T.G.I.F.

Posted on by zman

 

Expiry Watch - Today's Forecast: Boring in the morning with the occasional shower of mundanity followed by listlessness into the close. Expect pinning action to set in early today as traders look to take a 2 1/2 day weekend while they can.  Very little news on the energy front with action being dictated by the broad market which is deciphering results from IBM (good), GOOG (good but maybe not good enough), GE (ugly), Citi and B of A (OK) and better than expected Housing Starts data (582K vs expectations of 531K).

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Stuff We Care About Today - Next Week's Earnings Calendar
  5. Odds & Ends

Holdings Watch

  • $10KP:

    • $19,900
    • 47% Cash
    • The Wiki Holdings tab is updated.
    • I will update the $10KP tab on Monday.

Yesterday's Trades:

  • RRC -  Added (20) RRC July $42.50 Calls (RRCGV) for $0.25.
  • RRC - Added (5) RRC August $42.50 Calls (RRCHV) for $2.20.
  • RRC - Sold the July $42.50 Calls taken earlier in the day for $0.55, up 120%.  I will hold the August calls through earnings next week unless the stock puts on a larger move before then.
  • HK - Added (10) August $24 Calls (HKHO) for $0.70.

Commodity Watch

Crude oil ended up $0.48 to close at $62.02 yesterday in rather random, broad market influenced trading. This morning crude is trading off slightly with a modest bounce in the dollar. The dollar still looks lower to me near term.

  • Nigeria Watch: Quiet as we enter day three of a 60 day ceasefire.

Natural gas jumped $0.38 (11%) to close at $3.67 yesterday after the EIA reported an "in line" storage injection (see comments next section). This morning gas is trading off slightly and tracking crude.

  • Tropics Watch: Mostly quiet on the tropical front; this is way out there for now but could become more interesting over the weekend.

Natural Gas Storage Review


ZComment: This was the 4th consecutive report to come in better than expectations although this time, expectations had been quickly reduced to make that happen. The Street wanted to bounce gas and gas bounced. The short position here remains high and the easy gains have been made, giving shorts an itchy trigger finger on the cover button. With storm season heating up as quickly as the sea surface temps of the Gulf of Mexico I expect continued elevated volatility with gas prices but for the moves to be fleeting. I still don't expect gas to get a firm footing until we see month end supply numbers that begin to show a more obvious decline in production. It's way too early to expect a V-shaped recovery and much will depend on the persistence of summer heat, on the tropics, and on LNG (the much feared tsunami of LNG continues to be MIA). 

Comments for graphs below:

A) Yes, still at a record, still going to be at a record although we may temporarily dip below 2006 levels in about 6 weeks due to easy comps. This should provide a little support for gas prices but again, month end supply figures are probably the only thing which can provide anything but fleeting gains for now.

B) & C) We continue to make modest progress in eroding the surpluses to the year ago and five year averages.

D) Injections continue to track seasonal norms which continues to be a nice change of pace from earlier this summer.

 

 

0--- graphs ----need to repaste with correct titles -----

 

Stuff We Care About Today

Earnings Watch: Calendar for next week. Service names dominate followed by E&P as we enter the last week of July and first week of August. I'll be entering next week rather light in terms of positions in reporting names holding HAL (on the long side for once), NFX and RRC after yesterday's operations update.

Odds & Ends

Analyst Watch:

  • Zip, nada, nothing.

91 thoughts on “T.G.I.F.”

  1. Z,

    With the energy green shoots popping all around, why has CLB not received any news attention? Seems pretty quiet. Their pullback has not been as severe as CRR.

    Perhaps TPH could shed some light?

  2. Interesting comments from TechTrader today. Keep in mind, these comments were based on last night’s close, so do not incorporate the affect of fundamental data reported this morning. But, if correct, he thinks it’s a tradeable day.
    —————————————–

    TechTrader — 60/40 Long Day. For another cash rally. A little better odds. And the best color pattern to work. Go Long on the morning pullback usually early, and on any pullback near 11:15 and 11:30, for a rally up through lunch. and into the afternoon and last hour and closes. Look for a few points with average odds of 60/40. Be sure to tighten stops after any rally in the morning and especially after 12:05. And again at lunch at 1:55 and 2:10.
    Gamblers: The real gamble today is holding into the closes for more and a replay of Monday.

  3. Wyoming – Don’t know, perhaps lack of press releases of late detailing how many miles and miles of core they have in house now. I’ve been ignoring the stock due to wide spreads on the options but it looks over valued to me. That should draw a positive comment, eh?

  4. Morning and thanks BOP. I was thinking today ends green, Monday fairly uncertain but we shift to more of an energy (service) focus then so it’ll be up to HAL to beat severely down trodden estimates and spin the lack of further hard declines in rig counts and price stability in 2Q vs 1Q and cost cutting in the most positive light possible. Interesting to see them leading out again with SLB not reporting until week’s end.

  5. Oil is off a dime now, CNBC’s ticker is wrong today.

    NG is off 11 cents as well (a little give back after yesterday’s dead cat bounce).

  6. Spoke with a former SLB guy about the whole SLB lagged reporting last quarter. Said it has to do wholly with the schedule of the board of directors before they can bless earnings, their tee time for golf, etc, rather than anything noteworthy. Said Gould hates having his stock depend on the mouths of HAL/Bernard, can’t say I’m surprised.

  9. Oil moving well now, closing on $63. Group will likely green up even if the broad market acts punky. Agree with TT today.

  11. #7 – nice gear. Now i know what to send to my tree hugging friends who drive a prius.

  12. 1520 – Yes, they can burn the shirts for warmth at night instead of consuming clean burning natural gas. Don’t get me wrong, I’m all for conservation, just along with maximization of resource potential.

  15. West — thx for posting the TFS article last night. That is one of the many reasons KOG is in a good place right now… unless oil goes below $50 and stays there.

  16. Bill – hear ya VQ. Good luck with the name. Not a big fan, playing WRES instead for California oil exposure. I had recent dealings with a senior member of VQ management, left bad taste.

    HK looks like it is going to get pinned to $23.

  17. #12 – bingo. use what we have in north america.

    i would like to see a good options expiration vigilante show up this afternoon. some shred of good news (CIT private workout maybe…) that makes the b-team freak out in the last 2 hours. Call them off the golf course, on the cell phone on the way to the shore, montauk, whatever… big-volume-buy-in-the-shorts-must-get-long-before-i miss-it.

  18. 1520s — TechTrader thinks that is a good possibility. Will keep us around through the close, I think.

    Maybe California settles it’s budget fight? That would send the mrkt higher…

  21. BOP – california budget workout would do it too. Have you heard any other comments from banks re: taking the iou’s that cali is issuing. I thought today was the last day that WFC said they would take them?? that may be bad info though.

    the b-team needs a test.

  22. Bill – nothing related to the stock’s value or anything to keep me away from a fundamental or management credibility standpoint, guy just ticked me off.

  23. 1520s — not hearing banks back off the deadline for refusing IOUs. Also, reading that the smaller banks may follow the larger guy’s lead. Frankly, that would be a positive. Sacramento needs to come to a reasonable conclusion… not sure that includes legalizing marijuana, tho…

  27. I believe the following is significant to BP (60%):

    BHP Billiton says Mad Dog South well encounters significant Hyrdocarbon pay
    BHP Billiton announced that the Mad Dog South appraisal well and sidetrack, drilled and operated by BHP Billiton, had encountered significant hydrocarbon bearing reservoir. The 826-5 well is located on Gulf of Mexico Green Canyon block 826 approximately 100 miles south of Grand Isle, Louisiana, in approximately 5,100 feet of water. The well encountered 280 net feet of hydrocarbons in the objective, Miocene, hydrocarbon bearing sands. The subsequent sidetrack reached a total measured depth of 27,143 feet and discovered an oil column of more than 2,200 feet.

  28. west — yep. Two different risk profiles. KOG is just a tasty side dish… EOG is part of the main course.

  29. Wyoming re 25 = Ugh.

    West – It does. EOG also has a high profile E. Texas Haynesville/Bossier to announce this quarter, a big but undisclosed S. Texas oil discovery (rumor), and also is rumored to have higher rate wells out of the Barnett combo play. My sense is that they will talk about Horn River wells again but that’s just a guess… it has been awhile since they have given an update there. On the numbers, I think we are in for a beat based on oil prices with better realizations, lower transportation and middle of the guidance range type production.

  30. Thanks, West, for post last eve-WLL looks good from that article as well.

    I guess I have been completely asleep on WLL-it has run from 30 to 38 in the last week-maybe tad late for now.

    Z, have you done any analysis on WLL recently?-what is your view on WLL?

    Thanks.

  32. Choices – not really no, ugly option spreads and no room for them in the common stock portfolio just now. CLR has bigger position by about 5x although much of WLL’s is in the sweet spot at least for the Bakken of Sanish and Parshall fields east of the Neeson. So while you may see some big IPs and EURs out of WLL, CLR with smaller reserves and an already higher reserve life has greater leverage to the play (especially if the TFS becomes a homogenous/ubiquitous thing) and should be granted a higher P/CF ratio (again, for the longer reserve life). One last thing to add is that EOG has commented in the past that it saw somewhat less potential for TFS in some areas inside the Parshall while it felt there was more potential outside it, again benefiting CLR. But that’s just my two cents right now and WLL has been an excellent performer for me in the past.

    That greening of the group I was referring to is now fully in progress. Less boring of a day than I thought but that should soon change.

  33. Adding to 32x

    CLR:
    Reserves (2008): 159 MMBOE
    Production 75% oil (no hedges)
    CFPS
    2009 $1.96 14.2x
    2010 $2.98 9.3x (mispoke in #32, re reserve life, they are roughly equivalent now) This is high because their production is priced near the strip being unhedged.
    TEV / ’10 EBITDA 5259 / 428 = 12.3x.
    Bakken acres: 500,000

    WLL:
    Reserves (2008): 239 mm BOE
    Production 74% oil
    CFPS:
    2009 $7.23 5.3x
    2010 $11.60 3.3x (pretty cheap given the assets and growth)
    TEV / ’10 EBITDA 3090 /642 = 4.8x – not high, not especially low. Greater leverage here mutes what would be excessively low ’10 p/CF
    Bakken acres: 95,000

  35. I’ve heard that the knock on WLL is that they are a “serial equity filer”… like HK, only worse. I don’t follow the company, is there any truth in that z?

    I mean, compared to CLR on metrics alone, WLL seems cheap…

  37. Re 35.

    That is one knock against them yes, would not say they are worse than HK in printing paper and the risk should be down now as they have done equity and debt deals in the last couple of months.

    CLR looks more expensive because they don’t hedge and as such are being caught by the low current price strip. I show the Street at $69.75 oil in 2010 which is just a couple of bucks under the 2010 strip now.

    WLL is about 60% hedged with floors at $60 and ceilings close to $80.

    So yes, on a CF basis, WLL is getting the cheaper multiple as a knock on the limits those ceilings put on them next year in the event oil prices mount a recovery while CLR has money in it as a play on a strong oil price recovery. CLR’s CF will ratchet up quickly, “cheapening it” when oil prices rally.

    I also think, the 500,000 acres comes into play here. This is the biggest Bakken acreage position by 2x to the next player. If you forget about the TFS for a minute and just look at a low, 300,000 EUR on on 640 acre spacing (which is very conservative), that works out to gross additional BOE’s of 234 mm (I’m using the low EUR to risk the play) vs reserves of 159 mm BOE for the whole company now. That’s really very conservative. You probably get better EURs over the life of the play over more of the play and then the TFS may add another who layer.

    For WLL, if you go with a 600,000 barrel EUR (they are seeing 400 to 900 now), same spacing, you get 89 mm boe vs their current reserves of 239 mm boe. So less leverage on current reserves from their potential Bakken play, again, leaving out the TFS to keep apples to apples but accounting for the better reserve size of their acreage seen to date.

  38. z — excellent points about the low current spot price vs strip and the total acres. It’s really the leverage to the acres (and the potential for the reserves here to go up… quite a lot, if you factor in better completion + multiple horizons) that makes CLR such an interesting prospect. thanks!

  39. HeadTrader weighing in… he thinks mrkt ends higher from here… putting $$ where his mouth is, too. Just FYI

  40. Re 26 – way to tick off your largest creditor mr. commerce secretary. Carbon tariffs. Ugh.

    BOP – yeah, its the acres. I think they do 450,000+ ultimately, will take a long time to drill that many 320s or 160s or maybe 80s (doubt it but ya never know 20 years from now). Lot of oil. They are already thinking enhanced recovery as well down the road. I think NFX is the sleeper here.

  41. BOP re 39. Certainly has that feel. Monday may be troubling for financials with a dearth of news from what I can tell. XLF has run out of steam since day before GS.

  42. FWIW, i think of NFX as a good “bond investment company” and CLR as a good “stock investment company.” But, now that David Tice is gone, I don’t know what risk profile NFX will take on a go-forward basis. Maybe it won’t change. But, I don’t know yet…

  43. z — re 41… LOL. I’ll tell you what we went long at the end of the day… if it works.

  44. I can tell you what they would tell you, business as usual, be consistent, under promise and over deliver.

  45. #44… no change, in other words.

    Always wondered why their stock underperforms. Maybe just a little hype is ok? Don’t know. LOVE ’em as a fixed income investment, tho!

  46. NFX – It’s a number of things, Hurricane knocks a couple of years back that really took the wind out of their production profile, exposure to Rockies gas, lousy Woodford gas price realizations at present. But they do a lot right from an operations standpoint and would / will make a nice acquisition when gas prices recover for someone like APC who could use mid con gas, Bakken and deepwater exposure.

  47. How about that HK $23 pin? If it will migrate through $23 a bit I will actually get to sell some completely toast $23 strike July calls there. One thing to keep in mind on expiry is that many brokers now force conversion (not an option) on Saturday if you are as much as a penny in the money unless you sell the in the money option or call them and say not to.

  48. Re 27 – I think it was more interesting when Mad Dog was a prospect of Vastar’s. At this juncture, its not big enough to have a lot of leverage on BP unless the well gives them further satellite opportunities for extending the life of the spar (I think it was a spar or cell spar development).

  49. Vastar… haven’t heard that name in a while. Sure miss Steve Shapiro. Smart man, independent thinker.

  50. EOG. Just for those keeping track from today’s RMOJ…… EOG May Have Signicant Discovery in Mountrail/ Burke Co. Line prospect. ( RMOJ is saying that EOG requesting 65, 640 ac units.) The company is currently evaluating the Sidonia #1-06H, se-se 6-158n-90w, which, according to latest production reports, yielded 1,113 bo, 1,220 bw, and 290 mcf for one day during May. Roughly a half mile to the east of this indicated new field discovery, EOG has recently completed drilling another sideways Bakken test at the Sidonia #2-05H, nw-nw 5-158n-90w. No information has been released on this hole……I was wrong about the simofrac as the first well has been completed and they are drilling monitor well to the TFS. I will try to post add’l infor this weekend.

  51. http://www.bloomberg.com/apps/news?pid=20602099&sid=aZEXeXE056J8

    And I thought US Windfall Profits Taxes were steep…

    Perenco Rules Out Future Investment in Ecuador After Seizure

    The fields are a joint venture with a unit of Houston-based ConocoPhillips….
    (snip)
    The Ecuador government has seized about $327 million of crude from the fields this year as payment for what it says are back taxes…
    (snip)
    Ecuador, which increased a windfall tax on oil to 99 percent in October 2007, has said that Perenco and other companies haven’t paid the full levy, which has since been cut to 70 percent. The seizure affects the Block 7 and 21 concessions, which produce about 21,000 barrels a day, in the northeastern Amazon region.

  52. Oil jumping now, short covering after the CNBC predictions of $50, where did all those guys they interviewed last week go now? Hmmm. Caves I’d bet.

    Anyway, two months of housing starts is a long way from a recovery and the inventory is too high anyway. Not sure why that’s really a sign of recovery. Why, because the home builders, who wouldn’t know a bubble in housing from a bad Travolta movie have increased confidence? Give me a break.

  53. (On a somewhat slow day)

    CIT up 95% to $0.80, 218 mil shares-there must be an entirely different world out there trading this stuff-it seems like it is shooting crap with just one die.

  54. Choices – right, like when GM was known to be dead but the stock was at $0.60 with 2 hours to the close. Not my bag baby!

  55. Movie Quote Friday Watch:

    “Not that I condone fascism, or any -ism for that matter. -Ism’s in my opinion are not good. A person should not believe in an -ism, he should believe in himself. I quote John Lennon, “I don’t believe in Beatles, I just believe in me.” Good point there. After all, he was the walrus. I could be the walrus. I’d still have to bum rides off people.”

  58. Thought that was too easy. Was really looking for a socialism thing as it relates to Correa in 51 above.

    Here’s another:

    When some wild-eyed, eight-foot-tall maniac grabs your neck, taps the back of your favorite head up against the barroom wall, and he looks you crooked in the eye and he asks you if ya paid your dues, you just stare that big sucker right back in the eye, and you remember what ol’ Jack Burton always says at a time like that: “Have ya paid your dues, Jack?” “Yessir, the check is in the mail.”

  60. Can’t tell which way the train went, by looking at the tracks.

    Can’t tell which way the mrkt will go by looking at the 12:30 – 2:00 action.

    Two sayings to live by.

    (Hint: the first one doesn’t mean anything… but, say it to someone and watch them try to figure it out. big fun)

  61. Gonna take the rest of the week off… still think we see an end-of-day rally.

    Good luck to all!

  63. z — yep. You need a HeadTrader! Give the interns another year or two… then just tell ’em it’s a video game.

    😉

  64. Rig Count Watch:

    Oil up 10 to 244 vs year ago 385

    Gas down 7 (new cycle low, 7 year low) at 665 vs 1,534 rigs a year ago

    Horizontals up 9 399 vs 568 a year ago.

    Louisiana lost another 4 rigs, second week in a row to be down, probably just shifting locations.

    Texas up 6, rare move up for the Lone Star state of late. Now at 342 rigs vs 922 a year ago.

  66. RRC punched through its 200 day 4 days ago, today up through its 50. Left a little on the table by trading away those July’s yesterday but I don’t complain about 3 hour doubles. The Augusts are up 40% or so now with the stock at $44 and I may tap out there too and reposition on a red day next week prior to earnings.

  68. GT – probably just noise, has been building seasonally after hitting an 8 year low in the off season. Storage up there is very full and with cheap gas down here and not a big export market people are probably looking at their rigs pretty hard. Will of course keep an eye on it but the generally low level doesn’t bode well for WCSB production.

  69. ATPG – I did and I have a skeletal post fashioned which I have been putting off posting until I thought people would be interested. I will try to get it out. Nutshell is that I like it more than I thought I would.

  73. Good afternoon to all.

    Wow wow wow!!!

    Clearly a third wave! Still going strong by the looks of things. Possible upside target in the 950 region on the SPX, then a pullback to 932 – 934 for wave iv, then the final surge for wave v. Pick an upside target – maybe 971.

    FWIW this is one of the most ridiculously overdone rallies I have ever seen – 700 Dow points in 5 trading sessions based on what? A few people saying things are quite as bad as expected due to cost cutting???

  77. Target for gold 960 – 965, silver 1450 ish, oil 65 – 66.

    I expect August and September to be big down months.

  79. Me too on the near term on oil, $65 probably gets tired much above that level unless we see product demand inch up.

  82. BS Lawsuit and Emerald is a bunch of idiots. Known fact that historically better off drilling grassroots then re-enter a P&A. I do see how a 50% royalty is uneconomical for most operators and therefore abandoned.

  84. well if you want to call that end of day mini pump a rally, I guess it qualifies.

    They held 8700 all day. All they needed to do was juice IBM.

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