16
Oct

T.G.I.Expiration

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 Market Sentiment Watch:

  • More Big Name Earnings (and one of them is even energy related):

    • GOOG - Beats on both top and bottom lines; stock rallies after hours
    • IBM - Beats, raises guidance; stock falls
    • GE - slightly better than expected bottom line, miss on the top line; stock marked lower
    • BAC - worse than expected, also marked lower
    • HAL - Better than expected top and bottom line with positive comments (see Stuff section below); stock bidding higher.
  • Eco Data:

    • Industrial Production is expected to come in at 0.4% a little later this morning, followed by
    • Consumer Sentiment at 10 am EST (expecting 72 vs last reading of 73.5)

 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Inventory Review
  4. EIA Oil Inventory Review - I got exactly what I was looking for.
  5. Stuff We Care About Today - HAL earnings, SD,
  6. Odds & Ends

 

Holdings Watch:

  • $10KP II:
    • $36,100
    • 84% Cash

Yesterday's Trades:

  • WLL – Doubled the $60 October calls for $1.35 with the stock down 20 cents on the day after strong oil inventory numbers.  I won’t be in these long, maybe out on all by end of day.
  • APC – Added (5) November $70 Calls (AZWKN) for $2.05 (on mid) with the stock down $3.20 on a broker downgrade today.
  • WLL – Sold all 20 contracts of the October $60 calls (WLLJL) for $1.95, up 64%. I continue to hold the November $65 calls.
  • 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

 

Commodity Watch:

Crude oil rallied $2.40 to its highest close for the November contract of 2009 at $77.58 yesterday. EIA numbers were bullish on demand (see below).  This morning crude is trading off about 30 cents with a rebound in the dollar and weak equity futures.

  • Nigeria Watch: MEND end ceasefire via emailed statement; vows to return to the fight. I would imagine the group, with almost 100% new leadership, will want to kick things off next week.

Natural gas recovered $0.05 close at $4.48yesterday despite EIA numbers which showed a slightly larger than expected injection (see comments next section). This morning gas is trading up slightly.

Natural Gas Preview

ZComment:  Another bigger than expected injection ... and no one cared. Well, they cared but only for about 30 minutes. The volatility in prices continues during the shoulder season. I continue to project peak storage of between 3.75 and 3. 85 Tcf but that will be highly dependent on weather and we could see gas hit 3.9 if the recent cold moderates.

 

 

EIA Oil Inventory Review


ZComment: I got what I was looking for in terms of an uptick in demand and a larger than expected withdrawal on the distillates side. We are now running at record gasoline demand, for this week in history, for a second consecutive week. Cautions for next Wednesday:

  • First, utilization fell hard last week but refinery inputs were not down as much as the capacity numbers would suggest, so that probably shows up in next week’s report as slack oil demand.
  • Second, 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.

CRUDE OIL - Utilization finally fell off a cliff as expected. Inventories were saved from a big build by a concurrent decline in imports.

 

GASOLINE - Got What I Was Looking For As Production Retreated From Last Week's Record High.

 

 

 

DISTILLATES: About time this surprised on the downside. Expect bigger draws next week.


 

 

 

Stuff We Care About Today

Earnings Watch:

HAL Reports Stronger Numbers

  • The 3Q09 Numbers:

    • Revenue of $3.6 B vs $3.4 B expected and were up 3% sequentially
    • EPS of $0.31 (ex items) vs $0.26 expected (range of $0.22 to $0.30)
  • North America:
    • Revenues were up 2% sequentially, starkly contrasting the 25% sequential drop we saw last quarter. 
    • “We believe that North America pricing has stabilized in most basins; however, competition remains fierce in North America particularly in areas that exhibited growing activity such as the Haynesville and Marcellus shale plays. We are seeing signs that margins are bottoming in the third quarter, but it is likely that fourth quarter margins will continue to be under pressure due to typical weather issues, winter stipulations in the Rockies, and customers who are likely to continue drilling but deferring completions until they see a more favorable pricing outlook."
       
  • International:
    • Revenues rose 3% from the prior quarter
    • Margins rose to 22% from 20% in 2Q; this should be a surprise as they had been talking about deterioration in international margins over the course of 2H09 through 2010. They continue however to expect softer international margins.
  • Nutshell: Improving results, talk of price stability.
  • Conference Call: today at 9 EST


SD Announces Borrowing Base Reaffirmation

  • Reaffirmed at $985 mm; less than $20 MM drawn at present (probably add $85 mm to the drawn amount in early November if they complete the proposed Crusader acquisition).
  • They are in compliance with all debt covenants
  • They also commented that Phase 1 of their Century Gas Plant will be online as scheduled by mid 2010, key in growing volumes from a first half '09 average of 306 MMcfepd to 500 MMcfepd by 2012 (not including potential for upside from the Crusader buy should that deal close). 
  • When Phase 2 is complete in 2011, Century will be the largest CO2 capture facility in North America (benefits from cap and trade)
  • Nutshell: Positive. I plan to wait to add November calls until sometime in the next couple of weeks on a group red day. My October calls will be sold, if possible, on any strength associated with this news.

Earnings season begins to warm up next week with more service names and the first E&P name, (MMR), and I will have a calendar up over the weekend. 

Most Shorted Gassy and Oil Names:

 

Odds & Ends

Analyst Watch:

  • FBR starts (PXP) at Outperform, (EOG) at Perform

168 Responses to “T.G.I.Expiration”

  1. 1
    BirdsofpreyRcool Says:

    Nice morning blurb from one of our 2 X-Asset Class Strategisits — “The Recovery Has Warts.” Couldn’t say it any better. However, until proven wrong, it is still a recovery… ugly or not.

    http://www.capmarkets.com/ViewFile.asp?ID1=125375&ID2=358512657&ssid=1&directory=6571&bm=0&filename=10.16.09_The_Recovery_Has_Warts.pdf

  2. 2
    zman Says:

    HAL call about to start

  3. 3
    zman Says:

    HAL

    International:
    Margins were up in the quarter but they still see the previously mentioned downside risk to margins as lower prices filter through. They say they have more visibility and time to adjust costs to revenues in international than they did in NAM.

    NAM
    Price stability coming into play.
    Significant pricing pressure was seen in product lines with excess capacity.
    Stimulation business pricing in the busy basins continues to decline.

    They point to a “grind up” of equipment by the shales again, saying capacity will be “absorbed” (read destroyed) by the shale which will quickly remove capacity and help to stabilize prices.

  4. 4
    zman Says:

    Thanks BOP and thanks for your comments last night.

    You too West.

    HAL saying there are now between 1,300 and 1,500 wells drilled but not completed in North America. That’s double the level from a couple of quarters back.

  5. 5
    zman Says:

    … that drilled but not completed comment makes one scratch ones head over recent upgrades of NAM focused drillers. Stimulation I get. But drilling?

  6. 6
    BirdsofpreyRcool Says:

    TechTrader saying best trade today is 55/45 LONG. Doesn’t mean we close higher, just means that buying the dips for a day trade have the best probability of working today.

    HeadTrader points out that we just got a HUGE eco # with Industrial Production UP 0.7% vs 0.2% exp’d.

  7. 7
    zman Says:

    NG up a dime
    Oil positive
    Dollar up 0.5%

  8. 8
    zman Says:

    Hear ya BOP, agree with HT. I will likely add more SWN and WLL depending on how they open. I plan to be in and out relatively quickly carrying small positions by Tuesday evening as per my oil comments for next week’s numbers. I may take puts Tuesday on some of the more expensive names for a trade as well.

  9. 9
    BirdsofpreyRcool Says:

    HeadTrader thinks people will buy, on the Industrial Production number… he points out that GE, C, and BAC are all up significantly off their pre-mrkt lows.

    Credit markets back this up… better, following IP

    IG 99

    HY 94 1/8

  10. 10
    Dman Says:

    Everybody suddenly noticed their tank was empty? Or they found a new use for the stuff?

  11. 11
    zman Says:

    BEXP on the tape with their Brad Olson well …

  12. 12
    zman Says:

    BEXP – 2,112 BOEpd. That would be their biggest Bakken well to date. Guess they got the mechanical problem fished just in time for expiry. This is the first 28 stage frac in the Bakken. Good chance USEG runs up on this as they have 61% of the well (before payout) in the new JV with BEXP.

  13. 13
    zman Says:

    BEXP bidding 10.19

  14. 14
    zman Says:

    Jerome – can you take a look at the BEXP and USEG charts? Thanks.

  15. 15
    BirdsofpreyRcool Says:

    The consumer is weak, but not dead. Comments from the Cabela’s Sept credit card report from a boutique bank… for all you sportsmen…

    Cabela’s, Inc. (CAB – $14.20) BUY

    CAB released its September Master Trust data for its securitized credit cards that was better than we expected. Gross charge-offs declined 62 basis points sequentially to 4.57% and are significantly below industry averages. We raised our 3Q:09 revenue estimates due to low charge-offs. However, we remain cautious in our outlook given delinquencies that have increased slightly for four consecutive months. We trimmed our 2010 revenue estimates slightly due to higher-than-expected delinquencies. We maintained our 3Q:09 and 2010 EPS estimates and reiterate our BUY rating and $19 price target.

  16. 16
    zman Says:

    BEXP – this is in their Rough Rider area (west of the Neeson Anticline). Last well completed here by them was the Olson, a 20 stage frac with an IP of 1,433 BOEpd. This Brad Olson will help solidify their thoughts regarding their western acreage. Could be 400 to 500 wells drilled on their acreage.

  17. 17
    BirdsofpreyRcool Says:

    If TechTrader and HeadTrader are right… you buy this open. We shall see, of course.

  18. 18
    zman Says:

    ZTRADE:

    BEXP – Added (20) BEXP November $10 Calls for $1 upon positive Bakken well news. See comments in post for details. I will be selling the October calls a little later this morning.

  19. 19
    zman Says:

    ZTRADE:

    BEXP – Added (25) BEXP $12.50 November calls (QBJKV) for $0.25 with the stock at $10.18. The $10 strikes added earlier are symbol (QBJKB).

  20. 20
    Dman Says:

    Anyone know anything about ENER ?

  21. 21
    Jerome Blank Says:

    Re: #14, BEXP is currently on a somewhat dated P&F buy signal, having met its $8.00 price objective and then some… BEXP has made an incredible run higher since July. There is strong resistance right above here at $10.50 to $11.00, but right now it looks great and is a buy, back with USEG in a minute

  22. 22
    reefguy Says:

    1500 wells waiting on frac…lets give that 300/month @ 2.5MMCFPD = 750MMCFPD additional gas. Even with a decline of 6%/month that like 3.0 BCFD in six months!

  23. 23
    zman Says:

    BEXP starting to move; USEG not so much yet.

    NG up 15 cents now, volatile.

  24. 24
    zman Says:

    Reef – hear ya, blame guys like KWK (I think they have 90 to 100 of those). The E&Ps are going to have to be careful dolling that out to make their growth numbers and not crush the gas market. HAL is pretty bearish on a supply demand rebalance happening in the near future. I got the sense he was basically saying we don’t see it happening in the first half of 2010.

  25. 25
    West Says:

    For those with an interest I posted this late last nite on Stetson Dry Hole…….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…….http://www.streetinsider.com/Press+Releases/Stetson+Reports+Results+on+First+Bakken+Well+in+North+Dakota/5021641.html

  26. 26
    zman Says:

    Thanks Jerome.

  27. 27
    BirdsofpreyRcool Says:

    HeadTrader pointing out that BAC on conf call = Believes credit losses may have peaked this quarter… stock rallied 30c following that comment.

  28. 28
    zman Says:

    Refiners – Down this morning after a rare surge yesterday. Feels like plenty of supply is willing to punt shares at any opportunity.

  29. 29
    zman Says:

    CLR, WLL – liking the BEXP news

  30. 30
    zman Says:

    Jat – I have not heard anything on the HAL call yet that would make me want to short it. You?

  31. 31
    BirdsofpreyRcool Says:

    U of Mich Consumer Conf in at 69.4 vs 73.3 exp’d.

    Consumer not feeling as perky as they were last month.

  32. 32
    Jerome Blank Says:

    #14 USEG is currently on a P&F buy signal but is currently in o’s…although USEG is still below its bearish P&F trendline, it is pressing against that trendline as I write this, trying to break strong reistance at $4.25, where it breaks thru the trendline and goes back into x’s, a print of $4.25 would really improve the stock’s technical structure

  33. 33
    zman Says:

    Hear ya BOP – Such a lagging indicator though. Let them “Dow 10,000 percolate” for awhile and they’ll be happier with the next reading. Maybe ridiculous but it happens often that big market headlines (no matter how silly) can drive those numbers up.

  34. 34
    BirdsofpreyRcool Says:

    z — you know my stance on watching/trading on any indicator with “nerve endings”…. i ignore ’em.

  35. 35
    elijahwc Says:

    # 25: Nice call

    On another matter the Chinese going out policy is being extended to the GOM.

    Dow Jones Newswires

    Cnooc Ltd. (0883.HK, CEO) is in talks with Norway’s StatoilHydro ASA
    (STL.OS, STO) over a deal that would open the U.S. Gulf of Mexico to China’s
    oil companies for the first time, a person familiar with the matter said.
    The move is significant as Cnooc’s aborted $18.5 billion bid for
    California-based Unocal Corp. (UCL) in 2005 is widely seen as having deterred
    state-owned Chinese oil giants from investing in U.S. oil and gas assets.

    ……
    According to StatoilHydro’s Web site, the company has 448 active leases in
    the U.S. Gulf of Mexico, including some of the biggest discoveries such as
    Jack, Tahiti and St Malo.

  36. 36
    Dman Says:

    Looking at WLL, the recent advance (since mid September) seems to have occurred on slowly declining volume.

  37. 37
    zman Says:

    Eli – I’m confident some dingle berry in Congress will try to block it based on national security. I recall when they were after UCL, people even cited the company’s seismic library being turned over to the Chinese would endanger the U.S. I guess if the Chinese had the right 3D they could pinpoint where it is you need to drill to cause the ultimate U.S. ending quake. Ugh.

  38. 38
    zman Says:

    Dman – Agreed. But what hasn’t?

  39. 39
    zman Says:

    If anyone sees a broker first call note out on BEXP for this well please shoot it my way. zmanalpha@gmail.com. Thanks.

  40. 40
    Jerome Blank Says:

    USEG prints $4.25, back into X’s

  41. 41
    zman Says:

    Thanks J, thought the delayed reaction there was odd but its the market’s fault. This is a pretty big deal for them.

  42. 42
    Dman Says:

    #38 GDP

  43. 43
    bloodystupidjohnson Says:

    From Scottrade Jag notes rumors: CHK is rumor to make a bid for FST. Price is rumor to be around 30.

  44. 44
    kyleandy Says:

    z – when WEST says a well will be wet what does that mean?

  45. 45
    Dman Says:

    Bizarro chart of the day: CRK

    Incredibly smooth ascent (also on declining vol).

  46. 46
    zman Says:

    Non productive, a water producer, a dryhole, non commercial

  47. 47
    elijahwc Says:

    Z – They (Congress) won’t be able to block this one. Also, it will be interesting to note the implications for our domestics, the DVNs et al, if the BPs have a major source for partnering in the GOM and our Congress decides that they don’t.

  48. 48
    Dman Says:

    Maybe the missing volume was just high-frequency shenanigans anyway.

  49. 49
    Jerome Blank Says:

    KOG daily triangle should break soon, it’s getting very narrow now… tested and bounced off the top trendline 6 times,including today, and held support on the bottom trendline 4 times, so the mkt is paying attention to this technical pattern, it can continue to drift sideways negating the pattern, but its probable it breaks one way or the other, traditional technical analysis suggests that this type of triangle is more likely to break in the direction of the underlying trend which is higher…

  50. 50
    Nicky Says:

    Morning all. The fall nothing to get too excited about – yet. Could be just a wave iv with another high out there. 1065 is my line in the sand for the spx. Still expect any new high to be brief and in the low 1100’s. A high should be in by the middle of next week but this rally is now running on borrowed time.

  51. 51
    zman Says:

    CHK for FST. Hmmm. Makes sense on an acquired reserves basis (FST is trading under $2.00 proved while CHK is close to $2.50 / Mcfe). Street probably wouldn’t like because CHK has enough on their plat with #1 or #2 positions in the 4 biggest shale plays and is moving into the Eagle Ford now. It helps a little but not a lot with the oil / gas production profile as FST is 25% oil but there are other cheaper things you could buy if you really want to shore up your liquids. From a debt to cap and debt to reserves basis the combined could look prettier on a pro forma balance sheet even if you used a good chunk of cash to keep the earnings numbers accretive in 2010. So it makes some sense. But 99% of these rumors turn out to be wrong or started by hedgies who want a higher exit for their positions.

  52. 52
    Nicky Says:

    Monday October 19th 1987 was the crash. If we were to close down hard today Asia may choke on Sunday night….just a thought. Something tells me they won’t want a really bad close today.

  53. 53
    zman Says:

    Where are all the bears on CNBC? Normally you get a downward move in the broad market and they drag those guys out so fast you’d think they were kept in a back closet with last week’s donuts and Mark Haynes scotch. Odd complacency regarding several violations of one of this quarter’s rules: Must Show Revenue, Not Just Earnings Beats.

  54. 54
    zman Says:

    Well at least somebody likes APC today, only big cap E&P in green land.

  55. 55
    bloodystupidjohnson Says:

    Z, I have started investing in 1973, and have made every mistake know to man. However I have learned over the years, don’t listen to rumors. For every rumor that is true 100 are false. I just threw it out for general comment.

  56. 56
    zman Says:

    Denise or anyone, is Kass adding more S&P puts up here?

  57. 57
    zman Says:

    BSJ – hey, keep em coming, don’t at all mean to discourage people from sharing that kind of stuff. You never know and some of them I agree with. That one makes some sense but I think the Street would cast dispersions on Aubrey and CHK for not being able to stop buying things.

  58. 58
    bloodystupidjohnson Says:

    I was leary of posting because I own the FST Nov 25, but I also own the Nov 30 CHK, so I guess it might be a wash from the touting point of view. I don’t think Mr Market would take kindly to CHK in buying anything. Mr Market would say, there goes old Aubrey again.

  59. 59
    BirdsofpreyRcool Says:

    OK then… to add to the rumor mill… one is making the rounds that KOG is talking to someone new. Or vice versa… these rumors are never very clear. However, the smell of M&A is in the air again.

    What is clear is that KOG will have to do something. Either issue more equity, issue less equity + draw down some debt, sell down more acreage, JV or combine with a larger, more liquid entity. BUT, KOG has the luxury of picking through that list of options, unlike last time around (when a Hail Mary equity raise was the only option open to them, other than selling out for pennies).

  60. 60
    zman Says:

    I think he should form a JV with someone like CLNE to open Chesapeake branded NG fueling stations or pumps centered around his shales. Don’t do it in house as you’ll be seen as a refiner and get further discounted. But if they could get a major signed on to put a Chesapeake/CLNE pump at every gas station you could give yourself a whole new demand wedge.

  61. 61
    zman Says:

    USEG up 11% now. BEXP up 6%, held down by the group/market for the moment.

  62. 62
    jat Says:

    RE: 30.

    Nope, nothing to make me want to short. I closed out that one a long time ago. HAL came ahead of whisper, with a bullish call, revealing more and more that their projected international decline is more a matter of managing expectations than anything else.

    My big question now is what happens to the capital equipment guys like the subsea guys. People have been hiding in them for the potential EPS beats this quarter, but HAL has just underlined yet again that, if you’re playing service, you want to be in general service and early cycle, and not in businesses where the ’10 growth outlook is going to be challenged no matter what. So I am wondering how much the capital equipment guys have gotten ahead of themselves. I’m not talking about disaster quarters, and they are good companies with good cash flow. Their growth outlook is just so much more challenged for now, dunno why anyone would pay up for it.

  63. 63
    Gtinvest Says:

    Z I asked that very question to Jeff Mobley at chk 6 months ago. He said they cannot get into the retail business becuase it jepoardizes there tax status as an independent producer. I did not get into the details but I guess intergrated oil companies have different tax rules than independents. Can you explain?

  64. 64
    bill Says:

    Im offering 17 calls bexp nov 10 at 1.20 if anyone wants them.

    Im trying to write a covered call position

    Todays news helps useg as well…

  65. 65
    choices Says:

    Z, Jerome, you nailed USEG-up 19%.

    I bought a small amount.

  66. 66
    zman Says:

    GT – There are tax advantages to being upstream only as opposed to being integrated. This is why I said JV or maybe an ownership interest in a new entity, maybe an MLP that buys gas from CHK and sells it, and pays dividends back to CHK. Point is to get that ball rolling. You could even do it in an MLP structure with DVN and XTO to name a couple of likely candidates who could contribute VPPs to the deal (to keep prices down over time for the consumer) but also to take dedicated volumes from the current supply chain. Then you just have to get Honda to build more of their cars.

    Jat – thanks very much. Good insights.

  67. 67
    zman Says:

    Choices – glad someone made $ on that thought, I did not pull the trigger there.

  68. 68
    kyleandy Says:

    WEST – BOP – am confused about the magic pink line. i see it drawn in on KOG presentation, who originated it?? i notice tall bear #9 well is right up against it. does that mean it is more risky?? i assume stetson’s well is on east side – how far east of tall bear? would we assume that stetson’s dryhole well #1 means that there be some grave doubt about drilling #2 ??
    thks much for all the info u have provided about KOG. priceless!!!

  69. 69
    bill Says:

    i just got here, wish i was here for the opening..

    I had a slug of bexp oct 10 calls i took a beating on as i closed out last week at .25 cents ARRRRGGGGGG

    Obviously great news for bexp,useg,wll

  70. 70
    john11 Says:

    MPET, interesting news re montana oil acquisition..The Company has acquired an 83.5% controlling interest in Nautilus Poplar, LLC (Nautilus). Nautilus, based in Denver, Colorado, owns and operates oil development assets in Roosevelt County, Montana known as the East Poplar Unit and the Northwest Poplar field.

    Anyone familiar with these guys?

  71. 71
    zman Says:

    Montana – EOG drilling a well somewhere around there. Concern is you may not have dolomites in the middle Bakken you have over in North Dakota. So not the big Bakken wells, at least that’s one of the fears. MPET I know of from somewhere, will look about the office a bit.

  72. 72
    bill Says:

    ng up 25 cents and it snowed today in boston , earliest i’ve ever seen snow.. is it global cooling????

    Can you imagine if the ice shield started coming down from the north to push down into ohio valley. We would have to “polute” again to warm things up

  73. 73
    bill Says:

    someone wanted the -QBJKB nov 10 as my 1.20 taken out

    bid now 1.15 to ask 1.35 with the stock unchanged at 10.46

  74. 74
    john11 Says:

    thx Z! One other question… anyone done any estimates of potential value of USEG investment in BEXP acreage play? It looks like it is quite substantial.

  75. 75
    occam Says:

    West, thanks for your many comments. I am still in KOG (some very cheap). I made a little money on SSN, then got out due to your comments. Thanks again.

    Anyone with views on GSX? The hunkered down a while ago, but have just done deals on property near the OXY announcement in California. If a survivor, holdings may have value.

  76. 76
    bill Says:

    wow useg soaring up 33 %

  77. 77
    zman Says:

    People in BEXP noticing the 30% move in USEG and getting jealous, lol. USEG has something like 5% access to BEXP’s Rough Rider acreage (94K acres). Honestly its a bigger deal to USEG

    But it’s a big deal to BEXP if they start drilling a couple of hundred (maybe double that if you go after the TFS too) wells at nearly 1 MM barrels EUR, gross. After royalties and future assumed farmouts say they get 500,000 barrels per well, net to their interest. Call it, just from this area, 400 wells. That’s 200 mm BOE. 2008 proved reserves for the whole company were 22.8 mm BOE

  78. 78
    zman Says:

    BEXP says they have 240 locations at 3 wells per section on the Rough Rider acreage in the Bakken. Another 240 for the TFS. I’d never give them that without a lot more drilling but they are helping to derisk the play with the drill bit and they did pull off the biggest or one of the biggest fracs in the basin today.

  79. 79
    zman Says:

    Dollar bounce story… at least that’s the headline… the bounce came before the confidence data and fell apart after it.

    http://www.marketwatch.com/story/dollar-edges-higher-against-most-rivals-2009-10-16

  80. 80
    bloodystupidjohnson Says:

    Gee, a rumor I missed. Last week BP was rumored in buying CHK for $40.

    As an aside, with the value of the dollar as it is, I am surprised that some foreign energy company has not made any purchases of US companies.

  81. 81
    BirdsofpreyRcool Says:

    Kyleandy – re#68 — other than their 1st well on the Rez, KOG’s #9 is the most important well they will drill this year. It will help define what west calls the Magic Pink Line and what I call The Pink Line of Death. Simply explained, it is the line that defines oil productive Middle Bakken from non-oil productive Middle Bakken. Step over this line, and your well is a duster (dry, wet, non-economic).

    This line is defined by geologic data (actual wells drilled through to that horizon) and not thru remote sensing from the surface (i.e. geophysics). So, the placement of the PLofDeath is only as good as your well control. Where you don’t have wells, you just smooth through and extrapolate between data points.

    You can see from KOG’s blown up map where wells have been drilled… and there just isn’t enough hard geologic data to suggest exactly where the PLofD falls with respect to #9. So, #9 is truly a wildcat well, in an otherwise resource play.

    Yes, #9 is indeed riskier. However, there is evidence that if you can get right up close to the PLofD, you get better production from higher pressures associated with that pinchout. Simply stated, well #9 could be the worst well or the best well that KOG has drilled this year. But, that’s why they call it “wildcatting.” Exciting, but dangerous.

    The Stetson well was drilled about 8-9 miles NNE from well #9 (in 148N90W, sec13, if i recall correctly). You can plot this on KOG’s map and see that it is not close enough to tell us whether we will be doing the Happy Dance when #9 is announced… or, have to go back to our models and adjust KOG’s NAV.

    This is also why I don’t think KOG would do an equity offering ahead of #9 results.

  82. 82
    BirdsofpreyRcool Says:

    KOG M&A rumor gaining devotees, it appears.

  83. 83
    cargocult Says:

    Anybody following tanker stocks know why FRO is up with such gusto?

  84. 84
    BirdsofpreyRcool Says:

    jivey — your KOG purchase at 2.42 yesterday is gaining IQ points by the hour. Nice!

  85. 85
    West Says:

    #68… Here is link from yesterday about the geologist who discovered the Parshall Field and how the trapping mechanism works and area of active oil generation. The NDIC SITE has gis map feature that will also help. Just a note most Stetson’s additional lands are east of the drilled location. Probably less prespective as you go east.………..http://www.searchanddiscovery.net/documents/2009/090810johnson/ndx_johnson.pdf

  86. 86
    jiveyjr Says:

    although market breadth still very negative, it has been steadily improving the past couple of hours….

  87. 87
    jiveyjr Says:

    thx, BOP…I just used a potential add point Jerome pointed out I jotted down in my notes

  88. 88
    bill Says:

    with all the action in the bahken, no one commented on the “great work” the pay czar did with ken lewis

    forfeit all salary and bonus for 2009, yipeeee

  89. 89
    bloodystupidjohnson Says:

    Yes, Stalin would be happy for all these goverment czars. Maybe these czars should check out on some of these pay figures for some non performing sports stars and get them to also forfeit some of their salaries.

  90. 90
    BirdsofpreyRcool Says:

    BSJ — you really should drop the “BS” part of your name. You don’t live up to the hype.

    I love your comments.

  91. 91
    ram Says:

    Zman – Are you still holding out for a late BEXP surge on the OCT’s?

  92. 92
    bloodystupidjohnson Says:

    Thank you BOP, however believe me the BS is appropriate. Maybe I should drop the J.

  93. 93
    zman Says:

    Ram – Yes, I have them offered at $0.75, may be optimistic, will adjust that downward later if necessary. Everything feels pretty pinned now although there have been some big rallies off the lows in the group, like HK earlier which is flat now

  94. 94
    BirdsofpreyRcool Says:

    BSJ — or change Johnson to Davidson… then you could be BSD!

  95. 95
    zman Says:

    BSJ – there is a bios tab if you want to drop a little background about yourself, nothing too specific, just a “where’re your coming from” type of thing. If you or anyone wants to send one in please shoot it over to zmanadmin@gmail.com

  96. 96
    bill Says:

    fro

    rates up a tad but i didnt see anything to explain it

    other tanker stocks up as well, might be following price of oil

    http://files.irwebpage.com/reports/shipping/08l26Pvi9u/Imarex%20Daily%20Report%2010.16.09.pdf

  97. 97
    zman Says:

    Next week’s eco calendar starts pretty slow with Homebuilders index on Monday and stays pretty slow all week (leading indicators, beige book, housing starts … not big numbers)

  98. 98
    bill Says:

    90 concur

    call me instigator

  99. 99
    kyleandy Says:

    BOP – WEST – thks for info re KOG. by the way, michael johnson is multi-talented, he wrote both the Parshall rept in post #85 and the market strategy rept in post #1. (just letting u guys know i actually read this stuff!!!)

  100. 100
    BirdsofpreyRcool Says:

    kyleandy — lol. Impressive!!

  101. 101
    elijahwc Says:

    Question(s): When measured is wellhead pressure grouped by tiers (eg: tier 1,2 or 3)? and, where can I go for a short course on the same?

  102. 102
    zman Says:

    At last, proof that gnomes are evil.

    http://gmy.news.yahoo.com/vid/16108226

  103. 103
    zman Says:

    Eli – buy me a beer and we’ll chat all about it.

  104. 104
    elijahwc Says:

    Done your way, early next week at beerthirty.

  105. 105
    BirdsofpreyRcool Says:

    west — do you see the KOG TB 16-15-10H as “WOC”? thanks.

  106. 106
    bill Says:

    aubrey buying bexp?

    http://blogs.wsj.com/wealth/2009/10/16/aubrey-mcclendon-unloads-more-wine/?mod=yahoo_hs

  107. 107
    Patipati Says:

    Re FRO, I read Cramer called it a BUY.

  108. 108
    zman Says:

    He’s probably selling wine because the world is awash in grapes and prices are no longer skyrocketing.

  109. 109
    West Says:

    BOP is that TB 16-15-16H, the #9 ? The spudded 9-20-9 so they are probably thru drilling now. Is this the right well that u r asking about?

  110. 110
    BirdsofpreyRcool Says:

    west — yes, #9. And you’re right… it takes less than 30 days to drill now, so i guess they could be done and WOC. Wonder what surfaced in the shale shaker… and if it had that sweet smell of hydrocarbons… ??

  111. 111
    BirdsofpreyRcool Says:

    west — my bad… “10H” changed to “16H” when they changed the orientation, I guess.

  112. 112
    zman Says:

    Thanks for sending the GS piece on APC.

    I disagree with them as well regarding the impact of the Cote d’voire dry hole on the prospectivity of the other 30 prospects Id’d between Sierra Leone and Ghana. They same this takes down their exploratory chances by a full third on those. Simply picking a number out of the air in my book. I’d also note that GS has been neutral on the stock and would like nothing more than to find reasons to rein it in prior to an upgrade.

  113. 113
    zman Says:

    NG November contract up 31 cents (7%). More importantly, the entire strip is up from 31 to 21 cents.

  114. 114
    zman Says:

    ZTRADE:

    SWN – Added (5) SWN November $50 Calls (TKQKJ) for $2.25 with the stock at $48.90. I continue to hold the $55s picked up yesterday.

  115. 115
    elijahwc Says:

    Oil spiking 77.85

  116. 116
    bill Says:

    useg up 45 %

    giddy up

  117. 117
    zman Says:

    And from comment 12 we have the understatement of the week watch:

    “Good chance USEG runs up on this as they have 61% of the well (before payout) in the new JV with BEXP.”

    USEG up 50% on the day.

  118. 118
    Jerome Blank Says:

    APC perfects a bear trap and goes back into x’s on a print of $68, this print also closes the daily chart gap created yesterday…almost any folks who shorted yesterdays gap lower are now losing money, APC is currently looking good, holding well above the daily 20 SMA…near term $68 is a big price point for APC…

  119. 119
    West Says:

    Buying additional shares of KOG in here. Reworking model with new 3Frks cross-sections and other positives:cash flow from oil production, gas deal announcement probably with 3rd qtr results, lots of positive stock trades that say accumulation. The stock is just not going down, which to me is a big positive.

  120. 120
    zman Says:

    Hey, thanks J for the proactive chart read!

  121. 121
    jiveyjr Says:

    re: # 12…I thought I had acted on that when the stock was $4.20; but I used a limit order and forgot about it…I think you know the rest of the story…no fill; very good post though

  122. 122
    zman Says:

    Energy commodities complex brightly green

    NG up 38 cents
    Oil up 60 cents at $78+
    Mogas up 1+%
    Heating oil flat which is odd but it ran hard yesterday.

    Group largely pinned but a little more green with the S&P rally.

    Probably only one more trade out of me today, to punt the BEXP Oct calls, still holding out for higher out of sheer boredom and for a post Nymex close of oil over $78 and thoughts from many that Monday will bring price target boosts from the analyst crowd.

  123. 123
    Wyoming Says:

    Two day old coyote. It’s better than three day old coyote.

    Saw it on a flight recently.

  124. 124
    zman Says:

    Wyo – I give up.

  125. 125
    zman Says:

    Crude up a buck as the closes approaches

  126. 126
    bill Says:

    i cant remember seeing a stock react to news like useg has.

    What is this really worth to useg in value?

    Any guesses?

  127. 127
    Wyoming Says:

    Terminator – Salvation

  128. 128
    zman Says:

    It seems like an overreaction, a thin float reaction. The deal terms are a little fuzzy but for back of the envelope say they have 40% of the reserve value after payout and BEXP’s back interest. On 5% of 94000 acres, that’s 4,700 acres, being generous and to use round numbers say the EUR is 1 mm barrels gross per well. 3 wells per section gets you 21 wells, call it 20 to be simple. Their share would be 8 mm barrels. Put an inground value on that of $20 per barrel (and that is generous) and you have $160 mm of value.

    That the well was going to work is not the surprise here. We it had hydrocarbons, it had been p&a’d for later completion. The high rate is good, getting the 28 stage frac off the first time is good. But this is adding about $50 mm of market cap for the first well which again seems like an over reaction to me.

  129. 129
    zman Says:

    Wyo – Have not seen it yet. Good?

  130. 130
    bill Says:

    128

    thats good stuff, ty

  131. 131
    zman Says:

    Bill – It was a semi complex deal but I should be in the ball park, will go back and look at the percents to make sure I’m hand grenade close.

  132. 132
    choices Says:

    Nov CL hitting 79, energy stks ok but not relatively as strong as CL-may be a sign that CL rally lacks staying power, maybe too far, too fast.

  133. 133
    zman Says:

    BEXP apparently getting pinned towards $10, could pop up late, looking a bit doubtful.

  134. 134
    zman Says:

    Rig Count Watch:

    Oil up 4 to 309 vs 428 a year ago

    Gas down 5 to 721 vs 1,537

  135. 135
    Wyoming Says:

    I liked it, kind of teared up when John Connor does the I’ll be back, he has become a such a grown man. Why I remember when he was just a boy stealing out of ATM machines …

  136. 136
    zman Says:

    For Dman:

    http://blogs.discovery.com/space_disco/2009/10/first-ever-black-hole-created-on-earth.html

    Note the mention of solar applications.

  137. 137
    West Says:

    http://finance.yahoo.com/news/GMX-Resources-Inc-Announces-pz-3338291555.html?x=0&.v=1

  138. 138
    zman Says:

    Thanks West, “everybody’s doin it”. Good to see them get that second rig running with the proceeds. They have to have a bullseye on their foreheads. This certainly puts yet another target on the heads of the big short interest guys here. I continue to hold the common.

  139. 139
    reefguy Says:

    Effect of haynesville Gas:
    Carthage- $3.08
    Henry Hub-$3.94
    Opal, Wyo-$3.82

    I have never seen this situation

  140. 140
    West Says:

    I’m showing almost 26% short interest as of the last filing, with 750k available to short today.

  141. 141
    West Says:

    Some of these big bets against natural gas cos may blow up in here somewhere. Do we have a list that we are working on with potentional canidiates?

  142. 142
    zman Says:

    Reef – just emailed you back on that. Damn odd. Rockies players should throw a party. Other than their gas price stinks too. Rockies express helping them obviously of late though. Probably ought to dust off my stack on BBG.

  143. 143
    zman Says:

    GMXR, GDP, SD, KWK, all big shorted names.

  144. 144
    Dman Says:

    #136 – interesting. I’ve been thinking along similar lines myself, because there have been a lot of exotic optical experiments recently using these “meta-materials”.

    Eg. there’s an “invisibility cloak” experiment, which persuades incident light to bend around an object instead of reflecting off it, thus rendering the object “invisible”. I hadn’t heard of the “black hole” variant.

    But one problem is that the exotic “meta materials” that are being proposed to focus sunlight are probably more expensive than your plain old silicon slabs. Still, it might not always be so & I’m reasonably sure that some freaky solutions will be found to these problems.

  145. 145
    zman Says:

    I added the graph of highly shorted gas and oily names to the bottom of the post.

  146. 146
    BirdsofpreyRcool Says:

    New record monthly deficit… Sept came in at -$46.6B vs -$31.0B expected.

    Ugh.

  147. 147
    Dman Says:

    Z – do you know when that short data is from? I think they update twice a month, but I don’t know exactly when.

    i.e. I’m wondering if that data is almost 2 weeks old…

  148. 148
    zman Says:

    That data is 6 weeks old on the graphs but a random check shows it has not moved much.

  149. 149
    zman Says:

    BOP – re 146 – why don’t they just shoot the dollar in the head and get it over with.

  150. 150
    West Says:

    Money Managers only have about 50 trading days left in this year to get invested, this buying at the end of the day is probably them.

  151. 151
    zman Says:

    October Scud Watch:

    5 APC $70 calls – Another reason for me not to like the JPM analyst. It’s running today which is fine for my Novembers but the APC’s of October will die worthless

    SD – Just no joy on the reaffirmation, everyone holding their breath for crusader so my $14s will go out worthless. I will reload in Novembers in the next 2 weeks.

    TSO – the odd day here and there of joy in the group but for the most part, refining analysts are the most depressed and depressing bunch of guys on the planet right now … with good reason. The October $16s will die worthless and I have little to no interest in looking at the group soon.

    BEXP – Oct $10s – Back from the dead, will punt in the next couple of minutes for a 50% loss which is better than a 100% loss. I have positioned today for further gains here in the near future.

  152. 152
    zman Says:

    West – yep, absolutely agree.

  153. 153
    BirdsofpreyRcool Says:

    I’m not sure you can have “fiscal responsibility” when it is not your own money. Either party, doesn’t matter. Used to be the best way to prevent spending is to not send more in. But even that doesn’t work anymore.

    This is just crazy crazy stuff. It’s all been tried before and it never ends well.

  154. 154
    ram Says:

    BEXP did quite the fade into the close.

  155. 155
    zman Says:

    Too true.

  156. 156
    BirdsofpreyRcool Says:

    Quite the week, overall, however. Tell me, z, what did the 10kP start monday morning at?

  157. 157
    jiveyjr Says:

    Trader Vic said in one of his books the only way this fiscal irresponsiblity will ever get fixed is for us to wind up like Argentina, then pols will be held accountable for something better….(now my take not Trader Vic’s) hoping for something better from one party or the other is like asking your teenager to save sex for old age….. .

  158. 158
    zman Says:

    ZTRADE:

    Out on 15 BEXP Oct $10s for $0.20, down 67%.

  159. 159
    zman Says:

    re 156: $27,800; going to close close to $35,500 today.

  160. 160
    BirdsofpreyRcool Says:

    Nice work. I’ll take up 28% in one week any week!

    Have a great weekend all. Cheers!

  161. 161
    zman Says:

    Thanks BOP

    Have a great weekend everyone!

    Beerthirty

  162. 162
    bill Says:

    bexp seems to have underperformed relative to useg 65 % up move.

    Longer term, this is great news for bexp. Maybe, next week people will realize it.

  163. 163
    elijahwc Says:

    159 = Quite the week. Kudos

    Other great news, MHR today had its 100mil mixed shelf declared effective. Always nice to know that a holding of mine has a shelf out there well in excess of its current market cap. Brazen, but Gary Evans apparently has studied the Federal balance sheet and come to the conclusion that if you finance it, they will come. And, they will.

    Happy weekend to all.

  164. 164
    JD Says:

    Z, dk how to attach graphs.
    After a solid 7.5% move higher over the past ten days, the U.S. equity market may be ready for another rest such as those we have seen three times in the past few months, mentioned in this week’s earlier comment . The third quarter earnings reporting season started out strong but has been rather mixed over the past couple of days with disappointing results from Intel, GE, Bank America, IBM and others. Google reported a solid 3Q yesterday and is up 4% today and 12% over the past two weeks. Goldman Sachs reported fantastic earnings, yet the stock has traded lower by 5%. Overall, corporate revenues continue to come in light, as the employment picture remains bleak and consumers are largely on the sidelines.
    From a technical perspective and as seen below, the daily Stochastic is at the high end of its range, and the RSI is already turning down. While headline earnings reports will likely drive the market over the next couple weeks, a slight correction would appear welcome.
    I exited all Oct. call options yesterday and entered Nov. puts in the tech sector today.
    Make a good weekend.
    JD

  165. 165
    zman Says:

    $10KP II closed at:
    $36,000
    75% cash

  166. 166
    West Says:

    “The Brad Olson 9-16 #1H was successfully fracture stimulated and while Brigham was drilling out frac plugs the well produced approximately 1,805 barrels of oil and 1.84 MMcf of natural gas, or 2,112 barrels of oil equivalent, from the Bakken formation during a 24 hour period.” this from BEXPs press release.http://finance.yahoo.com/news/Brigham-Exploration-Announces-iw-4018331207.html?x=0&.v=1….. Not to be a stick in the mud but KOG would never report an IP in such a way. Most companies do not do their IP test until they recover frac fluid or use a 7 day average. The most favorable light, similiar to a Hollywood Movie Opening, type IP announcement. It got the desired effect, but for USEG. Don’t get me wrong there is definitely oil out there, their Olson 10-15-1H is a very good well. ….Current Operator: BRIGHAM OIL & GAS, L.P.
    Current Well Name: OLSON 10-15 1-H
    Elevation(s): 2183 KB 2164 GL Total Depth: 20600 Field:
    PAINTED WOODS
    Spud Date(s): 9/7/2008
    Casing String(s): 9.625″ 2154′ 7″ 11000′
    Completion Data
    Pool: BAKKEN Perfs: 11000-20600 Comp: 1/21/2009 Status:
    AL Date: 3/16/2009 Spacing: 2SEC
    Cumulative Production Data
    Pool: BAKKEN Cum Oil: 69849 Cum MCF Gas: 42015 Cum
    Water: 67677 [Interactive Performance Curve] [PDF Curve]
    Production Test Data
    IP Test Date: 1/27/2009 Pool: BAKKEN IP Oil: 1160 IP
    MCF: 1338 IP Water: 1134

    Monthly Production Data
    Pool Date Days BBLS Oil Runs BBLS Water MCF Prod MCF Sold Vent/Flare
    BAKKEN 8-2009 31 6714 7368 4768 5861 5861 0
    BAKKEN 7-2009 31 8183 7768 5023 6709 6709 0
    BAKKEN 6-2009 30 8222 8671 5077 5949 5949 0
    BAKKEN 5-2009 31 6412 5953 4526 4701 4701 0
    BAKKEN 4-2009 30 11233 11333 6784 7899 7899 0
    BAKKEN 3-2009 26 7218 7077 7126 4824 4824 0
    BAKKEN 2-2009 28 15332 15121 10709 3331 3331 0
    BAKKEN 1-2009 11 6535 5920 23664 2741 0 2741
    Look for a stock issuance soon as they just increased authorized shares by 90 million on 10-9-09.http://biz.yahoo.com/e/091013/bexp8-k.html…………..I can just see Lynn rolling his eyes now. Sometimes I wish KOG would maybe jazz it up a little, but they shoot straight and outperform. Not to rain on anybody’s parade just my observation

  167. 167
    zman Says:

    West – Plenty of people report 24 hour IPs. IPs are a lot less meaningful than 7 day or 1 month performance. Maybe they wanted to get the news out quickly to combat rumors of a mechanical issue with the well.

    And to quote you from above:
    “Not to be a stick in the mud but KOG would never report an IP in such a way.”

    From KOG’s last PR:

    The TSB #14-33-6H well, a shorter 4,163 foot horizontal lateral, was completed in six stages. The well recorded initial 24-hour production rates of 903 BOPD and 453 Mcf/d, or 978 BOE/d.

    Sounds pretty similar to what BEXP said about their well to me.

  168. 168
    BirdsofpreyRcool Says:

    I do know that KOG doesn’t measure their reported 24-hr IP until after they recover the frac fluid. But, I don’t know exactly what that means (i mean, conceptually, i understand it… but don’t know the mechanics of measuring involved). But I do know KOG doesn’t just use the first 24 hrs after they turn on the spigot… So, agree with West in that not all “24-hr IP rates” are reported equally. Just don’t know how to tell the difference, reading company PRs. Or what that difference means.

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