28
Jul

Tuesday Morning

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In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today - Why I Added What I Added Monday
  5. Earnings Watch: (SII, VLO, NOV)
  6. Odds & Ends

Holdings Watch:

  • $10KP:

    • $28,200
    • 59% Cash
    • The Wiki Holdings tab is updated.

 

  • Yesterday's Trades:

    • NFX - sold the (20) August $40 Calls (NFXHH) for $1.85, up 67% since entry last week. Still holding the $35s. Market is very indecisive and in my book, the near term easy money was made here last week. Name is still cheap and I’m likely to reposition on a pullback.
    • NFX - sold the remaining NFX $35 August calls (NFXHG), for $5.40, up 148%. I will reposition on a group wide pullback. Cash in the $10KP is now about 70% of total.
    • SWN - Added (10) SWN $45 August Calls (TKQHI) for $0.90. I am starting to build a position for earnings Thursday afternoon/Friday CC.
    • OII - Added (10) OII $50 Calls (OIIHJ) for $1.55 on the mid with the stock at $48.25. Earnings come out Wednesday night for a Thursday morning call and I may add another set or two of these before then. I play these guys this time of year as an earnings and a hurricane play.
    • FSLR - Added (1) FSLR $180 September Call (HJQIP) for $13.30 on the mid with the stock at $172. I’m looking for continued improvements on the cost per watt metric (already industries lowest in thin film) as well as a more upbeat tone about the U.S. solar market and more details about the French market detail penned last week.
    • See bullets in the "Stuff" section for more about why I added these.


Commodity Watch

Crude oil closed up $0.33 at $68.33 yesterday in listless trading. Trading was tied to the broad markets and the dollar's lack of direction. This morning crude is trading off $0.60 on weaker index futures and a flat dollar.

  • OPEC Watch: Tanker tracker Oil Movements puts OPEC quota compliance at 72%. This is the slackest I have seen compliance since last Fall when OPEC began seriously reining in volumes. Oil Movements also projects that OPEC crude oil exports will drop 380,000 bopd in the four weeks to Aug. 8 to 22.39 million bopd.
  • Early Reach On Oil Inventories:
    • Crude: Down 1.6 MM barrels
    • Gasoline: Down 650 M barrels
    • Distillates: Up 1.0 MM barrels

Natural gas fell $0.09 to close at $3.60 yesterday on a slight rise in imports and mild weather. This morning gas is trading off slightly but we have front month expiry tomorrow so it could get a little wild.

  • Imports Watch: up 0.2 Bcfgpd from last om last week, down 0.8 Bcfgpd from last year.

    • LNG: 1.5 Bcfgdpd - pretty much treading water. U.S. gas traded higher than European gas last week and if that keeps up it could fuel volumes in 3Q coming to the U.S.
    • Canada: 7.5 Bcfgpd - in line with last week, down 0.7 Bcfgpd from last year.
  • Tropics Watch: Nothing for at least the next couple of days.

Crack Spread Update


I continue to avoid the independent refining group, see more details in the VLO earnings snapshot below.


Stuff We Care About Today

This Week's Earnings Plays, or Why I Added What I Added Monday: Today OII, tomorrow SWN and FSLR

 

  (OII) - Looking for a beat and good guidance:

  • On the quarter I'm looking for an earnings beat. So is everyone else. While management said last quarter that the year won't necessarily follow the normal seasonal pattern of lower earnings in 1Q and 4Q to as much of a degree as usual, analysts have 2Q earnings pegged at 1 cent over 1Q09 earnings which were a record. Historically, management has underguided with actual results coming in either at the top end of guidance or above it. 
  • Management guided 2Q EPS to a range of $0.75 to $0.85 ... note that:
    • 1Q09 was $0.80 vs 1Q08 of $0.74
    • 2Q08 was $0.93
  • A beat is necessary for strong performance but it must be accompanied by stronger guidance. Management inched up the low end of 2009 guidance on the last call by a dime to a range of $3.10 to $3.60. Before that, guidance had been inching lower for several quarters.
  • And strong guidance. On the last call, price for ROVs was expected to weaken this year but may not have come in as much as previously forecast by management since oil prices are better than they would have anticipated during the last call ($53 as of the end of  April for the 1Q call vs $68 today)
  • For that to happen we need to see improved fleet utilization on the ROV side and the results of previously announced cost cutting measures. Good chance we see improved day rates on the ROVs on more construction jobs in the mix and the weaker dollar. 
  • There's a good possibility we'll see their umbilical backlog creep back up which would help analysts firm up their 2009 and 2010 forecasts. 
  • Debt to Cap continues to drift lower here and with this year's reduced capex I'd expect that to continue this quarter and next unless they decide to pick off one of their smaller rivals.

Earnings Watch: 

VLO Reports Weak But In Line Results

  • The 2Q09 Numbers:

    • Revenue of $17.9 B vs $15.2 B expected
    • EPS of ($0.48) vs ($0.50) expected (this was pre-announced weeks ago)

      • low diesel and jet fuel margins and lower sour crude differentials (in other words the grades of oil they consume weren't as cheap to benchmark crudes as they have been in the past due to new sources of lower quality crude. Lower margins were partially offset by stronger performance from the retail side and from the startup of their acquired ethanol businesses.
  • Key Quotes:

    • “The downturn in the global economy has sharply reduced demand for refined products at a time when new refining capacity is coming online around the world."
    • "shutdown of our Aruba refinery was completed in mid-July mainly because of very poor margins. Our plan is to review the margin outlook in September to decide whether to restart the plant or keep it down."
    • "We will continue to monitor our other refineries for situations in which it makes economic sense to slow or shut down specific units or the entire plant."
  • VLO's Comment on Cap and Trade:

“A very important issue that every consumer, taxpayer, and investor should examine is the deceptively titled ‘American Clean Energy and Security Act of 2009,’ which the United States House of Representatives narrowly passed in June. This legislation, in some form, will be before the Senate early this fall. We recognize the concerns about climate change and increasing carbon dioxide levels. However, a hidden tax imposed by this legislation in the form of a cap-and-trade system on hydrocarbons will significantly raise the consumer price of gasoline and other fuels, and more than a million high-paying jobs will disappear from our already weakened economy with no measurable improvement in global climate change. I urge all Valero investors to contact their Congressmen, Senators, and the President to express opposition to any potential bill. To assist you with this effort, Valero has created a resource at www.voicesforenergy.com.”

  • Guidance: None
  • Nutshell: I've been avoiding the group for most of this year and see no reason to bottom fish VLO or other names in the group now.
  • Conference Call: Today, 11 am EST

NOV Reports Decent Quarter

  • The 2Q09 Numbers:

    • Revenue of $3.01 vs $3.046 expected

      • Backlog eased from $9.6 B at the end of last quarter to $8.7 B at June 30
    • EPS of $0.90 (clean) vs $0.87 expected (estimate range was $0.64 to $0.95) 

       
  • Guidance: None
  • Nutshell: I've not been in the name for quite some time. Performance on the revenue and margins side was impressive considering the current environment and their balance sheet remains more than what I'd call strong. Will listen to the call.
  • Conference Call: Today, 10 am EST

 

SII Comes Up Short, Sees Prices Stabilizing

  • The 2Q09 Numbers:

    • Revenue of $1.944 B vs $2.0 B expected
    • EPS of $0.15 (excluding charges) vs $0.21 expected

      • reflects lower N. American (NAM) activity and pricing; hit in in U.S. land, Canada, and offshore Mexico.
  • Management Quote: While we believe it’s unlikely that natural gas fundamentals will support U.S. activity growth in the back half of 2009, we do believe pricing in our oilfield-related product lines has stabilized.
  • Guidance: None
  • Conference Call: today, 11 am EST

Reporting After The Close Today: (STR) and (COP)

Odds & Ends


Analyst Watch:

  • None

121 Responses to “Tuesday Morning”

  1. 1
    zman Says:

    CFTC hearings begin today:

    http://www.marketwatch.com/story/oil-falls-ahead-of-supply-data-hearings-2009-07-28

  2. 2
    bill Says:

    http://online.wsj.com/article/SB124874574251485689.html

    speculators are blamed for oil price spike.

    I wonder who is to blame for the fall.

    Maybe they can consult Hilary Clinton as she is an expert in the cattle futures pits

    Sorry… lol

  3. 3
    zman Says:

    No problem Bill, wasn’t it chicken futures?

  4. 4
    BirdsofpreyRcool Says:

    CaseShiller home prices down just a smidge more than expected… -17.9% vs -17.06 expected.

    I know this is a weird way to look at it, but the faster prices fall, the faster we find a bottom. Average income levels + low interest rates + natural demographics will put a floor under home prices, so this is not a “bottomless pit.” Just a pit looking for a bottom.

  5. 5
    BirdsofpreyRcool Says:

    Strangely, the Credit Market rallied a bit higher after CaseShiller. Maybe all us bond geeks think along the same lines. “Closer to the bottom is better…. let’s buy bonds!”

  6. 6
    zman Says:

    BOP – I agree, faster fall is better. I wonder about rising housing starts as a positive thing. I hear/read lots of people say higher starts are better but then isn’t part of the problem a big inventory of unsold homes? Seems better to work the inventory down before we add to it.

  7. 7
    zman Says:

    Could be tough on Shell, CVX

    http://www.reuters.com/article/companyNews/idUSLS65795020090728

  8. 8
    bill Says:

    cattle futures but the broker was tied to arkansas chicken producer and trades were allocated at end of day

    she manage to make money in a declining market buying on the low and selling at exact highs on the day

    open acct with a 1000 dollars and took 50 lot trades with nio margin backing it.

    LOL, and the politicians talk about wall street greed and speculation

    They are all hypocrites on the take..and thats both sides of the aisle

    up here in ma, legislature were caught stuffing bribes in their shirts

    The more sophisticated get 8m advances for book deals that never sell.

    Anyone have a copy of Devil Patricks life

  9. 9
    zman Says:

    Red open on tap. I may add to those positions opened yesterday and add back the NFX if it takes a good hit but will be patient.

  10. 10
    BirdsofpreyRcool Says:

    Wow. The beat goes on….

    TechTrader says 55/45 best trade is still long today.

    HeadTrader says it feels more like we should sell the rallies.

  11. 11
    BirdsofpreyRcool Says:

    HT adding “but maybe we should ride the horse until it bucks us.” Meaning, don’t bet against the mo-mo guys, until they stop buying.

  12. 12
    zman Says:

    Oil down $1.20 at the open, falling fairly quickly. Profit taking before the CFTC hearings.

  13. 13
    zman Says:

    All three of today’s earnings names getting dropped at the open, especially the VLO.

  14. 14
    BirdsofpreyRcool Says:

    VLO — there was a WSJ article yesterday that pointed out there is no longer an advantage to being able to run low-grade crudes (like VLO Aruba and FTO’s two refineries). That probably can’t persist in the long run, but for now, refining is somewhat discombobulated, it seems.

  15. 15
    zman Says:

    Hear BOP, probably tough for someone like FTO now, who I normally would like.

  16. 16
    Wyoming Says:

    Tuesday movie quote

    “Baby got a little gas”

    http://cbs2chicago.com/local/chicago.coldest.july.2.1103959.html

  17. 17
    zman Says:

    ZTRADE:

    SWN – Added (5) SWN August $40 Calls (TKQHH) for $2.60 with the stock at $41, off just under 2% with a weak market and group. Still building my position for Friday’s quarterly release.

  18. 18
    zman Says:

    re 16 – that’s why they changed the name to climate change, lol.

  19. 19
    Wyoming Says:

    Bring it on Cletus, walk on over limp back …

  20. 20
    BirdsofpreyRcool Says:

    July Consumer Confidence down much more than expected at 46.6 vs 49.0 expected and 49.3 in June.

  21. 21
    zman Says:

    BOP – well, better news hasn’t been working for the market for the last couple of days so maybe worse news …

    NOV call about to start.

  22. 22
    zman Says:

    Interesting to see CLR still doing well despite oil and the group, looks like buying yesterday and now today (it is green) on WLL reporting later this week.

  23. 23
    choices Says:

    DX up over 79 this morning, gold down $11

  24. 24
    BirdsofpreyRcool Says:

    The chart of Fannie Mae 5-yr CDS spreads says volumes about where we were… and where we are now, in the credit/debt market.

    http://www.capmarkets.com/ViewFile.asp?ID1=306579&ID2=324596449&ssid=2&directory=11608&bm=0&filename=What_A_Difference_A_Year_Makes_7-28-09.pdf

  25. 25
    zman Says:

    NOV call, big picture is that outside Brazil deepwater activity is slowing. Financing remains #1 problem holding up new orders. Service remains more difficult than rig tech. NOV is driving the service group lower. I may take a little more OIH soon. On the plus side, my BJS $15 strike puts are waking up. The $12.50s are going to take more of this.

  26. 26
    choices Says:

    z-NFX weak this AM, currently $38.70-may get a test of mid $37 area which I read as breakout area as tater mentioned couple of days ago.

  27. 27
    jat Says:

    Z,

    What’re you thinking on OIH? 25 not clear to me.

  28. 28
    zman Says:

    Choices – Yep, I bailed out yesterday, looking for a re-entry but will take my time as in general, trying to fish early when people have made those kinds of profits has not worked out well for me. I don’t think it needs to fill that gap but I do think they are in that “so now what?” time after earnings and that it could fall back to your level.

  29. 29
    zman Says:

    Jat – apologies, meant OII

  30. 30
    zman Says:

    I may take some NOV for a trade in a minute on the long side. Stock is down on earnings, group, market, oil. CEO outlining quite a few positive items, not so much a rebound but a stabilization. Good things in Russia, new rig order in the M. East and seeing more of that. No rush but at end of CC, I may take some if it is still down 6+%.

  31. 31
    zman Says:

    SII on the tape with a second press release, talking about drilling results for CHK in the Haynesville. Wyo and TEXW can I get your thoughts on the pr? They are talking about a tripless run, vertical and lateral drilled together. There are no details in the press release and I thought others were already doing this, not commonly but has been done, so not sure what’s new here.

  32. 32
    zman Says:

    NOV didn’t stay down and I’m in no rush to trade it now. Call turning slightly more positive but my sense is it will trade with the broads and worse than the group if the broad indexes roll over.

    VLO call about to start.

  33. 33
    kaman Says:

    BJS Aug puts finding some life.

  34. 34
    zman Says:

    VLO call about to start

  35. 35
    zman Says:

    VLO CC#1

    Not in a hurry to do any acquisitions
    Will focus on cost structure

    3Q operations:
    Cash operating expenses: $4.50 per barrel

    Ethanol op exp cost of $0.30 per gallon

    The traditional refining cost per barrel is actually pretty good.

    Q&A
    Aruba refinery on hot mothball status, conducting maintenance, cutting back on contractors, could move to a cold shutdown status, no decision yet, review in September.

    Midcon inventories pretty full right now

    Cost savings plans – company wide penny pinching going on

    $1 billion savings program in 5 years. About $100 mm of savings so far, this has lagged plan, part of that is increased reliability, should be over $200 mm by year end.

    ….

  36. 36
    zman Says:

    VLO Q&A 2

    There is the possibility they will have a loss in 3Q. Not a real shocker but the Street is at 3 cents (positive) now. Unless they see some improvement in differentials for their heavier crudes they will expect a loss in 3Q and 4Q.

  37. 37
    bill Says:

    what is the ticker symbol for message 31

    SLL?

  38. 38
    bill Says:

    nevermind sii

    gas stocks are getting hit hard

    wall stree transcript??

  39. 39
    zman Says:

    ZTRADE:

    VLO – Adding (20) VLO $17 PUTS (VLBTM) for $0.43 with the stock at $18. The conference call is portraying more of the same depressed results for 3Q and 4Q. Cost cutting not happening as fast as expected, if no improvement in differentials on their intake crudes they could report losses in 3Q and 4Q. Current expectations may drift lower as Consensus is looking for slightly positive earnings in the back half of the year.

  40. 40
    zman Says:

    SII, Smith International

  41. 41
    zman Says:

    Bill – weak market, weak commodities, stronger dollar, gas giving back last two week’s rally on mild weather.

  42. 42
    bill Says:

    the politicians do a good job in talking the energy markets lower

    I remember they did this about a month ago knocking oil down about 8 bucks

    now that we are back to 70 the rhetoric is picking up again

  43. 43
    zman Says:

    Bill exactly. Get it low enough and the Nigerian cease fire will end.

  44. 44
    zman Says:

    Kaman – re 33, yep, group getting hit now with SII and NOV results taking down SLB and HAL and then from there, everyone else. Will probably exit the BJS puts if it can fill that gap in the chart down to about $13.50 on the $15s and may take the loss then or hold on to the $12.50s.

  45. 45
    Nicky Says:

    Good morning all.
    Broader market – this is getting tricky. Could be this morning’s pullback is ivc with one more move up to come – target area 992 – 997 spx. Support on Spx at 965,950,942.
    This looks like a bullish wedge but if it is to play out then needs to hold in this 965 area I would say or something more bearish may be playing out.

  46. 46
    zman Says:

    VLO citing a $0.77 per gallon of gasoline price increase due to cap and trade bill passed by the House. This is a congressional budget office estimate.

    Your Tax Dollars Working To Scrap The American Refining Industry:

    Estimate is that carbon credits will costs $20 per metric ton which translates into $6 billion of added cost for U.S. refiners refiners were only given 2% of their total footprint. The refiners in the U.S. are responsible both for the making of crude into gasoline AND then the burning of gasoline.

    In the House legislation, foreign refiners are only responsible for the emissions produced by the burning of the gasoline here. Not for the production of the gasoline in the foreign country. This puts the domestic refineries at a distinct pricing disadvantage. Moreover, India has said they will not participate. China is thinking about it but good luck on actual enforcement.

    Charles River estimates the House Bill would cost 1 million jobs.

  47. 47
    zman Says:

    Nicky – thanks for 45

  48. 48
    zman Says:

    VLO CEO commenting that this is the worst domestic diesel demand he’s ever seen. Trucking is 60% of diesel business and we need to get this business to get going. We see very weak demand, only thing that will take the inventories off the market is 1) an economic recovery, 2) a cold winter, or 3) reduced production.

  49. 49
    zman Says:

    VLO call over … depressing outlook for the domestic refiners. Headwinds to margin gains in the form of higher production of crude coming from OPEC (at some point) and the aforementioned weak product demand and unfriendly legislation.

  50. 50
    BirdsofpreyRcool Says:

    MIDDAY UPDATE

    Equities pull back, w/sp500 off more than 1% (on track for weakest performance since Jul 7). Handful of disappointing earnings releases, coupled w/the very strong recent price action, weighing on the tape. Keep in mind the sp500 has climbed 10.5% since AA kicked off earnings on Jul 8 as >75% of companies have reported ahead of expectations. Selling today is pretty orderly, w/some profit taking occurring, and volumes are on the light side (but still decent). Sentiment towards equities for now remains positive and this market has had trouble for weeks making sustained moves lower.

    · Sectors – sp500 bank index is up fractionally on the day, extending yesterday’s rally (when it was up >3%); the bank index hasn’t had two consecutive green days since early Jul. HMOs very strong today, w/AET rallying 11% (more than making up for Mon’s weakness, which came after an earnings miss/guidance reduction) and CVH up 8% (on back of earnings). Tech is off ~1% (3rd consecutive day in the red) and continues to see some sell-pressure (has been the case since Friday but really just a case of small profit taking). Energy and utilities are both off 2% (RRI’s warning weighing on utilities).

    · Dollar – the DXY index is up 0.44% on the day (largest % gain since Jul 10), but the buck’s performance against individual currencies varies. The Euro is down 0.55% against the dollar (DB’s earnings being cited as one of the reasons for Euro weakness) but the yen is up more than 1% against the dollar (risk aversion trade); the Euro is down ~1.5% against the yen.

    · Treasuries rally ahead of this afternoon’s auction ($42B of 2yrs at 1pmET); 10yr yields 3.63% (vs. 3.72% on Mon).

    · Crude – falling 2.6% on the day (largest decline since Jul 8). The stronger DXY, along w/noise out of Washington (today’s hearing and this morning’s WSJ/CFTC article), all weighing.

    · Corp Credit – IG is out ~4bp and pacing w/equities for the most part (although earlier this morning IG was out ~7bp to nearly 120 as the ABK news weighed). HY is down 5/8.

    · Housing prices – the Case-Shiller home price index, whose May value was released this morning, is one of a number of price measures that show that price declines are moderating or that prices are stabilizing. The Case-Shiller 20-city composite declined 0.2%m/m (seasonally adjusted) and fell 17.5%oya. The month-over-month decline was the smallest since March 2007, and the year-over-year drop was the smallest since August 2008.

    · M&A deals announced today: IBM unveiled plans to buy SPSS and S said it would buy VM.

  51. 51
    zman Says:

    Like watching red paint dry now. Grabbing some lunch. VLO hugging the $18 level. Can’t imagine what an analyst could tell me right now as reasoning to own it now, right now. Lots of uncertainty, nothing compelling on the near term (next 6 months) horizon.

  52. 52
    BirdsofpreyRcool Says:

    #46… I’m practically speechless here… but, not quite.

    U.S. Business needs to SPEAK UP on this stuff!! Once enacted, it won’t go away. And it is just about the WORST THING I have ever personally seen our own govt try to foist on it’s own people… under the guise of climate change. But, it does very very little of what is is “supposed to do” and is really all about political CONTROL and wealth REDISTRIBUTION.

    It’s all so stupid… it makes my brain hurt!! Can more people PLEASE tell our Govt that they are volutarily putting America into servitude to China with this? Are we that big of fools?? Nancy Pelosi thinks so… ’nuff said.

  53. 53
    zman Says:

    BOP – I think the panic / rush to do something method always ends in disaster. The CBO didn’t just make up that $0.77 gallon figure and that could be a best case scenario. Boggles the mind. I remember congressman after congressman claiming cap and trade would have $0 to less than $200 per year of cost per family. Maybe they mean after people are forced to stop driving.

  54. 54
    BirdsofpreyRcool Says:

    BHO is on record as saying “climate change legislation” would cost the average American “about the price of a postage stamp per day.”

    If we let them get away with those kind of lies, maybe we deserve to be boxed up and put on a shelf.

  55. 55
    zman Says:

    Fairly remarkable resilience in CLR. Everyone there is well watching.

  56. 56
    zman Says:

    … that CLR well, the Mathistad #2 is a m. Bakken offset to a 1,250 bopd IP TFS test drilled in 2008.

  57. 57
    BirdsofpreyRcool Says:

    z — where do you see the Math#2 results? thx

  58. 58
    zman Says:

    … this is the well that they feel would prove the concept that the TFS and M. Bakken are separate distinct reservoirs. If that works out they are thinking to drill from super pads, 4 wells, 2 wells going one direction (1 each to the TFS and M. Bakken) and 2 going the other direction. Then you will start to see an even greater reduction in drill and complete costs.

  59. 59
    zman Says:

    BOP – on the CLR 2Q press release on August 6th. I had been hoping for some weakness in the name prior to earnings but so far no joy in that endeavor.

  60. 60
    RMD Says:

    Z, did not listen to VLO call. Any other info on ethanol from them?

  61. 61
    zman Says:

    RMD – they got a great deal on the assets, yada yada yada, corn prices are helping, more yada, cost per gallon at $0.30 … I didn’t hear much else.

  62. 62
    zman Says:

    … and throughput was seen at 2.2 mm gpd for 3Q. That’s up from 1.6 mm gpd in 2Q from this last quarter. Don’t recall anything about acquiring more plants but they seem to be hoarding cash now.

  63. 63
    BirdsofpreyRcool Says:

    z — when are you headed out for vacation? I’m out the week-and-a-half before Labor Day… but, thinking about starting early. Like, now.

    After earnings season is over, then we will have the July Jobs report on Aug7th… unless there is a hurricane or two, that might be all the action we see for a while.

  64. 64
    zman Says:

    August 11-14th, I’ll be out of pocket that Tuesday but should have light posts Wednesday through Friday of that week.

  65. 65
    zman Says:

    CLR – case of what is strong on a weak day gets stronger.

  66. 66
    BirdsofpreyRcool Says:

    frankly, except for short-covering, i have no idea what is keeping BJS up here… should be 10-12 at the most, for now.

  67. 67
    zman Says:

    ZTRADE:

    WLL – Added (10) WLL August $45 Calls (WLLHI) for $1.55 with the stock at $43.30, down 3+%. 2Q earnings after the close on Wednesday.

  68. 68
    Denise Says:

    Good afternoon everyone-been out of town and catching up on my reading.

    Went to Costa Rica for the first time-beautiful country but it reminded me of Dallas in the late 80’s a sea of half empty buildings and homes -all constuction halted in the middle of a building boom)

    I think this is an interesting thesis-(forgive me if you discussed)

    Will China manipulate commodities? (for their benefit of course!)

    Was reading that the state owned and managed industrial co’s in China are struggling with profitability.Chineese officials are very concerned.

    One way to get profits up would be to cut input costs (raw materials)

    If we recall they began stockpiling crude, copper, ore, ect… last fall and continued while prices were low.

    I have read a few articles reccently that say there are huge warehouses full of ore, copper, manganese,ect.. We know they were buying crude close to the low.

    Why wouldn’t they start selling to drive down their material costs and take the profits?
    Crude, copper, ore ect.. will start to rollover. The selling will beget more selling ect…. Like the buying started more buying

    Then they can start the cycle all over!
    Start buying again at lower prices.
    Makes sense-doesn’t it

  69. 69
    zman Says:

    BOP – I think you answered your own question.

    http://shortsqueeze.com/?symbol=bjs&submit=Short+Quote%99

    It also keeps me from doing that CRR put trade again.

  70. 70
    Wyoming Says:

    Z,

    Any details you can provide for #31, SII? Link, file thinking they are talking about continuous system but want to make sure.

    VTZ,

    My mistake on mis-identity yesterday on sand pit opportunity, thought it was Z. made comment this morning on yesterdays section.

  71. 71
    zman Says:

    Denise: good points, thought I read the other day lots of layoffs happening over there, despite all the “growth”. The Chinese continue to pile on the crude contracts, most recently in Latin America but plenty of examples in Africa as well.

    … and we did pick Amelia Island for the vacation.

  72. 72
    zman Says:

    Wyo – will look about, scant details in the pr. Don’t other folks already do that on a trial, non widespread basis? By the way, remind me what that casing while drilling name was?

  73. 73
    zman Says:

    CLR up 2.5% now, only green in energy on my screen outside of one solar.

    Market just won’t give it up here which is probably good since I went from cash loving guy on the open Monday to getting ready for energy earnings week #2 by the close.

  74. 74
    zman Says:

    Wyoming – this is all I have found so far:

    HOUSTON, Texas (July 28, 2009)… Smith International, Inc. (NYSE: SII) announces drilling optimization solutions for Chesapeake Energy Corporation (NYSE: CHK) resulting in their first well drilling Curve and Lateral in one run, with no trips in the Haynesville shale gas play. The ability to drill the curve and lateral in one run with one directional assembly will afford Chesapeake the opportunity to further reduce time and cost on future wells.

    The powerful combination of Pathfinder, Smith International’s Directional Drilling group with their advanced drilling simulation technology, i-DRILL®, and DBOS® working in conjunction with Chesapeake’s Drilling Team, including engineering and superintendents, have come together to reach this milestone.

    The collaborative gains from practical drilling knowledge and technological innovation will continue to put both Smith International and Chesapeake at the forefront of cost reduction and improved efficiency with regard to hydrocarbon extraction in the Haynesville shale gas play.

  75. 75
    bill Says:

    46

    where are the refineries

    oh yeah Texas thats were Bush is from

    Ok yeah tax the hell out of Texas and Oklahoma they dont vote demoncratic

    Im suprised the sheeple arent marching in the streets

  76. 76
    bill Says:

    the beuty of 46 is they can blame the evil oil companies for the price hike

  77. 77
    bill Says:

    Barney Frank doesnt understand the importance of incentives in the marketplace.
    Congress should be incentivized to cut costs.

    lol Frank getting impatient with erin burnett, lol..

  78. 78
    bill Says:

    Rofl, the look on Erin’s face is priceless

  79. 79
    zman Says:

    Sheeple – lol, that’s going on the definitions page. And you’re not wrong about who will get the blame. You have to wonder why the car companies, who actually sell the product that consumes the gasoline and therefore releases the carbon aren’t burdened by the carbon credit scheme. I wonder if it has to do with them having the right kind of jobs.

  80. 80
    zman Says:

    Bill – I had it off, can you provide a recap? Last time BF was on Mark Haynes about punched him through the screen.

  81. 81
    bill Says:

    52 right on!

  82. 82
    RMD Says:

    Z,
    re :61, thanks. That’s why I didn’t listen…yada yada.

  83. 83
    West Says:

    Repeat for BOP on CLR Bakken/TFS. Some very interesting information came to light today (July 21) at the
    ND Oil and Gas Division
    Hearing in Bismarck.

    Continental Resources personnel were giving testimony regarding
    drilling units in McKenzie County
    when one of their engineers made reference to their findings
    concerning the possibility the
    Bakken and 3 Forks are, in fact, separate reservoirs.

    In June 2008, Continental drilled the Mathistad well in McKenzie
    County. It was a 3 Forks producer
    with initial production of about 1100 barrels per day. In its first
    year of production it has yielded more
    than 86,000 barrels of oil.

    Early in 2009, Continental drilled a second well on the Mathistad
    lease in the Middle Bakken, about
    100 feet above the 3 Forks zone. Special pressure sensors were
    installed in the 3 Forks zone and
    production was restricted while drilling and fracing were being done
    in the Middle Bakken. They
    were attempting to determine if their was communication between the
    two zones.

    At todays hearing, a Continental engineer volunteered that tests on
    the Mathistad wells have indicated
    the Bakken and 3 Forks appear to be separate reservoirs. He said
    further studies will continue.

    Today Continental was applying for “super drill pads” northeast of the
    Mathistad wells, with up to eight wells
    to be drilled from one location. Four of these wells would be 3 Forks
    and four Middle Bakken. It
    certainly appears that Continental is satisfied they have two distinct
    reservoirs to develop, at least
    in this portion of the Williston Basin.

    We have to assume Continential will soon release some more definitive
    information of their
    engineering studies.

  84. 84
    zman Says:

    West – thanks, that adds to 58 above. They have been saying they thought they were separate for the last 4 quarters, sounds like now they know. Thinking has been to go with those superpads for the last quarter or so. Implication argues for substantial increase in reserves. CLR still biggest position in the play with 500,000 acres.

  85. 85
    choices Says:

    I have been watching PXP after Bill mentioned it yesterday-seems to be holding up here and a PR came out last eve or this morn which said that PXP would continue to press the issue-PXP atty said a lot of misrepresentations were bouncing around (I know, hard to believe) -tempted to take a small stake but it is very tough to bet on the Calif legislature (or any legislature) to take the rational course.

    Bill, what do you think about PXP today?

  86. 86
    zman Says:

    Market turning green.

  87. 87
    BirdsofpreyRcool Says:

    west — thanks for the info/update! You’re pretty savvy about snooping and scooping on the NDIC website. Really appreciate that skillset.

    I was on a private conf call with CLR about a month (or two?) ago, when they talked about the Math Test and sensors and stuff. Just never heard the results of the well and test. But…. YIPPEEEEE!! Just makes the Bakken play Twice as Nice.

    With all the inflation, the US Govt is stuffing into the pipeline, owing oil-producing assets is going to look pretty tasty, someday soon.

  88. 88
    bill Says:

    Erin Burnett interviewed Barney Frank (BF)
    on compensation practices on incentive pay legislation.

    Shareholders would vote annually “say on pay” BF doesnt like incentive pay on good years with no negative penalty when things go wrong. Terms like “excessive risk” 2 way street.

    Erin asked about claw back say lets say a person earns 100 then next year loses 100m BF wants to lengthen horizon so 1 year compensation goes away–

    Erin then says that would create short term mind set..bf no longer than that.. ie let say you buy mortgage securites sell them make a profit, bf is saying you have to wait 30 years to see how the whole portfolio works out.

    Erin presses the questioning on limits on dollar amount bF takes umbrage and tells Erin to stop asking him questions until he can answer the question

    erin then ask a specific question of a citibank trader due 100 m, should they honor the contract, bf babbles, but the jest was time needs to be lengthen

    erin then goes on to ask why BF tried to protect dealerships in his district, bf takes umbrage on the critisim,she tries to follow up, bf tells her to shut up, babbles some more erin states she didnt ask unreasonable question ie fair questions then he argues whether the questions are fair or not

    Jeez it was hilarious..where is mark Haynes when you need him

  89. 89
    bill Says:

    I actually bot some shares yesterday in PXP. It should track to oil prices, so if you think oil will fall stay away

    The pricing of the offshore oil isnt in the stock, its icing on the cake

    Secondly, sooner or later, I think this comes back, it could take years, and a regime change ,but, how can California turn their back on 2 billion when you about to go broke

    Third, they have interests on some GOM prospects from Shell and MMR that could be very interesting

    They paid down debt, termed some debt out, had a secondary offering, (which btw SOROS took a big stake)

    they own 20 % of Chks Haynesville–you have to determine if thats a positive or negative

    I was first drawn to it when it was around 20 ,so its not as cheap as it was 3 months ago

    I like the oily exposure which is essentially unhedged, they own puts to protect the downside

    One final thing is they wrote down oil reserves/assets at end of 2008 due to prices oil below 40. Now that oil is above 70 some of those reserves come back at end of 2009.

  90. 90
    bill Says:

    I bot some HK calls today ( too early) as the stock sold off some more. But i plan to add a little each day leading up to earnings

    I might play swn but i’m less enthusiastic with the stock over 40 but they will have great numbers

  91. 91
    zman Says:

    Thanks for 88, lol.

    Re the HK, that’s what I’m doing as well. The pullback in the market, slight though it might be hits the higher beta, higher multiple names harder than the cheap names. So in general, an NFX should hold up better than a HK during a down turn.

    WRES still trying to push ahead.

  92. 92
    Wyoming Says:

    re 72, if it is the system I am thinking of, been using them for years.

  93. 93
    choices Says:

    #89-thanks bill

  94. 94
    Wyoming Says:

    OK, re 74. Basically, yes and no. People have been using one assembly before, depends on lithology. BHI, SLB, HAL all have something. Sometimes we like to set a casing string at the end of a curve due to risk mitigation from a shale or such preventing sloughing in and losing the hole. Much safer to only have the horizontal to deal with.

    It’s a me too system.

  95. 95
    zman Says:

    Thanks Wyoming. Thought the pr was a bit goofy.

  96. 96
    elduque Says:

    BOP- With out Bloomberg do you know which symbol I could use to track the High Grade Bond Market

    Thank you.

  97. 97
    choices Says:

    Z-Enercom has an Oil and Gas Conference 9-13 August-some big names are presenting-do you expect anything sufficiently significant to move some of the stocks? Earnings will all most likely be out by then so I’m not sure-maybe guidance amplified.

  98. 98
    zman Says:

    Choices – not really. If someone has something that is a straggler data point at the time of the quarterly press release it is possible they get it out there by then but most people like HK will pack it all into the ops update with the quarter so little new to say, just different venue.

  99. 99
    choices Says:

    EnerCom, Inc. Announces Presenting Companies for The Oil & Gas Conference(R) August 9-13, 2009 PR NewsWire

    link to #97

  100. 100
    zman Says:

    CLR up 5% now. The “TFS is separate from middle Bakken” news is what they previously thought, sounds like they are now more convinced than ever. Would not just be good for them despite market reaction today but would be welcome news for EOG, WLL, NFX, XTO, STR (reports tonight), SM, HES all the way down to BEXP and KOG.

  101. 101
    zman Says:

    I have the link to the EnerCom conference on the calendar tab.

  102. 102
    VTZ Says:

    Wyoming – I just saw your note re the proppant. The mine is a white sand and I don’t have any of the specs or a sample yet, but hopefully soon. I’ll ask for help from you or TEX again when I need it.

  103. 103
    zman Says:

    I may add a little more WLL tomorrow before their report. The stock has had a good run but like NFX, remains pretty cheap on a forward CFPS basis at just under 4x 2010 estimates. I’ll have a snapshot metrics table out on this one in tomorrow’s post along with some more comments.

  104. 104
    nifkin Says:

    CLR has a 20% short interest- seen as expensive to peers by some. Was there anything specific that hit today? odd that a release from last week would be the reason for a move today

  105. 105
    zman Says:

    Nifkin – see 55, 56, 58 and then 83.

  106. 106
    zman Says:

    Jat – Do you follow the OII story?

    Would someone post API after the close, thanks.

  107. 107
    zman Says:

    Good color today West, thanks.

    Looks like someone is trying to breakout the WRES chart on light volume.

    Beerthirty.

  108. 108
    BirdsofpreyRcool Says:

    Trading Update

    · SP500 finally has a down day, finishing off just 2.5pts to ~980. Today’s 0.26% decline is actually the SP500’s steepest single day fall since Jul 10 (when it fell 0.4%). The Nasdaq today ended up 0.39%. A bunch of disappointing earnings releases (Deutsche Bank, IPG), a “weak” TSY auction (today’s 2 year), and a sluggish consumer confidence number weren’t enough to hit the market more than just a couple points. The huge buy demand of last week has taken a breather so far Mon/Tues but there isn’t a lot of selling/shorting and there remains a strong reservoir of long demand on any meaningful pullback. Desk was pretty quiet today (similar to yesterday) as equities digest their powerful rally of the last couple weeks.

    · Sectors – tech actually stages rally off lows and ends up 0.3% on the day, one of the best acting major sectors. Telecom, health care, and discretionary all ended in the green as well. On the downside, energy and utilities both fell more than 1.5%. The HMO staged a huge rally, ending up 6.5% and reaching multi-month highs (earnings, from likes of CVH, along w/headlines out of Washington on HC reform, all contributed to the rally). Bank stocks also remain strong (sp500 bank index ends up 0.5%).

    · Credit goes out at tights of the day as equities rally; IG12 ends out just 2bps to 115/116 after approaching ~120 before the open

    · Fed speak – Fed’s Yellen made comments this afternoon that echoed a lot of other recent Fed officials; the economy was showing some tentative signs of recovery and the Fed would take decisive actions to prevent inflation from becoming a problem.

    · Dollar – the DXY late on Thurs was up 0.3%, one of its strongest % gains since Jul 10. However, most of the gain came against the Euro (Euro falls 0.4% against the US$) while the dollar falls 0.6% against the yen.

    · Treasury auctions – the 2yr auction was a bit on the weak side (yield came in 1.08%, which is higher than the Bloomberg consensus of 1.058%) and 2s came for sale as a result. 2yr yields late on Tues were at 1.08%, the highest since June 30 (and up from 0.9% on Jul 13). 10s were hit from their highs but late on Tues were still up on the day (but fractionally).

    Economics numbers out today

    · Richmond Fed jumps but consumer confidence lags; Richmond Fed manufacturing survey rose to its highest level in almost two years but the Conference Board consumer confidence survey slipped for the second consecutive month. The consumer confidence index fell from 49.3 in June to 46.6 in July. Declines occured in both the expectations index — falling from 65.5 to 62.0 — and in the present conditions index — which dropped from 25.0 to 23.4. While the headline number is well off its lows of 25.3 reached in February, the worsening mood of the consumer is reflected in other gauges of household attitudes and suggests that some of the Spring-time bounce in sentiment may be giving way to a renewed sense of gloom.

    · Housing prices – Case-Shiller index has smallest M/M decline in more than 2 years; Robert Shiller said the index result surprised him and that the “change in momentum here is very significant” – takeaway comments from Abiel Reinhart – the Case-Shiller home price index, whose May value was released this morning, is one of a number of price measures that show that price declines are moderating or that prices are stabilizing. The Case-Shiller 20-city composite declined 0.2%m/m (seasonally adjusted) and fell 17.5%oya. The month-over-month decline was the smallest since March 2007, and the year-over-year drop was the smallest since August 2008.

  109. 109
    BirdsofpreyRcool Says:

    elduque — #96. Off the top of my head, I don’t know. The WSJ has quotes on benchmark bonds every day, that is one way to follow the trend. But, as far as “real time”… let me see if there is some sort of ETF out there.

  110. 110
    zman Says:

    Oil selling off a touch in the after market.

  111. 111
    zman Says:

    API showing a big build in crude of 4 mm barrels, flattish products numbers. The crude build could be a combination of a rally in imports and a drop in refiner utilization. The former you never know about and the latter should have been expected. API probably won’t have as much of an effect as you’d guess as they saw a similar build in crude inventories last week and then EIA reported a draw on crude stocks.

  112. 112
    zman Says:

    S&P Equity downgrades VLO to Hold … but I’m not sure if anyone really listens to them.

  113. 113
    kyleandy Says:

    z – do u remember what day u did the CLR-WLL comparison. i remember one looked a lot better, but can’t remember which one!!

  114. 114
    BirdsofpreyRcool Says:

    kyleandy — WLL definitely looked “cheaper”!!! I think z said that CLR was pricing in higher oil prices, so the valuation looked “richer” than WLL.

  115. 115
    zman Says:

    Kyle – was it a short comment I did recently or do you mean back when I did a bigger piece on the Bakken?

    WLL os fairly cheap on a forward multiple and it has a good sized, but smaller than CLR, piece of the Bakken in and around what has been the best areas of the play to date.

  116. 116
    BirdsofpreyRcool Says:

    amazing, the stuff govt thinks they should be weighing in on these days…

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aYhdmIaV0uQo

  117. 117
    bill Says:

    on 116

    its time to re-engineer congress and the senate

    the only incentives they have is to pizz away money taxing and spending

  118. 118
    BirdsofpreyRcool Says:

    #117… i second that motion.

  119. 119
    PackMan Says:

    88 — Barney Frank is one of the biggest jackasses to walk the face of the earth.

    Glad I didn’t watch that today; but its happened several times before where Frank gets belligerent.

    This guy, who is a primary cause of the financial crisis and all that’s gone on w/ Fannie and Freddie, deserves to be in jail, not in Congress, let alone in a powerful position in Congress.

  120. 120
    PackMan Says:

    #117 – I third it.

  121. 121
    bill Says:

    cash for clunkers– govt changes standard

    lol what a fiasco

    http://autos.yahoo.com/articles/autos_content_landing_pages/1030/clunker-confusion-mpg-figures/;_ylc=X3oDMTFkNnJla280BF9TAzI3MTYxNDkEc2VjA2ZwLXRvZGF5BHNsawNjbHVua2VyLWNvbmZ1c2lvbg–

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