04
Sep

TGI Long Weekend

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This morning we had non-farm payrolls come in at 216,000 vs an expected loss of 225,000 to 233,000 jobs in August depending on which estimate you look at. At the start of the week expectations called for a 250,000 loss figure but analysts/economists have been raising their numbers as the week progressed, especially after the ADP employment report came in better than anticipated. The July report showed a decline of 247,000 jobs. Unemployment rose 9.7% from 9.4% last month, higher than expectations of 9.5%.


In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Stuff We Care About Today - A few odds and ends but not much news. That will begin to change next week.
  5. Odds & Ends

Holdings Watch

  • $10KP II:

    • $3,700
    • 54% Cash
    • The Wiki Holdings tab is updated.


Yesterday's Trades:

  • SWN - Adding SWN September $36 Calls (TKQIY), slowly, for a near term bounce or stabilization in natural gas which is off another 7% today after in line storage numbers were announced.
  • ZLT Trade - ROSE - Added a starting position in the common at $11.67. See today’s post for details.

Commodity Watch

Crude oil eased down $0.09 to close at $67.96 yesterday, its third day to essentially hug the $68 level. This morning crude is trading in a wide band around yesterday's close following the payrolls number.

  • Nigeria Watch: CVX says 100,000 bopd of production shut in from May 25th following militant attacks is back on line. Reuters sources estimate Nigeria's production is down some 800,000 bopd from peak capacity due to sabotage related shut ins.

Natural gas fell another 7% or $0.21 to close at $2.51 yesterday after the EIA reported another "in line" storage number (see below). Gas is at seven and a half year lows and the chart on the front month future may be targeting the $2 level I continue to look for a short covering rally of large proportions in the near future as a wave of production curtailments are announced. If we don't see that wave of curtailment announcements, it looks like the spark for such a rally will either be tropical in nature (and that would probably be short lived unless capacity is taken out of the system) or a re-rollover in the natural gas directed rig count (that will take time to develop), or will result from early, cooler than expected winter weather.  This morning gas was down early but has reversed higher before the bell and may be covering in front of what they see as a week of curtailments beginning next week.

  • Tropics Watch:

    • Erika has been downgraded to a tropical depression and does not appear to be a threat to Gulf production at this time.  The remnants of Erika are given less than a 30% chance of redeveloping over the next couple of days as they pass through the Caribbean. 

Natural Gas Storage Review


ZComment: Another in line number. Another big sell down for natural gas. Note in graphs B and C below that the trend in the surplus of gas in storage vs year ago levels and to the five year average continues to deteriorate. In fact, the surplus to year ago levels has in fact been cut in half since the beginning of April.


I Continue To Look For A Storage Peak of 3.7 to 3.85 Tcf. This is lower than most of the Street by 50 + Bcf but the peak level is probably not as important for gas prices right now as the timely beginning of withdrawal season. If we see small injections reported, stretching into mid to late November gas will have a tough time mounting a strong winter season recovery. Whether or not we see that happen will be determined first by weather and second by production curtailments.

 

Stuff We Care About Today

 

A Little HK News: 3 wells in DeSoto Parish completed. According to the local press HK completed 3 wells on the airport property, one at 16 and one at 12 MMcfepd.

OII Awarded BP Corrosion Contract. Terms are 3 years for a total of $45 mm which is not a big deal compared to OII's annual revenues of $1.8 billion but its good business for them to win in this environment and these deals have a way of translating into further deals down the road.

Conference Watch: Next week we have: I expect to see news flow pick up with these first of the Fall conferences.

Short Interest In Key Names:

Odds & Ends

Analyst Watch:

  •  (TLM) raised at UBS to Buy
  • (HK) target raised from $43 to $48 to account for Eagle Ford potential at Tudor

134 Responses to “TGI Long Weekend”

  1. 1
    BirdsofpreyRcool Says:

    “the chatty one”…? 😉

    From early this morning… pre-employment report (but with some good techinical data and fund flows)

    Levels at 7amET:

    · SP futures +3pts after holding test of 1000 overnight

    · Euro Stoxx just off highs +0.7%

    · USD (DXY) down slightly; EUR better bid vs yen & dollar

    · Crude ticks up 35c to $68.30; remains down ~6% on the week

    · Gold trades down $1.60 to $988.30; commodity is up 3.5% this week

    Today’s Top Stories & Catalysts

    · European stocks & US futures both better bid this morning; SP500 holding the 1000 level overnight and bouncing right back up. Asia acted well as China, HK, & India all finished higher; MSCI World Index up +0.3%, climbing for a second day. The EUR is moving higher vs both the dollar & yen this morning; Trichet op-ed in the FT titled “Europe has mapped its monetary exit.” Volumes remain muted across most world indices ahead of the long weekend in the US and the US jobs report at 8:30amET (print expectations for a loss of 230K).

    · Technical update from M Krauss: The decline is not over from last Fri’s 1039.47 overbought/diverging summer top. Stocks are usually strong on the day before Labor Day, and we still expect a four to six week correction. So, we’d add to our 50% position short on a corrective lift in the next 36-48 hours. If the S+P 500 sustains back above 1021-1023, new highs are coming…..Our primary correction targets are 979 and 956. Trade ideas will fade each by 5-6 points.

    · Equities vs. credit in financials: credit in financial land has been about unchanged on the whole week despite the volatility seen in stock prices (credit was flat on the sell-off earlier this week and was flat on the rally Thurs). CDS on the large IG financial barely budged on Thurs despite the move higher in stocks. In distressed financials, only big move from FGIC (which was out ~3 points+ to ~78-80 upfront).

    · White House considering further aid for homeowners; Obama administration officials are wary of rising home foreclosures and are exploring options to increase help to beleaguered homeowners, though they were not immediately supportive of an industry proposal for overhauling Fannie Mae and Freddie Mac. CNBC

    · Afghanistan: Obama being urged to rally support for the Afghan war effort amid faltering public interest. WSJ

    · Fund Flows: Total equity fund flows (excluding ETFs) saw outflows of $1.1 bn compared to $364 mm of inflows last week. Domestic equity funds had $1.4 bn of outflows compared to $101 mm of outflows in the prior week. International and Global equity funds gained $227 mm of assets compared to inflows of $465 mm in the prior week. JPM’s K Worthington

    · TrimTabs remains neg. on equities; says risk of market plunge is rising; inst investors aggressively bullish, a neg. omen. Insider selling remains very high. Concern about deluge of issuance post Labor Day.

  2. 2
    zman Says:

    How about “chatty one full of insight”

    Gas trying a reversal this morning. I think we see lots of curtailments next week. Companies are going to start speaking at the Fall conferences. They will be asked repeatedly about their guidance and why they don’t curtail in the face of such prices. Makes sense we see them cut numbers.

  3. 3
    BirdsofpreyRcool Says:

    KOG — TeddyCam report…. Company decided to wait until next Tues or Wed to release operational update. Why throw good information out there when everyone is on vacation? That was the thinking, anyway.

    So, hang in there Koggers… heard things are going well. We will get to hear what that means shortly.

  4. 4
    BirdsofpreyRcool Says:

    Hey… if the SHOE FITS…. ha!

  5. 5
    BirdsofpreyRcool Says:

    HeadTrader + TechTrader comments together = 55/45 short, I wud go the opp of any big move in the morning, but biased to the short side for the 3 day weekend. TechTrader is 55/45 short.

  6. 6
    zman Says:

    NG up 4% pre open. I know, I know. Big deal, it was down 7% yesterday and is off like 45% in the last 20 days. This meets my definition of oversold. SWN and KWK in calls for a bounce there along with HK of course.

  7. 7
    zman Says:

    BOP – are you back from vacation or just checking in? Missed your comments.

    KOG makes perfect sense. They speak at that RR conference so I’d assume a pr that morning?

  8. 8
    zman Says:

    TPH looking for a rebound to $7.50 natural gas next year. But sees longer term gas price of $6.50. Says sub $3 won’t work for even the low cost producers … no kidding.

  9. 9
    BirdsofpreyRcool Says:

    z — just checking in. Can’t sit still on an Employment Report Day. But cruising for bargains, if we get any weird, light-trading action in stocks I would like to own more of.

    So, doing some periodic weed-waiting… looking for the lazy antelope to wander close. In pounce-mode…

  10. 10
    zman Says:

    BOP – hear ya. If you get a chance, read that Montana, Blackfeet Reservation geology report contained in the ROSE piece from yesterday. Interesting talk of fractured Bakken and T.F.S. at a shallower depth than in North Dakota. The first bit is spinning to the right now. ROSE is staffed with smart folks from BR (via COP and Vastar). Those kids know Rockies and Gulf Coast very well and how to run a company.

  11. 11
    zman Says:

    Smart old oil hand sell sider citing Israel getting ready to roll as a reason for bonds and gold being up.

    True enough, the “season of brotherly love” is about to kick off with flare ups in Israel/Iran or Palestine, North Korea (hey, we’re upgrading uranium too now, see how fast we can make more nukes) and Nigeria (cease fire is about to die).

  12. 12
    zman Says:

    SWN starting to lift, obviously watching gas very closely. If gas looks like it has legs I will add there and at KWK.

  13. 13
    zman Says:

    BEXP > $8.

  14. 14
    BirdsofpreyRcool Says:

    z — thanks. Will do. Shallower is not necessarily better. I would be very interested to hear about the chemistry of the oil found there… thermal maturation and all that. Wonder if there is any difference…? But natural fractures are 90% better than anything the engineers can do (sorry Wyoming!), so that makes it very interesting.

  15. 15
    elijahwc Says:

    SWN: Nice piece in Local paper today on the FayShale which adds to a BB story on the same.

    Gas find in state buoys energy firm
    DAVID WETHE BLOOMBERG NEWS

    Friday, September 4, 2009

    LITTLE ROCK — Southwestern Energy Co., the top performer in the Standard & Poor’s 500 since the U.S. recession began, is weathering a seven-year low in natural-gas prices better than rivals, largely on an Arkansas fuel discovery.

    As gas producers such as Apache Corp. cut jobs to cope with a collapse in prices for the heating and power-plant fuel, Houston-based Southwestern continues to add staff. The company forecast a 45 percent jump in production this year while keeping capital spending at about $1.8 billion.

    Southwestern’s operating profit margin is 42 percent, more than triple its peergroup’s average, according to data compiled by Bloomberg. It will keep outperforming other independent producers that rank among the top 15 in U.S. gas output, analyst estimates indicate. Southwestern has the highest predicted gain in share price over the next year, at 40 percent, and the smallest decline in 2009 earnings excluding one-time costs and gains, according to the estimates.

    The company funds only projects that will yield a present-value return of $1.30 or more in cash flow for each $1 invested. “If there’s a key to our success over the last 10 years, it’s having that discipline through that whole timeframe,” Chief Executive Officer Steve Mueller said.

    Southwestern became a top performer after giving itself a two-year head start in developing the Fayetteville Shale formation in Arkansas, where the company has booked enough gas reserves to supply all the houses in New York for four years.

    After Southwestern got its first hint of the formation’s potential in 2002, Harold Korell, then CEO and now chairman, set up a team of nine employees to work on the project, Mueller said. They were the only people at Southwestern who knew about the prospect, and they were sworn to secrecy, he said.

    Over about a year and a half starting in 2003, Southwestern obtained drilling rights on 455,000 acres of Fayetteville Shale land. To avoid detection, Southwestern set up companies with other names to lease mineral rights, and it bought its own title company to prevent employees from being seen frequenting courthouses.

    Because it got in before anyone realized there was a gas rush, Southwestern was able to acquire rights for an average of $40 per acre, the company said in announcing the Fayetteville Shale find in August 2004.

    Since then, Southwestern has expanded its acreage in the formation to about 875,000 acres, almost the size of Rhode Island. The company said its average land cost for all of its Fayetteville Shale holdings was $140 an acre as of the start of this year.

    By contrast, Houston based Petrohawk Energy Corp. announced a deal at the end of 2007 to acquire mineral rights to 24,000 acres from other companies in the formation at a cost of more than $14,000 per acre.

    The Fayetteville Shale drove an almost quadrupling of Southwestern’s production from 2004-08. Net income last year was $568 million, exceeding combined earnings for 2000 through 2006 by more than $102 million.

    Gas futures have dropped 80 percent from their 2008 high. The futures, which touched a seven-year low last week, fell again on Thursday. Natural gas for October delivery gave up 20.7 cents to settle at $2.508 per 1,000 cubic feet on the New York Mercantile Exchange.

    Shares of Southwestern, which derives almost all of its production from gas, have jumped 44 percent since the recession began in December 2007. The next-biggest gainer in the S&P 500, Big Lots Inc., climbed 32 percent. Southwestern, which closed Thursday at $35.85 on the New York Stock Exchange, was the only oil and gas producer in the index to rise last year.

    Shortly after Korell joined Southwestern as chief operating officer in 1997, he didn’t find a project that met his return-on-investment criteria. “He told them to go find some projects,” said Mueller, 56.

    By August 2004, after seeing gas flow from a well in Jerusalem in Conway County, the company became convinced that there was enough recoverable fuel trapped in the shale formation to make it a winning investment.

    As nitrogen flowed back up from the well and a gas flame flickered, John Thaeler, vice president of the company’s nearby Arkoma Basin operations, placed a call to Korell at headquarters and announced, “Houston, we have gas.”

    To help keep its cost edge on competitors, Southwestern bought some drilling rigs of its own and started its own sand business. Sand, water and chemicals are used to fracture rock in shale formations, allowing gas to flow to the surface. The company also owns its own pipelines in the Fayetteville Shale.

    The company’s Fayetteville Shale holdings should drive double-digit gains in production each year for the next decade, said Jason Gammel, an analyst at Macquarie Securities USA Inc. in New York. He said Korell put Southwestern in the unique position to fund its growth with cash flow.

    “There are very few within energy that have been able to duplicate that,” Gammel said.

    Information for this article was contributed by Chris Kahn of The Associated Press.

    Business, Pages 29, 34 on 09/04/2009

  16. 16
    BirdsofpreyRcool Says:

    No more KOG shares for ME this morning… so far, that antelope is lopping away, fast.

  17. 17
    zman Says:

    BOP – yeah, I know, was thinking a little cheaper and also that it would have some vertical well bores through it from days of yore so you could have pretty good well control. They’ve been drilling since 1902 in the area, good production from higher interval, light sweet crude, just not from the Bakken. Lots of stacked pays here so they went with what worked early and that was shallower (had seeps to start them out). I just know that the ROSE guys would be on top of the well control and have optioned 200,000 acres on the Reservation. These same guys were on the forefront of the deepwater GOMEX which is why they got gobbled by BP.

  18. 18
    zman Says:

    Eli – thanks. The big deals on SWN now as I see them are getting downspacing to work, the fact that they are not hedged beyond about 10% in 2010 (which maybe good but is scaring people now) and that they could cut Capex by 80% and keep their acreage if need be. The boardwalk pipeline issue is a non event in my book, a speed bump if you will.

  19. 19
    Jerome Blank Says:

    KOG trying to test resistance again at 1.49 for a third time, 1.50 prints a fresh P &F buy signal, I will try to buy any pullbacks near 1.30, for the next push higher…long term resistance at 2.25, will probably take a short break there

  20. 20
    zman Says:

    KOG through $1.50

  21. 21
    BirdsofpreyRcool Says:

    Jerome — thanks for the P&F analysis on KOG. I’ve seen that charting work well too many times to ignore.

  22. 22
    zman Says:

    My contact who went to Enercom in August said basically the theme was “Got Bakken?” which continues to show strength here over the last several weeks despite this little pull back in oil.

  23. 23
    Wyoming Says:

    BOP,

    No worries, can not see nat fractures on seismic, still need us. Then once you find them you have to connect them. Only need geo’s for the XY’s.

  24. 24
    zman Says:

    BOP – one last thing on that ROSE. CEO is a smart, good guy. But the SVP of Strategy was the IR person at Vastar. She and I used to go back and forth over models. She knows the accounting inside out, never steered me wrong OR bagged me with overly conservative guidance. If she is indicative of the quality of the rest of their team which I know much less about than they are on the right track from that perspective.

  25. 25
    BirdsofpreyRcool Says:

    Wyoming — truth be told, if you don’t have a good engineer, the whole business model collapses. (shhhh…. don’t tell the geologists…..)

  26. 26
    Jerome Blank Says:

    RE: #21, Hi BOP…hopefully we get a little more of a pull back to add shares

  27. 27
    BirdsofpreyRcool Says:

    Love the Bakken. It is the gift that will keep on giving. We are only in the 2nd inning on that play… it will just keep getting better and better with time and technology. Gotta Get Your Bakken, for shore.

  28. 28
    zman Says:

    West – if you can get the Montana O&G commission to upgrade its software to ND’s that would be great. Ouch, painful to use slow and unfriendly. Sheesh. Anyway, going to be doing some digging on previous wells in NW Montana over the weekend.

    BOP – and according to D.C., once the code has been cracked the G&G and engineers can all go install solar panels as the wells can drill themselves, if they don’t mess up the drinking water.

    Jerome – The last two well announcements have seen pre pr runs like this only to sell the news. One of those announced a mechanically poor well so that may have been IP rate disappointment. Glad to see them speaking at a conference on the same week news is coming out.

  29. 29
    kyleandy Says:

    y’all can thk me for this KOG spurt. sold a little bit of my holdings at 1.37 on close yesterday!!!!

  30. 30
    BirdsofpreyRcool Says:

    Jerome — re KOG, i was hoping too. Logically, I don’t think we see sub-$1.30 again. But with a mini-micro cap like KOG (that WILL do a 2ndary at some point before next Feb/March [at the latest, so think it will probably be this year]), ya never know. That is why we saw resistance at 1.48. A lot of people playing the volatility in this one. But, mainly retail investors. I don’t see the institutional holders doing much, other than nibbling at more on dips.

  31. 31
    zman Says:

    NG still up 3.5%, after 45 minutes of trading. Wow. One pile of clouds off Africa. So this is shorts getting a little, not a lot, nervous.

  32. 32
    BirdsofpreyRcool Says:

    kyleandy — you made money (and protected the nuts!). So, GOOD TRADING on KOG.

  33. 33
    zman Says:

    Kyle – way to take one for the team.

    Nicky – can you update us on your levels for S&P and Oil? Thanks.

  34. 34
    bill Says:

    tanker rates are worse than ng prices

    id short nat,fro

    he dire state of the Persian Gulf to Far East VLCC trade was illustrated today with the fixing of the 306,000-dwt British Pioneer (built 1999) at just WS30.5 to South Korean refiner S-Oil.

    This Worldscale rate translates to a mere $8,300 a day compared to the current cash breakeven level for Frontline VLCCs of $31,900 a day.

    The British Pioneer is part of the fleet of the Frontline offshoot Independent Tankers Corp Ltd and on a two year bareboat charter at a minimum of $20,000 a day to BP.

    But at WS30.5 S-Oil looks to be the only winner on the deal.

    NYK’s 281,000-dwt Takachiho II (built 1998) was fixed by SK for a Persian Gulf to South Korea voyage at a marginally better rate of WS31 but this only amounts to $9,000 a day, so another unprofitable charter.

    Aeolos Management’s 260,000-dwt Tinos (built 1988) was fixed to carry an IRPC cargo from the Persian Gulf to Thailand for another lowly rate of WS26 but there were reports that a yet to be nominated TMT VLCC had been fixed for a Middle East to India voyage for an undisclosed charterer at WS37.5.

    Elsewhere rates were also soft with Clearlake securing Sonogol’s 158,000-dwt Sonangol Namibe (built 2007) for a West Africa to Gulf of Mexico or UK Continent range delivery at WS50.

    Liquimar’s 167,000-dwt Evridiki (built 2007) is to make a voyage from theTurkey’s Ceyhan pipeline terminal to either the Gulf of Mexico or a UK – continent range port for WS52.5

    Petrochina is paying a lump sum of $3m for GNMTC of Libya to sent its 165,000 Barbarosa (built 2009) on a Caribbean – China voyage.

    Alpha Tankers & Freighters 159,000-dwt Astro Perseus (built 2004) is to make a Scotland to Canada voyage for Irving for WS56.25.

    Marathon booked American Eagle’s 104,000-dwt Eagle Seville (built 1999) for a West Africa to Rotterdam run for WS65.

    Eurotankers’ 104,000-dwt Memphis (built 1987) is to make a couple of Middle East – Pakistan voyages for $260,000 and $230,000 respectively for FAL and Falcon.

    Fal also concluded a couple of other deals paying Liquimar’s $250,000 for another Pakistan delivery by the 94,000-dwt Frixon (built 1987) and Libya $290,000 for a Ras Tanura – Fujairah voyage by the 105,000-dwt Adafera (built 2004).

  35. 35
    zman Says:

    Here’s one of my trading rules from my list of unpublished trading rules:

    “My option portfolio should never exceed 20% of my equity investment portfolio. If it does, either via upward movement of options or downward movement of the common holdings, it is time to pull money out of the option portfolio. All this means is that options are the icing (good or bad) on the investment cake. At times, the runs can be tremendous and at times they can be terrible. Keeping them as a smaller percentage of the overall picture helps to keep emotion out of trading. See thoughts on emotionless trading below. ”

    This applies to me and me alone but people ask me all the time in emails and while I’m wearing my Z-apparel line at the post office. Just got asked again by email from a friend.

  36. 36
    bill Says:

    congrats to you kog buyers

    i sold mine at 1.25

    atpg still looking good

  37. 37
    bill Says:

    exxi is up big

    they are in the same plays (gom) as mmr and pxp

    http://finance.yahoo.com/news/Energy-XXI-Reports-Fiscal-pz-62255952.html?x=0&.v=1

  38. 38
    zman Says:

    Bill – heard that MMRs Moffett has been talking up Blackbeard prospectivity again.

  39. 39
    zman Says:

    BEXP in breakout mode now by my way of looking at charts. Would like to see more volume. Jerome, Tater, thoughts there would be appreciated.

  40. 40
    zman Says:

    I’ve added short interest in key names to the bottom of today’s post.

    Couple of key points to those graphs:

    As you’d guess, short interest in gassy names is higher than in oily names or in the case of the charts, in the Bakken names which I threw it to show which ones of those are being shorted.

    GDP and GMXR are 25% short, they have been high before and can see large runs in the names as the floats aren’t that big. So a squeeze for gas may see a run in the more shorted gassy names.

    I think the better two of the short squeeze candidates there is GMXR as it is over 80% hedged for 2010 at $6.50 whereas GDP is unhedged as far as I can tell in 2010. SD may also be a good squeeze candidate as it is well hedged as well.

    Flipside is that the unhedged gas names will see a chance to hedge at higher prices when the gas rebound occurs. So GDP has that going for it as down the lightly shorted SWN.

    On the oil side, I’ve seen a lot of short commentary over the run in the name. The name remains cheap. That seems like a good candidate for a squeeze should oil prices hang in there which I think they will.

  41. 41
    1520sbroad Says:

    Z – #35 – very sound thoughts there.

  42. 42
    Jerome Blank Says:

    Hi Zman…BEXP is currently on a buy signal, no question this is a strong stock, the only qualifier I have with it right now is that the buy signal is a bit dated, the buy signal occured with the print of 4.50, breaking right thru its long term resistance at 6.50 without hesitation (strong)…it did have a healthy pull back recently to its 20 day MA at 6.50 support which is good, then rallied off the convergence of MA and long term P&F support to where it is now, in my trading style I prefer to buy pullbacks into strength…BEXP prints a fresh buy signal at 8.50, there is overhead long term resitance at 11.50, here I am looking to be a buyer at around 7.25, with a stop at 5.50, a print of 6.00 puts BEXP on a sell signal, but given its strength and the fact that it is now above its trendline resistance, I am wary of a bear trap, a sell signal, bringing in sellers on the sell print, just to turn around and rally higher…

  43. 43
    zman Says:

    Thanks much J

  44. 44
    zman Says:

    KOG up 21% @ 1.66. Buy the rumor …

    Nah, I’m holding into next week.

  45. 45
    zman Says:

    EOG started the day weak and has gotten weaker. I don’t see a reason for it except the wrong footing in the morning. Not adding today but that looks interesting as trading ranges go. I’m pretty sure they will be speaking at Barclays next week but would sort of doubt they will have new news as that’s just not their style. Could also be that they are suffering from a bit of fear they will hack back production in light of gas prices.

  46. 46
    BirdsofpreyRcool Says:

    on KOG… i think if the stock gets anywhere near $2.00… mnmgt would be happy to issue 10mm shares at $1.75 or better. BUT if/when they do that, KOG is good to go. So, not sure I want to try to game it and sell, knowing that there will be a 2ndary down the line.

    z, any thoughts on that?

  47. 47
    zman Says:

    BOP – tough call, I have four tranches of KOG now, still not a big position but who likes to give money back? Best guess on gaming it would be positive move in the stock continues on Monday with no news and they announce for Rodman meeting and the stock either spurts or sputters (given the history of well announcements) then. I’m not selling today unless it goes quite a bit higher.

    Alternative is to take the long view, don’t worry at all about the near term as they will likely do that deal at $2 and then it comes off 10% from there, consolidates for awhile and then marches up into more respectable territory, results willing.

    So closer to $2, I’ll probably take half off, and buy it back once they announce a deal. If they get lucky, put up some big numbers on 7/8 they could be looking at a deal at $3 which is why I wouldn’t come out for the whole piece at $2.

  48. 48
    BirdsofpreyRcool Says:

    z — thanks. I’ve taken the long view on KOG. Have been in the name for well over a year (which means a lot of shares were bought at higher prices). I find that when i try to get too cute with my long-term holdings, i miss out. So, may try to lock in some gains at some point, as it is an overweighted position, but for the most part, I’m in for the longer haul. It’s all about the Bakken… and KOG is the purest way I found to play that play.

    Also, KOG is an event-driven stock… in more ways than just reporting on operating results.

  49. 49
    zman Says:

    Agreed – Being too cute will get you slapped.

    Collateral Benefit of the KOG move – may be NOG. Lots of smaller working interests in lots of Bakken wells. I don’t know the story well at all. But could see that one move higher with strong news at KOG as well, as one of the lower PPS Bakken names out there.

    NG up 5.5%

  50. 50
    Gtinvest Says:

    z announcemnt for meeting was out last night:http://finance.yahoo.com/news/Kodiak-Oil-Gas-Corp-Provides-prnews-1509312384.html?x=0 . Also curious that stocks runs on a friday prior to 3day holiday weekend.

  51. 51
    VTZ Says:

    RE 11: Why can’t the reason gold is up ever simply be because:
    -the USD is being devalued massively
    -the financial system is broken and there are many insolvent banks that are being propped up by FASB accounting
    -deficit spending for years to come
    -inflation on the horizon
    -global uncertainty (here I agree with him)
    -the flee to USD bonds in insanely huge amounts at ridiculously low interest rates and eventually people aren’t going to want pieces of paper in USDs that pay almost no interest
    -CFTC imposing rules on trading limits in gold means the ETF custodians that are mega-short the commodities may have to close a portion of their position.
    -the COMEX won’t allow audits and make it extremely difficult to take delivery
    -how about simply because the central banks holding down the price to make it look like things are under control can’t continue to do so and the perma-shorts are going to get run the hell over eventually
    -almost all central banks saying they want a new reserve currency

    Realistically it’s all these things… the move over the last few days and what is coming is long overdue.

  52. 52
    VTZ Says:

    Sorry for ranting.

  53. 53
    zman Says:

    VTZ – no, please rant. All true. Good trade by the way. So many people now looking for a dollar rally. I just don’t get that.

  54. 54
    elijahwc Says:

    Z -RE – 39

    From my friend the old O&G analyst upon his return from Enercom last week. What you hear is correct. Apparently “Mr. Moffitt” made a few statements during a breakout session to a geologist about how a viewing of his logs has the ability to initiate a warming biological response.

    Salt Dome partners with MMR = PXP and EXXI in Blackbeard and Blueberry Hill (don’t know if I got this one right). He’s a fan of EXXI whom he spend time with at the conference.

    Also, have you every run across Palo Alto Partners? Left coast hedge fund that is 50/50 biomedical and energy that he called to my attention. Very interesting portfolio.

    Salt Dome partners with MMR = PXP and EXXI in Blackbeard and BlueBerryHill(don’t know if I got these right). He’s a fan of EXXI whom he spend time with at the conference.

  55. 55
    BirdsofpreyRcool Says:

    Jerome — i LOVE your P&F analysis. Please, continue to educate us on your thoughts and technical observations there. On any stock. Thank you.

  56. 56
    BirdsofpreyRcool Says:

    Palo Alto Partners = well worth watching what they invest in….

  57. 57
    zman Says:

    Thanks Eli, I know. That’s where I got it, lol. Thanks for expounding.

    Palo Alto – no, don’t know em, heard the name, that’s it.

    Re EXXI – I know their CEO, Schiller. He was head of E&P at Ocean, worked for Hackett who runs APC now. Very much a gas finding guy. Have had no luck betting on Blackbeard in the past either via these stocks or via the Treasure Island warrants or via NFX back when they ran it. Will take a fresh look at EXXI.

  58. 58
    West Says:

    Current Issue – Vol. 89 Num. 36 – September 4, 2009Kodiak O&G Requests Spacing on Discovery
    Dunn County, North Dakota
    Denver-based Kodiak O&G (Kodiak) has requested temporary spacing for a horizontal Bakken discovery at the company’s Two Shields Butte #16-8-7H, se-se 8-149n-92w, Dunn County, North Dakota. The company is proposing two 640-acre laydown units comprising sections 7 and 8 of 149n-92w. Bottom-hole location for the #16-8-7H is in the nw-sw 7-149n-92w, indicating a lateral length of some 9,000’. The #16-8-7H is the first of two laterals that Kodiak has drilled off the same pad. The other lateral, the #16-8-16H, is also capable of production but has yet to be spaced for field development.

    Documents filed with the state by Kodiak in support of the creation of the two laydown units indicate the following:

    Reserves

    Spacing:
    640 acres

    Porosity:
    6%

    Water sat.:
    25%

    Thickness:
    45’

    Gravity, API:
    42°F

    Gas/oil ratio:
    870

    Oil form. vol. factor:
    1.59

    Res. temp.:
    265°F

    Res. pressure:
    7,800 psi

    Original oil-in-place:
    6,323.5 mbo

    EUR, oil:
    646.7 k bo

    EUR, gas:
    556 mmcf

    Recovery factor:
    10.2%

    Res. drive mech.:
    Fluid expansion

    Capital expenditure:
    $5.7 mm

    Oil price:
    $57/bbl

    Gas price:
    $3.95/mcf

    Lease operating/month:
    $5,900

    ROR:
    68.6%

    Undisc. payout:
    1.3 years

    Cumulative Production as of Aug. 15, 2009

    36,140 oil/stb
    23,329 mcfg
    9,694 bw

    The nearest hole drilled to Kodiak’s new producer that penetrated the Bakken is roughly 2 miles to the southwest at a dry hole drilled by Socony-Vacuum Oil Company (SVOC) at the Angus Kennedy #F32-24-P, sw-ne 24-149n-93w. Drilled almost 55 years ago, this hole bottomed in the Duperow at a depth of 11,331’. The company ran a DST in the Bakken/Three Forks across the interval at 10,530’–10,712’ and recovered 480’ of water cushion with a rainbow of oil, 60’ of heavy gas-cut mud, and 90’ of gas- and oil-cut mud with a strong gas odor. SVOC eventually ran 5-in. liner to a depth of 10,698’ and perforated the Bakken/Three Forks from 10,540’ to 10,645’. After acidizing, swab tests indicated a tight reservoir and only marginal oil shows were encountered. The decision to plug and abandon the well was made in 1954. Log tops of this hole include the Bakken at 10,508’, Three Forks at 10,600’, Birdbear at 10,846’, and the Duperow came in at 10,950’ under a KB elevation of 2,149’.

    Four miles south of the #16-8-7H, Kodiak has also completed drilling a northwest stepout to Heart Butte Field, a two-well horizontal Bakken oil pool re-opened in September of 2008 by Peak North Dakota LLC (PND). Spotting some 5 miles north of Squaw Creek Bay on Lake Sakakawea and within the confines of the Fort Berthold Indian Reservation, Kodiak has finished drilling the Two Shields Butte #14-33-6H, se-sw 33-149n-92w. This is the first of two horizontal Bakken tests planned by the company off the same pad. Earlier this year, Kodiak had staked the Two Shields Butte #14-33H, se-sw 33-149n-93w. Both of these prospects are being held on a confidential basis. Kodiak has also requested that the Two Shields Butte #16-8-7H be eventually incorporated into Heart Butte Field, which, if approved, would push this oil pool at least 4 miles to the north.

    Depending on the results of the #14-33-6H, Kodiak also has plans to drill up to four more Bakken tests several miles south and southwest of Heart Butte Field. The company has created four 1,280-acre Bakken units that will include sections 2 and 11, 3 and 10, 14 and 23, and 15 and 22 of 148n-93w. No previous drilling activity has been conducted on any of these designated units.

    PND re-opened Heart Butte Field for the Bakken with the completion of the Fredericks #5-11H, nw-nw 5-148n-92w. After first going on-production, the #5-11H has cumulated more than 48,388 bo, 32.5 mmcfg, and 11,642 bw from the horizontal Bakken interval at 10,932’–15,073’. The company then drilled a western stepout at the Fredericks #6-31H, nw-ne 6-148n-92w. Since March of 2009, this well has cumulated in excess of 24,831 bo, 15.3 mmcfg, and 11.6 k bw from the Bakken interval at 10,928’–14,760’.

  59. 59
    zman Says:

    SWN, KWK poster children for a natural gas bounce. Would like to see that rig count start rolling over today but I have a feeling it is still a bit early as they just started rebounding 4 to 5 weeks ago and those rigs won’t just come up and then come back off that quick for the most part.

  60. 60
    isleworth Says:

    EXXI up 55% today on 14M shares traded…..nice Eli

  61. 61
    zman Says:

    Re 58

    Those are wells 3 and 4. The EUR is well high of what I would have thought, cheaper as well. Still reading through that.

  62. 62
    elijahwc Says:

    Thanks BOP on #56. That is exactly the impression I got when I pulled the filings.

  63. 63
    BirdsofpreyRcool Says:

    elijahwc — wouldn’t be surprised to see Palo Alto in KOG… or, at least in the Partner’s PAs. There are a few guys i know in the SanFran HF community who own it. Mostly in PAs, tho.

  64. 64
    zman Says:

    Isle – yep, it’s single-digit-midget blastoff Friday.

  65. 65
    Jerome Blank Says:

    Re #55, BOP,your welcome…thanks for all of your insight and expertise about KOG, greatly appreciated…

  66. 66
    reefguy Says:

    EXXI- cc. Get $53MM payday for hurricane related claims from insurer in next six weeks. N&S gives them net 20 MMBO (142 MM gross) for Blackbeard as contingent resource.

  67. 67
    kyleandy Says:

    z – EXXI had cc this morn

  68. 68
    zman Says:

    Thanks Kyle – will add transcript to list of reading for the weekend. I won’t chase it here, just not my style to nab it cause its up.

  69. 69
    elijahwc Says:

    EXXI – also doing a debt exchange that will extend and lift about 50mm off the balance sheet. Still ugly terms: up 6% to 16% and only one year further out but with the usual convent lighting. But then again, it looks like it is getting done. Otherwise, might have new owners????

  70. 70
    kyleandy Says:

    even DNE up 3 cents which i have long ago given up on.

  71. 71
    zman Says:

    Kyle – remember the other day my comment about a gulf coast exploration president who told me they wouldn’t go to a shale game? That was them.

  72. 72
    kyleandy Says:

    z – DNE great!! makes me a proud shareholder.. not!!!!

  73. 73
    bill Says:

    exxi up 65 % now

    argg i used to own that at 50 and sold at 50

    arrrg

  74. 74
    bill Says:

    atpg doing well again

  75. 75
    BirdsofpreyRcool Says:

    MIDDAY OVERVIEW

    · Equities melt up to session highs as noon passes; SPX +10pts & trades up into the 1013-1016 resistance range after holding 1000 overnight. Equities basically pick up where they left off Thurs: ie, a low-volume rally in quiet market (activity/attendance promises to thin out further this afternoon). Our desk says they are not seeing a ton of buy interest on the ramp higher…more just a function of no one wanting to be short into the long weekend. The labor report today didn’t have much of an impact; futures were initially hit on the print @ 8:30amET but quickly bounced back and surpassed pre-BLS levels. On the week, the sp500 is tracking to a ~1.5% decline (which would be the weakest performance since early Jul). Technically, M Krauss noted that historically the couple days prior to Labor Day has favored the bulls but the 1013-1016 resistance levels remain in tact (Krauss is calling for a 6-8% pullback to 979 unless sp500 can manage a close >1023).

    · Sectors: tech is leading things on the upside, up 1%+ on the day (NVLS’ mid-Q update last night helping sentiment). Industrials also strong (also up >1%). Financials are relative underperformers (up 0.16% on the day).

    · Corp Credit trading even more quiet than in equities. IG about ~1bp tighter and HY is up slightly (on the week, IG is out about ~6.5bp).

    · Dollar – the DXY is flat in trading today (and on the week the DXY is about where it ended last Fri). Dollar inches up vs. the yen for the second consecutive day (after hitting multi-month lows earlier this week). Gold is pulling back slightly (~$4/0.4%) to ~$994 today (still up ~3.6% on the week).

    · Treasuries – 10s and 30s are weakening into noon; 10yr yields are up ~6bp on the day (still down on the week) and 30 yields are up 7bp. 2s are flattish in trading today.

    Calendar

    · G20 this weekend – preview comments from J Normand – G-20 officials begin the first of two September summits today, but should markets care? FX is not on the official agenda, and the communiqué will lack the shock-and-awe value of April’s IMF recapitalization. Going forward the key G-20 takeaway for FX will be signals on exit strategies. Country paths will diverge much more than communiqués will admit, which in turn will fuel currency trends (particularly in cross rates). Japan’s QE exit in spring 2006 highlights how a policy shift can drive vol higher and overturn carry short term, even though liquidity remains abundant.

    Economics Update

    · The August employment report did little to change the view that the labor market is gradually getting less worse. The 216,000 job loss was near expectations and an improvement — albeit a modest one — from the downward revised 276,000 decline in employment in July. The unemployment rate surprisingly jumped 0.3% point, rounding up to 9.7% and more than reversing the somewhat quirky decline in July. Finally, average hourly earnings increased a relatively solid 0.3%, giving some support to labor income, though the increase in the minimum wage may have temporarily flattered this figure. Because of this the inflation implications of today’s report are mixed. Recent Fed communications have emphasized disinflationary risks and the increase in labor market slack reported in today’s number probably serves to reinforce that concern. Feroli.

  76. 76
    zman Says:

    To be fair to DNE – their plan was never unconventional. They had a little Barnett which I think they sold at a good price but in the Gulf Coast, they were a harvester of Major legacy assets. Assets that were under funded, neglected, for which reserves had been bypassed because they were too small to be of much impact to the former owners. Their plan was to take those assets, apply capital, recompletions first, exploration down the road. Its a time tested plan. It did not foresee the shales depressing finding costs below $/Mcfe, or making the 15 to 20 MM/d IP well a thing as common as air. I need to go check in on them and see if their plan has remained the same or not. They can still compete due to falling service costs and an inventory of projects that has high bang (EURs) to their current buck (reserves). Will put it on the list to review.

  77. 77
    zman Says:

    Bill – great call on the ATPG. It just got away from me.

  78. 78
    zman Says:

    Weird trading in oil – this will be the 4th day we have hugged the 68 level.

  79. 79
    zman Says:

    Santelli just did a great job of saying it’s ok to disagree with your government.

  80. 80
    zman Says:

    Baylor, were you able to log in?

  81. 81
    bill Says:

    exxi transcript

    http://seekingalpha.com/article/160031-energy-xxi-f4q09-qtr-end-6-30-09-earnings-call-transcript?source=yahoo

    stars of the day

    exxi
    kog
    atpg

    i still like the story and await your analysis next week

    i think whats holding atpg back is covenant worries at ye

    debt cant be more than 3 times ebitda

    and ebitda fell this year due to lower prices but

    with titan coming on line

    and the cfo last night said oil production will double in 2010

    and oil holding at 70 and atpg mostly ungedge on upside means..

    atpg takes off so more upside, at least thats what im hoping/investing for

    trggier will be an announcement of new money coming either thru asset sale or debt or equity offering

    what i like is the huge short interest, the prospects, the debt being misunderstood, and the great einhorn being in this

    lets see what happens

    looks like ng is coming off lows and maybe sd and hk will run next

  82. 82
    zman Says:

    Don’t forget my BEXP, lol. And little WRES looks to be starting another run as well.

  83. 83
    kyleandy Says:

    z DNE will wait for your review before i do anything. my question is will they survive??

  84. 84
    zman Says:

    They look ok to iffy right now but redetermination will hurt them if gas prices are down here when it happens. Certainly a possibility they don’t stand alone for long. I would imagine their bankers will cut them a little slack given the gas strip but again, need to run through them to make sure. Lot of debt, not a lot of cash, not a lot of room level on their line and that’s before it get’s pared back. Flipside is they are adding reserves so the pare back may be small.

  85. 85
    Jerome Blank Says:

    WRES still trading on a ancient P&F sell signal…it goes on a buy signal at $3.00, once on a buy signal a pullback to $2.25 to consider long positions, stop at $1.75, target long term P&F resistance at $4.50

  86. 86
    zman Says:

    They upped the chance for development of that cloud pile off Africa.

    http://www.crownweather.com/?page_id=29

  87. 87
    zman Says:

    Thanks Jerome. I’m long, long term on the WRES shares for a return of reserves due to pricing revisions at year end. At these oil prices they should suddenly appear cheap on a $/BOE reserves basis at year end (with the reserves out in mid Feb).

    Eli – was that netherland sewell giving EXXI credit for 20 mm boe for Blackbeard in your comment above?

  88. 88
    baylor3217 Says:

    Yep. I’m in. Thanks zman. I’ll take care of it when I receive the email.

    I’m holding my KOG through the weekend up about 40%. May end up regreting that but will scale out as it gets closer to $2.

  89. 89
    elijahwc Says:

    Z you mean reef in #66. Beerthiry is still 2hrs 5min off. Happy Friday!

  90. 90
    baylor3217 Says:

    what’s nat gas trading at now?

  91. 91
    zman Says:

    Rig Count Watch:

    Oil up 9 to 295 vs 416 year ago

    Gas up 2 to 701 vs 1586 year ago … I think this rolls over again and goes to at least 650 soon. I see service analysts calling for a return to 1500 gas rigs end of next year. I really doubt that.

    Horizontal rigs off 3 to 426 vs 624 year ago.

  92. 92
    zman Says:

    Eli – actually the problem is First Thursday was last night. Much pizza, beer and wailing babies.

  93. 93
    zman Says:

    NG update

    October contract (prompt month) up a dime at $2.61.

    Nov at 3.66
    Dec at 4.44
    Jan at 4.74
    Feb at 4.81

    Only the front month is up.

  94. 94
    baylor3217 Says:

    Thoughts on the KWK common?

  95. 95
    zman Says:

    Considering owning it but I don’t right now. I do own some calls and may add lower strike ones. Short squeeze candidate with a big inventory of drilled but not yet completed wells. Can grow production this year and maintain or even grow production via completions without much rig activity next year. Lot of debt which they are working to reduce. 77% hedged in 2H09 at $8.75; half hedged next year > $8. It should play well in a natural gas bounce.

  96. 96
    Jerome Blank Says:

    Hi baylor…RE#94, KWK is currently on a short term P&F sell signal, Quicksilver rallied thru its long term bearish trendline at 11.50 and was looking good with the print of 13.00, but has since gone into a range, I see two different possible trades depending on what KWK does from here, it goes back on a buy signal at $12.50 which could be handled one way, and the other is a return to long term major P &F support between 8 and 8.50, I am waiting until it gets close to one of these areas before taking any futher trades

  97. 97
    zman Says:

    Definitely a bit of short covering starting today in natural gas, now up 20 cents or 8%, getting back all of yesterday’s losses.

  98. 98
    zman Says:

    Epperson on CNBC – talks about oil closing flat and gold being the story of the day. No mention of natural gas. She will get on it when its up 20% and someone in the pits tells her that he is now long. Sheesh.

  99. 99
    zman Says:

    That with oil flat, gold at 993, off 4 bucks and natural gas up 8%. No, no reason to talk about that. Double sheesh.

  100. 100
    elijahwc Says:

    Re: 92

    Well Z wait until the wailing babies become the wailing college grads who move back in and promptly invite the new Brit boyfriend (buy-product of the graduation trip this summer)to your house for the next week.

    Know any beer laden pizza joints I can hid in?

  101. 101
    zman Says:

    Eli – U.S. Pizza, upper, outside deck. First Thursday of the month, table in the corner has my name on it.

  102. 102
    zman Says:

    Anybody have the Barclay’s schedule for next week?

  103. 103
    zman Says:

    I have to assume that just having done a deal with Barclays, HK will be speaking. No pr about it though and nothing on their website. And no response to repeated emails to IR.

  104. 104
    zman Says:

    WLL moving higher later in the day. Bakken in general continues to move very well today.

  105. 105
    jpntexas Says:

    HK presenting at Barclays 11:05 Wednesday, breakout session following presentation

  106. 106
    zman Says:

    JP – Thanks! Tell them to put it on their website, maybe issue a pr to let people know. Is it being webcast?

  107. 107
    jpntexas Says:

    Uhhhhhhh, didn’t ask, hang on, yes it will be webcast

  108. 108
    zman Says:

    JP – communication is a wonderful thing.

  109. 109
    jpntexas Says:

    when exercised, lmao

  110. 110
    zman Says:

    Well, in fairness to them, I am just some lamehole shareholder/blogger with a background as an E&P analyst with a daily energy newsletter with 300+ readers, read by folks all over the world including Saudi Aramco (good luck to you guys at your meeting next week by the way), I mean, why bother responding to me?

  111. 111
    jpntexas Says:

    I hear ya Z.

    I would suggest contacting their CAM, Chief Administrative Officer, Larry Helm to voice your dissatisfaction. 832-204-2700.

  112. 112
    zman Says:

    No, I’ll call her first on a non-holiday week. But thanks.

  113. 113
    ram Says:

    Lamehole?

  114. 114
    zman Says:

    Re 113. And here I thought the real pejorative was “blogger”.

  115. 115
    zman Says:

    Anyone got a movie quote?

  116. 116
    zman Says:

    How about

    “Blue horseshoe loves Kodiak Oil and Gas”

  117. 117
    zman Says:

    Shell on the tape saying it will cut 15% of E&P people globally.

  118. 118
    zman Says:

    Energy stocks continuing to drift higher into the close. ROSE moving on $12. BEXP at 8.50.

  119. 119
    zman Says:

    KOG – 8.6 mm shares, up 24%. Big day.

  120. 120
    baylor3217 Says:

    Thoughts on dca’ing lower on hk with their upcoming presentation next week?

  121. 121
    Popeye Says:

    Strong close on my screen, everyone have a safe holiday.

  122. 122
    zman Says:

    Baylor – If I didn’t own it already I probably would, have been doing so on weakness and would like to see it walk up a bit first. Plus, they may say nothing new in terms of an update, ya just never know. Again, if I didn’t own a chunk I would likely do so. Would also like to see two straight days of gas prices in the green.

  123. 123
    baylor3217 Says:

    119- was thee any official news on kog? I didn’t see any this morn. Is this a rally to be sold?

  124. 124
    zman Says:

    Agreed.

    NG up 10% now, up 25 cents on the day. Nice reversal there, lets see more of that next week.

    Have a great, safe 3 day weekend.

  125. 125
    zman Says:

    Baylor – see West’s post above. As to selling that all depends on your time horizon and goals. Last two times they’ve had well news they have sold back off. They speak next week and are very likely to have well news then (more than very likely). I think they do their secondary around the $2 mark, sometime after the news.

  126. 126
    West Says:

    Everybody have a great weekend. “WE” are definitely partying !!!

  127. 127
    zman Says:

    Roger that West!

  128. 128
    BirdsofpreyRcool Says:

    Alright, West! Let the party begin. 🙂

  129. 129
    DrLink Says:

    Well I decided to attend RR. I don’t know if I will have the chance, but if their are any specific questions you would like asked (KOG)etc. let me know….

  130. 130
    DrLink Says:

    there

  131. 131
    Wyoming Says:

    http://tinyurl.com/mb634d

  132. 132
    zman Says:

    Test comment

  133. 133
    Wyoming Says:

    And hes out of there:

    http://www.latimes.com/news/nationworld/nation/healthcare/la-na-van-jones7-2009sep07,0,6923895.story

  134. 134
    zman Says:

    Saw that Wyo. LOL.

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