California Dreamin’ Tuesday

96 thoughts on “California Dreamin’ Tuesday”

1. Tudor with you on the HAL sell:

   HAL Q2 follow-up ($22.33 – A) – Pretty simple market: beats/good news better than misses/bad news…and will drive near-term outperformance. Strong Q2 for HAL..but investors probably overreacting yesterday (HAL +4.4%, OSX +1.8%) as HAL estimates shouldn’t be moving higher given continued pricing/margin pressure (notable downtick in international profitability guidance). Like HAL’s positioning; 19x 2010 P/E is acceptable valuation..but not barnburner. More below.

2. Also worth noting from TPH today —

   PXP’s T-Ridge saga resumes ($27.95 – B) – Outperformed 170bps yesterday on rumblings that drilling might happen. Decent optionality, but very long road. T-Ridge worth $10/share at $90/bbl (nothing in our $49 target). CA budget proposal includes drilling…next step is Thursday’s state legislature vote (bypassing CA State Land Commission that rejected drilling last Jan). Process doesn’t end there…then for approval of CA Department of Finance, CA Coastal Commission, and federal Minerals Management Service.

3. TechTrader — due to the mo-mo in the mrkt, TT has backed off his “best trade Tues = short.” He is hanging out in neutral with a 50/50 call for today. This is TT’s version of “waiting in the weeds.”

4. HeadTrader is with the mo-mo crowd… he thinks you “buy pullbacks until proven wrong.” Pretty much the definition of jumpin’ on the Mo-Mo Train.

5. Credit rallying hard this morning. But, not much volume behind the moves. So, could change direction fast. Jumpin’ on the Mo-Mo Train can be dangerous. You have to be really really careful and quick… and keep your finger on the trigger to jump off quickly.

   IG 121 1/2

   HY 86 5/8

6. BJS bidding strong on what can only be translated as poor results. On a weak equity futures day I don’t see how negative margins and missed numbers get you up in this market when 2009 and 2010 EPS will be coming down. Will listen to call this morning and will add to puts if it pops and the call doesn’t warrant it.

7. Hear ya Jat, TPH not dummies. Argus cut HAL too.

8. TechTrader talking about potential for panic short-covering from the Elliot Wavers today. He thought Tues would be a down day too. But, has pulled back his odds to 50/50 and says the “real gamble today is trading at all.”

   Just fyi

9. Thanks BOP, good color. GS raised their S&P500 target for year end and their EPS for 2009 and 2010 yesterday but I don’t have the numbers. Anyone?

10. LINE looks like a breakout on the daily chart, through the Spring highs now.

11. ZTRADE:

    BJS – Added (5) August $15 PUTS (BJSTC) with the stock at $14.50, up 1% following an earnings miss but amidst a strong market and commodities back drop. Call in 20 minutes and I will add more, do nothing, or punt at that time.

12. NFX and RRC continue to fly. I may have to pull them back before they release quarterly numbers on Thursday.

13. Tater – when you get a chance can you give your thoughts on NFX, RRC and, of course, HK. Much appreciated.

14. NG up a penny now. Third straight day to be up if it closes here and the second to fight off an opening decline.

15. BJS — CEO thinks we are bottoming right now… actually “hiring back some employees in some locations.”

16. Morning all. Not sure why tech trader would think there would be a panic amongst Elliott wavers – remember they can always find a count to suit!

    I too had thought a down day – but I still maintain this can’t on (and it does!). The earnings are crap and its all just spin. Art Cashin did comment the same earlier but said the market was doing its own sweet thing.

    Nasdaq up 10 days in a row – hasn’t happened in 11 years. Ftse up 7 days in a row – also extremely rare.

    We hit 955 SPX which is in my target area, if we go above that then 962 is next then 971.

17. Market looks like it is running out of steam.

    BJS CC Notes 1

    Difficult times for all areas of business.

    Think market in U.S. and Canada is stabilizing in terms of pricing and activity. Seeing some hiring but I’d add it can’t be a net gain in jobs, more likely jobs moving to hotspots as I hear more E&Ps are laying off, not just service names. Simply put if commodity prices don’t bounce and I specifically mean gas there won’t be a bounce in activity in the U.S.

18. Nicky — i knew that comment would get an eloquent response from you. Not disappointed!

19. BOP – did you note TPH sees the 2010 numbers for BJS falling from current consensus around $0.48 down to TPH’s $0.30? Cost reduction just can’t get you there.

20. FLSR up on a Raymond price target cut from 215 to 200.

21. Note to BJS management: Don’t Read The Press Release. Ugh.

22. BJS — he said at the begining of the call that he thought things were bottoming…. but, getting into the details, don’t know how he can come to that conclusion. Not hearing it in the body of the call….

23. BOP – yep, I guess he means flat bottoming and only if you exclude retired capacity.

24. Hehe – BOP – well the worst thing about e-wavers is that they can always find a count to talk their book! That said I wouldn’t be without it.

    Bernanke – unemployment looking bad through 2010 and 2011. Hello there is not going to be a recovery if employment doesn’t improve. Just my very basic thoughts that no job means no money to spend and therefore growth is going to remain very slugglish if at all.

25. Nicky – agreed, pretty hard for people to eat, go out and buy stuff etc on corporate cost cutting based earnings gains.

26. BJS flat as we come to the end of the prepared remarks. People going to be asking more about the “bottoming comment” in the Q&A and how much of a reduction in costs they are seeing to let them say next quarter will earnings positive.

27. BTU getting banged on earnings by the way, call in 40 minutes, will listen. Glad I didn’t chase that rally.

28. BJS — are they usually good with their outlook calls? They sound optimistic, but they aren’t presenting the data to back that up.

29. My oil count remains the same. This morning could have marked the top. Will have to take out 64.50 area impulsively for that to be the case. Likely to be volatile into expiry today.

30. Did I hear that right – CIT may not avoid bankruptcy? Oh well lets rally a bit more on that bad news.

31. BJS — they use Ray Guns to enhance production?? cool.

32. BJS CC Notes 4

    U.S.
    Improved margins in all segments,

    “we think the worst is behind us”

    Note that they said last quarter margins would stabilize as we would see the full benefit of cost reductions in this quarter just past. Hmmm.

    The see slight drop in rigs,

    They think we are approaching a bottom in U.S. pricing, (which sounds right as stated by E&Ps and other service co’s)

    They are encouraged by recent large contracts they’ve gotten in the big oil and gas shales

33. At some point the cost cuts in the short term are extremely detrimental to development and growth in the longer term.

34. BJS – this is what they said last quarter regarding margins and cost cutting.

    Offsetting the impact of margin erosions in the U.S. operation somewhat will be the positive contribution from the cost reduction measures we mentioned previously. We will begin to see the full effect of personnel reductions and labor efficiency measures take place during – that took place during the second quarter show through in the third and subsequent quarters.

    Fool me once …

35. BJS – contract wins in the big shales, will you disclose order of magnitude and customers?

    No. Won’t do for competitive reasons. I understand not giving the customers but the ballpark order of magnitude hurts you? Come on.

36. I’m with you on the broad based rally Nicky. To me it’s nonsense.

    Yesterday I heard a guy say, “Well we’re at about 65$ S&P earnings for 2010 so if you apply a 15 or 16 times multiple we could rally another 5-10%”

    a)65? really? REALLY?
    b)15 times multiple? In these times? With rates only having one way to go?
    c)15*65 is full valuation and we are basically there already.

37. BJS — beating up on the “smaller players.” So, taking market share?

38. BJS Q&A Notes 2

    Capacity coming down, smaller players are having difficulty completing in the Haynesville due to inadequacy of design. Maintenance has not been good at some of the players and that equipment is going away plus HAL is cutting 20% of production. These are pretty good sized capacity reductions.

39. Agree VTZ – the market is starting to look very expensive.

    I don’t hear Bernanke saying anything that positive. Still lots of downside risk.

40. Nicky – Do you feel the USDX is going to bounce off 78.30 again? Am I going to get another crack at 1014 gold or do I need a retrace first in your books?

41. z — BJS rallying a bit now. I’m not hearing anything in the call to warrant this. Am i missing something?

42. BOP – they said they are taking some share in the major shales earlier. Would like to hear what the contract sizes were. Given last quarter’s flattish comments and the doubtful looking direction of the rig count I have to look at the rosy, “up from here” comments with a just a little bit of skepticism. I won’t fight the tape but I think if HAL doesn’t get follow through on its “beat” yesterday, given the high forward multiple here, I have to think a miss gets less follow through on a down day tomorrow. For now, the stock looks like it will be ok, marking the market. I would imagine the analysts who were negative pre call will stay that way and the ones who were calling a bottom will see the silver lining here.

43. BOP re 41, I wrote 42 before I saw it, I don’t think so, CEO is definitely selling the sunny side, without giving any numbers. The run seems to be tracking the re rally in the DJIA.

44. z — yeah. Heard the part about taking mrk share from the smaller guys. But, taking share in a shrinking mrkt with lower margins is NOT the same as “seeing a bottom.” Oh well… glass half-full / half-empty argument, i guess. Thx

45. wow. mind-reader! I wondered how you typed fast enough to answer #41 so quickly. ha!

46. VTZ – you might find this interesting on the dollar. I heard Larry Summers commented last Friday that the U.S. should ramp exports. Easiest way to do that is to punk the dollar. The good old fashioned “export your way out of a recession” thinking, only, this time, who will be buying?

    http://seekingalpha.com/article/150107-larry-summers-leading-the-u-s-economy-towards-economic-ruin

47. BOP – I use a mind reading ray gun.

48. you lease that gun from BJS?

49. Z,

    Food for thought, if BJS is having pressure on their margins, where would you estimate the margins of a vendor of the vendor? CRR?

50. BOP – sorry no, proprietary, this one was nearly 20 years in the making.

51. Wyoming – last I heard ceramic was a generally a penny over RCS. And when I hear the BJS guys in the field are cutting costs from every source possible, well …

52. If they purge Bernanke in favour of Summers I say watch out below for the dollar. At least Bernanke postures like he has a clue and plans to remove liquidity.

    For all the talk about countries buying treasuries Brazil has actually been dumping them for 2 years straight.

53. BJS CC Q&A

    Ah, someone finally asking the HAL international 300 to 500 bps hit in the 6 quarters question.

    Can’t comment on HALs statement. BJS not seeing that kind of international pressure to reduce margins. Hmmm.

    They keep saying international pricing pressure is no where as near as bad as in NAM. That’s obvious. HAL was speaking about the go forward view.

    Analysts seem to be drinking the coolaid.

54. Summers is a smart guy… but he thought the Stimulus Plan was actually a Stimulus Plan that would create jobs immediately. So, either he is an idiot-savant, or a political tool. Both are bad characteristics as the “independent” Chair of the Federal Reserve.

55. BOP – switching to BTU call. If you linger at BJS, let me know if they say anything interesting.

56. Re BTU – I’m just listening to keep an eye on the coal markets, not going to play the stock, their guidance stunk up the room.

57. BJS call over. Q: “when are you going to add north american capacity?” Answer: “when we see demand pick up and margins expand.” Duh.

58. z — so… whatcha gonna do with your BJS puts?

59. BOP – sitting on them for now, not adding more yet, may not for awhile.

60. Still listening to BTU, has Ben said anything interesting?

61. re: Ben… just watching headlines scroll by. “Get the deficit down” and “won’t comment on social policies.”

62. Summary of Ben’s comments

    http://www.bloomberg.com/apps/news?pid=20601087&sid=artgbcp7ymuk

63. Thanks BOP

64. on 2

    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/07/20/ED2M18S3UU.DTL

    this would help pxp and vq

    vq hit 9 today

65. Nice call on the VQ Bill.

66. dnr has an interest in mlp GEL which raised its dividend 10 % last week

67. Listening to BTU, getting a bit into minutia now.

    Just looking about in energy land, most spikes in E&P this morning now gone, volumes very light. Just missed carrying through on my pullback comment on NFX and RRC above. If NFX continues to pull back I will add a 4th and final slug there prior to earnings on Thursday.

68. BTU call over, will have comments in the morning post. Nothing earth shattering, lots of uncertainty from both the met coal (steel) and thermal coal (electricity) markets.

69. ZTRADE

    RRC – Added (5) August $45 Calls (RRCHI) for $2 with the stock down a dime on the day. Earnings are Thursday and I will likely add more of these on strength should be get before the call while taking profits in my $42.50 call position.

70. Haha, this didn’t take long.

    NEW YORK (Reuters) – CIT Group Inc warned on Tuesday it could still file for bankruptcy if a cash tender offer for its outstanding notes fails, one day after securing $3 billion in emergency financing from its bondholders.

    The 101-year-old company, which lends to nearly 1 million small and mid-sized businesses, also forecast a second-quarter loss of more than $1.5 billion.

    In a regulatory filing, CIT said the cash tender offer for its outstanding floating-rate senior notes due August 17 was the first step in its recapitalization plan.

    The lender said it could file for bankruptcy if the offer does not succeed. The offer, disclosed on Monday, is $825 for each $1,000 principal amount of notes tendered on or before July 31.

    “The disruptions in the credit markets that began in 2007 … have materially worsened in the first and second quarters of 2009,” the company said in the filing. <—- Sounds good for the economy.

71. Crack investigator Cramer is on the CIT case, sure to find answers as to why Gov did not bail out CIT after billions to other banks-Sheila Bair must provide answers, has invited her to appear, heh-doubt if Goldman has any stake-
    another note, heard that bondholders provided financing at well over 10% interest.

72. Maybe the markets aren’t liking Ben or earnings so much after all?

73. Choice – yep, feel better just knowing he’s on it.

    V – feels like a buyers strike, volumes not really enough to be much beyond minor profit taking in most of my names. Market has had too much of a good run methinks.

74. z — put on your old sell-side analyst cap and tell me, after that BJS conf call, would you upgrade the stock? Care to call if we will see any changes in recs there tomorrow? thx

75. BOP – re BJS

    You have 16 analysts at Hold
    2 in the Buy camp and
    4 in the Sell camp.

    I would imagine the Buy’s stay buys as they’re “look through the trough that has a hole in it optimists”

    There may be enough to push some of the Holds into Buys as well if they take management’s comments at face value. To me it seemed there was some faith required in a flattening gas rig count in 3Q that they already expected in 2Q and which did not materialize for gas but did for oil.

    They are not deep in debt, so no troubles there. Maybe no urgent need to whack estimates further but certainly no upward impetus to raise them. At $0.47 for 2010 (with a range of 2 cents to 90 cents) they are not cheap, especially as that earnings level is down from this year’s numbers which are now going to come in close to $0.70 (their fiscal year is September).

    So, long story short (too late), I don’t know, maybe, I certainly don’t see a reason to be overjoyed with the forward valuation given the high degree of uncertainty with the outlook. I also would not be so quick to discount HAL’s international comments yesterday which predict a contraction in margins due to increasing pricing pressure overseas. But maybe BJS is immune to that sort of thing.

76. z — thank you for your thoughtful response. I find trying to time/understand/predict/and profit from the energy services group to be very difficult. So, looking for a little education there. Your comments help a lot. Thanks!

77. Sure BOP but as you are aware I’m an E&P guy first and foremost. Notice howcircular 75 was. You thought I said something when really I was just jogging around the topic. Had they been an E&P spinning that stuff I would be looking for downgrades.

78. z — i understand spinning. But, i also understand standing at the bottom, windmilling your arms, trying to stablize and find a new direction. I think that is where BJS thinks they are. Whether there is more down to go, we shall see. But, they did a good job of making analyst think they are bottoming. So, if a stock isn’t going down, it will go up, all else equal.

    How’s THAT for spinning?

79. I think it moves with the market unless one of the bigger players following it makes a move on the rating. As it isn’t selling off hard I’d guess the post call squawk box chat with the sales forces was pretty much along the lines of “yep, crappy quarter but we knew that going in, feeling pretty neutral here as the company speaks about bottoming”

80. September crude down 20 cents just about $65.

    NG flat to slightly down with 30 minutes until the Nymex close.

    API after the close:
    Street looking for 2 mm barrel draw on crude,
    600K gasoline build and
    1.5 mm barrel build in distillates.

81. Amazing paint drying action for earnings season. Market looks wrung out.

82. I’m hear working on a project if anyone has a question/comment. Somebody who gets API please post when you see it. Thanks.

83. V – It seems they have one mission now with the market … kill the shorts. Lot of up days strung together here.

84. Beerthirty

85. API Watch – bearish looking report

    Crude rose 3.1 mm barrels (expected down 2 mm barrels)

    API says utilization was off 2%

    Gasoline was up 800 K barrels vs 600,000 expected

    Distillates were up 147,000 vs 1.5 mm barrels expected.

    September crude fell 20 cents shortly after the report.

86. Jat – can you see if API saw a big increase in crude imports?

87. I have slightly different data with a gasoline build of 1.3mln. Doesn’t really change a ton. Same data on distillates / utilization. API also reporting that imports were down 563k WoW

88. Imports down? Then their numbers simply don’t add up.

89. On the gasoline you are right, I typed that in wrong, 85 should say 1.3 mm barrel build on gasoline. Thanks.

    On crude, their numbers simply don’t jive.

90. Hard to believe this

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aPn_MSUByx6A

    when you see this

    http://www.news-to-use.com/2009/07/oily-charts.html

91. Suncor received competition approval to buy Petro-Canada effective August 1 and it is going to be forced to sell 108 retail stations in Ontario.

92. V – saw that, pretty standard operation south of the border. Tilts them back more towards the upstream which may be a plus in the eyes of the Street. Numbers to be released in the morning. Stock has been moving well with oil.

93. Posted looks at the requested names. Not getting much. I’ll keep them up for a bit and try to work them. Generally am not seeing the names move in a manner conducive to my methodology. TA guys like to cop out by saying that it’s “not trending”. I’ll just say ??? for now.

    RRC – getting nothing
    NFX – take a look at the weekly chart, gives a bit of a clue
    HK – still think the current swing up is overdone but am obviously wrong there.
    Sorry, absolutely worthless for now, sitting out until the murky waters clear for me a bit.

94. Agree, the only question was the Petro-Canada clause. Only mentioned it because there was still an arb.

95. http://www.mhenergy.com/HOME/News/6460065.xml?sub=HOME&p=HOME/News&amp;?undefined&undefined

    z might be time to look at pxp again

96. see bop today # 2

    t-ridge worth 10 bucks to pxp

    i might buy options on weds, please wait until im done 🙂

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