Monday Morning And All Is Green

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Good morning and welcome to the last intense week of energy earnings this quarter. Oil is rallying sharply on a lower dollar and comments from the IEA about coming oil shortages (long term stuff on their part but that kind of talk almost never fails to goose the futures). I will be participating in a few more earnings plays this week but with an over arching goal of raising cash as the week progresses towards the end of week unemployment report. The period following earnings is generally a "so now what?" trading pattern: listless, more apt to fall than not, and occassionally subject to rapid profit taking on little volume. So I'd rather be largely in cash by next Monday. Besides, by next Tuesday I'll be making sand castles in Florida and while I plan to post a brief piece each day I'll spend little time on the site as I take my once a year recharge-the-batteries break. 


The Week Ahead: Big Week For Economic Data

  • Monday 8/3: ISM (exp 46.2%), Construction Spending (exp -0.6%), Vehicle Sales for July (previous 9.7 mm)
  • Tuesday 8/4: Personal Income (exp -1.2%), Consumer Spending (exp 0.3%), Pending Home Sales June (previous 0.1%)
  • Wednesday 8/5:  EIA Oil Inventory Report, ADP Employment (exp -402K, previous -473K), Factory Orders (exp -1.0%)
  • Thursday 8/6: EIA Natural Storage Report, Initial Jobless Claims (exp 578K)
  • Friday 8/7: Nonfarm Payrols (exp -275K vs previous -467K), Unemployment Rate (exp 9.7%)

In Today's Post:

  • Holdings Watch
  • Commodity  Watch
  • Energy Earnings Calendar Week Three - Busy
  • Stuff We Care About Today
  • Odds & Ends

Holdings Watch:

  • $10KP:
    • $29,400
    • 32% Cash
  • The Holdings Wiki Tab has been updated. Please note that at the bottom I've added my non-10KP stock holdings (in energy).
  • The $10KP tab has been updated.


Commodity  Watch:

Crude oil rose 2% last week to close at $69.45. The 12 month crude strip is now trading at $74.38. This morning crude is trading up well above $71.

  • IEA Watch: Supply Shortages. IEA says existing oil producing fields are being depleted at twice the rate previous thought and sees oil exporting countries as under investing in replacing production which will lead to supply shortages in the not too distant future. This IEA's 800 field study, last updated in 2007. It now says most fields have passed peak production and that global production will peak in 10, not 20 years as previously thought. IEA went on to say that to keep up in the next 10 years, the world would need to find the equivalent of four new Saudi Arabias to offset declines from these fields and to meet expected oil demand by 2030, we'd need to find six new Kingdoms. 
  • Dollar Watch: The dollar index edged just under the early June lows on Friday. Not a lot of support below here, both from chart and dollar policy standpoints.

Natural gas fell 1% last week to close at $3.65. The 12 month strip is now trading at $5.28. See more comments on natural gas in the "Stuff" section below. This morning gas is trading up a little under a dime with the move in oil.

  • Weather Watch: Much warmer. Cooling Degree Days (CDDs) compared to gas storage injections:

    • Week Before Last: 64 CDDs which was much cooler than normal.
    • Last Week: 75 CDDS vs 82 previously forecast (the Climate Prediction Center obviously needs to recalibrate their CDD forecasting model as they have overestimated heat forecasts all Summer). Still, this reading is the second highest of the year so far, and is normal for this time of year My early read on the gas storage report this week would be a range of 50 to 60 Bcf which would be the lowest injection of the season to date. 
      This Week's Forecast: Warmer Still. 78 CDDs vs 73 normal and 78 in the year ago week.


Energy Earnings Calendar Week Three - Busy Week For The E&P Crowd.

Quick Thoughts On This Week's Reports:

  • CHK - Preannounced production and an extensive operations update last week .... drew yawns/skepticism from the analyst crowd as the production beat was largely attributable to CHK deciding not to stick to its previous production curtailment announcments. Monster wells in the Haynesville and Granite Wash plays are great at higher gas prices but a stated desire to significantly ramp up operations in the Barnett leave me wondering where the fire is. Maybe the idea is to drown thy neighbor in gas and wait for the next upcycle when there are fewer players. Feels like growth for the sake of growth and acreage protection to me however and I'll listen as always but shy away from playing. I continue to own the common here but am not playing in the options this quarter.
  • SM - Getting more interested. Well hedged through 2010 with limited activity during this low price environment, thy have a large acreage position in the Eagle Ford Shale with 2 rigs currently running (1 of them in JV with APC) so we should see more well results this week there. They may also have results from their first horizontal in the Marcellus and may have something to say about a vertical test in the Haynesville.
  • APC - Good read on the natural gas macro, worth reading press release and the transcript of the conference call for tidbits on the eastern side of the Eagle Ford play. I'm not playing them this quarter.
  • XCO -  More on this one in tomorrow's post.
  • PXD - I don't see a reason to jump in for earnings season but will listen to the call  or replay and  read the transcript. Earnings should improve with oil and a couple of key things to watch for here will be an Eagle Ford Shale well post mortem (what they learned, what's next and I'd bet they are very quiet on details as they are acquiring more acreage), and any pickup in drilling activity (they pulled back on the throttle to preserve cash early this year but that was when oil prices were a good deal lower).
  • HK - Long two sets of calls and the common.
    • I expect them to modestly beat numbers, and would have put just under 50/50 odds on a production guidance boost for 2H09 before seeing SWN's guidance on Friday.
    • I don't think they'll take a guidance hit as they are less leverage than Southwestern is to the Fayetteville Shale  and even if they do it would be slight and quickly forgiven by the Street.
    • Eagle Ford Shale: I expect them to announce that they are adding a third rig in the second half (or strongly hinting that they might) to the Eagle Ford Shale play. They could have data on 6 to 8 more wells here as drilling times have fallen rapidly.  We know that they drilled their "best two wells" in the play since the last press release and the data there has been kept close to the vest. We also know that the a majority of the  recent drilling has not be long range stepouts but more akin to offsets to their biggest wells drilled so far in areas that are in the more liquids rich northern part of their acreage.
    • In the Haynesville look for drill times and costs to have fallen yet again and possibly for an update on their JV well in the East Texas part of the play with EOG (although that honor may go to EOG with their report Friday). 
  • PQ - waiting to see if they start to get more busy with the drill bit or when they see doing so. Not listening as I'm in the common for the long haul here and the story is extremely cheap but also rather uninteresting given their lack of activity.
  • WRES - another long term hold although I do have some near month calls on. Looking for a better quarter based on higher oil prices and smaller differentials to WTI than last quarter. Nothing barn burner until year end. This one took large writedowns due to low end of year oil prices but the reserves are still in the ground despite the ceiling test accounting. More in Tuesday's post on them.
  • ATW - Most interesting deepwater focused driller I track. Their fleet is small but they've largely been able to keep the lower capability vessels busy (except for the Southern Cross and that provides upside when they do land it a contract). Looking out into 2010, 2011 and 2012, they have the strongest built in EPS growth rate of any of their peers as new build rigs start working and add significantly (again, small fleet). 
  • PXP - Still getting to know the name, plan to listen, take notes, think the story through.
  • EOG - Don't own it now, plan to have long exposure by Friday. I expect them to beat as they typically bag the Street on guidance. I think its early in the year for them to up production guidance but they should have plenty in the operations updaate to talk about. Looking for more big Bakken wells and more news on their rail transport arrangement, bigger wells in the North Barnett "combo" oil play, news from the Horn River Basin (it's been awhile since they mentioned it).


This table has been added to the calendar tab at upper left.

Stuff We Care About Today

Weekend Mailbag:

Statman0 ~ Z - I’ve appreciated your advice already as an early position in HK has paid off well over the last week. Also, you make a good case for nat gas heading toward $3.00 or lower. It makes me wonder why you haven’t shorted NG directly via the UNG puts or something similar to help hedge your long positions on $10KP. I wouldn’t want to do anything that you wouldn’t do. Am I missing something?

ZComment: Good question. Couple of reasons why I don't do that:

  • Natural gas prices are normally volatile. Right now they are especially so:
    • There is a large net short position in gas futures now. These traders know the trade is long in the tooth and are skittish. It's well known gas will end the season at record levels and gas has already discounted this. So the easy money in the short trade has been made.
    • We're approaching busy part of hurricane season. This means weather reports often outweigh lousy current fundamentals.
  • I think the move happens but that downside is limited than upside.
    • Gas is the worst performing energy commodity of 2009 to date, again, setting up a bottom fish, short squeeze opportunity. Its more than a little bit difficult to tell which rallies are just small short covers and which is the actual turn.
    • Gas declines are coming. Its not if but when. The rollover in production has been slower than anyone expected but it is happening.
    • Combine the previous two bullets with an improving economy (maybe not on jobs but industrial gas consumers are getting the deal of nearly a decade on gas at the moment) and you have the makings of a rally. So gas futures are more than normally sensitive to GDP, ISM, factory orders, etc right now.
  • I don't think UNG is a good trading vehicle for natural gas and I generally use higher beta gas-production weighted E&P names as a proxy for gas. SWN and RRC work well on both the upside and downside for gas. 
  • In summary, too hard for me to get the timing right on when gas turns and I think downside is limited and I think the duration of such a move will be met with a good amount of "last hurrah type" short covering. My best hedge is the amount of cash I keep in the portfolio. At a third of the portfolio, I can tell you it is a bit low for my liking and that by the end of this week (the last intensive week of Q2 earnings) I will be at a much higher cash weighting.

Odds & Ends

Analyst Watch:

  • Nada.

110 Responses to “Monday Morning And All Is Green”

  1. 1
    ram Says:

    Is the oil rally following the dollar’s decline?

  2. 2
    rseidman Says:

    SW Energy downgraded to Underperform from Market Perform at Raymond James

  3. 3
    zman Says:

    … and the strong equity futures, yes.

    Good luck to Raymond James on getting on the deal team next time SWN has a financing. That’s a bit of a cheap shot cutting on the pipeline curtailment when the internal drivers continue to get stronger and a second core area looks to be coming closer to fruition.

  4. 4
    zman Says:

    NG suddenly surging, up 30+ cents, something must have blown up, have not yet seen news….

  5. 5
    bill Says:

    huron consulting blew up

    down 30 bucks on an accounting retstatement

    Huron was formed from remenants of arthur anderson which blew up with the enron scandal

    so this is a mini enron redux

  6. 6
    bill Says:

    back to 4

    the ng stocks seem to be picking up steam

  7. 7
    zman Says:

    Bill – That move is jumpy even for natural gas. This is the kind of unexpected and seemingly random kind of volatility which I was referring to in the post in answering the “why don’t you short gas here” question.

  8. 8
    bill Says:

    good point

    poor huron workers

    first the lost their azz when Arthur andersen blew up, then they rebuild lifes and get wiped out again

  9. 9
    Dman Says:

    Z – what’s the SU deal in a nutshell? Implications?

  10. 10
    Dman Says:

    Oh, OK I just saw that it is a completion of an existing deal, not a new one.

  11. 11
    Dman Says:

    I guess SU is up just with oil, not deal related

  12. 12
    zman Says:

    D – Yep, deal announced about 2 months ago, think strong SU with retail outlets and more exploration (although for comp purposes they had to punt some stations). I think the total savings is a $1 billion per year of costs. Idea would be to spread risk over a bigger asset base, lowers funding costs for all of SUs oil sand expansion projects, and other synergies. It was bid up early but that was probably overnight oil, don’t think they were sweating getting it closed, had already gotten reg approval.

    Open should be pretty green. I repeat that I will be taking profits all week and trading into smaller positions on this week’s earnings names.

  13. 13
    zman Says:

    BOP is out today so no update from the trading desk. If anyone hears Epperson come up with a reason for the gas price launch let me know.

  14. 14
    zman Says:

    Ok, just saw Epperson. Talked about WTI, Brent, the dollar, then even sugar and copper. No mention of natural gas which is now up 7%. No wonder the CNBC ratings are so lousy.

  15. 15
    zman Says:

    Raymond James getting kicked in the head on that downgrade of SWN.

  16. 16
    zman Says:


    WLL – Sold the remaining (10) August $45 calls (WLLHI) for $3.60, up 254%. I continue to hold the September $50s but may let them go soon.

  17. 17
    zman Says:


    OII – Sold all (10) August $50 Calls (OIIHJ) for $4.30, up 175%.

  18. 18
    zman Says:

    SWN is through the June high at 42.75, now 42.85. Letting it run a bit longer. Like to take lower strikes out later today or tomorrow.

  19. 19
    Dman Says:

    Z – think you meant the July high in SWN.

    Chart is amazing given the NG backdrop.

  20. 20
    zman Says:

    Dman – I did. Was just thinking that when the entire portfolio is up almost 25% it is time to take some chips off the table. At least for me.

  21. 21
    Dman Says:

    still no clarity on the NG jump?

  22. 22
    zman Says:

    Dman – Nope, still nothing I can find. Epperson on again, this time mentioned gas was up on the back of oil. Partly true but the jump and fast trades to up 35 cents at one point would indicate someone thought something was up.

  23. 23
    zman Says:

    HK resting comfortably over $25. My strategy here in addition to what I wrote in the post.

    If they come out with an operations update in the morning I will likely sell the August calls into the rally and add some September calls. They have earnings out Wednesday morning and I would not put it past them to do a deal if the stock gets into the high $20s as Floyd has never seen a shale play that he didn’t want to develop. He should have well results in the EFS that are best in class and not just one or two wells but 5 or 6 to talk about. That should be received well. If no operations update in the morning tomorrow than I will hold the Augusts through the earnings report unless it really surges between now and then.

  24. 24
    zman Says:

    WLL – that’s just a shamwow big move there. I continue to hold the September $50s as my oil focused long. At this juncture I am not going to chase EOG or CLR for earnings unless they get a good pullback.

  25. 25
    zman Says:

    NG testing $4 from below, up 9+%.

  26. 26
    kiaora Says:

    Z……How do you feel about the Sept WLL position? Big move in a short time frame

  27. 27
    Dman Says:

    rogue trader spike followed by a wave of “oil up & bound to be a hurricane soon” ?

  28. 28
    zman Says:

    Natural gas – still no big jump out and grab you headline. I do see a story on Europe adding storage capacity for LNG, but I doubt that’s it. If they were to start building more capacity it could be a bit of a game changer for gas prices on the high seas. Europe is more a spot market and the idea that they would want to remodel themselves after the U.S. would be new news. I doubt they go that far but its interesting to see them mull it over.

  29. 29
    zman Says:

    Dman – could be but other than those three tropical waves traversing the Atlantic there is not much thought that anything happens this week at least.

    K – I killed off the last of the Augusts and am considering taking the Septembers as well as they are a double now and I can always buy them back lower. I don’t mind leaving some cash on the table after these kinds of gains either.

  30. 30
    zman Says:

    NG at $4

  31. 31
    zman Says:

    … and I should add that nothing has changed on the fundamental front. We will likely get the smallest injection of the season to date this Thursday but from an over all storage standpoint we are going to be more than a little bit pregnant with gas in September let alone by Halloween when the withdrawal season begins.

  32. 32
    cargocult Says:

    What is your thinking on LINE at this price?

  33. 33
    zman Says:


    SWN – sold the (15) August $42 calls (TKQHC) for $2.00, up 44%, with the stock at $42.75.

    Sold the (5) August $40 calls (TKQHH) for $3.30, up 26%.

    I continue to hold a small August $45 Call position.

  34. 34
    reefguy Says:

    31- If you believe this and gas up .26 currently, then you better short before thursday. IMHO you will not see $3 this year….

  35. 35
    Dman Says:

    Z – but we are now close to the peak of hurricane season, so the capacity for a “pop-up” event has got to be there.

    i.e. the water is calm but warm. But was that the spike? Dunno. Someone hit a button by accident? Coffee spill on the keyboard 🙂

    Now natty is falling but the stocks are ramping!

  36. 36
    zman Says:

    Cargo – I’m continuing to hold it in the personal account, up 68%. Would add it now? I’m not but would on pullback. I think it goes ex-dividend this week and I would not be surprised to see these guys in late 3Q or early 4Q pick off the assets of some distressed player up against a bank redetermination for a low $/Mcfe price but only if the deal is immediately accretive. These guys have an excellent track record of buy low and monetize high and milk in between. My sense is that if gas prices are not comfortably over $4 by 4Q then we will see some forced asset sales to pay down bank lines, again, amongst the smaller players out there including some privates.

  37. 37
    zman Says:

    Reef – Its a tough call I agree. I won’t short natural gas for all the reasons in the post. I will get less long however through periods of uncertainty. I think on a regional basis we’ll see that gas on gas comp and it will kill some local prices. The move this morning I think is probably just short covering. I hope not to see sub $3, just dunno. I do know that at these prices people are going to be wondering “what surplus?” this time next year as the conventional declines become rather obvious by then.

  38. 38
    zman Says:

    There goes S&P 1,000.

  39. 39
    reefguy Says:

    z-just looking at physical markets over last 90 days shows a real “floor” of about $2.75 wellhead, equating to north of $3 AT nymex. I think $4 this early is dreaming and we can expect to see $3.40 Friday.

  40. 40
    choices Says:

    Canadian mkts closed today-holiday.

  41. 41
    zman Says:

    Reef – I can’t argue with any of that. I just went from 32% cash to 56% cash with this morning’s trades and I plan to up that percentage into the 70%s before Friday.

  42. 42
    zman Says:


    FSLR – Adding (2) August $160 calls for $5.90 with the stock trading sideways at $155. I continue to hold the September $180 call here as well. After listening to the call again and managements comments on the potential impact on income of the rebate program in German my sense is that the downside to earnings has been more than adequately reflected in last Friday’s swoon in the shares. But I’m not going in large as you can see.

  43. 43
    Dman Says:

    Z – any thoughts on how GMXR are travelling?

  44. 44
    zman Says:

    Dman – nothing fresh, had not planned to play the E. Tx Haynesville gang this earnings season. Will snoop about.

  45. 45
    Dman Says:

    No doubt the dollar is driving a lot of the green screen. Dollar index now at Sept 2008 levels. But I think the action against commodity currencies (AUD & CAD) is more significant. They are a bit stretched in these moves, but if the dollar is crashing, they could get more stretched before snapping back some. I was surprised to see Marc Faber (in his newsletter over the weekend) calling for a bit of a bounce in the dollar, based on a purely technical analysis. That’s a brave contrarian call, and he gets those right too often to ignore. (He is very bearish on the dollar long & medium term).

    I think the dollar *will* bounce, but from where? It’s now at 77.6. in the middle of a gap from September that will fill at 77.3. Nicky, you out there?

  46. 46
    zman Says:


    HK – Added (20) September $26 Calls (HKIP) for $1.45 with the stock at $25.35. I’m overweight here and plan to purge some but not all August calls today. Earnings due out Wednesday, see post for comments.

  47. 47
    choices Says:

    With the DX collapse down to 77.6, the Euro is trading at 1.442-hard to figure why the Euro is strong-Europe has same problems as US in spades with various govts taking their own course. Seems like a blow off with commods but I would not be shorting the DX down here altho looks like nothing but air below. Watching gold if it breaks 980-960 where it is now supposed to be minor resistance.

  48. 48
    PackMan Says:

    Z – FSLR – from last friday …notablecalls …

    First Solar (NASDAQ:FSLR): Downgraded at Credit Suisse
    First Solar (NASDAQ:FSLR) is getting downgraded to Neutral from Outperform at Credit Suisse this morning following earnings out last night. The firm is lowering their target to $135 (prev. $200).

    Earnings momentum peaking. While there has been a widespread concern on FSLR’s margins, FSLR’s stock in the meantime has benefited from its consistent track record of beat and raise quarters in the past. While CSFB expected upside to the quarter, FSLR’s reported Q2 results were well above consensus. However, they think Q3 will be the last good quarter for a while for similar upside surprises; and they expect a period where estimate resets are asymmetrically skewed to the downside as we move into 2010. Firm expects the stock to look ahead of this peaking earnings momentum and pull back to lower levels.

    Reasons for downgrade (short summary):

    1) earnings momentum peaking. CSFB thinks Q3 will be the last good qtr for a while for similar upside surprises; and they expect a period where est resets are asymmetrically skewed to the downside as we move into 2010.

    2) rebates could accelerate price competition and will sharpen focus for customers and investors around pricing. We also expect Asian c-Si suppliers to match or beat these rebates in return.

    3) ASP declines are winning the battle over vol growth;

    4) rate of cost reductions could moderate. Our call is a reflection of the new risk/reward on the stock; still believe FSLR has a compelling technology and capable mgmt team that can deliver on longer-term roadmaps.

    Notablecalls: This is a powerful downgrade from CSFB Solar Energy team. I’m actually surprised they didn’t downgrade the stock to Underperform (the language is that strong). The stock will have 8-10% downside in store today.

  49. 49
    Dman Says:

    Hmmm, the DX, AUD & CAD charts are all way beyond their 200 day SMAs. A little mean reversion wouldn’t be a huge surprise. But what if everyone is relying on that?

  50. 50
    zman Says:

    Dman – I’ve paged Nicky. A lot of folks are on vacation this week and next.

  51. 51
    zman Says:

    Thanks Pack, they may be right, hard to say. I think it is a bit overblown but I’m not putting much $ behind that.

  52. 52
    VTZ Says:

    My immediate USD target is 76 for a bounce… then down to 72.

  53. 53
    Nicky Says:

    Morning all. I am here!

    Indices. Finally 1000 plus on the spx so the bulls have their way. It isn’t done but its close. 1007, 1010, 1014 and then 1032.
    SPX 38.2% fib is at 1014. COMPQ 50% fib is at 2063. DJIA 38.2% is at 9451.
    For me the only question is how big a top is this going to be? Wave wise it looks like THE top but cyclewise it doesn’t.

    $ – I too am looking for a low. I have been saying for months 76 – 77 and I am sticking with it. We are in wave v down and $ sentiment is at extreme bearishness so we are about to see a huge rally in the $.

    Oil – It looks like the move to $58 was a b wave and we are now in wave C which will consist of five waves up and we are currently in iii of v. I am expecting at least a double top if not higher.

  54. 54
    VTZ Says:

    Dman – I hear what you’re saying about CAD. It’s gone from 84 cents on the dollar to about 94 in no time. But, fundamentally it also should be worth more than USDs because our banks aren’t collapsing and we are an exporting nation, so I’m not really worried about the MAs. Australia is in the same position and neither country has bank/financial problems.

  55. 55
    Nicky Says:

    VTZ – 73 is not out of the question. I think the equity market may start to get very nervous if the $ really starts to crumble.

  56. 56
    zman Says:

    Nicky – well, at least such a $ tumble would be good for the exporters.

    Any thoughts on NG? No hat eating for me this week at least, I think.

  57. 57
    VTZ Says:

    I just don’t see a catalyst for USD strength anytime soon. Each week is another slap across the face to anyone thinking of buying USDs because of the bond offerings.

  58. 58
    VTZ Says:

    I continue to firmly believe that the last thing thats holding up the USD is the long bond strength but as that fades then we are in for the beginning of a controlled fall.

  59. 59
    Nicky Says:

    Bloomberg TV just reported that the World Health Organization has rased the H1N1 alert to a level 6 which is a pandemic. They are investigating whether, once vaccines are available, a requirement will be put in place to have all US resident vaccinated twice, one shot followed by another 30 days later. They are commenting that, if so, this would place a huge burden on the US health care system.

  60. 60
    Nicky Says:

    I am not looking at $ fundamentals at all – in fact I totally agree with you that it should crater before all is said and done. But wave wise this move is almost done.

    Nat gas – will take a look but I am still look for a cycle low into September.

  61. 61
    zman Says:

    Lots of talk over the weekend about how a middle class tax hike is now a possibility for the administration. Wonder if that would stabilize the dollar as the nation would need less debt.

  62. 62
    Dman Says:

    Thanks Nicky!

    V, I agree (as does Marc Faber) about the $$ fundamentals. It’s just a sentiment-extreme bounce that I’m worrying about. Also, the Fed & international central banks will choose such an extreme moment to try to prop up the $$ & if they don’t do it soon, like choices said earlier, there is only air below.

  63. 63
    Dman Says:

    Nicky, I thought the WHO went to level 6 months ago. There has been no doubt for several months that a pandemic is under way. Swine flu has been widely propagating simultaneously in both hemispheres, which never happens with seasonal flu. The attack profile is also different, with more severe cases (hospitalizations) and deaths amongst young adults than happens with seasonal flu. Pregnant women are at particular risk, as are asthmatics. Having said that, most cases are only moderately severe, but need careful monitoring because they can go downhill fast.

    Public health experts have been saying for years that even a moderately severe flu pandemic (like this one) will flatten the US health system.

  64. 64
    zman Says:

    Market hugging 1,000 sp. Stock volumes are better than they have been of late in energy for this time of day but nothing to get excited about. I would imagine a lot of money on the sidelines is timidly thinking about entering here but afraid to chased the stocks in size.

  65. 65
    zman Says:

    Oil approaching $72, even for a non-fundamental based move, which this mostly is, this is ahead of itself. They always, always, always take the pendulum through the side glass and berry it in the hallway wall before pulling back sharply in the other direction.

  66. 66
    zman Says:

    GST up 10% post reverse split. Silly reason for a stock to run but it happens.

  67. 67
    Dman Says:

    #61 Can they get that thru Congress?

  68. 68
    Nicky Says:

    Dman I thought so too re 63 but this was Bloomberg reporting.

  69. 69
    zman Says:

    Dman – dunno, kind of doubt it. But if it looks promising I would think that would slow the dollar’s descent. Perhaps I’m looking at it the wrong way.

  70. 70
    Dman Says:

    Z – anything that would improve the balance sheet would (in theory) be good for the dollar, so I understand what you’re saying.

    But I worry about minor side effects, such as an armed revolution by the middle class. They watched $trillions in bailouts for bankers who are now getting billions in bonuses, so I can’t imagine they will take kindly to being asked to again shoulder the burden. If the pitchforks come out, I don’t suppose that will be good for the dollar!

  71. 71
    reefguy Says:

    z-10% move in NG. 2010 strip is 6.14. 2010-2101 is $6.47

  72. 72
    Dman Says:

    Nicky, WHO went to Phase 6 on June 11:


    Maybe Bloomberg only just noticed?

  73. 73
    zman Says:

    Looking around at what’s outperforming today, you can see people are buying names for earnings. SM up strong and drifting higher. I’d like to see this continue tomorrow for HK. APC and SM should give us the most recent look at EFS wells tomorrow and its probably not a mistake that the two JV partners are reporting on the same day.

  74. 74
    VTZ Says:

    Dman – That’s why tater has a cave!

  75. 75
    zman Says:

    Reef – time to see someone like SWN who is lightly hedged in 2010 take on some more contracts.

  76. 76
    Dman Says:

    reef, what’s your guess on the NG move?

  77. 77
    Dman Says:

    V – yep, tater way ahead of Bloomberg in all cave-related activities.

  78. 78
    reefguy Says:

    Dman- trying to stay in step to CL. $72/$4.04= ratio of 17.8. No move in NG would mean a 20 and it has not been that high in 20 years or ever! Historical data suggest a 8 to 16 range on ratio.

  79. 79
    zman Says:

    11% move on NG. Short squeeeeze.

  80. 80
    zman Says:

    APC denying rumor there is something wrong with the 1 Bcfgpd I-hub

  81. 81
    bill Says:

    took a position in plll

    they farmed out some barnett wells to chk

    they seem to be living within cash flow

    50 % permian oil

    negative 50 % in ng

  82. 82
    VTZ Says:


    No taxes to middle class according to that guy.

  83. 83
    zman Says:

    Following up on #61, tax revenues take biggest dive since great depression.


  84. 84
    jat Says:

    Trimming some oil service ETFs last repurchased at OSX 148, no real rhyme or reason, just profit taking in line with Z here. I’ve been early before, let’s see how this one goes…

  85. 85
    zman Says:

    V – He should get the people working for him into line then.

  86. 86
    bill Says:

    kog seems to be underperforming..HELLO

  87. 87
    zman Says:

    V – He should get the people working for him into line then.

    WRES holding pretty well, coming down to the wire on my Aug 2.50 calls there.

  88. 88
    ram Says:

    Was there any consideration to adding to WRES here to lower cost?

  89. 89
    zman Says:

    Ram – on the calls? I guess I considered it. But I’m mainly here for the stock and last management presentation left me somewhat, um, bored out of my skull. Like the assets, not going to add pre numbers which should be improved from 1Q just based on price. Just don’t know if they will be able to say anything interesting at all at this time.

  90. 90
    ram Says:

    Sorry, the calls. O.K., so if management presents a boring CC, then the stock could stall. I understand that this is in no way any inclination of advice, whatsoever.

  91. 91
    zman Says:

    Ram – I hear ya, right, but I figure with them so beat up at this point but right at the strike, why sell? It is now a small position and they could say something worth noting on the CA regulatory side. Or maybe they decide to drill a well. Either could move the stock towards the upper $2s.

  92. 92
    zman Says:

    “them” in 91 refers to the August 2.50 calls, not the stock.

  93. 93
    ram Says:

    Understood. The SWN AUG 45’s at this juncture are close to the ave. cost. I didn’t see SWN in taters world. Was there any short term upward price goal until major resistance?

  94. 94
    zman Says:

    Ram – I didn’t ask him about that one but I’d guess some reason to see a pause in the $45 to $46 range. I just punted because I wanted some more cash, had a nice profit and booked it, and I still think gas could retreat rather smartly with no notice. Given the high correlation of SWN to short term moves in gas it seemed the prudent course of action.

  95. 95
    zman Says:

    Last 3 hours has felt like an expiration Friday. Like watching paint dry. Very green paint. Market needs to hit the reset button so that the stocks can move again. I am thinking I will hold all three HK positions into tomorrow and then decide about the Augusts prior to the call on Wednesday morning.

  96. 96
    ram Says:

    Where’s Sambone?

  97. 97
    zman Says:

    Vacation I’d guess. Probably waiting for a spinner to enter the Gulf before commenting.

  98. 98
    zman Says:

    Added from Nicky on oil:

    Z its possible but equally it go to 76 or even 80 – its a C wave and they can be wild! I think we may pullback to 70 first. But I also think it has now gone so high that the previous highs are going to be taken out ie its beyond all the fib retracements.

  99. 99
    ram Says:

    No spinners entering the gulf.

  100. 100
    zman Says:

    Not yet. It’ll happen.

  101. 101
    RMD Says:

    KOG: page 2 of STR’s transcript says, “The good news, the Bakken play appears to be converging on our core acres block on the Fort Berthold Indian Reservation. Other operators have reported initial rates as high as 1700 barrels of oil equivalent per day on wells drilled near our core block, shown in yellow on slide five.”

  102. 102
    zman Says:

    Saw that RMD, yep its KOG’s well. Was a bit surprised STR didn’t get more play out of their pr last week. That wasn’t a bad quarter at all. Too “conglomeraty” for my taste but their E&P sub is performing well.

  103. 103
    VTZ Says:

    Great start to the week!

  104. 104
    zman Says:

    Good day. Beerthirty.

  105. 105
    bill Says:

    chk numbers are out


  106. 106
    bill Says:

    chk did another vpp deal

    Chesapeake-operated long-lived producing assets in South Texas in its fifth volumetric production payment transaction (VPP) for proceeds of $371 million, or $5.46 per mcfe of proved reserves. The assets included proved reserves of approximately 68 bcfe and current net production of approximately 55 mmcfe per day.

  107. 107
    bill Says:

    and then there is this

    Chesapeake is planning to sell certain non-Haynesville Shale producing assets in Louisiana in its sixth VPP in the next 90 days for approximately $225-$250 million and also other mature producing assets in the second half of 2009 for approximately $200 million. The company is also working to finalize agreements with a private equity investor to sell a 50% minority interest in its Barnett Shale and Mid-Continent natural gas gathering and processing assets in the company’s midstream subsidiary, Chesapeake Midstream Partners. The company anticipates completing the midstream transaction in the 2009 third quarter for proceeds of more than $550 million. Finally, Chesapeake continues to have discussions with several companies about a possible joint venture on some or all of its Barnett Shale leasehold in a transaction targeted for completion by year-end 2009.

    they took off hedges in q2 and with the rise iin ng they might look like heros

  108. 108
    bill Says:

    looks like capital spending up a little and net cash flow is down

    wondering out loud, i wonder if hedge montization was done for cash flow reasons as opposed a bet on higher prives or both

    In any event, i bet chk is chomping at the bit to offer 25 m shares to raise 500 m

  109. 109
    RMD Says:

    bill: few talk about your ever-so-logical question in #108. % production hedges has fallen over the last 4-6 quarters (I have not looked it up but memory says 85% to mid 30s%, many VPPs and asset JVs, yet debt down not so much it seems. The LAST thing investors want is yet another equity deal imho.

  110. 110
    zman Says:

    re 109. Agreed. Last thing they want is a deal. Second to last thing they want is to hear about “accelerating activity”.

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