Tuesday Morning – Welcome To September

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Monday was like watching red paint dry. Volumes were low.  Today will likely hinge on ISM at 10 EST. We saw news out of BEXP and PXD after the close which is detailed below and I expect news flow to begin creeping higher out of the E&P sector this week and especially next as the Fall conference season kicks off with Barclays.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today - BEXP, PXD
  5. Odds & Ends

Holdings Watch:

  • $10KP:

    • $5,000
    • 46% Cash
    • The Wiki Holdings Tab Is Updated.
  • Yesterday's Trades:

    • WLL - Added WLL $50 Call for $1.60 with the stock at $48.60, down 3.4% in a weak market. Tiptoeing into one of the cheapest E&Ps out there, big Bakken focus, with a feeling that the end of $65 to $75 is not here.

Commodity Watch

Crude oil fell $2.78 to close at $69.96 yesterday. Fears that China's growth, which accounts for roughly 10% of global crude demand, could falter sent crude lower. This morning crude is trading just back above $70 after a less dire night of trading in Asia.

  • Early Read On Oil Inventories: (from the Bloomberg survey)
    • Crude: DOWN 900,000 barrels
    • Gasoline: DOWN 1.0 million barrels
    • Distillates: UP 750,000 barrels

Natural gas fell $0.06 to close at $2.98 yesterday, impacted by lower crude and equity markets and ongoing disappointment with the recent natural gas supply figures. This morning gas is trading off a couple of pennies.

  • Imports Watch: 9.5 Bcfgpd, flat with last week, up 0.1 Bcfgpd from last year.

    • Canada: 8.4 Bcfgpd - high storage north of the border has led to bigger imports coming south.
    • LNG: 1.1 Bcfgpd prior with last week and the week before that and so on. It's the end of summer and many analysts were looking for us to be swimming in 4 Bcfgpd of shipped in volumes by this date. By all indications, China and India are soaking up new LNG capacity.


  • Tropics Watch: 94L shows some signs of strengthening but remains disorganized. The NWS thinks there is a good chance this system will continue to develop into a tropical cyclone as it tracks westward towards Cuba. A second wave off Africa is showing signs of organization.

Crack Spread Update

Key Takeaways:

  1. Margins remain under pressure as inventories for finished products remain bloated relative to crude.
  2. Watching demand for distillates more closely now. Without a pickup in demand or a sharp contraction in production I would expect further deterioration in already depressed margins.


Stuff We Care About Today

PXD Monetizes Reserves By Selling To Majority Owned PSE

  • Spraberry Reserves Sold:
    • 18.9 million BOE
    • for $171.2 mm
      $9.05 per BOE - which at first glance seems a bit low but a couple considerations are:

      • 63% of the reserves are proved undeveloped meaning they will take additional capital to get out of the ground.
      • Waterfloods has higher lifting costs.
      • They are selling the reserves to their 68% owned entity PSE.
      • It allows them to further ramp rigs. Due to oil lower prices earlier this year, drilling activity had ground to a halt. On the 2Q conference call PXD said it would be stepping up to 10 to 12 rigs by year end. This asset sale will essentially add 2 more rigs to that program so the 2010 planned well count goes up by 50 to range of 300 to 350 here.
      • Rates of return on the current strip are in 50% territory
  • The assets were producing:
    • 1,300 BOEpd (65% oil, 15% gas and 20% NGLs) so this was only 1.1% of Q2 production. I'm sure they'd be more than happy to be able to monetize the rest of the company for the same equvalent per barrel of production (which would come to $16.9 B vs their current TEV of $6.3 B).
  • Debt to Cap: Pro forma the deal, debt to cap drops from 46% to 44%
  • Valuation: Just over 3.3x 2010 CFPS estimates which won't be coming down much if at all for the production reduction here.
  • Nutshell Win - Win

BEXP Announces Strong Initial Production On The Figaro Bakken Well

  • The Well: Figaro 29-32 1H- McKensie County, west of the Neeson Anticlin, its its Rough Rider area
    • 24 stage frac - Initial production of 1,895 BOEpd, not quite as big as the last well, the Anderson 28-33 which came in at 2,154 BOEpd but moving in the right direction compared to their history.
      • 1,616 Bopd and 1.7 MMcfgpd and they do have a line in place to produce the natural gas volumes
  • This is the second of three deferred completions. Next up:
    • Brad Olson 9-16 (offset to the Olson, also west of the anticline), 28 stage frac being completed now....should provide the next catalyst for the stock. 
  • Now drilling the BDC Farms 16-21 to the northwest - also 28 stage planned
  • EURs had been thought to be in the <400,000 BOE viscinity with the sub 10 frac stage crowd, with these bigger fracs, the reserve estimates are migrating towards the 500 to 700,000 BOE arena. This makes for some very attractive finding costs, especially towards the top end of the scale of about $11 / BOE, not shabby for an oil project
  • The wells in this press release are all west of the Neeson where BEXP has 100,000 net acres. They think they have 220+ Bakken locations (based on 1.5 wells per section (or 3 wells per 1,280 acre unit). If the Three Forks works on this acreage you may be looking at 400+ wells in total.  Notably, cores taken from the TFS in the original Olson well were oil saturated.
  • BEXP has updated their presentation to include the results of this well. Interesting slides
    • page 11 - good map to get you oriented.
    • page 12 - EURs dependent on frac stage (lateral length) - more stages, bigger EUR. No duh but it's a nice graph.
    • page 16 - history of the Rough Rider area drilling, trend is good
    • page 17 - note next two wells in RR area, Bard Olson and BCD Farms
    • page 18 - note the time plot of the last delayed completion well, the Mrachek to the south of this well on the west side of the Neeson. It's engineered at 255 mm BOE by a third party reserve engineering group with an IP of less than half the Figaro well on oil only.
    • page 22 - TFS timeplot shows the Strobeck well production holding up very well; Strobecks first 30 day IP which is more important to me is nearly 1,000 BOEpd, very strong.
    • page 28 - good graph of completion costs coming down while the wells get bigger, more complex
    • page 29 - better time plot for this Figaro well and their older wells, broken out by # of frac stages
  • The stock will continue to have near term catalysts in the form of big new wells on the horizon which is something much of the group lacks right now. I would suspect it will be strong for the next few days, market willing.



Odds & Ends

Analyst Watch:

  • PBR upped to Outperform at Credit Suisse
  • WLT raised to Buy at Merriman

95 Responses to “Tuesday Morning – Welcome To September”

  1. 1
    West Says:

    This was written last nite prior to Z’s comments for information purposes only…..http://www.bexp3d.com/IR_pres.pdf…… BEXP has updated their presentation to include recently completed Figaro 29-32 #1H Bakken Well . A couple of interesting points from the updated presentation should be noted. They are now using BOE of 700,000 for 24 stage 9,500′ laterals. There is no break down between bo and mcf values. It should be noted that wells in this area do have nat gas pipeline access and are being hooked up very quickly. It is not known what wellhead price is available in the area but still preferable to flaring. They are showing total well cost mid 2009 at $ 6.25 million for 24 stage 9500′ lateral. There is a pretty lively debate as to whether the additional cost and stage fracs actually increases EURs by above suggested amounts. A cursory look at BEXP’s other wells in the Rough Rider area with 1 to 7 stage fracs suggest that these wells may not reach payout of original investment amount under present conditions, low total recovery over longer period . So 18+ mutli-stage fracs appear to make a barely viable play into a very profittable play if these EURs are even close to correct. It should be noted here that there is a counter view in the case of BEXP that they skew their IPs in the way they do their test and have insufficient long term data to support these higher EURs. I had cast a skeptic eye towards their reports and was glad to see that their reports to the NDIC of oil sold matched up well with their production reports for the Olson well in this area….Also very interesting note on slide 21 that Olson core sample had oil saturated Three Forks sample. This would add a lot of blue sky to this area along with their large acreage position East of the Nesson Anticline that appears to be very perspective for the 3Forks. In fact it would appear that the 3Forks will be better than the BKN in those areas just East of the Nesson Anticline. All in all their prospects have improved dramatically in the last few months and with their recent completions and improved financial condition…… It would be nice to have a better idea of what their acreage expiration book looked like going forward . At the present time they suffer the same problem as many of the other exploration companies in that they don’t have sufficient capital to fully develop their acreage positions…………………..As a sidebar to this discussion, my personal thought is that KOG will not do one of these 24 stage fracs at an additional cost of more than a Million $ any time soon due to financial constriants. Expect them to address this in 2010 along with a 3Forks test if they are still independent……..I would expect that the BKN/3Forks to continue to get better with continued advancements in drlg technologies and most especially fracing technologies. This will make larger areas economic to develop and more reserves will be added in proven zones…………………….Hoping for pull back in September to accumulate shares in KOG, WLL, CLR and now BEXP….. Other views , opinions and interpretations are greatly appreciated. thx

  2. 2
    zman Says:

    Thanks West, it looks like the Figaro was planned to be 24 stages and got off 19. Pretty strong rate for a partial completion. The upcoming 28 stage Brad Olson could be a pretty good driver for the stock. You’ve got to like their continued pushing of the angle, it’s good to be oily right now.

  3. 3
    zman Says:

    West – ever notice how WLL seems to be the high beta name when Bakken news crops up? It is uncanny. Low multiple, lots of acreage and the biggest wells in the play. So when a smaller operator gets some news with IPs half the size of WLL’s, the WLL shares react swiftly.

  4. 4
    1520sbroad Says:

    z- i’m still trying to pick up a feel for EOG – any impact for them given that BEXP news?

  5. 5
    zman Says:

    1520 – EOG is really an east of the Neeson Bakken player. They have a lot of acreage though, will take a look. EOG is the leader in horizontal drilling and strong news on a complex completion should be reflect well on them as they can pull off this kind of frac as well.

  6. 6
    zman Says:

    1520 – checking that, have not seen an EOG acreage map, they are sometime cagey about where their Bakken lite acres are, think it was included back in the Analyst day stuff but that has been taken off their website, may be in an old 8k, will look.

    Was mulling taking some $7.50 BEXP calls but was waiting on ISM at 10EST. Oil ran in advance of that and BEXP is cruising.

  7. 7
    West Says:

    WLL , longer term has maybe the best acreage position with BKN/3Forks in the play.Probably a large name that the funds feel comfortable trading. Definitely a hi beta name as of late with low volume days also. As we go forward this co with so many different oil projects should pop up on the big’s guns radar. Not that I want this but KOG could use a little more ethusiasm in press releases ie BEXP.

  8. 8
    bill Says:


    does this news help/hurt or neutral for useg partnership wells

  9. 9
    bill Says:

    useg up 7 % so the market views it as positive

  10. 10
    bill Says:

    the energy stocks are off the mat

    pxp up 2.5 %
    pxd up 1.3 %
    ng stocks up a tad
    clr up 1.1 %

  11. 11
    zman Says:

    Bill – its good, they have an interest in about 5,000 of the 100,000 acres BEXP has in this part of the basin.

  12. 12
    zman Says:

    Don’t forget the cheapest Bakken name, WLL, up 2.5%. That one is looking to test its 2009 high again.

  13. 13
    zman Says:

    ISM better than expected at 52.9%. Exp was 50.5 with 48.9% in July.

    Oil holding up a buck plus.

  14. 14
    zman Says:

    BEXP looking to test its ’09 high now, up 20%. Not going to chase here. But I do own CLR, WLL, NFX, EOG, and KOG which should get some benefit.

    KOG just came alive, up 5% to 1.34.

  15. 15
    zman Says:

    BOP pointing out via email the chart on KOG looking a little “scoopy”. Agreed. News probably needed for the next leg up but on a weekly chart, that looks like a flag forming.

  16. 16
    West Says:

    EOG’s big BKN lite play is north of the Parshall field.appling for 83 640,s (INCLUDING
    ALL OF TOWNSHIP T158 R 90)

  17. 17
    zman Says:

    Thanks West. I had not seen them drilling on the west side of the anticline but I had not been drilling. That seems more like CLR and HES and COP country aside form BEXP and a bunch of privates.

  18. 18
    zman Says:

    KOG – would be good timing for them to get their wells 5/6 pr out for tomorrow.

  19. 19
    West Says:

    Z your NFX has some ac east of the Nesson. Also in one of BEXP presentation about NE Montana wells the operator is KOG. Something that is not even talked about, Red River play.

  20. 20
    zman Says:

    CLR has good sized Red River production, more than double the size of their Bakken production from N.D.

  21. 21
    zman Says:

    Natural gas price looks total dependent on what the next storm does right now. 94L looks like it may hit Florida as a strong tropical storm, could cross into Gulf, go up east coast or dissolve. Models are not showing a lot of strengthening and it is running out of room to do so. If it dissolves gas will probably weaken on this mild weather in the middle of the country.

  22. 22
    zman Says:

    Volumes in the E&Ps pretty decent for this time of day. A little news goes a long way.

    NOG getting some move out of the BEXP news as well. They’re predominantly on the other side of the Neeson and to the south of the BEXP activity.

  23. 23
    West Says:

    #19 =should have been west of the Nesson for NFX .

  24. 24
    zman Says:

    West – yeah, I figured. They have about 10 pilot areas, good results so far, don’t seem to get a lot of credit for it though.

  25. 25
    Nicky Says:

    Morning all.

    Indices: two counts up for grabs at this precise moment both indicating the opposite. My prefence is that an abc correction is now finished and we are on our way to new highs in wave v.

    Alternative is that we are in fact just tracing out a wave ii correction which will not make new highs and once we turn down we will enter a wave iii down.

  26. 26
    zman Says:

    Morning Nicky, is 1024 the tipping point for that comment?

  27. 27
    zman Says:

    Got sent a broker note on a meeting yesterday with HK:

    EFS – would not be surprised to see results of recent completion tweaks announced at upcoming conferences. Caveat here would be that this same broker was with me in thinking there would be a pre earnings ops updated.

    Haynesville – no update

    Fayetteville – not immune to shut ins of Boardwalk pipe (what hit SWN’s guidance) BUT that is factored into the big guidance. That’s pretty telling in my book of just how big the Haynesville new wells are and how fast they are getting them drilled.

  28. 28
    Jerome Blank Says:

    Re: #15 the KOG chart looks good to me, seems to be an ascending triangle forming…top points at the 1.49 highs and the uptrending trendline from the 7/9 low, from a short term support point of view there are buying opportunities at 1.15- 1.20 level, the break of 1.50 would be the new P&F buy signal

  29. 29
    zman Says:

    Thanks Jerome – solid results, if they get them, from the fifth and sixth wells could push them to that level. I suspect if you get into the low $2s they throw an equity deal our way to fund 2010.

  30. 30
    Nicky Says:

    Z – todays lows really are the key level.

  31. 31
    Dman Says:

    Z – assuming that the declines in conventional NG wells will crimp supply & that the shale players are still drilling & getting good results (#27), doesn’t that mean that the conventional players are going to be in big trouble? i.e. something has to give ?

  32. 32
    john11 Says:

    Intersting from north of the border.. BQI moving on this;
    Yesterday, privately held Athabasca Oil Sands Corp., AOSC, announced that it was selling a 60% working interest in its MacKay River and Dover oil sands projects for a consideration of C$1.9 billion. The buyer is PetroChina International, a wholly-owned subsidiary of PetroChina, aka China.

    The projects are located in the center of the Athabasca area in northeastern Alberta and have been independently assessed to contain about five billion barrels of best-case contingent bitumen resource.

    “Oil sands projects are very capital-intensive long-term investments and difficult to fully finance in the traditional equity market,” said AOSC Chairman Bill Gallacher. “AOSC therefore decided to look for joint venture partners, and these strategic joint venture arrangements with PetroChina, one of the world’s largest energy companies, can ensure that the MacKay River and Dover projects will be developed in a timely manner, which is excellent news for Alberta and the rest of Canada.”

  33. 33
    zman Says:

    ISM story:


    Above 50% on this index means expansion. First time we’ve seen that in 19 months.

    Good news for industrial natural gas demand and also for manufacturers who are getting cut rate gas prices.

    Survey says 11 of 18 industries tracked grew in August with the top 3 textiles, apparel, and paper. Those first two aren’t big on the gas users list. Paper however is one of 6 big identifiable chunks of industrial natural gas demand. The others being chemicals, metals, refining, food, and various building materials.

  34. 34
    zman Says:

    Dman – they are going to contract in size and shift to non-conventional sources. Part of the reason for the big land grab, even now at these prices, is preparation for that future. I recall talking with an E&P president 3 years ago who was a Gulf Coast bright spot (3D) driller. A true explorationist. He scoffed at the shales as flash in the pan, and said you wouldn’t see him engaging in that stuff, likening it to the Austin Chalk in the 1990s. Not sure what he’s doing now.

    Thanks Nicky.

    John – saw that. At least we know China has a plan. VTZ may want to comment, I have not looked at it from a valuations standpoint, what does it say about others like SU’s reserves? I don’t have enough data to make a stand on that question.

  35. 35
    zman Says:

    Nicky – the start to this week reminds me of two weeks ago when everyone was calling a top and Monday and Tuesday looked toppy/tired. Hmmm.

  36. 36
    zman Says:

    Bill – just for clarity, USEG is not in the Figaro well, but will be participating in the area. The new BEXP presentation gives you a good idea of the wells for USEG with their working interest computed before and after payout for BEXP. See slide 5 here:


    It’s still good news though as it derisks the Rough Rider area, of which their participation agreement is a part.

  37. 37
    zman Says:

    SP500 just tapped that morning low Nicky.

  38. 38
    West Says:

    kog’s chart could be a cup and handle with breakout coming…My personal take is that BEXP gave up very little in the deal with USEG and gained an expotentional amount. It is always good to have someone else pay to prove up your acreage. Seems like a sweet deal for BEXP.

  39. 39
    zman Says:

    West – yes, when you count payout, BEXP still has a WI over 50% with USEG paying the bigger tab. Probably a win/win also as USEG was just a balance sheet before this deal and the IRRs on these wells on this strip is probably 40%+. Plus the deal is expandable so they can funnel the cash flow back into more higher IRR wells down the road.

  40. 40
    zman Says:

    Market getting thumped again. Crude finally gave up and went slightly red as well.

    Gasoline hanging in there still up nearly a percent. The Street has set the draw on gasoline inventories for tomorrow in line with historic averages. Looks like traders think it will come in with a bigger number and I would not doubt it as production is running a bit light.

  41. 41
    zman Says:

    Pretty much everything in the red again now, with the SP back to eying the 1,000 level. Watching BEXP to see if it gets crunked as well. Still up 15% for now.

  42. 42
    zman Says:

    Someone let me know if Doug Kass changes his mind again.

  43. 43
    Dman Says:

    Z – #34 so when they get in on the land grab, they have to start drilling! From the driller charts, it looks like people were already trying to get ahead of that. But at some point that will be the play.

    re comment on #32: China has a plan all right. They are trying to buy everything when it’s cheap. Oil, iron ore, agricultural land… everything they don’t have. But I still think they will be in trouble because they are really not getting access to the big chunks that they want (eg when they tried to buy Rio Tinto & there was also a large US oil company, I forget which one). Not to mention their longer term water problems. There will be trouble, no doubt about that.

  44. 44
    Dman Says:

    VTZ – if you’re around. I’ve seen mention in Minyanville of some other early-stage oil-sands players:

    UTS Energy Corporation (UTS.TO)
    Opti Canada (OPC.TO)
    Alberta Oil Sands (AOS.V)

    Any thoughts on these?

  45. 45
    Jerome Blank Says:

    Any thoughts on BQI Oilsands, holding up well at its 200 day MA

  46. 46
    zman Says:

    I don’t cover the oil sands names closely. There is a partial list of oil sands tickers here:


    and I got an email about Opti being a screaming buy earlier today so its on the touter’s lists. I probably won’t do anything with the names for now as the Chinese can come and go quickly in markets and it may be another year before you see them enter anything up there. I’ll also wait for VTZ to comment.

  47. 47
    zman Says:

    Doug Kass on CNBC pounding the short table.

  48. 48
    zman Says:

    Looking at some BEXP now that it has backed off a bit for a trade.

  49. 49
    zman Says:


    HAL – Added (5) HAL $24 Puts (HALUH) for $1.01 with the stock at $23.75.

  50. 50
    tater Says:

    Not trying to act like I have the market pegged. I don’t. Just want to point out when some of the landmarks that I pay attention to are working for me.

    CLR 60 min view in particular

    Also want to express caution in the face of some of the bullishness on KOG. That 60 min view is giving me pause. Personally, I find the toppy appearance of the last 2 weeks to point to a return to 1.15, but that’s just one guy’s opinion.

  51. 51
    zman Says:

    Thanks Tater, always appreciated.


    BEXP – Added (5) BEXP September $7.50 calls for $0.50 with with the stock at $7.46. I think this one will move higher again, market willing, as we move towards more well announcements.

  52. 52
    tater Says:

    Oh yeah, your comment on the coaching book a couple days ago. I actually found myself reading it again late into last night. Football practice getting tedious for the guys already. Good luck today.

  53. 53
    zman Says:

    Hear ya T. And I always always always want to here the flip side TA or fundamentals to my case. thanks.

    On the coaching, I have all girls, 8 of them, so far more like herding than coaching. But I am teaching them shirt pulling and leg sweeps first as we don’t have red cards at this age 😉 and I think that will be a big advantage over talent and the ability to run faster.

  54. 54
    PackMan Says:

    8 Girls ?? Z, god bless you and good luck !

  55. 55
    PackMan Says:

    oh coaching; not your kids … right ?

  56. 56
    PackMan Says:


  57. 57
    Nicky Says:

    Z – I have support at 997 SPX

  58. 58
    zman Says:

    Thanks Nicky.

    Yeah Pack, just one girl and a boy at the homestead. Though it would be cool to have my own team, will check with Petra on that.

    Wow am I bored. This feels like profit taking. Volumes still pretty good for summer and the time of day. Not really getting thrashed as hard as I would expect on a day like today … in other words, energy down same as market, not 2x or 3x like is typical. May add another wedge of WLL.

  59. 59
    Wyoming Says:

    I’ll loan you my 2 girls, just turned 6 and are taking up Jui-Jitsu. Would be good practice for them in addition to picking up your soccer skill lessons. Maybe throw in some stock trading lessons too?

  60. 60
    zman Says:

    By the way, got sent this yesterday. EIA’s estimate of natural gas storage capacity:


    Demonstrated peak capacity of 3,889 Bcf
    Design capacity of 4,313 Bcf.

    The demonstrated peak is what they think can be practically held given the inter-relationship between pipes and storage. The capacity number is how much they think it could hold if you didn’t have to worry about the system working as a whole.

  61. 61
    zman Says:

    Wyoming – Cool, more interns.

    By the way, the Farmer’s Almanac is out. Uncanny how right they have been. This winter’s forecast: colder than normal.


  62. 62
    zman Says:

    Nice quote from the Almanac story as I watch natural gas hover at 7+ year lows:

    “We feel the middle part of the country’s really going to be cold — very, very cold, very, very frigid, with a lot of snow,” she said. “On the East and West coasts, it’s going to be a little milder. Not to say it’s going to be a mild short winter, but it’ll be milder compared to the middle of the country.”

    Note also that the NWS thinks it will be a warm winter. Guess people are going with that.

  63. 63
    Wyoming Says:

    Funny how the EIA does not mention Pressures in their calculations. Line pressures are the reason we hook up compressors sometimes. The ideal gas law comes to mind http://en.wikipedia.org/wiki/Ideal_gas_law

  64. 64
    zman Says:

    Wyoming – they seem to have problems with pressure bases in general. They have a note on how they’re look at Texas in the monthly data is under review now. I guess a $111 mm budget isn’t enough.

  65. 65
    Nicky Says:

    Okay still two counts on the table. Everywhere I look the bears are out in force which has me worried! What with CNBC giving headlines every two minutes about what happened this time last year to everyone now saying the correction has started it has me nervous this may be a fake out on the downside. So the bullish count I can see is that we have completed an abc on the downside today for a wave ii and will now go and make new highs. Actually if you take the es it works out as c = a at around 1002.

    The far more bearish count says the top is in and we are likely still close to a bounce but that it will be corrective and then we go much lower.

    Line in the sand ultimately for the bulls I would say is around 980 on the spx.

    On another subject what the heck is going on with metals – silver in particular is flying whilst the USD bounces. Its not making sense to me.

  66. 66
    Wyoming Says:

    It is common sense too, for a know space, increasing the pressure will increase the volume you put into that space. Add some more gathering systems, very few being reclaimed/written off and you will have a swing amount of unknown volume capacity. The pressure will dictate when a well is un-economical. Too much pressure and a low commodity cost means I will either pull out my compressor or not install one due to lifting cost reasons. But hey lets drill some more wells?

  67. 67
    Nicky Says:

    Oil pretty close to a big uptrend line. This area needs to hold.

    Z – what are you seeing for inventories?

  68. 68
    zman Says:

    Wyo – yep, gotta hold those acres. Was reading those notes from a broker meet with HK and one of the first things they said was HK continues to acquire acreage in the EFS. We knew that but at the same time, you gotta scratch your head at the rush of it all.

  69. 69
    baylor3217 Says:

    bidding kog at 1.25 if anyone wants to sell me any 🙂

  70. 70
    baylor3217 Says:

    sold my SPY puts

  71. 71
    zman Says:

    Nicky – the Street is looking for 5 year averages so they obviously are unsure what to think here.

    Crude I have no good feel for, we got the rebound in imports last week I was looking for so but there may be a bit more behind it this week.

    I think oil will hinge on gasoline and then distillates unless the dist number is negative and then that will take precedence. I think we see a bit more demand for gasoline tomorrow which should give us a bit better draw than is expected in gasoline. But that number has been sketchy all summer and just when I think it is trending it breaks the pattern. Still, I think we are 9.3 to 9.4 mm bpd tomorrow which will give you a beat on gasoline.

    On distillates, I expect a bit better demand in diesel and in jet fuel.

  72. 72
    zman Says:

    Housekeeping watch: If you are a monthly google checkout subscriber send us a note at zmanadmin@gmail.com before you re up as rates for new google monthlies went up. We will send you a link for the old rate.

  73. 73
    baylor3217 Says:

    how would i know if im a google checkout subscriber? I’ve slept since then 🙂

  74. 74
    jpntexas Says:

    BOT KOG @ 1.25, again, 🙂

  75. 75
    zman Says:

    Baylor – you are and a link was sent to you earlier.

  76. 76
    West Says:

    Supposedly KOG is not going to release well data until after Lador Day weekend.

  77. 77
    zman Says:

    West – I was guessing that when they didn’t do it bright and early yesterday. No matter. Nice to have something priced like an option with no expiration.

  78. 78
    Nicky Says:

    Rumors everywhere about a big bank in trouble. Now people saying it may be a Hedge Fund. Maybe we are just due a correction and don’t need all the rumors to get it going!

    Volume could end up being the 5th heaviest of the year which helps the bear case obviously.

  79. 79
    zman Says:

    Nicky – got an email about a big bank default rumor about an hour after the open.

  80. 80
    tater Says:

    Just wanted to say thank you to everybody. Been very busy with any number of things, but wanted to let you know that the collective mind set here is VERY helpful in getting caught up late at night.
    And Nicky, want to say that your work is slipping notably. I mean come on, you see support at 997 SPX and then the day low is 998??? Slacker. Just not up to your usual exactitude 🙂

  81. 81
    Nicky Says:

    LOL Tater! Back to the drawing board for me!

  82. 82
    bill Says:

    useg liked the bexp news up 25 % on todays ugly day

  83. 83
    zman Says:

    I’d like to know, with gas falling as hard as it has, how the little rebound we have seen in natural gas directed drilling can possibly hold up here. It just does not make economic sense to drill over 95% of the reservoir acreage we normally drill in. TEXW, West, JP, Wyo – thoughts. I just don’t see it and if the strip keeps dropping, I don’t see it for quite some time.

  84. 84
    Nicky Says:

    992spx support if 997/998 goes.

  85. 85
    zman Says:

    Nice trade Bill.

  86. 86
    bill Says:

    i got out of useg at 3 last week
    i should have bot back in
    i dont think its worth 3.25 at this point

  87. 87
    zman Says:

    Bill – right, the little ones like that often tend to get out of hand. Good deal for them no doubt, better one for BEXP. Not to say it won’t keep going up but looking at the volume it has got to have some hot, hot money in it now.

  88. 88
    zman Says:

    Well, that was ugly. Beerthirty.

  89. 89
    zman Says:


  90. 90
    zman Says:

    Bullish APIs

    Crude: down 3.193 mm barrels
    Gasoline down 2.811 mm barrels – and API cites a big pop in demand
    Distillates: up 0.92 mm barrels

    Oil saw a small pop the minute of the release, now sinking back to 68.20. Should be more positive although the distillate number is a bit of a continuing disappointment.

  91. 91
    zman Says:

    Tropical Storm Erika:


    Does not appear to be much of a threat to the Gulf.

  92. 92
    nifkin Says:

    Looks Like D bank is going to liquidate there DXO (2x long ETN) fund because of CFTC imposed position limits.

  93. 93
    zman Says:

    Here’s the story. Not a lot of $ in the scheme of things. More will likely follow but may be waiting on the CFTC to actually make a ruling.


  94. 94
    nifkin Says:

    also one thing to point out from reading bloomberg, today’s action was interesting as one point crude was -1.00%, Gasoline + on the day, and DXY was up +1%- seemed like crude didn’t know who to follow…. looks like bberg article pointing to PDVSA refinery issues @ Isla refinery as the main driver behind gasoline strength (350k bpd) – link below http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aquacHRZXjjc

  95. 95
    zman Says:

    I’d add that pent up gasoline demand for end of season, after having been pretty stagnant, made for a pretty good bet we get a bigger than expected draw tomorrow. API bears that out but we’ll have to wait and see if EIA confirms.

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