Thursday – Natural Gas Preview and Oil Review

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News You Should Know About Watch:

  • "Cash for Clunkers" has been added to the so-called "American Clean Energy and Security Act of 2009". The vouchers to swap out your gas guzzler actual increased from the draft proposal.
  • Good article showing the disparity in Cap and Trade for dispersion of carbon emissions credits as the plan is currently envisioned. Note the raw deal refiners are getting. 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Stuff We Care About Today
  6. Odds & Ends


Holdings Watch:

  • $10KP: $27,800 / 66% Cash / The Wiki tab is updated.
  • PXD - with the stock at $27.40 added another (10 bringing me to 20) June PXD $30 calls (PXDFF) for $0.90 (bringing my average cost to $1.49). I continue to hold the June $25 calls as well. I continue to expect to hear news in the next few weeks on their Eagle Ford shale test.
  • PXD: Added 10 more June $30 PXD calls (PXDFF) for $0.70 with the stock at $26.80.

Commodity Watch:

Crude oil rallied into and held up well after the release of the EIA numbers which were on the whole, not too shabby (see breakout section below) but the real driver seamed to be a weak dollar. Crude ended the day up $1.94 at $62.04, levels not seen since mid November. Given the loftiness of the front months and the 12 and 18 month strips I find it increasingly unlikely that OPEC will do much at its May 28th meeting. This morning crude is trading off about a buck with weak equity market futures.

  • Nigeria Watch: Nigeria says its production is holding steady at about 1.6 MM bopd. This is below their production quota level and may slide further in coming months as MEND and other freedom fighter types battle the government.

Natural gas edged higher by $0.06 to close at $3.97 yesterday on the back of stronger crude. Gas is teetering here and a poor gas storage report would be likely to send it through the week's lows and headed towards $3.50 (see storage section below). This morning gas is trading trading off slightly with oil but everything will hinge on the inventory report today.


Natural Gas Preview

  • My number: 90 to 95 Bcf
    • History:
      • Last Week: 95 Bcf Injection.
      • Last Year:  86 Bcf
      • 5 Year Average: 90 Bcf
    • Weather:
      • HDDs - none to speak of and this is probably the last time you will see the acronym used on the site until October.
      • CDDs  - at 24, cooling degree days are 6 warmer than normal for this time of year and are building a bit faster than last year. Electricity demand was up 1.7% from the prior week and was off only 1.9% from year ago levels. Electricity has been running down by about 3% so far this year.
    • Imports - up 0.4 Bcfgpd from the prior week, but down as much from year ago levels.

      • Canada still low at 5.7 Bcfgpd
      • LNG moved up to 1.9 Bcfgpd from 1.5 Bcfgpd in the prior week.
  • Street Consensus: 95 Bcf

ZComment: Natural gas prices are once again on the cusp. We also have very little data available in the form of anecdotal evidence as earnings season is a fading memory and we don't get another report on supplies until May 29. Anything bigger than consensus today and I think we take out the lows from Tuesday and may take a trip to the $3.50 level. I don't see much more downside than that unless we get a large spike in LNG in coming weeks. LNG remains the gas bull's biggest fear. 

Comments on Natural Gas and Electricity: I will add some comments in the gas review section of the Friday post.


EIA Oil Inventory Review

ZComment: Another week of weak import levels save crude's bacon. On the gasoline front, my expected uptick in gasoline demand due to stocking at gasoline stations in front of the holiday and the beginning of driving season materialized and I expect that to continue into at least the next couple of reports, albeit, at levels of demand that are below last years levels by 1 to 2%. We are still not seeing much demand on the distillate side in the form of diesel and jet fuel volumes and that is a problem which will weigh on crude later in the year (or at least it should).

CRUDE OIL - A second, bigger than expected draw down on inventories, almost entirely related to low-ish imports.



GASOLINE - Well but not over inventoried at this point.



DISTILLATES - Bloated. Dilema comes in that you can't just make gasoline and forget about distillates for a time as they both come out of the tail end of the refinery.



Stuff We Care About Today

Cramer On (LINE) Yesterday

  • Interview with the CEO Link
  • ZComments:
    • Cramer did a good job of running down the basic story, hedges, yield etc, the link is worth listening to for a quick summary of them.
    • CEO Michael Linn made some better points at the company and about the big picture for natural gas:
      • On Hedging: Basically said they are heavy hedges because they are not speculators, they want to maintain their yield and buy long lived assets at good prices. This is pretty much their game plan and they've done a good job of it to date
      • On the "LNG Tsunami" - he didn't try to diffuse it, he just pointed out that even if LNG imports to the U.S. rose from 3 Bcfgpd to 6 Bcfgpd in 2010 - 2012, it would not replace the production lost if drilling stays at current levels.

        • My comment here would be that he is absolutely right. Current levels of drilling are likely to result in YoY declines in U.S. gas production of as much as 5 Bcfgpd and another 10% or so drop in 2010 start to finish is in the cards if drilling doesn't pick up.
        • He didn't mention Canadian production and imports but no one ever seems to and he was pressed for time.
      • On Obama's "No Show" on Natural Gas as a clean fuel. He said the President will have to come around to the facts on gas, that it is cleaner than coal by half and by 70% over diesel (that being a nod to natural gas as a trucking fuel in the future).
      • On long term gas prices: he's bullish, having hedged out the next 3 years at a price better than $8, he's looking to wait a bit for a rally in 2010 prices before heding the 2012 strip.
      • On The Lack of M&A Activity This Cycle: He sees a pickup in deals in 3Q09 with bank redeterminations forcing more sales and then more activity in 2010 as the lightly hedged players are foreced to be asset liquidators. It will be a good time for guys like this who have a strong "buy low, sell high" record. 
      • They don't plan on cutting dividend anytime soon.

Other things Cramer said yesterday: when asked about HK, he said, "I'd rather see you in BP". Wow. Why not say, "I'd rather see you in Walmart or Google". They are just about that different. Oh well. Jim, how about you stay out of my group and I'll stay out of the entertainment business. 

The (HGT) summary from yesterday's post has been added to the reports tab for future reference.

Odds & Ends

Analyst Watch:

  • Berstein Initiates on some gassy E&Ps
    • (HK), (RRC), (SWN) all picked up as Outperforms
    • (UPL) started at Market Perform

151 Responses to “Thursday – Natural Gas Preview and Oil Review”

  1. 1
    TEXWS6 Says:


    Just a thought, but do you think the poor distillate demand has anything to do with decreased rig count? Let me give you some background on my thought. Small 750hp rig (limited to <10,000′) can consume up to or over 200gal/hr. Drilling rigs run 24hrs/day, so that’s almost 5000gal/day/rig. This is an idea I had all along last summer when distillates were in high demand.

  2. 2
    BirdsofpreyRcool Says:

    z — “hard asset” discussion today…

    Investment Scenario = dollar weaker, gasoline going to $3, China still grows, mrkt correction for next month or so… then market rallies for the next year and a half before crashing again.

    What do plan to buy, on the correction?

  3. 3
    Sambone Says:

    By Nick Heath

    LONDON (Dow Jones)–Crude oil futures fell more than $1 Thursday as oil market
    and wider economic fundamentals prompted investors to take profits from crude’s
    recent rally.
    Nymex crude prices hit new 2009 highs above $62 a barrel Wednesday, widely
    seen as a near-term psychological target for the latest rally. But a
    combination of the Federal Reserve’s cautionary words Wednesday and Standard &
    Poor’s Corp. decision to lower its outlook on U.K. government debt to negative
    from stable Thursday proved a setback for hopes the worst of the economic
    slowdown has passed.
    Oil traders also mulled the outlook for crude given still-high global
    inventories, weak demand and a likelihood the Organization of Petroleum
    Exporting Countries will leave production unchanged at its meeting next week.
    “I feel we’re running into a bit of ‘toppiness’ here. After what’s been a
    relatively straight run up, we need some more headlines to push us on a bit,”
    said an oil broker at BGC Partners in London. “OPEC don’t look like they’re
    going to be making any more cuts. At the moment a bit of profit-taking is on
    the cards.”
    At 1106 GMT, the front-month July Brent contract on London’s ICE futures
    exchange was down $1.26 at $59.33 a barrel.
    The front-month July light, sweet, crude contract on the New York Mercantile
    Exchange was trading $1.38 lower at $60.66 a barrel.
    The ICE’s gasoil contract for June delivery was down $4.00 at $477.50 a metric
    ton, while Nymex gasoline for June delivery was down 280 points at 178.15 cents
    a gallon.
    Regional equity markets fell sharply to pull crude lower Thursday, adding to
    the incentive to book profits.
    The Federal Reserve Wednesday said its expectations for the depth of the
    recession worsened in the last three months and warned of a more sluggish
    recovery over the next two years.
    “A lot more doom and gloom on the economic front is starting to leak out,”
    said Jim Rintoul, analyst at London-based trade advisory TheOilTrader.com. “If
    equities start to crack we could drop back quite a long way and I think oil
    will go with it.”
    Further hints on the health of the U.S. economy are due later Thursday with
    weekly jobless claims data out at 1230 GMT.
    Crude’s recent rise appeared to reduce the likelihood OPEC will decide to cut
    output again when it meets May 28 in Vienna, market participants said. Signs of
    a recent drop in compliance to previous cuts, combined with the incentive to
    leak more amid higher prices, could leave oil prices under pressure should OPEC
    stand pat.
    “As the price goes up you can bet you’re going to see a lot more OPEC leakage.
    We’re going to see a kick on the supply side from this higher price,” said
    Simon Wardell, analyst at Global Insight in London. “A cut looks unlikely.”
    Despite the pullback Thursday, Nymex crude prices managed to hold above $60 a
    barrel, representing a near-doubling from the year’s lows. Wednesday’s Energy
    Information Administration data showing U.S. crude stocks falling for the
    second week in a row, as well as gasoline stocks shrinking sharply ahead of the
    U.S. driving season lent support.
    Militant unrest in Nigeria and a strong technical picture also helped underpin
    “Crude stockpiles shrunk for the second consecutive week. This is a positive
    development, but the trend needs to be maintained. That, in turn, largely
    depends on processing rates and summer demand for fuel,” said Andrey
    Kryuchenkov, vice president of commodities research at VTB Capital in London.
    “For now, we expect the market to consolidate below recent highs ahead of the
    long holiday weekend in the U.S. and U.K.”

    -By Nick Heath, Dow Jones Newswires
    Dow Jones Newswires
    05-21-09 0739ET

  4. 4
    BirdsofpreyRcool Says:

    I’m thinking (in addition to E&P), coal, fert, iron ore, dry bulker… what else?

  5. 5
    zman Says:

    TEX – yes, its definitely part of it. I’ve heard the comments from the E&Ps about enjoying the cheaper costs of fuel as well. I think the big piece is trucking (the lack thereof) and have a transportation analyst friend who says very little is being shipped about. Demand for diesel has been running down double digit percents vs last year. Just ugly. Also, the export market appears to be weak and this was where the refiners really saved themselves last year, by shipping out low cost diesel.

  6. 6
    bill Says:

    cow flatuance is 7 % of co2 emissions


  7. 7
    zman Says:

    Berstein looks to have picked a bad day to initiate on those names.

  8. 8
    bill Says:

    I listened to chk presentation at ubs (on web site) mention 2 vpp deals this qtr.

    One in Barnett about 500 m and another one worth 250 m. Said , they wont give it away, mention the KWK deal was too small

    I think a 500 m barnett deal would be well recd.

  9. 9
    BirdsofpreyRcool Says:

    Lots of things hit the tape today… lots of confusion about “where next?” Watch the bondholder reaction to the Govt’s “offer” in the GM pre-BK. If investors don’t draw a line in the concrete here, we will see a pretty dramatic repricing of “risk.”

    Credit market opening lower, of course. Want to see it hold the line here today, too.

    IG 151 1/2

    HY 79 1/2

  10. 10
    BirdsofpreyRcool Says:

    bill – #6… they have that pesky detail solved too. We all become vegetarians!

  11. 11
    zman Says:

    re 6 – damn cows.

    re 7 – they’ve mentioned those two before, anything they do in getting deals down at a favorable $/Mcfe metric will be looked at well. I don’t see them doing them too fast at a low price, has not been their history.

  12. 12
    Nicky Says:

    Morning all.

    Kyleandy – just wanted to follow up on yesterday (sorry I was knackered last night!).

    Okay big picture – we are in a wave 2 correction off the lows. This is looking like it will play out as a double/triple zigzag. Could it already be done and we are on our way to new lows? Possible but not likely as we have just not burned up enough time for the correction.

    So where are we now in this wave 2 correction? Yesterday the only indice to make new highs was the Dow (and by only 5 points) so likely we saw the end of a b wave correction and we are now in c down. To be a bit clearer the top of the first wave of the wave 2 correction -call it A was made on 7th May at the 930 area. The the small abc correction started. So a went down to 877 area, b back to 924, and we are now in c down. Targets for c? if a = 3 then around the 870 area. But possibly lower.

    Short term we have spx support at 893 (gone on the futures) and then 888.

  13. 13
    bill Says:

    Im starting to think the whole cap and trade legislation is a way for the politicians to shake down corporate america for donations

    Their tactics would make tony soprano proud.

    The whole mess is an utter disgrace.

  14. 14
    Nicky Says:

    Nat gas – I put some retracement levels for what I believe is merely a correction on the board last week. Can’t remember exactly what they were but I do know that the most important (and likely ones) were between 3.5 and 3.7.

  15. 15
    Nicky Says:

    Resistance on spx at 898 and 901.

  16. 16
    BirdsofpreyRcool Says:

    Some bond and preferred investment ideas, as well as a credit mrkt discussion of yesterday’s FOMC release, by a good mrkt strategist —


  17. 17
    kyleandy Says:

    nicky – thks knackered??? must be a british word!!

    bop – any trading comments this morn?

  18. 18
    bill Says:

    10 lol I didnt think of that, shhhhhh

    How about a tax on hamburgers and use the money to teach you how to make vegetarians dishes. Congress can target mcdonalds

    Im going to go make some bacon and eggs

  19. 19
    BirdsofpreyRcool Says:

    kyleandy — desk has been weirdly quiet… will check

  20. 20
    bill Says:


    Is CHK convertible debt publically traded.

    They want to redeem the early stuff

  21. 21
    Nicky Says:

    Z – I hadn’t realized it wasn’t universal – slang for exhausted!

  22. 22
    Nicky Says:

    Sorry I meant kyleandy! I am already at sixes and sevens (do you have that one? means all over the place). Think I said beige book on here yesterday when I meant FOMC minutes – minor detail!

  23. 23
    BirdsofpreyRcool Says:

    Tech Trader comments — day trading position is to short any rally before 10am with 70/30 odds of working; short the rest of the day on any rally after philly fed and LEI… however, longer-term technicals still bullish. Just short today.

  24. 24
    BirdsofpreyRcool Says:

    bill #20 — lemme check…

  25. 25
    kyleandy Says:

    nicky – first i heard of sixes and sevens except for shooting craps!!!

  26. 26
    BirdsofpreyRcool Says:

    bill — CHK converts… looks like 3 issues o/s, all registered, so all can be bought by individuals.

  27. 27
    BirdsofpreyRcool Says:

    bill — let me rephrase that, they can be purchased by non-QIBs.

  28. 28
    tater Says:

    Thank you for sharing all of that work Nicky!

  29. 29
    zman Says:

    Nicky – yes, thanks for the chart work.

  30. 30
    zman Says:

    LINE getting a small, 3%, Cramerica boost, all else pretty red, save for a dead cat bounce in the dollar.

    Still, not getting a sense of panic in the stock action.

  31. 31
    BirdsofpreyRcool Says:

    Oil May Climb to $73 After Breaching $60: Technical Analysis
    2009-05-21 11:18:17.448 GMT

    By Mark Shenk
    May 21 (Bloomberg) — Crude oil may reach $73 a barrel after futures broke through $60 this week, according to technical analysis by Newedge Group.
    Prices are heading toward $73 a barrel, which was the objective from a bull flag in March and April, Veronique Lashinski, a senior research analyst for Newedge USA LLC in Chicago, wrote in a note to clients yesterday.
    “Seventy-three dollars is the measured objective from the bull flag on the weekly continuation chart,” Lashinski said in an e-mail. “A bull flag represents a small pause, as if the market stopped to catch its breath.”
    Crude oil for July delivery rose $1.94, or 3.2 percent, to
    $62.04 a barrel yesterday on the New York Mercantile Exchange.
    It was the highest settlement since Nov. 10. Prices were last above $73 on Oct. 21.
    Futures are headed for resistance at $64.15 a barrel, Lashinski said.
    “A close below $60 would be a first warning of caution for the bulls, this level was such strong resistance that the bulls will prefer to see it hold,” Lashinski said in the report.
    Technical traders watch for patterns on daily charts for clues to price direction, and may sell or buy based on those signals.

  32. 32
    zman Says:

    If anyone has the Bernstein on SWN and HK I’d like to see it. Thanks.

  33. 33
    VTZ Says:

    Am I the only one worried about the markets rolling over here? Everybody else thinks pullback for fresh money to enter?

  34. 34
    zman Says:

    VTZ – I’m concerned about, still over 60% cash.

  35. 35
    gaamblor Says:

    Z, monday you said HDD was 40, today its 0? or is 40 “none to speak of”?

  36. 36
    reefguy Says:

    #10- Cows have flatulance issues because they are vegans. If we all become vegans, we generate more greenhouse gas per person. WSJ says eating beef in US is equivalent to each individual driving a car 1800 miles.
    Since all the grain farms are being planted as corn, and all the corn needs to make ethanol, I guess we eat the left over cows first, then each other next???

  37. 37
    1520sbroad Says:

    #33 – i too am a bit concerned – been raising cash and covering.

  38. 38
    VTZ Says:

    BOP – What did you think about the jobs #s? I didn’t think you could spin them to seem not-so-bad until I heard CNBC.

  39. 39
    zman Says:

    None to speak of is 40. Mostly I was thinking this week’s weather and ahead, HDD’s will be toast. It’s not a linear relationship between degree days and gas demand anyway so you have more intensity focused on the winter months; in other words, a degree day in February is going to be a lot more gas intensive than one in May. Part of that is the nature of the people and the use of thermostats. Much of the coolness occurs at night, when people are asleep and after having paid high gas bills all winter, they are loath to turn on the heat.

  40. 40
    bill Says:

    pxd down 5 %

  41. 41
    zman Says:

    Yep, pondering buying more. The move is pretty much in line with a lot of the mid caps and comes on no news.

  42. 42
    zman Says:

    Leading indicators:


  43. 43
    zman Says:

    Gas number in 5 minutes

  44. 44
    Nicky Says:

    There is a gap at 885 on spx which needs to be filled soooner or later.

  45. 45
    bill Says:


    Get ready for another 100 point drop

    1 person claps, lol

    now down 150, 50 yesterday

  46. 46
    zman Says:

    103 Bcf – not a good number.

  47. 47
    zman Says:

    Gas immediately off 25 cents, trying to defend the $3.70 level.

  48. 48
    bill Says:

    ng down 6 %

  49. 49
    zman Says:

    Volumes on this sell off are lower than on the last sell off. HK at 1 mm shares on gas report day with a new buy rec. Lots of people sitting on hands.

    After the gas numbers, the E&Ps fell about a percent more on the day. Still no sense of panic, prices are weak to be sure but its not in the volumes, looks like specialists and market makers are just backing away to let the stocks drop on small lots.

  50. 50
    bill Says:

    last year there were only 3 weeks with triple digit injections.

    in the last 3 weeks an extra 60 bcf have been injected vs last year or 3 bcf per day more on top of the 500 bcf glut

    so the drilling declines havent shown up yet

    this means alot of ng shut in’s in q3

  51. 51
    zman Says:

    Got the brief summary of Berstein’s comments this morning.

    Starts off with “With the gas market showing signs of improvement and the oil market rebounding, it is clear that investors seeking additional beta to an energy recovery in both commodities should consider looking at small companies … HK, SWN, and RRC are undoubtedly peas in a pod.” Blah, blah, blah.

    Anyone have the Berstein targets and their oil and gas price decks?

    Saw JMP upped their 2009 oil price forecast this morning. Seeing more of that of late. NG price decks still coming down.

  52. 52
    zman Says:

    Bill – it means demand is soft more than anything. YoY production is lower, not a lot but that will change and the move lower is inevitable with these prices and no rebound in site for gas drilling.

  53. 53
    zman Says:

    Denise or anyone, can you point me to a link or site that shows proper tax treatment of MLP distribution income, had one, can’t find it now. Thanks.

  54. 54
    md Says:

    Are you pegging production still at 58 BCFPD

  55. 55
    Nicky Says:

    I dont believe we see a move to new lows. There were far too many who missed this rally who will be anxious to get in on any pullback. Cycle highs are not due until end of June/early July. Should see a pullback in August and September.

  56. 56
    zman Says:

    md – you mean current production? It’s probably close about there, yes. Probably goes to 53 to 54 by year end.

    Nicky – 55 – agreed.

  57. 57
    bill Says:

    contango in oil is narrowing which means all the oil in tankers might come to market soon

    what other implications are to a narrowing contango?

  58. 58
    Sambone Says:

    MOSCOW (AFP)–Russia and Ukraine may be close to a new gas crisis as Kiev
    faces difficulties making payments, an official accompanying Prime Minister
    Vladimir Putin to Kazakhstan was quoted as saying Thursday.

    Dow Jones Newswires
    05-21-09 1046ET

  59. 59
    Sambone Says:

    By Steve Gelsi

    Valero Energy Corp. (VLO) drew heat from an analyst for its $725 million
    purchase of a stake in a European refinery run by Total SA (TOT) as energy
    stocks fell with the broad market and crude price on Thursday.

    The Amex Oil Index fell 2.6% to 927.45. The Amex Natural Gas Index dropped
    4.2% to 412. The Philadelphia Oil Service Index retreated 5.2% to 158.

    Crude futures recently fell $1.66 to $60.38, cooling off after several days of
    gains on a stronger dollar and jitters over a flare-up in Nigeria, where
    Italian oil giant Eni SpA (E) to declare a force majeure on 52,000 barrels a
    day of production.

    Shares of sector leader Exxon Mobil (XOM) gave up 1.7% to $68.45 and Chevron
    Corp. (CVX) dropped 1.8% to $64.04. Both oil majors are components of the Dow
    Jones Industrial Average, recently down 143 points, or 1.7%, to 8276.

    Deutsche Bank analyst Paul Sankey said Valero paid an “excessively high price”
    for its 45% stake in Total Raffinaderij Nederland refinery. Shares of Valero
    fell 3.7% to $20.83.

    Anglo-Russian oil joint venture TNK-BP said Thursday it increased production
    in the first quarter, but net profit more than halved due to lower oil prices.

    Russia’s third-biggest oil producer, TNK-BP said Thursday first-quarter net
    income dropped 58% to $747 million from $1.77 billion in the year-ago period.
    Revenue fell 50% to $6.33 billion from $12.71 billion on lower oil prices,
    even as production rose by about 4% to 1.67 million barrels of oil equivalent a

    Oil major BP (BP) owns half of TNK-BP. Shares of BP fell 1.9% to $46.89.

    Oil refiners are on the hook for about 44% of U.S. carbon emissions but would
    receive 2% of the emission allowance under the landmark Waxman-Markey climate
    bill, the American Petroleum Institute asserts.

    “The distribution of these credits is out of line with the actual distribution
    of emissions,” Amy Myers Jaffe, associate director of the Rice University
    Energy Program, told The Wall Street Journal.

    The added cost of buying allowances will likely be passed on to consumers in
    the form of higher gasoline prices, which could rise 28 cents to 54 cents a
    gallon by 2030, according to analysts at the National Commission on Energy
    Policy, a Washington-based bipartisan group.
    -Steve Gelsi

    Dow Jones Newswires
    05-21-09 1027ET

  60. 60
    zman Says:

    Bill – the key implication is that there is less impetus to store oil and sell it later, higher. Couple of stories in the last couple of weeks about the tankered storage, some of them have been tooling around Asia, not finding buyers. They’re going to either have to eake the oil out of storage over time or they will depress the front months.

  61. 61
    bill Says:

    bexp gets share sold at 2.75


  62. 62
    nifkin Says:


  63. 63
    zman Says:

    NOAA puts storms at 9 to 14 named ones this season. I think Colorado is still at 12, considering going to 10.

  64. 64
    Sambone Says:

    05/21 11:09 *DJ NOAA: 2009 Forecast Less Intense Than 2008 Hurricane Season

    DJ 05/21 11:08 *DJ NOAA: Predicts 1-3 Intense Hurricanes This Season

    DJ 05/21 11:08 *DJ NOAA: Predicts 4-7 Hurricanes This Season

    DJ 05/21 11:08 *DJ NOAA: Predicts 9-14 Tropical Storms This Season

    DJ 05/21 11:07 *DJ NOAA: Predicts Near Normal Atlantic Hurricane Season

  65. 65
    Sambone Says:

    NEW YORK (Dow Jones)–The Atlantic Hurricane season will have near normal
    activity and less storms than recorded in 2008, forecasters at the National
    Oceanic and Atmospheric Administration said Thursday.
    NOAA sees a 70% chance of nine to 14 named storms occurring, including four to
    seven hurricanes. One to three of those hurricanes will have sustained winds
    above 111 miles per hour.
    In 2008, there were 16 named storms, compared with a long-term average of 11.
    Eight were hurricanes, compared with the average of six and five were major
    hurricanes compared with the long-term average of two.
    – By David Bird, Dow Jones Newswires Dow Jones Newswires
    05-21-09 1119ET

  66. 66
    zman Says:

    ZTRADE: Added 30 more June $30 PXD Calls for $0.30 (on the mid) with the stock off another 5.6% today at $24.60 in a blood red energy and market day.

    If you are on the ZTEXT list and don’t get this one on your phone please let me know.

  67. 67
    cargocult Says:

    What is the catalyst on PXD again?

  68. 68
    Nicky Says:

    On the indices we are likely tracing out a correction to between 8300 and 8350 which will complete a small wave iv, then another leg down which will complete v.

  69. 69
    zman Says:

    PXD Catalyst – the main one I’m looking for is their first horizontal Eagle Ford shale well results, due out in the next couple of weeks, should be able to comment on it by the time they speak at RBC on June 2. They have a large acreage position and the Eagle Ford is looking comparable to the Hayensville on a return basis. They have quite a bit of well control here so I don’t think they’ll muck it up as a play. On a single well basis, you never know but they’ve been around the block. The stock was kissing $30 just days ago at earnings and there was nothing in the 1Q numbers or the call to account for a pullback like this, so in my mind it’s just market action/profit taking on the run into earnings.

    The other thing is oil has moved up which takes there oil production from marginal economic to 50+% IRR land. That’s really not been factored into the stock.

    I’ve gone a bit overweight there now, at least as far as my total cost goes and on a pop, I’ll back the number of $30 strikes back off. I also hold a handful of $25s here.

  70. 70
    zman Says:

    Coug – check your phone.

    Occam – did you get them today?

  71. 71
    elduque Says:

    BDI +42 2707

    TED 48.27

  72. 72
    Nicky Says:

    VTZ – I took another look at gold last night. My take is that we are in a wave 2 and to be exact wave 2 c – in which case we should see a top somewhere just above 967.

  73. 73
    zman Says:

    Emailed in question about PXD as a long term holding. I don’t own them as a stock simply because I have a full plate of E&Ps for that including oilier exposure in LINE. PXD, like CHK, has a good slug of debt. Their story works much better with higher oil prices. Also, in my previous lives, I did not follow the company but I did work for one of their CFO’s quite some time back. Company is a bit different now but I’m familiar with their background. The story is somewhat boring at current commodity prices, they are not drilling much and they are under spending cash flow deliberately. Long term, I expect them to do well as I expect oil prices to rise and management to bump up the rig count and get busy in the Sprayberry again. But the Eagle Ford adds a bit of spice. I did follow Evergreen which they acquired and there is some value there which, when the Rockies are debottlenecked some day, I think will be reflected in the stock price, but again, longer term. They have some international stuff that’s interesting as well.

  74. 74
    zman Says:

    ATT seems to be randomly blocking my attempts to send to Text.

  75. 75
    Denise Says:

    Z- If I remember correctly starting in 2010-brokers will be required to report this to the IRS-

    now they do not and it is the “honor system” currently

    Since MLPs are not subject to income tax, there are additional restrictions with respect to holding MLPs in tax-deferred accounts such as individual retirement accounts. Essentially, if the MLP is not paying tax on the income and the individual retirement account gets to defer tax on all of the distributions, the taxpayer will be receiving a double tax benefit.

    Therefore, MLPs held in IRAs receive special tax treatment. If an MLP is held within a tax-deferred account, the investor must calculate what is called the unrelated business taxable income of the MLP. If the UBTI exceeds $1,000 in a tax-deferred account, the excess generally is subject to tax.
    I do not believe many CPA’s are up to date on this-

    Also something else to be aware of the reverse etf’s are going to be a big issue because leverage(margin)is prohibited in retirement accts-haven’t
    heard the outcome yet but…

  76. 76
    zman Says:

    Thanks much Denise.

  77. 77
    Patipati Says:

    Z, where on the website are your long-term holdings? Cannot find them.

  78. 78
    Denise Says:

    On another note we have “good company”
    in our space-Pappa K has covered his trading shorts and will slowly be building positions in energy (also materials and financials)

    Read two T/A’s with buy ung recomendations today

  79. 79
    zman Says:

    CNBC – discussion on the rule of law vs the UAW was hilarious/sad.

  80. 80
    elduque Says:

    I stepped out to the plate and bt some UNG at 14.27. Rational-

    1. Cheap price – that’s what I thought when I bt. CHK last Aug. at $40.
    2. Mr. market will sooner rather than later figure out what Aubrey and Z have said about production drops.
    3. It is a play on more green and less carbon. Eventually the Obama admin. will figure this out. Why haven’t they figured it out so far. Good question.

  81. 81
    zman Says:

    PatiPati – I don’t think my stocks are on the site at present. I will add that somewhere.

    Just flipping through my accounts I hold common stock positions in HK, CHK, PQ, GMXR, LINE, CLR, NFX, NBR, SWN, WRES, and FTO at present.

  82. 82
    Sambone Says:

    LONDON (Dow Jones)–The second stage of the North Atlantic Treaty
    Organization’s training exercises in Georgia started at the Vaziani military
    base near Tbilisi Thursday, Russian news agency RIA Novosti reports on its Web
    The first stage was held at Vaziani on May 6-18 and comprised a series of
    drills involving officers from 13 NATO countries and allies.
    Moscow has criticized the exercises, which run until June 1, as unhelpful in
    the wake of last summer’s conflict between Russia and Georgia over South
    NATO says the drills in Georgia are aimed at improving interoperability
    between NATO and partner countries and have been planned before the Georgia
    war, the report says.
    Full story: http://en.rian.ru/world/20090521/155058782.html

    -London bureau, Dow Jones Newswires

    Dow Jones Newswires
    05-21-09 1245ET

  83. 83
    zman Says:

    Eld – I think Obama will come around to it. He was under the misconception that you could build an affordable battery powered tractor trailer until November until TBP disabused him of that notion. Want to get us off foreign oil, how about driving natural gas power trucks around on that 7 to 1 ratio? That’s $7 gallons of diesel to 1 Mcf of natural gas. That’s wow cheap. Side benefit, you cut particulate emissions by 70%.

    Was listening to local report that stimulus included matching funds for buying natural gas powered buses. However, the local municipality is strapped so they may not be able to match. If they only raise part of the cash they get $0 from the Feds (go figure) and said they will buy a smaller number of diesel powered buses. They have a short time to scrape the $ together. This is no way to run a government. Long term, the operating costs of the diesels will swamp that of the gas powered ones. Oh well.

  84. 84
    VTZ Says:

    Nicky – Could be. Technicals and waves always work until they don’t.

    A top at 967 would suggest that the dollar doesn’t fail at 81-82 or 78 on the dollar index, it would also probably coincide with the consensus upturn in the S&P that everyone is calling for after a pullback.

  85. 85
    Denise Says:

    Z- I guess the retail investor is back-LINE finding the love today (did not think anyone watched Cramer anymore)

  86. 86
    zman Says:

    Denise – yep. Almost helps him to have a day like this following the piece as people flock to the “one green name” out there.

    Anybody see a broker comment on XCO, still eying that one? Some the recent Marcellus news would seem to be good for them too.

  87. 87
    gaamblor Says:

    UNG only holds front month (maybe 2nd month) contracts right? so if nat gas is at 6 this time next year and everyone is cheering that its rebounded UNG will most likely be lower due to contango

    maybe i’m not understanding something but it seems like the futures already price in the rebound so unless you can buy gas now at 3.6 and store it until winter there isn’t much of a way to play it

  88. 88
    zman Says:

    If you buy UNG you are buying the part of the first and part of the second month contract. They continually roll their positions. This is costly and I don’t care for it. I think a better way is via a broker like a Linn-Waldock to buy an actual future or you can do what I do and buy a gassy stock that correlates well with moves in natural gas.

  89. 89
    bill Says:


  90. 90
    BirdsofpreyRcool Says:

    z — #79… been working on other things today… i’m afraid to ask… but, what did they say? That we are seeing Hugo Chavez channeled into this process? (Because, that is exactly what is happening.)

  91. 91
    zman Says:

    It was more along the lines of the administration supporter saying that she understood the rule of law and getting pretty inflamed when she was told that wasn’t possible. She basically said it acceptable to get 29 cents on the dollar for someone who paid a premium to get a secured position while the other guy said “see, you don’t understand the rule of law”.

  92. 92
    BirdsofpreyRcool Says:

    z — as bill pointed out last night, very few people really understand what is going on here. It’s not that it’s complicated or abstruse… it’s just that most investors don’t have to understand the bankrupcty process.

    That said, everyone should have a basic understanding that “secured” creditors (lenders), under the law, get repaid before subordinated claimants get anything. That includes a cash payment, new bonds, and/or 100% of the equity. In practise, there is usually some negotiation and give that takes place when there is an underfunded pension. But, NEVER have I seen claims turned completely upside down, as in what Obama is doing in automotive for the sole benefit of the UAW. This will make lending to any company with a union workforce and/or an underfunded pension cost that company a lot more. Just one more way to make the US less competitive (and more like Venezuela).

  93. 93
    Nicky Says:

    VTZ – I think even you will agree that a straight line up in gold like the last couple of hours is unsustainable. This sort of action normally marks a top.

  94. 94
    elduque Says:

    Can you tell me one co. that isn’t underfunded in their pension.

    It seems to me that this is a rather larger acorn that doesn’t get any press.

  95. 95
    zman Says:

    True enough. Did you read that second link on cap and trade and who gets the credits. Unreal to me that the refiners are being asked to pay for what they emit while making products AND for the consumption of those products when Detroit is apparently given a free pass.

  96. 96
    Nicky Says:

    Now in v down on indices. Target level anywhere between 870 and 880 on spx. Possible 875.

  97. 97
    Sambone Says:

    NEW YORK, May 21 (Reuters) – Pacific Gas and Electric Co’s PCG
    California Gas Transmission unit on Thursday issued an operational flow
    order for all customers on its natural gas pipeline system due to high
    The system-wide alert, issued at 10 percent tolerance, forces shippers
    to stay within 10 percent of their scheduled volumes in order to maintain
    system integrity, the company said in a website posting.
    OFOs and other alerts protect the operational integrity of a pipeline
    by requiring shippers to take action to balance their supply with their
    customers’ usage on a daily basis within a specified tolerance band.
    Forecaster Weather.com said the Northwest would stay dry and sunny
    Thursday with high pressure in place. With increased moisture and cloud
    cover, temperatures ill be much cooler across the Southwest.
    Highs in the lower elevations will reach into the 70s, 80s and 90s
    degrees Fahrenheit, while in the Northwest, temperatures will return to
    near and above average with afternoon readings in the 60s and 70s in lower
    CGT’s near 1,000-mile Line 300, with the capacity to transport 1.1
    billion cubic feet per day of supply, carries gas from several interstate
    pipelines to customers in California, while its 725-mile Lines 400 and 401
    deliver Canadian and Rocky Mountain gas to the state with a peak capacity
    of about 2 bcf per day.
    (Reporting by Eileen Moustakis; Editing by John Picinich)

    Thu May 21 17:45:40 2009

  98. 98
    zman Says:

    Eld- Yes. CHK, EOG, SWN, HK, etc, etc,

  99. 99
    zman Says:

    Nicky – did you say the other day you expect the dollar to bounce off 80?

  100. 100
    kyleandy Says:

    nicky – now down to 8000-8300 wha;s most likely next???
    any construction in bradenton?? still zero in venice

  101. 101
    kyleandy Says:

    niky just read 96

  102. 102
    elijahwc Says:


    Everyone ought to forward this to their elected representatives.

    Not for the faint of heart.

  103. 103
    zman Says:

    The unfunded liabilities number in 102 is just depressing.

  104. 104
    Nicky Says:

    if we move above 886 on spx low for this wave in.

  105. 105
    Nicky Says:

    80 Z yes – where is it now

  106. 106
    Nicky Says:

    I have been watching the pound and the euro all week. again crazy moves. the spikes are indicative of wave v and terminal moves.
    I mean heck how can the pound move up 600 points in a week when its about to go broke?

  107. 107
    elduque Says:

    z- Someone correct me if I am wrong, but I believe that the cos. are allowed to assume that they can earn 7% plus per year on their portfolio. I somewhat dubious percentage in my estimation.

  108. 108
    zman Says:

    Eld – Do you mean over the long term. 7% for stocks over the long term is doable by historic standards. I have a coffee cup from Ibbotson on my desk that says so.

  109. 109
    Nicky Says:

    My husband thought the following was hilarious and insisted I read it – as this is pretty much a male orientated board I am thinking you may all enjoy it too! Heaven knows why!

    The Man Rules

    At last a guy has taken the time to write this all down. Finally, the guys’ side of the story. We always hear “the rules” from the female side. Now here are the rules from the male side. These are our rules! Please note these are all numbered “1” ON PURPOSE!

    1. Men are NOT mind readers.

    1. Learn to work the toilet seat. You’re a big girl. If it’s up, put it down. We need it up, and you need it down. You don’t hear us complaining about you leaving it down.

    1. Sunday sports it’s like the full moon or the changing of the tides. Let it be.

    1. Crying is blackmail.

    1. Ask for what you want. Let us be clear on this one:

    • Subtle hints do not work!

    • Strong hints do not work!

    • Obvious hints do not work!

    • Just say it!

    1. Yes and No are perfectly acceptable answers to almost every question.

    1. Come to us with a problem only if you want help solving it. That’s what we do. Sympathy is what your girlfriends are for.

    1. Anything we said 6 months ago is inadmissible in an argument. In fact, all comments become Null and void after 7 Days.

    1. If you think you’re fat, you probably are. Don’t ask us.

    1. If something we said can be interpreted two ways and one of the ways makes you sad or angry, we meant the other one.

    1. You can either ask us to do something or tell us how you want it done. Not both. If you already know best how to do it, just do it yourself.

    1. Whenever possible, Please say whatever you have to say during commercials.

    1. Christopher Columbus did NOT need directions and neither do we.

    1. ALL men see in only 16 colors, like Windows default settings. Peach, for example, is a fruit, not a color. Pumpkin is also a fruit. We have no idea what mauve is.

    1. If it itches, it will be scratched. We do that.

    1. If we ask what is wrong and you say “nothing,” We will act like nothing’s wrong. We know you are lying, but it is just not worth the hassle.

    1. If you ask a question you don’t want an answer to, expect an answer you don’t want to hear.

    1. When we have to go somewhere, absolutely anything you wear is fine … really.

    1. Don’t ask us what we’re thinking about unless you are prepared to discuss such topics as baseball or golf.

    1. You have enough clothes.

    1. You have too many shoes.

    1. I am in shape. Round IS a shape!

    1. Thank you for reading this.

    Yes, I know, I have to sleep on the couch tonight; but did you know men really don’t mind that? It’s like camping.

  110. 110
    Wyoming Says:


  111. 111
    md Says:

    and just in time for Fathers Day

  112. 112
    BirdsofpreyRcool Says:

    elduque — ha! when you live long enough, you look back and realize you did a lot of stuff. One of the things I did for 2 yrs was oversee the “true-up” of the defined benefit plan at a fortune 100 company in the early 90s. You could use what ever assumptions on employee statistics (number, salaries, age, retirement rate, death rate), benefit costs, investment income, and discount rate you wanted. We used an outside acutarial firm to vette the number… but there is a lot of play in the assumptions that a company can make. All this info has to be spelled out in the company’s 10-k… so, you can see for yourself if a company’s assumptions “make sense” or not.

    For example, US Steel uses an assumed 8.00% expected annual return on U.S. plan assets and a 5.75% discount rate on their anticipated benefit obligations.

  113. 113
    zman Says:

    Re 109 – agreed.

  114. 114
    VTZ Says:

    Nicky- No I don’t think this is an abnormal move. To me it looks like buying and a short squeeze.

    Keep in mind, gold was moving 50 dollars a day not long ago and no I don’t think a 15 dollar move is exagerated.

    The 100 day moving average on the dollar index is just above 79 and so is the last low in December so you techies/banks better defend that level like crazy!

    RSI on gold also broke resistance and is moving higher and the HUI is also supportive of the move (it has either moved in advance or caught up to gold, depending on how you look at it).

    I agree that if it manages to bounce off 967 then we might trade in a range, otherwise it’s on to new highs. Let’s wait and see.

  115. 115
    Nicky Says:

    VTZ – its not the fact that its a $15 move its the fact that it is a straight line move. i actually think gold has been very weak of late and this move is likely a fake out. Those touting inflation are way ahead of the game we need to get rid of deflation first.

  116. 116
    choices Says:

    Cash for Clunkers (needs sound)


  117. 117
    VTZ Says:

    Doesn’t have to be price inflation to have monetary inflation and I’ll leave the inflation/deflation debate at that. Bottom line is the USD has no business being where it is.

    The US DOUBLED their monetary base. The only options are a)inflation or b) raise interest rates and crush the eaasy-money economy.

  118. 118
    Nicky Says:

    Spx – this may be a small iv bounce to be followed by a lower low but any higher than 886 and I would be out of shorts.

  119. 119
    Nicky Says:

    VTZ – I am with you, totally, just not yet.

  120. 120
    zman Says:

    VTZ – re 117. Agreed, surprised it took so long for people to notice, only reason I can come up with is that people felt the other go to currencies were in similar dire positions.

  121. 121
    tater Says:

    I’m out short. Looking for a relief rally heading into the long weekend. I figure Treasury will announce another $4 quadrillion backing from the Fed to make sure that I have green TP to use in the loo. (Or is it the other way around? Does it even matter any more?)

  122. 122
    PackMan Says:

    967 ? S&P or Gold ?

  123. 123
    tater Says:

    As I am too gutless at the moment to play anything long, I’m going to call it a week. Just wanted to say thanks to anybody who wears the uniform. Much appreciated.

  124. 124
    Nicky Says:

    I am with you T – v down looks complete or close so we should see at least a retracement of the fall.

    967 refered to Gold.

  125. 125
    zman Says:

    123 – Absolutely agreed.

  126. 126
    cargocult Says:

    VTZ-if the monetary base just doubled, what happened to it during this recent contraction? Are we ahead or behind where we were before the recent financial collapse? Is big time inflation on the horizon?

  127. 127
    zman Says:

    JY – check your email, may have found what you are looking for.

  128. 128
    md Says:

    Electric Flash numbers for March indicate NG up 5% and IND DN 12.7%. My guess is that NG Cons DN YOY 1 BCFPD between Elect and Ind
    and any other variance would be HDD related.
    LY Aug Electrical was DN over 200 BCF.
    TY Aug with fuel switching it will likely be the the opposite.
    Gus N Ike related Production DN 200 BCF so one cancelled the other.
    TY I will Assume the reverse.

  129. 129
    zman Says:

    Did anyone ever get a brief on that Dahlman upgrade of the dry bulks? The stocks have given up that pop they got from it.

  130. 130
    zman Says:

    Saw Friedman started DSX the day after Dalhman upped the group at outperform. Not much help there either.

  131. 131
    zman Says:

    Nicky – so a close above 886 on SP500 would be bullish near term for you?

  132. 132
    VTZ Says:

    Anybody who think deflation is the primary concern right now answer me this:

    Why not print a whole bunch of dollars and distribute them? What? That’s wrong? That’s inflationary? Well then that will fix your deflation problem!!!

    You can’t create dollars out of nothing? Well that’s exactly what you’re doing except they are giving them to the banks so that they can distribute the money and use the money multiplier, so that it costs them less.

    Asset values have decreased, but the monetary base has done nothing but go up and DOUBLE and it will continue to go up. Every time the US buys it’s own debt (every week now) it gets worse. The only guy worth listening to on CNBC is Santelli.

    Look at Britain, the exact same thing is going to happen to the US (probably worse because this is the center of all that financial “innovation”). Look at all the counterparties AIG paid out.

    People mistake inflation because they see asset values decreasing. Yes, that’s true but something was produced or exchanged to create those dollars. You can’t just double the amount of money in the system to start adding liquidity back. Who produced anything to create those dollars? Nobody. A printing press.

    At some point there is no way out but high inflation (assuming you don’t want to crush the recovery by boosting rates). Bernanke has said himself that the mistake that Japan made was stopping spending too early. The US is going to have loose policy and deficits for the foreseeable future, and as soon as the economy starts to recover that money is going to catch fire.

  133. 133
    BirdsofpreyRcool Says:

    EXM — did they just hit earnings out of the ballpark vs expectations? or, am I reading expectations wrong…

  134. 134
    Nicky Says:

    Sorry Z saw 131 a bit late. No it didn’t have to close above 886 – just needed to move above 886. Yes I see at least a retracement of the move down tomorrow and one count that says it could be a bit more than that. Oil was very strong today considering which I think is a tell all.

  135. 135
    zman Says:

    Looks like it based on the market reaction, Dahlman raised these guys to hold from sell.

    Looking at the numbers, even taking out a gain, they aren’t even the same state, let along ballpark, as the estimates. Odd.

  136. 136
    zman Says:

    Re 134 – so you are saying we erase today’s losses tomorrow. I appreciate the read.

    On EXM – their revenues were more than double expectations and half of what they are supposed to do this year. Very odd.

  137. 137
    john11 Says:

    In EXM’s revenues they included 129.1 mil of non cash time charter amortizations. From the release..
    Included in the above adjusted net income are also the amortization of favorable and unfavorable time charters that were fair valued upon acquiring Quintana on April 15, 2008 amounting to a net income of $67.8 million ($1.48 per weighted average diluted share), a non-cash gain of $51.5 million ($1.12 per weighted average diluted share) related to the accelerated amortization of the time charter value of M/V Sandra and M/V Coal Pride assumed upon Quintana Maritime Limited (“Quintana”) acquisition due to their termination and the amortization of stock based compensation expense of $2.4 million ($0.05 per weighted average diluted share).

  138. 138
    BirdsofpreyRcool Says:

    z — i’m reading the same thing… exp’d 90mm in revs… came in 222mm in revs. Is this the same company? wow

  139. 139
    john11 Says:

    The whole release takes more effort than I’m willing to put in…lol

  140. 140
    BirdsofpreyRcool Says:

    hey john11, thanks for the help. But, since the QMAR acqtn was done a yr ago… wouldn’t the ananlysts have updated their models?? Apparently not, it sounds like. What do you think of earnings? Does it imply anything for the rest of the group?

  141. 141
    john11 Says:

    Remember they’ve got the Quintana acquisition to deal with in the release.

  142. 142
    Nicky Says:

    Z – resistance on spx at 897 – 901 and there is a gap at the latter we may try and fill. If lower lows are ahead that area should stall it. Any higher than 910 and there is something much more bullish going on.

  143. 143
    zman Says:

    John, thanks and I hear ya, they should have backed it out of earnings too get to a comparable number with the analysts.

  144. 144
    BirdsofpreyRcool Says:

    john11 — ha! don’t blame ya.

  145. 145
    zman Says:

    Muchas Gracias Nicky. Beerthirty.

  146. 146
    zman Says:

    AIG proposing 1 for 20 reverse stock split. That’s one of my favorite no-no’s for a stock to do.

  147. 147
    jy Says:

    Z re #127, Many thanks! This will help immensely!
    Slides 3 &16 are a big help, especially #16

  148. 148
    tater Says:

    Updated the charts that needed it. I think the CLR daily and 60 min views are worth a look. Possible gap issues.


  149. 149
    mimster90 Says:

    zman I admire your conviction and tenacity with pxdff (june 30 calls).

  150. 150
    Wyoming Says:


  151. 151
    bill Says:

    read 137

    when exm bot qmar they recorded def rev due to the charters being below market and debited goodwill

    so in the future (like now) they

    included 129.1 mil of non cash time charter amortizations ie (revenue) NON CASH..they get this every qtr

    Its a phoney entry that makes no sense

    the ceo of exm sold himself shares in the 2 or 3’s when the stock was 6 and that after he gave himself free shares

    and this qtr has qmar in it and last year it omitted it

    id stay away even though i expect it to go up today

    I bot some dsx earlier in the week which i plan to sell on any upsurge, its too early for the whole sector , imho

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