Trepidation Tuesday

110 thoughts on “Trepidation Tuesday”

1. no cuts from opec..
   dollar stronger due to nut job..
   crude down 1.50..

   means lower prices for ep stocks at the open..

   Now should we buy when everybody wants to sell?

2. Deutsche Bank Energy & Utilities Conf
   Miami Beach

   Time,ET Companies
   27-May-09
   9:10 AM NRG
   10:00 AM FPL
   10:50 AM CAM (Energy Service/E&P) TSO (Energy Integrateds/Refiners)
   11:40 AM BHI (Energy Service/E&P) NWE XEC (Energy Service/E&P)
   2:00 PM DYN EQT (Energy Service/E&P) MUR (Energy Service/E&P)
   2:50 PM BBG (Energy Service/E&P) CEG OII (Energy Service/E&P)
   3:40 PM AEP FST (Energy Service/E&P) SII (Energy Service/E&P)
   4:30 PM CMS SWN (Energy Service/E&P) WFT (Energy Service/E&P)
   28-May-09
   8:00 AM APC (Energy Service/E&P) BAS PNW
   8:50 AM HAL (Energy Service/E&P) KWK (Energy Service/E&P) PPL
   9:40 AM CHK (Energy Service/E&P) ETR PXD (Energy Service/E&P)
   10:30 AM DK DUK XTO (Energy Service/E&P)
   1:30 PM ALJ (Energy Integrateds/Refiners) NVE UPL (Energy Service/E&P)
   2:20 PM FTO (Energy Integrateds/Refiners) RRC (Energy Service/E&P) SE
   3:10 PM CNQ POR SD (Energy Service/E&P)
   4:00 PM AES PDS (Energy Service/E&P) XCO (Energy Service/E&P)

3. Morning Bill.

   The oil headlines this morning their usual non sense. No one has expected cuts form OPEC at this meeting for over a month now. Oil falls with a small pop in the dollar so someone grabs the headline rolodex, flips to the “what do I write when oil is lower section” and takes a spin.

   I’ve been adding to positions over the last week but my cash component is still high. I see no rush to jump at “bargains” until the market gains a little more footing.

   Looks like everything will be lower at the open. One thing about N. Korea news that it is often a flash in the pan in terms of its ability to hold the markets attention. Give us some stronger eco data on housing this week and I would expect a prompt reversal higher in equities.

4. Thanks Nifkin for that schedule!

5. Case Schiller shows home prices fall at record pace:

   http://www.marketwatch.com/story/us-home-prices-fall-at-record-pace-case-shiller

6. Good morning.

   TechTrader was off Friday and again today. Seems 3 days were not long enough. Back tomorrow.

   HeadTrader says if you liked Friday’s action, then it’s Ground Hog Day all over again. Expect today to be much like Friday, slow and choppy. That’s all he said. He’s moving slow this morning.

7. Credit market slooooooooooooow and listless also (just like HeadTrader). Credit indices tried to open wider/lower, but regained most of that ground. So, not much changed from Friday’s mild sell off.

   IG 149 bps

   HY 79 7/16 points

8. By Lananh Nguyen
   Of DOW JONES NEWSWIRES

   LONDON (Dow Jones)–Nymex crude oil futures fell toward $60 a barrel Tuesday
   in London, depressed by weaker European equities and a strengthening dollar.
   “A stronger U.S. dollar has helped mark oil prices lower…other factors
   keeping a lid on prices are views in the market that OPEC will leave production
   quotas unchanged later this week and that fundamentals don’t justify current
   prices,” said David Hart, an analyst at Hanson Westhouse in London.
   At 1136 GMT, the front-month July Brent contract on London’s ICE futures
   exchange was down $0.61 at $59.60 a barrel.
   The front-month July contract on the New York Mercantile Exchange was trading
   $1.24 lower at $60.41 a barrel against Friday’s settlement.
   The ICE’s gasoil contract for June delivery was down $6.25 at $473.50 a metric
   ton, while Nymex gasoline for June delivery was down 339 points at 180.69 cents
   a gallon.
   Broader financial markets continued to hold sway over oil Tuesday, as crude
   followed equities south. Traders also took the opportunity to book profits from
   last week’s price surge to six-month highs.
   “The market is definitely overdone” and correcting lower Tuesday, a trader
   said.
   Ahead of the Organization of Petroleum Exporting Countries summit in Vienna
   Thursday, officials cemented market expectations the group wouldn’t change its
   output policy. OPEC pumps 40% of the world’s crude.
   Saudi Arabia’s Oil Minister Ali Naimi Tuesday reiterated his desire for OPEC
   to “stay the course” with its production and called for better compliance with
   past output reductions. King Abdullah of Saudi Arabia also said his country
   still considers a fair price for oil between $75 to $80 a barrel, Kuwait-based
   Al Seyassah daily newspaper reported.
   OPEC voted to hold output steady at its last meeting March 15, effectively
   ending a series of cuts pledged late in 2008 to shore up the market. Other
   members, including Iraq and Algeria, have also indicated OPEC may leave
   production targets unchanged.
   Separately, participants remained cautious about recent disruptions to
   Nigerian oil output, said Olivier Jakob, managing director of Switzerland-based
   consultancy Petromatrix.
   The combined 150,000 barrel a day shutdowns announced by Chevron Corp. (CVX)
   and Eni SpA (E) in recent days aren’t yet enough to outweigh a glut of oil
   inventories, “but with the military said to be expanding its operations we will
   maintain a premium for the Nigerian disruption risk,” Jakob said. “If the
   unrest continues it will not take long for the unions to start to threaten to
   walk-off from the [oil-producing] Delta.”

   -By Lananh Nguyen, Dow Jones Newswires (Spencer Swartz in Vienna and Yee Kai Pin in Singapore contributed to this
   report.)

   Dow Jones Newswires
   05-26-09 0743ET

9. 9:21 (Dow Jones) When gas prices surpassed $4/gallon last summer, “you
   couldn’t walk the halls of Congress without hearing lawmakers crying out for a new energy policy,” Rep. Carolyn B. Maloney (D-NY) writes on a Washington Post blog. “What a difference a year makes.” But last year’s high gas prices weren’t an anomaly, she argues, and lawmakers can’t remain complacent as the price of oil starts creeping back up. “We must implement long term changes in energy policy now to move America beyond oil and into a vibrant and diverse
   21st century energy economy,” Maloney says. “If we don’t, then the pains of last summer are an all too likely future.” (SMR)

10. CHK back below 20… lots of talk over the weekend about nat gas prices heading lower.

11. Interesting item.

    »EPA Administrator Forecasts Potential Shift on Bush-Era Drilling Loophole
    Posted: May 25, 2009 at 11:38 am

    By Joaquin Sapien, ProPublica

    Signaling the potential for an important policy reversal, Environmental Protection Agency Administrator Lisa Jackson said in a congressional hearing on Tuesday that the agency would consider revisiting its controversial position that a popular natural gas drilling technique doesn’t harm groundwater.

    A 2004 study conducted by the EPA concluded that hydraulic fracturing — a process that involves pummeling the earth with millions of gallons of water mixed with sand and chemicals to extract natural gas — causes “no threat” to underground drinking water.

    The study is often used by the gas industry to rebut concerns over drinking water contamination. It was also the main basis for a provision in a 2005 energy bill that exempts hydraulic fracturing from regulation under the Safe Drinking Water Act. The bill says the process is exempt because it doesn’t harm groundwater. Opponents of the exemption are trying to repeal it, and a new study from the EPA would add muscle to their argument.

    A ProPublica investigation co-published with BusinessWeek last November identified serious flaws in the EPA’s 2004 study. We found that the agency negotiated directly with the gas industry before finalizing its conclusions and ignored evidence that the process might indeed contaminate water supplies.

    Rep. Maurice Hinchey (D-NY) expressed concern about these issues and recent reports of contamination near drill sites. At a House Appropriations Subcommittee on Interior hearing on Tuesday, he asked Jackson whether the emerging evidence would prompt the EPA to revise its previous conclusions.

    Jackson said she recognized that the current regulations restrict the EPA’s ability to protect groundwater and said the issue “was well worth looking into.” But she didn’t say how the EPA would approach the problem or whether the 2004 study would be revised.

    A spokesperson for Jackson would not elaborate on her remarks.

    The statement has stirred optimism among environmentalists who have been urging the EPA and Congress to repeal the exemption. They feel it’s a sign that the Obama administration is willing to take a fresh look at the Bush administration’s legacy on gas drilling.

    “Big ships turn slowly,” said Bruce Baizel, an attorney with the Oil and Gas Accountability Project, “but I think this is the first time EPA has acknowledged that maybe their previous conclusions were not entirely supported by sound science.”

    Industry representatives contend that fracturing is safe and dispute the claim that the process has been linked to water contamination. They also maintain that fracturing is best regulated by individual states, rather than the federal government.

    “The EPA study is one of several studies done by a variety of different interests in the past decade, and I don’t believe that there is any compelling evidence that the risk has changed since 2004,” said Lee Fuller, vice president of government relations for the Independent Petroleum Association of America. “The reports mentioned (in the hearing) have been analyzed to show that they are not related to hydraulic fracturing.”

    Buzz up! Digg Fark Facebook Tip’d EPA Administrator Forecasts Potential Shift on Bush-Era Drilling Loophole

    http://247wallst.com/2009/05/25/epa-administrator-forecasts-potential-shift-on-bush-era-drilling-loophole/

12. BOP – re 10. I find it amusing/funny/sad that when something is moving up people think it should go higher but as soon as it falls back a bit, they find it less of a bargain, lose confidence in the previous move, and because it is now falling, think it should fall some more. Gas fell last week due to profit taking, after a strong run which is normal.

    Then we saw a bigger than expected injection into gas storage. At 103 Bcf actual vs the market’s 95 Bcf estimate, the difference between the two is inconsequential. Furthermore, it is a survey and 2 to 3 Bcf of the number is just the first standard deviation. Anyway, mine is not to criticize market behavior, only profit by it. The fear in the gas market is overblown but we’re going to need heat this summer and more production data, to prove it.

13. Re 11. Those people who want to ban fracing must own sheep or a blanket factory or some such. It would get awfully cold in the U.S. without natural gas heat. Oh, and then there is the 20% of electricity generation we get from NG. So we’re going to be sweating in the summer more.

14. CNBC talking about oil prices this morning. They act like the only determinant of prices is US demand. Think there is a bigger picture at work here…

    Also, that Storck fellow… i haven’t followed his history. He’s pretty bearish on nat gas prices. Does he have any credibility there?

15. Bill – saw the Schork comment bashing oil earlier. He seems to blow in the wind with oil prices, liking oil down at $50 and detesting it at $60. True enough, it is trading in that range and if you are playing the range he’s your guy. But his argument that OPEC got their $75 target by cutting last year’s price peak by 2 is silly. He’s becoming the new Phil Flynn of CNBC.

16. BOP – re Schork. He’s not a dumb guy but he likes the camera a lot. He likes to make rash statements and when NG was $3.40 a few weeks ago, he said it was going to $0. I have heard no good argument out of him for why outside of “too much supply, not enough demand, too much LNG”.

17. z — #16 thanks. I knew i spelled his name wrong… just didn’t bother to go look it up. His comments weren’t much value-add.

18. More on 11. Thanks for pointing it out. This has come up before, numerous times, and has not been proved to harmful. But I don’t believe this administration does things by accident and I don’t believe in coincidences. So when people note that the President hasn’t really gotten behind natural gas despite the obvious benefits the U.S. could reap in transportation from going with CNG I have to think that he’s looking for reasons not to.

19. HUGE positive jump in consumer conf…

    54.9 vs 42.6 exp’d

20. BOP – I’m not saying he’s not smart. Well dressed too, lol. But he talks his book more than most, of those CNBC lackies.

21. Last time (April number) revised slightly higher too… to 40.8. But, 40.8 (April) to 54.9 (May) is a pretty big jump.

22. Thanks BOP, had my eyes of the news tape. Market flying up. Kim Jong who?

23. z — understood. He sounds smart, that’s why i asked.

24. CHK… back over $20

25. High Yield CDS index heading a smidge higher… want to get back to that 80-handle. Getting there….

    HY 79 3/4

26. HY 79 13/16… almost there………..

27. NG green now.
    Oil off 40 cents from down $2 at the open.

    Consumer confidence ruling the day. Most of energy green, big drops on now volume on the open eradicated.

    SWN benefiting from that upgrade this morning.

    Broad market will rule day. Nicky, can you refresh our memories on your levels for the SP500?

28. Informal survey watch: anyone have anecdotes from the weekend on retail?

    I hit target, home depot, lowes and several smaller private retailers over the weekend. Gotta say they were more crowded than usual and the sales I saw were not that great but I went Saturday and maybe Monday was the big sale event. Anyway, good to see people buying things.

29. Z – Any opinion on Exxon spending money at Kearl Lake as it relates to their macro view?

30. ZTRADE:

    EOG – Added (5) June $70 Calls (EOGFN) for 2.15 with the stock off 3% at 66.80 on a broker downgrade today. The stock has been, in my opinion, overly sold off following earnings season. They speak tomorrow at an industry conference and while I don’t anticipate news of a catalytic variety they may release one or two new tidbits. I continue to hold 5 of the June $80 calls here as well.

31. V – I saw your comments over the weekend. XOM has said they are going ahead with their capital budget despite the fall in oil prices. It seems to me these guys continue to take the long view that prices will rebound, that others are not investing now and that it makes sense to gear up in a lower cost environment and then produce more in a higher price one. Seems pretty consistent to me. Also consistent that its a lower risk play with a lower risk country, something I think is wise given their recent history with Latin America and with the Russians. I think these stories that surface weekly about XOM buying a U.S. gassy E&P are bunk and this kind of story further debunks them. They like foreign oil and gas. U.S. drilling? Not so much.

32. Housekeeping Watch: All the text blasts went normal today which is a minor miracle. If anyone wants to be added to the text blast list send an email to zmanadmin@gmail.com with TEXT ME as the subject line and your number with area code and your cell carrier.

33. By Steve Gelsi

    Energy stocks fell Tuesday as Wall Street mulled oil prices below $60 a barrel
    and more difficult long-term prospects for major oil companies facing pressure
    to replace aging wells.
    OPEC also looms on investors’ collective radar screen this week, with the oil
    cartel expected to avoid any further cuts in production at a confab this week.
    Against this backdrop, the Amex Oil Index (XOI) dropped 1.3% to 919, the Amex
    Natural Gas Index (XNG) lost 2.2% to 405, and the Philadelphia Oil Service
    Index (OSXX) declined 0.4% to 161.
    While mega-projects such as the Thunder Horse project in the Gulf of Mexico
    are helping production, oil majors such as BP (BP) continue to be squeezed by
    maturing fields and capital-spending cutbacks, even while maintaining dividend
    payments.
    “Above all, the majors need to reassure investors that the regular
    distributions of cash are sustainable,” wrote Liam Denning in The Wall Street
    Journal’s Heard on the Street column on Tuesday. “That means, when it comes to
    replacing barrels, proving they can go out and find, not buy, more Thunder
    Horses.”
    Among energy stocks in the spotlight, Exxon Mobil (XOM) fell 1.1% to $68.03.
    The leader in the oil and gas sector is slated to hold its annual meeting on
    Wednesday. Some shareholders are concerned about the company’s move to spend
    $104 billion in stock buybacks in recent years rather than boosting reserves,
    according to a Bloomberg article on Tuesday.
    Royal Dutch Shell (RDSA) Executive Director Linda Cook is stepping down from
    the oil major on June 1 after a power struggle surrounding the retirement of
    Chief Executive Jeroen van der Veer this summer. A 29-year employee of the
    company, Cook headed the company’s massive natural-gas business. Shares of
    Royal Dutch Shell dropped 0.6% to $51.12.
    PetroChina’s (PTR) shares dipped 1.2% to $107.13 in trades on the New York
    Stock Exchange. The state-run oil company has proposed a $1 billion purchase of
    a minority stake in Singapore Petroleum Co.
    Among analyst ratings, FBR on Tuesday upgraded Southwestern (SWN) to
    outperform from market perform. Shares fell 4 cents to $40.07.
    Credit Suisse shuffled ratings on several energy firms by upgrading Noble
    Energy (NBL) and Occidental (OXY) to outperform from market perform and
    downgrading EOG Resources (EOG) and Ultra Petroleum (UPL) to underperform from
    neutral.

    -Steve Gelsi

    Dow Jones Newswires
    05-26-09 1005ET

34. Speaking of distributions, LINE holding nicely at last week’s $18.40 level. Thanks go to Cramer for getting the word out.

35. Morning all.

    I had 3 possible counts going into the weekend. Still two on the table!

    In no particular preference. 5 waves down completed last week and we are currently tracing out an abc correction with the current wave being c. If this is the current count then the line in the sand for the SPX is 915 and to be honest I would not want to really see it above 910. Then we would turn lower and head down in a wave iii which would likely test 830 – 850 spx.

    More bullish count says we completed our
    correction and are now up up and away!

    The move up today is very predictable – everyone was way too bearish.

36. Anybody have a good summary of the current Waxman energy markup? Trolling around, trying to find a high level view.

37. Thanks Nicky. In your EW thoughts, does psychology of big round numbers, like 900, factor in. Often, if you don’t bounce off a number like that but go right through it, like this morning, it gets pretty easy to set the target price on the index. Any thoughts what support is below 900?

38. Jat – Will look about. Last I saw all of the EOR tax reversions were still in it, along with hits on marginal wells and of course, cash for clunkers. Note last week that Alaska held a lease auction and nobody came. Sign of things to come if people start playing with royalties offshore and especially if they get rid of the breakeven breaks for marginally deepwater reserves.

39. May 23 Chronicle article on Waxman cap n trade…don’t see much newer.

    http://www.chron.com/disp/story.mpl/editorial/6438098.html

40. Z – the level everyone is watching is 878. I think because we tested that in the futures this morning everyone thought when we opened down that we would just continue. Many must have gone short on that.
    After 878, then 875, 869,852,843,830.
    I tend to look more at the fib retracements rather than the round numbers. There was a gap to fill at 902.

41. Thanks Nicky.

42. Metals should now be starting v up, dollar v down. We could see spikes in everything but I believe all are getting close to the end of their moves.

43. Yep, was just watching the dollar give back most of the overnight gains, back to 80.13 and taking a hard look at 80 and last week’s 79.80 5 month low.

44. Yes nothing to say we can’t go down to 77 Z but as you know I am not bearish short term on the $ and think we could see a huge bounce once this wave down is complete.

45. anything out there on the WLL weakness?

46. z-have you heard any rumors about BJS-fair amount of volume again on Jun calls with large op interest on june 17.5.

    Thanks.

47. Re WLL – Big run, time for a little profit taking there is all I think. SunTrust cut them last week but that was most likely a valuation call.

    Thanks Nicky, I’m paying pretty close attention here.

48. Choices – We had high volume in the calls on Friday. My rumor mill guys haven’t made a peep but they are probably still hung over, will check.

49. the BJS talk was flying around on Friday after noon- was sparked by the options activity- ran 5% intrady

50. Market looks frozen, volumes are unimpressive. GMXR moving well. everything else off lows but boring.

51. Are we getting General Motors news today?

52. Deadline for the bond holders to submit themselves for flogging is midnight.

53. Not sure which category this article falls into but it seems to follow the earlier discussion on CNBC-had to go down to the bottom so find his mention of the $25 oil-do not know anything about writer or his org-the whole thesis is based upon deflation-FWIW

    http://321energy.com/editorials/bibbings/bibbings052109.html

54. News came out on GM Bondholders. Looks like GM will go into bankruptcy next week. Market hasn’t flinched yet.

55. Nicky — GM’s debt-exchange offer to unsecured bondholders expires today. In order to agree to the proposal on the table, 90% of bondholders have to tender their bonds. Hearing from CNBC that the number of GM bondholders who tendered under the offer is in the “low-single-digit percentage.” I think the deadline for a GM Chapter 11 filing is June 1st. But, withouth a bondholder consent, there is really no reason to put off filing.

    Frankly, I think the mrkt will rally on a GM filing. The uncertainty would be over and we would stop getting headlines bashing providers of capital. At least, in this instance. As we have been saying since last Fall, Chapter 11 is the ONLY way to do the sort of things that GM needs to do to reorganize. Chapter 11 means the operations continue, but members of the capital structure get together and figure out how to reorganize the company to be able to profitable in the future. There has been so much mis-information about the BK process, it has been very damaging, wasted taxpayer money, and has kept uncertainty front-and-center. Let us hope we can close this current chapter under the rule of law.

56. Crude slightly green.

    Thanks Nicky, market probably not surprised at this point.

    ABC ran a story last night indicating you can get a new chrysler for about 40% right now.

    Choices – Don’t know the guy.

57. Old Fave Addax mentioned:

    By Joseph Chaney, Asia Resources Correspondent

    HONG KONG (Reuters) – Asian oil giants including India’s ONGC (ONGC.BO) are among firms eyeing a potential bid for a $3 billion stake in Africa-focused oil and gas independent Kosmos Energy, three sources familiar with the matter said.

    Private equity-backed Kosmos, which has received a total of $800 million in financing from Blackstone (BX.N) and Warburg Pincus, has hired Standard Chartered (STAN.L) and Barclays Plc (BARC.L) to sell its stakes in the Jubilee oil field offshore Ghana, London-based media reported over the weekend.

    Lower oil prices are slamming smaller oil players, handicapping their ability to finance projects and making many vulnerable to takeover, analysts say.

    Oil has fallen to roughly $57 a barrel since the record highs of close to $150 hit last July, with few convincing signs of a sustained demand recovery in sight.

    Kosmos has eyed a potential stake sale for months, but management could not agree with the firm’s financial sponsors on timing because of the cloudy outlook for oil price recovery amid the global financial crisis, dealmakers said.

    “This is a world class asset,” said a Hong Kong-based investment banker with direct knowledge of the situation.

    “There’s been some disagreement about how to monetize it,” the source added. All three bankers declined to be named to protect client sensitivities.

    Kosmos’ stake is also expected to draw bids from global energy players BP (BP.L), Shell Oil (RDSa.L), Chevron Corp (CVX.N), Exxon Mobil (XOM.N) and Italy’s ENI SpA (ENI.MI).

    China’s CNOOC (0883.HK)(CEO.N) is also eyeing a bid for the stake, a source familiar with the matter told Reuters.

    CNOOC declined to comment when contacted by Reuters.

    AFRICAN OIL

    Jubilee, one of the largest oil finds in West Africa in the past decade, is predicted to hold 1.2 billion barrels of oil equivalent. The entire field is valued at around $15 billion.

    Texas-based Kosmos has interests across Ghana, Benin, Cameroon, Morocco and Nigeria, including the Jubilee Field in Ghana’s deep waters.

    Other Africa-focused oil and gas independents are also drawing strong interest from Asian buyers.

    Addax Petroleum (AXC.TO)(AXC.L) has attracted buyout interest from CNOOC, ONGC and Japan’s Mitsubishi (8058.T), three sources with direct knowledge of the matter told Reuters in February.

    London-listed Tullow Oil (TLW.L), a partner to Kosmos in Ghana, is also attracting Chinese buyout interest, bankers have told Reuters.

    “We can neither confirm nor deny,” said a New Delhi-based spokesman for ONGC. “We do not want to comment on this at this point of time.”

    (Additional reporting by George Chen in HONG KONG and Devidutta Tripathy in NEW DELHI)

    (Editing by Ian Geoghegan)

58. Eli – Saw that, saw some upgrades on price targets there as well and new production coming on from Kurdistan.

59. Thanks, nifkin-BJS up almost 3% today.

60. (XOM)(HK) (XOM) may be making a bid for (HK) News provide by Acquire Media Corp., Anyone hear any truth to this rumor.

61. Webloner – That rumor was making the rounds last week. I just don’t see it happening, it would not make a lot of sense given their thoughts on domestic gas of late.

62. Z, re #11 on fracs. If EPA banned this technique, would that pretty much be the end of the shale plays? I agree with your take that there are a lot of moving parts to the political side of this. Two things we know are that Obama’s crowd absolutely see energy companies as public enemy number one and they seem oblivious to the effects of their policies.

63. TEX and Wyoming can chime in with specifics. But the horizontal monster shale wells would not be economically viable given current drilling costs. Surely the EPA does not suggest eliminating all fracs but perhaps limiting them in size. I’d like to see the EPA come with some hard facts instead of just making suggestions. Pretty damn important stuff.

64. Just working on a model so if anyone needs me, I’m here.

65. SP at your 910 Nicky, up 2.6%

    Crude up 20 cents, ng down a couple of pennies.

    Stocks well off their lows. North Korea should test something else (as long as it stays within their borders that is). Sheesh. Crazy market.

66. Volume is very light, tho. Need to see this rally confirmed when traders come back to work tomorrow. Credit market very sleepy.

67. Agreed, volume is light. Moves in energy are for the most part not very big. I’d say the rumor mill has shifted from targeting HK to GMXR in E&P.

    If anybody gets Morgan Stanley’s reasoning on the big service upgrade this morning I’d like to see it.

68. BOP or Sam or anyone, how much of the Street do you think is out today, half of the head guys?

69. Not getting political but it is slow around here and this gave me a chuckle.

70. A bunch are still out IMHO.

71. 910 is my warning Z and 916 is bullish.

72. z — think about 20% of the normal guys are still out. But, what we are really seeing is that no one wants to make a portfolio-changing decision today… no one is really taking a stand.

    Consumer Confidence and Richmond Fed Manufacturing Index much better than expected… so, rally monkey jumps up and down a little. No one wants to short it today. People still trying to figure out if this is a head-fake, like last May (I don’t think it is… credit is at a completely different place this year vs last, but we shall see).

73. Re #63:

    NO gas shale would be economic without fraccing! Hardly any play in the lower 48 would be economical without fraccing. Remember, fraccing does not apply to natural gas.

74. Edit #73:

    Fraccing dont not just apply to natural gas, most development oil fields utilize fraccing!

75. TEX – imagine how many jobs would be lost.

76. hmmmm…. normally, in a BK, this stuff gets voted on. Not dictated from above. So, still a lot of highly disturbing stuff going on between the White House, GM, and the UAW.

    GM Agreement Gives 17.5% of Stock to UAW Trust Fund to Cut Debt
    2009-05-26 17:31:47.277 GMT

    By Mike Ramsey
    May 26 (Bloomberg) — General Motors Corp., working on labor accords to speed its exit from a probable bankruptcy, will give 17.5 percent of new company stock to a union health-care trust while cutting future obligations to the fund.
    The United Auto Workers trust also will get $6.5 billion in preferred stock that pays a 9 percent annual dividend, as well as a $2.5 billion note that will be repaid in installments until 2017, according to a union document obtained by Bloomberg.
    GM previously proposed giving 39 percent of company stock to the UAW. The new agreement with the union gives the automaker more equity to divide among the U.S. and other creditors. GM has a plan to issue 60 billion shares of new stock to pay the UAW, the government and bondholders in exchange for reducing debt.
    The union agreement also gives 2.5 percent of GM’s stock to the trust fund if the price hits $75, according to the document.

77. 60 billion shares, with a B? $75 would a $4.5 trillion dollar company. Seems like bad math in there.

78. So the government giving GM another massive bail out – $30million? This is just ludicrous. For heavens sake why don’t they just let them go.

79. I wish more people would do more math so as to see the garbage that’s coming from dc.

80. z — hmmmm… don’t know. Depends on where the stock is trading, I guess. 60B is a lot of shares… there are only 610 million shares now… so, methinks you spotted a major typo.

81. Nicky – agreed. Why not put it in BK and give money in the form of loans to guys like Tesla who have a shot at ramping production of electric cars people actually want. Of course, you’d need natural gas to generate all that electricity but there does not seem to be a problem with supply at present.

82. I’ll have something out on WRES either tonight late or with the morning post.

83. Z ..re 67 what are the rumors re GMXR?
    TIA

84. Now we know what Uncle Hugo has in mind for all that service company equipment he “nationalized”…

    *PDVSA, PETROBRAS SIGN DEAL TO CREATE JOINT SERVICES COMPANY
    2009-05-26 17:46:31.586 GMT

    STORY TO FOLLOW.

    –ROBERT JAMESON

    -0- May/26/2009 17:46 GMT

85. John – I was joking about the action today but I have heard in the last 6 months, HK, CHK, BP all hot for GMXR. I seriously doubt any of it happens, BP being the most likely.

86. an interesting opinion piece in the WSJ this morning drawing parallels between a South Park eqisode and the current strategy from DC.

    # 68 – i think there are fewer memorial day monday longer weekend takers than half maybe 25% are still out. Lots of moving parts this week – GM, govt 2,5,7 year auctions, econ data. Still lots of hand sitting though.

87. It’s like BOP says, nobody wants to commit to this rally or this market just yet. I consider myself a pretty average joe and I’m sitting on my hands, studying up, feeling anything but a sense of urgency to get more long this market. I like what I like and I add more on weakness but I’ve also got my eye on going back to profit taking mode again soon.

88. SP 911.60

    Crude up 30 cents, no storage report tomorrow due to the holiday.

89. z — #69 … holy sh*t!! That should be required watching on Prime Time TV.

90. BOP – at least it should be run on Jon Stewart.

91. z — agreed. Or posted on the Huffington website.

92. SWN going for a breakout to new highs for the recent rally (post March 9th).

93. GM headlines — GM plans hourly-worker buyout offers valued at up to $140,000.

    What they are not telling you… white collar workers are being offered nothing. Your tax dollars at work… $140,000 per auto worker.

    Funny thing… the govt didn’t hand me any money, when low oil prices forced me out of the energy business and back to school in 1989. That is YOUR TAX MONEY being “offered” here, people!!

94. Z,

    Re fraccing, I was concerned to read in that article about the claims of ground water pollution. We must not lose sight of the fact that an important constituency of the democrat party is the trial lawyer bar. Ground water pollution equals massive tort cases, with possible tobacco style payouts. That makes ruling that fraccing is a hideous abuse of nature a win-win for the administration. They can placate the enviros and pay off big contributors.

95. Stepping out for 15 minutes.

96. Some comments on the bonds of Navios Maritime from a high yield underwriter… bonds currently quoted around 75 for a YTW of 16.5%

    We continue to rate Navios’ 9½% Senior Notes due ’14 a HOLD. The price on the notes fell from a high of 103 on 6/19/08 a low of 51 on 2/20/09 due to poor capital market conditions, a crash in dry bulk rates and the large capital commitments Navios has remaining on its newbuild ships in a difficult shipping and bank lending market. Navios recently secured $230mm of bank financing to provide a liquidity cushion of over $100mm through its 2009 newbuild program. The dry bulk market has recovered more quickly than expected due to scrapping, layups, resumption of letters of credit and Chinese stimulus. We believe Navios, with its young fleet, AA+ rated charter default insurance (unique in the industry) and strong industry relationships, is well positioned to survive this downturn and generate over $170mm of free cash flow per year after its newbuild program is completed in 2009.

97. Just got an erratum on the above note… Jefferies rates the NM 9.5% bonds a “BUY,” not a hold.

98. Stocks higher but I not sure the move has much staying power. I would guess that if we roll lower at the turn into the last half hour it will be a quick descent. With that said, the smart play is to take the EOGs, up 38% on the day off the table as own the higher strikes, and can always buy them back again when some other analyst decides to down them. The flip side is they speak tomorrow but I’ve already gotten my pound of flesh out of them for this trade. Mulling a day trade.

99. Sanford C. Bernstein & Co.
    Twenty-Fifth Annual Strategic Decisions Conference
    Waldorf Astoria, New York

    Wednesday, May 27
    8:00 AM EOG Resources (EOG) – Mark Papa, Chairman & CEO
    8:00 AM American Electric Power (AEP) – Michael Morris, Chairman, President & CEO
    9:00 AM Apache Corporation (APA) – Steven Farris, Chairman & CEO
    9:00 AM Exelon Corporation (EXC) – John Rowe, Chairman & CEO
    10:00 AM ConocoPhillips (COP) – James Mulva, Chairman & CEO
    12:00 PM Lunch Speaker: Joseph Stiglitz, Nobel Prize Winning Economist
    2:00 PM PG&E Corporation (PCG) – Peter A. Darbee, Chairman, President & CEO
    4:00 PM Monsanto Company (MON) –Hugh Grant, Chairman, President & CEO
    4:00 PM United States Steel Corporation (X) – John Surma, Chairman & CEO
    4:00 PM FPL Group (FPL) – Lewis Hay III, Chairman & CEO

    Thursday, May 28
    9:00 AM DuPont (DD) – Ellen Kullman, President & CEO
    10:00 AM Dominion Resources (D) – Mark McGettrick, President & CEO, Dominion Generation
    11:00 AM Adam Parker: Bernstein Chief Investment Strategist
    12:00 PM Lunch Speaker: Malcolm Gladwell, NY Times Best Selling Author
    2:00 PM Anadarko Petroleum Corp. (APC) – James T. Hackett, Chairman, President & CEO
    3:00 PM Marathon Oil (MRO) – Clarence Cazalot, President & CEO
    4:00 PM Edison International (EIX) – Theodore F. Craver, Jr., Chairman, President & CEO

    Friday, May 29
    8:00 AM Hess Corporation (HES) – John B. Hess, Chairman & CEO
    9:00 AM Alcoa Inc. (AA) – Klaus Kleinfeld, President & CEO
    10:00 AM ArcelorMittal (MT) – Lakshmi Mittal, Chairman & CEO
    10:00 AM Praxair (PX) – Steven F. Angel, Chairman, President & CEO
    11:00 AM Sunoco Inc. (SUN) – Lynn Elsenhans, Chairman, President & CEO

100. Thanks much for grabbing that one too Nifken. W have RBC next week as well.

101. NEW YORK, May 26 (Reuters) – Gasoline cash values are likely
     to find some strength near-term from higher U.S. summer driving
     season demand and lower supply due to refinery outages, traders
     and analysts said on Tuesday.
     Cash values in the U.S. Gulf Coast kicked off the short
     trading week on a strong note as traders returned from Memorial
     Day holiday, seen as the start of the season when millions of
     Americans take to the road for vacation travel.
     “Supplies in key markets areas are low and summer demand is
     picking up,” said Stephen Schork, editor of the Schork Report,
     in Philadelphia, Pennsylvania, who sees a bullish trend.
     According to last Wednesday’s Energy Information
     Administration (EIA) weekly report, U.S. gasoline stocks fell
     4.3 million barrels to 204 million barrels in the May 15 week,
     leaving gasoline stocks down by 13.4 million barrels over the
     last four weeks, Schork noted.
     “More importantly, stocks on both coasts are low. In the
     East (PADD I) stocks, 53.7 million barrels are 7.6 percent
     below a year ago …” Schork added in a report on Tuesday.
     In the Gulf Coast, PADD III, motor fuel inventories fell to
     70.1 million barrels that week from 71.3 million the previous
     week while Midwest supplies were also lower over the same
     period, at 47.6 million versus 49.3 million, the data shows.
     A preliminary Reuters poll of industry analysts Tuesday
     indicates they expect new EIA oil statistics due Thursday to
     show the nation’s total stockpile of motor fuel shrank further
     last week, off by an average 1.8 million barrels. [EIA/S]
     The analysts expect U.S. distillates stocks rose 900,000
     barrels while crude oil supplies fell 1.1 million barrels.
     Late last week, traders talked of market expectations of
     further economic run cuts by domestic refiners, with Citgo’s
     massive 429,500 barrel per day refinery in Lake Charles,
     Louisiana seen as the latest plant to cut back output. A
     spokesman has said he was unable to comment on operations.
     Sunoco Inc. SUN said on Tuesday it will not provide any
     more daily updates on its 178,000 bpd Marcus Hook,
     Pennsylvania, refinery which had shut a gasoline-making fluid
     catalytic cracker after a recent fire in an ethylene unit.
     Valero Energy Corp’s VLO 210,000-barrel-per-day
     refinery in Delaware City, Delaware, will continue to run at
     reduced rates until the coking unit returns to service at the
     end of May, a spokesman has said. nN20524684
     “There is no change in the status of the coker at Delaware
     City,” Valero spokesman Bill Day said in an email Tuesday.
     Meanwhile, processing units at Valero’s McKee refinery in
     Texas will restart late this week or early next week after
     maintenance, industry sources said. nN26485769 Exxon Mobil
     Corp XOM said it expects little impact from a Friday coker
     malfunction to production at its 348,500 bpd Beaumont, Texas,
     refinery.

     HIGHER IMPORTS
     Helping somewhat mitigate the price pressure from lower
     stocks, analysts expect a further gain in imports after the
     most recent EIA data showed that U.S. imports of motor fuel
     rose to 938,000 barrels per day in the week to May 15 from
     747,000 bpd in the prior week.
     A Gulf Coast-based market watcher said on Tuesday that
     conventional grade gasoline basis was pressured in the New York
     Harbor ahead of the Memorial Day holiday weekend “on news that
     there would be increasingly more cargoes headed from
     Northwestern Europe” to the United States.
     On the distillates front, New York Harbor traders said the
     week ahead will be devoted mostly to cleaning-up of positions
     ahead of Friday’s expiry of the benchmark June heating oil
     futures. On Tuesday, the new July screen benchmark was trading
     2.45 cent higher than June.
     “There’s plenty of products and the screen lets you roll
     forward, so it will be a matter of who does not have room to
     hold (barrels),” a New York Harbor distillates trader said.
     (Reporting by Haitham Haddadin with additional reporting by
     Gene Ramos; New York Energy Desk

     Tue May 26 19:21:00 2009

102. Re 101 – so … Shork was a bear this morning but prices are up no so he’s a bull? Whatever dude. Gasoline was off far more than crude in early trading but both oil and crude are up now with crude above 62.30 in late trading and gasoline up 2%. Has anyone seen the mastercard survey yet or AAA’s account of the weekend driving?

     PQ back over $5, WRES back over $2.

103. Big late move up into the close, held the EOG for the morning or longer, not really too concerned other than not wanting to suffer the impact of an irrational market. Heck it closed green, lol.

     WRES closed up 14%, will have that piece out late tonight or early morning.

     All in all, pretty good way to come back from a long weekend.

     Beerthirty.

104. I took note of this CNBC guest’s comments this afternoon, and so did Zero Hedge.

     This has been my feeling for quite some time regarding the market. Many buyers / investors are gone, and they are not coming back anytime soon !

     http://zerohedge.blogspot.com/2009/05/youve-got-computers-doing-all-this.html

105. K-Mart in the Hamptons (probably Kmart’s nicest store). Pretty empty; good inventory.

     Target – Long Island. Pretty empty.

106. On Frac employment, a lot of those jobs are already lost. Many will not return to the uncertainty, abuse and punishment of the life style. They will have moved on and realized that the hours were not worth the cash. You all tease me about the hours I keep.

     On the haz mat of frac fluid. A couple scenarios will probably develope:

     1. Commmod price will make disposal worth while. IE, informal tax on the consumer.

     2. An alternative technique will dominate. This is either N2 or CO2 foam fracs (less water). More expensive, results in an informal tax on the consumer. Air Liquide, BOC (British Oxygen Co – we called them Big Old Rock use your imagination) are two companies I used to use; BOC may have been bought.

     3. Hello imports and LNG.

     Think about why we frac wells (low perm). This basically tells you that the reservoirs of today are junk, unconventional. The easy stuff is done.

     http://www.iea.org/Textbase/Papers/2009/G8_investment_ExecSum.pdf

107. Thanks for the feedback pac.

     Thanks Wyoming. Are any of the guys who turn well waste in road bed public companies? Someday those just might be legislated into being economic.

108. AAA re 94, thanks, never thought of that angle, makes sense. Only the lawyers will be able to afford gas to drive to the court house by then anyway.

     Not sure on the road bed deal. Heard of land farming drilling cuttings, sometimes mixing fluids with concrete and giving away to farmers for road beds.

     On jobs, remember, Frac Tech closed Parachute, WFT closed Farmington, WFT turfed the frac sales guy calling on us. 71% of a certain Service Co took the early retire package (71% of all employees over 53 with enough points) ….

109. Wyoming – while I’ve got you, thanks for the 2 cent comment on the weekend RCS vs ceramic. So if I have a 3 mm pound job that’s $60,000 or about 1% on a $6mm well. Nothing to sneeze at but also not that big a savings. How much cheaper is plain old sand vs ceramic and RCS. Can you price it by the pound.

110. Absorbing & getting up to speed. Hugely long KOG . Was there any mention here that Xto had water in both bakken & 3forks south of KOG & east of MRO acreage? Mainly playing bakken players.

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