07
Aug

T.G.I.Rally

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Jobs Watch: Nonfarm payrolls fell 247,000. Unemployment came in at 9.4%. Initial reaction: Market surge. In an unrelated story, the Department of Labor has been acquired by Goldman Sachs.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Stuff We Care About Today - Earnings Watch: EOG, KOG
  5. Odds & Ends

Holdings Watch

  • $10KP:

    • $23,800
    • 36% Cash
    • The Wiki Holdings tab is updated.
    • I will update the $10KP tab on Monday.

Yesterday's Trades:

  • NFX - added (5) September $40 Calls (NFXII) for $2.95 with the stock at $40.80. Results from CLR Bakken / Three Forks Sanish test should have positive implications for other Bakken leverage names and NFX remains on the cheap side.
  • NFX - Added (5) more September $40 Calls (NFXIH) for $2.50 with the stock at $40.
  • CLR - Added (10) September $40 calls (CLRIH) for $2.00 with the stock at 37.35, up 4.7%. The stock was much stronger on the open and the conference call is going well. See post for comments on their results.

Commodity Watch

Crude oil closed down three pennies at $71.94 yesterday ignoring what most observers feel was to be a brief respite for the dollar. This morning crude is trading up above $72.

  • Offshore Storage Watch: Building. COP leased a VLCC for 30 days to store 2 mm barrels of oil off the Gulf Coast.

Natural gas fell $0.30 to close at $3.74 yesterday after the EIA reported a bigger than expected storage injection (see next section). This morning gas is trading up slightly

  • Tropics Watch: A low pressure system is meandering across the Atlantic. No development is expected through the weekend.

Natural Gas Storage Review


ZComment: I got that one wrong. If the weather proves to have held up over the end the week and into this week's CDD numbers than I would expect to see some of the Bcf come out of next week's number meaning a smaller injection than yesterday's report next Thursday. As I wrote yesterday, at this point the storage numbers are largely an academic study as the we are full and getting fuller on storage.

 

 

Stuff We Care About Today

Earnings Watch:

KOG Reports 2Q09 Results

  • 2Q09 Numbers: (its pretty early stage to start judging them based on results but the basics are here)
    • Production of 494 bopd
    • Revenue of $2.0 mm
    • EPS inline with expectations at a loss of $0.01
  • Highlights:
    • Wells drilled to date - Not a lot new you haven't seen BOP and West mentioned before. Drilling times from first to sixth wells fell from 41 to 26 days.

      • 1st four wells completed, average IP of just under 1,200 bopd
      • First 30 days production averaged 460 bopd
      • wells 5 and 6 are completing and awaiting completion now respectively
      • well 7 is drilling
      • they plan to drill 5 more wells in 2009.
      • They believe they can continue drilling into the first part of 2010 with current financial capacity and cash flow.
    • 2nd drilling rig deal worked out. Removes an immediate potential liability and replaces it with a fair workout plan.
    • Vermillion Basin deal reached with DVN is favorable as it removes their capital commitment but gives them upside in this second play once prices recover.
  • Conference Call: 11 am EST

 

EOG Reported Good Numbers, Good Well Results, Maintains Guidance But Is Getting Oilier Quicker Than Expected.


The 2Q09 Numbers:

  • Production: 189 Bcfe, down 2% sequentially, up 8% vs the year ago quarter

    • Guidance for the second quarter was 181 to 194 Bcfe so volues were above the mid point.
    • The  sequential decline in U.S. gas volumes was a little bigger than guidance and this may pressure the stock but it should have been baked into analyst thinking since the last conference call. The decline was foreshadowed by management on the last call but there may have been some curtailments in play here.
    • "Our North American gas production profile is such that our production nadir will occur at the beginning of the fourth quarter and begin inflecting upward at the end of the year in anticipation of stronger 2010 gas prices. Because of the current low gas prices, we are projecting our North American natural gas production to follow by 1% this year."
      • Additionally, we knew that they were delaying completions in the Bakken until July due to high transportation costs and low oil prices. 
      • Importantly, they kept the 5.5% organic 2009 production forecast (raised from 3% last quarter) intact.
  • Cash Costs: (includes LOE, transportation, gathering, production taxes and G&A):

    • Cash costs came in at a low $1.57 / Mcfe vs $1.75 last quarter and $2.05 a year ago. Much of the drop was attributable to to lower production taxes which is in turn due to lower commodity prices but they did manage to modestly improve lease operating expenses.
    • Every item was either at the low of the guidance range or below it. 

 Bottom Line Was Much Stronger Than Expected:

  • EPS of $0.73 vs $0.42 expected
  • CFPS of $2.67 vs $2.42 expected

 

Guidance:

  • 3Q Guidance
    • Volumes: 182 to 195 Bcfe
  • 2009: Volume guidance stays at 5.5% YoY; cost guidance moved down slightly
  • The 2009 total company liquids production growth target was upped from 22 to 25%, which means that CFPS numbers will be moving up modestly as analysts take into account that the production profile is getting oiler more quickly than previously thought.  Oil volumes actually seen a bit lower than previous estimate but more than offset by higher NGLs (which explains part of the natural gas swoon in 2Q and 3Q as they are electing to strip out more liquids from the gas stream).
    • This adds about 2,000 bopd to their 2009 target (bringing it to 77,000 bopd).
    • Note that they kept their 2010 liquids target at 20% growth.  This equates to more bopd in 2010 than before as well so 2010 numbers will be moving up slightly as well.

 

  • Managment had one caveat. Their guidance is "contingent on storage limitations in the North American natural gas market and the impact on natural gas prices." They mentioned this last time around and other operators including CHK have conceded that there may be forced production curtails in the Fall as we bump up against storage limits.

 

Operations Update: For play relevance recall EOG had booked reserves of 8.7 Tcfe (1,450 MM BOE). This operations update is expanded from last night's note as it includes new details from this morning's presentation.

Gas Projects:

Haynesville Shale: 116,000 net acres (unchanged from last notice)

  • 4 rigs running; will average 10 in 2010
  • They announced 5 wells from DeSoto Parish:
    • Average IP: 14.8 mm/d - run of the mill these days (very consistent range of 14.3 to 15.7 MM/d)
    • High working interest wells: average WI of 72%
  • At last commentary, they pegged recoverable reserves at 3 to 4 Tcfe on their acreage.


British Columbia - Horn River Basin Shale: 157,500 net acres (unchanged from last notice)

  • 500 foot thick shale (in general that's thicker than shales we talk about in the U.S. by 200 to 300 feet)
  • 7 wells flowing, IPs as high as 16 MMcfepd (that's not a new number)
  • No big impact here until 2012 expected
  • Still saying they think they’re acreage has recoverable gas potential of 6 Tcf

 

Marcellus Shale: 240,000 net acres

  • They added a second rig, no new drilling results released.
  • They put reserve potential at 2 to 3 Tcfe

China 130,000

  • Expect first well test here (may be in the Sichuan Basin ? ) in 4Q09

Oil Projects:

Bakken Oil Shale: 500,000 net acres

  • Core Area:
    • Announced two Core Area wells (1,600 and 1,700 BOEpd IPs), consistent with past wells
    • IPs in play to date have ranged from 1,100 to 1,800 Bopd; average for 2008 was 1,700 bopd
    • 100,000 net acres
    • 850,000 bo EUR
  • Bakken Lite:
    • Announced two Bakken Lite wells with IPs of 500 and 700 Bopd, which is higher than what we've been seeing from them.
    • 16 Wells completed to date IPs rangee from 400 to 700 Bopd
    • 400,000 net acres
    • 300,000 bo EUR
  • Says 3rd party pipeline is at capacity. Says "unit trains" will be in full operation early 2010.
  • Prairie Rose pipeline to transport liquids rich gas to Chicago market will be in service 4Q09
  • They continue to point to the play as being "over" 80 MM BOE (over 480 Bcfe). This number is tired and needs to be revised in light of the mounting evidence showing the underlying Three Forks Sanish well as a distinct reservoir.


Barnett Combo:  194,000 Acres in Montague and Cooke Counties; 144,000 acres in Clay and Archer Counties.

  • During the quarter they completed 7 high working interest wells ranging from 350 to 900 BOE pd. These are bigger numbers than people are used to seeing from this play.
  • Acquired 25,000 acres and 2,000 BOEpd in Montage and Cooke counties in a rare for EOG acquisition for $134 mm.
  • Four rig program now, going to seven by year end. 
  • Reserves: (no change in the press release)
    • Combo (oil): > 200 MMBoe (1.2 Tcfe) potential
    • Shale Gas: > 5 Tcfe potential (they’ve booked 1.8 Tcfe)

New Canadian Oil Shale Play - Waskada Field, Manitoba

  • They completed 13 wells in the quarter with average peak month produciton of 200 bopd.
  • They reiterated their belief they have 25 mm barrels recoverable barrels here (conservatively, they still call their Bakken play a > 80 MM barrel play) so this is a good start and likely to be upgraded in future quarters. 
  • They see volumes ramping here from current 1,900 Bopd to 9,500 bopd by YE12

Cleveland - MId Continent - New Play Added To Their Presentation This Morning - no details yet.

Hedges:

  • Second Half 2009 : 47% gas hedged at $9.03; oil remains unhedged.

Balance Sheet: Net debt to total cap of 18%; one of the lowest in the group, big, medium or small.

Nutshell: More consistently strong results from the Bakken, stronger results from the Barnett oil play. Last quarter at this time the Street was at $10.40 CFPS. Since then natural gas prices have deteriorated while crude has strengthened. Estimate came as they revised their production numbers higher adjusting for prices. Currently, 2009 estimated CFPS is $11.10 and the stock is where it was (about $78) at the time of the last conference call despite the $0.70 increase (7%) increase in estimates since then. Estimates will going up again based on the higher liquids guidance and falling operating costs. At 7x this year's estimates, EOG is cheap for EOG where long reserve life, a large, repeatable-success-oriented drilling inventory, clean and relatively unlevered balance sheet and conservative management have historically resulted in a premium multiple. 2010's CFPS Street estimate of $12.53 will move higher as well on the oil volumes as well. 


Conference Call: Friday, 9 am EST

 

Odds & Ends

Analyst Watch:

  • CLR - Natixis raises price target from $26 to $40, maintains Hold rating.
  • CLR - Jefferies raises target from $33 to $43, maintains Buy
  • CLR - RBC raised their target from $23 to $28, maintains Sector Perform rating. Um, with the stock at $37 shouldn't that be a Sell rating based on your target? The asleep at the wheel award for the month is a tie going to Natixis and RBC. 
  • EOG - Morgan Stanley increased their price target from $90 to $92, maintains Overweight
  • ATW - Jefferies raises price target from $23 to $31

 

136 Responses to “T.G.I.Rally”

  1. 1
    zman Says:

    EOG call in 5 minutes

    BOP – any thoughts from HT and TT following jobs?

    I deliberately left the portion of the post on KOG scant as that’s you and West’s baby and I’m still small there.

  2. 2
    zman Says:

    Jobs report story:

    http://www.marketwatch.com/story/job-losses-moderate-in-july-2009-08-07

  3. 3
    ram Says:

    How can the RBC guys release that info. with a straight face?

  4. 4
    zman Says:

    EOG 2Q09 CC Notes #1

    Expect the second half to see same trend of strong production and lower costs.

    Continuing to evolve towards a more balance 50/50 gas / liquids producers.

    N. American Oil:

    Barnett Combo:
    30 to 50% IRR at current oil prices
    100 to 120 wells this year.
    Early July on that acquisition in the field, reserves? Added 2,000 boepd, 25,000 acres.

    Concentrating in just 2 counties for now where Barnett is thickest and they have dominant acreage pos.

    Bakken –

    They restarted activity in late Spring

    * 72% average working interest in the core
    * CWC of $4.1 mm – that’s low.

    * Core is pretty well defined, dominated by EOG

    Bakken Lite – 400K acres

    * now turning attention here
    * CWC $4.4 mm, net EUR of 250,000 barrels each.

    * Railcar Plans – on schedule, Feb 2010 in service.

    Waskada Manitoba:

    * 100% IRR
    * wish it was bigger, yada, yada. Everything fine.

    ….

  5. 5
    zman Says:

    Ram – That’s the result of lazy director of research in my book. Makes little sense.

  6. 6
    bill Says:

    sd call on right now

    pxp priced offering at 24 , a few short days ago it was 30.

    I dont understand mgt fire sale but it sure is helping chk which will be pushing 25 today

    expect pxp to be down another dollar today

    yesterday z mention that cop leased a vlcc to store oil. Today frontline reported 100 m gallons of oil in floating storage

    Tankers rates are low and you can rent a vlcc for about 500 k a month, they hold 2 m barreles ofr a cost of 25 cents a barrel–so if there is 25 cent or more contango, there is an incentive to store and deliver later

  7. 7
    bill Says:

    menast to sat 100 mm barrels

  8. 8
    zman Says:

    EOG CC #2

    Natural Gas Plays:

    Haynesville:

    * All 5 wells in the quarter had IPs 14 to 16 mm/d – these were ALL PIPELINE RESTRICTED

    * See presentation for Haynesville wells.

    * 90% of EOG wells have IPs > 10 , this is best amongst peers

    * 4 rigs going to 10

    * Completed First Hz CV well – 15 mm/d IP (this is new, not in PR), Louisiana, missed the Parish name.

    Barnett Shale:

    * Now 480 mmcfepd, going to 700 mmcfepd by ye12 – will be more liquids, less gas by then.

    Marcellus –

    * Tested multiple

    * 2.4 to 3.1 Bcfe wells

    * Will be in development mode by year end

    Mississippi – New Cotton Valley Field – NOT IN PR.

    * 3 wells at 10 MMcfgdp, 7, 5, and 250 175 and 150 bopd respectively. Will check the oil numbers from transcript (typing fast), those are big wells,

    * Will drill 12 this year.

    UK North Sea – see pr, presentation shows this to be a pretty out year event (2012+)

    China – like to get more deets here

    ….

  9. 9
    zman Says:

    #7 – Sorry, how’s that?

  10. 10
    BirdsofpreyRcool Says:

    TechTrader weighed in this morning — before the Jobs numbe was out — with the 60/40 recommendation to go LONG for the day.

    HeadTrader thinks the mrkt will do whatever Goldmans Sachs wants it to do. He now refers to the firm as “Mother Goldman.”

  11. 11
    zman Says:

    EOG CC #3

    GAS MACRO COMMENTS from Mark Papa

    Dec 09 – Gas production will be 4.9 Bcfgpd lower than Dec 08

    See gas market to turn in early 2010, REGARDLESS of

    Texas Vertical Gas Production: 16.3 Bcfgpd in December 2008.

    * 145 rigs there today
    * They see this 13.x Bcfgpd Dec 09
    * Then 11.x Bcfgpd in December 10

    In the past you have seen me say that conventional is the big dog on gas production with the shales being big growers but really a small wedge of U.S. production. This talk about the Texas vertical wells is what I’ve been talking about.

  12. 12
    zman Says:

    EOG CC #4

    Q&A

    EOG basically unhedged on gas in 2010 which makes sense given their gas macro.

  13. 13
    zman Says:

    Emailed in question:

    Z: Going back to my comments after the CHK conference call. What level of confidence do you have in Aubrey’s call of NG $6 – $7 in the second half of ’10. Give me 1 – 10 with 10 being most confident. S

    Probably an 8.

  14. 14
    zman Says:

    EOG CC #5 Q&A

    Inevitable we will see a significant decline in NAM gas production in next 12 months.

    B.C. goverment’s energy stimulus package. EOG thinks the royalty stimulus is “quite significant”

    Bakken ?

    T.F.S. – stacked laterals question – reference to CLR’s test.

    How EOG sees it- most of what they have released to date has been the core area (Parshal). Bakken Lite area holds the most reserve upside.

    They see TFS on a significant portion of both the Lite and Core areas. Will test that next 6 to 12 months. That’s good to hear him say as he has played it down on the Core in the past.

  15. 15
    zman Says:

    EOG – early stock trading seeing some weakness. Clearly someone concerned about the caveat listed in the post on growth being contingent on storage limitations, maybe also not liking the lack of 2010 hedges. I think after or during the call the stock cleans up. Results are very strong here.

  16. 16
    zman Says:

    EOG CC #6 Q&A

    Haynesville – they think all 116,000 acres are good. See it as a big gas growth drive next year.

    Granite Wash – minimal position

    Eagle Ford – have a position, nothing to say at this time.

    E. Texas Haynesville – acknowledged that there is Gammage (sp?) well, holding results confidential. So it could be bad and they don’t want to talk about or good and they haven’t got their acreage position together yet.

    Marcellus – think they will run $3.5 to $4.0 mm for a 2.5 to 3.5 Bcfe.

    * had some 6 MM/d IPs here, not stabilized rates, a little misleading. Pretty slow volume contributer to the macro picture due to logistics.

  17. 17
    zman Says:

    EGO CC #7 Q&A

    Eagle Ford – will not say where they are drilling or where they have acreage.

  18. 18
    zman Says:

    EOG – down 3% now. Back to a little below even on my puts, will be patient for it to look fully washed out before adding. I haven’t heard anything on the call to warrant the sell off. I think the weaker open built on itself during that first broad market pull back.

  19. 19
    zman Says:

    EOG CC #8

    They see 2010 gas price of $7.50 +. Now that’s bold.

  20. 20
    zman Says:

    Bill – they priced that PXP to get it done, gave the buyers a nice bounce this morning which encourages them not to flip it. Kind of a glass half full way to look at it but the last thing they want to do is price it to high and have it be a busted deal, ticking off the new and old shareholders alike.

  21. 21
    Dman Says:

    #18 guess you meant calls …

  22. 22
    zman Says:

    Dman – yes.

  23. 23
    RMD Says:

    EOG slides have comparisons between EOG and other cos listed as co.s A, B, etc. If you find a report who identifies the specific co.s, please post it. Thanks.

  24. 24
    zman Says:

    Oil getting hit as the dollar rises, now down a buck plus.

    HK cracked yesterday’s levels. Watching for now.

  25. 25
    VTZ Says:

    The weekly close on the dollar could dictate whether or not it’s going to bounce or fall one more time before a bounce because the close last week was right at support and any close below it would paint the weekly chart as bullish whereas a weekly close above the support could be perceived a repairing the technical damage.

  26. 26
    zman Says:

    ZTRADE:

    HK – Sold the August $25 Calls, down 89%. These were my highest strike set in the near month and with the stock continuing to be weak following their secondary I thought I’d take them off the table before they completely died.

  27. 27
    VTZ Says:

    Meant to say close below would be bearish, obviously.

  28. 28
    zman Says:

    Hear ya V – personally I don’t think the economy “recovers” without a weaker dollar. So it rallying on the jobs number is kind of circular.

    How to insure a stock rallies? Sell your highest strike set of calls. See HK minute chart.

  29. 29
    zman Says:

    re 23 – I can guess who they are but as everyone measures IPs on different chokes, often different time frames, different capacity constraints and the wells are going to be different from east to west I don’t think its all that relevant to point other than to say their wells have been good and they’ve been consistent.

  30. 30
    zman Says:

    EOG – UBS just raised target from 83 to 88

  31. 31
    zman Says:

    HK catching a rally now with the broad market. This pulls it back from the technical breakdown brink. Not ready to add anything here at 22.75 but I do think new holders will gain confidence and move it higher if it can get over the 22.86 deal price.

  32. 32
    zman Says:

    HK – Southcoast just upped it from Hold to Buy.

  33. 33
    zman Says:

    LINE up 6% today.

  34. 34
    BirdsofpreyRcool Says:

    KOG — i will be on the conf call… starting in 2 mins, but i might not be able to post info in real time. The earnings release was about as good as I hoped for. I look forward to hearing more operational details on the call.

  35. 35
    zman Says:

    Market just keeping to tune of Goldman. Unreal rally here.

  36. 36
    zman Says:

    Thanks BOP, look forward to your read there.

  37. 37
    BirdsofpreyRcool Says:

    KOG — CFO leading the conf call… just reading the PR now. UGH.

  38. 38
    zman Says:

    KOG CC

    BOP – can you suggest they don’t read the pr? Pretty rookie.

  39. 39
    zman Says:

    Emailed in from Nicky:

    well i said yesterday we needed v and boy are we getting it! Look at the dollar though…..

    1014 is resistance and then 1020 – 25 spx.

    Its nuts – you heard the RBS chairman this morning – no recovery for two years!

  40. 40
    BirdsofpreyRcool Says:

    KOG — i definitely will. This is painful and amateurish. double-UGH

  41. 41
    zman Says:

    BOP – thanks, if they’d just put the operations update up front that would be good enough.

  42. 42
    BirdsofpreyRcool Says:

    KOG — pretty clear that the CEO is out of the office… still, no excuse to let the CFO and Operations guys lead this. Just nit-picking… but, still just reading the Q.

  43. 43
    zman Says:

    BOP – this guy doing the ops update is doing a much better job.

  44. 44
    BirdsofpreyRcool Says:

    KOG — first time i heard them mention TFS… will be able to drill TFS wells from same drilling pads… so, this will save $$.

  45. 45
    zman Says:

    Energy not yet participating, all due to the dollar strength. Stocks look very stalled.

    KOG – positive comment on TFS, have data on the TFS well in their acreage.

    465 bopd, 272 mmcf IP low but shallower decline. Hmmm.

    Test the TFS next year.

  46. 46
    BirdsofpreyRcool Says:

    KOG — south of river stuff… this is what is keeping people on the edge of their seats with this little company.

  47. 47
    BirdsofpreyRcool Says:

    KOG — Unitizing the So of Little Missouri River acreage… will make it easier to place/locate drilling locations. Good progress.

  48. 48
    zman Says:

    BOP – missed what he said about a new unit?

  49. 49
    BirdsofpreyRcool Says:

    KOG — cool. The Tribes on the FBIR own shares in KOG.

  50. 50
    BirdsofpreyRcool Says:

    Unitizing the South of River acreage. Just a regulatory thing… but, it’s done and it will make picking and locating drill sietes easier (more effective).

  51. 51
    zman Says:

    KOG – More pipeline concepts cropping up into their acreage. EOG reiterated that the Bakken is bumping up against capacity in several areas. Good to see these guys are on it.

  52. 52
    zman Says:

    Oil ticking into green. Group is lagging, this should help if it can hold. Dollar move is big so pretty hard to fight off today.

  53. 53
    zman Says:

    So they got the unitization done there? That too is positive as I recall how long the original process took where they are drilling now.

  54. 54
    zman Says:

    ZTRADE:

    PQ – Sold my PQ common stock position acquired back in March for $3.50, up 327%.

    I swapped this out for KOG taken at $1.03. This is one of the personal accounts, not the $10KP.

  55. 55
    BirdsofpreyRcool Says:

    KOG — doing a great job of not hyping their operations. Ultimately, this will serve them well… but, if people are looking for sizzle, mngmt is doing their best to keep the fire turned low.

  56. 56
    zman Says:

    BOP – on second thought, I would not have them change the presentation at all. They are doing a pro’s job on the Q&A.

    3 years until first acreage would expire, should be able to get it all into HBP.

  57. 57
    BirdsofpreyRcool Says:

    KOG — they are doing a great job on Q&A. Very open, informative, low-key, confident. Not hyping… but sounding very professional. Agreed.

  58. 58
    zman Says:

    Differential to NYMEX was 9.25 for them in July, tracks with EOG and CLR. They see it improving with new pipe cap over time, makes sense, also in line with other operators.

  59. 59
    zman Says:

    Working to swap some calls in HK around, let ya know if it fills.

  60. 60
    RMD Says:

    KOG: Am I correct it is encouraging how many co.s are going to be drilling Rez soon?

  61. 61
    BirdsofpreyRcool Says:

    KOG — nice closing remarks. “believe our acreage is in the fairway of the bakken play”… “the largest on-shore oil play in the U.S.”

  62. 62
    zman Says:

    KOG call wrapping up. I guess I’ve listened to three of them now … that was the most professional of them. Helps to have good news on multiple fronts. I still put the NAV somewhere between $1.50 and $2.00 per share. I’d bet on a secondary here in late 2009 or early 2010 unless it starts to pop up earlier than that.

    HK hugging the secondary deal price. I think if it can get through there and into the $23s you may see a pretty good relief rally. Needs to close over that level in the next few days or the weak hands in the names will come out of newly acquired shares in earnest.

  63. 63
    VTZ Says:

    Just above the offering price in HK now.

  64. 64
    Nicky Says:

    Morning all. Z asked me about the dollar.

    iv could still be in play – its too soon to say whether the low is in. I need to see it above 80.

    Oil detatched from $, euro getting slaughtered and equities continue to march higher, hmmmmmm

    This jobs number is BS (funny how GS knew it!) we will see heavy revisions next month.

  65. 65
    zman Says:

    Hear V now up 2%, canned my offer on the $24s but will look to shift risk down and out on the name until it gets its post deal legs for certain.

  66. 66
    zman Says:

    Nicky – so you’re thinking is no confirmed upward move in the $ until you see 80? That’s still aways off.

  67. 67
    zman Says:

    KOG – if anyone sees an analyst post mortem here let me know. Thanks.

  68. 68
    zman Says:

    CLR – Raymond James raises price target from $50 to $60. Stock could care less today but people are really starting to rethink the potential asset value here.

  69. 69
    Nicky Says:

    Z – I think the USD is done to the downside to be honest. The euro looks like toast….

  70. 70
    VTZ Says:

    How high though? 82?

  71. 71
    zman Says:

    Nicky – ok, didn’t get that from your earlier comment. Just based on technicals? Because the fundies just don’t look so good.

  72. 72
    zman Says:

    Anyone know what Kass is saying now? I thought he went very bearish about 3 or 4 weeks ago.

  73. 73
    Nicky Says:

    If and its a big if the USD has bottomed then it is heading way higher and the euro is heading sub 1.25 etc.

    Z – sorry yes I am standing on the fence looking at both the USD chart and the euro. It is the euro that looks particularly weak. That said the USD satisfied downside targets for wave v by making a lower low and has since reversed. Perhaps it is the strength in equities that is making me doubt whether the move is done in the USD. Or maybe the USD has just turned first.

  74. 74
    zman Says:

    Nicky, ok, gotcha, thanks.

  75. 75
    VTZ Says:

    Gold and oil are being defiant of the USD rally.

  76. 76
    zman Says:

    NFX back to flat on yesterday’s two sets of calls. That one is a cheap name despite the run. As we move closer to the fall I have a feeling cheap hedge and expensive but high growth names will do ok, with cheap and hedged for natural gas in 2010 and a bit more oil exposure outperforming.

  77. 77
    Nicky Says:

    Oil doesn’t look done to the upside.

  78. 78
    zman Says:

    Nicky and V – was just thinking same, amazing ability of crude to fight off the spike in the dollar today.

  79. 79
    zman Says:

    Housekeeping Watch:

    If you try to reset your password we get notification of that. If you don’t receive your password it is most likely due to your spam filter.

    It is a good idea to put both of the following addresses in your email’s address book so we can properly communicate:

    zmanalpha@gmail.com and
    wordpress@zmansenergybrain.com

  80. 80
    zman Says:

    Rig Count Watch:

    Oil up 16 to 277 vs 387 YoY
    Natural gas up 4 rigs to 681 vs 1571 YoY

    Horizontal up 9 to 422 vs 594 YoY

    Clearly trending up in the oil patch with prices at this level. Oddly, most of the gains this week were in Texas. Louisiana actually dropped 5 rigs.

  81. 81
    elijahwc Says:

    Kass to zman:

    “Looks like I am still on the wrong side of the Street, and I have been stopped out! But as Grandma Koufax used to say, “Dougie, get used to it.”

    “After covering my trading short rentals, I am going to contemplate the market dynamic over the weekend with the recognition that I have been wrong … and I don’t want to continue to be wrong.”

  82. 82
    john11 Says:

    Anyone see any broker comments re SD, stock perking up after this mornings report?

  83. 83
    Nicky Says:

    Bears capitulating right left and center it seems.

    Just put up CNBC to see how much they were pushing this and Steve Grasso just said onwards and upwards with a brief pause at 1020 SPX.

  84. 84
    zman Says:

    Eli – wise guy. That’s an invaluable skill (admitting when you have been wrong) to have.

  85. 85
    zman Says:

    Nicky – yep, it seems to be dragging energy stocks higher as well and even oil.

    John – I have not but will relay if I do. Chose not to focus there this quarter.

    How about a Why I’m In What I’m In while people are snoonzing at their desks?

    Quarter to date I’ve been 90/10 on getting results I wanted from the numbers but only 50/50 on the comments and 40/60 on the reactions. These are ballparks I keep in my head.

    EOG – am not too concerned. Went with Septembers through earnings and it is getting a pullback on some conservative sounding guidance. Same guidance was in last call. Same guidance would effect all E&Ps as it pertained to forced shut-ins. Silly market as other names, who didn’t have the guts to say same are up today on Jobs euphoria.

    FSLR – rebate program. great numbers but damnable rebate program. Analysts still sorting through impact. Fear is it will be bigger than expected and hurt margins. Management does not see it that way. They have been pretty right in the past but jury is out.

    HK – great results. Unreal beat on the production side. Huge hockey stick. All good things normally. Secondary. Ugh. Wading through remaining sellers. End of day, deal done and no new deal very soon. So, second highest production growth profile and better hedged that the #1 production growth guy in 2010, SWN. So, a bit safer. I think it goes higher but I reduced risk there today.

    NFX – not a worry with my follow up position. Cheap name. Will continue to hold September for a while.

    CLR – profit taking day. No hedges make Continental a price reactive boy when crude gets sickly looking. Some analysts now at fresh $60 targets gives me confidence that I’m right and the market is just being short sighted.

  86. 86
    zman Says:

    Bill – Re PXP – pricing in the hole helped their deal. New holds can go home at the end of the week saying they’re up $1.50. I was very surprised to see HK price at the closing price the other day. Guess the book runners thought they had the follow on interest to support that but there is a reason you price it in the hole, to discourage flippers.

  87. 87
    ram Says:

    WRES?

  88. 88
    zman Says:

    Ram – Left them off didn’t I. Like KOG, numbers not as big a deal as the long term improvement of the story. My theory is they have asset value off the books that will propel the stock higher as oil prices move up. Don’t see a near term catalyst. Holding stock for the long term to see improved reserve. Recall this name was in the teens last year but took a write down due to falling oil prices. The oil didn’t go away but the accounting rules forced them to mark its economics to market.

  89. 89
    zman Says:

    Tater – Can I get a look at NFX and EOG charts when you get some free time? Thanks.

  90. 90
    zman Says:

    If I were Barclays and JPM, I would make a hard push to drive HK up into the close or at least hold it at the deal price. My guess is it trades sideways for the next week or so. If the market continues this strength next week then it could see a jump back towards the $24 level or so.

  91. 91
    zman Says:

    Oil trying to make one last end of day push into green. It “feels” like they want to close it over $72 on the week.

  92. 92
    BirdsofpreyRcool Says:

    KOG — i am somewhat astonished that the stock is absolutely stuck in drying cement here. I thought the call went very well, the operations update was very positive, the resolution of the 2nd Unit Rig makes sense, the resolution with Devon on their Vermillion Basin stuff releives KOG of capital commitments, but leaves KOG with some upside exposure to the play… what’s not to like here? The fact that they will be looking for more capital in 4-6 months to continue a successful drilling program? PHUL-LEEEEEAAAAZE. That would eliminate a lot of the e&p kids.

    KOG has no debt. Frankly, with a reliable production stream, they can put some hedges in place and utilize a little debt, if they have to, to continue to invest in the Bakken.

    I think people just have e&p earnings fatigue… and KOG is not run by cheerleaders. So, not getting the interest I would have thought. Oh well… time will tell.

  93. 93
    zman Says:

    That was fast. Disregard 91, pretty amazing volatility, head fakey market.

  94. 94
    zman Says:

    Well said BOP. It was a good call. I think when they have a reliable production stream and can hedge a bit they will get some more support as well.

    Oil trying to fall out of bed now into the close.

  95. 95
    baylor3217 Says:

    what are we thinking on the HK August $24 calls? try to ride it out? They’ve clawed back a bit today.

  96. 96
    Nicky Says:

    Interesting re oil. What’s left to top out – the financials!

  97. 97
    zman Says:

    Baylor – I came within a hair of punting those at $0.45 to swap into $23s or into $24 strike September. May do that Monday. Sense is oil gets back to tracking the DJIA on Monday so if the market has legs, so too will energy.

  98. 98
    baylor3217 Says:

    Z Re97 – yeah im thinking the same. I’ve had a put position on the USO as a hedge but time value just keeps slipping away there as we’ve churned this week.

  99. 99
    RMD Says:

    XEC conf.call,whose mgt sounds very logical but I’m new to the story, mentioned the 2 Sisters well in XECs onshore GOM region in SE TX (Yegua, Cook Mt.) IPed 40,300/d (25,000gas, 2,500 bbl oil). Very excited in an understated way about it; 2 month payout. Cost $9.6mm. Think big EUR but won’t speculate, was a seismic anomaly so dk how many wells needed to drain, which will determine the decline curve. Tristone analyst asked if it was like the Mobley (phoenetic??)well which was flat for 2 yrs. Answer: we dk but Mobley still doing 6mm/d.

  100. 100
    zman Says:

    RMD – sounds like a bright spot in the good old classic sense. Big reserve potential scattered ab out down there. They said Yegua and not Frio or Vicksburg or anything like that? For something like that they or a partner is likely to have a presentation with a pre-drill reserve estimate somewhere. Did they say who else was in the well, SFY perhaps?

  101. 101
    zman Says:

    RMD – Looking through that presentation now. Did they say anything about the Cana – part of the Woodford. That’s a separate play from the normal woodford shale. I know people buying acreage there, pretty darn good wells.

  102. 102
    1520sbroad Says:

    #85 – EOG – i read their release this morning and thought it was fairly good. Not super exciting but not down 4-4.5% bad. Just squirrely market combined with boring guidance?

  103. 103
    zman Says:

    On a call, back to you in 10 min 1520.

  104. 104
    zman Says:

    1520 – my best thought is that it’s been up, the U.S. gas volumes were a little light to guidance but overall they were above the mid point so there should not be much crabbing about that. Well results were good in the Bakken, better in the N. Barnett. Can’t dislike the Haynesville, maybe a bid of disappointment that they were cagey over their results in the E. Texas test and said nothing about the Eagle Ford. There were some new plays thought that I would have thought would have inspired some interest but once it took the negative direction it could not fight it off with down oil and gas prices.

  105. 105
    RMD Says:

    XEC: own 100% of well so no outside news. Cana jottings mentioned: 94,000 net ac, 1/2 HBP, main focus for ’09 as reserves up and costs down, EUR 6.4B but with wide range (2-12) as 6.4 includes bad fracs, $8.4mm cost, 3,700 ft avg. lateral, ’08 avg cost $10.3, ’10 target cost$6.5-7mm, 3 rigs now adding 2 around Dec, 11 rigs in play, will see 17 in summer if play plays out (sorry about that), DVN big position in play and stimulating wells in series: got distracted here and will relisten; it’s 49 min into cc.
    Other comment: hedging for 1st time to insure CF as have robust capx plans for ’10. (Hedge prices did not look brilliant.)
    Love to see an intelligent report on XEC.

  106. 106
    zman Says:

    WILDZTRADE – High risk trade

    EOG – Added (5) August $80 Calls (EOGHP) with the stock down 4.5% at 74.75. See post for details on the quarter. With two weeks to go on these options this is a higher risk trade but I think the sell off in the name is unjustified following the earnings beat and positive operations update.

  107. 107
    zman Says:

    Paid $0.55 for those.

  108. 108
    ram Says:

    I guess CLR’s update is yesterday’s news.

  109. 109
    zman Says:

    People took profits, that got out of hand a bit. I’m holding Septembers and may add next week.

  110. 110
    ram Says:

    WLL acting pretty good compared to its peers. Is it still cheap?

  111. 111
    zman Says:

    Yes, it is.

  112. 112
    zman Says:

    Beerthirty.

  113. 113
    BirdsofpreyRcool Says:

    Phew! Are we through earnings now? Please??

  114. 114
    zman Says:

    Just about. All of my names anyway. No one said anything bad. Group got tired half way through. And then there was the occasional land mind.

  115. 115
    BirdsofpreyRcool Says:

    Congress is out. Earnings are over. MEND has a truce. Russia is quiet. Any reason to watch this mrkt the next coupla weeks?

  116. 116
    Nicky Says:

    Wow what a battle on the broader market into the close. I am not holding my breath but there is a possibility the saw the top of this leg at 1018 spx today. It was a clear ending diagonal and it HAD to stop there!

  117. 117
    BirdsofpreyRcool Says:

    So, Nicky, what’s your call for next week?

  118. 118
    zman Says:

    Sounds like a good time for me to take a vacation.

    I’ll be in Monday, out Tuesday and vaguely present Wednesday through Friday.

    If you have any questions I’ll get to them on a bit of a delayed basis in the back half of the week.

    Or just ask BOP as she has volunteered to lend a hand.

  119. 119
    BirdsofpreyRcool Says:

    z — NO ONE can fill your shoes…

    NO ONE would WANT to!! 😉

  120. 120
    BirdsofpreyRcool Says:

    Actually, I’m not kidding… it’s now OFFICIALLY Summer Trading. Seeing all sorts of emails from NY traders, telling people they will be out next week.

    So, z, you’re gonna have to check in with funny stories and/or movie quotes, to keep it interesting.

    Or, maybe POTUS will come out with a plan to nationalize fast food, or something. We can talk about that for a few minutes.

    Have a good one, z!

  121. 121
    Nicky Says:

    BOP I am looking for a B wave pullback to about 950 SPX. Need to take a look at the count…. I thought the close was very weak – GS were red all day – it may have been a heads up.
    Whats for sure though is that the government do not want to see interest rates go up so they can afford a little dollar squeeze here and an equity pullback.

  122. 122
    Nicky Says:

    A lot of pension funds have gone long the market recently due to the fact that they are way under water and need to take more risk.

    (JP) Japan’s FSA: Companies should reduce stock holdings

    This would be classic wave 2 action – everyone piles in believing the worst is over and then gets absolutely obliterated.

    I do have several up side targets for this rally further out. If you put up a very long term Dow chart you will see a huge head and shoulders pattern forming. If this market rallies back towards 11000 and fails then the target for the h and s is 2800 for the Dow.

  123. 123
    elijahwc Says:

    Too good to pass up – Howard Simmons:

    Last Clunker Update Of The Week
    8/7/2009 4:19 PM EDT
    There have been 245,384 transactions submitted on this program. There could have bee 245,385.
    The missus got wind of the program and insisted we go to a dealer. Oh, alright. She marches in, take me up to the sales manager’s desk, nods in my direction and demands her $4,500 check.

    After a moment of awkward silence the manager explained the program was for cars only.

    You could have heard a pin drop on the way home.

  124. 124
    Nicky Says:

    Baltic Dry Index Down 17% for the Week, Worst Fall Since October

  125. 125
    zman Says:

    … and yet the SEA (dry bulk ETF) was up a touch on the week. That won’t last.

    BOP, since you brought it up, this one’s for you.

    Friday Movie Quote Watch:

    “Put HER In Charge!!!”

  126. 126
    bill Says:

    sandridge really soared today

    we were discussing it the other day

    i wish i bot it

  127. 127
    BirdsofpreyRcool Says:

    z — i think i like you better when you are in a BAD mood. Clearly, you are ALREADY ON VACATION.

    SD — i was thinking the same thing. An old oil patch fart friend of mine whispered last week that SD was a buy with an 8-handle. Shoulda followed his advice.

  128. 128
    Paul in Kansas City Says:

    Howard is a really funny guy

  129. 129
    zman Says:

    BOP – You know I don’t have moods. But I do plan to spend a lot of time next week updating my FaceTwitSpace so if I have a mood it will be represented out there.

  130. 130
    Nicky Says:

    Possible count. This could be a double zig zag off the March low in which case:
    The move from 66 to 956 is A, then B down to 869. If C=.62A the target would be 1051. If C=A then 1158 (the 50% fib of the entire bear market is at 1121) and if C=1.62 A then 1340.

  131. 131
    Dman Says:

    Nicky (& tater as well): I didn’t like the look of the reversal today in crude, with a gap waiting below. Relatedly, in the USD/CAD chart, the dollar looks set for a move up (eg the daily MACD is crossing over quite steeply), which would be unlikely if crude stays strong.

    Interested in your technical take …

  132. 132
    BirdsofpreyRcool Says:

    z — #125… Aliens??????

  133. 133
    tater Says:

    My first thought was Aliens as well.
    I’ll give a look at NFX and EOG and maybe have a peek at crude over the weekend. The charts just seem to look much clearer once I’ve had a couple bratwurst and a case of beer.

  134. 134
    choices Says:

    This may be old news but as I understand, UNG is rolling its contracts over next week.

    http://www.cisoptions.com/2009/07/us-natural-gas-fund-etf-stops-issuing-new-shares/

  135. 135
    West Says:

    I was out and missed the KOG cc live. Just some personal thoughts. The cc was loaded with excellent information and some very positive information on existing wells. The glaring fact is that the stock once again didn’t move on what should have been good news. This is reminiscent of when the released results from their 3rd and 4th wells and the stock did not move up and in the days following it started moving down. It seems to me that there is no new big money players moving into the stock and the stock doesn’t trade with enough liquidity for most money managers. There is nothing worst than being on the wrong side of the trade and having to liquidate your position and add to the free fall. My four plays for the Bakken/TFS are WLL, CLR, EOG and KOG. Looking for some red days here to reestablish positions most of these stocks have gone up at a 45 degree angle for 3 weeks , time for a break. The bad news is that KOG is the only stock that didn’t go up during the run.

  136. 136
    BirdsofpreyRcool Says:

    West — thanks for your thoughts and comments on KOG. It was a solid quarter and a good conf call (once it got past reading the PR). I think you nailed the reason the stock isn’t climbing… I think every institutional investor that wants to own KOG at this point has already established a position. I know several of those guys and they aren’t adding (although they bought in the recent 2ndary). That said, they aren’t selling either… but someone is.

    There seems to be a steady offer at the $1.03 level. That smells suspiciously like someone who bought in the recent direct-placement secondary at 75c saying “hey… i’m up 33% on these shares, throw in 3c for commission and let’s lock in some of our gains here.” It’s still a week away from the 90-day expiration of the lock-up… but, it’s not like I haven’t seen people try to sneak ahead of the official starting gun.

    That said, KOG is by far the purest play on what is arguably the best onshore US oil play in recent history. And it’s just getting started. Once KOG proves up their south of the Little Missouri River acreage (results estimated to be in mid-October from wells 7&8), I think it’s off to the races for the next leg up. At that point, KOG will start to think about either merging with a larger parent or raising some more capital (probably a combination of some bank debt + 2ndary equity) to continue to develop their acreage on the FBIR. (BTW, it was very encouraging to hear that individual members of the Three Tribes own shares in KOG… very capitalistic and supportive of private ownership on the Rez.)

    So, KOG now has something they haven’t had in a long time… financial flexibility and a growing reserve base. The direct result of financial flexibility is to lengthen the time value of the embedded call option in KOG’s stock. And — all else equal — you increase the expiration date of a call option, you greatly increase it’s value.

    One other piece of “optionality” embedded in KOG stock is ANY results from their Baxter Shale JV with Devon in the Vermillion Basin, Wyoming. KOG has restructured their capital commitment with Devon to release KOG’s obligation to spend $4-6mm in 2009 there. KOG can now redirect that to further fund their 2009 $21mm capital expenditures in the Bakken. KOG believes they have enough finacial flexibility (using cash flow from operations, more land transactions, and the extinguishment of the Vermillion Basin obligations) to internally fund this drilling program.

    By the time KOG needs to raise more cash to support their Bakken development, KOG will be in a much stronger position (and much more attractive to any potential acquirer).

    Just a few thoughts.

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