Thursday – Gas Preview and Oil Review

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Sentiment Watch: Hugging more cash as the market rips higher.

  • As September expiry arrives tomorrow, I find myself largely in cash with only two scuds for this expiration to report (HAL puts and some too far out of the money HK calls taken last month). Otherwise I have a few cheaper name E&P calls and am content to go into the weekend that way.
  • As far as the ZLT stock portfolio goes, I'm going to play the watchful but fairly complacent investor there. Some of the smaller names like KOG which have seen 100%+ moves in such a short amount of time are tempting me to take some chips off the table and play through the next retrenchment/retracement/correction in the group/market with "house money".
  • Lastly, there is a normal tempation after making large gains to try and be too cute by either, immediately rolling to the next month and usually in the next strike up (rolling up and out) or by shorting on what has just risen so well for you or names where you feel you missed the boat. Given the broad market's "too far, too fast" action (at least it appears that way to me) I'm leary of either option this week and any trades you see in the next week are likely to be small nibbles, not big bites.

 In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Stuff We Care About Today - Gulf of Mexico shelf player update part 1
  6. Odds & Ends


Holdings Watch:

Yesterday's Trades:

  • 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.
  • 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.
  • 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.
  • 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.
  • 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.


Commodity Watch:

Crude oil moved up $1.58 to $72.51 with the help of a strong equity market, a weakening dollar and despite weaker demand for products. A bigger than expected draw down of crude stocks, though pretty obviously the result of weak imports and late season elevated throughput at refineries aided crude prices as well. This morning crude is trading down slightly.

Natural gas surged another 13%, or $0.44 to close at $3.76. Twist shorty, twist. I have my doubts as to the longevity of this rally but I don't think we'll be taking a trip into $1 handle land anytime soon either. This morning gas is trading flat to slightly up ahead of the EIA storage report.

Natural Gas Preview

  • My number: 75 Bcf. The weather was in line with the previous week but industrial demand would have taken a small hit due to the Labor day holiday. 
    • History:
      • Last Week: 69 Bcf
      • Last Year: 65 Bcf
      • 5 Year Average: 79 Bcf
    • Weather: Normal /  Mild, typical lowish demand for the should season.
    • Imports: Down 0.4 Bcfgpd from the prior week.
  • Street Consensus: 80 Bcf


EIA Oil Inventory Review

CRUDE OIL - Bigger than expected draw down as refinery utilization remains aloft longer than expected. Stocks at Cushing fell by a large amount that's pretty hard to explain. With Cushing stocks at their lowest levels of the year its not surprising we saw a bounce in oil yesterday, however, the reduction in stocks is likely to be temporary due to a combination of soon to normalize capcity rates and imports.














Stuff We Care About Today

WTI (W&T Offshore) Enters Hedges:

  • In 2010 added oil and gas collars with floors at $69.81/barrel and $5.00/MMBTU respectively. They also entered into a swap on natural gas at $5.71.
  • I don't follow WTI closely but my point in pointing this out is that it will be worth watching the market's reaction to a normally non-hedge player taking advantage of the recent run in especially natural gas.

Gulf of Mexico Shelf Player Update: Part 1

Key Points

  1. Big moves in the names.
  2. The names still look cheap on a CFPS basis.
  3. Lifting costs are generally higher for these guys meaning they need higher commodity price than their onshore competitors do.
  4. R/P ratios (reserves / production) are very short. This means that they are on a fast treadmill, constantly needing to make new discoveries to replace production, let alone grow it and reserves.
  5. In general, they are more exploration oriented than their shaley focused onshore peers.
  6. As such, lower commodity prices greatly increase their risk profile as reinvestment is less certain.
  7. I'm starting to take a look at these guys, after this big run from the put side.

    1. Probably no trades from me in the space this week but if you look at a 50% move in SGY month to date, you kind of have to scratch your head (Stone has a small position onshore in the Marcellus which may be boosting the shares).
    2. CPE has going concern risk and yet it has popped
  8. On the long side:

    1. I'm hearing a lot of noises surrounding MMR
    2. and MCF has always been interesting, has a quality set of assets and hasn't really moved yet.
  9. I'll have charts out tomorrow with production growth, balance sheet, reserves per share, and hedge information along with short notes on each name. Not rushing to buy or short, just taking a closer look.

E&P Insider Sales Mounting - Seeing more and more insider sales, people sell for lots of reasons and the amounts are generally not large but we are seeing a number of E&P execs punting shares after this recent run. Today, a KWK VP, in the last few days, execs at NFX, PXD, SWN.



Odds & Ends

Analyst Watch:

  • (TSO) - Soleil cut their rating to Sell (this may prove to be the entry opportunity I've been looking for).
  • (PCX) - Cut to Neutral at UBS


190 Responses to “Thursday – Gas Preview and Oil Review”

  1. 1
    zman Says:

    Eli – thanks for that note. Agreed. You should post your thoughts on the “lack of hedging” here.

  2. 2
    zman Says:

    APC – a little follow up. Ghana wants to take one of the junior partners (who wants to sell) out of Jubilee. This is APC’s big find 700 miles to the south east of yesterday’s Venus. Price not yet disclosed.

    CL down 60 cents
    NG down a dime

  3. 3
    zman Says:

    Jobless claims came in at 545K vs 563K exp

    Housing starts were in line at 598K. Ya gotta wonder why rising starts are needed at this juncture. I mean, come on, banks are paying people to squat in foreclosed homes and there is another wave of foreclosures coming. So adding to supply is a good idea? Seems deflationary, as in the value of my property being deflated.

  4. 4
    BirdsofpreyRcool Says:

    Good morning.

    Credit Market taking a bit of a rest and giving back some of it’s breathtaking gains over the last week or so. Speculation is that much of the move in the High Yield Index was “nothing but short covering.” And “they seem to be done now.” Frankly, HY is too tight, compared to other indices and stocks.

    But, here’s the thing… people always talk about “short covering” like it’s something different than “real buying.” But it IS real buying… by the ones who were most convicted that the mrkt was headed lower. So, should “short covering” be dismissed as “not real buyers”? I would argue the opposite. That the ones most sensitive to a change in mrkt direction are changing their minds.

    Anyway, “buying” is “buying,” in my book. Whether it’s short covering, or longs going long. That said, the positive move in the HY index has been eye-popping… just as it was eye-popping in the other direction, just over a yr ago.

    IG 105 1/2 (this traded as tight as 98 the other day)

    HY 94 1/4 (this traded as high as 96)

  5. 5
    kyleandy Says:

    z – in your chart on gom shelf players, what does TEV stand for

  6. 6
    BirdsofpreyRcool Says:

    From our cross-asset class strategist this morning…


    He went out with a “buy” on C yesterday. He lays out his arguments for that recommendation here.

  7. 7
    zman Says:

    Just looked at the morning comment from TPH on HAL. They really like it.

    Looking at their comments, they are higher than the Street on EPS for next year, they admit that margins in N. America will be under pressure, that margins in the international arena will be under pressure, and that HAL has again reiterated that in fact, its past down margin guidance is still just that, down. They see HAL grabbing market share during this downturn but admit that cost savings may not show up more in the 3Q numbers, maybe in 4q. In NAM specifically, they see continued pricing pressure, especially in the markets where activity has been strong like the Haynesville and Marcellus.

    But again, they like it.

  8. 8
    zman Says:

    Enterprise value, basically debt + mkt cap

  9. 9
    BirdsofpreyRcool Says:

    Just IMing HeadTrader that the mrkt feels like it could go in either direction today. He came back with TechTrader’s odds… 50/50.

    So, who knows.

    HT adds his color — “I would be biased to the downside after strength the last few days, but would be NIMBLE [his emphasis] ’cause I still like to buy dips for more than one day [swing trading]”

  10. 10
    zman Says:

    Kyle – when I compare companies with similar balance sheet structures, P/E or P/CF is fine. Because they are financing their future in similar manners.

    But when you are presented with a set of companies with wildly different capital structures, as is the case especially in the offshore, where some have a little debt and some have a lot, a better comparison, to get them into the realm of apples to apples is to take Mkt Cap + Debt less Working Capital / EBITDA (earnings before interest, taxes, depr and amort). That basically gets them on the same page.

    Note in the table how CPE looks cheap on a P/CF basis. Their mkt cap has been punished for their enormous debt load. P/CF doesn’t show you that. But take a look at TEV/EBITDA and suddenly, with the debt added into the picture of how the world views the asset, you can see the name looks expensive.

  11. 11
    zman Says:

    BOP tells me the Street fell to 79 Bcf from 80 listed in the post, so they are inching closer to my number. With the holiday in there I’d give the number 5 to 10 Bcf from last week given that the weather was pretty similar, gets tough to call this time of year anyway, I went with five on my math and a little tweaking for curtailments and flow orders turning gas back. I continue to think the injections from here on out will be on the smaller side of historic averages.

  12. 12
    zman Says:

    KOG – easy there stock, relax, base out. Too far too fast can make new investors hit the exits quickly.

    E&P group opened red but looks like it wants to turn green. Another day like yesterday and they can have all of my October calls as well.

    APC moving on up.

  13. 13
    zman Says:

    VTZ – dead on calls on the dollar and gold. Way to go.

  14. 14
    BirdsofpreyRcool Says:

    z — after watching your storage predictions for over a year, I have to say that I find you the most accurate… not to put any PRESSURE on you, or anything. But, you seem to have a good feel for how the numbers are calculated.

  15. 15
    zman Says:

    Re 14 – Now watch me brick this one big time!

  16. 16
    BirdsofpreyRcool Says:

    yeah… i know. I just put the kiss of death on ya. But I thought that new people should know that — at least historically — your calculations are well worth noting.

  17. 17
    zman Says:

    Thanks Bop. Back at ya on all things credit. Smart work there.

  18. 18
    zman Says:

    And KOG of course.

  19. 19
    BirdsofpreyRcool Says:

    z — thx. I’m gonna have to come up with another one. Thing is, I can only follow so many, as I do more stuff than just energy, so I try to pick my points. But need to surf for a few more ideas in E&P land. That’s where this site becomes very helpful.

  20. 20
    BirdsofpreyRcool Says:

    Sloppy, floppy trading day. Might stay this way through options expiry tomorrow.

  21. 21
    reefguy Says:

    APC- significant discovery of first oil in “Liberia”basin makes the next basin to the north west off Guinea curious. A microcap; HDY holds 20,000,000 acre concession there. This is super high risk equity idea.

  22. 22
    zman Says:

    Natixis cuts ATPG from Buy to Hold.

  23. 23
    zman Says:

    XTO playing catch up to the big cap E&Ps today.

  24. 24
    zman Says:

    Adding to 21.

    I read up on them last night after Reef’s prompting. Essentially they are a company with some good resumes and a concession off Guinea which the geologist CEO (former of the Kuwait oil company) thinks is highly prospective. They have nothing in terms of a balance sheet at this time, not debt, market cap is under $100mm, but no production that I saw. The CEO is new and I read his transcript when he addressed shareholders about taking the job in August.

    Essentially they are working up the seismic on the concession, a very large patch of water with both deepwater and shallow water targets in an effort to get to a point where they can decide where to drill and whether or not to farmout part of the project to a partner. The CEO said they have had partnership interest and are exploring both majority parnterhsips (where they would be highly carried and not operate), minority partnerships (which would be more of a financial transaction), or lastly, doing a market deal to pay for further seismic and drilling. They have to drill a well by the end of 2011 so you won’t see real news here outside of a partnership before that time most likely.

    What will move the stock is activity in the vicinity by the likes of APC, Tullow, Woodside etc., grabs by the governments as well like you are seeing with Jubilee to the south east.

    Anyway, interesting, nothing in terms of an asset you can say something about reserves or production about. But interesting and it is the kind of thing that in this market can pop. I am probably not going to take a piece but I have a little more reading to do before I decide for sure and if I do take some it will be small.

  25. 25
    Gtinvest Says:

    How about a contest, guess the spot price of ng for each month and a grand price for guessing the forward strip for 2010 any day prior to end of this year?

  26. 26
    BirdsofpreyRcool Says:

    reef — thanks for passing that along. You know the mngmt team there at HDY? Headed up by an old Amoco International guy, it looks like.

  27. 27
    zman Says:

    Philly Fed 14.1.
    9.0 was expected.

  28. 28
    zman Says:


    CEO is Ray Leonard, taking most of his comp in stock. August 11 webcast was pretty informative.


    I need to know more about their outstanding warrants and a couple of things to get comfy but it can run in this kind of market.

  29. 29
    reefguy Says:

    HDY- have watched and chuckled for four years until: 1) Now have real O&G managaement 2)APC in Liberia Basin.
    I am going to nibble some equity based on close-ology and gut

  30. 30
    zman Says:

    Irony Watch:

    Southcoast cuts SGY to hold, favors WTI.

  31. 31
    zman Says:

    BOP – by the way, agree re your short covering is buying comment. The only delta is that sometimes there is a lack of follow through by natural buyers in the wake of a short cover. The trading vehicle stalls and the shorts re short.

  32. 32
    Nicky Says:

    Good morning.

    Running for the door in equities:


    SPY Citi and Q’s leading selling on strength with huge money flows

  33. 33
    BirdsofpreyRcool Says:

    z — sure, ok. Agreed. And shorts are tenacious creatures. They have to be. Their “upside” isn’t as much as their “downside.” And once they get a bone, they love to chew on it.

  34. 34
    zman Says:

    If we get an 85+ Bcf number, which I doubt, but if we get that with the report in 15 minutes, I will take some puts in NG stocks. Probably SGY, maybe even a little of one of (SWN,UPL,RRC, or HK for a trade) and definitely HAL which is NG levered.

  35. 35
    zman Says:

    Adding to 34

    I will also punt my KWK $15 Octobers on that kind of a bad number.

  36. 36
    Wyoming Says:


    Tough on stripper wells. Long KEG for P&A’s if this happens.

  37. 37
    Nicky Says:

    Rick Santelli digs a bit deeper into Philly Fed and it isn’t pretty – New business orders down and hirings down.

  38. 38
    zman Says:

    Wyo – yeah but who’s going to pay for the P&A’s?

  39. 39
    zman Says:

    President scrapping the old European missile defense plan. I wonder what the U.S. gets from Putin for that.

  40. 40
    zman Says:

    GT – will have to think about that one.

  41. 41
    Garyinhou Says:

    maybe he’ll sign a bare chested photo for the white house wall

  42. 42
    zman Says:

    Gary comment = coffee out nose.

  43. 43
    zman Says:

    Natural gas inventory report:

    66 Bcf – that’s pretty bullish

  44. 44
    reefguy Says:


  45. 45
    zman Says:

    Gas from down 8 to up 8 cents in a second.

  46. 46
    reefguy Says:

    gas may cross $4

  47. 47
    bill Says:

    full is full and at some point the weekly number will be 0

    so is the 66 due to lower production or is it due to there is no where to put it

  48. 48
    zman Says:

    Reef – could indeed. Love the CNBC interview with the trader who when asked that question said, “I’m struggling with a $4 handle with so much in the tank.” Pretty naive view of what prices gas.

  49. 49
    bill Says:

    gst ,next little guy on the move

  50. 50
    Wyoming Says:

    Was this a cooler week?

    BTW, some will pay out of their OpEx others will probably BK and the State will have to flip the bill. Refer to the article about the old Forest properties I posted (bottom of the volcano).

  51. 51
    zman Says:


    Not sure I understand your first statement. 3.7 Tcf would be perceived differently than 3.85 or 4.0, all are considered full.

    The lower number is almost certain a combination of voluntary and involuntary curtailments, probably not demand given that it was a holiday week, however, industrial consumers have rarely had prices this good. And chemical shipments, which are a big slice of that piece of demand are rising.

  52. 52
    zman Says:

    No, it was in line with the last one.

  53. 53
    reefguy Says:

    66 in the face of a short labor day week.
    Next week may be the key on industrial pickup. We know coal use is down 15% Y over Y.

  54. 54
    Wyoming Says:

    Can anyone remind me of the website with the horizontal drilling animation? Drillers HS daughter has a presentation and was looking for a visual aid.

    I believe it was a Bakken operators site.

  55. 55
    zman Says:

    Reef – exactly my thinking as well. Electricity ytd running between 4 and 5% down, coal much worse so gas is grabbing share on the heat rate conversion. (BTU/KwH) just more economic for utilities for gas right now.

  56. 56
    Garyinhou Says:


  57. 57
    zman Says:

    Note gas failed to sustain rally. It has had a strong run. If it goes ahead and backs off some more in what appears to be a frenzy, I will carry out #34,35

  58. 58
    bill Says:

    i am thinking full is an absolute number and as one approaches it a combination of voluntary and involuntary curtailments happen and the “lower” weekly number is greeted with great glee and interperted as production is under control or demand is rising.

    I think we have made strides, but i still see companies producing more hk,swn,chk name them..they all are higher

  59. 59
    reefguy Says:

    5 day week could have been a 60 or 62

  60. 60
    Dman Says:

    #39 – Not long ago, Russia agreed to allow the US to supply Af-Pak via its territory. Could be this is part of that deal. Which is icing on the cake for Mr Putin, since he has plenty of other motives to assist the US in getting further ensnared in Af-Pak, just as the Russians did in the 1980’s.

  61. 61
    zman Says:

    Bill – I think what you can’t see is the big number of names that aren’t going to grow this year. HK and SWN for sure but even Aubrey is looking flattish as his big new wells offset declines elsewhere. Most names who are staying within cash flow aren’t going to be able to hold flat as cash flow is depressed by these prices, especially next year as many are lightly hedged. On the private company side, I understand things are shut down so that’s another big chunk of production that will be slipping in 2010.

  62. 62
    VTZ Says:

    RE 13 – I feel like I’ve had a good feel for the market interactions recently.

    In my opinion, there is no way that gold does not at least test 1033. I think it’s likely that gold tries to close above 1014 one more day and build a solid base above 1000 before making a run at it.

    Seeing as the dollar has not found technical support anywhere in the 76 range it’s likely that psycological resistance at 76 is the last chance.

    To me, if 76 breaks on the USD it’s assured that gold makes new highs.

    To those that say gold is overbought, look at a weekly chart and it has a long way to go.

  63. 63
    VTZ Says:

    72 for the USD and 1150-1200 for gold after a break both ways would make sense to me.

  64. 64
    Nicky Says:

    VTZ – not sure I understand your comments about the USD not finding support in the 76 area. Its been holding in that area all week? I have it currently at 76.40. That said it looks like it needs another spike lower.

  65. 65
    Wyoming Says:


    You are a gentleman and a scholar. I will honor you with a beer during tonight’s game. Thank you.

  66. 66
    zman Says:

    KEG – might be the play of the century. What’s stripper well production in the U.S. about a quarter of oil production. Without the marginal well tax status many those are toast. Unless prices are much higher. Good idea Wyo.

    I actually think the President is a friend of those wanting higher natural gas prices. Not because he’s in favor of natural gas demand increasing via transportation but via restrictions on drilling on both a geographic and a clean water act basis.

  67. 67
    elijahwc Says:

    Z RE#1 Sorry this took so long.

    This morning Helene Meisler an old school Techie that I follow offered up this observation, “I suppose if I had to sum it up, we’ve seen tons of call-buying on stocks (that’s the low equity put/call ratio), but also we’ve seen tons of put-buying on the index (that’s the relatively high index put/call ratio). That would mean folks are buying stocks but hedging with an index put.

    The change is that Wednesday there was no more hedging.”

    To which I penned in an client email this morning:


    An interesting observation about pros tossing in the towel is contained in
    the attachment above.

    Please note “The change is that Wednesday there was no more hedging.”.

    We are getting close.

    Here to fore, I have been watching the “quality of leadership” of the
    financials and the “quality of weakness” in the dollar as my tells.

    The financials gave up two weeks ago whereas the dollar is still doing just

    Now, I’m attempting to discern whether everyone is on the same side of the
    ship and “no more hedging” in an overbought market will sure get you there.

    The last marker we need to see is a rush to the market by issuers in order
    to accommodate the new found appetite for financial assets and thus over
    supply demand.

    Lots of deals coming.

    Maybe its time for a pause.

  68. 68
    Garyinhou Says:

    no problemo and thanks!

  69. 69
    zman Says:

    Bidding some October HAL puts, small.

    Re 65 – agreed. I’d bet they swap similar photos. I wonder if Putin will take O’s off the wall when Hugo visits.

  70. 70
    zman Says:

    Re 67 – I’ve known Eli since the early 90s and when he talks, I listen.

  71. 71
    zman Says:

    OIH strangely negative on the day. Lots of profit made there in a very short amount of time.

  72. 72
    zman Says:


    HAL – Added (5) October $27.50 PUTS (HZLVR) for $1.20 with the stock at $28.

  73. 73
    Wyoming Says:

    There are a lot of mom and pops who are attractive to operators for the obvious. Offshore, I think Tetra (TTI) has a good product;


    Full presentation here:


  74. 74
    VTZ Says:

    Nicky – It’s been sliding. It’s not at all like the 78.30 level that was defended with a passion on multiple occasions.

  75. 75
    1520sbroad Says:

    VLO – any news there? big volume today

  76. 76
    zman Says:

    1520 – I think a group upgrade, was just noticing it up 8+%, TSO and SUN moving too.

  77. 77
    zman Says:

    1520 – Could also just be that the group hasn’t run and the weak margins have been factored into the prices. Soleil cut TSO this morning to sell which seems very out of touch at this juncture.

  78. 78
    zman Says:


    TSO – Added (10) October $16 calls for $0.80 with the stock at $15.70. See reasoning in the Tuesday post. Group started to move up today after being a laggard. Downgrades not affecting the stock. I am likely to double this if it backs off as I was planning to add TSO soon anyway.

  79. 79
    1520sbroad Says:

    z – look at the sept option chain for vlo – big action on the $20 calls for tomorrow too. perhaps someone engineering an in the money finish.

  80. 80
    zman Says:

    1520 – still don’t see fresh news. There have been consolidation rumors swirling but when you listen to VLO, TSO, SUN, FTO they all say no one is looking at buying anything. Heating oil and gasoline popping a bit compared to oil today but not enough to warrant this move.

  81. 81
    zman Says:

    1520 – I have a feeling hot money has discovered that the last frontier is refining. Group hasn’t moved, estimates bashed, economy set to recover (don’t throw rocks at me but it will recover some day ya know) etc. Expectations are set very low. So they dive in.

  82. 82
    1520sbroad Says:

    i owned VLO the last time johnny hotmoney found refining. a wild ride.

  83. 83
    zman Says:

    Another consideration on the TSO. 20% short.


  84. 84
    zman Says:

    KOG seeing a little pt here.

  85. 85
    1520sbroad Says:

    #83 – good point – refining has been a good short for quite a while. Like nat gas eventually the pendulum does swing.

  86. 86
    Nicky Says:

    VTZ but the count is also quite clear and it shows us now in v. It will end.

  87. 87
    zman Says:

    APC – UBS took target from $68 to $75 on yesterday’s news, seeing some profit taking now, moving more with the market than anything else.

    Nicky – where’s your next line in the sand for oil resistance.

  88. 88
    VTZ Says:

    I agree it will end. Keep in mind I’m not trading the USD, I’m trading gold. I only use the USD as an indicator. If it trades sideways-ish for a bit gold can still make new highs.

  89. 89
    VTZ Says:

    Opti Canada surges in heavy volume for 2nd day
    15 minutes ago – Reuters
    CALGARY, Alberta (Reuters) – Opti Canada Inc shares surged for a second day on Thursday as speculation swirled over the reason for the gains in the company known for its minority stake in Nexen Inc’s Long Lake oil sands project.

    Opti was up 27 Canadian cents, or 12 percent, at C$2.52 on the Toronto Stock Exchange late in the morning on volume of nearly 9 million shares.

    Nexen shares were up 8 Canadian cents at C$25.68

    The rise brought Opti’s two-day gain to 50 percent. The company has not reported any developments, and officials have not been available for comment.

    Some analysts have said investors may believe Opti could be the next takeover target for a Chinese oil company after PetroChina’s C$1.9 billion ($1.8 billion) deal in August to buy a 60 percent stake in two planned oil sands projects from privately held Athabasca Oil Sands Corp.

  90. 90
    Alhambra Says:

    Talk about falling out of bed, NFX reaction to insiders selling?

  91. 91
    zman Says:

    A – After the run it has had it is not surprising to see it come in some. Maybe the insider selling adds to the fall a bit but that news was out days ago and the selling was pretty small. Maybe they fear more or maybe this is just profit taking. The name remains on the cheaper side of the group and they have a number of long and short term catalysts that should make it more of a goto name going forward. I have my tiny October call position and if we get much more of a pull back, I’ll look to double that next week.

  92. 92
    bill Says:

    ng storage is 3,458 bcf

    last year peak was 3,488 bcf

    so i dont know what the systems capacity is but i think we will find out

    the west and east are already at higher levels

    assuming they can squeeze 3.7 in thats 250 bcf fo the next 8 weeks or an avg of 31 a week

  93. 93
    zman Says:

    Bill – The EIA’s last look at peak storage is 3,889 Bcf.

    Non-coincident peak storage is I think around 4,100 Bcf.

  94. 94
    zman Says:

    That EIA look at storage capacity was from August, 2009.


  95. 95
    zman Says:

    NG down 16 cents now; missed an entry on RRC puts. Nothing against RRC but it is the most expensive in the extremely gassy group on a forward cash flow basis.

  96. 96
    zman Says:


    Added (5) APC October $70 calls (AZWJN) for $1.10 with the stock at 64.50, off a little with the group and on profit taking after yesterday’s move.

    I continue to hold the $65 October calls here.

  97. 97
    Nicky Says:

    Z – I think it likely that oil moves higher with the broader market which I know is rather stating the obvious. It has resistance at 73.30 and 74.50 and it looks likely that it will retest the highs.

    Only an impulsive move under 67 says its done.

  98. 98
    zman Says:

    Cool Nicky, thanks, pretty much what I was thinking. I don’t see much upside beyond $75 though, not until we get a better handle on winter heating demand, what gasoline looks like going forward (3 weeks of positive YoY demand in a row, waahoo), and the fall planting season which should soak up some diesel as well.

  99. 99
    RMD Says:

    For those still bullish: I reviewed P&F charts of the group looking for the same blast-off formation that CHK had at $24 and came up with these names (realizing at this point they are laggards):
    BPZ, COG, CXG, CVX,FST,KED, MCF, MRO, and some MLPs which have run a bit more. Full disclosure = I bot FST.)

  100. 100
    zman Says:

    Thanks much RMD.

    From a fundy standpoint, FST has gotten a lot more interesting this year.

    I like the quirky MCF and BPZ is a solid oil story.

  101. 101
    RMD Says:

    Opps: forgot GST which I bot also.

  102. 102
    bill Says:

    tax on soda coming

    butter and big macs next

    i swear they go to work every day thinking what can i tax today

  103. 103
    zman Says:

    GST got interesting after their last deal, lot of potential there although I’m told, EFS not on their acreage.

  104. 104
    Jay Says:

    If the stripper well operators take a hit, at least in this area, it’s not going to be pretty for the State of Louisiana. Last time lots of operators went bust the State was left with the thousands of Orphan Wells. There are something like 7,000 remaining to be “adopted” in the Shreveport District alone.

    Plugging, if done by the State, costs about 5X what it costs an operator to do it and these jobs are done by local P&A outfits.

    FWIW, this oil field also makes about 1MM bbl/year, a pretty good chunk of severance tax to the State even at stripper well rates 3.25%.

    When the last bust took place in the late 80’s there was one bank left in Shreveport that had not been closed by the FDIC. At the time I had a loan on some acreage adjoining my house, went to the bank to pay my monthly note and was told “don’t do anything, just wait and see what happens.”

    Two years later a guy from New Jersey called who said that he had bought my note and said he wouldn’t settle for less than 9 cents on the dollar! My tax dollars at work.

  105. 105
    zman Says:

    Bill – Would you like fries with that health care order sir?

  106. 106
    zman Says:

    Nice color Jay. Better look into that KEG.

  107. 107
    ram Says:

    Profit taking in the Bakken?

  108. 108
    zman Says:

    Ram – yep, there and just about everywhere else. Looks like the stuff that rose the most recently is having the worst of it.

  109. 109
    BirdsofpreyRcool Says:


    · Equities drift to session lows after a choppy morning; SPX dn 2pts to 1066 while credit underperforms (for a change). Despite some weakness early this afternoon, it remains a very resilient tape that refuses spend much time in the red; ie, negative headlines (ORCL earnings, S&P CDO announcement, etc) are not having a whole lot of impact on broader sentiment. The calendar is pretty quiet for the rest of the week as traders’ attention now turns to tomorrow’s expiration and rebalance.

    · Corp credit is actually underperforming stocks today (finally); very quiet trading in credit and space gives back some of the very strong move from yesterday. IG is wider by a few BPs (back out above 100bp) and HY falls 5/8.

    · Sectors: financials were again leaders on the bounce at the open (extending the very strong rally from last week). Tech is flattish on the day (despite ORCL being off ~2%). Materials strong again (steels are rallying further, extending strength from Wed). On the downside, industrials/cap goods (taking a breather following few sessions of strong trading), transports (this group lagged Wed and is weak again today; FDX off ~1.5%+ after earnings), telecoms (also lagged on Wed and extending weakness today; mgmt at S, VZ, T, DT all spoke this morning at Goldman). Airlines very strong on back of AMR’s announcement (the XAL airline index has been higher for the last 11 consecutive trading sessions).

    · Treasuries: 2s are flattish while 10s and 30s are higher. The Treasury announced the size of next week’s coupon sales and on the whole auction amount a bit lower than our forecasts. Coupon sales coming up Tues Sept 22 ($43B of 2s), Wed Sept 23 ($40B of 5s), and Thurs Sept 24 ($29B of 7s). Color from the desk: We con’t to see real $ demand for the back end, although the most recent leg of the flattening has been driven by the bond contract which is outperforming 10s and 30s on the crv.

    · Dollar again trending lower: has been down for 9 of the last 10 trading sessions. DXY off small (-0.13%) but continues to drift lower (and provide support for risk assets, inc. equities). The euro continues to march higher (at 1.473 now) and at highest level since Aug ’08.

    · S&P today published revised methodologies and assumptions it uses to rate global collateralized debt obligations (CDOs) backed by corporate debt. Today’s publication results from a proposal outlined in a request for comment published on March 16, 2009. “On implementation of today’s update, globally we will place on CreditWatch negative approximately 4,790 public rated corporate CDO tranches with an approximate equivalent U.S. dollar amount of $578 billion”

  110. 110
    West Says:

    They got Porky on the spit and I really like BBQ so I’m adding March 12.5 on ATPG.

  111. 111
    zman Says:

    West – re 110 – just to be clear, calls or puts?

  112. 112
    West Says:

    calls, sorry about that, somebody throwing more wood on the fire because I just got some at 7.7.

  113. 113
    zman Says:

    Ram – scroll about 3/4 of the way down on this…pretty much says it all about today.


    Note the bright green in refining land.

  114. 114
    zman Says:

    I wonder how cap and trade deals with this:


  115. 115
    zman Says:

    S&P Equity taking NFX target up $8 to $54

  116. 116
    zman Says:

    WLL – down 5%. Like it but not tempted yet. Give me another 5% down and I’ll be back long, all other things being equal.

  117. 117
    zman Says:

    Site was down for a few minutes, glitch at host. If you ever see it down shoot me a note or check the back up site at:


  118. 118
    bill Says:

    atpg down 9 %.. nice slap across the head to remind you that markets dont go straight up forever

    ng stocks are over extended except hk

  119. 119
    bill Says:

    110 lol i bet calls

    i just added oct 20’s and march 15’s

  120. 120
    BirdsofpreyRcool Says:

    After the long run we’ve had, in the mrkts in general and in energy especially, I’m going to guess we give back today and tomorrow. Maybe even Monday. I have some cash on the sidelines from selling down over the last few days. Will be patient in redeploying. But will redeploy. FWIW.

  121. 121
    zman Says:

    Hear ya BOP, echos the last 3 days of my opening paragraph.

    I will say that as sell offs go this one is pretty pathetic. Was hoping to get some deep hits on CLR and WLL to add them back. Being patient.

  122. 122
    reefguy Says:

    IOC- Antelope #2 encounters pay 345 higher than anticipated. Stock up 8%

  123. 123
    BirdsofpreyRcool Says:

    reef — you’re pretty good with the little international kids. Thanks for keeping us up to date on that stuff.

  124. 124
    RMD Says:

    Z, quirky MCF: someone described mgtaswearing sandals and Hawaiian shirts and wondering why the St. ignores them. No one follows stock acording to Yahoo? Any color would be appreciated as 9/14 release sounds stockholder friendly. Thanks.

  125. 125
    zman Says:

    Reef – and they added to ELK share last night, scooping another 4% of it. IOC is capable of big moves and that is a big pile of gas. You still long there?

  126. 126
    zman Says:

    MCF has one analyst following to my knowledge.

    At last check they had 7 employees and pretty much contract out everything except 3D reprocessing, maybe that too. They have made some good finds in the past but the Alice In Wonderland presentation style got a little weird and the Street didn’t see a lot of business from them. Still, worth a look as they had talent and reserves on their side and I will take a look again. I still think of SGY as the gang that couldn’t shoot straight but look at that chart.

  127. 127
    Wyoming Says:

    114 – Cap n Trade necessary because all the volcano’s were caused by frac’n the Bartnett.

  128. 128
    zman Says:

    MCF – been meaning to look at them a little harder, did not used to have options, does not with fat spreads as the stock is thin. Gotta like cash pile and lack of debt and unused credit line. Reserves per share is high, they’ve got a good track record (again, last time I checked) on the Shelf, don’t know if they have any deepwater interests. Sounds like they are not very busy, planning to drill 4 exploratory wells between now and mid 2010 on the Shelf. Will work it up for Monday or Tuesday.

  129. 129
    Wyoming Says:


  130. 130
    reefguy Says:

    ioc- long but looking

  131. 131
    zman Says:

    re 129 … my favorite quote:

    “We have tended to observe over the months that — despite the claims of some of the bloggers, self-proclaimed ‘experts,’ business TV circus freaks — there does not seem to be a predictable pattern where the front month-second month spread gets wider at the time of UNG’s roll,” Hyland said.

  132. 132
    jiveyjr Says:

    I added more KOG at 2.33

  133. 133
    zman Says:

    NG falling into the close of NYMEX, down 6.4%, or 24 cents now at 3.53. Strip is down about half that.

  134. 134
    BirdsofpreyRcool Says:

    jiveyjr — good trading!

  135. 135
    BirdsofpreyRcool Says:

    FWIW, HeadTrader thinks the mrkt closes in the green today. I’m not in his camp, but can see his point. Mrkt stalled, figuring out what to do next.

  136. 136
    zman Says:

    BOP – re 135 – yeah, its a coin toss in my book. No eco data tomorrow.

  137. 137
    jiveyjr Says:

    thx BOP…

  138. 138
    zman Says:

    Been on phone…

    Jivey wins the “gutsy move Mav” award for the day.

  139. 139
    RMD Says:

    Which roker follows MCF?

  140. 140
    RMD Says:

    opps, meant “broker”.

  141. 141
    zman Says:

    Re the Refining Group pop

    According to Dow Jones, analysts saying long term investors may be realizing that there’s not much downside form here for the stocks, so it is worth buying them now while they are cheap.

    Credit Suisse pointing out gasoline demand is showing some signs of recovery.

  142. 142
    zman Says:

    Don’t know, all I see is 1 analyst with EPS estimates…he doesn’t show CFPS or EBITDA so my guess is its a bucket shop, not an energy analyst at all.

  143. 143
    zman Says:

    Deutsche Bank on the tape raising APC target from 49 to 58

  144. 144
    elijahwc Says:

    OT but sort of OnT:

    For those of you who appreciate market commentary and beautiful prose Don Coxes’ most recent Basic Points can be found here.


    The on topic segment (e.g. no sun spots = Very cold) is in the Grains section found on pages 27 through 30, but you are doing yourself a disservice if you do not find the time to read the whole.

    A good single malt goes well when reading Coxe.

  145. 145
    jiveyjr Says:

    thx Z…I don’t make many gutsy moves any more…too old to come back

  146. 146
    BirdsofpreyRcool Says:

    RMD — yep… MCF has only one official “analyst” following it… EVA Dimensions, a black-box shop.

  147. 147
    RMD Says:

    Imagine my shame: only bucket shops folowing a name I’m interested in!

  148. 148
    zman Says:

    Feels like pinning action for tomorrow setting in early.

  149. 149
    zman Says:

    RMD – I will make an effort to add some value then.

  150. 150
    BirdsofpreyRcool Says:

    RMD — ha!

    aren’t some of the best stocks the ones the Street doesn’t follow?

  151. 151
    elijahwc Says:

    KOG closes in the green?? What say thee?

  152. 152
    zman Says:

    No idea. Today and tomorrow pretty wonky trading. I’d like to see a continued resurgence in APC today and the refiners tomorrow.

    On refining, I saw the signs and waited. Often the signs come and the group just sits there until someone mentions it in a news story that yes, by the way, demand was up for 3 weeks for gasoline and all is not lost on the distillate side. The refiners taking more capacity off line over the next 2 months should help keep oil in check while boosting product prices. Cold winter won’t hurt either. Anyway, big, easy to understand pieces that the fast money can sink its greedy little teeth into.

  153. 153
    zman Says:

    Re 127. Well, the good news is, they just found water on the moon so if all the fracing buggers the volcanoes into erupting we’ll have a place to move to.

  154. 154
    zman Says:

    Cool surface map of moon with the water story:


  155. 155
    Wyoming Says:

    153, Got to pay the Cap N Trade tax for the trip to the moon. 🙂

  156. 156
    zman Says:

    Dooohhhh. Don’t you have a well to drill somewhere? 😉

  157. 157
    BirdsofpreyRcool Says:

    seeing Wyoming and z use emoticons = just precious.

  158. 158
    zman Says:

    It was an accident, won’t happen again.


  159. 159
    RMD Says:

    BOP: #150 = story of my portfolio.

  160. 160
    bill Says:


    how was the bbq

  161. 161
    BirdsofpreyRcool Says:

    For a “down” day… sure wasnt’ very down. Option expiry tomorrow means more of the same, I’ll wager.

  162. 162
    Jay Says:

    Matt Simmons has weighed in with a new presentation:

    Investing In Energy: A Nightmare Or An Enlightened Dream


  163. 163
    zman Says:

    V – Opti says stumped by share gain, shares falling.

  164. 164
    West Says:

    Got a little smoke inhalation, but finally got the apple out of my mouth. Strong close for ATPG shook out a lot of weaker hands this morning and some reshorting occurred.Here is a site that you can check available shares to short…http://www.interactivebrokers.com/en/trading/ViewShortableStocks.php?key=atpg&cntry=usa&tag=United+States&ib_entity=llc&ln=…..ATPG last 5 days reads like this for shares available to short:9/11–450k,9/14–200k, 9/15–550k, 9/16–1,000k, and today 200k. WE are not really seeing any covering yet and in fact a little reshorting today. If ATPG does an additional offering this will increase the float and decrease the pressure on the shorts to cover.At the last filing 8-31-09 there was 20 % short interest in common float. I was wondering if anybody might have an idea how to find out how much they have registered at this time that could be offered?

  165. 165
    kyleandy Says:

    re VLO from phil’s newsletter
    A Vault for Valero Means Call Option Feeding-Frenzy as Expiration Nears

    By Andrew Wilkinson

    Posted: September 17, 2009 – 5:32pm

    Today’s tickers: VLO, NTRI, EFA, BAX & WFC

    VLO – We can explain in part the activity in the September 20 strike call options, which is due to expire at the weekend. That’s straight forward. It’s now in the money following a 9% share price gain to $20.97. Investors have possibly built up a substantial short position at the start of August in the expectation that share would remain below $20 as they have since they collapsed on June 2. Selling short the calls means they stand to retain the premium if the stock price remains south of the border. We see little news to set off today’s enthusiasm for Valero, but the rally that has put the calls into the money has the potential to spark a significant amount of short covering. Options open interest here is around 33,000 while today’s volume is at around 29,000. Expiration Friday tomorrow should be fun. – Valero Energy Corp

  166. 166
    occam Says:

    From Schork this morning:
    One client in Calgary quipped that storage in Canada is so full that Edmonton is going to ban smoking in Alberta for fear of blowing up half the province.

  167. 167
    zman Says:

    Schork has been one of the one’s who has been guilty of oversimplifying the relationship between storage and gas prices, having said in the last month that gas was “going to $0”. Canadian storage is just as “full” as is U.S. storage. Their production declines will almost certainly be greater than those seen in the U.S. in 2010 as their prices have been weaker longer, and their rig count has been far more depressed for longer. Also, while they have shale plays emerging with high IP completions, they have nowhere near the amount of activity in those basins as the U.S. has had in the Barnett, Woodford, Haynesville etc. So, limiting the rigs working in the Western Canadian Sedimentary Basin, from which Canada derives a vast majority of its gas volumes, leads to an inevitable decline in Canadian production.

  168. 168
    VTZ Says:

    RE 163 – Yeah I doubt it’s due to a deal and it was obviously a rumour. Just showing how undervalued they could be perceived as takeover targets.

    RE 166 and 167 – Canada has nowhere near the storage that the US has so it doesn’t really make a difference. You can see the gas surplus in the AECO price though. That being said, Z is right that drilling in Alberta has completely fallen off a cliff, it’s non-existant.

    RE dollar – $112 Billion in notes next week.

  169. 169
    zman Says:

    V – I wish the Canadian govt would give data away like the U.S. govt on volumes. Would be helpful. Do you have any recent brokerage or other scribblings on the state of production out of the WCSB? My stuff is sadly dated.

  170. 170
    zman Says:

    Just looking at scale, Canadian storage peaks out between 450 and 600 Bcf each year. This year it will set a record as well.

  171. 171
    VTZ Says:

    I can ask my friend at Peters and Co about the WCSB stats. I guarantee they have something.

  172. 172
    zman Says:

    If it’s not too much trouble that would be great V!

  173. 173
    VTZ Says:

    The next best solution is just to find stats for BC, Alberta and Saskatchewan.

  174. 174
    zman Says:

    Right but StatsCan data is pay per view which is annoying when you need a lot historical data. In a perfect world I’d have those three provinces on a monthly basis going back 10 years. I have data into about 2003 going back a long time.

  175. 175
    VTZ Says:

    yeah statscan pisses me off too.

  176. 176
    zman Says:

    Of course, they don’t have the Chinese funding the EIA has, lol.

  177. 177
    VTZ Says:


    is interesting but not what you’re looking for. Would suggest LOW production.

  178. 178
    zman Says:

    Thanks, will have a look, the Ziff bros used to put out good stuff.

  179. 179
    VTZ Says:


    There’s some stats for you. CAPP is pretty good.

  180. 180
    zman Says:

    Thanks much V.

  181. 181
    zman Says:

    re 179 – Look at Alberta flatten. Flatten Alberta, Flatten. Also note that Maritimes on the E. Coast is just a fart of gas compared to what happens if Alberta rolls over.

  182. 182
    VTZ Says:

    I have more current and better stuff somewhere. CAPP is good for data though and they are from industry. Dave Collyer for example, the current CAPP president was the former country chair for Shell Canada.

  183. 183
    VTZ Says:


    Good high level presentation

  184. 184
    VTZ Says:

    I’ve read a bunch of data suggesting Alberta is maturing faster than people originally though and it could roll over.

  185. 185
    zman Says:

    We thought it was rolling over late last decade… and it was. If you get the more recent stuff, I’d like to see it. Thanks much.

  186. 186
    VTZ Says:

    Wait until the drop this year! It will make the 07 to 08 look small.

  187. 187
    Wyoming Says:


  188. 188
    Wyoming Says:

    183, do they really think supply will total that high by 2030 (~105mm bpd)? Copy of the DOE International Energy outlook.

  189. 189
    zman Says:

    187 – haha

    183 – I didn’t look at the oil projection. That 105 number does sound familiar though. We’re going to need to spend more $ to get there, lol.

  190. 190
    Wyoming Says:

    How will the OIH do it when they are busy plugging wells that are uneconomical due to lack of incentives.

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