Ben’ll Be Back Tuesday

148 thoughts on “Ben’ll Be Back Tuesday”

1. Thanks for the info on Danny. Will wish that one away.

2. z — thanks for your additional look at KOG. It’s rare that we have to stoop to this level of detail (scrutinizing the pre-paids, to figure out if we can get through the year), but that is how the company is managing it. They have a VERY tight schedule on cash flows.

   The major difference between this year and last, is that this year they have money coming in the door, from current production in the Bakken. Having cashflow, reserves, and proved up acreage, gives KOG a lot more options.

   I think they will be able to make their 2010 capex by issuing only 10mm or so shares, or 10% dilution. Anything more than that would be used for accretive acqtns… but, that is a bit of the “horse-before-the-cart” at this point.

3. BOP – just wanted to relay my new sense of “ok, they don’t have to do it right now” – ness. I’ll have that back of the envelope CF look later this week.

   Any thoughts from HT and TT.

   Danny is modeled for an E. Coast run.

4. Market looking pretty wishy-washy after a green open. Consumer confidence on the hour.

5. TechTrader — 55/45 from the short side, but with low odds today (TT doesn’t trade on low odds days)

   HeadTrader says he has no feel for the mrkt, not enough volume to call a direction with any conviction.

   Like sailing the wide Sargasso Sea, looking to catch a little wind in your sails….

6. When everyone is afraid of Sept/Oct… is there really anything to fear?

   Other than Congress back from vacation, that is.

7. White House sees debt to GDP at 69% in 2019. There’s a fun headline.

8. hk down again

   took some kwk and sd

   tudor more bullish on ng today

9. …as is most of the group. NG was up pre open, then a seller came in, heavy handed. I think the group will shape up if the broad market holds the 1030 level, HK included. On things like HK, I buy a little and if it goes down I buy a little more. Yesterday’s add was at the low of day near the end of the day and brought my average in those $24 strikes down to 77 cents which is within easy strike of hear on news or with a bounce in gas.

10. Cramer watch: Cramer had CEO of APC on last eve-CEO said that he was astounded that the Clean Energy Bill moved so quickly thru House, favoring coal, etc over Nat Gas. They will attempt to re-balance that emphasis. In other words, Nat GAs producers were caught asleep. go figure.

11. NFX down a dime on their curtailment news. That’s a good start as analysts basically see that the year was in the bag and that even with the cut they will be in the top half of guidance … could be beat potential in their numbers.

12. Choices – It boggles the mind how nat gas was excluded from that bill but it was not for lack of trying. Everyone from the API to T Boone lobbied the president. The result is the Natural Gas Act which will get voted on later this Fall (maybe October) and which promotes natural gas as a transportation fuel.

    Dollar down 0.3%, back below 78. Oil holding flat. Stocks seem to want it to go up every day so they can. That’s pretty poor, and one of the signs of a tired market/group. We’ll see if consumer confidence ticking up can bring some life to the group without popping crude too much.

13. Consumer confidence of 54.1 vs 48 expected.

14. trying to write a covered call on kwk

    sep 12.5 calls -KWKJV at .85 cents if anyone wants 10 step up!

15. on 9

    seems to be playing out with most stocks off lod

16. Energy just not playing with the market today. Rally in oil on confidence data faded quickly as the dollar began to rally, group watched and took a little swoon. Volumes are very light.

17. Group may be trading in fear of crude build from API tonight. We had a very large drop in imports in last week’s data. That could/should partially reverse out in this week’s data. I continue to expect better end of season demand for gasoline and the continued beginnings of a very modest ramp in distillate demand.

18. Spoke to soon on NFX. This drop is more what I would expect from a curtailment announcement, even with the reaffirmed guidance.

19. Crude hit and bounced off $75 earlier…profit taking now as we breach $74.

20. Yeah dollar rally on a 9 trillion deficit vs 7 trillion previously, and a re-appointed Fed Chief who is more than willing to monetize… oh but wait we got an uptick in housing!

21. Broads looking shaky to me. Energy pretty red across board as profits come out of oil. Natural gas rethinking most of yesterday’s move but jury still out on if support at 2.80 level matters.

22. Reversal off the confidence number looks like classic topping action to me. Or alternatively, the market could just go to infinity because the consumer is confident. Broke maybe, but confident. Or at least more confident than expected. Or something.

    I just read that only 10% of current home sales are non-distressed: two-thirds of the total are foreclosures & of the remainder, only 1/3 of *them* are not due to financial distress. I.e. about 90% of sales are forclosures or people getting out before they are foreclosed.

23. This is one of those days where a re-strengthening of the major indexes, if it occurs will favor the names in E&P that are either still up or less down and had good early morning performance. Today’s name in that category: EOG.

24. First of 3 treasury auctions this week closes in an hour:

    http://www.marketwatch.com/story/treasurys-slide-before-2-year-note-auction-data-2009-08-25

25. Canaccord starts BEXP with Buy and target $8; EAC at Buy with target $40.

26. … and NOG with buy and target $8.50.

27. Wyoming – thanks for this read last night:

    http://www.foreignpolicy.com/articles/2009/08/17/scenes_from_the_violent_twilight_of_oil?page=full

28. If I were not already long enough NFX I would be adding here.

    KOG – considering adding more shares. Thought to pick it off pre wells 5/6 which may be end of month. Am thinking will either get it at support in the $1.20 to $1.25 range or wait for the wells and see if it “sells the news” as it did on the last 2 announcements.

29. I’m trying to coax KOG over towards the weeds at $1.25… that’s my pouncing number. Not sure it will get there, but i’m ready.

30. And now for something completely different… from my cross-asset class stratigist… looking forward a bit and musing this morning —

    The CBO reported that they expect peak unemployment of 10.2% will be reached by mid-2010. The CBO’s opinion is considerably less bullish than ours and we wanted to point out the difference. We believe that peak unemployment is likely to rise to only 10% and that peak unemployment might be reached by the end of the third quarter. The reason for our optimism is based on recent increases in consumer confidence that are likely to spur retail hiring for the Christmas season and inventory burn. This year’s Black Friday is excruciatingly important to retailers and they will be making a concerted effort to capture as much high margin business as they can. We expect that retailers will use the cost savings they made earlier this year to increase their salesforce presence during the silly season. The increase in consumer confidence also means that retailers may feel as if they under ordered for this year’s X-mas season. Inceasing sales expectations is also likely to generate overtime and hiring by the end of the 3rd quarter. The slight loosening of credit terms available to retailers and an expected increase in advertising dollars needed to compete with WalMart and Target will also provide incentive to have staff available to meet customer needs. Our opinion does not mean that we believe we are in the midst of a “V” shaped recovery – – just that the ending of the credit crisis reduces the likelihood of continued – sustained job losses given the depletion of inventories and the quickly approaching holiday. Once peak unemployment is reached….we would expect cyclical stocks and Fins to continue to lead.

31. BOP; does Richmond Fed factor into anyone’s thinking ?

    Those #s were pretty dismal.

32. PackMan — need to put it in perspective, tho. If i pull up the Richmond Fed index back to 1998, the highest reading they have ever had is around 21. So, this is not like the ISM diffusion index (expansion over 50, contraction under 50).

    Last December, the Richmond Fed index was about MINUS 50. In December 2006, the index was around 8. Not sure what they are measuring and how it’s computed, but the move from -50 in December to +14 today looks like a very very steep V. I’ll send z the bloomberg graph to forward to you.

33. OK… this is really great reading, but a tad excruciating. Just keep going, even if you don’t understand all the concepts. This is the 2nd piece out today from my cross-asset class guy… the one who called the bottom, 2 weeks from the actual bottom, in March.

    >>>>>>>>>>>> I know that a lot of credit and equity guy’s eyes immediately glaze over when CDS guys start talking about CDS credit curves – especially the guys who think CDS is the worst financial invention since paper money 🙂 …. but it is actually extraordinarily important. To begin with, let us assume that JPM is the leader of the Money Center Banking Sector. Last month an investor would have to pay a 10bps premium to buy 1-year CDS protection (79bps) versus buying 5-years of protection (69bps). The relationship has reversed (corrected) and JPM’s credit curve has steepened to the point where an investor can now buy 1-year of JPM CDS protection at 60bps and buy 5-year CDS protection at 73bps. The curve has steepened by 23bps in the past month whereas an investor that was just outright long 5 year JPM CDS has lost 5bps. (1) The reason this is important is because it highlights a return to credit normality and because it indicates that credit hedge funds are willing to put on credit steepening trades in JPM that require them to take jump to default risk. DO NOT UNDERESTIMATE THE IMPLICATIONS! (2) This also means that credit investors are beginning to look to earn incremental returns and cash carry on JPM that they sidestepped earlier in the year in favor of outright longs. (3) TAKEN ONE STEP FURTHER….IF CREDIT INVESTORS ARE ABANDONING OUTRIGHT LONGS FOR CURVE / RELVAL TRADES IT WOULD INDICATE THAT THEY BELIEVE THAT THE CONTINUED IMPROVEMENT IN CREDIT METRICS AND THE ECONOMIC WILL ACCRUE TO EQUITY INVESTORS….AND NOT CREDIT INVESTORS
    (4) The fact that the JPM is the sectors leader could indicate that a wave of bank credit curves are about to steepen. IF YOU CAN DO CDS – THIS MIGHT BE A TRADE TO LATCH ON TOOOOOOOOOOOOOOOOOOOOOOOO……. (5) The reestablishment of forward sloping CDS credit curves should also provide further evidence that the credit markets are continuing to heal and that worse case loss expectations at banks need to be narrowed. (6) It also indicates that the financial sector gains associated with higher secondary market pricing of toxic assets is being reflected in the CDS markets……………… We doubt this spill-over would be occuring unless investors were becoming convinced that bank earnings are again likely to exceed expectations.
    (7) The broad based steepening of money center bank CDS credit curves is also a strong signal that systematic risk is dissipating. One way to capture the decrease in systematic risk might be to bet that broad market equity volatility will begin to decline (VIX) and that investors may wish to generate additional income by selling money center bank put options.

34. CBO deficit projections assume major hike in income taxes (repeal/expiration of bush tax cuts).

    Very nice…

35. Richmond Fed … retail sales were
    -35 vs. -15 last month

36. Chart forwarded.

    Oil watching the broads and starting to pick up …. group off lows but not by much.

37. PackMan — one thing i will never understand is WHY Bush made those tax cuts “temporary.” I mean, i know it was to satisfy the budget requirements… but WHY they never went back to make them permanent is beyond me.

38. Speaking of asset pricing at banks; I have been meeting with some guys that are buying bank residential loans from major banks, at 25 cents on the already written down $.

    In other words, these pools have loans that were originally, say, $100,000. The banks wrote them down to $60,000 based on broker estimates of what the homes could quickly sell for. The banks are then selling these loans for about $15,000, maybe $20,000.

    And as this drek gets sold off by the investor, it shows up in the home sale stats.

    And obviously there are implications for the banks credit portfolios.

    So CDS says one thing; real life asset sales say another…

39. I was looking at the only “Richmond Fed” Index I see reported today: the Manufacturing Index, which came it at 14. If there was another index reported, I appologise for the confusion, but I don’t see it.

    The Richmond Fed Manufacturing Index was positive…. although the outlook is uncertain, still.

    Richmond Fed Manufacturing Survey for August (Text)
    2009-08-25 14:14:44.24 GMT

    By Kristy Scheuble
    Aug. 25 (Bloomberg) — The following is the text of the Richmond Federal Reserve Bank’s manufacturing sector activity survey for August.

    In August, manufacturing activity in the central Atlantic region expanded for the fourth straight month, according to the Richmond Fed’s latest survey. Looking at the main components of activity, shipments expanded further, while new orders grew at a slightly slower rate and employment steadied. Correspondingly, solid activity was evident in other broad indicators. Capacity utilization continued to strengthen notably, while backlogs and vendor delivery times matched July’s pace. In addition, manufacturers reported considerably quicker growth in raw materials inventories, but noted slower growth in finished goods materials inventories.

    Despite the recent increase in activity, manufacturers softened their outlook for the next six months. Contacts at more firms anticipated that their shipments, new orders, backlogs and capacity utilization would grow more slowly during the next six months than they expected in July. In contrast, contacts looked for capital expenditures to grow a bit more rapidly in the months ahead.

    Survey measures of prices revealed that growth in both raw materials and finished goods increased in August. Over the next six months, respondents told us that they expected raw materials and finished goods prices to grow at slightly slower rates than they had anticipated last month.

    Current Activity
    In August, the seasonally adjusted manufacturing index–our broadest measure of manufacturing activity–was unchanged from July’s reading of 14. Among the index’s components, shipments rose five points to 21, new orders fell six points to finish at 18, and the jobs index picked up five points to end at 0.

    Other indicators also suggested solid growth. The capacity utilization measure moved up eight points to 22, while the orders backlogs and delivery times indexes matched last months’
    reading of 4 and 2, respectively. Our gauges for inventories were mixed in August. The finished goods inventory index trimmed four points to 22, while the raw materials inventory index jumped ten points to 18.

    Employment
    Labor market conditions firmed at District plants in August. The employment index recouped five points to end at 5, and the average workweek measure edged up two points to 16. On the other hand, the wages index eased two points to 6.

    Expectations
    In our latest survey, our contacts were slightly less confident about their business prospects during the next six months. The index of expected shipments declined seven points to 20, the new orders indicator tumbled thirteen points to end at 16, and the orders backlogs measure dropped eight points to 3. Moreover, the capacity utilization index shed nine points to 10 and the vendor delivery times expectations index edged up three points to 7.
    Additionally, the index for planned capital expenditures gained two points to 3.

    District manufacturers’ hiring plans in coming months were slightly less optimistic as well. The expected manufacturing employment index edged down four points to -3, and the average workweek index dropped five points to finish at -5. Moreover, the expected wages index eased one point to 4.

    Prices
    District manufacturers reported that raw materials prices increased at an average annual rate of 1.15 percent in August–a slight uptick from last month’s reading of 0.75 percent.
    Finished goods prices also posted a slight increase from August, rising at a 0.86 percent pace compared to July’s reading of 0.58 percent. Looking forward, respondents expected that the prices they pay will advance at a 0.93 percent pace–a pullback from the previous month’s expectation of 1.96 percent. Additionally, contacts looked for finished goods prices to increase at a 0.06 percent annual rate during the next six months–down considerably from last month’s expectation of 0.51 percent.

    SOURCE: Federal Reserve Bank of Richmond, {FRRI }

40. Thanks for the info BOP; Z .. email received.

41. Pack – I do what I can.

    In 10 key hell on a project. Here if anyone has a comment/question.

42. BOP; I just see headlines on DJ Newswire, which scrolls on my trading platform.

    The Richmond Fed mfg hit at 10:07; Retail and services hit at 10:09

43. BOP … Bush …. agreed.

    I think he didn’t have the numbers to do it …

44. Re #33 How does that directly tie to job creation?

45. PackMan — just trying to help. I want us all to make money, long or short. The future is quite muddled… in part b/c we don’t have a clear idea what our own Govt has planned for us.

    Read something about Cap-and-Trade coming up for a vote on Friday. But, don’t know quite what they mean… House already voted, so is this the Senate committee? Or, something else.

    If cap-and-trade passes, as the Waxman Plan currently stands, I don’t think you will see economic activity continue to strengthen. As a matter of fact, I know you won’t. I read somewhere that one of the Swiss banks has said that if CAT passes in the US, they will withdraw their presence here. Not that that means much… but, never heard that before.

46. ram — without a properly-functioning credit market, nothing gets done and no one gets hired.

    It’s just that simple.

    We are getting back to “normal” in the credit markets. Whatever the new normal is. At some point, with credit stabilizing, you will see hiring again (again with the govt-mandate caveat).

47. Picked up a couple of blocks in 1.32 to 1.34 range on KOG. Their 7th well CE 1-22-10H a 9k lateral was drld in less than 30 days. This shows good penetration rates and reduces drlg cost. Their drlg rates have continued to improve with experience. Hopefully their fracing will also improve with each well. Since they are still early in their development program they are still trying different techniques with different results on each well. Since XTO is one of the premier e&p cos and have mastered some of the best frac techniques around they have inputted greatly in this process. Looking south of the Little Missouri River MRO continues to use single stage fracs on 10k laterals and get very ordinary wells. I still contend that the 5 & 6 wells will be very good wells and that KOG land position is superior to MRO’s south of the little river and also their ac north of the Big Missouri River( Reunion Bay). Slawson has 3 rigs running in this area now, 152-92, with their most recent well ip for 309 bopd, 154 mcf and 133 bowpd.

48. if kennedy replacement is delayed, does that affect the 60 vote super majority

    I cant believe this country could be so foolish to pass crap and trade

    but on the other hand it would hurt Bush supporters in the red states/ Thats how dems think

49. Thanks for the info West. I think you are thinking better rates on the 5/6 than that Slawson rate…that would not be viewed favorably.

50. west — you are standing between me and my antelope…

    nice buys.

51. KOG’s wells 5 and 6 should come in comparable to KOG’s other wells… which were great wells.

52. They are now saying high change of development of that cloud pile near Puerto Rico. Tracks call for an east coast hit or a fish storm in the Atlantic.

    Another wave further to the east just got designated as a Low, looks to be moving due west.

53. Job Contraction = Consumption Contraction = Economic Contraction. I guess I’m too much of a simpleton to recognize other forces.

54. BOP – quite a range there on IPs (711 to 1,856 BOEpd) in the first 4 wells. Here’s to them being on the high side of that range, lol.

55. Ram – FWIW, the White House said the contraction in jobs will end early 2010 followed by slow job growth.

56. The 711 one was a messed up frac… they will go back in and work that over someday. So, throw out that well and look at the others.

    Also, 7/8 have the potential to be something special. IF the theory proves correct, that as you approach the pinchout, you see an increase in natural pressure and fraccing… making IPs and recoveries higher… like the Parshall.

57. Oh, if the White House said that, then we are saved.

58. Well I did saw FWIW.

59. MRO has been using EURs of 325k per well but they also have all their wells south of the lmr hooked up to gasline which really helps economics. It is also my understanding that MRO has gasline coming their way for production north of the bmr. If you think about if they get a gas line into KOG’s area by the first of next year that is not to far off. It would also automatically increase their total EURs for the prospect as soon as they started hooking them up. It appears that Zenergy has already reached an agreement to bring the line to their production west of KOG and that they are in the process of starting that line now.

60. Trading Update

    · Stocks starts off the day strong again, spurred higher by better eco #s (home prices and confidence) as well as the Bernanke re-appointment. SP up 8.5 points/0.8% as of noon, just off highs (Sp500 sets new intra-day high for this rally earlier today @ 1037). A bit more inst. support to this move vs. Mon on the buyside, although still in a light attendance/volume end-of-summer environment where one program in either direction could move the whole market (volume numbers are a bit misleading given the huge activity occurring in names like Citi, FRE, FNM, etc). big events to watch this afternoon: potential FDIC Q2 bank report and the 1pmET auction.

    · Sectors – consumer discretionary leading the market, up 1.7% (helped by the confidence #s and a bunch of pos. retailer earnings; sp retail index up >2%; BIG, BKC, and CHS all trade very well after earnings). Financials also rally, up 1.3% and outperforming (life insurance up 2.5% and leading the group). Industrials and materials also up >1%. Energy is lagging, falling slightly on the day (energy only major group in the red today; energy has traded higher for the last 5 days as of Mon and outperformed the market; crude is down slightly). Tech, health care, staples, telecoms, all lag the broader market (each up ~0.5% on the day).

    · Corp Credit – continues to lag stocks (has been the trend for last couple weeks). IG is tighter by ~1bp as of noon while HY up ~1/4. From JPMorgan’s E Beinstein this morning: Based on a 3m regression to the S&P (Rsq of 86%) its should be trading at 107bp vs 114bp today – a 1.7 standard deviation difference. Using a 6m regression versus the S&P (Rsq of 95%) the predicted value for CDX is 98bp which is 1.8 standard deviations from the predicted level. While CDX.IG is trading too wide to these other markets it is currently trading 8bp tight to its intrinsic value based on the levels of the 125 underlying credits. CDX is therefore lagging because CDS is lagging the rally in bonds.

    · Treasuries are pulling back a bit today ahead of this afternoon’s auction; recall TSYs had a strong rally on Mon; short part of curve weakest. 2yr yields up 2bp, 10s up 3bp, and 30s just 1bp.

    · Dollar – DXY falls slightly (off 0.2% on the day). Yen rallies 0.28% against the buck.

61. Oh BOP sorry about your antelope. You will probably get another chance, although I think support is higher than your #.

62. West — i think you are right… i was just being a GREEDY predator. May move up, a little closer to the prey.

    thanks!

63. I still think broad support is $1.20 to $1.25 but I’m no chartist. It obviously has some support mid $1.30s 😉

64. Very odd to see energy not go ahead and participate today. Almost certainly some fear of a snap back in tomorrow’s headline crude number. API will be more closely watched tonight, except by TPH, after last week’s mirroring action by the EIA. If that comes in OK, look for a quick test of $75

65. PLLL a small cap oily name is starting to move

66. NFX out with fresh guidance for the 3Q in their @NFX publication, something they left out of the pr last night.

    3Q range goes from 62.9 to 70.0 Bcfe
    to 60.4 – 67.5. As you would expect with them curtailing 2.5 Bcfe in 3Q.

    Per Mcfe costs bump up slightly in accordance with the lower production. Also not unexpected.

    Prices: seeing better gas price realizations beginning 3Q09. New here is that they ramped up their basis hedges out of the Rockies and mid-continent going forward. Modest positive.

67. I’m bidding on HKIO at .45 and KWKIV at .35. Little volume the last half hour or so and about .05 out of the ask

68. Hear ya Baylor, sitting on my hands today, waiting on numbers tonight/tomorrow.

69. Nicky’s levels from yesterday:

    Resistance is at 1033, 1038, 1042, 1044, 1040. If we can get through there then 1100 is game, possible target 1134.

    SP at 1035.5 now, been as high as 1037.75 today.

70. a real red day in the mkt would probably move you down towards that level. There seems to be good buying on any dip. Of course that may just be me…..APA continues their move towards larger oil footprint in Permian Basin after recent purchase of MRO pb assets and they have deal to purchase XEC oil fields by Westbook, TX. APA techs should immediately improve production and recovery with institution of waterflood. There is still a lot of ooip in the pb and a lot of recent deals to capture the play by cos with money for the necessary investments…ARD raised to a buy today , oily play.

71. West – I think your mid cap sleeper name there is PXD. Underspending but about to ramp rigs.

72. Oil down $1.30, down 50 cents in a minute to test $73. Very jumpy. Volume about normal for this time of day. The quick drop was pretty low volume, being met by higher volumes at the 73.05 to 73.10 level.

73. There went $73. Still just seems like profit taking. Don’t see anything on the news wires.

74. Z, Hope PXD puts some back to work in the permian because at last glance they were at zero in pb. The # of stacked rigs around here is very high for this oil price. Although in recent years most rigs have been drlg for gas, i.e. Sandridge. PXD has been putting a hard squeeze on all the service cos and r probably starting to get some good rates. I personally prefer CXO to PXD in that space.

75. West – from the PXD 2Q:

    In the Spraberry field, first half 2009 daily production increased 12% as compared to the first half of 2008, reflecting the success of the 2008 drilling program, improved well performance and sales of inventoried natural gas liquids (NGLs) that were not fractionated and sold in the fourth quarter of 2008 as a result of hurricane damage to third-party fractionation facilities. The Company had no rigs running in the Spraberry field during the second quarter but will resume drilling with one rig in August. With substantially reduced well costs and the strip price for oil exceeding $60 per barrel for 2010 and 2011, the Company is planning to have ten to twelve rigs running by January 2010, drilling approximately 250 wells during the year. The majority of these wells will include completions in additional zones, including the Wolfcamp and shale/silt intervals. Pioneer also plans to implement a full-scale waterflood project in 2010.

76. thx z

77. I don’t own it now but have traded it from time to time. Getting more interested after an oil pull back if we get one.

78. Story on the dollar and today’s data. They are attributing all of the move in the commodity and commodity related stocks today to Asia’s drop overnight.

    http://www.marketwatch.com/story/dollar-loses-to-yen-but-beats-euro-2009-08-25

79. for better or worse, picked up another 10 contracts of HKIO at .45

80. Big put buying action in HK today, Sep 21s.

81. Z, very interesting note on that PXD about implementing full scale waterflood project in Wolfberry. Maybe they have cracked the code on these zones as there has never been a successful full scale waterflood of the Sprayberry formation in 50 years. The Sprayberry trend has some of the largest ooip #s of any field in the US. I hope their project goes well, that would be tremendous.

82. Broad market is going to have a tough time holding up for long without the support of the energy group.

    Crude still taking profits, down a little over $2 at $72.25. Crude appears to be in whole number support mode.

83. West – yep, just a little higher recovery factor would go a long, long way given what’s in the ground.

84. Z, Did u listen to PXD cc and if so did they discuss the waterflood?

85. ooip???

86. West – yes and yes.

    See transcript here:
    http://seekingalpha.com/article/154087-pioneer-natural-resources-co-q2-2009-earnings-call-transcript?page=-1

    Search for flood and read first 3 paragraphs after first reference.

87. original oil in place

88. Oil through $72. Still see nothing on the oil front, just seems to be profit taking after hitting a new high getting a bit out of hand. Will interesting to see where it closes. On the Asian front, Toyota says cutting production 10%, that may play into a further fall in Asian markets tonight.

89. Z- not sure if you saw that Gil Yang left citi. I didn’t notice until today.

90. 1520 – no, didn’t see that. Where did he land?

91. I haven’t seen anything else on him – my guess is you will see him pop up somewhere.

92. zman, re:80, I might be on the wrong side of this trade. Serious put buying in the sept 21 strikes.

93. Baylor – then that would mean you and me both. I don’t know what they think they know but I noticed it and am pointing it out. Nothing more. Someone is making a good sized bet it falls further.

94. Good afternoon. I just don’t see how the indices can hold up without oil and oil maybe telling us the writing is on the wall for this rally.

95. Nicky – I don’t think they can. Not sure if oil is “done” yet. A retreat here is actually healthy as it helps to forestall a lot of cranks calling for $100 oil before demand actually kicks back up. A lot will depend on tonight’s and tomorrow’s oil numbers. I think we may see a reversal on the headline crude inventory number due to imports. I also think we see continued OK (read plus 9 mm bpd gasoline demand) and a tick up in distillate demand. The demand numbers are a lot more important than the swing provided by imports.

96. Z – do you have the consensus for the inventory data?

97. HK: HK is the poster child for hot money in exploration. Since it led off the bottom, maybe it is first to lag also? Just musing here.

98. Consensus:

    crude: down 1.85 mm barrels (this fell 8 last week due to imports)

    gasoline: down 1.35 mm barrels

    distillates: up 0.3 mm barrels. This is quite of a smaller than normal build for this time of year and is attributable to lower production, a minor uptick in demand and last week’s number that showed a decline.

99. Oil now has a clear five waves down off the high this morning so look for a 3 wave correction once this move is done.

    Indices support is at 1028, 1022, 1020,1015,1000.

100. Nicky – “feels” like oil is in/right around support at the $71.25 level. Numbers will push it away from there tomorrow.

101. RMD – hear ya. It should outperform if we see a bounce in natural gas or news. Without news or at least a strong group it is like to flounder about for a bit.

102. HK employees still restricted?

103. No, they are not. In fact, it was not a general employee restriction, just a compliance update to specific employees. I misunderstood what I was initially told. Sorry everyone.

104. #102….risk that they may do an acquisition following the recent secondary??

105. Eli – As sure as I say they won’t … But that was not the intent I got. 1) drilling capital, 2) acreage. They want select acreage so highly doubt these is 1 name out there at least in the public domain that suits the bill. Maybe some privates with some select s. Texas acreage.

106. anyone know of an open end mutual fund that own mlp’s/canadian royalty trusts – similar to the kayne anderson closed end funds?

107. #106 Yes. Cushing MLP Total Return Fund. Symbol SRV. However, its a closed end but loaded with canadians. Run by Jim Swank, Swank Capital (E&P Hedge Funds)out of Dallas. My son worked his way through grad school in his employ but has since left for other employ on the “Darker Side of the Moon”. Results last few years have been all over the place so dicount from NAV is important.

108. Oil having a go at a $72+ close, looks iffy. Does not really matter as numbers will be the swing on the week. Bloomberg is looking for a very small uptick in utilization. Last week also saw a 0.5% rise in production although inputs to refiners didn’t catch up. This could yield a bit more front end demand which could help with tomorrow’s crude number. But there is still a good chance that imports play catch up and we get a big build instead of a medium sized draw on crude inventories.

109. I’ve been short treasuries via TBT for weeks now….it’s bringing back to my mind and the theme of an old song that was popular when I was a kid ” I Fought the Law and the Law Won”

110. Eli – in the MLP circles Swank is the best or one of the best. None of the MLP guys saw last year coming, some worse than others.

111. #107 – thanks. All of those type of closed ends are trading at huge premiums at the moment – makes me a little leery.

112. #110 – agreed on the never saw it coming. I’ve been trying to dig a little deeper into some of the ones i used to follow.

113. NG closing down 4 cents. Not terrible given crude, down about half as much on % basis. Consensus there is 53 Bcf vs 52 Bcf last week and 100 Bcf last year (it was very mild). I was thinking 50 to 55 Bcf so I’m pretty much in line.

114. West – sounds like 7/8 news maybe mid October? Have they spud 8 yet. Mulling buying more just under here. Last two times we had news the stock failed to react. Would like to see that change, especially for this type of stock where you are going to have people glommed onto it for little more than the chart.

115. Z they spudded 8 last Sunday

116. #110 & #112 – wasn’t intended to infer anything pejorative. Everyone in this business knows that genius is its own demise. After all, the country just re-upped the fellow who did not see Lehman coming. And, accordingly, the results in the aftermath are not all that bad. I’d got so far as to suggest that you hire’em when they are down.

117. West – ok, thanks, so probably second half October for news on those two.

118. Eli – don’t know that company well you inquired about via email…am looking into it a bit lately though.

119. I actually like the idea of the Rodney Dangerfield no respect for good wells. I know some people that know what that means and trade accordingly. The 7&8 completion dates are spot on time wise. This actually works better for KOG because they are probably just starting to get run checks and probably have some in suspense with purchaser waiting on title opinion. Most people think you start getting money immediately but there is usually a 3 month or so delay on the initial payments.After that you get paid on the 20th for the previous month’s runs. Also I would like for them to get hooked up to the gas line as soon as possible as there are continued rumblings about wasting of natural resources and shutting in production until gas lines are hooked up.

120. Interesting-SRV dividend of $0.225 per share, ex-div 26 Aug, substantially all treated as return of capital-maybe why it is up 7.14% today, spread between bid and ask is very wide.

121. Hear ya West, thanks for the continued color.

122. Gassier names taking it on the chin today over false start in natural gas yesterday to today. To fastest growers in the group HK and SWN both off 4% but most of group, oily, gassy, hedged, unhedged of 2 to 5% today.

     DNR getting knocked for 7% on a valuation based downgrade mentioned in the post … that’s a bit silly.

123. BOP – 45 … I know that (and appreciate it).

124. thanks, PackMan.

125. 1 down day for crude …

     … and they come out of the woodwork.

     “It looks like crude tested the $75 level and failed,” said Tom Bentz, a trader with BNP Paribas.

     “There’s been profit-taking in the energy markets … there’s a feeling that the markets are heavy and are sinking, with crude overvalued by around $20 a barrel,” said Tim Evans, analyst at Citi Futures Perspective in New York.

     What tripe. Evans has been saying the same $20 overvalued statement or something very similar all year.

126. Z – if the guy can make crude drop $20, I’ll happily buy some from him there if he wants to short it 🙂

127. From HeadTrader —

     from Doug Kass….High above the Alps, my Gnome is hearing a story that a major U.S. financial institution has incurred a multi-billion dollar currency loss.\

     I’m seeing signs of an imminent stock market correction in the performance of credit, which has begun to lag equities a bit of late.
     From my perch, credit, which remains undervalued relative to equity, should outperform stocks in order for the U.S. stock market to advance. Just the opposite has occurred.

     [editorial comment by HeadTrader — “screw him and his gnome… “]

     My comment — Doug is totally misinterpreting the credit market… credit DID lead us out and away from the abyss, and credit still has room to run. It has merely stalled, and in doing so, has established a floor for equities. Historically, equities turn around and help credit to take the next leg up at this point.

128. More comments by HeadTrader —

     Anheuser-Busch InBev executive says company will raise beer prices in most of the U.S. — WSJ

     [HT comment –TALK ABOUT A LOW BLOW]

129. You gotta like the HT’s attitude especially his ed comments

130. West — glad to share with someone else… HT really cracks me up!

131. Being a craft beer drinker I am not affected but appreciate HT comments and agree.

132. 127 … that’s what major financial institutions do when you give them “free public money” to play with.

     I would like to see that story break if its true …

     128…. inflation rears its ugly head.
     Is that how InBev is gonna try to pay for its top of market acquisition ?

133. InBev’s decision is sound. Get your price hike in before the government adds an “all things bad for you” consumption tax.

     http://www.upi.com/Top_News/2009/08/23/Junk-food-tax-idea-gaining-acceptance/UPI-31811251065916/

134. hey jpntexas — no worries on the HK news… it was interesting while it lasted.

     Love to see people post stuff they hear, that’s what keeps this interesting. We are all contributors.

135. I’m not normally a tin-foil hat guy, but it really feels like “someone” is trying to hold the market up. Are they going to do that for all of the Sept/Oct crash zone?

136. Dman ,,, ya think ?! lol

137. Saw a comment from a former pit trader that strength in the morning and tailing off in the afternoon usually is a sign of distribution-seems like that is the pattern we have had of late.

138. as a bar owner w/ declining sales and customers w/ no jobs, INBEV’s raising prices will hurt me!!!!

139. For those keeping score Peak ND’s 3forks well,FREDERICKS 6-31H,
     made 3879 bo in 7-09 the cum is now 24831 for 5 months of production. As near as I can determine the well is a 4k lateral and had a 5 or 6 stage frac with no information available about the # that were successful. This is a 320 acre spacing. This would work good for KOG’s model of 400k boe per 640 ac unit. While on the 640 ac and long lateral I wanted to repost this……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

140. Oil selling off 50 cent in the AH. Anyone have the API #s yet?

141. Anyone remember the symbol for the canadian natgas etf?

142. Thanks BOP – just got your email

     API – big build in crude at 4.7 mm barrels, that’s got to be the imports number I was talking about earlier.

     Gasoline saw a drop in line with the expectation at DOWN 1.8 mm barrels

     Distillates saw a drop of 146K barrels vs an expected uptick.

     Much more important to see demand for products picking up than worrying about the headline crude number but for now they have sold it off to $71.26 in the AH, about 70 cents lower than the close.

143. Baylor – will have a look in the post for tomorrow.

144. john11-HNU.to

145. The opinion

     http://www.nytimes.com/2009/08/25/opinion/25lynch.html?_r=2&pagewanted=1&emc=eta1

     the rebuttal

     http://www.theoildrum.com/node/5711

146. Wyoming – That first guy should read Matt’s book Twilight In The Desert. Now I know why I don’t read the NYT. Good rebuttal at theoildrum.

147. I think the man has a problem with the basics; mass balance & NPV. Just because we put a field on flood does not guarantee that the cheap energy of yesterday will be available tomorrow. A capital outlay has to be expended for a profit and the resource will probably be at a higher revenue stream then a grass roots well or acquisition / merger.

     BTW – as the pipelines and storage fields are getting stuffed, so are the liquids. As I understand, the fractionated products are starting to run into storage issues too. Wonder how that fact will fit in with the LNG flood is coming folks. Remember the bogus article that quoted the 85 bbl/mmcf yield (if not 85 it was high)?

148. LNG, the company, would have you believe that if it arrives onshore they will regas it and store it or better yet, check the crew in for the night, then send them elsewhere collect $200 for passing go.

     Oil at 71.64. Was 71.38 when API hit. Probably a touch weaker in the morning but the demand number for gasoline and the down distillate numbers would be more than welcome at the price of an imports related headline number, especially after today’s little bout of profit taking. All depends on China’s market tonight for pricing direction tomorrow.

     Here ya re the MIT guy. Sounds like an Ivory tower egghead, probably friends with the current secretary of energy.

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