15
Jul
Wednesday Morning Rebound Time
Sentiment Watch: INTC beats weak estimates and the crowd goes wild. Can (HAL) beat truly beaten down estimates next week and enjoy a similar reaction as it kicks off earnings season for the energy crowd? You bet. Busy post today with looks at GDP and BEXP operations update and the beginning of an update on the deepwater drillers. API was pretty bullish looking last night and futures are up this morning aided by a strong broad market which is aided by a better than expected Empire State read and those INTC results and now we've come full circle.
In Today's Post:
- Holdings Watch
- Commodity Watch
- Oil Inventory Preview
- Stuff We Care About Today - deepwater update, BEXP, GDP
- Odds & Ends
Holdings Watch:
- $10KP:
- $14,500
- 61% Cash
- The Wiki Tab is updated.
- $14,500
Yesterday's Trades:
- EOG - Sold the EOG July $55 Call for $9.40, up 57%. Will reposition prior to earnings.
- HAL - Added (10) HAL August $22 Calls (HALHV) for $0.41. Earnings next Monday.
- HK - Added (5) HK August $22 Calls (HKHS) to start building an August position for $0.95 with the stock at $20.30.
Why I Went Long HAL:
- I don’t think the stocks are necessarily cheap
- nor are their forward earnings estimates necessarily going to stop sliding following the quarter
- but comments from E&Ps show costs have not fallen as far as they could have
- the service companies will be able to point to the N American rig count and say that it has at least decelerated in its downward path.
- the service names will point to ongoing cost cutting efforts
- 3Q estimates are in many cases below 2Q levels already which is a bit out of seasonal alignment for many of the names obviating the need to slash near quarter estimates so much.
- the bigger names will be able to talk about stealing share from the smaller ones during this time as a way of explaining weaker than expected margins
- I will go with large names and only tentatively into the group
- This is an earnings related trade and little more, I don’t plan to stick around them for long.
Commodity Watch:
Crude oil eased down $0.17 to close at $59.52 yesterday, giving back an early rally as sentiment faded in the broad market and fear about today's EIA announcement mounted. This morning crude is trading up about a buck on bullish looking numbers out of API last night (see below).
- Henry Okah Watch: 1 day after accepting amnesty for his release from prosecution and jail, suspected MEND leader had the following to say:
- "violence will continue until government begins talks with militants"
- he does not believe other militants will join amnesty program
- "oil companies are criminals and must re-negotiate their contracts with Niger Delta residents"
- he added that he only took the deal so that he could get treatment for his kidney and ulcer problems.
- How shocking, that a shark, returned to the ocean, will turn and bite the hand of those who once held it captive.
- Nigeria Watch: 60 day Cease Fire Declared by MEND. Yeah sure.
Natural gas moved up $0.17 to close at $3.43 yesterday, it's first notable rally since early June. This morning gas is trading up a nickel.
- Early Read On Inventories: Consensus of 87 Bcf Injection
Oil Inventory Preview
.jpg)
API Watch:
- Crude: Down 1.158 million barrels. Without a large rally in
- Imports: up 1.3 mm bopd
- Utilization: up from 85.2% last week to 86% this week, which is catching up to the EIA's level.
- Gasoline: DOWN 69,000 barrels. Essentially flat but quite unexpected
- Distillates: Up 656,000 barrels. This is well below the estimates for EIA later today.
ZComment: Normally we see relatively small changes in both crude and gasoline stocks during this week but a large build in distillate stocks is to be expected. If API bears out in the EIA numbers I'd bet crude will get its bounce. The imports driven smaller than expected draw on crude stocks should be easily forgiven if we see a draw down in gasoline stocks.
Stuff We Care About Today
GDP - Haynesville Update
- Panola County well IP of 9.3 MMcfepd, 24/64 inch choke at 5,200 psi ... pretty standard for E. Texas wells of late, based on their recent assertions this puts the well in the 6.5 Bcfe camp.
- Two more E. Texas wells drilled but not yet completed in the release along with participation in 3 more wells NW Louisiana operated by CHK.
- Nutshell: Keeping on keeping on in the Haynesville, not gangbuster, not bad either and good to see them get a completion off successfully after some earlier missteps. Not sure why they released this prior to the second quarter release other than out of wanting to say something. Not going to play for now as I think the name is in the middle of where it should be on foward CF and I don't care for their lack of strong hedge coverage next year.
Brigham (BEXP) Announces Sizable Three Forks Sanish Test + Ops Update
Williston Basin, Ross Area, Montrail County, North Dakota
- Strobeck 27-34 #1H
- Three Forks Sanish well
- 24 hour production test of 2,021 BOEpd (88% oil)
- 20 frac stages, 18 successfully completed
- 20 frac stages, 18 successfully completed
- Believed to be 2nd largest IP out of the TFS (just underlies the middle Bakken)
- 63% NRI
- On a net to the company basis, the IP rate would represent 7,639 Mcfepd to BEXP, or 26% of 2Q09 total company production guidance.
- This will decline rapidly but it is still significant to the company
- On a net to the company basis, the IP rate would represent 7,639 Mcfepd to BEXP, or 26% of 2Q09 total company production guidance.
- $6.1 mm to drill and complete, a third below what it would have cost at year end 2008 (note press release says $3.6 mm but presentation goes with the higher, more plausible number).
Before the Strobeck well:
- BEXP's first TFS wells was completed in October as the Adix 25-1H well, with an IP of 892 BOEpd, has since been appraised by a 3rd party reservoir engineer at 374,000 BOE. Thinking here is double the IP and you roughly double the recoverable reserves.
Other Ross Area Activity
- Anderson 28-33 #1
- Bakken well, 1 mile from Strobeck, 24 stage frac to go off early August.
Ross Area
- To get your bearings, the Ross area lies to the north of the Sanish field, east of the Neeson Anticline
- BEXP has 35,200 net acres in Ross:
- they assume they can drill 1 Bakken and 1 TFS per section for a total 110 wells
- EUR estimate (gross): 411 to 720 MBOE per well for aggregate recoverable gross potential range of 45.2 to 79.2 MMBOE, not insignificant when compared to:
- BEXP proved reserves at year end 2008: 22.8 MMBOE
Good map of recent TFS discoveries is on page 10 of BEXP's most recent presentation here.
Nutshell: Good well. More on the way. BEXP mentions a couple of other wells in their 100,000 net acre Rough Rider area (one completes later this month, the other is still drilling) and comments that they think they are location rich here in the TFS as well as the Bakken with locations in excess of 300. Their debt load is still such that they will need to conduct asset sales. This news should help them monetize some of their acreage at better prices. Positive implications for the Bakken/TFS drilling set, including KOG, WLL, CLR, NFX, EOG, and XTO.
Offshore Drillers Pre 2Q Update: First, some tables.
Key Takeaways:
- Valuation: Not overly high by any stretch although you do have to wonder at the PDE levels vs their peers.
- ATW shows the most consistent growth target
- I recall when the RIG estimates for 2010 was $20 ... this was as of last summer.
- Rates in the deepwater have held up better than in the shallow water through the cycle. The longer term nature of the deepwater projects has meant that operators (for the most part Majors, National Oil Companies, and Large Cap E&P) have looked through the trough of low oil prices, something the shallower, small target drillers can't afford to do.
- Thus you have the global Jackup fleet at 75% vs drillships and semisubs (floaters) operating at 90 and 81% utilization at present.
- Number 4 and 5 above has been aided by some floater delays and cancellations. Deliveries of new floaters are slowing:
- 2009 = 19 new floaters expected to be delivered into the global fleet (all have contract commitments)
- 2010 = 32 new
- 2011 = 29 new
- 2012 = 11 new
- 2009 = 19 new floaters expected to be delivered into the global fleet (all have contract commitments)
- Jackup market set to add:
- 2009 = 26 new rigs
- 2010 = 26
- 2011 = 9
- 2009 = 26 new rigs
- Pareto Offshore estimates 70% of the approaching new floaters have contracts vs only 16% for new jack ups. While the jack up additions represent a smaller increment vs the installed base of jack-ups the largely uncontracted nature of the new arrivals will likely mean further compression of rates outside of regional hotspots like Mexico.
ATW UPdate
A Number of Idle Rigs :
- Southern Cross (their least capable semisub) is still idle, expected to be idle next quarter as well; I see this as potential upside as it should be a good earner for the company when it returns to service.
- Atwood Hunter (semisub) coming off contract in Israel this month, that will be a topic of conversation on the conference call on August 6th.
- Lower value Richmond off contract
- 2 Jackups coming off contract this summer
Backlog of Revenues on current signed contracts:
- Period June 1 through September (they are a September year end) of $160 mm, Street is at $128 for the 4Q so they should be in line.
- 2010: $555 mm backlog vs Street revenue estimate of $643 mm.
- Total current backlog: $1.9 billion between now and 2014. Over half of that figure is from 2010 and 2011.
New Rigs:
- Atwood Osprey - early 2011
- estimated to add $1.25 to $1.35 EPS per year. I'd like to find another driller with this much earnings leverage to a single rig.
- The rig remains on schedule for delivery.
- 10,000' dynamically position (but unnamed as of yet) semisub - mid 2012
- adds $1.20 to $1.80 per annum.
Balance Sheet: strong vs peers with debt to cap at 20%; required capital commitments for its new build rigs and rig upgrades decline substantial after this year.
Coming soon thoughts on DO, NE, PDE, RIG
Odds & Ends
Analyst Watch:
- (UPL) upped to Accumulate at SMH
That BEXP TFS well could be a game changer. Especially if the thesis holds up that the Middle Bakken and TFS are two separate reservoirs.
The Bakken Oil Play = the gift that just keeps on giving.
July 15th, 2009 at 7:42 amAlthough there are plenty of reasons to feel otherwise (unemployment comes immediately to mind), I believe this is the case —
“The Recession is Over – What America’s best economic forecaster is saying” – Macroeconomic Advisers reported to its clients Monday that while second-quarter GDP was tracking at negative 0.1 percent (recession), the third quarter was tracking at 2.4 percent growth”. Researchers at Economic Cycles Research Institute agree. Newsweek. http://www.newsweek.com/id/206631?from=rss
July 15th, 2009 at 7:44 amOn the other hand… more taxes on the way will put a damper on hiring in any sort of recovery —
· Washington & health care – the House released its version of health care reform Tues (as anticipated) and contained a slew of new tax initiatives that would pay for expanded coverage. The Street.com noted that part of Tues equities strength was in part b/c of the House bill as it contains so many elements that will never make it through the Senate that the whole effort may have been setback. The legislation would seek to place a surcharge on high income individuals generating about $500bn in revenue over 10 years. The surcharged would be waived for those earning less than $1mm if healthcare savings are at least $700bn, but would be maintained at 5.4% for those earning $1mm or more. Looking ahead, the bill now moves to individual committee markups, with Ways and Means beginning this Thursday, and some expect significant alterations will be necessary to obtain full buy-in of the BlueDog Democrats. House leaders are still targeting a pre-recess final bill.
· Infrastructure spending – more taxes proposed – new bill could be unveiled Wed – a group of bipartisan lawmakers have proposed a new tax to help pay for infrastructure spending, esp. upgrading the nation’s water systems. The bill calls for a 0.15% tax on any corporation earning a profit of more than $4 million a year. Manufacturers of any water-based beverages, excluding alcohol, would see a four-cent tax per container. Soaps, detergents, toiletries, toilet tissue, water softeners and cooking oils would face a 3% tax on wholesale prices. Pharmaceuticals would be taxed at 0.5% of the wholesale price. WSJ.
July 15th, 2009 at 7:47 amCHK raised to Buy at Calyon
July 15th, 2009 at 7:49 amCredit Indices — posting pretty large gains this morning.
IG 134 1/2
HY 84 3/4
July 15th, 2009 at 7:56 amBEXP bid up $0.70, will not chase that move although I suspect that after a mid morning cha cha it rallies further near term. I may play the pullback but I’ve never been a big fan of the name. Can’t knock the results though.
July 15th, 2009 at 8:08 amTechTrader is saying it’s a 55/45 odds day to short.
HeadTrader is saying that it feels more like a buy the pullbakck, but people might sell a rally to position for bank earnings out tonight (JPM) and tomorrow (BAC).
Will post any udate if I get them.
July 15th, 2009 at 8:09 amThe BEXP news is coloring pre open bids for the Bakken’s listed pretty green. A fast trader at the open could probably do well on a quick trade on the KOG as that name is a little further down the list and may react a bit more slowly (like right after the open instead of before it like is the case with CLR bid 25.25 now and WLL at 36).
July 15th, 2009 at 8:10 amBEXP — love the results… but company not run with an eye on the balance sheet. Debt rated Ca/CCC. Basically, a zombie company. But, hey, they could pull it off, if they don’t trigger a default first.
That is the lowest debt rating of any e&p I can think of, that isn’t already BK. Debt trades at a 21%+ yield.
July 15th, 2009 at 8:12 amBOP – well, at least they are working hard to prove up acreage … so they can sell it to someone else at a better price, lol.
Note in their 2 play areas how they see 1 Bakken and 1 TFS per section. On a two to three rig program that will take them about forever to get drilled, better to punt some acreage and shore up the balance sheet. The recent equity deal did little in that regard, was more for drilling capex.
July 15th, 2009 at 8:15 amWest – good comments last night. Thanks.
July 15th, 2009 at 8:15 amMorning all-
CRK Comstock Resources initiated add at Capital One Southcoast
Target is $44.
Pritchard Capital upgrades PTEN, UDRL
(PTEN) upgraded to neutral from sell; target increased to $12.50 from $10.50
(UDRL) upgraded to neutral from sell; target increased to $6 from $5
RDC Rowan Companies files mixed shelf registration of indeterminate amount
RDC announced a $375M note offering pursuant to this shelf registration.
BAS Basic Energy Services downgraded to underperform from market perform at BMO Capital
CHK Chesapeake Energy upgraded to buy from outperform at Calyon Securities
UPL Ultra Petroleum upgraded to accumulate from neutral at SMH Capital
July 15th, 2009 at 8:17 amBy the way, dollar spiking lower again, down almost a percent on the dollar inde at 79.45. Low to watch here was 79.60, now its 78.34.
July 15th, 2009 at 8:17 amDenbury Resources upgraded to buy from underperform at Calyon Securities
Target raised to $18 from $15
July 15th, 2009 at 8:18 amBEXP — can this be true? That monster TFS well was a 20-stage frac (18 of which were effective) and only cost $3.9mm. That well cost seems way outta whack… wonder if there is any sort of a story there.
July 15th, 2009 at 8:20 amSMH quoting the lower dollar figure of $3.9 mm for the BEXP well. It seems like that must be a typo. Will dig about on that.
July 15th, 2009 at 8:22 amThe well was drilled with a long lateral and completed using a 20-stage frac. BEXP has previously completed one other well with a 20-stage frac, also with strong IP results. The latest well provides another data point of the benefit of putting more “energy” into the ground (i.e. using more frac stages to complete wells in the region and that the TFS is economically productive). Similar wells can be completed for approximately $6.0-6.5MM which represents a tremendous economic opportunity for Brigham and others
July 15th, 2009 at 8:22 amBEXP — yeah…. i would have expected that well to cost amost 2x the $3.9mm. Doesn’t smell right.
July 15th, 2009 at 8:23 amNifkin and BOP – I’d like BEXP to clarify the $3.9 mm cost. See presentation here:
http://www.bexp3d.com/IR_pres.pdf
Page 24.
The “early 2009” well is described as costing $6.1mm
They then point to a “late 2009” $6.25mm for a 24 stage frac.
To me, the math doesn’t work on cost per frac stage (same page 24) to get you to $3.9 mm
July 15th, 2009 at 8:25 amThe “early well” doesn’t have this name on it but the description matches at 9,500 feet, 20 stage frac. I’d need that explained before I bought the shares as that would be a rather big oops. Maybe its not a typo however since they did say the well cost was down 33% from year end AFE. I then just have to wonder what’s up with that slide.
July 15th, 2009 at 8:29 amHK looking to top Tater’s level on the open.
July 15th, 2009 at 8:30 amjust for those th77West Says:
BEXP, A review of their wells that r off confidential list shows that most avg 30 to 40 bopd, most gas is vented, and avg about 30 bowpd. Their best well makes about 160 bopd, Addix 25 1-H and has cum 58312 bo, 48029 mcf and 30528 bw. At the present time it looks like the TFS best wells are along the Nesson anticline. XTO’s Boucher 41X-21, has made 42650 bo, 48679 mcf ( this is connected to sales line) and 4520 bw in 2 months. This is one of the wells drilled from the super pad on the north side of the Lake Sakakawea. Also from this pad NE directional CROWDER 41X-21 well has made 46017 bo in 5 months,SW DEANGELIS 41X-21
has made 62093 bo in 7 months. Most of this area was purchased from Headington and Hunt last year. Hopefully KOG will get XTO frac crews for their next 2 completions. It is my understanding that XTO brought the completion from the Barnett to the Williston Basin for their expertise. thx
at might not have seen:
July 15th, 2009 at 8:30 amCLR filled the gap in its chart on the BEXP news. Finger on the trigger to swap the July calls for a higher strike August, may do that before the oil numbers.
July 15th, 2009 at 8:39 amVery tempted to punt the CLR which is up 9% today, taking my July calls > 100% since picking them up last week. Will roll longer with proceeds. Seems imprudent not to do it pre oil numbers.
July 15th, 2009 at 8:59 amZTRADE:
CRL – Sold the July $25 Calls for $1.65, up 150%, with the stock at 26.50, up 9% today on the BEXP news (see post).
July 15th, 2009 at 9:02 amz — great trade. Stay nimble!
July 15th, 2009 at 9:04 amBOP – thanks, do you know Bud Brigham? Am tempted to call them on that well cost for the run down. Also would like to ask them about their debt load and future monetization plans.
NFX is probably the quiet Bakken play out there, lot of things working for those guys right now, only knock I see is bad economics in the Woodford but given where gas prices are now you have to think that is discounted. I will own NFX going into their earnings release (earliest E&P reporting I know of, reporting next week 7/23). Very likely to add it today after the oil numbers.
Stocks doing the pre inventory release cha-cha now.
July 15th, 2009 at 9:18 amBOP – Also thought KOG might have a comment on those well costs.
July 15th, 2009 at 9:19 amz — great point. Will add that to the list of KOG questions. Been playing phone-tag with the company since Friday. Anything else to add to the list?
I know of Bud… but, never met him. Heard good things about him as a geologist. But geologists aren’t always the best at keeping an eye on costs and debt (ref: Storm Cat)
July 15th, 2009 at 9:25 amBOP – never mention the cat. Ugh. Just kidding, never forget your absolute worst, loser trades, they are more important than your winners.
I’ll try to shoot you a list of ?s in a bit.
July 15th, 2009 at 9:27 amEIA Oil Inventory Report
Crude down 2.8 mm bbs
Gasoline up 1.5 mm bbs (that’s not good)
Distillates up 0.6 mm bbs (that’s light)
Imports 9.5 mm bopd up 325,000 from last week.
Utilization 87.9% – still high
Gasoline demand: tepid at 9.163 mm bpd, down slight from last week.
……
July 15th, 2009 at 9:31 amReading the BEXP operations PR, maybe the $3.9mm refered to the cost to just complete the well… not to drill and complete. If so, that is a really squirrely way of reporting well results. But, the $3.9mm just does NOT make sense.
July 15th, 2009 at 9:32 ammore EIA
Jet fuel caught a rally, interesting, need to see more of that
Distillates also best week in awhile but one week does not a trend make
Crude rallying on the numbers. In my book, they are a bit of a mixed bag, just not getting support from gasoline where production and demand were both down last week.
…..
July 15th, 2009 at 9:33 ammore EIA
Crude stocks at Cushing up again, not bullish. Up another 600,000 barrels at 30.8. Maybe more Canadian crude, definitely more Bakken crude and other. Refiners in area were flattish to last week so its not weaker demand.
Your tax dollars not at work: domestic production was flat (exactly) with the prior week.
July 15th, 2009 at 9:36 amRE 13 – I am watching the dollar intently. A break of the 78.30-35 level would be extremely bullish for crude and gold (and probably the S&P).
July 15th, 2009 at 9:37 amTaking 31, 33, and 34 together I am surprised that crude is basically unchanged after the numbers. The headline number on crude is good but the gasoline number stinks and ran counter to the API gasoline number which is the dance partner that brought us to this morning’s rally in the first place. She turned out to be a dog. Only thing saving gasoline from a worse build this week was lower production (which looks suspicious) given the utilization and the refining inputs and a big drop back in gasoline imports which is what I was expecting.
Looking at the performance of crude and the products 10 minutes after the release:
crude up 2.2%
gasoline up 1.7%
heating oil up 2.85%
so traders are keying off the better demand in jet fuel and distillates.
July 15th, 2009 at 9:39 amV – I’m with you on that. I say pound it down and export your way out of the recession.
Oil looking wobbly now.
July 15th, 2009 at 9:40 amZTRADE:
HK – Sold (30) of the July $20 calls for $1.20, up 22% with the stock at $21.15. Will reload into more August calls soon but oil and crude products are looking wobbly to me following a somewhat mixed oil inventory report and if the broad market eases later today, this one and the E&Ps could shave gains pretty quickly which would be tough on the July positions.
July 15th, 2009 at 9:44 amNG down 8 cents now. Just can’t put together more than 2 days of rally.
July 15th, 2009 at 9:46 amBOP, List of questions for KOG: 1) Do their EURs include gas, if not what is est Eur for gas. How much of their total est EUR gas will be vented before they r able to get a pipeline to the area? What is their cost of swd and estimated H2O daily production? Is their partner on the Southern acreage Zenergy? What is their est budget for the remainder of the year? Rig status? Maybe I should just wait till the conference call with this many questions, but if u can ask I would appreciate it. thx
July 15th, 2009 at 9:49 amZ – I think the crude market is oscillating between keying off Asian strength (& dollar weakness) versus worrying about US gasoline demand (not looking so hot).
I keep hearing two contradictory stories about Asia.
1) The Asian rebound is driven by strong internal demand across the whole region.
2) It’s really just the massive China stimulus, which is blowing out their bank lending to crazy levels and becoming a bubble of its own.
Of course, maybe it’s really some of each. But if Asian growth continues, whether real or “stimulated”, I think there will be a panic in the USD before too long.
July 15th, 2009 at 9:51 amWest — thanks for the assist. Had a few of those questions on my list, but you added a number of good ones.
July 15th, 2009 at 9:55 amDman – I really question the whole China stimulus is driving this thing because I remember all the criticism about the package being “ordinary spending” when it was first announced. To me this is just business as usual and 1 is more true than 2.
July 15th, 2009 at 9:55 amReal or synthetic, we get China GDP tomorrow, should be a market mover.
July 15th, 2009 at 9:57 amZ – some trader was the CNBC guest after the EIA #s came out; he was a raging bull for this week; calling oil to $65 by end of week.
Any idea why he would have that view ?
July 15th, 2009 at 9:57 amPack – Because he looks at the big 3 numbers in the release (change in oil, gasoline, and distillates) and oil and distillates were better than expected and then he opens his mouth and starts blabbing. Oh yes, and because he probably just went long.
July 15th, 2009 at 10:01 amyes, there would be that ! LOL.
July 15th, 2009 at 10:02 amWest — re: rig status at KOG, got a handle on the situation there. But don’t think KOG will be able to go into the gory details b/c Unit is a publicly-traded company. The situation is very satisfactory for KOG, tho. So, taking that item off my Worry List for KOG.
July 15th, 2009 at 10:03 amCredit continues to rally with stocks.
IG 133 1/2
HY 85 1/16
July 15th, 2009 at 10:04 amJefferies liking the BEXP well today too and pointing to potential of having 2 more wells down by the CC. I’ll believe it when I see it as neither is fraced yet and the call is in 3 weeks (with the second well not scheduled to frac until early August that hope is a stretch). But Chandra at Jefco makes some good points about them coming back with good results, longer laterals working and good F&D costs (he sites a mid $600K figure for D&C so I think BOP is probably right about BEXP on the tricky wording of completed cost vs drilled and completed cost).
July 15th, 2009 at 10:06 amNot in an all fired hurry to go long the August positions I just sold the July calls in. I may put in some low bids to see if I can nab and afternoon pullback. Oil is only up $1.50 due to the 190pt move on the Dow. If the DJIA gives back, oil will too and more so not a lot of pressure to buy before the end of NYMEX trading. Sentiment among oil traders will improve if they can close it over $60 which looks likely now but 2:30 EST is a world away for now.
July 15th, 2009 at 10:38 amyep… looking at page 24 of BEXP’s own presentation… that $3.9mm reported well costs is disingenuous. It can’t possibly be the total cost to drill and complete that well. As I said, squirrely way to report costs.
Don’t need no squirrels in the mix, when one is trying to protect the nuts. JMHO.
July 15th, 2009 at 10:38 amTater – on your last comment from yesterday about tossing your bear comments on HK if it breaks 20.47 level, I assume that’s the case now, even if we close substantially off the highs. On that one, which is not having nearly as big a day as its oilier brethren and the other H.S. plays I plan to add more August calls and soon.
July 15th, 2009 at 10:43 amZ – EOG having a quite day, what do you make of it?
July 15th, 2009 at 10:55 amZ – looking at CRK, how do you think they are positioned for prolonged NG weakness?
July 15th, 2009 at 10:58 am#54, meant “quiet”
July 15th, 2009 at 10:58 amDman
On the EOG, I think its just trading noise, honestly would have thought it would do better than its peers today but it has had a small run of late. Will add that one back before earnings, maybe this is a bit of an opportunity. I don’t feel a rush to jump in just yet.
July 15th, 2009 at 11:04 amOn the CRK, I have not seen a recent look at their 2010 hedges, will track down. They are outspending cash flow this year (one of the few) due to a strong balance sheet. They are drilling in the H.S. so they are going to be able to tolerate lower gas prices than people with production in other basins. Again, let me track down the hedges and will circle back. Estimate now call for a big jump in 2010 CFPS vs 2009 (nearly doubling) and that represents a shift to more of a Haynesville focus.
July 15th, 2009 at 11:12 amz — historically, CRK doesn’t like to hedge. They had some production in South TX hedged through the end of 2009 (520,000 mmbtu’s per month) at $8.00/mmbtu. But that is all that has been reported, I think.
July 15th, 2009 at 11:23 amBOP, you r funny. BEXP is definitely king of the hype. In researching their production ND state wide it does show some promising areas for other cos that r followed on this site. WLL’s Lewis & Clark play in sw ND is a TFS play from existing wellbores, which should bring down cost. WLL looks like it has one of the best acreage positions beside EOG.Wll’s financial position has improved with the recent partnership deal with Kaiser-Francis and their drilling activity should pickup from here. Hopefully WLL’s drlg cost have come down, because they were one of the highest in the Bakken play. EOG has recently purchased 8622 net acres for $2.75 million just west of the Missouri River from Sundance Energy.EOG has also applied to pool 83 adjacent sections as follows: 12 eastern sections of T158 R91 all of T158 R90 Western 12 sections
July 15th, 2009 at 11:24 amof T158 R89 and southern 18 sections of T159 R90. Also sections
4,5,6,7,18 of T157 R 90. Most of the Bakken and TFS will work but require the higher prices to be profitable. As always the best operators will be the most successful in good and bad times.
Right BOP, only 10% hedged as of the 1Q call which is what prompted the fall from $40 to $30 after strong 1Q results. Just didn’t want to answer until I’d checked all my boxes, first thought was that they have nothing for 2010 in place but again, still going to check. EBITDA growth for 2010 is almost double that of 2009, so if you assume no hedges you are looking at big production growth and higher prices (based on Street estimates of $6.10 for 2010) vs probably $4.50 for 2009. So, if they want to keep spending near current levels they are going to need to add some hedges or get bailed out by prices or watch their debt to cap balloon from 20% now to 50% by the end of next year.
July 15th, 2009 at 11:30 amWest – was that 3,000 bopd Bakken well for WLL new news or had they previously released that one. I assume its a Parshal well but have not tracked it down yet.
July 15th, 2009 at 11:32 amZTRADE:
NFX – Added (5) NFX August $35 calls (NFXHG) for $1.50 wit the stock at $33.25. Taken for earnings next and will likely double that or triple it prior to then. Not wild about the chart as its “gappy” but I think they will have good things to say on the call regarding the Bakken, deepwater, international, realizations out of the Rockies, and could turn in a small beat on the top and bottom lines. I bought these on the mid and probably could have bagged it a little lower with patience but I plan to add more later so am taking what I can get now think towards an average entry under $2 per contract.
July 15th, 2009 at 11:38 amBOP – just looked thru the latest CRK presentation. The word hedge didn’t appear. That would explain why the chart looks like NG + a lot of noise. But that might not be such a bad thing at this point.
July 15th, 2009 at 11:38 amDman – the word hedge is only in their quarterly press release under hedging, and you can see that their hedges were a positive but small factor vs their peers Overall $/Mcfe of $4.29 pre hedge, $4.75 post hedge. All from hedges on S. Texas product so you can see they are not hedging their Haynesville volumes.
July 15th, 2009 at 11:41 amOil up $2+ now, bit of a dead cat bounce. I thought it was oversold and we’re getting the bounce. Close over $61 now important from a pysch stand point. This is still being led by heating oil, now up 4.7% vs 3.3% gain for mogas and a 3.6% gain for crude.
July 15th, 2009 at 11:42 amRJ upgraded BEXP from Underperf to Strong Buy.
Johnson Rice also drooling over the TFS well. I agree with BOP, good well, long road ahead for BEXP. Its probably better news for the peers but of course, less of a stock impact for most.
July 15th, 2009 at 11:45 amZ, I will look, what is the name do you know or location?
July 15th, 2009 at 11:46 amZ – can you remind me of the hurricane drill? I think it goes that NFX will go up with NG as a system approaches, but may get hit if the thing actually strikes the GOM fields.
July 15th, 2009 at 11:49 amWest. Thanks, TTT Ranch 11-6H, in Mountrail Cnty.
BEXP gives the location as 153-91-6. Its a Bakken, not a TFS, and is probably in the WLL presentation, just have birddogged it yet.
July 15th, 2009 at 11:52 am6 ) TTT RANCH 11-6H 43% 35% 04/18/09 3,102 1,086 N/A, from WLL site. ip, avg fof 1st 30 days, avg 60 days. This is their TFS, 1 5) BRAAFLAT 21-11TFH (THREE FORKS) 97% 79% 01/01/09 1,005 362 314
July 15th, 2009 at 11:55 amDman – They have exposure yet, some deep, some Shelf. Generally the Street forgives 3Q production misses attributed to storm curtailments so unless you actually take damage its a good thing as it bolsters prices in the short term but prices are quick to retreat if no one else suffers damage. NFX always used to say they noticed it was raining harder on the SGY platforms when SGY would brick production, lol. Storms saved gas’s bacon last year…if we have not had 7 Bcfgpd curtailed for several weeks I would have eaten a hat long ago.
I’ll be in Florida mid August so I’m sure you can count on some storms by then.
July 15th, 2009 at 11:57 amThanks West, figure it was old news.
Their TFS is holding up pretty well out 60 days.
July 15th, 2009 at 12:00 pmKOG — West, to answer your question first, KOG does NOT include NatGas and NGLs in their EUR estimates. Although the production of nat gas (and NGLs) is significant (NGL capture will add about 50-70k BOE to the EUR), until KOG gets their gas into a pipeline and can separate out the liquids, they do not include them in reserve estimates.
Seems about right to me. Non-squirrely reporting. Like to see that.
July 15th, 2009 at 12:23 pmAnyone know what those squirrels over at NOG claim to complete a Bakken well for?
July 15th, 2009 at 12:24 pmRam – did you see my HK trade today?
July 15th, 2009 at 12:32 pmZTRADE:
HK – Added (5) more HK August $22 Calls (HKHS) for $1.20 with the stock around $21.10.
July 15th, 2009 at 12:33 pmThx BOP that helps a lot on the back of the envelope figures.
July 15th, 2009 at 12:34 pmCap And Trade:
http://republicans.oversight.house.gov/News/PRArticle.aspx?NewsID=605
July 15th, 2009 at 12:35 pmBEXP well — local industry operators estimate that the well cost almost $7mm in total.
Bud just dropped off my Christmas Card List.
July 15th, 2009 at 12:43 pmWest — KOG EUR reminder: they are thinking they get 350k and 600+k for short and long laterals. That is oil only. Also, they estimate that their cash commitment per well runs about $3mm and should have 10-11 wells down by EOY.
July 15th, 2009 at 12:45 pmAgreed BOP, that’s why I wrote this in the morning post:
“$6.1 mm to drill and complete, a third below what it would have cost at year end 2008 (note press release says $3.6 mm but presentation goes with the higher, more plausible number).”
That kind of word play is worth of politicians, not oil men.
I have seen some brokers quoting the $3.9mm as a big WOW!
July 15th, 2009 at 12:49 pmKOG — other comments. 99% of the water they “produce” from their wells comes from fraccing fluid. Water is not a big problem or cost. A pipeline (the Arrow Pipeline) will be completed in their area by the EOY 2009. KOG thinks they will be able to hook into this pipeline by mid-2010 and have planned their 2010 drilling schedule around this (to capture their nat gas and NGL production).
July 15th, 2009 at 12:51 pmBOP information on KOG is really a big WOW as far as I am Concerned. Thx for all the information and taking the time to get the answers. The lite trading volume makes it difficult to trade many shares at a time without moving the stock but here goes nothing. THX again
July 15th, 2009 at 1:04 pmOne more comment, floating around out there re: KOG. Think the source is TommyWeisel… they think KOG will be sold by the end of this year. TW has a $3 NAV on the stock, but think KOG would hit a bid at $2.00.
I beleive, at the right price, KOG will be sold. They didn’t like the bids they got last winter, so raised equity to prove up their acreage. I give KOG mngmt huge kudos, for managing through the definitive “tough period.” However, Lynn knows KOG is too small to be a stand-alone… just think he want’s to prove up Charging Eagle and Tall Bear (which will be a VERY interesting well to watch… as it is near the Bakken pinchout and on trend with Parshall Field). Both areas should have well results around the 1st of December.
Something else to watch for… hearing that EOG is in the process of buying the acreage of a small, private player on the Rez. Will be very curious to know what $/acre will be paid… if it gets reported.
July 15th, 2009 at 1:11 pm[want’s….? typo]
July 15th, 2009 at 1:13 pmI’ll put all of the KOG comments and the BEXP stuff too on the KOG notes page at the end of the day.
July 15th, 2009 at 1:18 pmEOG now playing catchup Dman, thinking NFX is next.
July 15th, 2009 at 1:20 pmZTRADE:
NFX – Doubled the August $35 call position (NFXHG) for $1.45 with the stock at $33.15.
July 15th, 2009 at 1:22 pmz — can’t find (easily) any comments from NOG on well costs. But, they (NOG) have a tiny fraction in so many wells (with so many different outcomes) that I don’t know if it would be useful. That said, NOG sports a pretty fuzzy tail, IMHO.
July 15th, 2009 at 1:22 pmBOP – hear ya on NOG, asking for someone else, I won’t touch em.
July 15th, 2009 at 1:25 pmCrude closing at 61.60, up $2 plus. I don’t see the level of demand we had last week (>15 mm bopd) from refiners being a sustainable trend but oil was due a bounce and this is a good excuse to do it.
Distillate demand was off 17% from year ago levels which was actually a 5 week high.
Kerosene (jet fuel) demand also rallied to a 1 month high and was off 11% from year ago levels which is an improvement from the year to date average of down 12%.
July 15th, 2009 at 1:39 pmBidding a little August CLR position, so far no joy on a pullback to nab it and not sense of rush to do so.
July 15th, 2009 at 1:44 pmCrazy market, Nicky, if you are out there can we get some new support / resistance levels for the SP?
July 15th, 2009 at 1:49 pmI guess I should go a little easier on the kog.
July 15th, 2009 at 1:55 pmWest – zoiks.
July 15th, 2009 at 1:57 pmZTRADE: Last one of the day
CLR – Added (10) CLR August $30 Calls (CLRHF) for $1.15 (on the mid after a pretty long wait) with the stock up 9% on the day. This is just a roll of the previous trade into the next month.
July 15th, 2009 at 2:03 pmWest — where you go, others want to follow. Nice call. That said, anything could happen between now and KOG’s earnings call… some time in early August. But, we have a sense of what we think it’s worth and the courage of our convictions. That is what this summer volatility is all about. Getting good stocks at great prices.
July 15th, 2009 at 2:04 pmGot this from Nicky after asking about levels:
Hi Z
Move really needs to stop at 937 which should be huge resistance.
Will try and come on the site shortly.
N
July 15th, 2009 at 2:04 pmHAL trade from yesterday working out pretty well, did not get to average into more today and probably won’t add until Friday late after it gets pinned for Monday’s earnings unless we get a red market day tomorrow.
July 15th, 2009 at 2:06 pmCIT halted… news pending
July 15th, 2009 at 2:21 pmTOO BIG TO FAIL! Like everyone else…
July 15th, 2009 at 2:26 pmV – I’ll bet you XOM or any energy company you care to name does not meet the criterion of “too big to fail”.
July 15th, 2009 at 2:29 pmYou guys realize that there is now no end to the bailouts and California is next. I would say that California represents more systemic risk than CIT.
July 15th, 2009 at 2:34 pmWorlds 8th biggest economy as compared to moderate sized lender?
July 15th, 2009 at 2:41 pmV – Its a mess, no doubt. Arnold probably has a suggestion box if you have any.
July 15th, 2009 at 2:45 pmMy suggestion is ask the feds for money. They’re good for it!
July 15th, 2009 at 2:46 pmIt’s too late to take suggestions… the whole thing is over… it’s already happening… pensions and medicare/medicaid to follow. Other states as well.
July 15th, 2009 at 2:47 pmZ, How do u get to the KOG comment section?
July 15th, 2009 at 2:50 pmToday has been an interesting day for VIX watchers, of which there are plenty apparently. The typical pattern is for VIX to move inversely with the SPX, but today’s strong stock market rally has seen a steady and dramatic rise in VIX all day. The VIX futures meanwhile have declined, erasing part of a large premium in the futures over the spot. No one seems to have an explanation for the curious action in VIX, other than to muse that it is somehow options related, but it is creating a degree of unease.
July 15th, 2009 at 2:52 pmCalifornia will be fine.
July 15th, 2009 at 2:53 pmAgree with ram. California will pull itself together. They know they have to and they will.
July 15th, 2009 at 2:59 pmNOG says typical well costs $3.6-3.8mm now; they use Slawson a lot who has a reputation for do-it-fast-and-cheap reputation, which NOG says yields a very high ROI (above 60%).
July 15th, 2009 at 3:01 pmWest – its about half way down the reports page at upper right.
http://zmansenergybrain.com/subscriber-data/zeb-reports/
July 15th, 2009 at 3:01 pmRMD – what kind of Hz well are they talking about though, lateral length, number of stages? Do those guys operate any wells?
July 15th, 2009 at 3:02 pmNOG doesn’t operate any wells. They are basically an MLP, owning little bits of lots of other operator’s wells.
July 15th, 2009 at 3:06 pmThx Z
July 15th, 2009 at 3:07 pmram, BOP – Fine for how long? Until people want pensions?
July 15th, 2009 at 3:08 pmV,
How about the decay of social services? Where will the police be if they are not paid. Already they had to ask for $$ for the Jacko funeral. Lot of issues right now.
July 15th, 2009 at 3:14 pmThe public employee pension promises will have to be addressed. Like the GM pension promises are being addressed. No one will like the outcome, but they will be addressed.
On the other hand, maybe retired Californians just “go French” and threaten to blow up Sacramento. Can’t say I would blame ’em, by the way.
—————————————–
French Workers Threaten to Blow up Factories
2009-07-15 11:48:51.866 GMT
Paris (dpa) — After “boss-napping,” French workers are now threatening more violent means to try and squeeze more severance pay out of their employers, French media reported Wednesday.
July 15th, 2009 at 3:16 pmIn the past week, workers at two French companies have threatened to blow up their factories unless they are given satisfactory severance payments.
Employees at a factory for Nortel France, in the city of Chateaufort, west of Paris, briefly placed 11 gas canisters on the site and threatened to detonate them unless workers to be made redundant received 100,000 euros (140,000 dollars) apiece.
Nortel France, a subsidiary of the Canadian communications equipment supplier Nortel, was placed in bankruptcy on May 28, with 467 of its 683 workers to be made laid off on August 1.
The workers dismantled the gas canisters after a meeting was set up later Wednesday with the company’s French and British receivers.
The tactic is a replica of that used by workers for the auto equipment supplier New Fabris. On Sunday, they said they had installed gas canisters at various locations around their factory.
They are asking France’s two large car-makers Renault and PSA Peugeot Citroen for 30,000 euros in severance pay per redundant worker.
“We’re ready to light the fuse,” a union representative said.
Asked on LCI television about the workers’ threats, Labour Minister Xavier Darcos said he “understood their anger,” but could not comprehend “wanting to resolve this difficulty with incredible violence.”
He called on all parties to return to the negotiating table.
However, Darcos also warned that he had “rather sombre”
expectations of the French labour market, with more mass layoffs foreseen for the summer “which could snowball.”
The threat of blowing up factories is in the same spirit as so-called boss-napping, in which workers threatened with redundancy of at least six factories held managers hostage this spring and demanded either a stop to the layoffs or higher severance payments.
According to polls, a majority of French adults approved of the tactic.
Yeah I’m not sure how “California is fine” is coming out of all this. They are broke now and they have the biggest wave of pensioners coming at them shortly.
Cut half of your social service in the middle of a recession? That’s a good way to cause more unemployment and reduce services when people need them most.
July 15th, 2009 at 3:19 pmOk so they’ll be adressed the same way the GM ones weer adressed… govt dollars. You agree with me then.
July 15th, 2009 at 3:20 pmYou joke about going French… but somehow I think I’ll be joking about going Californian when other states end up in the same situation.
July 15th, 2009 at 3:23 pmVTZ — not sure Calif will be bailed out with govt dollars directly. That would piss off 49 other states (or, 55, if Obama’s state count is more accurate than mine). I don’t think even this Administration can afford to lose the support of 89% of voters who are not Californians. But, we are not talking about some backwater state or country. California has assets. People got through recessions before, without all the extra services that Calif has added since 2002… the mid-90s were even worse, with the aerospace collapse. Problem is, 1% of Californians pay 50% of all the income taxes. That is not dependable revenue. And, since states can’t print money (although Calif tried), they will have to deal with the deficit. You can’t raise taxes on people who already pay the highest total rates in the country. They will just pick up and move. The City of Los Angeles is busy, learning this lesson. The City of Philadelphia could have told them it would happen. You can’t just keep raising taxes on your productive members. They move… and take jobs with them (as many of them actually employ other people as small business owners).
July 15th, 2009 at 3:33 pmYes… I joke about “going French.” I joke, b/c it scares the sh*t out of me. I chose to laugh, as I don’t want to think about crying. Yet.
July 15th, 2009 at 3:36 pmSo what’s going to happen when their pension obligations come? They are going to say “sorry we are trying to cut spending” ?
What are they going to start selling? Real estate? Yeah, I hear the real estate market is booming.
July 15th, 2009 at 3:38 pmWyo – Just got to read 79 … what a shocker.
July 15th, 2009 at 3:39 pmAlso, people got through recessions before, but not when they had huge pension obligations coming, rising health care costs, record debt, rising unemployment and a broken financial system.
July 15th, 2009 at 3:40 pmV – it makes you wonder just how far the dollar will ultimately fall.
July 15th, 2009 at 3:41 pm0.5 on the dollar index ultimately.
July 15th, 2009 at 3:43 pmand to add to 128 … not when they are net importers, have trade deficit, account deficit.
I meant 50 from 79.xx today.
July 15th, 2009 at 3:47 pmV – for a start I’ll take 77, then 72.
July 15th, 2009 at 3:49 pm72 by this time next year.
July 15th, 2009 at 3:51 pmActually, the GM pensioners have taken cuts to their benefits and pensions. That is what I meant about dealing with it, like GM did.
July 15th, 2009 at 3:57 pmYeah well they took some cuts but if the govt didnt step in what would they have gotten?
July 15th, 2009 at 3:58 pmEven more cuts, as their pension would have been flipped over to the PBGC… which doesn’t support all the gold-plated services that the GM private pension did.
No doubt, “freebie” and gold-plated benefits and services will have to be curtailed. But, the poor don’t employ people. You put too much burden on “the rich” and you will simply see more layoffs. That is an economic fact. Not the elitist, cold-hearted statement it sounds like. Just simple fact. Ask Hugo.
July 15th, 2009 at 4:02 pmEND OF DAY OVERVIEW
· Equities go out at highs with SPX +27pts (+3%), DJIA +3%, and Naz outperforming +3.5% on the back of tech strength…this is the SP’s best day since May 18 and best Dow % gain since Apr 9. Risk was bought back across asset classes today with crude up over 2 bucks, HYCDX12 tightening almost a full point, US tsy yields rising, USD dropping 1%, and the euro rallying vs nearly 2% vs the yen (only outlier was the vix, which end +3.5% after a weak open). Technically, the “head & shoulders” breakdown from last week has already reversed course; SP today broke above the s-t downtrend channel that had formed since early June.
· Trading Update: Monday’s action really caught people wrong footed – sentiment last week had become pretty negative as economic data points became more mixed, technicals sent neg. signals (head-and-shoulder break, etc), equities lacked leadership (crude broke below $60 and commodity-linked stocks crack), and some corporate headlines were less than optimistic (i.e. the bulk of mgmt commentary from last week’s Sun Valley event were pretty negative). Shorts were pressing a bit into the weekend in anticipation of neg. CIT headlines that would pressure trading further on Monday. However, M. Whitney’s hour long financials block Mon morning on CNBC (along w/her GS upgrade), coupled w/the market’s relaxed reaction to CIT, spurred a substantial short-covering rally in financials Mon (the group closed up 5% that day). Earnings season, while still in its infancy, is coming in better-than-expected (INTC so far is the highlight – the stock is up ~7% in trading Wed – but AA, PHG, GCI, ALTR, GS, and others, have all been strong as well). A lot of the buying so far this week has been short covering-led, although volumes increased today (higher than last 2-3 weeks) and there is a bit of anxiety setting in that could lead to some chasing of performance.
· Sector trading – strength across the board today – financials, tech, materials all up 4%+; industrials, energy up 3%+; discretionary, utilities, telecom services up 2%+. Health care was a laggard at up “only” 0.8% on the day (ABT ends off 2.5% after earnings and some headlines out of Washington weigh). Within tech, semis were up 4.4% (although SOX didn’t exceed highs of last few months). The BKX ended up >4% although closed just under the 200day MA (which remains a big level for it). Crude ends up 3.7% on the day and closed at $61.7
· Treasuries were VERY weak as stocks ramp higher – 10yr yields late on Wed were 3.6%, up more than 30bp since just this past Fri (and up from 3.47% on Tues). 10yr yields haven’t been this high since June 24.
· Dollar – the DXY falls ~1% on the day although has been at about the same levels since noon. Euro up more than 1% against the US$ (pretty much @ the same levels as mid-day) and up almost 2% vs the yen.
· Corp credit tightened Wed but arguably underperformed the massive move in equities; HY12 rallied nearly a full point though IG12 tightened just 3.5bps
July 15th, 2009 at 4:10 pmBOP – Exactly, they would have gotten next to nothing. Now somehow I don’t think that a whole bunch of people not working and not receiving pension income is going to be good for the economy. THIS ISN’T AN ISOLATED ISSUE. IT’S THE SAME ACROSS THE COUNTRY.
My suggestion is not tax more. I have not ever come close to suggesting that. All I’m saying there’s no practical solution because it’s TOO LATE.
Now they’ve also established the precedent for bailouts in multiple scenarios. California workers are going to say, well GM, etc, got it, why not me? Then the dominos will continue to fall.
All I’m getting at is this: CIT is not the first and they certainly won’t be the last. There is no way to stop what the US has started. Say goodbye to Kudlow’s BS king dollar. It should be gone already.
Say goodbye to importing with loaned dollars. Say goodbye to lower tax rates. Ultimately, we all need to say goodbye to the same standard of living until we actually start manufacturing or creating value internally. Recycling money, borrowing some to top it off, consuming in excess and producing nothing is not going to continue to work.
July 15th, 2009 at 4:10 pmZ,
As per the service trade, look at LUFK. Nuf said… 🙂
July 15th, 2009 at 4:13 pmVTZ — which is why deflation has been the fear, since the beginning of this downturn.
Once free trade and the globe opened up, you were bound to have a leveling out of living standards. Like water seeking a new level when a dam breaks. The tech and housing bubbles just masked this leveling for 10 yrs or so. But, it was bound to happen.
We have to address our competitiveness on a global basis. Something you pointed out in your last paragraph. I agree with you completely. The good news is that the US is blessed with a lot of resources, infrastucture, educated labor, know-how, and technology… unless Govt policies undermine our strengths, we will continue to enjoy a higher standard of living than most of the rest of the world. But, we won’t get that for “free.” And the Govt certainly can’t give it to us. We have to do if for ourselves.
Sorry about the rant. But, this goes to the core of everything I am thinking about (and investing in) these days.
July 15th, 2009 at 4:20 pmNot trying to rationalize anything here, my bearish outlook on HK was obviously wrong. The caveat that I want to point out though was that I had something listed about trying to get an entry point on a failed Head and Shoulders trade on the SPX back when price broke below the neckline. What has occurred here is just that, we just went berzerker as shorts had to get out of their H and S trades.
July 15th, 2009 at 4:35 pmI’m a bit missing in action as I have been meeting with lawyers and other suit types for the past week, getting another project off the ground.
Going forward, apologies to anybody I may have chased out of a profitable situation, but I think that it is a bit premature to call the recession over. I think these spikes will be given back. My two cents, and congrats to those who followed Z’s work.
Tater – you made the right call, that level was tough to get through and you said that if it failed (higher), chuck the bearish call. I got lucky with the API last night, and the big crude draw today. Oh and Intel and Empire State. Keep up the charting, much appreciated, I wouldn’t ask if I didn’t want to know and I actually held those July’s only because they broke the level on the open and was gone when they ran out of steam, reloading with Augusts.
July 15th, 2009 at 4:40 pmI don’t think I’ll ever understand how it’s deflationary.
If supply exceeds demand (ie housing) is that deflation or just an excess?
If the iphone gets cheaper because Apple is more efficient and they already suckered all the early adopters is that deflation?
If any deflationist can answer me the following then I’ll concede…
If QE isn’t massively inflationary, why don’t we print a whole whack of money and give it to average people so that they can pay off debts?
It won’t make it into the money supply, which is the argument why the QE so far isn’t inflationary.
If the govt is serious about deflation, they could fix it in a hurry.
July 15th, 2009 at 4:51 pmDeflation was a by-product then a driver of the Great Depression. The govt couldn’t fix it there, either. The govt can fix inflation. Other than time and the whittling down of excess capacity, there is no quick fix for deflation. Hence, the massive scariness of the prospect.
July 15th, 2009 at 4:56 pmGive everyone $$s to pay down debt and spend on goods made in US. Problem solved, excess capacity removed.
July 15th, 2009 at 4:58 pmCIT…. no bailout for YOU
July 15th, 2009 at 5:06 pmSo much for giving everyone money to pay down debt. Maybe the buck stops here?
July 15th, 2009 at 5:07 pmMake that: US Govt Agencies to CIT… “No Bailout for YOU”
(just to be clear)
July 15th, 2009 at 5:09 pmNo bailout in the near term it says. Paulson is going to come and pressure someone to buy them… jokes.
July 15th, 2009 at 5:09 pmCIT said to be evaluating alternatives after talks with govt agency cease. Like what, whether to open the window or not before running towards it? It would be nice to get some kind of playbook on who lives and who dies. Ben said the other day that if he had had the tools he would have saved Lehman. I’d think they have the tools to save CIT. Oh well.
July 15th, 2009 at 5:10 pmYes. I believe someone will be pressured to buy them. But, that is worlds away from Bailout Nation’s Taxpayers directly footing the bill. And — who knows — maybe no one will step in and buy CIT and it will be unwound in the Bankrupcy Court, some pieces sold off, others closed. CIT has been on the hairy edge off and on for a long time. Just like GM.
July 15th, 2009 at 5:14 pmIt’s just a shell game of paper shuffling instead. Taxpayers and US dollar holders will ultimately be left holding the bag.
July 15th, 2009 at 5:21 pmWhy not bail CIT out if you are worried about deflation? It will help your deflation fighting cause.
July 15th, 2009 at 5:23 pmgot NOG question late. BOP correct: operate no wells, largest partners in # wells and $$ are Slawson, EOG, XTO, and CLR (in no particular order, but see a well-by-well rundown in their comprehensive updates). BTW, their credit facility is with CIT.
July 15th, 2009 at 8:18 pmVTZ — keep it coming, man… you’re on a ROLL!!
July 15th, 2009 at 9:09 pmCIT situation… it will make it tougher on smaller businesses to get bank financing for a while. Only question is, how long that “while” is. But it will definitely raise the cost of capital and reignite liquidity concerns for the most fragile part of our business economy, the small businesses (like NOG).
CIT has always been sort of a “lender of last resort.” A business never proudly points to their bank credit facility and says: “see how financially STRONG we are, CIT is our banker!” Nope. You never heard that comment. And CIT’s lending standards during the height of the borrowing frenzy sank even lower. Unfortunately, hose pidgeons have come home to roost.
Still, no doubt about it, this is a temporary setback for a large segment of American business.
http://news.yahoo.com/s/ap/20090716/ap_on_bi_ge/us_cit_group_crisis_23
July 15th, 2009 at 9:41 pmNDIC site is showing KOG started drlg Charging Eagle 1-22-23H on 7-12-09.Thanks to BOP for updating all of us on KOG activity and getting the facts about what is going on with their operations……….EOG is setting up to another of their technology leading test in the Middle of their new 83 section (53,120 acres) area that they are trying to unitize on the Burke and Mountrail Co lines…EOG has also applied to pool 83 adjacent sections as follows: 12 eastern sections of T158 R91 all of T158 R90 Western 12 sections
July 16th, 2009 at 12:36 amof T158 R89 and southern 18 sections of T159 R90. Also sections
4,5,6,7,18 of T157 R 90…. They are drlg monitor well to 9,048′ to the bottom of the 3forks between two Bakken 5,000′ laterals. EOG has not released any infor on these wells but thought is they will do simo fracs with microseisms monitors in monitor well. Unconfirmed field reports say that Sidona#2-05H, nwnw 5-158n-90w, is flowing 250 bopd unfraced. The well monitoring would be similiar to recent stacked horizontal fracs with monitor well in Wyoming Powder River Basin. In addition EOG has been busy fracing many of the Parshall wells that they drilled this winter. I don’t know what it takes to move the needle on EOG’s stock but this all argues for a strong CC in August, especially if they give any information on their Eagle Ford Shale wells.