Tuesday Morning – Welcome To Fall Trading

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Welcome Back.  The equity and commodity markets are looking rather pleased with themselves and news flow is beginning to increase on schedule. OPEC meets tomorrow and while no one expects them to change their output targets we all expect them to try and reign in the more obvious cheaters. This week also signifies the beginning of the Fall conference circuit (see next section). The small cap E&Ps had a particularly good end to last week with KOG leading the way. Finally, congrats to VTZ and the other gold bugs on the move over $1,000 this morning.

Conference Watch:

  • Barclays Capital CEO Energy / Power Conference

    • HK - 11:05 am Wednesday - will add a link when I get it
  • Rodman Renshaw (9/9 through 9/11 - click here for schedule). Names of interest (all times EST):
    • Wednesday:
      • KOG - 11:15
      • SFY - 11:40 - Gulf Coast player, I'm listening for Eagle Ford update
    • Thursday:
      • MHR - 8:45
      • GMXR - 9:35 - I have a position in the common and its been awhile since we've had a good update
      • GDP - 10 am 
      • BPZ - 11:15
      • GST - 12:30 - first post reverse split, Australian asset punt presentation.
      • ATPG - 3:40 pm
    • Friday:
      • SWN 8:45


The Week Ahead:

  • Tuesday 9/8: Consumer credit .
  • Wednesday 9/9:  154th OPEC Meeting, Beige Book.
  • Thursday 9/10: EIA Natural Gas Storage and Oil Inventory Reports, jobless claims (expecting 558K), trade balance.
  • Friday 9/11: Import price index, wholesale inventories, Consumer sentiment (exp 68, last 65.7).

In Today's Post:

  • Holdings Watch
  • Commodity  Watch
  • Stuff We Care About Today
  • Odds & Ends

Holdings Watch:

  • $10KP II:
    • $4,500
    • 45% Cash
  • The Current Holdings tab is updated


Commodity  Watch:

Crude oil fell 6.5% last week to close at $68.02. The 12 month crude strip is now trading at $70.59. This morning crude is trading back up to the $70 level in early trading due to a weaker dollar and stronger equity markets. 

  • Dollar Watch: The dollar index has fallen to as low as 77.14 so far this morning, through support at the 77.40 level which had been serving as near term support. If 76 falls, look out below. 
  • OPEC Watch: OPEC will meet Wednesday and is widely expected to do nothing on its quotas. Russia will not be in attendance. I expect a rather Fed-like statement out of the group tomorrow regarding careful monitoring of production and inventories relative to the global economy.
  • Mexico Watch: President Caldaron fires Pemex chief as production continues to slide. 40% of Mexico's federal budget comes from oil so with oil production off 25% in the last 5 years it's not hard to see why.

Mexico's Production Slide

Natural gas fell another 10% last week to close at $2.73. Friday saw the strongest day in recent memory on short covering or the week would have been down closer to 15%. The 12 month strip is now trading at $4.71. On Friday I wrote that natural gas was due a bounce, and I think that Friday's action by no means satisfies that statement. This morning gas has switched from slipping due to the lack of weather and tropical activity to continuing that Friday bounce (now up a nickel), this time following oil higher.

  • Weather Watch: Getting Milder. Cooling Degree Days (CDDs) compared to gas storage injections:

    • Week Before Last: 61 CDDs which yielded a 65 Bcf gas injection.
    • Last Week: 46 CDDs vs 44 previously forecast. This is 5 under normal and 17 below last year. 
    • This Week's Forecast: 49 CDDs. HDDs have returned to "non-factor" status at this time. We are entering the second shoulder season of the year (when heating and cooling demand are both poor for natural gas) just about on time. 
  • Tropics Watch: TD 7 developed off Africa over the weekend. Looks like it will turn into a central Atlantic fish storm.

Stuff We Care About Today

Stoneburner Promoted At HK. COO Dick Stoneburner adds President to his resume at HK as of today. Floyd Wilson remains Chairman and CEO. I don't see how this will be viewed poorly by the Street. Separately, I expect HK to be a little more forthcoming with operations in the Eagle Ford Shale when they present at Barclay's later this week. 

KOG - speaking at RR tomorrow, expect to get numbers soon on the #5 and 6 wells and maybe some color on 7 and 8 and their plans for next year including capital requirements.

Later this week I'll have one of my mini pieces out on ATPG.

Odds & Ends

Analyst Watch:

  • (WLL) target upped $5 to $58 at Jefferies.
  • Barclays starts (RRC) and (HAWK) with Equal Weight ratings, adds (EXH) with Outperform rating
  • (VTG) started at FBR with an Outperform rating.
  • (SWN) and (SU) raised to Buy at Stifel


131 Responses to “Tuesday Morning – Welcome To Fall Trading”

  1. 1
    bill Says:

    pxp raising 300 m thru a note sale.

    they will owe chk 1.0 billion at end of month for haynesville. This will keep the bank line at or near 0

    exxi soared last week..whats good for them is good for pxp

    atpg up another 50 cents pre market..i sold some late friday hoping for a pull back today which doesnt look like it wil happen

  2. 2
    bill Says:

    looks like a strong opening today

    sd up 2 %
    hk up 1 %
    pxp 1 %
    swn up 2 %

  3. 3
    zman Says:

    Oil at 70.40 and NG up another dime won’t hurt the cause either.

    ATPG target raised from $10 to $16 at Pritchard.

  4. 4
    zman Says:

    Art Cashin on early. Talk about a stopped clock, no offense meant, smart, well seasoned guy of course, but his bear argument this morning seemed thin.

    Said, historically day after 3 day holiday is positive so he’ll wait until tomorrow to decide and also tomorrow is 9/9/9 and terrorists like to attack on odd numbered days. That just seems wonky to me.

    WLL above $50 again pre open
    BEXP angling for $9
    KOG bid $1.82
    ROSE – trying to see when they speak next.

    NG going to be very volatile back to flat on the morning.

  5. 5
    Nicky Says:

    Morning all. Everything looks dollar related to me which of course is stating the obvious.

    I have USD in 3 of 5 down. We need a small iv and then v – target area for me is 76.60.

    Euro should top in the 1.47 area.

    Indices – I am still looking for new highs although its possible the top is already in but not likely imo. The day after Labor Day is normally a good up day. Art Cashin interestingly (or not!) said that in 1929 the market topped the day after the day after Labor Day ie tomorrow. Also said they were worried about 9/9/09 being a terrorist day.

    Oil I am not sure about new highs here. We may just see a second wave to around the 72 area or this needs to get powering higher to around 76.00.

  6. 6
    PackMan Says:

    I don’t think we see new highs in the indexes.

  7. 7
    zman Says:

    Pack – personally I’m in the sideways trading camp with the possibility of a 10% correction in Sept or Oct if for no other reason than when we have more than 2 bad days in a row a sell off will gain momentum for profit protection.

  8. 8
    Nicky Says:

    Z – agree about the wonky bit. He has been trying to call a top for months now. Sooner or later he will be right after numerous false calls of course.

  9. 9
    zman Says:

    Nicky – and it’s not that I don’t think the guy is smart, just a thin argument today. There are plenty of headwinds (jobs, retail sales, lack of top line levered earnings growth come to mind) to a further rally. And he’s not alone in calling for a top, everyone seems to be calling a new top daily and after two consecutive red days they grin like Cheshire Cats on CNBC. Combine that with the fact that short interest on the NYSE is very high and the trade of late has been to jam the shorts when they least expect it.

  10. 10
    Nicky Says:

    Packman, if the market is not going to make new highs then it needs to stall about here and turn down pronto! Wave ii are known for retracing 61.8 – 76.4% of wave i’s. So 1025 is 76.4%. We take that out and we are going to see new highs in a wave v imo. Target areas for v would be 1051SPX, 9700 Dow, but a spike up to 1080 SPX and 10,000 Dow is not out of the question.

  11. 11
    zman Says:

    EOG was in Baron’s over the weekend, hot stocks to watch, fwiw.

    BOP officially gets back from vacation today.

  12. 12
    zman Says:

    KOG – very large opening volume with the stock 1.93. They speak tomorrow. If I were the CEO and had news to vault the stock further I would not hesitate to add a secondary shortly after such news. Unless I had another set of news (like wells 7 and 8) by say mid 4Q that could put me closer to $3 for a deal.

  13. 13
    zman Says:

    I hate smileys, that was supposed to be the number 8 in the previous comment.

    WLL hit 51 (new 2009 high).

    That short interest list from the bottom of the Friday post may be of interest here if the markets prove to have staying power. Names like GMXR and GDP could launch again if we see gas recover a bit.

  14. 14
    zman Says:

    Little WRES waking up as well, into the $2.60s. Still a long term play, fun to look at a weekly chart. Not a lot of people still that beat up on depressed oil prices. Coverage is a bit weakish there and they need to work on that … new reserve report in Feb 2010 should be a help.

  15. 15
    zman Says:

    ROSE at $12.50.

    Does anyone have the Barclay’s schedule? Thanks.

  16. 16
    zman Says:

    Tater and Jerome, can I get a read on WLL? On a weekly it looks to be filling a gap now from last October.

  17. 17
    kyleandy Says:

    where is “chatty one”? maybe she has to really do some work!!!!

  18. 18
    Nicky Says:

    For those thinking the top is in in indices then they will be all over this -that says we opened at the 76.4 retracement and the top is now in. My preferred counts says we are in 3 of 5 up and currently in a wave iv pullback which should resolve higher soon.

  19. 19
    PackMan Says:

    Nicky – 10 – like everyone else, I have an opinion without knowing what will happen.

    However, I have never been in the camp that the market needs to do anything.

    It do what it do.

    My own view is this has been ridiculous rally on low volume and a meaningful pullback is more than overdue.

    Will that happen ? I don’t know.

    New highs are possible also; I just don’t see it when I look at the macro picture.

  20. 20
    kiaora Says:

    There is a nice rotation to that low off of africa….Anyone know it’s predicted path?

  21. 21
    zman Says:

    Kiaora – mid Atlantic, not likely a threat.

  22. 22
    isleworth Says:

    Raymond James this AM:

    When gas storage fills and/or pipeline bottlenecks limit gas transportation, gas prices usually collapse. For well over six months, our gas models have been telling us that there would simply not be enough gas storage capacity to store all of the produced U.S. natural gas through this summer. Over the past two weeks, the impending gas price debacle has finally become clear to the market as several major pipelines carrying natural gas from producing regions to the Northeast have issued imbalance warnings. These imbalance warnings are a clear indication that the U.S. is running out of gas storage capacity. As the situation worsens, pipelines start issuing critical storage days and operational flow orders (OFOs), which halt interruptible services and assess penalties for flows exceeding scheduled quantities. These OFOs are already beginning to appear (as shown in the adjacent table) and are a very bad sign for natural gas prices, given that we have an incredible 8- 10 weeks left in injection season. So, what does this mean for natural gas prices? To put it bluntly, we’re filling storage too fast and gas producers will be forced to shut-in via lower (sub $2/mcf) gas pricing over the next couple of months.

  23. 23
    zman Says:

    Isle – their comments are technically correct from a ‘what happens when storage gets full’ standpoint. Pipes stop taking gas. With that said, the implications for natural gas prices are less of a certainty. We’ve gotten to “full” levels before and in fact, back in the late 90s, 3 Tcf was thought to be “full” as far as the gas markets were concerned. The upper limit is thought to be about 3.85 Tcf with a non-coincident peak storage over 4.2 Tcf. So, until the system gets that full, we won’t really know how full we can get. One thing is certain though. Gas is beat up. Gas futures are very much in the short zone. It’s pretty difficult to say gas prices will go sub $2 or they won’t. What’s an Mcf of gas worth to Dupont in a recovery if they are used to paying north of $6 for it? Does that new low price increase gas demand for someone like AGU or a Nucor? Probably so. So the comment that there is so much gas in storage that it should fall to decade lows, when we KNOW that production will rollover and we KNOW that demand will recover is a bit hard to pin down on the accuracy meter. I think this would be an excellent time for the President to take a look at the CNG price map:


    and say, “hey, we should run our cars and trucks on this cheap stuff”. He has an opportunity to really endorse the Nat Gas Act this Fall. He should take it.

  24. 24
    zman Says:

    Oil up $3.20. Hmmm. Seems a bit fast to me. Better lock up some speculators.

    Interesting to see HO outperforming gasoline. If anyone has access to that Oscar Truck index I would love to see it.

    WLL through $52. Woo-hoo.

    KOG up 13%. Needs to say good things about those wells tomorrow and that they don’t need to do a deal yet.

    ROSE approaching $13. That could move up on news from SFY tomorrow at RR.

    BOP sent me a note saying she will be on in awhile.

  25. 25
    Nicky Says:

    Pack re 19. Thats why I follow TA and in particular Elliott wave. Of course its not an exact science and as you know from the posts I make on here there are always several possibilities running but slowly one can eliminate the possibilities and get a high probability count. Right now I am looking for a final move up to finish a 5 wave count which up until now I just have not seen. That aligning with the cycles will give me I believe a good probability of ‘top picking’.

    I totally agree with you re the fundamentals. I am very bearish about the future. However this is typical wave 2 action which tend to completely defy the fundamentals but in the process kill, in this case the bears, the prevailing trend seemingly higher/lower and longer than most can ever believe is possible. That said the end for this bear market rally is in sight!

  26. 26
    zman Says:

    HK actually acting like it belongs to the E&P group today. Broke upwards through its 50 day moving average after having avoided falling though its 200 day average last week. They speak Wednesday at Barclays. Next need to see a close back above the 22.86 recent secondary price. I have not seen Street commentary on Stoneburner taking the president role…not sure there will be much of a difference in terms of risk taking propensity.

  27. 27
    zman Says:

    KWK to speak at Barclays tomorrow at 3:05 pm EST. I continue to hold Sept and Oct calls there.

  28. 28
    zman Says:

    Allianz OCC (Opco) Fund saying it likes natural gas long term, citing positions in HK, KWK, CRZO, XCO. “We believe natural gas is, frankly and candidly, the alternative energy to oil for the next number of years and it is going to get increasing focus from the governmental perspective due to its clean burning nature”

  29. 29
    Nicky Says:

    SPX has resistance at 1028.

  30. 30
    zman Says:

    Epperson talks about gold, then oil, then mentions other commodities. She didn’t talk about the 10% rally in NG on Friday and she failed to mention the follow through today as it rises another 4%. Sort of odd. Guess the short traders she talked to have nothing to tell her right now.

  31. 31
    Dman Says:

    Z – any thoughts on CRK here?

  32. 32
    zman Says:

    Wyo or TexW or anyone, got a clue who the leader in PDC bits is? Thinking SII but it could be a bigger guy I guess, like an SLB. Of all the over priced looking charts in the OIH, the SII chart looks interesting, just saw some recent downgrades and I haven’t followed them closely since they were just a bits and mud story. Anyway, something to look into based on the chart. For you guys that drill shale, always, always let me know if a particular process, bit, frac type, proppant, you name it is working better than the older ways. Thanks.

  33. 33
    zman Says:

    Dman – middle of its trading range, one of the gassy names I may go to. Nothing specific of late from them I’ve seen. Inexpensive name. Only concern for me is the almost complete lack of hedges in 2010. I don’t own it right now.

  34. 34
    Denise Says:

    Thank you from one “Tag-a-long Happy Kogger”

    I normally avoid micro caps like the plague (due to too many bad experiences to mention over the years)

    I wanted to thank BOP, West, and finally
    Z for bringing the company to my attention, and due to their joint sharing of knowledge and expertise -kept me holding the stock through some rough patches. Great Board!

  35. 35
    PackMan Says:

    Nicky 25; FWIW I met w/ someone over the weekend who does a diff type of TA; his view (fwiw of course) is top is in for 2009; low on S&P to about 850; rally into 2010 to new highs around 1100 and then sayonara.

    I, like others, appreciate your sharing your work and interpretations; I take it all into consideration.

  36. 36
    VTZ Says:

    This break downwards in the USD looks like it’s fully confirmed for a big move down.

    Nicky – Where are you at on the USD. Are you looking for support at 76 anywhere on the USDX or do you see down to 72?

  37. 37
    zman Says:

    Denise – I for the most part avoid the little ones too as that’s really not my bag. I add my thanks to BOP for pushing it back from the abyss of 25 cents and to West for the volumes of high quality Bakken data and news.

    Reading the latest WLL presentation, looks like the last one but comparing print outs to see if anything sticks out.

    PXD progam in the EFS said to be growing so they must like what they see. This is another cheapish name that can accelerate growth next year if oil prices stay up here. The EFS will be icing to their story. We know second well has spud, don’t know county. First well would have likely been a big one for the play were it not for a bad completion. This name may also jump along with ROSE, SFY if HK says the right stuff on Wednesday.

  38. 38
    zman Says:

    Congrats on the goldmove VTZ…nice. SU starting to trade more tightly with oil again by the way.

    EOG as well. Bakkens all moving very well today again.

  39. 39
    VTZ Says:

    This isn’t the real gold move, Z just the beginning of the breakout. I expect a battle for the all-time highs then a steady multi-year move.

    I think the market has disgested the merger now and SU is back to trading more tightly with oil. I still prefer COS-un.to/COSWF(?) (canadian oil sands trust) as my large cap in the space due to dividend policy and pure leverage.

  40. 40
    Dman Says:

    For anyone looking for a catchup play: Enerplus (ERF) has hardly moved today, probably due to going ex-div yesterday. Pays about 0.8% per month.

  41. 41
    VTZ Says:

    I know I’m beating a dead horse but ALL US INVESTORS SHOULD OWN COS-UN.TO in cad funds for usd diversification, leverage to oil price and as an income stream in a high oil price environment.

    Don’t purchase today because the cad moved 3.5 cents vs the usd in 2 days and oil is up a bunch but it’s a position people should be very interested in.

  42. 42
    zman Says:

    ROSE at $13. That was quick. I will add that intro note from last week to the Reports tab.

  43. 43
    Dman Says:

    V – wouldn’t want you to think no-one listens to ya. After you mentioned it, I’ve traded COSWF numerous times. Hasn’t failed me yet. Probably should hold some though.

    I’m waiting for Petrobank to come back down to where I last sold it – not sure I’ll be so lucky. But not complaining, it was a winner too.

  44. 44
    Wyoming Says:

    Driller says Baker, Reed/Hycalog has lost their way after being horse traded a couple of times.

  45. 45
    West Says:

    Get Well Production History Data
    Enter File Number:

    NDIC File No: 18022 API No: 33-025-00911-00-00 CTB No: 118022
    Well Type: OG Well Status: A Status Date: 6/21/2009 Wellbore type: Horizontal
    Location: SESE 8-149-92 Footages: 525 FSL 170 FEL Latitude: 47.7334547307367 Longitude: -102.471791531597
    Current Operator: KODIAK OIL & GAS (USA) INC.
    Current Well Name: TWO SHIELDS BUTTE 16-8-16H
    Elevation(s): 2075 KB 2047 GL Total Depth: 15760 Field: WILDCAT
    Spud Date(s): 3/4/2009
    Casing String(s): 9.625″ 2405′ 7″ 11297′
    Completion Data
    Pool: BAKKEN Perfs: 11297-15760 Comp: 6/21/2009 Status: F Date: 6/21/2009
    Cumulative Production Data
    Pool: BAKKEN Cum Oil: 4186 Cum MCF Gas: 2168 Cum Water: 2571 [Interactive Performance Curve] [PDF Curve]
    Production Test Data
    IP Test Date: 6/21/2009 Pool: BAKKEN IP Oil: 711 IP MCF: 604 IP Water: 880

    Monthly Production Data
    Pool Date Days BBLS Oil Runs BBLS Water MCF Prod MCF Sold Vent/Flare
    BAKKEN 6-2009 8 4186 3548 2571 2168 0 2068

  46. 46
    West Says:

    Search for Operator = “KODIAK OIL & GAS (USA) INC.”
    Click on the “FileNo” for a well to see scout ticket data.
    File No API No Well Type Well Status Status Date DTD Location Operator Well Name Field
    17003 3302500713 Confidential SESE 15-147-91 KODIAK OIL & GAS (USA) INC. TALL BEAR 16-15H WILDCAT
    17547 3302500814 OG EXP 8/21/2009 SWSW 21-147-91 KODIAK OIL & GAS (USA) INC. TALL BEAR 13-21-20H WILDCAT
    17495 3302500803 OG EXP 7/28/2009 SWSW 22-147-91 KODIAK OIL & GAS (USA) INC. TALL BEAR 13-22-21H WILDCAT
    17600 3302500828 Confidential NENE 22-147-92 KODIAK OIL & GAS (USA) INC. CHARGING EAGLE 1-22-10H WILDCAT
    17764 3302500856 Confidential NENE 22-147-92 KODIAK OIL & GAS (USA) INC. CHARGING EAGLE 1-22-23H WILDCAT
    18261 3302500960 Confidential SESE 3-147-93 KODIAK OIL & GAS (USA) INC. MOCCASIN CREEK 16-3H WILDCAT
    16162 3305302707 OG A 7/22/2006 15390 SWSW 6-147-104 KODIAK OIL & GAS (USA) INC. KODIAK GRIZZLY 13-6H MONDAK
    16169 3305302709 OG A 10/27/2006 15500 NWNW 11-147-105 KODIAK OIL & GAS (USA) INC. KODIAK FEDERAL 4-11H MONDAK
    17847 3302500875 OG A 2/26/2009 SESE 34-148-93 KODIAK OIL & GAS (USA) INC. MOCCASIN CREEK 16-34H WILDCAT
    17706 3302500842 OG A 1/28/2009 15525 SESE 34-148-93 KODIAK OIL & GAS (USA) INC. MOCCASIN CREEK 16-34-2H WILDCAT
    16300 3305302743 OG IA 12/23/2006 17753 NENE 27-148-105 KODIAK OIL & GAS (USA) INC. GRIZZLY FEDERAL 1-27H MONDAK
    18022 3302500911 OG A 6/21/2009 15760 SESE 8-149-92 KODIAK OIL & GAS (USA) INC. TWO SHIELDS BUTTE 16-8-16H WILDCAT
    17981 3302500900 Confidential SESE 8-149-92 KODIAK OIL & GAS (USA) INC. TWO SHIELDS BUTTE 16-8-7H WILDCAT
    18051 3302500918 Confidential SESW 33-149-92 KODIAK OIL & GAS (USA) INC. TWO SHIELDS BUTTE 14-33-28H WILDCAT
    18107 3302500934 Confidential SESW 33-149-92 KODIAK OIL & GAS (USA) INC. TWO SHIELDS BUTTE 14-33-6H HEART BUTTE
    16028 3302300480 OG PA 4/3/2008 14725 SESW 9-163-102 KODIAK OIL & GAS (USA) INC. PEDERSON 14-9H SKJERMO
    16576 3302300510 OG DRY 1/8/2008 10800 NESW 10-163-102 KODIAK OIL & GAS (USA) INC. DRAWBOND 11-10 SKJERMO
    16045 3302300481 OG DRY 1/14/2008 10812 SESW 12-163-102 KODIAK OIL & GAS (USA) INC. NIELSEN 14-12 WILDCAT

  47. 47
    VTZ Says:

    I know nobody listens to me… I just come by for a rant from time to time. 🙂

  48. 48
    cargocult Says:

    From New York Times online re new energy bill favoring coal over NG.


  49. 49
    zman Says:

    West – That first bit is about the #3 well, what’s new about that? Second looks like a list of old wells already filed plus a whole bunch of new well names.

    Wells #5 through #9 still showing as Confidential. Am I missing something?

  50. 50
    zman Says:

    Anyone see if we get API tonight or if that is a day delayed like the EIA data?

  51. 51
    apbd Says:

    We want chattiness.

  52. 52
    Nicky Says:

    Pack – yes i agree its a possibility too. Its the count which says we are currently in ii up. My problem with this count is cycles are not quite ready to top yet. But I can see the scenario for one more quick high here and then the rest playing out as he says.

    VTZ I think we are heading for 76.60 for the USD. I don’t see it collapsing to 72 here but its not impossible. Everything is aligning to turn together!

  53. 53
    zman Says:

    Re 48 –

    “Why any proposed energy legislation would choose to view the alternatives among energy resources for the United States as mutually exclusive is beyond me, logical only in that realm known as political science.”

  54. 54
    zman Says:

    APBD – hear ya. A guy can only beg so much to talk to a gal before he loses all self respect.

  55. 55
    zman Says:

    Grabbing lunch, back in 30 minutes.

  56. 56
    West Says:

    Z, That well just came off confidential and I am reading well file. Just posted the other as reference for their record of conf. & upcoming wells. I tried to copy some infor from well brief but at present it is not working

  57. 57
    zman Says:

    WLL in pretty clear break out territory, volume better than average for this time of day. Saw a story last week that said that 48% of volume at the beginning of the week for WLL was short volume. I really hope they are enjoying today.

  58. 58
    zman Says:

    Short lived dollar rally in the last 30 minutes, took oil back under 71 briefly, but as the dollar sold back off, not yet to its morning lows, oil has soared to a new HOD, up $3.60. This is not my favorite kind of action for oil and while I suspect there will be little to nothing of relevance out of OPEC tomorrow, higher prices will yield greater scrutiny of intent in their statement. Saudi has said it is ok with $50 oil for now, and they could act to tame oil’s advance here for a bit, sort of as a stick to Russia who has been unwilling to reign in their own production.

  59. 59
    BirdsofpreyRcool Says:

    Hell-looooooooooooooooo! Back from The Wilds. And (finally) off the phone. Thank you for making me feel like i was just a little bit missed. That was very kind.

    Here’s what I think: KOG puts out their PR tomorrow, pre-mrkt, with the 5/6 operational update. Stock opens up a bit, then starts to go down, then hits a low of $1.58. Lynn does his presentation at R&R, stock closes at $1.72.

    This is based on historical perfomance, following an operational update. I could be wrong this time. Lynn spent a good chunk of last week, visiting some new firms. Don’t know if those guys were the ones reponsible for goosing the stock price, but if they were, we should see support around $1.75 – 1.95 for the near term.

    Just wild speculation, on my part. But, investing requires one to have an opinion on both the fundamentals AND the stock price. (I’m better at the fundamentals… I need help with the technicals).

  60. 60
    zman Says:

    Welcome back BOP – had been thinking something similar as have many apparently as we reached the HOD early on good volume to trail off the rest of the morning. I’m holding, don’t think we see any kind of a deal announced below $2.

  61. 61
    BirdsofpreyRcool Says:

    Credit market is signalling that stocks will move higher.

    From the UK desk of a bond trader (about 30 mins ago) — “thx to all involved in one of our busiest days… we traded over L150mm across different asset classes with financials leading the way for the time being. Great effort all round and ths once again!”

    This was from a very small, off-the-run, firm. If THEY were busy, the trading desks of the Money Center Banks were screaming today.

    Credit points to higher stocks.

  62. 62
    BirdsofpreyRcool Says:

    z — i would HOPE kog would hold off, until the stock is firmly in 2-handle land.

    But something to keep in mind… if KOG can raise money above-and-beyond their 2010 shortfall in planned capex, that would allow them to make some accretive land deals, in and around their current acreage holdings.

  63. 63
    zman Says:

    BOP – That’s a good point, I was thinking from a burn rate standpoint that they don’t have to do one, so if they know something good about the 7 and 8 wells at this point they could afford to hold off for a higher price.

  64. 64
    BirdsofpreyRcool Says:

    Credit Index Levels —

    Investment Grade (IG) +117 bps -4 bps tighter on the day

    High Yield (HY) 88 13/16 +1 1/8 point higher on the day [HUGE positive move in high yield bonds]

    People are reaching for risk.

  65. 65
    zman Says:

    63 – meant, have to do one “now” to fund the 7,8,9 drilling and completion. Obviously they have to come to the market for funds next year’s drilling, maybe stretch that into 1Q but not if the stock pops up I’d think. Then it would be go time.

  66. 66
    BirdsofpreyRcool Says:

    z — from what i’m hearing, early indications on 7/8 site are encouraging. i.e., they hit hydrocarbon-iferous Bakken there… which would prove up the western part of their south-of-the-river acreage (about 1/3rd of their total Bakken holdings).

  67. 67
    zman Says:

    DrLink – if you are about, the question of the day for KOG will be something along the lines of “given your present drilling schedule, what you have on production now, and say $70 oil, when is the latest you come to market to fund 2010?” Do you intend to sell down interests in future wells on the reservation or ask more from the market to accomplish your program. Alternative is to ask what they think their Q4 or monthly cash flow is and where they leaves them at year end for a cash balance given their prepaids.

  68. 68
    zman Says:

    BOP &/or West- can you refresh my memory on why their is only one well on the pad for #9?

  69. 69
    BirdsofpreyRcool Says:

    z — KOG is has fully-funded their capital prgram through 1Q10. But, they will have to raise cash to fund the full 2010 capex budget. It doesn’t have to be 100% equity, this time around. They should be able to use their bank revolver to fund some working capital needs. I figure they will need to raise about $15-18mm in equity capital, and will fund another 8 – 10mm in debt. So, any equity raise above around $20mm would mean accretive land deals on the horizon.

  70. 70
    zman Says:

    BOP – to add to your last, volumes means they can afford to layer in some WTI hedges. Any flavor for Lynn’s willingness to hedge some of his 2010 oil production. The more you hedge, the more you can afford to take on a greater % of financial leverage, and the greater the debt load, the more accretive those land deals would be.

  71. 71
    zman Says:

    Also adding to you last, is 7,8,9,10 the extent of the 2009 program. I can sort of get their with the prepaids, but then it would be slow going in 2010 with the drill bit. Seems better to do a deal when you are not completely cash poor …

  72. 72
    BirdsofpreyRcool Says:

    z — originally, there were 2 wells planned from the 5th pad site, wells 9 and 10. KOG decided to go with just one long lateral, changing the orientation a bit. I don’t think they have publicly announced where well 10 will be… but, I would suspect them to continue to drill for the max cash flow and with an eye to turning leases into HBP status.

    Also, at some point early next year, hearing XTO will be drilling (and operating) some wells on the Rez with KOG. So, that will accelerate KOG’s production (KOG drilling + XTO drilling).

  73. 73
    zman Says:

    OK, thanks 72

  74. 74
    BirdsofpreyRcool Says:

    Yes. Once Lynn has stable production, i believe KOG intends to layer in some hedges to support a debt drawdown. Very prudent Balance Sheet management.

    That is one thing that standing on the Edge of the Abyss, looking down into the Valley of Death, will do for you. KOG escaped a near-death experince late last Fall… they are managing the check book (and balance sheet) with a firm grasp on sober reality now.

  75. 75
    zman Says:

    On the XTO operated wells, they can opt out on a well by well basis if need be?

  76. 76
    Jerome Blank Says:

    Re: #16, Hi Zman, I’ve been away from the mkt most of the day…with the print of $51 today, WLL went on a fresh P&F triple top breakout buy signal, a very stong stock, looking to buy pullbacks into strength, a retrace to buy between $49-$50,( WLL goes on a three box reversal at $49, which usually means stock is catching its breath) there is a short term sell signal at $46, but chart pattern suggests better stop placement at $45, there is major long term P&F support at $36, the long term price objective calculation with current price behavior is $91, but I don’t rely on these when they are so far away, longer term the better objective looks to be about $70. If WLL prints $49 and reverses back into X’s before going on a sell signal, stops would need to be changed.

  77. 77
    zman Says:

    Thanks much Jerome!

  78. 78
    West Says:

    My understanding is that when they finish #9 they are heading back north of the Little Missouri, for the winter. Unless BOP knows something about acreage that I don’t you would be hard pressed to find anything that is unleased.

  79. 79
    BirdsofpreyRcool Says:

    #75 — don’t know the answer to that one. But, KOG already knows what XTO wants to do in 2010… so that is already built into the KOG 2010 capex budget. And after well #9 is drilled, KOG will have proved up almost all their acreage… so, why opt out, when you know the reserves are there?

    It is SUCH a different game, developing a resource play, versus traditional development. It becomes more of an exercise in “project management,” than anything else. The biggest variable being oil prices, of course.

    Also, don’t forget that KOG intends to hook into a pipeline in 2010 (estimating late summer). That is an immediate $9 boost/bbl to the top line, risk-free.

  80. 80
    zman Says:

    Hello Fred


  81. 81
    zman Says:

    Fred lacks direction but appears to be headed to the mid Atlantic.


  82. 82
    BirdsofpreyRcool Says:

    West — you are correct (as usual). All the acreage is leased. But KOG seems to be the Go-To Guys, when other operators are looking to do a little horse trading with their acreage positions.

    Sometimes you sell a horse to make money, sometimes you sell a horse because you NEED money. KOG has done some small, quiet deals with companies who need to sell their horses.

  83. 83
    zman Says:

    Re 79 – why opt? Only if you don’t have the cash to meet the AFE.

  84. 84
    zman Says:

    Anyone know if API is tonight or delayed a day?

  85. 85
    BirdsofpreyRcool Says:

    #83… of course. But I also think that XTO has been very happy with their wells operated by KOG… so would expect that they are working pretty closely together on timetables.

  86. 86
    zman Says:

    Simpson should have scarfed up the donut hole when it was cheap, now it would probably cost him $300 mm which looks ugly on a $/acre basis.

  87. 87
    zman Says:


    Sold the BEXP September $7.50 calls (QBJIU) for $1.60, up 205% with the stock at $9.08. I continue to hold the common stock here.

  88. 88
    choices Says:

    BOP-welcome back-we missed you.

    Do you have any info on the 10-yr notes being offered by PXP-rate, call provisions, etc.


  89. 89
    BirdsofpreyRcool Says:

    choices — thank you!

    Saw the PXP headlines, haven’t looked for the deets yet. Let me check and get back to you.

  90. 90
    zman Says:

    Imports watch:

    Unchanged with last week at 9.5 Bcfgpd, down 0.1 Bcfgpd from last year.

    LNG stuck at 1.1 to 1.2 Bcfgpd range.
    Canada eased a hair to 8.3 Bcfgpd. Very full storage up there too so they want to send it down south while there is still time.

  91. 91
    BirdsofpreyRcool Says:

    PXP $300mm Senior Notes due 2019 rated B1/BB. Managers are JPMo, Barclays, BMO, BofA, MS, BNP, TD, C, RBS, Scotia, Wells (all the biggies, except GS). Looks like it is a 144A deal, so us regular slobs can’t buy it… also, it’s a Drive-By… books just closed (2pm ET), price talk is 8.75-9.0% (which includes 2 points of OID).

    Ooops… nope. It’s a registered deal, so we CAN buy it. It will price and allocate after close today. You’ll see it trading tomorrow.

  92. 92
    zman Says:

    Oil up 3+ to just over 71 with 15 minutes until the close of NYMEX

    NG up 4 cents, the strip is up slightly better, very volatile, feels like more short covering, nothing on the tropical or heating related fronts to signal a more bullish tone.

  93. 93
    Dman Says:

    Z – do you have a view on SPWRA fundamentals?

  94. 94
    zman Says:

    Dman – No, I don’t.

  95. 95
    Popeye Says:

    First Solar to start largest solar power plant in Ordos, China

  96. 96
    zman Says:

    Oil closed over 71, NG over 2.80. Should have a boring looking OPEC statement out overnight. The OPEC website will have good TV interviews before and after the announcement.

  97. 97
    zman Says:

    Popeye – thanks. FSLR is just turning the screws on the competition.

  98. 98
    zman Says:

    CERA sees oil demand resuming growth next year and recovering to pre recession levels by 2012.

  99. 99
    West Says:

    BOP, Welcome Back. They had a picture of your cam on the KOG well file. I tried to copy but it didn’t work.

  100. 100
    BirdsofpreyRcool Says:

    West — you mean the TeddyBearCam has been OUTTED!!! Yikes! This is going to put a serious kink in my due diligence… 😉

  101. 101
    zman Says:

    VLO on the tape cutting capacity/jobs due to weak cracks.


    Hello another loss for them in 3Q on charges and lower throughput.

    This actually works to their favor as it will likely boost margins for the group.

  102. 102
    zman Says:

    101 is not new, was out this morning, I just didn’t see it until now.

  103. 103
    BirdsofpreyRcool Says:

    z — speaking of smiley faces… i see that you learned the hard way that you can’t refer to KOG’s wells 7 and 8 in parentheses. I got caught on that a while back… irritating.

  104. 104
    zman Says:

    Bill – PXP up first tomorrow at Barclays.

    BOP – If I could find the switch in this software that turns those things off I would. Ugh.

    Probability of news elevated tomorrow for:
    KOG, SFY, HK

  105. 105
    BirdsofpreyRcool Says:

    “Dick Stoneburner”…. sounds like a good name for a Jet Fighter Pilot. Hope he can fly the value of the Hawk a bit higher. It’s been a laggart lately. LOVE the Haynesville exposure… HATE the serial equity issuance. You hear that, Mr. Stoneburner?? Over and out.

  106. 106
    bill Says:


    ty for that

    i re-entered pxp today and took a token position in mmr so i can follow their developments

    plll is up big today but they are influenced more with ng prices and luv for little guys

    seems like the tiny guys are having outsized moves

  107. 107
    Jay Reynolds Says:


    >”CERA sees oil demand resuming growth next year and recovering to pre recession levels by 2012.”

    Matt Simmons noted in 4Q 2008 that the current “run rate” was 72,124K bbls.

    18 to 24 months out he sees MOST LIKELY available run rate at 66,450K bbls, WORST CASE at 59,600K bbls.

    If we get back to 72,124K its going to be quite the shortfall.

  108. 108
    zman Says:

    Jay – yep, better have solar on your car. Thanks to Wyo for the Matt Simons retort over the weekend to all the “we have plenty of oil and peak oil is a myth stories that have suddenly cropped up”

  109. 109
    Jay Reynolds Says:

    Can you post the Simmon’s retort link? I missed that.

    Matt has been strangely quiet of late – the last speech I see up from him is June 2, 2009


    Thanks in advance,

  110. 110
    Dman Says:

    Z – just reflecting on your comments in #23 on the RJ screed in #22:

    Could we be so bold as to suspect that the move from $13 to $2.40 might have been anticipating the current storage situation?

  111. 111
    zman Says:

    Dman – thanks for the laugh.

    Jay – here ya go:


    Wyoming also sent this one along:


  112. 112
    zman Says:

    VLO says Corpus down indefinitely, plays Del City outage. Margin Support 101. There is no law that saws you have to sell product at a loss. E&P guys take note.

  113. 113
    gaamblor Says:

    Is API tonight despite the holiday?

  114. 114
    zman Says:

    Gaam – Don’t know, been trying to figure that out all day.

  115. 115
    zman Says:

    FTO saying its Kansas refinery will operate at reduced rates.

  116. 116
    VTZ Says:

    Just read a RBC Technicals note issued this morning saying that failing a big move lower early in the week they expect to see S&P 1133-1170 before the “real” correction.

  117. 117
    zman Says:


  118. 118
    BirdsofpreyRcool Says:

    Denise — thank you for your earlier comments. Glad you are a Happy Kogger! No argument, it is one volatile puppy.

    Here’s another one, just for you. Today’s Brian Reynolds comments…


  119. 119
    PackMan Says:

    Where is the Barclay’s conference ?

    Anyone have a link ?

  120. 120
    BirdsofpreyRcool Says:

    PXP debt deal upsized from $300mm and placed at a nice rate (for PXP) —

    PXP Announces Pricing of $400 Million of Senior Notes
    2009-09-08 23:12:31.508 GMT

    PR Newswire

    HOUSTON, Sept. 8 /PRNewswire-FirstCall/ — Plains Exploration & Production Company (NYSE: PXP) today announced that it has sold $400 million of 8.625% Senior Notes that will mature October 15, 2019. The notes were sold to the public at 98.335% of the face value to yield 8.875% to maturity.
    Net proceeds will be used for general corporate purposes, including to fund a portion of the payment of the remaining drilling carry under PXP’s agreement with Chesapeake Energy Corporation.

    Interest is payable April 15 and October 15 of each year. The first interest payment will be made on April 15, 2010, and will consist of interest from closing to that date. The offering is expected to close on September 11, 2009.

    J.P. Morgan Securities Inc., Barclays Capital Inc., BMO Capital Markets Corp., Banc of America Securities LLC, and Morgan Stanley & Co. Incorporated are acting as book-running managers of the offering. The offering will be made only by means of a prospectus supplement and accompanying base prospectus, copies of which may be obtained from: J.P. Morgan Securities Inc.

  121. 121
    zman Says:

    Packman – NYC Wed/Thurs. I have the schedule but its a PDF, not a link. Most of our talked about names are there.

  122. 122
    PackMan Says:

    Z – what hotel ?

  123. 123
    zman Says:

    Sheraton NY Hotel & Towers

  124. 124
    isleworth Says:

    The American Petroleum Institute will issue its data at 4:30 p.m. EDT (2030 GMT) on Wednesday and the U.S. Energy Information Administration will release its report at 11 a.m. EDT (1500 GMT) on Thursday.

    The natural gas storage report will arrive at its normal time
    of 10:30 a.m. EDT (14:30 GMT) on Thursday.

  125. 125
    zman Says:

    Thanks Isle.

  126. 126
    PackMan Says:

    Thanks Z

  127. 127
    BirdsofpreyRcool Says:

    Goodnight, John Boy.

  128. 128
    baylor3217 Says:


  129. 129
    zman Says:

    KOG latest presentation:
    Well 5 IP of 978 BOEpd
    Well 6 IP of 1,492 BOEpd

  130. 130
    bill Says:

    barclay pxp presentation

    -moving out on freisan discovery
    – gom prospects getting hotter
    – calif t-ridge still lives

  131. 131
    bill Says:



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