Thursday – Dualing Natural Gas and Oil Inventory Reports

Posted on by zman

 

Market Sentiment: One eye on euphoria, one eye on big name earnings.

  • Big Broad Market Earnings Watch:

    • GS reports top and bottom line beats:

      • EPS of $5.25 vs $4.24 expected with a range of $3.82 to $4.75.
      • Revenues of $12.37 B vs $11 B expected (range of 9.5 to 11.7)
      • Quote Watch: "Although the world continues to face serious economic challenges, we are seeing improving conditions and evidence of stabilization, even growth, across a number of sectors," Lloyd Blankfein,  Chairman and CEO.
      • Stock marked lower in early, post numbers, pre call trading.
    • C reported a loss of 27 cents vs expected losses of ($0.38). This one is also called lower.
    • GOOG and IBM release numbers after the close.
  • Eco - Data Watch:
    • Jobless Claims 514K vs 510K expected. Market wants to see this number fall under 500K on a weekly basis pretty soon.
    • CPI (both core and non core) at 0.2%, in line.
    • Empire State Index: 34.57 vs 18.9 at last read.
    • We get the EIA's Natural Gas Inventory data at 10:30 am EST.
    • EIA Oil Inventories come out at 11am EST due to Columbus Day.



In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today - APC
  5. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $34,100
    • 82% Cash
    • The Current Holdings Tab is updated.

 

  • Yesterday's Trades:
    • WLL – Added (5) WLL Nov $65 calls (WLLKM) for $2.40. I’ll be punting the remaining Oct. $60 calls here in the near future.
    • SWN – Sold the last (15) SWN October $45 calls for $1.25, up 245%, with the stock at $46. I may add to the November position started yesterday in a little while.
    • HK – Added (10) HK $28 November calls for $1.34 with the stock at $27.15.
    • NFX – Added (5) November $50 Calls, (NFXKJ) for $1.60 with the stock at $47.50. Will punt the last of the October calls soon.
    • NFX – Sold the remaining October $45 calls for $2.80, up 151%.


Commodity Watch:

Crude oil rallied $1.03 to close at $75.18 yesterday (once again due to strong equity markets and a weak dollar). After the close, the API released numbers that were better than expected for crude and gasoline (unexpected draws, see below). Overnight, crude traded above the previous high for 2009. This morning crude is trading flat.

Natural gas fell another $0.15 to close the day at $4.44. Despite colder than normal weather the evaporation of yet another tropical disturbance approaching the Gulf sent futures into a slump. This morning gas is also trading flat.

 

Natural Gas Storage Preview

  • My number: 50 Bcf on HDDs of 61.
    • History:
      • Last Week: 69 Bcf. Even with HDDs of only 42 this injection was surprisingly large.
      • Last Year:81. Last year saw gas using population weighed heating degree days of 50.
      • 5 Year Average: 65. Normal HDDs are 52 for this week.
    • Imports: Down 0.9 Bcfgpd due to a retrenchment in volumes from Canada.
  • Street Consensus: 53 Bcf

Oil Inventory Preview


API Watch:

  • Crude: DOWN 172,000 barrels
  • Gasoline: DOWN 2.658 MM barrels - API commenting this was driven by strong demand which is odd given the time of year but EIA has also been showing strong demand in the last couple of weeks.
  • Distillates: UP 219,000 barrels (this is where I think we could see a larger than expected build in the EIA numbers today which would be supportive of crude).

ZComment: With oil having moved to the top of its range, product demand stability is going to be increasingly important, especially on the distillates front. I listened to the LSTR conference call last night and essentially trucking volumes, on a variety of fronts, is showing stability and perhaps slight sequential quarterly growth. This appears to be a function of inventory restocking and customers taking advantage of reduced freight rates and those rates are now themselves starting to bottom as capacity has become constrained in some regions due to bankrupcies among the mom and pop operators. My call for rising distillate demand is therefore two-fold: a seasonal pick up in heating and improvement in the transportation sector. The caveat is that there is a large quantity of diesel or various grades tanker-stored around the world's oceans and such a pickup in demand may elevate prices enough to bring some of this product to U.S. shores. I think this a catch 22 for the refiners who can cut domestic production only to be slapped in the face by foreign volumes but not necessarily one for oil. Rising demand figures will bouy oil to some extent even if bloated distillate inventories are slow to shrink.


Stuff We Care About Today

APC West Africa Well Update

  • Mahogany 4 Appraisal well successful
  • M4 is the eastern most well to date of the Jubilee field, click here for map.
  • This well is 5 miles east of the discovery well and encountered140 net feet of high quality oil pay in stacked sands
  • This helps prove that Jubilee has massive areal extent and claims of its size of between 0.6 and 1.8 B barrels of recoverable reserves (APC has just under 31% and for comparison purposes the whole company has booked reserves of 2.3 B barrels (including some already booked at Jubilee).
  • They also announced a shallow dry hole off Cote d'Ivoire - not a complete loss as it gives them data in understanding the play.
  • Nutshell: Positive but not blow me away news, just firms up what they've got. The did find deeper sands with this well than in the previous three and it confirms that they know how to read the play type in the area. Should heat up the bidding war between XOM and China for the Kosmos stake (Kosmos was actually the operator of this well).

Gas Macro Tidbits From CHK:

  • CHK’s non shale production declined 16% in ‘08, and will decline 29% (ex divestitures) in 2009.
  • 85% of U.S. gas production is non-shale. This along with severely curtailed rig counts is how I get to comments about U.S. gas declines being inevitable.
  • They see production in decline now and said you should see the EIA's 914 data reflect that more obviously in the near future.
  • CHK sees peak to bottom swing on gas production is 7 Bcfgpd. From a 60 Bcfgpd peak at ye 2008 that’s like losing all of Canada’s imports to the U.S.
  • Comments of U.S. gas rig activity.
    • CHK said they are already well on their way to their target rig count so not a lot left from them in rig upside.
    • Says same of peers.
    • Says that CHK will be the most aggressive in bringing back rigs of anyone (they are in 1 of every 7 wells drilled now as an operator and again, are approaching what they see as a natural ceiling for their needs).
    • Aubrey affirmed my prior contention that CHK, HK etc are drilling enough to get acreage into HBP and little more than that and avoiding drilling in the conventional. Aubrey is making my points better than I do but he’s better paid to do it.
    • Says you are seeing others hedge as the back of the curve came up, but that CHK is waiting as they are front loaded on what hedges they do have and reiterates there is no way 700, 800, or 900 rigs will keep gas production from declining next year.

 

HAL reports tomorrow kicking off the energy earnings 3Q season (at least for the service names).

Odds & Ends

Analyst Watch:

  • NFX raised to Outperform at Wells Fargo
  • BHI cut to Sell at Citi
  • PETD cut to Neutral at SunTrust
  • (SPWRA) raised to Outperform at Baird
  • (PTEN), (SLB), and (HAL) started at Outperform at BMO
  • BMO also started (BHI) and (WFT) at Market Perform and (SII) at Underperform
  • (HES) started at Market Perform at Bernstein
  • (PBR) started at Under Perform at Bernstein

 

206 thoughts on “Thursday – Dualing Natural Gas and Oil Inventory Reports”

  1. TechTrader really going on on a limb this morning with his SHORT call… he gives it a 50/50 odds of being the best trade. [huh?]

    HeadTrader just says that IBM and GOOG report after the mrkt close and GE tomorrow morning. He thinks mrkt will look to those to pick a near-term direction. Also, BAC is out… but, after JPM, GS, and C, BAC doesn’t count for much.

    Credit Market a tad weaker… will probably take it’s cue from stocks today as otherwise, bond investors can’t find a lot of reason to sell here.

    IG 98

    HY 94 1/8

    Dollar stronger… explanation is that the appetite for risk assets is down today, so buy dollars. All else equal, that makes oil prices lower… all else equal.

  2. HT pointing out two things that GS said he thinks are significant… 1) on distressed assets, CFO says “there have not been a lot of willing sellers.” And 2) GS says it is a tough market for recruiting as competitor are paying people well.

    Sounds like banking is not falling off a cliff here.

  3. lets call it 51/49..futures are down a bit and the market needs a respite.

    oil still over 75

    tph, bullish on chk and echo’d some of z comments on cash flow expectations

  4. APC getting whacked, presumably on the Cote d’Ivoire dry hole. That’s a little silly but bad day to release that news.

  5. Hear ya Bill. I wouldn’t rule the market out just yet as its hinging mostly on GS for the moment and, well, its GS we are talking about. They probably know how to rally things including their share price if they want to, lol.

  6. NFX – That Fargo upgrade cities increased oil focus, significant valuation discount and operational catalysts. Talk about a good example of “asleep at the wheel” analysis ~ way to be on the ball Tameron. Citing increased oil focus a day after they enter the Marcellus is pretty rich as well.

  7. BOP- question re bank earnings. With the earnings being partly a function of a once in a life time drop in yields, what do you think there chances are of continuing to report earnings at this last quarters level?

    Thank you

  11. elduque — there are so many ways for a money-center bank to make, well, money. I am not talking about the regional or local banks, who depend so much on consumer and small biz deposits and make personal, residential, and small biz loans… but the JPM, BAC, C, GS, and MS’s of the world. 1Q we saw the flurry of debt issuance and all the underwriting fees that went along with that. 2Q was the reliquification of the balance sheet (with the stress test stuff). 3Q has seen a — gasp — huge rally in the so-called “toxic assets” (which GS is lamenting no one wants to sell to them). 4Q will probably hinge on whether or not we have a Christmas this year. But the backdrop to all this is that banks can borrow at absurdly low rates and lend at high ones… when they lend at all. Highly profitable.

    Then we have the trend (as currently seen in the likes of PQ) where banks are cutting back on loan commitments they made in prior years at lower rates. This money comes back to the banks and will be lent out later, at — you guessed it — much higher rates. However, at that point, overall economic activity should continue to pick up, so there will be competition to lend (and keep rates from being too high). But, the loans the banks make then, will turn out to be the most profitable ones.

    And then there’s sales-and-trading, underwriting, M&A fees (massive, for some banks), prop trading, and the improved pricing of existing assets on bank balance sheets. Plus, there is international banking. Growing economies in other countries need access to capital… and what better way to hedge a falling dollar, than to “invest” offshore?

    Lots of ways for bank earnings to improve from here. But, a steeply-positive yield curve means that even stupid bankers can make $$ in this environment.

    Don’t (ever) fight the Fed. Probably the #1 investment lesson.

  15. Nicky, et al,
    I don’t know how many have read Paumgarten’s article on financial market cycles in the October 12 New Yorker, but it is a reasonable presentation, for the mainstream press.
    What caught my eye, aside from the questionable legal judgment of Armstrong, is his discovery of these numbers. He came across a list of all the financial panics, 1683 – 1907, divided the span 224 years, by the number of panics, 26, an found an average of 8.6 years. He came to see it as the “Geometry of Time”:

    “In the early seventies, Armstrong became a trader and dealer in gold, and began compiling forecasts about commodities and currencies, which he sent out to clients. Over time, forecasting became his business. He constructed what he called an Economic Confidence Model, which he relied on to predict an upturn in the price of commodities in the early days of 1977. It worked. Later, he realized that 8.6 years was exactly three thousand one hundred and forty-one days: 3,141, the number pi times a thousand. If pi was essential to the physical world, perhaps it somehow governed the markets. Pi suggested some future dates of significance, which Armstrong watched carefully as they approached: December, 1989, which marked the Nikkei’s peak before it crashed; July, 1998, the high point in the S & P, just before a Russian default broke the giant hedge fund Long Term Capital management.”

    Later he references this cycle time span marking the recent downturn as beginning at another cycle point, February 23, 2007. That is the day of “the tightest credit spreads ever (that is the easiest credit)”.

    Overall, a good, though skeptical, overview of all the theories. Not quite yet available online.

    dij

  16. Good RS. I’d been a little hesitant to switch servers but our high traffic times was apparently crushing the old one or so they tell me.

    BOP – good answer.

  17. JPM downgraded APC to neutral calling them 0 for 2 outside of Ghana. They are talking about today’s Cote d’Ivoire well (which by the way was a shallow, 20 day to drill well, which is nothing in this play type) and the Venus well as non-commercial (which is an overstatement of the known facts) but this is Joe Alman and facts are not really that important to him as CHK and others can tell you regarding his idea of what reserve accounting should be. If it gets much weaker I’ll likely by lower strikes for a trade (inventories willing).

  18. Thanks BOP

    I have been here. Just watching. Got out too early.

    Still thing that the sh__ will hit the fan. I guess I am in the Japan 89 camp of how the market is going to perform over the next 20 years.

    Too much debt, Too much debt.

  20. If oil numbers are bullish, especially with regard to product demand I will take a look at near (for a trade with my remaining Oct $60s) and longer term WLL calls. Also looking for an entry on BEXP $10 Novs.

  24. Both Cashin and Ken Laggone on CNBC this morning saying there were no fundamentals behind this rally. According to Art it had just been ‘talked up’ and when Joe Kernen questionned that Laggone said yes ‘by the government’. What was interesting to me was that they both said Obama came out yesterday as the Dow hit 10k and said the stimulus was working so they said from now on this is his responsibility and he can no longer blame it all on the previous administration. They thought he had made a mistake doing that.
    And yes I know Art has been wrong up until now!

  25. I’m opting to not play HAL tomorrow, just can’t develop a good read there at present.

    * I think they get all “rah, rah” on the call but that’s normal. They can say pricing is flattening and margins should bottom in the next couple of quarters.

    * They can point to a very short history of increases in the NAM gas rig count as the start of something (jury out on that in my book).

    * They can also point to an increasing number of National Oil Company tenders out there and I can’t argue with that.
    If they say something along the lines of getting the south Ghawar contract the crowd could go wilder.

    * On the numbers I’d bet they don’t miss such downwardly revised estimates (which have actually been inching higher in the last couple of weeks).

    * Street can point to the ever present valuation discount to SLB and the “it’s gotta get better from here” theory as it pertains to the service environment. So I’ll be on the sidelines but on the call.

  27. Isn’t the market suppose to discount future conditions? Conditions that could be still blind to the public. When people say there is no reason for a rise or decline in the market it is becuase they currently on the wrong side of the market.

  28. SPX has support at 1085 and 1080. The latter I think should hold and we make a run for 1100 on the SPX. I think this wave finally ends between 1113 and 1123.

  30. Re#22, good morning…SWN broke thru and closed above that area of $46 resistance and remains on a buy signal. SWN printed another X this morning at $47…so far this stock continues to rip in an environment where a number of favorite names are starting to experience a little friction…

  31. KOG Report: http://www.kodiakog.com/pdf/KOG_Oct2009.pdf ….KOG has a new presentation and I would recommend viewing the new material with many updates and new information available. As mentioned in earlier report they are now showing their additional acreage in the Williston Basin including NW North Dakota and Eastern Montana Red River play which has 22,600 net acres.They had written this acreage down to zero at the end of last year so this would have additional future potentional. There is increased drilling permit activity in the area , but no active rigs on the North Dakota side as of this date……. They do have some producers in the Grizzly Area at the Eastern end of Elm Coulee Field but they actually horizontally drilled these a couple of years back and they were not very good wells they make about 30 bopd now.They spent several million dollars in this area waiting on the Unit #117 rig before they could start in the REZ, they have not been able to recoup this investment at this time…………………..Moving over to the REZ lands slide 5 is new and shows Stratigraphic Core Cross Sections and was mentioned by Lynn in his recent presentation. Please note cores 2 & 3 having excellent shows in the Three Forks which actually look better than the Bakken interval.Shell’s Burbank BIA 23-8 is in Section 8-147N-93W and is about 3 miles west of KOG’s wells 1&2. Shell’s Young Bear BIA 32-4 in Section 4-148N-92W is about 2 miles southeast of wells 5&6. Apparantly KOG thinks so as they state in their summary that, “Three Forks and higher density drilling: COULD represent an additional 25 to 50 MMBO ( million barrels of oil).” When KOG finishes drilling well #9 southeast of the River they are going to move the Rig back West of the River and offset the 1&2 with wells # 10,11,12 & 13. One of these wells should be a Three Forks test most likely well # 12 since they have not announced anything about it at this time. The # 1 well had a completion problem and has been average with a total of 22k bo in the first 5 months and is presently making about 100 bopd. Well #2 has made about 32kbo in 4 months and is averaging about 175 bopd. Both of these wells have about 4100′ laterals with 5 and 8 stage fracs respectively. In the Mocassin Creek unit KOG has promote with WI partner and only pays 20% cost with 60% WI on odd # wells which would be wells 11 and 13. If I remember correctly this promote applies to 4 wells only and then back to a heads up arrangement…To the west of the 1&2 Zenergy, Petro-Hunt and Peak ND continue to develop their plays in the Bakken and have permitted test for Three Forks….. I will add some more later and will post copy of response to a letter to KOG from Yahoo board. WAITING on the pullback

  32. I read a piece by a renowned Bear from the 12th that included in his market top theory a 4th stage that basically says everyone casts dispersions on the bears. I guess we are there.

    Personally I think its all up too far, too fast (hence the 80% ish cash position) but I don’t understand why the bears feel the need to fight the tape, trend, Fed etc. It’s like stepping in front of the train and then saying but its only cut off my legs so far, I can still get to the other side of the tracks. What’s worse, in some of the high profile bear cases, it’s about making the “Big Call”, on CNBC or Bloomberg or the cover of the Post, so that you can boost your client count, readership, personal ego, or whatever.

    Lastly, the bulls and bears often confuse the stock market with the economy. I’m not going to say anything on that other than they are different animals (one is a pile of numbers and is largely backward looking and the other is a pile of often irrational personalities wielding tremendous amounts of capital). I’m not a bull or a bear. I’m bullish long term on oil and gas prices and I play to what I think I know something about. How people make general market calls and understand everything from oil to the inner workings of C I will never know.

  36. From Yahoo KOG discussion board. I would think that they will do a secondary in here somewhere…………………………..James E. Catlin, COO,
    Vice-President
    jecatlin@kodiakog.com

    and

    Lynn A. Peterson, CEO, President
    lapeterson@kodiakog.com

    He must have forward my email to

    Investor Relations
    David P. Charles
    Sierra Partners LLC
    Denver, Colorado USA
    +1-303-757-2510
    david.charles@sierrapartners.us

    In my email I ask

    What is your plan on the second rig ?

    Do you plan on getting it ? Where you can have 2 rigs drilling.

    Why did you delay getting the second rig ?

    With oil price around $70 (not sure what KOG get for there oil).

    Do you have enough cash flow for two rigs ?

    Answer from

    James E. Catlin, COO,
    Vice-President

    We still have a second rig available. We have delayed it due to lack of adequate drilling permits as well as a shortfall in cash flow. Takes a while to get wells on and begin getting the revenue. We are still considering bringing second rig in but have not made final decision. We get our oil repriced each month. Recently we have been getting Nymex less $9-$10.

    Answer from

    David P. Charles

    Investor Relations

    Here are the answers to your questions:

    What is your plan on the second rig ?

    We would like to try and put the rig to work on the southern side of the leasehold if possible. This is contingent on additional capital. We can currently fund the present rig through cash on hand, cash flow from operations and through prepaid expenses.

    Why did you delay getting the second rig ?

    We delayed delivery of the second rig due to the global financial markets deterioration in 2008 and the corresponding drop in oil prices during the eand of 2008 and the beginning of 2009.

    With oil price around $70 (not sure what KOG get for there oil).

    At $74.15 oil, the price today, Kodiak receives approximately $65.15 per barrel at the wellhead. This includes the $9 differential to WTI prices. Loaded in the $9 deduct is basin differential and the cost to truck the oil to the delivery point.

    Do you have enough cash flow for two rigs ?

    We do not currently have enough cash flow to operate two rigs. A combination of reserve based line of credit and some equity capital would allow Kodiak to stand up a second rig.

    Best regards,

    David Charles

  38. Gas falling off initially. Storage at 3,716 Bcf now with 3 or so weeks left in the season. Demand this time of year is always squishy, and these numbers are smaller than the five year average and last year (see post for numbers). More importantly, the ability to take gas into storage is impressive. These numbers should call into question just how full we can get.

  39. Whisper for HAL above consensus according to the peers I’m talking to, they’re saying .28-.30

  41. BSJ – interestingly I think Cashin is currently on the sidelines and Laggone is fully invested! So neither has an axe to grind because they are on the wrong side of the trade.

    Yes the market is supposed to look ahead. Maybe when the spx was at 666 it looked ahead and said the financial system will be saved, and it was. Now it has to look ahead and see whether we are out of the woods enough to justify how far the market has come. We are not.
    The problems I think are really going to come a bit further down the line when the government has pulled out of the markets and then they have to stand on their own. I hope there are more signs of real recovery than we are seeing right now. The ‘stuff’ I follow says we are heading much lower later in 2010 to 2011 so that likely answers the question on whether the recovery is real.

  42. NG and group not yet falling out of bed on the storage number. All eyes on oil now. Bad oil number probably erases Dow gains from yesterday. Hard for the broad market to go up without the energy space.

  44. APC went on a short term sell signal this morning with the print below $65 another “bear trap”?…

  47. EIA Oil Inventory Report – crude flat at time of report.

    Crude up 0.4 mm barrels
    Gasoline down a whopping 5.2
    Distillates down 1.1 mm barrels – very good

    Utilization 80.9% – big drop
    Crude imports 8.7

    Gasoline demand – 9.256 mm bpd, very strong for this time of year
    Distillate demand – 3.557 inching up

  49. WildZ

    WLL – Doubled the $60 October calls for $1.35 with the stock down 20 cents on the day after strong oil inventory numbers. See comment 47 today’s post for details on the inventories. I won’t be in these long, maybe out on all by end of day.

  50. ZTRADE:

    APC – Added (5) November $70 Calls (AZWKN) for $2.05 (on mid) with the stock down $3.20 on a broker downgrade today.

  51. Dollar heading back down – we may finally be in v of v down for the dollar as the euro looks pretty clean and looks to be heading to 1.51 – 1.53. Metals may have topped and make a lower higher or else they too are now in v up and I am still looking at silver at 18.30 – 18.60 and gold at 1087 plus.

    Ray Carbonne on CNBC says that oil is going back above 100 in short order – I can’t stand that man – he always just talks his book.

  55. Think that WFT missing the quarter, if they still do, is old news. Mgmt has been pushing down for a few weeks now and there’s been a lot of pictures flying around with trucks submerged in Mexico due to rains. Bigger driver for the Q is how they reassure the market regarding the future of the Chicontopec projects, which is like 25-30 cents of EPS, and any FCPA details. I don’t think PEMEX can afford to cancel the project given declines elsewhere, just think we might have some headline risk. Am a general buyer of it given recent underperformance to the group, at the right price of course. That said, the majority of my longs are in E&P vs. service and I agree with Z’s points on service

  56. Z, do you have any resources on how to interpret the EIA numbers? i.e. descriptions of major categories, and how drawdowns (or each category), etc. can affect prices? I was looking at the EIA website but didn’t come across anything…

  58. Jat – yeah, kind of my point. Expectations = very low. I won’t be playing them but will listen. Some light at the end of the falling off a cliff margin tunnel?

  60. Nicky, the CNBC oil guy I can’t stand is that Schork guy that comes out with the “cute little storks” in the background. He is a typical “broken clock anylsis”, where if you say the same thing everyday, you are going to be right every once in a while.

  61. Bossman – I did a piece on that awhile back at someone’s request. Will see if I can dig it up or will recreate.

    As to the second point, the traders look at the big 3 numbers first, and how those went vs expectations, then over the day they get into what drove the numbers, (utilization, imports etc), then they get down to looking at implied demand vs product make. I try to get through all that in the first minute or so following release.

  63. The stock that is amazing is FST. Regardless what happens it just keeps chugging along.

  64. LINE through $24 now. Still pays 10%+ to wait for higher prices. They are in a position to increase their distribution for 2010 should they so choose.

  65. FWIW – we all know on here that oil is not going up without the broader market and vice versa. With that in mind I see upside on oil into next week. Oil looks to have been playing out as a triangle for wave iv for several weeks and ‘should’ now break higher to complete wave v. Maximum upside is 85 and I don’t think it will get close but never say never with oil.

  66. Refiners moving up. Finally we see utilization take the long awaited Fall nose dive. Next week we could be in for a big crude inventory build unless imports back down further.

  67. BOP-many weeks ago, you made available a list of energy related bonds-do you have an updated list-if so, is it available?

    Thanks.

  68. choices — i think i deleted the most recent version of that list… but I can scrounge up an older one. Not a lot of changes in the bonds, just the pricing. I’ll go look for you.

  69. choices — you’re in luck! Haven’t deleted my “deleted files” yet this week… on it’s way.

  76. Site slow, remnants of the changeover.

    NG up 6 cents
    Oil up 1.30 to 76.50 – this is a new 2009 high. Dollar just off even on the day now. I saw your comment last night VTZ and agree.

    If anyone has theories on strong gasoline demand I’m all ears. I suspect people are searching for work more again and driving to work further from home.

  80. GMXR broke thru P&F trendline resistance at $17, it’s standout performer so far today, albeit on light vol…so, might be a good canidate to consider on any pullbacks…have to say, its been a difficult mkt recently for pullback buyers, …you had to be willing to buy higher…a few went without me, waiting for the spot which never came, but I always stick to my discipline, get em next time around…

  82. West – re 36, just got a chance to read through that. Not sure I follow what part of that was posted to a message board?

  83. Good trade by BSJ in the GMXR 2 days back!

    I continue to hold the common.

    SWN at new ’09 high, through $48

    WLL fighting with getting back through flat. Seems like its being pinned to towards $60.

  85. SD looks like its trying to base for a run higher, probably won’t make it soon enough to save the Oct $14 calls, feels like there is pressure holding the stock down until Monday where we will probably see a rally to $15…

  87. Jerome – yep, I have no doubt the $14s are toast. I’m still doing a little digging but will likely be long some Novembers soonish.

  88. Colin Twiggs, who is a chartist over at incrediblecharts.com, says that a breakout over $75 would confirm a primary advance with a target of $86.

  91. The problem with moving crude up so far ahead of the fundamentals is a different one than it is for the stock market. OPEC spare capacity is near its upper limit. Higher prices invoke more cheating. This puts further pressure on the fundamentals. Whereas the market can look to future improvements in GDP and employment (some day) oil is facing more supply due to higher prices, at least in the near term. I’d much rather see crude hold $65 to $75 (better yet $70 to $75) than move on up just yet.

  93. Dij – someone’s making a big long bet there. I thought everything about CHK’s comments yesterday about the Fayetteville were great for SWN. I notice there is no similar call volume in higher strikes and nothing on the put side either. So its a straight up bet. Who knows, maybe they are caught up in upcoming merger Monday mania. GMXR certainly looks to be. SWN would make a large independent one heck of a focused gas division….not that anyone would want one right now.

  96. Re: #89…UGH…WLL is one I missed, it ripped higher after perfecting that bear trap at the beginning of Oct, but now with Crude where it is, it just seems like a number of the favorite names are acting a bit sluggish relative to the move in Oil…almost like, the are no sellers stomping them, but on the other hand, the buyers seem to be having a bit more trouble taking them higher with the same momentum…WLL remains on a buy, but has rallied without a breath, it’s another one you just have to be willing to close your eyes and buy up…

  97. West – Ok thanks, thought you were saying the KOG guys posted something on a message board. That stuff all seems pretty well known by you and BOP. Deal sometime in the future, don’t know when, would like higher price, etc.

  98. Jerome – The oily names often lag big moves in crude initial as there is a lot of skepticism the move will hold. I plan to punt those Octobers after the close of NYMEX and before they get Googed and IBM’d which may or may not send the market south in the morning. Many oily names have gotten expensive in this rally. WLL is not among them at about 5x CF on what appear to be weak oil price estimates for 2009. It’s easier to stomach the big move there than in a higher P/CF name like a CLR which WLL continues to outperform. In other words, its all relative.

  100. Terranova staying long Google through earnings tonight. Maybe he finally gets his head handed to him – sigh.
    TA guy on Fast Money saying oil has to close above 76 tomorrow and then we could hit 89.

    Z re 84 – we are in wave v up. could be wild and vertical! If they can run it to the mid 80’s by middle of next week I would short it as I think it will coincide with a equity market top.

  101. I should add re #100 – be on the watch for a failure to as if we start to reverse back through 75 impulsively this could be done.

    I am on the lookout for that with all the markets. Too many see 1123 on the spx makes me think its unlikely to happen.

  102. BOP – If it goes there I’ll go to 95% cash and do a little shorting with the other 5% for a quick trade. Too far, too fast.

  104. Meant Nicky.

    NG up 11 cents. Capacity bigger than we all thought, cold weather coming, declines coming. Going to be volatile.

    JT – talking up SUN.

  105. LOL… i’ve been clearly identified as a rah-rah-perma-bull here. Not true. Just not fighting the Fed, the bond market, energy prices, and money flows. But, willing to make $$ on either side of the trade, long or short.

    Just that the short trade hasn’t worked so well since last March… and the bond market is saying that the stock market rally isn’t entirely full of just hot air. But, to make $$, i’ll turn on a dime, if that is what makes sense.

    For right now, holding onto my long KOG and C among other things.

  106. Jerome — could you do your magic charting on DVN for me? Seems to be at a pretty critical point… thank you!

  107. SWN seems unlikely to be in play but it sure is acting like it is. Tempted to take some out of the money calls and cash my $48s bought yesterday. Had wanted to slowly add to that one but given the run…

  109. I always wonder, if these guys are such great traders, then why are they on shows such as fast money?

  112. RE: #100, the crude P&F chart adjusted for a 20 day avg true range (longer term look), shows there is major resistance at $86 to $90, which corresponds with Nicky’s number, but this chart is very fluid and is sensitive to volatility and more subjectivity than a traditional chart…from where crude is trading now, it goes back into o’s on a traditional chart on a print of $74 and back on a sell at $65, if you adjust for current ATR, it remains structually sound until a print of $64…difficult range to work with, but as of now, it remains buy the dips

  113. BSJ – exactly.

    BOP – probably not in the works but DVN could do it before guys like APC, CHK, or XTO could. EOG wouldn’t do it and I doubt APA has an interest that direction. That leaves the Majors…unlikely. If one had the guts/forethought to do it it would likely be COP.

  117. yep. That was his point… they all announced b/f open this morning and were ultra-sensitive indicators of consumer discretionary.

    his point being “shorts have to get out… things aren’t so horrible anymore”

  118. p.s. you thought i was kidding when i posted those yesterday. Shorts didn’t think it was very funny, tho…

  119. BOP – AAPL will only drive that home next week. Like anyone needs another Iphone or Ipod. And yet, everyone I know has the latest generation one. I even considered trading in the crackberry for something more youthful that would id me as a coolkid.

  120. well… it’s more than that… it’s been part of our theme to buy “credit sensitive names” since this summer. HOG was one of the first participant in TALFs with their securitized loans. So, it’s not just consumer-oriented stuff… but the stuff that got credit-log-jammed. (Just to be clear)

  121. BOP – I did, I have to admit, I really did. I’m not yet ready to short things, just hugging more cash than usual. HK at 27.50, SWN at 48.60 … we are seeing some pretty stiff multiple expansion here.

    On the WLL, I’m betting that it plays a little afternoon catchup unless the market falls out of bed. A close on oil close to $77 would reinforce that and give me a good excuse to exit those Octobers. No intention of getting rid of the Novembers there and will likely add more either tomorrow or next week.

    So far the financials and IBM seem to be the big drag on the Dow. But if this is the best sell off the shorts can muster they are in big trouble. There’s probably a fire sale on gnomes somewhere.

  122. Hear ya re credit. This is what is helping guys like PQ who hit a buck back in the Spring to clock in at $8 now, even with a negative redetermination.

  123. This is why we think C will ultimately be a good buy here… due to the consumer credit-sensitive nature of their asset holdings and business.

    Note to the squeemish, C has the lowest exposure to commercial real estate of all the money-center banks.

  126. RE: #106, hi BOP…DVN is currently on a P&F buy signal, rallying off a perfect daily bullish hammer at the 50 period SMA on 10/2/09…P&F resistance at $72, another one of those stocks that rallied without much of a breath, my only qualifier, is short term risk/reward here near resistance, a stall at $72 would be a lower high on the daily chart which could cause a move back toward the 20 day SMA…a buy here is a strong conviction of higher prices, another close your eyes and buy higher stock…

  127. Boss – I’m not doing the options there right now. All was good on the call but a broken guidance on the free cash flow side may prompt some to downgrade in coming days … will wait on that. Besides, I’m in more targeted plays with HK and SWN for gas shale exposure.

    Aubrey made a good point that the more single or double shale plays carry higher multiples (see SWN – Fayetteville; HK – F.S., Hayesville, EFS), RRC – Marcellus.). He said they are doing things to get the Street to expand their multiple over time but that will be tough given their size. For their multiple to expand (and not just to have their price move up but to have the P/CF move up) right now will simply take time and higher gas prices.

  129. My take out list: APA/XEC, XTO/KOG & EAC, DVN/HK or SWN, XOM/APC, BP or STATOIL/RRC, OXY/CXO&XEC, APA and the new ECA merge

  133. might BOP and I suggest a price for the XTO take out of KOG….$12 seems about right to me what about you BOP????

  135. Jivey – too funny. Can’t see that price even from XTO. Maybe if oil is $200 by then. I could see somewhere between $4 and $6 (max) on current prices for oil, gas, service costs.

  137. since I use my name on this board, reluctant to say what I think and have seen of XTO overpaying…but Bobby is rich and I’m not, so who’s to say who is the chump

  138. Hear ya Jivey.

    WLL inching up, still expecting it to catchup once Nymex is closed assuming we get a good close in about 25 minutes. Still expecting to punt the October calls before close of market today.

  140. Don’t want to jinx it, but a gorgeous reversal hammer developing at the KOG daily 20 period SMA, which continues to hold support…

  142. #136… as i recall, it was pretty darn close to $5,000/acre. Will go back and check my notes, tho, as that number seems like ancient ancient history.

  143. Yep Nicky, a bit nutty. Demand is recovering which is good. Inventories less but still bloated, especially for diesel, heating oil, etc. Couple of things to think about before next week’s EIA report.

    1) Utilization fell hard, refinery inputs not down as much as the capacity numbers would suggest, so that probably shows up in next week’s report as slack oil demand.

    2) Imports have been falling for 4 weeks while OPEC production has been on the rise for the last several months. Imports last week were near the seasonal low. There is oil stored on the high seas and I bet it has been piling into the Gulf Coast this week so I’d be surprised if we don’t see imports jump next week.

    So, utilization gets truly reflected at its low levels at the same time imports go up. Big build in crude next Wednesday. Just thinking out loud.

  144. Oil near $78

    Thanks BOP – so that’s $175 mm based on 35,000 acres. 105 mm or so shares out at last check, going to go higher. Going to have to price it on risked reserve potential as the per acre just wont get you close.

  145. Well its interesting to hear you say that the fundamentals do not really justify a move like this, because for sure wave v up will be reversed very quickly.

  147. #144 — yep. That’s what KOG (the seller) thinks.

    But, Lynn is in a good position, this time around. He doesn’t HAVE to sell and he knows where he can go to get $$. I think there was some sniffing around between KOG and a private company to do a merger, but the buyer didn’t meet the seller’s expectations.

    So, like i said, Lynn doesn’t have to sell. He can drill his way out of this… assuming oil doesn’t drop below $50/bbl again.

  148. Nicky – to be clear, I just think its too soon. The fundamentals are moving in the right direction. Gasoline is leading the way and distillate is inching higher. But there are headwinds. Next week’s big build may be no shock to the market, I’ll have to wait and see what the Street is thinking re numbers on Monday.

  150. Boss – Mulling it but had meant to take higher strikes and pull the 47s, still may. I do not want to be unexposed to them on Monday, that’s a weird move they are putting on.

  151. WRES is forming a nice cosolidation triangle on the traditional daily chart and seems to be behaving better than would be expected after yesterday’s news,(did’nt we get less than positive news yesterday)… the next buy spot from here for me would be $2.75, are the fundamentals, longer term, still good for this stock?

  152. Rumor mill: Going around is a rumor of a major new discovery off the west coast of Africa in the Gulf of Guinea by Addax Petro which was recently acquired by Sinopec. Nothing “inside” here, but if true it will be disruptive given Sino, Nigerian and US interests.

  154. Jerome – we received news that their production continues to decline due to lack of spending…not really a big surprise and the way I view them is not a production growth story but instead a higher prices will dig us out of a hole on our reserve report. Things that were not economic at $35 oil are quite economic at $80 oil (or so). They may not see a big upward reserve addition this year but they should see some price based positive revisions. This is not a go-go sexy name with well results out each quarter, just a long term hold for me and I’m not adding in here, just content to hold it for year end results.

  155. Pop – it was but the most recent figures available, which are admittedly spotty at best, indicated that they have cut imports back, still up from year ago but not way up. Meanwhile, OPEC curtailment compliance went from mid 80%s to low 60%s and $80 ish oil in the U.S. is only going to make that go up. You know, its all an expectations game with the weekly numbers and if I see folks lining up with small builds or heaven help oil prices, a draw, I’ll be going almost entirely to cash. I could be off a week but I don’t think I will be.

  156. SWN = Wow

    2010 CFPS est. = 5.13. (so 9.6x) I think that will turn out to be low based on gas prices and on production. They more often than not beat production guidance and they should be the second fastest grower among their size class next year.

    By comparison:
    RRC at 13x
    UPL at 11x
    HK at 9.1x – suddenly the cheap guy amongst the fast production growth crowd
    GDP 10x
    CRK 8x
    GMXR 7x

  157. Re: #154, thank you…RE: APC, if APC closes above $64, it requires a print of $68 to perfect a bear trap reversal into x’s, and a print of $70 to go back on a buy signal…

  159. Jerome…you are inspiring me to study the P&F charting again…very good to have you around

  160. ZTRADE:

    WLL – Sold all 20 contracts of the October $60 calls (WLLJL) for $1.95, up 64%. I continue to hold the November $65 calls.

  161. Re: SWN calls…I sold half of mine at $3.20 this morning…been humming the tune “What Kind of Fool Am I”…all afternoon

  163. RE: #159, thanks jiveyjr, it would be great to have another P&F trader to compare notes…

  167. jiveyjr — aren’t you the same “fool” who bot KOG at 2.42 this morning??

    I wish i was as foolish as you!

  168. That’s strange, I just sent a message saying that I had to leave my screen early, hoping not to miss anything too exciting and it just vanished?

  169. Is it only energy holding this market up now (and its always late to the party) – AAPL down 1pt, IBM down 1pt, goog down 5 pt, amzn down 1+ pt, GS down….

  172. ZTRADES:

    SWN – $47 Nov Calls sold for $4.20, up 107%

    SWN – Added (10) November $55 calls (TKQKK) for $0.95 (on the mid) with the stock at $49.45

  176. I’m also the fool who likes to say on good trading days… “I never had so much fun with my clothes on”

  178. jive – buying KOG at 2.42 might even be more fun than anything u cud do w/ clothes off!!!

  180. I have looked at GEOI in the distant past will refresh if u would like? KOG what a nice move intraday. Those new core sections on the new presentation are really exciting and could possibly point to the 3fks being a larger reserve than the Bakken!

  181. Bought some XEC dec/50 @ 1.75 for news soon on South Texas well and over all move in the group.

  183. z — i know mngmt… and can vouch for them. Really GOOD guys. I scratched my head over their recent deal with NOG… but, I know Frank is nothing, if not a savvy buyer. So, figure GEOI got some nice acreage exposure in the Bakken at a good price there.

    Frank manages his balance sheet better than any other micro-cap e&p i’ve ever seen. Knows how (and when) to use debt accretively.

  185. Another thing about GEOI… Frank is a cheap bastard too (lovingly said, of course). The Anti-Aubrey Poster Child, if you will. Mngmt pay (including his) is pathetic… But they all own their own stock. Also, Frank has access to some extremely deep pockets. So, funding is rarely (if ever) an issue.

  187. BOP – ok, I’ve come across them as a stock a couple of times, never went under the covers, gotta do some reading.

  198. BOP; I have to weigh in and say the consumer is very much hurting.

    High unemployment; no jobs; high foreclosures; high credit card debt; contracting credit; stores are empty; major discounting at stores; no Social Security COLA for seniors; taxes and fees going up; on and on.

    Yeah; a few retailers are doing reasonably well; a couple like AAPL doing great. They are the exception.

    Whatever is going on in retail equity sector is aberrational. Irrespective of what may be going on in the credit markets.

  203. Hey J, great video. I hope you didn’t break any labor child labor laws. If he is over 21, how come he wasn’t in a lawn chair drinking a beer? The best of fortune to you.

  204. PackMan — re#98… filing your taxes has put you in a particularly good mood, eh? 😉

    That said, no argument from me that things stink. I could throw my own personal story into the ring… but no need to add to the Joy of Tax Day. We are all trying to make it work out, however we can, in this brave new world of ours. But being short this mrkt has not made anyone much money lately. Being long has.

    I just call ’em as I see ’em. Trying to help… trying to make back some of what has happened over the last coupla years. It’s all we can do. And if we can have some fun doing it… well, so much the better.

    Thanks z, for hosting and maintaining a pretty darn professional, informational, and — at times — highly profitable and fun discussion forum for energy investors. It has been a bright spot during some of the darkest days I have ever personally known in the capital markets.

  206. For those watching for the Stetson well result link is provided. The magic Pink line is still the line until proven otherwise.This is also the reason that KOG’s price has been held back in recent days with a large block that has been sold but not forced on the market. Personally this does not have any bearing on KOG prospects but some of the fast money will be leaving and they also play on the short side also. In reviewing KOG’s recent cores cross sections. The 3Forks looks better than the Bakken does in the southeastern block on the eastern side of the River. This may provide a buying opportunity in the stock. I also think that they will do a stock deal in here somewhere which will be 10% delutive but we may be 10% higher when that happens. CLR’s recent test to the southeast of Charging Eagle is probably wet also but report will read we continue testing in this area.Until proven otherwise there is a lot of research behind that Pink Line and KOG is on the correct side of the line and will makes at least 2 wells that have already had shows and are flaring gas. ………………………….CALGARY, ALBERTA–(Marketwire – Oct. 15, 2009) – STETSON OIL & GAS LTD. (TSX VENTURE: SSN) (“Stetson” or the “Company”) today announced that it has completed the initial flow back test from the well Stetson MHA 1-11H-148-90. A mechanically successful eleven stage fracture stimulation was performed on the horizontal wellbore utilizing approximately 34,000 barrels of load water. The well began flow-back on October 5 and has flowed for ten days through production testing facilities. Recovery to date has been 9,600 barrels of load water. No oil or gas has been recovered during this test. Stetson and its partner Red Willow Great Plains LLC believe that it is unlikely the middle Bakken zone will produce economic oil in this well and the operation has now been suspended.

    The Stetson MHA 1-11H-148-90 well was initially drilled vertically and well logs were run to evaluate the Bakken and Three Forks intervals. The middle Bakken zone was encountered at an expected structural elevation and measured 32 feet thick. Bottomhole temperature readings indicated that the Bakken shales were thermally mature. It is believed that insufficient primary permeability has prevented oil from being trapped in the middle Bakken at this location. Encouraging oil and gas shows were encountered in the Bakken shales and in other zones during the drilling of the vertical pilot hole and the build section of the well. Stetson and Red Willow will now proceed to re-complete and test other zones based on oil and gas shows and will report on these operations as results are obtained.

    Stetson and Red Willow continue to believe that their landholdings are situated within the Bakken oil system. Stetson President Bill Ward stated “valuable information has been gained from the drilling of our first well and we are optimistic that further technical work, including acquisition of seismic data, will result in further drilling on our lands”.

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

    Bill Ward, President & CEO

    Cautionary Note Regarding Forward-Looking Information: This press release contains “forward-looking information”, within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to the prospectivity of the well; future plans for the well and the leased area; the timeline, plan and effectiveness of the proposed drilling program; receipt of regulatory approval; benefits of the programs; reserve estimates; estimates regarding future production; and the future financial and operating performance of Stetson and its projects. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those expressed or implied by such forward-looking information, including but not limited to: general business, economic, competitive, political and social risks and uncertainties; risks relating to oil and gas exploration and exploitation activities and oil and gas prices. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

    NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

    FOR FURTHER INFORMATION PLEASE CONTACT:
    Stetson Oil & Gas Ltd.
    Bill Ward
    President & CEO
    (403) 531-1711
    bward@stetsonoilandgas.com

    Source: Stetson Oil & Gas Ltd.

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