in March. While the homebuilder index is still at an extremely low level, its increase over the last couple months suggests that new single-family home sales hit bottom early in the year and are now slowly increasing.

    · Credit finally joins stocks: this morning HY12 was lower despite a rally in equities; recall last week credit underperformed stocks as cash positions eroded and new issues did not trade as well. As stocks surged Mon afternoon, credit finally joined in…CDX IG12 tightened 5bps and HY12 ended up 3/4pt (after opening 1/8pt lower).

    · Treasuries continued to move lower through the afternoon as equities rallied. 10yr yields rose the most in more than a week (8bps) to 3.21% after falling 15bps last week. Treasury Secretary T. Geithner commented that the US fiscal condition is “unsustainable” and a negative Barron’s article on treasuries weighed on the asset class. The Treasury’s next round of auctions begins on May 26 with sales of two-, five- and seven-year securities over three consecutive days.

  86. 86
    AAA Says:

    BOP, I really enjoy the commentary from HT, TT and Desks you provide. Can you say which firm it’s from?

  87. 87
    RMD Says:

    Eagle Ford jv. offered:
    I hear Rob Lewis is offering 300m acres for farm-in. Could further focus att’n on the EF though it is too late for TXCO.

  88. 88
    BirdsofpreyRcool Says:

    AAA — it’s from the trader at MS Howells. They are a small, but really great firm to work with. They function as a Prime Broker for hedge funds and smaller investment management firms. HT truly is a head trader. And he is linked into a great community of traders, including TechTrader.

    This business is all about who you know and what kind of personalized service they provide. When you find a firm and someone who knows what they are doing, you stick with them. I am pleased to recommend them to anyone contemplating forming an investment management firm. (This is not a commercial; I have no share in MS Howell’s success or failure… but 1) you asked… and 2) I like to give credit, where credit is due!)

  89. 89
    BirdsofpreyRcool Says:

    AAA – Just to be clear, I get trading colour and bond quotes off of numerous large cap banks and brokerages in NYC too… but HT is at MS Howells. Far from the Madding Crowd of Wall Street.

  90. 90
    Wyoming Says:

    I read it on the internet, it must be true:

    http://www.rigzone.com/news/article.asp?a_id=76043

    I’m not sure about the 48 bbl NGL/MCf is right. It may be a typo. There is about 6 mcf / boe

    http://en.wikipedia.org/wiki/Barrel_of_oil_equivalent

  91. 91
    zman Says:

    Wyoming – Please forgive me. I normally monitor the night time stuff with a pretty laisez faire hand. The weather here is fantastic for the first time in 3 weeks so the Oregen Pinot Gris is flowing freely. But 48 barrels of BGL equivalent per of Mcf I have to draw the line at. You can be as liquids rich as you want to be and not get within a multiple of that. Love the guy’s tone though. The dirty little secret and all. “gassy bubble”? There’s a new concept. Also, once again, the schlub can’t seem to look north of the border, where piped imports outweigh LNG imports by 4 to 5 to 1. Anyway, he just needs to pass a 3rd grade math course so that he can convert gas to liquids equivalents and dust himself off and he’ll be fine. To be his equal I figure “all I’d need is a lobotomy and a pair of tights”.

  92. 92
    Wyoming Says:

    Thought I might spark a rise. I’m an ass that way; won’t even tell you what I did today to win a bet.

    He does not really put a price on a unit in todays values. He does say that Europe is paying $18-20 per M BTU. That is BTU, correct me if I am wrong but the BTU content contains the NGL portion? Pretty sure but this is not my main area.

    Anyway, I read i on the internet, it must be true. Howl at the moon for me, I’m sober tonight.

  93. 93
    Wyoming Says:

    http://www.aspousa.org/index.php/2009/05/production-and-prices-16/

    I think his is the Trough Oil And Gas website.

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