Fearful Friday

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Eco Data Watch: Durable goods came in at -2.4% vs +0.7% expected and downwardly revised 4.8% last month. Equity and commodity futures rolled over immediately. Only natural gas remained aloft, trading around the $4 mark for the first time since early August. After the open we get new homes sales (expecting 440,000) and consumer sentiment (expecting a slight uptick to 70.5), either of which could move these nervous markets.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Stuff We Care About Today - CHK Midstream JV
  5. Odds & Ends

Holdings Watch

  • $10KP II:

    • $16,300
    • 51% Cash
    • The Current Holdings tab is updated.
    • I will update the $10KP tab before Monday.
  • Yesterday's Trades:

    • HAL – Sold my $27.50 puts for $1.37, up 12%. Just not liking the way it resists falling due to continued strong support from the Street. I may reenter higher later.
    • WLL – Added another (5) of the October $55 Calls (WLLJK) for $2.65 with the stock off nearly 4% at $55.25 and on a weak market, weak oil day.

Commodity Watch

Crude oil fell another $3.08 to close at $65.89 yesterday due to a weak equity market, the memory of Wednesday's less than stellar data from the EIA, and a second day of strength in the dollar. The front month crude chart has now broken its trend line at $68 and seems destined to establish a range in the mid $60s until evidence of increased end product demand shows up. I do not believe we will have to wait very long for the distillate side of demand to wake up and think that the API was foreshadowing increased demand that will be evidenced in next week's EIA report.  This morning crude is trading flat to down after giving up an overnight rally.

  • Goldman Sachs Says Oil Prices About To Breakout: Goldman said 2010 to 2013 will show declines in non-OPEC production of 1 mm bopd per year (that's a bold claim). Furthermore, they said oil prices are close to breaking out of the current narrow trading range of the past three months and will once evidence of an increase in demand surfaces. They also increased their global oil demand forecast. ZComment: Hmm, I try not to be jaded. But this looks like an attempt, I mean a really obvious attempt, to support oil prices after two strong days of selling which put the afformentioned trading range in danger of breaking down, not up.  My sense is that : 
    • Demand has apparently stabilized (but isn't exactly hopping in the U.S. and may be slipping in China), but
    • OPEC production is already inching higher and
    • inventories are rather full,
    • And so oil should probably be trading in that narrow trading range through year end until we see further evidence that demand is picking up and not just trending at depressed levels.
    • However, again, doing this on a Friday, after two bad days in the oil market, smacks of Goldman trying to catch a falling knife and flip it back up into the air. 

Natural gas rose nearly a dime to close at $3.96 yesterday after the EIA reported a slightly better than expected storage injection (see below). This morning gas is trading up slightly after trading as high at $4.03 in the overnight session.

  • Frac Fluids Watch: CEOs of CHK and RRC call for service companies to disclose frac fluids to dispel concerns about water pollution.
  • Supply Update Watch: Looks like the EIA's monthly report on gas supply will becoming out mid next week.
  • Winter Weather Watch: Tonight expect wide spread freezing temperatures in New England with cold pushing in the Carolinas over the weekend. Also forecast is the first arctic blast of the season for the Norther Plans and Upper Midwest.
  • Tropics Watch: Pretty quiet.

Natural Gas Storage Review

ZComment:  Curtailments are clearly showing up in the numbers as Cooling Degree Days fall seasonally but injections fail to build at the expected pace.

  • Storage has been above prior peak levels in the key Producing Region for five weeks now and at 1,126 Bcf, the region is approaching the EIA's new max storage estimate .  The region's storage has simply accepted more gas than many analysts believed possible has helped to curb fears that gas would have no place to go early in the injection season. 
  • Some analysts are refering to the smaller than expected builds as "false positives" or artificially reduced injections due to Operational Flow Orders keeping gas from storage.  OFOs are definitely forcing some gas to stay in the ground and out of the tank so to speak. If this was the only contributing factor to the reduced injections I would expect a much flatter than normal end of shoulder season period for storage. This would mute any cold-weather-price spikes as demand would be, at least early in the season, easily offset by formerly curtailed production that could now find its way into a pipe and from there into storage. 
  • The EIA numbers for July that are set to come out next week will be closely watched for signs of significant production rollover.
  • By the way, this is the fifth highest level of storage ever reported. The numbers that beat this level all came from October 2007. So we are essentially in full territory a month and half early. Notably, production was very much on the upswing in late 2007 and was thought to be accelerating. Just to put things in perspective, prices in October 2007 ranged from $6.76 to $8.33.





Stuff We Care About Today

CHK Forms Midstream JV With Private Equity Firm; To Receive $588 Million

  • CHK to receive $588 million in cash and have 50% ownership in the new midstream company, Chesapeake Midstream Partners or CMP. This transaction, combined with prior monetizations from earlier in the year easily pushed CHK over its target range of $600 to $800 mm in midstream monetizations for 2009. 
  • Aubrey will be CEO of CMP.
  • Most of the gathering assets CHK will contribute come from its Barnett Shale gathering system. Other gathering assets included come from a variety of conventional plays in the mid-continent.
  • They have been talking about this monetization for quite some time and I would think the stock should react favorably to getting this deal done.
  • CHK sees this as a first step in monetizing its midstream (gathering, treatment, compression) assets and sees adding more assets from its other operating areas to CMP over time.
  • CHK will hold a conference call Monday morning. 

MCF - I have a mini review of the company out next week.


Odds & Ends

Analyst Watch:

  •  Goldman Sachs makes numerous changes to E&P ratings, targets:

    • SD target goes from $12 to $13 but the rating is cut to Sell. I may double my position on weakness here today.
    • APA target goes from $92 to $115
    • CHK upped from $27 to $34
    • EOG upped from $85 to $101
    • NFX upped from $48 to $60
    • PXD upped from $36 to $46
    • FST upped from $16 to $22


111 Responses to “Fearful Friday”

  1. 1
    zman Says:

    Two stories in the last 12 hours on market watch saying natural gas rally is about to be over.



  2. 2
    zman Says:

    More Goldman’s call.

    They said they like oil levered E&P but that gas leveraged names will be impacted by slower to recovery natural gas prices.

    Speaking of the downgrade on SD, it was valuation based, saying that the asset based has improved but that SD would get less credit for it given the natural gas price environment. I’ll wait for it to get clocked today and buy more in a bit as I think GS is missing the boat there.

  3. 3
    zman Says:

    Art Hogan saying he would not put too much weight in these one off events (bad August eco data).

  4. 4
    zman Says:

    Crude and natural gas opening flat.

  5. 5
    Jerome Blank Says:

    SD has strong support at $11, and holds its buy signal until a print of $10.50

  6. 6
    zman Says:

    Thanks J. Usually when firms make a big call like this (go long the oily names) they pick a few names to sacrifice. Two trades in one for the broker.

  7. 7
    zman Says:

    Very odd GS did it on a Friday. Seems like a desperate/obvious attempt to support crude at a critical point in the crude chart. Normally you’d make a high profile call like this early in the week. Of course, volumes on Friday’s are often thin and so they may be hoping to have that work for them too.

  8. 8
    zman Says:

    Any comments from Kass’ gnome?

    Oil firming as the dollar weakens. No doubt the GS desk is a buyer here.

    If housing numbers come in relatively benign, I’d bet this market rallies and then the GS list in the post gets the go signal.

    TPH gas comment just received, they are thinking peak storage of 3.8 Tcf, in line with my range. Says gas market clearly tightening…they say lower supply due to down rig count is the big contributor.

  9. 9
    zman Says:


    WLL – added (10) $55 October Calls (WLLJK) for a quick swing trade for $2.35 with the stock off 80 cents on up oil, and a down group. I’ll come out of this one on a rally as this takes me to a pretty overweight position in the name.

  10. 10
    zman Says:

    CNBC showing refinery on fire in California.

    TSO and other refiners jumping.

  11. 11
    zman Says:

    That’s a TSO refinery on fire. Good for margins, bad for throughput.

  12. 12
    zman Says:

    Consumer sentiment higher than expected at 73.5 vs 70.2.

  13. 13
    zman Says:

    New home sale 429K, vs 440K expected.

  14. 14
    cargocult Says:

    Did I already ask if you have any take on CWEI? Looks interesting from a valuation standpoint.

  15. 15
    zman Says:

    Refining is just about the only industry where you can have your facility burn down and your stock go up.

  16. 16
    zman Says:

    Cargo – yep, I’m just not that close to the story. Will have a quick look at the metrics but it has had one heck of a run. But thanks for playing, I thought my mike was off again.

  17. 17
    zman Says:

    Crude up $1+ on the refining fire as products head higher.

    TSO’s Wilmington, CA refinery has throughput of 100,000 bopd making it a not insubstantial producer of gasoline and distillate on the west coast, call it a small to mid sized unit.

  18. 18
    1520sbroad Says:

    z – you don’t think Gsco works their own book do you??

    With respect to weather – i spoke to a couple of friends that live in Chicago and trade grains. They both said that their high priced weather forecasting advisory services are predicting a brutal winter. They also say that these weather advisory services have roughly the same predictive ability as a quarter.

    these guys talk to farmers all the time and they say that the upper midwest farmers are prepping for winter armageddon and hoping they can get the harvest in.

  19. 19
    zman Says:

    1520 – hear ya re GS. hear ya re high priced weather guys. National Weather Service has said it won’t be so bad. Farmer’s Almanac says it will be very cold. So yeah, coin toss.

    Anyone have Nicky’s levels for SP support?

  20. 20
    VTZ Says:

    Re 10 then 11… kind of hilarious train of thought.

  21. 21
    zman Says:

    V – don’t forget #15

  22. 22
    bill Says:

    drybulk/tankers avoid all names at the moment..short nat, imho


  23. 23
    bill Says:

    on tankers


  24. 24
    Dman Says:

    Z – I’m not sure that GS’s call on non-opec production is all that brave. A lot of declines out there: Mexico, North Sea etc. Isn’t Matt Simmons calling for much bigger shortfalls?

  25. 25
    zman Says:

    Bill – Right, those names just can’t catch a break. Need actual ships transporting actual goods, or at least more of them moving.

    Your ATPG came off $17 this morning with the group, first day its been positive since the announcement.

  26. 26
    bill Says:

    Some bearish comments from the ATS Report:
    – The +5.4 million barrel rise in U.S. gasoline stocks was a disaster for the oil complex. Wrong direction
    at the wrong time. We are +28 million barrels above last year’s levels and clearly headed higher.
    – We have enough distillates and natural gas to easily meet this winter’s heating demand (maybe next
    winter also), so a rapid increase in gasoline inventories over the next few weeks could kill prompt
    margins, which in turn could finally get the attention of the maverick refining complex. Distillate
    inventories, like natural gas, appear to be headed to the moon.
    – …more floating stocks move onshore to compete with rising imports (imports up 900,000 b/d). What we
    are seeing is a direct reflection of the current status of the global supply and demand balance – just too
    much supply. At some point OPEC will have to address the compliance issue, because stocks look
    poised to move higher over the coming weeks.
    – Demand in the U.S. is now dropping more from improved efficiency than from the effects of the
    recession. This is demand that won’t return when we exit the current economic downturn. Better use of
    fossil fuels, combined with aggressive introduction of alternative energy sources will/are beginning to
    flatten the demand curve for oil. The world will still need oil long into the future, but increasingly it will not
    be so dependent on petroleum to meet its basic energy needs.

  27. 27
    zman Says:

    Dman – Don’t know where Matt stands on the non-OPEC but it sounded like they were saying 1 mm bopd for each of the next 3 years. Mexico would have to go away for that to happen. Russia is looking like they will be up next year so it seems tough to get there. Norway will fall but not enough to get you there. U.S. should be up, Canada up. Hmmm. If they meant 1 mm bopd over the course of the next 3 years, that’s possible, sure.

  28. 28
    zman Says:

    Oil just gave back the buck rally this morning even as the dollar falls. SP pullback to blame, the fact that that refinery is not a very big one as well.

  29. 29
    Dman Says:

    #18 – speaking of grains, there are signs of a trend reversal in wheat & corn. They were up even on a strong dollar day recently (Wednesday I think).

  30. 30
    Dman Says:

    Canada up in conventional production or oil sands?

  31. 31
    zman Says:

    Re – corn – this area has been devastated by all the rain. Sparking a rally in ethanol.


  32. 32
    bill Says:

    In hindsight, atpg moved to far too fast as people were looking ahead to 2010.

    Once Titan platform is connected, oil will start flowing at 20,000 bbls per day all of which is unhedged (which i guess could be bad or good) looks like a glut currently.

    This will drive revenue to double and cash flow

    at 60 oil and 20 loe is 40 bbl cash flow or 800 k a day 72 m a qtr they are currently doing 80 m a qtr so cash flow double 160 times 4 = 640 m per year dividend by 50 m shares is about 13 per share


    Lower oil prices
    Hi debt load needs to be paid, interest is 100 m per year
    Getting titan connected

    I like it and will nibble at march 2010 calls 15’s and 17.50 on weakness.

    Just my opinion and open to others

    Does the underwriter eat it if stock is under the offer price?..it was priced at 18.50 and i didnt see any announcement saying its over.

  33. 33
    zman Says:

    Sands – Not a lot but should be up… sands. I may be speaking out of turn, V would know better.

    Assuming this is close to right for Canada:


  34. 34
    zman Says:

    ATPG – Underwriter eat it = NO. I saw 5.3 mm priced at $18.50.

  35. 35
    zman Says:

    Surprised CHK not moving on their deal. Lackluster day and I guess the brokers waiting on the conf call on Monday to really comment on it. Puts the need for equity raise further down the road. Gives them a vehicle with which to drop more midstream assets into over time to raise cash. They made Aubrey the CEO so I’d bet he has a pretty strong say on timing of future deals.

  36. 36
    zman Says:

    Dman – here’s another one:


  37. 37
    VTZ Says:

    Continued ramp at Long Lake (Opti/Nexen)= another 10-15 kbpd
    AOSP (Shell/Chevron/Marathon) startup at the end of 2010 = 100 kbpd
    Heavy oil insitu adds will be minimal to non-existant.
    Conventional adds from the Canadian Bakken will be the rest (I don’t know the volume there).

    That number is probably close because the AOSP add is at the end of the year.

  38. 38
    VTZ Says:

    I guess not conventional in Bakken, but not oil sands I mean.

  39. 39
    zman Says:

    Thanks V. Will take your numbers over the EIA any day. On the Bakken, I’d bet very small growth in 2010, maybe ramping after.

  40. 40
    VTZ Says:

    I’d damn well hope you’d take my number over the EIA, hahaha.

  41. 41
    zman Says:

    NG off 2.5% today, options expire there today, October contract goes off the board on Monday. Winter strip off but not as much.

  42. 42
    zman Says:

    Re 40. Right, right, I guess I set the bar a bit low on that one.

    Crude all over the place today. Jumps when they show flames in California on CNBC. Best move VLO could make right now would be to pick off private midwestern refining assets for cents on the replacement cost dollar and shutter them.

  43. 43
    1520sbroad Says:

    #29 – grains – i follow corn fairly closely and i would agree with the idea of a trend reversal. This year has been interesting and the weather holds the key for where the harvest finishes. I wouldn’t be surprised to see it make a run at a 4 handle if the weather gets involved.

  44. 44
    bill Says:


    so the announcement of pricing means it already happened?

    I didnt see the qty mentioned

  45. 45
    zman Says:

    Bill – I show several reuters headlines the night of the 23rd. 5.3 mm shares at $18.50 comes to 98 mm (gross).

    The preferred deal for $125mm netted $121 mm.

  46. 46
    RMD Says:

    #35;; maybe a way for Aubrey to collect another salary and options package as the B of D trys to make him whole again.

  47. 47
    zman Says:

    Swine flu update: 42 kids at a private school 1.5 miles from my house.

  48. 48
    zman Says:

    RMD – see my comment in the post on Goldman Sachs and trying not to be jaded, lol.

  49. 49
    zman Says:

    RMD – did you mention EVEP having comments about LINE or did I misread that?

  50. 50
    Nicky Says:

    Morning all.

    Indices I think are still working on iv down before v up. SPX has support at 1046, 1040, 1035.

    There are several ways the wave count could play out. The bearish count says we are completing the first wave down and will bounce in a wave ii not to take out the highs.

    One of the bullish counts says that we are bottoming here for iv and will make a new high for v.

    The other still bullish count says that iv needs a couple of more up down gyrations before it puts in a low and then moves higher.

    Oil – would be surprised if we don’t see a bit of short covering into the close after such a big move down over the last few says. There are a few wild cards ie Iran back on the table which may prove supportive or at least mean the shorts will want to take their money and run.

    Agree re the GS call – they must be long!

  51. 51
    bill Says:

    ty for 45

  52. 52
    zman Says:

    Morning Nicky and thanks much.

    Bill – I still think, as long as the market or oil does not fall apart, that the length of the digestion period on the ATPG deal will be pretty short. Probably a good deal shorter than HK. I don’t own but am watching it. And if we get a red,red,red stupid sized down day for the group I will take a hard look if it fills those gaps in the lower teens.

  53. 53
    RMD Says:

    Yes, the site seems to be working ok from here.
    I assume GS is’t pumping FST because of a deal given the 5/20 deal.
    EVEP and LINE share a worry that diverges from CHK, EOG and the St.’s that gas will recover in ’10. LINE lifted hedges in ’12-’13 and spent proceeds increasing strike prices of ’10 and ’11 hedges. EVEP said something about being wrried about the 2 year supply of gas, how co.s forecasting $7.70-8.00 gas were those “who need it”, and added that in reality gas prices are “unforecastable”.
    The divergent view is the most profitable, if correct. Which leads to today’s random musing: what if oil prices convere toward gas rather than visa-versa?

  54. 54
    zman Says:

    RMD – that is what happened in the summer of 2008. When Cramer was calling for $20 gas based on the price of oil so the ratio could narrow. Well it narrowed all right, just not the way he thought it would. Honestly I don’t think they have the square root of 0 to do with other right now. The adage that gas is local and oil is global has rarely if ever been more true.

    Re EVEP and LINE – nothing new from them on the gas call then. I had thought EVEP had a comment about LINE but I guess not. The E&Ps really ought to be hedging at least early 2010 now.

    Market definitely pausing on its way lower (or not) at Nicky’s first level.

  55. 55
    zman Says:

    Rig Count Watch:

    Oil up 4 to 297, vs 423 last year
    Gas up 5 to 710 vs 1159 last year

    Horizontals up 10 to 442, vs 636 last year.

    Not exactly bullish. E&Ps continue to talk about rising rig counts in their best plays into year end and the horizontal rig count is matching that talk.

  56. 56
    apbd Says:

    Dougie and the gnomes are off today.
    Replacement is meandering.

  57. 57
    zman Says:

    BOP sent me a note showing headline on COG that Susquehana county has issued a cease and desist on all fracing after their spill earlier this week. Stock down 8%. RRC and XCO could see some weakness out of that. Notably, the order is only for COG is seems and only in that county.

  58. 58
    baylor3217 Says:

    Thoughts on November $34 USO Calls?

  59. 59
    zman Says:

    I’m not in any USO calls and am not adding any right now.

  60. 60
    baylor3217 Says:

    Is KOG kicking themselves for not doing a secondary over the last couple of weeks? Or will a better opportunity manifest itself soon?

  61. 61
    zman Says:

    I can’t tell you what they are thinking but they can hold out for higher prices upon further news. My past thought had been that if oil prices fell and they announced good news, proving up more of their acreage, that the news might only propel them back to where they were. Hard to say. GS is out reiterating their $85 per barrel end of 09 oil target and if they are in that camp then they probably aren’t concerned.

  62. 62
    zman Says:

    GS just raised the refining sector to neutral from cautious.

  63. 63
    PackMan Says:

    BEXP CLR …. thoughts on sell off in these names ?

  64. 64
    choices Says:

    Z-what is your view now on SD-seems to be holding up well in the face of GS sell rating but it may be difficult to generate any enthusiasm on it in the market when GS has a sell sitting on it.


  65. 65
    zman Says:

    Ram – you will be happy to know this hurricane season continues to look like a dud.

    Pack – both selling down with oil and the other Bakkens. CLR is a bit pricey which is why I’m in WLL instead at present which is also traveling lower the last couple of days. Next week is IPAA and I expect one or more of the Bakken names to have news which should help the group unless oil tumbles out of site. BEXP is expected to have news in early October.

  66. 66
    choices Says:

    Copper is getting hammered this week, VIX up >5% today, probably not surprising.

  67. 67
    TEXWS6 Says:

    Re #57:

    It’s getting really scaring with frac chemicals. We just got in alot of trouble in Wyoming because it was “mentioned” that oil & gas companies contaminate the ground water. After research it was found that the local farming/ag community dumped over 100x the amount of carcinogens into the local water table than we did but funny thing was that this info was not relayed to the public!

  68. 68
    Jerome Blank Says:

    I know there is a difference of opinion regarding UNG in the group, but with the premium only around 2% right now its interesting that with the big contango spread between Oct/Nov futures, you would think UNG would be down further, based solely on technicals we’re probably going to see add’l short term gas weakness as OCT/NOV futures attempt to meet on a fair price. But there is a very long downward trendline (traditional daily) on UNG with resistance at $12, if $12 is broken, its probable $14 long term P&F resistance is tested, and the first buy signazl in ages prints at $14.50

  69. 69
    zman Says:

    Choices – today is kind of a throw away day for the group, the rating from GS I truly believe to be motivated to get people out of a name that has recently risen and into names that GS was cold on but suddenly likes. I think the real move comes for SD around Nov 5 (when their deal with Crusader should be awarded and they can talk about the new assets in detail) and I’m thinking I will add Nov or December calls a little further down the road. Also, the October gas contract expires on Monday. It is trading at 3.83 now while the November is a dollar higher. On the past several contract rolls, the new front month has promptly sold off. So I’d like to see how the Nov future behaves next week which will in part be determined by the latest supply data which we get mid next week.

  70. 70
    zman Says:

    Jerome – I think later next year as the contango flattens and when declines start to really manifest themselves that that vehicle will be much more interest.

  71. 71
    zman Says:

    TEX – I hear ya. Salt water production stories also circulating around the press these days. On the COG thing, exactly the kind of press the industry did not need right now. Ironic that it will be a surface spill that may cause further restrictions to be used on chemicals used thousands of feet underground.

  72. 72
    ram Says:

    Does this mean I can put my arms down? They have been raised and stretched outward with a long staff in my right hand for several weeks.

  73. 73
    Nicky Says:

    Ahmadinjad getting ready to make a statement.

  74. 74
    zman Says:

    Ram – LOL, thanks for the chuckle on the red red Friday.

  75. 75
    zman Says:

    Oil down 13 cents pre nutbag watch.

    Game rules:

    1 shot when he says their nuke program is for peaceful purposes.

    1 shot each time he lashes out at Israel or “the West”

    Finish bottle when he says the holocaust didn’t happen.

  76. 76
    Nicky Says:

    Z – oil totally shrugging him off right now.

  77. 77
    zman Says:

    Nicky – is he speaking yet, can find a network carrying it?

  78. 78
    bill Says:

    cog news seemed to impact mcf,sd,hk even though none of them are in the marcelus

  79. 79
    Nicky Says:

    not as far as i know – I got the impression that CNBC were going to cover it.

  80. 80
    zman Says:

    …and COG up by half off its lows. I have a sneaking feeling there was some panic that this would spread to other counties, then other states in general. The states have got to weigh that against crunched permit fees and royalities. Hmmm. Let me think, strapped budgets vs proven tech that’s been around for 50 years.

  81. 81
    bill Says:

    i see al gore snapped up 500 m for a start up that perkins sponsored

    perkins a big democratic contributor

    so make 2 m in campaign contributions and get 500 m back

    Politicians are corrupt as hell.

  82. 82
    Jerome Blank Says:

    I don’t want to jinx matters, but KOG and WRES are currently holding up well at their 20 day daily SMA

  83. 83
    apbd Says:

    Just looking ahead. Hoping it doesn’t come to this: What names should we look at if Israeli jets take to the runways?

  84. 84
    zman Says:

    Bill – ya know Al went mega platinum with the GOOG IPO. Washed his hands of his oily family money prior to that, lol.

    Ahmed – Fox news said Ahmad said that the second nuclear facility was legal, that it was not a secret, and that the U.S., Britain, Germany would regret Obama’s Friday statement.

  85. 85
    Nicky Says:

    re 84 – he is such a nice little man!!

  86. 86
    zman Says:

    APBD – Just the ones that produce hydrocarbons. I don’t think it happens soon, hard to bet on that kind of thing anyway. That’s probably a $10 add to oil. Depends on the response if it stays up. The little fella has joked about mining the Straits of Hormuz…if he tries that he will lose some mine laying vessels. Then I’d bet on a coup. People over there, like everywhere else, like to drive and Iran makes no gasoline out of its oil.

  87. 87
    VTZ Says:

    Would be a catalyst to raise gold to new highs as well.

    RE 82 and in the commodity space in general there are lots of stocks that are holding on.

  88. 88
    bill Says:

    next week at ogis


  89. 89
    AAA Says:

    RMD, re 46, my thoughts exactly. This kind of deal raises all kinds of red flags for me.

  90. 90
    zman Says:

    NG reversing into the close of NYMEX, going for a close near $4.

  91. 91
    Jerome Blank Says:

    That $12 level in UNG does seem to have somebody’s attention, UNG had a large vol rally up to $12 and pinned against resistance

  92. 92
    occam Says:

    Z – What’s your take on CLR right now? It’s off more than WLL over the last few days.

  93. 93
    PackMan Says:

    O’s statement this morning on Iran was pathetic (as in weak).

    Also, they had this lined up beforehand, why didnt they go public BEFORE or DURING the UN ?

    Totally feckless.

  94. 94
    zman Says:

    Occam – Its a good question. This is my best shot at an answer.

    CLR has a large acreage position, the largest in the Bakken at 500,000 or so acres on the official count. Their stock has done well although they are not in some of the sweeter spots of the Basin. They have worked hard to prove up the concept that the Bakken and the Three Forks are separate plays. Their stock popped nicely when they provided definitive evidence that the two zones were not in communication with the thought that double the number of wells could be put on the same acreage. Stock is now in “so now what mode?” in a hot group. CLR will not hedge. So when people fear oil is going to come off, they sell the stock down. There is some amount of the float that is played by people simply using the stock as a proxy for oil, impossible to say how much but it is a factor. Lastly, the stock is not cheap and so it will trade hard in either direction with swings in oil.

    2010 Estimated CFPS of 3.35 puts it at 11.5x CF. That is high for any E&P company. Best acreage position, strong reserve growth potential via PUDs (ask a question here if this needs elaboration) help to explain this high multiple.

    …. more in a second….

  95. 95
    cargocult Says:

    The street demonstrations of this past year demonstrated the lack of domestic support for the current Iranian regime. Any attack on Iranian soil will most likely have the effect of initial flag waving and increased domestic support for their government in spite of its failures and underlying domestic frustration. Thus attacking Iran militarily will help Ahmadinejad domestically in the short run, proving the point that Iran is vulnerable and needs to protect itself with nukes. A self fulfilling prophesy, so to speak.

    What to do? The last thing the US needs is another battle ground in the Middle East. The second to last thing we need is a nuclear armed Iran. Tricky business.

  96. 96
    zman Says:

    Meanwhile, WLL has a good long list of the highest IP wells in the play, they drill a well and they are adding 600K to 1mm BOE each time with wells this big.

    2010 Estimated CFPS of 12.26 puts it at 4.5x CF. So I go with this one until news moves the other one. Both good companies but that low cash flow helps to put a floor under the shares (unless oil really cracks or the financial markets seize). WLL has some debt (less than $1B and the interest is easily managed) and when the debt markets ground to a halt the stock was slammed, sending the shares into a steep discount from which, despite the big recent rally, they have not come close to recovering.

    In my book, BEXP is the little up and comer with a shot at proving up some new acreage. NFX is scattered about and is consistently seeing imporove

  97. 97
    occam Says:

    OXY, with the news being still discussed, is running, and may run more here.

    The thought is that they may be on to something quite big.

  98. 98
    zman Says:

    continuing 96.

    NFX is seeing consistently improved drilling results in the Bakken and has a lot going for it in each of the next 2 years.

    Occam – yep, I don’t really follow the OXY’s, HES’s, or MUR’s close enough to provide much help there. I saw the news in Kern county. Sounds biggish but they are a big company. It can run hard as can HES from time to time.

  99. 99
    zman Says:

    Has anyone seen more than a paragraph or two out of the Street on the SD proposed takeover of KRU? I have yet to read an intelligent note on the subject.

    Occam – Did that cover it in 94,96,98?

  100. 100
    zman Says:

    Russia looks West to go north


  101. 101
    RMD Says:

    SD/KRU: don’t follow SD mgt closely, but KRU has acres in lots of good plays, don’t know it they are in the core counties, so selling areas to ecapture cost of acq. would seem to make sense.
    Thoughts on 1-10 scale?

  102. 102
    zman Says:

    Re 101 – I looked over what they were getting from KRU when the deal hit and took calls the next day. Likely to add more before they complete the transaction as there is some high potential acreage in the KRU assets and they picked up the proved reserves for a song. SD has been such a Pinon WTO focused play that it will be nice to see them add some exploration upside: Granite Wash for gas, Bakken for oil.

  103. 103
    zman Says:

    In fact, West, have you come across any Crusader wells, I think they drilled some verticals before the BK, forgot to go check.

  104. 104
    Denise Says:

    Anyone have any ideas on why there would be some big buying in RDC Oct calls?

  105. 105
    RMD Says:

    KRU drilled a Bakken well that was in a NOG release that IPed at 60or 80/d; no wonder they tanked.

  106. 106
    zman Says:

    Denise – Haven’t seen anything circulated lately, had been a takeout rumored in the space, either them or ESV … jackup utilization poor, getting worse, buyer probably wouldn’t pay much of a premium. Probably something at the Herold’s conf.

  107. 107
    zman Says:

    RMD – what was the date of that pr?

  108. 108
    zman Says:

    Was that the Oilers 1-10H well?

  109. 109
    occam Says:

    Yes, thanks.

  110. 110
    zman Says:

    Oh, I found it, that’s a Montana Bakken well.

  111. 111
    RMD Says:

    Phew, that saves me looking …

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