Tuesday Morning

Pickens Watch: Watched T Boone on CNBC this morning talk about the Pickens Plan turning 1 year old tomorrow. Sounded like a proud grandpa. TBP noted that Harry Reid will introduce his version of the Natural Gas Act (a version of H.R. 1835) to the Senate floor tomorrow. The bill would promote CNG and LNG powered trucks. Direct beneficiaries of the bill would be natural gas producers, oil service companies with domestic drilling and completion focuses including the big diversified service names, and companies like (CLNE) that are looking to make natural gas "gas stations" ubiquitous to the landscape. Notably, when asked about cap and trade, he demurred saying "it's not my issue" and when pressed he said they'll have a tough time passing cap and trade in the Senate. 

ZComment: T. Boone Pickens = Definition of a Player.  I shook his hand and looked him in the eye when he was here, and I no more believe he likes the cap and trade portion of the "Energy Bill", and I use quotes intentionally,  than I believe he likes being dependent on foreign oil. But coming out against cap and trade, a measure that is likely to kill a jobs recovery in the U.S., would close a lot of doors in D.C. for him as he lobbies to get the Natural Gas Act passed. I also think it speaks to his confidence that the Senate and the House are two very different bodies and that the simple math (60 votes now that Franken is in) is not certainty that cap and trade, in its current draconian form, will be included in the Senate version of the bill.

Pickens Oil Price Watch (and he's been good and bad on oil price predictions but good of late):

  • 2009 year end: $75
  • 2010 average: $80 to $85

Housekeeping Watch: New people and old alike please ask questions. It's summer, so it's slow on the Street and on the site. 2Q earnings season is around the corner and things will get busy so if there is something you want to see in a post or reflected in the tabs on the site, ask and we'll see what we can do.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update ~ Not yet.
  4. Stuff We Care About Today - Oil Service thoughts
  5. Odds & Ends

Holdings Watch


  • $14,900
  • 66% Cash

Yesterday's Trades: None

Commodity Watch

Crude oil tumbled $2.68 to close at $64.05 yesterday. The front month contract's chart looks gappy with support just over $60. This morning crude is trading up slightly having given up steeper gains made overnight.


Natural gas fell $0.13 to close at $3.49 yesterday. Support here is another 8 to10% below current levels and is fairly thin at that level. We need sustained heat and/or supply disruptions from tropical action in the Gulf to force a bit of short covering and keep us from testing the lows from April. My sense is that oil will become more supportive of natural gas in short order but if oil fails $60, gas will be looking squarely at $3 (yes, 20x). This morning gas is trading flat.

  • Imports: Mixed bag of news for NG:

    • Imports from Canada rallied back over 7 Bcfgpd (to 7.3), still down 0.9 Bcfgpd from year ago.
    • LNG holding flat at 1.3 Bcfgpd.



Crack Spread Update

The following chart of S&P's refining index shows that its been a good sector to avoid; its looks like we have another 1/3rd drop before we are at long term support.

These estimates have not yet bottomed. With gasoline demand less than stable and diesel offering no, zero, zippo seasonal support later this year, margins are likely to remain under pressure baring a Gulf of Mexico weather event of rare proportion. As such, I will remain away from the refining group for now but am open to the occasional trade, especially if we get a storm headed into the Louisiana / Texas Gulf Coast region later this summer.

Stuff We Care About Today

Oil Service Multiple Update:

Key Takeaways:

  1. Looking at the charts, they all pretty much look the same; in my layman's technical opinion most of the names on the following chart look to be on the verge of a precipitous fall.
  2. The stocks are not historically cheap; and most are expected see worse years for earnings, even after costs cuts in 2010 than they will in 2009.
  3. Of the drillers:
    1. Deepwater stocks (ATW) standouts on earnings performance as they add a couple of new rigs in the next two years and given their smaller size than big brothers RIG, DO, and NE, this leverage translates into a quickly cheapening name with the passage of time. 
    2. Land focused drillers, especially in North America, I will continue to avoid. I think "lower for longer" will apply to both natural gas prices and to rig counts in the U.S. and Canada.
  4. EPS Estimates Have Been Relatively Stable. We're at a crossroads on earnings and it will take positive news/sentiment from the service names for earnings to gain any traction for 3Q and beyond. At present, estimates have been hacked back with back half 2009 estimates below those of 2Q09, which is not the normal seasonal pattern meaning the analysts have built themselves some cusion.
  5. I'm not going to underestimate the ability of the Street to defend these names in the face of uncertainty and adversity. As estimates fell sharply between 1Q release and present, the Street rallied the group just as sharply, crushing some early shorts (me).


GST NAV - Tabled until tomorrow, still filling in a couple of holes.

Look For Drybulk and Solar Multiple Updates in the Wednesday Post.


Hugo Chavez is a Thieving Nutbag Watch: PDVSA is demanding steep discounts from oil service providers on bills dating back as long as a year. PDVSA gave providers one day to respond to discounts on total bills of about $5.6 billion. (SLB) is at the top of the list. Note to service companies: Venezuela produces about 2% of global oil volumes; look elsewhere for gigs or get gigged.


Odds & Ends

Analyst Watch:

  • APC raised to Buy at Merrill, target upped from $52 to $57
  • ME started at Buy at Merrill. target $19


114 Responses to “Tuesday Morning”

  1. 1
    zman Says:

    China growth article:


  2. 2
    kiaora Says:

    Hi Z…..can’t get the link to yahoo to open..?

  3. 3
    Dman Says:

    The whole yahoo finance site seems to be stalled.

    It amazes me that any companies are still working in VZ. Maybe they are hostages in the sense that they wouldn’t be able to pull their equipment out(?)

  4. 4
    zman Says:

    Re 2. Hmmm, seems to be working now.

    Oil failing $64 as equity futures come off and other commodity futures ease as well. Gasoline may hold up a little better today as VLO is saying one of its Louisiana units remains down after a fire last month and gives no ETA on recovery.

  5. 5
    Dman Says:

    Z – I plead ignorance on the cap & trade. I have studiously ignored it, because I know one thing fer sure: it isn’t going to fix global warming. But worse than that, it will incur costs (I gather) to the energy sector, whilst achieving less than nothing. By that I mean that like a lot of political endeavors aimed at environment issues, they don’t fix the problem but they *do* fool a lot of people into thinking that *something* is being done, when it isn’t really.

    If you needed to build a bridge across a river and congress passed a law to build a bridge that started on one bank & then declined into the water 10% of the way across the river, no-one would be saying “well at least they’re doing something”. But for some reason, for the environment, people do think that “something” is worthwhile. In reality, it just distracts from the problem & makes a real solution even less likely.

  6. 6
    Dman Says:

    I’m sure TBP is biting his tongue pretty hard. Might need some medical attention there.

  7. 7
    zman Says:

    re Analogy in #5, very well said.

    TBP brought up a pipeline being commissioned from Alberta to the coast in BC. Idea is to send oil sand volumes to China. Volumes that the U.S. has commented on at times as big carbon emitters. TBP pointed out that if the U.S. doesn’t take those volumes but the Chinese do, that the net effect on Carbon is the same. I say its actually more as you have to tanker the oil across the Pacific but that’s not the big piece of the carbon pie, the production and subsequent consumption is.

    He also pointed out that India has flatly refused to go for a cap and trade plan. The “energy bill” will monitor China and India and issue a report on their progress or lack thereof in curbing emissions. Sheesh.

  8. 8
    tater Says:


    “You keep using that word!” the Spaniard snapped. “I don’t think it means what you think it does.”

    Inconceivable that we can let these complete economic idiots spend the country’s future into oblivion. More crack for Cracky.

    “A stimulus package IS a spending package, duh!”
    Yes POTUS, but every spending bill is not a stimulus package.
    Duh, yourself.

  9. 9
    elduque Says:

    BDI is coming back down fast. -159 3216

  10. 10
    BirdsofpreyRcool Says:

    Good morning. Quick update, then back later to fill in more:

    Things I am NOT worried about: KOG stock price, the credit market (huge inflows of $$ here), and the banking system.

    Things I AM worried about: Congress is back, a Mt. Everest of political uncertainty keeping companies from doing anything (like hiring), and new “stimulus” package.

    KOG = like SD. SD is volatile b/c of financial leverage. KOG is volatile b/c of operating leverage. Both have good managements. Both suffer when oil prices bounce around.

    HT and TT say it’s a low odds day for trading. “55/45 short on a bad trading day.”

  11. 11
    zman Says:

    Elduque. Makes sense. Port authority in NY is reportedly out of room for containers. Lot of stuff sitting on the docks going no where.

    Tiny bits of green in gas focused energy land. Nothing to get excited about just less down.

  12. 12
    BirdsofpreyRcool Says:

    z — you read about the Calif judge blocking the approved expansion at a Chevron refinery? (b/c not all evironmental concerns were addressed, i guess.) Anyway, who sells refined product into Calif that is not based in Calif? Just wondering which refiners to jump on, at some point in the future.

  13. 13
    zman Says:

    Paint drying action.

    APC getting some favor due to Merrill but that will be worth about one day’s trading if the group does not turn. Don’t get me wrong, I like APC but at this point in the cycle I think the EOG story is superior among the big caps (though they are very different companies).

  14. 14
    PackMan Says:

    KOG = 0.84

  15. 15
    zman Says:

    re 12. It was environmental concerns. It’s also not needed. The Majors, TSO, VLO. On a longer term basis, the domestic refiners are going to face a pretty tough macro picture as U.S. capacity is set to inch up but middle eastern capacity is set to really ramp. We are going to be seeing a lot more gasoline imported in the next five years if the Saudi’s get their way.

  16. 16
    zman Says:

    Oil off a buck plus now with weak broad market and a recovery in the dollar from earlier selling. Oily names not really pulling back. Gas names a mixed bag, SWN only riser yesterday one of worst names today. Haynesville names seem to be trading more flattish as everyone expects something out of HK soon.

  17. 17
    BirdsofpreyRcool Says:

    Not happy with 84¢ KOG, but not concerned either. Just wish I had waited to add to my position at this price.

    Recall, current institutional investors bought almost 10mm of stock at 75¢ (which was “at mrkt” at the time). And they were required to sign a confidentiality agreement, so presumably, they have more insight into the game plan.

  18. 18
    zman Says:

    We have a little different tone today in energy land, less panic, more of a buyers strike based on the volumes and drifting, sideways down action in the names.

  19. 19
    elduque Says:

    Welcome back BOP. It seems to me that there is a common belief that the credit markets are just fine thank you. I always get a little concerned when the consensus appears to be unanimous. When you have a minute, what is your take?

    Just doesn’t seem to me that there is any concern about the amount of federal financing and state financing.

    Thank you.

  20. 20
    BirdsofpreyRcool Says:

    Pls tell me that it’s not “Michael Jackson’s Memorial” that i am hearing about in the background on CNBC… i’m going back on vacation.

  21. 21
    choices Says:

    Re: #5 & 6 and Z’s excellent comments on T Boone.

    I note a new term (at least for me) of “Green Industrial Complex,” which indicates that industry (ie GE), invest banks (read goldman) and their lobbyists see huge money in this push “to do something.” I have not studied the bills but as I read, cap and trade will be a windfall for the likes of goldman but will do virtually nothing to solve any of the problems it seeks to solve. The Energy bill will do absolutely nothing to reduce reliance on foreign oil. GE (Imhoff) was and is a big supporter of Obama and we all know how extensive the fat fingers of Goldman
    are throughout the Admin and Congress. I tend to agree that the Senate will take a closer look at the legislation but never underestimate the influence of huge money being thrown at the Senators by the lobbyists. One huge disappointment for me has been Obama’s practice of turning over legislation to Congress (where normally it belongs) and then standing back and watching the product come out which is the work of our hugely corrupt Congressmen and women.

    Again, a depressing prospect.

  22. 22
    Dman Says:

    Z – I decided to take a closer look at global warming science, mainly as a result of the WSJ article (a week or so back) mentioning Ian Plimers’s book.

    Previously I looked into the literature enough to satisfy myself that the atmospheric physicists were competent and were asking the questions that any good physicist should. They were indeed doing it right and their results agreed with my simple theoretician’s back-of-envelope expectations of how a system like the climate would behave.

    It hasn’t surprised me that the “consensus” outlook keeps getting worse whilst still lagging the data (which gets worse even faster). In fact this is just what I expected, for various reasons.

    Without going into all of those various reasons, I should mention that “consensus” is not really a concept that exists in science. It particularly doesn’t exist in science with any connotation of “compromise”. It exists in the IPCC, but that is a weird science-politics mutant hybrid.

    In science, consensus/compromise doesn’t exist because there is simply no point in averaging a correct idea with a whole lot of wrong ideas. You just use the correct one & throw out the wrong ones (of which there are usually copious numbers).

    Anyway, I thought it was time to take another look & it was very worthwhile.

    Unfortunately, the outlook is even worse than I had expected (which was already a lot worse than the sanitized IPCC version).

    Leading climate scientists have well and truly hit the panic button, and that button has “4th generation nuclear” written on it in green glowing letters.

    There is another button called “geoengineering option” and an informal survey of climate scientists recently found a majority thought this button will have to be pressed.

    Not long ago, I got the impression that myself and a few science-fiction writers were the only ones in that camp. Not any more.

    I had hoped that there would be time to roll out solar etc, but many who have studied it now think there just won’t be time. Hence the 4th gen. nuclear option.


  23. 23
    BirdsofpreyRcool Says:

    elduque — Credit Markets and Treasury Market = two different animals, in my book. All along, I have said that the GGG could blow the rest of us (private sector) away, with his random blasts of armor-piercing bullets. So, yes, very very very concerned by run-away deficits and increasing reluctance on the part of China to finance our disgusting spending spree.

    The best (and most informed) opinion on credit markets…


  24. 24
    zman Says:

    Thanks Jat for the presentation link.

    Choices – I think GE, GS, HAL, SLB, Flour, and some of the other big infrastructure guys stand to benefit from cap and trade.

    ZTRADE: $10KP – HK – Added (10) HK July $20 calls (HKGD) for $0.50 and plan to double that if I can get more at $0.40 to $0.45 in the next day or so. Stock was at 19.25 at time of trade. Still expecting an operations update here but may not get it prior to expiry.

  25. 25
    zman Says:

    Re 22. Thanks. Reading the IFR stuff now, think I recall that from a popular mechanics article awhile back. Sounds too good to be true on the efficiency, safety, waste issues but will keep reading. Why no utilities focus on this is a key question in my book? Cost? Science not all there?

  26. 26
    zman Says:

    ZTRADE: Added a second set of $10 HK July $20 calls for $0.45.

  27. 27
    Dman Says:

    The truly amazing thing about the IFR (Integrated Fast Reactor) technology discussed in the link (bottom of #22) is that it offers to:

    1) fix climate change
    2) eliminate nuclear waste
    3) ultimately eliminate oil imports

    In other words, as the author says, even if you don’t accept climate change science, you’d still want IFR.

    Many climate scientists are saying bluntly that the “green” movement is going to have to “get over” the problems with old nuclear and embrace the idea of 4th generation nuclear. As a green bonus, you get rid of plutonium waste, which I would think should make the pill a bit easier to swallow.

  28. 28
    Dman Says:

    Z – I see what you mean about “too good to be true” but this technology was rated the #1 nuclear option in a comprehensive review of available nuke methods (of which there are a bewildering range).

    As for utilities, good question. I think they are waiting for “someone” (= the govt) to build the first plant.

    As an aside, the Chinese, Russian etc are onto this and I have little doubt it will proceed there.

  29. 29
    zman Says:

    Dman – Any idea of the cost of the foreign projects? Also, why was this killed in 1994?

  30. 30
    Wyoming Says:

    TBP on CNBC (broken in 3 parts) in one link


  31. 31
    zman Says:

    IFR safety in question, apparently folks at Oak Ridge are not fans. I have seen some stuff on Lithium Chloride fast reactors which are said to be safer and cheaper to produce. I noticed that there wasn’t much in the energy bill for nukes.

  32. 32
    zman Says:

    Thanks Wyoming, it was a pretty good interview, nothing really new, but nice to see someone with a plan that actually would do what it purports to do.

  33. 33
    zman Says:

    Early Read on Oil Inventories:

    Crude: down 2.8 mm barrels
    Gasoline: up 1 mm barrels
    Distillates: up 1.9 mm barrels

  34. 34
    Dman Says:

    Z – there are other 4th gen concepts (eg. thorium fueled) that also look good. It probably doesn’t make sense to just back one horse. The Chinese are working on modular high temperature(gas-cooled) pebble-bed reactors.

    A key point is that these “new” reactors can be built to be inherently safe, meaning “no meltdown even if *all* safety systems fail”.

    (BTW, I say “new” but some of these ideas date to the 1940s).

    (BTW2, do you have a link for the Oak Ridge critique?)

    Whereas the traditional light-water reactors are very hard to make “inherently safe”: you need active systems like control rods and you need a containment dome in case it all goes wrong.

    Unfortunately, those containment domes are now the universal symbol of nuclear power, which is probably the #1 reason nukes have stalled in the US.

  35. 35
    Nicky Says:

    Morning all.

    Oil looks to be completing either v of 1 down or v of 4C down. Under either count we bounce soon.

    Broader market. As long as we hold these levels we should make another move up. 880 is actually more important support than 888 spx.

  36. 36
    Popeye Says:

    Thanks again Dman.

  37. 37
    zman Says:

    Nicky – would you take a look at natural gas, just went green, despite the day’s sea of red.

    Dman – I was snooping around stories on Exelon, hang on one second.

  38. 38
    Dman Says:

    Z – looking into this 4th gen stuff I looked up Chernobyl (ultimate symbol of nuke failure) in Wikipedia. The accounts there are absolutely gripping. But also completely amazing what actually went down. They had people running nukes who’s background was coal & they literally didn’t know how their reactor worked.

    They manually shut down *all* safety systems (seven of them, if I recall) in a reactor design that depended on active safety systems and had no containment dome if it *did* go wrong. Result: nuclear lava flows.

  39. 39
    zman Says:

    Dman – here’s one mention although I don’t know this guy from Adam, so I can’t vouch for his comment.


    I see other Oak Ridge guys saying the opposite like here:


  40. 40
    BirdsofpreyRcool Says:

    Additional Credit Market Commentary/Strategy. This points to more near-term volatility (CDS mrkt going lower, panicking stocks temporarily), but long-term improvement. So, have to live through ups and downs, but overall trend is still that we bottomed in credit at the end of 2008 and have been improving since then.

    Let me know if this helps and/or makes sense. Thanks.


  41. 41
    zman Says:

    The problem we have now is not a lack of new reactor designs but a lack of financing for the plants. So we are always $10 billion and 10 years out from the first new one built since I think Grand Gulf. The current crop is getting old but producing more (through the uprate process). Sane could tell you a lot more about it but at some point in the next 10 years a couple more of them will be decommissioned.

  42. 42
    zman Says:

    Interesting shape south of the Yucatan, currently a tropical wave, no development expected.


    Click the animate button, last frame sort of interesting.

  43. 43
    VTZ Says:

    Z- With reference to TBP’s pipeline to the Pacific, Enbridge/Transcanada/Kinder Morgan would all jump on the opportunity as soon as the US imposes restrictions like a LCFS (low carbon fuel standard like California). I’m not sure which one he is referencing that’s being commissioned right now, I know that there are some being considered though.

  44. 44
    Dman Says:

    Z – I had seen the first site in #39 (but not seen the post). The guy was making some bizarre statements about France, which just left the impression he was spouting off about things he clearly knew nothing about.

    He blamed the deaths during the 2003 heatwave on a “European power system” saying “.. it does not provide affordable electric power to older people. You know what happened in Paris during the summer of 2003. Enough said”

    This revealed that

    a) he had no clue that the French simply don’t have home A/C because they don’t usually need it.

    b) He seemed to have forgotten that most French electricity is from nukes and if they needed more (i.e. if people started installing A/C), they’d just build more of them.

    So I don’t know what to make of his pronouncements.

  45. 45
    Dman Says:

    #41: yes, I agree, I think the whole decision cycle is broken & there are vested interests with a lot of sunk capital who don’t want to change. And of course the politicians don’t want to even talk about it.

  46. 46
    zman Says:

    D – yeah, when I see statements like that I try to find an alternate comment and a comment from the source but can’t track one down so he may be off the rails there. Like I said, don’t know him so can’t vouch.

  47. 47
    zman Says:

    SP back to Nicky’s 888 level.

  48. 48
    zman Says:

    Note the uptick in CLNE today. That would be the pre game show for the Nat Gas Act.

  49. 49
    zman Says:

    CLR rising as people bet on a near term oil bounce and on earnings which are being revised higher.

  50. 50
    BirdsofpreyRcool Says:

    MIDDAY Trading Update

    · S&P500 weak to start the day – off >1% to 888; industrials, energy, materials, discretionary, tech all weakest (dwn 1.5-2% each). Health care and staples outperform. So far things tracking similar to how Mon started off.

    · a lot of the same technical levels being watched: the “Golden Cross” level of 888 (when 50 and 200days first crossed couple wks ago); 2) 200day (which is now 885 vs. ~886 yesterday; recall the market bounced from this level yesterday) and then the low 880s. The Nasdaq is breaking down below its 50day MA (recall intra-day on Mon the Nazz broke through this level but ended up closing ahead of it)

    · “Safety” again outperforming – health care (helped in part by comments from White House Chief of Staff Rahm Emanuel in WSJ in which he appeared to signal a softer stance when it came to the “public plan”) and staples (which have been on a strong run for last few days) are both outperforming (HC up 0.5% and staples are down 0.22%)….utilities though are underperforming, off >1.5% on the day. Within health care, the HMOs up 4% are outperforming and really driving the group. Semis traded well in the morning (on back of the Merrill/BoA sector upgrade), although finding it tough to hold the gains and SOX dwn more than 1% as noon passes (has been trend for last couple wks in tech that good news being sold into). Banks are pretty strong today, esp. the regionals.

    · sp500 energy continues to lag….crude off again today (dwn >1% today to under $63)…..this is the 5th consecutive day of crude declines (yesterday’s 4%+ drop was largest % fall since Mar).

    · Treasuries – 2s/3s are flattish while 10s and 30s both rally off the lows into the green. All eyes are on the $35B 3yr auction due out @ 1pmET.

    · Corp credit – IG is out ~4bp on the day while HY trades down ½

    · Dollar – DXY up fractionally on the day

    · VIX climbs 3% on the day (3rd straight day of gains)

    Calendar of events

    · G8 meeting will take place in Italy Jul 8-10.

    · Earnings: The first CQ2 earnings reports will hit (AA/PBG on Wed Jul 8 and INFY on Fri Jul 10), but the real volume isn’t due until the week of Jul 13. Retailers will be reporting June same-store-sales on Thurs Jul 9.

    · Eco events – nothing major in the US on Tues; on Wed, weekly MBA mortgage apps (7amET) and May consumer credit figures hit (3pmET).

    · Treasury sales – the next coupon auctions are: Jul 7 3yrs ($35B), Jul 8 10yrs ($19B), Jul 9 30yrs ($11B)

    · TALF – the next funding period ends Jul 7 (headlines should hit tonight about specifics)

    · China: A much anticipated (and long-delayed) report on the Chinese economy from the IMF is due out Jul 8 and is expected to say that the yuan is significantly undervalued (Reuters).

    · Short interest stats for the back half of June are due out Jul 10.

    SP500 Performance Breakdown (source: Bloomberg)

    · Stocks helping sp500 most: UNH, PFE, INTC, JPM, MRK, AET, WFC, WLP, WMT, BSX

    · Stocks hurting sp500 most: XOM, MSFT, GOOG, T, CVX, SLB, QCOM, COP, AAPL, CMCSA

    · Top Gainers: CIT, CI, AET, THC, UNH, KEY, HUM, PCS, CVH, LSI

    · Top Decliners: DFS, DYN, CBG, ICE, WY, EP, MWW, CIEN, TSO, SHLD, TLAB

  51. 51
    zman Says:

    EIA’s Short Term Energy Outlook Out.

    Oil price forecast for 2H09 upped to $70 from $67.

    NG price is expected to stay below $4 until last year, no change from last month

    Global oil consumption for 2009 seen down 1.6 mm bopd vs 1.8 mm bopd last month. This is the second consecutive bump in demand.

    Non-OPEC supply seen rising 360,000 bopd in 2009 vs 400,000 bopd expected last month.


  52. 52
    zman Says:

    … more STEO …

    Natural gas production: 2009 now seen falling 0.6% vs 1.1% last month. 2010 seen down 2.9% vs 2.6% seen last month. I think that is going to be low.

  53. 53
    PackMan Says:

    Energy names starting to move … almost break even on some.

  54. 54
    zman Says:

    Packman, “shhh, don’t talk, don’t talk, you’ll make it crawl back up”, lol

  55. 55
    cargocult Says:

    Time to add more KOG?

  56. 56
    zman Says:

    Cargo – I’m mulling. More based on timing than on price right now. If oil falls out of bed (and I don’t think it will but if it does), I’ll get more cheaper. The little names, the unknowns as it were, will be abandoned recklessly. I don’t have trouble buying it here today but I’m going to wait. I see a lot of Street talk about going with the bigger names (in fact they constantly suggest owning integrateds, Majors etc which I think is not the play) but I hear them from a liquidity and size = safety standpoint.

  57. 57
    zman Says:

    Abu Dhabi buying 1,300 sq kilometers in the Horn River basin. This is a perfect example of the wealth transference TBP was speaking of this morning that has been taking place due to the U.S. dependence on foreign oil. U.S. buys foreign oil, petro dollars get reinvested buying cheap U.S. real estate and now, an entry into one of the biggest N. American resource plays to continue the cycle with natural gas. They must think the Natural Gas Act passes too.

  58. 58
    BirdsofpreyRcool Says:

    z — just finished reading that Bernstein piece. If they are right and energy prices are higher in 2010 and beyond, then larger names will be 50-70% higher than today. KOG will be 100%+ higher. But, the higher upside for KOG comes with higher downside (volatility) if energy prices continue to head south for a while longer. KOG has no debt, that is why I am less concerned about their long-run sustainability (i.e. ability to stay in the game and achieve at least a $1.75 price target).

    But, that is the trade-off. Higher upside paid for with more downside. Mini-micro cap investing at its finest.

  59. 59
    zman Says:

    BOP – Agreed. I was just thinking very short term on it. Am holding long term.

  60. 60
    zman Says:

    By the same taken, the claw back on reserves for WRES, should oil prices hold these levels will justify a return to prior prices for that name long term as well, 3 to 4x current levels would not be out of the question as both reserves “re-expand” and bad hedges roll off next year.

  61. 61
    BirdsofpreyRcool Says:

    z — nice buy on those HK $20 calls. You’re up something like 33% already. I may be a whimp, but maybe it’s a good idea to take profits?

  62. 62
    zman Says:

    Analyst Watch: RICK upgraded to Buy at Merriman. Record quarterly revenues.

  63. 63
    BirdsofpreyRcool Says:

    RICK — ha! your petro-dollars being recycled into the economy!!

  64. 64
    zman Says:

    BOP – I’m holding, waiting on news and now a bit of a technical bounce. I do the day trade thing so poorly that I generally don’t fire one off unless its a really big % move.

  65. 65
    zman Says:

    Merryman indeed, lol

  66. 66
    BirdsofpreyRcool Says:

    (33% seems like a nice intra-day move… but, can’t argue with your success rate)

  67. 67
    zman Says:

    Re 66. Sure you can. Long term what I do seems to work for me. From time to time it stinks, like the last 3 weeks. Not for the feint of heart.

  68. 68
    john11 Says:

    UNG halted, news dissemination

  69. 69
    BirdsofpreyRcool Says:

    What’s to “halt” in a nat gas ETF? Is that normal??

  70. 70
    zman Says:

    Natural gas rolling over a bit. Maybe UNG is going to do something in front of the CFTC holding position limit talks.

  71. 71
    zman Says:

    BOP – No. My kingdom for a free market.

  72. 72
    nifkin Says:

    UNG- hearing could be a decision on wether or not they can issue more units above their 300m cap

  73. 73
    zman Says:

    NG selling off in all the out months, down 4 to 10 cents across the board. UNG still halted, bid/ask down. Share issue makes sense. Maybe the SEC working with the CFTC has told them no new shares. I see others saying it could be a hedge fund cracking. Maybe so. But with the CFTC making waves right now I’d bet on that one.

  74. 74
    BirdsofpreyRcool Says:

    On a happy note… Lance Armstrong “surged to within a second of the Tour de France lead” today. Nice to see an old fart (37 yrs old) put in a stong showing.

  75. 75
    Wyoming Says:


  76. 76
    zman Says:


    Suspending issuance of additional creation baskets.

  77. 77
    zman Says:

    UNG 8K filing


  78. 78
    PackMan Says:

    That should be good for UNG ? Or simply neutral ?

  79. 79
    zman Says:

    Pack, seems neutral, unless the SEC is planning on delaying or not approving the S3.

  80. 80
    PackMan Says:

    yes, i guess that’s right.

  81. 81
    Wyoming Says:

    But if UNG is expanding the number of contracts, and people by on the long side,creating the demand. Then would the closure of supply and a high demand not increase the price? Short squeeze too?

    Actually thinking in fundamental terms … odd.

  82. 82
    BirdsofpreyRcool Says:

    UNG would trade like the closed-end fund that it is. Sometimes above the NAV, sometimes below. I would think.

  83. 83
    nifkin Says:

    prob see a near term rally in UNG as there is less of it and now harder to borrow? This should not affect the ability to track the front month action of nat gas, so there should not be all out selling of the etf. Intermediate term, probably a slight negative for nat gas as there is less implied demand from the etf. Make sense?

  84. 84
    zman Says:

    Wyoming – From the UNG side, that would seem to be correct. But from the natural gas side, a limit on the amount of natural gas contracts they can buy would seem to be a downer for gas, and therefore bring in the price of gas as the self-perpetuating “buying it higher as more money comes in” action ceases. However, this action has not resulted in higher gas prices.

    Given that gas is local and is therefore more easily manipulated than oil prices, I have to shake my head in amazement at all those who see a price spike and immediately yell “speculator, you bastard!” but are silent when prices toil in the depths of decade low pricing due to fundamentals. Maybe the government should just tell me what the price of gas is going to be so I can plug it into my model and I can then decide what I think the price of the stocks should be. No wait, they could just tell me what the price of the stocks should be. Ugh.

  85. 85
    zman Says:

    Nifkin – yes, thank makes sense. I think the negative reaction in the gas strip will likely be short lived and not a new depressing force.

  86. 86
    tater Says:

    Looks like that 60 min view for CLR is showing it trading the head and shoulders pattern. I’ve got the neckline in green. Whether the pattern plays out to fruition, or it becomes a failed pattern trade, remains to be seen. Just be aware that it appears to be affecting the way it is trading.
    Basically we have our return move back to the neckline and now either it dumps down to 2x the measure of neckline to top of head, or the shorts are trapped and price bounces to even with right shoulder. That’s the theory anyway.

  87. 87
    zman Says:

    Thanks Tater. Awful lot charts look similar now, more than usual, with the outperformers being reigned in to look like the rest.

  88. 88
    zman Says:

    Welcome to new lows in natural gas prices; fresh nearly 7 year low on NG.

  89. 89
    tater Says:

    Very much agree. I point out the failed pattern trade because many times it can actually be a much better way to look at a set-up in terms of cost/benefit. Need to use the quick fingers though and be quick to admit you are on the wrong side. Volume usually points the way.

  90. 90
    zman Says:

    SP at 883, well below the 888 level. Choices, add Tuesday’s to your list. This is probably the 4th day in which we have had no eco data for the U.S. (issued by the govt) combined with a good sized sell off.

  91. 91
    BirdsofpreyRcool Says:

    HeadTrader pointed out that we have to hold at 885, or the next level is the 878-ish area, where we pulled back 2 times ago. He points out that this week is kinda useless tho… as next week we get earnings from GS, INTC, IBM, GE, and JPM. What they report — and more importantly — what they can say about forward outlook to last quarter of 2009 and into 2010 (if anything) will be key to picking a near-term direction for stocks.

  92. 92
    zman Says:

    Thanks Bop.

  93. 93
    choices Says:

    It’s added, Z.

  94. 94
    zman Says:

    LINE holding the line pretty well in here at least. The smaller $ figure names are really getting sapped. PQ back to $3 from almost $6 at the beginning of June. Nutty.

  95. 95
    Dman Says:

    Z – according to my continuous contract chart, the NG low was on April 27 at $3.26

  96. 96
    zman Says:

    Yep, for a brief time the last front month was there, I didn’t have it in my sheet.

  97. 97
    Dman Says:

    It looks like we are seeing another round of “everything deflation”. All commodities, including grains, being hit. I doubt demand for grains is down, so I can only interpret this as asset deflation across the board. With fund selling exaggerating the moves. naturally.

  98. 98
    zman Says:

    I think we get that uptick in gasoline demand tomorrow and maybe a foreshadowing of that number in today’s API this afternoon. The bar for gasoline inventories is set pretty low and we have seen no build in gasoline demand pre July 4 so again, wouldn’t be surprised to see a smaller than expected build or even a draw down in gasoline inventories tomorrow. That should likely send crude for a bounce.

  99. 99
    Nicky Says:

    Wow talk about carnage. We are attempting to bounce off 880 spx but this feels yuk although the chart doesn’t look that impulsive. just a drip drip drip to the downside.

  100. 100
    Wyoming Says:

    Getting time to go, I leave you all with this:

    A man died and went to heaven.

    As he stood in front of St. Peter at the Pearly Gates,

    he saw a huge wall of clocks behind him.

    He asked, ‘What are all those clocks?’

    St. Peter answered, ‘Those are Lie-Clocks.

    Everyone on Earth has a Lie-Clock.

    Every time you lie the hands on your clock will move.’

    ‘Oh,’ said the man, ‘whose clock is that?’

    ‘That’s Mother Teresa’s.

    The hands have never moved,

    indicating that she never told a lie.’

    ‘Incredible,’ said the man. ‘And whose clock is that one?’

    St. Peter responded, ‘That’s Abraham Lincoln’s clock.

    The hands have moved twice, telling us that Abe told

    only two lies in his entire life.’

    ‘Where’s Barrack Obama’s clock?’ asked the man.

    ‘Obama’s clock is in Jesus’ office.

    He’s using it as a ceiling fan.

  101. 101
    zman Says:

    Beer thirty, I’ll be back on with the API in 30 minutes.

  102. 102
    Nicky Says:

    Z – re natural gas. I think we need a lower low but it doesn’t have to go much lower or it could truncate slightly
    On a long term chart there is huge support at 2.0 but I would be surprised if we get that low.

  103. 103
    zman Says:

    Nicky – there will be a second wave of rigs stacked below $3. No reason to drill at that price unless you have to to hold acreage.

  104. 104
    Nicky Says:

    Z – maybe 3 will be the low. I believe we are in the final wave down. Wave count looks pretty clear its just a question of how the last wave sub divides.

  105. 105
    Nicky Says:

    Is the API out – can’t believe it is as there is no movement in oil at all.

  106. 106
    zman Says:

    Nicky – it must be seeing some more trades now but I have not seen the numbers yet. They look to have been bearish by crude’s reaction. I’d point out they’ve been out of sync with EIA last couple of weeks.

  107. 107
    Nicky Says:

    wondering how much more it can sell off without some sort of correction – its unreal.

  108. 108
    zman Says:

    Seeing a short story saying technical problems have delayed the release of the API, don’t know if its out or not yet.

  109. 109
    zman Says:

    API Watch:

    Crude down 1.4 mm barrels (smaller than expected)

    Gasoline up 767,000 (in line to a little light depending on which survey you were looking at)

    Distillates up 3.4 mm barrels (big but not surprising)

    Somewhat bearish looking but would have been a lot worse to see a bigger gasoline build. I have not yet seen the utilization and imports numbers to see if these numbers even make sense. Crude is down from the close but flat since these were released, gasoline is flat since the release.

  110. 110
    jat Says:

    Utilization flat at 85% and imports down 658kpd from 8842 to 8184.

    Riddle me that

  111. 111
    zman Says:

    I just sent you an email Jat, numbers look jumbled with the prior week. Oil not going to like the headline on the open but I think key will be gasoline demand tomorrow and its impact on gasoline numbers. We are down 9 bucks on crude in five sessions, that pretty quick and will get a reaction from the Cartel shortly. I see lots of people saying there’s no demand for oil which is a great exaggeration of the facts and even EIA is pushing their demand numbers up now which means other parts of the globe are doing a bit better (mid east and Asia demand specifically). Anyway, looks like we are in for a test of the $61 in the morning.

  112. 112
    choices Says:

    Z-Chamber of Commerce letter re cap & trade


    Z-Do you have news release of EOG Conf Call on Aug 7-if not, I will send.

  113. 113
    zman Says:

    Thanks Choices, I do have it, just putting together my earnings calendar now so I can figure out when to sneak away for a vacation.

  114. 114
    Wyoming Says:

    Hugo is Nuckin Futs Part II, their vendors are screwed and so are their bonds:


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