Market Sentiment: See Webster's under schizophrenia.

Big Cap Earnings Watch:

  • AMZN and AXP wowed the crowd after the bell last night

Eco Data Watch:

  • Existing Home Sales due out at 10 EST, expecting 5.38 mm


In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Stuff We Care About Today - SLB, GMXR, WRES, BEXP
  5. Odds & Ends

Holdings Watch

  • $10KP II:

    • $31,800
    • 60% Cash
    • The Current Holdings tab is updated.
    • I will update the $10KP tab on Monday.
  • Yesterday's Trades:

    • None.

Commodity Watch

Crude oil closed down $0.17 to close at $81.20 yesterday. Oil briefly traded as low as $79.86 before bouncing into the close. This morning crude is trading up slightly after approaching $82 in the overnight session, despite a slight uptick in the dollar and flattish equity futures.

Natural gas fell $0.15 to close at $4.95 yesterday after the EIA reported a slightly lower than injection of 18 Bcf - see storage section below. This morning gas is trading up a dime, back above $5.

  • Chesapeake's Big Gas: CHK issued a press release citing record gross operated production in each of their four big shale plays. Good for them. On the surface that sounds scary for gas. But I am reminded of two comments they made the other day during their analyst meeting:

    • Their non-shale plays will decline 29% in 2009 due to the low rig count.
    • 85% of U.S. gas production is not shale based.
    • I would add that smaller outfits with less access to capital would have been less drill happy (who isn't) than Chesapeake, the U.S.' most active driller, this year.

Natural Gas Storage Review

ZComment:  Just a couple of thoughts here:

  • Storage is full, but does not look to be getting as full as many bears thought it would. My target range for peak storage is intact.
  • This probably becomes pretty unimportant once the peak is in because either way we are very full.
  • I'd note that demand is coming back or supply is falling faster than the most recent data would indicate (of course its both) and the third chart below shows the season to date cumulative surplus of injections, on a Bcfgpd basic, peaked at a 1.9 Bcfgpd this past summer and is now at only 0.6 Bcfgpd figure (as we continue to show below normal injections).   
  • We get another storage number next week, so look for gas prices to key off that figure.
  • Cold weather this winter is going to be a must in boosting the strip back towards a healthy mid $6 level.



Stuff We Care About Today

SLB Reported In Line Numbers; Tepidly Optimistic Comments Regarding The Future.

The 3Q Numbers:

  • Revenue of $5.430 B vs $5.479 B expected

    • Oilfield service revenues flat sequentially, down 22% YoY due to weaker pricing continuing to filter through.
    • North and South America showed improvements, Middle East and Asia declined further
    • In seismic, WesternGeco slipped again (revenue down 48% YoY, operating income down 83%), due to lower multi client shoot revenues, margins slipped as well. There are hints in the pr things are improving here.
    • Overall margins for the quarter were up slightly due to mix and cost cutting
  • EPS of $0.65 vs $0.63

Typically conservative tone in the press release regarding the future:

We see continuing stabilization of activity around the world. However, this will not be uniform across either geographies or for services by commodity type.

In North America we feel the current slight recovery in drilling is fragile and not likely to significantly improve service activity and pricing until late 2010.

For oil, the current robust price will lead to operators maintaining their spending levels, and this, coupled with the lowering of their cost structures, may produce some modest increases in activity. We see continued strength in deepwater areas and some increases in selected land markets. We also feel that a more robust commodity price will lead to some increase in seismic activity, although new marine capacity will continue to depress pricing.

The worst, provided the economy continues to show signs of recovery, is behind us.”

Nutshell: Always conservative commentary keeps its record clean and stays conservative. Numbers were ok but aren't going to wow anyone. Comments throughout the press release point to a long wide bottoming.

Conference Call: Today, 9 EST

WRES Announces Secondary

  • No idea on the deal size as it wasn't in the PR (that's a new one).
  • Questions submitted to management last night via email re size and use of proceeds (guess is to pay down a piece of th the revolver and re ramp activity in California).
  • BMO Capital Markets and RBC Capital Markets are acting as the joint book runners for the offering.

GMXR Secondary Closed

  • 6.95 mm shares, up from originally 5 mm, priced at $15
  • $75 mm converts, paying 4.5% and convertible at $18.75/share

BEXP Deal Follow Up

  • Net proceeds are $159.9 mm pre overallotment, $183.9 mm with it and I'm sure it will be exercised.
  • Dramatic improvement to the balance sheet although they will be paying off the $110 on the revolver and then reborrowing a portion of it. Without the over allotment, the new stats look like this:

Odds & Ends

Analyst Watch:

  • (VLO) upped to Overweight at Barclays
  • (RRC) target upped from $51 to $64 at Jefferies
  • (NE) target upped from $50 to $53 at Jefferies
  • (NFX) target upped from $51 to $56 at Jefferies

Article Watch:

153 Responses to “T.G.I.F.”

  1. 1
    zman Says:

    Thanks Bill, say your comment re VLO and Barclays.

    MSFT numbers out, pleasing the Street. Apparently MSFT doing well is worth 45 cents to oil and five cents to natural gas, lol.

  2. 2
    bill Says:

    lol, we will take any help we can get

    I dont follow hi tech but msft has been lagging and i think vista will do better than some expect. My kids love aapl and i have to admit im impressed with their products

    NM (dry bulker) had a succesful debt offering last night

  3. 3
    elijahwc Says:

    On Briefing:

    SMH Capital upgrades Quicksilver (KWK 15.68) and Petrohawk Energy (HK 27.38) to Buy from Accumulate… SMH Capital upgrades Energy XXI (EXXI 2.33) ATP Oil & Gas (ATPG 20.94) Brigham Exploration (BEXP 10.57) and Encore Acquisition (EAC 43.64) to Accumulate from Neutral..

  4. 4
    bill Says:

    Z, have you listen in to the old MCF webcasts. The ceo is hilarious.

    Anyway, pure ng play, no debt, company buying back stock..whats not to like

    The guy isnt issuing any stock options and on expenses is tighter thans a bulls butt

    I dont think anyone can touch them on cost per mcf

  5. 5
    BirdsofpreyRcool Says:

    TechTrader out with a tepid 55/45 LONG call today. Caveat is that paterns like this often result in a cliff dive formation near the end of the day. So, while the morning trade says “go long,” the afternoon trade says “start your weekend early and go walk the dog.”

    HeadTrader is giddy with all the positive numbers out yesterday and this morning. The desk thesis has been that the consumer is not dead and consumer credit will continue to get better. Desk is making a lot of $$ with this thesis.

    Don’t fight the tape. But might be a good day to take profits early-ish.

  6. 6
    zman Says:

    Bill – yeah, been listening to him for years now. He’s a funny guy. They didn’t have options for the longest time and they were a shelf player so I wasn’t all that interested, just watched the stock go up and up. Love his comments on his biggest partner, the IRS. Me too buddy, me too. Now they have options but they are thin. I’ve built a model, may play the quarter, may not, not yet finished.

  7. 7
    BirdsofpreyRcool Says:

    Rumor going around this morning that Blueberry Hill will report today or monday… and that’s its HUGE.

    Just a rumor, tho, so take it with the usual grain of salt.

  8. 8
    zman Says:

    SLB call in 5

    Is this the U.S.?

  9. 9
    zman Says:

    BOP – they’re below the salt there. Grain of sand, grain of sand.

  10. 10
    jat Says:

    KWK looks to be committing to double digit prodn growth in ’10. You knew it was going to happen with this curve, but it’s explicit now.


  11. 11
    zman Says:

    Probably going to take my SD position today by the way.

    SLB starting.

  12. 12
    zman Says:

    SLB – largely completed previously announced head count reductions

    Analyst Watch: FBR target changes:

    SWN target goes from 48 to 55
    WLT goes from 72 to 76
    NFX goes from 50 to 55

  13. 13
    zman Says:

    SPRWA – good numbers last night, outlook not so good, going to get docked. I continue to keep them and FSLR on the back burner.

    Listening to SLB, mostly a press release read so far.

  14. 14
    BirdsofpreyRcool Says:

    #8 — if the US people get a long enough — and good enough — look at this type of Activist Govt (or whatever you want to call it), perhaps we won’t chose to go down that path for another 20 yrs. So, BRING IT ON, I say. Let people see if “job creation” results from this kind of BS. I think I know the answer, but would like to see other people come to the same conclusion.

  15. 15
    zman Says:

    BOP – surely you mean “job creation or salvation”

  16. 16
    bill Says:



    i like it when you talk dirty

  17. 17
    TEXWS6 Says:

    Big news out of OKC for SD

  18. 18
    BirdsofpreyRcool Says:

    z — yep. However they want to spin the rhetoric… spin away. People can see the truth.

    Here’s a good one… in Michigan, the governor is set to INcrease taxes to support, well, govt. There are now something like 635,000 govt employees in a state of less than 10mm people. To compare, there are only around 500,000 people left in manufacturing in Michigan… And Jennifer Granholm is one of BHO’s fav people.

    Gotta laugh… or you’re gonna cry, if you think about it too hard.

  19. 19
    BirdsofpreyRcool Says:

    Being told PXP has 27% of Blueberry Hill, fwiw.

  20. 20
    bill Says:

    Up here in taxachusets they increased sales tax 20%

    Business cut back, govt keeps chuggin along

  21. 21
    zman Says:

    TEX – you mean re Crusader?

    SLB – sounding more positive on Russia, and for Western Geco (sees multi client stabilizing, turning up, makes sense given oil prices)

  22. 22
    BirdsofpreyRcool Says:

    HeadTrader pointing out the Briefing comment — Citigroup: Hearing Merrill out with positive valuation comments on C; saying they see sum of parts valuation as $8.73, best case scenario $11.67

  23. 23
    zman Says:

    WRES – needs help on the IR side. That pr with no number of shares … that’s a new one. This morning turns out it was a spot secondary of 11.78 mm shares at $2.60… will have more thoughts after the SLB call.

  24. 24
    elijahwc Says:

    GMXR upsized & priced:

    GMX Resources Inc. (the
    “Company”) (Nasdaq:GMXR) today announced that it has priced a public offering
    of 6,950,000 shares of its common stock, which was previously announced at
    5,750,000 shares, at $15.00 per share as well as a public offering of $75
    million aggregate principal amount of its convertible senior notes due 2015,
    which was previously announced at $70 million aggregate principal amount, and
    expects the issuance and delivery of the shares and the notes to occur on
    October 28, 2009, subject to customary closing conditions. The Company has
    also granted the underwriters a 30-day option to purchase a maximum of
    1,042,500 additional shares of its common stock as well as a 30-day option to
    purchase a maximum of $11.25 million aggregate principal amount of additional
    notes, in each case, solely to cover over-allotments. The Company intends to
    use the aggregate net proceeds from these offerings to repay a portion of the
    outstanding indebtedness under its revolving bank credit facility, to repay
    all of its outstanding senior secured notes and for general corporate
    The notes will be general senior, unsecured obligations of the Company and
    will be convertible, under certain circumstances, into cash, shares of the
    Company’s common stock or a combination of cash and shares of the Company’s
    common stock, at the Company’s election. The notes bear interest at a fixed
    rate of 4.50% per year, payable on May 1 and November 1 of each year,
    beginning May 1, 2010. The notes will mature on May 1, 2015.
    The initial conversion rate of the notes is 53.3333 shares of the Company’s
    common stock per $1,000 principal amount of notes (equivalent to an initial
    conversion price of approximately $18.75 per share of the Company’s common
    stock). The conversion rate and the conversion price are subject to adjustment
    upon the occurrence of certain events.
    Credit Suisse Securities (USA) LLC and Jefferies & Company, Inc. are acting
    as joint book-running managers for both offerings.

  25. 25
    BirdsofpreyRcool Says:

    Why care about Citi? Because, they are the Money Center bank MOST levered to the U.S. Consumer. So, worth watching as an indicator on sentiment about the consumer.

  26. 26
    zman Says:

    Analyst Watch:

    NFX target upped at Barclays from $37 to $45. Way to stay behind the game.

  27. 27
    bill Says:

    gulf refinery blew up

    whats the news with sd

  28. 28
    TEXWS6 Says:

    No sir…old news i suppose. I went to school with over 50% of the engineers at SD, so you can say I am pretty close to the source. But, apparently SD had pushed all the engineers out in the field running rigs, supervising completions, etc. so they wouldn’t have to fire them due to the recent slow down. Apparently a memo went out yesterday that all engineers will be back in OKC and they need MORE engineers and needed them yesterday. They are planning to perform a massive ramp up.

  29. 29
    zman Says:

    They gotta be taking a hard look at all of Crusaders assets. Heard Granite wash stuff may be excluded. Lots of things to look at there including Bakken.

  30. 30
    zman Says:

    No idea what SLB said to knock the stock a buck lower just now. Computer crashed. Ugh. Trading pretty weak here. No action from me.

  31. 31
    zman Says:

    Energy trading oddly for second day, buyers just not playing here.

    Maybe a little bit of safety buying, LINE at new high atop $25.

  32. 32
    BirdsofpreyRcool Says:

    Frankly, I’m hoping for a Big Swoon today. Have some cash I want to put into service… and it just isn’t professional, buying on UP Days.

    Just talkin’ my book.

  33. 33
    zman Says:

    SLB still sinking. Not even a little tempted to add more calls here. Not going to take puts or anything, but this is a very guarded call, Given the less than exuberant market, this could go either way and hard later in the day.

  34. 34
    BirdsofpreyRcool Says:

    With you on “guarded,” z. Would not be surprised in the least, to see a sell-off ahead of the weekend. Keeping some powder dry….

  35. 35
    Dman Says:

    Z – what price would tempt you on GMXR?

  36. 36
    zman Says:

    Dman – I own the stock now.

  37. 37
    BirdsofpreyRcool Says:

    HT not willing to commit to a mrkt direction from here. Trading is too choppy, to call a trend.

  38. 38
    BirdsofpreyRcool Says:

    wow… home resale rate…. jumps 9.4%

  39. 39
    BirdsofpreyRcool Says:

    lots of 4-yr-olds buying their first home, i guess.

  40. 40
    zman Says:

    Market bumping on the housing numbers.

    5.57 mm exist homes sold to 4 year olds.

  41. 41
    zman Says:

    SLB basically calling for a more gradual recovery for service activity and pricing than “others” are looking for as the call comes to a close.

    Townhomes for Tots had only a transitory bump in the market.

  42. 42
    BirdsofpreyRcool Says:

    z — don’t you have 2 potential 1st time buyer in your house? Maybe you could sell the family home to one of them… and the vacation home to the other. You’d get $16k from Uncle Sam!

  43. 43
    BirdsofpreyRcool Says:

    Stock mrkt goosey. Bond mrkt holding in there.

  44. 44
    BirdsofpreyRcool Says:

    Hearing mrkt down with fears of an interest rate hike. Thus, strong USD and weak commodities.

    Ha! I’ll take the other side of that bet…

  45. 45
    Dman Says:

    Daily copper chart (JJC) is quite something to behold. But on the weekly, it looks to be entering into what “should” be heavy resistance.

    “should” = “would be” if the world wasn’t full of evil speculators whose sole purpose is to drive Nicky to distraction.

    But I would point out that governments are forcing people to speculate, so maybe not all speculators are evil. Or maybe they are, but just not as much as others. Or something. Anyway, they haven’t been eradicated just yet.

  46. 46
    zman Says:

    BOP – hear ya on that one, no interest rate hikes coming any time soon. Why are they speculating that there will be one? I thought the dollar got a small bounce because Britain was worse than expected.

  47. 47
    elijahwc Says:

    44 – Yes and the ursine crowd is trumpeting it loud. Attached is the gnomes fav, Doug Kass.

    “Run, don’t walk, to read Krishna Guha’s column on the Fed in today’s Financial Times.
    Today’s Financial Times speculates that the Fed is considering a change in its language regarding what period of time it will maintain the current level of low interest rates.

    Some in the press are suggesting that the author, Krishna Guha (similar to his counterpart Greg Ip, who used to be with the Wall Street Journal), has the inside track with the U.S. central bank.

    A must-read!”

  48. 48
    zman Says:

    MSFT saying economy may have hit bottom.

  49. 49
    zman Says:

    Eli – How big a retrenchment or correction is Kass looking for?

  50. 50
    zman Says:

    Just read an article from yesterday’s close on the market wrap. It attributed the late Wednesday swoon as I did at least at first, to the pay czar. Then everyone said it was the WFC downgrade and WMT price cutting.

    Then we rallied yesterday on WMT and other things and WFC completely recovered. Today we here comments of a broadening “pay review”. I think my first reaction to Wednesday’s sell down was correct.

    On the interest rate hike, I say no way, no how. We are bottoming, maybe. You want to tighten with no sign of inflation, maybe deflation (which tightening won’t help)? That is silly. You would slam the door on the recovery which I don’t see as a desirable thing when benefits are expiring at the rate of 2,000 people per day while congress watches Rome burn again.

  51. 51
    elijahwc Says:

    Mr Kass

    Having anticipated your question, he answered it yesterday as follows:

    “I would be curious — and it might be helpful …. to see all contributors post their expectations for the S&P 500 between now and year-end. How about high, low and closing price?

    My guess?

    High/low between now and year-end: 1110/1020

    Close at year-end: 1030

    Current level: 1083

    Position: Short SPY shares, short SPY calls”

  52. 52
    bloodystupidjohnson Says:

    In Aug Kass was also calling for a top.

  53. 53
    zman Says:

    BSJ – which is why I want to know what % drop he’s looking for. From here, it may only get him back to his starting point.

  54. 54
    BirdsofpreyRcool Says:

    hmmmmm…. Dole IPO’d yesterday at 12.50. Currently trading below IPO price. That sucks the wind out of the Rally Monkey (and i-bankers) for a while. Underwater IPOs are a very very bad thing.

  55. 55
    zman Says:

    Hey look at that, we were at 1030 in August.

  56. 56
    elijahwc Says:

    52 – that is on point and correct. On the other hand he is usually 6 months early having only gotten the 3/6/09 S&P 666 botton call dead on in the 8 or 9 years that follwed his work.

  57. 57
    zman Says:

    BOP – heard that was because they had too much debt, not a well structured deal there. I’ve always been a CQB man myself.

  58. 58
    zman Says:

    Eli – Thanks. I thought he was more closely tied than that. In my world that’s off by an eon. Let me know if he comes up with anything incremental on reasoning… otherwise I could care less about his jawboning for a correction. Last time I saw him on CNBC it was a smugfest.

  59. 59
    BirdsofpreyRcool Says:

    Poorly structured IPOs should get whacked. Especially companies who were BK at one point who IPO with too much debt.

    Agreed, prefer the CQB bananas… but, can’t beat a good, fresh Dole pineapple.

  60. 60
    zman Says:

    BOP – true but then I think how often I eat a pineapple compared to my daily potassium kick from CQB and the number seems rather small to me.

  61. 61
    bloodystupidjohnson Says:

    It seems that at least of energy names, outside of HAL it does not matter how you do on your earnings side. You are going to be shot regardless of what you report. I wonder if this is going to be a trend, at least for this quarters earnings?

  62. 62
    BirdsofpreyRcool Says:

    Actually, I’m not familiar with all the stuff that Dole is into these days. They used to be a play on Hawaiian real estate long ago. But I think packaged fruit veggies are the big contributors now. Don’t really know, don’t really care…. not interested in owning such a low-margined company.

  63. 63
    zman Says:

    Interesting to see what’s actually green in energy today:

    Refining – sector upgrade by Barclays, I don’t think the call has legs but whatever. I’ve seen too many one or two day runs there to get excited.

    Some little names like NOG, GST

    KWK which was mentioned above.

    LINE and some of the other MLPs which are yield/safety plays

    Certainly not Solar, gassy, oily, or service.

  64. 64
    BirdsofpreyRcool Says:

    EXXI green…

  65. 65
    zman Says:

    BOP – I hear ya. Ram wondered long ago if I ever talked about anything but energy so I thought I’d run with bananas for a bit. I’ll stop.

    BSJ – ya know, too early to tell. Depends on if this is a real change in sentiment in the market or not. This started late Wednesday so for me its too early to tell about that to. I am not adding into it though and I think most investors are eying it warily. Probably all about the technicals.

  66. 66
    BirdsofpreyRcool Says:

    Running with bananas… sounds dangerous!

  67. 67
    zman Says:

    Bondbuddha test – can you see this comment buddha?

  68. 68
    elijahwc Says:

    Following HTE yesterday, NXY is now going on my watch list with regard to China’s “Going Out” policy. If I remember correctly NXY has snubbed France’s Total on several occasions over valuation thus putting them on the Chinese radar given their willingness to overpay al la Addax.

    The following from a Reuter’s story caught my eye this am:

    “With so many options off the table, remaining possibilities could include Canadian oil firm Opti Canada Inc (OPC.TO), which may be on PetroChina’s radar, and its peer Nexen Inc (NXY.TO), which CNOOC and CNPC may be interested in, bankers say.”

    Full Link:


  69. 69
    zman Says:

    Better than running with Pineapples.

  70. 70
    VTZ Says:

    UTS, OPC, CLL are some of the more likely Canadian companies that could be taken out by sovereign wealth funds.

    Nobody talks about UTS here but they are partnered with Teck Cominco and Suncor and have a tonne of prime land that is outside of the partnership that they could swap in place of capital payments.

    NXY and the two pieces of ECA (once they split) are the more likely pieces for a major.

  71. 71
    zman Says:

    I’d TLM would make a good choice as well and they’ve worked alongside China in the Sudan.

  72. 72
    VTZ Says:

    …or running with durians – spiky and smelly!

  73. 73
    VTZ Says:

    Yes TLM too. I ignore them because they never seem to be acknowledged by anyone even though they are a great independant.

  74. 74
    zman Says:

    V – I used to follow them when Buckey was in charge, don’t know how involved he is now. Lots of good and perpetually undervalued assets scattered about the globe (Vietnam to the North Sea).

  75. 75
    zman Says:

    CNBC talking head “big earnings reports are helping move the market” … she’s not watching the same market I am.

  76. 76
    RMD Says:

    Tex #28: great color, thanks. Sounds like they are getting busy on Crusader’s assets.

  77. 77
    jat Says:

    I feel like I’ve been waiting for NXY to get taken out for years. Oh, wait, that’s because I have.

  78. 78
    zman Says:

    Earnings next week of interest around here:

    Prompt me if you see one I missed

  79. 79
    BirdsofpreyRcool Says:

    Running with Durians. Now THAT’s a scary picture!!

  80. 80
    bill Says:

    sd seems cheap here

    bot more mmr,sd,mcf

  81. 81
    bloodystupidjohnson Says:

    Bill, we are of like minds, I also bought more MMR, SD, however I added CHK instead of MCF.

  82. 82
    VTZ Says:

    On BNN, (almost on cue) they just had a manager speaking about Canadian takeout targets and he quoted:

    Nuvista, Pengrowth, Peyto, Ember Resources, Iteration Energy, Zargon Energy Trust, Pacific Rubiales, Bankers Petroleum

    Compton petroleum was also quoted due to financial distress.

  83. 83
    zman Says:

    I’ve been waiting to add SD closer to the acquisition call which should be first week of November. I may add a little today as this down spike is pretty tempting and then add more next week. Hinky hinky market.

  84. 84
    VTZ Says:

    They are also talking about Conoco selling off their Syncrude stake, potentially to COS.un

  85. 85
    elijahwc Says:

    68 re the comments thereafter. Thanks, lots of insight.

  86. 86
    bloodystupidjohnson Says:

    I also added XCO at least the Nov 20’s.

  87. 87
    BirdsofpreyRcool Says:

    energy M&A question… how much is a producing barrel in the shallow GoM (already hooked up to pipe), going for these days? Just back of the envelope…

    So, if you have 20,000 BOE/d of production on a slow decine, what would someone pay for that?

    Any guesses?

  88. 88
    zman Says:


    Slow decline on the shelf? Kind of an oxymoron. Probably trades in the market at 2 to 4x next year’s cash flow, on a takeout maybe $20/barrel on the reserves or towards the upper end of that cash flow range. Need more data. How slow a decline or how big are proved, other acreage, PUDs, etc. Happy to work it as I’m one bored dude at the moment.

  89. 89
    BirdsofpreyRcool Says:

    trying to put a Back-of-Envelope together on EXXI… i could feed you the input data, but it’s all there, on the company’s IPAA presentation.

    The only part that isn’t there, is the assumptions i’m making about the about debt structure. I can fill in the blanks there. Just need to figure out how to value the assets. I came up with a number, but want to check that against someone elses… care to play?

  90. 90
    zman Says:

    It’s do that or go for a walk. Hmmm.

  91. 91
    Dman Says:

    Maybe I missed something: what’s happened to WRES?

  92. 92
    Jay Says:


    You might enjoy this – pg 23, GOM decline curves


  93. 93
    Dman Says:

    Oops just saw the offering

  94. 94
    BirdsofpreyRcool Says:

    z, jay… ok. thanks. i’ll consider myself “spanked” there. Been a long time since i’ve even THOUGHT about looking at Shelf Assets. Forgot that the first step (down) is a doozy.

    But, back to my question… what is the current M&A value on 20,000 boe/d (58% oil) of production on the shelf?

    We used to keep all this data at JSH… but, don’t have that access any more.

  95. 95
    bloodystupidjohnson Says:

    I see SMH Capital has raised BEXP to accumulate with a 12 target.

  96. 96
    zman Says:

    Jay – thanks for illustrating my point, good slide about 3 back from that one showing declines by play, little dated, add Haynesville at about 82% first year.

    Dman – for shame, not reading the post, lol.

    BOP – I’ll stick with my original answer of it trading at 2 to 4x next years cash flow, now that I know the ticker.

    Checked 2010 CFPS of 1.95 on 2.44 stock = 1.25x forward cash flow (and you thought I was being harsh with that 2x on the low end). I’d bet they could get $4 or $5 for the stock on a take out, maybe a little more as it isn’t that big a company. Need to look at the reserves, properties are pretty scattered, don’t see one big sacred cow in there. Valuation would be different were some of this exploration to come in with tall gas charged sand columns ala Moffett.

  97. 97
    cargocult Says:

    Any thoughts on CWEI?

  98. 98
    zman Says:

    And yes BOP, I saw the JS Herold comment in there for your bio. Thanks for playing.

  99. 99
    zman Says:

    Cargo – I don’t follow them closely enough to comment, they have some exploration stuff that can really swing it. You want I should take a closer look?

    BOP – You want me to take a look at the EXXI value over the weekend or just a quick take?

  100. 100
    zman Says:

    BSJ – thanks. Second or third broker who was not on the deal team to say positive things about the name AFTER the deal was announced. Too kind of them.

  101. 101
    BirdsofpreyRcool Says:

    exxi … both quick take… and over the weekend. i come up with a number close to $6… but, i make some forward assumptions about debt too.

    also, just got a back-of-envelope answer of about $100k/flowing BOE in GoM. Comment was, “that number might be low.” But, it’s a start.

  102. 102
    Dman Says:

    Not guilty! I always read it, honest I do. Sometimes I read it pretty damn fast though, if ya see what I’m sayin’.

    Any thoughts on digestion time for GMXR & WRES secondaries? BEXP amazing.

  103. 103
    cargocult Says:

    It looks interesting from a valuation point of view. Has decent earnings and a decent trend. Highly leveraged, but who isn’t.

  104. 104
    zman Says:

    GMXR should be fairly quick with earnings in front of us and good explanation of use of proceeds that I’m sure we’ll hear translated into volume adds. Maaayyybbeee they give 2010 guidance to go with it. I know they will get asked the question. Good find the other day on the HBP again, that’s pretty key there. This is getting more production on line and more reserves booked and not just about trying to keep the acreage, so they can optimize their program with growth in mind and not on the land.

  105. 105
    zman Says:

    Re WRES – I sent them an email for deets. Zippo back. I think they can’t accelerate oil drilling in California without some gas handling permits that won’t be distributed to 1Q10. Their communication with the Street is not great. Their presentation is ok, but needs stream lining with some big pix nutshell comments at the beginning. If they apply money to both oil and to the Rockies gas, restarting activity there, I think it may react a little better. Still waiting on comments though.

  106. 106
    elijahwc Says:

    89 & 96 – Z, Lew spent a lot of time at EnerCom with EXXI. BOP, the folks from Palo Alto did as well per Lew.

  107. 107
    bloodystupidjohnson Says:

    Z, concerning post 78 – does that mean we can look forward to all those stocks tanking too — lol.

  108. 108
    zman Says:

    Eli – I think a lot of Schiller but Lew liked what he saw eh?

  109. 109
    elijahwc Says:

    Z – Very much so. Along with MMR & PXP. Also, he opined at the time that that IOC ought to be owned given that RJFs best (Wayne Andrew?) took a job in exchange for stock. EnerCom was early August. I figure he made the house payment.

  110. 110
    zman Says:


    SD – Added (10) SD November $12.50 calls for $0.80 with the stock at 12.55 (off 5+%) on a weak market, weak group day.

  111. 111
    BirdsofpreyRcool Says:

    hmmmm…. $100k/producing barrel in the GoM seems too high. It gives too high a value for EXXI, that is. Let me know if anyone has a different number.

    Ken Peak would know… MCF is (almost?) a pure-play on GoM production.

  112. 112
    zman Says:

    MCF is going to be a bad comp for them, lot lower LOE.

  113. 113
    Jay Says:


    Where I live, the most miserable production you can imagine, 2/3 BOPD/wells, 20 gravity oil, $37/bbl lifting costs sells for $38,000/BOPD in production capability. Numbers are current per buy/sell agt in place for just such production.

  114. 114
    choices Says:

    Spread on bid/ask on MCF fairly wide=51/51.12.

    Have not followed the stk.

  115. 115
    BirdsofpreyRcool Says:

    Jay — just the sort of info i’m looking for. So, in your opinion, what would a flowing barrel in the shallow Gulf (hooked up to pipe, of course) go for? Is $100k ridiculous??

  116. 116
    elijahwc Says:

    106, 108 & 109 – Went back to my late Aug notes on EnerCom and found this on MMR. Interestingly, Jim Bob (who was the speaker)after the meeting apparently turned to a known Petro-Geologist in the room and made a remark about a warming biological event occurring if one could see his logs. WOW, to read those long forgotten notes two months later. Warm Fuzzy on a red tape day.

  117. 117
    BirdsofpreyRcool Says:

    HT saying that Kass’s gnome came out and said he was hearing of a large seondary for BAC…..then 1.5 hours later he said …… I am ignoring the gnome and adding to my Bank of America (BAC) position now.

    Sounds like a Cramer tactic from the good ol’ days.

  118. 118
    Jay Says:

    I have no idea what the associated liabilities might be with acquiring GOM production. Simmons says that something like 90% of the current GOM production won’t cover the P&A costs. If that were true in the case of what you were looking at then any amount would be too much I suppose. I’m so far removed from any concept of a “flowing” well it bends my mind to think about it.

    ELI – “warming biological event”??

  119. 119
    zman Says:

    BOP – it does sound exactly like that. I do recall Kass making a comment about a large hedge fund about to fail back in September or something similar to that. I say, cry wolf too many times and we will get to toast to your trampled bones shorty.

  120. 120
    BirdsofpreyRcool Says:

    maybe a “warning biologic marker” ?

  121. 121
    zman Says:

    BOP – yeah, was thinking he meant paleo, as in seeing the right bugs to confirm the zone.

  122. 122
    BirdsofpreyRcool Says:

    Jay — i’m too far removed from valuing anything offshore these days. So, thank you for your perspective.

  123. 123
    BirdsofpreyRcool Says:

    “bugs”… it’s how they tell where they are, in the geologic column, in those thick, offshore plays. THAT MUCH i remember. (i hope)

  124. 124
    zman Says:

    EXXI – BOP

    The P&A liability is on the balance sheet, just under $100 mm. That’s not a deal killer for someone that wants the reserves.

    Half of production comes from 2 fields (one at S. Tim, one at Main Pass), would need to look those over for remaining workover opportunities, just to assure oneself the bread and butter isn’t about to go bad. Then you have the value of the ultra deep play. If MMR hits this thing will run pretty fast, $4 first day would be a fair guess as you still aren’t close to expensive on cash flow.

    Last share count I saw was 144K fully diluted, do you have a better one?

  125. 125
    BirdsofpreyRcool Says:

    z — trotting thru the EXXI presentation again… i need to do some looking, to get a current pro forma share count. Until then, use 146mm

  126. 126
    BirdsofpreyRcool Says:

    HT says he has “no feel” for the direction of this mrkt in the last hour. But, he points out that volumes are light… so, bears might be able to sell it down.

    We shall see.

  127. 127
    zman Says:

    BOP – what’s the debt side look like post exchange? Cash position too?

  128. 128
    BirdsofpreyRcool Says:

    think they will have about 150mm of cash at 12/31/09, from insurance settlement and stock and bond proceeds. Not sure how much stock will be issued, so this is not a hard number… but it should be ballpark-correct.

    Then there is about 100m of bank debt + 277mm old bonds + 338 of new bonds. So, net debt around 565. that number includes about 12mm of new shares. Could be 2mm more shares than that… but, again, ballpark.

  129. 129
    BirdsofpreyRcool Says:

    Also, FY2010 capex around 80mm + pro forma estimated annual cash interest around 80mm should be funded out of FCF.

  130. 130
    Jerome Blank Says:

    If mkt conditions like this can’t bring down stocks like KOG, BEXP and EXXI, what will?

  131. 131
    BirdsofpreyRcool Says:


  132. 132
    zman Says:

    Jerome – Depends on how low it lasts. Easy for the single digit midget crowd to ignore a few days of this. If we got into an exodus of sector rotation, that same group gets crunked.

    This isn’t about earnings, this is about the broad market move. Recall that on Wednesday before 3 pm EST we had many new 52 week highs in the group. So we’re down for 2 days at this point. Painful if you need to sell today, otherwise just annoying.

  133. 133
    zman Says:

    BOP – what about it.

  134. 134
    BirdsofpreyRcool Says:

    will kill demand, will cripple the economy, will crash the mrkt. But, JMHO, of course.

  135. 135
    elijahwc Says:

    BOP- Sorry, Just now noticed the query on “warming biological event”?? The type that subsequently requires the services of a laundry.

  136. 136
    zman Says:

    Right but why do you bring it up now?

  137. 137
    BirdsofpreyRcool Says:

    elija — OOOOPS. got it. And i was trying to get all scientific about it. 😉

  138. 138
    BirdsofpreyRcool Says:

    answer to #130

  139. 139
    zman Says:


    Re Moffett. He’s colorful. He’s also a salesman. I recall the Mound Point, JB Mound and a third prospect a little further away being rather graphically described by him along the lines of a woman’s anatomy. He has a way of getting people excited about his prospects.

  140. 140
    Jerome Blank Says:

    SD went back into o’s but holds its P&F buy signal until a print of $11.50, it would be nice to see SD shake that “head and shoulders esque like” pattern….$11.50 also breaks the neckline and confirms…strong support at $11.51 to $12.00

  141. 141
    Jerome Blank Says:

    Nice continuation flag pattern forming on USEG daily chart

  142. 142
    zman Says:

    Beerthirty declared early. Have a good weekend.

  143. 143
    BirdsofpreyRcool Says:

    z — just confirmed, exxi shares o/s post debt-swap will be less than 160mm. So, that’s a good, conservative number to use. thanks!

  144. 144
    bill Says:

    any more good rumors on mmr?

  145. 145
    bill Says:

    >MCF is going to be a bad comp for them, lot lower LOE.

    Its going to be a bad comp for everyone

    Yes, mcf doesnt hedge, so you 3 to 4 ng vs last year $ 10 ++

  146. 146
    bill Says:

    131 lol

  147. 147
    BirdsofpreyRcool Says:

    bill #144… i gave it the best i got this morning. but, the rumor was today or monday. so, so far, the rumor is only HALF wrong.

    thing about rumors… only about 8% are real. right?

  148. 148
    bill Says:

    homework for the week end

    review exxi enercom briefing


  149. 149
    bill Says:


    JimBob got me excited when he said he didnt want to raise expectations

    Either he is going senile or I am..

    Im thinking 60/40 for paydirt

  150. 150
    bill Says:

    i reviewed exxi

    san fran
    and last earnings call

    its a great story

    production for the next yr should be flatish at 20,000 boe per day. its already mostly hedged

    The upside is davy jones and blackbeard

    pxp is about 80,000 per day and ev is over 6 b…. 6 b divided by 4 = 1.5 b

    exxi did 50 m in cash flow last qtr abd 225 for the year..next year same production at lower rates so cash flow will be lower or about the same

    pv-10 is about 1,5 b

    1.5b divided by 200 m = 7.5 times cash

    exxi shares 150 m at 2.50 – 375 m

    + debt- im not sure what this is but less say 625 m for est = 1.b ev

    so if it traded at pxp valuations we would need anohter 3 bucks per share and this doesnt include the davy jones and blackbeard bonus

    anyways, i agree , it looks very good

  151. 151
    bondbuddha Says:

    Z, just wanted to leave you a note, no problem with access at home. Seems as if my IT guy wants to get in a pissing match over the other info, I dunno what I am gonna do. Prob take my laptop to office for the present.

  152. 152
    Wyoming Says:

    The Cook Inlet is a pretty neat exercise in having an isolated nat gas market. Prices for sales had to be correlated to a Lower 48 average in order to encourage domestic E&P’s to explore. AK projects compete with the companies other Asset Teams for Capital. So, for years, no problem. As mentioned previously COP exports about 52 BCF per year to Tokyo Power and Light. I believe COP got a 1 year extension after their export permit expires in 2009. Well here is the rub:


    BTW – I was involved with the Happy Valley exploration.

  153. 153
    Wyoming Says:

    As a separate post, thought I would leave you with our governments solution:


    While going through these 2 posts ask your self a couple of questions:

    1. If reserves and production predictions by the ended up being overly optimistic in the CI document, what about OPEC’s reserve predictions or in the larger market perspective?
    2. Are there enough alternative energy sources to replace the void of energy?

    Have a good weekend, I am currently out of the country for a bit, my apologies for putting this out on the weekend.

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