Monday Morning

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The Week Ahead:

  • Monday 10/26: No eco data scheduled
  • Tuesday 10/27: Home prices, consumer confidence for October (53.1 forecast, flat with the last reading).
  • Wednesday 10/28:  EIA Oil Inventory Report, Durable goods (exp up 1%), New homes sales (forecast 438K vs last reading of 429K)
  • Thursday 10/29: EIA Natural Storage Report, Jobless claims (forecast at 524K vs last of 531K), 3Q GDP first reading (forecast 3.5%, could make for a wild day for the markets and for the dollar and oil)
  • Friday 10/30: Consumer spending (forecast down 0.4%), Chicago PMI (forecast 50%), Consumer Sentiment (forecast 70.5)

In Today's Post:

  • Holdings Watch
  • Commodity  Watch
  • Earnings Watch - Calendar - Energy Week #2
  • Stuff We Care About Today - PXD - EFS Well, NOV earnings, KOG Offering, SPWRA - new high efficiency panel
  • Odds & Ends

Holdings Watch:

  • $10KP II:
    • $27,400
    • 54% Cash
    • Current Holdings Tab is updated


Commodity  Watch:

Crude oil rose 2% last week to close at $80.50, the highest closing level of 2009. The 12 month crude strip is now trading at $82.95. This morning crude is trading off slightly with flattish equity markets and a slightly weaker dollar.

Natural gas was flat on the week closing at $4.79. The 12 month strip fell 3% last week and is now trading at $5.81. This morning gas is trading off 20 cents on milder than expected weather readings last week and a mild forecast this week.  A continued slow but steady rally in the natural gas directed rig count is also likely to keep upside muted in the gas markets until we see further production declines.

  • China Watch: LNG Imports Hit Record.  Where'd the LNG tsunami go? China. Imports up 144% vs year ago levels as China brings on line its 2nd and 3rd LNG import terminals. 
  • Weather Watch: Mild.

    • Week Before Last: 95 HDDs which yielded an 18 Bcf injection, the smallest injection for that week in survey history.
    • Last Week: 66 HDDs vs a prior forecast of 72.
    • This Week's Forecast: 74 HDDs
  • Tropics Watch: The season is winding down, such as it was. One more wave is headed across the Atlantic which could produce an end of season disturbance but it looks doubtful. 


Earnings Watch - Calendar - Energy Week #2



Stuff We Care About Today

PXD Drills Stout Eagle Ford Shale Well

  • IP of 11.3 mm from the Sinor #5 in Live Oak County

    • 8.3 MMcfgpd (high BTU gas at 1,200 Btucf) and 500 bcpd. They've got to like the extra liquids here.
    • 22/64 " choke with 4,550 psi
    • 9 stage frac of a 2,600 lateral
    • impressive well.
  • This was the first in a five well program which has now been expanded to a continuous drilling program (we got wind a while back of this) with one rig dedicated to the play.
  • A second well has spud that will test longer lateral length with more stages
  • This is the first well to my knowledge testing the EFS in this area, between PXD's first mechanically botched well in Dewitt County to the northeast and HK's Hawkville Field in LaSalle and McMullen counties to the southwest.
  • See Texas county map here
  • Positive implications, in order of leverage to the play vs current total company booked reserves:

    • TMR, SM, HK, SFY, ROSE among real companies and 
    • TXCOQ and REOS among the walking wounded. 
  • I'm long HK (calls and common) and ROSE (common) and may add a little PXD call position this morning as this is what they've been looking for in the play.

NOV Reports Strong 3Q09 Results

The 3Q Numbers:

  • Revenue of $3.087 B vs $2.897 expected

    • The Rig Technology segment was $2 billion of quarterly revenue, up 4% YoY and sequentially
    • Petroleum Services and Supply segment revenue was $882 mm for the quarter, down 33% from year ago levels but only 3% from 2Q09 levels suggesting a bottoming.
    • Total Backlog eased to $7.3 B from $8.7 B at the end of last quarter
  • EPS of $0.95 vs $0.79 expected

Nutshell: Big projects continue to come through for them. I don't own but will see how it reacts to such a large beat.

Conference Call: Today, 10 EST.

KOG Announces Secondary

  • 10 mm shares (9.5% of the current shares out), plus another 1.5 mm for over allotment.
  • Keybanc is running the deal. Ok, not great. Don't know timing yet, don't know if they do a roadshow or try to get this one done overnight.
  • I find it interesting they announced the 7 and 8 wells last Thursday, obviously looking for a move up in the stock on that news, but didn't get it due in part to soft market conditions and in part due to the initial production rates of those wells. It's riskier to put your news out at the end of the week; better chance of that data getting ignored. Also, the fact that they are drilling #9 which would further prove up their acreage but didn't wait for those results tells me they are either less confident there or are less confident of the market holding in here, despite $80 oil.
  • I continue to hold the common.

SPWRA Announces New High Efficiency Panel

  • New panel has 20.4% efficiency, total area
  • Expects them to be to sales in 24 months
  • This was developed with DOE funding from 2 years ago, so pretty short drawing board to proto type cycle
  • Most of the panels on the market now are in the 10% to 13% range, with the lower cost thin film variety at the lower end of the range.

Odds & Ends

Analyst Watch:

  • Zip, nada, nothing.

Interesting Article Watch:


144 Responses to “Monday Morning”

  1. 1
    BirdsofpreyRcool Says:

    Not happy with the KOG deal announcement. Will have to get more info… but choice of timing and managers not particularly good.

    KeyBanc has not done KOG any favors in the past (as a matter of fact, the last offering KOG did was a direct placement, by-passing Key completely) PLUS why announcement this before you announce your 3Q earnings?? And then there’s the little issue about results from well #9… how’s it going to turn out?

    Sheesh, Lynn… pretty Bush League move, if you ask me.

    I guess KOG saw the warm reception of BEXP and said “me too!” Thing is, BEXP had a bunch of MAJOR i-banks on the deal… KOG has Key and Thomas Weisel. Don’t get me wrong, those aren’t bad banks… but they are FAR from powerhouses in equity placement.

    I’ll find out the details (timing, roadshow, etc). But KOG is not scheduled to host their next earnings call until Nov 5th. So, this is totally bogus, in my book. In order to get this deal done, they will be giving out information to prospective buyers that will not be publicly released until Nov 5th. Not that there is a lot we don’t know (given the last update), but this is just BAD FORM, boys. Bad form.

    bill — you just might get your $2 shares on this announcement. And actually, that would still be a good buy (as we knew they would be doing this… just thought the timing and information flow would be handled differently).

    Sheesh, Lynn.

  2. 2
    bill Says:

    boardwalk cc call in a minute


    Anybody have anything on mmr?

  3. 3
    zman Says:

    Wow. Woman scorned.

    I would guess that the deal was well along its path as the results for 7/8 approached last week. I think they should have approached an energy centric house to lead this one, Jefferies or Weil or even a Johnson Rice. Oh well. There is always the deal that will likely happen mid 2010 for them to make that decision on. I read and have read a lot of energy research in the past. Keybanc doesn’t make my list of people with influence. I’m not planning on selling any time soon so I don’t really care that much other than I think they shorted themselves 50 cents or about $5 mm due to poor timing and a lack of pursuit of quality Street coverage.

    Interesting last minute pop in crude.

    That PXD news outlined in the post is indeed strong.

  4. 4
    zman Says:

    I see no news there Bill.

  5. 5
    apbd Says:

    Notre Dame V BC, ugh
    Yankees V Angels, ugh
    Cardinals V Giants, yea

  6. 6
    zman Says:

    NOV pre market not great on a big beat.

  7. 7
    BirdsofpreyRcool Says:

    z — I don’t like to lose $$ when I don’t have to. KOG is making a bad, money-losing decision when they don’t HAVE to. I try to keep the nerve endings out of it… but, stupidity always makes me mad. And this was a stupid move… until proven otherwise.

  8. 8
    bill Says:

    pxd looks to open + 1.25 or more

  9. 9
    zman Says:

    Natural gas down 31 cents or 6.5%. Volatility continues in the shoulder season, mild weather unwelcome.

    BOP – I’m not disagreeing with you, as per my comments in the post, they made a number of Street unfriendly decisions. Let us know the deets on the call time.

  10. 10
    zman Says:

    Analyst Watch:

    Pritchard ups SLB target to $90 from $77.

  11. 11
    BirdsofpreyRcool Says:

    KOG — they are hosting an Institutional Investor conf call at 8:30am PT today, Monday. They expect the deal to price the deal post-close TODAY.

  12. 12
    zman Says:


    PXD – Added (5) November $45 Calls (PXDKI) for $1.65 with the stock at $44. See post for details.

  13. 13
    zman Says:

    Analyst Watch: more on SLB – gee I knew that quarter wasn’t that bad …

    Credit Suisse raises their FY10 and FY11 EPS ests to $2.80 and $3.45 from $2.50 and $3.15 (consensus $2.73 and $3.67), respectively, in addition to raising their SLB tgt to $72 from $63. The firm notes that although they continue to allow for more oil company spending in 2010, their EPS increases are driven primarily by higher margins as they acknowledge the impact of cost savings.

  14. 14
    elijahwc Says:

    MHR announces a new $150 million three-year term senior secured revolving credit facility.

  15. 15
    BirdsofpreyRcool Says:

    TechTrader — today is a throw-away day… “a coin flip odds on a worst trending day.” Meaning, he has absolutely no insight into today’s mrkt direction and is going to go sit on the beach.

    HeadTrader says to “take profits when you get them.” He likes profits. Meaning, stay nimble and be willing to pull the trigger.

  16. 16
    Dman Says:

    BOP – KOG not down much. Maybe not a disaster?

    Z – why are energy stocks so jiggy? NG down 5%, crude not doing much.

  17. 17
    zman Says:

    KOG lack of real negative move on the secondary tells me they were already in touch with people with appetite. Deal is probably largely pre packaged. Thanks for the call info BOP.

    Gassy names could care less re NG down 6%.

  18. 18
    zman Says:

    Dman – They were due plus crude is $81+ again.

  19. 19
    kyleandy Says:

    bop – beach in oct in mi??

  20. 20
    zman Says:

    Analyst Watch: Another quarter that I knew did not stink.

    CS taking target from $48 to $52 on NFX. That’s highly conservative but in the right direction.

  21. 21
    zman Says:

    Did anyone see a news tidbit on crude that accounts for the rally from pre open red to up nearly $1? I don’t see it myself and it does not appear to be the dollar.

  22. 22
    BirdsofpreyRcool Says:

    kyleandy — My professional colleagues stretch across the country. TechTrader lives in Palm Beach. HeadTrader is in Scottsdale. Two Best X-Asset Class strategists are in North Carolina and New Hampshire. Best color guys are in New Orleans, Dallas, and Houston (of course). I have lived all over the country… just happen to be in Michigan right now. (where the beach is a tad coldish, you are correct!)

  23. 23
    zman Says:

    Take the weight of last week’s market off the stocks and they are ready to run. BEXP post secondary, up 5%, nearly $11 again. That still gives me a little bit of a grin as its just not a common occurrence.

  24. 24
    BirdsofpreyRcool Says:

    Going to be on the KOG conf call… so, will let you know what they say. But, i think z must be right, deal must be largely pre-sold.

    Also, Key not letting any individuals into the deal… also an indication to me that it was pre-sold. A major shareholder I spoke with is going to participate (even tho he already owns a large chunk). FWIW, he thinks the NAV, post 2ndary, is $3.50 to $4.00 just on what we know now. So, not gonna argue with him.

  25. 25
    zman Says:

    Those #s must throw in a healthy EUR for the Bakken and a goodly sized number for the TFS as well. $25 mm ish could probably prove to me its there. BOP – do you have CWC on those last 2 wells?

  26. 26
    zman Says:

    Oil rally looks like a gasoline rally, based on refining outages. Probably over done at this point.

  27. 27
    bondbuddha Says:

    Look it’s Z man’s energy brain, hurray!
    pardon the sarcasm as I am truly pleased to be beyond the tech glitch.

    Depressing is best word for our market as Mortgage Bonds continue to hold prices in the face of massive Treasury sales. Lots of somebodies out there do not believe the move in equities longer term.

  28. 28
    zman Says:

    Bond – Glad to have you back in here. Site seems faster to me today. Everything should be functioning at the new level.

    Approaching some key resistance on the S&P, or so they tell me.

  29. 29
    zman Says:

    Listening to the NOV call.

  30. 30
    zman Says:

    Have put a message in with Nicky. Jerome, would you do some PF work on the indexes?

  31. 31
    zman Says:

    PXD Impacts:

    SFY up almost as much as PXD which continues to punch new highs

    HK and SM up double the XNG
    ROSE up in line with group

    No move in TXCOQ or REOS; I am not going to touch these as I just don’t know enough of about the current workings of the companies.

  32. 32
    BirdsofpreyRcool Says:

    z — KOG completed well costs on the last two wells isn’t out there yet. Might be able to find out today. But, looking at their last presentation, KOG is saying CWC range between $4-6mm with drilling to TD at 20-35 days. However, wells 7&8 were 9,950′ and 6,620′ and took only 32 and 19 days to drill. So, gonna guess that they are driving the costs toward $5mm/CW on avg.

  33. 33
    VTZ Says:

    RE 26 – Somebody on CNBC was citing global diesel demand.

  34. 34
    jat Says:

    Wow, Clay just pushed back PBR orders until Q3’10. That’s a negative.

  35. 35
    zman Says:

    MMR silence. Hmmm. As they said last week, they would know something imminently if they had no troubles in drilling the last couple of hundred feet. No press release today may mean nothing; these guys always take longer than you expect. But if they had seen gas charged sands of the multi-hundred foot variety I think we would have seen a press release out last night.

  36. 36
    zman Says:

    BOP – working interest in those?

  37. 37
    zman Says:

    Jat – yeah, probably good news for oil, lol. They sound a bit bummed by the slowness out of Brazil.

  38. 38
    zman Says:

    S&P hitting a wall at 1091.

  39. 39
    BirdsofpreyRcool Says:

    KOG — #7 Long lateral with 1,288 BOE/d IP is 55% WI and 45% NRI. #8 Shorter lateral with 845 BOE/d is 60% WI and 50% NRI.

  40. 40
    zman Says:

    Thanks. On 9 and going forward are they planning to be roughly half the well?

  41. 41
    elijahwc Says:

    Briefing reports: PXD Pioneer Natural Resources target raised to $50 at Caris & Company (45.89 +3.15)

    Caris & Company raises their PXD tgt to $50 from $45 following this morning’s announcement of the success of the Sinor #5 well, the first PXD’s five well drilling program designed to access the potential of its Eagle Ford Shale acreage. Firm notes given the success with the first well, PXD will expand its Eagle Ford Shale program, continuing to operate the current rig through next year. They also believe it likely that management will expand the number of rigs in the Eagle Ford early next year.

  42. 42
    isleworth Says:

    NOV diving….what did they say?

  43. 43
    zman Says:

    Eli – Thanks for the note. Hearing activity rally from vendor contacts re PXD and the EFS for awhile now.

  44. 44
    zman Says:

    Brazil slower than expected, talking about contracting margins that will stabilize down the road, no nibbles from me today.

  45. 45
    BirdsofpreyRcool Says:

    I think assuming 50% would be conservative. With the capital, they will (should) be able to keep a higher %age of the wells. Don’t know the breakdown and number of wells in the XTO AMI, tho. And that should commence drilling in the 1Q10 or so. But, since XTO is the operator, indicates less than 50%, of course. So, makes sense to use 50% until told otherwise, imho.

  46. 46
    isleworth Says:

    NOV cratered $3 on that news……yikes!

  47. 47
    elijahwc Says:

    42 & 44 This is what is being reported: “on conf call, says recent orders have been frustratingly slow; says despite some thawing in credit, their customers continue to face deep headwinds”

  48. 48
    zman Says:


    SWN – Added another (5) SWN $50 November calls for $1.55 with the stock at $48.45. Earnings Friday.

  49. 49
    VTZ Says:

    Z – I know you mentioned it at the start of the post but do we expect the 3Q GDP numbers to drive everything this week?

  50. 50
    zman Says:

    V – I am the wrong guy to ask that. I’m even sure if better than expected GDP is good for the stocks. Better would probably boost the dollar, take crude lower and maybe the group. However, if it takes the market higher, they’ll be watching that as well. Glad I’m not a day trader.

  51. 51
    zman Says:

    S&P500 can’t get through that 1091 – 1,094 range, again.

  52. 52
    VTZ Says:

    BOP – HT thoughts on 49?

  53. 53
    BirdsofpreyRcool Says:

    VTZ — lemme check….

  54. 54
    BirdsofpreyRcool Says:

    VTZ — HT moving slow on a Monday, but doing some trading on the desk. I’ll get back to you with his comments when the weekend Beer Fog (and trading slips) clear out a bit.

  55. 55
    bill Says:

    bop 22

    Two Best X-Asset Class strategists are in North Carolina and New Hampshire

    Nashua?? Hi tech?? Hickey??

  56. 56
    zman Says:

    NOV call over, no trade by me there.

  57. 57
    zman Says:

    Wrong side of the border watch:


  58. 58
    zman Says:

    Simmons saying positive things on PXD but apparently slept in as they have no model or price target changes, still giving them very little credit for their acreage position in the E.F.S. but hinting that will change with further drilling (duh).

  59. 59
    elijahwc Says:

    SLB from the WSS – SLB
    Schlumberger Limited Pritchard Capital Partners, LLC Reiterate Buy – Price Target: $90 from $77
    The most important factor coming out of this report is that SLB has managed to keep estimates in check by reiterating the risks at this stage of a cyclical recovery. We expect customer spending will become iteratively more constructive over the next six months and view SLB as set up nicely for stronger-than-expected performance.

  60. 60
    zman Says:

    Sigh of the day watch:

    Headlines from market watch:
    Obama concerned by budget deficit, aide says
    Health-care costs add to deficit, White House says
    Health reform key to tackling deficit, aide says
    I have my doubts that health reform is the key.

  61. 61
    zman Says:

    Didn’t know what sparked that crude rally early. Guess no one else did either. Crude going red.

  62. 62
    BirdsofpreyRcool Says:

    HT on outlook for this week — “GDP will be a big deal, but I think mrkt will be wishy washy this week…. people are crazy to think the Fed will raise rates any time soon.”

    That’s why we love him. He speaks plainly.

    If the mrkt sells off on any “tightening fears,” that would set up the next strong BUY signal. Inflation is not the issue in the US, for the foreseeable future. Doesn’t mean prices of some stuff goes up… but, the Big Ticket items (like wages and houses) aren’t headed up any time soon. I’ll just be happy when they stop falling. Don’t think we are there yet, either. Especially with the “healthcare reform” and “cap-and-trade” stuff congress is planning for us. These are NOT going to create jobs in the private sector. Lots more Govt jobs… but, those are a drain, not a value-add, to an overall economy.

  63. 63
    VTZ Says:

    Hahaha – 60 is representative of the mainstream media’s reporting of most issues. Depends on which hacks they talk to immediately before writing up their stories.

  64. 64
    zman Says:

    S&P filling the morning gap up now.

    Agreed wishy washy, almost went with Monday Morning and All Is Wishy Washy as a post name today, didn’t like so just chopped it off.

    Stocks way off highs, mostly still green, eying crude. A break below $80 likely inspires a redder day. If that happens and drags everything lower I’ll double that PXD position.

  65. 65
    bloodystupidjohnson Says:

    I see CRT has up its price targets on some stocks of interest:

    EOG TO 105
    FST TO 36
    MMR TO 15
    WLL TO 69
    BRY TO 36

  66. 66
    BirdsofpreyRcool Says:

    EXXI — the debt swap has been pushed out until Oct 28th. But, not for lack of participation by bondholders. EXXI got more bonds tendered than they needed, so in good shape there. It’s the SEC that is being the barrier, picking at nits in the exchange document. The company wants it, the bondholders want it, it’s good for equity… but the SEC can delay the final documents for as long as they like… just because they don’t like the color of the print used in the documents. THAT is what giving govt officials power over your life and decisions is like. They nit pick and miss the bigger picture…

    So, bought more EXXI on the downdraft (thank you, SEC). That said, the next quarter to be reported on Nov 3rd, will not be any great shakes. It’s all about production that is coming on during this quarter, getting the balance sheet more balanced, generating free cash flow over the next coupla quarters, and EXXI’s stake in Davy Jones and Blackbeard West. Even without the impact of those two deep wells, EXXI is cheap here, IMHO.

  67. 67
    elijahwc Says:

    Rumor: Sinopec joining the Jubilee frenzy.

  68. 68
    zman Says:

    S&P gapping lower, looks like more of the second half of last week’s action continuing.

  69. 69
    zman Says:

    S&P getting ready to test last week’s lows.

  70. 70
    zman Says:

    Market went through last week’s lows, then paused. Charts all went ugly together.

  71. 71
    bill Says:

    did kog have a call today

    how do we get on it

  72. 72
    zman Says:

    BOP says that call is on now but it is institutional only, so password required.

  73. 73
    zman Says:

    Wow. What a difference an hour makes. Anyone catch the reason for the latest market swoon?

  74. 74
    bloodystupidjohnson Says:

    Oct is the end of the mutual fund fiscal year. All tax loss selling must be down before the end of the month. This is different from individuals, where tax loss selling is the end of Dec.

  75. 75
    BirdsofpreyRcool Says:

    Stronger dollar… taking down treasuries and energy, looks like.

  76. 76
    zman Says:

    BOP – That’s what CNBC says although the dollar was pretty flat when the S&P came off and what they call a “rally” in the dollar looks like a blip.

  77. 77
    bloodystupidjohnson Says:

    Per post 74: so there is alot of cross currents at the end of Oct by mutual funds.

  78. 78
    zman Says:


    SWN – Added (10) more SWN $50 November calls for $0.90 with the stock at $46.45.

  79. 79
    isleworth Says:

    Over the past hour, the major equity averages have experienced a sharp reversal of this morning’s gains, with the Dow falling ~200 pts (Dow is now -107, SPX -12, Nasdaq -14). Two factors contributed to this sharp pullback: 1) the euro weakened vs. the dollar (euro fell below $1.50/euro), sending the dollar index into positive territory in a relatively swift move; and 2) the Nasdaq 100 failed another attempt to break out to fresh 52-week highs. The combination of the technical failure in one of the strongest segments of the market (big tech names have been recent leaders) combined with dollar strength (which weighs on anything dollar denominated — most directly energy and metals related issues), caused longs to bail out of positions that were being held in front of a potential breakout. In addition, there is some general chatter out there that could be contributing to the weakness (e.g., BAC may need to raise more money, concerns about Brazil continuing to aggressively buy Dollars), but this seems to be secondary in nature.

    After last week’s back and forth trade, the market came into the week looking for direction. It’s a busy week ahead with many potential catalysts, as it is the peak week of Q3 earnings season (~150 S&P 500 cos report) and advanced Q3 GDP is due out on Wed morning, so the markets will be taking their cues from many different areas. For now however, with few other catalysts today, the swift move higher in the dollar coinciding with the technical failure in the tech space has been enough to turn early strength into mid-day weakness.

  80. 80
    BirdsofpreyRcool Says:

    KOG — just got off the conf call… really, nothing new. Some more details about well economics (severance tax assumptions) and some discussion about long vs short laterals (think long has “better economics” but leaves some oil behind). Other than that, KeyBanc did them no favors by announcing and pricing all in one day. At the least, could have left a couple day window, to minimize the mrkt risk. (Idiots.)

    KeyBanc is currently negotiating with KOG to put a bank line in place, so explains why they are on the deal. But it doesn’t explain why they (KeyBanc) are handling it in such a lame-o fashion.

    Yeah. I’m mad. But stupidity always gets under my skin. My own included.

  81. 81
    bill Says:

    govt wants to take over bankrupcy process with banks. They want to wipe out investors first equity and debt.. before they inject funds

    I guess that puts the creditor commitee out of business

  82. 82
    zman Says:


    Use of proceeds. Did they give an end 2009, first half 2010 road map for what they will spend the money on? Number of wells, any Three Forks tests in close proximity to one of their producers? Did they mention anything about acreage adds?

    Say they net about $24 mm including the shoe, that’s maybe 10 or 12 wells to their 50% interest.

  83. 83
    zman Says:

    Bill – it boggles the mind.

  84. 84
    BirdsofpreyRcool Says:

    KOG — nothing about acreage adds. UOP will be to continue to fund the drilling program. They currently have about $3mm cash on the balance sheet and expect to have almost $30mm after this raise. Also, hearing separately that Keybanc will give them a $30mm bank line. After that, KOG will put a hedging program in place.

    Key going out with the story that KOG wants the money now, in case XTO starts their drilling early. I think that is a load. I think Key and KOG saw BEXP and decided to strike while the iron was hot. Ha.

    Anyway, they said their first 3FS well will probably be drilled in early 2010. And they are spudding well #10 today. Nothing said about #9 except that they expect to complete that in early Dec.

    They currently have 16 additional drilling permits in hand… and I think that includes the 3FS wells. Mentioned that Dunn Co has the 2nd highest rig count right now, with 13 rigs running and about half of them on the Rez.

    Mentioned they exect to tie into a pipeline — to recover all the production currently flaring — in 2010. That sounds vague. I have heard Lynn talk about late summer for that to happen.

    Also mentioned the Vermillion, where Devon continues the science experiment. Could be some upside from that. But that is only a footnote to the investment here for now.

    Bewteen this offering and the bank line, they have funded 2010. That should also give them some pocket change to add to wells/acreage opportunistically… but they didn’t say that out loud.

    Anyway, we knew it was coming… guess the best thing to come out of this will be that the 2ndary overhang will be out of the way now.

  85. 85
    BirdsofpreyRcool Says:

    #81 — It’s an odd feeling, when the Biggest Risk to the market, economy, our own jobs, and our wallets, is our own govt. Guess that is what it feels like to live in a Banana Republic.

    Kinda really sucks.

  86. 86
    zman Says:

    Thanks BOP, good deets.

  87. 87
    zman Says:

    The Print Function has been fixed.

    Bio For BSJ:


    Bio: Spent 2 years US Army, with 1 year in Vietnam. BS in acctg. Spent 7 years at a deep value mutual fund (2 years as analysis, 5 years as devil’s advocate). Left to form my own investment partnership which I ran for 25 years. Closed in 2005, now just manage my own money. Would be considered a value investor.

    To see all the Bios click here:

  88. 88
    BirdsofpreyRcool Says:

    BSJ — ha!!!… you’re going to have to drop the BS part now. After 35+ yrs in the investment biz, if you have any money left, you are clearly not “bloody stupid.” 😉

  89. 89
    bloodystupidjohnson Says:

    More like bloody stupid and brain dead.

  90. 90
    zman Says:

    I don’t buy the dollar as reason for this move, it looks to me like the dollar move trailed the market. Looks simply technical to me.

  91. 91
    BirdsofpreyRcool Says:

    OK… bloomberg blaming the fall off in stocks on concern that the Homebuyer Tax Credit is not going to be extended.

    Frankly, that is a GOOD thing. The Govt has GOT to stop the “Freebies.” It’s piling too much debt on the heads of the working class and our children (including 4-yr-olds who are busy, buying houses).

  92. 92
    BirdsofpreyRcool Says:

    Oh boy… now seeing headlines that Washington was to “gradually phase out” the Homebuyer Credit.

    And these are the guys who are promising to “wring out cost savings” from govt medical programs to pay for universal care? Wow. They can’t even say “boo” to a 4-yr-old. Sick stuff, people, just plain wrong.

  93. 93
    BirdsofpreyRcool Says:

    [make that “wants to ‘gradually phase out’ the Homebuyer Credit”]

  94. 94
    zman Says:

    Worried about the ballooning deficit? Stop spending money. On the other hand, the market likes it because spending causes artificial growth until you actually stop.

  95. 95
    RMD Says:

    I saw this and my reaction was: is this is a (first?) step toward a gold standard again? Gold is “good enough” for the CME.

    Last week a “tree fell in the forest and nobody heard it.” The headline read, “CME To Allow Gold As Collateral For All
    Exchange Products.” The lead paragraph was:
    “U.S.-based clearing house CME Group Inc. (CME/$319.96/Market Perform) will allow physical gold to be used as
    collateral for margin requirements on all exchange products, a spokesman said Monday. The new global policy is
    effective Oct. 19 in accordance with a member’s notice issued late Friday, said spokesman Jeremy Hughes in London.
    Clearing member firms will be allowed to post up to a maximum of $200 million worth of gold as collateral to cover
    performance bond, or margin, requirements, Hughes said.”

  96. 96
    BirdsofpreyRcool Says:

    Looks like KOG might be pinned around $2.25. Guess it could have been worse.

  97. 97
    Jerome Blank Says:

    KOG broke the triangle to the downside, unless there is a strong recovery by the close, the continuation pattern failed, there’s not much technical support right here, next meaningful technical support level is at the 50 day SMA $2.05 to $2.10, then major P&F support at $2 and KOG does hold its buy signal from here until a print of $1.75, KOG still on a buy

  98. 98
    zman Says:

    RJ out saying KOG will enter 2010 with $20 mm in cash and no debt, sounds a little light but close enough. They sounded like they weren’t bothered by the cash raise; basically said it sets them up for 2010 when they don’t think they will need to do another deal.

    Thanks Jerome.

  99. 99
    zman Says:

    Not a lot of thought going into the selling right now. CRK and PXD green on my screen in E&P. XOM flat which is interesting as they come out later this week. FSLR green (reports Wednesday) and CRR close to flat in service (reports later in the week).

  100. 100
    VTZ Says:

    RMD – I’m convinced a gold standard will happen in some fashion due to competitive devaluation. Most likely scenario is a ratio of gold to reserves such that it becomes a part of a basket of currencies.

  101. 101
    baylor3217 Says:

    Any chance kog is pricing now because they foresee trouble ahead in the broader market?

  102. 102
    zman Says:

    Baylor – Absolutely. I argued a couple of months ago that they should seize the day then after wells 5/6 came out as the market was running strong and oil was up on a daily basis. They waited. Lots of other folks did secondaries in two separate cluster, and KOG has caught the end of the second cluster. I doubt they are getting this done with bad knowledge on #9 in hand but instead want to make sure that the broad market doesn’t fall out from under them. However, I doubt they have superior knowledge to anyone else on what oil or the equity markets are going to do.

  103. 103
    zman Says:

    I’d also caution them about getting too far under the covers with one broker on the equity side and on the revolver. That analyst will have 0 Street cred for one thing as results of the appearance of more than the usual amount of conflict of interest. They also don’t have a big name in energy so if you are going to get hitched, get hitched to a big dog and not just a hungry one.

  104. 104
    VTZ Says:

    RE 100: Or international bonds (IMF?) issued in a basket of currencies that would include or be backed by gold.

  105. 105
    BirdsofpreyRcool Says:

    baylor — between KeyBanc’s wanting banking and underwriting fees and telling Lynn to “strike while the BEXP iron is hot” and Lynn knowing he is going to have to raise 10mm shares at some point over the next 4 months… i just think it came down to “do it now, while there is investor appetite for Bakken players.”

    KeyBanc clearly overestimated their placement abilities… and stupidly painted KOG into a box by announcing and pricing in less than 24 hrs. But I honestly don’t think it’s a mrkt call on KOG or KeyBanc’s part. I think that KOG wants to get their bank line in place (so they can hedge) and KeyBanc won’t sign off on the line until the capital raise. So, I think it just came down to wanting to move KOG forward… fund 2010, put bank line in place, work on putting hedges in place, make sure the cash was there for their obligations with XTO, and raise $$ in the footsteps of BEXP.

    I don’t think there is anything more to it than that. And i really don’t think it’s a “market call.” Those guys aren’t that macro. Either of them (KOG or Key).

  106. 106
    zman Says:

    V – OPEC has said much the same regarding a basket of currencies and gold as being a desirable replacement for dollar traded oil.

  107. 107
    VTZ Says:

    OPEC, Russia, China, Brazil… basically everyone outside of Western Europe and the US has said it. It’s going to happen.

  108. 108
    zman Says:

    BOP – my 102,103 was attempting to say what your 105 did.

  109. 109
    BirdsofpreyRcool Says:

    posted #105 before i saw #102, fwiw.

  110. 110
    VTZ Says:

    It will put to rest all this “there’s no alternative to the US dollar BS”

  111. 111
    BirdsofpreyRcool Says:

    Note to self — This is clearly a market for swing traders. Sold some HK nov26 calls this morning, reluctantly… but then watched the mrkt crap out and bought some back for almost a buck cheaper. Crazy stuff. Don’t get wed to a position, if it’s not a “buy-it-and-forget-about-it” stock for you. You have to be willing to sell.

  112. 112
    VTZ Says:

    The other thing to note is that even average investors are looking for alternatives to the USD so that says something about the demand for an alternative.

    1 trillion deficits for 10 years = no thanks.

  113. 113
    jiveyjr Says:

    as the new highs were recently put in the transports didn’t make new highs(confirm)….in fact the rails fell particularly hard last week. I’m not a tech expert nor do I fully understand all the nuances of Dow Theory but John Murphy/Art Hill noted this in their market messages last week

  114. 114
    VTZ Says:

    Also, for the record, the USD is in two bearish wedges:

    1. Drawing a line from the the first peak in 1985 to the peak in 2002. The bottom of the wedge is from 1978 to 1993.

    2. The second is drawing a line from the peak in 2002 to the peak in 2009. The bottom of the wedge is the lows.

    Watch what happens when it breaks out of one of those wedges.

  115. 115
    VTZ Says:

    Also, that devaluation of the dollar corresponds to the aftermath of the elimination of the gold standard.

  116. 116
    VTZ Says:

    Sorry I’ll stop ranting now.

  117. 117
    zman Says:

    No, no, keep going, just doing a little reading and don’t have anything to add right now.

  118. 118
    RMD Says:

    VTZ: #100 strikes me as the first straw-in-the-wind which connotes change is coming. Hence it is important.

  119. 119
    VTZ Says:

    The bottom line is that there is no faith in the dollar except for people like Buffett and Kudlow.

    The administration has intentionally taken on weak dollar policy facilitated by Bernanke and has no intent to stop. There has also been reference on many occasions to a weaker dollar helping manufacturing. They also don’t think that quantitative easing has any impact on inflation (DUUUH, of course it’s not going to impact CPI until it makes it’s way back to the market).

    By the time the monetary inflation is reflected in CPI it’s going to be too late in terms of money in the system. Once people start lending again watch the M3 explode.

    Good luck suckign up excess capital. It’s not going to happen.

    Good luck raising interest rates, it’s also not going to happen.

    Good luck spending your way out of the recession, it’s going to happen but all you’re going to end up with is a worthless dollar and no creditors and a lot of debt.

  120. 120
    zman Says:


    WLL – Added (5) WLL $60 November Calls (WLLKL) for $2.45 with the stock just falling through $59. I continue to hold the $65 strikes here as well. Earnings mid week.

  121. 121
    VTZ Says:

    And you can tell me that there’s so many people that are bearish and it’s so oversold that it’s bound for a reversal.

    Fine, maybe for a dead cat bounce so that people can reload their carry trades.

  122. 122
    jat Says:

    VTZ— any thoughts on the major Canadians this quarter? SU;CNQ;NXY? Generally like them, just thinking through things given the Buzzard turnarounds, etc.

  123. 123
    VTZ Says:

    The 10-year notes are going to be the real canary for serious devaluation. I’ll be interested to see what happens once they stop buying back treasury notes. My money says they are either forced to continue or be met with a collapse of the 30-year and 10-years.

  124. 124
    Jerome Blank Says:

    The S&P cash index $SPX is still on a P&F buy signal but has now reversed back into o’s, there is a convergence of trendline and moving average support at 1050

  125. 125
    elijahwc Says:

    Today and too often this year. Not a market, not a valuation discovery mechanism, and most certainly not an auction forum. The machines are in charge and clearly the dollar has found its way into the algorithm. Frustrating. The only good news is that the end of the month and the attendant markup is neigh and probable. The James Simons of this world and his quant cadre can’t close their shops soon enough in my opinion.

  126. 126
    zman Says:

    No argument from me Eli. I’m opportunistically averaging down into names where I expect relative outperformance.

  127. 127
    VTZ Says:

    I can really only comment on the oil sands portions. From what I’ve heard the CNRL rampup of Horizons has improved and been more stable (naturally in the summer, they are stupid for trying to startup through the winter).

    Nexen is still having problems at Long Lake although it has also improved. Production is still lower than was expected but I don’t know how they did compared to guidance for this quarter.

    For Suncor I have not looked at their post-merger pro-forma earnings and I don’t have any meaningful insight.

    I still prefer COS.un to SU for pure leverage and dividend policy.

  128. 128
    Jerome Blank Says:

    The total mkt and S&P 500 bullish percent indexes, indexes which measure the % of stocks on P&F buy signals are at elevated levels over 80%, and are both in bull correction status, that is they have reversed into o’s, this suggests caution taking on new risk right here…

  129. 129
    elijahwc Says:

    122 – Not on the majors but there is an interesting arb in HTE. The buyer (KNOC) is credit worthy, willing to overpay at 10.00, and only the shareholders can get in the way of this deal. Since we are essentially in parity with our friends to the north (1.0672) and HTE is currently US 9.18 this = roughly 8% before the monthly pay dividend of .05 of which you should get several.

  130. 130
    jat Says:

    re: 127, appreciate it, thx

  131. 131
    VTZ Says:


    New video of that fire the other day.

  132. 132
    zman Says:

    Another thing hitting the financials today


  133. 133
    zman Says:

    It’s a shame PXD had their news out today, that likely would have been a double digit % mover, although it has held up remarkably well in the face of this “baby and bathwater” action.

  134. 134
    zman Says:

    If anyone sees a Street comment on SPWRA’s new high efficiency panels please send it my way. Thanks.

  135. 135
    kyleandy Says:

    eli bot some HTE @9.18 . sounded good to me.

  136. 136
    jiveyjr Says:

    one diff. it seems in today’s selloff from the others is that treasuries are getting hit instead of bid

  137. 137
    zman Says:

    Stocks coming off their lowest of lows very late in the session, not adding to anything here, will wait to see the morning opening as it all seems a bit contrived at this point. Am a little tempted to play the $25 LINE Nov strikes at the premium bled away after the distribution was announced and never really returned. A solid day and the market and that one could bounce back to its $25+ levels easily, which would yield a near double in that strike. Otherwise sitting on hands mode.

  138. 138
    elijahwc Says:

    135 two of us

  139. 139
    BirdsofpreyRcool Says:

    Nice day to price a 2ndary. Way to go, KeyBanc!

  140. 140
    zman Says:


  141. 141
    baylor3217 Says:

    Doesn’t look like KOG secondary has been priced yet. Sure got pinned to $2.25 though. If priced there it Serena it could go another 5-8% lower and you can start legging in as a safe play.

    Assuming broader market stays flat or continues to trend up.

    Of course I put half my 401k back in the market, albeit 40% in foreign markets, about 3 weeks ago which should signal the top for traders everywhere

  142. 142
    baylor3217 Says:

    Chk obliterated the past few days with ng down only 10% the same time. Possible call opportunity soon?

  143. 143
    VTZ Says:


  144. 144
    zman Says:

    Baylor – re 142, not by me. I own the common. As far as catalysts go I don’t know what they could say to re energize the shares as they’ve just let all the cats out of the bag. Nothing wrong with the story, it’s just pretty well known at present so I don’t see something that will swing it for me on the calls. Over time I expect them to move up and maybe soon with a rally in natural gas late this week on supply numbers as they aren’t as heavily hedged as usual for this time of year for the next year. But I don’t see their earnings report really driving the stock.

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