20
Aug

Thursday – Oil Review, Gas Preview and a couple of words on KOG

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In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Stuff We Care About Today - KOG
  6. Odds & Ends

 

Holdings Watch:

  • $10KP:
    • $18,800
    • 54% Cash
    • The wiki tab has been updated.

Yesterday's Trades:

  • 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.

 

Commodity Watch:

Crude oil jumped $3.23 to close at 72.42 yesterday after the EIA reported across the board "bullish looking" numbers (more on that below). This morning crude is trading off slightly following somewhat disappoint initial claims numbers and it is expiration day for the September oil futures contract so expect some wild gyrations. The October contract takes over as the front month on Friday and is currently trading at $73.50.

  • Ahmadinejad Is A Nutbag Watch. Headline shy no longer, Mahmoud says the Iranian nation is no longer afraid of any sanctions, a counter to President Obama's promise to tighten sanctions on the Iran, especially on gasoline of which the country produces none at present, should they not come back to 6 party talks regarding their nuclear program in September. Look for the Iranian thing to heat up as we move into Fall.

Natural gas inched up $0.02, its first positive day in 10 sessions, to close at $3.12 yesterday. This morning gas is trading up a penny pre natural gas storage inventories (see next section.)

 

  • Tropics Watch: BILL - Remains a Cat 3 fish storm. Its track has moved noticeably to the West although it is highly improbable it will make a run for the Gulf.  

 

Natural Gas Preview

  • My number: 50 to 55 Bcf Injection. The low end of the range could inspire a bounce / short cover in prices. 
    • History:
      • Last Week: 63 Bcf
      • Last Year: 82 Bcf
      • 5 Year Average: 60 Bcf
    • Weather: Last week was the warmest of the year at 79 Cooling Degree Days, 10 more than normal and a whopping 26 CDDs above the comparable week in 2008.
    • Imports: 9.2 Bcfgpd, flat with the prior week, down slightly from year ago levels.
  • Street Consensus: 57 Bcf

EIA Oil Inventory Review


ZComment: Better than expected results on all top three numbers. All nice datapoints go as weekly numbers but no change in the bloated status of inventories. Well, in the case of crude that's not quite true as we did fall significantly versus the five year average but that one will likely be reversed in the next couple of weeks as it was imports based and not an indication of stronger demand for refiners. Refiners continue to maintain discipline in the face of stout inventories and I see no reason for them to increase throughput significantly before the end of maintenance season in October or November.

CRUDE OIL - Big Decline. Three words: Imports, imports, imports.

 

 

Crude Stocks


 

GASOLINE: Production has remained off the recent highs and demand ticked back up last week but remains weak. I expect demand to remain somewhat stronger (above 9 mm bpd) through August.

 

 

 



 

DISTILLATES:


 

 


 

Stuff We Care About Today

KOG valuation thoughts. Most of the data points in the tables below are self explanatory. I presented my back of the envelope NAV, which is my answer for what KOG would be worth in a takeout given what they have accomplished to date and my sense of oil prices for the near term (next 3 to 6 months). I do not see them getting acquired in the near term as I think the M&A window is still pretty tightly shut for most of their potential suitors. Some other thoughts:

  • This is very back of the envelope
  • This is not a present value analysis
  • This is a "what they might fetch" given a look at potential reserves and an "in the ground" (undeveloped) $ price for oil
  • With more drilling they will derisk more of their acreage ... or not.
  • My assumptions are deliberately more conservative than management's but also what I feel to be fair given where we are at now:
    • 4 wells with data, all in the Bakken, none in the Three Forks
    • IPs have been decent but not what I'd call gangbuster: average of 4 wells: 1,193 BOEpd.
    • KOG is calling EURs of 600,000 barrels in the Bakken and 400,000 barrels of oil in the Three Forks.
    • Production history has been short. We don't yet have 30 and 60 day rates on these wells. Again, feel that its a bit early to start tossing high EURs around.
    • The wells are grouped in 2 locations so much of the acreage is untested
    • The acreage is in a relatively untested part of the Bakken play
    • I find management's 90% of acreage prospective comment from their presentation to be over zealous
    • I find management's EURs to be unwarranted as averages go given the data we have seen to date.
    • They obviously have more data than I do.
    • They will have to do a deal to fill the gap between their nascent cash flows and their proposed drilling program. I am working on a model to try and pinpoint but this but if you look at the recent rally in the shares you have to think they will be tempted in the $1.25 to $1.50 range. Recent insider sales may mean such a deal is not imminent but the a deal will have to happen at some juncture as their cash position is limited and they are not entirely carried on their upcoming wells. But again, I still have to pin this down.
  • EUR comments from other Bakken players:
    • WLL is estimating EURs of 850,000 BOE. Their wells are some of the biggest seen in the plays in terms of IPs with an average IP north of 2,000 BOEpd from over 40 wells. 
    • EOG - in their core area (Parshall) they see EURs of 850,000 BOE as well. Out side the core they see less oil in place and EURs around 300,000 BOE.
    • CLR - puts reserves at 325,000 BOE for both its Bakken and its TFS tests (2 to date).
    • NFX - has 500,000 acres in the play and calls 200,000 prospective for development of the Bakken and / or the Three Forks. They have drilled 11 wells to date in the play, ranging from 300 to 1,300 BOEpd and at last check, were still declining to estimate EURs saying that it was still too early to comment.

My table and then what it would look like using their assumptions. Compelling in either case but I think they need to be conservative until they get more results under their belt from a wider swath of their acreage. Repeat after me: "Under promise. Over deliver."

I will add this section to the KOG tab.

Lease Sale 210 Wrap ( Western Gulf of Mexico)

  • BP had high bid of $28 mm for a Keithly Canyon deepwater block, DVN bid on this block as well.
  • BP was also highest bidder in the LS210 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.
  • I say a couple of reporters attribute the seeming disinterest to lower oil prices and the economy. I think the real truth is they don't like the bait and switch, change the deal after the deal is signed attitude of many in the Beltway. Lesson to the current Administration - If you mess with the domestic energy guys they will drill in foreign countries where they can find better deals. If you really want to "get off foreign oil" you have a funny way of going about it.

BEXP Files $300 MM Mixed Securities Shelf - had to happen.


 

Odds & Ends

Analyst Watch:

  • PXP - Barclays cuts target from $37 to $34, maintains Overweight
  • ME - initiated with an Outperform rating and $16 target at Credit Suisse
  • UBS and Deutsche Bank cut FSLR targets to $150 (from $180) and to $125 (from $170) respectively.

Discounts For Dishwashers. Ok that phrase is mine so if you see it out in the world tell them where it came from. Government to offer discounts on new appliances to keep your old refrigerator from killing the planet.

162 Responses to “Thursday – Oil Review, Gas Preview and a couple of words on KOG”

  1. 1
    1520sbroad Says:

    Z – i almost threw up in the wall street journal this morning when i saw the “discounts for dishwashers”.

    A Cushing related question – where does inventory there stand right now? i remember a while back that there was a lot of thought that they were “full”? Still the case?

  2. 2
    zman Says:

    1520 – Gee and all I thought was “finally something that applies to me”, lol

    Cushing stocks are in the graphs in the post, right below total crude stocks. At 33.3 mm barrels they are lofty. Capacity is closer to 40.

  3. 3
    BirdsofpreyRcool Says:

    z — nice, succinct, up-to-date valuation of KOG. One minor observation, you used the updated sharecount (112mm) post-recent-secondary. Strangely (from what I have read), not one of the sell-side firms have updated their models to include that, or the new acreage position. Does anyone need more evidence than that? That brokerage research is good for some things, but nothing beats the analysis by someone who actually owns the stock.

    Anyway, something I really appreciate is your inclusion of the range of EURs provided by the other players. I didn’t think to include that. Most excellent data points. Thanks again for updating your model (and thinking) on KOG.

  4. 4
    zman Says:

    BOP – re KOG – I fall short in examining their cash flow and capex requirements. Need to pin down when they are zippo for cash. Looks soon to me but I don’t have a good understanding of their share of costs on 6 (completion) and D&C on 7-9. Also, is 9 the last well of the year to drill?

  5. 5
    1520sbroad Says:

    got it – thanks for the cushing update – should have read the fine print in the post better.

    only thing that applies to me is more tax dollars used to buy other people stuff that they eventually would have used their own money to buy.

  6. 6
    zman Says:

    PBR said yesterday at a conference they will move to 10 deepwater rigs by 2010 from 6 currently. Good for the dw crowd, probably RIG and DO most benefit from a boost in deepwater sustainability sentiment.

  7. 7
    zman Says:

    1520 – I’m sure you need a “drink” fridge for your office. I know I do. ;->

  8. 8
    BirdsofpreyRcool Says:

    z — KOG — their cash position is tricky, as they are also using stockpiled drill pipe and some other “pre-paid” capex. They ordered more pipe last month, for example, to be used in wells 9 and 10, so can’t just look at “cash” to figure out when they run out of it.

    KOG believes they will have 10 wells on-line and producing by the end of this year (assuming 7, 8, 9, and 10 are not dusters). But, clearly, there is a shortfall in funding KOG’s 2010 drilling program. Good news is that “issuing more equity” is NOT the only way they can fill that gap. That said, i fully expect that — at the right price — they will come to mrkt with a new issue at some point.

  9. 9
    gaamblor Says:

    how big is the 2010 gap KOG needs to fill?

  10. 10
    zman Says:

    Re KOG spending:

    Here are the things I want to pin down.

    What is their working interest in wells 6 through 10.

    Are they carried for a piece of each of 6 through 10

    What day rate are they paying unit for rig 1. (at $20kpd for 20 days that $400k for 7-10 or $1.4 for just the rig to throw out a number).

    Understand they have stockpiled pipe, thought I heard Lynn say they had about used it all up.

    Completion costs can run $2 mm a well (again, need to know what portion XTO is paying)

    They had $3.8 mm on the books at 6/30. Assume quite a bit less now unless the acreage swap boosted that. Their cash flow is still a low but I’ll work that out later (at best it is a marginal help).

    Their bank line was untapped but is small with less than $2 mm available.

    So it comes down to how much the partner picks up. Total costs on those wells (#7-10) will be $4 to $6 mm a pop or probably $20 mm to take the mid point. That’s just 2009.

  11. 11
    rseidman Says:

    09:26 NFX Newfield Expl profiled in New America section of IBD (39.26 )

    IBD reports when Lee Boothby took over as CEO of the co in May, he’d already been with the company for 10 years. But he still sees a big change happening. “We think of our internal history as being made up of nice decade-long packages,” he explained. The first decade after Newfield’s 1989 founding, it was one of many oil and gas producers working in the shallow waters of the Gulf of Mexico. The second decade brought diversification, as Newfield plunged deeper into the Gulf and into the shores of Texas, and started exploring the oceans off East Asia and the North Sea. Now, like many of its peers, it’s going to “unconventional” plays. These plays are “tight” fields, in the industry lingo, because the fuel was too difficult to extract using traditional technology. New drilling techniques are changing that… The economic meltdown, of course, goaded all energy producers to cut costs. But at Newfield this doesn’t just mean cutting back on production. It means reallocating manpower and equipment to where they will be most profitable… Newfield can do this partly because of favorable lease arrangements. Newfield can do this partly because of favorable lease arrangements. Most of its property is held by production, meaning it retains rights to it so long as it produces a minimal amount of oil or gas. This eases the pressure to produce instant results everywhere.

  12. 12
    BirdsofpreyRcool Says:

    KOG has said that with one rig, they want to (can) drill and complete 10 wells per year. The cost to drill and complete is still coming down, but pick a well-cost-to-competion number, multiply by 10, adjust by KOG’s working interest, subtract G&A, add net cash from operations, and you have the shortfall.

    I’ll try to do a BOE (back of envelope) on that today, making the assumtion that KOG runs out of cash and pre-paid capex by Jan 2010, but has 10 producing wells by then (which will add to their bank borrowing base, so they can use a little debt to get by for a while).

  13. 13
    West Says:

    KOG. Excellent workup and as you have said yours is more conservative. KOG’s 90% prospective is a little large since to me the wells on the east ide of the river are moving towards the magic line or pinchout. This represents 1/3 of their acreage and would cast an towards their estimated EURs. Looks like the presentation is being made for an offering before they announce their results from wells east of the river just in case…..Side note BEXP another shelf for $300 million. Again great piece, thx

  14. 14
    zman Says:

    RS – Thanks. I like Boothby, very solid. Thought the world of Elliot Pew who was head of exploration but he retired. Boothby is different than his predecessor Trice in a number of ways, and I think will be good for getting the story into more of a household name status over time. Everybody likes NFX, they just have never wanted to pay up for them. That I think changes over time. This is one I’ll be adding for my kids accounts along with, go ahead and insert your ugh here, CHK.

  15. 15
    BirdsofpreyRcool Says:

    z — Lynn has been very clear that they have enough cash + pre-paids to fully fund 2009 drilling program. They got cash in from the acreage swap (but they have not publicly said how much) plus they got a 10% carry in wells 7-10, where they have a 60% working interest. It’s 2010 we have to work out. KOG is already laying out their 2010 drilling program, so they will know the funding requirement shortly (if not already).

  16. 16
    zman Says:

    West – saw that BEXP deal. My only comment is you knew it had to happen and it is not one of the shelfs that will sit around unused to have on hand “in case its needed”.

    Hear ya BOP – I’m just don’t see how they make it out of this year without a deal. Certainly do one in advance for next year’s budget but also, to fund this year’s remaining budget. As you said, they are in control of the drilling schedule. Should be an easy question for Lynn, “so, what are you on the hook for for 2010 assuming you D&C 7 through 10?” He knows that ballpark number like I know my mortgage payment.

  17. 17
    Nicky Says:

    Morning all.

    CNBC just saying gas storage is in a wide range between 55 and 67 bcf. That gives them plent of leeway!

    Broader market:

    looking at two counts both which will resolve bullishly. We could have a flat playing out in which case in the next few days we likely test the lows or a bit lower than earlier in the week. 960 – 970 is likely to find support imo before the final launch higher towards 1050 SPX before they finally correct this rally.

    Or more bullishly the correction is already complete in which case we are already on our way to those new highs.

    There is a minor cycle low due tomorrow into early next week which may favor the first count.

    Oil to me looks like its ready to break higher which I just find to be highly irritating but that is what the chart is saying! Until we take out the previous highs it is not a given but we are very close. Then its a question of trying to pin where what will be wave v is going to conclude. We may see a major spike higher into the 80’s or it could be just a brief new high around 76. This is likely to be the factor that takes the indices higher imo.

    If nat gas goes sub 3 then support is at 2.76 area.

  18. 18
    zman Says:

    BOP – So they are shouldering 50% of the costs of those remaining 2009 wells?

  19. 19
    tater Says:

    Sorry to throw my cynical blanket on KOG, but just want to voice a warning that I think the big boys are playing here again. I added a 15 min chart (use the toggle at upper right corner to see a particular chart instead of 10 at a time)

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

    and the Fib lines are being hit too perfectly for my taste. Means to me that somebody with enough money to move this small name is doing so with their computer model. This is how some of the programs are set up.
    Not a conspiracy theory. It’s just how some people make money. Can’t change that, but what we can do is be aware that these same people leave at a moments notice.
    “Lets be careful out there!”

  20. 20
    zman Says:

    Oil trading very erratically. Front month expires today. Sept crude up slightly, all out months are off 20 to as much as 70 cents through Spring.

  21. 21
    BirdsofpreyRcool Says:

    z — that’s the way i understand it, 60% WI less 10% carry = 50%. But, will confirm and ask a few more Qs at the same time.

  22. 22
    zman Says:

    Tater – thanks much, always throw that stuff at us.

  23. 23
    zman Says:

    BOP – then the $10 mm question is, how much is prepaid. Rig cost, pipe, bits, mud, sand, all non G&A? Also wondering about pipeline completion and acreage acquisition costs in the 2H09. Thanks for BIRDdogging.

  24. 24
    zman Says:

    Nicky – S&P at 1,001. In your view, does that mean “look out above”?

  25. 25
    Nicky Says:

    No Z it doesn’t really. We could go up to 1012 and it doesnt mean much really. My view is that if THE correction turns out to be done earlier this week then any new high is likely to be pretty feeble. This rally could end at 1025 in that case. If we saw a deeper pulback to say 960 I think there is more chance of a final stronger launch higher.

  26. 26
    BirdsofpreyRcool Says:

    I am irritated that there is a rally going on. I am irritated that I didn’t do some of the things i would have liked to have done, if i knew there would be a rally going on.

    That said, HeadTrader pointed out that it’s all about the Philly Fed and LEI at 10am now. So, stay tuned.

  27. 27
    zman Says:

    NG down 5 cents ahead of the numbers at $3.07. If gas comes out fat we will have an ugly day for NG pricing. Interesting that people talk about contango so much in oil but you don’t hear it mentioned in natural gas circles as often, I assume because with high storage and low prices people just assume that the fundamentals apply to this market.

    Strip:
    Sept 3.07
    Oct 3.45
    Nov 4.34
    Dec 5.12
    Jan 5.42
    Feb 5.46
    March 5.44

    Now that is a steep curve and you can say well its just winter.

    Then you look at:
    July 2010: 5.68
    August 5.78
    November 6.36
    and you are at $7 by year end 2010

    Hmmm, that couldn’t be a reason to jam more gas into storage could it? Those are fat returns.

  28. 28
    BirdsofpreyRcool Says:

    I know that you’re not supposed to let mrkts get to you emotionally. But that dishwasher thing this morning really got under my skin.

    We are busy buying stuff… and sticking our kids and grandkids with the bill. That is not right.

  29. 29
    tater Says:

    BOP, which article? Having a bit of trouble skimming for it.

  30. 30
    BirdsofpreyRcool Says:

    Leading indicators 0.6% vs 0.7% expected

    Philly Fed 4.2 vs -2.0 expected

    Mortgage Delinquencies for 2Q 9.24% vs 9.12% in 1Q

  31. 31
    zman Says:

    LI up 0.6%

  32. 32
    tater Says:

    Got it..page 3. Thought you were referring to people who work as dishwashers.

  33. 33
    zman Says:

    Tater – there’s a link to it at the bottom of the post.

  34. 34
    tater Says:

    That’s just one more feather in Jeff Immelt’s cap for promoting the new regime last fall.

  35. 35
    zman Says:

    Re 25 – that’s why I ask because I usually get the chicken bones and voodoo stuff wrong. Thanks Nicky.

  36. 36
    tater Says:

    Sorry, Z. I’m a skimmer in the morning. I usually go back and read your stuff in depth later.

  37. 37
    zman Says:

    Tater – as a taxpayer I think those of us who don’t buy a new dishwasher should at least get one of their t-shirts for free:

    http://www.nbcuniversalstore.com/detail.php?p=56289&ecid=5511&pa=CSE-FGL

  38. 38
    zman Says:

    Tater – its best in the morning, chock full of energy goodness.

  39. 39
    BirdsofpreyRcool Says:

    tater — sorry, not quick enough to answer your question.

    but, you have to ask yourself, what is different about paying off a politicial directly (like Wm Jefferson and his icebox full of cash) and paying them off indirectly, like GE and GS. We increasingly have a “pay-to-play” govt. That is massively corruptive.

  40. 40
    Nicky Says:

    ‘Massively corruptive’- perfectly said!

  41. 41
    gaamblor Says:

    re 27 wouldn’t that be more of an argument for curtailments? i don’t recall seeing much of those in the qtr recaps

  42. 42
    Nicky Says:

    Fleckenstein last night on CNBC was asked whether Bernanke would keep his job. Of course was basically the response as he is just an extension of the Greenspan years and the only fix they know is the quick fix which ultimately is going to end disastrously as its more of the same that got us into this economic mess in the first place. I think more and more people are starting to see this. I honestly don’t believe Bernanke has a clue how to exit this – as I have said before he never even saw it coming!

  43. 43
    tater Says:

    “Energy goodness…” LOL!

    BOP, Just read the Sat/Sun Aug 15 WSJ page A11 Notable and Quotable for some real insight into what makes people tick.
    Somehow it looks like “power to the people”, just as long as it doesn’t affect his family.

  44. 44
    zman Says:

    Nicky – I hear ya. Amazing how he went from Goat to God in the span of three months. Personally I think he is too political for the job but at the same time, replacing him now will roil the markets quite a bit.

    Gas numbers in 10 minutes, group outperforming the market despite a selloff in NG and a lower crude strip. Interesting to see names like SWN really moving today (up 2.8%) in front of the number as it is a benchmark for natural gas.

  45. 45
    zman Says:

    Tater – just glad to have you back from the clutches of bureaucratic red tape.

  46. 46
    PackMan Says:

    This isn’t a rally; its low volume, computer generated BS …

  47. 47
    RMD Says:

    Raymond James adds LINE to “Flight to Safety” MLP list.

  48. 48
    zman Says:

    EIA Natural Gas Storage:

    52 Bcf Injection

    My estimate 50 to 55
    Street at 57 with a wide range

  49. 49
    zman Says:

    Gas very volatile, attempted a rally quickly which failed, best guess, and that’s all it is, is that if it can grab a couple of pennies of green it will rally sharply. On the downside, it obviously needs to hold $3.

    Thanks RMD – good name for a list they should be on.

  50. 50
    Wyoming Says:

    Next bailout is not dishwashers, the funeral union is strong cash for caskets ..

    http://www.usatoday.com/news/nation/2009-08-19-funerals_N.htm

  51. 51
    zman Says:

    Wyo – That’s how we get to place in time where soylent green is seen as acceptable. It’s even got green in the name.

  52. 52
    RMD Says:

    Arthur Berman’s article begs analysis as to whether he is largely correct or all wet. If the top shale plays, and co.s selling at high valuations like SWN, RRC,CHK,EOG, etc, have far lower EURs than publicised, these cos are going to hae massive writedowns at some point.
    Key long term issue of the moment to me.

  53. 53
    Wyoming Says:

    Soylent Green, that would have been an excellent Friday movie quote, very appropriate for this theme.

  54. 54
    zman Says:

    RMD – Hear ya, going to take more than my resources to contradict or confirm his stuff. I don’t think you see big writedowns from the shale guys before you see them start to talk “winds of change” as to EURs on the conference calls. So far nada on that account. I will ask NFX what they think but that probably doesn’t allay your fears much.

    Wyoming – I am a big fan of recycling, composting etc. Just kind of flows down that path naturally for me. Use the resources we have, all of them from coal, oil, and gas to hydro, wind, nukes, solar, biomass, algae to oil … use all of them as pieces of the energy puzzle. Not one in favor of the other but in combination. Got 350 years of coal sitting around? You probably ought to figure out how to use it responsible and not just climb onto turbines. End of rant.

  55. 55
    zman Says:

    $2 handle.

  56. 56
    zman Says:

    Gassy stocks not reacting. Seems to be quite a bit of disbelief we close there.

  57. 57
    Nicky Says:

    re #49 – it obviously needs to hold 3 and…. it hasn’t! Bingo! Humor me Z as I am having a little giggle here! A little bright spot amongst the rest of the BS market as Packman so rightly said.

  58. 58
    Popeye Says:

    On 54 you can add Navy to make jet fuel from seawater.

    http://hardware.slashdot.org/story/09/08/20/0215202/US-Navy-Tries-To-Turn-Seawater-Into-Jet-Fuel?art_pos=7

  59. 59
    zman Says:

    Local car dealer in the paper today saying due to lack of payment on the CARS program by the government they will discontinue it this weekend.

  60. 60
    BirdsofpreyRcool Says:

    Nicky — is it Hat Eating Time for z?

  61. 61
    Wyoming Says:

    Zmans conservation brain?

  62. 62
    Nicky Says:

    BOP – I am afraid so – its certainly been a long time coming and looks like it only may be under 3 for a few brief tantalising moments. I am not in the camp that think we collapse from here to 2.0 as I think we have already collapsed! Of course I may be wrong.

  63. 63
    zman Says:

    Thanks Popeye – favorite quote from that story watch: “the complex multi-step process will always consume significantly more energy than the fuel it produces could yield. ‘It’s a lot more complicated than it at first looks.'”

  64. 64
    BirdsofpreyRcool Says:

    z — you want some fries with that Hat??

    Great call, Nicky!

  65. 65
    zman Says:

    Wow BOP, look at this, your membership seems to have suddenly expired, lolol. We’ll see where it closes ;->

  66. 66
    Nicky Says:

    Re 65 – ROFL!

  67. 67
    BirdsofpreyRcool Says:

    z — i don’t recall the bet being on closing prices… but, then again, I’m not the one faced with chomping a chapeau…

  68. 68
    Nicky Says:

    He may have last laugh yet and I could be faced with chomping a hat of my own if oil doesn’t start reversing soon!

  69. 69
    BirdsofpreyRcool Says:

    z — #65… wow… COLD, man! Totally frigid. You are one Tough Dude.

    KOG — someone is hitting the sell button. Maybe they figured out that there is a funding gap. But, if that was a reason to sell, most of the high growth guys would be in the dust bin.

  70. 70
    zman Says:

    Well, these gas prices are good the fertizer and chemical names.

  71. 71
    BirdsofpreyRcool Says:

    Nicky — was there a bet on oil prices too? I just recall the gassy one…

  72. 72
    zman Says:

    The oil to gas ratio just hit 24.4x

  73. 73
    BirdsofpreyRcool Says:

    Does reef have to eat a hat now too?

  74. 74
    choices Says:

    go figure-AIG up 28% today-what is the expression, operating on fumes-this market makes NO sense.

  75. 75
    Nicky Says:

    Yes I think I have until the end of next year for oil to drop into the 20’s.

  76. 76
    zman Says:

    BOP – do HT and/or TT have a sense for tomorrow. We don’t have a lot of data left in the week and we are again above where many people thought. Just wondering if this Friday looks like last Friday to them at this point.

  77. 77
    zman Says:

    How To Get No Work Done 101. Devote one monitor out of five to a live tick chart of natural gas and stare at it.

    By the way it is basing at 2.96 to 2.98. Sheesh.

  78. 78
    BirdsofpreyRcool Says:

    TT doesn’t trade on Fridays or Mondays in August… so, he doesn’t bother to run the numbers for us.

    HT says he has no feel for this mrkt right now. As far as today went, he said that Philly Fed and LEI would dictate.

    Also, tomorrow is option expiry day. HT never makes day predictions on option expiry day… especially in August.

    Not very helpful, eh?

  79. 79
    zman Says:

    Look fast, NG back above $3. Yep, getting nothing done today.

    BOP – Would it be possible to get feedback from Lynn on my 2009 capex requirement today?

  80. 80
    Nicky Says:

    Nat gas needs to get back above 3.20 now quickly and this is done to the downside.

  81. 81
    zman Says:

    Seeing bigger volumes on the upticks in NG now than the downs.

  82. 82
    zman Says:

    ehhh, I take 81 back, mixed bag really.

  83. 83
    BirdsofpreyRcool Says:

    z — #79… i’ll work on it…

  84. 84
    zman Says:
  85. 85
    md Says:

    To add my 2.96-2.98 cents worth in NG
    The next few weeks are very hard YOY comps. having said that it really doesnt matter whether it’s 3800 or 3900 at seasons end.
    Electric Flash report indications for June: YOY
    NG electric DN 2%
    Industrial DN 14.6%
    Commercial DN 3.7%
    Transportation DN 3.3%
    Res DN 5.8%
    CDD’s DN 16%

  86. 86
    Nicky Says:

    cnbc gonna talk about nat gas on their power lunch show. Hopefully a great contrarian indicator as they wheel out all the analysts who will say it is going to 0.

  87. 87
    zman Says:

    md – agreed re the comps.

  88. 88
    zman Says:

    Surprising lack of response of BEXP to the filing. They have “catalyst type” drilling news on the way.

  89. 89
    Nicky Says:

    Doug Kass has put out a twitter that John Paulson has taken out as much as a $3Billion long position in the dollar.

  90. 90
    zman Says:

    What a twit

  91. 91
    ram Says:

    HK pre-pinning @ 22.50?

  92. 92
    Nicky Says:

    Z! imo he will be right…..

  93. 93
    zman Says:

    Ram – maybe but I don’t think so. Whole market hasn’t moved in an hour now more than a point or two.

  94. 94
    zman Says:

    Nicky – after it takes a trip to 72 that is fine.

  95. 95
    zman Says:

    LNG – beyond September and October prices, the strip isn’t really reacting to this front month breach of $3. Most months not off more than a penny or two so substantially higher than $4 just two months from now for the strip and over five in 3 months.

  96. 96
    West Says:

    kog a fund maybe?

  97. 97
    zman Says:

    Probably, 200,000 shares in 2 minutes.

  98. 98
    BirdsofpreyRcool Says:

    West — i think a fund kick-started it… but, think there are a lot of eyes watching now.

    I think a fund bot the 500k shares at 1.25 the other day… so, i think that puts a floor under the stock. Also, there are oil shows in well 7, so we know it’s not a dry hole… just don’t know if there is more natural fracturing there. That’s the hope. But, won’t know until they complete it.

  99. 99
    zman Says:

    Thursday movie quote watch: for KOG

    “we’re going ballistic Maverick”

  100. 100
    BirdsofpreyRcool Says:

    z — did you KOG valuation get picked up by some outside source? Just wondering… unfortunately, big moves bring out sellers. Would rather see slow and steady, than all-in-one-day type moves.

  101. 101
    zman Says:

    You know what it probably was, some blogger probably did a back of the envelope NAV that pointed to $2.

  102. 102
    zman Says:

    BOP – No, I did not submit it that one to the services.

  103. 103
    zman Says:

    Anyone see news or a comment on ROSE?

  104. 104
    BirdsofpreyRcool Says:

    Top Gun?

  105. 105
    BirdsofpreyRcool Says:

    Rodman out with a new “Mrkt Outperf” on Rosetta Resources this am

  106. 106
    zman Says:

    BOP wins the prize!

  107. 107
    zman Says:

    Ok, thanks on 105. No wells drilled by them to EFS yet, good leverage based on acreage and where those acres are is not bad.

  108. 108
    zman Says:

    BOP – on their offering in May, that was a private placement without a banker, correct, just a fairness opinion, no big fees?

  109. 109
    BirdsofpreyRcool Says:

    z — DK about a “fairness opinion.” But, yes. It was a direct placement of registered shares with a select group of institutional investors. I would guess that all of them were current holders, as the placement was done at mrkt (at the time).

  110. 110
    zman Says:

    I like in their prospectus how they are authorized to issue an unlimited # of shares. Saves time when you need to deals, makes you feel like the POTUS, lol.

  111. 111
    choices Says:

    BOP-general mkt question, I recently read comments that in addition to the China mkt weakening substantially, and the BDI rolling over,(both negatives) the credit spreads have widened significantly-do you agree and if so, would this be a serious negative at this point.

    Thanks-again, I am credit market challenged.

  112. 112
    kyleandy Says:

    take that mr cfo and your big 4000 sale re KOG

  113. 113
    zman Says:

    You tell em Kyle! That guy’s out of the loop. Except for the fact that he understands their funding gap this year (I know, I’m harping) a lot better than I do.

    Let me ask you this? If your stock was $75 last time you did a deal (May) and it had advanced to $140 and you have a need for capital because you have a good IRR project, would you feel like its too soon (August) to do another secondary? Probably not. I know there is a question of scale here but its a thought process each single digit midget CEO must go through after a move like this.

  114. 114
    West Says:

    “we” likes this

  115. 115
    BirdsofpreyRcool Says:

    There was a 90-day lock-up with those shares, as KOG gave the buyers information on wells that they hadn’t released publicly at that time. But, all the info is out now… and the lock-up has expired.

  116. 116
    zman Says:

    BOP – with that in mind, sounds like more closed door meetings with fresh money at the end of August with well results just for the new money on wells 5 and 6?

  117. 117
    zman Says:

    Did that 90 day lockup expire last week?

  118. 118
    BirdsofpreyRcool Says:

    z — if that was currently happening, the Teddy Cam would pick it up. Doesn’t mean it’s not going to… doesn’t mean it won’t happen tomorrow. Just, not today.

  119. 119
    BirdsofpreyRcool Says:

    choices — #111… there is massive, record issuance of corporate debt… in AUGUST (totally UNHEARD of) AND in the face of record issuance of Govt debt (also unheard of). So, yes, spreads have widened a bit. But, that’s just like saying HK has gone down b/c they did a 2ndary, without recognizing the fact that they were able to get a 2ndary off. So, the credit mrkt is telling us that “it’s OK to get back into the water.” The credit market has been telling us that since last May.

  120. 120
    BirdsofpreyRcool Says:

    choices — here’s some credit mrkt reading… good stuff.

    http://www.capmarkets.com/ViewFile.asp?ID1=310347&ID2=329180549&ssid=2&directory=11608&bm=0&filename=What_The_Mexican_Jumping_Bean_Action_Tells_Us_8-20-09.pdf

  121. 121
    zman Says:

    Natural gas holding $2.95. A little surprised it hasn’t taken another run at $3 and as such am a little surprised they haven’t killed it to the downside, say at least $2.80. Going to be an interesting close.

  122. 122
    BirdsofpreyRcool Says:

    z — i think KOG will have to get results from at least wells 7/8 before they talk about further financing. As 1/3 of their net acres are south of the river, need to show it’s productive.

    The question will be “how productive”? There is the possibility that there are more natural fractures in those wells, so IPs and EURs would be higher. So, worth the wait to get those results, before thinking about where and how much to raise $$ next.

  123. 123
    RMD Says:

    Z: #74 the oil/gas ratio is obsolete.

  124. 124
    zman Says:

    RMD – I never thought it was causal.

  125. 125
    bill Says:

    what filing are you refering to in # 88

  126. 126
    zman Says:

    Bill – its a $300 mm mixed shelf filing. No actual deal but one is probably around the corner.

  127. 127
    choices Says:

    Thanks, BOP

  128. 128
    jy Says:

    re #123
    I think the 6:1 btu ratio for oil to gas may still be valid.

  129. 129
    zman Says:

    Last minute push to take NG back over $3.

    JY – valid from a heat content basis for sure. And in time I’m sure it will contract back to something close to low teens. Like when gas production is off 10% next year.

  130. 130
    zman Says:

    SWN up 3+% now. Interesting in the face of gas below $3 and off 5.5% on the day. Recall they are well hedged through 2009 but very light hedged in 2010.

  131. 131
    Nicky Says:

    Sorry Z – but nothing could save you. It closed under 3! I think it could have a big up day tomorrow. Even though I think oil may have a down day.

  132. 132
    zman Says:

    Hear ya Nicky. The main thing was avoiding the all out lambasting of it towards $2.50 or $2 in a single day. Although that might have drawn a big short cover. Now that it has closed, the gassy names are freed up to trade with the market…many of them already moving with a sigh of relief it didn’t just collapse. That short in NG is getting extended.

    On a side note, I think holder in UNG should sue the government as this we may or we may not limit them on their position size is killing that ETF. There is demand for it but they won’t issue shares because they don’t know if they will be able to buy contracts or not.

  133. 133
    BirdsofpreyRcool Says:

    You can’t sue the US Govt without the permission of the US Govt.

    That rule used to make more sense, than it does today.

  134. 134
    Nicky Says:

    Z- I’ve gone long so its sure to fall further! Gonna stick with it as I think the risk/reward is pretty good down here and I plan on holiding it for a long time.

  135. 135
    Gtinvest Says:

    z Why is ung down and Gaz up?

  136. 136
    zman Says:

    BOP – yeah, yeah, I know. I was watching Pisani on CNBS earlier show the underperformance of UNG to the futures since the CFTC started crawling all over their case. Pretty big divergence in a short time.

  137. 137
    zman Says:

    GT – no idea. I don’t follow that one but they are up 4% with the whole strip is off about 6 cents. They must be invested in something besides or in addition to natural gas futures. It says it is made up of futures but that seems a little hard to believe given the perf.

  138. 138
    zman Says:

    Fair warning August $22 HK calls

  139. 139
    Gtinvest Says:

    It is a note: http://www.ipathetn.com/GAZ-overview.jsp

  140. 140
    zman Says:

    Re 139. Ok, thanks. Not my kind of animal.

  141. 141
    RMD Says:

    Arthur Berman followup: word is: flawed data, flawed analysis w/o any backup statistics.

  142. 142
    zman Says:

    RMD – that was first blush reaction. Can I ask if the feedback comes from a firm that is energy focused, intensively so, on the sell side, with people who are rock savvy?

  143. 143
    zman Says:

    Wow. This kind of market has got to be driving the shorts up a freakin’ wall.

  144. 144
    gaamblor Says:

    UNG sold off after it broke through the old all time low and is also still way over its NAV (it was over 10% premium at close of yesterday)

  145. 145
    Nicky Says:

    Something doesn’t seem quite right. Equities up and US Treasury Bonds up too. This move in equities has to be linked to expiry tomorrow.

  146. 146
    zman Says:

    NFX – anyone see a note there today? Been a bit stronger than group all day, probably just noise but thought I’d check.

  147. 147
    isleworth Says:

    IBD Feature on NFX

  148. 148
    choices Says:

    z-NFX seems to be holding in very well-consensus Q3 earnings was increased this week by a penny, well hedged but in Q4 2009 and Q1-Q4 2010, fairly low at $6.50 but I guess anyone would be happy with $6.50 at this stage of the game.

  149. 149
    zman Says:

    Isle – oooohhhh yeah. my bad, thanks.

  150. 150
    zman Says:

    $6.50 is a very good number for 2010 hedges. A lot of people are waiting for the winter run up (assuming we get one) for the strip to pop and for them to lock in prices around there. I’ve heard bigger players say $6 to $7 and $7 to $8 is their thinking on when they lock in ’10.

  151. 151
    ram Says:

    HK?

  152. 152
    zman Says:

    Mulling …

  153. 153
    ram Says:

    To sell or not to sell?

  154. 154
    zman Says:

    Those $22s are up 68% on the bid and the prudent thing to do for me would be to sell them. I’ll let ya know when I do sell them.

  155. 155
    zman Says:

    Beerthirty

  156. 156
    RMD Says:

    yes, savvy.

  157. 157
    BirdsofpreyRcool Says:

    Cash For Clunkers program will end August 24th.

    Then it’s Cash For Dishwashers?

  158. 158
    Dman Says:

    #157 are they *trying* to crash the market in September?

    next program to roll out: Cash for More Cash! You give the govt $90, they give you $100 as long as you say you’ll be good and spend it right away!

  159. 159
    zman Says:

    re 156 – Well, I feel better.

    Nice close on KOG at 1.38, up 11%.

  160. 160
    zman Says:

    Maybe they’ll have TARP for Toys to buck up flagging Christmas sales.

  161. 161
    Garyinhou Says:

    trade in your old GI Joes and Lionel trains and they’ll give you a chinese checker board

  162. 162
    West Says:

    First Thanks to Z for BOE on KOG and BOP for the insightful information that helps separate the wheat from the chaff (or getting the shaft). Sometimes EURs are not equal as I believe WLL’s 850kbo is for 10k lateral on 1280ac drilled diagonally acroos unit. On EOG’s 850kbo is for 5k lateral on 640ac drilled diagonally across unit. It is my understanding that KOG is now drilling their 9k lateral on 640ac ( two 320ac half sections stand up or lay down units). Their TSB #16-8-7H 9k lateral on the northern end of the acreage is a 640 ac unit. Their 4500′ laterals will be 320 ac spacing. This helps to explain the higher estimated EURs per 640ac unit. This concept works for promoting higher EURs for ac positions , but makes it harder to hold ac HBP. There has been a couple of operators petitioning the NDIC to reduce their 1280s to 640s recently. Since this basically doubles the # of wells that would need to be drld to hold the same acreage for a cash strapped company, I would view this more as a short term brochure type information that they are posting in their presentation. I have no doubt that this field will ultimately be developed on these closely parallel drlg units because of the tightness of the formation. A look at the steep decline curves tells you that these wells do not drain a very large area from the well bore frac zones…. Again thx to everyone and to Tater for putting the charts back up.

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