Wednesday Oil Preview + APC Well Thoughts

Posted on by zman

 

Sentiment Watch: Cautious Despite The Short Busting Rally. At least that's my market perspective. Yesterday Ben Bernanke said the recession was over and the crowd went wild. I continue to raise cash as it seems to me that many sectors and individual stocks are heading into the "too far, too fast" category.  Likewise, I continue to be surprised by the stamina of the short covering rally in natural gas but believe that recent gains in the commodity will remain fragile until we see further evidence of falling production or lots of snow.


In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today - MLP schedule, APC W. Africa discovery.
  5. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $16,300
    • 72% Cash
    • The Current Holdings tab is updated. 
  • Yesterday's Trades:
    • EOG – Added (10) October $85 Calls (EOGJQ) for $1.35 with the stock at $79.90.
    • EOG – Sold all 25 of the September $80 Calls (EOGIP) for $0.90, up 15% to my average cost.


Commodity Watch:

Crude oil rallied $2.07 to close at $70.93 yesterday. Blame a strong equity market and subdued dollar for that. After the close, the API released an across the board bearish looking set of data (see below). This morning crude is trading off slightly.

  • MEND Watch: MEND said it would extend the truce it has had with the government for the last two months for another 30 days. MEND warned that the Yar Adua government's amnesty program did not cover key issues.

Natural gas jumped as high as $0.30 yesterday but only closed up $0.02 at $3.32. This morning gas is trading up as much as 20 cents as the desire to cover shorts continues.

Oil Inventory Preview

 

API Watch: Bearish Looking Set of Numbers

  • Crude Oil: UP 0.6 mm barrels
    • Imports: API estimates they declined sharply.
  • Gasoline: UP 1.3 mm barrels
  • Distillates: UP 5.2 mm barrels

ZComment: Normally this time of year we see end of summer draw downs in crude and gasoline stocks and smallish builds in distillates in advance of heating season. API's look a little squirrelly once again make sense only if utilization plummeted. We do expect refinery utilzation to fall as part of the normal seasonal pattern but also due to a number depressed margin related curtailments that have been announced. I would be surprised if the magnitude of capacity lost from week to week is borne out in the EIA's numbers. But it's tough call this time of year and crude demand will inevitably fall in the next few weeks. So its just a question of when that decline begins.

  • Gasoline demand becomes less important from here until Spring although it had been making progress back towards the mean and that bears watching.
  • Distillate demand appears to be inching higher and we should actually see that continue due first to strength from the agricultural demand followed by season retail stocking. 

Stuff We Care About Today

APC Announces New West African Deepwater Discovery; Extends West African Oil "Frontier"

  • Venus B1 well off Sierra Leone, 5,900 feet of water, 18,500 measured depth
  • 45 net feet of pay, (don't know pre drill MMBOE on this one, should get that on the call),
  • This is around the corner so to speak from their 2007 and 2008  big oil discoveries off Ghana and Cote D'Ivoire

  • Essentially, this discovery is the north western most bookend to their W. African discoveries.
  • Before this discovery, they estimated gross reserves in this total area to be in the 600 mm to 1.8 billion barrel range from their Jubgilee, Mahogany Deep and associated wells.
  • For point of reference, APC had 2.28 billion BOE booked at year end 2008,
  • APC operates with a 40% working interest. Partners are, Tullow, Woodside and REP, but the play on it in the U.S. will be APC.
  • Since the original 2007 discovery, APC has boosted its W. African offshore acreage count from 1.7 mm acres to 8.8 mm acres to capture as much of this West African Cretaceous fan play as possible. These are large stratigraphic traps so think of a fan of sediments laid down from a river and then overlapped by another, and another etc to create potential hyrdrocarbon traps. This kind of oil system is what you see in many of the really big oil fields around the planet.
  • They plan to drill 2 to 5 additional wells to prove up the area in 2010.
  • Nutshell: This is an important find. As they say, it extends a frontier of coastline thought to be 1,100 kilometers long. Management at APC is top notch and is well versed in bringing deepwater developments to fruition, with dominant positions in the U.S. Gulf of Mexico and a blooming position in W. Africa. Note that from discovery to expected first oil at Jubilee (May 2007) will be only about 3.5 years. Moreover, they have lots of experience dealing with foreign goverrnments.
  • APC Valuation: 6x 2010 CFPS of $10.16 should not be much of a restriction for this name, at least for a short term trade.
  • My trade: I am likely to buy a little of the September $65 (depending on how it opens) and October $70 calls for a quick trade. I suspect this will open strong, move with oil a bit during the EIA report and then resovle higher on the day. 
  • Conference: Today, at 8:30 EST, I'll add additional notes later.   

MLP's That I Care About Presenting Today: (all times EST)

  • (BBEP) at 11:15
  • (LINE) at 11:45
  • (LGCY) at 2:15

GDP Snapshot- will be in the Thursday post.

  

Odds & Ends

Analyst Watch:

  • (WLL) - Cut to Neutral at SunTrust

206 thoughts on “Wednesday Oil Preview + APC Well Thoughts”

  1. APC Call starting now.

    TPH – calling the well “probably non-commercial” based on the pay but that’s premature and not really the point of the discovery.

  2. The Credit Market continues upward and to the right… and frankly, at an increased pace. Early comments from a NY Trading desk –

    · Stocks continue to rally around the globe; Europe trades +1% and most of Asia ends higher. MSCI World Index +0.8% as all 10 industry groups rose. Bloomberg headline says “Emerging-Market Stocks Double From 2008 Low as Economy Recovers.” Gold surges $13 to $1017 as the USD rolls over again overnight (particularly weak vs yen following comments by Japan’s incoming finance minister). Indonesia’s rupiah climbed to the strongest against the dollar in 11 months after raised the nation’s foreign- and local-currency sovereign debt ratings. China’s Metal Demand Returns in ‘Big Way,’ according to a CLSA report.

    · Equity Secondary calendar quiets but huge volume of debt sales; after a flurry of deals on Mon, the secondary market was pretty quiet on Tues. As of Tues night, there were only 2 secondaries announced on Tues Sept 15 on North American exchanges. On fixed income side, huge day of debt issuance – banks led corporation in raising ~$20.6B in debt today, the most in a single day since Feb (according to Bloomberg).

    · Corp credit update: as strong as stocks have been, corp. credit in many ways has been more impressive. IG late in trading on Tues had tightened all the way down to 103 (note that early last week this was ~120 range) before finishing @ 104-104.5. HY also very strong – up ~1 5/8 late in Tues to 94 ¼-94 ½. From the credit desk today – the last time HY was close to this spread level the SP was trading at 1300. We continue to see buyers of risk to sellers in a 7:1 ratio; the market is extremely overbought but could also see more pain before it turns.

    · “Buy Stocks, Sell Bonds as Gap Hits 24-Year High” according to Bloomberg article out late on Tues…The level of bond prices over stocks is the widest in at least two decades, a signal to buy equities and sell debt. Bloomberg’s “CHART OF THE DAY” reveals that the gap between the MSCI Index and the World Gov’t Bond Index (WGBI) is the largest since ’85 when the index was introduced.

    · Strategic M&A continues; ADBE after the close announces deal to buy OMTR for $21.50/shr cash. $1.8B deal.

  4. Here’s the “PORKY PIG SPECIAL” usual disclaimers apply….ATPG……Links, http://phx.corporate-ir.net/phoenix.zhtml?c=123846&p=irol-presentations,http://shortsqueeze.com/?symbol=atpg,http://www.interactivebrokers.com/en/trading/ViewShortableStocks.php?key=atpg&cntry=usa&tag=United+States&ib_entity=llc&ln=. Huge bets have been made that is company is in big financial trouble and that is a freight train coming down the tunnel instead of a light. Listen to the presentation if you have an interest , they have at least 2 deals that will be announced in the next couple of months. Their new Titan platform floating out next month, with many only citing all the bad things that could happen, what if everything goes right, this has been an extremely light Hurricane season. Three million $ in new bullish calls instituted yesterday, 10 million $ in the last week. Maybe somebody knows more than the average investor . NAV a $114 according to their site is it worth that, not today. Six higher lows in the last 2 days equals accumlation. 20% of the float short (7.5 million shares) with only 450K available to short, 70% up move in the last 8 days with no appreciable pull back. Plenty of negative sentiment especially in light of the huge up move in the stock. Many of the players took profit last Friday and got out of the stock drying up supply. Now for the part that makes this so interesting, Greenlight Capital, Mr E, looking to increase position and put the squeeze on the 20%ers.The type of Risk/ Reward setup that I look for in stocks that I have researched and know that underlying story is better than preception. Watch stock action and especially pullbacks and associated volume. Low volume pullbacks should be buying opportunities and a break above 19 with volume is a big buy signal. I am looking for at least a move to 25 by the end of 2009, barring usual end of everything scenario. I am long the stock and at present do not own any options. I would recommend the January or later options for those with that inclination to give everything a chance to play out and that is where the smart money is buying. Personally this is a long term hold for me and they should at least double their production next year and triple by by 2011. I only own 2 stocks ATPG and KOG and with my average price much lower I’ll roll the dice. In a contrary way, I hope most do not agree…So here in the land of wet noodles and white rice, here is your PORK

  6. APC not giving a lot of details, saying everything about the well was positive, recovered hydrocarbons to the surface, its early, still evaluating, won’t release more data on this well.

    This is a technical discovery, may or may not be commercial. Will need to evaluate versus their seismic.

    My hope would be the stock pulls back a little early from the current 62.70 bid as people say, eh, maybe not commercial, again, that’s not the point. The point is that they got everything they wanted (aside from 600 feet of pay like at Jubilee) that encourages them to drill more.

  7. APC – they should do some additional drilling around Venus maybe later half of 2010. Next couple of wells will be back closer to Cote D’voire due to well commitments so you won’t be hearing much about this area (Liberian Basin as opposed to the Ivorian Basin) for some time.

    Some they have good source rock, good thermal maturity (oil), they know the hydrocarbons are there, just need to find exactly where they are trapped…so back to the seismic.

  8. This should be interesting…

    Schwarzenegger orders increase in renewable energy use – the Gov signed an exec order Tues requiring that CA draw 33% of its electricity from renewable sources like solar and wind power by 2020, stricter than any other state’s plan except for Hawaii (which calls for 40% by 2030). Adds “Right now, we are relying too heavily on coal-fired power plants.” NYT http://www.nytimes.com/2009/09/16/us/16standard.html?_r=1&partner=rss&emc=rss

  9. west — #4… did you write that piece? So, you own only ATPG and KOG? I can’t get the link to work. Thanks!

  11. TechTrader thinks it’s a 55/45 short day, but with loads of volatility.

    Here’s his color comments — “A little fact from today report, in trading history there has only been 9 times when the spoos have traded for 8 consecutive positive closes, the following day has closed negative 100% of the time. but the best trade has been short in only 55% of the cases, volatility reigns”

  12. APC – won’t say quality of crude (logging well now), they did say they had multiple sands with good reservoir quality rock, and had shows from multiple sands.

  18. Nutshell on APC. Good discovery, maybe, maybe not commercial itself. Goes a long way towards proving what they are seeing on 3D works on a much bigger area than previously proven off the coast of Africa. I will see how it opens for a quick trade.

  19. west — they worked just fine. Thanks for circling back. Your 2-stock portfolio has given Much Joy lately, for sure!

  20. west 4

    ty for your atpg comments

    im into it pretty heavy. atpg caught a downgrade today

    How do you know Mr e wants to add?

    I think the credit issues are overblown although i avoided the name earlier in the year due to the debt levels.

    Once they get Titan connected , oil starts flowing at 20,000 bbls a day at 70 bbl= 1.4 m day, 42 m per month, 500 m per year. They can pay off the entire debt in 3 years

    the short interest is icing on the cake. I think some of those shorts covered in the last week.

    It will have a pullback somewhere in here. When the market opened lower on monday it traded as low as 15.79 ( i had a buy order at 15.75 that didnt get filled)but closed over 17.50 with another dollar yesterday.

    .. and there is a possibility the company will sell some shares into the strength

  22. APC call still going on, quality of questions improving.

    45 feet of pay is hydrocarbon saturated. They saw a “tremendous amount of reservoir rock” in this wellbore. So now they go back and tie the well data back to the seismic. The well was not optimally positioned which is not surprising at all given that this is the first well anywhere nearby in this chunk of water and so there’s no, absolutely no, well control.

    “Encountered multiple, multiple fan systems here”. Put the well in the right place next time and you could have a multi-hundred foot column of hydrocarbon pay. That’s pure spec to even write on my part but from what I’m hearing a very real possibility. This is what you saw over at Ghana.

    Noting that dip rate is very low, meaning that the areal extent of these, if you find oil, can be very large.

  23. Mr E has pocket aces and just got another ace on the flop and is raising. Other funds are desperate for % returns since they are under performing on the year and this stock is on their radar also. Some think Friday was a selloff I think it was an accumulation day. Time will tell the story. Provided for the board more as a wild z type play if you wanted to be long an oil e&p in this area of over extension.

  25. Thanks much for that Bastardi comment. We need a cold one. He must have a contract with the Farmer’s lol. NWS last I saw was still saying Pac SSTs were on the rise, meaning El Nino meaning wet but warmer than normal winter in the U.S. That last is their basic interpretation. I can tell you from having studied El Nino in a former life that the degree of strength of an El Nino or La Nina is very important in determining its usefulness in terms of U.S. weather prediction. Only strong events have a high correlation to U.S. land temperatures and we aren’t there yet (again, last I checked).

  27. Big cap E&P bid up nicely this am. We still need to get across those wonky looking APIs with the EIA release later but all large caps bidding higher.

    Oil is now up slightly

    NG is up 7% (music stopped, not enough chairs for the shorts to sit in … I tried to warn them, I really did). I still doubt the sustainability of this move but it offers a big out in the form of hedging opportunity to the lightly hedged in 2010.

  30. The High Yield Index is up almost 2 points… that is like seeing a Pink Elephant. You kinda don’t know what to say.

    HY 96 3/8 +1 7/8

  33. ZTRADE:

    HK – Half out HK $24 September calls (HKIO) for $0.65, up 21%, with the stock at $24.40. Still raising cash, seems prudent in front of inventories.

  35. ZTRADE:

    APC – Added (5) October $65 calls (AZWJM) for $1.95 with the stock up 6+% on news (see today’s post) at $63. I’ll take another half if the market gets depressed by today’s oil numbers.

  39. With the amount of BANK DEBT that atpg has, the CFO would have to be certifiable, NOT to issue equity up here.

  43. Hear ya BOP, I will be today, almost certainly. I’ve got my lower buyin stuff left which is up a lot, no need to be a hero. $26 calls bought quite awhile back still toast but you never know. Nah, they’re toast.

  44. Kyle – I was mulling doing same with APC earlier but then I saw there aren’t any higher strike calls listed at present as the stock has run too much.

  45. z — i’m still long a slug of HK common… holding on here. No doubt, it’s been a bit of a laggard here lately. But love their acreage position.

  46. That WLL downgrade is probably a gift. Will wait to see EIA in 15 minutes before making a buy, no buy decision on October calls. Still cheapest Bakken out there.

  48. KOG at $2.50+
    WRES at $3.50+

    Single digit midget crowd is outrunning the commodity at this point. Not selling, just not adding for now.

    If KOG goes on to $3, I will have to take half off and wait out a secondary.

  50. i see a rec by an analyst from Van Eck for KWK and XTO. Shawn Reynolds from Van Eck. He mentioned buying individual drillers as opposed to UNG.

  53. Bill – that part is true but then the two diverge:

    GMXR is in a short squeeze with about 25% short interest,
    not really growing this year and next is uncertain, having marked their production guidance lower multiple times this year.
    Their acreage is more Haynesville / bossier focused.

    HK is relatively lightly shorted. HK is playing post deal catch up now.

    HK will grow about 50% yoy in 2009 and then 30 to 40% next year.

    Acreage is more spread out, more opportunities for upside aside from the Haynesvile (Fayetteville, Woodford, Eagle Ford).

  54. ROSE quietly drifting to a new 2009 high after a downgrade 2 days ago. It remains fairly cheap on forward CFPS and has catalysts in the form of another Eagle Ford well and a Bakken test (vertical) in the next 30 to 45 days.

  56. EIA Oil Inventories Report:

    Oil at time: 70.60, down 30 cents

    Inventories:
    Crude: down 4.7 mm barrels
    Gasoline: up 0.5
    Distillates: up 2.2

    Crude imports: imports back to 8.9 mm bopd
    Utilization: 86.9% – still high but backing off.

    Gasoline demand: 9 mm bpd. Ok, not great, not terrible
    Dist demand: 3.355 mm bpd, ok

    …

  57. Pretty good numbers, much better than API suggested. Would have liked to see diesel up a touch more.

    Total product supplied backed off again.

    Market seems to like the numbers so not complaining.

    May take some of that Oct WLL here.

  60. Ram – pretty good report. Don’t care for the lack of direction on diesel but they are going to like that topline crude number. Waiting a little bit before I respond but I think I’ll take a little Oct WLL position and may add to my NFX Octobers. CLR is a bit pricey and in general I don’t trust this market.

    Need to look at breakdown of gasoline stocks on the west coast but am thinking I’ll go long a bit of TSO in the next week or sooner.

  61. EOG in full breakout mode now. I wonder if XTO can be far behind? I’m not touching it, just thinking it would make sense.

  66. Ram – adding to that, HO is trying to come positive on the day despite the bigger than expected build in distillates. Part of that uptick was a normal, but I guess unexpected, uptick in distillate fuel oil production, on the East Coast. They normally build for winter from now until November or so and this number looks a little bit like some data from last week creeping in this week’s report (since utilization actually fell). Anyway, the demand from the roads (diesel) and the air (kerosene) wasn’t there to offset the greater production and therefore you get this big build in total distillate inventories. In the coming weeks, this should slip a bit (small builds in distillates) as production comes off at refineries. The flipside to that of course is that the oil draws will get smaller and may even start building for a few weeks.

  69. Off topic and two hours early for off topic discussion but what the heck as the insanity continues:

    Market Commentary:

    With nearly $4 trillion on the sidelines and investors having real trust issues with our corrupt banking system and a Fed who is determined to get this sidelined money back into the equity market, it should come as no surprise that September is proving to be an up month despite the fact that “insiders” are exiting the market at a 100 to 1 on the sell side.

    Who is driving the market up here? This chart should be revealing.

    http://www.screencast.com/users/chartwiz/folder…

    These five banks have borrowed heavily from the Fed at a near zero interest rate and they are hoping to make a killing if they can get the public to buy into this rally. The banks are getting worried because the public isn’t going for it as they had hoped. While share price is going up, banks have to ante more up to make it more enticing and more convincing to suck in the public.

    When CNBC is now hocking their parent company’s stock, i.e., GE, and talking technical breakouts, while the insiders are selling into the advance, what does that tell you?

    Why are insiders selling at a 100 to 1 ratio? What is smart money seeing?

    As I have told you I am very alarmed by the deterioration I am seeing in the money supply. In my career over the last 30 years, I have never seen such a collapse in the M2 indicator. Here is a quote you need to read and understand!

    “ Both bank credit and the M3 money supply in the United States have been contracting at rates comparable to the onset of the Great Depression since early summer, raising fears of a double-dip recession in 2010 and a slide into debt-deflation.”

    “ Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn).

    ” There has been nothing like this in the USA since the 1930s,” he said. “The rapid destruction of money balances is madness.”

    The M3 “broad” money supply, watched as an early warning signal for the economy a year or so later, has been falling at a 5pc annual rate.

    Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an “epic” 9pc annual pace, the M2 money supply shrank at 12.2pc and M1 shrank at 6.5pc.

    ” For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew,” he said.

    It is unclear why the US Federal Reserve has allowed this to occur.”

    http://www.telegraph.co.uk/finance/financetopic…

    http://www.telegraph.co.uk/finance/financetopic…

    The Fed chart’s growth axis doesn’t even go this low!

    This will not show up in the third quarter’s GDP figures but beginning in the fourth quarter – a plunging money supply will severely undercut growth again.

    This means there is no new money entering the system to buy houses, cars or for business loans to invest. The seriousness of this fact can not be over-emphasized. If this continues we are headed for a recession if not a Depression, despite the false assurances of Mr. Bernanke again.

    This is why the dollar is plunging. This is why crude oil prices were up $2.07 a barrel to close at $70.93 today. This is why gold is at $1,005 an ounce as people grow fearful and angry.

    Insiders are jumping ship while they can before the news turns ugly. This isn’t good news for the longevity of this bull market and with the dollar falling every investor needs to understand we will remain in a secular bear market, even though at the moment we remain in a cyclical bull market that is even now being deprived of its growth components.

  70. Well if money supply is falling you know what to do… print… easy fix for that one. Hasn’t stopped ya before.

  72. Just seeing a lot of reasons to be somewhat cautious in E&P. Here is another. Take a look at the chart of SFY. Just keeps running and while Terry and the guys are good chaps, they are running hard on EFS results. Just seems too far, too fast.

  78. ATPG report, double top breakout on p&f chart. There has been continued bullish call buying in all months.There are not many shares being offered for sale. P&F objective is 45. Long term play developing as big buyers aren’t pressing bids up until they have secured all available shares at that price. oink…oink

  87. Re: #77, LINE is a stong stock on a buy signal, but the bullish price objective on the current buy signal is 24. At its current price of 23.50, I consider the Price obj to have been reached. That’s not to say it can’t go higher, but from a P&F perspective, the chances of a consolidation or pullback are now greater.

  91. ZTRADE:

    HK – Sold last 20 HK $24 Calls (HKIO) for $0.95, up 76%, with the stock at $24.85. I continue to hold some currently worthless $26 September calls in the $10KP (and they are highly likely to stay that way) and the common outside the $10KP II.

  93. High Yield CDS index losing most of it’s steam from earlier today…

    HY 94 3/4… up only 1/4 now

  96. HeadTrader says to watch IBM today, for mrkt direction… like GE thru 15 the other day and CAT thru 50 yesterday… it’s a sentiment indicator at 120.

  97. RBOB and HO just turning green now, helped by the equity rally. Oil is eying HO pretty closely its seems.

    Refiners pretty flattish on the day.

    NG up 26 cents, 8%. Wow.

  100. LINE Presentation:

    Big question of late has been: What are we going to do with the Granite Wash play? (this was the one NFX had the big press release on a month or so ago)

    Says he would not normally think of this as a horizontal play, since it has 7 to 8 pay zones.

    He’s saying they are going for the upper most section with 4,000 foot laterals, this is where the liquids are in addition to the gas and this takes the F&D costs from $2/Mcfe on a vertical down to $1 / Mcfe.

    Their acreage – they have 38,000 net acres, HBP.

    …

  101. LINE

    Working on best way to exploit it from a horizontal standpoint.

    This is the kind of thing that can bump up the distribution here. When you talk about that kind of savings on finding and development costs, that means bigger distributions, ceteris paribus.

  103. NG up 10%

    SP smoking higher. Any word from Kass? Not taunting, I really would like to know if he has anything incremental to add to the bear story here.

  104. ZTRADE

    Talk about back from the dead.

    KWK $12.50 calls (KWKIV) sold for $1.25, up 103% with the stock at $13.75. I continue to hold the Oct 15s here.

  105. LINE – good call. I bet they raise their distribution later this year as they have good hedges in place and more than adequate coverage relative to expected EBITDA and I suspect they will be driving production a bit more strongly than expected from the Granite Wash.

    $10KP II back to 78% cash.

  107. Midwest refineries strong runs of the last three weeks are coming home to roost in the Cushing Ok storage data.

    I just noticed, inventories there fell by a whopping 3.7 mm barrels (or 12%) to 27.6 mm barrels, the lowest level of the year. That is a far cry from just a couple of months ago when people were concerned about their being enough storage at Cushing to hold all the oil. I have to admit that the size of the move itself is pretty suspicious. Good thing they are upping the EIA’s budget 😉

  110. z — wonderful monologue… ejoying the banter.

    Frankly, i think people are watching this mrkt in stunned silence. Either you’re in (and can’t beleive it)… or you’re sitting on the sidelines (and can’t believe it).

    Credit Market still supports this rally. But I am watching it like a hawk for any signs of heading south.

  113. BOP – been in and now out and still can’t believe it! Hence the reason I am out – I just don’t believe in it!

    But to the charts – it ain’t done – we need another wave up.

  114. can you imagine the day when oil gallops up 10 %.

    Then the cries will begin…about speculators

    Not the energy polcies

    Coal mlp said they have to jump thru a 4th hoop to get permission to mine

    eroc up at 115

    z even lng is p today

  116. Going into cash in my 401k after the huge run from March while the dow was at 8500 is looking genius now.

    Trying to decide if I should put some back in or if we’re at the precipice of the top here.

  119. I think gold targets 1100-1150 before a pullback on a break above 1033. It could be panic all the way to 1200 though.

  121. Break above 1033 means a couple 50$ up days in a row before a pullback and people will cry about how oversold it is but it wont stop because people are scared.

  125. Cargo – When I first took a look they were at $7 and I was busy and didn’t get my write up or buy the stock until it was at 11.67. And it has a good run to 15.32 at present.

    2009 CFPS 3.13
    2010 CFPS 3.62 – and that will likely go up with EFS development and better than expected gas prices 2H10 (my thinking, not the Street’s).

    That puts the stock in cheap land given their assets but they aren’t growing this year as they wanted to stay in cash flow so you would expect a lower multiple.

    Recall also they are lightly hedged in 2010 and a 95% gas producer. So you have with this rally in natural gas a real opportunity for them to layer on some hedges in early 2010 to give themselves a little more comfort. They are in this process now as can be seen by their recent small add to gas hedges voiced in their last pr.

    Then you have catalysts. EFS #2 and Bakken #1 to be released in 30 to 45 days. First EFS well was pretty positive. But if Bakken works, then you start to see a transformational story (moving from an almost all gas player to someone more balanced over time … Street currently likes that concept pretty well).

    Anyway, I’m long term there and not adding here. If it goes to $20 just to pull a number out of the air too quickly without support from the group or commodities I start writing higher strike calls against it to reduce my cost basis and keep waiting.

    For a quick look at the story click here:

    http://zmansenergybrain.com/2009/09/03/rose-intro-piece/

  126. Mid-cap equities or royalty companies… Royal Gold, Silver Wheaton, Redback Mining, Kinross. The small caps have extreme short positions that are going to get obliterated at some point but youd need to buy a basket.

  128. Thanks for your thoughts VTZ. I shall watch with interest and keep my fingers crossed for your position. I am not trading it as to be honest I am not sure and my thoughts are that the $ is close to a low which could put a dampener on a gold rally.

    One little fly in the ointment – Joe Terranova saying he is long gold on Fast Money just now. Says he would be long gold rather than energy. He is normally the kiss of death!

  129. OK, I’m going to put an end to this “bull market”. Just bought SPX Oct calls. That should do it !!

  131. I’ve been hedging up for the past few days, feeling like less than a genius right now. If my nausea level over being only slightly mkt overweight and having only small positions in some of the nat gas beta names is any indication, we pull back soon. The last time I felt this pain was June 12th.

  133. Gary – No, not that I see. It started off weak and stayed that way. The name is a little pricey up here on a cash flow basis and people have had a good run in it … probably just a bit tired.

    Jat – hear ya, hard to call tops.

    Getting ready (today or tomorrow) to take some Oct calls off the table too and wait.

  136. ZTRADE:

    EOG – Sold half (5 of 10) October $85 Calls (EOGJQ) for $2.45, up 79%. These were bought yesterday and that kind of move is meant to be taken, at least by me. Furthermore, it had jumped to 10% of the portfolio and I don’t want any 10% positions at the moment. The $10KP II is now over 80% cash.

  137. Z – do you have a target in mind for EOG? I took some profit today on some Oct 80’s i bought a month or so ago and am looking to buy some new higher strikes. (one of my few long call moves this year) Chart looks like we are in breakout mode.

  142. Here is your Kass-o-Gram:

    “At the margin, I would characterize the buying as excessive and panicky now.

    From my perch, the ingredients for a blow-off top are now in place.”

    I agree but the sheer verticality of the ladders ahead is breathtaking. K2 sighting anyone?

  143. 1520 – It could go to $90 to $100 without really being in trouble on historic valuation. I’m just lightening because I don’t trust the market. Playing with a bit of house money at present, quite happy to go into expiration very light, watch football over the weekend with a relaxed brain.

  144. He should drop kick that gnome of his from his perch.

    Can’t say I disagree with the blow off top comment, I just despise gnomes.

  145. In my experience, after moves like this you either get some unexpected overnight event to turn it or it runs until it runs out of steam and everyone yells “holy crap, I can’t breath up” at the same time in the middle of the day.

  147. KOG at $2.73. Stock marching too fast to have the news flow keep up with it now. Such verticality, to borrow a word, will make doing a deal less, not more easy, as potential deal buyers won’t trust this move. In other words, I think Lynn would have to price it in the hole. I know he isn’t planning to do a deal, or that’s his last story, for some time but it would be more salable were the stock to go to three and base out for a bit.

  148. CHK almost to 29. This is getting a little insane or so it would seem to me. Learned a good lesson on hedge protection there this week.

  151. #150 – haha. Yeah I was on the wrong side of that trade as well. The OIH has roared the past week up almost 20%

  152. A couple of weeks ago, Lynn said that he would wait until wells 7,8,9 were done… but he held out the caveat “unless the stock does something stupid.”

    Now, I know he thought KOG was cheap at $1. I know he didn’t want to do a deal at $2. But I don’t know where the Stupid Line is. My guess is north of $3. But I don’t know. And I don’t think he does either.

  157. I’m in cash so I am just watching you all pull in the harvest. Here is something to read if you are tired about stocks, still energy related and not political. Back to work. GL to all in the PM. For grins 😉

  159. ATPG report, option activity is good on the stock and higher than normal.This is accumulation and not a squeeze. Which means they are trying to buy all the shares here that they can without driving the price higher. This tells me that they think that the price is still to low and there is not any big blocks offered. oink..oink

  166. VTZ – I’m still long all of my shares in the ZLT. I’ve just raised cash in the options portfolio.

    Nicky – re Natural Gas. Two weeks ago when I wrote that we were near the bottom at $2.50 and that we at some point soon would see a sharp short covering rally … well, this is what I was talking about.

  168. Reef – Important to note the whole strip is flying. Up massively as far out as the eye can see. Get your hedges on boys.

    And I do think I get to chuck at all the “gas storage is at record levels so here’s a $1 handle for you” comments out of the brokerages in the last two weeks. Those same guys are probably thinking its time to raise their price decks.

  171. … re 167. Probably. Also, a move higher from here and you will see greatly reduced or even negated borrowing base worries for some of the people on the edge.

    GSX and PQ – 100% drawn on revolver
    SGY 90%
    CHK 79%
    KWK 69%

    This is your lucky day. If it holds.

  172. Z re66 – if you remember I agreed re natural gas (although it sure felt like we were the only ones bullish natural gas at that moment which only served to make me more bullish!). However I think this may turn out to be something more than short covering. I think that low should be a major major low. I need to start putting some waves on the move up off the low but for sure the low completed five waves down.

  173. Nicky – I absolutely remember. I just want credit too you see, lest people only remember the hat eating and not the “this won’t last long, traders and analysts are driving with the rear view mirror on the data” comments I was making at the time, lol. I think we have made the major low. I think fighting off the next down day will be a good test. Hopefully we hold $3. I’m sticking with my upside on the winter months, not averaging above a high of $5.50 but with $6.50 to $7.50 later next year as a target.

  174. One last thing on the EIA numbers and then I’ll leave it alone for the post. The gasoline demand was off week to week but it was the third week in a row that exceeded year ago levels and it was pretty much in line with the 5 year average. If we get more of that type of action I have to wonder if there is more to it than just business surrounding the holiday.

  177. I’m still wondering when we will see the big buy in at HK. Thought Floyd had to punt last year, don’t recall seeing him slam back in.

  180. He essentially sold 370K he picked up for 93 cent in May for $42 and then bought them back at 93 cents the same day. Neat job if you can get it, lol. His holdings are essentially unchanged at 1.787 mm shares.

  183. hmmmm…. don’t see the other half of that transaction. The “buy” half. So, my bad. thx

  184. BOP re: 24: Howell’s comments echo another very seasoned investor’s who I know, as everyone is fighting the up tape here. I bought some junky financial stocks awhile back on the theory that spreads would narrow, and continue to find some interesting, so your postings have been VERY HELPFUL keeping me just holding on. Thank you. Now they mention secondary Media stocks, a group I pay no att’n to; any names?

  185. Question on Stetson (SSNOF) in the Bakken as I believe well results are due given we are on day 24 relative to the release below. Any new information?

    CALGARY, ALBERTA — (MARKET WIRE) — 08/24/09 —

    STETSON OIL & GAS LTD. (TSX VENTURE: SSN) (“Stetson” or the “Company”) today announced that on August 23 drilling operations commenced on its first horizontal well on land holdings in North Dakota. It is expected that the well, Stetson MHA 1-11H-148-90, will be drilled to a vertical depth of approximately 9500 feet (2896 meters) and open hole logs will be run to evaluate the Bakken and Three Forks formations. The well will then be plugged back and horizontally drilled in the Bakken formation for a length of approximately 4500 feet (1372 meters). The well is expected to take 26 days to drill and completion operations will commence approximately two to three weeks following release of the drilling rig. Production results should be known in early October 2009. Stetson is the operator of the well and has a 48.75% working interest.

    The well will be drilled, in part, on lands leased from the Three Affiliated Tribes of the Fort Berthold Reservation. Stetson is in the process of licensing a second well that is expected to be spud in Q4 2009.

    Stetson is an emerging junior oil and gas company with exploration, development, and production programs in Saskatchewan and Alberta, Canada and North Dakota, USA.

    Bill Ward, President & CEO

  187. Nothing from me on Stetson, West?

    BOP – any thoughts from HT/TT on tomorrow. I assume HT is in buy the dips until it doesn’t continue mode, maybe thinking tomorrow open is ok as long as jobless claims are in line. Asia likely to be up on oil and U.S. equities again, same Europe. U.S. data thins after jobs for the week and there is nothing of consequence on my calendar for Friday. Other than quad-witch.

  188. been noting a steady rise in the vix since about 11:00 central…somebody has been buying insurance since about two and one-half hours into the day

  190. vix peaked at 23.92 around 2:00 central has backed down a bit to 23.78 the past half hour…may not mean anything

  191. RMD — thanks for your feedback. If it’s helpful, I’ll keep posting. As an aside, I got a note this afternoon from the MSH strategist… seems his research is gaining popularity with other sell-side firms… not many firms have a strategist who does cross-asset class stuff (which is what MJ and I specialize in). But they realize that you have to look at those sign posts, to figure out where the new “there” is.

    I’ll ask about the media names. But, he also sent around a special note this afternoon, pointing out that Citi (C) CDS are ripping, while the stock has gone the other way. Typically, ripping CDS presages much higher stock prices, once the equity mrkt wakes up to that fact.

    I’ll get back to you on the media names.

  193. Looking very solid into the close. I got what I wanted out of APC for a quick move and will hold into the open to see if we get a follow on move from analysts. I may hold it longer and am more concerned about the broad market than the story there. Things seems to need to cool even if they don’t appear to want to.

  195. I don’t know on stetson but I still say it will be wet, east of the Magic Pink Line. Although you can count on some news release that says they are continuing to test or something like that. I have been trying to short the stock so I may not be the one with an objective opinion.

  196. Pina Colada-thirty…

    “I was in the Virgin Islands once. I met a girl. We ate lobster, drank Piña Coladas. At sunset we made love like sea otters. That was a pretty good day. Why couldn’t I get that day over and over and over?”

  197. West, thanks, you are a resource. I will take a research position so that you will know where to locate a borrow. BTW, heartfelt thanks for the work you did on KOG.

  198. BBEP replay: expect to restart distributions “sooner rather than later”.
    Thought mgt weak, so have no feel here.

  201. re 200. So we buy plastic toys from China which funds their investment in Venezuela from which barrels are sent to China to make more plastic toys to sell to the U.S.

  202. I see it as XOM gets out of the Orinoco bed, sheets are still warm and in slides China. They really should ask why the bed is still warm? Then again, I do not think the Chinese reaction to getting screwed would be the same. I think they would be the same as a creepy stalker type of jilted lover.

  203. Wyoming – exactly. He’s gone from kicking out the bad old U.S.A. to dating China and Putin at once. Cross Putin and there will suddenly be a coup and a new, friendlier-to-Russia banana republic.

  204. That is where it gets interesting, will the US save his ass in the interest of securing oil? Hilary sucked up to Angola pretty good.

  205. Re 204. Great double message she presented. U.S. should get off foreign oil; Angola, please produce as much oil as possible.

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