06
Oct

Tuesday Morning – Rally Day 2

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In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today - 3Q09 Emerging Trends 1 and 2, Big Cap E&P Orange charts, CRK ops update, APC
  5. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $14,200
    • 30% Cash
    • The Current Holdings Tab Is Updated.
  • Yesterday's Trades:

    • HK – Added another (20) HK $24 October calls (HKJO) for $0.45 with the stock at $23.09.


Commodity Watch

Crude oil fought off early declines to close up $0.46 at $70.41 yesterday. Credit goes to a strong equity market and weak dollar. This morning crude is trading up nearly a buck on further slippage in the dollar (see second bullet below).

  • Early Read On Oil Inventories:
    • Crude: UP 1.9 mm barrels
    • Gasoline: UP 1.2 mm barrels
    • Distillate: DOWN 0.45 mm barrels (I suspect demand could again be stronger here than the Street is anticipating).
  • Secret Talks Dollar Watch: According to UK newspaper The Independent, Gulf Arab states along with China, Russia, Japan and France have been meeting secretly  to end dollar based trading in oil, replacing the dollar with a currency basket made up of the yen, the yuan, the euro, gold, and a new unified currency for nations in the Gulf Co-operation Council. The talks aim at replacing the dollar in nine years. A number of governments and banks have come out saying this is all rubbish since the story broke last night.

 

Natural gas jumped $0.27 (or 5.6%) to close at $4.99 yesterday. Yesterday I said stops were likely just short of and at $5. This morning gas is trading up 8 cents.

  • Imports Watch: Flat with last week at 8.8 Bcfgdp; down 0.5 Bcfgpd from last year.

    • Canada: 7.7 Bcfpgpd, down 0.6 Bcfgpd from year ago levels.
    • LNG: Stuck at 1.1 Bcfgpd as we enter the last quarter of the year. Recall many gas bears were prognosticating LNG imports would be in the 4 to 6 Bcfgpd by the end of 3Q. Hmmmm. China anyone? The gas is going some place as not all new liquefaction capacity due to come on line in 2009 has been delayed. This means the purveyors of such "gas tsunami" research need to get back to their demand side models.
  • More Early Cold Air Coming.

Crack Spread Update


Key Takeaway: I was caught up in the recent headfake in the group adding to TSO on group strength. I will not add more exposure to the refining group until I see a solid pick up in distillate demand. Cracks have deteriorated further than I expected in recent weeks and while west coast margins remain strong than the other regions they too are lackluster. 


Stuff We Care About Today

XOM Buys Stake In Jubilee (Ghana) Deepwater Development

  • Exxon bought Kosmos Energy's stake in Jubilee for an undisclosed amount
  • This is APC's multi-billion barrel field off Ghana (Tullow is here too)
  • Positive for APC the Exxon is coming in, not that the play needs their legitimacy but they are in many of the "off West Africa" plays
  • Positive for HDY as well for their prospect area to the north of Jubilee appears to contain look alike plays

 

CRK Provides Brief 3Q Operations Update:

  • 7 most recent NW Louisiana Haynesville Shale completions have average IP of 15.6 MMcfepd, up 23% from the IP average of the previous seven wells outlined in the 2Q press release.

    • Initial production of the 7 ranged from 10 to 21 MM/d which is in line with other operator's good wells in the respective areas tested.
    • I'd rather see 30 day averages but at least the trend is higher. No comparative data between the sets of wells was given (choke size, pressures) so you have to take it on faith that the first batch of wells isn't choked back relative to the second.
    • Lateral length appears to be up slightly
  • No comment on recent completions in the East Texas Haynesville Shale play.
  • 3Q09 production came in at 184 MMcfepd

    • They didn't have official 3Q guidance but this number should look OK since:

      • July 31 production was 190 MMcfedp
      • this is up 9% sequentially from 2Q09's 169 MMcfepd. 
      • last quarter they had sequential growth of 6%.
  • End of quarter debt stood at $340 mm vs $315 mm at end of 2Q
  • CRK also announced a $200 mm senior debt deal:

    • Use of proceds listed as paying down revolver and then other purposes. Revolver was at $165 mm.

Emerging Trend For Earnings 3Q09 Watch #1:  "Energy names to see less oil production biased favoritism this quarter than last."

Last quarter, oil was rising into the close of the quarter and gas could find no bottom. The obvious choice for analysts was to lead recommendations with the oil names. As we approach this earnings season, oil remains aloft but subdued in a narrow trading range between $65 and $74. Natural gas, on the other hand, appears to be putting fears of a retest of recent lows with $2 handles in the distant rear view mirror. The stabilization potential of natural gas is going to yield more balanced calls (oil weighted production profiles vs gas weighted profiles) this quarter vs last quarter. Don't get me wrong, I still think oil calls will be the easier "go to" trades at this time but gas won't be so back burnered as it was last quarter.

Emerging Trend For Earnings 3Q09 Watch #2: "Earnings may hit lowered targets for 3Q09 but the market will be watching the top line with the fear that growth remains non-existent"

My answer to this thought is that people will flock to stocks and groups where they see a higher propensity for revenue growth. And I’m thinking on a sequential, not a YoY, basis. Oil prices moved in a fairly flat range during the quarter, but averaged $68.20 in 3Q vs $59.78 in 2Q. If you pull an oil price chart you can see oil was running up into the close of the second quarter. This will mean that for companies with flat or up production, higher sequential revenues are a given.

Large Cap E&P Charts -


Odds & Ends

Analyst Watch:

  • Stifel raises CRK, NFX, and UPL to Buy
  • Credit Suisse raises NFX target from $44 to $48
  • Crude Suisse cuts DVN and CHK to Underperform

 

155 Responses to “Tuesday Morning – Rally Day 2”

  1. 1
    bill Says:

    vq has an analsyt day going on right now

    http://media.corporate-ir.net/media_files/irol/19/193733/VenocoAnalystDay100609a.pdf

    prelude to an offering?

  2. 2
    zman Says:

    Maybe, don’t know them well enough to say. Many companies just have an annual analyst day about the same time each year.

  3. 3
    Denise Says:

    Good morning from “Mish” Shedlock

    Once again everyone is hyperventilating over “secret” moves to trade oil in currencies other than the US dollar. Please consider The demise of the dollar by Robert Fisk.

    In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

    Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

    The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China’s former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. “Bilateral quarrels and clashes are unavoidable,” he told the Asia and Africa Review. “We cannot lower vigilance against hostility in the Middle East over energy interests and security.”
    Supposedly Robert Fisk knows the plans but “Americans have not discovered the details”.

    Such “secret” talks surface about once a year and nothing ever happens. Yet, even if these talks led to actual actions, they are irrelevant for the simple reason it does not matter one iota what oil is priced in.

    I discussed this concept in Oil Pricing Unit Red Herring on November 18, 2007. At the time everyone was going gaga because Venezuela and Iran would supposedly not take dollars for oil.

    Ten Simple Facts

    1) Oil is priced in dollars.
    2) Oil trades in Dollars and Euros right now in spite of the pricing unit being dollars. OPEC has recently admitted this fact.
    3) Clearly oil does not have to be priced in Euros to trade in Euros, or for that matter priced in Yen to trade in Yen. The same applies to any major currency.
    4) Neither Venezuela or Iran hold any dollar reserves. To the extent that either is taking trades in dollars, there is clearly nothing forcing them to hold dollars. By extension there is nothing forcing any OPEC country to hold dollars if it doesn’t want to.
    5) It takes less than a second for Forex trades to take place. 24 hours a day, 7 days a week, one can sell any currency they want and buy any other currency.
    6) The above logic applies to any currency and any commodity.
    7) Nothing is stopping anyone at any time anywhere from selling dollars for whatever currency they want to hold. Nor is anything stopping anyone anywhere at any time from selling any major currency for U.S. Dollars.
    8) Because currency conversion is instantaneous no one has to hold U.S. dollars to buy oil, copper, gold, iron, lead, wheat, soybeans, or anything else.
    9) Dollars are held (or not held) for reasons totally unrelated to pricing unit. Some of those reasons are political, some are based on sentiment, some on trade patterns and trade relationships, and some to suppress the value of local currencies to improve exports.
    10) Currencies float and so do the price of oil and commodities. Pricing oil (or any other commodity) in Euros will not cause a price change in dollars. Look at gold which is simultaneously priced in everything as proof.

    War Over Pricing Unit?

    Fisk concludes with “Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.”

    Iran has virtually no trade with the US, nor is there US foreign direct investment in Iran. Pray tell what does Iran need to hold dollar reserves for? Iran’s statements amount to political hot air and nothing more. It announced something the world already knew, they already held no dollar reserves. Who should care?

    Note that it takes less than a second for Forex trades to take place, and 24 hours a day, 7 days a week, one can sell any currency they want and buy any other currency. Logically, it makes no difference if US dollars are converted into Euros one second before a purchase or one second after the a purchase.

    Given that it is irrelevant what oil is priced in outside of something illiquid like Yap Island stones, the logical conclusion is the US did not go to war over oil being priced in Euros.

    Currencies Are Fungible

    Let’s put the horse in front of the cart where it belongs.

    You can get a price of oil in any major currency you want today because all major currencies are fungible. However, pricing oil in a basket of currencies would do nothing but cause confusion. The idea is ridiculous.

    Saudi Arabia, China, Japan, and any other country can hold whatever reserves they want in whatever currencies they want regardless of the pricing unit of oil. Reserves are based on trade relationships not pricing units!

    Pricing oil in Euros (or even sillier – a basket of currencies) will not cause anything to happen. If pricing unit changes do happen, they will be a result of sentiment changes in regards to existing dollar hegemony and not the other way around.

    Dollar Armageddon is not coming over a pricing unit, nor did the US invade Iraq for that reason. The story is nothing meaningless hype.

    Mike “Mish” Shedlock
    http://globaleconomicanalysis.blogspot.com
    Click Here To Scroll Thru My Recent Post List

  4. 4
    bill Says:

    Looks like another up day based on early indications

    atpg indicating up 60 cents
    hk up 20 cents
    sd up 15 cents
    kog & bexp up 15 cents
    even dnr up 10 cents

    live off vq call– going to market hastings 26 mboe reserves at 20 bucks 500 m but wont see anything until dnr gets its piece wont see that for 4 years– so there will be a discount..wont sell unless they get 100 m

    also looking for a partner for monteray

    wants to sell assets to pay down debt

  5. 5
    zman Says:

    Thanks Denise – my two cents would be 1) things are a bit different now, in terms of world economics and the position of the U.S., 2) forex can be traded quickly in small amounts. But when you are talking $T dollar, that’s different and a basket approach makes more sense for risk diversification.

    I’ve heard the same arguments for a long time (much further back than 2007) that the dollar would be supplanted and so far it has not happened. That to me is no indicator that it won’t happen in the future. I think it makes sense for the current majority producers and the rising consumers (China and India) and the rising producers (Brazil) to start thinking hard about a basket now. The conspiracy theorist in me agrees that the U.S. can’t do much about it and will be leveraged into making concessions to some of these nations to forestall dollar abandonment.

  6. 6
    BirdsofpreyRcool Says:

    TechTrader says the best pattern for today is to sell the morning gap up, for a 60/40 SHORT call. That doesn’t mean the mrkt closes down, just means the highest probability trade for making money this morning is to go short any rally.

    HeadTrader still thinks you buy the dips. “Don’t be sore, buy some more.”

    I think we continue to climb a wall of worry… and rally. I welcome any pullbacks to add to names I like, as I will also peel a little off into volatility. I think bank earnings (starting next week) will be the leg that kicks this mrkt up it’s next notch. That’s what I think and that’s how I’m invested. FWIW.

  7. 7
    jy Says:

    Time to bring up a subject that may be getting short shrift in public company prounouncements and analyst hype regarding “resource plays”. The “manufacturing paradigm” where “all we need is some acreage and a drilling rig”, particularly in shale plays, may be highly overrated. For a couple of good articles, with actual data, and analysis see: http://www.aspousa.org/index.php/2009/08/lessons-from-the-barnett-shale-sugg
    est-caution-in-other-shale-plays/
    also: http:/www.info.drillinginfo.com/pdf/bermanRebuttal.pdf . Time will allow us to discern whether these authors are correct regarding ultimate hydrocarbon recovery per well, but they are correct that careful geological and petrophysical analyses of the reservoir/source rocks for each particular play will allow operators to place wells in the best locations for increased recovery. These sorts of rock analyses will also greatly affect reserve bookings in these plays. With new SEC regulations regarding reserve estimates that will be reflected in company announcements at year end 2009 I suspect there may be wide variations among reserve analysts estimates for Proved reserves in these resource plays; engendering confusion among investors as to what those reserve numbers mean.

    Note the small number of private companies as major participants in resource gas plays. They are using their own money and have little need to impress the public investment community with projects that are more capital intensive, with longer payouts and lower returns than more conventional exploration and production projects. Private companies are in the business to make money, not sell stock or book reserves.

  8. 8
    zman Says:

    Bill – re BEXP – that is one that could easily have news this week or next on the highest numbers of stages Bakken completion to date.

  9. 9
    zman Says:

    JY – have been sent those pieces and another in the last few days. Lot of talk of the shales being exponential and not hyperbolic declines. So smaller reserves and shorter reserve life.

    On the other issue, the new look at year end reserves, I have not yet seen a final set of rules from the SEC.

  10. 10
    zman Says:

    APC bid up strongly on the win vs the Interior Dept yesterday and the news of XOM taking an interest in the Ghana play.

  11. 11
    zman Says:

    UBS hires 18 bankers for energy lending in Dallas. Hello expectation of M&A.

  12. 12
    West Says:

    Just a note on that BEXP well they had a problem when frac and got 6 stages off and hung up in the hole . This has been reported by someone that was at the site this weekend. Just a heads up.

  13. 13
    zman Says:

    Natural gas volatility continues. Nothing goes up in a straight line. Gas off 3 cents but more importantly back under $5 as crude backs off its highs by half.

  14. 14
    zman Says:

    Thanks much West.

  15. 15
    Dman Says:

    Mish is hurting his credibility with all this “you can sell dollars in less than a second” nonsense. Obviously, as Z points out, if that were true when there’s a “T” involved, then the Chinese would have sold already & wouldn’t be wasting their time complaining.

  16. 16
    zman Says:

    D – I don’t know the guy, I’m sure he knows more than I do about currencies as that’s not really my bag but it struck me as a bit silly.

    You’ll note I’m not adding much in here. I guess I was buying last week (and a little yesterday) for the rally we are seeing now. I am going to be a seller soon.

  17. 17
    bondbuddha Says:

    Z, u still holding NFX JI ?

  18. 18
    zman Says:

    ROSE closing on fresh highs. News there is unlikely until earnings. (one more EFS and their first Bakken completions)

    BB – yes, holding the NFX $45s, a little happier I quitupled down on that when it shrank back the other day. I will be rolling there soon, maybe take a couple of days to roll.

    In general, I plan to raise cash levels before the close tomorrow.

  19. 19
    VTZ Says:

    Goodbye USD, hello carry trade.

  20. 20
    West Says:

    BEXP, link from Bakken Shale Discussion Group:http://groups.google.com/group/bakken-shale-discussion/browse_thread/thread/192e720f9e9ef11f

  21. 21
    VTZ Says:

    I’m actually surprised that a whole whack of bids didn’t hit after gold made the new high and that it stayed orderly.

  22. 22
    West Says:

    http://groups.google.com/group/bakken-shale-discussion/browse_thread/thread/192e720f9e9ef11f

  23. 23
    RMD Says:

    I’m always looking for how the market is valuing stocks today, and the tight grouping in Z’s Mkt Value per Proved MCFE graph above suggests it is $2.50/mcfe. Any thoughts?

    BEXP #12: looks like BEXP botched another science project.

  24. 24
    Nicky Says:

    Morning all. Still looking for that 1061 level for absolute confirmation but I really do not have much doubt that new highs are on the cards.

  25. 25
    zman Says:

    RMD – higher for the smaller cap names.

    RE BEXP – these aren’t the simplest of completions. May be fixable.

  26. 26
    zman Says:

    Just read that link, that happens, doesn’t sound like toast. Also note that that guy could be a lying little short.

  27. 27
    zman Says:

    Morning Nicky, thanks for the tarot card read.

  28. 28
    BirdsofpreyRcool Says:

    Credit Market update…

    IG 101 1/2

    HY 93 1/2

    Thought we might get as wide as 125bps on the Investment Grade Index and as low as 89 on the High Yield Index… looks like we don’t get there.

  29. 29
    zman Says:

    ROSE – at new 2009 high. Quiet, boring little story. For the new folks there is a writeup on them on the reports tab here:

    http://zmansenergybrain.com/subscriber-data/zeb-reports/

    Scroll down to ROSE

    The reports tab is a combination of my beginning and ongoing thoughts and notes on a number of names, many with quarterly updates.

  30. 30
    Nicky Says:

    Santelli telling it like it really is – not that anyone is listening.

  31. 31
    zman Says:

    Nicky – I would not be surprised to get some fear selling back into the market pre AA.

  32. 32
    BirdsofpreyRcool Says:

    Nicky — missed it… what did Rick say?

  33. 33
    Nicky Says:

    BOP – US likely to be behind the rest of the world on recovery. Be careful what you wish for with the weak dollar.

  34. 34
    Nicky Says:

    Z – feels like one of those grind higher all day days to me. I have heard several traders on CNBC they expected the market to correct more but now they are just jumping back in.

  35. 35
    zman Says:

    Yep, basically said “our fiscal imprudence is catching up with us”. Something I mentioned a month or so ago was some markets getting ready to raise rates before the U.S. can afford to. Also hard on the dollar and we saw Australia, who has a much stronger balance sheet than the U.S., raise rates over night.

  36. 36
    choices Says:

    “New normal” for jobless recovery.

    http://www.economist.com/opinion/displaystory.cfm?story_id=14548881

  37. 37
    zman Says:

    Nicky – agreed, I’m just thinking they lose their nerve before tomorrow’s close and AA’s results. I plan on raising cash before they do. Despite looking for a bigger than market expected draw in distillates, I’d like to be more in cash before EIA tomorrow.

  38. 38
    Nicky Says:

    Z – aren’t AA;s results tonight after the close?

  39. 39
    VTZ Says:

    Santelli is the only on on CNBC I actually listen to. The rest of them are generally hacks.

    If anyone can tell me a bullish point on the dollar other than some oversold technical condition I’d be pleased to hear it.

    Nicky – I’m a fan of the grind higher days than the insane volatility.

  40. 40
    zman Says:

    Re AA:

    Presentation is after the bell, I assume that means numbers are at the close:

    http://www.alcoa.com/global/en/investment/analysis.asp

  41. 41
    BirdsofpreyRcool Says:

    Nicky — #33. Thanks for the summary. I always like to hear what Rick says… I’m with VTZ… he’s the only one worth listening too. (He understands credit markets, which is more than 98% of all equity commentators out there.)

  42. 42
    BirdsofpreyRcool Says:

    FWIW, bloomberg shows AA earnings out after-mrkt on 10/7. Analysts expecting -0.9 cents in “adjusted EPS” on 45,112mm in sales and 333 ebitda.

  43. 43
    reefguy Says:

    Interesting well- Fayetteville, White County. Chesapeake completes a 12 stage 6900′ lateral the Reva Deen 7-8 #1-15H9 at 7,691 MCFPD 1300# FTP on a 44/64″ choke.

  44. 44
    VTZ Says:

    Z – You called the move yesterday on the strength of the weak dollar. I was thiiiiis close to closing out a few long positions and very glad now that I didn’t.

  45. 45
    zman Says:

    Fayetteville Shale – circling back to Eli’s question from last week, my permit guy said Faulkner county has been pretty slow. Looking at the Ark O&G Commish report from last Friday, I now see — Faulkner county permits from CHK (that’s outside what has been the southern most portion of the play). Good news for CHK and SWN. Maybe for HK too as they have a large position in the county just to the north.

  46. 46
    zman Says:

    Reef – that is a monster well for the Fayetteville, biggest IP I’ve seen to date, also one of the longest laterals. Has got to make you happy to own SWN as well. Thanks.

    That kind of well also will be a boon for someone like PQ who drills A LOT of non-operated wells with the likes of CHK, SWN and HK. Gives them potential for upside to their guidance when they give it for 2009.

  47. 47
    VTZ Says:

    8+% moves in the gold/silver names today.

  48. 48
    reefguy Says:

    z-Fauklner County, CHK permits??

  49. 49
    zman Says:

    ROSE through $16.

    APC having best in class day.

    HDY – contracting for an oil seeps study, so making progress as they work towards ID’ing their first prospect off Guinea.

  50. 50
    zman Says:

    Reef – 5 of 6 are CHK, one is SWN

    http://aogc2.state.ar.us/WIPE/2009/WklyRep%2010-2-09.pdf

  51. 51
    zman Says:

    Bill – your ATPG appears to be forgiven.

  52. 52
    BirdsofpreyRcool Says:

    Global Hunter raised its PT on ATPG and summarized it this way —

    ATP Oil & Gas (ATPG) completed two capital markets transactions, completed the sale of the Gomez pipelines and obtained project financing for the Octabuoy hub at Cheviot. Titan Hub next on the auction block. For perspective, the sale of 100% of this asset – while doubtful – would allow ATPG to pay off all debt. Maintain Buy rating while raising price target to $25.00 from $12.50 per share on greatly increased NAV & production levels.

  53. 53
    zman Says:

    Um, just looked up from a little due diligence to see the Dow up 172, the SPX up 20 at 1060. Um, W0W.

  54. 54
    VTZ Says:

    Nicky – Do you still see resistance for the dollar around 76? or do you think we test the low?

    I personally think we have to test the low, but that’s just me.

  55. 55
    Dman Says:

    VTZ – Mish is talking his book with his woefully wrong analysis. If we took it seriously, we would have to conclude there is no meaning at all in the dollar being the world’s reserve currency. If fact, of course, it is precisely this reserve status that has allowed colossal US debts to pile up. The reserve status is ultimately psychological: if everyone suddenly adopted another currency (say gold or the Euro) then dollar reserve status is over. Simple as that.

    So the significance of the “Secret Dollar Talks” story is not the details (eg. the time horizon seems absurdly long). It is the fact that the more widely such stories permeate, the more confident “player A” becomes that “players B, C, D … etc” are also thinking the same way. It is about a cumulative shift in psychology. This can precipitate, without warning, a sudden shift when one of the players decides that he’s going to sell all his dollars real quick, accepting the heavy losses (which will increase drastically when he starts to sell), because he wants to get the jump on the rest.

    Having said all that, to answer your question #39 with another question: is it possible that on a short-term basis, all the conceivable bad news for the dollar is out? What else is there that could hit the market?

    I have to admit that this “oversold” case for the dollar sounds rather weak, even as I try to make the case, & it hasn’t counted for anything in a long time.

    Also, there is plenty more that *could* go wrong. For example, Ron Paul has been saying that an attack on Iran would finish the dollar off. I would add that further escalation in Af-Pak could have the same effect, only slower.

    In the Iran scenario (or any other “big scary thing”), what will be crucial is whether the “flight to safety” impulse fails to support the dollar. Why not rush into silver, gold, oil etc instead? If the psychology has shifted far enough, the dollar won’t be views as “safety” by anyone.

  56. 56
    zman Says:

    Dman – hear ya. I’d given an absurdly long time line to you if I held your asset and wanted to abandon it for the best price too.

  57. 57
    zman Says:

    NFX made a new 2009 high. Pretty torn on the concept of hugging more cash before API tonight or holding into the opening rally, assuming the market closes near HOD tonight. Eco data is again light tomorrow (just consumer credit and that in the afternoon).

    I’m likely to halve a bunch of positions later.

  58. 58
    VTZ Says:

    Dman – Correct, it’s a measure of confidence. Here are potential dollar catalysts:

    -Stimulus 2
    -Passing a health care bill
    -Cap and trade
    -More QE
    -Bad treasury auctions
    -Larger and larger treasury auctions
    -A confirmed worsening unemployment outlook
    -Middle East tensions
    -Further SDR talks
    -Confirmation from the Fed that rates will stay low for a long time so that the carry trade can go all out
    -etc, etc

    Keep in mind it was only last week they were pumping dollar strength on CNBC. The average investor still holds a LOT of USDs. I’d be hard pressed to believe that lots of pension funds have diversified either.

  59. 59
    VTZ Says:

    Re 56: Exactly. It’s all about accumulation of gold and other alternatives for the Chinese. While they can still go buy foreign assets like oil and metals with their USDs.

  60. 60
    zman Says:

    58 – Good points and your third to last sentence is priceless.

  61. 61
    Dman Says:

    VTZ – afterthought: what happens if China really starts trying to buy US assets in earnest? Couldn’t that put a floor under the dollar?

  62. 62
    bloodystupidjohnson Says:

    Tell me Z, is your trigger finger starting to get itching on liquidating some of your positions?

  63. 63
    zman Says:

    BSJ – I have had to tie it to my desk. I will be coming out of some half positions and some wholes and taking losses on higher strikes soonish.

  64. 64
    zman Says:

    NG through $5 again, had been resting all morning but starting to puts its own move on now. Frankly, I would not expect it to move much higher without more set backs. Maybe $5.25 to $5.50 and then a test of $5. 4 weeks left in injection season, going to be volatile. Cold air masses from Canada helpful but not likely to drive winter type price spikes just yet.

    Short stories and broker comments are taking on a more whiny quality “but gas is fuuuullll, why is is going upppp?!” My message to those guys is embrace your fear, cover your short, and find a new trade you can get comfortable in. Or short it again on the move to $5.50.

  65. 65
    Dman Says:

    Z – #56 right. Reminds me of a Star Trek movie where Spock & Kirk are speaking over an open channel & Spock says “hours could seem like days” to disguise the repair time estimates.

    So when they say 10 years to get off the dollar, maybe they mean 10 days … or 10 minutes.

    Panic stations everyone! Oh, wait, we’re already there.

  66. 66
    zman Says:

    Gassy names with held calls:

    SWN, SD, KWK moving well

    HK – not so much, having trouble with that $24 level … again. This grows tiresome and I’m likely to back the lower strikes out … probably just in time for the move up that comes with people realizing the name hasn’t moved as well but am not concerned about that so much as getting rid of the overweight on those $24 strikes.

  67. 67
    DrLink Says:

    RE 55 I read this guy everyday. He is wordy but knows currency. Chuck Butler from Everbank writes….. http://www.dailypfennig.com/

  68. 68
    zman Says:

    Re 65: LOLOLOLOL

    Let Petra at zmanadmin@gmail.com know what size you wear and where to send this:

    http://www.cafepress.com/ZmansEnergy.386917299

  69. 69
    zman Says:

    Re 67 – Other than using more ! than I use in a year, good stuff. Thanks for that.

  70. 70
    Nicky Says:

    VTZ – I am looking for a lower low on the dollar – maybe 75.50? We are currently in 3 of 5 down and need a 4 up (small) and then a final 5 down. Should coincide with the top in equities and metals and energy.

  71. 71
    zman Says:

    Note how quick energy backs off with a tiny downwards move in the Sp500.

  72. 72
    bloodystupidjohnson Says:

    NFX is at a key point. It gaped up this morning to a new high. Lets see if it can keep that high. If it can’t, then lets see how it behaves on a pull back.

  73. 73
    Dman Says:

    I’m not ashamed to admit I’m a Star Trek fan, I just never thought it would help me understand global markets 🙂

  74. 74
    Jerome Blank Says:

    The Nat gas continuous futures contract went on a P&F buy signal when prices held on the Oct/Nov rollover. Looks like the first buy signal for NG since March of last year…P&F trendline resistance $8.50-$9.00

  75. 75
    zman Says:

    Thanks much Jerome. Looks like gas is taking a breather today after a 2 day 50 cent move; can’t blame it. If the market pulls back today well away from it’s highs I’d expect a close in the 4.80 to 4.90 range, does that mess your PF chart?

  76. 76
    bloodystupidjohnson Says:

    Over on yahoo, they listed chick cars and guys cars. The top selling chick cars at the Beetle, Civic, Prius, Eclipse Spyder and the PT Cruiser.

    Guy cars, Silverado 1500, BMW M6, Viper, GMC Savana Cargo Van, and Vette.

  77. 77
    reefguy Says:

    Real Guy Cars- no lease, no payment…

  78. 78
    Dman Says:

    Big corn spike today. Was up about 8% at one point.

  79. 79
    Jerome Blank Says:

    #75, no worries, at the current level, futures go back into a col of O’s on a print of $4.25, if it only pulls back to $4.80 to $4.90, we’re in good shape…

  80. 80
    zman Says:

    ZTRADE:

    KWK – Sold the KWK $15 October calls (KWKJC) for $0.45, up 69%, with the stock at $14.50. Just starting to raise a little cash.

  81. 81
    zman Says:

    Thanks Jerome. Apologies if I’ve asked on this one before but EOG, having trouble moving through $84.40 or so for the fourth time. Earnings strong, fundamentals improving, no joy from last conf call despite all good. Looks like a break out would carry it significantly higher which the forward CFPS multiple could allow. Getting more liquids rich faster than most people or management thought they would do to Bakken, Barnett Combo and yet it has trouble with this level. Low low debt ~ 18% net debt to cap, not pushed by lease expirations but it does have some natural gas “exploration” upside in E. Texas Haynesville with a highly watched well.

  82. 82
    zman Says:

    ZTRADE

    HK – Sold the (20) HK $24 Calls picked up yesterday at $0.45 for $0.75 on the mid with the stock holding at $23.90. I continue to hold (30) more of the $24s as well as $25 and $26 strikes.

  83. 83
    Dman Says:

    Z – #69 I see what you mean about the exclamation marks: my eyes hurt when I try to read that page. I think he might have cured me of my slight tendency to use them.

  84. 84
    zman Says:

    RMD – By the way, have not forgotten MCF, working up a model there since the Street has decided not to.

  85. 85
    bloodystupidjohnson Says:

    Concering EOG, maybe you can take some heart Z because PXD had a similar chart and it broke through its waterloo today at 36.66.

  86. 86
    zman Says:

    Hear ya BSJ – I’d rather the PXD didn’t run pre earnings but what can you do…

  87. 87
    Jerome Blank Says:

    Re:#81 EOG has a very interesting chart, after completing a recent “bear trap” , EOG reversed back into X’s and goes on a quadruple top buy signal on a print of $85 (quadruple tops are relatively rare) This charts shows there is a lot of pressure building behind the price movement…this stock is going to move when it finally prints $85

  88. 88
    zman Says:

    Jerome – exactly what I was thinking.

    Z Trading Rule #13: Technical Analysis. I don’t have to understand all the workings of the VooDoo or even agree with it relative to the fundamental backdrop … as long as I am mindful to respect the VooDoo and trade accordingly.

  89. 89
    zman Says:

    Nicky – your buddy Terranova saying oil will rise with gold. I recall him disliking oil at $65 but heck, at 71.60 its suddenly a bargain.

  90. 90
    Nicky Says:

    Pete Najarean selling into the close as GS have gone negative.

  91. 91
    VTZ Says:

    Pete must be a sophisticated investor to use the ole GS positive or negative signal.

  92. 92
    Nicky Says:

    Oil looks like it should see at least a 3 wave correction to the downside. The advance was halted near that 72 area again – trendline there.

  93. 93
    zman Says:

    ZTRADE – This went out as a ZBLAST earlier but I don’t see it in the comment stack above for some reason.

    HK – Sold the (20) HK $24 Calls picked up yesterday at $0.45 for $0.75 on the mid with the stock holding at $23.90. I continue to hold (30) more of the $24s as well as $25 and $26 strikes.

  94. 94
    Dman Says:

    Z – #93 Ztrade appears as #82

  95. 95
    zman Says:

    Inventories best guesstimate is that we see better than expected demand on distillates prompting a bigger draw down of distillate inventories than the expected draw of 0.4 mm barrels.

    We saw a draw two weeks ago, then a big build in distillates with last week’s report from API. That probably but not necessarily puts them back on track for a draw, especially factoring in the rapid up tick in heating oil home using HDDs which slightly bested gas-weighted degree days last week.

    … more in a second…

  96. 96
    zman Says:

    Ok, I see it now, thanks D.

  97. 97
    zman Says:

    … adding to 95, the five year average for inventory builds or draws shows only a small draw this time of year due to a couple of warm weeks in the average. We things normal, the average would indicate a bigger draw down of inventories. Last week’s weather was essentially normal for this week of the year vs the year ago week’s unseasonably warm temps.

    On an oil weighted basis:
    Last week: 52 HDDs
    Normal for the week: 55
    Year ago week: 30

  98. 98
    ram Says:

    Zman – Is there one particular drag on HK that needs to be reconciled?

  99. 99
    zman Says:

    Ram – Not that I’m aware of it. It has good days often when others aren’t. The balance sheet has been handled, growth will be best in class next year, reserve growth will likely be best in class this year. It is a higher multiple name but always has been and isn’t near the top of its band. No one trusts them not to peel off another deal but they’ve mitigated the need for another deal by doing the last one and by doing the Permian asset sale.

    Nasty mid day reversal on the equity market in motion, sucker punched oil will close a dime off $71 but still green. Data will push oil for tomorrow and again, I’m looking for a bigger draw on the distillates side than the Street although I could be off by a week.

  100. 100
    BirdsofpreyRcool Says:

    CIT bonds just started trading “flat.” Means they are trading without accrued interest. Means most people think there will be a Ch11 filing. That could put a bit of a kink in the mrkt, until it’s a done deal and people see that the sun still comes up the next morning.

    Could be why financials reversed.

  101. 101
    ram Says:

    O.K. It just seems like that if HK was a person walkig down the street amongst other E&P people, that analyst that lived in buildings above would urinate on poor HK as it walked by. It seems unloved.

  102. 102
    zman Says:

    Ok, don’t really see it that way but thanks for visual.

    Cramer saying CIT BK rumored to be a hit to GS quarter, saying he doesn’t see it but that that is what turned GS lower today.

  103. 103
    BirdsofpreyRcool Says:

    OK… just got a clarification note from the bond trader… the CIT CDS CURVE is trading “flat”… that is, the near-term CDS are trading at the same price as the long-term ones.

    Ha! They have to be careful with the word “flat” when referring to bonds/CDS of a company widely thought to be on the verge of Ch11.

    I’ll keep you updated.

  104. 104
    zman Says:

    CVX on the tape saying Piceance Basin gas drilling halted due to low prices. This is one in a series of statements CVX has been making about uneconomic gas pricing in the U.S.

  105. 105
    zman Says:

    NG by the way did pull back to the $4.80 to $4.90 range as the market softened. But it did not get out of control on the downside even as oil gas up a majority of its gains.

    On HK, another issue they have is being heavily hedged:
    2009: 70% at $7.50
    2010: 70% at $5.93

    So as prices rise, people will give them a little grief for giving up some upside, despite the fact that they are one of the lowest cost producers out there. Given where their gas is coming from, it stands to reason that their LOE/Mcfe will do nothing but fall next year meaning that their $6ish hedge price will be the same as someone else getting $6.50 to $7.50.

  106. 106
    zman Says:

    Volumes again look on the lowish side today, both in the gassy and oily names.

  107. 107
    zman Says:

    EOG playing around with that quad top level, looking to close above it on a close of 84.43. Continuing to hold my 10 Oct 85 Calls.

  108. 108
    BirdsofpreyRcool Says:

    so, is this a techinical blast off for EOG? or, do we actually have to get thru 85?

  109. 109
    Jerome Blank Says:

    Re: #108, EOG goes on a P&F buy signal on a print of $85, must print $85

  110. 110
    zman Says:

    Just to be clear from a PF perspective, is that a closing print or just a print? I’d say we have to wait for the open tomorrow for $85 which will likely be determined in part by markets and part by API after the bell. If I were looking at it with my layman’s TA eye, I’d say a higher close here, under $85 but around 84.50 is positive but will need a breakout with further volume, something noticeable towards $87 to get people’s attention. The stock is easily capable of $3 to $5 moves, the fundamental’s support it, yada, yada, yada.

  111. 111
    BirdsofpreyRcool Says:

    Jerome — I’m a BIG FAN of your P&F work. Thanks for your answer.

  112. 112
    zman Says:

    Wow = Gold. Congrats on that call VTZ.

  113. 113
    VTZ Says:

    The alltime high close signals nothing but good things to come to those who wait. Too bad I wasn’t holding any short term calls for this move because I was too overweight already. I semi-expected some consolidation although the close yesterday was very bullish. When I said we’d move to alltime highs, I meant within a week or two, not the next day.

    I don’t intend to lighten up at all in the short term but may add depending on the market.

    My intermediate term target before this part of the move is done is ~1150ish.

  114. 114
    VTZ Says:

    Today seemed like a nice win for you too. You have tonnes of good analysis that I don’t congratulate you for.

  115. 115
    zman Says:

    So, given the eco light data load again tomorrow (although there is a big treasury auction) it looks like news on CIT, the dollar, and AA earnings after the bell tomorrow are in the drivers seat. You could see a case where the market goes to new highs if nothing happens at CIT (this week), the auction goes poorly which could hurt the dollar and AA beats downwardly revised EPS estimates. One thing that should help AA is lower electricity costs due to low natural gas prices during the quarter. Anyone have a quote on aluminum on the LME? Someone with a Bloomberg perhaps.

  116. 116
    zman Says:

    Anyone have a quote on aluminum on the LME? Someone with a Bloomberg perhaps.

  117. 117
    Dman Says:

    CRK getting a good reception today.

  118. 118
    zman Says:

    V – don’t make me blush.

  119. 119
    zman Says:

    Ahh, beerthirty.

  120. 120
    BirdsofpreyRcool Says:

    Auminum from the CRB… 1782.75 -14.75

  121. 121
    BirdsofpreyRcool Says:

    make that “Aluminum”

  122. 122
    Jerome Blank Says:

    #111, BOP, thank you, Re#110, does not need to be a closing print, EOG must trade at $85 to trigger a new P&F buy signal, it can be intraday. P&F has strict rules, but you can trade it many different ways. Some folks will buy the break on a print of $85, or if you know the stock, anticipate the buy signal like we are seeing here. Usually, I like to wait for a buy signal to print and then look for at least a little intraday pull back…risk is missing the trade on strong upward momentum…

  123. 123
    zman Says:

    Dman – yep, flubbed that one, really should have done at least a short term trade there a little bit back, hitting all cylinders. I don’t do the shoulda, woulda, coulda thing so enough of that. It also highlights another emerging trend as we approach earnings season: with gas prices rising or at least stabilizing we are seeing outperformance from the least hedged names in 2010.

  124. 124
    zman Says:

    Is that CRB quote metric tons?

  125. 125
    BirdsofpreyRcool Says:

    correct. From the LME, contract size 25 metric tons

  126. 126
    zman Says:

    Guessing so, anyway, big upgrade in price per ton which is good because the Street is looking for $4.55 B in revenues vs $4.2 B last quarter.

    Normal seasonality for the industry would have 3Q down to 2Q.

    That goes up against $7 B in 3Q08.

    As long as volumes didn’t fall off a cliff (and they did in 2Q) then maybe the rally in price due to curtailments will result in a top line beat which is more important this quarter than last from the Street’s perspective.

  127. 127
    BirdsofpreyRcool Says:

    sorry… that is a price/metric ton. but minimum trade is 25 tons.

  128. 128
    zman Says:

    Thanks, good stuff Jerome. You and RMD are long lost cousins on the PF format.

    Thanks BOP, I used to follow aluminum back in my gas demand days, along with steels, fertilizer etc. No longer track all that data as I don’t generally pin much benefit on it.

  129. 129
    zman Says:

    2Q average aluminum price was $1,485 / mt so that will offset some volumes!

  130. 130
    VTZ Says:

    RE 112: It’ll be interesting to see what happens to gold in Asian trading overnight.

  131. 131
    zman Says:

    V – Yep. When’s wedding season over there?

  132. 132
    elijahwc Says:

    LINE Linn Energy announces it plans to make a public offering of 6 mln units of its limited liability company interests (23.14 )

  133. 133
    VTZ Says:

    There is seasonally strong demand September through October.

  134. 134
    zman Says:

    Would someone post API when it comes out in 5 minutes? Thanks.

  135. 135
    zman Says:

    Eli – thanks, not entirely surprising. I have some other yield money that needs a home if it gets back to around $20/$21. Good solid distribution there. With their coverage ratio they could conceivably due an accretive deal that boosts the 2010 distribution level.

  136. 136
    zman Says:

    CRK priced $300 mm senior deal, not the $200 mm previously announced. Good rate at 8.375%. Good appetite out there.

  137. 137
    zman Says:

    Heating oil legging up with release of API. Crude’s added 20 cents as well.

  138. 138
    Nicky Says:

    Can someone confirm whether Alcoa earnings are today or tomorrow?

  139. 139
    bill Says:

    vq star of the day up 10 %

    bullish plans– z you should listen to it

    atpg, underwriters are working on the over allotment..they have 30 days so i expect it to be peg’d around 18.50 until the overhang is tottaly gone then mayne it makes another charge

    vq could be the next atpg

    they want to sell the hastings off and develop monterry

    anyways i added a little of both

  140. 140
    BirdsofpreyRcool Says:

    Nicky — AA earnings are tomorrow, conf call after mrkt close

  141. 141
    zman Says:

    Nicky – that link I put above, says after the close Oct 7.

    http://www.alcoa.com/global/en/investment/analysis.asp

    This says tomorrow after close too:

    http://biz.yahoo.com/research/earncal/a/aa.html

  142. 142
    Nicky Says:

    Thanks guys and gals.

  143. 143
    zman Says:

    Thanks for that BOP

    Got the distillate draw I was babbling about above:

    API Watch:

    * Crude: DOWN 0.254 MM Barrels
    * Gasoline: UP 0.544 MM Barrels
    * Distillates: DOWN 2.913 MM Barrels

    Crude was expected to be up 2 mm
    Gasoline was to be up 1 mm
    Distillates were to be down 0.4 mm barrels

  144. 144
    BirdsofpreyRcool Says:

    hmmmm…. sounds bullish to me

  145. 145
    zman Says:

    Pretty bullish number on distillates, when someone gets the detail on those shoot them to my email please.

    The crude number could just be imports backing off, almost has to be really as the refiner utilization numbers just about has to be backing off.

  146. 146
    BirdsofpreyRcool Says:

    Market To Do List for tomorrow — kick EOG thru the $85 goalposts.

  147. 147
    zman Says:

    Wow I like it when I get those advance numbers right. Should be a good open for oil and energy unless the market finds a reason to crap out. Probably a good open on a name like SUN which is closely associated with the east coast heating oil market this time of year.

  148. 148
    zman Says:

    BOP – you long the Papa?

  149. 149
    zman Says:

    Alright gang, have a nice night, gotta go pay more attention to a Red Stripe.

  150. 150
    BirdsofpreyRcool Says:

    sssssssssssssshhhhhhhhhhh… doan wanna jinks it, no how…

  151. 151
    zman Says:

    Any word if Kass is covering or if this little re rally is of no concern?

    Eli – did you see my Faulkner comments?

  152. 152
    bill Says:

    on drybulk

    http://finance.yahoo.com/news/71-Million-of-Deadweight-twst-2713915898.html?x=0&.v=1

    currently im not in anything related to shipping

  153. 153
    zman Says:

    Bill – thanks. Me either. But keeping about an eighth of one eye on the group.

  154. 154
    PackMan Says:

    Dman – you can’t argue with Live Long & Prosper !

  155. 155
    bloodystupidjohnson Says:

    Z, I sent in my bio. If the mice are friendly today it was sent to the right address.

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