19
Aug

Wednesday

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No economic data today outside of the EIA oil inventory release. API was bullish on the surface (higher utilization meets lower imports) but as is typical for this post earnings period, there isn't much news from the energy space to counter the effects of another swoon in the Asian markets overnight.

 

What A Difference A Year Makes:

Lease Sale 207 for the Western Gulf of Mexico was held one year ago:

  • 319 blocks were bid on

  • 423 total bids were made

  • These bids covered 1.8 mm acres or 10% of the 18.3 mm acres offered by the MMS for lease in the Western Gulf of Mexico.

Lease Sale 210 for the Western Gulf of Mexico is today. Bids were unwrapped last night:

  • 162 blocks received bids

  • 189 total bids were made

  • Bids covered 0.9 mm acres or just under 5% of the 18.4 mm acres offered for lease.

  • There were only a handful of blocks receiving 2 bids and only 4 blocks with 3 bidders. You can see who bid on those here.

  • For a complete map of the sale click here.

  • Leases were overwhelmingly deepwater and longer dated with 10 year leases garning 2/3rds of the bids.

  • The decline in bidding is not simply a function of oil prices but a fear that changes proposed by the current team at the MMS and the Administration will alter the attractiveness of the leases post sale. Strangely enough, people don't like to buy things and then find out that what they bought isn't as attractive or costs more than they thought. 

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today
  5. Odds & Ends

Holdings Watch:

  • $10KP:

    • $17,300
    • 60% Cash
    • The wiki tab is updated

Yesterday's Trades:

CLR - Sold the $35 August calls (CLRHG) taken yesterday for $0.75, up 104%. I continue to hold the $40 strike Septembers here.

HK - Added (10) more HK August $22 Calls (HKHS) for $0.40 with the stock at $21.82, up a little over 1%. Obviously risky with expiration later this week.

Commodity Watch:

Crude oil rallied $2.44 to close at $69.19 yesterday, sharply outperforming the equity markets. The dollars new found weakness helped as well but the move seemed also like panic short covering at times, especially when the Dow periodically surged in the early afternoon hours. Oil looks like this now. Last night, API reported a bullish looking set of data, more on that below, but oil is trading lower with equity futures which are taking another hit from declines in the Asian markets.

  • OPEC Watch: Kuwait's oil minister said there is no need for quota changes when the group meets in September. "Kuwait is happy with current output. The current oil price is not bad at all."

Natural gas fell $0.07 to close at $3.10 yesterday, its ninth consecutive losing session. The oil / gas ratio is now at a record 22.7 to 1. This should not last very long. This morning gas is trading up slightly, but is within easy striking distance of a $2 handle.


  • Early Read on Gas Storage: 58 Bcf injection.  I'm thinking more like 50 to 55 Bcf.
  • Tropics Watch:
    • Ana - still raining, still disorganized, Accuweather thinks it has a chance of reorganization.
    • Bill - Now a Cat 4, still tracking to be just a fish storm in the Atlantic.

Oil Inventory Preview


API Watch:

  • Crude: DOWN 6.134 million barrels
    • Combination of higher production (that's a bit odd but not extraordinary and would be normal in a normal year) and lower imports.
  • Gasoline: DOWN 0.847 million barrels
  • Distillates: UP 1.529 million barrels

Note: I saw one sellside firm comment this morning that they won't be paying attention to what they call the increasingly erratic numbers coming out of the API. The cited the EIA's numbers as more accurate as well. I have my doubts about both statements. I also doubt that the market will stop paying attention to them.

ZComment: Where we're at on inventories:

  • Crude - Inventories are 11% over the five year average and have been moving lower seasonally. Due to curtailed refining capacity we have seen the occasional increase in crude stocks.
  • Gasoline - Inventories of gasoline are starting to bloat due to soft demand and despite refiner production curtailments. I expect to see an uptick in gasoline demand with today's numbers and into the coming holiday.
  • Distillates - Inventories are in sky high territory. They have been for eight months now and actually starting to fall. There are signs that over the road diesel demand has stabilized ... down 10 to 20% from last year depending on the week. Normally we see builds in stocks of distillates rise for another month or so so. We have been seeing some deterioration of the surplus to year ago levels and the five year average, all due to lower production, not demand. 

Stuff We Care About Today


The Large E&P Cap Tables - just an update of the large cap E&P tables. The large caps are extremely cheap on an historical basis and the positioning within the group has been altered. EOG, which normally trades at a premium to its big cap peers has now fallen to the middle of the pack as the stock has tread water since the 1Q report and failing to respond to positive 2Q metrics.

 

Both the large cap and small and mid cap E&P orange charts will be placed on the E&P metrics tab at upper left.

I'll have an updated version of the KOG NAV table with a comparison of their look vs mine out for the Thursday post.


 

Odds & Ends

Analyst Watch:

  • Barclays takes targets on CHK up from $29 to $30 and on CRK up from $40 to $43

Interesting Reading Watch:

156 Responses to “Wednesday”

  1. 1
    zman Says:

    Food for thought:

    Last week was the warmest of the year at 79 CDDs, 10 more than normal and a whopping 26 CDDs above the comparable week in 2008.

    Last year saw an injection of 82 Bcf on the mild weather.
    The five year average is closer to 60 Bcf
    The Street is at 58 Bcf for this Thursday.

    We saw an injection last week of 63 Bcf on CDDs of 67

    I’m still thinking 50 to 55 Bcf is more like it for Thursday.

  2. 2
    zman Says:

    At the open, natural gas is the only thing green on my screen. Barely.

    No trades from me until we see the oil numbers at 10:30 EST.

  3. 3
    zman Says:

    If I recall correctly, Nicky’s first line of support for the S&P was 982 from earlier this week.

  4. 4
    zman Says:

    Crude trying to go positive as the market recovers half the morning loss, NG up 3 pennies, tomorrow is going to be pretty important for the next week. I could see a solid beat of the numbers leading to a large rally back towards the mid $3s, much to the chagrin of Schork and others calling for it to fall to $0 or at best sub $2.

  5. 5
    bill Says:

    what do you think of this article

    http://www.rigzone.com/news/article.asp?a_id=79414&hmpn=1

  6. 6
    BirdsofpreyRcool Says:

    Head Trader and Tech Trader both said it’s too sloppy to call a direction today… so, look for anomolies.

  7. 7
    Nicky Says:

    Morning all. Odd action even for the charts to be honest. My best take is that we are in a big wave 2 correction and that it should resolve to the downside but this market continually fails to sell off which I find extraordinary considering that China is falling apart.

  8. 8
    zman Says:

    First paragraph true until last sentence, then I don’t necessarily agree. There is a near record short position in gas futures at present. The concept he is talking about has been well communicated to the markets … we’ve known we were going to get full for a long time. There is the potential for a short covering rally as the play has gotten pretty tired and conventional production, which is the majority of production is already well underwater at the wellhead.

    For me to give credence to his comments about production I’d have to know that he knows what he’s talking about. That is not apparent. He does not talk about lower 48 production but gross aggregate and he doesn’t talk about the fact that onshore is seeing declines while offshore was still recovering from storms (Ike and Gustav) last year. So you have Texas coming down and noticeably so, while the Gomex recovers. That’s kind of important and leaving it out undermines his credibility on the whole subject in my book.

    The whole revision comment is silly. The simply answer is the front months are always low due to some data arriving more slowly. The MMS and the EIA have done there best to speed this up but it is a headache that continues with some operators, especially in the deepwater. Onshore, revisions can go either way as estimates made by EIA are replaced with actuals as they come in. I know because I used to work with the EIA whenever we saw something obviously anomalous in the numbers.

    … more in a bit …

  9. 9
    Nicky Says:

    Resistance for SPX remains at 992,994

    Support at 982, 975,968

  10. 10
    zman Says:

    Thanks much for the levels Nicky.

  11. 11
    BirdsofpreyRcool Says:

    Tellingly, investors continue to pile into the financials… both BAC and (riskier) C are up today. I admit, this is a bit puzzling.

  12. 12
    Nicky Says:

    EWI have released Bob Prechters latest report free. Ignore it at your peril imo.

    http://www.elliottwave.com/club/free-theorist/default.aspx?code=34720

  13. 13
    RMD Says:

    Bill’s great article in #5 above raisies some key questions. IP rates in Fayetteville go from 1.0 to 2.4mmcfd; we know these numbers. Barnett EUR for horizontals go from 1.24 to .84B; is this a good number? I don’t recall co.s talking about EUR decreasing 32% for horizontal wells vs. verticals. Did I miss something or is there not enough data to back up his statement that at$6.00 as only 15% of Barnett wells are breakeven?
    His real story is the 3.9X increase in IP/rig/yr in Exhibit 2 going from 18,360 to 72,139 and it’s effect on DCF, and why gas production has been slow to decline (so far).

  14. 14
    zman Says:

    RMD – don’t know where that EUR comes from. Sounds like he’s looking at Tier 2 wells which aren’t really the focus of the play at these prices. Industry thinking on Barnett economics is closer to economic at $4 gas in Tier 1

  15. 15
    zman Says:

    I’ll take a harder look at that article in a bit.

  16. 16
    choices Says:

    fwiw:
    http://seekingalpha.com/article/156999-natural-gas-could-this-be-the-first-bullish-chart

  17. 17
    zman Says:

    Crude down 8.4 mm barrels

  18. 18
    zman Says:

    Gasoline down 2.1 mm barrels

    Imports of crude plummeted to 8.1 mm bopd, down 1.4 mm bopd from last week. This is partly catchup from the prior weeks weird numbers.

    Distillates fell 0.7

    Very bullish numbers so far…

  19. 19
    zman Says:

    Gasoline demand rallied 300,000 bpd to 9.205

    Distillates saw their best demand levels in several weeks at well getting back up to 3.466 mm bopd

  20. 20
    zman Says:

    Funny that TPH won’t be watching the API any more because it was “erratic” and less accurate, as they cite the big API draw and then EIA comes with an even bigger number. That is wow big but it is mostly imports based which detracts a bit from the quality of the number.

    CLR should be zooming in here along with SU, WLL, EOG … could be enough of a rally in crude to lift the market into the green.

  21. 21
    Nicky Says:

    So equities are going to rally on the back of oil going higher. I do not see this ending well. Neither do I believe oil is justified at this level.

  22. 22
    choices Says:

    DX collapsing (again)

  23. 23
    zman Says:

    We did see a slight uptick in demand from refiners but the overwhelming % of it is attributable to a decline in imports. That level of imports is not sustainable. It will be offset in coming weeks. Makes for a nice trade today though.

  24. 24
    zman Says:

    Glad to see I’m not off my nut on the end of summer rally in gasoline demand as well. That should stay here or better next 2 to 3 weeks.

  25. 25
    gaamblor Says:

    that import number looks way out of the normal range

  26. 26
    zman Says:

    Gaamblor – it happens. We had a big one the other direction a couple of reports back. The data slosh about from week to week a bit so this can be a true up to get inventories where they think they are now.

    Looking at crude stocks, we have suddenly fallen from 19% above year ago levels to 12%

    The move against the 5 yr average is from 11% last week to 8% now.

    Not saying oil should run to the moon on these or any other numbers until we see demand resurface. But it is positive to get inventories down some and to see end product demand tick up.

  27. 27
    zman Says:

    Next 30 minutes of trading going to be pretty important for oil in here Nicky. The bulls can point to three headline numbers that are all better than expected (oil,gas,dist) and the bears can say “its just imports stupid”

  28. 28
    benbobby Says:

    Zman,are they still adding barrels to the SPR?

  29. 29
    gaamblor Says:

    z, looking at your gasoline demand chart from a couple weeks ago it looks like there is a spike for this week on the 5 year avg, and a big spike in 2007, none for ’08 though

    why would that be? labor day pre stocking? seems too early for that

  30. 30
    kyleandy Says:

    NFX seems to be the star today. any reason?

  31. 31
    Nicky Says:

    I fail to see how any demand can be sustained when the economy is on the bones of its arse. The higher it goes the bigger the squeeze for the consumer. End result will be the same. Eventually price is going to plummet again. I did think we may see 73 – 74 level before a move down again but that spike may have been it.

  32. 32
    bill Says:

    20

    that is funny

    tph tottally dissed the api number, then eia is larger, lol

    the tanker rates indicate no business

  33. 33
    zman Says:

    Ben – No, they haven’t added to it in a month, stuck at 724.1 mm barrels.

    Gaam – I think it is real demand from pre back to school family travel. And pre stock will be done a bit early for the gas stations as they know it will run into the holiday, now more than ever given last year’s summer pricing.

    CLR – got dropped hard following oil’s little pull back. More volatility in that name than in the past. And nothing for volume in that move.

    Kyle – nothing that I see. It is the cheap name in the group but its always cheap. Just noise in my book. I continue to hold the Septembers there.

    Nicky – when I look at demand I look at products first, then oil demanded by refiners to make the products. What I am seeing is what I would call stabilization with normal season patterns. That’s a lot better than continued plummetation or cliff diving or arse levels. I think Winter is going to be very important for oil this year. Cold in the U.S. will be needed to take down bloated HO inventories and people will need to shop for Christmas (not saying they will but that’s what we need to see). So if the retailers throw in the towel on Christmas this year than you won’t see more trucks rolling. Lot of truckers sitting in the middle of the country doing nothing right now.

  34. 34
    Nicky Says:

    Z my own view is that oil is purely a momentum/speculation play right now – I don’t think anyone really doubts that now despite all the protests about it last year. And it is also a $ related play.

  35. 35
    zman Says:

    Bill – after cost cutting has taken effect, what do you think it now takes to operate a VLCC on a daily basis. I’ve read reports of massive fleets of finished diesel floating around the planet, waiting on winter to come to various ports or not. Just thinking that the domestic refiners are in for a reality check if they think we are going to return to a healthy diesel export market anytime soon. If costs have fallen a lot and those tankers are indeed being booked as floating storage than its possible they are able to take lower day rates and still turn a nice profit. How’s FRO doing these days?

    RMD – I will circle back to that article in a bit.

  36. 36
    zman Says:

    Gaamblor – if you go back to the imports chart from 2 weeks ago you can see there was also a big drop (a few weeks from now) in imports. This was storm related as most imports come in through the Gulf. This year’s is odd since we really had no weather in the Gulf last week, maybe high seas off Mexico (don’t know, was on vacation and didn’t really look for stories on that this week). Anyway, these big dips usually sort themselves out in the next week or two following the report.

  37. 37
    RMD Says:

    #35: IP/rig/yr is key data point there.

  38. 38
    Nicky Says:

    watching the USD. Line in the sand for the bullish count is 78.20. We could be about to explode higher here but if that level goes bullish count is wrong for now.

  39. 39
    Dman Says:

    Nicky, I don’t doubt that the oil market *acquires* momentum, in both directions. But that doesn’t mean momentum is the whole story.

  40. 40
    BirdsofpreyRcool Says:

    TechTrader weighing in with a rare, mid-day comment. He thinks there are good odds for a sell off after lunch today. And he believes there is the potential for a big move. I don’t know if he is already short, or not. But, will be interesting to see what happens.

  41. 41
    zman Says:

    Nicky – trying to do three things at once at the moment. Would you mind summarizing prechtor thoughts, you are the second person to send a one time free link to his stuff. I am dubious of one time free material as it seems like more and more people are trying to make “the big call”, witness doug kass of late who was good in the spring but has since gotten a little too cute on timing the pullback but does show up on CNBC more regularly.

  42. 42
    zman Says:

    Thanks BOP – lots of people looking for the big fall …

  43. 43
    Dman Says:

    Z – another article for your expert eye

    http://www.aspousa.org/index.php/2009/08/lessons-from-the-barnett-shale-suggest-caution-in-other-shale-plays/

  44. 44
    Nicky Says:

    Z I have not read him yet. But I have seen the headline which is that the worst is yet to come. Deflation, followed by inflation. It isn’t a one time call for him. He called the top and covered at the bottom! I have seen him all over the web calling for a top at 9700 which will be the end of wave 2. His call is that there is now overriding bullishness that the worst is behind us – this is typical wave 2 sentiment.

  45. 45
    BirdsofpreyRcool Says:

    z — that’s just it… Mr. Mrkt never does what most people think he will. So, does that mean we RALLY post lunch? This short-term trading stuff is truly a random walk, in my book.

  46. 46
    Nicky Says:

    Dman I just don’t support the fact that there are any fundamentals that support oil at these levels. Traders have piled into anything and everything where they could see a buck to be made since March when everything was extremely oversold. Equities are the same – the valuations are now way ahead of where they should be for our recoveryless recovery.

  47. 47
    zman Says:

    BOP – I have no idea about short term moves. I was simply stating that a lot of people of have been looking for a fall in the markets and eventually they will be right. Many of them have been looking for that fall for the last 2+ months. I think the market is overheated by a bit. I think it can defy you longer than you can stay solvent fight it, yada, yada, yada.

    As to oil, it went up with the market and is still off over half of what it was at a year ago. So, if oil is up too much, than the market, which has fared far better over the same time frame must be even more elevated. If the dollar continues to fall watch the pre OPEC rhetoric regarding great quota discipline ratchet higher. The pendulum always swings to far and we’re back to yadas.

    Anyway, I note that the bears get louder after 1 down day and then disappear after 3 up days each mini cycle we go through.
    I note that the market goes up on bad eco news and may or may not on good eco news.
    It falls on days with no eco news.
    It seems to increasingly forward focused which at some point gets you into trouble if you are indeed looking across the valley of the double dip.

    Oil back to up $2 on the day with little change in the markets. A close up here will lead to a shot at the recent high north of $72 tomorrow and Friday unless the Chinese tumble yet again.

  48. 48
    jpntexas Says:

    alphatrends watching KOG on twitter!

  49. 49
    zman Says:

    Nicky – do you look at oil on a dollar adjusted basis? That takes some of the gain out of the, um, gain.

  50. 50
    reefguy Says:

    71.28/3.127 =22.79 BTU’s continue to be on sale….

  51. 51
    zman Says:

    jpntexas – thanks. I don’t tweet (unless this counts). Is there a link? My daughter told me I have to have a facebook page and the Zman site now has one. It says basically to come over here.

  52. 52
    West Says:

    Seems like some big blocks have been trading on SD lately. Bought some Jan 17.5 @.55 just in case somebody wants them. Bakken Update: WLL has applied for drlg permit SEC 2&3 154-92 which is just south of BEXP recently announced Strobeck well. This will be a 3forks test with a long lateral. It shows on BEXP website that they also have an interest in these parcels…..CLR is drlg a wildcat in sec31-146-89 a sparsely drld area & will probably test both bk & tfs, this approx. 15 miles east of KOG’s present drlg location. It should be noted that both CLR& XTO hold large acreage positions in this area. XTO recently drld a wet Bakken and then tested the 3forks that was wet also. Until proven otherwise the bakken wavy line shown on KOG’s website is the eastern edge of productive zone.

  53. 53
    ram Says:

    What’s with the pole climbing in HK?

  54. 54
    Nicky Says:

    Z – in a word no I don’t.

    Indices if c = a and this is a wave ii then 994 is as high as this move should go.

  55. 55
    jpntexas Says:

    Here is the ” tweet” , it is a seperate thing from facebook, just an instant communication service really. alphatrendseye on $KOG needs to clear 127 to get momo

  56. 56
    zman Says:

    WILDZTRADE: (high risk)

    EOG – Added (9, also a part fill) EOG August $75 calls (EOGHO) for $0.35 with the stock at $73.20. Oil is now up over $2 on a bullish looking set of EIA data which confirmed API’s bullish look last night. The move is mostly imports which detracts from the big headline numbers but products did see an uptick in demand. This will obviously be a quick one.

  57. 57
    BirdsofpreyRcool Says:

    West — CLR well 15 miles EAST of KOG’s present location? That will be interesting. Thank you for all your work on well watching.

    15 miles EAST??

  58. 58
    zman Says:

    Ram – just me getting a bit lucky.

    West – sounds like KOG acreage is in the doughnut hole. Thanks for the update.

    JPN – thanks.

  59. 59
    Nicky Says:

    When I start seeing headlines which say that higher oil prices are helping the market claw back its losses I know we are in overdne territory.

  60. 60
    BirdsofpreyRcool Says:

    jpntexas — KOG will definitely clear $1.27. It’s not a matter of “if”… just a matter of “when.”

    Of course, those pesky insider sales don’t help. If i was the CEO, i would be a little unhappy with my troops (and Board) for selling at this point (after a May capital raise, before 5/6 well results, before funding 2010 capital budget). But, it’s a Free World, i guess.

  61. 61
    jpntexas Says:

    no thoughts on price from me, just thought it was interesting as alphatrends is one that I follow on twitter

  62. 62
    BirdsofpreyRcool Says:

    TechTrader can’t be happy with this rally.

    But, go figure. Short-term moves just too tough to call… especially during the “Light in August” days.

  63. 63
    BirdsofpreyRcool Says:

    jpntexas — understood. Thanks for posting the twitter info. I don’t tweet. So, will have to rely on you. Thanks.

  64. 64
    Nicky Says:

    BOP according to CNBC which I have now thankfully turned off some idiot analyst saying that huge draw in crude inventories is an extremely good sign that the economy is recovery and this thing is going to be over sooner rather than later. What an absolute idiot – I mean isn’t he thinking about what he is really saying??? How can higher oil prices possibly be good for the economy. Sure if we had recovered but we haven’t!

  65. 65
    BirdsofpreyRcool Says:

    KOG — i hope the CFO chokes on his 4,000 share sale at $1.23.

  66. 66
    West Says:

    https://www.dmr.nd.gov/oilgas/, then go to gis mapserver and zoom in and u can check out the whole bk/tfs play.

  67. 67
    BirdsofpreyRcool Says:

    Buy Program just hit on the futures floor, HeadTrader says.

  68. 68
    BirdsofpreyRcool Says:

    LOL… just passing along info. I find this entire week just too tough to call a trend. According to HeadTrader, USD is getting smoked.

  69. 69
    BirdsofpreyRcool Says:

    Briefing citing the following as the reason for the rally today (not sure i believe this is the reason, tho) —

    Intraday spike in market being attributed to talk of a second stimulus package; however, most professionals are discounting the idea given that majority of money from the initial stimulus hasn’t been dispersed yet

  70. 70
    BirdsofpreyRcool Says:

    West — thanks for the map link.

    z, can you add that to the KOG notes page? thanks!

  71. 71
    zman Says:

    Nicky – that was Jamie Cox, a partner at Harris Financial. He is absolutely wrong with his statement that this shows economic recovery. Could not be more wrong. It was imports, plain and simple.

  72. 72
    West Says:

    Tater would it be to much to ask to add KOG chart back on your members site at stockcharts.com. THX

  73. 73
    BirdsofpreyRcool Says:

    z — #58. “donut hole”???? Bite your tongue!

  74. 74
    zman Says:

    West – I was just going to suggest that. Lot of Zenergy wells around there, have not tracked down all of KOGs wells, I do see the rig on the pad for #7 and #8. Ties to the new presentation which I had not looked at until now, good to see them stepping out in all directions on their acreage, with 9 being the furthest south and east. Is the CLR well you are looking at the Traxel 1-31H? Also, any data on that XTO well just to the west and south of CLR’s spud? The Miller 34x-9 (looks like a 9000 foot lateral spud in November)?

  75. 75
    zman Says:

    Hey, doughnut holes get eaten.

  76. 76
    1520sbroad Says:

    BOP – do your traders follow put/call ratios and put them into their models?

    big disconnect in the index options vs. equity options right now. Loads of put have been bought for the past few days on the indexes SP 100 and 500 while tons of calls purchased on individual equities.

  77. 77
    1520sbroad Says:

    my thought is that many of those individual equity options are on tickers like C, BAC etc. staggering volume on them.

    all while the index options traders are setting up on the short side.

    Makes me a bit leery of the market at the moment – especially with some low volume days/weeks to come.

    If we could only get Johnny Hotmoney to jump into energy while watching a spinner in the gulf things would get really interesting…

  78. 78
    ram Says:

    Lucky?? Lucky is if those 24’a are in the money by Friday!

  79. 79
    West Says:

    z, i will locate RMOJ story and give details when i find it. Zenergy has several more wells planned there west of KOG and have applied for more 1280 units. They keep most of their wells on confidential so not sure of production figures. These guys are also drilling along the Nesson and have partnered with Peak ND on several wells. Maybe BOP can ask but KOG has probably either partnered with them or Petro-Hunt on the Moccasin Creek wells and also their new partner east of the river.

  80. 80
    apbd Says:

    Doughnut holes are zero calories too!
    My storm has strengthened.
    apbd

  81. 81
    BirdsofpreyRcool Says:

    1520s — if they do, they don’t talk about it much. So, i suspect no. More of a futures-watching crowd, truth be told. But, they also collect a lot of color from what other buy-siders are doing.

    For some reason, your observation makes sense. People are scared of Sept-Oct… but, they don’t want to miss out on the upside. So, buy puts for protection, but buy calls to take advantage of any upside, with limited exposure.

    Mrkt is jumpy… afraid of both directions, it seems.

  82. 82
    zman Says:

    Ram – they can’t all be winners.

    APBD – LOL. Got your letter. Thanks.

    West – thanks much.

  83. 83
    BirdsofpreyRcool Says:

    west — i asked KOG about parterning with Zenergy on the MC wells. Answer was “no.” Might be Petro-Hunt, tho. Didn’t ask that question.

  84. 84
    1520sbroad Says:

    BOP #81 – agreed on jumpy, squirelly, confused etc.

  85. 85
    zman Says:

    Market climbs a wall of jumpy, squirrelly, confused worry.

  86. 86
    BirdsofpreyRcool Says:

    yeah… i feel like climbing the walls myself. lol.

  87. 87
    ram Says:

    O.K., but if the walls have no sense of any foundation, then doesn’t the wall crumble and you fall on the broken bricks and you die?

  88. 88
    West Says:

    kog somebody sold 500k shares

  89. 89
    zman Says:

    …which is why I hold a good chunk of cash, cushions the fall.

  90. 90
    zman Says:

    That 489K trade was a mkt swap. So they had a buyer in place, otherwise would have crunked the stock.

  91. 91
    zman Says:

    re 90 – That’s actually positive for the stock. Seller is no longer a pressure (at least that particular seller) and we have a new buyer willing to take a half million at this price.

  92. 92
    Nicky Says:

    The insiders are selling into this rally. Mom and Pop are buying in and the guys in the know are offloading happily to them. Seriously the market has rallied 50% in 5 months how much more upside do you think we have. China should be the warning. It started rallying sooner than we did and it is now tanking. 20% in two weeks.

  93. 93
    BirdsofpreyRcool Says:

    ram — #87… God Damn, sir! You are one CHEERY GUY! 😉

  94. 94
    BirdsofpreyRcool Says:

    (ram — you seriously crack me up… lol)

  95. 95
    BirdsofpreyRcool Says:

    West — on the other hand, someone BOUGHT 500k shares too. With that size, musta been a brokered trade. Probably someone who added at 75c.

  96. 96
    BirdsofpreyRcool Says:

    z — oops, didn’t see #90… didn’t mean to repeat you.

  97. 97
    zman Says:

    Bop – watch that potty mouth, sailor. That’s what I was saying in 90 on the KOG

  98. 98
    BirdsofpreyRcool Says:

    sorry… too many formative years on the Trading Desk, i guess.

  99. 99
    zman Says:

    Hear ya BOP, lol, guess I had too many formative years making fun of half the guys on the trading desk.

  100. 100
    BirdsofpreyRcool Says:

    z — what was their nickname for you?

    They give every one and every deal a nickname. And it’s generally not a NICE nickname… 😉

  101. 101
    zman Says:

    The professor.

  102. 102
    zman Says:

    At least to my face, that and Z of course.

  103. 103
    BirdsofpreyRcool Says:

    Good one, z.

    Like a perfect answer to an interview question… “what is your worse characteristic?” answer: “I work too hard.”

  104. 104
    BirdsofpreyRcool Says:

    that’s just it… you never get to hear what they REALLY call you.

    I never wanted to know. Happier that way!

  105. 105
    apbd Says:

    Hey, wait. I thought I was the professor.
    apbd

  106. 106
    BirdsofpreyRcool Says:

    apbd — change your handle… you CAN be The Professor!

  107. 107
    Nicky Says:

    I am looking at two counts for the indices.

    One says we go up from here to make new highs sometime next week. 1025 target area for SPX.

    The other says we stop here and move down to around 965 SPX before making a move to new highs. This would be a w,x (currently completing) y correction.

    Right now I give them equal weighting.

  108. 108
    zman Says:

    AP – It’s the whole great minds thing.

    Ram – you may have wished Bill out of the Gulf into a Cat 4 strike on NYC. That thing looks like its tracking a bit further east now and it is much stronger than they thought it would be. Bermuda better look out too.

    http://weather.myfoxtampabay.com/maps/WTVT/custom/storms/bill_track.html

  109. 109
    zman Says:

    Nicky – at what level on the SP do you decide it is the higher or lower case. If we pass 1000 again? Or some other level?

  110. 110
    apbd Says:

    apbd = Associate Professor Bill ……

  111. 111
    zman Says:

    AP – what subject?

  112. 112
    BirdsofpreyRcool Says:

    apbd — I have to admit, that wasn’t intuitive. What about “ProfBill”?

  113. 113
    apbd Says:

    Business Management, now retarded, er retired. I’ll stick with apbd. It’s become part of me.
    apbd

  114. 114
    zman Says:

    Oh, Biz management. That’s what I get for not looking on the Bios tab.

    For you new folks we have a Bios tab at upper left. If you care to submit something along the lines of those entries to zmanadmin@gmail.com we will include it there.

  115. 115
    zman Says:

    Oil up $2.50+ with an hour to go in NYMEX trading. Passed that first 30 minutes with flying colors.

    NG up 2 pennies. Street now sees tomorrow’s injection at 57 Bcf, creeping down to my 50 to 55 range. Towards the low end of that range or better and you should get a nice rally.

  116. 116
    zman Says:

    Today would be the first positive day in 10 sessions if NG doesn’t close lower. Those strings usually have a way of snapping back. This fall began at just over $4 and we are now at $3.12.

  117. 117
    BirdsofpreyRcool Says:

    apbd — good point. Can’t go changing the name of a boat either. Bad karma.

  118. 118
    reefguy Says:

    72.02/3.139=22.94…

  119. 119
    Nicky Says:

    It shouldn’t go much over 1000 Z. But as you can see by oil I think we are more likely on our way to new highs. As we are running out of oil and our economy is on fire they really need to run this up.

  120. 120
    zman Says:

    Ok thanks Nicky.

    Crude at 72.45, up $3.25 (4.7%) on the day. The front month hit a high of $74.66 back in June. I’m with T Boone. Opec set a price of $75 for the back half and here were are, lol.

  121. 121
    BirdsofpreyRcool Says:

    don’t know if TT still sees a sell-off into the close (you can’t ask him… he tells you what he thinks, when he thinks it, then disappears)… but HT doesn’t. However, HT says that 1,000 could prove to be a tough nut to crack on SPX, so could see some selling in the last 20 mins, if we test 1,000 and can’t get through.

  122. 122
    zman Says:

    Cramer now saying oil is a better barometer of world economy than the Chinese market.

  123. 123
    ram Says:

    O.K., but what if oil is manipulated?? It could be a setup!

  124. 124
    gaamblor Says:

    anything up is a pure barometer of the economy anything down is being blatantly and criminally manipulated…according to cramer

  125. 125
    1520sbroad Says:

    Cramer is an entertainer. Lewis Black does the same act but is a lot funnier.

  126. 126
    zman Says:

    Bill Spaghetti tracks now much closer to the East Coast.

  127. 127
    zman Says:

    Lease Sale 210 – Western Gulf of Mexico

    BP had high bid of $28 mm for a Keithly Canyon deepwater block,

    BP was also highest bidder with $50mm in bids (they are the biggest producer of natural gas out of the Gulf and that is a lousy number)

    COP came in 2nd at $15.2mm
    PBR was 3rd at $10 mm

    For the top 6 independents (who do most of the interesting drilling in the Gulf) to be absent from the sale is telling.

    Total high bids – these are the bids that should win their leases – was $115.5 mm.

    Last year’s Western sale brought in $484 mm.

    Lesson to the administration – mess with energy guys and they will drill in foreign countries.

  128. 128
    zman Says:

    I recall a couple of months ago reading that MMS director Salazar thought the proposed changes to Gulf leases would have little to no impact on Gulf players’ plans. Guess again Sally.

  129. 129
    BirdsofpreyRcool Says:

    ram #123 — if it’s manipulated UP, then smart guys will short it. If it’s manipulated DOWN, smart guys will buy it. Can’t manipulate any deep mrkt for long. And oil is a very deep market.

  130. 130
    zman Says:

    Grain ETF loses speculative limits exemption.

    http://www.marketwatch.com/story/deutsche-commodities-fund-loses-cftc-exemption-2009-08-19

  131. 131
    BirdsofpreyRcool Says:

    #128 — yeah… like Calif raising taxes on “the rich”… then watching as people with incomes scoot to Arizona, Nevada, Utah, Tennessee. Are Dems barred from taking economic courses in college? Or, does that stuff just fly over their heads.

    sheesh.

  132. 132
    zman Says:

    Salazar obviously doesn’t get how oil companies are run.

    They are basically a portfolio of assets. Some of the assets are economic at low prices, some are not economic unless prices get to a certain level. So things are safe, low upside, cash cows. Some things are a swing at the fence and cost quite a bit of money to test let alone develop.

    The idea that a company pays $10 to $30 mm for the right to test a lease block in the Gulf to the government, upon which they’ve already spent seismic dollars, management’s time etc, before testing it with probably just one well (hit or miss) which will cost in all probability much more than the lease itself (and in the deepwater a multiple of that cost), then pay the govt nearly 19% off the top with no capital recovery period, and with no dispensation of risk to the government if the watery area they sold the company doesn’t work out is amazing. Oh and then you have production taxes and then you have income taxes. And abandonment liability etc, etc, etc.

    If Salazar doesn’t think that raising the royalty rate, killing off the small reserve capex recovery period, and adding a unused license annual fee to the mix would make something as risky as deepwater exploration less attractive … then I can’t talk to a guy like that.

  133. 133
    BirdsofpreyRcool Says:

    Well, look at the bright side. By keeping these assets off the market, Salazar has effectively raised the volatility of future oil prices. Salazar won’t be there forever. But his decisions will have the effect of raising oil prices. So, it will make it more economic in the future, for energy companies to return to the Gulf.

    Sadly, the US consumer will bear the cost of the cost of Salazar’s decision. Unfortunately, most people will think it’s just Big Oil raising prices.

  134. 134
    BirdsofpreyRcool Says:

    “bear the burden of the cost…”

  135. 135
    West Says:

    Does anyone have an opinion what would happen if KOG did a ? million share offfering. They need the money, they revamped their presentation for buyer appeal and the could activate the other rig. What would this do to current price? Just wondering.

  136. 136
    zman Says:

    If I could explain one concept to those who use the phrase “big oil” in anything other than a joking way it would be that of “price taker”.

    The second phrase would be “hypocrite” as all of them drive.

  137. 137
    zman Says:

    West – depends largely on the banker and the analyst. If they go with a bucket shop I’d look for a 30% haircut from here. If they go with someone energy savvy, maybe only 15%. Probably have to do 10 to 15 mm shares to get anyone interesting interested in selling it for them.

  138. 138
    zman Says:

    I’m holding my recent August wildtrades into the close but will more than likely punt them tomorrow.

  139. 139
    zman Says:

    Seeing some decent buying into the close. Guessing the feeling is that people like Dennis Gartman are throwing in the towel and going long, at least oil trades, that Asia will react positively to the U.S. rally and the U.S. could get a bump up on the open tomorrow. We do have jobless claims but as long as those come in relatively benign I suspect the market could at least shoot at that 1,000 level on the open. Any other eco stuff for tomorrow I’m missing?

  140. 140
    BirdsofpreyRcool Says:

    8/20 eco-releases

    Initial Jobless Clains
    Continuing Claims
    RPX Composite 28d YoY
    RPX Composite 28d Index
    Leading Indicators
    Philly Fed
    Mortgage Delinquencies

    so, you didn’t miss much… 😉

  141. 141
    West Says:

    KOG. I would think that they are getting pressure from jv partners to drill and they don’t have the money. On the 9k ac that they don’t operate but 50/50 with XTO, XTO is applying for 1280s and drlg permits. Also on the sw of their ac Petro-Hunt has applied for a drlg permit and I think that they r 50/50 partners. $ 20 million would be a good #.

  142. 142
    BirdsofpreyRcool Says:

    west — according to KOG, they are driving the bus on all well scheduling, not their partners. But, it’s clear that KOG will have to find some way to fund the gap in their 2010 drilling schedule.

    However, the recent sale by the CFO and director tells me that there is nothing definitively on deck at the moment. Otherwise, those guys would have been restricted. So, any equity issuance would be at least two months away, I would think. There is a lot that can happen in two months. KOG also has a credit facility that will have some value, now that they have been able to book some reserves. So, a lot more options than this time last year.

  143. 143
    West Says:

    thx

  144. 144
    tater Says:

    West,
    Just saw the request for KOG. I put it back up at the link

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

    Be careful of the possibility of an exhaustion of demand for the name. Hard call. I’m sure it has to do with the price of oil. (“WOW” said West. “That Tater sure is intuitive pointing out that the price of an oil stock might have something to do with the price of a barrel! Jeez Tater, how’d yall get so damn smart?”)

  145. 145
    zman Says:

    West or BOP – must have missed it and can’t seem to located now. What is the rate on the fifth well? Not listed in their presentation.

  146. 146
    BirdsofpreyRcool Says:

    z — they haven’t said officially what the IP on well 5 is. But the TeddyBear Cam overheard that it is “similar to their other completions.”

  147. 147
    West Says:

    WOW, Thx Tater and appreciate your chart work on many of the other names followed here on the site…..Z, KOG has not released any ip for #5 and probably wait till they compltete #6 before reporting. I think this will be one of the best wells for the co because they have 50% wi/ 41%nri and its over a thicker part of the Lower Bk (source rock) than the southern wells .

  148. 148
    zman Says:

    146/47 thanks

  149. 149
    zman Says:

    memory refresh on completion of #6. I know they don’t want to get in the habit of pr’ing individual wells. Bet they announce two though.

  150. 150
    West Says:

    Activity picking up in KOG area across the river Stetson has spudded their well and STR is drlg their second well. STR is suppose to drl on the west side of the river on their 3rd or 4th well offsetting KOG’s ac. Peak ND is drlg 3 miles wesy of Mocassin Creek wells. Zenergy has been drlg west of KOG and also has locations just north of the Big Missouri. Sent XTO to u Z on e.

  151. 151
    BirdsofpreyRcool Says:

    z — #149 — well 6 is being completed as we speak. Once KOG has the results from the 24 hr test on well 6 (drilled from the same pad as 5), they will release an operational update. Mnmgt doesn’t begin the 24 hr IP test until they get the frac fluid flowed back, so it takes them longer than other companies to complete the IP measurement. However, the data is more accurate. Recent comments by the company suggest that they think they will have the full results from wells 5 and 6 by August 31st, “give or take a few days.”

    By the way, wells 5&6 are partnered with XTO. South of the river (well pairs 7&8 and 9&10), the partner is a private group called “PetroGulf.”

    KOG doesn’t want to get into the habit of reporting single well results… and frankly, they would rather just report on quarterly operations. However, as their 2009 drilling program involves jumping all over their Bakken lease holdings, essentially attempting to prove up their entire net acre holdings, it is important to their investors that they report the well pairs. Once KOG starts the true development program in 2010, I expect they will try to stick to the quarterly operational update. (Exception to that will be the TFS well they say they plan to drill in 2010.) Assuming KOG is still a stand-alone company in 2010…

  152. 152
    BirdsofpreyRcool Says:

    By the way… going through some notes from a conversation with KOG mnmgt in mid-July, they do NOT include nat gas in their EURs… only oil. z, i think you were asking about that earlier. At the time, they were using 350k for the short and 600k for the long-lateral wells.

  153. 153
    Dman Says:

    Enerplus deal in the Marcellus:

    http://finance.yahoo.com/news/Enerplus-Announces-Strategic-iw-4255795864.html?x=0&.v=1

    Also, Z, just wanted to check if you saw #43.

  154. 154
    zman Says:

    Dman – I did and it ties in with the article Bill brought to light. That runs counter to data presented by the major Barnett players to date. I have not torn through the railroad commission data to isolate the horizontals from the verticals in the play nor am I going to. I will say that Netherland Sewell and Ryder Scott, the premier reserve engineers used by many of the Barnett players have been allowing the companies to book larger reserves over time as completions have improved. So you don’t have to take it from CEOs who point to type curves and trust them. I can also tell you that several wells have produced in a short time frame a high percentage of their original EUR estimate. I do have to wonder about the agenda of someone who works for a firm whose very name augers for skepticism about enough hydrocarbons being around. Not saying he’s wrong. Saying I don’t have his data in front of me and I’m not an engineer. But I have never heard any comments about shrinking EURs with the newer wells.

  155. 155
    West Says:

    THX BOP, I tried to find the article about how different did different things to up their ip rates. IPs make you headlines…EURs make you money. You have to admire the professional attitude exhibited by KOG.( I’m trying to block the insider sales.) We haven’t seen much m&a but with higher strips available, cos like XTO might be receptive or more active….I think that potentional acquirors of e&p cos are waiting for gas prices to fall further because full storage. THis would make the market bring the price of e&p stocks down. Of course I have been thinking this for a while. The real jewels to me that have to be on the radar of these big cos are RRC, HK, WLL, CLR, SD, ATPG and of course the bigger players APA,,APC,,EOG,,DVN

  156. 156
    West Says:

    Thx Dman for link to Marcellus deal, plays well with my RRC theory.

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